Quarterly results are a waste of time
BP’s $17bn loss, amid the Gulf of Mexico clean-up, was trumpeted as “the biggest quarterly loss ever announced by a British company.” That’s not a hard record to dispute: few companies could lose so much and remain solvent, but even fewer report their results four times a year. BP had the field to itself.
The banks are probably the only ones who can compete on losses but they are far too wise (or lazy) to report quarterly. Producing four sets of figures a year is an American affectation, subscribed to by some UK companies seeking a market for their shares in the US, but it is a trick not worth the effect - and Unilever’s boss has had the courage to say so.
The Anglo-Dutch food and household goods group is one of that handful of European companies to report quarterly and probably does so only because its arch-rival in the US, Proctor & Gamble, has to do so - just as BP is trying to keep up with its American competitors. But Unilever chief executive Paul Polman thinks such frequent reporting only encourages short-termism by investors, making them concentrate on immediate trading rather than looking at the future or the long-term trend.
“A lot of problems the world has found itself in are because people were chasing quarterly results,” he pronounced after, oddly enough, announcing results that the City analysts considered disappointing.
Polman has previously said customers are more important than shareholders - a fair point if you accept that without a top line there can be no bottom line. He has abolished forecasts too, leaving those to the analysts to get wrong.
For the few firms that do produce quarterly results, the annual circus of announcements seems to be a never-ending conveyor belt. As well as the four results statements there are pre-announcement trading updates, an annual report and an annual shareholders’ meeting - plus any additional disclosures to accompany takeovers or other deals. And there is also pressure to produce interim balance sheets as well as profit and loss accounts too. Accounts departments work overtime and companies seem to be perpetually in close periods, always too close to an announcement to be able to say anything of interest - or allow directors to deal in the shares.
If BP does not want to report another record quarterly loss, the easiest way to avoid it is to cut out quarterly reporting. Then it can go into competition with the UK banks and aim for the biggest half-yearly loss instead.
