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Debunking those excuses for not publishing analyst consensus

Every listed company monitors analyst consensus internally. This is in line with the IR Society best practice guidance that companies should establish internally which line items need to be tracked for company-compiled consensus. This may depend on factors such as internal KPIs, market guidance and metrics of interest to the buy and sell-side. To do this, IROs should request to see copies of analyst models for review after any change of forecasts is published, in order to maintain an up to date view.

The IR Society goes further than this purely internal monitoring, and states that best-practice is to publish consensus on the website. I recently read this comment on Linked-in by veteran IRO, Andrew Ripper – he believes that only 40% of FTSE100/250 companies publish consensus on their websites.

As an Investor Relations (IR) professional, ex sell side analyst and private investor, I’ve spent a lot of time on the IR pages of corporate websites over the years. They are an important source of information, being where investors/analysts go to learn about the business, get access to reports, make contact and understand the investment case. Most cover the basics well. 

Investors also need access to consensus estimates, to understand market expectations and valuation. This is particularly important in an environment where corporates may be understandably more reluctant to provide guidance (given COVID), there is less general access to broker estimates (due to MiFID) and consensus on wire services can be hit and miss.

Considering a broad range of 100 corporates, I estimate that only around 40% of the FTSE100 and FTSE250 include company-compiled consensus on their websites, of which only a third (~15% of the total) include cash flow and/or net debt estimates, important metrics. This includes some companies which do it well, such as Rio Tinto, Vodaphone and Serco, but there’s scope for many more to join them. Putting consensus on the website should be best practice – investors will thank you for it.

It got me thinking. Consensus is such a basic tool for investors that putting it on your company website should be an easy best-practice win so I struggle to understand why you wouldn’t. Yet many companies don’t. Over the years, I’ve heard numerous reasons/ excuses, and I wanted to take this opportunity to debunk some of them.

  • We only have a few analysts covering us so it’s not meaningful. True, the fewer contributors, the less of an average it is, but it is still relevant. Institutional investors may have access via Bloomberg/ other third party providers, but the retail investor doesn’t. If you’re really worried about the number of analysts that contribute to consensus, just put a footnote to say “This is based on forecasts from [x] analysts.”
  • It’s too complicated. Apart from being a bit rude about your investor base (!), it’s the job of an IRO to make the investor information accessible to their audience. That could mean focusing on KPIs, adding relevant industry specific metrics/ ratios, or adjusting numbers to put them on a consistent, meaningful, basis. In fact, it’s arguably more important that you disclose a company-compiled consensus in this situation as the third-party providers may not be generating a consensus that is accurate/ particularly helpful. Don’t forget to footnote what you’ve done for transparency.
  • The analyst models are out of date. Again, it’s true that some analyst models are not updated as often as IR would like, but they are still out in the market so if this is the case, I would argue it is helpful to investors clarify the issue. I’d generally suggest that numbers published over a year ago can legitimately be excluded from the consensus calculation. If you’re doing this, it’s best to set a clear policy for calculating consensus, disclose it, and apply it consistently. Then there is no risk of being accused of manipulating the numbers to generate a particular outcome.
  • Outliers. This is probably the trickiest issue to handle. Often an analyst has intentionally taken an extreme stance, and stands by their number, so (whether you like it or not) it is not necessarily appropriate to exclude it from a company-compiled consensus. One solution in this situation would be to give a range, and maybe also show mean, mode, and median.

The only other thing I’d add, and I’m sure it’s obvious, is that once you publish consensus, you need to keep it up to date.

I’d love to hear your thoughts on publishing consensus.

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RIP to the annual Investor Day

The Investor Day has been a fixed part of every IR calendar for decades. But is it time to call a day on the all singing, all dancing, annual Powerpoint extravaganza?

If you read my last blog, you’ll know I’m a big fan of the virtual roadshow. But that doesn’t mean I’m going to recommend we take the Investor Day online. If you ever had any doubt, lock-down has proved it’s completely impossible to concentrate on a webcast for that length of time.

In fact, over the years, physical attendee numbers at the official Investor Day events have generally declined, with more people opting to join online, dotting in and out, keeping half an eye on it whilst multi-tasking at their desks. Even before Covid, it was already starting to feel like the format needed to be refreshed. So what do you replace them with?

Easy: Workshops!

As well as the obvious benefits from removing capacity and location constraints, there are so many reasons why these are the way to build deeper investor and analyst engagement, and increase the understanding of your business.

If you’ve never hosted workshops, here are some things to consider.

  1. Keep the sessions bite-sized. They don’t need to be an hour, 45 minutes could be plenty. Maybe even 30 minutes? I love that Zoom frees us from the feeling of having to fill an hour to justify the meeting.
  2. Do a series, spotlighting a different aspect of your business in each session. Bonus – this is a great way to keep a steady flow of news and engagement with the capital markets participants. And, once you’ve done a few, you’ll be able to rattle through the prep in no time at all (well, a lot less time than for an Investor Day anyway).
  3. Consider doing something different – virtual creates the opportunity to do live product demos and site visits.
  4. Use the sessions as an opportunity to demonstrate the strength and depth of your leadership team, beyond the CEO and CFO who are more usually visible to the investor community.
  5. Host them jointly with your comms colleagues and invite the media too. Half the work for the IR team, double the benefit for the company. Win, win!

If you’d like to discuss your IR engagement and plans, why not book a “Power Hour” with me?

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Six reasons to LOVE a virtual roadshow

As we come to the end of interim reporting season, most of us have now completed at least one fully virtual roadshow. Initial complaints about going virtual were that it is harder to establish a connection and that it isn’t as good as an ‘in-person’, ‘whites-of-the-eyes’ meeting. Then we grumbled about ‘Zoom fatigue’ and the tech issues of hopping from platform to platform. But we HAVE got used to it.

I guess it’s like the transition from letters to emails, and I’m old enough to recall the typing pool at the accountancy firm I trained at, complete with mountains of pink copies and yellow copies that, as a junior, I had to carefully file. Probably my best ever intern role was when a group of us were tasked with sorting the archives in the attic  – we discovered some sun loungers stashed up there and spent hours relaxing on the roof whilst theoretically deep archiving records. Not sure it added much to my personal development, but they did offer us all a training contract at the end of the summer!

So, I’m going to stick my neck out and say I hope the virtual roadshow is here to stay. Maybe supplemented by a traditional roadshow, but I believe virtual can be the primary format. I know some management teams, corporate brokers, and IRO’s, believe there are certain times that it is still better to do meetings in person (e.g. during a transaction), but I would challenge that it’s not necessarily better, just more familiar. Of course, it’s likely that we will end up with a hybrid model, but in defence of the virtual meeting, here are six killer benefits.

1.Time efficiency

Not only do you recoup the travel time between cities and in the car between meetings, but in a traditional meeting, there is almost an unspoken obligation to fill the hour. Now, if it takes 37 minutes to cover the Q&As, you wrap up, and since you haven’t moved from your desk, you can crack on with stuff straight away. Nice.

2. Before market-open sales force blitz

Here’s one I would never even have contemplated in the old world. You can now speak to your corporate broker sales team for 15 minutes before market open. How much better is that than waiting until after market close?

3. Equal access

Traditionally, a typical UK based IR, we would do the UK roadshows first, then head to the US. That meant the US investors had to wait. Although there is no new information being disclosed in the meeting, if you buy into the ‘whites-of-their-eyes’ theory, then the investors who have to wait are potentially disadvantaged. Now you can hop from London, to New York, to Hong Kong and see all your key investors at a time that works for them, not that fits your travel plans.

4. New opportunities

Previously, certain locations were more challenging to visit logistically, or it was a struggle to justify a long trip to meet a potential investor that may, or may not, be interested.

5. Cost efficiency

This is an obvious one so I’ve left it to last. Clearly, you can save a fortune on travel and accommodation, not to mention those chauffeur driven cars or taxis between meetings. That budget can then be reallocated within IR – every IRO has a budget wish list.

6. Recording?

This is one which I suspect will be discussed more as the virtual IR world evolves. There was always a risk of challenge over selective disclosure at a meeting, hence IROs generally take copious contemporaneous notes as evidence. Now we have the facility to save a factual record. Subject to permissions, surely this is a compliance win.

The downside of virtual is, of course, for the attendee to switch of their video and disengage, which means the delivery of your messages is even more critical than ever.

If you’d like to review your IR strategy or hone those delivery skills, why not book a virtual ‘Power Hour’ with me?

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Do you know how vocal skills can make your IR presentations stronger?

Traditionally, IR presentations are heavily focused on content, with a couple of rehearsals in front of your advisors as a practice run. Of course content is critical in investor relations, but the public speaking skills are also essential.

I recently shared some cool tech tools and apps that will help boost your public speaking skills ahead of the upcoming reporting season and the roadshows.

But have you ever worked specifically on your voice? There are several key aspects that you can focus on

Register (not volume)

I don’t mean the sign in register to see which investors and analysts are taking part in your event. It’s your vocal register. One of the first public speaking skills I was ever taught was by my mother, a teacher, and it’s probably my top tip. If you want to make an impact, lower your voice. She used to say if you want to be heard across a playground, you don’t scream, you boom. If you don’t believe my mum, did you know it’s been proven that people tend to vote for the politician with the deepest voice? Not sure how to do it? It’s actually pretty easy – the trick is to drop the voice from your throat to your chest. It sounds weird, but it totally works, guaranteed.

I do want to stress this is totally different to volume. There’s great coaching exercise where you put people into pairs (name them A and B) and then make them stand at opposite sides of a room. Try getting all the As to read a passage from a book aloud at the same time. Is it easier for B to hear their partner when it’s shouted or whispered?

Timbre

That’s basically a fancy word for tone. Think of the velvety voice in the M&S food adverts “This is not just a chocolate bar, this is a molten caramel chocolate bliss bar” (OK I made that up, but it does sound rather yummy). Compare it to the screechy YouTubers that my teenage son insists on watching (I’m not going to name names, but you can imagine). I wouldn’t suggest you go full on rich chocolate bar for a results presentation (even if you’re M&S), but you can experiment to get the right energy levels.

Rhythm

Basically you’re looking for a more poetic sound vs. a flat monotone. Regional accents can also come into play here (e.g. the Australian accent – sorry guys – has a tendency to have an upwards tilt at the end as if it was a question which you might want to vary in a longer presentation.

With 42 million views, this has to be one of the best TED talks! It covers these points, and more.

If you’d like to work on the delivery of your IR presentations, I offer a Presentation Power Hour for only £97.

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IR post Covid – how do your plans compare to others?

The IR Magazine has published the results of a survey on the impact of Covid on IR globally. It’s not gloom and doom, but there are some key takeaways

  • a third of IR teams expect their budgets to be cut (and a much higher proportion in Asia)
  • more cuts are expected for IRs at small caps than large caps
  • IR team sizes are expected to be broadly unaffected, with no obvious regional biases
  • senior management has been more “hands-on” in IR than usual
  • after an initial decrease in external providers, outsourcing is expected to become much more common going forward, particularly in small companies

The report goes on to cover working practices and give interesting stats on the use of virtual roadshows and conferences.

If you want to make sure your IR plans are ready for this new world, our one-hour strategy review will give you clarity on the path, and it’s only £125. If not now, then when?