CorpComms Magazine

Experimenting with the statutory annual report may seem risky. But Nick Jefferson, chief executive of Likemind, thinks that experimentation is a major feature characterising online reporting today. And speaking to several communication agencies in the reporting field, it seems he has a point. Far from taking a regulatory tick-box approach to the annual report, companies are using it to convey some of the most important messages about their business - and they are testing out the best platforms with which to do that.

For the biggest UK companies at least - that is, the biggest 100 companies listed on the London Stock Exchange who comprise the FTSE 100 - the rise of the online report continues apace. 'More of the reporting budget is moving online,' says David Stocks, founder and client partner at SAS. 'We have a real sense that the compliance led way in which reporting has been happening in the print documents over the past few years has not led to greater understanding or engagement with the company strategy. There's now a move towards very simple printed annual reports alongside the online version.' For smaller companies, the take-up appears to be more gradual. Barry Dunne, head of investor relations at Radley Yeldar, has seen increasing numbers of organisations outside of the FTSE 100 producing online reports. For Scotland-based design consultancy Tayburn, however, the shift to online is not quite so apparent among its smaller FTSE 250 clients. 'These companies that have around 5,000 shareholders do not face such onerous print costs, so there isn't the cost incentive to migrate online. If they do so, it is because going online makes it easier to access information,' says Tayburn director Steven Mitchell.

The cost of HTML

In fact, lowering costs may not now prove much of an incentive to move online anyway. 'The cost of producing an online report is creeping up to where the print costs would have been. And with print getting more efficient, you may find you've spent more online than you would have done on a print report,' says Cliff Hide, head of investor relations, Europe, at Imagination. His rationale lies in the increasing complexity of the online proposition. Many companies have incorporated Flash into their online reports - whether in supporting animation or charting tools. The online annual report for supermarket group J Sainsbury is one of the most sophisticated (and no doubt expensive) examples of this approach, enabling visitors to tour a high street branch, picking up company information as they go.

Added to that is an increasingly popular use of video and the introduction by some of social media - for example, including a blog alongside the report. 'More reports are providing additional tools and functionality to help users access the information in a format of their choice. This has been supported by greater use of video to profile the management or showcase their operations,' says Henry Sanford, digital director at Black Sun. Dunne sees a similar trend. 'The integration of moving image into reports has already become more widespread throughout the FTSE, particularly for executive interviews,' he says. 'Social media will also become more relevant to reporting. It helps companies communicate this type of content to a wider audience and engage in two-way communication with various stakeholders.'

Just as the technology is advancing to enable a multimedia approach, so are the platforms multiplying on which to deliver it. 'You may have something that looks good on your PC, but will it look good on a Mac, and on Internet Explorer, Firefox and Chrome? And then there's the consideration of delivering to mobile devices too,' says Hide. 'Companies are finding an increasing amount of resource and budget going to online distribution, even though online was meant to get away from that.'

The complex demands of delivering a full HTML annual report may, in fact, have resulted in a number of companies pulling back - especially where web analytics do not support the case for spending lots of resource on it. 'The hit rates on HTML reports have shown that, for some companies, it doesn't always represent good value for money,' says Stocks. 'Instead they are opting for searchable PDFs - from which you can build your own reports.'

Imagination's Hide found a similar issue when looking at annual report usage statistics. 'Measurements show that a lot of users seem to spend about 30 seconds on the homepage before drilling down really deep into the reports - for example, straight into the financial statement. That's the behaviour of someone who knows what they want and where to find it,' he says. The site for Sainsbury's may look beautiful, but as Hide found, it also takes a couple of minutes just to load on an average PC, a frustrating lag for an analyst or investor looking for specific information quickly.

Sainsbury's - and other similar organisations - has a good rationale for building such a sophisticated online proposition: the need to communicate to an incredibly broad audience, including consumers. But for other companies with a narrower audience, the case may not be so compelling. 'More clients are using smart PDFs than the full bells-andwhistles HTML site,' says Likemind's Jefferson. 'It depends on the message - those that have a large retail or branding message that need to go to a broad range of stakeholders will often go with the HTML. But PDF is a lot easier and cheaper. Some are doing both.'

Mobility and continuous reporting

The possibility of reporting via mobile devices will likely only increase this experimentation with the options. 'Online content is increasingly being visualised on iPhones and soon-to-be iPads,' says Dunne. 'The user experience for these devices is different to an HTML report; organisations will need to think about the appropriate nature and format for reporting content for these devices.' For Black Sun's Sanford, the prospect may have profound implications for online reporting. 'With increased access to online content via smartphones corporate reporting is moving towards more continuous reporting and ongoing engagement as opposed to just an annual update,' he says.

And, if continuous reporting becomes more of the norm, there may be further changes. 'Should organisations start to move more towards real-time or continuous reporting, it is likely they'll feature more of this content within the IR section of their website - this approach will restrict engaging communication in exchange for functional content,' says Dunne. 'From a resource perspective the distribution of reporting content may become a more automated process through mediums such as RSS feeds.'

For many, such a move to continuous reporting still seems unlikely - as much as anything because it would not support company strategy. 'It's one thing having continuous relations with your shareholders - that's fundamental,' says Jefferson. 'But I think continuous reporting would be a pain for everyone. You'd have the complication of having to get endless sign-offs as well as delivering a short-term approach that the market doesn't want right now.'

In fact, what seems to be more pricking the ears of many agencies is the move to integrated communications via reporting centres. 'Overall we're seeing a trend of companies trying to align/integrate financial and non-financial reporting by presenting the information alongside each other and by providing relevant links to supporting information,' says Sanford. Such an approach that has gained praise is that by global security firm G4S, which combines its annual report and accounts, as well as corporate social responsibility report in one portal - including a number of videos from senior management explaining strategy, services and the company's financial review. 'A reporting centre gives companies a greater ability to tell a bigger story,' says Jefferson. 'I think G4S is one of the best at this.'

Where to start

Where there is an increasing amount of choice and change in annual report delivery, it may be hard for companies to know where to start. Kate Shaw, chief executive of Living Group, adds: 'Forget about conversion from print to online. Plan your content to suit your media.' Tayburn's Mitchell warns against getting sucked into a race to do something that is showy. 'Remember, it's about delivering cogent information about your company,' he says. Stocks agrees, saying that there are a lot of companies currently being reactive. 'You've got to think about what you're trying to say and there really needs to be a strategic message map going on for longer than just a year.'

For Imagination's Hide, the process has to start with a consideration of the audience - what are they looking for? If considering moving the annual report online, he urges companies to consider the rationale: it may make sense, for instance, if you want to broaden your shareholder base and/or attract an international audience. 'You have to have a good reason for doing it, or you might just end up adding costs to the process,' he says. Hide also thinks it's important for companies to prioritise online or print. 'All designers in the process need to be able to focus on the most important document and then spin the other off it,' he says. 'And you've got to consider the technical side: do you want to make it available on Macs and iPhones, and the like?' Mitchell adds that the migration online need not happen overnight - firms can test the online proposition before deciding whether to shift priorities away from the print version. 'For a smaller business the expertise is in the printed report, so it's better that the thrust of the effort initially remains there. But in year one, you might produce a smart PDF document. Then year two, you could do a part HTML report, adding some further functionality in year three. So you're learning and resourcing up, as you go,' he says.

Once an online strategy is agreed, there is then the challenge of agreeing the content - a point that, in itself, raises a potential challenge. Shaw adds: 'Three things make a great online report; content, content, content. Analyse your content and decide where you really need genuine interactivity. Don't assume that the financial statements are fine.' There is a regulatory demand, for instance, to include the same content in both the print and online versions, but most companies have realised that successful online reports are rarely those that merely replicate the print version. 'Within the report, you've got a balance of communication and regulation, but nobody is quite sure what's allowed and what isn't,' says Paul Owen, managing partner of the College Group. 'There are a lot of grey areas, for instance, around how different your online version can be to your print version.' Jefferson agrees, saying: 'You have to be careful about providing the same information online as you do in print. We're quite surprised that the regulators haven't picked up on the businesses that are taking a quite relaxed view of that.'

The answer may lie with Radley Yeldar's Dunne. 'Annual reports whether delivered in print or online should tell the same story - they are simply different mediums,' he says. As long as the auditors also recognise this then the very different style of online communication will likely prevail. 'You've got more flexibility and space to develop a message in print, but online you have maybe a paragraph at most to play with, before people will click away,' says Hide. 'The message therefore has to be quite succinct and very catchy. No-one is going to plough through five or six pages of a chairman's statement.' Owen reinforces this point saying that the language has to be far more easy-going and vernacular, with Berkshire Hathaway, the investment vehicle for American billionaire Warren Buffett, and Caledonia Investments winning his particular praise for calling, as he says, 'a spade a spade'

Why online?

A problem that firms might also face is attracting people to the online version. 'One thing about the printed annual report is that it is a very proactive form of communication. It goes out to people whereas you have to go to the website to find the online report,' says Owen. But with announcements increasingly linking through to mobile devices, such obstacles may be transitory. In addition, while a printed report may land in your shareholder's lap, there is no guarantee that he or she will actually read it. In fact, web analytics are already providing companies with one of the best reasons of all for moving online: interest can actually be measured. They can then adapt their reports each year to areas of the report where they know shareholders spend time.

As for the cost of moving online, there is little doubt that some companies are finding the demand on resources more onerous than expected. But that may be a relatively short-term problem as firms are still testing the waters by producing both full print and online reports. Once priority is given to the online version, costs can be more easily rationalised. Many companies, for example, have already ditched the highquality print reports for a much cheaper version that merely backs up the online version. Sanford thinks that concerns over online costs may actually be misplaced. 'When budgets are tight the online report can be seen as an easy casualty when actually it's the most cost-effective way of reaching a much wider audience,' he says. 'A far better solution is to focus the online budget on the key parts of the report that add the most value to the communication - for example, by explaining the strategy in an engaging way or showcasing the operations of the business.'

Just a few years ago, it is unlikely that companies would have ever predicted that the annual report could be such a cause for excitement. But companies are increasingly recognising the opportunity of the annual report to truly engage shareholders. And that seems to be opening up a world of possibility.

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