Small listed companies have to make major changes to their annual reporting structures if they are to establish better communication links with the City and attract higher levels of investment, according to new Stock Exchange guidance.
The guide, ‘Creating Quality Dialogue’, says small companies should produce annual ‘Statements of Prospects’ and quarterly trading reports to ensure that shareholders are better informed. At the moment, most small companies only produce trading statements every six months. The guide has been sent to all listed small companies outside the FTSE-350.
Gervais Williams, head of smaller companies at investment house Gartmore, which helped produce the guide, said: ‘Consolidation of fund managers, indexation and pan-European investments mean that smaller companies have to work harder to reassure the market and raise a sufficient profile.’
But Chris Swan, chairman of car components distributor Finelist, and a contributor to the report, said communication needed to be two-way if small companies wanted to improve their valuation levels.
‘We found that 60% of smaller companies were not understood by fund managers, while 70% of fund managers felt that these companies had little grasp of shareholder values,’ Swan said. ‘We need to look at how we mobilise financial institutions and accountants should take a lead role.’
He was doubtful the new insertions, which would describe key performance indicators, would be an onerous task for such firms to comply with.
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