Q. My company has made the switch to international financial reporting standards (IFRS) and so far we haven’t had many questions about the change from analysts. But I have heard there is a lack of understanding of how these rules affect the bottom line. Should we educate our analysts on how IFRS has affected our reporting?
A. I highly recommend taking the lead and proactively educating analysts and investors on the impact IFRS will have on the financials to ensure the changes are fully understood. It’s easier to buy some insurance against the possibility of the numbers being misinterpreted than to have to address any misperceptions that arise.
Not all analysts are created equal and it’s important to keep this in mind when communicating with the Street. Many firms have professionals working through these changes with their analysts and clients, but some don’t have this luxury, which is another reason to take the lead.
I have also heard many complaints from US analysts following overseas issuers that the change has made it harder to navigate the comparables. Although some countries and early adopters have paved the way for a smoother transition, it’s important to remember that analysts in other countries – like New Zealand, for instance – have until 2007 to fully adopt IFRS. Generally, firms that have proactively addressed the impending changes have had less fallout to deal with after the change and are generating some ‘goodwill’ with analysts.
Q. We’re considering hiring a junior IR person and I am leading the recruitment campaign. What I need is someone to manage requests from smaller investors and analysts so I can focus on targeting and dealing with major institutional investors. Any tips on what sort of skills and experience I should specify for this position?
A. Traditionally, retail investors and small institutions have fallen to the junior person in the IR department, while larger institutions and the sell side are the domain of the senior IRO. But keep in mind that small institutions can become some of your largest shareholders if they take large positions in only a few firms – so make sure your future largest shareholder is getting the most senior attention it needs.
As for skills and experience, good staffers are born self-motivated and possess a willingness to learn. When dealing with retail investors, patience and attentiveness can make a world of difference, so make sure these qualities come naturally to your candidates.
I have always found it easy to train people who have the basic building blocks of IR and an interest in Wall Street. Knowledge of the company can easily be learned, but an appreciation for the markets can rarely be taught.
