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.

Thank you, Anna. As you can see, we're now in a position where we're delivering consistently strong broad-based growth. With the breadth of our offering and the depth of our relationships, we see significant further potential. So I think it's worth recapping here on why that is, those really powerful market trends that we're taking advantage of and the transformation we are driving into every corner of our business. Demand for data is greater than ever, and that's only going to grow from here. Customers want to automate workflows, manage financial and reputational risk, optimize capital, and trade electronically and cross-border. We're at the fulcrum of all of these trends. We already have a great business for this environment. We're multi-asset class, we're global, and we serve our customers across the trade lifecycle. And we are transforming our business. We're transforming LSAG to match our customers' needs as the world continues to evolve in line with these key trends. We're creating greater connectivity across our business, linking our different offerings to serve our customers better, and we're turning our data infrastructure into a scalable machine where we can ingest data once and distribute that data an unlimited number of times in a more cost-effective way. And we've transformed our earnings profile with almost three quarters of our business now recurring revenue with strong and long customer relationships, something our new leverage range rightly reflects. And we're not even close to done. We're building the next generation of workflow tools for financial markets with Microsoft, the world's leader in enterprise productivity. We're creating a new business in post-trade solutions, which will expand our addressable markets significantly and help our customers optimize their capital. We'll tell you more about that at the Capital Markets Day. And we are upgrading and modernizing almost all of our platforms, whether they are externally facing like our FX matching venue or internal, like our network infrastructure or our billing system. That's a great position to be in as we look ahead. We're delivering a strong performance across the group. We're innovating and improving the customer offering on many fronts. Just a few examples on this slide. We're delighted with how we've driven performance in data and analytics, growing almost twice as fast as the first half of 2022. We're accelerating innovation in FTSE Russell, where we're getting to market much faster with new index products, thanks to our investment in the systems driving that business. Trading and banking is now achieving consistently healthy growth after over a decade of decline, building on our deep and broad customer relationships. and we're constantly improving our products. We executed 130 updates to Workspace in the last six months. And we saw record volumes in both TradeWeb and PostTrade, where we continue to demonstrate the critical role we play in helping customers navigate periods of market volatility and uncertainty. We're focused on building a consistent track record of growth across the business. And on the next few slides, I'll outline some of the ways we're doing that. Now, we're aware that some of our peers have been calling out longer sales cycles, given the tougher environment for some customer segments. Currently, we are not seeing a longer sales cycle. In fact, sales cycles are holding pretty steady over the last few quarters. Where we are seeing change in our sales data, it is positive. And I'll call out a couple of things in particular. Average deal sizes are increasing as we move from product selling to solution selling. Across the first half, deal sizes were up roughly 15% year on year. Even more positively, win rates in DNA have stepped up significantly under our ownership, moving up around seven percentage points since 2020. This reflects the great progress we've made across sales, product, and customer service over the last couple of years. So I've talked in the past about how we partner with large customers to build enterprise-wide solutions across our offering and how that's leading to larger deals for us that are better for our customers. But what does that look like in practice? On this slide, we've set out a real-world example, an enterprise-wide deal with HSBC, one of the world's largest banks. You can think of the benefits of a deal like this in three ways. First, we're saving them money by rationalizing their data vendors. We look at the vendors they use and tell them what we can provide and how much money we can save them. At the same time, we've displaced over 750 competitor terminals and their number two provider of real-time data. As a result, HSBC is saving $30 million a year. Second, we're partnering to create bespoke solutions to drive their growth. They've launched a next generation digital wealth management portal powered by our data and our underlying tech workflow. And HSBC has joined our design partner program with Microsoft. So we are working together to build what they want and need for the future. And lastly, the deal is financially attractive for LSEG. We've turned an account that was in slow decline into one that's growing, and we've left ourselves room to upsell new services. It's now consistently one of our highest performing accounts. It's a win-win situation, and we're seeing increasing demand from larger customers for these kinds of deals, particularly in the current economic environment. And these are strong multi-year relationships. We have a number of other relationships like this. You would have seen the Barclays announcement earlier this year. That's another example. Another area I want to focus on is enterprise data. It's a 1.3 billion pound business growing at double digits. Data is becoming more valuable every day, backing AI and quant-driven strategies, and we've got more data and higher quality data than anyone. We also have data that other providers just don't have, and we're seeing a lot of demand for it. This applies to standalone datasets, but even more so to packages of separate datasets, which together drive even greater insight. A great example is TIC History, our comprehensive database of historical pricing information and one of our many proprietary datasets. It gives customers access to over 87 trillion ticks of data, spanning over 100 million instruments across over 500 execution venues, dating back more than 25 years. With our PCAP or Packet Capture product, we can offer a subset of that historical pricing information in the cleanest, highest quality format in the world. This is sourced directly from an exchange's data center and is timestamped to the nanosecond using GPS technology. By combining these two data sets, tick history and PCAP, customers are able to perform a deep regression analysis that would not otherwise be possible. They can use the data to power advanced backtesting techniques, precisely reconstructing the market at a point in time. And just as importantly, we are delivering these data sets in the most convenient and flexible way possible via the cloud and open source file formats. This is a powerful example of the kind of technology driven demand that we are seeing as customers realize what they can do with our data. And we're also excited by the continuing progress we're making with Workspace, our next generation workflow tool for financial markets. We're regularly adding to its functionality in many different ways, continuously improving the product. We continue to get positive customer feedback. Our first half customer survey is hot off the press, and it tells a great story. Just to call out some highlights, providing powerful analytics is up 11 percentage points. Ease of sharing news and analysis is up 13 percentage points. And functionality across multiple devices is also up 11 points. This reflects the continuous improvement we're driving in the product. We're well on course to migrate the vast majority of users from the prior generation product to Workspace by the end of next year and are today announcing our intention to shut down that prior generation product icon in 2025. We, of course, plan to take a significant additional step forward for Workspace with Microsoft next year. Okay, inevitably we need to talk about AI. For successful use of AI in financial services, we think there are four critical conditions. The quality and breadth of the data, its integrity, its lineage, and customer trust. We think LSEG scores very strongly on all four of these. The scale of our data assets is immense, and it's all cleaned and codified. It's internally consistent, scrubbed for quality control, and comes with our decades of experience in data management. Our data is fully auditable. We can tell you exactly where it comes from. And we are trusted. We've been working with most of the world's largest financial institutions for years, and our feeds and taxonomy drive many of their critical processes. So we see a great opportunity ahead of us to drive more value through AI. But we've been working with AI for a while now, and it's already built into a lot of what we do, both in our own business and for our customers. First, we are building AI functionality into our platforms and workflow to enhance customer productivity. This is at the heart of what we're building with Microsoft, but we've already been innovating here. Second, we're creating more valuable insight as we build proprietary AI powered analytics. We have a number of tools in the market today, but we see this as the single biggest area of value creation over the next few years. One example we've been investing in for some time is our product Sentimine, which mines earnings releases, filings, and transcripts to assess key themes and related sentiment. It is available as part of Workspace and leverages large language models extensively. To optimize the accuracy of sentiment and theme classification, we have performed extensive model tuning and selection experiments. And this work will continue as LLMs evolve. An example of something we are talking about with our customers today is bespoke large language models, combining our leading data with each customer's own private data, driving their productivity and giving them new capabilities in trading strategies and risk management. And third, we are using AI to modernize our own business. Today, we have over 7,000 people working in data ingestion and another 2,500 in customer service. That's around 40% of our global workforce. We have a significant opportunity to do what we do a lot more efficiently. In the past, it might have taken us weeks to ingest all the data in a market's reporting season. Today, that same task could take us minutes. To give you just one great example, we're automating the transcription of 38,000 company webcasts annually through natural language processing, reducing average processing time of transcript summaries into Workspace from eight hours to five minutes, increasing company coverage by over 30% and eliminating the need to spend over five million pounds. Actions like these free up resources for quality control, audit, and other value add actions, or simply allow us to create an even wider and deeper pool of data. We're also increasingly using AI tools in customer service, and there's much, much more in development in this area. Here's one example of how AI is enhancing customer productivity, where we've brought a decades old dealing platform up to date with a first in the FX industry. Our FX Dealing product is a communication network for the FX trading community. It has been around for decades and it has around 14,000 users. And for years, they've been pivoting between two screens, one for chat and news and the other for trading. Tickets were entered manually and were entirely separate from the trade formation in chat. But now we've brought all of that together with a new FX trading environment in the cloud. Full integration with Workspace, seamless compliance, and chat-driven trading functionality powered by AI. Tickets are now generated automatically with AI picking up key information like currency, price, and size from the chat. And finally, a quick update on our Microsoft partnership. There's a lot of activity here, and it's been an incredibly productive six months. We have hundreds of people across the two companies working together, designing product and writing code. One big development is the launch of Fabric, Microsoft's end-to-end data and analytics solution, where we are working with Microsoft as their customer zero, i.e. jointly developing the product. This will make access to and usage of our data seamless for our customers in a very powerful and versatile Microsoft environment. We're also making good progress in the development with Microsoft of our workspace and analytics products. As part of our design and build process, we have created a design partner program with a number of customers. We had a lot of incoming interest from major customers when we announced the partnership, and we've captured that interest in a framework to work closely with those customers on our design thinking and new product capabilities. This in turn will inform where we focus and prioritize through the development cycle, so the end product meets our customers' most pressing needs. We'll bring you more detailed updates on all of this at the Capital Markets Day in November. So, bringing all of that together, LSEG's transformation is well underway. Our markets are growing, driven by the demand for data, the advance of technology, and the need to manage risks of all kinds. We have a number of leading solutions, and the investments we're making are only improving and strengthening those assets. Innovation is at the heart of what we do, and the strength of our customer relationships informs the work we are doing to drive value for them and us. And we have a great opportunity with Microsoft to create the leading workflow tools and analytic standards for financial markets. And with that, we'd be happy to take your questions. Peregrine, over to you.

Thanks, David. Operator, please could you open the line for the first question? Thank you.

Bruce, please go ahead with your question.

Thank you. Sorry, third effort. Hopefully it's not because my questions are offensive. On ASV, just to understand a little bit more around the kind of step down, Q on Q, 70 bps down, obviously there's some timing issues there, but any more color there, and also on your conviction levels, that that recovers in the second half, and should we think it goes back to 7.5% like Q1, or whereabouts should we think? And then second question, just on sort of operating leverage, obviously you're investing in the business, the future growth, the revenue growth is quite strong, How should we think about EBITDA margin expansion from here? Could you deliver 100 basis points per annum in 24 and 25? Or how should we think about that, please?

So on ASV, as David said, we've had a really good half in sales terms. And the pipeline is strong. And actually, getting stronger, the quality is improving. And that's why we're confident to say that we'll be at the upper end of our revenue guidance. ASV is a point-in-time measure, so it's the book of contracts that we're billing today versus the same book a year ago and it's impacted by sales retention and price. So what's happening here is as we see much more of our ASV growth be driven by sales, which is a good thing and talks to our improving product offerings, we're seeing that it's getting a little bit lumpier and that's because We can sign the contract. And for some contracts, we start billing immediately because the product is a direct install. And other products can take up to nine months to install. And that's really about working through the process with the customer. And that's what creates this sort of slightly lumpy timeliness. But I think what you should take away is sales pipeline strong, contractual sales delivered in the period, feeling good about ASV. And you would expect it to absolutely improve from the point that it is at today.

Second question around EBITDA margin.

So we've been investing across the board to make our business more scalable over the medium term and you will see ongoing enhancement in our EBITDA margin as we deliver on those opportunities. And as you've seen with both the early stage M&A that we've done and also the Microsoft relationship, where we see opportunities to invest to deliver future growth, we're going to take them. So I suppose that's me saying you should expect ongoing EBITDA margin improvement, but it may be, again, a little bit lumpy where we see those opportunities to invest for future growth.

The next question we have is from Mike Werner of UBS. Please go ahead.

Thank you very much. I have a quick follow-up on the ASV and then another question, if you don't mind. On the ASV, can you just tell us, you know, what some of the businesses are or, you know, in terms of where you get the contract signed but then there's a delay? My understanding that, you know, a chunk of that's probably from the enterprise data solutions businesses. I think you have to install potentially some hardware on premise at the customers, but I was just wondering if there was any other of the five divisions within data analytics where you have that dynamic.

Happy to take it. Mike, thanks for the question. So you're right in the context of enterprise data. That is one example. And you can see that in a number of different ways. In some cases, there is a time lag, for example, in terms of a customer being ready to take on a new feed. That could require some technology changes or some shifts. Sometimes, if it's a displacement, of a competitor, that competitor contract may run through a period of time, another three months, another six months or so, and then our product would only come in after the end of that other contract. So you can see that in a number of the different businesses. It's not exclusive to Enterprise Data. Anything you'd add?

And then just a second question, if you don't mind. Just going back to the EBITDA margin guidance, I just wanted to confirm that the guidance, you know, in terms of the constant perimeter 48% EBITDA margin for full year 2023, that is the reported EBITDA margin. Just given the disparity that we've seen between the reported and adjusted, I just want to make sure that the, whether that EBITDA margin is on adjusted numbers or reported. Thank you.

So the 48% guidance is against the perimeter that we described and it's out of the set of exchange rates that we described because of course exchange volatility as we've seen in this period can distort the reported number. We can maybe take you through that directly offline if that's helpful.

That works. Thank you very much. Appreciate it, Anna.

The next question is from Arnold Giblet of BNPP Exxon. Please go ahead.

Good morning. I've got three questions, please. First, if I can start with the impact of inflation and the price-related increases you've put through in data analytics. How much of growth did that contribute for? I mean, given how your pricing is structured and since inflation has continued in 2023, should we be expecting some more price increases in 2024? Is that mechanical? My second question is on Workspace, especially since you're talking about sunsetting ICON in 2024. Should we be expecting any material savings from that? And equally, is there a pricing opportunity within the implementation of workspace? I understand that's mostly going to happen now in 2024 with the remaining clients. And my final question is on post-trade. So H1 benefited from strong NTI and some one-off from transitioning to SOFA. What is a sort of sustainable level of post-trade if I normalize for those effects? Thank you.

Thanks Arnaud. You wanna take the first question, we can both do a little bit of the workspace conversation and then you can talk about run rate for post-trade.

Sure. So we took slightly higher price increase this year, and actually our realised price benefit was a little over 3%, which is something we've shared previously. And that was received very well by our customers. In terms of how we think about price, what we're doing is we're building relationships with our customers for the medium term. So you see us look to see those improvements in customer satisfaction, and it's that that gives us confidence to take price rises. Now, looking forward, a number of our products are priced more cheaply than the competitive product, and that gives us some opportunity. And as we see the customer satisfaction scores like David was just talking about with Workspace, that gives us confidence to start to close some of those pricing gaps. So that's price versus inflation, Workspace.

Let me just, quick correction on Workspace. I know you mentioned sunsetting ICON in 24. We're actually sunsetting ICON in 25, as we will be substantially complete with the migration from ICON to Workspace by the end of 2024. So just want to be very clear about the timing there. And that migration timeline is one that we've been talking about, I think, for a couple of years now. So no change there, full consistency there. It is new today that we've announced the sunsetting of ICON in 2025. Anna can touch on your cost saving question in a moment, but just to put this into a little bit of a broader context, we are upgrading a number of our systems. We are investing in a number of platforms, moving on from a number of legacy products and legacy platforms. And this is a multi-year process. We wanted to highlight the sunsetting of ICON because it has gotten a lot of attention, in particular from this community. We're very excited about how Workspace is being received and the potential for Workspace to grow further and improve further, in particular as we roll out the functionality with Microsoft next year. But I just want to put it into that broader context. And there are a number of different, whether products, systems, platforms, that over time we will be moving on from and sunsetting. But you shouldn't expect us to be making regular announcements on all of those.

And in terms of costs associated with sunsetting ICON or the benefit of that, we've been working through a huge change in our tech stack. And we've talked about moving DNA to being a much more scalable business as we do so. And as we do so, we are sunsetting elements of that tech stack. all of the time an icon is just one of them so i wouldn't look to any specific um cost saving associated with it what i'd say more is this is one of the reasons to bruce's question earlier that we should be seeing ongoing underlying ebitda margin enhancement Should I do post-trade? Sure. So you're right. I mean, post-trade had a very strong first half, in part because of volatility in the market and also because we had an 18 million benefit from the change in reference rate reform. In terms of go forward, we're done with reference rate reform, so that won't repeat. And it's hard to call what level of volatility we'll see in the market. What I would say, if NTI is a bit of an indicator for where we are at the moment, at the end of July, our cash collateral levels have dropped about 10%. So, you know, that would say that there is less activity going on and you would expect those numbers to be a bit more subdued in the second half.

That's great. Thank you.

The next question we have is from Carl Voigt of KBW. Please go ahead.

Hi, good morning. Thanks for taking my question. With respect to the increase in the leverage target, I guess given that LSEG has largely been a recurring business since the deal closure in early 2021, just wondering why make the change in the leverage target now? And should investors read into this as signaling anything with respect to your appetite for M&A near term? And then my follow-up is also related to M&A. Just wondering if you could provide an update on the current environment. We've seen some larger deals in the broader info services sector. I guess, is there any indication that bid-asks are narrowing from your perspective, whereby we could see a bit larger-sized M&A from LSEG than some of the smaller-sized deals you've been executing on over the past 18 months? Kyle?

So the leverage target does not indicate any change in terms of our capital allocation policy. We've been largely operating at the 1.8, 1.9 level of net debt to EBITDA. It's where we are today. I think it's really just a recognition. And a number of you all have been asking us about this for a couple of years. It's a recognition that we've really made great progress in terms of the integration of Refinitiv and very high level of recurring revenues, very high level of diversification across the business. So you shouldn't expect any change there. We're not trying to signal anything there. And then with respect to the M&A environment, again, I would expect that we continue what we have been doing. And that's modest-sized bolt-ons that fit in strategically to what we're doing, that we can take advantage of our scale, our global distribution, our global customer relationships, and plug those kinds of capabilities into that broader machine. So again, no signaling here of any change. In terms of your question about the broader environment, And it's hard to draw any particular conclusions. I think sellers still want to maximize value, and buyers will try to be opportunistic. I think from our perspective, you've seen what we've done in the past. We try to be very focused on a strong strategic fit, and we try to be very focused on financial discipline. And that's the approach we've taken in the past. And to the extent we do anything going forward, you'll see us take a similar approach. Anything you would add?

Great, thank you.

The next question we have is from Tom Mills of Jefferies. Please go ahead.

Hi, good morning. Thanks for taking my question. I, too, please. Firstly, on the FCA wholesale data market study, what's the latest that you're hearing there? Do you have any sense as to whether There'll be an interim report. And is there anything that suggests to you one way or another how they may be thinking about a potential CMA referral? Because I think the deadline for them to do that was the 1st of September. And then just on AI, I think you referred in your prepared comments to proprietary data sets. Could you give us an idea what proportion of your data sales relate to proprietary versus non-proprietary data?

is that something that we should obsess about in an ai world and if not why not thanks very much thanks tom so on the wholesale market data study a wide-ranging study a lot of information that's being brought in or being considered there. As you would expect, we have a long and active engagement with the FCA. I think you're right about the September 1st date. But really, given where it is, given sort of the early stage, no great insight that we can share with you on that. And then with respect to AI, we often get this question around proprietary data sets. It's important to understand. So I was talking about the TIC data set that we have and then the PCAP data set that we have. On one hand, I could say that's all public data. It's publicly available. It's been public for 25 years. On the other hand, no one has captured it and collected it and makes it available in the way that we have it. So you could define that as publicly available, non-proprietary data. But the way that we monetize it, it's effectively proprietary. And so because of nuances like that, and among other things, we don't break down how we think about proprietary versus non-proprietary. To get to the AI part of your question, you used the word obsessed. I think your suggestion is that you shouldn't obsess about these kinds of things. We certainly don't think you should. What you should be very focused on in an AI-driven world and in terms of all of the potential to extract more value from generative AI is the quality of the data, the integrity of the data, so you know it's very high quality, you know where it's come from, You know the data lineage. You can audit it and figure out where it's come from. And then the ability to have trust both in the data and in how that data is going to be used. And we think, as I mentioned in our presentation, we score very strongly on all of those. And so if you think about what can go wrong in a large language model or in generative AI, if you don't have good data, you can make mistakes with even greater confidence than you could have before. If you do have confidence in the data and you can identify where it's coming from, you can evaluate if something's a hallucination, you can audit it, you can double click on it and figure out where it's come from. So it's that kind of both quality of data auditability of data and the ability to really evaluate it, know that it's not going to be used for competitors, models, etc. That kind of trust that we also bring. There are really important metrics as the world continues to move in this direction. Hope that helps.

That's very helpful. Thanks, David.

The next question we have is from Hubert Lam of Bank of America. Please go ahead.

Hi, good morning. Thank you for taking my questions. I've got two of them. Firstly, on enterprise data, you had a very strong first half of growth. How much of it was driven from the FTSE Russell cross-sell, which you identified? Just wondering if there's any lumpiness in the first half, and how should we think about the second half? So just wondering if the second half would be lower, if there's lumpiness in the first half. The second question is on your design partner program. Can you just talk a little bit more about it? How significant are the members of your design partner program today? How much revenues do they represent? And does the firm have enough, have the ability to meet the sort of requests that your partners may come up with? Thank you.

Got it. You want to take the first question?

Sure. So we've got really good momentum in enterprise, strong momentum in real time. And that is also helped by the May Street acquisition. And we've disclosed the organic versus non-organic piece so that you can see that. And then in PRS, yes, we're seeing really strong cross-sell with FTSE Russell. And that's really benefiting us. And that momentum should continue. So no specific one-offs in there, just a really healthy business performance.

And then to your second question around the design partner program, probably the best way you should think about that, it's a fairly small number of our very large clients, our very large customers. And maybe the first point just to make is that we have 250 customers. making up 50% of our revenue, and then thousands making up the next 50%. So that gives you a sense, although we do have some very large, important customers in the broader scheme of our revenue, we are a very, very diversified business. So the way that you should think about those who are participating in the design partner program is not in terms of percentage of revenue, but as representatives of different customer groups. And so large buy side, large sell side, making sure that we're taking into account trading customers, wealth management customers, et cetera. And that kind of representative sample is the way that we have approached that. And then in terms of how this is actually working, we will have both senior representation from the design partners and frankly relatively junior representation from the design partners so that we have the senior buy-in and the senior validation of what we're focusing on and prioritizing as well as members of their teams who will actually be using a lot of the products. uh and so they can work with us on some of the design what would be most useful to them most valuable to them so that they can use beta versions etc that gives you a little bit of a sense of how we're working with that group great thank you the next question we have is from ben bothurst of rbc please go ahead morning

Two questions from my side, if I may, starting with one on Acadia. I think the results note suggests it's running at a circa 25% EBITDA margin in Q2. Which could we expect this business to be growing revenues at the sort of above the top end of the group revenue growth target with widening margins looking forward? And how much will growth there hinge on market conditions? And then secondly, on page two of the statement, you provide the detail that Q2 total income was up 8.4% year on year versus Q2 22. I wonder if you could provide that same data point on an organic basis as well. So the equivalent of that 6.5% growth you reported for H1 for Q2. Thank you.

On Acadia, great business. I don't think we're going to be giving guidance on the specific margin within Acadia. Fast-growing business, it's a great contribution to what we are building in post-trade solutions. And we'll talk more about this at our Capital Markets Day in November. But just to give you a little bit of a sense of where we're going with that, the acquisition of Acadia, the acquisition of Quantile, and a number of initiatives that we are building internally. Swap Agent is an existing product already. bringing all of these different businesses together will allow us to effectively provide what we're referring to, what Dan McGuire, head of post-trade, refers to as the clearinghouse for the uncleared space. And so what that will enable us to do is serve our customers customers in post-trade across their balance sheets. They don't think of their balance sheets as the cleared part and the uncleared part. They think about managing their balance sheets, managing their risk, optimizing their capital. And so by bringing in the functionality that Acadia brings in, that Quantile brings in, what we can do with SwapAge and some other things we're building, we'll be able to help them optimize their capital, make decisions as to what they want to clear, what they will leave uncleared, how they want to net their positions down through compression algorithms, et cetera. So more to come on that, but a really interesting space. Do you want to?

Yeah, the Q2 organic number. I don't have it off the top of my head. I don't know if you know it off the top of your head, Peregrine, but if not, I'm sure the IR team can share.

Yeah, it's 6.7%.

Brilliant. You're very good.

Thank you very much.

The next question we have is from Johannes Thormann of HSBC. Please go ahead.

Good morning, Johannes from HSBC. Three questions left on my side. First of all, on FX All, you described the weakness in the overall trading volumes. What is your feeling? Did you maintain, gain or lose some global market share in this business? Secondly, regarding the recently spent money to acquire full ownership of LCHSA. Are there any benefits for you in being the 100% owner? And then last but not least, as I have heard, that there are different rollouts of different icons coming still. How confident are you really in sunsetting them in early 25? Thank you.

Thanks, Johannes. I'll take your last question. First, high level of confidence in 2025 of sunsetting ICON. As I said earlier, the migration path for workspace is very much on track. And so we look forward to being substantially complete with that by the end of 2024. And then the 2025 sunsetting of ICON makes sense. On LCHSA, so when Euronext had the 11% stake there, there were some hoops that we had to jump through from a governance perspective. They had a seat on the board. There were certain times when we had to navigate conflicts and excuse their director from board participation, things like that. It's not going to change how we operate the business. I don't know if you want to touch on some of the financial impact of that. It's not really significant exactly. And then FX, feel free.

Yeah, sure. Whenever we see a revenue drop in a business, we look very hard at share. It's something we're all over all of the time. But FX Oil is holding to gaining share. Actually, it's doing quite nicely.

Okay, thank you.

The next question we have is from Russell Quilch of Rayburn. Please go ahead.

Yeah, I have three questions for me, please. Firstly, on pricing, when you talk to a pricing gap to peers, how big do you perceive that gap to be? And over what time frame do you think you can close that gap? I'm just trying to get a better appreciation of the path of pricing growth, please. Second, on ASV, you said there's no impact of longer sales cycles. Can you clarify also that you've not seen any impact from higher customer churn, and you don't expect that to be a problem in the second half of the year? And thirdly, if I can, please, on AI, in addition to the costs already laid out with respect to the Microsoft partnership, do you expect to realize any additional OPEX or CAPEX impacts from AI product development in the short or near term? Thanks.

I'll touch briefly on the pricing gap to peers. We estimate that our high-end product in some areas is about 25% below the cost of competitive products. That's just an example in one product area that a lot of people are are focused on. I think in terms of your second question, you want to touch on ASB and expectation or lack thereof. I think your question was around higher customer churn.

In short, no customer churn. This is not about customer churn whatsoever. It's really just the timing lag, as we've talked about, between contracted sales and us getting them installed. Do you want me to do a custom efficiency?

Yeah, sure.

Yeah, I mean, look. We evolve as technology changes all of the time. I mean, we've had machine learning, natural language processing, classic AI, now we're into generative AI. And we are forever evolving our business to make sure that we're taking the new technology and shifting our investment to be building our products that way, and also using it to look for efficiencies. And you then see those efficiencies come through in our cost base. So I just see generative AI as the next step along that journey. I don't see any specific big new cost. And you'll see us continue to look for efficiencies across our cost base using this capability, but also all of the other areas of technical capability that we can use to drive efficiencies.

Okay, very clear. Thanks.

next question is from ian white of autonomous research please go ahead hi there thanks for uh thanks for taking my questions just a few uh follow-ups from my side please i'm just finally on the um the asb growth point um i'm not sure whether it's sort of baked into your answer to the previous question um but we're talking about um sort of impact in 2h are you expecting anything from uh say credit suites ubs merger or anything like that that might have sort of a one-time adverse impact in the second half is that something we might need to look out for in the latter part of the year that's question one question two I wonder if you could provide us with some help perhaps around how you see the the total sort of addressable market opportunity and enterprise data particularly interested in the material you've shared on slide 26 um do you see this as a market where perhaps there are significant number of customers that you're not currently serving or uh is it the case that the existing user base might have um significantly higher demand for these products in the future and that's that's kind of where the growth's coming from some monetization um of of higher consumption from these use i'm just trying to get my my head around whether this is a you know a business that you see doubling in size over a medium term horizon or whether it's a couple of years of high growth and then a reversion to more mature growth rates. So some detail around how you're thinking about that would be appreciated, please. And then just finally, on FX, it sounds like the technology upgrades now are basically complete. What should we be looking out for in 2H just to affirm the success of the upgrades Do you expect to see a meaningful change in volumes, for example, or higher revenues from other sources? What should we be looking out for, please, in the second half?

Thanks, Ian. And you want to touch on the first question on anything from CS, and then I'm happy to take the other two.

Perfect. Yeah. So as Credit Suisse and UBS, as UBS absorbs Credit Suisse, that will have a single digit million impact on us this year. So it's very small in 2023. There'll be a slightly larger impact in January 2024, which we will see in our ASV. But again, it's not big in the scheme of our group at all.

Then in terms of enterprise data, I'll take a shot at this. And if we don't quite answer your question, we're happy to take it offline. But a number of things are going on in that business. One, Anna touched on this earlier in terms of we're seeing attractive synergies. from the work that customers are appreciating with respect to FTSE Russell. In terms of the real-time data, we are the number one provider in the world in terms of real-time data, and we are continuing to invest in that. And so that's actually growing further. And when I say invest in that, some of that is making it available through different distribution channels. So for example, in the past, that was primarily available through putting our hardware on trading floors. And now you can get access to our real-time data through a cloud distribution. And that is enabling us to serve a different set of customers. Sometimes corporates are interested. Sometimes want to have real-time pricing that helps them evaluate their supply chains or navigate their supply chains. We also made an acquisition of May Street, which has moved us into the ultra-low latency space, which is a space we weren't really in before. And that has been growing, and that's been extending as well. And then the final point I'll just make is that we continue to invest in this space, both on the real-time side, where it's about technology and distribution, and adding new execution venues. I think we at last count had access or connectivity to something like 534 different execution venues around the world. And recently we added, for example, the Beijing Stock Exchange, which a number of our customers wanted to have access to. So there's more growth there. And then on the non-real-time side, we are investing in new products and new capabilities. And we've been talking over the past year or two about how we've been adding, for example, in terms of corporate actions or evaluated pricing. And that kind of investment in new product is also driving incremental growth. So in terms of broader TAM, maybe a little bit of expansion because the cloud distribution makes it more interesting and more accessible for a broader set of customers that might otherwise not have been interested in putting our hardware on a trading floor. So I hope that answers that question. Anything you would add to that? OK. And then just to clarify on your question around FX, so we are launching our non-deliverable forward platform on our new tech this coming fall. We are not fully done in 2023 with the continuing redevelopment of our FX matching platform, and that will be in 2024. So I just wanted to be clear about that. The NDF platform, completely new platform. We're launching it in Singapore. It does not exist today. So I don't expect that will have a meaningful financial impact near term. But in terms of the broader matching upgrade next year, we have already started to see a stabilization of volumes in that business after they've been declining for a number of years. And with this new tech platform, I expect to see that continuing to actually grow going forward. But we look forward to seeing that in 2024. Again, anything you'd add to that?

No. Thanks very much. If I could just clarify on the first point around UBS CS. It's a single digit million impact in FY23, if I understood correctly. And does that mean I should be thinking about a number roughly 4x that in terms of run rate for FY24? Is that the right sort of thinking?

I'm not going to be specific about 2024. It's a teeny tiny impact this year, as I say, single digit million. It's a little bit more than that. And we'll see that flow through into ASV in January 2024.

OK, thanks.

The next question we have is from Enrico Bolzoni of JP Morgan. Please go ahead.

Hi, good morning and thanks for taking my questions. So the first question I have is on your dealing, making bigger deals. So you say you're signing bigger deals, 15% higher. And at the same time, however, we did see the drop in ASB. So I presume that when you onboard the bigger clients, the lag between when you sign the contract and when you start to recognize revenues might be a bit longer, correct me if I'm wrong, but if this is the case, Is it fair to expect a material pickup in ASV going forward because of the large increase in larger deals that you've been signing recently? So this is my first question. My second question is actually related to the color you provided on the partnership with HSBC. I think it's very useful. You mentioned 750 terminals that have been replaced. It seems like quite a big number. Can you just give us some color on whether these are desktop solution or actually the mix of desktop and feeds that you managed to replace? And what was the driving factor? Is it because you offer a better deal or is it because of the product itself? So you're offering some data, some capabilities that the competitors didn't have. And finally, just on customer satisfaction, the number is going up quite nicely. Can you give some color on what customers are liking more? Is it the product that has improved or is it the customer service that has improved? And if you can be a bit more granular in terms of what specific division you're seeing the biggest uptick in customer satisfaction. Thank you.

Sure. I think I've got that, but we might need you to remind us on a couple things. Maybe just on your first question about the bigger deals. The important thing to think about is not the size of the deal, it's the kind of product. So because as Anna was touching on earlier, there are some products that you can basically switch on in a day. There are some products, and I touched on this a little bit earlier as well, that for a variety of reasons could take three, six, nine months. And it comes into ASB not when the initial sale is made, but when the billing starts. If it's a big, complex deal, then perhaps that takes longer. But it's really more driven by what the nature of the product is. Your question around the 750 terminals that we displaced. The first point I should just make on this, we often get asked questions when one of our competitors makes a specific announcement about a competitive process or a displacement. We tend not to do that. We have a lot of successful displacements of competitors. And this is just one example of that. And we thought it would be useful to share that with you all. The 750 displacements likely to be terminals, not electronic feeds. We called out that we have also displaced the number two provider of a feed there. So that's separate and distinct. But I just think maybe for everyone to understand that we don't put out a press release every competitive process we win or every displacement we have. But we would not see the growth that you are seeing in our numbers without our having a lot of displacements of our competitors in a number of different areas. So that should just give you a little bit of a sense of the receptivity to our product and the success we're having. And then with respect to your third question on customer satisfaction, This is largely that specific customer satisfaction survey was for Workspace. And as I mentioned, we are we have a program of continuous improvement and have put out, I think, one hundred hundred something, a very substantial number of changes and improvements to Workspace just in the first half of this year. And that's something that we will continue to be doing. It can be anything from the functionality to share an article or share an analytic with a colleague. It can be new analytics. I was touching earlier on the new functionality that we have around FX dealing. That's available in Workspace, all those kinds of things. It can also be better customer service, as we've talked with you all in the past. We have a very different approach now to our workspace customers because we have gone through the process of identifying what those customers are using the product for, which seems like an obvious thing, but it hadn't been done in the past. That allows us to serve our customers much more effectively, to have the product team, the customer service team, and the sales team coordinated in terms of making sure the customers are getting what they wanted. So hopefully that gives you a little bit of a sense. And again, anything else?

Thank you very much.

There are no further questions on the conference line. I will now hand the presentation back to Peregrine Revere, Group Head of Investor Relations.

Thanks for joining us, everyone. The IR team remain available for any follow-up questions. And Anna and David will see many of you on the road over the next week or so. So thanks for your time.