Customs Street Advisors is a full service investor relations firm based in Lagos, Nigeria.

Do you speak my language: Why shareholders are tone deaf to your company’s message

This week in Street Talking, the Friday column I write in NEXT, I discuss the message content and channels companies on the Nigerian Stock Exchange adopt to reach out to the investment community. In the article, I use Cadbury Nigeria's rights issue as a generic type to illustrate the case.

It never ceases to amaze me how companies on the Nigerian Stock Exchange, which have no qualms spending significant management time and tens of millions of naira on developing customer-targeted messages, marketing collateral and brand campaigns, have a hard time committing a fraction of that amount to investor communications.

Actually, that is incorrect. Let me rephrase that. Most public companies in Nigeria have a hard time seeing the sense in engaging the investment community beyond regulator mandated shareholder communications.

Cadbury offer

The ongoing Cadbury Nigeria rights offer provides a good example. I will illustrate this at two levels: strategic and tactical. In the strategic sense, I will discuss the content of Cadbury’s message, and at the tactical level, I will cover the channels of that message.

Cadbury, the confectionery company, which owns iconic brands like Bournvita, Tom Tom, Buttermint, Trebor, opened its rights offer two weeks ago. According to the company, it plans to raise N22 billion to pay off its crunching debt load and invest in the “improvement of capacity supporting infrastructure, efficiency initiatives and upgrade of utilities”.

Emphasis on debts

The emphasis in Cadbury’s rights offering message has been on debt repayments and operational improvements. No doubt, servicing the company’s debts, which are in excess of N15 billion, has placed a heavy burden on the company’s cash flows. Likewise, for a business in which fractional advantages in operations and distribution can, and do have an important impact on the bottom line, investments in infrastructure are well worth the capital commitment.

However, Cadbury’s stress on the utility of the proceeds, while ignoring the equally vital need to elucidate the shareholder value case has created a gap between the company’s view of its prospects and investment community perceptions. Put differently, Cadbury’s message has focused on the “how”, that is, “how the cash raised would be spent”, while investors want to hear more about the “why”, that is, “why the outlook for Cadbury’s products are positive and better than ever”. In a nutshell, Cadbury could have done better at communicating the exciting opportunities for its brands and segments.

It is, therefore, no surprise that the mood among Cadbury’s retail shareholders has been less than enthusiastic. Timothy Adesiyan, president of the Nigerian Shareholders’ Solidarity Association, was quoted in one of the national dailies as saying: “The opinion of many people is that since they want to use the proceed to settle their indebtedness, they are not willing to take up their rights, but I do not share that view.”

Clearly, Cadbury overlooked key aspects in its message to shareholders. Notably, the perception gap is often just that: a perception. Although, Cadbury’s board may be well aware of the immense opportunities that the company can seize, the failure to convey same creates a non-negligible gulf, not just with regard to the take up of the rights issue, but on the valuation of the company. Ultimately, this has critical implications for the company’s cost of capital and its competitiveness vis a vis its peers like Nestlé in the contest for capital.

No information on the offer

Yet, beyond the quality of content of the message Cadbury gave its shareholders, the channels it is using to deliver the message leaves much to be desired. As investors increasingly move their research on companies to the web, it is disappointing that Cadbury Nigeria does not have a website. The domain name, CadburyNigeria.com, which is registered to the company, returns a 403 Forbidden error message. The absence of a company website severely limits the company’s ability to communicate with the investment community, especially the large Nigerians-in-the-diaspora community, which has in recent years become a significant tap of capital. For instance, many investors who would like to download a soft copy of the prospectus would typically enter the Google query “Cadbury Nigeria rights issue prospectus” or a similar search string like “Cadbury Nigeria annual report archives”. Unfortunately, no positive results are returned. Worse still, the website of StanbicIBTC Stockbrokers offers no consolation. Neither the Market Information panel nor Downloads dropdown at www.stanbicibtcstockbrokers.com has any information on the Cadbury offer. The lack of a Search box on the site does not help matters either.

Gone are the days when it was enough for a company with household names in its brand portfolio to treat shareholders like extras in a film shoot. In the new dispensation, it is a buyers’ market and that’s unlikely to change soon.

So, next time management is preparing to go on a retreat to brainstorm on brand re-positioning or meeting with marketing consultants on product positioning, they should spare some thoughts to investing the time to develop an attractive equity story. Unless, of course, they plan to distribute hearing aids at the next shareholder general meeting. The choice is theirs.

The original article may be read here on the NEXT site.

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