April 27, 2023

London Stock Exchange Group plc: Q1 2023 Trading Update 

Strong start to the year across subscription and transactional businesses

David Schwimmer, CEO said:

“Our strategy continues to deliver, with all divisions contributing to growth. Our performance in the first quarter demonstrated the strength of our business model, the improving quality of our revenue and our critical role in the resilience of financial markets. In Data & Analytics, we saw a further acceleration in Annual Subscription Value growth, reflecting the investments we have made in our services and stronger customer engagement. In Post Trade, our leading franchise attracted a surge in volumes as clients looked to manage risk effectively during a period of heightened volatility.

“As we continue our shift from integration to transformation, we are confident of making further progress through the rest of the year.”

Q1 2023 highlights

(All growth rates on a constant currency basis unless otherwise stated)
 
  • Total income (excl. recoveries) +7.5%, or +8.0% excluding the impact of the Russia/Ukraine war[1]
  • Data & Analytics +7.1% (+7.8% ex Russia/Ukraine), Capital Markets +2.5%, Post Trade +16.8%
  • March 2023 organic Annual Subscription Value (“ASV”) growth +7.6%, up from +6.2% at December 2022
  • Microsoft partnership underway; teams engaged in joint product development 
  • Acquisition of Acadia completed in March 2023, furthering LSEG’s strategy to enhance and grow its multi-asset class Post Trade offering 
  • Good progress on £750 million buyback programme, with second £250 million tranche completed
  • Satvinder Singh to join LSEG in July 2023 as Group Head, Data & Analytics
  • All 2023 guidance reiterated: 6-8% constant currency growth in total income (excl. recoveries), EBITDA margin c. 48%, business-as-usual capex c. £750 million 

This release contains revenues, cost of sales and key performance indicators (KPIs) for the three months ended 31 March 2023 (Q1). Certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Throughout this document, revenues and cost of sales associated with the BETA divestment, completed on 1 July 2022 have been classed as discontinued and are excluded from all periods. To reflect underlying performance, all constant currency variances compare the current and prior period at consistent exchange rates. Organic variance is calculated on a constant currency basis, adjusting the results to remove disposals from the entirety of the current and prior year periods, and including acquisitions from the date of acquisition with a comparable adjustment to the prior year.    

[1]Growth rates excluding the impact of the Ukraine / Russia war exclude income in the region and from sanctioned customers and related business from both periods. In Q1 2022, this amounted to £18 million, and nil beyond that. 

Q1 2023 summary

Continuing operations

Q1 2023
£m

Q1 2022
£m

Variance
%

 

Constant Currency Variance
%

Organic

Variance

%

 

         

 

Trading & Banking Solutions

425

378

12.4%

 

4.7%

2.7%

Enterprise Data Solutions

347

303

14.5%

 

7.9%

6.8%

Investment Solutions

350

309

13.3%

 

5.7%

5.7%

Wealth Solutions

73

63

15.9%

 

7.2%

7.2%

Customer & Third-Party Risk Solutions

120

94

27.7%

 

18.8%

13.3%

Data & Analytics

1,315

1,147

14.6%

 

7.1%

5.7%

 

 

 

 

 

 

 

Equities

59

67

(11.9%)

 

(11.6%)

(11.6%)

FX

66

60

10.0%

 

(0.9%)

(0.9%)

Fixed Income, Derivatives & Other

269

232

15.9%

 

7.3%

7.3%

Capital Markets

394

359

9.7%

 

2.5%

2.5%

 

 

 

 

 

 

 

OTC Derivatives

126

93

35.5%

 

30.7%

27.0%

Securities & Reporting

64

64

-

 

(3.3%)

(3.3%)

Non-Cash Collateral

26

24

8.3%

 

5.9%

5.9%

Net Treasury Income

73

57

28.1%

 

20.5%

20.5%

Post Trade

289

238

21.4%

 

16.8%

15.4%

 

 

 

 

 

 

 

Other

9

7

28.6%

 

10.2%

10.2%

Total Income (excl. recoveries)

2,007

1,751

14.6%

 

7.5%

6.4%

Recoveries

93

80

16.3%

 

2.3%

2.3%

Total Income (incl. recoveries)

2,100

1,831

14.7%

 

7.2%

6.2%

Cost of sales

(288)

(240)

20.0%

 

11.7%

10.0%

Gross Profit

1,812

1,591

13.9%

 

6.5%

5.6%

Total income (excluding recoveries) was up 7.5% year-on-year in Q1, or up 8.0% excluding the impact of the Russia/Ukraine war. On an organic basis, growth was 6.4%.

  • Data & Analytics was up 7.1%, or 7.8% ex Russia/Ukraine, with growth accelerating from 2022 as a result of improving sales and retention, and a higher annual price increase than in recent years. Organic ASV growth was +7.6% at March 2023, with the further improvement on the December rate mainly the result of this year’s price review, for the most part effective from January 2023.
    • Trading & Banking was up 4.7%, or 6.1% ex Russia/Ukraine. Both Trading and Banking accelerated, reflecting consistent improvements in retention as well as price benefits. Growth was broad-based across all user groups. Organic growth was 2.7%, with the acquisition of TORA in 2022 adding 2 percentage points to constant currency growth.
    • Enterprise Data was up 7.9%, or 8.5% ex Russia/Ukraine. We continue to see strong demand for our data in Real-Time, with growing usage and good renewal rates as well as a number of new contracts. In PRS, we are making further rapid progress towards our revenue synergy targets through continued cross-selling activity.
    • Investment Solutions was up 5.7%, with very strong growth in Benchmark Rates, Indices & Analytics (+14.1%) mainly driven by flagship equity products. The decline in asset-based revenue (-12.4%) reflected lower market values year-on-year. 
    • Wealth was up 7.2%, as growth accelerated from 2022 supported by strong sales of data feeds and price increases.
    • Customer & Third Party Risk was up 18.8%, or 13.3% on an organic basis. World-Check, our screening business, continued to show excellent business momentum driven by customer demand and the benefits of cloud migration. 
  • Capital Markets was up 2.5%, with growth driven primarily by Tradeweb.
    • Equities was down 11.6%, reflecting subdued market volumes in both primary and secondary markets and a strong prior period for trading volumes in 2022. 
    • FX was down 0.9%, as a result of record volumes in the prior period. Activity levels in FXall improved compared to the second half of 2022, and last year’s commercial actions in FX Matching continued to drive good volume growth.
    • Fixed Income, Derivatives & Other was up 7.3%. Average daily volumes were up 16.2% at Tradeweb, with strong performance across rates, credit, and money markets, although this was partly offset by lower fee capture across rates as investors increased trading in shorter-duration securities.  
  • Post Trade was up 16.8%, with OTC Derivatives up 30.7% on very strong activity in SwapClear arising from heightened market volatility. We also benefited from reference rate reform as clients switch US Dollar LIBOR contracts to SOFR. Net Treasury Income was up 20.5% on higher collateral balances and a slight increase in the yield achieved.
  • Group cost of sales was up 11.7%, with the very good performance in SwapClear and related Net Treasury Income resulting in a higher level of profit share, which is reflected in cost of sales.

Capital allocation

LSEG is highly cash-generative and we continue to take an active approach to capital allocation, investing for growth and returning excess capital to shareholders. At the end of March, we completed the acquisition of Acadia, significantly enhancing our multi-asset class capabilities in Post Trade. Acadia provides risk management, margining and collateral services to global financial institutions for the uncleared derivatives markets. Its risk and margining products span all OTC derivative asset classes and provide direct connectivity to over 2,000 market participants.

We made further progress with our on-market £750 million buyback programme, completing the second £250 million tranche in March and launching the final tranche, which we expect to complete by July. In addition, at today’s AGM, we are seeking shareholder approval for a directed buyback from the Blackstone/Thomson Reuters consortium, expected to be up to £750 million by April 2024.

Appointment of Group Head, Data & Analytics

Last week, we announced that Satvinder Singh will join LSEG in July 2023 as Group Head, Data & Analytics and as a member of the Executive Committee. Satvinder brings strong leadership experience in financial services, in many parts of the trade lifecycle, and a proven track record of building high performing global teams.  

Capital Markets Event

We plan to host a Capital Markets Event in London on 16 (afternoon/evening) and 17 November 2023. The event will combine plenary presentations, which will be webcast, and a day of break-out sessions enabling investors and analysts to engage in-depth with management across a wide range of LSEG’s businesses. We strongly encourage in-person attendance. Please register your interest with the IR team at ir@lseg.com. Further details will follow in due course.

Contacts

Media
Lucie Holloway, Rhiannon Davies
+44 (0)20 7797 1222

Investor relations:
Peregrine Riviere / Chris Turner
ir@lseg.com

About LSEG

LSEG (London Stock Exchange Group) is a leading global financial markets infrastructure and data provider, playing a vital social and economic role in the world’s financial system.

With our open approach, trusted expertise and global scale, we enable the sustainable growth and stability of our customers and their communities. We are dedicated partners with extensive experience, deep knowledge and a worldwide presence in data and analytics; indices; capital formation; and trade execution, clearing and risk management across multiple asset classes. 

LSEG is headquartered in the United Kingdom, with significant operations in 70 countries across EMEA, North America, Latin America and Asia Pacific. We employ 23,000 people globally, more than half located in Asia Pacific. LSEG’s ticker symbol is LSEG.