London Stock Exchange Group plc: Q3 2021 trading statement

This release contains revenues and key performance indicators (KPIs) for the three months ended 30 September 2021 (Q3). All figures quoted in this release are on an underlying basis. Figures are stated on both a statutory and pro-forma basis for Q3 2021 and Q3 2020. Pro-forma figures assume that the acquisition of Refinitiv took place on 1 January 2021 and the prior year comparator assumes that the acquisition of Refinitiv occurred on 1 January 2020. All pro-forma and statutory figures exclude the financial contribution from Borsa Italiana which was divested in H1 2021. Constant currency variance is calculated on the basis of consistent FX rates applied across the current and prior year period, the conversions have been made from the transactional values, which will eliminate any transactional and translational movements along with any related accounting adjustments. For more information, please refer to the “Accounting and modelling notes” section below. Organic variances have been removed from our disclosure due to the large variances associated with the acquisition of Refinitiv.

Highlights

Note: Unless otherwise stated, variances refer to Q3 growth rates on a pro-forma constant currency basis, excluding the impact of a deferred revenue accounting adjustment1, to provide the best view of underlying performance

• Strong performance across all divisions driving 7.6% growth in Q3 total income1 and gross profit growth of 7.3%
• Continued good progress on the integration of Refinitiv and comfortably on target for full year run-rate cost synergy delivery of £125 million, ahead of original phasing; 10 new products launched in Q3 as part of revenue synergy programme, taking the total to 37 year-to-date
• Data & Analytics revenue grew 6.0% and continues to perform well with growth in Annual Subscription Value increasing from 3.9% at H1 to 4.0% in Q3, reflecting strength in subscription-based new business wins
• Capital Markets revenue grew 17.2% driven by double-digit growth at Tradeweb, strong primary issuance within Equities and good dealer-to-client volumes at FXall
• Post Trade revenue grew 11.5% driven by increased clearing activity from both new and existing customers; total income up 2.3%, reflecting lower investment returns in Net Treasury Income compared to the strong comparator in Q3 2020
• Year-to-date total income1 grew 5.6%, reflecting the good performance across the Group
• As previously guided, the Group expects total income1 to grow between 4-5% for full year 2021, with Q4 2021 income not expected to grow as fast as Q3 on a constant currency basis due to the strong comparator in Q4 2020; no change to previous cost or capex guidance although supply chain pressures may impact timing of some technology spend this year
• The Group’s second Investor Education Event on 1 October confirmed the strong growth ambitions for Data & Analytics, with revenues to increase by 4-6% annually over the medium term, reflecting multiple supportive trends and our ongoing focus on rigorous performance management and improvement of the customer experience. FX trading is also well-positioned for continued growth in electronic trading and the planned migration to new technology will strengthen it further. Replays of the two Investor Education Events are available online

[1] Excluding recoveries and a deferred revenue accounting impact. As previously stated, the deferred revenue impact is a one-time, non-cash, negative revenue impact resulting from the accounting treatment of deferred revenue within Refinitiv’s accounts which have been re-evaluated upon acquisition by LSEG under purchase price accounting rules. The result of this accounting treatment is a £1m adjustment reducing revenue for Q3 2021, (£24m reduction for Q3 YTD). The vast majority impacts the Data & Analytics business with a smaller impact applied to the FX venues business within Capital Markets. There will be further immaterial impacts in Q4 2021. Further information is available in the “Accounting and modelling notes” section. Constant currency variance shows underlying financial performance, excluding currency impacts, by comparing the current and prior year periods at consistent exchange rates.

David Schwimmer, CEO said:
“The Group has delivered a strong Q3 financial performance with revenue growth across all divisions.

“We are making excellent progress on the integration of Refinitiv and are comfortably on-track to achieve £125 million of cost synergies in 2021, ahead of our original phasing. We continue to execute across a number of workstreams to deliver the target revenue synergies. The Group is well placed as we make targeted investments in product and technology enhancements to help us meet the needs of our customers and capitalise on the growth trends driving change across our industry.”

Q3 2021 Summary – Pro-forma

For the pro-forma table, variances are provided on a reported and constant currency basis. Commentary is provided on the constant currency variance (excluding deferred revenue adjustment) to provide the best insight into underlying performance. Please refer to the “Accounting and modelling notes” section for more information on relevant accounting adjustments.

1 Pro-forma underlying assumes that the acquisition of Refinitiv took place on 1 January 2021 for the current financial year and 1 January 2020 for the prior financial year comparator figure. Both figures exclude the financial contribution from the businesses contained within the Borsa Italiana divestment
2 Reported variance is the difference between current and prior year periods on a pro-forma underlying basis, using year-to-date FX rates prevalent in each period, therefore any changes in the FX rates are also reflected in the variance percentage alongside business performance. The Q3 results are derived by deducting the H1 results, which have been translated using the average exchange rates for the 6 months to 30 June 2021, from the 9 months figure
3 Constant currency variance shows underlying financial performance, excluding currency impacts, by comparing the current and prior period at consistent exchange rates
4 The deferred revenue adjustment is explained in the “Accounting and modelling notes” section

Pro-forma[1] Q3 2021 Highlights

Data & Analytics: revenues up 6.0%

• Annual Subscription Value growth for the division increased from 3.9% at H1, to 4.0% at Q3; ahead of the subscription revenue growth in Q3 year-to-date of 3.5%. This indicates that the current book of business covered by the ASV metric (c.87% of Data & Analytics revenue) is growing faster than the associated subscription revenues so far this year
• Trading & Banking Solutions revenues down 0.3% - Banking segment delivered a good performance, reflecting product and customer service enhancements, including Workspace; in the Trading segment the pace of decline in Eikon Premium continues to slow
• Enterprise Data Solutions revenues up 4.1% - strong sales in the period in Pricing & Reference Services (PRS) and Real Time Data, with low, early-stage revenue synergies now contributing
• Investment Solutions revenues up 11.1% - double-digit growth in Benchmark Rates, Indices & Analytics with good sales. Asset-based ETF AUM remained above $1 trillion with strong growth
• Wealth Solutions revenues down 0.8% - Advisor & Investor Services revenues were flat as cancellations offset new client wins. Operations Management (BETA) saw a small decline in revenue despite increased volumes due to the mix of customers using the service Customer & Third-Party Risk Solutions revenues up 40.6% - strong growth continues, with double-digit growth at World-Check, GIACT and Due Diligence

Capital Markets: revenues up 17.2%

• Equities revenues up 15.4% - large scale and high-profile listings on London Stock Exchange, the world’s most international exchange. Secondary markets revenues have grown due to higher volumes across our orderbooks
• FX revenues up 7.1% - strong volumes in dealer-to-client (FXall) driving growth, reflecting the investment in new product capabilities, relationship management and better customer service
• Fixed Income, Derivatives & Other revenues up 21.1% - Tradeweb2 continues to grow strongly, as it expands its offering to meet demand from increased electronification of trading markets

Post Trade: revenue up 11.5%; total income up 2.3% (impacted by Net Treasury Income)

• OTC Derivatives revenues up 11.4% - strong performance across services with increased SwapClear revenues driven by growth in the number of active clients
• Securities & Reporting revenues up 8.8% - RepoClear activity growth continues to drive revenue with record volumes in September across Euro debt clearing
• Non-Cash Collateral revenues up 19.0% - partly due to increased activity at SwapClear and RepoClear
• Net Treasury Income down 21.0% - rate of investment return reduced compared to a strong comparator in Q3 2020, alongside flat cash collateral balances. NTI expected to continue at current levels for time being

[1] Pro-forma assumes that the acquisition of Refinitiv took place on 1 January 2021 for the current financial year and 1 January 2020 for the prior financial year comparator figure. Both figures exclude the financial contribution from the businesses contained within the Borsa Italiana divestment
[2] Tradeweb Q3 2021 results will be released on 28 October 2021

The full announcement can be accessed from LSEG's Investor Relations page: Financial results | LSEG

Contacts

London Stock Exchange Group plc
Investor Relations
Paul Froud
Group Head of Investor Relations
ir@lseg.com

Media
Lucie Holloway / Rhiannon Davies
Financial Communications
+44 (0) 20 7797 1222
newsroom@lseg.com