Challenges aplenty for Australasian IR
Your correspondent left rainy London behind last month and arrived 22 hours later in the glorious late spring of Sydney to attend the annual conference of the Australasian Investor Relations Association (AIRA).
Despite the serene weather, however, delegates had some thorny details to discuss inside, from the recent enforcement action against Newcrest Mining to confusion over how to handle consensus estimates.
Kevin Lewis, chief compliance officer of ASX (left), and ASIC commissioner John Price
Indeed, given the range of challenges facing the local IR community, AIRA gave this year’s event the following title: ‘IR risks are more pronounced as regulators tighten the reins and investors demand clarity’.
With everyone keen to learn more about staying on the right side of the rules, it made sense for the day to kick off with a panel discussion featuring representatives from the two organizations that set them: stock exchange operator ASX and the Australian Securities and Investments Commission (ASIC).
Kevin Lewis, ASX’s chief compliance officer, and ASIC commissioner John Price tackled questions on Newcrest ‒ which received the largest ever fine for a disclosure breach earlier this year ‒ broader disclosure obligations and a range of other issues.
Price said disclosure practices in Australia were on the whole ‘pretty good’ but the Newcrest situation served as a reminder that companies must have ‘good processes and procedures’ in place around the release of price-sensitive information.
AIRA's CEO Ian Matheson takes a question from the audience
‘If there is a divergence of views between institutions or people in the market and the company itself, and it relates to material pieces of information that are relevant to that company, do not try to address that issue by jawboning the institutions or the analysts,’ continued Price. ‘The way to try to address the issue is to make an announcement to the market first and then follow up with discussions.’
Another key topic was the publishing of consensus earnings estimates, an area that Australasian companies want more clarity on. Price commented that companies are under no obligation to disclose these figures, while Lewis said the exchange is much more comfortable with the release of a consensus range – including high, low and average figures – rather than a single number. ‘There is considerably greater risk with a single consensus number that people will take it as being implicitly endorsed by the company,’ he commented.
In the following session, your correspondent joined recent UK IR Society chair John Dawson and former AIRA chair John Murray to discuss IR challenges on both a regional and global basis.
All participants agreed that IR teams should expect to do more work themselves given the difficult conditions affecting brokers. Australian and overseas broker desks are shrinking, requiring IROs to boost their own marketing, said Murray, who is currently senior vice president of corporate affairs at Amcor. There were also warnings over how new corporate access rules in the UK could affect the sell-side support offered to smaller issuers.
Later in the morning, attendees enjoyed a light-hearted panel discussion with three fund managers before moving on to a session on private wealth, which included a talk on the rise of self-managed super funds (SMSFs). Hasan Tevfik, Australian equities strategist at Credit Suisse, explained that SMSFs (or ‘selfies,’ as they are known internally at his bank) now account for 16 percent of the Australian stock market.
Panel session on best practice investor relations, featuring senior IROs from Westpac, Charter Hall, Toll Holdings and Fletcher Building
The challenge for IROs is how to engage with this growing shareholder block. Given that the majority of the assets are invested directly in stocks, Computershare’s Greg Dooley said the corporate website is a good place to provide information. As for their investment focus, SMSFs favor stocks with high dividends, noted Tevfik.
Lunch came next and saw delegates seated on tables by industry, giving them the chance to catch up with sector peers. Then it was into the afternoon sessions, starting with TED-style talks where four speakers had 15 minutes each to hold forth on a particular topic. Following that, the conference broke into two streams with one looking at shareholder activism ‒ which is booming globally but has yet to hit the Australasian market in a meaningful way ‒ and successful IR strategies for small caps.
Attendees came back together in the main hall for the final session of the day: a wide-ranging discussion between three senior IROs. These panelists touched on topics including the thinning ranks of brokers (a recurring theme of the day), the Australian currency (a turn-off for international investors right now) and how IR teams should provide objective counsel to their own firms (we are paid to be ‘internal-externals,’ said David Shirer of Toll Holdings).
Among the final comments, the three IROs picked out what they like best about the job. For Westpac’s Andrew Bowden, job satisfaction comes from the caliber of people you work with and whether you are really making a difference in your role – two areas, he said, in which IR delivers handsomely. He also said he relishes the constant change IROs must deal with, a fact illustrated by the range of current challenges outlined over the course of the day.
With the conference over, delegates had time to change outfits and take a short break before the start of AIRA’s annual awards, which are voted for by investors and analysts polled by the association, and celebrate the best IR practitioners across a range of categories and market segments.
AIRA chair Warwick Bryan (left) congratulates Sean O'Sullivan, vice president of investor and media relations at James Hardie Industries, on becoming an AIRA Fellow
Two of the big awards – best international IR by an Australasian company and overall best IR by a company in the S&P/ASX 200 – went to Amcor. On picking up the former, Murray provided the moment of the night: he gave a speech praising the career of Warwick Bryan, the executive general manager of IR at Commonwealth Bank of Australia and current chair of AIRA, who is shortly to retire. Bryan then received a standing ovation. Murray said he was delighted to receive an award, just so he could give that speech.