Shares in London Stock Exchange Group (LSEG) slid to the bottom of the FTSE 100 heading into the weekend, down a hefty 7.3% to £87.93 and wiping £3.2 billion off its market value, despite what on the surface seemed a resilient set of 2020 results and an increase in the final dividend.
SHARES OUTPACE EARNINGS
In fairness the earnings report wasn’t as stellar as the shares have been over the last year, with total income up just 6% to £2.44 billion. FTSE Russell revenues could have been better, but a significant drop in ETF assets in the first half limited growth to just 3%.
Also, the capital markets business reported flat earnings. It was only the post trade London Clearing House division which racked up solid gains, with revenues up 7% to £751 million thanks to record activity in contracts for difference, foreign exchange and stocks.
Despite the UK’s exit from the European Union and the lack of an ‘equivalence’ agreement, the systemically important role of LCH means it has been given ‘temporary recognition’ until June to continue to service EU member banks.
CEO STILL BULLISH
Chief executive David Schwimmer called 2020 a ‘strong performance across our business’ and described the decision to raise the final dividend by 7% a reflection of the firm’s ‘confident outlook’.
He also said he was ‘very excited’ about the potential to sell Refinitiv’s fixed-income and commodity data and analytics to institutions alongside its traditional equities data.
LONDON STILL ATTRACTIVE
Regarding Lord Hill's review into listing rules, which goes to the consultation stage this summer, Schwimmer described it as part of a ‘clear message to investors that London is focused on being the most attractive location it can be’.
In the past, some companies which wanted to float in London have ended up listing overseas, put off by requirements such as the need to have at least a 25% free float.
Schwimmer described SPACs or Special Purpose Acquisition Companies – essentially ‘blank cheque’ vehicles set up to invest in other companies – as ‘a useful tool in the capital markets’, despite concern about frothy conditions in the US markets.