Dax Companies Seen Neglecting Investor Relations

Around a third of the companies included in Germany's Dax-30 blue-chip index are also listed in New York, but that doesn't mean that they are meeting the information needs of international investors.

This is the sobering conclusion reached in a survey by British consultancy Makinson Cowell. Makinson Cowell surveyed 39 fund-management companies in Britain and the United States, managing a total of around 2.4 trillion euros, for their opinions on the investor-relations performance turned in by Germany's top companies.

The best ratings were awarded to software company SAP, followed by Deutsche Bank and Henkel. The worst ratings were given to Volkswagen, followed by ThyssenKrupp, Metro and Commerzbank.

Respondents were less critical of the work done by investor-relations managers than of companies' information policies. They said companies mostly are too late in providing information and the results, when they come, always take the provisional form so hated by British and American investors, and they're always incomplete.

VW rejected the criticism. "We always release final quarterly figures 4–5 weeks after the quarter ends," a company spokesman told Handelsblatt.

He said the company's annual figures always come 7–9 weeks after the quarter closes. This, he said, is in line with the narrow time margins allowed by the New York Stock Exchange (NYSE).

Whereas Deutsche Börse AG allows companies a period of two months for quarterly figures and three months for annual figures, the NYSE always wants to see figures after six weeks.

In the view of Peter Kirkow at Makinson Cowell, investor-relations work is particularly important at a time of economic downturn. He reasoned that because of the strong weighting they tend to give to cyclical industries, international investors tend to take their capital out of Germany anyway.

But instead of making an effort to persuade international funds to stay on board, it's the companies that are most vulnerable in this respect – car makers BMW AG and VW, and Metro AG, the Dax's only remaining retailer – whose investor-relations work leaves most to be desired.

That Metro is in a tricky position, since it has a large number of competitors who aren't listed companies, is acknowledged by the fund managers. The more transparency it offers, the more it risks putting itself at a competitive disadvantage.

If it breaks down its results by division, it provides valuable information to investors – but also to competitors such as Aldi, which, being unlisted, has no requirement to return the favor, as one fund manager pointed out.

Even in the digital age, personal presence clearly counts for a lot. The fund managers surveyed tended to agree that they saw too little of the German company chiefs. One fund manager said a company should send its chief executive or chief finance officer on a roadshow to meet the big investors at least once a year, and they should turn in a convincing performance.

But VW and ThyssenKrupp, the two companies whose names were mentioned most in an unfavorable context, claim to fulfill this condition. "Clearly it takes a long time to improve a poor image among investors," said the VW spokesman.

Since the company took on British public-relations consultancy Gillian Karran, its investor-relations team has been boosted from 2 to 12, and it has opened a separate office in London. This approach seems to have paid off.

"We now have more institutional investors from abroad than German ones," said the VW spokesman. Around 14% of the group's capital is now in the hands of North American investors.

ThyssenKrupp, which is also listed in London, said US and British investors account for around 5% each of its capital. So while most fund managers have to concede that the quality of German investor relations has improved in the past five years, they also stress that it's still not good enough to rank among the best in Europe.

Alongside British companies, it's the companies from Germany's smaller neighbors, Denmark and the Netherlands, as well as Sweden, Norway and Finland, whose performance in this area is tending to attract the most favorable ratings.