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RNS

Half-year Report

Released 07:00 01-Aug-2019

RNS Number : 5188H
London Stock Exchange Group PLC
01 August 2019
 

1 August 2019

LONDON STOCK EXCHANGE GROUP PLC

INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2019

 

Unless otherwise stated, all figures below refer to continuing operations for the six months ended 30 June 2019 (H1 or H1 2019).  Comparative figures are for continuing operations for the six months ended 30 June 2018 (H1 2018). 

·     Strong financial performance in H1 despite challenging market conditions

·     Continued good growth in Information Services and Post Trade

·     Focus on Group-wide collaboration to drive product innovation and development of growth opportunities

·     Continued successful execution of strategy aligned with core principles of Open Access and Customer Partnership

 

H1 Summary

·     Total Revenue up 7% to £1,018 million (H1 2018: £953 million); total income up 8% to £1,140 million (H1 2018: £1,060 million)

·     FTSE Russell revenue up 9% to £315 million (H1 2018: £290 million) with growth in subscription and asset-based revenues

·     Post Trade revenue at LCH up 12% to £266 million (H1 2018: £237 million), driven by strong growth in OTC volumes notably in the SwapClear service

·     Operating expenses, excluding depreciation and amortisation, were flat and 2% down on a constant currency basis, with good cost control while continuing to invest

·     Adjusted operating profit1 up 11% to £533 million (H1 2018: £480 million); operating profit was up 2% at £399 million (H1 2018: £393 million); profit before tax up 1% to £363 million (H1 2018: £360 million); profit after tax of £265 million (H1 2018: £283 million)

·     Adjusted EPS1 up 13% to 100.6 pence (H1 2018: 88.7 pence); basic EPS down 1% at 70.7 pence (H1 2018: 71.1 pence)

·     Interim dividend increased 17% to 20.1 pence per share (H1 2018: 17.2 pence per share), in line with stated dividend policy

·     Strong balance sheet position with leverage at 1.7 times adjusted net debt: pro forma EBITDA notwithstanding continued investment spend during the period

 

Commenting on performance for the period, David Schwimmer, CEO said:

"The Group has delivered another strong performance with an 8% increase in income during the first half of the year.  In Post Trade, LCH's OTC clearing services have achieved record volumes during the period and have seen strong growth in member and client clearing.  In Information Services, we have acquired Beyond Ratings, a highly regarded provider of ESG data and analytics, which will accelerate our ability to develop differentiated multi-asset solutions in sustainable finance investing.  And, in Capital Markets, despite a slower start to the year, we have seen activity improve in Q2 with companies able to benefit from access to the deep liquidity pools available across our listings and trading businesses. 

 

"We have continued to invest across our businesses, working in partnership with customers to deliver innovative products and services, while continuing to control costs.  The Group remains well positioned in an evolving regulatory and macroeconomic environment and we expect to make further progress in H2.

 

"Today, we have announced a proposed transaction to acquire Refinitiv, a leading global provider of data, analytics and financial markets solutions.  This transformational acquisition creates a multi-asset class capital markets business and brings world class data content, management and distribution capabilities to LSEG, accelerating our strategy and expanding our global footprint.  This positions us in key areas of future growth as a global financial markets infrastructure leader."  

 

Organic growth combined with new product development and investment in opportunities continued throughout the period.  Highlights include:

 

Information Services

·     Acquisition of Beyond Ratings, a highly regarded provider of Environmental, Social and Governance (ESG) data for fixed income investors

·     FTSE Russell launched innovative climate risk government bond index allowing investors to incorporate climate change risk considerations into their fixed income portfolios for the first time

·     FTSE Russell successfully commenced inclusion of China A-Share stocks within its global equity benchmarks increasing connectivity between Chinese companies and international investors

·     ETF AUM benchmarked to FTSE Russell indices increased 9% in the period to $705bn

 

Post Trade

·     Acquisition of a 4.9% stake in Euroclear with a seat on the Board, which has helped strengthen the existing commercial relationships between the businesses

·     SwapClear volumes hit a record €660trn in the period with strong growth in both member and client clearing

·     Continued growth at ForexClear, RepoClear and CDSClear with record volumes cleared across all services

 

Capital Markets

·     Newly launched Shanghai-London Stock Connect welcomed its first issuer Huatai Securities raising over $1.5bn on the Shanghai segment of London Stock Exchange

·     CurveGlobal trading volumes in H1 increased 211% whilst total open interest increased 156% over the last 12 months with strong market share in SONIA products

·     Following acquisition of minority investment in Nivaura, we are working in partnership to make the debt issuance process more efficient and cost-effective

 

1 Before amortisation and impairment of purchased intangible assets and goodwill and non-underlying items

The Group's principal foreign exchange exposure arises from translating and revaluing its foreign currency earnings, assets and liabilities into LSEG's reporting currency of Sterling.

London Stock Exchange Group uses non-GAAP performance measures as key financial indicators as the Board believes these better reflect the underlying performance of the business.  As in previous years, adjusted operating expenses, adjusted operating profit, adjusted profit before tax, adjusted earnings before interest, tax, depreciation and amortisation and adjusted earnings per share all exclude amortisation and impairment of purchased intangibles assets and goodwill and non-underlying items.

Further information is available from:

London Stock Exchange Group plc

Gavin Sullivan / Lucie Holloway - Media

Paul Froud - Investor Relations

+44 (0) 20 7797 1222


+44 (0) 20 7797 3322

 

Additional information on London Stock Exchange Group can be found at www.lseg.com

 

The Group will host a conference call for analysts and investors today at 09:30am (UK time).  On the call to discuss the H1 results will be David Schwimmer (CEO), David Warren (CFO) and Paul Froud (Group Head of Investor Relations). 

To access the telephone conference call please pre-register using the following link and instructions below: http://emea.directeventreg.com/registration/5664169

 

·     Please register in advance of the conference using the link above. Upon registering with your full name, company name and email address, you will be provided with participant dial-in numbers, Direct Event passcode and unique registrant ID

·     In the 10 minutes prior to the call start time, you will need to use the conference access information provided in the email received at the point of registering

Note: Due to regional restrictions some participants may receive operator assistance when joining this conference call and will not be automatically connected.

 

For further information, please call the Group's Investor Relations team on +44 (0) 20 7797 3322.

 

Chief Executive's Statement

Overview of H1 results

The Group has produced a strong half-year performance, with good growth in FTSE Russell, record clearing volumes across a number of services at LCH, and a resilient performance in Capital Markets against a challenging market backdrop. 

We have maintained good cost control while continuing to invest in organic growth initiatives and efficiency opportunities, as well as make a number of acquisitions, including Beyond Ratings, a provider of specialist data for fixed income investors, and the purchase of a minority share in Euroclear.  We have launched new services, such as the Shanghai-London Stock Connect service which welcomed its first issuer, and new products, including an innovative climate risk government bond index allowing climate change considerations to be incorporated in fixed income portfolios.  We continue to make good progress towards achievement of our revenue and margin growth targets.  Our strategy, based on open access and customer partnership, continues to position us well, providing critical services to clients around the world.

On a reported basis, total income increased 8%, including a £32 million one-off change in estimate for IFRS 15 accounting in Primary Markets.  Total operating expenses were 4% higher on a constant currency basis, driven by increased depreciation and amortisation.  Excluding depreciation and amortisation, operating expenses were flat, reflecting good cost control and the effect of an IFRS 16 related transfer of lease costs from expenses to depreciation.  The Group's EBITDA margin increased in H1 to 54.5% (2018 H1: 51.3%), reflecting the good operational performance and the benefit of the one-off IFRS 15 impact.  Adjusted operating profit increased 11% to £533 million, and adjusted EPS rose 13% to 100.6 pence per share.

We remain in a strong financial position.  The Group is strongly cash generative, supporting development of the Group, and leverage remained stable at 1.7 times net debt to pro forma EBITDA.  In line with the Group's stated progressive dividend policy, we have increased the interim dividend by 17%, to 20.1 pence per share. 

Further commentary on the Group's performance from continuing operations in the six month period is provided below.

Operational Performance

Information Services, the Group's largest business segment by revenue, delivered a 7% increase in revenue, to £441 million (up 4% on a constant currency basis).  FTSE Russell revenue increased by 9% to £315 million, and was 4% higher on a constant currency basis.  Subscription revenue grew 10% to £203 million, while asset-based revenue increased 7% to £112 million.  ETF AUM benchmarked to FTSE Russell indexes increased 9% to US$705 billion.  Revenue from other Information Services and real time data both grew 3% to £78 million and £48m respectively.  Cost of sales rose 5%, with 7% growth in gross profit at £405 million.

Post Trade Services - LCH, the Group's majority-owned global clearing business, produced a 12% increase in total revenue, to £266 million (up 12% at constant currency).  OTC clearing revenue increased 14%, reflecting a strong performance at SwapClear, with record clearing activity in terms of notional value cleared and compressed, including a 5% increase in the number of client trades which account for c.50% of SwapClear's clearing revenue.  Volumes at CDSClear increased, and ForexClear produced good growth in Deliverable FX Options and client clearing.  Membership numbers for all three OTC services increased during the period.  Non-OTC products clearing revenue rose 2% (3% at constant currency), reflecting growth in fixed income clearing at RepoClear, offset by lower cash equities and derivatives clearing volumes. 

LCH net treasury income (NTI) rose 16% as average cash collateral increased 7% to €92 billion.  NTI is expected to be slightly lower in H2, reflecting lower yields.  Cost of sales for LCH rose 15% and gross profit rose 13% to £301 million.  In Q1 we announced that 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.  LCH's EBITDA margin increased to 51.2% (2018 H1: 47.5%), reflecting the good H1 result and the benefit of the updated SwapClear agreement.

Total income for Post Trade Services in Italy, comprising CC&G and Monte Titoli, grew 3% to £75 million (up 4% at constant currency), underpinned by NTI which grew by 14% to £24 million.  Clearing revenue was flat at £22 million while settlement and custody revenue declined 3% to £29 million.  Cost of sales grew from £3 million to £4 million, with gross profit growing 3% to £71 million.

Capital Markets increased revenue by 5% on a reported and constant currency basis, helped by a one-off change in estimate for IFRS 15 accounting in Primary Markets, with an impact of c.£32 million.  In Secondary Markets, equities trading revenue fell 16%, reflecting a challenging trading environment with equity value traded on LSE and Turquoise down 24% and 33% respectively, and the number of trades at Borsa Italiana down 21%.  Fixed income, derivatives and other trading revenue fell by 4% in aggregate, with growth in repo offset by weaker derivatives markets.  Cost of sales fell from £9 million to £3 million, reflecting the removal of "maker-taker" rebates at Turquoise since Q4 2018.  In total, gross profit grew 8% to £223 million. 

Technology Services revenue decreased 6% on a reported basis.  Lower cost of sales meant overall gross profit for the segment was down 2% at £26m. 

Financial Summary

Unless otherwise stated, all figures below refer to continuing operations for the six months ended 30 June 2019 (H1 2019).  Comparative figures are for continuing operations for the six months ended 30 June 2018 (H1 2018).  Variances are also provided on a constant currency basis.  All income is on an organic basis as there has been no inorganic income seen in either period. 



Six months ended

Constant




30 June

currency




2019

2018

Variance

variance


Continuing operations


£m

£m

%

%









Revenue







Information Services


 441 

 412 

7% 

4% 


Post Trade Services - LCH


 266 

 237 

12% 

12% 


Post Trade Services - CC&G and Monte Titoli


 51 

 52 

(1%)

- 


Capital Markets


 226 

 215 

5% 

5% 


Technology Services


 30 

 32 

(6%)

(7%)


Other revenue


 4 

 5 

- 

- 


Total revenue


 1,018 

 953 

7% 

5% 









Net treasury income through CCP businesses


 120 

 104 

16% 

14% 


Other income


 2 

 3 

- 

- 


Total income


 1,140 

 1,060 

8% 

6% 


Cost of sales


(109)

(106)

3% 

2% 


Gross profit


 1,031 

 954 

8% 

7% 









Operating expenses before depreciation, amortisation and impairment


(406)

(407)

- 

(2%)


Underlying depreciation, amortisation and impairment


(88)

(64)

37% 

37% 


Total operating expenses


(494)

(471)

5% 

4% 


Share of loss after tax of associate


(4)

(3)

20% 

20% 


Adjusted operating profit 1


 533 

 480 

11% 

9% 









Add back underlying depreciation, amortisation and impairment


 88 

 64 

37% 

37% 


Adjusted earnings before interest, tax, depreciation, amortisation and impairment 1


 621 

 544 

14% 

13% 









Amortisation and impairment of purchased intangible assets and goodwill and non-underlying items 2


(134)

(87)

55% 

51% 









Operating profit


 399 

 393 

2% 









Earnings per share







Basic earnings per share (p)


 70.7 

 71.1 

(1%)



Adjusted basic earnings per share (p) 1


 100.6 

 88.7 

13% 










Dividend per share (p)


 20.1 

 17.2  

17% 










 

1 Before amortisation and impairment of purchased intangible assets and goodwill and non-underlying items

 

2 2019 H1 includes transaction costs and restructuring costs

 

Note: Variances in all tables are calculated from underlying numbers. 

 

The Group's principal foreign exchange exposure arises from translating and revaluing its foreign currency earnings, assets and liabilities into LSEG's reporting currency of Sterling.

Revenue increased 7% to £1,018 million (H1 2018: £953 million), and up 5% on a constant currency basis.  As described in the operational performance section above, many parts of the Group have delivered good results, with strong contributions in particular from LCH and Information Services.  Total income rose 8% to £1,140 million (H1 2018: £1,060 million), and up 6% on a constant currency basis.  Cost of sales increased 3% to £109 million, (2% on a constant currency basis) primarily as a result of the growth in LCH and FTSE Russell, with gross profit increasing 8% to £1,031 million (H1 2018: £954 million). 

Operating expenses excluding depreciation, amortisation and impairment were flat on a reported basis and down 2% on a constant currency basis.  Underlying depreciation and amortisation at £88 million was 37% higher than last year, reflecting investments in previous periods and incorporating IFRS 16 accounting changes transferring lease costs from expenses to depreciation.  The Group continues to invest in new products and efficiency projects, to increase sales and to develop the Group's infrastructure.  Due to the phasing of spend during the year, operating expenses (including depreciation and amortisation) in the second half of the year are likely to be c.£25 million higher than H1.

Adjusted operating profit for the period, before amortisation and impairment of purchased intangible assets and goodwill and non-underlying items, increased 11% to £533 million (H1 2018: £480 million).  Operating profit was up 2% at £399 million (H1 2018: £393 million) dampened by an increase in amortisation and impairment of intangible assets and goodwill and non-underlying items.

Net finance costs were £36 million (H1 2018: £33 million) reflecting marginally higher debt levels after the purchase of a 4.9% stake in Euroclear within the period.  Profit before tax was £363 million (H1 2018: £360 million).  The effective underlying tax rate was 22.9%, and 24.1% for H1 with the inclusion of one-off adjustments (year ended 31 December 2018: 21.9%). 

Adjusted basic EPS, before amortisation and impairment of purchased intangible assets and goodwill and non-recurring items, increased 13% to 100.6 pence (H1 2018: 88.7 pence) while basic EPS was 70.7 pence (H1 2018: 71.1 pence).

Net cash inflow from operating activities was £400 million (H1 2018: £287 million), the increase year on year reflecting stronger business performance with good cost control.  Capital expenditure in the period amounted to £89 million, (H1 2018: £90 million).  Looking ahead, we expect capex to run at a slightly higher level in H2 as we continue to invest in further product development and projects to help scale-up our business.  Net cash generated after capex, other investing activities and dividends, was £122 million (H1 2018: £28 million).  Discretionary free cash flow per share on the same basis was 89.7 pence (30 June 2018: 56.6 pence).

At 30 June 2019, operating net debt had increased to £1,942 million (after setting aside £1,022 million of cash for regulatory and operational support purposes).  During the period the Group acquired a 4.92% stake in Euroclear for €278 million (£244 million) and completed some smaller inorganic investments.  Cash generated by the business funded the majority of the Group's investment activities referred to above as well as the regular debt servicing and dividend payments, with the balance being sourced from bank facilities.  Operating net debt: pro forma EBITDA remained stable at 1.7 times (from 1.8 times at 31 December 2018), reflecting strong earnings growth offsetting the increase in operating net debt. 

During the period, Standard & Poor's raised its long term ratings of LSEG to A and of LCH Limited and LCH SA to AA-, with stable outlooks for all three rated entities.  Moody's maintained its A3 rating of LSEG, but raised its outlook to positive from stable.  The Group had net assets of £3,788 million at 30 June 2019 (31 December 2018: £3,698 million), including £1,450 million in cash and cash equivalents (31 December 2018: £1,510 million).

The Group's principal foreign exchange exposure arises as a result of translating and revaluing its foreign currency earnings, assets and liabilities into LSEG's reporting currency of Sterling.  For the 6 months to 30 June 2019, the main translation exposures for the Group were its Euro reporting businesses (accounting for 29% of Group income and 28% of Group expenses) and its US dollar reporting businesses (accounting for 28% of income and 19% of expenses).  A 10 cent movement in the average £/€ rate for the six months would have changed the Group's operating profit for the period before amortisation of purchased intangible assets and non-recurring items by approximately £14 million.  A 10 cent movement in the average £/US$ rate for the six months would have changed the Group's operating profit by approximately £15 million.  The Group continues to manage its translation risk exposure by matching the currency of its debt (including debt effectively issued in one currency and swapped into a different currency) to the currency of its earnings, where possible, to ensure its key financial ratios are protected from material foreign exchange rate volatility.

Interim Dividend 

In line with the Group's dividend policy, the interim dividend is calculated as one-third of the prior full year dividend.  Accordingly, the Directors have declared an interim dividend of 20.1 pence per share, an increase of 17% (H1 2018: 17.2 pence per share).  The interim dividend will be paid on 17 September 2019 to shareholders on the register on 23 August 2019.

Board of Directors

Cressida Hogg CBE joined the LSEG Board as an Independent Non-Executive Director on 8 March 2019.  Cressida is Chair of Landsec and brings a strong corporate background in infrastructure and private equity.  In July, Dominic Blakemore was announced to be joining the LSEG Board as an Independent Non-Executive Director, with effect from 1 January 2020.  Dominic is the Chief Executive of Compass Group PLC and will bring deep financial and commercial expertise to the Group It is expected that Dominic will become Chair of the Board's Audit Committee after the conclusion of the 2020 AGM.

 

Outlook

The Group has delivered a strong financial performance in H1, with good revenue growth and cost control across our businesses while we invest in new products and support the Group's development.  We continue to make good progress towards achievement of our financial targets.  The Group remains well positioned in an evolving regulatory and macroeconomic environment and we expect to make further progress in H2. 

 

In addition to strong H1 results, today the Group has announced a transaction to acquire Refinitiv, a leading global provider of data, analytics and financial markets solutions.  This transformational acquisition creates a multi-asset class capital markets business and brings world class data content, management and distribution capabilities to LSEG, accelerating our strategy and expanding our global footprint.  This positions us in key areas of future growth as a global financial markets infrastructure leader.  Completion is expected in H2 2020.

 

 

David Schwimmer - Group CEO

1 August 2019

 

Operating Performance - Key statistics

To assist investors in understanding the underlying performance of the Group, percentage changes are also presented on an organic and constant currency basis.

 

Information Services

 

The Information Services division consists of global indices products, real time data products and a number of other discrete businesses including trade processing operations, desktop and work flow products.  As stated in our Q1 2019 release, we have revised the reporting format for Information Services as per the below:

 


Six months ended


Constant


30 June


currency


2019

2018

Variance

variance


£m

£m

%

%

Revenue





Index - Subscription

203 

185 

10%

6%

Index - Asset based

112 

105 

7%

2%

FTSE Russell

315 

290 

9%

4%

Real time data

48 

47 

3%

3%

Other information services

78 

75 

3%

1%

Total revenue

441 

412 

7%

4%

Cost of sales

(36)

(34)

5%

1%

Gross profit

405 

378 

7%

4%

 

Note:
Mergent and some other minor items (previously reported in FTSE Russell subscriptions), are now included in Other information services

 

Previous reporting format:

 


Six months ended


Constant


30 June


currency


2019

2018

Variance

variance


£m

£m

%

%

Revenue





FTSE Russell

336 

309 

9%

4%

Real time data

48 

47 

3%

3%

Other information services

57 

56 

2%

2%

Total revenue

441 

412 

7%

4%

Cost of sales

(36)

(34)

5%

1%

Gross profit

405 

378 

7%

4%

 


As at



30 June

Variance


2019


2018

%

ETF assets under management benchmarked ($bn)





FTSE

421


387

9%

Russell Indexes

284


259

10%

Total

705


646

9%






Terminals





UK

66,000


68,000

(3%)

Borsa Italiana Professional Terminals

100,000


109,000

(8%)

 

Post Trade Services - LCH

 

This LCH division comprises the Group's majority owned global clearing business.

 


Six months ended


Constant


30 June


currency


2019

2018

Variance

variance


£m

£m

%

%

Revenue





OTC - SwapClear, ForexClear & CDSClear

148 

130 

14%

12%

Non OTC - Fixed income, Cash equities & Listed derivatives

69 

67 

2%

3%

Other

49 

40 

25%

24%

Total revenue

266 

237 

12%

12%

Net treasury income

96 

83 

16%

14%

Total income

362 

320 

13%

12%

Cost of sales

(61)

(53)

15%

16%

Gross profit

301 

267 

13%

12%

 


Six months ended



30 June

Variance


2019


2018

%






OTC derivatives





SwapClear





IRS notional cleared ($tn)

660


574

15% 

SwapClear members

120


109

10% 

Client trades ('000)

807


771

5% 

CDSClear





Notional cleared (€bn)

348


325

7% 

CDSClear members

26


14

86% 

ForexClear





Notional value cleared ($bn)

8,767


8,664

1% 

ForexClear members

34


32

6% 

Non-OTC





Fixed income - Nominal value (€tn)

52.7


48.8

8% 

Listed derivatives (contracts m)

73.0


76.9

(5%)

Cash equities trades (m)

349


414

(16%)






Average cash collateral (€bn)

91.8


85.9

7% 

 

Post Trade Services - CC&G and Monte Titoli

 

This division comprises the Group's Italian-based clearing, settlement and custody businesses.   

 


Six months ended


Constant


30 June


currency


2019

2018

Variance

variance


£m

£m

%

%

Revenue





Clearing

22 

22 

- 

1% 

Settlement, Custody & other

29 

30 

(3%)

(2%)

Total revenue

51 

52 

(1%)

- 

Net treasury income

24 

21 

14% 

15% 

Total income

75 

73 

3% 

4% 

Cost of sales

(4)

(3)

13% 

13% 

Gross profit

71 

70 

3% 

3% 

 


Six months ended



30 June

Variance


2019


2018

%

CC&G Clearing





Contracts (m)

50.1


62.5

(20%)

Initial margin held (average €bn)

14.0


9.7

44% 






Monte Titoli





Settlement instructions (trades m)

21.5


23.9

(10%)

Custody assets under management (average €tn)

3.30


3.30

-

 

Capital Markets

 

Capital Markets comprises the Group's Primary Markets activities, providing access to capital for corporates and others, and the Secondary Market trading of cash equities, derivatives and fixed income.

 


Six months ended


Constant


30 June


currency


2019

2018

Variance

variance


£m

£m

%

%

Revenue





Primary Markets 1

90 

62 

44% 

44% 

Secondary Markets - Equities

74 

89 

(16%)

(16%)

Secondary Markets - Fixed income, derivatives and other

62 

64 

(4%)

(3%)

Total revenue

226 

215 

5% 

5% 

Cost of sales

(3)

(9)

(68%)

(68%)

Gross profit

223 

206 

8% 

8% 

 

1 Primary Markets revenue has increased by c.£32 million in H1 2019 due to a change in estimate relating to IFRS 15.  This is due to a reduction in the length of time initial admissions and further issue revenues are required to be recognised.  Under this new treatment, it is estimated the impact on Primary Markets will be an increase in revenue of £1 million on an annual basis.

 

Capital Markets - Primary Markets











Six months ended



30 June

Variance


2019


2018

%

New Issues





UK Main Market, PSM & SFM

28


38

(26%)

UK AIM

15


36

(58%)

Borsa Italiana

15


13

15%

Total

58


87

(33%)






Money Raised (£bn)





UK New

2.7


1.9

42% 

UK Further

10.8


10.8

- 

Borsa Italiana new and further

1.9


2.5

(24%)

Total (£bn)

15.4


15.2

1% 

 

Capital Markets - Secondary Markets





Six months ended



30 June

Variance

Equity

2019


2018

%

Totals for period





UK value traded (£bn)

583


769

(24%)

Borsa Italiana (no of trades m)

31.1


39.4

(21%)

Turquoise value traded (€bn)

311


464

(33%)






SETS Yield (basis points)

0.69


0.62

11% 






Average daily





UK value traded (£bn)

4.7


6.2

(24%)

Borsa Italiana (no of trades '000)

249


312

(20%)

Turquoise value traded (€bn)

2.5


3.7

(32%)






Derivatives (contracts m)





LSE Derivatives

1.6


4.1

(61%)

IDEM

16.8


20.7

(19%)

Total

18.4


24.8

(26%)






Fixed Income





MTS cash and BondVision (€bn)

1,650


1,888

(13%)

MTS money markets (€bn term adjusted)

57,749


43,964

31% 

 

Technology Services

 

Technology Services comprises technology connections and data centre services for clients of London Stock Exchange and Borsa Italiana, plus the MillenniumIT software business, based in Sri Lanka, which provides technology for the Group as well as third party sales.

 


Six months ended


Constant


30 June


currency


2019

2018

Variance

variance

Revenue

£m

£m

%

%

MillenniumIT & other technology

30 

32 

(6%)

(7%)

Cost of sales

(4)

(5)

(28%)

(28%)

Gross profit

26 

27 

(2%)

(3%)

 

Basis of Preparation

 

Results for the European and US businesses have been translated into Sterling using the exchange rates set out below.  Constant currency growth rates have been calculated by translating prior period results at the average exchange rate for the current period.

 


Average rate


Average rate



6 months ended

Closing rate at

6 months ended

Closing rate at


30 June 2019

30 June 2019

30 June 2018

30 June 2018

GBP : EUR

1.15

1.12

1.14

1.13

GBP : USD

1.29

1.27

1.38

1.32

 

 

Condensed CONSOLIDATED Income Statement

 



Six months ended 30 June 2019 Unaudited


Six months ended 30 June 2018

Unaudited



Underlying items

Non-underlying items

Total


Underlying items

Non-underlying items

Total



£m

£m

£m


£m

£m

£m


Notes


(Note 5)




(Note 5)


Revenue

3

1,018

-

1,018


953

-

953

Net treasury income from CCP clearing business

3

120

-

120


104

-

104

Other income

3

2

-

2


3

-

3

Total income


1,140

-

1,140


1,060

-

1,060

Cost of sales

3

(109)

-

(109)


(106)

-

(106)

Gross profit


1,031

-

1,031


954

-

954










Expenses









Operating expenses before depreciation, amortisation and impairment

4

(406)

(48)

(454)


(407)

(10)

(417)

Share of loss after tax of associates


(4)

-

(4)


(3)

-

(3)

Earnings before interest, tax, depreciation, amortisation and impairment


621

(48)

573


544

(10)

534

Depreciation, amortisation and impairment

4

(88)

(86)

(174)


(64)

(77)

(141)










Operating profit/(loss)

3

533

(134)

399


480

(87)

393










Finance income


7

-

7


6

-

6

Finance expense


(43)

-

(43)


(39)

-

(39)

Net finance expense

6

(36)

-

(36)


(33)

-

(33)

Profit/(loss) before tax


497

(134)

363


447

(87)

360










Taxation

7

(120)

22

(98)


(101)

24

(77)

Profit/(loss) for the period


377

(112)

265


346

(63)

283

Profit/(loss) attributable to:









Equity holders


350

(104)

246


307

(61)

246

Non-controlling interests


27

(8)

19


39

(2)

37



377

(112)

265


346

(63)

283

Earnings per share attributable to equity holders









Basic earnings per share

8



70.7p




71.1p

Diluted earnings per share

8



69.5p




69.7p

Adjusted basic earnings per share

8



100.6p




88.7p

Adjusted diluted earnings per share

8



98.9p




87.0p










Dividend per share in respect of the financial period









Dividend per share paid during the period

9



43.2p




37.2p

Dividend per share declared for the period

9



20.1p




17.2p


Condensed CONSOLIDATED STATEMENT of comprehensive income

 



Six months ended 30 June



2019

2018



Unaudited

Unaudited



£m

£m

Profit for the period


265

283





Other comprehensive income:








Items that will not be subsequently reclassified to profit or loss




Defined benefit pension scheme remeasurement gain


7

31

Income tax relating to above items


(2)

(8)







5

23





Items that may be subsequently reclassified to profit or loss




Net investment hedges


(1)

4

Exchange (loss)/gain on translation of foreign operations


(1)

38

Debt instruments at fair value through other comprehensive income:




  - Net gains/(losses) from changes in fair value


11

(29)

  - Net gains reclassified to the consolidated income statement on disposal


(4)

-

Income tax relating to above items


(3)

9







2

22





Other comprehensive income, net of tax


7

45





Total comprehensive income for the period


272

328





Attributable to non-controlling interests


16

35

Attributable to equity holders


256

293

Total comprehensive income for the period


272

328






Condensed CONSOLIDATED balance sheet

 



30 June 2019


31 December 2018



Unaudited




Notes

£m


£m

Assets





Non-current assets





Property, plant and equipment


304


149

Intangible assets

10

4,666


4,687

Investment in associates


21


25

Deferred tax assets


43


42

Investments in financial assets

11

297


31

Retirement benefit assets


50


46

Other non-current receivables

 11, 12

42


30

Contract assets


3


3



5,426


5,013

Current assets





Trade and other receivables

 11, 12

714


644

Contract assets


146


141

Derivative financial instruments

11

1


-

Clearing member financial assets


842,378


764,411

Clearing member cash and cash equivalents


80,429


70,927

Clearing member assets

11

922,807


835,338

Current tax


146


147

Investments in financial assets

11

49


53

Cash and cash equivalents

11

1,450


1,510



925,313


837,833

Total assets


930,739


842,846

Liabilities





Current liabilities





Trade and other payables

11, 13

421


538

Contract liabilities


247


153

Derivative financial instruments

11

28


30

Clearing member liabilities

11

923,033


835,508

Current tax


107


61

Borrowings

11, 14

686


561

Provisions


21


2



924,543


836,853

Non-current liabilities





Borrowings

11, 14

1,634


1,642

Derivative financial instruments

11

23


17

Contract liabilities


89


118

Deferred tax liabilities


466


475

Retirement benefit obligations


18


22

Other non-current payables

11, 13

165


11

Provisions


13


10



2,408


2,295

Total liabilities


926,951


839,148

Net assets


3,788


3,698

Equity





Capital and reserves attributable to the Company's equity holders




Ordinary share capital


24


24

Share premium


967


965

Retained earnings


541


424

Other reserves


1,929


1,930

Total shareholders' funds


3,461


3,343

Non-controlling interests


327


355

Total equity


3,788


3,698


Condensed CONSOLIDATED cash flow statement

 




Six months ended 30 June




2019

2018




Unaudited

Unaudited



Notes

£m

£m

Cash flow from operating activities





Cash generated from operations


16

485

375

Interest received



3

1

Interest paid



(32)

(30)

Corporation tax paid



(54)

(60)

Withholding tax received



-

1

Royalties paid



(2)

-

Net cash inflow from operating activities



400

287

Cash flow from investing activities





Purchase of property, plant and equipment



(15)

(14)

Purchase of intangible assets



(74)

(76)

Net receipt on sale of a disposal group



-

27

Deferred consideration received on disposal of subsidiary 1



1

-

Acquisition of business, net of cash acquired



-

3

Investment in associates



-

(27)

Investment in subsidiary undertaking 2


17

(12)

-

Investment in financial assets classed as FVOCI 3


11

(246)

-

Investment in government bonds



-

(3)

Cash disposed on sale of a subsidiary



-

(2)

Proceeds from disposal of businesses



-

1

Net cash outflow from investing activities



(346)

(91)

Cash flow from financing activities





Dividends paid to shareholders


9

(151)

(129)

Dividends paid to non-controlling interests



(39)

(39)

Purchase of non-controlling interests 4


11

(9)

(70)

Proceeds from own shares on exercise of employee share options



3

3

Purchase of own shares by the employee benefit trust



(5)

(4)

Principal element of lease payments (2018: Payments towards lease obligations)


(20)

(2)

Issue of convertible debt to external party 3



(4)

-

Proceeds from the issue of commercial paper


14

-

176

Additional drawdowns from bank facilities


14

150

-

Repayments made to bank facilities


14

(24)

(227)

Net cash outflow from financing activities



(99)

(292)

Decrease in cash and cash equivalents



(45)

(96)

Cash and cash equivalents at beginning of period


1,510

1,381

Cash and cash equivalents at beginning of period classified as held for sale


-

1

Exchange (loss)/gain on cash and cash equivalents



(15)

13

Cash and cash equivalents at end of period



1,450

1,299


1 Deferred consideration of £1m was received by the Group on its prior year disposal of Exactpro Systems Limited and its subsidiaries.

2 Investment in subsidiary undertaking relates to the Group's investment in Beyond Ratings SAS (Beyond Ratings).

3 Investment in financial assets classed as FVOCI include investments of £244m in Euroclear Holding SA/NV and £2m in Nivaura Limited, by the Group, during the period. The Group additionally issued £4m convertible debt to the latter.

4 The Group purchased the remaining interest in EuroTLX SIM S.p.A. for £9m (€10.2m).

 

Group cash flow does not include cash and cash equivalents held by the Group's Post Trade operations on behalf of its clearing members for use in its operation as manager of the clearing and guarantee systems. These balances represent margins and default funds held for counterparties for short periods in connection with this operation.


Condensed CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 


Attributable to equity holders




Ordinary share capital

Share premium

Retained earnings

Other reserves

Total attributable to equity holders

Non-controll-

-ing interests

Total equity


£m

£m

£m

£m

£m

£m

£m

31 December 2017 (as previously presented)

24

964

419

1,820

3,227

525

3,752

Adoption of new accounting standards1

-

-

(95)

-

(95)

-

(95)

1 January 2018 (restated)

24

964

324

1,820

3,132

525

3,657









Profit for the period

-

-

246

-

246

37

283

Other comprehensive income/(loss) for the financial period

-

-

3

44

47

(2)

45

Final dividend relating to the year ended 31 December 2017 (Note 9)

-

-

(129)

-

(129)

-

(129)

Dividend payments to non-controlling interests

-

-

-

-

-

(42)

(42)

Employee share scheme expenses

-

-

19

-

19

-

19

Tax in relation to employee share scheme expenses

-

-

4

-

4

-

4

Purchase of non-controlling interests

-

-

(10)

-

(10)

(32)

(42)






-



30 June 2018 (Unaudited)

24

964

457

1,864

3,309

486

3,795









31 December 2018 (as previously presented)

24

965

424

1,930

3,343

355

3,698

Adoption of new accounting standards (Note 2)

-

-

(16)

-

(16)

-

(16)

1 January 2019

24

965

408

1,930

3,327

355

3,682









Profit for the period

-

-

246

-

246

19

265

Other comprehensive income/(loss) for the financial period

-

-

11

(1)

10

(3)

7

Issue of shares2

-

2

-

-

2

-

2

Final dividend relating for the year ended 31 December 2018 (Note 9)

-

-

(151)

-

(151)

-

(151)

Dividend payments to non-controlling interests

-

-

-

-

-

(43)

(43)

Employee share scheme expenses

-

-

19

-

19

-

19

Tax in relation to employee share scheme expenses

-

-

6

-

6

-

6

Purchase of non-controlling interests

-

-

2

-

2

(1)

1

30 June 2019 (Unaudited)

24

967

541

1,929

3,461

327

3,788









1 After issuing the Group's Interim Report on 2 August 2018, the IFRIC published clarification guidance regarding the impact of adopting IFRS 15 on admission and listing service provided by the Group's Primary Markets businesses within the Capital Markets segment. Under the new standard, the Group recognises revenue from initial admissions and further issues over the period the Group provides the listing service. As a result the Group recognised an additional £113m reduction to retained earnings compared to amounts previously recognised at 1 January 2018, comprising a £140m increase in total contract liabilities, representing admission fee revenues previously recognised as revenue prior to transition that are now deferred, and a consequential £27m increase in deferred tax assets. The adjustment brings the total impact on the Group's opening retained earnings in relation to new accounting standards effective 1 January 2018 to £95m. The Group's accounting policy for admission fee revenues under IFRS 15 is presented in Note 1 of the Group's annual consolidated financial statements for the year ended 31 December 2018.

2 During the period, the Company issued 47,921 new ordinary shares to the Employee Benefit Trust which generated share premium of £2m.


NOTES TO THE interim condensed consolidated financial statements

 

The Interim Report for the London Stock Exchange Group plc (the 'Group' or the 'Company') for the six months ended 30 June 2019 was approved by the Directors on 1 August 2019.

 

1.   Basis of preparation and accounting policies

 

The interim condensed consolidated financial statements of London Stock Exchange Group plc and its subsidiaries (collectively, the 'Group') for the six months ended 30 June 2019 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with International Accounting Standard 34 (IAS 34), 'Interim Financial Reporting' as adopted by the European Union (EU).

 

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual consolidated financial statements for the year ended 31 December 2018.

 

Comparative amounts presented for the condensed consolidated balance sheet relate to the Group's position as at 31 December 2018. All other comparative amounts presented relate to the six months ended 30 June 2018.

 

All notes to the financial statements include amounts for continuing operations, unless otherwise stated.

 

The Company is a public company, incorporated and domiciled in England and Wales. The address of its registered office is 10 Paternoster Square, London, EC4M 7LS.

 

The principal accounting policies adopted in the preparation of these interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2018, except for the following and the adoption of new and amended standards effective as of 1 January 2019. 

 

The Group adopted IFRS 15 prospectively from 1 January 2018.  The Group recognised initial admission fees over the period the Group provides the listing services.  As at 30 June 2019 the Group revised the recognition period within parts of its Capital Markets segment, resulting in a reduction of the recognition period by 2 years.  The Group now has a recognition period estimated to be between 3 and 12 years.  The change has resulted in £32 million being released from contract liabilities as at 30 June 2019 and recognised as revenue in the Group's Capital Markets segment.

 

IFRS 16 'Leases' issued by the International Accounting Standards Board (IASB) and IFRS Interpretations Committee (IFRIC) has been adopted by the Group in these interim condensed consolidated financial statements. The impact of adoption of this standard is explained further in Note 2.

 

Several other amendments and interpretations apply for the first time in 2019, but these have not had a material impact on the interim condensed consolidated financial statements of the Group.

 

The Group has not early adopted any other standards, amendments or interpretations that have been issued but are not yet effective.

 

The preparation of the interim condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported income and expense, assets and liabilities and disclosure of contingencies at the date of the interim condensed consolidated financial statements.  Although these estimates and assumptions are based on management's best judgement at the date of the interim condensed consolidated financial statements, actual results may differ from these estimates.

 

The statutory financial statements of London Stock Exchange Group plc for the year ended 31 December 2018, which carried an unqualified audit report, have been delivered to the Registrar of Companies and did not contain a statement under section 498 of the Companies Act 2006.

 

The interim condensed consolidated financial statements are unaudited but have been reviewed by the auditors and their review opinion is in included in this report. 

 

The interim condensed consolidated financial statements do not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006.

 

2. Adoption of new accounting standards and interpretations

 

IFRS 16 'Leases' - impact of adoption

 

The Group adopted IFRS 16 on 1 January 2019 using the modified retrospective transitional arrangements and consequently the comparative amounts have not been restated.

 

The standard requires the Group to recognise a 'right-of-use' asset where the Group has a long-term arrangement to benefit from an asset which it controls in return for regular consideration (a lease). This definition includes the large majority of the Group's offices around the world, and these form the largest group of assets recognised on 1 January. Other assets include motor vehicles and other equipment. 

 

The Group has recognised right-of-use assets and corresponding liabilities for all leased assets, except for those with only short-term commitment (less than 12 months) or for individual assets of a value less than £5,000. In such cases, the Group recognises the associated lease payments as an expense on a straight-line basis over the lease term.

 

Right-of-use assets for property or equipment are included within property, plant and equipment on the face of the balance sheet. Assets relating to the right-of-use of an intangible, e.g. software licenses, are included within intangible assets on the face of the balance sheet.

 

The cost of right-of-use assets was calculated as if the Group had always applied the new standard, but using an incremental borrowing rate calculated as at 31 December 2018. The value recognised for lease liabilities is the present value of the remaining lease payments, discounted to 1 January 2019 using the same rate.

 

The following practical expedients were applied by the Group:

 

·      The use of hindsight to determine the lease term if the contract included extensions or break clauses

·      Application of the short-term lease exemption to leases that expire before 31 December 2019

·      Excluding initial direct costs from the measurement of the cost of the asset

·      Applying a single discount rate to groups of leases with similar characteristics, e.g. similar period and location

 

The opening adjustments had the following impact on the opening net assets of the Group:

 



As

reported at

31 December 2018

IFRS 16 transitional adjustments

After

adoption

1 January 2019







£m

£m

£m


Property, plant and equipment


149

170

319


Investment in leases


-

3

3


Assets


149

173

322








Trade and other payables


538

27

565


Non-current payables


11

163

174


Provisions


12

3

15


Deferred tax


475

(4)

471


Liabilities


1,036

189

1,225








Retained earnings


424

(16)

408


Equity


424

(16)

408


 

A reconciliation of the new liabilities to the amounts disclosed at 31 December 2018 as lease commitments is given below:

 


£m



Lease commitments at 31 December 2018

226



Discounted lease commitments at 1 January 2019

185

Less:


Lease liabilities recognised as short-term leases

(2)

Add:


Leases not previously recognised

5

Adjustments in respect of change in treatment of extension options

5

Lease liability as at 1 January 2019

193

 

Weighted average incremental borrowing rate as at 1 January 2019

2.4%

 

New accounting policies

 

The Group has adopted the following accounting policies in respect of leased assets:

 

Right-of-use assets

 

The Group recognises a right-of-use asset where the Group has control of an asset for a period of more than 12 months. Assets are recorded initially at cost and depreciated on a straight line basis of the lease term. Cost is defined as the lease liabilities recognised, plus any initial costs and dilapidations provisions less any lease incentives received.

 

The lease term is the non-cancellable term plus any optional extensions or less any reductions due to break clauses that in the judgement of management are likely to be exercised.

 

Lease liabilities

 

Lease liabilities are recognised at the net present value of the payments to be made over the lease term at the commencement of a lease. Where a lease includes a break clause or extension option, management use their best estimate on the likely outcome on a lease by lease basis. Variable lease payments based on an index are estimated at the commencement date.

 

The present value is determined using the incremental borrowing rate of the leasing entity.

 

Lease payments due within the next 12 months are recognised within current liabilities; payments due after 12 months are recognised within non-current payables.

 

Short-term leases and leases of low value assets

 

Rental costs for leased assets that are for less than 12 months or are for assets with a value of less than £5,000 are recognised directly in the income statement.

 

Lease movements in the period

 

There were additions of £1m to right-of-use property assets during the period. Additions to right-of-use intangible assets are included within intangible assets (note 10).

 

Interest charges recognised in respect of lease liabilities are disclosed within net finance expense (note 6). Depreciation of right-of-use property assets is disclosed within expenses by nature (note 4) and amortisation of right-of-use intangible assets is included within intangible assets (note 10).

 

Amounts incurred in respect of assets leased for less than 12 months or of a low value are disclosed in expenses by nature (note 4).

 

3. Segmental information


Segmental disclosures for the six months ended 30 June 2019 are as follows:











Information

Services

 

 

Post Trade Services - LCH

Post Trade Services - CC&G

and Monte Titoli

Capital

Markets

Technology

Services

Other

Eliminations

Group

Unaudited

£m

£m

£m

£m

£m

£m

£m

£m

Revenue from external customers

441

266

51

226

30

4

-

1,018

Inter-segmental revenue

-

-

-

-

10

-

(10)

-

Revenue

441

266

51

226

40

4

(10)

1,018

Net treasury income from CCP clearing business

-

96

24

-

-

-

-

120

Other income

-

-

-

-

-

2

-

2

Total income

441

362

75

226

40

6

(10)

1,140

Cost of sales

(36)

(61)

(4)

(3)

(4)

(1)

-

(109)

Gross profit

405

301

71

223

36

5

(10)

1,031

Share of loss after tax of associates

-

-

-

-

-

(4)

-

(4)










Earnings before interest, tax, depreciation, amortisation and impairment

253

185

50

134

9

(5)

(5)

621










Underlying depreciation, amortisation and impairment

(24)

(31)

(4)

(15)

(12)

(4)

2

(88)

Operating profit/(loss) before non-underlying items

229

154

46

119

(3)

(9)

(3)

533

Amortisation and impairment of goodwill and purchased intangible assets








(86)

Other non-underlying items








(48)

Operating profit








399

Net finance expense








(36)

Profit before tax








363

 

Net treasury income from the CCP businesses of £120m comprises gross interest income of £655m less gross interest expense of £535m.

The Group's revenue from contracts with customers disaggregated by segment, major product and service line, and timing of revenue recognition for the six months ended 30 June 2019 is shown below:

 

Six months ended 30 June 2019







Information

Services

 

 

Post Trade Services - LCH

Post Trade Services - CC&G

and Monte Titoli

Capital

Markets

Technology

Services

Other

Group

Unaudited

£m

£m

£m

£m

£m

£m

£m

Revenue from external customers








Major product & service lines








FTSE Russell Indexes - subscription

203

-

-

-

-

-

203

FTSE Russell Indexes - asset based

112

-

-

-

-

-

112

Real time data

48

-

-

-

-

-

48

Other information services

78

-

-

-

-

-

78

Clearing


266

22

-

-

-

288

Settlement, custody and other

-

-

29

-

-

-

29

Primary capital markets

-

-

-

90

-

-

90

Secondary capital markets - equities

-

-

-

74

-

-

74

Secondary capital markets - fixed income, derivatives and other

-

-

-

62

-

-

62

Capital markets software licences

-

-

-

-

30

-

30

Other

-

-

-

-

-

4

4

Total revenue from contracts with customers

441

266

51

226

30

4

1,018









Timing of revenue recognition








Services satisfied at a point in time

21

263

47

156

1

4

492

Services satisfied over time

420

3

4

70

29

-

526

Total revenue from contracts with customers

441

266

51

226

30

4

1,018

 

The Group's revenue from contracts with customers disaggregated by geographical location is shown below:




Six months ended 30 June






2019

2018






Unaudited

Unaudited






£m

£m

UK





584

550

Italy





160

162

France





68

53

USA





185

165

Other





21

23

Total





1,018

953

Segmental disclosures for the six months ended 30 June 2018 are as follows:

 










 


Information

Services

 

 

Post Trade Services - LCH

 

Post Trade Services - CC&G

and Monte Titoli

Capital

Markets

Technology

Services

Other

Eliminations

Group

 

Unaudited

£m

£m

£m

£m

£m

£m

£m

£m

 

Revenue from external customers

412

237

52

215

32

5

-

953

 

Inter-segmental revenue

-

-

-

-

8

-

(8)

-

 

Revenue

412

237

52

215

40

5

(8)

953

 

Net treasury income from CCP clearing business

-

83

21

-

-

-

-

104

 

Other income

-

-

-

-

-

3

-

3

 

Total income

412

320

73

215

40

8

(8)

1,060

 










 

Cost of sales

(34)

(53)

(3)

(9)

(5)

(2)

-

(106)

 










 

Gross profit

378

267

70

206

35

6

(8)

954

 

Share of loss after tax of associates

-

-

-

-

-

(3)

-

(3)

 

Earnings before interest, tax, depreciation and amortisation

234

149

46

113

1

4

(3)

544

 

Underlying depreciation and amortisation

(13)

(28)

(4)

(4)

(14)

(2)

1

(64)

 

Operating profit/(loss) before non-underlying items

221

121

42

109

(13)

2

(2)

480

 

Amortisation of purchased intangible assets








(77)

 

Other non-underlying items








(10)

 

Operating profit








393

 

Net finance expense








(33)

 

Profit before tax








360

 

 

Net treasury income from the CCP businesses of £104m comprises gross interest income of £457m less gross interest expense of £353m.

 

The Group's revenue from contracts with customers disaggregated by segment, major product and service line, and timing of revenue recognition for the six months ended 30 June 2018 is shown below:

 

 

Six months ended 30 June 2018






 


Information

Services

 

 

Post Trade Services - LCH

Post Trade Services - CC&G

and Monte Titoli

Capital

Markets

Technology

Services

Other

Group

 

Unaudited

£m

£m

£m

£m

£m

£m

£m

 

Total revenue








 

Major product & service lines








 

FTSE Russell Indexes - subscription 1

185

-

-

-

-

-

185

 

FTSE Russell Indexes - asset based

105

-

-

-

-

-

105

 

Real time data

47

-

-

-

-

-

47

 

Other information services1

75

-

-

-

-

-

75

 

Clearing

-

237

22

-

-

-

259

 

Settlement, custody and other

-

-

30

-

-

-

30

 

Primary capital markets

-

-

-

62

-

-

62

 

Secondary capital markets - equities

-

-

-

89

-

-

89

 

Secondary capital markets - fixed income, derivatives and other

-

-

-

64

-

-

64

 

Capital markets software licences

-

-

-

-

32

-

32

 

Other

-

-

-

-

-

5

5

 

Total revenue from contracts with customers

412

237

52

215

32

5

953

 









 

Timing of revenue recognition








 

Services satisfied at a point in time

21

234

48

149

1

4

457

 

Services satisfied over time

391

3

4

66

31

1

496

 

Total revenue from contracts with customers

412

237

52

215

32

5

953

 









 

1Mergent and some other minor items totalling £19m have been reclassified from FTSE Russell subscriptions to other information services.

 

 

 

4. Expenses by nature





Expenses comprise the following:








Six months ended 30 June




2019

2018




Unaudited

Unaudited

Underlying items



£m

£m

Employee costs



270

255

Short-term lease costs



1

-

IT costs



68

65

Low value items leasing



1

-

Other costs



66

87

Operating expenses before depreciation, amortisation and impairment



406

407

Depreciation, amortisation and impairment



88

64

Total operating expenses



494

471






Other costs include foreign exchange gains of £2m (30 June 2018: £5m gain).

Depreciation and impairment in relation to right-of-use property assets of £14m is included with in depreciation, amortisation and impairment.

 

5. Non-underlying items








Six months ended 30 June




2019

2018




Unaudited

Unaudited




£m

£m

Amortisation and impairment of goodwill and purchased intangible assets



86

77

Transaction costs



22

5

Restructuring costs



24

-

Integration costs



2

5

Total affecting profit before tax



134

87






Tax effect on items affecting profit before tax





Deferred tax on amortisation of purchased intangible assets



(13)

(17)

Current tax on amortisation of purchased intangible assets



(6)

(5)

Tax effect on other items affecting profit before tax



(3)

(2)

Total tax effect on items affecting profit before tax



(22)

(24)






Total charge to income statement



112

63

 

Transaction costs comprise charges incurred for services relating to potential mergers and acquisition transactions.

 

Restructuring costs comprise of one-off implementation costs arising from the cost savings programme announced and provided for in March 2019.

 

Integration costs principally relate to the activities to integrate the Mergent and Yield Book businesses into the Group.

 

6. Net finance expense



 




 


Six months ended 30 June

 


2019

2018

 


Unaudited

Unaudited

 


£m

£m

 

Finance income



 

Bank deposit and other interest income

5

3

 

Expected return on defined benefit pension scheme assets

1

1

 

Other finance income

1

2

 


7

6

 




 

Finance expense



 

Interest payable on bank and other borrowings

(38)

(35)

 

Defined benefit pension scheme interest cost

-

(1)

 

Lease interest expense

(2)

-

 

Other finance expenses

(3)

(3)

 


(43)

(39)

 




 

Net finance expense

(36)

(33)

 




 

Bank deposit and other interest income includes negative interest earned on the Group's borrowings. Interest payable includes amounts where the Group earns negative interest on its cash deposits.

Other finance income includes an immaterial amount of interest on finance leases.

 

7. Taxation






Six months ended 30 June


2019

2018


Unaudited

Unaudited

Taxation charged to the income statement

£m

£m




Current tax:



UK corporation tax for the period

53

41

Overseas tax for the period

57

56

Adjustments in respect of previous years

(2)

-


108

97

Deferred tax:



Deferred tax for the period

3

(3)

Deferred tax liability on amortisation of purchased intangible assets

(13)

(17)


(10)

(20)

Taxation charge

98

77






 




Six months ended 30 June

 




2019

2018

 




Unaudited

Unaudited

 

Taxation on items not credited/(charged) to income statement



£m

£m

 






 

Current tax credit:





 

Tax allowance on share options/awards in excess of expense recognised



5

5

 






 

Deferred tax (expense)/credit:





 

Tax allowance on defined benefit pension scheme remeasurements



(2)

(8)

 

Tax allowance on share options/awards in excess of expense recognised



1

(1)

 

Tax on movement in value of investments in financial assets



(3)

1

 




1

(3)

 






 

Factors affecting the tax charge for the period





 

The income statement tax charge for the period differs from the standard rate of corporation tax in the UK of 19% (30 June 2018: 19%) as explained below:

 






 




Six months ended 30 June

 




2019

2018

 




Unaudited

Unaudited

 




£m

£m

 

Profit before taxation



363

360

 






 

Profit multiplied by standard rate of corporation tax in the UK


69

68

 






 

Expenses not deductible



12

2

 

Overseas earnings taxed at higher rate



16

7

 

Adjustments in respect of previous years



(2)

-

 

Deferred tax not recognised



3

-

 

Taxation charge



98

77

 






 

The tax rate applied as at 30 June 2019 is the expected rate for the full financial year.

 

 

EU State Aid

The Group continues to monitor developments in relation to EU State Aid investigations. On 25 April 2019, the EU Commission's final decision regarding its investigation into the UK's Controlled Foreign Company (CFC) regime was published. It concludes that the legislation up until December 2018 does partially represent State Aid.

The UK Government has since appealed the decision but has not yet announced how it will identify and recover State Aid, which it is still required to do regardless of the appeal.

 

The Group has made claims under the CFC legislation and considers that the potential amount of additional tax payable excluding compound interest is between nil and £65 million depending on the basis of calculation.

 

Following the UK Government's appeal and managements internal view, the Group does not consider any provision is required in relation to this investigation.

 

The assessment of uncertain tax positions is subjective and significant management judgement is required. This judgement is based on current interpretation of legislation, management experience and professional advice.

8. Earnings per share




 





 

Earnings per share attributable to equity holders of the parent company of the Group, London Stock Exchange Group plc (the 'Company') is presented on four bases: basic earnings per share; diluted earnings per share; adjusted basic earnings per share; and adjusted diluted earnings per share. Basic earnings per share is in respect of all activities and diluted earnings per share takes into account the dilution effects which would arise on conversion or vesting of share options and share awards under the Employee Share Ownership Plans (ESOP). Adjusted basic earnings per share and adjusted diluted earnings per share exclude amortisation of purchased intangible assets and non-underlying items and to enable a better comparison of the underlying earnings of the business with prior periods.

 





 


Six months ended 30 June

 


2019


2018

 


Unaudited


Unaudited

 

Basic earnings per share

70.7p


71.1p

 

Diluted earnings per share

69.5p


69.7p

 

Adjusted basic earnings per share

100.6p


88.7p

 

Adjusted diluted earnings per share

98.9p


87.0p

 





 

Profit and adjusted profit for the financial period attributable to the Company's equity holders

 


Six months ended 30 June

 


2019


2018

 


Unaudited


Unaudited

 


£m


£m

 

Profit for the financial period attributable to the Company's equity holders

246


246

 





 

Adjustments:




 

 Amortisation and non-underlying items




 

Amortisation and impairment of goodwill and purchase intangibles assets

86


77

 

Transaction costs

22


5

 

Restructuring costs

24


-

 

Integration costs

2


5

 


134


87

 

 Other adjusting items




 





 

Tax effect of amortisation of purchased intangibles and non-underlying items

(22)


(24)

 

Amortisation of purchased intangible assets, non-underlying items and taxation attributable to non-controlling interests

(8)


(2)

 





 

Adjusted profit for the financial period attributable to the Company's equity holders

350


307

 





 

Weighted average number of shares - million

348


346

 

Effect of dilutive share options and awards - million

6


7

 

Diluted weighted average number of shares - million

354


353

 





 

The weighted average number of shares excludes those held in the employee benefit trust and treasury shares held by the Group.

 


 

9. Dividends









Six months ended 30 June



2019

2018



Unaudited

Unaudited



£m

£m









Final dividend for 31 December 2017 paid 31 May 2018: 37.2p per Ordinary share


-

129

Final dividend for 31 December 2018 paid 29 May 2019: 43.2p per Ordinary share


151

-



151

129




Dividends are only paid out of available distributable reserves.

The Board has proposed an interim dividend in respect of the six-month period ended 30 June 2019 of 20.1p per share, amounting to an estimated £70m, to be paid in September 2019.  This is not reflected in these interim condensed consolidated financial statements.

 

10.  Intangible assets









Purchased intangible assets




Goodwill

Customer and supplier relationships

Brands

Software, licenses and intellectual property

Software, contract costs and other

Total


£m

£m

£m

£m

£m

£m

Cost:







1 January 2019

2,447

1,892

1,005

582

872

6,798

Additions

15

 -

 -

-

113

128

Disposals

 -

(2)

-

(1)

(2)

(5)

Asset transfer

 -

 -

 -

-

2

2

Foreign exchange

(6)

(3)

1

(1)

(1)

(10)

30 June 2019 (Unaudited)

2,456

1,887

1,006

580

984

6,913








Accumulated amortisation and impairment:







1 January 2019

528

662

197

304

420

2,111

Impairment

8

1

-

-

-

9

Amortisation charge for the period

-

46

20

11

55

132

Disposals

-

(2)

-

(1)

-

(3)

Asset transfer

-

-

-

-

2

2

Foreign exchange

(2)

(1)

-

-

(1)

(4)

30 June 2019 (Unaudited)

534

706

217

314

476

2,247








Net book values:







30 June 2019 (Unaudited)

1,922

1,181

789

266

508

4,666

31 December 2018

1,919

1,230

808

278

452

4,687

 

Goodwill

 

During the period, the Group acquired Beyond Ratings SAS ("Beyond Ratings"), which resulted in an increase of £15m in goodwill. Further details are provided in Note 17.

 

Purchased intangible assets

 

Following a review of purchased intangible assets, Turquoise Global Holdings Ltd disposed of assets no longer in use, comprising £2m of customer relationships and £1m software licences with a nil net book value.

 

Software, contract costs and other

 

During the period, additions relating to internally generated software amounted to £92m (30 June 2018: £80m).

 

The carrying value of licences held by leases at 30 June 2019 amounted to £3m (31 December 2018: £6m).

 

The Group capitalised £18m right of use assets held under leases at 30 June 2019. All the assets were acquired in the period and recognised a £3m amortisation charge.

 

During the period, the Group capitalised £3m (June 2018: £5m) of incremental contract costs in respect of revenue generating contracts with customers and recognised a £3m (June 2018: £4m) amortisation charge relating to contract cost assets.  No impairment was recognised in period in relation to contract cost assets.

 

Impairment

 

An impairment has been recognised in relation to Turquoise Global Holdings Ltd due to uncertainties on the underlying future cash flows. This has arisen due to weaker demand in the 'lit' trading book coupled with increased cost arising out of additional investment in information technology to support the business. This has resulted in an impairment of £8 million in Goodwill and £1 million in Customer and Supplier Relationships.

 

11. Financial assets and financial liabilities






Financial instruments by category





The financial instruments of the Group at 30 June 2019 are categorised as follows:






30 June 2019

Financial assets at amortised cost

Financial assets at fair value through OCI

Financial assets at fair value through profit or loss

Total

Unaudited

£m

£m

£m

£m

Financial assets





Clearing member financial assets





- Clearing member trading assets

149,932

-

669,906

819,838

- Other receivables from clearing members

3,958

-

-

3,958

- Other financial assets

-

18,582

-

18,582

- Clearing member cash and cash equivalents

80,429

-

-

80,429

Clearing member financial assets

234,319

18,582

669,906

922,807






Trade and other receivables

678

-

5

683

Cash and cash equivalents

1,450

-

-

1,450

Investments in financial assets - debt

-

94

-

94

Investments in financial assets - equity

-

252

-

252

Derivative financial instruments

-

-

1

1






Total financial assets

236,447

18,928

669,912

925,287


Trade and other receivables excludes prepayments as these are not financial instruments.

 

30 June 2019


Financial liabilities at amortised cost

Financial liabilities at fair value

through profit

or loss

Total

Unaudited


£m

£m

£m

Financial liabilities










Clearing member financial liabilities:





- Clearing member trading liabilities


149,932

669,906

819,838

- Other payables to clearing members


103,195

-

103,195

Clearing member financial liabilities


253,127

669,906

923,033






Trade and other payables


551

-

551

Borrowings


2,320

-

2,320

Derivative financial instruments


-

51

51






Total financial liabilities

255,998

669,957

925,955






There were no transfers between categories during the period.

Trade and other payables excludes social security and other taxes as these are not financial instruments.




 

The financial instruments of the Group at 31 December 2018 were categorised as follows:

 






 

31 December 2018 (re-presented)

Financial assets at amortised cost

Financial assets at fair value through OCI

Financial instruments at fair value through profit or loss

Total

 


£m

£m

£m

£m

 

Financial assets





 






 

Clearing member financial assets:





 

- Clearing member trading assets

138,153

-

604,303

742,456

 

- Other receivables from clearing members

2,261

-

-

2,261

 

- Other financial assets

-

19,694

-

19,694

 

- Cash and cash equivalents of clearing members

70,927

-

-

70,927

 

Clearing member financial assets

211,341

19,694

604,303

835,338

 






 

Trade and other receivables

621

-

-

621

 

Cash and cash equivalents

1,510

-

-

1,510

 

Investments in financial assets - debt

-

84

-

84

 






 

Total financial assets

213,472

19,778

604,303

837,553

 


 

There were no transfers between categories during the prior period. The financial assets have been re-presented excluding contract assets, as they are no longer considered to be a financial asset.

 

 

31 December 2018



Financial liabilities at amortised cost

Financial liabilities at fair value through profit or loss

Total




£m

£m

£m

Financial liabilities












Clearing member financial liabilities:






- Clearing member trading liabilities



138,153

604,303

742,456

- Other payables to clearing members



93,052

-

93,052

Clearing member financial liabilities



231,205

604,303

835,508







Trade and other payables



510

10

520

Borrowings



2,203

-

2,203

Derivative financial instruments



-

47

47







Total financial liabilities



233,918

604,360

838,278







There were no transfers between categories during the prior period.


The following table provides the fair value measurement hierarchy of the Group's financial assets and liabilities as at 30 June 2019:

 

30 June 2019

Quoted prices in active markets

(Level 1)

Significant observable inputs

(Level 2)

Significant unobservable inputs

(Level 3)

Total

fair value

Unaudited

£m

£m

£m

£m






Financial assets measured at fair value:










Clearing member trading assets:





- Derivative instruments

7,741

171,701

-

179,442

- Non-derivative instruments

20

490,444

-

490,464

Other financial assets

18,582

-

-

18,582






Fair value of clearing member assets

26,343

662,145

-

688,488






Investments in financial assets - debt

94

-

-

94

Investments in financial assets - equity

-

250

2

252

Trade and other receivables - convertible loan notes

-

-

5

5






Derivatives not designated as hedges:





 - Foreign exchange forward contracts

-

1

-

1






Total financial assets at fair value

26,437

662,396

7

688,840



30 June 2019

Quoted prices in active markets

(Level 1)

Significant observable inputs

(Level 2)

Significant unobservable inputs

(Level 3)

Total

fair value

Unaudited

£m

£m

£m

£m






Financial liabilities measured at fair value:










Clearing member trading liabilities:





- Derivative instruments

7,741

171,701

-

179,442

- Non-derivative instruments

20

490,444

-

490,464






Fair value of clearing member liabilities

7,761

662,145

-

669,906






Derivatives not designated as hedges:





Foreign exchange forward contracts

-

1

-

1






Derivatives designated as hedges:





Cross currency interest rate swaps

-

50

-

50






Total financial liabilities at fair value

7,761

662,196

-

669,957






The following table provides the fair value measurement hierarchy of the Group's financial assets and liabilities as at 31 December 2018:

 

31 December 2018

Quoted prices in active markets

(Level 1)

Significant observable inputs

(Level 2)

Significant unobservable inputs

(Level 3)

Total

fair value


£m

£m

£m

£m






Financial assets measured at fair value:










Clearing member trading assets:





- Derivative instruments

4,958

8

-

4,966

- Non-derivative instruments

5

599,332

-

599,337

Other financial assets

19,694

-

-

19,694






Fair value of clearing member assets

24,657

599,340

-

623,997






Investments in financial assets - debt

84

-

-

84






Total financial assets at fair value

24,741

599,340

-

624,081



31 December 2018

Quoted prices in active markets

(Level 1)

Significant observable inputs

(Level 2)

Significant unobservable inputs

(Level 3)

Total

fair value


£m

£m

£m

£m






Financial liabilities measured at fair value:










Clearing member trading liabilities:





- Derivative instruments

4,958

8

-

4,966

- Non-derivative instruments

5

599,332

-

599,337






Fair value of clearing member liabilities

4,963

599,340

-

604,303






Deferred consideration

-

-

10

10






Derivatives used for hedging:





- Cross currency interest rate swaps

-

47

-

47






Total financial liabilities at fair value

4,963

599,387

10

604,360

 

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
- Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
- Level 2: other techniques for which all inputs, which have a significant effect on the recorded fair value are observable, either directly or indirectly; and

- Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

 

For assets and liabilities classified as Level 1, the fair value is based on market price quotations at the reporting date.

 

For assets and liabilities classified as Level 2, the fair value is calculated using one or more valuation techniques (e.g. the market approach or the income approach) with market observable inputs.  The selection of the appropriate valuation techniques may be affected by the availability of the relevant inputs as well as the reliability of the inputs. The inputs may include currency rates, interest rate and forward rate curves and net asset values.  The results of the application of the various techniques may not be equally representative of fair value, due to factors such as assumptions made in the valuation.

 

There have been no transfers between Level 1 and Level 2 during the current and prior period.

 

When observable market data is not available, the Group uses one or more valuation techniques for which sufficient and reliable data is available. The inputs used in estimating the fair value of Level 3 financial instruments include expected timing and level of future cash flows, timing of settlement, discount rates and net asset values of certain investments.

 

On 30 January 2019, the Group acquired a 4.92% equity interest in Euroclear Holding SA/NV (Euroclear) for €278m (£244m). As at 30 June 2019, the carrying value of this investment is £250m. The fair value of the investment is classified as a Level 2 investment, as the fair value can be obtained from external observable inputs.

 

On 25 February 2019, the Group acquired a 7.3% equity interest in Nivaura Limited (Nivaura) for £2m. A further investment of £4m in the form of a convertible loan was also made. The loan is convertible to equity under certain conditions and attracts a discount on the available share price. The fair value of the loan as at 30 June 2019 is £5m, calculated using expected values based on the probability of each possible outcome. A fair value gain of £1m has been recognised during the period in the income statement. The value of the loan is not affected by future cash flows.

 

The Group has opted to treat the equity investments as fair value through other comprehensive income, given the intended long-term nature of these investments. The convertible loan is treated as fair value through profit or loss, as it contains a derivative option.

 

The fair value of the Nivaura investment is classified as a Level 3 investment as it is based on a calculated share price using discounted future cash flows.

 

A 10% increase or decrease in cash flows or a 1% change in the discount rate applied would not have a material effect on the valuation of the investment.

 

The deferred consideration recognised at December 2018 has been paid during the period.

 

With the exception of Group borrowings, management has assessed that the fair value of financial assets and financial liabilities recognised at amortised cost approximates to their carrying values. The fair value of the Group's borrowings is disclosed in Note 14.

 

The Group's financial assets and liabilities held at fair value consist largely of securities restricted in use for the operations of the Group's CCPs as managers of their respective clearing and guarantee systems. The nature and composition of the CCP clearing business assets and liabilities are explained in the accounting policies note in the Group's annual consolidated financial statements for the year ended 31 December 2018.

 

As at 30 June 2019, there were no provisions for impairment in relation to any of the CCP financial assets (31 December 2018: nil) and none of those assets are past due (31 December 2018: nil).

 

Hedging activities and derivatives

 

Current derivative financial liabilities of £27m (31 December 2018: £30m) represent the fair value of the cross currency interest rate swaps comprising 6 contracts totalling €300m notional (31 December 2018: €300m). These instruments effectively exchange the obligations and coupons of the 2019 £250m bond from sterling into euros in order to more closely match the currency of borrowings to the Group's currency of net assets and earnings. It also results in a reduction in balance sheet translation exposure on euro denominated net assets and the protection of sterling cash flows. These swaps have been designated as a hedge of the Group's net investment in the Italian group and qualify for effective hedge accounting.

 

For the period ended 30 June 2019, the Group recognised a net £3m loss on mark to market of these derivatives in reserves (30 June 2018: £6m gain).

 

In 2017, the Group issued €1bn of bonds in two €500m tranches that mature in 2024 and 2029. €700m of these bonds were swapped on a coordinated basis into US$836m through a series of nine cross currency interest rate swaps. As at 30 June 2019, non-current derivative financial liabilities of £23m (31 December 2018: £17m) represent the fair value of these cross currency interest rate swaps. These instruments effectively exchange some of the obligations and coupons of the bonds from euros into US dollars in order to more closely match the Group's currency of borrowings to the currency of its net assets and earnings. These swaps have been designated as a hedge of the Group's net investments in its US dollar reporting subsidiaries and qualify for effective hedge accounting.

 

The remaining €300m of bonds are a hedge of the Group's net investments in euro denominated subsidiaries and qualify for effective hedge accounting.

 

Through the period the Group drew on its committed bank facilities in euro and US dollars and issued euro Commercial Paper. These drawings and issuances were designated as hedges of the Group's net investment and euro and US dollar denominated subsidiaries.

For the period ended 30 June 2019, the Group recognised a net £10m revaluation gain on euro and USD dollar borrowings in reserves (30 June 2018: £2m loss).

 

Foreign exchange forward contracts were arranged during the period to hedge the fair value of euro and US dollar denominated exposures. These contracts forward buy payables denominated in euro and US dollar, with the mark to market adjustments offsetting the revaluation of the underlying item in the income statement. They also offer more predictable cash flows to the Group at maturity. At 30 June 2019, payables of €157m (31 December 2018: €34m) and US$122m (31 December 2018: US$43m) were bought forward and receivables of US$52m (31 December 2018: US$69m) were sold forward. The market value of foreign exchange forward contracts was £1m of assets and £1m of liabilities (31 December 2018: nil) in aggregate.

 

12. Trade and other receivables













30 June

31 December




2019

2018




Unaudited





£m

£m

Non-current





Deferred consideration



28

28

Net investment in leases



3

-

Convertible loan notes



5

-

Other receivables



6

2




42

30






Current





Trade receivables



428

432

Less: Provision for impairment of receivables



(10)

(11)

Trade receivables - net



418

421

Prepayments



73

53

Amounts due from associates



1

1

Deferred consideration



29

28

Other receivables



193

141




714

644






Total trade and other receivables



756

674

 

13.  Trade and other payables








30 June

31 December




2019

2018




Unaudited

Re-presented




£m

£m

Non-current





Lease liabilities 1



159

1

Other payables



6

10




165

11






Current





Trade payables



30

52

Social security and other taxes



35

29

Amounts due to joint venture & associates



1

-

Accruals



244

355

Other payables



72

98

Lease liabilities 1



39

4




421

538






Total trade and other payables



586

549

 

1 Prior to the adoption of IFRS 16, at 31 December 2018, lease liabilities totalling £5m were reported within other payables. There is no change to the total of trade and other payables.

 





 




14.  Borrowings





 




30 June

31 December

 




2019

2018

 




Unaudited


 




£m

£m

 

Current





 

Bank borrowings



167

41

 

Commercial paper



269

270

 

Bonds



250

250

 




686

561

 






 

Non-current





 

Bonds



1,634

1,642

 




1,634

1,642

 






 

Total



2,320

2,203

 

 

The Group has the following committed bank facilities and unsecured notes:






Notes/       Facility

Carrying value at

Interest rate percentage at

Unaudited



30 June 2019

30 June 2019

Type

Expiry Date

£m

%






Multi-currency revolving credit facility

Nov 2022

600

18

LIBOR + 0.45

Multi-currency revolving credit facility

Dec 2024

600

149

LIBOR + 0.3

Total committed Bank facilities



167







Commercial paper

July 2019

269

269

(0.29)1






Bond due October 2019

Oct 2019

250

250

9.125

Bond due November 2021

Nov 2021

300

299

4.75

Bond due September 2024

Sep 2024

448

446

0.875

Bond due December 2027

Dec 2027

448

444

1.75

Bond due September 2029

Sep 2029

448

445

1.75

Total Bonds



1,884


Total borrowings



2,320


1 The Commercial paper interest rate reflected is the average interest rate achieved on outstanding borrowings.

 

The fair value of the Group's borrowings at 30 June 2019 was £2,434m (31 December 2018: £2,475m). 

 

Current borrowings

The Group retained total committed bank facilities of £1,200m during the period. These facilities were partially drawn at 30 June 2019 with carrying value of £167m (31 December 2018: £41m) which includes £2m of deferred arrangement fees (31 December 2018: £2m).

In February 2018, the Group commenced with issuances on the newly arranged £1bn, Euro Commercial Paper facility. Outstanding issuances at 30 June 2019 of €300m (£269m) (31 December 2018: €300m (£270m)) are reissued upon maturity in line with the Group's liquidity requirements.

In June 2009, the Company issued a £250 million bond which is unsecured and is due for repayment in October 2019. Interest is paid semi-annually in arrears in April and October each year. The bond coupon remained at 9.125% per annum throughout the period.

Cassa di Compensazione e Garanzia S.p.A (CC&G) has direct intra-day access to refinancing with the Bank of Italy to cover its operational liquidity requirements in the event of a market stress or participant failure. In addition, it has arranged commercial bank back-up credit lines with a number of commercial banks, which had a total of €420m at 30 June 2019 (31 December 2018: €420m), for overnight and longer durations to broaden its liquidity resources consistent with requirements under the European Markets Infrastructure Regulation (EMIR).

LCH SA has a French banking licence and is able to access refinancing at the European Central Bank to support its liquidity position. LCH Limited is deemed to have sufficient fungible liquid assets to maintain an appropriate liquidity position, and has direct access to certain central bank facilities to support its liquidity risk management in accordance with the requirements under the EMIR. In accordance with the Committee on Payments and Market Infrastructures (CPMI), International Organization of Securities Commissions (IOSCO) and Principles for Financial Market Infrastructures (PFMIs), many Central Banks now provide for CCPs to apply for access to certain Central Bank facilities.

In addition, a number of Group entities have access to uncommitted operational, money market and overdraft facilities which support post trade activities and day to day liquidity requirements across its operations.

 

Non-current borrowings

 

In November 2012, the Group issued a £300m bond under its Euro Medium Term Notes Programme (launched at the same time) which is unsecured and is due for repayment in November 2021. Interest is paid semi-annually in arrears in May and November each year. The issue price of the bond was £100 per £100 nominal. The coupon on the bond is fixed at 4.75% per annum.

 

In September 2017, the Group issued €1bn of bonds in two €500m (£448m) tranches under its updated Euro Medium Term Notes Programme. The bonds are unsecured and the tranches are due for repayment in September 2024 and September 2029 respectively. Interest is paid annually in arrears in September each year. The issue prices of the bonds were €99.602 per €100 nominal for the 2024 tranche and €99.507 per €100 nominal for the 2029 tranche. The coupon on the respective tranches is fixed at 0.875% per annum and 1.75% per annum respectively.

 

In December 2018, the Group issued a €500m (£448m) bond under its updated Euro Medium Term Notes Programme. The bond is unsecured and due for repayment in December 2027. Interest is paid annually in arrears in December each year. The issue price was €99.457 per €100 nominal. The coupon on the bond is fixed at 1.75% per annum.

 

15. Analysis of net debt












30 June

31 December




2019

2018




Unaudited





£m

£m

Due within one year





Cash and cash equivalents



1,450

1,510

Bank borrowings



(167)

(41)

Commercial paper



(269)

(270)

Bonds



(250)

(250)

Derivative financial assets



1

-

Derivative financial liabilities



(28)

(30)




737

919

Due after one year





Bonds



(1,634)

(1,642)

Derivative financial liabilities



(23)

(17)

Total net debt



(920)

(740)






Reconciliation of net cash flow to movement in net debt




30 June

31 December




2019

2018




Unaudited





£m

£m

(Decrease)/increase in cash in the period/year



(45)

84

Bond issue proceeds



-

(445)

Additional drawdowns from bank credit facilities



(150)

-

Repayments made towards bank credit facilities



24

489

Commercial paper issuance



-

(255)

Change in net debt resulting from cash flows



(171)

(127)






Foreign exchange movements



(5)

4

Movement on derivative financial assets and liabilities



(3)

(22)

Bond valuation adjustment



(1)

3

Movement in bank credit facility arrangement fees



 -

(1)

Net debt at the start of the period/year



(740)

(597)

Net debt at the end of the period/year



(920)

(740)






Note: the Net Debt excludes the non-current derivative asset.








16. Net cash flow generated from operations

 






 




Six months ended 30 June

 




2019

2018

 




Unaudited

Unaudited

 



Notes

£m

£m

 

Profit before tax



363

360

 






 

Adjustments for depreciation, amortisation and impairment of fixed assets:





 

Depreciation and amortisation


10

164

141

 

Impairment of intangible assets


10

9

-

 

Impairment of property, plant and equipment



1

-

 






 

Adjustments for other non-cash items:





 

Profit on disposal of fixed assets



(1)

-

 

Share of loss of associates



4

3

 

Net finance expense


6

36

33

 

Royalties



1

-

 

Share scheme expense



19

19

 

Movement in pensions and provisions



18

9

 

Net foreign exchange differences



(13)

(13)

 

Capitalisation of expenses on adoption of new accounting standard



 -

(12)

 






 

Movements in working capital:





 

Increase in trade and other receivables



(77)

(115)

 

(Decrease)/increase in trade and other payables



(80)

174

 

Movements in other assets and liabilities related to operations:





 

Increase in clearing member financial assets



(97,650)

(77,525)

 

Increase in clearing member financial liabilities



97,704

77,301

 

Movement in derivative assets and liabilities 1



(13)

-

 

Cash generated from operations



485

375

 






 

Comprising:





 

Ongoing operating activities



479

364

 

Non-underlying items



6

11

 




485

375

 


 

1 Movement in derivative assets and liabilities includes £10m relating to the Group's exercise of its option to purchase the remaining interest in EuroTLX SIM S.p.A., a subsidiary of the Group.

 

 

 

17.   Business combinations

 

Acquisitions in the period to 30 June 2019

 

The Group made one acquisition in the period ended 30 June 2019.

 

On 31 May 2019, the Group acquired Beyond Ratings SAS (Beyond Ratings) a provider of Environmental, Social and Governance data for fixed income. The consideration comprised £12m cash paid on completion for 87.2 per cent of the share capital and £3m deferred consideration for the remaining shareholdings to be settled before 31 December 2019.

 

The Group recognised £15m provisional goodwill representing the growth of future expected income streams as a result of the acquisition being highly complementary to the Groups index and data offering and the analytics tools.

  

The provisional fair value of net assets identified was nil. The fair values attributed to the Beyond Ratings acquisition are preliminary and will be finalised within 12 months of the acquisition date.

 

The post acquisition revenues and operating profit from continuing operations of Beyond Ratings for the period ended 30 June 2019 were not material to the Group.  If the acquisition had occurred on 1 January 2019, the results of the additional period of ownership would have had an immaterial impact on the Group's revenue and operating profit from continuing operations for the period ended 30 June 2019.

 

The acquisition-related costs incurred in relation to the transaction were not material to the Group.

 

Acquisitions in the year ended 31 December 2018

 

There were no business combinations during the year ended 31 December 2018.

 

18.   Transactions with related parties

 

The nature and contractual terms of key management compensation and inter-company transactions with subsidiary undertakings during the period are consistent with the disclosures in Note 36 of the Group's annual consolidated financial statements for the year ended 31 December 2018.

 

19.   Commitments and contingencies

 

The Group had no contracted capital commitments and other contracted commitments not provided for in the interim condensed consolidated financial statements (31 December 2018: nil).

 

In the normal course of business, the Group receives legal claims in respect of commercial, employment and other matters. Where a claim is more likely than not to result in an economic outflow of benefits from the Group, a provision is made representing the expected cost of settling such claims.

 

20.   Events after the reporting period

 

On 1 August 2019 the Group announced that it had agreed definitive terms with a consortium including certain investment funds affiliated with Blackstone as well as Thomson Reuters to acquire the Refinitiv business (Refinitiv) in an all share transaction for a total enterprise value of approximately $27 billion.  Blackstone's consortium includes an affiliate of Canada Pension Plan Investment Board, an affiliate of GIC and certain co-investors.  The transaction would result in the Refinitiv Shareholders holding an approximately 37 per cent stake in the enlarged group and less than 30 per cent of the total voting rights of LSEG.  The approval of shareholders is expected to be sought before the end of 2019.  Completion of the transaction is expected during the second half of 2020.

 

On the same day the Group has arranged underwritten bridge financing of approximately $13.5 billion to refinance the Refinitiv notes and term loans in full following completion.

 

 

Principal Risks

 

The management of risk is fundamental to the Group's day-to-day operations and the successful execution of its Strategic Plan.

 

LSEG's Enterprise-wide Risk Management Framework (ERMF) is designed to allow management and the Board to identify, assess and manage LSEG's risks and to ensure better decision taking in the execution of its strategy. It also enables the Board and executive management to maintain and attest to the effectiveness of the systems of internal control and to manage principal risks as set out in the UK Corporate Governance Code. Additional details can be found in our risk management oversight supplement. Please visit: www.lseg.com/about-london-stock-exchange-group/risk-management-oversight for the year ended 31 December 2018.

 

The Group does not consider that the principal risks and uncertainties set out on pages 48-57 of its Annual Report for the year ended 31 December 2018 to have changed materially. A summary of the principal risks and uncertainties which may affect the Group in the second half of the financial year include the following:

 

Strategic Risks

 

Global Economy

As a diversified markets infrastructure business, we operate in a broad range of equity, fixed income and derivative markets servicing clients who increasingly seek global products and solutions. If the global economy underperforms, lower activity in our markets may lead to lower revenue.

 

The widening geographical footprint of the Group has had the dual effect of increasing the proportion of the Group's earnings that are in foreign currency, leading to greater foreign exchange risk, but also improving the geographical diversification of the Group's income streams.

 

Ongoing geopolitical tensions add uncertainty in the markets and may impact investor confidence and activity levels. In particular, the political uncertainty in the UK as well as the trade tensions between the US and its major trading partners continue to unsettle global markets. LSEG monitors the potential impact of macroeconomic and political events on our operating environment and business model and the Group is an active participant in international and domestic regulatory debates.

 

Regulatory Change

The Group and its exchanges, trading venues, clearing houses (CCPs), benchmark index businesses, central securities depositories, trade repositories and other regulated entities operate in areas that are highly regulated by governmental, competition and other regulatory bodies. New regulations, such as the EU General Data Protection Regulation (GDPR), MiFID II and the EU Benchmarks Regulation, create operational risks as the Group implements processes to established business models to meet the new regulations.

 

Brexit - The UK vote in 2016 to leave the EU introduced significant uncertainty concerning the political and regulatory environment, the UK's future relationship with the EU, and the overall impact on the UK and European economies both in the short and medium term. Negotiations between the UK and the EU continue, but the UK's final exit terms are unclear. The lack of agreement between the UK and the EU increases the risk of a 'no deal' hard Brexit scenario. The effects of Brexit (including a no deal Brexit or another extension to the Article 50 process) are uncertain, and could affect the Group's businesses, operations, financial condition and cash flows.

 

In the event of a hard 'no deal' Brexit, LSEG business will not necessarily be able to rely on respective access between the UK and the EU. Accordingly, the Group is executing contingency plans to maintain continuity of service to customers and orderly functioning of its markets. These plans include setting up   authorised entities in the EU27 and in the UK for certain Group businesses, as well as  receiving temporary equivalence and filing for authorisation for certain clearing operations. However, the complexity and the lack of clarity of the application of a hard Brexit may decrease the effectiveness or applicability of some of these contingency plans. As is the case with all change, these contingency plans introduce some execution risk. In addition, the Group has a structured Brexit programme to engage with UK, EU and US Brexit policy leads to advise on financial market infrastructure considerations. LSEG's key objectives are maintaining London's position as a global financial hub and providing continuity of stable financial market infrastructure services.

 

Any of these effects of Brexit, and others the Group cannot anticipate, could adversely affect the Group's business, results of operations, financial condition and cash flows.

 

Competition

The Group operates in a highly competitive industry. Continued consolidation has fuelled competition including between groups in different geographical areas.

 

·     

Our Capital Markets operations face continuing risk from competitors' commercial and technological offerings. There is strong competition for primary listings and capital raising from other global exchanges and regional centres with the increasing take-up of new funding models such as private equity and direct investment.

 

·     

The Group's Information Services business faces competition from a variety of sources, such as from index providers which offer indices and other benchmarking tools which compete with those offered by the Group, as well as analytics providers.

 

·     

In Post Trade Services, we continue to see increased clearing activity across a number of asset classes, in particular OTC derivatives products, reflecting the attractiveness of the Group's current customer offering and open access philosophy.

 

·     

In Technology Services, there is intense competition across all activities as investment increases across the industry in technological innovation. At present, technology product and service innovation is highly fragmented with many new entrants and start-ups. There are also strong incumbents in some of our growth areas.

 

The Group's track record of innovation and diversification ensures the Group continues to offer best in class services with a global capability. The Group maintains strong customer relationships by meeting their requirements through organic growth strategies designed in partnership with them. In addition, the Group continues to effectively integrate acquisitions and deliver tangible synergies from them, supported by robust governance and programme management structures.

 

Compliance

There is a risk that one or more of the Group's entities may fail to comply with the laws and regulatory requirements (incl. GDPR) to which it is, or becomes, subject. In this event, the entity in question may be subject to censures, fines and other regulatory or legal proceedings.

 

The Group continues to maintain systems and controls to mitigate compliance risk and compliance policies and procedures are regularly reviewed.

 

Transformation Risk

The Group is exposed to transformation risks (risk of loss or failure resulting from change/transformation).

 

The Group continues to grow rapidly both organically and inorganically. Acquisitions may, in some cases, be complex and/ or necessitate change to operating models, business models, technology and people. Acquisitions may increase integration risks and expected synergies may not be achieved.

 

A failure to successfully embed the corporate operating model may lead to an increased cost base without a commensurate increase in revenue, a failure to capture future product and market opportunities, and risks in respect of capital requirements, regulatory relationships and management time.

 

The additional effort related to M&A and post-transaction alignment activities may adversely impact on the Group's day-to-day performance and/or key strategic initiatives, which could damage the Group's reputation and financial performance.

 

The size and complexity of acquisitions in the past 5 years have increased the Group's change management and transformation risks. However, they have also increased its opportunities to compete on a global scale and diversified its revenue footprint by industry, geography and customer base.

 

LSEG's Enterprise-wide Risk Management Framework (ERMF) ensures appropriate risk management across the Group, and the governance of the ever-growing Group is aligned and strengthened as appropriate. The Group performs regular reporting of change performance, including ongoing alignment activity. Each major initiative is overseen by a Steering Committee which monitors the associated risks closely. Regular reports are submitted to the Executive Committee, the Board Risk Committee and the Board.

 

Reputation/Brand

A number of the Group's businesses have iconic national brands that are well-recognised at international as well as at national levels. The strong reputation of the Group's businesses and their valuable brand names are a key selling point. Any events or actions that damage the reputation or brands of the Group could adversely affect its business, financial condition and operating results.

 

Failure to protect the Group's Intellectual Property rights adequately could result in costs for the Group, negatively impact the Group's reputation and affect the ability of the Group to compete effectively. Further, defending or enforcing the Group's Intellectual Property rights could result in the expenditure of significant financial and managerial resources, which could adversely affect the Group's business, financial condition and operating results.

 

LSEG has policies and procedures in place which are designed to ensure the appropriate usage of the Group's brands and to maintain the integrity of the Group's reputation. LSEG actively monitors the usage of its brands and other Intellectual Property in order to prevent or identify and address any infringements. The Group protects its Intellectual Property by relying upon a combination of trade mark laws, copyright laws, patent laws, trade secret protection, confidentiality agreements and other contractual arrangements with its affiliates, clients, customers, suppliers, strategic partners and others.

 

Financial Risks

 

Credit Risk

The Group's CCPs manage the credit risk of clearing counterparties by imposing stringent membership requirements, analysing member credit quality by means of an internal rating system and via variation margin, initial margins and additional margins.

 

Investment Risk

Under the ERMF, CCP investments must be made in compliance with the LSEG Financial Risk Policy (as well as the Policies of the CCPs themselves). These Policies stipulate a number of Risk Management standards including investment limits (secured and unsecured) as well as liquidity coverage ratios. Committees overseeing CCP investment risk meet regularly. CCP counterparty risk including liquidity management balances and counterparty disintermediation risk is consolidated daily at the Group level and reported to the Executive Committee, including limits and status rating.  Requirements for investments by other members of the Group are set out in the Group's Board approved Treasury Policy.

 

Market Risk (non-clearing)

The Group is exposed to foreign exchange risk through its broadening geographical footprint, and interest rate risk through borrowing activities and treasury investments.  Non-clearing market risk is monitored and managed closely and is under the oversight of the Group's Treasury Committee.

 

Latent Market Risk (clearing)

There is a risk that one of the parties to a cleared transaction defaults on their obligation; in this circumstance the CCP is obliged to honour the contract on the defaulter's behalf and thus an unmatched risk position arises. The CCP may suffer a loss in the process of work-out (the 'Default Management Process') if the market moves against the CCP's positions.

 

All of the Group's CCPs have been EMIR certified and are compliant with the EMIR requirements regarding margin calculations, capital and default rules. Under the ERMF, CCP latent market risk must be managed in compliance with the Group Financial Risk Policy as well as policies of the CCPs themselves.

 

Liquidity Risk (clearing)

There are two distinct types of risk commonly referred to as liquidity risk. Market liquidity risk is the risk that it may be difficult or expensive to liquidate a large or concentrated position. Funding liquidity risk is the risk that the CCP may not have enough cash to pay for physically settled securities delivered by a non-defaulter that cannot be sold to a defaulter.

 

The Group's CCPs collect clearing members' margin and/or default fund contributions in cash and/or in highly liquid securities. To maintain sufficient ongoing liquidity and immediate access to funds, the Group's CCPs deposit the cash received in highly liquid and secure investments, such as central bank deposits, sovereign bonds and reverse repos, as mandated under EMIR; securities deposited by clearing members are therefore held in dedicated accounts with Central Securities Depositories (CSDs) and/or International Central Securities Depositories (ICSDs). The Group's CCPs also hold a small proportion of their investments in unsecured bank and money market deposits. The successful operation of these investment activities is contingent on general market conditions and there is no guarantee that such investments will not suffer market losses. Furthermore, there is a risk that a counterparty default could lead to losses to the Group. Such a loss may occur due to the default of an issuer of bonds in which funds may be invested or the default of a bank in which funds are deposited.

 

The Group's CCPs manage their exposure to credit and concentration risks arising from such investments by maintaining a diversified portfolio of high-quality liquid investments. The Group relies on established policies with minimum counterparty credit criteria, instructions, rules and regulations, as well as procedures specifically designed to actively manage and mitigate credit risks. There is no assurance, however, that these measures will be sufficient to protect the Group's CCPs from a counterparty default.

 

Group CCPs have put in place regulatory compliant liquidity plans for day-to-day liquidity management, including contingencies for stressed conditions. Group CCPs have multiple layers of defence against liquidity shortfalls including; minimum cash balances, access to contingent liquidity arrangements, and, for certain CCPs, access to central bank liquidity.

 

Capital Management

Principal risks to managing the Group's capital are: capital adequacy compliance risk and capital reporting compliance risk (in respect of regulated entities); commercial capital adequacy and quality risk and investment return risk (in respect of regulated and unregulated entities) and availability of debt or equity.

 

The Group's Capital Management Policy provides a framework to ensure the Group maintains suitable capital levels (both at Group and individual subsidiaries levels), and effectively manages the risks thereof. The Group's Treasury Policy recognises the need to observe regulatory requirements in the management of the Group's resources. The Risk Appetite approved by the Board includes components related to the Group's leverage ratios and capital risks; Key Risk Indicators are monitored regularly, and this risk is mitigated by the fact that the Group is strongly profitable and cash generative. The Group regularly assesses debt and equity markets and seeks to maintain a good, investment grade, credit rating to maintain access to new capital at reasonable cost.

 

Operational Risks

 

Technology

Robust, secure and stable technology performing to high levels of availability and throughput is critical for the support of the Group's businesses. Technology failures may impact our clients and the orderly running of our markets, potentially leading to a loss of trading or clearing volumes or impacting our information services activities.

 

The Group continues to consolidate its technology delivery and operation capabilities through its LSEG Technology and LSEG Business Services companies respectively. 

 

The Group's technology teams mitigate the risk of resource over-stretch by ensuring prioritisation of key development and operations activities, and resource utilisation and allocation are kept under constant review. LSEG Technology's systems are designed to be software and hardware fault tolerant and alternative systems are available in the unlikely event of multiple failures from which the system is unrecoverable.

 

The Group is reliant on outsourced service providers for key technology services and data provision and actively manages relationships with strategic technology suppliers to avoid a breakdown in service provision. The Group also actively monitors new technological developments and opportunities for innovation.

 

Change Management

The considerable change agenda exposes the Group to the risk that change is either misaligned with the Group's strategic objectives or not managed effectively within time, cost, risk and quality criteria. The volume of change is driven by both internal and external factors. Internal factors include the diversification strategy of the Group and its drive for technology innovation, consolidation and operational resilience. External factors include the changing regulatory landscape and requirements which necessitate changes to our systems and processes. 

 

Appropriate governance and executive oversight is exercised over individual programmes and projects based on the scale, complexity and impact of the change to confirm compliance with the approved project management policy and to manage budget, resource, escalations, risks, issues and dependencies. For software specific development, software design methodologies, testing regimes and test environments are continuously being enhanced to minimise implementation risk.

 

Security Threats

The threat of cybercrime has the potential to have an adverse impact on our business. Public and private organisations continue to be targeted by increasingly sophisticated cyber-attacks.

 

Threats such as ransomware, theft of customer data and distributed denial of service attacks remain increasingly significant to the financial industry. Additionally, new emerging technologies for the Group such as cloud computing could impact our cyber security risk profile. The Group's technology and operational support providers, internal and third-party, could suffer a security breach resulting in the loss or compromise of sensitive information (both internal and external) or loss of services.

 

The Group continues to invest in and enhance its information security control environment, cyber defences and operational processes, including its recovery capability, as it delivers its Board approved Cyber Security Strategy. Extensive IT measures aligned to the National Institute of Standards and Technology (NIST) control framework are in place to prevent, detect and respond to cyber security threats such as sophisticated malware, system vulnerabilities and access control, as well as enhancing our security event detection and incident response processes. Effective vetting and monitoring and security training and awareness of our third-party service providers and people remain key components of the control framework. Additionally, the Group undertakes regular testing of security controls and incident response processes. Information Security teams monitor intelligence and liaise closely with global Government agencies as well as industry forums and regulators.

 

Model Risk

The Group manages parts of its operations and risks using sophisticated models. It also provides analytical services to its customers. To that effect the Group is exposed to model risks or fundamental flaws in modelling including model selection, lack of quality in model inputs and assumptions, as well as risk stemming from implementation error, interdependencies, or misuse of models. Decisions based on wrongly designed or misused models may negatively affect the Group. In order to mitigate this risk, LSEG businesses have a robust, formalised model validation processes to ensure the models are fit for purpose and appropriately developed, implemented, maintained and documented. Additionally, LSEG has established a Group Model Risk Management to standardize model governance and validation across the Group. The Model Risk Committee provides oversight for all model activities across the Group and reports to the Board Risk Committee.

 

Settlement and Custodial Risks

The Group's CCPs are exposed to operational risks associated with clearing transactions and the management of collateral, particularly where there are manual processes and controls. While the Group's CCPs have in place procedures and controls to prevent failures of these processes, and to mitigate the impact of any such failures, any operational error could have a material adverse effect on the Group's reputation, business, financial condition and operating results.

 

Operational risk is minimised via highly automated processes reducing administrative activities while formalising procedures for all services.

 

The Group provides routing, netting and settlement and custody services through its CSD to ensure that securities are settled in a timely and secure manner. There are operational risks associated with such services, particularly where processes are not fully automated.

 

The operations of the settlement service are outsourced to the European Central Bank (TARGET2-Securities).

 

The CSD mitigates IT risks by providing for redundancy of systems, daily backup of data, fully updated remote recovery sites and SLAs with outsourcers.

 

Employees

The calibre and performance of our leaders and colleagues is critical to the success of the Group. The Group's ability to attract and retain key talent is dependent on a number of factors. This includes (but not exclusively) organisational culture and reputation, prevailing market conditions, compensation packages offered by competitors, and any regulatory impact thereon.

 

It is therefore critical that the Group continues to have appropriate variable remuneration and retention arrangements in place. These are necessary to drive strong business performance and alignment to long-term shareholder value and returns, impact the size of the local labour force with relevant experience, and the number of businesses competing for such talent. While the Group focuses very carefully on the attraction and retention of talent, if unsuccessful, it may adversely affect the Group's ability to conduct its business through an inability to execute business operations and strategies effectively.

 

Going concern

 

After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  For this reason, they continue to adopt the going concern basis in preparing the interim condensed consolidated financial statements.  The financial risk management objectives and policies of the Group and the exposure of the Group to capital, credit and concentration, country, liquidity and market risk are discussed on pages 133 to 137 of the Annual Report for the Group for the year ended 31 December 2018.

 

Directors

 

The Directors of London Stock Exchange Group plc during the period ended 30 June 2019 were as follows:

 

Don Robert

David Schwimmer

David Warren

Raffaele Jerusalmi

Jacques Aigrain

Marshall Bailey OBE

Professor Kathleen DeRose

Paul Heiden

Cressida Hogg CBE

Stephen O'Connor

Val Rahmani

Andrea Sironi

Dr Ruth WandhÖfer

 

 

Statement of directors' responsibilities

 

The directors confirm that, to the best of their knowledge, the interim condensed consolidated financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and that the interim report herein includes a fair review of the information required by the Financial Conduct Authority's Disclosure and Transparency Rules 4.2.7 and 4.2.8, namely:

 

·      an indication of important events that have occurred during the first six months of the financial year and their impact on the interim condensed consolidated financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

 

·      material related party transactions in the first six months of the current financial year and any material changes in the related party transactions described in the last annual report.

 

 

 

 

By order of the Board

 

 

 

David Schwimmer

Group CEO

 

 

 

David Warren

Group CFO

 

 

 

1 August 2019

 

 

Independent review report to London Stock Exchange Group plc

 

Introduction

We have been engaged by London Stock Exchange Group plc (the "Group", the "Company") to review the condensed set of financial statements in the half-yearly financial report for the six months ended  30 June 2019, which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Cash Flow Statement, the Condensed Consolidated Statement of Changes in Equity and related explanatory notes 1 to 20. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

Ernst & Young LLP

London

1 August 2019

 

 

Notes:

1.     The maintenance and integrity of the London Stock Exchange Group plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

2.     Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

FINANCIAL CALENDAR

 

Ex-dividend date for interim dividend

22 August 2019

Interim dividend record date

23 August 2019

Interim dividend payment date

17 September 2019

Q3 Trading Statement (revenues only)

October 2019

Financial year end

31 December 2019

Preliminary results

March 2020

Annual General Meeting

April/May 2020

The financial calendar is updated on a regular basis throughout the year.
P
lease refer to our website http://www.lseg.com/investor-relations  and click on the shareholder services section for up-to-date details.

 

INVESTOR RELATIONS CONTACTS

 

Investor Relations

 

London Stock Exchange Group plc

10 Paternoster Square

London EC4M 7LS

 

For enquiries relating to shareholdings in London Stock Exchange Group plc:

 

Shareholder helpline: +44 (0)20 7797 3322

 

email: irinfo-r@lseg.com

 

Visit the investor relations section of our website for up-to-date information including the latest share price, announcements, financial reports and details of analysts and consensus forecasts

http://www.lseg.com/investor-relations 

 

 

Independent auditors

 

Ernst & Young LLP

25 Churchill Place

Canary Wharf

London

E14 5EY

 

T +44 (0)20 7951 2000

 

 

Registered office

 

London Stock Exchange Group plc

10 Paternoster Square

London EC4M 7LS

 

Registered company number

London Stock Exchange Group plc: 5369106

 

 

Registrar information

 

Equiniti

Aspect House

Spencer Road

Lancing

West Sussex

BN99 6DA

 

T +44 (0)371 384 2233 or +44 (0)121 415 7065

Lines open 8.30 to 17.30, Monday to Friday.

www.shareview.co.uk

 

Principal legal adviser

 

Freshfields Bruckhaus Deringer LLP

65 Fleet Street

London

EC4Y 1HT

 

T +44 (0)20 7936 4000

 

Corporate brokers

 

Barclays

5 The North Colonnade

Canary Wharf

London

E14 4BB

 

T +44 (0)20 7623 2323

www.barclays.com

 

 

RBC Capital Markets

RBC Europe Limited

Thames Court Office

One Queenhithe

London

EC4V 3DQ

 

T +44 (0)20 7653 4000

www.rbccm.com



AIM, London Stock Exchange, London Stock Exchange Group, LSE, LSEG, the London Stock Exchange Coat of Arms Device, NOMAD, RNS, SEDOL, SEDOL Masterfile, SETS, TradElect, UnaVista, and IOB are registered trade marks of London Stock Exchange plc. Main Market, Specialist Fund Market, SFM, ORB, High Growth Segment, Professional Securities Market and PSM are un-registered trade marks of London Stock Exchange plc.

 

Curve Global is a registered trade mark of Curve Global Limited.

 

Borsa Italiana, MTA, MIB, MOT, AGREX, IDEX, SEDEX and BIT EQ MTF are registered trade marks of Borsa Italiana S.p.A.. IDEM is an un-registered trade mark of Borsa Italiana S.p.A..

 

CC&G is a registered trade mark of Cassa di Compensazione e Garanzia S.p.A..

 

Monte Titoli and X-TRM are registered trade marks of Monte Titoli S.p.A..

 

ELITE, E, ELITE Growth, ELITE Connect, and Basket Bond are registered trade marks of Elite S.p.A..

 

Gatelab is a registered trade mark of Gatelab S.r.L..

 

EuroMTS, MTS, the MTS logo and BOND VISION are registered trade marks of MTS S.p.A..

 

EuroTLX is a registered trade mark of EuroTLX SIM S.p.A..

 

FTSE is a registered trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence.

 

FTSE Russell is a registered trade mark of London Stock Exchange plc.

 

Russell, Russell Investments and Mountain Logo, Russell 1000, Russell 2000 and Russell 3000 are registered trade marks of Frank Russell Company.

 

Mergent is a registered trade mark of Mergent, Inc..

 

XTF is a registered trade mark of LSEG Information Services (US), Inc.

 

The Yield Book, Yield Book Q. the Funnel Logo, WGBI and WorldBIG are registered trade marks of The Yield Book Inc..

 

Beyond Ratings is a trade mark of Beyond Ratings, S.A.S..

 

Millennium Exchange, Millennium Surveillance, Millennium CSD and Millennium PostTrade are registered trade marks of Millennium IT Software (Private) Limited.

 

Turquoise and Turquoise Plato are registered trade mark of Turquoise Global Holdings Limited. Turquoise Plato Midpoint Continuous, Turquoise Plato Uncross, Turquoise Plato Block Discovery and Turquoise Plato Dark Lit Sweep un-registered trademarks of Turquoise Global Holdings Limited.

 

SwapClear, RepoClear, EquityClear, ForexClear and LCH are registered trade marks of LCH Limited.

 

CDSClear is a registered trade mark of LCH S.A..

 

Other logos, organisations and company names referred to may be the trade marks of their respective owners.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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Half-year Report - RNS