How to keep investors and management happy with winning tips on cutting costs in IR
Balancing the books is a challenge at the best of times, let alone in a recession. That said, while IR recruitment might have stagnated, redundancies in IR are few and far between, so a bit of careful planning means you can still manage an active IR strategy without having to resort to drastic measures.
The following input from a global selection of IR experts should help ensure you’re still servicing your shareholders without bleeding your budget dry. Investors certainly won’t want to see you shelling out money left, right and center while they are busy sacking staff and cutting back on overheads.
‘We stay thrifty through prioritizing what we really need over what’s nice to have.’
‘If a company’s overall budget is cut by an average of 20 percent, it will often be cut by 40 percent in the IR department,’ points out Georg Andersen, head of corporate communications at Icelandic bank Straumur. ‘We are having to differentiate between the must-haves, such as basic services or things we are legally bound to produce like annual reports and financial statements, and the nice-to-haves.
‘It’s not a good idea to focus on expanding your shareholder base or doing roadshows in several new countries when you know you’ll only have a 20 percent chance of getting something out of it. There isn’t much in the way of equity roadshows at the moment.’
Andersen hones in on the changing stance of investors. ‘Financial institutions are too busy taking over corporates or firing personnel,’ he says. ‘They don’t want you to be throwing lavish dinners or investor days with Champagne; they want more sober affairs with coffee and biscuits instead.’ As Andersen recognizes, investors want to see companies being cost-efficient and not paying bonuses indiscriminately.
‘Instead of cutting services, I am trying to renegotiate fees. At the moment I am squeezing every single supplier I have.’
The head of IR at one FTSE 100-listed global company says she is finding creative ways of negotiating. ‘For example, one particular supplier agreed to tag its fees to our revenues,’ she explains. ‘If things continue grimly for us, we will pay it half of what we paid it last year, for exactly the same service. I am so glad I have these amazingly flexible service providers.’
Other measures the thrifty IRO has deployed include zeroing the photography budget for the annual report. ‘Believe it or not, we ended up finding some amazing ‘never used before’ imagery hidden in our files, which we will use in this year’s report,’ she enthuses. ‘Some other images will have to be a repeat of older annual reports, however, but I don’t think anyone will notice.’
The company’s corporate brochure is not being redesigned; the team will merely refresh the wording and cut the number of pages from six to four. ‘We will save on printing costs and design fees,’ says the IRO, who is also relying more on video conferencing and less on flying.
‘Finally, my boss decided to peg all our bonuses, including his own, to any reduction in size of our audit fee, which was horrendously high last year.’
‘Get rid of the IR director.’
Some helpful advice from a former IRO at a FTSE 100-listed company, recently promoted to chief financial officer of a major division.
‘Replace lengthy CEO results presentations and pages of speaker notes with the short, dynamic approach, saving IR staff many a laborious hour of drafting and writing.’
The head of IR at an NYSE Euronext-listed global company toys with a different approach from his CEO: ‘Hi everyone. Profit is up/down 10 percent. Are there any questions?’
On a more serious note, he recommends replacing roadshows with site visits. ‘We recently invited the Scandinavian sell side over for a site visit and included an hour-long meeting with the CFO,’ he recounts. ‘It saves traveling and management time and is highly appreciated by most investors, especially the Scandinavians, as they don’t seem to see the market as often as other regions.’ He also recommends allowing ample management time for a Q&A session after the site visit.
Other tips include avoiding having to call people. ‘As much as possible communicate by email or let them call you,’ the IRO suggests. And a final suggestion: ‘Kick out all faxes and stop all fax lines – accept documents only via email.’
‘Tell IR it has to fly economy, which means it generally refuses to fly long haul – which saves you lots of money.’
This was rumored at one FTSE 250-listed company, but in the end common sense prevailed. ‘We have tried to cut expenditure, but the big items – website, annual report – are regulatory and fixed cost,’ the firm’s IRO explains. Although the group hasn’t cut down on roadshows, it decided against adding staff, by seconding bodies from its general finance division.
‘If we cut anywhere, it will probably be in courting the media, which seem increasingly flighty and 24-hour-deadline-driven,’ she adds. ‘They are focused on short-term stories and alternative media like blogs and websites at the expense of in-depth company research.
‘All they want to hear is bad news stories. I mean the newspapers, of course, not publications like IR magazine.’
Top tips from Anne Guimard of Fineo
- AGMs can eat up a substantial part of an IR budget, even if the total is split across various departments. Conduct a thorough analysis of who attended your last AGM and how big an audience your CEO actually wants to have in the room. Local regulation permitting, and before proxy voting is solely online, compare the number of proxy forms printed and mailed with the number returned and work out how many documents have been discarded. Adjusting printing and banking fees accordingly can generate substantial savings.
- Organize investor lunches at your head office instead of using fancy – and expensive – venues.
- Consider outsourcing consensus and market intelligence, or hire IR staff on an interim basis to lower your overall payroll.
- Review your free float structure: is it worth continuing to travel to Italy, for example, if you haven’t had an Italian investor in years?
- Don’t bring handouts to your one-on-ones. Have your own copy and offer to send a PDF version in a follow-up email to anyone who wants one.
- Clean up your contact list. If you don’t remember how someone came to be on it, he or she is probably out of date or no longer active.
- Use video interviews of your management, post them on your website and inform your contacts. This will save time on roadshows and conference calls.
- Stop timing roadshows with earnings announcements. The chances are investors are well-enough informed at this time and overwhelmed by any further meeting requests. Plan one or two roadshows a year, away from the earnings season, and focus on strategy. The level of questions will be much higher.
- Train your staff members to become Excel and PowerPoint artists and increase their expertise in IR. You will be traveling less, so you might need more help spreading the company’s message throughout the investment community.
- See whether the local securities analysts’ association can do a better and cheaper job than a broker at organizing meetings with the investment community.
For more handy tips, visit www.irmagazine.com to buy Guimard's book, Investor relations principles and international best practices of financial communications.