LSE Group total income rises as it deals with 'challenging' market
London Stock Exchange Group reported “good” overall income performance in its first quarter on Wednesday, against a “challenging” market backdrop, with total income up 5% year-on-year to £546m.
Financial Services
14,075.11
17:09 19/04/24
FTSE 100
7,895.85
16:59 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
London Stock Exchange Group
8,984.00p
17:15 19/04/24
The FTSE 100 stock market operator said it had continued to develop and invest for growth in the three months ended 31 March as well, with the acquisition of a minority stake in Euroclear and the launch of new services in its post trade and information services segments.
In information services, revenues were up 6% to £214m, with 7% growth at FTSE Russell.
Growth in index subscriptions remained “strong”, while FTSE Russell asset-based revenues reduced due to a reduction in assets under management at the end of 2018, which the board said impacted on revenue in the first part of the first quarter.
Asset-based revenue in the second quarter was expected to be stronger.
In the post trade segment at LCH, income was up 17% to £182m, with 16% revenue growth in OTC following record volumes at SwapClear and “no discernible change” to customers' use of the service, as equivalence was secured in the event of a hard Brexit.
The company said LCH, in which it holds a majority shareholding, benefitted from an updated SwapClear agreement with partner banks, with effect from the start of the year, estimated to deliver around £30m in savings to its cost of sales in 2019.
At post trade in Italy, income was down 4% to £36m as equity markets experienced a slow first quarter.
After adjusting for the treatment of T2S costs, gross profit there increased 3%.
In capital markets, LSE said revenues were down 9% to £97m, which mostly reflected lower equity trading volumes, while in technology services, revenues were ahead 9% at £14m.
“We continue to execute our strategy across our core businesses of information services, post trade and capital markets,” said LSE Group chief executive officer David Schwimmer.
“In post trade, we acquired a stake in Euroclear, which shares our open access approach, and we updated our SwapClear agreement, which will deliver significant savings as we further develop the service.”
New product development and investment in opportunities continued across the business during the period, the board reported, noting the acquisition of a 4.9% stake in Euroclear with a seat on its board.
LSE said that would help strengthen the existing commercial relationships between the businesses.
LCH RepoClear members successfully consolidated European debt clearing activity in LCH SA, benefitting from T2S efficiencies, while SwapClear Non-Deliverable IRS Clearing was expanded to include five new Latin American and Asia-Pacific currencies.
The Dutch pension fund, Pensioenfonds Detailhandel, selected a custom FTSE Russell ESG benchmark as the basis of a new €6bn developed market passive equity mandate managed by BlackRock during the quarter.
FTSE Russell also launched a new Multi-Asset Composite Index Series, which LSE described as a “wide range” of indices across major asset classes covering global, regional and emerging markets.
In early April, Network International - a Middle Eastern payments company - raised £1.1bn on London Stock Exchange, and Nexi - a major Italian payments company - listed on Borsa Italiana, raising $2.6bn, which was the largest IPO globally in the year-to-date.
LSE also acquired a minority stake in Nivaura, partnering with it to support capital markets innovation through use of emerging technologies.
“We are investing in and growing our Information Services business, including developing our multi-asset and data and analytics offering,” said David Schwimmer.
“While equity markets were slower due to macroeconomic uncertainty, we have seen an improved listing environment in the second quarter.”
On the financial front, LSE said its position remained “strong” and was broadly unchanged from 31 December.
As at 31 March, having funded the purchase of a 4.9% stake in Euroclear, the group had committed facility headroom of more than £750m available for general corporate purposes.
S&P maintained a positive outlook over its ‘A-’ long term rating of LSE Group, the board noted, while Moody's rated it ‘A3’ with a stable outlook.
The euro weakened by 2% and the US dollar strengthened by 6% against sterling compared with the same period last year, LSE pointed out.
It said that, to illustrate its exposure to movements in exchange rates, a five euro cent change up or down in the average euro-sterling rate would have resulted in a corresponding change to continuing operations total income of about £7m for the first quarter , while a five US cent move would have resulted in a £6m change.
“The group is strategically well positioned to develop its growth opportunities further in the evolving macroeconomic landscape,” Schwimmer concluded.