DESPITE having some of the highest rates of Internet use in the world, Nordic public companies still spend a huge proportion of their investor relations budgets on printed annual reports — even though there is growing evidence that investors seldom read them.
Now, a few pioneering firms are boldly blazing a new trail by focusing their efforts on producing high-end online reports that combine stunning visuals and video with advanced usability features that make it easier for professionals to dig into and analyze their comprehensive financial disclosures.
As I reported last year, Nordic IROs spend 85 % of their IR budgets producing and printing their annual reports each year, even though there is little evidence that investors are actually using them. According to a CA Cheuvreux European Corporate Survey 2010, only one-third of 370 investors in Europe and the US read annual reports in detail, while another third just give them a quick glance. These facts have also been confirmed in several of Sculptor IR’s perception studies.
Spending huge sums to produce, print and distribute a paper annual report to a target group that doesn’t use it seems to be a bad investment and ineffective use of a company’s investor relations budget. This is especially true considering that the region has some of the highest rates of Internet adoption in the world. According to stats compiled by Internet World Stats, Internet penetration rates are consistently above 85% in the region with highs of 92.5% for Sweden and 95% in Norway.
Yet, despite the obvious readiness of the market to move to web reporting and the huge opportunities to cut costs and inefficiencies, Nordic companies have been surprisingly slow to adopt the web as their primary annual reporting channel, or to provide online annual reports that are more than a PDF version of the printed report.
That’s why it is so reassuring to see the latest online annual reports from Danish biotech company Novozymes and Finnish engineering firm Wärtsilä, and to have an opportunity to get their first-hand insights into their practices. These two companies have successfully combined strong corporate messaging through the use of striking visuals and video with detailed disclosure in highly usable formats that will please even the most jaded financial analysts.
At Wärtsilä, bold design with highly usable financials
Finland based Wärtsilä, which won the European Excellence Award 2010 for their first online report last year, is back this year with an even better offering. In their 2010 report, the company makes an immediate powerful impact with a bold, full-screen Flash introduction that gives a brief overview of the company’s values and growth drivers. Flash introductions seldom work and often get in the way of people accomplishing their tasks, but Wärtsilä cleverly only shows the introduction on the user’s first visit, after which they are taken to a static homepage.
Video also features prominently throughout the report. It is used to complement the Message to Shareholders, in the Business review, and the Sustainability section. There is also an image gallery called Wärtsilä in Pictures. Overall, the heavy use of eye-candy makes a strong statement about the company.
However, it’s not all about image and branding. The report’s financial section has also been given the care and attention it deserves. Wärtsilä enhanced the format by improving the usability of the financial section, giving analysts easy access to notes and the opportunity to download figures to Excel, including individual spreadsheets of each note.
The Financial Targets page is another highlight, reporting on the company’s performance against its prior-year goals and providing fresh targets for the year ahead. It is illustrated by bar graphs that give context for the company’s performance on the target measures over time.
Completing the picture, Wärtsilä’s annual report is also available as an iPad app, a format that seems to please investors, with one noting: “Certainly one of the best corporate publications for investors I have seen so far.”
At Novozymes, mixing video, interactive graphs and solid financials
Novozymes, a Danish biotech company, launched their first integrated online Annual Report in 2007. They have since then constantly developed the concept by adding video introductions and management interviews.
The management interviews in the Novozymes Report 2010 are a best practice for using video to communicate a company’s investment story. Illustrated by metaphors and describing the company’s progress during 2010, the videos capture the core message in the company’s equity story, featuring executives in a relaxed but confident way.
The CEO interview, filmed in a Danish winter landscape, helps communicate the company’s sustainability strategy as well as explain the core business and market drivers.
From the start, Novozymes’ online annual reports have also had a strong focus on the usability of the financials section, as well as allowing users to create and download their own PDF version. This year they are also using Flash to create interactive graphs and charts the illustrate key figures throughout the report.
Positive investor feedback
Joséphine Mickwitz, IR Director at Wärtsilä, says the company has received mostly positive feedback about their online annual report, especially from international investors who she says “have been impressed by the extensive data we have managed to produce within a very short time.”
The company now only mails printed PDF versions of its report to shareholders who ask for it prior to the AGM, but the company also is trying to encourage shareholders to use the online version or download and print the PDF version themselves.
At Novozymes, a few retail shareholders missed the printed version, even if they did not necessarily read it. However, they appreciate that with a web-based report they can select and print only the sections of the report they’re interested in, says Tobias Björklund, the company’s Head of Investor Relations
Process improvements and savings
Both Mickwitz and Björklund agree that the production of online annual reports has resulted in a streamlined production process, saving both time and money for their respective IR teams.
“Initially, you have some upfront costs and you might also receive some negative feedback from shareholders, but over the long term the money saved on not having to print and distribute the reports is significant,” says Björklund.
According to Mickwitz, the online report has created many more positive than negative effects: “Since our report is published very early (week 6), we have been forced to streamline the production process. We have for example automated the transfer process of all the financial data. Figures from the financial team’s database are sent directly to the online annual report, minimizing the margin for error as well as saving a great deal of time.“
In addition, Wärtsilä is able to reuse the video material for other purposes. The company shows some of the videos at its AGM and uses the CEO interview for internal employee communications as well.
“We are convinced that an html-version of the Annual Report is a step in the right direction. The global trend is growing online communication,” says Mickwitz.
“In the end, it has to do with how you want to profile your company,” adds Björklund. “By producing an online only annual report you send a clear environmental statement to your shareholders.”
Disclosure: None. Sculptor IR does not provide consultancy within annual reports, has no relationship with any service providers that produce reports, and did not advise either of the companies covered here on the production of their annual reports.