London Stock Exchange Group

LN: LSE

£24341.8m market cap

6960p last close

LSE is Europe’s leading exchange group in cash equities. MTS is Europe’s largest electronic government bond market, LCH and CC&G offer post-trade services and FTSE Russell provides benchmark indices and related data services.

Investment summary

Following the withdrawal of HKEX’s preliminary takeover approach, LSE continues to make progress with its proposed transformational acquisition of Refinitiv. Its activities include: data, distribution, analytics and workflow (75% of revenue); FX and fixed income trading venues (19%); and risk and other activities (6%). The vendors, including Blackstone and Thomson Reuters, will hold a 37% stake in LSE but less than 30% of voting rights. The enterprise value at an LSE share price of c £70 would be c $30bn, of which c $12.5bn is assumed debt. The EV/adjusted FY18 EBITDA multiple would be c 13.6x. Targets include year 5 revenue and cost synergies of £225m (3.5%) and £350m (7%), respectively, a three-year post deal revenue CAGR of 5–7% and a medium-term EBITDA margin of 50%.

Y/E Dec
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2016A 1657.0 771.0 623.0 124.7 55.8 N/A
2017A 1955.0 915.0 750.0 148.7 46.8 N/A
2018E N/A N/A N/A N/A N/A N/A
2019E N/A N/A N/A N/A N/A N/A
Industry outlook

The transaction requires shareholder, competition and regulatory approvals and is expected to complete in H220. It will shift LSE’s emphasis further towards the structurally attractive area of data management and analytics and rebalance revenues so that they are more global, more diverse in terms of asset class and with a higher % of recurring revenues (c 70% vs 40%). LSE’s Q3 update showed total income up 12% with growth across the group.

Last updated on 12/11/2019
Share price graph
Price performance
%
1m
3m
12m
Actual (4.7) 2.5 67.1
Relative* (6.3) (0.4) 59.2
52-week high/low 7514.0p/3867.0p
*% relative to local index
Key management
Donald Brydon Chairman
David Schwimmer CEO
David Warren CFO