They Wont Put It Down; It's Not Impossible to Produce an Attractive, Clear Annual Report That Combines Brevity with Depth of Analysis, Although Far Too Few Firms Manage It. Camilla Berens and Steve Kemp Explain How to Convert Your Company's Yearly Statement into a Triumph of Investor-And Public-Relations

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Annual reports are rather like Danish pastries: they often look attractive on the outside, but you can never be sure whether their contents will live up to expectation, writes Camilla Berens. This yearly publication is an ideal tool for promoting your company, not only to investors hut also to a wider audience, yet finding the right balance of style and substance isn't easy. Some companies have made theirs far more user-friendly, according to Mike Guillaume, director of, a Belgian firm that analyses 1,000 reports a year, but too many are still failing to present key information clearly and concisely.

One of his main gripes is that reports are getting fatter. Much of this, he says, is a result of the latest raft of compliance requirements. According to Deloitte, the average annual report in the UK has increased by almost 60 per cent in the past decade. Guillaume blames the Sarbanes-Oxley Act 2002 for the marked increase in the girth of US annual reports.

"The tendency is for companies to pack the information in one large chunk," he says. "They need to spend much more energy on sorting out the data and refining it. This is where the art of communication comes to the fore."

The result of poor data analysis can lead to one of two extremes. Either the report becomes a doorstep, weighed down with a mass of dense information, or it's over-designed, with a range of attractive but fairly useless graphics at the front and a block of raw data at the back.

Another recent trend is the increasing involvement of FDs in compiling reports. After Enron, directors in the US are anxious to cover themselves against any liability, so everything has to be triple-checked, according to Guillaume, who welcomes the change--in principle, at least.

"If you have an FD on board, it usually results in a much better quality of report," he says. "The FD's involvement means better accountability, although too much involvement can lead to a very dull document. A team incorporating the FD and the marketing, corporate communications and investor relations departments is the best scenario."

One of's highest-rated annual reports was produced by Swedish paper and packaging firm SCA. Its 2004 document was one of the slimmest of the year at 100 pages, but still presented a detailed breakdown of the company's progress that year. It won top marks from for its explanation of financial risk management and its "crystal clear" summary of the business's transition to international financial reporting standards. It also produced a separate CSR report, which included product- and region-specific charts giving a vivid picture of the business's social and environmental impact.

"Above all", Guillaume says, "SCA's report shows that the firm knows it's being read not only by its current shareholders but also by potential investors who need a clear idea of the links between the business's activities and its financial performance." Here's to more tasty pastries and fewer cream puffs.

For many finance directors the highs and lows of an IPO are swiftly followed by the harsh realities of life as a listed company, writes Steve Kemp. Producing the annual report is often one of the first big challenges, according to the results of a recent survey commissioned by my financial reporting consultancy, Emperor Design.

The researchers aimed to determine how newly listed firms tackled their first annual report, what problems they faced and what advice they would give to others embarking on the same process. They interviewed FDs from a range of AIM and small-cap companies that had listed over the previous three years.

One of their key findings was that companies consistently underestimated the amount of time required to do the job. More than half of the respondents found the front sections the directors' statements and the CSR and corporate governance reports--the hardest to produce. …