During our presentations we have chatted to numerous executives about that ensuring company’s stakeholders have a good working knowledge of why investors should invest in your company and the opportunities and risks driving that thesis at all times.

One executive dismissed this as a clearly bad practice due to the possibility that this information could be beneficial to a competitor. This showed us that the executive, like most of people responsible for IR or indeed implementing IR policies, need to change their focus on the information they provide to shareholders and prospective investors. This is the standard corporate presentation given in most situations in board rooms or analyst presentations:

“We have the best circuit boards in the world. Customers love our circuit boards; here are a few of their logos. We have a new secret recipe for circuit boards that we are very excited about. The circuit board industry is an $8 gazillion industry per annum. If you look at this map, I have placed red dots everywhere we have a manufacturing plant. Standing next to me are the geniuses I have hired that know a lot about circuit boards. I will now pass around some of our circuit boards for you to touch and feel. Please feel free to ask any questions that you may have.”

Everyone in the audience has their minds going 1,000 miles per hour through out the entire presentation trying to determine why they should invest by stacking the bits and pieces of information in their respective templates. It is a little like playing bingo with five cards, each card representing a different investment thesis, and every piece of information covers a spot on one or more cards until finally, BINGO! The faces on the audience members during these presentations can be fascinating. It’s like listening to a very long riddle where the person telling it doesn’t actually know the answer. An example of what they should have said:

It is our goal to be an excellent candidate for the “Growth at a Reasonable Price” portfolio. This chart shows the steady positive industry growth being driven primarily by the following factors… Our current market share is approximately (x) which has grown steadily from approximately (x) three years ago, which has been driven primarily by the following factors… Based on peer analysis tools, here are the average ratios and growth rates of similar shares to our company as compared to our current ratios and growth rates.

There is nothing in the second presentation that is of any value to a real competitor – this is all general knowledge to them. If anything, it’s the standard presentation that offers the potential for competitive insight. Okay, so what does this have to do with IR best practices?

• Push the information in the second presentation to the public in every possible format possible and by every means possible.
• Do everything possible to get the business cards (through online form or in person) of everyone who reads, listens, watches or consumes the information in any way.
• Update the information as necessary (but very promptly) to adjust for changes and to incorporate answers to frequently asked questions.

Submitted by a puzzled investment thesis bingo player.

“Competitive information rests in the companies’ products and services; investors don’t buy the company’s product or service, they buy into its investment thesis.”

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The presentations made around Africa this year to listed companies highlighted an excellent look into the future by IR Web Report which provided a “past, present and future” overview of the web in investor relations.

Web 1.0 involved the publication of data on the web through intermediaries, Web 2.0 through people and Web 3.0, predicted by Dominic Jones IR Web’s leading IR strategist, through machines or databases. Web 3.0 means that peoples’ role in the distribution of data will be seriously eroded. The majority of information people want will be obtained through programmes and databases.

A link with people is what business is all about. You see it everywhere. The latest trends around the world involve the creation of online communities. You see it in Facebook, Google, Twitter e.t.c. and it’s not different for businesses in Africa. Create a community, a secure two-way link, offer what people want and nurture the relationship. Enjoy the returns.

To executives in Africa this is common sense and they shake their heads in agreement when I present to them. But in their minds there is no pressing need to adopt these strategies. These executives are busy. Subconsciously, negative conditioning about anything to do with websites kicks in. It’s easier to maintain the status quo. So what’s the catalyst for an executive to say “OK let’s do it”?

Vision.

It’s personal.

Knowing the long-term value and having the strength to make the decision is what it’s about. Using the web effectively cannot be done in-house anymore so trusting the right partner to achieve your goals is also important. This takes courage. Yes, the majority of executives are miffed with their website managers but why go create more problems all over again?

As I said, it’s about vision.

African Is Cool’s 11-client investment community is just over 8,000 investor contacts and this is growing daily. We have over 12,000 visits to our websites monthly and visitors view over 19,000 pages of information. They come from over 100 countries, mostly from the UK, USA and South Africa and India, the latter country where many of the wholesale investment data vendors e.g. ThompsonReuters process information into their databases for onward sale to subscribers around the globe.

Our clients, visionaries in their own right, are seeing the benefits of the online community strategy. In many cases the commercial return has exceeded the cost of investment in the first year. This image below shows the categories of feedback we receive through our client websites.

What are some of the results from this feedback? New deals, lower cost of doing business, hiring better staff, identifying shareholder administration problems sooner and better informed investors. We have the evidence. This was not an expected benefit of our service when we started, but the communications channel that we set up online works and sources feedback related to areas other than investor relations.

In a broader sense, our community of investors knows what African is Cool is about now and each new client is looked upon with excitement. For new clients, it’s an immediate introduction to a previously unidentified investor community.

In 2010 my mission will be to continue to increase the awareness of the value of online communities. We will also ensure that for our clients, if there is increased interest in Africa from the 2010 World Cup, we take advantage of it.

The comfort of knowing that a core governance activity is being carried out reliably, and in a way that benefits brand, corporate reputation and governance, is the KEY factor that justifies the long-term vision of the executive in the short-term.

But it’s only the executive that can make the decision.

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What makes investor relations management so difficult is that it spans many corporate disciplines and affects many aspects of business and governance. We have gone one step further and taken this challenging task online. Successfully.

We specialise in building online communities

African Information Solutions for Companies Online Limited (“African Is Cool”) specialises in online stakeholder communications and investor relations. Based on best IR practices, we use the internet to create and grow an online investment community with which you can communicate, and from which you can receive feedback. The bigger the online community, the lower the costs of communication, the greater your influence and the more efficient your communication is.

We use robust specialised software: Investorpass™

The key part of our service is the maintenance of a fully comprehensive interactive investor relations website that includes investor relations specific online software (Investorpass™). Investorpass™ is hosted in Texas in the USA. InvestorPass is US Sarbanes Oxley Act compliant online communications software, which means that the directors are able to certify that the platform is secure – over 300 companies use this software in the USA and on a number of other continents.

InvestorPass uses comprehensive data and interactive features to automatically build an online investor contact database. It is low maintenance since the security and upgrades to the software are all handled online. There are therefore no domestic IT implications to this service, and we do not even need to touch your existing corporate website – we just provide the link to append to your website. In fact our software is so flexible it can manage your whole corporate website should you want a “one-stop” corporate and online investor relations managed solution.

Managed online our service is relevant to companies of all sizes

Our service is managed online so other than an initial visit to your senior executives, generally all of our services are managed over the web. Country visits do depend, however, on the extent of the services required of us: Some clients expand our online mandate to include face-to-face consulting.

We introduce best IR practices to our clients, made relevant for Africa

We also provide advice on investor relations best practices and related communications policies specifically for sub Saharan Africa’s environment; i.e. we focus on the basics and do not get bogged down with onerous regulatory and legislative implications of US securities law.

There are many ways to measure our IR performance (and yours)

We report back monthly to our clients on progress. The key transparent measurement of our and our client performance is the number of visitors registering in Investorpass and opting in to receive information.

We appraise IR practices and research them in Africa

Our blog and news section includes original information and coverage of developments in sub-Saharan capital markets that are relevant to investors and listed companies. Our alerts and feedback interactivity ensures we are responsive to the community’s needs and represent them in the best interests of investor relations.

Our client base is growing rapidly. So is our investor community

We currently have 15 clients in four countries, with several more in the contract implementation stages. Our clients’ market capitalisation exceeds US$1.2 billion and we serve over 75,000 shareholders in our rapidly growing online investor community. In Zimbabwe, we manage the investor relations websites of Kingdom Meikles, Econet and OK Zimbabwe and are currently signing on two other Zimbabwean listed companies. In Botswana, we manage Imara’s online investor relations, and in Zambia Copperbelt Energy’s website and IR function. In addition, we have three clients in Malawi. Our offices are in Zimbabwe, Johannesburg and the UK.

The crux of the matter is not good governance…

If there is one reason you should consider breaking your many barriers (such as technology, lack of time and of resources) to an interactive website, it’s the commercial return enjoyed from communicating effectively with your investment community.

Ask our clients.

Our experience from our clients in the past five years shows really meaningful feedback from all stakeholders in all areas of our clients’ business: new deals, reducing input costs, employment opportunities etc. And we make sure that each feed back submission is responded to. Quickly. If our clients do not respond quickly we remind them repeatedly to do so, in the nicest possible way. This creates so much goodwill.

Our services appeal to a broad range of companies

Brand oriented companies such as telecoms companies and banks find our solution ideal for brand growth and enhancement. These advantages are also very marked in organisations that have a significant number of stakeholders, i.e. a large number of clients, policyholders, outgrowers, depositors, employees, stakeholders and product ranges etc.

Our solution is also a retail shareholder strategy at no extra cost

By providing a proprietary online email service to each and every investor the levels of appreciation shown by ordinary investors is high since most, if not all, companies in Africa ignore their retail shareholders. This appreciation evolves into improved corporate reputation and more business.

It’s also about actively pursuing investors but keeping costs low

We actively attract investors and other stakeholders to our clients’ websites: One of our initiatives is www.africanfinancials.com, Africa’s largest portal of online annual reports, freely accessible to investors. This website directs significant visitor numbers to our clients’ IR websites through the prominent position of our clients’ annual reports, and the traffic is then converted to stakeholder contacts. There are many other communications practices that we recommend to ensure your online community grows. A recent blog on Africanfinancials.com sheds more light.

So what sets us apart from our competitors?

• We identify visitors to your website individually.
• We offer each investor an online webmail function to enable to them to archive and manage your communications, and participate in the communications process. They can even include their own contact details.
• An online investor contact database categorises the investors and other stakeholders that are interested in your website. Investor lists can be exported at any time, which complements other traditional means of investor interaction, e.g. through advisors.
• All that is required in order to create a two-way communication channel with investors is a single visit to your website. There, email options are available to enable your company to “push” the information desired to the email addresses supplied. If your organisation has information of use to the investment community, then you are ideally placed to implement an online stakeholder relations management programme.
• All the activity of each investor on your website is tracked, so there is a full audit trail.
• We solicit and manage feedback from your stakeholders and investment community at every opportunity, i.e. in every email and other exchanges, and it is in this feedback where the strategic value lies.

Our clients are our greatest supporters

Have a look at the African Sun testimonial for an example of what our clients think. All our clients have recommended our services and if you want to know more, and perhaps speak to them directly, you will find them in the document named “What Our Clients Say” on our website.

Being unique means we don’t stand on anyone’s toes

We offer a truly unique comprehensive online investor solution across Africa. Our solution does not in any way conflict with your current IT, PR or marketing initiatives – in contrast, it complements them.

The crux of the matter is…

The core objective of having an investor relations approach such as this is to ensure that investors have access to information that enables them to make educated investment decisions about the value of your business. This protects directors from the wrath of shareholders when shares are undervalued and overvalued.

This is prima facie about hassle free responsible communications that ensure that directors carry out their core governance obligations. In reality the efficient mechanisms we implement to solicit feedback are of strategic commercial value. It is this latter point that set us apart from any other communications or website firm.

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On 23 September 2009, I held a workshop on online IR management in Accra, Ghana. My co-presenters were Winston Nelson, the CEO of African Alliance Securities Ghana, a pan-African stockbroking firm, and Farayi Mangwende, the corporate communications manager for African Sun, one of our clients.

At the moment, Ghana’s online investor relations practices can be described as practically non-existent. This is not unusual. We have pointed out that it has only been in the last three to five years that technologies have developed to the point where the majority of the pain associated with online communication can be eliminated and some of the commercial pleasure enjoyed.

Winston Nelson, the CEO of African Alliance Securities Ghana, analysed the online IR practices of Ghana’s listed companies in his presentation at our workshop.

The following key statistics were presented:-

• Only 17% of listed companies in Ghana have IR websites
• Only 2% have the contact details of an IR officer online
• Company apathy toward meeting investors has increased after the worldwide economic meltdown (when it should be the other way) as only 6 out of 34 listed companies utilised the GSE’s meet investor initiatives (one third of the activity of 2008)
• The practice of posting annual reports online is not prevalent

But Ghana, like many other countries, is reaching that tipping point where internet and mobile access rates show the rapidly growing potential for digital investor communications. Some statistics on the market:

• Number of listed companies on the Ghana Stock Exchange: 34
• Total market capitalization: USD10bn
• Number of Internet users : 1,000,000
• Number of shareholders: 250,000
• Number of shareholders in CSD: 25,000
• Mobile penetration rate: 60%

In my experience, in many countries with smaller, illiquid stock markets, securities markets professionals seem staid in their attitudes to the market. Things don’t change much from day to day, so the introduction of something new like online shareholder communication takes some time to digest. I have often noted that African capital market regulators are some of the most widely travelled executives, yet have not pushed the technology agenda to ensure that stock market information is immediately available online, and that shareholder communications from listed companies use online platforms.

What Does the Audience Think?

We asked participants to fill in a brief questionnaire to hear whether and how they prioritise online IR management. Here are some of the highlights:

Participants almost unanimously agreed that those companies starting their online IR activities early would benefit the most in the long run. This is consistent with the experience of US companies after electronic communications were permitted in 2005. Those that embraced the technology changes learnt how to benefit from them early.

The majority of respondents may agree that the internet was the way forward for shareholder communications and the environment was right in Ghana for online IR, but approximately 1/3 of respondents indicated that the timing and the environment were only somewhat relevant, so there are clearly some doubts. Executives, investors and market participants are not looking forward, they are looking backward. That said, the Ghanaian executives I met have been most responsive to the principles we shed light on.

The other common retort across all markets I have visited (including, incidentally, in the US where 90% of the investing population has access to the internet) is why should online investor relations practices be introduced when rural people have no access to computers? Ghana has approximately 1 million Internet users, compared to only 250,000 shareholders. Surely it is a safe assumption that the majority of shareholders should have access to the internet. It access to email that is the key criterion, but lets stick with the Internet at the moment. It just takes one investor to change the fortunes of a company and directors have an obligation to ensure that broad arrays of tools are available for investors to access information. I am unaware of any regulators in any markets in Africa that are carrying out surveys of the profiles of investors, retail or otherwise, their habits, their needs, access to phones, internet average wealth etc. These have been common in the US and are used to drive the SEC’s strategy for overall market development. The various African Governments that were proponents of privatisation campaigns and that carried them out successfully should now ensure that the mass of shareholders that they created can make meaningful use of their share in the economy. Listed companies generally ignore retail shareholders.

In explaining why companies had not previously had an online IR presence, respondents most commonly attributed this to a lack of policy (probably at board level) within their company. Lack of awareness was also mentioned. This was substantiated by similar findings elsewhere that also noted the absence of policies to deal with online communications. Dealing with the hassle of IT and the cost of IT were the next most common reasons, which I assume have their origins in the absence of tools and technology (and skills) readily available to listed companies.

Most respondents were somewhat (not strongly) happy with their corporate websites – to me, this is further evidence of limited awareness of recent trends and online communications practices.

In considering the relevance of an online IR programme, increasing communications efficiency was seen as the overriding relevant factor in justifying an online IR programme. Saving management time was the next most prominent justification, followed equally by ensuring competitiveness to peers, reducing costs and promoting investor and customer loyalty.

Rob Stangroom

CEO

African Is Cool

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I am currently doing an annual report in Malawi where the legislation permits the distribution of abridged annual reports in compliance with the requirements of the Companies Act and MSE Rules.  Shareholders wanting a full copy are able to request one from the company. The result: a big saving of cash. Some listed companies are using some of their freed up funds to put extra effort into the integrated (full) report which is made available online in most cases in PDF.

Most of our clients use iPaper, online software that publishes PDF’s online professionally, avoiding the need for bulky downloads.

The future for us is taking advantage of our Investorpass shareholder communications platform to act as an audit trail of the delivery of online annual reports so that the paper trail is cut out altogether. In Africa the default delivery mechanism will be hardcopy for some time to come as Internet penetration rates are low, nevertheless those companies adopting the online strategy sooner rather than later will be ahead of the Governance Curve in the long run.

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Our clients drawing a diverse community of interested identified stakeholders (over 6,000 at the last count) to their websites and the responsibility of managing these contact details is becoming apparent. It’s not easy. Contact details should always be complete and accurate and we have found that the best time to do this is as soon as investors register in the investor relations section of your website. Thereafter an annual email blast asking for updated information should suffice.

Once correct details have been recorded (our software enables our clients to choose what information is needed in order for investors to register) the investor categories can be used to great effect. The ability to immediately discern and communicate with the media, analysts (buy side or sell side), individuals, shareholders at the press of a button (say upon the release of significant news, corporate actions etc) is key to saving time and money.

Our clients are also realizing that the compounding effect of corporate communications in brand enhancement and investment case dissemination can be significant. For example one client of ours has 500 registrants registered to receive the daily share price alert. On average 250 investors open these emails daily so in an average month of 20 trading days, our clients’ investment case and brand is exposed 5,000 times.

In addition, each time the community to which the email is addressed opens an email they have the opportunity to communicate with management and send their feedback. They do, with interesting results. This direct form of communication requires an immediate response and the benefits of having automated communications and a friendly IR firm to assist really enhances corporate brand and reputation.

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I have been involved in two IPOs where our software solution has been used to great effect to identify the investors interested in our client company. African IPOs are beautiful in this respect – huge demand and interest and an amazingly strong following from the diaspora.

A few statistics of interest relating to effective online IR at IPO stage (extracted from our clients and are indicative of course):  Online IR at IPO stage

• attracts 3 times the number of visits to your website than an established company in the first year post-listing
• generates visits from investors in 30% more countries than an established company websites in the first year of listing
• have 30% less time-on-site because of the absence of historical information BUT
• typically attracts twice the number of unique visitors to your website than an established company in the first year AND will attract twice the number of page views on your investor relations website
• have 30% less pages per visit because typically the absence of historical information, this reverses over time

During the IPO the ability to immediately communicate with the market (allay their fears about shortages of prospectuses or delayed timetables, IPO results etc) occurs at the press of a button. The ability to receive feedback immediately can really help avoid disasters and enable you to change the structure of the transaction administration or communication to avoid those little things that blow out an IPO – just ask some of the big advisory players that have implemented IPOs in Africa – there’s always one or two things that go wrong.

I have lead managed 5 IPOs personally and the comfort that you get being in control of the IR function online in the advisory funtion is huge. The PR and marketing agencies are secondary players as opposed to perceived primary players (in the absence of an online solution where the advisor is more in control of the IR / media function.)

Both IPOs I did also obtained regulatory approval to have application forms delivered with softcopy prospectuses. The legal issues associated with distributing application forms without prospectus is a significant legal one given the massive market scams of the South Sea Bubble etc.

How did we give the regulators comfort in our product?:- provided a SOX compliant online shareholder communications platform: the full audit trail that shows the investor reaceived the prospectus with the application form.

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