2017: a year of anticipation and change
As 2017 draws to a close, we asked a selection of professionals from the IR community to share their views on the key IR events, trends and highlights of 2017, and what lessons IROs can learn from these going into 2018.
Carla Fabiano, IR manager at New Look
‘For investor relations, 2017 was a year of anticipation for one the biggest regulatory changes in the past ten years. With Mifid II at the doorstep, preparation for the new regulatory environment was at the top of every IRO’s agenda.
‘Given the unbundling of research and corporate access from trading commissions, companies have been reshaping how their future interactions with the buy and sell side will be modelled. Faced with a decreased analyst coverage, for some IR departments this will entail increasing their commercial activities as they try to proactively promote the company with the investment community. For others, efficiency will play a key role as they take on more responsibilities.
‘Overall, although Mifid II has been related to disruption and uncertainty, there is a positive element, as the new regulation will help companies regain control on the IR front. As several activities will move in-house, IROs will be able to influence them directly going forward.
‘The main takeaway from these changes is that Mifid II is just one piece of the puzzle as when it comes to financial markets regulation, change is the only constant. It is therefore key to be able to continuously adapt in an ever-changing game.’
John Gollifer, general manager at the IR Society
‘2017 has been a particularly busy year with global regulatory change working apace. As companies, we have had many things to contend with, such as Mifid II, Brexit, the changing landscape of investor engagement, corporate governance, sustainability and many other issues as we promote our company’s equity story.
‘Mifid II has exerted an overwhelming influence on the IR Society’s activities in 2017. This year, we’ve hosted a number of discussions to help IROs consider how they can prepare for Mifid II.
‘The impact on companies will be different depending on their size and sector, with many facing additional resource and budget requirements, but this is also an opportunity for IROs to take control of their IR programs and ensure that they remain open, accessible and communicative in engaging all stakeholders.
‘Another overriding theme is the inexorable rise of material non-financial matters and how to factor these into the IR conversation. Notably, these centre on ESG issues, including the consideration of mandatory reporting and the next generation’s penchant for ESG matters and a growing sense of responsibility.
‘The theme of the IR Society 2018 Annual Conference of ‘IR: Future-proofing Business’ will enable us to explore some of these longer-term agenda items on the minds of those influencing capital markets and regulations and how these may impact IR. We’ll look at how best practice IR can influence a company’s thinking, culture, values and behaviour by bringing the outside view in.
‘As we move into 2018 we should all, by now, recognise the changes wrought by the impending implementation of Mifid II. Based on the experience of our IRO members, direct communication between listed companies and their stakeholders is likely to become more important than ever.
‘As such, IR professionals, along with their company management, are likely to play an ever-increasing role in the efficient functioning of capital markets. To do so, we see a need for IR to step up now and find ways, including possibly adding to their own resources, to ensure that in 2018, UK plc is as ready as it can be for the new regulatory environment.’
Charles Hamlyn, MD at QuantiFire
‘Over the last year, QuantiFire noticed an increasingly positive outlook for equity markets, among almost 1000 investors and analysts that provided feedback to our clients, which was in step with the strong performance of international equities over this period. After a bit of a dip in the middle of the year, our investor outlook score is at a nine-month high as we reach the end of 2017.
‘Whilst we have also seen a gradual closing of the gap between perceived ‘value opportunity’ and ‘fair value’ as share prices have risen, the difference between investors’ outlook for equity markets and their views on equity valuations is currently as wide as we have seen it since Q1 2017, implying a positive start to the markets in 2018.
‘However, this is not to suggest that IR teams will find investors being any more forgiving next year. Our research into what QuantiFire’s large cap clients most need to demonstrate shows that investors were increasingly keen to hear companies talking about growth last year, versus the year before. Whilst markets remain strong we expect them to remain highly focused on messages and metrics that support company growth stories next year.
‘At a more operational level, one of the themes that we noticed in 2017 was an increasing preference among investors to provide feedback to companies electronically, with 57 percent opting for this rather than giving feedback over the telephone. In view of the fact that investors’ time is ever more limited, we expect the majority of investors and buy side analysts to continue to increasingly favour online interaction in 2018.
‘Finally, something else that we noticed this year was a real appreciation for independent outreach to arrange meetings among mid-tier investors, including those who, despite having concentrated portfolios, have not been targeted by brokers, possibly because of low levels of turnover.
‘Correspondingly we also saw increasing demand from IROs for research that identifies new investors with a confirmed interest in their company, but which the IR team doesn’t already know.
‘We expect these trends to accelerate in 2018, as IROs need to look for solutions that reach out beyond the ‘same old faces’, once Mifid II is in effect and substantially restricting the universe of ‘new target investors’ that brokers are able to initiate meetings with.’
Sandra Novakov, IR director at Citigate Dewe Rogerson
‘Our 2017 annual IR survey revealed a number of key trends in 2017. Mifid II was a major theme for the year, and most of our clients started preparing for its implementation during the second half of 2017. This included a range of initiatives, from reviews and upgrades of IR websites and information materials, to investments into investor databases and CRM systems.
‘Our results also showed a significant amount of direct engagement between companies and investors, with 76 percent of companies taking the initiative to approach potential investors directly to arrange meetings in 2017, either regularly or on an ad-hoc basis. Incoming requests from investors have also continued to rise – 62 percent of companies in our sample have noticed an increase in direct requests from potential investors for meetings.
‘We also saw continued growth in passive investment. In addition to reinforcing the need for proactive investor targeting, the impact of the continued rise in passive investment has led to a growing focus on corporate governance practices, and the need for boards to be more engaged with shareholders.
‘In terms of events, we saw a rise in capital market days with our research showing an increase in resources allocated to company-hosted events which are seen as an effective way of educating the market regarding company strategy and different business segments.
‘We also observed a growing trend in holding virtual AGMs which was particularly notable in North America where, according to our findings, 21 percent of companies hold virtual AGMs against 10 percent in 2016.
‘Looking forward to 2018, companies will need to determine the impact of Mifid II on the practices of their shareholders, sell-side analysts and brokers and adapt their IR strategies in line with this.
‘This includes investigating the research approach that each analyst is planning to take going forward, which research teams will be investing in coverage of their sector or region, to whom each broker will distribute research to and establishing the agreements the company’s top shareholders have negotiated regarding research and corporate access.’