BusinessCorporate FinanceAIM: life after listing

AIM: life after listing

There's a whole lot more to an AIM listing than a ticker code and access to all-important funds. For FDs new to th AIM game, don't underestimate the challenge of putting together your first annual report

For many finance directors, the highs and lows of a flotation are swiftly followed by the reality of life as a listed company. Producing the company’s first set of annual results, including the annual report, is often the first challenge.

Finance directors of AIM-listed companies are on the frontline facing the changes in financial reporting requirements, according to the results of a recent survey commissioned by financial reporting consultancy Emperor.

The survey of finance directors of AIM and small-cap companies that had listed in the last three years, across a variety of industry sectors, set out to gauge how newly-listed companies tackle the production of their first annual report and accounts, the difficulties they face and what advice they would give to others just about to go through the process.

Meeting the deadlines is a growing challenge
Companies consistently underestimate the amount of time it will take them to produce their first annual report. Over half of respondents find the front sections – the directors statements, corporate social responsibility (CSR) and corporate governance reports – the most difficult to produce.

Collecting and analysing the information within the time constraints presents the biggest hurdle. This situation is likely to be exacerbated as all companies move towards including more non-financial information in their annual report, to meet the requirements of the new operating and financial review (OFR), even though it is not mandatory for AIM-listed companies. This will put even more pressure on the timescales.

In fact, all FDs are aware of the requirements of the OFR and the majority plan to comply with the requirements as far as possible, to ensure their shareholders do not view them differently to fully listed companies. The rest would not do it, if it was not a regulatory requirement.

Good advice is key to success
A quarter of the companies in the sample do not have any in-house experience of working in a listed company environment and find going through the process for the first time complicated and laborious.

The main issues highlighted included not having the right information, establishing the right structure, understanding the regulations, coping with the number of changes involved in moving from private to public and judging the timescales.

Many identify access to good advice as critical to managing the project successfully, either from advisers, or suppliers who have been through the process before.

The burden on financial directors is increasing
The requirements for the annual report continue to expand and increasingly require contributions from across the organisation – from health and safety data from the human resources department to customer case studies from the marketing department. Nonetheless, the responsibility for producing the annual report in AIM companies remains firmly in the hands of the finance director or financial controller.

Two thirds of the companies in the sample place the responsibility for the annual report with the finance director, with the chief executive, chairman, company secretary and investor-relations manager taking responsibility in only a small number of cases.

Any increase in reporting requirements will only add to an already expanded workload at the busiest time of year for the finance department. In many AIM-listed companies, the finance director is frequently the company secretary as well, so changes in corporate governance will also add to the burden.

The annual report is taking on a wider communications role
Only 20% of respondents aim to produce a document that merely satisfies the legal requirements. The majority of the companies interviewed see the annual report as an important part of the company’s corporate marketing collateral, to help build its reputation with customers and prospects. At the same time, more than a quarter of respondents believe the objective of their annual report is to communicate with all stakeholders, including staff, suppliers and the community, as well as shareholders.

The annual report has long since deserted its role as a document of historical record and it is the finance director who is responsible for delivering a more comprehensive report for a wider range of stakeholders.

For finance directors just about to go through the process of preparing their first annual report, the advice is simple: start early, get resources sorted in advance, allocate an internal project manager, prepare a detailed project plan and get help from someone who has done it before. As one respondent to the survey says: ‘It’s not as daunting as it first appears – enjoy it!’

Steve Kemp is a director of Emperor Design

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