Are we in for a big dose of annual reporting mediocrity?

Recessions have a habit of putting extreme pressure on people. Take your typical IR professional. The company has taken a nose dive. Shares are worth considerably less than they were in 2008. Shareholders are not happy and there is a groundswell of activism. Membership of the Australian Shareholders Association rises in anticipation of a dog fight. The company’s executive remuneration policies suddenly look out of synch with these recessionary times, and don’t the shareholders know it. Strangely the ‘people at the top’ don’t quite share your views on the matter. Communications to shareholders remain infrequent and have failed to deliver the admissions, information, strategies and insight from the CEO’s mouth they so dearly need to hear. The more senior and vocal shareholders build up a head of steam and make the phone call, lambasting IR and executive teams and generally blowing a valve that leaves junior staff lost for words and ruing the day they entered the world of IR. The press are unrelenting in their criticism of your industry, company and CEO, revelling in the firestorm that has clouded the previous years’ stellar performance, now a distant memory. Calls to prominent jornalists become lost in the queue. No-one wishes to discuss the AGM with you despite it promising to be the company levelling event of the year, perhaps with a record number of shareholders in attendance demanding than a cup of coffee and a biscuit. Thoughts of sacrificial swords loom large. The phone rings on.  

Investor Relations professionals are presently under immense pressure to smoothe the waters, pacify shareholders and maintain their company on the investor radar.

The annual report which over recent years has kept a modest face will, in 2009 and probably 2010 also, be under more scrutiny than ever before and has a very hard job to perform.

So how will companies approach the annual report this year? The pessimists among us will bet their dollars on the ‘same as last year, don’t rock the boat, and for heaven’s sake don’t make it look as though we spent any money on it’ approach. The optimists, and I am confident that there are some of you out there, will seek expert opinion on how to realise ‘more for less’ based on the following:

> cost savings across the entire annual reporting process
> an intelligent presentation without the designer decoration, that is sympathetic to circumstances yet confident in its ability to tackle the future
> a comprehensive and convincing HTML online annual report (mini website) from which shareholders can access information easily and quickly
> a centrepiece Q&A video with the Chairman and CEO who answer specific questions in a frank and open manner on the company’s position, its ability to survive and succeed, and how it will achieve this
> a decision on how to present the report in hard copy form for those 10-20% of shareholders still requesting it – do we produce a colour annual report, a black & white one or a discreet Shareholder Review in an easily digested format?

Times change. Markets change. And so must the annual report. It has a hard job to perform this year and warrants advice from experts to not only provide new cost efficiencies but take it to a level that satisfies the information needs of concerned investors and reinforces confidence in the company’s ability to forge ahead when markets recover.

So are you a pessimist or an optimist? Your decision will most *certainly influence your shareholders’ decision making later this year. 

Tony Heywood is a Fellow of the Design Institute of Australia, founder of Heywood Innovation in Sydney Australia and joint founder of BrandSynergy in Singapore.

View some of Heywood’s work on www.heywood.com.au

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2009 annual reports face intense scrutiny from investors and analysts

It is inevitable that companies will slash their 2009 investor communications budgets as they grapple with risk averse investors who are seriously concerned about the future of their investments and the ability of listed companies to weather the financial storm.

BUDGETS SQUEEZED + SHAREHOLDERS MORE DEMANDING

Companies will demand more for less and need reassurance that despite lower budgets their spending on IR activities is highly effective.

How will this translate as the year unfolds? Fewer roadshows. More shareholder analysis despite the high perceived costs. More frequent communication with investors. More focus on the annual report and its content, which has a hard job to do this year and will be under intense scrutiny from both investors and analysts.

The value of a company’s annual report will be much higher this year. Why?
Because it needs to achieve the following:

A frank and honest understanding of the company’s position
> For many companies the annual report is the sole source of information from which an investor can accurately glean a comprehensive understanding of the company, how it has been impacted by market change, its financial health, the competency of its team driving the company forward, its vision, the strategies that have been put in place to protect its interests in stressed markets and its future potential. Investors will perceive the annual report to have much greater value this year as a means of guiding thei investing decisions.

Outline strategies that are in place
> Reveal strategies the company leaders have put in place to strengthen its position and minimise damage to its business, brand and investment potential

Forward looking
> The report will need to be more forward looking than previous years in order to convince investors the company has adapted to change and is strategically positioned to benefit from recovering markets.

Investors want reassurance that companies are being very honest and realistic when it comes to explaining their state of affairs and strategies that are in place to weather deteriorating market conditions, protect value and position for future growth when markets start to recover hopefully in the latter part of 2009.

The need for companies to engage in regular communication with investors will prompt them to consider half year reports and quarterly reports. It goes without saying that those companies who are willing to keep investors regularly informed with accurate and up to the minute information will engage more positively with the investment community.

It is a sure bet that the expertise of IR professionals will be sorely tested this year. Newcomers to the industry will probably have a ‘baptism of fire’ as markets are predicted to drop even lower before they get better.

This suggests that the successful investor communications businesses in 2009 will be those who can adapt to change, be able to work within lower budgets yet deliver much more, have comprehensive understanding of the challenges facing IR professionals and be totally attuned to working in the online arena to deliver competent HTML online reports as part of the investor communications mix. We’re ready for it.

Tony Heywood is a Fellow of the Design Institute of Australia, founder of Heywood Innovation in Sydney Australia and joint founder of BrandSynergy in Singapore.

View some of Heywood’s work on www.heywood.com.au

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Does digital printing produce better quality results than litho printing?

More than 400 print and procurement managers in the UK, Germany, France and the US were recently asked the above question by IT research company Gartner. The responses indicated that digital delivers both better image quality and better value for money. On a scale of 1 ‘poor quality’ to 7 ‘excellent quality’ toner-based digital scored an average of 5.68 with offset the lowest at 5.17.

What does this mean for annual report printing?

Quality
In Australia, the last few years has seen digital printing become a serious contender in the print quality stakes. As regards annual report printing however, with my hand held firmly on my heart, in my own experience it has not yet beaten litho on quality bu is getting close. There are special considerations when designing for digital printing. It does not like large areas of solid or tinted colour, otherwise ‘banding’ will result. Even the mighty iGen3 press from Fuji Xerox, something of an industry standard in Australia, hasn’t found an answer to this achilles heel of digital printing. Overall however, quality is to a very good commercial standard. I estimate that if you took them to task, more than 50% of investor relations professionals would not be able to identify any real quality differences.

Value for money
Digital beats litho on price if you are printing less than around 300 full colour annual reports. Above 300 quantity, there are litho printers in Sydney who can easily better the digital price. Above 1,000 quantity, digital is not in the running.

Where digital really scores is when a reprint is required. Perhaps the share registry underestimated the quantity of reports and you suddenly need another 200 urgently. Reprinting this quantity litho is a very expensive exercise. It takes a lot of time to set up a litho press and get the job ready, where printing plates have to be registered and ink coverage on the paper optimised. It is not unusual for a pallet of paper to be wasted in this process. With digital printing it is a much faster and easier process to reload the files and print 200. And if you select 200 quantity, 200 is what you get, thereby saving a a significant amount of paper.

The future of annual report printing
Legislation in the USA, UK, Australia and New Zealand has made online the default delivery method for annual reports unless shareholders specifically request a hard copy version. This has seen the quantity of printed reports plummet - in Australia by 80-90%. These increasingly small quantities are more and more likely to be printed digitally. It is inevitable that with the R&D funds pouring into it, digital printing or something very similar, will replace litho printing. How many years away is this? Probably quite a few because litho has been around for many years and isn’t going to give up its market share without a big fight.

Tony Heywood is a Fellow of the Design Institute of Australia, founder of Heywood Innovation in Sydney Australia and joint founder of BrandSynergy in Singapore.

View some of Heywood’s work on www.heywood.com.au

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