LSEG tie-up with Microsoft bears fruit
London Stock Exchange Group (LSEG) reported first-quarter earnings in line with expectations and continued progress with its Microsoft tie-up on Thursday, as shareholders approved more buybacks and a potential doubling of CEO David Schwimmer’s pay.
LSEG was “confident of continued growth and improving profitability”, adding that it was on track to meet all its financial guidance from November 2023.
Shares in LSEG initially hit lows last seen in November, but recovered to be up 2% after analysts digested a drop in a closely watched metric tracking recurring subscription revenue.
First-quarter income, excluding recoveries, was £2.089bn, with gross profit of £1.893bn, in line with analysts’ consensus forecasts compiled by LSEG.
LSEG, which provides financial market data and analytics to banks and other financial institutions, said that organic annual subscription value growth was 6%, short of some analysts’ expectations and a drop on the prior quarter.
The fall was due to the continued effects of loss of business from Credit Suisse, which was taken over by UBS, and the start of a new multiyear contract with a major global bank that included a “modest” first year discount, LSEG said, though helping to grab desktop business from rivals.
Despite only half of the Credit Suisse influence felt so far, annual subscription value growth is expected to remain about 6% in 2024, LSEG said in a call with analysts, who Schwimmer urged “not to get hung up” on small quarterly annual subscription value changes.
“We are not seeing any broad -based weakness in terms of our business. We are still seeing modest improvement in retention,” Schwimmer said.
Analysts at RBC Capital Markets said the “solid income number” and reiteration of all guidance meant material changes to consensus on earnings were not expected.
Schwimmer said LSEG continued to make “strong progress” in its partnership with Microsoft, with a number of products expected to be externally piloted or on general release during this half. The tie-up is expected to boost revenues from 2025.
LSEG is completing integration of data and analytics company Refinitiv. The 2021 acquisition turned the 300-year-old bourse into a company where data and analytics account for about 70% of the business.
At LSEG’s annual meeting, shareholders voted by nearly 89% in favour of a “reset” in remuneration policy for Schwimmer, thereby doubling his potential annual pay to a maximum of just over £13m.
LSEG faces concerns that London is losing ground to rival listings centres in New York and, since Brexit, the EU, but Schwimmer said the IPO pipeline was encouraging, and that a pending shake-up in UK listings rules would help.
“We are very pleased with the direction of travel in terms of the London market and all of the reforms that are being put in place,” Schwimmer said, adding that analysis of higher IPO valuations in New York was “overly simplistic”.
LSEG said that £500m in a directed buyback was completed in the first quarter, and shareholders approved a further buyback of up to £1bn in total in 2024, mainly from the consortium that sold Refinitiv to LSEG.
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