The role of the investor relations (IR) professional continues to evolve from simple stock promotion, to a combination of public relations and financial knowledge.
With most plcs now having a dedicated investor relations unit, with several staff focusing on this area, the role IR professionals play in enhancing the company’s share price performance has come under the spotlight.
For Patricia Clarke, assistant manager group investor relations in AIB Group, success in IR is, ‘a combination of the understanding investors and analysts have of the company and equally the understanding AIB’s board and management have of investor issues’.
For Ryanair’s Howard Millar, chief financial officer, and deputy chief executive, success in IR is reflected in the share price. He says it’s, ‘about making people understand your story, and them then making the decision to buy the stock’.
On the key challenges facing IR professionals today, Clarke says, ‘As well as the ever increasing compliance and corporate governance issues, I think the biggest challenge facing IR professionals today is keeping track of the investor base and targets given the rapidly changing nature of institutional investors and the way they invest e.g. increased use of contracts for difference (CFDs).
Millar asserts that the increasing amount of information being produced is a key challenge for IR professionals, as it means that it has become more difficult, ‘to communicate effectively to shareholders and analysts’.
Ryanair’s recent bid for Aer Lingus posed an additional IR challenge, but Millar says that their focus was on, ‘communication to the market and shareholders the rationale for the deal effectively and quickly’.
The methods of communicating with investors have changed significantly over the past 10 years or so, with the growth of the internet and new media. AIB’s Clarke sees her role as, ‘meeting the demands and expectations of the financial community. They expect constant, consistent, concise communication in a real time environment. The growth of the internet and multi media has opened new doors to disseminating information to a wide audience at the same time’.
Millar says that the role has changed radically, pointing to the fact that Ryanair can now send documents and press releases via email. Similarly he highlights that investors can also be more pro-active themsevles, by downloading relevant information from Ryanair’s website. Another change he notes is the use of Bloomberg terminals by institutional investors, which greatly increases information transfer speeds. ‘This puts pressure on IR professionals to re-act to breaking news,’ he adds.
Managing the expectations of investors is a key function of today’s IR professionals. According to Clarke, ‘investors want clear, factual and consistent messages from our company. They want to understand the links between financial performance, strategy and operations. We favour the direct approach – open two way interaction with the market to ensure a full understanding and re-enforcement of our company’s strategy and performance. We proactively contact investors and the sell side community and issue formal trading comments four times per annum (results and trading updates)’.
Clarke says that AIB’s main goal is to, ‘ensure that shareholders and potential investors have a proper understanding of AIB Group’s financial performance, market position, corporate strategy and future prospects and that this understanding is fully reflected in the valuation of the Group’s equity stocks and debt instruments on Irish and international financial markets’. ‘Equally,’ she adds, ‘we need to ensure that AIB management is aware of, and up to date on, investor issues and concerns’.
Getting out there and meeting both existing and new investors is a key function of today’s IR professional.
‘We view multi-media communication as a necessary part of investor relations but nothing replaces the value and importance of one to one personal contact. Investors and analysts want to speak directly with management in order to understand the corporate strategy better and to be in a position to evaluate managements’ performance at first hand. Roadshows are not just held for existing shareholders. They are about generating interest in the company as well as fostering the loyalty of existing investors so roadshows still remain a primary role in our IR strategy,’ says Clarke.
Millar also sees roadshows as being a vital cog in the IR wheel. He says Ryanair use roadshows, ‘to meet existing shareholders and keep them up-dated, and to meet potentially new investors’. The firm tries to visit as many shareholders as possible every six months.
Apart from roadshows, Ryanair also uses a variety of methods to keep in touch with shareholders, including financial results, investor presentations, annual general meetings, broker roadshows, and investor days. |
