London Stock Exchange Group Plc · LSE:LSEG
London Stock Exchange — Investor Day (June 2017)
82 slides from London Stock Exchange's investor day presentation, Jun 12, 2017
Slide 1: Investor Update 12 June 2017
Investor Update 12 June 2017 Page 1
Slide 2: Welcome
Welcome Xavier Rolet Group CEO Page 2
Slide 3: Agenda
Agenda Topic Presenter Title Welcome Xavier Rolet CEO, LSEG Strategy Overview Mark Makepeace Group Director of Information Services, LSEG and CEO, FTSE Russell Information Services Caroline O’Shaughnessy Global Head, Sales & Marketing Waqas Samad CEO, Benchmarks, Fixed Income and Multi Assets Raffae
Slide 4: What you'll hear today
What you’ll hear today Group strategy Diversified range of businesses positions us well to meet an evolving macroeconomic and working well political landscape Information Services Further growth to come from FTSE Russell – The Yield Book and Mergent provide new opportunities to expand products, sale
Slide 5: Successful strategy executed across three key areas
Successful strategy executed across three key areas Diversified, resilient and international markets infrastructure business Unique Open Access model, working in close partnership with customers Intellectual Property Indexes, Data and Technology Capital Formation Primary and Secondary markets Risk a
Slide 6: An interconnected business
An interconnected business RNS UnaVista Real Time Data SEDOL Monte Titoli CC&G Selected LSEG business lines and areas of focus (1) Post completion of Citi Fixed Income Indices and The Yield Book London Stock Exchange Group Page 6
Slide 7: Proven strategy with increasing scale
Proven strategy with increasing scale c.4,000 employees based in 18 countries, delivering services worldwide $15tr FTSE Russell 115 Issuers on largest global index provider with c.$15tr in London Stock benchmarked Exchange operate in c.115 different AUM(1) 800+ Companies, countries advisers and inve
Slide 8: Long term growth
Long term growth diversification by business activity 2009–2016 Income CAGR 2016 Income by Segment 1657.1 1418.6 14% 1213.1 36% 36% Post Trade Information Services Services 852.9 814.8 671.4 674.9 628.3 22% 6% Capital Technology Markets Services & Other FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 CY20
Slide 9: Diversified by currency
Diversified by currency Diversification by both income and expenses across GBP, EUR and USD 2016 Income 2016 Expenses 40% 54% GBP GBP 35% 28% EUR EUR £1,657.1m £966.4m 20% 11% USD USD 5% 7% Other Other Continuing operations only, expenses include cost of sales London Stock Exchange Group Page 9
Slide 10: Strong growth across both ISD and LCH
Strong growth across both ISD and LCH Growth in Information Services driven by greater use 16% 2009-2016 Revenue of benchmarks, indexes, data CAGR 594.7 517.4 and analytics, smart beta, ETFs, 348.7 306.3 fixed income indexes and 207.5 169.3 171.8 218.9 new products and geographies FY2009 FY2010 FY20
Slide 11: MiFID II opportunities
MiFID II opportunities — MiFID II implementation from January 2018 — MiFID II mandates Open Access across financial markets infrastructure — Will promote greater competition, transparency and innovation through unbundling of services and fees — Transparency and consumer choice will create deeper poo
Slide 12: Euro-denominated IRS clearing
Euro-denominated IRS clearing SwapClear – clearing volumes SwapClear is a global service (May 2017) SwapClear directly licensed to clear in many jurisdictions including: EU, UK, US, Australia, 60% 12% Canada, Japan, Hong Kong and Switzerland USD GBP, CAD, Asian & Other 18 55 European 21% 7% Internat
Slide 13: LSEG well positioned
LSEG well positioned Operating clearing houses in multiple jurisdictions LSEG operates authorised clearing houses in the UK, US and Eurozone with global and domestic licences, operating within and across multiple jurisdictions around the world We are well positioned to — All CCPs EMIR authorised or
Slide 14: Further growth and enhanced returns
Further growth and enhanced returns FTSE Russell Double-digit growth to continue 2017-2019 Sustainable and attractive margins over the same period LCH OTC revenue growth to continue at double-digit 2017-2019 Accelerating EBITDA margin growth - approaching 50% by 2019 (2016: 35.6%) LSEG Operating exp
Slide 15: Information Services Division
Information Services Division Mark Makepeace Group Director of Information Services CEO, FTSE Russell Page 15
Slide 16: Agenda
Agenda Information Services Division (ISD) Overview Mark Makepeace, Group Director of Information Services and CEO, FTSE Russell Index Growth and Future Opportunities Caroline O’Shaughnessy, Global Head of Sales & Marketing Fixed Income Opportunities, The Yield Book & Citi Indexes Waqas Samad, CEO B
Slide 17: Double-digit growth
Double-digit growth Sustainable margins £447m £595m CAGR of 18% LCH Information services Information Services revenue £368m CAGR of 18% from FY2013-2016 Capital Markets £1,657m £146m Organic & CC&G & Monte Titoli inorganic £88m Combination of organic & Technology inorganic growth drivers £12m Other
Slide 18: Diverse revenue mix
Diverse revenue mix Market tailwinds Exchange data & regulatory Benchmarks & analytics Data solutions reporting Real-time pricing data UnaVista Multi-asset data Reference data Citi Fixed Income Indexes Corporate events Underlying trends driving double-digit growth Increasing sophistication of Multi-
Slide 19: Index business has global scale
Index business has global scale Broad & deep opportunity set Total By asset class4 By client segment4 By investment strategy4 FTSE Russell 80% 55% 79% Equity Institutional Active ~$15tr Total assets 20% 45% 21% Fixed Income Other Passive benchmarked1 MSCI 100% 53% 85% ~ $11tr Equity Institutional Ac
Slide 20: FTSE Russell & The Yield Book
FTSE Russell & The Yield Book The largest multi-asset index company globally Consideration Synergies $107m $46m 2016 revenue 2016 EBITDA1 $685m $30m for the Yield Book and Citi Indexes Implied EV / 2016 EBITDA 3 year revenue synergies multiple of 14.9x $18m 3 year cost synergies EPS accretive in yea
Slide 21: FTSE Russell & Mergent
FTSE Russell & Mergent New index products & scalable data operations Mergent allows creation of new products for index clients and provides scalable data operations at low cost Multi-asset content and product for index and analytics business Creation of complementary data products for index users fr
Slide 22: Index Growth, Clients and Products
Index Growth, Clients and Products Caroline O’Shaughnessy Global Head of Sales & Marketing Page 22
Slide 23: Core client base driving growth
Core client base driving growth Global adoption of products & network effect Global relationships 97 / 100 48 / 50 Top 10 221m top asset managers of the largest US investment derivatives contracts plan sponsors banks traded on 15 exchanges globally in 2016 Embedded ~$15tr ~$500bn #1 #1 in the entire
Slide 24: High quality recurring revenue
High quality recurring revenue Range of clients & licensing models Clients Asset owners Stock Exchanges Investment & Actuarial Consultants Derivatives Exchanges Active Fund Managers Passive Fund Managers Investment Bankers & Brokers 1 2016 Revenue Split Recurring revenues 2 Asset linked FTSE Russell
Slide 25: Ability to commercialise trends
Ability to commercialise trends Index growth through deep client relationships Smart Beta Fixed Income and multi-asset Global institutional Global ETP AUM by AUM by asset class2 asset class3 $2tr+ AUM increase 54% 75% Smart Beta ETF AUM growth to 2025F1 Equity Equity $2,400bn 42% 18% Fixed income Fi
Slide 26: Fixed Income, The Yield Book & Citi Indexes
Fixed Income, The Yield Book & Citi Indexes Waqas Samad CEO Benchmarks, Fixed Income and Multi-Asset Page 26
Slide 27: The Yield Book
The Yield Book Accelerates FTSE Russell fixed income strategy Pre - 2000 2013 2014 2016 2017 FTSE UK FTSE TMX Bank of FTSE ASFA FTSE TMX LSEG LSEG to Gilts JV China (HK) Australia acquires acquires acquire The Offshore Bond Index MTS Indexes Mergent Yield Book RMB Bond Index Leading Adds Canadian Bu
Slide 28: Broadening client relationships
Broadening client relationships Complementary and synergistic offering Combined assets under management Clients — $107m revenue from analytics and index services in 2016 — 300 clients globally, including 200 fixed income asset managers and asset owners — Used by most leading US fixed income managers
Slide 29: A unique index company
A unique index company Diversified product range & global scale Combination of The Yield Book and Citi Fixed Income Indexes with FTSE Russell creates a unique multi-asset index company with ~$15tr AUM Deepen and extend Accelerate New fixed income and client base through commercialisation of multi-as
Slide 30: Summary
Summary Mark Makepeace Group Director of Information Services CEO, FTSE Russell Page 30
Slide 31: Successful track-record of value creation through acquisitions
Successful track-record of value creation through acquisitions 2011 2014 2016 2017 3 year synergy 3 year synergy target Leading provider of Accelerates data and targets achieved delivered ahead of proprietary fixed analytics offering, builds schedule income and global US and Asia presence and equity
Slide 32: Continued double-digit growth
Continued double-digit growth Attractive and sustainable margins FTSE Russell will continue to deliver high levels of top line growth through organic and inorganic strategies Positive secular Robust business Strategic focus & Proven execution trends + model + ambition + capability — Active to passiv
Slide 33: Capital Markets Division
Capital Markets Division Raffaele Jerusalmi Director of Capital Markets CEO, Borsa Italiana Page 33
Slide 34: Agenda
Agenda Growth Opportunities in Capital Markets Raffaele Jerusalmi Director of Capital Markets CEO, Borsa Italiana Opportunities for CurveGlobal Michael Davie Chairman, CurveGlobal London Stock Exchange Group Page 34
Slide 35: Leading primary and secondary markets
Leading primary and secondary markets Capital Markets has delivered growth across varied market conditions LSEG 2016 Total Income by segment Capital Markets Total Income: 2013 ‒ 2016 £368m £333m £330m £297m 113 105 98 92 £1,657m 165 139 144 127 £368m Capital Markets 91 77 89 89 CY 2013 CY 2014 CY 20
Slide 36: ELITE
ELITE Supporting private high growth SMEs ELITE is a programme that helps fast-growing private companies prepare and structure for further growth through sharing experiences, access to financing opportunities and education. ELITE Growth ELITE Connect ELITE Club Deal Catalyst for growth Connection to
Slide 37: Delivering MiFID II solutions
Delivering MiFID II solutions In partnership with customers MiFID II ready solutions – delivering innovative services providing choice and flexibility to customers Turquoise Plato Block Discovery™ Value Traded Selected Regulatory-Driven Client Solutions 3,500 Facilitating MiFID II compliant dark liq
Slide 38: Fixed Income
Fixed Income Opportunities for growth across multiple segments Significant presence across inter-dealer, dealer-to-client and retail trading segments. Positioned for growth as regulatory tailwinds and market participants increasingly support shift to electronic trading. LSEG Institutional & Retail F
Slide 39: CurveGlobal
CurveGlobal Michael Davie Chairman, CurveGlobal Page 39
Slide 40: Innovation in partnership with customers
Innovation in partnership with customers LSEDM — FCA regulated exchange — The largest Rates margin — Robust trading infrastructure pool and default fund and connectivity — 90%+ share of global cleared — Rates futures: EUR and GBP, OTC Rates(1) short-term and long-term — LCH Spider portfolio — Open a
Slide 41: Steady progress through early stage adoption
Steady progress through early stage adoption CurveGlobal Weekly Trading Volume & Open Interest 1.1% share of STIR 120,000 open interest (1) Contracts Contracts Traded 100,000 Traded (single sided) Open Interest 80,000 60,000 40,000 20,000 0 30 Sep 14 Oct 28 Oct 11 Nov 25 Nov 09 Dec 23 Dec 06 Jan 20
Slide 42: Further opportunities and drivers of growth
Further opportunities and drivers of growth — Could potentially enable material duration offset and “full curve” portfolio margining for some Portfolio customers margining for LTIR — Of particular interest to relative hedge fund community and their FCMs futures — Sea change when individual traders a
Slide 43: LCH Group
LCH Group Suneel Bakhshi CEO, LCH Group Page 43
Slide 44: Agenda
Agenda Introduction Suneel Bakhshi, CEO, LCH Group Rates and Credit Daniel Maguire, COO, LCH Group & Global Head of Rates & FX Derivatives ForexClear Paddy Boyle, Global Head of ForexClear RepoClear and Net Treasury Income Bruce Kellaway, Global Head of RepoClear, EquityClear & Collateral Driving gr
Slide 45: Uniquely positioned as a leading global clearing house
Uniquely positioned as a leading global clearing house — Customer driven business model, underpinned by our commitment to best in class risk management and open access, leading to innovation and unrivalled service adoption — Regulatory tailwinds support growth in our core business – aimed to attract
Slide 46: A growing contributor to LSEG financial performance
A growing contributor to LSEG financial performance LSEG 2016 Total Income by segment LCH Group Total Income: FY2014 – 2016 (1) £447m £389m 58 £361m 31 £322m 33 82 60 £1,657m 4 56 62 117 160 115 146 £447m LCH 191 138 157 110 £595m £368m £146m £88m £12m FY 2014 (March 14 2014 2015 2016 Information Ca
Slide 47: Rates & Credit
Rates & Credit Daniel Maguire COO, LCH Group Global Head of Rates & FX Derivatives Page 47
Slide 48: Delivering against growth opportunities
Delivering against growth opportunities We have delivered, or are on track to deliver, the revenue targets and key initiatives presented at the May 2015 Post Trade Investor Day Service Revenue Targets (1) Current Status Client clearing €30m - 40m p.a. Achieved in 2016 SwapClear Compression €10m - 15
Slide 49: SwapClear
SwapClear Continued global leadership in OTC rates clearing Future SwapClear Total Income Growth (€m) (1) Headline Statistics 2010 2016 Trend Number of clearing members 35 107 350m €315m Number of dealers 52 197 300m 44% 2010-2016 €253m Number of members offering client clearing 21 49 CAGR 250m Numb
Slide 50: SwapClear Client Clearing
SwapClear Client Clearing Significant increase in client volumes, notional cleared and revenue contribution across EMEA, North America and Asia Pacific, with further growth expected Headline Statistics 2014 2015 2016 Average Daily Client Trades Cleared Notional ($US tr) 122 93 139 5,000 4,534 Cleare
Slide 51: SwapClear compression services
SwapClear compression services Continuing to deliver significant value to members and clients Notional Compressed (USD tr) Notional Outstanding (USD tr) Cleared and Compressed Notionals (USD tr) 450 450 400 400 350 350 281 300 300 666 250 250 200 200 384 150 150 100 100 50 50 251 252 0 0 2013 2014 2
Slide 52: SwapClear Inflation Swaps
SwapClear Inflation Swaps Uncleared Margin Rules driving clearing volumes and benefits for members and clients Inflation Swap Volume (USD bn) 450 450 EUR GBP USD 397 400 400 335 350 350 300 265 300 220 231 231 250 250 189 200 171 170 200 150 150 100 100 43 33 30 30 50 50 0 0 May-16 Jun-16 Jul-16 Aug
Slide 53: CDSClear
CDSClear Clearing the broadest set of CDS across both European and US underlyings CDSClear – Share of Overall Indices (1) Performance 35% 31% 30% 25% 23% +160% 31% 20% 22% €449bn cleared in 2016, up Share of overall indices at 20% 18% 17% 160% versus 2015 31% in Q2 2017, up from 6% 15% 13% in Q2 201
Slide 54: LCH SwapAgent
LCH SwapAgent A new service developed with dealer support to simplify the processing, margining and settlement of uncleared derivatives Uncleared Service Comparison: LCH SwapAgent vs. Bilateral Service Adoption LCH Category Bilateral SwapAgent 14 dealers already committed, including: Standardised co
Slide 55: ForexClear
ForexClear Paddy Boyle Global Head of ForexClear Page 55
Slide 56: ForexClear – The FX Opportunity
ForexClear – The FX Opportunity Economic incentives increasingly driving FX products into scope for central clearing LCH well positioned to address capital and margin challenges within the vast $5.1tr daily FX market Average Daily Instrument Category LCH offering Turnover (1) NDFs $134bn Live today
Slide 57: A strong foundation in NDF clearing
A strong foundation in NDF clearing ... A step-change in volumes following the introduction of Uncleared Margin Rules, with scope for significant further growth ForexClear: Cleared Notional and Total Trades +600% +775% 1,000 140 in cleared notional in trade count following Uncleared following UMR 90
Slide 58: ... provides a compelling platform for growth
... provides a compelling platform for growth Well positioned to target large pool of FX participants, including existing LCH network, to support further service adoption G10 NDFs FX Options Alternative to deliverable A ‘clearing to settlement’ solution forwards for participants who for OTC FX optio
Slide 59: RepoClear and Net Treasury Income
RepoClear and Net Treasury Income Bruce Kellaway Global Head of RepoClear, EquityClear & Collateral Page 59
Slide 60: RepoClear
RepoClear A leading provider of clearing for cash bonds and repos across multiple European markets LCH Nominal Volumes (all fixed income) — Highest ever nominal cleared in Q1 2017, with strong growth in Gilts 50 45 — Cost of leverage ratio means member Nominal Value (in €tr) 40 banks looking to net
Slide 61: Collateral – Net Treasury Income
Collateral ‒ Net Treasury Income Significant contributor to LCH Group performance, generating £82m of net treasury income in 2016 (18% of total LCH income) LCH Group Collateral Held1 (€bn) — Total collateral continues to grow – 90 180 both cash and non-cash 85 160 — Blended investment return on cash
Slide 62: Driving growth and operating leverage
Driving growth and operating leverage Daniel Maguire LCH Group COO Global Head of Rates & FX Derivatives Page 62
Slide 63: Driving growth and operating leverage
Driving growth and operating leverage Financial Targets: 1) Deliver double digit income growth per annum through to 2019 2) Deliver EBITDA margin in LCH approaching 50% in 2019 (2016: 36%) Delivery of financial targets driven by: Growth Efficiency Continued expansion and diversification of revenue S
Slide 64: Delivering best in class capabilities
Delivering best in class capabilities Chris Corrado Group CIO Group COO Page 64
Slide 65: CIO / COO function
CIO / COO function To be the enabler of LSEG as a leading financial markets infrastructure provider To provide safe, stable, and trusted operations To provide technology that provides our businesses with competitive advantage London Stock Exchange Group Page 65
Slide 66: Delivering high quality infrastructure
Delivering high quality infrastructure 2009 2013 / 2015 2016 2017 Delivery of critical Business Services Ltd infrastructure and (BSL) efficiency initiatives In-source technology In-sourcing and Creation of Group-wide shared LCH implementation of via acquisition of high expanding software service del
Slide 67: Scalable and efficient operations
Scalable and efficient operations LSEG 2016 costs1 Efficiency enhancement initiatives £118m Centralisation Creation of shared services company BSL; LCH back IT costs ex staff office and technology integration with Group. Leveraging scale £429m Progressive off-shoring and near-shoring; delivering val
Slide 68: IT scale enables global customer service
IT scale enables global customer service c.4,000 LSEG employees based in 18 countries, delivering services worldwide Russia, 450 UK, 400 USA, 220 2,520 Italy, 200 Total LSEG technology employees(1) Malaysia, 100 Sri Lanka, 1,150 20% 80:20 MillenniumIT, 900 Business Services Limited, 250 LSEG average
Slide 69: LSEG customer partnerships deepen relationships
LSEG customer partnerships deepen relationships — High performing, low-cost technology LSEG 2016 Technology revenue enabling growth and efficiency — As an open access Group, LSEG provides 65% technology to over 40 exchanges and financial services infrastructure providers Software and services — Key
Slide 70: Enhancing core businesses through new technology
Enhancing core businesses through new technology High impact technologies adapted to financial markets infrastructure Distributed ledger Machine learning Cloud-enabled technology & big data computing Business application and operational value for LSEG — Resiliency / reconciliation — Infrastructure a
Slide 71: Capital Management / Financial track record
Capital Management / Financial track record David Warren Group CFO Page 71
Slide 72: Financial position
Financial position Facilities 31 December 2016 Undrawn Drawn - Bonds 227 Operating net debt £882m Drawn - Revolving credit facilities (31 December 2015: £1,273m) 586 300 Net debt: Pro forma EBITDA 1.1x 343 (excluding £848m restricted cash) 373 257 250 Adjusted for 2017 2017 2018 2019 2020 2021 Net d
Slide 73: Capital management framework
Capital management framework Balance Sheet Prudency Flexibility to operate within this range for normal investment / development and to go above this range in the short term for compelling Maintain existing leverage target strategic opportunities of 1.0-2.0x Net Debt / EBITDA Manage credit rating, d
Slide 74: Increasing shareholder returns
Increasing shareholder returns Dividend and buy-back Strong track record of progressive dividend payments Share buy-back Dividend cover of 2.9x in 2016 now in targeted range £200m on market programme commenced April 10% 43.1 2017 2009-2016 CAGR 36.0 27.2 28.4 24.7 26.1 22.5 22.5 FY2009 FY2010 FY2011
Slide 75: Total Shareholder returns
Total Shareholder returns Total shareholder returns1 2011-2016 LSEG in Top 10 for FTSE 100 TSR 2011-2016 Rank Company TSR Return 1 Ashtead group 907.1% 300% 324% 2 Micro Focus International 560.3% 3 Barratt Developments 500.2% 200% 4 Taylor Wimpey 463.9% 5 Persimmon 452.1% 138% 134% 6 St. James’s Pl
Slide 76: Further growth and enhanced returns
Further growth and enhanced returns FTSE Russell Double-digit growth to continue 2017-2019 Sustainable and attractive margins over the same period LCH OTC revenue growth to continue at double-digit 2017-2019 Accelerating EBITDA margin growth - approaching 50% by 2019 (2016: 35.6%) LSEG Operating exp
Slide 77: Appendix: Speaker biographies
Appendix: Speaker biographies Page 77
Slide 78: Today's presenters
Today’s presenters Xavier Rolet David Warren Chris Corrado CEO, LSEG CFO, LSEG COO/CIO, LSEG Xavier joined the Board of LSEG in March David was appointed LSEG’s Chief Financial Officer Chris was appointed Group COO and Group 2009 and was appointed CEO in May 2009. and joined the Board as a Director
Slide 79: Today's presenters
Today’s presenters Mark Makepeace Caroline O’Shaughnessy Waqas Samad Group Director of Information Services, Global Head, Sales & Marketing CEO, Benchmarks, LSEG and CEO, FTSE Russell Fixed Income and Multi Assets Mark was appointed Group Director of Information Caroline joined LSEG in April 2015, t
Slide 80: Today's presenters
Today’s presenters Raffaele Jerusalmi Michael Davie CEO, Borsa Italiana Chairman, CurveGlobal Adding to his role as Director of Capital Markets, In October 2015, Michael became Head of Rates Raffaele became CEO of Borsa Italiana in April 2010. Services, LSEG. He was appointed to the Board of LSEG in
Slide 81: Today's presenters
Today’s presenters Suneel assumed his role as Group Chief Daniel was appointed Group COO, LCH in April 2017. Executive Officer of LCH in February 2014. He is also Global Head of Rates and FX Derivatives, He is also a member of the Executive responsible for the world’s leading interest rate and FX Co
Slide 82: Glossary
Glossary EBITDA margin ( Adjusted operating profit – Depreciation ) / Total income calculation CY2016 Total income £1,657.1m Adjusted operating profit (before amortisation of £685.8m purchased intangible assets and non-recurring items) Depreciation, software amortisation and impairment -£85.0m EBITD
London Stock Exchange Group — Investor Day (June 2017) on 6ix