Introducing “investor relations” to corporate strategy in Ghana


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Using commercial imperative to bridge a governance gap

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  • Good work Rob and keep it up with your work.I have head about investor relationship before but have not given it too much of a taught but now with your insight I think is a really good tool for African's to leverage to get investors here to help boast our economy with constant engagement with investors.
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Introducing “investor relations” to corporate strategy in Ghana

  1. 1. Introducing “investor relations” to corporate strategy using commercial imperative to bridge a governance gap January 2009 Rob Stangroom
  2. 2. Definition of IR & background to AIC “ Investor relations is a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company's securities achieving fair valuation.” (Adopted by the NIRI Board of Directors, March 2003.) IR ≠ PR
  3. 3. History of investor relations in USA <ul><li>Post WWII & depression = savings </li></ul><ul><li>Interest & inflation were low </li></ul><ul><li>Great need for capital in USA </li></ul><ul><li>’ 52 4.5m families owned shares 4.2% of population </li></ul><ul><li>‘ 65 20.1m families owned shares 15% of population </li></ul><ul><li>Shareholders targeted for business </li></ul><ul><li>Shareholder activists resulted </li></ul><ul><li>PR abused – analysts “hyped” shares </li></ul><ul><li>Managements & boards inexperienced </li></ul><ul><li>SEC promoted retail investors </li></ul><ul><li>GE & AMA & NIRI (4300 members) </li></ul>“ To become recognised and active as a group working in the long-term interests of the investor, of broad share ownership and of better relationships between companies and potential investors.”
  4. 4. IR function in the First world <ul><li>Engage investors directly </li></ul><ul><li>Be an expert on the company </li></ul><ul><li>Carry out the valuation and financial modelling </li></ul><ul><li>Know all laws and regulations </li></ul><ul><li>Be a communicator </li></ul><ul><li>Analyse shareholders and market perceptions </li></ul><ul><li>Attend conferences </li></ul><ul><li>Collect salary of US$150,000 to US$250,000 per annum </li></ul>Africa is only just emerging onto the IR scene & technology means it can jump right into the 21 st century
  5. 5. Where technology is taking IR… Web 1.0 = document web Web 2.0 = people web Web 3.0 = database web Source
  6. 6. IR’s future – costs low, impact high 2.4m estimate = 8% of population Source Why isn’t Africa there yet?
  7. 7. The corporate IR website: a beast <ul><li>Marketing doesn’t understand finance </li></ul><ul><li>Internal PR doesn’t understand marketing </li></ul><ul><li>External PR company never in the loop </li></ul><ul><li>Finance doesn’t understand IT </li></ul><ul><li>Co sec. can manage shareholder lists but not shareholders </li></ul><ul><ul><li>No-one understands HR </li></ul></ul><ul><li>Legal department : everything is a legal case </li></ul><ul><li>IT guy should be in charge but is TOO BUSY </li></ul>Governance codes + regulations + technology agenda
  8. 8. The reality of doing business… <ul><li>Are finding competition levels increasing? </li></ul><ul><li>Are trying to re-build equity values? </li></ul><ul><li>Are looking to protect market share? </li></ul><ul><li>Are looking regional & need to show credibility? </li></ul><ul><li>Wish to stand above their peers? </li></ul><ul><li>Will be re-capitalising – from any source? </li></ul>How many companies:-
  9. 9. <ul><li>Desired position in the investment community </li></ul>Actively participate in investment community identify, influence them & receive feedback achieves MANY objectives Your company website: a prime communications tool Data, strategy, interaction
  10. 10. “ African Is Cool” <ul><li>Smallest client US$3m mkt cap. Largest + US$500m </li></ul><ul><li>Commercial benefits > cost of implementation </li></ul><ul><li>Managed investor relations website “SaaS” </li></ul><ul><ul><li>How it works </li></ul></ul><ul><li>Filling a unique market gap: the basics </li></ul><ul><li>No conflict with existing services e.g. PR firms </li></ul>Holistic outsourced online software as a service
  11. 11. Our clients <ul><ul><li>14 clients in 4 countries: Botswana, Zambia, Malawi & Zimbabwe </li></ul></ul><ul><ul><ul><li>National Investment Trust Malawi </li></ul></ul></ul><ul><ul><ul><li>Malawi Property Investment Company IPO IR </li></ul></ul></ul><ul><ul><ul><li>Celsys </li></ul></ul></ul><ul><ul><ul><li>Econet Zimbabwe </li></ul></ul></ul><ul><ul><ul><li>Imara Holdings Botswana </li></ul></ul></ul><ul><ul><ul><li>Telekom Networks Malawi IPO IR </li></ul></ul></ul><ul><ul><ul><li>Copperbelt Energy Corporation </li></ul></ul></ul><ul><ul><ul><li>African Sun Group </li></ul></ul></ul><ul><ul><ul><li>Kingdom Meikles </li></ul></ul></ul><ul><ul><ul><li>+ 2 commercial banks tba </li></ul></ul></ul><ul><ul><ul><li>+ 1 property + 1 agric company tba </li></ul></ul></ul>Market capitalisation of clients + / - US$1bn +/- 70,000 shareholders served
  12. 12. Investorpass ™ : IR software <ul><li>Vendor B2i Technologies: Texas USA + 300 clients </li></ul><ul><li>Appends to existing websites seamlessly </li></ul><ul><li>An online CRM and CMS </li></ul><ul><li>Web-mail for each investor </li></ul><ul><li>Self populating / managed investor contacts </li></ul><ul><li>Full audit trail of investor activity </li></ul><ul><li>Strong analytical and interrogation reports </li></ul><ul><li>Sarbanes Oxley compliant – i.e. secure </li></ul>
  13. 13. <ul><li>Comprehensive data – “educated investment decisions” </li></ul><ul><li>Timely data – “material data within 24 hours” </li></ul><ul><li>Interactivity – “ability to communicate & receive feedback” </li></ul><ul><li>Brief overview of a comprehensive IR website </li></ul><ul><li>Other key issues </li></ul><ul><li>Updating website </li></ul><ul><li>Reaching an audience – existing and potential investors </li></ul><ul><li>Identifying the audience individually </li></ul>The make up of your IR website
  14. 14. Using your website…… <ul><li>A retail shareholder strategy:- </li></ul><ul><li>Objective:- </li></ul><ul><ul><li>Build shareholder loyalty </li></ul></ul><ul><ul><li>Build brand </li></ul></ul><ul><ul><li>Improve corporate “reputation” </li></ul></ul><ul><li>Automated contacts collection & management </li></ul><ul><li> Build brand, cross sell keep costs low </li></ul><ul><li>Use shareholder education as a tool </li></ul><ul><li>Identify diaspora investors </li></ul>
  15. 15. <ul><li>To respond to or influence the media </li></ul><ul><ul><ul><li>Emails are free – press releases are not </li></ul></ul></ul><ul><ul><ul><li>Pre-empt press releases </li></ul></ul></ul><ul><ul><ul><li>Respond to the media / press directly </li></ul></ul></ul><ul><ul><ul><li>Crisis communications </li></ul></ul></ul>Newspaper and PR firm placement costs can be avoided if you have a direct communications channel with the broader media Using your website……
  16. 16. Why communicate online? <ul><li>Legal & regulatory requirements </li></ul><ul><li>Easy access to a global community </li></ul><ul><li>It makes money, brand & reputation growth is cheap </li></ul><ul><li>Increases valuation:- </li></ul><ul><ul><li>79% of analysts include poor communication as a reason to downgrade stock valuations </li></ul></ul><ul><ul><li>88% of analysts said poor disclosure also dropped ratings </li></ul></ul><ul><li>Shareholders purchased shares based on 2 assumptions:- </li></ul><ul><ul><li>There is a market for them </li></ul></ul><ul><ul><li>At a reasonable price </li></ul></ul>Corporate governance guidelines
  17. 17. Your annual report…. <ul><li>Annual reports: prime tool for analysts </li></ul><ul><li>Can be used to identify investors </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li>Traffic analysis </li></ul></ul><ul><li>Costs a lot: must be delivered in hardcopy </li></ul><ul><li>Should be scaled down to </li></ul><ul><ul><ul><li>Abridged – 6 pages </li></ul></ul></ul><ul><ul><ul><li>Regulatory - IFRS </li></ul></ul></ul><ul><ul><ul><li>Online - Sample iPaper annual report </li></ul></ul></ul> Only 29% of all African annual reports are online 27% for Ghana Annual reports
  18. 18. <ul><li>Barriers to online communications fallen away </li></ul><ul><li>High commercial ROI to online communications </li></ul><ul><li>Fulfill core governance practices in one solution </li></ul><ul><li>Take an active interest in IR </li></ul><ul><li>Early starters will benefit the most </li></ul><ul><li>Objective is to ensure equities can achieve “fair valuation” </li></ul><ul><li>“ Good Governance” principles are not “implemented” they result from actions by management to communicate responsibly with the investment community </li></ul>Our message
  19. 19. <ul><ul><ul><li>“ Questions” </li></ul></ul></ul><ul><ul><ul><li>& </li></ul></ul></ul><ul><ul><ul><li>“ Thank you” </li></ul></ul></ul>