How do Austria’s ATX Prime companies cope with the corona crisis as compared to the German DAX?
Study by Kirchhoff Consult and HHL shows: Austrian companies have to catch up in corona-related financial communication
HHL, in cooperation with Kirchhoff Consult AG, has investigated how listed companies of Austria’s stock index with the highest transparency standard – ATX Prime – have managed their financial communication during the COVID-19 pandemic. The result of the study reveals that the expectations towards listed Austrian companies are not met.
In the newly developed assessment system consisting of four categories, the 38 examined companies only achieved an average score of 32%. In comparison, Germany’s DAX companies achieved an average score of 61%. This illustrates the significance of the catch-up need concerning Corona-related financial communication in Austria. In particular, there is room for improvement in discussing the financial impact of the pandemic and the outlook for the further course of business. Austria’s front-runner Wienerberger AG would only rank 11th in the ranking of German DAX160 companies, while the second-ranked Zumtobel Group AG would only rank 33rd. Among Germany’s DAX stocks, Deutsche Bank AG and Indus Holding AG are the best performers. In a dedicated chapter, the study provides practical recommendations for high-quality and transparent financial reporting on the corona pandemic in the current 2020 financial year and beyond.
The financial community must always be given the most realistic picture possible of the current and future business situation of the listed company. After all, transparency creates trust and that is a company’s greatest asset – especially in times of crisis.
The quality of financial communication of Austrian ATX Prime companies fluctuates and has room for improvement. In the national ranking, 12 of the 38 Austrian companies achieve a score of more than 50%, whereas more than 60% of the examined companies only achieve a score between 50% and 1%.
Some listed companies, including Wienerberger AG, Zumtobel Group AG, Voestalpine AG and Raiffeisen Bank International, stand out clearly from the crowd and achieve a score of more than 75% each. Wienerberger AG, the top performer, was considered the reference point in Austria and marks the benchmark at 100%. Nevertheless, this result is only a good 9 out of 16 possible points, which would put the company only 11th in the ranking of German DAX160 companies. The second-ranked company in Austria, Zumtobel Group AG, would be in 33rd place.
During the ongoing uncertainty caused by the corona pandemic, it is better to communicate less accurately than not at all. The study therefore also contains some recommendations on how companies in Austria and Germany can improve their ongoing capital market communication and financial reporting in the 2020/21 season.
Financial implications of COVID-19 and forecast remain largely unexplained
For the study, the 38 companies listed in the ATX Prime index at the beginning of July 2020 formed the sample. To assess the quality of their capital market communication, key questions from the four categories “Management”, “Financials”, “Non-Financials” and “Prospectives” were analyzed. The focus was on the first hot phase of the pandemic in March and April 2020, and on the question of whether financial communication was timely, considering the crisis. This included reporting on the 1st quarter of 2020.
It became apparent that communication on the financial impact of the pandemic on the company’s net assets, financial position and results of operations was particularly weak. In terms of the quality of the forecasts, which provide an outlook on the expected course of business, the ATX Prime companies even reach only half the score of the DAX-listed companies from Germany. According to the analysis, the market demand for high-quality forecasts will increase shortly. As the consequences of the Corona pandemic can now be better estimated than in spring 2020, the expectations of investors and analysts that their outlook will again be underpinned by tangible figures are also increasing. In the future, it will no longer be sufficient to stop giving guidance or to make purely qualitative forecasts.
“A lack of transparency is particularly harmful because it damages trust. Therefore, this was a major focus of our analysis. For this purpose, we developed a new, Corona-specific methodology that allows comparability with German companies in times of the corona pandemic.” – Prof. Dr. Zülch
On the search for the „Effective Financial Crisis Communicator | Austria”
In the past four years, Prof. Dr. Henning Zülch from HHL has already examined and evaluated the quality of financial communication for the Austrian Financial Communication Award (AFCA). The basis was the “RIC Model” developed by Zülch at the Chair of Accounting and Auditing in Leipzig. The analysis reveals weaknesses in the areas of reporting and investor relations. “A lack of transparency is particularly harmful because it damages trust. Therefore, this was a major focus of our analysis. For this purpose, we developed a new, Corona-specific methodology that allows comparability with German companies in times of the corona pandemic. Our goal is to identify those companies on the Austrian market that stand out from the crowd as so-called “Effective Financial Crisis Communicators in Austria”, says Prof. Dr. Zülch.
These DAX companies best meet the expectations of the capital market
Germany’s listed companies have mastered the challenges of transparent and high-quality financial reporting during the COVID-19 pandemic much better. The best performer is Deutsche Bank AG, achieving 12 of the possible 16 points. The second place goes to Indus Holding AG with 11.5 points. Third place is shared by the companies Puma SE, Qiagen N.V. and Hapag-Lloyd AG with 10.5 points each.