LSEG shares drop following H1 costs miss

investmentweek.co.uk:

“Given solid 7.9% revenue growth in H1 on constant currency, we think it is a solid set of results despite the headline cost miss, which is driven by a one-off,” BofA analysts said.

The group's share price fell 4.2% following the publication of the results, before recovering slightly, according to data from MarketWatch, although the share price was still down 3.2% over the last five days.

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The group's revenues were in line with company consensus, but costs came in 3% higher than expected, according to Bank of America analysts Hubert Lam and Alexandre Tissieres.

This miss on costs came largely from a £30m non-cash FX adjustment, the analysts said, meaning that excluding this, the EBITDA margin would have been 47.7%, above BofA forecasts of 47.6% but below 2022's figure of 50.4%.

«Given there was solid 7.9% revenue growth in H1 on constant currency, we think it is a solid set of results despite the headline cost miss, which is driven by a one-off,» the analysts said.

Total income for the group, excluding recoveries, grew 7.9% throughout six months, while being up 11.8% on a reported basis. Total income excluding recovering grew a similar amount, being up 8.4% from Q2 2022.

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Meanwhile, annual subscription value fell in Q2 to 6.9% from 7.6%, which the group said was due to the short-term timing differences between cancellations and the on-boarding of contracted sales, and it expected a reversal in this trend in the second half of the year.

Looking ahead, the group said it expected revenue growth for 2023 to be on «the upper end» of 6-8%, with the BofA analysts expecting 7.3%.

David Schwimmer, CEO of LSEG, said: «LSEG delivered