London Stock Exchange Group – Preliminary Results 2021

London Stock Exchange Group plc

Preliminary results for the year ended 31 December 2021

This release contains revenues, costs, earnings and key performance indicators (KPIs) for the year ended 31 December 2021 (FY). All figures quoted in this release are on an underlying basis.  Figures are stated on both a statutory and pro-forma basis for FY 2021 and FY 2020. Pro-forma figures assume that the acquisition of Refinitiv took place on 1 January 2020. All pro-forma and statutory figures exclude the financial contribution from Borsa Italiana which was divested within the period and classed as a discontinued business in both periods. Constant currency variance is calculated on the basis of consistent FX rates applied across the current and prior year period, the conversions have been made from the transactional values, which will eliminate any transactional and translational movements along with any related accounting adjustments. Organic variances have been removed from our disclosure due to the large variances associated with the acquisition of Refinitiv.

David Schwimmer, CEO said:

“LSEG has delivered a successful first year after completion of the Refinitiv acquisition.  We have produced a strong financial performance, have met or are ahead of all targets and have good momentum into 2022.

“All of our businesses produced good results and are well positioned in markets demonstrating strong growth.  Our clear focus on customer service and innovative solutions improved Data & Analytics' performance.  Our Capital Markets and Post Trade businesses also delivered good growth.  We are building a more scalable and efficient business, creating a platform for further growth and delivering the benefits of an interconnected global company.'

“We are in a strong financial position, with a business model based on high-quality, recurring revenues that generates considerable and predictable cashflows. We have brought our leverage to within our target range a year ahead of schedule and will continue with disciplined deployment of capital to create further shareholder value. We remain focused on our strategic priorities for the benefit of our customers and our shareholders.”

Pro-forma results – Strong financial and operational performance across all businesses

Note: Unless otherwise stated, variances refer to growth rates on a pro-forma constant currency basis, excluding the impact of a deferred revenue accounting adjustment³, to provide the best view of underlying performance

• Strong revenue growth across all divisions driving 6.1% constant currency total income³ growth – £6,811 million (2020: £6,767 million) – on course to achieve the 5-7% 2020-23 CAGR target
• Data & Analytics accelerated growth to 5.3% (2020: 2.5%), with >90% of revenues from highly recurring subscriptions; annual subscription value (ASV) growth of 4.6% at end of 2021, up from 4.0% at Q3, signalling strong revenue momentum for 2022
• Capital Markets grew 12.5% driven by strong growth at Tradeweb and good performance across equities and FX venues
• Post Trade revenue grew 11.1% driven by strong performance in RepoClear and continued growth in OTC clearing; total income up 2.0% including Net Treasury Income (NTI)
• Good delivery of early run-rate revenue synergies, with c.25% of total synergy-related products launched in 2021. A similar proportion planned for this year, establishing strong foundations for synergy realisation in 2022 and beyond
• Adjusted operating expenses growth of 4.8% – guidance unchanged for low-single digit constant currency cost growth for 2022 and 2023
• Adjusted operating profit grew 8.5% reflecting strong top-line growth and good cost control
• Adjusted EBITDA up 8.3% to £3,283 million; adjusted EBITDA margin² of 48.2%; high confidence of further improvements to achieve >50% target by end of next year
• Long-term debt refinancing completed in H1 2021 – secured at historically low rates – with average cost of debt of 1.6%
• Proposed final dividend of 70 pence per share, a 27% increase in full year dividend to 95 pence per share, reflecting our strong performance in the year and confidence in our outlook
• Announced acquisition of Quantile, a fast-growing provider of portfolio, margin and capital optimisation and compression services for the global financial services market
• Since year end, announced the acquisition of TORA, a leading provider of trading technology solutions that supports customers trading multiple asset classes across global markets; will further strengthen our capabilities in the Trading & Banking data business
• We are closely monitoring the impact of the conflict in Ukraine, with our immediate focus being the safety of our people.  We are actively engaging with regulators and authorities on all relevant sanctions and taking appropriate actions. LSEG's operations in Russia and Ukraine account for less than one per cent of total income

¹ Adjusted basic earnings per share (AEPS) variance is on a reported pro-forma basis, not constant currency

² Adjusted EBITDA margin is Adjusted EBITDA divided by Total Income (excl. Recoveries)

³ Excluding recoveries and the deferred revenue accounting impact. The deferred revenue impact is a one-time, non-cash, negative revenue impact resulting from the accounting treatment of deferred revenue within Refinitiv's accounts which have been re-evaluated upon acquisition by LSEG under purchase price accounting rules. The result of this accounting treatment is a £23m adjustment reducing revenue for H1 2021. The vast majority impacts the Data & Analytics business with a smaller impact applied to the FX venues business within Capital Markets. There were further immaterial impacts in subsequent periods within 2021. Further information is available in the “Accounting and modelling notes” section. Constant currency variance shows underlying financial performance, excluding currency impacts, by comparing the current and prior year period at consistent exchange rates.

Pro-forma results – Financial summary

Unless otherwise stated, all figures refer to continuing operations for the year ended 31 December 2021 (FY 2021). Comparative figures are for continuing operations for the year ended 31 December 2020 (FY 2020).

1  The pro-forma results assume that the acquisition of Refinitiv took place on 1 January 2020. The Borsa Italiana group was classified as a discontinued operation once the sale became highly probable on 13 January 2021 and therefore its profits and losses have been excluded from the Group's continuing operations for both years presented

2  Pro-forma variance is the difference between current and prior year on a pro-forma basis, using the average exchange rate for the respective period, therefore any changes in the exchange rates are also reflected in the variance along with business performance

3  Constant currency variance shows financial performance, excluding currency impacts, by comparing the current and prior year at consistent exchange rates

4  As a result of the acquisition of Refinitiv and the associated accounting rules, Refinitiv's deferred revenue balances were subject to a one-time haircut at the time of acquisition. This is a non-cash adjustment. The negative revenue impact was mostly in Q1 2021 at approximately £22 million, with an additional £1 million in Q2, £1 million in Q3 and £1 million in Q4. The impact is mostly in the Group's Data & Analytics division, with a much smaller impact on the Group's FX venues business in Capital Markets. There will be no impact in 2022. An adjusted variance, excluding the deferred revenue adjustment, has been presented to show underlying business growth on the prior year.

5  Before non-underlying items

6  Adjusted EBITDA margin is Adjusted EBITDA divided by Total Income (excl. Recoveries)

7  Weighted average number of shares used to calculate Adjusted basic earnings per share on a pro-forma underlying basis is 556 million