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London Stock Exchange Group: Too early to declare victory with Refinitiv merger

by LLB Finance Reporter
5th Aug 22 10:30 am

The London Stock Exchange Group (LSE) has announced half-year results for the six months ended 30 June 2022, and their total income grew 6.2%, excluding currency moves, with growth across all three divisions.

The LSE reported adjusted operating profit grew 4.3%, excluding currency moves, to £1,408 million. Inflationary pressures being well managed with “robust levers in place to manage cost pressure going forward.”

The LSE launched a £750 million share buy-back over next 12 months, the group commented: “We are successfully executing on our strategy, have good momentum going into the second half and our targets remain unchanged.”

Charlie Huggins, Head of Equities at Wealth Club said, “Around three quarters of LSE’s revenue is recurring, and the products and services it provides tend to be mission-critical to customers. This makes it a pretty resilient business, as these results highlight.

High inflation is less of a problem for LSE than for most businesses, thanks to good pricing power which results in consistently solid margins. The business model is also highly scalable and capital light. This limits the need to take on more staff in order to grow, while on-going cost savings from the Refinitiv merger provide an additional efficiency lever to pull.

The Refinitiv deal transformed LSE’s data capabilities, creating a financial powerhouse to rival Bloomberg. So far, the integration seems to be progressing broadly to plan. However, it’s too early for LSE to declare victory. Transformational acquisitions like this are always easier to plot on PowerPoint than they are to pull off in practice.

Refinitiv’s IT infrastructure is frankly a mess, resembling a plate of tangled spaghetti. Modernising this legacy tech estate will be a multi-year process and is far from straightforward. The acquisition also makes LSE a significantly larger, more complex business with two distinct cultures that now need to be meshed. The spate of divisional leadership changes since the deal completed speak to some of these challenges.

These risks certainly shouldn’t be overlooked. However, If LSE can pull off the integration, investors could be richly rewarded.”

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