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Brightmen and Coolwords Research Shows: Corporate Earnings Announcements Often Too Long


Warmond, The Netherlands (July 14, 2005) -- The publication of interim earnings reports will send a deluge of fresh data over to American investors. However, despite the fact that the narratives are progressively longer, they are not necessarily becoming more informative.

Less is better

It is estimated that the average length of earnings release narratives has more than doubled in the past five years. Data on Canadian stock-listed companies for example, published last April, indicate an increase from 1,185 words in 2000 to 2,545 words in 2004. Dutch companies, many of which have operations in the United States and target American investors, publish even lengthier earnings press releases. Brightmen and Coolwords has found that the 25 companies included in the benchmark AEX Index on average use 3,202 words for their interim statements. Yet, only a few succeed in getting their message across, such as Ahold (NYSE: AHO), Unilever (NYSE: UN), and Akzo Nobel (NYSE: AKZOY). Surprisingly, most of the companies that communicate well, appear to use significantly less words than the average number.

Five Points to Make

A better way to address the needs of investors is to focus the story on what the company sees happening in its operating environment, on what progress it makes in the execution of its strategy, and on what will drive growth and value creation going forward. Brightmen and Coolwords identified the Five Key Points to Make as: Performance, Progress, Position, Peculiarities, and Prospects. The first point refers to the disclosure on historic sales performance, operating costs, financial position, and earnings. Next on the list comes an update on the progress made with the execution of initiatives that are key to growth and value creation going forward. This leads up to the third point: giving an indication of the companyís position in the markets in which it operates, preferably relative to its competitors. Fourth comes a specification of non-cash items, non-recurring charges and benefits, changes in goodwill and other financial items that have an impact on the reported bottom-line result. Brightmen and Coolwords has labelled these: peculiarities. The prospects, in conclusion, remain the most sought after guidance with regard to managementís own expectations concerning the future performance of the company.


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