Investor Relations insights
“We develop a storyboard and include tactical activities to tell the investment story over time”
Creating a binge-worthy company story
As the world was gripped by Netflix-mania, Mav Wynn saw certain parallels with the IR industry. Here, she explains how storyboarding will help maintain company focus.
Many of us discovered the wonders of Netflix over the past 18 months, recommending our latest TV addictions to friends and family. With a plethora of programmes to choose from, these recommended shows had me hooked, gripped and goggle-eyed for days. I was caught between saving episodes, not wanting the story to end, and desperate to know what would happen next letting auto play take control, happily investing my time watching another episode. Once my trusted recommendations had run out, I trawled Netflix and was struck by the similarity of investor relations to either a bingeworthy multiple series award-winning programme or a one-series wonder.
Any company (TV programme), no matter sector or size (genre or budget), must capture and maintain the attention and imagination of the market (viewers) to attract and retain capital, allowing it to grow and be successful (release another season). I will leave the analogy there.
Strategy and planning
The point is that the challenge and ability to attract and retain investors is especially true for smaller companies. This could be due to investment constraints (market capitalisation and liquidity), limited analyst coverage (MiFID II) or management lacking the time and resource to dedicate to an IR programme.
Our view is that, as part of the strategic development of a company in the capital markets, regardless of sector or size, it is essential to have a dedicated IR resource and a clearly defined investor relations strategy and plan (IRS&P) that supports the overall business strategy.
This IRS&P facilitates a structured approach in an end-to-end communication programme and this in turn provides the market with an easy way to gauge progress and identify any gaps in objectives and guidance. As a result, the company builds its credibility and reputation for consistent delivery and, when the day comes, forgiveness for under-delivery. By having the board and senior management agree on the detail of the IRS&P over time, a company can focus on delivering results, avoid being overly focused on short-term movements in the share price and better allocate time spent on IR activities.
Of course, developing the IRS&P initially involves some heavy lifting however, once in place, prepares and guides a company in its communications programme as planned business developments provide evidence of ongoing strategic progress. It provides a structure to tell the corporate and investment story in such a way that its purpose, strategy, business model and KPIs weave together in a believable and authentic way.
Easing the burden
We are often told by smaller companies that they simply lack the time and resources to develop and commit to an IRS&P. However, this disciplined, structured approach led by a dedicated IR resource will ultimately ease the burden on management and finance teams at reporting time and gives the company breathing space to deal with any unexpected situations that may arise. It also enables and empowers other company resources, such as advisers, brokers, social media, the PR and events team and the corporate website, to do much of the storytelling and address questions on their behalf.
Take one of the key challenges for smaller companies – access to capital. Identifying the appropriate audience and attracting new or previous investors often requires multiple meetings, a time-consuming endeavour when the primary focus of management time must be on running the business. Smaller companies could also be disadvantaged by MiFID II and less available company research. In the absence of research, investors rely more on the company to provide the information they need. If a company has a well laid-out IRS&P, with a clearly articulated group strategy, well-defined KPIs providing evidence of sustained financial performance supported by an end-to-end reputation strategy identifying, attracting, and convincing investors to invest becomes easier and quicker.
Pace and direction
When we help companies develop their IRS&P we bring together the company’s ‘Why’ (purpose), ‘What’ (strategy) and ‘How’ (business model and governance). Once clearly defined, the IR strategy links the business strategy and the strategic development of a company to the proof or evidence investors will need to help value a company so doing creating its investment thesis.
Most companies can identify the pillars of their strategy. It then simply becomes an exercise of consistently being able to provide evidence of the progress under each pillar. This evidence includes financial and non-financial KPIs. For example: margins, cash flow, market share growth, capital returns, brand health, succession planning and so forth, can all be grouped under each strategic pillar. This way we are linking a company’s KPIs directly to its strategy making it easy for investors to gauge the pace and direction of travel.
In the IR plan we develop a storyboard and include tactical activities to tell the investment story over time which allows us to identify the content of each market update (episode – couldn’t help sneaking that back in!) ahead of time. This continuity and flow in our communications builds credibility. Developing a storyboard requires a deep dive into the business, meeting quarterly with business units mapping their activities, which will provide evidence of progress, against each strategic pillar. The storyboard facilitates clearer and speedier announcements and serves as an early alert system of delays in business plans or where plans are tracking ahead allowing us to pull the levers on what to communicate when. Consequently, the investment story remains believable, ever evolving, and fresh.
The tactical aspects of the IR plan include forward planning (financial calendar, management diaries, conferences, and roadshows) investor and analyst feedback, consensus management, a contact management system, a regularly updated and clearly sign-posted website, and co-ordinating all stakeholder communications.
Becoming a designated survivor
In summary, investing in a dedicated IR resource and an IRS&P will free up management time, help a company achieve fair value and continued investor interest. P.S. Equitory recommends: The Witcher, After Life, Sex Education, Designated Survivor, Lupin and Peaky Blinders.