Few complaints over end to "short-termist" quarterly reports

Looking at the slew of quarterly announcements from FTSE100 companies - BP, Standard Chartered and St James's Place on Tuesday alone - it is hard to remember that interim management statements (IMSs) are now an entirely voluntary exercise.

Some groups still have strong reasons for updating the market frequently. Those with a big US shareholder base have investors who expect the quarterly earnings cycle. Complex financial organisations, and seasonal businesses such as retailers, also have an incentive to keep shareholders informed on a regular basis.

But outside those categories, a growing number of companies are taking advantage of the regulatory relaxation last November that made IMSs optional.

Last week insurance group Admiral and support services group G4S said they would not release interim statements this spring.

The first FTSE100 groups to say they were dispensing with IMS reporting were United Utilities,National Grid and Diageo.

James Edwardes Jones, a consumer analyst at RBC Capital Markets, says he has heard hardly any complaints about Diageo's decision. "My personal view is that it is a very good thing when companies stop doing quarterly reporting," he says. "I think that particularly with consumer staples - these companies are run for the long term, even though there will be quarterly fluctuations."

Clive Black, a retail analyst at Shore Capital, is similarly dismissive of quarterly reporting: "It's the City version of 24-hour news - very shallow".

And David Lis, head of equities at Aviva Investors, agrees. "I've never been a fan of quarterly reporting. It's the noise the market likes to engage in for short-term trading," he says.

When IMS reporting was introduced in 2004 as part of the EU Transparency Directive it was meant to improve the quality and flow of information available to investors. Yet from the start it was a compromise, after some member states had objected to an earlier plan to make companies release full-blown quarterly reports.

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"Lots of companies talk about assets and margins in IMSs when they want to get this information out," says one analyst. "But when they don't want to highlight those parts of the business, they say 'It's just a trading statement, we'll only talk about sales'".

Analysts also say that the strict timings for these statements make them less useful than the trading updates that companies often issue around the start of the "close" period before they release full results.

IMSs have also attracted increasing criticism since the Kay review on long-termism argued that quarterly reports contributed to short-termist attitudes and should be scrapped.

Yet even as the arguments against IMSs have grown louder, the number of big companies abandoning them is still small.

"I am surprised that more people haven't stopped," Mr Lis says. "For long-term investors it really wouldn't matter whether there are quarterly reports or not in any sector."

One reason companies might still issue IMSs is that they are used to the process. Though it takes up management time, the routine is so familiar that it may be easier than responding to individual requests from analysts for extra information, or judging whether a particular piece of trading information really merits a separate announcement that might give it undue weight.

Another is that companies worry about an investor backlash. FTI Consulting, a financial PR firm, surveyed 165 international institutional investors in November when the IMS requirement was dropped: three in five believed that companies should continue with IMS reporting on a voluntary basis while two in three said dropping it might lead to reduced levels of investor confidence.

"I think companies are slightly scared about stopping," says Mr Edwardes Jones.

That fear should reduce as the number and diversity of companies declaring an end to IMSs increases. "There will be a trickle….and then it will turn into a flood," predicts Mr Black.

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