LSE Slumps as Refinitiv Costs Overshadow Confident Outlook

London Stock Exchange Group Plc said it will spend more on its integration with Refinitiv this year, disappointing analysts and sending its shares falling by the most in over a decade.

Capital expenditure is set to be about 850 million pounds ($1.2 billion) in 2021, with 150 million pounds of associated operating costs, according to a statement Friday. That overshadowed the company’s confident outlook as it increased its full-year dividend by 7% for 2020.

Shares dropped 14.4% in London, the biggest one-day fall since May 2006. The stock set a record high less than a month ago.

Revenue rose to 2.1 billion pounds ($2.9 billion) in 2020 and the company proposed a final dividend of 51.7 pence a share. The group said its recently completed acquisition of Refinitiv left it well-positioned to navigate the challenges of the pandemic and Brexit.

“LSEG is now truly global with a significant presence in North America, Europe, Asia and emerging markets,” Chief Executive Officer David Schwimmer said in the statement. The group “is well positioned for long-term sustainable growth.”

LSE Slumps as Refinitiv Costs Overshadow Confident Outlook

The stock exchange completed its $27 billion purchase of Refinitiv earlier this year, kicking off a new era where the majority of its revenues come from data. Schwimmer said in a call with journalists that he expects the combination to result in some job cuts and a reduction in some of its real estate footprint.

The combined company will generate about 70% of revenues from data, up from 40%, according to Bloomberg Intelligence. The parent company of Bloomberg News competes with Refinitiv to provide financial news, data and information.

Schwimmer said LSEG was well-positioned to handle continuing uncertainties around how Brexit might impact the City of London.

LSEG’s clearing unit remains a critical element of the European Union’s financial infrastructure even after the U.K. left the bloc. EU politicians have been vocal in demanding that companies shift euro clearing out of London and into the 27-nation bloc. They have achieved some success, with Eurex in Frankfurt increasing its share of euro clearing.

Clearing Volumes

So far, though, Schwimmer said the company has seen “no discernible change” in its LCH clearing business, which can continue to service clients in the European Union through June 2022 under the bloc’s temporary rules.

“Volumes continue to be very strong and if anything growing,” Schwimmer said in an interview with Bloomberg Television Friday.

While London lost its crown to Amsterdam this year as the top place in Europe to buy and sell stock, the shift has had little impact on the group itself, with trades previously done on the company’s U.K. venues largely moving over to its Dutch platform.

Schwimmer also welcomed proposals from a review of London’s listings rules, saying recommendations unveiled this week including on special purpose acquisition companies, or SPACs, should be adopted quickly to help London maintain its prime position.

“No question, London remains one of world’s leading financial capitals,” Schwimmer said.

©2021 Bloomberg L.P.

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