London Stock Exchange Group plc

Good morning and welcome to the investor and analyst call for LSEG's third quarter 2024 trading update. At this time, all participants are in listen only mode. Later, we will conduct a question and answer session through the phone lines and instructions will follow at that time. I would like to remind all participants that this call is being recorded. I will now hand over to Peregrine Riviere, Group Head of Investor Relations, to open the presentation. Please go ahead.

Thank you. Good morning, everyone. and welcome to LSEG's third quarter update. I'm here with David and Matt. Matt will make some brief opening remarks on our Q3 performance and then we'll open up to questions on the conference call line. So let me hand over to him right now.

Thanks Peregrine and good morning everyone. I'm happy to report that Q3 has continued the trends of H1 with strong organic growth across the group. Total income grew 9.5% on a constant currency basis. This includes 80 basis points of M&A benefit, mainly from the ICD acquisition within TradeWeb that closed at the start of August. Organic growth was 8.7%, and I will actually refer to this metric through the rest of my comments. So growth has accelerated in Q3 from Q2 and H1. The acceleration has come from both trade, DNA, and our FX and equities businesses. TradeWeb has sustained its particularly strong trend from H1. Overall, our performance reflects the strength of our proposition for our customers and continued good execution. Turning first to data and analytics, organic growth was 4.6%. This represents a slight improvement in growth from H1 of 30 basis points. All three business lines accelerated from Q2. Our overall sales and retention performance continued to be solid. Workflow's revenue was up 3.2%, with particular strengths in FX, commodities, and banking users. We continue to enhance the workspace platform and have now integrated news from Dow Jones publications after the partnership we announced in July. We have made further progress on the migration from ICON and we are on track to sunset ICON in the first half of next year. In data and feeds, growth continue to be strong at 6.1%, driven by solid retention and a good pipeline of innovation. We recently launched one of our leading PRS products, Datascope on Snowflake, making the full streaming dataset available outside North America for the first time and significantly enhancing its flexibility for customers. And in analytics, we achieved 5.2% growth, with initial demand for our analytics API being very encouraging. We have seen adoption from both existing and new customers with a good mix of uptake from broker-dealers, asset managers, hedge funds, and regional banks. Our partnership with Microsoft continues to progress in line with the timetable we set out at our CMD last year. We expect Microsoft meeting prep. We choose LSEC workspace data to enter general availability by year end. Single sign-on and interoperability between teams and workspace will also be available by year end and data as a service entered external pilot in the quarter. Turning now to FTSE Russell, our index and benchmark business. FTSE Russell continue its strong subscription momentum up 13.1% and consistent with the growth reported in Q2. This reflects ongoing demand for flagship equity indices and benchmarks. Growth in asset-based revenues slowed, reflecting mixed effects and the termination of an ETF contract at the end of H1. Risk intelligence continued to grow double digits at 10.4%. WorldCheck, our leading screening platform, remains the main driver. Divisional growth is a little diluted by the due diligence business, which continues to face headwinds. Let me turn now to ASV growth, which encompasses all of the subscription business of the three divisions I just covered. ASV grows to that 6.0% at the end of Q3. This is fully in line with our guidance that we would be around 6% through the balance of 2024. The slight decline from the 6.4% growth reported at the end of June reflects a small incremental impact from Credit Suisse and normal quarter-to-quarter variation that we've talked about before. And as previously mentioned, we expect to remain at around the 6% level at the end of this year. Moving on to capital markets, growth was 22.4%, with all three business units making a significant contribution to growth in the quarter. TradeWeb's outstanding year continues, driven by strong execution and very good market conditions. We continue to grow market share in U.S. investment grade and high yield to around 18% and 8% respectively. The ICD acquisition closed in early August, giving TradeWeb access to a fourth client channel, Corporate Treasury. Growth in our equity business accelerated, up 8.5%, driven mainly by secondary markets. We saw higher market activity and drove around 2 percentage points of share gains year on year in September. July saw the launch of the new main market, ensuring the continued competitiveness of the UK market. FX also had a good quarter, growing 12.8%, with FX All and Matching both growing well in a strong market. This reflected good growth in relationship trading and swaps in the dealer-to-client business, stronger volumes in Matching, and some price increases in data. Post-trade had a very strong quarter considering the headwinds faced from the Euronext exit, which step up with the exit of commodities derivative in July and financial derivatives in September. Total income was up 4.8%. OTC derivative was a standout performer, growing 18.4%. This reflects very high volume growth in the swaps market and the power of our business model. Furthermore, in September, we supported the launch of FMX with the clearing of Sofair Futures in the US market. Securities and reporting was down 11.1% as Euronext exited in full during September. As expected, this also affected the net treasury income line, which was down 5.5%. However, collateral levels began to rise again during the quarter, and we maintain a good level of yield on collateral balances. And just a reminder that the Euronext impact will be felt more strongly in Q4, with a continued drag of around 30 million in 2025, weighted to H1. And finally, a word on capital allocation and our balance sheet. We have recently reached agreement with a number of LCH minority shareholders to buy them out. We are purchasing a further 8.3% of LCH Group for a consideration of 433 million euros on the same terms as the transaction in Q1 of this year. This will take our ownership to 94.2%. We expect to complete the transaction shortly and it will be obviously slightly accretive to 2025 EPS. We have also been active in the debt market. In September, we successfully raised circa £575 million across two debt instruments, a €600 million bond at 2.75% and a $100 million private placement at 4%, both with three-year maturities. We will update you on our 2025 capital allocation plans at the full-year result next February. So just to wrap up, it has been a particularly strong quarter with healthy growth in our subscription business and very strong performance in our high-quality volume-based businesses. We continue to innovate and bring new products to our customer with the first Microsoft partnership applications entering general availability soon. And we will still see significant scope to enhance our services and improve efficiency in the coming years. So now we're happy to take your questions. Eric Green. Thank you, Matt.