29 November 2018

Interesting times: 2018 in review

Giles Rafferty, Media and Corporate Communications

“May you live in interesting times”, is often presented as a Chinese curse and, as we enter the final month of 2018, it has certainly been an interesting year thus far.

In Australia, the Banking Royal Commission has been the dominant story in the financial media during the latter half of 2018, while on the political front we have seen yet another Prime Minister lost to a leadership spill – resulting in Australia’s 7th (possibly soon to be 8th) change in PM in 10 years. Global equity markets are falling, although there is debate as to whether it is a long overdue correction or the beginning of the much predicted bear market. In Australia, the S&P/ASX200 is now down 5.5% since the start of the year, peaking at the end of reporting season (August 30) when it recorded a post GFC high of 6351, just 400 points shy of the previous market peak in October 2007.

Internationally, Donald Trump has dominated the headlines; however, Brexit, the inexorable expansion of China’s economic influence through its Belt and Road programme, sabre rattling followed by détente on the Korean peninsula and escalating tensions between Russia and Ukraine have all made their impact on the news agenda and financial markets in Australia.

Through FIRST Advisers’ monthly newsletter, the FIRST Edition, we’ve explored many of the issues that have impacted company performance and reputation over the past twelve months, including rising shareholder activism; mandatory data breach notification; the increasing importance of ESG metrics and the role of proxy advisors.

‘Proxy Advisors and the rise and rise of ESG’

The article that captured the most interest in 2018 was our Time to talk to proxy advisers, suggesting that there is still a way to go before corporates are comfortable with the role of proxy advisors. In our view, while engaging with Proxy Advisers can be a frustrating exercise, as long as they provide a service their institutional clients value, corporates will have to work out how and when to engage with them, anticipate their likely response to various governance matters and put their case.  Most importantly, with corporate Governance and ESG such hot topics, it is important for companies to engage directly with their own shareholders, including not only fund managers, but also the asset owners who frequently control the ultimate vote.

‘A short attack is akin to going to war.’

Our analysis of Short Attacks in April, prompted by Glaucus’ report into Blue Sky Alternative Investments, just missed out on being the most read article. The Short Attacks: Is Glaucus an Aberration or the new Normal? blog worked through the anatomy of a short attack, outlined response strategies and highlighted the importance of constant, targeted communication with key stakeholders and of controlled, considered communication in both word and tone. Essentially, being the subject of a short attack is akin to going to war, with a company’s very survival the ultimate goal.

‘Same day reporting is the new standard’

A trend within financial reporting, identified and tracked by FIRST Advisers over the past 2 years, has been companies publishing their Annual Report on the same day as their full year results. We updated our research into this trend at the end of the August 2018 reporting season, which formed the basis for our third most popular blog – Setting the standard – ‘Same-day reporting’ of the annual report at Full Year Results. This highlighted that ‘same day’ or simultaneous reporting has emerged as the new benchmark in corporate reporting, with a clear majority (58%) of ASX 300 companies adopting this approach in Financial Year 2018.

‘IR should own digital real estate on a company’s homepage’

The importance of retail shareholders and how to engage with them was the fourth most popular newsletter article. Engaging Retail investors – work smarter not harder revealed how they generally invest for the long term, are volatility averse and focus on a company’s fundamentals. These characteristics can also make them hard to engage with and seem unresponsive. The emergence of digital channels and social media provides several ways for companies to connect directly with retail shareholders, making it critical for the Investor relations team to:

  • own some of the digital real estate on a company’s website homepage
  • curate the content on the IR site landing page to present the most relevant information
  • build a stand-alone social media profile to avoid the IR narrative being diluted by marketing or customer-focused messages

‘Adopt an activist mindset as part of defense planning’

The rise of shareholder activism was a persistent theme throughout 2018 and was very much in focus when we attended the NIRI Conference in Las Vegas back in July. A view from the other side of the fence looked at the US experience of activism and what lessons there are for Australian companies. Self-reflection, where a company adopts an activist mindset to review operations, emerged as an important part of activism defense planning while absolute, as opposed to relative, underperformance was the most important red flag for triggering an activist investor’s interest in a stock.

We still have a month of 2018 to go, which includes Christmas, and although we live within an always on, 24/7 news cycle, our wish is that you all get some time to relax and enjoy the festive season.

5 April 2018

Short Attacks: Is Glaucus an Aberration or the new Normal?

VICTORIA GEDDES, EXECUTIVE DIRECTOR Two years ago we wrote an article on a well-established activist strategy in the US called the “short attack”. In Australia we are very familiar with short selling as a legitimate tactic to deliver portfolio performance but short or bear attacks are something else altogether. Equity markets and investors received their […]

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