Keep giving guidance to your investors in uncertain times

by José Tijssen

Board member & Strategy Director
April 2, 2020
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Next week the quarterly reporting season will start. Never before has the publication of quarterly results taken place in such unprecedented uncertain times. And more than ever, investors are looking for information and guidance on the performance of their investments in any possible form, quantitative or qualitative.

Ahead of the Q1 results publications we see companies communicating different measures, withdrawing dividend, introducing cost measures and abandoning earlier guidance or postponing their outlook for the full year 2020. Understandable, giving guidance in unpredictable markets as we see today is sheerly impossible. In recent weeks  board rooms have been in a fire fighting mode, with a focus on managing the balance sheet to generate and preserve as much liquidity as possible. Communicating again on market developments will heavily depend on the length and depth of this downturn, and the end of it is not in sight as only yesterday measures have been extended to the 28th of April.

Giving guidance by shortening your outlook
First of all and foremost, provide your investors with insight in how the company is assessing the risks identified, and give guidance within this context. As said, the uncertainties with respect to the impact of the crisis in the coming months makes it impossible to give guidance on a full year outlook.

Understanding investors’ need for guidance is a given. It is however a challenge on how to respond  by fulfilling this need as much as possible without being capable of giving forecasts and quantitative targets based on ongoing business.

One way of guiding your investors through this storm is by shortening your full year outlook and by restricting  the guidance to cover the next quarter only. In doing so make use of bandwidths that are reflecting the uncertainties that your company and your sector are facing.

Communicate clearly and continuously on the actions and measures you have taken and are taking to prepare the organization for facing that still uncertain future. You can reflect on managing your balance sheet, cost measures and other actions In doing so you can keep the dialogue with your investors going. However, don’t be tempted into giving too much guidance to analysts and investors who seek certainty –as this could be perceived as a certainty, which can simply not be provided at this point in time.

From action to recovery
Uncertainty is the only certainty at this time. Government measures and timing are a great unknown. In the next weeks more visibility on impact, timing and measures taken will be developed on a daily basis, moving from action to recovery. ‘Recovery’ in this sense doesn’t mean going back to normal,  but recovery while facing a drastically changed economic environment that asks for adjusted and redefined debt and equity stories. However, right now the most important action is to keep your investors close by giving them clear insights of the steps and measures taken in these uncertain times, and the rationale and assessment that lays behind it and focus on short term guidance.

José Tijssen

Board member & Strategy Director
Amsterdam
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