London Stock Exchange Group plc

Good morning, and welcome to our first half 2024 results. I'm joined by Michel-Alain Proche, or MAP, our CFO, and by Peregrine Riviere, head of investor relations. LTAG had a strong first half. Revenues were up 7.6%, and we made good progress in the commercial and strategic transformation of our business. Our first half growth was broad-based, with positive contributions from every business line. We're bringing stronger offerings to the market, driven by a high pace of innovation and consistent customer focus. We're driving regular displacements with Workspace, and the recent deal with Dow Jones expands our leadership in news. Our partnership with Microsoft is progressing well, delivering wider availability of the first products by year end. We're delivering this performance with a clear and critical focus on efficiency and discipline, driving a 50 basis point improvement in H1 margins. We are committed to further margin expansion over the next few years. Cashflow growth was very strong, supporting significant shareholder returns. We bought back a billion pounds of shares in the first half, and we increased our interim dividend by 15% today. I'll come back to the commercial and strategic progress we're making in a moment. But first, I'll hand over to Map to take you through our financial performance in more detail. Thanks, David.

Good morning, everyone. It has been good to meet many of you over the past few months. My key messages are partly what I have seen since I joined and partly what our first half performance confirms. First, we have a great portfolio of assets, providing critical services to our customers and with strong growth drivers behind them. This is clear from the 7.6% growth derived from every business line in H1. Second, there is scope for scaling our operating model. And this is something that I have executed before. Again, this is apparent already in H1 as margin improvements are coming through as we planned. And third, even if LSEC is highly cash generative today, the pathway to stronger cash flow is well marked with higher margin and lower capital intensity. So when I put all that together as a new CFO coming in after the capital market day last November and seeing what the plan is, I can say the plan makes complete sense to me and we are going to execute it in a very disciplined way. In a nutshell, you can have confidence in our medium term guidance as we all do. Turning to the next slide, I'm looking at how our growth has accelerated in Q2. Q1 was good at 6.4% organic, but Q2 has been better at 7.8%. The acceleration has been driven mainly by capital markets and FTSE Russell. So now, if we look at the whole of H1 division by division on the next slide, you can see a strong pattern with three out of five divisions growing at double digit rate on an organic basis. Data analytics maintained a solid performance throughout the first half, despite the known headwinds, and post-trade was stable despite an exceptional 2023 and the first impact of the loss of the Euronext business. Looking now at data and analytics in more detail, there was a really good performance from workflows with organic growth of 2.4%, which would be over 3% adjusting for Credit Suisse and the enterprise deal we mentioned at Q1. We are increasingly displacing other providers as workspace becomes more powerful. And in Q2, we had our strongest net sales quarter for workflows for many years. The integration of Tora and SDC Platinum and the strategic partnership in news with Dow Jones all bring significant enhancement to the platform. Data and feeds maintain its good momentum. The slight slowdown this quarter reflects the very strong Q2 last year. We continue to invest in broadening our data sets and adding more low latency feeds. In analytics, underlying growth remains solid. We expect the new analytics API to drive an acceleration in H2, with initial sales looking encouraging. David will talk about that in a moment. Turning to the next slide, I will cover FTSE Russell and Risk Intelligence, now reported as separate divisions. FTSE Russell had a very strong first half, with a real acceleration in 2Q2, as anticipated. The growth here is broad-based, with good progress in both FTSE and Russell equity franchise, a strong performance in fixed income, and encouraging sales in new areas like interest rate benchmarks. Asset-based revenue was also up double-digit, reflecting market movements and inflows. Risk intelligence continues to be driven by WorldCheck, our leading screening business. The market remains very attractive, although we are just seeing a normalization of growth rates post the spike in activity caused by the invasion of Ukraine. Our due diligence business continues to be impacted by the shortage of IPOs in the Asian market, particularly in Hong Kong. Looking now at our ASV metric on the next slide. ASV growth was 6.4% as we exited Q2, compared to 6.0% three months earlier. The stronger result reflects a very good performance for sales and installs in a number of businesses with limited additional headwind from credit risk cancellation in the quarter. So now we now expect a bit more impact in H2. and our guidance for the rest of the year that we shared in Q1 remains around 6%. We remain around halfway through the total expected Credit Suisse impact on ASV. On the next slide, capital markets present a positive picture across the board, with all businesses contributing to growth. As you can see, performance has notably improved in Q2 in equities. While the primary market remains relatively subdued globally, the pipeline for the autumn is improving. Meanwhile, secondary volumes have picked up and so has our market share. We are encouraged by the significant revisions to listing rules announced in July, reflected in this week's launch of the new main market, which we believe will help to ensure London remains a leading global exchange. Fixed income had an outstanding H1, driven by the growth of TradeWeb. TradeWeb continued to grow share in a number of product lines in a very healthy market environment. We also made important strategic progress, completing the Redfin acquisition earlier in the year and announcing the acquisition of ICD, which completes shortly. This deal adds a fourth customer group for ThreadWeb, expanding into the corporate treasury market. This also presents an attractive opportunity for other parts of LSEG, particularly for our FX business. Turning then to FX, we are seeing a more positive trend here, with the business returning to growth in Q2, supported by stronger markets and new products. Finally, looking at post-trade on the next slide. Here, the reported growth does not fully reflect the strengths of the underlying performance, given the one-time revenue bump from reference rate reform in 2023 and the first impact of the Euronext exit. We still achieve organic growth across all our revenue lines and only saw a decline in net treasury income, reflecting lower levels of collateral. Just on Euronext, it's worth highlighting that the full year impact of 35 to 40 million pounds, which we have previously talked about, is very heavily weighted to the second half. Business was good both in our core swap franchise and in newer growth areas. CDS Clear grew strongly after a competitor exited the market in 2023, and Repo Clear increased its share in a buoyant market. We also made progress with the development of post-trade solutions and bought out a further minority stake in LCH Group. So we are moving now from revenue to the rest of the P&L on the next slide. I will go into OPEX and margin in a bit more detail on the following slides. The overall message here is that the strong top line growth of 7.6% fully translate into similar level of earnings growth at 7.7% on a constant currency basis. And this, it is important to note it, despite higher finance costs and tax. That latter impact is actually offset by the significant share buybacks we completed over the last 12 months, which have reduced our average share count by around 3%. Let's look at our cost base in more detail on the next slide. both cost of sales and operating expenses. First, cost of sales is heavily influenced by the mix of our top line growth. On a constant currency basis, it grew by 5.5%, a slower pace than the 7.6% growth we posted. This is mainly due to the improved contribution to the growth from DNA, where a part of the cost of sales is fixed, like our Reuters news costs. Second, looking at operating expenses, I like to present this by nature of cost because that's how we drive it. And I think it helps to see what levers there are to manage this cost. Staff costs, which are our largest expense, increased by 20 bps year on year as a proportion of total income at 26.2%. This is a very good result of our global resource equation. Indeed, one of the strategic projects we are conducting with Irfan Hussein, our global CIO, is a massive insourcing of our external technology contractors in order to enhance our engineering expertise and create a strong product culture. And we begin to see its materialization in our numbers with the stabilization of our third-party services where these contractor costs are recognized. This is providing operating leverage overall on our resource costs, as I'm going to show you on the next slide. So let's turn to the next slide where we bridge the effects of these cost drivers on our EBITDA margin rate. Starting from the left, the 47.3% is the reported margin rate for H1 last year. Then there are the adjusting FX factors, both transactional, namely embedded derivative on our client contracts for positive 40 bps, and then translational with the minus 20 bps, mainly coming from the evolution of the USD and Euro versus GBP. All in, it gets you to a comparable baseline of 47.5% for H1 2023. Then you can see the contribution to margin from each cost line on a constant currency base. The net benefit to margin from resource cost leverage that I just mentioned is a net 30 basis points. And from IT and other costs, another 20 basis point benefit. Taking these controllable movements together gives our underlying margin improvement of 50 basis points, and all this while we continue to invest in our strategic projects as our Microsoft partnership. So that brings us to an underlying margin in H1 at 48%. And to complete the bridge on the right-hand side, we enjoyed this semester a benefit of 50 basis points, mainly from embedded derivatives, from certain non-sterling customer contracts as, over time, exchange rates move. And that gets you to our reported 48.5%. turning to net finance expense, which stepped up about 30 million pounds in H1. There are two main drivers to this increase. First, as you may remember, we refinanced a part of our debt in March that came to maturity. Consequently, we issued $1.25 billion of bonds at 3 and 10 years at about 300 bps higher coupons than the instrument they were replacing, which is just the reality of where the markets are. Second, we front-loaded our announced £1 billion buyback to take advantage of Blackstone's sales down, which led to an increase of the group net debt in the semester. Finally, I just want to mention that the net finance expense includes now swap interest costs, when, for example, we swap commercial paper labelled in euro back in GBP. We previously identified these as FX losses, but they are actually an ongoing financing cost of our balance sheet. There were around £9 million in H1, both this year and last year, and they sit in the interest differential line on this table. I remind you that the full year impact last year was around £24 million, and they were reclassified from OPEX to net finance expense. So taking all that into account for the full year, we expect net finance expense to be a little over 200 million pounds. On tax, on the next slide, the effective tax rate rose from 23.7% to 24.8%, in line with our guidance of 24 to 25% for the full year. The increase is mostly a result of last year's step-up in the UK corporation tax rate. On AAPS, I think it's worth taking a slightly longer-term view, given the noise from year to year from FX. Here you can see that over the last three years, AAPS has grown 26% or a compound rate of 8%. That's a bit ahead of organic revenue growth of 6.5% to 7%. Now looking at non-underlying items which are similar in nature to previous years and for the most part relate to Refinitiv. We remain on track for total integration costs across CAPEX and OPEX of around £1.4 billion by the end of next year. As you know, we have already reached our cost synergy target a couple of years ahead of plan and we are well set for revenue synergies. Let's turn to cash flow now. We saw a big step up in operating cash flow, generating over 300 million pounds more year on year. Net taxes paid optically increased by about 150 million pounds, reaching 203 million pounds. There are two reasons for such an increase. First, H1 2023 was exceptionally low due to a rebate we got last year. And second, our UK business is now moving into statutory profit. CapEx came in at £454 million, slightly below last year, and fully in line with our full-year guidance that CapEx will be 11% to 12% of revenue. We have a good line of sight to that number coming down in 2025 and beyond. Putting those movements together, equity free cash flow shows a strong growth of 29% year on year. We have continued to be very active in our allocation of cash as well, as you can see from the next slide. We have just talked about capex. Next is the dividend, with the interim dividend increasing 15% to 41 pence. As you know, we have slightly tweaked our policy here. The interim will represent around one-third of the full-year dividend, and our payout ratio remains between a third and 40% of EPS. On M&A, total spend was just over £200 million. This relates to the acquisition of Ratefin and the buyout of about 3% of the LCH minorities back into one. The acquisition of ICD completes shortly with a consideration of $785 million, therefore impacting in H2O. And as I mentioned already, we have deployed 1 billion pounds in the first half on buybacks, playing our part in Blackstone's orderly exit from the register. In total, we've now returned 2.5 billion pounds via buybacks in the last two years. We ended the period with a leverage of two times net debt to EBITDA, exactly in the middle of our guided range. So to sum up, you can see from our performance in H1 that we are well set to deliver on our promises from last year's Capital Markets Day. We see revenue in the mid to high single digits organic growth range accelerating after this year. We see that acceleration coming from a number of sources reflecting how we have been investing across LSEG. Our EBITDA margin will increase over time. We have structural levers here which will support this expansion while still leaving plenty of room for growth investment. As I mentioned just now, CapEx will fall as a percentage of revenue from its current elevated levels. And finally, we are confident of very strong cash conversion. Now let me hand back to David to talk about our strategic and operational progress.

Thank you, Map. I'm going to spend the next few minutes giving you some of the highlights of our commercial progress, the investments we're making to drive growth, and our partnership with Microsoft. At our Capital Markets Day in November last year, I highlighted how the breadth of our business is a key competitive differentiator. With products and services along the whole trade lifecycle across multiple asset classes and with global reach, we are a natural partner to large banks and asset managers. Enterprise agreements are a great example of this competitive advantage. These bespoke multi-year agreements with our largest customers give access to a broad selection of our products and services in a single contract. We've talked to you before about how it has strengthened relationships with major institutions like Barclays and HSBC. By removing barriers to consumption and giving certainty on cost, these agreements drive improvement in customer engagement and satisfaction. So these are great for customers and also good for us. We've seen a step change in growth from these major accounts, as well as growth in our wallet share. We're also focused on how our scale can better serve our smaller customers, ensuring a consistent experience and more efficient delivery. We opened four new service hubs and migrated an additional 2,000 customers in H1. One quarter of our customers are now served from these locations. Through technology and process improvements, we are raising service levels and outcomes for smaller customers. To give just one example, our new AI-based question and answer tool is helping us answer customer queries up to 70% more quickly and can be applied to 60% of all incoming queries. And as we train it on the almost 3,000 queries a day that we receive, it will continue to get better. In H1, we added new risk intelligence services to our e-commerce platform, which offers smaller customers a self-serve capability for the first time. We will add further products to the platform in the second half and beyond. We continue to keep a close eye on the sales environment. In a business as diversified as ours, with our size and breadth, there will always be puts and takes, but the overall trend here is consistent with what we shared at the full year. No change to the length of our sales cycle, average deal size, or win rates. And we have seen encouraging growth in our sales pipeline, which we expect to support our sales performance in H2 and beyond. In the next few slides, I'll outline some of what we are doing to accelerate LSEG's growth. Starting with our data and feeds business on slide 27. This business is built on the superior richness, breadth and depth of our data and the power of our distribution. And we are investing in both. Over the last three and a half years, we've expanded our fixed income corporate action data tenfold. Since acquiring Refinitiv, we've doubled the number of companies covered by our ESG data and increased the number of metrics fourfold. And we have expanded our private markets coverage by 80%. At the same time as we are growing the breadth of our data, we have also improved its quality, cutting in half the number of data corrections over the last 18 months. This continuing investment in data scale and quality is driving growth and share gains in our pricing and reference business. We're also focused on making it easier for customers to consume our data in ways that work for them, meeting them where they want to be. When we make it easier for customers to access our data sets and gain insights from them, the usage and value of our data increases. We are investing from a position of strength in real-time data where we are the global leader. We significantly expanded the footprint of our low latency business in H1, adding new feeds from over 70 venues to an offering that was already unmatched by peers. We also launched cloud distribution of our full tick real-time offering, meeting a need from compliance, risk, and market surveillance teams for comprehensive full tick data, but with the ease of cloud distribution. Turning to workflows, the story here is getting better and better. The improvements we've made over the last few years are having a real impact. Let's look at two specific groups of users, bankers and asset managers. Our offering to bankers saw another step change in H1 as we integrated deals and security ownership data, both previously hosted on separate LSEG platforms. We also integrated third-party presentation tools from Macavicus, a key workflow requirement of many junior bankers. Workspace already had a strong news offering with exclusive distribution of Reuters content. The multi-year agreement we signed with Dow Jones a month ago takes this to the next level, giving Workspace an unparalleled offering. As part of this partnership, Dow Jones will benefit from access to our data sets and Workspace, making our deals data and league tables the default source in Wall Street Journal reporting and driving further appetite in the banking community for our products. For asset managers, our end-to-end offering is now a real differentiator. We've integrated our multi-asset class order and execution management services and the FX trading capabilities of FX All and Advanced Dealing into Workspace. This allows users to remain in Workspace while they seek liquidity and then execute and manage their trades. A much neater, more seamless workflow that is helping drive displacements. We have a powerful analytics offering with around 300 models across a broad range of asset classes. but our offering has been fragmented across a variety of distribution platforms and user interfaces, making it hard for customers to find or access many of our analytics. In H1, we launched a single consolidated distribution channel via API. This makes it much quicker and easier for customers to connect with LSEG and find the analytics they need. The customer experience is further enhanced by real-time updates and seamless distribution to data lakes and other customer locations. It is also an approach that makes it much easier to build AI solutions on top of our analytics tools. Not only are we improving specific products, but we are getting better at combining them to build end-to-end solutions that mirror a customer's workflow. Let me give you an example from an Asia-Pacific asset management customer. First, we combined our portfolio management tools and our workspace desktop to create a single space for the customer's traders to monitor their portfolios in real time and explore pre-trade data, news, and analytics. We then extended this seamless experience to the point of trade through a combination of our order and execution management tools and our trade routing capabilities. In the past, these have been positioned as discrete offerings, hence the product names on the slide. By combining them into a single solution, we've unlocked a powerful end-to-end workflow that is really appealing to our customers. In this particular example, allowing us to replace four products from two competitors. This is something we now do on a regular basis. On the right-hand side of slide 30, We show a selection of other customer wins from H1. Note the broad range of customer types and geographies and the variety of products we're selling. That really speaks to the breadth and strength of our end-to-end offering. Moving to TradeWeb, which had another good half. The business sits at the heart of multiple strong growth vectors. TradeWeb's innovation in new trading protocols and execution tools like portfolio trading is aiding the electronification of interest rate and credit markets. As this trading evolves, it creates the need for new risk management tools, which TradeWeb is meeting with its automated pricing engine and similar innovations. More sophisticated performance and risk management is driving demand for more data and insights. Armed with all of these tools, new market segments, asset classes, and geographies are opening up to electronic execution. We work with TradeWeb across every part of this industry cycle, from the benefits of integrating FX All with the TradeWeb platform, to the UK and European government bond price benchmarks FTSE Russell is providing to TradeWeb, through to the comprehensive distribution of TradeWeb data by our data and feeds business. This is a great example of our focus on partnership and the power of our end-to-end business model. We're still in the early stages of realizing our full potential here. Post-trade is another area where we are working in partnership, in this case with the industry, to transform financial markets infrastructure. We continue to grow our core clearing business, adding new swap clear members, expanding CDS clearing in the U.S., taking share in repos, and working with partners such as FMX to offer cross-margin benefits to customers in the futures space. But the industry is also demanding common standards and greater capital efficiency in the other half of this pie chart, the uncleared space. In the first half, we added five banks to our smart clearing service, helping to optimize their capital and margin in FX forwards. We continue to work closely with other industry partners to build out our broader suite of post-trade solutions, providing trade compression and optimization, risk management, margining, and collateral services across the 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're effectively doubling our market opportunity. Now, let's turn to our partnership with Microsoft. I'll give you an update on our progress with the integration of Workspace with Teams and Office 365 in a moment. But first, I want to give you some insight into the products we are building in the data and feed space. Today, it's harder than it should be for our customers to use our data. There are multiple data sets and multiple distribution channels, often based on complex underlying technology. And this is true across the industry. This can make it hard to isolate the data you need or combine it with other data. Sometimes you might not even know what data is available. Those are the issues we are addressing with the data as a service where DAS products will be rolling out from the second half. We will host our key data sets in a single cloud-based platform with a single catalog to help customers find what they need. They will have a single common data structure and be accessible through a variety of channels with the option to use the data on our platform or to export it to their own data lake. By removing many of the obstacles to consumption of our data, we make it easier for our customers to use a lot more of it. The initial launch will cover eight of our data sets, including company fundamentals and ESG data. We will continue to expand the service from here, and by the end of next year, we expect many of our most popular data sets to be live on the platform. The capabilities we are introducing are revolutionary for our industry and will change how people discover, access, and maintain our data. Now we know how helpful you have found the demo videos that we've released in understanding the new product capabilities we are building. However, watching someone find and manipulate data sets doesn't make for a particularly engaging video. For those of you who are interested, we do have that demo video on our website. We know there is a lot of interest in the integration of Workspace with Microsoft Teams and Office 365 products. So we thought you might like to see an update on that experience with a particular focus on the way Open Directory will open up communication across our industry and the increased insights provided by embedded co-pilots and natural language search and prompts. This is very much a prototype at this stage, but gives you a good idea of where we are heading. Let's watch the video.