Robert K Moorhouse FCIS CDipAF MIRS, Corporate Strategy Director, Merrill Corporation | July 29, 2016
I have worked in the listed environment long enough to know that reporting is never easy, no matter the organisation. But for smaller companies, some particular challenges are magnified. The UK Financial Reporting Council (FRC) has been examining and analysing reporting quality issues in AIM-quoted and other smaller companies. If you’re one of these AIM companies, the findings will likely hold greater interest for you.
Think investors aren’t looking at your reports? Big mistake.
The FRC report highlighted a glaring perception vs. reality gap. Most small companies think no one is paying attention to their reporting. They see reporting as a perfunctory compliance exercise, apply bare minimum resources toward the process and accept minimum quality.
But investors are paying attention and using reports to drive investment decisions. An FRC survey found that 87 percent of investors consider the Annual Report & Accounts (ARA) a critical info source, and 27 percent consider the ARA their primary info source.
In fact, investors say the ARA is even more important when considering smaller companies. Why? Because unlike their larger counterparts, AIM-quoted companies have precious few opportunities to engage directly with investors and tend to get cursory coverage from analysts. In other words, the ARA is often the only thing an investor can base a decision on.
“An investor is more likely to invest if the annual report conveys a clear message of the business model of a company and its position and prospects, is prepared in accordance with clear and appropriate accounting policies and gives insight into these and other judgements, estimates and provisions. Yet it is in exactly these areas that the FRC finds issues of quality.” – FRC
You’re missing out on investment opportunities
If your ARA is an afterthought; if it is filled with generic, boilerplate disclosures; if it doesn’t present key info in a user-friendly format; or if it’s filled with errors, then investors can’t make confident decisions about your company. And if they’re not confident, they are likely to move on to the next opportunity.
“High-quality annual reports improve a company’s access to capital and potentially reduce its cost of capital.” – FRC
Merrill can help
In response to the FRC report, we’ve composed a special content series of advisory blogs and a white paper to help address the issues affecting AIM-listed companies.
In my special FRC blog series I’ll be discussing:
- How Merrill Bridge solves the disorganised process that many smaller companies currently have for creating, editing and reviewing their ARA.
- How Merrill Bridge can facilitate better auditing and get the Board and shareholders more engaged in the review process.
Finally in September, we’ll be publishing a white paper which will cover the key challenges and barriers to reporting quality identified in the FRC report. We’ll also show you how technology-enabled solutions like Merrill Bridge are ideal for AIM-quoted companies, helping you:
- Reduce internal reporting burdens and costs: Automated workflows simplify and speed processes, automating routine tasks so you can focus on growing your business.
- Connect with dedicated expertise: We can help reduce the worry in relation to reporting errors through Bridge functionality. We understand what investors are looking for and how to best present that information.
- Capture all your investor opportunities: We make it easy and cost-effective for smaller companies give investors the confidence-inspiring reports they want.
Read more from this special content series.
If you would like to learn more about how Merrill Bridge can help with your reporting, don't hesitate to contact us or read our brochure.