London Stock Exchange Group PLC: Strong Growth in Q3

London Stock Exchange Group PLC announced on Thursday that it is on track to meet the upper end of its guidance following a period of robust and widespread growth in the third quarter.

Impressive Financial Performance

According to the trading update, the UK's main stock exchange, owned by LSEG, experienced an 8% year-on-year increase in income, reaching £1.97 billion ($2.38 billion). This growth was observed across all three segments of the business, showcasing its strong performance.

Positive Market Response

LSEG's reported income met the expectations of three analysts, according to Factset data. As a result, LSEG shares rose by 2%, building on their 10% increase in the past 12 months.

Promising Outlook

The exchange operator has expressed confidence in its future growth, projecting that it will achieve growth at the upper end of its current guidance range of 6% to 8% for 2023. The company also reaffirmed all existing guidance, including earnings expectations, which bolsters investor confidence.

Analysts' Optimism

Barclays' analysts, led by Claudia Gilbert-Allen, have expressed a bullish outlook for LSEG. Their optimism stems from LSEG's leading earnings per share compound annual growth rate within the exchange sector, potential for further guidance increases, and what they perceive as an attractive valuation. They also noted that LSEG's stock has remained solid throughout the year.

Key Driver of Income Growth

One of the major contributors to LSEG's income growth was its Data & Analytics segment, which experienced a notable 7.2% increase in revenue. Following the acquisition of Refinitiv for $27 billion in February 2021, this segment now accounts for a significant portion of LSEG's total revenues.

Overall, London Stock Exchange Group PLC's positive financial performance in the third quarter, coupled with its promising outlook and analysts' confidence, reinforces its position as a leading player in the industry.

Refinitiv - A Major Contributor to LSEG's Revenues

Refinitiv, the financial data provider previously owned by Thomson Reuters, currently holds a prominent position in LSEG’s revenue generation. With annual revenues exceeding $6 billion, it accounts for the majority of LSEG’s total sales. According to 14 analysts surveyed by Factset, LSEG is projected to achieve £8.17 billion in sales this year.

Recovery in LSEG's Annual Subscription Value (ASV)

LSEG's annual subscription value (ASV) has demonstrated signs of recovery, bringing relief to investors. ASV measures the recurring revenues derived from LSEG's Data & Analytics business. After experiencing a slight decrease in the second quarter, this key indicator has rebounded.

The second-quarter dip, which saw ASV drop from 7.6% in the first quarter to 6.9%, was primarily attributed to "timing differences" by the company. However, LSEG has now witnessed a 7.1% increase in ASV. This positive development is credited to improved sales, higher prices, and an increase in customer retention rates.

Promising Implications on LSEG's Trajectory

The rise in ASV serves as a reassuring factor for investors, as it aligns with the strong performance of LSEG's most lucrative segment. The trajectory of the company appears to be on track, instilling confidence among stakeholders.

Growth in Post-Trades and Capital Markets

LSEG's Post-Trades segment experienced notable growth, with income reaching £286 million—an increase of 17%. Additionally, the Capital Markets division, which includes the London Stock Exchange itself, witnessed a 6.2% surge in income, amounting to £375 million.

In summary, Refinitiv's significant contribution to LSEG's revenues, coupled with the recovery in ASV and the positive performance of key segments, suggests a promising outlook for the company.