Snapshot Global IR Practice 2011

Transcription

1 Snapshot Global IR Practice 2011 REPORTING LINES LOW TEAM SIZE LOW BUDGET LOW GLOBAL REPORTING LINES n small caps Basic materials Regional Cap size Sector Brazil vs China Regional Cap size Sector Brazil vs China 67 report to CFO 80 TMT Brazil and China Brazil and China GLOBAL TEAM SIZE North America European small caps Healthcare people per team Financial Brazil China GLOBAL BUDGET n small caps Utilities China 30 $336,000 $160,000 $346,000 $363,000 CFO Regional Cap size Sector Brazil vs China 72 North America $561,000 per year European mega-caps $650,000 North America $1,911,000 North American and European mega-caps European mega-caps $711,000 Basic materials $1,131,000 Brazil REPORTING LINES HIGH TEAM SIZE HIGH BUDGET HIGH Reporting lines (to CFO) IR team size (people) IR budget ($) GLOBAL $561,000 NORTH AMERICA $650,000 EUROPE $648,000 ASIA $336,000 Introduction 1

2 Respondent data company profile Region Market cap North America Europe Latin America Africa/Middle East Introduction The Global IR Practice Report is an annual study of the practice of investor relations worldwide. On the supply side of IR, it draws the picture of current IR team sizes and budgets as well as the office into which the heads of those teams report. On the demand side, it looks at the relationship between the make-up of investors and analysts in these companies and four external functions of investor relations: one-on-one meetings, roadshows, earnings guidance and investor conferences. The 2011 edition of the report is based on the responses of more than 1,200 respondents to a survey that was sent out to companies from around the world. The respondents were mainly IR professionals with a minority view provided by senior management with responsibility for investor relations Small cap (<$1 bn) Mid-cap ($1 bn to <$5 bn) Large cap ($5bn to <$30 bn) Mega-cap ($30 bn+) Headline observations from the sample 79 percent of respondents put investor relations as their primary role 53 percent of respondents have spent six or more years in IR 249 companies come from the TMT sector 178 companies have their main listing on the NYSE Sectors Basic materials Conglomerates Consumer goods Consumer services Energy Financial services Healthcare Industrials Support services Technology, media & telecoms Utilities The main report is split into two sections. Section 1 looks at all the data worldwide. Section 2 is split into three regions: North America, Europe and. A special country comparison of Brazil and China is also included in this regional section. In addition to splitting the sample by region, companies have also been periodically split into four cap sizes and 11 industry sectors throughout the report. The details about the market capitalization bands used in this report and the specific industry sectors can be found in Respondent data company profile (left). All monetary figures are given in US dollars. Also, some figures have been rounded and thus may not add to 100 percent. Introduction 2

3 Contents Page 5: Section 1: Global IR practice Respondent data personal profile Page 14: Section 2: Regional IR practice (i) North America (ii) Europe (iii) (iv) Brazil vs China Page 30: Section 3: IR Insight cause and effect in global IR practices At the end of the global and regional sections, IR Insight analyzes a number of topics to see what effect each has on investor relations practice, either globally or regionally. For example, the effect of industry sectors is looked at on a global level, while the impact of having an above-average percentage of North American investors is explored in. The final section of the report sees IR Insight analyze the global data in search of causes and effects in current IR practice. The links between IR practice and awardwinning IR are also investigated. Main listings Stock exchanges in North America and western Europe are the most represented in the sample, but companies are also listed on most if not all of the major exchanges worldwide, including Shanghai, Singapore, Shenzhen, Tokyo, Kuala Lumpur, Bangkok, Jakarta, Prague, Warsaw, Moscow, Johannesburg and Mumbai. Job title ( of sample) Primary role ( of sample) Chief IRO/ head of department IRO/IR manager/ir analyst Senior vice president/ vice president/director CEO/president/ managing director CFO/treasurer/comptroller/ finance director Other C-level executive Manager Consultant Associate/specialist/ coordinator Other Investor relations Finance Marketing/communications Other Most popular main listings 1. NYSE NASDAQ NASDAQ OMX Toronto Stock Exchange 9 5. Frankfurt Stock Exchange 6 6. London Stock Exchange 5 7. Hong Kong Stock Exchange 4 8. São Paulo Stock Exchange 3 Time served in IR ( of sample) 20 Six years or more 53 Three to five years Less than three years 27 Introduction 3

4 CEO CFO IR Reporting lines Reporting structure CEO Overall () Small cap () Midcap () Large cap () Megacap () CFO Other Team size: 3.7 people IR budget: $561,000 External IR spend ( of total budget): 25 Global IR supply The global trend for 2011 is for two in three IR departments to report to the CFO. Average IR teams have 3.7 people and budgets of $561,000 (excluding salaries and annual reporting costs). Trends to report to the CFO are strongest among European and North American mega-cap companies in the technology, media and telecoms (TMT) sector. European mega-caps in the financial services sector tend to have the biggest IR teams, and the biggest IR budgets belong to European mega-caps in the basic materials sector. As the above suggests, European mega-caps are pushing the upper ceiling of IR resourcing. This is unrepresentative of the rest of the IR field in Europe, however, as IR resourcing below the mega-cap size varies much more than the global average, as it does in North America and, where IR teams acquire extra personnel and larger budgets much more incrementally than in Europe. Budgets are big and teams are small in North America, while the opposite is true in. The majority of IR departments report directly into the CFO (67 percent). The CEO s involvement in IR peaks in small-cap companies, gradually falling away thereafter. 67 of IR heads report to CFO This trend is strongest in Europe and North America. At small-cap companies in those regions the IR oversight role is evenly split between the two offices, by and large, whereas at large and mega-cap companies responsibility for IR moves predominantly into the CFO s job description. The involvement of other managers directly overseeing the investor relations function at North American and European companies of all cap sizes never rises above 10 percent. In other parts of the world there are signs the CEOs and CFOs of some of the largest companies are shying away from taking direct responsibility for investor relations and delegating IR oversight to other senior management positions. These include the chairman, treasury and strategy departments (all percent) and the COO and communications department to a lesser extent (both percent). is the leading example of this diversification at regional level. It is far more common in to report to the chairman percent) or strategy percent) than it is in North America and Europe, to the extent that on a global level the figures skew the largely homogenous results in North America and Europe. Often the chairman in n companies is the leading executive, akin to the CEO, lessening the impact of that Global IR practice 5

5 IR team size Team size (people) Overall Small cap Global North America Europe Mid-cap Large cap Mega-cap 3.7 Average number of people in global IR teams At 3.7 people per team, the size of IR teams across the world has remained largely static in The figures globally and for each region support the trend for bigger companies (by cap size) to have bigger IR teams, as might be expected. On a regional level, has the highest number of IR professionals per company in With 4.3 people on average, n IR teams are fractionally bigger than the average European IR team and one more than in North America. This holds true across all cap sizes other than mega-cap companies, where European teams begin to get significantly bigger people in Europe compared with in ). To some extent, the traditionally larger team sizes in Europe have been dragged down by the inclusion of the UK and continental Europe together in this year s report. On its own, the UK has average IR team sizes o Europe excluding the UK has an average team size of Nonetheless, Europe has the biggest range of teams, spanning from two people at small-cap companies to almost eight at mega-cap firms. The narrowest gap between small and mega-caps is in North America. It is only the figures for North American IR teams the smallest of the three regions that point to any notable increase in size. An average size of in 2010 is up to this year, narrowing the gap on Europe (including the UK). Type of investor (all cap sizes) 9 Institutional Retail Location of investors (all cap sizes) Global investor/analyst profile Number of analysts Small cap Mid-cap Large cap High-net-worth individuals State and/or sovereign wealth fund Other Mega-cap North America Europe Rest of world Global IR practice 7

6 Regional IR practice North America IR YEAR PLANNER North America * Time split with investors and with analysts per year * give quarterly earnings guidance * Go on roadshows per year * one-on-one meetings/ with senior management ( ) * Attend investor conferences * senior management IR days per year North America IR demand IR departments in North America should know their audience better than most. Almost nine in every 10 percent) investors come from North America. Moreover, institutional investors account for nearly three quarters percent) of the investors in North American companies, percent more than the global average, percent more than in Europe and more than double the figure for. In addition to this homogenous investor profile, analyst coverage is perhaps surprisingly less than the global average. North American companies have one less analyst than the global average at small, mid and large-cap level and five fewer analysts cover North American mega-caps than the global figure. Taken together, the combination of a homogenous investor base and fewer analysts is likely to have its effect on the level and type of engagement with the investment community. The clearest evidence of this is the location of non-deal roadshows. Of the global firms that have been on the road in the last 12 months, three in five went on a roadshow outside of their home region. This number rises to as high as three quarters in Europe percent) but falls below half percent) in North America. The other differentiator for North American IR practice is in the commitment senior management shows to investor relations. All in all, North American senior managements attended one-on-one investor meetings in the previous 12 months, just under the global average and their peers in Europe. This level of attendance percent) applies to two thirds of all one-onone meetings held with investors throughout the year. The equivalent global average is one in every two meetings percent). In Europe it falls below half percent). One-on-one meetings per year Small cap Mid-cap Large cap Mega-cap 10 Total IR-only With senior management with senior management As cap sizes get bigger, North American companies follow the global trend for senior management attendance to fall as a percentage of overall meetings conducted. But in North America the attendance ceiling is higher at small-cap companies (82 percent) and not as low at mega-cap companies (47 percent). The global drop is from 69 percent to 41 percent, and 54 percent to 37 percent in Europe. The flip side of this is that IR departments in North America conduct fewer IR-only meetings without management (and fewer overall one-on-one meetings as a result). The average of 146 for all cap sizes in the previous 12 months is 30 below the global average and 61 fewer than in Europe. Small and mid-cap North American companies conduct 39 one-on-one meetings per year without senior management, 17 fewer than the global average (56). The same figure for North American large and mega-cap companies rises to 92. Regional IR practice North America 16

7 IR Insight: Effect of North American investment on n IR practice Nearly half of the investors in n companies are located outside and the largest portion of those investors is based in North America. To examine the influence that North American investors have on n IR practice, this section splits the n companies in the sample into two groups: companies with less than 30 percent of existing investors located in North America and companies with more than 30 percent. Two thirds of the above 30 percent group is made up of large and mega-cap companies and the remaining third comprises small and mid-caps. The below 30 percent group is split almost 50/50. This may be a factor in some of the findings. Bearing that in mind, the upside of having more North America-based investors is a bigger team and more money to spend on IR. The downside of more money and additional personnel is greater demand for roadshows, earnings calls and one-on-one meetings, during which senior management is even more likely than usual to be absent. IR Insight: North American investors bring bigger teams and bigger budgets n companies in the above 30 percent group of North American investors tend to have bigger IR teams and bigger IR budgets than the regional average for. The IR departments at these companies are also more likely to report to the CFO. IR budget ($) Small cap Mid-cap Large cap Mega-cap >30 North American investment <30 North American investment North American investment Reporting structure: <30 North American investment CEO CFO Team size (people) Budget $ $ Senior management IR days >30 North American investment External IR spend One-on-one meetings per year One-on-ones per year with senior management Roadshows outside region Give quarterly earnings guidance IR Insight: More dollars mean more IR In the above 30 percent bracket, companies go on more roadshows outside of. Also, the percentage of these companies that give quarterly earnings guidance percent) moves level with the global average and the averages in Europe percent) and North America percent). Conversely, companies in the below 30 percent bracket are even less likely to give quarterly earnings guidance percent) than the comparatively low regional average percent). Continuing this trend, the IR departments in the above 30 percent bracket conduct one-on-one meetings per year, more than the regional average of and more than the below 30 percent bracket. Yet not everything about n IR practice goes up with higher levels of North American investment. The number of one-on-one meetings n senior management attends actually goes down at the companies with more North American investment, both by number of meetings attended and as a percentage of total meetings conducted. = $ Regional IR practice 25 Global IR Practice Report October 2011

8 IR Insight: Cause and effect in global IR PRACTICES Part 2: IR analysis The alternative method: comparing below-average and above-average datasets The four observations on pages show that any direct comparison of data like team sizes and IR budgets does not eliminate the gravitational pulls of company size and region. Budgets increase with team size, for instance, but this could be because a company s IR budget and team size both increase as a company s market cap gets bigger. Therefore, it is necessary to adopt an alternative in order to isolate the influence that individual factors have on the broader practice landscape. The earlier sections of this report use average figures for all the companies included in the sample. These average numbers are broken down further by cap size and geographical region. In the section below, the same overall data have been split between companies with values that fall below their regional cap size average and those with values that are above their regional cap size average (the small number of companies that are the same as the regional average are included in the below-average grouping). For example, the average budget for a small-cap n company is $ This means any small-cap n company with a budget below $ will be included in the below-average budget dataset. Similarly, the average team size for a mega-cap European company is, so any European companies in that market cap that have an IR team size above this figure will be included in the above-average team size dataset. Comparing the below and above averages in this way should eliminate the influence of region and cap size on the findings, as all cap sizes within all regions should be represented in both the below-average and aboveaverage datasets to the same level. For ease of comparison, the same data points are used as in the observations above: team size, budget, analyst coverage and senior management IR days. 1. Cause: Budget There is a vast disparity between budgetary figures, as shown in the table below: the budget ($ of companies in the above-average group is four times larger than the budget of those in the below-average group ($. Budget of sample companies Below average Budget $ $ Team size (people) Above average Report CEO Report CFO Number of one-on-one meetings Number of one-on-one meetings with senior management Senior management IR days per year of sample companies been on roadshow Number of roadshows Analyst coverage Effect: The breadth of disparity seen in the budget does not have a similarly strong effect on IR team size, analyst coverage and senior management IR time. This shows All the same, there are some noticeable trends that separate the resources and practices of companies with below-average IR budgets from those with above-average budgets: companies with above-average budgets are more likely to have IR report to the CEO, go on more roadshows and have a slightly larger team. In fact, there is quite a significant difference between the average number of roadshows undertaken by companies with above-average IR budgets and those IR Insight 32

9 Senior management IR days Below average Above average of sample companies Senior management IR days per year Budget Team size (people) Report to CEO Report to CFO Number of analysts covering Number of one-on-one meetings Number of one-on-one meetings with senior management of sample companies been on roadshow Number of roadshows Effect: This disparity in senior management IR days sees a percent increase in IR budget and an percent increase in IR team size. Comparing the above and below-average datasets for senior management IR days indicates that IR departments in the above-average group are marginally more likely to report to the CEO and go on markedly more roadshows. On a regional basis, the vast majority percent) of senior managements in the TMT and consumer goods companies spend less than the average number of days on IR by comparison with their peers. The key finding in this analysis is that a percent increase in the number of days senior management dedicates to IR causes At the same time, the number of overall one-on-one meetings undertaken increases by a bigger increase than caused by budget, team size or analyst coverage. As mentioned earlier in this section, the number of days senior management spends on IR was asked of IROs and not senior management itself. The responses, therefore, could be the IROs perception of senior management time, rather than an actual figure, influenced by the number of meetings senior management attends. The findings here show There is clearly an increase in the number of IR-only meetings, which means that, rather than according to the number of meetings they attend, IROs recognize that, This goes some way to explaining how n senior managements can spend less time on external IR obligations like one-on-one meetings, roadshows and conferences than their North American and European counterparts and still spend more time on IR overall. Part 3: Award-winning IR practice Comparing below and above-average datasets for certain metrics is helpful in understanding the level of interrelationship these factors have. It does, however, still leave the question as to what value these factors and their inter-relationships have to the practice of investor relations in general. In particular, how is having a bigger budget, team size, greater analyst coverage or more senior management involvement in investor relations actually reflected in the perception of the investment community? One credible way of assessing the value of IR is by asking the primary clients: investors. Every year, IR Insight conducts a series of investor perception studies across the globe. Investors and analysts are asked to name the companies that practice the best IR across a number of different categories. The results of this research forms the basis for IR magazine s regional IR awards ceremonies and also enables the production of regional league tables of IR excellence. Since many of these ranked companies have also taken part in IR Insight s global practice survey, it is possible to assess the likelihood of these companies having a below or above-average IR budget, team size, analyst coverage or senior management commitment to IR Insight 35