LSEG sets higher 2025 profitability goals as Microsoft partnership ramps up

By Chandini Monnappa and Sinead Cruise

LONDON (Reuters) -London Stock Exchange Group set new goals for improved profitability in 2025 on Thursday, citing a strong pipeline of enhancements to its flagship Workspace product and substantial growth in its financial data and technology businesses.

The company, which runs the London Stock Exchange and provides data and analytics to banks and other institutions, said it expects its 2025 annual income to grow between 6.5% and 7.5%, after reporting 2024 income slightly ahead of analysts' expectations.

LSEG's upper estimate for 2025 income growth is above the 7.1% consensus forecast, according to a company compiled poll. The company said it was looking to grow EBITDA margins by around 250 bps between 2024-2026, against a 2023 baseline.

Pointing to highlights in 2024, CEO David Schwimmer said LSEG had reached an important milestone in its partnership with Microsoft, with the first products - including Microsoft Entra and Financial Meeting Prep - rolling out to customers.

The rollouts were complemented by an "exceptional" year for Tradeweb, a multi-asset electronic trading platform, and continued significant progress across products and geographies in its Post Trade business, Schwimmer added.

Tradeweb helped drive a 17.8% increase in Capital Markets revenue, while FTSE Russell and Risk Intelligence also saw double-digit growth.

Shares rose as much as 3.8% to 115.2 pounds per share after the results.

"There was a building level of angst in the market heading into this print, so what LSEG has delivered should be well-received," analysts at Jefferies said in a note.

LSEG's total income, on a constant currency basis and excluding recoveries, rose 8.4% to 8.49 billion pounds for 2024, slightly ahead of a company-compiled analysts' average estimate of 8.47 billion pounds.

Microsoft bought a 4% stake in LSEG worth $2 billion in 2022 as part of a 10-year partnership to make its data and analytics available through Microsoft products including Azure, AI and Teams. Schwimmer had said customers would see the benefits from 2024.

Reuters provides news for LSEG's news and data terminal Workspace.

PROSPECTS

LSEG, which transformed into a data giant after its $27 billion acquisition of Refinitiv in 2021, declared an annual dividend of 130 pence per share, up 13% from a year earlier.

Annual subscription value (ASV), which reflects recurring revenue and is closely watched by analysts, rose 6.3% last year, slowing from 7.4% growth the previous year.

Speaking to reporters post-earnings, Schwimmer said the firm was regularly evaluating bolt-on M&A opportunities, adding that the its recent acquisitions in the post-trade and data and analytics space have been "very helpful" to the company.

He also denied that the London Stock Exchange business, where revenue has been hurt by thin IPO activity, could be sold.

"If you look at our strategy, which is to provide a financial markets infrastructure and data ecosystem ... the London Stock Exchange, as well as the other execution venues we have ... those are core to our strategy," Schwimmer said.

"We are very, very happy to have that business."

Britain's policymakers have introduced a series of measures to revive the country's capital markets, ranging from proposals to enable trading in shares of privately-owned firms and creating pension megafunds to channel billions of pounds into infrastructure and capital-hungry businesses.

Schwimmer said London's capital markets had moved past a "cold spell" seen post-Brexit, citing the listing of Canal+. He said the company was in regular dialogue with the government about possible changes to stamp duty on equity trading, and that ministers had taken a "constructive" approach to boost the City.

($1 = 0.7900 pounds)

(Reporting by Chandini Monnappa in Bengaluru and Sinead Cruise in London; Editing by Savio D'Souza, Susan Fenton and David Evans)