The London Stock Exchange Group did its bit to slow Russia’s advance on Thursday. Sanctions compliance was one reason given for suspending 27 Russian companies from London trading.
Even as an effort to support Ukraine from afar, this decision will hardly trouble the exchange and data information group’s bottom line. Chief executive David Schwimmer described the loss of any fees and commission as “less than immaterial” while presenting annual results on Thursday.
That description extends to the previously central activity of equities trading. Share dealing was under one 20th of revenues last year. The $27bn acquisition of financial data provider Refinitiv, just over one year ago, accelerated LSE’s diversification into a broad financial services provider.
If integration continues as smoothly as these numbers suggest, the LSE will be far stronger than if it had joined with European rival Deutsche Börse. A national champion would also help dispel naysayers who think the City of London has lost its way.
Results met targets, pleasing some jittery shareholders. Underlying revenues grew by 5.8 per cent last year to £6.8bn. Data and analytics revenues, which include Refinitiv, grew a little less to £4.6bn. This area encompasses the lucrative FTSE and Russell index businesses. Trading revenues, including equities, rose an eighth, boosted by fixed income from a majority stake in US bond platform Tradeweb. Group ebitda margins, up to 48 per cent, are on track to hit a target of over 50 per cent by the end of 2023.
Cost savings from the Refinitiv integration of £151mn last year beat the expected £125mn. LSE has also identified an additional £50mn of annual cost savings, bringing the total estimated by the end of 2025 to £400mn.
To save more money, LSE must spend some. One-off charges to achieve these lower costs increased by £225mn to £775mn in total, offsetting any gains in the short term.
Plenty of hard work remains. LSE needs to drag Refinitiv out of the shadow of rival and market leader Bloomberg — a tall task. No wonder brokerage analysts anticipate higher capital spending than the LSE’s own forecasts in the next few years.
The company’s market value has fallen by about a third from the beginning of 2021, reflecting this scepticism. For the patient holder, a valuation back at pre-Refinitiv levels offers the wager that LSE’s business model of data plus securities trading will pay off.