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 Sponsors Best Communication Award at the AIM Awards 2015

AIM_2015_Sponsor_logo_RDIR.fw

 

 

 

 

We are pleased to announce our involvement with this year’s AIM Awards, now in its twentieth year. The event will take place on the evening of Thursday 8th October 2015 at Old Billingsgate in the City of London and RD:IR will be sponsoring the ‘Best Communication Award’.

Each year the AIM ‘club’ gathers to celebrate outstanding achievement on the world’s most successful growth market. Sponsored by PwC, the Awards identify the quoted companies and entrepreneurs who have harnessed AIM to help them fulfil their ambition and growth potential in the last twelve months.

 

1H 2015 RD:IR Proxy Round-Up

 

 

The UK M&A market saw an upturn in 2014 and this positive momentum continued into the beginning of 2015. RD:IR in turn began the year by carrying out two M&A proxy solicitation campaigns, the first for Salamander Energy plc and the second for Friends Life Group Ltd.

Salamander Energy plc, a FTSE 250 Asia-focused oil exploration company, reached an agreement to be acquired by Ophir Energy plc in an all share deal in November 2014, to be effected by a Court-sanctioned scheme of arrangement. The scheme required the approval of Salamander shareholders at both a court meeting and a general meeting in February. Our campaign to Salamander institutional investors helped ensure the successful passing of all resolutions at both meetings, with a large majority of 95% of Salamander shareholders voting in favour of the takeover.

Continuing the M&A trend, Aviva plc agreed to buy Friends Life Group Ltd in December 2014 in an all-share deal between the two FTSE 100 companies. The deal, worth £5.6bn, created the largest UK insurance deal since 2000.

RD:IR conducted a proxy solicitation campaign to Friends Life institutional shareholders to ensure maximum voting. This resulted in more than 99.9% of Friends Life shareholders voting at the general meeting to support the deal, which overwhelmingly passed the 75% threshold required for the two companies to combine.

During the AGM proxy season RD:IR was pleased to provide proxy and corporate governance services to a number of clients, among them: Tullow Oil plc, bwin.party digital entertainment plc and Faroe Petroleum plc.  

If you wish to enquire further about our shareholder communication services please contact Yolande Lundy (Proxy Research Manager) on yolande.lundy@rdir.com / +44 20 7492 0527

IR Magazine Awards – Europe 2015

The evening of Tuesday 30th June saw the annual ‘IR Magazine Awards – Europe’ take place at The Troxy in London’s East End. Hosted by broadcaster and journalist Jeremy Vine, the event attracted the cream of IR teams from across Europe.

 

 

 

 

 

Each year the Awards are designed to celebrate the successes of individuals and companies that are leading the way in the IR community. The ‘Categories’ and ‘Best in Sector’ awards pit IR teams and individuals on a pan-European level and additionally, ‘Regional’ awards are available for companies which are deemed to have shone that year in their respective regions. The winners are identified by research collected from the investment community in the six months leading up to the event by IR Magazine.

The big winner on the night was Danish multinational pharmaceutical company, Novo Nordisk, whose IR team picked up the grand prix for best overall investor relations (large cap), in addition to best financial reporting, best sustainability practice, best in sector for healthcare and the regional award for Northern Europe. 

Several of RD:IR’s clients were shortlisted for awards and we were thrilled when the IR team at BT Group plc won the sector award for Technology and Communications. 

BT Award_B&W

 

 

 

 

 

Pictured here: BT’s Damien Maltarp & Evelyne Bull with RD:IR’s Senior IR Consultant Philippe Ronceau

A full list of winners can be found on the IR Magazine website here.

 

 

The Divestment Movement: Where do Investors Stand?

WHITE PAPER

Discover where investors stand on climate change and the divestment movement by downloading our White Paper at the bottom of this post. You can also discover how RD:IR can overlay your ownership information on our proprietary investor relations platform, IR InTouch, with insight into the ESG principles of your investors.

  • The divestment movement has gathered considerable traction over the past year and it is forcing investors to evaluate their position on fossil fuel investments. 
  • As world leaders prepare to meet in Paris in December this year for the annual UN Climate Change Conference COP 21, stakeholders hope that a global carbon pricing system will result to guide policy and planning for carbon dioxide emissions reductions.
  • The role of investors is evolving; many see both a moral case and a superior investment case for companies with sustainable business plans involving less carbon extraction and less carbon consumption.
  • Investors are looking to understand their carbon exposure and develop strategies to reduce, offset and hedge against risk without relinquishing engagement opportunities.
  • Companies must be aware of shareholder sentiment, initiatives and research, as well as possible regulatory changes, in order to communicate effectively with investors.

Download Paper here:

The Divestment Movement – Where do Investors Stand – RDIR