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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.
For educational purposes only
Management Information Reporting
Slide 2March 2015
Integrated Reporting – telling your story
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Management Information Reporting
Slide 3
March 2015
Are you getting your message across?
March 2015
Slide 4For educational purposes only
Management Information Reporting
Are there gaps in the annual report?
March 2015
Slide 5
Source: Ocean Tomo 2010, “Intangible Asset Market Value Study”
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Management Information Reporting
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”
For educational purposes only
Management Information Reporting
And yet length and complexity is a problem
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Slide 7For educational purposes only
Management Information Reporting
Growth in regulation
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Slide 8
2013: 3,382 pages
1993: 370 pages
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Management Information Reporting
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
Slide 9For educational purposes only
Management Information Reporting
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
Slide 10For educational purposes only
Management Information Reporting
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
Slide 11For educational purposes only
Management Information Reporting
Investor perspectives
March 2015
Slide 12For educational purposes only
Management Information Reporting
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
For educational purposes only
Management Information Reporting
Why bother? The Coloplast experiment
March 2015
Slide 14For educational purposes only
Management Information Reporting
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
Slide 15For educational purposes only
Management Information Reporting
Winning the competition for capital: Cash and debt disclosure
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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
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Management Information Reporting
Cutting the clutter:a practical approach
BT Group
March 2015
Slide 17For educational purposes only
Management Information Reporting
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
Slide 30For educational purposes only
Management Information Reporting
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
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Slide 31For educational purposes only
Management Information Reporting
Link market discussion to strategic choices
IIRC pilot programmeHeadline findings
March 2015
Slide 32
40%
Discuss future market trends
83%For educational purposes only
Management Information Reporting
Base reporting on strategic themes
21%
IIRC pilot programmeHeadline findings
March 2015
Slide 33
Include strategic priorities
94%
Embed sustainability in strategy
25%For educational purposes only
Management Information Reporting
Integrate business model into other areas of reporting
IIRC pilot programmeHeadline findings
March 2015
Slide 34
40%
Make reference to their business model
67%For educational purposes only
Management Information Reporting
Report priorities for non-financial capitals
IIRC pilot programmeHeadline findings
March 2015
Slide 35
17%
Identify one or more material capitals
84%For educational purposes only
Management Information Reporting
Integrate risks into other areas of reporting
IIRC pilot programmeHeadline findings
March 2015
Slide 36
23%
Report principal risks
96%For educational purposes only
Management Information Reporting
Identify targets for KPIs
47%
IIRC pilot programmeHeadline findings
March 2015
Slide 37
Explicitly identify KPIs
71%
Some alignment of KPIs with strategy
17%For educational purposes only
Management Information Reporting
How does our industry measure up?PwC European benchmarking 2012
March 2015
Slide 38For educational purposes only
Management Information Reporting
Thank you!
Slide 39
March 2015For educational purposes only
Management Information Reporting