3rd Quarter Interim Management Statement

RNS Number : 0141U
London Stock Exchange Group PLC
19 October 2017
 



19 October 2017                            

 

LONDON STOCK EXCHANGE GROUP plc

 

INTERIM MANAGEMENT STATEMENT

FOR THE PERIOD TO 18 OCTOBER 2017, INCLUDING REVENUES AND KPIs FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2017 (Q3)

 

 

·    Another period of delivery against our targets with continued good growth - Q3 total income up 17% to £486 million; and up 19% for 9 months year-to-date, to £1,432 million

·    Q3 revenues up 18% to £443 million; up 18% for 9 months year-to-date at £1,295 million

 

·    Strong demonstration of capital deployment to drive growth and returns, including: completion of the Citi Fixed Income Indices and The Yield Book acquisition; increasing our stake in LCH; and, completion of the £200 million share buyback programme

 

Q3 summary:

 

·    Information Services: revenues up 22% (up 15% on organic and constant currency basis) - with good underlying growth and one month's inclusion of The Yield Book and Citi Fixed Income Indices

 

·    Post Trade: LCH income up 26% (up 22% at constant currency), with 23% revenue growth in OTC from higher volume of SwapClear client trades; ForexClear continues to see strong volume growth.  CC&G and Monte Titoli income up 2% (down 4% at constant currency)

 

·    Capital Markets: revenues up 8% (up 5% on organic and constant currency basis), with record quarterly primary markets revenues in a period of strong equity issuance; Turquoise continues to trade well, with strong growth in the Turquoise Plato Block Discovery service (including a record month in September)

 

·    Technology Services: revenues up 9% (up 7% at constant currency)

 

Commenting on performance in Q3, Xavier Rolet, Chief Executive, said:

 

"The Group continues to perform very well, with good revenue growth in our main businesses and a strong period of successful development and delivery.  The completion of the acquisition of Citi Fixed Income Indices and The Yield Book is already contributing to the further growth in FTSE Russell while LCH continues to perform strongly and has launched innovative new services.  I am also delighted that we are increasing our stake in the LCH Group. 

 

"The Group's excellent financial performance is reflective of our continued innovation and execution of our growth strategy, enabling us to deliver against our three year financial targets.  Together with our proven Customer Partnership and Open Access approach, this positions us strongly to benefit from the introduction of MiFID II in less than three months time."

 

Organic growth is calculated in respect of businesses owned for at least 3 months in either period and so excludes The Yield Book and Citi Fixed Income Indices, ISPS, Mergent and SwapMatch. The Group's principal foreign exchange exposure arises from translating our European based Euro and US based USD reporting businesses into Sterling.

 

Investment in growth opportunities and new developments continued across the business:

 

-    LSEG will increase its stake in LCH Group to 64.4% (on completion of regulatory processes before the end of 2017), acquiring an additional 6.63% following a sale by certain minority shareholders

-    LCH SwapAgent service for non-cleared derivatives now live and has processed its first trades

-    LCH RepoClear launched Sponsored Clearing, offering buy-side firms direct access to LCH for repos clearing across 11 government bond markets

 

-    LCH signed binding terms with Euronext N.V. for the continued provision of clearing services for listed financial and commodity derivatives with LCH SA.  The agreement is expected to be finalised in Q4 2017

 

-    The Government Pension Investment Fund (GPIF) of Japan selected new FTSE Blossom Japan Index as a core ESG benchmark through its flagship fund

 

-    Good flow of new issues on our UK and Italian markets, with a near doubling in the number of new issues year on year - in early October Borsa Italiana welcomed Pirelli to its market, the largest continental European IPO so far in 2017; together with Allied Irish Bank in the summer, the two largest European IPOs have been on Group markets

 

-    Turquoise Lit Auctions, a pre-trade transparent and MiFID II compliant trading mechanism, received regulatory approval for Q4 2017 launch; and Turquoise Plato Block Discovery delivered record value traded in September (8 times the level of Q3 last year)

 

-    CurveGlobal marked its first year in operation - the platform is building a firm foundation, with 1.5 million lots traded since launch (of which 40% of the volume traded was in the last three months)

 

-    UK's Financial Conduct Authority approved London Stock Exchange to be authorised as an Approved Publication Arrangement (APA) and an Approved Reporting Mechanism (ARM) - enabling firms to meet their trade and transaction reporting obligations under MiFID II and MiFIR

 

-    Borsa Italiana and IBM announced they are building a blockchain solution to digitise the issuance of securities for small and medium enterprises (SMEs) in Europe

 

-    LSEG Technology completed the go-live of Millennium Exchange through a technology partnership with Caja de Valores S.A., which acts as the technology provider for Bolsas y Mercados Argentinos

 

-    Gatelab has become an approved provider of risk gateway services for Bombay Stock Exchange

 

Financial Position

 

Refinancing to extend Group debt maturities was successfully completed in September. The Group issued €500 million 0.875% 2024 bonds and €500 million 1.75% 2029 bonds, of which an aggregate €700 million was immediately swapped into USD to appropriately match Group currency of debt to currency of earnings. The resulting effective blended rate of interest on the bonds is fixed at c2.8% per annum until the first maturity date.

The Group's financial position remains strong, with good cash generation from operations offset by normal course interim dividend and bond coupon payments, and the conclusion of the £200 million share buyback programme.  We also continue to invest in projects to support growth initiatives.  During the period the Group completed the acquisition of the Citi Fixed Income Indices and The Yield Book, paying US$685 million.  At 30 September 2017, the Group's committed facility headroom was c£700 million, available for general corporate purposes.

The euro and US dollar both strengthened by 8% against sterling compared with the same period last year.  To illustrate our exposure to movements in exchange rates, a €0.05 change in the average euro:sterling rate would have resulted in a change to continuing operations total income of c£6.9 million for Q3, while a US$0.05 move would have resulted in a c£4.8 million change.

 

Current trading

 

The Group continues to execute on its successful growth strategy to deliver attractive shareholder returns.  All main parts of the Group continue to perform well and investment remains ongoing on a number of initiatives.  We are well positioned for the introduction of MiFID II and a broader changing regulatory environment.

 

The Group released a separate statement this morning regarding succession planning.

 

Further information is available from:

 

London Stock Exchange Group plc

Lucie Holloway/Ramesh Chhabra - Media

Paul Froud - Investor Relations

+44 (0) 20 7797 1222

 

+44 (0) 20 7797 3322




 

A conference call for analysts and investors will be held at 8:30 (UK time) on Thursday 19 October.  On the call will be David Warren (CFO) and Paul Froud (Head of Investor Relations).

 

To access the telephone conference call dial 0800 694 0257 or +44 (0) 1452 555 566

 

Conference ID: 8705 3054 

 

Q3 Revenue Summary

 

Revenues for three months and nine months ended 30 September 2017 refer to continuing operations, with comparatives against performance for the same period last year, are provided below.  Growth rates for both Q3 and year to date performance are also expressed on an organic and constant currency basis.  All figures are unaudited.

 





Organic




Organic


Three months ended


and constant


Nine months ended


and constant


30 September


currency


30 September


currency


2017

2016

Variance

variance1


2017

2016

Variance

variance1

Continuing operations:

£m

£m

%

%


£m

£m

%

%

Revenue










Information Services

181.8 

148.5 

22%

15% 


536.7 

434.4 

24%

14%

Post Trade Services - LCH

113.9 

89.5 

27%

24% 


321.1 

256.7 

25%

19%

Post Trade Services - CC&G and Monte Titoli

26.2 

25.2 

4%

(2%)


81.5 

73.3 

11%

2%

Capital Markets

96.7 

89.6 

8%

5% 


286.3 

271.2 

6%

1%

Technology Services

22.7 

20.8 

9%

7% 


63.8 

58.8 

9%

3%

Other

1.4 

2.6 

-

- 


5.9 

3.7 

-

-

Total revenue

442.7 

376.2 

18%

13% 


1,295.3 

1,098.1 

18%

11%











Net treasury income through CCP businesses

42.0 

35.3 

19%

13% 


116.8 

91.3 

28%

18%

Other income

1.4 

3.1 

-

- 


19.4 

11.0 

-

-

Total income

486.1 

414.6 

17%

12% 


1,431.5 

1,200.4 

19%

12%

Cost of sales

        (55.7)

        (44.8)

24%

20% 


        (157.3)

     (121.8)

29%

22%

Gross profit

430.4 

369.8 

16%

11% 


1,274.2 

1,078.6 

18%

11%

 

1 Organic growth is calculated in respect of businesses owned for at least the full 3 or 9 months in either period and excludes The Yield Book and Citi Fixed Income Indices, ISPS, Mergent and SwapMatch. The Group's principal foreign exchange exposure arises from translating our European based euro and US based USD reporting businesses into sterling.

 

 

 

 

More detailed revenues by segment are provided in tables below:

 

Information Services

Three months


Organic and





Organic and


ended


constant


Nine months ended


constant


30 September


currency


30 September


currency


2017

2016

Variance

variance1


2017

2016

Variance

variance1


£m

£m

%

%


£m

£m

%

%

Revenue










FTSE Russell Indexes

135.3 

102.1 

33% 

19% 


395.8 

295.7 

34% 

17%

Real time data

23.0 

23.3 

(1%)

(3%)


70.4 

67.7 

4% 

1%

Other information services

23.5 

23.1 

2% 

18% 


70.5 

71.0 

(1%)

11%

Total revenue

181.8 

148.5 

22% 

15% 


536.7 

434.4 

24% 

14%

Cost of sales

(15.4)

(13.6)

13% 

8% 


(45.5)

(38.5)

18% 

9%

Gross profit

166.4 

134.9 

23% 

15% 


491.2 

395.9 

24% 

14%

 

1 Removal of Mergent (acquired Q1 2017) and The Yield Book and Citi Fixed Income Indices (acquired Q3 2017) from FTSE Russell and ISPS from Other information services (disposed Q1 2017)

 

Post Trade Services - LCH

 


Three months ended


Constant


Nine months ended


Constant


30 September


currency


30 September


currency


2017

2016

Variance

variance


2017

2016

Variance

variance


£m

£m

%

%


£m

£m

%

%

Revenue










58.6 

47.6 

23%

21%


171.2 

136.7 

25%

19%

33.3 

28.3 

18%

12%


99.3 

85.9 

16%

7%

Other

22.0 

13.6 

62%

59%


50.6 

34.1 

48%

51%

Total revenue

113.9 

89.5 

27%

24%


321.1 

256.7 

25%

19%

Net treasury income

31.1 

24.1 

29%

23%


86.6 

59.1 

47%

36%

Other income

(0.5)

1.3 

-

-


6.5 

5.7 

-

-

Total income

144.5 

114.9 

26%

22%


414.2 

321.5 

29%

22%

Cost of sales

(22.7)

(15.8)

44%

36%


(63.1)

(39.0)

62%

49%

Gross profit

121.8 

99.1 

23%

20%


351.1 

282.5 

24%

18%

 

Post Trade Services - CC&G and Monte Titoli

 


Three months ended


Constant


Nine months ended


Constant


30 September


currency


30 September


currency


2017

2016

Variance

variance


2017

2016

Variance

variance


£m

£m

%

%


£m

£m

%

%

Revenue










Clearing

8.9 

10.0 

(11%)

(16%)


29.5 

30.7 

(4%)

(12%)

Settlement, Custody & other

17.3 

15.2 

14% 

7% 


52.0 

42.6 

22% 

12% 

Total revenue

26.2 

25.2 

4% 

(2%)


81.5 

73.3 

11% 

2% 

Net treasury income

10.9 

11.2 

(3%)

(8%)


30.2 

32.2 

(6%)

(14%)

Total income

37.1 

36.4 

2% 

(4%)


111.7 

105.5 

6% 

(3%)

Cost of sales

(4.3)

(3.1)

39% 

30% 


(12.7)

(8.8)

44% 

34% 

Gross profit

32.8 

33.3 

(2%)

(7%)


99.0 

96.7 

2% 

(6%)

 

Capital Markets

 


Three months


Organic and





Organic and


ended


constant


Nine months ended


constant


30 September


currency


30 September


currency


2017

2016

Variance

variance1


2017

2016

Variance

variance1


£m

£m

%

%


£m

£m

%

%

Revenue










Primary Markets

29.6 

21.1 

40% 

38% 


77.3 

65.3 

18% 

16% 

Secondary Markets - Equities

39.0 

40.0 

(3%)

(4%)


122.9 

123.1 

(0%)

(2%)

Secondary Markets - Fixed income, derivatives and other

28.1 

28.5 

(1%)

(6%)


86.1 

82.8 

4% 

(4%)

Total revenue

96.7 

89.6 

8% 

5% 


286.3 

271.2 

6% 

1% 

Cost of sales

(4.0)

(5.5)

(27%)

(29%)


(12.9)

(17.2)

(25%)

(27%)

Gross profit

92.7 

84.1 

10% 

7% 


273.4 

254.0 

8% 

3% 

 

1 Removal of SwapMatch from Capital Markets (acquired Q3 2016)

 

Technology Services

 


Three months









ended


Constant


Nine months ended


Constant


30 September


currency


30 September


currency


2017

2016

Variance

variance


2017

2016

Variance

variance

Revenue

£m

£m

%

%


£m

£m

%

%

MillenniumIT & other technology

22.7 

20.8 

9% 

7% 


63.8 

58.8 

9%

3% 

Cost of sales

(9.0)

(6.5)

38% 

41% 


(21.6)

(17.1)

26%

20% 

Gross profit

13.7 

14.3 

(4%)

(8%)


42.2 

41.7 

1%

(5%)

 

Basis of Preparation

 

Results for the period ended 30 September 2017 have been translated into Sterling using the average exchange rates for the period.  Constant currency growth rates have been calculated by translating prior period results at the average exchange rate for the current period.

 

 


Average rate



9 months ended

Closing rate at


30 September 2017

30 September 2017

GBP : EUR

1.15

1.13

GBP : USD

1.28

1.34





Average rate



9 months ended

Closing rate at


30 September 2016

30 September 2016

GBP : EUR

1.25

1.15

GBP : USD

1.39

1.30

 

Appendix - Key performance indicators

 

Information Services






As at



30 September

Variance


2017


2016

%

ETF assets under management benchmarked ($bn)





FTSE

345


246

40% 

Russell Indexes

227


176

29% 

Total

572


422

36% 






Terminals





UK

69,000


73,000

(5%)

Borsa Italiana Professional Terminals

116,000


129,000

(10%)

 

Post Trade Services - LCH











Three months ended



Nine months ended



30 September

Variance


30 September

Variance


2017


2016

%


2017


2016

%











OTC derivatives










SwapClear










IRS notional cleared ($tn)

197


160

23%


666


506

32%

SwapClear members

105


105

0%


105


105

0%

Client trades ('000)

313


232

35%


923


693

33%

CDSClear










Notional cleared (€bn)

147


106

39%


445


348

28%

CDSClear members

13


12

8%


13


12

8%

ForexClear










Notional value cleared ($bn)

3,097


630

392%


7,954


1,206

560%

ForexClear members

28


24

17%


28


24

17%

Non-OTC










Fixed income - Nominal value (€tn)

22.3


17.1

30%


65.2


52.1

25%

Listed derivatives (contracts m)

33.7


28.5

18%


110.1


98.5

12%

Cash equities trades (m)

194


166

17%


613


511

20%











Average cash collateral (€bn)

82.1


68.9

19%


85.0


63.8

33%

 

Post Trade Services - CC&G and Monte Titoli












Three months ended



Nine months ended



30 September

Variance


30 September

Variance


2017


2016

%


2017


2016

%

CC&G Clearing










Contracts (m)

22.6


28.0

(19%)


82.7


96.4

(14%)

Initial margin held (average €bn)

9.4


11.7

(20%)


11.6


11.8

(2%)

 

 










Monte Titoli










Settlement instructions (trades m)

10.1


9.4

7% 


33.0


32.0

3% 

Custody assets under management (average €tn)

3.30


3.17

4% 


3.26


3.17

3% 

 

Capital Markets - Primary Markets





















Three months ended



Nine months ended



30 September

Variance


30 September

Variance


2017


2016

%


2017


2016

%

New Issues










UK Main Market, PSM & SFM

18


11

64% 


60


36

67%

UK AIM

25


11

127% 


53


52

2%

Borsa Italiana

10


5

100% 


24


13

85%

Total

53


27

96% 


137


101

36%











Money Raised (£bn)










UK New

2.5


0.3

733% 


5.0


2.2

127%

UK Further

3.8


4.0

(5%)


12.2


10.0

22%

Borsa Italiana new and further

0.8


0.8

(2%)


13.7


4.7

191%

Total (£bn)

7.1


5.1

39% 


30.9


16.9

83%

 

 

Capital Markets - Secondary Markets




















Three months ended



Nine months ended



30 September

Variance


30 September

Variance

Equity

2017


2016

%


2017


2016

%

Totals for period










UK value traded (£bn)

327


310

5% 


1,010


947

7% 

Borsa Italiana (no of trades m)

15.1


16.6

(9%)


52.6


57.2

(8%)

Turquoise value traded (€bn)

225


325

(31%)


781


1,085

(28%)











SETS Yield (basis points)

0.63


0.63

0% 


0.63


0.63

0% 











Average daily










UK value traded (£bn)

5.1


4.8

6% 


5.3


5.0

6% 

Borsa Italiana (no of trades '000)

237


255

(7%)


275


298

(8%)

Turquoise value traded (€bn)

3.5


4.9

(29%)


4.1


5.6

(27%)











Derivatives (contracts m)










LSE Derivatives

1.5


0.9

67% 


4.7


3.3

42% 

IDEM

6.6


10.2

(35%)


27.1


35.4

(23%)

Total

8.2


11.1

(26%)


31.8


38.7

(18%)











Fixed Income










MTS cash and BondVision (€bn)

733


982

(25%)


2,635


3,024

(13%)

MTS money markets (€bn term adjusted)

17,385


19,305

(10%)


58,740


63,730

(8%)

 

Total Income - Quarterly


CY 2016





CY 2017



£ millions

Q1

Q2

Q3

Q4

CY 2016

Q1

Q2

Q3










Primary Markets

22.2 

22.0 

21.1 

25.5 

90.8 

21.3 

26.4 

29.6 

Secondary Markets - Equities

42.2 

40.9 

40.0 

41.8 

164.9 

42.0 

41.9 

39.0 

Secondary Markets - Fixed income, derivatives & other

28.0 

26.3 

28.5 

29.8 

112.6 

30.4 

27.6 

28.1 

Capital Markets

92.4 

89.2 

89.6 

97.1 

368.3 

93.7 

95.9 

96.7 










Clearing

10.6 

10.1 

10.0 

11.8 

42.5 

10.7 

9.9 

8.9 

Settlement, Custody & other

12.9 

14.5 

15.2 

18.6 

61.2 

17.0 

17.7 

17.3 

Post Trade Services - CC&G and Monte Titoli

23.5 

24.6 

25.2 

30.4 

103.7 

27.7 

27.6 

26.2 










OTC - SwapClear, ForexClear & CDSClear

44.6 

44.4 

47.6 

54.0 

190.6 

56.8 

55.8 

58.6 

Non OTC - Fixed income, Cash equities & Listed derivatives

28.6 

29.1 

28.3 

30.5 

116.5 

32.9 

33.1 

33.3 

Other

11.1 

9.3 

13.6 

15.4 

49.4 

16.0 

12.6 

22.0 

Post Trade Services - LCH

84.3 

82.8 

89.5 

99.9 

356.5 

105.7 

101.5 

113.9 










FTSE Russell Indexes

96.4 

97.1 

102.1 

113.7 

409.3 

126.7 

133.8 

135.3 

Real time data

22.7 

21.8 

23.3 

23.1 

90.9 

23.0 

24.4 

23.0 

Other information

22.4 

25.5 

23.1 

23.5 

94.5 

23.9 

23.1 

23.5 

Information Services

141.5 

144.4 

148.5 

160.3 

594.7 

173.6 

181.3 

181.8 










Technology Services

16.2 

21.9 

20.8 

29.4 

88.3 

20.5 

20.6 

22.7 










Other

1.0 

0.1 

2.6 

0.4 

4.1 

1.4 

3.2 

1.4 










Total Revenue

358.9 

363.0 

376.2 

417.5 

1,515.6 

422.6 

430.1 

442.7 

Net treasury income through CCP:









CC&G

10.3 

10.7 

11.2 

10.4 

42.6 

9.8 

9.6 

10.9 

LCH

17.6 

17.4 

24.1 

23.1 

82.2 

24.2 

31.3 

31.1 

Other income

0.8 

7.1 

3.1 

5.7 

16.7 

4.1 

13.8 

1.4 










Total income

387.6 

398.2 

414.6 

456.7 

1,657.1 

460.7 

484.8 

486.1 










Cost of sales

        (35.3)

        (41.7)

        (44.8)

        (53.0)

      (174.8)

(50.4)

       (51.2)

          (55.7)

Gross profit

352.3 

356.5 

369.8 

403.7 

1,482.3 

410.3 

433.6 

430.4 

 

Note: Minor rounding differences may mean quarterly and other segmental figures may differ slightly

 

 


This information is provided by RNS
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