The Complete 100: Making connections... - Black Sun Global

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The Complete 100: Making connections...

This year marks Black Sun’s ninth annual analysis of FTSE 100 corporate reporting. ‘The Complete 100: Making connections…’ evidences that companies have made huge progress in this time, with this year being no exception.

The regulatory changes to narrative reporting – which have been in the pipeline for a number of years – are now a reality. While these changes represent a relatively modest change to existing legal requirements, they have undoubtedly been a catalyst for positive change. This year we have seen a significant improvement in the key areas where there has been the most significant regulatory change – particularly business model, strategy and governance. These changes bring greater transparency, accountability and more meaningful information to the Annual Reports of the FTSE 100.

Some insights from areas with the most notable changes are as follows:

  • Business model – While 95% of companies describe their business model, 62% of companies provide a detailed or very detailed explanation, up from 12% four years ago. The business model is now a key component of the Annual Report which gives readers a clearer understanding of how the business creates value, its differentiators and ultimately the investment case.
  • Strategy – Today, 97% provide a specific strategic discussion with 88% of companies defining and addressing strategic objectives, up from just 40% in 2005. Interestingly, companies are increasingly providing targets for these objectives, providing investors with the tools to hold them to account. Put simply, Reports have become more strategic and companies have become accountable.
  • Governance – 84% of companies now include a personal introduction to the governance section, up from just 17% four years ago. Similarly, 72% of companies provide either a personal letter or quote from the committee chairmen to open the committee reports, up from just 33% two years ago. Not only does this show that governance is moving away from its boilerplate past, it is evidence of the rising level of accountability.
  • Conciseness – While perhaps not meeting BIS’s ambition of shorter, more concise reporting, the increase in average page numbers from 188 to 197 pages this year, is a result of the financial statements rather than the narrative. This year, the narrative content has remained static at 55% of the overall content. Whilst it seems companies have taken steps to try and ensure conciseness without sacrificing meaningful disclosure, there is still more work to be done.
  • Connectivity – Pulling all of these trends together is the enhanced level of connectivity. Making critical connections gives readers a more cohesive and holistic picture of the business – otherwise the information can come across as siloed with little relevance to other areas of the Report. Highlighting the critical inter-relationships and dependencies between a company’s ability to create value over time presents a much more useful insight to the business for investors and stakeholders alike.


Sallie Pilot, Director of Research & Strategy at Black Sun commented, "Although challenging areas in reporting still exist, the new regulations have been a catalyst for positive change which has brought about an encouraging improvement in the quality of content. In particular, the enhanced level of connectivity which we have seen is helping corporates to tell a more complete and holistic story. As ever, a strong group of enlightened reporters are striving forward and paving the way, clearly investing significant time and effort into providing innovative communications which are increasingly insightful and in the ‘spirit of the new requirements’. What is encouraging is the expanding size of this group year on year. Additionally, the group of ‘following’ companies who shadow the leading pack are also showing signs that they are increasingly seeing the benefits of good reporting. It seems that BIS’s ambitions for the narrative reporting reforms – to bring reporting standards up to ‘best practice’ – are beginning to be realised.”