2022 Preliminary Results
2 March 2023
David Schwimmer, CEO said:
“LSEG has had a strong year, successfully integrating Refinitiv and significantly improving its performance, while also delivering strong results in our Capital Markets and Post Trade businesses. The resilience of our business model and the quality of our earnings, diversified by customer, geography, product and asset class, and over 70% subscription-based, are becoming increasingly clear.
“Our strategy is working. We are an increasingly important strategic partner to customers across the financial markets value chain, and that is translating into growth. We continue to invest in new products and services, and have completed four highly complementary acquisitions to further strengthen our offer. In addition to our existing share buyback, we are today announcing plans to seek shareholder approval for a buyback directed towards the Blackstone consortium’s stake, which will benefit all shareholders.
“We are shifting from integration to transformation. Our strategic partnership with Microsoft, as well as the investments we are making in our market-leading infrastructure and venues, will create an even stronger platform for long-term sustainable growth.”
2022 highlights - Broad-based growth and strong execution
Note: all growth rates are expressed on a pro-forma constant currency basis, excluding the impact of the deferred revenue adjustment, unless otherwise stated
- Full-year Total Income (excl. recoveries) up 5.7%, and up 6.6% excluding the impact of the Russia/Ukraine war; up 19.6% on a reported basis
- Broad-based growth: Data & Analytics +4.2% (+5.3% ex Russia/Ukraine), Capital Markets +9.8%, Post Trade +7.5%
- Accelerating subscription revenue: Annual Subscription Value (ASV) up 6.2% (ex Russia/Ukraine) at December 2022; further progress expected in 2023
- Good cost control: opex +3.4% excluding the impact of acquisitions during the year
- Improving profitability: Adjusted EBITDA growth 6.0%, margin flat year-on-year, or up 110 basis points like-for-like
- Basic earnings per share growth +65.3% on a reported basis; AEPS +16.7% to 317.8 pence
- Continued strong cash generation: equity free cash flow (before dividends) £1.7 billion
- Strong and consistent execution on Refinitiv integration: Trading & Banking returned to growth; target 2022 runrate synergies delivered for both revenue and costs; runrate revenue synergy target raised from £225 million to £350-400 million by 2025
- From integration to transformation: strategic partnership with Microsoft for next generation of Workspace, innovative new solutions in modelling and analytics, and data platform in the cloud
- Active capital allocation towards growth: disposal of low-growth BETA business; four acquisitions completed in higher-growth areas, highly complementary to existing customer offering
- Significant shareholder returns: £300 million of £750 million buyback executed in 2022, balance to be completed by July 2023; full-year dividend +12.6% to 107.0 pence
LSEG 2022 Preliminary Results presentation
LSEG hosted a presentation and conference call for its 2022 Preliminary Results for analysts and investors on 2 March at 10:00am (UK time). The presentation was hosted by David Schwimmer (Chief Executive Officer), Anna Manz (Chief Financial Officer) and Peregrine Riviere (Group Head of Investor Relations). View a replay below.
(upbeat music)- Are we good to go here?All set. Great.Terrific.All right,well good morning everyone,and welcome to our 2022 financial results.It is great to be giving this presentation in-person.Great to see so many of you here in our offices,and also great to have those of you joining us onlineor on the call.2022 was a year of strong, broad-based growth for LSEG,our strategy's working,and it's driving better performance and higher growth.Our Data & Analytics division grew by more than 5%.Trading & Banking grew in each quarter of the year.The first time that's happened in roughly a decade.We also delivered great results in our Capital Marketsand Post Trade businesses.With the success of the definitive integration,we are bringing forward delivery of our cost synergy programby around two years and we're significantlyincreasing our revenue synergy target.We continue to invest to improve our customer offering.In particular, our partnership with Microsoftwill revolutionize workflowfor financial market participants,introducing new products and making it easier for usersto gain insights and interact with our data.We generate a lot of cashand we're deploying it to the benefit of all stakeholders,targeting over 1 billion pounds of share buybacksover the next 12 months or so.We've started the year in a strong positionand we are not stopping here.As we transition from integration to transformation,we are building an even stronger platformfor long-term growth.We're investing in our market leading infrastructureand venues the benefits of which will become more visibleover the course of this year and beyond.I'll give more detail on this a little bit later.First though, I will hand over to Annato take you through our 2022 financial performance.- Thanks David.It's just great to be here together in-person today.I'm going to talk through our 2022 performance.We continue to make good progress towards our targets,delivering strong, broad-based growth and margin expansion.Cash generation is also strong,funding investment in our business and shareholder returns.2023 has started well and we expect growthand income of between 6-8% this year.We continue to deliver on all of our key targetsin what's been a challenging external environment.This reflects the strength of our business model,the value to our customers of the services that we provide,and good execution against our plan.Growth and income was at the upper end of our rangeand a slight acceleration on the 6.1% we reported in 2021.Underlying margins continue to expandand we're over-delivering on the revenueat the Refinitiv acquisition synergies.Today we are significantly raising our targetfor revenue synergies to between 350 and 400 million.David will give you a bit more on this in a minute.We're also delivering the bulk of our cost synergiestwo years earlier than targeted.On a reported basis, we benefited from an FX tailwindand an extra month's ownership of Refinitiv.On this basis, total income of £7.4 billion was up 20%.Adjusted operating profit was up 20%,and also EPS grew 17%.For the rest of this presentation,I'm going to focus on performer constant currency growthas it gives the best insightinto the performance of our business.All of our divisions are performing well,which I'm gonna run through over the next few slides.Data & Analytics was up 5.3%,excluding the impact of the Ukraine/Russia conflict.That's the second year of growth over 5%.Capital Markets and Post Trade also grew stronglyup 10% and 8% respectively.These are structurally growing businesses,which also benefited from some market volatility last year.In Data & Analytics, trading and banking,Enterprise data and Investment solutions all grew well,and I'm gonna come back to this in a minute.Growth in Wealth solutions accelerateddriven by the demand for data feedsand other digital solutions needed by wealth managers.The primary driver of the 10% growth in customerand third party risk is World Check.World Check is the industry leading solutionin a fast growing market.Returning to our three biggest Data & Analytics businessesand these make up over half of the group.For the first time in many years,Trading & Banking delivered four consecutive quartersof positive underlying growth.A more focused and structured sales approachmeans we're better understanding our customersand acting on their feedback, driving up retention,and we're also continuing to invest.The acquisition of TORA enhances our offeringby adding important order,execution and management capability.Enterprise data has accelerated its growth,gaining share in both real time and non-real time data.Investment in content and capabilitiesover the last two years has improvedwhat was already a strong offering,and we're driving increasing benefitsfrom the linkage with FTSE Russell.The acquisition of MayStreet has also added to growth.Meeting the customer demandfor low latency real-time data.In our Investment solutions business,we've increased the pace of product developmentlaunching 33% more products last year,and an environment of substantial customer demand,that drove high single digit growthin recurring subscriptions.Our asset based revenues were broadly flatwith inflows into passive funds using our indicesoffset by the market decline in asset prices.The quality of growth in Data & Analyticscontinues to improve.We've made more progress on subscription revenuesin the fourth quarter,ending the year with ASV growth of 6.2%,up more than three percentage points from acquisition.And this acceleration has been driven byall the improvements that I've just talked about.Capital Markets grew 10%.Our equities business delivered growthagainst a backdrop of limited new issuanceand relatively flat volumes.We continue to drive change in our FX trading venues.New functionality is supporting growth in FXall,strengthening its positionas the leading dealer-to-client venue globally.Our dealer-to-dealer Matching venuereturned to growth in the second half.The first time this business has grown in many years.The largest driver of growth in Capital Marketswas Tradeweb, which continues to innovateas markets electronify,growing its share of credit and ETF tradingand expanding into new geographies.Turning to Post Trade.2022 was a record year for trading activity on SwapClear,and that was the primary driver of the 10% growthin OTC derivative revenues,and the 19% increase in net treasury income.As banks and other financial institutionslook for more efficient ways to manage their balance sheet,demand for uncleared derivative solutions is increasing.The acquisition of Quantile and soon Acadia,round out what's already a compelling offering.We see a long runway for growth hereand David will come back to this as well in a few minutes.We saw a small decline in our securitiesand reporting revenues.Price competition and cash equity clearingis the key driver,and it was offset by good growth in RepoClear.Let's shift now to marginand cost over the next few slides.Starting with EBITDA margins,you can see the FX and the impactof the Ukraine/Russian conflict were a drag on margin.We also acquired four early stage growth companies,which in the short term lower our margins slightly.But on an underlying basis margin expansionwas 110 basis points,and this reflects the strong top line growthand great progress on costsas you can see on the next slide.Organic costs grew by 3.4%with cost growth slowing in the second half.This is a good result in a period of double digit inflation.We continue to invest in transforming the businessand driving further growth,and you can see from the chart that those investmentsare being offset by the actionsthat we're taking to increase efficiency,including the £133 million of cost synergies.A year ago I told you we'd identifiedan additional £50 million of cost synergiestaking our total to at least £400 million.We continue to execute strongly,and you can see this through the metrics on the slide.Following this progress,we expect to deliver the significant majorityof these cost synergiesroughly two years ahead of the original target.So by the end of 2023 rather than 2025.I think it's important to highlightthe reconciling items between adjustedand reported operating profit.These are all as expectedand largely relate to the Refinitiv acquisition.The key message here is that the cost to achieveour synergy targets continue to be in line with our plans.You can also see the gain on a property disposalthat I spoke about a year ago,and various costs related to acquisition activity.Our business is highly cash generativewith £3.3 billion of operating cash flow last year.The Capex figure here is the cash costof both business as usual Capex and integration Capex.If you remember, the equivalent figure in 2021was £662 million.So taking the two years together we're on track,both with our business as usual capital investmentand the cost required to achieve our synergies.More importantly, our pace of executionon our major programs is increasingas we get better at execution and they too are all on track.Equity free cash flow was also substantialat £1.7 billion before dividends.And over the next couple of slidesI'll look at how we're deploying this capital.Last year we allocated roughly equal amountsof our cash flow to organic investment,inorganic investment and shareholder returns.Capex reflects the transformationwe are driving in our business,investing in platforms future growthand extracting acquisition synergies.In M&A we've acquired four high growth businesses last year.And each case we've added an important capabilityand will accelerate their growthwith our customer relationships and our technology platform.We also continue to return capital to shareholdersconsistent with our capital allocation framework.This slide highlights our shareholder returns.Our total dividend is up 13%,consistent with our progressive dividend policyand strong earnings growth.We expect to return over a billionvia share buybacks over the next 12 months or so.Let me talk you through that.We returned £300 millionof the current £700 million share buyback program last year.We expect to return the balance of this program£450 million by July.Today we also announced our intentionto return a further £750 millionvia directed buyback starting in the second half.The lockup covering the first triche of sharesowned by the former Refinitiv shareholders recently ended,and it makes sense to target our excess capitaldirectly at the overhang to help supportan orderly sell downand that benefits all of our shareholders.This slide summarizes everything you've heard.We're confident in the growth of the business.We expect total income to grow between 6-8%in constant currency terms in 2023,underpinned by strong growth in recurring revenuesin our Data & Analytics business.We expect another good year in Capital Marketsand Post Trade,but the growth range reflectsa degree of market volatility that we can't predict.We expect to deliver this growthat margins consistent with the current market expectationsand that's an EBITDA marginof around 48% on a reported basis.This reflects continued expansion of underlying marginsoffset by the impact of the investmentin the Microsoft partnership and M&A.The 50% exit rate, 2023 margin guidance still stands.So to wrap up.The change we're driving in our businessputs us in a strong position for further growth this year.A further step up in our revenue synergy target,and an additional share buyback.And I'll now hand back to Davidto get into how we're transforming the business.- Thank you Anna.So it's two years since we closed the Refinitiv acquisition.The strong financial performance that Anna just outlinedspeaks to the effective way we're driving that integration,and the positive impact of the changes that we're making.I'll come back to our actions in 2022 shortly,but 2023 is the year that we shiftfrom integration to transformation,moving to capitalize on the opportunities for growthin all of our businessesand the significant potentialin building on the linkages between them.Microsoft is an important partner in this transformation,supporting our initiatives across the data platform,workspace and analytics,as well as our broader tech infrastructure.Our relationship with Microsoftis strong and it is getting strongerand in a few minutes I'll give you a glimpse of whatthat partnership will mean for the future of workspace.You can see the successof the Refinitiv integration on this slide.Our Data & Analytics business grew by 5.3% last year.A significant acceleration on its historical growth rate.When we acquired it,Refinitiv was a business with solid positionsin growing markets,providing services which solved business critical issuesfor a broad range of customers.However, it had delivered low single digit growthfor the best part of a decade.We knew from our due diligencethat we needed to address a history of underinvestment,improve our engagement with customersand build better products and that is what we have done.We started by restructuring our sales approach,aligning more closely with our customersand acting on their feedback.To give one example,we've made our conversations with customers more strategicby focusing on nine core solutionsinstead of 240 individual products.I've talked in the past about how Refinitivwas a single P&L when we acquired it.Now we have much better insight into the business,and make data-driven decisions.As a result, we can manage the business more effectivelyand we are setting targets that are more ambitious.We're investing in our content and capabilities.To give two examples,we've doubled the footprint of our fixed income ESG dataand we provide ESG data for 15,000 companies,that's 50% higher than at the time of the acquisition.This is driving tangible benefitswith better sales and retention.Underpinning all of this,is our delivery of a more modern,agile and resilient technology infrastructure,increasing the flexibility and efficiency of our businessand significantly improving the customer experience.Our Trading & Banking businessis a good example of this strategy in action.This was a business that had been in decline for many years,losing both market share and revenues.We stabilized the top line in year one,and delivered positive underlying growthin all four quarters of last year.We drove this with better execution in sales,customer management and product.This is materially improving our retentionand we continue to enhance our offering.The acquisition of TORA, as Anna mentioned,adds order execution and management capabilitiesand creating a more seamless workflow,and adding functionality that customers were asking for.The rollout of Workspaceour next generation human interface continuesending last year with versions for all customer segmentseither live or in beta testing.We expect the rollout to be significantly completeby the end of 2024.At the same time, Workspace is not a static product.It continues to evolve with 200 updates last year,including the addition of sentiment data for transcripts,sustainable investing analytics and a custom index sandbox.Workspace will also change and improve significantlyas part of our partnership with Microsoft,and more on that shortly.We are transitioning from the heavy lifting phaseof our integration into a period oftransformational growth in our business.We are outperforming on our revenue synergies.As Anna has said,we are announcing a step change in our targetswith 350 to 400 million pounds in revenue synergiesexpected by 2025.That's up from the £225 millionthat we had originally announced.This is due to the great responsethat we are getting from customersas we cross sell existing products and launch new serviceswith a hundred product launches and counting.Our customers need financial data and analyticsto support their decision making,risk management and regulatory compliance.Increasingly, they want straight through workflowconnecting financial market infrastructurewith the data and analytics that support them,and that is the very essence of what we are providing.Revenue synergies are just one exampleof our broader transformationas we build on the strengths of our businessesand explore the connections among them.LSEG has a great set of businesseswith multiple trophy assets and growth engines.Our Data & Analytics business is deeply embeddedwith almost all major banks and asset managers globally.Our realtime offering is the global leader,and we are one of the top threeglobal providers in the index space.In Capital Markets,FXall is the world's leadingdealer-to-client platform for FX.And Tradeweb has a leading position in electronictrading of government bond creditand interest rate products.Our Post Trade business providessystemically important infrastructure for financial marketsaccounting for roughly one quarterof the global segment in which it operates.Its share of global interest rateswap clearing is more than 90%.The group is highly diversifiedacross product and geography,with more than 40,000 customers who value our open approachand see it as a key differentiator.These businesses have strong positions in growing segmentswith great potential to increase shareand to build on the links between themto create additional value for our customers.We have no intention of stopping here.Let me talk you through three examplesof how we are building on this position of strengthand driving further growth in our business.Starting on slide 28.First, Enterprise data.In 2022 performance improved significantlycompared to 2021 as we re-accelerated growthin one of our leading businesses.Customer demand in this space is stronger than everas institutions increasingly rely on multiple data sourcesfor decision making.In the past, some products have been too cumbersomeand difficult to access.Our investment is changing this.You can see this in the customer experience measureson the left hand side of this slide,showing strong year on year improvements in resilienceand workflow integration.Our realtime optimized producthas attracted 350 customers in the last two years.Tick History has 126 new customerssince migrating to the cloud,and MayStreet acquired just a few months ago,has eight new customersand is driving retention with others.We've also invested in distribution,strengthening our sales effort,winning more head-to-head pitchesand continuing to benefitfrom strong partnerships like Aladdin.We're seeing benefits from our synergy programwith the sale of fixed income datato FTSERussell customersour single biggest area of synergy delivery last year.Looking ahead two of our biggest tech programs,electron co-location and software defined networkwill make material progress in 2023.And we have a pipeline of cloud migrationsand new venues and feeds, making us more flexibleand user friendly for our customers.We are just scratching the surface of the opportunity here.Turning to Post Trade.2022 was a strong year for our interest rateswap business SwapClear,clearing over 1.1 quadrillion dollars in notional value.Now that business has had a decade of good growthfueled by the strength of its open partnership approachand by regulation that required financial institutionsto clear most of their interest rate swaps.That franchise continues to growadding new customers and with more activityfrom existing customers.The regulatory landscape, (clears throat)excuse me, continues to evolveand our Post Trade offering is evolving with it.Regulation such as the uncleared margin rules and SA-CCRmeans that banks are more focused than everon optimizing their capitaland managing their balance sheets efficiently.We are well positioned to help our customers with this.Activity in our FX clearing solution,ForexClear continues to build as it does at SwapAgent,which provides workflow efficienciesin the uncleared interest rate swap space.Both of these illustrate the growthin importance of capital optimizationand balance sheet efficiency.Adding Quantile and Acadiawill considerably enhance these capabilitiesas we extend our solutions into uncleared products,across asset classes and alongour customers post-trade workflow.So we are well positioned for further structural growthin Post Trade this year and beyond.Turning to Capital Markets.6.6 trillion a day is traded.That's in dollars, $6.6 trillion a dayis traded on foreign exchange markets.It's the largest traded asset classand touches all aspects of global finance and global trade.We have two of the leading global FX trade venues,FXall and our matching business.By investing in these platformsand connecting them to other partsof the financial markets ecosystemwe are building a compelling end-to-end solutionand driving further growth.Through Workspace and FX trade,an FX trader, excuse me,can access the deepest and broadest FX data and news,and then we'll be able to access liquidityon FXall to make a trade.Later this year we will launch connectivitybetween Tradeweb and FXall,offering customers the ability to tradeemerging market securitiesand currencies on a single screen.This brings significant workflow benefitsand reduces customer's execution risk.Imagine the potential if we scale thisto all cross-border trading.We also offer foreign exchangecustomers seamless access to our post-trade servicesthrough the link between FXall and ForexClear.The first transaction through this linktook place last year.So whether customers come to us through Workspace,through Tradeweb, through our FX venuesor through Post Trade,they're entering a compelling ecosystemthat can serve their end-to-end needsin an increasingly integrated way.We have two significant developmentsin our FX business coming this year.We will launch a new FX trading venue in Singapore,trading non-deliverable forwards.And then we will also introduceour new state-of-the-art matching platformbuilt on LSEG technology and that is 10 times fasterthan the current platform.All the improvements to our businessand the resulting higher growthbenefit from the transformation that we are drivingwithin our core technology backbone,and the engineering culture that we are building.The partnership with Microsoftis contributing to this transformation.It has three main work streams.First, with Microsoft's Cloud technology,we are consolidating our data setsonto one flexible infrastructure.Our customers will be able to access datafaster and more easilywith greater resilience and adaptability.Second, we are combining Microsoft's expertisein machine learning and cloud infrastructurewith our advanced analytics and modeling capabilitiesto develop a new suite of solutionsfor the financial industry.This will revolutionize how businessesthat rely on analytics and models,like all of the firms that you all work for,build access and scale these capabilities.And third, we are working with Microsoftto transform the workflow for financial market participants.And I don't use that word transform lightly.We are integrating our next generationhuman interface Workspacewith Microsoft's productivity and communication toolscreating an all-in-one data analytics workflowand collaboration solution.Let me bring this to life by showing a short videothat captures a few different aspectsof the seamless functionality,workflow and intelligence that we are building together.- [Presenter] Contoso Investment Bank,it's the start of another busy week.She receives a Workplace notification in Teamsabout Fabrikam, one of her largest customers.Last year she pitched VanArsdel,an M&A opportunity to Ethan the Fabrikam CFO.But with the EPS accretionpredicted to take at least 36 months,he said it was a no-go.They agreed to meet again when it was achievablewithin 18 months.They simply set up an alertin the Workspace analytics engineto monitor when the deal becomes accretive.A year later, it's possible.The combination of VanArsdel's recent earnings guidanceand movements in the FX marketmeans 18 months is now realistic.Before she loops in the team,she wants to provide crucial contextabout recent deals in Fabrikam's sector.As she's searching the Workspace botinstantly filters the deal's analysisand shares an overview of all recent deals.She loves how easily she's able to pull togethersuch a variety of important data for her team.With the preliminary analysis ready,Monica pulls in Sarah,the VP on her team to the Fabrikam channel.Sarah will be taking the lead on the project.As Sarah receives a message from Monicato check in on key themes coming out of research reports,a Workspace bot powered by the signal search appintervenes and presents a card detailinga time series summary of all the key themesdiscussed by equity analysts.Through its intelligent NLP engine,it has identified an increasing emphasison dry powder and M&A opportunities.The insights will be helpfulin guiding the focus of the pitchbook.With all the information she needs in hand,Sarah is up to speed faster than ever.Next she turns her attention to creating the project team.The workspace bot asks some simple questionsthat help her set up the new team as quickly as possible.The new team is immediately presentedwith their retail group's critical pre-populated contenton both Fabrikam and VanArsdel,making it much easier to get started on the pitchbook.What's more, the Workspace bot has pulled togetherthe previous versions of the pitchbook and supporting filesacross Microsoft PowerPoint and Excel,and updated them with the latest datausing the native Workspace and Office integration.All the data has flowed into Microsoft PowerPointand Excel automatically using the Workspace oneand Office integration.After a bit of wordsmithing to reflect the new data,it's ready for review.Monica messages Ethan on the Contoso Fabrikamexternal channel and is excited when he agrees to meet.Ethan suggests adding their new treasurer Hollie,but this will be her first time contacting her.She initiates a search in app Workspacefollowed by the treasurer's name.Then messages, "Hollie looking forward to meeting you."Keep an eye out for an invite"to the Contoso Fabrikam shared channel"and a meeting invite".Integration of Microsoft Teams' directory,Workspace and Messengermakes reaching out to someone newa lot easier in fewer clicks.At the beginning of the meeting,Teams automatically creates an internal group channelwhere the Contoso team can chat,ready to handle any tough questionsor objections from the client.Hollie is running late because of a fire drill.Fortunately, the automatic transcriptensures she can quickly catch up within seconds.The meeting is going wellwhen suddenly Ethan raises a questionabout his FX exposure with the transaction.Sarah quickly catches onto the concern,jumps into Workspace and examines the FX rate and estimates.She then shares the analysis from Workspacein the internal group chat with Monica.Monica confidently shares the informationand suggests that she set up a follow-up meetingbetween Hollie, Fabrikam's treasurerand an FX specialist to discuss how to manage the riskwith a deal contingent FX forward.The Workspace bot automatically adds thisas a to-do list item to the project task board,ensuring nothing is missed.Both the CFO and treasurer are feeling confidentand give Monica the thumbs upto dig further into the opportunity.(lively music)- So that is an investment banking example for you,but there will be many different use cases across sectors.What's more important than the specific exampleis the interoperability, the collaboration,and the intelligence that we will bringto Workspace with Microsoft.Just think of your own day-to-day workwith this functionality.The five bullets we have herecan't really capture the revolutionary natureof the change to workflows that will resultfrom our partnership with Microsoft.But whether it's multi firm collaboration on Teams,or the power of AI to filter informationand support decision making,it is clear this will drive huge productivityand insight improvements for our customers.And the response we have already had from customershas been very encouragingwith a number keen to partner with us.So what is the growth potential here?A number of you have asked us that,and we will provide more guidanceas we get closer to product launch.As we said in December,we do expect the partnership to increaserevenue growth meaningfully over time.We think of the opportunity in three ways.In value terms,we are developing a much more powerful platformwith leading functionality.We all know there's a price gap in the marketand we're confident we can begin to close it.On the volume side, this is the heartof the information services investment case.When data is liberated by technology usage grows,customers find more useful ways to manipulate dataand to integrate it with their own and other sourcesdriving insight and decision making,we are already seeing this effectwhere we have used technologyto reduce friction in enterprise data,and we see it as a significant future driveracross all of Data & Analytics.We also see an opportunity to increase our market share.Third, the opportunity in new markets.We're creating a new market in modelingand analytics as a service,whereas I mentionedwe expect institutional demand to be strong.There's also a long tail of customerswith an installed Team space of over 250 million customers.The opportunity to sell light versions of Workspaceinto corporates or the retail markethas real potential as well.To summarize on slide 34.2022 was a year of strong, broad-based growth for LSEGwith all divisions performing well.We are accelerating delivery of our cost synergiesand increasing our revenue synergy target.We continue to generate a lot of cashand are actively deploying itto improve our customer offering.we expect the Acadia acquisitionto close in the next few weeks.A transaction that is roughly twice the sizeof the types of deals that we completed last year.We're also returning surplus capital to shareholders.The share buyback we started last year is continuingand then as Anna mentioned at our AGM next month,we will seek authorization for a directed buybackthat will support an orderly sell downand reduce our share countto the benefit of all of our shareholders.Our partnership with Microsoftwill revolutionize workflowfor financial market participantssupporting further growthand transformation of our business.The changes across our businessare improving our offering and accelerating growth.We have a lot of confidence as we forge ahead in 2023.And with that,Anna and I will now be very happy to take your questions.So Peregrine, I will turn it over to youand I can see the hands rising.- Thank you David.Morning everyone.So we'll take the questions in the room firstand then we'll move on to the conference call.So Philip, you're the first person I spotted.- Thank you. And thank you very much for the presentation.You've talked very eloquently about the qualitative benefitsof the Microsoft partnership,and you've talked slightly more prosaicallyabout the quantitative costs of them.When will we see the quantitative benefitsand what will those look like?What should we looking forward to say,ah yes, this is working like they said it would?- So as we mentioned when we announcedthe partnership in December,our customers will start to see the benefitsfrom the partnership in terms of the product18 to 24 months out.In terms of when we will see that in our revenues,we expect that in 2025 and beyond.So as I mentioned in the presentation,we expect to see benefits in terms of value,in terms of volume,in terms of new markets,and we're very pleased with that,looking forward to that.But given we're still two years offfrom seeing that revenue impact in 2025,we're not gonna put outmore specific guidance at this point.- Thank you. Haley.- Thank you. It's Haley Tam from Credit Suisse.Could I ask a couple of simple questions please?Firstly, thank you for the increasedto revenue synergy guidance.That's very welcome.Could you just clarify for me that ison the side Refinitiv deal basisdoesn't include TORA or any other acquisitions.Okay, thank you.And then the second question,just in terms of the directed buyback of £750 million,I think I'm right in thinkingthere's a $2 billion debt repaymentassociated with Refinitiv transactiondue at the end of this year.So not to get too far ahead of ourselves,but presumably that means in 2024you could ask for much bigger capacityfor a directed buyback.That was that, that was the question. Thank you.- [David] Do you wanna take this?- Yeah, sure.So firstly, the increase in revenue synergiesis entirely associated with the Refinitiv transactionand doesn't have any benefit of the other acquisitions in.And in terms of how we might might think aboutdirective buybacks going forward,I mean, you are right,we are highly cash generative,it's one of the real strengths of our business.However, the way we think about capital allocationis we firstly look at organic investmentand we look at the M&A opportunities that we can see,and then we return what we can't seealready useful to shareholders.So we're not going to guide specifically, but you are right,we're highly cash generativeand we'll continue to be active in how we use our capital.- Enrico- Thank you. Enrico with J.P. Morgan.Sorry, just one clarification.Going back to when we gonna seethe economic benefit of that,clearly you say the clients will start to see a benefitbetween 18 and 24 months,but then the monetary benefit to youis gonna be a bit further delayed.Can you give some color, why is that?Is it because you like kind of a hook?So you first give the new productand then once it's brought out you can start charging them.I'd be just curious to get some coloron how actually is gonna be monetized.A second question, I just wanted to ask clearlythe integration, some of the acquisition you've donelike MayStreet for example,looks like is going very, very well.I think when you announced it,you say that in 2021 MayStreetrated about £15 million revenues.I was just curious to know what kind of synergies,for example, from a revenue point of viewyou expect from that specific acquisitionor more in general if I think aboutthe bolt on deals that you can do,do you have internal guidelines in terms ofwhat kind of, I don't know, return invested capitalyou usually aim to achieve or synergies or EPS secretionto make them worth basically?- Sure. So maybe I'll touch on each of theseand you should feel free to add in as well'cause just touch on both of our areas,if I can put it that way.First of all, in terms of howthe Microsoft partnership's going to be monetized,I wouldn't read too much into the differencebetween the 18 to 24 month timeframe and 2025 revenue.So will we be rolling out some product capabilityon that 18 month timeframe,which will basically be the second half of 24? Yes.And our customers will start to see that then.But again, given that timeframe,18 to 24 months basically takes us into 2025.So that's how you should think about that.Anything you would add on that?- Only that as we build this product,we're gonna be working witha number of our customers in the build phaseto make sure it's really meeting their needs.So some customers will be interacting with it earlier.- And then with respect to MayStreet,which for those of you who don't know,is a great capability, great business we acquired last year,very small, but it's a great example ofour M&A strategy in terms of acquiringrelatively small businessesthat give us a great functionalityor a new technological capability.We can plug that into our global networkboth in terms of distributionand also in terms of our customer relationships.It provides ultra-low latency realtime data,so very fast realtime data and is very high quality.The SEC uses it as an example.And as it has become part of our larger business,this is a critical function.Realtime data is a critical functionfor a number of our customers,and they feel more comfortable using it with usbecause we are established longtime partners of themas opposed to a very small entitythat's not very well known.So that is the kind of benefitand the kind of synergy that we are seeing there.And so it has improved in terms...We already have the number one in the worldrealtime data franchise and this is just addingto that capability and strengthening that.If you wanna touch on any internal thinkingor internal guidelinesas to how we think about our M&A please.- I won't share that much, but you know,firstly we've been quite clearthat we get a benefit next year of one pointassociated with the acquisitions that we've done.They're all early stage businesses,so they're all businesses that we should be seeinga rapid acceleration in top line growthas we scale them across our platform.The way we think about our financial criteriadepends a little bit on the business life cycle,you know, where it is in its life cycle.And we're prepared to take a longer investment periodin these early very scalable small businesses'cause we're going to drive performancethrough those revenue synergies,but I'm not going to go into specific return criteria.- Bruce.- Thanks. Yeah, Bruce Hamilton, Morgan Stanley.And apologize, I was a bit late,so if I ask a question you've already answered my apologies.Firstly just on the Microsoft thing,I know we're gonna learn more,but if I think about what you're saying aboutsort of user experience functionality,should we assume that when that starts to have an impact,it'll be most strongly felt in the Tradingand Banking solutions piece.So obviously the rest of the businessis growing already mid-high single digits,so is that where you'll see perhaps the biggest deltain terms of kind of growth rate?And then secondly,just on the incremental revenue synergies,obviously the cost to achievehas stepped up fairly meaningfully.I mean, I guess clearly you go forthe easier win revenue synergies firstand then they'll cost more as you go along.But can you just add any color around that please?- Sure. Anna do you wanna touch on cost to achieve firstand then I'll answer Bruce's questionon the Microsoft impact.- Sure.So just to frame it for you,the first £225 million of revenue synergies that we announcedhad an ROI I think of 125%, so a stunning return.Now we've really got into selling these productsand we see an opportunity to scale themmuch more broadly across a broader customer base.And that's what gives us the content,the confidence to increase our revenue synergies.And so we're now talking about a revenue synergythat's delivering a 65% ROI.So, you know, still a very, very strong return.And you know, to your point, why is it a little bit lower?Because what we're doingis taking a very strong performanceand scaling it more broadly across our customer base.- So to your questionon where you might see the benefits financiallyin terms of the Microsoft partnership.I think it's worth breaking down a little biteach of the different aspectsof the Microsoft partnership,because for example,we showed the video of Workspace embeddedin the Microsoft products.I think in that particular product area, yes,you'll see the benefits in the Trading and Banking lineand it's, I would just point out,and we touched on this in the presentation,we've taken trading and banking from, as I described it,a declining business over many, many years.And we indicated that our investor presentation,the investor day was now a year and a half ago or so,that we would take that businessinto a low single digit growth area,and we've gotten there.Frankly we've gotten there a little bit earlierthan we expected,but the partnership with Microsoftand the integration of that functionalitywith Microsoft Teamsand the other Microsoft collaboration tools,we think there's a real opportunity to turn thatinto more of a growth engine going forward.We're not giving any change in guidance at this point,but we are very excited about that opportunity.Then if you look at other parts of the partnershipwith Microsoft under the analytics as a service offering,that's a product that doesn't exist today.Now analytics currently appears in trading and banking,but we'll have to think about how we make that clearfor people in terms of what we're seeing there.And then the movement of our data platforminto Microsoft's Cloud,that will have an impact I think across our business.I think that will be very attractive for our customers.That will make our products much easier to use.Customers will be able to access it themselves,pick and choose what they want to access,create their own new products,and that'll have an impact I think, as I said,across many different parts of our business.- Tom, you've been waiting ages.- Thanks very much. it's Tom Mills at Jefferies.I just had a question about,I think Nasdaq recently noted that it's seen some slippagein its anti financial crime businessfrom a subscription new perspective.I guess as decisions were having to be seniorised,if I can put it that way.Are you seeing any signs of that in your risk businessor other subscription businesses?- So in our customer and third party risk business,we have our World-Check business,which has had a very strong yearand we talked about this last yearwhen a lot of the focus was on what was going onwith Russia and Ukraine and World-Checkproved itself during that time periodas being really essential as a productfor many, many of our customers.We saw big spikes in usage there,so strong year for World-Check.In terms of some of the other parts of the businesswithin our customer and third party risk solutions business,for example, our enhanced due diligencepart of that business that tends to be very activewhen there's an active IPO market.And so that has been a slower yearin terms of some of the payment verificationand fraudulent ID parts of the business.Some of that also has had exposureto both the crypto markets from a customer perspective,not in terms of any crypto trading that it's doing,but serving customers in that market.And so there's been a little bit of a slowdown in that area.Anything you went add there?- Yeah, maybe just coming back to, you know,subscription revenue strength as a wholeand what we're seeing with our customers.We're seeing good demand across the groupand I think, you know, that 6.2% ASV figureat the end of the year is all driven byincreasing sales and better retention,it's not accelerated due to price.And we've gone into 2023 again with strong demand,so we're not seeing any slowdown in our customer base.- Yeah, and just actually it's a great point.Just to clarify some of the pointsI was touching on in customer and third party risk,those are not subscription revenues.So for example, some of the enhanced due diligence,those are more transactional type revenues.- And Andrew. Is it?Sorry, I couldn't, sorry.- No, it's Greg Simpson from BNP Paribas Exane.Can I just ask, with the 6-8% revenue growth,did you say one percentage point that was from M&Athat's been announced and thereforeif you look at in the organic guidanceI guess of five to seven, that's quite similar to, you know,what was the previous targetand isn't there more of a pricing impact this year,so just trying to square that point.And then the second one would be on cost,once you get to the 50% exit EBITDA margin,is that like a level that is sustainablefor this kind of business,or do you think there is still inherent scalabilityin terms of operating leveragewhen you look into 25, 26 and so on? Thank you.- Do you wanna take this?- Sure. So I'll say it's to 8% revenue guidance.Maybe just talking through the things that make me confidentlooking at our forward revenues.Firstly ASV, so December ASV gives youa measure at a point in time of our contractsversus the same contracts billing a year ago.And that gives you a sense of the accelerationthat we're seeing in our underlyingsubscription revenue book of business,which is 70% of our revenue.And so this healthy acceleration there, which should start,which will flow through our revenueas we move through the year.Secondly, yes, we've taken more price in 2023than we did in 2022.What I've said to you before is thatwe tended to take low single digit price historicallyparticularly on our subscription revenue book of businessand that we would be taking slightly more this year.So you will see that flow through as of January 1st.And thirdly, yes, we get the benefit of M&Aand it's about a point year on year.And then your second question about the 50% exit rate marginand do we see more scalability?Yes, we see more scalability for this business.You know, we'll continue to investin opportunities like Microsoftthat we think will accelerate the top line.And so it won't always be a perfectly straight line,but you know, yes, this is a businesswhere we are not yet fully scaled.- Ian. Sorry, we'll finally come overto the other side of the room.- It's no problem.Ian White from Autonomous.Thanks much for taking my questions.First up please what feedback could you shareregarding the user reception of Workspace so far?You had some interesting statisticswith the 1H update, I wondered what the latest viewon that was now that on that rollout is more advanced.Secondly, can you just provide a little bit more coloron what specifically you have seen to drive the upgradeto the revenue synergy guidance?I know that the release mentioned,I think some aspects around FXand those businesses to me seem to beat sort of early stage of sort of growthor recovery, so just wondering what the sort ofnew information is, if you like,that's led to the upgrade there.And finally on the Microsoft partnershipcan you just talk me through considerationsthere that you made in terms of thinking aboutthe partnership around the risk of lock in with Microsoft.Basically how do you weigh the need to retainsort of sufficient in-house expertiseand negotiating power with Microsoft,especially towards the end of the partnershipversus the benefits that the partnershipmight bring to the group?Thank you.- Thank you Ian. Maybe I'll take your first and thirdand you can touch on the revenue synergies uplift.So the feedback from users on Workspacecontinues to be very positive and easier to use,easier to find data on it,lighter on their desktops, better functionality.And as I mentioned in the presentation,we are continuing to add new features and new capabilities.So this is not a static productand it's continuing to get better and better.And again, as I mentionedand you saw the demo in the video,it's going to get better and betterand significantly changeas part of the partnership with Microsoft.So really excited about the opportunity set there.To your third question,with respect to the risk of lock in as you described it,a couple things on that.First of all, this is not an exclusive arrangementwith Microsoft.We have very strong existing relationshipsand do significant amounts of workwith other cloud providers and that will continue,and there will be parts of our businessthat will be in other cloud providers servicesfor the duration.The other point I would make is thatour open access model extends to the cloud.And what I mean by that is that we will serve our customerswhere they want to be served.And so although we may be housing a certain productor designing it to be native to Azure in Microsoft's Cloud,we will make it available.And there are some interesting engineering aspectsto this that we will be working throughwith the various cloud providers,but we will make it available to our customerswhere they want to have access to it.And so I think it's really importantto make those points.From I'll say from a commercial perspective,from a regulatory perspective,from a risk perspective,we are very focused on maintaining the capabilityto use multiple cloud providersand not to have that risk of overdependenceon any one provider,but we're at the same time we're very excitedabout the partnership opportunities with Microsoft.So I'll turn it over to you on the--- Sure. Revenue synergy guidance.I think the first thing I'd say is the upgradein revenue synergies is really the thesisthat we had acquisition has been proved outand been proved out to be more valuablethan we first thought.And so a lot of the synergies we are talking aboutare the same synergiesthat we were talking about at acquisition.They're just more valuableand we can take them to a broader range of customers.So you know, the biggest revenue synergy areasthat we've talked to you about beforeis using Refinitiv data in our indices,particularly fixed income,selling that data with our indices so that cross sell,putting Yield Book into Workspace, you know,all of those areas.And as I say, it's largely the same,but they're more valuable and we can take it more broadlyto a broader customer set.- Ben.- Good morning, it's Ben Bathurst from RBC.I've got a question on targets.I think I'm right in saying that your initial targetsannounced at the time of the acquisitionset to expire at the end of 2023.Does that mean we should be expectingnew medium term targets at some point in the next yearor so, and if so when?- Anna you wanna?- Sure. So you're absolutely right.Our targets at acquisition really took us to the end of 2023and you know, towards the end of this yearwe will come back and share with youhow we're thinking about the journey from here.But right now we are very focused on making surewe absolutely knock those acquisition targets out the park.- Any more in the room?No. Okay.I'll open it to the com...Oh, sorry Mike.Sorry, one more.Sorry.- Just a couple of one, sorry. Mike Sanderson from BarclaysFirst one, note on the slide you specifically talked aboutleverage and what you're willing about,I mean, historically we've talked aboutthe more recurring subscription natureof revenues and the model.Is that a reiterationthat's now sort of long term reiteration,or is this just sort of reiterating the pastas how we think aboutwhat sort of leverage you could put in?And second one, I guess on the political angle,clearly there's some developmentswith discussions with EU and other parts of the worldAre there any sort of tone that might feelthat financial services feelscould be making better progressfor the clearing side of the business?- So you wanna take the leverage question and then I'll--- Sure. So our capital allocation policyis our capital allocation policyand within that we talk abouta one to two times leverage range.And it's something we continue to review,but it's working very well for us at the moment.And I think the most important thingis we're very cash generative.And so within that cash generationwe have a lot of freedom to invest in the business,do the M&A we want to do and return.- Then with respect to your question around the,I'll call it the improvement in tonein relations between the UK and the EU,that's only a good thing in terms of the markets overall.I think from our perspective,fragmentation is not helpful for the markets.Now, as we've said in the past,we are, I would say fairly confidentgiven the messages that have come out of the EU,including the European Commission,including recently ESMA.There's not going to be a cliff edge in June, 2025.That seems increasingly clearand our customers have also made itincreasingly clear that they,and when I say our customers, our members in the EUmade it increasingly clearthat they want to make surethey have continued access to LCH Limited.And so all of that continues to be playing out.And I think I've said in the past that we are optimisticand hopeful that that will continue to play out well,if anything the improvement in toneis making us that much more optimisticthat that's going to play out fine.But the improvement in tone is only a good thing.And I think, you know, I was readingin the paper this morning that we may havethe financial services MOU between the UKand the EU finally gets signed.That doesn't have a direct impact on us, it's tonal.And we're regulated in the EU by ESMA,we're regulated by the Bank of England,we're regulated by the CFTC.It's a good thing if the regulatorsare cooperating with each otherand if there are good political relationships there.So all positive from our perspective.- Last check for the room.Okay. Operator over to you.Could you let us knowif there's anyone queuing on the call please?- [Operator] If you would like to ask a question,please signal by pressing star oneon your telephone keypad.We'll pause for a moment to assemble the queue.We'll take our first questionfrom Russell Quelch of Redburn, please go ahead.- [Russell] Yeah, thank you.Just checking you can hear me okay in the room.- Very well.- [Russell] Good stuff. Thanks.So yeah, a few questions here.Firstly, I'll start off with a clarificationon the back of Greg's question if that's okay.And I appreciate you've got the productswith different market penetration,but how much of the 6-8% revenue growth in 23you expect to be driven by pricing?And I guess the reason for the questionis do you have to be less aggressive on pricingthan perhaps peers in this environmentin order to improve retentionand ensure retention stays highas you move customers over to new platforms?- You wanna take that?- Yeah, sure.So to come back to sort of what I said to Gregwhen we're talking pricing here,we're predominantly talking aboutthe subscription revenuethat's largely in the D&A business,which is 70% of our revenue.And historically we've takenlow single digit pricing there, call it 2%.We are taking a little bit more than this year,which is, you know,not more than of the order of a percenton that book of business.Are we less aggressive than our customers?No. So a lot of the stuff that you're seeing in the pressis headline pricing.So you know, the number I get asked a lot aboutis the Bloomberg 9% increase,they take price every two years.So you need to half that.So four and a half percent.Now there's always a differencebetween a headline price increaseand the yield you actually achievebecause there'll be different reasonsin different places where contractually not every customerhas the price increase applied to them.I think it's all quite consistent.So that's largely how I think about it.- [Russell] Okay, that's good.And then just coming back on Mike's questionas well around leverage,'cause you're now at 1.8 times you're targeting 1 -2.If I look across the data analytics peer group,mainly in the US the average leverage is sort oftwo to two and a half times,depending on where we are in the cycle.Would you be prepared to, you know,move up towards that rangeto use that capacity to drive growth, either you know,M&A or buybacks or is there something perhapsin your covenants that restricts youfrom doing that right now?- Go ahead- Yeah. We have no restriction.I think I'll come back to generating a lot of cashand we have the cash generationthat we need to deliveron all the things that we want to do.So while leverage is somethingwe continue to keep under review,you know, we're sticking with our 1-2 times for now.- Okay. And then, sorry to squeeze one more inon the fixed income indices,'cause you've spoken a couple of times about that today.How do you take market share in this sphereversus incumbents in the spaceparticularly people like S&P now comingpost the info deal coming with arolling out new product in this area,it's highly competitive.There are incumbents there already.Where is your competitive advantage here.- And is that question...I couldn't quite hear at the beginning,is that specifically around fixed income indicesor indices in general?- [Russell] Yeah, thanks David.Particularly fixed income indices. Yeah.Where you're talking a lot about growth.- Yeah, so we have a great franchisein fixed income in the index productand it's actually one of the significant competitiveadvantages and differenceswith respect to the FTSE Russell Index productcompared to a number of the other,basically the other top two,the other two players in the top three,if I can put it that way.And we continue to invest in the space.We do very, very well from a competitive perspectivein terms of RFPs or the head-to-head pitches.And we're continuing to invest in it,and I look forward to continuing to do really well.We've got new inflows, new productsthat we have been launching.The number of products that we are putting outhas gone up dramatically over the past year or twocompared to the product development pipelinethat we had in the past.And part of that is related tohaving additional investment in the space.Part of that is related to having the benefits of accessto the Refinitiv data and that's part of the synergy casethat we've been talking about.So the product is doing very well.The space is doing very well for us.- [Russell] Great. Thanks very much.- Next question please operator.Operator. Hello?I think you've still got Russell's line openby the sound of things.Operator.- [Operator] Kyle Voight KBW, please go ahead.- [Kyle] Hi, good morning.So just one follow up on the Microsoft partnership.You previously disclosed £250 to £300 million of cash costsrelated to the partnership from 2023 to 2025.Just wondering how much of those costsare embedded in the margin guidance for 2023 specifically.And it might be helpful if you could providean exit 2023 margin run rateinclusive of the Microsoft cost,just so we have that like for like with the 50%excluding it on a exit basis.And then also I was wondering if you could run throughhow we should think about those costsas we get past that 2025 point.Do those costs really fall away,and so are kind of more one-off in natureor do they kind of become embedded into the expense spaceon an ongoing basis past 2025?- Thanks Kyle. I'll turn that over to Anna.- So where to start?Maybe I'll do the second one first.So what we've shared with you is the product,what we're talking about here is product development costs.So it is one-off cost and we've been quite clear about itand we've called out the investmentthat we are making before we start to get to revenue.Now we'll need to continue to invest from 2025 onwards,but at that point we'll be seeing a revenue flow come inand the investment will be very commensuratewith the returns that you're starting to see,and we'll guide on those numbers near the time.I'm not going to unpickour 48% margin guidance into its component parts'cause there's an awful lot of moving pieces in there.But you know, as you work it through,you can see that there is some,if you think about the level of underlying marginimprovement we've delivered this year of 110 basis points,you can see as you look forward to 2023,there is a level of investment going inagainst ongoing underlying margin improvement.And that is against the combination of Microsoftand also the early stage M&A businesses that we've got.- [Kyle] Great. And then just one follow up for meif I could just with the Euronext clearing migrationnow set for the third quarter of 2024.I know it's small in context of the larger group,but just wondering if you could update us againon the financial impactand if there could be any potential offsetson the expense side as those revenues migrate away.- Yeah Kyle, as we announcedwhen they made their indicationof that migration last year sometime,this is immaterial for LSEGso nothing really to add in terms of, you know,it was immaterial then.We're growing so it's,can you say more immaterial now.- [Kyle] Fair enough. Thank you.- Thanks Kyle.Operator the next question please.- [Operator] Yes next we have a questionfrom Johannes Thormann at HSBC.Please go ahead.- [Johannes] Good morning everybody.Johannes Thormann, HSBCTwo questions from my side please.First of all, the costs developmentwere probably one reason for a slight missand the increase is probably strongerthan anybody had expected.Is this something that the inflationary environmentyou have to live with?Do you start any new cost savings initiatives, new measures?What do you really thinkas you stop guiding on costsas well that you have the only ability to live with thatis to compensate this via higher price increaseson the revenue side.And secondly also on a small business of yoursthe cash trading business in UK,you lost market share and the yield deteriorated,any countermeasures for the origin of the group?Thank you.- I'll do the first one? - Sure.- So 2023 cost.So a couple of years ago we gave you cost guidanceand you're right, we've stepped away from itand we've moved to a margin guidance for 2023.And that's because in a high growth environmentwe think that is the right way to run our business,sorry, high growth,high inflation environment,because we are managing boththe impact of the inflation on our top lineand also on the cost base.What you can see as you look at our margin,which is in line with expectation for 2023,there's a number of moving parts,there is some ongoing efficiency deliveryjust as we've delivered this year.And you will see us continue to work very hardto run this business more efficiently,and there is more opportunity to do that.And you will also see us investing for future growth,investing in the Microsoft partnershipwhich will accelerate growth from 2025 onwardsand investing against early stage M&Athat's got a long runway for growth.So the way I think about itis our cost base is carefully controlled.We work very hard to drive efficiencyand we will continue to do so,and we will invest where there isa runway for growth as we are.- And on your second question on cash trading in the UKand as you mentioned,this is a very small part of our overall revenues,so certainly sub 5%,but nothing really newin terms of what's going on in that space.And just to break that down a little bit,there's obviously the London Stock Exchangethere's Turquoise and we have seensome sort of subdued volumes in that space.When there is more volatility,you tend to see a lot of the volumecoming back to the primary exchange.We have done a few things with respect to Turquoisein terms of bringing in some incremental volume therethat has meant some moves on some of the pricingand the relationshipswith some of the biggest providers there.So a few puts and a few takes there,but nothing really dramatic to touch on there.I don't see any signs of any longer term trends there.- Thank you. Operator anymore?- [Operator] Yep. Mike Werner at UBS, please go ahead.- [Mike] Thank you very much.Just have a question on cost and thank youfor the improved guidancewith regards to being able to capturethe bulk of your cost synergies by the end of 2023.I'm just thinking beyond that, you know,those cost synergies I think haveobviously helped the EBITDA marginand allowed you to invest in the business.You know, as you look out to 24 and 25,do you see further opportunitiesto capture cost synergiesabove what you're currently targeting?Or is this one where, you know,the tailwinds or the benefits from synergiesare likely to slow in those years?And you know, again, if youand will have an impact on your EBITDA margin as we look at,as you guys continue to build scale. Thank you.- Thanks Mike. Anna.- So you're right,we've guided today that we'll be substantially donewith our cost synergies by the end of this year,but that is a run rate exit at the end of this year.So we'll see the in year benefit of those cost synergiesbenefiting both 23 and 24.Now, looking beyond that,you are not going to see us announce furthercost synergies from the integration,but you will see us continue to drive efficiencyand there is a lot of opportunityto continue to drive efficiency in this businessthrough running our processes better,through better automating things.And we are very motivatedto continue to drive that efficiency.And so you will see that happen beyond 2024.And in terms of what does that mean for marginover the medium term as somebody asked me earlier,is the 50% exit rate margin, you know are we done?No, there's opportunity for further scalabilityin this business and therefore margin enhancementas we continue to drive the cost at the top line,and as we continue to manage our cost base sensiblyand you will see us investwhere we see there's opportunitiesto further accelerate that growth.- [Mike] Thank you. And just actually a quick follow upif you don't mind.I think David, you mentioned earlierthat you expect to close the price gapin some of your markets.Is this something where we can maybe expectto see actually an acceleration of pricing poweras we look out over the next couple of years?- I think that's a fair conclusion.We're investing in our product,we're improving our product significantly.We're seeing stronger retention,we're seeing stronger customer interestin what we're providing.And so, and we've said this before,when we are asking our customersfor an appropriate returnon the investment that we're making,and that investment is adding incremental value for them,they're willing to pay for that.So the answer to your question is yes.- [Mike] Thank you.- [Operator] Next is Andrew Coombs of Citiplease go ahead.- [Andrew] Good morning.Sorry I can't be there in-person.Just a couple of follow ups.Just firstly coming back to this pointon the 6-8% revenue growth.When you answered this question previously,you admitted that it's 1% of that's inorganic this year.But then you talked about some of the pricing initiatives,you talked about the higher revenue synergies,you talked about the Microsoft agreementas a function of justreading between the lines,it sounds like you think 6-8% is actuallya sustainable level even on an organic basis.Is that a fair conclusion?- Go ahead.- So our guidance for 2023 is 6-8%,but you can be absolutely surethat the investments that we are makingand the things that we are doingare around improving the quality of our businessin order to sustain good growth.- [Andrew] And then a second question just to follow upon kind of the inorganic point.I mean, you said you weren't gonna expandon financial criteria,but if I look at the M&A areas of interest to yourselfand what you've historically donehas been bolt on in order to expandyour existing capabilities,is there anything that you particularly look atand think you could benefit fromany particular areas where you thinkyou would need inorganic dealsin order to improve your offering?- So I'll answer that question in a slightly different way,which is that we did four acquisitions last year,each of which was relatively small,sort of a couple hundred to, well 200 to 300 million or so.That's a lot.I mean that's small in size,but to do that amount of M&A in a year is a lotand it kept the team very busy.So one aspect of our approach to M&Athat we have talked about,is trying to do when we're doing bolt-onsto the extent that we can do themin slightly bigger size,because you're doing the same amount of work fora $200 million or pound transactionas you are for a $500 million or pound transaction.And if you can add incremental value in that one transactionand move the needle a little bit more,that's just more efficient for the team.And the integration work is the same amountfor the size, et cetera.So we have talked about trying to domodestly larger transactions in the bolt-ons,and you'll see this in Acadia.Acadia's about double the size of the transactionsthat we announced last year.I wouldn't call out any particular area specificallywhere we're looking to fill a gap.We'll continue to scour the landscape,if I can use that phrase in termsof figuring out whether there are opportunitiesthat make sense for us from a strategic perspectiveand from a financial perspective.We'll continue to maintain the discipline that we havemaintained both strategically and financially.And if it makes sense,we have a lot of different areasof potential growth internally,organically we have a very broad platformand so if there are are assets out there that make sense,we certainly have, as Anna mentioned,we certainly have the cash and the financing capabilityto do it while continuing to invest organically,while continuing our progressive dividend and policy,and while continuing our share buyback.- [Andrew] Thank you.- Thank you.- [Operator] Benjamin Goy of Deutsche Bank, please go ahead.- [Benjamin] Yes, hi, good morningand two smaller questions left on my side.The first, maybe you can also talk aboutyour cash Capex here,not only the 750 business as usual.And then secondly just want to checkon trading and banking solutions.It looks like the implied growth rate in Q4 accelerated,I just want to check it was mainly adding TORAor is there also QoQ underlying accelerationof the underlying business?Thank you very much.- Wanna take this?- Yeah, sure.So I think I heard your question right on cash Capexif I don't quite nail it, come back at me.So cash Capex 966 million or somethingwas the number you saw in the cash flow slide for 2022,prior that same number was 600 and some,that is both BAU Capexplus the Refinitiv acquisition integration Capex,which was about 300 million over the couple of years.So if you look at that together,we're absolutely on track to our guided number,which is actually an accruals number of 650 to 700 millionfor the year just gone.Now if you look forward,we've said that we will be investing 750 million,which is a little bit more in 2023.And that increase really in the vast majorityis some of the Microsoft spend and the early stage M&A.There's a slight uplift because of currency,but of course you see the benefitthat comes through on revenuesassociated with the stronger dollar as well.- [Benjamin] And thank you.So means that this year there's no additionto the business as usual.So it's 750 the reported number essentially.- So what I'm saying is we've delivered in the yearjust gone well across the couple of years,so 21 and 22 we've delivered absolutely in linewith our cumulative guidance,and that guidance is a little bit higher for 2023reflecting the impact of Microsoft and also the M&A.- He might be asking about integration Capex.- Oh, sorry. - So yeah, I think.- Which we haven't guided on explicitly,but we're in line with our absolute integration plans.The Capex Opex split moves around a little bit,which is why we don't sort of guide on it explicitly,but we'll share it with you at the end of the year.- And then the question around.- Trading and banking-- - Trading and banking.So yeah, TORA has helped the Q4 numbers,but also we've continued to seegood underlying performance in that business.So it's a bit of both ongoing retentionand sales improvement plus the benefit of TORA.- [Benjamin] Thank you.- [Operator] No further questionsfrom the conference call lines.- Thank you very much, I'll hand back to David.- Great.Well, I'm happy to do it from here.Thank you all for joining us both here in-personand online and on the video.Really appreciate it.And we look forward to executingon our ambitious agenda for 2023.So thanks very much.(upbeat music)
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