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VIEWPOINT: Who reads annual reports?

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“Integrated reporting is making annual reports more relevant to investors and thoughtful business leaders alike.”

My October 2013 Accountancy SA column opened with the line: “Annual reports are probably the most expensive publications ever produced that never get read.” I was being as cynical as some of my clients about the glossy publications that absorb management’s time for seemingly little purpose beyond compliance with JSE regulations.

Yet a recent survey by PR NewsWire, founded in 1954 and the world’s leading corporate communications service, finds exactly the opposite. PR NewsWire updates its Shareholder Confidence 365 survey constantly by asking about 20 000 investors one question every week or so to prevent “survey fatigue”. This survey reveals that a steadily growing percentage of investors are reading printed and online annual reports.

In mid-2014 about 53% of the investors responded that they read the annual reports of companies they have invested in, while 52% of investors will read the reports of companies that attract their interest. Moreover, 49% still prefer printed reports, though a growing percentage (currently 36,6%) choose to read or download online reports.

I was staggered by these numbers, which are so much higher than I had expected. These results from a highly credible source are a sharp wakeup call for those who write off annual reporting as a waste of time.

A valued client – the financial director in a blue chip JSE company – has a rare talent for communicating regularly and transparently with his stakeholder universe, which may well be a factor in why his company steadily improves its annual results. In our initial meeting to launch this year’s reporting cycle he stated that he intended extracting additional value from his integrated and sustainability reports.

This astute businessman explained that this year’s report would be a useful tool for introducing “integrated thinking” throughout the company. It would kick off with a reporting workshop that includes all departments, so that the content providers would be motivated to produce “our” report, rather than “my” section of the report.

He also envisaged the integrated report as the company’s definitive “story”, so that all can use it as a record of what the business has achieved, and where it is going from here.

This growing understanding of the intrinsic value of a well-crafted annual report was confirmed in the same week by an IT sector client who regularly bids for multi-million-rand tenders. For him the annual report neatly packages all the relevant information and financials that these tenders require, which is as useful to his business as keeping shareholders properly informed.

Integrated reporting is clearly making annual reports more relevant to investors and thoughtful business leaders alike. I couldn’t be more delighted to have been so wrong. ❐

Author: Clive Lotter is an Integrated Reporting Consultant and writer of annual reports for listed companies