message d’entreprise

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Investors relations

Internal processes for information

production, certification and disclosure
Corporate organisation & ethical
principles
Skema - MSc Finance
 Internal processes
for information production,
certification and disclosure

2
Financial disclosures
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! Information must be delivered on-time

\ Financial reporting flow and consolidation process
\ Auditors due diligence
\ Information and approval from the Supervisory Board
\ Information to employees representatives & Work Council, Unions…

! Information must be structured and commented

\ Analysing information
\ Preparing communication tools: press release, slideshow, reports…
\ Organising information meetings:
conference calls, one-to-one and one-to-many meetings with financial analysts,
investors, journalists… shareholders’ meeting

! Information must be scheduled

\ Every companies communicate at the same periods
\ Disclosure has to be equal for every audience

Skema - Investors relation - Internal organisation 3

International Financial reporting Standards (IFRS)
! GAAP and financial standards shall
reach 2 aims:
\ guarantee that financial statements give
a true and fair view of the situation of the
company in every dimension
! past / present
! assets / liabilities
! profitability / risks
\ allow to value and compare the
company
! time-wise / sector-wise
! produce forecasts / discounted cash flows
! Since 2005, listed companies
must be IFRS compliant
\ initially created for investors purposes
\ and for a convergence with US GAAP
Skema - Investors relation - Internal organisation
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! Financial communication has
become each time more complex
\ IFRS are more complex and increase
volatility on balance sheets and P&L
\ IASB keeps producing new standards,
widely objected to by every category of
users (corporations, analysts, investors…)
\ The US keep delaying a possible
convergence IFRS/ US GAAP
! Some companies now disclose non-
IFRS financial statements, restated to
be understandable
\ Comparison between companies and
sectors is nothing but from easy
\ While accounting and auditing costs
surge
4
Financial calendar
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! For a company ending financial year on December 31st

Disclosure Deadline Form

Q4 & Annual sales February 15th Press release / Conference call

Press release / Information

Annual results April 30th
meetings

Q1 sales May 15th Press release / Conference call

Annual
June 30th Public meeting / Press release
shareholders’ meeting

Q2 & interim sales August 15th Press release / Conference call

Press release / Information

Interim results August 31st
meetings

Q3 & 9-month sales November 15th Press release / Conference call

Skema - Investors relation - Internal organisation 5

 Accounting and finance organisation
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! Accounting teams in each subsidiary ! External auditors control and certify

prepare the financial package in line accounting results and every
with the accounting principles information provided to the market
approved by the Board
! The Supervisory board approves
! Consolidation teams ensure global financial statements and draft
coherence, make adjustments and communication tools, backed by the
produce consolidated accounts Audit Committee

! CFO and IRO analyse the results ! CEO, CFO and IRO will then disclose the
and define the “official” message information

Production Control Structure Disclosure

Full, timely & reliable Fair, Accurate & comparable Understandable & compliant Equal & Simultaneous

financial information process

Skema - Investors relation - Internal organisation 6

Accounting and consolidation
! Accounting teams are in charge of
legal and analytic reporting
\ for each subsidiary
\ in accordance with group consolidation
and accounting rules
\ and IFR Standards
! Reporting deadlines are increasingly
short, while reported information
tends to become more complex and
detailed
! Local accounting teams deal with
auditors’ correspondents
Skema - Investors relation - Internal organisation
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! Consolidation team is in charge of
producing group financial information
\ Sales intercos
\ Goodwill valuations and depreciation
\ Deferred tax assets & liabilities
\ Impairment tests…
! High-expertise in IFRS is required
! As well as the capacity to discuss and
negotiate with external auditors
! And a good understanding of market
reactions to accounting decisions
and disclosures
7
Internal audit
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! Internal audit teams assess that information is consistent and

that operational teams are compliant with procedures
\ Accounting methods for sales, inventories...
\ Cash payment, provisioning methods for customers & inventories
! Companies are
\ Security of assets of the company
\ repartition and delegation of responsibility required to report

! Their aim is to identify and address every potential risks on the quality of
\ Risk of fraud
their internal control
\ Risks of uncontrolled cash & payment policy
\ Industrial risks, people protection, environmental respect procedures
\ Risk concerning credibility and corporate image
\ Financial risks: credit, exchange rate, cash…

Skema - Investors relation - Internal organisation 8

External audit
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! Auditors certify that financial statements are true and fair, based on:
\ Random controls of the different accounting processes for the company and its subsidiaries
\ Meetings with the accounting teams and company management, on any technical or
strategical aspect
\ And they engage their responsibility

! An widening scope of information is to be submitted to Auditors’ certification

\ Content and consistency of the “Reference Document”
\ Report of the Board on corporate governance and internal control
\ Financial forecasts
\ Information concerning Sustainable development
\ Operations concerning securities and the shareholders’ rights

! External audit is a crucial component of trust

\ cf. Enron / Arthur Andersen case

Skema - Investors relation - Internal organisation 9

Supervisory Board
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! The Board is responsible for ! The Board is also responsible for

supervising, monitoring and overseeing the execution and
evaluating the management of the fulfilment of strategy and
Corporation in the best interest of fundamental goals
the shareholders \ strategic plan and options
\ approval of the budgets
! The Board is to approve financial
statements before disclosure \ Merger & acquisitions
\ Executive compensation program,
\ Members of the Board hold civil an
including the variable portion
criminal liability toward shareholders
based on earnings targets
\ Increasing commitment from board and individual performance
members changes the process,
as they need time to achieve their task
\ The Board creates a dedicated team in
order to achieve specific controls on
financial statements: the audit
committee

Skema - Investors relation - Internal organisation 10

Audit committee
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! The Audit committee is an extension of the Board

\ Initially a Best practise, they tend to become a legal requirement (cf. European Statutory
Audit Directive)
\ Committee’s composition is not regulated.
Best practise :
! a majority of independent members;
! members with a relevant expertise in accounting and finance;
! executive members excluded
\ The Audit Committee can use any means to understand accounting options,
and evaluate if risks are correctly anticipated and addressed

! The Board bears the ultimate responsibility for approving financial statements
\ It is the legal institution liable toward shareholders

Skema - Investors relation - Internal organisation 11

Chief Financial Officer: a key position
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! Financial communication is under the responsibility of CFO

\ According to specific studies among Europe, CFO estimate that financial communication
takes at least 50% of their working time
\ Experience of listed companies and financial communication requirements is a highly-sought
expertise
\ More and more listed companies tend to recruit a person responsible for and dedicated to
financial communication: the IR Officer, attached to the CFO

! Financial communication has to co-ordinate with other functions in the

company
\ Operational functions to collect information
\ HR for internal communication and legal requisite
\ Communication, in order to ensure that the company delivers a consistent message,
even to different targets

Skema - Investors relation - Internal organisation 12

Chief Executive Officer : fully committed
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! CEO is legally responsible for the information disclosed to the market

\ Civil Liability
\ Criminal Liability

! CEO is strongly committed in financial communication, considering:

\ required time and commitment
\ legal responsibility
\ company ‘s credibility: the CEO embodies the company, its vision and values

Skema - Investors relation - Internal organisation 13

Investors Relation Officer: a matter of influence
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! A very delicate position ! No operational power but a strong

\ in the US, generally a senior VP, influence
\ in France, it is not so often
! No specific profile but a financial
\ he is one of the official speakers for the background is required
company
\ financial analysts
! Always involved in major decisions \ controller

! Need to have a strong knowledge ! Communication skills is a must

of every aspect of company life

! Brings market perception and

expectations back to the top
management

Skema - Investors relation - Internal organisation 14

Strategic risks related to financial communication
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! Risks related to the share price

\ Sharp change in share price, due to an inappropriate anticipation of a specific disclosure
\ Under valuation due to a inefficient or insufficient communication
\ High volatility in share price due to a lack of liquidity

! Risks for the company

\ Difficulties in finding a financing due to a low share price
or a lack of interest from investors
\ Risk to loose the control of the company (public offer)
\ Risk to face tension inside (staff) or outside (business partners) the company

! Risks for the management

\ criminal risk in the case they disclose unfair and untrue information, they try to manipulate the
share price, or are involved in insider process
\ Risk to be dismissed if shareholders consider the company to be under valued
\ Risk for their personal wealth

Skema - Investors relation - Internal organisation 15

 pour convaincre vos partenaires

! Interview Emma Mercier

Skema - Investors relation - Internal organisation 16

Corporate organisation
& ethical principles

17
 Common organisation of an IR Team
in a medium-to-large cap pour convaincre vos partenaires

CFO

Head of IR

Team schedule Reporting : market evolution, Contact with the

analysts feed-backs financial market :
Data Base
Analysts & investors
Annual report
Logistics
Q&A
Shareholder analysis
Dissemination of
the press releases Individuals shareholders
Financial web site
SRI

1 Assistant 2/6 persons 2/4 persons

Skema - Investors relation - Internal organisation 18

Who does IR ?
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! A dedicated team or not : depending on the size of the company

\ with the support of one/several IR consulting agency (ies)

! With a key position within the organisation

\ Direct report to the CFO
\ Close to the CEO & Executive Committee

! Financial background required

\ either from corporate finance: accounting & auditing, management control, cash
management…
\ or from financial markets: financial analysts, corporate access…

Skema - Investors relation - Internal organisation 19

Main tasks
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! Financial Communication
\ Designing and editing financial documents : press release, annual report, financial web site
\ Managing the dissemination of the financial communication

! Investor Relations
\ Main contact for Investors and analysts
\ Organisation and attendance to analysts meeting, road-show, conference
\ Individuals shareholders : letters, meetings, club …
\ Organisation of the AGM

! Others
\ Preparation of Board Meeting
\ Communication on Sustainable Investment issues
\ ...

Skema - Investors relation - Internal organisation 20

Aims and objectives : external
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! KEEP INFORM the financial market ! BUILD a professional relationship

on a regular basis on financial
accounts, outlooks and strategic
issues
! ADAPT the communication to the
different stakeholders needs while
still delivering the same message
and information
based on confidence and credibility
with the stakeholders
! A good UNDERSTANDING of the
competitive environment
! On going MANAGEMENT of the
« consensus »

! ANTICIPATE and manage the

expectations and the fears of the
financial market

! IMPROVE the company brand

image without overselling the stock

Skema - Investors relation - Internal organisation 21

Aims and objectives : in-house
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! HAVE ACCESS to the information ! REPORT to the Board Members on

in-house that could have an impact market expectations
on the share price

! CO-ORDINATE the corporate

communication with the other
departments of the company

! REPORT to the Top Management on

market, sector and company
perception from analysts and
investors = advisory role

Skema - Investors relation - Internal organisation 22

Main principles
! Integrity
\ Honest and ethical conduct, including
the ethical handling of actual or
apparent conflicts of interest between
personal and professional relationships;
\ Full, Fair, Accurate, Timely and
Understandable Disclosures
\ Consistency and comparability of the
released information
Skema - Investors relation - Internal organisation
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! Equality
\ Equal access to information for all
categories of audience
\ Simultaneous disclosure of any
information that may impact the
valuation
! Responsibility
\ Compliance with Laws and Regulations
\ Accurate risk management and
procedures of control
23
Code of ethics
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! ITW (electronic components)

http://investor.itw.com/phoenix.zhtml?c=71064&p=irol-govconduct

! AT&T (telecoms)
http://www.att.com/gen/investor-relations?pid=5595

! CBS (media)
http://investors.cbscorporation.com/phoenix.zhtml?c=99462&p=irol-
govConduct

! CLIFF (French Investor Relations Association)

http://www.cliff.asso.fr/Code%20de%20deontologie.asp

Skema - Investors relation - Internal organisation 24

Main issues
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! Conflict of interest

! Insider information

! Fair disclosure / spread of false or misleading information

! Price manipulation

Skema - Investors relation - Internal organisation 25