London Stock Exchange : LSEG Interim Results H1 2022 RNS

London Stock Exchange Group plc: H1 2022 Interim Results

David Schwimmer, CEO said:

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

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

H1 2022 highlights - Execution on strategy driving strong financial performance

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

• Strong progress in H1 across all divisions, and momentum continuing into H2
• Continued delivery on revenue and cost synergies; all targets unchanged
• Successfully executing on organic and inorganic investment opportunities to drive growth, build a more agile and efficient business and enhance our customer offering
• Well positioned for the current environment; providing high value solutions for customers' critical needs
• Launching £750 million share buy-back over 12 months with the first tranche to commence immediately
• Strong income growth across all divisions, with pro-forma total income (excluding recoveries) up 6.2%; up 7.0% adjusting for Ukraine and Russia conflict impact2
• ASV growth metric on a like-for-like basis continues to improve, up 5.4% at the end of H1 (Q1: 4.9%); improved retention and new sales driving the increase
• Pro-formaadjusted operating expense increase of 4.3% reflects lower phasing of costs in H1 2021; cost guidance for low-single digit growth in 2022 maintained despite inflationary backdrop
• Adjusted EBITDA margin of 48.8%3; on track to deliver margin target of at least 50% by end of 2023
• Pro-formaAEPS up 21% to 167.4p
• Robust cash generation in H1 and completion of two acquisitions - GDC and MayStreet; Quantile and TORA expected to complete in H2
• Leverage is inside our 1-2x target range within 18 months of the Refinitiv acquisition
• Interim dividend up 27% to 31.7 pence per share

This release contains revenues, costs, earnings and key performance indicators (KPIs) for the six months ended 30 June 2022 (H1). H1 2022 is compared against H1 2021 on both a statutory and pro-forma basis. Pro-forma figures assume that the acquisition of Refinitiv took place on 1 January 2021. Revenues and costs associated with the BETA divestment have been classed as discontinued and are excluded from all periods. Revenues and costs associated with the Borsa Italiana group divestment, which completed in H1 2021, are also excluded. Constant currency variance is calculated on the basis of consistent FX rates applied across the

1

current and prior year period. For more information on accounting treatments and approach to FX please refer to the "Accounting and modelling notes" section below. Within the financial information and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes.

1. The deferred revenue impact is a one-time,non-cash, negative revenue impact resulting from the accounting treatment of deferred revenue within Refinitiv's accounts which have been re-evaluated upon acquisition by LSEG under purchase price accounting rules. This reduced H1 2021 revenue by £23m, mainly in Data & Analytics with a smaller impact in the FX business within Capital Markets. There is no material impact in 2022. More details can be found in the "Accounting and modelling notes" section
2. Growth rates excluding the Ukraine / Russia conflict impact have been calculated by excluding income in the region and from sanctioned customers and related business from both periods
3. This margin figure has been adjusted to remove a non-cashFX-related balance sheet adjustment which is a £59m credit within adjusted operating expenses in H1 2022. This is explained further in the 'Year-on-yearpro-forma financial performance' and 'Embedded Derivatives' sections. Adjusted EBITDA margin is adjusted EBITDA divided by Total Income (excl. Recoveries).

H1 2022 Statutory results1

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

Continuing operations	H1 2022	H1 20211
£m	£m
Data & Analytics	2,354	1,872
Capital Markets	720	539
Post Trade	483	446
Other	12	13
Total income (excl. recoveries)	3,569	2,870
Recoveries	166	148
Total income (incl. recoveries)	3,735	3,018
Cost of sales	(504)	(392)
Gross profit	3,231	2,626
Operating expenses before depreciation, amortisation	(1,593)	(1,401)
and impairment
Adjusted operating expenses before depreciation,	(1,433)	(1,219)
amortisation and impairment 2
Non-underlying operating expenses before depreciation,	(160)	(182)
amortisation and impairment
Non-underlying profit on disposal of property, plant and
133	-
equipment
Non-underlying remeasurement gain	23	-
Income from equity investments	-	11
Share of profit / (loss) after tax of associates	1	(2)

Earnings before interest, tax, depreciation, amortisation and impairment

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

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

Depreciation, amortisation and impairment

Adjusted depreciation, amortisation and impairment 2

1,7951,234

1,7991,416

1. (182)

1. (684)

1. (297)

2

	Non-underlying depreciation, amortisation and	(507)	(387)
	impairment
	Operating profit	897	550
	Adjusted operating profit 2
	1,408	1,119
	Non-underlying operating loss	(511)	(569)
	Net finance expense	(94)	(87)
	Adjusted net finance expense 2
	(81)	(86)
	Non-underlying net finance expense	(13)	(1)
	Profit before tax	803	463
	Adjusted profit before tax 2
	1,327	1,033
	Non-underlying loss before tax	(524)	(570)
	Taxation	(159)	(254)
	Adjusted tax 2
	(262)	(215)
	Non-underlying tax	103	(39)
	Profit for the period (from continuing operations)	644	209
	Adjusted profit 2
	1,065	818
	Non-underlying loss	(421)	(609)
	Profit from continuing operations attributable to:
	Equity holders	548	143
	Underlying	934	721
	Non-underlying	(386)	(578)
	Non-controlling interest	96	66
	Underlying	131	97
	Non-underlying	(35)	(31)
	Continuing basic earnings per share (p) 3	98.0	27.2
	Adjusted continuing basic earnings per share (p) 3	167.4	139.0

1. The comparator H1 2021 figures are statutory results, incorporating Refinitiv from acquisition at the end of January 2021. Revenues and costs associated with the BETA divestment have been classified as discontinued and are excluded from all periods. Revenues and costs associated with the Borsa Italiana group divestment, which completed in H1 2021, are also excluded
2. The Group reports adjusted operating expenses before depreciation, amortisation and impairment, adjusted earnings before interest, tax, depreciation, amortisation and impairment (EBITDA), adjusted depreciation, amortisation and impairment, adjusted operating profit and adjusted basic earnings per share (EPS). These measures are not measures of performance under IFRS and should be considered in addition to, and not as a substitute for, IFRS measures of financial performance and liquidity. Adjusted performance measures provide supplemental data relevant to an understanding of the Group's financial performance and exclude non-underlying items of income and expense that are material by their size and/or nature. Non-underlying items include: amortisation and impairment of goodwill and purchased intangible assets (including customer relationships, trade names, and databases and content, all of which are recognised as a result of acquisitions); incremental depreciation and amortisation of the fair value adjustments on tangible assets and intangible assets recognised as a result of acquisitions; and other non-underlying income or expenses not related to day-to-day operations, such as transaction costs related to acquisitions and disposals of businesses, as well as integration costs
3. Weighted average number of shares used to calculate basic earnings per share and adjusted basic earnings per share from continuing operations is 558 million (H1 2021: 519 million)

3

H1 2022 Statutory results highlights

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

• Data & Analytics: revenues up £482 million to £2,354 million. Each business across the division performed well, with good momentum continuing into H2. £292 million of this increase is due to the additional month of contribution in H1 2022 compared with H1 2021, associated with the acquisition of Refinitiv. £85 million was driven by broad based growth in subscription revenues through new sales, strong customer retention and price increases, partially offset by the impact of the Ukraine / Russia conflict. Other factors, which included the strengthening USD rate vs GBP offset by the deferred revenue accounting adjustment in H1 2021, contributed £85 million in the period.
• Capital Markets: revenues up £181 million to £720 million. Each of the underlying asset classes have seen good growth in H1 2022. £57 million of this increase is due to the additional month of contribution from our FX venues and Tradeweb. Other factors such as the strengthening of USD vs GBP contributed a further £21 million.
• Post Trade: total income up £37 million to £483 million. Growth has primarily been driven by a strong performance in OTC Derivatives as we support customers to manage risk in an uncertain rate environment and in Net Treasury Income and Non-Cash Collateral, which was the result of high cash and non-cash collateral balances. Overall the FX impact was neutral.

4

H1 2022 Pro-forma summary

						Constant
		Pro-forma			Constant	Currency
				Variance
Continuing operations	H1 2022	Variance2		Currency
H1 20211
£m	%		Variance3	(excl. deferred
	£m		revenue
				%
					adjustment) 3,4
						%
Data & Analytics	2,354	2,164	8.8%		5.0%	4.0%
Capital Markets	720	616	16.9%		13.0%	12.9%
Post Trade	483	446	8.3%		8.5%	8.5%
Other	12	14	(14.3%)		(14.2%)	(14.2%)
Total income (excl. recoveries)	3,569	3,240	10.2%		6.9%	6.2%
Recoveries	166	178	(6.7%)		2.9%	1.8%
Total income (incl. recoveries)	3,735	3,419	9.2%		6.7%	6.0%
Cost of sales	(504)	(452)	11.5%		6.6%	6.6%
Gross profit	3,231	2,967	8.9%		6.7%	5.9%
Adjusted operating expenses before
depreciation, amortisation and	(1,433)	(1,397)	2.6%		4.3%	4.3%
impairment 5
Income from equity investments	-	11	-		-	-
Share of profit / (loss) after tax of	1	(2)	-		-	-
associates
Adjusted earnings before	1,799	1,579	13.9%		8.4%	6.8%
interest, tax, depreciation,
amortisation and impairment 5
Adjusted EBITDA Margin 6	50.4%	48.7%
Adjusted depreciation, amortisation
and impairment 5	(391)	(347)	12.7%		16.3%	16.3%
Adjusted operating profit 5	1,408	1,233	14.2%		6.2%	4.3%
Adjusted net finance expense 5	(81)	(124)	(34.7%)
Adjusted profit before tax 5	1,327	1,108	19.8%
Adjusted tax 5	(262)	(233)	12.4%
Adjusted profit for the period 5	1,065	874	21.9%
Adjusted profit attributable to:
Equity holders	934	767	21.8%
Non-controlling interest	131	107	22.4%
Continuing adjusted basic
earnings per share (p)	167.4	138.0	21.3%
Weighted average shares (m)	558	556

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

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

5