How do the most respected corporate reporters use language in their annual reports? Harriet Hobbs of Stratton Vraig looks at the four nominated companies for Best Overall Annual Report in the FTSE 100 category at the IRS Best Practice Awards.

When these reports appeared, all four companies were in the eye of the storm which hit the financial markets in 2008. Some felt the effects more keenly than others.3i report

The 3i cloud is about as gloomy as they come. During the financial year to March 2009, the private equity group was in the thick of a rapid economic downturn. It took a beating, reporting a record loss of £2.15 billion in the year to March 2009. The cloud is darkened by words like ‘debt’ (54 mentions), ‘fall’ (32), and ‘loss’ (25). The word ‘gearing’ is mentioned 15 times. Given that 3i’s own gearing reached an excruciating 103%, while net debt stood at more than £2 billion this is perhaps not surprising. The word ‘upturn’ is dangled in front of investors’ noses in the chairman’s statement but not frequently enough to make it onto the cloud.

M&S report

Marks & Spencer was suffering more than its fair share as a result of the downturn. The words ‘customer’ and ‘food’ are writ large as it seeks to reassure investors it is focusing on shoppers and its food offering in the face of stiff competition. What is striking though is the word ‘governance’ with 75 mentions in all. At the time, Sir Stuart Rose was taking flak for taking on both the chairman and chief executive roles. The repetition of ‘governance’ may play into the popular idea that if you say a word often enough, people will start to believe you are doing something about it. Now just the chairman, Sir Stuart recently described the Christmas 2008 trading period as “Armageddon” – although there is no reference to that word in the cloud.

Centrica report

In Centrica’s annual report, the word ‘customer’ is mentioned more frequently than the word ‘shareholder’, which is perhaps surprising given its investor audience. This may be part of a broader attempt to present a customer-friendly face after the soaring profits at its residential unit.
The words ‘higher’ and ‘lower’ feature prominently too, and are perhaps indicative of the extreme levels of volatility in wholesale gas and power prices.

Tullow Oil report

But the picture was brighter at Tullow Oil, and this cloud’s lining looks distinctly silver compared to the others. The words ‘upside’ and ‘potential’ appear frequently with ‘success’ garnering 96 mentions. The company is not shy about its good fortune. The words ‘deliver’, ‘growth’, ‘success’ and ‘strong’ (which is mentioned 66 times) feature heavily. But the tone is measured, a reflection perhaps of the hazardous nature of its business: the word ‘risks’ crops up 110 times.

The word ‘responsibility’ comes up in all clouds (except Marks & Spencer’s). While it’s probably a regular term in annual reports you can’t help wondering if this rather mundane word might suddenly have become attractive – sexy even – as companies seek to soothe and reassure their investors in the wake of the seismic events of 2008.