London Stock Exchange Group plc

and welcome to our 2023 financial results. It's great to have people here in Paternoster Square, and welcome to those who are joining us online. I'm here with Anna, and we are also joined by Michel-Alain Proche, or Map, as he is widely known, who has joined us this week as our new CFO. We have had a very good 2023. We delivered at the top end of our growth guidance for the year and have compounded organic growth at 6.5% over the last three years. We also accelerated within 2023, exceeding the year with organic growth at 8.5% in Q4. So this is a great setup as we head into 2024. I'm pleased to say that we've met or exceeded all of our Refinitiv acquisition targets, which Anna will talk you through in a moment. Cash generation was very strong with all of our profit converted to cash. This means we can invest in growth and our platform and still have significant excess capital to return to investors. You have seen us do this with over a billion pounds of buybacks in the past year and further growth in our dividend announced today. At our Capital Markets Day in November, we set new upgraded targets for growth with an acceleration over the medium term. I'll give more detail on our progress and our plans in a few moments. First, though, let me hand over to Anna to take you through our 2023 financial performance.

Thanks, David. And good morning. 2023 marked the end of our initial guidance period following the Refinitiv acquisition. And I'm pleased to say that thanks to a strong track record of performance, we've beaten all of our acquisition targets, we've delivered good cash generation and have been active in our approach to capital allocation. Looking forward, we're confident in our delivery of our upgraded medium-term guidance. So let's start with the performance against our three-year Refinitiv acquisition targets. Income growth has been consistently at the upper end of our 5% to 7% range, and our organic growth has accelerated through the period from 6.1% in 2021 to 7.1% in 2023. Excluding the impact of the Ukraine-Russia conflict, our three-year organic income CAGR was 6.5%. Our 2023 margin, on a like-for-like basis, and that's reflecting a constant perimeter from the time that guidance was set, was 50.3%, ahead of our guidance of a 50% exit run rate. There's a bridge in the appendix which walks you through the perimeter changes. These changes strengthen our business for the future. Turning to revenue synergies. Here, we're on track to deliver against our upgraded targets. For 2023, we aim to double the prior year run rate of 68 million. In fact, we've significantly exceeded that, exiting the year at a run rate of 158 million. Our cost synergy program is largely complete with a bit more to come in 2024. We're well ahead of the upgraded targets with a run rate of 442 million. In short, we've delivered against all of our acquisition targets. Now, for the rest of this presentation, I will, as usual, focus on constant currency growth rates. And you can see the strength of our 2023 performance on this slide. Total income, excluding recoveries, rose by over 8%, and EBITDA was up nearly 9%. Depreciation and amortization was up about 11%. There's two drivers of this. Firstly, we've continued to invest at a high level. And secondly, during 2023, we've embedded a more agile product engineering culture. And this means we're delivering product to our customers faster in regular releases. And we're starting to depreciate earlier. This accelerated depression in 2023 and will have a further impact in 2024. Growth in adjusted operating profit was about 8%, fairly consistent with EBITDA growth. Turning to the lower half of the P&L on the next slide. Our finance expense includes 30 million of FX losses mainly related to the group's funding arrangements. Previously, these FX movements were included in operating expense, and this change is to bring us in line with best practice disclosure. 16 million of the 30 million relates to the first half, which at the time was reported in OPEX. Our effective tax rate has gone up 2.2 percentage points from last year, and that reflects the higher UK corporate tax rate in place from April 2023. TradeWeb and LCH performed strongly in the year, and this has resulted in higher profit attributable to non-controlling interests. The combination of depreciation, FX impacts, and higher tax has impacted our EPS performance relative to EBITDA. All our divisions grew well. Data and analytics grew 7.3%, with higher pricing, improved retention, and stronger sales. Capital markets grew 6.1%, with good growth at TradeWeb, partly offset by market-driven weakness in equities and FX. Post-trade had an exceptional year, up 17% as interest rate uncertainty drove strong client demand for our swap-clear services. And there was also a contribution from M&A. Let's start with data and analytics, where all of our businesses performed well. Trading and banking grew over 3% this year, or 2.5% organically. We've turned around a business that had been in decline for over a decade to one achieving consistent, solid growth for the last two years. And we continue to get better and better feedback on Workspace, as David will cover later. This improved product delivered better price realization and higher retention. Enterprise data grew strongly, up over 9%, driven by demand for our proprietary real-time data. Within investment solutions, subscription revenues have accelerated, and we've seen double-digit growth this year. Improved sales execution is driving a better customer experience and helping us meet the strong demand for our core benchmark products. We also saw a recovery in asset-based revenues over the year, with Q4 up 11%. Assets under management at year end were 23% higher than December 2022. Wealth was up 4%, driven by digital solutions where we have seen sustained demand for data feeds. Customer and third party risk grew 16%. WorldCheck continued to show excellent growth, benefiting from both regulatory and reputational risk management tailwinds. Turning to ASV. ASV growth continues to be good evidence of the improvements we're making in our business. Subscription revenues and data and analytics are growing nearly 4% faster than when we acquired Refinitiv. ASV growth was 6.7% at the end of the year. As we saw over the course of the year, this metric will fluctuate from quarter to quarter. So while it remains indicative of future growth, it won't always perfectly align. The 6.7% in December includes a small impact of Credit Suisse, with some more to come in the first half of 2024. We continue to monitor our sales metrics closely, and they remain strong. And David will talk more about that in a minute. Turning to capital markets, we grew 6.1%. Equity revenues declined due to market conditions, as 2023 was a pretty weak year globally for equities. In FX, market volumes were also weaker, impacting activity across both FX all and matching. In fixed income, TradeWeb, which drives over two-thirds of our capital market's revenues, saw record transaction volumes in both rates and credit. Variable fees per million were lower due to product mix and a skew towards shorter duration instruments. So overall, revenue growth was a bit behind volumes, but still very strong and accelerating in the second half. Our post-trade business delivered an exceptional performance, up 17%. Interest rate volatility drove strong client demand for Swapclear services, and that was the primary driver of the organic growth in OTC derivatives. In addition, we helped our clients through US LIBOR reference rate reform, contributing 18 million in one-time revenues. The acquisitions of Acadia and Quantile, which round out our post-trade solutions offering, contributed a further 15% to OTC derivatives growth. Securities and reporting grew 7% as revenues relating to the early termination of the Euronext clearing agreement more than offset the in-year impact of the business last. And we also saw strength in repo clear. Net treasury income was up nearly 13% as interest margins benefited from the shape of the yield curve in 2023. We saw higher levels of cash collateral in the first half, which moderated in the second half as balances normalized and members optimized their collateral between cash and non-cash. Turning to costs on slide 13. Before I go into the drivers of our cost growth, I want to touch on FX. In 2022, you'll remember we had a 68 million benefit in OPEX. And this year we saw an adverse impact of 42 million. These effects impacts are a result of being a global organization operating in over 170 countries. And that's why constant currency growth rates are a better indicator of underlying performance. Organic cost growth of 5.3% was broadly balanced between ongoing operating costs and investment for growth. Average pay increases in 2023 were around 6%, but at the same time, we've delivered further cost synergies which partly offset this. Acquisitions added 2.4% to our cost growth. Ongoing operating cost growth reduced from 6.4% in the first half to 3% in the second half. This reflects the phasing of investment and efficiencies. Looking ahead, Refinitiv synergies will continue to benefit us in 2024, but that's not the end of the efficiency opportunity. Our broader transformation program is building a more scalable platform, which will deliver cost efficiencies over the medium term. Turning to margins on slide 14, we delivered an EBITDA margin of 47.2%, which included 110 basis point improvement in our underlying efficiency. As I mentioned earlier, the FX-related items are impacting margins in both years, and the impact is clearly shown in the table on this slide. When laying out our 2023 EBITDA margin guidance, I explained how our investment with Microsoft and recent acquisitions would impact this year's margin. And you can see that the impact was 120 basis points. Our guidance was set excluding the Acadia acquisition and FX. On this basis, we delivered an in-year margin of 48% in line with guidance. The reconciling items between adjusted and reporting operated profit relate to the acquisitions that we've closed over the last few years and most materially, Refinitiv. The 69 million remeasurement gain relates to the fair value adjustment of our previously held 14% in Acadia. Moving from the P&L to cash flow. Our business is highly cash generative as you can see on slide 16. We delivered 3.2 billion of operating cash in the year. As a reminder, the capex figure here is the cash cost of both business as usual and integration capex. Equity free cash flow was again substantial at 1.8 billion and we converted all of our profit into cash this year. Let's look at how we're deploying this capital on the next slide. We continue to deploy our strong cash generation back into the business for future growth, whilst also returning any excess to shareholders. The level of capex reflects the transformation we're driving in our business and investments in our broad range of growth opportunities. On dividends, we're proposing a final dividend of 79.3 pence, totaling 115 pence for the year, up 7.5% from last year. We completed the acquisitions of Acadia and Yieldbroker and the buyout of the LCHSA minorities in the year. We returned 1.2 billion to shareholders via share buybacks in the year. We carried out the remaining 450 million of the on-market buyback announced in 2022, followed by a 750 million directed buyback targeting the former Refinitiv shareholders. At our capital markets day in November, we announced a further one billion share buyback in 2024. As we announced this morning, we intend to do that through directed buybacks from the former Affinitiv shareholders. Looking ahead, we're reiterating our upgraded medium term targets that we announced at our capital markets day. We expect revenue to grow organically at mid to high single digits, accelerating after 2024. 2024 is impacted by a number of known one-offs, including Credit Suisse and the Euronet clearing termination. These impacts are well understood and reflected in consensus. We expect underlying EBITDA margin to increase over time. The improvement won't be linear because it will depend partly on the phasing of investments and efficiencies. With regards to CapEx, for 2024, this will remain at current levels of 11% to 12% of income, reducing over time to high single digits as a percentage of income. And lastly, over the medium term, our cumulative free cash flow will exceed net income. For 2024, we're confident of continued growth and improving profitability in line with our medium term guidance. and we expect the adjusted tax rate to be 24 to 25%. As noted at the CMD, we'll be moving to our new reporting structure from the first quarter. So in summary, we've built a strong track record of performance and met or beaten all of our Affinitive Acquisition targets. 2023 was another great year of delivery across the top line and in profitability. And we continue to be very active and thoughtful about how we allocate capital, combining investments in the long-term growth with returns today. It's been a privilege and a pleasure to be part of the LSEC journey these last few years and now see the transformation that we've been driving. I'll be eagerly watching the group deliver the next phase of growth. And with that, David.

Thank you, Anna. Now, we gave you a pretty detailed update at the CMD back in November. So for the next few minutes, I want to briefly look at our plans for accelerating growth in three key ways. One, by delighting our customers, improving retention and pricing power as a result. Two, by transforming our sales and account management approach to deepen and scale our customer relationships. And three, by improving existing products and bringing new solutions to market. These are the building blocks of our growth goal to deliver mid to high single digit growth accelerating after this year. So first, our customers are recognizing the ongoing transformation of our business and our products. Customer satisfaction is up across all of our key products with the biggest improvement seen in our largest accounts. Our customers also tell us they feel better informed about our products and find it easier to get things done. We are significantly improving our customer service. We've already reduced the time it takes us to resolve customer queries by 25%, and we plan to lower it much more. Second, we are deepening and scaling our relationships. You've heard us talk before about the success we've been having with our key strategic accounts, those 20 or so global institutions that are our biggest customers. The combination of LSEG and Refinitiv has created a truly strategic partner, and we have resourced our account management to reflect that. These relationships involve regular top-to-top dialogues and more strategic partnerships that have led to faster growth from our biggest customers. The design partner program with Microsoft is a great example of this. We're now putting in place a similar account coverage program for our top 250 accounts. Across all of these accounts, we are focused on solution selling. A comprehensive sales training program, Selling the El Segway, is on target for global rollout completion by the end of next month. And then, for our smaller customers, we are improving how we serve them by consolidating and standardizing our approach. We have already migrated 10,000 customers to be served out of three global hubs, with two further hubs to follow. At the end of last year, we launched our e-commerce platform, empowering our smaller customers to self-serve and giving us a tool to upsell and cross-sell much more effectively. We will be launching new products onto that platform throughout 2024. And as you know, we continue to keep a close eye on sales cycle trends. The data remain very consistent with what we shared at the first half. Deal sizes are up year on year. Win rates are up strongly since acquisition, and we are not seeing any lengthening in those cycles. And now, onto product, where I'll update you on what we're doing and the breadth of opportunity in front of us. You'll recognize this slide from the CMD. It underlines the waves of growth as they contribute to our acceleration. Half of LSEG, enterprise data, trade web, and post-trade, are businesses driving industry-leading growth. Another set of businesses, such as trading and banking and investment solutions, have great market positions and are the focus of investment programs to make them even better. And then we have our partnerships with Microsoft and with the world's leading financial institutions, where we are transforming the industry. Let's look at enterprise data first, which is just under a fifth of our revenue. This has been a continuing success story, building on our leadership in real time and our growing share in pricing and reference services. Our continuing investment in content is driving strong growth. We're having real success with fixed income and evaluated pricing data. A recent major win with an Asian bank reflects the new LSEG's unrivaled breadth and depth, as well as the quality of our data set. This was business that Refinitiv lost to a competitor pre-ELSEG, largely because of that competitor's extremely aggressive pricing. But this customer has come back to ELSEG because of the quality of our product. Our real-time optimized service in the cloud now has over 500 new customers since its launch a couple years ago and opens up a real-time service to many more customers who previously would not have invested in on-premise infrastructure to take the service. We're also seeing growing demand for data management and storage, which is an encouraging sign for our move into this space with Microsoft. Looking ahead, we are expanding on the same winning formula. We're investing in our content, transforming our data operations so we can onboard data much more efficiently and accurately. And as we make it easier for customers to access and combine data sets and drive insights from them, usage and value are only going to increase. Moving to TradeWeb, which is about 13% of our revenue. It was another strong year, with a notable acceleration in the second half. This business has a number of really strong growth vectors. Overall, electronification is an ongoing tailwind, but one the team is adding to with market share gains, particularly in credit, where TradeWeb represents a quarter of the high-grade credit market. Innovation in core markets continues, as does international expansion. In 2023, TradeWeb moved into the Australian market with the acquisition of a yield broker. Looking at 2024, TradeWeb is adding more trading tools, pushing further into emerging markets where electronification is in its very early stages, and looking to make further share gains in credit. Overall, we've stepped up the level of collaboration between TradeWeb and the rest of LSEC, building better products for customers. The Footsie Russell Partnership and the integration with FX All are great examples of this, but there is much more to go for. Turning to our businesses where we are driving improvement through investment. Trading and banking has probably been the area with the most upside surprise for our investors. After years of revenue declines, it's fair to say that expectations of a turnaround were low. But we have now delivered eight straight quarters of organic growth. What's changed? Put simply, Workspace is a great product, and we are continuing to improve it week in and week out. In 2023 alone, we made nearly 400 updates. We integrated some of the Tora functionality, and we launched the AI-driven advanced dealing for FX. Customers with multiple desktop services are spending 59% of their time on Workspace compared to 43% for ICON. and that is showing up in improved retention and better pricing. We also continue to make inroads in volumes and competitor displacements. Unicredit is a great example of this. They were lining up to cancel, but they saw how good and cost-effective the new product was. And we are confident that this progress can continue. As you know, we plan to have nearly all of Icon customers migrated to Workspace by the end of this year before sunsetting Icon in 2025. And the first applications from the Microsoft partnership will be in customers' hands in the first half of this year, with meeting prep and open directory pilots scheduled for the next month or two. Now, we have also seen improving performance in our FTSE Russell index business, which forms the bulk of investment solutions. We are selling more to our existing customers, and we have also generated significant refinitive revenue synergies as we link index sales to underlying data subscriptions much more effectively. Together, these measures have led to an acceleration in subscription revenue in 2023, as you can see on the right. Looking to 2024 and beyond, we see further growth from better commercialization of our existing products and improved distribution both through partnerships and technology. On top of that, we'll improve functionality as we complete our index refactoring program, accelerating time to market and giving our customers better tools and functionality. Now, moving on to our truly transformational opportunities, where we are making a step change to our addressable markets through deep partnership with the industry. For post-trade, it's worth reflecting on 2023 before we go on to the new opportunities in 24 and beyond. the division achieved total income growth of over 17% and 12% on an organic basis. Not bad for a supposedly mature business. That extends a double-digit compound growth record over five years. In addition to market volatility, the drivers were continued expansion, with our first two Singaporean members onboarded, product innovation, and a strong demonstration of our partnership credentials. We helped our customers migrate 600,000 contracts worth $45 trillion from LIBOR to SOFR in the first half of the year. Looking ahead, we will continue to innovate in our core clearing business with a move into clearing of derivatives on digital assets, CDS in the U.S. market, and the development of our FX forward service. But the big opportunity is in post-trade solutions. We thought it would be useful on this slide just to frame the opportunity in the simplest way possible. Over the last 10 years, LCH has achieved extraordinary growth, tripling revenues and increasing profits six times. It now generates well over a billion pounds in revenue and is still growing. Almost all of its income is generated from clearing. But this is only half of the OTC derivatives market, as you can see from the pie chart. At the end of 2022, the total value of OTC derivatives contracts outstanding was $21 trillion. Obviously, the amount traded during any year is many multiples of that. Almost all of that cleared business is in swaps, where, as you know, we are the market leader. Two important changes are taking place in the industry. First, regulations such as SACR are making it much more expensive from a capital perspective for banks to enter into bilateral trades. We think this will see more and more business migrate to clearing over time as liquidity improves and the relative cost comes down. Note that FX, the second biggest OTC market, is still over 90% uncleared. Second, the industry is crying out for common standards in the uncleared space. Participants want a consistent framework for contracting, documentation, valuation, and dispute resolution. And they want us to provide that. We are combining our existing swap agent business with Quantile, which offers trade compression and optimization across multiple counterparties, and with Acadia, which provides risk management, margining, and collateral services for uncleared markets. Together, these businesses offer a full suite of services to manage risk and capital efficiency across the whole OTC market, i.e. cleared and uncleared. So we are effectively doubling our market opportunity. And finally, a brief update on our Microsoft partnership. We covered this in some detail at the CMD, but progress continues to be encouraging, and we are very close to having product in the hands of our customers, a few months ahead of our original plan. Now, I know you have found the demo videos that we have shared in the past very helpful in visualizing the types of service we will be providing. So here is another one. This is actually a recording of a live demo done by Nez Jalal, our head of Workspace, to our board. And it shows the integration of Workspace with meeting prep and the broader team suite and just how flexible and embedded it is. So please play the video.