AT THE first CA Cheuvreux Investor Relations Summit in London last week, 170 IR officers from around Europe got to hear directly from research heads and fund managers about what they’re looking for from investor relations departments.
The event also marked the release of Cheuvreux’s second annual survey (PDF 213KB) covering 370 institutional investors in Europe and the US, which found that they overwhelmingly prefer meeting directly with CEOs or CFOs instead of investor relations pros. The survey found that investors are four times more likely to make an investment decision following a meeting with a CEO/CFO than after a meeting with a head of investor relations.
Fully 43% of respondents said they got little more than “public relations” out of meetings with IR officers, with one quoted as saying: “Quality of IR can vary strongly…it really depends on the IR and their relationship with the board, if close enough.”
At the event, several senior analysts and fund managers gave presentations about their investment or research approaches and offered tips for improving IR. Here are highlights from their presentations along with links to their slide decks.
Jeff Taylor, Head of European Equities, INVESCO
When companies/investor relations get it wrong
- Use of IR as a defence mechanism to protect senior management from the outside world
- Not giving IR sufficient information/tools to handle the questions that investors really need to have answered
- Inconsistent messaging to different audiences
- Overly complicated messaging: analysts need detail but investors also need to be able to get a clear overview. Share prices are typically moved by simple things
- Lack of willingness to communicate clearly and in a timely way in bad times
When companies/investor relations get it right
- IR recognized as an asset not just a cost center: a vital and integral part of a company’s long-term success in accessing the capital markets
- Close involvement of IR in a company’s strategic development planning to enable IR to be seen by investors as an appropriate alternative to meeting management
- Recognition that investors will still need regular access to senior management
- Giving IR sufficient information/tools to handle the questions that investors really need to have answered
- Clear communication on corporate direction: issues, solutions, review of progress made, outlook
Full presentation (PDF 284KB)
Henk-Jan Rikkerink, Head of European Equity Research, Fidelity Investment Managers
A few personal perspectives
- Encourage two way communication between management and investors
- IR role to make shareholder views known to senior management & board
- Find out who key shareholders are & seek their views
- Use analyst as your first point of call and highly influential to our holdings
- Realize we may not always have an aligned house view
- Appreciate access to your board members, senior management, your premises and outside roadshow timings
- Please make company reports clear for your shareholders to understand the business – limited jargon, glossary of terms, etc.
- Like to fully understand your remuneration policies for executives
Full presentation (PDF 288KB)
Tawhid Ali, Director of Research, UK & European Value Equities, AllianceBernstein
Investor Relations Behaviors We Like
- Willingness to engage in debate (not just repeat company line), even on potentially contentious issues
- Anticipate market concerns / needs and respond accordingly
- Seek out non shareholders / shorts to hear their point of view
- Honesty about own organization’s short comings
- Pushes back on own senior management at appropriate times
Full presentation (PDF 219KB)
Daniel Roberts, Head of Research for Core Team, Marshall Wace
Five recommendations
- Set clear medium term financial objectives focused on growth, C/F return on capital and risk. These goals should be ambitious but realistic
- Short term guidance can be helpful but not essential. If you provide it, be specific
- Management compensation – align it with shareholders and publicise it
- Eliminate any impediments to your share price reflecting intrinsic value e.g. Governance/archaic legal forms; multiple share classes; poison pills; unclear strategy; poor communication
- FCF – if you can not invest surplus cash in a way which enhances value, return it!
Full presentation (PDF 103KB)
Roderick D. Jack, COO & CIO, ADELPHI
How Should Investor Relations Treat Hedge Funds?
- “Hedge fund” label describes a fee structure rather than investment approach
- Learn who in the industry to spend time with
- We also hate the rude, unprepared, short term-ist analysts who ruin group meetings and lower the tone
- Do not take a short position personally nor view it as an indication we view management as poor
- Seek feedback from us; an active dialogue with investors should not be limited to activist funds
- Be informed but admit what you don’t know
- Sell the reality, not the dream. Less PR and more IR
- Be consistent – with all investors, across the entire management team, over time
- Make divisional management available
- Don’t try to be clever; it always backfires
- Clear communication is more important in bad times than good
- Ask us what we think and tell us why we are wrong if you disagree
- A well informed market gets fewer surprises
- This lowers volatility and therefore cost of capital
- When times are tough, people will listen to you
- Managements generally prefer stimulating meetings
- Investors can be a source of free advice and market information
- Communication is a two way street – we will gladly share our opinions with you
Full presentation (PDF 137KB)
You can obtain all of the information from the summit, including video interviews, at http://conference.cheuvreux.com/
Dominic Jones (bio) created IR Web Report in 2001. He is a consultant to leading public companies and investor relations service providers worldwide. You can contact him via the contacts page.
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