Speaking to Gord Nelson, CFO of Cineplex, you get a real feel for why he’s so good at what he does. For him, a successful finance chief needs much more than technical skills – they need those personal qualities that really connect with investors and bring the company story to life.
As we chat, Ellis Jacob, the firm’s CEO, pops in to ask Nelson a question. This is indicative of the close-knit relationship enjoyed by the company’s senior management has – perhaps because they’ve been through ups and downs, listings and market growth, near-buyouts and pandemics together.
Cineplex has previously been recognized for its IR efforts, with former head of IR Pat Marshall scooping regular trophies at the IR Magazine Awards – Canada, and current head of IR Mahsa Rejali nominated for the best IRO at a small-cap company trophy at this year’s event.
Here, Nelson talks to IR Magazine about some of the secrets to his success, what makes him tick when it comes to IR – and his IR bugbears. He also walks us through his ideal trip to the cinema, with an evocative walk down memory lane to a 1994 mega-hit.
How did you come to this role?
Similar to a lot of CFOs, I started off in public accounting but I knew that wasn’t going to be a career for me. I moved into a financial planning and development role at Cineplex to start, and then moved through various, progressive roles. We sold our company to a US company and became a US-listed firm. I was very involved in the integration of the two large organizations. But they eventually went through bankruptcy, Chapter 11, in the US; we went through a restructuring in Canada and I led the Canadian side of that. Ultimately, we were owned by private equity, before being spun out into a new, Canadian-only, publicly listed company. That’s the point where I was made CFO.
You’ve been named Canada’s CFO of the year before. What are the qualities you think the investment community appreciates in what you do, and what makes for success in the finance chief role?
As you ladder up the overall responsibilities of a CFO, technical skills are a given. The real differentiators include your contributions to strategy and your contributions to the growth and the transparency of the organization. That’s where I believe I excel.
I have a real partnership with the CEO and the COO. From going public in 2003 with a market share of about 34 percent, we built the company to a 75 percent market share over 10 years.
My role included building, financing and developing the strategy, as well as explaining our strategy to the investor base.
At the time that I was named CFO the year, we delivered a 26 percent annual CAGR on a return on an investment in Cineplex. We provided a healthy dividend to our investors and we became a must-hold company in Canada.
Given what you bring to the role, what do you look for in your head of IR?
I’m so fortunate to have Mahsa Rejali as my vice president of IR and corporate development. She’s not an accountant but an investment banker by background – and she‘s a great communicator, a great understander of investor expectations.
With an accounting background, you sometimes find yourself explaining these increasingly complex accounting standards to investors. If you had someone that was solely an accountant in that lead IR role, you might well end up stuck in accounting speak.
Rejali is someone that can simplify nonsensical accounting and make it make sense to investors. She is my first point of contact for any type of question and it really takes things off of my plate to have that combination of a strong communicator as well as someone that is very financially literate – but not a technical accountant.
How would you sum up your own approach to the IR work you do?
For me, it’s about telling the story of where the company is going and what we do – and trying to keep it relatively simple and high-level – but being able to go into the weeds if needed.
It’s also about balancing against what I’m hearing when we go out and do investor roadshows. We’re always listening and adapting our disclosures and a simple example is that, as a Canadian company, we release results quarterly, but coming out of the pandemic, we started to release our box office data monthly. The reason for that was that during the pandemic, different jurisdictions or local governments would either allow you to open or not open or put different restrictions on organizations. This meant that although investors could see how popular films were on a domestic market basis, across all North America for example, that information wasn’t granular enough to understand what was going on in Canada.
We began to press release our box office data monthly, along with a few other reference points: perhaps we weren’t allowed to sell food in Ontario or we had to have people six feet apart from each other. We wanted to add a little bit of color to the information that was out there.
And we continue to do it. This has developed into a good opportunity that we use to talk about things that are perhaps not quite newsworthy or material enough to put out in a separate press release and we now we have a monthly disclosure where we can tell a story – without having to wait for the quarterly release.
Could you tell us about a time when IR really proved its worth to you and to the company?
The pandemic is a great example, but I wanted to give another: coming out of the pandemic, we had taken on a lot of debt as an organization, and some of this was thrust upon us because we had a limited financing options in the middle of a pandemic. We wanted to clean up our balance sheet and start from scratch.
We did a comprehensive refinancing at the beginning of this year, which took all of our existing debt and replaced it with new debt. Roughly a year in advance of that we described our thoughts on what we wanted to do and when we wanted to execute this strategy. Then we gathered feedback, talking about it with investors, refining the plan, with our commentary getting more specific with each quarter. When we were able to do the refinancing, not only was no one surprised, but we had in essence been soft marketing for a year and had built up a significant book of demand because people knew this was coming. In the end, we were almost four times oversubscribed and we achieved a lower coupon rate.
How do you measure the success of the company’s IR efforts?
You’d love to say that you see it in your share price, but that’s not often the case. We provide a quarterly investor relations update to our board, which includes metrics like the number of meetings and number of conferences attended.
We also include a chart of investor concerns. Whenever we do a roadshow, we ask the broker to provide us with investor feedback. And we put that feedback in verbatim for our board to see. I’m not filtering investor comments: they see exactly what is written.
We then categorize those issues into green, yellow or red: what’s a major concern, what’s of lesser concern. Sometimes it’s a communication issue, sometimes it’s an action issue, a performance issue but, to the extent that it’s possible, we want to track those investor concerns as they go from red to green for example.
We know the board can’t read everything, but a list of 15 investor concerns with red, yellow and green? That’s an easy way to provide that insight for them.
At such a well-known company where do you find yourself doing the most investor education?
We’re a diversified entertainment business. We have a movie theatre business, media businesses and a location-based entertainment business and we’re part of Canada’s second-largest loyalty program.
People understand the movie theatre, and they understand when movies are popular or not popular. We often get into the questions of Why are you diversified? What are the synergies between all the businesses? What are the synergies and advantages that Cineplex has that bring all these businesses together?
That’s the challenge: the story of the emerging businesses and the growing businesses – how and why they all fit together.
What proportion of investor one-on-ones do you typically attend?
I probably do somewhere between 80 percent and 90 percent of them. It typically depends on who the investor is and at what stage they’re at – and I leave that totally up to our IR lead’s discretion. If someone’s just reaching out for an overview of the business model and trying to understand how the company fits together and what we’re doing, then our IR lead will typically take that. Once they’ve built up a model and want to get into the weeds, that’s typically where I get in.
But most investors want to get into the weeds right away because they’ve done their research.
What’s your favorite thing about the IR-related work that you do?
For me, there’s a couple things. From the work side of things, it’s the learning experience. We want to hear what investors’ concerns are and let them know it is a two-way street. They’re the owners of the company and we are the stewards for their investment. And I do want to hear their line of thinking. I want to listen when they suggest things for us to think about, when they talk about what other organizations have done. It’s great to hear a different way of looking at things – that really fascinates me.
The other thing is that I’ve been CFO for 20 years. You get to see people progress through their life cycle: they get married, start their families. Next thing you know, they’re the chief investment officer. It’s great to see the bright ones go through and become bigger players in their organizations, or shift organizations and become bigger players somewhere else.
What about your least favorite?
My least favorite is the short-term investor that’s typically there for a quick in and out, pushing for short-term actions with short-term benefits. They may not be interested in the long-term value of the company and they tend to be very noisy.
What has been the biggest challenge that you’ve had to deal with?
Certainly the pandemic because it was all about uncertainty. How do you communicate something like that when you yourself don’t know how long it’s going to last? When you don’t know what the government’s response is going to be? What your suppliers’ or your studio’s response is going to be? The trickiest situations are when there’s uncertainty and all you can really do is try to provide scenarios: if it goes on for this many months, we’re burning cash at this rate and this is what we can expect in a worst-case scenario.
Liquidity became a prime concern for investors, but for us, it was all about how you deal with an uncertain world that no one’s ever seen before.
The interesting thing is, we had sold the company in December 2019 but the transaction didn’t close – really because of the pandemic. As the pandemic was starting out, our buyer walked away. We sued them and we won a billion-dollar settlement – and then they went bankrupt. I was, obviously, very involved through the litigation of that, so there were a lot of things going on throughout the pandemic, lots of challenges.
What piece of advice would you offer to others in the CFO seat?
To remember your personal brand. A lot of CFOs go from organization to organization [in that role] and that’s because of their personal brand. People have to trust what you say and you have to deliver on what you say. You have to be able to communicate in simple language, because accounting gets more complicated every day.
I’m very proud of our disclosures, our MD&A for example. We put a lot of thought into it and spend a lot of time trying to answer the questions and deliver the information that we think investors want to hear. What we’re demonstrating is that we’re responsive to their needs.
My last question: what does your perfect trip to the cinema look like?
First of all, the cinema has got to be packed – for business reasons of course but also because the impact of people’s reactions is really what makes a great out-of-home experience.
I love when I go to a film that I have no expectations about – maybe I don’t even know what it’s about – and it just wows me.
The one film that I always remember when this comes up is Four Weddings and a Funeral. I didn’t know much about it. It had just come out. Despite the title, I heard it was supposed to be funny and so I went into the auditorium and it was quite full – people were just laughing through the whole movie. And I was too.
I came out 120 minutes later and I just had this amazing feeling of having shared this great, fun experience. I was in a great frame of mind and so was everyone else – and it was amazing partly because it was unexpected.
