INVESTOR RELATIONS: Quarterly reporting edges ever nearer - Are you ready to move to quarterly reporting? Richard Carpenter looks at the pressure for improving corporate disclosure post-Enron and the FSA's plans to move in that direction

On the other hand, Citigate Marchcom development director Paul Reynolds seems to accept a move to quarterly reporting almost as a given. His company specialises in net-based communications. He believes the real financial communications test over the next few years will lie in smaller companies using the net as a means of generating interest in their stories between the official quarterly reporting dates. The financial reporting calendar may be set to get a whole lot busier but canny companies will be peppering the marketplace with updates on a regular basis, thereby avoiding the news rush around reporting times.

'It's not just a question of reporting,' says Reynolds. 'People want more information and there is a quest for that information. There are huge communications opportunities for companies that get that right.'

With many of the smallest tech companies already reporting quarterly, complaints of an impossible burden on management time are likely to get short shrift from the regulators if investors demand the switch. If, like some in the IR industry, you accept that a move to quarterly reporting is now nigh on inevitable over the next few years - even if it is only a 'best practice' recommendation - it may be time to jump the gun and put your reporting systems in order.

The UK's investor relations (IR) officers and financial PROs have been having a tough time of late from market regulators and jittery investors.

But those who think they are over the worst of it had better think again.

A raft of regulatory proposals, directives and reviews is set to hit desks during the next few months and the IR community will be in the line of fire. Many of the initiatives are aimed at improving transparency, disclosure and corporate governance and revolve around the frequency and manner of reporting certain financial information. With IR best practice attempting to stay ahead of any regulatory push, it could be a busy year.

Last December's introduction of the market-abuse regime under the auspices of the Financial Services Authority (FSA) left more than a few in-house communicators concerned and confused as to whether they were breaching financial disclosure rules.

Although there was no change in the rules regarding the dissemination of financial information, the power to impose penalties did change. The result? Several companies became more conservative in the information they released to the markets, testing the patience of investors along the way.

Then investors got more jitters as the full import of Enron's collapse became apparent and Allied Irish Banks tried to locate its rogue trader earlier this year. Trade and industry secretary Patricia Hewitt responded to some of the Enron concerns in late February by announcing two separate reviews: one of the role of non-executive directors, the other looking at the UK's accountancy and auditing practice.

The two review bodies are set to publish their reports later in the year, just as the FSA and the European Union pick up the pace with their own initiatives. The FSA is set to start its own in-depth review of the Listing Rules this summer. They govern the way in which listed companies disclose information to the market.

Why it could not have timed this review to coincide with the introduction of the new market-abuse regime remains a mystery to many, but it seems to have been mindful of the fact that the EU will introduce its own market-abuse directive in the near future.

This, in turn, could entail another look at the UK regime and possibly changes to the conditions companies have been struggling to come to terms with since the end of last year.

Further complications arise when added into the mix are the forthcoming Prospectus Directive, the Regular Reporting Directive, the discussions regarding a regulation on adopting International Accounting Standards and the ongoing debate about a Takeover Bids Directive - to mention just a few. If you start trying to get to grips with the European Company Regulation statute and the slow progress on the UK's company law review, you start to run into real trouble.

This regulatory flurry cannot all be blamed on Enron. Far from it. Many of the issues have been on the table for some time as the EU pushes through a range of directives and proposals in its move towards an integrated securities market by 2003. Enron has, however, added an element of regulatory panic and zeal to some of the discussions.

The worrying thing is that relatively few IR officers or financial PR executives in the UK seem to be aware of the nature of those discussions - particularly at EU level - or the way in which their companies could be affected in the future.

Certainly, few of the smaller to mid-size companies seem to have much knowledge of the upcoming issues, yet they could be the hardest hit because of their relative lack of IR resources.

One of the most significant impacts of the current regulatory debates could be a switch to quarterly reporting for all listed UK companies.

At the moment, a lot of younger hi-tech companies report quarterly as a trade-off for not being able to offer investors three years of accounts, or simply because they want to be up there with their peers in the technology industry in the US - quarterly reports are already part of the regulatory landscape in the US for listed companies.

Many FTSE 100 companies also provide quarterly reports as a result of 'IR best practice', a US listing or heavy US shareholder interest.

FSA associate Patrick Humphris admits that the increasing calls for more frequent reporting will form part of the Listing Rules review set for this summer, but notes that it will be part of a fully consultative process that will include an opportunity for feedback from the IR and PR industries.

'We'll be inviting anyone who has an interest to come forward and comment,' he says.

Humphris agrees the collapse of Enron has added an extra element to the discussions, with some of the key issues being the accuracy of financial statements and the role and rotation of auditors. 'We were going to do a wider review of the listing rules before Enron happened but it would certainly be perverse if we didn't wrap them all up together,' he says.

The exact timescale remains unclear, with the FSA only prepared to say 'the summer'. Most observers expect the review to get under way in June, with a potential running time of up to two years but Humphris points out that one of the reasons for being 'slightly circumspect' is the need to take into account the deliberations at EU level.

'We want to dovetail our work as closely as possible,' he says.

There is, after all, little point in debating the finer merits of introducing quarterly reporting if the EU has already imposed it from on high.

Douwe Cosijn, corporate affairs manager at UK-listed venture capitalist 3i, has been following the debate at both UK and European levels. At the moment, 3i only reports its annual results and interims - like the majority of UK-listed companies - although it keeps in regular contact with the market at other times throughout the year. Cosijn notes that any move towards fairer disclosure of financial information has to be a move in the right direction but that forcing companies to report too frequently could lead to short-termism by institutional investors.

'It could become very results season-driven,' Cosijn says. Nevertheless, he admits that a lot of US research indicates that there are no real signs of increased volatility around reporting periods. 'We need to balance fair disclosure with ensuring that investors have confidence in the markets,' he argues, adding that quarterly reporting might be more necessary for younger, untested markets such as Germany's Neuer Markt. But he does not believe it is necessarily the way to go for the London Stock Exchange.

'It has to do with whether or not institutional investors have confidence in the market,' says Cosijn. 'For a market like the LSE, with such a strong history and culture, it should be less of an issue.'

Still, quite a number of FTSE 100 companies have already taken the quarterly reporting plunge, and some seem to like the discipline it imposes. British Airways IR manager George Stinnes says he is a great believer in quarterly reporting and the opportunities it affords to keep the market informed.

BA goes even further, releasing monthly traffic figures to investors to keep them up to date.

'Quarterly reporting is the norm in many countries,' notes Stinnes, adding that he has little time for those who moan about the extra burden such a requirement would impose on their businesses.

'At first it is a challenge but once you have the systems in place it is not that much more difficult,' he says.

All well and good for a company of BA's size, perhaps. But those lower down the market capitalisation scale do not have the same resources to devote to investor relations. Few of the smaller to medium-sized companies have full-time IR officers and even fewer seem aware of the issues currently under discussion.

Those that have the knowledge to comment tend towards the view that the additional burden of mandatory quarterly reporting will be an unnecessary drain on management time.

Frances Gibson-Smith, IR officer at logistics business Christian Salvesen, falls into this group and says that making it mandatory would be an unnecessary and costly restriction on smaller companies. She points out that most companies talk to the market at least five times a year in any case with pre-closing statements, prelims, interims, full-year results and AGMs - prescribing an additional two dates could be going over the top.

'I think a bit of discretion could be in order,' she says, noting that when she was at BAA and helped switch the company to quarterly reporting, all she got was moans from the analysts and investors. 'They were most annoyed,' she recalls. 'It's quite a burden for them too.'

That type of thinking is backed up by Stephen Benzikie, Edelman UK director of financial communications. He also points to the current four or five official occasions on which companies talk to the market and says that a move to quarterly reporting would mean they are never out of the reporting process.

Although that may be good for keeping the market up to date and managing expectations, it can be a terrible drain on management time. 'Statutory quarterly reporting would undoubtedly have an adverse effect on smaller companies,' he says.

Whatever the outcome of the ongoing regulatory discussions, there is little doubting the current appetite of investors for more information from companies as a partial means of assuaging their fears.

There does, however, seem to be a difference of opinion in the financial community as to whether that is wanted in an official extra quarterly reporting capacity or drip-fed throughout the year by means of trading statements, general updates and the like.

The UK's Investor Relations Society believes there is 'far from unanimity' on the use of quarterly reporting.

It acknowledges the possibility that it would be a burden on smaller companies - to say nothing of those in the financial community themselves.

IR Society director general Andrew Hawkins says that it could well be that a non-regulated 'horses for courses' approach is best, with the needs and demands of the financial community determining best practice at each company. He points out that the quarterly reporting debate is all part of that move towards greater transparency - a move that has been accelerated by the Enron and AIB affairs.

'It creates a need for the IR community to get ready to provide more information on a general basis, not just through quarterly reporting,' he says. 'It has put IR under the spotlight.'

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