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Richard Davies moderates IR Seminar on Governance

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On 7 October, Richard Davies, Managing Director of RD:IR, moderated the IR Society’s second 2015 Corporate Governance Seminar.  Hosted by Instinctif, the 40-strong audience heard from a knowledgeable panel of speakers on topics broadly around the theme of “Collective Engagement: the next step in Governance”

The event was kicked off by a panel including representatives from The Investor Forum, a body formed following the recommendations of the Kay Review and subsequent Collective Engagement Working Group (a group established by the ABI, IMA and NAPF); Emily Carey, BP; and David Trenchard, David Trenchard Consulting.  The Investor Forum is an investor-led organisation, whose governance is independent of any trade association, and which was represented on the panel by Simon Fraser (Chairman), Andy Griffiths (Executive Director) & Phineas Glover (Senior Advisor).  The three speakers outlined the purpose for the formation of The Investor Forum, namely to position stewardship at the heart of investment decision-making by facilitating dialogue, creating long-term solutions and enhancing value.  They also talked through the engagement process, explaining how they would typically get involved in helping companies and investors to agree courses of action to achieve their stated goals in a confidential environment.  Following the presentation, a discussion between the panel and participants from the audience ensued, with several different points of view being aired and addressed by The Investor Forum team.

The next presentation was given jointly by David Trenchard, David Trenchard Consulting and Cas Sydorowitz, Georgeson on “Framing Activist Risk”.  They compared the typical US model of activist investment against the European model, as well as examining the difference on how activism is perceived in both geographies.  There were some fascinating insights and behind the scenes information about how activist funds operate, and real examples of companies who had successfully defended themselves against activism.

Mark Robinson, Senior Client Manager for EMEA Issuers, RD:IR, followed with a talk on Depositary Receipts (DR’s) and the governance issues surrounding this equity instrument.  He highlighted, among other issues, the lack of transparency in ownership as something for companies to consider when issuing DRs.  Representatives from depository banks in the audience contributed views and insights from their perspective to provide a useful background to the topic.

Finally, Will Pomroy, representing the National Association of Pension Funds (NAPF), posed the question “Where is the workforce in corporate reporting?”  His presentation looked at how companies regularly report on directors’ remuneration in their annual reporting but seldom report in any depth on other workforce metrics.  He argued that “for long-term investors, conversations about the people that constitute the workforce are crucial to understanding a company’s culture, how well a company is functioning and whether warning lights are beginning to flash”.

 

RD:IR Sponsors Best Communications at 2015 AIM Awards

The 20th annual AIM Awards Dinner took place on 8th August 2015 at Old Billingsgate, a striking City location overlooking Tower Bridge and the Thames.  Attended by well over 1,200 guests drawn from the companies and professional advisors of the AIM Market, the evening celebrated AIM as a platform for smaller and more entrepreneurial companies to grow and fulfil their strategies.

The compere for the evening was Bev Turner, LBC presenter and journalist, and entertainment was provided by Dara Ó Briain, the Irish comedian, who had the audience in stitches with his rapid-fire delivery.

RD:IR was pleased to sponsor an award for the first time – the Best Communication Award which recognises a company’s ability to communicate clearly and effectively with shareholders and  potential investors.  Amongst the areas being judged were the website, the annual report, regulatory news and press releases and the appropriate utilisation of social media.  The judging panel was looking for clarity, honesty, timeliness and consistency of messaging throughout all the company’s communications during the period from 1st August 2014 to 31st July 2015.

The panel shortlisted four companies for the award – Breedon Aggregates, Cohort, EMIS and Imperial Innovations, and it was Imperial Innovations that was announced the winner.  Jon Davies, IRO was presented his award by Richard Davies (Managing Director, RD:IR),  David Snell (Partner & AIM Leader, PwC) and Bev Turner.

 

From left to right: Richard Davies (RD:IR), David Snell (PwC), Bev Turner (awards presenter) and Jon Davies (Imperial Innovations Group plc)

From left to right:
Richard Davies (RD:IR), David Snell (PwC), Bev Turner (awards presenter) and Jon Davies (Imperial Innovations Group plc)

 

RD:IR would like to congratulate all of the shortlisted companies and the successful winners at the 2015 AIM Awards:

  • Best Communication Award – Imperial Innovations Group plc
  • Best Performing Share Award – Victoria plc
  • Best Use of AIM Award – Ideagen plc
  • Best Technology Award – Advanced Oncotherapy plc
  • AIM Transaction of the Year Award – Optimal Payments plc
  • Best Performer Over 20 Years – ASOS plc
  • Best Research Award – finnCap
  • International Company of the Year Award – Hutchison China Meditech Ltd
  • Best Newcomer Award – Fevertree Drinks plc
  • Entrepreneur of the Year Award – Clinigen plc
  • Company of the Year Award – CVS Group plc

 

Richard Davies looks back over three decades of Investor Relations

 
After three decades in IR, including two years as the Chair of the IR Society, RD:IR’s Managing Director, Richard Davies, believes that though the IR industry has come far, there is still a long way to go.

 

Summary

  • Technological change has driven faster, cheaper and more accurate data
  • IROs are better qualified than ever
  • Regulatory changes have had huge effects on the capital markets
  • The sell-side is here to stay, despite what some people think
  • Companies with dedicated IROs typically perform better

 

The best thing about working in the IR industry is the constant change, which provides both challenge and opportunity. This is matched by the continuity in the profession of the striving towards better practice. Looking back over the last 27 years of my time in the sector, I see much that has changed and much that has stayed the same. The most startling developments have, of course, been in the area of technology, with the impact of faster processing speeds in computing and the arrival of the internet. Many readers will find it difficult to imagine a time before digital and, indeed, I find it difficult to believe that we used to perform so much data entry and analysis manually in the late 80s. I started my IR career creating one of the first share register analysis systems, which was a spin-off of a hard copy publication I was hired to edit, The Index of Nominees & their Beneficial Owners. This directory of nominee companies and the funds they represented became a minor City classic, which I still get asked about, 15 years after its final edition was published. The early iterations were researched using fiches from Companies House, telephone calls to nominee companies and inspections of often hand-written or typed registers of beneficial owners, derived from interrogation under the old Companies Act Section 212 legislation (now known as s793). We went on to use this painstaking research (further augmented by fund-to-fund manager researched linkages) to analyse share registers, which arrived in hard copy format in piles of boxes, which we sifted and entered manually into computers the size of a desk. Analysis which now takes seconds, with electronic registers and sophisticated data processing, took days in some cases – and the fees reflected this.

Big data

The commoditisation and universalisation of data has certainly been a key change in the IR and financial services industry. Today’s IRO has easy access to information that would have been unimaginable 30 years ago. The challenge remains, however, in understanding how data should be used efficiently and strategically. It is a cliché in the industry to point out that IR is now taken more seriously by company boards but this is, of course, true. IR has become more professionalised in the UK, partly due to the impact of the IR Society. Gone are the days when fund managers and analysts would only speak to senior management, largely due to the rise in financial competence of the average IR officer (although I am not of the opinion that IROs necessarily have to be ex-analysts to have gravitas).

Disrupted industry

A major change, which historical significance in total, like the French Revolution according to Zhou Enlai, has yet to be fully understood, has been the forced unbundling of broker fees to fund managers for corporate access and research. I suspect that this is only the beginning of a deeper and wider disruption of financial services as market Darwinianism and internet technology scythe their way in months through centuries-old relationships in the City. There are so many other changes to the way that the capital markets operate that have impacted on the world of IR, all of which we now take for granted: internationalisation and consolidation of the asset management sector; the rise of hedge funds and proprietary trading; the impact of EU regulation (for example, MiFIDs 1 & 2); high-frequency trading and dark pools; the rise of Asia and other emerging markets as part of the globalisation process; the increase in interest in governance and the commensurate rise in importance of the proxy advisory agencies.

Big banks are here to stay

While so much has changed, so much has stayed the same. It is a rather wonderful aspect of the IR market that many of the market players of 27 years ago are still in place, whether as companies or IRO professionals. The young bucks of the 80s are now part of the IR establishment, albeit with greyer hair and expanded waistlines (including this writer). The arguments about companies needing to be pro-active about their equity marketing strategy are as true now as they were then, if not more so. People have decried the end of the sellside since I started work in the City. It hasn’t happened yet and will not happen for some years to come: there are too many vested interests. The major investment banks will be part of the scene for the foreseeable future and life for larger companies in terms of the services they receive therefrom will go on much as usual for the time being. Given the changes in the research and corporate access fee model that the recent FCA and forthcoming MiFID changes precipitate, my concern relates to the funding of small- and mid-cap public companies. Growth companies are the basis of a healthy public company market, where investors, retail and institutional, can invest in entities which are subject to market scrutiny, unlike the private equity market, where the only real oversight is provided by the auditor. Many of our current large-cap companies started life as small-caps but I wonder how many would achieve the same growth under today’s capital market conditions.

The role of the IRO

We have come very far in the IR industry in the UK but there is still a long way to go. Many UK public companies still do not see the need for a dedicated IR professional. Even those companies that do employ an IR officer may not take a pro-active approach to marketing their equity. The UK IR industry includes some of the world’s leading IR professionals, running sophisticated processes and strategies, utilising a mix of data and consultancy to take their company’s equity story to the global marketplace. On the other hand, there are companies that still do not consider IR to be important or which rely totally on a lacklustre broker with no interest in promoting their equity. The most exciting aspect of my last 27 years in the IR world is that I see that the former category is growing and the latter is shrinking. Research shows that companies which do not perform IR so well tend to disappear faster than those that do. In my experience, it was always thus and I am sure this will continue to be true. I wish the IR Society a very happy 35th birthday. I am delighted to have been part of its history. I look forward to the future of the Society and of the global IR market as we all embrace change and challenge. 

 

Richard wrote this article as a contribution to the IR Society’s 35th anniversary celebratory edition of Informed Magazine. A copy of the magazine can be downloaded on the Society’s website here.

RD:IR announces major new contract wins in FTSE 100 & FTSE 250

PRESS RELEASE

Richard Davies Investor Relations (“RD:IR”) is thrilled to announce new contract wins within the FTSE 100, as BT Group plc and Marks and Spencer Group plc join its growing list of blue-chip clients.

RD:IR is also delighted to welcome FTSE 250 constituents, AA plc, Ophir Energy plc and Tullow Oil plc to its mid-cap stable. RD:IR acts for one-third of this Index.

RD:IR is pleased to act for over 630 public company clients in the UK and internationally, across a range of sectors and market capitalisations.

New FTSE 100 clients

BT Group plc, one of the world’s leading fixed line telecommunications groups, and international multi-channel retailer, Marks and Spencer Group plc, have both taken RD:IR’s integrated IR InTouch service, combining rigorous share register analysis, powerful targeting, in-depth profiling and tailored investor relations contact relationship management in one online platform.

New FTSE 250 clients

Roadside assistance provider, AA plc, and oil and gas, exploration and production companies, Ophir Energy plc and Tullow Oil plc, have all chosen to employ RD:IR’s proprietary IR InTouch platform to assist and manage their investor relations activity.

Richard Davies, Managing Director of RD:IR, said, “We are very pleased to make more client gains within the FTSE 100 and FTSE 250. We welcome all our new clients, large and small, and look forward to working with the investor relations teams of these businesses in the coming months and years.

 

ENDS

 

For further information please contact:

 

Richard Davies, Managing Director

+44 20 7492 0501 or Richard.Davies@rdir.com

 

Sarah Blackshaw, Head of Marketing

+44 20 7492 0533 or Sarah.Blackshaw@rdir.com

Why 2015 will be a year of great change for IROs

The world of investor relations is changing and there are major challenges ahead, particularly for small- and medium-sized business, suggests RD:IR’s Managing Director, Richard Davies.

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We live in strange times. As I write, the FTSE has reached record highs but, for those of us living in Europe, the world has not seemed as dangerous for many years. If you are not directly exposed to West Africa, the Ebola scare may have faded into the distance as quickly and quietly as the last outbreak of foot-and-mouth but we now have greater and even graver concerns. The sabre-rattling of the Russian state threatens the stability of European Union members in the East, and the savage chaos of the so-called Islamic State spreading ever wider across North Africa and the Middle East has even penetrated, according to recent reports, the southern border of Turkey.

The UK economy is growing strongly once again but uncertainty looms about the shape of the next government, with most polls predicting no overall majority. For the first time, political parties outside the main three could have a pivotal role in shaping policy, which the bond markets will not find encouraging. While much is made of the commendably rise in employment numbers, neither side of the House wants to talk about the thorny issue of the £1.5 trillion mountain of public debt, which has, on a non-inflation adjusted basis, risen more under five years of the Coalition than under the thirteen years of the last regime. European markets, encouraged by a vast programme of ECB quantitative easing, are currently performing strongly, even despite the threat of Grexit. However, despite the irrational ebullience, we cannot ignore the spectre of deflation which European bond markets tacitly forecast through the widespread purchase of negative rate instruments. Things will definitely get worse before they get better, fixed income fund managers now clearly believe.

We can, however, attenuate our concerns about rising currency risk for UK exports from stronger sterling by the thought of cheaper holidays on the beaches of Europe, particularly if Grexit goes ahead. That fine bottle of Château Margaux you have been coveting is getting cheaper by the day! Nobody expects oil prices to rise quickly any time soon and while this is good news for the users of oil, the fracking sector is looking increasingly desperate. Given the increasing evidence of environmental damage wreaked by this controversial process, some may see this as no bad thing. There is rich irony in Saudi intervention in oil markets producing a positive result for the ecology movement.

Disruptive regulation

The world is becoming a more difficult place for the UK banking sector, facing uncertainty from the outcome of the next election and increasing public and regulatory scrutiny. Long established practices in the areas of research and corporate access are now under fire in the quest for greater market transparency, with the expected perverse outcome of finding funding for small- and mid-cap companies even more difficult. The regulator is now the prime source of market disruption, by dint of its breaking up of the historically opaque structure of fee payments between asset managers and stockbrokers. We are entering a new market paradigm of which the outcomes are as yet unknown, although most assume that independent providers of research and corporate access will take over an increasing share of business from the sell-side outside the bulge bracket.

Life for large-cap companies will go on much as usual in the new environment due to higher trading volumes justifying the supply by investment banks of corporate advisory services. Lower down the food chain, things will get more difficult. There are already rumblings of some big-name mid-market brokers ditching their corporate access departments and trimming back on their research teams significantly as they move to a near execution-only model. It seems likely that brokers will become sector specialists if they continue to have research analysts at all.

Stewardship and engagement

The grey area remains on the valuation of investor meetings in terms of their worth to investors. Fund managers still perceive there to be great value in meeting companies’ senior management – and not just to glean information not in the public domain, as many believe.

Stewardship and engagement are now viewed as an essential part of the investment process but some doubt that investor meetings are not really situations where price-sensitive information is disclosed on a selective basis. The assumption is that if investors rely so heavily on investor meetings as part of their investment research process, these meetings must by default contain the imparting of price-sensitive information to investor benefit.

While some canny hedge fund managers may well occasionally glean additional insights from senior management on the way to the lift, we all know that most investor meetings are mainly about providing the context to fund managers for the stock selection, as well as building a level of personal trust between investor and investee company senior management.

No amount of meeting technology such as video conferencing is going to change this attitude in the short to medium term. Given that the changes in regulation move the emphasis of responsibility in terms of payment to those receiving the benefit from those providing the service, it remains unclear how investors should value investor meetings in terms of monetary sums and as ever the regulator is unwilling to provide clear guidance, leaving open a potential regulatory minefield.

The idea that the market will find its own balance in this matter due to the emergence of new formations of access and research services seems highly hazardous.

Market participants

The upshot for small- and medium-sized companies is they will increasingly have to pay for their own access and research, and install a dedicated IR professional to manage these services where one is not present (as in the majority of UK quoted companies at this time). Unless there is a deal in the offing, most brokers will not be interested in providing free services, if at all, to these companies, so they will become commoditised practices over time.

Active asset managers are still reeling from the massive rise in cashflows heading into indexed and quant products, including ETFs, as investors wake up to the disparity between charges and performance for many funds. Why choose a live fund manager when a robot can do just as well but for a fraction of the fees? UK fund managers are in a difficult place: they are no longer allowed to pay for investor access from client money; they may be unclear about the value they should apply to company meetings in their accounting; and some still believe that the market will go back to its old ways despite the imminent arrival of MIFID2 which gold-plates the actions of the FCA.

The life of the IRO will change as a result of the regulatory shake-up: there will be fewer market participants to deal with on the buy- and sell-side over time but there will be a greater demand on time to manage those that remain. Targeting, ongoing investor interface in a systemic manner and a greater emphasis on buyside analyst modelling will become generic issues and not just the domain of the large caps.

A long road ahead

2015 will be a year of significant change for IR in the UK and internationally as a result of the regulatory changes relating to access and research. We are only at the beginning of a significant restructuring of the market which will create new challenges to IROs in terms of handling of the communication and distribution of their equity story, and managing the demand for their shares in increasingly concentrated capital markets. Life will become increasingly more difficult for smaller companies, abandoned by capital markets not incentivised to support their growth. On the upside, the changes should mean an expansion in the number of IR professionals at smaller public companies. The marketisation of research is already creating higher quality analysis of companies, especially as new providers utilise the insights of deep data mining better to understand companies and the global competitive landscapes within which they operate. The marketisation of corporate access should encourage better quality investor roadshows, where the interests of the access provider/organizer are aligned with the company, and not the analyst bonus.

Like many other industries, investor relations, corporate broking and asset management are facing disruption on a major scale at home and abroad but unlike in other sectors, the disruption is being invoked by regulatory change, rather than new technologies and related market entrants. We know the route of travel but we may not yet understand so well the destination.