London Stock Exchange Group Plc - Trading Statement
· Good overall Q1 income performance against challenging market backdrop
· Q1 total income up 5% year-on-year to £546 million
· Group continues to develop and invest for growth, with the acquisition of minority stake in Euroclear and launch of new services in Post Trade and Information Services
· Information Services: revenues up 6% to £214 million - with 7% growth at FTSE Russell. Growth in index subscriptions remained strong while FTSE Russell asset-based revenues reduced due to reduction in AuM at the end of 2018 (which impacted on revenue in the first part of Q1 2019); asset-based revenue in Q2 is expected to be stronger
· Post Trade - LCH: income up 17% to £182 million, with 16% revenue growth in OTC following record volumes at SwapClear and no discernible change to customers' use of the service as equivalence secured in event of hard Brexit; LCH benefited from an updated SwapClear agreement with partner banks, with effect from the start of the year, estimated to deliver c.£30 million savings to cost of sales in 2019
· Post Trade - Italy: income down 4% to £36 million as equity markets experienced a slow first quarter; after adjusting for the treatment of T2S costs, gross profit increased 3%
· Capital Markets: revenues down 9% to £97 million, mostly reflecting lower equity trading volumes
· Technology Services: revenues up 9% to £14 million
David Schwimmer, CEO said:
"We continue to execute our strategy across our core businesses of Information Services, Post Trade and Capital Markets. In Post Trade, we acquired a stake in Euroclear, which shares our open access approach, and we updated our SwapClear agreement, which will deliver significant savings as we further develop the service.
"We are investing in and growing our Information Services business, including developing our multi-asset and data and analytics offering. While equity markets were slower due to macroeconomic uncertainty, we have seen an improved listing environment in Q2.
"The Group is strategically well positioned to develop its growth opportunities further in the evolving macroeconomic landscape."
New product development and investment in opportunities continued across the business:
- Group acquired a 4.9% stake in Euroclear with a seat on the Board, which will help strengthen the existing commercial relationships between the businesses
- LCH RepoClear members successfully consolidated European debt clearing activity in LCH SA, benefitting from T2S efficiencies
- SwapClear Non-Deliverable IRS Clearing expanded to include 5 new LatAm and Asia-Pacific currencies
- Dutch pension fund Pensioenfonds Detailhandel selected a custom FTSE Russell ESG benchmark as the basis of a new €6bn developed market passive equity mandate managed by BlackRock
- FTSE Russell launched a new Multi-Asset Composite Index Series - a wide range of indexes across major asset classes covering global, regional and emerging markets
- In early April, Network International, a Middle Eastern payments company, raised £1.1 billlion on London Stock Exchange plc; and Nexi, a major Italian payments company listed on Borsa Italiana, raising $2.6 billion, the largest IPO year to date globally
- Acquisition of minority stake in Nivaura, partnering with them to support capital markets innovation through use of emerging technologies
The Group's financial position remains strong and is broadly unchanged from that reported for 31 December 2018. As at 31 March 2019, having funded the purchase of a 4.9% stake in Euroclear, the Group had committed facility headroom of over £750 million available for general corporate purposes.
S&P maintains a positive outlook over its A- long term rating of LSEG, while Moody's rates LSEG A3 with a stable outlook.
The euro weakened by 2% and the US dollar strengthened by 6% against sterling compared with the same period last year. To illustrate our exposure to movements in exchange rates, a €0.05 change up or down in the average euro:sterling rate would have resulted in a corresponding change to continuing operations total income of c.£7 million for Q1, while a US$0.05 move would have resulted in a c.£6 million change.