LSEG Continues Revenue Growth – Markets Media

David Schwimmer, CEO said:

“LSEG delivered a strong performance in the first half with continued revenue growth across all of our businesses. We are managing costs well and we continue to make progress in realizing synergies.

“We provide solutions that solve our customers’ critical problems, with a high proportion of recurring subscription revenue and structurally growing transactional revenue that benefits from volatility. Our cash generation allows us to actively deploy capital in organic and inorganic investments, increase our dividend and initiate a share buyback program, creating additional value for our shareholders. We are successfully executing our strategy, we have good momentum for the second half and our objectives remain unchanged. »

H1 2022 Highlights – Strategy Execution Drives Strong Financial Performance

Note: Unless otherwise indicated, differences refer to growth rates at constant exchange rates, with the comparator, H1 2021, on a pro-forma which also excludes the impact of an accounting adjustment for deferred revenue1.

  • Strong growth in H1 in all divisions, and continued momentum in H2
  • Continued realization of revenue and cost synergies; all targets unchanged
  • Successfully execute organic and inorganic investment opportunities to drive growth, create a more agile and efficient business, and improve our client offering
  • Well positioned for the current environment; provide high added value solutions for critical customer needs
  • Launch of £750m 12-month share buyback program with first tranche to begin immediately
  • Strong revenue growth across all divisions, with pro forma total revenue (excluding recoveries) up 6.2%; up 7.0% after adjusting for the impact of conflicts in Ukraine and Russia2
  • The like-for-like ASV growth metric continues to improve, up 5.4% at the end of H1 (Q1: 4.9%); improved retention and new sales driving the increase
  • The increase in pro forma adjusted operating expenses of 4.3% reflects a lower phasing of costs in the first half of 2021; maintenance of cost forecasts for single-digit growth in 2022 despite an inflationary environment
  • Adjusted EBITDA margin of 48.8%3; on track to reach the margin target of at least 50% by the end of 2023
  • AEPS pro forma up 21% to 167.4p
  • Robust cash generation in the first half and completion of two acquisitions – GDC and MayStreet; Quantile and TORA should be completed in H2
  • Leverage is within our target range of 1-2x within 18 months of acquiring Refinitiv
  • Interim dividend up 27% to 31.7 pence per share

H1 2022 statutory results key figures

Total revenue rose by £717m to £3,735m. This increase is partly due to the additional month of contribution in H1 2022 compared to H1 2021, related to the acquisition of Refinitiv, which closed on January 29, 2021.

  • Data analysis: Revenues up £482 million to £2,354 million. All the division’s activities performed well, with the good momentum continuing in the second half. £292 million of this increase is due to the additional month of contribution in the first half of 2022 compared to the first half of 2021, associated with the acquisition of Refinitiv. £85m was driven by broad-based growth in subscription revenue thanks to new sales, strong customer retention and price increases, partially offset by the impact of the conflict between Ukraine and Russia . Other factors, which included the strengthening of the USD rate against the GBP offset by the accounting adjustment for deferred revenue in the first half of 2021, contributed £85 million in the period.
  • Capital markets: revenue up £181m to £720m. Each of the underlying asset classes saw good growth in the first half of 2022. £57m of this increase was due to the additional month of contribution from our FX and Tradeweb platforms. Other factors such as the strengthening of the USD against the GBP contributed an additional £21 million.
  • Post-exchange: Total revenue up £37m to £483m. Growth was primarily driven by a strong performance in OTC derivatives as we help clients manage risk in an uncertain rate environment, and in net cash income and non-cash collateral , which resulted from high cash and non-cash collateral balances. Overall, the currency impact was neutral.

H1 2022 pro forma highlights

Total revenue (excluding recoveries) increased by 6.2% at constant exchange rate; up 7.0% excluding the impact of the Ukraine/Russia conflict.

Data analysis: revenue up 4.0%; up 5.0% excluding the impact of the Ukraine/Russia conflict

  • Trading & Banking Solutions down 1.1%; but rose 0.7% excluding the impact of the Ukraine-Russia conflict – Momentum continues with underlying revenue growth and improved retention. Trading showed growth in Q2 for the first time in many years excluding Ukraine/Russia. New Advances in Workspace in Banking Deployment
  • Enterprise Data Solutions up 6.3% – Improved retention and sales growth partially offset by loss of business due to Ukraine-Russia conflict. The demand for data continues to grow as clients shift more investment strategies towards a “big data focus”. MayStreet acquisition completed in late May expands scope of our low latency offering
  • Investment Solutions up 8.0% – Growth in benchmarks, indices and analytics at FTSE Russell continues strongly, up 10.4% with 15 new ESG products thanks to our Synergy Program revenue, more than the total number of products launched in 2021. Asset-based revenue increased 8.0% with strong growth in Q1, but broadly flat in Q2 as assets under management declined
  • Wealth Solutions up 2.3% – Good turnover and retention, offsetting cancellations linked to the Ukraine/Russia conflict. The performance excludes the contribution of low-growth non-strategic BETA business moved to discontinued operations; sale completed on July 1
  • Client Solutions & Third Party Risks up 7.3% – Double-digit organic growth continued in H1. Strong performance at World-Check. Acquisition of GDC completed at the end of May, expanding our capabilities in the digital identity and anti-fraud sector

Capital markets: turnover up 12.9%; up 13.4% excluding the impact of the Ukraine/Russia conflict

  • Shares up 7.8% – Higher market capitalization of listed companies at the end of last year contributed to the growth in annual fee income, partially offset by the reduction in new issues in difficult market conditions primary. Strong secondary market activity driven by market volatility but with a lower average yield
  • FX up 6.1% – Strong growth at FXall with overall stable performance at Matching. Announcement of plans to launch NDF Matching in Singapore, supporting strong demand from Asian markets. Modernization of our FX site technology by re-platforming on LSEG technology
  • Fixed Income, Derivatives & Other up 16.5% – Good performance of Tradeweb in H11, with double-digit revenue growth in the Fixed Income, Credit and Equity asset classes. Announcement of a collaboration between Tradeweb and FXall to develop hedging workflow solutions for emerging market products

Post-trade: total revenue up 8.5%; up 8.6% excluding the impact of the Ukraine/Russia conflict

  • OTC derivatives up 12.0% – Strong activity on SwapClear and SwapAgent as we help our clients 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 earnings 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 cash income up 11.3% – Growth driven by higher cash collateral balances, which are not expected to stay at current levels and are expected to return to normalized levels over the remainder of 2022

1 Tradeweb H1 2022 results were released on August 3, 2022 and provided more detailed performance commentary

Source: LSEG