Strong start to the year for London Stock Exchange Group

As the London Stock Exchange Group updates the market, Helal Miah, investment research analyst at The Share Centre, explains what it means for investors.

“The London Stock Exchange Group, whose potential merger with the Deutsche Boerse recently blocked, is trading at an all-time high as it this morning reported a fairly encouraging interim trading update. The group has seen a strong start to the year as total income from operations are up by 19% to £459m helped by good trading from across its various divisions. Furthermore, its LCH business saw income up by 31%, Italian post trade service up 18% and Information Services Revenue up 24% which includes an encouraging contribution from the recently acquired Mergent Inc. Interested investors should note that these numbers were significantly boosted by sterling’s fall.

“Investors should note that the group has starting its £200m share buyback which was announced after the failed merger with its German counterpart. Encouragingly, the CEO, Xavier Rolet indicated that it the firm continues “to be actively engaged in exploring selective ongoing organic and inorganic investments in order to drive further growth”. Its balance sheet remains relatively unchanged from the full year results.

“The London Stock Exchange Group should be a beneficiary of higher equity market levels, trading and IPO activity but valuations could be looking a little stretched. It trades on a p/e ratio of roughly 24x higher than most of its peers with a very modest dividend yield. We continue with our ‘Hold’ recommendation for investors willing to accept a medium level of risk.”