LSE eases the pain

What merger? LSE eased the pain for investors with a 20% increase in its dividend, a sign it expect the €29bn merger with Deutsche Borse is dead in the water.

And it looks like LSE will be just fine without its German partner. Total income rose impressively, up 17%, while operating profit climbed 6%. Cost synergies from its FTSE Russell merger are ahead of schedule and it’s completed the sale of

Sometimes engagements shouldn’t end in marriage. In the case of LSE, its continental forays have not ended well and perhaps with Brexit looming the chance for a cross-channel merger has come and gone.

A big boost to dividends might not cut it. Shareholders approved this deal and were keen to see it done. Shares in LSE slid 1% on the open but remain up about 50% since the Deutsche Borse merger was first mooted last February. There could be a long way to go down if, as expected, regulators administer the coup de grace a month from now. A tie-up with a US player would be even trickier to pull off.

WPP suffers

Shares in WPP tanked on the open, sliding over 5% with investors worried about the prospects for the year ahead in spite of record revenues.

Interesting that WPP noted ‘tepid economic growth’ — exactly the reverse of what we’re seeing in terms of equity market bullishness and the Trump trade — pro-growth, pro-inflation. Brexit is in there — political uncertainty in Europe a big factor in the cautionary outlook, while currency tailwinds has delivered a big helping hand to revenues. These should fade by the second half of this year, which may in part be a reason for the caution.

Like-for-like revenues in line at +3%, but growth of +2% in 2017 is a little below expectations following what WPP called a slow start to the year. At first glance it seems a little overly-cautious.

With investors worried about the outlook, expect Sir Martin Sorrell to face the customary revolt over pay come the AGM. A little nod to his steady hand was included in the results, just as a little reminder perhaps: ‘At a time when all external pressures seem to call for instant, short-term responses, an understanding of the value of confidence, consistency and continuity has never itself been more valuable.’

Neil Wilson

Senior Market Analyst

ETX Capital