For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220303:nRSC4643Da&default-theme=true
RNS Number : 4643D London Stock Exchange Group PLC 03 March 2022
London Stock Exchange Group plc
Preliminary results for the year ended 31 December 2021
This release contains revenues, costs, earnings and key performance indicators
(KPIs) for the year ended 31 December 2021 (FY). All figures quoted in this
release are on an underlying basis. Figures are stated on both a statutory
and pro-forma basis for FY 2021 and FY 2020. Pro-forma figures assume that the
acquisition of Refinitiv took place on 1 January 2020. All pro-forma and
statutory figures exclude the financial contribution from Borsa Italiana which
was divested within the period and classed as a discontinued business in both
periods. Constant currency variance is calculated on the basis of consistent
FX rates applied across the current and prior year period, the conversions
have been made from the transactional values, which will eliminate any
transactional and translational movements along with any related accounting
adjustments. Organic variances have been removed from our disclosure due to
the large variances associated with the acquisition of Refinitiv.
Strong delivery against our strategy and targets
· Successful first year following the acquisition of Refinitiv -
LSEG well positioned as a leading global financial market infrastructure and
data business
· Delivering on our strategy to accelerate growth and build a more
agile and efficient business, creating a platform for further growth
· Integration of Refinitiv delivering strong financial and
operational benefits; confident in meeting or beating all targets
· Strong financial performance - good revenue growth across all
businesses and ahead of previous guidance (up 6.1% at constant currency); Data
& Analytics grew strongly, up 5.3%
· Cost synergy delivery running significantly ahead of target with
£151 million run-rate achieved in 2021
· Additional £50 million cost synergies announced today,
increasing the 5-year target to at least £400 million per annum
· Adjusted EBITDA up 8.3% to £3,283 million
· Pro-forma leverage of 1.9x at the end of 2021, within the target
1-2x range one year ahead of schedule; focus on disciplined allocation of
capital to create further shareholder value
· Strong financial performance driving 46% increase in AEPS to
286.7p(1); dividend up 27% to 95 pence per share
David Schwimmer, CEO said:
"LSEG has delivered a successful first year after completion of the Refinitiv
acquisition. We have produced a strong financial performance, have met or
are ahead of all targets and have good momentum into 2022.
"All of our businesses produced good results and are well positioned in
markets demonstrating strong growth. Our clear focus on customer service and
innovative solutions improved Data & Analytics' performance. Our Capital
Markets and Post Trade businesses also delivered good growth. We are
building a more scalable and efficient business, creating a platform for
further growth and delivering the benefits of an interconnected global
company.'
"We are in a strong financial position, with a business model based on
high-quality, recurring revenues that generates considerable and predictable
cashflows. We have brought our leverage to within our target range a year
ahead of schedule and will continue with disciplined deployment of capital to
create further shareholder value. We remain focused on our strategic
priorities for the benefit of our customers and our shareholders."
Pro-forma results - Strong financial and operational performance across all
businesses
Note: Unless otherwise stated, variances refer to growth rates on a pro-forma
constant currency basis, excluding the impact of a deferred revenue accounting
adjustment(3), to provide the best view of underlying performance
· Strong revenue growth across all divisions driving 6.1% constant
currency total income(3) growth - £6,811 million (2020: £6,767 million) - on
course to achieve the 5-7% 2020-23 CAGR target
· Data & Analytics accelerated growth to 5.3% (2020: 2.5%), with
>90% of revenues from highly recurring subscriptions; annual subscription
value (ASV) growth of 4.6% at end of 2021, up from 4.0% at Q3, signalling
strong revenue momentum for 2022
· Capital Markets grew 12.5% driven by strong growth at Tradeweb and
good performance across equities and FX venues
· Post Trade revenue grew 11.1% driven by strong performance in
RepoClear and continued growth in OTC clearing; total income up 2.0% including
Net Treasury Income (NTI)
· Good delivery of early run-rate revenue synergies, with c.25% of
total synergy-related products launched in 2021. A similar proportion planned
for this year, establishing strong foundations for synergy realisation in 2022
and beyond
· Adjusted operating expenses growth of 4.8% - guidance unchanged for
low-single digit constant currency cost growth for 2022 and 2023
· Adjusted operating profit grew 8.5% reflecting strong top-line growth
and good cost control
· Adjusted EBITDA up 8.3% to £3,283 million; adjusted EBITDA margin(2)
of 48.2%; high confidence of further improvements to achieve >50% target by
end of next year
· Long-term debt refinancing completed in H1 2021 - secured at
historically low rates - with average cost of debt of 1.6%
· Proposed final dividend of 70 pence per share, a 27% increase in full
year dividend to 95 pence per share, reflecting our strong performance in the
year and confidence in our outlook
· Announced acquisition of Quantile, a fast-growing provider of
portfolio, margin and capital optimisation and compression services for the
global financial services market
· Since year end, announced the acquisition of TORA, a leading provider
of trading technology solutions that supports customers trading multiple asset
classes across global markets; will further strengthen our capabilities in the
Trading & Banking data business
· We are closely monitoring the impact of the conflict in Ukraine, with
our immediate focus being the safety of our people. We are actively engaging
with regulators and authorities on all relevant sanctions and taking
appropriate actions. LSEG's operations in Russia and Ukraine account for less
than one per cent of total income
(1) Adjusted basic earnings per share (AEPS) variance is on a reported
pro-forma basis, not constant currency
(2) Adjusted EBITDA margin is Adjusted EBITDA divided by Total Income (excl.
Recoveries)
(3) Excluding recoveries and the deferred revenue accounting impact. The
deferred revenue impact is a one-time, non-cash, negative revenue impact
resulting from the accounting treatment of deferred revenue within Refinitiv's
accounts which have been re-evaluated upon acquisition by LSEG under purchase
price accounting rules. The result of this accounting treatment is a £23m
adjustment reducing revenue for H1 2021. The vast majority impacts the Data
& Analytics business with a smaller impact applied to the FX venues
business within Capital Markets. There were further immaterial impacts in
subsequent periods within 2021. Further information is available in the
"Accounting and modelling notes" section. Constant currency variance shows
underlying financial performance, excluding currency impacts, by comparing the
current and prior year period at consistent exchange rates.
Pro-forma results - Financial summary
Unless otherwise stated, all figures refer to continuing operations for the
year ended 31 December 2021 (FY 2021). Comparative figures are for continuing
operations for the year ended 31 December 2020 (FY 2020).
Pro-forma underlying(1)
Continuing operations 2021 2020 Pro-forma Variance (2 Constant Currency Variance (3 Constant Currency Variance (excl. deferred revenue adjustment) (3,4
£m
£m ) % ) % ) %
Data & Analytics 4,609 4,653 (0.9%) 4.8% 5.3%
Capital Markets 1,255 1,170 7.3% 12.5% 12.5%
Post Trade 913 915 (0.2%) 2.0% 2.0%
Other 34 29 17.2% 21.5% 21.5%
Total Income (excl. recoveries) 6,811 6,767 0.7% 5.8% 6.1%
Recoveries 354 338 4.7% (0.8%) (0.3%)
Total Income (incl. recoveries) 7,165 7,105 0.8% 5.5% 5.8%
Cost of sales (923) (946) (2.4%) 3.0% 3.0%
Gross profit 6,242 6,159 1.3% 5.9% 6.3%
Adjusted operating expenses before depreciation, amortisation and impairment (2,977) (3,023) (1.5%) 4.8% 4.8%
(5)
Income from equity investments 22 - - - -
Share of loss after tax of associates (4) (4) - 3.1% 3.1%
Adjusted earnings before interest, tax, depreciation, amortisation and 3,283 3,132 4.8% 7.4% 8.3%
impairment (5)
Adjusted EBITDA Margin (6) 48.2% 46.3%
Adjusted depreciation, amortisation and impairment (5) (774) (747) 3.6% 7.6% 7.6%
Adjusted operating profit (5) 2,509 2,385 5.2% 7.5% 8.5%
Adjusted net finance expense (5) (206) (569) (63.8%)
Adjusted profit before tax (5) 2,303 1,816 26.8%
Adjusted tax (5) (480) (555) (13.5%)
Adjusted profit for the year (5) 1,823 1,261 44.6%
Adjusted profit attributable to:
Equity holders 1,595 1,087 46.7%
Non-controlling interest 228 174 31.0%
Continuing adjusted basic earnings per 286.7 195.7 46.5%
share (p) (7)
1 The pro-forma results assume that the acquisition of Refinitiv
took place on 1 January 2020. The Borsa Italiana group was classified as a
discontinued operation once the sale became highly probable on 13 January 2021
and therefore its profits and losses have been excluded from the Group's
continuing operations for both years presented
2 Pro-forma variance is the difference between current and prior
year on a pro-forma basis, using the average exchange rate for the respective
period, therefore any changes in the exchange rates are also reflected in the
variance along with business performance
3 Constant currency variance shows financial performance, excluding
currency impacts, by comparing the current and prior year at consistent
exchange rates
4 As a result of the acquisition of Refinitiv and the associated
accounting rules, Refinitiv's deferred revenue balances were subject to a
one-time haircut at the time of acquisition. This is a non-cash adjustment.
The negative revenue impact was mostly in Q1 2021 at approximately £22
million, with an additional £1 million in Q2, £1 million in Q3 and £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 in
Capital Markets. There will be no impact in 2022. An adjusted variance,
excluding the deferred revenue adjustment, has been presented to show
underlying business growth on the prior year.
5 Before non-underlying items
6 Adjusted EBITDA margin is Adjusted EBITDA divided by Total Income
(excl. Recoveries)
7 Weighted average number of shares used to calculate Adjusted basic
earnings per share on a pro-forma underlying basis is 556 million
CEO Review
Overview of 2021 performance
The Group has delivered a strong financial and operating performance in the
first year following the successful completion of the acquisition of
Refinitiv, with good revenue growth across all of our businesses. We are
making excellent progress on integration and are on track to meet or exceed
all the acquisition targets. We have established our position as a leading
global market infrastructure and data business, and we carry good momentum
into 2022.
Strong position
We have a diverse set of world-class assets, giving us global scale and
multi-asset class capabilities across the trade lifecycle, and highly
recurring revenues with our products and services providing value across our
customers' core operations. We are playing a leading role in the sustainable
transition through our ESG data, analytics and indices, capital issuance
venues and industry leadership.
We are building on our track record of partnering with our customers to drive
innovation and create value, and on our position as a trusted operator of
large-scale critical market infrastructure. We are creating an integrated
business that is much more than the sum of the parts.
Priorities for the Group
We remain focused on three strategic priorities: 1) integrating our
world-class businesses; 2) driving growth; and, 3) building an efficient and
scalable platform, particularly in Data & Analytics. We are implementing a
range of actions across our systems, property and workforce to progress our
integration plans. In driving the top line, we are using the strengths across
the Group to enable innovation and product benefits for our customers. In
delivering our scalable platforms, we are investing in technology and
infrastructure to drive greater efficiencies and facilitate sustainable margin
enhancement over time. These are discussed in more detail below.
Executing on our integration plan
The Group's divisions are working successfully together to create new
opportunities. An important first step has been the simplification of our
sales team structure, to create a single point of contact for all key
customers. This enables a joined-up approach to providing products and
services from across the Group, based on a better understanding of customer
needs and workflow, as well as helping us build deeper and stronger customer
relationships. Improving customer service has led to record retention rates
in 2021.
We have integrated capabilities across the Group, including connectivity
between the Group's FX dealer-to-client trading venue and ForexClear to
provide additional clearing optionality for customers, inclusion of Yieldbook
data into our evaluated pricing services for fixed income, and Pricing and
Reference Service (PRS) data and content provision through the Issuer Services
platform. We recently launched Yieldbook's Fixed Income Analytics on our
desktop platforms, joining up related data for customers and significantly
increasing the distribution of the product on a global basis.
We have made good progress on revenue synergies, for example with
cross-selling PRS data to FTSE Russell customers, and using this data to
create and launch new FTSE Russell products. We are on track for the
delivery of revenue synergies, with c25% of planned synergy-related products
launched in 2021 and a similar proportion planned for this year. We expect to
generate run-rate revenue synergies of £40-60 million by the end of 2022.
We are delivering cost synergies ahead of the planned phasing target, through
property consolidation, supplier optimisation, technology efficiencies and
de-duplication of roles. Against a target of £88 million of run-rate
synergies in the first year, we have delivered £151 million. In addition,
we have identified another £50 million of cost synergies, increasing the
5-year target to at least £400 million per annum.
Driving growth
Our achievements in 2021 in terms of integrating and connecting our businesses
also provide a platform for driving revenue growth. Data & Analytics
delivered an excellent revenue performance, doubling the level of growth in
2021 compared with the previous two years. The improvement was driven by
improved customer service and expansion of content which resulted in record
customer retention levels in 2021.We have made targeted investment to further
enhance services across Data & Analytics, notably on the development of
Workspace next generation software that transforms human interaction with
financial data distributed from our data platform. Roll out of Workspace in
the Wealth, Investment Solutions and Banking businesses continued in 2021,
with positive customer reaction to the new offerings, and improvements in net
promoter scores. At the end of 2021, we launched the beta version of
Workspace for FX Trading. With much of the planned product development and
related tools now in place, we are around a quarter of the way through the
implementation of Workspace. We are also investing in new content to support
growth in a number of areas such as the PRS business and sustainable finance.
Since year end, we announced the acquisition of Tora, a leading provider of
trading technology solutions that supports customers trading multiple asset
classes across global markets. This will further strengthen our capabilities
in the Trading & Banking data business.
Capital Markets produced strong financial results, with the highest level of
IPO activity since 2007. FX trading, particularly the FXall dealer-to-client
market, produced a good performance. The Group's FX venues are also
facilitating integrated workflow within a large liquidity pool as electronic
trading of FX increases. Record levels of trading through Tradeweb, a leading
electronic trading venue for credit and rates products, contributed
substantially to growth in Capital Markets. Tradeweb is growing through
product expansion to meet the increasing demand for electronification of
trading and from market share gains in the period.
In Post Trade, LCH is the leading clearer of OTC products worldwide across
asset classes (Rates, FX, CDS) and is also a leading clearing service
for European and UK repos and equities. Post Trade delivered good revenue
growth, as SwapClear expanded its offering and increased the number of clients
to the service, with 78 firms signing up across a diverse range of
geographies. RepoClear grew strongly as it provided netting efficiencies to
customers for higher repo volumes arising from European debt issuance
programmes. In December, LSEG announced the acquisition of Quantile, a
fast-growing provider of portfolio, margin and capital optimisation and
compression services for the global financial services market. It will further
our strategy of providing customers with a global, multi-asset class financial
markets infrastructure operating across the trading ecosystem.
Building a scalable platform
As previously discussed, we are implementing a targeted investment programme
in our technology and infrastructure to serve our customers better and
facilitate margin enhancement and product profitability. A key part of this is
continuing our ongoing migration of services to the cloud, which enhances the
customer experience and also improves our scalability, simplifying our data
platform by reducing and consolidating a fragmented offering towards a single
point of access. The addition of new tools and services has helped to gain
increased customer volumes at FXall, while work continues on the
re-platforming of our interdealer FX platform, Matching, to our own proven
technology. RepoClear is also moving its clearing platform onto the same
platform as the EquityClear service, developed by LSEG Technology, to drive
further customer efficiencies. As we deliver on these initiatives, our EBITDA
margin enhancement will continue above the current target 50% level beyond
2023.
Looking ahead, we continue to focus on the same three strategic priorities -
integrating, driving growth and building a scalable platform. In 2022, we will
increase the range of services for customers through an integrated offering,
deliver further growth through revenue synergies, enhanced products and data
content, and build out our platforms and technology to create greater scale
and operational efficiencies.
Board Change
Jacques Aigrain will step down from the LSEG Board on 27 April 2022, after
nine years as a non-executive director. The Board is grateful for his advice
during a time of significant transformation for the Group, and his leadership
of the Group's Remuneration Committee.
External Audit Tender
In accordance with the requirement to undertake an audit tender every ten
years, LSEG will put the external audit to tender in 2022 for the audit of the
2024 financial year.
Statutory results - Financial highlights
Note: Unless otherwise stated, variances refer to growth rates on a statutory
basis with no adjustments for currency or accounting treatments
· Total income (excluding recoveries) grew to £6,416 million (2020:
£2,030 million), primarily as a result of the acquisition and consolidation
of Refinitiv as a 29 January 2021
· Operating expenses before depreciation, amortisation and impairment
grew to £3,130 million (2020: £917 million), as the Group incorporated the
costs of the Refinitiv business
· Adjusted(2) EBITDA margin of 48.4%; AEPS of 286.5p(3)
Statutory results - Financial summary
Unless otherwise stated, all figures refer to continuing operations for the
year ended 31 December 2021 (FY 2021). Comparative figures are for continuing
operations for the year ended 31 December 2020 (FY 2020).
Continuing operations 2021 2020
£m
£m
Data & Analytics 4,294 824
Capital Markets 1,177 288
Post Trade 913 915
Other 32 3
Total Income (excl. recoveries) 6,416 2,030
Recoveries 324 -
Total Income (incl. recoveries) 6,740 2,030
Cost of sales (862) (208)
Gross profit 5,878 1,822
Operating expenses before depreciation, amortisation and impairment (3,130) (917)
Adjusted operating expenses before depreciation, amortisation and (2,791) (749)
impairment(2)
Non-underlying operating expenses before depreciation, amortisation and (339) (168)
impairment
Income from equity investments 22 -
Share of loss after tax of associates (4) (4)
Earnings before interest, tax, depreciation, amortisation and impairment 2,766 901
Adjusted earnings before interest, tax, depreciation, amortisation and 3,105 1,069
impairment(2)
Non-underlying earnings before interest, tax, depreciation, amortisation and (339) (168)
impairment
Adjusted EBITDA Margin 48.4% 52.7%
Depreciation, amortisation and impairment (1,608) (339)
Adjusted depreciation, amortisation and impairment (2) (721) (180)
Non-underlying depreciation, amortisation and impairment (887) (159)
Operating profit 1,158 562
Adjusted operating profit(2) 2,384 889
Non-underlying operating profit (1,226) (327)
Net finance expense (171) (70)
Adjusted net finance expense (166) (57)
Non-underlying net finance expense (5) (13)
Profit before tax 987 492
Adjusted profit before tax 2,218 832
Non-underlying profit before tax (1,231) (340)
Taxation (327) (138)
Adjusted tax(2) (458) (186)
Non-underlying tax 131 48
Profit for the year (from continuing operations) 660 354
Adjusted profit 1,760 646
Non-underlying profit (1,100) (292)
Profit attributable to:
Equity holders 529 293
Underlying 1,541 584
Non-underlying (1,012) (291)
Non-controlling interest 131 61
Underlying 219 62
Non-underlying (88) (1)
Basic earnings per share (p) (3) 98.4 83.6
Adjusted basic earnings per share (p) (3) 286.5 166.7
1 The results for the year ended 31 December 2021 include the
results from Refinitiv for 11 months ended 31 December 2021 since the date of
acquisition. The Borsa Italiana group was classified as a discontinued
operation once the sale became highly probable on 13 January 2021 and
therefore its profits and losses have been separated from the Group's
continuing operations for both periods presented
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 substitutes 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
· 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
538 million (2020: 350 million)
Contacts: London Stock Exchange Group plc
Investors
Paul Froud - Group Head of Investor Relations ir@lseg.com
Media
Lucie Holloway / Rhiannon Davies - Financial Communications +44 (0) 20 7797 1222
newsroom@lseg.com
Additional information can be found at www.lseg.com (http://www.lseg.com)
Preliminary results investor and analyst conference call:
The Group will host a presentation and conference call on its Preliminary
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 telephone conference call or webcast please register in advance
using the following link and instructions below:
https://www.lsegissuerservices.com/spark/LondonStockExchangeGroup/events/37f07ab7-6ace-4722-a051-6df9a6a78af2
(https://www.lsegissuerservices.com/spark/LondonStockExchangeGroup/events/37f07ab7-6ace-4722-a051-6df9a6a78af2)
· Please register with your full name, company name and email
address
· If you wish to participate in Q&A, questions can be provided
in written form via the Q&A tool on the webcast page or by emailing the
LSEG Investor Relations team at ir@lseg.com. Questions can be submitted in
advance and during the event itself. Written questions will be prioritised
· If you wish to ask a question live, you will need to register for
the telephone conference call. The telephone conference registration link can
be found in the link above and here:
https://cossprereg.btci.com/prereg/key.process?key=P6MXEYTPH
(https://cossprereg.btci.com/prereg/key.process?key=P6MXEYTPH)
Presentation slides can be viewed at http://www.lseg.com/investor-relations
(http://www.lseg.com/investor-relations)
For further information, please contact the Group's Investor Relations team on
ir@lseg.com (mailto:ir@lseg.com)
The information in the preliminary announcement of the results for the year
ended 31 December 2021, which was approved by the Board of Directors on 03
March 2022, does not constitute statutory accounts as defined in Section 435
of the UK Companies Act 2006. The financial statements for the year ended 31
December 2020 were filed with the Registrar of Companies, and the audit report
was unqualified and contained no statements in respect of Sections 498 (2) and
498 (3) of the UK Companies Act 2006. The financial statements for the year
ended 31 December 2021 will be filed with the Registrar of Companies in due
course.
In accordance with the Listing Rules of the UK Listing Authority, these
preliminary results have been agreed with the Company's auditors, Ernst
&Young LLP, and the Directors have not been made aware of any likely
modification to the auditor's report to be included in the Group's Annual
Report and Accounts for the year ended 31 December 2021.
The preliminary results have been prepared on a basis consistent with the
accounting policies set out in the Group's Annual Report and Accounts for the
year ended 31 December 2021.
FY 2021 Pro-forma results - Year-on-year performance / synergies and
investment
In this section we report on the year-on-year performance of the business. As
2021 growth rates are impacted by the acquisition of Refinitiv, as well as
currency movements, we show the pro-forma figures and associated growth
rates. The pro-forma results assume that the acquisition of Refinitiv took
place on 1 January 2020. For a reconciliation of the Group's profit for the
year to the pro-forma profit for the year refer to the Appendix. As with the
statutory results, the pro-forma view excludes all financial contribution from
the Borsa Italiana Group in both periods.
Variances are provided on a pro-forma and constant currency basis. Unless
otherwise stated, commentary is provided on the constant currency variance
(excluding a deferred revenue adjustment arising on the acquisition of
Refinitiv) to provide insight into performance on a comparable basis.
Constant currency variance is calculated on the basis of consistent FX rates
applied across the current and prior year. The conversions are from the
transactional values, which eliminates any transactional and translational
movements along with any related accounting adjustments.
Pro-forma underlying(1)
Continuing operations 2021 2020 Pro-forma Variance (2 Constant Currency Variance (3 Constant Currency Variance (excl. deferred revenue adjustment) (3,4
£m
£m ) % ) % ) %
Data & Analytics 4,609 4,653 (0.9%) 4.8% 5.3%
Capital Markets 1,255 1,170 7.3% 12.5% 12.5%
Post Trade 913 915 (0.2%) 2.0% 2.0%
Other 34 29 17.2% 21.5% 21.5%
Total Income (excl. recoveries) 6,811 6,767 0.7% 5.8% 6.1%
Recoveries 354 338 4.7% (0.8%) (0.3%)
Total Income (incl. recoveries) 7,165 7,105 0.8% 5.5% 5.8%
Cost of sales (923) (946) (2.4%) 3.0% 3.0%
Gross profit 6,242 6,159 1.3% 5.9% 6.3%
Adjusted operating expenses before depreciation, amortisation and impairment (2,977) (3,023) (1.5%) 4.8% 4.8%
(5)
Income from equity investments 22 - - - -
Share of loss after tax of associates (4) (4) - 3.1% 3.1%
Adjusted earnings before interest, tax, depreciation, amortisation and 3,283 3,132 4.8% 7.5% 8.3%
impairment (5)
Adjusted EBITDA Margin (6) 48.2% 46.3%
Adjusted depreciation, amortisation and impairment (5) (774) (747) 3.6% 7.6% 7.6%
Adjusted operating profit (5) 2,509 2,385 5.2% 7.5% 8.5%
Adjusted net finance expense (5) (206) (569) (63.8%)
Adjusted profit before tax (5) 2,303 1,816 26.8%
Adjusted tax (5) (480) (555) (13.5%)
Adjusted profit for the year (5) 1,823 1,261 44.6%
Adjusted profit attributable to:
Equity holders 1,595 1,087 46.7%
Non-controlling interest 228 174 31.0%
Adjusted basic earnings per 286.7 195.7 46.5%
share (p) (7)
1. The pro-forma results assume that the acquisition of Refinitiv took
place on 1 January 2020. The Borsa Italiana Group was classified as a
discontinued operation once the sale became highly probable on 13 January 2021
and therefore its profits and losses have been excluded from the Group's
continuing operations for both years presented
2. Pro-forma variance is the difference between current and prior year
on a pro-forma basis, using the average exchange rate for the respective
period, therefore any changes in the exchange rates are also reflected in the
variance along with business performance
3. Constant currency variance shows financial performance, excluding
currency impacts, by comparing the current and prior year at consistent
exchange rates
4. As a result of the acquisition of Refinitiv and the associated
accounting rules, Refinitiv's deferred revenue balances were subject to a
one-time haircut at the time of acquisition. This is a non-cash adjustment.
The negative revenue impact was mostly in Q1 2021 at approximately £22
million, with an additional £1 million in Q2, £1 million in Q3 and £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 in
Capital Markets. There will be no impact in 2022. An adjusted variance,
excluding the deferred revenue adjustment, has been presented to show business
growth on a comparable basis to the prior year.
5. Before non-underlying items
6. Adjusted EBITDA margin is Adjusted EBITDA divided by Total Income
(excl. Recoveries)
7. Weighted average number of shares used to calculate Adjusted basic
earnings per share on a pro-forma underlying basis is 556 million
Pro-forma income
All variances for income are on a pro-forma and constant currency basis,
excluding a deferred revenue adjustment.
Total income (excluding recoveries) grew 6.1% in the year, with strong
performances across all three divisions, despite the headwind of exceptional
NTI in the prior year.
Data & Analytics revenue (excluding recoveries) grew 5.3% with strong
sales performance and high retention rates in the subscription-based
businesses, combined with strong growth in the asset-based business within
Investment Solutions, and high organic and inorganic growth in Customer &
Third-Party Risk.
Capital Markets revenue grew 12.5%, largely driven by Tradeweb where
increasing electronification of the Fixed Income market and market volatility
drove record volumes. The Equities and FX businesses also performed well.
Post Trade revenue excluding NTI grew 11.1% driven primarily by strong
performances at SwapClear and RepoClear, with both high volumes in the year
(as a result of market volatility) and continued focus on addressing the needs
of our customers.
Net Treasury Income was down 20.0% on 2020, reflecting lower investment
returns in 2021 compared to the exceptional market conditions in 2020.
The Group continues to expect the 2020-23 CAGR for the growth of income
excluding recoveries to be in the 5-7% range.
Progress to date on revenue synergies from the Refinitiv acquisition is in
line with expectation. Run-rate revenue synergies of £15 million were
delivered in 2021. This was primarily through the cross sell of our Pricing
& Reference Services (PRS) products and reflecting the launch of 48 new
products for the combined Group, representing c.25% of planned revenue
synergy-related projects. We expect £40-60 million of run-rate revenue
synergies by the end of 2022.
Pro-forma income by type
Pro-forma(1)
Year ended 31 December 2021 2020 Pro-forma variance(2 Constant currency variance(3 Constant currency variance (excl. deferred revenue adjustment)(3, 4
£m
£m ) % ) % )%
Continuing operations
Recurring (5) 4,976 4,952 0.5% 4.0% 4.5%
Transactional (6) 1,594 1,517 5.1% 15.9% 15.9%
Net Treasury Income 207 269 (23.0%) (20.0%) (20.0%)
Other income 34 29 17.2% 21.5% 21.5%
Total income (excl. recoveries) 6,811 6,767 0.7% 5.8% 6.1%
Recoveries 354 338 4.7% (0.8%) (0.3%)
Total income (incl. recoveries) 7,165 7,105 0.8% 5.5% 5.8%
1 The pro-forma results assume that the acquisition of Refinitiv
took place on 1 January 2020. The Borsa Italiana Group was classified as a
discontinued operation once the sale became highly probable on 13 January 2021
and therefore its profits and losses have been separated from the Group's
continuing operations for both periods presented
2 Variance is the difference between current and prior year on a
pro-forma basis, using the average exchange rate for the respective period,
therefore any changes in the exchange rates are also reflected in the variance
along with 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 As a result of the acquisition of Refinitiv and the associated
accounting rules, Refinitiv's deferred revenue balances were subject to a
one-time haircut at the time of acquisition. This is a non-cash adjustment.
The negative revenue impact was mostly in Q1 2021 at approximately £22
million, with an additional £1 million in Q2, £1 million in Q3 and £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 in
Capital Markets. There will be no impact in 2022. An adjusted variance,
excluding the deferred revenue adjustment, has been presented to show business
growth on a comparable basis to the prior year.
5 Recurring revenues primarily represent revenues earned under
contractually renewable or highly predictable customer contracts such as
subscriptions, membership, annual tariff fees and other participation fees
that are generally recognised on a pro-rata basis over the service period.
6 Transactional revenues primarily represent fees earned on
products and services where our contractual terms do not indicate recurring
revenue, including volume-based trading fees on our markets. However, within
this revenue type we often see consistent, recurring activity
Pro-forma adjusted operating expenses
All variances for operating expenses are on a pro-forma and constant currency
basis.
Pro-forma adjusted operating expenses before depreciation, amortisation and
impairment were £2,977 million (2020: £3,023 million), an increase of 4.8%
on a constant currency basis. This was slightly better than the c.5% guidance
provided in the Interim results.
With our total income growing faster than our costs, Pro-forma adjusted
earnings before interest, tax, depreciation, amortisation and impairment
increased 8.3% to £3,283 million (2020: £3,132 million).
The cost base grew by £27 million due to the annualisation and growth of
costs associated with acquisitions made by Refinitiv in Q4 2020.
Cost growth also reflects the investments being made to improve the
scalability, resiliency and agility of the business, deliver the revenue
synergies and support the high growth at Tradeweb.
Ongoing cost growth reflects inflation and higher performance-related people
costs, partly offset by the impact of Covid restrictions, which continued to
suppress the cost base in 2021, with lower spend on travel and savings on
facilities costs. This is expected to be a temporary benefit, with some of
these costs expected to increase with the easing of restrictions in the coming
year.
Our cost transformation programmes delivered £133 million of in-year cost
savings, of which £97 million related to the Group's synergy initiatives and
the remainder related to the annualisation of Refinitiv's cost-saving
programme that completed in 2020.
The Group delivered run-rate cost synergies of £151 million by the end of
2021, above the original £88 million run-rate target for the first year
following the Refinitiv acquisition and greater than the £125 million
guidance provided in the Interim results. These synergies have been delivered
through role restructuring, optimisation of 27 properties, decommissioning
three data centres and contract renegotiations with 23 strategic suppliers.
Looking ahead, the Group continues to expect adjusted operating expenses
(before depreciation, amortisation and impairment) to grow at a low single
digit rate in 2022 and 2023. We expect to see the ongoing impact of
inflation and the return of some costs previously suppressed by Covid
restrictions. We also expect cost growth in order to deliver our revenue
synergies, drive organic growth and as we continue to improve the scalability
of our business. These increases will be partly offset by the benefit of cost
synergies from the Refinitiv acquisition and other efficiency programmes.
In the year since acquiring Refinitiv, we have been able to identify further
savings and efficiencies and have increased our cost synergies target by an
additional £50 million, in addition to the £350 million initially targeted.
This means our five-year cost synergy programme will now deliver at least
£400 million of run-rate savings by the end of 2025. The additional savings
are being delivered through property rationalisation and process
simplification and will support ongoing work to create a more seamless
customer experience.
The additional £50 million run-rate does not impact our cost guidance of low
single digit growth in 2022 and 2023 and the benefit will primarily impact in
2024 and 2025. In 2022 we expect to deliver c.£70 million run-rate synergies,
bringing the total to c.£220 million run-rate delivered by the end of 2022,
representing over 60% of our original £350 million cost synergy programme.
We anticipate costs to achieve the incremental £50 million cost synergy
benefits to be around £225 million. This reflects project-specific
characteristics, such as the relatively high costs incurred with exiting
multi-year property leases in order to optimise our property portfolio. The
overall one-time cost to achieve the £400 million of savings is expected to
be £775 million, or 1.9x the recurring synergy benefit. This reduces to £642
million, or 1.6x, when including a gain from an associated property disposal.
Below is a summary of our revenue and cost synergy programmes delivery in 2021
and the associated cost to achieve.
Synergies and cost to achieve
FY 2021
£m
Revenue Synergies
Run-rate realised 15
Cost to achieve 74
of which:
Capital expenditure 40
Non-underlying operating expenses 34
Cost synergies
Run-rate realised 151
In-period benefit 97
Cost to achieve 217
of which:
Capital expenditure 46
Non-underlying operating expenses 171
Note: Synergies and cost to achieve £ million values are on a constant
currency basis to allow comparison with the guidance provided
Pro-forma Capital Expenditure and Pro-forma Depreciation, Amortisation and
Impairment
Pro-forma Capital Expenditure(1) was £780 million in the year, with £671
million of investment in business-as-usual initiatives and £109 million of
integration-related investment. The £109 million of integration-related
investment includes £86 million of cost to achieve capital expenditure as
well as separation costs related to the divestment of the Borsa Italiana
Group. We expect capital expenditure in 2022 and 2023 to be within the target
£650-700 million range for business-as-usual initiatives, with additional
integration-related investment, in line with previous guidance.
Pro-forma Depreciation, Amortisation and Impairment was £774 million (2020:
£747 million), growth of 7.6%. The increase reflects the go-live of projects
associated with the investment in product development and infrastructure
resiliency, including integration-related investments.
Depreciation, Amortisation and Impairment is expected to increase in 2022,
reflecting additional depreciation associated with integration-related
investments and technology initiatives. Depending on the timing of capital
purchases in the coming period, it is expected to be c.£820m.
(1 )Capital expenditure on a pro-forma constant currency accrued basis
excluding additions of Right-of-Use assets such as property leases
Divisional year-on-year performance and KPIs
Data & Analytics
Pro-forma results(1)
2021 2020 Variance (2) Constant Currency Variance (3 Constant Currency Variance (excl. deferred revenue adjustment) (3,4
£m
£m
% ) % ) %
Trading & Banking Solutions 1,489 1,596 (6.7%) (0.9%) (0.3%)
Trading 1,180 1,273 (7.3%) (1.4%) (0.9%)
Banking 309 323 (4.3%) 1.1% 1.7%
Enterprise Data Solutions 1,135 1,163 (2.4%) 3.1% 3.7%
Real-Time Data 730 766 (4.7%) 1.1% 1.8%
PRS 405 397 2.0% 7.0% 7.5%
Investment Solutions 1,152 1,111 3.7% 9.0% 9.4%
Benchmark Rates, Indices & Analytics 516 495 4.2% 9.3% 9.4%
Index - Asset-Based 253 225 12.4% 19.1% 19.1%
Data & Workflow 383 391 (2.0%) 2.8% 3.7%
Wealth Solutions 474 500 (5.2%) 0.8% 1.0%
Advisor & Investor Services 281 278 1.1% 3.8% 4.1%
Operations Management (BETA) 193 222 (13.1%) (3.3%) (3.3%)
Customer & Third-Party Risk Solutions 359 283 26.9% 33.7% 34.6%
Total Revenue (excl. recoveries) 4,609 4,653 (0.9%) 4.8% 5.3%
Recoveries 354 338 4.7% (0.8%) (0.3%)
Total Revenue (incl. recoveries) 4,963 4,991 (0.6%) 4.4% 4.9%
Cost of sales (771) (788) (2.2%) 3.6% 3.6%
Gross Profit 4,192 4,203 (0.3%) 4.5% 5.1%
Adjusted operating expenses before depreciation, amortisation and impairment (2,058) (2,135) (3.6%) 3.0% 3.0%
Adjusted earnings before interest, tax, depreciation, amortisation and 2,134 2,068 3.2% 6.1% 7.3%
impairment
Depreciation, amortisation and impairment (569) (559) 1.8% 6.1% 6.1%
Adjusted operating profit 1,565 1,509 3.7% 6.1% 7.7%
Adjusted EBITDA Margin 46.3% 44.4%
Non-financial KPIs(1)
2021 2020 Variance (2)
%
Annual Subscription Value Growth % (5) 4.6% - -
Subscription revenue growth % (6) 3.5% - -
Index - ETF AUM ($bn) 1,138 869 31.0%
Index - ESG Passive AUM ($bn) (7) 167 63 165.1%
BETA transaction volumes (m) 547 540 1.3%
1 The pro-forma results assume that the acquisition of Refinitiv
took place on 1 January 2020. The Borsa Italiana Group was classified as a
discontinued operation once the sale became highly probable on 13 January 2021
and therefore its profits and losses have been separated from the Group's
continuing operations for both periods presented
2 Variance is the difference between current and prior year on a
pro-forma basis, using the average exchange rate for the respective period,
therefore any changes in the exchange rates are also reflected in the variance
along with 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 As a result of the acquisition of Refinitiv and the associated
accounting rules, Refinitiv's deferred revenue balances were subject to a
one-time haircut at the time of acquisition. This is a non-cash adjustment.
The negative revenue impact was mostly in Q1 2021 at approximately £22
million, with an additional £1 million in Q2, £1 million in Q3 and £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 in
Capital Markets. There will be no impact in 2022. An adjusted variance,
excluding the deferred revenue adjustment, has been presented to show business
growth on a comparable basis to the prior year.
5 The variance is a constant currency variance adjusted for
acquisitions and disposals
6 The variance is a constant currency variance excluding the impact
of the deferred revenue accounting adjustment
7 ESG Passive AUM is at 30 June 2021 and prior period comparator is
at 30 June 2020. The metric is updated bi-annually.
Data & Analytics: pro-forma revenues excluding recoveries increased 5.3%
Data & Analytics provides high value data, analytics, indices, workflow
solutions and data management capabilities. The division is split into five
areas to address the different needs of our customers. Total revenue
(excluding recoveries) was £4,609 million (2020: £4,653 million).
Trading & Banking Solutions' revenues decreased only marginally by 0.3%.
This is an improvement in performance over recent years and has been driven by
good retention in our premium desktop business. The Banking business
benefitted from improved sales and retention as we continue to invest in
modernising our platforms.
Enterprise Data Solutions' revenues increased by 3.7%. Steady growth in
Pricing & Reference Services (PRS) was driven by the addition of new data
to better meet our customers' needs as well as the benefit of initial revenue
synergies. The Real Time business is growing helped by improved customer
retention. Additionally, offering data from the cloud is helping grow our
customer base in new segments.
Investment Solutions' revenues increased by 9.4%. Benchmark Rates, Indices
& Analytics revenue growth was primarily driven by increased demand for
FTSE-Russell products with existing clients. Asset-based revenues increased,
reflecting a strong recovery in asset valuations and ETF AUMs surpassing $1
trillion. Data & Workflow revenues increased primarily driven by improved
retention and sales of our quantitative analytics data products.
Wealth Solutions' revenues increased by 1.0%. The Advisor & Investor
Services business grew, benefitting from our digital content offerings, partly
offset by the loss of a large client in the period. Operations Management
(BETA) delivered an increase in trading volumes in the year but shows a
decline in revenue due to the impact of a one-time professional services
engagement that occurred in 2020.
Customer & Third-Party Risk Solutions' revenues increased by 34.6%,
primarily driven by the acquisition of the GIACT and Red Flag businesses in
2020, as well as strong organic growth in our World-Check, Digital Identity
and Due Diligence businesses.
Cost of sales increased by 3.6%, driven by the acquisition of the GIACT
business, higher data fees, and an increase in payments to FTSE-Russell
business partners (in line with index subscription revenues).
Adjusted operating expenses excluding depreciation, amortisation and
impairment increased by 3.0% whilst depreciation, amortisation and impairment
increased 6.1%.
Operational Highlights
· Annualised Subscription Value (ASV) (1) growth of 4.6% at the end
of 2021 driven by high product retention rates and new business growth
· Currently around a quarter of the way through the implementation
of Workspace, with positive customer feedback, improved customer engagement
scores, and new sales; approximately half-way through in Banking
• Trading & Banking Solutions Workspace for FX launched and
tested with customers; upgrades to begin in 2022
• Workspace for Analysts and Portfolio managers (within Investment
Solutions) launched; further deployment in 2022
• In Wealth Solutions, Workspace for Wealth has been well received
by customers with additional new wins around the globe
· Continuing investment in the data platform; a single, consistent
data experience, making it easier for customers and partners to access,
distribute and develop with LSEG or in the cloud
· Good progress on revenue synergy delivery, with 46 new Indices
and other product capabilities launched
· Seeing immediate benefits as a result of the Refinitiv
acquisition from bringing enhanced capabilities to our customers with the
combination of Yieldbook analytics, our Fixed Income and Multi-Asset Indices
business, and PRS. This is aiding retention and assisting with cross-sell
across our combined customer base
· Refinitiv integration activities on track in our Customer &
Third-Party Risk Solutions business. We integrated our World-Check and Qual ID
solutions into the GIACT platform and secured our first sales. Launched new
third party data product in our Customer Due Diligence business, combining Red
Flag and World-Check content sets
· In November 2021, we completed the sale of the Enterprise Risk
Management Technology (ERMT) business. This business sat within Customer and
Third-Party Risk and contributed £11 million of revenue in the year
1 The variance is a constant currency variance adjusted for
acquisitions and disposals
Capital Markets
Pro-forma(1)
2021 2020 Variance (2) Constant Currency Variance (3 Constant Currency Variance (excl. deferred revenue adjustment) (3,4
£m
£m
% ) % ) %
Equities 241 227 6.2% 5.1% 5.1%
FX 223 234 (4.7%) 2.3% 2.4%
Fixed Income, Derivatives & Other 791 709 11.6% 18.2% 18.2%
Total Revenue 1,255 1,170 7.3% 12.5% 12.5%
Cost of sales (29) (26) 11.5% 16.9% 16.9%
Gross Profit 1,226 1,144 7.2% 12.4% 12.4%
Adjusted operating expenses before depreciation, amortisation and impairment (574) (571) 0.5% 9.6% 9.6%
Adjusted earnings before interest, tax, depreciation, amortisation and 652 573 13.8% 14.7% 14.8%
impairment
Depreciation, amortisation and impairment (117) (97) 20.6% 25.7% 25.7%
Adjusted operating profit 535 476 12.4% 12.6% 12.6%
Adjusted EBITDA Margin 52.0% 49.0%
Non-financial KPIs(1)
2021 2020 Variance
%
Equities
Primary Markets
New issues 174 86 102.3%
Total money raised (£bn) 34.8 43.2 (19.4%)
Secondary Markets - Equities
UK Value Traded (£bn) - Average Daily Value 4.5 4.9 (8.2%)
SETS Yield (bps) 0.73 0.71 2.8%
FX
Average daily total volume ($bn) 443 429 3.3%
Fixed income, Derivatives and Other
Tradeweb Average Daily ($m)
Rates - Cash 345,008 319,514 8.0%
Rates - Derivatives 293,655 211,716 38.7%
Credit - Cash 9,297 7,608 22.2%
Credit - Derivatives 12,235 14,492 (15.6%)
1 The pro-forma results assume that the acquisition of Refinitiv
took place on 1 January 2020. The Borsa Italiana Group was classified as a
discontinued operation once the sale became highly probable on 13 January 2021
and therefore its profits and losses have been separated from the Group's
continuing operations for both periods presented
2 Variance is the difference between current and prior year on a
pro-forma basis, using the average exchange rate for the respective period,
therefore any changes in the exchange rates are also reflected in the variance
along with business performance
3 Constant currency variance shows financial performance, excluding
currency impacts, by comparing the current and prior year at consistent
exchange rates
4 As a result of the acquisition of Refinitiv and the associated
accounting rules, Refinitiv's deferred revenue balances are subject to a
one-time haircut at the time of acquisition. This is a non-cash adjustment.
The negative revenue impact is mostly in Q1 2021 at approximately £22
million, with an additional £1 million in Q2, £1 million in Q3 and £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 in
Capital Markets. There will be no impact in 2022. An adjusted variance,
excluding the deferred revenue adjustment, has been presented to show business
growth on a comparable basis to the prior year.
Capital Markets: pro-forma revenues increased 12.5%
Capital Markets provides businesses with access to capital through issuance
and offers secondary market trading for equities, fixed income and foreign
exchange (FX). Total revenue was £1,255 million (2020: £1,170 million).
Equities revenues increased by 5.1%. Within Primary Markets, the number of new
issues more than doubled year on year, representing the strongest primary
listing activity for over 10 years. Secondary markets volumes were down 8.2%
whilst revenues remained broadly in line as orderbook yield increased.
FX revenues increased by 2.4%. FX revenue is linked to transaction fees for
average daily traded volumes, which increased 3.3% to $443 billion (2020: $429
billion). Strong volumes in dealer-to-client (FXall) have driven growth,
reflecting the investment in new product capabilities, our customer
relationships and better customer service. Growth was partially offset by a
decline in the dealer-to-dealer Matching service revenue, as anticipated until
the re-platforming is complete.
Fixed Income, Derivatives & Other revenues increased 18.2%. Tradeweb
delivered record revenues, driven by average daily trading volume of more than
$1 trillion including record activity across a number of asset classes.
Notably, Credit Cash volumes were up 22.2% and Rates Cash volumes were up
8.0%.
Cost of sales increased to £29 million (2020: £26 million) driven primarily
by the revenue growth in Tradeweb.
Adjusted operating expenses excluding depreciation, amortisation and
impairment increased by 9.6% driven largely by Tradeweb growth. Depreciation,
amortisation and impairment increased by 25.7% reflecting investment in future
growth and continued investment in our infrastructure.
Operational Highlights
· Successful migration of market liquidity to Turquoise Europe with
total average daily value traded above 2020 across Turquoise orderbooks
· The planned transition of FX Matching onto LSEG proprietary
trading technology has continued to make good progress and is on course for
initial delivery in 2023
· Following a strategic review of the CurveGlobal business, LSEG
and other shareholders decided to wind the company down with derivative
contract trading ceasing on 28 January 2022
· FXall is now integrated with ForexClear, allowing clients to
complete their workflow by clearing via ForexClear, providing benefit across
the FX value chain
· London Stock Exchange remains the number one exchange in Europe
based on number of IPOs and equity capital raised. 2021 saw record retail
participation in New and Further Equity capital raises on markets
· London Stock Exchange is leading in supporting Green Issuers with
116 equity issuers (with a combined market cap of over $200 billion) now
having the Green Economy Mark
· Tradeweb became the largest electronic trading platform for US
Treasuries. As rates volatility increased there was a global resurgence in
swaps market activity and within credit, we continued to grow our market share
and notional volumes with strong client demand for automation
Post Trade
Pro-forma(1)
2021 2020 Variance (2) Constant Currency Variance (3
£m
£m
% ) %
OTC Derivatives 358 334 7.2% 8.9%
Securities & Reporting 253 230 10.0% 12.0%
Non-Cash Collateral 95 82 15.9% 17.8%
Total Revenue 706 646 9.3% 11.1%
Net Treasury Income 207 269 (23.0%) (20.0%)
Total Income 913 915 (0.2%) 2.0%
Cost of sales (4) (123) (132) (6.8%) (3.9%)
Gross Profit 790 783 0.9% 3.0%
Adjusted operating expenses before depreciation, amortisation and impairment (331) (309) 7.1% 8.0%
Adjusted earnings before interest, tax, depreciation, amortisation and 459 474 (3.2%) (0.3%)
impairment
Depreciation, amortisation and impairment (97) (90) 7.8% 9.0%
Adjusted operating profit 362 384 (5.7%) (2.5%)
Adjusted EBITDA Margin 50.3% 51.8%
Non-financial KPIs(1)
2021 2020 Variance
%
OTC
SwapClear
IRS notional cleared ($trn) 921 1,058 (12.9%)
SwapClear members 123 122 0.8%
Client trades ('000) 2,180 1,784 22.2%
Client average 10-year notional equivalent ($trn) 4.2 3.7 13.5%
ForexClear
Notional value cleared ($bn) 21,670 18,986 14.1%
ForexClear members 35 35 0.0%
CDSClear
Notional cleared (€bn) 2,283 2,425 (5.9%)
CDSClear members 25 26 (3.8%)
Securities & Reporting
EquityClear trades (m) (5) 1,996 1,963 1.7%
Listed derivatives contracts (m) 285.8 341.0 (16.2%)
RepoClear - nominal value (€trn) 237.6 205.3 15.7%
Non-Cash Collateral
Average non-cash collateral (€bn) 165.5 161.1 2.7%
NTI
Average cash collateral (€bn) 107.2 109.9 (2.5%)
1 The pro-forma results assume that the acquisition of Refinitiv
took place on 1 January 2020. The Borsa Italiana Group was classified as a
discontinued operation once the sale became highly probable on 13 January 2021
and therefore its profits and losses have been separated from the Group's
continuing operations for both periods presented
2 Variance is the difference between current and prior year on a
pro-forma basis, using the average exchange rate for the respective period,
therefore any changes in the exchange rates are also reflected in the variance
along with business performance
3 Constant currency variance shows financial performance, excluding
currency impacts, by comparing the current and prior year at consistent
exchange rates
4 Cost of sales incorporates the elimination of intercompany
transactions in the Post Trade division as part of the pro-forma financial
disclosure
5 EquityClear trades exclude interoperability trades; these will
differ to the volumes published on the LCH website which includes these trades
Post Trade: pro-forma revenues excluding NTI increased 11.1%
Post Trade provides clearing, risk management, capital optimisation and
regulatory reporting solutions. Total revenue was £706 million (2020: £646
million) and total income, including Net Treasury Income, was £913 million
(2020: £915 million). LCH, the leading clearing franchise within Post Trade,
achieved record clearing volumes in 2021.
OTC Derivatives revenues increased by 8.9% driven by strong performance in
SwapClear client clearing. During Q4, the emergence of the Omicron variant
together with central bank interest rate decisions significantly increased
client clearing volumes, coupled with one-off revenues in the quarter related
to reference rate reform.
Securities & Reporting revenues increased by 12.0% reflecting record
volumes from Euro debt issuance and market share gains. RepoClear processed
€238 trillion in nominal value, up 15.7%.
Non-Cash Collateral revenues increased 17.8% as a result of the strong volumes
and commercial policy changes.
Net Treasury Income (NTI) decreased by 20.0%, reflecting lower investment
returns compared with a strong comparator in 2020.
Cost of sales decreased by 3.9%, reflecting lower NTI, which impacted the
SwapClear revenue share agreement.
Adjusted operating expenses excluding depreciation, amortisation and
impairment increased by 8.0% and depreciation, amortisation and impairment
increased by 9.0% driven by our continued investment in our infrastructure and
commitment to resilience.
Operational Highlights
· During the year LCH was instrumental in supporting and guiding
the market with LIBOR reference rate reform, benefitting from one-off revenues
in Q4 as a result
· ForexClear connected with the FXall trading venue to provide
seamless connectivity between these two LSEG services
· RepoClear successfully migrated onto our state-of-the-art MCCP
clearing platform
· SwapAgent saw a near 500% year-on-year increase with over 10,000
trades registered in 2021, a record for the service
· UnaVista revenues increased by 4% due to clients taking
on additional licenses to fulfil their product needs post Brexit
· The European Commission has announced the extension of equivalence
for UK-based CCPs to June 2025, allowing a continuation of service to EU
customers
· Acquisition of Quantile Group Limited announced (expected to complete
in 2022). The acquisition will enable the expansion of Post Trade risk
management solutions to customers through trade compression, capital, and
margin optimisation services
· In November 2021 Euronext N.V. (Euronext) announced its intentions to
move clearing arrangements away from LCH SA. We continue to work closely with
Euronext under our existing partnership and look forward to continuing to
offer our clearing services to our global customers
Pro-forma Finance Income and Expense and Taxation
Pro-forma adjusted net finance costs were £206 million (2020: £569 million),
a decrease of £363 million on the prior year, due to the refinancing of
Refinitiv's debt at lower market rates and the reduction in gross debt after
the sale of the Borsa Italiana Group in the first half of the 2021 year. We
expect net finance costs to be in the region of £160 million in 2022.
On an underlying basis the 20.9% pro-forma effective tax rate is materially
the same as the statutory rate. The global tax landscape is undergoing
fundamental change. At this stage the Group expects some upward pressure on
its underlying tax rate in 2022 and beyond, principally due to UK tax rate
change and potential US tax reform. Based on the current tax rates and
geographical mix, the Group expects an underlying tax rate in 2022 of 22% to
24%.
Pro-forma adjusted earnings per share
The Group delivered a 46.5% increase in pro-forma adjusted basic earnings per
share from continuing operations to 286.7 pence (2020: 195.7 pence).
Balance Sheet / Leverage / Ratings
Net debt
Year ended 31 December 2021 2020
£m
£m
Gross borrowings 7,654 1,951
Cash and cash equivalents (2,665) (1,785)
Net derivative financial liabilities 25 17
Lease liabilities 715 189
Net debt 5,729 372
Less lease liabilities (715) (189)
Regulatory and operational amounts 1,294 1,242
Operating net debt 6,308 1,425
At 31 December 2021, the Group had operating net debt of £6,308 million after
setting aside £1,294 million for regulatory and operational requirements. The
amount set aside was relatively stable year-on-year. The Group's operating net
debt increased during the year due to additional borrowings undertaken to
refinance Refinitiv's debt on acquisition.
Net leverage(1) increased to 1.9x as 31 December 2021 (2020: 1.1x). The Group
is in its targeted range of 1-2 times despite the debt related to Refinitiv.
The Group's interest cover, the coverage of net finance expense by underlying
EBITDA (earnings before net finance charges, taxation, impairment,
depreciation and amortisation, foreign exchange gains or losses and
non-underlying items), decreased to 17.9 times in the year (2020: 18.8 times)
reflecting the cost of the additional debt taken on to acquire the Refinitiv
group.
Effective at the time of the Refinitiv acquisition in January 2021, the Group
increased its committed revolving credit facilities to £2.5 billion (2020:
£1.2 billion). This was achieved by increasing its £600 million facility
maturing in December 2024 to £1,425 million and replacing the £600 million
facility due in November 2022 with a £1,075 million facility maturing in
December 2025. During the period, the first of two one-year extension options
on the £1,075 million facility were taken up, extending the facility's
maturity out to December 2026.
On completion of the Refinitiv acquisition the Group refinanced Refinitiv's
debt by borrowing $9.936 billion and €3.629 billion under the bridge
facility, term loans and multi-currency revolving credit facilities. The
bridge facility and multi-currency revolving credit facilities were repaid on
the issuance of nine senior unsecured bonds under a newly established Global
Medium Term Note Programme and using proceeds from the sale of the Borsa
Italiana Group. The bridge facility was cancelled upon repayment. Partial
repayments have been made to the US Dollar and Euro term loans using cash
generated by the Group's operations.
With £2.5 billion of fully available funding headroom and strong cash
generation, the Group continues to be well positioned to fund further growth
opportunities and meet its stated deleveraging targets.
LSEG is rated A with a stable outlook by Standard & Poor's; the negative
outlook at close of the Refinitiv acquisition has since been removed. Moody's
rating of A3 was confirmed at the close of the Refinitiv acquisition. Standard
& Poor's maintained its long-term rating of LCH Limited and LCH SA at AA-
with a stable outlook through the period.
1 Net leverage is calculated as operating net debt (i.e. net debt
after excluding amounts set aside for regulatory and operational purposes) to
proforma adjusted EBITDA (Group consolidated earnings before net finance
charges, taxation, impairment, depreciation and amortisation, foreign exchange
gains or losses and non-underlying items, prorated for acquisitions or
disposals undertaken in the period).
Foreign Exchange
As a result of the acquisition of Refinitiv, the majority of LSEG revenues and
expenses are in US dollars followed by Sterling, Euro 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
2021 Total Income (1) 60% 17% 15% 8%
2021 Underlying Expenses (2) 52% 23% 11% 14%
2021 Total Income by Division (1) USD GBP EUR Other
Data & Analytics 67% 10% 12% 11%
Capital Markets 59% 24% 16% 1%
Post Trade 18% 46% 34% 2%
Other 48% 18% 29% 5%
1 Total income includes recoveries
2 Underlying expenses includes cost of sales, underlying operating
expenses and underlying depreciation and amortisation
Spot / average rates
Foreign exchange
2021 2020
Spot £/€ rate at 31 December 1.19 1.11
Spot £/US$ rate at 31 December 1.35 1.36
Average £/€ rate for the year 1.16 1.13
Average £/US$ rate for the year 1.38 1.28
Appendix: Reconciliation of IFRS continuing results to pro-forma continuing
results
Year ended 31 December 2021 LSEG Refinitiv
Continuing operations Year ended One month ended Adjustments(2) Pro-forma Group
31 Dec 2021(1) 31 Jan
2021
£m £m £m
Data & Analytics 4,294 315 - 4,609
Capital Markets 1,177 78 - 1,255
Post Trade 913 - - 913
Other 32 2 - 34
Total income (excl. recoveries) 6,416 395 - 6,811
Recoveries 324 30 - 354
Total income (incl. recoveries) 6,740 425 - 7,165
Cost of sales (862) (61) - (923)
Gross profit 5,878 364 - 6,242
Adjusted operating expenses before depreciation, amortisation and impairment (2,791) (186) - (2,977)
Income from equity Investments 22 - - 22
Share of loss after tax of associates (4) - - (4)
Adjusted earnings before interest, tax, depreciation, amortisation and 3,105 178 - 3,283
impairment
Adjusted depreciation, amortisation and impairment (721) (53) - (774)
Adjusted operating profit 2,384 125 - 2,509
Adjusted finance expense (166) (40) - (206)
Adjusted profit before tax 2,218 85 - 2,303
Adjusted tax (458) (22) - (480)
Adjusted profit for the year (from continuing operations) 1,760 63 - 1,823
Profit attributable to:
Equity holders 1,541 54 1,595
Non-controlling interest 219 9 228
Adjusted basic earnings per share (p) 286.5 286.7
1 The LSEG results from continuing operations exclude non-underlying
items and are prepared in accordance with IFRS and have been extracted without
adjustment from the audited consolidated financial statements of LSEG for the
year ended 31 December 2021
2 Total income and cost of sales are adjusted to eliminate
inter-company transactions
Year ended 31 December 2020 LSEG Refinitiv
Continuing operations Year ended Year ended Adjustments(2) Pro-forma Group
31 Dec 2020(1) 31 Dec
2020
£m £m £m £m
Data & Analytics 824 3,851 (22) 4,653
Capital Markets 288 882 - 1,170
Post Trade 915 - - 915
Other 3 26 - 29
Total income (excl. recoveries) 2,030 4,759 (22) 6,767
Recoveries - 340 (2) 338
Total income (incl. recoveries) 2,030 5,099 (24) 7,105
Cost of sales (208) (762) 24 (946)
Gross profit 1,822 4,337 - 6,159
Adjusted operating expenses before depreciation, amortisation and impairment (749) (2,274) - (3,023)
Income from equity Investments - - - -
Share of loss after tax of associates (4) - - (4)
Adjusted earnings before interest, tax, depreciation, amortisation and 1,069 2,063 - 3,132
impairment
Adjusted depreciation, amortisation and impairment (180) (567) - (747)
Adjusted operating profit 889 1,496 - 2,385
Adjusted finance expense (57) (512) - (569)
Adjusted profit before tax 832 984 - 1,816
Adjusted tax (186) (369) (555)
Adjusted profit for the year (from continuing operations) 646 615 1,261
Profit attributable to:
Equity holders 584 503 1,087
Non-controlling interest 62 112 174
Adjusted basic earnings per share (p) 166.7 195.7
1 The LSEG results from continuing operations exclude non-underlying
items and are prepared in accordance with IFRS and have been extracted without
adjustment from the audited consolidated financial statements of LSEG for the
year ended 31 December 2020
2 Total income and cost of sales are adjusted to eliminate
inter-company transactions
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2021 2020
(Re-presented)(1)
Underlying Non-underlying Total Underlying Non-underlying Total
Continuing operations Notes £m £m £m £m £m £m
Revenue 4, 5 6,502 - 6,502 1,760 - 1,760
Net treasury income from CCP clearing business 4, 5 207 - 207 269 - 269
Other income 4, 5 31 - 31 1 - 1
Total income 6,740 - 6,740 2,030 - 2,030
Cost of sales 4 (862) - (862) (208) - (208)
Gross profit 5,878 - 5,878 1,822 - 1,822
Expenses
Operating expenses before depreciation, amortisation and impairment 6, 8 (2,791) (339) (3,130) (749) (168) (917)
Income from equity investments 22 - 22 - - -
Share of loss after tax of associates (4) - (4) (4) - (4)
Earnings before interest, tax, depreciation, amortisation and impairment 3,105 (339) 2,766 1,069 (168) 901
Depreciation, amortisation and impairment 8, 13, 14 (721) (887) (1,608) (180) (159) (339)
Operating profit/(loss) 2,384 (1,226) 1,158 889 (327) 562
Finance income 46 - 46 6 - 6
Finance expense (212) (5) (217) (63) (13) (76)
Net finance expense 8, 9 (166) (5) (171) (57) (13) (70)
Profit/(loss) before tax 2,218 (1,231) 987 832 (340) 492
Taxation 8, 10 (458) 131 (327) (186) 48 (138)
Profit/(loss) from continuing operations 1,760 (1,100) 660 646 (292) 354
Discontinued operations
Profit/(loss) after tax from discontinued operations 3 84 2,519 2,603 158 (25) 133
Profit/(loss) for the year 1,844 1,419 3,263 804 (317) 487
Profit/(loss) from continuing operations attributable to:
Equity holders 1,541 (1,012) 529 584 (291) 293
Non-controlling interests 219 (88) 131 62 (1) 61
1,760 (1,100) 660 646 (292) 354
Profit/(loss) from discontinued operations attributable to:
Equity holders 80 2,520 2,600 150 (22) 128
Non-controlling interests 4 (1) 3 8 (3) 5
84 2,519 2,603 158 (25) 133
Profit/(loss) for the year 1,844 1,419 3,263 804 (317) 487
Earnings per share attributable to equity holders
Continuing operations
Basic earnings per share 11 98.4p 83.6p
Diluted earnings per share 11 97.8p 82.6p
Adjusted basic earnings per share 11 286.5p 166.7p
Adjusted diluted earnings per share 11 284.7p 164.8p
Total operations
Basic earnings per share 11 581.7p 120.3p
Diluted earnings per share 11 578.1p 118.9p
Adjusted basic earnings per share 11 301.4p 209.7p
Adjusted diluted earnings per share 11 299.5p 207.3p
Dividend per share in respect of the financial year
Dividend per share paid during the year 12 25.0p 23.3p
Dividend per share declared for the year 12 70.0p 51.7p
(1)( )The 2020 results have been re-presented to exclude the results of the
discontinued operations (refer to note 3).
( )
CONSOLIDATED STATEMENT of comprehensive income
Year ended 31 December 2021 2020
(Re-presented)(1)
Continuing operations Notes £m £m
Profit from continuing operations 660 354
Other comprehensive income
Items that will not be subsequently reclassified to the income statement
Actuarial gains/(losses) on retirement benefit obligations 101 (1)
Gain on equity instruments designated as fair value through other 59 6
comprehensive income
Income tax relating to these items 10 (25) -
135 5
Items that may be subsequently reclassified to the income statement
Gain on cash flow hedges 22 -
Gain on cash flow hedges recycled to the income statement (2) -
Net gains/(losses) on net investment hedges 87 (64)
Debt instruments at fair value through other comprehensive income:
- Net gains from changes in fair value 2 17
- Gains on disposal recycled to the income statement (4) (4)
Net exchange gains on translation of foreign operations 13 13
Income tax relating to these items 10 1 (3)
119 (41)
Other comprehensive income/(loss) net of tax from continuing operations 254 (36)
Total comprehensive income from continuing operations 914 318
Discontinued operations
Total comprehensive income from discontinued operations 2 2,498 214
Total comprehensive income 3,412 532
Total comprehensive income from continuing operations attributable to:
Equity holders 775 242
Non-controlling interests 139 76
Total comprehensive income from continuing operations 914 318
Total comprehensive income from discontinued operations attributable to:
Equity holders 2,496 207
Non-controlling interests 2 7
Total comprehensive income from discontinued operations 2,498 214
Total comprehensive income 3,412 532
(1)( )The 2020 results have been re-presented to exclude the results of the
discontinued operations (refer to note 3).
( )
consolidated balance sheet
At 31 December Group
2021 2020
Notes £m £m
Assets ( )
Non-current assets
Property, plant and equipment 13 832 297
Intangible assets 14 31,724 4,324
Investment in subsidiary companies - -
Investment in associates 25 25
Deferred tax assets 508 51
Derivative financial instruments 15 2 -
Investments in financial assets 15 351 280
Retirement benefit assets 568 81
Trade and other receivables 202 14
34,212 5,072
Current assets
Trade and other receivables 967 594
Derivative financial instruments 15 25 -
Clearing member financial assets 665,031 758,510
Clearing member cash and cash equivalents 83,795 83,011
Clearing member assets 15 748,826 841,521
Current tax receivable 398 77
Investments in financial assets - debt instruments 15 - 92
Cash and cash equivalents 15 2,665 1,785
Assets held for sale 13 16 -
752,897 844,069
Total assets 787,109 849,141
Liabilities
Current liabilities
Trade and other payables 1,782 613
Contract liabilities 245 168
Derivative financial instruments 15 7 6
Clearing member financial liabilities 15 748,644 841,553
Current tax payable 73 24
Borrowings 15, 16 - 605
Provisions 16 1
750,767 842,970
Non-current liabilities
Borrowings 15, 16 7,654 1,346
Derivative financial instruments 15 45 11
Contract liabilities 101 94
Deferred tax liabilities 1,835 411
Retirement benefit obligations 85 18
Other payables 1,059 152
Provisions 44 14
10,823 2,046
Total liabilities 761,590 845,016
Net assets 25,519 4,125
Equity
Capital and reserves attributable to the Company's equity holders
Ordinary share capital 17 39 24
Share premium 17 978 971
Retained earnings 3,816 911
Other reserves 17 18,807 1,805
Total shareholders' funds 23,640 3,711
Non-controlling interests 1,879 414
Total equity 25,519 4,125
cash flow statement
Year ended 31 December Group
2021 2020
(Re-presented)(1)
Notes £m £m
Operating activities
Profit before tax from continuing operations 987 492
Adjustments to reconcile profit before tax to net cash flow:
- Depreciation and impairment of property, plant and equipment 13 296 59
- Amortisation and impairment of intangible assets 14 1,312 281
- Share based payments 141 44
- Net finance expense 9 171 70
- Foreign exchange gains 110 56
- Dividend income (22) -
- Other movements 59 (23)
Working capital changes and movements in other assets and liabilities:
- Decrease/(increase) in receivables, contract and other assets 702 21
- (Decrease)/increase in payables, contract and other liabilities (319) (53)
- Increase in clearing member financial assets (72,668) (44,139)
- Increase in clearing member financial liabilities 72,408 44,329
Cash generated from/(used in) operations 3,177 1,137
Interest received 14 4
Interest paid (152) (78)
Taxes paid (390) (215)
Royalties paid (70) (1)
Net cash flows from continuing operations(2) 2,579 847
Net cash flows from discontinued operations 3 23 125
Net cash flows from operating activities 2,602 972
Investing activities
Purchase of property, plant and equipment 13 (97) (19)
Purchase of intangible assets 14 (565) (177)
Investments in financial assets (28) (2)
Cash acquired on acquisition of subsidiaries (Refinitiv) 2.1 925 -
Acquisition of subsidiaries, net of cash acquired (NFI) 2.2 (151) -
Acquisition of subsidiaries, net of cash acquired (Quorate) 2.3 (12) -
Proceeds from sale of disposal group, net of cash disposed 3 3,592 -
Dividends received 22 -
Other investing activities - 31
Net cash flows from continuing operations 3,686 (167)
Net cash flows from discontinued operations 3 (2) (26)
Net cash flows from investing activities 3,684 (193)
Financing activities
Payment of principal portion of lease liabilities (118) (43)
Proceeds from borrowings 17 6,944 5
Repayment of borrowings 17 (11,614) (228)
Dividends paid to equity holders of the parent 12 (426) (257)
Dividends paid to non-controlling interests (95) (21)
Other financing activities (31) 2
Net cash flows from continuing operations (5,340) (542)
Net cash flows from discontinued operations 3 (6) -
Net cash flows from financing activities (5,346) (542)
Increase/(decrease) in cash and cash equivalents 940 237
Foreign exchange translation (60) 55
Cash and cash equivalents at 1 January 1,785 1,493
Cash and cash equivalents at 31 December(3) 2,665 1,785
(1 )The 2020 results have been re-presented to exclude the results of the
discontinued operations (refer to note 3).
(2 )The Group's net cash inflow from continuing operating activities of
£2,579 million (2020: £847 million) includes £293 million (2020:
£95 million) of expenses related to non-underlying items.
(3 )Group cash flow does not include cash and cash equivalents held by the
Group's Post Trade operations on behalf of the Group's clearing members for
use in their operations as managers of the clearing and guarantee systems.
These balances represent margins and default funds held for counterparties for
short periods in connection with these operations.
STATEMENT OF CHANGES IN EQUITY
Group
Year ended 31 December
Attributable to equity holders
Ordinary share capital Share premium Retained earnings Other reserves(1) Total attributable to equity holders Non-controlling interests Total equity
Notes £m £m £m £m £m £m £m
1 January 2020 24 967 668 1,796 3,455 346 3,801
Total comprehensive income for the year - - 440 9 449 83 532
Issue of shares 17 - 4 - - 4 - 4
Dividends paid in the year 12 - - (257) - (257) (16) (273)
Share-based payments - - 51 - 51 - 51
Tax benefit on share-based payments in excess of expense recognised - - 9 - 9 1 10
31 December 2020 24 971 911 1,805 3,711 414 4,125
Total comprehensive income for the year - - 3,250 21 3,271 141 3,412
Issue of shares 17 - 7 - - 7 - 7
Issue of shares for acquisition of subsidiaries (with non-controlling 2 15 - (25) 16,981 16,971 1,442 18,413
interest)
Dividends paid in the year 12 - - (426) - (426) (97) (523)
Share-based payments - - 76 - 76 67 143
Tax benefit on share-based payments in excess of expense recognised - - 30 - 30 - 30
Disposal of business 3 - - - - - (65) (65)
Adjustments to non-controlling interest - - - - - (23) (23)
31 December 2021 39 978 3,816 18,807 23,640 1,879 25,519
(1 )Movements in other reserves are detailed in note 17.
NOTES TO THE FINANCIAL STATEMENTS
This section describes the Group's significant policies and critical
accounting judgements and estimates that relate to the financial statements
and notes as a whole. Where a significant accounting judgement or estimate
relates to a particular note, it is disclosed in that note.
1. Significant accounting policies
1.1 Reporting entity
These financial statements are prepared for London Stock Exchange Group plc
(the Company) and its subsidiaries (the Group). The Group is a diversified
global financial markets infrastructure and data business. 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 29 January 2021, the Group acquired Refinitiv Parent Limited and its
subsidiaries (Refinitiv) (refer to note 2). The results of Refinitiv have been
consolidated since the date of acquisition. As a result of the acquisition,
the Group now reports its results in three main segments: Data &
Analytics, Capital Markets and Post Trade. The segment reporting for the
comparative period has been re-presented to align with this new structure
(refer to note 4).
On 29 April 2021, the Group disposed of London Stock Exchange Group Holdings
(Italia) SpA and its subsidiaries (the Borsa Italiana group) (refer to note
3). The Borsa Italiana group was classified as a discontinued operation and
disposal group once the sale became highly probable on 13 January 2021 (the
date the EU Commission approved the acquisition of Refinitiv). 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. The Borsa Italiana group
operations were not classified as a disposal group as at 31 December 2020 and
the balance sheet has not been re-presented from that published in the 2020
Annual Report.
1.2 Compliance with International Financial Reporting Standards (IFRS)
The Group's consolidated and the Company's financial statements are prepared
in accordance with UK-adopted international accounting standards in conformity
with the requirements of the Companies Act 2006. The significant accounting
policies applied in the preparation of these financial statements are set out
below. These policies have been consistently applied to all the periods
presented, unless otherwise stated.
1.3 Basis of preparation
The financial statements are prepared on a historical cost basis except for
derivative financial instruments, debt and equity financial assets and
contingent consideration which are measured at fair value.
Going concern
The financial statements have been prepared on a going concern basis.
The Directors consider there to be no material uncertainties that may cast
significant doubt on the Group and Company's ability to continue to operate as
a going concern. The Directors have a reasonable expectation that the Group
and the Company have adequate resources to continue in operational existence
for the foreseeable future, being at least 12 months from the date when these
financial statements are authorised for issue. Accordingly, they continue to
adopt the going concern basis in the preparation of these financial
statements.
Presentation of income statement
The Group uses a columnar format for the presentation of its consolidated
income statement to separately identify 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 presentation is consistent with the way that financial performance is
measured by management and reported to the Executive Committee and Board.
Non-underlying items include:
· Amortisation and impairment of goodwill and other purchased
intangible assets
· Incremental depreciation, amortisation and impairment of the fair
value adjustments of tangible or intangible assets recognised as a result of
acquisitions
· Other income or expenses not considered to drive the operating
results of the Group (including integration and transaction costs related to
acquisitions and disposals of businesses)
· Tax on non-underlying items
The profit measure before non-underlying items is used to calculate adjusted
earnings per share. Profit before non-underlying items is reconciled to profit
before taxation on the face of the income statement. Non-underlying items are
disclosed in note 8.
1.4 New and amended standards and interpretations
Standards, interpretations and amendments to published standards effective for
the year ended 31 December 2021
During the year, the following amendments to standards became effective. These
do not have a material impact on the Group's financial statements:
· Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9
· Amendments to IFRS 7 Financial Instruments: Disclosures, IFRS 9
Financial Instruments and IAS 39 Financial Instruments: Recognition and
Measurement: Interest Rate Benchmark Reform - Phase 2
Standards, interpretations and amendments to published standards which are not
yet effective
The new and amended standards that are issued, but not yet effective, up to
the date of the Group's financial statements are disclosed below. The Group
intends to adopt these, if applicable, when they become effective. The Group
is currently assessing their impact, but this is not expected to be material
to the Group's financial statements:
International accounting standards and interpretations Effective date
Amendments to IFRS 3 Business Combinations: reference to the Conceptual 1 January 2022
Framework
Amendments to IAS 16 Property, Plant and Equipment: proceeds before intended 1 January 2022
use
Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets: 1 January 2022
onerous contracts - cost of fulfilling a contract
Annual Improvements to IFRS 2018-2020 1 January 2022
Amendments to IAS 1 Presentation of Financial Statements classification of 1 January 2023
liabilities as current or non-current
IFRS 17 Insurance Contracts, including amendments to IFRS 17 1 January 2023
1.5 Significant accounting judgements, estimates and assumptions
Judgements, estimates and assumptions are regularly evaluated based on
historical experience, current circumstances and expectations of future
events. The key areas involving a higher degree of judgement or complexity or
areas where assumptions are significant to the financial statements, are
highlighted in the relevant note.
We have considered the impact of climate change on our financial reporting for
the year. Some physical and transition risks can manifest in the shorter term
however many of the effects arising from climate change will be longer term in
nature, and therefore come with an inherent level of uncertainty. Climate
change has had limited effect on the accounting judgements and estimates for
the current period and we believe there is no material impact on the asset and
liability valuations at 31 December 2021 in relation to climate risks.
Critical judgements are disclosed in the following notes:
Note Judgements
2 Business combinations Assessing lock-up provisions when valuing consideration shares
8 Non-underlying items Classifying items as non-underlying
10 Taxation Uncertain tax positions
Estimates and assumptions are disclosed in the following notes:
Note Estimates and assumptions
2 Business combinations · Tangible and intangible assets acquired as part of a business
combination
· Fair value of equity-settled share-based payment awards granted by
Tradeweb
5 Total income Expected service period for admission and listing in the Primary Markets
business
10 Taxation Uncertain tax positions
14 Intangible assets · Recoverable amounts of relevant cash-generating units (CGUs)
· Estimated useful economic lives
2. Business combinations
Significant accounting judgements
Assessing lock-up provisions when valuing consideration shares
In accordance with IFRS 13 Fair Value Measurement, the fair value of
consideration shares should take into account any restrictions on the sale or
use of those shares. If those restrictions relate to the shares rather than to
the holder of the shares, a market participant would take those restrictions
into account in determining the price they would pay for those shares. LSEG
acquired the issued share capital of Refinitiv Parent Limited and, in
exchange, LSEG issued voting and limited-voting ordinary shares. Each
limited-voting share includes a right to convert the instrument into an
ordinary voting share (provided that a 30% voting rights restriction for the
previous Refinitiv shareholders is not breached). Were the Refinitiv
shareholders to sell the limited-voting shares to a market participant, the
market participant would hold these as ordinary voting shares. Similarly,
lock-up provisions are only applicable to the Refinitiv shareholders and are
also not considered an attribute of the shares. It was therefore determined
that there is no fair value difference between the voting and limited-voting
shares issued as consideration.
Significant accounting estimates and assumptions
Intangible assets acquired as part of a business combination
The fair value of acquired intangible assets (and therefore the resulting
goodwill recognised on acquisition) is significantly affected by a number of
factors. These include management's best estimates of future performance (i.e.
forecast revenue, expected revenue attrition, forecast operating margin and
contributory assets changes) and estimates of the return required to determine
an appropriate discount rate (in order to calculate the net present value of
the assets).
Fair value of equity-settled share-based payment awards granted by Tradeweb
Estimating fair value for share-based payment awards requires determination of
the most appropriate valuation model. This depends on the terms and conditions
of the grant. It also requires determination of the most appropriate inputs to
the valuation model. The Group measured the fair value of outstanding
equity-settled share-based payment awards granted by Tradeweb as if the
acquisition date were the grant date and used the Black-Scholes model.
2.1 Refinitiv acquisition
On 29 January 2021, the Group acquired Refinitiv, a company based in the
Cayman Islands and headquartered in London and New York. Refinitiv is a
leading global provider of market and financial data and infrastructure,
delivering data, insight and analytics.
At acquisition, Refinitiv held an approximate 52% economic interest in
Tradeweb Markets Inc. (Tradeweb) and its subsidiaries (the Tradeweb group).
Tradeweb is a US company and the holding company of Tradeweb Markets LLC,
which offers electronic marketplaces for trading fixed income, derivatives,
money market and equity products. Tradeweb operates as a standalone, publicly
listed entity.
The acquisition of Refinitiv is a transformational transaction, strategically
and financially, and positions the Group for long-term sustainable growth.
Refinitiv brings highly complementary capabilities in data, analytics and
capital markets.
The combination of LSEG and Refinitiv is expected to deliver significant
benefits for customers, and in particular is intended to:
· transform LSEG's position and create a global financial markets
infrastructure leader of the future
· strengthen LSEG's global footprint and accelerate its successful
growth strategy across multiple key financial centres and jurisdictions,
including in North America (the world's largest financial market), Asia and
fast-growing emerging markets
· significantly enhance LSEG's customer proposition in data and
analytics, utilising the combined business's intellectual property to offer
innovative new services
· complement LSEG's existing multi-asset class growth strategy to
create a global multi-asset class capital markets business with the addition
of high-growth foreign exchange and fixed income venues
· deepen and expand LSEG's and Refinitiv's shared core principles of
open access and customer partnership
At 29 January 2021, the purchase price allocation (PPA) was prepared on a
provisional basis in accordance with IFRS 3. During the measurement period,
the Group finalised:
· the valuation of the intangible assets recognised on acquisition
· the valuation of certain right-of-use property assets
· the measurement of deferred tax liabilities assumed on acquisition
Adjustments were made to the provisional PPA, which was disclosed in the
Group's condensed consolidated financial statements for the six months ended
30 June 2021, resulting in:
· decrease in the fair value of customer contracts and relationships
(intangible assets) of US$100 million (£73 million)
· decrease in right-of-use property assets of US$109 million (£80
million)
· decrease in net assets of US$14 million (£10 million)
· decrease in the net deferred tax liabilities of US$188 million
(£138 million)
· decrease in the non-controlling interest of US$87 million (£63
million)
· resulting decrease in goodwill of US$52 million (£38 million)
Details of the purchase consideration, non-controlling interest, net assets
acquired and goodwill are set out below.
Purchase consideration
Number of shares (million) US$m £m
Ordinary shares issued
- to the sellers 198 22,703 16,570
- to the Management Incentive Plan (MIP) participants 6 547 399
204 23,250 16,969
Fair value of equity-settled share-based payment awards (attributable to 3 2
pre-acquisition services rendered)
Purchase consideration 23,253 16,971
Under the terms of the Stock Purchase Agreement, LSEG (directly and through
certain wholly owned subsidiaries) acquired the entire issued share capital of
Refinitiv Parent Limited and, in exchange, LSEG issued 204,225,968 shares
(comprising 136,870,442 listed LSEG ordinary shares and 67,355,526 unlisted
LSEG limited-voting ordinary shares). The limited-voting ordinary shares rank
pari passu with the LSEG ordinary shares. Based on LSEG's issued share capital
at completion, the total shares amounted to an economic interest in LSEG plc
of approximately 37% but less than 30% of the total voting rights in LSEG.
Of the total number of shares issued, 179,610,123 shares were issued on 29
January 2021 and the remaining 24,615,845 shares were issued on 1 March 2021.
Shares issued to the sellers
The fair value of the 198,184,632 shares issued as part of the consideration
paid to the sellers, excluding the MIP participants, of £16,570 million, was
based on the opening share price on 29 January 2021 of £83.94 adjusted for
the valuation difference of deferred shares issued on 1 March 2021.
The same value per share was applied to the voting and the limited-voting
shares, as explained above.
Shares issued to the MIP participants
Members of Refinitiv's senior management team participated in the MIP set up
by Refinitiv Holdings Limited (now York Parent Limited). The MIP was designed
to retain management, incentivise performance and share growth in Refinitiv's
value. Under the MIP, management acquired shares in York Parent Limited.
To improve retention of the MIP participants, amendments were made to the MIP
to include additional service vesting conditions.
The fair value of the 6,041,336 shares issued as part of the consideration
paid to the MIP participants of £399 million was measured in accordance with
IFRS 3 and IFRS 2 Share-based Payment.
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised fair value of the identifiable
assets acquired and liabilities assumed at the acquisition date:
Notes Acquired value Acquired value
US$m £m
Assets
Non-current assets
Property, plant and equipment 13 929 678
Intangible assets 14 17,224 12,570
Investments in associates 12 9
Deferred tax assets 749 547
Investments in financial assets - equity instruments 30 22
Retirement benefit assets 522 381
Other non-current assets 275 200
19,741 14,407
Current assets
Trade and other receivables 1,582 1,154
Derivative financial instruments 2 2
Current tax receivable 49 36
Cash and cash equivalents 1,267 925
2,900 2,117
Liabilities
Current liabilities
Trade and other payables (1,419) (1,036)
Contract liabilities (839) (612)
Derivative financial instruments (48) (35)
Current tax payable (77) (55)
Other current liabilities (14) (11)
(2,397) (1,749)
Non-current liabilities
Borrowings (14,336) (10,462)
Deferred tax liabilities (1,890) (1,379)
Retirement benefit obligations (136) (99)
Provisions (42) (31)
Other non-current liabilities (1,141) (833)
(17,545) (12,804)
Fair value of identifiable net assets acquired 2,699 1,971
The identified intangible assets are as follows:
US$m £m Estimated useful lives
Customer contracts and relationships 10,116 7,383 13-20 years
Databases and content 3,286 2,398 5-12 years
Trade names 1,347 983 5-15 years
Licences 272 199 5-15 years
Software 2,134 1,557 3-13 years
Contract costs 61 44 3 years
Other 8 6
17,224 12,570
The fair value of assets acquired and liabilities assumed was determined based
on assumptions that reasonable market participants would use in the principal
(or most advantageous) market for the asset or liability. The following
assumptions, the majority of which include significant unobservable inputs
(Level 3 of the fair value hierarchy), and valuation methodologies were used
to determine fair value:
· Customer contracts and relationships - The income approach:
multi-period excess earnings method (MEEM) was used. The value of the
intangible asset is estimated from the residual earnings after fair returns on
all other assets employed (including other intangible assets) have been
deducted from the business's after-tax operating earnings - so called
'contributory asset charges'. The MEEM approach comprises the following steps:
a) Forecasting revenues attributable solely to existing assets (e.g.
revenue associated with existing customer contracts and relationships). This
will include estimating expected revenue attrition (e.g. of customers) over
time, as well as forecasting any revenue growth (e.g. expected from existing
customers)
b) Applying an appropriate operating margin to forecast sales
c) Applying an appropriate tax charge to estimate post-tax cash flows
d) Applying post-tax contributory asset charges to reflect the return
required on other tangible and intangible assets that contribute to the
generation of the forecast cash flows
e) Discounting the resulting net post-tax cash flows, using an
appropriate discount rate to arrive at the net present value
· Databases and content, trade names and internally developed
computer software - The income approach: relief from royalty method was used.
The value of the asset is estimated from the value of saved or avoided future
royalty payments over the life of the asset by virtue of owning the asset. In
summary, the steps which the method comprise are:
a) Forecasting the revenue that is derived using the asset (e.g. trade
name or technology)
b) Estimating an arm's length royalty rate that would be paid for the
use of each asset
c) Applying this royalty rate to the projected revenue relating to
each asset over the economic life
d) Deducting income tax from the net royalty stream
e) Selecting and applying an appropriate discount rate to the
after-tax royalty stream to derive a net present value
· Broker-dealer licences - The income approach: with or without
method was used. The fair value is estimated based on income streams, such as
cash flows or earnings, discounted to a present value. These discounted cash
flows are calculated both with the asset and without the asset. The difference
in the cash flows is discounted to the present value to determine the value of
the asset.
· Deferred revenue (contract liabilities) - The income approach: top
down approach was used. Costs for activities (sales commissions) that have
already been performed to generate future revenue that has not yet been
recognised, and a notional profit on those activities that a market
participant would expect in order to take on the performance obligations, are
deducted from the market value of the deferred revenue. The result is
discounted to present value.
· Lease liabilities and right-of-use assets - The Group measured the
acquired lease liabilities using the present value of the remaining lease
payments as if the leases were new leases at the date of acquisition. The
corresponding right-of-use assets were measured at an amount equal to the
lease liabilities, adjusted to reflect favourable or unfavourable terms of the
leases when compared with market terms.
· Borrowings - The book value of debt assumed has been adjusted to
its fair value. On acquisition of Refinitiv, the Group refinanced the
Refinitiv third-party debt. The fair value is therefore the cost to settle the
debt.
· Retirement benefit assets and obligations - Substantially all of
Refinitiv's employees participate in defined benefit and defined contribution
employee future benefit plans. Significant defined benefit plans are measured
in terms of IAS 19 Employee Benefits using the projected unit credit method.
Within trade and other receivables of £1,154 million (US$1,582 million), the
fair value of the trade receivables amounts to £876 million (US$1,200
million). The gross amount of trade receivables is £883 million
(US$1,210 million) and it is expected that the full contractual amounts can
be collected.
The deferred tax liability mainly comprises the tax effect of the intangible
assets.
Non-controlling interest
The Group elected to measure the non-controlling interest in Tradeweb at the
non-controlling interest's proportionate share (48%) in the identifiable net
assets.
US$m £m
Non-controlling interest based on the unowned proportionate interest (48%) of 1,642 1,198
net assets
Fair value of equity-settled share-based payment awards (attributable to 335 244
pre-acquisition services rendered)
Non-controlling interest 1,977 1,442
The fair value of the outstanding equity-settled share-based payment awards
granted by Tradeweb was measured in accordance with IFRS 3 and IFRS 2 as if
the acquisition date were the grant date and using the Black-Scholes model.
The fair value was allocated to the non-controlling interest based on the
proportion of the share awards attributable to pre-acquisition services.
Goodwill
Goodwill arising from the acquisition has been recognised as follows:
Note US$m £m
Purchase consideration 23,253 16,971
Less: Fair value of identifiable net assets acquired (2,699) (1,971)
Non-controlling interest 1,977 1,442
Goodwill 14 22,531 16,442
The goodwill is attributable to:
· growth in the underlying business
· future data and technology not yet developed
· expected synergies which will drive growth in the combined business
Goodwill is allocated to the Data & Analytics and Tradeweb cash-generating
units (CGUs) (refer to note 14). Goodwill recognised of £1,150 million
(US$1,575 million) is expected to be deductible for income tax purposes.
Revenue and profit before tax
From the date of acquisition, Refinitiv contributed:
· revenue of £4,653 million
· total income of £4,671 million
· operating profit before non-underlying items of £1,482 million
· profit before tax (from continuing operations) of £328 million
If the acquisition had occurred on 1 January 2021, estimated Group revenue for
the period from continuing operations would have been £7,165 million, with
operating profit before non-underlying items of £2,509 million.
Acquisition related costs
The Group incurred acquisition related costs of £99 million primarily on
adviser and professional fees and management retention costs. These costs are
recognised as non-underlying transaction costs (refer to note 8).
2.2 NFI acquisition
On 25 June 2021, the Tradeweb group acquired all of the outstanding equity
interests of Execution Access, LLC, Kleos Managed Services Holdings, LLC and
Kleos Managed Services, L.P. (collectively the NFI Acquisition). The all-cash
purchase price of US$190 million (£137 million) is:
· net of cash acquired (US$34 million (£24 million))
· net of deposits with clearing organisations acquired (US$18 million
(£14 million))
Execution Access, LLC is a limited liability company organised in the state of
Delaware and is a broker-dealer registered with the US Securities and Exchange
Commission (SEC) and Financial Industry Regulatory Authority. The platform
(formerly known as eSpeed), acquired from Nasdaq, is a fully executable
central order limit book for electronic trading in 'on-the-run' US government
bonds.
The PPA has been prepared on a provisional basis in accordance with IFRS 3. If
new information obtained within one year of the acquisition date, about facts
and circumstances that existed at the acquisition date, identifies adjustments
to the amounts below or any additional provisions that existed at the date of
acquisition, then the accounting for the acquisition will be revised. The
primary areas not yet finalised relate to the valuation of the identifiable
intangible assets and software, and final working capital adjustments.
Goodwill arising from the acquisition has been recognised as follows:
Notes US$m £m
Purchase consideration, including cash and deposits with clearing 242 175
organisations acquired
Less: Fair value of identifiable net assets acquired
- Intangible assets: Customer relationships 14 (101) (73)
- Intangible assets: Software 14 (1) (1)
- Other non-current assets (1) (1)
- Other current assets (22) (15)
- Cash and cash equivalents (34) (24)
- Current liabilities 2 2
Fair value of identifiable net assets acquired (157) (112)
Goodwill 14 85 63
The fair values 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). Customer relationships were valued using the income approach, the
same approach used to value the Refinitiv customer relationships.
The acquired software development costs will be amortised over a useful life
of one year and the customer relationships will be amortised over a useful
life of 13 years.
The goodwill recognised in connection with the NFI Acquisition is primarily
attributable to the acquisition of an assembled workforce and expected
synergies from the integration of the operation of the NFI Acquisition into
the Tradeweb group's operations. The goodwill has been allocated to the
Group's Tradeweb CGU and is expected to be deductible for income tax purposes.
Revenue and profit
From the date of acquisition, NFI contributed revenue of £4 million (US$5
million) and profit before tax of £1 million (US$1 million).
Acquisition related costs
The Group incurred acquisition related costs of £3 million (US$5 million),
which are recognised as non-underlying transaction costs (refer to note 8).
2.3 Quorate Acquisition
On 4 August 2021, the Group acquired Quorate Technology Limited, a specialist
provider of automatic speech processing solutions. Quorate was founded in 2012
as a spin-out from the Centre for Speech Technology Research at The University
of Edinburgh. This acquisition will enable the Group to own and develop
automatic speech processing capabilities in order to better serve its
customers and their evolving needs.
The consideration was £15 million: £12 million paid upfront in cash and a
further £3 million deferred over three years conditional on the delivery of
product milestones. The provisional fair value of the net assets acquired is
£nil million. We have therefore concluded that the total consideration (of
£15 million) should be recognised as goodwill and provisionally allocated to
the Tradeweb CGU. Quorate is complementary to the Group's existing business
and there is expected to be future cash flow growth from the combined
business.
3. Disposal of business and discontinued operations
Disposal of the Borsa Italiana group
On 13 January 2021, the disposal of the Borsa Italiana group was judged to be
highly probable and the group was treated as a disposal group from that date
until 29 April 2021, the date of disposal. The Borsa Italiana group is a
discontinued operation as a result of its size and geographical area of
operation. Its results have been excluded from the continuing results of the
Group for the year ended 31 December 2021. The results for 31 December 2020
have been re-presented to exclude the Borsa Italiana group results from the
continuing operations of the Group.
The Borsa Italiana group was sold for consideration of £3,876 million
(€4,444 million), realising a profit on sale for the Group of £2,519
million.
The results for the Borsa Italiana group included in the income statement and
statement of comprehensive income as discontinued operations are as follows:
2021 2020
£m £m
Income statement
Total income 146 414
Cost of sales and operating expenses excluding non-underlying amortisation (52) (185)
Adjusted profit before tax 94 229
Non-underlying expenses (4) (36)
Profit before tax 90 193
Taxation (6) (60)
Profit on disposal (see below) 2,519 -
Profit from discontinued operations 2,603 133
Other comprehensive income
Recycled amount from hedging reserve on disposal 17 -
Net (losses)/gains from debt instruments held at FVOCI (10) 9
Foreign exchange (losses)/gains on translation in the period (53) 73
Cumulative foreign exchange adjustments recycled on disposal (62) -
Tax on items in other comprehensive income 3 (1)
Other comprehensive income from discontinued operations (105) 81
Total comprehensive income from discontinued operations 2,498 214
The profit on disposal was calculated as follows:
2021 2020
£m £m
Cash consideration received 3,876 -
Net assets disposed of (1,413) -
Non-controlling interests disposed 65 -
Recycling of cumulative foreign exchange translation reserve 62 -
Recycling of amounts held in hedging reserve (17) -
Transaction costs (46) -
Other expenses (8) -
Profit on disposal 2,519 -
The results for the Borsa Italiana group included in the cash flow statement
as discontinued operations are as follows:
2021 2020
£m £m
Cash consideration received on disposal 3,876 -
Cash disposed of (284) -
Net cash inflow from operating activities 23 125
Net cash outflow from investing activities (2) (26)
Net cash outflow from financing activities (6) -
Foreign exchange translation (of cash and cash equivalents) (10) -
Net cash flow from discontinued operations 3,597 99
As part of the disposal agreement the Group continues to provide services to
the Borsa Italiana group on an arm's length basis.
4. Segment information
The Group has reorganised its operating units following the acquisition of
Refinitiv and has realigned its segment reporting to reflect management
structure changes. The Group now uses three main operating segments:
· Data & Analytics includes the division formerly reported as
Information Services as well as the core Refinitiv business
· Capital Markets includes the former Capital Markets division plus
the former Technology Services segment as well as Refinitiv's Tradeweb and
FXall businesses
· Post Trade includes the Group's CCPs and other post trade services
The segment results for the comparative period have been re-presented to align
with the new structure. There is no change to the overall result. All results
are on a continuing basis and exclude the results of the Borsa Italiana group,
which was disposed of during the year (refer to note 3).
The Executive Committee monitors the operating results of its divisions
separately for the purpose of making decisions about resource allocation and
in assessing performance. The Executive Committee uses a measure of adjusted
earnings before interest, tax, depreciation, amortisation and impairment
(EBITDA) to assess the performance of the operating segments.
Sales between segments are carried out at arm's length and are eliminated on
consolidation.
Results by operating segment for the year ended 31 December 2021 are as
follows:
Data & Analytics Capital Post Trade Other Group
Markets
Continuing operations Notes £m £m £m £m £m
Revenue from external customers(1) 5 4,618 1,177 706 1 6,502
Net treasury income from CCP clearing business 5, 15 - - 207 - 207
Other income 5 - - - 31 31
Total income 4,618 1,177 913 32 6,740
Cost of sales (712) (27) (123) - (862)
Gross profit 3,906 1,150 790 32 5,878
Adjusted operating expenses before depreciation, amortisation and impairment (1,909) (537) (331) (14) (2,791)
Income from equity investments - - - 22 22
Share of loss after tax of associates - - - (4) (4)
Adjusted earnings before interest, tax, depreciation, amortisation and 1,997 613 459 36 3,105
impairment
Underlying depreciation, amortisation and impairment 13, 14 (522) (112) (97) 10 (721)
Adjusted operating profit (before non-underlying items) 1,475 501 362 46 2,384
Non-underlying depreciation, amortisation and impairment 8 (887)
Other non-underlying items excluding net finance expense 8 (339)
Operating profit 1,158
Net finance expense (including non-underlying items) 9 (171)
Profit before tax from continuing operations 987
Profit before tax from discontinued operations 3 2,609
Profit before tax 3,596
(1)( )Data & Analytics revenue includes recoveries of £324 million. Post
Trade revenue includes net settlement and similar expenses recovered from the
CCP clearing businesses of £12 million which comprise gross settlement income
of £46 million less gross settlement expense of £34 million.
Re-presented results by operating segment for the year ended 31 December 2020
are as follows:
Data & Analytics Capital Post Trade Other Group
Markets
Continuing operations Notes £m £m £m £m £m
Revenue from external customers(1) 5 824 288 646 2 1,760
Net treasury income from CCP clearing business 5, 15 - - 269 - 269
Other income 5 - - - 1 1
Total income 824 288 915 3 2,030
Cost of sales (66) (5) (137) - (208)
Gross profit 758 283 778 3 1,822
Adjusted operating expenses before depreciation, amortisation and impairment (288) (144) (309) (8) (749)
Income from equity investments - - - - -
Share of loss after tax of associates - - - (4) (4)
Adjusted earnings before interest, tax, depreciation, amortisation and 470 139 469 (9) 1,069
impairment
Underlying depreciation, amortisation and impairment 13, 14 (51) (39) (90) (180)
Adjusted operating profit/(loss) (before non-underlying items) 419 100 379 (9) 889
Non-underlying depreciation, amortisation and impairment 8 (159)
Other non-underlying items excluding net finance expense 8 (168)
Operating profit 562
Net finance expense (including non-underlying items) 9 (70)
Profit before tax from continuing operations 492
Profit before tax from discontinued operations 3 193
Profit before tax 685
(1) Post Trade revenue included net settlement and similar expenses recovered
from the CCP clearing businesses of £9 million which comprise gross
settlement income of £38 million less gross settlement expense of £29
million.
5. Total income
Significant accounting estimates and assumptions
Expected service period for admission and listing in the Primary Markets
business
As described above for Capital Markets, fees for primary market initial
admission are combined with ongoing listing services as one performance
obligation. Initial admission fees are spread over the estimated period for
admission services which is determined by using historical analysis of listing
durations in respect of the companies on our markets. The estimated service
period inherently incorporates an element of uncertainty in relation to the
length of a customer listing, which is subject to factors outside of the
Group's control. The estimated service periods are reassessed at each
reporting date to make sure the period reflects the Group's best estimates.
The current estimated deferral period is five years or seven years, depending
on the market. The Group estimates that a one year decrease in the deferral
period would cause an estimated £24 million increase in revenue and a one
year increase in the deferral period would cause an estimated £23 million
decrease in revenue recognised in the year.
The Group's revenue from contracts with customers disaggregated by segment,
major product and service line, and timing of revenue recognition for the year
ended 31 December 2021 is shown below:
Data & Analytics Capital Post Trade Other Group
Markets
Continuing operations £m £m £m £m £m
Revenue from external customers
Major product and service lines
Trading & banking solutions 1,364 - - - 1,364
Enterprise data solutions 1,050 - - - 1,050
Investment solutions 1,117 - - - 1,117
Wealth solutions 433 - - - 433
Customer & third-party risk solutions 330 - - - 330
Recoveries 324 - - - 324
Equities - 241 - - 241
FX - 204 - - 204
Fixed income, derivatives and other - 732 - - 732
OTC derivatives - - 358 - 358
Securities & reporting - - 253 - 253
Non-cash collateral - - 95 - 95
Other - - - 1 1
Total revenue 4,618 1,177 706 1 6,502
Net treasury income - - 207 - 207
Other income - - - 31 31
Total income 4,618 1,177 913 32 6,740
Timing of revenue recognition
Services satisfied at a point in time 324 790 677 1 1,792
Services satisfied over time 4,294 387 29 - 4,710
Total revenue 4,618 1,177 706 1 6,502
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 year ended 31 December 2020 is shown below:
Data & Analytics Capital Post Trade Other Group
Markets
Continuing operations £m £m £m £m £m
Revenue from external customers
Major product and service lines
Trading & banking solutions 17 - - - 17
Enterprise data solutions 128 - - - 128
Investment solutions 679 - - - 679
Equities - 227 - - 227
Fixed income, derivatives and other - 61 - - 61
OTC derivatives - - 334 - 334
Securities & reporting - - 230 - 230
Non-cash collateral - - 82 - 82
Other - - - 2 2
Total revenue 824 288 646 2 1,760
Net treasury income - - 269 - 269
Other income - - - 1 1
Total income 824 288 915 3 2,030
Timing of revenue recognition
Services satisfied at a point in time 6 161 625 2 794
Services satisfied over time 818 127 21 - 966
Total revenue 824 288 646 2 1,760
6. Operating expenses before depreciation, amortisation and impairment
Operating expenses before depreciation, amortisation and impairment comprise
the following:
2021 2020
(Re-presented)
Continuing operations Notes £m £m
Employee costs 7 1,702 464
IT costs 467 127
Professional fees 333 55
Short-term lease costs 43 -
Other costs 256 97
Foreign exchange (gains)/losses (10) 6
Underlying operating expenses before depreciation, amortisation and impairment 2,791 749
Non-underlying operating expenses before depreciation, amortisation and 8 339 168
impairment
Total operating expenses before depreciation, amortisation and impairment 3,130 917
7. Staff costs
Employee costs for continuing operations comprise the following:
2021 2020
(Re-presented)
Continuing operations Notes £m £m
Salaries and other benefits 1,661 413
Social security costs 166 59
Pension costs 82 27
Share-based payment expense 141 44
Total payments made to employees 2,050 543
Amounts capitalised as development costs 14 (192) (72)
Total staff costs 1,858 471
Underlying staff costs 6 1,702 464
Non-underlying staff costs 8 156 7
Total staff costs 1,858 471
The average number of employees, including executive directors, in the Group
from continuing operations was:
2021 2020
Continuing operations (Re-presented)
UK 4,416 1,772
USA 3,929 683
India 5,762 -
EU countries 2,132 440
Philippines 1,974 -
Sri Lanka 1,423 1,238
China 1,373 -
Other Asia 1,717 375
Africa and Middle East 640 -
Other 792 18
Average number of employees 24,158 4,526
Average employee numbers represent full time equivalent members of staff and
are calculated from the date of acquisition of subsidiary companies purchased
in the year and up to the date of disposal of businesses sold in the year.
Employees from discontinued operations have been excluded.
8. Non-underlying items
Significant accounting judgements
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. These
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 integration, restructuring and transaction
costs)
· Tax on non-underlying items
2021 2020
(Re-presented)
Continuing operations Notes £m £m
Non-underlying operating expenses before interest, tax, depreciation,
amortisation and impairment
- Transaction costs 114 173
- Integration costs 225 -
- Restructuring credit - (5)
339 168
Non-underlying depreciation, amortisation and impairment
- Depreciation of property, plant and equipment 13 10 -
- Impairment of property, plant and equipment 13 22 -
- Impairment of goodwill 14 - 10
- Amortisation and impairment of purchased intangible assets 14 855 128
- Amortisation and impairment of other intangible assets 14 - 21
887 159
Non-underlying items before interest and tax 1,226 327
Non-underlying net finance expense 9 5 13
Non-underlying items before tax 1,231 340
Tax on non-underlying items (131) (48)
Non-underlying loss 1,100 292
Transaction costs mainly relate to the following acquisitions and include:
· Refinitiv acquisition (refer to note 2):
- Advisor and professional fees of £38 million
- Retention bonuses of £12 million
- Post-acquisition Management Incentive Plan (MIP) share-based payment
expense of £10 million
- Fair value adjustment to the outstanding Tradeweb equity-settled awards
(as if the acquisition date were the grant date) of £36 million
· Acquisition by Tradeweb of Nasdaq's fixed income electronic trading
platform (refer to note 2): Acquisition related costs of £3 million
Integration costs relate to activities to:
· Integrate the Refinitiv businesses of £201 million
· Separate the Thomson Reuters Financial & Risk Business from
Thomson Reuters and then restructure it. The separation costs of £24 million
primarily consist of professional fees, consulting fees and IT charges
The finance expense relates to fees to establish the Bridge Facility to
refinance the Refinitiv notes and term loans in full following completion of
the Refinitiv acquisition. Further details of the facility are provided in
note 16.
The tax impact of the Group's non-underlying items and its adjustment to
profit or loss of the individual entities of the Group to which the
non-underlying items relate, is computed based on the tax rates applicable to
the respective territories in which the entity operates.
9. Net finance expense
2021 2020
(Re-presented)
Continuing operations Note £m £m
Finance income
Interest income on retirement benefit assets 41 1
Bank deposit and other interest income(1) 3 3
Lease interest income 2 1
Other finance income - 1
Underlying finance income 46 6
Finance expense
Interest payable on bank and other borrowings(1) (151) (56)
Amortisation of arrangement fees (12) (2)
Interest cost on retirement benefit obligations (35) -
Lease interest expense (12) (3)
Other finance expenses (2) (2)
Underlying finance expense (212) (63)
Underlying net finance expense (166) (57)
Non-underlying finance expense 8 (5) (13)
Total net finance expense (171) (70)
(1) Bank deposit and other interest income includes negative interest earned
on the Group's borrowings. Interest payable includes amounts where the Group
suffers negative interest on its cash deposits.
Interest payable on bank and other borrowings is net of amortisation of the
realised gain on interest rate derivatives held in the hedging reserve.
Net finance expense is earned on assets and liabilities held at amortised
cost, except for amounts earned or paid on defined benefit pension scheme
assets and liabilities which are held at fair value.
10. Taxation
Significant accounting judgements and estimates
Uncertain tax positions
The Group is subject to taxation in the many countries in which it operates.
The tax legislation of these countries differs, is often complex and is
subject to interpretation by management and the government authorities. These
matters of judgement sometimes give rise to the need to create provisions for
tax payments that may arise in future years with respect to transactions
already undertaken. Provisions are made against individual exposures and take
into account the specific circumstances of each case, including the strength
of technical arguments, recent case law decisions or rulings on similar issues
and relevant external advice. The provision is estimated based on one of two
methods: the expected value method (the sum of the probability weighted
amounts in a range of possible outcomes) or the single most likely amount
method, depending on which is expected to better predict the resolution of the
uncertainty. Due to the uncertainty associated with tax audits it is possible
that, at some future date, liabilities resulting from such audits or related
litigation could vary significantly from our provisions requiring the Group to
make an adjustment in a subsequent period which could have a material impact
on the Group's profit.
Income tax
The standard UK corporation tax rate for the year was 19% (2020: 19%).
2021 2020
(Re-presented)
Continuing operations £m £m
Tax recognised in the income statement
Current tax
UK corporation tax for the year 47 74
Overseas tax for the year 84 79
Adjustments in respect of previous years 2 1
Total current tax 133 154
Deferred tax
Deferred tax for the year 236 1
Adjustments in respect of previous years (9) (6)
Deferred tax credit on amortisation and impairment of purchased intangible (33) (11)
assets
Total deferred tax 194 (16)
Total tax 327 138
2021 2020
(Re-presented)
Continuing operations £m £m
Tax on items recognised in other comprehensive income
Deferred tax (expense)/benefit
Actuarial gains/losses on retirement benefit obligations (25) -
Losses/gains of financial assets (at fair value through other comprehensive 1 (3)
income)
Total tax recognised in other comprehensive income (24) (3)
Tax on items recognised in equity
Current tax benefit
Share-based payments in excess of expense recognised 12 12
Deferred tax benefit/(expense)
Share-based payments in excess of expense recognised 18 (3)
Investment in partnerships (recognised in non-controlling interests) 25 -
Total tax recognised in equity 55 9
Total tax recognised in other comprehensive income and equity 31 6
Factors affecting the tax charge for the year
The tax charge for the year differs from that derived from the standard rate
of corporation tax in the UK of 19% (2020: 19%) as explained below:
2021 2020
(Re-presented)
Continuing operations £m £m
Profit before tax from continuing operations 987 492
Profit multiplied by standard rate of corporation tax in the UK 187 93
Overseas earnings taxed at higher rate 15 45
Adjustment arising from changes in tax rates on amortisation of purchased 189 7
intangible assets
Adjustment arising from changes in tax rates - other (18) (2)
Income not taxable (35) (1)
Adjustments in respect of previous years (7) (5)
Deferred tax not recognised (4) 2
Deferred tax provided for withholding tax on distributable reserves - (1)
Total tax 327 138
On 24 May 2021, the UK Finance Act 2021 was substantively enacted, increasing
the corporate tax rate to 25% effective from 1 April 2023. As a result of the
change the UK deferred tax assets and liabilities have been remeasured.
During the period the Group completed the sale of the Borsa Italiana group.
The gain on disposal of the shares qualifies for UK corporation tax exemption
under the substantial shareholding exemption rules.
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.
The Group, several other UK PLCs and the UK Government have submitted appeals
to the EU General Court to annul the EU Commission's findings. The EU General
Court heard those appeals for annulment on 18 October 2021 but has not yet
announced a decision, which is expected in 2022.
Until a decision is reached, the UK Government is required to continue
recovering amounts determined to be State Aid. In December 2019 and the
beginning of 2021, HMRC issued determinations to the Group totaling £10.5
million, excluding interest and penalties, which the Group paid. Our appeal
against these determinations is likely to be stayed until the final outcome of
all appeals to the EU Courts in respect of the EU Commission's original
decision are known.
The issuance and settlement of any such determinations, however, does not
change the Group's view that in light of the appeals made by UK PLCs
(including the Group), the UK Government's own appeal, and in consideration of
management's own internal view, no provision is required in relation to the
investigation. 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 US Internal Revenue
Service (IRS) in relation to the interest rate applied on certain cross border
intercompany loans from the UK to the US. During 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.
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.
11. Earnings per share
2021 2020
Continuing Discontinued Total Continuing Discontinued Total
Basic earnings per share 98.4p 483.3p 581.7p 83.6p 36.7p 120.3p
Diluted earnings per share 97.8p 480.3p 578.1p 82.6p 36.3p 118.9p
Adjusted basic earnings per share 286.5p 14.9p 301.4p 166.7p 43.0p 209.7p
Adjusted diluted earnings per share 284.7p 14.8p 299.5p 164.8p 42.5p 207.3p
Profit and adjusted profit for the year attributable to the Company's equity
holders
2021 2020
Continuing Discontinued Total Continuing Discontinued Total
Note £m £m £m £m £m £m
Profit for the financial year attributable to the Company's equity holders 529 2,600 3,129 293 128 421
Adjustments:
- Total non-underlying items net of tax 8 1,100 (2,519) (1,419) 292 25 317
- Non-underlying items attributable to non-controlling interests (88) (1) (89) (1) (3) (4)
Adjusted profit for the year attributable to the Company's equity holders 1,541 80 1,621 584 150 734
Weighted average number of shares - millions(1) 538 350
Effect of dilutive share options and awards - millions 3 4
Diluted weighted average number of shares - millions 541 354
(1) The weighted average number of shares excludes those held in the Employee
Benefit Trust.
12. Dividends
2021 2020
£m £m
Final dividend for 31 December 2019 paid 27 May 2020: 49.9p per Ordinary share - 175
Interim dividend for 31 December 2020 paid 22 September 2020: 23.3p per - 82
Ordinary share
Final dividend for 31 December 2020 paid 26 May 2021: 51.7p per Ordinary share 287 -
Interim dividend for 31 December 2021 paid 21 September 2021: 25.0p per 139 -
Ordinary share
426 257
Dividends are only paid out of available distributable reserves of the
Company.
The Board has proposed a final dividend in respect of the year ended 31
December 2021 of 70.0p per share, which amounts to an expected payment of
£390 million in May 2021. This is not reflected in the financial statements.
13. Property, plant and equipment
Land & Buildings Plant and equipment
Freehold property Right-of-use assets Leasehold improve-ments Right-of-use assets Owned Total
Group Notes £m £m £m £m £m £m
Cost
1 January 2020 57 163 59 2 264 545
Additions 6 36 - 3 34 79
Lease modifications - 3 - - - 3
Disposals - (6) (1) - (10) (17)
Foreign exchange translation (1) 1 1 - 4 5
31 December 2020 62 197 59 5 292 615
Property, plant and equipment acquired on acquisition of subsidiaries 2 9 379 36 32 222 678
Additions 3 25 24 27 101 180
Lease modifications - 34 - (1) - 33
Disposals and other (2) (1) (12) - (43) (58)
Disposal of business 3 - (28) (4) (3) (69) (104)
Transfer to held for sale assets (17) - - - - (17)
Foreign exchange translation - (1) - - (1) (2)
31 December 2021 55 605 103 60 502 1,325
Accumulated depreciation and impairment
1 January 2020 29 25 39 1 163 257
Disposals - (3) (1) - (10) (14)
Charge for the year - 28 6 1 35 70
Foreign exchange translation - - 1 - 4 5
31 December 2020 29 50 45 2 192 318
Disposals - (1) (12) - (39) (52)
Charge for the year(1) 3 99 19 18 135 274
Impairment - 22 - - - 22
Disposal of business 3 - (11) (3) (1) (50) (65)
Transfer to held for sale assets (1) - - - - (1)
Foreign exchange translation - (1) - - (2) (3)
31 December 2021 31 158 49 19 236 493
Net book values
31 December 2021 24 447 54 41 266 832
31 December 2020 33 147 14 3 100 297
(1) Includes non-underlying depreciation for the year of £10 million
Consideration for additions comprises £97 million in cash (2020: £33
million) and £31 million (2020: £7 million) in accruals. Right-of-use assets
are paid for over the term of the lease.
14. Intangible assets
Significant accounting judgements and estimates
Intangible assets and goodwill form a significant part of the balance sheet
and are key assets for the Group's businesses. Refer to note 2 for the
significant accounting estimates of intangible assets acquired as part of the
Refinitiv and NFI acquisitions.
Recoverable amounts of relevant CGUs
The recoverable amounts of relevant CGUs are based on value-in-use
calculations. These use management's best estimate of future performance
together with estimates of the return required by investors to determine an
appropriate discount rate, which is used to derive the present value.
Estimated useful economic lives
Intangible assets are amortised over the estimated useful economic lives,
based on management's best estimate of the period over which value from the
intangible assets is realised. In determining useful economic life, management
considers a number of factors including customer attrition rates, product
upgrade cycles for software and technology assets, market participant
perspectives for brands and pace of change of regulation.
Purchased intangible assets
Goodwill Customer and supplier relationships Brands Databases and content Software, licences and intellectual property Software and other Total
Cost Notes £m £m £m £m £m £m £m
1 January 2020 2,357 1,826 980 - 568 1,023 6,754
Additions - - - - - 221 221
Disposals and write-off - - - - - (18) (18)
Foreign exchange translation 45 21 (27) - 1 34 74
31 December 2020 2,402 1,847 953 - 569 1,260 7,031
Intangible assets acquired on acquisition of subsidiaries 2 16,520 7,455 983 2,398 199 1,608 29,163
Additions - - - - - 642 642
Disposal of business 3 (927) (692) (1) - (66) (181) (1,867)
Disposals and write-off - - - - (1) (59) (60)
Foreign exchange translation (42) 111 21 36 1 (38) 89
31 December 2021 17,953 8,721 1,956 2,434 702 3,232 34,998
Accumulated amortisation and impairment
1 January 2020 515 752 232 - 318 516 2,333
Amortisation charge for the year - 101 40 - 23 139 303
Impairment 10 - - - - 23 33
Disposals and write-off - - - - - (18) (18)
Foreign exchange translation 21 15 (7) - 4 23 56
31 December 2020 546 868 265 - 345 683 2,707
Amortisation charge for the year(1) - 491 130 220 33 425 1,299
Impairment(1) - - - - - 13 13
Disposal of business 3 (54) (409) - - (58) (139) (660)
Disposals and write-off - - - - (1) (43) (44)
Foreign exchange translation (25) 6 3 4 (4) (25) (41)
31 December 2021 467 956 398 224 315 914 3,274
Net book values
31 December 2021 17,486 7,765 1,558 2,210 387 2,318 31,724
31 December 2020 1,856 979 688 - 224 577 4,324
(1) Includes non-underlying amortisation of intangible assets of £855
million. There was no impairment identified for purchased intangible assets.
Goodwill
Goodwill arising on acquisition typically represents the growth potential of
the underlying businesses and the assembled workforce. During the year, the
Group reassessed its CGUs and concluded that the previously reported FTSE
Group, Frank Russell Group, Mergent and Yield Book CGUs are no longer
generating independent cash inflows and operating on a standalone basis.
Together with the operations acquired with Refinitiv (but excluding Tradeweb),
these businesses now form the Data & Analytics CGU. The other CGUs in the
Group are Capital Markets, Post Trade and Tradeweb.
At 31 December 2021, the goodwill on acquisition has been reallocated to the
Group's CGUs as follows, where the goodwill is tested for impairment.
Acquisition CGU
2021 2020
Refinitiv, excluding Tradeweb Data & Analytics -
Tradeweb Tradeweb -
Yield Book Data & Analytics Yield Book
Mergent Data & Analytics Mergent
Frank Russell Group Data & Analytics Frank Russell Group
LCH Group Post Trade LCH Group
FTSE Group Data & Analytics FTSE Group
MillenniumIT Capital Markets MillenniumIT
Turquoise Capital Markets Turquoise
Internally developed software and other intangible assets
The Group creates technology solutions where software products are developed
internally, for use within the Group or to sell externally. These assets have
a useful economic life of up to 12 years.
During the year, consideration for additions comprises £611 million (2020:
£189 million) in cash, £2 million (2020: £10 million) of leased assets
and £29 million (2020: £22 million) in accruals. During the year, the
Group:
· recognised additions of £2 million (2020: £10 million) as
right-of-use assets, with a right-of-use assets amortisation charge of
£6 million (2020: £7 million)
· capitalised sales commissions paid to employees (contract costs) of
£46 million (2020: £6 million)
The cost of self-developed software products includes £447 million (2020:
£188 million) of assets not yet brought into use. No amortisation has been
charged on these assets and instead they are tested for impairment annually.
Impairment tests for internally developed software and other intangible assets
Following a review of software assets in the year the Group recognised
£13 million (2020: £23 million) of impairment in relation to assets with a
recoverable amount less than the value-in-use.
During the year the Group recognised disposals and write-offs of assets which
are no longer in use of £60 million with £16 million net book value (2020:
£18 million with nil net book value).
15. Financial assets and financial liabilities
The financial instruments of the Group are categorised as follows:
Financial assets
Group
Amortised cost FVOCI FVPL Total
31 December 2021 £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(1) 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
(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).
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:
Group
Quoted prices in active markets Significant observable inputs Significant unobserv-able inputs Total
(Level 1) (Level 2) (Level 3)
31 December 2021 £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
Investment in financial assets - equity 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 measured at fair value 13,832 645,567 356 659,755
There were no transfers between levels during the year.
Financial liabilities
Group
Amortised cost FVPL Total
31 December 2021 £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
Total financial liabilities 113,438 645,639 759,077
The following table provides the fair value measurement hierarchy of the
Group's financial liabilities measured at fair value:
Group
Quoted prices in active markets Significant observable inputs Significant unobservable inputs Total
(Level 1) (Level 2) (Level 3)
31 December 2021 £m £m £m £m
Clearing business financial liabilities
Derivative instruments 47 2,631 - 2,678
Non-derivative instruments - 642,909 - 642,909
47 645,540 - 645,587
Derivatives not designated as hedges
Foreign exchange forward contracts - 8 - 8
Derivatives designated as hedges
Cross-currency interest rate swaps - 44 - 44
Total financial liabilities measured at fair value 47 645,592 - 645,639
There were no transfers between levels during the year.
The financial instruments of the Group for the prior year were as follows:
Financial assets
Group
Amortised cost FVOCI FVPL Total
31 December 2020 £m £m £m £m
Clearing business financial assets
Clearing member trading assets 98,736 - 632,699 731,435
Other receivables from clearing members 2,484 - - 2,484
Other financial assets - 24,591 - 24,591
Clearing member cash and cash equivalents 83,011 - - 83,011
184,231 24,591 632,699 841,521
Trade and other receivables 544 - 5 549
Cash and cash equivalents 1,785 - - 1,785
Investments in financial assets - debt instruments - 111 - 111
Investments in financial assets - equity instruments - 261 - 261
Total financial assets 186,560 24,963 632,704 844,227
Financial assets measured at fair value
The following table provides the fair value measurement hierarchy of the
Group's financial assets:
Group
Quoted prices in active markets Significant observable inputs Significant unobserv-able inputs Total
(Level 1) (Level 2) (Level 3)
31 December 2020 £m £m £m £m
Clearing business financial assets
Derivative instruments 5,867 2,726 - 8,593
Non-derivative instruments 6 624,100 - 624,106
Other financial assets 24,591 - - 24,591
30,464 626,826 - 657,290
Investments in financial assets - debt 111 - - 111
Investment in financial assets - equity - - 261 261
Derivatives not designated as hedges
Trade and other receivables - convertible loan notes - - 5 5
Total financial assets measured at fair value 30,575 626,826 266 657,667
There were no transfers between levels during 2020.
Financial liabilities
Group
Amortised cost FVPL Total
31 December 2020 £m £m £m
Clearing business financial liabilities
Clearing member trading liabilities 98,736 632,699 731,435
Other payables to clearing members 110,118 - 110,118
208,854 632,699 841,553
Trade and other payables 747 - 747
Borrowings 1,951 - 1,951
Derivative financial instruments - 17 17
Total financial liabilities 211,552 632,716 844,268
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:
Group
Quoted prices in active markets Significant observable inputs Significant unobserv-able inputs Total
(Level 1) (Level 2) (Level 3)
31 December 2020 £m £m £m £m
Clearing business financial liabilities
Derivative instruments 5,867 2,726 - 8,593
Non-derivative instruments 6 624,100 - 624,106
5,873 626,826 - 632,699
Derivatives not designated as hedges
Foreign exchange forward contracts - 6 - 6
Derivatives designated as hedges
Cross-currency interest rate swaps - 11 - 11
Total financial liabilities measured at fair value 5,873 626,843 - 632,716
16. Borrowings
Group
2021 2020
£m £m
Non-current
Bank borrowings - committed bank facilities and term loans(1) 1,347 (2)
Trade finance loans 1 1
Bonds 6,306 1,347
Total non-current borrowings 7,654 1,346
Current
Bank borrowings - committed bank facilities - 135
Commercial paper - 170
Bonds - 300
Total current borrowings - 605
Total borrowings 7,654 1,951
(1) Balances are shown net of capitalised arrangement fees. Where there are no
amounts borrowed on a particular facility, this gives rise to a negative
balance.
The Group has the following committed bank facilities, loans and unsecured
bonds:
Expiry date Facility/ bond Carrying value Interest rate
2021 2020
£m £m £m %
Committed bank facilities
Dual-currency bridge facility - (8) LIBOR + 0.3
Multi-currency revolving credit facility - 6 LIBOR + 0.45
Multi-currency revolving credit facility Dec 2024 1,425 (3) 138 see note(2)
Multi-currency revolving credit facility Dec 2026 1,075 (3) (1) see note(2)
Total committed bank facilities(1) 2,500 (6) 135
Commercial paper - 170 (0.380)
Committed term loans
€500 million term loan Dec 2023 126 - EURIBOR + 0.725
$2,000 million term loan Dec 2023 1,227 (2) see note(2)
Total committed term loans(1) 1,353 (2)
Bonds
£300 million bond, issued November 2012 Nov 2021 - - 300 4.750
$500 million bond, issued April 2021 Apr 2024 370 369 - 0.650
€500 million bond, issued September 2017 Sep 2024 419 419 450 0.875
€500 million bond, issued April 2021 Apr 2025 419 419 - -
$1,000 million bond, issued April 2021 Apr 2026 741 738 - 1.375
€500 million bond, issued December 2018 Dec 2027 419 417 448 1.750
€500 million bond, issued April 2021 Apr 2028 419 417 - 0.250
$1,000 million bond, issued April 2021 Apr 2028 741 737 - 2.000
€500 million bond, issued September 2017 Sep 2029 419 417 449 1.750
£500 million bond, issued April 2021 Apr 2030 500 493 - 1.625
$1,250 million bond, issued April 2021 Apr 2031 926 919 - 2.500
€500 million bond, issued April 2021 Apr 2033 419 413 - 0.750
$750 million bond, issued April 2021 Apr 2041 556 548 - 3.200
Total bonds 6,348 6,306 1,647
Trade finance loans Nov 2023 1 1 7.3
Total committed facilities, loans and unsecured notes 7,654 1,951
(1) Negative balances represent the value of unamortised arrangement fees
(2) As part of the IBOR Reform, a Credit Adjustment Spread (CAS) has been
applied where US dollar and sterling LIBOR rates were respectively replaced
with SOFR and SONIA rates in the bank facilities. The CAS is variable and
depends on the tenor and currency of the borrowings
Committed bank facilities
On 29 January 2021, as part of the Refinitiv acquisition, the Group refinanced
the debt acquired with Refinitiv by drawing down £8 billion on its
dual-currency bridge facility, €500 million (£430 million) on its euro term
loan, US$2,000 million (£1,468 million) on its US dollar term loan and £500
million on its multi-currency revolving credit facilities. The draw downs on
the bridge facility and revolving credit facilities were repaid in April 2021
using funds received from bond issues (see below) and proceeds from the sale
of the Borsa Italiana group. The bridge facility was cancelled upon repayment.
Multi-currency revolving credit facilities
In December 2020, the Group arranged a £1,075 million syndicated committed
facility maturing in December 2025. This was to replace the former £600
million facility which would have matured in November 2022. In December 2021,
the first of two 1-year extension options were taken up, extending the
maturity to December 2026. In December 2020, the Group had also increased the
£600 million Revolving Credit Facility agreement maturing in December 2024
to £1,425 million. These new facility arrangements became effective in
January 2021. The revolving credit facilities were drawn down during the year
and fully repaid as at 31 December 2021 (2020: £143 million).
Commercial paper
The Group maintained its £1 billion Euro Commercial Paper Programme. There
were no outstanding issuances at 31 December 2021 (2020: €188 million (£170
million)).
Term loan facilities
In December 2020, the Group arranged €500 million and US$2,000 million
3-year term loan facilities which became effective in January 2021 and mature
in December 2023. The term loans were fully drawn in January 2021 and partly
repaid by €350 million and US$340 million respectively during the year.
Bonds
In April 2021, the Group issued nine new senior unsecured bonds using its
newly established Global Medium-Term Note Programme. The £5 billion issued
consisted of US$4.5 billion (£3.2 billion), €1.5 billion (£1.3 billion)
and £500 million with maturities between April 2024 and April 2041.
The Group's £300 million 4.75% bond, issued in 2012, matured in November
2021.
Other Group facilities
In accordance with the Committee on Payments and Market Infrastructures, the
International Organisation of Securities Commissions and Principles for
Financial Market Infrastructures, many central banks now allow CCPs to apply
for access to certain central bank facilities. LCH SA has a French banking
licence and is able to access financing at the European Central Bank to
support its liquidity position. LCH Ltd is deemed to have sufficient fungible
liquid assets to maintain an appropriate liquidity position and has direct
access to central bank facilities to support its liquidity risk management in
accordance with the requirements under European Market Infrastructure
Regulation.
In addition, a number of Group entities have access to uncommitted
operational, money market and overdraft facilities which support post trade
activities and day-to-day liquidity requirements.
None of these facilities were drawn during the year.
The carrying amounts of the Group's borrowings are denominated in the
following currencies:
2021 2020
Drawn Swapped Effective Drawn Swapped Effective
Currency £m £m £m £m £m £m
Sterling 484 - 484 421 - 421
Euro 2,630 (619) 2,011 1,530 (613) 917
US dollar 4,540 619 5,159 - 613 613
Total 7,654 - 7,654 1,951 - 1,951
Analysis of net debt
Net debt comprises cash and cash equivalents less interest bearing loans and
borrowings, lease liabilities, and derivative financial instruments.
Group
2021 2020
(Re-presented)(1)
£m £m
Current
Cash and cash equivalents 2,665 1,785
Bank borrowings - (135)
Commercial paper - (170)
Bonds - (300)
Lease liabilities (168) (42)
Derivative financial assets 25 -
Derivative financial liabilities (7) (6)
Net amounts owed from/(to) subsidiary companies - -
Total due within one year 2,515 1,132
Non-current
Bank borrowings (1,347) 2
Net amounts owed from Group companies - -
Bonds (6,306) (1,347)
Trade finance loans (1) (1)
Lease liabilities (547) (147)
Derivative financial assets 2 -
Derivative financial liabilities (45) (11)
Total due after one year (8,244) (1,504)
Net debt (5,729) (372)
(1) The 2020 analysis of net debt has been re-presented to include lease
liabilities.
Reconciliation of net cash flow to movement in net debt
Group
2021 2020
(Re-presented)(1)
£m £m
Increase/(decrease) in cash and cash equivalents 940 237
Bond issue proceeds (5,061) -
Bond repayment 300 -
Net repayments on commercial paper 170 101
Net repayments on short-term bank borrowings 122 -
Additional drawdowns from bank credit facilities (1,883) (4)
Repayments made towards bank credit facilities 548 127
Arrangement fees paid 52 4
Trade finance loans received - (1)
Lease liability principal repaid 118 43
Change in net debt resulting from cash flows (4,694) 507
Foreign exchange 8 (36)
Movement on derivative financial assets and liabilities (8) 21
Movement in bank credit facility arrangement fees (19) (2)
Net amounts owed from/(to) Group companies - -
Lease liabilities acquired in year (644) (49)
Net debt at 1 January (372) (813)
Net debt at 31 December (5,729) (372)
(1) The 2020 analysis of net debt has been re-presented to include lease
liabilities and net amounts owed from/(to) subsidiary companies
17. Share capital, share premium and other reserves
Ordinary share capital issued and fully paid
Number of shares Ordinary share capital Share premium Total
Note millions £m £m £m
1 January 2020 351 24 967 991
Issue of shares to the Employee Benefit Trust - - 4 4
31 December 2020 351 24 971 995
Acquisition of subsidiaries 2 204 15 - 15
Issue of shares to the Employee Benefit Trust 2 - 7 7
31 December 2021 557 39 978 1,017
Ordinary share capital consists of ordinary shares of 6 (79/86) pence.
LSEG issued 204,225,968 shares (comprising 136,870,442 listed LSEG ordinary
shares and 67,355,526 unlisted LSEG limited-voting ordinary shares) to acquire
Refinitiv (refer to note 2). The purchase consideration for the acquisition of
Refinitiv of £16,971 million includes the fair value of equity-settled awards
(attributable to pre-acquisition services rendered) of £2 million, which is
recognised in the employee share scheme reserve within retained earnings.
The Board approved the allotment and issue of 1,368,896 ordinary shares at par
and a further 177,894 ordinary shares at a weighted average price of £35.74
to the Employee Benefit Trust (2020: 775,00 ordinary shares at par and 139,970
at £31.11) to settle employee share plans. A share premium of £7 million
(2020: £4 million) has been recognised in the year in respect of these.
The number of shares held by the Employee Benefit Trust to settle exercises of
employee share awards was 566,034 (2020: 487,866).
Other reserves
Merger relief reserve Capital Redemption reserve Reverse acquisition reserve Hedging reserve Foreign exchange translation reserve Total
Notes £m £m £m £m £m £m
1 January 2020 1,305 514 (512) (46) 535 1,796
Foreign exchange on retranslation - - - - 73 73
Changes in fair value - - - (64) - (64)
31 December 2020 1,305 514 (512) (110) 608 1,805
Acquisition of subsidiaries 2 16,981 - - - - 16,981
Amounts recycled on disposal 3 - - - 17 (62) (45)
Foreign exchange on retranslation recognised - - - - (41) (41)
Amount recycled to income statement - - - (2) - (2)
Changes in fair value recognised - - - 109 - 109
31 December 2021 18,286 514 (512) 14 505 18,807
Merger relief reserve
The merger relief reserve is a potentially distributable reserve arising as a
result of shares issued to acquire subsidiaries.
The Group applied merger relief, as required by section 612 of the Companies
Act 2006, to the issue of shares to acquire Refinitiv (refer to note 3). The
Group acquired a 100% equity holding in Refinitiv and recognised the excess of
the fair value above the nominal share capital issued in the merger relief and
retained earnings.
Capital redemption reserve
This reserve was set up as a result of a court approved capital reduction
scheme and is non-distributable.
Reverse acquisition reserve
This reserve arises in consolidation as a result of the capital reduction
scheme and is non-distributable.
Foreign exchange translation reserve
The foreign exchange translation reserve records the cumulative impact of
foreign exchange rate movements on the retranslation of non-sterling
subsidiary companies. It is distributable under certain circumstances.
Net gains and losses are recognised in other comprehensive income and amounts
remain in equity until the subsidiary is derecognised. An amount of £62
million (2020: nil) was reclassified to the income statement during the year
as a result of the disposal of the Borsa Italiana group (refer to note 3).
Hedging reserve
The hedging reserve represents the cumulative fair value adjustments
recognised in respect of net investment and cash flow hedges entered into in
accordance with hedge accounting principles. It is distributable under certain
circumstances.
Net gains and losses are recognised in other comprehensive income and balances
remain in equity until both the hedging instrument and the underlying
instrument are derecognised.
An amount of £17 million was reclassified to the income statement during the
year as a result of the disposal of the Borsa Italiana group (refer to note
3). The gain realised on cash flow hedges during the year is being amortised
through the income statement over the life of the underlying instrument.
During the year £2 million was recycled back through the income statement.
18. Commitments and contingencies
The Group had no contracted capital commitments which are not provided for in
the financial statements. The Group has a long-term agreement with Reuters
News, to receive news and editorial content for a minimum payment of US$325
million per year.
In the normal course of business, the Group can receive legal claims
including, for example, in relation to commercial matters, service and product
quality or liability, employee matters and tax audits. The Group is also
involved in legal proceedings and actions, engagement with regulatory
authorities and in dispute resolution processes. These are reviewed on a
regular basis and, where possible, an estimate is made of the potential
financial impact on the Group.
In appropriate cases a provision is recognised based on advice, best estimates
and management judgement. Where it is too early to determine the likely
outcome of these matters, no provision is made. Whilst the Group cannot
predict the outcome of any such current or future matters with any certainty,
it currently believes the likelihood of any material liabilities to be low,
and that these will not have a material adverse effect on its consolidated
income, financial position or cash flows.
19. Events after the reporting period
Sale of assets
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 profit on
disposal of £133 million. The Group continues to have exclusive access to the
building until June 2023 through a lease back arrangement.
Quantile acquisition
On 6 December 2021, LSEG announced that it had agreed to acquire Quantile, a
UK-based provider of portfolio compression and optimisation solutions for
financial institutions dealing with derivatives instruments. The transaction
represents an opportunity for Post Trade to acquire a high growth asset in an
area of strategic importance, complementing our existing suite of analytics,
data and funding optimisation and efficiency solutions. The maximum aggregate
consideration is £274 million (subject to customary adjustments).
Until 6 August 2021, Stephen O'Connor, the chairman and a significant
shareholder of Quantile Group Limited, was Senior Independent Director of the
Company. He remains a director of a Group subsidiary, London Stock Exchange
plc.
TORA acquisition
On 22 February 2022, LSEG announced it has agreed to acquire TORA, a leading
cloud-based technology provider that supports customers trading multiple asset
classes across global markets. TORA offers an order and execution management
system and a portfolio management system for customers trading multiple asset
classes, including equities, fixed income, FX, derivatives and digital assets.
Following completion, TORA will be part of LSEG's Data & Analytics
division. The maximum aggregate consideration is US$325 million (subject to
customary adjustments) and the acquisition is expected to close in H2 2022,
subject to regulatory approvals.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR UPUPAWUPPUUW