Anecdotal evidence of a consistent upturn in the fortunes of design groups gets some backing from hard figures this week, with the publication of the annual Merchant Handbook.
Merchant, which boasts a number of high profile clients for its annual report and identity business, subcontracts to a wide variety of design groups to carry out the creative work tied to its own consultancy service. Its handbook – which includes a ranking table of annual report design groups – has become a regular feature since its first publication in 1997.
Research among FTSE 250 companies forms the basis of the figures in the book.
Chief among these figures is that in 1998 37 per cent fewer FTSE 250 clients designed their annual reports in-house compared with last year. A swing of this size in the use of external consultancies suggests a far wider acceptance of design in the UK’s top-performing businesses than has previously been the case.
The use of design groups to create annual reports – and their subsequent use as a brand-building communication device rather than just a necessary evil – seems to have become the norm rather than the exception. Only 15 FTSE 250 companies designed their own annual reports this year, even though many more have the in-house capability to do so.
There is also a growing acceptance of the use of summary financial statements created by design groups. Unlike annual reports, SFSs are not compulsory – the information in them can also be distributed by advertising – but they are increasingly being used as another medium through which to represent companies to brokers and shareholders.
This year 80 per cent of companies with more than 110 000 shareholders published an SFS, compared to 73 per cent last year. But 11 per cent of companies with 39 999 shareholders or less, which can hardly consider an SFS the most cost-effective way of communicating to their investors, also commissioned SFSs this year. While the figure seems small, it is more than double last year’s figure of 5 per cent. Medium-sized companies, with between 40 000 and 109 999 shareholders saw a healthy growth in SFS use from 34 per cent in 1997 to 57 per cent this year.
“It’s definitely a trend,” says Bryan Edmondson of annual reports and identity design group SEA. “The annual report has become far more of a brochure and a corporate statement. I think people are far more aware that if they do them in-house they don’t pay as much attention to them. It’s often the only chance to get a real independent view of their companies,” he says.
Amanda Merron, partner of accountant Willott Kingston Smith, agrees: “It’s all part of your branding communications. If, for example, British Gas was to take out poster and press ads, and then its report looked completely different, what does that say?”
Merron, however, is still critical of the language used in annual reports, which she says often hampers their message. “The Economist Group’s report is really easy to assimilate because it is so well written,” she says, suggesting other companies learn from it. When the target audience for such publications is taken into account – busy stockbrokers and analysts – surely straightforward communication of complicated finances has to be a key goal.
At present, there is a relatively consistent churn of clients between design groups. An average of between one quarter and one third of the top 250 FTSE groups changed annual report design groups between their 1997 and 1998 reports, with figures varying depending on whether the clients ranked in the top 50, second 50, or so on.
The handbook ranks design groups in the annual report sector by the number of FTSE 250 clients on their books. Figures are based on information supplied by the client companies. Conveniently – as it compiled the report – Merchant tops the list for the first time, ranking equal first with the merged Addison and Sampson Tyrrell Corporate Marketing.
Merchant gained six new annual report clients over the year, while Addison/STCM gained the same, but lost three others. Each wound up with 19 of the FTSE 250 on its client list, knocking previous champion Pauffley, which also gained six new clients, but lost seven existing ones, from its perch.
The last three years have also seen a polarisation of work in the sector. Since 1995 the top five designers in the table have increased their share of the market by 25 per cent. Whether the groups lower down the annual report chain are making up the difference by creating reports for smaller clients, which don’t make the FTSE listing, is unclear.
The gain in market share is obviously good news for the bigger design groups. But smaller groups can’t be blamed if it gives them pause for thought.