UK: QUANTITY EQUALS QUALITY?

UK: QUANTITY EQUALS QUALITY? - More UK companies are choosing to report quarterly results.

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Last Updated: 31 Aug 2010

More UK companies are choosing to report quarterly results.

Investors in American business are never more than seven weeks away from a quarterly report. As UK companies increasingly seek listings in the US, so the number publishing quarterly figures is also rising here - to maybe 10% of the FTSE-100 by now. Should more British businesses be following their lead, even where there are no foreign investors to please or pacify?

UK companies which list in the US are not, in fact, obliged to report quarterly. In the case of foreign businesses, the American authorities will work to the rules in force in their home countries as long as these require publication of figures at least half-yearly. But for companies such as WPP Group, which began producing quarterly reports nearly 18 months ago, the percentage of American shareholders can be decisive.

US investors hold 37-38% of WPP's stock through Nasdaq. 'We wanted to increase our visibility among US shareholders, and US institutions are much more comfortable with us reporting quarterly,' says chief executive Martin Sorrell, whose voluntary reports show sales and sales growth, movements in margins and net debt - while profits appear twice yearly, as required.

Even if US shareholder preferences are put on one side, Sorrell would now commend the shorter reporting interval since it 'leads to fewer surprises, because there is more regular communication'.

British Petroleum's position on the matter was determined at an earlier date, also by US practice. In this instance, explains Kevin Abbott, manager of investor relations, the company could not ignore the fact that, 'our peer group are the American oil majors - and they all report quarterly'.

Abbott adds that, 'There is obviously substantial work involved in preparing the results, but it is probably better than doing it once a year, and sorting out the message then. It encourages frequent communication with the investment community.' BP goes further than many in that it also pays a dividend every three months.

The dividend question can be the cause of much head scratching. National Power went for a US listing in March 1995 but is not (yet) reporting quarterly.

'We have been looking at quarterly reporting conceptually,' says head of investor relations Lynda Jenkins, explaining that, while the company was happy about the proportion of its equities held in the US (between 13% and 15%), it was felt that some refinement of the shareholder base would not come amiss.

It comes down to 'What sort of shareholder would you like?', says Jenkins.

'We are probably looking for a diverse but long-term base, such as institutions and some high net worth individuals. To do this, do we need to go for quarterly reporting?' While there are arguments in favour, it might also be said (as Jenkins suggests) that 'there is little point in reporting quarterly if the shareholder doesn't get anything for it'. But if dividends were paid quarterly too, complications might arise from fluctuations in currencies and in seasonal demand.

Surprisingly, perhaps, for a professional working to billable hours, John Kellas, senior technical partner in audit and accounting at KPMG, is not at all sold on the need for more frequent reporting. 'Companies now have a genuine obligation to keep the market informed about matters to ensure a free market,' he says. 'If anything needs to be made known - such as an acquisition or profits warning - it will be made known. This requirement for there to be no false market in shares means there is a safety valve in place already.'

This view finds some support in the Accounting Standards Board, which has decided to concentrate efforts on improving the quality of companies' half-yearly reports rather than on fighting for more frequent figures.

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