Smurfit move to quarterly reports is an example to other companies

It is easy to knock a non-performing group for almost everything it does. The Jefferson Smurfit Group is an easy target. But when it does something enlightening, it deserves the relevant accolades.

The decision of Michael Smurfit, chairman and chief executive of Jefferson Smurfit Group, to move to quarterly reporting of its results is a welcome move, particularly as there is no regulatory obligation for him to do so. The reasons given for this move are pragmatic. "The US is, in many respects, a natural home for our equity and has now become our primary capital market. Quarterly reporting is a logical move to meet the needs of our internationally diverse investor group," explained Mr Smurfit.

But what about the long-suffering Irish investors? Surely the main reason for going onto a quarterly reporting basis should be to give the most up-to-date information to all the group's shareholders.

Nevertheless, Jefferson Smurfit Group has led the way; others should follow.

However, maintenance of the status quo appears to be the order of the day. While admitting that there could well be a move in the EU towards quarterly reporting, Conor Hurley, group investor relations manager of AIB, argues that his bank had initiated trading statements before the interim and final figures. These give the general state of the business, but not detailed figures. Mr Hurley says that "they fill the void without going through the full figures".

AIB provides quarterly data on its US operations because it is required to. It would be a comparatively easy extension to give quarterly figures on the group. "We could, but we don't, because there are no requirements," he says. And he points to the US, where investors are "almost obsessed" with quarterly figures - to such an extent that if the company misses its earnings expectations, the market will mark the share price down. He contends that "this short-term focus can be a distraction" from how the business should be operated.

A spokeswoman for the Bank of Ireland says that bank has no plans to issue quarterly reports, as there is no legal reason to do so. She notes the bank (like AIB) does issue trading statements in addition to the interim and annual results.

A spokesman for Irish Life & Permanent takes an analytical approach. "Quarterly reports are more relevant for high-risk sectors," where there is a significant shift in expectations. In contrast, in the group's area of financial services, the shifts are much slower, he says.

Jim Flavin, chief executive of DCC, thinks the Irish reporting system "is about right" and "more balanced" than the US quarterly system. He says quarterly results are not as representative as half-year or yearly results. He agrees it would be good for newspapers (more results to report on) and analysts, but bad for company executives, who would be running around giving briefings instead of running the business and getting results.

One businessman who did not want to be named argues it would be more difficult to analyse the underlying trend from the shorter term because of values placed on stocks and debtors. Quarterly results also create too much volatility, as can be seen in the US. He poses the mischievous question: why not monthly or even weekly? Every company has "bad weeks and good weeks", he adds.

A spokesman for Waterford Wedgwood does not see any usefulness in reporting quarterly. He notes that negligible business is done in its first and third quarters, while quarters two and four see a "significant amount of business". He adds that the company would, of course, comply with any reporting requirements.

Those opposed to going quarterly could point to cost considerations; there would be extra costs associated with quarterly reporting and management accounts would have to be tailored into reporting accounts. But these are trifling considerations.

Arguments that quarterly accounts might cause confusion, or might be difficult to interpret, are unsustainable. Prior to the compulsory reporting of interim results, companies were vigorously against their publication on the grounds that they would cause confusion because of cycles associated with trading. Those contentions are now seen for what they are: sheer poppycock.

Companies opposed to quarterly reports also point to the profit warnings made by groups whose trading is going contrary to expectations. True, but then aren't they obliged to!

The necessity for profit warnings would largely be obviated if companies kept their shareholders briefed on a regular basis. A recent survey by Arthur Andersen found that companies reporting information beyond legislative requirements and stock exchange listing rules are likely to produce fewer profit warnings.

That survey - based on a study of the voluntary reporting of 25 FTSE 100 companies - found that 20 per cent of companies reported only when required and, of those, 60 per cent issued profit warnings during the year under review. Of the companies that reported more frequently, only one issued a profit warning.

Clearly, Irish publicly quoted companies that want their shareholders to be better informed should follow the Jefferson Smurfit Group's example.

bmurdoch@irish-times.ie