As of this writing, most companies had released their fourth quarter and full year 2021 results and many management and IR teams were in the process of post-results investor outreach. This includes February roadshows and March broker conferences before Q1 preparations begin in April.
A few pioneer countries like the UK and Denmark lifted most Covid-19 restrictions in January as cases dwindled, others followed in February, but others – Hong Kong, for example – have seen an increase in cases. In mid-February, German investors in Frankfurt were still working from home, and only about half of American investors returned to their offices.
The work of IRs is global – capital markets are global – but while Covid-19 is a global infectious disease, countries have responded individually. As an IRO, you cannot function in the same way as in the past. What works in London with some investors will not work in Germany. The idea of a global, American or European roadshow is irrelevant when the rules and reopenings differ between countries.
These national responses to the pandemic have confirmed a trend that has already begun a few years ago: the world has become less integrated, less global. Governments stockpiled vaccines for home use, people in some countries were offered a second booster shot when many people had yet to receive their first shot. The UK has completed its exit from the EU. Russia invaded Ukraine.
Financial markets, and with them the IR profession, have been the main beneficiaries of globalization. It made our work easier to do, but the trend is now reversing, again creating more fragmentation.
Taking ESG seriously
Change was underway before the pandemic hit. And we will eventually put Covid-19 behind us, even if the world is a more unstable place by then. What the pandemic has done, however, is accelerate a number of existing trends, including ESG, and people in business relationships will also be faced with the reality of ESG engagements and cost containment. Despite the challenges, however, ESG remains a great development opportunity to grow the IR program and learn how to help your business climb the ladder of increasing cyclicality.
During the pandemic, CFOs have appreciated the lower costs of doing business, with travel and activity costs in particular falling. This hasn’t had a material impact on many businesses, so why not keep travel and business permanently at the new lower level? This has helped many businesses maintain some level of profitability with lower revenues during the pandemic, and the odds are slim that costs will be allowed to rise again as the world reopens.
We must now ask ourselves, did people in the past really travel out of commercial necessity, or by right, or by tradition? Several companies have also pledged to reduce their carbon footprint – and travel is an obvious place to start. IRs need to take ESG seriously, across the company as a whole, but also in how they conduct their own business.
This again powers the new at least partly virtual reality. March has several broker conferences: Credit Suisse in London is virtual, Barclays in Miami is live, and Carnegie in Stockholm has a choice of on-site and virtual.
Brokers able to manage events where some participants are present in person and others only virtually will emerge stronger from this period; the hybrid is also the likely future of IR interactions. If you have the budget and it’s possible to cram multiple activities into a full week in the US, then you go – but not for a single conference in Miami like we did before.
The value of a good IR remains more important than ever
What all this change means is that, if anything, good IR is more important than ever. I recently met a contact who joined a new company last year. The company had announced its fourth quarter results for the full year and provided guidance – an outlook for 2022 – at the same time. A year earlier, the company had lost 9% on its 2021 outlook day and another 5% in the following trading week.
This new IR manager recommended a different approach to providing guidance: scrap revenue and profit targets in absolute amounts – why would the company guarantee exchange rates? Instead, the new IR manager wrote a guidance paragraph for the results that led the company to use constant exchange rates, while outlining its critical success factors.
The company is in an investment phase and moving towards results, and the consensus had earnings figures higher than the company’s plans suggested. But the depiction of the need to continue spending on R&D, sales and marketing to improve the company’s long-term value has been a strong draw for sell-side investors and analysts. Recommended updates followed. A week after the 2022 forecast, the stock price was up.
What this shows is that in a world of growing uncertainty and challenges over how IR is conducted, public companies and their shareholders, potential investors and sell-side analysts need a helping hand. firm in the IR chair to help provide guidance and steer the business through the turmoil. waters.
The value of good investor relations has increased. It is more in demand than ever. IR is getting more complex again, with new and forgotten challenges, but it’s good for continuous learning, development and the ability to grow in the job. These changes are good for the IR profession and for people who have made IR their career choice.
Thomas Kudsk Larsen is Head of Communications and Investor Relations at Sobi.
This article originally appeared in the Spring 2022 issue of IR Magazine.