Management Information Reporting - AUEB · Management Information Reporting Link market discussion...

Management Information Reporting

ΒΗΜΑ ΤΩΝ ΕΠΙΧΕΙΡΗΣΕΩΝ

March 2015

For educational purposes only

PwC Limiting Liability

During the training services, lecturers act solely in their capacity as such and in no other professional capacity such as, but not limited to, advisors, accountants, auditors, tax experts, valuers etc.

Conclusions, views and opinions expressed by the lecturers or in the distributed course materials do not consist in any way conclusions, views or opinions of PwC or any other member firm of the PwC International Limited (PwCIL) network of firms, each member firm of which is a separate legal entity.

Services rendered under this seminar are solely training services and do not consist any other type of service that may be rendered by member firms of the PwC International Limited (PwCIL) network of firms such as, but not limited to, audit and assurance services, due diligence, valuation, tax, accounting or legal services.

PwC cannot be held liable for decisions taken by participants based on the training courses and the material distributed. Course material, examples and case studies distributed are intended only for training purposes and should not be used as a basis for decision making.



Slide 2March 2015

Integrated Reporting – telling your story



Slide 3

March 2015

Are you getting your message across?

March 2015

Slide 4For educational purposes only


Are there gaps in the annual report?

March 2015

Slide 5

Source: Ocean Tomo 2010, “Intangible Asset Market Value Study”



There are many other sources of information

March 2015

Slide 6

“Today the data we have available to make

predictions has grown almost unimaginably large: it

represents 2.5 quintillion bytes of data each day,

enough zeros and ones to fill a billion books of 10

million pages each”

Nate Silver, author of “The Signal & the Noise”



And yet length and complexity is a problem

March 2015



Growth in regulation

March 2015

Slide 8

2013: 3,382 pages

1993: 370 pages



Number of

pieces=40

Big Picture

Close-up pictures

(partial connectivity)

without big picture

Pieces of

information without

connectivity

Number of

pieces=40

Number of

pieces=40

‘How’ is as important as ‘what’: joining the dots

March 2015



Integrated reporting

“A process that results in communication by an organisation about value creation over time.”

“An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long term.”

(IIRC Consultation Paper, April 2013)

March 2015



Key differences to current reporting

• Broader scope – Financial and non-financial ‘capitals’, including stakeholder relationships, as drivers of long term value

• Integrated thinking– bringing together different parts of the business

• Integrated information – Business model, market drivers, strategy, risk, remuneration, governance, performance.

• Aligning internal and external – Alignment between internal and external measurement and reporting processes

March 2015



Investor perspectives

March 2015



What do investors look for in annual reports?

• Apply the following principles:

- Reflect economic reality – substance over form

- Transparent and comprehensive disclosure

- Clear, understandable, consistent and relevant

• And help them to understand:

- How profitable is the business?

- How much cash is it generating?

- What assets are being employed?

- What risks are being taken?

March 2015

Slide 13

Source: Corporate Reporting Users Forum



Why bother? The Coloplast experiment

March 2015



Where do investors think reporting could improve?Some quick wins - Segmental disclosure

• Investors analyse businesses from the bottom up

• Alignment with management reporting is helpful, but aggregation has to make sense

• Going beyond the minimum required disclosure (eg operating cash flow by segment) makes a real difference

March 2015



Winning the competition for capital: Cash and debt disclosure

March 2015

Slide 16

• Clearer explanations and reconciliations in the cash flow statement

• More detail on capital expenditure

• Net debt reconciliations are highly valued

• Debt maturity tables could be improved beyond the IFRS requirements (although sector as a whole does well here)

• Covenant restrictions and terms would be helpful



Cutting the clutter:a practical approach

BT Group

March 2015



BT’s Annual Report Our Journey

Our purpose

Our annual reports through the years

A real challenge – the length of the reportOur annual report length has increased from 176 to 196 pages over the last 7 years.

Our challenges - How is it best to cut the length?

And how do we ensure readers see what is important within this?

0

50

100

150

200

250

2007 2008 2009 2010 2011 2012 2013

Num

ber

of pages

Year

Financial statements:

Between 94 and 107

pages over period

Business review: Increase from 72 to 97

pages over this period

Attacking the dense text

2009 Annual Report

Financial instruments note

2013 Annual Report

Financial instruments note

Extra information – when is ‘more’ worthwhile?We have also added detail to helps users interpret information held in the financial statements. The net debt maturity profile was well received.

Helping our readersA picture can tell a thousand words.

More graphics – following emerging practice

• 2009 Annual Report

• Remuneration report

• 2013 Annual Report

• Remuneration report

Linking performance measures to strategy

Bringing the story to life – use of case studies

A range of media

Reduction in printed, hard copy distribution

Numbers distributed to shareholders in hardcopy

Full ARA SFS

2008 6,300 1,055,000

2013 4,900 175,100

Fallen by 20% 83%

… while the online version of

our 2012 annual report has

had over three million hits

Where are we now?

International Integrated Reporting Council Perspective

March 2015



To mislead or to inform?

• Alternative performance measures are generally very relevant anduseful when used in combination with defined measures

• Inconsistent use of measures affects credibility and weight given by investors

• Credibility and transparency of disclosures to be enhanced by:

- Compliance with qualitative characteristics

- Clear definitions and headings that reflect content of the measure

- Presentation together with defined measures and provision of reconciliations

- Consistency and comparatives

• Industry consensus on alternative measures used will enhance credibility and usefulness for investors

March 2015



Link market discussion to strategic choices

IIRC pilot programmeHeadline findings

March 2015

Slide 32

40%

Discuss future market trends

83%For educational purposes only


Base reporting on strategic themes

21%


March 2015

Slide 33

Include strategic priorities

94%

Embed sustainability in strategy



Integrate business model into other areas of reporting


March 2015

Slide 34

40%

Make reference to their business model



Report priorities for non-financial capitals


March 2015

Slide 35

17%

Identify one or more material capitals



Integrate risks into other areas of reporting


March 2015

Slide 36

23%

Report principal risks



Identify targets for KPIs

47%


March 2015

Slide 37

Explicitly identify KPIs

71%

Some alignment of KPIs with strategy



How does our industry measure up?PwC European benchmarking 2012

March 2015



Thank you!

Slide 39

March 2015For educational purposes only


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