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Interview with Matt Johnson, Group Head of Investor Relations at Vodafone

Vodafone seem to be very much ahead of the curve in terms of transitioning to predominantly digital investor engagement. This must have been a huge advantage when the pandemic hit?

The future of investor relations will be ‘digital first.’ The old way of doing things is gone because our audience has fundamentally shifted. Today, it is much more globalised and the initial touch point is often someone still in their twenties. They’ve grown up with technology in a completely different way and they want to interact with us in a different way. But many of us are still managing our industry as we were 15 years ago. So I think we need to take a very different approach in the future.

Even pre-covid, we were planning to do pre-recorded results presentations, video Q&A sessions, digital roadshows, etc. It’s not always the best use of time for a CEO to travel the world to see different shareholders, so we have committed to significantly limiting time allocated to traditional roadshows – they will be done predominantly virtually for evermore. We will happily host people if they want to travel to see us, but we are definitely not reverting back to the traditional model.

Digital capital markets days are brilliant because it’s all pre-recorded and every user is treated equally with the same level of information in the same format. I can’t think of any area where we’ve struggled to do our jobs as a result of these changes. If anything, our team has significantly increased its productivity and been able to do a better job because we have taken a digital first approach.

How is the growing significance of ESG affecting your day-to-day work?

The massive shift we’ve seen recently is consumer demand putting pressure on the fund management industry to prove that it’s doing the right thing. In turn, that places a significant burden on investor relations, because the ESG we used to talk about – and the traditional IR skill-set to deal with it – is no longer fit for purpose.

The primary audience for ESG in the past was regulatory bodies and consumers, so it was warm, narrative story telling. But you communicate to an investor base through hard fact-based reporting. So now we have a much more all-encompassing view of our role as a company in broader society and we are communicating on ESG in a very different way. ESG is absolutely central to everything we do in the investor relations function. 

What changes have you observed in your sell-side interaction post MiFID II?

The starting point is that the profit core of the sell-side industry has shrunk. Analysts are stretched because they’re having to cover more companies and, inevitably, the quality of the research suffers.

In addition, the corporate access function used to be an important sell-side role. But since the separation, corporates have reacted by having bigger teams – we’ve now had a dedicated corporate access person in our team for 2 years. That is mirrored on the fund management side, they now have dedicated corporate access people too. So nowadays 90% of our interactions are booked directly between us and the fund managers, rather than through the sell-side, and the feedback we get from the sell-side is greatly reduced. The roles have fundamentally shifted. 

What issues have you found with the traditional feedback routes and mechanisms?

The old-school system of feedback from brokers is largely based on anecdotes from a small sample size. Sometimes it’s like a long game of Chinese whispers where an investor has a relationship with their immediate trader, who passes the feedback to the sell-side analyst, who passes it to the corporate broker, who passes it on to the company. It loses all context and you don’t understand the strength of opinion, because the broker has never actually spoken to that investor. So the feedback is perhaps interesting, but rarely actionable.

Then there are the traditional investor perception reports where an intermediary interviews ten different shareholders at length. That’s interesting too, but again it doesn’t really give you strength of opinion. How do you match up one person’s view against another’s? And how do you make it actionable?

Coming from a corporate strategy background, I’d seen how the market research discipline had evolved, and I thought, ‘Surely there has to be a better way to quantify how investors think about us?’ And then Charlie knocked on my door one day and I thought, ‘This is exactly what I’m after.’ 

Why do you continue to use QuantiFire, as you have through your various IR roles?

I first met Charlie in 2014 and I’ve used QuantiFire ever since. First while I was at Travis Perkins, then at Whitbread and, when I moved to Vodafone in February 2020, I signed Charlie up to help again.  

There are several key things I like about the QuantiFire approach to Perception Studies. The first is, it is unemotional and takes out an intermediary’s opinion or own perception. There is no sanitising, no interpretation, no filtering the message. I like that because it is completely honest, completely independent, and applies market research disciplines to quantify qualitative discussion points. This means I can do something with that information; I can match up one person’s opinion against another’s, which I can’t necessarily do from text.

The second thing is that I can reach a much broader universe. Having ten opinions is interesting, but 100 is much more representative, and I can start to see the views of different constituents within the market. I can see specifically whether they are American holders, or UK non-holders, etc. I can say, ‘This person has chosen to invest in Vodafone because of these things, and these people are choosing not to invest because of these things.’ And then I can use that knowledge to start to change the way we communicate.

The third thing that I really like – and the reason I’ve been a repeat customer – is that I can measure change over time. When you have consistent scoring methodologies, you can say, ‘This is what it was last time, this is what it is this time, and this is what has changed in between.’ This is absolutely invaluable for two reasons. One is that it makes me do a better job. The second thing is that it helps me guide our Board on the expectations of the capital markets with a significantly higher degree of confidence.

How did the first QuantiFire Perception Study land with Vodafone’s management team?

I’d only been at Vodafone six or seven months at that point. I was trying to make the case for the things I felt we needed to do differently, but it was only based on my perception or my experience. But once I had a 100-page detailed report representing the views of over 120 people, I had the hard evidence to say, ‘This is what I have been telling you, this is now proven from these different constituent parts of the market, here is the backup.’ And the Board said, ‘Great, we’ve never seen anything like this. Go ahead.’

I also had a series of demonstrable actions. I could say, ‘This thing isn’t landing well, so I am going to change it, and I will come back to you in a few months and tell you whether it has worked or not.’ Six months after the first Perceptions Study we did a mini update. Once I had that, I could prove via a series of measures, ‘This was a problem, here are the actions we took, and here is the output from them.’ And that is invaluable for building credibility with the management team. It forms the basis of an ongoing discussion to show we are doing a good job, hopefully.

The net confidence score (NCS) is particularly interesting because it makes it a bit more digestible, particularly for Board members who aren’t all equally knowledgeable about capital markets. What do you think about strategy? What do you think about management team? What do you think about execution? The answers to those questions are summed up in one helpful NCS measure. Companies are used to seeing net promoter score (NPS) measures, and they understand how those work, so an investor equivalent has been quite powerful. 

Do you have any sense of how the investors who participate feel about the QuantiFire process?

It may be the first time we have ever asked some shareholders for direct feedback. If you only take the traditional qualitative approach, you are only going to approach your top 20 shareholders. But shareholder number 30, who has never once been asked for independent feedback, thinks it is great that Vodafone is reaching out like this. It shows that you actually care what they think and the dialogue has started to change because, as soon as you start asking for their feedback, you open an honest discussion. You are on the same side, rather than on the defensive, and that effect has been powerful. 

Finally, what advice would you give to a new client considering working at QuantiFire?

I always say that this is the single most invaluable thing I have in the IR tool set. And for a relatively small amount – the cost of an extra person in the team. The value you get out of it, in terms of understanding what your shareholders think and, more importantly, communicating that in a credible way internally so you can improve the things that you do, it is absolutely invaluable.

SEE EXAMPLE PERCEPTION STUDY