ii view: London Stock Exchange confirms acquisition

Moving towards the largest listed global financial markets infrastructure provider.

First-half results to 30 June 2019

• Revenue up 7% to £1.02 billion
• Adjusted profit up 11% to £533 million
• Interim dividend up 17% to 20.1p per share

Chief executive David Schwimmer said:

"The Group has delivered another strong performance with an 8% increase in income during the first half of the year. Today, we have announced a proposed transaction to acquire Refinitiv, a leading global provider of data, analytics and financial markets solutions. This transformational acquisition creates a multi-asset class capital markets business and brings world class data content, management and distribution capabilities to LSEG, accelerating our strategy and expanding our global footprint.  This positions us in key areas of future growth as a global financial markets infrastructure leader."  

ii round-up:

London Stock Exchange Group (LSEG) is a global financial markets infrastructure business. 

Its diversified global business focuses on Information Services including indices and pricing data, Post Trade services and Capital Formation.

Headquartered in the UK, with significant operations in North America, Italy, France and Sri Lanka, the company employs approximately 4,500 people.

London Stock Exchange Group (LSE:LSE) earlier this week announced that it is in discussions with shareholders who include investment funds affiliated with Blackstone and Thomson Reuters about a possible acquisition of Refinitiv. 

Today, alongside first-half results, LSEG confirmed the acquisition for $27 billion. 

Refinitiv is a global provider of financial data and infrastructure, serving over 40,000 customer institutions across 190 countries. Together LSEG and Refinitiv will be the largest listed global financial markets infrastructure provider by revenue. 

As for first-half results, LSEG reported continued good growth in Information Services and Post Trade services. Both revenue and profit grew, with the company rewarding shareholders with a 17% increase in the interim dividend payment. 

The share price rose by over 6% in mid-morning UK stock market trading. 

ii view:

The group’s journey to become an international financial markets infrastructure business began in 2007 when it combined with the Milan Stock Exchange. It is today the largest financial services company by stock market value within the FTSE-100 index. 

An ultra-low interest rate environment pushing investors away from cash and into other assets looks to provide a supportive backdrop. The explosion of data across all sectors of society and including financial services also appears favourable. 

For investors, the group’s latest acquisition propels it to the top of the global league. But a 70% plus gain in the share price year to date now leaves the forward price earnings ratio comfortably ahead of its ten-year average, warranting some investor caution. 

Positives: 

• The new company will be the largest listed global financial markets infrastructure provider by revenue. 
• New product development and investment in opportunities continues across the business

Negatives:

• Small Technology Services business saw revenues fall by 6%
• Factors outside of its control such as macroeconomic uncertainty can hinder performance

The average rating of stock market analysts:

Buy