Recently, I received an e-mail from a public company in which I have a few shares. The company had sent the mail to invite me to a Conference Call for analysts and investors to discuss its 2012 results. I thought this was a peculiar development. For the avoidance of doubts, in my practice of Investor Relations I have heard a handful of Nigerian companies say they made, or were in the process of making, conference calls to present their financial statements. However, I believe these to be fashion statements rather than acts aimed at communicating better with the investment community.
In the mature markets, public companies use conference (earnings) calls to report and illuminate their financial statements. It is considered a basic Investor Relations function and is a proven corporate financial communication activity. Its successful deployment over the years has at once elevated the practice and attracted regulatory attention with a view to forestalling possible abuses through insider dealing. Thus, one service provider remarked that “these days earnings calls aren’t just high-stake communication; they are high-profile events.”
But, sadly, everything about this practice in the Nigerian environment appears contrived. For one, the public companies do not reckon with the investing public as a significant stakeholder group; the much they have tried to do in communicating with the investing public have been largely in response to regulatory pressure than anything else; which is why the incidence of suspending companies at The Nigerian Stock Exchange for non-rendition of financial statements has remained a recurring decimal. In a February 2013 review of the X-Compliance Report of The Nigerian Stock Exchange, Proshare, an online financial information provider, informed that there were “32 delinquent filers of accounts…” on The Stock Exchange as at the review period. These are companies that have issued securities to the general public and are answerable to their shareholders as provided for by the rules of The Stock Exchange and the Securities and Exchange Commission, among other provisions in the relevant laws of the land!
Nigerian public companies have not really adopted the professional practice of Investor Relations in their corporate scheme of things and are failing in the very important areas of Investor Relations. Investor Relations has been defined as a professional practice that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a public company and its investors, financial analysts and the regulatory authorities.
In their Investor Relations, it is easy to see that the few that profess to be into the practice only intend to be like the Jones, which is why very often they limit participation in their conference calls to foreign audience (investors and analysts) and the more fashionable local institutional investors/fund managers and analysts, for instance.
Of course, it could be argued that the foreign investors are the more significant investor group in the Nigerian stock market today, going by statistics from The Nigerian Stock Exchange which states that in 2012 foreign portfolio investors accounted for 61% of trading on The Exchange. But that is as far as the argument goes. The truth is that public companies should not be seen as discriminating in their communication to investors; shutting out one group and opening up to another.
One did not take up the invitation to participate in the conference call because the issue of Nigerian public companies organizing conference calls begs the question of what they have done in other important, but less sophisticated, areas of Investor Relations. Today, as with yesterday, shareholders rarely receive Notice of Annual General Meetings (AGMs) and Extra-Ordinary General Meetings (EGMs). How many shareholders received notice of the EGMs that ratified the recapitalization arrangements for the “rescued banks”? As a shareholder in Union Bank and the defunct Intercontinental Bank I never received any notice. If I did not read newspapers I would not have known these meetings took place, just as I have just learnt from newspaper reports that Zenith Bank Plc, Guaranty Trust Bank, and Access Bank have held their AGMs to consider the reports of their 2012 operations. Not a few shareholders are in my shoes; a lot more do not read the newspapers and therefore have no inkling of what is happening in their companies. Yet, the news in the media is always that “shareholders have approved …” Which shareholders? It would be interesting to see the statistics of shareholder turnout at these AGMs and EGMs.
I looked at the website of the company that invited me to participate in their conference call and came out peeved by what I considered a misplaced priority, as the website resoundingly lacked salient Investor Relations information on the company. But the poor state of the website, relative to Investor Relations demands, was not surprising to me. According to a South African Investor Relations firm that follows the practice of Investor Relations across the continent, many public companies in Nigeria are failing in the most basic areas of IR practice; these companies have not leveraged the possibilities of the Internet to occupy more public space and thereby get closer to their shareholders and the larger investment community. Few have functional websites. Where websites exist, they have no dedicated IR section. In the report of their 2010 research, the South African firm listed Nigerian companies last in Africa in their use of Internet to communicate online with the investment community. And yet here we are organizing conference calls …
- The author, Mr. Okafor, works for Alexander-Davids Limited, a boutique Investor Relations advisory firm