Spotlight on Europe: What every IRO should be thinking about heading into 2019
As the end of 2018 grows nearer, we talk to Lili Huang, head of IR at De La Rue, and Basak Kotler, director of IR at the Coca-Cola Hellenic Bottling Company, who share their experiences from this year and their insight into what’s already shaping their IR agenda for 2019.
What’s been your main IR focus in 2018?
Lili Huang: De La Rue has had a difficult year. We unexpectedly lost our CFO at the beginning of the year, followed by the loss of one of our biggest contracts. An activist investor also entered our register during the year. Our 2018 plan was to prepare for Mifid II but this has been disrupted as we have spent much of our time and resources dealing with various issues and investor activism.
What are the main topics on your mind when you’re thinking about next year?
LH: Mifid II. As a small cap, the impact of Mifid II was significant – our analyst coverage dropped in the last six months, which has impacted liquidity and investor outreach. Brexit will also be one of the main topics for next year as the UK leaves the EU. As it is inevitable that some capital will flow from the UK to elsewhere, such as Europe and the US, we now need to consider how to balance the limited resources available to IR and maximize IR value as we increase our efforts outside the UK.
Basak Kotler: As a FTSE 100 constituent, Coca-Cola HBC has not seen a noticeable impact from Mifid II, but we have taken steps to ensure we continue to improve accessibility, even if we get less support from the traditional broker and sell-side relationships in the future. We are also seeing a renewed focus on ESG topics. Of late, we have had more engagement with SRI analysts than ever before and expect this trend to continue, requiring more time from IR and sustainability communications. These changes in the market require different ways of working, as well as more resources.
How do you think the IR landscape in Europe will change and/or develop in 2019?
BK: In anticipation of Mifid II and the service shortfalls it may create for companies – particularly smaller caps – we have seen numerous consultancy companies come up with innovative solutions and we can expect this to continue next year. These are typically digital solutions, with the use of big data becoming increasingly common in IR.
LH: Investors are increasingly engaging with companies directly following the implementation of Mifid II. In-house IROs, often constrained by time and resources, will require additional help to cope with this change. I think the IR consultancy and services industry will flourish as a result. I also think there will be more focus on ESG. The UN Global Compact Sustainable Development Goals have gained a lot of traction since they were set out at the end of 2016, and companies are under pressure from governments and investors to report against these goals. As IROs, we need to be at the forefront of this.
What are your personal thoughts on the main issue for IROs in Europe next year?
LH: It will be Mifid II again. Diminishing influence of the brokers and increasing demand from investors will put IROs, particularly those at small and mid-caps, under constant pressure. The challenge for us would be to uphold our standards in the quality of services we provide without a significant increase in resources.
BK: For us it’s striking the correct balance between in-house activity and outsourced support. Our focus is on using our internal resources and house brokers efficiently, while partnering with the right third-party service providers to navigate the changing and complex landscape post-Mifid II.