Investor Relations and Shareholder Communication : Linking internal aspirations with external...
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Transcript of Investor Relations and Shareholder Communication : Linking internal aspirations with external...
I R l i & Sh h ld C i iInvestor Relations & Shareholder CommunicationLinking internal aspirations with external expectations
Sanjay UppalGroup Chief Financial OfficerEmirates NBD
Challenges for the Modern CFO28 – 29 October 2007The Fairmont Dubai, Dubai
Best Practices & Messaging
IR Departments : Organization & Staffing
B d & M t S tBoard & Management Support
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Your company belongs to its shareholders……
h t t d t dwho want to understand…..
‘What makes this company so unique that they should h t i t th i h ll thchoose to invest their money here, versus all other
opportunities’
2
The Investor Relations challenge ……
‘How should I communicate the performance and outlook f th th t ld ll i t t itfor the company that would allow investors to assess its
fair value’
3
Objective of Investor Relations
Achieving ‘fair & sustainable value’ for theIt IS sustainable value for the company’s stock
It IS
‘M i i i ’ t k lO ‘Maximizing’ stock valueIt is NOT
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Too many companies have paid the price of over-promising & disappointing investors
Core issues to address
How big are the opportunities of market capitalization improvement (gap between intrinsic value vs. market value) ?
What are the key drivers of the gap ?
– Communication
Strategic content– Strategic content
– Transparency
– Governance
Where are the primarily IR levers that should be “moved” ?
– Is the communication content clear and consistent ?
– Is the communication correctly targeted and done toward the right segment of investors / analysts with the right method and frequency ?
– What type of financial tactics could unlock the value of the company in the
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– What type of financial tactics could unlock the value of the company in the market ?
Role of Investor Relations
Discussion Topics Role of the IR teamStakeholders Discussion Topics Role of the IR team
Financial resultsQ t l / A l
Stakeholders
Shareholders Prepare financial results announcement
Quarterly / Annual
Capital / Funds raising
St t
Investors & Analysts
Prepare investor / analyst communication (equity story)
Manage rating agency Strategy
Forward looking statements
Rating Agencies communications
Coordinate regulator communication
Coordinate all internal IRAnalyst / Investor presentations & roadshows
Regulators
Customers
Coordinate all internal IR related publishings / communications
Validate / filter external
Regulator communication
Customers strategy / financial discussions - prepare guidelines
Manage all media for IR.
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AGMsGeneral Public e.g. website, paper, conference calls, etc.
It’s not just about money……
“Institutional investors attributed 72 percent of the information they regard as important to non-financial measures, compared with only 28% which are financial.
Most frequently cited factors relate to people such as management credibilityMost frequently cited factors relate to people, such as management credibility and expertise, alignment of compensation with shareholder interests and ability to attract and retain talented people.”
7Source: PwC 2004
Strategy communication matters
e9
10
Aholdla
tion
scor
e
7
8
Heineken
AegonUnilever
Rabobank
Inve
stor
rel
6
7
Numico
Fortis
AchmeaABN-Amo
Wessaren
4
5Numico
Credibility of strategy (%)0 20 40 60 80 100
8Source: Rematch (2001)
High correlation between credibility of strategy (as seen by investors) & their appreciation of investors relations
Disclosure are of paramount importance
What do you consider to be the most essential elements of IR ?Percentage of respondents *
48
32
Disclosure
Frequency & quantityDisclosure = Financials + Corporate
32
26
Frequency & quantity
Accessibility
Strategy16Quality of interactions**
2Procedures
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* Multiple answers lead to total not equal to 100%** Presentations, visits, meetings, etc.
Source: Taylor Nelson Sofres survey of more than 600 investors & buy-side analysts over the summer of 2001
Factors influencing perception factor CONCEPTUAL
Li idit
Investor baseAnalyst
Liquidity y
models
Market value
Real Perception
Market reactions
Financialpfactor Financial
forecasting
Country / Governance
discountIR activities
Story-telling
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IR Magazine : US Investor Relations Awards 2007
Grand Prix for Best Overall Investor Relations : Mega-cap GE
Best Corporate Governance GEBest Corporate Governance GE
Best Use of Technology GE
Best Annual Report : Large to Mega-cap Berkshire HathawayBest Annual Report : Large to Mega-cap Berkshire Hathaway
Best Investor Relations by a Chairman or CEO Cisco Systems
Best Investor Relations for an IPO Western UnionBest Investor Relations for an IPO Western Union
Best Investor Relations Web Site : Mid to Large Cap General Motors
B S i M C i i Ci SBest Senior Management Communications Cisco Systems
Best Investor Relations by a European Company in US Nokia
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Best Investor Relations by an Asia-Pacific Co in US Toyota Motor
Winning investor confidence .
“We don’t believe reliable growth has gone out of style. We know that reliable growth is
always in style for long-term investors. They look at GE over an extended horizon, like I
do. They benefit from a company that anticipates change in the environment and executes y p y p g
aggressively. This is your GE.”
—Jeff Immelt, Chairman and CEO, Letter to Investors, 2006 Annual Report
With more than five million shareowners, GE is one of the most widely-held stocks in the world. For generations, GE has offered a sound investment for institutional and individual shareowners. Over the last 10 years, GE has returned 13.5% versus the S&P 100 total ret rn of 9 1% Additionall GE has paid a di idend e er ear since 1899 and has
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return of 9.1%. Additionally, GE has paid a dividend every year since 1899 and has increased its dividend for 31 consecutive years.
Source: www.ge.com
Honesty Works – Spin Doesn’t !
An example of how candid Warren Buffett can be, below is a passage in his 2001 l tt t h h ld th l d i D t Sh
BERKSHIRE HATHAWAY INC.
2001 letter to shareholders on the losses made in Dexter Shoe :
“I've made three decisions relating to Dexter that have hurt you in a major way: (1) buying it in the first place; (2) paying for it with stock and (3) procrastinating when the need for changes in its operations was obvious. I would like to lay these mistakes on Charlie (or anyone else, for that matter) ou d e to ay t ese sta es o C a e (o a yo e e se, o t at atte )but they were mine. Dexter, prior to our purchase – and indeed for a few years after – prospered despite low-cost foreign competition that was brutal. I concluded that Dexter could continue to cope with that problem and I wasI concluded that Dexter could continue to cope with that problem, and I was wrong.”
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Warren Buffett’s letters to Berkshire shareholders over the years are a great example of honesty and simplicity in investor communication
Best Practices in Investor Relations
IR Departments : Organization & Staffing
B d & M t S tBoard & Management Support
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Investor Relations : Organization Design
Report to CEO / CFO CEO / CFOReport to CEO / CFO
3 Key elements :
IR Specialists
CEO / CFO
Head – IRp
Analysts
Administrative / SupportIR Specialists Analysts Admin
Key role in Corporate Strategy development
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Long-term success depends on IR professionals addressing investor concerns & building confidence in their companies
IR Department : Specialization Required
IR ExecutivesAnnual ReportWebsiteProduct development for investorsInternal business / product informationCompetitor analysisIR T h i l S t IR Executives
Head – IR
IR Technical SystemsAnalyst interaction & communicationManage stock transfer agents
IR Executives
Analysts
AnalystsSell-side experience
Buy-side experience
Admin
Financial & valuation modeling
Administrative & SupportEvent organization
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Event organization
Production
Best Practices in Investor Relations
IR Departments : Organization & Staffing
B d & M t S tBoard & Management Support
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Board & Management Commitment –the starting point
Understand the demands of a public listed company
Understand that the role of IR is achieving a ‘fair’ value for the stock price & not priceUnderstand that the role of IR is achieving a fair value for the stock price & not price maximization
Allocate time to IR activities – this can be very demanding
Focus on value creation – day in and day out
Meet with investors – to demonstrate commitment of their interests. This also allows i t t th l d hi f thinvestors to assess the leadership of the company
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The starting point for success in Investor Relations
In ConclusionIn Conclusion
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In conclusion……
1. Board & management commitment
2 Equity story : Communicate future value2. Equity story : Communicate future value
3. Reduce gap between intrinsic value & market value
4 K i t h h h t h & h4. Know your investors : who, why, what, when & how
5. Know your other stakeholders : Understand the role of Media
6. Statutory disclosures are only the minimum : Honesty & Openness pays
7. Establish formal IR department, processes & disciplines
8. Manage Expectations : Investor confidence is hard won, but easily lost
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I R l i & Sh h ld C i iInvestor Relations & Shareholder CommunicationLinking internal aspirations with external expectations
Sanjay UppalGroup Chief Financial OfficerEmirates NBD
Challenges for the Modern CFO28 – 29 October 2007The Fairmont Dubai, Dubai