London Stock Exchange Group Earnings: Good First Half; New Data Services Should Unlock Potential

London Stock Exchange Group, or LSEG, reported a good first half year. Total income was up 5.4% to GBP 4.204 billion with the second quarter, showing a step up from the first. Over the first half year, capital markets, risk intelligence, and the index business FTSE Russell stood out positively with double-digit organic growth rates. Data and analytics, LSEG's largest segment, showed decent organic growth at 4.3%, driven primarily by its strong data and feeds offering. Workflows (up 2.4%) had a decent half year as the exchange group booked further client wins and improved its retention metrics. In the second half of the year, the collaboration with Microsoft is expected to throw off its first deliverables in the form of greater access to data sets and easier integrations into clients' workflows. LSEG expects greater ability to price for enhanced products as well as greater data consumption as a result of how it makes its data sets available to its clients. As we have argued in the past, we believe that LSEG bought valuable intellectual property with acquisition of Refinitiv, much of which was underutilized in the past. The collaboration with Microsoft is the correct step, in our view, to unlock this potential. We maintain our GBX 9,800 per share fair value estimate and wide economic moat rating.