Today’s IR Society creating tomorrow’s CFOs?
The sun shone on the brightly-colored narrow boats as some 300 delegates convened canal-side for the IR Society’s (IRS) annual bash, held once again at King’s Place. John Gollifer, IRS general manager, says the location is simply too popular to change.
Glorious London weather isn’t usually something to be passed indoors, but the promise of a day filled with everything from how to successfully attract international investors to handling activist investors and a CEO’s thoughts on IR, this year’s theme of Today’s IR: creating tomorrow’s value was more than enough to tempt attendees inside and down the stairs to hear chairman John Dawson open the event.
Interview with a CEO
Host and BBC presenter Evan Davis then kicked off the first talk in the day’s packed schedule: an interview with Harriet Green, CEO of Thomas Cook, who described how she took the unconventional step of offering herself up for the challenge of turning around the world’s oldest travel company.
So where had Thomas Cook been going wrong? For a start, there were 15 levels of management between Green and the customer when she took control of the company in July 2012. ‘Which is slightly more than the highly regulated French nuclear industry,’ she noted.
As part of Green’s explanation into how she changed the firm’s fortunes – including pulling up the share price from 14p when she joined to 138.2p at the time of writing – she talked about the need to raise some £1.6 bn and how that reflected on the importance of IR.
‘From day one,’ Green and the CFO ‘spent about 30 percent of our time with investors,’ she explained. ‘So we consider ourselves to be central [to IR]. As an example, just since we announced our half year [results] in May, I’ve done 50 investor visits.’ To ensure her efforts are supported by the best team, Green brought in a new CFO, a new head of IR; as she puts is, she replaced ‘the whole team’. More than that, she says, around a third of Thomas Cook’s top staff were newly recruited after she joined.
Green’s views on the importance of IR in turning Thomas Cook around were followed up by a discussion on how to successfully attract international investors – and indeed, whether or not you should even bother.
Before the morning break, the five-strong panel, which included John Andrews, head of IR at Deutsche Bank, and Fay Dodds, Burberry’s vice president of IR, discussed regional trends that dictate a preference for long or short-term investments – explaining that some investors have even asked where a company will be in 20 years’ time. Other topics that came up during the 45 minute session included the preference for research and numbers in Europe and the US over a focus on relationships in Asia; regulatory issues – such as those in China; and the time it can take to get some international investors on board.
The debate took an amusing turn when Davis asked whether it was fair to say that Asia generates a huge proportion of the world’s savings, while America doesn’t really save much at all. ‘Is it simply the case that the Asians lend money to the Americans, who then invest the money in shares? So the Asians hold a book of loans and the Americans hold a book of equities?’ he asked.
‘We’re doing our bit for global growth,’ quipped Nicholas Colas, managing director and chief market strategist at ConvergEx, adding that ‘the biggest bank in the world is the Japanese Post Office: they own Japanese government bonds. They're probably the most bullish story you can tell about global equities. [But] Asian investors will move to equities as they want to diversify an ever-increasing base of savings.’
The good, the bad and the IRO
Three sessions followed the morning break, with attendees offered advice on how to get the sell side to work more effectively – a topical subject given the UK’s Financial Conduct Authority (FCA) spotlight on corporate access – as well as a talk on the value of investor feedback and a debate about what makes good IR and bad IR.
As well as the usual adjectives, Andrew Bonfield, financial director at National Grid (with his head of IR John Dawson beside him) added that a sense of humor and thick skin were also IR essentials.
After an hour’s break for a waterside lunch, delegates returned to hear the pros and cons of digital IR, with moderator Helen James, Investis CEO, asking Emmett Kilduff, founder and CEO of Eagle Capital, and Adam Smallman, head of content at Liberum Capital, whether digital IR is worth the investment.
While almost a quarter (24 percent) of delegates in attendance said they didn’t see digital IR as a key part of their strategy, both Kilduff and Smallwood agreed that for little time and investment, everything from LinkedIn to short, snappy, low-cost videos offering a personal touch and even ‘online advocates’ could benefit an IR program.
With four break-out sessions, attendees had the choice of picking up some tips to get on the buy-side’s radar, or learning how to handle an activist investor, followed by a talk on navigating your way around a fund versus tips on ‘proactive governance’. I opted for a change of scenery and headed over to hear Josh Black, editor of Activism Monthly, moderate a session on – what else – dealing with activists.
The varied panel was made up of Stuart Morgan, head of IR at National Express (who had first-hand activist investor experience with Elliot Management), activist Paul Harrison, CEO of RWC Partners, Mark Bardell, partner at Herbert Smith Freehills, which advises clients on how to deal with activists, and finally Steve Balet, managing director of strategic communications at FTI Consulting, who also specializes in corporate governance, IR and M&A advisory.
Morgan recounted how Elliot had moved quite quickly from discussion to activism, while Harrison detailed what he looks for in a target company. Balet talked about a shift from ‘balance sheet activism’ towards an ‘operational style of activism,’ offering the advice that you should always look at the tactics your opponent has employed in the past and ‘know your activist’.
One of the key points in dealing with an activist investor – or rather being prepared to deal with an activist – is good governance, according to the IRS panel of experts. So following that idea, I headed back to the main hall for my second break-out session on proactive governance, which saw the panel discuss how board performance is judged, what KPIs are used to measure governance and, of course, the issue of senior management pay – ‘the one that makes a lot of noise in the UK,’ noted Shade Duffy, head of corporate governance at AXA Investment Managers. ‘We want performance to be linked to how boards are paid,’ she said.
As the remaining delegates regrouped in the main hall for the final talk of the day, titled ‘The strategic value of IR from the CFO’s perspective and what this means for your career,’ Davis followed up on an earlier joke about all IROs being frustrated CFOs – who, he said, are in turn frustrated CEOs.
However, the talked kicked off with some stats that showed that very few investor relations professionals move into CFO positions. Talking about where investor relations fits into wider career plans, how the profession can be used as a stepping stone and whether it’s possible to move into the CFO seat from an IR role were John Rogers, CFO at J Sainsbury and Stephen Jones, CFO at Santander UK – himself a former IRO.
With the day’s sessions drawn to an end, attendees moved upstairs to the balcony, for a spot of live music, nibbles and a well-deserved mojito.