Preparing for your Business Review and the Companies Bill

Tony Hoskins

The changing nature of company reporting

Report format Purpose of the reporting

The Business Review - statutory for all companies –SI 2005

Enhanced Directors’ Report – fair review of the business, incl. principal risks and uncertainties and KPIs – effective 1/4/2005

The OFR for listed companies – voluntary

Assist members to assess strategies and their potential for success – (new Reporting Statement - the only available guidance)

The Business Review -under the Companies Bill

Extra requirements for listed companies plus new Directors’ role – effective 1/10/2007 - tbc

How have companies coped?

12 FTSE100

4 FTSE30

9 FTSE200

Research amongst 25 listed companies with 31st March reporting – out of a total of 39

Assessing compliance with BR requirements – and the extent to which they built an informed picture of the company for shareholders and investors

48% produced an OFR – But the devil lies in the detail!!

The research findings - 1

27 pp – BR/OFR

ave. length

1 in 3 gave further explanation

to the accounts

A few hadboth a BR & an OFR

Very little explanation about the purpose of the BR

Companies were

generally good at giving

a fair review

The weaknesses lay in

the “balanced and comprehensive” – particularly the strategies & outlook for business areas

The research findings - 2

Risks – Tended to

be a list

Ave 11 –Max. 33

- few companies reported mitigation

KPIs – clearly caused

problems – too few could identify

KEY measures

The weaknesses:failure to identify the KPIs used to manage the business

very few related to key business areas e.g. customers or employees.

Ave 2 financial &

c.5 non financial- max 33

The research findings - 3KPIs – Very few

companies reported

> 2 years’ data

How well does this help investors judge a

company’s performance?

Report development –

the BRs appear drawn up in a silo fashion

Alignment requiredbetween business segment

strategy and outlook, the risks and the KPIs

Companies producing an OFR – Better quality

statutory BR reporting

Suggests thatRS1 gives a useful structure,

in the absence of BR guidance

FTSE30 more complete in BR reporting than FTSE100, and FTSE200 counterparts

And the new BR requirements?Gives BR an

additional rationale with the new role

of directors

Extends KPI reporting – specific requirements for non-financial areas

Effectively creates the BR for listed companies,

similar to the OFR

Report on policies related to KPIs

– & comment on their effectiveness

Preparing for the BR – now and in 2007

A multi-functional approach

Streamline corporate reporting

Consistencyacross

qualifying subsidiaries

Execs & Non-Executives –

aware of the new role

Mock up the BR to “touch and feel”

Identify the key issues

under the BR A system to assess policyeffectiveness

But the most important questions!

Do BR’s and the OFR's help

investors and shareholders gain a more informed view

How can your BR preparation

help you improve your business’ reputation

What are investors looking for

from your BR reporting?