London Stock Exchange Group has today reported mixed first-half results, with investors looking beyond in-line income to slowing subscriptions growth and a 20% earnings per share drop.
The news sent its stock to a four-month low.
LSEG said its total income rose nearly 12% to £4.179 billion, adding that revenue growth for the year is expected to be near the top end of its 6-8% guidance range.
First-half growth in data and analytics was 7.6%, helping to reassure investors that a multi-year integration plan for data company Refinitiv is progressing without hitches after a bumpy start.
But growth in annual subscriptions value (ASV) in data and analytics eased in the second quarter to a weaker than expected 6.9% from 7.6% in the prior quarter.
LSEG attributed this to a lag between signing up and billing some new customers, which LSEG CFO Anna Manz told analysts has not affected business momentum and ASV will improve in the second half.
"We are confident in delivering all of our targets for the full year," Manz said.
LSEG bought Refinitiv for $27 billion in 2021 and data and analytics now makes up about 70% of its revenue.
"Stock has traded well year to date so mixed results not ideal for market reaction," Barclays analysts said in a note.
LSEG's shares tumbled 5% in early trading to hit four-month lows, before recouping lost ground to trade down 1.5% by mid-session.
"Data & Analytics is growing faster than it has for many years," the company's chief executive David Schwimmer said.
But basic earnings per share fell 21.2% to 77.2 pence, hit by a higher UK tax rate.
Profit before tax was down 17.6% at £662m, while dividends per share rose 12.6% to 35.7 pence, with an interim dividend up 12.6%.
LSEG raised its leverage target but Schwimmer said this does not flag an M&A buying spree.
"I would expect that we continue what we have been doing, that is modest-sized bolt-ons that fit in strategically into what we are doing," Schwimmer said.
The Eikon terminals LSEG inherited from Refinitiv to supply data and news to banks will have been replaced by the exchange's new Workspace by early 2025, Schwimmer told reporters.
LSEG said in December that Microsoft would buy a 4% stake worth $2 billion in the group, making its data and analytics available through Microsoft Teams, and Schwimmer said customers would see the benefits from 2024.
The exchange's use of AI via Microsoft and more broadly is becoming a key focus.
"We see this as the single biggest area of value creation over the next few years," Schwimmer said.
The exchange is studying with Microsoft and a small group of top customers how LSEG data can be "co-mingled" with proprietary data at a bank in a secure way to take advantage of generative AI, Schwimmer told reporters.
LSEG will also set out in its November Capital Market Day how it will expand post-trade services to help customers better net positions across their portfolios and save on margining, including uncleared assets.
"With a lack of positive surprise at these H1 results, we expect the Capital Markets event in London on 16/17 November to be critical for LSEG share price development towards end 2023," Credit Suisse said.
Thomson Reuters, parent of Reuters News, holds a minority stake in LSEG, which pays Reuters for news.
