August 05, 2022
London Stock Exchange Group plc: H1 2022 Interim Results
David Schwimmer, CEO said:
“LSEG has delivered a strong first half performance with continued revenue growth across our businesses. We are managing costs well and we continue to make progress on achievement of synergies.
“We provide solutions solving critical issues for our customers, with a high proportion of recurring subscription revenues and structurally growing transactional revenues that benefit from volatility. Our cash generation is allowing us to actively deploy capital across organic and inorganic investments, grow our dividend and commence a share buy-back programme, driving further value for our shareholders. We are successfully executing on our strategy, have good momentum going into the second half and our targets remain unchanged.”
H1 2022 highlights – Execution on strategy driving strong financial performance
Note: Unless otherwise stated, variances refer to growth rates on a constant currency basis, with the comparator, H1 2021, on a pro-forma basis which also excludes the impact of a deferred revenue accounting adjustment1.
- Strong progress in H1 across all divisions, and momentum continuing into H2
- Continued delivery on revenue and cost synergies; all targets unchanged
- Successfully executing on organic and inorganic investment opportunities to drive growth, build a more agile and efficient business and enhance our customer offering
- Well positioned for the current environment; providing high value solutions for customers’ critical needs
- Launching £750 million share buy-back over 12 months with the first tranche to commence immediately
- Strong income growth across all divisions, with pro-forma total income (excluding recoveries) up 6.2%; up 7.0% adjusting for Ukraine and Russia conflict impact2
- ASV growth metric on a like-for-like basis continues to improve, up 5.4% at the end of H1 (Q1: 4.9%); improved retention and new sales driving the increase
- Pro-forma adjusted operating expense increase of 4.3% reflects lower phasing of costs in H1 2021; cost guidance for low-single digit growth in 2022 maintained despite inflationary backdrop
- Adjusted EBITDA margin of 48.8%3; on track to deliver margin target of at least 50% by end of 2023
- Pro-forma AEPS up 21% to 167.4p
- Robust cash generation in H1 and completion of two acquisitions – GDC and MayStreet; Quantile and TORA expected to complete in H2
- Leverage is inside our 1-2x target range within 18 months of the Refinitiv acquisition
- Interim dividend up 27% to 31.7 pence per share
This release contains revenues, costs, earnings and key performance indicators (KPIs) for the six months ended 30 June 2022 (H1). H1 2022 is compared against H1 2021 on both a statutory and pro-forma basis. Pro-forma figures assume that the acquisition of Refinitiv took place on 1 January 2021. Revenues and costs associated with the BETA divestment have been classed as discontinued and are excluded from all periods. Revenues and costs associated with the Borsa Italiana group divestment, which completed in H1 2021, are also excluded. Constant currency variance is calculated on the basis of consistent FX rates applied across the current and prior year period. For more information on accounting treatments and approach to FX please refer to the “Accounting and modelling notes” section below. Within the financial information and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes.
1 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. This reduced H1 2021 revenue by £23m, mainly in Data & Analytics with a smaller impact in the FX business within Capital Markets. There is no material impact in 2022. More details can be found in the “Accounting and modelling notes” section
2 Growth rates excluding the Ukraine / Russia conflict impact have been calculated by excluding income in the region and from sanctioned customers and related business from both periods
3 This margin figure has been adjusted to remove a non-cash FX-related balance sheet adjustment which is a £59m credit within adjusted operating expenses in H1 2022. This is explained further in the ‘Year-on-year pro-forma financial performance’ and ‘Embedded Derivatives’ sections. Adjusted EBITDA margin is adjusted EBITDA divided by Total Income (excl. Recoveries).
H1 2022 Statutory results1
The statutory results in the table below and the commentary beneath that compare LSEG continuing results for H1 2022 against the comparable H1 period in 2021 that only included 5 months of contribution from Refinitiv following completion of the acquisition at the end of January 2021. For an analysis of results on a pro-forma basis, please see the following section. Both statutory and pro-forma results treat BETA as discontinued and therefore the revenues and costs associated with the divestment are excluded from all periods.
| Continuing operations | H1 2022 £m |
H1 20211 £m |
|---|---|---|
| Data & Analytics | 2,354 | 1,872 |
| Capital Markets | 720 | 539 |
| Post Trade | 483 | 446 |
| Other | 12 | 13 |
| Total income (excl. recoveries) | 3,569 | 2,870 |
| Recoveries | 166 | 148 |
| Total income (incl. recoveries) | 3,735 | 3,018 |
| Cost of sales | (504) | (392) |
| Gross profit | 3,231 | 2,626 |
| Operating expenses before depreciation, amortisation and impairment |
(1,593) | (1,401) |
| Adjusted operating expenses before depreciation, amortisation and impairment 2 |
(1,433) | (1,219) |
| Non-underlying operating expenses before depreciation, amortisation and impairment |
(160) | (182) |
| Non-underlying profit on disposal of property, plant and equipment |
133 | - |
| Non-underlying remeasurement gain | 23 | - |
| Income from equity investments | - | 11 |
| Share of profit / (loss) after tax of associates | 1 | (2) |
| Earnings before interest, tax, depreciation, amortisation and impairment |
1,795 | 1,234 |
| Adjusted earnings before interest, tax, depreciation, amortisation and impairment 2 |
1,799 | 1,416 |
| Non-underlying earnings before interest, tax, depreciation, amortisation and impairment |
(4) | (182) |
| Depreciation, amortisation and impairment | (898) | (684) |
| Adjusted depreciation, amortisation and impairment 2 | (391) | (297) |
| Non-underlying depreciation, amortisation and impairment | (507) | (387) |
| Operating profit | 897 | 550 |
| Adjusted operating profit 2 | 1,408 | 1,119 |
| Non-underlying operating loss | (511) | (569) |
| Net finance expense | (94) | (87) |
| Adjusted net finance expense 2 | (81) | (86) |
| Non-underlying net finance expense | (13) | (1) |
| Profit before tax | 803 | 463 |
| Adjusted profit before tax 2 | 1,327 | 1,033 |
| Non-underlying loss before tax | (524) | (570) |
| Taxation | (159) | (254) |
| Adjusted tax 2 | (262) | (215) |
| Non-underlying tax | 103 | (39) |
| Profit for the period (from continuing operations) |
644 | 209 |
| Adjusted profit 2 | 1,065 | 818 |
| Non-underlying loss | (421) | (609) |
| Profit from continuing operations attributable to: | ||
| Equity holders | 548 | 143 |
| Underlying | 934 | 721 |
| Non-underlying | (386) | (578) |
| Non-controlling interest | 96 | 66 |
| Underlying | 131 | 97 |
| Non-underlying | (35) | (31) |
| Continuing basic earnings per share (p) 3 | 98.0 | 27.2 |
| Adjusted continuing basic earnings per share (p) 3 | 167.4 | 139.0 |
1 The comparator H1 2021 figures are statutory results, incorporating Refinitiv from acquisition at the end of January 2021. Revenues and costs associated with the BETA divestment have been classified as discontinued and are excluded from all periods. Revenues and costs associated with the Borsa Italiana group divestment, which completed in H1 2021, are also excluded
2 The Group reports adjusted operating expenses before depreciation, amortisation and impairment, adjusted earnings before interest, tax, depreciation, amortisation and impairment (EBITDA), adjusted depreciation, amortisation and impairment, adjusted operating profit and adjusted basic earnings per share (EPS). These measures are not measures of performance under IFRS and should be considered in addition to, and not as a substitute for, IFRS measures of financial performance and liquidity. Adjusted performance measures provide supplemental data relevant to an understanding of the Group’s financial performance and exclude non-underlying items of income and expense that are material by their size and/or nature. Non-underlying items include: amortisation and impairment of goodwill and purchased intangible assets (including customer relationships, trade names, and databases and content, all of which are recognised as a result of acquisitions); incremental depreciation and amortisation of the fair value adjustments on tangible assets and intangible assets recognised as a result of acquisitions; and other non-underlying income or expenses not related to day-to-day operations, such as transaction costs related to acquisitions and disposals of businesses, as well as integration costs
3 Weighted average number of shares used to calculate basic earnings per share and adjusted basic earnings per share from continuing operations is 558 million (H1 2021: 519 million)
H1 2022 Statutory results highlights
Total Income grew by £717 million to £3,735 million. This increase is partly due to the additional month of contribution in H1 2022 compared with H1 2021, associated with the Refinitiv acquisition, which completed on 29 January 2021.
- Data & Analytics: revenues up £482 million to £2,354 million. Each business across the division performed well, with good momentum continuing into H2. £292 million of this increase is due to the additional month of contribution in H1 2022 compared with H1 2021, associated with the acquisition of Refinitiv. £85 million was driven by broad based growth in subscription revenues through new sales, strong customer retention and price increases, partially offset by the impact of the Ukraine / Russia conflict. Other factors, which included the strengthening USD rate vs GBP offset by the deferred revenue accounting adjustment in H1 2021, contributed £85 million in the period.
- Capital Markets: revenues up £181 million to £720 million. Each of the underlying asset classes have seen good growth in H1 2022. £57 million of this increase is due to the additional month of contribution from our FX venues and Tradeweb. Other factors such as the strengthening of USD vs GBP contributed a further £21 million.
- Post Trade: total income up £37 million to £483 million. Growth has primarily been driven by a strong performance in OTC Derivatives as we support customers to manage risk in an uncertain rate environment and in Net Treasury Income and Non-Cash Collateral, which was the result of high cash and non-cash collateral balances. Overall the FX impact was neutral.
H1 2022 Pro-forma summary
| Continuing operations |
H1 2022 £m |
Pro-forma H1 20211 £m |
Variance2 % |
Constant Currency Variance3 % |
Constant Currency Variance (excl. deferred revenue adjustment) 3,4 % |
|---|---|---|---|---|---|
| Data & Analytics | 2,354 | 2,164 | 8.8% | 5.0% | 4.0% |
| Capital Markets | 720 | 616 | 16.9% | 13.0% | 12.9% |
| Post Trade | 483 | 446 | 8.3% | 8.5% | 8.5% |
| Other | 12 | 14 | (14.3%) | (14.2%) | (14.2%) |
| Total income (excl. recoveries) |
3,569 | 3,240 | 10.2% | 6.9% | 6.2% |
| Recoveries | 166 | 178 | (6.7%) | 2.9% | 1.8% |
| Total income (incl. recoveries) |
3,735 | 3,419 | 9.2% | 6.7% | 6.0% |
| Cost of sales | (504) | (452) | 11.5% | 6.6% | 6.6% |
| Gross profit | 3,231 | 2,967 | 8.9% | 6.7% | 5.9% |
| Adjusted operating expenses before depreciation, amortisation and impairment 5 |
(1,433) | (1,397) | 2.6% | 4.3% | 4.3% |
| Income from equity investments |
- | 11 | - | - | - |
| Share of profit / (loss) after tax of associates |
1 | (2) | - | - | - |
| Adjusted earnings before interest, tax, depreciation, amortisation and impairment 5 | 1,799 | 1,579 | 13.9% | 8.4% | 6.8% |
| Adjusted EBITDA Margin 6 | 50.4% | 48.7% | |||
| Adjusted depreciation, amortisation and impairment 5 |
(391) | (347) | 12.7% | 16.3% | 16.3% |
Adjusted |
1,408 | 1,233 | 14.2% | 6.2% | 4.3% |
| Adjusted net finance expense 5 |
(81) | (124) | (34.7%) | ||
| Adjusted profit before tax 5 |
1,327 | 1,108 | 19.8% | ||
| Adjusted tax 5 | (262) | (233) | 12.4% | ||
| Adjusted profit for the period 5 | 1,065 | 87.4 | 21.9% | ||
| Adjusted profit attributable to: | |||||
| Equity holders | 934 | 767 | 21.8% | ||
| Non-controlling interest | 131 | 107 | 22.4% | ||
| Continuing adjusted basic earnings per share (p) |
167.4 | 138.0 | 21.3% | ||
| Weighted average shares (m) | 558 | 556 |
Variances are provided on a pro-forma and constant currency basis. Unless stated otherwise, commentary below is provided on the constant currency variance (excluding the deferred revenue adjustment) to provide insight into performance on a comparable basis. Revenues and costs associated with the BETA divestment have been classified as discontinued and are excluded from all periods. Revenues and costs associated with the Borsa Italiana group divestment, which completed in H1 2021, are also excluded.
1 The H1 2021 comparator is pro-forma and assumes that the acquisition of Refinitiv took place on 1 January 2021
2 Variance is the difference between current and prior year periods using FX rates prevalent at each time, therefore any changes in the FX rates are reflected in the variance percentage alongside business performance
3 Constant currency variance shows underlying financial performance, excluding currency impacts, by comparing the current and prior period at consistent exchange rates
4 Excludes the deferred revenue adjustment further explained in the “Accounting and modelling notes” section
5 Before non-underlying items
6 Adjusted EBITDA margin is adjusted EBITDA divided by Total Income (excl. Recoveries)
H1 2022 Pro-forma highlights
Total Income (excluding recoveries) grew 6.2% at constant currency; up 7.0% excluding Ukraine / Russia conflict impacts.
Data & Analytics: revenues up 4.0%; up 5.0% excluding Ukraine / Russia conflict impacts
- Trading & Banking Solutions down 1.1%; but grew 0.7% excluding Ukraine / Russia conflict impacts – Momentum continues with underlying revenue growth and improved retention. Trading showed growth in Q2 for the first time in many years when excluding Ukraine / Russia. Further progress in the rollout of Workspace in Banking
- Enterprise Data Solutions up 6.3% – Improved retention and sales growth partly offset by business lost through Ukraine / Russia conflict. Data demand continues to grow as customers move more investment strategies to a “big data focus”. MayStreet acquisition completed at the end of May, enhances the breadth of our low-latency offering
- Investment Solutions up 8.0% – Benchmark, Indices and Analytics growth at FTSE Russell continues strongly, up 10.4% with 15 new ESG products through our revenue synergy programme, more than 2021’s total number of products launched. Asset-based revenues rose 8.0% with strong growth in Q1 but broadly flat in Q2 as AUM declined
- Wealth Solutions up 2.3% – Good net sales and retention, offsetting Ukraine / Russia conflict cancellations. Performance excludes the contribution from the low growth, non-core BETA business moved to discontinued operations; divestment completed on 1 July
- Customer & Third-Party Risk Solutions up 7.3% – Double-digit organic growth continued in H1. Strong performance at World-Check. GDC acquisition completed at the end of May, broadening our capability in the digital identity and anti-fraud sector
Capital Markets: revenues up 12.9%; up 13.4% excluding Ukraine / Russia conflict impacts
- Equities up 7.8% – Higher market capitalisation of listed companies at the end of last year, helped drive annual fees revenue, partly offset by reduction in new issues in challenging primary market conditions. Strong secondary market activity driven by market volatility but with lower average yield
- FX up 6.1% – Strong growth at FXall with broadly flat performance at Matching. Announced plans to launch NDF Matching in Singapore, supporting strong demand from Asia markets. Modernising our FX venue technology by re-platforming onto LSEG technology
- Fixed Income, Derivatives & Other up 16.5% – Strong performance at Tradeweb in H11, with double-digit revenue growth across Rates, Credit and Equity asset classes. Tradeweb and FXall collaboration announced to develop hedging workflow solutions for emerging market products
Post Trade: total income up 8.5%; up 8.6% excluding Ukraine / Russia conflict impacts
- OTC Derivatives up 12.0% – Strong activity across SwapClear and SwapAgent as we support customers to manage risk in an uncertain rate environment. Record volumes at ForexClear and CDSClear
- Securities & Reporting up 1.9% – Good volume growth at RepoClear and EquityClear, with the benefit limited by increased competition. Value at Risk (VAR) model introduced at LCH SA RepoClear to improve margin efficiency for members
- Non-Cash Collateral up 6.2% – Driven by higher non-cash collateral balances due to strong volumes
- Net Treasury Income up 11.3% – Growth driven by increased cash collateral balances, unlikely to remain at current level and expected to reduce towards normalised levels across the rest of 2022
1 Tradeweb H1 2022 results were released on 3 August 2022 and provided more detailed commentary on performance
About LSEG
LSEG (London Stock Exchange Group) is a leading global financial markets infrastructure and data provider, playing a vital social and economic role in the world’s financial system.
With our open approach, trusted expertise and global scale, we enable the sustainable growth and stability of our customers and their communities. We are dedicated partners with extensive experience, deep knowledge and a worldwide presence in data and analytics; indices; capital formation; and trade execution, clearing and risk management across multiple asset classes.
LSEG is headquartered in the United Kingdom, with significant operations in over 60 countries across EMEA, North America, Latin America and Asia Pacific. We employ 25,000 people globally, more than half located in Asia Pacific. LSEG’s ticker symbol is LSEG.
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Paul Froud
Chris Turner
ir@lseg.com
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Rhiannon Davies
+44 (0) 20 7797 1222
newsroom@lseg.com
