The investor relations function in listed companies is critical in a crisis. When everything is going right and share prices are appreciating, investors are happy. But when it goes wrong and they demand answers, an investor relations team has to be ready to deliver.
Intellidex released the results of the second annual investor relations awards on Friday. It is based on a survey of 130 institutional investors and professional analysts regarding their experience of the investor relations of JSE-listed businesses. The research identifies companies that excel and those that investors say need to improve. The headlines were that Absa, Nedbank and Growthpoint ranked top in the overall awards (in that order). But there were interesting findings in other parts of the survey too.
One that stood out was Transaction Capital, which for a second year ranked first for “most accessible senior management”. As the survey research was undertaken from November to February 7, Transaction Capital’s recent earnings disappointment, which led to a sharp fall in the share price, occurred after the study period. The obvious question is to what extent its reputation among shareholders for accessible management helped soften the market reaction to bad news.
Speaking at an the awards event on Friday, Transaction Capital investor relations head Nomonde Xulu said her team worked flat out to respond to every inquiry received. She said that due to the company’s reputation there was a level of trust that was important in communicating with the market, which while disappointed could at least access the information needed to make sense of performance.
As one respondent in the survey commented, “The good [investor relations] teams will be available specifically around bad news to try to dissect it for investors. Horrible IRs or teams that have a lot to worry about will just bury their heads in the sand.”
Large-caps tend to dominate the airwaves and get the most investor attention, so the investor relations function at small and midcaps must work to build investor interest.
The small-caps rankings were led by former heavyweight Murray and & Roberts, which has faced intense pressure amid a construction industry slump. Also in the top three were gas developer Renergen and Dipula Income Fund, a real estate investment trust (Reit). For these companies, standing out among much larger peers is an achievement on its own.
Among midcaps, resources company Afrimat, Vukile Property Fund and Transaction Capital took top honours. Afrimat was also notable for beating the much larger mining majors to rank top in that sector.
The companies that investors thought needed to improve include Capitec, Dis-Chem, Coronation Fund Managers and Fortress Reit. Capitec also surprised the market with weaker-than-expected earnings announced shortly before the research period.
One analyst commented, “Historically Capitec hasn’t had a particularly well-established IR function and as long as they were beating market expectations that wasn’t a huge problem. But their results for the six months to August 31 2022 missed market consensus, yet they believed that they hadn’t underdelivered.
“The market took a bit of umbrage to that, and indicated that it was incumbent on Capitec to become a bit more institutionalised and provide more information. That I think was the genesis of the problem.”
Capitec has historically had senior executives in finance and treasury functions engage directly with investors, but when the market felt it was getting bad news it wanted a dedicated investor relations function. Other companies mentioned had all had some level of bruising encounter with shareholders, whether it was about remuneration policies or, in the case of Fortress, losing its Reit status.
Almost all respondents said investor relations was important or very important when assessing potential investments. Max Gebhardt, MD of FTI Consulting, which sponsored the awards event, says the role of investor relations practitioners is becoming increasingly complex as they have to explain company policies across a variety of measurables that investors are demanding. “Both investors and legislators are demanding more insight and information from C-suites every year. IR is there to facilitate this,” he says.
By shining a spotlight on the investor relations sector and the increased transparency it brings, this survey will help practitioners fulfil the important role they play in enabling investors to make informed decisions.
- Consumer companies: Mr Price
- Industrials: Growthpoint Property
- Resources: Afrimat
- Large-caps: Absa
- Mid-caps: Transaction Capital
- Small-caps: Murray & Roberts
- Most accessible senior management: Transaction Capital
- Best integrated annual report: Nedbank
- Best market communications: Nedbank
- Best disclosure of ESG metrics: Anglo American Platinum