Recommend: The use of SENS announcements as a stakeholder communication tool

In light of the COVID-19 pandemic, it has been noted that stakeholders require a more reactive and proactive manner of communication to disclose material information and disseminate information to stakeholders timeously. Different reporting avenues can provide stakeholders with material information on how a crisis is managed, emerging risks and opportunities as well as integrated thinking disclosures.

The JSE offers a service for companies to issue announcements with regards to key topics which have an impact on the market movement. This service is known as the Stock Exchange News Service (SENS). Research has primarily focused on the impact of SENS announcements on trading activity and market reactions. Assessing what information is being disclosed by way of SENS announcements can highlight key trends and focal points for organisations to improve their stakeholder communication tools.

Legitimacy theory suggests that an organisation can manage what and how it discloses information to stakeholders to inform, iterate or change their perceptions, especially when dealing with a crisis. For example, after the Deepwater Horizon disaster in 2010, affected organisations increased the number of environmental disclosures dealing directly and indirectly with the disaster in an effort to allay stakeholders’ concerns, appear responsive to the environmental damage and avoid a loss of public confidence. In other instances, an organisation may choose to limit the extent of reporting to avoid additional scrutiny or inadvertently highlighting deficiencies in how material problems are being managed.

In general, a careful balancing act is required which entails a trade-off between the amount of information communicated to stakeholders and where that information is disclosed. Consequently, when faced with a crisis, disclosures deal predominantly with economic considerations and are concentrated on the primary communication platform such as the annual report, integrated report or investor updates. To maintain stakeholders’ confidence in how organisations are responding to various social, economic and environmental issues, companies can be expected to report more frequently via alternative platforms.

Method
To analyse the current trends, all SENS announcements of JSE-listed entities were downloaded from the JSE for the period January 2020 to January 2021. This produced 9 865 individual SENS announcements to be analysed. SENS announcements were analysed because these are an official basis for reporting to stakeholders and regulated by the local stock exchange. Data were analysed using interpretive text analysis as not all the content was presented in a consistent format.

The announcements were then coded according to content and could be coded to more than one theme. Examples of codes include details on dividends, financial results, donations, credit rating, COVID-19 updates, operational updates, and compliance with regulations. The disclosure codes were recorded on a theme register and aggregated by principle/theme. The frequencies of disclosures themes were recorded. To retain an exploratory focus, scientific text analysis and inferential statistics were not run; instead, companies were ranked according to the amount and type of information provided. Results are also presented graphically and include details on COVID-19 specific disclosures, topics of SENS announcements and the SENS announcements per industry.

Results and discussion

SENS announcements offer an additional platform for disseminating information formally and quickly to the capital market. They are a quick and effective means of updating market participants on important developments which can affect an organisation’s share price.

As per figure 1, during March 2020 to May 2020, a significant portion of SENS announcements (approximately 10%) provided updates on the pandemic and details of its impact on the organisation. Examples included the following:

• Updates on the impact of COVID-19 in the context of current trading performance and market conditions in light of the pandemic and its impact on costs, liquidity, debt covenants, working capital, strategic initiatives, supply chains and prospects
  Safeguards to be implemented to curb the spread of the virus at operations functioning over the lockdown
• Details on how online channels were being used to service customers and ensure the continuation of operations, and
• Donations provided to specific COVID-19 relief funds

As the impacts of the pandemic have subsided and organisations have included more detailed impact assessments and strategy/risk responses in integrated and sustainability reports, the references to COVID-19 in SENS announcements has decreased. Announcements dealing specifically with COVID-19 were complemented by information on the indirect impact of the pandemic. Common examples included dividend policy revisions, postponements of annual general meetings (AGMs) and delays in publishing financial results. This platform, as a result, primarily contains information focused on financial providers of capital assessing the financial implications. The fact that there was a high concentration of SENS announcements during the onset of the pandemic illustrates that information dissemination was being aimed at providers of financial capital rather than a broader group of stakeholders.

Figure 2 moves to a broader assessment to analyse the key themes of the SENS announcements.

For the one-year period under review, details with regards to changes in the share structure as well as potential mergers and acquisitions had the most disclosures in the announcements (31%). This was followed by details pertaining to changes in the board of directors (16%) and then information pertaining to the results of the company (11%). There were limited disclosures relating to donations/aid provided by the organisation, credit rating impacts and integrated report disclosures. This again emphasises that core integrated reporting disclosures targeting a broader group of stakeholders (with a focus on environmental and social impacts) are not necessarily the focus of SENS announcements, but rather, information relating to a granular focus on providers of financial capital.

Finally, the number of SENS announcements by industry per figure 3 illustrates that the financial services sector (21%), REITs (12%) the and mining sector (10%) comprised the highest amount of SENS announcements. These industries can be seen to have high communication levels with stakeholders to inform them of material matters impacting the organisation.

SENS announcements can be used by organisations to disseminate information to a broader group of stakeholders that is not necessarily focused only on financial capital-specific information. Webpages and press releases can also be leveraged to keep stakeholders aware of material events. In light of the various social, environmental and economic crises, stakeholders would also require a more robust assessment of performance measurement to date, and this has been identified as a key communication gap with disclosure generally only taking place once a year in an annual report. A SENS announcement could provide an alternative platform for integrated thinking/reporting disclosures to take place more frequently.

References are available on request