FOCUS: INVESTOR RELATIONS - Exploiting Europe’s changing market/As the investment markets in continental Europe catch up with those in the UK and US, new opportunities are emerging for investor relations professionals. Wendy Smith and Robert Gray

If anyone was harbouring doubts that investor relations is becoming ever more a pan-European activity, these were swept away on the seventh day of this month. It was then that the London Stock Exchange and the Frankfurt-based Deutsche Borse, Europe’s two largest stock markets, announced that they had formed a strategic alliance.

If anyone was harbouring doubts that investor relations is becoming

ever more a pan-European activity, these were swept away on the seventh

day of this month. It was then that the London Stock Exchange and the

Frankfurt-based Deutsche Borse, Europe’s two largest stock markets,

announced that they had formed a strategic alliance.

The ultimate aim of the alliance is to develop a joint electronic

trading platform as an access point for investors in European shares.

London Stock Exchange chief executive Gavin Casey talked of the creation

of a ’unified capital market’, words that will have European Single

Market evangelists jumping for joy. But although the timing of the

announcement came out of the blue, the investment community had foreseen

a move of this nature as inevitable.

Trading will begin in the new euro currency at the start of next


At a stroke, the performance of many of Europe’s leading corporations

will be more directly comparable. ’Frankfurt and London are trying to

make sure they control the access,’ says Paddy Manning, director of

Grayling-owned financial consultancy St James. ’Investor relations

programmes, IPOs (initial public offerings) and roadshows will focus in

on that access.’

Already there has been a trend towards pan-European financial analysis,

with sector analysts following companies irrespective of the countries

in which they are located and quoted. This trend will intensify when the

euro arrives. The logic for this is inescapable: investors are demanding

it. And not just European investors. ’Europe is increasingly on the

agenda for US investors,’ says Citigate director Noga Villalon, whose

clients include the Italian bank Credito Italiano and one of Austria’s

largest utility companies EVN. ’They are worried about Asia but that’s

not the only reason. They see Europe as a real growth opportunity.’

There are clear IR implications for European companies in having US


The US is the most advanced and proactive - some might even say

aggressive - IR market in the world. The upshot of this is that US

investors demand a high level of information and transparency, something

that many companies in Europe have never needed to concern themselves

with before. ’The bigger the proportion of international investors

holding your shares, the more you will be driven and obliged to become

transparent, especially in the case of US investors,’ adds Villalon.

Herein there are clear opportunities for the UK-based financial and IR

consultancies. The UK IR market is the most sophisticated in Europe and,

as such, expertise acquired here could be used to advise corporations in

mainland Europe as the Continent evolves into something more closely

resembling a single investment market. (Although Europe has 30 stock

exchanges, many are expected to merge, focus on smaller companies or

linkup in the manner of London and Frankfurt once the euro is firmly


’The UK has always been on a par with the US,’ says Reg Hoare, head of

the City division of Ludgate Communications, whose European clients

include the Spanish bank BBV, Italian luxury jeweller Bulgari and

Belgo-Dutch financial services giant Fortis. ’But although continental

Europe is catching up, it is still is a long way behind.’

Hoare cites finance culture differences as one of the reasons for this

discrepancy in IR sophistication. ’The Europeans have simply not had an

equity culture. And when you don’t have an equity culture, you don’t

need IR. As far as I see it, the system in Europe has been basically a

protectionist one. There has been little incentive to take companies

over or to manage the businesses aggressively.’

However, the 1990s has seen some of continental Europe follow the

privatisation route taken by the UK in the 1980s, with major IPOs such

as Deutsche Telekom and France Telecom bringing consumer as well as

institutional investors into the market.

Enthusiasm for equity investment in mainland Europe is definitely


’Europeans are finally waking up to the fact that they have got it

wrong,’ says Hoare. ’They have been through a severe recession and there

is pressure on them to change and drag themselves into the 21st


Charles Cook is chief executive of Grandfield, whose clients range from

India’s biggest quoted company Reliance Industries to French company J C

Decaux and Anglo-French media group Taylor Nelson Sofres. He believes

that UK IR practitioners have a lot to offer European companies.

’Financial PR people with a track record of working within Anglo-Saxon

equity markets can bring considerable expertise to explain how to go

about it,’ he says.

Cook agrees with Villalon that transparency is key. ’Potential investors

need to be provided with enough information to be able to arrive at an

objective investment decision,’ he reasons, calling for a ’transparency


But where are the main opportunities for IR experts to win business?

Which countries are the best at communicating with investors and which

lag behind? Manning identifies the Dutch and Scandinavian markets as the

most sophisticated in Europe outside the UK. ’The Holland market is

truly international and the Scandinavian markets are also very outward

looking,’ he says.

But it has to be said that the Scandinavian markets are relatively


The market value of the Oslo stock exchange, for instance, is less than

one hundredth that of New York. And the Stockholm market is only four

times the size of Oslo, making it a minnow even in comparison with


The Dutch market, however, is more substantial, ranking ahead of Madrid

and Milan and not that far behind Switzerland, France and Germany.

According to Omnium Financial director Pascal Huser, whose company

advises 27 of the 40 companies that make up the CAC 40 index of the

biggest corporations in France, there is a higher percentage of foreign

ownership of French-listed companies than ever before. The cosy

protectionism of the nayau dur, a system of friendly cross shareholdings

among companies which helped to preserve the status quo, is on the wane.

’There was not a need to speak to analysts and fund managers in the

past,’ says Huser. ’But senior management has become much more

accountable. Companies are competing for attention and support.’

In Germany, the culture has not traditionally been to invest in


Rather than issue shares, many corporations historically raised capital

through debt, often on the bond markets. But the advent of the single

currency should see more German insurance groups and pension funds

investing in equities in the euro zone. Manning thinks that few

companies listed on the Milan and Madrid stockmarkets have yet developed

international IR strategies. ’Much of the IR work is being done

in-house,’ he says.

’A lot of corporations there have not yet reached the level where they

use consultancies. But that will increase as the euro zone starts in

earnest on January 4.’

Villalon broadly agrees, although she thinks that the leading Spanish

banks should be singled out for their good international IR. ’Europe is

in a state of flux,’ concludes Simon Brocklebank-Fowler, vice chairman

of the Investor Relations Society and managing director of Citigate


’EMU will create a unitary investment market with differences of

national location becoming less important.’

For those UK financial and IR consultancies with expansion plans this

can only be good news. A growing number of European companies will need

top notch advice if they are to deliver the level of IR service that

international investors expect. The euro will change the European

investment landscape and in its wake it will bring a flurry of

consultancy activity. Some of those businesses at the cutting edge of IR

are sure to grasp the nettle by investing in start-ups and acquisitions

on the Continent and building networks to reflect the reality that, in

equity terms at least, Europe is fast becoming a single market.


The London Stock Exchange is backing a poster campaign to persuade the

public to invest in shares through the stock market.

Launched last month, the pounds 1 million ’share aware’ campaign has

been backed by a clutch of companies listed on the exchange, along with

a wide range of firms of brokers which give private investors access to

the market.

Apart from the posters, seen for two weeks in June and for another two

weeks this September, the campaign will also be backed up by a

widespread newspaper blitz.

The campaign, with its slogan ’get your share of great British

companies’, aims to advise the public on how they can invest directly or

indirectly in companies whose products they know and use.

Despite the fact that over the last decade shares have outperformed most

other forms of savings, the 1996 Weinberg Committee on Wider Share

Ownership says there has been a distinct lack of understanding of the

benefits of investment in shares. James Senior, marketing manager of the

London Stock Exchange, says: ’With the recent demutualisations, such as

the Halifax and Norwich Union, UK share ownership is up to 15 million

for 1997.’ However, he adds, that despite this impressive figure, it

appears those investors are still confused by what to do with their

shares. So to boost awareness and to spread the ’share aware’ message

still further, the London Stock Exchange launched an internet service

last month, which allows private investors easier access to company news

and share prices. Visitors to the site can view online informative

publications specifically designed for the private investor, plus

regional lists of exchange member firms detailing the share investment

services they offer.

To further support the campaign, a telephone hot line has been set up,

offering information to callers wanting to invest in shares. To date,

the response rate has been good, according to Senior. He says that the

call centre has been taking up to 1,000 calls a day from interested


’We are delighted with the campaign so far and we have every intention

of building on the success we have had.’


Keeping interested parties up to speed with companies’ financial

activities is an on-going headache.

A vital part of this activity is the analyst presentation, which is

regarded by many as one of the most significant activities for moving

the value of a company’s stock quote. But now that business activities

are more often than not global, not local, attending these vital

presentations can be not just time-consuming but also costly.

According to Paul Reynolds, director of Marchcom, providers of internet

investor relations services, as long as you have the foresight, the

technology and the web site, the solution is quite straightforward - web


Reynolds asks: ’We have seen the birth of a baby live on the internet,

so why not analysts’ presentations?’

To prove his point, on 20 July, Marchcom launches i2i corporate

presentation for analysts’ briefings. What this means, according to

Reynolds, is that stock quoted companies with web site technology and

who are seeking a global presence, will now be able to deliver their

financial presentations to a geographically decentralised audience.

Time lag will not be an issue, since this internet-based technology,

provided by Real Media and marketed by Marchcom, enables corporations to

broadcast a presentation live across the internet.

’How it works,’ says Reynolds, ’is that companies capture their

financial presentations using tiny cameras and microphones which are

then embedded into their web sites along with a power point presentation

and scrolling text.’

All the viewer needs is access to the internet and the relevant

accompanying software.

’The benefits of this system are enormous,’ according to Reynolds.

’Corporations can reach a wider audience, the presentation can be

downloaded for hard copy, there can be repeat viewing as and when

required, and most importantly, it will position those corporations that

use it as serious global players.’

So who is the target audience? Reynolds explains: ’This new service is

aimed at corporations’ existing stock holding analysts and teams which

may be placed all over the world. Or, again, it could be suitable for

companies keen to diversify their portfolios by attracting a wider range

of analysts.’


According to research conducted by specialist consultancy Brand Finance,

there is growing disquiet among City analysts about the amount of

information they receive about the marketing activities of public


As many as 86 per cent of the analysts interviewed felt that public

companies did not provide adequate information on their marketing

expenditure. Well over two-thirds felt that companies should be

publishing more information on brand values.

More than three-quarters of the analysts interviewed thought that all

this marketing information would be useful for investors to have to hand

when making investment decisions. And, according to the survey, the

right place for all this additional information was in a company’s

annual report.

David Haigh managing director of Brand Finance and author of the report,

believes that this is very timely and necessary research. ’It is clear

that the City is increasingly aware of the long-term corporate value

which advertising and branding creates. In future, chief executives and

finance directors will be called upon to explain their marketing

investments in much greater detail. More specifically, marketers will

need to understand dynamic brand evaluation and the drivers of that

value in clear quantifiable terms.’

Haigh says he has observed a significant shift in the needs, attitudes

and general level of sophistication of today’s analysts. ’It was quite

clear to me from the research that analysts are asking for much more

information and more pointed questions about how well or badly companies

are carrying out their marketing activities.

’The skills of analysts have improved significantly over the past decade

- there are far more people with MBAs under their belt and it is

generally becoming a more highly developed profession.’

Apart from the change in the type of analysts, Haigh also points out

that they now have technological tools at their disposal to analyse data

and expect a greater degree of corporate transparency. ’They don’t like

it when companies say they spend a lot of money on marketing and won’t

tell them what they are doing.’

In his view, the better the analysts understand the brands and the

businesses that are part of the company they are forecasting, the better

the chance of forecasting future profits.

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