3rd Quarter Interim Management Statement

RNS Number : 9993M
London Stock Exchange Group PLC
20 October 2016
 

20 October 2016                                        

 

LONDON STOCK EXCHANGE GROUP plc

 

INTERIM MANAGEMENT STATEMENT

FOR THE PERIOD TO 19 OCTOBER 2016, INCLUDING REVENUES AND KPIs FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2016 (Q3)

 

 

·    Continued good growth: Q3 total income from continuing operations (excluding assets sold / held for sale) up 19% to £414.6 million and rose 14% year-to-date to £1,200.4 million

·    Q3 revenues from continuing operations up 15% to £376.2 million; up 11% for 9 months year-to-date at £1,098.1 million

 

·    Reflecting strong resilience and diversified range of business, all core divisions delivering good growth despite a backdrop of testing markets and economic uncertainty

 

·    Focus remains on completion of the merger with Deutsche Börse, creating a leading global markets infrastructure group - shareholder approvals achieved and work continues to secure regulatory consents

 

Q3 summary:

 

·    Capital Markets revenues up 16% (up 8% at constant currency), with growth in both primary and secondary markets despite volatile markets; Turquoise continues to trade well, with strong growth in the Block Discovery service (including a record month in September)

 

·    LCH income increased 29% (up 18% at constant currency), with 21% revenue growth in OTC from higher SwapClear client trades; good volume growth also in CDSClear and ForexClear 

 

·    Post Trade Services (Italy) income up 23% (up 5% at constant currency) -  increased settlement and custody revenues, together with increased net treasury income, offsetting lower clearing revenue

 

·    Information Services revenues up 13% (up 3% on organic and constant currency basis) - underlying growth at FTSE Russell impacted in part by market-related weakness (ETF AUM/passive fund revenues lag recovery in market and derivatives contracts down versus high levels in volatile markets last year), and by one-off accounting adjustments.  Improvement is expected in Q4 as values have increased and confidence remains in the many continuing positive market trends and opportunities to drive further good growth

 

·    Technology Services revenues up 5% (up 4% at constant currency)

 

·    Investment continues in a wide range of growth opportunities, with notable developments in the period:

 

-     CurveGlobal, an open access interest rate derivatives venture, launched in partnership with major dealer banks and CBOE - providing customers with the opportunity to gain efficiencies through the LCH Spider portfolio margining service

 

-     Turquoise Plato platform launched with buy side and sell side partners - using the successful  "large in scale" Block Discovery platform

 

-     LCH received recognition as a designated central counterparty in Hong Kong for SwapClear and ForexClear to clear certain OTC interest rate derivatives in HKD or one of the G4 currencies (USD, EUR, GBP and JPY)

 

-     MillenniumIT equities and fixed income trading and surveillance technology went live at Casablanca Stock Exchange; MillenniumIT also showcased its new real time post trade technology capabilities

 

-     Integration of the FTSE Russell index businesses is running ahead of plan

 

Organic growth is calculated in respect of businesses owned for at least the full 3 months in either period and so excludes Exactpro,  Proquote, Russell Investment Management, SwapMatch and XTF Inc. The Group's principal foreign exchange exposure arises from translating our European based euro and US based USD reporting businesses into sterling.

 

Commenting on performance in Q3, Xavier Rolet, Chief Executive, said:

 

"This is another good performance, delivering growth across our core businesses while continuing to invest in a wide range of opportunities to drive future returns. 

 

"In line with our open access approach, we continue to partner with customers to drive innovation with both CurveGlobal and Turquoise Plato going live in September.  In Post Trade, we continue to see good growth in OTC clearing across the SwapClear, CDSClear and ForexClear services. The integration of FTSE Russell is running ahead of schedule and the Information Services business is delivering good results. The Group is financially well positioned as we reduce operating leverage and further strengthen our balance sheet. 

 

"We remain focused on achieving the necessary regulatory approvals to complete the merger with Deutsche Börse, creating a global markets infrastructure group, which we believe will generate significant value and benefits for customers and shareholders."

 

Financial Position

 

Following normal course interim dividend and bond coupon payments, as well as ongoing investment in organic growth initiatives and integration, the Group's financial position is broadly unchanged from that reported at 30 June 2016. As at 30 September, 2016, the Group had committed facility headroom of circa £780 million available for general corporate purposes, having drawn facilities to repay the £250 million Bond due on 7 July 2016.

 

The euro and US dollar both strengthened by 15% 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 c£6.5 million for Q3, while a US$0.05 move would have resulted in a c£3.5 million change.

 

Merger with Deutsche Börse

 

Following receipt of shareholder approvals, the Group has maintained its focus on achieving regulatory consents for the merger with Deutsche Börse.  The European Commission concluded its initial competition review of the merger and announced that it opened a further (Phase II) process on 28 September 2016.  At the same time, the Group announced that, in order to proactively address anti-trust concerns in relation to certain businesses, it intends to explore a potential sale of LCH SA, LCH Group Limited's French-regulated operating subsidiary.  The sale of this business would be conditional on the successful closing of the merger.

 

Current trading

 

The Group is well positioned and continues executing on its successful growth strategy.  All core parts of our business continue to perform well, despite testing market conditions.  Investment remains ongoing on a wide range of initiatives, and the Group has successfully launched services to meet customer demands for innovative and efficient new products to drive future performance.

 

Further information is available from:

 

London Stock Exchange Group plc

Gavin Sullivan - 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 Thursday 20 October.  On the call will be David Warren (CFO) and Paul Froud (Head of Investor Relations).

To access the Telephone conference call dial 0800 694 0257 or +44 (0) 1452 555 566

Conference ID: 9820 7601

Q3 Revenue Summary

 

Revenues for three months and nine months ended 30 September 2016 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 and




Organic and


Three months ended


constant


Nine months ended


constant


30 September


currency


30 September


currency


2016

2015

Variance

variance1


2016

2015

Variance

variance1

Continuing operations:

£m

£m

%

%


£m

£m

%

%

Revenue










Capital Markets

89.6

77.1

16%

8% 


271.2

247.1

10%

5% 

Post Trade Services - CC&G and Monte Titoli

25.2

21.8

16%

(2%)


73.3

68.7

7%

(3%)

Post Trade Services - LCH

89.5

75.8

18%

10% 


256.7

224.9

14%

9% 

Information Services

148.5

131.5

13%

3% 


434.4

387.9

12%

6% 

Technology Services

20.8

19.8

5%

4% 


58.8

58.1

1%

(4%)

Other

2.6

0.5

-

- 


3.7

2.1

-

- 

Total revenue

376.2

326.5

15%

6% 


1,098.1

988.8

11%

5% 











Net treasury income through CCP businesses

35.3

21.2

67%

44% 


91.3

61.5

48%

36% 

Other income

3.1

1.7

-

- 


11.0

4.3

-

-

Total income

414.6

349.4

19%

9% 


1,200.4

1,054.6

14%

8% 

 

1 Organic growth is calculated in respect of businesses owned for at least the full 3 or 9 months in either period and excludes Exactpro, Proquote, Russell Investment Management, SwapMatch and XTF Inc. The Group's principal foreign exchange exposure arises from translating our European based euro and US based USD reporting businesses into sterling.

 

More detailed revenues by segment are provided in tables below:

 

Capital Markets




Organic and





Organic and


Three months ended


constant


Nine months ended


constant


30 September


currency


30 September


currency


2016

2015

Variance

variance1


2016

2015

Variance

variance1

Revenue

£m

£m

%

%


£m

£m

%

%











Primary Markets

21.1

19.1

10%

6%


65.3

64.5

1%

(1%)

Secondary Markets - Equities

40.0

35.1

14%

9%


123.1

109.8

12%

10% 

Secondary Markets - Fixed income, derivatives and other

28.5

22.9

24%

7%


82.8

72.8

14%

4% 

Total revenue

89.6

77.1

16%

8%


271.2

247.1

10%

5% 

 

1 Removal SwapMatch from Capital Markets (acquired Q3 2016)

 

Post Trade Services - CC&G and Monte Titoli

 

Three months ended


Constant


Nine months ended


Constant


30 September


currency


30 September


currency


2016

2015

Variance

variance


2016

2015

Variance

variance


£m

£m

%

%


£m

£m

%

%

Revenue










Clearing

10.0

9.4

6%

(10%)


30.7

29.3

5%

(5%)

Settlement, Custody & other

15.2

12.4

23%

3% 


42.6

39.4

8%

(2%)

Total revenue

25.2

21.8

16%

(2%)


73.3

68.7

7%

(3%)

Net treasury income

11.2

7.7

45%

24% 


32.2

21.0

53%

39% 

Total income

36.4

29.5

23%

5% 


105.5

89.7

18%

7% 

 

LCH









Three months ended


Constant


Nine months ended


Constant


30 September


currency


30 September


currency


2016

2015

Variance

variance


2016

2015

Variance

variance

Revenue

£m

£m

%

%


£m

£m

%

%











OTC - SwapClear, ForexClear & CDSClear

47.6 

39.4

21%

13% 


136.7 

114.7

19% 

14% 

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

28.3 

30.0

0%

(18%)


85.9 

87.9

(2%)

(10%)

Other

13.6 

            6.4

113%

178% 


34.1 

22.3

53% 

65% 

Total revenue

89.5 

75.8

18%

10% 


256.7 

224.9

14% 

9% 

Net treasury income

24.1 

13.5

79%

55% 


59.1 

40.5

46% 

35% 

Other income

2.8 

-

-

-


7.2 




Unrealised gain / (loss)

(1.5)

            0.1

-

-


(1.5)

0.2

- 

- 

Total income

114.9 

89.4

29%

18%


321.5 

265.6

21% 

15% 

 

Information Services





Organic and





Organic and


Three months ended


constant


Nine months ended


constant


30 September


currency


30 September


currency


2016

2015

Variance

variance1


2016

2015

Variance

variance1


£m

£m

%

%


£m

£m

%

%

Revenue










FTSE Russell Indexes

102.1

90.7

13%

0%


295.7

261.9

13%

5%

Real time data

23.3

19.9

17%

12%


67.7

61.8

10%

7%

Other information services

23.1

20.9

11%

6%


71.0

64.2

11%

8%

Total revenue

148.5

131.5

13%

3%


434.4

387.9

12%

6%

 

Note: Continuing operations only (excludes Proquote from 2015)

1 Removal XTF from Other information services (acquired Q4 2015)

 

Technology Services





Organic and





Organic and


Three months ended


constant


Nine months ended


constant


30 September


currency


30 September


currency


2016

2015

Variance

variance1


2016

2015

Variance

variance1


£m

£m

%

%


£m

£m

%

%

MillenniumIT & other technology

20.8

19.8

5%

4%


58.8

58.1

1%

(4%)

 

1 Removal Exactpro from Technology services (acquired Q4 2015)

 

Basis of Preparation

 

Results for the period ended 30 September 2016 have been translated into Sterling using the average monthly exchange rates.  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

9 months ended

Closing rate at


30 September 2016

30 September 2016

30 September 2016

GBP : EUR

1.18

1.25

1.15

GBP : USD

1.31

1.39

1.30






Average rate

Average rate



3 months ended

9 months ended

Closing rate at


30 September 2015

30 September 2015

30 September 2015

GBP : EUR

1.39

1.38

1.35

GBP : USD

1.55

1.53

1.52

 

Appendix - Key performance indicators

 

Capital Markets - Primary Markets




















Three months ended



Nine months ended



30 September

Variance


30 September

Variance


2016


2015

%


2016


2015

%

New Issues










UK Main Market, PSM & SFM

11


13

(15%)


36


60

(40%)

UK AIM

11


14

(21%)


52


46

13% 

Borsa Italiana

5


7

(29%)


13


20

(35%)

Total

27


34

(21%)


101


126

(20%)











Money Raised (£bn)










UK New

0.3


0.8

(63%)


2.2


7.1

(69%)

UK Further

4.0


4.3

(7%)


10.0


17.1

(42%)

Borsa Italiana new and further

0.8


0.4

100% 


4.7


4.4

7% 

Total (£bn)

5.1


5.5

(7%)


16.9


28.6

(41%)

 

Capital Markets - Secondary Markets




















Three months ended



Nine months ended



30 September

Variance


30 September

Variance

Equity

2016


2015

%


2016


2015

%

Totals for period










UK value traded (£bn)

310


311

(0%)


947


965

(2%)

Borsa Italiana (no of trades m)

16.6


17.5

(5%)


57.2


54.6

5% 

Turquoise value traded (€bn)

325


254

28% 


1,085


825

32% 











SETS Yield (basis points)

0.63


0.62

2% 


0.63


0.62

2% 











Average daily










UK value traded (£bn)

4.8


4.8

0% 


5.0


5.1

(2%)

Borsa Italiana (no of trades '000)

255


265

(4%)


298


286

4% 

Turquoise value traded (€bn)

4.9


3.8

29% 


5.6


4.3

30% 











Derivatives (contracts m)










LSE Derivatives

0.9


1.1

(18%)


3.3


3.4

(3%)

IDEM

10.2


11.5

(11%)


35.4


33.6

5% 

Total

11.1


12.6

(12%)


38.7


37.0

5% 











Fixed Income










MTS cash and BondVision (€bn)

982


861

14% 


3,024


2,996

1% 

MTS money markets (€bn term adjusted)

19,305


22,728

(15%)


63,730


67,584

(6%)

 

Post Trade Services - CC&G and Monte Titoli


















Three months ended



Nine months ended



30 September

Variance


30 September

Variance


2016


2015

%


2016


2015

%

CC&G Clearing










Contracts (m)

28.0


30.2

(7%)


96.4


91.7

5% 

Initial margin held (average €bn)

11.7


12.8

(9%)


11.8


12.4

(5%)











Monte Titoli










Settlement instructions (trades m)

9.4


14.0

(33%)


32.0


48.9

(35%)

Custody assets under management (average €trn)

3.17


3.30

(4%)


3.17


3.31

(4%)

 

Post Trade Services - LCH

 


Three months ended



Nine months ended



30 September

Variance


30 September

Variance


2016


2015

%


2016


2015

%











OTC derivatives










SwapClear










IRS notional cleared ($tn)

160


131

22% 


506


392

29% 

SwapClear members

105


114

(8%)


105


114

(8)%

Client trades ('000)

232


182

27% 


693


492

41% 

CDSClear










Notional cleared (€bn)

105.9


38.5

175% 


370.3


104.9

253% 

CDSClear members

12


11

9% 


12


11

9% 

ForexClear










Notional value cleared ($bn)

630


291

116% 


1206


813

48% 

ForexClear members

24


23

4% 


24


23

4% 

Non-OTC










Fixed income - Nominal value (€tn)

17.1


18.5

(8%)


52.1


55.0

(5%)

Listed derivatives (contracts m)

28.5


38.2

(25%)


98.5


110.8

(11%)

Cash equities trades (m)

165.8


139.2

19% 


511.3


410.3

25% 











Average cash collateral (€bn)

68.9


58.8

17% 


63.8


57.1

12% 

 

Information Services






As at



30 September

Variance


2016


2015

%

ETF assets under management benchmarked ($bn)





FTSE

246


206

19% 

Russell Indexes

176


145

21% 

Total

422


351

20% 






Terminals





UK

73,000


75,000

(3%)

Borsa Italiana Professional Terminals

129,000


130,000

(1%)

 

Total Income - Quarterly


CY 2015





CY 2016



£ millions

Q1

Q2

Q3

Q4

CY 2015

Q1

Q2

Q3










Primary Markets

21.4

24.0

19.1

24.3

88.8

22.2

22.0

21.1

Secondary Markets - Equities

38.2

36.5

35.1

33.9

143.7

42.2

40.9

40.0

Secondary Markets - Fixed income, derivatives & other

26.3

23.6

22.9

25.0

97.8

28.0

26.3

28.5

Capital Markets

85.9

84.1

77.1

83.2

330.3

92.4

89.2

89.6










Clearing

10.0

9.8

9.4

8.8

38.0

10.6

10.1

10.0

Settlement, Custody & other

13.4

13.6

12.4

12.4

51.8

12.9

14.5

15.2

Post Trade Services - CC&G and Monte Titoli

23.4

23.4

21.8

21.2

89.8

23.5

24.6

25.2










OTC - SwapClear, ForexClear & CDSClear

36.5

38.8

39.4

42.1

156.8

44.6

44.4

47.6

Non OTC - Fixed income, Cash equities & Listed derivatives

29.0

28.9

30.0

26.6

114.5

28.6

29.1

28.3

Other

8.4

7.5

6.4

8.5

30.8

11.1

9.3

13.6

Post Trade Services - LCH

73.9

75.2

75.8

77.2

302.1

84.3

82.8

89.5










FTSE Russell Indexes

85.0

86.2

90.7

87.0

348.9

96.4

97.1

102.1

Real time data

21.3

20.7

19.9

20.3

82.2

22.7

21.8

23.3

Other information

24.5

23.3

23.1

23.0

93.9

22.4

25.5

23.1

Information Services

130.8

130.2

133.7

130.3

525.0

141.5

144.4

148.5










Technology Services

19.6

18.6

19.8

22.5

80.6

16.2

21.9

20.8










Russell Investment Management (gross)

246.7

251.5

237.4

217.5

953.1




Other

0.8

0.8

0.5

2.4

4.5

1.0

0.1

2.6










Total Revenue

581.1

583.9

566.1

554.3

2,285.4

358.9

363.0

376.2

Net treasury income through CCP:









CC&G

6.8

6.6

7.7

8.2

29.3

10.3

10.7

11.2

LCH

13.4

13.6

13.5

15.9

56.4

17.6

17.4

24.1

Other income

1.7

1.7

2.0

5.0

10.4

0.8

7.1

3.1










Total income

603.0

605.8

589.3

583.4

2,381.5

387.6

398.2

414.6

Russell Investment Management (incl Other Income)

246.7

252.3

237.7

218.5

955.3




Proquote

2.3

2.3

2.2

0.8

7.6




Total income- continuing operations

354.0

351.2

349.4

364.1

1,418.6




 

Note: Minor rounding differences may mean quarterly and other segmental figures may differ slightly


This information is provided by RNS
The company news service from the London Stock Exchange
 
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