REG - LondonStockExGroup - Capital Markets Event, Capital Markets Day

London Stock ExchangeAnnouncement

16/11/2023 17:00

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RNS Number : 7433T  London Stock Exchange Group PLC  16 November 2023

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

London Stock Exchange Group plc: Capital Markets Day

Partnering to transform our industry: accelerating growth and improving
profitability; strong cash generation for ongoing investment; £1 billion
share buybacks in 2024

 

LSEG is hosting a Capital Markets event today and tomorrow, 16 and 17 November
2023. The theme of the event is "Partnering to Transform our Industry."

 

At the event, we will highlight LSEG's differentiation, the attractiveness of
our end markets and our plans to accelerate growth, both through continued
organic investment in our leading businesses and our extensive partnership
with Microsoft. We will also set out our new medium-term guidance, reiterate
our capital allocation model and outline our simplified reporting structure.

David Schwimmer, CEO said:

"In less than three years we have transformed our business, trebling the
growth rate of the Refinitiv Data & Analytics businesses we acquired and
beating our growth targets line by line. But the real opportunity still lies
in front of us. As we enter the next phase of growth, we will leverage our
leading franchises across the financial markets lifecycle to create seamless
workflows within and across asset classes. We will provide our customers with
new AI-driven insights based on our trusted and validated data, combined with
straight-through execution, risk management and capital efficiency across
their businesses.

"LSEG's heritage - a track record of trusted industry partnership and constant
innovation - is also its future. Working with Microsoft and across the
industry, I'm excited about the growth opportunities ahead of us, and I am
confident we have the right people, assets and partners to deliver them."

Highlights

·    New medium-term guidance: accelerating growth and improving
profitability

o  Step-up in growth expectations: mid to high single digit organic(1)
revenue growth annually, accelerating after 2024 as customers start to benefit
from our investment in platforms and the Microsoft partnership

o  Underlying EBITDA margin to increase over time

o  Capex to decline to high single digit % of revenue over time

o  Cumulative free cash flow to exceed underlying profit after tax
attributable to equity holders

 

·    Strong progress with Microsoft:

o  New cloud environment build well advanced: first applications to migrate
shortly

o  Major customers closely engaged through the Design Partner Programme

o  Early product enhancements and new applications to begin to launch in H1
2024

o  Revenue to build from 2025

·    Enhanced shareholder returns: £1 billion of buybacks to be executed
during 2024

·    New reporting: from 2024, LSEG to report as five divisions and
simplify D&A business lines, aligning with new management structure and
enabling easier identification of key business trends

 

Summary

LSEG is hosting a Capital Markets event starting at 5.30pm today and
continuing tomorrow, 17 November 2023. The event will begin with presentations
from David Schwimmer, CEO and Anna Manz, CFO this evening.

 

Tomorrow, further presentations from Satvinder Singh, Head of Data &
Analytics, and Ron Lefferts, Head of Sales & Account Management, will be
followed by a number of break-out sessions with business leaders. The event
will end with a panel Q&A session. For more information on the agenda,
including the timings of webcast content, please visit
www.lseg.com/en/investor-relations/capital-markets-days-2023
(http://www.lseg.com/en/investor-relations/capital-markets-days-2023) .

 

 

LSEG's differentiators

During the event, we will highlight five key differentiators for our business:

We are global: we have operations in 65 markets and provide services into
around 190 countries. The markets we serve and the asset classes our customers
trade are increasingly global and cross-border. We are very well positioned to
help customers expand into new markets and to drive our own growth through
geographic expansion.

We are multi-asset class: we have leading businesses in fixed income, foreign
exchange and equities. Our breadth supports a wider range of services to
customers while limiting our own exposure to volatility in a single asset
class.

We operate across the trade lifecycle: we provide products and services at
scale from capital raising and pre-trade research, through counterparty risk
management and performance benchmarking, to trade execution and clearing. This
allows us to build seamless platforms through the trade lifecycle and serve
our customers by developing bespoke solutions, driving efficiencies across
their businesses and significantly enhancing their workflow.

We are a trusted, long-term partner: many of LSEG's businesses were originally
founded by market participants. We have constantly enhanced these platforms
under our ownership, laying the foundation for trusted, long-term
relationships across the industry, which continues to work in partnership with
us to solve new challenges.

We have a high-quality revenue profile: in 2022, 73% of our total income
(excluding recoveries) was from recurring subscriptions, and most of our
transactional revenue was from leading franchises in Post Trade and Tradeweb.
As a result, our growth has been very consistent despite significant
volatility in broader market drivers.

 

 

Attractive end markets, significant growth potential

We have closely aligned our business to highly attractive end markets and
continue to shape those markets through innovation and investment, both
through our own transformation and our partnership with Microsoft. We see a
number of major drivers of future growth.

Demand for data and its integration into workflows is growing, with the
increasing trend towards algorithmic trading and other quant strategies, and
the appetite for newer data sets like ESG. Our leadership in Real-Time, our
investments across the latency spectrum and our growing share in Pricing &
Reference Services position us well for continued growth.

The rise of new technologies including AI will increase the usage and value of
data and give rise to new applications and use cases. Our investments here
will drive customer consumption, enhance workflows and create new
opportunities as we launch Data Management, Analytics and Modelling as a
Service.

The electronification and digitisation of trading continues to be a tailwind
for Tradeweb, which is also expanding successfully into new products and
markets. In addition, we are examining the potential in digital markets
infrastructure after the initial exploratory work we undertook with Microsoft.
 

Reputational and financial risk management is a fast-growing space where we
have a leading platform with WorldCheck. More broadly, Post Trade is a vital
and trusted partner for the world's major financial institutions, helping them
to manage trillions of dollars of exposures every day.

Changing regulation is increasing pressure on customers' capital requirements.
Financial institutions are looking to optimise capital across their
derivatives book (cleared or uncleared) with simplified and standardised
processes governing uncleared business specifically. We have built Post Trade
Solutions - combining SwapAgent with the acquisitions of Quantile and Acadia -
to address this customer need, which will significantly expand the medium-term
growth opportunity in the division.

 

Progress with Microsoft

We have made excellent progress in our strategic partnership with Microsoft
since its launch in December 2022, and we are well into the product build
phase across all workstreams. The major developments over the last 11 months
include:

·    The commercialisation of generative AI: the combination of
Microsoft's strong position in generative AI with LSEG's unparalleled breadth
and depth of trusted data and analytics will enable us to develop even more
powerful tools to streamline workflow and generate new insights.

·    The launch of Microsoft Fabric, which will be the cornerstone of
LSEG's Data Platform. Our development teams are working together to enable
customers to use AI and other capabilities with LSEG's trusted financial
markets intelligence natively integrated into Microsoft Fabric.

·    The Design Partner Programme, which is engaging a number of global
financial institutions operating across the trade lifecycle to help inform
product development, trial prototypes and give feedback as part of an agile
and iterative process.

·    An acceleration of our time to market, with a number of applications
entering external pilot and general availability from H1 2024. These include
the first elements of Workspace interoperability and initial launches in our
Analytics as a Service suite. We will also start to migrate our applications
and datasets into the new Microsoft Azure cloud environment as we enter 2024.

 

Medium-term guidance

For 2023, we remain on track to achieve our guidance. We expect to deliver
full year revenue growth towards the upper end of the 6-8% guidance range,
with EBITDA margin also in line with guidance.

Our guidance framework for the medium term is as follows:

·    Accelerating growth: a step-up in growth expectations to mid to high
single digit organic revenue growth annually, accelerating after 2024 as
customers start to benefit from our investment in major platforms and the
Microsoft partnership. For comparison, our guidance of 6-8% constant currency
growth for 2023 included an M&A benefit of approximately 1%.

·    Improving profitability: underlying EBITDA margin to increase over
time, as the benefit from top-line growth more than offsets underlying
inflation and our reinvestments in growth. For guidance purposes, we will
measure EBITDA margin excluding the impact of foreign exchange-related balance
sheet items.

·    Sustained investment: total capex (including Refinitiv integration)
to remain around current levels of 11-12% of revenue in 2024, then declining
over time to high single digit % of revenue.

·    Strong cash conversion: cumulative free cash flow to exceed
underlying profit after tax attributable to equity holders. LSEG's cash flow
dynamics are very strong, giving us the capacity to invest consistently for
growth and resilience, to target M&A where it adds value and to return
excess capital to shareholders.

 

 

Capital allocation

In addition to our capex plans outlined above, the other key elements of
capital allocation are as follows:

 

·    Simplified dividend policy: we are removing the link between the
prior full-year dividend and the current year interim dividend. From 2024 our
policy will be:

o  progressive dividends;

o  a targeted 2.5x - 3.0x cover ratio (c.33% - 40% pay-out) based on expected
full-year AEPS growth; and

o  a split of approximately one-third/two-thirds between the interim and
final dividends.

·    Consistent M&A strategy: we continue to focus on acquisitions
that are value-accretive and will add new technology, capabilities or data to
enhance our offering to customers.

·    New share buybacks: as a result of our continued strong cash
generation, we plan to return £1 billion to shareholders via share buybacks
during 2024. We will provide more detail on the proposed structure of these
buybacks with the 2023 preliminary results. We continue to expect to maintain
day-to-day leverage around the middle of our target range of 1.5-2.5x
operating net debt to adjusted EBITDA.

 

New divisional reporting

With effect from 2024, we are changing our reporting structure, simplifying
our Data & Analytics reporting under product lines and aligning divisional
disclosure with changed management reporting lines. The new structure is set
out in the table below.

 Division              Business line                   Approx % of 2022 revenue ex recoveries

 Data & Analytics                                      50%
                       Workflows                       25%
                       Data & Feeds                    23%
                       Analytics                       2%

 FTSE Russell                                          11%
                       Subscription                    7%
                       Asset-based                     4%

 Risk Intelligence                                     6%

 Capital Markets                                       20%
                       Equities                        3%
                       Fixed Income & Derivatives      13%
                       FX                              4%

 Post Trade                                            13%
                       OTC Derivatives                 5%
                       Securities & Reporting          3%
                       Collateral                      5%

 

We will now report under five divisions. Within Data & Analytics, we will
report under three business lines: Workflows, Data & Feeds and Analytics.
This will align with our Microsoft workstreams for Workspace, the Data
Platform and Analytics and Modelling as a Service. Workflows will consolidate
all of our "user interface" business and comprise all of Trading &
Banking, plus the desktop activities previously reported within Investment
Solutions and Wealth. Data & Feeds will comprise Enterprise Data plus the
data and feeds activities previously reported within Investment Solutions and
Wealth. Analytics was previously reported within Investment Solutions.

 

Benchmarks & Indices will be split out from the Investment Solutions
segment of Data & Analytics and be renamed FTSE Russell. Customer &
Third Party Risk will also become a stand-alone division, and be renamed Risk
Intelligence.

 

There will be no change to our Capital Markets or Post Trade reporting, apart
from the combination of our Non-cash Collateral and Net Treasury Income
revenue lines.

 

We will report 2023 financials under the existing structure, and subsequently
provide 2023 segmental performance under this new structure during March 2024.

 

 

Registration for webcast

Presentations will be webcast at 5.30-6.30pm UK time today, 16 November, and
continue tomorrow, 17 November at 9.00-10.00am and approximately 3.15-4.15pm.
To access the webcasts please register in advance using the following links:

 16 November:
 https://www.lsegissuerservices.com/spark/LondonStockExchangeGroup/events/8f332467-588d-4757-9fc3-cc7e791d95e9
 (https://www.lsegissuerservices.com/spark/LondonStockExchangeGroup/events/8f332467-588d-4757-9fc3-cc7e791d95e9)

 17 November:
 https://www.lsegissuerservices.com/spark/LondonStockExchangeGroup/events/6d23af44-ce4b-4593-87d3-9b9aec03e55e
 (https://www.lsegissuerservices.com/spark/LondonStockExchangeGroup/events/6d23af44-ce4b-4593-87d3-9b9aec03e55e)

 

Contacts: London Stock Exchange Group plc

 Investors

 Peregrine Riviere / Chris Turner - Investor Relations       ir@lseg.com (mailto:ir@lseg.com)

 Media
 Lucie Holloway / Rhiannon Davies - External Communications  +44 (0) 20 7797 1222

                                                             newsroom@lseg.com (mailto:newsroom@lseg.com)

 

Additional information can be found at www.lseg.com (http://www.lseg.com) .

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