LSEG narrows revenue forecast, says it had "constructive" dialogue with Elliott

By Pushkala Aripaka and Samuel Indyk

LONDON, July 30 (Reuters) - London Stock Exchange Group narrowed its full-year revenue growth forecast and slightly exceeded first-half sales forecasts on Thursday, although its shares slipped amid some disappointment among analysts.

LSEG is facing pressure from activist investor Elliott Management, which bought a stake in the London Stock Exchange operator and has been pushing for portfolio changes and margin improvements, as well as broader investor concerns that AI could disrupt its financial data business and squeeze margins.

LSEG CEO David Schwimmer said on Thursday there had been "good, constructive dialogue with Elliott", without elaborating.

Shares in LSEG, which have risen 21% since Elliott's stake became public on February 11, fell 3.1% following the results. LSEG's share price is now flat for the year, compared to a 10% rise for the FTSE 100.

"The market will have the reaction that the market will have," said Schwimmer.

"But we feel very good about our opportunity set and we have upped our guidance and tightened our guidance range for the second half of this year with both revenue and margin, which is a reflection of that confidence," he added.

LSEG had previously forecast organic constant-currency growth in total income, excluding recoveries, at the upper end of a 6.5% to 7.5% range. Its new 7.0% to 7.5% range remains below analyst expectations of 7.8% growth for the year.

"Guidance may disappoint," said Citigroup analyst Andrew Lowe, adding the revenue mix was "likely to be viewed as modestly negative".

The Iran war prompted a spike in trading activity across all major asset classes, helping LSEG's markets business, which typically benefits from such volatility.

For the six months to June, total income excluding recoveries rose 8.4% versus expectations of 8.3%. Its markets business delivered 11.9% growth in the first half.

CONSTRUCTIVE DIALOGUE

LSEG's push to address investor concerns about AI comes as the data provider seeks to reassure shareholders.

"We're always evaluating our business, and if there's anything that it makes sense to consider, that is something that we're always thinking through," Schwimmer told reporters.

LSEG has been investing in its analytics business and partnering with AI firms including OpenAI and Anthropic to roll out AI tools and license its data.

Its data and analytics business reported a 5.1% rise in organic growth in the second quarter.

"12 months on from when AI concerns first impacted LSEG shares, the continued improvement in financials should help to reassure the market that the vulnerabilities have been overblown," said RBC analyst Ben Bathurst in a note.

LSEG forecast EBITDA (earnings before interest, tax, depreciation and amortisation) margin growth of around 100 basis points, versus its previous expectation of an 80 to 100 bp rise.

It also said it planned a further £1.35 billion ($1.8 billion) share buyback, to be completed by February next year, and raised its dividend by 17%.

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

($1 = 0.7496 pounds)

(Reporting by Pushkala Aripaka in Bengaluru and Samuel Indyk in London; Editing by Mrigank Dhaniwala and Alexander Smith)