One third of FTSE 100 firms reducing financial forecasts

FTSE 100 companies ‘lack confidence to commit to future financial projections following the crisis’, claims new research.

The volume of forward-looking information included in statements from chairmen and CEOs experienced its sharpest decline this year, falling by 24 percent, says business analysis consultancy Metapraxis. This brings the total reduction in future financial statements to a third since the Lehman crisis five years ago, says Metapraxis, which looked at the annual reports of FTSE 100 companies between 2006 and 2012.

Three sectors in particular saw ‘significant reductions’ in the quantity of forward-looking data, with information from telecoms firms down by 85 percent, basic materials by 74 percent and consumer goods by 43 percent, according to the research. The quality of financial data has also taken a hit, with the ‘majority of statements consisting of predominantly historical data’ over the last six years, according to Metapraxis.

‘With the economy starting to recover, it is important that FTSE 100 firms lead by example and start providing better information to shareholders,’ says Simon Bittlestone, managing director of Metapraxis, in a press statement. ‘Despite an increase in historical and non-financial data reported, stakeholders are right to expect more forward-looking financial data from FTSE 100 boards in order to gain a strong understanding of how the business is likely to progress in the future.

‘Organizations need to improve management information to support better decision making. Those companies that feel confident enough to provide forward-looking financial projections generally have better internal management information and greater visibility of future performance. This increased transparency gives shareholders confidence that management is fully in control of the business.’

It’s not all bad, though, as the increasing adoption of integrated reporting – offering up data on manufactured capital, human capital, intellectual capital and social or relationship capital – sees a ‘greater variety’ of information appearing in annual statements. ‘Non-financial data, which can be used to understand the long-term sustainability of a company, has increased by 72 percent since 2006,’ according to Metapraxis.