It’s that time of year when one is deluged with Annual Reports. Is it just me or have the size of Annual Reports got substantially larger in the last few years? The latest report received is for Spirent Communications (SPT) which is only a mid-sized company (profits last year of £106 million) but the Annual Report spreads to 210 pages – Cover Photo is above. That includes 29 pages for the Remuneration Report alone! Are we really expected to read all of this? When one has a large portfolio such as I have, the volume of reading required is more than can be justified.
Annual Reports are likely to get even longer in future with more ESG reporting being mandated. Some of the detail is important but a lot of it is simple “boiler-plate” stuff. For example the Independent Auditors Report of 10 pages mainly consists of statements such as “We have nothing to report in respect of these matters”. Why do we need telling that?
No doubt auditors love all the work required to put these statements together but the company management must also waste time on putting together such extended Annual Reports – including 4 pages on “stakeholder engagement” in the case of Spirent.
It surely is time to take an axe to these over-voluminous Annual Reports. This could be done by having reporting only on exceptions, or by off-loading non-essential detail to an on-line page. The objective should be to get all Annual Reports down to under 100 pages in size, even for FTSE-100 companies, with small companies as low as 50 pages.
Too much information clouds the picture for any reader and enables important detail to be lost in the welter of trivia.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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I am currently reading the 420+ pages of the NatWest Group report. There is a lot of clutter that does not add value. I have said to the FRC that the key parts should lie in the annual report and if the others stuff is needed for regulatory reason it can be put in a separate report that is on the web and is easily accessible from the company website (eg the drivel from the auditors to protect them from being sued, which because of Caparo is so very difficult anyway). The investors do not benefit from these large reports. It add fees for auditors but has failed to stop the Carillion collapse, nor several others. Hopefully ARGA will get to grips with this issue.
Alas, we are doomed to see things getting worse. I was a director of Finsbury Growth & Income Trust (a very simple business) for a decade. Each year I tried to slim the next annual report, but short of printing the whole thing in 10-point type (and offering free magnifying glasses) I was told that each irritating piece of boiler-plate was mandated by the Companies Act. The only places where serious cuts were possible were the chairman’s statement or the fund manager’s report, the two things shareholders might actually want to read.
Analyst reports typically run from 3 to 30 or so pages. They seem to be able to distill the key issues into a few pages. Perhaps those who write annual reports and those regulators who proscribe what should be in annual reports could learn from reading a few analyst reports to see what is important? Also the FRC should strongly encourage companies to put analyst reports on their website, perhaps requiring the in house broker reports to be published via RNS (so all shareholders are traded fairly and have equal access to new information) and on the company website; and other analyst reports perhaps after a period to reflect that some investors pay for the research and should have preferential access to such analysis (but obviously not to inside information, nor information only disclosed by the company to one or a small group of investors).