Morgan Sindall Group plc builds automated financial reporting

Simplifying the creation of accurate and timely annual and interim reports

Published on 14-Dec-2011

Validated on 03 Jun 2013

"We’re delighted with the results we’ve achieved so far with Cognos FSR and Cognos Controller, and we are looking at ways to build on our success. IBM has a strong portfolio of business analytics solutions, and the ability to introduce a broad range of capabilities with a single family of software from a single vendor is very appealing for our business." - Dan Engler, Group Finance Manager at Morgan Sindall Group plc

Customer:
Morgan Sindall Group plc

Industry:
Construction / Architecture / Engineering

Deployment country:
United Kingdom

Solution:
BA - Business Analytics, Business Integration, Business Performance Transformation, Information Governance, Learning and Training, BA - Performance Management

Overview

Morgan Sindall Group plc is the holding company for a group of leading businesses in the UK construction and regeneration industry, including big names such as Morgan Sindall, Lovell, Overbury, Morgan Lovell and Muse Developments. The group has more than 7,000 full-time employees and also manages thousands of subcontractors; it can have as many as 20,000 people working in its supply chain at any one time. It generated £2.1 billion in revenues in 2010, and achieved profits before tax amortisation and non-recurring costs of £51.3 million.

Business need:
As a FTSE company, Morgan Sindall Group plc is required to publish full annual and interim reports that comply with IFRS guidelines. Writing these reports was a mostly manual process, requiring many cycles of editing and checking. The finance team wanted to find an easier, more automated way to create and manage these important documents, ensuring timely disclosure and eliminating the risk of errors.

Solution:
Morgan Sindall’s finance team built a new annual reporting process by implementing IBM Cognos Financial Statement Reporting (FSR). The solution uses consolidated financial data from IBM Cognos Controller and creates linked Microsoft Excel and Word documents that form the basis of the final report. The solution also provides full version control and audit capabilities.

Benefits:
Ensures consistent use of up-to-date data. Cognos FSR automatically imports data from the Cognos Controller consolidation system and refreshes it throughout the document, reducing the risk of errors. Enhances the overall quality of the report. Instead of spending all their time checking and re-checking the numbers, the finance team can focus on analysing and interpreting the data. Enables a more collaborative approach, as several people can work on the document concurrently. Eliminates the need for an editorial ‘gatekeeper’; this has freed up one full-time employee to focus on other duties.

Case Study

Morgan Sindall Group plc is the holding company for a group of leading businesses in the UK construction and regeneration industry, including big names such as Morgan Sindall, Lovell, Overbury, Morgan Lovell and Muse Developments. The group has more than 7,000 full-time employees and also manages thousands of subcontractors; it can have as many as 20,000 people working in its supply chain at any one time. It generated £2.1 billion in revenues in 2010, and achieved profits before tax amortisation and non-recurring costs of £51.3 million.

“Our business is structured in a very entrepreneurial manner, and our strategy is for each division in the group to operate quite independently,” comments Dan Engler, Group Finance Manager at Morgan Sindall Group plc. “As a result, we keep our head office team very lean – we have about 25 people in total, including the directors, and there are three people in the Group finance team.”

Meeting increasing financial reporting requirements

As a public company listed on the FTSE index at the London Stock Exchange, Morgan Sindall Group plc is obliged to publish a full annual report and periodic Regulatory News Service (RNS) announcements. It also releases full and half-year analyst announcements and various other interim management updates.

“Our reports need to comply with International Financial Reporting Standards (IFRS), and the level of detail that we have to disclose has been increasing year on year,” comments Dan Engler. “As a result, our annual report is now well over 100 pages – and creating and managing a document of this size was becoming a struggle. So many different departments need to contribute to it that it was no longer efficient for everyone to sit in a room together and go through the whole document. However, when we split the document up into sections, we found that it was difficult to maintain consistency. This led to a lot of cross-checking and late changes, which inflated the cost and complexity of the process.”

Identifying bottlenecks and process improvements

Morgan Sindall recognised that this wasn’t a problem that could be solved by adding manpower, because the only way to ensure proper version control in its reports was for a single person to act as ‘gatekeeper’ and take responsibility for managing all changes in the document. This created a bottleneck that slowed the process down, and also created risk. For example, if the designated gatekeeper fell ill part way through the review process, it would be difficult for someone else to take over the role.

“We wanted to find a way to focus on improving the overall quality and consistency of the report,” says Dan Engler. “We realised that this would only be possible if we could reduce the amount of time and effort we were spending on checking the data and asking the gatekeeper to make edits. We looked for a solution that would eliminate the need for a gatekeeper by introducing proper version control, and that would make it easier to manage and update data consistently throughout the document.”

Finding a more automated solution

The company was already using IBM Cognos Controller to consolidate financial information from across the Group and export it as a Microsoft® Excel spreadsheet. The annual report itself was written in Microsoft Word, and figures from the spreadsheet were copied into it manually. This manual process often introduced errors and inconsistencies which then needed to be checked and corrected. Dan Engler’s team realised that if they could find a solution that linked the Microsoft Excel and Microsoft Word documents and allowed the data to be reliably and automatically imported and updated, this would dramatically reduce workload and improve quality.

“One afternoon I sat in on a meeting with the Group Tax and Treasury Director where he was looking at a demo of FSR,” explains Dan Engler. “It just clicked that this was exactly what we needed in Finance. It works by allowing you to create ‘tags’ or ‘variables’ in the Microsoft Word document, which are linked to data in the Microsoft Excel file. If a number needs to be changed, you can just update the spreadsheet and Cognos FSR pulls the new data through into the Microsoft Word document automatically.” As of 2013 FSR is now referred to as Cognos Disclosure Management.

Getting up and running

The Group finance team asked IBM for a proposal for the implementation of Cognos FSR, which was reviewed by Morgan Sindall Group’s finance director and the deputy company secretary. The deal was signed in May, with a view to getting the solution up and running in time to create the half-year interim reports in June.

“We had two or three days of IBM education to set the software up, and then another two or three days of training,” says Dan Engler. “That’s really all it took before we were ready to start using the software. It was very easy to understand the concepts, and the fact that the front-end is based on Microsoft Word and Microsoft Excel meant that all those involved in preparing the report, not just our finance team, were able to pick it up quickly.”

Tagging variables with Cognos FSR

The next step was to tag the Microsoft Word document. Every time the text referred to a piece of financial data, the Morgan Sindall team replaced the raw number with a ‘variable’ that links to the underlying Microsoft Excel spreadsheet via Cognos FSR. If the number is changed in the Microsoft Excel sheet, Cognos FSR updates it wherever the variable occurs in the Microsoft Word document. The solution can also use inbuilt logic to update the wording around the variable – so, for example, if a revenue figure (“X”) changes from an increase to a decrease, the surrounding wording will change automatically from “An increase of £X” to “A decrease of £X”.

“You need to invest some time in the tagging process to get the most out of it, but the real advantage is that when you’ve done it once, you can re-use it next time,” states Dan Engler. “We spent four or five days on the tagging for our half-year RNS announcement in June, and we expect we’ll have to spend a similar amount of time on extra tagging for our annual report in February – but once that’s done, creating the data-focused sections of future reports should be a streamlined process. If there aren’t any significant structural changes from one report to the next, it’s simply a matter of running the consolidation in Cognos Controller, refreshing the Microsoft Excel spreadsheet, and then refreshing the variables in Cognos FSR – a completely automated process.”

Increasing process controls

Cognos FSR also provides much more robust version control than Morgan Sindall’s gatekeeper-based process.

“We can put changes through much more quickly because there’s no longer a bottleneck where we have to wait for one person to make all the edits manually,” says Dan Engler. “We can even have several people working on the document at the same time. For the recent half-year announcement, we had a situation where we needed to insert a couple of new notes which preceded the existing ones, which meant renumbering all the subsequent notes. I was able to go into the document and insert the new notes; Cognos FSR then renumbered all the later notes automatically; and while this was happening, one of my colleagues was able to keep working on a different section of the document without any problems. Everyone’s changes are tracked in both Microsoft Word and Microsoft Excel, so even if something does go wrong, it’s easy to identify where the mistake was made and find out which parts of the document it has affected.”

Realising the benefits

Despite implementing Cognos FSR only a month before the deadline, Morgan Sindall was able to complete its half-year RNS announcement on schedule.

“It’s a testament to how easy the software is to use that we were able to implement the new process so quickly and successfully,” says Dan Engler. “We saved time on proofreading and editing, partly because Cognos FSR reduces the risk of getting the figures wrong in the first place, and partly because we were able to parallelise some of the work instead of running everything through the gatekeeper. Set against this time saving, we did have to put some work into the tagging process, but that was a one-off task which we won’t need to redo next time.”

Making time savings through reuse

The finance team is anticipating greater benefits when the time comes for its next RNS announcement and the creation of the annual report.

“The potential to reuse variables not only within documents, but also between them, should be a major time-saving,” explains Dan Engler. “If we’ve already set up the tags for the RNS, we can reuse them in the annual report, and we can be sure that the data in both documents will match. This will reduce the need for manual checking and give us a lot more confidence in the accuracy of our disclosures.”

Looking forward to cost benefits

From a cost perspective, the solution has already begun to pay back the investment.

“For one thing, we don’t need a gatekeeper any more, which means that one full-time employee can focus on more valuable duties instead of being involved in the reporting process,” says Dan Engler. “We’re also expecting our design costs to fall, because we won’t need to make so many late changes when a document is already at PDF layout stage. Finally, there’s a possibility of a reduction in our external audit costs, because the audit process should be much simpler and we’re expecting fewer overruns. But we’ll have to wait until after the audit in February to find out!”

He concludes: “We’re delighted with the results we’ve achieved so far with Cognos FSR and Cognos Controller, and we are looking at ways to build on our success. IBM has a strong portfolio of business analytics solutions, and the ability to introduce a broad range of capabilities with a single family of software from a single vendor is very appealing for our business.”

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Products and services used

IBM products and services that were used in this case study.

Software:
Cognos Financial Statement Reporting, Cognos Controller, Cognos Disclosure Management

Service:
IBM Learning Services

Legal Information

© Copyright IBM Corporation 2011. IBM United Kingdom Limited, PO Box 41, North Harbour, Portsmouth, Hampshire, PO6 3AU. Produced in the United Kingdom. December 2011. IBM, the IBM logo, ibm.com, and Cognos are trademarks of International Business Machines Corporation, registered in many jurisdictions worldwide. A current list of other IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml. Microsoft, Windows, Windows NT, and the Windows logo are trademarks of Microsoft Corporation in the United States, other countries, or both. Other company, product or service names may be trademarks, or service marks of others. References in this publication to IBM products, programs or services do not imply that IBM intends to make these available in all countries in which IBM operates. Any reference to an IBM product, program or service is not intended to imply that only IBM’s product, program or service may be used. Any functionally equivalent product, program or service may be used instead. All customer examples cited represent how some customers have used IBM products and the results they may have achieved. Actual environmental costs and performance characteristics will vary depending on individual customer configurations and conditions. IBM hardware products are manufactured from new parts, or new and used parts. In some cases, the hardware product may not be new and may have been previously installed. Regardless, IBM warranty terms apply. This publication is for general guidance only. Photographs may show design models.