How I learnt to decode the secret language of the City of London - and you can too: David Richards

It was only after I entered the City that I began to understand. These weren’t straightforward updates. They were part of a well-established dialect used by people who live and breathe the public markets. A kind of corporate shorthand. To the uninitiated, it reads as calm, controlled optimism. But among those who know the terrain, certain phrases carry a very different meaning.

Most of these statements appear through the Regulatory News Service, or RNS. It is the official channel through which listed companies communicate price-sensitive information to the market. This includes trading updates, results, acquisitions, profit warnings and strategic changes. In theory, the language should be clear and, in regulatory parlance, “not misleading”. In practice... well, I’ll let you decide.

Take “trading in line with expectations.” You’d think this means the company is hitting the targets it set. In practice, it often means performance is within about 10 per cent of those targets. Not a disaster, but not quite what was hoped for either. The slightly more qualified “broadly in line” tends to mean things are slipping further. A gentle signal that confidence is fraying.

As one might expect, language tends to be clearer when the news is good. “Ahead of expectations” is one of the few terms that still lands as intended (although it disguises whether the expectations were challenging or modest). It typically means the company is outperforming by 10 per cent or more. “Materially ahead” signals an even bigger beat. These phrases are rightly welcomed and usually reflect strong performance. There’s no ambiguity there.

Other phrases, however, are more nuanced. “Facing headwinds” is one of them. It sounds like an external challenge. Macroeconomics, currency swings, geopolitical uncertainty. This may be the case, but the phrase has become a catch-all for an indeterminate mulch of bad news, both internal and external, temporary or structural.

If the “headwinds” are accompanied by kind words about the departure of a CEO or FD, then the news is bad, and you can expect to see some red ink on the share price chart.

“Taking longer than expected” nearly always indicates a miss. A deal didn’t close. A product wasn’t ready. A target slipped. It’s a way of implying the issue is timing, not outcome, when that need not be the case.

Then there’s the classic “strategic review”. This may sound like a routine reassessment of priorities. Often, it is code for the company being put up for sale. But the nuance does not end there: the company that is selling from a position of strength does not need to put itself in the shop window, so you should consider whether this is actually a cry for help.

Some phrases sound encouraging, yet communicate very little. “Strongly encouraged by early signs” has no specific meaning or legal weight. “Met management expectations” can refer to internal targets never publicly disclosed. And “management looks forward with confidence” is the investor relations equivalent of a firm handshake. Pleasant, but not especially informative.

Perhaps the most telling omission is when companies announce that they’ve “met revenue expectations,” with no mention of profit or cash flows. That often implies they’ve matched top-line forecasts but missed on margin. Sales were solid. Earnings less so.

None of this is necessarily misleading. These phrases are the product of decades of convention, legal caution and regulatory nuance. They’ve been shaped by countless investor updates, boardroom debates and risk assessments.

Some very smart people are paid handsomely to act as the guardians of this lexicon. But that doesn’t mean they should be taken literally, and like all clubs, if you don’t know the language, you won’t do well.

For anyone outside the City, this can feel opaque or disingenuous, but it is frequently designed to protect companies and their shareholders in a world where there are no prizes for honesty or directness. But it’s worth learning the code because once you understand it, RNS statements become a different kind of document.

Less about what is said, more about what isn’t. And that, more often than not, is where the real story lies.

David Richards is managing partner of Yorkshire AI Labs