London Stock Exchange Group PLC (LSE:LSEG) increased its dividend 7% as it reported stronger income growth in the second quarter and “good progress” on the integration of its US$27bn acquisition of financial data provider Refinitiv.
Total income for the first half of 2021 was up 4.6% excluding the one-off “deferred revenue” accounting treatment relating to the Refinitiv deal, while underlying income of £2.97bn was almost three times the level of this time last year.
Revenues from the Data & Analysis division were up 4.8%, boosted by exchange-traded fund assets and risk solutions; Capital Markets were up 9.6% as the half saw the largest number of new issues since 2014 and strong growth at its Tradeweb electronic markets for fixed income and derivatives.
Underlying profits (EBITDA) of £1.48bn were up 172%.
While the addition of Refinitiv led to net debt increasing to £7.1bn from £1.4bn at the end of December, chief executive David Schwimmer said the cost synergy programme is “ahead of plan”, with £77mln of run-rate cost synergies by the end of June and full-year cost synergy guidance increased to £125mln from £88mln.
Seeing a “favourable outlook”, the board have lifted the interim dividend to 25p per share from 23.3p a year ago.
Schwimmer said the group is continuing to invest in projects to improve the customer offering, particularly in Data & Analytics.
“This will support our revenue growth ambitions and lead to further operating margin improvement.”
The shares jumped 5% to 7,838p, though are still down 17% since spooking investors in March with the massive costs of integrating recent acquisition Refintiv
Analysts at UBS said they expected a positive market reaction given that costs were 4% less than expected and adjusted operating profit of £1.29bn was a 10% beat versus the City consensus.
Susannah Streeter, analyst at Hargreaves Lansdown, said this year’s IPO boom has helped boost the fortunes of the LSE.
“London may still pale in comparison to New York in the scale of new listings, but it’s making sure but steady progress in attracting bigger names. Last year’s frenzy of share trading as new investors swept into stocks as the financial markets plunged, has subsided, so secondary revenues for the group have fallen back as volumes normalised.”
But she added that “clearly more work needs to be done, as the expense of legacy IT is expected to be one of the rising costs eating into the bottom line in the second half of the year”.
**Adds shares and broker comment**