TIDMLSE
RNS Number : 3086Q
London Stock Exchange Group PLC
18 October 2019
18 October 2019
LONDON STOCK EXCHANGE GROUP plc
TRADING STATEMENT
INCLUDING REVENUES AND KPIs FOR THE THREE MONTHSED
30 SEPTEMBER 2019 (Q3)
-- Strong Q3 performance across all parts of the Group - LCH
continues to grow strongly in OTC products; FTSE Russell performing
well with growth in subscription revenues
-- Q3 total income up 12% to GBP587 million
-- On a nine-month year-to-date basis total income up 9% to GBP1,727 million
-- Proposed acquisition of Refinitiv continues to progress:
o Appointment of David Shalders as Chief Integration Officer
and member of the LSEG Executive Committee, reporting
to LSEG CEO
o Regulatory approvals process and integration planning
underway
o Integration Management Office established
o Shareholder circular posting soon with General Meeting
scheduled for November 2019
o Transaction remains on track for completion in H2 2020
Q3 summary
-- Information Services: revenues up 9% to GBP230 million. FTSE
Russell up 10%, with strong performance in subscription
revenues
-- Post Trade - LCH: income up 19% to GBP197 million. Strong
results driven by 22% revenue growth in OTC clearing with strong
volumes at SwapClear and continued growth in net treasury income,
up 16%
-- Post Trade - Italy: income up 8% to GBP39 million. Good
performance supported by growth in clearing; settlement, custody
and net treasury income, reflecting good volumes in fixed
income
-- Capital Markets: revenues up 14% to GBP102 million. On a
like-for-like basis (adjusting for last year's IFRS 15 change),
revenue increased 5%, with growth in Primary Markets and in fixed
income trading partly offset by subdued equity markets trading
-- Technology: revenues up 2% to GBP16 million
Commenting on performance in Q3, David Schwimmer, CEO, said:
"The Group continues to perform well and has delivered a strong
Q3 performance. LCH's OTC clearing services saw continued strong
volumes during the period in both member and client clearing. In
Information Services, FTSE Russell reported 10% growth as
subscription revenues remained strong. Capital Markets also
produced a good overall performance against a backdrop of continued
challenging market conditions.
"During the quarter, we announced the proposed acquisition of
Refinitiv, a leading global provider of data, analytics and
financial markets solutions. This is a transformational transaction
that accelerates our Group's strategy, positioning us in key areas
of future growth as a global financial markets infrastructure
leader. Together, we will create a multi-asset class capital
markets business and bring world class data content, management and
distribution capabilities to our customers on an open access basis.
The transaction offers substantial strategic and financial benefits
to our shareholders, customers, employees and other
stakeholders."
Developments in the period
-- FTSE Russell launched the first climate risk government bond
index, the FTSE Climate Risk-Adjusted World Government Bond
Index
-- FTSE Russell successfully implemented inclusion of the second
tranche of China A Shares in the FTSE GEIS (September 2019)
-- Expanded ForexClear offering by launching FX Forwards
clearing and also linked up with FX Connect TradeNeXus, enabling
simpler buy-side access to clearing
-- Published plans to launch clearing of products referencing
EURSTR, the new reference rate and announced plans to transition to
EURSTR discounting
Financial Position
The Group's financial position remains strong with a good level
of funding flexibility in place. As at 30 September 2019, the Group
had available committed facility headroom of c.GBP750 million
having paid the interim dividend to shareholders and met other
normal course payment obligations. The Group is therefore able to
fund the repayment of the 2009 GBP250 million Bond, due 19 October
2019, from existing resources. While LSEG's credit ratings are
unchanged (long term A3 and A), both Moody's and S&P moved
their rating outlooks, respectively, to "review for possible
downgrade" and "credit-watch negative" in early August as a result
of the debt component of the Refinitiv acquisition. Both agencies
were otherwise constructive on the strategic rationale for the deal
and positive towards the Group's arrangement of a c.$13.5 billion
bridge facility to de-risk refinancing of Refinitiv's debt at or
around closing of the transaction.
The euro was flat and the US dollar strengthened by 6% against
sterling compared with the same period last year. 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 GBP8 million for Q3, while a
US$0.05 move would have resulted in a GBP7 million change.
Board, Management and organisation changes
David Shalders is joining the Group in November 2019 as Chief
Integration Officer and a member of the LSEG Executive Committee,
reporting to LSEG's CEO. David brings to the Group over thirty
years' experience in Integration, Technology and Operations in the
financial services sector. He has successfully led a number of
global integration programmes. Most recently, David was Group
Operations and Technology Director at Willis Towers Watson, having
led the integration of Willis and Towers Watson. Prior to his six
years at Willis Towers Watson, David spent nineteen years at The
Royal Bank of Scotland in a number of senior operations and
technology roles, including as Group Head of Integration for the
ABN Amro acquisition. We also announced today that we have formed
the Integration Management Office (IMO). Led by David Shalders, the
IMO will be comprised of senior leaders from LSEG and
Refinitiv.
As of 1 January 2020, the Group's Post Trade businesses, which
are currently reported separately as LCH and Post Trade Italy, will
be aligned, in a manner consistent with the necessary regulatory
oversight, into one Post Trade Division. Daniel Maguire, CEO, LCH
Group will lead the division as Group Director, Post Trade, LSEG in
addition to his current responsibilities. The Post Trade Division
will include LCH Group, our Italian post trade businesses Monte
Titoli and CC&G, and UnaVista, our trade reporting business
that currently reports as part of the Information Services
Division. The new Division will ensure greater Group-wide
collaboration and aim to facilitate coordination amongst the
different businesses with a view to developing commercial
activities for the benefit of customers. We will continue to
operate all our businesses on an open access basis in partnership
with customers and stakeholders. The current local legal entity
governance, including decision-making processes and reporting
lines, will be unchanged.
Separately, today LSEG announced that David Warren, Group CFO
has informed the Group of his intention to retire from the company
and step down from the Board by the end of 2020. David will
continue in his current roles through the close of the Refinitiv
transaction to ensure a smooth transition to his successor. LSEG
will undertake a global search, which will be led by the Board's
Nomination Committee.
Further information is available from:
+44 (0) 20 7797
Gavin Sullivan/Lucie Holloway 1222
London Stock Exchange - Media +44 (0) 20 7797
Group plc Paul Froud - Investor Relations 3322
The Group will host a conference call for analysts and investors
today, Friday 18 October 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/1079764
-- 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.
Q3 Revenue Summary
Revenues for three months and nine months ended 30 September
2019 refer to continuing operations, with comparatives against
performance for the same period last year, are provided below.
Growth rates for both Q3 and year to date performance are also
expressed on a constant currency basis. Income in all periods is on
an organic basis as there has been no inorganic income. All figures
are unaudited.
Three months Nine months
ended Constant ended Constant
30 September currency 30 September currency
--------------- ----------------
2019 2018 Variance variance 2019 2018 Variance variance
Continuing operations: GBPm GBPm % % GBPm GBPm % %
Revenue
Information Services 230 212 9% 5% 671 624 8% 4%
Post Trade Services -
LCH 144 120 20% 19% 410 357 15% 14%
Post Trade Services -
CC&G and Monte Titoli 27 25 8% 6% 78 77 2% 2%
Capital Markets 102 89 14% 14% 328 305 8% 8%
Technology Services 16 16 2% 1% 46 48 (3%) (5%)
Other 2 2 - - 6 7 - -
----------------------------- ------- ------ --------- ---------- ------- ------- --------- ----------
Total revenue 521 464 12% 10% 1,539 1,418 9% 7%
Net treasury income through
CCP businesses 65 57 15% 13% 185 160 16% 14%
Other income 1 1 - - 3 4 - -
---------
Total income 587 522 12% 10% 1,727 1,582 9% 7%
----------------------------- ------- ------ --------- ---------- ------- ------- --------- ----------
Cost of sales (58) (57) 2% - (167) (163) 3% 1%
Gross profit 529 465 14% 11% 1,560 1,419 10% 8%
----------------------------- ------- ------ --------- ---------- ------- ------- --------- ----------
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.
More detailed revenues by segment are provided in tables
below:
Information Services
Three months Nine months
ended Constant ended Constant
30 September currency 30 September currency
------------------------------------------ ---------------
2019 2018 Variance variance 2019 2018 Variance variance
GBPm GBPm % % GBPm GBPm % %
Revenue
Index - Subscription 108 94 15% 10% 311 279 12% 7%
Index - Asset based 61 59 3% (1%) 173 164 6% 1%
----------------------------- ----- ----- --------- --------- ------- ------ --------- -----------
FTSE Russell Indexes 169 153 10% 5% 484 443 9% 5%
----------------------------- ----- ----- --------- --------- ------- ------ --------- -----------
Real time data 24 23 4% 4% 72 70 4% 4%
Other information services 37 36 4% 2% 115 111 3% 2%
Total revenue 230 212 9% 5% 671 624 8% 4%
----------------------------- ----- ----- --------- --------- ------- ------ --------- -----------
Cost of sales (20) (17) 16% 11% (56) (52) 9% 4%
----- ----- ------- ------
Gross profit 210 195 8% 4% 615 572 7% 4%
----------------------------- ----- ----- --------- --------- ------- ------ --------- -----------
Post Trade Services - LCH
Three months Nine months
ended Constant ended Constant
30 September currency 30 September currency
--------------- ---------------
2019 2018 Variance variance 2019 2018 Variance variance
GBPm GBPm % % GBPm GBPm % %
Revenue
OTC - SwapClear, ForexClear
& CDSClear 80 65 22% 20% 228 196 17% 15%
Non-OTC - Fixed income,
Cash equities and Listed
derivatives 36 34 6% 5% 104 101 3% 3%
Other 28 21 38% 36% 78 60 29% 28%
------- ------ --------- --------- ------- ------ --------- ---------
Total revenue 144 120 20% 19% 410 357 15% 14%
----------------------------- ------- ------ --------- --------- ------- ------ --------- ---------
Net treasury income 53 46 16% 14% 149 128 16% 14%
Other income - - - - - - - -
Total income 197 166 19% 17% 559 485 15% 14%
----------------------------- ------- ------ --------- --------- ------- ------ --------- ---------
Cost of sales (33) (31) 6% 5% (93) (83) 12% 12%
------- ------ ------- ------
Gross profit 164 135 22% 20% 466 402 16% 14%
----------------------------- ------- ------ --------- --------- ------- ------ --------- ---------
Post Trade Services - CC&G and Monte Titoli
Three months Nine months
ended Constant ended Constant
30 September currency 30 September currency
--------------- ---------------
2019 2018 Variance variance 2019 2018 Variance variance
GBPm GBPm % % GBPm GBPm % %
Revenue
Clearing 11 10 16% 14% 33 31 5% 5%
Settlement, Custody &
other 16 15 3% 2% 45 46 (1%) (0%)
Total revenue 27 25 8% 6% 78 77 2% 2%
----------------------- ------- ------ --------- --------- ------- ------ --------- ---------
Net treasury income 12 11 10% 8% 36 32 13% 13%
Total income 39 36 8% 7% 114 109 5% 5%
----------------------- ------- ------ --------- --------- ------- ------ --------- ---------
Cost of sales (2) (2) (11%) (11%) (5) (5) 4% 4%
------- ------ ------- ------
Gross profit 37 34 9% 8% 109 104 5% 5%
----------------------- ------- ------ --------- --------- ------- ------ --------- ---------
Capital Markets
Three months Nine months
ended Constant ended Constant
30 September currency 30 September currency
--------------- ---------------
2019 2018 Variance variance 2019 2018 Variance variance
GBPm GBPm % % GBPm GBPm % %
Revenue
Primary Markets(1 2) 30 20 53% 53% 120 83 45% 46%
Secondary Markets - Equities 39 39 (2%) (2%) 113 128 (12%) (12%)
Secondary Markets - Fixed
income, derivatives and
other 33 30 10% 9% 95 94 1% 1%
Total revenue 102 89 14% 14% 328 305 8% 8%
------------------------------ ------- ------ --------- --------- ------- ------ --------- ---------
Cost of sales (1) (4) (67%) (68%) (4) (13) (68%) (68%)
------- ------ ------- ------
Gross profit 101 85 18% 18% 324 292 11% 11%
------------------------------ ------- ------ --------- --------- ------- ------ --------- ---------
(1) Primary Markets 2018 Q3 on a like-for-like basis would be
GBP8 million higher than reported relating to the adoption of IFRS
15. The nine-month impact for 2018 was GBP9 million
(2) Primary Markets 2019 Q3 YTD includes a one-off change in
estimate for IFRS 15 accounting, with an impact of GBP32 million,
recognised in H1 2019
Technology Services
Three months Nine months
ended Constant ended Constant
30 September currency 30 September currency
---------------- ---------------
2019 2018 Variance variance 2019 2018 Variance variance
Revenue GBPm GBPm % % GBPm GBPm % %
MillenniumIT & other technology 16 16 2% 1% 46 48 (3%) (5%)
--------------------------------- ------- ------- --------- --------- ------- ------ --------- ----------
Cost of sales (2) (2) (11%) (11%) (6) (8) (23%) (23%)
------- ------- ------- ------
Gross profit 14 14 4% 2% 40 40 - (1%)
--------------------------------- ------- ------- --------- --------- ------- ------ --------- ----------
Basis of Preparation
Results for the period ended 30 September 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
9 months ended Closing rate
at
30 September 30 September
2019 2019
---------------
GBP : EUR 1.13 1.12
---------------
GBP : USD 1.27 1.23
--------------- -------------
Average rate
9 months ended Closing rate
at
30 September 30 September
2018 2018
GBP : EUR 1.13 1.12
GBP : USD 1.35 1.30
--------------- -------------
Appendix - Key performance indicators
Information Services
As at
30 September Variance
------------------
2019 2018 %
ETF assets under management
benchmarked ($bn)
FTSE 423 396 7%
Russell Indexes 273 267 2%
----------------------------- ---------
Total 696 663 5%
----------------------------- -------- -------- ---------
Terminals
UK 65,000 68,000 (4%)
Borsa Italiana Professional
Terminals 100,000 107,000 (7%)
Post Trade Services -
LCH
Three months ended Nine months ended
30 September Variance 30 September Variance
--------------------- --------------------
2019 2018 % 2019 2018 %
OTC derivatives
SwapClear
IRS notional cleared
($tn) 337 236 43% 997 811 23%
SwapClear members 121 110 10% 121 110 10%
Client trades ('000) 472 332 42% 1,280 1,103 16%
CDSClear
Notional cleared (EURbn) 219 138 59% 567 463 22%
CDSClear members 26 15 73% 26 15 73%
ForexClear
Notional value cleared
($bn) 4,795 4,282 12% 13,561 12,946 5%
ForexClear members 34 32 6% 34 32 6%
------------------------------- ---------- --------- --------- --------- --------- ---------
Non-OTC
Fixed income - Nominal
value (EURtn) 28.0 25.2 11% 80.7 74.1 9%
Listed derivatives (contracts
m) 36.3 36.4 - 109.2 113.3 (4%)
Cash equities trades
(m) 179 179 - 526 593 (11%)
------------------------------- ---------- --------- --------- --------- --------- ---------
Average cash collateral
(EURbn) 103.8 86.2 20% 96.3 86.0 12%
Post Trade Services - CC&G and
Monte Titoli
Three months ended Nine months ended
30 September Variance 30 September Variance
--------------------- --------------------
2019 2018 % 2019 2018 %
CC&G Clearing
Contracts (m) 24.7 23.8 4% 74.7 86.3 (13%)
Initial margin held (average
EURbn) 15.1 12.0 26% 14.3 10.5 36%
Monte Titoli
Settlement instructions
(trades m) 10.3 10.3 - 31.7 34.3 (8%)
Custody assets under
management (average EURtn) 3.33 3.30 1% 3.31 3.30 -
Capital Markets - Primary
Markets
Three months ended Nine months ended
30 September Variance 30 September Variance
--------------------- --------------------
2019 2018 % 2019 2018 %
New Issues
UK Main Market, PSM &
SFM 13 17 (24%) 41 55 (25%)
UK AIM 5 13 (62%) 20 49 (59%)
Borsa Italiana 11 12 (8%) 26 25 4%
----------
Total 29 42 (31%) 87 129 (33%)
--------------------------- ---------- --------- --------- --------- --------- ---------
Money Raised (GBPbn)
UK New 1.0 2.0 (50%) 3.7 3.9 (5%)
UK Further 1.9 3.1 (39%) 12.7 13.8 (8%)
Borsa Italiana new and
further 0.1 0.6 (83%) 2.0 3.1 (35%)
Total (GBPbn) 3.0 5.7 (47%) 18.4 20.8 (12%)
--------------------------- ---------- --------- --------- --------- --------- ---------
Capital Markets - Secondary
Markets
Three months ended Nine months ended
30 September Variance 30 September Variance
---------------------------- --------------------
Equity 2019 2018 % 2019 2018 %
Totals for period
UK value traded (GBPbn) 309 329 (6%) 892 1,098 (19%)
Borsa Italiana (no of
trades m) 16.3 15.4 6% 47.4 54.8 (14%)
Turquoise value traded
(EURbn) 111 180 (38%) 423 644 (34%)
SETS Yield (basis points) 0.68 0.65 5% 0.69 0.63 10%
Average daily
UK value traded (GBPbn) 4.8 5.1 (6%) 4.7 5.8 (19%)
Borsa Italiana (no of trades
'000) 254 240 6% 249 288 (14%)
Turquoise value traded
(EURbn) 1.7 2.8 (39%) 2.2 3.4 (35%)
Derivatives (contracts
m)
LSE Derivatives 0.6 1.1 (45%) 2.2 5.2 (58%)
IDEM 7.2 7.5 (4%) 24.0 28.2 (15%)
Total 7.8 8.6 (9%) 26.2 33.4 (22%)
------------------------------ ------------------- ------- --------- --------- --------- -----------
Fixed Income
MTS cash and BondVision
(EURbn) 803 670 20% 2,453 2,558 (4%)
MTS money markets (EURbn
term adjusted) 31,759 21,134 50% 89,508 65,098 37%
Total Income - Quarterly
2018 2019
GBP millions Q1 Q2 Q3 Q4 2018 Q1 Q2 Q3
---------------- ---------------- ---------------- ---------------- ---------------- ----- -----
Index -
Subscription 89 96 94 94 373 99 104 108
Index - Asset
based 52 53 59 55 219 52 60 61
FTSE Russell 141 149 153 149 592 151 164 169
Real time
data 24 23 23 24 94 24 24 24
Other
information 36 39 36 44 155 39 39 37
-------------
Information
Services 201 211 212 217 841 214 227 230
OTC -
SwapClear,
ForexClear
& CDSClear 66 64 65 73 268 76 72 80
Non OTC -
Fixed
income,
Cash
equities &
Listed
derivatives 33 34 34 35 136 34 35 36
Other 19 21 21 22 83 24 25 28
------------- ---------------- ---------------- ---------------- ---------------- --------------- ---------------- ----- -----
Post Trade
Services -
LCH 118 119 120 130 487 134 132 144
Clearing 10 12 10 9 41 11 11 11
Settlement,
Custody &
other 18 12 15 16 61 14 15 16
------------- ---------------- ---------------- ---------------- ---------------- --------------- ---------------- ----- -----
Post Trade
Services -
CC&G
and Monte
Titoli 28 24 25 25 102 25 26 27
Primary
Markets 29 33 20 31 113 28 62 30
Secondary
Markets -
Equities 45 44 39 41 169 37 37 39
Secondary
Markets -
Fixed
income,
derivatives
& other 33 31 30 31 125 32 30 33
------------- ---------------- ---------------- ---------------- ---------------- --------------- ---------------- ----- -----
Capital
Markets 107 108 89 103 407 97 129 102
Technology 13 19 16 17 65 14 16 16
Other 3 2 2 2 9 2 2 2
Total Revenue 470 483 464 494 1,911 486 532 521
Net treasury
income
through
CCP:
CC&G 10 11 11 11 43 11 13 12
LCH 38 45 46 46 175 48 48 53
Other income 2 1 1 2 6 1 1 1
Total income 520 540 522 553 2,135 546 594 587
------------- ---------------- ---------------- ---------------- ---------------- --------------- ---------------- ----- -----
Cost of
sales (56) (50) (57) (64) (227) (56) (53) (58)
Gross profit 464 490 465 489 1,908 490 541 529
------------- ---------------- ---------------- ---------------- ---------------- --------------- ---------------- ----- -----
Note: Minor rounding differences may mean quarterly and other
segmental figures may differ slightly
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
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of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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