Q3 Interim Management Statement

RNS Number : 0401D

London Stock Exchange Group PLC

22 October 2015

 

22 October 2015

LONDON STOCK EXCHANGE GROUP plc

INTERIM MANAGEMENT STATEMENT

FOR THE PERIOD TO 21 OCTOBER 2015, INCLUDING REVENUES AND KPIs FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2015 (Q3)

·    Another period of growth: Q3 total income from continuing operations up 11% and rose 8% year-to-date; headline Q3 total income¹ up 85% to £589.3 million and 9 months year-to-date up 83%, to £1,798.1 million

·    Q3 revenues  from continuing operations (excluding assets held for sale) up 12% to £326.4 million; up 10% for 9 months year-to-date at £897.4 million

·    All business divisions delivering growth on an underlying, organic and constant currency basis

·    Information Services Q3 revenues up 44% (up 5% on organic and constant currency basis), reflecting good growth at FTSE and contribution from Russell Indexes; the index businesses are now managed and reported as an integrated business

·    LCH.Clearnet Q3 revenues, excluding loss of LME commodities clearing, increased 8%, with 14% growth in OTC; on a reported basis revenue reduced 8%

·    Capital Markets Q3 revenues down 1% (up 5% at constant currency), with growth in cash equities trading offset in part by weaker primary markets and reduction in fixed income trading

·    Post Trade Services (Italy) Q3 revenues down 1% (up 10% at constant currency), with growth in clearing volumes partly offset by decline in settlement and custody

·    Technology Services revenues up 20% (up by same amount on an organic and constant currency basis), driven by growth from MillenniumIT

·    Group continues to deliver on its strategy:

-    announced the launch of CurveGlobal, a new interest rate derivatives venture with a number of major dealer banks and CBOE, further extending our product offer and reflecting our partnership and open access approach; all products designed and supported by CurveGlobal will be admitted to trading on the Group's, London Stock Exchange Derivatives Market, and cleared through LCH.Clearnet

-    On 8 October 2015, the Group announced the proposed sale of Russell Investment Management to TA Associates, for gross proceeds of US$1,150 million; the transaction is expected to complete in H1 2016

-    During the period, the Group confirmed the sale of Proquote, a UK market data vendor provider, which is expected to close in Q4 2015

¹ revenue and total income include both continuing and discontinuing operations

Organic growth is calculated in respect of businesses owned for at least the full 3 or 9 months in either period and so excludes Bonds.com, MTS Indices and Frank Russell Company. 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 Q3, Xavier Rolet, Chief Executive, said:

"The Group has delivered further revenue growth in the third quarter, with good performance in particular from our Information Services division, including FTSE Russell, and from LCH.Clearnet with another strong result from the OTC clearing services.

"The Group also continues to innovate, partnering with customers to deliver open access solutions, such as the launch of CurveGlobal, part of our effort to further develop a comprehensive Rates offering to our customers.

"We have started Q4 well, with the successful IPO of Worldpay, the largest UK new issue so far in 2015, and the expected IPO of Poste Italiane which will be the largest in Europe this year. We remain focused on executing on a wide range of attractive growth opportunities and continuing to deliver on our strategy to be a leading globally diversified open access market infrastructure business."

Financial Position

Following normal course interim dividend and bond coupon payments, as well as ongoing investment in organic growth initiatives, the Group's financial position is broadly unchanged from that reported at 30 June 2015. As at 30 September, 2015, the Group had committed facility headroom of circa £500 million available for general corporate purposes.

The euro weakened by 10% against sterling compared with the same period last year while the US $ strengthened by 8%. 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 total income of c£4 million for Q3, while a US$0.05 move would have resulted in a c£1.5 million change.

Current trading and outlook

The Group made good progress in Q3 and year-to-date, despite exchange rate headwinds. While we are early in the fourth quarter, the period has started well, with continuing capital raising activity, including the largest IPO on our markets this year - Worldpay - and an encouraging pipeline of companies seeking to join our markets in Italy and the UK.  In secondary markets, both UK and Italian cash equity trading and fixed income trading is running in line with levels in September.

We remain focused on delivering the synergy benefits from the continuing integration of FTSE Russell index operations and on completing the successful disposal of Russell Investment Management, following full separation from the Indexes business. The Group continues to invest in a wide range of growth initiatives, including the opportunities highlighted in our Post Trade event earlier this year, and we are well placed to develop further. 

The Group will host an investor update event on Information Services, in particular focusing on FTSE Russell Indexes, on 9 November 2015.

Further information is available from:

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

A conference call for analysts and investors will be held at 8:30 (UK time) on Thursday 22 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 [phone]

Conference ID: 49956864

 

Q3 Revenue Summary

Revenues for three months and nine months ended 30 September 2015, 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  and constant					Organic and constant
	Three months ended					Nine months ended
	30 September			currency		30 September			currency
	2015	2014	Variance	variance1		2015	2014	Variance	variance1
	£m	£m	%	%		£m	£m	%	%
Revenue
Capital Markets	77.1	77.6	(1%)	5%		247.1	248.7	(1%)	5%
Post Trade Services - CC&G and Monte Titoli	21.8	22.0	(1%)	10%		68.7	73.0	(6%)	5%
Post Trade Services  - LCH.Clearnet	75.8	82.5	(8%)	(6%)		224.9	256.4	(12%)	(9%)
Information Services 2	133.7	93.0	44%	5%		394.7	273.0	45%	6%
Technology Services	19.8	16.5	20%	20%		58.1	49.4	18%	16%
Russell Investment Management (gross)2	237.4		-	-		735.6
Other	0.5	1.1	(55%)	(55%)		2.1	3.8	(45%)	(42%)
Total revenue	566.1	292.7	93%	3%		1,731.2	904.3	91%	1%
Net treasury income through CCP businesses	21.2	25.2	(16%)	(12%)		61.5	71.3	(14%)	(9%)
Other income	2.0	0.1	-	-		5.4	4.5	-	-
Total income	589.3	318.0	85%	2%		1,798.1	980.1	83%	1%

¹ Organic growth is calculated in respect of businesses owned for at least the full 3 or 9 months in either period  and so excludes Bonds.com, MTS Indices and Frank Russell Company The Group’s principal foreign exchange exposure arises from translating our European based euro and US based USD reporting businesses into sterling.

² includes discontinuing operations revenue of £239.7m (2014: £2.2m) for 3 months and £742.4m (2014: £6.9m) for 9 months

More detailed revenues by segment are provided in tables below:

Capital Markets

				Organic and constant					Organic and constant
	Three months ended					Nine months ended
	30 September			currency		30 September			currency
	2015	2014	Variance	variance1		2015	2014	Variance	variance1
Revenue	£m	£m	%	%		£m	£m	%	%
Primary Markets	19.1	20.1	(5%)	(3%)		64.5	66.1	(2%)	0%
Secondary Markets - Equities	35.1	32.5	8%	11%		109.8	103.2	6%	9%
Secondary Markets - Fixed income, derivatives and other	22.9	25.0	(8%)	0%		72.8	79.4	(8%)	3%
Total revenue	77.1	77.6	(1%)	5%		247.1	248.7	(1%)	5%

¹ Removal 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		Nine months ended			Constant
	30 September			currency		30 September			currency
	2015	2014	Variance	variance		2015	2014	Variance	variance
	£m	£m	%	%		£m	£m	%	%
Revenue
Clearing	9.4	8.2	15%	27%		29.3	28.8	2%	14%
Settlement, Custody & other	12.4	13.8	(10%)	(1%)		39.4	44.2	(11%)	(0%)
Total revenue	21.8	22.0	(1%)	10%		68.7	73.0	(6%)	5%
Net treasury income	7.7	8.0	(4%)	7%		21.0	24.9	(16%)	(6%)
Total income	29.5	30.0	(2%)	9%		89.7	97.9	(8%)	2%

LCH.Clearnet

	Three months ended			Constant		Nine months ended			Constant
	30 September			currency		30 September			currency
	2015	2014	Variance	variance		2015	2014	Variance	variance
Revenue	£m	£m	%	%		£m	£m	%	%
OTC - SwapClear, ForexClear & CDSClear	39.4	34.5	14%	17%		114.7	101.8	13%	16%
Non-OTC - Fixed income, Cash equities and Listed derivatives1	30.0	41.7	(28%)	(25%)		87.9	129.8	(32%)	(29%)
Other	6.4	6.3	2%	(2%)		22.3	24.8	(10%)	(11%)
Total revenue	75.8	82.5	(8%)	(6%)		224.9	256.4	(12%)	(9%)
Net treasury income	13.5	17.2	(22%)	(20%)		40.5	46.4	(13%)	(11%)
Unrealised gain / (loss)	0.1	(0.3)	-	-		0.2	0.4	-	-
Total income	89.4	99.4	(10%)	(8%)		265.6	303.2	(12%)	(10%)

¹ 2014 includes LME revenue of £12.2m for 3 moths and £37.5m for 9 months. Total revenue adjusted for the loss of LME increased 8% for 3 months and 3% for 9 months

Information Services

				Organic and constant					Organic and constant
	Three months ended					Nine months ended
	30 September			currency		30 September			currency
	2015	2014	Variance	variance1		2015	2014	Variance	variance1
	£m	£m	%	%		£m	£m	%	%
Revenue
FTSE Russell Indexes	90.7	48.3	88%	12%		261.9	138.6	89%	10%
Real time data	19.9	21.3	(7%)	(4%)		61.8	65.9	(6%)	(4%)
Other information services2	23.1	23.4	(1%)	1%		71.0	68.5	4%	6%
	133.7	93.0	44%	5%		394.7	273.0	45%	6%

¹ Removal Russell Indexes and MTS Indices revenue from FTSE Russell Indexes

² includes discontinuing operations revenue of £2.3m (2014: £2.2m) for 3 months and £6.8m (2014: £6.9m) for 9 months

Technology Services

				Organic and					Organic and
	Three months ended			constant		Nine months ended			constant
	30 September			currency		30 September			currency
	2015	2014	Variance	Variance		2015	2014	Variance	variance
	£m	£m	%	%		£m	£m	%	%
MillenniumIT & other technology	19.8	16.5	20%	20%		58.1	49.4	18%	16%

Basis of Preparation

Results for the period ended 30 September 2015 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 3 months ended	Average rate 9 months ended	Closing rate at	Average rate 3 months ended	Average rate 9 months ended	Closing rate at
	30 September 2015	30 September 2015	30 September 2015	30 September 2014	30 September 2014	30 September 2014
GBP : EUR	1.39	1.38	1.35	1.26	1.23	1.29
GBP : USD	1.55	1.53	1.52	1.67	1.67	1.62

Appendix - Key performance indicators

Capital Markets - Primary Markets
	Three months ended					Nine months ended
	30 September			Variance		30 September			Variance
	2015		2014	%		2015		2014	%
New Issues
UK Main Market, PSM & SFM	13		14	(7%)		60		62	(3%)
UK AIM	14		24	(42%)		46		88	(48%)
Borsa Italiana	7		10	(30%)		21		22	(5%)
Total	34		48	(29%)		127		172	(26%)
Money Raised (£bn)
UK New	0.8		2.1	(62%)		7.1		14.1	(50%)
UK Further	4.3		3.8	13%		17.1		12.3	39%
Borsa Italiana new and further	0.4		1.7	(76%)		4.4		9.3	(53%)
Total (£bn)	5.5		7.6	(28%)		28.6		35.7	(20%)

Capital Markets - Secondary Markets
	Three months ended					Nine months ended
	30 September			Variance		30 September			Variance
Equity	2015		2014	%		2015		2014	%
Totals for period
UK value traded (£bn)	311		264	18%		965		851	13%
Borsa Italiana (no of trades m)	17.5		14.4	22%		54.6		49.4	11%
Turquoise value traded (€bn)	254		228	11%		825		691	19%
SETS Yield (basis points)	0.62		0.65	(5%)		0.62		0.64	(3%)
Average daily
UK value traded (£bn)	4.8		4.1	17%		5.1		4.5	13%
Borsa Italiana (no of trades '000)	265		222	19%		286		260	10%
Turquoise value traded (€bn)	3.8		3.5	9%		4.3		3.6	19%
Derivatives (contracts m)
LSE Derivatives	1.1		1.9	(42%)		3.4		9.8	(65%)
IDEM	11.5		8.9	29%		33.6		28.3	19%
Total	12.6		10.8	17%		37.0		38.1	(3%)
Fixed Income
MTS cash and BondVision (€bn)	861		998	(14%)		2,996		3,259	(8%)
MTS money markets (€bn term adjusted)	22,728		17,743	28%		67,584		54,412	24%

Post Trade Services - CC&G and Monte Titoli
	Three months ended					Nine months ended
	30 September			Variance		30 September				Variance
	2015		2014	%		2015			2014	%
CC&G Clearing
Contracts (m)	30.2		24.0	26%		91.7			79.9	15%
Initial margin held (average €bn)	12.8		9.3	38%		12.4			10.2	22%
Monte Titoli
Settlement instructions (trades m)	14.0		14.5	(3%)		48.9			49.2	(1%)
Custody assets under management (average €tn)	3.30		3.36	(2%)		3.31			3.37	(2%)

Post Trade Services - LCH.Clearnet
	Three months ended					Nine months ended
	30 September			Variance		30 September			Variance
	2015		2014	%		2015		2014	%
OTC derivatives
SwapClear
IRS notional cleared ($trn)	131		159	(18%)		392		505	(22%)
SwapClear members	114		108	6%		114		108	6%
Client trades ('000)	182		104	75%		492		296	66%
CDSClear
Notional cleared (€bn)	38.5		10.0	285%		104.9		48.4	117%
CDSClear members	11		9	22%		11		9	22%
ForexClear
Notional value cleared ($bn)	291		247	18%		813		650	25%
ForexClear members	23		20	15%		23		20	15%
Non-OTC
Fixed income - Nominal value (€trn)	18.5		19.0	(3%)		55.0		55.6	(1%)
Listed derivatives (contracts m)	38.2		40.7	(6%)		110.8		132.7	(17%)
Cash equities trades (m)	139.2		105.2	32%		410.3		326.9	26%
Average cash collateral (€bn)	58.8		50.9	16%		57.1		46.9	22%

Information Services
	As at
	30 September			Variance
	2015		2014	%
Terminals
UK	75,000		78,000	(4%)
Borsa Italiana Professional Terminals	130,000		129,000	1%
ETFs assets under management benchmarked ($bn)
FTSE	206		216	(5%)
Russell Indexes	145		134	8%
Russell Investment Management AuM ($bn)1	237		275	(14%)

Total Income - Quarterly

	CY 2014						CY 2015
£ millions	Q1	Q2	Q3	Q4	CY 2014		Q1	Q2	Q3
Primary Markets	20.7	25.3	20.1	22.7	88.8		21.4	24.0	19.1
Secondary Markets - Equities	36.3	34.5	32.5	35.9	139.2		38.2	36.5	35.1
Secondary Markets - Fixed income, derivatives & other	27.2	27.2	25.0	25.8	105.2		26.3	23.6	22.9
Capital Markets	84.2	87.0	77.6	84.4	333.2		85.9	84.1	77.1
Clearing	10.4	10.2	8.2	9.3	38.2		10.0	9.8	9.4
Settlement, Custody & other	14.6	15.8	13.8	14.1	58.3		13.4	13.6	12.4
Post Trade Services - CC&G and Monte Titoli	25.0	26.0	22.0	23.4	96.5		23.4	23.4	21.8
OTC - SwapClear, ForexClear & CDSClear	33.2	34.1	34.5	36.4	138.2		36.5	38.8	39.4
Non OTC - Fixed income, Cash equities & Listed derivatives	44.5	43.6	41.7	29.8	159.8		29.0	28.9	30.0
Other	13.0	5.5	6.3	6.8	31.4		8.4	7.5	6.4
Post Trade Services - LCH.Clearnet	90.7	83.2	82.5	73.1	329.4		73.9	75.2	75.8
FTSE Russell Indexes	45.9	44.4	48.3	58.2	196.8		85.0	86.2	90.7
Real time data	23.3	21.3	21.3	18.4	84.3		21.3	20.7	19.9
Other information	22.8	22.3	23.4	23.4	91.9		24.5	23.3	23.1
Information Services	92.0	88.0	93.0	100.0	373.0		130.8	130.2	133.7
Technology Services	18.6	14.3	16.5	16.6	66.0		19.7	18.6	19.8
Russell Investment Management (gross)				79.7	79.7		246.7	251.5	237.4
Other	1.3	1.4	1.1	1.6	5.4		0.8	0.8	0.5
Total Revenue	311.8	299.9	292.7	378.8	1,283.2		581.1	583.9	566.1
Net treasury income through CCP:
CC&G	9.4	7.5	8.0	7.7	32.6		6.8	6.6	7.7
LCH.Clearnet	14.1	15.1	17.2	13.6	60.0		13.4	13.6	13.5
Other income	1.9	2.1	0.4	0.9	5.3		1.7	1.7	2.0
Total income	337.2	324.6	318.3	401.0	1,381.1		603.0	605.8	589.3

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

 

END

 

 

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