RNS Number : 5419E
London Stock Exchange Group PLC
19 October 2018
 

 

19 October 2018

 

LONDON STOCK EXCHANGE GROUP plc

 

TRADING STATEMENT

INCLUDING REVENUES AND KPIs FOR THE THREE MONTHS ENDED

30 SEPTEMBER 2018 (Q3)

 

·    Good Q3 results - growth across the Group including strong performances from LCH OTC clearing and FTSE Russell

·    Q3 reported revenue up 5% and total income up 8% to £522 million; on a like-for-like basis, excluding a £9 million year-to-date accounting change impact on adoption of IFRS15 in Capital Markets, revenue would have been up 7% and total income up 9%

 

·    Reported revenue up 9% and total income up 10% on a nine-month year-to-date basis (including effects of IFRS 15)

·    LSEG acquiring up to a further 15.1% stake in LCH Group, expected to take majority ownership to over 80%; completion targeted by end of Q4

Q3 summary

 

·    Information Services:  revenues up 17% (up 9% on an organic and constant currency basis) - with reported double-digit growth at FTSE Russell

·    Post Trade:  LCH income up 15% (up 15% at constant currency), driven by 12% revenue growth in OTC clearing, with strong volumes at SwapClear and ForexClear also contributing to 49% growth in net treasury income

 

·    Capital Markets:  like-for-like revenues up 2% (up 2% at constant currency); adjusting for IFRS 15, Capital Markets reported revenues are 8% lower than the comparative Q3 unadjusted period in the prior year

 

Commenting on performance in Q3, David Schwimmer, Chief Executive, said:

 

"The Q3 results show continued momentum across the Group, reflecting another period of operational execution and investment in the business.  Information Services and LCH both delivered good year on year growth.  We also announced today that we are in the process of acquiring up to a further 15.1% stake in LCH, which is expected to take our majority ownership of this valuable strategic business to over 80%, reflecting our continued confidence in LCH's opportunities for further growth as it develops its business in partnership with its customers.

 

"Since I joined LSEG in August my initial impressions of the Group's strengths have been reinforced as I have spent time with our businesses and met with key stakeholders.  The Group has world class assets, a strong financial position and a proven strategic approach. As today's results show, we have a great platform from which to grow and develop further opportunities as we navigate the evolving economic and regulatory landscape ahead."

 

Organic growth is calculated in respect of businesses owned for at least 9 months in either period and so excludes ISPS, The Yield Book and Citi Fixed Income Indices, MillenniumIT ESP and Exactpro. The Group's principal foreign exchange exposure arises from translating our European based Euro and US based USD reporting businesses into Sterling.

 

Investment in growth opportunities and new developments continued across the business during the past quarter:

 

-    LSEG expected to increase its stake in LCH Group to over 80%, acquiring up to an additional 15.1% stake following reductions in holdings by a number of minority shareholders. Targeting completion before end Q4 2018

-    LCH ForexClear launched FX options clearing, with connected settlement through CLS settlement

 

-    LCH SwapClear cleared its first Secured Overnight Financing Rate (SOFR) swaps

-    SEDOL Masterfile expanded its Fixed Income coverage to include 1.5 million US Municipal and US Corporate Bonds with data from Mergent, part of FTSE Russell

 

-    MTS and Johannesburg Stock Exchange opened South Africa's first electronic government bonds trading platform powered by MTS

 

-    LSEG and National Stock Exchange of India signed a MoU to create a dual listing route for Masala bonds and an agreement to look at launching ELITE in India

 

Financial Position

 

The Group's financial position continues to be strong with a good level of funding flexibility in place.  As at 30 September 2018, the Group had available committed facility headroom of c.£500 million having paid the interim dividend to shareholders and other normal course payment obligations.  On a pro forma basis, assuming the acquisition of up to a further 15.1% stake in LCH Group for up to c.€438 million, the Group's net debt:EBITDA would be towards the top end of our target leverage range, though should reduce quickly as the Group continues to generate strong cash flows.

 

Credit ratings are unchanged since 30 June 2018, with S&P maintaining a positive outlook around its A- long term rating of LSEG plc and its A+ long term rating of LCH Ltd and LCH SA. Moody's rates LSEG long term A3 with a stable outlook.

The euro strengthened by 1% and the US dollar weakened 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 £2 million for Q3, while a US$0.05 move would have resulted in a £2 million change.

 

IFRS 15 accounting change

 

Since issuing its Interim Report on 2 August 2018, the Group has received clarification guidance from the IFRS Interpretations Committee (IFRIC) regarding the impact of adopting IFRS 15 on admission and listing services provided by the Group's Primary Markets businesses within the Capital Markets segment.

 

On conversion to the new standard, with effect back dated to 1 Jan 2018, the Group now treats the initial admission and the continual and ongoing listing service as one performance obligation and recognises revenue from initial admissions and further issues over the period the Group has provided the listing service.  In the majority of cases this is estimated to be between 4 and 11 years, dependent on the nature of the listing and the service provided.  The net £9 million revenue reduction taken in Q3 reflects the impact for the 9 months year-to-date.

 

All new and further listing fees will continue to be billed and cash collected at the point when the service is first provided.  Revenues deferred as at 1 January 2018 will result in a recovery of tax paid at the prevailing rate on adoption of IFRS 15 by means of a reduction in the corporation tax payable due to the relevant tax authorities.  The Group will subsequently incur corporation tax charge as the deferred revenues from initial admission and further issue fees are recognised in the income statement.

 

Further information is available from:

 

London Stock Exchange Group plc

Gavin Sullivan/Lucie Holloway/Ramesh Chhabra - Media

Paul Froud - Investor Relations

+44 (0) 20 7797 1222

 

+44 (0) 20 7797 3322

 

 

 

 

A conference call for analysts and investors will be held at 8:30 (UK time) on Friday 19 October.  On the call will be David Warren (CFO) and Paul Froud (Head of Investor Relations).

 

To access the telephone conference call dial 0800 376 7922 or +44 (0) 2071 928 000

 

Conference ID: 6477 558 

 

Q3 Revenue Summary

 

Revenues for three months and nine months ended 30 September 2018 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 an organic and constant currency basis.  All figures are unaudited.

 





Organic




Organic


Three months ended


and constant


Nine months ended


and constant


30 September


currency


30 September


currency


2018

2017

Variance

variance1


2018

2017

Variance

variance1

Continuing operations:

£m

£m

%

%


£m

£m

%

%

Revenue










Information Services

212 

182 

17% 

9% 


624 

537 

16% 

9% 

Post Trade Services - LCH

120 

114 

5% 

6% 


357 

321 

11% 

11% 

Post Trade Services - CC&G and Monte Titoli

25 

26 

(7%)

(5%)


77 

82 

(6%)

(7%)

Capital Markets

89 

97 

(8%)

(7%)


305 

286 

6% 

6% 

Technology Services

16 

23 

(32%)

15% 


48 

64 

(26%)

17% 

Other

2 

1 

- 

- 


7 

5 

- 

- 

Total revenue

464 

443 

5% 

4% 


1,418 

1,295 

9% 

8% 











Net treasury income through CCP businesses

57 

42 

36% 

35% 


160 

117 

37% 

37% 

Other income

1 

1 

- 

- 


4 

20 

-

- 

Total income

522 

486 

8% 

7% 


1,582 

1,432 

10% 

10% 

Cost of sales

(57)

(56)

1% 

12% 


(163)

(158)

3% 

12% 

Gross profit

465 

430 

8% 

6% 


1,419 

1,274 

11% 

9% 

 

1 Organic growth is calculated in respect of businesses owned for at least 9 months in either period and so excludes ISPS, The Yield Book and Citi Fixed Income Indices, MillenniumIT ESP and Exactpro. The Group's principal foreign exchange exposure arises from translating our European based Euro and US based USD reporting businesses into Sterling.

 

Note: Variances in all tables are calculated from underlying numbers

More detailed revenues by segment are provided in tables below:

 

Information Services


Three months


Organic and





Organic and

 

 

ended


constant


Nine months ended


constant

 

 

30 September


currency


30 September


currency

 

 

2018

2017

Variance

variance1


2018

2017

Variance

variance1

 

 

£m

£m

%

%


£m

£m

%

%

 

Revenue










FTSE Russell Indexes

162 

135 

20%

9%


471 

396 

19% 

9% 

Real time data

23 

23 

1%

1%


70 

70 

(1%)

(1%)

Other information services

27 

24 

13%

13%


83 

71 

18% 

21% 

Total revenue

212 

182 

17%

9%


624 

537 

16% 

9% 

Cost of sales

(17)

(15)

15%

-


(52)

(45)

15% 

5% 

Gross profit

195 

167 

17%

9%


572 

492 

16% 

9% 

 

1 Removal of The Yield Book and Citi Fixed Income Indices (acquired Q3 2017) from FTSE Russell and ISPS from Other information services (disposed Q1 2017)

 

Post Trade Services - LCH

 


Three months ended


Constant


Nine months ended


Constant


30 September


currency


30 September


currency


2018

2017

Variance

variance


2018

2017

Variance

variance


£m

£m

%

%


£m

£m

%

%

Revenue










OTC - SwapClear, ForexClear & CDSClear

65 

59 

12% 

12% 


196 

171 

14%

16%

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

34 

33 

2% 

2% 


101 

99 

2%

1%

Other

21 

22 

(5%)

(6%)


60 

51 

19%

18%

Total revenue

120 

114 

5% 

6% 


357 

321 

11%

11%

Net treasury income

46 

31 

49% 

47% 


128 

87 

48%

49%

Other income

0 

(1)

- 

- 


0 

6 

-

-

Total income

166 

144 

15% 

15% 


485 

414 

17%

17%

Cost of sales

(31)

(23)

36% 

36% 


(83)

(63)

32%

31%

Gross profit

135 

121 

11% 

11% 


402 

351 

15%

15%

 

1 Pass through of LIBOR data fees Cost of sales have now been netted off against Other income, 2018 Q3 impact £2m 9 months impact £7m

 

Post Trade Services - CC&G and Monte Titoli

 


Three months ended


Constant


Nine months ended


Constant



currency


30 September


currency


2018

2017

Variance

variance


2018

2017

Variance

variance


£m

£m

%

%


£m

£m

%

%

Revenue










Clearing

10 

9 

5% 

9% 


31 

30 

5% 

4% 

Settlement, Custody & other

15 

17 

(13%)

(13%)


46 

52 

(12%)

(14%)

Total revenue

25 

26 

(7%)

(5%)


77 

82 

(6%)

(7%)

Net treasury income

11 

11 

1% 

2% 


32 

30 

6% 

4% 

Total income

36 

37 

(4%)

(3%)


109 

112 

(3%)

(4%)

Cost of sales

(2)

(4)

(58%)

(58%)


(5)

(13)

(61%)

(61%)

Gross profit

34 

33 

3% 

4% 


104 

99 

5% 

3% 

 

1 Pass through of T2S costs, Cost of sales have now been netted off against Settlement, Custody & other, 2018 Q3 impact £2m, 9 months impact £7m

 

Capital Markets

 


Three months









ended


Constant


Nine months ended


Constant


30 September


currency


30 September


currency


2018

2017

Variance

variance


2018

2017

Variance

variance


£m

£m

%

%


£m

£m

%

%

Revenue










Primary Markets

20 

30 

(32%)

(32%)


83 

77 

7%

6%

Secondary Markets - Equities

39 

39 

1% 

1% 


128 

123 

4%

4%

Secondary Markets - Fixed income, derivatives and other

30 

28 

6% 

7% 


94 

86 

9%

9%

Total revenue

89 

97 

(8%)

(7%)


305 

286 

6%

6%

Cost of sales

(4)

(4)

(3%)

(3%)


(13)

(13)

1%

-

Gross profit

85 

93 

(8%)

(8%)


292 

273 

7%

6%

 

IFRS 15 changes

 

Adoption of IFRS 15 has reduced Q3 2018 Primary Markets revenues by £9m, compared to the previous treatment of revenues.  On like-for-like basis, adding back the £9m, Capital Markets revenues in Q3 would have been 2% higher than Q3 2017.

 

If the adjustment had been made on 1 January 2018, the Q1, Q2, & Q3 adjustment to the quarterly revenue would have been a £3m decrease (2017: £1m increase), £5m decrease (2017: £3m decrease) and £1m decrease (2017: £5m decrease) respectively.

 

Primary Markets

2018



Nine months ended 30 September


Q1

Q2

Q3

2018


£m

£m

£m

£m

Revenue (as previously reported)

29 

33 

30 

92 

IFRS 15 deferral adjustment

(3)

(5)

(1)

(9)

Revenue - revised for IFRS 15

26 

28 

29 

83 

 

The Group has chosen to adopt the modified retrospective approach and is therefore not required to restate financial statement issued prior to 1 January 2018 for the impact of IFRS 15.  However for information purposes the P&L impact of IFRS 15 for the year ended 31 December 2017 would have been: 

 

Primary Markets

2017




 

 


Q1

Q2

Q3

Q4

2017


£m

£m

£m

£m

£m

Revenue (as previously reported)

21

26 

30 

33 

110 

IFRS 15 deferral adjustment

1

(3)

(5)

(6)

(13)

Revenue - revised for IFRS 15

22

23 

25 

27 

97 

 

Technology Services

 


Three months ended


Organic and constant


Nine months ended


Organic and constant


30 September


currency


30 September


currency


2018

2017

Variance

variance1


2018

2017

Variance

variance1

Revenue

£m

£m

%

%


£m

£m

%

%

MillenniumIT & other technology

16 

23 

(32%)

15% 


48 

64 

(26%)

17%

Cost of sales

(2)

(9)

(77%)

(24%)


(8)

(22)

(65%)

38%

Gross profit

14 

14 

(4%)

24% 


40 

42 

(5%)

14%

 

1 Excludes MillenniumIT ESP and Exactpro (disposed Q4 2017 and Q1 2018 respectively)

Basis of Preparation

 

Results for the period ended 30 September 2018 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 2018

30 September 2018

GBP : EUR

1.13

1.12

GBP : USD

1.35

1.30





Average rate



9 months ended

Closing rate at


30 September 2017

30 September 2017

GBP : EUR

1.15

1.13

GBP : USD

1.28

1.34

 

Appendix - Key performance indicators

 

Information Services






As at



30 September

Variance


2018


2017

%

ETF assets under management benchmarked ($bn)





FTSE

396


345

15% 

Russell Indexes

267


227

18% 

Total

663


572

16% 






Terminals





UK

68,000


69,000

(1%)

Borsa Italiana Professional Terminals

107,000


116,000

(8%)

 

 

Post Trade Services - LCH











Three months ended



Nine months ended



30 September

Variance


30 September

Variance


2018


2017

%


2018


2017

%











OTC derivatives










SwapClear










IRS notional cleared ($tn)

236


197

20% 


812


666

22% 

SwapClear members

110


105

5% 


110


105

5% 

Client trades ('000)

332


313

6% 


1,117


923

21% 

CDSClear










Notional cleared (€bn)

139


147

(5%)


464


445

4% 

CDSClear members

15


13

15% 


15


13

15% 

ForexClear










Notional value cleared ($bn)

4,282


3,097

38% 


12,946


7,943

63% 

ForexClear members

32


28

14% 


32


28

14% 

Non-OTC










Fixed income - Nominal value (€tn)

25.1


22.3

13% 


74.1


65.2

14% 

Listed derivatives (contracts m)

36.4


33.7

8% 


113.3


110.1

3% 

Cash equities trades (m)

179


194

(8%)


593


613

(3%)











Average cash collateral (€bn)

86.2


82.1

5% 


86.0


85.0

1% 

 

 

Post Trade Services - CC&G and Monte Titoli




















Three months ended



Nine months ended



30 September

Variance


30 September

Variance


2018


2017

%


2018


2017

%

CC&G Clearing










Contracts (m)

23.8


22.6

5%


86.3


82.7

4% 

Initial margin held (average €bn)

12.0


9.4

28%


10.5


11.6

(9%)











Monte Titoli










Settlement instructions (trades m)

10.3


10.1

2%


34.3


33.0

4% 

Custody assets under management (average €tn)

3.30


3.30

0%


3.30


3.26

1% 

 

 

Capital Markets - Primary Markets





















Three months ended



Nine months ended



30 September

Variance


30 September

Variance


2018


2017

%


2018


2017

%

New Issues










UK Main Market, PSM & SFM

17


18

(6%)


55


60

(8%)

UK AIM

13


25

(48%)


49


53

(8%)

Borsa Italiana

12


11

9% 


25


22

14%

Total

42


54

(22%)


129


135

(4%)











Money Raised (£bn)










UK New

2.0


2.6

(23%)


3.9


5.0

(22%)

UK Further

3.1


3.6

(14%)


13.8


12.0

15% 

Borsa Italiana new and further

0.6


0.9

(33%)


3.1


13.1

(76%)

Total (£bn)

5.7


7.1

(20%)


20.8


30.1

(31%)

 

 

Capital Markets - Secondary Markets




















Three months ended



Nine months ended


 


30 September

Variance


30 September

Variance

 

Equity

2018


2017

%


2018


2017

%

Totals for period










UK value traded (£bn)

329


327

1% 


1,098


1,010

9% 

Borsa Italiana (no of trades m)

15.4


15.1

2% 


54.8


52.6

4% 

Turquoise value traded (€bn)

180


225

(20%)


644


781

(18%)











SETS Yield (basis points)

0.65


0.63

3% 


0.63


0.63

0% 











Average daily










UK value traded (£bn)

5.1


5.1

0% 


5.8


5.3

9% 

Borsa Italiana (no of trades '000)

240


237

1% 


288


275

5% 

Turquoise value traded (€bn)

2.8


3.5

(20%)


3.4


4.1

(17%)











Derivatives (contracts m)










LSE Derivatives

1.1


1.5

(27%)


5.2


4.7

11% 

IDEM

7.5


6.6

14% 


28.2


27.1

4% 

Total

8.6


8.2

5% 


33.4


31.8

5% 











Fixed Income










MTS cash and BondVision (€bn)

670


733

(9%)


2,558


2,635

(3%)

MTS money markets (€bn term adjusted)

21,134


17,385

22% 


65,098


58,740

11% 

 

Total Income - Quarterly

 

2017





2018



£ millions

Q1

Q2

Q3

Q4

2017


Q1

Q2

Q3











Primary Markets

21 

26 

30 

33 

110 


29 

33 

20 

Secondary Markets - Equities

42 

42 

39 

40 

163 


45 

44 

39 

Secondary Markets - Fixed income, derivatives & other

31 

28 

28 

31 

118 


33 

31 

30 

Capital Markets

94 

96 

97 

104 

391 


107 

108 

89 











Clearing

11 

9 

9 

10 

39 


10 

12 

10 

Settlement, Custody & other

17 

18 

17 

18 

70 


18 

12 

15 

Post Trade Services - CC&G and Monte Titoli

28 

27 

26 

28 

109 


28 

24 

25 











OTC - SwapClear, ForexClear & CDSClear

57 

55 

59 

60 

231 


66 

64 

65 

Non OTC - Fixed income, Cash equities & Listed derivatives

33 

33 

33 

34 

133 


33 

34 

34 

Other

16 

13 

22 

17 

68 


19 

21 

21 

Post Trade Services - LCH

106 

101 

114 

111 

432 


118 

119 

120 











FTSE Russell Indexes

127 

134 

135 

150 

546 


150 

159 

162 

Real time data

23 

24 

23 

24 

94 


24 

23 

23 

Other information

24 

23 

24 

25 

96 


27 

29 

27 

Information Services

174 

181 

182 

199 

736 


201 

211 

212 











Technology Services

20 

21 

23 

27 

91 


13 

19 

16 











Other

1 

4 

1 

3 

9 


3 

2 

2 











Total Revenue

423 

430 

443 

472 

1,768 


470 

483 

464 

Net treasury income through CCP:










CC&G

10 

10 

11 

11 

42 


10 

11 

11 

LCH

24 

31 

31 

34 

120 


38 

45 

46 

Other income

4 

14 

1 

6 

25 


2 

1 

1 











Total income

461 

485 

486 

523 

1,955 


520 

540 

522 











Cost of sales

        (51)

             (51)

          (56)

             (57)

           (215)


             (56)

             (50)

             (57)

Gross profit

410 

434 

430 

466 

1,740 


464 

490 

465 

 

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 rns@lseg.com or visit www.rns.com.
 
END
 
 
TSTMMMMGMRLGRZZ