Investment management sale
London Stock Exchange Group (L:LSE) continues to gain from its strategy to diversify its business and gain exposure to growth opportunities through acquisition. The expected sale of the Russell Investment Management business has been announced and should complete in H116. In H115, it benefited from its acquisition of the Russell index business and organic growth in its other activities, especially at LCH.Clearnet’s SwapClear. LSE has identified more future revenue and cost-saving opportunities from its businesses. Its shares are trading in line with international peers on a P/E basis, but the yield is substantially lower. An update on LSE’s capital allocation and longer-term dividend policy is scheduled for March 2016.
Acquisition success
The Russell Index business was successfully integrated with the existing FTSE index business in H115, and marked another positive acquisition for LSE. It has outlined plans to grow revenue at CC&G and LCH.Clearnet and cut costs at the latter, which should lead to profit growth. LSE continues to look for further acquisitions. Its observation that many of its clients, notably the asset managers and investment banks operate globally, but that market infrastructure companies such as the LSE are more regionally focused, could imply geographical expansion is on the agenda. If it does proceed with an acquisition, it would do so on the back of a successful track record.
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