The timetable
The Directive says:
An issuer shall make public a statement by its management during the first six month period of the financial year and another statement by its management during the second six month period.
Such statement shall be made in a period between ten weeks after the beginning and six weeks before the end of the relevant six month period.
You need to look at a calendar to grasp the timetable. For a company whose financial year matches the calendar year, it means that interim statements must be issued somewhere between March 5th and May 14th and between September 4th and November 13th.
For those following the traditional financial year to March 31st, the relevant dates are June 10th to August 19th and between October 9th and December 18th.
Don’t worry about the precise dates. The idea is that statements should come out a week or two after the end of the first and third quarters, although the 10-week window is very wide for this purpose.
It means that many companies combine their interim management statement with the issuing of half-yearly or annual results.
When to expect updates
One has to say that companies quoted on the London stock market are playing the game and issuing four reasonably equally spaced trading updates per year. So a company using the calendar year will issue a trading update around March 31st, a second immediately before or after the half year end at June 30th, a third around September 30th and a fourth within days of the full year end at December 31st.
This means you know promptly how the business has performed in each complete quarter.
However, some companies do have leeway to time the updates to suit their particular trading pattern. The most obvious example is in retailing, where companies have traditionally provided an update on how the key Christmas trading period has gone.
There is nothing to stop companies issuing more trading updates than the rules demand. We do occasionally see companies issue updates at the end of each quarter, another update with half year and full year figures and one for good measure at the AGM.
Most companies give advance warning when the next trading statement is due. In some cases each trading update includes a line saying when the next one is due. Sometimes an indication is given within the company results announcements. Other companies issue a separate announcement of an impending update.
In any case you can easily discover when a trading update is likely to be issued by checking the dates on which statements were made in the previous financial year. They tend to be repeated at much the same stage each year.
What the statement contains
The Directive says what should go into the statement:
It shall contain information that covers the period between the beginning of the relevant six-month period and the date of publication of the statement.
Such a statement shall provide:
An explanation of material events and transactions that have taken place during the relevant period and their impact on the financial position of the issuer and its controlled undertakings, and
A general description of the financial position and performance of the issuer and its controlled undertakings during the relevant period.
It is thus no longer possible to hide behind routine ‘nothing much has happened’ statements that were issued by many companies when quarterly statements started as a fad rather than a legal requirement.
Instead, it is now necessary to provide financial data up to within a few days of the trading update, not only for the main company but for any subsidiaries and joint ventures under its control.
These will not be as detailed as the twice yearly financial results. It would be unreasonable to expect them to be, if they are to be bang up-to-date. Full results take time to compile.
In theory, companies need not produce specific figures. They could include sufficient information in the narrative of the statement. However, that would be difficult to achieve without including key operating statistics such as growth in sales or changes in profit margins.
Recording key events
In addition to any figures, companies are required to record any key events since the previous update and explain the impact. There is wide scope for interpreting what constitutes a material event but the intention is clear: anything that could affect the share price that has not been reported already should be in the quarterly update. Among candidates for inclusion, where relevant, would be:
changes in the state of the market that the company serves
large orders received or lost
refinancing
acquisitions or disposals
opening of new premises such as stores, distribution centres or factories
change in strategy
progress so far in carrying out a previously announced strategy
adequacy of finance to fund day-to-day operations or expansion
new product range
effects of external events such as foreign exchange rates, energy costs, business rates or wage rates
Bit by bit, quarterly statements have become clearer and more comprehensive so that they now contain much relevant and significant information that the investor ignores at his or her peril.
The downside is that companies are tempted to err on the side of putting an excessive amount of detailed information into the quarterly statements – but that is a price worth paying for being a better informed investor.
Half year results
The Transparency Directive replaced the EU’s existing Interim Reporting Directive as regards half yearly and annual results. It requires:
A report covering the first six months of the financial year as soon as possible after the end of the relevant period, but at the latest within two months
The report must remain available to the public for at least five years
It must contain a condensed set of financial statements and an interim management report
The
