Why choose HTML for an online annual report?

Reasons why HTML is the obvious choice
Best practice starts with an HTML annual report. To all intents and purposes these are commonly referred to as mini-websites. Why is HTML the preferred format for an online annual report? Is it because billions of people view websites every day and don’t complain too much about them? Quite a few of these people are shareholders of Australian companies. Just think, if they’re relatively happy with looking at websites, it probably means they’d be happy looking at your online HTML annual report!

What are the key reasons for websites having become the global favourite means of accessing information online?
1/. It’s fast
2/. It’s easy
3/. You can include audio and video files

The challenges facing PDF reports
Basically, there’s nothing better than HTML. It would take a brave man or woman to argue that there is something better. Yet some do. For many years listed companies relied on a quick and easy PDF of their annual report courtesy of Adobe Acrobat to satisfy shareholder needs.  Although a wonderful tool to get documents from A to B by email, the shortcomings of viewing PDFs of information heavy annual reports have been well documented:

1/. Slow download
2/. Need to zoom in and out to be able to read text
3/. Need to scroll up and down to read columns of text

It’s a bit like listening to music on an old 8-track player from the ’70s in preference to an iPod. But in PDF’s defence it is an inexpensive way of getting your annual report online and keeping the ASX happy... but only if you care little for your shareholders’ welfare. The basic problem is that most printed annual reports are portrait format while PC screens are landscape format. A bit like trying to fit a square peg in a round hole. Several years ago several bright minded individuals started to think of ways to improve PDF annual reports. So onto the market emerged several stopgap measures. These feature a more elaborate navigation and tend to be marketed as ‘interactive PDFs’, or they are based on HTML images of the printed annual report pages, sometimes with pages that ‘turn over for you’ when prompted. How wonderful is that? The old PDF restrictions however still prevail. Beware also that they can be hosted on the supplier’s server which means that when you decide to move supplier, bang goes your report. In its defence, because the printed pages are ‘captured’, the only additional checking by the client is to ensure that the navigation is linking to the correct pages.

In a side-by-side contest HTML wins every time.

So what stimulated this interest in online reporting?
Despite the fact that Heywood Innovation has created HTML reports since 2000 for Top 200 Australian companies, it wasn’t until mid-2007 that The Simpler Regulatory System Bill was finally introduced that stimulated the present interest in online annual reporting. It stipulated that online is the default method for listed companies to provide annual report information to shareholders. Shareholders can however request a hard copy if they so desire.

Although public sector reports still require full printed documents, it is only a matter of time before a mandatory shift to online reporting comes into force.

So what is the level of uptake?
The Australian Shareholders Association calculated in mid-2008 that 90% of shareholders have now made the move online.

From our own experiences in 2008, the number of Australian companies producing HTML annual reports will not equal that of the UK, where 46% of listed companies have produced an HTML report since the Companies Act 2006 came into effect in January 2007 and switched the default towards electronic rather than print-based reporting. Yes, they had a headstart on us. It appears that Australian companies are being a little slow on the uptake and are persevering with PDF-based formats. They are reluctant to change from traditional reporting practices. The move to XBRL will be a real test.

In a 2007 ASA survey it was reported that 40% of Australian shareholders didn’t want an annual report in any shape or form.

A big opportunity with HTML is that audio and video files can be incorporated. For the same reasons that people do not watch static images on television, no longer do shareholders have to endure static photographs of the Chairman and CEO complete with frozen smiles.

Building a case for moving to HTML online reporting
So you’re ready to make the move to HTML. What do you need to consider and what information do you need in order to present a case for moving beyond PDF?
> HTML is the most effective means of displaying annual reporting information online
> reports are fast to download and feature easy and intuitive navigation
> requires no zooming in and out as text is at a readable size on screen
> editorial text can be in bite size chunks thereby eliminating the need to scroll
> reports can be obtained which indicate visitor hits on every page – useful for determining what information interests shareholders, and planning future content
> all photos and images can have descriptive ‘tags’ applied to them that explain their purpose and content
> audio and video files can be incorporated that provide an interactive and engaging experience

Why are 10-20% of Australian shareholders still requesting a hard copy report?
Since the 2007 Legislation change, many companies have found it difficult to make the right decision for their online reporting needs because a printed report is still requested by some shareholders. Let’s analyse why the requests keep coming in.

> shareholders are not fully aware of the Legislation change and its implications
> they didn’t understand the poorly designed share registry communication with the option to ‘tick the box’
> they don’t trust the company’s intentions
> they don’t like the PDF annual reports they’ve seen in the past and probably aren’t aware of user-friendly HTML ones
> they don’t have a PC and internet connection
> they’re too old for ‘all this internet stuff’
> they love the smell of ink on paper and its tactile qualities
> it provides tangible evidence of the investment they’ve made

Most shareholders aren’t happy with viewing large PDF documents on screen such as annual reports. They will be reluctant to move online until they experience a simple and easy to navigate HTML report and realise that the old challenges and frustrations are no longer there, and that it is now as easy as navigating any website.

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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Hug your shareholders

I often wonder how much notice listed companies take of their shareholders. Apart from the occasional skirmish at the AGM and awkward phone call now and then from those shareholders more advanced in years who ‘just don’t get it’ and have too much time on their hands, do you ever solicit comment from them, or are they a necessary evil to be avoided at every opportunity?

Every time I ask a company the question “Do you know what your shareholders are looking for in an annual report?”, I inevitably receive a shrug of the shoulders in reply, accompanied by a vacant stare. “If we don’t hear from them then everything must be OK”. Come on guys, you can do better than this. Show them a bit of respect and interest. You may just learn something. It may just be valuable. It may just save you money. It may just help save the planet. It may get you more sleep at night.

I know some companies do actually send out the occasional survey and request for feedback, but I suspect they’re very few. And you never get to hear what they did with the results. Strange that.

As a result of the change in reporting Legislation in late 2007 here in Australia, share registries have asked shareholders this year if they are happy to receive their annual report online, or if not, they can request a printed one, mailed at great expense and inconvenience to the company and the planet.

For many companies this change in Legislation was one of the biggest challenges they have ever faced. Do you consider then that it may be beneficial to ask shareholders if they’re happy with the online information delivery? – particularly if you tried to engage them with one of those new fangled HTML mini-website things. You defaulted again to a PDF of the printed report! How could you? Have you no shame? They’re so ’90s.

Beyond the choice of delivery… have you considered the report content and whether it is actually covering ground that shareholders really want you to cover? Why not? Consider this. Have you been blindly following the same old tired format year in and year out? Have you been wasting lots of your time all these years? Do these agonising thoughts keep you awake into the small hours?

You know the writing is on the wall don’t you? You’re going to have to shift to one of those mini-website HTML online reports. Those that are fast to access and easy on the navigation. Those that look pretty schmicko and can even have video of the Chairman and CEO included (providing they get a haircut and a weekend crash course at NIDA). And when you do shift it makes sense you rejig the content into screen size chunks that make for easy reading. I guess you may as well go the whole hog and reconsider the entire report and do it properly! My number in Australia is 02 8256 3999. We’ll start by asking your shareholders what they want and then we’ll create something new, different and devastating – something your shareholders will love you for. They may even want to hug you.

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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Video in online annual reports – a moving experience

Video provides an interactive experience of key people in your organisation that is far more engaging than static photographs. At relatively small expense, video can unleash the Chairman and CEO in true dynamic style to give shareholders a ‘real’ experience of how competent they are in delivering the company’s results and potential for the future. Video can reveal a lot more about a person than a static photo can. This requires a decision on what style of presentation best suits the subject and the objectives of the video. Is the subject dressed formally or informally... in the boardroom or in the workplace... delivering a monologue or engaged in active discussion with an interviewer in a Q&A scenario? Beware however that the larger the video file the longer the download time. 

Both of the following examples take time to download, but the experience is worthwhile. They are expensive productions and probably beyond the budget of many companies, but serve to demonstrate what can be achieved.

The Philips President does a great job projecting a bold and confident face to shareholders. Integrating graphics with his video is particularly convincing. http://www.annualreport2007.philips.com/



The Sainsbury report adopts the ‘page turning’ method which is not universally liked. The design firm SAS however, has reproduced all text at a readable size, and included animated items and ‘hidden text’ that can be uncovered by pulling tabs or peeling back the photos. Ingenuous and engaging. Sainsbury are to be applauded for having an introductory and closing video that explains what they have done and why.
http://www.j-sainsbury.co.uk/ar08/flash/full.shtml

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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Hard Copy Report

Why are 10-20% of Australian shareholders still requesting hard copy annual reports?

In this first reporting season since the 2007 Legislation change in Australia that made online reports the default option, many companies have found it difficult to make the right decision for their online reporting needs because a printed report is still requested by some shareholders. Companies dream of the day when no shareholders request a hard copy annual report and they can then have a clean slate to determine the way they really want to communicate with shareholders. Let’s analyse why the requests keep coming in.

> shareholders are not fully aware nor understanding of the Legislation change and its implications
> they didn’t understand the poorly designed share registry communication they receive and the implications of ‘ticking the box’
> they don’t trust the company’s intentions and subscribe to the belief that ‘if it ain’t broke, don’t try and fix it’
> they don’t like the PDF annual reports they’ve seen in the past and probably aren’t aware of user-friendly HTML ones
> they don’t have a PC and internet connection
> they’re too old for ‘all this internet stuff’ and delight in showing off the annual report at the bowling club
> they love the smell of ink on paper and its tactile qualities
> it provides tangible evidence of the investment they’ve made
> they don’t fully subscribe to environmental considerations

Most shareholders, particularly the older ones, aren’t happy with viewing large PDF documents on screen such as annual reports. They will be reluctant to move online until they experience a simple and easy to navigate HTML report and realise that the old challenges and frustrations are no longer there, and that it is now as easy as accessing and navigating any website.

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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Annual reporting mistakes you need to avoid

1/. Not informing shareholders
Research and workshops conducted by Heywood Innovation in Sydney and the Gold Coast have revealed that:

> several months after the event, there are still many companies that have little understanding of the new annual reporting Legislation, its implications and how these affect their shareholder communications
> there is a desire to find out what other companies are doing
> pre-Legislation many companies have already made attempts to migrate shareholders to online communications, but with limited success
> many retail and institutional shareholders have little or no knowledge of the Legislation

Communicating effectively with shareholders has always been a challenge. It does not stop with shareholders, as there are other stakeholders – analysts, employees, environmental groups – who also have expectations from communications such as the annual report. These objectives must be met while meeting core legal, financial and regulatory requirements.Have you told your shareholders about the changes in annual reporting Legislation? Are they blissfully unaware that a printed annual report is no longer coming their way unless they request one? Will this cause you considerable angst when they phone you up to find out why? Most shareholders at present have little or no understanding of the changes that will be implemented this year which will affect the way they access annual reporting information. Here is an opportunity to engage with them and apply some best practice communication that will ultimately save your company money and save the environment and stop the phone from ringing.

The less informed shareholders are, the more likely they will request a printed report and the more it will cost you.

Please be warned however. Telling them all this won’t have too much effect if you intend to simply place a pdf of your printed report on your website. One of those that is slow and difficult to view – one they love to hate. Demonstrate that you have their interests at heart by producing a fast and easy-to-access HTML online report – one that works just like a website that they feel comfortable with.

Remember this. If a shareholder doesn’t like what you’re offering online, if it is slow and difficult to use, they will opt for a printed report and it will take an awful lot of effort over the next few years to change their mind.

> Ensure that not only shareholders know about the new Legislation and the implications for the annual report moving online, but also your analysts and brokers. They'll wonder what's going on when they don't receive a printed annual report from you. Pay particular attention to your institutional shareholders.

> You will probably need different approaches to cover retail and institutional shareholders.

> Inform them that they will be contacted by mail or email when the next annual report is available to view on the company website/or they will receive a link in the email if they have so requested.

> Inform them if you intend to produce a 16-28 page Shareholder Review document (short form report) or continue with a concise report.

> Reinforce to them the company’s commitment to the environment.

> Your share registry will provide shareholders with the opportunity to request a printed report and will collect this information as it determines the new printing quantities. Note that this needs to be repeated every 12 months to accommodate for new shareholders. Shareholders must reply within a specified timeframe in order to receive a printed report.

> Consider a shareholder newsletter and the opportunity for shareholders to receive media releases.

> Be prepared for Legislation-related questions from shareholders at the next AGM.

2/. Not making a determined effort to collect shareholder preferences
The future of communicating with shareholders lies online. Shareholders can not only receive their annual report and NOM & Proxy online but they can also vote online. To achieve this with any degree of success requires that you have their email address and permission to send them financial information direct to their email box – such as when the online report is available for them to view on your website, details of the AGM etc. So how do you communicate this to your shareholders?

Most companies will leave this up to their share registry. Unfortunately they seem to do this in a somewhat half hearted way. The piece of paper that is being mailed to shareholders is not exactly best practice communication. No persuasive argument for the environmental benefits of online reporting, just a quick explanation and the opportunity to tick the box. Nevertheless, some of the larger companies are experiencing only around 5% of their shareholder base are still requesting a printed report.

Remember that each year shareholders must be given the opportunity to re-subscribe if they so wish.

Your share registry must be extra diligent when managing your shareholder database.

3/. Not considering an Annual Review
Producing an Annual Review as an alternative less expensive option to the printed annual report is gaining much support from shareholders. AMP, ANZ, Commonwealth Bank and Fosters are leading the way in producing a smaller A5-format booklet in sizes ranging from 16 to 28 pages. The Annual Review is essentially a short, easy-to-read overview of the more essential information normally contained in the Annual Report. Typical contents are: Investor Snapshot, Welcome, Chairman's Report, CEO's Report, Business Performance, Business Review, Five Year Summary, Director and Executive Remuneration, Our People, Our Customers, Our Community, Our Environment, Board of Directors, Directory and Important Dates.

4/. Opting for a PDF online report instead of HTML
A PDF relies on having a printed report available, from which the PDF is produced. PDFs are not meant for reading reports online. The traditional ‘portrait’ print format is different to the ‘landscape’ format PC screen, requiring scrolling and zooming to read down the page. Large reports can be slow to download. It is not possible to determine what shareholders are interested in as it is only possible to track the number of times the PDF file is accessed, not what pages are read. PDF files have been used extensively by companies to display annual reports on their websites. It is a very effective way to transfer data from one place to another.
Annual reports have relied on having a designed and print-ready file available from which a PDF is made and uploaded to the company’s website. Therefore design costs are incurred.

PDFs are not meant for reading documents online. The traditional ‘portrait’ print format is different to the ‘landscape’ format PC screen, requiring scrolling and zooming to read down the page. Large documents can be slow to download. They shift the requirement on to the reader to print pages from their PC.

It is not possible to determine what shareholders are interested in as it is only possible to track the number of times the PDF file is accessed, not what pages are read.

5/. Litho printing a small quantity of printed annual reports instead of considering digital printing
Digital printing is a toner based process, as opposed to litho printing which relies on liquid inks. Quality and speed of digital printing have come a long way in the last few years. The technology uses coloured toners similar to an office laser printer. The big advantage is that a specific quantity of annual reports, from one to many, can be printed with little or no wastage. ‘Press ready’ time is shorter than litho printing. The range of papers however is limited but seems to be constantly expanding. Embellishments such as varnishes and embossing are not possible.

A big benefit is that digital allows each document to be personalised or have variable data from a customer-supplied database printed anywhere in the report. This means you can impress say institutional shareholders by having their name on the front cover.

Professional digital printing (using toner) primarily uses an electrical charge to transfer toner or liquid ink to the substrate it is printed on. Digital print quality has steadily improved from early color and black & white copiers to sophisticated colour digital presses like the Xerox iGen3, the Kodak Nexpress and the HP Indigo Digital Press series. The iGen3 and Nexpress use toner particles and the Indigo uses liquid ink. All three are made for small runs and variable data, and rival offset in quality. Digital offset presses are called direct imaging presses; although these receive computer files and automatically turn them into print-ready plates, they cannot insert variable data.

Digital printing is more cost effective than litho printing in quantities up to 500, similar in price in quantities from 500 to 750 and more expensive in quantities above this.

Digital printing is less wasteful than litho printing. With digital, if you want 500 printed reports the press prints 500. With litho printing it's likely the printer will print maybe 700 or even 800 to ensure they get a good set of 500. This is because if they are short, it is very expensive to re-run the job to make up the balance. The litho printing process is more wasteful of paper, energy, water and it requires more chemicals and produces more waste.

Use customer data captured from CRM databases, Web sites, and call centers to drive variable text, images, and graphics in marketing communication materials. Variable information printing enables you to support high-value customer marketing programs and increases customer loyalty and response rates.

Wikipedia's take on digital printing:
For more information on digital printing visit http://en.wikipedia.org/wiki/Digital_printing

Details on one of the more popular digital presses, the iGen3
http://www.xerox.com/go/xrx/igen/iGen.jsp

6/. XBRL and its impact on annual reporting
As if the new annual reporting Legislation is not enough to contend with, along comes more technology in the financial arena to enhance investor communications. With yet another acronym to commit to memory, XBRL (eXtensible Business Reporting Language) – the financial equivalent of HTML and XML – promises to revolutionise the way financial information is generated and analysed.

There has long been a desire by global capital markets and investors to compare the financial reporting information of companies regardless of that company’s location around the globe. In other words, standardised reporting of public company results under a single world standard.

A global initiative – XBRL defines categories of financial data and ‘tags’ or ‘bar codes’ them, thus enabling users to search for, identify and retrieve them and pull them into any standard spreadsheet software such as MS Excel to view and analyse them, reducing or eliminating the need for manual re-entry and easing the data collection process. This saves time and increases the accuracy of the data.

It is suggested that XBRL will enable companies to realise significant savings in their internal and external audit costs over time.

Significantly, the US Securities and Exchange Commission (SEC) is moving to electronic filing of company accounts with an interactive database that uses XBRL. This follows a successful pilot program involving 25 companies. The SEC’s first step is to create a dictionary of terms. Once completed, all companies will be required to report to the SEC in XBRL format. This will also affect foreign companies with a US listing.

A sign of things to come in Australia?

For more information visit www.xbrl.org or www.microsoft.com/office/showcase/xbrl/default.mspx

7/. Not considering the environmental benefits of online reporting
Australian Legislation amendments mean that delivery of annual reports online is now the default option, unless shareholders specifically request a printed version. How can you maximise the print and processing cost savings and thus help save the environment?

There is now an opportunity to reduce quantities of printed annual reports quantities or eliminate them altogether and help the environment. We think this is a powerful argument that can be leveraged when outlining the online reporting benefits to shareholders to persuade them not to request a printed report.

Greenhouse gas emissions
> Manufacturing 26 sheets of A4-size paper emits the same amount of greenhouse gas as driving your car one kilometre.
Clean Up Australia

Trees
> One tree is used to produce 100 copies of an average (83 pages) annual
report.
> The average print run of a Top 200 Australian company is 186,000 copies
= 1,853 trees per company.
Chartered Secretaries Australia

Water consumption
> More water is consumed to produce one tonne of paper than any other commodity
> one litre of water is used to produce seven sheets of A4 paper, therefore
1.1 million litres of water are consumed for an average Top 200 Australian
company’s annual report.

energy
> Pulp and paper production is an energy-intensive activity and energy costs can represent up to 25% of the total manufacturing cost. It takes 13.5 GJ of energy to produce one tonne of paper. This is equivalent to using 552 litres of heavy crude oil.

8/. Not considering the new opportunities for video that HTML reporting offers
HTML reporting offers new opportunities to integrate video into your online annual report.

Video provides an interactive experience of people that is far more engaging than static photographs. At relatively small expense, video can unleash the Chairman and CEO in true dynamic style to give shareholders a 'real' experience of how competent they are in delivering the company's results and potential for the future. Video can reveal a lot more about a person than a static photo can. This requires a decision on what style of presentation best suits the subject and the objectives of the video. Is the subject dressed formally or informally... in the boardroom or in the workplace... delivering a monologue or engaged in active discussion with an interviewer in a Q&A scenario? Beware however that the larger the video file the longer the download time.

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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Online reporting – bit slow on the take up

Online reporting – bit slow on the take up

2008 represented a golden opportunity for Australian companies to embrace the benefits of online reporting, following the industry-shaking change in Legislation that went through in mid 2007. Sadly the take up so far has not been as thorough and fast as we had anticipated. There is a fair degree of caution and reticence to make changes to a time honoured print-based process that has been in place for decades.

As the company that introduced HTML reporting to Australia in 2001, we have a great headstart over our competitors, and an obligation to spread the good word about best practice annual reporting to the 2,000+ listed companies in Australia. Later in the year we will be producing a more in depth formal review of what has happened with online reporting in Australia in 2008.

Here were some key messages we have been pushing so far this year:

> HTML is the obvious choice for fast and effective access to information online.

> Interactive PDF versions of printed reports will slowly disappear.

> It makes sense to leverage the HTML medium and adopt video to provide a more convincing and expressive presentation by key players, that static photos cannot achieve.

> If the Chairman and CEO don’t feel comfortable in front of a video camera, consider audio files.

> Printed Shareholder Reviews of around 28 pages in length satisfy the requirement of keeping in touch with shareholders now that 80-90% are happy to access annual reports online. Some companies are mailing them to all shareholders.

> HTML reports can be produced quickly if financial tables are presented as images.

> XBRL is anticipated to be mandatory in 2010 in Australia, which means that all financial tables will need to be in HTML, not images. (see the 10 July blog post)

> Print quantities below 500 are likely to cost less when printed digitally than by the traditional litho process.

> Digital printing is more environmentally friendly than litho printing, particularly with less paper wastage.

> Many companies are resorting to bland, low cost, black & white printed full reports to mail to those shareholders who still request a hard copy of the annual report. Once shareholders receive these unexciting black & white reports in their mail box, they are less likely to want one again in 2009, unless they are really looking for the fine detail in the financials. By that time they may also have seen the company’s pdf-beating HTML annual report which will encourage them to transfer their attentions online.

> HTML reports can easily be enhanced with Flash animation if a more expressive and marketing-oriented online report is required.

> It is now relatively easy and cost-effective to also produce half year reports in HTML for consistency of delivery and ease of use.

> Traditional print designers are slow in advising their clients on the best course of action and don’t seem confident embracing the online medium.

If you are one of the 2,000+ listed companies who still haven’t made a decision as yet and are experiencing sleepless nights, give me a call on 02 8256 3999 or email lyn@heywood.com.au for details of our upcoming workshops.

Lyn Heywood is a Director of Heywood Innovation.

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CSR reports follow the online trend

There is a downhill trend in the number of CSR reports published by FTSE 100 companies according to new research conducted by corporate reporting consultancy Black Sun in the UK. Evidently 2005 was the peak year with 78 companies producing separate CSR reports. Numbers then fell to 65 in 2006 and then 57 in 2007.

“One obvious reason is that companies are cutting back on paper-based reports for cost and environmental reasons and shifting online, consistent with trends experienced in the USA, UK, Australia and New Zealand”, said Tony Heywood of Sydney-based communications company Heywood Innovation. “Stakeholders can now access the information more quickly and more selectively”.

Reporting of CSR issues inside annual reports however is on the increase. Black Sun reports that in 2007, 87 percent of companies discussed CSR in a dedicated section in their reports.

“Now that 80-90% of shareholders in countries like Australia are accepting their annual report information online, it makes sense that CSR information follows suit, either within the online annual report or in a dedicated online CSR document” said Heywood.

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