Summary from our IR Webinar - Moving forward: Life after the crisis

As we think ahead to life after the COVID-19 crisis, our webinar today looked at two areas of IR which will form part of the future of many Society members. Firstly, how public companies will draw on the capital markets to bolster their balance sheets through recapitalisation, and secondly, how ESG issues will affect the relationship between companies and their stakeholders. We were delighted by be joined by an economist and leading industry practitioners from corporate finance and ESG, who provided us with pointers and insights into how the future landscape may look.

A replay of this webinar will be available to members shortly. 

  • The economic shock from the crisis is unprecedented and economies will take time to rebound. UK consensus growth forecasts for this year range from -6 to -12% 
  • Online household spending is currently growing in the mid-teens and is likely to remain the main growth driver going forward
  • The crisis has highlighted the importance of companies having the correct technology in place for home working. The transition has been much easier for those companies and employees that were already well prepared
  • Many companies have had to withdraw financial guidance and provide more regular market updates. 
  • Investors and sell-side analysts have largely been supportive, although it is likely that markets will become increasingly critical of companies and how they emerge from the crisis as time goes on
  • Being on the front foot in engaging with investors is important. More incoming requests have been received directly from the buy-side
  • The virtual meeting environment may geographically broaden a company’s potential investor base  
  • In the session ‘preparing your balance sheet for life after the crisis’ our guests discussed in detail the financing options open to companies and the process for equity fundraisings both in more ‘normal’ times and during the crisis 
  • Companies with revenue or balance sheet constraints, or a combination of both, have become a real focus. Retailers are one example 
  • There are three key sources of financial help: 1) bank lending - and we have seen a heavy draw down of credit facilities; 2) Government funding; and 3) equity fundraising 
  • From the start of February to 18th May, EUR 25bn of equity was raised across Europe
  • There is likely to be more equity fundraisers in the next year or so, once markets stabilise, to repay the debt financing relied upon during the crisis
  • The removal of pre-emption rights creates strong feelings among investors as existing holders, particularly small/retail investors, often feel they should be given first refusal 
  • During the COVID-19 crisis the usual thresholds for pre-emptive rights has been relaxed and issuers are now allowed to raise up to 20% of share capital without first offering shares to existing holders
  • Currently, if the fundraising is below 20% of market capitalisation it can be done rapidly and without offering to all existing shareholders. Raising more than 20% requires a more detailed process and prospectus 

ESG considerations post-crisis

  • There is strong appetite for convergence towards one global set of standards for ESG reporting; currently there are too many ratings agencies and frameworks 
  • However, we should avoid this becoming a very prescriptive set of standards which tries to cater to all audiences as this may result in excessive box-ticking and fail to serve its true purpose 
  • The CEO/CFO should be able to articulate the monetary impact of ESG on their business and in the creation of long-term value, and IR teams should play an important role in these communications
  • As one example, National Grid have published an ESG data book, providing investors with the core set of ESG data it considers to be important 
  • More companies are quantifying the monetary impact of ESG alongside the narrative. Currently around 100 companies globally are doing this  
  • Momentum around climate change has rapidly shifted to a focus on human and social capital and the supply chain as a result of the crisis
  • BlackRock’s recent research showed that ESG investments have been outperforming
  • Raising new debt should be linked to a green agenda  
  • Companies could consider holding retail investor meetings to give those smaller holders the opportunity to engage with management in a way they may not have been able to at the AGM due to the crisis

Results from our live webinar polls: 

  • Over the next year approximately 80% of respondents expect the crisis to have a negative impact on their company. 
  • Conversely, over the next three years, 25% of participants expected the crisis to have a negative impact, 50% were neutral and 20% expected it to have a positive impact
  • 55% of respondents said there had been an increase in discussions around liquidity and capital needs and a further 39% reporting a material increase 
  • 86% of respondents expect ESG to become more important as we emerge from the current crisis

 

We would like to thank Richard Davies, Managing Director, RD:IR, for moderating this event and our guest speakers: 

Fabrice Montagné, Chief UK and Senior European Economist, Barclays
Rory Elliott, Director, Investor Relations, Ascential
Andrew Tusa, Managing Director, Corporate Broking, Barclays
Julian Macedo, Managing Director, The Deal Team
Neil Stewart, Director of Corporate Outreach, SASB
Barend van Bergen, Partner at EY (leading the UK Sustainable Business Team) 
Rakesh Patel, Director of Investor Relations, IHG

Published 28 May, 2020

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