Webinar Series Strategic Planning Developing an IR Plan 1. Introduction: Developing an IR Plan August 6, 2009 4-5 p.m. ET Keith Mabee Vice Chairman, Dix & Eaton
Agenda 1. August 6 Introduction The role of IR in value creation Developing an IR plan Assessment Plan 2. August 13 Case study discussion Tactics and execution 3. August 20 Measuring the Success of your Program Measurement and strategy evolution 2
What is Investor Relations? Investor relations is a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company's securities achieving fair valuation. (Source: National Investor Relations Institute) 3
What is Fair Market Value? When a current stock price accurately reflects the full value of the company Based on the absolute value of the company (on paper) and the perceived value of the company in the future Driven by perceptions; intangibles play a key role 4
How Fair Market Value is Created Fair Market Value Steady Earnings Growth Revenue Growth Solid Execution Compelling Corporate Strategy 5
Role of IR in Value Creation Market awareness and feedback to management Credibility and consistent communication Numbers of long-term investors; optimize shareholder mix Analyst following Access to capital Share liquidity P/E ratio Share value Corporate governance 6
Outside Factors Affecting Fair Value MEDIA SELL-SIDE ANALYST INDUSTRY ANALYSTS BUY-SIDE ANALYST INSTITUTIONAL SALES FORCE RETAIL BROKER PORTFOLIO MANAGER INDIVIDUAL INVESTOR REGULATORS 7
The IR Equation Stock Price = Performance + Perception 8
Performance-Related Variables Revenue growth Sector attractiveness Earnings growth Return on invested capital Cash flow Balance sheet strength Dividend yield Beta Share float Liquidity 9
Perception-related Variables Intangibles An intangible asset is an identifiable nonmonetary asset without physical substance held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. Source: Cap Gemini Ernst & Young 10
Intangibles Are Growing in Importance Non-financial performance accounts for 35% - 50% of institutional investors valuation The more sell-side analysts rely on non-financial performance, the more accurate are their earnings forecasts Consistent set of non-financial drivers that analysts rely on: Strategy Execution Management Credibility Quality of Strategy Innovativeness Ability to Attract Talented People Market Position Management Experience Quality of Executive Compensation Quality of Major Processes Research Leadership Source: Cap Gemini Ernst & Young 11
Perception-related Variables Other intangibles Management credibility and integrity Customer loyalty Employee commitment Corporate reputation Business ethics Unique corporate culture Intellectual know-how Brand image 12
Developing an IR Plan Assessment Begin with assessment of your company, its current business/strategic plans and competitive set SWOT Analysis Strengths Weaknesses Opportunities Threats Include an analysis that factors in the impact on valuation of the economy, business sector, company performance or other issues 13
Developing an IR Plan Assessment Analyze historic changes in the ownership profile Growth GARP Value Hedge Funds Income Momentum Players Index Insiders Retail What s been the company s guidance track record? What are analyst expectations about performance and how it gets communicated? 14
Developing an IR Plan Setting Program Objectives Typical IR Program Objectives To focus investors on your business, financial results and long-term prospects for creating value To provide meaningful and relevant public disclosure tied to business dynamics To establish timely and consistent communications and appropriate transparency with existing and potential investors To attract the optimal shareholder mix To educate management and employees about how their efforts can impact share price To providing management and the Board with timely competitive feedback, corporate governance and market analysis 15
Developing an IR Plan Setting Program Objectives Benefits Reduced volatility Expanded liquidity More optimal and diversified shareholder base Lowered cost of capital Enhanced shareholder value creation Higher multiple relative to peers/company-specific benchmarks 16
Developing an IR Plan Identifying and Prioritizing Target Audiences SEC Stock exchange Rating agencies Sell-side analysts Buy-side institutional analysts and investors in the U.S. and international markets Individual investors Financial media Governance rating firms Management and board of directors Employees Customers 17
Developing an IR Plan Components of a Program Quarterly disclosure Release Conference Call Timing Approvals: Disclosure, Audit Committees Management presentations at industry conferences On-site visits with investors (groups of buy/sell side) Quarterly road shows Analyst days; analyst-hosted conferences Targeted one-on-ones Annual report to shareholders 18 IR/corporate governance sections of web site
Ask a Question During the live event only August 6, 2009 4:00 5:00 p.m ET On the Telephone follow the operator s instructions On your computer click on the Questions link on the right side of your screen Telephone access provided by In Comm August 6, 2009
Replay Options A replay is available via telephone until midnight on 8/20/09 (Eastern time). Call 877-660-6853 (USA) or 201-612-7415 (International) The account number is 286 and the conference I.D. is 328709. View this forum on the web until 1/31/10 by going to the webinar page: http://www.niri.org/main-menu- Category/learn/webinars.aspx Webcast provided by VCall, a service of Precision IR