strategic investor relations and public disclosure
DESCRIPTION
LexisNexis Capital Raising for Corporations Conference August 2009 Establishing Sustainable Growth through Successful Funding Strategies and Addressing the Shareholders’ Crisis of Confidence through Strategic Communications • Assess the importance of communications for Investor Relations and Public Disclosures • Differentiating communication initiatives in maximizing their value • Defining the communications, investor relations, and statements and why they play an integral role in a corporations financial activity • What is the information that companies are required to make public? • Frequency of disclosure and maintaining confi dentialityTRANSCRIPT
STRATEGIC INVESTOR RELATIONS AND PUBLIC DISCLOSUREAddressing the Shareholders’ Crisis of Confidence through Strategic CommunicationsCase Study, Concepts, and Debatable Ideas
Kenny OngCNI Holdings Berhad
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Intro: CNI
1. 20 years old2. Core Business: MLM3. Others: Contract Manufacturing, F&B Retail,
Export/Trading, eCommerce, Shared Services4. Malaysia, Singapore, Brunei, Indonesia, India,
China, Hong Kong, Philippines, Italy, Taiwan, Oman, United States, Vietnam
5. Staff force: ± 5006. Distributors: 200,0007. Products: Consumer Goods and Services
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Contents
1. IR and its problems
2. Importance of IR to Value Creation
3. Corporate Reputation
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IR and its problems
Overview of Corporate Communications and Investor
Relations problems
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Value destruction in 48 hours…
13th April 2009
•Two Domino’s employees
•YouTube
•Apology from Domino’s after 48 hours
•1 million hits
•Twitter: questions on silence
•LinkedIn: suggestions by users in forum
BusinessWeek, May 4, 2009www.myCNI.com.my www.OOBEY.com
How to please Investors (the Dilbert version)
© 1998 United Feature Syndicate, Inc.
How to please Investors (the Dilbert version)
1. Buy back shares
2. Announce massive cutbacks
3. Spin off New Divisions
Ironically and Unfortunately, the above prescription is true in real life…
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Why is UMW favored by Analysts?
1. high dividend yield,
2. low price earnings multiple,
3. buoyant growth outlook;
Importance of Investor Relations
Why focus on Investor Relations in the first place?
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Is Investor Relations important?
1. Funds
2. Brand
3. Intelligence
4. Customer-shareholders
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IR’s Key Roles
1. Funds
2. Brand
3. Intelligence
4. Customer-shareholders
Communication to bring in the Funds
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IR’s Key Roles
1. Funds
2. Brand
3. Intelligence
4. Customer-shareholders
Communication to bring in the Sales
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Funds: Types of Investors (1/2)
Institutional
Fund Managers
Corporations
Sovereign Funds
VCs
NGOs
Non-Profit Org
Financial (Loans)
JV Partners
M&A
Social VCs
Holding Co.
HQ (MNC)
Gov. VCs
Supply Chain
Gov. Partnership
PFI
Competitors
Franchisees
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Funds: Types of Investors (2/2)
Retail
Investor-Shareholders
Employee-Shareholders
Management-Shareholders
Customer-Shareholders
Distributor-Shareholders*
Distributor-Entrepreneurs*
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Why do they Invest?
1. Return/Profit
2. Risk Management/ Hedging
3. Tax-benefits
4. CSR/Image
5. Diversify revenue
6. Counter-cyclical balance
7. Support ‘Mission’
8. Exclusive rights
8. Contractual obligation
9. National Agenda
10.Control Supply Chain
11.R&D portfolio
12.Control Management
13.Alternative Cash Flow
14.M&A
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Funds: What do Investors look for?
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Market Value
0
10
•M&A
•P/E
•Investor
•Etc.
Strategic Control
0
10
•I.P.
•Monopoly
•Gov-linked
Business Model
0
10
•USP
•Profit Mod.
•Mkt Disc.
•Growth
Funds: Business Model
USP
Market Discipline
Profit Model
•Tata Nano
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Business Model: USP
Unique Selling Proposition (USP)
=
Targeted Customer
=
Core Buying Purpose/ Customer Value Proposition/ Job To Be Done (JBTD)
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Business Model: Profit Model
Income
Cost
MarginCash Flow
Assets
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Business Model: Profit Model
1. Gillette shaver
2. Amazon, Facebook
3. Tata Nano
4. Newspapers, DVD
5. Google
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Income
Cost
MarginCash Flow
Assets
Income
Cost
MarginCash Flow
Assets
Funds: Business Model
"They are the most innovative"
"Constantly renewing and creative"
"Always on the leading edge"
"A great deal!"
Excellent/attractive price
Minimal acquisition cost and hassle
Lowest overall cost of ownership
"A no-hassles firm"
Convenience and speed
Reliable product and service
"Exactly what I need"
Customized products
Personalized communications
"They're very responsive"
Preferential service and flexibility
Recommends what I need
"I'm very loyal to them"
Helps us to be a success
Product Leadership
OperationalExcellence
CustomerIntimacy
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•Air Asia
Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Funds: Business Model: Market Disciplines
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Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Funds: Business Model: Market Disciplines
Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Funds: Business Model: Market Disciplines
Operational Excellence
• Competitive price
• Error free, reliable
• Fast (on demand)
• Simple
• Responsive
• Consistent information for all
• Transactional
• 'Once and Done'
Operational Excellence
• Competitive price
• Error free, reliable
• Fast (on demand)
• Simple
• Responsive
• Consistent information for all
• Transactional
• 'Once and Done'
Customer Intimacy
• Management by Fact
• Easy to do business with
• Have it your way (customization)
• Market segments of one
• Proactive, flexible
• Relationship and consultative selling
• Cross selling
Customer Intimacy
• Management by Fact
• Easy to do business with
• Have it your way (customization)
• Market segments of one
• Proactive, flexible
• Relationship and consultative selling
• Cross selling
Product Leadership
• New, state of the art products or services
• Risk takers
• Meet volatile customer needs
• Fast concept-to- counter
• Never satisfied - obsolete own and competitors' products
• Learning organization
Product Leadership
• New, state of the art products or services
• Risk takers
• Meet volatile customer needs
• Fast concept-to- counter
• Never satisfied - obsolete own and competitors' products
• Learning organization
Funds: Business Model: Disciplines, Priorities, and KPIs
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The McPlaybook*
Make it easy to eat• 50% drive-thru• Meals held in one
hand
Make it easy to prepare• High Turnover• Tasks simple to learn
& repeat
Make it quick• “Fast Food”• Tests new products
for Cooking Times
Make what customers want• Prowls market for new
products• Monitored field tests
*Adapted from: Businessweek , Februrary 5th 2007
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Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Funds: Business Model
Operational Excellence(low cost producer)
Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Product Leadership(best product)
Customer Intimacy(best total solution)
Funds: Business Model
HP well-balanced portfolio, mass customization
Acer super lean cost structure, aggressive pricing
Apple powerful products, premium
pricing, limited range
Still Doing well in 2009
Funds: Business Model: Business Model
USP
Market Discipline
Profit Model
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Business Situation vs. Focus
Upturn Flat Downturn
Fight Complacency
Sharpen Edge
Keep Momentum
Conquer
‘Change’ mgmt
Reduce Fat
Continuity
Everyone Happy
Innovation
Acquire
Profits
Build momentum
Sales
Cash Flow
Talent Mgmt
Innovation/R&D
Early wins
Slow Down HR Costs
Top Talent focus
Sales, Sales, Sales
Increase attrition
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Side Notes on Cost Reduction Strategy
Cost Reduction
Business Model
•USP
•Profit Model
•Market Discipline
Operational
•Finance and HR
•Supply Chain
•R&D
•Sales & Marketing
5% - 30%
30% - 80%
Business Situation vs. Sales
Upturn Flat Downturn
Fight Complacency
Sharpen Edge
Keep Momentum
Conquer
‘Change’ mgmt
Reduce Fat
Continuity
Everyone Happy
Innovation
Acquire
Profits
Build momentum
Sales
Cash Flow
Talent Mgmt
Innovation/R&D
Early wins
Slow Down HR Costs
Top Talent focus
Sales, Sales, Sales
Increase attrition
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1. Optimize customers’ current assets
2. Offset customers’ costs 3. Focus market share 4. CEO and Sr. Mgmt in the field 5. Sell up the buyer chain 6. Motivate troops 7. Add extra services 8. Control troop emotions9. Specialized vs. general teams,
i.e. sell support services, sell equipment, existing customers etc. (e.g. Xerox)
Business Situations vs. Focus
Upturn Flat Downturn
Fight Complacency
Sharpen Edge
Keep Momentum
Conquer
‘Change’ mgmt
Reduce Fat
Continuity
Everyone Happy
Innovation
Acquire
Profits
Build momentum
Sales
Cash Flow
Talent Mgmt
Stack R&D
Early wins
Slow Down HR Costs
Top Talent focus
Stack Sales
Increase attrition
Many times, you need a different CEO/Leader/Management Team
for each business situation
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Branding
Positioning
Execution
Communication
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Investor Relation’s
role
How do Investors get their ‘INFO’? (1/2)
Institutional
Gov./PoliticsCustomer
s
Suppliers
EconomicsAGM
Market Research
Internet*
Annual Report
Media
Analysts
Fund Managers
Due Diligence
NGOs
NewsletterSpokespersons
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How do Investors get their ‘INFO’? (1/2)
Institutional
Gov./PoliticsCustomer
s
Suppliers
EconomicsAGM
Market Research
Internet
Annual Report
Media
Analysts
Fund Managers
Due Diligence
NGOs
NewsletterSpokespersons
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How do Investors get their ‘INFO’? (2/2)
Retail
Gov./ Politics
Customers Public
Events
EconomicsAGMAds
Internet*
Annual Report
Media
Analysts
Fund Managers
Relatives
Friends
Pasar Malam
Employees
Employee Bloggers
Mgmt Action
s
Newsletter
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How do Investors get their ‘INFO’? (2/2)
Retail
Gov./ Politics
Customers Public
Events
EconomicsAGMAds
Internet
Annual Report
Media
Analysts
Fund Managers
Relatives
Friends
Pasar Malam
Employees
Employee Bloggers
Mgmt Actions
Newsletter
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How not to talk to Retail Investors
“The holder [of a CAB certificate] may continue to serve regularly any point named herein through the airport last regularly used by the holder to serve such point prior to the effective date of the certificate. Upon compliance with such procedures relating thereto as may be prescribed by the Board, the holder may, in addition to the services hereinabove expressly prescribed, regularly serve a point named herein through any airport convenient thereto.”
Civil Aeronautics Board, 1977
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How not to talk to Retail Investors
“It has been determined not to be in the public interest that United Airlines continue to provide air transportation services between San Diego and San Antonio”
“I forbid United Airlines to fly between San Diego and San Antonio”
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What topics interest Investors?
Acquisition target
Layoffs
CostCutting
New Mgmt
Treatment of ProfitsConsistency
Ecology
Economics
Politics
Strategy Alignment
CSR-related
Crisis
Topics?
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What topics interest Investors?
Acquisition target
Layoffs
CostCutting
New Mgmt
Treatment of ProfitsConsistency
Ecology
Economics
Politics
Strategy Alignment
CSR-related
Crisis
Topics?
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What Events impact Investors?
Politics
Financial Announcements
Shareholdingchanges
Structure
AccidentsEconomic
Crisis
CompetitorMoves
M&A
New Plans
Share-drop
Events?
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What Events impact Investors?
Politics
Financial Announcements
Shareholdingchanges
Structure
AccidentsEconomic
Crisis
CompetitorMoves
M&A
New Plans
Share-drop
Events?
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Importance: Intelligence
Two types:
I.R. InvestorsCRM Intelligence
Deal with…
I.R. Management
Investor Intelligence
Deal with…
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Investor Intelligence: What?
Examples…
1. Record feedback and questions
2. Competitors’ IR communications
3. Top 10 Analysts’ views on Company
4. Top 10 Analysts’ views on Industry
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Attachment 1 -How Sony Can Keep the Momentum
Investor Intelligence: Why?
1. Broad view of market
2. Less optimistic/review own assumptions
3. Upgrade IR function to be strategic
4. Feed Management discussions
5. Better and more relevant IR communications
6. Support (buy-in)
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Revenue Growth
Base Retention
Share Gain Positioning Adjacent Market
New Business
Operational Excellence
Product Leadership
Customer Intimacy
Competencies Information Systems
Motivation, empowerment,
alignment
Financial
Learning & Growth
Internal Process
Customers
Investment Strategy
Productivity Market Value
Investor Intelligence: Why?
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Dangers of Intelligence…
Also known as ‘Beware of Benchmarking’:
1. Big vs. Small company
2. Selective success stories
3. Correlation vs. Causal
4. Survey problems
5. Actionable vs. For-fun
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IR and Customer-Shareholders
Retail
Investor-Shareholders
Employee-Shareholders
Management-Shareholders
Customer-Shareholders
Distributor-Shareholders
Distributor-Entrepreneurs
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Affect Sales
Is Investor Relations important?
1. Funds
2. Brand
3. Intelligence
4. Customer-shareholders
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Corporate Reputation
Good News, Bad News. Who cares?
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Challenges of Public and Investor Relations
1. Stake- vs. Share-holder*2. Public Opinions3. Indirect Stakeholders –
NGOs, Community Activists, Online Networks
4. Increasing focus on ecological, social, ethical issues
5. Diverged expectations for same issue
6. Web 2.0
7. What to do with Excessive Cash?
8. Superficial changes vs. Fundamental Changes
9. Investors depend on ‘hearsay’ vs. ‘facts’
10.Share Price ≠ Market11.R&D/M.S./HR vs.
Investor Expectations12.Opposing ‘Expert’ views13.Operational Risk ->
Reputational Risks
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IR problems
“Good news for stockholders can be bad news for other
stakeholders.” Gregory Miller, Assoc. Prof., Harvard Business School.
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Audiences – Good News? Bad News?
• money saved by tough bargaining with a union
• announcing a dividend: to employees
• announcing a dividend: to environmentalists
• setting up Diversified business
Refer Attachment 2 - Building Trust with One Group Can Destroy Trust with Another
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News vs. Controllability
Can Control Cannot Control
Internal Attribution
External Attribution
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Born StupidDidn’t study hard enough
Lousy Teachers
Sudden high extreme marking stds
E.g. Failed SPM
Good News vs. Controllability
Can Control Cannot Control
Internal Attribution
External Attribution
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?
Good News vs. Controllability
Can Control Cannot Control
Internal Attribution
External Attribution
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?
Foreign investor
Segment growth
R&D breakthrough
Bad News vs. Controllability
Can Control Cannot Control
Internal Attribution
External Attribution
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Bad News vs. Controllability
Can Control Cannot Control
Internal Attribution
External Attribution
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Oil spill
Product recall
Marketing strategy
Bad debts (NPL)
Pandemic
Economy crisis
The 6 Sins of Greenwashing
1. Sin of the Hidden Trade-Off
2. Sin of No Proof
3. Sin of Vagueness
4. Sin of Irrelevance
5. Sin of Fibbing
6. Sin of Lesser of Two Evils
Study by: TerraChoice, December 2007
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Summary
1. IR and it’s problems
2. Importance of IR to Value Creation
3. Corporate Reputation
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Post-Downturn Possibilities vs. Investor Choices
•Strong supply of goods and weak demand
•Huge amount of money being pumped
•Combination of slow growth and surging inflation
•CPI•Real estate values •Savings rate
•CPI •Commodity prices •Government debt as a % of GDP
•Misery Index, = Unemployment + Inflation Rates
•Short-term•Technology
•Pegged to inflation •Commodities, utilities, specialty materials
•Conservative•High-quality growth
Deflation Inflation Stagflation
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Source
Indicator
Investment
Investor and Analyst Picks
Low-cost solutions for small businesses Healthcare (especially Vaccines) Solutions that increase Customer Loyalty Government Stimulus-linked Green tech
Large fixed headcount Commodities Confused Business Models High Leverage
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10 Questions for CFOs – post recovery
1. Recovery shape?
2. Restructured enough?
3. Supply Chain flexible?
4. Acquisition targets?
5. Restart alliances?
6. Divest underperforming businesses?
7. Financial resources for upturn?
8. Buying talent, marketing, R&D?
9. New risks?
10.How to sell recovery plan to investors?
McKinsey & Company, May 2009, “What’s Next - 10 Questions for CFOs”
“…in the past 18 months, we have heard that profit is more important than revenue,
quality is more important that profit, people are more important than profit,
customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our
performance is inconsistent"CEO, Anonymous
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Don’t forget…
“The business of business is Business, not Investor
Relations”
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Thank You.
soft copy of slides: http://totallyunrelatedrandomanddebatable.
blogspot.com/