London Stock Exchange Shares Slip On Integration Costs Of Refinitiv

Costs related to the integration of Refinitiv and the London Stock Exchange Group (LSEG)  likely “spooked” analysts, causing shares to fall Friday morning (March 5), despite an increase in profits and revenue, Reuters reported.

LSEG acquired the data and analytics company Refinitiv in January for $27 billion. Following a conference call with analysts on Friday, shares dropped 13 percent to 8,237 pence, the steepest one-day decline in the past 12 months.

Guidance for this year’s mid-single-digit cost growth “spooked the market” and sparked fears that long-term forecasts could be lower than previously forecast, according to Credit Suisse, per Reuters.

Citing unexpected high expenses relating to LSEG’s takeover of Refinitiv, Citi cut its rating on the stock to neutral from buy.

“A need to improve the resilience of the legacy Refinitiv tech platform, suggests the bulk of the incremental 150 million euros operational expenditure investment will recur in 2022 and beyond,” Citi said in a note, per Reuters. It also said that 2021’s earnings-per-share accretion target now appeared like it would be a tough achievement.

Despite that upset, the LSE Group reported a 5 percent increase in pre-tax profits to 685 million pounds in 2020 and a 3 percent increase in revenues, rising to 2.1 billion pounds, in part driven by growth in its FTSE Russell and clearing businesses, according to a previous press release from LSEG.

The group anticipates 7 percent growth in revenue across the next few years due to its tie-up with Refinitiv. LSE also proposed a 7 percent increase in its full-year total dividend to 75p.

David Schwimmer, chief executive officer of LSEG, said that despite the challenges presented by the coronavirus pandemic and the “broader geo-political events,” LSEG showed “strong financial performance, demonstrating strong operational resilience.”

He added that the company will continue on a path of innovation and collaborate with customers “to develop our services, in areas such as reference rate reform and sustainable investment.”

Schwimmer also said the booming trend for companies to go public by way of special purpose acquisition companies (SPACs) in the U.S. could end “poorly” for investors.

FinTechs and payment firms joined the 2020 stampede to file initial public offerings (IPOs). An estimated 480 IPOs were filed for the U.S. markets alone, up more than 100 percent from 2019.

The trend of going public via a SPAC was approved in the U.K. as a way to boost London after Brexit.