Skip to 0 minutes and 4 seconds It’s all very well being successful, but how do you let the outside world know how you are performing? We have an entire function based in our global headquarters in Germany called Investor Relations. And these people are employed to work alongside our internal finance functions to find out the financial information, and then share that financial information with the analysts in the financial institutions. That’s their reason for being. So they are absolutely specialist and know what they can and can’t say, obviously within a very strict legal framework when you’re a public company. And certainly from the point of view of customers, suppliers, employees, we would always share financial data.
Skip to 0 minutes and 48 seconds It might be historic financial data because, of course, obviously anything with a future dimension to it will start to become sensitive. Equally, we want it to be relevant as it’s important that we don’t phase our customers, or phase our suppliers or employees with information as it is anybody else. So we would always want to tailor that information to become relevant and useful to them. Most large companies have an Investor Relations section to their websites. This contains the full annual report often supported by spreadsheets that can be downloaded as well as forecasts, trading updates released in between the formal reports, and press releases. Companies used to send out written reports to their owners, the shareholders, at least once a year.
Skip to 1 minute and 29 seconds This has changed recently, and now they use the internet and social media to keep interested parties up to date on a more regular basis. We report quarterly anyway, so we report quarterly plus then the half-year and the full-year results. So there are six sort of external touchpoints a year, and that would be reporting them to the stock exchange and to the financial community. All of that goes up on our website. As new technology has opened up more communication channels, it has become even more important for businesses to convey the right message at the right time with accurate data.
Skip to 2 minutes and 4 seconds If a company releases information to the market that is subsequently found to be inaccurate, this can cause the share price to fall as investors lose confidence in the reliability of the company’s information. And there may be other consequences such as regulatory investigations, which follow on from mistakes in reporting. In other cases, the misleading information may be the result of deliberate action rather than an inadvertent error. Where this has happened, the consequences can be much more severe and long lasting as has been emphasised by high-profile scandals such as the Enron case in the United States, which resulted in bankruptcy for the company and new regulations regarding financial reporting affecting other companies listed in the US.
Skip to 2 minutes and 52 seconds Traditional annual reports largely contain backward-looking financial information, reporting on financial periods which are already complete. However, there are also elements of forward-looking information in the annual reports and in companies’ other external communications. Well, obviously in the case of an annual report, you’re reporting on the year just passed, so that an historical backwards-looking document. But there’s an element of it now which gives you strategic insight for what our plans would be from a sort of strategic objectives for the next three to five years. In terms of the information we provide on a quarterly or particularly half-year and yearly basis, there will be an element of forward-looking guidance.
Skip to 3 minutes and 35 seconds And we provide guidance actually around gross margin targets for both sides of our business in terms of general merchandise and foods. We’ll provide some guidance around space and store openings. We’ll provide some guidance on the level of capital expenditure. So typically we provide a number of elements of guidance. But as a publicly quoted company, we provide a lot of data points and have done for a number of years. As we have already seen this week, financial success is a crucial component of business success. But success is also measured along non-financial dimensions by most organisations. Therefore, in recent years external reporting by listed companies in particular has tended to include more non-financial information, particularly regarding sustainability.
Skip to 4 minutes and 23 seconds A large element of our shareholders will be very focused on the environmental factors and the CSR, or plan A. And we publish a separate document in conjunction with our annual report and accounts, which is our annual report on our performance against our 180 commitments under plan A. So that is a very far-reaching document. And again, most of those will be non-financial. Companies in the UK and in many other countries around the world are also required to hold an annual general meeting, or AGM, which is an open meeting at which shareholders hear from senior management and can vote on major decisions such as whether to accept a takeover offer, changes to board members, and directors’ pay.
Although measuring and achieving success are important, an organisation also needs to be able to effectively communicate its success to the wider world.
In this video, Alice considers how businesses go about reporting their financial information to investors and other stakeholders.
We’ll look at traditional forms of communication, including annual reports and the Annual General Meeting (AGM). We’ll also see how new technology has given organisations greater opportunities to report their achievements, and at the same time presented new challenges and risks.
In the next step of the course we’ll look in more detail at stakeholders. Who are they exactly and what kinds of information are different stakeholders most interested in? We’ll then take a closer look at annual reports and how they can be used to understand and analyse an organisation.
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