TIDMLSEG

RNS Number : 8829P

London Stock Exchange Group PLC

22 October 2021

London Stock Exchange Group plc: Q3 2021 Trading Statement

This release contains revenues and key performance indicators (KPIs) for the three months ended 30 September 2021 (Q3). All figures quoted in this release are on an underlying basis. Figures are stated on both a statutory and pro-forma basis for Q3 2021 and Q3 2020. Pro-forma figures assume that the acquisition of Refinitiv took place on 1 January 2021 and the prior year comparator assumes that the acquisition of Refinitiv occurred on 1 January 2020. All pro-forma and statutory figures exclude the financial contribution from Borsa Italiana which was divested in H1 2021. Constant currency variance is calculated on the basis of consistent FX rates applied across the current and prior year period, the conversions have been made from the transactional values, which will eliminate any transactional and translational movements along with any related accounting adjustments. For more information, please refer to the "Accounting and modelling notes" section below. Organic variances have been removed from our disclosure due to the large variances associated with the acquisition of Refinitiv.

Highlights

Note: Unless otherwise stated, variances refer to Q3 growth rates on a pro-forma constant currency basis, excluding the impact of a deferred revenue accounting adjustment(1) , to provide the best view of underlying performance

-- Strong performance across all divisions driving 7.6% growth in Q3 total income(1) and gross profit growth of 7.3%

-- Continued good progress on the integration of Refinitiv and comfortably on target for full year run-rate cost synergy delivery of GBP125 million, ahead of original phasing; 10 new products launched in Q3 as part of revenue synergy programme, taking the total to 37 year-to-date

-- Data & Analytics revenue grew 6.0% and continues to perform well with growth in Annual Subscription Value increasing from 3.9% at H1 to 4.0% in Q3, reflecting strength in subscription-based new business wins

-- Capital Markets revenue grew 17.2% driven by double-digit growth at Tradeweb, strong primary issuance within Equities and good dealer-to-client volumes at FXall

-- Post Trade revenue grew 11.5% driven by increased clearing activity from both new and existing customers; total income up 2.3%, reflecting lower investment returns in Net Treasury Income compared to the strong comparator in Q3 2020

   --    Year-to-date total income(1) grew 5.6%, reflecting the good performance across the Group 

-- As previously guided, the Group expects total income(1) to grow between 4-5% for full year 2021, with Q4 2021 income not expected to grow as fast as Q3 on a constant currency basis due to the strong comparator in Q4 2020; no change to previous cost or capex guidance although supply chain pressures may impact timing of some technology spend this year

-- The Group's second Investor Education Event on 1 October confirmed the strong growth ambitions for Data & Analytics, with revenues to increase by 4-6% annually over the medium term, reflecting multiple supportive trends and our ongoing focus on rigorous performance management and improvement of the customer experience. FX trading is also well-positioned for continued growth in electronic trading and the planned migration to new technology will strengthen it further. Replays of the two Investor Education Events are available online

(1) Excluding recoveries and a deferred revenue accounting impact. As previously stated, the deferred revenue impact is a one-time, non-cash, negative revenue impact resulting from the accounting treatment of deferred revenue within Refinitiv's accounts which have been re-evaluated upon acquisition by LSEG under purchase price accounting rules. The result of this accounting treatment is a GBP1m adjustment reducing revenue for Q3 2021, (GBP24m reduction for Q3 YTD). The vast majority impacts the Data & Analytics business with a smaller impact applied to the FX venues business within Capital Markets. There will be further immaterial impacts in Q4 2021. Further information is available in the "Accounting and modelling notes" section. Constant currency variance shows underlying financial performance, excluding currency impacts, by comparing the current and prior year periods at consistent exchange rates.

David Schwimmer, CEO said:

"The Group has delivered a strong Q3 financial performance with revenue growth across all divisions.

"We are making excellent progress on the integration of Refinitiv and are comfortably on-track to achieve GBP125 million of cost synergies in 2021, ahead of our original phasing. We continue to execute across a number of workstreams to deliver the target revenue synergies. The Group is well placed as we make targeted investments in product and technology enhancements to help us meet the needs of our customers and capitalise on the growth trends driving change across our industry."

Q3 2021 Summary - Pro-forma

For the pro-forma table, variances are provided on a reported and constant currency basis. Commentary is provided on the constant currency variance (excluding deferred revenue adjustment) to provide the best insight into underlying performance. Please refer to the "Accounting and modelling notes" section for more information on relevant accounting adjustments.

 
                                                       Pro-forma underlying(1) 
                                   -------------------------------------------------------------- 
 Continuing operations              Q3 2021   Q3 2020   Reported         Constant      Constant 
                                                         Variance         Currency     Currency 
                                                           (2)            Variance     Variance 
                                                                            (3)         (excl. 
                                                                                       deferred 
                                                                                        revenue 
                                                                                      adjustment) 
                                                                                         (3,4) 
                                      GBPm      GBPm         %                %            % 
                                   --------  --------  ----------       ----------  ------------- 
 
 Trading & Banking Solutions            372       399      (6.8%)           (0.5%)         (0.3%) 
 Enterprise Data Solutions              283       290      (2.4%)             4.1%           4.1% 
                                             -------- 
 Investment Solutions                   293       278        5.4%            11.1%          11.1% 
                                             -------- 
 Wealth Solutions                       115       123      (6.5%)           (0.8%)         (0.8%) 
                                             -------- 
 Customer & Third-Party Risk 
  Solutions                              92        69       33.3%            40.6%          40.6% 
---------------------------------  --------  --------  ----------       ----------  ------------- 
 Data & Analytics                     1,155     1,159      (0.3%)             5.9%           6.0% 
                                             -------- 
 
 Equities                                60        52       15.4%            15.4%          15.4% 
                                             -------- 
 FX                                      56        56           -             7.1%           7.1% 
                                             -------- 
 Fixed Income, Derivatives 
  & Other                               195       170       14.7%            21.1%          21.1% 
---------------------------------  --------  --------  ----------       ----------  ------------- 
 Capital Markets                        311       278       11.9%            17.2%          17.2% 
                                             -------- 
 
 OTC Derivatives                         86        80        7.5%            11.4%          11.4% 
                                             -------- 
 Securities & Reporting                  61        58        5.2%             8.8%           8.8% 
                                             -------- 
 Non-Cash Collateral                     24        21       14.3%            19.0%          19.0% 
                                             -------- 
 Net Treasury Income                     47        63     (25.4%)          (21.0%)        (21.0%) 
---------------------------------  --------  --------  ----------       ----------  ------------- 
 Post Trade                             218       222      (1.8%)             2.3%           2.3% 
                                             -------- 
 
 Other                                    9         6           -                -              - 
---------------------------------  --------  --------  ----------       ----------  ------------- 
 Total Income (excl. recoveries)      1,693     1,665        1.7%             7.5%           7.6% 
                                             -------- 
 Recoveries                              90        82        9.8%           (1.1%)         (1.1%) 
---------------------------------  --------  --------  ----------       ----------  ------------- 
 Total Income (incl. recoveries)      1,783     1,747        2.1%             7.1%           7.2% 
                                             -------- 
 
 Cost of sales                        (228)     (228)           -             5.7%           5.7% 
                                   --------  --------  ----------       ----------  ------------- 
 Gross Profit                         1,555     1,519        2.4%             7.2%           7.3% 
                                   --------  --------  ----------  ---  ----------  ------------- 
 

(1) Pro-forma underlying assumes that the acquisition of Refinitiv took place on 1 January 2021 for the current financial year and 1 January 2020 for the prior financial year comparator figure. Both figures exclude the financial contribution from the businesses contained within the Borsa Italiana divestment

(2) Reported variance is the difference between current and prior year periods on a pro-forma underlying basis, using year-to-date FX rates prevalent in each period, therefore any changes in the FX rates are also reflected in the variance percentage alongside business performance. The Q3 results are derived by deducting the H1 results, which have been translated using the average exchange rates for the 6 months to 30 June 2021, from the 9 months figure

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

(4) The deferred revenue adjustment is explained in the "Accounting and modelling notes" section

Pro-forma(1) Q3 2021 Highlights

   --    Data & Analytics : revenues up 6.0% 

o Annual Subscription Value growth for the division increased from 3.9% at H1, to 4.0% at Q3; ahead of the subscription revenue growth in Q3 year-to-date of 3.5%. This indicates that the current book of business covered by the ASV metric (c.87% of Data & Analytics revenue) is growing faster than the associated subscription revenues so far this year

o Trading & Banking Solutions revenues down 0.3% - Banking segment delivered a good performance, reflecting product and customer service enhancements, including Workspace; in the Trading segment the pace of decline in Eikon Premium continues to slow

o Enterprise Data Solutions revenues up 4.1% - strong sales in the period in Pricing & Reference Services (PRS) and Real Time Data, with low, early-stage revenue synergies now contributing

o Investment Solutions revenues up 11.1% - double-digit growth in Benchmark Rates, Indices & Analytics with good sales. Asset-based ETF AUM remained above $1 trillion with strong growth

o Wealth Solutions revenues down 0.8% - Advisor & Investor Services revenues were flat as cancellations offset new client wins. Operations Management (BETA) saw a small decline in revenue despite increased volumes due to the mix of customers using the service

o Customer & Third-Party Risk Solutions revenues up 40.6% - strong growth continues, with double-digit growth at World-Check, GIACT and Due Diligence

   --    Capital Markets: revenues up 17.2% 

o Equities revenues up 15.4% - large scale and high-profile listings on London Stock Exchange, the world's most international exchange. Secondary markets revenues have grown due to higher volumes across our orderbooks

o FX revenues up 7.1% - strong volumes in dealer-to-client (FXall) driving growth, reflecting the investment in new product capabilities, relationship management and better customer service

o Fixed Income, Derivatives & Other revenues up 21.1% - Tradeweb(2) continues to grow strongly, as it expands its offering to meet demand from increased electronification of trading markets

   --    Post Trade : revenue up 11.5%; total income up 2.3% (impacted by Net Treasury Income) 

o OTC Derivatives revenues up 11.4% - strong performance across services with increased SwapClear revenues driven by growth in the number of active clients

o Securities & Reporting revenues up 8.8% - RepoClear activity growth continues to drive revenue with record volumes in September across Euro debt clearing

o Non-Cash Collateral revenues up 19.0% - partly due to increased activity at SwapClear and RepoClear

o Net Treasury Income down 21.0% - rate of investment return reduced compared to a strong comparator in Q3 2020, alongside flat cash collateral balances. NTI expected to continue at current levels for time being

(1) Pro-forma assumes that the acquisition of Refinitiv took place on 1 January 2021 for the current financial year and 1 January 2020 for the prior financial year comparator figure. Both figures exclude the financial contribution from the businesses contained within the Borsa Italiana divestment

(2) Tradeweb Q3 2021 results will be released on 28 October 2021

Q3 2021 Summary - Statutory

Unless otherwise stated, all figures refer to continuing operations for the three months ended 30 September 2021 (Q3 2021). Comparative figures are for continuing operations for the three months ended 30 September 2020 (Q3 2020).

 
                                     Statutory underlying(1) 
                                   -------------------------- 
 Continuing operations                Q3 2021       Q3 2020 
                                        GBPm          GBPm 
                                   ------------  ------------ 
 
 Trading & Banking Solutions                372             4 
                                                 ------------ 
 Enterprise Data Solutions                  283            32 
                                                 ------------ 
 Investment Solutions                       293           172 
                                                 ------------ 
 Wealth Solutions                           115             - 
                                                 ------------ 
 Customer & Third-Party Risk                 92             - 
  Solutions 
---------------------------------  ------------  ------------ 
 Data & Analytics                         1,155           208 
                                                 ------------ 
 
 Equities                                    60            52 
                                                 ------------ 
 FX                                          56             - 
                                                 ------------ 
 Fixed Income, Derivatives 
  & Other                                   195            16 
---------------------------------  ------------  ------------ 
 Capital Markets                            311            68 
                                                 ------------ 
 
 OTC Derivatives                             86            80 
                                                 ------------ 
 Securities & Reporting                      61            58 
                                                 ------------ 
 Non-Cash Collateral                         24            21 
                                                 ------------ 
 Net Treasury Income                         47            63 
---------------------------------  ------------  ------------ 
 Post Trade                                 218           222 
                                                 ------------ 
 
 Other                                        9             - 
---------------------------------  ------------  ------------ 
 Total Income (excl. recoveries)          1,693           498 
                                                 ------------ 
 Recoveries                                  90             - 
---------------------------------  ------------  ------------ 
 Total Income (incl. recoveries)          1,783           498 
                                                 ------------ 
 
 Cost of sales                            (228)          (44) 
                                   ------------  ------------ 
 Gross Profit                             1,555           454 
                                   ------------  ------------ 
 

(1) Statutory underlying figures for Q3 2021 are equivalent to the pro-forma figures presented. Figures associated with the Borsa Italiana Group divestment are excluded from Q3 2020

Contacts: London Stock Exchange Group plc

 
 Investors 
 Paul Froud - Group Head of Investor Relations                   ir@lseg.com 
 Media 
 Lucie Holloway / Rhiannon Davies - Financial Communications     +44 (0) 20 7797 1222 
                                                                 newsroom@lseg.com 
 
 

Additional information can be found at www.lseg.com

Q3 investor and analyst conference call:

The Group will host an audio-only webcast and conference call on its Q3 Trading Statement for analysts and institutional shareholders today at 09:00am (UK time). On the call will be David Schwimmer (Chief Executive Officer), Anna Manz (Chief Financial Officer) and Paul Froud (Group Head of Investor Relations).

To access the telephone conference call or webcast please register in advance using the following link and instructions below:

https://www.lsegissuerservices.com/spark/LondonStockExchangeGroup/events/1be2d3b3-dddc-4d42-8827-12facb646b4f

   --     Please register with your full name, company name and email address. 

-- If you wish to participate in Q&A, questions can be provided in written form via the Q&A tool on the webcast page or by emailing the LSEG Investor Relations team at ir@lseg.com . Questions can be submitted in advance and during the event itself, with written questions prioritised

-- If you wish to ask a question live, you will need to register for the telephone conference call. The telephone conference registration link can be found in the link above and here: https://cossprereg.btci.com/prereg/key.process?key=PN3G9JCK6

As is normal with quarterly trading statements, there will be no slides published for Q3.

Accounting and modelling notes

Reclassified revenues within Trading & Banking

In the 2021 Q3 results, there has been a small reclassification of revenues within Trading & Banking, with revenue moving from Trading into Banking to better align with our operating model. The income by quarter table in the appendix has been adjusted to reflect the changes.

Renamed revenue lines

The following revenue lines have been renamed to better describe our business. Beyond the names, there have been no further changes to the businesses or revenues within the lines.

Investment Solutions

   --     Benchmark Rates, Indices & Analytics - was previously named 'Index - Subscription' 
   --     Index - Asset-Based - was previously named 'Index - AUM' 
   --     Data & Workflow - was previously named 'Investment Solutions Data & Analytics' 

Wealth Solutions

   --     Advisor & Investor Services - was previously named 'Wealth Data & Analytics' 
   --     Operations Management (BETA) - was previously named 'BETA' 

Deferred revenue accounting adjustment

As a result of the acquisition of Refinitiv and the associated purchase price accounting rules, Refinitiv's deferred revenue balances are subject to a one-time haircut at the time of acquisition. This is a non-cash adjustment. Q3 2021 saw a GBP1 million negative revenue impact following GBP22 million in Q1 and GBP1 million in Q2. The remaining impact will be immaterial in Q4 2021. The impact is mostly in the Group's Data & Analytics division, with a much smaller impact on the Group's FX venues business sitting within Capital Markets.

An adjusted variance, excluding the deferred revenue adjustment, has been presented to show true underlying business growth on the prior year.

FX conversion

As a result of the acquisition of Refinitiv, the majority of LSEG revenues and expenses are in USD followed by GBP, EUR and other currencies. All guidance given by LSEG, including the longer-term targets associated with the acquisition of Refinitiv as well as specific guidance for the 2021 financial year, has been given on a constant currency basis.

The results for the 9 months to 30 September 2021 have been translated into Sterling using the average exchange rates for the period. The Q3 results are then derived by deducting the H1 results, which have been translated using the average exchange rates for the 6 months to 30 June 2021. The rates for the largest two currency pairs are shown in the table below.

 
              Average rate   Closing rate   Average rate   Closing rate 
               9 months       at             9 months       at 
               ended          30-Sep-21      ended          30-Sep-20 
               30-Sep-21                     30-Sep-20 
 GBP : USD           1.385          1.343          1.271          1.287 
             -------------  -------------  -------------  ------------- 
 GBP : EUR           1.157          1.157          1.131          1.095 
             -------------  -------------  -------------  ------------- 
 

Divisional revenue, gross profit and non-financial KPIs

   1.   Data & Analytics 

Pro-forma(1)

 
 Continuing operations               Q3 2021   Q3 2020   Reported         Constant      Constant 
                                                          Variance         Currency     Currency 
                                                            (2)            Variance     Variance 
                                                                             (3)         (excl. 
                                                                                        deferred 
                                                                                         revenue 
                                                                                       adjustment) 
                                                                                          (3,4) 
                                       GBPm      GBPm         %                %            % 
                                    --------  --------                   ---------- 
 
 Trading & Banking Solutions             372       399      (6.8%)           (0.5%)         (0.3%) 
    Trading                              295       318      (7.2%)           (0.6%)         (0.6%) 
                                              -------- 
    Banking                               77        81      (4.9%)             0.9%           1.2% 
                                              -------- 
 Enterprise Data Solutions               283       290      (2.4%)             4.1%           4.1% 
                                              -------- 
    Real Time Data                       182       191      (4.7%)             2.6%           2.6% 
                                              -------- 
    PRS                                  101        99        2.0%             8.1%           8.1% 
                                              -------- 
 Investment Solutions                    293       278        5.4%            11.1%          11.1% 
                                              -------- 
    Benchmark Rates, Indices 
     & Analytics                         135       125        8.0%            12.8%          12.8% 
                                              -------- 
    Index - Asset-Based                   62        56       10.7%            15.8%          15.8% 
                                              -------- 
    Data & Workflow                       96        97      (1.0%)             5.2%           5.2% 
                                              -------- 
 Wealth Solutions                        115       123      (6.5%)           (0.8%)         (0.8%) 
                                              -------- 
    Advisor & Investor Services           69        71      (2.8%)                -              - 
                                              -------- 
    Operations Management (BETA)          46        52     (11.5%)           (1.1%)         (1.1%) 
                                              -------- 
 Customer & Third-Party Risk 
  Solutions                               92        69       33.3%            40.6%          40.6% 
----------------------------------  --------  --------  ----------       ----------  ------------- 
 Total Revenue (excl. recoveries)      1,155     1,159      (0.3%)             5.9%           6.0% 
                                              -------- 
 Recoveries                               90        82        9.8%           (1.1%)         (1.1%) 
----------------------------------  --------  --------  ----------       ----------  ------------- 
 Total Revenue (incl. recoveries)      1,245     1,241        0.3%             5.5%           5.6% 
                                              -------- 
 Cost of sales                         (191)     (195)      (2.1%)             3.6%           3.6% 
----------------------------------  --------  --------  ----------       ----------  ------------- 
 Gross Profit                          1,054     1,046        0.8%             5.9%           6.0% 
----------------------------------  --------  --------  ----------       ----------  ------------- 
 

Pro-forma Non-financial KPIs(1)

 
                                  Q3 2021   Q3 2020   Reported 
                                                       Variance 
                                                          % 
                                 --------  -------- 
 
 Annual Subscription Value           4.0%         -           - 
  growth (%) (5) 
 Subscription revenue growth         3.5%         -           - 
  (%) (5, 6) 
 Index - ETF AUM ($bn)              1,036       718         44% 
 Index - ESG Passive AUM ($bn) 
  (7)                                 132        46        187% 
 BETA transaction volumes 
  (m)                                 130       121          7% 
-------------------------------  --------  --------  ---------- 
 

(1) Pro-forma assumes that the acquisition of Refinitiv took place on 1 January 2021 for the current financial year and 1 January 2020 for the prior financial year comparator figure. Both figures exclude the financial contribution from the businesses contained within the Borsa Italiana divestment

(2) Reported variance is the difference between current and prior year periods on a pro-forma underlying basis, using year-to-date FX rates prevalent in each period, therefore any changes in the FX rates are also reflected in the variance percentage alongside business performance. The Q3 results are derived by deducting the H1 results, which have been translated using the average exchange rates for the 6 months to 30 June 2021, from the 9 months figure

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

(4) The deferred revenue adjustment is explained in the "Accounting and modelling notes" section

(5) The variance is a constant currency variance excluding the impact of the deferred revenue accounting adjustment

(6) The growth rate is based on Q3 year-to-date

(7) ESG Passive AUM is as at 31 December 2020 and prior period comparator is at 31 December 2019 and is as presented at H1 2021. The metric is updated bi-annually with June 2021 available at our 2021 Preliminary Results

   2.   Capital Markets 

Pro-forma(1)

 
 Continuing operations        Q3 2021   Q3 2020   Reported         Constant      Constant 
                                                   Variance         Currency     Currency 
                                                     (2)            Variance     Variance 
                                                                      (3)         (excl. 
                                                                                 deferred 
                                                                                  revenue 
                                                                                adjustment) 
                                                                                   (3,4) 
                                GBPm      GBPm         %                %            % 
                             --------  --------                   ---------- 
 
 Equities                          60        52       15.4%            15.4%          15.4% 
                                       -------- 
 FX                                56        56           -             7.1%           7.1% 
                                       -------- 
 Fixed Income, Derivatives 
  & Other                         195       170       14.7%            21.1%          21.1% 
                             --------  --------  ----------       ----------  ------------- 
 Total Revenue                    311       278       11.9%            17.2%          17.2% 
                                       -------- 
 Cost of sales                    (7)       (6)       16.7%            16.7%          16.7% 
---------------------------  --------  --------  ----------       ----------  ------------- 
 Gross Profit                     304       272       11.8%            17.2%          17.2% 
---------------------------  --------  --------  ----------       ----------  ------------- 
 

Pro-forma Non-financial KPIs(1)

 
                                 Q3 2021   Q3 2020   Reported 
                                                      Variance 
                                                         % 
                                --------  -------- 
 Equities 
 Primary Markets 
 New issues                           45        12        275% 
 Total money raised (GBPbn)          6.9       8.3       (17%) 
 
 Secondary Markets - Equities 
 UK Value Traded (GBPbn) 
  - Average Daily Value              4.1       3.8          8% 
 SETS Yield (bps)                   0.75      0.76        (1%) 
 
 FX 
 Average daily total volume 
  ($bn)                              426       416          2% 
 
 Fixed income, Derivatives 
  and Other 
 Tradeweb Average Daily ($m) 
 Rates - Cash                    337,167   311,033          8% 
 Rates - Derivatives             246,981   179,054         38% 
 
 Credit - Cash                     8,440     7,036         20% 
 Credit - Derivatives             13,796    12,507         10% 
------------------------------  --------  --------  ---------- 
 

(1) Pro-forma assumes that the acquisition of Refinitiv took place on 1 January 2021 for the current financial year and 1 January 2020 for the prior financial year comparator figure. Both figures exclude the financial contribution from the businesses contained within the Borsa Italiana divestment

(2) Reported variance is the difference between current and prior year periods on a pro-forma underlying basis, using year-to-date FX rates prevalent in each period, therefore any changes in the FX rates are also reflected in the variance percentage alongside business performance. The Q3 results are derived by deducting the H1 results, which have been translated using the average exchange rates for the 6 months to 30 June 2021, from the 9 months figure

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

(4) The deferred revenue adjustment is explained in the "Accounting and modelling notes" section

   3.   Post Trade 

Pro-forma(1)

 
   Continuing operations    Q3 2021   Q3 2020   Reported         Constant 
                                                 Variance         Currency 
                                                   (3)            Variance 
                                                                    (4) 
                              GBPm      GBPm         %                % 
                           --------  -------- 
 
 OTC Derivatives                 86        80        7.5%            11.4% 
                                     -------- 
 Securities & Reporting          61        58        5.2%             8.8% 
                                     -------- 
 Non-Cash Collateral             24        21       14.3%            19.0% 
-------------------------  --------  --------  ----------       ---------- 
 Total Revenue                  171       159        7.5%            11.5% 
 Net Treasury Income             47        63     (25.4%)          (21.0%) 
                           --------  --------  ----------       ---------- 
 Total Income                   218       222      (1.8%)             2.3% 
                                     -------- 
 Cost of sales (2)             (30)      (26)       15.4%            24.0% 
-------------------------  --------  --------  ----------       ---------- 
 Gross Profit                   188       196      (4.1%)           (0.5%) 
-------------------------  --------  --------  ----------       ---------- 
 

Pro-forma Non-financial KPIs(1)

 
                                        Q3 2021          Q3 2020      Reported 
                                                                       Variance 
                                                                          % 
                                   ----------------  -------------- 
 
 OTC 
 SwapClear 
 IRS notional cleared ($trn)                    202             209        (3%) 
 SwapClear members                              122             122           - 
 Client trades ('000)                           516             367         41% 
 Client average 10-year notional 
  equivalent ($trn)                             3.8             3.2         19% 
 
 ForexClear 
 Notional cleared ($bn)                       5,528           4,556         21% 
 ForexClear members                              35              35           - 
 
 CDSClear 
 Notional cleared (EURbn)                       467             495        (6%) 
 CDSClear members                                25              26        (4%) 
 
 Securities & Reporting 
 EquityClear trades (m) (5)                     493             424         16% 
 Listed derivatives contracts 
  (m)                                          66.3            70.8        (6%) 
 RepoClear - nominal value 
  (EURtrn)                                     62.0            52.1         19% 
 
 Non-Cash Collateral 
 Average non-cash collateral 
  (EURbn)                                     167.2           165.5          1% 
 
 Net Treasury Income 
 Average cash collateral 
  (EURbn)                                     103.9           103.9           - 
---------------------------------  ----------------  --------------  ---------- 
 

(1) Pro-forma assumes that the acquisition of Refinitiv took place on 1 January 2021 for the current financial year and 1 January 2020 for the prior financial year comparator figure. Both figures exclude the financial contribution from the businesses contained within the Borsa Italiana divestment

(2) Cost of sales incorporates the elimination of intercompany transactions in the Post Trade division as part of the pro-forma financial disclosure

(3) Reported variance is the difference between current and prior year periods on a pro-forma underlying basis, using year-to-date FX rates prevalent in each period, therefore any changes in the FX rates are also reflected in the variance percentage alongside business performance. The Q3 results are derived by deducting the H1 results, which have been translated using the average exchange rates for the 6 months to 30 June 2021, from the 9 months figure

(4) Constant currency variance shows underlying financial performance, excluding currency impacts, by comparing the current and prior period at consistent exchange rates

(5) EquityClear trades exclude interoperability trades, these will differ to the volumes published on the LCH website which includes these trades

Appendix - Pro-forma(1) Q3 YTD results

The table below shows LSEG's pro-forma results to gross profit for the nine months ended 30 September 2021.

 
                                                      Pro-forma underlying(1) 
                                   ------------------------------------------------------------ 
 Continuing operations              Q3 9m    Q3 9m    Reported         Constant      Constant 
                                     2021     2020     Variance         Currency     Currency 
                                                         (2)            Variance     Variance 
                                                                          (3)         (excl. 
                                                                                     deferred 
                                                                                      revenue 
                                                                                    adjustment) 
                                                                                       (3,4) 
                                      GBPm     GBPm        %                %            % 
                                   -------  -------  ----------       ----------  ------------- 
 
 Trading & Banking Solutions         1,116    1,205      (7.4%)           (1.0%)         (0.3%) 
 Enterprise Data Solutions             840      872      (3.7%)             2.3%           3.0% 
                                            ------- 
 Investment Solutions                  851      832        2.3%             8.8%           9.2% 
                                            ------- 
 Wealth Solutions                      353      380      (7.1%)             0.3%           0.5% 
                                            ------- 
 Customer & Third-Party Risk 
  Solutions                            267      205       30.2%            38.2%          39.7% 
---------------------------------  -------  -------  ----------       ----------  ------------- 
 Data & Analytics                    3,427    3,494      (1.9%)             4.6%           5.2% 
                                            ------- 
 
 Equities                              180      170        5.9%             4.7%           4.7% 
                                            ------- 
 FX                                    166      177      (6.2%)             1.7%           1.7% 
                                            ------- 
 Fixed Income, Derivatives 
  & Other                              584      531       10.0%            17.6%          17.6% 
---------------------------------  -------  -------  ----------       ----------  ------------- 
 Capital Markets                       930      878        5.9%            12.0%          12.0% 
                                            ------- 
 
 OTC Derivatives                       255      249        2.4%             4.4%           4.4% 
                                            ------- 
 Securities & Reporting                188      168       11.9%            13.0%          13.0% 
                                            ------- 
 Non-Cash Collateral                    70       61       14.8%            18.0%          18.0% 
                                            ------- 
 Net Treasury Income                   155      212     (26.9%)          (23.6%)        (23.6%) 
---------------------------------  -------  -------  ----------       ----------  ------------- 
 Post Trade                            668      690      (3.2%)           (0.9%)         (0.9%) 
                                            ------- 
 
 Other                                  24       23        4.3%             8.7%           8.7% 
---------------------------------  -------  -------  ----------       ----------  ------------- 
 Total Income (excl. recoveries)     5,049    5,085      (0.7%)             5.2%           5.6% 
                                            ------- 
 Recoveries                            268      246        8.9%           (1.1%)         (0.8%) 
---------------------------------  -------  -------  ----------       ----------  ------------- 
 Total Income (incl. recoveries)     5,317    5,331      (0.3%)             4.8%           5.3% 
                                            ------- 
 
 Cost of sales                       (682)    (714)      (4.5%)             2.0%           2.0% 
                                   -------  -------  ----------       ----------  ------------- 
 Gross Profit                        4,635    4,617        0.4%             5.3%           5.8% 
                                   -------  -------  ----------  ---  ----------  ------------- 
 

(1) Pro-forma underlying assumes that the acquisition of Refinitiv took place on 1 January 2021 for the current financial year and 1 January 2020 for the prior financial year comparator figure. Both figures exclude the financial contribution from the businesses contained within the Borsa Italiana divestment

(2) Reported variance is the difference between current and prior year periods on a pro-forma underlying basis, using year-to-date FX rates prevalent in each period, therefore any changes in the FX rates are also reflected in the variance percentage alongside business performance

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

(4) The deferred revenue adjustment is explained in the "Accounting and modelling notes" section

Appendix - Statutory(1) Q3 YTD results

The table below shows LSEG's pro-forma results to gross profit for the nine months ended 30 September 2021.

 
                                     Statutory underlying(1) 
                                   -------------------------- 
 Continuing operations                 Q3 9m         Q3 9m 
                                        2021          2020 
                                        GBPm          GBPm 
                                   ------------  ------------ 
 
 Trading & Banking Solutions                991            13 
                                                 ------------ 
 Enterprise Data Solutions                  755            96 
                                                 ------------ 
 Investment Solutions                       818           508 
                                                 ------------ 
 Wealth Solutions                           311             - 
                                                 ------------ 
 Customer & Third-Party Risk                239             - 
  Solutions 
---------------------------------  ------------  ------------ 
 Data & Analytics                         3,114           617 
                                                 ------------ 
 
 Equities                                   180           170 
                                                 ------------ 
 FX                                         147             - 
                                                 ------------ 
 Fixed Income, Derivatives 
  & Other                                   526            45 
---------------------------------  ------------  ------------ 
 Capital Markets                            853           215 
                                                 ------------ 
 
 OTC Derivatives                            255           249 
                                                 ------------ 
 Securities & Reporting                     188           168 
                                                 ------------ 
 Non-Cash Collateral                         70            61 
                                                 ------------ 
 Net Treasury Income                        155           212 
---------------------------------  ------------  ------------ 
 Post Trade                                 668           690 
                                                 ------------ 
 
 Other                                       23             4 
---------------------------------  ------------  ------------ 
 Total Income (excl. recoveries)          4,658         1,526 
                                                 ------------ 
 Recoveries                                 238             - 
---------------------------------  ------------  ------------ 
 Total Income (incl. recoveries)          4,896         1,526 
                                                 ------------ 
 
 Cost of sales                            (622)         (158) 
                                   ------------  ------------ 
 Gross Profit                             4,274         1,368 
                                   ------------  ------------ 
 

(1) Statutory underlying figures for Q3 9 months 2021 incorporate figures from Refinitiv for February to September 2021. Figures associated with the Borsa Italiana Group divestment are excluded from both periods

Appendix - Pro-forma(1) income by type

 
                                                       Pro-forma underlying(1) 
                                   -------------------------------------------------------------- 
 Continuing operations              Q3 2021   Q3 2020   Reported         Constant      Constant 
                                                         Variance         Currency     Currency 
                                                           (2)            Variance     Variance 
                                                                            (3)         (excl. 
                                                                                       deferred 
                                                                                        revenue 
                                                                                      adjustment) 
                                                                                        (3, 4) 
                                      GBPm      GBPm         %                %            % 
                                   --------  --------  ----------       ----------  ------------- 
 
 Recurring                            1,180     1,196      (1.3%)             4.7%           4.9% 
 Transactional                          457       401       14.0%            19.7%          19.7% 
 Net Treasury Income                     47        63     (25.4%)          (21.0%)        (21.0%) 
 Other income                             9         6           -                -              - 
---------------------------------  --------  --------  ----------                   ------------- 
 Total income (excl. recoveries)      1,693     1,665        1.7%             7.5%           7.6% 
 Recoveries                              90        82        9.8%           (1.1%)         (1.1%) 
                                   --------  --------  ----------       ----------  ------------- 
 Total income (incl. recoveries)      1,783     1,747        2.1%             7.1%           7.2% 
                                   --------  --------  ----------  ---  ----------  ------------- 
 

(1) Pro-forma underlying assumes that the acquisition of Refinitiv took place on 1 January 2021 for the current financial year and 1 January 2020 for the prior financial year comparator figure. Both figures exclude the financial contribution from the businesses contained within the Borsa Italiana divestment

(2) Reported variance is the difference between current and prior year periods on a pro-forma underlying basis, using year-to-date FX rates prevalent in each period, therefore any changes in the FX rates are also reflected in the variance percentage alongside business performance. The Q3 results are derived by deducting the H1 results, which have been translated using the average exchange rates for the 6 months to 30 June 2021, from the 9 months figure

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

(4) The deferred revenue adjustment is explained in the "Accounting and modelling notes" section

Appendix - Pro-forma(1) income by quarter

The table below has used FX rates on a YTD average basis which is the basis upon which the Group presents its financials. The split between Trading and Banking has been updated to recognise the reclassification at Q3 2021.

 
 GBPm                                Q1      Q2      Q3      Q4     2020     Q1      Q2      Q3 
                                   ------  ------  ------  ------  ------  ------  ------ 
 
 Trading & Banking Solutions          396     410     399     391   1,596     372     372     372 
                                                                                           ------ 
    Trading                           316     328     318     311   1,273     296     295     295 
                                           ------  ------  ------  ------  ------  ------  ------ 
    Banking                            80      82      81      80     323      76      77      77 
                                           ------  ------  ------  ------  ------  ------  ------ 
 Enterprise Data Solutions            285     297     290     291   1,163     277     280     283 
                                           ------  ------  ------  ------  ------  ------  ------ 
    Real Time Data                    187     197     191     191     766     177     182     182 
                                           ------  ------  ------  ------  ------  ------  ------ 
    PRS                                98     100      99     100     397     100      98     101 
                                           ------  ------  ------  ------  ------  ------  ------ 
 Investment Solutions                 272     282     278     279   1,111     272     286     293 
                                           ------  ------  ------  ------  ------  ------  ------ 
    Benchmark Rates, Indices 
     & Analytics                      118     127     125     125     495     121     126     135 
                                           ------  ------  ------  ------  ------  ------  ------ 
    Index - Asset-Based                58      54      56      57     225      58      64      62 
                                           ------  ------  ------  ------  ------  ------  ------ 
    Data & Workflow                    96     101      97      97     391      93      96      96 
                                           ------  ------  ------  ------  ------  ------  ------ 
 Wealth Solutions                     126     131     123     120     500     122     116     115 
                                           ------  ------  ------  ------  ------  ------  ------ 
    Advisor & Investor Services        66      72      71      69     278      69      70      69 
                                           ------  ------  ------  ------  ------  ------  ------ 
    Operations Management 
     (BETA)                            60      59      52      51     222      53      46      46 
                                           ------  ------  ------  ------  ------  ------  ------ 
 Customer & Third-Party 
  Risk Solutions                       67      69      69      78     283      85      90      92 
---------------------------------  ------  ------  ------  ------  ------  ------  ------  ------ 
 Data & Analytics                   1,146   1,189   1,159   1,159   4,653   1,128   1,144   1,155 
                                           ------  ------  ------  ------  ------  ------  ------ 
 
 Equities                              62      56      52      57     227      61      59      60 
                                           ------  ------  ------  ------  ------  ------  ------ 
 FX                                    64      57      56      57     234      57      53      56 
                                           ------  ------  ------  ------  ------  ------  ------ 
 Fixed Income, Derivatives 
  & Other                             186     175     170     178     709     201     188     195 
---------------------------------  ------  ------  ------  ------  ------  ------  ------  ------ 
 Capital Markets                      312     288     278     292   1,170     319     300     311 
                                           ------  ------  ------  ------  ------  ------  ------ 
 
 OTC Derivatives                       87      82      80      85     334      87      82      86 
                                           ------  ------  ------  ------  ------  ------  ------ 
 Securities & Reporting                59      51      58      62     230      65      62      61 
                                           ------  ------  ------  ------  ------  ------  ------ 
 Non-Cash Collateral                   19      21      21      21      82      22      24      24 
                                           ------  ------  ------  ------  ------  ------  ------ 
 Net Treasury Income                   67      82      63      57     269      55      53      47 
---------------------------------  ------  ------  ------  ------  ------  ------  ------  ------ 
 Post Trade                           232     236     222     225     915     229     221     218 
                                           ------  ------  ------  ------  ------  ------  ------ 
 
 Other                                 11       6       6       6      29       5      10       9 
---------------------------------  ------  ------  ------  ------  ------  ------  ------  ------ 
 Total Income (excl. recoveries)    1,701   1,719   1,665   1,682   6,767   1,681   1,675   1,693 
                                           ------  ------  ------  ------  ------  ------  ------ 
 Recoveries                            87      77      82      92     338      88      90      90 
---------------------------------  ------  ------  ------  ------  ------  ------  ------  ------ 
 Total Income (incl. recoveries)    1,788   1,796   1,747   1,774   7,105   1,769   1,765   1,783 
                                           ------  ------  ------  ------  ------  ------  ------ 
 Cost of sales                      (242)   (244)   (228)   (232)   (946)   (231)   (223)   (228) 
---------------------------------  ------  ------  ------  ------  ------  ------  ------  ------ 
 Gross Profit                       1,546   1,552   1,519   1,542   6,159   1,538   1,542   1,555 
---------------------------------  ------  ------  ------  ------  ------  ------  ------  ------ 
 

(1) Pro-forma assumes that the acquisition of Refinitiv took place on 1 January 2021 for the current financial year and 1 January 2020 for the prior financial year comparator figure. All figures exclude the financial contribution from the businesses contained within the Borsa Italiana divestment

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