Here’s why you should invest: Say it in the annual report

Jul 20, 2017
Growing number of FTSE 100 firms publish investment proposition in annual report, notes Black Sun

Almost a third (31 percent) of companies now publish ‘a clear investment proposition’ in their annual report, according to new research from Black Sun – a figure that’s up from just 20 percent in 2015.

The Complete 100 research, now in its 12th year, looks at every FTSE 100 report in detail. Last year’s report was titled ‘Ticking the boxes but missing the point’ and focused on how companies were – or were not – communicating their value creation story. This year’s research focuses on three key themes Black Sun says are emerging across FTSE 100 annual reports: ‘value creation, evidencing long-term thinking and stakeholder insight’.

Explaining its thinking behind the title of this year’s research – ‘The real drivers of value: Lost and found’ – Black Sun says in a press statement that ‘while many companies are still in their infancy when it comes to articulating a fully credible value creation story, there is clear momentum around a number of common themes. These include a focus on stakeholders and wider purpose. 

‘The research also reveals cautious attempts at long-term thinking. There is quiet optimism of incremental progress over time as companies start to feel the pressure from regulators and other stakeholders, and begin to realize the benefits of reporting on these themes.’  

As well as increasingly setting out the investment proposition, Black Sun notes two other areas of improvement related to investor reporting:

  • Investing in new capabilities: More than three quarters (77 percent) of FTSE 100 firms outline how they are ‘investing in building new capabilities’
  • CEO leadership statement: Sixty-one percent discuss forward-looking market trends in this section of the report.

But the research also highlights two areas companies need to improve on, both centered on strategy:

  • Planning and strategy: Three quarters (74 percent) of FTSE 100 companies ‘still draw no link between succession planning and strategy’
  • Strategy timeframes: Sixty-nine percent fail to set timeframes for all of their strategic goals. In fact, within the annual report, just one in 10 companies sets out a timeframe for strategic priorities five or more years into the future.

Of course, there are examples of excellence among FTSE 100 annual reports, and Black Sun does highlight some best practice in its research, such as outlining the steps both the board and the nominations committee have taken to ensure a pipeline of leadership positions – with skills tailored to the company’s strategy. 

Another example is setting ‘milestones the company needs to reach in order to achieve its strategy over the long term’, while providing ‘further explanation of the link between remuneration structures and strategy’ also gets a mention. 

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