FTSE 100 firms warned over financial transparency

Proportion of companies providing quality forward-looking data to shareholders isn’t quite where it should be

FTSE 100 firms warned over financial transparency

In times of economic austerity, it may not be all that unusual for a number of start-ups and SMEs to look towards the big guns for some inspiration and examples of best practice. Well, such an approach should not extend to the exercise of financial transparency, if new research is anything to go by. Business analysis company Metapraxis has revealed that the quality of financial information being provided in CEO statements for the top 100 firms is steadily decreasing.  

Indeed, one may reasonably ask how ‘quality’ is defined when it comes to financial information. Well, Metapraxis believes it very much centres on the proportion of measurable, forward-looking data provided by chairmen and CEOs in companies’ annual statements. Needless to say, Metapraxis examined the quantity of such information over a five year-period to gauge how our market-leading enterprises are doing on the financial transparency side of things.

Worryingly, it reported a 49% decrease in the quality of information provided by the CEOs of telecommunication companies, a 23% fall in the basic materials sector and a 32% fall in the consumer goods arena. However, more encouragingly, it seems companies in industries that are subject to additional regulation – such as utilities, oil and gas – are starting to understand the importance of looking to the future for the sake of maintaining the trust of investors, and ultimately showing themselves to have a credible business model. The proportion of quantifiable forward-looking data is rising by 20% or more in such companies, a satisfactory figure it must be said. 

Nevertheless, there is still a lot of work to be done, as stressed by managing director of Metapraxis, Simon Bittlestone. 

He said: “In order to continue attracting investors, FTSE companies need to focus on providing consistent information on how future performance is likely to progress to reassure shareholders in an uncertain market environment and help them make informed investment decisions. 

“Those organisations that fail to improve financial transparency leave shareholders wondering whether the internal management information and planning processes are robust enough to give management control over the business and confidence in its future performance.”

For now at least, the future still isn’t looking all that bright. 

Adam Pescod
Adam Pescod

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