Equity Trading And Clearing Boost LSEG Income
Good Q1 performance against unprecedented market backdrop
Good Q1 performance against unprecedented market backdrop
Q1 total income up 13% year-on-year to £615 million, driven by increased equity trading in Capital Markets and higher clearing activity across listed and OTC products leading to higher NTI in Post Trade
Resources focused on ensuring strong operational resilience across the Group’s systemically important market infrastructure platforms and services; Group employees working almost entirely on a remote basis across all locations
Integration planning for Refinitiv transaction progressing well: CFIUS approval received and anti-trust filings prepared in multiple jurisdictions; remain committed to achieving completion in H2 2020
Information Services: revenues up 7% to £215 million – with 8% growth at FTSE Russell. Good growth in both subscription and asset-based revenues, the latter reflecting growth in ETF AUM in prior quarter; ETF AUM fell sharply at the end of Q1, reflecting market turbulence in March
Post Trade: income up 17% to £271 million, with 11% growth in LCH revenue, with strong listed and OTC clearing activity, including record volumes in SwapClear. Good clearing volumes at CC&G drove a 15% revenue increase. Increased clearing activity drove higher cash margin, with consequent stronger NTI, up 39% in LCH and 10% in CC&G
Capital Markets: revenues up 15% to £112 million, principally reflecting higher equity secondary markets activity in London and Milan
Technology Services: revenues unchanged at £14 million
Update on the Refinitiv transaction
The Group continues to make good progress on planning for the integration of Refinitiv. A number of workstreams on business structure and opportunities, including synergy realisation, are well developed, and the Integration Management Office has been expanded to bring additional resource to the Group.
The Group also continues to make progress with merger control, foreign investment and financial regulatory filings. US foreign investment clearance has been received from CFIUS. Merger control clearance has been received from Botswana, Japan, Kenya and Ukraine, and merger control reviews have commenced in several other jurisdictions. As disclosed last month, the European Commission has requested a delay to submission of filings by merger parties generally; the Group continues to work constructively with the European Commission case team and will file as soon as it is possible to do so. The Group is committed to completion of the transaction in H2 2020.
Comment on Q1 and outlook:
LSEG recognises the significant impact of the coronavirus Covid-19 global pandemic on its employees, customers and other stakeholders. Employee health and wellbeing has been a key focus. The vast majority of our employees have been working remotely, and we continue to adapt our technology and working practices to this changing environment. LSEG is in regular contact with public health authorities, governments and stakeholders around the world and will continue to adjust our response as needed.
As a systemically important financial markets infrastructure business, LSEG places a high priority on its responsibility to ensure the orderly functioning of markets and continuity of services for its customers and other stakeholders. During this unprecedented period, the Group has prioritised operational resilience across the Group’s Capital Markets, Information Services and Post Trade businesses.
In light of current circumstances, LSEG regularly assesses the strength of its balance sheet and stress-tests its liquidity positions under various market scenarios. The Group strongly believes it has sufficient cash resources and access to liquidity to maintain continuity of business and has no need to materially adjust any its operations or incur significant additional costs. As at 31 March 2020, the Group had committed facility headroom of over £600 million available for general corporate purposes. Reflecting the strong 2019 results and ongoing financial strength, the Group intends to pay its final dividend in relation to the 2019 financial year, subject to shareholder approval at today’s AGM.
While the Group has performed well in Q1, it is too early to comment specifically on the impact of the coronavirus pandemic on the outlook for LSEG and its customers for the remainder of the year. The Group believes the longer-term drivers of growth in each of its business lines remain intact.
David Schwimmer, CEO said: “The Group has delivered a good financial performance and strong operational resilience during this unprecedented period. We have had a focus on ensuring orderly functioning of markets and continuity of service to customers across our businesses.” “A key priority has been the health and wellbeing of our employees around the world. The vast majority of our colleagues are working remotely as a key element of our business continuity measures. I’ve been impressed by their adaptability, resiliency and commitment to continue to support our customers. Although market conditions are likely to remain challenging in the coming period, we believe the Group is financially strong and has the necessary resources to continue to operate effectively in this environment.”
.@LSEGplc publishes Q1 trading statement – total income up 13% year-on-year to £615 million, driven by increased equity trading in Capital Markets and higher clearing activity across listed and OTC products leading to higher NTI in Post Trade https://t.co/j4xZ3hvP6I— London Stock Exchange Group (@LSEGplc) April 21, 2020
London Stock Exchange Group plc Annual General Meeting Chair’s statement by Don Robert
We are disappointed that, as a result of the global pandemic COVID-19, we are unable to host our shareholders in person at today’s Annual General Meeting. The challenges that we collectively face as a society are unprecedented and we appreciate shareholders’ understanding in light of the current circumstances.
As a systemically important financial markets infrastructure business, London Stock Exchange Group places a high priority on its responsibility to ensure the orderly functioning of markets and continuity of services for its customers and other stakeholders. LSEG has in place robust business continuity arrangements and we continue to prioritise operational resilience across the Group’s Capital Markets, Information Services and Post Trade businesses. Employee health and wellbeing has been a key focus. The vast majority of our employees have been working remotely, and I commend them for their commitment to serving our customers during these unusual times. We are in regular contact with public health authorities, governments and stakeholders around the world and will continue to adjust our response as needed.
The Group delivered another strong performance in 2019, despite another year of macroeconomic and geo-political events that have directly influenced global financial markets. Total income rose 8% and adjusted earnings per share increased 15%. The Board is proposing a final dividend of 49.9 pence per share, resulting in a full year dividend of 70.0 pence per share, up 16%.
We have continued to invest in our business as we grow in scale, while continuing to progress financially, strategically and operationally across our core businesses of Information Services, Post Trade and Capital Markets. Our successful strategy is underpinned by the continuation of our Open Access and customer partnership approach to deliver innovative solutions across the financial markets value chain.
In our Information Services division, FTSE Russell is a key contributor to Group revenues, delivering 10% revenue growth over the course of the year. This included strong growth in subscription revenues, up 12% in 2019, reflecting new sales across a number of indices. The Group’s Post Trade businesses continued to perform well. LCH delivered a strong performance with income up 14% to £756 million. Post Trade – Italy saw income increase by 5% to £152 million. Capital Markets continued to perform well despite macroeconomic headwinds with revenue up 5% to £426 million.
Building on the results from 2019, I am pleased to share our Q1 2020 results, released this morning. Against a challenging market environment, the Group delivered a good performance in the first quarter. Total income rose 13% year-on-year to £615 million, driven by increased equity trading in Capital Markets and higher clearing activity across listed and OTC products leading to higher NTI in Post Trade.
While the Group has performed well in Q1, it is too early to comment specifically on the impact of the coronavirus pandemic on the outlook for LSEG and its customers for the remainder of the year. However, the Group believes the longer-term drivers of growth in each of its business lines remain intact.
On 1 August 2019, LSEG announced the proposed acquisition of Refinitiv. This was the culmination of many months of strategy development, deep consideration and discussion. It is a transformational transaction, strategically and financially. The combined global business will be headquartered and domiciled in the UK with a premium listing in London. The transaction received overwhelming shareholder approval in November, and we continue to make progress in relation to the remaining antitrust, foreign investment and regulatory clearances that the transaction is also conditional upon. We remain committed to closing the transaction during the second half of 2020.
The global transition to a more sustainable economy continues to be a focus across our industry. LSEG has many touch points with stakeholders that put us in a strong position to engage in this discussion and we take our responsibility seriously. Our ability to help facilitate change is demonstrated through the diverse ecosystem of sustainable bonds listed on our markets with issuers from 18 different countries and bonds issued in 17 different currencies. FTSE Russell has also launched an innovative new index providing a forward-looking assessment of the climate risk faced by sovereigns, allowing investors to reduce climate risk and greenhouse gas emissions in their portfolios.
As a global company, we are committed to playing our part, building on our engagement with UK Government initiatives such as the Green Finance Taskforce, which led to the creation of the Green Finance Institute, and the EU’s High Level Expert Group and Technical Expert Group. Both of these groups included representatives from LSEG as part of their work to develop recommendations for the EU’s Green Finance Taxonomy.
The Board seeks to operate to high governance and ethical standards. The Board, along with the executive team, seeks to promote a culture of Group-wide collaboration and customer focus. LSEG has made good progress this year on these efforts. The Board has also engaged directly with employees, with candid feedback provided to Directors through a series of informal meetings, as well as more formal interaction with employee forums, which will continue in the coming year.
Dominic Blakemore joined the Board as a Non-Executive Director, effective 1 January 2020. Following the conclusion of today’s Annual General Meeting, Paul Heiden will step down from the LSEG Board and Dominic will assume the Chair of the Audit Committee from Paul, and Stephen O’Connor will become the Senior Independent Director. I would like to record the Board’s gratitude to Paul Heiden for his significant contribution to LSEG over the last decade during which the Group has delivered significant growth and diversification. His counsel and experience have been invaluable during this period of transformational change.
In October 2019, David Warren, Group Chief Financial Officer informed the Group of his intention to retire from the company and step down from the Board. The Board is grateful for the key role David has played in the successful growth, diversification and global expansion of our business over the last seven years as well as for his leadership when he served as Interim CEO. David will continue in his current role as Group CFO and a member of the Board through the close of the Refinitiv transaction to ensure a smooth transition to his successor. LSEG is undertaking a global search for his replacement, which is being led by the Board’s Nomination Committee.
In March 2020, LSEG also announced that Dr. Ruth Wandhöfer, Non-Executive Director, had stepped down from the Board with immediate effect to pursue new opportunities.
It was a great honour to be asked to serve as Chair of London Stock Exchange Group, an iconic institution with a 300-year history at the heart of global financial markets. I would like to extend my appreciation to Donald Brydon for handing over the reins to a Group that is well positioned strategically and financially.
Since becoming Chair in May 2019, I have been impressed by the calibre and focus of our employees. I’d like to thank them for their dedication and professionalism during what has been a very busy year. I would also like to thank my Board colleagues for their support, challenge and for their commitment.
London Stock Exchange Group is in a position of strength, sitting at the heart of international financial markets, as we look ahead to the many opportunities within our industry. I look forward to working with the Board and the executive team to continue to develop the business for the future.
OCC now provides central counterparty clearing and settlement services to 21 exchanges and trading platforms.
The exchange and Eurex have been extending their investor network in Asia.
Exchanges and CCPs have successfully moved to operate remotely.
Open access was first identified in 2001 as a key element of an integrated EU post-trading landscape.
Clearing of Singapore Overnight Rate Average swaps helps the industry transition from Libor.