LSEG plc preliminary results for the year ended 31 December 2016

Unless stated otherwise, all figures in the highlights below refer to continuing operations1 for 12 months to 31 December 2016 and comparisons with the prior 12 month period on the same basis.

  • Continued execution against strategic objectives and investment drives multiple growth opportunities across each of our market-leading businesses
  • Strong financial performance across all business areas with good control of underlying costs – positioned for delivering strong operational leverage
  • Successful strategy based on customer partnership, innovation and an Open Access model makes the Group strongly positioned to make further progress as a well diversified financial markets infrastructure business with a global footprint

2016 Highlights

  • Total income up 17% to £1,657.1 million (2015: £1,418.6 million)
  • Total revenue up 14% to £1,515.6 million (2015: £1,324.7 million)
  • Adjusted operating expenses2 continue to be well controlled, at £791.6 million - up 4% on an organic and constant currency basis as the Group invests in growth and efficiency projects
  • FTSE Russell delivered strong growth and integration synergies of US$78 million p.a. are ahead of schedule; on track to reach €40 million of annual cost savings at LCH by end of 2017
  • Adjusted operating profit2 up 17% at £685.8 million (2015: £584.7 million); operating profit of £426.8 million (2015: £404.4 million); adjusted profit before tax2 up 21% at £623.1 million (2015: £516.4 million)
  • Adjusted EPS2 up 21% at 124.7 pence (2015: 103.4 pence); basic EPSof 63.8 pence (2015: 74.8 pence)
  • Proposed final dividend increased to 31.2 pence per share - a 20% increase in the full year dividend to 43.2 pence per share – reflecting the strong outlook for the Group
  • New initiatives and achievements in the year include:
    - SwapClear saw a 25% increase in clearing volumes at over US$665 trillion notional and provided record compression of US$384 trillion; new portfolio margining service, LCH Spider, launched on an open access basis
    - CurveGlobal, a new listed interest rate futures platform, successfully launched in partnership with major dealer banks and CBOE – onboarding a growing number of clients and increased trading flow
    - Continued volume growth at CDSClear and ForexClear – driven by regulatory changes
    - FTSE Russell launched a Low Carbon Economy data model and accompanying Green Revenue Index Series
    - Announced acquisition of Mergent Inc., a leading US provider of business and financial information on companies, to further build the Information Services portfolio
    - ELITE, our platform for high growth companies, now operational in 25 countries with nearly 500 companies
  • Sale of Russell Investment Management successfully completed, for gross proceeds of US$1,150 million – resulting in an implied multiple of 18x EBITDA (pre synergies) for the retained, high growth Russell Indices business, now integrated with FTSE
  • The Group continues to work hard on its proposed merger with Deutsche Börse AG – awaiting outcome of the European Commission Phase II process on or before 3 April 2017

1 continuing operations exclude businesses sold, being Russell Investment Management and Proquote.

2 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 Exactpro, Proquote, Russell Investment Management, SwapMatch and XTF. The Group’s principal foreign exchange exposure arises from translating our European-based Euro and US based US Dollar reporting businesses into Sterling.

Commenting on performance for the year, Xavier Rolet, Group Chief Executive, said:

“The Group continues to execute against its strategic objectives, driving both short and longer term growth through organic investment and selective inorganic opportunities. This has resulted in another year of strong financial performance, with continued revenue growth, control of underlying expenses and a 21% increase in adjusted earnings per share.  Each of our business areas delivered year-on-year growth, highlighting the strength in the diversity of our business, launching new products such as LCH Spider, new services in partnership with customers such as CurveGlobal and Turquoise Plato, and expanding our global footprint with acquisitions such as Mergent Inc. 

“FTSE Russell produced another good top line performance and the integration savings are now mostly achieved, ahead of schedule.  The LCH OTC clearing services performed well, particularly SwapClear and its compression services.   We remain well positioned across all our businesses, underpinned by our Open Access approach and strong customer partnerships.”  

Financial Summary

Unless otherwise stated, all figures below refer to continuing operations for the year ended 31 December 2016.  Comparative figures are for continuing operations for the year ended 31 December 2015.  Variance is also provided on an organic and constant currency basis.

Organic and

Twelve months ended

constant

31 December

currency

2016

2015

Variance

variance1

Continuing operations

£m

£m

%

%

Revenue

 

 

 

Capital Markets 1

368.3 

330.3 

12% 

6% 

Post Trade Services - CC&G and Monte Titoli

103.7 

89.8 

15% 

3% 

Post Trade Services - LCH

356.5 

302.1 

18% 

10% 

Information Services 1

594.7 

517.4 

15% 

7% 

Technology Services 1

88.3 

80.6 

10% 

4% 

Other revenue

4.1 

4.5 

- 

- 

Total revenue

1,515.6 

1,324.7 

14% 

7% 

Net treasury income through CCP business

124.8 

85.7 

46% 

31% 

Other income

16.7 

8.2 

- 

- 

Total income

1,657.1 

1,418.6 

17% 

9% 

Cost of sales

(174.8)

(125.5)

39% 

30% 

Gross profit

1,482.3 

1,293.1 

15% 

7% 

Operating expenses

(791.6)

(708.4)

12% 

4% 

Share of loss after tax of associate

(4.9)

- 

- 

- 

Adjusted operating profit 2

685.8 

584.7 

17% 

10% 

Amortisation of purchased intangible assets and non-recurring items

(259.0)

(180.3)

44% 

33% 

Operating profit

426.8 

404.4 

6% 

(1%)

Earnings per share

Basic earnings per share (p)

63.8 

74.8 

(15%)

Adjusted basic earnings per share (p) 2

124.7 

103.4 

21% 

Dividend per share (p)

43.2 

36.0 

20% 

1Organic growth is calculated in respect of businesses owned for at least 12 months in either period and so excludes Exactpro, Proquote, Russell Investment Management, SwapMatch and XTF. 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 of purchased intangible assets and non-recurring items.

Unless otherwise stated, all figures refer to the 12 months ended 31 December 2016 and comparisons are against the same corresponding period in the previous year.

Contacts:

London Stock Exchange Group plc

Gavin Sullivan
Paul Froud

Media
Investor Relations

+44 (0) 20 7797 1222
+44 (0) 20 7797 3322

 

 Corporate Brokers
Kunal Gandhi - Barclays
Oliver Hearsey - RBC Capital Markets

+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 09:00am (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 # 7561 4680

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 2016, which was approved by the Board of Directors on 2 March 2017, does not constitute statutory accounts as defined in Section 435 of the UK Companies Act 2006. The financial statements for the year ended 31 December 2015 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 2016 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 2016.

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 2016.

To view the fulll RNS please visit our Investor Relations page - http://www.lseg.com/investor-relations