François Rouiller ’s interview with Dr. Roland Abt, CFO and Daniel Bösiger, Head of Controlling and Investor Relations at Georg Fischer.
Roland Abt: What’s sure is that the actual annual report has lost its significance. The annual report is a very traditional medium, which is printed and communicated once a year. We also publish a short version, which is a concise summary of all the topics; this also contributes to the overall insignificance of the annual report. Most likely, very few people still take a detailed look at annual reports. Nonetheless, an annual report still functions as a calling card for clients and service providers. Nonetheless, because of its bulk, a printed version of an annual report remains the wrong medium to quickly transmit information about a company. Persons interested in a company these days gather their information through an investors’ presentation. There, it is easier to obtain the vital information.
Daniel Bösiger: Over the last few years, requests for the printed versions of the annual report have decreased dramatically. Even investors’ conferences do not bother with the printed version of the annual report anymore. Our main target group for the printed annual report are universities and technical colleges. As far as processes are concerned, it is clear that the trend is towards automation, beginning from the consolidation process all the way to the printing: any changes in the consolidation are integrated directly into the tables of the annual report. These days, most exchange-listed companies use a special system for this. The same is true for the audit: paper is no longer king; instead, most of the documentation is electronic. This has very much influenced our work.
Roland Abt: This is a justified question, for sure! We also sometimes wonder about the use of an annual report. Nonetheless, there are still some recipients who use the annual report to obtain information on our company, for instance, clients. After all, an annual report still provides a good overview of how the company is organized and how much economic power it has. Often, the annual report is also used as a marketing tool.
Daniel Bösiger: The question is whether annual reports will still be printed and mailed. Already now, we only send the short version tour shareholders and will only send the long version upon explicit request. For sure, electronic media will become even more important, as will dynamic web platforms, which will allow the thumbing through of an annual report and the querying of specific topics. The trend is towards Management sending online messages to their stakeholders, for instance by means of a video conference or a video message. However, in this regard, Swiss companies still lag behind their Anglo-Saxon colleagues. In my opinion, the trend is to just print the few copies that are expected, and to put the rest online.
Roland Abt: In this respect, Georg Fischer has two basic problems: we have three different divisions, which are very different from each other and which produce very different products. Moreover, our products are seldom visible in people’s daily life, which makes it difficult to convey what we actually produce. Emotional pictures and stories help build up trust, even if the products are not that well known.
Roland Abt: As a rule, a company will want to hold a conversation with all of its stakeholders. Naturally, the most important stakeholder groups are the shareholders and the employees. Good communication can help motivate employees and have them become ambassadors for our company. This is why these two groups are the most important to me. But others are also important, such as clients, service providers and others.
Roland Abt: It is vital to keep communication consistent across all stakeholder groups. Nevertheless, there are certain general guidelines that must be observed in some areas to be communicated, such as for the sustainability reports.
Daniel Bösiger: In recent years, clients’ and service providers’ need for sustainability reports have increased tremendously. These days, many need this for their own communication. In our context, there is a special focus on life cycle assessment. The likelihood that we get specific requests for this type of information is great and we usually answer such questions directly and separately in each case.
Roland Abt: To a large degree, these needs are the same. We use the same key performance indices externally and internally. Of course the internal reporting s more granular and goes a step further, especially in regard to strategic aspects.
Roland Abt: As a company, we would like to remain transparent. Despite our change from IFRS to Swiss GAAP FER, we still disclose as much as before, which is an important aspect for analysts and investors alike. We are also ready to disclose more than is actually needed in order not to be less transparent than other companies are.
Daniel Bösiger: The sustainability report has standards, such as the Global Reporting Initiative. We disclose our key performance indicators according to these standards, which certainly helps the comparability of our company.
Roland Abt: Naturally, we hold frank conversations with such interest groups in order to explain to them why we do things the way we do. Naturally, these interest groups would also like to present their views. Such groups are becoming more and more important and their input at annual general meetings holds a certain gravitas. This is why it is important to talk to such groups early on.
Daniel Bösiger: Apart from strategic cornerstones, we also disclose our strategic financial objectives. Apart from the EBIT margin, this is typically also the yield generated by investments. Such strategic financial objectives are part of our internal and external reporting and are considered as benchmarks to assess our performance.
Roland Abt: Our communications department always refers to these figures and shows to what degree we have achieved our goals. Management’s credibility is vital for a successful company. Trust in Management is a central aspect of our company values and transparent communication is imperative for this!
Roland Abt: Communicating negative messages, such as a profit warning, is never fun. But even positive messages can sometimes test shareholders because they may consider a company incalculable. This is why it is best to avoid surprises in either direction as much as this is possible.
Roland Abt: We also find information important that relates to market trends and information on the state of the market, not to mention information on technology, changes in this area and how to position yourself. Furthermore, we are interested in ecological aspects and what these aspects may mean for our business. Such information allows Georg Fischer to relate to its environment, also but not exclusively in financial terms.
Daniel Bösiger: This has changed drastically over the last few years. The fewest companies provide a lengthier forecast. Instead, companies focus on individual objectives, such as margins, as the entire environment has become much more volatile and insecure.
Roland Abt: Prior to the financial crisis, it was impossible to forego a forecast with a multi-year horizon. Indeed, stakeholders expected this at the time. Post-financial crisis, forecasts are no longer common, which has become the order of the day. Instead, companies publish long-term financial goals, such as the margins or return on investment that are meant to serve as a guidance for the coming years.
Roland Abt: The trend in Switzerland towards switching to Swiss GAAP FER has shown that the complexity and the volume of financial reports should no longer increase. It would be interesting to see how much balance sheet readers actually absorb. Our experience, even when working with professional analysts, has been rather sobering. Many no longer understand the details of what they are looking at. It cannot be that there is more of that – it seems as if we have truly come to the limit of the amount of information that may be useful.
Daniel Bösiger: I am of the opinion that the existing standards can no longer increase in complexity. The current rules are utilitarian. For sure, companies have become more professional about disclosures. Should financial reports become even more detailed, this would certainly point in the wrong direction and not be beneficial for the quality of the information. If anything, financial reports should be even more consolidated and certain topics could be treated at an aggregate level, a kind of integrated reporting, thus making it easier for the reader of balance sheets.
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