ESTABLISHING EFFICIENT IR COMMUNICATION PLATFORM
Alexander TolkachDirector for External Affairs
DTEK
ESTABLISHING EFFICIENT IR COMMUNICATION PLATFORM
ALEXANDER TOLKACH
DIRECTOR FOR EXTERNAL AFFAIRS
October 11
TO WHOM IT MAY CONCERN
Few people in the company know what is IR…
Everywhere nobody likes to share information, so you have to force it
Successful IR office is reporting to CEO only! It is presented on the Management and Board meetings
There is no direct system to calculate the profits of successful IR office
But what IR can not do
The company won’t get in money terms
HOW INVESTORS MAKE DECISIONS?
They rely heavily on information inflows
Direct communications from the company (82%*)
Buy-side of investment community (70%*)
Trade media (64%*)
Sell-side of investment community (53%*)
National business media (49%*)
*Percentage of respondents who ranked this type of communication in
the top 3
Source: Financial Dynamics US Investment Community Survey
WHAT DO INVESTORS WANT FROM A FOREIGN COMPANY?
Financial transparency 62% want a reconciliation to US GAAP, IFRS as a second choice
46% say it is imperative that companies provide translation into US dollars
79% believe foreign companies should report on a quarterly basis
Access to management 87% of investors want foreign companies to visit at
least once a year
Source: Financial Dynamics US Investment Community Survey
BEFORE STARTING COMMUNICATIONS
Within the Company business strategy has to be finalized and approved• The Company has to understand it’s future for next 3-5 years• Business plan must be followed
Clean up your business• Demonstrate integration• Demonstrate modernization• Demonstrate M&A targets
Limit your management in what they do!
Regular financial reporting
Unified and coordinated external communications of all the Company is a must! Especially when communicating with financial society
You need to meet the minority shareholders’ expectations and respect their rights
MAKE A POSITIVE FACE OF THE COMPANY
First impression analysts and investors form based on your public information
Positive image of the company
Media WEB Site Brand recognition
Rumors within the society
Unblured vision and consistency
Key message
A public company must send clear and commonly accepted messages
Which believes in itself!
Strong, qualified and cooperative management team
Clear and transparent public strategy of development
Proofs that the Management is capable of implementing the strategy
Ability to admit mistakes or difficulties and explain ways out of them
Understanding of the ways to increase shareholder’s value
Limitations in self-advertising
Public company under no circumstances can be involved or initiate any
action, which can be treated as advertising it’s shares
Any public address or information can be treated as attempt to advertise of
inflict your share price
Broad understanding – so be aware of provocations
There aremany examples
If the can, they will punish you
Teach everyone in the company
Monitor and record everything what you say or e-mail to third parties
Do not say anything ‘extras’ in the private conversation – it can be used and/or
recorded
Never say anything beyond already reported (all employees should know published press
releases at least)
All forecasts and forward looking statements should be limited to officially
published reports/releases
Do not say anything ‘extras’ on public, especially if media are present. No
friendship here allowed
Everything, even heard privately, by one journalist, analyst or banker can
impact the market!
Communication system
To deliver all mentioned the company must have a joint internal communications and alerting system
All information from the company, it’s branches and subsidiaries should be approved by IR office
• To avoid selective disclosure• To be cautious in forecasts• To be honest• All information should be based on consolidated US GAAP/IFRS financials, not on local reporting standards
On all the events and emergencies IR office must be informed immediately, 24/7
•All divisions should cooperate with IR to allow for fast and correct communications with investor society on all the events
Information availability
Information should be available without necessity to contact you
Intuitive, multilingual and transparent WEB Site with all distributed public information such as reports, presentations, management statements and press releases
Nice, logical and not boring IR booklet with brief figures of financial and operational results
Well structured and detailed Annual Report. Not contradicting previous reports…
Well structured, pre-analyzed and detailed IR Presentation (for 1x1 meetings)
Be Farsighted
If the question was asked and you immediately give the page number
with an answer – you’ve won!
You’d better answer questions before they are asked
• Collect the history of Q&A
• Questions you don’t like will not disappear
• All unanswered questions leave negative impression
• All available information should better be inserted in the presentation or report in advance
• Study presentations and report of the peers!
Respond to e-mails, phone calls and meeting requests
• For all investors and analysts IR is the face of the company. Those who deny them will never get a good valuation
• All unanswered questions leave negative impression
Communications should be frequent and systemized
IPO AND IF THERE IS IR-LIFE AFTERWARDS
Create contacts before IPO Maintain contacts after IPO
NDR 1x1 Investor day
Whom they really want to see
IR officerIR officerTheoretically knows everything, but from others
…Least wanted
When proposing a meeting,
good analyst want to see the one, who
really manages the money
CFOCFOHe knows what is going on, he rules the money flows
…And he is really expected
CEOCEOHe rules the strategy and they all want him
… But his time is presious
WHY BUY-SIDE IS THE MOST IMPORTANT CHALLENGE OF IR
Buy-side PM/analysts are responsible for other people's money (trillions USD). That they need to know:
• Truth
• Details
• “Pearls”
Funds care to trust and about the history of relations
They long remember the fact of fraud or deception, and therefore almost impossible to restore good relations.
They do not believe a publicly accessible records of sell-side, so they build own models
They like to provoke and test newcomers, especially in the U.S.
ESSAY TO CLASSIFY PEOPLE AT THE MEETING
In general, IR is always a balance of mathematics, analysis, and psychology. But that balance is always different.
I have devised the following classification:
• Mathematics • Explorers or stalkers
Behavioral strategy and using materials depends on the classification
In London and the U.S. people at a meeting certainly believe that they are smarter. Rare - in continental Europe.
But usually they are really clever
The history of relations is a key to growth or lower a volatility of paper!
VARIANTS TO ORGANIZE MEETINGS - PASSIVE AND ACTIVE
Passive: banks or funds go to an issuer with a proposal to meet
Active: issuer calls banks/funds and suggest to meet for an update/NDR
Active issuers are treated as smarter ones
Active companies generate more recognition and recalculating = buy
Active company is loved by sell-side, as they earn their bonus
CONDUCTING A MEETING
There are rules to be obeyed, IR world is a peculiar society…
There are familiar and unfamiliar funds – treat them accordingly
Try to stay within courtesy limits, while breaking ice and sending “trust me” messages
Time management: 45-60 minutes per meeting, at least 20 minutes spared for Q&A
Be calm, self-assured and polite. Do not react emotionally (apart from humor)
Follow up a meeting (e-mail, clarifications, database)
HARD WORK AHEAD
It is far from easy to build up a working system of information exchange and materials’ preparation
IR officer needs to know the company in deepest details of it’s operations, otherwise he is just a parrot – with appropriate disrespect
IR officer needs to invest in networking with top-management – access to first-hand information
IR needs to create handful of handouts, presentations, training programs for management, regular internal meetings, reporting scenarios…
IR officer must draft and get approved full and sophisticated scheme of information flows, approvals and reporting
•Many divisions will hate you for that and deprive you of information – it’s a long fight
IR TEAM COMPOSITION
It’s not numbers, it’s experience and devotion
IR office will not achieve goals just relying on numbers of people in it
External consultancy can be of use, but not a ultimate solution at all! If they are on a monthly payment – forget about efficiency at all
Analysis, communicative skills, visual materials
• Assemble a team, which can cover all that. But no more extra hands – excessive numbers will slow you down
Do they know you?
If analysts know the name of your IR officer,
If name of the company is known to major media,
If logo on your card is recognized on a conference,
If others start to steal from your presentations and releases,
If you have coverage coming from all-size banks:
Congratulations,
you have right IR team!
Thank You!
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