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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