8 ways to... improve investor relations

Managing the market’s expectations is particularly difficult in an era of austerity. But CFOs and their boards have several tactics open to them when it comes to the two crucial tasks of differentiating their businesses and making a clear case for investment

1. Encourage the whole board to get involved
In most big companies, investor relations (IR) activities are led by a team that may include the chairman, chief executive, managing director and CFO or FD. But this doesn’t mean that the other directors should be sitting on the sidelines.

“The whole board must be committed to a proper IR approach that links, perhaps, with corporate governance as well,” says Laurence Sacker, a partner at accountancy firm UHY Hacker Young who leads work for AIM-listed companies.

This entails having IR on the agenda at board meetings. And it should mean that the IR officer, if the company has one, sits in on these meetings when it’s being discussed.

Yet, according to recent research by Sandra Novakov, IR director at PR agency Citigate Dewe Rogerson, three-quarters of IR officers do not regularly attend board meetings.

2. Explain to investors the dynamics of your market
The kind of IR that investors like best helps them to understand how a company generates its income and builds its value. It’s the kind of IR that is not insular but outward looking, giving people confidence that the company is in touch with the world around it.

Janet Dignan, editor of IR Magazine, cites the example of London property development firm Great Portland Estates, whose chief executive and CFO spearheaded an award-winning IR programme.

This included trips for analysts to view properties and participate in planning discussions.

“That kind of activity works very well,” Dignan says. “Investors and analysts like it when they can speak to somebody who can talk about the wider sector as well as their own company.”

3. Meet your performance targets
Nothing will undermine your IR efforts more than consistently failing to hit the targets you’ve set yourself, according to Catherine Miles, an IR specialist at financial services firm Sanlam Securities UK.

Luxury goods maker Mulberry, for instance, was forced to issue three profit warnings in the year to March.

Increasingly, the milestones that are so crucial to reach aren’t only financial ones. There could be environmental and social criteria to satisfy as well.

4. Attract more analyst coverage
It’s important to maximise coverage of your business by sell-side analysts, because investors are becoming increasingly reliant on their opinions.

Although a big multinational can attract the attention of as many as 20 analysts, recent research by IR Magazine suggests that CFOs and IR officers are becoming dissatisfied with the quality of their reports: only 26 per cent of the sample said they were “very satisfied” with the coverage their firms had received.

Novakov’s research has also revealed a decline in satisfaction among companies with coverage from sell-side analysts: 41 per cent of respondents said that they had noticed a drop in quality over the preceding 12 months.

She notes that face-to-face meetings between analysts and senior managers are among the most popular measures to encourage better coverage.

5. Provide a regular flow of information
“In a volatile market it is imperative to have a continuous flow of news,” advises Hugo de Salis, founder and director of IR consultancy St Brides Media & Finance.

A good flow of information helps to keep investors interested in your company, he says. “If you’re an investor and you have not heard from the company you’ve invested in for some time, and you’ve got a call on your fund, you’re going to try to sell something that you don’t believe in.”

De Salis’s point: don’t be that company the investor doesn’t believe in.

6. Target those investors who matter the most
The scattergun approach to seeking capital rarely works well. It’s clearly important, therefore, to seek out and court those investors who are most likely to be interested in your company, Sacker says.

Both wealthy individual investors and institutions have specialisms – usually by industrial sector or region.

“You’ve got to speak to the right sort of people,” he stresses.

Dignan warns that it can require a lot of time and effort to build productive relationships with investors.

“The thing that institutions, or indeed any sensible investors, want to see is a business that is consistent and one that keeps giving them information,” she says.

That also entails talking to investors when things have gone wrong as well as when they’ve gone right, she adds. “If you can build those relationships as your business develops and grows, they won’t go away.”

7. Hold a roadshow
Roadshows have become something of a routine for many quoted companies. They offer a regular way to meet existing and potential shareholders.

Novakov’s research has found that 40 per cent of firms are planning to spend more time on going out to see investors.

A similar proportion are taking their roadshows to emerging financial centres, including continental Europe and secondary financial cities in the US.

8. Build social media into investor relations programmes
When it comes to IR, social media is still in its infancy. But more and more firms are putting a corporate profile page on Facebook, while some are using LinkedIn

IR apps for tablets are also becoming popular in Europe. But most companies are using social media purely to disseminate news about themselves.

This ignores the potential value of social media as a two-way communication channel. Novakov says that IR professionals who have found more innovative ways of using social media have seen a positive effect on their companies’ share prices.

Some are monitoring conversations on social media for rumours or using these forums to gather market intelligence, she reports.

Illustration: Borja Bonaque

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