Which annual reports are regarded most highly by the corporate reporting industry itself? Neil Gibbons finds out:

The F-Word or Masterchef? When it comes to judging success, which prime-time cooking show offers the best approach? Either method can be used to judge any product from food to fiction, from architecture to annual reporting. The distinction boils down a single issue: who is best placed to judge what’s good and what’s not? Which group represents the best arbiter of quality?

The first approach – the F-Word model, if you like – places decision-making in the hands of the product’s eventual consumers. Gordon Ramsey’s customers decide whether a plate of food is much cop or not. Some might be foodies, others might be philistines, but the food was intended for them and they alone decide whether it gets a thumbs up. The second approach – that of Masterchef – puts its trust in the hands of those in the know. Masterchef contestants have to impress a table of fellow chefs, dispassionate judges who spend their lives thinking about what constitutes good and bad. It’s skilled chefs setting out to impress their peers. In the world of corporate reporting, there’s no shortage of research into what the consumer – the investment community – thinks. Indeed, there is a host of awards to celebrate the annual reports that analysts, fund managers and investors consider to be the most worthy.

But surely there’s a place for the Masterchef approach too? To find out, Communicate polled the UK corporate reporting industry to discover which annual reports the annual reporters rate most highly. Of course, few industries are as competitive as this. Convincing an agency to gush about one of its competitors is like persuading Simon Cowell to compliment a fellow X Factor judge. For that reason, we assured each respondent that his or her views would remain completely anonymous. We asked the 19 agencies producing reports for FTSE 100 companies to submit their five favourite annual reports, and 14 responded. The results might raise a few eyebrows: for all the resources available to FTSE 100 businesses, a FTSE 250 firm has managed to gatecrash the top five. Here we serve up the five most popular reports. Bon appétit.

1st – Land Securities

“It’s not happened overnight, that’s for sure,” says SAS Design’s James Parsons of Land Securities’ winning report. “It’s been a four or five year process in which we’ve tried to improve consistently every year. It’s been evolution, not revolution.” Their goal, says Parsons, was simple: to achieve best practice reporting. “It’s the document they use to communicate with shareholders so they wanted it to be top-notch,” he says. “They’ve invested a lot of time and effort, not just in producing the reports but in benchmarking them afterwards to determine what worked well and what needs to be changed.” According to Parsons, the biggest change this year was in persuading Land Securities to allow the agency’s own writer to produce the copy. Not only did this make for a smoother process, it improved its readability too. “It meant it read more consistently throughout,” he says. “That was a big step forward.” Like Speedy (rated joint third), Land Securities was upfront about the state of the sector, and told its story in the context of the market’s across-the-board adversity.

SAS Design also worked on making the book’s remuneration and risk reporting clearer and easier to access. “It’s an approach that appeals to even the most sophisticated investor,” says Parsons. “It’s accessible but they can still drill down to the detail.” This was aided in no small part by the innovative design. Scribbled notes and hand-drawn arrows link financial data with its underlying context and draw the eye to relevant information. “It would have quite a corporate style but we’ve deliberately included more human touches, such as the handwriting and arrows,” says Parsons. “And that really helps the reader.” Once again, the agency was grateful for the input of its client. “This was only possible with their support,” says Parsons. “If we suggest a format, we need them to buy into it and give us information that is cut in a certain way. Thankfully, we had a very close relationship with key people there. It was a big team effort that involved finance and the secretariat.”

2nd – Vodafone

“As a truly global company, there’s a lot of information we have to give,” says Simon Lewis, Vodafone’s director of corporate affairs. So it’s little wonder that the company’s full report runs to almost 160 pages. That may sound unwieldy but Vodafone has considered its audiences carefully and produces what it calls a ‘suite of reports’, each sharply distinguished and targeted at different sections of readership. “The full report isn’t necessarily appropriate for the private shareholders,” says Lewis. “It’s designed primarily for institutional investors. So we also produce a summary of the annual report’s highlights which is contained in the notice of meeting, and an annual corporate responsibility report.” With so much to disclose in the annual book, preserving the clarity of the narrative was a key consideration. “It’s important not to let the weight of all that information obscure the message,” adds Lewis.
 “So in the corporate responsibility section, we kept it down to three pages but made it clear that more is available online and in the CR report. People can find the information if they want to drill down further. “We focused particularly on the chairman’s statement and the CEO’s review,” he continues. “If someone only reads those pages, will they get the story of the company? Obviously, there’s much more detail in the business review. But we wanted to make sure that the narrative is contained within those statements.” Visually, Vodafone has bucked a trend by paring back its use of imagery in favour of a more considered style. “We used very few photographs this year,” says Lewis. “In previous years, we’ve had lots of photography. But this time we wanted pictures and photos that explain, rather than simply illustrate.”

= 3rd – National Grid

National Grid, as one of the largest investor-owned energy companies in the world, is bound by far more rigorous reporting rules. “The fact that National Grid is a regulated business is a challenge of its own,” admits Simon Lake, managing director of London-based communications agency Likemind, which produced the report. “But in a sense, utilities have a head start over non-regulated businesses when it comes to reporting. They’re used to reporting on health and safety, their environmental impact, risk and CSR issues. They are ahead because they’re predisposed to in-depth, analytical disclosure.” Likemind has worked on the National Grid account for three years and Lake admits that his firm’s job has been made easier by the utility’s willingness to embrace transparency and enlighten its investors. “They’re very good at providing material,” he says. “They’re good at Companies Act compliance. And they’re very good at generating financial content.

Overall, you’re looking at a company that’s great at articulating its business and its KPIs. “Our job is to help them tell that story in a clear and straightforward way. It’s about making sure that their key messages aren’t buried under the weight of their content.” According to Lake, that focus on clear narrative is invaluable, given the make-up of National Grid’s investor base. “National Grid has two sets of shareholders: smaller shareholders who have less than 100 shares and the more sophisticated investors,” he says. “We have to make sure we explain the business and strategy very clearly to both groups. We provide very clear explanation for the smaller shareholders, while making sure that the sophisticated investors receive the more detailed disclosure they want to see.” As an energy company, there’s an onus on National Grid to provide information on much more than just the financials. “It’s always about explaining its impact, its values and how it is delivering against its stated targets,” says Lake. “It’s something of a rarefied concept but it’s still an enormous and fantastically successful business. The report needs to communicate that.”

= 3rd – Speedy Hire

It’s not even a FTSE 100 company and still Speedy Hire has shown that it can mix with the big guns when it comes to reporting. Last year, The Observer and the Co-operative Bank published the Good Companies Guide, a league table ranking FTSE 350 companies on their ethical and environmental performance. Speedy came first, scoring highly for its jargon-free corporate responsibility reports. And now its annual report, produced by London-based agency Merchant, has been recognised by UK corporate reporters. “Every year, they strive to reinvent the book,” says Robert Moser, the outgoing managing director of Merchant. “They build on what worked well and rip out what didn’t. There’s just this desire in their DNA to get better and better.”

Speedy isn’t afraid to discuss how it stacks up against its competitors. Its report even contains a chart that shows its market share as well as a clear statement of what it might do differently from the rest. And it employs a novel tactic to attract the eye of analysts. “Each year, an external industry expert writes a kind of benchmarking report on the tool hire market,” explains Moser. “We persuaded her to produce a summary for us to publish within our annual report, a month before her full market report comes out. That gives all analysts in that sector a reason to seek out Speedy’s annual report. It’s a really good pull into the book.” The annual is particularly strong on risk and governance, adds Moser. “Risks are charted against the likelihood of them happening and the impact if they do,” he says. “Then each one is allocated a director who reports on how that risk will be mitigated. Some might say that’s extreme, but in this climate it helps. Speedy was also one of the first to include a Combined Code checklist. Yes, it’s tick-box, but it makes corporate governance specialists happier.” The visual ephemera of the book is taken from Speedy’s marketing. Merchant developed a theme based on the look of the company’s on-site signage. “The book actually looks like the industry they operate in,” says Moser. “We got to this point by taking our designers into the depots so that they can understand the culture. It’s all thought through, nothing is left to chance.”

5th – Home Retail Group

Sometimes an agency and a client just click. SAS Design and its client Home Retail Group are fairly new bedfellows but have already hit on a winning formula. Having only won the account at the back end of 2007, this is the first annual that SAS Design has produced for the client. “Their previous annual report was their first post- IPO and was all quite new and rushed,” says Adrian Parker, client partner at SAS Design. “This time they’ve got an agency to produce a really effective piece of communication.” As a consequence, the learning curve was steep. “There was a bit of education going on,” admits Parker. “Other than the company’s IR team, not many of the people there had been involved in an annual report before. We had to learn who each other was and get to know each other’s personalities.” Client and agency decided not to draw on the previous year’s effort – “We started with a blank sheet of paper,” Parker says – and they set about determining what they wanted to say to key audiences. “We held a messaging workshop and identified the top three to five messages,” says Parker. “Some of the information is bound to be overlooked when readers spend only 10-15 minutes with the report, so we had to work out what we wanted them to take away.”

Considerable thought went into a visual design that made use of existing motifs. “We took the look from the Homebase box that forms part of its logo,” says Parker. “We knew we could make more of it and use it consistently throughout. It’s not just a logo in the top left-hand corner. “So we used that box in images – we illustrated the compactness of the supply chain by showing the boxes stacked tightly into a van; we presented the financials with an image of the box being weighed and measured. We wanted it to engage the reader.” Parker believes that the report showcases the personality of the group. “They’re made up of no-nonsense hardcore retailers,” he says. “As a result, the report is clean and efficient. There’s nothing fancy about it; there are no bells and whistles. And that’s reflective of the company.”