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21 Oct 2022 07:00
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, revenues 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 | 9 | 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: strong 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 | 4 |
Depreciation | 0 |
Operating profit | 3 |
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 rate9 months ended30-Sep-22 | Closing rate at30-Sep-22 | Average rate9 months ended30-Sep-21 | Closing rate at30-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 | 1,114 | 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 | 5 | 10 | 9 | 10 | 34 | 7 | 5 | 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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