Over the course of this week, some confusing corporate results from two UK 100 stalwarts have left investors bemused. Despite headline figures of rising losses, shares of one of the firms topped the daily performance charts, while rising profits at another firm have been met with a share price sell-off. What are the reasons behind these confusing share price moves? And is there a way for investors to sift through often conflicting results to find the underlying driver?

To highlight the potential for mixed and often surprising market reactions to earnings releases, this piece focuses on two UK 100 companies: Vodafone (VOD) and British Land (BLND).

The former reported its full year numbers on Tuesday and, despite reporting a headline €6.1bn loss on a seemingly disappointing set of results, the shares ended up finishing the session as the top performer on the UK’s blue chip index. The latter reported its full year earnings this morning, leading the release by reporting an underlying pre-tax profit of £390m. And yet, the UK landowner finds itself the second worst performer on the day.

The reason behind these diverging results is twofold; firstly due to the way in which the company reports its profits and secondly to do with the way in which these numbers are then interpreted.

In the case of Vodafone, the (seemingly) significant loss was not as bad as expected, thanks to the exclusion of its Indian business Vodafone India. The component saw a year-on-year revenue decline of 11.5%, which would have dragged the rest of the group-wide numbers down further. However, due to the upcoming merger with Idea Cellular, the company reported its results ‘ex-India’, choosing to ignore the results entirely and hence beating analysts’ expectations.

Furthermore, the company provided much better than expected outlook for the upcoming year. The group now sees 4-8% earnings growth for FY17/18, while also announcing it is looking to increase its dividend annually, against expectations of leaving it unchanged. This removal of the dragging Indian figures and attractive forward guidance saw bulls latch onto the positives, in the hope that the stock will, in the future, outperform.

British Land, the UK’s second largest landowner, also released a batch of figures that could be interpreted in a number of different ways. The company led with an underlying FY profit – the total profit without including what it deems ‘exceptional’ items – of £390m, a 7.4% increase on the previous year. Yet this number betrays the statutory profit – the simple bottom line figure which includes all items  – which was £195m, down a huge 85% on the year before.

It is this second figure that has led to today’s share price drop, alongside:

A) The fact that a significant portion of the group’s earnings were derived from a single £575m deal – the sale of the group’s 50% stake in London’s Leadenhall building, commonly known as ‘the Cheesegrater’;

B) That the group’s total assets valuation decreased by 1.4% over the past year;

And C) The CEO’s official statement that he believes the ongoing operating environment the group is operating in will remain uncertain ‘for some time’.

Markets loath uncertainty and, following the sale of such a large asset, investors are pessimistic over future prospects for British Land going forward, which has resulted in today’s weakness.

These two very different reactions to corporate results highlight how numbers that may look attractive or ugly can be interpreted in very different ways and sometimes, as is the case with Vodafone India, not even considered at all!

Once again, that old mantra ‘guidance is king’ rings true.

Henry Croft, Research Analyst, 17 May