Investor Relations insights
The Return of the Capital Markets Day!
Having read many ‘Trends for 2023’ articles and blogs over the past few weeks we have noticed a common thread amongst the predictions for the year ahead – the importance of in-person engagement with investors. There is a definite appetite for more in-person meetings, presentations and events. After a quiet few years, the Capital Markets Day seems to be firmly back on the IR Agenda! This has been confirmed by the many conversations that we at Equitory have been having with clients and prospective clients: the first half of 2023 would seem to be a popular choice for hosting a CMD. Given this, we think it is a good time to look at the whole subject of CMDs and answer a few questions: what are they, what format should they take, what is their purpose, what do they need to include, who should they involve and what makes a good CMD?
What is a CMD?
While it is something of a ‘catch-all’ term, a CMD is an event hosted by a company to which it would typically invite the sell-side analysts who cover the stock and representatives of the institutional shareholders who own the shares. As it also has something of an IR marketing purpose, many companies choose to invite buy-side representatives who may not currently own their shares but have previously met with the senior management team or expressed an interest in the business, as well as targeting potential new sell-side followers. While the CMD has become a pretty universal term, some companies use other terms such as Investor Event, Analyst and Investor Day, and Strategy Day: however, in essence they all refer to a similar thing.
The format of these events varies considerably: in some cases, they are all-day events as the name would suggest, but more commonly they are half-day sessions, or even just two or three hour ‘bite-size’ events. Whilst historically they were done as physical face-to-face events, the Covid-19 pandemic meant that in the last three years, many were hosted virtually. With the return of face-to-face meetings, some companies are reverting to physical events, and live streaming or a hybrid format is very common. In recent years, a trend had already started towards more time-efficient events with less travelling required by attendees. Even before MiFID II, considerations of time and increasing compliance issues around travel costs and hospitality, particularly for the sell-side, meant that the days of the fabled City ‘site visits’ and ‘analyst trips’ lasting several days had long passed: a conveniently located venue such as a hotel or presentation centre with a buffet meal or drinks and canapés is very much the norm for most companies. Particularly with the use of digital media, companies are able to showcase their assets remotely to a City audience without the need to travel. Whatever format you choose, our advice would be to think about maximising the use and efficiency of the time available for attendees: by making it time-efficient and convenient, you will maximise the number of people who will attend, particularly from the sell-side.
What is the purpose of a CMD?
Whatever format you choose, the purpose of a CMD should be the same: to increase the understanding and appreciation of your business – or an aspect of your business – by the investment community. As such, it should allow attendees to get deeper ‘under the skin’ of your business. It does not – and probably should not – have to disclose any new information that is price sensitive: indeed, it is often considered best-practice for companies to issue a short announcement to the market on the day of a CMD confirming that they are hosting an event and that no new information that might be price sensitive will be disclosed. Unlike a post-results analysts’ meeting or a one-on-one meeting with a shareholder, there is no need to provide the normal details that would be included in a results pack. Instead, a CMD should focus on broader strategic and business issues: strategy, growth drivers and market dynamics rather than reporting on historical results and financials. The aim of the event should be to provide your audience with material and information that you do not typically have the time to discuss at your results presentations, but which will enable them to build a fuller, more detailed picture of your business and the markets in which it operates. It allows you to convey more non-financial information: the culture of your business and to introduce other members of your senior operational team, or perhaps get a key customer or partner to present. Whatever you decide to provide, it should represent a deeper dive into your business – or an aspect of your business – that gives attendees a better, more detailed understanding of what makes your business tick, how you generate returns and growth and what makes it a successful business.
So, if you are considering hosting a CMD this year, what are Equitory’s key tips?
The importance of a theme
It is important to have an overarching narrative and theme for any CMD: what do you want to convey to the investment community and why? Obviously, in some cases, the theme of the CMD is self-selecting, for instance the unveiling of a strategic review, showcasing a new acquisition or maybe highlighting a particular business or division. However, if this is not the case, then it is important to identify a common thread or over-arching narrative for the whole event: it could be, for example, innovation or the role of technology in your business.
Identify any gaps in knowledge or misperceptions
Although you might feel you have a good understanding of what aspects of your business are the least well-understood or appreciated by the investment community, we would always recommend using a third party, such as Equitory, to speak to a selected sample of your sell-side followers and shareholders before planning the day to ascertain what they would find useful and interesting. Identifying gaps in their knowledge and understanding before you draft the content for the event is important to ensure that your CMD hits the mark.
Planning: Logistics and Timings
Whilst the contents of any CMD is clearly the most important aspect of the event, the organisation and logistics of the day are also important in creating an impression of your company: a well-organised CMD suggests a well-managed business. It is therefore essential that things run smoothly, that timings are strictly adhered to, and attendees feel that the material is pitched at the right level for them. As well as consulting your advisers on the draft materials for your CMD, we advise our clients to practise and rehearse as much as possible, preferably in the venue they will be using on the day. Speakers, particularly any members of the operational team new to investor events, need to do a full run-through of their slides and script to check sequencing, timings and how to seamlessly move between speakers and any digital content which might be used. Questions (and answers!) need to be practised, not just to attempt to ‘question spot’, but to ensure that the members of the operational team who are less familiar with City audiences understand what information they can or cannot share in that environment. It is also important to practise the transitions between speakers and how the Q&A sessions will be handled well in advance of the actual event.
Content: Less can be more
It is important that the event length and pace is comfortable for the attendees and that it can hold their attention and interest: there is no more of a turn-off than sessions that go for too long or are too detailed to be of any use or interest. Make sure there are adequate breaks in the schedule and set a limit to the lengths of individual presentations (e.g. 30 minutes). Incorporate short Q&A sessions throughout the day, rather than having a long session at the end of the day. Provide opportunities for attendees to chat to the management team in a more informal way during coffee or lunch breaks. Many CMDs end their formal sessions with a drink or a meal at the end, but inevitably not all attendees will be able to stay on, so it is good to provide them with an opportunity to meet your team during the event. Finally, do not be tempted to pack everything into the schedule: far better to hold something back for another occasion than to bombard people with too much information and too many presentations: less can be more!
Showcase the strength of your management bench
A CMD is an excellent way to introduce the investment community to senior members of your operational team with whom they are less familiar, or maybe have not met before. For many companies, the only regular representatives at City presentations are the Chief Executive, the Chief Financial Officer, and the Head of Investor Relations. A CMD is the ideal opportunity to introduce members of the team who are delivering the Company’s performance and results and an opportunity for you to show that there is ‘strength in depth’ on the management bench – an important message as far as succession planning goes. It is important to let them have their voice and some of the best CMDs are ones in which the usual ‘City C Suite team’ say very little beyond some opening and closing remarks and effectively ‘hand over’ the day to their senior operational team.
Produce interesting and useful content
Organising a CMD takes a lot of planning and hard work: it is important to ensure it has a good impact. Even if you are streaming your event live, it is worth recording or filming it and making it available for those who were unable to attend on the day by putting it on your website. You might want to create edited or shorter versions that you could put on your website or use later. Create a separate area on the investors’ section of your website for the event where you can place this content and index it to make it easy for people to access individual sessions without having to replay the whole event. Consider producing some ‘bite size’ videos or materials that you can send to invitees who were unable to attend on the day.
Obtain post-event feedback
Organising a CMD entails significant cost and management time: it is important to get a good return on your investment. We would strongly advise clients to follow up with attendees after the event to obtain their feedback. Did the CMD hit the mark in terms of extending their knowledge and understanding? Were there aspects that they felt needed more explanation or time? Did the format work and do they have any suggestions that could be adopted in the future. Whilst there are a number of online survey products available that can provide mainly quantitative responses, we would advise using a trusted third-party adviser such as Equitory to undertake more detailed, qualitative feedback by speaking to a representative sample of attendees. In our experience, attendees are more than happy to provide this, and it provides an excellent basis for learnings for future events and the ongoing IR programme.
If you would like to find out more about how Equitory could support you in planning and running your next Capital Markets Day please email email@example.com.