LONDON STOCK EXCHANGE PLC 
20 October 2016
LONDON STOCK EXCHANGE GROUP plc
INTERIM MANAGEMENT STATEMENT
FOR THE PERIOD TO 19 OCTOBER 2016, INCLUDING REVENUES AND KPIs FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2016 (Q3)
· Continued good growth: Q3 total income from continuing operations (excluding assets sold / held for sale) up 19% to £414.6 million and rose 14% year-to-date to £1,200.4 million
· Q3 revenues from continuing operations up 15% to £376.2 million; up 11% for 9 months year-to-date at £1,098.1 million
· Reflecting strong resilience and diversified range of business, all core divisions delivering good growth despite a backdrop of testing markets and economic uncertainty
· Focus remains on completion of the merger with Deutsche Börse, creating a leading global markets infrastructure group - shareholder approvals achieved and work continues to secure regulatory consents
Q3 summary:
· Capital Markets revenues up 16% (up 8% at constant currency), with growth in both primary and secondary markets despite volatile markets; Turquoise continues to trade well, with strong growth in the Block Discovery service (including a record month in September)
· LCH income increased 29% (up 18% at constant currency), with 21% revenue growth in OTC from higher SwapClear client trades; good volume growth also in CDSClear and ForexClear
· Post Trade Services (Italy) income up 23% (up 5% at constant currency) - increased settlement and custody revenues, together with increased net treasury income, offsetting lower clearing revenue
· Information Services revenues up 13% (up 3% on organic and constant currency basis) - underlying growth at FTSE Russell impacted in part by market-related weakness (ETF AUM/passive fund revenues lag recovery in market and derivatives contracts down versus high levels in volatile markets last year), and by one-off accounting adjustments. Improvement is expected in Q4 as values have increased and confidence remains in the many continuing positive market trends and opportunities to drive further good growth
· Technology Services revenues up 5% (up 4% at constant currency)
· Investment continues in a wide range of growth opportunities, with notable developments in the period:
- CurveGlobal, an open access interest rate derivatives venture, launched in partnership with major dealer banks and CBOE - providing customers with the opportunity to gain efficiencies through the LCH Spider portfolio margining service
- Turquoise Plato platform launched with buy side and sell side partners - using the successful 'large in scale' Block Discovery platform
- LCH received recognition as a designated central counterparty in Hong Kong for SwapClear and ForexClear to clear certain OTC interest rate derivatives in HKD or one of the G4 currencies (USD, EUR, GBP and JPY)
- MillenniumIT equities and fixed income trading and surveillance technology went live at Casablanca Stock Exchange; MillenniumIT also showcased its new real time post trade technology capabilities
- Integration of the FTSE Russell index businesses is running ahead of plan
Organic growth is calculated in respect of businesses owned for at least the full 3 months in either period and so excludes Exactpro, Proquote, Russell Investment Management, SwapMatch 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 Q3, Xavier Rolet, Chief Executive, said:
'This is another good performance, delivering growth across our core businesses while continuing to invest in a wide range of opportunities to drive future returns.
'In line with our open access approach, we continue to partner with customers to drive innovation with both CurveGlobal and Turquoise Plato going live in September. In Post Trade, we continue to see good growth in OTC clearing across the SwapClear, CDSClear and ForexClear services. The integration of FTSE Russell is running ahead of schedule and the Information Services business is delivering good results. The Group is financially well positioned as we reduce operating leverage and further strengthen our balance sheet.
'We remain focused on achieving the necessary regulatory approvals to complete the merger with Deutsche Börse, creating a global markets infrastructure group, which we believe will generate significant value and benefits for customers and shareholders.'
Financial Position
Following normal course interim dividend and bond coupon payments, as well as ongoing investment in organic growth initiatives and integration, the Group's financial position is broadly unchanged from that reported at 30 June 2016. As at 30 September, 2016, the Group had committed facility headroom of circa £780 million available for general corporate purposes, having drawn facilities to repay the £250 million Bond due on 7 July 2016.
The euro and US dollar both strengthened by 15% against sterling compared with the same period last year. 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£6.5 million for Q3, while a US$0.05 move would have resulted in a c£3.5 million change.
Merger withDeutsche Börse
Following receipt of shareholder approvals, the Group has maintained its focus on achieving regulatory consents for the merger with Deutsche Börse. The European Commission concluded its initial competition review of the merger and announced that it opened a further (Phase II) process on 28 September 2016. At the same time, the Group announced that, in order to proactively address anti-trust concerns in relation to certain businesses, it intends to explore a potential sale of LCH SA, LCH Group Limited's French-regulated operating subsidiary. The sale of this business would be conditional on the successful closing of the merger.
Current trading
The Group is well positioned and continues executing on its successful growth strategy. All core parts of our business continue to perform well, despite testing market conditions. Investment remains ongoing on a wide range of initiatives, and the Group has successfully launched services to meet customer demands for innovative and efficient new products to drive future performance.
Further information is available from:
London Stock Exchange Group plc | Gavin Sullivan - Media Paul Froud - Investor Relations | +44 (0) 20 7797 1222 +44 (0) 20 7797 3322 |
A conference call for analysts and investors will be held at 8:30 (UK time) on Thursday 20 October. On the call will be David Warren (CFO) and Paul Froud (Head of Investor Relations).
To access the Telephone conference call dial 0800 694 0257 or +44 (0) 1452 555 566
Conference ID: 9820 7601
Q3 Revenue Summary
Revenues for three months and nine months ended 30 September 2016 refer to continuing operations, with comparatives against performance for the same period last year, are provided below. Growth rates for both Q3 and year to date performance are also expressed on an organic and constant currency basis. All figures are unaudited.
Organic and | Organic and | ||||||||
Three months ended | constant | Nine months ended | constant | ||||||
30 September | currency | 30 September | currency | ||||||
2016 | 2015 | Variance | variance | 2016 | 2015 | Variance | variance | ||
Continuing operations: | £m | £m | % | % | £m | £m | % | % | |
Revenue | |||||||||
Capital Markets | 89.6 | 77.1 | 16% | 8% | 271.2 | 247.1 | 10% | 5% | |
Post Trade Services - CC&G and Monte Titoli | 25.2 | 21.8 | 16% | (2%) | 73.3 | 68.7 | 7% | (3%) | |
Post Trade Services - LCH | 89.5 | 75.8 | 18% | 10% | 256.7 | 224.9 | 14% | 9% | |
Information Services | 148.5 | 131.5 | 13% | 3% | 434.4 | 387.9 | 12% | 6% | |
Technology Services | 20.8 | 19.8 | 5% | 4% | 58.8 | 58.1 | 1% | (4%) | |
Other | 2.6 | 0.5 | - | - | 3.7 | 2.1 | - | - | |
Total revenue | 376.2 | 326.5 | 15% | 6% | 1,098.1 | 988.8 | 11% | 5% | |
Net treasury income through CCP businesses | 35.3 | 21.2 | 67% | 44% | 91.3 | 61.5 | 48% | 36% | |
Other income | 3.1 | 1.7 | - | - | 11.0 | 4.3 | - | - | |
Total income | 414.6 | 349.4 | 19% | 9% | 1,200.4 | 1,054.6 | 14% | 8% | |
Organic growth is calculated in respect of businesses owned for at least the full 3 or 9 months in either period and excludes Exactpro, Proquote, Russell Investment Management, SwapMatch 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.
More detailed revenues by segment are provided in tables below:
Capital Markets | |||||||||
Organic and | Organic and | ||||||||
Three months ended | constant | Nine months ended | constant | ||||||
30 September | currency | 30 September | currency | ||||||
2016 | 2015 | Variance | variance | 2016 | 2015 | Variance | variance | ||
Revenue | £m | £m | % | % | £m | £m | % | % | |
Primary Markets | 21.1 | 19.1 | 10% | 6% | 65.3 | 64.5 | 1% | (1%) | |
Secondary Markets - Equities | 40.0 | 35.1 | 14% | 9% | 123.1 | 109.8 | 12% | 10% | |
Secondary Markets - Fixed income, derivatives and other | 28.5 | 22.9 | 24% | 7% | 82.8 | 72.8 | 14% | 4% | |
Total revenue | 89.6 | 77.1 | 16% | 8% | 271.2 | 247.1 | 10% | 5% | |
Removal SwapMatch from Capital Markets (acquired Q3 2016)
Post Trade Services - CC&G and Monte Titoli | |||||||||
Three months ended | Constant | Nine months ended | Constant | ||||||
30 September | currency | 30 September | currency | ||||||
2016 | 2015 | Variance | variance | 2016 | 2015 | Variance | variance | ||
£m | £m | % | % | £m | £m | % | % | ||
Revenue | |||||||||
Clearing | 10.0 | 9.4 | 6% | (10%) | 30.7 | 29.3 | 5% | (5%) | |
Settlement, Custody & other | 15.2 | 12.4 | 23% | 3% | 42.6 | 39.4 | 8% | (2%) | |
Total revenue | 25.2 | 21.8 | 16% | (2%) | 73.3 | 68.7 | 7% | (3%) | |
Net treasury income | 11.2 | 7.7 | 45% | 24% | 32.2 | 21.0 | 53% | 39% | |
Total income | 36.4 | 29.5 | 23% | 5% | 105.5 | 89.7 | 18% | 7% | |
LCH | |||||||||
Three months ended | Constant | Nine months ended | Constant | ||||||
30 September | currency | 30 September | currency | ||||||
2016 | 2015 | Variance | variance | 2016 | 2015 | Variance | variance | ||
Revenue | £m | £m | % | % | £m | £m | % | % | |
OTC - SwapClear, ForexClear & CDSClear | 47.6 | 39.4 | 21% | 13% | 136.7 | 114.7 | 19% | 14% | |
Non-OTC - Fixed income, Cash equities and Listed derivatives | 28.3 | 30.0 | 0% | (18%) | 85.9 | 87.9 | (2%) | (10%) | |
Other | 13.6 | 6.4 | 113% | 178% | 34.1 | 22.3 | 53% | 65% | |
Total revenue | 89.5 | 75.8 | 18% | 10% | 256.7 | 224.9 | 14% | 9% | |
Net treasury income | 24.1 | 13.5 | 79% | 55% | 59.1 | 40.5 | 46% | 35% | |
Other income | 2.8 | - | - | - | 7.2 | ||||
Unrealised gain / (loss) | (1.5) | 0.1 | - | - | (1.5) | 0.2 | - | - | |
Total income | 114.9 | 89.4 | 29% | 18% | 321.5 | 265.6 | 21% | 15% | |
Information Services | |||||||||
Organic and | Organic and | ||||||||
Three months ended | constant | Nine months ended | constant | ||||||
30 September | currency | 30 September | currency | ||||||
2016 | 2015 | Variance | variance | 2016 | 2015 | Variance | variance | ||
£m | £m | % | % | £m | £m | % | % | ||
Revenue | |||||||||
FTSE Russell Indexes | 102.1 | 90.7 | 13% | 0% | 295.7 | 261.9 | 13% | 5% | |
Real time data | 23.3 | 19.9 | 17% | 12% | 67.7 | 61.8 | 10% | 7% | |
Other information services | 23.1 | 20.9 | 11% | 6% | 71.0 | 64.2 | 11% | 8% | |
Total revenue | 148.5 | 131.5 | 13% | 3% | 434.4 | 387.9 | 12% | 6% | |
Note: Continuing operations only (excludes Proquote from 2015)
Removal XTF from Other information services (acquired Q4 2015)
Technology Services | |||||||||
Organic and | Organic and | ||||||||
Three months ended | constant | Nine months ended | constant | ||||||
30 September | currency | 30 September | currency | ||||||
2016 | 2015 | Variance | variance | 2016 | 2015 | Variance | variance | ||
£m | £m | % | % | £m | £m | % | % | ||
MillenniumIT & other technology | 20.8 | 19.8 | 5% | 4% | 58.8 | 58.1 | 1% | (4%) | |
Removal Exactpro from Technology services (acquired Q4 2015)
Basis of Preparation
Results for the period ended 30 September 2016 have been translated into Sterling using the average monthly exchange rates. Constant currency growth rates have been calculated by translating prior period results at the average exchange rate for the current period.
Average rate | Average rate | ||
3 months ended | 9 months ended | Closing rate at | |
30 September 2016 | 30 September 2016 | 30 September 2016 | |
GBP : EUR | 1.18 | 1.25 | 1.15 |
GBP : USD | 1.31 | 1.39 | 1.30 |
Average rate | Average rate | ||
3 months ended | 9 months ended | Closing rate at | |
30 September 2015 | 30 September 2015 | 30 September 2015 | |
GBP : EUR | 1.39 | 1.38 | 1.35 |
GBP : USD | 1.55 | 1.53 | 1.52 |
Appendix - Key performance indicators
Capital Markets - Primary Markets | |||||||||
Three months ended | Nine months ended | ||||||||
30 September | Variance | 30 September | Variance | ||||||
2016 | 2015 | % | 2016 | 2015 | % | ||||
New Issues | |||||||||
UK Main Market, PSM & SFM | 11 | 13 | (15%) | 36 | 60 | (40%) | |||
UK AIM | 11 | 14 | (21%) | 52 | 46 | 13% | |||
Borsa Italiana | 5 | 7 | (29%) | 13 | 20 | (35%) | |||
Total | 27 | 34 | (21%) | 101 | 126 | (20%) | |||
Money Raised (£bn) | |||||||||
UK New | 0.3 | 0.8 | (63%) | 2.2 | 7.1 | (69%) | |||
UK Further | 4.0 | 4.3 | (7%) | 10.0 | 17.1 | (42%) | |||
Borsa Italiana new and further | 0.8 | 0.4 | 100% | 4.7 | 4.4 | 7% | |||
Total (£bn) | 5.1 | 5.5 | (7%) | 16.9 | 28.6 | (41%) | |||
Capital Markets - Secondary Markets | |||||||||
Three months ended | Nine months ended | ||||||||
30 September | Variance | 30 September | Variance | ||||||
Equity | 2016 | 2015 | % | 2016 | 2015 | % | |||
Totals for period | |||||||||
UK value traded (£bn) | 310 | 311 | (0%) | 947 | 965 | (2%) | |||
Borsa Italiana (no of trades m) | 16.6 | 17.5 | (5%) | 57.2 | 54.6 | 5% | |||
Turquoise value traded (€bn) | 325 | 254 | 28% | 1,085 | 825 | 32% | |||
SETS Yield(basis points) | 0.63 | 0.62 | 2% | 0.63 | 0.62 | 2% | |||
Average daily | |||||||||
UK value traded (£bn) | 4.8 | 4.8 | 0% | 5.0 | 5.1 | (2%) | |||
Borsa Italiana (no of trades '000) | 255 | 265 | (4%) | 298 | 286 | 4% | |||
Turquoise value traded (€bn) | 4.9 | 3.8 | 29% | 5.6 | 4.3 | 30% | |||
Derivatives (contracts m) | |||||||||
LSE Derivatives | 0.9 | 1.1 | (18%) | 3.3 | 3.4 | (3%) | |||
IDEM | 10.2 | 11.5 | (11%) | 35.4 | 33.6 | 5% | |||
Total | 11.1 | 12.6 | (12%) | 38.7 | 37.0 | 5% | |||
Fixed Income | |||||||||
MTS cash and BondVision (€bn) | 982 | 861 | 14% | 3,024 | 2,996 | 1% | |||
MTS money markets (€bn term adjusted) | 19,305 | 22,728 | (15%) | 63,730 | 67,584 | (6%) | |||
Post Trade Services - CC&G and Monte Titoli | |||||||||
Three months ended | Nine months ended | ||||||||
30 September | Variance | 30 September | Variance | ||||||
2016 | 2015 | % | 2016 | 2015 | % | ||||
CC&G Clearing | |||||||||
Contracts (m) | 28.0 | 30.2 | (7%) | 96.4 | 91.7 | 5% | |||
Initial margin held (average €bn) | 11.7 | 12.8 | (9%) | 11.8 | 12.4 | (5%) | |||
Monte Titoli | |||||||||
Settlement instructions (trades m) | 9.4 | 14.0 | (33%) | 32.0 | 48.9 | (35%) | |||
Custody assets under management (average €trn) | 3.17 | 3.30 | (4%) | 3.17 | 3.31 | (4%) | |||
Post Trade Services - LCH | |||||||||
Three months ended | Nine months ended | ||||||||
30 September | Variance | 30 September | Variance | ||||||
2016 | 2015 | % | 2016 | 2015 | % | ||||
OTC derivatives | |||||||||
SwapClear | |||||||||
IRS notional cleared ($tn) | 160 | 131 | 22% | 506 | 392 | 29% | |||
SwapClear members | 105 | 114 | (8%) | 105 | 114 | (8)% | |||
Client trades ('000) | 232 | 182 | 27% | 693 | 492 | 41% | |||
CDSClear | |||||||||
Notional cleared (€bn) | 105.9 | 38.5 | 175% | 370.3 | 104.9 | 253% | |||
CDSClear members | 12 | 11 | 9% | 12 | 11 | 9% | |||
ForexClear | |||||||||
Notional value cleared ($bn) | 630 | 291 | 116% | 1206 | 813 | 48% | |||
ForexClear members | 24 | 23 | 4% | 24 | 23 | 4% | |||
Non-OTC | |||||||||
Fixed income - Nominal value (€tn) | 17.1 | 18.5 | (8%) | 52.1 | 55.0 | (5%) | |||
Listed derivatives (contracts m) | 28.5 | 38.2 | (25%) | 98.5 | 110.8 | (11%) | |||
Cash equities trades (m) | 165.8 | 139.2 | 19% | 511.3 | 410.3 | 25% | |||
Average cash collateral (€bn) | 68.9 | 58.8 | 17% | 63.8 | 57.1 | 12% | |||
Information Services | ||||
As at | ||||
30 September | Variance | |||
2016 | 2015 | % | ||
ETF assets under management benchmarked ($bn) | ||||
FTSE | 246 | 206 | 19% | |
Russell Indexes | 176 | 145 | 21% | |
Total | 422 | 351 | 20% | |
Terminals | ||||
UK | 73,000 | 75,000 | (3%) | |
Borsa Italiana Professional Terminals | 129,000 | 130,000 | (1%) | |
Total Income - Quarterly | ||||||||
CY 2015 | CY 2016 | |||||||
£ millions | Q1 | Q2 | Q3 | Q4 | CY 2015 | Q1 | Q2 | Q3 |
Primary Markets | 21.4 | 24.0 | 19.1 | 24.3 | 88.8 | 22.2 | 22.0 | 21.1 |
Secondary Markets - Equities | 38.2 | 36.5 | 35.1 | 33.9 | 143.7 | 42.2 | 40.9 | 40.0 |
Secondary Markets - Fixed income, derivatives & other | 26.3 | 23.6 | 22.9 | 25.0 | 97.8 | 28.0 | 26.3 | 28.5 |
Capital Markets | 85.9 | 84.1 | 77.1 | 83.2 | 330.3 | 92.4 | 89.2 | 89.6 |
Clearing | 10.0 | 9.8 | 9.4 | 8.8 | 38.0 | 10.6 | 10.1 | 10.0 |
Settlement, Custody & other | 13.4 | 13.6 | 12.4 | 12.4 | 51.8 | 12.9 | 14.5 | 15.2 |
Post Trade Services - CC&G and Monte Titoli | 23.4 | 23.4 | 21.8 | 21.2 | 89.8 | 23.5 | 24.6 | 25.2 |
OTC - SwapClear, ForexClear & CDSClear | 36.5 | 38.8 | 39.4 | 42.1 | 156.8 | 44.6 | 44.4 | 47.6 |
Non OTC - Fixed income, Cash equities & Listed derivatives | 29.0 | 28.9 | 30.0 | 26.6 | 114.5 | 28.6 | 29.1 | 28.3 |
Other | 8.4 | 7.5 | 6.4 | 8.5 | 30.8 | 11.1 | 9.3 | 13.6 |
Post Trade Services - LCH | 73.9 | 75.2 | 75.8 | 77.2 | 302.1 | 84.3 | 82.8 | 89.5 |
FTSE Russell Indexes | 85.0 | 86.2 | 90.7 | 87.0 | 348.9 | 96.4 | 97.1 | 102.1 |
Real time data | 21.3 | 20.7 | 19.9 | 20.3 | 82.2 | 22.7 | 21.8 | 23.3 |
Other information | 24.5 | 23.3 | 23.1 | 23.0 | 93.9 | 22.4 | 25.5 | 23.1 |
Information Services | 130.8 | 130.2 | 133.7 | 130.3 | 525.0 | 141.5 | 144.4 | 148.5 |
Technology Services | 19.6 | 18.6 | 19.8 | 22.5 | 80.6 | 16.2 | 21.9 | 20.8 |
Russell Investment Management (gross) | 246.7 | 251.5 | 237.4 | 217.5 | 953.1 | |||
Other | 0.8 | 0.8 | 0.5 | 2.4 | 4.5 | 1.0 | 0.1 | 2.6 |
Total Revenue | 581.1 | 583.9 | 566.1 | 554.3 | 2,285.4 | 358.9 | 363.0 | 376.2 |
Net treasury income through CCP: | ||||||||
CC&G | 6.8 | 6.6 | 7.7 | 8.2 | 29.3 | 10.3 | 10.7 | 11.2 |
LCH | 13.4 | 13.6 | 13.5 | 15.9 | 56.4 | 17.6 | 17.4 | 24.1 |
Other income | 1.7 | 1.7 | 2.0 | 5.0 | 10.4 | 0.8 | 7.1 | 3.1 |
Total income | 603.0 | 605.8 | 589.3 | 583.4 | 2,381.5 | 387.6 | 398.2 | 414.6 |
Russell Investment Management (incl Other Income) | 246.7 | 252.3 | 237.7 | 218.5 | 955.3 | |||
Proquote | 2.3 | 2.3 | 2.2 | 0.8 | 7.6 | |||
Total income- continuing operations | 354.0 | 351.2 | 349.4 | 364.1 | 1,418.6 | |||
Note: Minor rounding differences may mean quarterly and other segmental figures may differ slightly
London Stock Exchange plc published this content on 20 October 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 20 October 2016 07:28:06 UTC.
Original documenthttp://www.lseg.com/regulatory-news/13007000/details
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