P/E, ROE and EPS. All right?!
As a listed company, Swiss Prime Site is subject to the guidelines of the Swiss stock exchange as well as the public. Accountable communication to all stakeholders is therefore a top priority for the company. Swiss Prime Site strives for consistent, credible, appropriate and timely financial and project communication with its stakeholders. In doing so, the real estate company ensures that the public and all interest groups are informed in a fair and transparent manner, both about key developments and changes in the company and their relevant markets.
Markus Waeber, Head Group Investor Relations & Communications, and Mladen Tomic, Head of Corporate Communications, are responsible for communication at Swiss Prime Site. As a team, they work together to ensure that all regulatory and communicative requirements are fulfilled. Markus Waeber describes the main tasks: «We actively report about the course of business, development projects and market conditions using various means and channels, thus avoiding information asymmetry between the different stakeholder groups. The priority is to ensure that investors, analysts, media representatives, shareholders and authorities have the same knowledge and therefore a sufficiently identical basis on which to make decisions and interact with our company.» The instruments include press releases, press briefings on annual results, roadshows, investor meetings and conferences as well as a Capital Markets Day aimed specifically at achieving open dialogue. «The aim is that our reporting should be accurate and appropriate for our market position. We therefore establish the basis for a fair valuation of Swiss Prime Site», adds Mladen Tomic.
This is necessary because it cannot be assumed that stakeholders adequately perceive a company’s qualities and strengths. This is often a long, challenging and time-consuming process for all involved. Companies that are listed and therefore have a broad investor and stakeholder base face a double challenge. They need to generate consistently positive results in accordance with their market position, but these qualities also need to be externally communicated in an optimum manner. In an ideal case, this results in a view of the company that corresponds to reality and a share valuation that matches their intrinsic or true value.
«If the various stakeholder groups classify a company too optimistically, it’s just as unhealthy as if they were too pessimistic», says Markus Waeber. For example, if analysts, investors and media representatives are too euphoric and expect unrealistic results, companies are often penalised for missing targets. If this happens, the share price falls and the company lose financial freedoms and opportunities. «The opposite of this is negative or even pessimistic stakeholders. The company’s value and potential are assessed negatively, ultimately resulting in a valuation that is too low, which then leads to financial opportunity costs», adds Mladen Tomic. This is another situation in which the company and management are deprived of opportunities to fully develop the strategy and business activities and maximise added value.
To create an ideal balance between internal and external expectations, Swiss Prime Site uses a range of instruments. In addition to the press releases and presentations that accompany the financial results press conference twice a year, other means of communication are used. «We describe our actions in a range of stories that we spread throughout the year and share with our stakeholders over different channels. We also organise events for individual or multiple stakeholders and answer their questions. We are very pleased that the management and Board of Directors of Swiss Prime Site take this transparent approach. It makes our job much easier», explains Mladen Tomic.
One of these important meetings took place in Zurich on 23 October 2019. Called Capital Markets Day, investors, analysts and media representatives were shown management presentations and given a tour of the key projects in Zurich, allowing them to see how Swiss Prime Site is adding value. Participants gained an overview of how the company handles challenges and is helping to shape the future of the real estate market as well as the face of whole districts. At Jelmoli, management gave a detailed explanation of their new collaboration with Pallas Kliniken and how retail floor space has now been enhanced with services. A look behind the curtains of the West Log and JED projects provided information on market trends such as logistics real estate and the transformation of whole areas as well as construction that focuses on a careful use of resources.
There may have been a constant stream of questions at the Capital Market Day about key financial figures such as EBIT and net yield, but general conversations between stakeholders and management were just as important. «We’ve heard so many times from the participants today that they really appreciate the close contact with executive management and the insights into the projects. The presentations from our tenants, i.e. our clients, also helped our stakeholders to look to Swiss Prime Site’s future with confidence. They heard the theory from management in the morning and were able to see the reality in the afternoon», says Mladen Tomic.
After press releases have been issued, or following an event like the Capital Markets Day, the Swiss Prime Site management answer any outstanding points or questions at roadshows. Markus Waeber and his team also conduct phone calls with stakeholders to clarify any issues. «We get to a level of detail where we typically answer to questions about key figures with three letters», smiles Markus Waeber. But that’s just the last missing piece of the puzzle needed to balance expectations and move one step closer to a fair valuation of the company.
P/E = The price-to-earnings ratio relates a company’s share price to its earnings per share (P/E ratio = share price / earnings per share)
EPS = Earnings per share is calculated from a company’s profit divided by the number of shares and is used to assess a company’s profitability
ROE = Return on equity measures the return or profitability on shareholders’ equity (ROE = profit / shareholders’ equity)