The Private Equity Reporting Group (formerly the Guidelines Monitoring Group) published its eighth annual report on disclosure and transparency in private equity on 11 December 2015, assessing conformity with the Walker Guidelines. The report stated that the Guidelines covered 65 private equity (and private equity-like) firms and 66 portfolio companies during 2015, and notes that 2015 was the first reporting year in which portfolio companies were required to comply with new reporting obligations, following amendments to the Guidelines made in July 2014 to reflect the replacement of the business review with the strategic report requirement.
The key findings in this report include the following:
- 95% of those portfolio companies reviewed achieved a level of compliance that would benchmark well against the better performers in the FTSE 250 (where PERG's objective is to see reporting at a level at least equivalent to that of the FTSE 350). However, this is a fall when compared to 100% compliance in 2014, which PERG attributes to the new reporting requirements introduced in July 2014 and improvements in reporting within the FTSE 350.
- 19 of the 20 portfolio companies reviewed made the full audited report and accounts (or an alternative report) available on their websites, with the Private Equity Reporting Group noting that some companies still believe that access to reports at Companies House would suffice. During 2016, the Private Equity Reporting Group intends to monitor whether companies publish their accounts on a timely basis and within six months of year end, as required by the Guidelines. Also, only eight of the portfolio companies reviewed included a statement of compliance with the Guidelines, now required under the Guidelines as amended in July 2014. None of the sampled companies adopted an 'explain' approach within the 'comply or explain' model.
- Portfolio companies have improved the quality of disclosure on key performance indicators, trends and factors affecting the future of the company, environmental matters and social and community issues. However, on the new reporting requirements, few of the sampled portfolio companies included information on gender diversity, and quality of disclosure was mixed as regards an explanation of the business model and commentary on human rights issues. Performance against Guidelines-specific requirements to disclose the identity of its private equity firm and composition of its board has also fallen compared to 2014.