Interim Management Statement for the period to 26 April 2016, including revenues and KPIs for the three months ended 31 March 2016 (Q1)
- A strong performance – all main business divisions delivering growth on an organic and constant currency basis
- Q1 total income from continuing operations up 9% to £387.6 million
- Merger with Deutsche Börse announced in March 2016; a compelling value enhancing opportunity through the creation of a leading global markets infrastructure group anchored in Europe – shareholder documents being prepared
- Sale of Russell Investment Management, for gross proceeds of US$1,150 million, is on track to complete in Q2 2016
- Information Services revenues up 10% (up 7% on organic and constant currency basis), reflecting continued good growth at FTSE Russell
- LCH revenues increased 14% (up 12% at constant currency), with 22% revenue growth in OTC from higher SwapClear client trades; good growth also in CDS volumes
- Capital Markets revenues up 8% (up 6% at constant currency), with growth across all areas
- Post Trade Services (Italy) income up 12% (up 8% at constant currency), with growth in clearing volumes and net treasury income
- Technology Services revenues down 18%, mainly as the result of the timing of customer deliveries
- Group continues to deliver on its strategy:
- LCH received recognition as a clearing house in Singapore for SwapClear, ForexClear and EnClear (Freight); and in Japan for non-yen interest rate derivatives at SwapClear
- LCH Spider, a new rates portfolio margining service, expected to launch in Q2, subject to regulatory approval
- CurveGlobal expected to launch Q3 2016
- SETS intra-day auction launched in March 2016 with good initial volumes
- MillenniumIT, successfully implemented its Millennium PostTrade platform to support Singapore Exchange’s Central Depository (CDP) business
- ELITE expanded to over 380 companies in 23 countries, as has been launched with partnerships in Morocco and Turkey
Organic growth is calculated in respect of businesses owned for at least the full 3 months in either period and so excludes ExactPro, Proquote and XTF Inc. The Group’s principal foreign exchange exposure arises from translating our European based euro and US based USD reporting businesses into sterling.
Commenting on performance in Q1, Xavier Rolet, Chief Executive, said:
“The Group has started the year well and delivered a strong Q1 financial performance. We achieved underlying growth in each of our core business areas, with particularly strong performances in LCH’s OTC clearing, at FTSE Russell and good results across Capital Markets. We also continued to make good progress integrating recent acquisitions, developing innovative new products and expanding services and partnerships in line with our successful open access strategy.
“We recently announced our proposed merger with Deutsche Börse. This presents a compelling opportunity to expand our business in an industry-defining combination, creating a global markets infrastructure group. With substantial cost synergies and multiple opportunities to extend our product offerings, we believe this transaction offers significant value and benefits to customers and shareholders”
Following normal course bond coupon payments, as well as ongoing investment in organic growth initiatives, the Group’s financial position is not materially changed from that reported at 31 December 2015. As at 31 March 2016, the Group had committed facility headroom of circa £550 million available for general corporate purposes.
The euro strengthened by 4% against sterling compared with the same period last year while the US $ strengthened by 5%. To illustrate our exposure to movements in exchange rates, a €0.05 change in the average euro:sterling rate would have resulted in a change to continuing operations total income of c£5 million for Q1, while a US$0.05 move would have resulted in a c£3 million change.
Merger with Deutsche Börse
The Group announced a proposed merger with Deutsche Börse during the period, with a detailed announcement on 16 March 2016. The Board believes the combination would create a leading global markets infrastructure group anchored in Europe and represents a compelling opportunity for both businesses to accelerate their successful and complementary growth strategies.
We continue to prepare our shareholder documents and will update the market in due course.
Current trading and outlook
The Group has made a strong start to the year, despite testing market conditions during the first quarter. The growth achieved at LCH and in our Information Services division, particularly at FTSE Russell, demonstrates the strong ongoing demand for our services. The good performance of our Capital Markets business is also encouraging.
We remain focused on achieving the synergies from the FTSE Russell index operations and on investment in a wide range of growth initiatives. The Group is well placed to develop further. In addition, we are also advancing the proposed merger with Deutsche Börse and working on shareholder documentation as well as preparatory work on approvals needed for the transaction.