With volatility returning to markets in general perhaps it’s karma that shares in London Stock Exchange (LSE) should have a topsy-turvy results day.
Having traded down nearly 3% to below £44 shortly the open the shares are now trading up 3% at £46.70 to finish the week on a high.
While the 2018 results were perfectly sound, with total income up 9% to £2.1m and operating profits up 15% to £931m, analysts instead seized on the margin guidance for 2019 and hit the alarm button.
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Where the statement says that ‘prioritisation of further investment in growth opportunities means the group does not plan to achieve cost and margin targets in 2019’, analysts seem to have only heard the final phrase.
As a result they assumed that new chief executive officer (CEO) David Schwimmer was rowing away from his predecessor’s targets, even though by consensus they were viewed as ambitious.
Once the full implications of the statement became clear - that the new CEO is focused on revenue growth, which is crucial for the business, rather than margins - the shares reversed course sharply.
As Trevor Green, head of UK equities at Aviva Investors, explains: ‘Schwimmer is on the button with his strategy to focus on the top line, and he is an experienced integrator’.
Since taking up the role the new CEO has taken the LSE’s stake in LCH Group up to over 80%, while LCH’s business has grown in leaps and bounds with the volume of swaps cleared last year up 23% to $1 quadrillion.
He also engineered the acquisition of a 4.9% stake in European financial settlements group Euroclear in order to strengthen LSE’s commercial opportunities.
