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Going Public Magazin: Online Annual Reports – of Spinach and Popeye
05/10/2006
Online Annual Reports – of Spinach and Popeye
By Rupert Spiegelberg, Director, Investis
I want to tell you a little secret. No-one really likes annual reports.
Companies hate them because they cost money and take up a lot of time while investors think these reports spend too much effort telling them stuff they already know. That is why there are rules that force companies to produce them.
Having said that, both companies and investors recognize that annual reports are to the financial world what spinach is to young children – very good for you but difficult to swallow. Interactive reports can help us to love annual reports in the same way Popeye convinced a generation of children that spinach was delicious – or at least made you very strong.
The annual report is an opportunity for companies to promote their business in the way they wish shareholders and other stakeholders to understand them in terms of financial data, key business drivers, strategy and business description.
The innovation that an interactive version brings is that it is far more engaging than a piece of paper and can reach a far wider audience. It can significantly expand the number of ways you can communicate this message by enabling you to move beyond simple text and images into a world that does not have to follow linear page progression, where data can be served up in flexible formats according to user requirements (.XLS, PDF, HTML) and tools can be employed to view the data through different lenses and where moving images like video can create a more powerful impact. Finally and best of all, the cost of an interactive report published on a website costs the same to show to one person as it does to show to 1 million people.
These are among the reasons why the appetite amongst German and other European companies for interactive reports has grown significantly in recent years. In 2006, every DAX30 company had an interactive version of its annual report on its website and smaller companies are following suit.
This trend is going to accelerate next year for the following reasons:
User Demand: The use of these reports is growing strongly as investors and other stakeholders become more familiar with the format and like the idea of being presented the data in various formats. Investis produces more than a hundred interactive reports each year and has witnessed a three to fivefold increase in user traffic on some reports over the last three years.
Budget Focus: In the beginning the interactive report was seen as an additional cost to the existing annual report budget and therefore another burden on company resources. Today, however, companies are beginning to see the interactive version of the report as a means to reduce print run and save money or transfer this budget one-to-one to the online version. Why print more copies that sit in boxes in your office when you can spend that money on an online version and reach people you never knew wanted one in the first place? As a comparison, each annual report you print and send out can cost €10 per copy, while the marginal cost of distribution for an online version is close to €0.
Technology: The technology employed to create online annual reports is improving each year in terms of speed and cost while new formats are being created that improve usability, accuracy and message impact.
Regulation: As always, regulation may create the biggest impetus. The European Transparency Directive, which comes in to force next year across all Member States, affects how companies think about the publication and distribution of annual and interim reports in two ways.
Firstly, the directive calls for speed. Annual reports must be published within four months of year end while interim reports must go out two months after the period. While much of the time creating a report is involved in collecting information and design, sending the final copy off to the printers can take two weeks or more to come back while an interactive version is ready to go once the copy has been signed off – cutting days or weeks off the process.
More importantly, the directive has endorsed the use of “electronic means” as a form of communications with shareholders. It states that provided companies inform shareholders of a move to communicate electronically and they “do not object within a reasonable period of time, their consent shall be deemed to be given.”
This paves the way for the rise of the online reports and makes it easier to meet the other central tenet of the directive of equal and fair disclosure for all shareholders irrespective of their European country of residence. What better way to ensure pan-European disclosure than publishing your report on the most efficient distribution platform ever created – the Internet.
The interactive annual report of the future is going to be far richer than today’s versions where focus – quite rightly - is about ensuring users can navigate quickly around the site thanks to fast page loading, good navigation and the use of related links and hypertext links. Some reports also have basic customization tools such as print baskets, summary areas and most-looked-at pages functions.
More and more reports also employ interactive tools where you can chart and compare different sets of financial data as a means of helping shareholders better understand the numbers. adidas Group has a tool that where you can create your own analysis of the financial numbers online and create your own bar charts, pie charts or line graphs.
http://www.adidas-group.com/en/investor/reports/annually/2005/en/index.html
However, for sheer impact nothing beats the annual and interim reports of Danish bank Danske Bank A/S which uses video in a very professional way to convey its key messages.
http://www.danskebank.com/link/HTMLQ22006/$file/frontpageuk.html
These developments do not necessarily signal the death of the print report – don’t forget Popeye endlessly competes with Bluto for Olive’s attention - but it is clear that the interactive version has created a new dawn of opportunity for the annual report and has made corporates think more about the way they communicate with their stakeholders.
More spinach anyone?
Published in Going Public Magazin, October 2006 http://www.goingpublic.de/
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