TIDMLSE
RNS Number : 5564W
London Stock Exchange Group PLC
02 August 2018
2 August 2018
LONDON STOCK EXCHANGE GROUP PLC
INTERIM RESULTS FOR THE 6 MONTHSED 30 JUNE 2018
Unless otherwise stated, all figures below refer to continuing
operations for the six months ended 30 June 2018. Comparative
figures are for continuing operations for the six months ended 30
June 2017 (H1 2017).
-- Strong financial performance - with double-digit revenue
growth in Information Services, LCH and Capital Markets
-- Revenue up 12% to GBP953 million (H1 2017: GBP853 million);
total income up 12% to GBP1,060 million (H1 2017: GBP946
million)
-- Adjusted operating profit(1) up 21% to GBP480 million (H1
2017: GBP398 million), with underlying operating expenses on an
organic and constant currency basis up 5% as the Group continues to
invest in growth and efficiencies
-- On a reported basis, operating profit up 29% to GBP393
million (H1 2017: GBP305 million); profit before tax up 30% to
GBP360 million (H1 2017: GBP277 million); profit after tax of
GBP283 million (H1 2017: GBP208 million)
-- Adjusted EPS(1) up 25% to 88.7 pence (H1 2017: 71.2 pence);
basic EPS up 41% to 71.1 pence (H1 2017: 50.4 pence)
-- Interim dividend increased 19% to 17.2 pence per share (H1
2017: 14.4 pence per share), in line with stated dividend
policy
-- Strong balance sheet position with leverage reduced to 1.6
times adjusted net debt: pro forma EBITDA
-- During the period, capital deployed for acquisitions,
including increasing stake in LCH Group to 68%; 100% ownership of
FTSE TMX; and c.16% minority stake in AcadiaSoft alongside organic
investment to capitalise on multiple growth opportunities
-- FTSE Russell integration of The Yield Book is on track,
delivering further expanded multi-asset index capabilities, data
and analytics
-- LCH continues global leadership with record clearing volume
at SwapClear, and successfully launched non-deliverable and SOFR
IRS. ForexClear launched options clearing
-- Group is well positioned to drive further growth as a diversified, global financial markets infrastructure business - operating on an open access basis in partnership with customers
David Schwimmer, Group CEO, said:
"I am delighted to join the Group, which continues to deliver
strong growth. The Group's strategy, based on an open access and
customer partnership approach, provides a great foundation for
further success. My immediate focus is to meet with colleagues,
customers, shareholders and other stakeholders, and to ensure we
continue our focus on driving operational excellence across LSEG as
I work with the executive team to develop the Group's many
opportunities ahead."
David Warren, Group CFO, said:
"The Group has delivered another strong performance, with growth
across all business areas. LCH has launched new products and set
new records for clearing levels in the SwapClear and ForexClear
services, while FTSE Russell has produced another good result.
Capital Markets performed well with increases in primary and
secondary markets activity. We are in a strong position as we work
to execute on our strategy and to meet our financial targets while
continuing to invest for further growth."
(1) before amortisation of purchased intangible assets and
non-underlying items
Organic growth is calculated in respect of businesses owned for
at least 6 months in either period and so excludes ISPS, The Yield
Book and Citi Fixed Income Indices, MillenniumIT ESP and Exactpro.
The Group's principal foreign exchange exposure arises from
translating our European based Euro and US based USD reporting
businesses into Sterling.
Figures are for the Group on a continuing basis so exclude
businesses classified as discontinued during 2017.
London Stock Exchange Group uses non-GAAP performance measures
as key financial indicators as the Board believes these better
reflect the underlying performance of the business. As in previous
years, adjusted operating expenses, adjusted operating profit,
adjusted profit before tax and adjusted earnings per share all
exclude amortisation and impairment of purchased intangibles assets
and goodwill and non-underlying items.
Further information is available from:
Gavin Sullivan / Lucie +44 (0) 20 7797 1222
Holloway / Ramesh Chhabra
London Stock Exchange - Media +44 (0) 20 7797
Group plc Paul Froud - Investor Relations 3322
Additional information on London Stock Exchange Group can be
found at www.lseg.com
The Group will host a conference call for analysts and
institutional shareholders today at 08:30am (UK time). On the call
to discuss the H1 results will be David Warren (CFO) and Paul Froud
(Head of Investor Relations).
To access the telephone conference call dial 0800 376 7922 or
+44 (0) 2071 928 000
Conference ID: 518 9224
For further information, please call the Group's Investor
Relations team on +44 (0) 20 7797 3322.
Group CEO statement
I am delighted to have started my position at London Stock
Exchange Group as of 1 August. I join a Group that has a strong
financial position as well as a proven strategy, underpinned by its
customer partnership approach, which is being executed by a highly
capable and experienced management team. I am excited by the many
opportunities for further growth, both organically and
inorganically, as we continue to execute and develop the
business.
My immediate priority in the coming weeks is to meet with
colleagues, customers, shareholders and other key stakeholders. I
intend to continue the focus on driving operational excellence
across the Group, and I will work with the executive team to
implement plans for further growth and value creation. I look
forward to sharing more thoughts in the future.
In the meantime, I would like to thank everyone at LSEG for the
hard work that has produced this strong set of half-year results,
and in particular, I would like to acknowledge David Warren's
leadership as Interim CEO over the period.
Group CFO statement
Overview of H1 results
The Group has delivered another strong set of results, with
growth across all business areas. The Group is well positioned as a
global financial infrastructure business, providing critical
services to clients around the world, based on a strategy with open
access and customer partnership at its centre.
During the period, we have continued to invest for growth as we
launch new products and drive further efficiencies across our
businesses. On a reported basis, total income increased 12%, while
operating expenses (before depreciation and amortisation) rose by
2%, with adjusted operating profit rising 21% to GBP480 million,
and adjusted EPS increasing 25% to 88.7 pence per share.
Underpinning the income growth were strong performances at FTSE
Russell and at LCH, with both businesses achieving the targeted
double-digit revenue growth rates. LCH delivered record notional
cleared volume at the SwapClear service, up 23% to $576 trillion,
and compression activity increased 24% at $388 trillion. The
ForexClear service also saw record clearing levels with $8.7
trillion cleared and 1.26 million trades, up by 79% and 87%
respectively. Capital Markets performed well, with good growth in
the period in Primary Markets, where issuance was strong, and in
Secondary Markets, with increased equities, derivatives and repo
trading.
Other selected developments:
- FTSE Russell acquired minority interests to assume 100%
ownership of FTSE TMX Global Debt Capital Markets Limited, further
strengthening its global fixed income capabilities, following the
acquisition of The Yield Book, where integration is on track
- LSEG increased its stake in LCH Group to 68%, acquiring an
additional 2% following a sale by a minority shareholder
- LSEG acquired c.16% minority stake in AcadiaSoft; LCH
SwapAgent and AcadiaSoft signed heads of terms agreement
- LCH SwapClear continues to expand its spread of currencies from 18 to 21, clearing its first non-deliverable interest rate swaps denominated in Chinese Yuan, Korean Won and Indian Rupee; and, in June, gained approval to clear for counterparties domiciled in Mexico
- LCH SwapClear launched Secured Overnight Financing Rate (SOFR) clearing
- LCH ForexClear launched clearing of FX options in early July 2018
- Capital Markets - Increase in the number of new issues, with
87 companies joining the Group's markets
- LSEG announced plans to expand the global footprint of Group's
shared services company, BSL, with the establishment a new Business
Services Centre in Romania
We remain in a strong financial position, with leverage reduced
to 1.6 times net debt to pro forma EBITDA, during a period in which
we have also continued to invest in projects to deliver additional
sales growth and to drive further operational efficiencies. In line
with the Group's stated progressive dividend policy, we have
increased the interim dividend by 19%, to 17.2 pence per share.
Further commentary on the Group's performance from continuing
operations in the six month period is provided below.
Operational Performance
Information Services, the Group's largest business segment by
revenue, delivered a 16% increase in revenue, to GBP412 million (up
9% on an organic and constant currency basis). FTSE Russell revenue
increased by 19% to GBP309 million, including contributions from
the Citi Fixed Income Indices and The Yield Book acquisition, and
was 9% higher on an organic and constant currency basis. ETF AUM
benchmarked to FTSE Russell indexes increased 22% to US$646 billion
and subscription revenues for access to indexes and data increased,
comprising c.65% of FTSE Russell revenues in H1. Revenue from other
information services grew 21%, with UnaVista benefitting from
increased demand for services following the introduction of MiFID
II, while revenue from real time data was 1% lower as the number of
terminals taking UK and Italian market data reduced. Cost of sales
on an organic and constant currency basis rose 8%, with 10% growth
in gross profit on an equivalent basis at GBP378 million.
Post Trade Services - LCH, the Group's majority-owned global
clearing business, produced an 18% increase in total income, to
GBP320 million (up 19% at constant currency). OTC clearing revenue
increased 16%, reflecting a strong performance at SwapClear, with
record clearing activity in terms of notional value cleared and
compressed, plus a 29% increase in the number of client trades
which account for c.50% of SwapClear's clearing revenue. Clearing
volumes at CDSClear and ForexClear also rose well, with notional
cleared value up 9% and 78%
respectively. Membership numbers for all three OTC services increased during the period.
Non-OTC products clearing revenue rose 2% (flat at constant
currency), reflecting an uplift in fixed income clearing, offset by
lower cash equities and derivatives clearing revenues. LCH net
treasury income (NTI) increased 47%. With average cash collateral
broadly unchanged at EUR86 billion, the increase in NTI is mainly
driven by higher USD returns through investment positions that have
benefitted from the USD rate environment, as well as a step change
from further extension of counterparties for placing investments.
While NTI is expected to remain strong in H2, absent from any
further rate rises, NTI may not reach the H1 levels. Cost of sales
for LCH rose 32%, reflecting the revenue share arrangements across
a number of the OTC clearing services, with a resulting 16%
increase in gross profit, at GBP267 million.
Total income for Post Trade Services in Italy, comprising
CC&G and Monte Titoli, decreased 2% to GBP73 million (down 5%
at constant currency). The headline decline reflects a change in
the reporting of settlement activity, with the revenues and cost of
sales for settlement through the T2S system now being netted,
amounting to GBP5 million in H1. As a result there is a reduction
in cost of sales, which reduced by 61%, with the result that gross
profit rose 5% to GBP70 million (up 3% at constant currency).
Clearing revenue rose 4% (up 2% at constant currency), reflecting
higher clearing volumes in Italian equities, derivatives and repo
markets. Settlement and custody revenue was down 12% on a reported
basis, but flat after adjusting for the reporting changes,
mentioned above. Assets under custody increased 2% to EUR3.30
trillion. Treasury income increased 9% to GBP21 million, with a
reduction in average initial margin held offset by higher spreads
over the period.
Capital Markets increased revenue by 13% (up 12% at constant
currency) while cost of sales rose by just 1%, resulting in a 14%
increase in gross profit to GBP206 million (up 13% on constant
currency). In Primary Markets, revenue rose 31%, with an increase
in number of new issues to 87 in the first half of the year (H1
2017: 81). In Secondary Markets, equities trading revenue increased
5%, with lower trading levels at Turquoise offset by increased
trading volume at Borsa Italiana and higher UK value traded, up 5%
and 13% respectively. Fixed income and derivatives trading revenue
increased 10%, reflecting higher trading volumes.
Technology Services revenue decreased 22% on a reported basis,
and up 18% on an organic and constant currency basis, principally
adjusting for the disposals of the MillenniumIT ESP business and
Exactpro.
Financial Summary
Unless otherwise stated, all figures below refer to continuing
operations for the six months ended 30 June 2018. Comparative
figures are for continuing operations for the six months ended 30
June 2017 (H1 2017). Variances are also provided on an organic and
constant currency basis.
Organic
and
Six months ended constant
30 June currency
-------------------------
2018 2017 Variance variance(1)
Continuing operations GBPm GBPm % %
------------------------------------------ ------ ------ --------- ------------
Revenue
Information Services (1) 412 355 16% 9%
Post Trade Services - LCH 237 207 14% 14%
Post Trade Services - CC&G and
Monte Titoli 52 55 (6%) (8%)
Capital Markets 215 190 13% 12%
Technology Services (1) 32 41 (22%) 18%
Other revenue 5 5 - -
------------------------------------------- ------ ------ --------- ------------
Total revenue 953 853 12% 11%
Net treasury income through CCP
businesses 104 75 38% 39%
Other income 3 18 - -
------------------------------------------- ------ ------ --------- ------------
Total income 1,060 946 12% 11%
Cost of sales (106) (102) 4% 13%
------------------------------------------- ------ ------ --------- ------------
Gross profit 954 844 13% 11%
Operating expenses before depreciation
and amortisation (407) (399) 2% 5%
Underlying depreciation and amortisation (64) (46) 39% 34%
------------------------------------------- ------ ------ --------- ------------
Total operating expenses (471) (445) 6% 8%
Share of loss after tax of associate (3) (1) - -
Adjusted operating profit (2) 480 398 21% 14%
------------------------------------------- ------ ------ --------- ------------
Add back underlying depreciation
and amortisation 64 46 39% 34%
------------
Earnings before interest, tax,
depreciation and amortisation 544 444 23% 16%
------ ------ --------- ------------
Profit on disposal of business - 5 - -
Amortisation of purchased intangible
assets and non-underlying items (87) (98) (11%) (10%)
Operating profit 393 305 29% 19%
------------------------------------------- ------ ------ --------- ------------
Earnings per share
Basic earnings per share (p) 71.1 50.4 41%
Adjusted basic earnings per share
(p) (2) 88.7 71.2 25%
Dividend per share (p) 17.2 14.4 19%
(1) Organic growth is calculated in respect of businesses owned
for at least 6 months in either period and so excludes ISPS, The
Yield Book and Citi Fixed Income Indices, MillenniumIT ESP and
Exactpro. The Group's principal foreign exchange exposure arises
from translating our European based Euro and US based USD reporting
businesses into Sterling
(2) before amortisation of purchased intangible assets and
non-underlying items
Note: Variances in all tables are calculated from underlying
numbers
The Group has performed well. Revenue increased 12% to GBP953
million (H1 2017: GBP853 million), and up 11% on an organic and
constant currency basis. As described in the operational
performance section above, many parts of the Group have delivered
good results, with strong contributions in particular from LCH and
Information Services. Total income rose 12% to GBP1,060 million (H1
2017: GBP946 million), and up 11% on an organic and constant
currency basis. Cost of sales increased 13% in underlying terms to
GBP106 million, (up 4% as reported) primarily as a result of the
growth in LCH and FTSE Russell, with gross profit increasing 13% to
GBP954 million (H1 2017: GBP844 million).
Operating expenses excluding depreciation and amortisation rose
by 2% on a reported basis and were 5% higher on an organic and
constant currency basis. Underlying depreciation and amortisation
at GBP64 million is 39% higher than last year, reflecting
investments in previous periods. The Group is continuing to invest
in new products and efficiency projects, to increase sales and to
develop our infrastructure. Due to the phasing of spend during the
year, operating expenses (including depreciation and amortisation)
in the second half of the year are likely to be c.GBP25-30 million
higher than H1.
Adjusted operating profit for the period, before amortisation of
purchased intangible assets and non-underlying items, increased 21%
to GBP480 million (H1 2017: GBP398 million). Operating profit also
increased by 29%, to GBP393 million (H1 2017: GBP305 million).
Net finance costs were GBP33 million (H1 2017: GBP28 million)
reflecting higher year on year average borrowings in the period
following the acquisition of the Citi Fixed Income Indices and The
Yield Book business in August 2017. Profit before tax was GBP360
million (H1 2017: GBP277 million). The underlying effective Group
tax rate for the period (excluding prior year and one-off
adjustments) was 23.0% (year ended 31 December 2017: 23.4%).
Adjusted basic EPS, before amortisation of purchased intangible
assets and non-recurring items, increased 25% to 88.7 pence (H1
2017: 71.2 pence) while basic EPS was 71.1 pence (H1 2017: 50.4
pence).
Net cash inflow from operating activities was GBP287 million (H1
2017: GBP261 million), the increase reflecting stronger cash
generation from operating activities. Capital expenditure in the
period amounted to GBP90 million, (H1 2017: GBP88 million). Looking
ahead, we expect capex to run at a slightly higher level in H2 as
we continue to invest in further product development and projects
to help scale-up our business. Net cash generated after capex,
other investing activities and dividends, was GBP28 million (H1
2017: GBP79 million). Free cash flow per share on the same basis
was 56.6 pence (30 June 2017: 59.4 pence).
During the period the Group commenced issuance under its GBP1
billion commercial paper programme in order to further diversify
its funding sources and reduce its cost of borrowing. At 30 June
2018 EUR200 million was in issuance. The commercial paper is backed
up by a GBP600 million multi-currency, committed swingline facility
- available also for general corporate purposes. Committed undrawn
credit lines available to the Group, after considering the euro
commercial paper programme issuances, at 30 June 2018 totalled over
GBP720 million, extending out to 2022.
At 30 June 2018, operating net debt had decreased to GBP1,627
million (after setting aside GBP1,005 million of cash for
regulatory and operational support purposes), with cash generated
by the business effectively funding the investment activities
highlighted above as well as the regular debt servicing and
dividend payments. Operating net debt: pro forma EBITDA reduced to
1.6 times (from 1.7 times at 31 December 2017), reflecting the
continued strong organic cash generation during the period,
partially offset by further organic and inorganic investment by the
Group.
During the period, Standard & Poor's maintained its long
term ratings of LSEG at A- and of LCH Limited and LCH SA at A+, but
improved the outlooks to positive from stable for all three rated
entities. Moody's maintained its A3 rating of LSEG with a stable
outlook. The Group had net assets of GBP3,908 million at 30 June
2018 (31 December 2017: GBP3,752 million), including GBP1,299
million in cash and cash equivalents (31 December 2017: GBP1,381
million).
The Group's principal foreign exchange exposure arises as a
result of translating and revaluing its foreign currency earnings,
assets and liabilities into LSEG's reporting currency of Sterling.
For the 6 months to 30 June 2018, the main translation exposures
for the Group were its Euro reporting businesses (accounting for
31% of Group income and 29% of Group expenses) and its US dollar
reporting businesses (accounting for 27% of income and 16% of
expenses). A 10 cent movement in the average GBP/EUR rate for the
six months and a 10 cent movement in the average GBP/US$ rate for
the six months would have changed the Group's operating profit for
the period before amortisation of purchased intangible assets and
non-recurring items by approximately GBP14 million in each event.
The Group continues to manage its translation risk exposure by
matching the currency of its debt (including debt effectively
issued in one currency and swapped into a different currency) to
the currency of its earnings, where possible, to ensure its key
financial ratios are protected from material foreign exchange rate
volatility.
Interim Dividend
In line with the Group's dividend policy, the interim dividend
is calculated as one-third of the prior full year dividend.
Accordingly, the Directors have declared an interim dividend of
17.2 pence per share, an increase of 19% (H1 2017: 14.4 pence per
share). The interim dividend will be paid on 18 September 2018 to
shareholders on the register on 24 August 2018.
Board of Directors
David Schwimmer was appointed as Group Chief Executive Officer,
joining the LSEG Board as an executive director on 1 August
2018.
Outlook
The Group has delivered a strong financial performance in H1,
with revenue growth across our businesses as we invest further to
drive further sales growth and operating efficiencies. We remain
well positioned in an evolving regulatory and macroeconomic
environment and remain focused on achieving the 2019 financial
targets.
David Warren (Group CFO and Interim CEO during period)
2 August 2018
Operating Performance - Key statistics
To assist investors in understanding the underlying performance
of the Group, percentage changes are also presented on an organic
and constant currency basis.
Information Services
The Information Services division consists of global indices
products, real time data products and a number of other discrete
businesses including trade processing operations, desktop and work
flow products.
Organic
and
Six months ended constant
30 June currency
-------------------
2018 2017 Variance variance(1)
GBPm GBPm % %
Revenue
FTSE Russell Indexes 309 261 19% 9%
Real time data 47 47 (1%) (2%)
Other information services 56 47 21% 25%
Total revenue 412 355 16% 9%
---------------------------- --------- -------- --------- ------------
Cost of sales (34) (30) 15% 8%
--------- --------
Gross profit 378 325 16% 10%
---------------------------- --------- -------- --------- ------------
(1) Excludes The Yield Book and Citi Fixed Income Indices
(acquired Q3 2017) from FTSE Russell Indexes and ISPS from Other
information services (disposed Q1 2017)
As at
30 June Variance
------------------
2018 2017 %
ETF assets under management
benchmarked ($bn)
FTSE 387 315 23%
Russell Indexes 259 215 20%
----------------------------- ---------
Total 646 530 22%
----------------------------- -------- -------- ---------
Terminals
UK 68,000 70,000 (3%)
Borsa Italiana Professional
Terminals 109,000 127,000 (14%)
Post Trade Services - LCH
This LCH division comprises the Group's majority owned global
clearing business.
Six months ended Constant
30 June currency
-------------------
2018 2017 Variance variance
GBPm GBPm % %
Revenue
OTC - SwapClear, ForexClear
& CDSClear 130 112 16% 17%
Non OTC - Fixed income,
Cash equities & Listed
derivatives 67 66 2% 0%
Other 40 29 38% 37%
--------- --------
Total revenue 237 207 14% 14%
----------------------------- --------- -------- --------- ---------
Net treasury income 83 56 47% 51%
Other income (1) - 7 - -
Total income 320 270 18% 19%
----------------------------- --------- -------- --------- ---------
Cost of sales (1) (53) (40) 32% 29%
--------- --------
Gross profit 267 230 16% 17%
----------------------------- --------- -------- --------- ---------
(1) Pass through of LIBOR data fees Cost of sales have now been
netted off against Other income, 2018 H1 impact GBP5m
Six months ended
30 June Variance
-------------------
2018 2017 %
OTC derivatives
SwapClear
IRS notional cleared
($tn) 576 468 23%
SwapClear members 109 106 3%
Client trades ('000) 785 610 29%
CDSClear
Notional cleared (EURbn) 325 298 9%
CDSClear members 14 13 8%
ForexClear
Notional value cleared
($bn) 8,664 4,847 79%
ForexClear members 32 27 19%
------------------------------- --------- -------- ---------
Non-OTC
Fixed income - Nominal
value (EURtn) 48.9 42.9 14%
Listed derivatives (contracts
m) 81.9 76.4 7%
Cash equities trades
(m) 414 419 (1%)
------------------------------- --------- -------- ---------
Average cash collateral
(EURbn) 85.9 86.5 (1%)
Post Trade Services - CC&G and Monte Titoli
This division comprises the Group's Italian-based clearing,
settlement and custody businesses.
Six months ended Constant
30 June currency
-------------------
2018 2017 Variance variance
GBPm GBPm % %
Revenue
Clearing 22 21 4% 2%
Settlement, Custody &
other (1) 30 34 (12%) (15%)
Total revenue 52 55 (6%) (8%)
----------------------- --------- -------- --------- ---------
Net treasury income 21 19 9% 6%
Total income 73 74 (2%) (5%)
----------------------- --------- -------- --------- ---------
Cost of sales (1) (3) (8) (61%) (63%)
--------- --------
Gross profit 70 66 5% 3%
----------------------- --------- -------- --------- ---------
(1) Pass through of T2S costs, Cost of sales have now been
netted off against Settlement, Custody & other, 2018 H1 impact
GBP5m
Six months ended
30 June Variance
-------------------
2018 2017 %
CC&G Clearing
Contracts (m) 62.5 60.1 4%
Initial margin held (average
EURbn) 9.7 12.8 (24%)
Monte Titoli
Settlement instructions
(trades m) 23.9 22.9 4%
Custody assets under
management (average EURtn) 3.30 3.24 2%
Capital Markets
Capital Markets comprises the Group's Primary Markets
activities, providing access to capital for corporates and others,
and the Secondary Market trading of cash equities, derivatives and
fixed income.
Six months ended Constant
30 June currency
-------------------
2018 2017 Variance variance
GBPm GBPm % %
Revenue
Primary Markets 62 48 31% 30%
Secondary Markets - Equities 89 84 5% 5%
Secondary Markets - Fixed
income, derivatives and
other 64 58 10% 9%
Total revenue 215 190 13% 12%
------------------------------ --------- -------- --------- ---------
Cost of sales (9) (9) 1% 1%
--------- --------
Gross profit 206 181 14% 13%
------------------------------ --------- -------- --------- ---------
Capital Markets - Primary
Markets
Six months ended
30 June Variance
-------------------
2018 2017 %
New Issues
UK Main Market, PSM &
SFM 38 42 (10%)
UK AIM 36 28 29%
Borsa Italiana 13 11 18%
---------
Total 87 81 7%
--------------------------- --------- -------- ---------
Money Raised (GBPbn)
UK New 1.9 2.4 (21%)
UK Further 10.8 8.4 29%
Borsa Italiana new and
further 2.3 12.2 (81%)
Total (GBPbn) 15.0 23.0 (35%)
--------------------------- --------- -------- ---------
Capital Markets - Secondary
Markets
Six months ended
30 June Variance
-------------------
Equity 2018 2017 %
Totals for period
UK value traded (GBPbn) 769 683 13%
Borsa Italiana (no of
trades m) 39.4 37.5 5%
Turquoise value traded
(EURbn) 464 556 (17%)
SETS Yield (basis points) 0.62 0.63 (2%)
Average daily
UK value traded (GBPbn) 6.2 5.5 13%
Borsa Italiana (no of
trades '000) 312 295 6%
Turquoise value traded
(EURbn) 3.7 4.4 (16%)
Derivatives (contracts
m)
LSE Derivatives 4.1 3.2 28%
IDEM 20.7 20.4 1%
Total 24.8 23.6 5%
--------------------------- --------- -------- ---------
Fixed Income
MTS cash and BondVision
(EURbn) 1,888 1,902 (1%)
MTS money markets (EURbn
term adjusted) 43,964 41,355 6%
Technology Services
Technology Services comprises technology connections and data
centre services for clients of London Stock Exchange and Borsa
Italiana, plus the MillenniumIT software business, based in Sri
Lanka, which provides technology for the Group as well as third
party sales.
Organic
and
Six months ended Constant
30 June currency
-------------------
2018 2017 Variance variance(1)
Revenue GBPm GBPm % %
MillenniumIT & other technology 32 41 (22%) 18%
--------------------------------- --------- -------- --------- ------------
Cost of sales (5) (13) (57%) 93%
--------- -------- --------- ------------
Gross profit 27 28 (6%) 10%
--------------------------------- --------- -------- --------- ------------
(1) Excludes MillenniumIT ESP and Exactpro (disposed Q4 2017 and
Q1 2018)
Basis of Preparation
Results for the European and US businesses have been translated
into Sterling using the exchange rates set out below. 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
6 months ended at 6 months ended at
30 June 2018 30 June 2018 30 June 2017 30 June 2017
GBP : EUR 1.14 1.13 1.16 1.14
GBP : USD 1.38 1.32 1.26 1.30
--------------- ------------- --------------- -------------
Condensed CONSOLIDATED Income Statement
Six months ended 30
June 2017
Six months ended 30 June
2018 (Unaudited) (Unaudited)
--------------------------------- ---------------------------------
Underlying Non-underlying Underlying Non-underlying
items items Total items items Total
GBPm GBPm GBPm GBPm GBPm GBPm
(See note (See note
Notes 5) 5)
Continuing operations
--------------------------------- ----- ---------- -------------- ----- ---------- -------------- -----
Revenue 3 953 - 953 853 - 853
Net treasury income
through CCP business 3 104 - 104 75 - 75
Other income 3 3 - 3 18 - 18
--------------------------------- ----- ---------- -------------- ----- ---------- -------------- -----
Total income 1,060 - 1,060 946 - 946
Cost of sales 3 (106) - (106) (102) - (102)
Gross profit 954 - 954 844 - 844
Expenses
Operating expenses
before depreciation
and amortisation 4 (407) (10) (417) (399) (24) (423)
Profit on disposal
of business - - - - 5 5
Share of loss after
tax of associates (3) - (3) (1) - (1)
Earnings before interest,
tax, depreciation
and amortisation 544 (10) 534 444 (19) 425
Depreciation and amortisation 4 (64) (77) (141) (46) (74) (120)
Operating profit/(loss) 3 480 (87) 393 398 (93) 305
Finance income 6 - 6 4 - 4
Finance expense (39) - (39) (32) - (32)
---------- -------------- ----- ---------- -------------- -----
Net finance expense 6 (33) - (33) (28) - (28)
--------------------------------- ----- ---------- -------------- ----- ---------- -------------- -----
Profit/(loss) before
tax from continuing
operations 447 (87) 360 370 (93) 277
Taxation 7 (101) 24 (77) (88) 19 (69)
--------------------------------- ----- ---------- -------------- ----- ---------- -------------- -----
Profit/(loss) for
the financial period
from continuing operations 346 (63) 283 282 (74) 208
--------------------------------- ----- ---------- -------------- ----- ---------- -------------- -----
Discontinued operations
Loss after tax for
the period from discontinued
operations 8 - - - - (22) (22)
--------------------------------- ----- ---------- -------------- ----- ---------- -------------- -----
Profit/(loss) for
the financial period 346 (63) 283 282 (96) 186
--------------------------------- ----- ---------- -------------- ----- ---------- -------------- -----
Profit/(loss) attributable
to:
Equity holders
Profit/(loss) for
the period from continuing
operations 307 (61) 246 247 (72) 175
Loss for the period
from discontinued
operations 8 - - - - (22) (22)
--------------------------------- ----- ---------- -------------- ----- ---------- -------------- -----
307 (61) 246 247 (94) 153
--------------------------------- ----- ---------- -------------- ----- ---------- -------------- -----
Non-controlling interests
Profit/(loss) from
continuing operations
attributable to non-controlling
interests 39 (2) 37 35 (2) 33
Loss from discontinued
operations attributable
to non-controlling
interests 8 - - - - - -
--------------------------------- ----- ---------- -------------- ----- ---------- -------------- -----
39 (2) 37 35 (2) 33
--------------------------------- ----- ---------- -------------- ----- ---------- -------------- -----
346 (63) 283 282 (96) 186
--------------------------------- ----- ---------- -------------- ----- ---------- -------------- -----
Earnings per share
attributable to equity
holders
Basic earnings per
share 9 71.1p 44.1p
Diluted earnings per
share 9 69.7p 43.2p
Adjusted basic earnings
per share 9 88.7p 71.2p
Adjusted diluted earnings
per share 9 87.0p 69.8p
Earnings per share
for continuing operations
attributable to equity
holders
Basic earnings per
share 9 71.1p 50.4p
Diluted earnings per
share 9 69.7p 49.4p
Adjusted basic earnings
per share 9 88.7p 71.2p
Adjusted diluted earnings
per share 9 87.0p 69.8p
Dividend per share
in respect of the
financial period
Dividend per share
paid during the period 10 37.2p 31.2p
Dividend per share
declared for the period 10 17.2p 14.4p
--------------------------------- ----- ---------- -------------- ----- ---------- -------------- -----
Condensed CONSOLIDATED STATEMENT of comprehensive income
Six months ended 30
June
----------------------------
2018 2017
Unaudited Unaudited
(re-presented)(1)
GBPm GBPm
---------------------------------------------------- --------- -----------------
Profit for the financial period 283 186
Other comprehensive income/(loss):
Items that will not be subsequently reclassified
to profit or loss
Defined benefit pension scheme remeasurement
gain 31 11
Income tax relating to items that will not
be subsequently reclassified to profit or
loss (8) (4)
------------------------------------------------------ --------- -----------------
23 7
---------------------------------------------------- --------- -----------------
Items that may be subsequently reclassified
to profit or loss
Net investment hedges 4 (8)
Exchange gain/(loss) on translation of foreign
operations 38 (15)
Investments in debt instruments at fair value
through other comprehensive income:
- Net (losses)/gains from changes in fair
value (29) 6
- Net gains reclassified to the consolidated
income statement on disposal - (1)
Net gains reclassified to the consolidated
income statement on disposal of equity instruments
under IAS 39 - (7)
Income tax relating to items to be subsequently
reclassified to profit or loss 9 -
22 (25)
---------------------------------------------------- --------- -----------------
Other comprehensive income/(loss), net of
tax 45 (18)
------------------------------------------------------ --------- -----------------
Total comprehensive income for the financial
period 328 168
------------------------------------------------------ --------- -----------------
Attributable to non-controlling interests 35 45
Attributable to equity holders 293 123
------------------------------------------------------ --------- -----------------
Total comprehensive income for the financial
period 328 168
------------------------------------------------------ --------- -----------------
(1) The comparatives have been re-presented to disclose fair value
gains on investments in equity and debt instruments separately.
Condensed CONSOLIDATED balance sheet
30 June 31 December
2018 2017
Unaudited (revised)(1)
Notes GBPm GBPm
------------------------------------------- ------- --------- ------------
Assets
Non-current assets
Property, plant and equipment 127 129
Intangible assets 11 4,604 4,589
Investment in associates 27 5
Deferred tax assets 41 38
Derivative financial instruments 12 8 4
Investments in financial assets 12 30 86
Retirement benefit assets 72 56
Other non-current receivables 12, 13 60 55
------------------------------------------- ------- --------- ------------
4,969 4,962
------------------------------------------- ------- --------- ------------
Current assets
Trade and other receivables 12, 13 792 689
Derivative financial instruments 12 1 -
CCP financial assets 741,803 673,354
CCP cash and cash equivalents (restricted) 73,340 61,443
--------- ------------
CCP clearing business assets 12 815,143 734,797
Current tax 129 126
Investments in financial assets 12 62 19
Cash and cash equivalents 12 1,299 1,381
------------------------------------------- ------- --------- ------------
817,426 737,012
------------------------------------------- ------- --------- ------------
Assets held for sale 8 - 6
------------------------------------------- ------- --------- ------------
Total assets 822,395 741,980
------------------------------------------- ------- --------- ------------
Liabilities
Current liabilities
Trade and other payables 12, 14 785 598
CCP clearing business liabilities 12 815,125 734,981
Current tax 108 70
Borrowings 12, 15 475 522
Provisions 1 1
------------------------------------------- ------- --------- ------------
816,494 736,172
Non-current liabilities
Borrowings 12, 15 1,428 1,431
Derivative financial instruments 12 27 29
Deferred tax liabilities 490 502
Retirement benefit obligations 16 36
Other non-current payables 12, 14 23 49
Provisions 9 9
------------------------------------------- ------- --------- ------------
1,993 2,056
Total liabilities 818,487 738,228
------------------------------------------- ------- --------- ------------
Net assets 3,908 3,752
------------------------------------------- ------- --------- ------------
Equity
Capital and reserves attributable to the
Company's equity holders
Ordinary share capital 24 24
Share premium 964 964
Retained earnings 570 419
Other reserves 1,864 1,820
------------------------------------------- ------- --------- ------------
Total shareholders' funds 3,422 3,227
------------------------------------------- ------- --------- ------------
Non-controlling interests 486 525
------------------------------------------- ------- --------- ------------
Total equity 3,908 3,752
------------------------------------------- ------- --------- ------------
(1) The 31 December 2017 comparatives have been revised for IFRS
3 fair value adjustments on the acquisition of the Yield Book
business.
Condensed CONSOLIDATED cash flow statement
Six months ended 30
June
----------------------
2018 2017
Unaudited Unaudited
Notes GBPm GBPm
------------------------------------------------- ----- ---------- ----------
Cash flow from operating activities
Cash generated from operations (1) 17 375 357
Interest received 1 3
Interest paid (30) (37)
Corporation tax paid (60) (59)
Withholding tax received/(paid) 1 (3)
Net cash inflow from operating activities 287 261
-------------------------------------------------- ----- ---------- ----------
Cash flow from investing activities
Purchase of property, plant and
equipment (14) (27)
Proceeds from disposal of property,
plant and equipment - 5
Purchase of intangible assets (76) (61)
Net receipt/(payment) on sale of
a disposal group 8 27 (2)
Acquisition of business, net of
cash acquired 18 3 (118)
Investment in associates (2) (27) -
Investment in government bonds (1) (3) -
Proceeds from divestment of government
bonds (1) - 14
Cash disposed on sale of a subsidiary 8 (2) -
5,
Proceeds from disposal of businesses 8 1 9
Proceeds from disposal of investments
in financial instruments - 7
Net cash outflow from investing
activities (91) (173)
-------------------------------------------------- ----- ---------- ----------
Cash flow from financing activities
Dividends paid to shareholders 10 (129) (109)
Dividends paid to non-controlling
interests (39) (18)
Purchase of treasury shares relating
to share buyback - (98)
Acquisition of non-controlling interests
(3) (70) -
Redemption of preferred securities - (155)
Proceeds from own shares on exercise
of employee share options 3 1
Purchase of own shares by the employee
benefit trust (4) (5)
Repayments of finance lease (2) -
Proceeds from the issue of commercial
paper 15 176 -
Additional drawdowns from bank facilities
(4) - 296
Repayments made to bank facilities
(4) (227) -
-------------------------------------------------- ----- ---------- ----------
Net cash outflow from financing
activities (292) (88)
-------------------------------------------------- ----- ---------- ----------
Decrease in cash and cash equivalents (96) -
Cash and cash equivalents at beginning of
period from continuing operations 1,381 1,151
Cash and cash equivalents at beginning of
period classified as held for sale 1 -
Exchange gain on cash and cash equivalents 13 19
Cash and cash equivalents at end
of period 1,299 1,170
-------------------------------------------------- ----- ---------- ----------
(1) Investments in financial assets have been reclassified from
net cash flow generated from operations to cash flow from investing
activities. Cash flows arising on financial assets are now presented
within investment in government bonds. There is no impact to cash
and cash equivalents at the end of the period as a result of this
change.
(2) During the period, the Group acquired 15.7% equity interest
in AcadiaSoft Inc., an industry provider for margin automation,
risk optimisation and standards for collateral counterparties for
a consideration of GBP16m. A further GBP11m was invested in Curve
Global Limited.
(3) Acquisition of non-controlling interests includes further investments
by the Group in LCH Group Holdings Limited of GBP31m and FTSE Global
Debt Capital Markets Limited of GBP39m.
(4) Within cash from financing activities, the prior year net amount
of receipts and repayments of borrowings has been re-presented
to show the gross cash flows.
Group cash flow does not include cash and cash equivalents held
by the Group's Post Trade operations on behalf of its clearing
members for use in its operation as manager of the clearing and
guarantee system. These balances represent margins and default
funds held for counterparties for short periods in connection with
this operation.
Condensed CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders
-------------------------------------------------------
Total
Ordinary attributable
share Share Retained Other to equity Non-controll- Total
capital premium earnings reserves holders -ing interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- -------- --------- --------- ------------- --------------- -------
31 December 2016 24 961 260 1,861 3,106 508 3,614
Profit for the period - - 153 - 153 33 186
Other comprehensive
income/(loss) for the
financial period - - 1 (31) (30) 12 (18)
Final dividend relating
to the year ended 31
December 2016 (Note
10) - - (109) - (109) - (109)
Dividend payments to
non-controlling interests - - - - - (18) (18)
Employee share scheme
expenses - - 14 - 14 - 14
Tax in relation to employee
share scheme expenses - - 6 - 6 1 7
Share buyback - - (200) - (200) - (200)
Disposal of business
(Note 8) - - - 31 31 - 31
30 June 2017 (Unaudited) 24 961 125 1,861 2,971 536 3,507
---------------------------- -------- -------- --------- --------- ------------- --------------- -------
31 December 2017 (as
previously presented) 24 964 419 1,820 3,227 525 3,752
Adoption of new accounting
standards (Note 2) - - 18 - 18 - 18
---------------------------- -------- -------- --------- --------- ------------- --------------- -------
1 January 2018 (restated) 24 964 437 1,820 3,245 525 3,770
Profit for the period - - 246 - 246 37 283
Other comprehensive
income/(loss) for the
financial period - - 3 44 47 (2) 45
Final dividend relating
to the year ended 31
December 2017 (Note
10) - - (129) - (129) - (129)
Dividend payments to
non-controlling interests - - - - - (42) (42)
Employee share scheme
expenses - - 19 - 19 - 19
Tax in relation to employee
share scheme expenses - - 4 - 4 - 4
Purchase of non-controlling
interest within acquired
subsidiary - - (10) - (10) (32) (42)
30 June 2018 (Unaudited) 24 964 570 1,864 3,422 486 3,908
---------------------------- -------- -------- --------- --------- ------------- --------------- -------
The other reserves are set out on page 113 of the Group's Annual
Report for the year ended 31 December 2017. The movement in the
current period includes a gain of GBP40m to the foreign exchange
reserves (30 June 2017: loss of GBP23m) and a gain of GBP4m to the
hedging reserve (30 June 2017: loss of GBP8m).
Purchase of non-controlling interests in the period relates to
the acquisition of shareholdings from non-controlling equity
holders in LCH Group Holdings Limited and FTSE Global Debt Capital
Markets Limited.
NOTES TO THE interim condensed consolidated financial
statements
The Interim Report for the London Stock Exchange Group plc (the
'Group' or the 'Company') for the six months ended 30 June 2018 was
approved by the Directors on 2 August 2018.
1. Basis of preparation and accounting policies
The interim condensed consolidated financial statements of
London Stock Exchange Group plc and its subsidiaries (collectively,
the 'Group') for the six months ended 30 June 2018 have been
prepared in accordance with the Disclosure and Transparency Rules
of the Financial Conduct Authority and with International
Accounting Standard 34 (IAS 34), 'Interim Financial Reporting' as
adopted by the European Union (EU).
The interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the
Group's annual consolidated financial statements for the year ended
31 December 2017.
The principal accounting policies adopted in the preparation of
these interim condensed consolidated financial statements are
consistent with those followed in the preparation of the Group's
annual consolidated financial statements for the year ended 31
December 2017, except for the adoption of new and amended standards
and interpretations set out below.
Comparative amounts presented for the condensed consolidated
balance sheet relate to the Group's position as at 31 December
2017. All other comparative amounts presented relate to the six
months ended 30 June 2017.
All notes to the financial statements include amounts for
continuing operations, unless otherwise stated.
The Company is a public company, incorporated and domiciled in
England and Wales. The address of its registered office is 10
Paternoster Square, London, EC4M 7LS.
The following standards and interpretations have been issued by
the International Accounting Standards Board (IASB) and IFRS
Interpretations Committee (IFRIC) and have been adopted by the
Group in these interim condensed consolidated financial
statements:
-- IFRS 15 'Revenue from Contracts with Customers', amendments and clarifications; and
-- IFRS 9 'Financial Instruments' and amendments.
The impact of adoption of these standards is explained further
in Note 2.
The following standards and amendments to standards and
interpretations have also been issued by the IASB and IFRIC,
endorsed by the EU and adopted by the Group; however the adoption
did not have a material impact on these interim condensed
consolidated financial statements:
-- Amendments to IAS 40, 'Transfers of Investment Property';
-- IFRIC 22, 'Foreign Currency Transactions and Advance Consideration';
-- Amendment to IFRS 2, 'Share-based Payment' on classification
and measurement of share-based payment transactions;
-- Amendment to IFRS 4, 'Insurance Contracts' regarding the
implementation of IFRS 9, 'Financial Instruments'; and
-- Annual improvements 2014-2016.
The following standards and interpretations were issued by the
IASB and IFRIC, but have not been adopted either because they were
not endorsed by the EU at 30 June 2018 or they are not yet
mandatory and the Group has not chosen to early adopt. The impact
on the Group's financial statements of the below future standards,
amendments and interpretations is still under review, and where
appropriate, a description of the impact of certain standards and
amendments is provided below:
International accounting standards and interpretations Effective date
------------------------------------------------------- ---------------
IFRIC 23, 'Uncertainty over Income Tax Treatments' 1 January 2019
IFRS 16, 'Leases' 1 January 2019
------------------------------------------------------- ---------------
IFRS 16 'Leases' will be effective for the year ended 31
December 2019 and requires that all contracts that convey the right
to control the use of an identified asset for a period of time in
return for consideration are required to be recognised on the
balance sheet, to the extent that the assets are individually
material. Currently, IAS 17 'Leases' only requires leases
categorised as finance leases to be recognised on the balance
sheet, with leases categorised as operating leases not recognised.
In broad terms, the impact will be to recognise a lease liability
and corresponding asset for the current operating lease
commitments.
The preparation of the interim condensed consolidated financial
statements requires management to make estimates and assumptions
that affect the reported income and expense, assets and liabilities
and disclosure of contingencies at the date of the interim
condensed consolidated financial statements. Although these
estimates and assumptions are based on management's best judgement
at the date of the interim condensed consolidated financial
statements, actual results may differ from these estimates.
The statutory financial statements of London Stock Exchange
Group plc for the year ended 31 December 2017, which carried an
unqualified audit report, have been delivered to the Registrar of
Companies and did not contain a statement under section 498 of the
Companies Act 2006.
The interim condensed consolidated financial statements are
unaudited but have been reviewed by the auditors and their review
opinion is in included in this report.
The interim condensed consolidated financial statements do not
constitute statutory financial statements within the meaning of
section 434 of the Companies Act 2006.
2. Adoption of new accounting standards and interpretations
On 1 January 2018, the Group adopted two new accounting
standards being IFRS 15 'Revenue from Contracts with Customers' and
IFRS 9 'Financial Instruments'. The impact of adopting the new
standards has been reflected through transition adjustments to the
Group's opening retained earnings at the start of the current
period, as presented in the condensed consolidated statement of
changes in equity. The table below provides a summary of the impact
at the date of transition:
Transition adjustments
As previously IFRS IFRS After
reported 15 9 adoption
31 December 1 January
2017 2018
Notes GBPm GBPm GBPm GBPm
---------------------------- ------ ------------- ---------- ------------ ---------
Intangible assets (revised) 11 4,589 12 - 4,601
Trade and other receivables 13 689 - 10 699
---------------------------- ------ ------------- ---------- ------------ ---------
Total assets 741,980 12 10 742,002
---------------------------- ------ ------------- ---------- ------------ ---------
Deferred tax liabilities 502 2 2 506
---------------------------- ------ ------------- ---------- ------------ ---------
Total liabilities 738,228 2 2 738,232
---------------------------- ------ ------------- ---------- ------------ ---------
Retained earnings 419 10 8 437
Total equity 3,752 10 8 3,770
---------------------------- ------ ------------- ---------- ------------ ---------
Further details on the impact of each of the new accounting
standards is provided below.
IFRS 15 Revenue from Contracts with Customers - impact of
adoption
On 1 January 2018, the Group adopted IFRS 15 'Revenue from
Contracts with Customers' (IFRS 15). This new accounting standard
requires the Group to recognise revenue when the Group transfers
promised goods or services to customers in an amount that reflects
the consideration to which the Group expects to be entitled in
exchange for those goods or services. The new guidance requires
more detailed revenue disclosures and policies to identify the
Group's performance obligations to customers.
The key area of judgement for the Group in adopting IFRS 15 is
in relation to the identification of performance obligations and
determining the timing of when performance obligations are
satisfied in respect of admission and listing services, provided by
the Primary Markets business within the Capital Markets
segment.
Under IAS 18 'Revenue', initial admission fees were recognised
at the time of admission to trading. The conversion to IFRS 15
requires management to make an assessment as to whether the initial
admission service is a distinct service that is separate from the
continual and ongoing listing service provided by the Group. In
light of diverging views on this matter, the IFRIC will be
considering whether sufficient guidance currently exists in the new
standard to identify the performance obligation in the admissions
and ongoing listing process (refer to AP8: IFRS Interpretation
Committee work in progress of the June 2018 Agenda). As a result,
and given the uncertainty that currently exists on this judgement,
the Group has continued to recognise revenue from initial admission
fees at the time of admission to trading in its interim condensed
consolidated financial statements for the period ended 30 June
2018. The Group expects to have clarity on the accounting treatment
for revenues from the admissions and listings services under IFRS
15 by the time it prepares its consolidated financial statements
for the year ending 31 December 2018.
For all remaining revenue streams in the Group, the new rules
set out in IFRS 15 have been adopted prospectively from 1 January
2018 under the modified retrospective approach, and consequently
the comparative amounts in these interim condensed consolidated
financial statements remain unchanged and are reported under IAS
18.
In addition to any potential IFRS 15 impact on the Primary
Markets business as explained above, the adoption of the new
standard required the Group's incremental sales commission costs
that were previously expensed when incurred, to be capitalised when
they are expected to be recovered. The capitalised contract costs
are amortised over a period consistent with the transfer of goods
and services to the customer, which the Group has determined to be
between 3 to 5 years. As a result the Group recorded a GBP10m
adjustment to opening retained earnings as at 1 January 2018, as
presented in the condensed consolidated statement of changes in
equity comprising a GBP12m increase in the intangible assets from
capitalising sales commissions previously expensed prior to
transition, and a consequential GBP2m increase in deferred tax
liabilities.
The impact of capitalising contract costs under IFRS 15 on the
Group's income statement for the period ended 30 June 2018 was a
decrease in the Group's underlying operating expenses before
depreciation and amortisation of GBP5m and an increase underlying
depreciation and amortisation of GBP4m, along with an increase in
the net book value of intangible assets of GBP13m and an associated
GBP2m increase in deferred tax liabilities as at 30 June 2018.
For all remaining business lines, the adoption of IFRS 15
resulted in no material changes to the measurement or timing of
revenue recognition in the income statement for the Group.
Comparative amounts presented in the notes to the Group's
condensed consolidated balance sheet as at 31 December 2017 have
been updated to adopt the new terminology used to describe certain
balance sheet items under IFRS 15. Accrued income and deferred
income are now referred to as 'contract assets' and 'contract
liabilities' respectively. The previously reported amounts of
accrued income of GBP156m and deferred income of GBP104m as at 31
December 2017, are now referred to as contract assets in Note 13
and contract liabilities in Note 14 respectively. There were no
changes to the measurement or timing of recognition of these
contract assets and contract liabilities on conversion to IFRS 15
and as such the Group's total equity as at 30 June 2017 and 31
December 2017 are unchanged as a result of adopting the new
standard.
Revenue
The main source of the Group's revenue is through fees for
services provided. Revenue is measured based on the consideration
specified in a contract with a customer. Amounts deducted from
revenue relate to discounts, value added tax and other sales
related taxes, and revenue share arrangements whereby, as part of
an operating agreement, amounts are due back to the customer.
The Group recognises revenue as services are performed and as it
satisfies its obligations to provide a product or service to a
customer. Further details of the Group's revenue accounting policy
are set out below:
Information The Information Services segment generates revenues
Services from the provision of information and data products
including indexes, benchmarks, real time pricing
data and trade reporting and reconciliation services.
Data subscription and index licence fees are recognised
over the licence or usage period as the Group meets
its obligation to deliver data consistently throughout
the licence period. Services are billed on a monthly,
quarterly and annual basis.
Other information services include licences to
the regulatory news service and reference data
business. Revenue from licences that grant the
right to access intellectual property are recognised
over time, consistent with the pattern of the service
provision and how our performance obligation is
satisfied throughout the licence period. Revenues
from other information services, including revenues
from the sale of right to use licences, are recognised
at the point the licence is granted or service
is delivered.
------------------- ---------------------------------------------------------
Post Trade Revenue in the Post Trade segment is generated
- LCH, CC&G from clearing, settlement, custody and other post
and Monte trade services.
Titoli
Clearing, settlement and custody services generate
fees from trades or contracts cleared and settled,
compression and custody services which are recognised
as revenue at the point when the service is rendered
on a per transaction basis. Services are billed
on a monthly basis.
Other post trade services include revenue from
client connectivity services which is recognised
as revenue on a straight-line basis over the service
period as this reflects the continuous transfer
of services.
------------------- ---------------------------------------------------------
Capital Markets(1) Revenues in the Capital Market segment are generated
from Primary and Secondary market services.
Revenue from secondary market trading and associated
capital market services is recognised as revenue
on a per transaction basis at the point that the
service is provided.
------------------- ---------------------------------------------------------
Technology Technology revenue is generated from contracts
to develop capital market technology solutions,
software licences, network connections and hosting
services.
Capital markets software licences contracts contain
multiple deliverables for the provision of licences
and software installation, and ongoing maintenance
services. The transaction price for each contract
is allocated to these performance obligations based
upon the relative standalone selling price. Revenue
is recognised based on the actual service provided
during the reporting period, as a proportion of
the total services to be provided. This is determined
by measuring the inputs consumed in delivering
the service (for example, material and actual labour)
relative to the total expected input consumption
over the contract. This best reflects the transfer
of assets to the customer which generally occurs
as the Group incurs costs on the contract.
Network connections and service hosting revenues
are recognised on a straight-line basis over the
period to which the fee relates as this reflects
the continuous transfer of technology services
and measures the extent of progress towards the
completion of the performance obligation.
------------------- ---------------------------------------------------------
Other Fees are generated from the provision of events
and media services, and are typically recognised
as revenue at the point the service is rendered
and becomes payable when invoiced.
------------------- ---------------------------------------------------------
(1) The accounting policy for revenues from the Primary Markets
business within the Capital Markets segment will be finalised on
conclusion of the Group's assessment as to whether the initial
admission service is distinct from the continual and ongoing
listing service provided to customers under IFRS 15.
Customer contracts across the Group that contain a single
performance obligation at a fixed price do not require variable
consideration to be constrained or allocated to multiple
performance obligations. However certain businesses in the Group
provide services to customers under a tiered and tariff pricing
structure that generates a degree of variability in the revenue
streams from the contract. Where the future revenue from a contract
varies due to factors that are outside of the Group's control, the
Group limits the total transaction price at contract inception and
recognises the minimum expected revenue guaranteed by the terms of
the contract. Any variable element is subsequently recognised in
the period in which the variable factor occurs.
As permitted by the practical expedient in IFRS 15, the Group
does not adjust the promised amount of consideration for the
effects of significant financing components in contracts where the
Group expects, at contract inception, the period between the
transfer of a promised good or service to a customer and when the
customer pays for that good or service to be one year or less.
Other income
Other income typically relates to property rental income and
property service charges.
Cost of sales
Cost of sales comprises data and licence fees, data feed costs,
expenses incurred in respect of revenue share arrangements and
costs incurred in the MillenniumIT business that are directly
attributable to the construction and delivery of customers' goods
or services, and any other costs linked and directly incurred to
generate revenues and provide services to customers.
Revenue share expenses presented within cost of sales relate to
arrangements with customers where the revenue share payment is not
limited to the amount of revenues receivable from the specific
customer.
Contract assets
Contract assets are recognised when the Group has the
conditional right to consideration from a customer in exchange for
goods or services transferred.
Contract assets are transferred to and presented as trade
receivables when the entitlement to payment becomes unconditional
and only the passage of time is required before payment is due.
Contract liabilities
Revenue relating to future periods is classified as a contract
liability on the balance sheet to reflect the Group's obligation to
transfer goods or services to a customer for which it has received
consideration, or an amount of consideration is due, from the
customer.
Contract liabilities are amortised and recognised as revenue in
the income statement over period the services are rendered.
Contract costs
Incremental costs of obtaining a customer contract, such as
sales commissions paid to employees, are recognised as an asset if
the benefit of such costs is expected to be longer than one year.
The associated asset is amortised over a period consistent with the
transfer to the customer of the products and services under the
contract and is presented as an intangible assets in the Group's
consolidated balance sheet. The Group amortises the contract costs
over the period which a customer benefits from existing software
technology supporting the underlying product or service.
The Group also applies the practical expedient in IFRS 15 to
recognise the incremental cost of obtaining a contract as an
expense when incurred, if the amortisation period is one year or
less.
IFRS 9 Financial instruments - impact of adoption
On 1 January 2018 the Group adopted IFRS 9 'Financial
Instruments' and applied the standard retrospectively. The Group
has elected to continue to apply hedge accounting under IAS 39.
The Group has not restated comparative amounts in the financial
statements, as this would require the use of hindsight in factors
influencing measurement such as fair values and expected credit
loss calculations and therefore is proscribed by the standard.
Instead the Group has recognised any differences between the
carrying amounts measured in accordance with IFRS 9 at the date of
transition with previously reported carrying amounts, in the
opening retained earnings of the current period. This has resulted
in an GBP8m adjustment to opening retained earnings as at 1 January
2018, as presented in the condensed consolidated statement of
changes in equity. This comprises a GBP10m reduction in the
provision for impairment of trade receivables as the Group modified
its previous impairment model to an expected credit loss approach
which takes into account historic collection rates as well as
forward-looking information, and a consequential GBP2m increase in
deferred tax liability.
Amounts presented in the Group's interim condensed consolidated
financial statements as at 31 December 2017 have been updated to
adopt the new terminology under IFRS 9. The previously reported
'loans and receivables' and 'available for sale at fair value
through other comprehensive income' categories are now referred to
as 'financial assets at amortised cost' and 'financial assets at
fair value through other comprehensive income' ('FVOCI')
respectively in Note 12.
The new standard requires financial instruments to be classified
as fair value through profit or loss (FVPL), fair value through
other comprehensive income (FVOCI) or amortised cost, each of which
are explained further below. The classification depends on the
Group's business model for managing its financial instruments and
whether the cash flows generated are "solely payments of principal
and interest" (SPPI).
-- Financial assets at amortised cost: this category includes
financial assets that are held in order to collect the contractual
cash flows and includes the Group's cash and cash equivalents and
trade and other receivables. Clearing member trading balances
relating to sale and buy back transactions and other receivables
from clearing members within the Central Counterparty (CCP)
businesses also fall within this category. At the date of
transition, GBP164,906m previously reported as loans and
receivables are now referred to as financial assets at amortised
cost.
-- Financial assets at fair value through profit or loss (FVPL):
this category includes derivative instruments held by the Group and
CCP clearing member trading balances comprising derivatives, equity
and debt instruments that are marked to market on a daily basis.
There is no change on the previous treatment for these instruments.
At the date of transition GBP549,891m of assets remained as fair
value through profit or loss.
-- Financial assets at fair value through other comprehensive
income (FVOCI): this category includes investments in financial
assets and quoted debt instruments (predominantly government bonds)
held by the CCP businesses, which are used under the business model
to both collect the contractual cash flows and also to sell.
Previously these assets were classified as either 'available for
sale at FVOCI' or 'FVPL'. At the date of transition, GBP3,652m of
other financial assets of the CCP clearing businesses previously
designated as FVPL were reclassified as FVOCI with no change in
valuation, and GBP18,541m of assets previously designated as
available for sale at FVOCI are now referred to as FVOCI with no
change in valuation. Any profit or loss recognised in other
comprehensive income on debt instruments is recycled to the income
statement if the asset is sold. Any profit or loss on an equity
investment remains in other comprehensive income and is not
recycled.
-- Financial liabilities at amortised cost: this category
includes all financial liabilities that are not included within
financial liabilities at fair value through profit or loss and
comprises the Group's trade and other payables balances and
borrowings as well as clearing member trading balances related to
sale and buy back transactions and other payables to clearing
members. There was no change on the previous treatment for these
instruments.
-- Financial liabilities at fair value through profit or loss
(FVPL): this category includes all the CCP clearing member trading
balances, comprising derivatives, equity and debt instruments,
which are marked to market on a daily basis, along with any
derivative instruments held by the Group. There was no change on
the previous treatment for these instruments.
IFRS 9 adopts a new approach to calculating impairment losses on
financial instruments, with the Group required to adopt a
forward-looking approach to estimate expected credit losses (ECLs).
ECLs are based on the difference between the contractual cash flows
due and the expected cash flows, the difference is then discounted
at the asset's original effective interest rate. The impact of the
new approach on the Group's financial statements is as follows:
Financial assets at amortised cost - the ECL for trade
receivables, contract assets and cash and cash equivalents has been
calculated using IFRS 9's simplified approach using lifetime ECL.
The provision is based on the Group's historic experience of
collection rates, adjusted for forward looking factors specific to
each counterparty and the economic environment at large.
Financial assets held at FVOCI - the Group's financial assets
held at FVOCI are largely held by the CCP businesses and consist of
high quality government bonds that have a low credit risk. The
Group's policy is to calculate a 12 month ECL on these assets. If
there is a significant increase in credit risk, then a lifetime ECL
will be calculated. A significant increase in credit risk is
considered to have occurred when contractual payments are more than
30 days past due. As at the date of adoption, the Group has
determined that the 12 month ECL on these assets is immaterial, and
there have been no significant increase in credit risk, and
therefore no lifetime ECL has been provided against these
assets.
Financial assets at fair value through profit or loss (FVPL) -
in accordance with IFRS 9, no ECLs are required for assets held at
FVPL.
Impairment losses on the remaining financial assets are measured
using the general approach. The Group calculates a loss allowance
based on the 12 month ECL at each reporting date until there is a
significant increase in the financial instrument's credit risk, at
which point the Group will calculate a loss allowance based on the
lifetime ECL, as described above for FVOCI assets.
The table below illustrates the changes to the classification of
the Group's financial assets under IFRS 9 and IAS 39 at the date of
initial application of IFRS 9:
Instrument Description IAS 39 IFRS 9
--------------------------------- ---------------------------------- -------------------- ---------------------
Assets
--------------------------------- ---------------------------------- -------------------- ---------------------
Financial assets of
the CCP business:
- CCP trading assets Sale and buyback transactions Amortised cost Amortised
cost
- CCP trading assets All other CCP trading FVPL FVPL
assets
- Other receivables Interest and margin Amortised cost Amortised
from clearing members receipts due cost
- Other financial assets Investments relating FVPL or Available FVOCI
to cash collateral for sale
held
Cash and cash equivalents Own cash and cash Amortised cost Amortised
of clearing members cost
Trade and other receivables Trade receivables, Amortised cost Amortised
including non-current contract assets and cost
receivables other receivables
Investments in financial Typically comprise Available for FVOCI
assets investments in government sale
debt
Derivative financial Both assets and liabilities FVPL FVPL
instruments
Liabilities
--------------------------------- ---------------------------------- -------------------- ---------------------
Financial liabilities
of the CCP business:
- CCP trading liabilities Sale and buyback transactions Amortised cost Amortised
cost
- CCP trading liabilities All other CCP trading FVPL FVPL
liabilities
- Other payables to Interest and margin Amortised cost Amortised
clearing members payments due cost
Trade and other payables, Trade payables, accruals Amortised cost Amortised
including other non-current and deferred consideration cost
payables
Borrowings Bank borrowings and Amortised cost Amortised
other forms of financing cost
--------------------------------- ---------------------------------- -------------------- ---------------------
3. Segmental information
Segmental disclosures for the six months ended 30 June 2018 are
as follows:
Post Trade
Post Services
Trade - CC&G
Information Services and Monte Capital Technology
Services - LCH Titoli Markets Services Other Eliminations Group
Unaudited GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ----------- ---------- ------------ -------- ------------ ------ ------------ -----
Revenue from
external customers 412 237 52 215 32 5 - 953
Inter-segmental
revenue - - - - 8 - (8) -
-------------------- ----------- ---------- ------------ -------- ------------ ------ ------------ -----
Revenue 412 237 52 215 40 5 (8) 953
Net treasury
income through
CCP business - 83 21 - - - - 104
Other income - - - - - 3 - 3
-------------------- ----------- ---------- ------------ -------- ------------ ------ ------------ -----
Total income 412 320 73 215 40 8 (8) 1,060
-------------------- ----------- ---------- ------------ -------- ------------ ------ ------------ -----
Cost of sales (34) (53) (3) (9) (5) (2) - (106)
Gross profit 378 267 70 206 35 6 (8) 954
-------------------- ----------- ---------- ------------ -------- ------------ ------ ------------ -----
Share of loss
after tax of
associate - - - - - (3) - (3)
-------------------- ----------- ---------- ------------ -------- ------------ ------ ------------ -----
Earnings before
interest, tax,
depreciation
and amortisation 234 149 46 113 1 4 (3) 544
Underlying
depreciation
and amortisation (13) (28) (4) (4) (14) (2) 1 (64)
Operating
profit/(loss)
before
non-underlying
items 221 121 42 109 (13) 2 (2) 480
Amortisation
of purchased
intangible assets (77)
Other non-underlying
items (10)
-------------------- -----
Operating profit 393
Net finance
expense (33)
Profit before
tax from continuing
operations 360
Net treasury income through CCP business of GBP104m comprises
gross interest income of GBP457m less gross interest expense of
GBP353m.
The Group's revenue from contracts with customers disaggregated
by segment, major product and service line, and timing of revenue
recognition for the six months ended 30 June 2018 is shown below:
Six months ended 30 June 2018
------------ -----
Post Trade
Services
Post Trade - CC&G
Information Services and Monte Capital Technology
Services - LCH Titoli Markets Services Other Group
Unaudited GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------ -----
Revenue from external
customers
Major product & service
lines
FTSE Russell Indexes 309 - - - - - 309
Real time data 47 - - - - - 47
Other information
services 56 - - - - - 56
Clearing - 237 22 - - - 259
Settlement, custody
and other - - 30 - - - 30
Primary capital markets - - - 62 - - 62
Secondary capital
markets - - - 153 - - 153
Capital markets software
licences - - - - 32 - 32
Other - - - - - 5 5
Total revenue from
contracts with customers 412 237 52 215 32 5 953
Timing of revenue
recognition
Services satisfied
at a point in time 21 234 48 149 1 4 457
Services satisfied
over time 391 3 4 66 31 1 496
Total revenue from
contracts with customers 412 237 52 215 32 5 953
The Group's revenue from contracts with customers disaggregated
by geographical location is shown below:
Six months ended
30 June
2018
Unaudited
GBPm
UK 550
Italy 162
France 53
USA 165
Other 23
Total 953
The disaggregated revenue table presented above for the six
months ended 30 June 2018 is a new requirement as a result of the
Group adopting IFRS 15 on 1 January 2018. The Group has used the
modified retrospective approach to transition to IFRS 15 and
therefore no comparative disclosures are presented.
Segmental disclosures for the six months ended 30 June 2017 are
as follows:
Post Trade
Services
Post Trade - CC&G
Information Services and Monte Capital Technology
Services - LCH Titoli Markets Services Other Eliminations Group
Unaudited GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------
Revenue from
external customers 355 207 55 190 41 5 - 853
Inter-segmental
revenue - - - - 8 - (8) -
Revenue 355 207 55 190 49 5 (8) 853
Net treasury
income through
CCP business - 56 19 - - - - 75
Other income - 7 - - - 11 - 18
Total income 355 270 74 190 49 16 (8) 946
Cost of sales (30) (40) (8) (9) (13) (2) - (102)
Gross profit 325 230 66 181 36 14 (8) 844
Share of loss
after tax of
associates - - - - - (1) - (1)
Earnings before
interest, tax,
depreciation
and amortisation 207 113 36 91 1 (2) (2) 444
Underlying depreciation
and amortisation (9) (22) (6) (6) (3) (1) 1 (46)
Operating profit/(loss)
before non-underlying
items 198 91 30 85 (2) (3) (1) 398
Amortisation
of purchased
intangible assets (74)
Other non-underlying
items (19)
Operating profit 305
Net finance
expense (28)
Profit before
tax from continuing
operations 277
Net treasury income through CCP business of GBP75m comprises
gross interest income of GBP351m less gross interest expense of
GBP276m.
4. Expenses by nature
Expenses comprise the following:
Six months ended
30 June
2018 2017
Unaudited Unaudited
Underlying items GBPm GBPm
Employee costs 255 231
IT costs 65 59
Other costs 87 109
Operating expenses before depreciation
and amortisation 407 399
Depreciation and amortisation 64 46
Total operating expenses 471 445
Other costs include foreign exchange gains of GBP5m (30 June 2017:
GBP12m loss).
5. Non-underlying items
Six months ended
30 June
2018 2017
Unaudited Unaudited
Note GBPm GBPm
---------
Amortisation of purchased intangible
assets 77 74
Transaction costs 5 17
Restructuring costs - 5
Integration costs 5 2
Profit on disposal of business - (5)
10 19
Total affecting profit before tax 87 93
Tax effect on items affecting profit
before tax
Deferred tax on amortisation of purchased
intangible assets (17) (20)
Current tax on amortisation of purchased
intangible assets (5) (1)
Tax effect on other items affecting
profit before tax (2) 2
Total tax effect on items affecting
profit before tax (24) (19)
Total charge to continuing income statement 63 74
Loss after tax from discontinued operations 8 - 22
Total charge to income statement 63 96
Transaction costs comprise charges incurred for services
relating to potential mergers and acquisition transactions.
Integration costs in the current and prior period principally
relate to the activities to integrate the Mergent and Yield Book
businesses into the Group.
In the prior period, the Group incurred restructuring costs in
relation to the LCH Group.
In the prior period, the Group disposed of Information Services
Professional Solutions (ISPS) a business line of BIt Market
Services S.p.A, for a cash consideration of EUR10m (GBP9m). The
profit on disposal was GBP5m, and the net assets disposed contained
brands, intellectual property and capitalised research and
development investments, used for carrying out the ISPS business
along with identified agreements with suppliers and clients and
employment relationships.
The loss after tax on discontinued operations in the prior
period relates to the disposal of Russell Investment Management
business. See Note 8 for further details.
6. Net finance expense
Six months ended 30
June
2018 2017
Unaudited Unaudited
GBPm GBPm
Finance income
Bank deposit and other interest
income 3 1
Expected return on defined benefit
pension scheme assets 1 -
Other finance income 2 3
6 4
Finance expense
Interest payable on bank and other
borrowings (35) (28)
Defined benefit pension scheme interest
cost (1) (1)
Other finance expenses (3) (3)
(39) (32)
Net finance expense (33) (28)
Net finance expense includes amounts where the Group earns negative
interest on its cash deposits and borrowings.
7. Taxation
Six months ended
30 June
2018 2017
Unaudited Unaudited
Taxation charged to the income statement GBPm GBPm
Current tax:
UK corporation tax for the period 41 39
Overseas tax for the period 56 55
97 94
Deferred tax:
Deferred tax for the period (3) (4)
Deferred tax liability on amortisation
of purchased intangible assets (17) (21)
(20) (25)
Taxation charge 77 69
Six months ended 30
June
---------------------
2018 2017
Unaudited Unaudited
Taxation on items not credited/(charged)
to income statement GBPm GBPm
--------- ----------
Current tax credit:
Tax allowance on share options/awards in
excess of expense recognised 5 1
Deferred tax (expense)/credit:
Tax allowance on defined benefit pension
scheme remeasurements (8) (4)
Tax allowance on share options/awards in
excess of expense recognised (1) 6
Movement in value of available for sale
financial assets 9 -
5 3
Factors affecting the tax charge
for the period
The income statement tax charge for the period differs from the
standard rate of corporation tax in the UK of 19% (30 June 2017:
19.25%) as explained below:
Six months ended 30
June
---------------------
2018 2017
Unaudited Unaudited
Notes GBPm GBPm
--------- ----------
Profit before taxation from continuing
operations 360 277
Loss before taxation from discontinued
operations 8 - (23)
----------
360 254
Profit multiplied by standard rate of corporation
tax in the UK 68 49
Expenses not deductible 2 12
Overseas earnings taxed at higher
rate 7 7
Taxation charge 77 68
Income tax from continuing operations 77 69
Income tax attributable to discontinued
operations 8 - (1)
----------
77 68
The tax rate applied as at 30 June 2018 is the expected rate for
the full financial year.
Uncertain tax positions
As at 30 June 2018 an amount of GBP2m has been provided for
uncertain tax positions (31 December 2017: GBP2m). This reflects
ongoing discussions with the tax authorities regarding the
uncertainty arising from the introduction of UK Diverted Profits
Tax.
Judgements
The Group is monitoring developments in relation to EU State Aid
investigation into the UK's Controlled Foreign Company regime. The
Group does not currently consider that any provision is required in
relation to EU State Aid.
8. Discontinued operations and assets held for sale
On 17 January 2018, the Group completed the sale of Exactpro
Systems Limited and its subsidiaries (Exactpro) for an aggregate
consideration of GBP6m, comprising a purchase price of GBP3m and an
unconditional waiver on GBP3m of deferred consideration payable to
the Exactpro purchasers recognised on the acquisition of Exactpro
by the Group.
A total of GBP6m of Exactpro assets were disposed and comprised
goodwill, property, plant and equipment, trade receivables, cash
and accumulated foreign exchange translation reserve.
The Exactpro business was part of the Technology Services
segment and was contained within a stand alone CGU.
Exactpro was classified as a disposal group held for sale in the
Group's 31 December 2017 balance sheet.
Discontinued operations
As previously reported, on 31 May 2016 the Group completed the
sale of the Russell Investment Management business to TA Associates
and Reverence Capital Partners for US$1,150m (GBP794m) total
consideration, of which $150m consideration was deferred and
payable in cash instalments until 31 December 2022. In the prior
period, the Group incurred a non-underlying loss before tax of $29m
(GBP23m) (loss after tax of $27m (GBP22m)) relating to the disposal
of the Russell Investment Management business comprising a $21m
(GBP17m) adjustment to the disposal balance sheet relating to tax
balances at the disposal date and a $8m (GBP6m) reduction to the
net proceeds received on disposal as a result of the finalisation
of the completion statement, which resulted in a $2m (GBP2m) cash
payment by the Group. During the prior period, the Group also
recognised $18m (GBP14m) current tax and other receivable in
relation to the disposed business. The disposal accounting and
final tax position will be finalised on completion of the relevant
tax returns.
There were no cash flows generated or incurred by discontinued
operations from operating, investing or financing activities in the
period ended 30 June 2018 (30 June 2017: nil).
9. Earnings per share
Earnings per share is presented on four bases: basic earnings per
share; diluted earnings per share; adjusted basic earnings per
share; and adjusted diluted earnings per share. Basic earnings
per share is in respect of all activities and diluted earnings
per share takes into account the dilution effects which would arise
on conversion or vesting of share options and share awards under
the Employee Share Ownership Plans (ESOP). Adjusted basic earnings
per share and adjusted diluted earnings per share exclude amortisation
of purchased intangible assets and non-underlying items and to
enable a better comparison of the underlying earnings of the business
with prior periods.
Six months ended 30 June
2018 2017
Unaudited Unaudited
Continuing Discontinued Total Continuing Discontinued Total
Basic earnings/(loss) per
share 71.1p - 71.1p 50.4p (6.3)p 44.1p
Diluted earnings/(loss) per
share 69.7p - 69.7p 49.4p (6.2)p 43.2p
Adjusted basic earnings per
share 88.7p - 88.7p 71.2p - 71.2p
Adjusted diluted earnings
per share 87.0p - 87.0p 69.8p - 69.8p
Profit and adjusted profit for the financial period attributable
to the Company's equity holders
Six months ended 30 June
2018 2017
Unaudited Unaudited
Continuing Discontinued Total Continuing Discontinued Total
GBPm GBPm GBPm GBPm GBPm GBPm
Profit/(loss) for the financial
period attributable to the
Company's equity holders 246 - 246 175 (22) 153
Adjustments:
Amortisation and non-underlying
items
Amortisation of purchased
intangible assets 77 - 77 74 - 74
Transaction costs 5 - 5 17 - 17
Restructuring costs - - - 5 - 5
Integration costs 5 - 5 2 - 2
(Profit)/loss on disposal
of businesses - - - (5) 23 18
87 - 87 93 23 116
Other adjusting items:
Tax effect of amortisation
of purchased intangibles
and non-underlying items (24) - (24) (19) (1) (20)
Amortisation of purchased
intangible assets, non-underlying
items and taxation attributable
to non-controlling interests (2) - (2) (2) - (2)
Adjusted profit for the financial
period attributable to the
Company's equity holders 307 - 307 247 - 247
Weighted average number of
shares - million 346 347
Effect of dilutive share
options and awards - million 7 7
Diluted weighted average
number of shares - million 353 354
The weighted average number of shares excludes those held in the
employee benefit trust and treasury shares held by the Group.
10. Dividends
Six months ended 30
June
2018 2017
Unaudited Unaudited
GBPm GBPm
Final dividend for 31 December 2017 paid
30 May 2018: 37.2p per Ordinary share 129 -
Final dividend for 31 December 2016 paid
31 May 2017: 31.2p per Ordinary share - 109
129 109
Dividends are only paid out of available distributable
reserves.
The Board has proposed an interim dividend in respect of the six
month period ended 30 June 2018 of 17.2p per share, amounting to an
estimated GBP60m, to be paid on 18 September 2018. This is not
reflected in these interim condensed consolidated financial
statements.
11. Intangible assets
Purchased intangible
assets
Software, Software,
Customer licenses contract
and supplier and intellectual costs
Goodwill relationships Brands property and other Total
GBPm GBPm GBPm GBPm GBPm GBPm
Cost:
31 December 2017 (revised) 2,377 1,848 960 584 652 6,421
Adoption of new accounting
standard (Note 2) - - - - 26 26
1 January 2018 (restated) 2,377 1,848 960 584 678 6,447
Additions - - - - 87 87
Disposals - (6) - (15) - (21)
Asset transfer - - - - 5 5
Foreign exchange 11 9 16 3 (1) 38
30 June 2018 (Unaudited) 2,388 1,851 976 572 769 6,556
Accumulated amortisation
and impairment:
31 December 2017 521 566 151 291 303 1,832
Adoption of new accounting
standard (Note 2) - - - - 14 14
1 January 2018 (restated) 521 566 151 291 317 1,846
Amortisation charge for
the period - 45 19 13 49 126
Disposals - (6) - (15) - (21)
Asset transfer - - - - 2 2
Foreign exchange (2) - 2 - (1) (1)
30 June 2018 (Unaudited) 519 605 172 289 367 1,952
Net book values:
30 June 2018 (Unaudited) 1,869 1,246 804 283 402 4,604
31 December 2017 (revised) 1,856 1,282 809 293 349 4,589
Goodwill
During the current period, the Group completed the exercise of
attributing fair value adjustments to the assets and liabilities
acquired from the Yield Book business. As a result, final fair
value adjustments have been made to the previously presented
provisional fair values at 31 December 2017 arising from a
reduction in the value of purchase consideration of GBP1m and an
increase in other receivables of GBP1m. The impact of these final
fair value adjustments resulted in a decrease in goodwill of GBP1m
to amounts previously disclosed in our 31 December 2017 Annual
Report, reducing the total goodwill on acquisition of the Yield
Book business from GBP215m to GBP214m. The impact of these final
fair value adjustments have been incorporated with effect from the
acquisition date of the Yield Book business and the comparative 31
December 2017 balance sheet and related notes have been
revised.
Software, contract costs and other
During the period, additions relating to internally generated
software amounted to GBP80m (30 June 2017: GBP65m).
The carrying value of licenses held under finance leases at 30
June 2018 amounted to GBP8m (31 December 2017: GBP7m).
Transfers in the period relate to re-classification of property,
plant and equipment to software intangibles.
During the period, the Group capitalised GBP5m of incremental
contract costs in respect of revenue generating contracts with
customers and recognised a GBP4m amortisation charge relating to
contract cost assets. No impairment was recognised in period in
relation to contract cost assets.
12. Financial assets and financial liabilities
Financial instruments by category
The financial instruments of the Group at 30 June 2018 are categorised
as follows:
Financial Financial
Financial assets assets at
assets at at fair fair value
amortised value through through profit
30 June 2018 cost OCI or loss Total
Unaudited GBPm GBPm GBPm GBPm
Assets as per balance sheet
Financial assets of the CCP
clearing businesses:
- CCP trading assets 124,945 - 592,074 717,019
- Other receivables from clearing
members 2,933 - - 2,933
- Other financial assets - 21,850 1 21,851
- Cash and cash equivalents
of clearing members 73,340 - - 73,340
Financial assets of the CCP
clearing businesses 201,218 21,850 592,075 815,143
Trade and other receivables 791 - - 791
Cash and cash equivalents 1,299 - - 1,299
Investments in financial assets
- debt - 92 - 92
Derivative financial instruments - - 9 9
Total 203,308 21,942 592,084 817,334
On transition to IFRS 9 on 1 January 2018, GBP3,652m of other financial
assets of the CCP clearing businesses previously designated as fair
value through profit or loss were reclassified as fair value through
OCI.
Prepayments within trade and other receivables are not classified
as financial instruments.
Financial
liabilities
Financial at fair
liabilities value through
at amortised profit or
30 June 2018 cost loss Total
Unaudited GBPm GBPm GBPm
Liabilities as per balance
sheet
Financial liabilities of the
CCP clearing businesses:
- CCP trading liabilities 124,945 592,074 717,019
- Other payables to clearing
members 98,106 - 98,106
Financial liabilities of the
CCP clearing businesses 223,051 592,074 815,125
Trade and other payables 547 17 564
Borrowings 1,903 - 1,903
Derivative financial instruments - 27 27
Total 225,501 592,118 817,619
There were no transfers between categories during the period.
Contract liabilities, social security and other tax liabilities within
trade and other payables are not classified as financial instruments.
The financial instruments of the Group at 31 December 2017 are
classified as follows:
Financial
assets Financial
Financial at fair instruments
assets at value at fair value
amortised through through profit
31 December 2017 (revised) cost OCI or loss Total
GBPm GBPm GBPm GBPm
Assets as per balance sheet
Financial assets of the CCP clearing
businesses:
- CCP trading assets 98,076 - 549,874 647,950
- Other receivables from clearing
members 3,303 - - 3,303
- Other financial assets - 18,436 3,665 22,101
- Cash and cash equivalents of
clearing members 61,443 - - 61,443
Financial assets of the CCP clearing
businesses 162,822 18,436 553,539 734,797
Trade and other receivables (1) 703 - - 703
Cash and cash equivalents 1,381 - - 1,381
Investments in financial assets
- debt - 105 - 105
Derivative financial instruments - - 4 4
Total 164,906 18,541 553,543 736,990
(1) The 31 December 2017 comparatives have been revised for IFRS
3 fair value adjustments on the acquisition of the Yield Book business.
Refer to Note 18 for further details.
There were no transfers between categories during the prior period.
Financial
Financial liabilities
liabilities at fair value
at amortised through profit
31 December 2017 cost or loss Total
GBPm GBPm GBPm
Liabilities as per balance
sheet
Financial liabilities of
the CCP clearing businesses:
- CCP trading liabilities 98,076 549,874 647,950
- Other payables to clearing
members 87,031 - 87,031
Financial liabilities of
the CCP clearing businesses 185,107 549,874 734,981
Trade and other payables 502 18 520
Borrowings 1,953 - 1,953
Derivative financial instruments - 29 29
Total 187,562 549,921 737,483
There were no transfers between categories during the prior period.
Financial liabilities have been re-presented to exclude provisions,
which are no longer considered a financial liability.
The following table provides the fair value measurement
hierarchy of the Group's financial assets and liabilities as at 30
June 2018:
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs Total
30 June 2018 (Level 1) (Level 2) (Level 3) fair value
Unaudited GBPm GBPm GBPm GBPm
Financial assets measured at
fair value:
CCP trading assets:
Derivative instruments 7,125 2,017 - 9,142
Non-derivative instruments 22 582,910 - 582,932
Other financial assets 21,851 - - 21,851
Fair value of CCP clearing
business assets 28,998 584,927 - 613,925
Investments in financial assets
- debt 92 - - 92
Derivatives not designated
as hedges:
- Foreign exchange forward
contracts - 1 - 1
Derivatives used for hedging:
- Cross currency interest
rate swaps - 8 - 8
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs Total
30 June 2018 (Level 1) (Level 2) (Level 3) fair value
Unaudited GBPm GBPm GBPm GBPm
Financial liabilities measured
at fair value:
CCP trading liabilities:
Derivative instruments 7,125 2,017 - 9,142
Non-derivative instruments 22 582,910 - 582,932
Fair value of CCP clearing
business liabilities 7,147 584,927 - 592,074
Deferred consideration - - 17 17
Derivatives used for hedging:
Cross currency interest rate
swaps - 27 - 27
A fair value gain of GBP1m (30 June 2017: nil) from Level 3 financial
liabilities was recognised in the income statement in the period.
The following table provides the fair value measurement
hierarchy of the Group's financial assets and liabilities as at 31
December 2017:
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs Total
31 December 2017 (Level 1) (Level 2) (Level 3) fair value
GBPm GBPm GBPm GBPm
Financial assets measured
at fair value:
CCP trading assets:
Derivative instruments 5,834 1,557 - 7,391
Non-derivative instruments 14 542,469 - 542,483
Other financial assets 22,101 - - 22,101
Fair value of CCP clearing
business assets 27,949 544,026 - 571,975
Investments in financial
assets - debt 105 - - 105
Derivatives used for hedging:
- Cross currency interest
rate swaps - 4 - 4
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs Total
31 December 2017 (Level 1) (Level 2) (Level 3) fair value
GBPm GBPm GBPm GBPm
Financial liabilities measured
at fair value:
CCP trading liabilities:
Derivative instruments 5,834 1,557 - 7,391
Non-derivative instruments 14 542,469 - 542,483
Fair value of CCP business
clearing liabilities 5,848 544,026 - 549,874
Deferred consideration - - 18 18
Derivatives used for hedging:
- Cross currency interest
rate swaps - 29 - 29
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
- Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
- Level 2: other techniques for which all inputs, which have a
significant effect on the recorded fair value are observable,
either directly or indirectly; and
- Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
For assets and liabilities classified as Level 1, the fair value
is based on market price quotations at the reporting date.
For assets and liabilities classified as Level 2, the fair value
is calculated using one or more valuation techniques (e.g. the
market approach or the income approach) with market observable
inputs. The selection of the appropriate valuation techniques may
be affected by the availability of the relevant inputs as well as
the reliability of the inputs. The inputs may include currency
rates, interest rate and forward rate curves and net asset values.
The results of the application of the various techniques may not be
equally representative of fair value, due to factors such as
assumptions made in the valuation.
There have been no transfers between Level 1 and Level 2 during
the current and prior period.
When observable market data is not available, the Group uses one
or more valuation techniques (e.g. the market approach or the
income approach) for which sufficient and reliable data is
available. These inputs used in estimating the fair value of Level
3 financial instruments include expected timing and level of future
cash flows, timing of settlement, discount rates and net asset
values of certain investments.
The Group has classified deferred consideration in relation to
put options over the non-controlling interests of subsidiaries as
Level 3 in the hierarchy for determining the fair value, due to the
significant inputs used in the valuation that are not based on
observable data. The valuation of the deferred consideration is set
out in the terms of the option agreement, where the cash flow
forecasts of the underlying business over the deferred
consideration payment period are discounted at the Group's pre-tax
cost of debt. The key inputs into the valuation of the deferred
consideration are cash flow forecasts from the date of acquisition
and the discount rate.
A 10% increase or decrease in the total cash flows or a 1%
change in the discount rate applied would not have a material
effect on the valuation of the amounts payable.
The Group does not consider there to be any alternative
assumptions that will be used in the valuation of the
liability.
With the exception of Group borrowings, management has assessed
that the fair value of financial assets and financial liabilities
categorised as 'Financial instruments at amortised cost'
approximate their carrying values. The fair value of the Group's
borrowings is disclosed in Note 15.
The Group's financial assets and liabilities held at fair value
consist largely of securities restricted in use for the operations
of the Group's CCPs as managers of their respective clearing and
guarantee systems. The nature and composition of the CCP clearing
business assets and liabilities are explained in the accounting
policies note in the Group's annual consolidated financial
statements for the year ended 31 December 2017.
As at 30 June 2018, there were no provisions for impairment in
relation to any of the CCP financial assets (31 December 2017: nil)
and none of those assets are past due (31 December 2017: nil).
Hedging activities and derivatives
In September 2017, the Company issued EUR1bn of bonds in two
EUR500m tranches maturing in 2024 and 2029. At the same time
EUR700m of these bonds was swapped on a coordinated basis into
US$836m through a series of 9 cross currency interest rate swaps.
As at 30 June 2018, non-current derivative financial assets of
GBP8m (31 December 2017: GBP4m) represents the fair value of these
cross currency interest rate swaps. These instruments effectively
exchange some of the obligations and coupons of the 2024 and 2029
EUR500m bonds from Euros into US Dollars in order to more closely
match the Group's currency of borrowings to the currency of its net
assets and earnings. These swaps have been designated as a hedge of
the Group's net investments in its US Dollar reporting subsidiaries
and qualify for effective hedge accounting.
The remaining EUR300m of bonds outstanding remain in place as a
hedge of the Group's net investments in Euro denominated
subsidiaries and qualify for effective hedge accounting.
Non-current derivative financial liabilities of GBP27m (31
December 2017: GBP29m) represents the fair value of the cross
currency interest rate swaps comprising 6 contracts totalling
EUR300m notional (31 December 2017: EUR300m). These instruments
effectively exchange the obligations and coupons of the 2019
GBP250m bond from Sterling into Euros in order to more closely
match the currency of borrowings to the Group's currency of net
assets and earnings. This also results in a reduction in balance
sheet translation exposure on Euro denominated net assets and the
protection of Sterling cash flows. These swaps have been designated
as a hedge of the Group's net investment in the Italian group and
qualify for effective hedge accounting.
For the period ended 30 June 2018, the Group recognised a net
GBP6m gain on mark to market of these derivatives in reserves (30
June 2017: GBP7m loss).
Foreign exchange forward contracts were arranged during the
period to hedge the fair value of Euro and US Dollar denominated
exposures. These contracts forward buy payables denominated in Euro
and US Dollar, with the mark to market adjustments offsetting the
revaluation of the underlying item in the income statement. They
also offer more predictable cash flows to the Group at maturity. At
30 June 2018, payables of EUR88m (31 December 2017: EUR19m) and
US$120m (31 December 2017: US$10m) were bought forward. The market
value of foreign exchange forward contracts was GBP1m (31 December
2017: nil) in aggregate.
13. Trade and other receivables
30 June 31 December
2018 2017
Unaudited (revised)(1)
GBPm GBPm
Non-current
Deferred consideration 53 52
Contract assets (2) 1 -
Other receivables 6 3
60 55
Current
Trade receivables 431 326
Less: Provision for impairment of
receivables (3) (12) (21)
Trade receivables - net 419 305
Contract assets (2) 183 156
Prepayments 61 41
Amounts due from associate 3 -
Deferred consideration 28 51
Other receivables 98 136
792 689
Total trade and other receivables 852 744
(1) The 31 December 2017 comparatives have been revised for IFRS
3 fair value adjustments on the acquisition of the Yield Book business.
Refer to Note 18 for further details.
(2) Prior to the adoption of IFRS 15 on 1 January 2018, contract
assets were previously referred to as 'accrued income'. Refer to
Note 2 for further details.
(3) The Group recognised a GBP10m reduction in the provision for
impairment of receivables at the date of application of IFRS 9,
as a result of adopting the expected credit loss model on the Group's
trade receivables. This has been presented as an adjustment to opening
retained earnings as at 1 January 2018 in the condensed consolidated
statement of changes in equity. Refer to Note 2 for further details.
14. Trade and other payables
30 June 31 December
2018 2017
Unaudited
GBPm GBPm
Non-current
Deferred consideration 8 38
Contract liabilities (1) 3 -
Other payables 12 11
23 49
Current
Trade payables 47 50
Social security and other taxes 36 23
Contract liabilities (1) 205 104
Accruals 214 293
Other payables 283 128
785 598
Total trade and other payables 808 647
(1) Prior to the adoption of IFRS 15 on 1 January 2018, contract
liabilities were previously referred to as 'deferred income'. Refer
to Note 2 for further details.
15. Borrowings
30 June 31 December
2018 2017
Unaudited
GBPm GBPm
---------- -----------
Current
Bank borrowings 298 522
Commercial paper 177 -
475 522
Non-current
Bonds 1,428 1,431
1,428 1,431
Total 1,903 1,953
The Group has the following committed
bank facilities and unsecured notes:
Notes/ Carrying Interest
Facility value at rate percentage
at
30 June 30 June
Unaudited 2018 2018
Expiry
Type Date GBPm GBPm %
Multi-currency revolving credit LIBOR +
facility Nov 2022 600 125 0.45
Multi-currency revolving credit LIBOR +
facility Dec 2022 600 173 0.3
Total Bank Facilities 298
Commercial paper Jul 2018 177 177 (0.244)(1)
Bond due October 2019 Oct 2019 250 249 9.125
Bond due November 2021 Nov 2021 300 299 4.75
Bond due September 2024 Sep 2024 442 441 0.875
Bond due September 2029 Sep 2029 442 439 1.75
Total Bonds 1,428
Total Committed Facilities 1,903
(1) The Commercial paper interest rate reflected is the average
interest rate achieved in the period.
The fair value of the Group's borrowings at 30 June 2018 was
GBP1,974m (31 December 2017: GBP2,042m).
Current borrowings
The Group retained total committed bank facilities of GBP1,200m
during the period. A new GBP600m facility was arranged in December
2017 on improved terms whilst the existing GBP600m facility was
extended for a further year to November 2022. The new facility is a
5 year commitment with two 1 year extension options available to
the Group, subject to lender approval, and includes a GBP600m
multicurrency swingline facility for Commercial Paper issuance
support. These facilities were partially drawn at 30 June 2018 with
carrying value of GBP298m (31 December 2017: GBP522m) which
includes GBP3m of deferred arrangement fees (31 December 2017:
GBP3m).
In February 2018, the Group commenced with issuances on the
newly arranged GBP1bn, Euro Commercial Paper facility. Outstanding
issuances at 30 June 2018 of EUR200m (GBP177m) (31 December 2017:
nil) are reissued upon maturity in line with the Group's liquidity
requirements.
Cassa di Compensazione e Garanzia S.p.A (CC&G) has direct
intra-day access to refinancing with the Bank of Italy to cover its
operational liquidity requirements in the event of a market stress
or participant failure. In addition, it has arranged commercial
bank back-up credit lines with a number of commercial banks, which
had a total of EUR420m at 30 June 2018 (31 December 2017: EUR420m),
for overnight and longer durations to broaden its liquidity
resources consistent with requirements under the European Markets
Infrastructure Regulation (EMIR).
LCH SA has a French banking licence and is able to access
refinancing at the European Central Bank to support its liquidity
position. LCH Limited is deemed to have sufficient fungible liquid
assets to maintain an appropriate liquidity position, and has
direct access to certain central bank facilities to support its
liquidity risk management in accordance with the requirements under
the EMIR. In accordance with the Committee on Payments and Market
Infrastructures (CPMI), International Organization of Securities
Commissions (IOSCO) and Principles for Financial Market
Infrastructures (PFMIs), many Central Banks now provide for CCPs to
apply for access to certain Central Bank facilities.
In addition, a number of Group entities have access to
uncommitted operational, money market and overdraft facilities
which support post trade activities and day to day liquidity
requirements across its operations.
Non-current borrowings
In June 2009, the Company issued a GBP250m bond which is
unsecured and is due for repayment in October 2019. Interest is
paid semi-annually in arrears in April and October each year. The
issue price of the bond was GBP99.548 per GBP100 nominal. The
coupon on the bond is dependent on the Company's credit ratings
with Moody's and Standard & Poor's, both of which improved
during the year by 1 notch to A3 and A- respectively. The bond
coupon remained at 9.125% per annum throughout the period.
In November 2012, the Company issued a GBP300m bond under its
Euro Medium Term Notes Programme (launched at the same time) which
is unsecured and is due for repayment in November 2021. Interest is
paid semi-annually in arrears in May and November each year. The
issue price of the bond was GBP100 per GBP100 nominal. The coupon
on the bond is fixed at 4.75% per annum.
In September 2017, the Company issued EUR1bn of bonds in two
EUR500m (GBP442m) tranches under its updated Euro Medium Term Notes
Programme. The bonds are unsecured and the tranches are due for
repayment in September 2024 and September 2029 respectively.
Interest is paid annually in arrears in September each year. The
issue prices of the bonds were EUR99.602 per EUR100 nominal for the
2024 tranche and EUR99.507 per EUR100 nominal for the 2029 tranche.
The coupon on the respective tranches is fixed at 0.875% per annum
and 1.75% per annum respectively.
16. Analysis of net debt
30 June 31 December
2018 2017
Unaudited
GBPm GBPm
------------------- -------------
Due within one year
Cash and cash equivalents 1,299 1,381
Bank borrowings (298) (522)
Commercial paper (177) -
Derivative financial assets 1 -
825 859
Due after one year
Bonds (1,428) (1,431)
Derivative financial assets 8 4
Derivative financial liabilities (27) (29)
-------------
Total net debt (622) (597)
-------------
Reconciliation of net cash flow to movement in net debt
30 June 31 December
2018 2017
Unaudited
GBPm GBPm
(Decrease)/increase in cash in the
period/year (96) 216
Bond issue proceeds - (885)
Redemption of preferred securities - 157
Additional drawdowns from bank credit
facilities - (242)
Repayments made towards bank credit
facilities 227 87
Commercial paper issue proceeds (176) -
Utilisation of drawn funds for financing
activities - 103
-------------
Change in net cash resulting from
cash flows (45) (564)
Foreign exchange movements 14 2
Movement on derivative financial
assets and liabilities 7 (6)
Bond valuation adjustment (1) 5
Movement in bank credit facility
arrangement fees - 1
Reclassification of cash to assets
held for sale - (1)
Net debt at the start of the period/year (597) (34)
-------------
Net debt at the end of the period/year (622) (597)
17. Net cash flow generated from operations
Six months ended 30
June
2018 2017
Unaudited Unaudited
Notes GBPm GBPm
Profit before tax from continuing
operations 360 277
Loss before tax from discontinued
operations 8 - (23)
-----------
Profit before tax 360 254
Adjustments for depreciation and
amortisation:
4,
Depreciation and amortisation 5 141 120
Adjustments for other non-cash items:
Profit on disposal of business 5 - (5)
Cost of closure of business - 3
Gain on disposal of available for
sale financial assets - (7)
Share of loss of associates 3 1
Loss on disposal of investment in
a subsidiary 8 - 23
Net finance expense 6 33 28
Share scheme expense 19 19
Movement in pensions and provisions 9 2
Net foreign exchange differences (13) 6
Capitalisation of expenses on adoption 2,
of new accounting standard 11 (12) -
Movements in working capital:
Increase in trade and other receivables (115) (95)
Increase in trade and other payables 174 32
Movements in other assets and liabilities
related to operations:
Increase in CCP financial assets (77,525) (14,517)
Increase in CCP financial liabilities 77,301 14,493
Movement in derivative assets and
liabilities - (1)
Unrealised gain on the revaluation
of financial assets - 1
Cash generated from operations 375 357
Comprising:
Ongoing operating activities 364 324
Non-underlying items 11 33
-----------
375 357
-----------
Comparatives have been reclassified to align prior period disclosure
to the current period.
18. Business combinations
Acquisitions in the period to 30 June 2018
There were no business combinations during the period ended 30
June 2018.
Acquisitions in the year ended 31 December 2017
The group made two acquisitions during the year ended 31
December 2017.
Mergent
On 3 January 2017, the Group acquired the entire share capital
of Mergent, a leading global provider of business and financial
information on public and private companies, for total cash
consideration of US$147m (GBP119m). The acquisition will support
the growth of FTSE Russell's core index offering, supplying
underlying data and analytics for the creation of a wide range of
indexes.
On completion of the fair value exercise in the prior year, the
Group recognised GBP74m of goodwill and GBP69m of purchased
intangible assets arising on the acquisition of Mergent.
Yield Book
On 31 August 2017, the Group acquired the entire share capital
of The Yield Book business, a leading global provider of fixed
income indexes and analytics. The cash consideration paid by the
Group at completion was US$679m (GBP525m). The acquisition enhances
and complements LSEG's Information Services data and analytics
offering, building on FTSE Russell's US market presence and fixed
income client base globally.
In the prior year, the Group recognised GBP215m in provisional
goodwill and the provisional fair value of net assets identified
was GBP310m, including GBP307m of other intangibles assets.
Subsequent to the year ended 31 December 2017, the purchase
price exercise was finalised whereby the Group received GBP3m ($4m)
cash consideration from the vendor and resulted in a GBP1m
reduction in the total purchase consideration paid by the Group on
acquisition of the Yield Book business. The GBP3m ($4m) cash
consideration received in the period ended 30 June 2018 was offset
against a GBP2m other receivable already recognised within the
provisional fair values reported on the Group's balance sheet at 31
December 2017. A final fair value adjustment for an additional
GBP1m other receivable was recognised in the acquisition balance
sheet compared to the provisional fair value amounts previously
presented in our 31 December 2017 Annual Report. Consequently, the
Group recognised a GBP1m decrease in goodwill from amounts
previously disclosed at 31 December 2017, bringing the total
goodwill on acquisition of the Yield Book business to be
GBP214m.
The impact of these final fair value adjustments have been
incorporated with effect from the acquisition date of the Yield
Book business and the comparative 31 December 2017 balance sheet
and related notes have been revised.
19. Transactions with related parties
The nature and contractual terms of key management compensation
and inter-company transactions with subsidiary undertakings during
the period are consistent with the disclosures in Note 33 of the
Group's annual consolidated financial statements for the year ended
31 December 2017.
20. Commitments and contingencies
Contracted capital commitments and other contracted commitments
not provided for in the Group's interim condensed consolidated
financial statements were nil (31 December 2017: nil) and nil (31
December 2017: nil), respectively.
In the normal course of business, the Group receives legal
claims in respect of commercial, employment and other matters.
Where a claim is more likely than not to result in an economic
outflow of benefits from the Group, a provision is made
representing the expected cost of settling such claims.
21. Events after the reporting period
There were no significant events after the reporting period.
Principal Risks
The management of risk is fundamental to the Group's day to day
operations and the successful execution of its Strategic Plan. As
the Group has grown it has enhanced its risk management
capabilities to maintain its trajectory while protecting the value
of its business.
The LSEG Enterprise-wide Risk Management Framework (ERMF) is
designed to allow management and the Board to identify and assess
LSEG's risks and to ensure better decision taking in the execution
of its strategy. It also enables the Board and executive management
to maintain, and attest to the effectiveness of the systems of
internal control and risk management as set out in the UK Corporate
Governance Code. Additional details regarding the Group's risk
management oversight are set out on pages 42-45 of its Annual
Report for the year ended 31 December 2017.
The Group does not consider that the principal risks and
uncertainties set out on pages 46-53 of its Annual Report for the
year ended 31 December 2017 to have changed materially. A summary
of the principal risks and uncertainties which may affect the Group
in the second half of the financial year include the following:
Strategic Risks
Global Economy
As a diversified markets infrastructure business, we operate in
a broad range of equity, fixed income and derivative markets
servicing clients who increasingly seek global products and
solutions. If the global economy underperforms, lower activity in
our markets may lead to lower fee revenue.
The widening geographical footprint of the Group has had the
dual effect of increasing the proportion of the Group's earnings
that are in foreign currency, leading to greater foreign exchange
risk but also improving the geographical diversification of the
Group's income streams.
Ongoing geopolitical tensions continue to add uncertainty in the
markets and may impact investor confidence and activity levels. In
particular recent escalating trade tensions between the US and its
major trading partners have unsettled global markets. The scope of
US action so far (as of June 2018) has been limited to tariffs on
Chinese goods; however the threat of expanding the scope of US
tariffs, and the uncertain future of the North American Free Trade
Agreement (NAFTA), may prompt further retaliation. LSEG continues
to monitor the potential impact of macroeconomic and political
events on our operating environment and business model, and the
Group is an active participant in international and domestic
regulatory debates.
Regulatory Change
The Group and its exchanges, other trading venues, clearing
houses, index administrators, central securities depositories,
trade repository and other regulated entities operate in areas that
are highly regulated by governmental, competition and other
regulatory bodies at European federal and national levels. New
regulations, such as the EU General Data Protection Regulation
(GDPR), MiFID II and the EU Benchmarks Regulation, increase the
compliance risk of the Group's global operations and also create
operational risks as the Group implements processes to meet the new
regulations.
The UK vote to leave the EU introduces significant uncertainty
concerning the political and regulatory environment, the UK's
future relationship with the EU, and the overall impact on the UK
economy both in the short and medium term. Recent proposals suggest
that third country Central Counterparty Clearing House (CCPs) could
face increased regulatory supervision by European regulators or
become subject to certain restrictions on clearing European
business.
Brexit negotiations between the UK and the EU continue but the
UK's final exit terms are still unclear. A draft Withdrawal
Agreement agreed by the negotiators and published in March 2018
provided for a 21 month transition arrangement after the Article 50
exit date in March 2019. However this is subject to final approval
by a number of bodies within both the UK and EU, and cannot be
relied upon at this stage. On 12 July 2018, the UK Government
released a White Paper on The future relationship between the UK
and the EU. The section on financial services focused on an
enhanced equivalence model for financial services, rather than
passporting or mutual recognition. Although this provided further
clarity around the UK's negotiating position, there remain several
issues to be resolved with the EU or risk a 'no deal' scenario.
Any of these effects of Brexit, and others the Group cannot
anticipate, could adversely affect the Group's business, results of
operations, financial condition and cash flows.
LSEG companies conducting regulated activities in the EU or with
customers in the EU are subject to EU regulation. The Group is
executing contingency plans to maintain continuity of market
function and customer service in the event of a hard Brexit. These
contingency plans include incorporation of new entities in the EU27
and applications for authorisation within the EU27 for certain
Group businesses. However, the complexity and the lack of clarity
of the application of a hard Brexit may decrease the effectiveness,
or applicability of some of these contingency plans. As is the case
with all change, these contingency plans introduce some change
management risk. In addition, the Group has formed a structured
Brexit programme to engage with UK and EU Brexit policy leads to
advise on financial market infrastructure considerations. LSEG's
key objectives are maintaining London's position as a global
financial hub and providing continuity of stable financial
infrastructure services.
Competition
The Group operates in a highly competitive industry. Continued
consolidation has fuelled competition including between groups in
different geographical areas.
-- In the Capital Markets operations, there is a risk that
competitors will improve their products, pricing and technology in
a way that erodes these businesses. There is increasing competition
for primary listings and capital raising from other global
exchanges and regional centres with the increasing take-up of new
funding models such as private equity and direct investment.
-- The Group's Information Services business faces competition
from a variety of sources, such as from index providers which offer
indices and other benchmarking tools which compete with those
offered by the Group.
-- In Post Trade Services, competition will continue to
intensify from a shift towards open access and interoperability of
CCPs and legislative requirements for mandatory clearing of certain
Over-the-Counter (OTC) derivative products. While this may create
new business opportunities for the Group, competitors may respond
more quickly to changing market conditions or develop products that
are preferred by customers.
-- In Technology Services, there is intense competition across
all activities as investment increases across the industry in
technological innovation. At present, technology product and
service innovation is highly fragmented with many new entrants and
start-ups. There are also strong incumbents in some of our growth
areas.
The Group's track record of innovation and diversification
ensures the Group continues to offer best in class services with a
global capability. The Group maintains strong customer
relationships by meeting their requirements through organic growth
strategies designed in partnership with them. In addition, the
Group continues to effectively integrate acquisitions and deliver
tangible synergies from them, supported by robust governance and
programme management structures.
Compliance
There is a risk that one or more of the Group's entities may
fail to comply with the laws and regulatory requirements to which
it is, or becomes, subject, which may result in censures, fines and
other regulatory or legal proceedings for the entity.
The Group continues to maintain systems and controls to mitigate
compliance risk and compliance policies and procedures are
regularly reviewed.
Transformation Risk
The Group is exposed to transformation risks (risk of loss or
failure resulting from change/transformation) given the current
levels of change and alignment activity taking place across the
Group. As part of the alignment processes, the Group targets
specific synergy deliveries.
The Group continues to grow rapidly both organically and
inorganically. Acquisitions may, in some cases, be complex and / or
have a global footprint. Acquisitions may increase integration
risks and expected synergies may not be achieved.
A failure to successfully embed the corporate operating model
may lead to an increased cost base without a commensurate increase
in revenue, a failure to capture future product and market
opportunities, and risks in respect of capital requirements,
regulatory relationships and management time.
The additional work related to M&A and associated
integration activities could have an adverse impact on the Group's
day-to-day performance and/or key strategic initiatives which could
damage the Group's reputation.
The size and complexity of recent acquisitions have increased
the Group's change management and transformation risks. However
they have also increased its opportunities to compete on a global
scale.
The LSEG ERMF ensures appropriate risk management across the
Group, and the governance of the enlarged Group is aligned and
strengthened as appropriate. The Group performs regular reporting
of change performance, including ongoing alignment activity. Each
major initiative is overseen by the Project Management Office and
the Investment Committee which monitors the associated risks
closely. Regular reports are submitted to the Executive Committee,
the Board Risk Committee and the Board.
Reputation/Brand
The Group's businesses have iconic national brands that are
well-recognised at international as well as at national levels. The
strong reputation of the Group's businesses and their valuable
brand names are a selling point. Any events or actions that damage
the reputation or brands of the Group could adversely affect its
business, financial condition and operating results.
Failure to protect the Group's Intellectual Property rights
adequately could result in costs for the Group, negatively impact
the Group's reputation and affect the ability of the Group to
compete effectively. Further, defending or enforcing the Group's
Intellectual Property rights could result in the expenditure of
significant financial and managerial resources, which could
adversely affect the Group's business, financial condition and
operating results.
LSEG has policies and procedures in place which are designed to
ensure the appropriate usage of the Group's brands and to maintain
the integrity of the Group's reputation. LSEG actively monitors the
usage of its brands and other Intellectual Property in order to
prevent or identify and address any infringements. The Group
protects its Intellectual Property by relying upon a combination of
trade mark laws, copyright laws, patent laws, trade secret
protection, confidentiality agreements and other contractual
arrangements with its affiliates, clients, customers, suppliers,
strategic partners and others.
Financial Risks
Credit Risk
The Group's CCPs manage the credit risk of clearing
counterparties by imposing stringent membership requirements,
analysing member credit quality by means of an internal rating
system and via variation margin, initial margins and additional
margins.
Investment Risk
Under the ERMF, CCP investments must be made in compliance with
the LSEG Financial Risk Policy (as well as the Policies of the CCPs
themselves). These Policies stipulate a number of Risk Management
standards including investment limits (secured and unsecured) as
well as liquidity coverage ratios. Committees overseeing CCP
investment risk meet regularly. CCP counterparty risk including
liquidity management balances and counterparty disintermediation
risk is consolidated daily at the Group level and reported to the
Executive Committee, including limits and status rating.
Requirements for investments by other members of the Group are set
out in the Group Treasury Policy.
Market Risk (non-clearing)
The Group is exposed to foreign exchange risk through its
broadening geographical footprint, and interest rate risk through
borrowing activities and treasury investments. Non-clearing market
risk is monitored and managed closely and is under the oversight of
the Group's Treasury Committee.
Latent Market Risk (clearing)
There is a risk that one of the parties to a cleared transaction
defaults on their obligation; in this circumstance the CCP is
obliged to honour the contract on the defaulter's behalf and thus
an unmatched risk position arises. The CCP may suffer a loss in the
process of work-out (the 'Default Management Process') if the
market moves against the CCP's positions.
All of the Group's CCPs have been EMIR certified and are
compliant with the EMIR requirements regarding margin calculations,
capital and default rules. Under the ERMF, CCP latent market risk
must be managed in compliance with the Group Financial Risk Policy
as well as policies of the CCPs themselves.
Liquidity Risk (clearing)
There are two distinct types of risk commonly referred to as
liquidity risk. Market liquidity risk is the risk that it may be
difficult or expensive to liquidate a large or concentrated
position. Funding liquidity risk is the risk that the CCP may not
have enough cash to pay for physically settled securities delivered
by a non-defaulter that cannot be sold to a defaulter.
The Group's CCPs collect clearing members' margin and/or default
fund contributions in cash and/or in highly liquid securities. To
maintain sufficient ongoing liquidity and immediate access to
funds, the Group's CCPs deposit the cash received in highly liquid
and secure investments, such as central bank deposits, sovereign
bonds and reverse repos, as mandated under EMIR; securities
deposited by clearing members are therefore held in dedicated
accounts with Central Securities Depositories (CSDs) and/or
International Central Securities Depositories (ICSDs). The Group's
CCPs also hold a small proportion of their investments in unsecured
bank and money market deposits. The successful operation of these
investment activities is contingent on general market conditions
and there is no guarantee that such investments will not suffer
market losses. Furthermore, there is a risk that a counterparty
default could lead to losses to the Group. Such a loss may occur
due to the default of an issuer of bonds in which funds may be
invested or the default of a bank in which funds are deposited.
The Group's CCPs manage their exposure to credit and
concentration risks arising from such investments by maintaining a
diversified portfolio of high quality liquid investments. The Group
relies on established policies with minimum counterparty credit
criteria, instructions, rules and regulations, as well as
procedures specifically designed to actively manage and mitigate
credit risks. There is no assurance, however, that these measures
will be sufficient to protect the Group's CCPs from a counterparty
default.
Group CCPs have put in place regulatory compliant liquidity
plans for day-to-day liquidity management, including contingencies
for stressed conditions. Group CCPs have multiple layers of defence
against liquidity shortfalls including; intraday margin calls,
minimum cash balances, access to contingent liquidity arrangements,
and, for certain CCPs, access to central bank liquidity.
Capital Management
Principal risks to managing the Group's capital are: capital
adequacy compliance risk and capital reporting compliance risk (in
respect of regulated entities); commercial capital adequacy and
quality risk and investment return risk (in respect of regulated
and unregulated entities) and availability of debt or equity.
The Group's Capital Management Policy provides a framework to
ensure the Group maintains suitable capital levels (both at Group
and individual subsidiaries levels), and effectively manages the
risks thereof. The Group's Treasury Policy recognises the need to
observe regulatory requirements in the management of the Group's
resources. The Risk Appetite approved by the Board includes
components related to the Group's leverage ratios and capital
risks; Key Risk Indicators are monitored regularly and this risk is
mitigated by the fact that the Group is strongly profitable and
cash generative. The Group regularly assesses debt and equity
markets to maintain access to new capital at reasonable cost.
Operational Risks
Technology
Secure and stable technology performing to high levels of
availability and throughput is critical for the support of the
Group's businesses. Risks include IT failure, environmental
incidents, capacity shortfalls, cyber-attacks and confidentiality
management.
The Group has significantly upgraded cyber defences. Group
technology teams work continuously to strengthen operational
resilience through fault-tolerant design and standby systems;
constant monitoring and review of system performance; rolling
updates and replacement of out-of-date equipment; and
well-practised incident processes and business continuity
plans.
Group technology teams follow industry best practice and
continue to tighten software development standards. The Group has
adopted agile software development methodologies to improve
transparency of development and test activities, encourage autonomy
and ownership, reduce time to market and improve software
quality.
The Group actively manages relationships with key strategic IT
suppliers to avoid a breakdown in service provision. The Group
monitors new technological developments and opportunities such as
Blockchain through its dedicated Global Technology Innovation
team.
Change Management
The change agenda continues to be significant, driven by
internal and external factors. Internal factors include the
diversification strategy of the Group and its drive for technology
innovation and consolidation. External factors include the changing
regulatory landscape necessitating change to the Group's systems
and processes.
A number of major, complex projects and strategic actions are
underway concurrently with a large change agenda that, if not
delivered to sufficiently high standards and within agreed
timescales, could adversely impact the operation of core services,
adversely impact revenue growth or damage the Group's
reputation.
The senior management team is focused on the implementation of
the Group's strategy and delivery of the project pipeline. Major
projects are managed within a strict change management framework
and overseen by a dedicated Programme Board and by members of the
Executive Committee.
Security Threats
The Group is reliant upon secure infrastructure, applications
and premises to protect its data, employees, physical assets and
technology architecture, whilst maintaining uninterrupted operation
of its IT systems and infrastructure. The threat of cyber crime
requires a high level of scrutiny as it may have an adverse impact
on our business. As with many financial services companies we are
utilising leading technologies to an ever greater extent and care
must be taken to balance usability with security. Terrorist attacks
and similar activities directed against our offices, operations,
computer systems or networks could disrupt our markets, harm staff,
tenants and visitors, and have the potential to severely disrupt
LSEG's business operations. Civil or political unrest could impact
on companies within the Group.
Long-term unavailability of key premises or trading and
information outages and corruption of data could lead to the loss
of client confidence and reputational damage. Security risks have
escalated in recent years due to the increasing sophistication of
cyber crime.
Security threats are treated very seriously. The Group has
robust physical security arrangements, and extensive IT measures
are in place to mitigate technical security risks. Cyber security
operations within the Group utilise tools and service providers to
ensure protection layers remain adequate to monitor and support our
response teams managing events. Additionally, the Group
participates in a number of industry and government bodies focused
on identifying cyber security best practice market-wide. The Group
is supported by the Centre for the Protection of National
Infrastructure (CPNI) in the UK, with both physical and IT security
teams monitoring intelligence and liaising closely with police and
global Government agencies.
A third party security monitoring service is retained to assist
with monitoring global physical security events with the potential
to impact Group operations. The Group has well established and
regularly tested business continuity and crisis management
procedures. Awareness training is provided to all employees.
Model Risk
The Group defines model risk as the risk that a model may not
capture the essence of the events being modelled, or inaccuracies
in the underlying calculation potentially resulting in adverse
consequences resulting from decisions based on incorrect or missed
model inputs. The Group is reviewing model policies and procedures
to ascertain what enhancements are required to address changes to
the business.
Settlement and Custodial Risks
The Group offers post trade services and centralised
administration of financial instruments through its Italian CSD
subsidiary which offers pre-settlement, settlement and custody
services. Settlement activities performed in the cross-border
context carry counterparty risk. The CSD does not provide intra-day
settlement financing to its members.
The Group's CCPs are exposed to operational risks associated
with clearing transactions and the management of collateral,
particularly where there are manual processes and controls. While
the Group's CCPs have in place procedures and controls to prevent
failures of these processes, and to mitigate the impact of any such
failures, any operational error could have a material adverse
effect on the Group's reputation, business, financial condition and
operating results.
In addition, the Group provides routing, netting and settlement
services to ensure that cash and securities are exchanged in a
timely and secure manner for a multitude of products. There are
operational risks associated with such services, particularly where
processes are not fully automated. A failure to receive funds from
participants may result in a debiting of the Group's cash accounts
which could have a material adverse effect on the Group's business,
financial condition and operating results.
Counterparty risk is mitigated through pre-positioning
(availability of security) and pre-funding (availability of
cash).
Operational risk is minimised via highly automated processes
reducing administrative activities while formalising procedures for
all services.
CSD mitigates IT risks by providing for redundancy of systems,
daily backup of data, fully updated remote recovery sites and SLAs
with outsourcers. Liquidity for CSD operations is provided by the
Bank of Italy.
Employees
The calibre and performance of our leaders and colleagues is
critical to the success of the Group. The Group's ability to
attract and retain key talent is dependent on a number of factors.
These include (but are not limited to) organisational culture and
reputation, prevailing market conditions, compensation packages
offered by competitors, and any regulatory impact.
It is therefore critical that the Group continues to have
appropriate variable remuneration and retention practices in place.
These are necessary to optimise shareholder value, business
performance, and colleague engagement, and are increasingly a means
to drive organisational culture, supplemented by a focus on
leadership behaviours and organisational structure.
Going concern
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
interim condensed consolidated financial statements. The financial
risk management objectives and policies of the Group and the
exposure of the Group to capital, credit, concentration, country,
liquidity and market risk are discussed on pages 120 to 124 of the
Annual Report for the Group for the year ended 31 December
2017.
Directors
The Directors of London Stock Exchange Group plc during the
period ended 30 June 2018 were as follows:
Donald Brydon CBE
David Warren
Raffaele Jerusalmi
Jacques Aigrain
Paul Heiden
Professor Lex Hoogduin
David Nish
Stephen O'Connor
Val Rahmani
Mary Schapiro
Andrea Sironi
David Schwimmer was appointed to the Board as Group Chief
Executive Officer on 1 August 2018.
Statement of directors' responsibilities
The directors confirm that, to the best of their knowledge, the
interim condensed consolidated financial statements have been
prepared in accordance with IAS 34 as adopted by the European Union
and that the interim report herein includes a fair review of the
information required by the Financial Conduct Authority's
Disclosure and Transparency Rules 4.2.7 and 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months of the financial year and their impact on the
interim condensed consolidated financial statements, and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
-- material related party transactions in the first six months
of the current financial year and any material changes in the
related party transactions described in the last annual report.
By order of the Board
David Warren
Group CFO (Interim CEO during the period)
2 August 2018
Independent review report to London Stock Exchange Group plc
Introduction
We have been engaged by London Stock Exchange Group plc (the
"Group", the "Company") to review the condensed set of financial
statements in the half-yearly financial report for the six months
ended 30 June 2018, which comprises the Condensed Consolidated
Income Statement, the Condensed Consolidated Statement of
Comprehensive Income, the Condensed Consolidated Balance Sheet, the
Condensed Consolidated Cash Flow Statement, the Condensed
Consolidated Statement of Changes in Equity and related explanatory
notes 1 to 21. We have read the other information contained in the
half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
(UK and Ireland) 2410 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34 'Interim Financial Reporting' as adopted by
the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2018 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 'Interim Financial
Reporting' as adopted by the European Union and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Ernst & Young LLP
London
2 August 2018
Notes:
1. The maintenance and integrity of the London Stock Exchange
Group plc website is the responsibility of the directors; the work
carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for
any changes that may have occurred to the financial statements
since they were initially presented on the website.
2. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
FINANCIAL CALAR
Ex-dividend date for interim dividend 23 August 2018
Interim dividend record date 24 August 2018
Interim dividend payment date 18 September
2018
Financial year end 31 December 2018
Preliminary results March 2019
Annual General Meeting April 2019
The financial calendar is updated on a regular basis throughout
the year.
Please refer to our website
http://www.lseg.com/investor-relations and click on the shareholder
services section for up-to-date details.
INVESTOR RELATIONS CONTACTS
Investor Relations
Independent auditors
London Stock Exchange Group plc
10 Paternoster Square Ernst & Young LLP
London EC4M 7LS 25 Churchill Place
Canary Wharf
For enquiries relating to shareholdings London
in London Stock Exchange Group plc: E14 5EY
Shareholder helpline: +44 (0)20 T +44 (0)20 7951 2000
7797 3322
email: irinfo-r@lseg.com
Visit the investor relations section
of our website for up-to-date information
including the latest share price,
announcements, financial reports
and details of analysts and consensus
forecasts
http://www.lseg.com/investor-relations
Registered office Principal legal adviser
London Stock Exchange Group plc Freshfields Bruckhaus Deringer
10 Paternoster Square LLP
London EC4M 7LS 65 Fleet Street
London
Registered company number EC4Y 1HS
London Stock Exchange Group plc:
5369106 T +44 (0)20 7936 4000
Corporate brokers
Registrar information
Barclays
Equiniti 5 The North Colonnade
Aspect House Canary Wharf
Spencer Road London
Lancing E14 4BB
West Sussex
BN99 6DA T +44 (0)20 7623 2323
www.barclays.com
T +44 (0)371 384 2030 or +44 (0)121
415 7047
Lines open 8.30 to 17.30, Monday RBC Capital Markets
to Friday. RBC Europe Limited
www.shareview.co.uk Riverbank House
2 Swan Lane
London
EC4R 3BF
T +44 (0)20 7653 4000
www.rbccm.com
AIM, London Stock Exchange, London Stock Exchange Group, LSE,
LSEG, the London Stock Exchange Coat of Arms Device, NOMAD, RNS,
SEDOL, SEDOL Masterfile, SETS, TradElect, UnaVista, and IOB are
registered trade marks of London Stock Exchange plc. Main Market,
Specialist Fund Market, SFM, ORB, High Growth Segment, Professional
Securities Market and PSM are un-registered trade marks of London
Stock Exchange plc.
Borsa Italiana, MTA, MIB, MOT, AGREX, IDEX, SEDEX and BIT EQ MTF
are registered trade marks of Borsa Italiana S.p.A.. IDEM is an
un-registered trade mark of Borsa Italiana S.p.A..
CC&G is a registered trade mark of Cassa di Compensazione e
Garanzia S.p.A..
Curve Global is a registered trade mark of Curve Global
Limited.
Monte Titoli and X-TRM are registered trade marks of Monte
Titoli S.p.A..
EuroMTS, MTS, the MTS logo and BOND VISION are registered trade
marks of MTS S.p.A.. EuroTLX is a registered trade mark of EuroTLX
SIM S.p.A..
FTSE is a registered trade mark of the London Stock Exchange
Group companies and is used by FTSE International Limited under
licence.
FTSE Russell is a registered trade mark of London Stock Exchange
plc.
Russell, Russell Investments and Mountain Logo, Russell 1000,
Russell 2000, Russell 3000 are registered trade marks of Frank
Russell Company.
Millennium Exchange, Millennium Surveillance, Millennium CSD and
Millennium PostTrade are registered trade marks of Millennium IT
Software (Private) Limited.
Turquoise and Turquoise Plato are registered trade mark of
Turquoise Global Holdings Limited. Turquoise Plato Midpoint
Continuous, Turquoise Plato Uncross, Turquoise Plato Block
Discovery and Turquoise Plato Dark Lit Sweep un-registered
trademarks of Turquoise Global Holdings Limited.
XTF is a registered trade mark of LSEG Information Services
(US), Inc..
SwapClear, RepoClear, EquityClear, ForexClear and LCH are
registered trade marks of LCH Limited. CDSClear is a registered
trade mark of LCH S.A..
ELITE, E, ELITE Growth and ELITE Connect are registered trade
marks of Elite S.p.A.. Gatelab is a registered trade mark of
Gatelab S.r.L..
Mergent is a registered trade mark of Mergent, Inc..
The Yield Book, Funnel Logo, WGBI and WorldBIG are registered
trade marks of The Yield Book Inc..
Other logos, organisations and company names referred to may be
the trade marks of their respective owners.
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
IR LLFSATSILIIT
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