TIDMLSEG
RNS Number : 0146V
London Stock Exchange Group PLC
05 August 2022
London Stock Exchange Group plc: H1 2022 Interim Results
David Schwimmer, CEO said:
"LSEG has delivered a strong first half performance with
continued revenue growth across our businesses. We are managing
costs well and we continue to make progress on achievement of
synergies.
"We provide solutions solving critical issues for our customers,
with a high proportion of recurring subscription revenues and
structurally growing transactional revenues that benefit from
volatility. Our cash generation is allowing us to actively deploy
capital across organic and inorganic investments, grow our dividend
and commence a share buy-back programme, driving further value for
our shareholders. We are successfully executing on our strategy,
have good momentum going into the second half and our targets
remain unchanged."
H1 2022 highlights - Execution on strategy driving strong financial
performance
Note: Unless otherwise stated, variances refer to growth rates on
a constant currency basis, with the comparator, H1 2021, on a pro-forma
basis which also excludes the impact of a deferred revenue accounting
adjustment(1) .
-- Strong progress in H1 across all divisions, and momentum continuing
into H2
-- Continued delivery on revenue and cost synergies; all targets unchanged
-- Successfully executing on organic and inorganic investment opportunities
to drive growth, build a more agile and efficient business and enhance
our customer offering
-- Well positioned for the current environment; providing high value
solutions for customers' critical needs
-- Launching GBP750 million share buy-back over 12 months with the
first tranche to commence immediately
-- Strong income growth across all divisions, with pro-forma total
income (excluding recoveries) up 6.2%; up 7.0% adjusting for Ukraine
and Russia conflict impact(2)
-- ASV growth metric on a like-for-like basis continues to improve,
up 5.4% at the end of H1 (Q1: 4.9%); improved retention and new
sales driving the increase
-- Pro-forma adjusted operating expense increase of 4.3% reflects lower
phasing of costs in H1 2021; cost guidance for low-single digit
growth in 2022 maintained despite inflationary backdrop
-- Adjusted EBITDA margin of 48.8%(3) ; on track to deliver margin
target of at least 50% by end of 2023
-- Pro-forma AEPS up 21% to 167.4p
-- Robust cash generation in H1 and completion of two acquisitions
- GDC and MayStreet; Quantile and TORA expected to complete in H2
-- Leverage is inside our 1-2x target range within 18 months of the
Refinitiv acquisition
-- Interim dividend up 27% to 31.7 pence per share
--- -------------------------------------------------------------------------
This release contains revenues, costs, earnings and key
performance indicators (KPIs) for the six months ended 30 June 2022
(H1). H1 2022 is compared against H1 2021 on both a statutory and
pro-forma basis. Pro-forma figures assume that the acquisition of
Refinitiv took place on 1 January 2021. Revenues and costs
associated with the BETA divestment have been classed as
discontinued and are excluded from all periods. Revenues and costs
associated with the Borsa Italiana group divestment, which
completed in H1 2021, are also excluded. Constant currency variance
is calculated on the basis of consistent FX rates applied across
the current and prior year period. For more information on
accounting treatments and approach to FX please refer to the
"Accounting and modelling notes" section below. Within the
financial information and tables presented, certain columns and
rows may not add due to the use of rounded numbers for disclosure
purposes.
(1) The deferred revenue impact is a one-time, non-cash,
negative revenue impact resulting from the accounting treatment of
deferred revenue within Refinitiv's accounts which have been
re-evaluated upon acquisition by LSEG under purchase price
accounting rules. This reduced H1 2021 revenue by GBP23m, mainly in
Data & Analytics with a smaller impact in the FX business
within Capital Markets. There is no material impact in 2022. More
details can be found in the "Accounting and modelling notes"
section
(2) Growth rates excluding the Ukraine / Russia conflict impact
have been calculated by excluding income in the region and from
sanctioned customers and related business from both periods
(3) This margin figure has been adjusted to remove a non-cash
FX-related balance sheet adjustment which is a GBP59m credit within
adjusted operating expenses in H1 2022. This is explained further
in the 'Year-on-year pro-forma financial performance' and 'Embedded
Derivatives' sections. Adjusted EBITDA margin is adjusted EBITDA
divided by Total Income (excl. Recoveries).
H1 2022 Statutory results(1)
The statutory results in the table below and the commentary
beneath that compare LSEG continuing results for H1 2022 against
the comparable H1 period in 2021 that only included 5 months of
contribution from Refinitiv following completion of the acquisition
at the end of January 2021. For an analysis of results on a
pro-forma basis, please see the following section. Both statutory
and pro-forma results treat BETA as discontinued and therefore the
revenues and costs associated with the divestment are excluded from
all periods.
Continuing operations H1 2022 H1 2021(1)
GBPm GBPm
--------
Data & Analytics 2,354 1,872
-----------
Capital Markets 720 539
-----------
Post Trade 483 446
-----------
Other 12 13
-------------------------------------------- -------- -----------
Total income (excl. recoveries) 3,569 2,870
Recoveries 166 148
-------------------------------------------- -------- -----------
Total income (incl. recoveries) 3,735 3,018
Cost of sales (504) (392)
-------- -----------
Gross profit 3,231 2,626
-------- -----------
Operating expenses before depreciation,
amortisation and impairment (1,593) (1,401)
-------- -----------
Adjusted operating expenses before
depreciation, amortisation and
impairment (2) (1,433) (1,219)
Non-underlying operating expenses
before depreciation, amortisation
and impairment (160) (182)
-------- -----------
Non-underlying profit on disposal 133 -
of property, plant and equipment
-----------
Non-underlying remeasurement gain 23 -
-----------
Income from equity investments - 11
-----------
Share of profit / (loss) after
tax of associates 1 (2)
-------------------------------------------- -------- -----------
Earnings before interest, tax,
depreciation, amortisation and
impairment 1,795 1,234
-------- -----------
Adjusted earnings before interest,
tax, depreciation, amortisation
and impairment (2) 1,799 1,416
Non-underlying earnings before
interest, tax, depreciation, amortisation
and impairment (4) (182)
-------- -----------
Depreciation, amortisation and
impairment (898) (684)
-------- -----------
Adjusted depreciation, amortisation
and impairment (2) (391) (297)
Non-underlying depreciation, amortisation
and impairment (507) (387)
-------- -----------
Operating profit 897 550
-------- -----------
Adjusted operating profit (2) 1,408 1,119
Non-underlying operating loss (511) (569)
-------- -----------
Net finance expense (94) (87)
-------- -----------
Adjusted net finance expense (2) (81) (86)
Non-underlying net finance expense (13) (1)
-------- -----------
Profit before tax 803 463
-------- -----------
Adjusted profit before tax (2) 1,327 1,033
Non-underlying loss before tax (524) (570)
-------- -----------
Taxation (159) (254)
-------- -----------
Adjusted tax (2) (262) (215)
Non-underlying tax 103 (39)
-------- -----------
Profit for the period (from continuing
operations) 644 209
-------- -----------
Adjusted profit (2) 1,065 818
Non-underlying loss (421) (609)
-------- -----------
Profit from continuing operations
attributable to:
Equity holders 548 143
-------- -----------
Underlying 934 721
Non-underlying (386) (578)
-------- -----------
Non-controlling interest 96 66
-------- -----------
Underlying 131 97
Non-underlying (35) (31)
-------- -----------
Continuing basic earnings per
share (p) (3) 98.0 27.2
Adjusted continuing basic earnings
per share (p) (3) 167.4 139.0
-------------------------------------------- -------- -----------
(1) The comparator H1 2021 figures are statutory results,
incorporating Refinitiv from acquisition at the end of January
2021. Revenues and costs associated with the BETA divestment have
been classified as discontinued and are excluded from all periods.
Revenues and costs associated with the Borsa Italiana group
divestment, which completed in H1 2021, are also excluded
(2) The Group reports adjusted operating expenses before
depreciation, amortisation and impairment, adjusted earnings before
interest, tax, depreciation, amortisation and impairment (EBITDA),
adjusted depreciation, amortisation and impairment, adjusted
operating profit and adjusted basic earnings per share (EPS). These
measures are not measures of performance under IFRS and should be
considered in addition to, and not as a substitute for, IFRS
measures of financial performance and liquidity. Adjusted
performance measures provide supplemental data relevant to an
understanding of the Group's financial performance and exclude
non-underlying items of income and expense that are material by
their size and/or nature. Non-underlying items include:
amortisation and impairment of goodwill and purchased intangible
assets (including customer relationships, trade names, and
databases and content, all of which are recognised as a result of
acquisitions); incremental depreciation and amortisation of the
fair value adjustments on tangible assets and intangible assets
recognised as a result of acquisitions; and other non-underlying
income or expenses not related to day-to-day operations, such as
transaction costs related to acquisitions and disposals of
businesses, as well as integration costs
(3) Weighted average number of shares used to calculate basic
earnings per share and adjusted basic earnings per share from
continuing operations is 558 million (H1 2021: 519 million)
H1 2022 Statutory results highlights
Total Income grew by GBP717 million to GBP3,735 million. This
increase is partly due to the additional month of contribution in
H1 2022 compared with H1 2021, associated with the Refinitiv
acquisition, which completed on 29 January 2021.
-- Data & Analytics : revenues up GBP482 million to GBP2,354 million.
Each business across the division performed well, with good
momentum continuing into H2. GBP292 million of this increase
is due to the additional month of contribution in H1 2022 compared
with H1 2021, associated with the acquisition of Refinitiv.
GBP85 million was driven by broad based growth in subscription
revenues through new sales, strong customer retention and price
increases, partially offset by the impact of the Ukraine / Russia
conflict. Other factors, which included the strengthening USD
rate vs GBP offset by the deferred revenue accounting adjustment
in H1 2021, contributed GBP85 million in the period.
-- Capital Markets : revenues up GBP181 million to GBP720 million.
Each of the underlying asset classes have seen good growth in
H1 2022. GBP57 million of this increase is due to the additional
month of contribution from our FX venues and Tradeweb. Other
factors such as the strengthening of USD vs GBP contributed
a further GBP21 million.
-- Post Trade : total income up GBP37 million to GBP483 million.
Growth has primarily been driven by a strong performance in
OTC Derivatives as we support customers to manage risk in an
uncertain rate environment and in Net Treasury Income and Non-Cash
Collateral, which was the result of high cash and non-cash collateral
balances. Overall the FX impact was neutral.
H1 2022 Pro-forma summary
Continuing operations H1 2022 Pro-forma Variance(2) Constant Constant
Currency Currency
Variance(3) Variance
GBPm H1 2021(1) % % (excl.
deferred
revenue
adjustment)
(3,4)
GBPm %
--------- ------------ -------------
Data & Analytics 2,354 2,164 8.8% 5.0% 4.0%
Capital Markets 720 616 16.9% 13.0% 12.9%
Post Trade 483 446 8.3% 8.5% 8.5%
Other 12 14 (14.3%) (14.2%) (14.2%)
-------------------------------- --------- ------------ ------------ ------------- --------------
Total income (excl.
recoveries) 3,569 3,240 10.2% 6.9% 6.2%
Recoveries 166 178 (6.7%) 2.9% 1.8%
-------------------------------- --------- ------------ ------------ ------------- --------------
Total income (incl.
recoveries) 3,735 3,419 9.2% 6.7% 6.0%
Cost of sales (504) (452) 11.5% 6.6% 6.6%
-------------------------------- --------- ------------ ------------ ------------- --------------
Gross profit 3,231 2,967 8.9% 6.7% 5.9%
Adjusted operating expenses
before depreciation,
amortisation and impairment
(5) (1,433) (1,397) 2.6% 4.3% 4.3%
Income from equity investments - 11 - - -
Share of profit / (loss)
after tax of associates 1 (2) - - -
-------------------------------- --------- ------------ ------------ --- ------------- --------------
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment
(5) 1,799 1,579 13.9% 8.4% 6.8%
Adjusted EBITDA Margin
(6) 50.4% 48.7%
Adjusted depreciation,
amortisation and impairment
(5) (391) (347) 12.7% 16.3% 16.3%
Adjusted operating profit
(5) 1,408 1,233 14.2% 6.2% 4.3%
Adjusted net finance
expense (5) (81) (124) (34.7%)
-------------------------------- --------- ------------ ------------ ------------- --------------
Adjusted profit before
tax (5) 1,327 1,108 19.8%
Adjusted tax (5) (262) (233) 12.4%
-------------------------------- --------- ------------ ------------ ------------- --------------
Adjusted profit for
the period (5) 1,065 874 21.9%
Adjusted profit attributable
to:
Equity holders 934 767 21.8%
Non-controlling interest 131 107 22.4%
Continuing adjusted
basic earnings per share
(p) 167.4 138.0 21.3%
Weighted average shares
(m) 558 556
-------------------------------- --------- ------------ ------------ ------------- --------------
Variances are provided on a pro-forma and constant currency
basis. Unless stated otherwise, commentary below is provided on the
constant currency variance (excluding the deferred revenue
adjustment) to provide insight into performance on a comparable
basis. Revenues and costs associated with the BETA divestment have
been classified as discontinued and are excluded from all periods.
Revenues and costs associated with the Borsa Italiana group
divestment, which completed in H1 2021, are also excluded.
(1) The H1 2021 comparator is pro-forma and assumes that the
acquisition of Refinitiv took place on 1 January 2021
(2) Variance is the difference between current and prior year
periods using FX rates prevalent at each time, therefore any
changes in the FX rates are reflected in the variance percentage
alongside business performance
(3) Constant currency variance shows underlying financial
performance, excluding currency impacts, by comparing the current
and prior period at consistent exchange rates
(4) Excludes the deferred revenue adjustment further explained
in the "Accounting and modelling notes" section
(5) Before non-underlying items
(6) Adjusted EBITDA margin is adjusted EBITDA divided by Total
Income (excl. Recoveries)
H1 2022 Pro-forma highlights
Total Income (excluding recoveries) grew 6.2% at constant
currency; up 7.0% excluding Ukraine / Russia conflict impacts.
-- Data & Analytics : revenues up 4.0%; up 5.0% excluding Ukraine
/ Russia conflict impacts
-- Trading & Banking Solutions down 1.1%; but grew 0.7% excluding
Ukraine / Russia conflict impacts - Momentum continues with
underlying revenue growth and improved retention. Trading
showed growth in Q2 for the first time in many years when
excluding Ukraine / Russia. Further progress in the rollout
of Workspace in Banking
-- Enterprise Data Solutions up 6.3% - Improved retention and
sales growth partly offset by business lost through Ukraine
/ Russia conflict. Data demand continues to grow as customers
move more investment strategies to a "big data focus". MayStreet
acquisition completed at the end of May, enhances the breadth
of our low-latency offering
-- Investment Solutions up 8.0% - Benchmark, Indices and Analytics
growth at FTSE Russell continues strongly, up 10.4% with
15 new ESG products through our revenue synergy programme,
more than 2021's total number of products launched. Asset-based
revenues rose 8.0% with strong growth in Q1 but broadly flat
in Q2 as AUM declined
-- Wealth Solutions up 2.3% - Good net sales and retention,
offsetting Ukraine / Russia conflict cancellations. Performance
excludes the contribution from the low growth, non-core BETA
business moved to discontinued operations; divestment completed
on 1 July
-- Customer & Third-Party Risk Solutions up 7.3% - Double-digit
organic growth continued in H1. Strong performance at World-Check.
GDC acquisition completed at the end of May, broadening our
capability in the digital identity and anti-fraud sector
-- Capital Markets : revenues up 12.9%; up 13.4% excluding Ukraine
/ Russia conflict impacts
-- Equities up 7.8% - Higher market capitalisation of listed
companies at the end of last year, helped drive annual fees
revenue, partly offset by reduction in new issues in challenging
primary market conditions. Strong secondary market activity
driven by market volatility but with lower average yield
-- FX up 6.1% - Strong growth at FXall with broadly flat performance
at Matching. Announced plans to launch NDF Matching in Singapore,
supporting strong demand from Asia markets. Modernising our
FX venue technology by re-platforming onto LSEG technology
-- Fixed Income, Derivatives & Other up 16.5% - Strong performance
at Tradeweb in H1(1) , with double-digit revenue growth across
Rates, Credit and Equity asset classes. Tradeweb and FXall
collaboration announced to develop hedging workflow solutions
for emerging market products
-- Post Trade : total income up 8.5%; up 8.6% excluding Ukraine
/ Russia conflict impacts
-- OTC Derivatives up 12.0% - Strong activity across SwapClear
and SwapAgent as we support customers to 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 the benefit 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 Treasury Income up 11.3% - Growth driven by increased
cash collateral balances, unlikely to remain at current level
and expected to reduce towards normalised levels across the
rest of 2022
(1) Tradeweb H1 2022 results were released on 3 August 2022 and
provided more detailed commentary on performance
Contacts: London Stock Exchange Group plc
Investors
Paul Froud / Chris Turner - Investor Relations ir@lseg.com
Media
Lucie Holloway / Rhiannon Davies - Financial +44 (0) 20 7797 1222
Communications newsroom@lseg.com
Additional information can be found at www.lseg.com
H1 investor and analyst conference call:
LSEG will host a webcast and conference call for its H1 Interim
Results for analysts and institutional shareholders today at
09:00am (UK time). On the call will be David Schwimmer (Chief
Executive Officer), Anna Manz (Chief Financial Officer) and Paul
Froud (Group Head of Investor Relations).
To access the webcast or telephone conference call please
register in advance using the following link and instructions
below:
https://www.lsegissuerservices.com/spark/LondonStockExchangeGroup/events/82c50574-0690-4f15-8ff7-1a48298a8fc8
-- If you wish to participate in Q&A, questions can be submitted
by clicking the 'Ask a question' button on the page or by
emailing the LSEG Investor Relations team at ir@lseg.com .
Questions can be submitted in advance and during the event
itself
-- If you wish to ask a question live, you will need to register
for the telephone conference call here: https://cossprereg.btci.com/prereg/key.process?key=P9AGY89KE
-- NOTE: Once you have registered for the conference call, you
will be provided with the information you need to join the
conference, including dial-in numbers and passcodes. Please
save this information to your calendar or print this information
Presentation slides can be viewed at
www.lseg.com/investor-relations
Chief Executive's Statement
Overview of H1
We have delivered strong H1 results. All divisions have shown
good growth with momentum continuing into H2. Our financial targets
are unchanged and we have made good progress in realising further
revenue and cost synergies. We continue to execute on organic and
inorganic investment opportunities to drive growth, build a more
agile and efficient business and enhance our customer offering. We
are well positioned for the current environment, providing high
value solutions for customers' critical needs.
A leading global provider of financial markets infrastructure
and data
LSEG supplies business critical solutions globally, to customers
that include almost all of the top 100 global banks and
three-quarters of the top 100 asset managers by total assets. We
serve over 40,000 customers worldwide with a c.98% annual customer
retention rate in Data & Analytics.
We operate world-class assets and maintain systemically
important global infrastructure, delivering across asset classes
and along the whole financial markets value chain. Our open model
approach, which allows customers to choose which of our solutions
they use and then access on a fair and non-discriminatory basis, is
strongly preferred by customers.
We are well positioned for the current environment of rising
interest rates and inflation. Our income is diversified across
geographies, products and customers, with 73% recurring and
subscription-like. Our transactional revenues are structurally
growing and benefit from volatility, with leading global positions
for electronic trading in FX (FXall) and fixed income (Tradeweb)
and in the clearing of interest rate swaps (SwapClear) and European
repos (RepoClear). We have multiple levers to manage our costs and
run a business model that maintains a prudent balance sheet.
Announcement of share buy-back and capital allocation
approach
Our business is highly cash generative and our capital
management framework remains consistent. We actively deploy capital
for select organic and inorganic investments and will continue to
evaluate other shareholder returns alongside growing our
dividend.
Today, we have announced a share buy-back programme of GBP750
million which is expected to be phased over multiple tranches over
12 months, with the first commencing today. This is being funded,
in large part, using the proceeds of the divestment of the BETA
business which completed on 1 July 2022.
A separate RNS with full details on the share buy-back
announcement is available on the IR section of our website at:
www.lseg.com/investor-relations .
Integrating our world-class businesses
We continue to successfully execute on our multi-year
integration of the Refinitiv business, partner with customers to
create valued solutions and build our revenue synergies.
We are improving sales execution across the Group, with better
aligned incentives, more rigorous pipeline management and a greater
focus on cross-selling, driving an improvement in retention and
sales. We are simplifying our sales approach in Data &
Analytics, leveraging more than 240 products to focus customer
engagement around 9 core industry themes and introducing single
points of contact for customers. This has resulted in a more than
350bps increase in product retention with our large customer
segment since 2020.
Our revenue synergies continue to increase, with GBP44 million
run-rate achieved by the end of H1 2022. We are creating new index
and analytic products, improving distribution of our existing data
products and cross-selling FTSE Russell data products to Enterprise
Data customers. We now expect to deliver at the top end of our
GBP40-60 million run-rate target for the end of 2022.
Driving growth
As a Group, we are very well positioned to create innovative
products and services, drawing on the natural linkages across our
business. Our global end-to-end proposition across asset classes is
deepening and expanding our customer relationships, meaning we can
better understand their needs. This helps us to know how best we
can support them while creating targeted and innovative
solutions.
To illustrate this, a differentiator for us is our ability to
aggregate insight from across our business and rapidly deliver it
in a flexible way. In H1, we have been able to do this by drawing
on our proprietary data from across Tradeweb, SwapClear and Yield
Book, to implement a novel solution for customers that meets their
regulatory requirements of the Fundamental Review of Trading Book
(FRTB).
The rollout of our Workspace product has continued well in H1
and is ahead of schedule. Over 50% of users have been migrated onto
Workspace from legacy solutions. Having already launched Workspace
for FX Trading, we are targeting to go live or be in beta-testing
for all remaining user types by the end of 2022. The feedback
received has been very positive, with Banking customer satisfaction
more than 10 percentage points above the equivalent Eikon product
across quality of search functionality, ease of content sharing,
multi-device capabilities and value for money.
Building an efficient and scalable platform
We continue to develop connections across our businesses to
create a more seamless customer workflow. In H1, we announced a
connection between FXall and Tradeweb. This allows emerging market
products (bonds and currency swaps) to be traded and hedged
efficiently, reducing execution risk for customers. We have also
embedded our Yield Book product directly into Eikon and Workspace
to benefit from the broader distribution and ease of access that is
possible through our platforms.
Investments continue to drive efficiencies and scalability, as
we build our data platform and migrate to the cloud. Our software
defined network infrastructure is delivering better agility, higher
capacity and increased resilience.
Our cost synergy programme is on track to deliver at least
GBP400 million run-rate savings by end of 2025, with our 2022
target of GBP220 million run-rate already delivered in H1. Over 80
percent of our real estate optimisation programme is complete and
we are through over 60 percent of our data centre rationalisation
programme. We now expect to deliver GBP250 million run-rate cost
synergies by end of 2022.
Enhancing growth and creating shareholder value through
strategic M&A
We have completed two acquisitions in H1. MayStreet enhances the
breadth of our Enterprise Data offering in low-latency services and
GDC globalises our digital identity and fraud prevention offering
in the Customer & Third-Party Risk business. These contributed
income in the period of GBP1 million and GBP2 million respectively.
A summary of the financial contribution of both businesses can be
found in the "Financial details on completed acquisitions" section
later in the release.
Two other acquisitions that have previously been announced are
expected to close in H2, subject to merger control and other
regulatory approvals. These are TORA, which provides Trading &
Banking customers with multi-asset order and execution management
capabilities, and Quantile, which will help customers more
effectively manage both capital and margin in Post Trade.
On 1 July, we completed the divestment of the non-core,
lower-growth BETA wealth transaction business, and will return a
significant proportion of the proceeds to shareholders via the
share buy-back we have announced today.
We will continue to assess further bolt-on acquisitions in a
disciplined manner to accelerate our strategy.
Statutory financial performance
The commentary below refers to continuing operations. It
excludes BETA, which has been treated as a discontinued operation
in both the current and prior periods, and the Borsa Italiana group
which was treated as a discontinued operation in H1 2021.
Total income grew by GBP717 million to GBP3,735 million. This
increase reflects the strong business performance as well as the
additional month of contribution in H1 2022 compared with H1 2021
associated with the Refinitiv acquisition, which completed on 29
January 2021.
Operating expenses before depreciation amortisation and
impairment increased by GBP192 million to GBP1,593 million, with
the additional costs associated with the extra month from Refinitiv
in H1 2022 compared with H1 2021. Included within operating
expenses are GBP160 million (H1 2021: GBP182 million) of
non-underlying costs which mainly relate to Refinitiv integration
costs.
Depreciation, amortisation and impairment increased by GBP214
million to GBP898 million primarily as a result of the acquisition
of Refinitiv, including the amortisation associated with the
acquired intangible assets.
Operating profit was GBP897 million (H1 2021: GBP550
million).
Net financing expense increased by GBP7 million to GBP94
million. Tax of GBP159 million (H1 2021: GBP254 million) is net of
a GBP103 million non-underlying tax benefit which mainly reflects
the tax impact of the Group's non-underlying items. The effective
tax rate was 19.8%.
Profit for the period amounted to GBP644 million (H1 2021:
GBP209 million), within which GBP548 million (H1 2021: GBP143
million) is attributable to equity holders. Non-controlling
interest has increased by GBP30 million to GBP96 million, in part
reflecting the strong performance from Tradeweb and LCH in the
period.
Basic earnings per share from continuing operations has
increased by 70.8p to 98.0p.
Year-on-year pro-forma financial performance
LSEG has delivered strong income growth across all divisions in
H1, with total income (excluding recoveries and the deferred
revenue accounting adjustment) up 6.2%. This growth has been driven
by good new sales and retention in Data & Analytics, strong
activity at Tradeweb in Capital Markets and high volumes across OTC
in Post Trade. Our ASV growth metric on a like-for-like basis
(adjusted for the Ukraine / Russia conflict) continues to improve,
up 5.4% at the end of H1 (Q1: 4.9%) with improved retention and new
sales driving the increase.
In the period, there was a minor impact from M&A, with the
addition of one month of contribution from MayStreet and GDC, after
they both closed on 31 May. This was more than offset by the
divestment of the ERMT business at the end of 2021. On an organic
basis (which excludes the impact of M&A) total income
(excluding recoveries) grew 6.4%. Within this, on an organic basis,
Data & Analytics was up 4.2%, with Enterprise Data up 6.1% and
Customer & Third-Party Risk Solutions up 10.6%.
Following LSEG's actions taken in response to the Ukraine and
Russia conflict, there was a GBP23 million impact in H1 (with GBP7
million in Q1 and GBP16 million in Q2). The expected revenue impact
is c.GBP60 million in 2022. Excluding the impact of the conflict,
total income (excluding recoveries), grew 7.0%.
We continue to make good progress on our revenue synergy
programme, with GBP44 million run-rate achieved by the end of H1
2022. We now expect to deliver at the top end of our GBP40-60
million run-rate target for the end of 2022.
Cost management continues to be strong, with adjusted operating
expense growth of 4.3%, and on track to deliver our organic
low-single digit guidance for the full year. In the period, the
cost growth comprised of ongoing operating costs and investment for
growth, offset by the continued strong delivery of our cost synergy
programme. The investment for growth includes investment in
technology modernisation, increasing cloud usage, the costs of
delivering strong growth at Tradeweb and costs relating to the
delivery of our revenue synergy programme.
To simplify our business and manage inflationary pressures, we
are leveraging our global footprint. Excluding Tradeweb, over 65%
of new hires in H1 2022 were hired into lower cost locations. We
continue to take a strategic approach to technology, for example,
consolidating our low latency real time data products onto a single
efficient platform and we are increasing the efficiency of our
cloud estate.
Our cost synergy programme is on track to deliver at least
GBP400 million run-rate savings by end of 2025, with our 2022
target of GBP220 million run-rate already delivered in H1. We now
expect to achieve GBP250 million of run-rate savings by the end of
2022.
Adjusted operating expenses were also impacted by FX during the
period as USD strengthened vs GBP, with 48% of our costs recognised
in USD. The impact was reduced by a GBP59 million FX-related
credit, that is recognised as a balance sheet adjustment. For more
details please see the Embedded Derivatives section. This GBP59
million credit does not impact our adjusted operating expenses'
constant currency growth rate or therefore our guidance.
We are on track to deliver our organic cost guidance for 2022 of
low-single digit growth, despite the inflationary backdrop, with
robust levers in place to manage cost pressure going forward. H1's
growth is higher than the low-single digit full year guidance due
to phasing of costs and the annualisation of investment in sales
and resilience capacity in H2 2021.
In H2 2022, adjusted operating expenses are expected to show
modest growth to deliver our 2022 cost guidance, with further
M&A cost annualisation and a small H1 vs H2 cost phasing
impact. If FX rates stay at the current USD / GBP spot rate, our
reported Sterling figure at the end of year would likely see a more
material FX headwind.
Excluding the GBP59 million FX credit in operating expenses, we
have achieved an adjusted EBITDA margin of 48.8% in H1. On an
equivalent basis this is up 160bps from 47.2% at full year 2021. We
are confident of delivering a margin of at least 50% by the end of
2023, as we continue to invest to secure future growth and are well
positioned to manage inflationary pressures.
Adjusted depreciation, amortisation and impairment was GBP391
million. The previous full year guidance of GBP820 million was
provided before the announcement of the divestment of BETA. The
divestment reduced 2021 depreciation by GBP49 million. Therefore
our 2022 guidance has been updated accordingly and on a constant
currency basis from 2021 we expect depreciation, amortisation and
impairment to be GBP790 million, depending on the timing of and
phasing of H2 capital expenditure.
Adjusted net financing expense reduced by 35% to GBP81 million,
largely driven by the higher cost of debt in early 2021, before
refinancing in April 2021. Interest rates have risen in the US, UK
and Euro zone in H1. 18% of our debt as of H1 is floating and
therefore sensitive to rate increases. At current FX rates, a 1%
increase in rates would result in an annualised GBP15 million
higher financing expense. In light of the higher rates and the
strengthen USD, our full year guidance at current rates is c.GBP180
million.
The underlying tax rate was 20.5%, and 19.7% when adjusted for a
small benefit related to the prior year. The effective tax rate for
the full year is estimated to be between 21-22%. For 2023 and 2024,
the underlying tax rate is expected to be in the range of 22-24%
based on the current tax landscape.
Non-controlling interest has increased by 22% to GBP131 million,
reflecting the strong performance from Tradeweb and LCH in the
period.
Adjusted basic earnings per share has increased 21% to 167.4
pence demonstrating our continued strong financial delivery.
Capital expenditure, cash and balance sheet
Capital expenditure in H1 on an accrued, constant currency basis
was GBP384 million, with GBP310 million of investment in
business-as-usual initiatives and GBP74 million of
integration-related investment, of which GBP71 million relates to
cost to achieve synergies. Our business-as-usual capex guidance is
unchanged, expecting GBP650-700 million per annum until the end of
2023, before tapering thereafter.
Cash generated from operating activities was GBP1,338 million in
H1, showing a strong underlying performance. Net cash generated
after net interest and royalties paid, taxes paid, capex and other
investments was GBP531 million and GBP73 million after dividends.
We are a highly cash generative business, often weighted towards
the second half due to the phasing of our dividend. We expect to
generate over GBP1 billion of post-dividend free cash flow this
year, plus the proceeds from the BETA disposal.
As of 30 June 2022, the Group had operating net debt of GBP7,207
million after setting aside GBP1,372 million for regulatory and
operational requirements. The Group's operating net debt increased
during the period due to adverse movements in foreign exchange
rates, the payment of the 2021 final dividend and timing of M&A
transactions, with MayStreet and GDC acquired in H1 but proceeds
from the BETA divestment received on 1 July 2022. Leverage
temporarily increased to 2.1x from 1.9x as of 31 December 2021.
Including the net proceeds received from the BETA divestment,
leverage would have been 1.9x.
The Group did not issue or redeem any bonds during the first
half of 2022. The Group retains access to GBP2.5 billion of
committed liquidity via its revolving credit facilities, of which
GBP1.425 billion matures in December 2024 and GBP1.075 billion
matures in December 2026. As of 30 June 2022, $80 million (GBP66
million) was drawn under the revolving credit facilities (31
December 2021: GBPnil).
Both Standard & Poor's and Moody's maintained their
respective LSEG long-term credit ratings of A and A3 with stable
outlook and short-term ratings of A-1 and P-2 throughout the first
half of 2022. Standard & Poor's also maintained its long-term
rating of LCH Limited and LCH SA at AA- with a stable outlook and
short-term rating at A-1+ throughout the period.
The Group had net assets of GBP27,864 million at 30 June 2022
(31 December 2021: GBP25,519 million), including GBP2,520 million
in cash and cash equivalents (31 December 2021: GBP2,665
million).
Interim Dividend
In line with the Group's dividend policy, the interim dividend
is calculated as one-third of the prior full year dividend.
Accordingly, the Directors have declared an interim dividend of
31.7 pence per share, an increase of 27% (H1 2021: 25.0 pence per
share). The interim dividend will be paid on 20 September 2022 to
shareholders on the register on 19 August 2022.
Outlook
LSEG has delivered a strong first half performance with
continued revenue growth across our businesses. We are managing
costs well and we continue to make progress to achieve our
synergies. We are successfully executing on our strategy, with good
momentum going into the second half.
Accounting and modelling notes
Financial details on completed acquisitions
On 31 May 2022, we closed our acquisitions of both MayStreet and
GDC. They have a negligible impact on our H1 2022 results,
contributing revenue of GBP1 million and GBP2 million
respectively.
As a reminder:
MayStreet: Provides high-quality low latency technology
-- and market data, expanding our leading real-time data offering.
It contributes to Enterprise Data Solutions, Data & Analytics
GDC: Provides identity verification data for Know Your Customer
-- purposes, expanding our capabilities in the high growth Digital
Identity and Fraud solutions area. It contributes to Customer
& Third-Party Risk Solutions, Data & Analytics
To help incorporate the contribution of MayStreet and GDC within
models, below are the acquisitions' implied contributions in 2021,
as if they were within the Group. As our cost guidance is on an
organic constant currency basis, the inclusion of these businesses'
costs will not impact the guidance, and therefore will need to be
added when modelling for the full year, with the full annualisation
in 2023.
2021 GBPm MayStreet GDC
Total Income GBP11m GBP14m
---------- --------
Cost of Sales (GBP3m) (GBP7m)
---------- --------
Gross Profit GBP8m GBP7m
---------- --------
Operating Expenses (GBP16m) (GBP5m)
---------- --------
EBITDA (GBP8m) GBP2m
---------- --------
Depreciation (GBP1m) -
---------- --------
Operating profit (GBP9m) GBP2m
---------- --------
Both businesses saw strong income growth in 2021 and have
continued to grow in 2022 from a low base. These acquisitions will
complement our existing offerings to support growth in Enterprise
Data and Customer & Third-Party Risk Solutions.
Deferred revenue accounting adjustment
This adjustment is as previously described in 2021. There is no
material impact in 2022. An adjusted variance, excluding the
deferred revenue adjustment, has been presented to show comparable
business growth on the prior year.
As a reminder, the adjustment results from the acquisition of
Refinitiv and the associated purchase price accounting rules.
Refinitiv's deferred revenue balances were subject to a one-time
haircut at the time of acquisition. This was a non-cash adjustment.
2021 saw a negative revenue impact of GBP25 million, with GBP22
million in Q1; GBP1 million in Q2; GBP1 million in Q3; GBP1 million
in Q4. The impact is mostly in the Group's Data & Analytics
division, with a much smaller impact on the Group's FX venues
business sitting within Capital Markets.
Organic growth
Organic growth rates are a non-IFRS measure, intended to remove
the impact of acquisitions and disposals. Organic growth is
calculated on a constant currency basis, adjusting the pro-forma
results to remove disposals from the entirety of the current and
prior year periods, and by including acquisitions from the date of
acquisition with a comparable adjustment to the prior year.
Embedded derivatives
LSEG has embedded foreign currency derivatives which arise
primarily in revenue contracts where the currency of the contract
is different from the functional or local currencies of the parties
involved. The local-currency-based contract determines the revenue
and LSEG records the derivative instruments at fair value in the
balance sheet as either assets or liabilities, in accordance with
IFRS 9. Changes in fair value, which are based on latest FX rates
and forecasts, are recognised in the income statement, within the
operating expense line.
In H1 2022, due to the considerable strengthening of USD vs GBP,
particularly in June 2022, there was a significant FX gain
recognised within operating expense. In H1 2022 this totalled GBP59
million. Typically, and in previous periods, the gain or loss has
been immaterial. This is purely a non-cash accounting gain and does
not impact our organic constant currency operating expenses
guidance.
FX conversion
As a result of the acquisition of Refinitiv, the majority of
LSEG revenues and expenses are in USD followed by GBP, EUR and
other currencies. All guidance given by LSEG, including the
longer-term targets associated with the acquisition of Refinitiv as
well as specific guidance for the 2022 financial year, has been
given on a constant currency basis.
USD GBP EUR Other
2022 H1 - Total Income
(1) 57% 18% 17% 8%
---- ---- ---- ------
2022 H1 - Underlying Expenses
(2) 48% 26% 10% 16%
---- ---- ---- ------
2022 H1 - Total Income USD GBP EUR Other
by division (1)
Data & Analytics 64% 12% 13% 11%
---- ---- ---- ------
Capital Markets 58% 21% 20% 1%
---- ---- ---- ------
Post Trade 19% 43% 36% 2%
---- ---- ---- ------
Other 15% 30% 51% 4%
---- ---- ---- ------
(1) Total Income includes recoveries
(2) Underlying expenses includes cost of sales, underlying
operating expenses and underlying depreciation and amortisation
The results for H1 2022 have been translated into Sterling using
the average exchange rates for the period. The rates for the
largest two currency pairs are shown in the table below.
Average rate Closing rate Average rate Closing rate
6 months at 6 months at
ended 30-Jun-22 ended 30-Jun-21
30-Jun-22 30-Jun-21
GBP : USD 1.300 1.212 1.388 1.384
------------- ------------- ------------- -------------
GBP : EUR 1.188 1.157 1.152 1.163
------------- ------------- ------------- -------------
Statutory divisional revenues and adjusted operating profit
1. Data & Analytics
Results to adjusted operating profit (1)
Continuing operations
H1 2022 Statutory
GBPm H1 2021(1)
GBPm
---------
Trading & Banking Solutions 770 621
Trading 606 494
Banking 163 127
Enterprise Data Solutions 620 477
Real Time Data 397 305
PRS 224 172
Investment Solutions 637 525
Benchmark Rates, Indices
& Analytics 285 243
Index - Asset-based 141 122
Data & Workflow 210 160
Wealth Solutions 131 102
Customer & Third-Party
Risk Solutions 196 147
------------------------------------ --------- ------------
Total revenue (excl. recoveries) 2,354 1,872
Recoveries 166 148
------------------------------------ --------- ------------
Total revenue (incl. recoveries) 2,520 2,020
Cost of sales (420) (322)
------------------------------------ --------- ------------
Gross profit 2,100 1,698
Adjusted operating expenses
before depreciation, amortisation
and impairment (963) (820)
------------------------------------ --------- ------------
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment 1,137 878
Depreciation, amortisation
and impairment (291) (221)
------------------------------------ --------- ------------
Adjusted operating profit 846 657
------------------------------------ --------- ------------
(1) The H1 2021 comparator is statutory, incorporating Refinitiv
from acquisition at the end of January 2021. Revenues and costs
associated with the BETA divestment have been classed as
discontinued and are excluded from all periods. Revenues and costs
associated with the Borsa Italiana group divestment, which
completed in H1 2021, are also excluded
2. Capital Markets
Results to adjusted operating profit (1)
Continuing operations H1 2022 Statutory
GBPm H1 2021(1)
GBPm
--------
Equities 129 120
FX 124 91
Fixed Income, Derivatives
& Other 467 328
------------------------------------ -------- ------------
Total revenue 720 539
Cost of sales (16) (11)
------------------------------------ -------- ------------
Gross profit 704 528
Adjusted operating expenses
before depreciation, amortisation
and impairment (314) (250)
------------------------------------ -------- ------------
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment 390 278
Depreciation, amortisation
and impairment (48) (30)
------------------------------------ -------- ------------
Adjusted operating profit 342 248
------------------------------------ -------- ------------
(1) The H1 2021 comparator is statutory, incorporating Refinitiv
from acquisition at the end of January 2021. Revenues and costs
associated with the Borsa Italiana group divestment, which
completed in H1 2021, are excluded from all periods
3. Post Trade
Results to adjusted operating profit (1)
Continuing operations H1 2022 Statutory
GBPm H1 2021(1)
GBPm
--------
OTC Derivatives 191 169
Securities & Reporting 122 123
Non-Cash Collateral 49 46
------------------------------------ -------- ------------
Total revenue 362 338
Net Treasury Income 121 108
------------------------------------ -------- ------------
Total income 483 446
Cost of sales (68) (59)
------------------------------------ -------- ------------
Gross profit 415 387
Adjusted operating expenses
before depreciation, amortisation
and impairment (155) (147)
------------------------------------ -------- ------------
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment 260 240
Depreciation, amortisation
and impairment (52) (46)
------------------------------------ -------- ------------
Adjusted operating profit 208 194
------------------------------------ -------- ------------
(1) The H1 2021 comparator is statutory, incorporating Refinitiv
from acquisition at the end of January 2021. Revenues and costs
associated with the Borsa Italiana group divestment, which
completed in H1 2021, are excluded from all periods
Pro-forma divisional revenues, adjusted operating profit and
non-financial KPIs
1. Data & Analytics
Results to adjusted operating profit (1)
Continuing operations Constant Constant
Currency Currency
Variance(3) Variance
% (excl. deferred
revenue
adjustment)
(3,4) %
H1 2022 Pro-forma Variance(2)
H1 2021(1)
GBPm GBPm %
--------- ------------ -------------
Trading & Banking Solutions 770 745 3.4% (0.1%) (1.1%)
Trading 606 594 2.0% (1.0%) (2.0%)
Banking 163 151 7.9% 3.7% 2.6%
Enterprise Data Solutions 620 562 10.3% 7.5% 6.3%
Real Time Data 397 360 10.3% 7.2% 5.9%
PRS 224 202 10.9% 7.9% 6.9%
Investment Solutions 637 560 13.8% 8.7% 8.0%
Benchmark Rates, Indices
& Analytics 285 247 15.4% 10.6% 10.4%
Index - Asset-based 141 122 15.6% 8.0% 8.0%
Data & Workflow 210 191 9.9% 6.6% 4.9%
Wealth Solutions 131 123 6.5% 3.0% 2.3%
Customer & Third-Party Risk
Solutions 196 175 12.0% 8.5% 7.3%
------------------------------------ --------- ------------ ------------- ------------- -----------------
Total revenue (excl. recoveries) 2,354 2,164 8.8% 5.0% 4.0%
Recoveries 166 178 (6.7%) 2.9% 1.8%
------------------------------------ --------- ------------ ------------- ------------- -----------------
Total revenue (incl. recoveries) 2,520 2,343 7.6% 4.9% 3.9%
Cost of sales (420) (381) 10.2% 4.3% 4.3%
------------------------------------ --------- ------------ ------------- ------------- -----------------
Gross profit 2,100 1,962 7.0% 5.0% 3.8%
Adjusted operating expenses
before depreciation, amortisation
and impairment (963) (957) 0.6% 2.4% 2.4%
------------------------------------ --------- ------------ ------------- ------------- -----------------
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment 1,137 1,005 13.1% 7.5% 5.1%
Depreciation, amortisation
and impairment (291) (264) 10.2% 13.9% 13.9%
------------------------------------ --------- ------------ ------------- ------------- -----------------
Adjusted operating profit 846 741 14.2% 5.3% 2.1%
------------------------------------ --------- ------------ ------------- ------------- -----------------
Adjusted EBITDA margin 48.3% 46.4%
Non-financial KPIs (1)
H1 2022 H1 2021 Variance
%
-------- --------
Annual Subscription Value growth
(%) (5) 4.1% 3.9%
Annual Subscription Value growth
excl. U/R impact (%) (5, 6) 5.4% 3.9%
Subscription revenue growth (%)
(5, 7) 4.5%
Subscription revenue growth excl.
U/R impact (%) (5, 6, 7) 5.0%
Index - ETF AUM ($bn) 962 1,040 (8%)
Index - ESG Passive AUM ($bn) (8) 261 132 98%
----------------------------------- -------- -------- ---------
(1) The H1 2021 comparator is pro-forma and assumes that the
acquisition of Refinitiv took place on 1 January 2021. Revenues and
costs associated with the BETA divestment have been classed as
discontinued and are excluded from all periods. Revenues and costs
associated with the Borsa Italiana group divestment, which
completed in H1 2021, are also excluded
(2) Variance is the difference between current and prior year
periods using FX rates prevalent at each time, therefore any
changes in the FX rates are reflected in the variance percentage
alongside business performance
(3) Constant currency variance shows underlying financial
performance, excluding currency impacts, by comparing the current
and prior period at consistent exchange rates
(4) Excludes the deferred revenue adjustment further explained
in the "Accounting and modelling notes" section
(5) The variance is a constant currency variance adjusted for
acquisitions and disposals
(6) Growth rates excluding the Ukraine / Russia conflict impact
have been calculated by excluding income in the region and from
sanctioned customers and related business from both periods
(7) The variance is a 12-month rolling constant currency
variance excluding the impact of the deferred revenue accounting
adjustment. The comparator is not available due to different
methodologies applied to the data for the periods before the
completion of the Refinitiv acquisition
(8) ESG Passive AUM is at 31 December 2021 and prior period
comparator is at 31 December 2020. The metric is updated
bi-annually
2. Capital Markets
Results to adjusted operating profit (1)
Continuing operations Constant Constant
Currency Currency
Variance(3) Variance
% (excl. deferred
revenue
adjustment)
(3,4) %
H1 2022 Pro-forma Variance(2)
H1 2021(1)
GBPm GBPm %
--------- ------------ -------------
Equities 129 120 7.5% 7.8% 7.8%
FX 124 109 13.8% 6.3% 6.1%
Fixed Income, Derivatives
& Other 467 386 21.0% 16.5% 16.5%
------------------------------------ --------- ------------ ------------- ------------- -----------------
Total revenue 720 616 16.9% 13.0% 12.9%
Cost of sales (16) (13) 23.1% 16.3% 16.3%
------------------------------------ --------- ------------ ------------- ------------- -----------------
Gross profit 704 603 16.7% 12.9% 12.9%
Adjusted operating expenses
before depreciation, amortisation
and impairment (314) (291) 7.9% 10.7% 10.7%
------------------------------------ --------- ------------ ------------- ------------- -----------------
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment 390 312 25.0% 15.0% 14.9%
Depreciation, amortisation
and impairment (48) (37) 29.7% 19.3% 19.3%
------------------------------------ --------- ------------ ------------- ------------- -----------------
Adjusted operating profit 342 275 24.4% 14.4% 14.3%
------------------------------------ --------- ------------ ------------- ------------- -----------------
Adjusted EBITDA margin 54.2% 50.6%
Non-financial KPIs (1)
H1 2022 H1 2021 Variance
%
-------- ---------
Equities
Primary Markets
New issues 40 75 (47%)
Total money raised (GBPbn) 6.3 15.6 (60%)
Secondary Markets - Equities
UK Value Traded (GBPbn)
- Average Daily Value 5.3 4.7 13%
SETS Yield (bps) 0.66 0.72 (9%)
FX
Average daily total volume
($bn) 470 455 3%
Fixed income, Derivatives
and Other
Tradeweb Average Daily
($m)
Rates - Cash 364,423 348,673 5%
Rates - Derivatives 364,323 272,063 34%
Credit - Cash 10,483 9,951 5%
Credit - Derivatives 19,449 12,628 54%
------------------------------ -------- --------- ---------
(1) The H1 2021 comparator is pro-forma and assumes that the
acquisition of Refinitiv took place on 1 January 2021. Revenues and
costs associated with the Borsa Italiana group divestment, which
completed in H1 2021, are excluded from all periods
(2) Variance is the difference between current and prior year
periods using FX rates prevalent at each time, therefore any
changes in the FX rates are reflected in the variance percentage
alongside business performance
(3) Constant currency variance shows underlying financial
performance, excluding currency impacts, by comparing the current
and prior period at consistent exchange rates
(4) Excludes the deferred revenue adjustment further explained
in the "Accounting and modelling notes" section
3. Post Trade
Results to adjusted operating profit (1)
Continuing operations Constant
Currency
Variance(3)
%
H1 2022 Pro-forma Variance(2)
H1 2021(1)
GBPm GBPm %
--------- ------------
OTC Derivatives 191 169 13.0% 12.0%
Securities & Reporting 122 123 (0.8%) 1.9%
Non-Cash Collateral 49 46 6.5% 6.2%
------------------------------------ --------- ------------ ------------- -------------
Total revenue 362 338 7.1% 7.5%
Net Treasury Income 121 108 12.0% 11.3%
------------------------------------ --------- ------------ ------------- -------------
Total income 483 446 8.3% 8.5%
Cost of sales (68) (58) 17.2% 20.2%
------------------------------------ --------- ------------ ------------- -------------
Gross profit 415 388 7.0% 6.7%
Adjusted operating expenses before
depreciation, amortisation and
impairment (155) (147) 5.4% 5.1%
------------------------------------ --------- ------------ ------------- -------------
Adjusted earnings before interest,
tax, depreciation, amortisation
and impairment 260 241 7.9% 7.7%
Depreciation, amortisation and
impairment (52) (46) 13.0% 28.5%
------------------------------------ --------- ------------ ------------- -------------
Adjusted operating profit 208 195 6.7% 3.3%
------------------------------------ --------- ------------ ------------- -------------
Adjusted EBITDA Margin 53.8% 54.0%
Non-financial KPIs (1)
H1 2022 H1 2021 Variance
%
-------- --------
OTC
SwapClear
IRS notional cleared ($trn) 597 468 28%
SwapClear members 123 122 1%
Client trades ('000) 1,334 1,066 25%
Client average 10-year notional
equivalent ($trn) 4.0 4.4 (9%)
ForexClear
Notional cleared ($bn) 12,708 10,776 18%
ForexClear members 36 35 3%
CDSClear
Notional cleared (EURbn) 1,742 1,038 68%
CDSClear members 25 25 -
Securities & Reporting
EquityClear trades (m) 1,199 976 23%
Listed derivatives contracts
(m) 147.2 150.3 (2%)
RepoClear - nominal value
(EURtrn) 137.3 113.4 21%
Non-Cash Collateral
Average non-cash collateral
(EURbn) 169.5 161.5 5%
Net Treasury Income
Average cash collateral
(EURbn) 130.0 106.4 22%
--------------------------------- -------- -------- ---------
(1) The H1 2021 comparator is pro-forma and assumes that the
acquisition of Refinitiv took place on 1 January 2021
(2) Variance is the difference between current and prior year
periods using FX rates prevalent at each time, therefore any
changes in the FX rates are reflected in the variance percentage
alongside business performance
(3) Constant currency variance shows underlying financial
performance, excluding currency impacts, by comparing the current
and prior period at consistent exchange rates
Appendix - Synergies and cost to achieve
H1 2022
GBPm
Revenue synergies
Run-rate realised 44
Cost to achieve 64
of which:
Capital expenditure 44
Non-underlying operating
expenses 21
Cost synergies
Run-rate realised 221
In-period benefit 31
Cost to achieve 121
of which:
Capital expenditure 27
Non-underlying operating
expenses 94
Appendix - Total income by type (1)
Continuing operations H1 2022 Pro-forma Variance(2) Constant Constant
Currency Currency
Variance(3) Variance
(excl. deferred
revenue
adjustment)
(3,4)
GBPm H1 2021(1) % % %
GBPm
--------- ------------ ------------ ------------- -----------------
Recurring 2,604 2,389 9.0% 5.4% 4.5%
Transactional 832 729 14.1% 11.7% 11.7%
Net Treasury Income 121 108 12.0% 11.3% 11.3%
Other income 12 14 (14.3%) (14.2%) (14.2%)
Total income (excl. recoveries) 3,569 3,240 10.2% 6.9% 6.2%
Recoveries 166 178 (6.7%) 2.9% 1.8%
--------------------------------- --------- ------------ ------------ ------------- -----------------
Total income (incl. recoveries) 3,735 3,419 9.2% 6.7% 6.0%
--------------------------------- --------- ------------ ------------ ------------- -----------------
(1) The H1 2021 comparator is pro-forma and assumes that the
acquisition of Refinitiv took place on 1 January 2021
(2) Variance is the difference between current and prior year
periods using FX rates prevalent at each time, therefore any
changes in the FX rates are reflected in the variance percentage
alongside business performance
(3) Constant currency variance shows underlying financial
performance, excluding currency impacts, by comparing the current
and prior period at consistent exchange rates
(4) Excludes the deferred revenue adjustment further explained
in the "Accounting and modelling notes" section
Appendix - Total income and gross profit by quarter (1)
GBPm Q1 Q2 Q3 Q4 2021 Q1 Q2
------ ------ ------ ------ ------ ------
Trading & Banking Solutions 372 373 373 375 1,493 378 391
------ ------
Trading 297 297 296 296 1,186 298 308
------ ------ ------ ------ ------ ------
Banking 75 76 77 79 307 80 83
------ ------ ------ ------ ------ ------
Enterprise Data Solutions 279 282 284 296 1,141 304 317
------ ------ ------ ------ ------ ------
Real Time Data 178 182 182 188 730 195 202
------ ------ ------ ------ ------ ------
PRS 101 100 102 108 411 109 115
------ ------ ------ ------ ------ ------
Investment Solutions 274 286 294 302 1,156 308 328
------ ------ ------ ------ ------ ------
Benchmark Rates, Indices
& Analytics 122 126 136 134 518 137 148
------ ------ ------ ------ ------ ------
Index - Asset-Based 58 64 62 69 253 70 71
------ ------ ------ ------ ------ ------
Data & Workflow 94 96 96 99 385 101 109
------ ------ ------ ------ ------ ------
Wealth Solutions 61 62 61 65 249 63 68
------ ------ ------ ------ ------ ------
Customer & Third-Party
Risk Solutions 85 90 92 92 359 94 102
--------------------------------- ------ ------ ------ ------ ------ ------ ------
Data & Analytics 1,071 1,093 1,104 1,130 4,398 1,147 1,207
------ ------ ------ ------ ------ ------
Equities 61 59 60 61 241 67 62
------ ------ ------ ------ ------ ------
FX 57 53 56 57 223 60 63
------ ------ ------ ------ ------ ------
Fixed Income, Derivatives
& Other 200 187 193 205 785 232 235
--------------------------------- ------ ------ ------ ------ ------ ------ ------
Capital Markets 318 299 309 323 1,249 359 361
------ ------ ------ ------ ------ ------
OTC Derivatives 87 82 86 103 358 93 98
------ ------ ------ ------ ------ ------
Securities & Reporting 63 60 60 63 246 64 58
------ ------ ------ ------ ------ ------
Non-Cash Collateral 22 24 24 25 95 24 25
------ ------ ------ ------ ------ ------
Net Treasury Income 55 53 47 52 207 57 64
--------------------------------- ------ ------ ------ ------ ------ ------ ------
Post Trade 227 219 217 243 906 238 245
------ ------ ------ ------ ------ ------
Other 5 10 9 10 34 7 5
--------------------------------- ------ ------ ------ ------ ------ ------ ------
Total income (excl. recoveries) 1,621 1,621 1,639 1,706 6,587 1,751 1,818
------ ------ ------ ------ ------ ------
Recoveries 88 90 90 86 354 80 86
--------------------------------- ------ ------ ------ ------ ------ ------ ------
Total income (incl. recoveries) 1,709 1,711 1,729 1,792 6,941 1,831 1,904
------ ------ ------ ------ ------ ------
Cost of sales (230) (222) (227) (241) (920) (240) (264)
--------------------------------- ------ ------ ------ ------ ------ ------ ------
Gross profit 1,479 1,489 1,502 1,551 6,021 1,591 1,640
--------------------------------- ------ ------ ------ ------ ------ ------ ------
The table above has used FX rates on a YTD average basis which
is the basis upon which the Group presents its financials. Revenues
and cost of sales associated with the BETA divestment have been
classed as discontinued and are excluded in all periods. Revenues
and cost of sales associated with the Borsa Italiana group
divestment, completed in H1 2021, are also excluded.
(1) Q1 2021 is pro-forma and assumes that the acquisition of
Refinitiv took place on 1 January 2021
Condensed consolidated income statement
Six months ended 30
June 2022 2021
Unaudited Unaudited (re-presented)(1)
----------------------------------- -----------------------------------
Underlying Non-underlying Total Underlying Non-underlying Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Continuing operations
--------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
4,
Revenue 5 3,602 - 3,602 2,897 - 2,897
Net treasury income 4,
from CCP clearing business 5 121 - 121 108 - 108
4,
Other income 5 12 - 12 13 - 13
--------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Total income 3,735 - 3,735 3,018 - 3,018
Cost of sales 4 (504) - (504) (392) - (392)
Gross profit 3,231 - 3,231 2,626 - 2,626
Operating expenses before
depreciation, amortisation 6,
and impairment 7 (1,433) (160) (1,593) (1,219) (182) (1,401)
Profit on disposal of
property, plant and equipment 7 - 133 133 - - -
2.1,
Remeasurement gain 7 - 23 23 - - -
Income from equity investments - - - 11 - 11
Share of profit/(loss)
after tax of associates 1 - 1 (2) - (2)
--------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Earnings before interest,
tax, depreciation, amortisation
and impairment 1,799 (4) 1,795 1,416 (182) 1,234
Depreciation, amortisation
and impairment 7 (391) (507) (898) (297) (387) (684)
Operating profit/(loss) 4 1,408 (511) 897 1,119 (569) 550
Finance income 40 - 40 19 - 19
Finance expense (121) (13) (134) (105) (1) (106)
---------- -------------- ------- ---------- -------------- -------
7,
Net finance expense 8 (81) (13) (94) (86) (1) (87)
--------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Profit/(loss) before
tax 1,327 (524) 803 1,033 (570) 463
7,
Taxation 9 (262) 103 (159) (215) (39) (254)
--------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Profit/(loss) from continuing
operations 1,065 (421) 644 818 (609) 209
--------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Discontinued operations
--------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Profit/(loss) after tax
from discontinued operations 3 55 (2) 53 121 2,517 2,638
--------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Profit/(loss) for the
period 1,120 (423) 697 939 1,908 2,847
--------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
(1) The results for the six months ended 30 June 2021 have been re-presented
to exclude the results of discontinued operations (refer to note 3)
Condensed consolidated income statement (continued)
Six months ended 30 June 2022 2021
Unaudited Unaudited (re-presented)(1)
----------------------------------- -----------------------------------
Underlying Non-underlying Total Underlying Non-underlying Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Profit/(loss) from continuing
operations attributable
to:
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Equity holders 934 (386) 548 721 (578) 143
Non-controlling interests 131 (35) 96 97 (31) 66
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Profit/(loss) from continuing
operations 1,065 (421) 644 818 (609) 209
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Profit/(loss) from discontinued
operations attributable
to:
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Equity holders 55 (2) 53 117 2,518 2,635
Non-controlling interests - - - 4 (1) 3
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Profit/(loss) from discontinued
operations 3 55 (2) 53 121 2,517 2,638
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Profit/(loss) for the
period 1,120 (423) 697 939 1,908 2,847
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Earnings per share attributable
to equity holders:
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Continuing operations
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Basic earnings per share 10 98.0p 27.2p
Diluted earnings per share 10 97.3p 27.2p
Adjusted basic earnings
per share 10 167.4p 139.0p
Adjusted diluted earnings
per share 10 166.1p 138.1p
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Total operations
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Basic earnings per share 10 107.6p 535.3p
Diluted earnings per share 10 106.8p 532.2p
Adjusted basic earnings
per share 10 177.4p 161.5p
Adjusted diluted earnings
per share 10 176.0p 160.5p
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Dividend per share in
respect of the financial
period
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
Dividend per share paid
during the period 11 70.0p 51.7p
Dividend per share declared
for the period 11 31.7p 25.0p
-------------------------------- ----- ---------- -------------- ------- ---------- -------------- -------
(1) The results for the six months ended 30 June 2021 have been re-presented
to exclude the results of discontinued operations (refer to note 3)
Condensed consolidated statement of comprehensive income
Six months ended 30 June 2022 2021
Unaudited Unaudited
(Re-presented)(1)
Continuing operations Notes GBPm GBPm
----------------------------------------------------------- ----- --------- -----------------
Profit from continuing operations 644 209
----------------------------------------------------------- ----- --------- -----------------
Other comprehensive income
Items that will not be subsequently reclassified
to the income statement
Actuarial (losses)/gains on retirement benefit
obligations (105) 77
Gain on equity instruments at fair value through
other comprehensive income 13 21 -
Income tax relating to above items 9 35 (19)
(49) 58
----------------------------------------------------------- ----- --------- -----------------
Items that may be subsequently reclassified to
the income statement
Gain on cash flow hedges 14 - 22
Gain on cash flow hedge recycled to the income
statement 14 (1) -
Net (losses)/gains on net investment hedges 14 (85) 72
Debt instruments at fair value through other comprehensive
income (FVOCI)
-- Net gains/(losses) from changes in fair value 5 (4)
-- Gains recycled to the income statement - (3)
Net exchange gains/(losses) on translation of
foreign operations 2,329 (264)
Income tax relating to above items 9 (2) 1
2,246 (176)
----------------------------------------------------------- ----- --------- -----------------
Other comprehensive income/(loss) net of tax
from continuing operations 2,197 (118)
----------------------------------------------------------- ----- --------- -----------------
Total comprehensive income from continuing operations 2,841 91
----------------------------------------------------------- ----- --------- -----------------
Discontinued operations
----------------------------------------------------------- ----- --------- -----------------
Total comprehensive income from discontinued
operations 3 53 2,630
----------------------------------------------------------- ----- --------- -----------------
Total comprehensive income for the period 2,894 2,721
----------------------------------------------------------- ----- --------- -----------------
Total comprehensive income from continuing operations
attributable to:
----------------------------------------------------------- ----- --------- -----------------
Equity holders 2,566 39
Non-controlling interests 275 52
----------------------------------------------------------- ----- --------- -----------------
Total comprehensive income from continuing operations 2,841 91
----------------------------------------------------------- ----- --------- -----------------
Total comprehensive income from discontinued
operations attributable to:
----------------------------------------------------------- ----- --------- -----------------
Equity holders 53 2,627
Non-controlling interests - 3
----------------------------------------------------------- ----- --------- -----------------
Total comprehensive income from discontinued
operations 3 53 2,630
----------------------------------------------------------- ----- --------- -----------------
Total comprehensive income for the period 2,894 2,721
----------------------------------------------------------- ----- --------- -----------------
(1) The results for the six months ended 30 June 2021 have been re-presented
to exclude the results of discontinued operations (refer to note 3)
Condensed consolidated balance sheet
30 June 31 December
2022 2021
Unaudited
Notes GBPm GBPm
--------------------------------------------- ------ --------- -----------
Assets
Non-current assets
Property, plant and equipment 759 832
Intangible assets 12 34,567 31,724
Investment in associates 33 25
Deferred tax assets 602 508
Derivative financial instruments 14 10 2
Investments in financial assets 13, 14 385 351
Retirement benefit assets 472 568
Trade and other receivables 14 213 202
37,041 34,212
--------------------------------------------- ------ --------- -----------
Current assets
Trade and other receivables 14 1,334 967
Derivative financial instruments 14 65 25
Clearing member financial assets 734,107 665,031
Clearing member cash and cash equivalents 110,795 83,795
--------- -----------
Clearing member assets 14 844,902 748,826
Current tax receivable 553 398
Cash and cash equivalents 14 2,520 2,665
Assets held for sale 3 274 16
--------------------------------------------- ------ --------- -----------
849,648 752,897
--------------------------------------------- ------ --------- -----------
Total assets 886,689 787,109
--------------------------------------------- ------ --------- -----------
Liabilities
Current liabilities
Trade and other payables 14 1,598 1,782
Contract liabilities 424 245
Derivative financial instruments 14 22 7
Clearing member financial liabilities 14 844,651 748,644
Current tax payable 163 73
Borrowings 14, 15 60 -
Provisions 10 16
Liabilities directly associated with assets
held for sale 3 42 -
--------------------------------------------- ------ --------- -----------
846,970 750,767
--------------------------------------------- ------ --------- -----------
Non-current liabilities
Borrowings 14, 15 8,258 7,654
Derivative financial instruments 14 90 45
Contract liabilities 96 101
Deferred tax liabilities 2,141 1,835
Retirement benefit obligations 87 85
Other payables 14 1,126 1,059
Provisions 57 44
--------------------------------------------- ------ --------- -----------
11,855 10,823
Total liabilities 858,825 761,590
--------------------------------------------- ------ --------- -----------
Net assets 27,864 25,519
--------------------------------------------- ------ --------- -----------
Equity
Capital and reserves attributable to the Company's
equity holders
Ordinary share capital 39 39
Share premium 978 978
Retained earnings 4,028 3,816
Other reserves 20,876 18,807
--------------------------------------------- ------ --------- -----------
Total shareholders' funds 25,921 23,640
Non-controlling interests 1,943 1,879
--------------------------------------------- ------ --------- -----------
Total equity 27,864 25,519
--------------------------------------------- ------ --------- -----------
Condensed consolidated cash flow statement
Six months ended 30 June 2022 2021
Unaudited Unaudited
(Re-presented)(1)
Notes GBPm GBPm
---------------------------------------------------- -------- --------- -----------------
Operating activities
Profit from continuing operations 644 209
Adjustments to reconcile profit to net cash
flow:
- Depreciation and impairment of property,
plant and equipment 154 113
- Amortisation and impairment of intangible
assets 12 744 571
- Taxation 9 159 254
- Profit on disposal of property, plant and
equipment 7 (133) -
- Share based payments 71 64
- Net finance expense 8 94 87
- Net foreign exchange losses 68 162
- Dividend income - (11)
- Other movements 12 59
- (Increase)/decrease in receivables, contract
and other assets (331) 444
- Decrease in payables, contract and other
liabilities (89) (575)
- Increase in clearing member financial assets (68,887) (79,777)
- Increase in clearing member financial liabilities 68,832 79,714
---------------------------------------------------- -------- --------- -----------------
Cash generated from operations 1,338 1,314
Interest received - 7
Interest paid (77) (67)
Taxes paid (212) (85)
Withholding tax received 5 -
Royalties paid (40) (30)
---------------------------------------------------- -------- --------- -----------------
Net cash flows from continuing operations 1,014 1,139
Net cash flows from discontinued operations 3 37 (36)
---------------------------------------------------- -------- --------- -----------------
Net cash flows from operating activities 1,051 1,103
---------------------------------------------------- -------- --------- -----------------
Investing activities
Purchase of property, plant and equipment (110) (25)
Proceeds from disposal of property, plant
and equipment 153 -
Purchase of intangible assets 12 (363) (204)
Acquisition of subsidiaries, net of cash acquired 2.1, 2.2 (359) 774
Proceeds from sale of disposal group, net
of cash disposed - 3,592
Dividends received - 11
Other investing activities (35) (15)
---------------------------------------------------- -------- --------- -----------------
Net cash flows from continuing operations (714) 4,133
Net cash flows from discontinued operations 3 (16) (18)
---------------------------------------------------- -------- --------- -----------------
Net cash flows from investing activities (730) 4,115
---------------------------------------------------- -------- --------- -----------------
Financing activities
Payment of principal portion of lease liabilities (71) (45)
Proceeds from borrowings 15 62 5,043
Repayment of borrowings 15 - (8,852)
Dividends paid to equity holders of the parent 11 (390) (287)
Dividends paid to non-controlling interests (68) (70)
Other financing activities (123) 12
---------------------------------------------------- -------- --------- -----------------
Net cash flows from continuing operations (590) (4,199)
Net cash flows from discontinued operations 3 - (4)
---------------------------------------------------- -------- --------- -----------------
Net cash flows from financing activities (590) (4,203)
---------------------------------------------------- -------- --------- -----------------
(Decrease)/increase in cash and cash equivalents (269) 1,015
Foreign exchange translation 124 (58)
Cash and cash equivalents at beginning of
period 2,665 1,785
---------------------------------------------------- -------- --------- -----------------
Cash and cash equivalents at end of period 2,520 2,742
---------------------------------------------------- -------- --------- -----------------
(1) The results for the six months ended 30 June 2021 have been re-presented
to exclude the results of discontinued operations (refer to note 3)
Condensed consolidated statement of changes in equity
Attributable to equity holders
--------------------------------------------------------
Total
Ordinary attribu-table Non-
share Share Retained Other to equity control-ling Total
capital premium earnings reserves holders interests equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ----- -------- -------- --------- --------- -------------- ------------- -------
1 January 2021 24 971 911 1,805 3,711 414 4,125
Total comprehensive income
for the period - - 2,823 (157) 2,666 55 2,721
Issue of shares - 1 - - 1 - 1
Issue of shares for
acquisition
of subsidiaries (with
non-controlling
interest) 15 - (25) 16,981 16,971 1,442 18,413
Dividends paid in the period 11 - - (287) - (287) (76) (363)
Share-based payments - - 36 - 36 4 40
Tax benefit in relation
to share-based payments 9 - - 4 - 4 - 4
Disposal of business - - - (44) (44) (65) (109)
Adjustment to non-controlling
interests - - - - - (11) (11)
30 June 2021 (Unaudited)(1) 39 972 3,462 18,585 23,058 1,763 24,821
----------------------------- ----- -------- -------- --------- --------- -------------- ------------- -------
1 January 2022 39 978 3,816 18,807 23,640 1,879 25,519
Total comprehensive income
for the period - - 550 2,069 2,619 275 2,894
Dividends paid in the period 11 - - (390) - (390) (68) (458)
Share-based payments - - 42 - 42 32 74
Tax benefit/(expense) in
relation to share-based
payments 9 - - 6 - 6 (84) (78)
Deferred tax on investments
in partnerships 9 - - - - - 35 35
Purchase of non-controlling
interests - - 4 - 4 (19) (15)
Tradeweb share buyback - - - - - (43) (43)
Shares withheld from employee
options exercised (Tradeweb) - - - - - (64) (64)
30 June 2022 (Unaudited) 39 978 4,028 20,876 25,921 1,943 27,864
----------------------------- ----- -------- -------- --------- --------- -------------- ------------- -------
(1) The condensed consolidated balance sheet as at 30 June 2021 has
been revised from that reported in the H1 2021 interim results to reflect
the adjustment to the provisional accounting in respect of Refinitiv
Parent Ltd and its subsidiaries acquired on 29 January 2021.
N otes to the interim condensed consolidated financial
statements
1. Basis of preparation and changes to accounting policies
1.1 Reporting entity
The interim condensed consolidated financial statements (interim
statements) of London Stock Exchange Group plc (the 'Group' or the
'Company') for the six months ended 30 June 2022 were approved by
the Directors on 4 August 2022.
The Company is a public company, incorporated and domiciled in
England and Wales. The address of its registered office is 10
Paternoster Square, London, EC4M 7LS.
On 31 May 2022, the Group acquired:
-- Global Data Consortium Inc (GDC) (refer to note 2.1). The results
of GDC have been consolidated since the date of acquisition.
-- MayStreet Inc. (MayStreet) (refer to note 2.2). The results of MayStreet
have been consolidated since the date of acquisition.
On 21 March 2022, the disposal of the BETA, Maxit and Digital
Investor businesses (collectively BETA) was assessed to be highly
probable and the collective business was treated as a disposal
group from that date. BETA is also deemed to be a discontinued
operation as it represented a separate major line of business of
the Group. Its profits, losses and cash flows have therefore been
separated from the Group's continuing operations and are shown as
discontinued operations. The comparative period has been
re-presented accordingly.
1.2. Basis of preparation
The interim statements of the Group for the six months ended 30
June 2022 have been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and
UK-adopted International Accounting Standard 34 Interim Financial
Reporting.
The interim statements are unaudited but have been reviewed by
the auditors and their review opinion is included in this
report.
Comparative amounts presented for the condensed consolidated
balance sheet relate to the Group's position as at 31 December 2021
. All other comparative amounts presented relate to the six months
ended 30 June 2021 (referred to as H1 2021).
The interim statements do not include all the information and
disclosures required in the annual financial statements, and should
be read in conjunction with the Group's consolidated financial
statements for the year ended 31 December 2021, which were prepared
in accordance with UK-adopted international accounting standards in
conformity with the requirements of the Companies Act 2006. The
interim statements do not constitute statutory financial statements
within the meaning of section 434 of the Companies Act 2006.
The statutory financial statements of London Stock Exchange
Group plc for the year ended 31 December 2021 , which carried an
unqualified audit report and did not contain a statement under
section 498 of the Companies Act 2006, have been delivered to the
Registrar of Companies.
All notes to the interim statements include amounts for
continuing operations, unless otherwise stated.
Going concern
The Group has prepared these interim statements on the basis
that it will continue to operate as a going concern. In assessing
the appropriateness of the going concern assumption, management has
stress tested the Group's most recent financial projections using
severe but plausible downside scenarios as determined by the Group
Risk Committee and considering the Group's principal risks. No
scenario leads to an inability to meet the Group's obligations
through insufficient headroom. Therefore, the Directors consider
there to be no material uncertainties that may cast significant
doubt on the Group's ability to continue to operate as a going
concern. The Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence for the
foreseeable future, being at least 12 months from approval of these
interim statements.
1.3 New standards, interpretations, and amendments
The principal accounting policies adopted in the preparation of
these interim statements are consistent with those applied in the
preparation of the Group's annual consolidated financial statements
for the year ended 31 December 2021, except for the adoption of
amended standards effective as of 1 January 2022. None of the
amendments adopted on 1 January 2022 have had a material impact on
the interim statements of the Group.
The Group has not early adopted any other standards, amendments
or interpretations that have been issued but are not yet
effective.
1.4 Significant accounting judgements, estimates and
assumptions
The preparation of the interim statements requires management to
make judgements, estimates and assumptions that affect the reported
income and expense, assets and liabilities, and the disclosure of
contingencies at the date of the interim statements. Although these
judgements, estimates and assumptions are based on management's
best judgement at the date of the interim statements, actual
results may differ from these estimates.
Judgements and estimates are regularly evaluated based on
historical experience, current circumstances and expectations of
future events. The significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty are the same as those described in the
audited 31 December 2021 annual financial statements note 1.7
(significant accounting judgements, estimates and assumptions),
except for the judgements and sources of estimation uncertainty
related to the acquisitions of GDC and MayStreet, and the Russian
tax audit as described below:
Intangible assets acquired as part of a business combination :
--
- The fair value of the intangible assets (and therefore the
resulting goodwill recognised on acquisition) is significantly
affected by a number of factors including management's best
estimates of future performance and estimates of the return
required to determine an appropriate discount rate. Further
detail of the valuation methodologies is provided in note 2.
- The intangible assets are amortised over their estimated useful
economic lives, which are also based on management's best estimates
of the periods over which value from the intangible assets
is realised. Further detail of the estimated useful economic
lives of the intangible assets acquired during the period is
provided in note 2.
Russian tax audit: The Group has used its judgement in assessing
-- the financial reporting implications of its ongoing audit by the
Russian Tax Authorities. The Group has used guidance under IFRIC
23 Uncertainty over Income Tax Treatments to determine the possible
outcomes and to assign a probability to each of those outcomes.
Further detail is provided in note 9.
1.5 Other information
There have been no material related party transactions in H1
2022 and no material changes to the related party transactions
described in the audited 31 December 2021 annual financial
statements that could have a material effect on the H1 2022
financial position or performance.
2. Business combinations
2.1 GDC acquisition
On 31 May 2022, the Group acquired 89% of GDC, a global provider
of high-quality identity verification data to support clients with
Know Your Customer (KYC) requirements. Prior to the acquisition
LSEG held an 11% interest in GDC and on 31 May 2022, recognised a
remeasurement gain on this investment in associate of GBP23
million.
GDC's services are currently used within LSEG's Customer &
Third-Party Risk Solutions business within the Data & Analytics
division, to provide global digital identity verification to
customers. Adding GDC to the Group's suite of digital identity
solutions will enable the Group to continue to expand capabilities
in this segment, through both direct sales and channel
partnerships.
The purchase price allocation (PPA) has been prepared on a
provisional basis in accordance with IFRS 3 Business Combinations.
If new information obtained within one year of the acquisition
date, about facts and circumstances that existed at the acquisition
date, identifies adjustments to the amounts below or any additional
provisions that existed at the date of acquisition, then the
accounting for the acquisition will be revised.
Goodwill arising from the acquisition has been recognised as follows:
Estimated
useful
Notes US$m GBPm lives
-------------------------------------------- ------ ----- ---- -----------
Purchase consideration
- Cash (including settlement of share
options) 269 213
- Fair value of previous equity interest
held in GDC 36 28
-------------------------------------------- ------ ----- ---- -----------
Total purchase consideration 305 241
-------------------------------------------- ------ ----- ---- -----------
Less: Fair value of identifiable
net assets acquired
- Intangible assets: Customer and
supplier relationships 12 (85) (67) 15-18 years
- Intangible assets: Software 12 (35) (28) 10 years
- Other non-current assets (1) -
- Other current assets (5) (4)
- Cash and cash equivalents (6) (5)
- Total liabilities, excluding deferred
tax liabilities 5 4
- Deferred tax liabilities 15 12
-------------------------------------------- ------ ----- ---- -----------
Fair value of identifiable net assets
acquired (112) (88)
-------------------------------------------- ------ ----- ---- -----------
Goodwill 12 193 153
-------------------------------------------- ------ ----- ---- -----------
The fair values of the net assets acquired were determined based
on assumptions that reasonable market participants would use in the
principal (or most advantageous) market and primarily included
significant unobservable inputs (Level 3 of the fair value
hierarchy). The following valuation methodologies were used to
determine fair value:
-- Customer relationships: multi-period excess earnings method
(MEEM) (income approach)
-- Supplier relationships: replacement cost approach
-- Software: relief from royalty method (income approach)
The deferred tax liability mainly comprises the tax effect of
the intangible assets.
The goodwill is attributable to:
-- growth in the underlying business;
-- future data and technology not yet developed; and
-- expected synergies which will drive growth in the combined
business.
Goodwill has been provisionally allocated to the Data &
Analytics cash-generating unit. None of the goodwill recognised is
expected to be deductible for income tax purposes.
Revenue and profit before tax
From the date of acquisition, GDC contributed revenue of GBP2
million and immaterial profit before tax.
If the acquisition had occurred on 1 January 2022, estimated
Group revenue for the period from continuing operations would have
been GBP3,610 million, with operating profit before non-underlying
items of GBP1,407 million.
Acquisition related costs
The Group incurred acquisition related costs of GBP1 million on
advisor and professional fees and management retention costs. These
costs are recognised as non-underlying transaction costs in the
income statement (refer to note 7).
2.2 MayStreet acquisition
On 31 May 2022, the Group acquired MayStreet, a market data
solutions provider. MayStreet provides global low latency
technology and market data to over 65 industry participants,
including banks, asset managers and hedge funds. MayStreet has an
existing commercial partnership with LSEG to support LSEG's
Real-Time Direct feed offering. It has also served as a market data
provider to the SEC's Market Information Data Analytics System
(MIDAS) since 2019.
The acquisition enhances LSEG's Enterprise Data Solutions
business, within the Data & Analytics division, expanding
LSEG's capabilities across the latency spectrum through a global
low latency network of over 300 cross asset, exchange and trading
venue feeds. This broadens and complements LSEG's real-time feeds
and historical market data value proposition, particularly for
front office customers, who use these solutions to support research
and strategy development and to power electronic trading
applications.
The PPA has been prepared on a provisional basis in accordance
with IFRS 3. If new information obtained within one year of the
acquisition date, about facts and circumstances that existed at the
acquisition date, identifies adjustments to the amounts below or
any additional provisions that existed at the date of acquisition,
then the accounting for the acquisition will be revised.
Goodwill arising from the acquisition has been recognised as
follows:
Estimated
useful
Notes US$m GBPm lives
--------------------------------------------- ----- ---- ---- ---------
Purchase consideration
-- Cash (including settlement of
share options) 194 153
--------------------------------------------- ----- ---- ---- ---------
Total purchase consideration 194 153
--------------------------------------------- ----- ---- ---- ---------
Less: Fair value of identifiable
net assets acquired
-- Intangible assets: Customer relationships 12 (35) (28) 15 years
-- Intangible assets: Software 12 (49) (39) 10 years
-- Other non-current assets (1) (1)
-- Other current assets (3) (3)
-- Cash and cash equivalents (2) (2)
-- Total liabilities, excluding deferred
tax liabilities 24 19
-- Deferred tax liabilities 11 9
--------------------------------------------- ----- ---- ---- ---------
Fair value of identifiable net assets
acquired (55) (45)
--------------------------------------------- ----- ---- ---- ---------
Goodwill 12 139 108
--------------------------------------------- ----- ---- ---- ---------
The fair values of the net assets acquired were determined based
on assumptions that reasonable market participants would use in the
principal (or most advantageous) market and primarily included
significant unobservable inputs (Level 3 of the fair value
hierarchy). The following valuation methodologies were used to
determine fair value:
-- Customer relationships: multi-period excess earnings method (MEEM) (income approach)
-- Software: relief from royalty method (income approach)
The deferred tax liability mainly comprises the tax effect of
the intangible assets.
The goodwill is attributable to:
-- growth in the underlying business;
-- future data and technology not yet developed; and
-- expected synergies which will drive growth in the combined
business.
Goodwill has been provisionally allocated to the Data &
Analytics cash-generating unit. None of the goodwill recognised is
expected to be deductible for income tax purposes.
Revenue and profit before tax
From the date of acquisition, MayStreet contributed revenue of
GBP1 million and a loss before tax of GBP1 million.
If the acquisition had occurred on 1 January 2022, estimated
Group revenue for the period from continuing operations would have
been GBP3,607 million, with operating profit before non-underlying
items of GBP1,401 million.
Acquisition related costs
The Group incurred acquisition related costs of GBP4 million on
advisor and professional fees and management retention costs. These
costs are recognised as non-underlying transaction costs in the
income statement (refer to note 7).
Employment-linked management incentive and earn-out
arrangements
As part of the purchase agreement, employment-linked management
incentive and earn-out arrangements have been agreed with the
former founders and senior management. These arrangements are
contingent on continuing employment and will be recognised as
post-combination compensation over the arrangement period.
3. Discontinued operations and assets held for sale
Agreed disposal of BETA during the period ended 30 June 2022
On 21 March 2022, the disposal of BETA was assessed to be highly
probable and it has been treated as a disposal group from that
date. BETA is also deemed to be a discontinued operation as it
represented a separate major line of business. Its results have
been excluded from the continuing results of the Group for the
period ended 30 June 2022. The results for the period ended 30 June
2021 have been re-presented to exclude the BETA results from the
continuing operations of the Group.
On 1 July 2022, BETA was sold for a total cash consideration of
US$1.1 billion (GBP0.9 billion), realising an estimated profit on
disposal of GBP0.6 billion, before separation costs and tax.
Disposal of the Borsa Italiana group during the period ended 30
June 2021
On 29 April 2021, the Group disposed of Borsa Italiana. It was
presented as a discontinued operation and its results are excluded
from the continuing operations of the Group for the period ended 30
June 2021.
As part of the disposal agreement the Group continues to provide
services to the Borsa Italiana group on an arm's length basis.
Summary income statement and statement of other comprehensive income
The results for BETA and the Borsa Italiana group included in the income
statement and statement of comprehensive income as discontinued operations
are as follows:
Six months ended 30 June 2022 2021
Unaudited Unaudited
(Re-presented)
Discontinued operations GBPm GBPm
-------------------------------------------------------- --------- --------------
BETA
Total income 132 95
Cost of sales and expenses (excluding non-underlying
expenses) (59) (45)
--------------------------------------------------------- --------- --------------
Adjusted profit before tax 73 50
Non-underlying expenses (2) (3)
--------------------------------------------------------- --------- --------------
Profit before tax 71 47
Taxation (18) (12)
Profit from discontinued operations - BETA 53 35
Profit from discontinued operations - Borsa
Italiana group - 2,603
Other comprehensive income from discontinued
operations - Borsa Italiana group - (8)
--------------------------------------------------------- --------- --------------
Total comprehensive income from discontinued operations 53 2,630
--------------------------------------------------------- --------- --------------
Summary cash flow statement
The results for BETA and the Borsa Italiana group included in the cash
flow statement as discontinued operations are as follows:
Six months ended 30 June 2022 2021
Unaudited Unaudited
(Re-presented)
Discontinued operations GBPm GBPm
----------------------------------------------- ---------- --------------
Operating activities
BETA 37 42
Borsa Italiana group - (78)
------------------------------------------------- ---------- --------------
Net cash flows from operating activities 37 (36)
------------------------------------------------- ---------- --------------
Investing activities
BETA (16) (16)
Borsa Italiana group - (2)
------------------------------------------------- ---------- --------------
Net cash flows from investing activities (16) (18)
------------------------------------------------- ---------- --------------
Financing activities
Borsa Italiana group - (4)
------------------------------------------------- ---------- --------------
Net cash flows from financing activities - (4)
------------------------------------------------- ---------- --------------
Net cash flows from discontinued operations
for the period 21 (58)
------------------------------------------------- ---------- --------------
The BETA business holds no cash on its own account and is funded by
the Group.
The cash flow statement above excludes the net sale proceeds of the
Borsa Italiana group of GBP3,592 million.
Net assets held for sale
The major classes of assets and liabilities classified as held for
sale are as follows:
30 June
2022 31 December
Unaudited 2021
GBPm GBPm
----------------------------------------------- --------- -----------
Assets
Property, plant and equipment 37 16
Intangible assets 190 -
Other assets 47 -
------------------------------------------------- --------- -----------
Assets held for sale 274 16
------------------------------------------------- --------- -----------
Liabilities
Other liabilities 42 -
------------------------------------------------- --------- -----------
Liabilities directly associated with assets
held for sale 42 -
------------------------------------------------- --------- -----------
Net assets held for sale 232 16
------------------------------------------------- --------- -----------
4. Segment information
The Group reports three main operating segments: Data &
Analytics, Capital Markets and Post Trade.
The results are presented on a continuing basis and exclude the
results of the BETA business for the periods ended 30 June 2022 and
30 June 2021 and the Borsa Italiana group for the period ended 30
June 2021 (refer to note 3).
Some revenue items have been reallocated between business lines
to better reflect our current operating model. The comparative
results have been re-presented to reflect this. At a divisional
level, the impact on the H1 2021 results previously reported
is:
-- GBP3 million of revenue from Capital Markets to Data & Analytics
-- GBP4 million of revenue from Post Trade to Data & Analytics
Segment reporting for the six months ended 30 June 2022 is as follows:
Data Capital Post
Continuing operations & Analytics Markets Trade Other Group
Unaudited Notes GBPm GBPm GBPm GBPm GBPm
-------------------------------------- ----- ------------ -------- ------ ----- -------
Revenue from external customers 5 2,520 720 362 - 3,602
Net treasury income from CCP
clearing business 5 - - 121 - 121
Other income 5 - - - 12 12
Total income 2,520 720 483 12 3,735
Cost of sales (420) (16) (68) - (504)
Gross profit 2,100 704 415 12 3,231
Adjusted operating expenses
before depreciation, amortisation,
and impairment (963) (314) (155) (1) (1,433)
Share of profit after tax of
associates - - - 1 1
Adjusted earnings before interest,
tax, depreciation, amortisation
and impairment 1,137 390 260 12 1,799
Underlying depreciation, amortisation
and impairment (291) (48) (52) - (391)
Adjusted operating profit 846 342 208 12 1,408
Non-underlying depreciation,
amortisation and impairment 7 (507)
Other non-underlying items
excluding net finance expense 7 (4)
Operating profit 897
Net finance expense (including
non-underlying items) 8 (94)
Profit before tax from continuing
operations 803
Profit before tax from discontinued
operations 3 71
Profit before tax 874
Re-presented results by operating segment for the six months ended
30 June 2021 are as follows:
Data Capital Post
Continuing operations & Analytics Markets Trade Other Group
Unaudited GBPm GBPm GBPm GBPm GBPm
Revenue from external customers 5 2,020 539 338 - 2,897
Net treasury income from
CCP clearing business 5 - - 108 - 108
Other income 5 - - - 13 13
Total income 2,020 539 446 13 3,018
Cost of sales (322) (11) (59) - (392)
Gross profit 1,698 528 387 13 2,626
Adjusted operating expenses
before depreciation, amortisation,
and impairment (820) (250) (147) (2) (1,219)
Income from investments 11 11
Share of loss after tax
of associates - - - (2) (2)
Adjusted earnings before
interest, tax, depreciation,
amortisation and impairment 878 278 240 20 1,416
Underlying depreciation,
amortisation and impairment (221) (30) (46) - (297)
Adjusted operating profit 657 248 194 20 1,119
Non-underlying depreciation,
amortisation and impairment 7 (387)
Other non-underlying items
excluding net finance expense 7 (182)
Operating profit 550
Net finance expense (including
non-underlying items) 8 (87)
Profit before tax from
continuing operations 463
Profit before tax from
discontinued operations 2,656
Profit before tax 3,119
5. Total income
The Group's revenue from contracts with customers disaggregated by
segment, major product and service line, and timing of revenue recognition
for the six months ended 30 June 2022 is as follows:
Data & Capital
Continuing operations Analytics Markets Post Trade Other Group
Unaudited GBPm GBPm GBPm GBPm GBPm
Revenue from external customers
Major product and service
lines
Trading & banking solutions 770 - - - 770
Enterprise data solutions 620 - - - 620
Investment solutions 637 - - - 637
Wealth solutions 131 - - - 131
Customer & third-party risk
solutions 196 - - - 196
Recoveries 166 - - - 166
Equities - 129 - - 129
FX - 124 - - 124
Fixed income, derivatives
and other - 467 - - 467
OTC derivatives - - 191 - 191
Securities & reporting - - 122 - 122
Non cash collateral - - 49 - 49
Total revenue 2,520 720 362 - 3,602
Net treasury income - - 121 - 121
Other income - - - 12 12
Total income 2,520 720 483 12 3,735
Timing of revenue recognition
Services satisfied at a point
in time 75 504 356 - 935
Services satisfied over time 2,445 216 6 - 2,667
Total revenue 2,520 720 362 - 3,602
The Group's re-presented revenue from contracts with customers disaggregated
by segment, major product and service line, and timing of revenue recognition
for the six months ended 30 June 2021 is as follows:
Data & Capital
Continuing operations Analytics Markets Post Trade Other Group
Unaudited GBPm GBPm GBPm GBPm GBPm
Revenue from external customers
Major product and service
lines
Trading & banking solutions 621 - - - 621
Enterprise data solutions 477 - - - 477
Investment solutions 525 - - - 525
Wealth solutions 102 - - - 102
Customer & third-party risk
solutions 147 - - - 147
Recoveries 148 - - - 148
Equities - 120 - - 120
FX - 91 - - 91
Fixed income, derivatives
and other - 328 - - 328
OTC derivatives - - 169 - 169
Securities & reporting - - 123 - 123
Non cash collateral - - 46 - 46
Total revenue 2,020 539 338 - 2,897
Net treasury income - - 108 - 108
Other income - - - 13 13
Total income 2,020 539 446 13 3,018
Timing of revenue recognition
Services satisfied at a point
in time 66 366 331 - 763
Services satisfied over time 1,954 173 7 - 2,134
Total revenue 2,020 539 338 - 2,897
Geographical disclosures
The Group's revenue from continuing operations disaggregated by geographical
location of services provided is as follows:
Six months ended
30 June 2022 2021
Unaudited Unaudited
(Re-presented)
GBPm GBPm
----------------- ---------------------------
UK 1,131 953
USA 1,270 965
Europe 563 526
Asia 465 317
Other 173 136
Total revenue 3,602 2,897
6. Operating expenses before depreciation, amortisation and impairment
Operating expenses before depreciation, amortisation and impairment
comprise the following:
Six months ended 30 June 2022 2021
Unaudited Unaudited
(Re-presented)
Continuing operations Note GBPm GBPm
Employee costs 905 770
IT costs 258 189
Professional fees 191 133
Short-term lease costs 6 24
Foreign exchange gains (19) (5)
Other costs 92 108
---------
Underlying operating expenses before
depreciation, amortisation and impairment 1,433 1,219
Non-underlying operating expenses before
depreciation, amortisation and impairment 7 160 182
Total operating expenses before depreciation,
amortisation and impairment 1,593 1,401
7. Non-underlying items
The Group separately identifies results before non-underlying
items (adjusted). This provides the reader with supplemental data
relevant to an understanding of the Group's financial performance,
as non-underlying items of income and expense are material by their
size and/or nature.
The Group uses its judgement to classify items as
non-underlying. They include:
-- Incremental depreciation, amortisation and impairment of any
fair value adjustments of tangible or intangible assets recognised
as a result of acquisitions
-- Amortisation and impairment of goodwill and purchased intangible
assets. Purchased intangible assets include customer relationships,
trade names, and databases and content, all of which are as
a result of acquisitions
-- Other income or expenses not considered to drive the operating
results of the Group (including transaction, integration and
restructuring costs)
-- Significant gains or losses on disposals
-- Tax on non-underlying items
Six months ended 30 June 2022 2021
Unaudited
Unaudited (Re-presented)
Continuing operations Notes GBPm GBPm
--------- ---------------
Non-underlying expenses before interest,
tax, depreciation, amortisation and impairment
Transaction costs 24 69
Integration costs 122 112
Restructuring and other costs 14 1
Non-underlying operating expenses before
depreciation, amortisation and impairment 160 182
Profit on disposal of property, plant and
equipment (133) -
Remeasurement gain (23) -
Total non-underlying expenses before interest,
tax, depreciation, amortisation and impairment 4 182
Non-underlying depreciation, amortisation
and impairment
Depreciation and impairment of property, plant
and equipment 24 7
Amortisation of intangible assets 12 483 380
Total non-underlying depreciation, amortisation
and impairment 507 387
Non-underlying items before interest and
tax 511 569
-----
Non-underlying net finance expense 8 13 1
Non-underlying items before tax 524 570
Non-underlying tax (103) 39
Non-underlying items 421 609
Transaction costs mainly relate to the following
acquisitions:
-- GDC (note 2.1)
-- MayStreet (note 2.2)
-- Refinitiv - mainly fair value adjustments to the outstanding
Tradeweb equity-settled awards of GBP7 million (H1 2021: GBP17
million)
Integration costs relate to activities to integrate acquired
businesses with the Group and mainly consist of Refinitiv
integration costs of GBP108 million (H1 2021: GBP93 million)
On 5 January 2022, the Group completed the sale of one of its
freehold properties in the UK for a cash sum of GBP153 million
realising a gain on disposal of GBP133 million.
Prior to the acquisition of GDC on 31 May 2022, LSEG held an 11%
equity interest in GDC. The acquisition date fair value of the
previously held interest resulted in a remeasurement gain of GBP23
million.
We have continued to review our property needs following the
acquisition of Refinitiv. The decision to exit and sub-let some of
our property has resulted in a GBP24 million impairment to
right-of-use property assets and some fixtures and fittings.
Amortisation of intangibles of GBP483 million mainly relates to
the amortisation of intangible assets recognised as a result of the
acquisition of Refinitiv.
We have also recognised a GBP103 million non-underlying tax
benefit which mainly reflects the tax impact of the Group's
non-underlying items computed based on the tax rates applicable to
the respective territories.
8. Net finance expense
Six months ended 30 June 2022 2021
Unaudited Unaudited
(Re-presented)
Continuing operations Note GBPm GBPm
Finance income
Interest income on retirement benefit
assets 36 16
Bank deposit and other interest income 4 2
Other finance income - 1
Underlying finance income 40 19
Finance expense
Interest payable on bank and other borrowings(1) (70) (83)
Interest cost on retirement benefit obligations (31) (14)
Lease interest expense (7) (6)
Other finance expenses (13) (2)
Underlying finance expense (121) (105)
Non-underlying net finance expense 7 (13) (1)
Net finance expense (94) (87)
(1) Interest payable includes amounts where the Group incurs negative
interest on its cash deposits.
9. Taxation
Six months ended 30 June 2022 2021
Unaudited Unaudited
(Re-presented)
Continuing operations GBPm GBPm
Tax recognised in the income statement
Current tax
UK corporation tax for the period 20 13
Overseas tax for the period 91 48
Adjustments in respect of previous years 22 2
Total current tax 133 63
Deferred tax
Deferred tax for the period 44 205
Adjustments in respect of previous years (8) 1
Deferred tax benefit on amortisation and impairment
of purchased intangible assets (10) (15)
Total deferred tax 26 191
Total tax 159 254
Six months ended 30 June 2022 2021
Unaudited Unaudited
(Re-presented)
Continuing operations GBPm GBPm
Tax on items recognised in other comprehensive
income
Deferred tax (benefit)/expense
Actuarial losses/gains on retirement benefit
obligations (35) 19
Net gains/losses of financial assets (at FVOCI) 2 (1)
Total tax recognised in other comprehensive
income (33) 18
Tax recognised directly in equity
Current tax benefit
Share-based payments in excess of expense recognised (6) (6)
Share-based payments in excess of expense recognised
(in non-controlling interests) (7) -
Deferred tax expense
Share-based payments in excess of expense recognised - 2
Share-based payments in excess of expense recognised
(in non-controlling interests) 91 -
Investment in partnerships (recognised in non-controlling
interests) (35) -
Total tax recognised in equity 43 (4)
Total tax recognised in other comprehensive
income and equity 10 14
Factors affecting the tax charge for the period
The income statement tax charge for the period differs from the standard
rate of corporation tax in the UK of 19% (30 June 2021: 19%) as explained
below:
Six months ended 30 June 2022 2021
Unaudited Unaudited
(Re-presented)
Continuing operations GBPm GBPm
Profit before tax from continuing operations 803 463
Profit multiplied by standard rate of corporation
tax in the UK 152 88
Overseas earnings taxed at higher rate 9 4
Adjustment arising from changes in tax rates (12) 159
Income not taxable (2) -
Adjustments in respect of previous years 14 3
Other (2) -
Taxation charge from continuing operations 159 254
Uncertain tax positions
EU State Aid
The Group continues to monitor developments in relation to EU
State Aid investigations. On 25 April 2019, the EU Commission's
final decision regarding its investigation into the UK's Controlled
Foreign Company (CFC) regime was published. It concluded that the
Finance Company Partial Exemption (FCPE) rules in the UK tax
legislation partially represent illegal State Aid. The Group had
financing arrangements that utilised the FCPE during this
period.
In December 2019 and the beginning of 2021, HMRC issued
determinations to the Group totalling GBP10.5 million, excluding
interest and penalties, which the Group paid.
The Group, several other UK PLCs and the UK Government submitted
appeals to the EU General Court to annul the EU Commission's
findings. On 8 June 2022, the EU General Court rejected the
appeals. Affected parties have until 18 August 2022 to appeal this
decision to the European Court of Justice (ECJ). If the decision is
appealed, it will be some time before the issues are conclusively
determined by the ECJ. Until then, the UK Government is required to
continue recovering amounts determined to be State Aid.
Currently, the Group's view is that an appeal is likely and no
provision is required. Additionally, and in accordance with IFRIC
23, the Group continues to recognise a receivable against the HMRC
determinations paid to date of GBP10.5 million. The maximum
potential exposure excluding interest remains between nil and GBP65
million.
IRS Audit
The Group continues to be under audit in the US by the Internal
Revenue Service (IRS) in relation to the interest rate applied on
certain cross border intercompany loans from the UK to the US. In
2020, the IRS issued a Notice of Proposed Adjustment. The maximum
tax exposure is approximately US$145 million; however, this is the
upper bound of a range of nil to US$145 million (plus interest and
penalties) over the lifetime of the loans. The Group has an
uncertain tax liability of GBP12 million ($16 million) recorded on
the balance sheet related to this issue. The liability was measured
based on a probability weighted average of potential outcomes. The
issue is currently under appeal, and we expect to agree on a
satisfactory settlement in H2 2022.
HMRC audit of intellectual property valuation
HMRC is auditing the value of certain intellectual property
purchased from Thomson Reuters as part of the formation of
Refinitiv. Intellectual property valuation is complex and
significantly affected by multiple inputs of assumptions. As the
outcome is uncertain, especially given the inherent subjectivity of
the topic, the Group has recorded an uncertain tax liability in
accordance with the requirements of IFRS. Management and HMRC
continue to actively discuss this topic.
Diverted Profits Tax to Thomson Reuters
HMRC continues to issue notices of assessment under the Diverted
Profits Tax (DPT) regime to Thomson Reuters largely related to its
Financial and Risk Business for years prior to the sale of the
business to Refinitiv. As required by the notices and as directed
by Thomson Reuters, the Group makes payments to HMRC which are
immediately reimbursed by Thomson Reuters in accordance with an
indemnity agreement. Thomson Reuters does not agree with the
assessments and will continue to defend their position by
contesting the assessments through all available administrative and
judicial remedies.
Russian tax audit
The Group is under audit by the Russian Tax Authorities for the
period 2018-2020, which could result in additional taxes being paid
locally. We do not agree with the Tax Authorities' view and will
continue to defend our position through all available
administrative and judicial remedies. We have recorded an uncertain
tax liability in accordance with the requirements of IFRS.
10. Earnings per
share
Earnings per share is presented on four bases: basic earnings per share,
diluted earnings per share, adjusted basic earnings per share and adjusted
diluted earnings per share and is calculated on actual values (before
any rounding effects). Basic earnings per share is in respect of all
activities. Diluted earnings per share takes into account the dilutive
effect that would arise on conversion or vesting of all outstanding
share options and share awards under the Group's share option and award
schemes. Adjusted basic earnings per share and adjusted diluted earnings
per share exclude non-underlying items.
Six months ended
30 June 2022 2021
Unaudited Unaudited (Re-presented)
Continuing Discontinued Total Continuing Discontinued Total
Basic earnings per
share 98.0p 9.6p 107.6p 27.2p 508.1p 535.3p
Diluted earnings
per share 97.3p 9.5p 106.8p 27.2p 505.0p 532.2p
Adjusted basic earnings
per share 167.4p 10.0p 177.4p 139.0p 22.5p 161.5p
Adjusted diluted earnings
per share 166.1p 9.9p 176.0p 138.1p 22.4p 160.5p
Profit and adjusted profit for the period attributable to the Company's
equity holders
Six months ended
30 June 2022 2021
Unaudited Unaudited (Re-presented)
Continuing Discontinued Total Continuing Discontinued Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
----
Profit for the financial
period attributable
to the Company's equity
holders 548 53 601 143 2,635 2,778
Adjustments:
Non-underlying items
net of tax 7 421 2 423 609 (2,517) (1,908)
Non-underlying items
attributable to non-controlling
interests (35) - (35) (31) (1) (32)
Adjusted profit for
the financial period
attributable to the
Company's equity holders 934 55 989 721 117 838
Weighted average number of shares
Six months ended
30 June 2022 2021
Unaudited Unaudited
millions millions
Weighted average
number of shares(1) 558 519
Dilutive effect of
share options and
awards 4 3
Diluted weighted
average number of
shares 562 522
(1) The weighted average number of shares excludes those held in the
Employee Benefit Trust.
11. Dividends
Six months ended 30 June 2022 2021
Unaudited Unaudited
GBPm GBPm
Final dividend for 31 December 2020 paid 26 May
2021: 51.7p per Ordinary share - 287
Final dividend for 31 December 2021 paid 25 May
2022: 70.0p per Ordinary share 390 -
390 287
Dividends are only paid out of available distributable reserves
of the Company.
The Board has proposed an interim dividend in respect of the six
months ended 30 June 2022 of 31.7p per share, which amounts to an
expected payment of GBP177 million, to be paid in September 2022.
This is not reflected in these interim condensed consolidated
financial statements.
12. Intangible
assets
Purchased intangible assets
Software Software,
Customer licences contract
and supplier Database and intellectual costs
Goodwill relationships Brands and content property and other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Cost
1 January 2022 17,953 8,721 1,956 2,434 702 3,232 34,998
Acquisition of subsidiaries
(note 2) 261 95 - - 67 - 423
Additions(1) - - - - - 369 369
Disposals and write-offs - - - - - (21) (21)
Transfer to assets
held for sale - - (48) - - (162) (210)
Foreign exchange
translation 1,545 942 190 276 43 219 3,215
30 June 2022 (Unaudited) 19,759 9,758 2,098 2,710 812 3,637 38,774
Accumulated amortisation
and impairment
1 January 2022 467 956 398 224 315 914 3,274
Amortisation charge
for the period (2) - 279 72 112 17 273 753
Disposals and write-offs - - - - - (21) (21)
Transfer to assets
held for sale - - (4) - - (29) (33)
Foreign exchange
translation 12 99 38 33 8 44 234
30 June 2022 (Unaudited) 479 1,334 504 369 340 1,181 4,207
Net book values
30 June 2022 (Unaudited) 19,280 8,424 1,594 2,341 472 2,456 34,567
31 December 2021 17,486 7,765 1,558 2,210 387 2,318 31,724
(1) Includes additions for continuing and discontinued
operations. Consideration for additions for continuing operations
includes GBP363 million in cash
(2) Includes amortisation of intangible assets from continuing
and discontinued operations. Amortisation from continuing
operations of GBP744 million includes non-underlying amortisation
of GBP483 million
Goodwill and purchased intangible assets: Impairment testing
The Group performs its annual impairment testing for goodwill
and purchased intangible assets in December and when circumstances
indicate that the carrying values may be impaired. The Group's
impairment testing is based on value-in-use calculations. The key
assumptions used to determine the value-in-use for the different
cash generating units were disclosed in the annual consolidated
financial statements for the year ended 31 December 2021.
There were no circumstances indicating that the goodwill and
purchased intangible assets may be impaired during the current
reporting period.
13. Investments in financial assets
Equity instruments
The Group holds equity investments in a number of companies, the largest
of which is its stake in Euroclear. Movements in the period in the
fair value of the investments in equity instruments (which are almost
entirely classified as Level 3) are as follows:
2022
GBPm
-----
1 January 2022 351
Revaluation gains recognised in other comprehensive
income 21
Foreign exchange translation 13
30 June 2022 (Unaudited) 385
Fair value of equity instruments
In the absence of any relevant third-party data on the fair
value of its investments, the Group undertakes its own internal
valuations, as detailed in the annual consolidated financial
statements for the year ended 31 December 2021. The Group regularly
reviews the financial information of its investments which is
available publicly or received as a shareholder.
14. Financial assets and financial liabilities
The Group has a range of financial assets and financial
liabilities, the largest of which are clearing member trading
assets and liabilities. The Group classifies its financial
instruments as fair value though profit or loss (FVPL), fair value
through other comprehensive income (FVOCI) or amortised cost.
Management has assessed that the fair values of financial assets
and financial liabilities categorised as being at amortised cost
approximate to their carrying values, with the exception of Group
borrowings. The fair values of the Group's borrowings are disclosed
in note 15.
The Group's financial assets and financial liabilities held at
fair value consist largely of securities which are restricted in
use for the operations of the Group's Central Counterparties (CCPs)
as managers of their respective clearing and guarantee systems.
The Group adopts a forward-looking approach to estimating
impairment losses on financial assets. An expected credit loss
(ECL) arises if the expected cash flows are lower than the
contractual cash flows due. As at 30 June 2022, there are no
provisions for expected credit losses in relation to any of the CCP
businesses' financial assets held at amortised cost or FVOCI (31
December 2021: nil). The Group closely monitors its CCP investment
portfolio and invests only in government debt and other
collateralised instruments where the risk of loss is minimal. There
was no increase in credit risk in the period and none of the assets
are past due (31 December 2021: nil).
Financial instruments by category
The financial instruments are categorised as follows:
Financial assets
Amortised
30 June 2022 cost FVOCI FVPL Total
Unaudited GBPm GBPm GBPm GBPm
----------- ------ -------- --------
Clearing business financial assets
Clearing member trading assets 4,977 - 707,456 712,433
Other receivables from clearing
members 6,129 - - 6,129
Other financial assets - 15,545 - 15,545
Clearing member cash and cash
equivalents(1) 110,795 - - 110,795
----------- ------ -------- --------
121,901 15,545 707,456 844,902
Trade and other receivables(2) 1,336 - 18 1,354
Cash and cash equivalents 2,520 - - 2,520
Investments in financial assets
- equity instruments - 385 - 385
Derivative financial instruments - - 75 75
Total financial assets 125,757 15,930 707,549 849,236
----------- ------ -------- --------
(1) Clearing member cash and cash equivalents represents amounts received
from the clearing members to cover initial and variation margins, and
default fund contributions that are not invested in bonds. These amounts
are deposited with banks, including central banks, or invested securely
in short-term reverse repurchase contracts (reverse repos).
(2) Prepayments and contract assets within trade and other receivables
are not classified as financial instruments.
Financial assets measured at
fair value
The following table provides the fair value measurement hierarchy of
the Group's financial assets measured at fair value:
Quoted
prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level (Level (Level Total
30 June 2022 1) 2) 3) fair value
Unaudited GBPm GBPm GBPm GBPm
---------- ----------- ------------- -----------
Clearing business financial assets
Derivative instruments 232 17,785 - 18,017
Non-derivative instruments - 689,439 - 689,439
Other financial assets 15,545 - - 15,545
15,777 707,224 - 723,001
Investments in financial assets
- equity instruments 1 - 384 385
Derivatives not designated as
hedges
Foreign exchange forward contracts - 75 - 75
Trade and other receivables -
convertible loan notes - - 18 18
Total financial assets at fair
value 15,778 707,299 402 723,479
---------- ----------- ------------- -----------
There were no transfers between levels during the period.
Financial liabilities
Amortised
30 June 2022 cost FVPL Total
Unaudited GBPm GBPm GBPm
Clearing business financial liabilities
Clearing member trading liabilities 4,977 707,456 712,433
Other payables to clearing members 132,218 - 132,218
137,195 707,456 844,651
Trade and other payables(1) 2,311 - 2,311
Borrowings 8,318 - 8,318
Derivative financial instruments - 112 112
Total financial liabilities 147,824 707,568 855,392
(1) Social security and other taxes within trade and other payables
are not classified as financial instruments.
Financial liabilities measured at fair value
The following table provides the fair value measurement hierarchy of
the Group's financial liabilities measured at fair value:
Quoted
prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level (Level (Level Total
30 June 2022 1) 2) 3) fair value
Unaudited GBPm GBPm GBPm GBPm
---------- ----------- ------------- -----------
Clearing business financial liabilities
Derivative instruments 232 17,785 - 18,017
Non-derivative instruments - 689,439 - 689,439
232 707,224 - 707,456
Derivatives not designated as
hedges
Foreign exchange forward contracts - 22 - 22
Derivatives designated as hedges
Cross-currency interest rate swaps - 90 - 90
Total financial liabilities at
fair value 232 707,336 - 707,568
---------- ----------- ------------- -----------
There were no transfers between levels during the period.
The financial instruments of the Group at 31 December 2021 were categorised
as follows:
Financial assets
Amortised
31 December 2021 cost FVOCI FVPL Total
GBPm GBPm GBPm GBPm
----------- ------- -------- --------
Clearing business financial assets
Clearing member trading assets 1,476 - 645,587 647,063
Other receivables from clearing
members 4,184 - - 4,184
Other financial assets - 13,784 - 13,784
Clearing member cash and cash
equivalents 83,795 - - 83,795
89,455 13,784 645,587 748,826
Trade and other receivables 1,020 - 6 1,026
Cash and cash equivalents 2,665 - - 2,665
Investments in financial assets
- equity instruments - 351 - 351
Derivative financial instruments - - 27 27
Total financial assets 93,140 14,135 645,620 752,895
Financial assets measured at
fair value
The following table provides the fair value measurement hierarchy of
the Group's financial assets at 31 December 2021:
Quoted
prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level (Level (Level Total
31 December 2021 1) 2) 3) fair value
GBPm GBPm GBPm GBPm
---------- ----------- ------------- -----------
Clearing business financial assets
Derivative instruments 47 2,631 - 2,678
Non-derivative instruments - 642,909 - 642,909
Other financial assets 13,784 - - 13,784
13,831 645,540 - 659,371
Investments in financial assets
- equity instruments 1 - 350 351
Derivatives not designated as
hedges
Foreign exchange forward contracts - 27 - 27
Trade and other receivables -
convertible loan notes - - 6 6
Total financial assets at fair
value 13,832 645,567 356 659,755
There were no transfers between levels during the year to 31 December
2021.
Financial liabilities
Amortised
31 December 2021 cost FVPL Total
GBPm GBPm GBPm
--------- ------- -------
Clearing business financial liabilities
Clearing member trading liabilities 1,476 645,587 647,063
Other payables to clearing members 101,581 - 101,581
103,057 645,587 748,644
Trade and other payables 2,727 - 2,727
Borrowings 7,654 - 7,654
Derivative financial instruments - 52 52
Total financial liabilities 113,438 645,639 759,077
Financial liabilities measured
at fair value
The following table provides the fair value measurement hierarchy of
the Group's financial liabilities measured at fair value at 31 December
2021:
Quoted
prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level (Level (Level Total
31 December 2021 1) 2) 3) fair value
GBPm GBPm GBPm GBPm
---------- ----------- ------------- -----------
Clearing business financial liabilities
Derivative instruments 47 2,631 - 2,678
Non-derivative instruments - 642,909 - 642,909
47 645,540 - 645,587
Derivatives not designated as
hedges
Foreign exchange forward contracts - 8 - 8
Derivatives designated as hedges
Cross-currency interest rate swaps - 44 - 44
Total financial liabilities at
fair value 47 645,592 - 645,639
---------- ----------- ------------- -----------
There were no transfers between levels during the year to 31 December
2021.
Derivatives and hedging
As at 30 June 2022, the Group had derivative financial assets of
GBP75 million (31 December 2021: GBP27 million) and derivative
financial liabilities of GBP112 million (31 December 2021: GBP52
million). The components of this are set out below.
The Group uses foreign exchange contracts to manage its foreign
exchange risk. The fair value of these derivatives as at 30 June
2022 was an asset of GBP14 million (31 December 2021: GBP14
million) and a liability of GBP22 million (31 December 2021: GBP5
million).
The Group has embedded foreign currency derivatives primarily in
revenue contracts where the currency of the contract is different
from the functional or local currencies of the parties involved.
The fair value of embedded derivatives as at 30 June 2022 was an
asset of GBP61 million (31 December 2021: GBP13 million) and a
liability of nil (31 December 2021: GBP3 million).
Hedge accounting has not been applied to foreign currency
forwards or embedded derivatives.
In September 2017, the Group entered into cross-currency
interest rate swaps to swap EUR700 million of bonds into US$836
million. The fair value of these swaps as at 30 June 2022 was a
liability of GBP90 million (31 December 2021: GBP44 million). The
cross-currency interest rate swaps have been designated as a
hedging instrument and a loss of GBP47 million has been recognised
in other comprehensive income for the period ended 30 June 2022 (H1
2021: GBP13 million).
In February 2021, the Group entered into a series of US dollar
interest rate swaps, which were designated as cash flow hedges. The
interest rate swaps were settled in March and April 2021 and a gain
of US$31 million (GBP22 million) was recognised in the hedging
reserve. During the period GBP1 million was recycled to the income
statement (H1 2021: nil).
Non derivative hedges
EUR800 million of the Group's bonds and the EUR700 million of
bonds swapped into US dollars via cross-currency interest rate
swaps have been designated as a net investment hedge. For the
period to 30 June 2022, a loss of GBP38 million (H1 2021: GBP85
million gain) was recognised in other comprehensive income.
15. Borrowings and net debt
Borrowings
30 June 31 December
2022 2021
Unaudited
GBPm GBPm
Current
Bank borrowings - committed bank facilities(1) 60 -
Total current borrowings 60 -
Non-current
Bonds 6,760 6,306
Bank borrowings - committed bank facilities
and term loans 1,497 1,347
Trade finance loans 1 1
Total non-current borrowings 8,258 7,654
Total borrowings 8,318 7,654
(1) Balances are shown net of capitalised arrangement
fees of GBP6 million
During the period, US$250 million, EUR42 million and GBP32 million
was drawn down on the multi-currency revolving credit facility; US$170
million, EUR42 million and GBP32 million was repaid, with US$80 million
(GBP66 million) outstanding as at 30 June 2022 (31 December 2021: nil).
The movement in non-current bonds and bank borrowings during the period
relates to foreign exchange translation movements.
The fair value of total borrowings as at 30 June 2022 was GBP7,911
million (31 December 2021: GBP7,765 million).
Analysis of net debt
Net debt comprises cash and cash equivalents less interest-bearing
loans and borrowings, lease liabilities, and derivative financial instruments.
30 June 31 December
2022 2021
Unaudited
GBPm GBPm
Current
Cash and cash equivalents 2,520 2,665
Bank borrowings (60) -
Lease liabilities (126) (168)
Derivative financial assets 65 25
Derivative financial liabilities (22) (7)
Total due within one year 2,377 2,515
Non-current
Bonds (6,760) (6,306)
Bank borrowings (1,497) (1,347)
Trade finance loans (1) (1)
Lease liabilities (559) (547)
Derivative financial assets 10 2
Derivative financial liabilities (90) (45)
Total due after one year (8,897) (8,244)
Net debt (6,520) (5,729)
16. Commitments and contingencies
The Group has no contracted capital commitments which are not
provided for in the interim condensed consolidated financial
statements. The Group has a long-term agreement with Reuters News,
to receive news and editorial content in return for a minimum CPI
adjusted payment, which amounted to around US$340 million for the
2021 financial year.
The Group has commitments of GBP12 million for professional fees
relating to the divestment of BETA. The amount was payable on the
successful completion of the divestment (30 June 2021: nil).
In the normal course of business, the Group can receive legal
claims including, for example, in relation to commercial matters,
service and product quality or liability, employee matters and tax
audits. The Group is also involved in legal proceedings and
actions, engagement with regulatory authorities and in dispute
resolution processes. These are reviewed on a regular basis and,
where possible, an estimate is made of the potential financial
impact on the Group.
In appropriate cases a provision is recognised based on advice,
best estimates and management judgement. Where it is too early to
determine the likely outcome of these matters, no provision is
made. Whilst the Group cannot predict the outcome of any such
current or future matters with any certainty, it currently believes
the likelihood of any material liabilities to be low, and that
these will not have a material adverse effect on its consolidated
income, financial position or cash flows.
17. Events after the reporting period
On 1 July 2022, BETA was sold for a total cash consideration of
US$1.1 billion (refer to note 3).
Principal Risks
The effective management of risk is critical to the execution of
the Group's strategy. Accordingly, the Group maintains a robust
Enterprise-wide Risk Management Framework (ERMF), which sets out
the Group's approach to risk management and its appetite for taking
risks. Our regulated entities, including clearing houses, manage
their risks in-line with both local regulation and internal risk
and investment policies.
As well as our principal risks, we continue to identify and
monitor emerging risks which are either new to the Group or are
difficult to quantify due to their remote or evolving nature. In
most cases, the mitigation for such emerging risks is to establish
appropriate contingency plans and monitor the development of the
risk until it can be quantified and removed or included as a
principal risk. The Group does not consider the landscape of
principal risks and uncertainties set out on pages 50 to 59 of its
Annual Report for the year ended 31 December 2021 to have changed
materially.
Strategic Risks
Risks related to our strategy (including the implementation of
strategic initiatives and external threats to the achievement of
our strategy). The category also includes risks associated with
reputation or brand values.
Global economic and Geo-political (Executive Lead: Chief
Executive Officer)
As a financial markets infrastructure and data provider, we
operate in a broad range of equity, fixed income, foreign exchange
and derivative markets servicing customers who increasingly seek
global products and innovative solutions. If the global economy
underperforms, or there is reduced activity in our markets, it may
lead to lower revenue. Throughout the COVID-19 pandemic, the global
economy received unprecedented support from central banks and
governments. Although longer term impacts to the global economy
remain uncertain, rising inflation, during H1 2022, has led to
central banks to be less accommodative and raise interest rates;
this has impacted financial markets and is expected to slow
economic growth during the remainder of 2022. More broadly,
geopolitical relations continue to influence global financial
markets, particularly the ongoing conflict between Russia and
Ukraine which resulted in our decision to terminate services to
Russian clients and close most of our operations in Russia. In
addition, the Group continues to monitor Western relations with
China. Whilst well diversified, these global risks could have an
adverse impact on the Group's businesses, operations, financial
condition and cash flows.
Reputation/Brand/IP (Executive Lead: Chief Executive
Officer)
Several of the Group's businesses are iconic and trusted
international brands. Their strong reputations are valuable for the
Group and its business credibility with regulators and
attractiveness to customers alike. Some events or actions could
damage the reputation and brand of the Group, such as
miscommunication on social media, misrepresentation, interruption
of services or regulatory censure which could as a consequence
adversely impact the Group's business, financial condition and
operating results. The Group has a portfolio of intellectual
property including brands, products and services which are
proprietary and protected by patent, trademark and copyright. Some
of the Group's products and processes may include subject matter
not subject to intellectual property protection by the Group. And
competitors of the Group may also independently develop and patent,
or otherwise protect products or processes, that are the same or
similar to our products and processes. In either scenario, failure
to protect the Group's intellectual property rights appropriately
could result in reputational damage and affect the Group's ability
to compete. Additionally, any financial impact would be compounded
by costs incurred to defend or enforce our intellectual property
rights.
Transformation (Executive Lead: Chief Executive Officer, Chief
Operating Officer)
The Group is materially exposed to risk of loss or failure
resulting from transformation or integration as it continues to
grow rapidly both organically and inorganically. Acquisitions may,
in some cases, be complex or necessitate change to operating
models, business models, technology and people. The Group's success
has a high dependency on its ability to integrate all parts of its
business, including acquisitions, realise synergies across the
Group, and ensure that the Group is able to compete on a global
scale. A failure to align the businesses of the Group successfully
may lead to: an increased cost base without a commensurate increase
in revenue; a failure to capture future product and market
opportunities; and risks in respect of capital requirements,
regulatory relationships and management time.
In particular, some of the key challenges associated with the
integration of Refinitiv include coordinating and consolidating
services, technology and operations spanning different countries,
regulatory regimes and cultures. Furthermore, the divestment of the
Borsa Italiana Group in April 2021 that includes exiting
transitional services in 2022 and ongoing support to Borsa Italiana
Group's trading platforms until 2023, carries additional risk
related to the separation of two technology estates and associated
operations. The Group has engaged in further M&A activity, both
acquisitions and divestments, in 2022. Acquisitions require the
Group to operate and integrate different technology platforms and
systems. In addition, challenges for the Group include maintaining
the operational resilience and security of legacy platforms, and
consolidating services, or developing new services, where
underlying assets used to provide those services are subject to
contractual commitments with third parties.
The Group faces significant competition in each of its main
business areas. The businesses have to respond to this at the same
time as navigating through various transformation and integration
activities. The markets for the Group's data, information, services
and products are highly competitive and are subject to rapid
technological changes and evolving customer demands and needs.
Accordingly, the Group has a sizeable strategic change agenda to
transform its products, services and platforms as it leverages
growth synergies and upgrades and replaces legacy
infrastructure.
Financial and Model Risks
The risk of financial failure, loss of earnings and/or capital
as a result of investment activity, lack of liquidity, funding or
capital, and/or the inappropriate use of models.
CCP Risk (Executive Lead: Group Head of Post Trade)
The Group's CCP activities expose it to a number of financial
risks that arise from the CCP's obligation to guarantee the
performance of cleared contracts between its members in the event a
member defaults. In the event of a member default the CCP must
restore a matched book by liquidating or transferring the
defaulting member's positions held with the CCP. This can expose
the CCP to both adverse changes in the market value of the
positions (such as changes in asset prices, interest rates, credit
spreads and foreign exchange) and liquidation costs (such as the
cost of finding liquidity to exit the positions). In addition, the
CCP has treasury investment risk arising from the investment of
member cash and liquidity risk arising from its ongoing payment
obligations. If the CCP does not have sufficient cash available,
there is a risk of a liquidity shortfall (i.e. the CCP failing to
meet its payments). Non-financial risks arise as a result of the
CCP's day to day operations, such as operational risk, legal &
compliance risk and reputational risk.
Model Risk (Executive Lead: Divisional Group Heads, Chief Risk
Officer)
The Group's model risks could arise from errors during the
development, implementation, use, or decisions based on outputs, of
models. The Group utilises a suite of models, including Artificial
Intelligence (AI), across all three of its business divisions (e.g.
margin models used within our CCPs, market abuse detection models
within the Capital Markets division, as well as Risk's capital and
climate stress models). Model risks could impact both the
reputation and the financial condition of the Group.
Operational Risks
The risk of loss, or other adverse consequences to the business,
resulting from inadequate, or failures associated with, internal
processes, people and systems, or from external events.
Technology (Executive Lead: Chief Information Officer)
LSEG is highly dependent on the development and operation of its
sophisticated technology and advanced information systems and those
of its third-party service and outsourcing providers. Technology
failures potentially leading to system outages may impact our
customers and the orderly running of our markets, data services and
distribution. There has been some disruption primarily to Refinitiv
client services this year caused by legacy issues identified in
Refinitiv's technology estate , but overall, the number and
severity of incidents continues to decline. The integration of
Refinitiv's larger technology footprint and operations, increased
reliance on third-party services, continued movement to cloud-based
platforms and the shift to hybrid working practices all increase
the technology risk for the Group.
Information and cyber security threats (Executive Lead: Chief
Information Officer)
As a global Financial Markets Infrastructure (FMI) and data
provider, LSEG is exposed to cyber risk. Significant cyber events
continue to be observed in the financial sector and in the broader
economy that demonstrate the motivation and sophistication of cyber
adversaries and the impact they can have on the victim
organisation. LSEG is the sum of its networks, users and devices.
It consists of an eco-system of trusted vendors and business
partners with a workforce that is increasingly dynamic in terms of
how, when and where they are authorised to gain access to our
technology environment and digital assets. In addition to the
direct impact on ourselves, our role as an FMI provider underscores
the systemic impact a cyber event would have on the UK financial
sector and the global markets that we serve. Cyber risk does not
respect and is not bound by organisational perimeters and high
profile external cyber events reinforce this inter-connectivity and
inter-dependency and highlight the exposure to risks arising
outside of a firm's own control environment. We must acknowledge,
to remain competitive in this era of digitalisation and open
platforms, that cyber risk cannot be eliminated, however, it can be
managed to a level of risk that we are prepared to take as a cost
of doing business.
Business Continuity (Executive Lead: Chief Information Officer,
Chief Risk Officer, Divisional Group Heads)
Business continuity is one of the key objectives of the Group's
Operational Resilience strategy, helping to address the Group's
ability to prevent, adapt, respond and recover from operational
disruptions to minimise the impact on our customers and on the
financial stability of capital markets. Whilst the Group has
processes and controls in place to ensure the continuity of its
services and operations, unforeseen events such as physical
security and system security threats, epidemic or pandemic, or a
major system breakdown, could impact the continuity of the Group's
services, its reputation and its financial condition, causing
financial detriment both internally and externally to the wider
market. The Group's operations in Ukraine and Russia were impacted
by the Russian invasion requiring us to comply with relevant
sanctions, local legislative concerns and ensuring the wellbeing of
impacted colleagues. This initially triggered a decision to suspend
service for Russian clients followed by the exit of our Russian
business (excluding Kortes). Ongoing political and economic
disruption in Sri Lanka meant the Group put in place mitigations to
ensure operations are not impacted.
Third-party risk (Executive Lead: Chief Operating Officer,
Divisional Group Heads, Chief Information Officer)
Failure to manage the risks associated with the selection,
management and oversight of critical third-party suppliers could
impact the Group's ability to deliver its strategic objectives. Our
suppliers are exposed to a range of risks, including Geo-Political,
Cyber Security Threats and Regulatory Compliance, whereby events
may result in suppliers being unable to meet their contractual,
regulatory, confidentiality or other obligations to the Group. This
could lead to material financial loss, higher costs, regulatory
actions and reputational harm. The Group and its entities engage
third-party service providers, and external service providers,
including Cloud Service Providers (CSPs).
The Group has engaged CSPs to host critical services and data.
The Group also relies on access to certain data used in its
business through licences with third-parties. Some of this data is
provided exclusively by suppliers and may not be obtained from
other sources.
Data governance (Executive Lead: Divisional Group Heads, Chief
Operating Officer)
LSEG plays a significant role in the financial markets
infrastructure and data provider landscapes with commitments to its
customers, counterparties, owners, vendors, regulators and the
public in the proper usage of its data. LSEG collects, processes,
licenses, calculates, owns, transforms, administers and distributes
data in many formats (e.g. structured, unstructured, electronic and
print formats, audio-visual data, production, testing, archive
data, derived data and personal data).
Failure to govern the Group's data successfully could result in
those data being unfit for purpose with respect to quality and
usage. This could result in the Group or its customers and
stakeholders utilising deficient data when making decisions, which
could adversely affect the Group's reputation, financial condition
and operating results. Data privacy breaches, misuse of personal
data or failure to protect confidential information could adversely
affect the Group's reputation, expose it to litigation or other
legal or regulatory actions. Unauthorised data access or privacy
breaches may cause some of the Group's customers to lose confidence
in its security measures and could impact the Group's financial
performance.
People and Talent (Executive Lead: Chief People Officer)
People and culture risks could arise from a lack of critical
skills, talent and knowledge, resulting in the Group being unable
to achieve its objectives. These risks can arise from ineffective
career development, organisational structures and leadership, all
of which could impact on the engagement and wellbeing of our
people. Furthermore, increased market competition can result in
inability to attract and retain diverse, high-performing talent,
and/or it could lead to a disengaged workforce.
Regulatory Change and Compliance (Executive Lead: General
Counsel, Chief Executive Officer, Divisional Group Heads)
LSEG is a global business operating within many regulatory
environments. The Group is exposed to risks associated with changes
to regulatory requirements, and how we manage that change. These
include: risks arising from the conditions under which LSEG can
access a particular market (e.g. EU equivalence for UK CCPs); the
regulation and supervision of new activities; the overall reforms
in the wholesale markets in the EU and the UK; and the greater
focus on information and cyber security, data localisation, and ESG
data and scoring providers. There is also a risk that one or more
of the Group's entities may fail to comply with the laws and
regulatory requirements to which it is subject. In this event, the
entity may be subject to censures, fines and other regulatory or
legal proceedings.
Directors
The Directors of London Stock Exchange Group plc at 30 June 2022
were as follows:
Don Robert
David Schwimmer
Anna Manz
Dominic Blakemore
Martin Brand
Erin Brown
Professor Kathleen DeRose
Tsega Gebreyes
Cressida Hogg CBE
Dr Val Rahmani
Douglas M. Steenland
Ashok Vaswani
Statement of directors' responsibilities
The directors confirm that, to the best of their knowledge, the
interim condensed consolidated financial statements have been
prepared in accordance with UK adopted IAS 34 and that the interim
report herein includes a fair review of the information required by
the Financial Conduct Authority's Disclosure and Transparency Rules
4.2.7 and 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months of the financial year and their impact
on the interim condensed consolidated financial statements,
and a description of the principal risks and uncertainties
for the remaining six months of the financial year; and
-- material related party transactions in the first six months
of the current financial year and any material changes in
the related party transactions described in the last annual
report.
By order of the Board
David Schwimmer
Group CEO
Anna Manz
Group CFO
4 August 2022
Independent review report to London Stock Exchange Group plc
Conclusion
We have been engaged by London Stock Exchange Group plc (the
"Company") and its subsidiaries (together the "Group") to review
the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2022 which
comprises the Condensed Consolidated Income Statement, the
Condensed Consolidated Statement of Comprehensive Income, the
Condensed Consolidated Balance Sheet, the Condensed Consolidated
Cash Flow Statement, the Condensed Consolidated Statement of
Changes in Equity and related explanatory notes 1 to 17. We have
read the other information contained in the half yearly financial
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements ('ISRE') 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
04 August 2022
FINANCIAL CALENDAR
Ex-dividend date for interim dividend 18 August 2022
Interim dividend record date 19 August 2022
Interim dividend payment date 20 September 2022
Q3 Trading Statement (revenues only) 21 October 2022
Financial year end 31 December 2022
Preliminary results March 2022
Annual General Meeting April 2022
The financial calendar is updated on a regular basis throughout
the year.
P lease refer to our website
http://www.lseg.com/investor-relations and click on the shareholder
services section for up-to-date details.
INVESTOR RELATIONS CONTACTS
Investor Relations Independent auditors
London Stock Exchange Group plc Ernst & Young LLP
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in London Stock Exchange Group plc:
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email: ir@lseg.com
Visit the investor relations section
of our website for up-to-date information
including the latest share price,
announcements, financial reports
and details of analysts and consensus
forecasts
http://www.lseg.com/investor-relations
Registered office Principal legal adviser
London Stock Exchange Group plc Freshfields Bruckhaus Deringer LLP
10 Paternoster Square 65 Fleet Street
London London
EC4M 7LS EC4Y 1HT
Registered company number T +44 (0)20 7936 4000
London Stock Exchange Group plc:
5369106
Registrar information Corporate brokers
Equiniti Citi
Aspect House 33 Canada Square
Spencer Road Canary Wharf London
Lancing E14 5LB
West Sussex Telephone: +44 (0)20 7500 5000
BN99 6DA www.citigroup.com
T +44 (0)371 384 2233 or +44 (0)121 Morgan Stanley
415 7065 25 Cabot Square
Lines open 8.30 to 17.30, Monday Canary Wharf
to Friday. London
www.shareview.co.uk E14 4QA
Telephone +44 (0)20 7425 8000
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IR FFFFLTVISIIF
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