Companies must now, more than ever before, set out a robust investment case through effective and transparent corporate reporting if they want to secure and maintain trust with stakeholders. Yet, surprisingly there are many FTSE 100 companies failing to meet the standards of quality annual reporting.
How Does It Stack Up?
Radley Yeldar’s latest and eleventh ‘How Does It Stack Up?’ Report, an annual study of FTSE 100 companies’ corporate reporting, revealed a clear polarisation between those providing high quality, transparent annual reports, and those neglecting to deliver a coherent message, with an overall general neutrality prevailing.
The truth is that investors need to see where a business is going and their fundamental reason for existing. Without this clear communication FTSE 100 companies stand to shorten their life-span and must produce more than a list of financials. In such precarious economic times, companies need to communicate an opinion of future market conditions and demonstrate a clear case for investment. Sitting on the fence just won’t work.
That said, Radley Yeldar’s research did unveil the Top 10 FTSE 100 firms whose corporate reporting embody a clear communication strategy and industry insight.
The TOP 10
Ranking No. 1 is ARM, whose balanced and transparent annual reporting made for an accurate investment case - unquestionably facilitating its recent sale to Japan’s SoftBank for a staggering £24bn. The leader in microprocessor Intellectual Property, ARM was willing to make its investment case through bold predictions and a display of in-depth market understanding. It clearly understands the value of telling an engaging story with passion, style and above all transparency.
Other FTSE 100 companies making the TOP 10 were old-timers Fresnillo, Land Securities and Anglo American – whose open and transparent communication never fails to deliver. They were however joined by newcomers in the FTSE 100. Provident Financial Group was one of these first-timers whose annual reporting demonstrated the wider value the business has for customers, while Ashtead scored well with engaging discussion of their business model and market environment.
Your entire communications model
Providing a joined-up, integrated approach to annual reporting can, without a doubt, help companies lay the groundwork for their communication beyond the printed report. The combined story of management, company secretaries, auditors, communication teams, investor relations and accountants should be told with openness, to reflect both a short and long term company strategy. This story can then frame a business’s entire communications model for the entire year ahead, be it on their website, in announcements, social media or capital market days.
Explain and measure performance
Communicating the essence of a business in all its glory means annual reporting must embrace individual divisions of strategy, KPIs and overall performance. Focusing primarily on one is not enough. Businesses must name the strategy and define how it marries up to performance and KPIs. An investor will ask: “How do the individual divisions contribute to the overall execution of the strategy?” – A very valid question. An open, sustainable annual report should give investors an understanding of how the company measures its success.
Have an opinion
There are those FTSE 100 companies trying to stand out amongst their competitors and position their case for future investment through their annual and sustainable reporting. Those however choosing to say nothing only stand to let their silence in uncertain market forces get the better of them. Investors need to hear that companies are aware of these uncertainties and are managing their businesses accordingly. Having no opinion surely creates more ambiguity around a company’s sustainability.
Tell a compelling story
Being able to navigate a company’s annual report is absolutely key to attracting and maintaining investment. A well-written narrative, that highlights progress in a market, outlines critical resources of a business model and is open about risks and the mitigation of these through a considered strategy is an absolute must for a clear course of communication, no matter the industry.
Despite Brexit woes, the country’s future economic obscurity need not dampen the UK’s investment allure, as long as companies communicate a compelling and open narrative though annual reporting. After all, reporting should be a catalyst to clear communication, which translates to an attractive investment case.