Interim Management Statement

RNS Number : 4328W

London Stock Exchange Group PLC

27 April 2016

 

27 April 2016                                               

LONDON STOCK EXCHANGE GROUP plc

INTERIM MANAGEMENT STATEMENT

FOR THE PERIOD TO 26 APRIL 2016, INCLUDING REVENUES AND KPIs FOR THE THREE MONTHS ENDED 31 MARCH 2016 (Q1)

·    A strong performance - all main business divisions delivering growth on an organic and constant currency basis

·    Q1 total income from continuing operations up 9% to £387.6 million

·    Merger with Deutsche Börse announced in March 2016; a compelling value enhancing opportunity through the creation of a leading global markets infrastructure group anchored in Europe - shareholder documents being prepared

·    Sale of Russell Investment Management, for gross proceeds of US$1,150 million, is on track to complete in Q2 2016

Q1 summary:

·    Information Services revenues up 10% (up 7% on organic and constant currency basis), reflecting continued good growth at FTSE Russell

·    LCH revenues increased 14% (up 12% at constant currency), with 22% revenue growth in OTC from higher SwapClear client trades; good growth also in CDS volumes

·    Capital Markets revenues up 8% (up 6% at constant currency), with growth across all areas

·    Post Trade Services (Italy) income up 12% (up 8% at constant currency), with growth in clearing volumes and net treasury income

·    Technology Services revenues down 18%, mainly as the result of the timing of customer deliveries

·    Group continues to deliver on its strategy:

-	LCH received recognition as a clearing house in Singapore for SwapClear, ForexClear and EnClear (Freight); and in Japan for non-yen interest rate derivatives at SwapClear
-	LCH Spider, a new rates portfolio margining service, expected to launch in Q2, subject to regulatory approval
-	CurveGlobal expected to launch Q3 2016
-	SETS intra-day auction launched in March 2016 with good initial volumes
-	MillenniumIT, successfully implemented its Millennium PostTrade platform to support Singapore Exchange's Central Depository (CDP) business
-	ELITE expanded to over 380 companies in 23 countries, as has been launched with partnerships in Morocco and Turkey

Organic growth is calculated in respect of businesses owned for at least the full 3 months in either period and so excludes ExactPro  Proquote and XTF Inc. The Group's principal foreign exchange exposure arises from translating our European based euro and US based USD reporting businesses into sterling.

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

"The Group has started the year well and delivered a strong Q1 financial performance. We achieved underlying growth in each of our core business areas, with particularly strong performances in LCH's OTC clearing, at FTSE Russell and good results across Capital Markets.  We also continued to make good progress integrating recent acquisitions, developing innovative new products and expanding services and partnerships in line with our successful open access strategy. 

"We recently announced our proposed merger with Deutsche Börse.  This presents a compelling opportunity to expand our business in an industry-defining combination, creating a global markets infrastructure group.  With substantial cost synergies and multiple opportunities to extend our product offerings, we believe this transaction offers significant value and benefits to customers and shareholders"

Financial Position

Following normal course bond coupon payments, as well as ongoing investment in organic growth initiatives, the Group's financial position is not materially changed from that reported at 31 December 2015.  As at 31 March 2016, the Group had committed facility headroom of circa £550 million available for general corporate purposes.

The euro strengthened by 4% against sterling compared with the same period last year while the US $ strengthened by 5%. 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£5 million for Q1, while a US$0.05 move would have resulted in a c£3 million change.

Merger with Deutsche Börse

The Group announced a proposed merger with Deutsche Börse during the period, with a detailed announcement on 16 March 2016.  The Board believes the combination would create a leading global markets infrastructure group anchored in Europe and represents a compelling opportunity for both businesses to accelerate their successful and complementary growth strategies.

We continue to prepare our shareholder documents and will update the market in due course.

Current trading and outlook

The Group has made a strong start to the year, despite testing market conditions during the first quarter. The growth achieved at LCH and in our Information Services division, particularly at FTSE Russell, demonstrates the strong ongoing demand for our services. The good performance of our Capital Markets business is also encouraging.

We remain focused on achieving the synergies from the FTSE Russell index operations and on investment in a wide range of growth initiatives.  The Group is well placed to develop further.  In addition, we are also advancing the proposed merger with Deutsche Börse and working on shareholder documentation as well as preparatory work on approvals needed for the transaction.

Further information is available from:

London Stock Exchange Group plc	Gavin Sullivan - Media Paul Froud - Investor Relations	[phone] [phone]

A conference call for analysts and investors will be held at 8:00 (UK time) on Wednesday 27 April.  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 [phone]

Conference ID: 9069 4702

Q1 Revenue Summary

Revenues for three months ended 31 March 2016, with comparatives against performance for the same period last year, are provided below.  Growth rates for are also expressed on an organic and constant currency basis.  All figures are unaudited.

				Organic and
	Three months  ended			constant
	31 March			currency
	2016	2015	Variance	variance1
Continuing operations:	£m	£m	%	%
Revenue
Capital Markets	92.4	85.9	8%	6%
Post Trade Services - CC&G and Monte Titoli	23.5	23.4	0%	(3%)
Post Trade Services - LCH	84.3	73.9	14%	12%
Information Services	141.5	128.5	10%	7%
Technology Services	16.2	19.6	(17%)	(18%)
Other	1.0	0.8	25%	25%
Total revenue	358.9	332.1	8%	5%
Net treasury income through CCP businesses	27.9	20.2	38%	33%
Other income	0.8	1.7	-	-
Total income	387.6	354.0	9%	7%
Discontinued operations:
Russell Investment Management (gross)	226.2	246.7	(8%)	(13%)
Proquote	-	2.3	-	-
Total income	226.2	249.0	(9%)	(13%)
Continuing and discontinued operations:
Total income	613.8	603.0	2%	(2%)

¹ Organic growth is calculated in respect of businesses owned for at least the full 3 months in either period  and excludes ExactPro, Proquote and XTF Inc. 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:

Capital Markets

	Three months ended			Constant
	31 March			currency
	2016	2015	Variance	variance
Revenue	£m	£m	%	%
Primary Markets	22.2	21.4	4%	3%
Secondary Markets - Equities	42.2	38.2	10%	9%
Secondary Markets - Fixed income, derivatives and other	28.0	26.3	6%	3%
Total revenue	92.4	85.9	8%	6%

Post Trade Services - CC&G and Monte Titoli

	Three months ended			Constant
	31 March			currency
	2016	2015	Variance	variance
	£m	£m	%	%
Revenue
Clearing	10.6	10.0	6%	2%
Settlement, Custody & other	12.9	13.4	(4%)	(7%)
Total revenue	23.5	23.4	0%	(3%)
Net treasury income	10.3	6.8	51%	45%
Total income	33.8	30.2	12%	8%

LCH

	Three months ended			Constant
	31 March			currency
	2016	2015	Variance	variance
Revenue	£m	£m	%	%
OTC - SwapClear, ForexClear & CDSClear	44.6	36.5	22%	20%
Non-OTC - Fixed income, Cash equities and Listed derivatives	28.6	29.0	(1%)	(4%)
Other	11.1	8.4	32%	31%
Total revenue	84.3	73.9	14%	12%
Net treasury income	17.6	13.4	31%	27%
Unrealised gain / (loss)	(1.0)	0.4	-	-
Total income	100.9	87.7	15%	12%

Information Services

				Organic and
	Three months ended			constant
	31 March			currency
	2016	2015	Variance	variance1
	£m	£m	%	%
Revenue
FTSE Russell Indexes	96.4	85.0	13%	9%
Real time data	22.7	21.3	7%	5%
Other information services	22.4	22.2	1%	(1%)
Total revenue	141.5	128.5	10%	7%

Note: Continuing operations only (excludes Proquote from 2015)

¹ Removal XTF from Other information services (acquired Q4 2015)

Technology Services

				Organic and
	Three months ended			constant
	31 March			currency
	2016	2015	Variance	variance1
		£m	%	%
MillenniumIT & other technology	16.2	19.6	(17%)	(18%)

¹ Removal ExactPro from Technology services (acquired Q4 2015)

Basis of Preparation

Results for the period ended 31 March 2016 have been translated into Sterling using the average monthly exchange rates.  Constant currency growth rates have been calculated by translating prior period results at the average exchange rate for the current period.

	Average rate		Average rate
	3 months ended	Closing rate at	3 months ended	Closing rate at
	31 March 2016	31 March 2016	31 March 2015	31 March 2015
GBP : EUR	1.30	1.26	1.35	1.37
GBP : USD	1.43	1.44	1.51	1.48

  Appendix - Key performance indicators

Capital Markets - Primary Markets
	Three months ended
	31 March			Variance
	2016		2015	%
New Issues
UK Main Market, PSM & SFM	15		22	(32%)
UK AIM	15		16	(6%)
Borsa Italiana	3		6	(50%)
Total	33		44	(25%)
Money Raised (£bn)
UK New	1.4		2.0	(30%)
UK Further	2.1		6.1	(66%)
Borsa Italiana new and further	2.8		0.4	600%
Total (£bn)	6.3		8.5	(26%)

Capital Markets - Secondary Markets
	Three months ended
	31 March			Variance
Equity	2016		2015	%
Totals for period
UK value traded (£bn)	320		330	(3%)
Borsa Italiana (no of trades m)	21.5		19.5	10%
Turquoise value traded (€bn)	393		300.0	31%
SETS Yield (basis points)	0.63		0.62	2%
Average daily
UK value traded (£bn)	5.2		5.2	0%
Borsa Italiana (no of trades '000)	347		309	12%
Turquoise value traded (€bn)	6.3		4.8	31%
Derivatives (contracts m)
LSE Derivatives	1.3		1.3	0%
IDEM	13.3		11.0	21%
Total	14.6		12.3	19%
Fixed Income
MTS cash and BondVision (€bn)	1,020		1,186	(14%)
MTS money markets (€bn term adjusted)	23,108		23,613	(2%)

Post Trade Services - CC&G and Monte Titoli
	Three months ended
	31 March			Variance
	2016		2015	%
CC&G Clearing
Contracts (m)	36.2		31.8	14%
Initial margin held (average €bn)	11.9		11.1	7%
Monte Titoli
Settlement instructions (trades m)	11.4		17.5	(35%)
Custody assets under management (average €trn)	3.17		3.29	(4%)

Post Trade Services - LCH
	Three months ended
	31 March			Variance
	2016		2015	%
OTC derivatives
SwapClear
IRS notional cleared ($tn)	169		142	19%
SwapClear members	117		113	4%
Client trades ('000)	241		132	83%
CDSClear
Notional cleared (€bn)	131.1		21.9	499%
CDSClear members	11		11	0%
ForexClear
Notional value cleared ($bn)	293		270	9%
ForexClear members	23		22	5%
Non-OTC
Fixed income - Nominal value (€tn)	17.1		18.6	(8%)
Listed derivatives (contracts m)	36.4		36.7	(1%)
Cash equities trades (m)	169.5		140.3	21%
Average cash collateral (€bn)	60.0		54.0	11%

Information Services
	As at 31 March
				Variance
	2016		2015	%
ETFs assets under management benchmarked ($bn)
FTSE	219		223	(2%)
Russell Indexes	156		158	(1%)
Total	375		381	(2%)
Terminals
UK	75,000		76,000	(1%)
Borsa Italiana Professional Terminals	132,000		130,000	2%
Russell Investment Management AuM ($bn)1	247		272	(9%)

¹ LSEG and the members of its group accept no responsibility for or liability in respect of information relating to Russell AUM, which has been published by Russell Investments and has not been independently verified by LSEG. No representation or warranty, express or implied, is given by or on behalf of LSEG or its group as to its accuracy or completeness and no reliance should be placed on such information

Total Income - Quarterly

	CY 2015						CY 2016
£ millions	Q1	Q2	Q3	Q4	CY 2015		Q1
Primary Markets	21.4	24.0	19.1	24.3	88.8		22.2
Secondary Markets - Equities	38.2	36.5	35.1	33.9	143.7		42.2
Secondary Markets - Fixed income, derivatives & other	26.3	23.6	22.9	25.0	97.8		28.0
Capital Markets	85.9	84.1	77.1	83.2	330.3		92.4
Clearing	10.0	9.8	9.4	8.8	38.0		10.6
Settlement, Custody & other	13.4	13.6	12.4	12.4	51.8		12.9
Post Trade Services - CC&G and Monte Titoli	23.4	23.4	21.8	21.2	89.8		23.5
OTC - SwapClear, ForexClear & CDSClear	36.5	38.8	39.4	42.1	156.8		44.6
Non OTC - Fixed income, Cash equities & Listed derivatives	29.0	28.9	30.0	26.6	114.5		28.6
Other	8.4	7.5	6.4	8.5	30.8		11.1
Post Trade Services - LCH	73.9	75.2	75.8	77.2	302.1		84.3
FTSE Russell Indexes	85.0	86.2	90.7	87.0	348.9		96.4
Real time data	21.3	20.7	19.9	20.3	82.2		22.7
Other information	24.5	23.3	23.1	23.0	93.9		22.4
Information Services	130.8	130.2	133.7	130.3	525.0		141.5
Technology Services	19.6	18.6	19.8	22.5	80.6		16.2
Russell Investment Management (gross)	246.7	251.5	237.4	217.5	953.1		226.2
Other	0.8	0.8	0.5	2.4	4.5		1.0
Total Revenue	581.1	583.9	566.1	554.3	2,285.4		585.1
Net treasury income through CCP:
CC&G	6.8	6.6	7.7	8.2	29.3		10.3
LCH.Clearnet	13.4	13.6	13.5	15.9	56.4		17.6
Other income	1.7	1.7	2.0	5.0	10.4		0.8
Total income	603.0	605.8	589.3	583.4	2,381.5		613.8
Continuing operations	354.0	351.2	349.4	364.1	1,418.6		387.6

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

 

END

 

 

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