Announcement of Preliminary results for year ended 31 March 2014

  • Good financial and operational performance – 10 per cent organic revenue growth with increases across all business segments and contribution from acquisitions, including LCH.Clearnet
  • Reported revenue up 50 per cent at £1,088.3 million (2013: £726.4 million); adjusted total income1 up 42 per cent at £1,213.1 million (2013: £852.9 million)
  • Adjusted operating expenses1 up 65 per cent to £698.4 million, reflecting inclusion of acquisitions, including LCH.Clearnet (2013: £422.7 million); core operating costs1, excluding impact of acquisitions and FX, up 6 per cent, partly reflecting increased cost of sales
  • Increased cost synergies identified – integration with LCH.Clearnet to deliver €60 million (£49 million) of cost reductions in 2015 (significantly ahead of original €23 million target)
  • Adjusted operating profit1 up 20 per cent at £514.7 million (2013: £430.2 million); operating profit up 1 per cent at £353.1 million (2013: £348.4 million)
  • Adjusted profit before tax1 up 17 per cent at £445.9 million (2013: £380.7 million); profit before tax of £284.3 million (2013: £298.9 million), principally reflecting increased acquisition amortisation
  • Adjusted basic EPS1 up 2 per cent at 107.1 pence (2013: 105.3 pence); basic EPS of 63.0 pence (2013: 80.4 pence)
  • Strong cash generation reduced net debt: adjusted EBITDA of 1.9x as at 31 March 2014 (from 2.2x at 30 September 2013)
  • Proposed final dividend up 4.5 per cent to 20.7 pence per share; total dividend for the year increased 4.4 per cent to 30.8 pence per share. The final dividend will be paid on 19 August 2014 to shareholders on the register on 26 July 2014

1 before acquisition amortisation and non-recurring items and excluding unrealised net investment gains/losses at LCH.Clearnet

Chris Gibson-Smith, Chairman, London Stock Exchange Group, said:

“It has been a strong year for the Group. We have further expanded our global business, building best in class capabilities as we grow. We expect the substantial benefits of the LCH.Clearnet transaction to continue to work through over the coming year and the improving economic outlook and evolving regulatory landscape also present further opportunity to develop our business.  We look forward to further growth in the year ahead.”

Commenting on the year, Xavier Rolet, Chief Executive, London Stock Exchange Group said:

“The Group’s expansion in capital markets infrastructure is delivering tangible success.  We have produced a good full year financial performance with increased top line, operating profits and earnings, reflecting both strong organic growth and the benefits from recent additions to the Group.

“We have accelerated our cost saving targets at LCH.Clearnet Group and we see opportunities for growth as the regulatory landscape evolves. I am more optimistic than ever that our truly unique position as the only global open access market infrastructure player, which works in close partnership with its customers across all of our businesses, will position us well for the future.”

Summary financial Results

Organic and

Year ended

constant

31 March

currency

2014

2013

Variance

variance

 

 

£m

£m

%

%

Revenue

 

 

 

Capital Markets

309.5 

267.5 

16% 

12% 

Post Trade Services

98.4 

91.8 

7% 

4% 

LCH.Clearnet

263.0 

- 

- 

- 

Information Services

348.7 

306.3 

14% 

10% 

Technology Services

64.0 

56.1 

14% 

12% 

Other revenue

 

4.7 

4.7 

-

(2%)

Total revenue

1,088.3 

726.4 

50% 

10% 

Net treasury income through CCP business:

CC&G

47.6 

116.7 

(59%)

(61%)

LCH.Clearnet

62.2 

- 

- 

- 

Other income

11.5 

9.8 

17% 

19% 

Total income

 

1,209.6 

852.9 

42%  

0% 

Adjusted   total income excluding unrealised gain / (loss)

1,213.1 

852.9 

42% 

0% 

Operating   expenses

 

(698.4)

(422.7)

65% 

6% 

Adjusted   operating profit1

514.7 

430.2 

20% 

(6%)

Amortisation of purchased intangibles and non-recurring items

(158.1)

(81.8)

93% 

24% 

Operating   profit

 

353.1 

348.4 

1% 

(12%)

Basic   earnings per share (p)

63.0 

80.4 

(22%)

Adjusted   basic earnings per share (p)1

107.1 

105.3 

2% 

Dividend   (p)

30.8 

29.5 

4% 

 

Adjusted basic earnings per share1 of 107.1 pence includes a 4.6 pence benefit from one-time items including a gain from sale of a non-core asset (£6.9 million, 2.2 pence), release of provisions relating to Lehman debtors and exit from a leasehold property (£8.4 million, 2.4 pence).

Adjusted basic earnings per share1 in the prior year, of 105.3 pence, included a 5.4 pence benefit from a one-time £14.6 million tax credit relating to prior years.

1before amortisation of purchased intangibles, non-recurring items and unrealised net investment gains/losses at LCH.Clearnet

Organic growth is calculated in respect of businesses owned for at least 12 months and so excludes LCH.Clearnet, FTSE TMX, GATElab and EuroTLX.

Unless otherwise stated, all figures refer to the year ended 31 March 2014 and comparisons are against the same corresponding period in the previous year

Cost savings and other changes

The Group has identified significant additional cost savings as part of the integration process that commenced following completion of a majority stake in LCH.Clearnet in May 2013.  We have increased the cost synergies from the original €23 million (£19 million1) target, to €60 million (£49 million1) to be achieved in 2015 (from an expected LCH.Clearnet annualised 2013 cost base of €306 million (£251 million1), just prior to last year’s acquisition).  One-time costs to achieve the savings are expected to be €43 million (£35 million1), with €31 million (£26 million) of this included in non-recurring items in the Group’s March 2014 results.

These savings are being achieved through a number of measures, including restructuring of operations, procurement efficiencies, combination of group functions and other headcount reductions.  These saves will more than offset expected cost increases at LCH.Clearnet over the same period, principally from higher depreciation charges from investment in systems and processes required to meet EMIR requirements and other operational needs. The Group will continue to work on measures to improve the operational and cost efficiency of the business.

In April 2014, the SwapClear, ForexClear and CDSClear services’ arrangements were amended (with effect from 1 January 2014) to ensure they met EMIR and other regulatory requirements for clearing houses, as well as recognising the changing economics and increased regulatory capital for running OTC derivatives clearing services. The surplus share arrangements in the SwapClear and ForexClear services have been replaced with revenue share arrangements.  The impact for the period to 31 March 2014, including changes to CDSClear, has been to increase OTC revenues by £14.0 million with a corresponding increase in operating expenses of £10.2 million; this reflects the move to a revenue share and LCH.Clearnet is now recognising in full the assets and their associated amortisation relating to these businesses.  In 2014, it is expected that LCH.Clearnet’s overall share from the three OTC services in aggregate will be over 50 per cent, while SwapClear will be over 60 per cent.  The new arrangements will become increasingly beneficial as the cost base is controlled and the OTC businesses continue to grow, through fee increases for new services and products, geographic expansion and an increased number of customers using the services. 

1 using exchange rate of £1:€1.22

Contacts

London Stock Exchange Group plc

Gavin Sullivan   /  Lucie Holloway

Paul Froud

Media

Investor   Relations

+44 (0) 20 7797   1222

+44 (0) 20 7797   3322

 

Finsbury

Guy Lamming / David Henderson                                                                +44 (0) 207 251 3801

 

Further information

The Group will host a presentation of its Preliminary Results for analysts and shareholders today at 09:30am (BST) at 10 Paternoster Square, London EC4M 7LS. The presentation will be accessible via live webcast, which can be viewed at http://www.lseg.com/investor-relations or listened to on the numbers below:

Participant UK Dial-In Numbers: 0844 493 3800

Participant Std International Dial-In: +44 (0) 1452 555 566

Conference ID # 420 019 16

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

Please view our full financial results here.