Yahoo Finance London Stock Exchange sees bright future post-Brexit despite competition
The London Stock Exchange Group (LSEG,L) is bullish about its future prospects, despite rising international competition and the politicisation of finance post-Brexit.
The London Stock Exchange reported its 2020 results on Friday, showing revenues rose by 3% to £2.1bn ($2.9bn) last year. Capital market revenues were flat but income from information services rose by 3% and post-trade clearing revenues jumped by 7%.
Total income was up 5% to £2.4bn in the 12 months to 31 December 2020. Operating profit rose 3% to £755m. The company hiked its final dividend by 7% to 75p per share.
Barclays Capital said the results were "robust" and in-line with City forecasts.
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"The COVID-19 pandemic and broader geo-political events presented unprecedented challenges in 2020," chief executive David Schwimmer said in a statement.
"Despite this environment, and with the vast majority of employees working remotely across our global locations, LSEG has delivered for its customers and provided a strong financial performance, demonstrating strong operational resilience."
Britain officially left the European Union on 1 January 2021. Since then, equity trade worth billions has shifted from London to Amsterdam and derivatives trade worth billions has moved to New York.
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The EU is meanwhile pushing companies to move their clearing business — the settling of trades — away from London. This would be hugely damaging for the London Stock Exchange. Clearing through its LCH business accounted for 35% of the group's revenues last year.
Schwimmer said the London Stock Exchange was "well positioned for long-term sustainable growth in a continually evolving landscape". The company launched a new trading venue in Amsterdam, Turquoise, last November to give traders continued access to EU markets post-Brexit. The company said Turquoise had "successfully launched" with "complete continuity of service".
The London Stock Exchange is also betting on data as a growth engine, which may prove less sensitive to geopolitics. The company completed its $27bn takeover of data company Refinitiv at the start of the year. Schwimmer called the deal "transformational".
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"While early days, the work we have done so far confirms the quality of the business and the extent of the opportunities across the Group as we focus on integration and delivering the strategic and financial benefits of the transaction to our customers, shareholders and other stakeholders," he said.
Shares fell 4.3% in early trade in London.
The stock was weighed down by new guidance on costs. The company said operating costs would increase by mid-single digits and forecast expenditure of £850m in the year ahead. Barclays capital cut its earnings per share forecasts for the next two years as a result of the new guidance.
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