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LondonStockExGroup - LSEG 2020 Q1 Trading Statement

RNS Number : 2691K
London Stock Exchange Group PLC
21 April 2020
 

21 April 2020                                   

 

LONDON STOCK EXCHANGE GROUP plc

 

TRADING STATEMENT

INCLUDING REVENUES AND KPIs FOR THE THREE MONTHS ENDED
31 MARCH 2020 (Q1)

 

·    Good Q1 performance against unprecedented market backdrop

·    Q1 total income up 13% year-on-year to £615 million, driven by increased equity trading in Capital Markets and higher clearing activity across listed and OTC products leading to higher NTI in Post Trade

 

·    Resources focused on ensuring strong operational resilience across the Group's systemically important market infrastructure platforms and services; Group employees working almost entirely on a remote basis across all locations

 

·    Integration planning for Refinitiv transaction progressing well: CFIUS approval received and anti-trust filings prepared in multiple jurisdictions; remain committed to achieving completion in H2 2020     

 

Q1 summary:

 

·    Information Services:  revenues up 7% to £215 million - with 8% growth at FTSE Russell.  Good growth in both subscription and asset-based revenues, the latter reflecting growth in ETF AUM in prior quarter; ETF AUM fell sharply at the end of Q1, reflecting market turbulence in March

·    Post Trade:  income up 17% to £271 million, with 11% growth in LCH revenue, with strong listed and OTC clearing activity, including record volumes in SwapClear.  Good clearing volumes at CC&G drove a 15% revenue increase.  Increased clearing activity drove higher cash margin, with consequent stronger NTI, up 39% in LCH and 10% in CC&G

 

·    Capital Markets:  revenues up 15% to £112 million, principally reflecting higher equity secondary markets activity in London and Milan

 

·    Technology Services:  revenues unchanged at £14 million

 

Update on the Refinitiv transaction

 

The Group continues to make good progress on planning for the integration of Refinitiv.  A number of workstreams on business structure and opportunities, including synergy realisation, are well developed, and the Integration Management Office has been expanded to bring additional resource to the Group.

 

The Group also continues to make progress with merger control, foreign investment and financial regulatory filings.  US foreign investment clearance has been received from CFIUS.  Merger control clearance has been received from Botswana, Japan, Kenya and Ukraine, and merger control reviews have commenced in several other jurisdictions.  As disclosed last month, the European Commission has requested a delay to submission of filings by merger parties generally; the Group continues to work constructively with the European Commission case team and will file as soon as it is possible to do so.  The Group is committed to completion of the transaction in H2 2020.

 

Comment on Q1 and outlook:

 

LSEG recognises the significant impact of the coronavirus Covid-19 global pandemic on its employees, customers and other stakeholders.  Employee health and wellbeing has been a key focus.  The vast majority of our employees have been working remotely, and we continue to adapt our technology and working practices to this changing environment.  LSEG is in regular contact with public health authorities, governments and stakeholders around the world and will continue to adjust our response as needed.

 

As a systemically important financial markets infrastructure business, LSEG places a high priority on its responsibility to ensure the orderly functioning of markets and continuity of services for its customers and other stakeholders.  During this unprecedented period, the Group has prioritised operational resilience across the Group's Capital Markets, Information Services and Post Trade businesses.

 

In light of current circumstances, LSEG regularly assesses the strength of its balance sheet and stress-tests its liquidity positions under various market scenarios.  The Group strongly believes it has sufficient cash resources and access to liquidity to maintain continuity of business and has no need to materially adjust any its operations or incur significant additional costs.  As at 31 March 2020, the Group had committed facility headroom of over £600 million available for general corporate purposes.  Reflecting the strong 2019 results and ongoing financial strength, the Group intends to pay its final dividend in relation to the 2019 financial year, subject to shareholder approval at today's AGM.

 

While the Group has performed well in Q1, it is too early to comment specifically on the impact of the coronavirus pandemic on the outlook for LSEG and its customers for the remainder of the year.  The Group believes the longer-term drivers of growth in each of its business lines remain intact.

 

David Schwimmer, CEO said:

 

"The Group has delivered a good financial performance and strong operational resilience during this unprecedented period.  We have had a focus on ensuring orderly functioning of markets and continuity of service to customers across our businesses."

 

"A key priority has been the health and wellbeing of our employees around the world.  The vast majority of our colleagues are working remotely as a key element of our business continuity measures.  I've been impressed by their adaptability, resiliency and commitment to continue to support our customers.  Although market conditions are likely to remain challenging in the coming period, we believe the Group is financially strong and has the necessary resources to continue to operate effectively in this environment."

 

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, Tuesday 21 April 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/5831128

 

·    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.

 

Q1 Revenue Summary

 

Revenues for three months ended 31 March 2020, referring to continuing operations, with comparatives against performance for the same period last year, are provided below.  Growth rates for Q1 performance are also expressed on an organic and constant currency basis.  All figures are unaudited.

 





Organic





and


Three months ended


constant


31 March


currency


2020

2019

Variance

variance1

Continuing operations:

£m

£m

%

%

Revenue





Information Services

215 

201 

7%

6%

Post Trade

192 

172 

12%

13%

Capital Markets

112 

97 

15%

16%

Technology

14 

14 

- 

- 

Other

2 

2 

- 

- 

Total revenue

535 

486 

10%

10%






Net treasury income through CCP businesses

79 

59 

34%

34%

Other income

1 

1 

- 

- 

Total income

615 

546 

13%

13%

Cost of sales

(60)

(56)

8%

9%

Gross profit

555 

490 

13%

13%

 

1 Organic growth is calculated in respect of businesses owned for at least the full 3 months in either period and excludes Beyond Ratings.  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

 

The Euro weakened by 1% against Sterling compared with the same period last year while the US $ strengthened by 2%.  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£8 million for Q1, while a US$0.05 move would have resulted in a c£7 million change.

 

More detailed revenues by segment are provided in tables below:

 

Information Services





Organic
and


Three months ended


constant


31 March


currency


2020

2019

Variance

variance1


£m

£m

%

%

Revenue





Index - Subscription

105 

99 

6%

6%

Index - Asset based

58 

52 

12%

9%

FTSE Russell

163 

151 

8%

7%

Real time data

25 

24 

3%

4%

Other information services

27 

26 

2%

1%

Total revenue

215 

201 

7%

6%

Cost of sales

(17)

(17)

- 

- 

Gross profit

198 

184 

7%

6%

 

1 Removal of Beyond Ratings from Other information services (acquired June 2019)

 

Note: UnaVista previously reported in Other information services is now reported in Post Trade, historical comparators have been adjusted to reflect this

 

 

Post Trade

 


Three months ended


Constant


31 March


currency


2020

2019

Variance

variance


£m

£m

%

%

Revenue





OTC - SwapClear, Forex & CDSClear

82 

76 

8%

9%

Non OTC - Fixed income, Cash equities & Listed derivatives

41 

34 

21%

22%

Other

26 

24 

7%

7%

Total LCH revenue

149 

134 

11%

12%

Clearing

12 

11 

15%

17%

Settlement, Custody & other

15 

14 

6%

7%

Total Post Trade Italy revenue

27 

25 

10%

12%

UnaVista

16 

13 

22%

22%

Total revenue

192 

172 

12%

13%

LCH - Net treasury income

67 

48 

39%

39%

CC&G - Net treasury income

12 

11 

10%

12%

Total income

271 

231 

17%

18%

Cost of sales

(39)

(35)

14%

15%

Gross profit

232 

196 

18%

19%

 

Capital Markets

 


Three months ended


Constant


31 March


currency


2020

2019

Variance

variance


£m

£m

%

%

Revenue





Primary Markets

32 

28 

13% 

14% 

Secondary Markets - Equities

49 

37 

33% 

33% 

Secondary Markets - Fixed income, derivatives and other

31 

32 

(3%)

(2%)

Total revenue

112 

97 

15% 

16% 

Cost of sales

(1)

(1)

- 

- 

Gross profit

111 

96 

16% 

17% 

 

Technology Services

 


Three months ended


Constant


31 March


currency


2020

2019

Variance

variance


£m

£m

%

%

Total revenue

14 

14 

-

-

Cost of sales

(2)

(2)

-

-

Gross profit

12 

12 

-

-

 

Basis of Preparation

 

Results for the period ended 31 March 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


Average rate



3 months ended

Closing rate at

3 months ended

Closing rate at


31 March 2020

31 March 2020

31 March 2019

31 March 2019

GBP : EUR

1.16

1.12

1.15

1.16

GBP : USD

1.28

1.24

1.30

1.30

 

Appendix - Key performance indicators

 

Information Services






As at



31 March

Variance


2020


2019

%

ETF assets under management benchmarked ($bn)





FTSE


(10%)

Russell Indexes


(13%)

Total

583


654

(11%)




Terminals



UK


(4%)

Borsa Italiana Professional Terminals


(7%)

 

Note: FTSE ETF assets under management benchmarked KPI has been rebased to remove previously reported active ETFs. The previous year comparator has also been adjusted, with a change of $15 billion

 

Post Trade - LCH




Three months ended



31 March

Variance


2020


2019

%

LCH OTC derivatives



SwapClear



IRS notional cleared ($tn)


26% 

SwapClear members


3% 

Client trades ('000)


37% 

CDSClear



Notional cleared (€bn)


120% 

CDSClear members


- 

ForexClear



Notional value cleared ($bn)


25% 

ForexClear members


- 




LCH Non-OTC



Fixed income - Nominal value (€tn)


(2%)

Listed derivatives contracts (m)


43% 

Cash equities trades (m)


54% 




LCH average cash collateral (€bn)


27% 

 

Note: CDSClear notional cleared and LCH Non-OTC volumes have been rebased to count both sides of each cleared trade. This aligns with how activity is reported on LCH's website. The previous year comparator has also been adjusted

 

Post Trade - Italy




Three months ended



31 March

Variance



%

CC&G Clearing



Contracts (m)

38.9


25.0

56%

Initial margin held (average €bn)


4%




Monte Titoli



Settlement instructions (trades m)


29%

Custody assets under management (average €tn)

3.34


3.29

2%

 

Capital Markets - Primary Markets











Three months ended



31 March

Variance


2020


2019

%

New Issues





UK Main Market, PSM & SFM

12


10

20% 

UK AIM

6


5

20% 

Borsa Italiana

1


7

(86%)

Total

19


22

(14%)






Money Raised (£bn)





UK New

0.4


0.5

(20%)

UK Further

2.3


3.0

(23%)

Borsa Italiana new and further

-


-

- 

Total (£bn)

2.7


3.5

(23%)

 

Capital Markets - Secondary Markets





Three months ended



31 March

Variance

Equity

2020


2019

%

Totals for period





UK value traded (£bn)

390


294

33% 

Borsa Italiana (no of trades m)

27.3


15.6

75% 

Turquoise value traded (€bn)

166


163

2% 






SETS Yield (basis points)

0.68


0.68






Average daily





UK value traded (£bn)

6.1


4.7

30% 

Borsa Italiana (no of trades '000)

427


248

72% 

Turquoise value traded (€bn)

2.6


2.6

- 






Derivatives





Contracts (m)

9.2


9.1

1% 






Fixed Income





MTS cash and BondVision (€bn)

786


836

(6%)

MTS money markets (€bn term adjusted)

30,829


28,809

7% 

 

Note: The Q1 2019 number of derivative contracts includes 0.8 million from LSE Derivatives. This service no longer accepted new trades from November 2019  



 

 

Total Income - Quarterly

 

 

2019






2020

£ millions

Q1

Q2

Q3

Q4

2019


Q1









Index - Subscription

99 

104 

108 

107 

418 


105 

Index - Asset based

52 

60 

61 

58 

231 


58 

FTSE Russell

151 

164 

169 

165 

649 


163 

Real time data

24 

24 

24 

25 

97 


25 

Other information

26 

27 

27 

29 

109 


27 

Information Services

201 

215 

220 

219 

855 


215 









OTC - SwapClear, ForexClear & CDSClear

76 

72 

80 

79 

307 


82 

Non OTC - Fixed income, Cash equities & Listed derivatives

34 

35 

36 

35 

140 


41 

Other

24 

25 

28 

26 

103 


26 

Post Trade Services - LCH

134 

132 

144 

140 

550 


149 

Clearing

11 

11 

11 

10 

43 


12 

Settlement, Custody & other

14 

15 

16 

15 

60 


15 

Post Trade Services - CC&G and MT

25 

26 

27 

25 

103 


27 

UnaVista

13 

12 

10 

12 

47 


16 

Post Trade

172 

170 

181 

177 

700 


192 









Primary Markets

28 

62 

30 

31 

151 


32 

Secondary Markets - Equities

37 

37 

39 

38 

151 


49 

Secondary Markets - Fixed income, derivatives & other

32 

30 

33 

29 

124 


31 

Capital Markets

97 

129 

102 

98 

426 


112 









Technology

14 

16 

16 

20 

66 


14 









Other

2 

2 

2 

3 

9 


2 









Total Revenue

486 

532 

521 

517 

2,056 


535 

Net treasury income through CCP:








LCH

48 

48 

53 

57 

206 


67 

CC&G

11 

13 

12 

13 

49 


12 

Other income

3 










Total income

546 

594 

587 

587 

2,314 


615 









Cost of sales

(56)

(53)

(58)

(43)

(210)


(60)

Gross profit

490 

541 

529 

544 

2,104 


555 

 

Note: UnaVista previously reported in Other information services is now reported in Post Trade, historical comparators have been adjusted to reflect this

 


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.
 
END
 
 
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