Earnings Call: H1 2019

Aug 1, 2019

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the London Stock Exchange Groupons from H1 Results 2019 investor conference call. And at this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. And at this time, we see that there's a question you will need to press star in the morning, your telephone, and wait for your name to be announced. I must advise you, this conference is being recorded today. First 31st August 2019. And I would now like to hand the conference over to speak today, Mister Paul Fryd. Thank you. Please go ahead. Thank you. Good morning, everyone. Thank you very much for joining us. On the call today, we have David Schumacher, CEO of Emergency Change Group. David Warren, CFO, Huntsbook Team Group and David Craig, CEO of Refinitiv. We released our H1 results this morning in seen and results announcement and the slide deck are available on the IR section of the website. However, for this morning, the focus of the call will now to be around the acquisition of Refinitiv that we have announced today. After you press on the 3 speakers, we'll open up the line to take Thank you, Paul. Good morning and welcome everyone. Before turning to the acquisition, let me take a moment to run through the key financials from our first half twenty nineteen results. Starting with Slide 3. The group has delivered another strong performance with an 8% increase in the income during the first half of the year. We're seeing continued growth in our information services and post trade businesses. Revenues up 9% at FTSE Russell and 12% at LCH. Operating expenses, excluding depreciation and amortization, were flat and 2% down on a constant currency basis due to good cost control. Adjusted operating profit was 11 percent to £533,000,000. We continue to execute our strategy successfully. Underpinned by our open access and customer partnership approach. We've also made good progress against our 2019 financial targets. Let me now turn to the main This morning, we have announced terms to acquire Refinitiv in an off share transaction for an enterprise value of $27,000,000,000. Acquisition representative is transformational and significantly accelerates our existing strategy to be a leading global financial market infrastructure provider. Repinitive brings highly complementary capabilities in data, analytics, and capital markets, as well as deep customer relationships across a truly global business. As a result, we will significantly expand our data and analytics offering to create a global multi asset class, capital market business. We share a commitment to open access and partnering with our customers to deliver innovative solutions across the financial market value chain. We will deliver substantial cost and revenue run rate synergies of £350,000,000 and £225,000,000 respectively. In addition, transaction will deliver enhanced returns for shareholders, with significant EPS accretion of over 30% in the first full year post completion and increasing further in years 2 and 3. The key terms are summarized on the previous slide, but let me spend some time highlighting the strategic benefits and growth opportunities. David Warren will then talk you through the significant financial benefits for our shareholders. Turning to Slide 7. Financial Markets Infrastructure is a rapidly evolving sector, and one where the needs of our customers are changing. I have been closely involved in this industry for the last 20 years and have seen firsthand how the market landscape has changed. The change is happening at an even greater pace today. Increasingly, our customers want to trade across different regions and currencies. With fewer firms that can do more for them across the value chain, from Capital Markets to data to clearing and settlement. In this evolving landscape, Financial Markets Infrastructure, FMI needs to be global, cover multiple asset classes, and have deep data management, analytics, and distribution capabilities. This is something we are consistently hearing from our clients and further developing these capabilities has been a strategic priority for the group. And as a strong track record of delivering solutions for our customers while creating shareholder value. Starting on the left of this slide. We saw the shift to passive early on and may move to acquire quickly and subsequently Russell to create a leading global index provider. Classive investment is now growing at 20 percent per year with assets expected to reach $30,000,000,000,000 by 2023. Similarly, we saw the regulatory driven trends in post trade and acquired a majority stake in LCH. The leading provider in OTC clearing. Together, our information services and post trade businesses represent around 80% of the group's total revenue, and have been key drivers of our double digit growth in recent years. Looking at the right hand side, We believe that 2 big industry drivers going forward will be the increased value of data and analytics and multi asset class trading and investment strategies. As before, these will be underpinned by best in class technology and global reach. Refinitiv, will allow us to capitalize on both of these trends and position us strongly in these future growth areas. Turning to Slide 9. We are excited by this rare and 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. This provides an opportunity to broaden the number and importantly, the type of customers we work with. For example, sending our reach to customers in areas such as Wealth Management, where Refinitiv has a significant US footprint and our relationship with corporate enabled by their leading KYC service. 2nd, strengthens our multi asset class capital market capabilities to the addition of FX and fixed income. The 2 largest traded asset classes globally. Importantly, this will all be underpinned by world class data content, management and distribution capabilities, where Refinitiv has an expertise and scale of a top tier global data provider. Data and analytics are already critical to the digitization of financial market infrastructure, and that importance will continue to grow. Together, We will be the largest listed FMI provider by revenues with leading positions in key areas of future growth. David Warren will talk in greater detail on the financial benefits of the transaction. Let me highlight a few key areas as outlined on slide 10. The aggregate enterprise value of $27,000,000,000 represents approximately 11.9 times adjusted EBITDA. Inclusive of already delivered stock based from Rafiki's existing change program. Specifically, we will deliver 5 to 7% revenue over the first three years following completion and enhanced our revenue mix geographically. We plan to generate significant value through cost and revenue synergies. Comfortably meet our ROIC targets in the 3rd year post completion. The transaction will be immediately and substantially earnings accretive. In addition, approximately 70% of revenues have come from recurring subscriptions. The highly cash generative nature of the business will also allow us to delever quickly while maintaining our progressive dividend per share policy. Before I talk more about the strategic benefits, let me hand over to David Craig to give a brief overview of the Refinitiv business. Thank you, David, and good morning to everyone on the call. And, firstly, I just want to say how excited I am about this combination and the benefits of offering for customers for the market and for investors, and not to say how well David and I and our respective leadership teams have really worked together to evaluate others and industry safety opportunity. Turning to Slide 12. Affinitiv is a leading data and financial market infrastructure provider. We're providing services to 40,000 customers across the south side, across the buy side, and to corporates. We collect data and deliver services into every major financial center, and across a 190 countries. The Refinitiv's business offerings have reached into 3 areas. The first is data distribution analytics and workflow The preference is our trading venues, the first is our risk business. These are all underpinned by our Global Refinitiv Data Platform. The 1st and largest part of this business is a data distribution, collection, analytics, and workflow, representing 75 percent of our total business with revenue of £3,200,000,000 in 2018. Industry tailwinds of demand for new and broader data sets increasing automation, machine learning, and AI for the need to source and manage data both physically and in the cloud are all growth drivers of this business. We operate 1 of the most expansive data and data management platforms in financial markets. We're submitting many thousands of data attacks from billions of messages and data updates today and market pricing, reference data, economic company ESG fundamental data, deal data. Just to name a few of the examples. You capture and distribute real time and non real time data from over a 150,000 including exchanges, voters, and creditors and distributors from both public and private sources and based partners. Including over 500 of the world exchanges. We offer thousands of unique and high value derived datasets, for example, existing pricing, valuation data, WN Royce's FX benchmark and almost 100 other industries in benchmarks. And in some of these datasets, we have up to 40 years of historical data. Of course, we're one of the largest news providers carrying not only Reuters news in the long term relationship, but advocating and distributing content from over 10,000 other local and global news providers to both humans and machine users. And importantly, From an agent platform, we have the largest partner network in the industry with over around 10,000 content partners collaborating to deliver interesting to us data services, and access across our customer base. And supported by this data platform, our range of workflow solutions provide strong data analytics trading workflow and execution and portfolio management and risk capabilities. The second part of our businesses are trading venues, We've run significant leading venues in OTC markets, including in FX, dealer to dealer, and dealer to clients, in the shape of a tech call, and seeking from trading by favor, the leading trading venue for government and corporate debt program. These each support up to 400 $500,000,000,000 of trading volumes every day. This represents 19% of businesses with revenue of more than £8,000,000 in 2018. It is growing quickly driven by global volatility in FX, expansion into emerging markets such as Indonesia, China, Thailand, and the shift from voice to electronic trading. And last but certainly not least, the 3rd part of our business is risk. Where our risk analysts and data help our clients manage their financial crime risk after managing onboarding screen customers, screen suppliers, companies, and partners. This has exhibited strong growth driven by increasing global regulatory risk and compliance from the need to digitize clients and third party onboarding. As outlined on slide 13, these free dictionaries are designed and tailored to our global user communities, which include trading, investment, and advisory, wealth management and risks. Many of whom are not just based on workflow consumers would actually provide data back into the platform as well. And that the core of the value is that Refinitiv is the best platform with its global scale and reach, powered by proprietary and open technology and keeps domain and operational expertise. We collect and process 1,000,000 of datasets every day, driving the financial markets and financial community, and to us, data is infrastructure. In addition to desktop distribution, we deliver data through data feeds, open APIs, and on premise. And we are literally under the floorboards with most of the world's trading floor and more recently in the cloud. We have many specialist data product brands such as Lipitor fund fund performance data streams, vast economic data, high risk for estimates, or our data trade processing platform in work, just to name a few. We power the platforms and collect data from our OTC data domain in FX and fixed income as well as supporting other electronic trading, post trade execution managed and order management systems. And we support risk management for Life And Crime using the flagship WorldTrack product, which is used by 50 of the world's leading banks. And as I mentioned, the platform is open. In addition to supporting data partners, we have a rapidly expanding failed affinity with over 24,000 developers. This development community from the algos and machine stakeholders rely on the ability to extract and integrate data. Turning to slide 14. Over the last 18 months, we've been executing a very successful carve out and transformation program. And as a result, both margin and growth is accelerating. We've accelerated revenue growth through enhancing our data platform with all datasets and analysts example, in emerging markets, China pricing, usage income pricing, or ESG data, and we've been improving the desktop technology, functionality, and parents. We've improved our sales and service capabilities to drive new sales, higher usage and retention. And as of q 2, 2019, we've already delivered $380,000,000 of the targeted $650,000,000 run rate cost savings and we are on track to deliver 2 third party targets at the end of 2019. And this is going to be through delevering, through leveraging our global operating sensors in Manila and Bangalore, using modern technology to reduce our technology and content costs and executing on real estate and value fulfillment savings. And part of this savings has been used to fund investments in new products and technology platform capabilities, as well as new talent, which is driving the growth momentum that we are now seeing. So if I can just summarize, Firstly, Refinitiv's core strength is our data, our data platform, and our global data collection, aggregation management, and distribution. Secondly, this platform alongside our OTC venues in this business are highly complementary to LSCG's capabilities. As a result of the transaction, we will be able to offer new and enhanced services to benefit our customers and their employees. The business has been transformed over the last 18 months with increasing growth and margin and much more potential. And lastly, we have a strong experience global management team, which has led the carve out, and we're excited by the opportunities that this transaction brings. And with that, I'll hand back to David Trevor. Thank you, Devin. Over the next few slides, I will outline the strategic importance of this transaction for our group across four areas as described here on slide 15. The box on the right hand side demonstrates how well positioned the group will be creating a global leader in SMI. Our shared commitment to Open Access And Customer Partnership is also a core part of our operating model and is a key competitive differentiator from our peers. The fact that we shared a strong commitment to customer partnerships and innovation will also be key to our cultural integration and collaboration. Turning to slide 17. As the traffic on the left shows, LSCG and Refinitiv have highly complimentary world class businesses, both around 3 core strategic areas. There are many benefits, but let me give you just one example in each of the three segments. First, in capital formation and execution. The transaction will create multi asset class trading capabilities across equities, FX, and fixed income. 2nd, investment tools and research. Here, alternative press provides large and unique content sets that will expand our global index and analytics offering, particularly in the growing areas of fixed income and sustainable finance or EFT. Finally, risk management and post trade services where the transaction will allow us to unlock value added services. For example, Refinitiv's market data assets and capabilities and product development will allow us to unlock LCH evaluation, margin, and capital optimization tools and make these more widely available to customers. Turning to Slide 18. The group will significantly deepen and expand global footprint, particularly in Asia and emerging markets. As you can see from the chart on the right of the slide, it also substantially diversified our overall revenue pool in North America the world's largest financial market. We will also maintain strong positions in our home market in the UK and across Continental Europe. Where we have significant market infrastructure businesses in Italy and France, and it will grow our presence in other countries. On to Slide 19. Data capabilities will define the success of Financial Market Infrastructure Businesses in the future as our customers seek to create value through unique insight and analysis. To operate their businesses in the most efficient technology enabled way. The Stock Exchange Group has created through organic growth and strategic M and A to leading global benchmark data and analytics provider in Foci Russell. Foci Russell has consistently achieved double digit growth over the last several years and is a key contributor to group revenues. Now we are adding proprietary content like fixed income and FX pricing and reference plus content from 10,000 data partners. Refinitiv is 1 of the largest data providers globally with a leading position in data feeds. Employable distribution covers more than 190 countries 400,000 end users. This gives us more high quality data than almost any other provider. However, it's not just about the quantity of data. It's the deep capabilities in managing the sourcing, integration, and organization of that data to make it valuable for customers. That is what's important. We are very impressed by the data management capabilities of definitive. Combining LSEG's IP, which within the data management allows us to do more with our customers to provide the products and tools they are looking for. Let me provide more detail on the next slide. Data is already a critical driver of market infrastructure today. Our customers are demanding more data and data enabled services and this trend will only continue. For example, looking at the underlying data of Refinitiv, to index structures and definitional framework provides unique value to customers, activating a coherent view of their investments, from reducing the need for reconciliation or the risk of data errors. And in post trade, customers face considerable challenges to meet their evolving regulatory requirements while improving performance and efficiency. Consistent and accurate data from the front to back office and data enabled tools to enable efficient collateral and risk management in areas where we will be able to develop new offerings by combining LCH's deep knowledge and risk management experience with alternative data capabilities. As you will see on Slide 21, the acquisition is a great fit in our existing capital markets businesses, creating trading venues that cover the 2 largest asset assets, FX and fixed income. Over $10,000,000,000,000 globally, it traded daily across these two asset classes alone. Refinitiv OpEx trading platforms and solutions across spots, swaps, forwards and options present in every FX market globally. Transaction, then you can click F XOL, a dealer to customer platform, and matching, primary dealer to dealer platform. Electronic trading in FX has more than doubled since 2007, yet it is still significantly behind the levels we see in the cash equities and futures markets. We believe FX will continue to grow, particularly in the dealer to client sector, benefiting from increased direct participation of the buy side. As you know, Tradeweb is a leading fixed income derivative and ETF electronic trading platform for institutional and retail investors. And it has delivered strong growth over the last 3 years. Through its attractive market positions in rates, credit, and money markets, Fredweb is well positioned to benefit from the increasing electronification of fixed income markets and from expanding corporate and government debt pools in emerging markets. For example, it has been successfully developing its offering in China with record trading recorded in June 2019. Earlier this year, Craig Love completed a successful IPO in the US. We will look to retain this listing and we will hold a 54% shareholder. As you can see, on slide 22, the combination of trading venues will allow us to better serve our customers across the subside and drive side. For example, both turquoise, our pan European MTS, and free glass, successful existing relationships with the Playfield partnership. We will look to further develop these partnerships with the I5 community. Cochi Russell received trade web prices for calculation of guilt indices, demonstrating the interconnected ecosystem of trading, data, and investment insights which we can build across multiple asset classes and geographies. As well as enhancing our global offering, we will be able to develop more innovative products for our customers. In the financial market, driven by electronic trading and passive investment, the relevance of multi asset class capabilities will only increase as customers seek efficiency and simplicity with fewer and deeper partner relationships. It is also important to note here our continued unwavering commitment to capital formation, supporting Small and medium sized enterprises, and facilitating job creation by enabling businesses and economies to fund innovation and sustainable economic growth. Definitive content and product creation capabilities will also enable LSEG to improve transparency in capital markets and to protect companies from SME to blue chips. In communicating with investors. Turning to Slide 23. Customer partnership is one of our shared core principles. And is key to our strategic success. Both businesses have a proven strong track record of partnering with customers, and we will continue to work with This is a key competitive differentiator. Numbers on Slide 24 speak for themselves. We have a traditionally strong position with the sell side community through our trading and post trade businesses. We also have strong links to the buy side community, through Footy Russell Indices with long standing relationships with 98 of the top 100 asset managers. And now we can expand this through Refinitiv's relationship with over 30,000 certified analysts that use their data and trading products. We see multiple cross selling opportunities. Such as providing alternative pricing and reference data to our index customers and extending the full range of our index and analytics products to Refinitiv customers. Admitiv also brings additional exposure to coverage that use both risk services and the data platform. For example, corporate finance and strategy teams use Affinitive to gather market intelligence and explore M and A opportunities. At the treasury level, it is widely used for financing planning and hedging. LSCG now offering a number of additional services to its corporate issuers. I will now hand over to David Warren to talk through the key financials. Thank you, David. I'm returning to slide 26. We have a strong track record in successfully executing transactions that have been consistently delivered against our strategic and financial objectives and previous M and A. As David has mentioned, this transaction delivers very attractive financial returns for our shareholders. And over the next few minutes, I will provide more detail on 4 key points. The high quality revenue mix and attractive growth value creation through significant synergies, attractive returns for shareholders, and a commitment to our capital management framework. If we move to Slide 27, In large company, we'll deliver 5 to 7 percent revenue CAGR over the 1st 3 years following completion. This includes continued organic growth at Elk Day, driven by Footsie Russell and LCH. As evidenced in today's first half results, and this is a long also alongside Refinitiv's businesses. FXOL and Tradeweb are both benefiting from the shift to electronic trading and FX and extension. Infinity's risk business is structurally benefiting from regulatory driven growth in KYC and other services and we expect those growth rates to continue. There is also an acceleration of Refinitiv's growth due to ongoing transformation of the data platform where increased commercialization and investment are driving top line momentum. And finally, revenues interviews, which I will go through in more detail shortly in which we are highly confident of achieving. As you will see on slide 28, both businesses have a loyal and high quality client base. Driving recurring revenues with high retention rates. The transaction will increase our recurring subscription based revenue from nearly 40% today to around 70%. This enables us to have strong visibility and predictability. If you turn to Slide 29, we have done significant work over the last few months in merely thinking through both the cost and revenue synergy potential. The ability to work more closely with our customers to deliver innovative products and services means that we are highly confident in delivering in excess of 225,000,000 of revenues £9,000,000 of revenue synergies. These can be broken down into 3 broad areas. Approximately 50% of these are core Frostell Synergies. As David said, an example of this could be the distribution of yield book analytics via the Refinitiv platform and distribution of Refinitiv pricing and reference data to index customers. 30 percent of these synergies are enhanced products, such as enhancements to issuer services and our Capital Markets business, and 10% of these synergies are new products. Such as ESG indices and analytics and regulatory services such as surveillance. We accept expect to achieve 60% of these revenue synergies by year 3 with full run rate achieved in year 5. These energies are a key part of the targeted increase in group margin. And as you will see on Slide 30, We have already undertaken a large amount of work between the two teams to identify cost synergy opportunities. We estimated the £350,000,000 of cost synergies delivered through a wide ranging efficiency program. This will include the removal of duplication and greater use of our wider geographic footprint in technology, we will look to adopt the best of both organizations' capabilities and further develop cloud based strategies where appropriate. Consolidation of our property footprint will also continue. And it's important to note that key synergy are separate from and on top of Refinitiv's current $650,000,000 cost save program referred to earlier. We are also committed as we have always done to continue to invest for growth. The expected cost synergy run rate will be 25% in year 1 and 70% in year 3 with synergies fully achieved in year 5. We estimate the one time cost to achieve these synergies will be approximately £550,000,000 the majority of which will be incurred revenue synergies we are announcing today have been verified by an independent third party. As you know, we have a strong track record from previous transactions, and we are very confident in delivering the synergies we are announcing today. If you turn to slide 31, this deal is highly attractive across the strict financial criteria that we apply for all transactions. I've already covered most of the points on this slide, but I think it's important to talk through our ongoing capital management framework. Business will be highly cash generative which will allow us to not only de lever quickly, but also maintain our progressive dividend per share policy. Our pro form a leverage at close is expected to be approximately 3.5 times net debt to adjusted EBITDA. While this is outside our target range, we would expect to de lever back to our target 1 to 2 times range, within 24 to 30 months post completion. We are also targeting strong investment grade ratings, I will end here and let David Schrimmer provide an overview of the agreed management and governance structure. Thanks, David. Turning to Slide 33. John Roberts and I will retain our current positions as Chairman and CEO, respectively, as David Warren, as CFO. I'm also delighted that David Craig will join LSEG's executive committee and continue as CEO overfinity. We will add 3 new directors to our board, 2 from Blackstone and 1 from Thomson Reuters, and we will remain from clients with the UK or governance code. The group will continue to be a global business headquartered in the UK and will retain its premium listing on London Stock Exchange. Post completion, I will leave the integration team with senior representative from both LSTG and Refinitiv. I have personally been very impressed with the talented and experienced representative management team as we look forward to working with them. Turning to Slide 34. The long term commitment to LFPG from our new shareholders is a testament to their confidence in the strategic logic of the transaction and the value creation potential. Blackstone is transferring its entire Refinitiv stake for our equity, and expression of continued confidence in their investment. The lockup structure they've agreed to is a clear sign of relief in the future value creation from this transaction. This will be a loss for the 1st 2 years of completion with the shareholders then having the option to sell a 1 third stake in each of the subsequent 3 years post completion. In summary, on Slide 35, we are excited about the transformational nature of the transaction announced today. This is a rare and compelling opportunity to combine 2 world class businesses and create a global natural markets infrastructure leader. The transaction will create a leading UK headquartered global business with significant multi asset class capital markets capability. A leading data and analytics business, and a broad post trade offering, well positioned for future growth in an evolving landscape. Expedition's London Stock Exchange Group for long term sustainable growth, while delivering valuable benefits to our customers, shareholders, employees, and other stakeholders. With that, I want to thank you for your time, and we will be happy to take your questions. Thank you. Ladies and gentlemen, we'll now begin the question and answer session. And our first question comes from the line of Heilvoyce from KBW. I see your line is now open. Hi. Good morning. So just looking at the rescinded side, the new revenues grew by 10% or so in the past year. Looking back historically, revenues have been flat to down over the back over the last 5 plus years. And I think a big part of that has been the the shrinking of the desktop's business. Can you just talk about that desktop? Because it's a bit more how it fits into to LSE's strategy on a couple more days for this or maybe just parts of it that don't fit in your strategy. And then just as a follow-up to that, can you talk about synergies that exist by having that desktop business, and icon under the same roof as the electron and more of the enterprise data and risk business And whether you view them as separate pipelines or really one in terms of cost and investment? Sure, Kyle. Thanks. So first, let me just touch on the the growth aspect, we think that the combination will have a very attractive growth profile. And as David mentioned, we are expecting 5 to 7 percent revenue CAGR, over the 3 years after the transaction. A couple thoughts on that. So you're already familiar with the growth engines within LSEG. Our our POCE hospital business and LCEH continue to grow very well. With the representative, there are a number of other growth engines. So we will have a diversified, broader set of growth engines, if you will, and those that include FXAll Tradeweb, the risk business, all growing at very attractive growth rates. On top of that, very attractive revenue synergies. And then I would say with respect to the data business, we, there has been incremental investment in that business by David Craig's team, over the last year. And we will continue to invest in that business. And we have strong conviction that there will be a healthy growth rate coming out of that business. When, you ask about desktop, desktop is a distribution channel. It's not a revenue line. And we view, the distribution channels across the fees, the front desktops, in the cloud, etcetera. We think about revenue, according to the different communities, that David said was talking about earlier. We have a lot of conviction that the demand for incremental data is going to continue to grow, and that will be distributed via desktop, via feeds, and various other distribution channels. Your last question I believe was around synergies. And we think that there are very attractive synergies across the different businesses, the data platform that definitive brings will allow us to generate synergies across our businesses, and, get Warren touched on some of these. But if you think about what we can do with our existing businesses, and our existing product, whether it's our index and analytic business, we touched earlier on distributing yieldbook analytics, through the platform. We also think there's a really interesting opportunity to create new product through and use the distribution power of this platform. We have very interesting and potentially very valuable data across the different businesses with AMLSTT that we are currently not monetizing. And we will look to work together through those various opportunities and we're very excited about that. Thanks. If I could ask one more question and I'll hop back in the queue, but just on the the the competition review, seems like there's some level overlap on the trading businesses, you know, in terms of having key fixed income assets. Obviously, you own MTS. We'll now own trade web and majority stake in trade web. And with respect to trade web, it's the largest electronic sports trading platform, quarterly, obviously, LCH is clearly the reiterating and software clearing. I guess, why are you confident that would not be a territory pushback or antitrust pushback when completing this kind of leading trade training, I mean, with, the competing kind of clear intentions for for interest rate swaps. Or combining those fixed income assets. Thank you. Thank you. Our businesses are largely complimentary there is not a lot of overlapping businesses. So, we will work through the regulatory process. Not really, for us to prejudge any of that at this point. I would say that both definitive and LSCG share an open access approach. And we will continue to operate according to that open access topic. And we'll be working as a combined financial market infrastructure provider will be providing services to customers as well as other market infrastructure around the world. Next question comes from the line of Philip Middleton from Merrill Lynch. Yes. Thank you very much. Couple of things. First of all, could you say a little bit about the CapEx profile of the Refinitiv business? Is this something I've not really managed to get a handle on, but I think historically, it's probably run at about $500,000,000 a year. Is that what sort of thing I should be thinking about for the merged business from return it to them. Secondly, I think on the really exciting area of an index at the moment of the you've talked a little bit about that. Can you tell us what you've got with January proprietary industry, which would enable you to drive growth in that area? Philip, your question on ESG, is that a question as to what we collectively have this proprietary or what? Yeah, collected, collectively because that that will be a value device. Yeah. I I would say, that the ESG content datasets that were finitive has a a world class, and are used by many in the industry. As I said in, this is an earlier question. We will maintain our open access approach, and while our index business will benefit from for that data. So we'll, we'll many other market participants out there. So, hopefully that addresses your question on and then with step 2. Yes. So if you ask the question for that, look, I think the number that you're putting out as for current levels of investment, I think is good ones to model for right now. I think I'd make 2 points around that. One is that that investment continues, and that's important to support continued growth. And the second point is that these businesses come together and look, we'll be in a position to provide more information later, and we'll be able to adjust your thinking and modeling. But these businesses, as you, I think, can see, are highly cash character. I mean, if you just add them together and don't even call that a pro form a number, we're talking about a significant amount of EBITDA. So the opportunity on synergies, cash generation is there. I think an important part of what we're saying today is that we really are viewing this transaction's data as infrastructure with this cash generation, this gives us an opportunity to really continue to invest for growth. But I think for purposes you're modeling right now, number that we gave is a good one. Thank you. And next question comes from the line of Audrey from JP Morgan. Thank you. Your line is now open. Hi, good morning. It's Christopher Morgan. Just a couple of questions. You mentioned that, as in some investment being done in Refinitiv Businesses, But I know that some of that investment started, and there's obviously some that will will be ongoing. Now is that broadly included within the guidance for the sort of EBITDA margin to hit around 50,000,000 in medium terms. Just trying to get a feel for that. And also, you you call forward it within that 650,000,000 cost saves that are coming through. So that's that's the first question. And so, just any thoughts on the, I guess, the scrutiny in the industry around, you know, the pricing of data, both in the the US and in Europe. Do you know any thoughts around, how representatives are dealing with that, and how you will do all that going forward? Sure. So I'll take the second question and then, David Warren, we'll address your first one around the Yes. So the modeling that we are doing under the other, sorry, sorry, to run the pricing of, Dana in the U. S, that's a very different situation from, what we have here. A couple, aspects of why that's different. First of all, We have not raised our, market data pricing levels nearly as much and as a, the sort of pace or rate that has been done in the US. And if you look at what market data pricing is as a percentage of our overall business, it's somewhere around 5%, where it's significantly higher for, the US players where this has become, more focused and more of a controversial issue. Is that that's really not an issue that, Refinitiv directly, has been involved in. Well, they have been distributing the market data from the exchanges in the U. S. Now price is, that have created the issue or the controversy in US are driven by the exchanges themselves in the US. So we don't see that, particular sensitivity that's taking place in the US as having an impact on us. I would also say just on on that one, we share an approach of, as I mentioned earlier, open access, but in the deep customer partnership, and we think in areas different areas of our business, there are many ways in which we work very closely with our customers and generate value together. And I think that philosophy will continue as part of this transaction. And let me let me turn it over to you, David to address your question on the, investment. I think there are two parts to the question. One was as we modeled and what we've been saying today about the around, 50% EBITDA margin in the medium term. It kind of goes back to the earlier answer. Okay. We have we have modeled with that assumed its continuation of the same levels of investment. I think there was another part of your question as to whether or not that includes or how is that impacted by the existing $650,000,000 cost savings program? And those are separate. That program is well along. It's just as David Drake has said, and we would expect that those would be delivered. By, at the end of 2020. So what's captured in that EBITDA projection is the run rate benefit. Is that coming out of that program. And I I think that might give you the answer to that part of your question. Yeah. Sorry. I'm glad to come. Thank you. Thank you. Thank you. And next, yes, this question comes from the line of Ana Giddlet from Exane. Please. Hi. Good morning. It's Anna Gibber from Exane. I've got three questions, please. First, on cost synergies. So can I ask you for the cost synergies? We'll touch on trade web because, because you said you're keeping the listing. So the ability to to extract her synergies, custom geyser, theoretically, she should be limited, or is there perhaps a plan to to merge MTS into trade with down the line? Second question is on on the growth. So you're talking about 5 to 6 to 7 pounds around your growth rates on the combined business. I'm wondering, how how we get to that? Because if I look at the the last, growth rate for Refinitiv, it was 3%. Annualize your your revenue synergies that that has a a percent to growth. So 4% until I think consensus is looking about looking for around $0.70 of the bank or the as as that I see. So I guess I'll keep you slightly below that $0.57 range. So are you saying that you quote it as you could, actually accelerate, or are you saying that, like, all the investment that's concentration at the stand alone should have further enhanced the quickest workforce as well as what's been ready to not understand on this in in in 2018 and and the revenue synergy coming up. And my final question is, I'm sorry to say in the release, but, will there be any break up fees, in this transaction? Thank you. Great. Thank you. So, let me just take some questions. No cost synergies around Tradeweb. And that that is not part of our our energy plan as it is, a separate company. In terms of your question around growth, we do believe, we will be generating incremental growth, through investments, but we also feel very good about the existing growth engines of the business, touched on this before. In terms of LCH, Virtu Russell, Craigweb, FXL, World Check. We have a bunch of different businesses within the combined company. So we'll be generating very attractive growth rates. On top of that, we have the revenue synergies. And then yes, we expect to see investments that, Resinitive has been making in the data platform. Will lead to modest incremental improvement, in the near term, in the growth rate, but we think over the medium to longer term. We're very excited about that opportunity. And your last question on break fee, yes, sir, the break fee. What do you say? How much? It's a 198.3 to £1,000,000. And that is effectively 1% of the pre, announcement, market capitalization of LSEG is on page 13 of our longer release. And if I can if I can have a quick follow-up on on you assuming that the desktop revenues stopped declining? Again, we we don't think about it as desktop revenue. Desktop is a distribution channel. One of the distribution channels for our data revenues. And we expect our data revenues to grow and to continue growing. Thank you. And next question comes from the line of Mark Werner from UBS. Thank you. Your line is now open. Thank you. Just just a handful of questions for me, if you don't mind. And, again, apologies if this is in your your release. In terms of the delta between the, the 37 percent stake that Refinitiv shareholders will get in a combined entity. I think you indicate that you'll be less than 60% in terms of voting rights. I was just wondering if you could provide the, you know, what the delta there is. And then, a second on, as you mentioned, in terms of distribution, you guys look at, you know, really data, you know, how important, I guess, is the, electron. I think you call it, you know, I think you changed the name of it. Now that it's been bought by Refinitiv, but really the cloud based distribution of data. Is that going to be an important, you know, component of the value add that you're going be able to provide, to your customers. And then, finally, on, you know, the debt, that representative currently has outstanding provide us a list of, granularity as to whether there's call options or And and and and potentially, you know, when that debt may be able to be expired. Yeah. So, I'll take your first question. David Greg will take your second, and David Ward will take the third. We'll we'll share it here. So You asked about the 37% in the Delta to the voting rights. So the, Refinitiv shareholding consortium will have 29 percent voting rights and a 30, approximately 37% economic interest. The reason for that is that the construction did not want to go over the 30% threshold and trigger a a mandatory takeover offer obligation. Let me turn it. I I first thing to say, we're very excited about the distribution capability that it over to David Greg to talk about that. Yeah. Thanks for the question. Distribution is key and will continue to be an incredibly important part of this because I just summarized the 5 distribution capabilities on the Refinitiv data platform. 1 of David said the desktop is very important. 2, the partners that we have are distribution partners, 8000 of those. 3, the APIs, the feeds, put the file base for the on premise, very important for low latency high volumes. So and then lastly, the cloud, and we're gonna see all of those as being continually important. Clearly, growth in cloud, is that expense in future models? I think the last question was on the debt. Okay. That is it's public debt. So, about 9,000,000,000 US of, of, of, of, of term loan and about 4a half of bonds. I'm I'm very familiar with all the terms, but, I I don't want I won't go through the initiatives today, but they are called the the bonds are callable the term loans obviously called at any time. I think what we've said in the R and S is that we would expect to to take advantage of any financing opportunities on that debt. And we have secured a bridge or committed bridge that would, that would support, that action, and we would look to do that, at some point after completion. I I'm not gonna I can't really say much more beyond that today. That's very, very helpful. Thank you. Thank you. And next question comes from the line of Benjamin Koi from Deutsche Bank. Thank you. Your line is now open. Yes. Hi. Good morning. Two questions, please, to first speak on the other headline. You're not looking at disposals. So wondering why this in the future, it's not part of a bigger business review and to shift to more, recurring revenues, wire wire sales or potentially business sales. And then secondly, on the distribution and and how, this changes of data we highlighted before, channels effectively, but You've mentioned that you get all are very important, but, yeah, maybe you can give us some nuances where you see much bigger growth opportunities. And how does it impact the Refinitus business? Okay. So I'll turn it over David Craig again in a minute on the distribution channel section. We are we are not looking, at disposal. And, the business through this combination will take our, percentage of revenue that's basically recurring revenues to about 70%. And we view that as a very attractive level. If that answers your question, if I missed it somehow, please let me know. But like, let me turn it back to David Craig on your distribution channel. Yes. And I think the question is not just about the channel, but why is the data platform growing? So There is channel growth particularly in in areas like cloud, as I mentioned, builders will penetrate further into the buy side with our data. So there's also growth converse, broader datasets. And a few examples that we mentioned earlier in the call, EXG, we talked about regulation like FRTC, emerging market pricing. There's a few examples where actually there's increasing breadth of data that creates growth as well. Okay, understood. Pleasure. Thank you. And next question comes from the line of Ian White from Autonomous Research. First of all, I'm just debt refinancing. Can I just ask if you think is it a reasonable assumption for our modeling purposes? The debt can be refinanced. Up rates, kinda close to, the prevailing issuance rates for LSE Group. I'm just conscious it's quite a significant increase in debt, versus your current coverage on a stand alone basis. And just secondly, obviously, by the transaction, you you you increase significantly your, footprint in data ownership. Are there any areas within the data product offering where you you still see the combined truth as being, slightly underweight, and over the medium term or difficult for further, scale in those areas. Thank you. So, on your second question, I think we feel very good about the scale scope, of our, data platform. So no current plans, to increase that. And I'll turn it over to David Warren to answer your question about the debt refinancing. Yes. Thank you. I'd I'd go back to some of the answers I gave earlier. We are we would There are certainly opportunities for us to refinance that debt and you would look to us to explore those opportunities as to what the rates might be. That's really sort of anyway's guess right now. I said we would look to try to do this Let me mark the rates, obviously, at the time we would look to do it and we would look to do that at some point after after, after completion. But beyond that, there really isn't any more I can add The only only thing I've said, the combined company taking on that financing is a much stronger. Yeah. It's a much stronger credit. The other thing I would also just say, now I actually have thought about something I would add, is is that, whatever those savings are are in addition to the synergies. Thank you. And next question comes from the line of Richard Ricardo from Sandler O'Neill. Thank you. Your line is now open. Yeah. Good morning, and first, congratulations on the transaction. I I guess I have some questions in regards to, trade web. And and you mentioned David, you'd say you won't you'll have 54% ownership. Right now, that ownership translates to build almost 70% volume power and structure that TradeRev has right now. I guess, you know, 1st, the the ownership structure stay the same. We still have the same 70% voting power and just longer term. I'm just trying to see, you know, what your intentions might be with Tradeweb, you know, given that you have 54% ownership would be to try to buy in the rest of it or or what what's the longer term thing? Can I tell you you have one follow-up? Okay. Ownership structure will remain the same. And if if you are familiar with our broader business, and I know you are. We have a number of different entities within our broader business where we have, minority ownership interests. And those have been, working very well. And I've persisted over, in some cases many, many years. So just a few examples, LCH, turquoise, Curv Global, MTS, as a group, one of the stock exchanges is very comfortable having stakes in entities and having other minority investors in those. And in in this case, it happens to be a public company. We're fine with that. We think TradeRev is a great business. We were very happy to see how successful, the IPO has been, and we look to retain our 54%. Got it. And and I have one follow-up with the, the banks provide, well, first, they're significant owners of trade web. You know, behind you, but they also provide, you know, a lot of the revenue, you know, for about 40% of the revenue. With a lockup coming, I think, in sometime in October. I know this is premature, but what has there been any discussions at all with banks so far as sort of reaction of, you know, the LLC, being the owner, or what you expect, I guess, the you know, the reaction of relationship there. So no no interaction at all. So you're correct. It is a premature question. I would just say that given our operating philosophy of open access and partnership with our customers, we have a very strong relationship, with the sell side institutions, and in some cases, that has included revenue share, for example, in LPH, and just very consistent strong partnership operating operating relationship. And so the payment institutions that have been key drivers behind Tradeweb. So, I would expect that, we have a very strong and productive and constructive working relationship with them, whether they are equity holders or not. Got it. And one last quick thing. Was there a bidding process for Refinitiv overall at 10? And that'd be it. Thank you. We have had a a a long ongoing interaction with, Refinitiv and a shareholder. I don't believe I would characterize it as a competitive process. There were obviously other processes going on, around that not, specifically participating in, but I'm not really in a position to comment on this. Thank you. And next question comes from the line of Bruce Hamilton from Morgan Stanley. Your line is now open. Thank you. Hi, thanks, guys. And, to be honest, my question has been asked, but just a couple of clarifying ones. In terms of the, obviously, you've given So it's a sense of the revenue mix of Refinitiv. But are the profit margins very, very different as we think about the progress to sort of 60% operating margins, I assume that that's the the 350,000,000 of cost synergies, but no more. But any way to think about how the margins, you know, shift in the different parts of the business, or is that not really kind of relevant in terms of how you how you think about it? That'd be helpful. Yeah. We're we're not gonna get into that level of detail, at this point. Obviously, there are different margins across the different parts of That's our business at LFTG and, the Refinitiv business. We certainly understand that people will want more information, and we'll be providing that over time. But for this morning, we're not going to get into that level of detail. Other than just to say, it's more than just the synergies that are contributing to the to the growth and the margins. Sure. No problem. Sorry, Justin. I don't I don't I don't you probably have that. And so sorry if I'm to provide me with the obvious, but I just wanna make sure it was there. Yep. Got it. Thanks. Thank you. No further questions at this time. Please continue. Okay. Great. Thank you very much, everyone, for joining the call, and we'll come to the end of the questions for now. There will be a replay of this later on today. But in the meantime, have a good Good rest of the morning. Thank you. Thank you. And that does conclude our conference for today. Thank you for participating in me all this