IR Monitor – 15th March 2023

This week’s news

Caz former CEO Robert Pickering on his new book ‘Blue Blood: Cazenove in the age of global banking’

For years, Cazenove was the trusted intermediary between companies and investors in the UK. To this day, the company’s long corporate list survives at JP Morgan. In his new book, Blue Blood: Cazenove in the age of global banking – former Cazenove CEO Robert Pickering narrates the story of his unique position at the company, detailing what it was like to run the prestigious firm reputed to be the Queen’s very own stockbroker. Serving as its Chief Executive from 2001 to 2008, Pickering lead the private stockbroker on the road to become a leading investment bank and wealth manager. Readers of the IR Monitor are invited to an exclusive breakfast discussion where Pickering will offer his very own insights on the new book. Join us here at FTI on 19th April at 8.30am.

Europe’s IROs keen to hear where companies stand on social and political issues

For most companies, the decision to take a stance on key socio-political issues can be daunting. For better or worse, more than 90% of European IR professionals say that companies should make their positions clear on issues such as climate change and women’s rights, according to IR Magazine. From Black Lives Matter, to LGBTQ+ rights, to the war in Ukraine, IROs are keen to understand where companies stand. Despite this, many remain hesitant due to fears of backlash from investors who are less open to discuss these topics, according to the report which polled the views of nearly 800 IR professionals and more than 100 investors. Even so, the majority place importance in having an explicit opinion on issues which are relevant to a company’s operations.

The transatlantic valuation gap is mostly illusory – it’s about growth

It’s easy to assume that the valuation gap between U.S. and European stock indices, which is at its largest in decades, is the result of geography alone. However, Reuters suggests that the valuation gap is mostly illusory. When adjusted to consider the faster growth in U.S. earnings, it becomes clear that the valuation gap stems from a growth expectations gap. Indeed, a company which sees earnings grow at a fast rate will produce more cash over time than one with a stagnant bottom line, justifying a higher value. Refinitiv data shows that members of the FTSE 100 are expected to boost their earnings per share at an annual rate of 3.8% between 2023 and 2025, compared to 11.1% for S&P 500 members. This is primarily due to different business models and market exposures according to Reuters. While trading stateside may offer greater dynamism due to historic factors, like demographics or an entrepreneurial culture, European companies considering a transatlantic move under the assumption that they’ll gain U.S.-style multiples are advised to think twice.

Could remuneration disparity be contributing to the decline of the London stock exchange? 

2022 saw the decline of the London Stock Exchange – with a significant decrease in IPOs and UK-based brands like Arm, a chip-designer, and Irish multinationals such as CRH, which produces building materials, potentially planning to ditch the City in favour of the New York Stock Exchange. While there is a plethora of reasons that underpin this trend – from higher valuations to deeper liquidity and bigger peer groups in the US, the Financial Times argues that pay disparity may also play a role.  When modified for enterprise value, Albert Manifold who runs CRH, for example, earns around 60% less than his American counterparts in the same sector. It is not unreasonable to suggest that this vast disparity disincentivises top staff to stay in London but that this argument has largely been neglected from prominent discourse on the topic.

Adani Group’s head of investor relations on ‘gardening’ leave

Following the release of the Hindenburg report, which initiated a period of chaos for the listed entities of Adani Group, it has been revealed that Balasubramanyam Danturti, Adani Group’s head of IR, has been on “gardening leave” since December 2022. In other words, he has been paid for his role while being absent from work.  The unnerved investors who have been trying to contact Danturti over the past few months have all received the same automated reply which must have come as great reassurance: “I am out of system and no more a connect of Adani. Please reach out to Robbie or Anupam Mishra directly. It had [sic] been wonderful working with you and look forward to my next innings post retirement on June 30, 2023. Have a Great day”.

And finally … A guide to being a FTSE100 Don 

This week FTI’s very own Dwight Burden, who heads up London’s TMT strategic communications team, gave his advice on what it takes to be a “FTSE100 don” – finding parallels between successfully heading up a publicly listed company and running an organised crime family like fictional mafioso Tony Soprano. Dwight argues that CEOs can learn a lot from mafia bosses about achieving longevity in the post – a longevity which he points out is becoming progressively difficult in the face of increasing levels of stakeholder activism and M&A. The main lesson to be learnt is around stakeholder engagement. By building alliances, fostering loyalty and nurturing relationships both a CEO and a gangster can find success, even if admittedly the stakeholders with which to engage with are rather different. Some bonus material for true fans: Tony Soprano also understood the true picture of a company’s profitability: here is his righthand man Paulie “Walnuts” Gualtieri explaining EBITDA.

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