London Stock Exchange Group sticks with targets in quarterly update - Reuters

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• Summary
• Companies

• LSEG reports 16.2% rise in Q3 income, slightly beating forecasts
• Analysts say results show integration of Refinitiv on track
• Group says it's making good progress with share buyback programme

LONDON, Oct 21 (Reuters) - The London Stock Exchange Group (LSEG.L) beat forecasts slightly on Friday with a 16% rise in third-quarter income and maintained its cost and profit margin targets.

Analysts said the results indicated the integration of data and analytics company Refinitiv, purchased for $27 billion in 2021, is still on track.

Group income of 1.905 billion pounds ($2.13 billion) beat a consensus forecast from analysts of 1.881 billion pounds, excluding recoveries.

LSEG Chief Executive David Schwimmer told an analysts' call that 70% of revenues were recurring, with the balance now benefiting from high volatility and uncertainty in markets, which boost activities like clearing in interest rate swaps.

Gross profit in the third quarter rose to 1.696 billion pounds, LSEG said, roughly in line with analysts consensus of 1.7 billion pounds.

"This is an encouraging update," analysts at Jefferies said in a note to clients, with RBC Capital Markets adding that the update showed "continued delivery".

The group's shares, however, have been volatile during the integration of Refinitiv, with data and analytics now dwarfing LSEG's traditional stock trading operations. LSEG shares were down 2.6% on Friday, underperforming a 0.4% drop in London's blue-chip FTSE 100 index, although they have outperformed the FTSE this year, gaining more than 4%.

In August the exchange announced the launch of a larger than expected 750 million pound share buyback, and said on Friday that 235 million pounds was returned in the third quarter.

"We are also making good progress on returning surplus capital to shareholders through our share buyback programme," Schwimmer told the analysts' call.

DIRECTED BUYBACK

LSEG's purchase of Refinitiv turned the 300-year old exchange into a major market data player, but outages and sums invested in integration raised concerns among some investors.

LSEG chief financial officer Anna Manz said she was confident of not exceeding the "low-single digit" organic cost growth target for 2022. "We are in good shape on that," Manz said.

Schwimmer said LSEG could pursue a so-called directed buyback of shares from specific investors, rather than on the open market, a step which requires shareholder approval.

"You should not be surprised to see us asking for that as part of our AGM process in the spring," he said on the call.

A stock lock-up at Blackstone, which had been a joint owner of Refinitiv and thereby giving it a stake in LSEG after the takeover, ends in January, Schwimmer said.

Charlie Huggins, head of equities at financial research company Wealth Club, said the Refinitiv deal transformed LSE’s data capabilities, creating a financial powerhouse to rival Bloomberg.

"Confidence in the Refinitiv deal is growing, with every quarter of good delivery helping to quieten the sceptics. That said, it's still too early for LSE to declare victory," Huggins said.

Thomson Reuters (TRI.TO), which owns Reuters News, has a minority shareholding in LSEG.

($1 = 0.8945 pounds)

Reporting by Huw Jones; Editing by Simon Cameron-Moore and Susan Fenton

Our Standards: The Thomson Reuters Trust Principles.

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