AIM to Main Market reporting: what to expect
As market conditions become more favourable and companies’ long-term strategies are developed to successfully compete in the industry, it might be considered natural for companies to become more attracted to moving from the Alternative Investment Market (AIM) to the Main Market.
There are undoubtedly challenges when issuing shares on the Main Market; however, the rewards of a well executed market transition often outweigh the potential drawbacks which may occur as a result of the move.
Why do companies decide to move to the Main Market?
Despite the initial challenges companies might experience, moving to the Main Market has the potential to support success and the achievement of long-term growth. Gaining access to capital from a broader investor base will not only help support their financial goals but will provide the opportunity to invest in operations with the potential to achieve a sustainable competitive advantage. However, these benefits are only feasible when companies are ready to commit to a deeper level of corporate transparency to reassure investors and wider stakeholders.
What should be done from a communication point of view?
Once listed on the Main Market, companies are required to follow more restrictive and intricate rules.
Although the transition might be overwhelming at first, a Main Market-listed company’s first annual report should be viewed as a new and exciting opportunity to tell the company’s story and open the doors of the boardroom to its investors and wider stakeholders.
Here are some of the key changes an AIM company can expect:
Developing a strong strategic report
Companies should include a clear “At a glance” section to provide an impactful introduction to the company and highlight the investment case. Including dedicated pages to address the business model, group strategy and KPIs can help to further display the company’s future direction and ability to create long-term sustainable value for shareholders.
Enhancing the disclosure of corporate governance
Companies are required to comply with (or make reference to) the UK Corporate Governance Code (“the Code”). This can prove challenging for some companies as they may need to review their governance structure. However, AIM-listed companies that already report against the Quoted Companies Alliance (QCA) framework are in a stronger position when entering the Main Market. This is because the QCA framework was developed from the UK Corporate Governance Code and therefore these companies are often able to transition more seamlessly into the Main Market, following the new reporting standards.
The Code requires companies to outline their principal risks, as well as establishing an audit committee with the aim of developing internal controls to oversee risks and maintain a close relationship with the companies’ auditors.
Reporting on environmental and social issues
According to the Companies Act 2006 (Regulations 2013), companies with less than 500 employees are required to disclose GHG emissions and their approach to human rights and gender diversity. Similar to the “comply and explain” approach of the Code, companies should state where information on these subjects has been omitted from the annual report and the reasons behind this.
The opportunity?
When new Main Market-listed companies produce their first annual report, it provides them with a key opportunity to develop their overall corporate communications suite. Companies can reduce costs and increase efficiency by populating their corporate website with the new elements from the annual report, which will demonstrate consistency throughout their corporate communication channels.
Helping Sirius Real Estate with its reporting journey
This year Design Portfolio worked with Sirius Real Estate Ltd, a leading provider of workspace in Germany, to produce the company’s first annual report as a Main Market-listed company following almost ten years on AIM.
The objective was to take Sirius’ corporate reporting to new heights, by introducing best practice elements to reflect the company’s continuous growth and prosperous future, as well as demonstrating its commitment to transparency and accountability.
From the very beginning it was clear that Sirius had the ambition to go the extra mile to avoid boilerplate reporting. New sections were introduced and existing ones were developed to strengthen the corporate messaging. This included a Q&A with the CEO, a well rounded “At a glance” highlighting the investment case and an evolved business model which demonstrates the company’s strengths and stakeholder value creation. Furthermore, the report included clear connectivity between the strategic objectives and the key performance indicators to provide a holistic overview of the company’s operations.
To be compliant with the Code, Sirius has introduced an excellent section on risk management and principal risks, which has been strengthened by the inclusion of elements such as a risk processes diagram, a heatmap to demonstrate the risks’ materiality and a risk management framework overview.
Sirius also developed a sustainability section to explain how the company managed the material environmental and social issues which impacted the company’s operations. It is exciting to see the great progress Sirius Real Estate has made in its corporate reporting journey from 2016 to 2017, clearly demonstrated through the links below and certainly setting a benchmark for the years to come.