TIDMLSEG
RNS Number : 4643D
London Stock Exchange Group PLC
03 March 2022
London Stock Exchange Group plc
Preliminary results for the year ended 31 December 2021
This release contains revenues, costs, earnings and key
performance indicators (KPIs) for the year ended 31 December 2021
(FY). All figures quoted in this release are on an underlying
basis. Figures are stated on both a statutory and pro-forma basis
for FY 2021 and FY 2020. Pro-forma figures assume that the
acquisition of Refinitiv took place on 1 January 2020. All
pro-forma and statutory figures exclude the financial contribution
from Borsa Italiana which was divested within the period and
classed as a discontinued business in both periods. Constant
currency variance is calculated on the basis of consistent FX rates
applied across the current and prior year period, the conversions
have been made from the transactional values, which will eliminate
any transactional and translational movements along with any
related accounting adjustments. Organic variances have been removed
from our disclosure due to the large variances associated with the
acquisition of Refinitiv.
Strong delivery against our strategy and targets
* Successful first year following the acquisition of
Refinitiv - LSEG well positioned as a leading global
financial market infrastructure and data business
* Delivering on our strategy to accelerate growth and
build a more agile and efficient business, creating a
platform for further growth
* Integration of Refinitiv delivering strong financial
and operational benefits; confident in meeting or
beating all targets
* Strong financial performance - good revenue growth
across all businesses and ahead of previous guidance
(up 6.1% at constant currency); Data & Analytics grew
strongly, up 5.3%
* Cost synergy delivery running significantly ahead of
target with GBP151 million run-rate achieved in 2021
* Additional GBP50 million cost synergies announced
today, increasing the 5-year target to at least
GBP400 million per annum
* Adjusted EBITDA up 8.3% to GBP3,283 million
* Pro-forma leverage of 1.9x at the end of 2021, within
the target 1-2x range one year ahead of schedule;
focus on disciplined allocation of capital to create
further shareholder value
* Strong financial performance driving 46% increase in
AEPS to 286.7p (1) ; dividend up 27% to 95 pence per
share
David Schwimmer, CEO said:
"LSEG has delivered a successful first year after completion of
the Refinitiv acquisition. We have produced a strong financial
performance, have met or are ahead of all targets and have good
momentum into 2022.
"All of our businesses produced good results and are well
positioned in markets demonstrating strong growth. Our clear focus
on customer service and innovative solutions improved Data &
Analytics' performance. Our Capital Markets and Post Trade
businesses also delivered good growth. We are building a more
scalable and efficient business, creating a platform for further
growth and delivering the benefits of an interconnected global
company.'
"We are in a strong financial position, with a business model
based on high-quality, recurring revenues that generates
considerable and predictable cashflows. We have brought our
leverage to within our target range a year ahead of schedule and
will continue with disciplined deployment of capital to create
further shareholder value. We remain focused on our strategic
priorities for the benefit of our customers and our
shareholders."
Pro-forma results - Strong financial and operational performance
across all businesses
Note: Unless otherwise stated, variances refer to growth rates
on a pro-forma constant currency basis, excluding the impact of a
deferred revenue accounting adjustment(3) , to provide the best
view of underlying performance
-- Strong revenue growth across all divisions driving 6.1%
constant currency total income(3) growth - GBP6,811 million (2020:
GBP6,767 million) - on course to achieve the 5-7% 2020-23 CAGR
target
-- Data & Analytics accelerated growth to 5.3% (2020: 2.5%),
with >90% of revenues from highly recurring subscriptions;
annual subscription value (ASV) growth of 4.6% at end of 2021, up
from 4.0% at Q3, signalling strong revenue momentum for 2022
-- Capital Markets grew 12.5% driven by strong growth at
Tradeweb and good performance across equities and FX venues
-- Post Trade revenue grew 11.1% driven by strong performance in
RepoClear and continued growth in OTC clearing; total income up
2.0% including Net Treasury Income (NTI)
-- Good delivery of early run-rate revenue synergies, with c.25%
of total synergy-related products launched in 2021. A similar
proportion planned for this year, establishing strong foundations
for synergy realisation in 2022 and beyond
-- Adjusted operating expenses growth of 4.8% - guidance
unchanged for low-single digit constant currency cost growth for
2022 and 2023
-- Adjusted operating profit grew 8.5% reflecting strong top-line growth and good cost control
-- Adjusted EBITDA up 8.3% to GBP3,283 million; adjusted EBITDA
margin(2) of 48.2%; high confidence of further improvements to
achieve >50% target by end of next year
-- Long-term debt refinancing completed in H1 2021 - secured at
historically low rates - with average cost of debt of 1.6%
-- Proposed final dividend of 70 pence per share, a 27% increase
in full year dividend to 95 pence per share, reflecting our strong
performance in the year and confidence in our outlook
-- Announced acquisition of Quantile, a fast-growing provider of
portfolio, margin and capital optimisation and compression services
for the global financial services market
-- Since year end, announced the acquisition of TORA, a leading
provider of trading technology solutions that supports customers
trading multiple asset classes across global markets; will further
strengthen our capabilities in the Trading & Banking data
business
-- We are closely monitoring the impact of the conflict in
Ukraine, with our immediate focus being the safety of our people.
We are actively engaging with regulators and authorities on all
relevant sanctions and taking appropriate actions. LSEG's
operations in Russia and Ukraine account for less than one per cent
of total income
(1) Adjusted basic earnings per share (AEPS) variance is on a
reported pro-forma basis, not constant currency
(2) Adjusted EBITDA margin is Adjusted EBITDA divided by Total
Income (excl. Recoveries)
(3) Excluding recoveries and the deferred revenue accounting
impact. The deferred revenue impact is a one-time, non-cash,
negative revenue impact resulting from the accounting treatment of
deferred revenue within Refinitiv's accounts which have been
re-evaluated upon acquisition by LSEG under purchase price
accounting rules. The result of this accounting treatment is a
GBP23m adjustment reducing revenue for H1 2021. The vast majority
impacts the Data & Analytics business with a smaller impact
applied to the FX venues business within Capital Markets. There
were further immaterial impacts in subsequent periods within 2021.
Further information is available in the "Accounting and modelling
notes" section. Constant currency variance shows underlying
financial performance, excluding currency impacts, by comparing the
current and prior year period at consistent exchange rates.
Pro-forma results - Financial summary
Unless otherwise stated, all figures refer to continuing
operations for the year ended 31 December 2021 (FY 2021).
Comparative figures are for continuing operations for the year
ended 31 December 2020 (FY 2020).
Pro-forma underlying(1)
Continuing operations 2021 2020 Pro-forma Constant Constant
GBPm GBPm Variance Currency Currency
(2) % Variance Variance
(3) % (excl.
deferred
revenue
adjustment)
(3,4)
%
-------- -------- ---------- ---------- -------------
Data & Analytics 4,609 4,653 (0.9%) 4.8% 5.3%
Capital Markets 1,255 1,170 7.3% 12.5% 12.5%
--------
Post Trade 913 915 (0.2%) 2.0% 2.0%
--------
Other 34 29 17.2% 21.5% 21.5%
------------------------------------- -------- -------- ---------- ---------- -------------
Total Income (excl. recoveries) 6,811 6,767 0.7% 5.8% 6.1%
Recoveries 354 338 4.7% (0.8%) (0.3%)
------------------------------------- -------- -------- ---------- ---------- -------------
Total Income (incl. recoveries) 7,165 7,105 0.8% 5.5% 5.8%
Cost of sales (923) (946) (2.4%) 3.0% 3.0%
-------- -------- ---------- -------------
Gross profit 6,242 6,159 1.3% 5.9% 6.3%
------------------------------------- -------- -------- ---------- ---------- -------------
Adjusted operating expenses
before depreciation, amortisation
and impairment (5) (2,977) (3,023) (1.5%) 4.8% 4.8%
Income from equity investments 22 - - - -
--------
Share of loss after tax
of associates (4) (4) - 3.1% 3.1%
------------------------------------- -------- -------- ---------- ---------- -------------
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment
(5) 3,283 3,132 4.8% 7.4% 8.3%
Adjusted EBITDA Margin (6) 48.2% 46.3%
Adjusted depreciation, amortisation
and impairment (5) (774) (747) 3.6% 7.6% 7.6%
Adjusted operating profit
(5) 2,509 2,385 5.2% 7.5% 8.5%
Adjusted net finance expense
(5) (206) (569) (63.8%)
Adjusted profit before tax
(5) 2,303 1,816 26.8%
Adjusted tax (5) (480) (555) (13.5%)
Adjusted profit for the
year (5) 1,823 1,261 44.6%
Adjusted profit attributable
to:
Equity holders 1,595 1,087 46.7%
Non-controlling interest 228 174 31.0%
------------------------------------- -------- -------- ---------- ---------- -------------
Continuing adjusted basic
earnings per
share (p) (7) 286.7 195.7 46.5%
------------------------------------- -------- -------- ---------- ---------- -------------
1 The pro-forma results assume that the acquisition of Refinitiv
took place on 1 January 2020. The Borsa Italiana group was
classified as a discontinued operation once the sale became highly
probable on 13 January 2021 and therefore its profits and losses
have been excluded from the Group's continuing operations for both
years presented
2 Pro-forma variance is the difference between current and prior
year on a pro-forma basis, using the average exchange rate for the
respective period, therefore any changes in the exchange rates are
also reflected in the variance along with business performance
3 Constant currency variance shows financial performance,
excluding currency impacts, by comparing the current and prior year
at consistent exchange rates
4 As a result of the acquisition of Refinitiv and the associated
accounting rules, Refinitiv's deferred revenue balances were
subject to a one-time haircut at the time of acquisition. This is a
non-cash adjustment. The negative revenue impact was mostly in Q1
2021 at approximately GBP22 million, with an additional GBP1
million in Q2, GBP1 million in Q3 and GBP1 million in Q4. The
impact is mostly in the Group's Data & Analytics division, with
a much smaller impact on the Group's FX venues business in Capital
Markets. There will be no impact in 2022. An adjusted variance,
excluding the deferred revenue adjustment, has been presented to
show underlying business growth on the prior year.
5 Before non-underlying items
6 Adjusted EBITDA margin is Adjusted EBITDA divided by Total Income (excl. Recoveries)
7 Weighted average number of shares used to calculate Adjusted
basic earnings per share on a pro-forma underlying basis is 556
million
CEO Review
Overview of 2021 performance
The Group has delivered a strong financial and operating
performance in the first year following the successful completion
of the acquisition of Refinitiv, with good revenue growth across
all of our businesses. We are making excellent progress on
integration and are on track to meet or exceed all the acquisition
targets. We have established our position as a leading global
market infrastructure and data business, and we carry good momentum
into 2022.
Strong position
We have a diverse set of world-class assets, giving us global
scale and multi-asset class capabilities across the trade
lifecycle, and highly recurring revenues with our products and
services providing value across our customers' core operations. We
are playing a leading role in the sustainable transition through
our ESG data, analytics and indices, capital issuance venues and
industry leadership.
We are building on our track record of partnering with our
customers to drive innovation and create value, and on our position
as a trusted operator of large-scale critical market
infrastructure. We are creating an integrated business that is much
more than the sum of the parts.
Priorities for the Group
We remain focused on three strategic priorities: 1) integrating
our world-class businesses; 2) driving growth; and, 3) building an
efficient and scalable platform, particularly in Data &
Analytics. We are implementing a range of actions across our
systems, property and workforce to progress our integration plans.
In driving the top line, we are using the strengths across the
Group to enable innovation and product benefits for our customers.
In delivering our scalable platforms, we are investing in
technology and infrastructure to drive greater efficiencies and
facilitate sustainable margin enhancement over time. These are
discussed in more detail below.
Executing on our integration plan
The Group's divisions are working successfully together to
create new opportunities. An important first step has been the
simplification of our sales team structure, to create a single
point of contact for all key customers. This enables a joined-up
approach to providing products and services from across the Group,
based on a better understanding of customer needs and workflow, as
well as helping us build deeper and stronger customer
relationships. Improving customer service has led to record
retention rates in 2021.
We have integrated capabilities across the Group, including
connectivity between the Group's FX dealer-to-client trading venue
and ForexClear to provide additional clearing optionality for
customers, inclusion of Yieldbook data into our evaluated pricing
services for fixed income, and Pricing and Reference Service (PRS)
data and content provision through the Issuer Services platform. We
recently launched Yieldbook's Fixed Income Analytics on our desktop
platforms, joining up related data for customers and significantly
increasing the distribution of the product on a global basis.
We have made good progress on revenue synergies, for example
with cross-selling PRS data to FTSE Russell customers, and using
this data to create and launch new FTSE Russell products. We are on
track for the delivery of revenue synergies, with c25% of planned
synergy-related products launched in 2021 and a similar proportion
planned for this year. We expect to generate run - rate revenue
synergies of GBP40-60 million by the end of 2022.
We are delivering cost synergies ahead of the planned phasing
target, through property consolidation, supplier optimisation,
technology efficiencies and de-duplication of roles. Against a
target of GBP88 million of run-rate synergies in the first year, we
have delivered GBP151 million. In addition, we have identified
another GBP50 million of cost synergies, increasing the 5-year
target to at least GBP400 million per annum.
Driving growth
Our achievements in 2021 in terms of integrating and connecting
our businesses also provide a platform for driving revenue growth.
Data & Analytics delivered an excellent revenue performance,
doubling the level of growth in 2021 compared with the previous two
years. The improvement was driven by improved customer service and
expansion of content which resulted in record customer retention
levels in 2021.We have made targeted investment to further enhance
services across Data & Analytics, notably on the development of
Workspace next generation software that transforms human
interaction with financial data distributed from our data platform.
Roll out of Workspace in the Wealth, Investment Solutions and
Banking businesses continued in 2021, with positive customer
reaction to the new offerings, and improvements in net promoter
scores. At the end of 2021, we launched the beta version of
Workspace for FX Trading. With much of the planned product
development and related tools now in place, we are around a quarter
of the way through the implementation of Workspace. We are also
investing in new content to support growth in a number of areas
such as the PRS business and sustainable finance.
Since year end, we announced the acquisition of Tora, a leading
provider of trading technology solutions that supports customers
trading multiple asset classes across global markets. This will
further strengthen our capabilities in the Trading & Banking
data business.
Capital Markets produced strong financial results, with the
highest level of IPO activity since 2007. FX trading, particularly
the FXall dealer-to-client market, produced a good performance. The
Group's FX venues are also facilitating integrated workflow within
a large liquidity pool as electronic trading of FX increases.
Record levels of trading through Tradeweb, a leading electronic
trading venue for credit and rates products, contributed
substantially to growth in Capital Markets. Tradeweb is growing
through product expansion to meet the increasing demand for
electronification of trading and from market share gains in the
period.
In Post Trade, LCH is the leading clearer of OTC products
worldwide across asset classes (Rates, FX, CDS) and is also a
leading clearing service for European and UK repos and equities.
Post Trade delivered good revenue growth, as SwapClear expanded its
offering and increased the number of clients to the service, with
78 firms signing up across a diverse range of geographies.
RepoClear grew strongly as it provided netting efficiencies to
customers for higher repo volumes arising from European debt
issuance programmes. In December, LSEG announced the acquisition of
Quantile, a fast-growing provider of portfolio, margin and capital
optimisation and compression services for the global financial
services market. It will further our strategy of providing
customers with a global, multi-asset class financial markets
infrastructure operating across the trading ecosystem.
Building a scalable platform
As previously discussed, we are implementing a targeted
investment programme in our technology and infrastructure to serve
our customers better and facilitate margin enhancement and product
profitability. A key part of this is continuing our ongoing
migration of services to the cloud, which enhances the customer
experience and also improves our scalability, simplifying our data
platform by reducing and consolidating a fragmented offering
towards a single point of access. The addition of new tools and
services has helped to gain increased customer volumes at FXall,
while work continues on the re-platforming of our interdealer FX
platform, Matching, to our own proven technology. RepoClear is also
moving its clearing platform onto the same platform as the
EquityClear service, developed by LSEG Technology, to drive further
customer efficiencies. As we deliver on these initiatives, our
EBITDA margin enhancement will continue above the current target
50% level beyond 2023.
Looking ahead, we continue to focus on the same three strategic
priorities - integrating, driving growth and building a scalable
platform. In 2022, we will increase the range of services for
customers through an integrated offering, deliver further growth
through revenue synergies, enhanced products and data content, and
build out our platforms and technology to create greater scale and
operational efficiencies.
Board Change
Jacques Aigrain will step down from the LSEG Board on 27 April
2022, after nine years as a non-executive director. The Board is
grateful for his advice during a time of significant transformation
for the Group, and his leadership of the Group's Remuneration
Committee.
External Audit Tender
In accordance with the requirement to undertake an audit tender
every ten years, LSEG will put the external audit to tender in 2022
for the audit of the 2024 financial year.
Statutory results - Financial highlights
Note: Unless otherwise stated, variances refer to growth rates
on a statutory basis with no adjustments for currency or accounting
treatments
-- Total income (excluding recoveries) grew to GBP6,416 million
(2020: GBP2,030 million), primarily as a result of the acquisition
and consolidation of Refinitiv as a 29 January 2021
-- Operating expenses before depreciation, amortisation and
impairment grew to GBP3,130 million (2020: GBP917 million), as the
Group incorporated the costs of the Refinitiv business
-- Adjusted(2) EBITDA margin of 48.4%; AEPS of 286.5p (3)
Statutory results - Financial summary
Unless otherwise stated, all figures refer to continuing
operations for the year ended 31 December 2021 (FY 2021).
Comparative figures are for continuing operations for the year
ended 31 December 2020 (FY 2020).
2021 2020
Continuing operations GBPm GBPm
-------- ------
Data & Analytics 4,294 824
------
Capital Markets 1,177 288
------
Post Trade 913 915
------
Other 32 3
-------------------------------------------------------- -------- ------
Total Income (excl. recoveries) 6,416 2,030
Recoveries 324 -
-------------------------------------------------------- -------- ------
Total Income (incl. recoveries) 6,740 2,030
Cost of sales (862) (208)
-------- ------
Gross profit 5,878 1,822
-------------------------------------------------------- -------- ------
Operating expenses before depreciation, amortisation
and impairment (3,130) (917)
-------- ------
Adjusted operating expenses before depreciation,
amortisation and impairment (2) (2,791) (749)
Non-underlying operating expenses before depreciation,
amortisation and impairment (339) (168)
-------- ------
Income from equity investments 22 -
------
Share of loss after tax of associates (4) (4)
-------------------------------------------------------- -------- ------
Earnings before interest, tax, depreciation,
amortisation and impairment 2,766 901
-------- ------
Adjusted earnings before interest, tax, depreciation,
amortisation and impairment (2) 3,105 1,069
Non-underlying earnings before interest, tax,
depreciation, amortisation and impairment (339) (168)
-------- ------
Adjusted EBITDA Margin 48.4% 52.7%
Depreciation, amortisation and impairment (1,608) (339)
-------- ------
Adjusted depreciation, amortisation and impairment
(2) (721) (180)
Non-underlying depreciation, amortisation
and impairment (887) (159)
-------- ------
Operating profit 1,158 562
-------- ------
Adjusted operating profit (2) 2,384 889
Non-underlying operating profit (1,226) (327)
-------- ------
Net finance expense (171) (70)
-------- ------
Adjusted net finance expense (166) (57)
Non-underlying net finance expense (5) (13)
-------- ------
Profit before tax 987 492
-------- ------
Adjusted profit before tax 2,218 832
Non-underlying profit before tax (1,231) (340)
-------- ------
Taxation (327) (138)
-------- ------
Adjusted tax (2) (458) (186)
Non-underlying tax 131 48
-------- ------
Profit for the year (from continuing operations) 660 354
-------- ------
Adjusted profit 1,760 646
Non-underlying profit (1,100) (292)
-------- ------
Profit attributable to:
Equity holders 529 293
-------- ------
Underlying 1,541 584
Non-underlying (1,012) (291)
-------- ------
Non-controlling interest 131 61
-------- ------
Underlying 219 62
Non-underlying (88) (1)
-------- ------
Basic earnings per share (p) (3) 98.4 83.6
Adjusted basic earnings per share (p) (3) 286.5 166.7
-------------------------------------------------------- -------- ------
1 The results for the year ended 31 December 2021 include the
results from Refinitiv for 11 months ended 31 December 2021 since
the date of acquisition. The Borsa Italiana group was classified as
a discontinued operation once the sale became highly probable on 13
January 2021 and therefore its profits and losses have been
separated from the Group's continuing operations for both periods
presented
2 The Group reports adjusted operating expenses before
depreciation, amortisation and impairment, adjusted earnings before
interest, tax, depreciation, amortisation and impairment (EBITDA),
adjusted depreciation, amortisation and impairment, adjusted
operating profit and adjusted basic earnings per share (EPS). These
measures are not measures of performance under IFRS and should be
considered in addition to, and not as a substitutes for, IFRS
measures of financial performance and liquidity. Adjusted
performance measures provide supplemental data relevant to an
understanding of the Group's financial performance and exclude
non-underlying items of income and expense that are material by
their size and/or nature. Non-underlying items include:
-- amortisation and impairment of goodwill and purchased
intangible assets (including customer relationships, trade names,
and databases and content, all of which are recognised as a result
of acquisitions)
-- incremental depreciation and amortisation of the fair value
adjustments on tangible assets and intangible assets recognised as
a result of acquisitions
-- other non-underlying income or expenses not related to
day-to-day operations, such as transaction costs related to
acquisitions and disposals of businesses, as well as integration
costs
3 Weighted average number of shares used to calculate basic
earnings per share and Adjusted basic earnings per share from
continuing operations is 538 million (2020: 350 million)
Contacts: London Stock Exchange Group plc
Investors
Paul Froud - Group Head of Investor Relations ir@lseg.com
Media
Lucie Holloway / Rhiannon Davies - Financial +44 (0) 20 7797 1222
Communications newsroom@lseg.com
Additional information can be found at www.lseg.com
Preliminary results investor and analyst conference call:
The Group will host a presentation and conference call on its
Preliminary Results for analysts and institutional shareholders
today at 09:00am (UK time). On the call will be David Schwimmer
(Chief Executive Officer), Anna Manz (Chief Financial Officer) and
Paul Froud (Group Head of Investor Relations).
To access the telephone conference call or webcast please
register in advance using the following link and instructions
below:
https://www.lsegissuerservices.com/spark/LondonStockExchangeGroup/events/37f07ab7-6ace-4722-a051-6df9a6a78af2
-- Please register with your full name, company name and email address
-- If you wish to participate in Q&A, questions can be
provided in written form via the Q&A tool on the webcast page
or by emailing the LSEG Investor Relations team at ir@lseg.com.
Questions can be submitted in advance and during the event itself.
Written questions will be prioritised
-- If you wish to ask a question live, you will need to register
for the telephone conference call. The telephone conference
registration link can be found in the link above and here:
https://cossprereg.btci.com/prereg/key.process?key=P6MXEYTPH
Presentation slides can be viewed at
http://www.lseg.com/investor-relations
For further information, please contact the Group's Investor
Relations team on ir@lseg.com
The information in the preliminary announcement of the results
for the year ended 31 December 2021, which was approved by the
Board of Directors on 03 March 2022, does not constitute statutory
accounts as defined in Section 435 of the UK Companies Act 2006.
The financial statements for the year ended 31 December 2020 were
filed with the Registrar of Companies, and the audit report was
unqualified and contained no statements in respect of Sections 498
(2) and 498 (3) of the UK Companies Act 2006. The financial
statements for the year ended 31 December 2021 will be filed with
the Registrar of Companies in due course.
In accordance with the Listing Rules of the UK Listing
Authority, these preliminary results have been agreed with the
Company's auditors, Ernst &Young LLP, and the Directors have
not been made aware of any likely modification to the auditor's
report to be included in the Group's Annual Report and Accounts for
the year ended 31 December 2021.
The preliminary results have been prepared on a basis consistent
with the accounting policies set out in the Group's Annual Report
and Accounts for the year ended 31 December 2021.
FY 2021 Pro-forma results - Year-on-year performance / synergies
and investment
In this section we report on the year-on-year performance of the
business. As 2021 growth rates are impacted by the acquisition of
Refinitiv, as well as currency movements, we show the pro-forma
figures and associated growth rates. The pro-forma results assume
that the acquisition of Refinitiv took place on 1 January 2020. For
a reconciliation of the Group's profit for the year to the
pro-forma profit for the year refer to the Appendix. As with the
statutory results, the pro-forma view excludes all financial
contribution from the Borsa Italiana Group in both periods.
Variances are provided on a pro-forma and constant currency
basis. Unless otherwise stated, commentary is provided on the
constant currency variance (excluding a deferred revenue adjustment
arising on the acquisition of Refinitiv) to provide insight into
performance on a comparable basis.
Constant currency variance is calculated on the basis of
consistent FX rates applied across the current and prior year. The
conversions are from the transactional values, which eliminates any
transactional and translational movements along with any related
accounting adjustments.
Pro-forma underlying(1)
Continuing operations 2021 2020 Pro-forma Constant Constant
GBPm GBPm Variance Currency Currency
(2) % Variance Variance
(3) % (excl.
deferred
revenue
adjustment)
(3,4)
%
-------- -------- ---------- ---------- -------------
Data & Analytics 4,609 4,653 (0.9%) 4.8% 5.3%
Capital Markets 1,255 1,170 7.3% 12.5% 12.5%
--------
Post Trade 913 915 (0.2%) 2.0% 2.0%
--------
Other 34 29 17.2% 21.5% 21.5%
------------------------------------- -------- -------- ---------- ---------- -------------
Total Income (excl. recoveries) 6,811 6,767 0.7% 5.8% 6.1%
Recoveries 354 338 4.7% (0.8%) (0.3%)
------------------------------------- -------- -------- ---------- ---------- -------------
Total Income (incl. recoveries) 7,165 7,105 0.8% 5.5% 5.8%
Cost of sales (923) (946) (2.4%) 3.0% 3.0%
-------- -------- ---------- -------------
Gross profit 6,242 6,159 1.3% 5.9% 6.3%
------------------------------------- -------- -------- ---------- ---------- -------------
Adjusted operating expenses
before depreciation, amortisation
and impairment (5) (2,977) (3,023) (1.5%) 4.8% 4.8%
Income from equity investments 22 - - - -
--------
Share of loss after tax
of associates (4) (4) - 3.1% 3.1%
------------------------------------- -------- -------- ---------- ---------- -------------
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment
(5) 3,283 3,132 4.8% 7.5% 8.3%
Adjusted EBITDA Margin (6) 48.2% 46.3%
Adjusted depreciation, amortisation
and impairment (5) (774) (747) 3.6% 7.6% 7.6%
Adjusted operating profit
(5) 2,509 2,385 5.2% 7.5% 8.5%
Adjusted net finance expense
(5) (206) (569) (63.8%)
Adjusted profit before tax
(5) 2,303 1,816 26.8%
Adjusted tax (5) (480) (555) (13.5%)
Adjusted profit for the
year (5) 1,823 1,261 44.6%
Adjusted profit attributable
to:
Equity holders 1,595 1,087 46.7%
Non-controlling interest 228 174 31.0%
------------------------------------- -------- -------- ---------- ---------- -------------
Adjusted basic earnings
per
share (p) (7) 286.7 195.7 46.5%
------------------------------------- -------- -------- ---------- ---------- -------------
1. The pro-forma results assume that the acquisition of
Refinitiv took place on 1 January 2020. The Borsa Italiana Group
was classified as a discontinued operation once the sale became
highly probable on 13 January 2021 and therefore its profits and
losses have been excluded from the Group's continuing operations
for both years presented
2. Pro-forma variance is the difference between current and
prior year on a pro-forma basis, using the average exchange rate
for the respective period, therefore any changes in the exchange
rates are also reflected in the variance along with business
performance
3. Constant currency variance shows financial performance,
excluding currency impacts, by comparing the current and prior year
at consistent exchange rates
4. As a result of the acquisition of Refinitiv and the
associated accounting rules, Refinitiv's deferred revenue balances
were subject to a one-time haircut at the time of acquisition. This
is a non-cash adjustment. The negative revenue impact was mostly in
Q1 2021 at approximately GBP22 million, with an additional GBP1
million in Q2, GBP1 million in Q3 and GBP1 million in Q4. The
impact is mostly in the Group's Data & Analytics division, with
a much smaller impact on the Group's FX venues business in Capital
Markets. There will be no impact in 2022. An adjusted variance,
excluding the deferred revenue adjustment, has been presented to
show business growth on a comparable basis to the prior year.
5. Before non-underlying items
6. Adjusted EBITDA margin is Adjusted EBITDA divided by Total Income (excl. Recoveries)
7. Weighted average number of shares used to calculate Adjusted
basic earnings per share on a pro-forma underlying basis is 556
million
Pro-forma income
All variances for income are on a pro-forma and constant
currency basis, excluding a deferred revenue adjustment.
Total income (excluding recoveries) grew 6.1% in the year, with
strong performances across all three divisions, despite the
headwind of exceptional NTI in the prior year.
Data & Analytics revenue (excluding recoveries) grew 5.3%
with strong sales performance and high retention rates in the
subscription-based businesses, combined with strong growth in the
asset-based business within Investment Solutions, and high organic
and inorganic growth in Customer & Third-Party Risk.
Capital Markets revenue grew 12.5%, largely driven by Tradeweb
where increasing electronification of the Fixed Income market and
market volatility drove record volumes. The Equities and FX
businesses also performed well.
Post Trade revenue excluding NTI grew 11.1% driven primarily by
strong performances at SwapClear and RepoClear, with both high
volumes in the year (as a result of market volatility) and
continued focus on addressing the needs of our customers.
Net Treasury Income was down 20.0% on 2020, reflecting lower
investment returns in 2021 compared to the exceptional market
conditions in 2020.
The Group continues to expect the 2020-23 CAGR for the growth of
income excluding recoveries to be in the 5-7% range.
Progress to date on revenue synergies from the Refinitiv
acquisition is in line with expectation. Run-rate revenue synergies
of GBP15 million were delivered in 2021. This was primarily through
the cross sell of our Pricing & Reference Services (PRS)
products and reflecting the launch of 48 new products for the
combined Group, representing c.25% of planned revenue
synergy-related projects. We expect GBP40-60 million of run-rate
revenue synergies by the end of 2022.
Pro-forma income by type
Pro-forma (1)
-----------------------------------------------------------
Year ended 31 December 2021 2020 Pro-forma Constant Constant
Continuing operations GBPm GBPm variance(2) currency currency
% variance(3) variance
% (excl.
deferred
revenue
adjustment)
(3, 4)
%
------ ------ ------------- ------------- -------------
Recurring (5) 4,976 4,952 0.5% 4.0% 4.5%
Transactional (6) 1,594 1,517 5.1% 15.9% 15.9%
Net Treasury Income 207 269 (23.0%) (20.0%) (20.0%)
Other income 34 29 17.2% 21.5% 21.5%
--------------------------------- ------ ------ ------------- -------------
Total income (excl. recoveries) 6,811 6,767 0.7% 5.8% 6.1%
Recoveries 354 338 4.7% (0.8%) (0.3%)
------ ------ ------------- ------------- -------------
Total income (incl. recoveries) 7,165 7,105 0.8% 5.5% 5.8%
------ ------ ------------- ------------- -------------
1 The pro-forma results assume that the acquisition of Refinitiv
took place on 1 January 2020. The Borsa Italiana Group was
classified as a discontinued operation once the sale became highly
probable on 13 January 2021 and therefore its profits and losses
have been separated from the Group's continuing operations for both
periods presented
2 Variance is the difference between current and prior year on a
pro-forma basis, using the average exchange rate for the respective
period, therefore any changes in the exchange rates are also
reflected in the variance along with business performance
3 Constant currency variance shows underlying financial
performance, excluding currency impacts, by comparing the current
and prior period at consistent exchange rates
4 As a result of the acquisition of Refinitiv and the associated
accounting rules, Refinitiv's deferred revenue balances were
subject to a one-time haircut at the time of acquisition. This is a
non-cash adjustment. The negative revenue impact was mostly in Q1
2021 at approximately GBP22 million, with an additional GBP1
million in Q2, GBP1 million in Q3 and GBP1 million in Q4. The
impact is mostly in the Group's Data & Analytics division, with
a much smaller impact on the Group's FX venues business in Capital
Markets. There will be no impact in 2022. An adjusted variance,
excluding the deferred revenue adjustment, has been presented to
show business growth on a comparable basis to the prior year.
5 Recurring revenues primarily represent revenues earned under
contractually renewable or highly predictable customer contracts
such as subscriptions, membership, annual tariff fees and other
participation fees that are generally recognised on a pro-rata
basis over the service period.
6 Transactional revenues primarily represent fees earned on
products and services where our contractual terms do not indicate
recurring revenue, including volume-based trading fees on our
markets. However, within this revenue type we often see consistent,
recurring activity
Pro-forma adjusted operating expenses
All variances for operating expenses are on a pro-forma and
constant currency basis.
Pro-forma adjusted operating expenses before depreciation,
amortisation and impairment were GBP2,977 million (2020: GBP3,023
million), an increase of 4.8% on a constant currency basis. This
was slightly better than the c.5% guidance provided in the Interim
results.
With our total income growing faster than our costs, Pro-forma
adjusted earnings before interest, tax, depreciation, amortisation
and impairment increased 8.3% to GBP3,283 million (2020: GBP3,132
million).
The cost base grew by GBP27 million due to the annualisation and
growth of costs associated with acquisitions made by Refinitiv in
Q4 2020.
Cost growth also reflects the investments being made to improve
the scalability, resiliency and agility of the business, deliver
the revenue synergies and support the high growth at Tradeweb.
Ongoing cost growth reflects inflation and higher
performance-related people costs, partly offset by the impact of
Covid restrictions, which continued to suppress the cost base in
2021, with lower spend on travel and savings on facilities costs.
This is expected to be a temporary benefit, with some of these
costs expected to increase with the easing of restrictions in the
coming year.
Our cost transformation programmes delivered GBP133 million of
in-year cost savings, of which GBP97 million related to the Group's
synergy initiatives and the remainder related to the annualisation
of Refinitiv's cost-saving programme that completed in 2020.
The Group delivered run-rate cost synergies of GBP151 million by
the end of 2021, above the original GBP88 million run-rate target
for the first year following the Refinitiv acquisition and greater
than the GBP125 million guidance provided in the Interim results.
These synergies have been delivered through role restructuring,
optimisation of 27 properties, decommissioning three data centres
and contract renegotiations with 23 strategic suppliers.
Looking ahead, the Group continues to expect adjusted operating
expenses (before depreciation, amortisation and impairment) to grow
at a low single digit rate in 2022 and 2023. We expect to see the
ongoing impact of inflation and the return of some costs previously
suppressed by Covid restrictions. We also expect cost growth in
order to deliver our revenue synergies, drive organic growth and as
we continue to improve the scalability of our business. These
increases will be partly offset by the benefit of cost synergies
from the Refinitiv acquisition and other efficiency programmes.
In the year since acquiring Refinitiv, we have been able to
identify further savings and efficiencies and have increased our
cost synergies target by an additional GBP50 million, in addition
to the GBP350 million initially targeted.
This means our five-year cost synergy programme will now deliver
at least GBP400 million of run-rate savings by the end of 2025. The
additional savings are being delivered through property
rationalisation and process simplification and will support ongoing
work to create a more seamless customer experience.
The additional GBP50 million run-rate does not impact our cost
guidance of low single digit growth in 2022 and 2023 and the
benefit will primarily impact in 2024 and 2025. In 2022 we expect
to deliver c.GBP70 million run-rate synergies, bringing the total
to c.GBP220 million run-rate delivered by the end of 2022,
representing over 60% of our original GBP350 million cost synergy
programme.
We anticipate costs to achieve the incremental GBP50 million
cost synergy benefits to be around GBP225 million. This reflects
project-specific characteristics, such as the relatively high costs
incurred with exiting multi-year property leases in order to
optimise our property portfolio. The overall one-time cost to
achieve the GBP400 million of savings is expected to be GBP775
million, or 1.9x the recurring synergy benefit. This reduces to
GBP642 million, or 1.6x, when including a gain from an associated
property disposal.
Below is a summary of our revenue and cost synergy programmes
delivery in 2021 and the associated cost to achieve.
Synergies and cost to achieve
FY 2021
GBPm
---------
Revenue Synergies
Run-rate realised 15
Cost to achieve 74
of which:
Capital expenditure 40
Non-underlying operating expenses 34
Cost synergies
Run-rate realised 151
In-period benefit 97
Cost to achieve 217
of which:
Capital expenditure 46
Non-underlying operating expenses 171
----------------------------------------- ---------
Note: Synergies and cost to achieve GBP million values are on a
constant currency basis to allow comparison with the guidance
provided
Pro-forma Capital Expenditure and Pro-forma Depreciation,
Amortisation and Impairment
Pro-forma Capital Expenditure(1) was GBP780 million in the year,
with GBP671 million of investment in business-as-usual initiatives
and GBP109 million of integration-related investment. The GBP109
million of integration-related investment includes GBP86 million of
cost to achieve capital expenditure as well as separation costs
related to the divestment of the Borsa Italiana Group. We expect
capital expenditure in 2022 and 2023 to be within the target
GBP650-700 million range for business-as-usual initiatives, with
additional integration-related investment, in line with previous
guidance.
Pro-forma Depreciation, Amortisation and Impairment was GBP774
million (2020: GBP747 million), growth of 7.6%. The increase
reflects the go-live of projects associated with the investment in
product development and infrastructure resiliency, including
integration-related investments.
Depreciation, Amortisation and Impairment is expected to
increase in 2022, reflecting additional depreciation associated
with integration-related investments and technology initiatives.
Depending on the timing of capital purchases in the coming period,
it is expected to be c.GBP820m.
(1) Capital expenditure on a pro-forma constant currency accrued
basis excluding additions of Right-of-Use assets such as property
leases
Divisional year-on-year performance and KPIs
Data & Analytics
Pro-forma results(1)
2021 2020 Variance Constant Constant
(2) Currency Currency
Variance Variance
(3) % (excl.
deferred
revenue
adjustment)
(3,4)
%
GBPm GBPm %
------------------------------------ -------- -------- --------- ---------- -------------
Trading & Banking Solutions 1,489 1,596 (6.7%) (0.9%) (0.3%)
Trading 1,180 1,273 (7.3%) (1.4%) (0.9%)
--------
Banking 309 323 (4.3%) 1.1% 1.7%
--------
Enterprise Data Solutions 1,135 1,163 (2.4%) 3.1% 3.7%
--------
Real-Time Data 730 766 (4.7%) 1.1% 1.8%
--------
PRS 405 397 2.0% 7.0% 7.5%
--------
Investment Solutions 1,152 1,111 3.7% 9.0% 9.4%
--------
Benchmark Rates, Indices
& Analytics 516 495 4.2% 9.3% 9.4%
--------
Index - Asset-Based 253 225 12.4% 19.1% 19.1%
--------
Data & Workflow 383 391 (2.0%) 2.8% 3.7%
--------
Wealth Solutions 474 500 (5.2%) 0.8% 1.0%
--------
Advisor & Investor Services 281 278 1.1% 3.8% 4.1%
--------
Operations Management (BETA) 193 222 (13.1%) (3.3%) (3.3%)
--------
Customer & Third-Party Risk
Solutions 359 283 26.9% 33.7% 34.6%
------------------------------------ -------- -------- --------- ---------- -------------
Total Revenue (excl. recoveries) 4,609 4,653 (0.9%) 4.8% 5.3%
--------
Recoveries 354 338 4.7% (0.8%) (0.3%)
------------------------------------ -------- -------- --------- ---------- -------------
Total Revenue (incl. recoveries) 4,963 4,991 (0.6%) 4.4% 4.9%
--------
Cost of sales (771) (788) (2.2%) 3.6% 3.6%
------------------------------------ -------- -------- --------- ---------- -------------
Gross Profit 4,192 4,203 (0.3%) 4.5% 5.1%
--------
Adjusted operating expenses
before depreciation, amortisation
and impairment (2,058) (2,135) (3.6%) 3.0% 3.0%
------------------------------------ -------- -------- --------- ---------- -------------
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment 2,134 2,068 3.2% 6.1% 7.3%
--------
Depreciation, amortisation
and impairment (569) (559) 1.8% 6.1% 6.1%
------------------------------------ -------- -------- --------- ---------- -------------
Adjusted operating profit 1,565 1,509 3.7% 6.1% 7.7%
-------- -------- --------- ---------- -------------
Adjusted EBITDA Margin 46.3% 44.4%
------------------------------------ -------- -------- --------- ---------- -------------
Non-financial KPIs(1)
2021 2020 Variance
(2)
%
------------------ --------------------- ---------
Annual Subscription Value Growth
% (5) 4.6% - -
Subscription revenue growth %
(6) 3.5% - -
Index - ETF AUM ($bn) 1,138 869 31.0%
Index - ESG Passive AUM ($bn)
(7) 167 63 165.1%
BETA transaction volumes (m) 547 540 1.3%
---------------------------------- ------------------ --------------------- ---------
1 The pro-forma results assume that the acquisition of Refinitiv
took place on 1 January 2020. The Borsa Italiana Group was
classified as a discontinued operation once the sale became highly
probable on 13 January 2021 and therefore its profits and losses
have been separated from the Group's continuing operations for both
periods presented
2 Variance is the difference between current and prior year on a
pro-forma basis, using the average exchange rate for the respective
period, therefore any changes in the exchange rates are also
reflected in the variance along with business performance
3 Constant currency variance shows underlying financial
performance, excluding currency impacts, by comparing the current
and prior period at consistent exchange rates
4 As a result of the acquisition of Refinitiv and the associated
accounting rules, Refinitiv's deferred revenue balances were
subject to a one-time haircut at the time of acquisition. This is a
non-cash adjustment. The negative revenue impact was mostly in Q1
2021 at approximately GBP22 million, with an additional GBP1
million in Q2, GBP1 million in Q3 and GBP1 million in Q4. The
impact is mostly in the Group's Data & Analytics division, with
a much smaller impact on the Group's FX venues business in Capital
Markets. There will be no impact in 2022. An adjusted variance,
excluding the deferred revenue adjustment, has been presented to
show business growth on a comparable basis to the prior year.
5 The variance is a constant currency variance adjusted for acquisitions and disposals
6 The variance is a constant currency variance excluding the
impact of the deferred revenue accounting adjustment
7 ESG Passive AUM is at 30 June 2021 and prior period comparator
is at 30 June 2020. The metric is updated bi-annually.
Data & Analytics : pro-forma revenues excluding recoveries
increased 5.3%
Data & Analytics provides high value data, analytics,
indices, workflow solutions and data management capabilities. The
division is split into five areas to address the different needs of
our customers. Total revenue (excluding recoveries) was GBP4,609
million (2020: GBP4,653 million).
Trading & Banking Solutions' revenues decreased only
marginally by 0.3%. This is an improvement in performance over
recent years and has been driven by good retention in our premium
desktop business. The Banking business benefitted from improved
sales and retention as we continue to invest in modernising our
platforms.
Enterprise Data Solutions' revenues increased by 3.7%. Steady
growth in Pricing & Reference Services (PRS) was driven by the
addition of new data to better meet our customers' needs as well as
the benefit of initial revenue synergies. The Real Time business is
growing helped by improved customer retention. Additionally,
offering data from the cloud is helping grow our customer base in
new segments.
Investment Solutions' revenues increased by 9.4%. Benchmark
Rates, Indices & Analytics revenue growth was primarily driven
by increased demand for FTSE-Russell products with existing
clients. Asset-based revenues increased, reflecting a strong
recovery in asset valuations and ETF AUMs surpassing $1 trillion.
Data & Workflow revenues increased primarily driven by improved
retention and sales of our quantitative analytics data
products.
Wealth Solutions' revenues increased by 1.0%. The Advisor &
Investor Services business grew, benefitting from our digital
content offerings, partly offset by the loss of a large client in
the period. Operations Management (BETA) delivered an increase in
trading volumes in the year but shows a decline in revenue due to
the impact of a one-time professional services engagement that
occurred in 2020.
Customer & Third-Party Risk Solutions' revenues increased by
34.6%, primarily driven by the acquisition of the GIACT and Red
Flag businesses in 2020, as well as strong organic growth in our
World-Check, Digital Identity and Due Diligence businesses.
Cost of sales increased by 3.6%, driven by the acquisition of
the GIACT business, higher data fees, and an increase in payments
to FTSE-Russell business partners (in line with index subscription
revenues).
Adjusted operating expenses excluding depreciation, amortisation
and impairment increased by 3.0% whilst depreciation, amortisation
and impairment increased 6.1%.
Operational Highlights
-- Annualised Subscription Value (ASV) (1) growth of 4.6% at the
end of 2021 driven by high product retention rates and new business
growth
-- Currently around a quarter of the way through the
implementation of Workspace, with positive customer feedback,
improved customer engagement scores, and new sales; approximately
half-way through in Banking
-- Trading & Banking Solutions Workspace for FX launched and
tested with customers; upgrades to begin in 2022
-- Workspace for Analysts and Portfolio managers (within
Investment Solutions) launched; further deployment in 2022
-- In Wealth Solutions, Workspace for Wealth has been well
received by customers with additional new wins around the globe
-- Continuing investment in the data platform; a single,
consistent data experience, making it easier for customers and
partners to access, distribute and develop with LSEG or in the
cloud
-- Good progress on revenue synergy delivery, with 46 new
Indices and other product capabilities launched
-- Seeing immediate benefits as a result of the Refinitiv
acquisition from bringing enhanced capabilities to our customers
with the combination of Yieldbook analytics, our Fixed Income and
Multi-Asset Indices business, and PRS. This is aiding retention and
assisting with cross-sell across our combined customer base
-- Refinitiv integration activities on track in our Customer
& Third-Party Risk Solutions business. We integrated our
World-Check and Qual ID solutions into the GIACT platform and
secured our first sales. Launched new third party data product in
our Customer Due Diligence business, combining Red Flag and
World-Check content sets
-- In November 2021, we completed the sale of the Enterprise
Risk Management Technology (ERMT) business. This business sat
within Customer and Third-Party Risk and contributed GBP11 million
of revenue in the year
1 The variance is a constant currency variance adjusted for acquisitions and disposals
Capital Markets
Pro-forma(1)
2021 2020 Variance Constant Constant
(2) Currency Currency
Variance Variance
(3) % (excl.
deferred
revenue
adjustment)
(3,4)
%
GBPm GBPm %
------------------------------------ ------- ------- --------- ---------- -------------
Equities 241 227 6.2% 5.1% 5.1%
-------
FX 223 234 (4.7%) 2.3% 2.4%
-------
Fixed Income, Derivatives
& Other 791 709 11.6% 18.2% 18.2%
------- ------- --------- ---------- -------------
Total Revenue 1,255 1,170 7.3% 12.5% 12.5%
-------
Cost of sales (29) (26) 11.5% 16.9% 16.9%
------------------------------------ ------- ------- --------- ---------- -------------
Gross Profit 1,226 1,144 7.2% 12.4% 12.4%
-------
Adjusted operating expenses
before depreciation, amortisation
and impairment (574) (571) 0.5% 9.6% 9.6%
------------------------------------ ------- ------- --------- ---------- -------------
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment 652 573 13.8% 14.7% 14.8%
-------
Depreciation, amortisation
and impairment (117) (97) 20.6% 25.7% 25.7%
------------------------------------ ------- ------- --------- ---------- -------------
Adjusted operating profit 535 476 12.4% 12.6% 12.6%
------- ------- --------- ---------- -------------
Adjusted EBITDA Margin 52.0% 49.0%
------------------------------------ ------- ------- --------- ---------- -------------
Non-financial KPIs(1)
2021 2020 Variance
%
------------- ---------------- ---------
Equities
Primary Markets
New issues 174 86 102.3%
Total money raised (GBPbn) 34.8 43.2 (19.4%)
Secondary Markets - Equities
UK Value Traded (GBPbn) - Average Daily
Value 4.5 4.9 (8.2%)
SETS Yield (bps) 0.73 0.71 2.8%
FX
Average daily total volume ($bn) 443 429 3.3%
Fixed income, Derivatives and Other
Tradeweb Average Daily ($m)
Rates - Cash 345,008 319,514 8.0%
Rates - Derivatives 293,655 211,716 38.7%
Credit - Cash 9,297 7,608 22.2%
Credit - Derivatives 12,235 14,492 (15.6%)
----------------------------------------- ------------- ---------------- ---------
1 The pro-forma results assume that the acquisition of Refinitiv
took place on 1 January 2020. The Borsa Italiana Group was
classified as a discontinued operation once the sale became highly
probable on 13 January 2021 and therefore its profits and losses
have been separated from the Group's continuing operations for both
periods presented
2 Variance is the difference between current and prior year on a
pro-forma basis, using the average exchange rate for the respective
period, therefore any changes in the exchange rates are also
reflected in the variance along with business performance
3 Constant currency variance shows financial performance,
excluding currency impacts, by comparing the current and prior year
at consistent exchange rates
4 As a result of the acquisition of Refinitiv and the associated
accounting rules, Refinitiv's deferred revenue balances are subject
to a one-time haircut at the time of acquisition. This is a
non-cash adjustment. The negative revenue impact is mostly in Q1
2021 at approximately GBP22 million, with an additional GBP1
million in Q2, GBP1 million in Q3 and GBP1 million in Q4. The
impact is mostly in the Group's Data & Analytics division, with
a much smaller impact on the Group's FX venues business in Capital
Markets. There will be no impact in 2022. An adjusted variance,
excluding the deferred revenue adjustment, has been presented to
show business growth on a comparable basis to the prior year.
Capital Markets: pro-forma revenues increased 12.5%
Capital Markets provides businesses with access to capital
through issuance and offers secondary market trading for equities,
fixed income and foreign exchange (FX). Total revenue was GBP1,255
million (2020: GBP1,170 million).
Equities revenues increased by 5.1%. Within Primary Markets, the
number of new issues more than doubled year on year, representing
the strongest primary listing activity for over 10 years. Secondary
markets volumes were down 8.2% whilst revenues remained broadly in
line as orderbook yield increased.
FX revenues increased by 2.4%. FX revenue is linked to
transaction fees for average daily traded volumes, which increased
3.3% to $443 billion (2020: $429 billion). Strong volumes in
dealer-to-client (FXall) have driven growth, reflecting the
investment in new product capabilities, our customer relationships
and better customer service. Growth was partially offset by a
decline in the dealer-to-dealer Matching service revenue, as
anticipated until the re-platforming is complete .
Fixed Income, Derivatives & Other revenues increased 18.2%.
Tradeweb delivered record revenues, driven by average daily trading
volume of more than $1 trillion including record activity across a
number of asset classes. Notably, Credit Cash volumes were up 22.2%
and Rates Cash volumes were up 8.0%.
Cost of sales increased to GBP29 million (2020: GBP26 million)
driven primarily by the revenue growth in Tradeweb.
Adjusted operating expenses excluding depreciation, amortisation
and impairment increased by 9.6% driven largely by Tradeweb growth.
Depreciation, amortisation and impairment increased by 25.7%
reflecting investment in future growth and continued investment in
our infrastructure.
Operational Highlights
-- Successful migration of market liquidity to Turquoise Europe
with total average daily value traded above 2020 across Turquoise
orderbooks
-- The planned transition of FX Matching onto LSEG proprietary
trading technology has continued to make good progress and is on
course for initial delivery in 2023
-- Following a strategic review of the CurveGlobal business,
LSEG and other shareholders decided to wind the company down with
derivative contract trading ceasing on 28 January 2022
-- FXall is now integrated with ForexClear, allowing clients to
complete their workflow by clearing via ForexClear, providing
benefit across the FX value chain
-- London Stock Exchange remains the number one exchange in
Europe based on number of IPOs and equity capital raised. 2021 saw
record retail participation in New and Further Equity capital
raises on markets
-- London Stock Exchange is leading in supporting Green Issuers
with 116 equity issuers (with a combined market cap of over $200
billion) now having the Green Economy Mark
-- Tradeweb became the largest electronic trading platform for
US Treasuries. As rates volatility increased there was a global
resurgence in swaps market activity and within credit, we continued
to grow our market share and notional volumes with strong client
demand for automation
Post Trade
Pro-forma(1)
2021 2020 Variance Constant
(2) Currency
Variance
(3) %
GBPm GBPm %
------------------------------------ ------- ------- --------- ----------
OTC Derivatives 358 334 7.2% 8.9%
-------
Securities & Reporting 253 230 10.0% 12.0%
-------
Non-Cash Collateral 95 82 15.9% 17.8%
------------------------------------ ------- ------- --------- ----------
Total Revenue 706 646 9.3% 11.1%
Net Treasury Income 207 269 (23.0%) (20.0%)
------- ------- --------- ----------
Total Income 913 915 (0.2%) 2.0%
-------
Cost of sales (4) (123) (132) (6.8%) (3.9%)
------------------------------------ ------- ------- --------- ----------
Gross Profit 790 783 0.9% 3.0%
-------
Adjusted operating expenses
before depreciation, amortisation
and impairment (331) (309) 7.1% 8.0%
------------------------------------ ------- ------- --------- ----------
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment 459 474 (3.2%) (0.3%)
-------
Depreciation, amortisation
and impairment (97) (90) 7.8% 9.0%
------------------------------------ ------- ------- --------- ----------
Adjusted operating profit 362 384 (5.7%) (2.5%)
------- ------- --------- ----------
Adjusted EBITDA Margin 50.3% 51.8%
------------------------------------ ------- ------- --------- ----------
Non-financial KPIs(1)
2021 2020 Variance
%
------- ------- ---------
OTC
SwapClear
IRS notional cleared ($trn) 921 1,058 (12.9%)
SwapClear members 123 122 0.8%
Client trades ('000) 2,180 1,784 22.2%
Client average 10-year notional equivalent
($trn) 4.2 3.7 13.5%
ForexClear
Notional value cleared ($bn) 21,670 18,986 14.1%
ForexClear members 35 35 0.0%
CDSClear
Notional cleared (EURbn) 2,283 2,425 (5.9%)
CDSClear members 25 26 (3.8%)
Securities & Reporting
EquityClear trades (m) (5) 1,996 1,963 1.7%
Listed derivatives contracts (m) 285.8 341.0 (16.2%)
RepoClear - nominal value (EURtrn) 237.6 205.3 15.7%
Non-Cash Collateral
Average non-cash collateral (EURbn) 165.5 161.1 2.7%
NTI
Average cash collateral (EURbn) 107.2 109.9 (2.5%)
-------------------------------------------- ------- ------- ---------
1 The pro-forma results assume that the acquisition of Refinitiv
took place on 1 January 2020. The Borsa Italiana Group was
classified as a discontinued operation once the sale became highly
probable on 13 January 2021 and therefore its profits and losses
have been separated from the Group's continuing operations for both
periods presented
2 Variance is the difference between current and prior year on a
pro-forma basis, using the average exchange rate for the respective
period, therefore any changes in the exchange rates are also
reflected in the variance along with business performance
3 Constant currency variance shows financial performance,
excluding currency impacts, by comparing the current and prior year
at consistent exchange rates
4 Cost of sales incorporates the elimination of intercompany
transactions in the Post Trade division as part of the pro-forma
financial disclosure
5 EquityClear trades exclude interoperability trades; these will
differ to the volumes published on the LCH website which includes
these trades
Post Trade : pro-forma revenues excluding NTI increased
11.1%
Post Trade provides clearing, risk management, capital
optimisation and regulatory reporting solutions. Total revenue was
GBP706 million (2020: GBP646 million) and total income, including
Net Treasury Income, was GBP913 million (2020: GBP915 million).
LCH, the leading clearing franchise within Post Trade, achieved
record clearing volumes in 2021.
OTC Derivatives revenues increased by 8.9% driven by strong
performance in SwapClear client clearing. During Q4, the emergence
of the Omicron variant together with central bank interest rate
decisions significantly increased client clearing volumes, coupled
with one-off revenues in the quarter related to reference rate
reform.
Securities & Reporting revenues increased by 12.0%
reflecting record volumes from Euro debt issuance and market share
gains. RepoClear processed EUR238 trillion in nominal value, up
15.7%.
Non-Cash Collateral revenues increased 17.8% as a result of the
strong volumes and commercial policy changes.
Net Treasury Income (NTI) decreased by 20.0%, reflecting lower
investment returns compared with a strong comparator in 2020.
Cost of sales decreased by 3.9%, reflecting lower NTI, which
impacted the SwapClear revenue share agreement.
Adjusted operating expenses excluding depreciation, amortisation
and impairment increased by 8.0% and depreciation, amortisation and
impairment increased by 9.0% driven by our continued investment in
our infrastructure and commitment to resilience.
Operational Highlights
-- During the year LCH was instrumental in supporting and
guiding the market with LIBOR reference rate reform, benefitting
from one-off revenues in Q4 as a result
-- ForexClear connected with the FXall trading venue to provide
seamless connectivity between these two LSEG services
-- RepoClear successfully migrated onto our state-of-the-art MCCP clearing platform
-- SwapAgent saw a near 500% year-on-year increase with over
10,000 trades registered in 2021, a record for the service
-- UnaVista revenues increased by 4% due to clients taking on
additional licenses to fulfil their product needs post Brexit
-- The European Commission has announced the extension of
equivalence for UK-based CCPs to June 2025, allowing a continuation
of service to EU customers
-- Acquisition of Quantile Group Limited announced (expected to
complete in 2022). The acquisition will enable the expansion of
Post Trade risk management solutions to customers through trade
compression, capital, and margin optimisation services
-- In November 2021 Euronext N.V. (Euronext) announced its
intentions to move clearing arrangements away from LCH SA. We
continue to work closely with Euronext under our existing
partnership and look forward to continuing to offer our clearing
services to our global customers
Pro-forma Finance Income and Expense and Taxation
Pro-forma adjusted net finance costs were GBP206 million (2020:
GBP569 million), a decrease of GBP363 million on the prior year,
due to the refinancing of Refinitiv's debt at lower market rates
and the reduction in gross debt after the sale of the Borsa
Italiana Group in the first half of the 2021 year. We expect net
finance costs to be in the region of GBP160 million in 2022.
On an underlying basis the 20.9% pro-forma effective tax rate is
materially the same as the statutory rate. The global tax landscape
is undergoing fundamental change. At this stage the Group expects
some upward pressure on its underlying tax rate in 2022 and beyond,
principally due to UK tax rate change and potential US tax reform.
Based on the current tax rates and geographical mix, the Group
expects an underlying tax rate in 2022 of 22% to 24%.
Pro-forma adjusted earnings per share
The Group delivered a 46.5% increase in pro-forma adjusted basic
earnings per share from continuing operations to 286.7 pence (2020:
195.7 pence).
Balance Sheet / Leverage / Ratings
Net debt
Year ended 31 December 2021 2020
GBPm GBPm
--------
Gross borrowings 7,654 1,951
Cash and cash equivalents (2,665) (1,785)
Net derivative financial liabilities 25 17
Lease liabilities 715 189
-------------------------------------- -------- --------
Net debt 5,729 372
Less lease liabilities (715) (189)
Regulatory and operational amounts 1,294 1,242
-------------------------------------- -------- --------
Operating net debt 6,308 1,425
-------------------------------------- -------- --------
At 31 December 2021, the Group had operating net debt of
GBP6,308 million after setting aside GBP1,294 million for
regulatory and operational requirements. The amount set aside was
relatively stable year-on-year. The Group's operating net debt
increased during the year due to additional borrowings undertaken
to refinance Refinitiv's debt on acquisition.
Net leverage(1) increased to 1.9x as 31 December 2021 (2020:
1.1x). The Group is in its targeted range of 1-2 times despite the
debt related to Refinitiv.
The Group's interest cover, the coverage of net finance expense
by underlying EBITDA (earnings before net finance charges,
taxation, impairment, depreciation and amortisation, foreign
exchange gains or losses and non-underlying items), decreased to
17.9 times in the year (2020: 18.8 times) reflecting the cost of
the additional debt taken on to acquire the Refinitiv group.
Effective at the time of the Refinitiv acquisition in January
2021, the Group increased its committed revolving credit facilities
to GBP2.5 billion (2020: GBP1.2 billion). This was achieved by
increasing its GBP600 million facility maturing in December 2024 to
GBP1,425 million and replacing the GBP600 million facility due in
November 2022 with a GBP1,075 million facility maturing in December
2025. During the period, the first of two one-year extension
options on the GBP1,075 million facility were taken up, extending
the facility's maturity out to December 2026.
On completion of the Refinitiv acquisition the Group refinanced
Refinitiv's debt by borrowing $9.936 billion and EUR3.629 billion
under the bridge facility, term loans and multi-currency revolving
credit facilities. The bridge facility and multi-currency revolving
credit facilities were repaid on the issuance of nine senior
unsecured bonds under a newly established Global Medium Term Note
Programme and using proceeds from the sale of the Borsa Italiana
Group. The bridge facility was cancelled upon repayment. Partial
repayments have been made to the US Dollar and Euro term loans
using cash generated by the Group's operations.
With GBP2.5 billion of fully available funding headroom and
strong cash generation, the Group continues to be well positioned
to fund further growth opportunities and meet its stated
deleveraging targets.
LSEG is rated A with a stable outlook by Standard & Poor's;
the negative outlook at close of the Refinitiv acquisition has
since been removed. Moody's rating of A3 was confirmed at the close
of the Refinitiv acquisition. Standard & Poor's maintained its
long-term rating of LCH Limited and LCH SA at AA- with a stable
outlook through the period.
1 Net leverage is calculated as operating net debt (i.e. net
debt after excluding amounts set aside for regulatory and
operational purposes) to proforma adjusted EBITDA (Group
consolidated earnings before net finance charges, taxation,
impairment, depreciation and amortisation, foreign exchange gains
or losses and non-underlying items, prorated for acquisitions or
disposals undertaken in the period).
Foreign Exchange
As a result of the acquisition of Refinitiv, the majority of
LSEG revenues and expenses are in US dollars followed by Sterling,
Euro and other currencies. All guidance given by LSEG, including
the longer-term targets associated with the acquisition of
Refinitiv as well as specific guidance for the 2022 financial year,
has been given on a constant currency basis.
USD GBP EUR Other
2021 Total Income (1) 60% 17% 15% 8%
---- ---- ---- ------
2021 Underlying Expenses
(2) 52% 23% 11% 14%
---- ---- ---- ------
2021 Total Income by USD GBP EUR Other
Division (1)
Data & Analytics 67% 10% 12% 11%
---- ---- ---- ------
Capital Markets 59% 24% 16% 1%
---- ---- ---- ------
Post Trade 18% 46% 34% 2%
---- ---- ---- ------
Other 48% 18% 29% 5%
---- ---- ---- ------
1 Total income includes recoveries
2 Underlying expenses includes cost of sales, underlying
operating expenses and underlying depreciation and amortisation
Spot / average rates
Foreign exchange 2021 2020
------------
Spot GBP/EUR rate at 31 December 1.19 1.11
--------
Spot GBP/US$ rate at 31 December 1.35 1.36
--------
Average GBP/EUR rate for the year 1.16 1.13
Average GBP/US$ rate for the year 1.38 1.28
------------------------------------------ ----- --------
Appendix: Reconciliation of IFRS continuing results to pro-forma
continuing results
Year ended 31 December 2021 LSEG Refinitiv
Continuing operations Year ended One month Adjustments(2) Pro-forma
ended Group
31 Dec 31 Jan
2021(1) 2021
GBPm GBPm GBPm
-------------------------------------- ------------------ ------------------ ------------------ ------------------
Data & Analytics 4,294 315 - 4,609
Capital Markets 1,177 78 - 1,255
Post Trade 913 - - 913
Other 32 2 - 34
-------------------------------------- ------------------ ------------------ ------------------ ------------------
Total income (excl. recoveries) 6,416 395 - 6,811
------------------ ------------------
Recoveries 324 30 - 354
-------------------------------------- ------------------ ------------------ ------------------ ------------------
Total income (incl. recoveries) 6,740 425 - 7,165
------------------ ------------------
Cost of sales (862) (61) - (923)
-------------------------------------- ------------------ ------------------ ------------------ ------------------
Gross profit 5,878 364 - 6,242
------------------
Adjusted operating expenses
before depreciation, amortisation
and impairment (2,791) (186) - (2,977)
Income from equity Investments 22 - - 22
Share of loss after tax of associates (4) - - (4)
Adjusted earnings before interest,
tax, depreciation, amortisation
and impairment 3,105 178 - 3,283
Adjusted depreciation, amortisation
and impairment (721) (53) - (774)
Adjusted operating profit 2,384 125 - 2,509
Adjusted finance expense (166) (40) - (206)
-------------------------------------- ------------------ ------------------ ------------------
Adjusted profit before tax 2,218 85 - 2,303
Adjusted tax (458) (22) - (480)
Adjusted profit for the year
(from continuing operations) 1,760 63 - 1,823
-------------------------------------- ------------------ ------------------ ------------------ ------------------
Profit attributable to:
Equity holders 1,541 54 1,595
Non-controlling interest 219 9 228
-------------------------------------- ------------------ ------------------ ------------------ ------------------
Adjusted basic earnings per
share (p) 286.5 286.7
-------------------------------------- ------------------ ------------------ ------------------ ------------------
1 The LSEG results from continuing operations exclude
non-underlying items and are prepared in accordance with IFRS and
have been extracted without adjustment from the audited
consolidated financial statements of LSEG for the year ended 31
December 2021
2 Total income and cost of sales are adjusted to eliminate inter-company transactions
Year ended 31 December 2020 LSEG Refinitiv
Continuing operations Year ended Year ended Adjustments(2) Pro-forma
Group
31 Dec 31 Dec
2020 (1) 2020
GBPm GBPm GBPm GBPm
-------------------------------------- ------------------ ------------------ ------------------ ------------------
Data & Analytics 824 3,851 (22) 4,653
Capital Markets 288 882 - 1,170
Post Trade 915 - - 915
Other 3 26 - 29
-------------------------------------- ------------------ ------------------ ------------------ ------------------
Total income (excl. recoveries) 2,030 4,759 (22) 6,767
------------------
Recoveries - 340 (2) 338
-------------------------------------- ------------------ ------------------ ------------------ ------------------
Total income (incl. recoveries) 2,030 5,099 (24) 7,105
------------------
Cost of sales (208) (762) 24 (946)
-------------------------------------- ------------------ ------------------ ------------------ ------------------
Gross profit 1,822 4,337 - 6,159
Adjusted operating expenses
before depreciation, amortisation
and impairment (749) (2,274) - (3,023)
Income from equity Investments - - - -
Share of loss after tax of associates (4) - - (4)
Adjusted earnings before interest,
tax, depreciation, amortisation
and impairment 1,069 2,063 - 3,132
Adjusted depreciation, amortisation
and impairment (180) (567) - (747)
Adjusted operating profit 889 1,496 - 2,385
Adjusted finance expense (57) (512) - (569)
-------------------------------------- ------------------ ------------------ ------------------
Adjusted profit before tax 832 984 - 1,816
Adjusted tax (186) (369) (555)
Adjusted profit for the year
(from continuing operations) 646 615 1,261
-------------------------------------- ------------------ ------------------ ------------------ ------------------
Profit attributable to:
Equity holders 584 503 1,087
Non-controlling interest 62 112 174
-------------------------------------- ------------------ ------------------ ------------------ ------------------
Adjusted basic earnings per
share (p) 166.7 195.7
-------------------------------------- ------------------ ------------------ ------------------ ------------------
1 The LSEG results from continuing operations exclude
non-underlying items and are prepared in accordance with IFRS and
have been extracted without adjustment from the audited
consolidated financial statements of LSEG for the year ended 31
December 2020
2 Total income and cost of sales are adjusted to eliminate inter-company transactions
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2021 2020
(Re-presented)(1)
---------- -------------- ------- ----------------------------------
Underlying Non-underlying Total Underlying Non-underlying Total
Continuing operations Notes GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 4, 5 6,502 - 6,502 1,760 - 1,760
Net treasury income
from CCP clearing
business 4, 5 207 - 207 269 - 269
Other income 4, 5 31 - 31 1 - 1
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Total income 6,740 - 6,740 2,030 - 2,030
Cost of sales 4 (862) - (862) (208) - (208)
Gross profit 5,878 - 5,878 1,822 - 1,822
Expenses
Operating expenses
before depreciation,
amortisation and
impairment 6, 8 (2,791) (339) (3,130) (749) (168) (917)
Income from equity
investments 22 - 22 - - -
Share of loss after
tax of associates (4) - (4) (4) - (4)
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Earnings before interest,
tax, depreciation,
amortisation and
impairment 3,105 (339) 2,766 1,069 (168) 901
Depreciation, amortisation 8, 13,
and impairment 14 (721) (887) (1,608) (180) (159) (339)
Operating profit/(loss) 2,384 (1,226) 1,158 889 (327) 562
---------- -------------- ------- ---------- -------------- ------
Finance income 46 - 46 6 - 6
Finance expense (212) (5) (217) (63) (13) (76)
---------- -------------- ------- ---------- -------------- ------
Net finance expense 8, 9 (166) (5) (171) (57) (13) (70)
Profit/(loss) before
tax 2,218 (1,231) 987 832 (340) 492
Taxation 8, 10 (458) 131 (327) (186) 48 (138)
Profit/(loss) from
continuing operations 1,760 (1,100) 660 646 (292) 354
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Discontinued operations
Profit/(loss) after
tax from discontinued
operations 3 84 2,519 2,603 158 (25) 133
Profit/(loss) for
the year 1,844 1,419 3,263 804 (317) 487
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Profit/(loss) from
continuing operations
attributable to:
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Equity holders 1,541 (1,012) 529 584 (291) 293
Non-controlling interests 219 (88) 131 62 (1) 61
1,760 (1,100) 660 646 (292) 354
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Profit/(loss) from
discontinued operations
attributable to:
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Equity holders 80 2,520 2,600 150 (22) 128
Non-controlling interests 4 (1) 3 8 (3) 5
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
84 2,519 2,603 158 (25) 133
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Profit/(loss) for
the year 1,844 1,419 3,263 804 (317) 487
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Earnings per share
attributable to equity
holders
Continuing operations
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Basic earnings per
share 11 98.4p 83.6p
Diluted earnings
per share 11 97.8p 82.6p
Adjusted basic earnings
per share 11 286.5p 166.7p
Adjusted diluted
earnings per share 11 284.7p 164.8p
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Total operations
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Basic earnings per
share 11 581.7p 120.3p
Diluted earnings
per share 11 578.1p 118.9p
Adjusted basic earnings
per share 11 301.4p 209.7p
Adjusted diluted
earnings per share 11 299.5p 207.3p
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Dividend per share
in respect of the
financial year
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
Dividend per share
paid during the year 12 25.0p 23.3p
Dividend per share
declared for the
year 12 70.0p 51.7p
--------------------------- ------ ---------- -------------- ------- ---------- -------------- ------
(1) The 2020 results have been re-presented to exclude the results
of the discontinued operations (refer to note 3).
CONSOLIDATED STATEMENT of comprehensive income
Year ended 31 December 2021 2020
(Re-presented)(1)
--------------------------------------------------------- ----- ----- -----------------
Continuing operations Notes GBPm GBPm
Profit from continuing operations 660 354
--------------------------------------------------------- ----- ----- -----------------
Other comprehensive income
Items that will not be subsequently reclassified to
the income statement
Actuarial gains/(losses) on retirement benefit
obligations 101 (1)
Gain on equity instruments designated as fair
value through other comprehensive income 59 6
Income tax relating to these items 10 (25) -
135 5
--------------------------------------------------------- ----- ----- -----------------
Items that may be subsequently reclassified to the
income statement
Gain on cash flow hedges 22 -
Gain on cash flow hedges recycled to the income
statement (2) -
Net gains/(losses) on net investment hedges 87 (64)
Debt instruments at fair value through other
comprehensive income:
- Net gains from changes in fair value 2 17
- Gains on disposal recycled to the income statement (4) (4)
Net exchange gains on translation of foreign
operations 13 13
Income tax relating to these items 10 1 (3)
119 (41)
--------------------------------------------------------- ----- ----- -----------------
Other comprehensive income/(loss) net of tax
from continuing operations 254 (36)
--------------------------------------------------------- ----- ----- -----------------
Total comprehensive income from continuing operations 914 318
--------------------------------------------------------- ----- ----- -----------------
Discontinued operations
Total comprehensive income from discontinued
operations 2 2,498 214
Total comprehensive income 3,412 532
--------------------------------------------------------- ----- ----- -----------------
Total comprehensive income from continuing operations
attributable to:
--------------------------------------------------------- ----- ----- -----------------
Equity holders 775 242
Non-controlling interests 139 76
--------------------------------------------------------- ----- ----- -----------------
Total comprehensive income from continuing operations 914 318
--------------------------------------------------------- ----- ----- -----------------
Total comprehensive income from discontinued
operations attributable to:
--------------------------------------------------------- ----- ----- -----------------
Equity holders 2,496 207
Non-controlling interests 2 7
--------------------------------------------------------- ----- ----- -----------------
Total comprehensive income from discontinued
operations 2,498 214
--------------------------------------------------------- ----- ----- -----------------
Total comprehensive income 3,412 532
--------------------------------------------------------- ----- ----- -----------------
(1) The 2020 results have been re-presented to exclude the results
of the discontinued operations (refer to note 3).
-----------------------------------------------------------------------
consolidated balance sheet
At 31 December Group
----------------
2021 2020
Notes GBPm GBPm
Assets
Non-current assets
Property, plant and equipment 13 832 297
Intangible assets 14 31,724 4,324
Investment in subsidiary companies - -
Investment in associates 25 25
Deferred tax assets 508 51
Derivative financial instruments 15 2 -
Investments in financial assets 15 351 280
Retirement benefit assets 568 81
Trade and other receivables 202 14
34,212 5,072
--------------------------------------------------- ----- ------- -------
Current assets
Trade and other receivables 967 594
Derivative financial instruments 15 25 -
-------
Clearing member financial assets 665,031 758,510
Clearing member cash and cash equivalents 83,795 83,011
------- -------
Clearing member assets 15 748,826 841,521
Current tax receivable 398 77
Investments in financial assets - debt instruments 15 - 92
Cash and cash equivalents 15 2,665 1,785
Assets held for sale 13 16 -
--------------------------------------------------- ----- ------- -------
752,897 844,069
--------------------------------------------------- ----- ------- -------
Total assets 787,109 849,141
--------------------------------------------------- ----- ------- -------
Liabilities
Current liabilities
Trade and other payables 1,782 613
Contract liabilities 245 168
Derivative financial instruments 15 7 6
Clearing member financial liabilities 15 748,644 841,553
Current tax payable 73 24
15,
Borrowings 16 - 605
Provisions 16 1
--------------------------------------------------- ----- ------- -------
750,767 842,970
--------------------------------------------------- ----- ------- -------
Non-current liabilities
15,
Borrowings 16 7,654 1,346
Derivative financial instruments 15 45 11
Contract liabilities 101 94
Deferred tax liabilities 1,835 411
Retirement benefit obligations 85 18
Other payables 1,059 152
Provisions 44 14
10,823 2,046
--------------------------------------------------- ----- ------- -------
Total liabilities 761,590 845,016
--------------------------------------------------- ----- ------- -------
Net assets 25,519 4,125
--------------------------------------------------- ----- ------- -------
Equity
Capital and reserves attributable to the Company's
equity holders
Ordinary share capital 17 39 24
Share premium 17 978 971
Retained earnings 3,816 911
Other reserves 17 18,807 1,805
Total shareholders' funds 23,640 3,711
Non-controlling interests 1,879 414
--------------------------------------------------- ----- ------- -------
Total equity 25,519 4,125
--------------------------------------------------- ----- ------- -------
cash flow statement
Year ended 31 December Group
---------------------------
2021 2020
(Re-presented)(1)
Notes GBPm GBPm
---------------------------------------------------- ----- -------- -----------------
Operating activities
Profit before tax from continuing operations 987 492
Adjustments to reconcile profit before tax
to net cash flow:
- Depreciation and impairment of property,
plant and equipment 13 296 59
- Amortisation and impairment of intangible
assets 14 1,312 281
- Share based payments 141 44
- Net finance expense 9 171 70
- Foreign exchange gains 110 56
- Dividend income (22) -
- Other movements 59 (23)
Working capital changes and movements in other
assets and liabilities:
- Decrease/(increase) in receivables, contract
and other assets 702 21
- (Decrease)/increase in payables, contract
and other liabilities (319) (53)
- Increase in clearing member financial assets (72,668) (44,139)
- Increase in clearing member financial liabilities 72,408 44,329
---------------------------------------------------- ----- -------- -----------------
Cash generated from/(used in) operations 3,177 1,137
Interest received 14 4
Interest paid (152) (78)
Taxes paid (390) (215)
Royalties paid (70) (1)
---------------------------------------------------- ----- -------- -----------------
Net cash flows from continuing operations(2) 2,579 847
Net cash flows from discontinued operations 3 23 125
---------------------------------------------------- ----- -------- -----------------
Net cash flows from operating activities 2,602 972
---------------------------------------------------- ----- -------- -----------------
Investing activities
Purchase of property, plant and equipment 13 (97) (19)
Purchase of intangible assets 14 (565) (177)
Investments in financial assets (28) (2)
Cash acquired on acquisition of subsidiaries
(Refinitiv) 2.1 925 -
Acquisition of subsidiaries, net of cash acquired
(NFI) 2.2 (151) -
Acquisition of subsidiaries, net of cash acquired
(Quorate) 2.3 (12) -
Proceeds from sale of disposal group, net
of cash disposed 3 3,592 -
Dividends received 22 -
Other investing activities - 31
---------------------------------------------------- ----- -------- -----------------
Net cash flows from continuing operations 3,686 (167)
Net cash flows from discontinued operations 3 (2) (26)
---------------------------------------------------- ----- -------- -----------------
Net cash flows from investing activities 3,684 (193)
---------------------------------------------------- ----- -------- -----------------
Financing activities
Payment of principal portion of lease liabilities (118) (43)
Proceeds from borrowings 17 6,944 5
Repayment of borrowings 17 (11,614) (228)
Dividends paid to equity holders of the parent 12 (426) (257)
Dividends paid to non-controlling interests (95) (21)
Other financing activities (31) 2
Net cash flows from continuing operations (5,340) (542)
Net cash flows from discontinued operations 3 (6) -
---------------------------------------------------- ----- -------- -----------------
Net cash flows from financing activities (5,346) (542)
---------------------------------------------------- ----- -------- -----------------
Increase/(decrease) in cash and cash equivalents 940 237
Foreign exchange translation (60) 55
Cash and cash equivalents at 1 January 1,785 1,493
Cash and cash equivalents at 31 December(3) 2,665 1,785
---------------------------------------------------- ----- -------- -----------------
(1) The 2020 results have been re-presented to exclude the
results of the discontinued operations (refer to note 3).
(2) The Group's net cash inflow from continuing operating
activities of GBP2,579 million (2020: GBP847 million) includes
GBP293 million (2020: GBP95 million) of expenses related to
non-underlying items.
(3) Group cash flow does not include cash and cash equivalents
held by the Group's Post Trade operations on behalf of the Group's
clearing members for use in their operations as managers of the
clearing and guarantee systems. These balances represent margins
and default funds held for counterparties for short periods in
connection with these operations.
STATEMENT OF CHANGES IN EQUITY
Group
----------------------- ----- -------- -------- --------- ------------ ------------- --------------- -------
Year ended 31
December
Attributable to equity holders
----------------------------------------------------------
Total
Ordinary attributable
share Share Retained Other to equity Non-controlling Total
capital premium earnings reserves(1) holders interests equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ----- -------- -------- --------- ------------ ------------- --------------- -------
1 January 2020 24 967 668 1,796 3,455 346 3,801
Total comprehensive
income for the
year - - 440 9 449 83 532
Issue of shares 17 - 4 - - 4 - 4
Dividends paid
in the year 12 - - (257) - (257) (16) (273)
Share-based payments - - 51 - 51 - 51
Tax benefit on
share-based payments
in excess of
expense recognised - - 9 - 9 1 10
31 December 2020 24 971 911 1,805 3,711 414 4,125
Total comprehensive
income for the
year - - 3,250 21 3,271 141 3,412
Issue of shares 17 - 7 - - 7 - 7
Issue of shares
for acquisition
of subsidiaries
(with non-controlling
interest) 2 15 - (25) 16,981 16,971 1,442 18,413
Dividends paid
in the year 12 - - (426) - (426) (97) (523)
Share-based payments - - 76 - 76 67 143
Tax benefit on
share-based payments
in excess of
expense recognised - - 30 - 30 - 30
Disposal of business 3 - - - - - (65) (65)
Adjustments to
non-controlling
interest - - - - - (23) (23)
31 December 2021 39 978 3,816 18,807 23,640 1,879 25,519
----------------------- ----- -------- -------- --------- ------------ ------------- --------------- -------
(1) Movements in other reserves are detailed in note 17.
NOTES TO THE FINANCIAL STATEMENTS
This section describes the Group's significant policies and
critical accounting judgements and estimates that relate to the
financial statements and notes as a whole. Where a significant
accounting judgement or estimate relates to a particular note, it
is disclosed in that note.
1. Significant accounting policies
1.1 Reporting entity
These financial statements are prepared for London Stock
Exchange Group plc (the Company) and its subsidiaries (the Group).
The Group is a diversified global financial markets infrastructure
and data business. 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.
On 29 January 2021, the Group acquired Refinitiv Parent Limited
and its subsidiaries (Refinitiv) (refer to note 2). The results of
Refinitiv have been consolidated since the date of acquisition. As
a result of the acquisition, the Group now reports its results in
three main segments: Data & Analytics, Capital Markets and Post
Trade. The segment reporting for the comparative period has been
re-presented to align with this new structure (refer to note
4).
On 29 April 2021, the Group disposed of London Stock Exchange
Group Holdings (Italia) SpA and its subsidiaries (the Borsa
Italiana group) (refer to note 3). The Borsa Italiana group was
classified as a discontinued operation and disposal group once the
sale became highly probable on 13 January 2021 (the date the EU
Commission approved the acquisition of Refinitiv). Its profits,
losses and cash flows have therefore been separated from the
Group's continuing operations and are shown as discontinued
operations. The comparative period has been re-presented
accordingly. The Borsa Italiana group operations were not
classified as a disposal group as at 31 December 2020 and the
balance sheet has not been re-presented from that published in the
2020 Annual Report.
1.2 Compliance with International Financial Reporting Standards
(IFRS)
The Group's consolidated and the Company's financial statements
are prepared in accordance with UK-adopted international accounting
standards in conformity with the requirements of the Companies Act
2006. The significant accounting policies applied in the
preparation of these financial statements are set out below. These
policies have been consistently applied to all the periods
presented, unless otherwise stated.
1.3 Basis of preparation
The financial statements are prepared on a historical cost basis
except for derivative financial instruments, debt and equity
financial assets and contingent consideration which are measured at
fair value.
Going concern
The financial statements have been prepared on a going concern
basis.
The Directors consider there to be no material uncertainties
that may cast significant doubt on the Group and Company's ability
to continue to operate as a going concern. The Directors have a
reasonable expectation that the Group and the Company have adequate
resources to continue in operational existence for the foreseeable
future, being at least 12 months from the date when these financial
statements are authorised for issue. Accordingly, they continue to
adopt the going concern basis in the preparation of these financial
statements.
Presentation of income statement
The Group uses a columnar format for the presentation of its
consolidated income statement to separately identify results before
non-underlying items (adjusted). This provides the reader with
supplemental data relevant to an understanding of the Group's
financial performance, as non-underlying items of income and
expense are material by their size and/or nature.
The presentation is consistent with the way that financial
performance is measured by management and reported to the Executive
Committee and Board.
Non-underlying items include:
-- Amortisation and impairment of goodwill and other purchased intangible assets
-- Incremental depreciation, amortisation and impairment of the
fair value adjustments of tangible or intangible assets recognised
as a result of acquisitions
-- Other income or expenses not considered to drive the
operating results of the Group (including integration and
transaction costs related to acquisitions and disposals of
businesses)
-- Tax on non-underlying items
The profit measure before non-underlying items is used to
calculate adjusted earnings per share. Profit before non-underlying
items is reconciled to profit before taxation on the face of the
income statement. Non-underlying items are disclosed in note 8.
1.4 New and amended standards and interpretations
Standards, interpretations and amendments to published standards
effective for the year ended 31 December 2021
During the year, the following amendments to standards became
effective. These do not have a material impact on the Group's
financial statements:
-- Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9
-- Amendments to IFRS 7 Financial Instruments: Disclosures, IFRS
9 Financial Instruments and IAS 39 Financial Instruments:
Recognition and Measurement: Interest Rate Benchmark Reform - Phase
2
Standards, interpretations and amendments to published standards
which are not yet effective
The new and amended standards that are issued, but not yet
effective, up to the date of the Group's financial statements are
disclosed below. The Group intends to adopt these, if applicable,
when they become effective. The Group is currently assessing their
impact, but this is not expected to be material to the Group's
financial statements:
International accounting standards and interpretations Effective date
------------------------------------------------------------------------------------------------- ---------------
Amendments to IFRS 3 Business Combinations: reference to the Conceptual Framework 1 January 2022
Amendments to IAS 16 Property, Plant and Equipment: proceeds before intended use 1 January 2022
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets: onerous contracts 1 January 2022
- cost of fulfilling a contract
Annual Improvements to IFRS 2018-2020 1 January 2022
Amendments to IAS 1 Presentation of Financial Statements classification of liabilities as 1 January 2023
current or non-current
IFRS 17 Insurance Contracts, including amendments to IFRS 17 1 January 2023
------------------------------------------------------------------------------------------------- ---------------
1.5 Significant accounting judgements, estimates and
assumptions
Judgements, estimates and assumptions are regularly evaluated
based on historical experience, current circumstances and
expectations of future events. The key areas involving a higher
degree of judgement or complexity or areas where assumptions are
significant to the financial statements, are highlighted in the
relevant note.
We have considered the impact of climate change on our financial
reporting for the year. Some physical and transition risks can
manifest in the shorter term however many of the effects arising
from climate change will be longer term in nature, and therefore
come with an inherent level of uncertainty. Climate change has had
limited effect on the accounting judgements and estimates for the
current period and we believe there is no material impact on the
asset and liability valuations at 31 December 2021 in relation to
climate risks.
Critical judgements are disclosed in the following notes:
Note Judgements
----- ---------------------- ---------------------------------------------------------------
2 Business combinations Assessing lock-up provisions when valuing consideration shares
8 Non-underlying items Classifying items as non-underlying
----- ---------------------- ---------------------------------------------------------------
10 Taxation Uncertain tax positions
===== ====================== ===============================================================
Estimates and assumptions are disclosed in the following
notes:
Note Estimates and assumptions
----- ---------------------- ----------------------------------------------------------------------------------
2 Business combinations
* Tangible and intangible assets acquired as part of a
business combination
* Fair value of equity-settled share-based payment
awards granted by Tradeweb
===== ====================== ==================================================================================
5 Total income Expected service period for admission and listing in the Primary Markets business
===== ====================== ==================================================================================
10 Taxation Uncertain tax positions
===== ====================== ==================================================================================
14 Intangible assets
* Recoverable amounts of relevant cash-generating units
(CGUs)
* Estimated useful economic lives
===== ====================== ==================================================================================
2. Business combinations
Significant accounting judgements
Assessing lock-up provisions when valuing consideration
shares
In accordance with IFRS 13 Fair Value Measurement, the fair
value of consideration shares should take into account any
restrictions on the sale or use of those shares. If those
restrictions relate to the shares rather than to the holder of the
shares, a market participant would take those restrictions into
account in determining the price they would pay for those shares.
LSEG acquired the issued share capital of Refinitiv Parent Limited
and, in exchange, LSEG issued voting and limited-voting ordinary
shares. Each limited-voting share includes a right to convert the
instrument into an ordinary voting share (provided that a 30%
voting rights restriction for the previous Refinitiv shareholders
is not breached). Were the Refinitiv shareholders to sell the
limited-voting shares to a market participant, the market
participant would hold these as ordinary voting shares. Similarly,
lock-up provisions are only applicable to the Refinitiv
shareholders and are also not considered an attribute of the
shares. It was therefore determined that there is no fair value
difference between the voting and limited-voting shares issued as
consideration.
Significant accounting estimates and assumptions
Intangible assets acquired as part of a business combination
The fair value of acquired intangible assets (and therefore the
resulting goodwill recognised on acquisition) is significantly
affected by a number of factors. These include management's best
estimates of future performance (i.e. forecast revenue, expected
revenue attrition, forecast operating margin and contributory
assets changes) and estimates of the return required to determine
an appropriate discount rate (in order to calculate the net present
value of the assets).
Fair value of equity-settled share-based payment awards granted
by Tradeweb
Estimating fair value for share-based payment awards requires
determination of the most appropriate valuation model. This depends
on the terms and conditions of the grant. It also requires
determination of the most appropriate inputs to the valuation
model. The Group measured the fair value of outstanding
equity-settled share-based payment awards granted by Tradeweb as if
the acquisition date were the grant date and used the Black-Scholes
model.
2.1 Refinitiv acquisition
On 29 January 2021, the Group acquired Refinitiv, a company
based in the Cayman Islands and headquartered in London and New
York. Refinitiv is a leading global provider of market and
financial data and infrastructure, delivering data, insight and
analytics.
At acquisition, Refinitiv held an approximate 52% economic
interest in Tradeweb Markets Inc. (Tradeweb) and its subsidiaries
(the Tradeweb group). Tradeweb is a US company and the holding
company of Tradeweb Markets LLC, which offers electronic
marketplaces for trading fixed income, derivatives, money market
and equity products. Tradeweb operates as a standalone, publicly
listed entity.
The acquisition of Refinitiv is a transformational transaction,
strategically and financially, and positions the Group for
long-term sustainable growth. Refinitiv brings highly complementary
capabilities in data, analytics and capital markets.
The combination of LSEG and Refinitiv is expected to deliver
significant benefits for customers, and in particular is intended
to:
-- transform LSEG's position and create a global financial
markets infrastructure leader of the future
-- strengthen LSEG's global footprint and accelerate its
successful growth strategy across multiple key financial centres
and jurisdictions, including in North America (the world's largest
financial market), Asia and fast-growing emerging markets
-- significantly enhance LSEG's customer proposition in data and
analytics, utilising the combined business's intellectual property
to offer innovative new services
-- complement LSEG's existing multi-asset class growth strategy
to create a global multi-asset class capital markets business with
the addition of high-growth foreign exchange and fixed income
venues
-- deepen and expand LSEG's and Refinitiv's shared core
principles of open access and customer partnership
At 29 January 2021, the purchase price allocation (PPA) was
prepared on a provisional basis in accordance with IFRS 3. During
the measurement period, the Group finalised:
-- the valuation of the intangible assets recognised on acquisition
-- the valuation of certain right-of-use property assets
-- the measurement of deferred tax liabilities assumed on acquisition
Adjustments were made to the provisional PPA, which was
disclosed in the Group's condensed consolidated financial
statements for the six months ended 30 June 2021, resulting in:
-- decrease in the fair value of customer contracts and
relationships (intangible assets) of US$100 million (GBP73
million)
-- decrease in right-of-use property assets of US$109 million (GBP80 million)
-- decrease in net assets of US$14 million (GBP10 million)
-- decrease in the net deferred tax liabilities of US$188 million (GBP138 million)
-- decrease in the non-controlling interest of US$87 million (GBP63 million)
-- resulting decrease in goodwill of US$52 million (GBP38 million)
Details of the purchase consideration, non-controlling interest,
net assets acquired and goodwill are set out below.
Purchase consideration
Number
of shares
(million) US$m GBPm
------------------------------------------------------ ---------- ------ ------
Ordinary shares issued
- to the sellers 198 22,703 16,570
- to the Management Incentive Plan (MIP) participants 6 547 399
------------------------------------------------------ ---------- ------ ------
204 23,250 16,969
Fair value of equity-settled share-based payment
awards (attributable to pre-acquisition services
rendered) 3 2
------------------------------------------------------ ---------- ------ ------
Purchase consideration 23,253 16,971
------------------------------------------------------ ---------- ------ ------
Under the terms of the Stock Purchase Agreement, LSEG (directly
and through certain wholly owned subsidiaries) acquired the entire
issued share capital of Refinitiv Parent Limited and, in exchange,
LSEG issued 204,225,968 shares (comprising 136,870,442 listed LSEG
ordinary shares and 67,355,526 unlisted LSEG limited-voting
ordinary shares). The limited-voting ordinary shares rank pari
passu with the LSEG ordinary shares. Based on LSEG's issued share
capital at completion, the total shares amounted to an economic
interest in LSEG plc of approximately 37% but less than 30% of the
total voting rights in LSEG.
Of the total number of shares issued, 179,610,123 shares were
issued on 29 January 2021 and the remaining 24,615,845 shares were
issued on 1 March 2021.
Shares issued to the sellers
The fair value of the 198,184,632 shares issued as part of the
consideration paid to the sellers, excluding the MIP participants,
of GBP16,570 million, was based on the opening share price on 29
January 2021 of GBP83.94 adjusted for the valuation difference of
deferred shares issued on 1 March 2021.
The same value per share was applied to the voting and the
limited-voting shares, as explained above.
Shares issued to the MIP participants
Members of Refinitiv's senior management team participated in
the MIP set up by Refinitiv Holdings Limited (now York Parent
Limited). The MIP was designed to retain management, incentivise
performance and share growth in Refinitiv's value. Under the MIP,
management acquired shares in York Parent Limited.
To improve retention of the MIP participants, amendments were
made to the MIP to include additional service vesting
conditions.
The fair value of the 6,041,336 shares issued as part of the
consideration paid to the MIP participants of GBP399 million was
measured in accordance with IFRS 3 and IFRS 2 Share-based
Payment.
Identifiable assets acquired and liabilities
assumed
The following table summarises the recognised fair value of the
identifiable assets acquired and liabilities assumed at the acquisition
date:
Acquired Acquired
value value
Notes US$m GBPm
----------------------------------------------------- ------ -------- ----------
Assets
Non-current assets
Property, plant and equipment 13 929 678
Intangible assets 14 17,224 12,570
Investments in associates 12 9
Deferred tax assets 749 547
Investments in financial assets - equity instruments 30 22
Retirement benefit assets 522 381
Other non-current assets 275 200
----------------------------------------------------- ------ -------- ----------
19,741 14,407
----------------------------------------------------- ------ -------- ----------
Current assets
Trade and other receivables 1,582 1,154
Derivative financial instruments 2 2
Current tax receivable 49 36
Cash and cash equivalents 1,267 925
----------------------------------------------------- ------ -------- ----------
2,900 2,117
----------------------------------------------------- ------ -------- ----------
Liabilities
Current liabilities
Trade and other payables (1,419) (1,036)
Contract liabilities (839) (612)
Derivative financial instruments (48) (35)
Current tax payable (77) (55)
Other current liabilities (14) (11)
----------------------------------------------------- ------ -------- ----------
(2,397) (1,749)
----------------------------------------------------- ------ -------- ----------
Non-current liabilities
Borrowings (14,336) (10,462)
Deferred tax liabilities (1,890) (1,379)
Retirement benefit obligations (136) (99)
Provisions (42) (31)
Other non-current liabilities (1,141) (833)
----------------------------------------------------- ------ -------- ----------
(17,545) (12,804)
----------------------------------------------------- ------ -------- ----------
Fair value of identifiable net assets acquired 2,699 1,971
----------------------------------------------------- ------ -------- ----------
The identified intangible assets are as follows:
-----------------------------------------------------------------------------------
Estimated
useful
US$m GBPm lives
----------------------------------------------------- ------ -------- ----------
13-20
Customer contracts and relationships 10,116 7,383 years
Databases and content 3,286 2,398 5-12 years
Trade names 1,347 983 5-15 years
Licences 272 199 5-15 years
Software 2,134 1,557 3-13 years
Contract costs 61 44 3 years
Other 8 6
----------------------------------------------------- ------ -------- ----------
17,224 12,570
----------------------------------------------------- ------ -------- ----------
The fair value of assets acquired and liabilities assumed was
determined based on assumptions that reasonable market participants
would use in the principal (or most advantageous) market for the
asset or liability. The following assumptions, the majority of
which include significant unobservable inputs (Level 3 of the fair
value hierarchy), and valuation methodologies were used to
determine fair value:
-- Customer contracts and relationships - The income approach:
multi-period excess earnings method (MEEM) was used. The value of
the intangible asset is estimated from the residual earnings after
fair returns on all other assets employed (including other
intangible assets) have been deducted from the business's after-tax
operating earnings - so called 'contributory asset charges'. The
MEEM approach comprises the following steps:
a) Forecasting revenues attributable solely to existing assets
(e.g. revenue associated with existing customer contracts and
relationships). This will include estimating expected revenue
attrition (e.g. of customers) over time, as well as forecasting any
revenue growth (e.g. expected from existing customers)
b) Applying an appropriate operating margin to forecast sales
c) Applying an appropriate tax charge to estimate post-tax cash flows
d) Applying post-tax contributory asset charges to reflect the
return required on other tangible and intangible assets that
contribute to the generation of the forecast cash flows
e) Discounting the resulting net post-tax cash flows, using an
appropriate discount rate to arrive at the net present value
-- Databases and content, trade names and internally developed
computer software - The income approach: relief from royalty method
was used. The value of the asset is estimated from the value of
saved or avoided future royalty payments over the life of the asset
by virtue of owning the asset. In summary, the steps which the
method comprise are:
a) Forecasting the revenue that is derived using the asset (e.g. trade name or technology)
b) Estimating an arm's length royalty rate that would be paid for the use of each asset
c) Applying this royalty rate to the projected revenue relating
to each asset over the economic life
d) Deducting income tax from the net royalty stream
e) Selecting and applying an appropriate discount rate to the
after-tax royalty stream to derive a net present value
-- Broker-dealer licences - The income approach: with or without
method was used. The fair value is estimated based on income
streams, such as cash flows or earnings, discounted to a present
value. These discounted cash flows are calculated both with the
asset and without the asset. The difference in the cash flows is
discounted to the present value to determine the value of the
asset.
-- Deferred revenue (contract liabilities) - The income
approach: top down approach was used. Costs for activities (sales
commissions) that have already been performed to generate future
revenue that has not yet been recognised, and a notional profit on
those activities that a market participant would expect in order to
take on the performance obligations, are deducted from the market
value of the deferred revenue. The result is discounted to present
value.
-- Lease liabilities and right-of-use assets - The Group
measured the acquired lease liabilities using the present value of
the remaining lease payments as if the leases were new leases at
the date of acquisition. The corresponding right-of-use assets were
measured at an amount equal to the lease liabilities, adjusted to
reflect favourable or unfavourable terms of the leases when
compared with market terms.
-- Borrowings - The book value of debt assumed has been adjusted
to its fair value. On acquisition of Refinitiv, the Group
refinanced the Refinitiv third-party debt. The fair value is
therefore the cost to settle the debt.
-- Retirement benefit assets and obligations - Substantially all
of Refinitiv's employees participate in defined benefit and defined
contribution employee future benefit plans. Significant defined
benefit plans are measured in terms of IAS 19 Employee Benefits
using the projected unit credit method.
Within trade and other receivables of GBP1,154 million (US$1,582
million), the fair value of the trade receivables amounts to GBP876
million (US$1,200 million). The gross amount of trade receivables
is GBP883 million (US$1,210 million) and it is expected that the
full contractual amounts can be collected.
The deferred tax liability mainly comprises the tax effect of
the intangible assets.
Non-controlling interest
The Group elected to measure the non-controlling interest in Tradeweb
at the non-controlling interest's proportionate share (48%) in the
identifiable net assets.
US$m GBPm
----------------------------------------------------------- ------ -----
Non-controlling interest based on the unowned
proportionate interest (48%) of net assets 1,642 1,198
Fair value of equity-settled share-based payment
awards (attributable to pre-acquisition services
rendered) 335 244
------------------------------------------------------------ ------ -----
Non-controlling interest 1,977 1,442
------------------------------------------------------------ ------ -----
The fair value of the outstanding equity-settled share-based payment
awards granted by Tradeweb was measured in accordance with IFRS
3 and IFRS 2 as if the acquisition date were the grant date and
using the Black-Scholes model. The fair value was allocated to the
non-controlling interest based on the proportion of the share awards
attributable to pre-acquisition services.
Goodwill
Goodwill arising from the acquisition has been recognised as follows:
Note US$m GBPm
-------------------------------------------------- ----- -------- -------
Purchase consideration 23,253 16,971
Less: Fair value of identifiable net assets
acquired (2,699) (1,971)
Non-controlling interest 1,977 1,442
-------------------------------------------------- ----- -------- -------
Goodwill 14 22,531 16,442
-------------------------------------------------- ----- -------- -------
The goodwill is attributable to:
-- growth in the underlying business
-- future data and technology not yet developed
-- expected synergies which will drive growth in the combined business
Goodwill is allocated to the Data & Analytics and Tradeweb
cash-generating units (CGUs) (refer to note 14). Goodwill
recognised of GBP1,150 million (US$1,575 million) is expected to be
deductible for income tax purposes.
Revenue and profit before tax
From the date of acquisition, Refinitiv contributed:
-- revenue of GBP4,653 million
-- total income of GBP4,671 million
-- operating profit before non-underlying items of GBP1,482 million
-- profit before tax (from continuing operations) of GBP328 million
If the acquisition had occurred on 1 January 2021, estimated
Group revenue for the period from continuing operations would have
been GBP7,165 million, with operating profit before non-underlying
items of GBP2,509 million.
Acquisition related costs
The Group incurred acquisition related costs of GBP99 million
primarily on adviser and professional fees and management retention
costs. These costs are recognised as non-underlying transaction
costs (refer to note 8).
2.2 NFI acquisition
On 25 June 2021, the Tradeweb group acquired all of the
outstanding equity interests of Execution Access, LLC, Kleos
Managed Services Holdings, LLC and Kleos Managed Services, L.P.
(collectively the NFI Acquisition). The all-cash purchase price of
US$190 million (GBP137 million) is:
-- net of cash acquired (US$34 million (GBP24 million))
-- net of deposits with clearing organisations acquired (US$18 million (GBP14 million))
Execution Access, LLC is a limited liability company organised
in the state of Delaware and is a broker-dealer registered with the
US Securities and Exchange Commission (SEC) and Financial Industry
Regulatory Authority. The platform (formerly known as eSpeed),
acquired from Nasdaq, is a fully executable central order limit
book for electronic trading in 'on-the-run' US government
bonds.
The PPA has been prepared on a provisional basis in accordance
with IFRS 3. If new information obtained within one year of the
acquisition date, about facts and circumstances that existed at the
acquisition date, identifies adjustments to the amounts below or
any additional provisions that existed at the date of acquisition,
then the accounting for the acquisition will be revised. The
primary areas not yet finalised relate to the valuation of the
identifiable intangible assets and software, and final working
capital adjustments.
Goodwill arising from the acquisition has been recognised as
follows:
Notes US$m GBPm
----------------------------------------------------- ----- ----- -----
Purchase consideration, including cash and deposits
with clearing organisations acquired 242 175
----------------------------------------------------- ----- ----- -----
Less: Fair value of identifiable net assets acquired
- Intangible assets: Customer relationships 14 (101) (73)
- Intangible assets: Software 14 (1) (1)
- Other non-current assets (1) (1)
- Other current assets (22) (15)
- Cash and cash equivalents (34) (24)
- Current liabilities 2 2
----------------------------------------------------- ----- ----- -----
Fair value of identifiable net assets acquired (157) (112)
----------------------------------------------------- ----- ----- -----
Goodwill 14 85 63
----------------------------------------------------- ----- ----- -----
The fair values were determined based on assumptions that
reasonable market participants would use in the principal (or most
advantageous) market and primarily included significant
unobservable inputs ( Level 3 of the fair value hierarchy ).
Customer relationships were valued using the income approach, the
same approach used to value the Refinitiv customer
relationships.
The acquired software development costs will be amortised over a
useful life of one year and the customer relationships will be
amortised over a useful life of 13 years.
The goodwill recognised in connection with the NFI Acquisition
is primarily attributable to the acquisition of an assembled
workforce and expected synergies from the integration of the
operation of the NFI Acquisition into the Tradeweb group's
operations. The goodwill has been allocated to the Group's Tradeweb
CGU and is expected to be deductible for income tax purposes.
Revenue and profit
From the date of acquisition, NFI contributed revenue of GBP4
million (US$5 million) and profit before tax of GBP1 million (US$1
million).
Acquisition related costs
The Group incurred acquisition related costs of GBP3 million
(US$5 million), which are recognised as non-underlying transaction
costs (refer to note 8).
2.3 Quorate Acquisition
On 4 August 2021, the Group acquired Quorate Technology Limited,
a specialist provider of automatic speech processing solutions.
Quorate was founded in 2012 as a spin-out from the Centre for
Speech Technology Research at The University of Edinburgh. This
acquisition will enable the Group to own and develop automatic
speech processing capabilities in order to better serve its
customers and their evolving needs.
The consideration was GBP15 million: GBP12 million paid upfront
in cash and a further GBP3 million deferred over three years
conditional on the delivery of product milestones. The provisional
fair value of the net assets acquired is GBPnil million. We have
therefore concluded that the total consideration (of GBP15 million)
should be recognised as goodwill and provisionally allocated to the
Tradeweb CGU. Quorate is complementary to the Group's existing
business and there is expected to be future cash flow growth from
the combined business.
3. Disposal of business and discontinued operations
Disposal of the Borsa Italiana group
On 13 January 2021, the disposal of the Borsa Italiana group was
judged to be highly probable and the group was treated as a
disposal group from that date until 29 April 2021, the date of
disposal. The Borsa Italiana group is a discontinued operation as a
result of its size and geographical area of operation. Its results
have been excluded from the continuing results of the Group for the
year ended 31 December 2021. The results for 31 December 2020 have
been re-presented to exclude the Borsa Italiana group results from
the continuing operations of the Group.
The Borsa Italiana group was sold for consideration of GBP3,876
million (EUR4,444 million), realising a profit on sale for the
Group of GBP2,519 million.
The results for the Borsa Italiana group included in the income
statement and statement of comprehensive income as discontinued
operations are as follows:
2021 2020
GBPm GBPm
----------------------------------------------------- ------- -----
Income statement
Total income 146 414
Cost of sales and operating expenses excluding
non-underlying amortisation (52) (185)
------------------------------------------------------- ------- -----
Adjusted profit before tax 94 229
Non-underlying expenses (4) (36)
------------------------------------------------------- ------- -----
Profit before tax 90 193
Taxation (6) (60)
Profit on disposal (see below) 2,519 -
------------------------------------------------------- ------- -----
Profit from discontinued operations 2,603 133
------------------------------------------------------- ------- -----
Other comprehensive income
Recycled amount from hedging reserve on
disposal 17 -
Net (losses)/gains from debt instruments
held at FVOCI (10) 9
Foreign exchange (losses)/gains on translation
in the period (53) 73
Cumulative foreign exchange adjustments
recycled on disposal (62) -
Tax on items in other comprehensive income 3 (1)
------------------------------------------------------- ------- -----
Other comprehensive income from discontinued
operations (105) 81
------------------------------------------------------- ------- -----
Total comprehensive income from discontinued
operations 2,498 214
------------------------------------------------------- ------- -----
The profit on disposal was calculated as
follows:
----------------------------------------------------- ------- -----
2021 2020
GBPm GBPm
----------------------------------------------------- ------- -----
Cash consideration received 3,876 -
Net assets disposed of (1,413) -
Non-controlling interests disposed 65 -
Recycling of cumulative foreign exchange translation
reserve 62 -
Recycling of amounts held in hedging reserve (17) -
Transaction costs (46) -
Other expenses (8) -
------------------------------------------------------- ------- -----
Profit on disposal 2,519 -
------------------------------------------------------- ------- -----
The results for the Borsa Italiana group
included in the cash flow statement as discontinued
operations are as follows:
----------------------------------------------------- ------- -----
2021 2020
GBPm GBPm
----------------------------------------------------- ------- -----
Cash consideration received on disposal 3,876 -
Cash disposed of (284) -
Net cash inflow from operating activities 23 125
Net cash outflow from investing activities (2) (26)
Net cash outflow from financing activities (6) -
Foreign exchange translation (of cash and
cash equivalents) (10) -
------------------------------------------------------- ------- -----
Net cash flow from discontinued operations 3,597 99
------------------------------------------------------- ------- -----
As part of the disposal agreement the Group continues to provide
services to the Borsa Italiana group on an arm's length basis.
4. Segment information
The Group has reorganised its operating units following the
acquisition of Refinitiv and has realigned its segment reporting to
reflect management structure changes. The Group now uses three main
operating segments:
-- Data & Analytics includes the division formerly reported
as Information Services as well as the core Refinitiv business
-- Capital Markets includes the former Capital Markets division
plus the former Technology Services segment as well as Refinitiv's
Tradeweb and FXall businesses
-- Post Trade includes the Group's CCPs and other post trade services
The segment results for the comparative period have been
re-presented to align with the new structure. There is no change to
the overall result. All results are on a continuing basis and
exclude the results of the Borsa Italiana group, which was disposed
of during the year (refer to note 3).
The Executive Committee monitors the operating results of its
divisions separately for the purpose of making decisions about
resource allocation and in assessing performance. The Executive
Committee uses a measure of adjusted earnings before interest, tax,
depreciation, amortisation and impairment (EBITDA) to assess the
performance of the operating segments.
Sales between segments are carried out at arm's length and are
eliminated on consolidation.
Results by operating segment for the year ended 31 December 2021
are as follows:
Data & Capital
Analytics Markets Post Trade Other Group
Continuing operations Notes GBPm GBPm GBPm GBPm GBPm
------------------------------------ ----- ---------- -------- ---------- ----- -------
Revenue from external customers(1) 5 4,618 1,177 706 1 6,502
Net treasury income from
CCP clearing business 5, 15 - - 207 - 207
Other income 5 - - - 31 31
------------------------------------ ----- ---------- -------- ---------- ----- -------
Total income 4,618 1,177 913 32 6,740
Cost of sales (712) (27) (123) - (862)
Gross profit 3,906 1,150 790 32 5,878
Adjusted operating expenses
before depreciation, amortisation
and impairment (1,909) (537) (331) (14) (2,791)
Income from equity investments - - - 22 22
Share of loss after tax of
associates - - - (4) (4)
------------------------------------ ----- ---------- -------- ---------- ----- -------
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment 1,997 613 459 36 3,105
Underlying depreciation, 13,
amortisation and impairment 14 (522) (112) (97) 10 (721)
Adjusted operating profit
(before non-underlying items) 1,475 501 362 46 2,384
Non-underlying depreciation,
amortisation and impairment 8 (887)
Other non-underlying items
excluding net finance expense 8 (339)
------------------------------------ ----- ---------- -------- ---------- ----- -------
Operating profit 1,158
Net finance expense (including
non-underlying items) 9 (171)
------------------------------------ ----- ---------- -------- ---------- ----- -------
Profit before tax from continuing
operations 987
Profit before tax from discontinued
operations 3 2,609
Profit before tax 3,596
------------------------------------ ----- ---------- -------- ---------- ----- -------
(1) Data & Analytics revenue includes recoveries of GBP324
million. Post Trade revenue includes net settlement and similar
expenses recovered from the CCP clearing businesses of GBP12
million which comprise gross settlement income of GBP46 million
less gross settlement expense of GBP34 million.
Re-presented results by operating segment for the year ended 31
December 2020 are as follows:
Data & Capital
Analytics Markets Post Trade Other Group
Continuing operations Notes GBPm GBPm GBPm GBPm GBPm
------------------------------------ ----- ---------- -------- ---------- ----- -----
Revenue from external customers(1) 5 824 288 646 2 1,760
Net treasury income from
CCP clearing business 5, 15 - - 269 - 269
Other income 5 - - - 1 1
------------------------------------ ----- ---------- -------- ---------- ----- -----
Total income 824 288 915 3 2,030
Cost of sales (66) (5) (137) - (208)
Gross profit 758 283 778 3 1,822
Adjusted operating expenses
before depreciation, amortisation
and impairment (288) (144) (309) (8) (749)
Income from equity investments - - - - -
Share of loss after tax of
associates - - - (4) (4)
------------------------------------ ----- ---------- -------- ---------- ----- -----
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment 470 139 469 (9) 1,069
Underlying depreciation, 13,
amortisation and impairment 14 (51) (39) (90) (180)
Adjusted operating profit/(loss)
(before non-underlying items) 419 100 379 (9) 889
Non-underlying depreciation,
amortisation and impairment 8 (159)
Other non-underlying items
excluding net finance expense 8 (168)
------------------------------------ ----- ---------- -------- ---------- ----- -----
Operating profit 562
Net finance expense (including
non-underlying items) 9 (70)
------------------------------------ ----- ---------- -------- ---------- ----- -----
Profit before tax from continuing
operations 492
Profit before tax from discontinued
operations 3 193
Profit before tax 685
------------------------------------ ----- ---------- -------- ---------- ----- -----
(1) Post Trade revenue included net settlement and similar
expenses recovered from the CCP clearing businesses of GBP9 million
which comprise gross settlement income of GBP38 million less gross
settlement expense of GBP29 million.
5. Total income
Significant accounting estimates and assumptions
Expected service period for admission and listing in the Primary
Markets business
As described above for Capital Markets, fees for primary market
initial admission are combined with ongoing listing services as one
performance obligation. Initial admission fees are spread over the
estimated period for admission services which is determined by
using historical analysis of listing durations in respect of the
companies on our markets. The estimated service period inherently
incorporates an element of uncertainty in relation to the length of
a customer listing, which is subject to factors outside of the
Group's control. The estimated service periods are reassessed at
each reporting date to make sure the period reflects the Group's
best estimates. The current estimated deferral period is five years
or seven years, depending on the market. The Group estimates that a
one year decrease in the deferral period would cause an estimated
GBP24 million increase in revenue and a one year increase in the
deferral period would cause an estimated GBP23 million decrease in
revenue recognised in the year.
The Group's revenue from contracts with customers disaggregated
by segment, major product and service line, and timing of revenue
recognition for the year ended 31 December 2021 is shown below:
Data & Capital
Analytics Markets Post Trade Other Group
Continuing operations GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ---------- -------- ---------- ----- -----
Revenue from external customers
Major product and service lines
Trading & banking solutions 1,364 - - - 1,364
Enterprise data solutions 1,050 - - - 1,050
Investment solutions 1,117 - - - 1,117
Wealth solutions 433 - - - 433
Customer & third-party risk solutions 330 - - - 330
Recoveries 324 - - - 324
Equities - 241 - - 241
FX - 204 - - 204
Fixed income, derivatives and
other - 732 - - 732
OTC derivatives - - 358 - 358
Securities & reporting - - 253 - 253
Non-cash collateral - - 95 - 95
Other - - - 1 1
-------------------------------------- ---------- -------- ---------- ----- -----
Total revenue 4,618 1,177 706 1 6,502
Net treasury income - - 207 - 207
Other income - - - 31 31
-------------------------------------- ---------- -------- ---------- ----- -----
Total income 4,618 1,177 913 32 6,740
-------------------------------------- ---------- -------- ---------- ----- -----
Timing of revenue recognition
Services satisfied at a point
in time 324 790 677 1 1,792
Services satisfied over time 4,294 387 29 - 4,710
-------------------------------------- ---------- -------- ---------- ----- -----
Total revenue 4,618 1,177 706 1 6,502
-------------------------------------- ---------- -------- ---------- ----- -----
The Group's re-presented revenue from contracts with customers disaggregated
by segment, major product and service line, and timing of revenue
recognition for the year ended 31 December 2020 is shown below:
Data & Capital
Analytics Markets Post Trade Other Group
Continuing operations GBPm GBPm GBPm GBPm GBPm
------------------------------------ ------------ -------- ----------- ----- -----
Revenue from external customers
Major product and service lines
Trading & banking solutions 17 - - - 17
Enterprise data solutions 128 - - - 128
Investment solutions 679 - - - 679
Equities - 227 - - 227
Fixed income, derivatives and
other - 61 - - 61
OTC derivatives - - 334 - 334
Securities & reporting - - 230 - 230
Non-cash collateral - - 82 - 82
Other - - - 2 2
------------------------------------ ------------ -------- ----------- ----- -----
Total revenue 824 288 646 2 1,760
Net treasury income - - 269 - 269
Other income - - - 1 1
------------------------------------ ------------ -------- ----------- ----- -----
Total income 824 288 915 3 2,030
------------------------------------ ------------ -------- ----------- ----- -----
Timing of revenue recognition
Services satisfied at a point
in time 6 161 625 2 794
Services satisfied over time 818 127 21 - 966
------------------------------------ ------------ -------- ----------- ----- -----
Total revenue 824 288 646 2 1,760
------------------------------------ ------------ -------- ----------- ----- -----
6. Operating expenses before depreciation, amortisation
and impairment
Operating expenses before depreciation, amortisation
and impairment comprise the following:
2021 2020
(Re-presented)
Continuing operations Notes GBPm GBPm
-------------------------------------------------------- ----- ----- --------------
Employee costs 7 1,702 464
IT costs 467 127
Professional fees 333 55
Short-term lease costs 43 -
Other costs 256 97
Foreign exchange (gains)/losses (10) 6
Underlying operating expenses before depreciation,
amortisation and impairment 2,791 749
Non-underlying operating expenses before depreciation,
amortisation and impairment 8 339 168
-------------------------------------------------------- ----- ----- --------------
Total operating expenses before depreciation,
amortisation and impairment 3,130 917
-------------------------------------------------------- ----- ----- --------------
7. Staff costs
Employee costs for continuing operations comprise
the following:
-------------------------------------------------- ----- ----- --------------
2021 2020
(Re-presented)
Continuing operations Notes GBPm GBPm
-------------------------------------------------- ----- ----- --------------
Salaries and other benefits 1,661 413
Social security costs 166 59
Pension costs 82 27
Share-based payment expense 141 44
-------------------------------------------------- ----- ----- --------------
Total payments made to employees 2,050 543
Amounts capitalised as development costs 14 (192) (72)
Total staff costs 1,858 471
-------------------------------------------------- ----- ----- --------------
Underlying staff costs 6 1,702 464
Non-underlying staff costs 8 156 7
-------------------------------------------------- ----- ----- --------------
Total staff costs 1,858 471
-------------------------------------------------- ----- ----- --------------
The average number of employees, including executive directors,
in the Group from continuing operations was:
-------------------------------------------------------------------------------
2021 2020
Continuing operations (Re-presented)
------------------------------------------ --------- ---------------------
UK 4,416 1,772
USA 3,929 683
India 5,762 -
EU countries 2,132 440
Philippines 1,974 -
Sri Lanka 1,423 1,238
China 1,373 -
Other Asia 1,717 375
Africa and Middle East 640 -
Other 792 18
Average number of employees 24,158 4,526
--------------------------------------------- --------- ---------------------
Average employee numbers represent full time equivalent members
of staff and are calculated from the date of acquisition of subsidiary
companies purchased in the year and up to the date of disposal of
businesses sold in the year. Employees from discontinued operations
have been excluded.
8. Non-underlying items
Significant accounting judgements
The Group separately identifies results before non-underlying
items (adjusted). This provides the reader with supplemental data
relevant to an understanding of the Group's financial performance,
as non-underlying items of income and expense are material by their
size and/or nature.
The Group uses its judgement to classify items as
non-underlying. These include:
-- Incremental depreciation, amortisation and impairment of any
fair value adjustments of tangible or intangible assets recognised
as a result of acquisitions
-- Amortisation and impairment of goodwill and purchased
intangible assets. Purchased intangible assets include customer
relationships, trade names, and databases and content, all of which
are as a result of acquisitions
-- Other income or expenses not considered to drive the
operating results of the Group (including integration,
restructuring and transaction costs)
-- Tax on non-underlying items
2021 2020
(Re-presented)
Continuing operations Notes GBPm GBPm
------------------------------------------------------ ----- ----- --------------
Non-underlying operating expenses before interest,
tax, depreciation, amortisation and impairment
- Transaction costs 114 173
- Integration costs 225 -
- Restructuring credit - (5)
339 168
------------------------------------------------------ ----- ----- --------------
Non-underlying depreciation, amortisation and
impairment
- Depreciation of property, plant and equipment 13 10 -
- Impairment of property, plant and equipment 13 22 -
- Impairment of goodwill 14 - 10
- Amortisation and impairment of purchased intangible
assets 14 855 128
- Amortisation and impairment of other intangible
assets 14 - 21
887 159
------------------------------------------------------ ----- ----- --------------
Non-underlying items before interest and tax 1,226 327
Non-underlying net finance expense 9 5 13
------------------------------------------------------ ----- ----- --------------
Non-underlying items before tax 1,231 340
Tax on non-underlying items (131) (48)
Non-underlying loss 1,100 292
------------------------------------------------------ ----- ----- --------------
Transaction costs mainly relate to the following acquisitions
and include:
-- Refinitiv acquisition (refer to note 2):
- Advisor and professional fees of GBP38 million
- Retention bonuses of GBP12 million
- Post-acquisition Management Incentive Plan (MIP) share-based
payment expense of GBP10 million
- Fair value adjustment to the outstanding Tradeweb
equity-settled awards (as if the acquisition date were the grant
date) of GBP36 million
-- Acquisition by Tradeweb of Nasdaq's fixed income electronic
trading platform (refer to note 2): Acquisition related costs of
GBP3 million
Integration costs relate to activities to:
-- Integrate the Refinitiv businesses of GBP201 million
-- Separate the Thomson Reuters Financial & Risk Business
from Thomson Reuters and then restructure it. The separation costs
of GBP24 million primarily consist of professional fees, consulting
fees and IT charges
The finance expense relates to fees to establish the Bridge
Facility to refinance the Refinitiv notes and term loans in full
following completion of the Refinitiv acquisition. Further details
of the facility are provided in note 16.
The tax impact of the Group's non-underlying items and its
adjustment to profit or loss of the individual entities of the
Group to which the non-underlying items relate, is computed based
on the tax rates applicable to the respective territories in which
the entity operates.
9. Net finance expense
2021 2020
(Re-presented)
Continuing operations Note GBPm GBPm
------------------------------------------------- ---- ----- --------------
Finance income
Interest income on retirement benefit assets 41 1
Bank deposit and other interest income(1) 3 3
Lease interest income 2 1
Other finance income - 1
Underlying finance income 46 6
-------------------------------------------------- ---- ----- --------------
Finance expense
Interest payable on bank and other borrowings(1) (151) (56)
Amortisation of arrangement fees (12) (2)
Interest cost on retirement benefit obligations (35) -
Lease interest expense (12) (3)
Other finance expenses (2) (2)
Underlying finance expense (212) (63)
-------------------------------------------------- ---- ----- --------------
Underlying net finance expense (166) (57)
Non-underlying finance expense 8 (5) (13)
Total net finance expense (171) (70)
-------------------------------------------------- ---- ----- --------------
(1) Bank deposit and other interest income includes negative interest
earned on the Group's borrowings. Interest payable includes amounts
where the Group suffers negative interest on its cash deposits.
Interest payable on bank and other borrowings is net of amortisation
of the realised gain on interest rate derivatives held in the hedging
reserve.
Net finance expense is earned on assets and liabilities held at
amortised cost, except for amounts earned or paid on defined benefit
pension scheme assets and liabilities which are held at fair value.
10. Taxation
Significant accounting judgements and estimates
Uncertain tax positions
The Group is subject to taxation in the many countries in which
it operates. The tax legislation of these countries differs, is
often complex and is subject to interpretation by management and
the government authorities. These matters of judgement sometimes
give rise to the need to create provisions for tax payments that
may arise in future years with respect to transactions already
undertaken. Provisions are made against individual exposures and
take into account the specific circumstances of each case,
including the strength of technical arguments, recent case law
decisions or rulings on similar issues and relevant external
advice. The provision is estimated based on one of two methods: the
expected value method (the sum of the probability weighted amounts
in a range of possible outcomes) or the single most likely amount
method, depending on which is expected to better predict the
resolution of the uncertainty. Due to the uncertainty associated
with tax audits it is possible that, at some future date,
liabilities resulting from such audits or related litigation could
vary significantly from our provisions requiring the Group to make
an adjustment in a subsequent period which could have a material
impact on the Group's profit.
Income tax
The standard UK corporation tax rate for the year
was 19% (2020: 19%).
2021 2020
(Re-presented)
Continuing operations GBPm GBPm
--------------------------------------------------- ---- --------------
Tax recognised in the income statement
Current tax
UK corporation tax for the year 47 74
Overseas tax for the year 84 79
Adjustments in respect of previous years 2 1
Total current tax 133 154
---------------------------------------------------- ---- --------------
Deferred tax
Deferred tax for the year 236 1
Adjustments in respect of previous years (9) (6)
Deferred tax credit on amortisation and impairment
of purchased intangible assets (33) (11)
---------------------------------------------------- ---- --------------
Total deferred tax 194 (16)
---------------------------------------------------- ---- --------------
Total tax 327 138
---------------------------------------------------- ---- --------------
2021 2020
(Re-presented)
Continuing operations GBPm GBPm
---------------------------------------------------------- ---- --------------
Tax on items recognised in other comprehensive
income
Deferred tax (expense)/benefit
Actuarial gains/losses on retirement benefit
obligations (25) -
Losses/gains of financial assets (at fair value
through other comprehensive income) 1 (3)
Total tax recognised in other comprehensive income (24) (3)
----------------------------------------------------------- ---- --------------
Tax on items recognised in equity
Current tax benefit
Share-based payments in excess of expense recognised 12 12
Deferred tax benefit/(expense)
Share-based payments in excess of expense recognised 18 (3)
Investment in partnerships (recognised in non-controlling
interests) 25 -
----------------------------------------------------------- ---- --------------
Total tax recognised in equity 55 9
----------------------------------------------------------- ---- --------------
Total tax recognised in other comprehensive income
and equity 31 6
----------------------------------------------------------- ---- --------------
Factors affecting the tax charge for the year
The tax charge for the year differs from that derived from the
standard rate of corporation tax in the UK of 19% (2020: 19%) as
explained below:
2021 2020
(Re-presented)
Continuing operations GBPm GBPm
---------------------------------------------------------- ---- --------------
Profit before tax from continuing operations 987 492
----------------------------------------------------------- ---- --------------
Profit multiplied by standard rate of corporation
tax in the UK 187 93
Overseas earnings taxed at higher rate 15 45
Adjustment arising from changes in tax rates
on amortisation of purchased intangible assets 189 7
Adjustment arising from changes in tax rates
- other (18) (2)
Income not taxable (35) (1)
Adjustments in respect of previous years (7) (5)
Deferred tax not recognised (4) 2
Deferred tax provided for withholding tax on
distributable reserves - (1)
Total tax 327 138
----------------------------------------------------------- ---- --------------
On 24 May 2021, the UK Finance Act 2021 was substantively
enacted, increasing the corporate tax rate to 25% effective from 1
April 2023. As a result of the change the UK deferred tax assets
and liabilities have been remeasured.
During the period the Group completed the sale of the Borsa
Italiana group. The gain on disposal of the shares qualifies for UK
corporation tax exemption under the substantial shareholding
exemption rules.
Uncertain tax positions
EU State Aid
The Group continues to monitor developments in relation to EU
State Aid investigations. On 25 April 2019, the EU Commission's
final decision regarding its investigation into the UK's Controlled
Foreign Company (CFC) regime was published. It concluded that the
Finance Company Partial Exemption (FCPE) rules in the UK tax
legislation partially represent illegal State Aid. The Group had
financing arrangements that utilised the FCPE during this
period.
The Group, several other UK PLCs and the UK Government have
submitted appeals to the EU General Court to annul the EU
Commission's findings. The EU General Court heard those appeals for
annulment on 18 October 2021 but has not yet announced a decision,
which is expected in 2022.
Until a decision is reached, the UK Government is required to
continue recovering amounts determined to be State Aid. In December
2019 and the beginning of 2021, HMRC issued determinations to the
Group totaling GBP10.5 million, excluding interest and penalties,
which the Group paid. Our appeal against these determinations is
likely to be stayed until the final outcome of all appeals to the
EU Courts in respect of the EU Commission's original decision are
known.
The issuance and settlement of any such determinations, however,
does not change the Group's view that in light of the appeals made
by UK PLCs (including the Group), the UK Government's own appeal,
and in consideration of management's own internal view, no
provision is required in relation to the investigation.
Additionally, and in accordance with IFRIC 23, the Group continues
to recognise a receivable against the HMRC determinations paid to
date of GBP10.5 million. The maximum potential exposure excluding
interest remains between nil and GBP65 million.
IRS Audit
The Group continues to be under audit in the US by the US
Internal Revenue Service (IRS) in relation to the interest rate
applied on certain cross border intercompany loans from the UK to
the US. During 2020, the IRS issued a Notice of Proposed
Adjustment. The maximum tax exposure is approximately US$145
million, however, this is the upper bound of a range of nil to
US$145 million (plus interest and penalties) over the lifetime of
the loans. The Group has an uncertain tax liability of GBP12
million ($16 million) recorded on the balance sheet related to this
issue. The liability was measured based on a probability weighted
average of potential outcomes. The issue is currently under
appeal.
HMRC audit of intellectual property valuation
HMRC is auditing the value of certain intellectual property
purchased from Thomson Reuters as part of the formation of
Refinitiv. Intellectual property valuation is complex and
significantly affected by multiple inputs of assumptions. As the
outcome is uncertain, especially given the inherent subjectivity of
the topic, the Group has recorded an uncertain tax liability in
accordance with the requirements of IFRS. Management and HMRC
continue to actively discuss this topic.
Diverted Profits Tax to Thomson Reuters
HMRC continues to issue notices of assessment under the Diverted
Profits Tax (DPT) regime to Thomson Reuters largely related to its
Financial and Risk Business for years prior to the sale of the
business to Refinitiv. As required by the notices and as directed
by Thomson Reuters, the Group makes payments to HMRC which are
immediately reimbursed by Thomson Reuters in accordance with an
indemnity agreement. Thomson Reuters does not agree with the
assessments and will continue to defend their position by
contesting the assessments through all available administrative and
judicial remedies.
11. Earnings per
share
2021 2020
--------------------------------- --------------------------------
Continuing Discontinued Total Continuing Discontinued Total
------------------------- ---- ---------- ------------ ------- ---------- ------------ ------
Basic earnings per
share 98.4p 483.3p 581.7p 83.6p 36.7p 120.3p
Diluted earnings
per share 97.8p 480.3p 578.1p 82.6p 36.3p 118.9p
Adjusted basic earnings
per share 286.5p 14.9p 301.4p 166.7p 43.0p 209.7p
Adjusted diluted
earnings per share 284.7p 14.8p 299.5p 164.8p 42.5p 207.3p
------------------------- ---- ---------- ------------ ------- ---------- ------------ ------
Profit and adjusted profit for the year attributable to the Company's
equity holders
2021 2020
--------------------------------- --------------------------------
Continuing Discontinued Total Continuing Discontinued Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ---- ---------- ------------ ------- ---------- ------------ ------
Profit for the financial
year attributable
to the Company's
equity holders 529 2,600 3,129 293 128 421
Adjustments:
- Total non-underlying
items net of tax 8 1,100 (2,519) (1,419) 292 25 317
- Non-underlying
items attributable
to non-controlling
interests (88) (1) (89) (1) (3) (4)
------------------------- ---- ---------- ------------ ------- ---------- ------------ ------
Adjusted profit for
the year attributable
to the Company's
equity holders 1,541 80 1,621 584 150 734
------------------------- ---- ---------- ------------ ------- ---------- ------------ ------
Weighted average
number of shares
- millions(1) 538 350
Effect of dilutive
share options and
awards - millions 3 4
------------------------- ---- ---------- ------------ ------- ---------- ------------ ------
Diluted weighted
average number of
shares - millions 541 354
------------------------- ---- ---------- ------------ ------- ---------- ------------ ------
(1) The weighted average number of shares excludes those held in
the Employee Benefit Trust.
12. Dividends
2021 2020
GBPm GBPm
-------------------------------------------------------- ---- ----
Final dividend for 31 December 2019 paid 27 May
2020: 49.9p per Ordinary share - 175
Interim dividend for 31 December 2020 paid 22 September
2020: 23.3p per Ordinary share - 82
Final dividend for 31 December 2020 paid 26 May
2021: 51.7p per Ordinary share 287 -
Interim dividend for 31 December 2021 paid 21 September
2021: 25.0p per Ordinary share 139 -
-------------------------------------------------------- ---- ----
426 257
-------------------------------------------------------- ---- ----
Dividends are only paid out of available distributable reserves
of the Company.
The Board has proposed a final dividend in respect of the year
ended 31 December 2021 of 70.0p per share, which amounts to an
expected payment of GBP390 million in May 2021. This is not
reflected in the financial statements.
13. Property, plant and equipment
Land & Buildings Plant and equipment
--------------------------------------- --------------------- -----
Freehold Right-of-use Leasehold Right-of-use
property assets improve-ments assets Owned Total
Group Notes GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----- --------- ------------ -------------- -------------- ----- -----
Cost
1 January 2020 57 163 59 2 264 545
Additions 6 36 - 3 34 79
Lease modifications - 3 - - - 3
Disposals - (6) (1) - (10) (17)
Foreign exchange
translation (1) 1 1 - 4 5
31 December 2020 62 197 59 5 292 615
Property, plant and
equipment acquired
on acquisition of
subsidiaries 2 9 379 36 32 222 678
Additions 3 25 24 27 101 180
Lease modifications - 34 - (1) - 33
Disposals and other (2) (1) (12) - (43) (58)
Disposal of business 3 - (28) (4) (3) (69) (104)
Transfer to held
for sale assets (17) - - - - (17)
Foreign exchange
translation - (1) - - (1) (2)
31 December 2021 55 605 103 60 502 1,325
------------------------- ----- --------- ------------ -------------- -------------- ----- -----
Accumulated depreciation
and impairment
------------------------- ----- --------- ------------ -------------- -------------- ----- -----
1 January 2020 29 25 39 1 163 257
Disposals - (3) (1) - (10) (14)
Charge for the year - 28 6 1 35 70
Foreign exchange
translation - - 1 - 4 5
31 December 2020 29 50 45 2 192 318
Disposals - (1) (12) - (39) (52)
Charge for the year(1) 3 99 19 18 135 274
Impairment - 22 - - - 22
Disposal of business 3 - (11) (3) (1) (50) (65)
Transfer to held
for sale assets (1) - - - - (1)
Foreign exchange
translation - (1) - - (2) (3)
31 December 2021 31 158 49 19 236 493
------------------------- ----- --------- ------------ -------------- -------------- ----- -----
Net book values
------------------------- ----- --------- ------------ -------------- -------------- ----- -----
31 December 2021 24 447 54 41 266 832
------------------------- ----- --------- ------------ -------------- -------------- ----- -----
31 December 2020 33 147 14 3 100 297
------------------------- ----- --------- ------------ -------------- -------------- ----- -----
(1) Includes non-underlying depreciation for the year of GBP10
million
Consideration for additions comprises GBP97 million in cash (2020:
GBP33 million) and GBP31 million (2020: GBP7 million) in accruals.
Right-of-use assets are paid for over the term of the lease.
14. Intangible assets
Significant accounting judgements and estimates
Intangible assets and goodwill form a significant part of the
balance sheet and are key assets for the Group's businesses. Refer
to note 2 for the significant accounting estimates of intangible
assets acquired as part of the Refinitiv and NFI acquisitions.
Recoverable amounts of relevant CGUs
The recoverable amounts of relevant CGUs are based on
value-in-use calculations. These use management's best estimate of
future performance together with estimates of the return required
by investors to determine an appropriate discount rate, which is
used to derive the present value.
Estimated useful economic lives
Intangible assets are amortised over the estimated useful
economic lives, based on management's best estimate of the period
over which value from the intangible assets is realised. In
determining useful economic life, management considers a number of
factors including customer attrition rates, product upgrade cycles
for software and technology assets, market participant perspectives
for brands and pace of change of regulation.
Purchased intangible assets
-------------------------------------------------------
Software,
Customer licences
and supplier Databases and intellectual Software
Goodwill relationships Brands and content property and other Total
Cost Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ----- -------- -------------- ------ ------------ ----------------- ---------- -------
1 January 2020 2,357 1,826 980 - 568 1,023 6,754
Additions - - - - - 221 221
Disposals and
write-off - - - - - (18) (18)
Foreign exchange
translation 45 21 (27) - 1 34 74
31 December
2020 2,402 1,847 953 - 569 1,260 7,031
Intangible assets
acquired on
acquisition
of subsidiaries 2 16,520 7,455 983 2,398 199 1,608 29,163
Additions - - - - - 642 642
Disposal of
business 3 (927) (692) (1) - (66) (181) (1,867)
Disposals and
write-off - - - - (1) (59) (60)
Foreign exchange
translation (42) 111 21 36 1 (38) 89
31 December
2021 17,953 8,721 1,956 2,434 702 3,232 34,998
------------------ ----- -------- -------------- ------ ------------ ----------------- ---------- -------
Accumulated amortisation
and impairment
----------------------------------- -------------- ------ ------------ ----------------- ---------- -------
1 January 2020 515 752 232 - 318 516 2,333
Amortisation
charge for the
year - 101 40 - 23 139 303
Impairment 10 - - - - 23 33
Disposals and
write-off - - - - - (18) (18)
Foreign exchange
translation 21 15 (7) - 4 23 56
31 December
2020 546 868 265 - 345 683 2,707
Amortisation
charge for the
year(1) - 491 130 220 33 425 1,299
Impairment(1) - - - - - 13 13
Disposal of
business 3 (54) (409) - - (58) (139) (660)
Disposals and
write-off - - - - (1) (43) (44)
Foreign exchange
translation (25) 6 3 4 (4) (25) (41)
31 December
2021 467 956 398 224 315 914 3,274
------------------ ----- -------- -------------- ------ ------------ ----------------- ---------- -------
Net book values
------------------ ----- -------- -------------- ------ ------------ ----------------- ---------- -------
31 December
2021 17,486 7,765 1,558 2,210 387 2,318 31,724
------------------ ----- -------- -------------- ------ ------------ ----------------- ---------- -------
31 December
2020 1,856 979 688 - 224 577 4,324
------------------ ----- -------- -------------- ------ ------------ ----------------- ---------- -------
(1) Includes non-underlying amortisation of intangible assets
of GBP855 million. There was no impairment identified for purchased
intangible assets.
Goodwill
Goodwill arising on acquisition typically represents the growth
potential of the underlying businesses and the assembled workforce.
During the year, the Group reassessed its CGUs and concluded that
the previously reported FTSE Group, Frank Russell Group, Mergent
and Yield Book CGUs are no longer generating independent cash
inflows and operating on a standalone basis. Together with the
operations acquired with Refinitiv (but excluding Tradeweb), these
businesses now form the Data & Analytics CGU. The other CGUs in
the Group are Capital Markets, Post Trade and Tradeweb.
At 31 December 2021, the goodwill on acquisition has been
reallocated to the Group's CGUs as follows, where the goodwill is
tested for impairment.
CGU
------------------------------ ---------------------------------------
Acquisition 2021 2020
------------------------------ ----------------- --------------------
Refinitiv, excluding Tradeweb Data & Analytics -
Tradeweb Tradeweb -
Yield Book Data & Analytics Yield Book
Mergent Data & Analytics Mergent
Frank Russell Group Data & Analytics Frank Russell Group
LCH Group Post Trade LCH Group
FTSE Group Data & Analytics FTSE Group
MillenniumIT Capital Markets MillenniumIT
Turquoise Capital Markets Turquoise
------------------------------ ----------------- --------------------
Internally developed software and other intangible assets
The Group creates technology solutions where software products
are developed internally, for use within the Group or to sell
externally. These assets have a useful economic life of up to 12
years.
During the year, consideration for additions comprises GBP611
million ( 2020 : GBP189 million) in cash, GBP2 million ( 2020 :
GBP10 million) of leased assets and GBP29 million ( 2020 : GBP22
million) in accruals. During the year, the Group:
-- recognised additions of GBP2 million (2020: GBP10 million) as
right-of-use assets, with a right-of-use assets amortisation charge
of GBP6 million (2020: GBP7 million)
-- capitalised sales commissions paid to employees (contract
costs) of GBP46 million (2020: GBP6 million)
The cost of self-developed software products includes GBP447
million ( 2020 : GBP188 million) of assets not yet brought into
use. No amortisation has been charged on these assets and instead
they are tested for impairment annually.
Impairment tests for internally developed software and other
intangible assets
Following a review of software assets in the year the Group
recognised GBP13 million (2020: GBP23 million) of impairment in
relation to assets with a recoverable amount less than the
value-in-use.
During the year the Group recognised disposals and write-offs of
assets which are no longer in use of GBP60 million with GBP16
million net book value (2020: GBP18 million with nil net book
value).
15. Financial assets and financial liabilities
The financial instruments of the Group are categorised as
follows:
Financial assets
--------------------------------------------- --------- ------ ------- -------
Group
-----------------------------------
Amortised
cost FVOCI FVPL Total
31 December 2021 GBPm GBPm GBPm GBPm
--------------------------------------------- --------- ------ ------- -------
Clearing business financial assets
Clearing member trading assets 1,476 - 645,587 647,063
Other receivables from clearing members 4,184 - - 4,184
Other financial assets - 13,784 - 13,784
Clearing member cash and cash equivalents(1) 83,795 - - 83,795
--------------------------------------------- --------- ------ ------- -------
89,455 13,784 645,587 748,826
Trade and other receivables 1,020 - 6 1,026
Cash and cash equivalents 2,665 - - 2,665
Investments in financial assets - equity
instruments - 351 - 351
Derivative financial instruments - - 27 27
Total financial assets 93,140 14,135 645,620 752,895
--------------------------------------------- --------- ------ ------- -------
(1) Clearing member cash and cash equivalents represents amounts
received from the clearing members to cover initial and variation
margins, and default fund contributions that are not invested in
bonds. These amounts are deposited with banks, including central
banks, or invested securely in short-term reverse repurchase
contracts (reverse repos).
Financial assets measured at fair value
The following table provides the fair value measurement hierarchy
of the Group's financial assets measured at fair value:
Group
------------------------------------------------
Quoted
prices Significant Significant
in active observable unobserv-able
markets inputs inputs
(Level (Level (Level
1) 2) 3) Total
31 December 2021 GBPm GBPm GBPm GBPm
------------------------------------------ ---------- ----------- -------------- -------
Clearing business financial assets
Derivative instruments 47 2,631 - 2,678
Non-derivative instruments - 642,909 - 642,909
Other financial assets 13,784 - - 13,784
13,831 645,540 - 659,371
Investment in financial assets - equity 1 - 350 351
Derivatives not designated as hedges
Foreign exchange forward contracts - 27 - 27
Trade and other receivables - convertible
loan notes - - 6 6
Total financial assets measured at fair
value 13,832 645,567 356 659,755
------------------------------------------ ---------- ----------- -------------- -------
There were no transfers between levels
during the year.
Financial liabilities
---------------------------------------- --------- ------- -------
Group
---------------------------
Amortised
cost FVPL Total
31 December 2021 GBPm GBPm GBPm
---------------------------------------- --------- ------- -------
Clearing business financial liabilities
Clearing member trading liabilities 1,476 645,587 647,063
Other payables to clearing members 101,581 - 101,581
103,057 645,587 748,644
Trade and other payables 2,727 - 2,727
Borrowings 7,654 - 7,654
Derivative financial instruments - 52 52
Total financial liabilities 113,438 645,639 759,077
---------------------------------------- --------- ------- -------
The following table provides the fair value measurement hierarchy
of the Group's financial liabilities measured at fair value:
-----------------------------------------------------------------------------------------
Group
-----------------------------------------------
Quoted
prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level (Level (Level
1) 2) 3) Total
31 December 2021 GBPm GBPm GBPm GBPm
---------------------------------------- ---------- ----------- ------------- -------
Clearing business financial liabilities
Derivative instruments 47 2,631 - 2,678
Non-derivative instruments - 642,909 - 642,909
47 645,540 - 645,587
Derivatives not designated as hedges
Foreign exchange forward contracts - 8 - 8
Derivatives designated as hedges
Cross-currency interest rate swaps - 44 - 44
Total financial liabilities measured
at fair value 47 645,592 - 645,639
---------------------------------------- ---------- ----------- ------------- -------
There were no transfers between levels
during the year.
The financial instruments of the Group for the prior year were as
follows:
Financial assets
------------------------------------------ --------- ------ ------- -------
Group
-----------------------------------
Amortised
cost FVOCI FVPL Total
31 December 2020 GBPm GBPm GBPm GBPm
------------------------------------------ --------- ------ ------- -------
Clearing business financial assets
Clearing member trading assets 98,736 - 632,699 731,435
Other receivables from clearing members 2,484 - - 2,484
Other financial assets - 24,591 - 24,591
Clearing member cash and cash equivalents 83,011 - - 83,011
------------------------------------------ --------- ------ ------- -------
184,231 24,591 632,699 841,521
Trade and other receivables 544 - 5 549
Cash and cash equivalents 1,785 - - 1,785
Investments in financial assets -
debt instruments - 111 - 111
Investments in financial assets -
equity instruments - 261 - 261
Total financial assets 186,560 24,963 632,704 844,227
------------------------------------------ --------- ------ ------- -------
Financial assets measured at fair value
The following table provides the fair value measurement hierarchy
of the Group's financial assets:
Group
------------------------------------------------
Quoted
prices Significant Significant
in active observable unobserv-able
markets inputs inputs
(Level (Level (Level
1) 2) 3) Total
31 December 2020 GBPm GBPm GBPm GBPm
---------- ----------- -------------- -------
Clearing business financial assets
Derivative instruments 5,867 2,726 - 8,593
Non-derivative instruments 6 624,100 - 624,106
Other financial assets 24,591 - - 24,591
30,464 626,826 - 657,290
Investments in financial assets - debt 111 - - 111
Investment in financial assets - equity - - 261 261
Derivatives not designated as hedges
Trade and other receivables - convertible
loan notes - - 5 5
Total financial assets measured at fair
value 30,575 626,826 266 657,667
---------- ----------- -------------- -------
There were no transfers between levels
during 2020.
Financial liabilities
--------- ------- -------
Group
---------------------------
Amortised
cost FVPL Total
31 December 2020 GBPm GBPm GBPm
--------- ------- -------
Clearing business financial liabilities
Clearing member trading liabilities 98,736 632,699 731,435
Other payables to clearing members 110,118 - 110,118
208,854 632,699 841,553
Trade and other payables 747 - 747
Borrowings 1,951 - 1,951
Derivative financial instruments - 17 17
Total financial liabilities 211,552 632,716 844,268
--------- ------- -------
Financial liabilities measured at fair
value
The following table provides the fair value measurement hierarchy
of the Group's financial liabilities measured at fair value:
Group
Quoted
prices Significant Significant
in active observable unobserv-able
markets inputs inputs
(Level (Level (Level
1) 2) 3) Total
31 December 2020 GBPm GBPm GBPm GBPm
---------- ----------- -------------- -------
Clearing business financial liabilities
Derivative instruments 5,867 2,726 - 8,593
Non-derivative instruments 6 624,100 - 624,106
5,873 626,826 - 632,699
Derivatives not designated as hedges
Foreign exchange forward contracts - 6 - 6
Derivatives designated as hedges
Cross-currency interest rate swaps - 11 - 11
Total financial liabilities measured
at fair value 5,873 626,843 - 632,716
---------- ----------- -------------- -------
16. Borrowings
Group
2021 2020
GBPm GBPm
-----
Non-current
Bank borrowings - committed bank facilities and term
loans(1) 1,347 (2)
Trade finance loans 1 1
Bonds 6,306 1,347
Total non-current borrowings 7,654 1,346
----- -----
Current
Bank borrowings - committed bank facilities - 135
Commercial paper - 170
Bonds - 300
Total current borrowings - 605
----- -----
Total borrowings 7,654 1,951
-----
(1) Balances are shown net of capitalised arrangement fees. Where
there are no amounts borrowed on a particular facility, this gives
rise to a negative balance.
The Group has the following committed bank facilities, loans and
unsecured bonds:
Carrying value
Expiry Facility/
date bond 2021 2020 Interest rate
GBPm GBPm GBPm %
--------- --------- ------- -------
Committed bank facilities
Dual-currency bridge facility - (8) LIBOR + 0.3
Multi-currency revolving - 6 LIBOR + 0.45
credit facility
Multi-currency revolving
credit facility Dec 2024 1,425 (3) 138 see note(2)
Multi-currency revolving
credit facility Dec 2026 1,075 (3) (1) see note(2)
--------- --------- ------- -------
Total committed bank facilities(1) 2,500 (6) 135
--------- ------- -------
Commercial paper - 170 (0.380)
--------- ------- -------
Committed term loans
EUR500 million term loan Dec 2023 126 - EURIBOR + 0.725
$2,000 million term loan Dec 2023 1,227 (2) see note(2)
--------- --------- ------- -------
Total committed term loans(1) 1,353 (2)
--------- ------- -------
Bonds
GBP300 million bond, issued
November 2012 Nov 2021 - - 300 4.750
$500 million bond, issued
April 2021 Apr 2024 370 369 - 0.650
EUR500 million bond, issued
September 2017 Sep 2024 419 419 450 0.875
EUR500 million bond, issued
April 2021 Apr 2025 419 419 - -
$1,000 million bond, issued
April 2021 Apr 2026 741 738 - 1.375
EUR500 million bond, issued
December 2018 Dec 2027 419 417 448 1.750
EUR500 million bond, issued
April 2021 Apr 2028 419 417 - 0.250
$1,000 million bond, issued
April 2021 Apr 2028 741 737 - 2.000
EUR500 million bond, issued
September 2017 Sep 2029 419 417 449 1.750
GBP500 million bond, issued
April 2021 Apr 2030 500 493 - 1.625
$1,250 million bond, issued
April 2021 Apr 2031 926 919 - 2.500
EUR500 million bond, issued
April 2021 Apr 2033 419 413 - 0.750
$750 million bond, issued
April 2021 Apr 2041 556 548 - 3.200
--------- --------- ------- -------
Total bonds 6,348 6,306 1,647
--------- ------- -------
Trade finance loans Nov 2023 1 1 7.3
--------- --------- ------- -------
Total committed facilities, loans
and unsecured notes 7,654 1,951
--------- ------- -------
(1) Negative balances represent the value of unamortised arrangement
fees
(2) As part of the IBOR Reform, a Credit Adjustment Spread (CAS)
has been applied where US dollar and sterling LIBOR rates were respectively
replaced with SOFR and SONIA rates in the bank facilities. The CAS
is variable and depends on the tenor and currency of the borrowings
Committed bank facilities
On 29 January 2021, as part of the Refinitiv acquisition, the
Group refinanced the debt acquired with Refinitiv by drawing down
GBP8 billion on its dual-currency bridge facility, EUR500 million
(GBP430 million) on its euro term loan, US$2,000 million (GBP1,468
million) on its US dollar term loan and GBP500 million on its
multi-currency revolving credit facilities. The draw downs on the
bridge facility and revolving credit facilities were repaid in
April 2021 using funds received from bond issues (see below) and
proceeds from the sale of the Borsa Italiana group. The bridge
facility was cancelled upon repayment.
Multi-currency revolving credit facilities
In December 2020, the Group arranged a GBP1,075 million
syndicated committed facility maturing in December 2025. This was
to replace the former GBP600 million facility which would have
matured in November 2022. In December 2021, the first of two 1-year
extension options were taken up, extending the maturity to December
2026. In December 2020, the Group had also increased the GBP600
million Revolving Credit Facility agreement maturing in December
2024 to GBP1,425 million. These new facility arrangements became
effective in January 2021. The revolving credit facilities were
drawn down during the year and fully repaid as at 31 December 2021
(2020: GBP143 million).
Commercial paper
The Group maintained its GBP1 billion Euro Commercial Paper
Programme. There were no outstanding issuances at 31 December 2021
(2020: EUR188 million (GBP170 million)) .
Term loan facilities
In December 2020, the Group arranged EUR500 million and US$2,000
million 3-year term loan facilities which became effective in
January 2021 and mature in December 2023. The term loans were fully
drawn in January 2021 and partly repaid by EUR350 million and
US$340 million respectively during the year.
Bonds
In April 2021, the Group issued nine new senior unsecured bonds
using its newly established Global Medium-Term Note Programme. The
GBP5 billion issued consisted of US$4.5 billion (GBP3.2 billion),
EUR1.5 billion (GBP1.3 billion) and GBP500 million with maturities
between April 2024 and April 2041.
The Group's GBP300 million 4.75% bond, issued in 2012, matured
in November 2021.
Other Group facilities
In accordance with the Committee on Payments and Market
Infrastructures, the International Organisation of Securities
Commissions and Principles for Financial Market Infrastructures,
many central banks now allow CCPs to apply for access to certain
central bank facilities. LCH SA has a French banking licence and is
able to access financing at the European Central Bank to support
its liquidity position. LCH Ltd is deemed to have sufficient
fungible liquid assets to maintain an appropriate liquidity
position and has direct access to central bank facilities to
support its liquidity risk management in accordance with the
requirements under European Market Infrastructure Regulation.
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.
None of these facilities were drawn during the year.
The carrying amounts of the Group's borrowings are
denominated in the following currencies:
-------
2021 2020
Drawn Swapped Effective Drawn Swapped Effective
Currency GBPm GBPm GBPm GBPm GBPm GBPm
-------- ---------- ------------ ------- -------
Sterling 484 - 484 421 - 421
Euro 2,630 (619) 2,011 1,530 (613) 917
US dollar 4,540 619 5,159 - 613 613
Total 7,654 - 7,654 1,951 - 1,951
-------- ---------- ------------ ------- -------
Analysis of net debt
Net debt comprises cash and cash equivalents less interest bearing
loans and borrowings, lease liabilities, and derivative financial
instruments.
Group
2021 2020
(Re-presented)(1)
GBPm GBPm
Current
Cash and cash equivalents 2,665 1,785
Bank borrowings - (135)
Commercial paper - (170)
Bonds - (300)
Lease liabilities (168) (42)
Derivative financial assets 25 -
Derivative financial liabilities (7) (6)
Net amounts owed from/(to) subsidiary companies - -
Total due within one year 2,515 1,132
Non-current
Bank borrowings (1,347) 2
Net amounts owed from Group companies - -
Bonds (6,306) (1,347)
Trade finance loans (1) (1)
Lease liabilities (547) (147)
Derivative financial assets 2 -
Derivative financial liabilities (45) (11)
Total due after one year (8,244) (1,504)
Net debt (5,729) (372)
(1) The 2020 analysis of net debt has been re-presented to include
lease liabilities.
Reconciliation of net cash flow to movement in net debt
Group
2021 2020
(Re-presented)(1)
GBPm GBPm
-------
Increase/(decrease) in cash and cash equivalents 940 237
Bond issue proceeds (5,061) -
Bond repayment 300 -
Net repayments on commercial paper 170 101
Net repayments on short-term bank borrowings 122 -
Additional drawdowns from bank credit facilities (1,883) (4)
Repayments made towards bank credit facilities 548 127
Arrangement fees paid 52 4
Trade finance loans received - (1)
Lease liability principal repaid 118 43
Change in net debt resulting from cash flows (4,694) 507
Foreign exchange 8 (36)
Movement on derivative financial assets and
liabilities (8) 21
Movement in bank credit facility arrangement
fees (19) (2)
Net amounts owed from/(to) Group companies - -
Lease liabilities acquired in year (644) (49)
Net debt at 1 January (372) (813)
Net debt at 31 December (5,729) (372)
(1) The 2020 analysis of net debt has been re-presented to include
lease liabilities and net amounts owed from/(to) subsidiary companies
17. Share capital, share premium and other reserves
Ordinary share capital issued and fully paid
Ordinary
Number share Share
of shares capital premium Total
Note millions GBPm GBPm GBPm
-------- ----------- ------------ -------- ------------ ------
1 January 2020 351 24 967 991
Issue of shares to
the Employee Benefit
Trust - - 4 4
-------- ----------- ------------ -------- ------------ ------
31 December 2020 351 24 971 995
Acquisition of subsidiaries 2 204 15 - 15
Issue of shares to
the Employee Benefit
Trust 2 - 7 7
-------- ----------- ------------ -------- ------------ ------
31 December 2021 557 39 978 1,017
-------- ----------- ------------ -------- ------------ ------
Ordinary share capital consists of ordinary shares of 6 (79/86)
pence.
LSEG issued 204,225,968 shares (comprising 136,870,442 listed LSEG
ordinary shares and 67,355,526 unlisted LSEG limited-voting ordinary
shares) to acquire Refinitiv (refer to note 2). The purchase consideration
for the acquisition of Refinitiv of GBP16,971 million includes the
fair value of equity-settled awards (attributable to pre-acquisition
services rendered) of GBP2 million, which is recognised in the employee
share scheme reserve within retained earnings.
The Board approved the allotment and issue of 1,368,896 ordinary
shares at par and a further 177,894 ordinary shares at a weighted
average price of GBP35.74 to the Employee Benefit Trust (2020: 775,00
ordinary shares at par and 139,970 at GBP31.11) to settle employee
share plans. A share premium of GBP7 million (2020: GBP4 million)
has been recognised in the year in respect of these.
The number of shares held by the Employee Benefit Trust to settle
exercises of employee share awards was 566,034 (2020: 487,866).
Other reserves
-------- ----------- ------------ -------- ------------ ------
Foreign
Merger Capital Reverse exchange
relief Redemption acquisition Hedging translation
reserve reserve reserve reserve reserve Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
-------- ----------- ------------ -------- ------------ ------
1 January 2020 1,305 514 (512) (46) 535 1,796
Foreign exchange on
retranslation - - - - 73 73
Changes in fair value - - - (64) - (64)
-------- ----------- ------------ -------- ------------ ------
31 December 2020 1,305 514 (512) (110) 608 1,805
Acquisition of subsidiaries 2 16,981 - - - - 16,981
Amounts recycled on
disposal 3 - - - 17 (62) (45)
Foreign exchange on
retranslation recognised - - - - (41) (41)
Amount recycled to
income statement - - - (2) - (2)
Changes in fair value
recognised - - - 109 - 109
-------- ----------- ------------ -------- ------------ ------
31 December 2021 18,286 514 (512) 14 505 18,807
-------- ----------- ------------ -------- ------------ ------
Merger relief reserve
The merger relief reserve is a potentially distributable reserve
arising as a result of shares issued to acquire subsidiaries.
The Group applied merger relief, as required by section 612 of
the Companies Act 2006, to the issue of shares to acquire Refinitiv
(refer to note 3). The Group acquired a 100% equity holding in
Refinitiv and recognised the excess of the fair value above the
nominal share capital issued in the merger relief and retained
earnings.
Capital redemption reserve
This reserve was set up as a result of a court approved capital
reduction scheme and is non-distributable.
Reverse acquisition reserve
This reserve arises in consolidation as a result of the capital
reduction scheme and is non-distributable.
Foreign exchange translation reserve
The foreign exchange translation reserve records the cumulative
impact of foreign exchange rate movements on the retranslation of
non-sterling subsidiary companies. It is distributable under
certain circumstances.
Net gains and losses are recognised in other comprehensive
income and amounts remain in equity until the subsidiary is
derecognised. An amount of GBP62 million (2020: nil) was
reclassified to the income statement during the year as a result of
the disposal of the Borsa Italiana group (refer to note 3).
Hedging reserve
The hedging reserve represents the cumulative fair value
adjustments recognised in respect of net investment and cash flow
hedges entered into in accordance with hedge accounting principles.
It is distributable under certain circumstances.
Net gains and losses are recognised in other comprehensive
income and balances remain in equity until both the hedging
instrument and the underlying instrument are derecognised.
An amount of GBP17 million was reclassified to the income
statement during the year as a result of the disposal of the Borsa
Italiana group (refer to note 3). The gain realised on cash flow
hedges during the year is being amortised through the income
statement over the life of the underlying instrument. During the
year GBP2 million was recycled back through the income
statement.
18. Commitments and contingencies
The Group had no contracted capital commitments which are not
provided for in the financial statements. The Group has a long-term
agreement with Reuters News, to receive news and editorial content
for a minimum payment of US$325 million per year.
In the normal course of business, the Group can receive legal
claims including, for example, in relation to commercial matters,
service and product quality or liability, employee matters and tax
audits. The Group is also involved in legal proceedings and
actions, engagement with regulatory authorities and in dispute
resolution processes. These are reviewed on a regular basis and,
where possible, an estimate is made of the potential financial
impact on the Group.
In appropriate cases a provision is recognised based on advice,
best estimates and management judgement. Where it is too early to
determine the likely outcome of these matters, no provision is
made. Whilst the Group cannot predict the outcome of any such
current or future matters with any certainty, it currently believes
the likelihood of any material liabilities to be low, and that
these will not have a material adverse effect on its consolidated
income, financial position or cash flows.
19. Events after the reporting period
Sale of assets
On 5 January 2022, the Group completed the sale of one of its
freehold properties in the UK for a cash sum of GBP153 million
realising a profit on disposal of GBP133 million. The Group
continues to have exclusive access to the building until June 2023
through a lease back arrangement.
Quantile acquisition
On 6 December 2021, LSEG announced that it had agreed to acquire
Quantile, a UK-based provider of portfolio compression and
optimisation solutions for financial institutions dealing with
derivatives instruments. The transaction represents an opportunity
for Post Trade to acquire a high growth asset in an area of
strategic importance, complementing our existing suite of
analytics, data and funding optimisation and efficiency solutions.
The maximum aggregate consideration is GBP274 million (subject to
customary adjustments).
Until 6 August 2021, Stephen O'Connor, the chairman and a
significant shareholder of Quantile Group Limited, was Senior
Independent Director of the Company. He remains a director of a
Group subsidiary, London Stock Exchange plc.
TORA acquisition
On 22 February 2022, LSEG announced it has agreed to acquire
TORA, a leading cloud-based technology provider that supports
customers trading multiple asset classes across global markets.
TORA offers an order and execution management system and a
portfolio management system for customers trading multiple asset
classes, including equities, fixed income, FX, derivatives and
digital assets. Following completion, TORA will be part of LSEG's
Data & Analytics division. The maximum aggregate consideration
is US$325 million (subject to customary adjustments) and the
acquisition is expected to close in H2 2022, subject to regulatory
approvals.
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.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR UPUPAWUPPUUW
(END) Dow Jones Newswires
March 03, 2022 02:01 ET (07:01 GMT)
London Stock Exchange (LSE:LSEG)
Historical Stock Chart
From Mar 2024 to Apr 2024
London Stock Exchange (LSE:LSEG)
Historical Stock Chart
From Apr 2023 to Apr 2024
