Is your IR Brexit-ready?
As the UK prepares to leave the European Union, IR practitioners may wonder what impact this seism will have and whether their team is match-fit. With only a few weeks before the 29 March exit date, no agreement has been reached and the UK faces a cliff-edge, the no-deal, hard Brexit, or possibly no Brexit at all. This month, the Mediatree thinktank shares some of the sentiment we’ve picked up on the road and imparts some top tips on how you can make sure your IR effort is Brexit-ready.
Statement on the impact of Brexit on the company
As IR teams witnessed the progressive impasse of UK-EU negotiations through 2018, many published Brexit statement to give investors a good idea of what to expect—in a ‘known unknown’, how does your business navigate unchartered waters? The aim is to offer investors clarity on the implications for the business, and give some colour on the company’s supply chain position, foreign exchange issues, stock levels, human resources impact, etc.
Airbus made headlines in the UK media in June 2018 when it published that “… leaving both the single market and customs union immediately and without any agreed transition – would lead to severe disruption and interruption of UK production. This scenario would force Airbus to reconsider its investments in the UK, and its long-term footprint in the country, severely undermining UK efforts to keep a competitive and innovative aerospace industry, developing high value jobs and competences.” The COO of Airbus Commercial Aircraft Tony Williams was quoted as saying: “We have sought to highlight our concerns over the past 12 months, without success. Far from Project Fear, this is a dawning reality for Airbus. Put simply, a No Deal scenario directly threatens Airbus’ future in the UK.” Loud and clear for investors.
Effective IR communication – it’s more than just the messages
It’s not just about spelling out the position and the impact on the company. Content matters, but so does the delivery and style of communication. The Brexit issues are extremely sensitive and precision is paramount when issuing statements. Due care must be taken with Q&A around this topic — think, for example, of the impact that loosely formulated wording on relocation issues can have on employees. Every word will be scrutinised and therefore every word matters.
—Financial guidance: there is so little visibility, it is important to handle your predictions with caution. Try to keep the language open and caveated to avoid boxing yourself in.
—Body language: The IR director makes an impact in her/his interactions with the market, and stress and/or lack of control will seep into the body language. As uncertainty and volatility prevail in current Brexit preparations, it becomes particularly relevant to convey messages calmly and powerfully, without succumbing to loaded words and using the tone and pace of the voice to inflect energy and optimism. Remember to prepare pitch perfect statements. The manner is key.
—Ease of access to information: it’s critical to offer investors access to well-signposted, current, updated-in-real-time information. Equip your website with FAQs, CEO statements, jargon-free Brexit policy and key tips for your investors. Don’t forget most stakeholders access the website through their smartphone. Think about who in your team implements this and how you can issue press releases quickly when milestone dates in the political process impact your business.
—Leveraging the management: in times of uncertainty, the key to success is proximity to the market. The IRO can brief her/his CEO, CFO and other C-Suite executives on which investors will be most effective to see. You need to be clear about what the market expects, what the investor sentiment and objections are and address these proactively, as well as pass upwards the difficult messages. Some of them may be extremely sensitive and challenging—they can even require Board attention (see below). Finally, don’t forget to preserve the congruence of external and internal messages i.e. be aware of the impact that IR messages can have on employees.
Preparing the Board
Most Boards have shareholder engagement (or activism!) on the agenda and IR best practice dictates regular Board updates. The IR Director can ensure the Chairman and CEO are aware of restrictions that apply to communication with the markets and stay closely aligned with the ‘party line’ disclosure. The IRO also surfaces key market concerns to Directors. Ryanair, for example, has some tough messages to convey: EU law requires Ryanair to be majority owned and controlled by EU nationals, but in the event of a hard (or no-deal) Brexit, the UK shareholders may become non-EU nationals, and this may result in Ryanair (for a temporary period) being majority non-EU owned and controlled, which puts their EU airline licence at risk—a crisis situation any Board would need to know about.
Addressing Investor concerns specifically
Outlining the impact of Brexit on all aspects of your business will be a tough ask. The IRO can overcome this challenge by being up to speed with the governance rights, processes, charters and regulatory impact. Direct, succinct and factual disclosure is the best course of action. State the facts and strive to answer with clear unambiguous statements.
The Ryanair IR team does this well with its ‘quick links’ Brexit tab on its IR home page.
Grasp of the Regulatory Framework…it’s not just another box to tick
MiFID II directives have impacted IROs across Europe and the UK as they kicked in early January 2018 and have redefined the IR landscape for UK and EU IR/Corporate Access practitioners since their implementation. The future of this, and other regulation, is still very unclear and it is the IRO’s duty to guide the senior team in their investor communications. In a time of great uncertainty, mastering compliance and regulation is far more than a box-ticking exercise, as this can predicate what’s allowable. A robust knowledge of these topics will stand you in good stead through the coming months of political uncertainty.
Keep the perspective – CEOs don’t think it’s that bad
Be prepared and remain calm and rational. The February 2019 All-Europe Institutional Investor survey ranks the continent’s top CEOs, CFOs, and investor relations professionals. This list this year includes 3i Group’s Simon Borrows, Allianz chief Oliver Bäte, outgoing Lonza Group CEO Richard Ridinger, and Bernard Arnault of LVMH.
All of these top-ranked executives are showing a steady hand despite the uncertainty of Brexit. Whether down to their own prudence or a lack of faith in political leadership, the survey shows that executives across sectors have long had plans for a hard Brexit in place. They’re feeling confident even if Britain and the EU split on bad terms.
How much will Brexit impact your sector, and what has your company done to prepare?
Source: Institutional Investor, February 2019
If in any doubt, you could do a lot worse than to look to the best for some guidance. The best IR communications in UK and Europe are benchmarked by Institutional Investor as well as IR Magazine. It’s important to know how the likes of Airbus, Experian, Siemens, Nestlé, LVMH, Tesco or British American Tobacco are approaching these issues. For the small and mid-cap companies, GVC Holdings (Leisure & Hotels) is frequently held up as best-in-class for its IR.
Anticipate more complex logistics for your roadshow and conference travel
A no-deal Brexit would mean the UK would revert to WTO rules, which do not include aviation. So, a direct consequence of this is that planes would be unable to fly between the UK and the EU until an agreement is reached. You can expect a level of chaos at airports. In terms of customs, the recent Eurostar delays and long queues are early warning signs of what could be trouble ahead. You need to anticipate customs checks where none existed before. You may also think about what visas might be necessary for the various traveling executives. If you are in the UK and your IR team comprises Europeans, make sure they have secured a ‘settled status’ with the UK Home Office so that they can go on the road and return home without a hitch.
So, ready or not?
In what promises to be an historic month (somewhat boldly assuming no further delays), there will be no shortage of unchartered territory ahead. The IR director can play a leadership role that contributes to responsible and effective communication, but also influences and shapes how the board and management team engage with shareholders and the markets more broadly. This can make your IR game-changing.
On preparedness for Brexit Oliver Bäte, CEO at Allianz, sums up neatly for Institutional Investor: “Currently, the world moves from clear rules to a global Wild West, from a united Europe to national egoisms, from production of goods to data analytics. Clearly, 2019 will be another year of transition, and my wish is that it will be remembered as a year where decision-makers came together in a civil discourse to address our society’s biggest challenges like climate change, education, infrastructure, or impact of technology.” Ultimately it is these topics, as well as addressing the diversity and inclusion agenda, and innovation that companies need to put their focus on. These are high-stakes moments. What a time to be alive and kicking in the world of IR!