Shares in London Stock Exchange Group (LSEG), were trading 4.5% higher this morning after the group announced interim results showing a sharp increase in pre-tax profits.
Moreover today’s results have muted fears surrounding the integration costs associated with the group’s acquisition of data provider Refinitiv.
These concerns have held back the group’s share price in recent months. Synergies from the integration are running ahead of schedule and it has increased its forecast of cost savings emanating from the deal.
For the six months ended 30 June, pre-tax profits rose to £510 million, an increase from £262 million in the prior year. Total income increased by 4.6% to £3.36 billion and adjusted earnings before interest, taxes, depreciation and amortization rose by 9.4% to £1.66 billion.
The company has announced an interim dividend of 25p per share, an increase of 7%.
BETTER COST SYNERGIES
The group’s share price has suffered recently due to concerns surrounding the acquisition costs associated with the acquisition of data provider Refinitiv.
Today’s results have to a large extent removed these concerns. Cost synergies are ahead of plan, and the group had raised its forecast for costs savings associated with the Refinitv deal from £88 million to £125 million.
Two data centres have been closed, 19 properties exited, and 10 strategic supplier contracts have been renegotiated. Moreover net employee costs have been reduced by £50m.
Today’s results will remind the market that Refinitiv’s core competence in data provision will complement LSEG’s own global index and analytics business in a world where ‘data is the new oil’.
BUSINESS REDEFINED
The Refinitiv acquisition redefines LSEG’s business in three respects. First, it enhances LSEG’s exposure to higher margin subscription based revenues. Second, it secures LSEG’s position in the critical growth markets of Asia and America. Third, it creates the opportunity for LSEG to re-rate as a data company.
Pure data companies Factest (FDS NYSE) and MSCI (MSCI NYSE), have historically traded on higher multiples than stock Exchanges.
