Friday, November 27, 2009
During the summer of 2009, Greentarget reviewed the online annual reports and other reporting tools published by FTSE 100 companies. This review involved analysing those companies’ corporate web sites to determine current trends and formats.
Executive summary
- All the companies in the FTSE 100 publish their annual report on their website
- Online reports are provided in at least one of four formats – normal pdf, smart pdf, embedded pdf or HTML
- Few companies explain the pros and cons of the different formats their report can be found in
- Many companies have chosen formats that result in large file sizes and lengthy download times
- Fewer companies are publishing summary financial statement (SFS) or annual review documents.
Based on the page impression and download data we have reviewed for various companies, we conclude that most commentators and large shareholders prefer to view, download or locally print a pdf in preference to a fully interactive HTML report. The experience of using a document that looks and feels like a conventional, printed report creates a level of assurance that HTML, interactive reports do not. Feedback from end users appears to support this view:
“Before making critical investment decisions we always download sections or pages of the pdf version of a company’s annual report. An attractive and entertaining website is useful, as is all the analysis and opinion from the ‘sellside’, but these are no replacement for official documentation.”
Paul Harrison, Hermes Focus Asset Management
“We review the performance of many companies and make good use of their websites to gather information. As a matter of course we would prefer to download sections or pages of the pdf version of their annual report as opposed to relying on pages of their website that could easily change from day to day. The fact is that we know we can trust the information formally published by the company.”
Nigel Thomas, AXA Investment Managers
Our research suggests that few companies are using smart pdf technology that provides the user with the kind of navigation and search functionality normally found on websites, combined with the appearance and readability of a printed document.
Our research also shows many companies do not take the users’ needs or situation into account. Far too many companies publish online reports that take over five minutes to download and view – even using a high capacity broadband line. For private shareholders these file sizes and formats are simply impracticable and for professionals they are inefficient and frustrating.
Changes in legislation, environmental pressures, reduced budgets and the recognition that people want summary information has resulted in a substantial reduction in the number of SFS reports and annual reviews being published. Some companies are replacing these with a ‘super summary’ report.
Full annual reports
Pdfs and downloads
In recent years companies have moved from placing a single pdf of their entire annual report on their website to providing fully indexed reports and bite-sized chunks of information. This shift recognises that users often only want to access certain specific information and therefore don’t need to view the whole report (and don’t have time to download large files).
All of the companies reviewed publish a pdf of their annual report on their website. Average sizes of these are 4.2MB. However 19 reports viewed were over 6MB in size. The largest seen was Cadbury Schweppes at 13MB. Only two companies provide a choice between high and low resolution versions (Rangold Resources and Rio Tinto). All except for BG Group state how big their file sizes are – enabling users to estimate how long it would take to download the report.
Only six companies produce a fully interactive pdf of their annual report (BT, United Utilities and Smith & Nephew are good examples). However others have activated urls for their company websites and some are bookmarked to aid navigation around the document (e.g. Anglo American).
61 companies produce indexed pdfs. This ranges from a handful of pdfs covering the main sections (e.g. WPP), through to detailed lists for all sections including the notes to the accounts (e.g. BG Group). Some companies allow the user to create their own customised document from a series of pdfs (e.g. Compass).
26 companies provide downloadable excel files. These vary from the primary statements only (e.g. Tesco, International Power) to others that also include the notes to the accounts (e.g. Intercontinental Hotels, Legal & General). In many instances the spreadsheets provided do not contain calculation formulae, which reduces the files’ usability and value. One of the most comprehensive examples is Barclays, although the information provided is by page number rather than note number.
Around two thirds of FTSE 100 companies now provide an html programmed version of their annual reports. However this trend has started to reverse in the last couple of years as page impression data has shown that users are not accessing these documents as much as companies (and agencies) would like to think. Instead they prefer to view pdfs and focus on the particular section they are looking for. This trend is resulting in more indexed pdfs and smart pdfs being published (BT is a good example).
Six companies produce an online report that is actually an embedded pdf (usually via Hemscott). These tend to be the ‘smaller’ companies such as Cairn Energy or Hammerson. Whilst these reports can be used effectively they can result in substantial file sizes.
Ten companies produce a partial html version, with the remainder of the document being provided in pdf format. The pdf part is usually the notes section (e.g. Standard Life), but sometimes includes the corporate governance section too (e.g. Vedanta Resources).
55 companies produce a full html version of their entire annual report including full cross referencing in the notes section (e.g. Land Securities, Legal & General).
Good examples of well designed html reports with useful functionality include Barclays, Home Retail Group, Land Securities, Legal & General, M&S, Rio Tinto and Wolseley.
Annual review and SFS
The number of companies producing an annual review or SFS is in decline. In 2009, 33 companies produced an annual review/SFS, compared to 53 companies who were reporting in this way in 2006. For example BG, Diageo, Vodafone, BAT and Cadbury Schweppes no longer produce one, perhaps taking advantage of changes in company law regarding e-communications to shareholders.
Most companies that publish an annual review do so as a pdf. Only 16 companies produce an html version and this is often included within the annual report html version e.g. Aviva.
Alternatives to the annual review and SFS
Other factors driving change in company reporting are environmental pressures, lower print and production budgets as well as the recognition that many shareholders simply want short, summary information. In addition changes in legislation allow companies to no longer provide a printed report to those shareholders who have not specifically requested one (‘default’ shareholders). As a result many companies have adopted one of the following routes:
• Continue to produce the annual report and the SFS, but also produce a ‘super summary’ for default shareholders. These tend to be companies with a large shareholder base. However it is interesting to note that the super summaries are not readily available on the companies’ websites. These include Tesco, Alliance & Leicester, BG Group and Centrica.
• Continue to produce the annual report but replace the SFS with the ‘super summary’ e.g. Pearson, Vodafone, Severn Trent, GSK and Invensys.
• Continue to produce the annual report and SFS together with a notification letter for default shareholders e.g. Lloyds TSB, Aviva. Some may combine it as part of the NOM.
Some companies are pursuing other routes. For example Smith & Nephew no longer produce the SFS as a printed document, instead it is available as an html version only. J Sainsbury no longer produce an annual review or SFS in printed format. Instead they produce an engaging ‘online illustrated review’, perhaps the nearest in style to BT’s shareholder publication, Forward. Cadbury Schweppes produces a ‘shareholder magazine’ which, to all intents and purposes, is an unaudited annual review and Diageo produce a quarterly investor newsletter.
For further information about this review please contact Nick Glanvill: +44 (0)20 7680 5060 / nick.glanvill@greentarget.net or Annie Bissett: +44 (0)020 7680 5061 / annie.bissett@greentarget.net.
Greentarget Limited – November 2009