London think tank recap: Brexit and beyond
At a glance
Last year was a fitting one for IR Magazine to hold a new conference for the UK and Ireland. The vote by the UK to leave the European Union had left corporate IR professionals with much to ponder. Uncertainty hung over the economy, the stock market and London’s position as a financial center.
The conference took place in London in late October, when Donald Trump’s win in the US presidential election was still a few weeks away. As a result, Brexit was the main order of business. Proceedings kicked off with a talk from Reg Hoare from MHP Communications about how IROs could manage the impact of leaving the EU.
Hoare warned that quarter-to-quarter stock market volatility would persist and economic uncertainty was a given. Still, the relatively stable political situation in the UK, with Theresa May installed as prime minister, would help to steady the ship. Looking at the positives, he said investors appeared to have climbed the ‘wall of worry’ about Brexit and were starting to concentrate on the potential benefits of quitting the EU.
‘It is really important to continue communicating the impact of Brexit to investors and to continue maintaining a ‘business as usual’ position with shareholders,’ Hoare recommended.
In the following session the conversation turned to regulation: 2016 saw the introduction of new market abuse rules and Clifford Samuel, chief counsel for corporate and securities at BAE Systems, was on hand to outline the significance of the changes and what impact they would have on IR departments.
‘The Market Abuse Regulation is important to the IR community, not least because it changes the rules relating to the disclosure of inside information, including the content of the disclosure announcement itself,’ he pointed out.
Samuel noted the need to have the correct procedures in place. ‘It is now necessary to isolate and record the particular time and date when inside information crystallizes and, in the limited circumstances permissible, when a decision is taken to delay making an immediate announcement,’ he said.
To achieve this, brokers need to play their part. ‘Companies are likely to need to speak to their brokers more often now than they have in the past in order to ensure compliance – indeed, brokers are expecting this to happen,’ said Samuel.
UK companies, unlike their peers in continental Europe, receive IR support from their chosen house brokers. But that hasn’t stopped British IR teams feeling stretched by more demands and fewer resources. During the panel ‘Doing more with less’, Laura Doyle, head of IR at Legal & General, and Catherine Nash, director of IR at Royal Mail, discussed the growing remit of today’s IR departments.
For Doyle, the evolution of IR into more of a nance role has brought with it new duties. ‘Given the growth in understanding of IR and the more numerate that IR has become, the more useful we have become for other areas within the company,’ she said. ‘For example, we’ve taken on the annual report process, whereas if you go back a few years, that was more of a communications department task.’
Nash, in her comments, focused on the growing role of IR as a strategic adviser. ‘IR seems to be spreading out more within an organization, talking to the internal groups about the external views of the market and how the company is perceived,’ she said. ‘This is helping those who are in charge of strategic discussions take their decisions in light of the broader context of what investors want from the company.’
Gunhild Grieve, head of IR at RWE, underlined the potential for IR to offer critical advice to management and boards during a presentation in the afternoon when she discussed her team’s central role in a major corporate restructuring. In the years following the nancial crisis of 2008, RWE came under extreme pressure, she explained. The company was hit by economic weakness, lower energy prices and the decision by the German government to move away from both nuclear and coal-based power.
The company responded by selling off non-core assets and cutting costs – but investors no longer wanted to hear from it, said Grieve. So in 2015 the IR team locked itself in a room for two days with a blank sheet of paper and tried to reimagine the equity story in a way that would win over the capital markets.
The team took the new vision to the board, which responded by setting up a major strategic review. During this exercise, two teams at the company competed to come up with a new corporate model for RWE that investors would support. From this process, the company formulated a plan to bundle RWE’s downstream and renewables businesses – the parts of the company that were growing – and bring them to market as a completely new company called innogy, which listed in Frankfurt in October 2016.
Concluding her talk, Grieve urged investor relations teams to be courageous and challenge management to help shape the direction of the company, as only IR can bring a detailed knowledge of the investment community to the table. But, she cautioned, IR must also earn the respect of the C-suite and board before it can play its role as a key strategic adviser.
This article appeared in the spring 2017 issue of IR Magazine