Some of South Africa's award-winners reflect on their rapid progress
'There's still a long way to go on the IR journey in South Africa, but over the last two to three years the distance traveled has been immense.' That was the verdict of one of the investment professionals casting votes for the second annual IR Magazine South Africa Awards. Too true. The 2003 winners tell stories of dramatic change with most dating the genesis of their IR programs to around the turn of the millennium.
Look at grand prix winner SABMiller where Anna Miller Salzman, a former equity salesperson, arrived in 1999 to build an IR program. Standard Bank's revolution happened three years ago with a whole new management team including Kim Howard as IRO. Or AVI, whose headline message last year was 'from turnaround to growth'.
Last May SAB bought Miller and became the world's number two brewer. 'That shifted the whole emphasis to transformation and we realized we had to change gear in terms of IR,' Miller Salzman recounts. 'We had been plugging awareness, but now we had to get investors to actively consider SABMiller as a stock they should have in their portfolio.'
The brewer went into 'six months of purdah' after the merger, coinciding neatly with the IR chief's maternity leave, then unveiled its new look. It drafted a high-profile corporate affairs pro, Sue Clark from Railtrack, to oversee IR, media relations and corporate affairs. Tulchan Communications' Nigel Fairbrass joined Caroline Metcalf and Lisa Perryman on the London-based IR team, and IR agency Taylor Rafferty was hired to target the US investment community. Along the way the IR team released a CD-Rom about the US beer market and kept up a frenetic pace of site visits to Africa, Europe and China.
Sounds like a torrent of activity, but Miller Salzman says it's just 'a gentle level of communication' while the investment community is turned off on the sector. 'It's difficult when the market's bearish; you can't push water uphill,' she philosophizes. Lately she's been concentrating on equity sales forces and she has plans for 'missionary work', visiting funds off the beaten track in the US.
Big world
South Africa's large-cap banks and miners are out in the big world, too. Standard Bank just got back from a roadshow to New York and Boston - 32 meetings over three days - and its international shareownership has grown from 9 to 14 percent over the last year. Kim Howard reports: 'The buy-in from the international investment community is so much greater than when we started. We were greeted in a completely different way compared to two and a half years ago.'
She declines to take the credit herself. 'It's got to do with senior management's attitude,' she says. 'They regard international investors as senior stakeholders and treat them as such. Plus, the story for Stanbank is different from competitors in that we've got a much more diversified revenue stream and it's taken a while for investors to buy into that. But transparency has helped enormously.'
This year Stanbank became one of the first South African companies to produce a comprehensive sustainability report under the Global Reporting Initiative's guidelines. Howard says it demanded a lot of time and effort and also made the annual report so fat that it will probably be split out in the future.
Black economic empowerment is a big priority, especially for banks and mining companies. As banks and insurers prepare for their BEE charter, they want to avoid a fiasco similar to last summer when the government's leaked mining charter flustered foreign investors. Instead, the finance sector will come up with its own suggestion by year-end. 'The charter is a concern of international investors; it's just so foreign to them,' Howard confirms. 'But it's not forcing change, it's encouraging it. We see that as a growth opportunity.'
Big jump
AngloGold is a massive presence in South Africa, but it barely registered in our first awards survey in 2002. By contrast, in 2003 it ranked number one in terms of overall points and closely trailed SABMiller for the grand prix. Steven Lenehan, the gold miner's executive officer for corporate affairs, is nonplussed. He knows that recognition is usually built around deals, and the last adventure for AngloGold was its failed bid for Australia's Normandy in early 2002. 'But I hesitate to describe it as a failure,' he says. 'From what our significant shareholders tell us, they regarded it as a success. We walked away from a transaction rather than pressing ahead and destroying value. From an IR standpoint that was seen as a success.'
In fact, AngloGold and Harmony, another award-winner, have been in the spotlight lately with the return to favor of gold - both the metal and the equities. Even the mining charter proved positive for investor relations. 'Such setbacks often present opportunities as well,' Lenehan says. 'Over the last six months we've been doing a lot of work marketing South Africa as an investment destination despite the damage the early leaking of the charter did not only to our sector but to the economy in general. Our industry recovered remarkably well, largely due to efforts in making contact with investors abroad.'
AngloGold stepped up communications in Europe, the US and Japan where investors had become 'disenchanted'. 'We made a very deliberate effort to engage the debate around the charter,' Lenehan explains. CEO Bobbie Godsell's role in negotiating the mining charter's BEE scorecard also gave the company the chance to talk first-hand about the process.
Big small IR
Outside the FTSE/JSE Top 40, AVI ranked highly in both 2002 and 2003 with finance director Rob Katzen leading the program. Now AVI's growth is overtaking the 'lean' IR function. 'Doing IR properly is a full-time job, so we are now looking for an IRO,' says Katzen, who acknowledges the new executive has to be close to the top: 'IR is not only valuable in managing the market's expectations; it's very important in managing decisions internally. We're looking for an individual with a lot of experience and business acumen, oriented toward operations rather than finance.'
AVI has been focusing heavily on producing more timely information. Last year it began trading updates before long closed periods leading to interim results, eliciting a 'very positive response' from investors. June saw the launch of 'active news' on its web site - a big step for a company with a market cap of around R5 bn ($660 mn).
Respondents to the awards survey praised AVI for access to managers on the operations side. Around every results release AVI organizes a 'management campus', setting aside blocks in managing directors' diaries and inviting analysts and investors to meet with them one-on-one.
Lydia du Plessis at African Bank Investments Limited (Abil) also holds a dual role. At the beginning of 2003 she asked for and got the treasury function added to her IR job. She says stakeholder relationships with funders are equally as important as stockholder relationships and often they're the same people.
Du Plessis is all too aware of Abil's equity challenge, which contrasts with other banks here. Around 40 percent is held by foreign institutional investors, 40 percent by domestic ones, and the rest by 32,000 small shareholders. With eleven official languages in South Africa, Abil translates portions of its annual report into at least one or two black languages. The AGM's entire notice and the reasons behind each decision are translated and made easier to understand. Interpreters are present at the meeting and small investors get food and taxi money. For an hour prior to the last AGM, JSE Securities Exchange officials provided basic education on dividends, how to buy and sell shares, and who to talk to for advice.
Abil's comprehensive investor relations program helped it through a challenging year. In 2002 the failure of Saambou and UniFer, both medium-sized banks and direct competitors of Abil, put this microlender in a tough spot. Du Plessis recalls: 'The past year was about fighting fires, changing perceptions, explaining that we wouldn't be going under like those two and why, so investors didn't get scared and run away.'
Thus Du Plessis joins the club of award-winning South African IROs - heroic firefighters one and all.
IR magazine commissioned Mary Maude Research to identify award-winners through interviews with 80 fund managers and analysts covering South African equities. The complete rankings along with verbatim comments about winners and the general state of IR are published in our South Africa Research Report 2003. Order it for R900 (£75) from www.IRawards.com.
Click here to see the winners