Interim Management Statement

RNS Number : 4190M

London Stock Exchange Group PLC

16 July 2014

 



16 July 2014

LONDON STOCK EXCHANGE GROUP plc

INTERIM MANAGEMENT STATEMENT

FOR THE PERIOD TO 15 JULY 2014, INCLUDING REVENUES AND KPIs FOR THE THREE MONTHS ENDED 30 JUNE 2014 (Q1)

·    Strong financial performance - Q1 total income up 16 per cent to £323.9 million

·    Revenue increased 20 per cent overall and 12 per cent on an organic and constant currency basis, with growth across nearly all business segments

·    Capital Markets revenues up 16 per cent, with strong growth in primary markets as the number of new issues more than doubled; secondary markets benefitted from improvements in fixed income trading and Italian cash equity volumes

·    Post Trade Services (Italy) revenues up 4 per cent, and up 8 per cent on an organic and constant currency basis with increases in clearing volumes and within settlement and custody

·    LCH.Clearnet total income up 14 per cent on a pro forma, constant currency basis, with good growth in OTC and commodities revenues

·    Information Services revenues up 5 per cent, reflecting good performances from FTSE and a number of other services

·    Technology Services revenues declined 8 per cent, mainly as the result of the phasing of customer deliveries

·    The Group announced the proposed acquisition of Frank Russell Company on 26 June 2014; preparation of a Circular for a shareholder meeting and a Prospectus for the accompanying rights issue is underway, with posting expected in late August

Commenting on performance in Q1, Xavier Rolet, Chief Executive, said:

"We have made good progress in the first quarter, delivering a strong financial performance reflecting organic growth and inorganic revenues across the Group. We have been pleased by the continued resurgence in the IPO market with an increase both in the number of companies joining our markets and the amount of money raised.

"The proposed acquisition of Russell Investments will also help to expand the global footprint of the Group, particularly in the key U.S. market. This is a strong strategic acquisition for the Group, which will accelerate development in one of our core strengths, intellectual property, and offers significant growth potential.  In the coming months, we will focus on obtaining the necessary approvals to complete the acquisition and to deliver the financial benefits of the transaction to the Group."

Financial Position

Prior to the announcement of the proposed acquisition of Frank Russell Company, the Group put in place new, committed, multicurrency revolving credit facilities of £600 million for a term of up to 3 years. The new facilities have been arranged on similar terms to the Group's existing £700 million syndicated deal, signed in July 2013, and are available for part financing the Russell transaction.  Other than these new arrangements, and normal scheduled coupon payments on longer term debt in the quarter, there are no material changes to the Group's financial position since the financial year end.

The euro weakened against sterling compared with the same period last year, from €1.18 to €1.23. To illustrate our exposure to movements in this exchange rate, a €0.05 change in the average euro:sterling rate would have resulted in a change to total income of c£7.3 million for Q1

Current trading and outlook

The Group has made good progress in the start to the new financial year.  As we enter the seasonally quieter summer period, the Group remains well placed to benefit from continued positive market trends through its increasingly diversified  businesses and from the work to realise the previously announced integration synergies at LCH.Clearnet Group.

The Group expects to provide interim financial results for the period to 30 June 2014 at the time of the release of the Prospectus in connection with the acquisition of Frank Russell Company.

Further information is available from:

London Stock Exchange Group plc	Gavin Sullivan - Media Paul Froud - Investor Relations	[phone] [phone]
RLM Finsbury	David Henderson / Mike Turner	[phone]

A conference call for analysts and investors will be held at 9:00 (UK time) on Wednesday 16th July.  On the call will be David Warren (CFO) and Paul Froud (Head of Investor Relations).

To access the Telephone conference call dial 0800 376 7922 or [phone]

Conference ID: 7330 9625

Q1 Revenue Summary

Revenues for three months ended 30 June 2014, with comparatives against performance for the same period last year, are provided below.  Growth rates for performance are also expressed on an organic and constant currency basis.  All figures are unaudited.

				Organic and
	Three months ended			constant
	30 June			currency
	2014	2013	Variance	variance1
	£m	£m	%	%
Revenue
Capital Markets	87.0	75.0	16%	14%
Post Trade Services	26.0	25.1	4%	8%
LCH.Clearnet 2	83.2	49.0	70%	21%
Information Services	88.0	83.9	5%	7%
Technology Services	14.3	15.5	(8%)	(2%)
Other	1.4	1.2	17%	17%
Total revenue	299.9	249.7	20%	12%
Net treasury income through CCP business
CC&G	7.5	16.7	(55%)	(53%)
LCH.Clearnet 2	15.1	11.7	29%	(13%)
Other income	1.4	2.1	(33%)	(30%)
LCH.Clearnet unrealised gain / (loss)	0.7	(1.2)	-	-
Total income including unrealised	324.6	279. 0	16%	7%
Total income excluding unrealised	323.9	280.2	16%	7%

¹Exchange rates for the relevant period are detailed at the end of this section
 Adjustments to calculate organic growth:

1)    Removal of EuroTLX and Bonds.com revenue (Capital Markets - Fixed Income)

2)    LCH.Clearnet pro forma for three months

3)    MTS Indices removed from Capital Markets Fixed Income revenue and include in Information Services FTSE revenue

²LCH.Clearnet represents two months ended 30 June 2013

More detailed revenues by segment are provided in tables below:

Capital Markets

				Organic and
	Three months ended			constant
	30 June			currency
	2014	2013	Variance	variance1
Revenue	£m	£m	%	%
Primary Markets
Annual fees	11.0	10.0	10%	11%
Admission fees	14.3	9.5	51%	52%
	25.3	19.5	30%	31%
Secondary Markets
Cash equities UK & Turquoise	24.5	24.2	1%	1%
Cash equities Italy	10.0	8.6	16%	20%
Derivatives	4.9	5.0	(2%)	2%
Fixed income	19.9	15.5	28%	10%
	59.3	53.3	11%	7%
Other	2.4	2.2	9%	14%
Total revenue	87.0	75.0	16%	14%

¹ Removal of EuroTLX and Bonds.com revenue (Capital Markets - Fixed Income) and

MTS Indices removed from Capital Markets Fixed Income revenue and included in Information Services FTSE revenue

Post Trade Services

	Three months ended			Constant
	30 June			currency
	2014	2013	Variance	variance
	£m	£m	%	%
Revenue
Clearing	10.2	10.1	1%	5%
Settlement	5.0	4.4	14%	19%
Custody & other	10.8	10.6	2%	6%
Total revenue	26.0	25.1	4%	8%
Net treasury income	7.5	16.7	(55%)	(53%)
Total income	33.5	41.8	(20%)	(17%)

LCH.Clearnet

				Organic and
	Three months ended			constant
	30 June			currency
	2014	20132	Variance	variance1
Revenue	£m	£m	%	%
OTC
SwapClear	26.8	14.9	80%	25%
ForexClear / CDSClear	7.3	2.7	170%	85%
	34.1	17.6	94%	34%
Non-OTC
Fixed income	11.6	5.4	115%	53%
Commodities	14.1	4.4	220%	164%
Listed derivatives	9.5	12.4	(23%)	(48%)
Cash equities	8.4	6.2	35%	(3%)
	43.6	28.4	54%	9%
Total Clearing fee revenue	77.7	46.0	69%	19%
Other	5.5	3.0	83%	63%
Total revenue	83.2	49.0	70%	21%
Net treasury income	15.1	11.7	29%	(13%)
Unrealised gain / (loss)	0.7	(1.2)	-	-
Total income including unrealised	99.0	59.5	66%	16%
Total income excluding unrealised	98.3	60.7	62%	14%

¹Pro forma represents three months ended 30 June 2013

²LCH.Clearnet 2013 represents two months ended 30 June 2013

Information Services

				Organic and
	Three months ended			constant
	30 June			currency
	2014	2013	Variance	variance1
	£m	£m	%	%
Revenue
FTSE	44.4	41.7	6%	8%
Real time data	21.3	22.4	(5%)	(3%)
Other information services	22.3	19.8	13%	14%
Total revenue	88.0	83.9	5%	7%

¹ MTS Indices removed from Capital Markets Fixed Income revenue and included in Information Services FTSE revenue

Technology Services

				Organic and
	Three months ended			constant
	30 June			currency
	2014	2013	Variance	variance
	£m	£m	%	%
Revenue
MillenniumIT	6.0	7.4	(19%)	(9%)
Technology	8.3	8.1	2%	4%
Total revenue	14.3	15.5	(8%)	(2%)

Basis of Preparation

Results for Borsa Italiana and LCH.Clearnet for the period ended 30 June 2014 have been translated into Sterling using the average monthly exchange rate for the period of €1.23: £1.  Constant currency growth rates have been calculated by translating prior period results at the average exchange rate for the current period.

Average €:£ rate 3 months ended 30 June 2014	Closing €:£ rate at 30 June 2014	Average €:£ rate 3 months ended 30 June 2013	Closing €:£ rate at 30 June 2013
€ 1.23	€ 1.25	€ 1.18	€ 1.18

Appendix - Key performance indicators

Capital Markets - Primary Markets
	Three months ended
	30 June			Variance
	2014		2013	%
New Issues
UK Main Market, PSM & SFM	33		12	175%
UK AIM	38		18	111%
Borsa Italiana	7		3	133%
Total	78		33	136%
Company Numbers (as at period end)
UK Main Market, PSM & SFM	1,371		1,365	0%
UK AIM	1,104		1,085	2%
Borsa Italiana	297		283	5%
Total	2,772		2,733	1%
Market Capitalisation (as at period end)
UK Main Market (£bn)	2,270		2,088	9%
UK AIM (£bn)	78		62	26%
Borsa Italiana (€bn)	499		354	41%
Borsa Italiana (£bn)	400		300	33%
Total (£bn)	2,748		2,450	12%
Money Raised (£bn)
UK New	7.6		2.0	280%
UK Further	4.8		2.6	85%
Borsa Italiana new and further	7.5		0.3	2400%
Total (£bn)	19.9		4.9	306%

Capital Markets - Secondary Markets
	Three months ended
	30 June			Variance
Equity	2014		2013	%
Totals for period
UK value traded (£bn)	265		275	(4%)
Borsa Italiana (no of trades m)	16.9		14.3	18%
Turquoise value traded (€bn)	241.4		175.1	38%
SETS Yield (basis points)	0.66		0.66	0%
Average daily
UK value traded (£bn)	4.2		4.4	(5%)
Borsa Italiana (no of trades '000)	272		227	20%
Turquoise value traded (€bn)	3.83		2.74	40%
Derivatives (contracts m)
LSE Derivatives	2.8		3.7	(24%)
IDEM	8.8		8.1	9%
Total	11.6		11.8	(2%)
Fixed Income
MTS cash and Bondvision (€bn)	1,098		807	36%
MTS money markets (€bn term adjusted)	19,997		19,491	3%
MOT number of trades (m)	1.43		1.75	(18%)

Post Trade Services
CC&G and Monte Titoli
	Three months ended
	30 June			Variance
	2014		2013	%
CC&G Clearing (m)
Equity clearing (no of trades)	17.6		15.2	16%
Derivative clearing (no of contracts)	8.8		8.1	9%
Total	26.4		23.3	13%
Open interest (contracts as at period end)	4.4		3.9	13%
Initial margin held (average €bn)	10.3		12.4	(17%)
Monte Titoli
Pre Settlement instructions (trades m)	8.5		7.0	21%
Settlement instructions (trades m)	9.9		7.4	34%
Total Settlement	18.4		14.4	28%
Custody assets under management (average €tn)	3.40		3.28	4%

LCH.Clearnet
	Three months ended
	30 June			Variance
	2014		2013	%
OTC derivatives
SwapClear
IRS notional outstanding ($trn)	419		391	7%
IRS notional cleared ($trn)	181.3		127.2	43%
SwapClear members	106		83	28%
CDSClear
Open interest (€bn)	31.0		13.2	135%
Notional cleared (€bn)	19.5		44.5	(56%)
CDSClear members	9		11	(18%)
ForexClear
Notional value cleared ($bn)	212.2		263.3	(19%)
ForexClear members	20		15	33%
Non-OTC
Fixed income - Nominal value (€trn)	18.6		18.6	0%
Commodities (lots m)	46.3		34.3	35%
Listed derivatives (contracts m)	42.7		42.6	0%
Cash equities trades (m)	103.8		89.9	15%
Average cash collateral (€bn)	46.5		41.5	12%

Information Services
	As at
	30 June			Variance
	2014		2013	%
UK Terminals
Professional - UK	32,000		33,000	(3%)
Professional - International	47,000		48,000	(2%)
Total	79,000		81,000	(2%)
Borsa Italiana Professional Terminals	132,000		138,000	(4%)
FTSE ETFs assets under management benchmarked ($bn)	213		163	31%

                    Total Income - Quarterly

	FY 2014						FY 2015
£ millions	Q1	Q2	Q3	Q4	FY 2014		Q1
Annual Fees	10.0	10.3	10.2	10.7	41.2		11.0
Admission Fees	9.5	7.6	12.8	10.0	39.9		14.3
Cash equities UK & Turquoise	24.2	22.2	21.7	26.4	94.5		24.5
Cash equities Italy	8.6	8.6	9.0	9.9	36.1		10.0
Derivatives	5.0	4.7	4.9	5.0	19.6		4.9
Fixed Income	15.5	14.5	18.4	19.7	68.1		19.9
Other	2.2	2.3	3.1	2.5	10.1		2.4
Capital Markets	75.0	70.2	80.1	84.2	309.5		87.0
Clearing	10.1	9.0	10.4	10.5	40.0		10.2
Settlement	4.4	3.4	4.2	4.4	16.4		5.0
Custody & other	10.6	10.6	10.6	10.2	42.0		10.8
Post Trade Services	25.1	23.0	25.2	25.1	98.4		26.0
	2 months
OTC - SwapClear	14.9	26.3	24.5	25.8	91.5		26.8
OTC - ForexClear / CDSClear	2.7	4.0	4.0	7.4	18.1		7.3
Fixed income	5.4	8.4	7.0	11.0	31.8		11.6
Commodities	4.4	9.1	9.3	11.3	34.1		14.1
Listed derivatives	12.4	11.2	11.5	12.9	48.0		9.5
Cash equities	6.2	8.2	8.7	9.3	32.4		8.4
Other	3.0	(5.0)	(3.8)	12.9	7.1		5.5
LCH.Clearnet	49.0	62.2	61.2	90.6	263.0		83.2
FTSE	41.7	42.2	44.2	45.9	174.0		44.4
Real time data	22.4	22.1	23.0	23.3	90.8		21.3
Other information	19.8	20.1	21.2	22.8	83.9		22.3
Information Services	83.9	84.4	88.4	92.0	348.7		88.0
MillenniumIT	7.4	5.7	7.9	10.5	31.5		6.0
Technology	8.1	8.2	8.1	8.1	32.5		8.3
Technology Services	15.5	13.9	16.0	18.6	64.0		14.3
Other	1.2	0.8	1.4	1 3	4.7		1.4
Total Revenue	249.7	254.5	272.3	311.8	1,088.3		299.9
Net treasury income through CCP:
CC&G	16.7	11.4	10.1	9.4	47.6		7.5
LCH.Clearnet	11.7	18.8	17.6	14.1	62.2		15.1
Other income	2.1	2.2	8.9	1.8	15.0		1.4
LCH.Clearnet unrealised gain / (loss)	(1.2)	(0.8)	(0.9)	(0.6)	(3.5)		0.7
Total income including unrealised	279.0	286.1	308.0	336.5	1,209.6		324.6
Total income excluding unrealised	280.2	286.9	308.9	337.1	1,213.1		323.9

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

 

END

 

 

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