TIDMLSEG
RNS Number : 5980R
London Stock Exchange Group PLC
02 March 2023
London Stock Exchange Group plc
Preliminary results for the year ended 31 December 2022
Broad-based growth and strong execution
David Schwimmer, CEO said:
"LSEG has had a strong year, successfully integrating Refinitiv
and significantly improving its performance, while also delivering
strong results in our Capital Markets and Post Trade businesses.
The resilience of our business model and the quality of our
earnings, diversified by customer, geography, product and asset
class, and over 70% subscription-based, are becoming increasingly
clear.
"Our strategy is working. We are an increasingly important
strategic partner to customers across the financial markets value
chain, and that is translating into growth. We continue to invest
in new products and services, and have completed four highly
complementary acquisitions to further strengthen our offer. In
addition to our existing share buyback, we are today announcing
plans to seek shareholder approval for a buyback directed towards
the Blackstone/Thomson Reuters consortium's stake, which will
benefit all shareholders.
"We are shifting from integration to transformation. Our
strategic partnership with Microsoft, as well as the investments we
are making in our market-leading infrastructure and venues, will
create an even stronger platform for long-term sustainable
growth."
Reported 2022 2021 Variance Pro-Forma Constant
GBPm GBPm % Currency Variance
(excluding
deferred revenue
adjustment)
%(1)
------ ------
Total Income (excl. recoveries) 7,428 6,211 19.6% 5.7%
Recoveries(2) 315 324 (2.8%) 2.3%
--------------------------------- ------ ------ ---------
Total Income (incl. recoveries) 7,743 6,535 18.5% 5.5%
--------------------------------- ------ ------ ---------
Reported
Operating Profit 1,417 1,065 33.1%
Profit Before Tax 1,241 894 38.8%
Basic Earnings per Share 141.8 85.8 65.3%
Dividends per Share 107.0 95.0 12.6%
--------------------------------- ------ ------ ---------
Adjusted
EBITDA 3,550 2,969 19.6% 6.0%
EBITDA Margin 47.8% 47.8%
Operating Profit 2,728 2,282 19.5% 4.6%
Adjusted Earnings per Share 317.8 272.4 16.7%
--------------------------------- ------ ------ ---------
Financial highlights
(all growth rates are expressed on a pro-forma constant currency
basis, excluding the impact of the deferred revenue adjustment(1) ,
unless otherwise stated)
Full-year Total Income (excl. recoveries) up 5.7%, and up 6.6%
-- excluding the impact of the Russia/Ukraine war(3) ; up 19.6% on
a reported basis
Broad-based growth: Data & Analytics +4.2% (+5.3% ex Russia/Ukraine),
-- Capital Markets +9.8%, Post Trade +7.5%
Accelerating subscription revenue: Annual Subscription Value (ASV)
-- up 6.2% (ex Russia/Ukraine) at December; 2022; further progress
expected in 2023
Good cost control: opex +3.4% excluding the impact of acquisitions
-- during the year
Improving profitability: Adjusted EBITDA growth 6.0%, margin flat
-- year-on-year, or up 110 basis points like-for-like(4)
Basic earnings per share growth +65.3% on a reported basis; AEPS
-- +16.7% to 317.8 pence
Continued strong cash generation: equity free cash flow (before
-- dividends) GBP1.7 billion
Strategic progress and outlook
-- Strong and consistent execution on Refinitiv integration: Trading
& Banking returned to growth; target 2022 runrate synergies delivered
for both revenue and costs; runrate revenue synergy target raised
from GBP225 million to GBP350-400 million by 2025
-- From integration to transformation: strategic partnership with Microsoft
for next generation of Workspace, innovative new solutions in modelling
and analytics, and data platform in the cloud
-- Active capital allocation towards growth: disposal of low-growth
BETA business; four acquisitions completed in higher-growth areas,
highly complementary to existing customer offering
-- Significant shareholder returns: GBP300 million of GBP750 million
buyback executed in 2022, balance to be completed by July 2023;
full-year dividend +12.6% to 107.0 pence
-- Seeking shareholder approval at the 2023 AGM for directed buyback
from the Blackstone/Thomson Reuters consortium; expected to be up
to GBP750 million by April 2024
-- New guidance for 2023: constant currency revenue growth +6-8%, Adjusted
EBITDA margin c.48%, business-as-usual capex c. GBP750 million (including
Microsoft)
This release contains revenues, costs, earnings and key
performance indicators (KPIs) for the twelve months ended 31
December 2022. FY 2022 is compared against FY 2021 on a statutory
basis. 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 2021, are also excluded. Pro-forma
constant currency variance assumes that the acquisition of
Refinitiv took place on 1 January 2021 and is calculated on the
basis of consistent FX rates applied across the current and prior
year period. Organic growth is calculated on a constant currency
basis, adjusting the 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. 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 has been
re-evaluated upon acquisition by LSEG under purchase price
accounting rules. This reduced 2021 revenue by GBP23 million,
mainly in Data & Analytics, with a smaller impact in the FX
business within Capital Markets. There is no material impact in
2022.
(2) Recoveries mainly relate to fees for third-party content,
such as exchange data, that is distributed directly to
customers.
(3) Growth rates excluding the Russia/Ukraine war impact have
been calculated by excluding income in the region and from
sanctioned customers and related business from both periods. This
amounted to GBP80 million in 2021 and GBP18 million in Q1 2022, and
nil beyond that.
(4) The like-for-like margin calculation is on a constant
currency pro-forma basis, and adjusts for the impact of the
Russia/Ukraine war, acquisitions completed in 2022 and non-cash
FX-related balance sheet adjustments. Adjusted EBITDA margin is
adjusted EBITDA divided by Total Income (excl. recoveries).
Contacts: London Stock Exchange Group plc
Media:
Lucie Holloway / Rhiannon Davies
+44 (0)20 7797 1222
newsroom@lseg.com
Investor relations:
Peregrine Riviere / Chris Turner
ir@lseg.com
Additional information can be found at www.lseg.com
Preliminary results investor and analyst presentation, webcast
and conference call:
The Group will host a presentation and conference call on its
Preliminary Results for analysts and institutional shareholders
today at 10:00am (UK time) at its offices at 10 Paternoster Square,
London EC4M 7LS. There will be a Q&A session at the end of the
presentation for attendees and those dialling in to the conference
call.
To access the conference call or webcast please register in
advance using the following link and instructions below:
Conference call:
https://cossprereg.btci.com/prereg/key.process?key=P6U9PXVUM
Webcast:
https://www.lsegissuerservices.com/spark/LondonStockExchangeGroup/events/b77d62b7-a278-4f2f-9d4a-dc30e834594a
Presentation slides can be viewed at
http://www.lseg.com/investor-relations
The information in the preliminary announcement of the results
for the year ended 31 December 2022, which was approved by the
Board of Directors on 1 March 2023. This is unaudited and does not
constitute statutory accounts as defined in Section 435 of the UK
Companies Act 2006. The financial statements for the year ended 31
December 2021 were filed with the Registrar of Companies, and the
audit report was unqualified and contained no statements in respect
of Sections 498 (2) and 498 (3) of the UK Companies Act 2006. The
financial statements for the year ended 31 December 2022 will be
approved and filed with the Registrar of Companies in due
course.
In accordance with the Listing Rules of the UK Listing
Authority, these preliminary results have been agreed with the
Company's auditors, Ernst &Young LLP, and the Directors have
not been made aware of any likely modification to the auditor's
report to be included in the Group's Annual Report and Accounts for
the year ended 31 December 2022.
The preliminary results have been prepared on a basis consistent
with the accounting policies set out in the Group's Annual Report
and Accounts for the year ended 31 December 2022.
Overview and strategic progress
2022 performance in summary
LSEG performed strongly in 2022, growing consistently throughout
the year despite macroeconomic and geopolitical volatility. We
achieved our growth guidance and made good progress towards our
medium-term guidance for our EBITDA margin. We have continued to
execute very well on the integration of Refinitiv, not only on the
achievement of synergies but also on developing a distinct culture
for the combined business. The strategic partnership with
Microsoft, announced in December 2022, represents another
significant step forward in transforming our business and the
experience for customers.
Total income excluding recoveries rose 5.7% to GBP7,428 million,
with good growth across all our divisions. Adjusting for the
negative impact of the Russia/Ukraine war, growth was 6.6%, at the
upper end of our 5-7% medium-term growth guidance. On a reported
basis, total income excluding recoveries was up 19.6%, with the
good underlying performance boosted by the consolidation of a full
year of the Refinitiv acquisition (compared to 11 months in 2021)
and beneficial foreign exchange movements. Annual Subscription
Value (ASV) growth within Data & Analytics was 6.2% (excl.
impact of the Russia/Ukraine war) at December 2022, and
demonstrated an accelerating trend through the year.
Adjusted EBITDA increased by 6.0%. EBITDA margin was flat
year-on-year at 47.8%. The like-for-like EBITDA margin improvement,
adjusting for the negative impacts of the Russia/Ukraine war,
acquisitions completed in 2022 and non-cash FX-related balance
sheet adjustments, was 110 basis points. Operating expenses before
depreciation, amortisation and impairment grew by 4.1% on a
constant currency basis, or by 3.4% excluding acquisitions
completed in-year. Operating profit grew 33.1% on a reported basis
to GBP1,417 million, helped by foreign exchange movements and the
extra month from Refinitiv.
Financial performance is analysed in full in the Financial
Review section starting on page 10 of this release.
Progress on our strategic priorities
LSEG is a leading global financial markets infrastructure and
data provider. We are leaders in data and analytics; capital
formation and trade execution; and clearing and risk management. We
are also increasingly differentiated, both through our presence
across the financial markets value chain and our scale and
capabilities across multiple asset classes, including equities,
fixed income, foreign exchange and related derivatives.
Our businesses enjoy strong growth drivers, including the
increasing application of new technologies to data for
decision-making, the electronification of financial markets, the
growing digitisation of broader financial services, the growth of
cross-border trading and customer need for greater capital
efficiency.
Our strategy to maximise these opportunities is to be globally
essential, multi-asset class and seamlessly connected. To deliver
this strategy, we remain focused on three strategic priorities: 1)
integrating our world-class businesses; 2) driving growth; and 3)
building an efficient and scalable platform, particularly in Data
& Analytics. Our progress against these priorities, as well as
an update on Workspace, is described below.
Workspace progress
We continue to make steady progress with the roll-out of
Workspace across different user groups. At the year-end, we were
more than halfway through, and expect to be substantially complete
by the end of 2024. All other variants are now in full production
apart from Trading, which is in beta testing, and we have worked in
close partnership with new groups of customers as we move towards
launch.
At the same time, the pace of product development has been
rapid, with over 200 new features delivered during 2022. For the
core platform, these included infrastructure and reliability
improvements, enhanced search capabilities, real-time analytics in
Excel and streamlined access to training and support. There were
significant additional enhancements within specific variants, too.
For example, in Research and Portfolio Management we added a wide
range of new functionality, including Sentimine data for
transcripts, sustainable investing analytics, StarMine model
upgrades and our Custom Index sandbox.
Customer feedback is positive. Customers rate Workspace well
ahead of Eikon, the predecessor platform, for overall product
satisfaction, and notably higher for key product enablers including
resilience, workflow integration and ease of use. Trading &
Banking customers are the most satisfied category.
For 2023 our priorities are to focus on migrating a lower number
of high-usage, premium clients mainly in Trading and Research &
Portfolio Management. Further Workspace upgrades will include the
integration of some functionality from TORA, the multi-asset class
order and execution management business acquired in 2022.
Integrating our world class businesses
2022 has been a year of strong progress with the integration of
Refinitiv from both a revenue and cost perspective. We are
achieving revenue synergies through a combination of cross-selling,
the enhancement of existing services through the integration of
data and analytics and the development of new products. At the end
of 2022, we had delivered GBP68 million of recurring revenue
synergies, above our previous expectations of GBP40-60 million. The
main contributors to this have been the strong demand for data,
particularly fixed income-related, from FTSE Russell customers, and
the creation of new FTSE Russell indices drawing on the depth of
Refinitiv's data.
We have now raised our revenue synergy guidance from a GBP225
million runrate by 2025 to GBP350-400 million. The main drivers of
this additional opportunity are the two areas outlined above, the
increasing integration of Refinitiv's FX platforms into ForexClear
and other parts of the business, and growth from the automation of
content distribution to serve smaller clients more efficiently. We
now expect to incur total one-off costs of GBP550-600 million
between 2021 and 2025 to achieve these revenue synergies,
representing a very attractive return on investment.
On the cost side, the main areas of synergy are overlapping
roles and organisational structure, real estate and vendor
rationalisation. By the end of 2022, we had delivered recurring
savings of GBP297 million, ahead of our GBP250 million target. We
continue to expect total cost synergies of at least GBP400 million
runrate by the end of 2025, which we raised last year from our
original acquisition expectation of GBP350 million. We expect
nearly all of the runrate cost synergies to have been achieved by
the end of 2023, demonstrating the effectiveness of our integration
programme. The cost to achieve these synergies is in line with our
initial plans.
Just as importantly, we are integrating two groups of people and
developing a new, unified culture, with a much stronger focus on
performance and technology excellence, supported by data. We have
set much clearer expectations and more stretching goals throughout
the business, and this is already helping to deliver improved
results, particularly in Data & Analytics, as described
below.
The next steps in our sales transformation programme include
increasing the level of dedicated resource to our top 250 customers
(which represent the majority of Group revenue); evolving our
"solution selling" platform through learning and development,
deeper technology partnership with customers and greater consulting
capability; and leveraging technology and a standardised approach
to service smaller customers effectively.
We are also taking a much more rigorous and data-driven approach
to customer response times, network resilience and other factors
contributing to overall performance. Within Technology, we have
made significant progress in bringing engineering expertise
in-house. In 2022 alone, we moved from 70% external population to
60%, and our aim is to have the clear majority of our technology
resource insourced. This is not only creating an LSEG culture of
engineering excellence but also increasing our pace of product
delivery and efficiency.
Driving growth
Data & Analytics
Revenue growth in Data & Analytics has accelerated through
the year, from 5.1% in Q1 (adjusting for the impact of the
Russia/Ukraine war) to 6.0% in Q4. This improving trend has been
achieved through a combination of significantly-improved customer
retention as a result of better execution, strong demand for our
products and growing integration benefits.
We have improved execution on a number of fronts. We have
restructured our sales incentives and set more stretching targets.
We have developed significantly improved customer insights on
usage, profitability and pricing, and as a result we are managing
our renewal pipeline more rigorously and increasing the focus on
cross-selling. This is aided by our increased importance as a
trusted supplier to major financial institutions, where we are now
engaged in a more strategic dialogue and working in partnership to
develop solutions that are more customer-centred.
Within Enterprise Data, we are seeing strong demand for cloud
solutions such as Real-Time Optimised and Tick History, where we
have invested significantly to develop a valuable product, and the
migration to a cloud environment is significantly improving
customer access and stimulating growth. In Investment Solutions,
FTSE Russell product launches are up 33% year-on-year, in response
to substantial customer demand.
Revenue synergy highlights within Data & Analytics include
ongoing very strong cross-sell of Fixed Income data into FTSE
Russell clients, and Fixed Income Analytics, which achieved a
second successive year of double-digit growth after a decade of low
single-digit growth.
We also completed three acquisitions during the year. TORA
brings multi-asset class order and execution management
capabilities and we are integrating some of this functionality into
Workspace to meet growing client demand. MayStreet provides
low-latency (high speed) real-time data feeds, consolidating our
presence across the latency spectrum in a high-growth area. GDC is
a global provider of identity verification data and builds
strategic capability within Customer & Third Party Risk
Solutions.
Capital Markets
In Capital Markets, our growth opportunities lie in the
structural trends in our markets; our ability to link our platforms
and integrate data to provide enhanced services; and expansion into
new geographies and asset classes such as private markets.
Within Tradeweb, the continued electronification of fixed income
markets has been an ongoing tailwind, but the business is also
growing share in credit trading and expanding into new geographies.
In addition, its focus on ETFs in the equities space has
contributed strongly to performance in 2022 and represents a
significant additional runway for long-term growth.
During the year we announced plans to link Tradeweb and FXall,
our market-leading FX trading platform, to enable customers trading
local currency Emerging Market bonds to place their bond and
currency trades simultaneously, streamlining their workflow and
reducing risk. The longer-term opportunity to simplify workflow
across multiple transaction types is significant.
Post Trade
We are leveraging our expertise in interest rate derivative
clearing, the strength of our customer relationships and the power
of Refinitiv's multi-asset class venues to drive the next stage of
growth in Post Trade. Two examples of this are in foreign exchange
and in the development of Post Trade Solutions.
In foreign exchange, regulation is increasing the capital and
administrative burden on bilateral derivative transactions, which
is driving a shift to central clearing over time. Through building
seamless, direct connectivity between our foreign exchange trading
and clearing platforms, combined with our global footprint, we are
well positioned to build momentum in FX forwards and options
clearing.
In partnership with our members and clients we are developing
Post Trade Solutions, to help financial market participants
optimise their financial resources and reduce operational
complexity and processing costs, particularly in uncleared
positions. Post Trade Solutions will enable customers to route
trades in the most efficient way, depending on their existing
exposures, based on a single, centralised data source. In 2022 we
completed one acquisition (Quantile) and announced another (Acadia)
which significantly advance our solutions strategy. Quantile
provides compression and optimisation services to reduce risk and
capital requirements, and Acadia is a provider of automated
uncleared margin processing and integrated risk and optimisation
services.
Building an efficient and scalable platform
We are implementing a comprehensive investment programme in our
technology and infrastructure to serve our customers better while
also improving product profitability and overall margin over time.
Our software defined network, which replaces a number of complex
and costly legacy networks, will deliver better agility, higher
capacity and increased resilience. Progress during 2022 has been
ahead of plan, with over 2,400 server migrations, and we will
complete the programme in 2024.
Our programmes to transform two of our leading franchises - FTSE
Russell and FX Matching - are progressing well. The re-platforming
of FTSE Russell will enable greater product flexibility. The
migration of FX Matching to our own proven technology, and other
enhancements, will improve latency (speed) by a factor of 10, and
we expect the first new functionality to be launched by the end of
2023.
In December, LSEG and Microsoft announced a new long-term
strategic partnership to architect our data infrastructure using
the Microsoft Cloud, and to jointly develop new products and
services in the data and analytics space. The deal significantly
advances our strategy of building an efficient and scalable
platform for Data & Analytics to deliver next generation
services for customers through improved workflow and greater
flexibility, and we expect it to increase our revenue growth
meaningfully over time. Microsoft has also purchased a 4.2% stake
in LSEG. The major workstreams are described below.
Data platform in the cloud
Working with Microsoft Azure, we will accelerate our cloud
migration strategy, creating cloud-based data architecture that
consolidates our datasets onto one, flexible infrastructure. Our
customers will be able to access data faster when and wherever they
need it - enabling resilience and adaptability as capital markets
continue to evolve.
LSEG Workspace with Teams and Microsoft 365
Together LSEG and Microsoft will transform Workspace, creating
an all-in-one data, analytics, workflow and collaboration solution.
Through a single, simple-to-use interface, it will enable users to
collaborate with other LSEG customers inside and outside of their
organisations, using Teams, Excel and Powerpoint natively with LSEG
data and analytics.
New cloud analytics and modelling services
Microsoft and LSEG will use Azure Machine Learning and our
advanced analytics and modelling capabilities to co-develop a new
suite of solutions. Businesses that rely on analytics and models
will be able to scale quickly without the need for complicated
processes and systems.
Cloud infrastructure built on Microsoft Azure
We have entered into a 10-year commercial agreement to migrate
our data platform and other key technology infrastructure into the
Microsoft Cloud. This will be the foundation for many product
development programmes and enable us to build and run scalable
applications to achieve faster speed to market and greater customer
reach.
Capital allocation
Our goal is to invest for growth using the cash flows we
generate, building a platform for long-term capital appreciation
while rewarding investors today through a progressive dividend,
growing broadly in line with AEPS. We will do that within a
leverage range of 1-2x net debt to adjusted EBITDA, which offers a
degree of flexibility while maintaining a sufficiently conservative
structure even at the top of the range.
LSEG generated GBP3.3 billion in operating cash flow in 2022,
and a further GBP1.1 billion from the disposal of non-core
businesses and other property. Our leverage reduced from 1.9x at
the start of the year to 1.8x by year-end. We deployed our capital
as follows:
Business-as-usual capex - GBP750 million
Business-as-usual capex, on a constant currency accrued basis,
was GBP750 million. We continued to focus on programmes to address
growth, efficiency and resilience. Our investments in Tradeweb and
Workspace product development are expected to drive continued
revenue growth. The upgrades to our own infrastructure as we roll
out our software-defined network, giving higher capacity and
increased resilience, will benefit costs from 2023 onwards. Finally
the development of our data platform, including cloud migration and
the associated transformation of how we import new content, should
underpin both future revenue growth and cost efficiency.
In addition to this capex, we also incurred GBP184 million of
capex mainly related to delivering the synergies relating to the
Refinitiv acquisition, which was in line with our plans. Total
capex on a cash basis was GBP966 million.
M&A - GBP786 million
Our M&A strategy is twofold: businesses providing services
which are complementary to our existing offer and can be scaled
across our footprint and customer base; and technology-based
businesses which, while often small in revenue terms, can enhance
existing services at lower cost and higher speed than organic
investment.
We completed four acquisitions in 2022. Of these, GDC, Quantile
and TORA are established businesses which can benefit from our much
greater scale and deeper customer relationships. MayStreet allows
us to significantly enhance the breadth of our low latency data
offering much more quickly and cost effectively than if we were to
develop this in-house.
Dividend - GBP567 million
The proposed final dividend for 2022 is 75.3 pence - giving a
total for the year of 107.0 pence, up 12.6% on 2021. This is
consistent with our dividend policy and reflects a payout ratio of
34% of AEPS. Our dividend per share has grown at a compound annual
rate of 17.4% over the last 20 years.
Share buyback - GBP300 million
We remain very focused on capital discipline and will, from time
to time, return excess capital to shareholders to the extent that
we stay within our leverage range. On the back of the disposal of
BETA, a non-core business in the Wealth segment, we announced a
GBP750 million share buyback, which was 40% complete by the end of
the year. Looking ahead, we are seeking shareholder approval at the
2023 AGM for a directed share buyback, which will enable us to buy
shares directly from entities owned by certain investment funds
affiliated with Blackstone, an affiliate of Canada Pension Plan
Investment Board, an affiliate of GIC Special Investments Pte. Ltd,
and by Thomson Reuters, the former Refinitiv shareholders. We
expect to deploy up to GBP750 million in directed buybacks by April
2024.
Outlook and guidance for 2023
The year has started well. The broader macroeconomic and
geopolitical outlook remains uncertain, but while some of our
customers' businesses are under pressure, other areas are showing
strong growth. More importantly, the broader, structural growth
drivers that we are aligned to are well established and our
customer relationships are increasing in strategic value.
We expect total income growth on a constant currency basis of
6-8%. This includes a contribution from acquisitions completed in
2022 of approximately 1%. We expect further progress in ASV growth
in Data & Analytics in 2023 reflecting a greater annual price
increase than last year, and continued improvements in sales and
retention.
We expect to achieve an Adjusted EBITDA margin of around 48%
after Microsoft-related costs. We remain on track to achieve our
2023 exit EBITDA margin target of at least 50%, as adjusted for
acquisitions, disposals, Microsoft investments and the foreign
exchange movements of the last two years.
Business-as-usual capex for 2023 is planned to be around GBP750
million, which is consistent with previous guidance of GBP650-700
million after adjusting for foreign exchange movements,
acquisitions and Microsoft-related investments.
The 2023 EBITDA margin and capex guidance is based on exchange
rates of GBP 1: USD 1.21 and GBP 1: EUR 1.14, and excludes
announced acquisitions that are pending completion.
We anticipate completing the current GBP750 million share
buyback by July 2023, and we will seek shareholder approval for
buybacks directed at the Blackstone/Thomson Reuters consortium at
the AGM in April 2023. This is expected to amount to up to GBP750
million in the twelve months between the 2023 and 2024 AGMs,
starting in H2 2023.
Financial Review
Note: Unless otherwise stated, variances refer to growth rates
on a pro-forma(6) constant currency basis, excluding the impact of
a deferred revenue accounting adjustment(3)
Reported 2022 2021(1) Variance Pro-Forma Constant
(1) GBPm % Currency Variance
GBPm (excluding
deferred revenue
adjustment)
%
------ --------
Data & Analytics 4,944 4,103 20.5% 4.2%
Capital Markets 1,459 1,171 24.6% 9.8%
Post Trade 991 906 9.4% 7.5%
Other 34 31 9.7% (7.2%)
--------------------------------- ------ -------- ---------
Total Income (excl. recoveries) 7,428 6,211 19.6% 5.7%
Recoveries(2) 315 324 (2.8%) 2.3%
--------------------------------- ------ -------- ---------
Total Income (incl. recoveries) 7,743 6,535 18.5% 5.5%
--------------------------------- ------ -------- ---------
Reported
Operating Profit 1,417 1,065 33.1%
Profit Before Tax 1,241 894 38.8%
Basic Earnings per Share(4) 141.8 85.8 65.3%
Dividends per Share(4) 107.0 95.0 12.6%
--------------------------------- ------ -------- ---------
Adjusted (3)
EBITDA 3,550 2,969 19.6% 6.0%
EBITDA Margin 47.8% 47.8%
Operating Profit 2,728 2,282 19.5% 4.6%
Adjusted Earnings per Share(4) 317.8 272.4 16.7%
--------------------------------- ------ -------- ---------
(1) The comparator FY 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 2021, are also excluded.
(2) Recoveries mainly relate to fees for third-party content,
such as exchange data, that is distributed directly to
customers.
(3) 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 other purchased
intangible assets, incremental amortisation and impairment of the
fair value adjustments of intangible assets recognised as a result
of acquisitions, tax on non-underlying items and other income or
expenses not considered to drive the operating results of the Group
(including transaction, integration and separation costs related to
acquisitions and disposals of businesses), as well as restructuring
costs.
(4) Weighted average number of shares used to calculate basic
earnings per share and adjusted basic earnings per share from
continuing operations is 557 million (2021: 538 million).
(5) Growth rates excluding the Russia/Ukraine war impact have
been calculated by excluding income in the region and from
sanctioned customers and related business from both periods. This
amounted to GBP80 million in 2021 and GBP18 million in Q1 2022, and
nil beyond that.
(6) Pro-forma growth assumes that the acquisition of Refinitiv
took place on 1 January 2021 for the prior year comparator.
Total Income excluding recoveries grew by 5.7% to GBP7,428
million including a 0.3% contribution to growth from acquisitions
during the year, or by 19.6% on a reported basis, helped by an
extra month's contribution from Refinitiv (11 months included in
2021) as well as favourable foreign exchange movements. Excluding
the impact of the Russia/Ukraine war, growth was 6.6%(5) . Total
Income including recoveries grew by 5.5% to GBP7,743 million, or by
18.5% on a reported basis. This was driven by good growth across
all three divisions.
Adjusted operating expenses before depreciation, amortisation
and impairment grew by 4.1% to GBP3,140 million. Excluding
acquisitions and disposals, cost growth was 3.4%, reflecting
continued strong delivery of Refinitiv-related synergies. Our main
costs relate to our people, with staff costs of GBP1,896 million
(2021: GBP1,666 million). IT costs amounted to GBP567 million
(2021: GBP447 million) with professional fees of GBP420 million
(2021: GBP327 million).
Adjusted EBITDA increased by 6.0% to GBP3,550 million. EBITDA
margin was flat year-on-year at 47.8%. The like-for-like EBITDA
margin improvement, adjusting for the negative impacts of the
Russia/Ukraine war, acquisitions completed in 2022 and non-cash
FX-related balance sheet adjustments, was 110 basis points. Within
EBITDA, income from Equity Investments was GBP12 million in 2022,
down from GBP22 million in 2021.
Reported depreciation, amortisation and impairment of GBP1,900
million (2021: GBP1,570 million) includes GBP1,078 million (2021:
GBP883 million) related to the amortisation of purchased intangible
assets (mainly Refinitiv) as well as other non-underlying charges.
Excluding these, adjusted depreciation, amortisation and impairment
grew by 19.7% to GBP822 million on a reported basis and by 10.7% on
a pro-forma constant currency basis, driven by our continued
investment in technology and new services and the capex associated
with achieving the Refinitiv synergies.
Reported Operating Profit rose 33.1%, from GBP1,065 million to
GBP1,417 million, helped by an extra month's contribution from
Refinitiv as well as favourable foreign exchange movements.
Adjusted Operating Profit grew by 19.5% to GBP2,728 million. On a
pro-forma constant currency basis, it grew 4.6%, with the strong
income growth and good cost control highlighted above partially
offset by higher depreciation and amortisation.
Reconciliation of Adjusted Operating Profit to Reported
Operating Profit
2022 2021
GBPm GBPm
-------- ------
Adjusted Operating Profit 2,728 2,282
Transaction costs (85) (109)
Integration, separation & restructuring
costs (304) (225)
Profit on disposal & remeasurement
gains 156 -
Amortisation and impairment of purchased
intangible assets (1,044) (851)
Depreciation & impairment of other
assets (34) (32)
Operating Profit 1,417 1,065
------------------------------------------ -------- ------
Transaction costs of GBP85 million mainly relate to fees and
other charges incurred from acquisition activity during the year,
as well as awards and incentive plans linked to the Refinitiv
acquisition. Integration, separation and restructuring costs have
mostly been incurred in relation to the integration of Refinitiv
and are in line with previous guidance. Profit on disposal and
remeasurement gains of GBP156 million include the gain arising on
the disposal of a freehold property in the UK. Amortisation and
impairment of purchased intangible assets of GBP1,044 million
mainly arise from the Refinitiv acquisition.
Net Finance Expense / Tax / Non-Controlling Interest
Adjusted Net Finance Expenses were GBP160 million (2021: GBP166
million), and were GBP176 million (2021: GBP171 million) on a
reported basis.
Reported Profit Before Tax increased by 38.8%, from GBP894
million to GBP1,241 million. Adjusted Profit Before Tax increased
by 21.4% in the year to GBP2,568 million (2021: GBP2,116 million).
The Group incurred a tax charge in the year of GBP262 million
(2021: GBP302 million). The effective tax rate was 21.1% (2021:
33.8%). The decrease in rate is mainly due to the absence of the
prior year UK deferred tax remeasurement charge. The underlying
effective tax rate was 21.0% (2021: 20.4%). The higher rate
reflects the tax impact of the geographical mix of pre-tax
earnings.
Adjusted profits attributable to non-controlling interests,
mainly in Tradeweb and LCH, totalled GBP258 million for the year
ended 2022, an increase of 17.8% from 2021.
Earnings per share
Basic earnings per share from continuing operations was 141.8
pence (2021: 85.8 pence).
Adjusted earnings per share (AEPS) from continuing operations
was 317.8 pence (2021: 272.4 pence). The 16.7% increase in AEPS
year-on-year was driven by the growth in profitability and
favourable foreign exchange movements.
Dividend
The Board is proposing a final dividend of 75.3 pence per share,
which together with the interim dividend of 31.7 pence per share
paid to shareholders in September 2022, results in a 12.6% increase
in the total dividend to 107.0 pence per share. The final dividend
of 75.3 pence per share will be paid on 24 May 2023 to all
shareholders on the share register at the record date of 21 April
2023.
Data & Analytics
Continuing operations 2022 2021 Variance Pro-Forma Constant
GBPm GBPm % Currency Variance
(excluding
deferred revenue
adjustment)
%
-------- -------- ---------
Trading & Banking Solutions 1,612 1,369 17.8% 0.2%
Trading 1,275 1,086 17.4% (0.1%)
Banking 337 283 19.1% 1.4%
Enterprise Data Solutions 1,307 1,058 23.5% 6.1%
Real-Time Data 838 676 24.0% 6.0%
PRS 469 382 22.8% 6.5%
Investment Solutions 1,325 1,119 18.4% 6.2%
Benchmark Rates, Indices
& Analytics 607 512 18.6% 9.4%
Index - Asset-Based 280 253 10.7% 0.7%
Data & Workflow 438 354 23.7% 5.5%
Wealth Solutions 275 227 21.1% 3.0%
Customer & Third-Party Risk
Solutions 425 330 28.8% 9.5%
------------------------------------ -------- --------
Total Revenue (excl. recoveries) 4,944 4,103 20.5% 4.2%
Recoveries 315 324 (2.8%) 2.3%
------------------------------------ -------- --------
Total Revenue (incl. recoveries) 5,259 4,427 18.8% 4.1%
Cost of sales (879) (709) 24.0% 5.4%
------------------------------------ -------- --------
Gross Profit 4,380 3,718 17.8% 3.8%
Adjusted operating expenses
before depreciation, amortisation
and impairment (2,142) (1,857) 15.3% 3.2%
------------------------------------ -------- --------
Adjusted EBITDA 2,238 1,861 20.3% 4.6%
Depreciation, amortisation
and impairment (607) (481) 26.2% 15.9%
------------------------------------ -------- --------
Adjusted operating profit 1,631 1,380 18.2% 0.7%
------------------------------------ -------- --------
Adjusted EBITDA Margin 45.3% 45.4%
------------------------------------ -------- --------
Data & Analytics provides high value data, analytics,
indices, workflow solutions and data management capabilities. The
division is split into five areas to address the different needs of
our customers.
Total revenue excluding recoveries grew by 4.2% to GBP4,944
million, primarily driven by strong performances in Enterprise Data
and Investment Solutions and including a 0.4% contribution from
acquisitions during the year. Excluding the impact of the Russia /
Ukraine conflict, revenue growth was 5.3%. Organic Annual
Subscription Value growth ("ASV") at December 2022 was 6.2%
excluding Russia / Ukraine, reflecting continuous improvement
throughout the year as we work more closely with our customers to
improve retention and develop relevant new services.
Trading & Banking Solutions revenue increased by 0.2% to
GBP1,612 million, returning to growth in the second half despite
the negative impact of the lost Russia / Ukraine revenue. Excluding
this, full-year revenue growth was 2.3%. This performance was
primarily driven by a significant improvement in product retention,
particularly within the Trading business. During the year we
acquired TORA, enhancing our ability to meet customer need for
multi-asset class order and execution management capabilities,
which added 0.8% to growth.
Enterprise Data Solutions revenue grew by 6.1% to GBP1,307
million reflecting the continued investment and expansion of our
content and capabilities, and strong customer demand for data,
underpinned by the continuing trend towards data-driven analytics
to support and monitor investment decisions. The acquisition of
MayStreet, which deepens our ability to help customers with their
low-latency (higher speed) real-time data needs, further added to
growth.
Investment Solutions revenue increased by 6.2% to GBP1,325
million, driven by strong subscription revenue growth, with
Benchmark Rates, Indices & Analytics up 9.4%. Our multi-asset
class capabilities are becoming an important differentiator with
customers. We are also accelerating delivery of new FTSE Russell
products with 33% more product launches in 2022 compared to the
prior year, reflecting strong demand for custom indices. Our share
of ETF asset inflow was strong, although offset by the underlying
decline in many markets during the year.
Wealth Solutions contributed GBP275 million of revenue in 2022,
with the Digital Solutions business the main driver of the 3.0% YoY
growth. These numbers exclude the non-core BETA business, which we
sold during the year.
Customer & Third-Party Risk Solutions revenue grew by 9.5%
to GBP425 million. YoY growth of 18% in the World-Check screening
business was partially offset by lower due diligence revenue.
During the year we acquired GDC, which provides identity
verification data, expanding our capabilities in high growth
digital identity and fraud solutions.
Cost of sales of GBP879 million reflects the cost of purchased
content and royalties, including news, specialist data and exchange
data, which are required for the Data & Analytics products.
Growth at 5.4% was slightly ahead of revenue growth.
Adjusted operating expenses before depreciation, amortisation
and impairment increased to GBP2,142 million as careful management
of staff costs and ongoing delivery of synergies related to the
Refinitiv acquisition kept YoY cost growth to 3.2%.
Adjusted EBITDA was up 4.6% to GBP2,238 million, and the
Adjusted EBITDA margin decreased 10 basis points to 45.3%.
Non-Financial KPIs
2022 2021 Variance
%
------ ------
Annual Subscription Value Growth
(%) (1) 4.8% 4.6%
Annual Subscription Value Growth
excl U/R impact (%) (1,2) 6.2%
Subscription revenue growth (%)
(1,3) 4.6%
Subscription revenue growth excl
U/R impact (%) (1,2,3) 5.7%
Index - ETF AUM ($bn) 1,009 1,138 (11.3%)
Index - ESG Passive AUM ($bn)
(4) 296 167 77.3%
---------------------------------- ------ ------ ----------
(1) Organic, constant currency variance
(2) Growth rates excluding the Russia/Ukraine war impact exclude
income in the region and from sanctioned customers and related
business from both periods
(3) 12-month rolling constant currency variance excluding the
impact of the deferred revenue accounting adjustment. Due to a
change in methodology, prior year comparator is unavailable
(4) ESG Passive AUM is at 30 June 2022 and prior period
comparator is at 30 June 2021. The metric is updated
bi-annually
Capital Markets
Continuing operations 2022 2021 Variance Pro-Forma Constant
GBPm GBPm % Currency Variance
(excluding
deferred revenue
adjustment)
%
------ ------
Equities 248 241 2.9% 3.2%
FX 258 204 26.5% 4.2%
Fixed Income, Derivatives
& Other 953 726 31.3% 13.4%
------------------------------------ ------ ------
Total Revenue 1,459 1,171 24.6% 9.8%
Cost of sales (34) (27) 25.9% 9.1%
------------------------------------ ------ ------
Gross Profit 1,425 1,144 24.6% 9.8%
Adjusted operating expenses
before depreciation, amortisation
and impairment (665) (536) 24.1% 9.4%
------------------------------------ ------ ------ ---------
Adjusted EBITDA 760 608 25.0% 10.2%
Depreciation, amortisation
and impairment (103) (110) (6.4%) (15.3%)
------------------------------------ ------ ------
Adjusted operating profit 657 498 31.9% 15.8%
------------------------------------ ------ ------ ---------
Adjusted EBITDA Margin 52.1% 51.9%
------
Capital Markets provides businesses with access to capital
through issuance, and offers secondary market trading for equities,
fixed income, interest rate derivatives, foreign exchange (FX) and
other asset classes.
Total revenue grew by 9.8% to GBP1,459 million with the increase
primarily driven by Fixed Income, Derivatives & Other.
Equities revenue, which encompasses both our Primary &
Secondary Equity Markets, increased by 3.2% to GBP248 million.
Primary Markets growth was driven by annual listing fees alongside
the revenue deferral benefit from 2021's record admission
performance. Secondary Markets was broadly in line with the prior
year as competitive pricing pressures adversely affected revenue
yield, whilst overall volumes remained relatively flat.
FX revenue grew by 4.2% to GBP258 million driven by strong
performance in Fxall, our dealer-to-client platform, alongside
consistent outperformance in FX Spot Matching volumes as a result
of implementation of commercial incentives. FX Matching performance
returned to growth in H2 after a long period of decline.
Fixed Income, Derivatives & Other revenue increased by 13.4%
to GBP953 million. Tradeweb, a global operator of electronic
marketplaces for rates, credit, equities and money markets,
achieved another year of strong growth, driven by the ongoing
electronification of markets, continued share gains in most product
lines and further progress in international markets. Market
volatility contributed to higher average daily trading volumes and
record activity across a number of core products.
Cost of sales increased by 9.1% to GBP34 million reflecting the
cost of sales within the Tradeweb business which relate to data
feeds.
Adjusted operating expenses before depreciation, amortisation
and impairment increased by 9.4% to GBP665 million, again driven by
the strong revenue growth at Tradeweb.
Adjusted EBITDA rose 10.2% to GBP760 million as a result of the
strong topline growth at Tradeweb. The Adjusted EBITDA margin
increased slightly to 52.1%.
Non-Financial KPIs
2022 2021 Variance
%
-------- --------
Equities
Primary Markets
New issues 74 174 (57.5%)
Total money raised (GBPbn) 10.7 34.8 (69.3%)
Secondary Markets - Equities
UK Value Traded (GBPbn) - Average
Daily Value 4.6 4.5 2.2%
SETS Yield (bps) 0.66 0.73 (9.6%)
FX
Average daily total volume ($bn) 452 443 2.0%
Fixed income, Derivatives and
Other
Tradeweb Average Daily ($m)
Rates - Cash 342,798 345,008 (0.6%)
Rates - Derivatives 342,074 293,655 16.5%
Credit - Cash 10,090 9,297 8.5%
Credit - Derivatives 17,590 12,235 43.8%
----------------------------------- -------- -------- ----------
Post Trade
Continuing operations 2022 2021 Variance Pro-Forma
GBPm GBPm % Constant Currency
Variance %
------ ------
OTC Derivatives 402 358 12.3% 10.0%
Securities & Reporting 234 246 (4.9%) (3.8%)
Non-Cash Collateral 100 95 5.3% 3.6%
------------------------------------ ------
Total Revenue 736 699 5.3% 4.2%
Net Treasury Income 255 207 23.2% 18.8%
------------------------------------ ------ ------
Total Income 991 906 9.4% 7.5%
Cost of sales (150) (123) 22.0% 22.9%
------------------------------------ ------ ------
Gross Profit 841 783 7.4% 5.1%
Adjusted operating expenses
before depreciation, amortisation
and impairment (324) (329) (1.5%) (0.6%)
------------------------------------ ------ ------
Adjusted EBITDA 517 454 13.9% 9.0%
Depreciation, amortisation
and impairment (112) (96) 16.7% 14.5%
------------------------------------ ------ ------
Adjusted operating profit 405 358 13.1% 7.5%
------------------------------------ ------ ------
Adjusted EBITDA Margin 52.2% 50.1%
------ ------
Post Trade provides clearing, risk management, capital
optimisation and regulatory reporting solutions. T otal revenue
grew by 4.2% to GBP736 million and total income, including Net
Treasury Income, was GBP991 million, up 7.5% year-on-year.
Post Trade's clearing franchise, LCH, achieved record volumes in
2022 as Central Bank rate changes, political events and increasing
inflation led to heightened market volatility. OTC Derivatives
revenue increased by 10.0% to GBP402 million, driven by a strong
performance in SwapClear client clearing.
Securities & Reporting revenue decreased by 3.8% to GBP234
million reflecting commercial policy adjustments in equities in
response to increasing pricing pressures, partially offset by
growth in RepoClear.
Non-Cash Collateral revenue increased by 3.6% to GBP100 million
as high volumes continued and includes the full year impact of 2021
pricing changes.
Net Treasury Income (NTI) increased by 18.8% to GBP255 million
as sustained market volatility drove record collateral
balances.
Cost of sales increased by 22.9% to GBP150 million. This was
driven mainly by accounting for revenue share arrangements relating
to SwapClear and NTI, which both grew strongly during the year.
Adjusted operating expenses excluding depreciation, amortisation
and impairment decreased by 0.6% to GBP324 million demonstrating
good cost control. As a result, Adjusted EBITDA was up 9.0% to
GBP517 million and the Adjusted EBITDA margin improved by 210 basis
points to 52.2%.
Non-Financial KPIs
Variance
2022 2021 %
------- -------
OTC
SwapClear
IRS notional cleared ($trn) 1,091 921 18.5%
SwapClear members 124 123 0.8%
Client trades ('000) 2,684 2,180 23.1%
Client average 10-year notional
equivalent ($trn) 3.7 4.2 (11.9%)
ForexClear
Notional value cleared ($bn) 24,659 21,670 13.8%
ForexClear members 36 35 2.9%
CDSClear
Notional cleared (EURbn) 3,358 2,283 47.1%
CDSClear members 25 25 -
Securities & Reporting
EquityClear trades (m) 2,163 1,996 8.4%
Listed derivatives contracts (m) 262.6 285.8 (8.1%)
RepoClear - nominal value (EURtrn) 288.4 237.6 21.4%
Non-Cash Collateral
Average non-cash collateral (EURbn) 168.5 165.5 1.8%
Cash Collateral
Average cash collateral (EURbn) 140.8 107.2 31.3%
------------------------------------- ------- ------- ----------
Cash Flow
Cash Flow 2022 2021
GBPm GBPm
------
Operating Cash Flow 3,282 3,090
-------------------------------- ------ ---------
Net interest & royalties
paid (231) (208)
Other dividends, net (70) (73)
Net taxes paid (351) (390)
Capex & other investments (966) (632)
Equity Free Cash Flow 1,664 1,787
------
Lease payments (150) (118)
Disposal proceeds 1,056 3,592
Acquisitions (768) 762
Investments (227) (28)
Dividends to LSEG shareholders (567) (426)
Borrowings - 6,944
Repayments (209) (11,614)
Share buybacks (383) (55)
Other (56) 96
Net Cash Flow 360 940
------
The Group's business continued to be strongly cash generative
during the year, with operating cash flow of GBP3,282 million
(2021: GBP3,090 million). Cash outflows for purchases of property,
plant and equipment and intangibles amounted to GBP966 million
(2021: GBP632 million), which includes our business-as-usual
investment programmes as well as investments related to the
Refinitiv integration.
Equity free cash flow was GBP1, 664 million (2021: GBP1,787
million). During the year the Group received disposal proceeds of
GBP1,056 million, principally in relation to the sale of the BETA
business , and deployed GBP768 million on acquisitions , net of
GBP18 million cash acquired. Dividends paid during the year were
GBP 567 million, reflecting the continued strong growth in
dividends per share . GBP383 million was spent on share buybacks,
of which GBP300 million related to the LSEG share buyback programme
announced in August 2022, with the balance relating to Tradeweb's
buyback programme and fees.
Cash generation, after organic and inorganic investments and
other normal course payment obligations, was positive, contributing
to cash and cash equivalents growing from GBP2,665 million as at 31
December 2021 to GBP3,209 million as at 31 December 2022.
Balance Sheet / Leverage / Ratings
Net Debt
Year ended 31 December 2022 2021
GBPm GBPm
--------
Gross borrowings 8,151 7,654
Cash and cash equivalents (3,209) (2,665)
Net derivative financial liabilities 48 25
Lease liabilities 672 715
-------------------------------------- -------- --------
Net debt 5,662 5,729
Less lease liabilities (672) (715)
Regulatory and operational amounts 1,236 1,294
-------------------------------------- -------- --------
Operating net debt 6,226 6,308
-------------------------------------- -------- --------
At 31 December 2022, the Group had operating net debt of
GBP6,226 million after setting aside GBP1,236 million for
regulatory and operational amounts. Leverage ([1]) fell to 1.8x at
31 December 2022 (2021: 1.9x). The Group is within its targeted
leverage range of 1.0-2.0 times adjusted EBITDA before foreign
exchange gains or losses.
Effective January 2021, the Group increased its committed
revolving credit facilities to GBP2.5 billion. In 2022, the Group
had access to a GBP1,425 million facility maturing in December 2024
and a GBP1,075 million facility maturing in December 2026. The
second one-year extension option was exercised on the GBP1,075
million facility in December 2022, extending its maturity to
December 2027.
With respect to the Group's long-term debt finance, no bonds
were issued or repaid in 2022. The EUR150 million Euro term loan
was repaid in full, and a partial repayment was made to the US
Dollar term loan, reducing the outstanding balance to $1,560
million (2021: $1,660 million).
LSEG is rated A with a positive outlook by Standard & Poor's
and A3 with a stable outlook by Moody's. The Standard & Poor's
outlook was upgraded from stable to positive in November 2022.
Standard & Poor's maintained its long-term rating of LCH
Limited and LCH SA at AA- with a stable outlook through the
period.
Foreign Exchange
As a result of the acquisition of Refinitiv, the majority of
LSEG revenues and expenses are in US dollars followed by Sterling,
Euro and other currencies. The longer-term targets associated with
the acquisition of Refinitiv have been given on a constant currency
basis.
(1) Leverage is calculated as operating net debt (i.e. net debt
before lease liabilities and after excluding amounts set aside for
regulatory and operational purposes) to pro-forma adjusted EBITDA
before foreign exchange gains or losses.
USD GBP EUR Other
2022 Total Income(1) 57% 18% 17% 8%
---- ---- ---- ------
2022 Underlying Expenses(2) 50% 26% 11% 13%
---- ---- ---- ------
2022 Total Income by
division USD GBP EUR Other
Data & Analytics 65% 12% 12% 11%
---- ---- ---- ------
Capital Markets 59% 21% 19% 1%
---- ---- ---- ------
Post Trade 20% 44% 34% 2%
---- ---- ---- ------
Other 44% 23% 27% 6%
---- ---- ---- ------
1 Total income includes recoveries.
2 Underlying expenses includes cost of sales, underlying
operating expenses and underlying depreciation and
amortisation.
Spot / Average Rates
Average rate Average rate
12 months Closing rate 12 months Closing rate
ended at ended at
31-Dec-22 31-Dec-22 31-Dec-21 31-Dec-21
GBP : USD 1.237 1.203 1.376 1.350
------------- ------------- ------------- -------------
GBP : EUR 1.173 1.127 1.163 1.192
------------- ------------- ------------- -------------
Appendix:
Pro-forma(1) P&L
Continuing operations 2022 2021(1) Reported
GBPm GBPm Variance
%
--------
Data & Analytics 4,944 4,398 12.4%
Capital Markets 1,459 1,249 16.8%
Post Trade 991 906 9.4%
Other 34 34
------------------------------------- -------- -------- ----------
Total Income (excl. recoveries) 7,428 6,587 12.8%
Recoveries 315 354 (11.0%)
------------------------------------- -------- -------- ----------
Total Income (incl. recoveries) 7,743 6,941 11.6%
Cost of sales (1,064) (920) 15.7%
------------------------------------- -------- -------- ----------
Gross profit 6,679 6,021 10.9%
Adjusted operating expenses
before depreciation, amortisation
and impairment (3,140) (2,905) 8.1%
Income from equity investments 12 22 (45.5%)
Share of loss after tax
of associates (1) (4) (75.0%)
------------------------------------- --------
Adjusted EBITDA 3,550 3,134 13.3%
Adjusted EBITDA Margin 47.8% 47.6%
Adjusted depreciation, amortisation
and impairment (822) (737) 11.5%
------------------------------------- -------- ----------
Adjusted operating profit 2,728 2,397 13.8%
Adjusted net finance expense (160) (206) (22.3%)
------------------------------------- -------- ----------
Adjusted profit before
tax 2,568 2,191 17.2%
Adjusted tax (540) (451) 19.7%
------------------------------------- -------- -------- ----------
Adjusted profit for the
year 2,028 1,740 16.6%
Adjusted profit attributable
to:
Equity holders 1,770 1,512 17.1%
Non-controlling interest 258 228 13.2%
Continuing adjusted basic
earnings per share (p) 317.8 271.5 17.1%
------------------------------------- -------- -------- ----------
(1) Pro-forma 2021 assumes that the acquisition of Refinitiv
took place on 1 January 2021
Consolidated income statement
Year ended 31 December 2022 2021
(Re-presented)(1)
---------- -------------- ------- -----------------------------------
Underlying Non-underlying Total Underlying Non-underlying Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
Continuing operations
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Revenue 2, 3 7,454 - 7,454 6,297 - 6,297
Net treasury income
from CCP clearing
business 2, 3 255 - 255 207 - 207
Other income 2, 3 34 - 34 31 - 31
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Total income 7,743 - 7,743 6,535 - 6,535
Cost of sales 2 (1,064) - (1,064) (859) - (859)
Gross profit 6,679 - 6,679 5,676 - 5,676
Operating expenses
before depreciation,
amortisation and impairment 4, 6 (3,140) (389) (3,529) (2,725) (334) (3,059)
Profit on disposal
of property, plant
and equipment 6 - 133 133 - - -
Remeasurement gain 6, 11.1 - 23 23 - - -
Income from equity
investments 12 - 12 22 - 22
Share of loss after
tax of associates (1) - (1) (4) - (4)
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Earnings before interest,
tax, depreciation,
amortisation and impairment 3,550 (233) 3,317 2,969 (334) 2,635
Depreciation, amortisation
and impairment 6 (822) (1,078) (1,900) (687) (883) (1,570)
Operating profit/(loss) 2,728 (1,311) 1,417 2,282 (1,217) 1,065
Finance income 7.1 111 - 111 46 - 46
Finance costs 6, 7.2 (271) (16) (287) (212) (5) (217)
---------- -------------- ------- ---------- -------------- -------
Net finance costs (160) (16) (176) (166) (5) (171)
Profit/(loss) before
tax 2,568 (1,327) 1,241 2,116 (1,222) 894
Taxation 6, 8.1 (540) 278 (262) (432) 130 (302)
Profit/(loss) from
continuing operations 2,028 (1,049) 979 1,684 (1,092) 592
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Discontinued operations
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Profit after tax from
discontinued operations 12.1 59 453 512 160 2,511 2,671
Profit/(loss) for
the year 2,087 (596) 1,491 1,844 1,419 3,263
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Profit/(loss) from
continuing operations
attributable to:
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Equity holders 1,770 (980) 790 1,465 (1,004) 461
Non-controlling interests 258 (69) 189 219 (88) 131
Profit/(loss) from
continuing operations 2,028 (1,049) 979 1,684 (1,092) 592
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Profit from discontinued
operations attributable
to:
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Equity holders 59 453 512 156 2,512 2,668
Non-controlling interests - - - 4 (1) 3
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Profit after tax
from discontinued
operations 59 453 512 160 2,511 2,671
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Profit/(loss) for
the year 2,087 (596) 1,491 1,844 1,419 3,263
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Year ended 31 December 2022 2021
(Re-presented)(1)
---------- -------------- ------- -----------------------------------
Notes Underlying Non-underlying Total Underlying Non-underlying Total
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Earnings per share
attributable to equity
holders
Continuing operations
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Basic earnings per
share 9 141.8p 85.8p
Diluted earnings per
share 9 141.1p 85.2p
Adjusted basic earnings
per share 9 317.8p 272.4p
Adjusted diluted earnings
per share 9 316.1p 270.7p
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Total operations
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Basic earnings per
share 9 233.8p 581.7p
Diluted earnings per
share 9 232.5p 578.1p
Adjusted basic earnings
per share 9 328.4p 301.4p
Adjusted diluted earnings
per share 9 326.6p 299.5p
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Dividend per share
in respect of the
financial year
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
Dividend per share
paid during the year 10 31.7p 25.0p
Dividend per share
declared for the year 10 75.3p 70.0p
----------------------------- ------- ---------- -------------- ------- ---------- -------------- -------
1 The 2021 results have been re-presented to exclude the results of
the discontinued operations (see note 12)
Consolidated statement of comprehensive income
Year ended 31 December 2022 2021
(Re-presented)(1)
Notes GBPm GBPm
Continuing operations
-------------------------------------------------- ----- ----- -----------------
Profit from continuing operations 979 592
-------------------------------------------------- ----- ----- -----------------
Other comprehensive income
Items that will not be subsequently reclassified
to the income statement
Actuarial (losses)/gains on defined benefit
schemes (329) 101
Gain on equity instruments designated as fair
value through other comprehensive income 21 59
Income tax relating to these items 8.1 83 (25)
(225) 135
-------------------------------------------------- ----- ----- -----------------
Items that may be subsequently reclassified to
the income statement
Gains on cash flow hedges - 22
Gains on cash flow hedges recycled to the
income statement (3) (2)
Net (losses)/gains on net investment hedges (113) 87
Debt instruments at fair value through other
comprehensive income:
- Net (losses)/gains from changes in fair
value (15) 2
- Losses/(gains) recycled to the income statement 1 (4)
Net exchange gains on translation of foreign
operations 2,653 13
Income tax relating to these items 8.1 2 1
2,525 119
-------------------------------------------------- ----- ----- -----------------
Other comprehensive income net of tax from
continuing operations 2,300 254
-------------------------------------------------- ----- ----- -----------------
Total comprehensive income from continuing
operations 3,279 846
-------------------------------------------------- ----- ----- -----------------
Discontinued operations
-------------------------------------------------- ----- ----- -----------------
Total comprehensive income from discontinued
operations 12.1 512 2,566
Total comprehensive income 3,791 3,412
-------------------------------------------------- ----- ----- -----------------
Total comprehensive income from continuing
operations attributable to:
-------------------------------------------------- ----- ----- -----------------
Equity holders 2,889 707
Non-controlling interests 390 139
-------------------------------------------------- ----- ----- -----------------
Total comprehensive income from continuing
operations 3,279 846
-------------------------------------------------- ----- ----- -----------------
Total comprehensive income from discontinued
operations attributable to:
-------------------------------------------------- ----- ----- -----------------
Equity holders 512 2,564
Non-controlling interests - 2
-------------------------------------------------- ----- ----- -----------------
Total comprehensive income from discontinued
operations 512 2,566
-------------------------------------------------- ----- ----- -----------------
Total comprehensive income 3,791 3,412
-------------------------------------------------- ----- ----- -----------------
1 The 2021 results have been re-presented to exclude the results of
the discontinued operations (see note 12)
Balance sheet
At 31 December Group
----------------
2022 2021
Notes GBPm GBPm
Assets
Non-current assets
Intangible assets 13 35,066 31,724
Property, plant and equipment 797 832
Investments in associates 34 25
Investments in financial assets 15.1 394 351
Derivative financial instruments 15.1 12 2
Other receivables 209 202
Retirement benefit assets 231 568
Deferred tax assets 622 508
37,365 34,212
--------------------------------------------- ------ ------- -------
Current assets
Trade and other receivables 1,364 967
------- -------
Clearing member financial assets 687,727 665,031
Clearing member cash and cash equivalents 104,707 83,795
------- -------
Clearing member assets 15.1 792,434 748,826
Investments in financial assets 15.1 226 -
Derivative financial instruments 15.1 36 25
Current tax receivable 522 398
Cash and cash equivalents 3,209 2,665
Assets held for sale - 16
--------------------------------------------- ------ ------- -------
797,791 752,897
--------------------------------------------- ------ ------- -------
Total assets 835,156 787,109
--------------------------------------------- ------ ------- -------
Liabilities
Current liabilities
Trade and other payables 2,143 1,782
Contract liabilities 257 245
14.1,
Borrowings 15.2 1,295 -
Clearing member financial liabilities 15.2 792,594 748,644
Derivative financial instruments 15.2 9 7
Current tax payable 142 73
Provisions 29 16
--------------------------------------------- ------ ------- -------
796,469 750,767
--------------------------------------------- ------ ------- -------
Non-current liabilities
14.1,
Borrowings 15.2 6,856 7,654
Other payables 1,182 1,059
Contract liabilities 89 101
Derivative financial instruments 15.2 87 45
Retirement benefit obligations 64 85
Deferred tax liabilities 2,200 1,835
Provisions 58 44
10,536 10,823
--------------------------------------------- ------ ------- -------
Total liabilities 807,005 761,590
--------------------------------------------- ------ ------- -------
Net assets 28,151 25,519
--------------------------------------------- ------ ------- -------
Group
----------------
2022 2021
Notes GBPm GBPm
--------------------------------------------- ------ ------- -------
Equity
Capital and reserves attributable to the Company's
equity holders
Ordinary share capital 16 39 39
Share premium 16 978 978
Retained earnings 3,840 3,816
Other reserves 16 21,139 18,807
Total shareholders' funds 25,996 23,640
Non-controlling interests 2,155 1,879
--------------------------------------------- ------ ------- -------
Total equity 28,151 25,519
--------------------------------------------- ------ ------- -------
Cash flow statements
Year ended 31 December Group
--------------------------
2022 2021
(Re-presented)(1)
Notes GBPm GBPm
-------------------------------------------------- ----- ------- -----------------
Operating activities
Profit from continuing operations 979 592
Adjustments to reconcile profit to net cash
flow:
- Taxation 8.1 262 302
- Net finance costs 7 176 171
- Amortisation and impairment of intangible
assets 1,603 1,289
- Depreciation and impairment of property,
plant and equipment 290 281
- Profit on disposal of property, plant
and equipment 6 (133) -
- Share based payments 158 141
- Foreign exchange losses 38 112
- Dividend income (12) (22)
- Other movements 121 84
Working capital changes and movements in
other assets and liabilities:
- (Increase)/decrease in receivables, contract
and other assets (407) 747
- Decrease in payables, contract and other
liabilities (119) (347)
- Decrease/(increase) in clearing member
financial assets 709 (72,668)
- (Decrease)/increase in clearing member
financial liabilities (383) 72,408
-------------------------------------------------- ----- ------- -----------------
Cash generated from/(used in) operations 3,282 3,090
Interest received 29 14
Interest paid (171) (152)
Net taxes paid (351) (390)
Royalties paid (89) (70)
-------------------------------------------------- ----- ------- -----------------
Net cash flows from continuing operations(2) 2,700 2,492
Net cash flows from discontinued operations 12.3 37 110
-------------------------------------------------- ----- ------- -----------------
Net cash flows from operating activities 2,737 2,602
-------------------------------------------------- ----- ------- -----------------
Investing activities
Purchase of intangible assets 13 (773) (542)
Purchase of property, plant and equipment (193) (90)
Proceeds from disposal of property, plant
and equipment 153 -
Acquisition of subsidiaries, net of cash
acquired 11.2 (768) 762
Proceeds from sale of disposal group, net
of cash disposed 12.2 903 3,592
Investments in financial assets (227) (28)
Dividends received 12 22
Net cash flows from continuing operations (893) 3,716
Net cash flows from discontinued operations 12.3 (16) (32)
-------------------------------------------------- ----- ------- -----------------
Net cash flows from investing activities (909) 3,684
-------------------------------------------------- ----- ------- -----------------
Financing activities
Payment of principal portion of lease liabilities (150) (118)
Proceeds from borrowings - 6,944
Repayment of borrowings (209) (11,614)
Dividends paid to equity holders of the
parent 10 (567) (426)
Dividends paid to non-controlling interests (82) (95)
Repurchase of shares by Parent Company 16 (303) -
Repurchase of shares by subsidiary (Tradeweb) (80) (55)
Other financing activities (77) 24
Net cash flows from continuing operations (1,468) (5,340)
Net cash flows from discontinued operations 12.3 - (6)
-------------------------------------------------- ----- ------- -----------------
Net cash flows from financing activities (1,468) (5,346)
-------------------------------------------------- ----- ------- -----------------
Increase in cash and cash equivalents 360 940
Foreign exchange translation 184 (60)
Cash and cash equivalents at 1 January 2,665 1,785
Cash and cash equivalents at 31 December 3,209 2,665
-------------------------------------------------- ----- ------- -----------------
1 The 2021 results have been re-presented to exclude the results of
the discontinued operations (see note 12).
2 The Group's net cash inflow from continuing operating activities
of GBP2,700 million (2021: GBP2,492 million) includes GBP226 million
(2021: GBP202 million) of expenses related to non-underlying items.
Statements of changes in equity
Group
----------------------- ----- -------- -------- --------- ------------ ------------- ----------------- -------
Year ended 31
December
Attributable to equity holders
----------------------------------------------------------
Total
Ordinary attributable
share Share Retained Other to equity Non-controlling Total
capital premium earnings reserves(1) holders interests equity
(Re-presented)(2)
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
year - - 3,250 21 3,271 141 3,412
Issue of shares 16 - 7 - - 7 - 7
Issue of shares
for acquisition
of subsidiaries
(with non-controlling
interest) 15 - (25) 16,981 16,971 1,442 18,413
Dividends 10 - - (426) - (426) (97) (523)
Share-based payments - - 76 - 76 67 143
Tax benefit on
share-based payments
in excess of expense
recognised 8.1 - - 30 - 30 - 30
Disposal of business 12.2 - - - - - (65) (65)
Tradeweb share
buyback(3) - - - - - (55) (55)
Shares withheld
from employee
options exercised
(Tradeweb)(4) - - - - - (52) (52)
Tax benefit on
investment in
partnerships 8.1 - - - - - 25 25
Adjustments to
non-controlling
interest - - - - - 59 59
31 December 2021 39 978 3,816 18,807 23,640 1,879 25,519
Total comprehensive
income for the
year - - 1,069 2,332 3,401 390 3,791
Share buyback
by Parent Company 16 - - (503) - (503) - (503)
Dividends 10 - - (567) - (567) (80) (647)
Share-based payments - - 99 - 99 63 162
Tax expense on
share-based payments
less than expense
recognised 8.1 - - (78) - (78) - (78)
Purchase of
non-controlling
interests - - 4 - 4 (19) (15)
Tradeweb share
buyback(3) - - - - - (80) (80)
Shares withheld
from employee
options exercised
(Tradeweb)(4) - - - - - (82) (82)
Tax benefit on
investment in
partnerships 8.1 - - - - - 100 100
Adjustments to
non-controlling
interest - - - - - (16) (16)
31 December 2022 39 978 3,840 21,139 25,996 2,155 28,151
----------------------- ----- -------- -------- --------- ------------ ------------- ----------------- -------
1 Movements in other reserves are detailed in note 16
2 The disaggregated movements in non-controlling interests for the
year ended 31 December 2021 have been re-presented to be consistent
with 2022
3 On 4 February 2021, Tradeweb Markets Inc., a subsidiary of the Group,
announced a share repurchase programme, primarily to offset annual
dilution from stock-based compensation plans. Its share repurchase
programme authorises the purchase of up to US$150 million common stock
until 31 December 2023.
4 Tradeweb Markets Inc. is required to net-settle options exercised
by employees by reducing the shares to be issued by the number of shares
with a fair market value on the date of exercise equal to taxes payable
by employees in respect of the number of options exercised.
Notes to the financial statements
Reporting entity
These financial statements have been prepared for London Stock
Exchange Group plc (the Company) and its subsidiaries (the Group).
The Group is a diversified global financial markets infrastructure
and data business. 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.
During 2022, the Group acquired the businesses listed below. The
results of these businesses have been consolidated since the date
of acquisition (see note 11).
Acquired business Acquisition date Segment
----------------------------------- ----------------- -----------------
Global Data Consortium, Inc. (GDC) 31 May 2022 Data & Analytics
----------------------------------- ----------------- -----------------
MayStreet Inc. (MayStreet) 31 May 2022 Data & Analytics
----------------------------------- ----------------- -----------------
Tora Holdings, Inc. (TORA) 9 August 2022 Data & Analytics
----------------------------------- ----------------- -----------------
Quantile Group Limited (Quantile) 30 November 2022 Post Trade
----------------------------------- ----------------- -----------------
On 1 July 2022, the Group disposed of the BETA, Maxit and
Digital Investor businesses (collectively BETA) (see note 12). On
21 March 2022 , the disposal of BETA was assessed to be highly
probable and the 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. A ccounting policies
This section describes the Group's significant policies and
critical accounting judgements and estimates that relate to the
financial statements and notes as a whole. We have also detailed
below the new accounting pronouncements that we will adopt in
future years and how we have assessed the impact of climate change
on our financial statements.
1.1 Compliance with International Financial Reporting Standards
(IFRS)
The Group's consolidated and the Company's financial statements
are prepared in accordance with UK-adopted international accounting
standards and endorsed by the UK Endorsement Board.
1.2 Basis of preparation
The financial statements are prepared on a historical cost basis
except for derivative financial instruments, debt and equity
financial assets and contingent consideration which are measured at
fair value.
Going concern
The financial statements have been prepared on a going concern
basis. 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 12 months from the date
when these financial statements are authorised for issue.
Accordingly, the going concern basis has been adopted in the
preparation of these financial statements.
Presentation of income statement
The Group uses a columnar format for the presentation of its
consolidated income statement to separately identify results before
non-underlying items ("adjusted"). This is consistent with the way
that financial performance is measured by management and reported
to the Executive Committee and Board (see note 2).
The "adjusted" measures reported by the Group include:
-- Adjusted operating expenses before depreciation, amortisation and impairment
-- Adjusted EBITDA
-- Adjusted depreciation, amortisation and impairment
-- Adjusted operating profit
-- Adjusted 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.
The "profit before non-underlying items" measure is used to
calculate adjusted EPS. Profit before non-underlying items is
reconciled to profit before taxation on the face of the income
statement. Non-underlying items are disclosed in note 6.
Non-underlying items include:
-- Amortisation and impairment of goodwill and other purchased intangible assets
-- Incremental amortisation and impairment of the fair value
adjustments of intangible assets recognised as a result of
acquisitions
-- Other income or expenses not considered to drive the
operating results of the Group (including transaction, integration
and separation costs related to acquisitions and disposals of
businesses), as well as restructuring costs
-- Tax on non-underlying items
1.3 Foreign currencies
Functional and presentation currency
The consolidated financial statements are presented in sterling,
which is also the functional currency of London Stock Exchange
Group plc, the Parent Company. The Group determines the functional
currency for each of its subsidiary entities and items included in
the financial statements of each entity are measured using that
functional currency.
Transactions and balances in foreign currencies
Transactions in foreign currencies are initially recorded and
translated into the functional currency of the relevant Group
entity at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies
are translated into the respective functional currency of the
entity at the exchange rate prevailing at the reporting date.
Foreign exchange gains and losses resulting from the settlement
of such foreign currency transactions or from the translation of
monetary assets and liabilities denominated in foreign currencies
are recognised in the income statement within operating
expenses.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated at the exchange rate at the
date of the initial transaction. Non-monetary items that are
measured at fair value in a foreign currency are translated using
the exchange rate at the date when the fair value was determined.
The foreign exchange gain or loss on assets and liabilities carried
at fair value are reported as part of the fair value gain or loss.
This means foreign exchange gains and losses on non-monetary assets
and liabilities held at fair value through profit or loss are
recognised in the income statement (within operating expenses), and
foreign exchange gains and losses on non-monetary assets classified
as at fair value through other comprehensive income are recognised
in other comprehensive income.
Translation of non-sterling entities on consolidation
The results and financial position of all Group entities that
have a non-sterling functional currency are translated into
sterling on consolidation into the Group's results as follows:
-- assets and liabilities (including goodwill, purchased
intangible assets and fair value adjustments(1) ) are translated at
the reporting date exchange rates
-- income and expenses and other comprehensive income are
translated at the average exchange rate for the year. Where this
average is not a reasonable approximation of the rate prevailing on
the date of a material transaction, these items are translated at
the rate on the date of the transaction
-- all resulting exchange differences are recognised in other comprehensive income
On consolidation, exchange differences arising from the
translation of net investments in foreign operations, borrowings
and other currency instruments designated as hedging instruments
are recognised in other comprehensive income. On disposal of a
foreign currency operation, the cumulative exchange differences
previously recognised in other comprehensive income relating to
that operation are reclassified to the income statement as part of
the profit or loss on disposal.
1 Any goodwill and any fair value adjustments to the carrying
amounts of assets and liabilities on the acquisition of a foreign
operation are treated as assets and liabilities of the foreign
operation and translated at the reporting date exchange rate
1.4 New and amended standards and interpretations
Standards, interpretations and amendments to published standards
effective for the year ended 31 December 2022
During the year, the following amendments to standards became
effective. These have not had a material impact on the Group's
financial statements:
-- Amendments to IFRS 3 Business Combinations: reference to the Conceptual Framework
-- Amendments to IAS 16 Property, Plant and Equipment: proceeds before intended use
-- Amendments to IAS 37 Provisions, Contingent Liabilities and
Contingent Assets: onerous contracts - cost of fulfilling a
contract
-- Annual Improvements to IFRS 2018-2020
Standards, interpretations and amendments to published standards
which are not yet effective
New and amended standards that have been issued, but are not yet
effective, up to the date of the Group's financial statements are
disclosed below. We intend to adopt these, if applicable, when they
become effective. We are currently assessing their impact, but this
is not expected to be material to the Group's financial
statements:
International accounting standards and interpretations Effective date
------------------------------------------------------------------------------------------------- ------------------
IFRS 17 Insurance Contracts, including amendments to IFRS 17 (and initial application of IFRS 1 January 2023
17 and IFRS 9 Financial Instruments - comparative information)
Amendments to IAS 1 and IFRS Practice Statement 2: disclosure of accounting policies 1 January 2023
Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: definition 1 January 2023
of accounting estimate
Amendments to IAS 12 Income Taxes: deferred tax related to assets and liabilities arising 1 January 2023
from a single transaction
Amendments to IFRS 16: lease liability in a sale and leaseback 1 January 2024(1)
Amendments to IAS 1 Presentation of Financial Statements: non-current liabilities with covenants 1 January 2024(1)
and classification of liabilities as current or non-current
Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates Deferred(1)
and Joint Ventures: sale or contribution of assets between an investor and its associate or
joint venture
------------------------------------------------------------------------------------------------- ------------------
1 Not yet endorsed by UK Endorsement Board
1.5 Significant accounting estimates, assumptions and
judgements
Estimates, assumptions and judgements are regularly reviewed
based on historical experience, current circumstances and
expectations of future events.
Significant accounting estimates and assumptions are those that
have a significant risk of resulting in a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year.
Significant judgements are those made by management in applying
the Group's significant accounting policies that have a material
impact on the amounts presented in the financial statements.
Significant judgement may be exercised in management's accounting
estimates and assumptions.
Estimates, assumptions and judgements are described in the
relevant notes to the financial statements.
Note Significant estimates and assumptions Significant judgement
----- ------------------------ -------------------------------------- ----------------------
6 Non-underlying items P
----- ------------------------ -------------------------------------- ----------------------
8.2 Uncertain tax positions P P
===== ======================== ====================================== ======================
11 Business combinations P
----- ------------------------ -------------------------------------- ----------------------
13 Intangible assets P
===== ======================== ====================================== ======================
Management has discussed significant accounting estimates,
assumptions and judgements with the Audit Committee.
1.6 Climate change
We have reviewed the potential impact of climate change on the
Group's financial results and position. The areas that are deemed
to be most relevant to climate change are set out below. Based on
an assessment in each area, we have concluded that climate change
is not expected to have a material impact on the Group's financial
position, estimates or judgements. The directors monitor this on an
on-going basis.
-- Going concern and viability - The Group has committed to a
long-term ambition to achieve net zero by 2040 and set targets
to reduce selected carbon emissions by 50% by 2030. There is
no other direct impact on the viability period of the Group.
There is no climate-related scenario that is deemed to have
a probable likelihood of occurring which could also impact the
Group's going concern assessment.
-- Impairment of goodwill and intangible assets - Forecasted cash
flows are not expected to be impacted by climate change over
the period for which forecasts have been prepared, due to the
nature of the Group's revenue streams. The impact on costs mainly
relates to reducing our carbon footprint by encouraging responsible
employee travel.
-- Useful lives of assets - The Group's assets consist mainly
of property and IT equipment. Given the type of IT equipment
owned by the Group, there is no expected impact of climate change
on the future useful lives of these assets. The useful lives
of our property could be impacted by climate change in the form
of physical obsolescence of assets or because of a natural disaster
(such as flooding), however any such impact on the carrying
value of related assets is not deemed material.
-- Deferred tax assets - Deferred tax asset recoverability can
be affected by climate if there is an expectation that it will
impact on the future taxable profits that are expected to be
generated. The revenue of the Group is of such a nature that
it is not expected to be impacted by climate change over the
period for which forecasts are prepared. There is a potential
reduction in costs as we reduce our carbon footprint and encourage
responsible employee travel.
-- Pension scheme asset valuation and defined benefit liability
- Changes in interest rates, as a result of climate change,
could impact the future valuation of defined benefit liabilities
and pension asset valuations. While these are considered in
the valuation, there was no discernible impact from climate
change on the current year's valuation.
-- Trade and other receivables - The Group has a diverse client
base that operates in various industries. The Group's expected
credit loss provision considers the credit risk of its client
base, which could be impacted by the assessment of climate change
in a particular market or industry. Given that receivables are
mainly due within one year, the impact of climate change on
the short term is unlikely to be material.
2. Segment information
The Group reports three main operating segments:
-- Data & Analytics includes the core Refinitiv business and the FTSE Russell businesses
-- Capital Markets includes the London Stock Exchange, Tradeweb, FXall and Turquoise
-- Post Trade includes the Group's CCPs (LCH) and other post trade services
During the year, some revenue items were reallocated between
business lines to better reflect our operating model. The
comparative results have been re-presented to reflect this. At a
divisional level, the impact on the 2021 results previously
reported is:
-- GBP6 million of revenue from Capital Markets to Data & Analytics
-- GBP7 million of revenue from Post Trade to Data & Analytics
Results by operating segment for the year ended 31 December 2022 are
as follows:
Data Capital Post
& Analytics Markets Trade Other Group
Continuing operations Notes GBPm GBPm GBPm GBPm GBPm
------------------------------------ ----- ------------ -------- ------ ----- -------
Revenue from external customers(1) 3 5,259 1,459 736 - 7,454
Net treasury income from
CCP clearing business 3 - - 255 - 255
Other income 3 - - - 34 34
------------------------------------ ----- ------------ -------- ------ ----- -------
Total income 5,259 1,459 991 34 7,743
Cost of sales (879) (34) (150) (1) (1,064)
Gross profit 4,380 1,425 841 33 6,679
Adjusted operating expenses
before depreciation, amortisation
and impairment 4 (2,142) (665) (324) (9) (3,140)
Income from equity investments - - - 12 12
Share of loss after tax of
associates - - - (1) (1)
------------------------------------ ----- ------------ -------- ------ ----- -------
Adjusted EBITDA 2,238 760 517 35 3,550
Underlying depreciation,
amortisation and impairment (607) (103) (112) - (822)
Adjusted operating profit
(before non-underlying items) 1,631 657 405 35 2,728
Non-underlying depreciation,
amortisation and impairment 6 (1,078)
Other non-underlying items
excluding net finance expense 6 (233)
------------------------------------ ----- ------------ -------- ------ ----- -------
Operating profit 1,417
Net finance costs (including
non-underlying items) 7 (176)
------------------------------------ ----- ------------ -------- ------ ----- -------
Profit before tax from continuing
operations 1,241
Profit before tax from discontinued
operations 12 692
Profit before tax 1,933
------------------------------------ ----- ------------ -------- ------ ----- -------
1 Data & Analytics revenue includes recoveries of GBP315
million. Post Trade revenue includes net settlement and similar
expenses recovered through the CCP clearing businesses of GBP12
million which comprises gross settlement income of GBP47 million
less gross settlement expenses of GBP35 million.
Re-presented results by operating segment for the year ended 31 December
2021 are as follows:
Data Capital Post
& Analytics Markets Trade Other Group
Continuing operations Notes GBPm GBPm GBPm GBPm GBPm
------------------------------------ ----- ------------ -------- ------ ----- -------
Revenue from external customers(1) 3 4,427 1,171 699 - 6,297
Net treasury income from
CCP clearing business 3 - - 207 - 207
Other income 3 - - - 31 31
------------------------------------ ----- ------------ -------- ------ ----- -------
Total income 4,427 1,171 906 31 6,535
Cost of sales (709) (27) (123) - (859)
Gross profit 3,718 1,144 783 31 5,676
Adjusted operating expenses
before depreciation, amortisation
and impairment 4 (1,857) (536) (329) (3) (2,725)
Income from equity investments - - - 22 22
Share of loss after tax of
associates - - - (4) (4)
------------------------------------ ----- ------------ -------- ------ ----- -------
Adjusted EBITDA 1,861 608 454 46 2,969
Underlying depreciation,
amortisation and impairment (481) (110) (96) - (687)
Adjusted operating profit
(before non-underlying items) 1,380 498 358 46 2,282
Non-underlying depreciation,
amortisation and impairment 6 (883)
Other non-underlying items
excluding net finance expense 6 (334)
------------------------------------ ----- ------------ -------- ------ ----- -------
Operating profit 1,065
Net finance costs (including
non-underlying items) 7 (171)
------------------------------------ ----- ------------ -------- ------ ----- -------
Profit before tax from continuing
operations 894
Profit before tax from discontinued
operations 12 2,702
Profit before tax 3,596
------------------------------------ ----- ------------ -------- ------ ----- -------
1 Data & Analytics revenue includes recoveries of GBP324
million. Post Trade revenue includes net settlement and similar
expenses recovered through the CCP clearing businesses of GBP12
million which comprises gross settlement income of GBP46 million
less gross settlement expense of GBP34 million.
3. 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 year ended 31 December 2022 is shown below:
Data Capital Post
& Analytics Markets Trade Other Group
Continuing operations GBPm GBPm GBPm GBPm GBPm
---------------------------------------- ------------ -------- ------ ----- -----
Revenue from external customers
Major product and service lines
Trading & banking solutions 1,612 - - - 1,612
Enterprise data solutions 1,307 - - - 1,307
Investment solutions 1,325 - - - 1,325
Wealth solutions 275 - - - 275
Customer & third-party risk solutions 425 - - - 425
Recoveries 315 - - - 315
Equities - 248 - - 248
FX - 258 - - 258
Fixed income, derivatives and
other - 953 - - 953
OTC derivatives - - 402 - 402
Securities & reporting - - 234 - 234
Non-cash collateral - - 100 - 100
Total revenue 5,259 1,459 736 - 7,454
Net treasury income - - 255 - 255
Other income - - - 34 34
---------------------------------------- ------------ -------- ------ ----- -----
Total income 5,259 1,459 991 34 7,743
---------------------------------------- ------------ -------- ------ ----- -----
Timing of revenue recognition
Services satisfied at a point
in time 173 1,015 721 - 1,909
Services satisfied over time 5,086 444 15 - 5,545
---------------------------------------- ------------ -------- ------ ----- -----
Total revenue 5,259 1,459 736 - 7,454
---------------------------------------- ------------ -------- ------ ----- -----
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 year ended 31 December 2021 is shown below:
Data Capital Post
& Analytics Markets Trade Other Group
Continuing operations GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ------------- --------- ------ ----- -----
Revenue from external customers
Major product and service lines
Trading & banking solutions 1,369 - - - 1,369
Enterprise data solutions 1,058 - - - 1,058
Investment solutions 1,119 - - - 1,119
Wealth solutions 227 - - - 227
Customer & third-party risk solutions 330 - - - 330
Recoveries 324 - - - 324
Equities - 241 - - 241
FX - 204 - - 204
Fixed income, derivatives and other - 726 - - 726
OTC derivatives - - 358 - 358
Securities & reporting - - 246 - 246
Non-cash collateral - - 95 - 95
Total revenue 4,427 1,171 699 - 6,297
Net treasury income - - 207 - 207
Other income - - - 31 31
----------------------------------------- ------------- --------- ------ ----- -----
Total income 4,427 1,171 906 31 6,535
----------------------------------------- ------------- --------- ------ ----- -----
Timing of revenue recognition
Services satisfied at a point in
time 154 790 670 - 1,614
Services satisfied over time 4,273 381 29 - 4,683
----------------------------------------- ------------- --------- ------ ----- -----
Total revenue 4,427 1,171 699 - 6,297
----------------------------------------- ------------- --------- ------ ----- -----
4. Operating expenses before depreciation, amortisation and
impairment
2022 2021
(Re-presented)
Continuing operations Notes GBPm GBPm
--------------------------------------------------- ----- ----- --------------
Staff costs 5 1,896 1,666
IT costs 567 447
Professional fees 420 327
Short-term lease costs 13 43
Other costs 243 252
Foreign exchange losses/(gains) 1 (10)
Underlying operating expenses before depreciation,
amortisation and impairment 3,140 2,725
Non-underlying operating expenses before
depreciation, amortisation and impairment 6 389 334
--------------------------------------------------- ----- ----- --------------
Total operating expenses before depreciation,
amortisation and impairment 3,529 3,059
--------------------------------------------------- ----- ----- --------------
5. Staff costs
2022 2021
(Re-presented)
Continuing operations GBPm GBPm
---------------------------------------------- ----- --------------
Salaries and other benefits 1,905 1,626
Social security costs 191 164
Pension costs 81 81
Share-based payment expense 158 141
---------------------------------------------- ----- --------------
Total payments made to employees 2,335 2,012
Amounts capitalised as development costs (281) (190)
Total staff costs from continuing operations 2,054 1,822
---------------------------------------------- ----- --------------
Underlying staff costs 1,896 1,666
Non-underlying staff costs 158 156
---------------------------------------------- ----- --------------
Total staff costs from continuing operations 2,054 1,822
---------------------------------------------- ----- --------------
6. Non-underlying items
Significant accounting judgements
The Group uses its judgement to classify items as
non-underlying. They include:
-- 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
-- Incremental amortisation and impairment of any fair value
adjustments of intangible assets recognised as a result of
acquisitions
-- Other income or expenses not considered to drive the
operating results of the Group (including transaction, integration
and separation costs related to acquisitions and disposals of
businesses), as well as restructuring costs
-- Tax on non-underlying items
2022 2021
(Re-presented)
Continuing operations Notes GBPm GBPm
---------------------------------------------- ----- ----- --------------
Non-underlying operating expenses before
interest, tax, depreciation, amortisation
and impairment
Transaction costs 85 109
Integration and separation costs 278 225
Restructuring and other costs 26 -
389 334
---------------------------------------------- ----- ----- --------------
Profit on disposal of property, plant and
equipment (133) -
Remeasurement gain 11.1 (23) -
---------------------------------------------- ----- ----- --------------
(156) -
---------------------------------------------- ----- ----- --------------
Non-underlying operating expenses before
interest, tax, depreciation, amortisation
and impairment 233 334
---------------------------------------------- ----- ----- --------------
Non-underlying depreciation, amortisation
and impairment
Amortisation and impairment of purchased
intangible assets 13 1,044 851
Depreciation of property, plant and equipment 15 10
Impairment of property, plant and equipment 12 22
Impairment of other non-current assets 7 -
---------------------------------------------- ----- ----- --------------
1,078 883
---------------------------------------------- ----- ----- --------------
Non-underlying items before interest and
tax 1,311 1,217
Non-underlying finance costs 7.2 16 5
---------------------------------------------- ----- ----- --------------
Non-underlying items before tax 1,327 1,222
Non-underlying tax (278) (130)
Non-underlying items after tax 1,049 1,092
---------------------------------------------- ----- ----- --------------
The main non-underlying items are as follows:
Transaction costs
Transaction costs mainly relate to the following
acquisitions:
-- Refinitiv - mainly fair value adjustment to the outstanding
Tradeweb equity-settled awards (as if the acquisition date were the
grant date) of GBP26 million (2021: GBP36 million) and
post-acquisition Management Incentive Plan (MIP) share-based
payment expense of GBP16 million (2021: GBP10 million)
-- GDC, MayStreet, TORA and Quantile (see note 11.4)
Integration and separation costs
Integration and separation costs relate to activities to:
-- Integrate acquired businesses with the Group and mainly
consist of Refinitiv integration costs of GBP242 million (2021:
GBP201 million)
-- Separate disposed businesses and mainly consists of BETA
separation costs of GBP12 million (2021: GBP24 million to separate
the Thomson Reuters Financial & Risk Business from Thomson
Reuters and then restructure it)
Profit on disposal of property, plant and equipment
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.
Remeasurement gain
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.
Depreciation, amortisation and impairment
Amortisation of intangibles of GBP1,044 million (2021: GBP851
million) mainly relates to the amortisation of intangible assets
recognised as a result of the acquisition of Refinitiv.
We have continued to review our property needs following the
acquisition of Refinitiv. The decision to exit and sub-lease some
of our property has resulted in GBP27 million of accelerated
depreciation and impairment (2021: GBP32 million) to right-of-use
property assets and some fixtures and fittings.
Taxation
We have recognised a GBP278 million (2021: GBP130 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.
7. Net finance costs
7.1 Finance income
-------------------------------------------------------- ------------- -----
2022 2021
Continuing operations GBPm GBPm
-------------------------------------------------------- ----- ------ -----
Bank deposit and other interest income 29 3
Lease interest income 1 2
Interest income on retirement benefit assets 81 41
--------------------------------------------------------- ----- ------ -----
Underlying finance income 111 46
--------------------------------------------------------- ----- ------ -----
7.2 Finance costs
-------------------------------------------------------- ----- ------ -----
2022 2021
Continuing operations Note GBPm GBPm
-------------------------------------------------------- ----- ------ -----
Interest payable on bank and other borrowings(1) (156) (151)
Amortisation of arrangement fees (10) (12)
Lease interest expense (15) (12)
Other finance expenses (20) (2)
Interest cost on retirement benefit obligations (70) (35)
--------------------------------------------------------- ----- ------ -----
Underlying finance costs (271) (212)
Non-underlying finance costs 6 (16) (5)
--------------------------------------------------------- ----- ------ -----
Total finance costs (287) (217)
--------------------------------------------------------- ----- ------ -----
1 Interest payable on bank and other borrowings includes amounts where
the Group suffers negative interest on its cash deposits. It is net
of amortisation of the realised gain on interest rate derivatives held
in the hedging reserve.
8. Taxation
8.1 Income tax
Tax recognised in the income statement
2022 2021
(Re-presented)
Continuing operations GBPm GBPm
----------------------------------------------- ---- --------------
Current tax
UK corporation tax for the year at 19% (2021:
19%) 67 49
Overseas tax for the year 125 79
Adjustments in respect of previous years 81 2
Total current tax 273 130
------------------------------------------------ ---- --------------
Deferred tax
Deferred tax (benefit)/expense for the year (29) 214
Adjustments in respect of previous years (4) (9)
Deferred tax expense/(benefit) on amortisation
and impairment of intangible assets 22 (33)
------------------------------------------------ ---- --------------
Total deferred tax (11) 172
------------------------------------------------ ---- --------------
Total tax 262 302
------------------------------------------------ ---- --------------
Factors affecting the tax charge for the
year
The tax charge for the year differs from that derived from the standard
rate of corporation tax in the UK of 19% (2021: 19%) as explained below:
2022 2021
(Re-presented)
Continuing operations GBPm GBPm
------------------------------------------------------ ----- ---------------
Profit before tax from continuing operations 1,241 894
------------------------------------------------------- ----- ---------------
Profit multiplied by standard rate of corporation
tax in the UK 236 170
Overseas earnings taxed at higher rate 4 8
Adjustment arising from changes in tax rates (3) 171
Income not taxable (53) (36)
Adjustments in respect of previous years 77 (7)
Deferred tax not recognised 1 (4)
Total tax 262 302
------------------------------------------------------- ----- ---------------
Tax on items recognised in other comprehensive
income
------------------------------------------------------ ----- ---------------
2022 2021
Continuing operations GBPm GBPm
------------------------------------------------------ ----- ---------------
Deferred tax benefit/(expense) on:
- Actuarial losses/gains on retirement benefit
obligations 98 (25)
- Gains/losses of financial assets (at fair
value through other comprehensive income) (13) 1
Total tax recognise in other comprehensive
income 85 (24)
------------------------------------------------------- ----- ---------------
Tax on items recognised in equity
------------------------------------------------------ ----- ---------------
2022 2021
GBPm GBPm
------------------------------------------------------ ----- ---------------
Current tax benefit on:
- Share-based payments in excess of expense
recognised 14 12
------------------------------------------------------- ----- ---------------
Total current tax recognised in equity 14 12
------------------------------------------------------- ----- ---------------
Deferred tax benefit/(expense) on:
- Share-based payments less than/in excess
of expense recognised (92) 18
- Investment in partnerships (recognised
in non-controlling interests) 100 25
------------------------------------------------------- ----- ---------------
Total deferred tax recognised in equity 8 43
------------------------------------------------------- ----- ---------------
Total tax recognised in equity 22 55
------------------------------------------------------- ----- ---------------
On 24 May 2021, the UK Finance Act 2021 was substantively
enacted, increasing the corporate tax rate to 25% with effect from
1 April 2023.
Global Minimum Tax
To address concerns about uneven profit distribution and the tax
contributions of large multinational corporations, various
agreements have been reached at the global level, including an
agreement by over 135 countries to introduce a global minimum tax
rate of 15%. In December 2021, the Organisation for Economic
Co-operation and Development (OECD) released a draft legislative
framework, followed by detailed guidance in March 2022. This is
expected to be used by individual jurisdictions that signed the
agreement to amend their local tax laws. Enactment is currently
expected to occur with effect from 1 January 2024. Once changes to
the tax law in any jurisdiction are enacted or substantively
enacted, the Group may be subject to the 15% minimum tax rate. We
are closely monitoring these developments.
8.2 Uncertain tax positions(1)
Significant accounting judgements and estimates
Uncertain tax positions
The Group is subject to taxation in the many countries in which
it operates. The tax legislation of these countries differs, is
often complex and is subject to interpretation by management and
government authorities. These matters of judgement sometimes give
rise to the need to create provisions for tax payments that may
arise in future years with respect to transactions already
undertaken.
Provisions are made against individual exposures and take into
account the specific circumstances of each case, including the
strength of technical arguments, recent case law decisions or
rulings on similar issues and relevant external advice. In
accordance with IFRIC 23 Uncertainty over Income Tax Treatments ,
provisions are estimated based on one of two methods: the expected
value method (the sum of the probability weighted amounts in a
range of possible outcomes) or the single most likely amount
method. The method chosen depends on which is expected to better
predict the resolution of the uncertainty. Due to the uncertainty
associated with tax audits it is possible that, at some future
date, liabilities resulting from such audits or related litigation
could vary significantly from our provisions. This would require
the Group to make an adjustment in a subsequent period which could
have a material impact on the Group's results.
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 recognise the FCPE during this
period.
In December 2019 and the beginning of 2021, HMRC issued
determinations to the Group totalling GBP10.5 million 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. The Group has appealed this decision to the Court of
Justice of the European Union (CJEU). It will be some time before
the issues are conclusively determined by the CJEU. Until then, the
UK Government is required to continue recovering amounts determined
to be State Aid.
The Group's view is that no provision is required. Additionally,
and in accordance with IFRIC 23 Uncertainty over Income Tax
Treatments, the Group continues to recognise a receivable against
the HMRC determinations paid to date of GBP10.5 million. The
maximum potential exposure remains between nil and GBP65
million.
IRS Audit
The Group has been under audit in the USA by the Internal
Revenue Service (IRS) in relation to the interest rate applied on
certain cross border intercompany loans from the UK to the USA for
the 2014-2021 period. During the year, the Group reached a
settlement with the IRS on this matter for the 2014-2015 period.
This resulted in additional tax of GBP1 million ($1 million) for
this period and a GBP4 million ($5 million) increase in the
uncertain tax liability resulting from the remeasurement of the
open period.
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 believes that
resolution of this matter will not have a material impact on the
Group's financial position. 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 & 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
2018-2020 period, 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.
Management believes that resolution of this matter will not have a
material impact on the Group's financial position.
1 Amounts presented exclude interest and penalties
9. Earnings per share
2022 2021
Re-presented
---------------------------------- ----------------------------------
Continuing Discontinued Total Continuing Discontinued Total
--------------------------------- ---- ---------- ------------ -------- ---------- ------------ --------
Basic earnings per
share 141.8p 91.9p 233.8p 85.8p 495.9p 581.7p
Diluted earnings per
share 141.1p 91.4p 232.5p 85.2p 492.9p 578.1p
Adjusted basic earnings
per share 317.8p 10.6p 328.4p 272.4p 29.0p 301.4p
Adjusted diluted earnings
per share 316.1p 10.5p 326.6p 270.7p 28.8p 299.5p
Profit and adjusted profit for the year attributable to the Company's
equity holders
2022 2021
Re-presented
Continuing Discontinued Total Continuing Discontinued Total
Note GBPm GBPm GBPm GBPm GBPm GBPm
Profit for the financial
year attributable to
the Company's equity
holders 790 512 1,302 461 2,668 3,129
Adjustments:
- Total non-underlying
items net of tax 6 1,049 (453) 596 1,092 (2,511) (1,419)
- Non-underlying items
attributable to non-controlling
interests (69) - (69) (88) (1) (89)
Adjusted profit for
the year attributable
to the Company's equity
holders 1,770 59 1,829 1,465 156 1,621
Weighted average number of shares
2022 2021
millions Millions
Weighted average number
of shares(1) 557 538
Effect of dilutive share
options and awards 3 3
Diluted weighted average
number of shares 560 541
1 The weighted average number of shares excludes those held in the
Employee Benefit Trust.
10. Dividends
2022 2021
GBPm GBPm
Final dividend for 31 December 2020 paid 26 May 2021:
51.7p per ordinary share - 287
Interim dividend for 31 December 2021 paid 21 September
2021: 25.0p per ordinary share - 139
Final dividend for 31 December 2021 paid 25 May 2022:
70.0p per ordinary share 390 -
Interim dividend for 31 December 2022 paid 20 September
2022: 31.7p per ordinary share 177 -
567 426
-----
Dividends are only paid out of available distributable reserves of
the Company.
The Board has proposed a final dividend in respect of the year ended
31 December 2022 of 75.3p per share, which amounts to an expected payment
of GBP417 million on 24 May 2023. This is not reflected in the financial
statements.
11. Business combinations
During the year, the Group acquired the businesses listed below.
The results of the businesses have been consolidated since the date
of acquisition.
-- Global Data Consortium, Inc. (GDC)
-- MayStreet Inc. (MayStreet)
-- Tora Holdings, Inc. (TORA)
-- Quantile Group Limited (Quantile)
Significant accounting estimates and assumptions
Intangible assets acquired as part of a business combination
The fair value of acquired intangible assets (and therefore the
resulting goodwill recognised on acquisition) is significantly
affected by a number of factors. These include management's best
estimates of future performance (i.e. forecast revenue, expected
revenue attrition, forecast operating margin), any contributory
assets changes and estimates of the return required to determine an
appropriate discount rate (in order to calculate the net present
value of the assets).
The purchase price allocations (PPAs) (shown in 11.2 below) have
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.
11.1 Details of businesses acquired
Voting equity interest
Acquired business Description of business Reason for acquisition Acquisition date acquired
GDC's services are used
within LSEG's Customer
& Third-Party Risk
Solutions business
within
the Data & Analytics
division, to provide
global digital
identity verification
to customers.
A global provider of Adding GDC to the
high-quality identity Group's suite of
verification data to digital identity
support clients with solutions will enable
Know the Group to continue
Global Data Consortium, Your Customer (KYC) to expand capabilities
Inc. (GDC) requirements. in this segment. 31 May 2022 89%(1)
The acquisition
enhances the Group's
Enterprise Data
Solutions business,
within the Data &
Analytics division,
expanding our
capabilities across
the latency spectrum
A market data solutions through a global
provider. MayStreet low latency network of
provides global low over 300 cross asset,
latency technology and exchange and trading
market venue feeds. This
data to over 65 broadens
industry participants, and complements our
including banks, asset real-time feeds and
MayStreet Inc. managers and hedge historical market data
(MayStreet) funds. value proposition. 31 May 2022 100%
The transaction will
further enhance the
global footprint of
the Group's Trading &
Banking
A cloud-based Solutions business,
technology provider within the Data &
that supports Analytics division,
customers trading with TORA's
multiple asset classes established presence
across in Asia and North
global markets. TORA's America and operations
solutions include an in Europe. Our
order and execution customers will benefit
management system from a differentiated
(OEMS) and trading solution that
portfolio management combines the
system (PMS) for multi-asset class
customers trading capabilities of TORA's
equities, fixed software with
income, FX, the Group's rich data
Tora Holdings, Inc. derivatives and analytics
(TORA) and digital assets. services. 9 August 2022 100%
Quantile's powerful
optimisation engine
provides advanced
trade compression and
risk rebalancing
services to banks,
hedge funds and other
financial institutions
trading OTC
derivatives. Quantile
will therefore
complement our global
A leading provider of OTC Derivatives
portfolio, margin and clearing services,
capital optimisation which provide risk
and compression management and capital
services efficiencies to
for the global customers. It will
financial services also allow the Group
market. Quantile is to expand its
led by a team of range of Post Trade
industry experts with risk management
significant experience solutions through
in risk management, trade compression as
quantitative analysis well as capital
Quantile Group Limited and trading and margin
(Quantile) technology. optimisation services. 30 November 2022 100%
1 Prior to the acquisition LSEG held an 11% interest in GDC and
on 31 May 2022 recognised a GBP23 million non-underlying
remeasurement gain on this investment in associate (see note
6).
11.2 Consideration transferred, assets acquired and liabilities
assumed, and resulting goodwill
Goodwill arising from the acquisitions has been recognised as follows:
GDC MayStreet TORA Quantile Total
Note GBPm GBPm GBPm GBPm GBPm
---- ------------ ------------ ------------ -------- -----
Purchase consideration
- Cash (including settlement
of share options) 213 153 258 162 786
- Fair value of previous
interest held 28 - - - 28
- Deferred consideration - - - 5 5
- Contingent consideration
payable(1) - - - 38 38
--------------------------------- ---- ------------ ------------ ------------ -------- -----
Total purchase consideration 241 153 258 205 857
--------------------------------- ---- ------------ ------------ ------------ -------- -----
Less: Fair value of identifiable
net assets acquired
- Intangible assets: Customer
and supplier relationships(2) 13 (67) (28) (49) (44) (188)
- Intangible assets: Software(2) 13 (28) (39) (47) (35) (149)
- Intangible assets: Licences(2) 13 - - (3) - (3)
- Other non-current assets - (1) (3) - (4)
- Cash and cash equivalents (5) (2) (6) (5) (18)
- Other current assets (4) (3) (7) (9) (23)
- Total liabilities, excluding
deferred tax liabilities 4 19 6 5 34
- Deferred tax liabilities(3) 12 9 24 18 63
--------------------------------- ---- ------------ ------------ ------------ -------- -----
Fair value of identifiable
net assets acquired (88) (45) (85) (70) (288)
--------------------------------- ---- ------------ ------------ ------------ -------- -----
Goodwill 13 153 108 173 135 569
--------------------------------- ---- ------------ ------------ ------------ -------- -----
Allocated to cash-generating Data Data Data Post
unit & Analytics & Analytics & Analytics Trade
1 The contingent consideration payable is linked to performance
targets of Quantile. The contingent consideration is calculated
with reference to qualifying revenue and relevant valuation
multiples which determines the payment, discounted to a present
value. A 1% change in the discount rate applied would not have a
material effect on the valuation of the payable.
2 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)
-- Licences: replacement cost approach
3 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.
None of the goodwill recognised is expected to be deductible for
income tax purposes.
11.3 Revenue and profit
contribution
From the respective acquisition dates, the acquired businesses contributed
revenue and profit before tax as follows:
2022
GDC MayStreet TORA Quantile
Seven Seven Five
months months months One month
GBPm GBPm GBPm GBPm
Revenue 12 8 12 1
Adjusted EBITDA 4 2 - -
Profit/(loss) before tax - (3) (8) -
If the acquisitions had all occurred on 1 January 2022, the acquired
businesses would have contributed additional revenue and adjusted EBITDA
as follows:
2022
LSEG GDC MayStreet TORA Quantile
Five Five Seven
Year months months months 11 months
ended ended ended ended ended Pro-forma
31 Dec 31 May 31 May 31 Jul 30 Nov Group
Continuing GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 7,454 8 6 36 11 7,515
Adjusted EBITDA 3,550 2 (11) 13 - 3,554
11.4 Acquisition-related costs, including employment-linked management
incentive and earn-out arrangements
Acquisition-related costs are recognised as non-underlying transaction
costs in the income statement (see note 6). The Group incurred acquisition-related
costs (on advisor and professional fees and management incentive and
retention costs) as follows:
GDC MayStreet TORA Quantile
GBPm GBPm GBPm GBPm
Advisor and professional
fees 3 5 3 8
Employment-linked management
incentive and earn-out arrangements(1) - 22 3 -
Acquisition-related costs 3 27 6 8
1 As part of the MayStreet and TORA purchase agreements,
employment-linked management retention incentives 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 within salaries and other benefits in the income
statement
-- classified as non-underlying transaction costs
12. Disposal of businesses and discontinued operations
Disposal of BETA during the year ended 31 December 2022
On 21 March 2022, the disposal of BETA, Maxit and Digital
Investor (collectively BETA) was assessed to be highly probable and
it has been treated as a disposal group from that date. BETA
provides back-office processing to the wealth management industry,
including securities processing and tax reporting. BETA has also
been treated as 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 year ended 31
December 2022. The results for the prior year have been
re-presented to exclude the BETA results from the continuing
operations of the Group.
On 1 July 2022, BETA was sold for total cash consideration of
US$1.1 billion (GBP0.9 billion) to affiliates of Clearlake Capital
Group, L.P. (Clearlake) and Motive Partners (Motive), realising a
profit on disposal, after tax, of GBP0.5 billion. We announced that
we have entered into a new long-term strategic partnership for
data, content and tools with BETA and portfolio companies owned by
Clearlake and Motive.
Disposal of the Borsa Italiana group during the year ended 31
December 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 year ended 31
December 2021. As part of the disposal agreement the Group
continues to provide services to the Borsa Italiana group on an
arm's length basis.
12.1 Profit and total comprehensive income
from discontinued operations
Until the respective disposal dates, the profit and total comprehensive
income from discontinued operations are as follows:
2022 2021
(Re-presented)
GBPm GBPm
-----
Profit from discontinued operations
BETA 512 68
Borsa Italiana group - 2,603
---- -----
Profit from discontinued operations 512 2,671
---- -----
Other comprehensive loss of discontinued
operations
Borsa Italiana group - (105)
---- -----
Other comprehensive loss from discontinued
operations - (105)
---- -----
Total comprehensive income from discontinued
operations 512 2,566
----
Profit and total comprehensive income from
BETA
---- -----
2022 2021
Note GBPm GBPm
---- -----
Total income 132 205
Underlying cost of sales and operating expenses (57) (103)
---- -----
Adjusted profit before tax 75 102
Non-underlying expenses (1) (9)
---- -----
Profit before tax 74 93
Underlying tax (16) (27)
Non-underlying tax - 2
---- -----
Profit after tax of discontinued operation 58 68
Profit on disposal of discontinued operation,
after tax (non-underlying) 12.2 454 -
---- -----
Profit (and total comprehensive income)
from discontinued operation 512 68
----
Profit and total comprehensive income from
Borsa Italiana group
---- -----
2021
Note GBPm
----
Total income 146
Underlying cost of sales and operating expenses (52)
---- -----
Adjusted profit before tax 94
Non-underlying expenses (4)
---- -----
Profit before tax 90
Underlying tax (9)
Non-underlying tax 3
---- -----
Profit after tax of discontinued operation 84
Profit on disposal of discontinued operation
(non-underlying) 12.2 2,519
---- -----
Profit from discontinued operation 2,603
---- -----
Other comprehensive income
Recycled from hedging reserve on disposal 17
Net losses from debt instruments held at
FVOCI (10)
Foreign exchange losses on translation in
the period (53)
Cumulative foreign exchange adjustments
recycled on disposal (62)
Tax on items in other comprehensive income 3
---- -----
Other comprehensive loss from discontinued
operations (105)
---- -----
Total comprehensive income from discontinued
operations 2,498
----
12.2 Profit on disposal of discontinued
operations, after tax
---- -----
2022 2021
Borsa
Italiana
BETA group
GBPm GBPm
-----
Proceeds from disposal 903 3,876
Carrying value of cash disposed - (284)
----
Proceeds from disposal, net of cash disposed 903 3,592
Carrying value of net assets disposed, excluding
cash (241) (1,129)
Non-controlling interests disposed - 65
Transaction costs (44) (46)
Other expenses - (8)
----
Profit on disposal of discontinued operations,
before tax and recycling of reserves 618 2,474
Recycling of cumulative foreign exchange
translation reserve - 62
Recycling of amounts held in hedging reserve - (17)
Income tax on gain (164) -
----
Profit on disposal of discontinued operations,
after tax 454 2,519
----
12.3 Cash flows from discontinued operations
---- -----
2022 2021
GBPm GBPm
-----
Operating activities
BETA 37 87
Borsa Italiana group - 23
----
Net cash flows from operating activities 37 110
----
Investing activities
BETA (16) (30)
Borsa Italiana group - (2)
----
Net cash flows from investing activities (16) (32)
----
Financing activities
Borsa Italiana group - (6)
----
Net cash flows from financing activities - (6)
----
Foreign exchange translation (of cash and
cash equivalents) - (10)
----
Net increase in cash from discontinued
operations 21 62
----
13. Intangible assets
Significant accounting estimates and assumptions
Intangible assets and goodwill form a significant part of the
balance sheet and are key assets for the Group's businesses. See
note 11 for the significant accounting estimates of intangible
assets obtained through the purchase of subsidiaries.
Recoverable amounts of CGUs and intangible assets
The recoverable amounts of CGUs and intangible assets are based
on value-in-use calculations. The value-in-use calculations use
cash flow projections based on business plans prepared by
management for the three-year period ending 31 December 2025. These
use management's best estimate of future performance together with
estimates of the return required by investors, which is used to
determine an appropriate discount rate to derive the present
value.
Estimated useful economic lives
Intangible assets are amortised over their estimated useful
economic lives, being management's best estimate of the period over
which value from the intangible assets is realised. In determining
useful economic life, management considers a number of factors
including: customer attrition rates; product upgrade cycles for
software and technology assets; market participant perspectives of
brands; and pace of change of regulation.
Purchased intangible assets
Software,
Customer licences
and supplier Databases and intellectual Software
Goodwill(1) relationships Brands and content property and other Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------- -------------- ------ ------------ ----------------- ---------- -------
Cost
1 January 2021 2,402 1,847 953 - 569 1,260 7,031
Intangible assets
acquired on
acquisition
of subsidiaries 16,520 7,455 983 2,398 199 1,608 29,163
Additions - - - - - 642 642
Disposal of business
(re-presented)(1) (1,371) (692) (1) - (66) (181) (2,311)
Disposals and
write-off - - - - (1) (59) (60)
Foreign exchange
translation (42) 111 21 36 1 (38) 89
31 December 2021
(re-presented)(1) 17,509 8,721 1,956 2,434 702 3,232 34,554
Intangible assets
acquired on
acquisition
of subsidiaries 11.2 569 188 - 3 149 - 909
Additions(2) - - - - - 868 868
Disposal of business 12 - - (51) - - (174) (225)
Disposals and
write-off - - - - - (70) (70)
Foreign exchange
translation 1,781 1,016 208 297 52 273 3,627
31 December
2022 19,859 9,925 2,113 2,734 903 4,129 39,663
----------- -------------- ------ ------------ ----------------- ---------- -------
Accumulated amortisation
and impairment
1 January 2021 546 868 265 - 345 683 2,707
Amortisation
charge for the
year - 491 130 220 33 425 1,299
Impairment - - - - - 13 13
Disposal of business
(re-presented)(1) (498) (409) - - (58) (139) (1,104)
Disposals and
write-off - - - - (1) (43) (44)
Foreign exchange
translation (25) 6 3 4 (4) (25) (41)
31 December 2021
(re-presented)(1) 23 956 398 224 315 914 2,830
Amortisation
charge for the
year(3) - 590 150 232 41 587 1,600
Impairment(4) - - - - - 11 11
Disposal of business 12 - - (4) - - (31) (35)
Disposals and
write-off(5) - - - - - (70) (70)
Foreign exchange
translation 7 104 40 34 11 65 261
31 December
2022 30 1,650 584 490 367 1,476 4,597
----------- -------------- ------ ------------ ----------------- ---------- -------
Net book values(6)
31 December
2022 19,829 8,275 1,529 2,244 536 2,653 35,066
----------- -------------- ------ ------------ ----------------- ---------- -------
31 December 2021 17,486 7,765 1,558 2,210 387 2,318 31,724
1 The prior year comparatives for cost and accumulated impairment of
goodwill have both been re-presented by a reduction of GBP444 million
to reflect the correct gross disposal of goodwill cost and accumulated
impairment related to Borsa Italiana group. There is no impact on the
net book value.
2 During the year, consideration for additions comprised GBP787 million
(2021: GBP611 million) in cash, nil (2021: GBP2 million) of leased
assets and GBP81 million (2021: GBP29 million) in accruals. During
the year, the Group:
-- recognised additions of nil (2021: GBP2 million) as right-of-use
assets, with a right-of-use assets amortisation charge of nil (2021:
GBP6 million)
-- capitalised sales commissions paid to employees (contract costs)
of GBP40 million (2021: GBP46 million).
3 Includes non-underlying amortisation of intangible assets of GBP1,044
million (2021: GBP851 million). Includes amortisation of GBP8 million
related to discontinued operations (2021: GBP25 million).
4 Following a review of software assets in the year the Group recognised
an GBP11 million impairment charge (2021: GBP13 million) in relation
to assets with a recoverable amount less than the carrying value.
5 During the year the Group recognised disposals and write-offs of
assets which are no longer in use of GBP70 million with nil net book
value (2021: GBP60 million with GBP16 million net book value).
6 The GBP2,653 million (2021: GBP2,318 million) net book value of software
and other intangibles, includes GBP647 million (2021: GBP447 million)
of assets not yet brought into use. No amortisation has been charged
on these assets and instead they are tested for impairment annually.
At 31 December 2022, software and other net book value includes contract
costs of GBP75 million (2021: GBP71 million).
Goodwill
Carrying value of goodwill allocated to each of the Group's CGUs and
annual impairment test
Goodwill is allocated to and monitored by management at the level of
the Group's four CGUs as set out below:
Net book value
of goodwill
2022 2021
GBPm GBPm
Data & Analytics(1) 14,414 12,771
Capital Markets, excluding Tradeweb 2 2
Tradeweb(1) 5,152 4,594
Post Trade(1) 261 119
19,829 17,486
1 Goodwill allocated to the Data & Analytics, Tradeweb and
Post Trade CGUs include foreign exchange translation during the
year of GBP1,209 million, GBP558 million and GBP7 million,
respectively. The increase also reflects the acquisitions (see note
11).
Goodwill as at 31 December 2022 was tested for impairment. For
each CGU, the estimated recoverable amount is higher than its
carrying value (being the net book value as at 31 December 2022)
and therefore no impairment was identified or recognised.
14. Borrowings and net debt
14.1 Borrowings
Group
2022 2021
GBPm GBPm
Non-current
Bank borrowings - committed bank facilities and term
loans(1) (5) 1,347
Bonds 6,860 6,306
Trade finance loans 1 1
Total non-current borrowings 6,856 7,654
Current
Bank borrowings - term loan 1,295 -
Total current borrowings 1,295 -
Total borrowings 8,151 7,654
1 Balances are shown net of capitalised arrangement fees. Where
there are no amounts borrowed on a particular facility, this gives
rise to a negative balance.
The Group has the following committed bank facilities, loans and unsecured
bonds:
Carrying value
Maturity Facility/ Interest
date bond 2022 2021 rate
GBPm GBPm GBPm %
Committed bank facilities
Multi-currency revolving credit
facility Dec 2024 1,425 (2) (3) see note(2)
Multi-currency revolving credit
facility Dec 2027 1,075 (3) (3) see note(2)
Total committed bank facilities(1) 2,500 (5) (6)
Committed term loans
EURIBOR +
EUR500 million term loan Dec 2023 - 126 0.725
$2,000 million term loan Dec 2023 1,295 1,227 see note(2)
Total committed term loans 1,295 1,353
Bonds
$500 million bond, issued April
2021 Apr 2024 416 415 369 0.650
EUR500 million bond, issued September
2017 Sep 2024 444 443 419 0.875
EUR500 million bond, issued April
2021 Apr 2025 444 443 419 -
$1,000 million bond, issued April
2021 Apr 2026 831 828 738 1.375
EUR500 million bond, issued December
2018 Dec 2027 444 441 417 1.750
EUR500 million bond, issued April
2021 Apr 2028 444 441 417 0.250
$1,000 million bond, issued April
2021 Apr 2028 831 828 737 2.000
EUR500 million bond, issued September
2017 Sep 2029 444 441 417 1.750
GBP500 million bond, issued April
2021 Apr 2030 500 494 493 1.625
$1,250 million bond, issued April
2021 Apr 2031 1,039 1,033 919 2.500
EUR500 million bond, issued April
2021 Apr 2033 444 438 413 0.750
$750 million bond, issued April
2021 Apr 2041 623 615 548 3.200
Total bonds 6,904 6,860 6,306
Trade finance loans Nov 2025 1 1 7.274
Total committed facilities, loans
and unsecured bonds 8,151 7,654
1 Negative balances represent the value of unamortised arrangement
fees
2 As part of the IBOR Reform, a Credit Adjustment Spread (CAS) has
been applied where US dollar and sterling LIBOR rates were replaced
with SOFR and SONIA rates respectively in the bank facilities. The
CAS is variable and depends on the tenor and currency of the borrowings
Committed bank facilities : Multi-currency revolving credit
facilities
In December 2020, the Group arranged a GBP1,075 million
syndicated committed facility maturing in December 2025, which
replaced a former GBP600 million facility. In December 2022, the
second of two 1-year extension options was taken up (first option
exercised in December 2021), extending the maturity to December
2027. The Group continues to have access to a GBP1,425 million
Revolving Credit Facility, which became effective in January 2021
and matures in December 2024. The revolving credit facilities were
drawn down during the year and fully repaid as at 31 December
2022.
Committed term loans
The term loans were fully drawn in January 2021. During the year
the Euro term loan was fully repaid and the US Dollar term loan was
partly repaid by US$100 million (2021: repayments of EUR350 million
and US$340 million, respectively). The increase in the carrying
value of the US Dollar term loan compared with last year reflects
the impact of foreign exchange movements.
Commercial paper
During the year the Group maintained its Euro Commercial Paper
Programme limit of GBP1 billion and entered into a US Commercial
Paper Programme with a limit of $1 billion. There were no
outstanding issuances at 31 December 2022 and 31 December 2021.
Other Group facilities
In accordance with the Committee on Payments and Market
Infrastructures, the International Organisation of Securities
Commissions and Principles for Financial Market Infrastructures,
many central banks allow CCPs to apply for access to certain
central bank facilities. LCH SA has a French banking licence and is
able to access financing at the French Central Bank and at the
European Central Bank to support its liquidity position. LCH Ltd is
deemed to have sufficient fungible liquid assets to maintain an
appropriate liquidity position and has direct access to central
bank facilities to support its liquidity risk management in
accordance with the requirements under European Market
Infrastructure Regulation.
In addition, a number of Group entities have access to
uncommitted operational, money market and overdraft facilities
which support post trade activities and day-to-day liquidity
requirements. These facilities were drawn down during the year and
fully repaid as at 31 December 2022.
14.2 Net debt
Net debt comprises cash and cash equivalents less lease liabilities
and interest-bearing loans and borrowings, adjusted for derivative
financial instruments.
Group
2022 2021
Note GBPm GBPm
Current
Cash and cash equivalents 3,209 2,665
Bank borrowings 14.1 (1,295) -
Lease liabilities (139) (168)
Derivative financial assets 36 25
Derivative financial liabilities (9) (7)
Total due within one year 1,802 2,515
Non-current
Bank borrowings 14.1 5 (1,347)
Bonds 14.1 (6,860) (6,306)
Trade finance loans 14.1 (1) (1)
Lease liabilities (533) (547)
Derivative financial assets 12 2
Derivative financial liabilities (87) (45)
Total due after one year (7,464) (8,244)
Net debt (5,662) (5,729)
15. Financial assets and financial liabilities
15.1 Financial assets
Group
Amortised
cost FVOCI FVPL Total
31 December 2022 GBPm GBPm GBPm GBPm
Clearing business financial assets(1)
- Clearing member trading assets 1,997 - 661,370 663,367
- Other receivables from clearing members 5,945 - - 5,945
- Other financial assets(2) - 18,415 - 18,415
- Clearing member cash and cash equivalents(2) 104,707 - - 104,707
Total clearing member assets 112,649 18,415 661,370 792,434
Trade and other receivables 1,344 - 12 1,356
Cash and cash equivalents 3,209 - - 3,209
Investments in financial assets - debt
instruments - 226 - 226
Investments in financial assets - equity
instruments - 394 - 394
Derivative financial instruments - - 48 48
Total financial assets 117,202 19,035 661,430 797,667
1 At 31 December 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 (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
year and none of the assets are past due (2021: nil).
2 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). Other financial assets represent the CCP
investment in government bonds.
Group
Amortised
cost FVOCI FVPL Total
31 December 2021 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
Total clearing member assets 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
15.2 Financial liabilities
Group
Amortised
cost FVPL Total
31 December 2022 GBPm GBPm GBPm
Clearing business financial
liabilities
- Clearing member trading
liabilities 1,997 661,370 663,367
- Other payables to
clearing members 129,227 - 129,227
Total clearing member
financial liabilities 131,224 661,370 792,594
Trade and other payables 3,211 38 3,249
Borrowings 8,151 - 8,151
Derivative financial
instruments - 96 96
Total financial liabilities 142,586 661,504 804,090
Group
Amortised
cost FVPL Total
31 December 2021 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
Total clearing member
financial liabilities 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
16. Share capital, share premium and other reserves
Ordinary share capital issued and fully paid
Ordinary
Number share Share
of shares capital(1) premium(2) Total
millions GBPm GBPm GBPm
----------- ------------ ----------- ------------ ------
1 January 2021 351 24 971 995
Acquisition of subsidiaries 204 15 - 15
Issue of shares to
the Employee Benefit
Trust(3) 2 - 7 7
31 December 2021 557 39 978 1,017
Issue of shares to
the Employee Benefit
Trust(3) 1 - - -
Share buyback(4) (4) - - -
31 December 2022 554 39 978 1,017
----------- ----------- ------------ ----------- ------------ ------
1 Ordinary share capital consists of ordinary shares of 6 (79/86) pence
2 Share premium is the amount subscribed for share capital in excess
of par value
3 The Board approved the allotment and issue of 883,174 ordinary shares
at par to the EBT (2021: 1,368,896 ordinary shares at par and 177,894
at a weighted average price of GBP35.74) to settle employee share plans.
A share premium of nil (2021: GBP7 million) has been recognised in
the year in respect of these.
4 At 31 December 2022, the Group held 3,797,344 (2021: nil) treasury
shares which were acquired as part its of its share buyback programme
Share buyback programme
In August 2022, the Company launched a GBP750 million share buyback
programme which will be phased over multiple tranches over a 12 month
period. During the year, the Company repurchased 3.8 million of its
own shares from the market for GBP300 million, which are being held
as treasury shares. Total costs directly attributable to the share
buyback programme was GBP3 million. The consideration paid and costs
incurred have been deducted from retained earnings.
The Company entered into an irrevocable commitment with its corporate
brokers to repurchase shares as part of tranche two of the programme,
which in part covers the close period from 1 January 2023 up to the
announcement of the Group's full year results. At 31 December 2022,
the remaining obligation in relation to the share purchase was GBP200
million and is presented within trade and other payables. See note
18 for shares repurchased after the reporting date.
Other reserves
Foreign
Merger Capital Reverse exchange
relief redemption acquisition Hedging translation
reserve(1) reserve(2) reserve(3) reserve(4) reserve(5) Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------- ----------- ------------ ----------- ------------ ------
1 January 2021 1,305 514 (512) (110) 608 1,805
Acquisition of subsidiaries 16,981 - - - - 16,981
Amounts recycled on
disposal - - - 17 (62) (45)
Foreign exchange differences
on translation of
foreign operations - - - - (41) (41)
Amount recycled to
income statement - - - (2) - (2)
Changes in fair value
recognised - - - 109 - 109
----------- ----------- ------------ ----------- ------------ ------
31 December 2021 18,286 514 (512) 14 505 18,807
Foreign exchange differences
on translation of
foreign operations - - - - 2,448 2,448
Amount recycled to
income statement - - - (3) - (3)
Changes in fair value
recognised - - - (113) - (113)
31 December 2022 18,286 514 (512) (102) 2,953 21,139
----------- ----------- ------------ ----------- ------------ ------
1 The merger relief reserve is a potentially distributable
reserve arising as a result of shares issued to acquire
subsidiaries. The Group applied merger relief, as required by
section 612 of the Companies Act 2006, to the issue of shares by
the Company to acquire Refinitiv. The Group acquired a 100% equity
holding in Refinitiv and recognised the excess of the fair value
above the nominal share capital issued in the merger relief reserve
and retained earnings.
2 The capital redemption reserve was set up as a result of a
court approved capital reduction scheme and is
non-distributable.
3 The reverse acquisition reserve arose as a result of the
acquisition of London Stock Exchange Plc in 2007. It is recognised
on consolidation as a result of a capital reduction scheme and is
non-distributable.
4 The hedging reserve represents the cumulative fair value
adjustments recognised in respect of net investment and cash flow
hedges entered into in accordance with hedge accounting principles.
It is distributable under certain circumstances. Net gains and
losses are recognised in other comprehensive income and balances
remain in equity until both the hedging instrument and the
underlying instrument are derecognised. Gains realised on cash flow
hedges during the year are amortised through the income statement
over the life of the underlying instrument. During the year GBP3
million (2021: GBP2 million) was recycled back through the income
statement.
5 The foreign exchange translation reserve records the
cumulative impact of foreign exchange rate movements on the
translation of non-sterling subsidiary companies into sterling. It
is distributable under certain circumstances. Net gains and losses
on translation are recognised in other comprehensive income and
amounts remain in equity until the subsidiary is derecognised.
17. Commitments and contingencies
The Group has the following contracts in place for future
expenditure which are not provided for in the consolidated
financial statements:
Contract Description Minimum commitment
Agreement with Reuters News, entered To receive news and editorial content Minimum CPI adjusted payment, which
into in 2018, for a 30-year term was US$360 million for 2022
10-year strategic partnership with To architect LSEG's data Minimum cloud-related spend of US$2.8
Microsoft infrastructure using the Microsoft billion over the term of the
Cloud, and to jointly develop partnership
new products and services for data and
analytics
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 some 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.
18. Events after the reporting period
Acadia acquisition
On 19 December 2022, LSEG announced it has agreed to acquire
Acadia Soft, Inc. (Acadia) a leading provider of automated
uncleared margin processing and integrated risk and optimisation
services for the global derivatives community. Acadia provides risk
management, margining and collateral services to global financial
institutions for the uncleared derivatives markets. Acadia's risk
and margining products span all OTC derivative asset classes and
provide direct connectivity to over 2,000 market participants.
LSEG has held a minority stake in Acadia since 2018. Following
completion, Acadia will be part of LSEG's Post Trade division.
The purchase price consideration is $700 million (subject to
customary adjustments) and the acquisition is expected to close in
H1 2023, subject to regulatory approvals.
Share buyback programme
Since the reporting date, the Company repurchased 2.2 million of
its own shares from the market for GBP159 million which are being
held as treasury shares.
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