The UK’s top listed businesses are not exactly beacons of transparent and clear reporting, argues Brett Simnett, director of investor engagement at Radley Yeldar, and their ‘shyness’ damages their future prospects
SETTING OUT A STRONG investment case through effective and transparent corporate reporting is a critical element for any business looking to maintain trust with its stakeholders. Yet the failure by many FTSE 100 companies to do just this is jeopardising their ability to maintain and attract investment at a time when Britain’s economic future is uncertain in a post-Brexit world.
This year has seen a clear polarisation between a bold few providing high quality, transparent annual reporting, and the incoherent message, obfuscation and general neutrality being demonstrated by the majority.
According to Radley Yeldar’s eleventh How Does It Stack Up? report, an annual study of FTSE 100 companies’ corporate reporting, few were willing to explain why they exist and give an indication of where they see their businesses going. Apart from a few exceptions, FTSE 100 reporting demonstrated an apparent fear – or, at least, reluctance – to give an opinion of future market conditions and demonstrate how their business models and strategies create a clear case for future investment.
We highlighted the top ten reports that embrace clear communication. These companies have provided reports that clearly set out the long-term investment case for their business. They highlight progress made against their particular market environment. They outline the dynamics and critical resources of their business model. They are transparent about risk and demonstrate how management is setting strategic direction. And they do so through thoughtful, well-written narratives that are easy to navigate.
Consider ARM, number one in our list. It is a company that understands the value of telling an engaging story with style, passion and transparency. It is willing to say something different. It displays in-depth market understanding. And its balanced and transparent annual reporting undoubtedly helped the company secure its recent £24bn sale to Japan’s SoftBank.
Best practice reporting can, without doubt, help companies set how they talk about their business beyond the printed document. It is the one moment in time when management, company secretaries, auditors, communication teams, investor relations and accountants combine to set out the story of the year and future directions. That story can then frame communications throughout the year ahead, whether capital market days, announcements, websites or social media.
So, why are so many companies shy to communicate? Yes, economic and political uncertainty has created an environment where it is difficult to predict market forces, but investors need to hear that companies recognise these uncertainties and are managing the business accordingly.
Surely having no opinion creates more uncertainty around whether a business is sustainable?
Being clear, concise and transparent about the direction of a business is not a nice to have, it is fundamental to a believable investment case. And reporting should be the catalyst to providing that clarity.
Brett Simnett is director of investor engagement at Radley Yeldar
Read more about Radley Yeldar’s How Does It Stack Up? research