Despite all the painstaking work that goes into producing an annual report, the average reader takes just three minutes to flick through their copy, according to German consultancy Strichpunkt. With this in mind, IR magazine and London-based 35 Communications put together a panel to trawl through 40 annual reports from a select group of US and European companies and determine whether their investment story could be understood in three minutes. Reports were then ranked on their ability to communicate the ‘three-minute investment story’.
1 WPP (UK)
This monolithic communications group did a great job of quickly explaining how its business was put together and managed to produce an annual that was lively and engaging as well as informative. ‘It’s a nightmare of a company to explain, and I liked the fact that it was all spelled out,’ one judge commented. ‘You could actually conceive of sitting down and reading this report, whereas most of them seem designed to stop you in your tracks.’
2 Reuters (UK)
Perhaps unsurprisingly, our runner-up is also in the world of communications. It might have been through some difficult times in recent years, but Reuters now seems to be back on track, and this was evident from the report’s content. The company’s strategy was relayed in a crisp and effective manner. ‘Clearly, this is a business that’s on the up again,’ said one judge. ‘I know how they are doing and what’s likely to come next.’
3 Barclays (UK)
The British banking group led the way for the financial services industry with its strong communications and detailed explanation of performance across its various sectors. One of our panel commented: ‘There’s a good explanation of the company’s business model and risk factors, presented in a very clear way.’
4 Wolseley (UK)
The authors of this report had a no-nonsense approach and got straight into what investors really want to know about: the growth story. ‘It really gets to grips with how the company will continue to grow and lays out the context clearly,’ said one reviewer.
5 Novartis (Switzerland)Pharmaceutical companies tend to go over the top with gushing statements about their desire to cure the world’s sick. The first non-UK company in the rankings, Novartis broke the mould by bringing its investment story to the fore in a clear and convincing fashion.
6 GE (US)
GE emphasized the ‘big’ in its small but well-formed report. For a complex company, it did a good job at explaining the company’s investment story in three minutes. The panel was left divided as to whether the ‘ecomagination’ concept constituted a statement of intent about the importance of sustainability to GE’s growth strategy or just a clever PR stunt.
7 BP (UK)
Judges were also split on whether BP did a good job within the allotted reading time. One member argued that this report ‘addresses the issues for this sector, but it’s a little bit too vague to assure me of its success.’
8 Coach (US)
This was perhaps the only report our panel looked at that could pass itself off as a fashion magazine. While most glossy photos in annuals are irrelevant, Coach used its report to make the point that its brand is its biggest asset. ‘It explains the company’s outlook and strategy in a nutshell,’ said one judge.
9 Telefónica (Spain)
While the other Spanish companies we looked at struggled to condense their information into a concise and legible format, Telefónica managed to distil its key strategy and drivers of progress into an efficient three-minute read. ‘The report paints a very good picture of the breadth of the business,’ according to one adjudicator.
10 Reed Elsevier (UK)
Professional information publishing might not be as sexy an industry as fashion, but that didn’t impact on Reed Elsevier’s ability to communicate effectively. One judge commented: ‘Good explanation of what they do and how they have done. I would like a bit more on the future though.’
11 Royal Philips Electronics (Netherlands)
Philips had a well-developed strategy and was prepared to test it against how the company performed in the past year and how it expected to do in the future. It is rare to see a company assess whether or not it has met its targets in such a transparent and upfront fashion.
12 PSA Peugeot Citroën (France)
Peugeot’s report started and ended well, with a good explanation of the company’s strategy and business model. It’s just a shame the company had to fill the bulk of the middle with a succession of professional yet utterly pointless photographs of the cars it makes. If we’d wanted a showroom brochure, we would have picked one up ourselves.
13 Aviva (UK)
Good, but little to mark it out. ‘A competent report of the year just gone, but there’s little there to get me excited about Aviva’s future intentions,’ commented one judge.
14 Diageo (UK)
Although one of our panel called Diageo’s annual ‘concise and straightforward,’ adding that ‘it seems as though there’s nothing to hide,’ this report seemed to lack a clear vision for the future of the business.
15 Cadbury Schweppes (UK)
This was another report that generated some mixed reactions from the panel. Judges were divided as to whether they could get a real feel for the company’s investment story in three minutes.
16 Reckitt Benckiser (UK)
The worst (or best) proponent of the schizophrenic approach to annual reporting, Reckitt Benckiser produced a dull, characterless annual report (presumably aimed at professional investors) and a flashy but vapid annual review (slanted towards the retail holders). One judge did think this was an ‘innovative’ approach.
17 RWE (Germany)
This report was commended for a style and tone that was more approachable than many. ‘There is strong presentation of what the company does, alongside an outlook that includes a special section on risks,’ said one judge.
18 Merck (US)
This company’s honest approach, saying that it would strive to recover its position as an industry leader, stood out. Merck’s comeback strategy convinced one adjudicator, who said: ‘I felt motivated by Merck because it sounded like a good strategy.’
19 Adobe Systems (US)
Adobe’s stripped-down 10K filing didn’t make you want to pick it up and leaf through it, but sometimes the words can speak for themselves and the company did a great job of explaining its business drivers and underlying risks. It also engaged directly with the challenges it faces from its competitors.
20 SAP (Germany)
SAP’s annual was ‘very human and engaging and feels global and positive about the future,’ according to one member of our panel.
21 Berkshire Hathaway (US)
And so to Warren Buffet’s unique view on how to communicate with shareholders: write them a long letter. You either love his approach or hate it. Three judges took the former view and one dissented, sending Berkshire Hathaway further down the rankings than it otherwise would have been.
22 Rio Tinto (UK)
Rio Tinto presented its information well, but there wasn’t much in the way of strategy.
23 Royal Bank of Scotland (UK)
Royal Bank of Scotland did a good job of explaining how the parts of its business fitted together. As one judge pointed out, however, ‘it failed to engage or communicate efficiently.’
24 Aflac (US)
Aflac’s approach divided the judges yet again. One said there was no clarity of information or business case, while another praised the financial highlights on the first page.
25 British Land (UK)
This report was dominated by constant reminders that the company is now in its 150th year, an approach that one panelist termed ‘obfuscatory.’ ‘The company seems more concerned with reminding you that it’s been around since 1856 than it is with telling you what’s going on now,’ this judge said.
26 HSBC (UK)
Although HSBC’s presentation was unexceptional, its company’s investment strategy was upfront and clear. One of our panelists felt the company was way behind its competitors, though: ‘This was completely indigestible and not of a sufficient quality to stand up against its peers.’
27 E.ON (Germany)
E.ON isn’t the first company to claim that its people are its greatest asset, but it probably is the first to have pictures of staff in company uniform on nearly every page. The financial highlights section was strong but the rest of the report left much to be desired, with one judge describing it as ‘a reference book, not a communication.’
28 Royal Dutch Shell (UK)
Shell comes in way behind main competitor BP as it struggles to regain the confidence of the market. While Merck managed to lay out its recovery strategy in a clear fashion, Shell’s investment story seems to get lost in the detail of a rather dull report.
29 Boeing (US)
An average effort. One judge said: ‘They have some clear initiatives and are on the way back. The case studies seem innovative.’
30 XTO Energy (US)
It’s not good if your readers can’t get a clear idea of what the company actually does. XTO’s report contained ‘too much business talk and psychobabble.’
31 Total (France)
This was a comprehensive report – far too comprehensive. There was too much detail and no real hierarchy in the way the information was presented. As one panelist put it: ‘There’s a huge amount of detail about all aspects of the business, but where’s the meat?’
32 BASF (Germany)
Similarly, BASF struggled with the concept of ordering information. ‘It’s probably all in there somewhere, struggling to get out,’ said one judge.
33 Royal KPN (Netherlands)
Another uninspiring affair. There was ‘just nothing in there to engage with the reader or get specific messages across,’ according to one adjudicator.
34 GlaxoSmithKline (UK)
There was lots of detail here, but you can’t decipher the story speedily. ‘There’s no real performance evidence, just a lot of numbers and self-congratulation,’ said one judge.
35 UBS (Switzerland)
The global banking group split its annual reporting into three volumes: a financial report, a handbook and an annual review. With three books to get through, this approach made it very difficult to determine the company’s investment message in the average three-minute read.
36 Hartford Group (US)
Hartford’s annual conveyed a good sense of the company’s product range but not of its prospects and drivers. ‘At least the case studies helped me understand what they do, but it’s not very readable,’ said one panelist.
37 Costco (US)
Costco’s report went for a very basic format and successfully explained the business model at a simple level, but was ‘not sufficiently sophisticated to pass muster in today’s world.’
38 Endesa (Spain)
According to the judges, Endesa’s report made ‘no attempt to communicate’ and as a result was ‘deadly dull.’
39 Iberdrola (Spain)
Iberdrola produced a collection of detailed, weighty tomes that did everything but explain why you should invest in the company – very much a case of ‘full marks for intention, near zero for achievement.’
40 Eni (Italy)
It was a similar story (or lack of one) at Eni. As one judge said: ‘I can’t find what I need, but there’s lots of it.’
The Judges
Mike Tuffrey, a trained chartered accountant, is a founder and director of the Corporate Citizenship Company, a London-based CSR consultancy.
Nigel Forsyth is a director of 35 Communications, a London-based annual report design
and branding consultancy.
Adrienne Baker is editor-in-chief of IR magazine.
Ben Bland is international editor of IR magazine
