The importance of long-term business thinking

Posted in News on 22 June 2018 By Amber Ali, Business Development Manager

In an uncertain world of BREXIT, Donald Trump and Sir Martin Sorrell among a myriad of other shape-shifting changes, the most recent IR Society annual conference was an insight into how the IR industry continually adapts.

The conference began with an opening address by former Chairman of HSBC, who presented a view that we need to make the most of our situation with BREXIT and mitigate the difficulties presented by it in a way that we see fit. The UK is a global leader in the service industry and will continue to be if we foster and develop our talent as we always have. Businesses have the responsibility to approach the short-term in a way that enables them to build a bigger purpose. We need to be responsible and create a long-term story with a convincing long-term narrative, whilst being honest about the challenges.

Environmental, social and governance (ESG) helps to provide a longer-term view of a company for investors, and the FRC continues to provide guidance on how businesses can report to this end. The FRC has a responsibility to continually improve company standards, which is why the revised UK Corporate Governance Code, to be announced in July, notably places more emphasis on the long-term strategy, culture and purpose of a business. Although the annual report has been described by some as an ‘annualcyclopedia’, a document no longer read cover-to-cover the story can remain concise if the document is managed by a chosen few. It is clear that IR teams have a vital role to play in providing a clear and transparent narrative, with greater insight into long-term performance and ESG issues.

For a winning IR toolkit, the resounding thoughts here were:

  1. Direct interactions with analysts are the most valuable type of communication -  IR teams need to communicate with analysts in a personalised and consistent way, i.e., pick up the phone!

  2. A clear sense of business purpose, delivering benefit for both shareholders and wider stakholders, should be communicated on the investor website and in the annual report.

  3. Don’t let the corporate purpose be confused with the investment case, be clear on how you organise this information.

  4. People can normally only recall three to four things at a time, walk into an investor meeting with no more than one sheet of information, no matter how technical the business. Be mindful of the 30-second, 3-minute and 30-minute investor reader.

  5. IR teams needs to have a deep understanding of the business so they can talk to investors with as much detail and commitment as the senior management team.

  6. Provide concise regular updates, no matter how large or small the business – it will help encourage investor confidence and eventually demonstrate how you are achieving your long-term strategic goals!

  7. Capital markets days are an incredible platform to communicate a business's long-term story and stretch the imagination of the audience. Results presentations typically focus on short-term performance.

It was fitting that culture and changing behaviours were discussed - Fergus Wylie from SIFA Strategy spoke about research on the views and intentions of investors on the increasing importance of governance issues in the investment decision-making process. A topic that was discussed in a SIFA Strategy and Emperor breakfast event not too long ago, please feel free to have a closer look.

 

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