TIDMLSE

RNS Number : 2691K

London Stock Exchange Group PLC

21 April 2020

21 April 2020

LONDON STOCK EXCHANGE GROUP plc

TRADING STATEMENT

INCLUDING REVENUES AND KPIs FOR THE THREE MONTHSED

31 MARCH 2020 (Q1)

   --    Good Q1 performance against unprecedented market backdrop 

-- Q1 total income up 13% year-on-year to GBP615 million, driven by increased equity trading in Capital Markets and higher clearing activity across listed and OTC products leading to higher NTI in Post Trade

-- Resources focused on ensuring strong operational resilience across the Group's systemically important market infrastructure platforms and services; Group employees working almost entirely on a remote basis across all locations

-- Integration planning for Refinitiv transaction progressing well: CFIUS approval received and anti-trust filings prepared in multiple jurisdictions; remain committed to achieving completion in H2 2020

Q1 summary:

-- Information Services: revenues up 7% to GBP215 million - with 8% growth at FTSE Russell. Good growth in both subscription and asset-based revenues, the latter reflecting growth in ETF AUM in prior quarter; ETF AUM fell sharply at the end of Q1, reflecting market turbulence in March

-- Post Trade: income up 17% to GBP271 million, with 11% growth in LCH revenue, with strong listed and OTC clearing activity, including record volumes in SwapClear. Good clearing volumes at CC&G drove a 15% revenue increase. Increased clearing activity drove higher cash margin, with consequent stronger NTI, up 39% in LCH and 10% in CC&G

-- Capital Markets: revenues up 15% to GBP112 million, principally reflecting higher equity secondary markets activity in London and Milan

   --    Technology Services:  revenues unchanged at GBP14 million 

Update on the Refinitiv transaction

The Group continues to make good progress on planning for the integration of Refinitiv. A number of workstreams on business structure and opportunities, including synergy realisation, are well developed, and the Integration Management Office has been expanded to bring additional resource to the Group.

The Group also continues to make progress with merger control, foreign investment and financial regulatory filings. US foreign investment clearance has been received from CFIUS. Merger control clearance has been received from Botswana, Japan, Kenya and Ukraine, and merger control reviews have commenced in several other jurisdictions. As disclosed last month, the European Commission has requested a delay to submission of filings by merger parties generally; the Group continues to work constructively with the European Commission case team and will file as soon as it is possible to do so. The Group is committed to completion of the transaction in H2 2020.

Comment on Q1 and outlook:

LSEG recognises the significant impact of the coronavirus Covid-19 global pandemic on its employees, customers and other stakeholders. Employee health and wellbeing has been a key focus. The vast majority of our employees have been working remotely, and we continue to adapt our technology and working practices to this changing environment. LSEG is in regular contact with public health authorities, governments and stakeholders around the world and will continue to adjust our response as needed.

As a systemically important financial markets infrastructure business, LSEG places a high priority on its responsibility to ensure the orderly functioning of markets and continuity of services for its customers and other stakeholders. During this unprecedented period, the Group has prioritised operational resilience across the Group's Capital Markets, Information Services and Post Trade businesses.

In light of current circumstances, LSEG regularly assesses the strength of its balance sheet and stress-tests its liquidity positions under various market scenarios. The Group strongly believes it has sufficient cash resources and access to liquidity to maintain continuity of business and has no need to materially adjust any its operations or incur significant additional costs. As at 31 March 2020, the Group had committed facility headroom of over GBP600 million available for general corporate purposes. Reflecting the strong 2019 results and ongoing financial strength, the Group intends to pay its final dividend in relation to the 2019 financial year, subject to shareholder approval at today's AGM.

While the Group has performed well in Q1, it is too early to comment specifically on the impact of the coronavirus pandemic on the outlook for LSEG and its customers for the remainder of the year. The Group believes the longer-term drivers of growth in each of its business lines remain intact.

David Schwimmer, CEO said:

"The Group has delivered a good financial performance and strong operational resilience during this unprecedented period. We have had a focus on ensuring orderly functioning of markets and continuity of service to customers across our businesses."

"A key priority has been the health and wellbeing of our employees around the world. The vast majority of our colleagues are working remotely as a key element of our business continuity measures. I've been impressed by their adaptability, resiliency and commitment to continue to support our customers. Although market conditions are likely to remain challenging in the coming period, we believe the Group is financially strong and has the necessary resources to continue to operate effectively in this environment."

Further information is available from:

 
                          Gavin Sullivan/Lucie Holloway 
                           - 
 London Stock Exchange     Media                              +44 (0) 20 7797 1222 
  Group plc                Paul Froud - Investor Relations     +44 (0) 20 7797 3322 
 

The Group will host a conference call for analysts and investors today, Tuesday 21 April at 08:30am (UK time). On the call will be David Schwimmer (CEO), David Warren (CFO) and Paul Froud (Group Head of Investor Relations).

To access the telephone conference call please pre-register using the following link and instructions below: http://emea.directeventreg.com/registration/5831128

-- Please register in advance of the conference using the link above . Upon registering with your full name, company name and email address, you will be provided with participant dial-in numbers, Direct Event passcode and unique registrant ID

-- In the 10 minutes prior to the call start time, you will need to use the conference access information provided in the email received at the point of registering

Note: Due to regional restrictions some participants may receive operator assistance when joining this conference call and will not be automatically connected.

For further information, please call the Group's Investor Relations team on

+44 (0) 20 7797 3322.

Q1 Revenue Summary

Revenues for three months ended 31 March 2020, referring to continuing operations, with comparatives against performance for the same period last year, are provided below. Growth rates for Q1 performance are also expressed on an organic and constant currency basis. All figures are unaudited.

 
                                                                      Organic 
                                                                          and 
                                 Three months ended                  constant 
                                      31 March                       currency 
                               --------------------- 
                                     2020       2019   Variance   variance(1) 
 Continuing operations:              GBPm       GBPm          %             % 
 Revenue 
 Information Services                 215        201         7%            6% 
 Post Trade                           192        172        12%           13% 
 Capital Markets                      112         97        15%           16% 
 Technology                            14         14          -             - 
 Other                                  2          2          -             - 
-----------------------------  ----------  ---------  ---------  ------------ 
 Total revenue                        535        486        10%           10% 
 
 Net treasury income through 
  CCP businesses                       79         59        34%           34% 
 Other income                           1          1          -             - 
                               ----------             ---------  ------------ 
 Total income                         615        546        13%           13% 
-----------------------------  ----------  ---------  ---------  ------------ 
 Cost of sales                       (60)       (56)         8%            9% 
                               ----------  --------- 
 Gross profit                         555        490        13%           13% 
-----------------------------  ----------  ---------  ---------  ------------ 
 

(1) Organic growth is calculated in respect of businesses owned for at least the full 3 months in either period and excludes Beyond Ratings. The Group's principal foreign exchange exposure arises from translating and revaluing its foreign currency earnings, assets and liabilities into LSEG's reporting currency of Sterling

The Euro weakened by 1% against Sterling compared with the same period last year while the US $ strengthened by 2%. To illustrate our exposure to movements in exchange rates, a EUR0.05 change in the average euro:sterling rate would have resulted in a change to continuing operations total income of cGBP8 million for Q1, while a US$0.05 move would have resulted in a cGBP7 million change.

More detailed revenues by segment are provided in tables below:

Information Services

 
                                                                     Organic 
                                                                         and 
                                Three months ended                  constant 
                                     31 March                       currency 
                              --------------------- 
                                    2020       2019   Variance   variance(1) 
                                    GBPm       GBPm          %             % 
 Revenue 
 Index - Subscription                105         99         6%            6% 
 Index - Asset based                  58         52        12%            9% 
 FTSE Russell                        163        151         8%            7% 
----------------------------  ----------  ---------  ---------  ------------ 
 Real time data                       25         24         3%            4% 
 Other information services           27         26         2%            1% 
 Total revenue                       215        201         7%            6% 
----------------------------  ----------  ---------  ---------  ------------ 
 Cost of sales                      (17)       (17)          -             - 
                              ----------  --------- 
 Gross profit                        198        184         7%            6% 
----------------------------  ----------  ---------  ---------  ------------ 
 

(1) Removal of Beyond Ratings from Other information services (acquired June 2019)

Note: UnaVista previously reported in Other information services is now reported in Post Trade, historical comparators have been adjusted to reflect this

Post Trade

 
                                         Three months ended               Constant 
                                              31 March                    currency 
                                       --------------------- 
                                             2020       2019   Variance   variance 
                                             GBPm       GBPm          %          % 
 Revenue 
 OTC - SwapClear, Forex & 
  CDSClear                                     82         76         8%         9% 
 Non OTC - Fixed income, 
  Cash equities & Listed derivatives           41         34        21%        22% 
 Other                                         26         24         7%         7% 
 Total LCH revenue                            149        134        11%        12% 
-------------------------------------  ----------  ---------  ---------  --------- 
 Clearing                                      12         11        15%        17% 
 Settlement, Custody & other                   15         14         6%         7% 
 Total Post Trade Italy revenue                27         25        10%        12% 
-------------------------------------  ----------  ---------  ---------  --------- 
 UnaVista                                      16         13        22%        22% 
 Total revenue                                192        172        12%        13% 
-------------------------------------  ----------  ---------  ---------  --------- 
 LCH - Net treasury income                     67         48        39%        39% 
 CC&G - Net treasury income                    12         11        10%        12% 
 Total income                                 271        231        17%        18% 
-------------------------------------  ----------  ---------  ---------  --------- 
 Cost of sales                               (39)       (35)        14%        15% 
                                       ----------  --------- 
 Gross profit                                 232        196        18%        19% 
-------------------------------------  ----------  ---------  ---------  --------- 
 

Capital Markets

 
                                  Three months ended               Constant 
                                       31 March                    currency 
                                --------------------- 
                                      2020       2019   Variance   variance 
                                      GBPm       GBPm          %          % 
 Revenue 
 Primary Markets                        32         28        13%        14% 
 Secondary Markets - Equities           49         37        33%        33% 
 Secondary Markets - Fixed 
  income, derivatives and 
  other                                 31         32       (3%)       (2%) 
 Total revenue                         112         97        15%        16% 
------------------------------  ----------  ---------  ---------  --------- 
 Cost of sales                         (1)        (1)          -          - 
                                ----------  --------- 
 Gross profit                          111         96        16%        17% 
------------------------------  ----------  ---------  ---------  --------- 
 

Technology Services

 
                   Three months ended               Constant 
                        31 March                    currency 
                 --------------------- 
                       2020       2019   Variance   variance 
                       GBPm       GBPm          %          % 
 Total revenue           14         14          -          - 
---------------  ----------  ---------  ---------  --------- 
 Cost of sales          (2)        (2)          -          - 
                 ----------  ---------  ---------  --------- 
 Gross profit            12         12          -          - 
---------------  ----------  ---------  ---------  --------- 
 

Basis of Preparation

Results for the period ended 31 March 2019 have been translated into sterling using the average exchange rates for the period. Constant currency growth rates have been calculated by translating prior period results at the average exchange rate for the current period.

 
                Average rate                     Average rate 
                                Closing rate                     Closing rate 
              3 months ended              at   3 months ended              at 
               31 March 2020   31 March 2020    31 March 2019   31 March 2019 
 GBP : EUR              1.16            1.12             1.15            1.16 
 GBP : USD              1.28            1.24             1.30            1.30 
             ---------------  --------------  ---------------  -------------- 
 

Appendix - Key performance indicators

 
 Information Services 
                                     As at 
                                    31 March       Variance 
                               ----------------- 
                                  2020      2019          % 
 ETF assets under management 
  benchmarked ($bn) 
 FTSE                              359       398      (10%) 
 Russell Indexes                   224       256      (13%) 
-----------------------------                     --------- 
 Total                             583       654      (11%) 
-----------------------------  -------  --------  --------- 
 
 Terminals 
 UK                             64,000    67,000       (4%) 
 Borsa Italiana Professional 
  Terminals                     98,000   105,000       (7%) 
 

Note: FTSE ETF assets under management benchmarked KPI has been rebased to remove previously reported active ETFs. The previous year comparator has also been adjusted, with a change of $15 billion

 
 Post Trade - LCH 
                                  Three months ended 
                                       31 March         Variance 
                                --------------------- 
                                      2020       2019          % 
 LCH OTC derivatives 
 SwapClear 
 IRS notional cleared ($tn)            402        318        26% 
 SwapClear members                     123        119         3% 
 Client trades ('000)                  565        411        37% 
 CDSClear 
 Notional cleared (EURbn)              776        352       120% 
 CDSClear members                       26         26          - 
 ForexClear 
 Notional value cleared 
  ($bn)                              5,405      4,311        25% 
 ForexClear members                     34         34          - 
 
 LCH Non-OTC 
 Fixed income - Nominal 
  value (EURtn)                       51.6       52.4       (2%) 
 Listed derivatives contracts 
  (m)                                104.2       72.8        43% 
 Cash equities trades (m)              558        362        54% 
 
 LCH average cash collateral 
  (EURbn)                            115.9       91.1        27% 
 

Note: CDSClear notional cleared and LCH Non-OTC volumes have been rebased to count both sides of each cleared trade. This aligns with how activity is reported on LCH's website. The previous year comparator has also been adjusted

 
 Post Trade - Italy 
                                     Three months ended 
                                          31 March         Variance 
                                   --------------------- 
                                         2020       2019          % 
 CC&G Clearing 
 Contracts (m)                           38.9       25.0        56% 
 Initial margin held (average 
  EURbn)                                 14.3       13.7         4% 
 
 Monte Titoli 
 Settlement instructions 
  (trades m)                             13.8       10.7        29% 
 Custody assets under management 
  (average EURtn)                        3.34       3.29         2% 
 
 
 Capital Markets - Primary 
  Markets 
 
                               Three months ended 
                                    31 March         Variance 
                             --------------------- 
                                   2020       2019          % 
 New Issues 
 UK Main Market, PSM & 
  SFM                                12         10        20% 
 UK AIM                               6          5        20% 
 Borsa Italiana                       1          7      (86%) 
                             ---------- 
 Total                               19         22      (14%) 
---------------------------  ----------  ---------  --------- 
 
 Money Raised (GBPbn) 
 UK New                             0.4        0.5      (20%) 
 UK Further                         2.3        3.0      (23%) 
 Borsa Italiana new and 
  further                             -          -          - 
 Total (GBPbn)                      2.7        3.5      (23%) 
---------------------------  ----------  ---------  --------- 
 
 
 Capital Markets - Secondary Markets 
                                  Three months ended 
                                       31 March         Variance 
                                --------------------- 
 Equity                               2020       2019          % 
 Totals for period 
 UK value traded (GBPbn)               390        294        33% 
 Borsa Italiana (no of 
  trades m)                           27.3       15.6        75% 
 Turquoise value traded 
  (EURbn)                              166        163         2% 
 
 SETS Yield (basis points)            0.68       0.68          - 
 
 Average daily 
 UK value traded (GBPbn)               6.1        4.7        30% 
 Borsa Italiana (no of 
  trades '000)                         427        248        72% 
 Turquoise value traded 
  (EURbn)                              2.6        2.6          - 
 
 Derivatives 
 Contracts (m)                         9.2        9.1         1% 
 
 Fixed Income 
 MTS cash and BondVision 
  (EURbn)                              786        836       (6%) 
 MTS money markets (EURbn 
  term adjusted)                    30,829     28,809         7% 
 

Note: The Q1 2019 number of derivative contracts includes 0.8 million from LSE Derivatives. This service no longer accepted new trades from November 2019

Total Income - Quarterly

 
                                          2019                                2020 
 GBP millions                               Q1     Q2     Q3     Q4    2019     Q1 
                                         -----  -----  -----  -----  ------  ----- 
 
 Index - Subscription                       99    104    108    107     418    105 
 Index - Asset based                        52     60     61     58     231     58 
 FTSE Russell                              151    164    169    165     649    163 
 Real time data                             24     24     24     25      97     25 
 Other information                          26     27     27     29     109     27 
--------------------------------------- 
 Information Services                      201    215    220    219     855    215 
 
 OTC - SwapClear, ForexClear & 
  CDSClear                                  76     72     80     79     307     82 
 Non OTC - Fixed income, Cash equities 
  & Listed derivatives                      34     35     36     35     140     41 
 Other                                      24     25     28     26     103     26 
---------------------------------------  -----  -----  -----  -----  ------  ----- 
 Post Trade Services - LCH                 134    132    144    140     550    149 
 Clearing                                   11     11     11     10      43     12 
 Settlement, Custody & other                14     15     16     15      60     15 
---------------------------------------  -----  -----  -----  -----  ------  ----- 
 Post Trade Services - CC&G and 
  MT                                        25     26     27     25     103     27 
 UnaVista                                   13     12     10     12      47     16 
                                                                     ------ 
 Post Trade                                172    170    181    177     700    192 
 
 Primary Markets                            28     62     30     31     151     32 
 Secondary Markets - Equities               37     37     39     38     151     49 
 Secondary Markets - Fixed income, 
  derivatives & other                       32     30     33     29     124     31 
---------------------------------------  -----  -----  -----  -----  ------  ----- 
 Capital Markets                            97    129    102     98     426    112 
 
 Technology                                 14     16     16     20      66     14 
 
 Other                                       2      2      2      3       9      2 
 
 Total Revenue                             486    532    521    517   2,056    535 
 Net treasury income through CCP: 
   LCH                                      48     48     53     57     206     67 
   CC&G                                     11     13     12     13      49     12 
 Other income                                1      1      1      -       3      1 
 
 Total income                              546    594    587    587   2,314    615 
---------------------------------------  -----  -----  -----  -----  ------  ----- 
 
 Cost of sales                            (56)   (53)   (58)   (43)   (210)   (60) 
 Gross profit                              490    541    529    544   2,104    555 
---------------------------------------  -----  -----  -----  -----  ------  ----- 
 

Note: UnaVista previously reported in Other information services is now reported in Post Trade, historical comparators have been adjusted to reflect this

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

TSTPPUWCCUPUPGU

(END) Dow Jones Newswires

April 21, 2020 02:00 ET (06:00 GMT)

London Stock Exchange (LSE:LSE)
Historical Stock Chart
From Jul 2020 to Aug 2020 Click Here for more London Stock Exchange Charts.
London Stock Exchange (LSE:LSE)
Historical Stock Chart
From Aug 2019 to Aug 2020 Click Here for more London Stock Exchange Charts.