Time is up for annual reports

A slimmer summary is on the way, writes Richard Halstead

The annual report, with its glossy pictures of happy workers, pages of self-congratulation from the management, and reams of footnoted accounts, is scheduled for the chop. In its place will come a document containing just the audited accounts, which will be released at the same time as the company announces its results and will be available to investors electronically via the Stock Exchange or through the World Wide Web.

A few weeks later, slimmed-down reports - known as Summary Financial Statements - will be sent to shareholders. These will still contain pretty pictures, the chairman's review, details of directors' remuneration and an abbreviated set of accounts, but the detailed notes that can occupy a third of the space in an annual report will be omitted.

"Annual reports will not survive the next few years, especially among large companies," said Gerry Acher, head of auditing and accounting at KPMG. "There's too much duplication in the current system, and investors like to get their information much faster nowadays."

Summarised reports are already sent out by 30 blue-chip firms with large share registers, including BAT, SmithKline Beecham, British Telecom and National Power, with full annual reports available on request. The companies found that very few shareholders, apart from the institutions, were interested in receiving the full accounts. BAT recently estimated that this arrangement saved the company pounds 400,000 a year.

Those companies will be joined this week by Tesco, which wrote to its 141,000 shareholders announcing that it would send them Summary Financial Statements unless they instructed the company via a reply-paid envelope that they wanted the full report. "It will help clarify the information that shareholders want," said Jonathan Moore, head of investor relations at Tesco.

Mr Moore estimates that Tesco will cut its printing and mailing costs by up to 10 per cent, with further savings as more shareholders opt for slimmer reports. Industry observers believe that the company will save between pounds 150,000 and pounds 200,000 a year.

According to Mr Acher, the changes reflect not only the advancement of electronic media but the increasing size and complexity of accounts. "Full accounts should still be made available for those analysts and fund managers who really need them. But the way accounting is going, the poor shareholder in the street is not going to be able to make valid judgments based on the full accounts any more."