The Private Equity Reporting Group (the “PERG”) has reviewed the private equity industry’s conformity with the Guidelines for Disclosure and Transparency in Private Equity (the “Guidelines”). The Guidelines, recommended by Sir David Walker in 2007, seek to increase transparency through enhanced reporting and disclosure by the largest UK portfolio companies and their private equity owners. The PERG was established in March 2008 to monitor the industry’s compliance with the Guidelines and make periodic recommendations to the British Private Equity and Venture Capital Association (the “BVCA”).

Key findings

• This report covers 73 portfolio companies (2021: 64) that fall within the scope of the Guidelines and the 64 firms (2021: 56) that back them (private equity firms and those operating in a private-equity like manner).
• The war in Ukraine, Covid 19, Brexit and the associated rise in inflation and the cost of living has had an adverse impact on many businesses both globally and in the UK. The impact on UK companies is brought out in some of the narrative reporting, with increased disclosure on liquidity, loan covenants and forecasting. This disclosure is both understandable and encouraging to see as businesses adapt to the economic climate.
• The Covid-19 pandemic is still having an impact on some sectors of the economy, however, we have seen a shift back more broadly to ‘normal’ reporting timelines. As expected, a number of annual reports still contain significant levels of commentary on the impact of Covid-19 on business results and liquidity, given their reporting periods cover all periods up to and including the end of April 2022.
• All of the portfolio companies reviewed in the sample (2022: 25, 2021: 21) complied with the disclosure requirements in the annual report (2021: 100%).
  • 60% prepared disclosures to at least a good standard which is a drop on prior year (2021: 67%, 2020: 60%). The drop in the level of good reporting is disappointing yet understanding given the continued increase in the size of the sample due to the significant proportion of new companies reviewed for the first time. No companies produced excellent disclosures overall this year (2021: None), however, a significant number of companies did produce excellent individual disclosures.
  • Unfortunately, there has not been a notable increase in the quality of disclosure on non-financial key performance indicators. Many companies have still identified only one or two indicators and lack the level of analysis required for a deeper understanding of why they are strategic priorities. It is positive to note however, that none of the companies included in the sample this year used the “comply or explain” basis of the Guidelines to explain non-compliance with disclosure requirements.
  • A statement of compliance with the Guidelines is a requirement for portfolio companies, as this statement is viewed as a proxy for the “fair, balanced and understandable” requirement under the UK Corporate Governance Code. Only 52% of companies have included such a statement in their annual report which is disappointing given that this is a straight forward requirement (2021: 62%).
  • The number of addendums required to meet all of the disclosure requirements is increasing year on year. While these are generally used by new companies in the population, this trend will be monitored closely. Addendums to accounts should only be used as a last resort to address areas of omission. Portfolio companies should strive for higher standards of disclosure in their annual report, thus removing the need for such addendums.

The number of addendums required to meet all of the disclosure requirements is increasing year on year. While these are generally used by new companies in the population, this trend will be monitored closely. Addendums to accounts should only be used as a last resort to address areas of omission. Portfolio companies should strive for higher standards of disclosure in their annual report, thus removing the need for such addendums.

• 78% of portfolio companies have published an annual report in a timely manner on their website (2021: 75%). 86% of portfolio companies have published a midyear update in a timely manner on their website (2021: 87%). Given the ongoing pressure on UK businesses, it is encouraging that compliance rates have remained broadly comparable to the previous reporting year.
• 86% of portfolio companies provided data, which is presented in aggregate in the EY performance report published alongside this report (2021: 89%).
• 11% of portfolio companies have not complied with any of the three components of the Guidelines that apply to them – enhanced disclosures, publication of reports and provision of data (2021: 9%). All of these portfolio companies are backed by non-BVCA members, four are either new or re-entering the population.
• It was positive to note that all BVCA members published sufficient disclosures on their own websites, to meet the requirements of the Guidelines on publishing information about themselves, their portfolio companies and their investors, albeit that there were differences in the standard of reporting as between firms.