27 Jan COVID CHAOS, BIG DEALS & ESG: COMMUNICATING WITH YOUR INVESTORS IN AN UNCERTAIN 2022
Australian companies are facing challenges aplenty as 2022 kicks off, from supply chain delays, staff shortages due to COVID, weaker earnings growth and ongoing pressure to do more on the ESG front. With so much uncertainty around, clear communication with investors is key. Here are some tips on effective communications with your shareholders, by Associate Director Belinda Tasker.
First, the good news: The Australian share market enjoyed a stellar year in 2021, despite the ongoing chaos and confusion caused by the pandemic, with trading volumes soaring as investors pushed the ASX 200 up 13 per cent for the year.
Record numbers of new investors flocked to the market, all keen to grab a slice of the action in what Evan Lucus, chief market strategist at InvestSMART, described as “one of the biggest years ever for retail investors”.
Many of those new investors were Millennials looking for a place to invest their cash at a time when interest rates remain stuck at record lows. CommSec reported opening more than one million new share trading accounts since the start of the pandemic, with Millennials making up about two thirds of them.
Now for the less good news: The outlook for 2022 appears a lot less certain.
In fact, many observers here and overseas expect a more muted performance by the market this year amid the prospect of interest rate hikes by central banks while companies grapple with rising costs and supply chain pressures.
So, what are the key issues your company will need to grapple with – and what are the best ways to communicate with your shareholders?
COVID … AGAIN
As the omicron strain continues its path across the globe, many companies are scrambling to deal with supply chain issues and staff absences. And everyone wants to know what you are doing about it – your employees, your customers, and your shareholders.
Here are some communications tips:
- Provide clear and concise updates for all stakeholders on the impacts pandemic-related disruptions are having and your plan to overcome them.
- Provide context about what’s going on in the broader market and driving the disruption
- Explain how technology is helping your business manage risks.
- Consider the need for help lines – online and phone – so stakeholder questions can be answered accurately with consistent messages.
MORE DEALS BUT MUTED EARNINGS GROWTH
Slower earnings growth, rate hikes and rising inflation are all on the cards for 2022. On a brighter note, the mega M&A activity from 2021 is also expected to continue this year. So, now is a good time to think about how to keep shareholders in the loop.
Some useful tips:
- Consider enhancing disclosures around balance sheet and capital management, including your dividend policy.
- If your company is preparing to cut dividends or raise equity to help reduce debt, consider how you will explain the reasons behind your capital management decisions and the trade-offs between earnings, growth and security.
- For M&As, make sure you develop a clear communications plan with concise and consistent messages. And no matter how big or small the deal, remember that the key to a successful transaction is to keep your employees informed to maintain productivity and reduce uncertainty.
ESG – NO GREENWASHING, PLEASE
The COP 26 summit on climate change may be over but shareholders are keener than ever for details about Environmental, Social and Governance (ESG) issues.
As a result, expectations are high for companies to not only have a position on ESG issues, but also have high standards when it comes to reporting to shareholders and other stakeholders about them.
Some tips to avoid being accused of all talk, no action:
- Engaging with shareholders on ESG issues needs to be part of a company’s investor-relations strategy.
- Consider hosting ESG specific briefings involving Board members and senior management – and listen to feedback from shareholders.
- Have a dedicated ESG tab under the IR section of your website for easy reference.
- Ensure you incorporate ESG issues into your results presentations and investor days – but avoid spin at all costs, and ensure you back up your words with action.