Taking opportunities to strengthen investor brand

While markets and macroeconomic factors can’t be controlled, managing how a compelling investment case is crafted and distributed helps strengthen a company’s investor brand. Transparent and timely communication helps companies excel when times are good, and be more resilient during tougher, more volatile times.

 

Results reporting to strengthen investor brand

One of the primary objectives of a company is to effectively communicate its strategy, performance and governance to a broad readership, along with a compelling investor proposition to investors. Consistent and transparent communication provides a comprehensive understanding of a company, promotes confidence and trust, and strengthens investor brand.

Reporting season provides a great opportunity to communicate with all stakeholders, including current and potential investors, analysts, journalists, company employees, customers and suppliers. Yet, not all companies are taking full advantage of the communications opportunities available during full-year results reporting season.

During this time, it is imperative that organisations proactively communicate their corporate results with sufficient contextual messaging in a timely manner across all relevant stakeholder touchpoints, especially digital mediums such as the corporate website. This maximises the communication opportunity while providing full consistency and control over the company narrative.

For example, not all insights may be discernible from analysis of results announcements accompanied by the traditional Appendix 4E and Preliminary Final Report – competitive advantage increasingly involves combinations of value creation, risk management processes, intangible assets and other processes not detailed in short-form preliminary final reports.

Publishing a full annual report side by side with the full-year results announcement provides significantly greater opportunity to explore the nuances of both financial and non-financial performance, strategy and long-term outlook – and for companies embracing Integrated Reporting – commentary around the full range of relevant and material company capitals, including non-financial drivers (see our article <IR> Building trust through transparency).

In addition, there is also an important opportunity for companies to review how and when they report on sustainability/ESG matters. Buy and sell-side analysts and other stakeholders are lamenting the lack of hard ESG data in some reports as well as the common practice of releasing sustainability reports out of sync with financial results.

Investors increasingly view sustainability considerations as material risks to be managed—they expect timely disclosure of relevant, high-quality data. Any delay in the release of the sustainability report following the release of the annual results can give investors the impression that sustainability issues are an afterthought.  Daniel Smith, General Manager, CGI Glass Lewis

Sustainability performance and outlook is an increasingly important component of overall corporate assessment, so companies can benefit significantly from improving sustainability reporting. This may involve changing the timing of release of the company’s sustainability report to coincide with the annual results release, either as a separate publication or as part of the full or integrated annual report, and also offering it in digital format.

Case study

Designate recently partnered with Spark Infrastructure to design and deliver Spark’s results and full annual report concurrently. On results day, stakeholders were able to access the full financials along with contextual information around how they aligned with the strategy and vision of the company. Importantly, they were also able to view a concise version of the annual report, optimised for digital, via the corporate website.

Having the key annual report sections integrated into the corporate website also made for a smoother and more streamlined internal workflow; content management was easier, and all content was visually styled to be on brand by default.

Engaging stakeholders via the corporate website

Conveying the company narrative across digital mediums should be a consistent, ongoing investor relations commitment that is not limited only to reporting season. Proactive and ongoing engagement with stakeholders on a timely basis with a clear and compelling company narrative is the key to success.

While the efficient market hypothesis (EMH)* claims that markets are efficient at absorbing material information and securities will always trade at their fair value, practice tends to indicate otherwise, at least in the short term. By consistently providing salient, timely information, prices will more accurately reflect the company’s situation. Crucially, better communication leads to greater investor confidence in the business model, management, strategy and company outlook, and therefore, more efficient pricing of capital.

Several studies link effective investor relations and expanded informative disclosure with increased demands for the corporation’s shares and lower risk premium, thus, the lower cost of capital, or improved securities valuation.  Alexander V. Laskin1

The market has been conditioned to expect immediate access to quality information. Digital media provides an opportunity for immediate, responsible and engaging stakeholder communications, especially in this increasingly competitive market landscape (including competition for capital). A corporate website has a 24/7 global reach and is an essential resource for disseminating company information. It is often the first point of contact for many stakeholders.

While providing downloadable PDFs of company information and results via the corporate website is an expected minimum, it is important to utilise the platform to its full potential as a communication and engagement tool. For example, PDFs are usually optimised for print rather than interaction and are problematic when viewing on a mobile device.

Providing a positive and intuitive user experience (UX) on your website involves designing content for screen that can be quickly and easily accessed, navigated, and understood – content that provides context on the company’s strategy, and clarity about its execution and vision. When applicable, media such as video, interactive charts, diagrams, audio, and imagery can also be used to support the information and reflect the company’s brand.

Make your communications count

Stakeholders are looking for comprehensive information about a company and what sets it apart from its competitors. Before allocating their capital (or advising others to do so), they want to clearly understand the business model, the strategy, the competitive advantage, the prospects, and how the company creates value and manages risk.

It is important to present company information and results in a well-designed format that resonates with the stakeholder base, leaving them feeling educated and informed, connected to your company, and confident in your brand.

While markets and macroeconomic factors can’t be controlled, managing how a compelling investment case is crafted and distributed helps strengthen the company’s investor brand. Transparent and timely communication helps companies excel when times are good, and be more resilient during tougher, more volatile times.

A digital IR disclosure process with a commitment to delivering timely, accurate and meaningful information across all stakeholder touchpoints is essential for strengthening investor brand.

*The Efficient-market hypothesis

The Efficient-market hypothesis (EMH) states that security prices fully and fairly reflect all relevant available information. Economists Eugene Fama and Paul A. Samuelson developed the theory in the 1960s.

Supporters argue that it is impossible for investors to outperform the market by purchasing undervalued stocks or selling for inflated prices since stocks always trade at their fair value.

However, the EMH is highly controversial and often disputed. Detractors of the theory believe that markets can’t be completely efficient since all investors interpret information differently and have different methods of valuing stocks. Plus, not all investors are necessarily rational and there is ample evidence of markets overreacting to news events.

 

1 (2011) ‘How Investor Relations Contributes to the Corporate Bottom Line’, Journal of Public Relations Research, 23: 3, 302 — 324