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Bridging Expectation on All Sides
Established in 2004, Sempoa Partners is led by principals and founders with strong backgrounds and experience in the equity and capital markets, covering research, corporate exercises and fund management segments. Having served a broad range of public listed companies, Sempoa Partners understands the needs of corporates at different growth phases and offer unique, tailored solutions to ensure their clients stands out to the investment community.
While Investor Relations (IR) is formally defined as “a strategic responsibility whereby organizations manage communications between their executive leadership and the financial community”, to many public listed company’s senior management team, IR is increasingly seen as an important function rather than a “nice to have”. A good IR unit allows management to better articulate the company’s financial results and future strategy to all stakeholders, shareholders, potential investors, regulators, current and future business partners and the wider financial community.
The ultimate goal of IR is to enable a fair reflection of a PLC equity’s valuation in the capital markets as reflected by its prospects and growth. There can be many other factors other than earnings growth such acquisitions, dividend policy, introduction of new products etc on the company's position in the capital markets (e.g. stock price, competitive position, public perception). Investor Relations via dedicated personnel will act as an interface between the financial community and senior management – where quite often, the CEO and CFO will also pay a key IR role. The IR function also often includes the transmission of information relating to intangible values such as the company's policy on governance, corporate social responsibility and sustainability. While larger PLCs have in-house IR departments, most smaller and mid size PLCs do not have a specialized officer for this task, often placing these responsibilities on the corporate communications or finance departments. Increasingly, the IR function can be outsourced to third party firms with specialized experience and skill sets that helps these smaller PLCs engage with the stakeholders, especially the financial community. Sempoa Partners, established in 2004, is one of the industry pioneers in outsourced specialized IR consulting. Sempoa has represented, and continues to represent, PLCs in numerous industries, including oil & gas, marine transportation, financial services, technology, and property development. While our goal, as stated above, is primarily to help PLCs convey key messages and valuation discovery for a company’s securities to the market, our value add is very different from that of an internal IR team. As an independent consultant, Sempoa is not hampered in intra-company issues, thus we are able to provide dispassionate observations and comments on a company’s financials, corporate developments and strategy for the perspective of the market. Sempoa provides a more nuanced view as we are a bridge between the company and stakeholders, owing a duty of care to all sides.
Given the rising importance of Environmental, Social, and Governance (ESG) criteria, PLCs are met with a new challenge; they must not only do good, but be seen to do good, hence the increased focus in ESG reporting, both regulatory as well as for commercial reasons. Many PLCs have to set up a sustainability unit to augment existing Corporate Social Responsibility (CSR) measures in order to execute ESG initiatives, however, the reporting of these activities is still delegated to the finance or corporate communications department. This would be sufficient on the public relations front, but it would be recommended for these companies to start proper tracking of its ESG initiatives the careful recording of its performance. This is where, for the smaller PLCs, this additional regulatory reporting has become an added financial burden due to the incremental resources required. Often in the short term, companies will have no choice but to engage ESG consultants to assist in their transition into the sustainability based reporting formats.
Here in lies also, an opportunity for IR consultants to expand their services to their client base. It can be a natural progression for IR practitioners to add another specialty. The advantages are, First and foremost, IR specialists can communicate ESG objectives and achievements in an effective manner to stakeholders and show how these actions potentially affect a company’s bottom-line and hence, its market value. IR consultants can also advise company leaders on the best way to approach ESG, not just from a reporting perspective, but also on what the markets consider to be important and therefore should be prioritized. Thirdly, we can take some of the load off the finance and corporate communications departments, freeing them up for their main responsibilities and tasks. Finally, IR professionals are usually more up-to-date on the ESG requirements put forth by market regulators, and can guide companies to address areas they are falling short at and explain the mitigating circumstances that cause these occurrences to the financial community.
However, it must be noted that ESG is more than just reporting and ticking boxes. It requires a step change within the whole company on how they approach the subject of sustainability. Which brings an important question to fore, should big large cap PLCs and small market cap PLCs be subject to the same level of ESG reporting, given the obvious disparity of resources?
Investor Relations plays a crucial role in any PLC’s strategy, in that this is the mechanism through which a company’s financial and non-financial achievements are communicated to the market. PLCs with a strong understanding of IR will leverage internal IR specialists or external IR consultants to best inform their stakeholders of their performance and disseminating the right information in a balanced, timely manner, hence allowing for a fair valuation of their securities, and in the process, creating a stable, less volatile and fundamentally based market environment.