The Annual Report: At the heart of financial communications

For in the world of financial communications, in Germany and many other countries, the months of March and April are usually marked by the appearance of annual business reports. In Germany, it is a legal requirement for any stock exchange listed company, but there are also many non-listed companies that publish their own annual reports.

The annual report has developed into one of the central communication tools for companies. This was confirmed recently in a survey conducted by Quadriga University, where nearly 100 communication professionals from some of Germany’s largest listed companies participated: More than 84 percent of the respondents stated that they saw the annual report as more than just a regulatory obligation, they consider it to be an important or even a very important communications tool.

The annual report must serve a large number of target groups. It starts with the shareholders, then important stakeholders such as analysts, fund managers and potential investors, as well as banks, customers, and also their own staff, the media, and the general public.

Provide facts and build trust

The task of the annual report is to provide a record of the previous business year. The annual financial statement should, according to law, provide an accurate depiction of a company‘s net worth, financial position and profit situation. This is an important function – particularly for listed companies who are turning to the anonymous capital markets.

It is therefore important to make sure the report is designed with the investor in mind. The goal of the report is to improve transparency and to strengthen the trust of capital market investors: The report should build up confidence and trust in the company. And, in this way, a piece of the company’s history is written with each annual report. In terms of credibility, providing information with veracity is obviously indispensible.

Build up your image

As well as providing the obligatory financial information, an ever increasing section of annual reports is taken up by image building. As well as the pure description of the situation, the reader is given background information about the sector and the company. Here, the tendency in the medium-term is: Less is more. Many reports are more than 200 pages long, so the image text should ideally be short and incisive. Otherwise, there is the danger that the reader will simply lose interest.

In Focus: Letter to Shareholders

The reader should take time to read the foreword by the chairman and/or the letter to shareholders. In these, the board conveys an overview of the previous year and the strategy for the future. From the perspective of the communicator, the introductory chapter is an extremely important part of the whole report. 85.1 percent of the respondents indicated that the letter was very important and/or important.

Decisive: The first impression

Yes, it’s even true for annual reports: The first impression counts – for both private investors and major shareholders. Due to time constraints, many interested parties can initially only leaf through the publication in order to get a first impression about the report and, by extension, the company. For this reason, annual reports can also include entertaining elements. In the best case scenario, communicative quality is matched with reader-orientation. This makes the annual report a varied instrument for corporate communication. After all, the rules of communication apply here too: Don’t just grab the attention of the reader – keep it!

---