London Stock Exchange Group - Interim Management Statement For The Period To 17 July 2013, Including Revenues And KPIs For The Three Months Ended 30 June 2013 (Q1)

• Good Group performance – revenue up 39 per cent on Q1 last year at £249.7 million, reflecting growth across all business divisions and first time addition of LCH.Clearnet; revenue up 8% on an organic, constant currency basis
• Information Services – revenue up 11 per cent with continued good growth from FTSE (up 8% on organic and constant currency basis)
• Post Trade Services (excluding LCH.Clearnet) – the Group’s Italian-based operations reported revenues up by 10 per cent (up 5% on organic and constant currency basis)
• LCH.Clearnet  – £60.7 million total income contribution (excluding unrealised loss) since the Group’s completion of the acquisition of a majority stake, effective from 1 May 2013
• Capital Markets – revenue up 11 per cent with growth in both primary and secondary markets (up 9% on organic and constant currency basis)
• Technology Services – revenue up 28 per cent reflecting a strong performance from MillenniumIT (up 18% on organic and constant currency basis)
• Ian Axe to leave his position as CEO of LCH.Clearnet Group; will remain in place to ensure an orderly transition
• LSEG confirmed plans to expand its custody and settlement services through establishment of a new CSD in Luxembourg; a major new customer confirms selection of LSEG for settlement, custody and asset servicing

Commenting on performance in the past quarter, Xavier Rolet, Group Chief Executive, said:

“The Group has made a positive start to the year.  Our portfolio of complementary global brands continues to perform well and we have seen revenue growth across all of our business divisions.  In particular, we have delivered strong results from FTSE, MillenniumIT and from Capital Markets, reflecting an uplift in admissions and money raised, and improving market sentiment in secondary markets.

“We are also pleased to report the first revenue contribution from LCH.Clearnet, which showed year on year top line growth, including strong performance from the SwapClear IRS service as it continues to gain good traction.  Work is underway to drive the synergy benefits from the transaction with LCH.Clearnet.

“We remain focused on delivering benefits from recent transactions, developing opportunities and expanding our global footprint.  The Group is well placed to build on the positive start we have made so far this year”

LCH.Clearnet

LCH.Clearnet produced a good performance in clearing fee revenues with an increase in the type and volume of financial instruments cleared. SwapClear maintained its leadership position in the interest rate swap clearing business, with expansion of the service in the US as new customers were added following go-live of mandatory clearing for certain categories of firms under Dodd-Frank.

Net treasury income remained broadly flat year-on-year with a reduction in the level of cash collateral partly offset by revenue share movements.

Operating costs have increased further as investment continues in people and systems to enhance risk-management and implement regulatory requirements.  Investment in future growth opportunities also continued, including OTC client clearing, in listed product businesses, in energy and commodities clearing in Australia, and with the launch of LCH.Clearnet LLC in the US.

Over the past two and half years Ian Axe has implemented a programme of strategic initiatives that has secured the future direction of the LCH.Clearnet business, including leading the successful execution of the sale of majority stake in the business to LSEG. Following the transaction’s completion, Ian is to leave his position as CEO of LCH.Clearnet Group Limited, in order to pursue other interests. He will remain in his role to ensure an orderly handover process.

Financial Position

As expected, the Group increased its net debt in the quarter following completion of the acquisition of a majority stake in LCH.Clearnet and the subsequent subscription to its capital raise.  Operating net debt to EBITDA, following this investment, was consistent with the 2.1x illustrative pro forma guidance given at the time of our Preliminary Results.   While credit facility headroom remains comfortable, the Group is at an advanced stage of discussions with its banks to replace existing facilities with a new package of revolving credit facilities, increasing headroom and extending bank commitments out to 2018.  Otherwise, there are no other material changes to the Group’s financial position since financial year end. 

The average £:€ exchange rate weakened by 4 per cent in Q1 compared to the same period last year, from €1.23 to €1.18.  Each €0.05 movement in the average £:€ rate would have changed the Group’s operating profit by approximately £9 million in the last financial year.

Current Trading and Outlook

The Group has made a positive start to the new financial year and remains well placed to develop as markets evolve.  We will continue to focus on delivering benefits from recent transactions, developing opportunities and expanding our more diversified range of products and services.

Q1 Revenue Summary

 

Revenues for three months ended 30 June 2013, with comparatives against performance for the same period last year, are shown below.  Growth rates for Q1 performance are also expressed on an organic and constant currency basis.  All figures are unaudited.

 

 

 

¹Exchange rates for the relevant period are detailed at the end of this section
 Adjustments to calculate organic growth:

1)      Removal of LCH.Clearnet revenue and income from current year
2)      Removal of FTSE TMX revenue from current year (Information)
3)      Removal of GATElab revenue from current year (Technology)

More detailed revenues by segment are provided in tables below:

 

 

Capital Markets

 

 

 

 

Post Trade Services

 

 

 

LCH.Clearnet

 

 

 

 

Information Services

 

 

Note:

Adjustments to calculate organic growth:

1)      Removal of FTSE TMX revenue from current year

 

Technology Services

 

 

Note:

Adjustments to calculate organic growth:

1)     Removal of GATElab revenue from current year

 

Basis of Preparation

 

Results for Borsa Italiana and LCH.Clearnet for the periods ended 30 June 2013 have been translated into Sterling using the average monthly exchange rate for the period of €1.18: £1.  Constant currency growth rates have been calculated by translating prior period results at the average exchange rate for the current period.

 

 

  

For a full copy of the statement please visit the Investor Relations section of our website: http://www.lseg.com/content/regulatory-news