London Stock Exchange Group Plc · LSE:LSEG
London Stock Exchange — FY2021 Earnings Presentation
55 slides from London Stock Exchange's earnings presentation, Mar 3, 2022
Slide 1: Clear Strategy… Strong Delivery – 2021 Preliminary Results
London Stock Exchange Group Clear Strategy… Strong Delivery 2021 Preliminary Results |HIGHLY RESTRICTED|
Slide 2: Welcome – Introduction
Welcome – Introduction – David Schwimmer, CEO – The power of our combined business David Schwimmer, CEO – Strong 2021 financial performance Anna Manz, CFO – Delivering on our strategy in 2022 David Schwimmer, CEO – Q&A 2
Slide 3: Strong delivery against our strategy and financial targets
Strong delivery ☐ Strong financial performance; all divisions delivering good revenue growth against our strategy and ☐ Confident in meeting or beating all targets and good momentum into 2022 financial targets ☐ Strong progress on integration driving over-delivery on cost synergies: – 2021 cost syne
Slide 4: Meeting or beating our financial targets
Meeting or beating our financial targets DELIVERY IN 2021 ORIGINAL TARGET Total income growth(1) 6.1% Ahead of the 4-5% range indicated at Q3 5-7% 2020-23 CAGR ✓ EBITDA margin(2) 48.2% 190bps pro-forma margin expansion in 2021 >50% by exit 2023 ✓ Revenue c.25% £15m run-rate revenue synergies in 2021
Slide 5: Building a stronger business for the future
Building a stronger business for the future Integrating – Introducing next-generation products 1 our world-class businesses – Modernising our trading venues 2 Driving growth – Building our Data Platform Building an – Building a more agile and efficient 3 efficient and scalable platform operating pla
Slide 6: Delivery in 2021
2023 & Delivery in 2021 2021 2022 beyond... Integrating Building an 1 our world-class businesses 2 Driving growth 3 efficient and scalable platform Single face for customers Understanding customers Building our Data Platform – Creation of a single point of contact for – Stabilisation in Trading & Ba
Slide 7: The power of our combined business
The power of our combined business
Slide 8: A leading global provider of financial markets infrastructure and data
A leading global provider of financial markets infrastructure and data Global footprint – A global business that partners with customers wherever they operate – Facilitating the smooth functioning of critical market infrastructure across the world We are the only group able to Leading data and analy
Slide 9: A leading global provider of financial markets infrastructure and data
A leading global provider of financial markets infrastructure and data £6.8bn(1) Data & Analytics – A leading market position with upside in a large but fragmented global industry – ~4-6% annual industry growth driven by wide-ranging demand for financial data & analytics Post Trade Data & 68% – >90%
Slide 10: High-quality, highly recurring revenues
High-quality, highly recurring revenues Total Income(1) 73% recurring revenues – Visible revenues: Mostly subscription and license revenues; typically 12-24 month duration 73% 23% Transactional – Highly diversified: Revenues are broadly Revenue based across activity, product, geography and >40,000 c
Slide 11: High quality transaction revenues
High quality transaction revenues HIGH GROWTH BUSINESSES ESTABLISHED LEADERS IN MATURE, MARKET GROWING INDUSTRIES GROWTH BUSINESSES Tradeweb OTC Derivatives Wealth Solutions 20% growth 9% growth 1% growth – Volume gains and new products driving strength in – >90% global share of cleared IRS(1) notio
Slide 12: Integrating businesses to serve customers along the financial markets value chain
Integrating businesses to serve customers along the financial markets value chain London Stock Exchange Group Capital formation Pre-trade & liquidity Trade Post-trade & balance & issuance discovery execution sheet management Private Public Issuance Investment Reference Pre-Trade Price & Trade Execut
Slide 13: Business linkages benefit our customers and give us competitive advantage
Business linkages benefit our customers and give us competitive advantage Data & Analytics A more seamless customer experience – Where we were – distribution aligned with product lines, not customer needs; insufficient connectivity between activities – Where we are – single point of contact for key
Slide 14: Example: An asset manager hedging the currency risk of a transaction
Example: An asset manager hedging the currency risk of a transaction CUSTOMER JOURNEY Asset manager wants Asset manager wants to to obtain firm quotes from Asset manager wants to evaluate the cost of a range of banks, and remove the counterparty risk hedging the FX risk of future execute a hedging f
Slide 15: Example: A pension fund managing their Fixed Income portfolio
Example: A pension fund managing their Fixed Income portfolio CUSTOMER JOURNEY Pension fund wants Pension fund wants to accurate pricing and Pension fund wants to trade eliminate the counterparty performance measurement fixed income securities risk from the transaction and of their fixed income elec
Slide 16: Sustainability is core to our strategy and embedded in our offering
Sustainability is core to our strategy and embedded in our offering Accelerating the transition to Enabling the growth of the Driving sustainable finance, net zero green economy supporting emerging markets In 2021 LSEG became the first London Stock Exchange is a LSEG works with governments and globa
Slide 17: Example: Asset Manager looking to incorporate ESG into their investment process
Example: Asset Manager looking to incorporate ESG into their investment process Degree of ESG London integration Stock into the Exchange investment process Group Light integration Medium integration Full integration Asset Manager wants employees to Asset Manager wants raw data with Asset Manager wan
Slide 18: Strong 2021 financial performance
Strong 2021 financial performance Anna Manz, CFO
Slide 19: Driving long-term sustainable financial performance
Driving ☐ Strong 2021 progress across all divisions; good momentum into 2022 long-term ☐ Revenue contribution from synergies accelerating in 2022 sustainable ☐ Delivered 2021 cost guidance; 2022 and 2023 unchanged financial ☐ Cost synergy programme ahead of target performance ☐ £50m of further cost
Slide 20: Strong financial performance in 2021
Strong financial performance in 2021 Total income (excl. recoveries) Adjusted EBITDA Run rate Total Cost synergies achieved cost synergies identified £6,811m £3,283m £151m £400m 6.1% 8.3% vs. £88m original vs. £350m target(2) original target Adjusted EBITDA margin(1) Adjusted EPS Leverage Total divi
Slide 21: Strong 2021 revenue growth across all divisions
Strong 2021 ☐ Ahead of previous guidance revenue ☐ Broad-based growth across all businesses growth across all divisions ☐ Particular acceleration in Data & Analytics revenues; ASV(1) growth signals further momentum into 2022 Note: (1) Annual Subscription Value is a point-in-time year-on-year measure
Slide 22: Strong revenue growth across all three divisions
Strong revenue growth across all three divisions 6.1% growth(1) Strong revenue trends – Data & Analytics: >90% of revenues(2) from subscriptions +11.1% +12.5% – Capital Markets: Strong secular -20.0% growth dynamics, esp. Tradeweb +5.3% – Post Trade: Beneficiary of secular growth and interest rate u
Slide 23: Data & Analytics: strong growth in 2021 and ASV accelerating into 2022
Data & Analytics: strong growth in 2021 and ASV(1) accelerating into 2022 +5.3% Non-subscription revenues: Mostly asset linked revenues at FTSE Russell and transaction revenues in Customer & Third-Party Risk and Wealth +2.5% +1.9% +4.6% Subscription revenue growth(3) +3.5%(2) Trends towards ASV grow
Slide 24: Data & Analytics 5.3% growth: broad-based improvement in performance
Data & Analytics 5.3% growth: broad-based improvement in performance £1.49bn Trading & Banking -0.3% £1.15bn – Trading & Banking: improved revenue Investment Solutions +9.4% trend vs. prior years £1.14bn – Investment Solutions: 9.4% growth in Enterprise Data +3.7% subscription revenues(1) – Enterpri
Slide 25: Trading & Banking stabilised; reiterating medium-term growth target
Trading & Banking stabilised; reiterating medium-term growth target Stabilised growth in 2021 by getting low single- digit growth closer to our customers 2019 2020 2021 medium-term -0.3% ambition -1.2% Additional growth over the medium-term as we see the benefits of Workspace -2.1% Note: All growth
Slide 26: Capital Markets 12.5% growth: driven by Tradeweb and primary markets
Capital Markets 12.5% growth: driven by Tradeweb and primary markets £241m Equities +5.1% – Equities: Strongest primary listing activity in >10yrs – FX: 7% growth in our dealer-to-client £223m FXall platform FX +2.4% – Fixed Income, Derivatives & Other: Strong Tradeweb performance through market sha
Slide 27: Post Trade: 11.1% growth in core Post Trade revenues
Post Trade: 11.1% growth in core Post Trade revenues £358m OTC Derivatives +8.9% – OTC Derivatives: Secular growth complemented by tailwind from global £253m interest rate uncertainty and Libor reform Securities & Reporting +12.0% – Securities & Reporting: Strong increase in repo clearing volumes No
Slide 28: Costs, margins and synergies all in-line, or ahead of target
Costs, margins ☐ Strong 2021 margin performance; 190bp margin expansion and synergies ☐ On track to achieve >50% margin target on an exit basis by end-2023 all in-line, or ☐ Delivered 2021 cost guidance; 2022 and 2023 unchanged ahead of target ☐ Outperformance on cost synergies in 2021 ☐ Additional
Slide 29: Strong profitability across all our businesses
Strong profitability across all our businesses 190bps margin expansion 52% 52% 48.2% 50% 49% 46% 46.3% 44% 2020 2021 2020 2021 2020 2021 2020 2021 Data & Analytics Capital Markets Post Trade Group EBITDA margin expected to exceed 50% beyond 2023 Note: Adjusted EBITDA Margin is calculated as Adjusted
Slide 30: 2021 expense growth in-line with expectations; no change to 2022 & 2023 guidance
2021 expense growth in-line with expectations; no change to 2022 & 2023 guidance No change to 2022 & 2023 As per previous 2021 guidance cost guidance 4.8% cost growth Low-single Low-single digit cost digit cost growth growth >50% EBITDA Margin and beyond… Cost drivers 2021 2022 2023 Acquisition annu
Slide 31: Strong start to our cost synergy programme
Strong start to our cost synergy programme: 43% of cost synergies(1) delivered in 2021 up from initial target of 25%(2) £63m £151m – Data centre rationalisation c.40% complete – Exited 27 properties; c.75% of the original £88m property synergy plan – Renegotiated c.60% of the strategic supplier cont
Slide 32: Updating our cost synergy target: at least £400m by 2025
Updating our cost synergy target: targeting at least £400m of cost synergies by 2025(1), a £50m increase on initial target(2) – Hands-on experience has aided £50m £400m identification of additional savings: £350m – Property rationalisation – Process simplification – Aligned with ongoing work towards
Slide 33: Capex guidance unchanged: investments driving revenue growth and scalability
Capex guidance unchanged: investments driving revenue growth and scalability Initiative Benefit to LSEG and its customers Financial benefits A consistent experience, making it easier for Revenue growth and cost Data platform customers and partners to access, distribute, and efficiency following roll
Slide 34: Guidance for 2022
Guidance for 2022 Revenue synergies – Expected to be between £40m and £60m run-rate Cost synergies – Expect to deliver c.£70m run-rate cost synergies in 2022, taking total run-rate synergies to c.£220m Underlying operating – Low single-digit increase in operating expenses expenses Depreciation and –
Slide 35: Strong cash generation
Strong cash generation Operating cash flow – Strong cash generation driven by high quality subscription revenues Capex & other investments – Cash expense of both ongoing and integration & separation capex Free cash flow – Pre-dividend free cash flow of 342p per share(3) – Expected to increase over t
Slide 36: A strongly cash generative business with disciplined capital management
A strongly cash generative business with disciplined capital management 3.3x(1) A3 Moodys 2.2x 1.0x - 2.0x(2) 1.9x A S&P 1.6% Blended cost of debt(3) Dec-20 Jun-21 Dec-21 Target (1) Ratio of pro forma net debt to pro forma Underlying EBITDA for the year ended 31 December 2020 (2) Target leverage ran
Slide 37: Consistent capital management framework
Consistent capital management framework Continued focus on deploying capital for selected organic and inorganic investments, and shareholder returns, while maintaining a prudent balance sheet. KEY FACTORS THAT INFORM OUR CAPITAL HOW WE DEPLOY CAPITAL ALLOCATION DECISIONS Maintain our existing levera
Slide 38: Driving long-term sustainable financial performance
Driving ☐ Strong 2021 progress across all divisions; good momentum into 2022 long-term ☐ Revenue contribution from synergies accelerating in 2022 sustainable ☐ Cost synergy programme ahead of target financial ☐ £50m in further cost synergies identified performance ☐ Delivered 2021 cost guidance; 202
Slide 39: Delivering on our strategy in 2022
Delivering on our strategy in 2022 David Schwimmer, CEO
Slide 40: Delivering on this strategy in 2022
2023 & Delivering on this strategy in 2022 2021 2022 beyond... Integrating Building an 1 our world-class businesses 2 Driving growth 3 efficient and scalable platform Providing integrated solutions, Delivering revenue synergies Building our Data Platform instead of disconnected products – £40-60m of
Slide 41: Creating shareholder value through M&A
Creating shareholder value through M&A 2021 Quantile Group – Announced December 2021(1) – Helps customers manage their capital and margin more efficiently – increasingly valuable as banks adjust to new regulatory regimes such as SA-CCR(2) – A key step towards a more joined-up customer offering along
Slide 42: Delivering against our strategy and financial targets
Delivering ☐ Strong 2021 performance: All divisions delivered high growth against our ☐ Delivering on our strategy: Executing on a multi-year strategy to further accelerate growth and increase agility & efficiency strategy and ☐ Excellent progress on integration: Additional £50m of cost financial ta
Slide 43: A compelling proposition
A compelling proposition – High quality assets in growing markets Leading businesses in multiple fast-growing global markets, with deepening linkages between them – Highly recurring, diversified revenues High proportion of subscription revenues and strong customer retention; diversified across custo
Slide 44: Q&A
Q&A
Slide 45: Appendix - Modelling Information
Appendix - Modelling Information
Slide 46: Key performance indicators for 2021
Key performance indicators for 2021 ASV growth ESG AUM: BETA volumes: ETF AUM: ANALYTICS DATA & $167bn 547m $1.14trn +4.6% +165% +1.3% +31% TRADEWEB ADV UK Equity ADV: FX ADV: MARKETS CAPITAL Rates - Derivatives: Credit - Cash: £4.5bn $443bn $294bn $9bn -8.2% +3.3% +39% +22% POST TRADE SwapClear cli
Slide 47: 2021 adjusted operating expenses
2021 adjusted operating expenses Growth-related operating expenses: Growth-related expenses – Technology: Includes dual-running +4.8% costs as infrastructure is modernised Constant Currency Growth in order to deliver scalable platforms for the future – Investment for growth: Business 3.9% expenses r
Slide 48: Geographically diversified revenues & costs
Geographically diversified revenues & costs Total Income by Geography(1) Total Income by Currency(1) Total Costs by Currency(2) 42% 43% 15% 60% 17% 15% 8% 52% 23% 11% 14% Amers EMEA Asia USD GBP EUR Other USD GBP EUR Other Note: (1) 2021 total income including recoveries, on a constant currency basi
Slide 49: Divisional income by currency
Divisional income by currency(1) Data & Analytics Capital Markets Post Trade 67% 10% 12% 11% 59% 24% 16% 1% 18% 46% 34% 2% USD GBP EUR Other USD GBP EUR Other USD GBP EUR Other Note: (1) 2021 total income by division - including recoveries, on a constant currency basis 49 |HIGHLY RESTRICTED|
Slide 50: One-time costs of realising our synergy targets
One-time costs of realising our synergy targets ☐ £291m of costs to achieve (CTA) in 2021 Building a more – £205m of CTA recognised as non-operating costs – £86m of CTA recognised as capex(1) agile, efficient ☐ The one-time costs relating to the realisation of the additional £50m cost synergies and
Slide 51: Minor business revenue reallocation
Minor business revenue reallocation To better align with our internal reporting, some small revenue items will be reallocated between business lines from Q1 2022. At a divisional level, the impacts are: – c.£9m of annualised revenue moves from Post Trade to Data & Analytics – c.£6m of annualised rev
Slide 52: Supplementary FY2021 information
Supplementary FY2021 information
Slide 53: LSEG FY2021 – Results overview
LSEG FY2021 – Results overview Pro-forma underlying1 Constant Constant Currency Note: Pro-forma 2021 2020 Currency Variance (excl. (1) The pro-forma results assume that the acquisition of Refinitiv took place Continuing operations Variance 2 on 1 January 2020. The Borsa Italiana Group was classified
Slide 54: Quarterly pro-forma revenue progression
Quarterly pro-forma revenue progression 2020 2021 £m Q1 Q2 Q3 Q4 2020 Q1 Q2 Q3 Q4 2021 Trading & Banking Solutions 396 410 399 391 1,596 372 372 372 373 1,489 Trading 316 328 318 311 1,273 296 295 295 294 1,180 Banking 80 82 81 80 323 76 77 77 79 309 Enterprise Data Solutions 285 297 290 291 1,163 2
Slide 55: Contacts and further information
Contacts and further information Paul Froud London Stock Exchange Group plc Group Head of Investor Relations 10 Paternoster Square Tel: +44 (0)20 7797 1186 email: paul.froud@lseg.com London EC4M 7LS Chris Turner Investor Relations Senior Director Tel: +44 (0)77 6993 1614 For investor relations infor
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