London Stock Exchange Group plc

Good morning, everyone, and welcome to LSEG's H1 results presentation. I'm here with David and Anna, and they'll take you through our performance and outlook in just a moment. We'll then be happy to take your questions. If you want to ask a question, please join the conference call line. Details are available in the results release or from the IR team. David, over to you.

Thanks, Peregrine, and good morning, everyone. I'll give you the brief highlights and then hand over to Anna to go through the financials in more detail before I bring to life some of the great strategic progress we are making. And of course, then we'll be happy to take your questions. We have delivered another half of strong performance as we continue to accelerate revenue growth and drive transformation across our business, with Q2 growth at 8.4%, up from 7.5% in Q1. Our data and analytics division grew by more than 7.5% in the half, the fastest it has grown for many years, as the investments we've been making in our products and our stronger customer relationships are now really starting to bear fruit. We made progress in capital markets despite headwinds and equities, and we delivered outstanding growth in post-trade, as we once again demonstrated the critical role we play in helping customers manage risk in uncertain markets. We're making very good progress on a number of key strategic priorities, including projects to re-platform our FX venues and our index business. We'll be rolling out the first features of our new FX platform in the second half. We've made a great start with the Microsoft partnership, and we now have hundreds of people around the world building products together. Cash generation is good, and that's driving continued shareholder returns. Our 750 million pound on-market share buyback is now complete. We have a further $750 million directed buyback approved, and the dividend continues to grow. So those are a few highlights of a really strong first half. I'll now hand over to Anna to take you through our financial performance.

Thanks, David. Good morning. Let's start with the financial highlights. Strong, sustained growth. An EBITDA margin consistent with our guidance and reflecting the investments we're making in future growth. Strong cash generation, supporting our active approach to capital management. And confidence as we head into the second half, supporting our full year guidance. You can see the strengths of this first half on this slide. Total income, excluding recoveries, rose almost 8% and closer to 12% on a reported basis. For the rest of the presentation, I'll focus on constant currency growth as this gives you the best insight into our underlying performance. EBITDA growth was strong, up 6%. Both this year and last year's EBITDA margin are distorted by non-cash FX-driven balance sheet adjustments. Stripping these out, our first half EBITDA margin was 47.7% and this is consistent with our full year guidance of around 48%. I'll cover this in more detail in a moment. Growth in adjusted operating profit is a little slower than EBITDA, driven by investment into integration and our platforms for future growth. Looking at the lower half of the P&L on the next slide, our finance expense has come down, reflecting better returns on gross cash as interest rates have risen. On the other hand, the tax rate is going up. This mainly reflects the higher UK tax rate now in place. The combination of the non-cash FX item with higher depreciation and tax has impacted our EPS performance relative to EBITDA. All our divisions delivered sustained growth. Data and analytics grew 7.6% supported by higher pricing, improved retention and stronger sales. Capital markets grew 1.5% with continued growth at TradeWeb, partly offset by market-driven weakness in equities and parts of our FX offering. And post-trade had an outstanding half, up 19% as interest rate uncertainty drove strong client demand for our Swapclear services. Let's start with our data and analytics businesses, all of which performed strongly. I'll cover our three largest businesses, trading and banking, enterprise data and investment solutions on the next slide. Wealth was up 5.8%. Growth was strong in both digital solutions and workflow, where workspace revenues doubled from last year. Customer and third party risk posted high teens growth, with continued strength in our world check screening business. Last year's acquisition of GDC expanded our presence in the high growth digital identity space and boosted our overall growth rate. Trading and banking, enterprise data and investment solutions account for 85% of data and analytics revenues and all three grew strongly in the first half. Trading and banking performed well, up 4.7% in the quarter, and has now delivered underlying growth for six consecutive quarters. We're getting better and better feedback on workspace, which David will come on to later. And our 2023 price increase landed well. Enterprise data also grew strongly, up 11.8% in the quarter. We saw strong demand for proprietary real-time data and continued cross-sell of data to FTSE Russell customers. Subscription revenues in our investment solutions business have accelerated over recent years and grew 9.5% in the quarter. Growth in asset-based revenues improved over the period and we entered the second half well set, with assets under management 17% higher than at June 2022. Our investment in the index platform has already reduced our time to market by 25% and contributed to a near doubling of new products in the first half. ASV growth continues to be the best evidence of the huge improvements we're making to our business and the investment going into our customer proposition. Subscriptions are growing almost 400 basis points faster than when we acquired Refinitiv. Sequentially, our ASV growth fell slightly in the second quarter. To be clear, we don't see any issue here with business momentum. It merely reflects short-term differences in timing of different growth drivers between higher retention, which has an immediate impact, and onboarding of contracted sales, which can take anything from a day to several months. A lot of the rise in ASV over the past couple of years has been driven by higher retention, and now we're seeing more of it driven by new sales, which is a good thing. We expect this timing difference to reverse in the second half. Our capital markets businesses grew 1.5%. Equity revenues declined due to global market conditions. In FX, our matching platform sustained its return to growth, supported by last year's change in commercial incentives. Most FX platforms saw weaker buy-side activity in the first half. Our FX All platform is the global leader in this space, so it's something we saw too. And this offset the strength in matching. TradeWeb, which drives two-thirds of our capital market's revenues, saw record transaction volumes and revenues in the first half, with continued share gains in both US credit and global swaps. Activity in the period skewed towards shorter duration instruments and asset classes where TradeWeb earns lower fees, so revenue growth was a bit behind volumes. Our post-trade business delivered an outstanding performance, up 19%. Interest rate uncertainty drove strong client demand for Swapclear's services, and that was the primary driver of growth in OTC derivatives. Reference rate reform also added 18 million of one-time revenues in the half. we completed the Acadia acquisition. This really enhances our offer for customers as they manage regulatory and capital demands across the whole derivatives portfolio. Securities and reporting revenues grew 1.8% as revenues relating to early termination of a multi-year clearing agreement offset ongoing pricing pressures in equities. And higher cash balances contributed to net treasury income up 19%. Moving on to costs on slide 13. Organic cost growth of 6.1% was evenly balanced between ongoing operating costs and investments for growth. As with all companies, we're going through an inflationary period, and average pay increases this year have been around 6%. But at the same time, we've delivered cost synergies which are partially offsetting this headwind. Longer term, the platform investments we're making will build a simpler, more efficient and scalable business. Acquisitions added 3.4% to our first half cost growth. The vast majority of the FX impact shown here relates to non-cash movements in the balance sheet, which I'd encourage you to look through. Turning to profitability on slide 14. At the start of the year, I explained how our investment with Microsoft and recent M&A would impact on this year's EBITDA margin. That, along with the impact of the Russia-Ukraine conflict, reduced first half margin by 120 basis points. Our underlying efficiency improved slightly, giving an underlying margin of 47.7%. On track to deliver our full year EBITDA margin of around 48%. On a reported basis, margins were adversely impacted by non-cash FX-related balance sheet adjustments. As you'll remember, the same period last year benefited from similar adjustments, so this accounts for the swing in the reported margin. Now, looking at reconciling items between adjusted and reported operating profit. These largely relate to the Refinitiv acquisition. The main exception being the 69 million gain relating to the acquisition of Acadia in the first half. Moving now from the P&L to cash flow. Our business is highly cash generative. As you can see on slide 16, we delivered 1.2 billion of operating cash in the first half. As a reminder, the capex figure here is both the cash cost of business as usual and integration capex. Equity-free cash flow was substantial at almost 600 million. Let's look at how we're deploying this capital on the next slide. As you can see, our use of cash in the first half was balanced between capex, acquisitions, dividends and share buybacks and reflects our active approach to capital management within our allocation framework. Our capex reflects the transformation we're driving in our business and our investments in future growth. We completed the acquisition of Acadia at the end of March, an important step that rounds out our post-trade solutions business. On dividends, the cash flow in the first half reflects the 2022 final payment, and we're proposing an increase to the interim dividend for the current year of 12.6%. We returned 400 million to shareholders via share buybacks in the first half, with a further 50 million repurchased in July. This completes the 750 million share buyback announced in August last year. We also have approval for a directed share buyback, allowing us to target the shares owned by the former Refinitiv shareholders. This could be around 750 million by the next AGM. Our success in integrating Refinitiv and building a track record of strong growth and cash generation supports a higher leverage range. We're confident we can maintain leverage between one and a half and two and a half times net debt to adjusted EBITDA without impacting our current credit rating. Our new leverage range reflects our improving earnings quality while maintaining a sufficiently conservative structure even at the top end of the range. On a day-to-day basis, we expect to maintain leverage around the middle of that range and we're currently there at 1.8 times. Looking ahead, we're confident we'll deliver all of our full year targets, which I won't read out, but you can see on the slide. As you saw from the release, we now expect top line growth to be towards the upper end of the 6% to 8% range. Implicit in this is we expect continued strength in our ASV growth. Execution on synergies continues to be very strong, and we're well on track to meet or exceed those targets. So in summary, we delivered strong broad-based growth in the first half, supporting our confidence of being towards the upper end of the growth guidance for the full year. We're on track for a broadly fat EBITDA margin this year of around 48%, despite the additional Microsoft investment and the impact of a number of high-growth bolt-ons. And we're confident in delivering all of our targets for the full year. With that, back to David.