African Investor Relations

I am pleased to announce the launch of the on-line investor relations initiative of National FoodsHoldings Limited, a company listed on the Zimbabwe Stock Exchange. The company has a market capitalisation of US$95.8m and has 1,004 shareholders. Innscor (with a market capitalization of US$378m), also listed on the Zimbabwe Stock Exchange, is the majority shareholder with 49.6% shareholding.

The company announced earnings of US$7.9m recently, up from US$5m in the previous year. With shareholders’ funds of US$50m the company’s Price-to-Book Value ratio is 1.9 times. View their earnings release here.

Africansmallcaps.com, the platform upon which National Foods is hosted, is our standardised investor relations template (and portal) for listed companies to satisfy their core communications corporate governance obligations to investors. The standardised layout offers email alerts and all of the company information needed for investors to carry out meaningful investigation into making informed investment decisions. Currently 4 companies are using www.africansmallcaps.com to satisfy their company investor relations obligations.

Their historical annual reports are viewable here. The annual reports of all Africa’s listed food processors appear here. I will have some more exciting news about National Foods shortly. Sign up to alerts here.

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CBZ , a prominent Zimbabwe listed banking organisation, recently published wording that proposes to amend its memorandum and articles to enable electronic communications with shareholders. This is a bold move given that the legislative environment is not specifically supportive of this and there does not appear to have been consultation with the market with any of the broader market participants including regulators.

The positive thing about CBZ’s move is that it is an unsolicited statement by the private sector saying let’s take the next step forward because we have a need for this. The Board has obviously taken a conscious decision to obtain legal opinions, consult with their share registrars and amend their constitutional documents. I will not go into the practical issues arising from the approach CBZ has taken at this point.

No overall guidelines have been issued by regulators yet on the issue of electronic shareholder communications in Zimbabwe and the country has been struggling to re-launch an initiative to re-hash its outdated corporate governance code. The Companies Act is outdated and the regulatory structures are in a state of flux following the economic tsunami that hyper-inflation brought.

Is this bad or is it an opportunity? It’s an opportunity to start with a clean sheet and look 20 years into the future and adopt practices and a regulatory environment that is complemented by the current spurt in online communications infrastructure and tools.

The sanctity of the hard copy annual report is still protected in most sub-Saharan African markets but, shareholder apathy, shareholder ignorance and  directors’ focus on saving money, means that many companies are not delivering their shareholder proxy materials in hard copy to shareholders in advance of the AGM – typically companies make the annual report available at the AGM and rely on the newspaper publication of the AGM notice to inform shareholders that shareholder proxy material exists. How they (the shareholder) get it is their problem. It’s logical that in a regulatory vacuum companies will start to come up with their own initiatives in line with their interpretation of laws that, when promulgated, did not know that the internet would exist.

I have studied the regulatory issues of website disclosure internationally (particularly in the US) and its complex if you take it seriously.  If you don’t take it seriously it’s easy to dismiss retail shareholders as ignorant and irrelevant.

The principle of investor protection is of paramount importance to the SEC and there is ample precedent to see how the process of electronic communications has evolved, thanks to the SEC’s openness and transparency. In all cases, in my opinion, the SEC acts in a manner that protects the shareholder on their behalf, whether they are (the shareholder) is ignorant or not. All of the relevant stakeholders are consulted and the SEC publishes comments from the very many interested parties.

None of this debate in the US is happening in African markets. I can’t decide if African listed companies should adopt a different model altogether, one that does not go to the same extent as the US  on account of the fact that “Africa marches to the beat of its own drum”. African regulatory markets don’t have the resources or legislation to do this, or the skills and pan African organisations such as ASEA have yet to make any statements on the online arena as a platform for investment promotion to be more competitive in global markets. ASEA has recently opened the door to co-operation with third parties to achieve their objectives and a substantive head for the development of the association, Silvana Wanjiru, was appointed last year. Silvana is forward thinking so there may be some hope for getting online investor relations onto the pan-African agenda at some point in future.

Dominic Jones , a world leader in online investor relations, has this opinion about the trends in African markets regarding de-linking the direct communications channel with shareholders:

“Scrapping requirements for companies to mail printed disclosure documents to investors is a global trend, but it has exacerbated shareholder apathy in every jurisdiction where it has been implemented. This is largely because regulators have failed to replace printed disclosures with suitable standards of online disclosures. Apathy and an uniformed investing public is, to my mind, the single worst thing that can happen in any market. It ultimately will lead to market abuses.”

Whilst CBZ’s move is positive, CBZ needs to know, as do the regulators and all other players, that progress in this area has to be a team event, crafted from international best practice as amended for the very unique circumstances prevailing in our markets. To craft these solutions requires knowledge of best practice online communications, corporate governance, PR, marketing and financial reporting.

Here is an extract of the wording of the announcement which, at the time of writing this, does not appear on their website:-

1.       It was further Resolved:-

“That the Board be and hereby authorized to amend Article 129 by deletion of the last sentence and substitution thereof with the following:

Soft copies of the Director’s report, accompanied by soft copies of the statement of financial position and statement of comprehensive income and all other documents required to be annexed to the statement of financial position shall at least fourteen days before each meeting be delivered by electronic means to the registered e-mail address of every member. The publication of the said statements and accompanying documents on the Company‘s website address and the sending of such documents by e-mail from the Group Legal Corporate’s  Secretary’s Desk or such other designated person shall be deemed sufficient delivery to members.

”A printed copy of the Director’s report, accompanied by the printed copies of the statement of financial position and a  statement of comprehensive income, and of all other documents required to be annexed to the  statement of financial position, shall at least, fourteen days before each meeting be delivered  by electronic means of if so requested, sent by post to the registered address of the requisitioning member.)”

2.       It was further Resolved:-

“That the board be and is hereby authorized to amend Article 133 by its deletion and substitution thereof with the following:

133. A notice may be served by the Company upon any member whether by electronic means, personally or by sending it through the post in the prepaid letter, envelope or wrapper, addressed to such member at his registered address or e-mail address”

3.       It was further Resolved:-

“That the Board be and is hereby authorized to amend Article 135 as follows:

In line 2 by the addition of the following words, after the word ‘advertisement’: ‘and or publication on the Company’s website; in line 3 by the deletion of the words ‘or which may be’ and after the word ‘advertisement’ by addition of the words ‘or electronic means’; in line 5 after the word ‘newpapers’ by addition of the words ‘and the Company’s website’. In line 8, after the word advertisement’ by addition of the words ‘and or electronic means’ and in the line after the word ‘published’ by addition of the words ‘or the date the electronic communication was dispatched’”

4.       It was further Resolved:-

“That the Board be and is hereby authorized to amend Article 139 as follows:

In line 1, after the word ‘delivered’ by addition of the words ‘by  electronic means to the e-mail address of the member.’’

There are a number of companies in Zimbabwe taking their online investor relations practices seriously, however none have yet taken steps to adopt electronic communications by amending their constitutional documents.

My conclusion is that this move should be positive in Zimbabwe and will hopefully stimulate debate.

More on Kenya here

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I have done a quick review of African stock exchanges’ use of social media to connect with the broader investment public. I considered whether the stock exchange website had a feedback centre, email alerts, categorised email alerts, RSS, a watchlist function, client login, categorised RSS feeds, Facebook, Twitter and YouTube. 10 categories in all.

My review was cursory as I wanted to get a general feel for whether certain aspects of social media were being adopted by Africa’s stock exchanges. The spider diagram above summarises the % incidence of basic interactivity & social media indicators on stock exchange websites. The long and the short of this quick review is that social media is not seriously on any agenda of African stock exchanges. This, when Africa’s new Facebook statistics show a total of 37.7m users as at 31 December 2011. This, when the African Stock Exchanges Association is theoretically lacking strategic direction and when it’s raison d’etre is being eroded by regional stock exchange associations. There is ample scope for these organisations to seriously consider the extent of the opportunity offered by social media and other online platforms, especially in coal-face investor education initiatives.

Here are the various country scores representing how many of the 10 main indicators above appeared on African stock exchange websites – 100% is all of them appeared, 10% is only one appeared:-

Interestingly the Stock Exchange of Mauritius does not score highly but the exchange does have a very comprehensive website – just little interactivity. Zimbabwe’s website is currently being re-developed and it will be interesting to see where this emerging exchange fits into the overall ratings above.

Traditional capital markets regulators will argue that it is not the role of regulators to engage directly with investors. This may have been applicable in the past and certainly the prospect of African stock exchanges doing so now is scary given the absence of resources in this area. The fact is the conversation about these sorts of things needs to start happening now and a framework set out for the future.

There is no better platform than one to one communication to educate investors and an educated investor is a protected investor – and a protected investor is what African stock exchanges should be developing by the thousands, every day. But its not happening. OK the sky is not going to fall because of it, but there may be long term downsides to not engaging retail investors in African markets even if its just to provide them with corporate actions, annual reports and price sheets everyday.

My message is that these media are sitting ducks for someone to do something progressive for a change rather than lag behind the rest of the world.

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I follow Q4 closely because they are world leaders in what they do. I have no financial interest in Q4. Unfortunately. But what they say rings so true with my mission in life. There are good reasons for this.

With regulators, directors and investors in Africa lagging their first world peers, but with listed companies seeking capital and investment in the “last frontier”, the prospect of enabling African listed companies to empower themselves (rather than relying on brokers and regulators) in reaching out to investors is very compelling. For me at least – because the absence of progressive capital markets regulators (in the adoption of the internet as a communications and investment promotion tool) means that listed companies should be given the reins to determine their own future. The reasons are : there’s an absence of information, its good corporate governance, it builds brand and corporate reputation and the upside is great.

Anyway I take the liberty of replicating Q4′s blog below because I want to send their message to listed companies in Africa. Bizarrely, what Q4 is saying in first world markets has even more relevance in African markets. For me at least.

A few notes about IR in African markets:-

- newswires are not used (with a few exceptions)

- conference calls are not used (with a few exceptions)

- podcasts are not used (with a few exceptions)

Here goes the message from Q4

“Late last week the SEC issued guidance on how companies can use corporate web sites and blogs for the release of material information under regulation Fair Disclosure. This timely announcement has the potential to dramatically impact the corporate disclosure industry.

Rather than outlining the content of the guidance I thought I would provide some initial thoughts on what I see as being the key messages of the interpretive release. If you are not familar with the guidance please see the following links for more information.

SEC Docs

• The full SEC interpretive release (47 page PDF)
• SEC Press Release

Some Initial Blog Posts

• SEC OKs websites and blogs for Reg. FD
• SEC To Recognize Corporate Blogs as Public Disclosure, What This Means for Wires and Press Releases
• SEC To Recognize Corporate Blogs as Public Disclosure. Can We Now Kill the Press Release?
• The emerging self-distribution news model

Here are a few initial take aways from the announcement:

The playing field of disclosure has been leveled. Newswires no longer have the built in demand for their services that they did before. (NYSE still mandates the use of wires but the assumption is that they will follow suit). This does not mean that the Newswire’s are going out of business, but it certainly means they are going to have to compete with more than just each other moving forward. Newswires will need to look closely at their business model and determine how they are going to compete in a world where the distribution of information is free (welcome to the Internet).

The press release is not dead. There is nothing in any of the SEC announcement that speaks to companies not using a press release. The press release is a document type, not a distribution method. It can be posted to a corporate web site, company blog or sent out over a newswire. IROs and public companies have well defined controls and procedures around the creation of press releases and other disclosure documents. This recent announcement does not impact the importance of using a press release to disclose information to the market, just how the press release gets from the company to the investor.

In order for information to be “Public” (and applicable to RegFD) the corporate web site needs to meet 3 criteria.

1. a company web site is a recognized channel of distribution
2. posting of information on a company web site disseminates the information in a manner making it available to the securities marketplace in general, and
3. there has been a reasonable waiting period for investors and the market to react to the posted information.

As you can see, these are quite general and not prescriptive, this means that companies will need to be committed to meeting these guidelines and likely it also means that new vendors will step up to help. This criteria warrants a post on its own, so I won’t go into detail on each aspect here.

The guidance is principle based and future proof. If the SEC had come out and said “you must use RSS and email alerts” it would be creating the same problem it is now getting out of. By using a principle based approach it allows the market to determine what is acceptable and ensures that certain technologies and/or companies are not able to create protected industries (like the newswires did). Having said that, a principle based approach also creates a grey zone that lawyers do not like, which means that the mass market of issuers will likely not change anything, until the market adopts a new standard. This will require forward-thinking issuers and vendors to innovate and create this new standard.

The corporate web site is the podium for all disclosure. We’ve been saying this for some time (as have many others) but it is now official. The corporate web site is the hub of corporate disclosure. With this new guidance and the combined innovated efforts of issuers and vendors, we will continue to see the corporate site dominate the world of disclosure for the foreseeable future.

I would certainly advise all those in the corporate disclosure space to read the full 47 page report. It’s long but there are some great comments in there.”

NOTE: This blog entry is sourced from the company blog for Q4 Web Systems a leading provider of on-demand software for corporate and investor websites. The text above is a direct extract from Q4 Web Systems Blog, an excellent resource for IR best practices.

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Lynton Edwards Securities, (“LES”) a Zimbabwe based stockbroker is using data direct from corporate investor relations websites to service its clients information needs on listed companies in Zimbabwe. This entails directly linking corporate investor relations website data, news and corporate actions from listed company websites to and through their own website.

This model avoids the pitfalls of having to re-process investment data for brokers, who in Zimbabwe, have traditionally struggled with ensuring that the Internet is used to efficiently disseminate data to investors. A review of a few Zimbabwe based broker websites shows out of date and incomplete information and the new LES website is a win-win situation for brokers and the listed companies covered.

In the face of growing Government pressure for indigenisation of Zimbabwean companies, this sort of retail shareholder strategy should be on the agenda for every listed company. Firstly, it makes commercial sense, it makes sense from a governance perspective and lastly, it’s a means of mitigating political risk. Oh, I forgot, it also makes sense for brokers as they are seen to be responsive to their client needs.

I believe that this model is going to grow as a tool for listed companies in Zimbabwe to spread their investment story as widely as possible- think of it – every pension fund – every broker website – leading investors directly to the listed companies in which they invest. No middle men – the investor hears it from the horse’s mouth as they say.

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African listed company executives generally want nothing to do with smaller shareholders. Dealing with smaller shareholders who are ignorant and poor is costly and a “waste of time”. There’s another slant however. An innovative view that should be considered by any listed company given the way the Internet is changing this world. Please see the interesting article below on how to engage your shareholder base in a respectful manner.

These shareholders that are “irrelevant” and a “waste of time”  are human. They have feelings, emotions and can communicate with other humans about the way companies and brands treat them. This communication is enhanced by the new technological era to the extent that this communication can go global in seconds. In short companies cannot categorise shareholders as shareholders, they are people with many interests in the listed company in which they are a shareholder. Call them “stakeholders” people that are:-

• Interested that the company is acting responsibly in the community – this is more important in Africa where the degree of difference in wealth is very high
• Interested in the services and products offered by the company – Africa’s markets are competitive
• Interested in their dividend – African retail shareholders are almost singly focused on their dividends
• Interested in companies paying taxes and employing people – this is related to the first point above

The article below, on how listed companies in the USA use a free Google open forum to solicit questions from shareholders at the AGM is an innovative tool that could be used by listed companies in Africa to communicate with shareholders (stakeholders) responsibly. But there are some key questions on how to structure this interaction effectively. There are three key issues that a listed company executive needs to consider when structuring an initiative like this:-

• Is the forum public or private?
• Are forum participants identified or anonymous?
• Is the forum limited to shareholders or anyone?

Here are the answers to how to structure your online shareholder forum (a summary of what Dominic Jones says below):-

• The forum should be public
• The forum participants should be identified
• The forum should be open to anyone – shareholders are not identified as such, they are identified has humans interested in your company. Unclassified or tainted by perception.

Here are extracts of insight from Dominic Jones, world leader in online IR from the article below:-

“Small shareholders have no incentive to participate in the forum because they will perceive that anything they say will not be taken seriously. This is because everyone is classified by the size of their shareholding. They’re not people, they’re just a holding size. …………. it reflects their worldview where everyone is just an account. Social media, of which shareholder forums are one form, is about people interacting with people.”

How about anonymity?

“ anonymity is not conducive to serious discussion on forums. Usually, people who are anonymous have something to hide and are less accountable for what they say. It would have been much better not to show holding ranges and instead allow users to create a profile and identify themselves, if that is what they wanted. Anyone who chose to be anonymous would not be taken seriously by other participants”

Check out Google moderator here. This is an excellent tool for African listed companies to combat the apathy in dealing with their shareholders. Think out the box, do something different and innovative that will double up as some seriously good PR.

But why should a listed company executive bother with an initiative of this nature?

• Humans are human. They will hold the listed company in high regard – their corporate reputation improves, shareholders products and spread the word.
• Foreign investors will appreciate this – they get to be heard – and get an excellent feel for what’s being said about the company. It is more than likely that they as foreigners have not had interaction with management and this may be a welcome channel to communicate
• Its good corporate governance and will result in some good PR
• The feedback that you receive might actually help corporate strategy

If you are in anyway skeptical about the foundation upon which this article is written then ask yourself why listed companies and corporates worldwide are engaging stakeholders directly with Facebook and Twitter etc.

Here is Dominic’s article below:-

Attributed to Dominic Jones, IR Web Report‘s founder and an online investor relations consultant.

A GROWING number of companies are using the web to give their shareholders opportunities to pose questions to directors and executives at their annual meetings.

Since many shareholders are unable to attend meetings in person, the move by companies to use the web could help to reengage apathetic retail stockholders in the annual meeting process. At many U.S. company meetings last year, less than 5% of retail shareholder accounts participated.

Google Inc. (NASDAQ: GOOG) recently opened a forum for stockholders to submit questions and vote for other shareholders’ submissions. The most popular questions will be put to the board and management at the company’s annual meeting on May 7.

To filter the questions, the Internet giant is using Google Moderator, a free application that it has long used for internal meetings. The White House used the same application for a Town Hall with President Obama last month.

Anyone with a Google account is able to submit and vote on questions for the company’s annual meeting.

One of the least tech savvy companies, Warren Buffett’s Berkshire Hathaway (NYSE: BKR.A, BKR.B), broke with tradition this year to include an Internet component for its May 2 annual meeting. The company asked shareholders to email questions to leading journalists, who will choose which questions to ask at the meeting. A draw will also be held for shareholders in attendance who want to ask questions.

In the UK, Barclays plc (NYSE: BCS) included a form in its online annual report for investors to submit questions to the company. They are alsoinvited to email questions to be asked at the meeting. Similarly, UK-based insurer Aviva plc (LON:AV) provides an online form for shareholders to submit questions for its upcoming meeting.

For several years, International Business Machines Corp. (NYSE: IBM) has invited shareholders to submit annual meeting questions online and thenpublished answers after the meeting. It is doing the same thing for its 2009 meeting on April 28. Exxon Mobil Corp. (NYSE: XOM) has followed a similar process for the past two years, but does not post answers to questions online.

`”Your View” is a main section in Barclays’ online annual report.

As we were first to report, this year Intel Corporation (NASDAQ: INTC) will become the first company to permit live voting at its annual meeting via the web. Shareholders will also be able to ask questions online during the meeting.

Last week, Intel launched a closed shareholder forum, which is built on the Investor Network platform of Broadridge Financial Solutions (NYSE: BR). I suspect Intel’s forum will be a flop because it is not public, because it demeans retail shareholders, and because it’s not clear what investors are signing up for.

Of all the approaches companies are taking, I like Google’s the most. It’s open, transparent and relies on the crowd to determine which are the most important questions. Best of all, any company can use the same approach for free.

Finally, let me just place on record that inviting questions from shareholders who are unable to attend the annual meeting is not new. Australian companies such as BHP Billiton and Commonwealth Bank have long included a printed question card with their meeting materials for shareholders to mail back to the company.

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African Is Cool is pleased to launch the online stakeholder initiative of Zimplow Limited a company listed on the Zimbabwe Stock Exchange. Zimplow Limited, incorporated in 1939, is the largest manufacturer and distributor of farming implements in sub-Saharan Africa and operates through three divisions, namely, Mealie Brand, CT Bolts and Tassburg:-

• Mealie Brand – Incorporated in 1939, this division is the largest manufacturer and distributor of farming implements in sub-Saharan Africa. The factory is based in Bulawayo.
• CT Bolts is a distributor of mild steel bolts and nuts, nails and a wide range of other fasteners. The division also manufactures specialised fasteners at its Bulawayo factory.
• Tassburg is a manufacturer of Wood screws, Veranda Bolts and High tensile bolts. The factory is based in Harare.

The 3 divisions employ about 500 employees. Zimplow’s registered and branded products are marketed to several countries in Africa through a well-established distribution network. Zimplow has a market capitalisation of US$19.62m. The company’s recent share price performance is illustrated below:-

Zimplow’s basic valuation indicators for its financial results for the period ended 31 December 2009 (2010 results are out shortly and figures below should be read in this context) :-

• Market capitalisation: US$19.62m
• Cash and cash equivalents:  US$1.04m
• Interest bearing debt US$ Nil
• Price to book value (times) 2.18

The company’s share quote as at 22 February 2011 follows:-

In announcing the launch on their website, Zimplow’s CEO, Zondi Kumwenda said:-

“We have launched our interactive website to better communicate with our stakeholders through comprehensively populated investor and corporate information. We hope that our website serves as the reference point for any of our stakeholders wishing to interact with us whether it’s selling products to us, investing in our shares or buying our products. We invite you to register online to receive our email alerts and interact with us.”

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The power of the press in influencing your community on issues pertinent to your industry can be negative. And listed companies can feel powerless. Unless they get out their cheque book and pay for content to be published in the hard copy press to counter the negative press or at least correct it.

Actively building an online community of online media enables you to distribute your message at any time as often as you want at no additional cost.

For example when a bank is accused of fraud in the hardcopy press, they may feel obliged to respond in the hardcopy press at a cost. The press then has the luxury of continuing publication of whatever material that they want without having to get out their cheque books. On the other hand the listed company and its cheque book is forever beholden to the hardcopy press. It eventually ends up where there is no communication from the listed company and people are left with their perceptions. Which are typically negative. Everyone thinks the fraud is larger than it actually is.

Having a targeted online community of online stakeholders levels the playing field for you. Being able to send out whatever information you need to respond to the market at any time, as often as you want, for no additional cost is a powerful tool especially where listed companies have a wide base of stakeholders, a politically important profile and a pan African presence.

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