If you follow London-listed shares, you will often see a company’s price jump or fall sharply at 7am on a day that is not its results day. Very often the reason is a trading statement. These short updates are a feature of the UK market, and they can move shares as much as full results.
What a trading statement is
A trading statement is an update a company publishes between its formal results to tell investors how the business is performing. It usually covers recent sales, how trading compares with the company’s own expectations and whether it still expects to meet market forecasts for the year. Some are scheduled, such as quarterly updates or pre-close statements just before the financial year ends. Others are unscheduled, issued because something important has changed.
In the UK, companies are required to tell the market promptly about information that could significantly affect their share price. That is why trading statements are released through the regulatory news service, usually at 7am before the London open.
Why they matter
Trading statements fill the gap between half-year and full-year results, so they are often the first sign that forecasts are about to change. The key phrases are about expectations. Wording such as “in line with expectations” usually means no change. “Ahead of expectations” suggests analysts will raise forecasts. “Below expectations”, or a statement that profits will be lower than expected, is a profit warning, and shares can fall hard.
A simple example
Imagine a retailer whose shares have drifted lower on worries about consumer spending. At 7am it issues a trading statement saying Christmas sales were stronger than planned and full-year profits will be ahead of market expectations. Analysts raise their forecasts, short sellers rush to close positions and the shares open 10 per cent higher. The full results, weeks later, may barely move the price because the good news was already out.
How traders use them
Traders check the company calendar so they know when scheduled updates are due, and they read the statement for tone as much as numbers. Small changes in wording, such as moving from “confident” to “cautious”, can matter. They also compare the update with what similar companies have said recently, because one firm’s comments can move peers in the same sector.
Because statements come out before the market opens, shares often gap at 8am. That means a stop order may be filled well below its level, a risk worth planning for if you hold shares into a known update.
Common mistakes
The main mistake is reading only the headline sales figure and missing the line about expectations, which is usually what moves the price. Another is chasing the opening move without waiting to see whether it holds. A third is forgetting that a positive statement can still disappoint if the market was hoping for an even bigger upgrade.
The bottom line
A trading statement is a company’s update between results, and in London it is often where the real news comes out. Read the wording around expectations first, check whether the update was scheduled, and be prepared for the shares to gap at the open. If you want to test how well you read company news, try the free Samuel & Co Trading Trader Assessment.
