You will be able to use interim reports and call transcripts to track a company between annual reports.
A year ago, on Larkspur's results briefing, the chief executive said the coatings business would "return to healthy margins within twelve months". Marcus heard it at the time and thought it sounded reasonable. He didn't write it down. This year's results showed coatings margins lower than before, and nobody on the call mentioned the promise. Without a record, he had no way to hold management to it, and no way to judge how much to believe the next one.
The annual report comes once a year. Between reports, companies publish interim results and hold calls with analysts, and that's where you track whether the story you read in the annual report is still true.
US companies file a 10-Q with the SEC after each of their first three fiscal quarters, with condensed financial statements, notes, management's discussion and updated risk factors. The fourth quarter is covered by the 10-K. Most also issue a results press release on the same day, with the headline figures and the reconciliation of any adjusted measures.
SGX moved most listed companies from quarterly to half-yearly reporting in 2020. Companies whose auditors have raised certain concerns must still report quarterly, and some others choose to. Results announcements on SGXNet include the financial statements, a commentary on performance and, often, a slide presentation. Check your company's announcement history to see which cycle it follows.
Interim reports are usually unaudited. Auditors may review them, but a review is far less thorough than an audit, so treat interim figures as a little softer than annual ones.
Many US companies give guidance: a range for next quarter's revenue or earnings, or for the full year. SGX companies give guidance less often and more loosely, as commentary on the outlook. Either way, a change in guidance usually moves the share price more than the reported quarter does, because the price already reflected expectations for the quarter just ended.
The earnings call is where management presents the results and then takes questions from analysts. The prepared remarks are polished. The questions are where you learn things. Analysts who follow the company closely ask about whatever they think management is glossing over, and the way management answers, directly or by changing the subject, tells you something too.
US companies usually publish a recording or webcast on their investor relations page, and transcripts are widely available from data providers. SGX companies more often hold results briefings for analysts and publish the slides, with transcripts less common. Read the transcript rather than listening if you can, because it lets you search and compare.
On the chip designer's last call, made-up as always, three analysts in a row asked about inventory, which had grown faster than sales for two quarters. Management said it was building stock ahead of a product launch. Marcus noted that this was the same pattern he'd seen when short interest rose in lesson 5.6, Short selling, borrow cost and what short interest tells you, and that the next quarter's inventory figure would test the answer.
The most useful thing you can do with interim results is score management's past statements. Keep a running list of specific promises: a margin target, a cost saving, a factory opening date, a debt reduction, a return to growth. Each time new results come out, mark each one as met, missed or quietly dropped.
Over a few years, the list tells you how far to trust management's forecasts. Some management teams set targets they beat. Others set targets they miss and then stop mentioning. That record is information no financial ratio captures, and it costs nothing but the habit of writing things down.
Marcus started his list after missing the coatings promise. His first two entries for Larkspur read: "CEO, results briefing: coatings margin to recover within twelve months. Missed." And: "CFO, same briefing: capital spending to stay near 8% of revenue. Met, 8.5%." One missed promise isn't a verdict. Five are.
Interim figures get restated, guidance gets revised and transcripts get corrected. If your notes say "revenue up 9%", you'll eventually forget whether that was the quarter, the half or the year, reported or adjusted, from the press release or the 10-Q.
So every figure you record gets three tags: the period it covers, the document it came from and the date of that document, with a page or slide number where there is one. A made-up example: "Revenue S$205 million, first half, results announcement on SGXNet, dated 9 August, page 3." It feels fussy. It's what makes your records checkable by someone else, and by you a year from now, and lesson 6.8, Build an annual report reading log for one company, builds the habit into a log.
For the activity, read your chosen company's latest results announcement and, if one exists, the call transcript or briefing slides. Find two specific promises management made that you can check against the next set of results.
Read the latest results announcement and call transcript for your company and write two promises management made that you will check next time.
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