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LondonStockExGroup (LSE)

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Friday 18 October, 2019

LondonStockExGroup

3rd Quarter Trading Statement

RNS Number : 3086Q
London Stock Exchange Group PLC
18 October 2019
 

18 October 2019

 

LONDON STOCK EXCHANGE GROUP plc

 

TRADING STATEMENT

INCLUDING REVENUES AND KPIs FOR THE THREE MONTHS ENDED
30 SEPTEMBER 2019 (Q3)

 

·    Strong Q3 performance across all parts of the Group - LCH continues to grow strongly in OTC products; FTSE Russell performing well with growth in subscription revenues

 

·    Q3 total income up 12% to £587 million

 

·    On a nine-month year-to-date basis total income up 9% to £1,727 million

 

·    Proposed acquisition of Refinitiv continues to progress:

 

o

Appointment of David Shalders as Chief Integration Officer and member of the LSEG Executive Committee, reporting to LSEG CEO

o

Regulatory approvals process and integration planning underway

o

Integration Management Office established

o

Shareholder circular posting soon with General Meeting scheduled for November 2019

o

Transaction remains on track for completion in H2 2020

 

Q3 summary

 

·    Information Services:  revenues up 9% to £230 million.  FTSE Russell up 10%, with strong performance in subscription revenues

 

·    Post Trade - LCH:  income up 19% to £197 million.  Strong results driven by 22% revenue growth in OTC clearing with strong volumes at SwapClear and continued growth in net treasury income, up 16%

 

·    Post Trade - Italy:  income up 8% to £39 million.  Good performance supported by growth in clearing; settlement, custody and net treasury income, reflecting good volumes in fixed income

 

·    Capital Markets:  revenues up 14% to £102 million.  On a like-for-like basis (adjusting for last year's IFRS 15 change), revenue increased 5%, with growth in Primary Markets and in fixed income trading partly offset by subdued equity markets trading

 

·    Technology:  revenues up 2% to £16 million

 

Commenting on performance in Q3, David Schwimmer, CEO, said:

 

"The Group continues to perform well and has delivered a strong Q3 performance. LCH's OTC clearing services saw continued strong volumes during the period in both member and client clearing.  In Information Services, FTSE Russell reported 10% growth as subscription revenues remained strong.  Capital Markets also produced a good overall performance against a backdrop of continued challenging market conditions.

 

"During the quarter, we announced the proposed acquisition of Refinitiv, a leading global provider of data, analytics and financial markets solutions.  This is a transformational transaction that accelerates our Group's strategy, positioning us in key areas of future growth as a global financial markets infrastructure leader. Together, we will create a multi-asset class capital markets business and bring world class data content, management and distribution capabilities to our customers on an open access basis.  The transaction offers substantial strategic and financial benefits to our shareholders, customers, employees and other stakeholders."

 

Developments in the period

 

·    FTSE Russell launched the first climate risk government bond index, the FTSE Climate Risk-Adjusted World Government Bond Index 

·    FTSE Russell successfully implemented inclusion of the second tranche of China A Shares in the FTSE GEIS (September 2019)

·    Expanded ForexClear offering by launching FX Forwards clearing and also linked up with FX Connect TradeNeXus, enabling simpler buy-side access to clearing

·    Published plans to launch clearing of products referencing €STR, the new reference rate and announced plans to transition to €STR discounting

 

Financial Position

 

The Group's financial position remains strong with a good level of funding flexibility in place.  As at 30 September 2019, the Group had available committed facility headroom of c.£750 million having paid the interim dividend to shareholders and met other normal course payment obligations.  The Group is therefore able to fund the repayment of the 2009 £250 million Bond, due 19 October 2019, from existing resources.  While LSEG's credit ratings are unchanged (long term A3 and A), both Moody's and S&P moved their rating outlooks, respectively, to "review for possible downgrade" and "credit-watch negative" in early August as a result of the debt component of the Refinitiv acquisition.  Both agencies were otherwise constructive on the strategic rationale for the deal and positive towards the Group's arrangement of a c.$13.5 billion bridge facility to de-risk refinancing of Refinitiv's debt at or around closing of the transaction.

 

The euro was flat and the US dollar strengthened by 6% 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 £8 million for Q3, while a US$0.05 move would have resulted in a £7 million change.

 

Board, Management and organisation changes

 

David Shalders is joining the Group in November 2019 as Chief Integration Officer and a member of the LSEG Executive Committee, reporting to LSEG's CEO.  David brings to the Group over thirty years' experience in Integration, Technology and Operations in the financial services sector.  He has successfully led a number of global integration programmes.  Most recently, David was Group Operations and Technology Director at Willis Towers Watson, having led the integration of Willis and Towers Watson.  Prior to his six years at Willis Towers Watson, David spent nineteen years at The Royal Bank of Scotland in a number of senior operations and technology roles, including as Group Head of Integration for the ABN Amro acquisition.  We also announced today that we have formed the Integration Management Office (IMO).  Led by David Shalders, the IMO will be comprised of senior leaders from LSEG and Refinitiv.

 

As of 1 January 2020, the Group's Post Trade businesses, which are currently reported separately as LCH and Post Trade Italy, will be aligned, in a manner consistent with the necessary regulatory oversight, into one Post Trade Division. Daniel Maguire, CEO, LCH Group will lead the division as Group Director, Post Trade, LSEG in addition to his current responsibilities. The Post Trade Division will include LCH Group, our Italian post trade businesses Monte Titoli and CC&G, and UnaVista, our trade reporting business that currently reports as part of the Information Services Division. The new Division will ensure greater Group-wide collaboration and aim to facilitate coordination amongst the different businesses with a view to developing commercial activities for the benefit of customers. We will continue to operate all our businesses on an open access basis in partnership with customers and stakeholders. The current local legal entity governance, including decision-making processes and reporting lines, will be unchanged.

 

Separately, today LSEG announced that David Warren, Group CFO has informed the Group of his intention to retire from the company and step down from the Board by the end of 2020.  David will continue in his current roles through the close of the Refinitiv transaction to ensure a smooth transition to his successor.  LSEG will undertake a global search, which will be led by the Board's Nomination Committee.

 

Further information is available from:

 

London Stock Exchange Group plc

Gavin Sullivan/Lucie Holloway - Media

Paul Froud - Investor Relations

+44 (0) 20 7797 1222

 

+44 (0) 20 7797 3322

 

 

 

       

 

The Group will host a conference call for analysts and investors today, Friday 18 October at 08:30am (UK time).  On the call will be David Schwimmer (CEO), David Warren (CFO) and Paul Froud (Group Head of Investor Relations). 

To access the telephone conference call please pre-register using the following link and instructions below: http://emea.directeventreg.com/registration/1079764

 

·    Please register in advance of the conference using the link above.  Upon registering with your full name, company name and email address, you will be provided with participant dial-in numbers, Direct Event passcode and unique registrant ID

·    In the 10 minutes prior to the call start time, you will need to use the conference access information provided in the email received at the point of registering

 

Note: Due to regional restrictions some participants may receive operator assistance when joining this conference call and will not be automatically connected.

 

For further information, please call the Group's Investor Relations team on +44 (0) 20 7797 3322.

 

Q3 Revenue Summary

 

Revenues for three months and nine months ended 30 September 2019 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 a constant currency basis.  Income in all periods is on an organic basis as there has been no inorganic income.  All figures are unaudited.

 

 

Three months ended

 

 Constant

 

Nine months

ended

 

 Constant

 

30 September

 

currency

 

30 September

 

currency

 

2019

2018

Variance

variance

 

2019

2018

Variance

variance

Continuing operations:

£m

£m

%

%

 

£m

£m

%

%

Revenue

 

 

 

 

 

 

 

 

 

Information Services

230 

212 

9%

5%

 

671 

624 

8% 

4% 

Post Trade Services - LCH

144 

120 

20%

19%

 

410 

357 

15% 

14% 

Post Trade Services - CC&G and Monte Titoli

27 

25 

8%

6%

 

78 

77 

2% 

2% 

Capital Markets

102 

89 

14%

14%

 

328 

305 

8% 

8% 

Technology Services

16 

16 

2%

1%

 

46 

48 

(3%)

(5%)

Other

2 

2 

-

-

 

6 

7 

- 

- 

Total revenue

521 

464 

12%

10%

 

1,539 

1,418 

9% 

7% 

 

 

 

 

 

 

 

 

 

 

Net treasury income through CCP businesses

65 

57 

15%

13%

 

185 

160 

16% 

14% 

Other income

1 

1 

-

-

 

3 

4 

- 

- 

Total income

587 

522 

12%

10%

 

1,727 

1,582 

9% 

7% 

Cost of sales

 (58)

 (57)

2%

-

 

 (167)

 (163)

3% 

1% 

Gross profit

529 

465 

14%

11%

 

1,560 

1,419 

10% 

8% 

                       

 

The Group's principal foreign exchange exposure arises from translating and revaluing its foreign currency earnings, assets and liabilities into LSEG's reporting currency of Sterling.

 

More detailed revenues by segment are provided in tables below:

 

Information Services

 

 

Three months ended

 

Constant

 

Nine months

ended

 

Constant

 

 

30 September

 

currency

 

30 September

 

currency

 

 

2019

2018

Variance

variance

 

2019

2018

Variance

variance

 

 

£m

£m

%

%

 

£m

£m

%

%

 

Revenue

 

 

 

 

 

 

 

 

 

Index - Subscription

108 

94 

15%

10% 

 

311 

279 

12%

7%

Index - Asset based

61 

59 

3%

(1%)

 

173 

164 

6%

1%

FTSE Russell Indexes

169 

153 

10%

5% 

 

484 

443 

9%

5%

Real time data

24 

23 

4%

4% 

 

72 

70 

4%

4%

Other information services

37 

36 

4%

2% 

 

115 

111 

3%

2%

Total revenue

230 

212 

9%

5% 

 

671 

624 

8%

4%

Cost of sales

(20)

(17)

16%

11% 

 

(56)

(52)

9%

4%

Gross profit

210 

195 

8%

4% 

 

615 

572 

7%

4%

                         

 

Post Trade Services - LCH

 

 

Three months ended

 

Constant

Nine months

ended

 

Constant

 

30 September

 

currency

30 September

 

currency

 

2019

2018

Variance

variance

2019

2018

Variance

variance

 

£m

£m

%

%

£m

£m

%

%

Revenue

 

 

 

 

 

 

 

 

OTC - SwapClear, ForexClear & CDSClear

80 

65 

22%

20%

228 

196 

17%

15%

Non-OTC - Fixed income, Cash equities and Listed derivatives

36 

34 

6%

5%

 

104 

101 

3%

3%

Other

28 

21 

38%

36%

78 

60 

29%

28%

Total revenue

144 

120 

20%

19%

410 

357 

15%

14%

Net treasury income

53 

46 

16%

14%

149 

128 

16%

14%

Other income

 - 

 -   

-

-

 - 

 - 

-

-

Total income

197 

166 

19%

17%

 

559 

485 

15%

14%

Cost of sales

(33)

(31)

6%

5%

(93)

(83)

12%

12%

Gross profit

164 

135 

22%

20%

 

466 

402 

16%

14%

 

Post Trade Services - CC&G and Monte Titoli

 

 

Three months ended

 

Constant

 

Nine months

ended

 

Constant

 

30 September

 

currency

 

30 September

 

currency

 

2019

2018

Variance

variance

 

2019

2018

Variance

variance

 

£m

£m

%

%

 

£m

£m

%

%

Revenue

 

 

 

 

 

 

 

 

 

Clearing

11 

10 

16% 

14% 

 

33 

31 

5% 

5% 

Settlement, Custody & other

16 

15 

3% 

2% 

 

45 

46 

(1%)

(0%)

Total revenue

27 

25 

8% 

6% 

 

78 

77 

2% 

2% 

Net treasury income

12 

11 

10% 

8% 

 

36 

32 

13% 

13% 

Total income

39 

36 

8% 

7% 

 

114 

109 

5% 

5% 

Cost of sales

(2)

(2)

(11%)

(11%)

 

(5)

(5)

4% 

4% 

Gross profit

37 

34 

9% 

8% 

 

109 

104 

5% 

5% 

 

Capital Markets

 

 

Three months ended

 

Constant

 

Nine months

ended

 

Constant

 

30 September

 

currency

 

30 September

 

currency

 

2019

2018

Variance

variance

 

2019

2018

Variance

variance

 

£m

£m

%

%

 

£m

£m

%

%

Revenue

 

 

 

 

 

 

 

 

 

Primary Markets1 2

30 

20 

53%

53%

 

120 

83 

45% 

46% 

Secondary Markets - Equities

39 

39 

(2%)

(2%)

 

113 

128 

(12%)

(12%)

Secondary Markets - Fixed income, derivatives and other

33 

30 

10%

9%

 

95 

94 

1% 

1% 

Total revenue

102 

89 

14%

14%

 

328 

305 

8% 

8% 

Cost of sales

(1)

(4)

(67%)

(68%)

 

(4)

(13)

(68%)

(68%)

Gross profit

101 

85 

18%

18%

 

324 

292 

11% 

11% 

 

1 Primary Markets 2018 Q3 on a like-for-like basis would be £8 million higher than reported relating to the adoption of IFRS 15.  The nine-month impact for 2018 was £9 million

2 Primary Markets 2019 Q3 YTD includes a one-off change in estimate for IFRS 15 accounting, with an impact of £32 million, recognised in H1 2019

 

Technology Services

 

 

 Three months ended

 

Constant

 

Nine months

ended

 

 Constant

 

30 September

 

currency

 

30 September

 

currency

 

2019

2018

Variance

variance

 

2019

2018

Variance

variance

Revenue

£m

£m

%

%

 

£m

£m

%

%

MillenniumIT & other technology

16 

16 

2% 

1% 

 

46 

48 

(3%)

(5%)

Cost of sales

(2)

(2)

(11%)

(11%)

 

(6)

(8)

(23%)

(23%)

Gross profit

14 

14 

4% 

2% 

 

40 

40 

-

(1%)

 

Basis of Preparation

 

Results for the period ended 30 September 2019 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 2019

30 September 2019

GBP : EUR

1.13

1.12

GBP : USD

1.27

1.23

 

 

 

 

Average rate

 

 

9 months ended

Closing rate at

 

30 September 2018

30 September 2018

GBP : EUR

1.13

1.12

GBP : USD

1.35

1.30

 

Appendix - Key performance indicators

 

Information Services

 

 

 

 

 

As at

 

 

30 September

Variance

 

2019

 

2018

%

ETF assets under management benchmarked ($bn)

 

 

 

 

FTSE

423

 

396

7% 

Russell Indexes

273

 

267

2% 

Total

696

 

663

5% 

 

 

 

 

 

Terminals

 

 

 

 

UK

65,000

 

68,000

(4%)

Borsa Italiana Professional Terminals

100,000

 

107,000

(7%)

 

Post Trade Services - LCH

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Nine months ended

 

 

30 September

Variance

 

30 September

Variance

 

2019

 

2018

%

 

2019

 

2018

%

 

 

 

 

 

 

 

 

 

 

OTC derivatives

 

 

 

 

 

 

 

 

 

SwapClear

 

 

 

 

 

 

 

 

 

IRS notional cleared ($tn)

337

 

236

43%

 

997

 

811

23% 

SwapClear members

121

 

110

10%

 

121

 

110

10% 

Client trades ('000)

472

 

332

42%

 

1,280

 

1,103

16% 

CDSClear

 

 

 

 

 

 

 

 

 

Notional cleared (€bn)

219

 

138

59%

 

567

 

463

22% 

CDSClear members

26

 

15

73%

 

26

 

15

73% 

ForexClear

 

 

 

 

 

 

 

 

 

Notional value cleared ($bn)

4,795

 

4,282

12%

 

13,561

 

12,946

5% 

ForexClear members

34

 

32

6%

 

34

 

32

6% 

Non-OTC

 

 

 

 

 

 

 

 

 

Fixed income - Nominal value (€tn)

28.0

 

25.2

11%

 

80.7

 

74.1

9% 

Listed derivatives (contracts m)

36.3

 

36.4

-

 

109.2

 

113.3

(4%)

Cash equities trades (m)

179

 

179

-

 

526

 

593

(11%)

 

 

 

 

 

 

 

 

 

 

Average cash collateral (€bn)

103.8

 

86.2

20%

 

96.3

 

86.0

12% 

 

Post Trade Services - CC&G and Monte Titoli

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Nine months ended

 

 

30 September

Variance

 

30 September

Variance

 

2019

 

2018

%

 

2019

 

2018

%

CC&G Clearing

 

 

 

 

 

 

 

 

 

Contracts (m)

24.7

 

23.8

4%

 

74.7

 

86.3

(13%)

Initial margin held (average €bn)

15.1

 

12.0

26%

 

14.3

 

10.5

36% 

 

 

 

 

 

 

 

 

 

 

Monte Titoli

 

 

 

 

 

 

 

 

 

Settlement instructions (trades m)

10.3

 

10.3

-

 

31.7

 

34.3

(8%)

Custody assets under management (average €tn)

3.33

 

3.30

1%

 

3.31

 

3.30

- 

 

Capital Markets - Primary Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Nine months ended

 

 

30 September

Variance

 

30 September

Variance

 

2019

 

2018

%

 

2019

 

2018

%

New Issues

 

 

 

 

 

 

 

 

 

UK Main Market, PSM & SFM

13

 

17

(24%)

 

41

 

55

(25%)

UK AIM

5

 

13

(62%)

 

20

 

49

(59%)

Borsa Italiana

11

 

12

(8%)

 

26

 

25

4% 

Total

29

 

42

(31%)

 

87

 

129

(33%)

 

 

 

 

 

 

 

 

 

 

Money Raised (£bn)

 

 

 

 

 

 

 

 

 

UK New

1.0

 

2.0

(50%)

 

3.7

 

3.9

(5%)

UK Further

1.9

 

3.1

(39%)

 

12.7

 

13.8

(8%)

Borsa Italiana new and further

0.1

 

0.6

(83%)

 

2.0

 

3.1

(35%)

Total (£bn)

3.0

 

5.7

(47%)

 

18.4

 

20.8

(12%)

 

 

Capital Markets - Secondary Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

30 September

Variance

 

30 September

Variance

 

Equity

2019

 

2018

%

 

2019

 

2018

%

Totals for period

 

 

 

 

 

 

 

 

 

UK value traded (£bn)

309

 

329

(6%)

 

892

 

1,098

(19%)

Borsa Italiana (no of trades m)

16.3

 

15.4

6% 

 

47.4

 

54.8

(14%)

Turquoise value traded (€bn)

111

 

180

(38%)

 

423

 

644

(34%)

 

 

 

 

 

 

 

 

 

 

SETS Yield (basis points)

0.68

 

0.65

5% 

 

0.69

 

0.63

10% 

 

 

 

 

 

 

 

 

 

 

Average daily

 

 

 

 

 

 

 

 

 

UK value traded (£bn)

4.8

 

5.1

(6%)

 

4.7

 

5.8

(19%)

Borsa Italiana (no of trades '000)

254

 

240

6% 

 

249

 

288

(14%)

Turquoise value traded (€bn)

1.7

 

2.8

(39%)

 

2.2

 

3.4

(35%)

 

 

 

 

 

 

 

 

 

 

Derivatives (contracts m)

 

 

 

 

 

 

 

 

 

LSE Derivatives

0.6

 

1.1

(45%)

 

2.2

 

5.2

(58%)

IDEM

7.2

 

7.5

 (4%)

 

24.0

 

28.2

(15%)

Total

7.8

 

8.6

(9%)

 

26.2

 

33.4

(22%)

 

 

 

 

 

 

 

 

 

 

Fixed Income

 

 

 

 

 

 

 

 

 

MTS cash and BondVision (€bn)

                803

 

670

20% 

 

2,453

 

2,558

(4%)

MTS money markets (€bn term adjusted)

          31,759

 

21,134

50% 

 

89,508

 

65,098

37% 

                       

 

Total Income - Quarterly
 

 

2018

 

 

 

 

 

2019

 

 

£ millions

Q1

Q2

Q3

Q4

2018

 

Q1

Q2

Q3

 

 

 

 

 

 

 

 

 

 

Index - Subscription

89 

96 

94 

94 

373 

 

99 

104 

108 

Index - Asset based

52 

53 

59 

55 

219 

 

52 

60 

61 

FTSE Russell

141 

149 

153 

149 

592 

 

151 

164 

169 

Real time data

24 

23 

23 

24 

94 

 

24 

24 

24 

Other information

36 

39 

36 

44 

155 

 

39 

39 

37 

Information Services

201 

211 

212 

217 

841 

 

214 

227 

230 

 

 

 

 

 

 

 

 

 

 

OTC - SwapClear, ForexClear & CDSClear

66 

64 

65 

73 

268 

 

76 

72 

80 

Non OTC - Fixed income, Cash equities & Listed derivatives

33 

34 

34 

35 

136 

 

34 

35 

36 

Other

19 

21 

21 

22 

83 

 

24 

25 

28 

Post Trade Services - LCH

118 

119 

120 

130 

487 

 

134 

132 

144 

 

 

 

 

 

 

 

 

 

 

Clearing

10 

12 

10 

9 

41 

 

11 

11 

11 

Settlement, Custody & other

18 

12 

15 

16 

61 

 

14 

15 

16 

Post Trade Services - CC&G and Monte Titoli

28 

24 

25 

25 

102 

 

25 

26 

27 

 

 

 

 

 

 

 

 

 

 

Primary Markets

29 

33 

20 

31 

113 

 

28 

62 

30 

Secondary Markets - Equities

45 

44 

39 

41 

169 

 

37 

37 

39 

Secondary Markets - Fixed income, derivatives & other

33 

31 

30 

31 

125 

 

32 

30 

33 

Capital Markets

107 

108 

89 

103 

407 

 

97 

129 

102 

 

 

 

 

 

 

 

 

 

 

Technology

13 

19 

16 

17 

65 

 

14 

16 

16 

 

 

 

 

 

 

 

 

 

 

Other

3 

2 

2 

2 

9 

 

2 

2 

2 

 

 

 

 

 

 

 

 

 

 

Total Revenue

470 

483 

464 

494 

1,911 

 

486 

532 

521 

Net treasury income through CCP:

 

 

 

 

 

 

 

 

 

CC&G

10 

11 

11 

11 

43 

 

11 

13 

12 

LCH

38 

45 

46 

46 

175 

 

48 

48 

53 

Other income

2 

1 

1 

2 

6 

 

1 

1 

1 

 

 

 

 

 

 

 

 

 

 

Total income

520 

540 

522 

553 

2,135 

 

546 

594 

587 

 

Cost of sales

             (56)

             (50)

             (57)

             (64)

           (227)

 

             (56)

 (53)

 (58)

Gross profit

464 

490 

465 

489 

1,908 

 

490 

541 

529 

 

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


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 [email protected] or visit www.rns.com.
 
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