London Stock Exchange Group preliminary results for the year ended 31 December 2015

Unless stated otherwise, all figures in the highlights below relate to performance for 12 months to 31 December 2015 and comparisons with the prior 12 month period (unaudited)

  • Continued delivery of successful strategy - Group strongly positioned to make further progress
  • Strong performance from underlying growth in Capital Markets, Information Services including indices, SwapClear and Italian Post Trade operations – and full year contribution from Russell Indexes
  • Total income1 up 72% to £2,381.5 million (2014: £1,381.1 million)
  • Total revenue1 up 78% to £2,285.4 million (2014: £1,283.2 million); revenue up 11% on a continuing operations basis2 and up 15% exc. LME clearing
  • Total operating expenses1 continue to be well controlled, at £1,052.0 million - up 1% on an organic and constant currency basis as the Group invests in growth initiatives
  • Total adjusted operating profit3 up 27% at £709.6 million (2014: £558.0 million); operating profit of £499.9 million (2014: £346.0 million); adjusted profit before tax3 up 31% at £643.4 million (2014: £491.7 million)
  • Adjusted EPS1,3 up 25% at 129.4 pence (2014: 103.3 pence); basic EPS1 of 94.6 pence (2014: 56.5 pence)
  • Proposed final dividend increased to 25.2 pence per share - an implied 20% increase in the full year dividend to 36.0 pence per share – reflecting strong financial position and confidence in further progress
  • Group remains committed to a progressive dividend policy with intention to move towards a 2.5 – 3.0x dividend cover range
  • Good operational performance and new initiatives from our strategy to deliver best in class capabilities, drive global growth and develop our customer partnership approach:

    - Group’s Post Trade operations (in May 2015) highlighted €175-250 million incremental revenues by end 2018 through new products
    - SwapClear provided record compression of US$328 trillion (resulting in estimated regulatory capital reductions of US$25 billion for our customers), strengthened its share of OTC swaps clearing to almost 95% in the United States and is preparing to launch new portfolio margining service by using its IRD liquidity pool, the world’s largest
    - CDSClear growing and ForexClear service further developed
    - Development of CurveGlobal listed derivatives trading venue, in partnership with customers
    - Group’s Information Services operations (in November 2015) disclosed expected double-digit revenue growth from its indexes business, through multiple initiatives, including new future and options contracts on FTSE Russell Indexes agreed in year with CBOE and CME

  • Further cost efficiencies to come with FTSE Russell integration benefits on track; an additional €40 million of cost synergies identified at LCH.Clearnet (May 2015), and further long term efficiencies as IT platforms are upgraded
  • Agreed sale of Russell Investment Management for US$1,150 million with proceeds used to repay debt; completion on track for H1 2016
  • In February 2016, the Group confirmed that it is in detailed discussions with Deutsche Börse regarding a potential merger of equals to form a global market infrastructure group with significant benefits for our customers and shareholders

1 revenue, total income, operating expenses and EPS include both continuing and discontinued operations and excludes unrealised gains and losses for 2014 at LCH.Clearnet

2 continuing operations exclude businesses classified as disposal group, primarily being Russell Investment Management

3 before amortisation of purchased intangible assets and non-recurring items

Organic growth is calculated in respect of businesses owned for at least 12 months in either period and so excludes Bonds.com, Proquote, Exactpro, MTS Indices and Frank Russell Company. 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 for the year and recent developments, Xavier Rolet, Group Chief Executive, said:

"The Group has produced another strong financial performance and continues to make excellent progress executing our strategy to be a leader in global markets infrastructure. We have delivered underlying growth in each of our business areas and maintained good cost control. We have further strengthened the Group through integrating recent acquisitions and developing innovative new products.

"FTSE Russell, our global indexes business has shown strong growth and our integration savings remain firmly on track. LCH.Clearnet has delivered another good performance in its OTC clearing services, and its new portfolio margining service, LCH Spider will launch shortly. Across all of our businesses, we are well positioned with a number of growth opportunities delivering significant efficiencies and services on an open access basis to customers globally.  

"We have recently confirmed that we are in detailed discussions with Deutsche Börse regarding a potential merger of equals. This represents a compelling opportunity to strengthen each other in an industry-defining combination, by creating a global market infrastructure group with significant benefits for our customers and shareholders."

Financial Summary

Unless otherwise stated, all figures below refer to the year ended 31 December 2015. Comparative figures are for the year ended 31 December 2014 (unaudited). Variance is also provided on an organic and constant currency basis. Adjustments have been made to include discontinued operations in the tables and narrative below.


Organic and



Twelve months ended



constant



31 December



currency



2015



2014



Variance



variance1



 



£m



£m



%



%



Revenue



 



 



 



Capital Markets 1



330.3


 


333.2


 


(1%)



3%


 


Post Trade Services - CC&G and Monte Titoli



89.8


 


96.5


 


(7%)



3%


 


Post Trade Services - LCH.Clearnet



302.1


 


329.4


 


(8%)



(6%)



Information Services 1



525.0


 


373.0


 


41%


 


5%


 


Technology Services 1



80.6


 


66.0


 


22%


 


20%


 


Russell Investment Management 1



953.1


 


79.7


 


-


 


-



Other revenue



4.5


 


5.4


 


(17%)



(15%)



Total revenue



2,285.4


 


1,283.2


 


78%


 


2%


 


Net treasury income through CCP business



85.7


 


92.6


 


(7%)



(1%)



Other income



10.4


 


5.3


 


96%


 


100%


 


Total income



2,381.5


 


1,381.1


 


72%


 


2%


 


Cost of sales



(620.4)



(120.9)



413%


 


38%


 


Gross profit



1,761.1


 


1,260.2


 


40%



1%


 


Operating expenses



(1,052.0)



(702.3)



50%


 


1%


 


Share of gain after tax of associate



0.5


 


0.1


 


-


 


Adjusted operating profit 2



709.6


 


558.0


 


27%


 


(1%)



Amortisation of purchased intangibles and non-recurring items



(210.2)



(211.5)



(1%)



22%


 


LCH Clearnet unrealised loss



-


 


(0.5)



Gain on disposal of assets held for sale



0.5


 


-


 


Operating profit



499.9


 


346.0


 


44%


 


4%


 


Basic earnings per share (p)



94.6


 


56.5


 


67%


 


Adjusted basic earnings per share (p) 2



129.4


 


103.3


 


25%


 


Dividend per share (p) 3



36.0


 


22.5


 


20%


 

1 Organic growth is calculated in respect of businesses owned for at least 12 months in either period and so excludes Bonds.com, MTS Indices, Proquote, Frank Russell Company and Exactpro. The Group’s principal foreign exchange exposure arises from translating our European based euro and US based dollar reporting businesses into sterling.

2 before amortisation and impairment of purchased intangible assets and goodwill and non-recurring items

3 growth rate calculated compared to 2014 dividend for period April - December 2014 pro rata to 12 months

Unless otherwise stated, all figures refer to the 12 months ended 31 December 2015 and comparisons are against the same corresponding period in the previous year

Post period end

On 23 February 2016, the Board of LSEG and the Management Board of Deutsche Börse confirmed that they are in detailed discussions about a potential merger of equals, with the new Combined Group to be a UK plc domiciled in London.

The Boards believe that the potential merger would represent a compelling opportunity for both companies to strengthen each other in an industry-defining combination, creating a leading European-based global markets infrastructure group.  The combination of LSE and Deutsche Börse’s complementary growth strategies, products, services and geographic footprint would be expected to deliver an enhanced ability to provide a full service offering to customers on a global basis.  LSEG and Deutsche Börse believe that the potential merger would offer the prospect of enhanced growth, significant customer benefits including cross-margining between listed and OTC derivatives clearing (subject to regulatory approvals), as well as substantial revenue and cost synergies and increased shareholder value.  All key businesses of LSEG and Deutsche Börse would continue to operate under their current brand names.  The existing regulatory framework of all regulated entities within the Combined Group would remain unchanged, subject to customary and final regulatory approvals.

Discussions between the parties remain ongoing regarding the other terms and conditions of the potential merger. There can be no certainty that any transaction will occur.  Any transaction would be subject to regulatory approval, LSEG shareholders’ approval and Deutsche Börse shareholders’ acceptance, as well as other customary conditions.

Contacts:

London Stock Exchange Group plc


Gavin Sullivan


Paul Froud



Media


Investor Relations



+44 (0) 20 7797 1222


+44 (0) 20 7797 3322



Finsbury



Guy Lamming / Michael Turner



Corporate Brokers



Kunal Gandhi - Barclays



Oliver Hearsey - RBC Capital Markets




 


+44 (0) 207 251 3801



 


 


+44 (0) 20 7623 2323



+44 (0) 20 7653 4000



 


Further information:

The Group will host a conference call on its Preliminary Results for analysts and institutional shareholders today at 09:30am (GMT). On the call will be Xavier Rolet (CEO), David Warren (CFO) and Paul Froud (Head of Investor Relations).

Participant UK Dial-In Numbers: 0800 694 0257
Participant Std International Dial-In: +44 (0) 1452 555 566
Conference ID # 5470 2878

Presentation slides can be viewed at
http://www.lseg.com/investor-relations

For further information, please call the Group’s Investor Relations team on +44 (0) 20 7797 3322.

The information in the preliminary announcement of the results for the year ended 31 December 2015, which was approved by the Board of Directors on 4 March 2016, does not constitute statutory accounts as defined in Section 435 of the UK Companies Act 2006. The financial statements for the 9 month period ended 31 December 2014 were filed with the Registrar of Companies, and the audit report was unqualified and contained no statements in respect of Sections 498 (2) and 498 (3) of the UK Companies Act 2006. The financial statements for the year ended 31 December 2015 will be filed with the Registrar of Companies in due course.

In accordance with the Listing Rules of the UK Listing Authority, these preliminary results have been agreed with the Company’s auditors, Ernst &Young LLP, and the Directors have not been made aware of any likely modification to the auditor’s report to be included in the Group’s Annual Report and Accounts for the year ended 31 December 2015.

The preliminary results have been prepared on a basis consistent with the accounting policies set out in the Group’s Annual Report and Accounts for the year ended 31 December 2015.