Earnings Call: H2 2019

Feb 28, 2020

Followed by David Swimmer, CEO, who's going to comment on the execution of our strategy and give an update on the Refinitiv transaction as well. After that as normal, we're going to take Q and As both from here in the room, but also from those on the phone lines. So with that, I'll hand over to David. Thanks very much, Paul, and, good morning, everyone. You will have seen from this morning's announcements, we have released a strong set of results. And slide 4 gives the main highlights. Our total income increased 8 percent to £2,300,000,000, driven by strong organic growth and another good contribution from NTI. After deducting cost of sales, gross profit increased 10%, up to £2,100,000,000. Underlying operating costs were again well controlled. We strip out depreciation. Operating expenses rose just 1%. Adjusted EBITDA increased 19 percent to £1,300,000,000 and adjusted earnings per share rose by 15 percent to 200.3p. And finally, the proposed dividend of 49.9p per share brings the full year dividend per share to 70p an increase of 16% and within our target cover range. I'll take a more detailed look at our the result starting on Slide 5. Information Services performed well, up 7% and within this division, Footsie Russell delivered reported revenue increase of 10%. LCH also delivered a strong performance with revenues up 13% And with inclusion of NTI, total LCH income rose 14%. The principal driver of growth continues to be the OTC clearing services with record notional cleared volumes at Swapclear. Italian post trade services delivered a headline 1% increase to revenue. And including NTI, there was a 5% growth in total income. Capital markets performed well in challenging markets. Headline revenue increased 5%. Which includes a £32,000,000 increase in primary markets from the impact of IFRS 15. We exclude this impact Capital markets would have declined by 3%. So overall, a strong performance across the group with 7% income growth on an organic and constant currency basis, a strong result given challenging markets in 2019. And finally on this slide, cost of sales declined 8% in large part reflecting an updated agreement at Swapclear, which delivered a more than £30,000,000 saving. Next to Slide 6, which provides the main year on year changes to the income line. The graph shows that FX changes were comparatively small £36,000,000, reflecting good growth both at LCH, up 18% and at CC and G and Italy, up 14%. Growth in NTI mainly arose from an increase in the quantum of margin, which reflects higher clearing volumes, volatility, and also a change to risk methodology at LCH. We expect NTI to stabilize around the levels seen in the second half of twenty nineteen. The largest increase to the top line was from the strong organic growth across the group adding £120,000,000. Contributions from acquisitions were not as significant this year, we completed 1 small acquisition beyond ratings, although we did announce a much larger acquisition, which you may have heard something about yet to complete. We next move to operating expenses, which is on Slide 7. Our cost excluding depreciation and amortization were again well controlled, increasing by just 1%, including D And A, operating expenses rose 7%. Now on this slide, we highlight the principal movements in the cost line, First, we adjust for the currency effects, which increases last year's starting position by £8,000,000. We achieved $17,000,000 of savings during the year as part of the total $30,000,000 headcount reduction program we announced last year together with good control of costs and some benefit from IFRS 16, this means net underlying expenses, excluding D and A, are almost unchanged year on year. And finally, you can see from the slide that the principal increase in expenses arose from depreciation and amortization, which were £65,000,000 higher. This increase was driven by the continuation of investment for growth and efficiency and also from accounting changes under IFRS 16. I'll give a little more information on this on the next slide. So if we move to Slide 8, this slide looks at some of the actions we are taking to keep the focus on cost efficiencies, and it also provides some expectations for the current 2020 year. There is an ongoing focus on efficiency opportunities that arise from being a larger and more diversified group. And as mentioned just now, we have continued to review headcount. We are making changes to remove duplication and remove reduced the number of efficiencies and contractors. We have delivered $17,000,000 savings in 2019 and aim to achieve the full $30,000,000 on a run rate basis this year. We remain an expanding business, so we're also continuing to invest in the group for growth efficiency and resilience. We therefore expect underlying depreciation to increase again in 2020, The graph on this slide shows an expected increase of approximately £35,000,000 in overall depreciation which is similar to the increase experienced in 2019. And finally on this slide, the reported tax rate for 2019 was 23.7 percent. And for 2020, we expect the tax rate to be between 22% 23%. Turning to Slide 9. This provides more detail on investment initiatives. We invested £195,000,000 of CapEx in various projects in 2019. With 2020, we expect an uplift in the ongoing level of investment to around £220,000,000. We continue to invest for growth and projects to drive increased returns. Approximately 1 third of current year investment is for new enhanced products and also for projects to drive group efficiencies. Examples here include development of index data and analytics products, trading venue enhancements, and multi asset class clearing and risk platform. And the other 2 thirds of investment focuses on operational projects, of which will also deliver long term benefits. And these include data center consolidation, continued cloud migration and technology upgrades and system resilience. These CapEx projects reflect the group in its current state and do not include the ongoing spend on plans to integrate Refinitiv and the associated integration project costs. And now let's turn to cash flow, which is on slide 10. Cash generation was good with £639,000,000 of discretionary free cash flow after tax interest payments and investment activities. This equates to in growth initiatives and infrastructure as just described. And separately, we invested in a 4.9% stake in Euroclear. And as I mentioned, acquired Beyond Ratings. Let's now look at our financial position on slide 11. Operating net debt at the end of December after setting aside £1,100,000,000 of restricted cash, was £1,800,000,000, a reduction from 1,900,000,000 at the half year. We have approximately £680,000,000 of net committed undrawn bank facilities, which extend out to 2024. And separate to this, we have a $13,300,000,000 bridge facility available to refinance Refinitiv debt which gives us flexibility when we consider our financing needs after closing. In terms of ratings, S and P maintaining long term A rating and Moody's 7 A3 rating. Both like the benefits of the Refinitiv deal and the longer term financial strength, although they signal an increased near term credit risk on completion. And in terms of leverage, Year end net debt to adjusted EBITDA is 1.4 times and well within our targeted 1.2 times range. And so we start 2020 in a strong position continuing to support investment in the business and putting us in a good position ahead of the Refinitiv transaction. And finally, let's move to Slide 12, This slide confirms achievement of the financial targets we set in 2017. FTSE Russell delivered a reported 10% revenue increase for 2019 having met the growth target in the previous years. LCH OTC has exceeded targets with 15% reported revenue growth in 2019 and 13% on a constant currency basis. LCH operating margin has increased to 54.9% helped by top line growth and the reduction in cost of sales, which I noted earlier. And we have kept close control of costs and have prioritized ongoing investment opportunities across the group. And as a result, and helped in part by IFRS 1516 effects, We have finished 2019 with a 54.7 percent EBITDA margin. So another strong set of results and a strong financial position. And with that, I will, I will pass on to David. Thank you, David, and good morning everyone. We have delivered this morning's strong results despite another year of macroeconomic and geopolitical events. That have directly influenced global financial markets. As David has highlighted, we've continued to invest in our business as we grow in scale while remaining focused on group wide efficiency and operational excellence. On the next few slides, I will provide further detail on the group's progress strategically and operationally across our businesses of information services, capital markets and post trade. I will then provide an update on the proposed acquisition of Refinitiv, which significantly accelerates our strategy to be a leading, Global Financial Markets Infrastructure Provider. Turning to Slide 14. As our financial performance demonstrates, we have continued to make progress on our strategic objectives and to take significant steps on a number of group wide initiatives. Our open access and customer partnership approach are key to our strategy as we work with LSEG has consistently anticipated notable trends in financial markets and has a strong track record of delivering solutions for our customers, while creating shareholder value. Capitalizing on global investment trends and an evolving regulatory landscape. We continue to see multiple opportunities for growth and enhanced collaboration. In Information Services, but see Russell has consistently achieved double digit growth over the last several years and is a key contributor to group revenues. We acquired Beyond Ratings, a very complimentary business to Putsy Russell's existing ESG and data offering, as well as to the analytics tools provided through the yield book. From the start of this year, we have aligned the group's post trade businesses into a single post trade division, encompassing LCH Group, CCNG, Monte Titilly, and Univista. Our trade reporting business that previously sat within information services. This will ensure greater group wide collaboration and benefits for customers. While continuing to operate on an open access basis with no changes to local legal entity governance and regulatory oversight. We are committed to continued investment in The group continued to pursue its cloud strategy to reduce operational costs, deliver system scalability, and support our growing global footprint. Let me now turn to each of I will then give an update on Refinitiv. 1st, turning to Information Services on Slide 15. FTSE Russell continues to be a leader in the global index industry and is benefiting from industry trends, such as the increased demand for data and analytical tools, and the continuing growth in passive investing. At the end of the year, the value of ETF assets tracking its indices was $765,000,000,000, up 26% on the previous year. Pudsey Russell successfully began inclusion of China A shares into its global equity benchmarks, a significant development for the country. The completion of the 1st phase will take place in March and we will continue to consult with the market and regulators on the next stages of inclusion. This past July, FTSE Russell launched the 1st Climate Risk Government Bond Index which allows the market to FTSE Russell has also won a number of client mandates to develop sustainable indices, including a new customized ESG benchmark for a Dutch pension fund. Turning to Slide 16. Our ISD business provides solutions across the investment lifecycle. Customers are increasingly demanding valuable IP from market infrastructure providers in the form of indices, data, and analytics. FTSE Russell's multi asset class capabilities enable it to offer world class investment tools across these three areas. Working in partnership with customers to help them improve investment processes and portfolio composition. Core index benchmark families covering global equities and fixed income provide essential foundations upon which other key growth areas can be built. Similarly, data accumulated from our benchmarks, are used to inform smart beta and factor solutions, where we are continuing to see strong demand. The yield book augments our fixed income index capabilities by providing single security and portfolio level analytics across a wide range of fixed income instruments. Our index and analytics are complemented by data solutions, which provide valuable data sets for customers performing a wide variety of activities across Our Capital Markets business has continued to perform well despite macroeconomic headwinds. While IPO activity globally has been slower, London Stock Exchange and Bourset Taliana attracted significant listings with a total of £23,400,000,000 raised by firms in new and further issues across the group's markets. London Stock Exchange retained its status as the leading European exchange in terms of money raised, and Varsay Taliano recorded the highest number of new listings in Europe. After close work with the UK and Chinese governments and regulators, we launched Shanghai London Stock Connect in June. It is an important step in our relationship with China, And while we expect it will take a while to build, we welcome Huatai Securities as the first issuer of GDRs on the new segment. In secondary markets, current global continued to innovate and build momentum, seeing trading volumes rise by 78% in 2019, compared to 2018. It has introduced a new uncapped prepaid trading scheme to encourage further use of its services as it supports the market's transition away from LIBOR based derivatives. MTS, our trading platform for European Government Bonds saw the value traded on its repo platform rise by 30 percent to €113,000,000,000,000. Turning to Slide 18, The debate among issuers, investors, regulators, policymakers, and wider society about the transition to a more sustainable, low carbon economy is quickly evolving. Upseg has many touch points with stakeholders that put us in a strong position to engage on and lead We provide companies and investors a comprehensive green and sustainable product offering in both our capital markets and index business. Pudsey Russell calibrates indices to investors' requirements by integrating climate and other environmental, social, and governance themes. I would highlight the recent launch of the FTSE TPI Climate Transition Index developed in partnership with the Church of England Pensions Board and the transition pathway initiative. In Capital Markets, London Stock Exchange launched 2 new green initiatives to recognize the increased interest. The new green economy mark recognizes listed companies with 50% or more of their revenues derived from products and services that contribute to the global green economy And the sustainable bond market builds on the success of the green bond segment, launched in 2015, and includes new sustainability, social and issuer level segments based on independently verified frameworks and use of proceeds. As a listed company, LSAG is also carefully considering the climate risks and opportunities facing our own business. We have been a public supporter of the task force for climate related financial disclosures, TCFD, since its launch in 2017. Not only encourage issuers to report against TCFD through our reporting guidance, but we follow through on that in our own reporting. In terms of our own direct carbon emissions, we achieved a 41% reduction in our absolute carbon footprint in 2019. On Slide 19, we outlined some of the key highlights and initiatives in our post trade division. Another area of strategic focus for the group. LCH's OTC clearing services continued to set new records in 2019, and have seen good growth in member and client clearing. Forex Clear has expanded its product offering to include clearing of deliverable forwards. This comes at a time of increased demand from asset managers to clear their FX derivatives portfolios ahead of the next phases of uncleared margin roles, this year rate derivatives market, LCH swap Agent has the opportunity to expand its offering. Swap Agent now has 16 members live and actively using the surface and has recently surpassed $1,000,000,000,000 in total notional registered since launch. In Italy, the group's central securities depository, Monte Titoli, is implementing a digital transformation program to deliver increased efficiency, risk reduction, and simplification for clients. And as David highlighted in the previous section, LCH and CCNG both recorded double digit growth in NTI, up 18% 14%, respectively. Turning to Slide 20. Swapclear remains the largest OTC rates liquidity pool in the world. Processing over $1,200,000,000 in notional volume in 2019. Alongside this, the increased use of its compression services has enabled members and customers to save approximately $35,000,000,000 in capital over the course of the year. We are never complacent about the competitive landscape, but we continue to see no discernible change in our customer behavior. Our members and clients across 62 countries recognize the benefits and efficiencies offered through Swap Clear's global margin pool with clearing available in with the relevant government authorities and industry participants to fully support a smooth transition to selected alternative reference rates. In October, LCH became the 1st CCP to offer clearing of euro denominated swaps benchmarked to the new reference rate euro STR. The move follows its launch of clearing for Sopher swaps and Sonya Futures in 2018, and Sarah swaps in 2017. Head of phase 5 of the uncleared margin rules from September of this year, Forex Clear is focused on on onboarding new clients. Under UMR, firms will have to set up new accounts, calculate, agree, and exchange initial margin with their counterparties. This is why we are seeing an increase in funds that have FX hedges clearing non deliverable forwards. Looking ahead, we will continue to add more currencies on the deliverable forwards as well as expanding our non deliverable service to offer options on emerging market currency pairs. Finally, a quick word on Brexit. The withdrawal agreement from the EU provides for a transition period until December 31st this year, during which the UK will continue to apply EU law. As such, LCH Limited remains an EMR authorized UK CCP and continues to offer clearing for all products and services to all members and clients. LCH Limited also continues to engage in the application process under the revised supervisory framework for EU And Third Country CCP's, so called EMR 2.2 in order to ensure a smooth transition to become a recognized 3rd country CCP. Over the next few slides, I'd like to provide an update on Ltek's proposed acquisition of Refinitiv. Turning to Slide 22. Proposed acquisition, which has been well received by the market and strongly supported by our shareholders, significantly accelerates our existing strategy to be a leading global Financial Markets infrastructure provider. Refinitiv brings highly complementary capabilities in data, analytics and capital markets, as well as deep customer relationships across its global business. As a result, We will significantly expand our data and analytics offering and create a global multi asset class capital markets business. We also both share a commitment to Open Access and to partnering with our customers to deliver innovative solutions across a financial market value chain. Turning to Slide 23. We are excited by this compelling opportunity to combine 2 world class businesses and create a global financial markets infrastructure leader. This transaction will create a business with global scale and geographic diversification in key markets, including North America and in fast growing emerging markets, particularly in Asia. As outlined on Slide 24, you'll have seen earlier this week, Thompson Reuters reported its results Refinitiv continues to make good progress on its cost program with $520,000,000, run rate savings, achieved in 2019 and on track to achieve $650,000,000 by end of 2020. Between the businesses detailed integration planning is underway to ensure we are ready to deliver the benefits of the transaction to our shareholders customers and other stakeholders. David Childers joined the group in November as Chief Integration Officer, bringing over 30 years' experience in integration, technology and operations in the financial services sector. We have established 18 work streams across functions and businesses each with an LSAG and Refinitiv executive sponsor. The regulatory approvals and antitrust process are ongoing, including active engagement with the European Commission in the pre notification period. There's nothing particularly unexpected in the length of engagement with the commission, for a global large scale transaction such as this. While the pre notification process is ongoing, we anticipate formally filing in March. We remain on track to close the transaction in the second half of twenty twenty. So in summary, turning to Slide 25, LSEG is a great business with a successful strategy working in close partnership with our customers. We have continued to invest across our businesses, delivering innovative products and services while also controlling underlying costs. The group also remains highly cash generative. So LSAG is well positioned for future growth in this involving environment as a global financial markets infrastructure leader. And with that, I'll now hand back to Paul We're going to line up questions on the phone, but before we do that, I'll have to take questions from those on the floor. So first of all from please. Firstly, on ESG, you outlined that ESG in your presentation was a key component of indexation. And the info services. Some of your peers are growing, they disclosed revenues and they disclosed that they're growing revenues at 20% or 30%. I'm wondering if you could give us a bit of color as to how much the revenues that are ESG related within Protsey Russell are growing at. And if, the combination with Refinitiv helps enhance the SG offering and X Series, that's That's my first question. And my second question is, FTSE Russell, grew revenues on a constant currency by 6% you, I suppose, you may be waiting for the transactions too close to give us new targets, per segment, but is a double digit growth rate for Sea Russell something that remains sustainable? And thirdly, on costs, so this year, 17,000,000 efficiency savings. You invested so broadly costs are neutral. Is that something is that the paradigm we should be looking at for 2020? I'll answer. Thank you, Arnaud. I'll answer the first 2 and then, David, will address the cost question. On ESG, we don't disclose specific growth rates with respect to ESG specific products, but we are seeing as, is clear from the, the, I'll call it, the shift in the debate or perception worldwide. We are seeing an enormous amount of focus on an interest in, the topic in the issue, and in our products that address it. And I think you know, I touched in my remarks on the, FTSE TPI Climate Transition Index, which was launched last month, the World Government Bond Index now has a climate, WIGBY, in January, we launched a government bond index focused on the Eurozone, henceforth known as the egg b. So the level of interest and engagement, and involvement with our customers is substantial. The second part of your question on that was, whether we see opportunity in the Refinitiv transaction, to enhance our capabilities in this area. And the answer is, certainly, yes. Refinitiv has, a, a very strong, attractive data set across ESG, data and analytics, and we will be as part of the transaction combining our product or enhancing our product with the incremental data, and analytics capabilities from the Refinitiv business. So we look forward to that after closing. In terms of, the, potential growth of FTSE Russell going forward, we are not putting out targets today. Going forward, as David mentioned, we have, Footsie Russell has achieved the double digit growth rate that was set out in 2017. All of the growth drivers, and the, I'll call them, the tailwinds in that business persist. And so we still think that has, a very attractive growth trajectory and whether that is, the ESG products that we had just touched on, whether that is the continuing trend towards passive, whether that is the growth in emerging market, product, such as China and other markets whether it is the, I'll call it the relatively earlier phase in terms of a bunch of these trends on the fixed income side where we have capabilities in both fixed income and equity smart data and factoring, all of those trends are still, present and active. So we view this as a a very attractive growth business, but no specific targets, today. Turn it over to you on the cost side. Yes, I think on the cost side, We've given you some information in the materials today to help you with, understanding where we think depreciation will go because it will be the flow throughs of the ongoing investment, which continues and is increasing in 2020 over 2019. And also the impacts of IFRS 16. So that obviously, depreciation will grow for all those reasons. We will continue to invest and we're actually investing more in 2020, for both growth initiatives as well as for efficiency opportunities and certainly improvements to our systems and improvements in cyber and operating resilience. These are important things that we will focus on as we are a bigger and more diversified company. As it relates to expenses, ex depreciation and amortization, you can ex I would expect that for 2020, although we're not giving any specific guidance, We will continue to maintain the discipline, the focus on efficiencies and I think the core costs will continue to be well controlled. There are programs that were started in 2019, as I mentioned today, in terms of headcount, which will continue So those actions, those actions will continue. So I think that will paint a picture for you in terms of the cost growth for 2020 over 2019. And exactly where it will come from. Hi. It's Ian White from Autonomous. Thank you very much for presentation. 3 also from my side, please. Just first of all, on, FTSE Russell, the ETF volumes are obviously very strong in the 4th quarter, but the, the revenues I think actually fell, versus 3Q, and the growth there was, sort of significantly, sort of, less strong and the growth in volume. So can you just maybe just talk through some of the drivers of what's going on there, please? And just secondly on costs, Thanks for the additional detail. I'm just trying to understand, I'm sorry if I've missed it, the interim stage. I think you guided to a million uplift in the second half across the two cost lines, the outturn has been 51, I think. So can you just set out for me sort of precisely what the delta was versus your expectation at the interim stage, please. And lastly, just wanted to get your thoughts on potential opportunities for the group arising as a result of the introduction of MiFID II's open access provisions in July, the group's previous CEO sounded a very confident tone on opportunities for the group arising from that, And do you think that those changes will still be introduced? And can you just talk through some of the opportunities there, please? I think on the question on the, on FTSE Russell, there are a number of factors that go into the pricing of, of of the index products and particularly on the AUM side. I think the important thing, and I know you know this, but just to say it, just to underline this, is that I think a strength of the, FTSE Russell business is the composition of those revenues being about 65% in the strongly recurring and strongly growing subscription subscription revenues. The AUM based fees, the more the asset based fees percentages on asset under management, are about are a smaller part of that, 35%. Within that, there are a number of different pricing structures for different customers. So there are, I think, 2 things I would highlight. 1 is that part of the pricing structure is that, in particularly for funds, the actual revenue that we build and collect lags the fund performance by about a quarter, in some cases more. So you will have that. This is the function of how the contracts are sent up. So you'll always have a bit of a lag. So you see that Q4 was strong. But we would hope that that we've expected that would come through as we go into this year. I think the other aspect of this which obviously I can't go into in full detail. But with each customer, a lot of this will depend on the on the on the asset side, on the mix of different funds. And there are different pricing contracts with different customers. Some of them have some of them have certain tiered structures, certain cap structures. So it's not going to be precisely linear, even with the lag. In terms of how billing and collection and revenue will flow from the AUM growth. I think the most important part about FTSE Russell in terms of watching it is you've got to really evaluate it over time. Because there will be quarterly fluctuations, but if we look at the growth of that business over time, which is what we do, that's I think where you can really see that the growth is occurring. Second question was the $25,000,000 too? Yes, I think. Look, I it's interesting because when we sat here last year at time, we said we were going to consciously prioritize investments over costs. And I think what, you know, what in simply what happened in the second half of this past year was we did, we did that. In fact, we actually did more of it. So there was a little bit more investment that I think we had sight of, you know, at the half year. We saw more opportunities. We thought they made a lot of sense. And we invested in them. So it was, I would say again, that's where the word came from. Again, as I said in my in my part of the presentation, if you strip out the DNA, the core costs were well controlled. So it really was a continuation of a very conscious decision that we took last year to prioritize investments in efficiencies and investments in top line growth. And then your third question was on open access. So many of you, are very well aware of this. We operate under open access today and have operated under open access for years. So customers can execute with us, clear elsewhere, execute elsewhere, clear with us. We will continue to operate under open access going forward. We think that is the right way to operate. We think that's the right operating philosophy from a customer perspective in terms of giving customers choice as to where they want to you. A number of our competitors operate with vertical silos, and force customers if they come in at any any step along that, trading, life cycle value chain, whatever you want to call it, then they they force them to stay within that vertical silo. You are absolutely correct that under MiFID II open access is supposed to be the law of the land, this coming summer. We'll see. I think that, a number of our competitors are not excited about that. It is likely to get caught up in the politics of the moment, and various equivalence decisions, etcetera. So we'll see how that plays out. The one thing I can say is that we are committed to open access. We will continue to operate under open access, and we think it's it is the right approach for our customers. You can just pass it around to Philip on the 4th row. It's almost next to you. Mike took the senior route. Yes, it's Philip Middleton from Bank of America. I just wonder, could you say a little bit more about what you're seeing in FX clearing? Because You've previously said how to fairly ambitious perspectives here for layering product on product on product as the UMR rolls out. Is that still how you're looking at it and when should we begin to see, all this incremental growth coming through? Thanks a lot. So we still have, ambitious plans, and we're pleased with how Forex Clear is developing. We have always indicated that it would be a, relatively long trajectory. A couple of thoughts on that. So as you all will be aware, the uncleared margin rule timeline has been stretched out by a year. So, we have, the next phase of the uncleared margin rule rolling in this September, and then the final phase, the big phase rolling in next September because the industry was viewed as not ready for that this year. The second point, just to remind everyone, the uncleared margin rule is a an economic or a capital incentive. It is not a mandate. And so even as these, different phases roll in, there are many market participants who are still playing catch up in terms of realizing, what they are, what's going on, what is the capital cost, etcetera. It is not from a time perspective, it is not as, a definite not as much of a definitive driver as is, for example, the the clearing mandate under swaps. And then the 3rd point I would just mention, and this gets specifically to your question, we are expanding the product suite within Forex. Clear. So it started out as non deliverable forwards, that expanded into options. This past year, we included deliverable forwards. And, deliverable forwards are a a significantly larger percentage of the market in terms of, for extra derivatives. So, the process is moving along. Customers and members are engaging. They're being educated, they're testing their connections, testing their systems, and we that process to carry on over the course of the next couple of years as that business continues to grow. I think we can go to the phones now. I think there's a couple of questions there today, and then we'll come back to the floor after that. Kyle Boyd from a keep BW. Hi. Good morning. Two questions for me. One is on the Refinitiv business. I think there was some thought of wanting to offer a different pricing model to the dealers there, kind of enterprise or more bundled fee structure. Just wondering how the progress has developed thus far and offering that, whether you're seeing any early success or take. And then my second question is for Dave Warren. The sets on futures curve in the U. S. Is pricing in more cost even this morning. Just wondering if we get back into a kind of 0 interest rate policy environment globally, how that how you think that would impact the yield in terms of the NTI yield on at LCH? Thank you. Thanks, Kyle. So on your question on Refinitiv pricing model, that is ongoing, and that evolution is ongoing, in terms of how they are engaging with customers that will be a fairly lengthy process. I think it's fair to say just as it it it will happen from negotiation by negotiation. But as we have talked about in the past, There is growing demand for data, and that is a pricing model that takes advantage of that Yes, I think, Kyle, on your other question, So I think let's just start with, the guidance we've kind of given you for next year based on where we are right now, which I think H2 is sort of on NCI is sort of the right level to think about for next year given kind of current markets and activities. I think in terms of going forward, if we look at just kind of rate environments overall and where they might go, certainly, LCH, invest, a large part of its collateral, which is in dollars, so invest those in dollar products. But I think in terms of how to predict it, well, frankly, it's not something you can predict. But I think what is also true about NTI is that what really drives it is the absolute is the level of collateral that we collect. So that's going to be a function of clearing activity and volatility And in terms of the yield rate environment, it's more going to be a function of not the absolute levels per se, but really, you know, the deepness of the yield curve and how that's playing out, because what we really are able to capture, is the yield between an overnight rate and a very short term rate. I know you know this, but just to say it. So I think if you want to project where it's going. You'll have to make an assessment about what the real short term part of the yield curve looks like, but you'll also have to hold that against collateral balances themselves, and how they will be, moving in terms of just overall clearing activity. So I appreciate the I've never been an interest rate, an accurate interest rate forecaster. So I think, I'll have to leave a little bit to that to your modeling as well. Please? Benjamin Goy, Deutsche Bank. Yes, hi, good morning. Two questions, please, from my side. First, on your information services ecosystem slide, just wondering whether you could give a bit more color on the different growth rates you see in the index business was it the analytics part? And then secondly, on LCH OTC volumes, they declined quite a bit in Q4 and then strongly recovered in January. Both effects were more than we would normally seasonally expect. So, some some additional insights will be much appreciated. Thank you. Yes, I think in terms of the first question. That that that breakout is not a level of detail that that we give right now. But certainly all of that is contributing to the mix and the growth that we have seen and we'll see in the IST business going forward. It's just not information that we're that we're that we're giving at this point. I mean, I think in terms of LCH book volumes for Q4 across the market were down. And we know that. In fact, many of you, were were predicting that and factoring that into some of your, some of the adjustments you were making in your models, both for us and for other companies that you follow. And I think we have seen a strong pickup in, in Q1, for a number of factors. But, I'm not sure that's responsive to your question, but that's probably about all I can say on it. It's always going to move around with markets. Market activity will influence, you know, market activity with clearing anyway will be a function of clearing activity and volatility, and both of those are going to drive clearing activity, as well as the amount of margin that we collect. Understood. Thank you. Johannes Thormann, HSBC. Good morning, everybody. Johannes Thormann, HSBC, two questions for me as well. First of all, as you call it the politics of the moment, what could happen if it turns more ugly between the EU and you And we see more negative impact on the reciprocity agreements and so on. Could you update us on the OTC clearing pans and the feedback from your customers? What do they say? How quickly have you to move to Paris if this is needed, what would it cost you? Is this in your current cost plans? And how quickly could you get a license for this? Secondly, on the Refinitiv refinancing, the timeline from the bond issuance, can you talk about this? And did you already get a feeling for the coupons to be paid? Thank you. Okay. Thanks, Johannes. I'll take your first question and David will probably not answer your second question. So not in a position to speculate on the politics as to how the I'll call it the final year of Brexit or maybe not the final year. The negotiations on this year in terms of equivalents and various other decisions are going to play out. I think the important thing to note and for everyone to remember is that there has been a very clear recognition by regulators in the EU in, the UK in the various different national markets within the EU and in jurisdictions outside of the EU, around the world, of the systemic importance of LCH Limited, and the swap clearing service that it provides. And it provides that service in 60 plus jurisdictions around the world in 26 different currencies. No other service provides that and no other service has that kind of swaps, clearing liquidity. To be very clear on your specific question, We have, no plans to move that. And we have always been, clear both publicly and and with regulators that We, we work with our customers and, and with our members, and our members have made it very clear that they have no interest in moving that. So, we will continue to work with the regulatory authorities in all the relevant jurisdictions. We look forward to the process of equivalence. We look forward to applying under EMR 2.2 for, permanent recognition for LCH Limited as a 3rd country CCP. If there is a delay in that process for whatever reason, we would expect that we get another round of temporary recognition. We'll see how that plays out, but the key message here is that there has been clear recognition that LCH Limited is systemic in its importance and that regulators, central bankers, in all the relevant jurisdictions do not want to go down a path of, systemic disruption, because of the politics of the situation. On the Yeah. Johannes, on your second question. So As I said in in my comments this morning, as you know, we have, we have bridge financing in place So we have that, and that provides us with further flexibility. So when we look at, we will look at the market very closely as we as we get up to closing, and we have the option to draw on the bridge. We have the option to sort of go into the market and, and, and establish some permanent financing. For the takeout of the Refinitiv debt. So that plan remains the same. Good flexibility that bridge has been secured at very attractive rates. So I'm not going to make a prediction, although if you're if you've got some contract you wanna propose. I'm I'm I'm happy to listen, but I think in, in terms of the rates, we will wait and see. I will say though that this will be a combination of, of term bonds as well as, as well as bonds. And those bonds, obviously, will be will be priced at some reference rate. And I will say that over the past, over the past 6, 8 months, those rates, both with respect to dollars, as well as with euros, have been tracking, in a downwards direction. So whatever we're able to secure, we're in a very good interest rate environment right now as it relates to the reference rates for, for whatever, whatever instruments we decide to price. A couple more questions on the phone. So next one please. Mike Werner, UBS Thank you. Most of my questions have been asked, but I have a couple of follow-up, if that's alright. Particularly on 4x clear, you know, in terms of the, the volume growth, it was certainly slower, year than what we saw last year and particularly going into the end of the year, we we saw a slowdown. I I assume that's mostly driven by dealer dealer volumes has been has there been any pickup in, dealer to client volumes? And then a follow-up on the equivalency question. Yep. What proportion of your business, in terms of swap clear is being done by euro, domiciled institution? Thank you. Sure. So on the second question, it's roughly in terms of euro denominated euro domicile, it's something like mid single digit percentage of the swap clear pool. If you include non euro currencies, you know, and this will be a rough estimate. Maybe you double that, for euro domiciled institutions. So it is a relatively small percentage of the swap clear pool. On the your first question, do you want to answer the other question, your question on Forex Clear and I think the best way to think about that is that as with Swapclear, volumes are driven by market activity, and market volatility. And so that will ebb and flow, with market levels of volatility. And and there were some as David touched on earlier, in various different asset classes in the fourth quarter, there were some moderate levels of, of volatility and, therefore, trading I mean, that's probably the best way to think about that. I don't know if you would add that. No. I mean, the other the other part is is that I think we've always said and we're seeing it now. I mean, with Dave, we've already talked about it today. It's just the growth dynamic. It's the overall growth dynamics of the of 4x Clearing are are going to well, they're very much there, but they're they're going to play out in a different way than we were seeing with swaps, just given the the different, the different motivation on the part of the customer, to clear Forex contracts centrally. Got it. One more question on things. Bruce Hamilton, Morgan Stanley. Hi, thanks. Thanks for taking my questions. It's 2 sort of follow ups really. On the ESG topic. Obviously, you made some comments. But in terms of just think about your source of competitive differentiation, Given that MCI, MSCI have a lead on sort of equity benchmark, should we be thinking more on the fixed income side for you guys Or are you saying the fact that you can offer sort of integrated equity fixed income, issuance, provision that will be that that will help me help you dramatically versus the other players. And then secondly, on the OTC business, obviously, FX is is the kind of most interesting source of growth going forward. But is there any other sort of growth runway in terms of buy side clients doing more in interest rates? Well, or on the credit side that could be meaningful or should we really just focus on FX in terms of what's going to drive most of the delta? Thanks. Sure. Thanks Bruce. So on your first question, I would really say it's all of the above. You're correct in pointing out the fact that unlike some of our, unlike most of our competitors, FTSE Russell has a leading position in equity indices and a leading position in fixed income indices, and our competitors are not in a position to say that. So we are able to have conversations and customer engagement across asset classes and really that helps us have a discussion at a portfolio, more of a portfolio but that does not mean we have ceded the field in terms of of equity, and every equity, mandate that's given out there in terms of, index products, benchmarks, etcetera. We are in the fight with the other competitors, and we we win some of those, and we lose some of those. In the fixed income space, it's a little bit more of an open field with respect to that, certainly with respect to the particular competitor that you met In terms of growth runway in clearing beyond Forex Clear, we touched there are a couple different areas I will I'll touch on. One of which I mentioned in my remarks, one of which I don't think we mentioned in our remarks. But, as this group knows very well, we have 90% plus market share in cleared interest rate swaps. Cleared interest rate swaps, percent, roughly 75% of this, the swaps market. And there are certain swaps such as swaptions, cross swaps, etcetera, that do not need to be cleared under the mandate. But given the size of the swaps market, that is that 25% or so is a is a big, pool of potential business. And that is what swap agent is going after. And so agent, we did not build signing up for it and they are using it. So it's still early days. But, it is, we think, a very attractive option in an attractive product for members, to sign up for and use for that pool, let's call it 25% of uncleared swaps. It also provides the capability to compress a portfolio of uncleared swaps. So, attractive both in terms of, all of the, the other non non cleared services that it provides in addition to compression. The other area that I mentioned briefly, is we had a very strong year this past year with repos. Now repos, in many ways, a a relatively more much sure market from our perspective, but I think the combination of our, moving repo volumes across our consolidating repo volumes in LCHSA, as well as market activity led to significantly higher growth than we expected in repos. Unclear if we'll see that going forward on an annual basis, but it's just a sign of how diverse, the business is by asset class. And, we will, see what other opportunities there are in other asset classes. But in terms of the growth opportunities swap clear continuing to do very well, swap agent, we think, has a nice trajectory going forward for it. Clear, we think has trajectory going forward. Repo cleared surprised us a bit this past year. CVS cleared doing very well. Equity CLEAR pretty mature It's probably the way that we think about the landscape, but new products in each of those areas. And so we're not we're not sitting still in any of these. Thank you. Thank you. I don't think we'll have any more, questions on the phone. I'm conscious that 1 or 2, if you need to go to another results presentation shortly. So me just put it back out to the floor one more time. So if there's any more questions before we finish, Martin, on the ore thread there. Thank you. Thank you. Good morning. It's Martin Price from Jefferies. I was just wondering if you could talk briefly about Porsche Italian and how you sort of investments you're making in that business, how you see it evolving in the context of the group. I guess one of your competitors has been sort of reasonably active in quoting that business. So any response to that would be helpful as well? We are aware of some of the speculation out there. We've seen some of the comments from from some of the competition, and we're not surprised that they find it in attractive assets. Bortzetaliana has been an integral part of the business since 2007, good contributor to the financial results, good contributor to our culture, our culture of innovation. So, there is no expectation, no intention that we're doing anything with that business. So we've got one more there. Sorry, just a very quick follow-up on what you mentioned about swap agents. And the growth there. Are you taking market share from Trapsima? From? Trioptima. I I don't think we think about that as a direct, competitor there. So I don't know if I would and we we can come back to you with more detail on that, but I I don't I don't think we really think about it as it's a different service provision there. I think we're about finished then. So thank you very much for your time. Thanks for coming along. We can also take questions throughout the rest of the day, but That's the end of the call.