Interactive Investor

ii view: LSE looks to future with Microsoft and AI on its side

One of the world's most recognisable stock markets and a specialist data provider with a global presence. We assess prospects for this City icon.

15th September 2023 15:27

by Keith Bowman from interactive investor

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First-half results to 30 June

  • Total income up 12% to £4.18 billion
  • Adjusted profit (EBITDA) up 4.1% to £1.87 billion
  • Interim dividend up 12.6% to 35.7p per share
  • Share buybacks of up to £750 million expected by April 2024

Chief executive David Schwimmer said:

“LSEG delivered strong, broad-based growth in the first half. Data & Analytics is growing faster than it has for many years, with the ongoing improvements to our offering and strengthened customer relationships increasingly reflected in financial performance. Post Trade once again demonstrated the critical role it plays in helping customers manage risk in uncertain markets, delivering outstanding growth. Our Capital Markets businesses also made progress, despite a very strong prior period. LSEG’s resilient business model and the quality of our earnings, diversified by customer, geography, product and asset class, position us well for further growth in the second half and beyond.

“Through our multi-year investment programme we are delivering better solutions and higher customer satisfaction, and building a faster-growing, more scalable business. We are progressing well with the implementation phase of our transformational strategic partnership with Microsoft, with customers beginning to see the benefits from next year.”

ii round-up:

The London Stock Exchange Group (LSE:LSEG) is a leading global financial markets infrastructure company which delivers financial data, analytics, news, and index products to more than 40,000 customers in 190 countries.

For a round-up of these latest results announced on 3 August, please click here

ii view:

Headquartered in the City of London, LSEG employs over 25,000 people across 70 countries. It operates across the three divisions of Data and Analytics, generating around 70% of revenues, Capital Markets at close to a fifth of sales, and Post Trade services the balance. In 2021, it acquired major financial data provider Refinitiv.  

For investors, an uncertain economic outlook and its potential impact on markets should not be ignored. Cyclicality in certain operations such as company admissions and IPOs also warrant consideration. So do elevated costs including wages under the current higher inflation environment. 

On the upside, a previously agreed partnership with US computing giant Microsoft Corp (NASDAQ:MSFT) promises to enhance its data platforms, and high levels of subscription-based revenues offer some protection against cyclical economic ups and downs. Artificial intelligence, or AI, is likely to further boost the LSE’s future data offering, while a previous takeover attempt from the Hong Kong Exchange arguably underlines its unique position.

On balance, and with the consensus analyst estimate of fair value at over £95 per share, there's good reason for investors to remain supportive of this UK financial giant. 

Positives: 

  • Product and geographical diversity
  • Microsoft partnership 

Negatives:

  • Subject to regulation
  • Macroeconomic uncertainty can hinder performance

The average rating of stock market analysts:

Buy

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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