It may be a testament to typical Canadian modesty but, when asked why they won prizes at this year’s IR Magazine Canada Awards, a remarkable proportion of respondents said: ‘I have no idea. It isn’t rocket science.’ Indeed, IR is not brain surgery – but the recipe for a successful program is rather more subtle and complex than these humble winners imply.
Consistency and commitment, for example, are key ingredients for successful IR. ‘We’ve always made IR a priority,’ says John Rogers, vice president of IR at oil and gas giant Suncor Energy, winner of best IRO in the mega-cap category. ‘There were no particularly new initiatives last year. We try to regularly visit our shareholders and keep them informed so they can do their job. If we continue to do that, we’ll stay in favor.’
This same approach works for companies at the other end of the market-cap scale. ‘We do consistent IR regardless of market conditions,’ explains Ian Mortimer, senior director of IR at biotech firm Inex Pharmaceuticals, and winner of the award for best IRO in the small-cap category. ‘Now investors understand our long-term strategy and there’s no disconnect between where the company thinks it is going and where the Street thinks it is headed.’
Mortimer notes the biotech field is a technical one and his experience in the lab allows him to talk – with authority – about complicated scientific matters to investors and analysts alike. ‘My role is to understand our company extremely well and doing so requires understanding of the context in which the company operates,’ he says. ‘With my background, it is much easier to put Inex in the context of the broader sector.’
Another important aspect of outstanding IR is the ability to differentiate a company from its peers. ‘Companies, particularly smaller ones, often compete in a marketplace with their product or service and forget they are also competing in the investment marketplace,’ notes Jim Pelot, CFO for Tm Bioscience, winner of best IR by a venture-listed company. ‘IR is one of the mechanisms of differentiating yourself from the competition.’
Tm Bioscience is a first-rate role model for venture companies pining for the big leagues. The company places great emphasis on IR, governance, reporting and disclosure. As a venture company, it doesn’t have to disclose whether it follows TSX governance guidelines – but it does. It also doesn’t have to follow the Canadian Institute of Chartered Accountants’ (Cica) MD&A guidelines – but it does that, too.
The result has been relatively easy access to capital, and an upcoming TSX listing. ‘We think of ourselves as a big company trapped in a small company’s body,’ says Pelot. ‘And we do IR and everything else based on that – everything, that is, except spend.’
Context is everything
In recent years, many investors have developed a hunger not only for understanding a company’s financials and operations but also for getting to grips with its sector and how it fits into the competitive landscape. As such, Canadian IROs are becoming good at putting a company in context.
‘There’s a broader brushstroke that goes along with due diligence these days,’ observes Greg Secord, director of investor relations at Open Text and winner of best IRO in the mid-cap category. ‘Analysts require both a company and industry outlook. If, for example, you are coming out with a new product, IROs must be able to communicate not only its significance for the company’s revenue stream but how it places you in context of the competitive landscape and expectations for the industry as a whole.’
To provide effective context, Secord suggests IROs integrate themselves into all areas of a company’s business. ‘As company spokesman, an IRO must collaborate with management teams throughout the business, including product development and sales and marketing,’ he says. ‘Anyone can read back a press release. But to give it context, you must be able to make investors and analysts understand not only what the product is but also how you plan to sell it and how it supports the company’s long-term vision. IROs at technology companies often find 80 percent of the questions they get are product-related. As long as you are plugged in to what’s happening in R&D, you can answer them on the spot.’
This is a useful ability, given that 90 percent of respondents to the IR Magazine Canada Awards’ survey said responsiveness is the most important attribute of an IR professional. ‘What analysts and investors like most is responsiveness – and [being responsive] is how people do well in IR,’ says Janet Craig, director of IR at computer graphics chipmaker ATI Technologies and winner of best IRO in the large-cap category this year.
ATI also took home the award for best senior management communications in 2004. The company’s IR department is proactive in gathering feedback from analysts and investors and following up on their queries. Before any event, ATI e-mails participants asking them what they want to learn and hear. A similar missive is sent after the event asking for feedback. ‘That way, each time we do something we get better at it,’ says Craig.
IR is not an island
For Craig and other successful IROs, staying in the loop requires internal cooperation. ‘IR is not an island unto itself,’ says Greg Kist, IR manager at oil and gas company EnCana. ‘We see it as an integrated function that requires the support and cooperation of everybody in the company.’
At EnCana, which took home the grand prix for best overall IR by a mega-cap company, this means a culture of continuous learning. ‘We regularly upgrade our business and industry knowledge,’ says Kist. ‘Each month, we’ll have someone from the operations side come to our IR team meeting and talk to us about his or her area. That gives the investor community a single point of contact – the IR group – where it knows it will get up-to-date information from people who understand the business.’
Kist also says EnCana is focusing on building its investor base in the US. ‘While we have strong support in Canada, it is likely we’ll have to penetrate the US market and our focus for the coming year will be on growing our investor base there,’ he says. To that end, EnCana has initiated US dollar reporting and US protocol reporting for oil and gas volumes. ‘We have to make the evaluation against our peers as seamless as possible,’ concludes Kist.
Another energy company intent on broadening demand for its shares is Calgary-based Enbridge, which won the grand prix award in the large-cap category this year. The pipeline operator has tripled its foreign ownership in recent years. ‘That was the result of a lot of shoe leather on our part,’ says Colin Gruending, Enbridge’s manager of investor relations. ‘But at the same time the market has retreated from a get-rich-quick philosophy to the sort of sound, long-term investment that we offer.’
Sometimes, IR requires a hands-on approach, Gruending adds. ‘One of the best things we ever did was an asset tour where we plucked 30 analysts from their offices, jammed them in half a dozen helicopters and flew them over [northern Canada’s vast oil sands development],’ he says. ‘That gave them a sense of the expanse of the supply. You can spend hours in hotel ballrooms doing your presentations – a rather sterile environment. Or you can spend the money to get people out to see for themselves what we are talking about. It was probably the best IR money we ever spent.’
Ultimately, in the IR field, more is better. ‘In this era where selective disclosure is an issue, we made the decision to disclose as much as possible, as broadly as possible,’ says Mike Hough, senior vice president at rental community provider Boardwalk Equities, which won the grand prix in the mid-cap category. Hough adds that one welcome result of Boardwalk Equities’ best practice approach has been a significant decrease in the number of callbacks following press releases and conference calls.
Regardless of specific style or tactical emphasis, it seems a common thread found in any successful IR department is common sense. And that’s not rocket science.
