29th Feb 2024 10:33
(Alliance News) - London Stock Exchange Group PLC's well-documented troubles in losing new initial public offerings to New York have been less pronounced in the new year so far, according to analysts.
It comes after the exchange operator and provider of post-trade services, financial data and stock indices said it has delivered on all the targets it set for its acquisition of Refinitiv and is set to release the first artificial intelligence-based products from its partnership with Microsoft Corp.
While the focus of LSEG's annual results was on the Data & Analytics business, Chief Executive Officer David Schwimmer also said the company is "seeing an encouraging IPO pipeline for the London Stock Exchange", amid concern that big initial public offerings are taking place in New York, rather than London.
Hargreaves Lansdown said Schwimmer noted an "encouraging pipeline after a string of disappointments", particularly after chip designer Arm opted to list on the Nasdaq.
"After a veritable drought there are more signs of life for the IPO market...The City has been pedalling hard to attract new IPOs with help from the government's listing rules shake up but it’s been an uphill struggle, particularly with New York wielding such pulling power. Although trading operations only make up a small fraction of revenues, perception is still important for the company and wooing bigger names to London is high on its wish list," said Hargreaves Lansdown analyst Susannah Streeter.
"The confirmation of the Airline Astana IPO has helped the LSEG start the year on a more positive footing and the rumoured Shein listing would also be a boost for the exchange even though it would present some ethical issues for investors to navigate."
AJ Bell analyst Russ Mould quipped that LSEG "may need to consider a name change", given that just 4% of its revenue comes from the bourse. But similarly to Streeter highlighting the perception importance of new London IPOs to LSEG, Mould noted the IPO market was "seeing some signs of life" which is "good news for a pretty sickly UK market."
LSEG reported pretax profit of GBP1.20 billion 2023, down 3.7% from GBP1.24 billion in 2022.
Total income including recoveries was GBP8.38 billion, up 8.2% from GBP7.74 billion and slightly better than market consensus of GBP8.36 billion. LSEG said income growth was broad-based across the business, with Data & Analytics income up 7.3%, Capital Markets up 6.1%, and Post Trade up 17%.
Group adjusted operating profit was GBP2.86 billion, exactly as consensus expected and up 4.9% from GBP2.73 billion in 2022.
LSEG declared a final dividend of 79.3 pence per share. Combined with the interim payout of 35.7p, this gave a full-year dividend of 115.0p, up 7.5% from 107.0p.
The company said it plans GBP1 billion in share buybacks in 2024, down from GBP1.2 billion in 2023. The 2024 buybacks will be done directly from the Blackstone/Thomson Reuters consortium, from which LSEG purchased Refinitiv at the start of 2021 and a major shareholder in LSEG as a result.
Back at the end of 2022, LSEG and Microsoft signed a 10-year cooperation agreement under which Microsoft bought a 4.2% stake in LSEG, which committed to buying Microsoft products in return. The pair also aim to jointly develop market data and financial markets infrastructure products.
"In Data & Analytics, customers will shortly be using the first products from our partnership with Microsoft," CEO Schwimmer said. "Together, we will transform how financial markets participants communicate, research, analyse data and trade."
LSEG said the first of these AI products will be released in the first half of 2024.
Hargreaves Lansdown's Streeter said the acquisition of Refinitiv showed that LSEG is "now firmly a financial data driven company...with revenues spilling from its data streams representing almost three quarters of turnover."
Streeter continued: "Total income for the full year came in slightly ahead of expectations up 7.8% on 2022. The group has also heralded a tie up with Microsoft for the delivery of its services as a potential game-changer for communication and analysis in the financial services industry, with AI innovation front and centre. Refinitiv AI Alerts using a market-data powered AI assistant to provide personalised insights to users is just one of the new services being offered."
Shares in LSEG were down 2.4% to 8,702 pence each in London on Thursday morning.
By Greg Rosenvinge, Alliance News senior reporter
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