A MAJOR shareholder in generator giant Aggreko has called for the firm to alter its quarterly reporting practices in order to deter short-term investing strategies.
Alastair Salvesen, whose family controls a stake in the FTSE 100 listed firm worth more than £1 billion, believes that Aggreko should be like Unilever, which changed its approach to financial reporting in 2009 in an effort to reduce damaging “short-termism” in market thinking.
Although listed companies are required to update shareholders on key information on a regular basis, quarterly reporting has come under scrutiny for promoting a “get rich quick” attitude among City investors, particularly hedge funds.
Last year the coalition government pledged to work with European Union counterparts to end mandatory quarterly reporting.
The shift came on the back of a report by London School of Economics professor John Kay, whose government-appointed review of equity markets recommended “removing quarterly reporting obligations and encouraging high-quality narrative reporting”.
The removal of the requirement for listed companies to publish interim management statements has already been proposed by the European Commission in its review of the Transparency Directive.
Paul Polman, chief executive of Anglo-Dutch consumer goods giant Unilever, stopped providing earnings guidance and quarterly profit updates to investors when he took over the company in 2009. The company reports its revenues on a quarterly basis but earnings are reported at mid-year and at the end of the year.
Polman has said that since the change “our discussions have become more mature” and the number of hedge funds owning shares in the firm has dropped from 10 per cent to less than 5 per cent.
Salvesen, whose family also owns trout and seafood company Dawnfresh, believes chief executive Rupert Soames should replicate these principles to reduce the company’s stock volatility.
He said: “The City is encouraging short-termism because of its approach and that is not helping either the company or the economy.
“There is too much pressure and too many people listening to hedge funds and what they are talking about. In my view they are not helpful. Frankly, I don’t think the City understands the company.”
Salvesen reiterated his support for Soames despite what he called a “hiccup” in the company’s share performance and confirmed he was keeping his family’s 20 per cent stake. “Rupert is doing a first-class job,” Salvesen said. “What he has achieved over the past few years is absolutely first-class.
“I asked an analyst a couple of years ago: ‘Tell me, if I was to sell this, what other company could I go into that would achieve as well?’ He said to me if I took a one-year view, a five-year view and a ten-year view, Aggreko is one of the best.”
Aggreko declined to comment.