Listed firms save millions in electronic investor relations

Public companies are promising shareholders greater value from money saved in the ongoing shift to electronic communication.

The firms that have taken to sending shareholders electronic copies of financial statements via e-mail and using mobile money transfers to pay dividends are saving millions of shillings in investor relations budgets which they say is being ploughed back into the businesses to grow profits.

Safaricom, Kenya’s top mobile operator with the highest number of shareholders, blazed the trail last year when it held a no-frills annual general meeting in Nairobi and used its popular mobile money transfer platform M-Pesa to pay dividends.

The shift has been made possible by a 2007 repeal of the laws governing investor relations following the roll-out of Kenya’s biggest initial public offering (IPO) - Safaricom.

A number of large listed companies at the Nairobi Stock Exchange have been moving to the electronic communication platform following in the footstep of Safaricom that has twice used its wide M-Pesa network to pay dividends and published its financial report on the internet.

KenGen, Mumias Sugar and Scangroup are among the listed firms that have amended their articles of association and gone electronic reducing their investor relations budgets by millions of shillings.

KenGen is one of NSE’s companies with the largest number of shareholder and has in the past spent more than Sh25 million on annual reports alone, and a further Sh17 million on postage to 250,000 shareholders.

But even as listed firms wallow in the huge savings they have been able to make using the new methods of communication, the NSE’s estimated four million investors – used to receiving hard copies of the annual financial reports and dividend pay cheques from the post office -- have been asking what is in it for them.

“Savings made from this and other investor relations functions are ploughed back into the business to grow profits and increase shareholder value,” said Les Baillie, the Chief Officer in charge of Investor Relations at Safaricom.

Kenya Airways last week jumped into the cost-cutting pool with publication in the print media of an abridged version of its annual report and announcement to shareholders that it will use electronic funds transfers, including mobile money to pay dividends for the financial year ended March 2010.

This means that the airline will significantly cut its printing budget and the millions of shillings it had set aside for posting the annual reports to investors.

Use of mobile money transfers to pay dividends also means that KQ saves part of the costs it incurred writing and posting cheques to the more than 100,000 investors in its register.

“Companies with large registries of more than 100,000 shareholders are particularly keen on cutting costs,” said Zena Ahmed, a share registrar at Image Registrars that serves more than 63 per cent of all shareholders of companies listed at the Nairobi Stock Exchange.

“This trend began with Safaricom last year and is now spreading to other big firms after amending their articles of association,” she said.