Market trends and outlook Five-year trend analysis Quality of reporting D Market trends Outlook Time • In the past, the focus has been on providing a general overview of conditions within the industry or sector. • Impact of the financial crisis led to more companies providing additional market context but less in the way of forward-looking information. Leading reporters: • Evidence their knowledge of the sector and the potential opportunities within it, through their market discussion. • Provide meaningful, quantifiable, forward-looking information post the financial crisis, a sign of growing confidence. ifficult market conditions and continuing economic uncertainty have clearly driven companies’ reporting on contextual market information to justify caution or poor performance. Many reporters are also taking this a step further by using their Annual Report as an opportunity to outline their thoughts about the industry or where they see significant opportunities in the future. Company-specific forward-looking information is also on the increase after such statements nearly vanished from Reports during the financial crisis. While it is rarely quantified or particularly detailed, there are signs that companies again have confidence in their ability to forecast performance, at least to some extent. What’s required? The UK Corporate Governance Code has highlighted some sections of the repealed OFR as guidance. These sections include a recommendation to discuss ‘the entity’s major markets and competitive position within those markets and the significant features of the legal, regulatory, macro-economic and social environment that influence the business’. With respect to forward-looking information, companies should look towards the Companies Act 2006 for guidance as it states that the business review: ‘must, to the extent necessary for an understanding of the development, performance or position of the company’s business, include the main trends and factors likely to affect the future development, performance and position of the company’s business’. Whilst this guidance leaves room for the company to report as they see fit, the company should ultimately present contextual information to support the business’ strategic and performance information in the Annual Report. 14 © Black Sun Plc 2011 www.blacksunplc.com
