Delivering on the promise
Balancing communication priorities with the technical obligations has always been a challenge of reporting.
While the annual report undoubtedly presents an opportunity for companies to communicate their story and vision clearly and concisely, it is important to remember that the purpose of the Annual Report under the UK Companies Act is ‘to inform members and help them assess how the directors have performed their duty to promote the long-term success of the company’. Indeed, the FRC’s current consultation updating the Guidance on the Strategic Report emphasises the Report’s purpose and expands on this point to include the interests of stakeholders more broadly.
It is important to remember that the purpose of the Annual Report under the UK Companies Act is ‘to inform members and help them assess how the directors have performed their duty to promote the long-term success of the company’.
Thus the Annual Report, in addition to setting out the company’s story, must also disclose information that enables shareholders and other stakeholders to evaluate how the company is performing and identify the potential impacts on long-term success. To do this, the Report should articulate how the company is delivering on any promises, by including a balanced discussion of its performance during the year, highlighting challenges and opportunities, and reporting on metrics which clearly show the company’s progress.
In addition – and, arguably, more importantly – the Report should take a longer-term perspective, incorporating forward-looking information on the company’s strategic objectives, the key risks to achieving these objectives, and the actions the management team is taking to mitigate these risks.
In this way, the Annual Report demonstrates how the company is delivering on its promises and focusing on long-term success.
To read more about best practice reporting and communications for Small Cap and AIM listed companies take a look at our reporting showcase.