Informing the Investor: Making Financials Interesting

This post originally appeared on Newswire.ca

Investors are hungry for information about your company, particularly if they have a large stake in your success. Yet the days of mailing massive annual reports to each investor are long gone: websites and SEDAR, the online filing system, have taken care of that.

While the methods of informing investors have changed, the fundamentals remain the same, says Peter Block, principal at Hansel McLaughlin Advisory. They still expect full explanation and disclosure.

“Investors are looking for consistency in corporate disclosure so that they can assess the trend line, as much as information pertaining to a point in time,” said Block. “I don’t think that has changed. Investors — at least longer term ones — are trying to gain insight into direction as much as anything.”

The MD&A: incredibly long, and important

The Management Discussion and Analysis (MD&A) is a crucial, but often very long, part of an annual or quarterly report and many companies have wrestled with how to make it readable and accessible. However, says Block, there is really no way around providing a long MD&A.

“I would not want to presume which investors read which sections, so believe that we need to continue to provide the level of detail and analysis,” he said.

Some companies provide a highlight package, which could be a news release, investor presentation or brochure. That’s fine, but Block warns that all of these documents must be carefully aligned to effectively provide investors information in multiple formats with varying levels of detail.

“If anything, using more social media to call attention to specific highlights with a link to the MD&A may be worthwhile,” he said.

Making it (more) interesting

It’s possible to improve the presentation of the MD&A, through strong writing and presentation — such as using visuals to make a point, said Block.

“My caution, though, is that those investors who do read the MD&A do so because they are looking for specific and detailed information from the company,” he said.

Because the quarterly and annual news releases and investor presentations condense the same information, preserving the MD&A as a text-heavy document does serve a purpose, he said.

Engaging the investor, whether the news is good or bad

Your investors are among the most important people in your company’s success, so engaging them appropriately is extremely important.

Block says the best way to engage them is to put them in management’s shoes as much as possible.

“Providing context helps investors understand the issues management faces and the considerations that need to be weighed in making decisions,” he said.

“This can be done in a company’s continuous disclosure, but it also plays a part in other forums such as one-on-one meetings, investor or analyst days, and conference presentations.”

Contact with investors should not change depending on whether the news is good or bad, unless there is more engagement at times when the news is less favourable, he said.

“This goes for any stakeholder – not just investors. Avoiding a discussion does not make it go away. It merely makes people look for information from other sources, many of which may be less accurate or reliable than a company would like.”

Block’s final piece of advice is not to look at the MD&A in isolation, but to see it as part of a broader package of investor communications.

“The real issue is whether companies are presenting a comprehensive narrative to investors. Provide the information in different formats and allow each investor to decide how much information they want and how they want to receive it.”