London Stock Exchange Group plc Preliminary results for the year ended 31 December 2021

Strong delivery against our strategy and targets

• Successful first year following the acquisition of Refinitiv - LSEG well positioned as a leading global financial market infrastructure and data business
• Delivering on our strategy to accelerate growth and build a more agile and efficient business, creating a platform for further growth
• Integration of Refinitiv delivering strong financial and operational benefits; confident in meeting or beating all targets
• Strong financial performance – good revenue growth across all businesses and ahead of previous guidance (up 6.1% at constant currency); Data & Analytics grew strongly, up 5.3%
• Cost synergy delivery running significantly ahead of target with £151 million run-rate achieved in 2021
• Additional £50 million cost synergies announced today, increasing the 5-year target to at least £400 million per annum
• Adjusted EBITDA up 8.3% to £3,283 million
• Pro-forma leverage of 1.9x at the end of 2021, within the target 1-2x range one year ahead of schedule; focus on disciplined allocation of capital to create further shareholder value
• Strong financial performance driving 46% increase in AEPS to 286.7p1; dividend up 27% to 95 pence per share

David Schwimmer, CEO said:

“LSEG has delivered a successful first year after completion of the Refinitiv acquisition. We have produced a strong financial performance, have met or are ahead of all targets and have good momentum into 2022.

“All of our businesses produced good results and are well positioned in markets demonstrating strong growth. Our clear focus on customer service and innovative solutions improved Data & Analytics’ performance. Our Capital Markets and Post Trade businesses also delivered good growth. We are building a more scalable and efficient business, creating a platform for further growth and delivering the benefits of an interconnected global company.’

“We are in a strong financial position, with a business model based on high-quality, recurring revenues that generates considerable and predictable cashflows. We have brought our leverage to within our target range a year ahead of schedule and will continue with disciplined deployment of capital to create further shareholder value. We remain focused on our strategic priorities for the benefit of our customers and our shareholders.”

Pro-forma results – Strong financial and operational performance across all businesses

Note: Unless otherwise stated, variances refer to growth rates on a pro-forma constant currency basis, excluding the impact of a deferred revenue accounting adjustment3, to provide the best view of underlying performance

• Strong revenue growth across all divisions driving 6.1% constant currency total income3 growth - £6,811 million (2020: £6,767 million) – on course to achieve the 5-7% 2020-23 CAGR target
• Data & Analytics accelerated growth to 5.3% (2020: 2.5%), with >90% of revenues from highly recurring subscriptions; annual subscription value (ASV) growth of 4.6% at end of 2021, up from 4.0% at Q3, signalling strong revenue momentum for 2022
• Capital Markets grew 12.5% driven by strong growth at Tradeweb and good performance across equities and FX venues
• Post Trade revenue grew 11.1% driven by strong performance in RepoClear and continued growth in OTC clearing; total income up 2.0% including Net Treasury Income (NTI)
• Good delivery of early run-rate revenue synergies, with c.25% of total synergy-related products launched in 2021. A similar proportion planned for this year, establishing strong foundations for synergy realisation in 2022 and beyond
• Adjusted operating expenses growth of 4.8% - guidance unchanged for low-single digit constant currency cost growth for 2022 and 2023
• Adjusted operating profit grew 8.5% reflecting strong top-line growth and good cost control
• Adjusted EBITDA up 8.3% to £3,283 million; adjusted EBITDA margin2 of 48.2%; high confidence of further improvements to achieve >50% target by end of next year
• Long-term debt refinancing completed in H1 2021 – secured at historically low rates – with average cost of debt of 1.6%
• Proposed final dividend of 70 pence per share, a 27% increase in full year dividend to 95 pence per share, reflecting our strong performance in the year and confidence in our outlook
• Announced acquisition of Quantile, a fast-growing provider of portfolio, margin and capital optimisation and compression services for the global financial services market
• Since year end, announced the acquisition of TORA, a leading provider of trading technology solutions that supports customers trading multiple asset classes across global markets; will further strengthen our capabilities in the Trading & Banking data business
• We are closely monitoring the impact of the conflict in Ukraine, with our immediate focus being the safety of our people. We are actively engaging with regulators and authorities on all relevant sanctions and taking appropriate actions. LSEG’s operations in Russia and Ukraine account for less than one per cent of total income

[1] Adjusted basic earnings per share (AEPS) variance is on a reported pro-forma basis, not constant currency
[2] Adjusted EBITDA margin is Adjusted EBITDA divided by Total Income (excl. Recoveries)
[3] Excluding recoveries and the deferred revenue accounting impact. The deferred revenue impact is a one-time, non-cash, negative revenue impact resulting from the accounting treatment of deferred revenue within Refinitiv’s accounts which have been re-evaluated upon acquisition by LSEG under purchase price accounting rules. The result of this accounting treatment is a £23m adjustment reducing revenue for H1 2021. The vast majority impacts the Data & Analytics business with a smaller impact applied to the FX venues business within Capital Markets. There were further immaterial impacts in subsequent periods within 2021. Further information is available in the “Accounting and modelling notes” section. Constant currency variance shows underlying financial performance, excluding currency impacts, by comparing the current and prior year period at consistent exchange rates.

Pro-forma results – Financial summary
Unless otherwise stated, all figures refer to continuing operations for the year ended 31 December 2021 (FY 2021). Comparative figures are for continuing operations for the year ended 31 December 2020 (FY 2020).

1 The pro-forma results assume that the acquisition of Refinitiv took place on 1 January 2020. The Borsa Italiana group was classified as a discontinued operation once the sale became highly probable on 13 January 2021 and therefore its profits and losses have been excluded from the Group’s continuing operations for both years presented
2 Pro-forma variance is the difference between current and prior year on a pro-forma basis, using the average exchange rate for the respective period, therefore any changes in the exchange rates are also reflected in the variance along with business performance
3 Constant currency variance shows financial performance, excluding currency impacts, by comparing the current and prior year at consistent exchange rates
4 As a result of the acquisition of Refinitiv and the associated accounting rules, Refinitiv’s deferred revenue balances were subject to a one-time haircut at the time of acquisition. This is a non-cash adjustment. The negative revenue impact was mostly in Q1 2021 at approximately £22 million, with an additional £1 million in Q2, £1 million in Q3 and £1 million in Q4. The impact is mostly in the Group’s Data & Analytics division, with a much smaller impact on the Group’s FX venues business in Capital Markets. There will be no impact in 2022. An adjusted variance, excluding the deferred revenue adjustment, has been presented to show underlying business growth on the prior year.
5 Before non-underlying items
6 Adjusted EBITDA margin is Adjusted EBITDA divided by Total Income (excl. Recoveries)
7 Weighted average number of shares used to calculate Adjusted basic earnings per share on a pro-forma underlying basis is 556 million

CEO Review

Overview of 2021 performance

The Group has delivered a strong financial and operating performance in the first year following the successful completion of the acquisition of Refinitiv, with good revenue growth across all of our businesses. We are making excellent progress on integration and are on track to meet or exceed all the acquisition targets. We have established our position as a leading global market infrastructure and data business, and we carry good momentum into 2022.

Strong position

We have a diverse set of world-class assets, giving us global scale and multi-asset class capabilities across the trade lifecycle, and highly recurring revenues with our products and services providing value across our customers’ core operations. We are playing a leading role in the sustainable transition through our ESG data, analytics and indices, capital issuance venues and industry leadership.

We are building on our track record of partnering with our customers to drive innovation and create value, and on our position as a trusted operator of large-scale critical market infrastructure. We are creating an integrated business that is much more than the sum of the parts.

Priorities for the Group

We remain focused on three strategic priorities: 1) integrating our world-class businesses; 2) driving growth; and, 3) building an efficient and scalable platform, particularly in Data & Analytics. We are implementing a range of actions across our systems, property and workforce to progress our integration plans. In driving the top line, we are using the strengths across the Group to enable innovation and product benefits for our customers. In delivering our scalable platforms, we are investing in technology and infrastructure to drive greater efficiencies and facilitate sustainable margin enhancement over time. These are discussed in more detail below.

Executing on our integration plan

The Group’s divisions are working successfully together to create new opportunities. An important first step has been the simplification of our sales team structure, to create a single point of contact for all key customers. This enables a joined-up approach to providing products and services from across the Group, based on a better understanding of customer needs and workflow, as well as helping us build deeper and stronger customer relationships. Improving customer service has led to record retention rates in 2021.

We have integrated capabilities across the Group, including connectivity between the Group’s FX dealer-to-client trading venue and ForexClear to provide additional clearing optionality for customers, inclusion of Yieldbook data into our evaluated pricing services for fixed income, and Pricing and Reference Service (PRS) data and content provision through the Issuer Services platform. We recently launched Yieldbook’s Fixed Income Analytics on our desktop platforms, joining up related data for customers and significantly increasing the distribution of the product on a global basis.

We have made good progress on revenue synergies, for example with cross-selling PRS data to FTSE Russell customers, and using this data to create and launch new FTSE Russell products. We are on track for the delivery of revenue synergies, with c25% of planned synergy-related products launched in 2021 and a similar proportion planned for this year. We expect to generate run-rate revenue synergies of £40-60 million by the end of 2022.

We are delivering cost synergies ahead of the planned phasing target, through property consolidation, supplier optimisation, technology efficiencies and de-duplication of roles. Against a target of £88 million of run-rate synergies in the first year, we have delivered £151 million. In addition, we have identified another £50 million of cost synergies, increasing the 5-year target to at least £400 million per annum.

Driving growth

Our achievements in 2021 in terms of integrating and connecting our businesses also provide a platform for driving revenue growth. Data & Analytics delivered an excellent revenue performance, doubling the level of growth in 2021 compared with the previous two years. The improvement was driven by improved customer service and expansion of content which resulted in record customer retention levels in 2021.We have made targeted investment to further enhance services across Data & Analytics, notably on the development of Workspace next generation software that transforms human interaction with financial data distributed from our data platform. Roll out of Workspace in the Wealth, Investment Solutions and Banking businesses continued in 2021, with positive customer reaction to the new offerings, and improvements in net promoter scores. At the end of 2021, we launched the beta version of Workspace for FX Trading. With much of the planned product development and related tools now in place, we are around a quarter of the way through the implementation of Workspace. We are also investing in new content to support growth in a number of areas such as the PRS business and sustainable finance.

Since year end, we announced the acquisition of Tora, a leading provider of trading technology solutions that supports customers trading multiple asset classes across global markets. This will further strengthen our capabilities in the Trading & Banking data business.

Capital Markets produced strong financial results, with the highest level of IPO activity since 2007. FX trading, particularly the FXall dealer-to-client market, produced a good performance. The Group’s FX venues are also facilitating integrated workflow within a large liquidity pool as electronic trading of FX increases. Record levels of trading through Tradeweb, a leading electronic trading venue for credit and rates products, contributed substantially to growth in Capital Markets. Tradeweb is growing through product expansion to meet the increasing demand for electronification of trading and from market share gains in the period.

In Post Trade, LCH is the leading clearer of OTC products worldwide across asset classes (Rates, FX, CDS) and is also a leading clearing service for European and UK repos and equities. Post Trade delivered good revenue growth, as SwapClear expanded its offering and increased the number of clients to the service, with 78 firms signing up across a diverse range of geographies. RepoClear grew strongly as it provided netting efficiencies to customers for higher repo volumes arising from European debt issuance programmes. In December, LSEG announced the acquisition of Quantile, a fast-growing provider of portfolio, margin and capital optimisation and compression services for the global financial services market. It will further our strategy of providing customers with a global, multi-asset class financial markets infrastructure operating across the trading ecosystem.

Building a scalable platform

As previously discussed, we are implementing a targeted investment programme in our technology and infrastructure to serve our customers better and facilitate margin enhancement and product profitability. A key part of this is continuing our ongoing migration of services to the cloud, which enhances the customer experience and also improves our scalability, simplifying our data platform by reducing and consolidating a fragmented offering towards a single point of access. The addition of new tools and services has helped to gain increased customer volumes at FXall, while work continues on the re-platforming of our interdealer FX platform, Matching, to our own proven technology. RepoClear is also moving its clearing platform onto the same platform as the EquityClear service, developed by LSEG Technology, to drive further customer efficiencies. As we deliver on these initiatives, our EBITDA margin enhancement will continue above the current target 50% level beyond 2023.

Looking ahead, we continue to focus on the same three strategic priorities – integrating, driving growth and building a scalable platform. In 2022, we will increase the range of services for customers through an integrated offering, deliver further growth through revenue synergies, enhanced products and data content, and build out our platforms and technology to create greater scale and operational efficiencies.

Board Change

Jacques Aigrain will step down from the LSEG Board on 27 April 2022, after nine years as a non-executive director. The Board is grateful for his advice during a time of significant transformation for the Group, and his leadership of the Group’s Remuneration Committee.

External Audit Tender
In accordance with the requirement to undertake an audit tender every ten years, LSEG will put the external audit to tender in 2022 for the audit of the 2024 financial year.

Statutory results – Financial highlights
Note: Unless otherwise stated, variances refer to growth rates on a statutory basis with no adjustments for currency or accounting treatments

• Total income (excluding recoveries) grew to £6,416 million (2020: £2,030 million), primarily as a result of the acquisition and consolidation of Refinitiv as a 29 January 2021
• Operating expenses before depreciation, amortisation and impairment grew to £3,130 million (2020: £917 million), as the Group incorporated the costs of the Refinitiv business
• Adjusted2 EBITDA margin of 48.4%; AEPS of 286.5p3

Statutory results – Financial summary
Unless otherwise stated, all figures refer to continuing operations for the year ended 31 December 2021 (FY 2021). Comparative figures are for continuing operations for the year ended 31 December 2020 (FY 2020).

1       The results for the year ended 31 December 2021 include the results from Refinitiv for 11 months ended 31 December 2021 since the date of acquisition. The Borsa Italiana group was classified as a discontinued operation once the sale became highly probable on 13 January 2021 and therefore its profits and losses have been separated from the Group’s continuing operations for both periods presented

2       The Group reports adjusted operating expenses before depreciation, amortisation and impairment, adjusted earnings before interest, tax, depreciation, amortisation and impairment (EBITDA), adjusted depreciation, amortisation and impairment, adjusted operating profit and adjusted basic earnings per share (EPS). These measures are not measures of performance under IFRS and should be considered in addition to, and not as a substitutes for, IFRS measures of financial performance and liquidity. Adjusted performance measures provide supplemental data relevant to an understanding of the Group’s financial performance and exclude non-underlying items of income and expense that are material by their size and/or nature. Non-underlying items include:

• amortisation and impairment of goodwill and purchased intangible assets (including customer relationships, trade names, and databases and content, all of which are recognised as a result of acquisitions)
• incremental depreciation and amortisation of the fair value adjustments on tangible assets and intangible assets recognised as a result of acquisitions
• other non-underlying income or expenses not related to day-to-day operations, such as transaction costs related to acquisitions and disposals of businesses, as well as integration costs

3       Weighted average number of shares used to calculate basic earnings per share and Adjusted basic earnings per share from continuing operations is 538 million (2020: 350 million)

Contacts

Investors
Paul Froud – Group Head of Investor Relations
ir@lseg.com

Media
Lucie Holloway / Rhiannon Davies – Financial Communications
+44 (0) 20 7797 1222
newsroom@lseg.com