How to Craft an Effective Perception Study

Transcription

1 How to Craft an Effective Perception Study Gene Rubin Senior Vice President Rivel Research Group March 4, 2010

2 Rivel Research Group Established in 1991 One core competency marketing research A unique specialty investment community research Thousands of interviews with investment professionals every year Clients include Global Fortune 500 companies (including BP, McDonalds, BG, PepsiCo, AT&T, MasterCard, AXA, Altria, Vale)

3 Investor Perception Study Necessities 1. Good list investors should be familiar with your company. 2. Questionnaire to ensure that objectives are addressed. 3. Question order start with broad and end with specific. 4. Structure every respondent must be asked the same questions in the same order. 5. Qualitative feedback thought provoking questions needed to probe for insight. 6. Quantification results must be counted and cross tabulated in order to benchmark, measure and compare. 7. Objectivity protect against bias. 8. Anonymity protect identity for most candid results.

4 Key Elements of Effective Research A study should be able to: Measure the effectiveness of communications: Do they hear it? Right audience? Enough transparency? Analyze knowledge gaps (audience differences) Compare findings against peers Measure perceptions as they evolve Foster stronger relationships between the board, C-Suite and investor relations professionals

5 Poll Question #1 How well do you think your investors understand your company s investment proposition? Excellent Good Fair Poor

6 Investment Community Universe Buy-side Sell-Side Financial Media Debt Retail Internal Fringe Core

7 Subgroups Public Company Buy-Side Sample Region Stock Activity Fund Type Investment Style Ownership US Europe Asia Canada Recent Buyers Recent Sellers Mutual Fund Asset Management Hedge Fund Pension Fund Growth GARP Value Total Return Top Owners Secondary Owners Underweights Targets

8 Sample Creation The Most Important Step Total Core Fringe Total Interviews Sell-Side (net) Covers Does Not Cover Buy-Side (net) Top Owner Secondary Owner Target Met with Management Did not Meet Management Growth Value GARP

9 A Study Should Provide In-Depth Qualitative Feedback What are the Strengths of ABC Company? They have solid assets as well as a strong market share in a high growth market. The management team is very capable and did a great job turning the company around from the situation it was in three years ago. They re ahead of others in terms of new information technology and implementing process re-engineering. They re doing a good job in changing the way they perform routine administrative tasks in order to protect themselves against being exploited by vendors who traditionally have had better information systems and tend to charge too much or pay too little, whatever the case may be. ABC has done a good job of updating their systems in order to make sure their dealings with the suppliers and payers are fair. PM/Owner/US/Met Management Operational execution is probably their biggest strength. Relative to the industry, they do a fairly good job of managing the political exposure to which this industry is subject. The management team is viewed very favorably relative to other companies and maybe slightly above the average firm. They re decent, but very good on the operational side. PM/Owner/UK/Has Not Met Management Senior management is very accessible. I like the fact that I can get a hold of these guys and that they will call me back. They do a good job of being visible to Wall Street i.e., they present at a lot of conferences and are also accessible at their headquarters. I appreciated being able to go down there and spend a day with different corporate managers within the company. Furthermore, they ve done a good job of actually running the company. BSA/Owner/US/Has Met Management They re going from a very bad time to a better time. They are getting much more focused and back to the strategy they had before times were difficult. Essentially, new management came in, changed the strategy and brought on the bad times. Then, the old management came back and fixed things. Other strengths are ABC s size, which leads to power in many different markets, and the fact that they are concentrated in many markets. BSA/Former Owner/UK/Has Met Management

10 What are the strengths of ABC Company? Able to mention strengths (Base) (66) (10) (56) (34) (22) %* %* %* %* %* Advanced technology/r&d (net) Strong R&D, drug discovery, science/develop products well/ good technology/platform continuously yields new drugs Productive scientific staff for size/often first in making scientific discoveries Strong/diverse product pipeline/portfolio (net) Deep, strong, diversified pipeline/diversified products/ high number of compounds advancing to clinical stage Pipeline just beginning to bear fruit/some near-term catalysts Broad late stage product portfolio/strong portfolio/ impressed with products have with big partners Have marketable/quality products (net) Have products on market, approved drugs/succeeded in developing drugs High quality/very good products Have some high quality partnerships/ahead of curve on joint ventures/able to use deals, partnerships to build company Total Buy-side Sellside Total Owner nonowner 14

11 What are the strengths of ABC Company? Total Buy-side Sellside Total Owner nonowner Management strengths (net) Good regulatory track record/ability to get drugs approved/to market Experienced marketing, selling drugs/have sales force, commercial strength Effective management/excellent, hard driving CEO/gets things done Attractive/interesting areas of research/targeting attractive, high growth markets Well-diversified company/conservative business plan/low risk business model Communications strengths (net) CEO markets company well/very good analyst presentations Approachable management/management responsive Management honest/reliable Increasing sales for products/steady revenue stream/exceeded sales estimates Stock less volatile than typical stock in industry

12 Major Themes Raised in Discussing ABC Strengths* (Unaided) (Total Respondents) Advanced Technology/ R&D 42% 59% Strong/Diverse Product Pipeline 29% 57% ABC 2006 S&P 500 Norm Management 20% 58% Communications 6% 37% 0% 20% 40% 60% 80% 100%

13 An Effective Study Should Allow You to Compare to Important Peers and to Yourself Over Time Overall Impressions of ABC Norm Norm Overall Impressions of Management (Scale: 6 - highest and 1 lowest)

14 Expected Earnings Growth Performance of ABC versus Peers Better than peers About the same Worse than peers Uncertain 100% 80% 60% 39% 64% 56% 74% 70% 52% 40% 39% 18% 32% 20% 13% 26% 21% 19% 20% 0% 9% 6% 4% 8% 4% 5% 6% 5% 10% Did Not Meet Management Met Management Attended Analyst Day Missed Analyst Day

15 ABC Ratings on Selected Aspects of IR since 2004 Quarterly conference calls Responsiveness Norm Providing access to management Candor and credibility Level of disclosure

16 Driver Analysis Importance / performance Describes ABC well Uncertain Not descriptive of ABC Full R&D pipeline (85%) Good growth potential (85%) High caliber senior management (78%) Financially strong company (68%) Well developed commercial capabilities (65%) Strong technology (63%) Balances R&D with profitability (43%) Predictable financial results (38%) Good liquidity (38%) Will reach operating profitability (30%) 53% 40% 7% 60% 38% 2% 25% 65% 10% 10% 70% 20% 13% 77% 10% 48% 47% 5% 32% 57% 11% 10% 50% 40% 20% 58% 22% 13% 62% 25%

17 Importance of ABC Pursuing Various Capital Deployment Initiatives (Aided) (Aided) Very Important Important Not as Important Uncertain Reinvest in the business 84% 16% Make bolt-on acquisitions 28% 52% 12% 8% Repurchase shares 16% 40% 44% Initiate a dividend 12% 8% 68% 12% Make a major acquisition 8% 24% 52% 16%

18 Possible Areas for Discovery Quantified Evaluation of Strategic Plan Cash Deployment Policies Board Structure Corporate Governance Social Responsibility Impression of Senior Management Disclosure Familiarity with Strategic Plan Measures to Improve Investment Appeal Corporate Strengths Corporate Weaknesses Assessment of Peer Strategy Identification of Key Valuation Drivers Corporate Performance on Key Drivers Best Practices in Communications Overall Impression Major Issues Facing Industry Peer Analysis Expected Performance vs. Peers Familiarity Investor Relations Assessment Improvements to the Investor Relations Program Quantified Assessment of IR Characteristics Quantified Assessment of Communication Vehicles Executive Compensation Viability of Strategic Initiatives Assessment of Current Valuation

19 Poll Question #2 Do you plan to conduct a Perception Study over the next 12 months? Yes No Under consideration

20 Q&A

21 Contact Ivan Peill Gene Rubin