Company Announcements

RNS Number : 0146V
London Stock Exchange Group PLC
05 August 2022
 

London Stock Exchange Group plc: H1 2022 Interim Results

David Schwimmer, CEO said:

"LSEG has delivered a strong first half performance with continued revenue growth across our businesses. We are managing costs well and we continue to make progress on achievement of synergies.

"We provide solutions solving critical issues for our customers, with a high proportion of recurring subscription revenues and structurally growing transactional revenues that benefit from volatility. Our cash generation is allowing us to actively deploy capital across organic and inorganic investments, grow our dividend and commence a share buy-back programme, driving further value for our shareholders. We are successfully executing on our strategy, have good momentum going into the second half and our targets remain unchanged."

H1 2022 highlights - Execution on strategy driving strong financial performance

Note: Unless otherwise stated, variances refer to growth rates on a constant currency basis, with the comparator, H1 2021, on a pro-forma basis which also excludes the impact of a deferred revenue accounting adjustment1.

Strong progress in H1 across all divisions, and momentum continuing into H2

Continued delivery on revenue and cost synergies; all targets unchanged

Successfully executing on organic and inorganic investment opportunities to drive growth, build a more agile and efficient business and enhance our customer offering

Well positioned for the current environment; providing high value solutions for customers' critical needs

Launching £750 million share buy-back over 12 months with the first tranche to commence immediately

Strong income growth across all divisions, with pro-forma total income (excluding recoveries) up 6.2%; up 7.0% adjusting for Ukraine and Russia conflict impact2

ASV growth metric on a like-for-like basis continues to improve, up 5.4% at the end of H1 (Q1: 4.9%); improved retention and new sales driving the increase

Pro-forma adjusted operating expense increase of 4.3% reflects lower phasing of costs in H1 2021; cost guidance for low-single digit growth in 2022 maintained despite inflationary backdrop

Adjusted EBITDA margin of 48.8%3; on track to deliver margin target of at least 50% by end of 2023

Pro-forma AEPS up 21% to 167.4p

Robust cash generation in H1 and completion of two acquisitions - GDC and MayStreet; Quantile and TORA expected to complete in H2

Leverage is inside our 1-2x target range within 18 months of the Refinitiv acquisition

Interim dividend up 27% to 31.7 pence per share

This release contains revenues, costs, earnings and key performance indicators (KPIs) for the six months ended 30 June 2022 (H1). H1 2022 is compared against H1 2021 on both a statutory and pro-forma basis. Pro-forma figures assume that the acquisition of Refinitiv took place on 1 January 2021. Revenues and costs associated with the BETA divestment have been classed as discontinued and are excluded from all periods. Revenues and costs associated with the Borsa Italiana group divestment, which completed in H1 2021, are also excluded. Constant currency variance is calculated on the basis of consistent FX rates applied across the current and prior year period. For more information on accounting treatments and approach to FX please refer to the "Accounting and modelling notes" section below. Within the financial information and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes.

1 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. This reduced H1 2021 revenue by £23m, mainly in Data & Analytics with a smaller impact in the FX business within Capital Markets. There is no material impact in 2022. More details can be found in the "Accounting and modelling notes" section

2 Growth rates excluding the Ukraine / Russia conflict impact have been calculated by excluding income in the region and from sanctioned customers and related business from both periods

3 This margin figure has been adjusted to remove a non-cash FX-related balance sheet adjustment which is a £59m credit within adjusted operating expenses in H1 2022. This is explained further in the 'Year-on-year pro-forma financial performance' and 'Embedded Derivatives' sections. Adjusted EBITDA margin is adjusted EBITDA divided by Total Income (excl. Recoveries).

 

H1 2022 Statutory results1

The statutory results in the table below and the commentary beneath that compare LSEG continuing results for H1 2022 against the comparable H1 period in 2021 that only included 5 months of contribution from Refinitiv following completion of the acquisition at the end of January 2021. For an analysis of results on a pro-forma basis, please see the following section. Both statutory and pro-forma results treat BETA as discontinued and therefore the revenues and costs associated with the divestment are excluded from all periods.

 

Continuing operations

H1 2022
£m

H1 20211
£m

Data & Analytics

2,354 

1,872 

Capital Markets

720 

539 

Post Trade

483 

446 

Other

12 

13 

Total income (excl. recoveries)

3,569 

2,870 

Recoveries

166 

148 

Total income (incl. recoveries)

3,735 

3,018 




Cost of sales

(504)

(392)

Gross profit

3,231 

2,626 




Operating expenses before depreciation, amortisation and impairment

(1,593)

(1,401)

Adjusted operating expenses before depreciation, amortisation and impairment 2

(1,433)

(1,219)

Non-underlying operating expenses before depreciation, amortisation and impairment

(160)

(182)

Non-underlying profit on disposal of property, plant and equipment

133 

Non-underlying remeasurement gain

23 

Income from equity investments

11 

Share of profit / (loss) after tax of associates

1 

(2)

Earnings before interest, tax, depreciation, amortisation and impairment

1,795 

1,234

Adjusted earnings before interest, tax, depreciation, amortisation and impairment 2

1,799 

1,416 

Non-underlying earnings before interest, tax, depreciation, amortisation and impairment

(4)

(182)

 

 

 

Depreciation, amortisation and impairment

(898)

(684)

Adjusted depreciation, amortisation and impairment 2

(391)

(297)

Non-underlying depreciation, amortisation and impairment

(507)

(387)




Operating profit

897 

550 

Adjusted operating profit 2

1,408 

1,119 

Non-underlying operating loss

(511)

(569)




Net finance expense

(94)

(87)

Adjusted net finance expense 2

(81)

(86)

Non-underlying net finance expense

(13)

(1)




Profit before tax

803 

463 

Adjusted profit before tax 2

1,327 

1,033 

Non-underlying loss before tax

(524)

(570)




Taxation

(159)

(254)

Adjusted tax 2

(262)

(215)

Non-underlying tax

103

(39)




Profit for the period (from continuing operations)

644 

209 

Adjusted profit 2

1,065 

818 

Non-underlying loss

(421)

(609)




Profit from continuing operations attributable to:



Equity holders

548 

143 

Underlying

934 

721 

Non-underlying

(386)

(578)

Non-controlling interest

96 

66 

Underlying

131 

97 

Non-underlying

(35)

(31)




Continuing basic earnings per share (p) 3

98.0 

27.2 

Adjusted continuing basic earnings per share (p) 3

167.4 

139.0 

1 The comparator H1 2021 figures are statutory results, incorporating Refinitiv from acquisition at the end of January 2021. Revenues and costs associated with the BETA divestment have been classified as discontinued and are excluded from all periods. Revenues and costs associated with the Borsa Italiana group divestment, which completed in H1 2021, are also excluded

2 The Group reports adjusted operating expenses before depreciation, amortisation and impairment, adjusted earnings before interest, tax, depreciation, amortisation and impairment (EBITDA), adjusted depreciation, amortisation and impairment, adjusted operating profit and adjusted basic earnings per share (EPS). These measures are not measures of performance under IFRS and should be considered in addition to, and not as a substitute for, IFRS measures of financial performance and liquidity. Adjusted performance measures provide supplemental data relevant to an understanding of the Group's financial performance and exclude non-underlying items of income and expense that are material by their size and/or nature. Non-underlying items include: amortisation and impairment of goodwill and purchased intangible assets (including customer relationships, trade names, and databases and content, all of which are recognised as a result of acquisitions); incremental depreciation and amortisation of the fair value adjustments on tangible assets and intangible assets recognised as a result of acquisitions; and other non-underlying income or expenses not related to day-to-day operations, such as transaction costs related to acquisitions and disposals of businesses, as well as integration costs

3 Weighted average number of shares used to calculate basic earnings per share and adjusted basic earnings per share from continuing operations is 558 million (H1 2021: 519 million)

 

H1 2022 Statutory results highlights

Total Income grew by £717 million to £3,735 million. This increase is partly due to the additional month of contribution in H1 2022 compared with H1 2021, associated with the Refinitiv acquisition, which completed on 29 January 2021.

Data & Analytics: revenues up £482 million to £2,354 million. Each business across the division performed well, with good momentum continuing into H2. £292 million of this increase is due to the additional month of contribution in H1 2022 compared with H1 2021, associated with the acquisition of Refinitiv. £85 million was driven by broad based growth in subscription revenues through new sales, strong customer retention and price increases, partially offset by the impact of the Ukraine / Russia conflict. Other factors, which included the strengthening USD rate vs GBP offset by the deferred revenue accounting adjustment in H1 2021, contributed £85 million in the period.

Capital Markets: revenues up £181 million to £720 million. Each of the underlying asset classes have seen good growth in H1 2022. £57 million of this increase is due to the additional month of contribution from our FX venues and Tradeweb. Other factors such as the strengthening of USD vs GBP contributed a further £21 million.

Post Trade: total income up £37 million to £483 million. Growth has primarily been driven by a strong performance in OTC Derivatives as we support customers to manage risk in an uncertain rate environment and in Net Treasury Income and Non-Cash Collateral, which was the result of high cash and non-cash collateral balances. Overall the FX impact was neutral.

 

H1 2022 Pro-forma summary

Continuing operations

H1 2022

£m

Pro-forma

H1 20211

£m

Variance2

%

 

Constant Currency Variance3

%

Constant Currency Variance

(excl. deferred revenue adjustment) 3,4

%

Data & Analytics

2,354 

2,164 

8.8% 

 

5.0% 

4.0% 

Capital Markets

720 

616 

16.9% 

 

13.0% 

12.9% 

Post Trade

483 

446 

8.3% 

 

8.5% 

8.5% 

Other

12 

14 

(14.3%)

 

(14.2%)

(14.2%)

Total income (excl. recoveries)

3,569 

3,240 

10.2% 

 

6.9% 

6.2% 

Recoveries

166 

178 

(6.7%)

 

2.9% 

1.8% 

Total income (incl. recoveries)

3,735 

3,419 

9.2% 

 

6.7% 

6.0% 

Cost of sales

(504)

(452)

11.5% 

 

6.6% 

6.6% 

Gross profit

3,231 

2,967 

8.9% 

 

6.7% 

5.9% 

 

 



 


 

Adjusted operating expenses before depreciation, amortisation and impairment 5

(1,433)

(1,397)

2.6% 


4.3% 

4.3% 

Income from equity investments

- 

11 

- 


- 

- 

Share of profit / (loss) after tax of associates

1 

(2)

- 


- 

- 

Adjusted earnings before interest, tax, depreciation, amortisation and impairment 5

1,799 

1,579 

13.9% 


8.4% 

6.8% 

Adjusted EBITDA Margin 6

50.4% 

48.7% 

 

 

 

 








Adjusted depreciation, amortisation and impairment 5

(391)

(347)

12.7% 


16.3% 

16.3% 

Adjusted operating profit 5

1,408 

1,233 

14.2% 

 

6.2% 

4.3% 








Adjusted net finance expense 5

(81)

(124)

(34.7%)




Adjusted profit before tax 5

1,327 

1,108 

19.8% 











Adjusted tax 5

(262)

(233)

12.4% 




Adjusted profit for the period 5

1,065 

874 

21.9% 











Adjusted profit attributable to:







Equity holders

934 

767 

21.8% 




Non-controlling interest

131 

107 

22.4% 











Continuing adjusted basic earnings per share (p)

167.4 

138.0 

21.3% 




 

Weighted average shares (m)

558 

556 





Variances are provided on a pro-forma and constant currency basis. Unless stated otherwise, commentary below is provided on the constant currency variance (excluding the deferred revenue adjustment) to provide insight into performance on a comparable basis. Revenues and costs associated with the BETA divestment have been classified as discontinued and are excluded from all periods. Revenues and costs associated with the Borsa Italiana group divestment, which completed in H1 2021, are also excluded.

1 The H1 2021 comparator is pro-forma and assumes that the acquisition of Refinitiv took place on 1 January 2021

2 Variance is the difference between current and prior year periods using FX rates prevalent at each time, therefore any changes in the FX rates are 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 Excludes the deferred revenue adjustment further explained in the "Accounting and modelling notes" section

5 Before non-underlying items

6 Adjusted EBITDA margin is adjusted EBITDA divided by Total Income (excl. Recoveries)

 

H1 2022 Pro-forma highlights

Total Income (excluding recoveries) grew 6.2% at constant currency; up 7.0% excluding Ukraine / Russia conflict impacts.

Data & Analytics: revenues up 4.0%; up 5.0% excluding Ukraine / Russia conflict impacts


Trading & Banking Solutions down 1.1%; but grew 0.7% excluding Ukraine / Russia conflict impacts - Momentum continues with underlying revenue growth and improved retention. Trading showed growth in Q2 for the first time in many years when excluding Ukraine / Russia. Further progress in the rollout of Workspace in Banking


Enterprise Data Solutions up 6.3% - Improved retention and sales growth partly offset by business lost through Ukraine / Russia conflict. Data demand continues to grow as customers move more investment strategies to a "big data focus". MayStreet acquisition completed at the end of May, enhances the breadth of our low-latency offering


Investment Solutions up 8.0% - Benchmark, Indices and Analytics growth at FTSE Russell continues strongly, up 10.4% with 15 new ESG products through our revenue synergy programme, more than 2021's total number of products launched. Asset-based revenues rose 8.0% with strong growth in Q1 but broadly flat in Q2 as AUM declined


Wealth Solutions up 2.3% - Good net sales and retention, offsetting Ukraine / Russia conflict cancellations. Performance excludes the contribution from the low growth, non-core BETA business moved to discontinued operations; divestment completed on 1 July


Customer & Third-Party Risk Solutions up 7.3% - Double-digit organic growth continued in H1. Strong performance at World-Check. GDC acquisition completed at the end of May, broadening our capability in the digital identity and anti-fraud sector

 

Capital Markets: revenues up 12.9%; up 13.4% excluding Ukraine / Russia conflict impacts


Equities up 7.8% - Higher market capitalisation of listed companies at the end of last year, helped drive annual fees revenue, partly offset by reduction in new issues in challenging primary market conditions. Strong secondary market activity driven by market volatility but with lower average yield


FX up 6.1% - Strong growth at FXall with broadly flat performance at Matching. Announced plans to launch NDF Matching in Singapore, supporting strong demand from Asia markets. Modernising our FX venue technology by re-platforming onto LSEG technology


Fixed Income, Derivatives & Other up 16.5% - Strong performance at Tradeweb in H11, with double-digit revenue growth across Rates, Credit and Equity asset classes. Tradeweb and FXall collaboration announced to develop hedging workflow solutions for emerging market products

 

Post Trade: total income up 8.5%; up 8.6% excluding Ukraine / Russia conflict impacts


OTC Derivatives up 12.0% - Strong activity across SwapClear and SwapAgent as we support customers to manage risk in an uncertain rate environment. Record volumes at ForexClear and CDSClear


Securities & Reporting up 1.9% - Good volume growth at RepoClear and EquityClear, with the benefit limited by increased competition. Value at Risk (VAR) model introduced at LCH SA RepoClear to improve margin efficiency for members


Non-Cash Collateral up 6.2% - Driven by higher non-cash collateral balances due to strong volumes


Net Treasury Income up 11.3% - Growth driven by increased cash collateral balances, unlikely to remain at current level and expected to reduce towards normalised levels across the rest of 2022

1 Tradeweb H1 2022 results were released on 3 August 2022 and provided more detailed commentary on performance

 

 

Contacts: London Stock Exchange Group plc

 

Investors

 

 

Paul Froud / Chris Turner - 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

 

 

H1 investor and analyst conference call:

 

LSEG will host a webcast and conference call for its H1 Interim Results 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 webcast or telephone conference call please register in advance using the following link and instructions below:

https://www.lsegissuerservices.com/spark/LondonStockExchangeGroup/events/82c50574-0690-4f15-8ff7-1a48298a8fc8

 

If you wish to participate in Q&A, questions can be submitted by clicking the 'Ask a question' button on the page or by emailing the LSEG Investor Relations team at ir@lseg.com. Questions can be submitted in advance and during the event itself

If you wish to ask a question live, you will need to register for the telephone conference call here: https://cossprereg.btci.com/prereg/key.process?key=P9AGY89KE

NOTE: Once you have registered for the conference call, you will be provided with the information you need to join the conference, including dial-in numbers and passcodes. Please save this information to your calendar or print this information

 

Presentation slides can be viewed at www.lseg.com/investor-relations

 

 

Chief Executive's Statement

 

Overview of H1

 

We have delivered strong H1 results. All divisions have shown good growth with momentum continuing into H2. Our financial targets are unchanged and we have made good progress in realising further revenue and cost synergies. We continue to execute on organic and inorganic investment opportunities to drive growth, build a more agile and efficient business and enhance our customer offering. We are well positioned for the current environment, providing high value solutions for customers' critical needs.

 

A leading global provider of financial markets infrastructure and data

 

LSEG supplies business critical solutions globally, to customers that include almost all of the top 100 global banks and three-quarters of the top 100 asset managers by total assets. We serve over 40,000 customers worldwide with a c.98% annual customer retention rate in Data & Analytics.

 

We operate world-class assets and maintain systemically important global infrastructure, delivering across asset classes and along the whole financial markets value chain. Our open model approach, which allows customers to choose which of our solutions they use and then access on a fair and non-discriminatory basis, is strongly preferred by customers.

 

We are well positioned for the current environment of rising interest rates and inflation. Our income is diversified across geographies, products and customers, with 73% recurring and subscription-like. Our transactional revenues are structurally growing and benefit from volatility, with leading global positions for electronic trading in FX (FXall) and fixed income (Tradeweb) and in the clearing of interest rate swaps (SwapClear) and European repos (RepoClear). We have multiple levers to manage our costs and run a business model that maintains a prudent balance sheet.

 

Announcement of share buy-back and capital allocation approach

 

Our business is highly cash generative and our capital management framework remains consistent. We actively deploy capital for select organic and inorganic investments and will continue to evaluate other shareholder returns alongside growing our dividend.

 

Today, we have announced a share buy-back programme of £750 million which is expected to be phased over multiple tranches over 12 months, with the first commencing today. This is being funded, in large part, using the proceeds of the divestment of the BETA business which completed on 1 July 2022.

 

A separate RNS with full details on the share buy-back announcement is available on the IR section of our website at: www.lseg.com/investor-relations.

 

Integrating our world-class businesses

 

We continue to successfully execute on our multi-year integration of the Refinitiv business, partner with customers to create valued solutions and build our revenue synergies.

 

We are improving sales execution across the Group, with better aligned incentives, more rigorous pipeline management and a greater focus on cross-selling, driving an improvement in retention and sales. We are simplifying our sales approach in Data & Analytics, leveraging more than 240 products to focus customer engagement around 9 core industry themes and introducing single points of contact for customers. This has resulted in a more than 350bps increase in product retention with our large customer segment since 2020.

 

Our revenue synergies continue to increase, with £44 million run-rate achieved by the end of H1 2022. We are creating new index and analytic products, improving distribution of our existing data products and cross-selling FTSE Russell data products to Enterprise Data customers. We now expect to deliver at the top end of our £40-60 million run-rate target for the end of 2022.

 

Driving growth

 

As a Group, we are very well positioned to create innovative products and services, drawing on the natural linkages across our business. Our global end-to-end proposition across asset classes is deepening and expanding our customer relationships, meaning we can better understand their needs. This helps us to know how best we can support them while creating targeted and innovative solutions.

 

To illustrate this, a differentiator for us is our ability to aggregate insight from across our business and rapidly deliver it in a flexible way. In H1, we have been able to do this by drawing on our proprietary data from across Tradeweb, SwapClear and Yield Book, to implement a novel solution for customers that meets their regulatory requirements of the Fundamental Review of Trading Book (FRTB).

 

The rollout of our Workspace product has continued well in H1 and is ahead of schedule. Over 50% of users have been migrated onto Workspace from legacy solutions. Having already launched Workspace for FX Trading, we are targeting to go live or be in beta-testing for all remaining user types by the end of 2022. The feedback received has been very positive, with Banking customer satisfaction more than 10 percentage points above the equivalent Eikon product across quality of search functionality, ease of content sharing, multi-device capabilities and value for money.

 

Building an efficient and scalable platform

 

We continue to develop connections across our businesses to create a more seamless customer workflow. In H1, we announced a connection between FXall and Tradeweb. This allows emerging market products (bonds and currency swaps) to be traded and hedged efficiently, reducing execution risk for customers. We have also embedded our Yield Book product directly into Eikon and Workspace to benefit from the broader distribution and ease of access that is possible through our platforms.

 

Investments continue to drive efficiencies and scalability, as we build our data platform and migrate to the cloud. Our software defined network infrastructure is delivering better agility, higher capacity and increased resilience.

 

Our cost synergy programme is on track to deliver at least £400 million run-rate savings by end of 2025, with our 2022 target of £220 million run-rate already delivered in H1. Over 80 percent of our real estate optimisation programme is complete and we are through over 60 percent of our data centre rationalisation programme. We now expect to deliver £250 million run-rate cost synergies by end of 2022.

 

Enhancing growth and creating shareholder value through strategic M&A

 

We have completed two acquisitions in H1. MayStreet enhances the breadth of our Enterprise Data offering in low-latency services and GDC globalises our digital identity and fraud prevention offering in the Customer & Third-Party Risk business. These contributed income in the period of £1 million and £2 million respectively. A summary of the financial contribution of both businesses can be found in the "Financial details on completed acquisitions" section later in the release.

 

Two other acquisitions that have previously been announced are expected to close in H2, subject to merger control and other regulatory approvals. These are TORA, which provides Trading & Banking customers with multi-asset order and execution management capabilities, and Quantile, which will help customers more effectively manage both capital and margin in Post Trade.

 

On 1 July, we completed the divestment of the non-core, lower-growth BETA wealth transaction business, and will return a significant proportion of the proceeds to shareholders via the share buy-back we have announced today.

 

We will continue to assess further bolt-on acquisitions in a disciplined manner to accelerate our strategy.

 

Statutory financial performance

 

The commentary below refers to continuing operations. It excludes BETA, which has been treated as a discontinued operation in both the current and prior periods, and the Borsa Italiana group which was treated as a discontinued operation in H1 2021.

 

Total income grew by £717 million to £3,735 million. This increase reflects the strong business performance as well as the additional month of contribution in H1 2022 compared with H1 2021 associated with the Refinitiv acquisition, which completed on 29 January 2021.

 

Operating expenses before depreciation amortisation and impairment increased by £192 million to £1,593 million, with the additional costs associated with the extra month from Refinitiv in H1 2022 compared with H1 2021. Included within operating expenses are £160 million (H1 2021: £182 million) of non-underlying costs which mainly relate to Refinitiv integration costs.

 

Depreciation, amortisation and impairment increased by £214 million to £898 million primarily as a result of the acquisition of Refinitiv, including the amortisation associated with the acquired intangible assets.

 

Operating profit was £897 million (H1 2021: £550 million).

 

Net financing expense increased by £7 million to £94 million. Tax of £159 million (H1 2021: £254 million) is net of a £103 million non-underlying tax benefit which mainly reflects the tax impact of the Group's non-underlying items. The effective tax rate was 19.8%.

 

Profit for the period amounted to £644 million (H1 2021: £209 million), within which £548 million (H1 2021: £143 million) is attributable to equity holders. Non-controlling interest has increased by £30 million to £96 million, in part reflecting the strong performance from Tradeweb and LCH in the period.

 

Basic earnings per share from continuing operations has increased by 70.8p to 98.0p.

 

Year-on-year pro-forma financial performance

 

LSEG has delivered strong income growth across all divisions in H1, with total income (excluding recoveries and the deferred revenue accounting adjustment) up 6.2%. This growth has been driven by good new sales and retention in Data & Analytics, strong activity at Tradeweb in Capital Markets and high volumes across OTC in Post Trade. Our ASV growth metric on a like-for-like basis (adjusted for the Ukraine / Russia conflict) continues to improve, up 5.4% at the end of H1 (Q1: 4.9%) with improved retention and new sales driving the increase.

 

In the period, there was a minor impact from M&A, with the addition of one month of contribution from MayStreet and GDC, after they both closed on 31 May. This was more than offset by the divestment of the ERMT business at the end of 2021. On an organic basis (which excludes the impact of M&A) total income (excluding recoveries) grew 6.4%. Within this, on an organic basis, Data & Analytics was up 4.2%, with Enterprise Data up 6.1% and Customer & Third-Party Risk Solutions up 10.6%.

 

Following LSEG's actions taken in response to the Ukraine and Russia conflict, there was a £23 million impact in H1 (with £7 million in Q1 and £16 million in Q2). The expected revenue impact is c.£60 million in 2022. Excluding the impact of the conflict, total income (excluding recoveries), grew 7.0%.

 

We continue to make good progress on our revenue synergy programme, with £44 million run-rate achieved by the end of H1 2022. We now expect to deliver at the top end of our £40-60 million run-rate target for the end of 2022.

 

Cost management continues to be strong, with adjusted operating expense growth of 4.3%, and on track to deliver our organic low-single digit guidance for the full year. In the period, the cost growth comprised of ongoing operating costs and investment for growth, offset by the continued strong delivery of our cost synergy programme. The investment for growth includes investment in technology modernisation, increasing cloud usage, the costs of delivering strong growth at Tradeweb and costs relating to the delivery of our revenue synergy programme.

 

To simplify our business and manage inflationary pressures, we are leveraging our global footprint. Excluding Tradeweb, over 65% of new hires in H1 2022 were hired into lower cost locations. We continue to take a strategic approach to technology, for example, consolidating our low latency real time data products onto a single efficient platform and we are increasing the efficiency of our cloud estate.

 

Our cost synergy programme is on track to deliver at least £400 million run-rate savings by end of 2025, with our 2022 target of £220 million run-rate already delivered in H1. We now expect to achieve £250 million of run-rate savings by the end of 2022.

 

Adjusted operating expenses were also impacted by FX during the period as USD strengthened vs GBP, with 48% of our costs recognised in USD. The impact was reduced by a £59 million FX-related credit, that is recognised as a balance sheet adjustment. For more details please see the Embedded Derivatives section. This £59 million credit does not impact our adjusted operating expenses' constant currency growth rate or therefore our guidance.

 

We are on track to deliver our organic cost guidance for 2022 of low-single digit growth, despite the inflationary backdrop, with robust levers in place to manage cost pressure going forward. H1's growth is higher than the low-single digit full year guidance due to phasing of costs and the annualisation of investment in sales and resilience capacity in H2 2021.

 

In H2 2022, adjusted operating expenses are expected to show modest growth to deliver our 2022 cost guidance, with further M&A cost annualisation and a small H1 vs H2 cost phasing impact. If FX rates stay at the current USD / GBP spot rate, our reported Sterling figure at the end of year would likely see a more material FX headwind.

 

Excluding the £59 million FX credit in operating expenses, we have achieved an adjusted EBITDA margin of 48.8% in H1. On an equivalent basis this is up 160bps from 47.2% at full year 2021. We are confident of delivering a margin of at least 50% by the end of 2023, as we continue to invest to secure future growth and are well positioned to manage inflationary pressures.

 

Adjusted depreciation, amortisation and impairment was £391 million. The previous full year guidance of £820 million was provided before the announcement of the divestment of BETA. The divestment reduced 2021 depreciation by £49 million. Therefore our 2022 guidance has been updated accordingly and on a constant currency basis from 2021 we expect depreciation, amortisation and impairment to be £790 million, depending on the timing of and phasing of H2 capital expenditure.

 

Adjusted net financing expense reduced by 35% to £81 million, largely driven by the higher cost of debt in early 2021, before refinancing in April 2021. Interest rates have risen in the US, UK and Euro zone in H1. 18% of our debt as of H1 is floating and therefore sensitive to rate increases. At current FX rates, a 1% increase in rates would result in an annualised £15 million higher financing expense. In light of the higher rates and the strengthen USD, our full year guidance at current rates is c.£180 million.

 

The underlying tax rate was 20.5%, and 19.7% when adjusted for a small benefit related to the prior year. The effective tax rate for the full year is estimated to be between 21-22%. For 2023 and 2024, the underlying tax rate is expected to be in the range of 22-24% based on the current tax landscape.

 

Non-controlling interest has increased by 22% to £131 million, reflecting the strong performance from Tradeweb and LCH in the period.

 

Adjusted basic earnings per share has increased 21% to 167.4 pence demonstrating our continued strong financial delivery.

 

Capital expenditure, cash and balance sheet

 

Capital expenditure in H1 on an accrued, constant currency basis was £384 million, with £310 million of investment in business-as-usual initiatives and £74 million of integration-related investment, of which £71 million relates to cost to achieve synergies. Our business-as-usual capex guidance is unchanged, expecting £650-700 million per annum until the end of 2023, before tapering thereafter.

 

Cash generated from operating activities was £1,338 million in H1, showing a strong underlying performance. Net cash generated after net interest and royalties paid, taxes paid, capex and other investments was £531 million and £73 million after dividends. We are a highly cash generative business, often weighted towards the second half due to the phasing of our dividend. We expect to generate over £1 billion of post-dividend free cash flow this year, plus the proceeds from the BETA disposal.

 

As of 30 June 2022, the Group had operating net debt of £7,207 million after setting aside £1,372 million for regulatory and operational requirements. The Group's operating net debt increased during the period due to adverse movements in foreign exchange rates, the payment of the 2021 final dividend and timing of M&A transactions, with MayStreet and GDC acquired in H1 but proceeds from the BETA divestment received on 1 July 2022. Leverage temporarily increased to 2.1x from 1.9x as of 31 December 2021. Including the net proceeds received from the BETA divestment, leverage would have been 1.9x.

 

The Group did not issue or redeem any bonds during the first half of 2022. The Group retains access to £2.5 billion of committed liquidity via its revolving credit facilities, of which £1.425 billion matures in December 2024 and £1.075 billion matures in December 2026. As of 30 June 2022, $80 million (£66 million) was drawn under the revolving credit facilities (31 December 2021: £nil).

 

Both Standard & Poor's and Moody's maintained their respective LSEG long-term credit ratings of A and A3 with stable outlook and short-term ratings of A-1 and P-2 throughout the first half of 2022. Standard & Poor's also maintained its long-term rating of LCH Limited and LCH SA at AA- with a stable outlook and short-term rating at A-1+ throughout the period.

 

The Group had net assets of £27,864 million at 30 June 2022 (31 December 2021: £25,519 million), including £2,520 million in cash and cash equivalents (31 December 2021: £2,665 million).

 

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 31.7 pence per share, an increase of 27% (H1 2021: 25.0 pence per share). The interim dividend will be paid on 20 September 2022 to shareholders on the register on 19 August 2022.

 

Outlook

 

LSEG has delivered a strong first half performance with continued revenue growth across our businesses. We are managing costs well and we continue to make progress to achieve our synergies. We are successfully executing on our strategy, with good momentum going into the second half.

 

Accounting and modelling notes

 

Financial details on completed acquisitions

 

On 31 May 2022, we closed our acquisitions of both MayStreet and GDC. They have a negligible impact on our H1 2022 results, contributing revenue of £1 million and £2 million respectively.

 

As a reminder:

 

MayStreet: Provides high-quality low latency technology and market data, expanding our leading real-time data offering. It contributes to Enterprise Data Solutions, Data & Analytics

GDC: Provides identity verification data for Know Your Customer purposes, expanding our capabilities in the high growth Digital Identity and Fraud solutions area. It contributes to Customer & Third-Party Risk Solutions, Data & Analytics

 

To help incorporate the contribution of MayStreet and GDC within models, below are the acquisitions' implied contributions in 2021, as if they were within the Group. As our cost guidance is on an organic constant currency basis, the inclusion of these businesses' costs will not impact the guidance, and therefore will need to be added when modelling for the full year, with the full annualisation in 2023.

 

2021 £m

MayStreet

GDC

Total Income

£11m 

£14m 

Cost of Sales

(£3m)

(£7m)

Gross Profit

£8m 

£7m 

Operating Expenses

(£16m)

(£5m)

EBITDA

(£8m)

£2m 

Depreciation

(£1m)

Operating profit

(£9m)

£2m 

 

Both businesses saw strong income growth in 2021 and have continued to grow in 2022 from a low base. These acquisitions will complement our existing offerings to support growth in Enterprise Data and Customer & Third-Party Risk Solutions.

 

Deferred revenue accounting adjustment

 

This adjustment is as previously described in 2021. There is no material impact in 2022. An adjusted variance, excluding the deferred revenue adjustment, has been presented to show comparable business growth on the prior year.

 

As a reminder, the adjustment results from the acquisition of Refinitiv and the associated purchase price accounting rules. Refinitiv's deferred revenue balances were subject to a one-time haircut at the time of acquisition. This was a non-cash adjustment. 2021 saw a negative revenue impact of £25 million, with £22 million in Q1; £1 million in Q2; £1 million in Q3; £1 million in Q4. 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.

 

Organic growth

 

Organic growth rates are a non-IFRS measure, intended to remove the impact of acquisitions and disposals. Organic growth is calculated on a constant currency basis, adjusting the pro-forma results to remove disposals from the entirety of the current and prior year periods, and by including acquisitions from the date of acquisition with a comparable adjustment to the prior year.

 

Embedded derivatives

 

LSEG has embedded foreign currency derivatives which arise primarily in revenue contracts where the currency of the contract is different from the functional or local currencies of the parties involved. The local-currency-based contract determines the revenue and LSEG records the derivative instruments at fair value in the balance sheet as either assets or liabilities, in accordance with IFRS 9. Changes in fair value, which are based on latest FX rates and forecasts, are recognised in the income statement, within the operating expense line.

 

In H1 2022, due to the considerable strengthening of USD vs GBP, particularly in June 2022, there was a significant FX gain recognised within operating expense. In H1 2022 this totalled £59 million. Typically, and in previous periods, the gain or loss has been immaterial. This is purely a non-cash accounting gain and does not impact our organic constant currency operating expenses guidance.

 

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 2022 financial year, has been given on a constant currency basis.

 


USD

GBP

EUR

Other

2022 H1 - Total Income 1

57%

18%

17%

8%

2022 H1 - Underlying Expenses 2

48%

26%

10%

16%

 

2022 H1 - Total Income by division 1

USD

GBP

EUR

Other

Data & Analytics

64%

12%

13%

11%

Capital Markets

58%

21%

20%

1%

Post Trade

19%

43%

36%

2%

Other

15%

30%

51%

4%

1 Total Income includes recoveries

2 Underlying expenses includes cost of sales, underlying operating expenses and underlying depreciation and amortisation

 

The results for H1 2022 have been translated into Sterling using the average exchange rates for the period. The rates for the largest two currency pairs are shown in the table below.

 


Average rate
6 months ended
30-Jun-22

Closing rate at
30-Jun-22

Average rate
6 months ended
30-Jun-21

Closing rate at
30-Jun-21

GBP : USD

1.300

1.212

1.388

1.384

GBP : EUR

1.188

1.157

1.152

1.163

 

Statutory divisional revenues and adjusted operating profit

 

1.   Data & Analytics

 

Results to adjusted operating profit 1

 

Continuing operations


H1 2022
£m


Statutory   H1 20211
£m

 



Trading & Banking Solutions

770 

621 

Trading

606 

494 

Banking

163 

127 

Enterprise Data Solutions

620 

477 

Real Time Data

397 

305 

PRS

224 

172 

Investment Solutions

637 

525 

Benchmark Rates, Indices & Analytics

285 

243 

Index - Asset-based

141 

122 

Data & Workflow

210 

160 

Wealth Solutions

131 

102 

Customer & Third-Party Risk Solutions

196 

147 

Total revenue (excl. recoveries)

2,354 

1,872 

Recoveries

166 

148 

Total revenue (incl. recoveries)

2,520 

2,020 

Cost of sales

(420)

(322)

Gross profit

2,100 

1,698 

Adjusted operating expenses before depreciation, amortisation and impairment

(963)

(820)

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

1,137 

878 

Depreciation, amortisation and impairment

(291)

(221)

Adjusted operating profit

846 

657 

 

1 The H1 2021 comparator is statutory, incorporating Refinitiv from acquisition at the end of January 2021. Revenues and costs associated with the BETA divestment have been classed as discontinued and are excluded from all periods. Revenues and costs associated with the Borsa Italiana group divestment, which completed in H1 2021, are also excluded

 

2.   Capital Markets

 

Results to adjusted operating profit 1

 

Continuing operations

H1 2022
£m

Statutory   H1 20211
£m

Equities

129 

120 

FX

124 

91 

Fixed Income, Derivatives & Other

467 

328 

Total revenue

720 

539 

Cost of sales

(16)

(11)

Gross profit

704 

528 

Adjusted operating expenses before depreciation, amortisation and impairment

(314)

(250)

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

390 

278 

Depreciation, amortisation and impairment

(48)

(30)

Adjusted operating profit

342 

 248 

1 The H1 2021 comparator is statutory, incorporating Refinitiv from acquisition at the end of January 2021. Revenues and costs associated with the Borsa Italiana group divestment, which completed in H1 2021, are excluded from all periods

 

3.   Post Trade

 

Results to adjusted operating profit 1

 

Continuing operations

H1 2022
£m

Statutory   H1 20211
£m

OTC Derivatives

191 

169 

Securities & Reporting

122 

123 

Non-Cash Collateral

49 

46 

Total revenue

362 

338 

Net Treasury Income

121 

108 

Total income

483 

446 

Cost of sales

(68)

(59)

Gross profit

415 

387 

Adjusted operating expenses before depreciation, amortisation and impairment

(155)

(147)

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

260 

240 

Depreciation, amortisation and impairment

(52)

(46)

Adjusted operating profit

208 

194 

1 The H1 2021 comparator is statutory, incorporating Refinitiv from acquisition at the end of January 2021. Revenues and costs associated with the Borsa Italiana group divestment, which completed in H1 2021, are excluded from all periods

 

Pro-forma divisional revenues, adjusted operating profit and non-financial KPIs

 

1.   Data & Analytics

 

Results to adjusted operating profit 1

 

Continuing operations


H1 2022
£m


Pro-forma   H1 20211
£m


Variance2
%


Constant Currency Variance3
%

Constant Currency Variance (excl. deferred revenue adjustment)3,4
%

Trading & Banking Solutions

770 

745 

3.4% 


(0.1%)

(1.1%)

Trading

606 

594 

2.0% 

 

(1.0%)

(2.0%)

Banking

163 

151 

7.9% 

 

3.7% 

2.6% 

Enterprise Data Solutions

620 

562 

10.3% 


7.5% 

6.3% 

Real Time Data

397 

360 

10.3% 

 

7.2% 

5.9% 

PRS

224 

202 

10.9% 

 

7.9% 

6.9% 

Investment Solutions

637 

560 

13.8% 


8.7% 

8.0% 

Benchmark Rates, Indices & Analytics

285 

247 

15.4% 

 

10.6% 

10.4% 

Index - Asset-based

141 

122 

15.6% 

 

8.0% 

8.0% 

Data & Workflow

210 

191 

9.9% 

 

6.6% 

4.9% 

Wealth Solutions

131 

123 

6.5% 


3.0% 

2.3% 

Customer & Third-Party Risk Solutions

196 

175 

12.0% 


8.5% 

7.3% 

Total revenue (excl. recoveries)

2,354 

2,164 

8.8% 


5.0% 

4.0% 

Recoveries

166 

178 

(6.7%)


2.9% 

1.8% 

Total revenue (incl. recoveries)

2,520 

2,343 

7.6% 


4.9% 

3.9% 

Cost of sales

(420)

(381)

10.2% 


4.3% 

4.3% 

Gross profit

2,100 

1,962 

7.0% 


5.0% 

3.8% 

Adjusted operating expenses before depreciation, amortisation and impairment

(963)

(957)

0.6% 


2.4% 

2.4% 

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

1,137 

1,005 

13.1% 


7.5% 

5.1%

Depreciation, amortisation and impairment

(291)

(264)

10.2% 


13.9% 

13.9%

Adjusted operating profit

846 

741 

14.2% 


5.3% 

2.1%

Adjusted EBITDA margin

48.3%

46.4%





 

Non-financial KPIs 1

 

 

H1 2022

H1 2021

Variance

%


 


 

Annual Subscription Value growth (%) 5

4.1%

3.9%


Annual Subscription Value growth excl. U/R impact (%) 5, 6

5.4%

3.9%


Subscription revenue growth (%) 5, 7

4.5%



Subscription revenue growth excl. U/R impact (%) 5, 6, 7

5.0%



Index - ETF AUM ($bn)

962

1,040

(8%)

Index - ESG Passive AUM ($bn) 8

261

132

98% 

 

1 The H1 2021 comparator is pro-forma and assumes that the acquisition of Refinitiv took place on 1 January 2021. Revenues and costs associated with the BETA divestment have been classed as discontinued and are excluded from all periods. Revenues and costs associated with the Borsa Italiana group divestment, which completed in H1 2021, are also excluded

2 Variance is the difference between current and prior year periods using FX rates prevalent at each time, therefore any changes in the FX rates are 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 Excludes the deferred revenue adjustment further explained in the "Accounting and modelling notes" section

5 The variance is a constant currency variance adjusted for acquisitions and disposals

6 Growth rates excluding the Ukraine / Russia conflict impact have been calculated by excluding income in the region and from sanctioned customers and related business from both periods

7 The variance is a 12-month rolling constant currency variance excluding the impact of the deferred revenue accounting adjustment. The comparator is not available due to different methodologies applied to the data for the periods before the completion of the Refinitiv acquisition

8 ESG Passive AUM is at 31 December 2021 and prior period comparator is at 31 December 2020. The metric is updated bi-annually

 

2.   Capital Markets

 

Results to adjusted operating profit 1

 

Continuing operations


H1 2022
£m


Pro-forma   H1 20211
£m


Variance2
%


Constant Currency Variance3
%

Constant Currency Variance (excl. deferred revenue adjustment)3,4
%

Equities

129 

120 

7.5%


7.8%

7.8%

FX

124 

109 

13.8%


6.3%

6.1%

Fixed Income, Derivatives & Other

467 

386 

21.0%


16.5%

16.5%

Total revenue

720 

616 

16.9%


13.0%

12.9%

Cost of sales

(16)

(13)

23.1%


16.3%

16.3%

Gross profit

704 

603 

16.7%


12.9%

12.9%

Adjusted operating expenses before depreciation, amortisation and impairment

(314)

(291)

7.9%


10.7%

10.7%

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

390 

312 

25.0%


15.0%

14.9%

Depreciation, amortisation and impairment

(48)

(37)

29.7%


19.3%

19.3%

Adjusted operating profit

342 

275 

24.4%


14.4%

14.3%

Adjusted EBITDA margin

54.2%

50.6%





 

Non-financial KPIs 1

 

 

H1 2022

H1 2021

Variance
%

Equities

 



Primary Markets

 



New issues

40

 75

(47%)

Total money raised (£bn)

6.3

 15.6

(60%)


 



Secondary Markets - Equities

 



UK Value Traded (£bn) - Average Daily Value

5.3

 4.7

13% 

SETS Yield (bps)

0.66

 0.72

(9%)


 



FX

 



Average daily total volume ($bn)

470

 455

3% 





Fixed income, Derivatives and Other




Tradeweb Average Daily ($m)




Rates - Cash

364,423

 348,673

5% 

Rates - Derivatives

364,323

 272,063

34% 





Credit - Cash

10,483

 9,951

5% 

Credit - Derivatives

19,449

 12,628

54% 

1 The H1 2021 comparator is pro-forma and assumes that the acquisition of Refinitiv took place on 1 January 2021. Revenues and costs associated with the Borsa Italiana group divestment, which completed in H1 2021, are excluded from all periods

2 Variance is the difference between current and prior year periods using FX rates prevalent at each time, therefore any changes in the FX rates are 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 Excludes the deferred revenue adjustment further explained in the "Accounting and modelling notes" section

 

3.   Post Trade

 

Results to adjusted operating profit 1

 

Continuing operations


H1 2022
£m


Pro-forma   H1 20211
£m


Variance2
%


Constant Currency Variance3
%

OTC Derivatives

191 

169 

13.0% 


12.0%

Securities & Reporting

122 

123 

(0.8%)


1.9%

Non-Cash Collateral

49 

46 

6.5% 


6.2%

Total revenue

362 

338 

7.1% 


7.5%

Net Treasury Income

121 

108 

12.0% 


11.3%

Total income

483 

446 

8.3% 


8.5%

Cost of sales

(68)

(58)

17.2% 


20.2%

Gross profit

415 

388 

7.0% 


6.7%

Adjusted operating expenses before depreciation, amortisation and impairment

(155)

(147)

5.4% 


5.1%

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

260 

241 

7.9% 


7.7%

Depreciation, amortisation and impairment

(52)

(46)

13.0% 


28.5%

Adjusted operating profit

208 

195 

6.7% 


3.3%

Adjusted EBITDA Margin

53.8% 

54.0% 




 

Non-financial KPIs 1

 

 

H1 2022

H1 2021

Variance
%





OTC




SwapClear




IRS notional cleared ($trn)

597

468

28% 

SwapClear members

123

 122

1% 

Client trades ('000)

1,334

 1,066

25% 

Client average 10-year notional equivalent ($trn)

4.0

 4.4

(9%)





ForexClear




Notional cleared ($bn)

12,708

 10,776

18% 

ForexClear members

36

 35

3% 





CDSClear




Notional cleared (€bn)

1,742

 1,038

68% 

CDSClear members

25

 25

- 





Securities & Reporting




EquityClear trades (m)

1,199

 976

23% 

Listed derivatives contracts (m)

147.2

 150.3

(2%)

RepoClear - nominal value (€trn)

137.3

113.4

21% 





Non-Cash Collateral




Average non-cash collateral (€bn)

169.5

 161.5

5% 





Net Treasury Income




Average cash collateral (€bn)

130.0

 106.4

22% 

1 The H1 2021 comparator is pro-forma and assumes that the acquisition of Refinitiv took place on 1 January 2021

2 Variance is the difference between current and prior year periods using FX rates prevalent at each time, therefore any changes in the FX rates are 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

 

Appendix - Synergies and cost to achieve

 

 


H1 2022
£m



Revenue synergies




Run-rate realised

44



Cost to achieve

64

of which:


Capital expenditure

44

Non-underlying operating expenses

21





Cost synergies




Run-rate realised

221

In-period benefit

31



Cost to achieve

121

of which:


Capital expenditure

27

Non-underlying operating expenses

94

 


 

Appendix - Total income by type 1

 

Continuing operations

H1 2022

£m

Pro-forma

H1 20211

£m

Variance2

%

 

Constant Currency Variance3

%

Constant Currency Variance (excl. deferred revenue adjustment) 3,4

%

Recurring

2,604

2,389

9.0% 

 

5.4% 

4.5% 

Transactional

832

729

14.1% 

 

11.7% 

11.7% 

Net Treasury Income

121

108

12.0% 

 

11.3% 

11.3% 

Other income

12

14

(14.3%)

 

(14.2%)

(14.2%)

Total income (excl. recoveries)

3,569

3,240

10.2% 

 

6.9% 

6.2% 

Recoveries

166

178

(6.7%)

 

2.9% 

1.8% 

Total income (incl. recoveries)

3,735

3,419

9.2% 

 

6.7% 

6.0% 

 

1 The H1 2021 comparator is pro-forma and assumes that the acquisition of Refinitiv took place on 1 January 2021

2 Variance is the difference between current and prior year periods using FX rates prevalent at each time, therefore any changes in the FX rates are 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 Excludes the deferred revenue adjustment further explained in the "Accounting and modelling notes" section

 

Appendix - Total income and gross profit by quarter 1

 

£m

Q1

Q2

Q3

Q4

2021

 

Q1

Q2


 

 

 

 

 

 

 

 

Trading & Banking Solutions

372 

373 

373 

375 

1,493 


378 

391

    Trading

297 

297 

296 

296 

1,186 

 

298 

308

    Banking

75 

76 

77 

79 

307 

 

80 

83

Enterprise Data Solutions

279 

282 

284 

296 

1,141 


304 

317

    Real Time Data

178 

182 

182 

188 

730 

 

195 

202

    PRS

101 

100 

102 

108 

411 

 

109 

115

Investment Solutions

274 

286 

294 

302 

1,156 


308 

328

    Benchmark Rates, Indices & Analytics

122 

126 

136 

134 

518 

 

137 

148

    Index - Asset-Based

58 

64 

62 

69 

253 

 

70 

71

    Data & Workflow

94 

96 

96 

99 

385 

 

101 

109

Wealth Solutions

61 

62 

61 

65 

249 


63 

68

Customer & Third-Party Risk Solutions

85 

90 

92 

92 

359 


94 

102

Data & Analytics

1,071 

1,093 

1,104 

1,130 

4,398 

 

1,147 

1,207






 




Equities

61 

59 

60 

61 

241 


67 

62

FX

57 

53 

56 

57 

223 


60 

63

Fixed Income, Derivatives & Other

200 

187 

193 

205 

785 


232 

235

Capital Markets

318 

299 

309 

323 

1,249 

 

359 

361






 




OTC Derivatives

87 

82 

86 

103 

358 


93 

98

Securities & Reporting

63 

60 

60 

63 

246 


64 

58

Non-Cash Collateral

22 

24 

24 

25 

95 


24 

25

Net Treasury Income

55 

53 

47 

52 

207 


57 

64

Post Trade

227 

219 

217 

243 

906 

 

238 

245






 




Other

10 

9

10 

34 


5

Total income (excl. recoveries)

1,621 

1,621 

1,639 

1,706 

6,587 

 

1,751 

1,818

Recoveries

88 

90 

90 

86 

354 


80 

86

Total income (incl. recoveries)

1,709 

1,711 

1,729 

1,792 

6,941 

 

1,831 

1,904

Cost of sales

(230)

(222)

(227)

(241)

(920)


(240)

(264)

Gross profit

1,479 

1,489 

1,502 

1,551 

6,021 

 

1,591 

1,640

 

The table above has used FX rates on a YTD average basis which is the basis upon which the Group presents its financials. Revenues and cost of sales associated with the BETA divestment have been classed as discontinued and are excluded in all periods. Revenues and cost of sales associated with the Borsa Italiana group divestment, completed in H1 2021, are also excluded.

 

1 Q1 2021 is pro-forma and assumes that the acquisition of Refinitiv took place on 1 January 2021

 

 

Condensed consolidated income statement

 

Six months ended 30 June


2022

2021

 


Unaudited

Unaudited (re-presented)1



Underlying

Non-underlying

Total

Underlying

Non-underlying

Total

 

Notes

£m

£m

£m

£m

£m

£m

Continuing operations


 

 

 

 

 

 

Revenue

4, 5

3,602

-

3,602

2,897

-

2,897

Net treasury income from CCP clearing business

4, 5

121

-

121

108

-

108

Other income

4, 5

12

-

12

13

-

13

Total income


3,735

-

3,735

3,018

-

3,018

 


 

 

 




Cost of sales

4

(504)

-

(504)

(392)

-

(392)

Gross profit

 

3,231

-

3,231

2,626

-

2,626



 

 

 




Operating expenses before depreciation, amortisation and impairment

6, 7

(1,433)

(160)

(1,593)

(1,219)

(182)

(1,401)

Profit on disposal of property, plant and equipment

7

-

133

133

-

-

-

Remeasurement gain

2.1, 7

-

23

23

-

-

-

Income from equity investments


-

-

-

11

-

11

Share of profit/(loss) after tax of associates


1

-

1

(2)

-

(2)

Earnings before interest, tax, depreciation, amortisation and impairment


1,799

(4)

1,795

1,416

(182)

1,234

 


 

 

 




Depreciation, amortisation and impairment

7

(391)

(507)

(898)

(297)

(387)

(684)

Operating profit/(loss)

4

1,408

(511)

897

1,119

(569)

550



 

 

 




Finance income


40

-

40

19

-

19

Finance expense


(121)

(13)

(134)

(105)

(1)

(106)

Net finance expense

7, 8

(81)

(13)

(94)

(86)

(1)

(87)

Profit/(loss) before tax


1,327

(524)

803

1,033

(570)

463



 

 

 




Taxation

7, 9

(262)

103

(159)

(215)

(39)

(254)

Profit/(loss) from continuing operations


1,065

(421)

644

818

(609)

209

 


 

 

 




Discontinued operations

 

 

 

 

 

 

 

Profit/(loss) after tax from discontinued operations

3

55

(2)

53

121

2,517

2,638

Profit/(loss) for the period

 

1,120

(423)

697

939

1,908

2,847

1 The results for the six months ended 30 June 2021 have been re-presented to exclude the results of discontinued operations (refer to note 3)

 

Condensed consolidated income statement (continued)

 

Six months ended 30 June


2022

2021

 


Unaudited

Unaudited (re-presented)1



Underlying

Non-underlying

Total

Underlying

Non-underlying

Total

 

Notes

£m

£m

£m

£m

£m

£m

Profit/(loss) from continuing operations attributable to:

 

 

 

 




Equity holders


934

(386)

548

721

(578)

143

Non-controlling interests


131

(35)

96

97

(31)

66

Profit/(loss) from continuing operations


1,065

(421)

644

818

(609)

209

 


 

 

 




Profit/(loss) from discontinued operations attributable to:

 

 

 

 




Equity holders


55

(2)

53

117

2,518

2,635

Non-controlling interests


-

-

-

4

(1)

3

Profit/(loss) from discontinued operations

3

55

(2)

53

121

2,517

2,638

Profit/(loss) for the period


1,120

(423)

697

939

1,908

2,847









Earnings per share attributable to equity holders:

 

 

 

 




Continuing operations

 

 

 

 

 



Basic earnings per share

10

 

 

98.0p



27.2p

Diluted earnings per share

10

 

 

97.3p



27.2p

Adjusted basic earnings per share

10

167.4p

 

 

139.0p



Adjusted diluted earnings per share

10

166.1p

 

 

138.1p





 

 

 




Total operations

 

 

 

 

 



Basic earnings per share

10

 

 

107.6p



535.3p

Diluted earnings per share

10

 

 

106.8p



532.2p

Adjusted basic earnings per share

10

177.4p

 

 

161.5p



Adjusted diluted earnings per share

10

176.0p

 

 

160.5p





 

 

 




Dividend per share in respect of the financial period

 

 

 

 




Dividend per share paid during the period

11

 

 

70.0p



51.7p

Dividend per share declared for the period

11

 

 

31.7p



25.0p

1 The results for the six months ended 30 June 2021 have been re-presented to exclude the results of discontinued operations (refer to note 3)

 

Condensed consolidated statement of comprehensive income

 

Six months ended 30 June


2022

2021



Unaudited

Unaudited



 

(Re-presented)1

Continuing operations

Notes

£m

£m

Profit from continuing operations

 

644

209

 

 

 


Other comprehensive income

 

 


 

 

 


Items that will not be subsequently reclassified to the income statement

 

 


Actuarial (losses)/gains on retirement benefit obligations


(105)

77

Gain on equity instruments at fair value through other comprehensive income

13

21

-

Income tax relating to above items

9

35

(19)

 

 

(49)

58

 

 

 


Items that may be subsequently reclassified to the income statement

 

 


Gain on cash flow hedges

14

-

22

Gain on cash flow hedge recycled to the income statement

14

(1)

-

Net (losses)/gains on net investment hedges

14

(85)

72

Debt instruments at fair value through other comprehensive income (FVOCI)


 


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


5

(4)

‒ Gains recycled to the income statement


-

(3)

Net exchange gains/(losses) on translation of foreign operations


2,329

(264)

Income tax relating to above items

9

(2)

1

 


2,246

(176)



 


Other comprehensive income/(loss) net of tax from continuing operations

 

2,197

(118)

 

 

 


Total comprehensive income from continuing operations

 

2,841

91

 

 

 


Discontinued operations

 

 


Total comprehensive income from discontinued operations

3

53

2,630


 

 


Total comprehensive income for the period

 

2,894

2,721

 

 

 


Total comprehensive income from continuing operations attributable to:

 

 


Equity holders


2,566

39

Non-controlling interests


275

52

Total comprehensive income from continuing operations

 

2,841

91





Total comprehensive income from discontinued operations attributable to:

 

 


Equity holders


53

2,627

Non-controlling interests


-

3

Total comprehensive income from discontinued operations

3

53

2,630

Total comprehensive income for the period

 

2,894

2,721

1 The results for the six months ended 30 June 2021 have been re-presented to exclude the results of discontinued operations (refer to note 3)

 

Condensed consolidated balance sheet

 


 

30 June

2022

31 December 2021


 

Unaudited

 

 

Notes

£m

£m

Assets


 

 

Non-current assets


 


Property, plant and equipment


759

832

Intangible assets

12

34,567

31,724

Investment in associates


33

25

Deferred tax assets


602

508

Derivative financial instruments

14

10

2

Investments in financial assets

13, 14

385

351

Retirement benefit assets


472

568

Trade and other receivables

 14

213

202



37,041

34,212

Current assets


 


Trade and other receivables

 14

1,334

967

Derivative financial instruments

14

65

25

Clearing member financial assets


734,107

665,031

Clearing member cash and cash equivalents


110,795

83,795

Clearing member assets

14

844,902

748,826

Current tax receivable


553

398

Cash and cash equivalents

14

2,520

2,665

Assets held for sale

3

274

16



849,648

752,897

Total assets


886,689

787,109

Liabilities


 


Current liabilities


 


Trade and other payables

14

1,598

1,782

Contract liabilities


424

245

Derivative financial instruments

14

22

7

Clearing member financial liabilities

14

844,651

748,644

Current tax payable


163

73

Borrowings

14, 15

60

-

Provisions


10

16

Liabilities directly associated with assets held for sale

3

42

-



846,970

750,767

Non-current liabilities


 


Borrowings

14, 15

8,258

7,654

Derivative financial instruments

14

90

45

Contract liabilities


96

101

Deferred tax liabilities


2,141

1,835

Retirement benefit obligations


87

85

Other payables

14

1,126

1,059

Provisions


57

44



11,855

10,823

Total liabilities


858,825

761,590

Net assets


27,864

25,519

Equity


 


Capital and reserves attributable to the Company's equity holders

 


Ordinary share capital


39

39

Share premium


978

978

Retained earnings


4,028

3,816

Other reserves


20,876

18,807

Total shareholders' funds


25,921

23,640

Non-controlling interests


1,943

1,879

Total equity


27,864

25,519

 


 


Condensed consolidated cash flow statement

 

Six months ended 30 June


2022

2021



Unaudited

Unaudited



 

(Re-presented)1


Notes

£m

£m

Operating activities


 

 

Profit from continuing operations


644

209

Adjustments to reconcile profit to net cash flow:


 


- Depreciation and impairment of property, plant and equipment


154

113

- Amortisation and impairment of intangible assets

12

744

571

- Taxation

9

159

254

- Profit on disposal of property, plant and equipment

7

(133)

-

- Share based payments


71

64

- Net finance expense

8

94

87

- Net foreign exchange losses


68

162

- Dividend income


-

(11)

- Other movements


12

59

- (Increase)/decrease in receivables, contract and other assets


(331)

444

- Decrease in payables, contract and other liabilities


(89)

(575)

- Increase in clearing member financial assets


(68,887)

(79,777)

- Increase in clearing member financial liabilities


68,832

79,714

Cash generated from operations


1,338

1,314

Interest received


-

7

Interest paid


(77)

(67)

Taxes paid


(212)

(85)

Withholding tax received


5

-

Royalties paid


(40)

(30)

Net cash flows from continuing operations


1,014

1,139

Net cash flows from discontinued operations

3

37

(36)

Net cash flows from operating activities


1,051

1,103

Investing activities


 


Purchase of property, plant and equipment


(110)

(25)

Proceeds from disposal of property, plant and equipment


153

-

Purchase of intangible assets

12

(363)

(204)

Acquisition of subsidiaries, net of cash acquired

2.1, 2.2

(359)

774

Proceeds from sale of disposal group, net of cash disposed


-

3,592

Dividends received


-

11

Other investing activities


(35)

(15)

Net cash flows from continuing operations


(714)

4,133

Net cash flows from discontinued operations

3

(16)

(18)

Net cash flows from investing activities


(730)

4,115

Financing activities


 


Payment of principal portion of lease liabilities


(71)

(45)

Proceeds from borrowings

15

62

5,043

Repayment of borrowings

15

-

(8,852)

Dividends paid to equity holders of the parent

11

(390)

(287)

Dividends paid to non-controlling interests


(68)

(70)

Other financing activities


(123)

12

Net cash flows from continuing operations


(590)

(4,199)

Net cash flows from discontinued operations

3

-

(4)

Net cash flows from financing activities


(590)

(4,203)

(Decrease)/increase in cash and cash equivalents


(269)

1,015

Foreign exchange translation


124

(58)

Cash and cash equivalents at beginning of period


2,665

1,785

Cash and cash equivalents at end of period


2,520

2,742

1 The results for the six months ended 30 June 2021 have been re-presented to exclude the results of discontinued operations (refer to note 3)

 

Condensed consolidated statement of changes in equity

 


 

Attributable to equity holders




 

Ordinary share capital

Share premium

Retained earnings

Other reserves

Total attribu-table to equity holders

Non- control-ling interests

Total equity


Notes

£m

£m

£m

£m

£m

£m

£m

1 January 2021


24

971

911

1,805

3,711

414

4,125

Total comprehensive income for the period


-

-

2,823

(157)

2,666

55

2,721

Issue of shares


-

1

-

-

1

-

1

Issue of shares for acquisition of subsidiaries (with non-controlling interest)


15

-

(25)

16,981

16,971

1,442

18,413

Dividends paid in the period

11

-

-

(287)

-

(287)

(76)

(363)

Share-based payments


-

-

36

-

36

4

40

Tax benefit in relation to share-based payments

9

-

-

4

-

4

-

4

Disposal of business


-

-

-

(44)

(44)

(65)

(109)

Adjustment to non-controlling interests


-

-

-

-

-

(11)

(11)

30 June 2021 (Unaudited)1


39

972

3,462

18,585

23,058

1,763

24,821


 

 

 

 

 

 

 

 

1 January 2022


39

978

3,816

18,807

23,640

1,879

25,519

Total comprehensive income for the period

 

-

-

550

2,069

2,619

275

2,894

Dividends paid in the period

11

-

-

(390)

-

(390)

(68)

(458)

Share-based payments

 

-

-

42

-

42

32

74

Tax benefit/(expense) in relation to share-based payments

9

-

-

6

-

6

(84)

(78)

Deferred tax on investments in partnerships

9

-

-

-

-

-

35

35

Purchase of non-controlling interests

 

-

-

4

-

4

(19)

(15)

Tradeweb share buyback

 

-

-

-

-

-

(43)

(43)

Shares withheld from employee options exercised (Tradeweb)

 

-

-

-

-

-

(64)

(64)

30 June 2022 (Unaudited)

 

39

978

4,028

20,876

25,921

1,943

27,864

1 The condensed consolidated balance sheet as at 30 June 2021 has been revised from that reported in the H1 2021 interim results to reflect the adjustment to the provisional accounting in respect of Refinitiv Parent Ltd and its subsidiaries acquired on 29 January 2021.

 

Notes to the interim condensed consolidated financial statements

 

1.   Basis of preparation and changes to accounting policies

 

1.1  Reporting entity

The interim condensed consolidated financial statements (interim statements) of London Stock Exchange Group plc (the 'Group' or the 'Company') for the six months ended 30 June 2022 were approved by the Directors on 4 August 2022.

 

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.

 

On 31 May 2022, the Group acquired:

 

Global Data Consortium Inc (GDC) (refer to note 2.1). The results of GDC have been consolidated since the date of acquisition.

MayStreet Inc. (MayStreet) (refer to note 2.2). The results of MayStreet have been consolidated since the date of acquisition.

 

On 21 March 2022, the disposal of the BETA, Maxit and Digital Investor businesses (collectively BETA) was assessed to be highly probable and the collective business was treated as a disposal group from that date. BETA is also deemed to be a discontinued operation as it represented a separate major line of business of the Group. Its profits, losses and cash flows have therefore been separated from the Group's continuing operations and are shown as discontinued operations. The comparative period has been re-presented accordingly.

 

1.2. Basis of preparation

The interim statements of the Group for the six months ended 30 June 2022 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and UK-adopted International Accounting Standard 34 Interim Financial Reporting.

 

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

 

Comparative amounts presented for the condensed consolidated balance sheet relate to the Group's position as at 31 December 2021. All other comparative amounts presented relate to the six months ended 30 June 2021 (referred to as H1 2021).

 

The interim 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 consolidated financial statements for the year ended 31 December 2021, which were prepared in accordance with UK-adopted international accounting standards in conformity with the requirements of the Companies Act 2006. The interim statements do not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006.

 

The statutory financial statements of London Stock Exchange Group plc for the year ended 31 December 2021, which carried an unqualified audit report and did not contain a statement under section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies.

 

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

 

Going concern

The Group has prepared these interim statements on the basis that it will continue to operate as a going concern. In assessing the appropriateness of the going concern assumption, management has stress tested the Group's most recent financial projections using severe but plausible downside scenarios as determined by the Group Risk Committee and considering the Group's principal risks. No scenario leads to an inability to meet the Group's obligations through insufficient headroom. Therefore, the Directors consider there to be no material uncertainties that may cast significant doubt on the Group's ability to continue to operate as a going concern. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being at least 12 months from approval of these interim statements.

 

1.3 New standards, interpretations, and amendments

The principal accounting policies adopted in the preparation of these interim statements are consistent with those applied in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2021, except for the adoption of amended standards effective as of 1 January 2022. None of the amendments adopted on 1 January 2022 have had a material impact on the interim 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.

 

1.4 Significant accounting judgements, estimates and assumptions

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

 

Judgements and estimates are regularly evaluated based on historical experience, current circumstances and expectations of future events. The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty are the same as those described in the audited 31 December 2021 annual financial statements note 1.7 (significant accounting judgements, estimates and assumptions), except for the judgements and sources of estimation uncertainty related to the acquisitions of GDC and MayStreet, and the Russian tax audit as described below:

 

Intangible assets acquired as part of a business combination:


-

The fair value of the intangible assets (and therefore the resulting goodwill recognised on acquisition) is significantly affected by a number of factors including management's best estimates of future performance and estimates of the return required to determine an appropriate discount rate. Further detail of the valuation methodologies is provided in note 2.


-

The intangible assets are amortised over their estimated useful economic lives, which are also based on management's best estimates of the periods over which value from the intangible assets is realised. Further detail of the estimated useful economic lives of the intangible assets acquired during the period is provided in note 2.




Russian tax audit: The Group has used its judgement in assessing the financial reporting implications of its ongoing audit by the Russian Tax Authorities. The Group has used guidance under IFRIC 23 Uncertainty over Income Tax Treatments to determine the possible outcomes and to assign a probability to each of those outcomes. Further detail is provided in note 9.

 

1.5 Other information

There have been no material related party transactions in H1 2022 and no material changes to the related party transactions described in the audited 31 December 2021 annual financial statements that could have a material effect on the H1 2022 financial position or performance.

 

2.   Business combinations

 

2.1  GDC acquisition

On 31 May 2022, the Group acquired 89% of GDC, a global provider of high-quality identity verification data to support clients with Know Your Customer (KYC) requirements. Prior to the acquisition LSEG held an 11% interest in GDC and on 31 May 2022, recognised a remeasurement gain on this investment in associate of £23 million.

 

GDC's services are currently used within LSEG's Customer & Third-Party Risk Solutions business within the Data & Analytics division, to provide global digital identity verification to customers. Adding GDC to the Group's suite of digital identity solutions will enable the Group to continue to expand capabilities in this segment, through both direct sales and channel partnerships.

 

The purchase price allocation (PPA) has been prepared on a provisional basis in accordance with IFRS 3 Business Combinations. If new information obtained within one year of the acquisition date, about facts and circumstances that existed at the acquisition date, identifies adjustments to the amounts below or any additional provisions that existed at the date of acquisition, then the accounting for the acquisition will be revised.

Goodwill arising from the acquisition has been recognised as follows:

 

 

 

 

 

 

Notes

US$m

£m

Estimated useful lives

Purchase consideration


 

 

 

- Cash (including settlement of share options)


269

213

 

- Fair value of previous equity interest held in GDC


36

28

 

Total purchase consideration


305

241

 

 


 

 

 

Less: Fair value of identifiable net assets acquired


 

 

 

- Intangible assets: Customer and supplier relationships

12

(85)

(67)

15-18 years

- Intangible assets: Software

12

(35)

(28)

10 years

- Other non-current assets


(1)

-

 

- Other current assets


(5)

(4)

 

- Cash and cash equivalents


(6)

(5)

 

- Total liabilities, excluding deferred tax liabilities


5

4

 

- Deferred tax liabilities


15

12

 

Fair value of identifiable net assets acquired


(112)

(88)

 

 


 

 

 

Goodwill

12

193

153

 

 

The fair values of the net assets acquired were determined based on assumptions that reasonable market participants would use in the principal (or most advantageous) market and primarily included significant unobservable inputs (Level 3 of the fair value hierarchy). The following valuation methodologies were used to determine fair value:

 

Customer relationships: multi-period excess earnings method (MEEM) (income approach)

Supplier relationships: replacement cost approach

Software: relief from royalty method (income approach)

 

The deferred tax liability mainly comprises the tax effect of the intangible assets.

 

The goodwill is attributable to:

 

growth in the underlying business;

future data and technology not yet developed; and

expected synergies which will drive growth in the combined business.

 

Goodwill has been provisionally allocated to the Data & Analytics cash-generating unit. None of the goodwill recognised is expected to be deductible for income tax purposes.

 

Revenue and profit before tax

From the date of acquisition, GDC contributed revenue of £2 million and immaterial profit before tax.

 

If the acquisition had occurred on 1 January 2022, estimated Group revenue for the period from continuing operations would have been £3,610 million, with operating profit before non-underlying items of £1,407 million.

 

Acquisition related costs

The Group incurred acquisition related costs of £1 million on advisor and professional fees and management retention costs. These costs are recognised as non-underlying transaction costs in the income statement (refer to note 7).

 

2.2  MayStreet acquisition

On 31 May 2022, the Group acquired MayStreet, a market data solutions provider. MayStreet provides global low latency technology and market data to over 65 industry participants, including banks, asset managers and hedge funds. MayStreet has an existing commercial partnership with LSEG to support LSEG's Real-Time Direct feed offering. It has also served as a market data provider to the SEC's Market Information Data Analytics System (MIDAS) since 2019.

 

The acquisition enhances LSEG's Enterprise Data Solutions business, within the Data & Analytics division, expanding LSEG's capabilities across the latency spectrum through a global low latency network of over 300 cross asset, exchange and trading venue feeds. This broadens and complements LSEG's real-time feeds and historical market data value proposition, particularly for front office customers, who use these solutions to support research and strategy development and to power electronic trading applications.

 

The PPA has been prepared on a provisional basis in accordance with IFRS 3. If new information obtained within one year of the acquisition date, about facts and circumstances that existed at the acquisition date, identifies adjustments to the amounts below or any additional provisions that existed at the date of acquisition, then the accounting for the acquisition will be revised.

 

Goodwill arising from the acquisition has been recognised as follows:

 

 

Notes

US$m

£m

Estimated useful lives

Purchase consideration


 

 

 

‒ Cash (including settlement of share options)


194

153

 

Total purchase consideration


194

153

 

 


 

 

 

Less: Fair value of identifiable net assets acquired


 

 

 

‒ Intangible assets: Customer relationships

12

(35)

(28)

15 years

‒ Intangible assets: Software

12

(49)

(39)

10 years

‒ Other non-current assets


(1)

(1)

 

‒ Other current assets


(3)

(3)

 

‒ Cash and cash equivalents


(2)

(2)

 

‒ Total liabilities, excluding deferred tax liabilities


24

19

 

‒ Deferred tax liabilities


11

9

 

Fair value of identifiable net assets acquired


(55)

(45)

 

 


 

 

 

Goodwill

12

139

108

 

 

The fair values of the net assets acquired were determined based on assumptions that reasonable market participants would use in the principal (or most advantageous) market and primarily included significant unobservable inputs (Level 3 of the fair value hierarchy). The following valuation methodologies were used to determine fair value:

·    Customer relationships: multi-period excess earnings method (MEEM) (income approach)

·    Software: relief from royalty method (income approach)

 

The deferred tax liability mainly comprises the tax effect of the intangible assets.

 

The goodwill is attributable to:

 

growth in the underlying business;

future data and technology not yet developed; and

expected synergies which will drive growth in the combined business.

 

Goodwill has been provisionally allocated to the Data & Analytics cash-generating unit. None of the goodwill recognised is expected to be deductible for income tax purposes.

 

Revenue and profit before tax

From the date of acquisition, MayStreet contributed revenue of £1 million and a loss before tax of £1 million.

 

If the acquisition had occurred on 1 January 2022, estimated Group revenue for the period from continuing operations would have been £3,607 million, with operating profit before non-underlying items of £1,401 million.

 

Acquisition related costs

The Group incurred acquisition related costs of £4 million on advisor and professional fees and management retention costs. These costs are recognised as non-underlying transaction costs in the income statement (refer to note 7).

 

Employment-linked management incentive and earn-out arrangements

As part of the purchase agreement, employment-linked management incentive and earn-out arrangements have been agreed with the former founders and senior management. These arrangements are contingent on continuing employment and will be recognised as post-combination compensation over the arrangement period.

 

3.   Discontinued operations and assets held for sale

 

Agreed disposal of BETA during the period ended 30 June 2022

On 21 March 2022, the disposal of BETA was assessed to be highly probable and it has been treated as a disposal group from that date. BETA is also deemed to be a discontinued operation as it represented a separate major line of business. Its results have been excluded from the continuing results of the Group for the period ended 30 June 2022. The results for the period ended 30 June 2021 have been re-presented to exclude the BETA results from the continuing operations of the Group.

 

On 1 July 2022, BETA was sold for a total cash consideration of US$1.1 billion (£0.9 billion), realising an estimated profit on disposal of £0.6 billion, before separation costs and tax.

 

Disposal of the Borsa Italiana group during the period ended 30 June 2021

On 29 April 2021, the Group disposed of Borsa Italiana. It was presented as a discontinued operation and its results are excluded from the continuing operations of the Group for the period ended 30 June 2021.

 

As part of the disposal agreement the Group continues to provide services to the Borsa Italiana group on an arm's length basis.

 

Summary income statement and statement of other comprehensive income

The results for BETA and the Borsa Italiana group included in the income statement and statement of comprehensive income as discontinued operations are as follows:

 

 

 


Six months ended 30 June

 

2022

2021

 

 

Unaudited

Unaudited

 

 

 

(Re-presented)

Discontinued operations

 

£m

£m

BETA

 

 

 

Total income

 

132

95

Cost of sales and expenses (excluding non-underlying expenses)

 

(59)

(45)

Adjusted profit before tax

 

73

50

Non-underlying expenses

 

(2)

(3)

Profit before tax

 

71

47

Taxation

 

(18)

(12)

Profit from discontinued operations - BETA

 

53

35

 

 

 


Profit from discontinued operations - Borsa Italiana group

 

-

2,603

Other comprehensive income from discontinued operations - Borsa Italiana group

 

-

(8)

Total comprehensive income from discontinued operations

53

2,630

Summary cash flow statement

The results for BETA and the Borsa Italiana group included in the cash flow statement as discontinued operations are as follows:






Six months ended 30 June

 

 

2022

2021

 

 

 

Unaudited

Unaudited

 

 

 

 

(Re-presented)

Discontinued operations

 

 

£m

£m

Operating activities


 

 


BETA


 

37

42

Borsa Italiana group


 

-

(78)

Net cash flows from operating activities


 

37

(36)

Investing activities


 

 


BETA


 

(16)

(16)

Borsa Italiana group


 

-

(2)

Net cash flows from investing activities


 

(16)

(18)

Financing activities


 

 


Borsa Italiana group


 

-

(4)

Net cash flows from financing activities


 

-

(4)



 

 


Net cash flows from discontinued operations for the period


 

21

(58)



 

 

 

The BETA business holds no cash on its own account and is funded by the Group.



 

 

 

The cash flow statement above excludes the net sale proceeds of the Borsa Italiana group of £3,592 million.

 

Net assets held for sale

 

 

 


The major classes of assets and liabilities classified as held for sale are as follows:






 

 

 

30 June 2022

31 December

 

 

 

Unaudited

2021

 

 

 

£m

£m

Assets


 

 

 

Property, plant and equipment



37

16

Intangible assets



190

-

Other assets



47

-

Assets held for sale

 

 

274

16

 

 

 

 

 

Liabilities

 

 

 

 

Other liabilities



42

-

Liabilities directly associated with assets held for sale

 

 

42

-

 

 

 

 


Net assets held for sale



232

16

 



 


4.   Segment information

 

The Group reports three main operating segments: Data & Analytics, Capital Markets and Post Trade.

 

The results are presented on a continuing basis and exclude the results of the BETA business for the periods ended 30 June 2022 and 30 June 2021 and the Borsa Italiana group for the period ended 30 June 2021 (refer to note 3).

 

Some revenue items have been reallocated between business lines to better reflect our current operating model. The comparative results have been re-presented to reflect this. At a divisional level, the impact on the H1 2021 results previously reported is:

 

£3 million of revenue from Capital Markets to Data & Analytics

£4 million of revenue from Post Trade to Data & Analytics

 

Segment reporting for the six months ended 30 June 2022 is as follows:








Continuing operations


Data & Analytics

Capital Markets

Post Trade

Other

Group

Unaudited

Notes

£m

£m

£m

£m

£m

Revenue from external customers

5

2,520

720

362

-

3,602

Net treasury income from CCP clearing business

5

-

-

121

-

121

Other income

5

-

-

-

12

12

Total income

 

2,520

720

483

12

3,735

 

 

 

 

 

 

 

Cost of sales


(420)

(16)

(68)

-

(504)

Gross profit

 

2,100

704

415

12

3,231

 

 

 

 

 

 

 

Adjusted operating expenses before depreciation, amortisation, and impairment


(963)

(314)

(155)

(1)

(1,433)

Share of profit after tax of associates


-

-

-

1

1

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

 

1,137

390

260

12

1,799

 

 

 

 

 

 

 

Underlying depreciation, amortisation and impairment


(291)

(48)

(52)

-

(391)

Adjusted operating profit

 

846

342

208

12

1,408

 

 

 

 

 

 

 

Non-underlying depreciation, amortisation and impairment

7

 

 

 

 

(507)

Other non-underlying items excluding net finance expense

7

 

 

 

 

(4)

Operating profit

 

 

 

 

 

897

 

 

 

 

 

 

 

Net finance expense (including non-underlying items)

8

 

 

 

 

(94)

Profit before tax from continuing operations

 

 

 

 

 

803

 

 

 

 

 

 

 

Profit before tax from discontinued operations

3

 

 

 

 

71

Profit before tax

 

 

 

 

 

874

Re-presented results by operating segment for the six months ended 30 June 2021 are as follows:




 

 



Continuing operations


Data & Analytics

Capital

Markets

Post Trade

Other

Group

Unaudited

 

£m

£m

£m

£m

£m

Revenue from external customers

5

2,020

539

338

-

2,897

Net treasury income from CCP clearing business

5

-

-

108

-

108

Other income

5

-

-

-

13

13

Total income

 

2,020

539

446

13

3,018

 

 






Cost of sales


(322)

(11)

(59)

-

(392)

Gross profit

 

1,698

528

387

13

2,626

Adjusted operating expenses before depreciation, amortisation, and impairment


(820)

(250)

(147)

(2)

(1,219)

Income from investments





11

11

Share of loss after tax of associates


-

-

-

(2)

(2)

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

 

878

278

240

20

1,416

 

 






Underlying depreciation, amortisation and impairment


(221)

(30)

(46)

-

(297)

Adjusted operating profit

 

657

248

194

20

1,119

Non-underlying depreciation, amortisation and impairment

7





(387)

Other non-underlying items excluding net finance expense

7





(182)

Operating profit

 





550

 

 






Net finance expense (including non-underlying items)

8





(87)

Profit before tax from continuing operations






463

 







Profit before tax from discontinued operations






2,656

Profit before tax






3,119

 







5.   Total income

 

 

 

 

 







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 2022 is as follows:

 



Continuing operations

Data & Analytics

Capital Markets

Post Trade

Other

Group

Unaudited

£m

£m

£m

£m

£m

Revenue from external customers

 

 

 

 

 

Major product and service lines

 

 

 

 

 

Trading & banking solutions

770

-

-

-

770

Enterprise data solutions

620

-

-

-

620

Investment solutions

637

-

-

-

637

Wealth solutions

131

-

-

-

131

Customer & third-party risk solutions

196

-

-

-

196

Recoveries

166

-

-

-

166

Equities

-

129

-

-

129

FX

-

124

-

-

124

Fixed income, derivatives and other

-

467

-

-

467

OTC derivatives

-

-

191

-

191

Securities & reporting

-

-

122

-

122

Non cash collateral

-

-

49

-

49

Total revenue

2,520

720

362

-

3,602

Net treasury income

-

-

121

-

121

Other income

-

-

-

12

12

Total income

2,520

720

483

12

3,735


 

 

 

 

 

Timing of revenue recognition

 

 

 

 

 

Services satisfied at a point in time

75

504

356

-

935

Services satisfied over time

2,445

216

6

-

2,667

Total revenue

2,520

720

362

-

3,602

 

The Group's re-presented 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 2021 is as follows:

 

 


Continuing operations

Data & Analytics

Capital Markets

 

 

Post Trade

Other

Group

Unaudited

£m

£m

£m

£m

£m

Revenue from external customers

 

 

 

 

 

Major product and service lines

 

 

 

 

 

Trading & banking solutions

621

-

-

-

621

Enterprise data solutions

477

-

-

-

477

Investment solutions

525

-

-

-

525

Wealth solutions

102

-

-

-

102

Customer & third-party risk solutions

147

-

-

-

147

Recoveries

148

-

-

-

148

Equities

-

120

-

-

120

FX

-

91

-

-

91

Fixed income, derivatives and other

-

328

-

-

328

OTC derivatives

-

-

169

-

169

Securities & reporting

-

-

123

-

123

Non cash collateral

-

-

46

-

46

Total revenue

2,020

539

338

-

2,897

Net treasury income

-

-

108

-

108

Other income

-

-

-

13

13

Total income

2,020

539

446

13

3,018







Timing of revenue recognition






Services satisfied at a point in time

66

366

331

-

763

Services satisfied over time

1,954

173

7

-

2,134

Total revenue

2,020

539

338

-

2,897



Geographical disclosures

The Group's revenue from continuing operations disaggregated by geographical location of services provided is as follows:








Six months ended 30 June

 

 

 

 

2022

2021

 

 

 

 

 

Unaudited

Unaudited

 

 

 

 

 

 

(Re-presented)

 

 

 

 

 

£m

£m

UK

 

 

 

 

1,131

953

USA





1,270

965

Europe


 

 

 

563

526

Asia





465

317

Other





173

136

Total revenue





3,602

2,897

 





 


6.   Operating expenses before depreciation, amortisation and impairment




 


Operating expenses before depreciation, amortisation and impairment comprise the following:




 

Six months ended 30 June


2022

2021

 



Unaudited

Unaudited

 



 

(Re-presented)

Continuing operations


Note

£m

£m

Employee costs

 

 

905

770

IT costs

 

 

258

189

Professional fees

 

 

191

133

Short-term lease costs

 

 

6

24

Foreign exchange gains

 

 

(19)

(5)

Other costs

 

 

92

108

Underlying operating expenses before depreciation, amortisation and impairment

 

 

1,433

1,219

 

 

 

 


Non-underlying operating expenses before depreciation, amortisation and impairment

 

7

160

182

Total operating expenses before depreciation, amortisation and impairment

 

 

1,593

1,401

 

7.   Non-underlying items

 

The Group separately identifies results before non-underlying items (adjusted). This provides the reader with supplemental data relevant to an understanding of the Group's financial performance, as non-underlying items of income and expense are material by their size and/or nature.

 

The Group uses its judgement to classify items as non-underlying. They include:

 

 

Incremental depreciation, amortisation and impairment of any fair value adjustments of tangible or intangible assets recognised as a result of acquisitions

Amortisation and impairment of goodwill and purchased intangible assets. Purchased intangible assets include customer relationships, trade names, and databases and content, all of which are as a result of acquisitions

Other income or expenses not considered to drive the operating results of the Group (including transaction, integration and restructuring costs)

Significant gains or losses on disposals

Tax on non-underlying items

 

 

Six months ended 30 June

 


2022

2021




Unaudited

Unaudited

(Re-presented)

Continuing operations


Notes

£m

£m

Non-underlying expenses before interest, tax, depreciation, amortisation and impairment



 

 

Transaction costs



24

69

Integration costs



122

112

Restructuring and other costs



14

1

Non-underlying operating expenses before depreciation, amortisation and impairment



160

182

Profit on disposal of property, plant and equipment



(133)

-

Remeasurement gain



(23)

-

Total non-underlying expenses before interest, tax, depreciation, amortisation and impairment



4

182

 



 


Non-underlying depreciation, amortisation and impairment



 


Depreciation and impairment of property, plant and equipment



24

7

Amortisation of intangible assets


12

483

380

Total non-underlying depreciation, amortisation and impairment



507

387

 



 


Non-underlying items before interest and tax



511

569




 


Non-underlying net finance expense


8

13

1

Non-underlying items before tax



524

570

 



 


Non-underlying tax



(103)

39

Non-underlying items



421

609

 

Transaction costs mainly relate to the following acquisitions:

 

GDC (note 2.1)

MayStreet (note 2.2)

Refinitiv - mainly fair value adjustments to the outstanding Tradeweb equity-settled awards of £7 million (H1 2021: £17 million)

 

Integration costs relate to activities to integrate acquired businesses with the Group and mainly consist of Refinitiv integration costs of £108 million (H1 2021: £93 million)

 

On 5 January 2022, the Group completed the sale of one of its freehold properties in the UK for a cash sum of £153 million realising a gain on disposal of £133 million.

 

Prior to the acquisition of GDC on 31 May 2022, LSEG held an 11% equity interest in GDC. The acquisition date fair value of the previously held interest resulted in a remeasurement gain of £23 million.

 

We have continued to review our property needs following the acquisition of Refinitiv. The decision to exit and sub-let some of our property has resulted in a £24 million impairment to right-of-use property assets and some fixtures and fittings.

 

Amortisation of intangibles of £483 million mainly relates to the amortisation of intangible assets recognised as a result of the acquisition of Refinitiv.

 

We have also recognised a £103 million non-underlying tax benefit which mainly reflects the tax impact of the Group's non-underlying items computed based on the tax rates applicable to the respective territories.

 

8.   Net finance expense



 





 

 

Six months ended 30 June



2022

2021




Unaudited

Unaudited




 

(Re-presented)

Continuing operations


Note

£m

£m

Finance income



 


Interest income on retirement benefit assets



36

16

Bank deposit and other interest income



4

2

Other finance income



-

1

Underlying finance income



40

19




 


Finance expense



 


Interest payable on bank and other borrowings1



(70)

(83)

Interest cost on retirement benefit obligations



(31)

(14)

Lease interest expense



(7)

(6)

Other finance expenses



(13)

(2)

Underlying finance expense



(121)

(105)

 



 


Non-underlying net finance expense


7

(13)

(1)

Net finance expense



(94)

(87)

1 Interest payable includes amounts where the Group incurs negative interest on its cash deposits.

 

9.   Taxation



 





 

Six months ended 30 June



2022

2021




Unaudited

Unaudited

 



 

(Re-presented)

Continuing operations


 

£m

£m

Tax recognised in the income statement



 


Current tax



 


UK corporation tax for the period



20

13

Overseas tax for the period



91

48

Adjustments in respect of previous years



22

2

Total current tax



133

63




 


Deferred tax



 


Deferred tax for the period



44

205

Adjustments in respect of previous years



(8)

1

Deferred tax benefit on amortisation and impairment of purchased intangible assets



(10)

(15)

Total deferred tax



26

191




 


Total tax



159

254

 



 


Six months ended 30 June

 


2022

2021




Unaudited

Unaudited

 



 

(Re-presented)

Continuing operations



£m

£m

Tax on items recognised in other comprehensive income



 

 

Deferred tax (benefit)/expense



 


Actuarial losses/gains on retirement benefit obligations



(35)

19

Net gains/losses of financial assets (at FVOCI)



2

(1)

Total tax recognised in other comprehensive income



(33)

18




 


Tax recognised directly in equity



 


Current tax benefit



 


Share-based payments in excess of expense recognised



(6)

(6)

Share-based payments in excess of expense recognised (in non-controlling interests)



(7)

-

Deferred tax expense



 


Share-based payments in excess of expense recognised



-

2

Share-based payments in excess of expense recognised (in non-controlling interests)



91

-

Investment in partnerships (recognised in non-controlling interests)



(35)

-

Total tax recognised in equity



43

(4)




 


Total tax recognised in other comprehensive income and equity



10

14




 


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 2021: 19%) as explained below:




 

 

Six months ended 30 June



2022

2021




Unaudited

Unaudited




 

(Re-presented)

Continuing operations



£m

£m

Profit before tax from continuing operations



803

463




 


Profit multiplied by standard rate of corporation tax in the UK


152

88




 


Overseas earnings taxed at higher rate



9

4

Adjustment arising from changes in tax rates



(12)

159

Income not taxable



(2)

-

Adjustments in respect of previous years



14

3

Other



(2)

-

Taxation charge from continuing operations



159

254

 



 


Uncertain tax positions

 

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 concluded that the Finance Company Partial Exemption (FCPE) rules in the UK tax legislation partially represent illegal State Aid. The Group had financing arrangements that utilised the FCPE during this period.

 

In December 2019 and the beginning of 2021, HMRC issued determinations to the Group totalling £10.5 million, excluding interest and penalties, which the Group paid.

 

The Group, several other UK PLCs and the UK Government submitted appeals to the EU General Court to annul the EU Commission's findings. On 8 June 2022, the EU General Court rejected the appeals. Affected parties have until 18 August 2022 to appeal this decision to the European Court of Justice (ECJ). If the decision is appealed, it will be some time before the issues are conclusively determined by the ECJ. Until then, the UK Government is required to continue recovering amounts determined to be State Aid.

 

Currently, the Group's view is that an appeal is likely and no provision is required. Additionally, and in accordance with IFRIC 23, the Group continues to recognise a receivable against the HMRC determinations paid to date of £10.5 million. The maximum potential exposure excluding interest remains between nil and £65 million.

 

IRS Audit

The Group continues to be under audit in the US by the Internal Revenue Service (IRS) in relation to the interest rate applied on certain cross border intercompany loans from the UK to the US. In 2020, the IRS issued a Notice of Proposed Adjustment. The maximum tax exposure is approximately US$145 million; however, this is the upper bound of a range of nil to US$145 million (plus interest and penalties) over the lifetime of the loans. The Group has an uncertain tax liability of £12 million ($16 million) recorded on the balance sheet related to this issue. The liability was measured based on a probability weighted average of potential outcomes. The issue is currently under appeal, and we expect to agree on a satisfactory settlement in H2 2022.

 

HMRC audit of intellectual property valuation

HMRC is auditing the value of certain intellectual property purchased from Thomson Reuters as part of the formation of Refinitiv. Intellectual property valuation is complex and significantly affected by multiple inputs of assumptions. As the outcome is uncertain, especially given the inherent subjectivity of the topic, the Group has recorded an uncertain tax liability in accordance with the requirements of IFRS. Management and HMRC continue to actively discuss this topic.

 

Diverted Profits Tax to Thomson Reuters

HMRC continues to issue notices of assessment under the Diverted Profits Tax (DPT) regime to Thomson Reuters largely related to its Financial and Risk Business for years prior to the sale of the business to Refinitiv. As required by the notices and as directed by Thomson Reuters, the Group makes payments to HMRC which are immediately reimbursed by Thomson Reuters in accordance with an indemnity agreement. Thomson Reuters does not agree with the assessments and will continue to defend their position by contesting the assessments through all available administrative and judicial remedies.

 

Russian tax audit

The Group is under audit by the Russian Tax Authorities for the period 2018-2020, which could result in additional taxes being paid locally. We do not agree with the Tax Authorities' view and will continue to defend our position through all available administrative and judicial remedies. We have recorded an uncertain tax liability in accordance with the requirements of IFRS.

 

10.   Earnings per share

 

 

 

 

 

 


 

 

 

 

 

 

 


Earnings per share is presented on four bases: basic earnings per share, diluted earnings per share, adjusted basic earnings per share and adjusted diluted earnings per share and is calculated on actual values (before any rounding effects). Basic earnings per share is in respect of all activities. Diluted earnings per share takes into account the dilutive effect that would arise on conversion or vesting of all outstanding share options and share awards under the Group's share option and award schemes. Adjusted basic earnings per share and adjusted diluted earnings per share exclude non-underlying items.






 

 

 

Six months ended 30 June


2022

2021

 

 

Unaudited

Unaudited (Re-presented)

 

 

Continuing

Total

Continuing

Total

Basic earnings per share

 

98.0p

9.6p

107.6p

27.2p

508.1p

535.3p

Diluted earnings per share

 

97.3p

9.5p

106.8p

27.2p

505.0p

532.2p

Adjusted basic earnings per share

167.4p

10.0p

177.4p

139.0p

22.5p

161.5p

Adjusted diluted earnings per share

166.1p

9.9p

176.0p

138.1p

22.4p

160.5p









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

 

 

 

Six months ended 30 June

 

2022

2021

 

 

Unaudited

Unaudited (Re-presented)

 

 

Continuing

Discontinued

Total

Continuing

Discontinued

Total

 

Note

£m

£m

£m

£m

£m

£m

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

 

548

53

601

143

2,635

2,778

Adjustments:

 

 

 

 




Non-underlying items net of tax

7

421

2

423

609

(2,517)

(1,908)

Non-underlying items attributable to non-controlling interests


(35)

-

(35)

(31)

(1)

(32)

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

 

934

55

989

721

117

838

 

 

 

 

 




Weighted average number of shares

 

 

 

 

 




Six months ended 30 June

 

 

 

2022

 

 

2021

 

 

 

 

Unaudited

 

 

Unaudited

 

 

 

 

millions

 

 

millions

Weighted average number of shares1

 

 

 

558



519

Dilutive effect of share options and awards


 

 

4



3

Diluted weighted average number of shares

 

 

 

562



522

1 The weighted average number of shares excludes those held in the Employee Benefit Trust.

 

11.   Dividends


 

 


 

 

Six months ended 30 June


2022

2021

 


Unaudited

Unaudited

 


£m

£m

Final dividend for 31 December 2020 paid 26 May 2021: 51.7p per Ordinary share


-

287

Final dividend for 31 December 2021 paid 25 May 2022: 70.0p per Ordinary share


390

-



390

287

 

Dividends are only paid out of available distributable reserves of the Company.

 

The Board has proposed an interim dividend in respect of the six months ended 30 June 2022 of 31.7p per share, which amounts to an expected payment of £177 million, to be paid in September 2022.  This is not reflected in these interim condensed consolidated financial statements.

 

12.   Intangible assets








 








 


Purchased intangible assets



 

Goodwill

Customer and supplier relationships

Brands

Database and content

Software licences and intellectual property

Software, contract costs and other

Total

 

£m

£m

£m

£m

£m

£m

£m

Cost






 


1 January 2022

17,953

8,721

1,956

2,434

702

3,232

34,998

Acquisition of subsidiaries (note 2)

261

95

-

-

67

-

423

Additions1

-

-

-

-

-

369

369

Disposals and write-offs

-

-

-

-

-

(21)

(21)

Transfer to assets held for sale

-

-

(48)

-

-

(162)

(210)

Foreign exchange translation

1,545

942

190

276

43

219

3,215

30 June 2022 (Unaudited)

19,759

9,758

2,098

2,710

812

3,637

38,774







 

 

Accumulated amortisation and impairment






 

 

1 January 2022

467

956

398

224

315

914

3,274

Amortisation charge for the period2

-

279

72

112

17

273

753

Disposals and write-offs

-

-

-

-

-

(21)

(21)

Transfer to assets held for sale

-

-

(4)

-

-

(29)

(33)

Foreign exchange translation

12

99

38

33

8

44

234

30 June 2022 (Unaudited)

479

1,334

504

369

340

1,181

4,207

 








Net book values

 

 

 

 

 

 

 

30 June 2022 (Unaudited)

19,280

8,424

1,594

2,341

472

2,456

34,567

31 December 2021

17,486

7,765

1,558

2,210

387

2,318

31,724

 

1 Includes additions for continuing and discontinued operations. Consideration for additions for continuing operations includes £363 million in cash

 

2 Includes amortisation of intangible assets from continuing and discontinued operations. Amortisation from continuing operations of £744 million includes non-underlying amortisation of £483 million

 

Goodwill and purchased intangible assets: Impairment testing

The Group performs its annual impairment testing for goodwill and purchased intangible assets in December and when circumstances indicate that the carrying values may be impaired. The Group's impairment testing is based on value-in-use calculations. The key assumptions used to determine the value-in-use for the different cash generating units were disclosed in the annual consolidated financial statements for the year ended 31 December 2021.

 

There were no circumstances indicating that the goodwill and purchased intangible assets may be impaired during the current reporting period.

 

13.   Investments in financial assets








Equity instruments




The Group holds equity investments in a number of companies, the largest of which is its stake in Euroclear. Movements in the period in the fair value of the investments in equity instruments (which are almost entirely classified as Level 3) are as follows:







 

2022

 

 

 

£m

1 January 2022



351

Revaluation gains recognised in other comprehensive income



21

Foreign exchange translation



13

30 June 2022 (Unaudited)



385

 

Fair value of equity instruments

In the absence of any relevant third-party data on the fair value of its investments, the Group undertakes its own internal valuations, as detailed in the annual consolidated financial statements for the year ended 31 December 2021. The Group regularly reviews the financial information of its investments which is available publicly or received as a shareholder.

 

14.   Financial assets and financial liabilities

 

The Group has a range of financial assets and financial liabilities, the largest of which are clearing member trading assets and liabilities. The Group classifies its financial instruments as fair value though profit or loss (FVPL), fair value through other comprehensive income (FVOCI) or amortised cost. Management has assessed that the fair values of financial assets and financial liabilities categorised as being at amortised cost approximate to their carrying values, with the exception of Group borrowings. The fair values of the Group's borrowings are disclosed in note 15.

 

The Group's financial assets and financial liabilities held at fair value consist largely of securities which are restricted in use for the operations of the Group's Central Counterparties (CCPs) as managers of their respective clearing and guarantee systems.

 

The Group adopts a forward-looking approach to estimating impairment losses on financial assets. An expected credit loss (ECL) arises if the expected cash flows are lower than the contractual cash flows due. As at 30 June 2022, there are no provisions for expected credit losses in relation to any of the CCP businesses' financial assets held at amortised cost or FVOCI (31 December 2021: nil). The Group closely monitors its CCP investment portfolio and invests only in government debt and other collateralised instruments where the risk of loss is minimal. There was no increase in credit risk in the period and none of the assets are past due (31 December 2021: nil).

 

Financial instruments by category

 

 

 

 

The financial instruments are categorised as follows:






Financial assets





 




 

30 June 2022

Amortised cost

FVOCI

FVPL

Total

Unaudited

£m

£m

£m

£m

Clearing business financial assets




 

Clearing member trading assets

4,977

-

707,456

712,433

Other receivables from clearing members

6,129

-

-

6,129

Other financial assets

-

15,545

-

15,545

Clearing member cash and cash equivalents1

110,795

-

-

110,795

 

121,901

15,545

707,456

844,902





 

Trade and other receivables2

1,336

-

18

1,354

Cash and cash equivalents

2,520

-

-

2,520

Investments in financial assets - equity instruments

-

385

-

385

Derivative financial instruments

-

-

75

75





 

Total financial assets

125,757

15,930

707,549

849,236





 

1 Clearing member cash and cash equivalents represents amounts received from the clearing members to cover initial and variation margins, and default fund contributions that are not invested in bonds. These amounts are deposited with banks, including central banks, or invested securely in short-term reverse repurchase contracts (reverse repos).

2 Prepayments and contract assets within trade and other receivables are not classified as financial instruments.

 

Financial assets measured at fair value

 

The following table provides the fair value measurement hierarchy of the Group's financial assets measured at fair value:

 

 

 

 

 

30 June 2022

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

Clearing business financial assets




 

Derivative instruments

232

17,785

-

18,017

Non-derivative instruments

-

689,439

-

689,439

Other financial assets

15,545

-

-

15,545

 

15,777

707,224

-

723,001

Investments in financial assets - equity instruments

1

-

384

385

Derivatives not designated as hedges




 

Foreign exchange forward contracts

-

75

-

75

Trade and other receivables - convertible loan notes

-

-

18

18





 

Total financial assets at fair value

15,778

707,299

402

723,479





 

There were no transfers between levels during the period.

Financial liabilities




 

 




 

30 June 2022

 

Amortised cost

FVPL

Total

Unaudited

 

£m

£m

£m

Clearing business financial liabilities




 

Clearing member trading liabilities


4,977

707,456

712,433

Other payables to clearing members


132,218

-

132,218

 


137,195

707,456

844,651

Trade and other payables1


2,311

-

2,311

Borrowings


8,318

-

8,318

Derivative financial instruments


-

112

112



 

 

 

Total financial liabilities


147,824

707,568

855,392

1 Social security and other taxes within trade and other payables are not classified as financial instruments.

 

Financial liabilities measured at fair value

The following table provides the fair value measurement hierarchy of the Group's financial liabilities measured at fair value:

 




 

30 June 2022

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

Clearing business financial liabilities




 

Derivative instruments

232

17,785

-

18,017

Non-derivative instruments

-

689,439

-

689,439

 

232

707,224

-

707,456





 

Derivatives not designated as hedges




 

Foreign exchange forward contracts

-

22

-

22


 

 

 

 

Derivatives designated as hedges

 

 

 

 

Cross-currency interest rate swaps

-

90

-

90


 

 

 

 

Total financial liabilities at fair value

232

707,336

-

707,568






There were no transfers between levels during the period.

The financial instruments of the Group at 31 December 2021 were categorised as follows:






Financial assets




 

 




 

31 December 2021

Amortised cost

FVOCI

FVPL

Total

 

£m

£m

£m

£m

Clearing business financial assets





Clearing member trading assets

1,476

-

645,587

647,063

Other receivables from clearing members

4,184

-

-

4,184

Other financial assets

-

13,784

-

13,784

Clearing member cash and cash equivalents

83,795

-

-

83,795


89,455

13,784

645,587

748,826






Trade and other receivables

1,020

-

6

1,026

Cash and cash equivalents

2,665

-

-

2,665

Investments in financial assets - equity instruments

-

351

-

351

Derivative financial instruments

-

-

27

27






Total financial assets

93,140

14,135

645,620

752,895

 

Financial assets measured at fair value




 

The following table provides the fair value measurement hierarchy of the Group's financial assets at 31 December 2021:

 




 

31 December 2021

Quoted prices in active markets

(Level 1)

Significant observable inputs

(Level 2)

Significant unobservable inputs

(Level 3)

Total

fair value

 

£m

£m

£m

£m

Clearing business financial assets




 

Derivative instruments

47

2,631

-

2,678

Non-derivative instruments

-

642,909

-

642,909

Other financial assets

13,784

-

-

13,784


13,831

645,540

-

659,371

Investments in financial assets - equity instruments

1

-

350

351






Derivatives not designated as hedges





Foreign exchange forward contracts

-

27

-

27

Trade and other receivables - convertible loan notes

-

-

6

6

Total financial assets at fair value

13,832

645,567

356

659,755





There were no transfers between levels during the year to 31 December 2021.

Financial liabilities




 

 




 

31 December 2021

 

Amortised cost

FVPL

Total

 

 

£m

£m

£m

Clearing business financial liabilities





Clearing member trading liabilities


1,476

645,587

647,063

Other payables to clearing members


101,581

-

101,581



103,057

645,587

748,644






Trade and other payables


2,727

-

2,727

Borrowings


7,654

-

7,654

Derivative financial instruments


-

52

52