Good (and not so good) practices in the publication of an annual report on the Web
The challenge
In the last few years, the Web has become one of most important means of communication in regards to investor relations. It is in this context that the vast majority of public companies are now publishing their annual reports via their corporate Web site.
The analysis of about fifty North-American company Web sites in life sciences has shown that in more than 75% of cases, the annual report is presented in a PDF format, which contains financial information and texts.
Unfortunately, even if it is a very widespread practice, the publication of the annual report in conventional PDF format (also called “PDF blob”) is probably the worst way of presenting this type of document to the investors for several reasons:
According to the firm Rivel Research, 44% of fund managers in North America choose to purchase shares of a company following the consultation of its corporate Web site.
- Regrouping the entire annual report in one PDF document requires that the investors consult a document that is very long to download and is quite bulky, whereas the majority of investors only wish to consult specific sections;
- It is difficult to consult this type of document on screen because it does not contain any hypertext links nor any interactive content, thus forcing the user to scroll through the entire document to find information of interest;
- Printing a PDF format of the annual report requires a lot of ink due to the many images and colors used;
- The analysts wishing to recover financial information for evaluation purposes must manually enter the data which requires considerable time and an increase in errors during data entry.
The consequences
The principal element evoked by companies to justify the publication of their annual report in the form of a PDF blob is that it appears to be the least costly option. However, these savings can in fact prove to be even more expensive:
- Initially if investors must choose between a difficult to consult PDF format, and a very high quality printed version, they will probably choose the second option that will significantly increase expenses related to printing and postage.
- More importantly, the principal messages of the annual report will be lost in the “PDF blob” thus strongly decreasing the possibility of attracting new investors.
The solutions
Following, are two solutions that are offered to companies who wish to adopt a professional approach in the presentation of their annual report on the Web.
An optimized version of the PDF document
The first option, which represents a vital minimum rather than an optimal solution, consists in an in-depth modification of the PDF document in order to correct major flaws:
- The annual report is divided into several sections so as to accelerate uploading and to facilitate its consultation;
- An interactive table of contents is integrated into the document and hyperlinks are inserted in the text to facilitate navigation to specific pages and information;
- The superfluous images and colors of the annual report are eliminated to facilitate printing;
- An Excel file is created in order to make it possible for analysts to easily export financial data.
The annual report in HTML format
The second option offered by LSW consists in developing the equivalent of a “mini Web site” for annual reports in HTML format. As an example, view Genentech’s e-annual report.
It is important to stress that this solution proves much more powerful than an optimized PDF document for the simple reason that on the Internet, the Web site is by far the most effective format to disseminate information.
To be convinced of this, imagine the difficulties that a company would encounter in replacing its corporate Web site by a PDF document! More importantly, an HTML version of an annual report has three great advantages compared to an optimized version in PDF format:
- Navigation between the various sections of the annual report and locating specific information is much simpler in HTML thanks to functions available in the Browser (for example “back” or “home” buttons, as well as the integration of scrolling menus.
- HTML pages are more quickly and more easily indexed by the search engines than PDF documents are, hence the Web version of an annual report gains greater visibility.
- Contrary to PDF format, the Web offers several functionalities making it possible to enrich the contents of an annual report (for example the use of a video for the presentation of the message to shareholders or the integration of links towards various sections in the corporate Web site).
Several companies in the life sciences industry publish an HTML version of their annual report on their respective Web sites such as Merck, Celesio, Axcan, Celgene, Amgen, etc. Of those companies, the majority do not respect Web best practices.
Although a consultation meeting is necessary to allow us to properly advise a client in developing a proper Web version of their annual report, it is possible to easily identify some frequent errors which can be avoided by companies:
- After analyzing traffic statistics of several Web sites, it appears that financial data is more frequently consulted than other sections of the annual report. In this context, it is much more important to concentrate on presenting effective contents rather than to emphasize the structure. For example, integrating heavy graphic design is not the best option.
- In several cases, the companies have a tendency to simply transpose the concept of the paper document onto the Internet (Pfizer’s 2005 annual report is particularly eloquent on this level). In doing so, this has an effect of depriving a company of practically all the advantages rising from the interactivity that the Web has to offer.
The consultation of texts on a Web page is primarily based on scanning the information rather than on the reading itself. The contents of an annual report in paper format must thus be adapted to this reality particularly by using short and simple sentences, obvious key words and updated lists.
In conclusion
For the majority of public companies in the life sciences industry, the investors constitute a target of great importance. In the context where the Internet exerts a growing influence within the financial community, publishing an annual report on the Web in an adequate format can only prove to be beneficial.
Thus, by adopting a balanced approach in regards to allocating budgets for an electronic format and paper format of an annual report, companies will benefit from a better return on their investment.
In the last few years, LSW has developed an expertise in Web communications for the life sciences industry. In particular, LSW was instrumental in advising several public companies about their investor relations on the Internet. If you wish to obtain better results in the publication of your annual report in electronic format, do not hesitate to contact us.