LSEG income surges as Microsoft joint venture moves to next stage

By Huw Jones

LONDON (Reuters) - London Stock Exchange Group's income rose strongly in the first half, beating analysts' expectations, helped by progress with its Microsoft joint venture, as well as a rise in annual subscription value, an indicator of customer retention.

LSEG, which suffered outages in February and this month, said its partnership with Microsoft was moving from the pilot stage to "approaching commercialisation" as the first product becomes more widely available by year-end.

The exchange, transformed into a data powerhouse after its $27 billion acquisition of Refinitiv in 2021, reiterated all medium-term guidance of mid to high single digit organic revenue growth annually, accelerating after this year.

LSEG shares, which have risen 2.1% so far this year, rose by as much as 4.2% on Thursday to their highest since February 2021, when they traded at a record peak.

"We are also delivering efficiency improvements, with underlying margin improving year-on-year despite ongoing investment, and we expect this trend to continue," LSEG CEO David Schwimmer, said in a statement.

Growth was broad-based, with an "outstanding" first half at Tradeweb, the group's bond trading platform.

"We look forward to further progress in the second half of the year, and are reiterating all of our medium-term guidance," Schwimmer said.

A shake-up in UK listings rules was also making the LSE a more attractive rival to New York and elsewhere for initial public offerings, he said.

LSEG's significant enhancements to Workspace, which distributes news and data to customers, has resulted in "several competitor displacements", Schwimmer said, adding that the pick-up in taking business from rivals was expected to continue.

Bank of America said it would maintain a 'Buy' rating on the shares as LSEG benefits from "strong recurring revenues and structural demand for data".

LSEG's total income, excluding recoveries, rose 5.4% to 4.204 billion pounds ($5.40 billion), topping an analysts' consensus of 4.195 billion pounds.

Operating profit in the first half rose 9% to 1.563 billion pounds, with adjusted earnings per share of 174 pence, up 8.1% on the same period last year, both ahead of analysts' consensus estimates collated by LSEG.

Annual subscription value, which reflects recurring revenue and is closely watched by analysts, was up 6.4% at June 2024, in line with guidance, and up from 6% in the first quarter.

In the first quarter, LSEG said annual subscription value was hit by Swiss bank UBS' forced takeover of Credit Suisse which reduced demand for LSEG products, but the full impact of the Credit Suisse deal is still to come.

ASV will be around 6% for the rest of the year, LSEG said.

"All medium-term targets have been reiterated, and we think notably more confident commentary of competitor displacements around Workspace will be taken well," analysts at RBC said in a note to clients.

LSEG said its content agreement with Dow Jones announced in July creates a leading news offering across its platforms.

LSEG pays Reuters for news.

($1 = 0.7785 pounds)

(Additional reporting by Amanda Cooper, editing by Sinead Cruise and Jane Merriman)