17th Nov 2023 11:57
(Alliance News) - London Stock Exchange Group PLC received a mixed response from analysts after it laid out growth plans at an investor event late-Thursday.
LSEG now expects mid to high single-digit organic revenue growth annually, accelerating after 2024 as customers start to benefit from the investment in platforms and the Microsoft Corp partnership.
It predicts underlying earnings before interest, tax, depreciation, and amortisation margin to increase over time and capital expenditure to decline to a high single-digit percentage of revenue over time. Cumulative free cash flow is to exceed underlying profit after tax attributable to equity holders, it said.
Enhanced shareholder returns are also planned with GBP1 billion of buybacks to be executed during 2024 plus a progressive dividend policy.
Deutsche Bank analyst Benjamin Goy appeared underwhelmed, labelling the targets as "solid" but questioned if they were "solid enough".
"We think the announced targets are in line at the top-line level, below expectations on Ebitda margin development, whereas cash generation & return surprised positively, though this remains the least important for the investment case," Goy commented.
Deutsche Bank rates the stock at 'hold' with a EUR96 price target.
LSEG shares traded 1.5% higher at 8,548.00 pence each in London on Friday late morning.
Jefferies has a 'buy' rating on the stock, with a GBP100 price target.
Analysts at Jefferies commented: "With its new medium-term targets, LSEG is clearly keen that the market should not obsess over specific numbers and instead focus on trajectory.
"Overall, the growth algorithm presented looks broadly consistent with where market expectations currently sit, albeit with perhaps broader and more paired back parameters than anticipated."
German bank Berenberg, while noting LSEG's newly-issued outlook will not send consensus for 2024 much higher, believes it can lift expectations for 2025.
"Overall, while near-term consensus should not materially change, we believe this strategy supports FY2025 consensus revenue and Ebitda and will reinforce growth expectations beyond that" Berenberg analysts commented.
Berenberg rates the stock at 'buy' with a 10,000p price target.
LSEG said for 2023 it remains on track to achieve guidance. It targets full year revenue growth towards the upper end of the 6-8% range.
Chief Executive David Schwimmer said: "In less than three years we have transformed our business, trebling the growth rate of the Refinitiv Data & Analytics businesses we acquired and beating our growth targets line by line. But the real opportunity still lies in front of us."
"As we enter the next phase of growth, we will leverage our leading franchises across the financial markets lifecycle to create seamless workflows within and across asset classes."
Key to LSEG's outlook is the Microsoft deal, which was announced back in December of last year. The 10-year partnership related to LSEG's data, analytics and cloud infrastructure.
LSEG said at the time that the partnership will jointly develop "new products and services for data and analytics, building on the good progress made by LSEG on the integration of Refinitiv and enhance its position as a financial markets infrastructure and data provider".
The company on Thursday reported strong progress with its Microsoft partnership with a new cloud environment build well advanced and early product enhancements and new applications are to begin to launch in the first half of 2024. LSEG expects revenue to build from 2025.
It also unveiled a new reporting structure. From 2024, LSEG will report as five divisions and simplify its business lines, aligning with a new management structure and enabling easier identification of key business trends.
By Eric Cunha, Alliance News news editor
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