Source: London Stock Exchange
LSEG Q1 2017 Interim Management Statement
• Strong start to 2017: Q1 total income from continuing operations up 19% to £458.7 million; gross profit (after cost of sales) up 17%
• Strong results reflect good headline growth across all core business areas as the Group continues to deliver and execute on its strategy; revenue up 18% (up 8% on an organic and constant currency basis)
• Group remains actively engaged in exploring selective ongoing organic and inorganic investments in order to drive further growth
• LCH income increased 31% (up 21% at constant currency), with 27% revenue growth in OTC from higher SwapClear client trades; good performances also in CDSClear and ForexClear. Non-OTC clearing revenue up 15% with good growth in fixed income.
• Post Trade Services (Italy) revenue up 18% (up 6% at constant currency) - increased settlement and custody revenues offset lower clearing revenue.
• Information Services revenues up 24% (up 9% on organic and constant currency basis) - FTSE Russell up 11% on a like for like basis, and up 31% on a headline basis with the inclusion of Mergent following the successful completion in early January
• Capital Markets revenues up 1% (down 4% at constant currency), reflecting lower trading levels against a strong comparative quarter last year
• Technology Services revenues up 27% (up 18% at constant currency)
• Group continues to invest - new initiatives in the period include:
• CDSClear launched client clearing
• LCH SA began offering repo clearing on German debt
• FTSE Russell launched £SONET - a new secured rate for sterling overnight funds
• London Stock Exchange announced plans to launch a new International Securities Market
• More than 500 companies on ELITE, across 26 countries; ELITE Club Deal (online private placement platform) signed a strategic partnership with The HUB to provide bespoke technology
• £200 million share buyback programme commenced at the end of the quarter
Organic growth is calculated in respect of businesses owned for at least the full 3 months in either period and so excludes: Russell Investment Management, SwapMatch, Mergent and ISPS. 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 made a strong start to the year with growth across all of our core businesses. In particular, we recorded strong results in the SwapClear OTC clearing service, and at FTSE Russell. We also have the first contribution from Mergent, having completed the transaction at the start of the quarter.
“We are well positioned as an open access financial markets infrastructure group to benefit from the introduction of MiFID II and remain focused on executing our strategy, partnering with customers and delivering value for shareholders. We continue to be actively engaged in exploring selective ongoing organic and inorganic investments in order to drive further growth.”
Taking account of the acquisition of Mergent Inc. on 3 January 2017, together with normal course expenses (including funding organic investment), the Group’s financial position is broadly unchanged from that reported at 31 December 2016. As at 31 March 2017, the Group had committed facility headroom of over £600 million available for general corporate purposes. During the period, the Group extended £600 million of its facilities that were due to mature in June 2017, for up to a further 12 months to maintain financial flexibility as the Group continues to invest for growth. The Group also confirmed LCH’s intention to redeem and cancel its €200,000,000 Preferred Securities, effective on 18 May 2017.
The Euro strengthened by 10% against sterling compared with the same period last year while the US $ strengthened by 13%. 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£6.3 million for Q1, while a US$0.05 move would have resulted in a c£4.9 million change.
Reflecting the Group’s active capital management framework and with leverage as at 31 December 2016 being at the lower end of the target 1-2x range, the Group committed in March 2017 to a £200 million on market share buyback programme. The value of the programme reflects the special dividend that would have been paid to LSEG shareholders had the merger with Deutsche Borse taken place.
Investor Update event
LSEG will hold an event in London on 12 June 2017 to update investors on the Group’s plans and progress in executing its strategy for growth across its core business areas. Further details will be provided nearer to the date.