The Investor Relations (IRs) circle in Nigeria is evolving due to the rising levels of investors’ expectation and sensitivity in the capital market. This has, therefore, increased the need for Investor Relations Officer in companies. To discuss the conflicting roles of IRs and how companies can utilise such role for growth, Nairametrics spoke with the Head of Investors’ Relations and Chief Executive Officer of Arrhenn Limited, Abayomi Ogunjobi.
Tell us about Arrhenn Limited.
It is an investing company in Prosperis Holdings Limited. Prosperis Holdings is a principal investment company. We invest in smaller companies, look at the value of the company, and then place investment in them.
We have a number of clients whom we handle their stakeholder management, so what we do is we come in as their investor relations consultant and advisor. So we actually handle their investor conferences, stakeholder management, and strategic communication. Basically, we are more like the link between the company and the investors.
How does this differentiate Arrhenn from companies’ communications departments?
For Arrhenn, we are more strategically focused on handling stakeholder engagement. And the stakeholders include investors, financial media, and the Analyst; the buy side and the sell-side analysts. So for us, we are more concerned about the communication of the financial outlook of the organization – how the company performs financially and the strategic outlook of the company going into the future.
Investor Relations have in recent times been a grey area in Nigeria, and that’s because investors are becoming more and more sensitive. So the communications department, they have the role they play. But for Arrhenn, we are more strategically focused to ensure we man that line between investors and the organization.
We ensure they have quarterly presentations, Earnings call, for most of the companies, that’s not the culture despite the fact that they are listed, (although) it’s not a regulatory requirement that every listed company should have a quarterly conference call, but as your IR person, we tell you this is very important.
However, some companies are skeptical about the information they put out there because, once you put information out there, the competitors get it. So, we also advise on the timing of when to put out the information, we get the documentation and also look through it to ensure sensitive information is not out there that shouldn’t be.
What led to the creation of an Investor Relations Officer; is it due to investors relationship with their companies or lack of expertise?
I will say it’s a combination of both. And the reason is that with the level of globalization, organizations are beginning to think like the developed countries; trying to do things like the way they do. Also, investors are becoming more and more sensitive with respect to information and requirement.
They (investors) require that there’s adequate communication to them on what’s happening and how the financial outlook of the organization is. So, for us basically there are also organizations that do have their financial investor relations department and that’s because they see the value that having a good IR will give to them.
Statistics have shown that organizations that have IR personnel or officer, actually grow 30%. That’s because, with IR, investors are able to see the value of in company. What we do is show the value in the company, give the investors a strategic outlook of how the company is currently doing and how it will do going into the future.
For us, we have relationships with the buy and sell side of the analysts. These analysts are those who write about the company, just like you guys also do; you guys are the financial media. If you don’t have the right information about how a particular company is performing, you will not be able to write about them. So for the sell-side analysts, they have a client they have to write a research report on, so we have that relationship with them to provide them the necessary information. As I said, we are more like the link between the company and those analysts.
We are able to let the company know this is what the analysts what to see from the financial and strategic point of view. That ensures that there’s that effective stakeholder management.
When was your company founded and how has the journey been so far?
Prosperis started about two years ago, and the investors’ relations arm (Arrhenn) started as a department under Prosperis. As time went by, we saw the need to have a standalone company for Arrhenn.
Although a key number of our (Arrhenn) clients are currently under Prosperis, we still going to advise them that this is the new name. So we decided to have a new standalone company, Arrhenn, which will focus on Investor Relations. This is because we are seeing that for Investor Relations, you must not have divided attention; you will not be able to focus and get information from the company. We more or less work with these companies like their staff.
The journey has been intense, interesting and also challenging. The reason is because we are trying to enlighten organizations on the need to have that strong Investor Relations outlook. So we are trying to educate them on Investor Relations, which means we would have to explain to them why they need Investor Relations.
Also, part of the challenges we’ve been having is that most companies do have an IR department. It’s either in the form of one person being the IR officer that reports to the CFO or the same person being the Head of Strategy; reporting to the CFO or the Communications Director.
However, the challenge we are facing is, most of them think we coming in as a consultant, we are coming to take their role. So, we are trying to educate them and make them understand that we are working in synergy to take the organization to where it should be. So we doing a lot to try to make them understand that we not trying to take their job. We are only trying to bring in our experience. Combined, we have about 30-years’ experience in investors relations. Our Chairman used to be the Director of Relations with UBA. So, we have that vast experience in Investor relations and bring our relationship with Analysts and the way we think is actually different with respect to portraying the way the company looks.
Won’t your partnership with these companies increase their expenses at a time companies are trying to cut down costs?
What we do is try to let the organization understand the value we are going to provide. Because in the IR framework, once there’s effective communication of what you currently doing and what you intend to do, it tends to bring about an improved valuation for you. So once an organization knows it brings an improved valuation for them, they are able to get access to capital, because once investors see what you potentially want to do, they will definitely want to invest with you. So, overall, having us will bring that increased value for the company.
And once we are able to show to them, our value proposition in terms of making sure that communication-wise to stakeholders is effective, and help you draw your strategic outlook in a very effective way, also matching the relationship we have with Analysts and the experience we have, this will tend to bring about a good valuation for the company which will definitely drive their profit and give them access to liquidity.
This is a good development. If there’s communication flow between investors and organizations, there’ll be tremendous turnover and economy will be cushioned.
Weldone Arrhenn team.
In as much as pursing a cost reduction strategy is a short cut for preservation of wealth for the shareholders, Value added services such as Investor Relations actually ensures shareholders value accretion.
The Investor Relations initiative by the Prosperis group is a right step in keeping with international best practices. Prosperis indeed is a forward thinking firm!