There is a framework which will assist companies in examining their business and hence identify the key information to report and communicate to analysts and investors. This 'value reporting' framework comprises four critical blocks of information:
Market overview - specifically, the macro-economic, regulatory and competitive environments;
Strategy - goals and objectives, organisational design and governance;
Value creating activities - customers, innovation, brands, supply chain as well as environmental, social and ethical;
Financial performance - specifically, financial position, risk profile, economic performance, segmental analysis and accounting policies.
Linking those elements coherently facilitates evaluation and comparison of a company's performance and the differentiation of a genuinely well-managed company from one that can merely talk. Through this structured reporting framework, financial performance can be assessed in the context of total corporate activity, and I will focus on the survey findings for the advertising sub-sector.
In terms of the specific performance measures rated as 'highly important' by at least one of the surveyed groups (CFOs, analysts and investors), all agreed on three measures as being highly important: key accounts, organic growth and new business (billings). Investors and analysts also ranked account loyalty (length of client relationships) as highly important.
The survey did produce a surprise - that none of the groups ranked another measure that was tested (key employee/manager account turnover) as highly important.
In respect of the adequacy of information being provided, the advertising sub-sector performed better than most, as analysts and investors considered the information provided by companies as adequate, except in the area of key accounts and account loyalty.
Company executives were still willing to admit that although they have more information available internally, they could do better at communicating this.
This reasonable performance by the advertising sub-sector is in sharp contrast to a number of the others. Take, for example, the radio and outdoor advertising sector. The groups surveyed agreed on six key measures - ad rates relative to national averages, share in key markets relative to rating share, key contracts and commitments and comparative pricing statistics, station and billboard ownership by location and key market statistics(sell-through).
Analysts and, to a greater degree, investors seemed dissatisfied with the information that they receive on all bar one of these measures. In this sub-sector, industry executives did also admit that their internal systems were capable of producing reliable data on these measures, but were doing nothing about communicating any of it.
Well, I guess that this proves the message about value reporting and that this sector might need to rethink its communication strategy, given what the broader investment community thinks.