LSEG Continues Revenue Growth08.05.2022
David Schwimmer, CEO said:
“LSEG has delivered a strong first half performance with continued revenue growth across our businesses. We are managing costs well and we continue to make progress on achievement of synergies.
“We provide solutions solving critical issues for our customers, with a high proportion of recurring subscription revenues and structurally growing transactional revenues that benefit from volatility. Our cash generation is allowing us to actively deploy capital across organic and inorganic investments, grow our dividend and commence a share buy-back programme, driving further value for our shareholders. We are successfully executing on our strategy, have good momentum going into the second half and our targets remain unchanged.”
David Schwimmer, CEO, @LSEGplc said: “LSEG has delivered a strong first half performance with continued revenue growth across our businesses. We are managing costs well and we continue to make progress on achievement of synergies.” https://t.co/p8eYwWt96v pic.twitter.com/Wkbc8Ob48q
— LSEG (London Stock Exchange Group) (@LSEGplc) August 5, 2022
H1 2022 highlights – Execution on strategy driving strong financial performance
Note: Unless otherwise stated, variances refer to growth rates on a constant currency basis, with the comparator, H1 2021, on a pro-forma basis which also excludes the impact of a deferred revenue accounting adjustment1.
- Strong progress in H1 across all divisions, and momentum continuing into H2
- Continued delivery on revenue and cost synergies; all targets unchanged
- Successfully executing on organic and inorganic investment opportunities to drive growth, build a more agile and efficient business and enhance our customer offering
- Well positioned for the current environment; providing high value solutions for customers’ critical needs
- Launching £750 million share buy-back over 12 months with the first tranche to commence immediately
- Strong income growth across all divisions, with pro-forma total income (excluding recoveries) up 6.2%; up 7.0% adjusting for Ukraine and Russia conflict impact2
- ASV growth metric on a like-for-like basis continues to improve, up 5.4% at the end of H1 (Q1: 4.9%); improved retention and new sales driving the increase
- Pro-forma adjusted operating expense increase of 4.3% reflects lower phasing of costs in H1 2021; cost guidance for low-single digit growth in 2022 maintained despite inflationary backdrop
- Adjusted EBITDA margin of 48.8%3; on track to deliver margin target of at least 50% by end of 2023
- Pro-forma AEPS up 21% to 167.4p
- Robust cash generation in H1 and completion of two acquisitions – GDC and MayStreet; Quantile and TORA expected to complete in H2
- Leverage is inside our 1-2x target range within 18 months of the Refinitiv acquisition
- Interim dividend up 27% to 31.7 pence per share
— LSEG (London Stock Exchange Group) (@LSEGplc) August 5, 2022
H1 2022 Statutory results highlights
Total Income grew by £717 million to £3,735 million. This increase is partly due to the additional month of contribution in H1 2022 compared with H1 2021, associated with the Refinitiv acquisition, which completed on 29 January 2021.
- Data & Analytics: revenues up £482 million to £2,354 million. Each business across the division performed well, with good momentum continuing into H2. £292 million of this increase is due to the additional month of contribution in H1 2022 compared with H1 2021, associated with the acquisition of Refinitiv. £85 million was driven by broad based growth in subscription revenues through new sales, strong customer retention and price increases, partially offset by the impact of the Ukraine / Russia conflict. Other factors, which included the strengthening USD rate vs GBP offset by the deferred revenue accounting adjustment in H1 2021, contributed £85 million in the period.
- Capital Markets: revenues up £181 million to £720 million. Each of the underlying asset classes have seen good growth in H1 2022. £57 million of this increase is due to the additional month of contribution from our FX venues and Tradeweb. Other factors such as the strengthening of USD vs GBP contributed a further £21 million.
- Post Trade: total income up £37 million to £483 million. Growth has primarily been driven by a strong performance in OTC Derivatives as we support customers to manage risk in an uncertain rate environment and in Net Treasury Income and Non-Cash Collateral, which was the result of high cash and non-cash collateral balances. Overall the FX impact was neutral.
H1 2022 Pro-forma highlights
Total Income (excluding recoveries) grew 6.2% at constant currency; up 7.0% excluding Ukraine / Russia conflict impacts.
Data & Analytics: revenues up 4.0%; up 5.0% excluding Ukraine / Russia conflict impacts
- Trading & Banking Solutions down 1.1%; but grew 0.7% excluding Ukraine / Russia conflict impacts – Momentum continues with underlying revenue growth and improved retention. Trading showed growth in Q2 for the first time in many years when excluding Ukraine / Russia. Further progress in the rollout of Workspace in Banking
- Enterprise Data Solutions up 6.3% – Improved retention and sales growth partly offset by business lost through Ukraine / Russia conflict. Data demand continues to grow as customers move more investment strategies to a “big data focus”. MayStreet acquisition completed at the end of May, enhances the breadth of our low-latency offering
- Investment Solutions up 8.0% – Benchmark, Indices and Analytics growth at FTSE Russell continues strongly, up 10.4% with 15 new ESG products through our revenue synergy programme, more than 2021’s total number of products launched. Asset-based revenues rose 8.0% with strong growth in Q1 but broadly flat in Q2 as AUM declined
- Wealth Solutions up 2.3% – Good net sales and retention, offsetting Ukraine / Russia conflict cancellations. Performance excludes the contribution from the low growth, non-core BETA business moved to discontinued operations; divestment completed on 1 July
- Customer & Third-Party Risk Solutions up 7.3% – Double-digit organic growth continued in H1. Strong performance at World-Check. GDC acquisition completed at the end of May, broadening our capability in the digital identity and anti-fraud sector
Capital Markets: revenues up 12.9%; up 13.4% excluding Ukraine / Russia conflict impacts
- Equities up 7.8% – Higher market capitalisation of listed companies at the end of last year, helped drive annual fees revenue, partly offset by reduction in new issues in challenging primary market conditions. Strong secondary market activity driven by market volatility but with lower average yield
- FX up 6.1% – Strong growth at FXall with broadly flat performance at Matching. Announced plans to launch NDF Matching in Singapore, supporting strong demand from Asia markets. Modernising our FX venue technology by re-platforming onto LSEG technology
- Fixed Income, Derivatives & Other up 16.5% – Strong performance at Tradeweb in H11, with double-digit revenue growth across Rates, Credit and Equity asset classes. Tradeweb and FXall collaboration announced to develop hedging workflow solutions for emerging market products
Post Trade: total income up 8.5%; up 8.6% excluding Ukraine / Russia conflict impacts
- OTC Derivatives up 12.0% – Strong activity across SwapClear and SwapAgent as we support customers to manage risk in an uncertain rate environment. Record volumes at ForexClear and CDSClear
- Securities & Reporting up 1.9% – Good volume growth at RepoClear and EquityClear, with the benefit limited by increased competition. Value at Risk (VAR) model introduced at LCH SA RepoClear to improve margin efficiency for members
- Non-Cash Collateral up 6.2% – Driven by higher non-cash collateral balances due to strong volumes
- Net Treasury Income up 11.3% – Growth driven by increased cash collateral balances, unlikely to remain at current level and expected to reduce towards normalised levels across the rest of 2022
1 Tradeweb H1 2022 results were released on 3 August 2022 and provided more detailed commentary on performance
The new futures will help customers manage sovereign debt risk in Europe.
HKEX launched its first A-shares index futures contract in October 2021.
Crypto derivatives need central clearing to become a major asset class.
Euro-denominated cryptocurrencies are the second highest traded fiat behind the U.S. dollar.
Exchange group reported its best second quarter, following a record first quarter.