Ir Apractical Guide
Ir Apractical Guide
Ir Apractical Guide
A Practical Guide
CAPITAL
LIQUIDITY
RESEARCH
INVESTORS
COMMUNICATIO
N
The aim of this guide is to provide practical assistance to
companies on investor relations by examining best practice
and key principles that might be considered when
developing an investor relations strategy.
Page
02 Contributors
03 Preface
04 Key Practicalities
Contents 01
Contributors
Andrew Hutchings, Partner and James Kerton, Associate Freshfields Bruckhaus Deringer LLP
G
e
P
r
R
a
F
o
Investor Relations
COMPANY
Communications
ions
2 Insuranc
In e & life
stit assurance
Return uti companies
on 3 Unit
al trusts,
In investment
ve trusts, Venture
st Capital Trusts
or
s 4 Enterpri
se Investment
1 Scheme
U investors
Access to K
Capital 5 Pension
& funds, hedge
funds &
sovereign wealth
o funds
v
Fair e
Liquidity
Valuation r
s Private Investors
e
a 1 Individu
s al & high net
worth investors
f
i
2 Employe
n es
a 3 Private
n client
c stockbrokers
i
a 4 Persona
l l wealth
i managers/fina
n ncial advisers
s
t
i
t Analysts
u
t
1 Sell-side
2 Buy-side 2 3 On-
3 Company sponsored/paid-for Br line/new media
research o
a
d
c
Media a
s Output
1 Print t
What Investor Relations
is and who it is aimed at 09
Institutional Investors
Andrew Buchanan, Executive Director, UBS Corporate Broking
companys long assurance and
term prospects pension plans,
Long-term,
and are therefore which
concentrated support
able to look individuals or
Institutional investors
beyond short run other
are, by some margin,
volatility in its investment firms
the most important
performance. collectively
category of investor to
Such support is invest into. This
quoted companies
extremely is an important
owing to the sheer
important in distinction from
weight of assets that
allowing individual
they manage and the
management private investors
degree to which they
teams the time who invest their
can invest. It is widely
and space to be own money.
acknowledged that
able to execute
institutional investors
their strategic
own the vast majority of
plans. That said,
the UK equity market. In
most institutions
some cases, institutional
have a fiduciary
investors may also own
duty to achieve
nearly all of a companys
best value for their
issued share capital.
underlying
Their influence extends
investors and will
beyond their total assets
only tolerate short
under management
term
since, compared to
underperformance
individual private
so long as it
investors, investment
remains
decision making,
consistent with
including voting, is
eventual delivery
concentrated in a much
of long term value.
smaller group of
individuals.
Managing pooled
assets
A key attraction of
Institutional
institutional investors to
investors are
companies is that the
those investors
bulk of assets they
who manage
manage are long term in
pooled assets,
nature which means that
ranging from
their investment horizons
Venture Capital
are also long term. This
Trusts to mutual
means that institutions
funds, unit
generally form a
trusts, life
fundamental view on a
The institutional asset or small sized other types of
management industry businesses. institutional
operates globally and is Although investors. For
very diverse in terms of institutional instance, hedge
the variance in size and investors invest funds are often
depth of funds that firms across markets lightly regulated
have under management. such as AIM and entities which
Similarly, there is wide the Main Market, means that they
diversity in the areas that fund mandates are prohibited
institutional investors may dictate what from marketing
focus on and the percentage of a their products to
investment strategies they fund can be certain
deploy. For example, allocated to a categories of
funds may be tailored to certain market, investor,
offer very specific industry sector or principally non-
investment including pure even professional
exposure to a particular shareholding individual
country, region or industry level in any one investors. Their
sector, whereas other company. clients are
funds may only invest in usually wealthy
certain asset classes or Hedge funds, individuals and
be seeking a specific long only other institutional
income level, perhaps investors and investors.
through dividends, or a sovereign Similarly, hedge
certain growth profile. wealth funds funds generally
Hedge funds are adopt relatively
In addition, some fund an example of a unconstrained
managers will more recent investment
approach their specialist strategies which
investment selections category of allow them to
on an ethical or institutional invest across
corporate social investor. There asset classes
responsibility basis. are several and geographies
Others may allocate features that as well as use
funds to companies distinguish a leverage in their
considered to be large hedge fund from
and who it is aimed
10 What at
Investor Relations is
increases the risk exposure
to the investors and is one
of the reasons why
regulators have restricted
their availability. The more
traditional asset managers
who do not use leverage
techniques, such as short-
selling, are often referred to
as long only investors.
Conclusion
The interest and support of private
client brokers and private investors
can be vital in stimulating demand for
shares and with it, potential liquidity.
These constituents must be catered company management must
for as part of every companys rolling consider how much effort they
investor relations programme, and expend with this set of investors.
What Investor Relations is and
who it is aimed at 15
Members of the Association of Private
Client Investment Managers and
Stockbrokers (APCIMS), who include
wealth management and broking
firms, provide a key role in facilitating
investment in and providing liquidity
for quoted companies, including Small
and Mid-Caps, on behalf of private
investors.
David Bennett
Chief Executive,
APCIMS
Company Sponsored/Paid-
for Research:
Similar to sell-side analysts, but
rather than getting paid via
share-trading commission flows,
these analyst firms charge the
quoted company under
coverage directly for individual
research reports or a
subscription service. Due to this,
the research can be criticised for
being biased, however the
research house has a reputation
What Investor Relations is
and who it is aimed at 19
Company Sponsored/Paid-for Research
A Fund Managers View
Gervais Williams, Head of UK Small Cap, Gartmore Investment Limited
of fund managers Paid-for research
As a fund manager in the may consider the also widens the
Small-Cap space, an area company. The time range of
comprising a large number of taken to liquidate
opportunities
companies who are not always fund holdings is an
available to
widely researched, we regularly important
investors who are
use paid-for research reports consideration for
not able to meet
(research reports managers of open- the management
commissioned and paid for by ended funds, who of companies
quoted companies and may need to sell being considered
procured from independent assets to fund for purchase.
equity research providers) to redemptions and While institutional
support our decision-making cannot afford to investors are able
process. We have found such have large positions to gain access to
reports useful as part of our which may be the management
research process as it means difficult to sell. of such
we have more information companies and
about a company. Indeed we possibly spend
also utilise such research as we time with them,
find it may add value when not everyone has
marketing our products by this opportunity.
providing a third-party opinion With a large
to support investment universe of
decisions. quoted
companies, it is
The availability of paid-for
difficult to meet
research, often referred to as every company
company sponsored research, even if you do
has the potential to bring a have access.
greater number of active
participants in the stock trading It is sometimes
of a company. It may be easier difficult to ascertain
to raise new capital and whether the
increase liquidity of the shares research provided
already in existence if a broader is sufficiently
base of potential investors is objective. We have
familiar with a company. found that research
Reducing the liquidity risk companies are
premium should be reflected in keen to develop a
a more favourable share price. reputation for
Additionally, improved liquidity quality and for this
is a factor which improves the reason they are
likelihood that a larger number very careful about
what they publish. While As a result, paid-for willing to be critical
companies will be able to research of the companies
review factual information, companies they research.
typically they are not permitted opinions are taken
to influence the opinions more seriously
expressed by the researchers. because they are
20 What
Investor Relations is
and who it is aimed at
1 Financial/investment magazines
3 Newsletters
companies should
expect a briefing with professional will have a
On some occasions, journalists will call their IR or PR advisers good relationship with
companies outside normal working hours if ahead of each relevant journalists and
they believe they have unearthed an journalist meeting so if a meeting is taking
exclusive and want to pre-empt any planned they know what to place, will understand
press activity. In this situation, IR and PR expect. A PR the basis on which the
advisers should be working with a meeting is happening,
companys management with pre-agreed the information
responses ready. required by the
journalist and how to
It pays to treat journalists as important handle any potential
and very demanding customers, and that problem areas. If this
way a company is more likely to get a process is not adhered
favourable result. to, companies may
well find themselves in
Relationship-building with the media a difficult situation; ill-
Relationship-building should be at the heart prepared for an
of any media strategy. A positive interview, handling an
relationship should smooth lines of inquisitive journalists
communication and generate goodwill questions awkwardly
between a company and media, and should and potentially giving
go a long way to ensuring that a company away confidential
has its fair share of voice in the media. information and the
wrong impression of
Companies should try to engage with media the company.
in a variety of ways including 1:1 meetings
throughout the corporate calendar and not All key announcements
just at results. Different news will require by public companies
different approaches to the media. Key to any need to be released to
meeting or engagement is preparation and the market. Annual and
interim results are major opportunities for Other events that might can encourage media
quoted companies to engage with the media spark communication relationships and
and this can mean several interviews with include announcements develop understanding
relevant journalists from the financial pages, of key contracts or new of the company.
newswires and online. Outside the normal business and Board
reporting periods, companies may need to appointments. These
update shareholders, with trading statements. are opportunities that
Relations is and who it is
22 What Investor aimed at
Andrew Buchanan
Fund Manager,
Octopus Investments
28 The Investor
Relations Team
Registrar
Matthew Edmund, Business Development Manager, Computershare and Georgeson
When devising an The register of
investor relations members cannot
Why do companies need a registrar?
programme the first tell you what you
The Companies Act 2006 states
place to start is the need to do in
that every company must keep a
register of members. isolation, but it can
register of its members. be analysed and
This is your list of
current shareholders cross referenced
A good registrar will: against other data
and from this point
you can start to sources to identify
1 Maintain the companys
understand who they investors. This
register of members and handle are and as shareholder
shareholder transactions and queries analysis unearths
importantly, who has
2 Provide an interface to chosen not to invest. the underlying
share-trade settlement providers beneficial holders
3 Make payments, including below the
actioning dividends custodian.
4 Manage corporate
actions, such as capital The registrar will have
raisings, mergers and a comprehensive view
acquisitions into a companys
registered
5 Distribute information about
shareholders enabling
the company to its shareholders
companies to gain
6 Aid industry and market enhanced visibility
development. For example, into who is behind the
influencing procedural changes to various nominee
the benefit of companies accounts, and how
the shareholder base
In addition to the above, the table is comprised: direct
overleaf details a wider range of registered retail
activities that registrars also typically (private) investors,
assist quoted companies with. private client brokers,
institutions, prime
The share register knowing who owns broking desks (usually
your shares Quoted companies will held for hedge funds)
need to constantly monitor share and stock lending
ownership either via the registrar or accounts. This view
working alongside other providers that allows a companys
specialise in shareholder analysis. This investor relations
analysis of the register is of particular team to plan and
importance during an AGM, corporate prioritise its time to
action or when trying to spot stock ensure they are
predators. meeting with actual
shareholders,
understand what type of investor they terms of likely future
are and who they should be targeting in shareholders.
Team 29
The Investor Relations
Range of activities that registrars typically
assist quoted companies with:
Shareholder communication
Companies can dispatch electronic copies of statutory documents and tax vouchers directly to
shareholders and email broadcasts of pre-scheduled company publications. Some registrars will
offer on and offline printing and annual report design and production.
Meeting services
Registrars can usually provide a comprehensive package of meeting solutions essentially designed
to support every stage of the process, from proxy card design, printing and distribution to vote
collation and reporting of results. In addition, registrars might also offer technology solutions
including electronic hand-held voting.
Share-dealing services
Registrars often have the ability to offer comprehensive share-dealing programmes, which
include dividend reinvestment and register reduction programmes.
Conclusion
By the nature of the tasks involved, it will
typically be the company secretarial and
investor relations teams who create and
develop the long term relationship with the
companys registrar. As the above points
demonstrate, aside from supporting companies
with their core shareholder communications and
payment needs, registrars are instrumental in
assisting companies with their corporate
actions, such as the IPO, shareholder meetings,
acquisitions and takeovers.
The Investor Relations Team
31
Corporate Broker
Adam Kelly, Vice President Corporate Finance, J.P. Morgan Cazenove
The key regulators, e.g.
services that AIM
Remit of the corporate broker Regulation (in
brokers
Historically, brokers were the a Nominated
provide
principal corporate advisers to Adviser
a company, with long-standing quoted
companies capacity), the
relationships that originated UK Listing
when the company first with include:
Authority
floated. Traditional broker (UKLA) and
arrangements were relatively 1 Pure
the Takeover
informal; brokers provided broking services,
Panel, as
advice on a broad range of which comprise
appropriate
issues through the life of the all market
making and
4 Advising
relationship and derived fees
equity-raising the company on
mainly from relatively
activities for the market
infrequent security issues.
quoted company aspects of
The brokerage model today
clients, such as transactions,
includes both the traditional
successfully such as the
broking firms with a specialist
issuing equity likely market
focus on equity-related
(company response to an
activities, as well as the full-
shares) and M&A transaction
service broking firms, usually
comprising a banking and supporting the
equity issues More recently, there
brokerage component.
with the brokers has been a trend
in-house towards a full-
Today, the single most
underwriting service brokerage
important aspect of the
capabilities model, where banks
broker function is to monitor
2 Providing with corporate
the company on an ongoing
support services finance and debt
basis, acting as the conduit
such as market capabilities
between the company and
disseminating offer a broader
the markets. Brokers are
market spectrum of
responsible for identifying
intelligence to services to clients.
potential issues and
clients, A typical full-service
opportunities and working
supporting them specialist would
with the company and the
during results also offer M&A
market to propose solutions
that are in line with the core announcements, financial advisory
objectives of the company. assisting with services, financial
investor relations advice concerning
and performing capital structure,
shareholder assistance with
analysis corporate
3 Serving as governance issues,
the interface with compliance with the
Combined Code and, in some an in-depth house typically
cases, additional services description of the undertakes on
such as electronic processing core activities and behalf of quoted
and trust dealing. services that a companies.
corporate broking
The table opposite provides
32 The
Investor
Relations Team
Description of a corporate broking houses
core services for quoted companies
Sales
Sales teams have a duty to advise their institutional investor clients on the merits of a range of
stocks. The clients will include institutions and hedge funds in both the UK and overseas. Sales
teams are often involved in meetings with the companies to which the firm is broker and develop a
deep knowledge of these companies, strengthening their dialogue with institutional clients. As a
result, sales teams have a very good understanding of investors views on a particular stock.
Research
Brokers provide a range of research for institutional clients. Research includes daily, weekly and monthly
commentaries, sector reports and stock-specific analysis. Research teams provide a good understanding
of market and sector trends, and their insights are supplemented by their frequent interactions with a range
of sector specialists and fund managers amongst the brokers institutional clients.
(continued overleaf)
Shareholder analysis
Shareholder analysis is typically the foundation for the investor relations function. Brokers are
responsible for providing integrated shareholding information including details on the history of a
share register, current shareholding patterns and the breakdown of beneficial holders. Further,
brokers will typically analyse the weighting of an institutional holding relative to the sector and market,
helping to identify the over and under weights. Most brokerage firms provide an extensive
shareholder analysis report which includes changes in shareholdings, details of buyers and sellers,
identification of investment styles of the investing institutions, explanations of movements within
shareholdings and value-added knowledge on the identities of nominee holders. Ideally a quoted
company should be able to use the shareholder reports to monitor institutional changes, to
understand better the trading in their stock, reconcile institutional notifications against underlying
shareholdings and as a tool to assist in monitoring proxy votes at EGM/AGMs.
Other services
In addition, some brokers have developed electronic processing as client requirements have
increasingly focused on a more efficient way of processing exercise and sale information. Brokers
may provide quoted companies with custody and trust dealing services. Additionally, full service
brokers may provide services such as employee share incentives and director share dealing services,
to assist companies during transactions such as IPOs, takeovers and fund raisings.
36
investment
case, the
brokerage
house often
performs a
critical market
making
function for
their clients. In
general, this
implies that the
equities
business of the
broker has to
quote buy and
Market
sell prices,
making
encouraging
In addition to
trade in the
developing the
companys enshrined in a
shares. The companys
market making Continuing
function Obligations to
provided by the market.
the brokerage
firm is
particularly
relevant for
smaller
companies that
tend to have
fewer liquidity
providers.
Conclusion
Effectively, the
corporate
broker is the
eyes and
ears of the
Board, acting
as the conduit
between the
market and
the company,
reporting the
views of the
shareholders
to the Board
on an ongoing
basis and
giving the
company a
good feel for
what investors
more
generally are
looking for at
any particular
stage in the
cycle. The
broker
(Nominated
Adviser in the
case of an
AIM
company), is
also
responsible
for ensuring
that a quoted
company
releases
important
information to
the market on
a timely basis,
the
spread,
which itself
can help
with
increasing
the liquidity
of your
shares.
When
deciding
whether to
register as a
By quoting market
buy and sell maker in a
prices in a stock, I will
companys consider a
shares number of
throughout factors such
the trading- as the likely
day, market spread, free
float and the
makers
companys
undertake
market
an capitalisatio
important n.
function to
provide and In general,
contribute market
to the makers
liquidity of welcome
individual companies
shares as contacting
them
well as the
directly in
overall
order for us
liquidity of
to better
the markets understand
that we their
trade in. business
activities and
help price
Having the security
multiple appropriately
market- .
making
firms Julian
quoting Palfreyman
prices in Chief
your shares Executive,
can assist in Winterflood
reducing the Securities
difference Limited
between
buy and sell
prices,
known as
The
Investor
Relations
Team
37
Financial PR Firm
Ed Firth, Managing Director, Investor Relations Practice, FD
management and The company -
any other activity financial PR
Remit of the financial
PR agency
crucial to agency
achieving the relationship
Nearly all quoted
companies will
companys fair Financial PR
valuation on the agencies work
employ a financial
communications
stock market. The closely with
table opposite senior
adviser - typically
referred to as its
details what a management
financial PR within the
financial PR agency.
The financial
agency will company,
typically advise usually the Chief
communications
adviser is primarily
and assist a Executive and
quoted company Finance Director,
responsible for
promoting the
with. and if it has the
function in-
company and its
prospects to the house, the
investor relations
investment
community. team. This is
because a
It is the role of this companys
agency to work closely corporate
with quoted companies reputation and
and the companys other that of its
advisers, such as its management
investment bank(s), team are
lawyer(s) and auditor(s), fundamental
to ensure consistency in influencers of
messages to investors, perceptions
analysts, employees, towards the
customers, journalists business as a
and other key traded stock.
stakeholders. This
A financial PR
includes providing the
agency can be
company with strategic
engaged by a
communications advice
company to
on capital markets
advise on a
communications
specific project
strategy, through
for example to
ongoing investor
provide advice
relations advice and
and support
support, shareholder
regarding an
targeting, peer group
IPO, M&A
analysis, financial news
activity, hostile bid or agency on this usually the
defence, reputation basis, as the gatekeeper
issue/crisis agency builds up to company
communications, a relationship announcem
fundraising or share and knowledge ents, it is
placing or on an of the company authorised
ongoing retained and works with typically by
basis to provide the client its clients to
continued support. continually. issue
Most quoted announcem
companies engage a As the ents to the
retained financial financial PR market on
communications agency is their behalf.
38
The Investor
Relations
Team
6 Gathering analyst
forecasts and
establishing consensus
forecasts
7 Corporate
governance issues
8 Shareholder
analysis
10 Roadshow
financial PR management
agencies 11 Investor perception
advise on: audits
12 Analyst liaison
13 Crisis
1 Communications communications issues
strategies
14 The in-house
2 Business and corporate PR function
financial media
strategy and
relations
3 Financial calendar
reporting
4 Drafting of
regulatory news
releases and
financial
communication
presentations
5 Peer monitoring
and analysis
keeping the company
informed of analyst
sentiment and consensus
forecasts.
Financial/business media
A financial PR agency will
have extensive knowledge
of and contact with the
financial and business
media. The agency will
provide advice to its client
to maximise the
opportunities available to
them to communicate with
the global marketplace and
will use its detailed
knowledge of the media to
best advise its clients on
particular situations.
Sell-side analysts
Sell-side analysts will issue
stock recommendation
notes on companies, based
on their understanding of
the business, its markets
and future prospects. It is
the agencys role to
manage the relationships
with the analysts, including
engaging them at financial
calendar events such as
full-year and half-year
results, conducting
perception studies and
39
40 The
secretariat role. Even with a
dedicated Investor Relations
Officer or team in place, there can
sometimes be periods when more
resource is required. IR
consultancies can help quoted
companies in these situations by
providing:
1 Specific advice on a
given corporate action
2 All round support on a
retained basis
3 Training and support to
those who may find
Sentiment studies
Corporate governance as defined themselves with investor
by the Combined Code demands relations responsibilities with
that there should be a dialogue no prior experience
with shareholders based on the
mutual understanding of
objectives. The board as a whole
has responsibility for ensuring that
a satisfactory dialogue with
shareholders takes place. It is the
Chairmans responsibility to ensure
the entire Board is informed of
shareholder sentiment. Many
companies undertake sentiment
surveys to ascertain cognition and
perception of their stock. IR
consultancies can support quoted
companies by interviewing a cross
section of overweight, underweight
and absentee investors to gauge
shareholder sentiment and offer
strategic outputs.
Building the
Investor
Relations
Programme
46
Press
Building strong relationships with
the press is the key to gaining
coverage in a highly competitive
market. It is important to build
relationships and understanding
with the key journalists in your
sector across all types of media.
You should use your results The most effective way to
twice a year as an opportunity engage a journalist and convey
to hold group analyst a companys equity story is
presentations, usually at the through face to face meetings. If
offices of your financial PR firm. the journalist has good
These meetings are an background knowledge of the
opportunity for analysts who company this will mean that they
are new to the company to gain will be more inclined to cover
an overview of its operations your story when you release
from the management, as well
specific news, or to quote you as
an expert on your space as part
of a broader article.
Site visits
If your operations have a visual
element to them, a site visit is
a powerful way to convey your
story and to give visitors for them to speak with other
greater insight into the employees, and to gauge the
company. Inviting the media, quality of the middle
analysts and investors to visit management. Events such as
your company will increase the opening of new facilities,
their understanding of what acquisitions or the launch of a
you do and how you operate. new product are the ideal
This also gives an opportunity opportunities to host a visit.
Building the Investor
Relations Programme 49
Meeting collateral
Presentations used at
meetings should contain
information about the
companys operations, the
management team, the
financials, the market drivers
for the business and the
competitive landscape. These
are the areas that the
investment community will be
most interested in, and will
give its members an insight
better a fund manager
understands your business,
the more support your
company is likely to have in
the market.
50 Building the
Investor Relations
Programme
Conclusion
The meetings that you have
throughout the year are an
opportunity to demonstrate the
companys progress and to
keep investors updated and
informed. They are also a way
to attract new investors and the
support of the press and analyst
community. It is critical to
leverage all of these
opportunities to their full effect,
and to remain transparent and
consistent in all
communications.
Building the Investor
Relations Programme 51
What to announce
The need to provide investors
with regular news flow means
that companies will need to have
in place an annual reporting
calendar to enable them to
announce certain planned
events throughout the year, such
as the publication of annual and
half-yearly reports. In addition to
this, companies may hold
regular investor or analyst
briefings and will also
communicate with their
shareholders at the Annual
General Meeting. The periodic
publication of news helps to
create a balanced and orderly
market in a companys
securities.
principles are very similar.
NOT
INSIDE
INFORM
ATION
No
anno
No unce
ment
Yes requir
ed
Building the
Investor Relations
Programme
54
sensitive negotiations on a
deal are underway by a
company and its advisers,
and disclosure of the
information would prejudice
the outcome of the
transaction.
In adverse market
conditions, companies may
be reluctant to publish
negative news in
circumstances where trading
may have already
substantially deteriorated.
Even if a company does have The DTRs do recognise that
full details of certain inside where the companys
information, it can still delay financial viability is in grave
disclosure if its reason for and imminent danger
doing so is so as not to (although not insolvent),
prejudice its legitimate disclosure of rescue
interests, provided that: negotiations can be delayed
for a limited period if the
1 such non- information would seriously
disclosure would not jeopardise shareholders
be likely to mislead interests by undermining the
the public; conclusion of those
2 any person negotiations. However, it is
receiving the information important to be clear that
owes the company a this only applies to the
duty of confidentiality; details of the specific
and transaction and not to the
3 the company is able fact that the company is in
to ensure the financial difficulty, which in
itself remains disclosable.
confidentiality of that
Companies should consult
information.
their advisers on such
matters.
An example of this may be
where confidential and price
Financial Services Authority
(FSA) approved Regulatory
Information Service (RIS) in
the first instance so as to
ensure prompt and fair
disclosure to the market.
How to announce
Information that is disclosed
must be available to
everyone. The concept of
selective disclosure to only
certain people is
incompatible with a
transparent market and is
therefore not possible,
except in very limited
circumstances such as when
there is valid delay in
disclosure as noted above.
In order for information to be
accessible by all, an
announcement must be
released to the market via a
Building the Investor
Relations Programme 55
compliance with the DTRs. For
companies on a regulated
market (which does not
include AIM companies), this
includes the obligation to
compile insider lists where
their employees and advisers
have access to inside
information.
The technological
environment has changed
significantly too. Many
companies are looking to
move their reporting into an
online format. That
progression has been
helped by changing
legislation both in the UK
(the Companies Act 2006)
and overseas allowing
companies to default to Content
online or electronic
communications with their The annual report remains an
shareholders rather than absolutely key part of the
sending printed material. overall shareholder and
stakeholder communications
Key document mix. Many companies view it
Due to its statutory nature, the as the document that brings
production of the annual report together all of their key
should be seen as a key messages throughout the year.
activity in any companys It is, in that regard, a sort of
investor relations programme. convenience publishing tool
In many ways, the annual for investors. It should bring
report is a direct extension of a together a description of the
one-on-one meeting with business; the context in which
investors it gives the the business is operating; an
strategic detail of the results overview of strategy,
information that is released at performance and operations;
the time of the preliminary plus key governance
announcement. As with any information, including risks and
other key part of the investor uncertainties. Last, but
relations programme, the certainly not least, it should
publication date of the annual present the main financials,
report should be set well in together with detailed
advance as part of a explanatory notes. In essence,
companys financial calendar. the report should give readers
an in-depth understanding of
the company, its performance
and, crucially, its prospects
going forward.
Many companies
communicate their
strategy, performance,
governance and risks
effectively in their annual
reports, presenting the
information in such a way
that enables readers to
quickly understand each
aspect.
Design
There is, of course, little
point in drawing together lots
of detailed financial and non-
financial information if no-
one can access the
information or no-one wants
to access the information
Indeed, it is these and other because it looks too
softer elements of company complicated. Many
reporting that have come companies nowadays hire
more to the fore in recent the services of annual report
years partly as a result of design and consultancy
the changing regulatory specialists to help them
environment and partly due to structure and design the
changing focus from content in both print and
companies and investors. online. The navigational aids
Increasingly, companies are and look and feel should be
including a range of non- specifically designed to help
financial key performance guide readers through the
indicators (KPIs) alongside maze of information included
the more traditional financial within the report. It is also
measures of performance. worth bearing in mind that
These range from indicators your audiences will want to
such as footfall per unit in the access the information in
case of, say, a retail operation different ways. Some will
to those associated with want to read all of the
corporate responsibility content in depth, but many
programmes, such as will be looking for a quick
environmental and employee read approach, so pulling out
satisfaction indicators. The key messages and content is
idea behind this non-financial crucial.
focus is to give readers a
58 Building the
Investor Relations
Programme
Building the
Investor
60 Relations
Programme
Guidelines on investor relations
website content and structure
The above table provides high-level guidance only and advice on detailed requirements should be sought.
Building the Investor Relations
Programme 61
Context
Perhaps the most common failing of websites is
Content to focus too inwardly on the company and not to
The general rule on content is that more is better: provide the broader picture of the market
investors can then filter what they do not want. environment and other contextual information.
Many investors are using the website as their
primary source of information and they value both 1 What are the dynamics of the market
depth in content (for example comprehensive in which you operate?
archives of historical information going back five or
2 What are the long term trends and where
10 years) and breadth in content (for example
do you see it going?
detailed information about operating companies and
their products, explained from an investors
3 Who are your competitors and what
is your market position?
perspective not with a customer in mind).
4 Is it a tightly regulated market?
Importantly more content does not mean longer
text. When creating content specifically for the If you are not providing answers to these sorts of
web, make it easy to digest. The more text there questions then investors will be going elsewhere
is on a page, the lower the recall in general, for this information, to sources over which you
web copy should be 40 per cent shorter than the have no control. It is a missed opportunity to not
print equivalent. You can improve search engine provide the contextual framework within which
rankings and comprehension by keeping text people will be assessing your company.
short and breaking it up with good use of sub-
headings and bulleted lists.
Usability
However good your content is, users will leave
your website quickly and with a negative
impression if the site suffers from poor usability.
Good usability is the sum of many parts,
including for example:
Functionality
The web is an interactive environment and there
are many useful tools you can provide to
engage and help your website visitors. Think
about your audiences needs and how you can
help them with those. Some examples of
features and tools you might consider:
Conclusion
Websites are a critical part of the investor
relations toolkit: an opportunity (and an obligation
with respect to AIM companies under the AIM
Rules for Companies) to reach the widest
investor audience, to engage with them and to
start building valuable relationships. The most
important success factor is not the size of the
budget you have, but the commitment you make
to treat it as a communications platform. If you
embrace it, you will be rewarded.
Building the Investor Relations
Programme 63
Electronic Shareholder Communications:
The Companies Act 2006
Andrew Hutchings, Partner and James Kerton, Associate, Freshfields Bruckhaus Deringer LLP
administration, Since Carillion
New regime printing and post. introduced the
The Companies Act 2006 (the Act) created a
provision of
new regime for communications between
shareholder
companies, shareholders and holders of debt
securities that came into force on 20 January
documents in
2007. It applies to any information or document electronic form
required or authorised to be sent or supplied in September
under the Act. This means it covers, but is not 2008, we have
limited to, annual accounts and reports and enabled
notices of general meetings. The three basic shareholders to
types of permitted communication from a access
company to its shareholders are hard copy, documents more
electronic communication (such as email or fax) quickly, reduced
and website publication. the impact on the
environment
Website publication: the advantages for
through printing
companies and shareholders
The Act allows a company to communicate with
a lot less
its shareholders by website either with their
documents and
express agreement or, if certain conditions are also benefited
met and procedures followed, with their from the cost
deemed agreement. Website publication has savings of
several advantages for the company and its printing and
shareholders: posting less. It is
a good and
1 increased speed and convenience of sensible
communication for the company and arrangement
shareholders - shareholders will be able to which recognises
access communications on the date of the development
publication, rather than waiting for postal in
deliveries;
communications.
2 savings on environmental resources, as
the company can reduce paper and printing Tim George
usage; and Deputy Company
3 cost savings in relation to Secretary,
Carillion plc
64 Building the
Investor Relations
Programme
How can companies take advantage of the
rules for website communications?
A shareholder is deemed to have agreed to
receive company communications on the
website if two conditions are met.
The company may only send a request once
First: every 12 months for the same or similar
1 either the shareholders have passed a documents or information. Even if a
resolution at a general meeting allowing the shareholder has agreed expressly, or is
company to communicate in this way or the deemed to have agreed, to website
companys articles contain provisions to this communication, he or she may still obtain hard
effect. copies of documents free of charge at any time.
Listed companies (which does not include AIM
Second: companies) must also comply with the Financial
1 the company has asked the Services Authority (FSA) rules on electronic
shareholder individually to agree that the communications set out in the FSA Disclosure
company may communicate by website Rules and Transparency Rules. Similarly, the
(either generally, or in relation to a AIM Rules for Companies contain guidance for
particular document or item of information), AIM companies that opt to communicate with
explaining that the effect of a failure to shareholders by electronic means.
respond will be to trigger the automatic
consent rules (i.e. the shareholder will be
deemed to have agreed to website
communication); and
2 no response is received within 28
days beginning with the day of its request.
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