2022 Q3 Trading Statement

RNS Number : 6366D
London Stock Exchange Group PLC
21 October 2022
 

Logo Description automatically generated

 

London Stock Exchange Group plc: Q3 2022 Trading Update

Broad based growth, sustained execution, guidance unchanged

David Schwimmer, CEO said:

"We have delivered another strong quarter, with good growth across all businesses. The consistency of delivery in recent quarters demonstrates the strength of our business model, generating quality recurring revenues from a range of services that are highly valued by our customers.

"Our strategy is working, delivering growth and increasing efficiency. We are investing organically for growth and completed the acquisition of TORA during the quarter to strengthen our offering in Trading & Banking. We are also making good progress on returning surplus capital to shareholders through our share buyback programme.

"With sustained execution, a broad base of businesses and leading market positions, we remain well positioned."

Q3 2022 highlights

Strong growth continues across all divisions : total income excluding recoveries up 16.2% on a reported basis, to £1,905m. Up 5.9% on a constant currency basis, and up 7.0% adjusting for Ukraine and Russia conflict impact1

High-quality recurring revenue : like-for-like ASV growth continues to improve, up 5.8% in Q3 (up 280 basis points since Refinitiv acquisition in Q1 2021); driven by new sales and improved retention

Continued good progress on integration : revenue and cost synergies in line with targets

Active capital management :


-

TORA acquisition completed, enhancing Trading & Banking Solutions in Data & Analytics; provisional clearance achieved for Quantile acquisition, expected to complete in Q4


-

Share buyback: £235 million returned in Q3 as part of our active 12 month, £750 million share buyback programme

Well-positioned for further growth : strong progress, no change to guidance or targets

 

Note: Unless otherwise stated, variances refer to growth rates relative to Q3 2021 on a constant currency basis

 

This release contains revenues, cost of sales and key performance indicators (KPIs) for the three months ended 30 September 2022 (Q3), certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Throughout this document, r evenues and cost of sales associated with the BETA divestment, completed on 1 July 2022, and the Borsa Italiana divestment, completed in H1 2021, 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. For more information on accounting treatments and approach to FX please refer to the "Accounting and modelling notes" section below.

 

1 Growth rates excluding the Ukraine / Russia conflict impact exclude income in the region and from sanctioned customers and related business from both periods

 

 

Q3 2022 summary

 

The deferred revenue accounting adjustment1 was immaterial to growth rates in Q3.

 

Continuing operations

Q3 2022
£m

Q3 2021
£m

  Variance
%

 

 

Constant Currency Variance
%







 

Trading & Banking Solutions

417 

373 

11.8% 


1.0% 

Enterprise Data Solutions

332 

284 

16.9% 


6.2% 

Investment Solutions

344 

294 

17.0% 


4.7% 

Wealth Solutions

71 

61 

16.4% 


5.0% 

Customer & Third-Party Risk Solutions

110 

92 

19.6% 


8.5% 

Data & Analytics

1,274 

1,104 

15.4% 

 

4.1% 






 

Equities

60 

60 

0.0% 


1.2% 

FX

68 

56 

21.4% 


4.3% 

Fixed Income, Derivatives & Other

241 

193 

24.9% 


12.1% 

Capital Markets

369 

309 

19.4% 

 

8.6% 






 

OTC Derivatives

103 

86 

19.8% 


14.5% 

Securities & Reporting

55 

60 

(8.3%)


(7.4%)

Non-Cash Collateral

25 

24 

4.2% 


0.8% 

Net Treasury Income

66 

47 

40.4% 


30.7% 

Post Trade

249 

217 

14.7% 

 

10.4% 






 

Other

13 

44.4% 


23.4% 

Total Income (excl. recoveries)

1,905 

1,639 

16.2% 

 

5.9% 

Recoveries

80 

90 

(11.1%)


4.5% 

Total Income (incl. recoveries)

1,985 

1,729 

14.8% 

 

5.9% 

Cost of sales

(289)

(227)

27.3% 


12.4% 

Gross Profit

1,696 

1,502 

12.9% 

 

4.9% 

1 The deferred revenue adjustment is further explained in the "Accounting and modelling notes" section

 

 

Q3 2022 business highlights

Constant currency basis

Data & Analytics : revenues up 4.1%; up 5.4% excluding impact of Ukraine / Russia conflict, with good growth across all businesses. In particular:


Trading & Banking Solutions: up 1.0%; up 3 .5% excluding impact of Ukraine / Russia conflict with an improved product offering reflected in stronger sales and continued good retention. First time contribution from acquisition of TORA.


Enterprise Data Solutions: up 6.2%; up 7.1% excluding impact of Ukraine / Russia conflict as investment in data content improved retention and sales growth; contribution of MayStreet's low-latency capabilities.


Investment Solutions: up 4.7%; continued strong growth across Benchmark, Indices and Analytics, up c.8% adjusting for prior year effects; resilient Asset-based revenues with encouraging product inflows.

 

Capital Markets : revenues up 8.6% with strong demand for our services and benefit of volatility at the end of the quarter . In particular:


Fixed Income, Derivatives & Other: s trong performance at Tradeweb, with double-digit revenue growth across Rates, Credit, Equity and Money Market asset classes.

 

Post Trade : total income up 10.4% reflecting strong demand for clearing services; good performance in OTC markets as we helped customers manage their risk in an uncertain market environment. Higher Net Treasury Income (NTI) reflects increased cash collateral (up 45% yoy to €151 billion).

Cost of sales : up 12.4% reflecting strong SwapClear performance where revenue share arrangements are in place, additional cost of sales from acquisitions, and continued growth in Data & Analytics.

 

 

 

Annual Subscription Value (ASV) growth

 

 

 

Organic, constant currency ASV growth, excluding recoveries.

 

 

 

Share buyback programme

In August 2022, we announced a £750 million on-market share buyback programme through three tranches over a 12 month period. We made good progress in Q3, repurchasing 3.0 million shares for £235 million. The first tranche of £250 million (3.1 million shares) completed on 5 October 2022. The next tranche will commence on 1 December 2022.

 

Board appointment

William Vereker joined the Board as a Non-Executive Director with effect from 3 October 2022 and will also serve on the Risk, Remuneration and Nomination Committees. William brings a strong track record in the global financial services sector. His international experience in developing senior relationships, managing risk and organisational change will benefit the Group as we look to further capitalise on the trends shaping our industry.

 

 

Statutory1 Q3 YTD results

 

Continuing operations

Q3 9m

2022
£m

Q3 9m

2021
£m

 

 


Trading & Banking Solutions

1,186 

994 

Enterprise Data Solutions

953 

761 

Investment Solutions

980 

819 

Wealth Solutions

202 

163 

Customer & Third-Party Risk Solutions

306 

239 

Data & Analytics

3,627 

2,976 




Equities

190 

180 

FX

191 

147 

Fixed Income, Derivatives & Other

708 

521 

Capital Markets

1,089 

848 




OTC Derivatives

294 

255 

Securities & Reporting

177 

183 

Non-Cash Collateral

74 

70 

Net Treasury Income

187 

155 

Post Trade

732 

663 




Other

25 

22 

Total Income (excl. recoveries)

5,474 

4,510 

Recoveries

246 

238 

Total Income (incl. recoveries)

5,720 

4,747 

 



Cost of sales

(793)

(619)

Gross Profit

4,927 

4,128 

1 Statutory figures for 9 months to 30 Sep 2021 incorporate figures from Refinitiv for February to September 2021.

 


Pro-forma Q3 YTD results

 

 Continuing operations

 Q3 9m 2022
£m

  Q3 9m 2021
£m

  Variance
%

 

Constant Currency Variance
%

 

Constant Currency Variance (excl. deferred revenue adjustment) 1
%








 

Trading & Banking Solutions

1,186 

1,118 

6.1% 


0.3% 

(0.4%)

Enterprise Data Solutions

953 

845 

12.8% 


7.0% 

6.2% 

Investment Solutions

980 

854 

14.8% 


7.3% 

6.8% 

Wealth Solutions

202 

184 

9.8% 


3.7% 

3.2% 

Customer & Third-Party Risk Solutions

306 

267 

14.6% 


8.5% 

7.6% 

Data & Analytics

3,627 

3,268 

11.0% 

 

4.7% 

4.0% 


 






Equities

190 

180 

5.6% 


5.6% 

5.6% 

FX

191 

166 

15.1% 


5.7% 

5.5% 

Fixed Income, Derivatives & Other

708 

580 

22.1% 


15.0% 

15.0% 

Capital Markets

1,089 

926 

17.6% 

 

11.5% 

11.5% 



 

 


 


OTC Derivatives

294 

255 

15.3% 


12.9% 

12.9% 

Securities & Reporting

177 

183 

(3.3%)


(1.2%)

(1.2%)

Non-Cash Collateral

74 

70 

5.7% 


4.3% 

4.3% 

Net Treasury Income

187 

155 

20.6% 


17.2% 

17.2% 

Post Trade

732 

663 

10.4% 

 

9.1% 

9.1% 








Other

25 

24 

4.2% 


0.3% 

0.3% 

Total Income (excl. recoveries)

5,474 

4,881 

12.1% 

 

6.6% 

6.1% 

Recoveries

246 

268 

(8.2%)


3.5% 

2.7% 

Total Income (incl. recoveries)

5,720 

5,149 

11.1% 

 

6.4% 

5.9% 

Cost of sales

(793)

(679)

16.8% 


8.6% 

8.6% 

Gross Profit

4,927 

4,470 

10.2% 

 

6.1% 

5.6% 

 

1 Excludes the deferred revenue adjustment further explained in the "Accounting and modelling notes" section

 

 


Contacts: London Stock Exchange Group plc

 

Investors

 

 

Peregrine Riviere / Chris Turner - Investor Relations

ir@lseg.com

 



Media


Lucie Holloway / Rhiannon Davies - Financial Communications

+44 (0) 20 7797 1222

newsroom@lseg.com

 

Additional information can be found at www.lseg.com

 

 

Q3 investor and analyst conference call:

 

LSEG will host a conference call for its Q3 Trading Update for analysts and investors today at 09:00am (UK time). On the call will be David Schwimmer (Chief Executive Officer), Anna Manz (Chief Financial Officer) and Peregrine Riviere (Group Head of Investor Relations).

 

To access the webcast or telephone conference call please register in advance using the following link:

 

https://www.lsegissuerservices.com/spark/LondonStockExchangeGroup/events/b49ef70b-c219-4ae7-a007-b470b8a5ed8a

 

Questions can be submitted in advance and during the event itself, either by clicking the 'Ask a question' button on the page or by emailing the LSEG Investor Relations team at ir@lseg.com .

 

To ask a question live you will need to register for the telephone conference call here: https://cossprereg.btci.com/prereg/key.process?key=PTAJ4VAPV  

 

 

Accounting and modelling notes

 

Financial details on completed acquisitions

 

The acquisition of TORA completed on 9 August 2022, enhancing our multi-asset class order and execution management capability within Trading & Banking Solutions. TORA will provide approximately 5 months of contribution to our P&L in 2022.

 

The financial performance of TORA in 2021 is shown below, consistent with LSEG's accounting treatment. TORA's costs are in addition to our existing organic constant currency cost guidance.

 

£m

2021

Total Income

29 

Cost of Sales

(2)

Gross Profit

27 

Operating Expenses

(24)

EBITDA

Depreciation

Operating profit

 

 

Divestment of BETA

 

On 1st July, LSEG completed the divestment of BETA, previously contained within the Wealth Solutions business. Consistent with the treatment at Q1 and H1 2022, the financial contribution of BETA is excluded from our 2021 and 2022 continuing operations.

 

 

Organic growth

 

Organic growth is calculated on a constant currency basis, adjusting the results to remove disposals from the entirety of the current and prior year periods, and by including acquisitions from the date of acquisition with a comparable adjustment to the prior year.

 

 

Deferred revenue accounting adjustment

 

Consistent with purchase price accounting rules, Refinitiv's deferred revenue balances were subject to a one-time haircut at the time of acquisition. This adjustment impacted 2021 revenues, with no material impact in 2022. In order to provide insight into the underlying business performance, variance figures are presented that exclude the deferred revenue adjustment where appropriate.

 

 

FX conversion

 

The majority of LSEG revenues and expenses are in USD, followed by GBP, EUR and other currencies. The rates for the largest two currency pairs are shown in the table below.

 


Average rate
9 months ended
30-Sep-22

Closing rate at
30-Sep-22

Average rate
9 months ended
30-Sep-21

Closing rate at
30-Sep-21

GBP : USD

1.26

1.10

1.39

1.34

GBP : EUR

1.18

1.13

1.16

1.16

 

For definitions of technical terms - refer to the Glossary contained in the 2021 Annual Report, page 207.

 

 

Divisional revenues, gross profit and non-financial KPIs

 

1.  Data & Analytics

 

The deferred revenue accounting adjustment1 was immaterial to growth rates in Q3.

 

 

Q3 2022
£m

Q3 2021
£m

Variance
%


Constant Currency Variance
%


 


 

 


Trading & Banking Solutions

417 

373 

11.8% 


1.0%

  Trading

330 

296 

11.5% 


0.9%

  Banking

87 

77 

13.0% 


1.4%

Enterprise Data Solutions

332 

284 

16.9% 


6.2%

  Real-Time Data

212 

182 

16.5% 


5.8%

  PRS

120 

102 

17.6% 


7.0%

Investment Solutions

344 

294 

17.0% 


4.7%

  Benchmark Rates, Indices & Analytics

157 

136 

15.4% 


4.9%

  Index - Asset-Based

73 

62 

17.7% 


1.9%

  Data & Workflow

113 

96 

17.7% 


6.1%

Wealth Solutions

71 

61 

16.4% 


5.0%

Customer & Third-Party Risk Solutions

110 

92 

19.6% 


8.5%

Total Revenue (excl. recoveries)

1,274 

1,104 

15.4% 


4.1%

Recoveries

80 

90 

(11.1%)


4.5%

Total Revenue (incl. recoveries)

1,354 

1,194 

13.4% 


4.2%

Cost of sales

(240)

(191)

25.7% 


9.3%

Gross Profit

1,003 

11.1% 


3.2%

 

 

Non-financial KPIs

 

 

Q3 2022

Q3 2021

Variance

%


 


 

Annual Subscription Value growth (%) 1

4.4%

4.0%

Annual Subscription Value growth excl. U/R impact (%) 1, 2

5.8%

4.0%

Subscription revenue growth (%) 1, 3

4.5%

-

Subscription revenue growth excl. U/R impact (%) 1, 2, 3

5.3%

-

Index - ETF AUM ($bn)

896

1,036

(14%)

Index - ESG Passive AUM ($bn) 4

261

132

98%  

 

1 The deferred revenue adjustment is further explained in the "Accounting and modelling notes" section

2. Organic, constant currency variance

3. Growth rates excluding the Ukraine / Russia conflict impact exclude income in the region and from sanctioned customers and related business from both periods

4. 12-month rolling constant currency variance excluding the impact of the deferred revenue accounting adjustment. Due to a change in methodology, prior year comparator is unavailable

5. ESG Passive AUM is at 31 December 2021 and prior period comparator is at 31 December 2020. The metric is updated bi-annually

 

 

2.  Capital Markets

 

The deferred revenue accounting adjustment1 was immaterial to growth rates in Q3.

 

 

Q3 2022
£m

Q3 2021
£m

Variance
%


Constant Currency Variance
%


 


 

 

 

Equities

60 

60 

0.0%


1.2%

FX

68 

56 

21.4%


4.3%

Fixed Income, Derivatives & Other

241 

193 

24.9%


12.1%

Total Revenue

369 

309 

19.4%


8.6%

Cost of sales

(9)

(7)

28.6%


12.4%

Gross Profit

361 

302 

19.5%


8.5%

1 The deferred revenue adjustment is further explained in the "Accounting and modelling notes" section

 

 

Non-financial KPIs

 

 

Q3 2022

Q3 2021

Variance
%

Equities

 



Primary Markets

 



New issues

18

45

(60%)

Total money raised (£bn)

2.5

 6.9

(64%)


 



Secondary Markets - Equities

 



UK Value Traded (£bn) - Average Daily Value

4.1

4.1

0% 

SETS Yield (bps)

0.67

0.75

(11%)


 



FX

 



Average daily total volume ($bn)

442

426

4% 





Fixed income, Derivatives and Other




Tradeweb Average Daily ($m)




Rates - Cash

324,153

337,167

(4%) 

Rates - Derivatives

328,636

246,981

33%  





Credit - Cash

9,275

8,440

10% 

Credit - Derivatives

20,020

13,796

45% 

 

 

3.  Post Trade

 

 

Q3 2022
£m

Q3 2021
£m

Variance
%


Constant Currency Variance
%


 


 

 

 

OTC Derivatives

103 

86 

19.8% 


14.5% 

Securities & Reporting

55 

60 

(8.3%)


(7.4%)

Non-Cash Collateral

25 

24 

4.2% 


0.8% 

Total Revenue

183 

170 

7.6% 


4.7% 

Net Treasury Income

66 

47 

40.4% 


30.7% 

Total Income

249  

217 

14.7% 


10.4% 

Cost of sales

(40)

(29)

37.9% 


33.3% 

Gross Profit

209 

188 

11.2% 


6.7% 

 

 

Non-financial KPIs

 

 

Q3 2022

Q3

2021

Variance
%

OTC




SwapClear




IRS notional cleared ($trn)

249

202

23% 

SwapClear members

123

 122

1% 

Client trades ('000)

696

516

35% 

Client average 10-year notional equivalent ($trn)

3.5

 3.8

(8%)





ForexClear




Notional cleared ($bn)

6,243

5,528

13% 

ForexClear members

36

 35

3% 





CDSClear




Notional cleared (€bn)

881

467

89% 

CDSClear members

25

25

0% 





Securities & Reporting




EquityClear trades (m)

486

 493

(1%) 

Listed derivatives contracts (m)

57.0

 66.3

(14%)

RepoClear - nominal value (€trn)

75.8

62.0

22% 





Non-Cash Collateral




Average non-cash collateral (€bn)

165.5

167.2

(1%) 





Net Treasury Income




Average cash collateral (€bn)

151.0

 103.9

45% 

 

 

Appendix - Total income constant currency growth rates: Q3 2022

 

Continuing operations

Constant Currency Variance

%

Constant Currency Variance (organic)

%


Trading & Banking Solutions

1.0% 

(0.3%)


Enterprise Data Solutions

6.2% 

5.3% 


Investment Solutions

4.7% 

4.7% 


Wealth Solutions

5.0% 

5.0% 


Customer & Third-Party Risk Solutions

8.5% 

8.8% 


Data & Analytics

4.1%  

3.5% 

 

Capital Markets

8.6% 

8.6% 

 

Post Trade

10.4% 

10.4% 

 

Total Income (excl. recoveries)

5.9%  

5.5% 

 


 

 

 

 


Appendix - Total income and gross profit by quarter

 

 

2021

 

2022

£m

Q11

Q2

Q3

Q4

2021

 

Q1

Q2

Q3


 

 

 

 

 

 

 

 

 

Trading & Banking Solutions

372 

373 

373 

375 

1,493 


378 

391 

417 

  Trading

297 

297 

296 

296 

1,186 


298 

308 

330 

  Banking

75 

76 

77 

79 

307 


80 

83 

87 

Enterprise Data Solutions

279 

282 

284 

296 

1,141 


304 

317 

332 

  Real-Time Data

178 

182 

182 

188 

730 


195 

202 

212 

  PRS

101 

100 

102 

108 

411 


109 

115 

120 

Investment Solutions

274 

286 

294 

302 

1,156 


308 

328 

344 

  Benchmark Rates, Indices & Analytics

122 

126 

136 

134 

518 


137 

148 

157 

  Index - Asset-Based

58 

64 

62 

69 

253 


70 

71 

73 

Data & Workflow

94 

96 

96 

99 

385 


101 

109 

113 

Wealth Solutions

61 

62 

61 

65 

249 


63 

68 

71 

Customer & Third-Party Risk Solutions

85 

90 

92 

92 

359 


94 

102 

110 

Data & Analytics

1,071 

1,093 

1,104 

1,130 

4,398 


1,147 

1,207 

1,274 




 


 





Equities

61 

59 

60 

61 

241 


67 

62 

60 

FX

57 

53 

56 

57 

223 


60 

63 

68 

Fixed Income, Derivatives & Other

200 

187 

193 

205 

785 


232 

235 

241 

Capital Markets

318 

299 

309 

323 

1,249 


359 

361 

369 



 



 





OTC Derivatives

87 

82 

86 

103 

358 


93 

98 

103 

Securities & Reporting

63 

60 

60 

63 

246 


64 

58 

55 

Non-Cash Collateral

22 

24 

24 

25 

95 


24 

25 

25 

Net Treasury Income

55 

53 

47 

52 

207 


57 

64 

66 

Post Trade

227 

219 

217 

243 

906 


238 

245 

249 






 





Other

10 

10 

34 


13 

Total Income (excl. recoveries)

1,621 

1,621 

1,639 

1,706 

6,587 


1,751 

1,818 

1,905 

Recoveries

88 

90 

90 

86 

354 


80 

86 

80 

Total Income (incl. recoveries)

1,709 

1,711 

1,729 

1,792 

6,941 


1,831 

1,904 

1,985 

Cost of sales

(230)

(222)

(227)

(241)

(920)


(240)

(264)

(289)

Gross Profit

1,479 

1,489 

1,502 

1,551 

6,021 


1,591 

1,640 

1,696 

 

1 Q1 2021 is pro-forma and assumes that the acquisition of Refinitiv took place on 1 January 2021

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