Cross Border blogs

A very British affair

What a pity that British Airways, the great British bastion of the nation's gloomy skies, now has the business prospects to match its country's unenviable climate.

The company's chairman, Martin Broughton, stated at yesterday's annual meeting that BA is 'up to its neck in perhaps the biggest crisis the aviation industry has ever known.'

The occasion must have been a sober affair that, by some accounts, was made even more arduous by the lack of refreshments on hand.

When the company pledged it would be reviewing elements of its business for cost-saving opportunities, investors quickly got the picture. Cost cutting was starting with the annual meeting.

It's surprising that investors were so keen to get their hands on BA's food, especially given airline food's somewhat unappetizing reputation. But everyone knows that isn't really the way the Brits do business. You can't drop a bombshell without sitting your audience down with a nice cup of tea first. Surprisingly, BA failed to heed this cultural quirk, making its poor old shareholders go without their precious cuppa while delivering them a harsh financial kick in the teeth.

Even Willie Walsh, the chief executive with the cartoon-character-sounding name, couldn't inject some optimism into the occasion. BA 'can't save £1 bn from non-fuel related costs' to compensate for skyrocketing fuel prices, he said. But hey, it can evidently save a few pennies scrimping on the sarnies.

While the share price held up rather stoically yesterday, rising 0.6 percent, it tumbled 5 percent today, presumably once investors had had time to reflect on the dire warnings, or maybe because of those disgruntled shareholders.

Clare Harrison
Deputy international editor
IR magazine

Winning IR

Financial journalists don’t seem to have twigged that share price is not the only indicator of good IR. The market moves in mysterious ways - you only have to look at companies totally bereft of any IR function but blessed with a deceptively rocketing share price for proof of this.

UK broadsheet the Daily Telegraph has accused IR magazine of redefining the benchmark for good investor relations. ‘The list of award winners from its annual awards reads like a who’s who of Britain’s most troubled companies,’ it sniped. Cryptically dubbing us the ‘bible for bean counters’, the paper mocks IR accolades handed out to subprime victims in the UK banking sector. (See http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/27/ccdiary127.xml)

So Barclays’ shares were down 57 percent in 12 months, but why else would investors vote for the bank to win grand prix for best overall IR if not for its fight to stay afloat in tough times? Barclays’ delicate handling of its recent share issue and the timely reduction of its consensus estimates are clear indicators of the potency of its IR division.

The Telegraph also takes a swipe at HBOS for picking up the prize for best corporate governance when it shares were down 72 percent and at HSBC for winning the best disclosure practice award when it was the first bank to own up to a subprime black hole. The paper didn’t stop to consider that being the first to own up may have led to its win.

I hate to point out the obvious, but scant few banks have escaped the subprime crisis anywhere in the world. It’s a shame some journos keep missing the point: if the awards were only about share price, we wouldn’t bother getting the consensus from analysts and investors. Good IR is only put to the test when the share price starts to stutter.

Fay Sanders
International editor
IR magazine