London Stock Exchange Group plc · LSE:LSEG
London Stock Exchange — FY2014 Earnings Presentation
39 slides from London Stock Exchange's earnings presentation, Mar 5, 2015
Slide 1: London Stock Exchange Group plc Preliminary results 2014
London Stock Exchange Group plc Preliminary results – period ended 31 December 2014 5 March 2015 Page 1 London Stock Exchange Group
Slide 2: Agenda
Agenda Introduction Financial Review David Warren, Chief Financial Officer CEO Overview Xavier Rolet, Chief Executive Q&A London Stock Exchange Group Page 2
Slide 3: David Warren
David Warren London Stock Exchange Group Page 3
Slide 4: Key financial highlights
Key financial highlights • Strong financial performance, on a 12 month basis: • revenue up 32% • organic and acquisitions both delivering • organic revenue up 12% - growth across each business area • adjusted total income up 26% • continued focus on cost control, expenses on organic basis up 5%1 • a
Slide 5: Overview of results
Overview of results Twelve months ended1 Organic and 31 December constant currency 2014 2013 Change variance £m £m % % Revenue 1,283.2 974.0 32% 12% 2 Adjusted total income 1,381.1 1,096.4 26% 7% Profit from JV / associates 0.1 - Adjusted operating expenses2 (823.2) (616.5) 34% 5% Adjusted operating
Slide 6: Income growth
Income growth Strategy delivering – both organically and from acquisitions London Stock Exchange Group Page 6
Slide 7: Capital Markets - Primary
Capital Markets - Primary Revenue up 15%; up 14% at constant currency Annual fee revenue up 10% Admission fee revenues up 20% • 219 new issues, up 30% (169) • highest since 2007 • UK Main Markets: 75 - up 47% • UK AIM: 118 - up 18% • Italy: 26 - up 44% • £42.6bn raised via equity issuance, up 40% (£
Slide 8: Capital Markets - Secondary
Capital Markets - Secondary Revenue up 12%; up 12% at organic and constant currency • UK equities Average Daily Value (ADV) up 15% • Turquoise equities ADV up 42% • Italy equities average daily number of trades up 16% • Derivatives volumes unchanged • Fixed Income revenue up 20%; up 12% at organic a
Slide 9: Post Trade Services – CC&G and MT
Post Trade Services – CC&G and MT Revenue down 2%; up 3% at constant currency (excl NTI), Income down 14% CC&G Clearing revenues up 1% • Clearing volumes up 18% Monte Titoli Settlement revenues up 9% • Settlement instructions up 14% Custody revenues up 2% • Assets under Custody up 2% to €3.35 trilli
Slide 10: Post Trade Services - LCH.Clearnet
Post Trade Services - LCH.Clearnet Adjusted Income up 23% at organic and constant currency OTC revenue up 34% SwapClear: • $642 trillion notional cleared (up 26%) • 114 members (103) Non-OTC clearing revenue up 8% Volumes: • Fixed Income up 1% • Commodity unchanged • Equity up 30% • Listed derivativ
Slide 11: Information Services
Information Services Revenue up 10%; up 8% on organic and constant currency FTSE revenue up 14%; • ETF AUM benchmarked up 16% to $216bn (2013: $186bn) • FTSE China Indices AUM benchmarked grew to $24bn Russell Indexes acquired 3 December 2014, revenue £10.0m • ETF AUM benchmarked up 19% to $153bn (2
Slide 12: Technology Services
Technology Services Revenue up 6%; up 11% on organic and constant currency MillenniumIT revenues up 1%; up 8% constant currency • Aequitas Innovations Inc selects suite of MillenniumIT products to power new exchange in Canada • MillenniumIT to provide a suite of capital markets technology to Casabla
Slide 13: Russell Investment Management
Russell Investment Management • High quality, solutions-based investment management • Revenue shown gross • £79.7m for December 2014 (since acquisition date) • £80.4m monthly run-rate last 6 months1 (H1 £77.9m) • Assets under management • $273 bn (31 Dec 2013: $257 bn) • Continued focus on client se
Slide 14: LCH.Clearnet
LCH.Clearnet • Increased cost synergy target successfully reached • €45m achieved programme to date, with €30m achieved in 2014 • Costs to achieve synergies of €38m • €60m full run-rate will be delivered in 2015: • Staffing reduced by almost 200 - including contractors • Consolidation of property an
Slide 15: Good control of operating expenses
Good control of operating expenses • Organic costs up 5% include: • Change to LCH.Clearnet OTC service arrangements • Cost of sales and project spend Note: Excluding amortisation of purchased intangibles and non-recurring items. London Stock Exchange Group Page 15
Slide 16: Summarised cash flow
Summarised cash flow Good cash generation £ million • £84m capex – mainly technology upgrades, new projects and integration of LCH • Discretionary free cash flow after investment activities remains strong at 79.5p per share1 (FY 2014 : 89.5p) 1 Based on weighted average shares in issue for the perio
Slide 17: Borrowings
Borrowings Facilities • Operating net debt £1,587m (£1,023m 30 June 2014) • Net debt: Pro forma EBITDA 2.1x (excluding £1bn restricted cash) • Committed undrawn credit lines available for Group purposes at 31 December 2014 Leverage totalled £0.5 billion, extending out to 2018 Ratings: • LSEG: S&P BB
Slide 18: Capital allocation
Capital allocation Current considerations: • Leverage / debt position • Long term range 1.0x – 2.0x net debt : EBITDA • Under 2.0x within 12 months of completion of Russell acquisition • Investment opportunities • Capex for organic developments, plus flexibility for inorganic opportunities • Ordinar
Slide 19: Xavier Rolet
Xavier Rolet London Stock Exchange Group Page 19
Slide 20: Strategy delivering strong results
Strategy delivering strong results • Delivering organic and inorganic growth as we develop global leadership positions • Successful geographic and product diversification strategy - expanded footprint established in US • Valuable international franchise: • Indices – FTSE and Russell • Post Trade - L
Slide 21: Developing organically and through M&A
Developing organically and through M&A • Resilient and interconnected markets infrastructure business • All parts of Group delivering growth • Broad spread of international businesses Enlarged Group Adjusted Total Income FY 2009: £671.4m CY 2014: £1,381.1m Chart excludes Russell Investment Managemen
Slide 22: Diversified income by currency
Diversified income by currency CY 2014 Total income including Frank Russell Company (pro forma) Page 22
Slide 23: FTSE – strong track record of achievement
FTSE – strong track record of achievement • Acquired the remaining 50% of FTSE in December 2011 • Delivered strong revenue growth from 2011 to 2014 - CAGR of 16% • Achieved target £28m cost and revenue synergies. • Exceeded our WACC in year 2 (one year ahead of schedule) and return on invested capit
Slide 24: FTSE/Russell - creating a global leader in indices
FTSE/Russell - creating a global leader in indices • Opportunities to drive growth: • Cost synergies underway • Revenue synergies - cross selling and extended product range • Strong international market positions – well placed for growth in passive and smart beta strategies • Integration of indices
Slide 25: CBOE to list FTSE and Russell index options in the US
CBOE to list FTSE and Russell index options in the US Russell 2000 Index Options ADV (contracts) • CBOE to trade the highly liquid Russell 2000 index 100,000 options after a competitive tender process 90,000 80,000 87,800 86,400 • Agreement also licenses CBOE to list and trade 70,000 71,126 74,951 6
Slide 26: LCH.Clearnet – building global positions
LCH.Clearnet – building global positions • Well placed in evolving regulatory landscape • Leveraging new opportunities in FX, Repo, equities and derivatives • Positioning to be global leader in portfolio margining LCH.Clearnet to launch new, open access portfolio margining tool for users • Maximise
Slide 27: Portfolio margining – LCH covers entire curve
Portfolio margining – LCH covers entire curve The global rates market has a variety of products to access interest rate exposures Some or all of these products potentially provide margin offset Key rates products to hedge interest rate risk or speculate on rates DSFs SwapClear OTC Rate Derivativ
Slide 28: SwapClear – Clearing more, compressing more
SwapClear – Clearing more, compressing more Compression reduces notional and trade count with the 2014 Highlights: following benefits : • Record year for cleared swap volume on SwapClear • Reduced leverage ratio and capital requirements for members • $64 trn reduction in total notional outstanding.
Slide 29: Innovation – leveraging Group's enhanced product and geographic range
Innovation – leveraging Group’s enhanced product and geographic range Fixed Income offering, consistent with open-access principles: • Listing • Trading in Europe and US (MTS, MOT, ORB, EuroTLX, Bonds.Com) • Clearing – CC&G and LCH.Clearnet RepoClear • Indices – FTSE TMX Global Debt Capital Markets
Slide 30: Outlook
Outlook • Strong financial performance • Delivering organic and inorganic growth as we develop global leadership positions • Leveraging opportunities from Group’s enhanced scale and scope • Focus on integration of Russell and FTSE indices to achieve synergies • Continued product innovation e.g. Comp
Slide 31: Appendices
Appendices London Stock Exchange Group Page 31
Slide 32: Notes
Notes Adjusted operating profit - excludes amortisation of purchased intangible assets, non-recurring items and unrealised gains/losses at LCH.Clearnet, to enable comparison of the underlying earnings of the business with prior periods. Adjusted earnings per share Based on number of shares 317.1m (C
Slide 33: Operating expenses
Operating expenses Cost : Income ratio 60% (CY 2013 56%) Excluding amortisation of purchased intangibles and non-recurring items Note: Minor rounding differences, figures may not cast down London Stock Exchange Group Page 33
Slide 34: Key performance indicators
Key performance indicators Capital Markets - Primary Markets Capital Markets - Secondary Markets Twelve months ended Twelve months ended 31 December Variance 2014 2013 % 31 December Variance Equity 2014 2013 % New Issues 75 51 Totals for period UK Main Market, PSM & SFM 47% UK AIM 118 100 18% UK val
Slide 35: Key performance indicators
Key performance indicators Post Trade Services - CC&G and Monte Titoli Post Trade Services - LCH.Clearnet Twelve months ended Twelve months ended 31 December Variance 31 December Variance 2014 2013 % 2014 2013 % CC&G Clearing (m) Equity clearing (no of trades) 69.7 60.0 16% OTC derivatives Derivativ
Slide 36: Revenues - Quarterly
Revenues - Quarterly CY 2013 CY 2014 £ millions Q1 Q2 Q3 Q4 CY 2013 Q1 Q2 Q3 Q4 CY 2014 Annual Fees 9.7 10.0 10.3 10.2 40.2 10.7 11.0 11.3 11.2 44.2 Admission Fees 7.3 9.5 7.6 12.8 37.2 10.0 14.3 8.8 11.5 44.6 Cash equities UK & Turquoise 23.3 24.2 22.2 21.7 91.4 26.4 24.5 23.8 26.5 101.2 Cash equit
Slide 37: Revenues – Quarterly (continued)
Revenues – Quarterly (continued) CY 2013 CY 2014 £ millions Q1 Q2 Q3 Q4 CY 2013 Q1 Q2 Q3 Q4 CY 2014 FTSE 36.4 41.7 42.2 44.2 164.5 45.9 44.4 48.3 48.2 186.8 Russell Indexes - - - - - - - - 10.0 10.0 Real time data 26.9 22.4 22.2 23.0 94.5 23.3 21.3 21.3 18.4 84.3 Other information 19.4 19.8 20.1 21.
Slide 38: Contacts
Contacts Paul Froud Tom Woodley Head of Investor Relations Investor Relations Manager Tel: +44 (0)207 797 1186 Tel: +44 (0)207 797 1293 email: [email protected] email: [email protected] London Stock Exchange Group plc 10 Paternoster Square London EC4M 7LS For information on the Group: www.lseg.com Lon
Slide 39: Disclaimer
No representation or warranty, expressed or implied, is made or given by or on behalf of London Stock Exchange Group plc (the “Company”) or any of its directors or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation and no respo
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