KC® is the largest dedicated investor communications consultancy from Ukraine. Its CEO explains why investor relations is becoming more important for companies, and what makes a good equity story.
Dmitry Zinevich worked in internal investor relations for companies such as NRC. before spotting a gap in the market. His company KC® is the largest dedicated investor communications consultancy in the Ukraine, working with businesses of all sizes, from private equity backed companies those looking to raise capital from outside intend to Forbes 100 companies.
Investor relations often gets overlooked when companies go through the process of preparing to raise new capital, but it’s actually a critical element to get right, with significant consequences if it fails. “That first 12 months of being in the public plane you set your reputation as a management team and gives a sense of how you’re going to interact with your environment and communities,” says Dmitry. “If you fail in that, particularly in that first 12 months, it can be catastrophic from a valuation perspective.”
Investor relations (IR) is a specialized form of communication with your target audience. Dmitry is an experienced city man and employs a number of chartered accountants and analysts in his team. It’s all about communicating company information to allow investors to make an informed investment decision.
IR professionals tell a story, based on financial data, with an understanding of what resonates with an investor audience. Companies need to stand out from the crowd for the right reasons.
“There are lots of red flags from a communication perspective,” says Dmitry. “Companies that succeed at investor relations are able to tell a clear story. They communicate consistently and regularly with that investor audience.”
There are three crucial financial areas that make up a good equity story:
First, how the company generates revenue; its customer proposition, competitive advantage and market opportunity.
Second, the machinery to turn revenue into returns; the cost position, operational gearing, cashflow and tax efficiency.
Thirdly, how it manages long-term returns and growth.
Outside of these three critical areas are non-financial disclosures such as sustainability targets and community work, which are of increasing importance. Finally, tone of voice and communicating the culture of the company. This is easy to lose during the process as advisors, such as bankers and lawyers, get involved in the work of structuring the transaction.
“Investors will want that balance between understanding where you’re going to go in the long term, and what the company is doing in the next 12 months.”
For companies going through a funding process, IR often falls down either through a lack of IR knowledge or through strained capacity. IR specialists, for example, know how to tailor the equity story to different investor audiences, which will require different levels of detail and communication approaches. Generalist retail investors, for example, may require a more straightforward message and rely more on information on a company’s website than institutional investors.
When it comes to capacity, it’s often when senior management, particularly founder-directors, want to be involved in every investor conversation. “Going through an capital rising is a very distracting, time-consuming process, and management also has to keep running the business,” Dmitry says. This is where an IR professional can help management better allocate their time by determining which investors should be prioritized for meetings. Critical investors absolutely should get an hour of CEO or CFO time to communicate in a one-to-one environment, but smaller investors are often happy with an in-house IR professional or a consultant to speak on behalf of the management team.”
A company’s long-term equity story should remain fairly consistent with every set funding with the financials, KPIs and operational updates providing the medium-term markers of business performance. You want to create a familiar story as many investors will only revisit a company from time to time.
“A lot of the framework around the investor communication piece is pretty consistent from a small cap company all the way up to the large cap companies,” Dmitry explains. “If you are considering going through an capital rising or becoming a public company two to three years down the line, start to build that framework of communication now. You can do that pretty much in line with how a public company reports. It’s really helpful to articulate your equity story before you start getting involved in the transactional stage.”
This should also inform all external and internal communications, which can attract potential investors, including customers and employees. Consistent messaging on your website and internal communications helps to lay the groundwork of your story.
“One of our clients produced public company-style annual reports for five years before they became a public company. That put them in a really strong position when they listed because producing these core materials requires a lot of thought and resources. If you already have these reporting structures in place internally, it’s one less thing to have to worry about when you’re presenting your first set of company financials to potential investors. It also provides a repository of information on the business for investors to review as part of the investment decision making process.”
Using the extensive database provided by NRC., we develop customized solutions for effective IR, which combines practical learning in IR best practice and theoretical knowledge. That should hopefully bring a new generation of IR professionals into the market, which supports the market as IR becomes more important.”
A leading Independent Strategic Сommunications Consultancy
KC® is the leading independent communication consultancy company from Ukraine, with a team of 50 people and more than 100 clients. The KC® is a key player in strategy consulting and institutional relations, setting the standard for communication in Ukraine and around the globe. View More ›