RNS Number : 6531X
London Stock Exchange Group PLC
01 May 2019
 

1 May 2019                          

 

LONDON STOCK EXCHANGE GROUP plc

 

TRADING STATEMENT

INCLUDING REVENUES AND KPIs FOR THE THREE MONTHS ENDED 31 MARCH 2019 (Q1)

 

·    Good overall Q1 income performance against challenging market backdrop

·    Q1 total income up 5% year-on-year to £546 million

 

·    Group continues to develop and invest for growth, with the acquisition of minority stake in Euroclear and launch of new services in Post Trade and Information Services

 

Q1 summary:

 

·    Information Services:  revenues up 6% to £214 million - with 7% growth at FTSE Russell.  Growth in index subscriptions remained strong while FTSE Russell asset-based revenues reduced due to reduction in AuM at the end of 2018 (which impacted on revenue in the first part of Q1 2019); asset-based revenue in Q2 is expected to be stronger

·    Post Trade - LCH:  income up 17% to £182 million, with 16% revenue growth in OTC following record volumes at SwapClear and no discernible change to customers' use of the service as equivalence secured in event of hard Brexit; LCH benefited from an updated SwapClear agreement with partner banks, with effect from the start of the year, estimated to deliver c.£30 million savings to cost of sales in 2019

 

·    Post Trade - Italy:  income down 4% to £36 million as equity markets experienced a slow first quarter; after adjusting for the treatment of T2S costs, gross profit increased 3%

 

·    Capital Markets:  revenues down 9% to £97 million, mostly reflecting lower equity trading volumes

 

·    Technology Services:  revenues up 9% to £14 million

 

 

David Schwimmer, CEO said:

 

"We continue to execute our strategy across our core businesses of Information Services, Post Trade and Capital Markets. In Post Trade, we acquired a stake in Euroclear, which shares our open access approach, and we updated our SwapClear agreement, which will deliver significant savings as we further develop the service.

 

"We are investing in and growing our Information Services business, including developing our multi-asset and data and analytics offering. While equity markets were slower due to macroeconomic uncertainty, we have seen an improved listing environment in Q2.  

 

"The Group is strategically well positioned to develop its growth opportunities further in the evolving macroeconomic landscape."

 

New product development and investment in opportunities continued across the business:

 

-    Group acquired a 4.9% stake in Euroclear with a seat on the Board, which will help strengthen the existing commercial relationships between the businesses

-    LCH RepoClear members successfully consolidated European debt clearing activity in LCH SA, benefitting from T2S efficiencies

 

-    SwapClear Non-Deliverable IRS Clearing expanded to include 5 new LatAm and Asia-Pacific currencies

 

-    Dutch pension fund Pensioenfonds Detailhandel selected a custom FTSE Russell ESG benchmark as the basis of a new €6bn developed market passive equity mandate managed by BlackRock

 

-    FTSE Russell launched a new Multi-Asset Composite Index Series - a wide range of indexes across major asset classes covering global, regional and emerging markets

 

-    In early April, Network International, a Middle Eastern payments company, raised £1.1 billlion on London Stock Exchange plc; and Nexi, a major Italian payments company listed on Borsa Italiana, raising $2.6 billion, the largest IPO year to date globally

 

-    Acquisition of minority stake in Nivaura, partnering with them to support capital markets innovation through use of emerging technologies

 

Financial Position

 

The Group's financial position remains strong and is broadly unchanged from that reported for 31 December 2018.  As at 31 March 2019, having funded the purchase of a 4.9% stake in Euroclear, the Group had committed facility headroom of over £750 million available for general corporate purposes.

 

S&P maintains a positive outlook over its A- long term rating of LSEG, while Moody's rates LSEG A3 with a stable outlook.

 

The euro weakened by 2% 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 up or down in the average euro:sterling rate would have resulted in a corresponding change to continuing operations total income of c.£7 million for Q1, while a US$0.05 move would have resulted in a c.£6 million change.

 

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

 

A conference call for analysts and investors will be held at 8:00 (UK time) on Wednesday 1 May.  On the call will be David Warren (Group CFO) and Paul Froud (Group Head of Investor Relations).

 

To access the telephone conference call dial 0800 376 7922 or +44 (0) 20 7192 8000

 

Conference ID: 506 6297

 

Q1 Revenue Summary

 

Revenues for three months ended 31 March 2019 refer 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.

 


Three months ended


Constant


31 March


currency


2019

2018

Variance

variance

Continuing operations:

£m

£m

%

%

Revenue





Information Services

214 

201 

6% 

3% 

Post Trade Services - LCH

134 

118 

14% 

14% 

Post Trade Services - CC&G and Monte Titoli

25 

28 

(10%)

(9%)

Capital Markets

97 

107 

(9%)

(9%)

Technology

14 

13 

9% 

9% 

Other

2 

3 

(31%)

(31%)

Total revenue

486 

470 

3% 

2% 






Net treasury income through CCP businesses

59 

48 

23% 

22% 

Other income

1 

2 

(53%)

(53%)

Total income

546 

520 

5% 

4% 

Cost of sales

(56)

(56)

- 

(1%)

Gross profit

490 

464 

6% 

4% 

 

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

Revised reporting format:

 


Three months ended


Constant


31 March


currency


2019

2018

Variance

variance


£m

£m

%

%

Revenue





Index - Subscription

99 

89 

11% 

7% 

Index - Asset based

52 

52 

- 

(6%)

FTSE Russell

151 

141 

7% 

2% 

Real time data

24 

24 

(1%)

(1%)

Other information services

39 

36 

8% 

7% 

Total revenue

214 

201 

6% 

3% 

Cost of sales

(17)

(18)

(2%)

(7%)

Gross profit

197 

183 

7% 

3% 

 

Note:

Mergent and some other minor items (previously reported in FTSE Russell subscriptions), are now included in Other information services

 

Previous reporting format:

 


Three months ended


Constant


31 March


currency


2019

2018

Variance

variance


£m

£m

%

%

Revenue





FTSE Russell

161 

150 

7% 

2% 

Real time data

24 

24 

(1%)

(1%)

Other information services

29 

27 

7% 

7% 

Total revenue

214 

201 

6% 

3% 

Cost of sales

(17)

(18)

(2%)

(7%)

Gross profit

197 

183 

7% 

3% 

 

Post Trade Services - LCH

 


Three months ended


Constant


31 March


currency


2019

2018

Variance

variance


£m

£m

%

%

Revenue





OTC - SwapClear, ForexClear & CDSClear

76 

66 

16%

14%

Non OTC - Fixed income, Cash equities & Listed derivatives

34 

33 

2%

3%

Other

24 

19 

26%

27%

Total revenue

134 

118 

14%

14%

Net treasury income

48 

38 

26%

24%

Other income

- 

- 

-

-

Total income

182 

156 

17%

16%

Cost of sales

(32)

(25)

26%

28%

Gross profit

150 

131 

15%

14%

 

Post Trade Services - CC&G and Monte Titoli

 


Three months ended


Constant


31 March


currency


2019

2018

Variance

variance


£m

£m

%

%

Revenue





Clearing

11 

10 

3% 

4% 

Settlement, Custody & other

14 

18 

(18%)

(16%)

Total revenue

25 

28 

(10%)

(9%)

Net treasury income

11 

10 

13% 

15% 

Total income

36 

38 

(4%)

(3%)

Cost of sales 1

(2)

(4)

(61%)

(61%)

Gross profit

34 

34 

3% 

5% 

 

1 Pass through of T2S costs, Cost of sales have now been netted off against Settlement, Custody & other, 2019 Q1 impact £3m

 

Capital Markets

 


Three months ended


Constant


31 March


currency


2019

2018

Variance

variance


£m

£m

%

%

Revenue





Primary Markets

28 

29 

(2%)

(1%)

Secondary Markets - Equities

37 

45 

(18%)

(18%)

Secondary Markets - Fixed income, derivatives and other

32 

33 

(4%)

(3%)

Total revenue

97 

107 

(9%)

(9%)

Cost of sales

(1)

(5)

(67%)

(67%)

Gross profit

96 

102 

(6%)

(6%)

 

Technology Services

 


Three months ended


Constant


31 March


currency


2019

2018

Variance

variance

Revenue

£m

£m

%

%

MillenniumIT & other technology

14 

13 

9% 

9% 

Cost of sales

(2)

(3)

(16%)

(16%)

Gross profit

12 

10 

16% 

16% 

 

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 2019

31 March 2019

31 March 2018

31 March 2018

GBP : EUR

1.15

1.16

1.13

1.14

GBP : USD

1.30

1.30

1.39

1.40

 

Appendix - Key performance indicators

 

Information Services






As at



31 March

Variance


2019


2018

%

ETF assets under management benchmarked ($bn)





FTSE

413


399

4% 

Russell Indexes

256


240

7% 

Total

669


639

5% 






Terminals





UK

67,000


68,000

(1%)

Borsa Italiana Professional Terminals

105,000


109,000

(4%)

 

Post Trade Services - LCH






Three months ended



31 March

Variance


2019


2018

%






OTC derivatives





SwapClear





IRS notional cleared ($tn)

318


291

9% 

SwapClear members

119


105

13% 

Client trades ('000)

411


407

1% 

CDSClear





Notional cleared (€bn)

176


162

9% 

CDSClear members

26


13

100% 

ForexClear





Notional value cleared ($bn)

4,311


4,286

1% 

ForexClear members

34


30

13% 

Non-OTC





Fixed income - Nominal value (€tn)

26.2


23.9

10% 

Listed derivatives (contracts m)

36.4


38.5

(5%)

Cash equities trades (m)

180.8


221

(18%)






Average cash collateral (€bn)

91.1


83.0

10% 

 

Post Trade Services - CC&G and Monte Titoli










Three months ended



31 March

Variance


2019


2018

%

CC&G Clearing





Contracts (m)

25.0


29.7

(16%)

Initial margin held (average €bn)

13.7


9.0

52% 






Monte Titoli





Settlement instructions (trades m)

10.7


11.7

(9%)

Custody assets under management (average €tn)

3.31


3.30

- 

 

Capital Markets - Primary Markets











Three months ended



31 March

Variance


2019


2018

%

New Issues





UK Main Market, PSM & SFM

11


19

(42%)

UK AIM

5


12

(58%)

Borsa Italiana

7


6

17% 

Total

23


37

(38%)






Money Raised (£bn)





UK New

0.5


1.0

(50%)

UK Further

3.0


5.5

(45%)

Borsa Italiana new and further

0.0


1.5

(100%)

Total (£bn)

3.5


8.0

(56%)

 

Capital Markets - Secondary Markets





Three months ended



31 March

Variance

Equity

2019


2018

%

Totals for period





UK value traded (£bn)

294


388

(24%)

Borsa Italiana (no of trades m)

15.6


19.2

(19%)

Turquoise value traded (€bn)

163


254

(36%)






SETS Yield (basis points)

0.68


0.61

11% 






Average daily





UK value traded (£bn)

4.7


6.2

(24%)

Borsa Italiana (no of trades '000)

248


305

(19%)

Turquoise value traded (€bn)

2.6


4.0

(35%)






Derivatives (contracts m)





LSE Derivatives

0.8


1.8

(56%)

IDEM

8.3


9.2

(10%)

Total

9.1


11.0

(17%)






Fixed Income





MTS cash and BondVision (€bn)

836


1,030

(19%)

MTS money markets (€bn term adjusted)

28,809


19,588

47% 

 

Total Income - Quarterly

 


2018






2019

£ millions

Q1

Q2

Q3

Q4

2018


Q1









Index - Subscription

89

96

94

94

373


99

Index - Asset based

52

53

59

55

219


52

FTSE Russell

141

149

153

149

592


151

Real time data

24

23

23

24

94


24

Other information

36

39

36

44

155


39

Information Services

201

211

212

217

841


214









OTC - SwapClear, ForexClear & CDSClear

66

64

65

73

268


76

Non OTC - Fixed income, Cash equities & Listed derivatives

33

34

34

35

136


34

Other

19

21

21

22

83


24

Post Trade Services - LCH

118

119

120

130

487


134









Clearing

10

12

10

9

41


11

Settlement, Custody & other

18

12

15

16

61


14

Post Trade Services - CC&G and Monte Titoli

28

24

25

25

102


25









Primary Markets

29

33

20

31

113


28

Secondary Markets - Equities

45

44

39

41

169


37

Secondary Markets - Fixed income, derivatives & other

33

31

30

31

125


32

Capital Markets

107

108

89

103

407


97









Technology

13

19

16

17

65


14









Other

3

2

2

2

9


2









Total Revenue

470

483

464

494

1,911


486

Net treasury income through CCP:








CC&G

10

11

11

11

43


11

LCH

38

45

46

46

175


48

Other income

2

1

1

2

6


1









Total income

520

540

522

553

2,135


546









Cost of sales

             (56)

             (50)

             (57)

             (64)

           (227)


             (56)

Gross profit

464

490

465

489

1,908


490

 

Note Information Services:

Mergent and some other minor items (previously reported in FTSE Russell subscriptions), are now included in Other information services

 


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