London Stock Exchange Group plc (LSEG) Earnings Call Transcript & Summary

Good morning, everyone. Thank you very much for joining us. On the call today are David Schwimmer, Group CEO; and Anna Manz, the Group CFO. After an introduction from David, Anna will walk through our H1 results in detail. David will then share some additional insights into our business performance before we open the lines for Q&A. [Operator Instructions] So with that, let me hand you over to David Schwimmer.

Thanks, Paul. Good morning, everyone. Let's start on Slide 3. LSEG has delivered a good financial performance in the first half of the year, reflecting strong revenue growth across all divisions. 6 months after our acquisition of Refinitiv, we're making great progress integrating the business and delivering on our operating and financial targets, and we are ahead of where we expected to be. Our cost synergy program is ahead of plan, and we're raising our full year target for cost synergies up from GBP 88 million to GBP 125 million. We also remain confident in achieving the other financial targets that we have previously set out. We're making excellent progress on the integration as we execute across a number of work streams to deliver the strategic and financial benefits of the transaction. We completed the disposal of Borsa Italiana to Euronext, and our high-caliber management team is in place and working well together. In addition to all the operational progress integrating systems and building new products and capabilities, we have also rolled out a leadership culture and integration program to align the broader team, and that's going very well. Turning to Slide 4. My 3 priorities are integrating our business, driving growth and building an efficient and scalable platform. I will regularly update you as we execute on these priorities over the coming years. With our diverse world-class assets in a number of growing markets, LSEG is well positioned to capitalize on the trends driving change across our industry. Our integration is enabling our customers to access data, trading tools, analytics, liquidity and risk management across the financial markets and at scale around the world. We are improving how we execute across the business, in sales, in operations, in technology, among other areas. We're making significant but targeted investments in projects that enhance our customer offering and deliver a more scalable and efficient business, particularly in Data & Analytics. This will support our revenue growth and lead to further operating margin improvement. I'll talk in more detail about the performance and the opportunities across our 3 core operating divisions, but first, let me hand over to Anna to talk through our first half financial performance.

Thanks, David. And good morning. Turning to Slide 6. We've delivered a good first half financial performance. We are making great progress on integrating our business and on delivering on our financial targets. All divisions demonstrated good revenue growth. Our cost synergy program is ahead of plan at the half year, and we're on track against both our cost and CapEx guidance. We're confident in the delivery of our acquisition financial targets, and we're embedding a disciplined and rigorous performance management approach across the group as we drive execution. So in summary, it's been a good first half. Now let's look at this in more detail, starting on Slide 7. Throughout, I'm going to talk to constant currency pro forma performance excluding the impact of the deferred revenue accounting adjustment, as it gives you the best understanding of our underlying performance. This slide highlights the key results and our financial performance in the half. I won't read all the numbers, but you can see we've delivered good results across a range of measures. There's 3 things I'd like to pick out: revenue growth of 4.6%, and 5.5% in the second quarter; a big reduction in net debt-to-EBITDA leverage to 2.2x on the back of the disposal of Borsa Italiana; and the dividend. Our policy remains unchanged, so we've announced an interim dividend of 25p per share, a 7% increase on last year. Let me take you through the drivers of our performance, starting with the top line, turning to Slide 8. Overall, we've delivered high-quality top line growth. Currency moved against us in the first half. Looking through that, our total income excluding recoveries rose 4.6%. The majority of this growth is in subscription revenues driven by Data & Analytics. However, our transaction revenue growth was also of high quality with strong performance at Tradeweb and strong growth in RepoClear. As we expected, net treasury income was impacted by an exceptional COVID-related year-on-year comparison. So overall, we're seeing good growth driven by supportive market trends and the actions that we're taking to better meet our customers' needs. Slide 9 looks at that growth on a divisional basis. Our income is high quality with 66 recurring revenue -- 66% recurring revenue, and the growth in the half is broad-based. Data & Analytics grew 4.8%, and we saw an acceleration in revenues over the period with Q2 growth of 5.1%. This is a result of the changes that we're making. Capital Markets also delivered a strong performance with 9.6% growth. And excluding NTI, our Post Trade business grew by 8.4%, so I'm pleased with both our performance and the quality of our revenues which remains very high. Before I walk through the divisions, I wanted to flag that we're introducing a number of new KPIs. These are designed to better help you understand our business and its performance. Starting with Data & Analytics on Slide 10. We have broad-based momentum across the business. Data & Analytics generates revenues in 3 ways: through recurring subscriptions, revenues linked to asset values and revenues linked to transaction volumes. We've color coded the chart to make that clear. Performance has been driven by subscription revenues and asset values. Trading and banking revenues were flat overall. Banking grew 1.9%, and trading declined slightly as the pace of decline in Eikon desktops slowed. Enterprise data grew 2.4%, with our pricing and reference service growing ahead of the market and real-time data stabilizing with an improving outlook. Investment Solutions continues to grow well at 8.4%, with index subscriptions growing 7.9% and the increasing value in assets under management driving asset-based growth of 18.2%. In Wealth Solutions, the transaction revenues from Beta declined as we lapped high volumes driven by COVID last year. And the rest of wealth grew well at 5.7%. Customer and third-party risk grew over 37%. And even removing the acquisition benefit from GIACT and Red Flag, it grew in the mid- to high teens. So a very pleasing and improving performance reflecting good supporting market trends and the disciplined execution. The next slide shows KPIs for Data & Analytics. We show a KPI for each of the revenue types I described on the previous slide. I'm only going to touch on the new ones: firstly, annual subscription value or ASV. This covers nearly 90% of Data & Analytics revenues. It's a constant currency measure giving the annualized value today of our subscription contract book against a year ago. You should compare it with our subscription revenue growth rate. It's higher, reflecting positive sales momentum. You'll recognize our ETF AUM metric, which relates to our asset-based revenues. We've added an ESG AUM metric, as this is both an area of strength and focus for us. And you can see it's grown by almost 200% to $132 billion. Finally, we have a KPI which gives you transaction volumes in Beta. Turning to Capital Markets. Capital Markets delivered another strong performance driven by good primary markets activity and Tradeweb's growth. U.K. equity ADV declined in the half against elevated trading last year. However, a less-volatile market supported primary issuance. There were 75 in the first half, more than twice as many as last year. As a reminder: Accounting treatment spreads that revenue recognition over several years. Revenues from our FX business declined by 0.8%, although FX volumes rose 4%. Mix was the primary factor here. We delivered good growth in our dealer-to-client platform FXall, offset by weakness in dealer-to-dealer volumes on our matching platform. We'll spend time on both of these businesses at our next investor event in October. Finally, fixed income and derivatives was driven by Tradeweb, where revenue increased 15%. This growth is driven by rates products, particularly derivatives; and growth in cash credit products, which generate a higher fee per million. Overall, a really strong combined performance. The next slide shows KPIs linked to Capital Markets' performance. Again I'll only touch on the new ones. FX ADV is a measure of volume traded, although this combines a number of FX products. The KPIs for Tradeweb will be familiar to those of you that follow the business. While there are a number of traded products through their platform, more than half of the revenue is linked to rates, either cash or derivatives. We're including cash credit as well given it's driving strong growth. The increase in these measures in the first half reflects continuation of the growth in electronic trading plus market share gains. Let's look next at Post Trade on Slide 14. I've already highlighted the COVID-related dynamics driving exceptional NTI performance last year. Excluding this, the division grew by 8.4%. OTC derivative revenues rose 2.4%. Securities & Reporting revenues rose 15.3%. This was driven by increased repo activity linked to European debt issuance and service expansion into new products such as clearing green bonds. Noncash collateral revenue increased 17.5%, as customers posted more noncash margin. The current levels of both NTI and noncash collateral are a good indicator for the second half. On Slide 15, you can see that we've introduced 2 new KPIs to help understand Post Trade performance: firstly, for SwapClear. The new metric is a client average 10-year notional equivalent. It's a measure of the size of our client portfolio weighted for duration and is more closely correlated to our revenues. It has increased in the period. The second new metric is average noncash collateral. It provides a value of the noncash margin held. We charge a fee on this collateral. I'll now turn to costs and investment, starting on Slide 16. I want to give you an update on the key areas of costs, investment and margin. Put simply, our costs, investment and margin guidance is all unchanged. Our execution is on track and our cost synergies are ahead. In a bit more detail: We're making great progress on cost synergies. We're ahead of plan after 5 months. The CapEx required to deliver our integration remains GBP 150 million in the year, and we're targeting full year 5% cost growth in line with guidance. Cost growth will reduce after this to low single digit in 2022 and 2023. We're on track to achieve our target 50% medium-term EBITDA margin. And guidance on ongoing CapEx is unchanged at GBP 650 million to GBP 700 million per annum. We've included a couple of slides in the appendix to help you with your modeling. We're making disciplined investment now, which will support delivery of our 50% margin target and drive further margin enhancement beyond our 50% target. Let's go to Slide 17 to look at synergies. We've made good progress with the realization of our cost synergies. In the first half, we've delivered a run rate cost saving of GBP 77 million. This slide shows we have a clear plan for delivery and we're executing well. We now expect full year delivery of GBP 125 million in run rate savings, well ahead of the GBP 88 million guided. Let's turn to operating costs on Slide 18. Guidance for OpEx is unchanged. On the back of our strong execution in the half, I want to pull out some key things. Our full year cost growth target of 5% is unchanged, as the lower growth in the first half is largely phasing. Cost growth will then drop to low single digit in 2022 and 2023. We're on track for our 50% medium-term EBITDA margin target. The investments we're making and our execution progress means that we can deliver further margin expansion beyond the 50% after 2023. Now let's unpack the drivers of our cost growth. First, this year, we have the full year impact of acquisitions made by Refinitiv in late 2020. These drop away from next year. Second, we have higher costs, as we replaced old technology. We should get through this during 2023. Third, as we signaled before, there's costs associated with revenue synergies, such as new salespeople. This impacts the next 2 years. Fourth, normal cost inflation and higher levels of cost at Tradeweb supporting the expansion in that business. And finally, partially offsetting this are the cost savings. So net-net, guidance is unchanged. And our investments will create a sustainably better, more efficient and resilient business with stronger margins. Slide 19 outlines our outlook on CapEx. The main point here is the ongoing CapEx is unchanged and steady at GBP 650 million to GBP 700 million. There will also be CapEx for synergy achievement. You can see the investments being made here are the ones that you've heard about from David and [ Andrea ]. They support revenue growth and create a more efficient and scalable business. In addition to the financial benefits, these projects also deliver the service our customers want, a reliable business that can adapt to their needs with agility. Our business is strongly cash generative, as you can see on Slide 20. We've generated GBP 606 million of free cash flow whilst we've continued to invest in the projects to support growth and efficiency. Slide 21 summarizes our strong financing position. We've achieved a lot in the first half, including refinancing the group. Our blended cost of debt now stands at just 1.7% with a weighted average maturity of 6.5 years. Our credit ratings remain at pre-Refinitiv levels of A3 and A. And our leverage ratio has reduced to 2.2x. We are comfortably on track to reaching our target ratio of 1 to 2x. Slide 22 gives you guidance for this year, 2021. The headline is that our outlook is largely unchanged. At the full year, we said this year's revenue growth would be below 5% due to the tough prior year comps in some of our businesses. Against that backdrop, 4.6% growth in H1 is good. I've covered costs and synergies. Depreciation will be lower than guided at about GBP 790 million for the year. Net finance expense will be about GBP 205 million. And the tax rate is expected to be 21.5% for this year and within the 22% to 24% range next year. In short, we expect to hit all of our financial targets. So to finish on Slide 23. We've delivered good first half results. We are executing well, and we are building a growing and more scalable business for the long term. And with that, I'll pass over to David.

Thanks, Anna. Let's turn to Slide 25. Our capabilities across the broad range of customer workflows in the trading life cycle are driving many growth opportunities. The combination of a truly global footprint, multi-asset class capabilities, market-leading data and analytics and a long track record of customer partnership positions us very well as a leading global financial markets infrastructure and data provider. Turning to Slide 26. Financial markets infrastructure is a rapidly evolving sector. Our customers' needs are changing as they look for efficiency and simplicity with fewer but deeper partner relationships. We're delivering innovative products and services aligned to long-term industry trends such as the digitization of markets, multi-asset class connectivity, the continued growth of passive investing and wealth management as well as ongoing regulatory change. We have natural linkages among our businesses, and those linkages drive many opportunities. Our data businesses and our execution businesses are mutually reinforcing. Liquidity begets liquidity. Data begets data. Executions generate more data; and data leads to more trading, more execution. One example. We use our pricing and reference data in the construction of FTSE Russell's fixed income indices, and we are able to sell both the index and the corresponding reference data. We're applying the same approach to our ESG indices. Another example, we're exploring how our post-trade data can be used to help inform customers' pre-trade decisions. So I'm really pleased with the early progress. We're creating new content, strengthening our sales and distribution channels and serving our customers better. Over the next few slides, I'll provide more detail across Data & Analytics, Capital Markets and Post Trade. Starting with Data & Analytics on Slide 27. Last month, we laid out how we're accelerating our performance to deliver revenue growth in D&A of 4% to 6% per annum over the medium term. We're doing this through focusing on execution, bringing rigor to how we run our daily -- our business day in and day out; enhancing the customer experience, [ I mean ] driving value from the investment in Workspace and the data platform; and focusing on high-impact priorities, synergy delivery and the benefits of our larger group. We're seeing progress across the 5 businesses within the division. A few examples. In trading and banking, we're seeing improving retention rates as a result of a greater focus on our customers. We've also begun the Workspace rollout for banking customers, with positive early feedback. In Investment Solutions, FTSE Russell continues to increase its range of climate-related indices. We've launched 15 new fund products and 11 new analytics products in the first half. And FTSE Russell continues to benefit from the growth of passive investing, with more than $1 trillion of ETF assets under management now benchmarked to its indices. And the integration of the GIACT and Red Flag acquisitions within customer and third-party risk significantly enhances the breadth and depth of our offering, helping customers navigate the complex risk and regulatory landscape. As you'll see from the right side of the slide, in the second half, we will continue to develop cross-selling opportunities between PRS and FTSE Russell and will extend the rollout of Workspace into our FX community. And we'll incorporate yield book analytics into our desktop products and Workspace. In Capital Markets, on Slide 28, our multi-asset class franchise is continuing to drive growth. London's attractiveness as a leading capital-raising venue is clear with the highest number of IPOs in the first 6 months of the year since 2014. And the pipeline remains strong into the second half. In FX, we've introduced some new functionality on our venues. The ongoing buy-side shift from voice to electronic trading is also driving growth at FXall. Electronification of markets is also resulting in market share growth at Tradeweb. We saw a 22% increase in daily volumes to more than $1 trillion a day. As we look into the second half, we expect some constructive changes to U.K. listing rules to make sure our markets remain competitive. We're enhancing our issuer services offering, adding ESG content for our issuers. And we will expand FX traders' access to clearing by building connectivity from FXall to LCH's ForexClear later this year. We'll make progress on the migration of FX matching to our LSEG Technology platform, which will further improve the attractiveness of our client offering here as well. In Post Trade, on Slide 29, LCH remains the leading clearer of OTC products worldwide and is growing in the uncleared market with SwapAgent. 47 new clients started using SwapClear in the first half. ForExClear processed over $10 trillion in notional during the first half and is onboarding new clients ahead of phase 5 of the uncleared margin rules in September. And RepoClear grew strongly as it expanded its offering and cleared higher repo volumes arising from European debt issuance programs. In the second half of the year, the global transition to alternative reference rates remains a focus for LCH. And RepoClear will extend its sponsored clearing model, meaning it can clear for the buy side, in addition to banks, for euro repo clearing. Turning to Slide 30. Our comprehensive ESG offering is supporting the transition to a net 0 carbon economy and is embedded throughout our business. We're going through a generational shift in Capital Markets. We're seeing the growing demand and benefiting from that growing demand for ESG content. Our customers are becoming more sophisticated and more demanding about the ESG content that they are looking for. They're increasingly looking to access the data underlying the ESG scores that various vendors provide. This trend really plays to our strengths, as we supply the data and analysis underpinning many of those ESG scores. We have a core ESG content set going back over 20 years across more than 500 metrics for more than 10,000 companies. At the same time that we supply the data underpinning ESG investments and help customers to identify opportunities, our markets are driving growth of the green economy, enabling issuers to raise equity and fixed income securities that are aligned with the green economy and the transition. We also provide the tools to benchmark performance of ESG investments through a suite of climate-themed equity and fixed income indices such as the FTSE TPI Climate Transition Index, the first global index to enable investors to align a broad equity portfolio with the climate transition goals of the Paris Agreement. Turning to Slide 31. As a group, we try to take a leadership role in our approach to sustainability and environmental stewardship through our own operations, and we're consistently ranked towards the top of ESG ratings within our peer group. In February, we became the first global exchange to commit to net 0, becoming a member of the UN's Race to Zero campaign. Our ambitious targets have been approved by the Science Based Targets initiative. And we've established an environmental management group to ensure we deliver on our targets and drive continued performance improvement. So in summary, on Slide 32. We've delivered a good financial performance with strong revenue growth across all divisions. We're making excellent progress on the integration and the synergies program as we execute across a number of work streams to deliver the strategic and financial benefits of the Refinitiv transaction. Our powerful combination of world-class assets, unique positioning in large and growing markets and a long track record of customer partnership enables us to build on our strengths, creating an integrated business that is much more than the sum of the parts. I'm excited by the multiple opportunities, and I look forward to providing further updates on our progress during the remainder of the year. Anna and I will now be pleased to take any questions you may have.

Great. Thank you, David. As David has just said, we are now into the Q&A section of the presentation. Just as a reminder: We can take questions either in written form or over the phone lines. Now we have got some written questions that have come in during the presentation, so we'll go to those ones first, and then we'll open to the phone lines after that.

So the first question is financial markets and technology have changed a lot since you first announced the acquisition of Refinitiv in 2019. You've now owned the business for 6 months. Does this change the way you think about the strategy or the opportunities?

Thanks, Paul. The strategic rationale for this transaction, if anything, feels more compelling now than it did when we announced the transaction 2 years ago. The demand for data and analytics has continued to grow. The continuing electronification of trading across multiple asset classes, we're seeing that, so our strategy of creating a global multi-asset class financial markets infrastructure and data provider, as I said, it feels more compelling today than it might have even felt 2 years ago. In terms of our understanding of the business, we had spent a lot of time with Refinitiv before we closed the transaction. We spent a lot of time with the Refinitiv shareholders, so there haven't really been any surprises as we've been executing over the past 6 months. And I must say I'm really pleased with how we've been delivering on that execution, and today's results really point to that. And we've gotten a lot done in the first half. We're making really good progress. So we've got plenty more to do, but I'm excited about the execution path going forward. We are making a more efficient, faster-growing, more scalable business with a lot of opportunities ahead.

Thanks, David. So the next question is on costs. And it is can you explain why you still expect 5% cost growth for the full year. And why does this 5% expense growth then become low single digit in the 2 years after, '22 and '23?

Thanks, Paul. So let me just start by saying I'm really pleased with our execution on costs in the first half and the progress that we've made out of the gate on the cost synergies. In terms of your question, you're right. The guidance is unchanged. So 5% growth this year, low single digit in '22 and '23. Our 50% EBITDA margin target is also unchanged, and we've said that we can go further than that beyond 2023. We've got good visibility of the drivers that underpin those cost changes. So maybe if I unpack them a little bit for you: Firstly, in 2021, we've got the impact of the annualization of the acquisitions that Refinitiv did at the end of 2020. Secondly, we've got the impact of some incremental tech costs. Now this is associated with the modernization of some of our older systems and is a combination of some higher costs associated with support of those systems and higher data costs as we work to improve the efficiency of our infrastructure and also a level of dual-running costs as we move to the cloud. I'm absolutely confident that the investments that we are making, which is between now and 2023, will see that those costs gradually fall during that period. The third reason is that we're seeing some increase in OpEx as we invest in some additional salespeople in support of our revenue synergies. So we'll see some ramp-up of that this year and over the next couple of years. And we've got ongoing cost growth, of course, as you would expect, and a higher level in Tradeweb in support of their faster revenue growth. And then we've got the benefit of the synergies coming through. So if you take that all together, that's 5% growth this year, dropping to low single digits in '22 and '23. And just a last point, in terms of the phasing with respect to 2021, I'd largely look at that as a phasing issue and look through it; a combination of things, ramp-up of COVID-related costs in the second half and the phasing of some of those tech costs coming through. I hope that helps.

Great, thanks, Anna. The next one looks at revenues. So you delivered 4.6% revenue growth in H1. Do you expect to be within the 5% to 7% target for H2?

So that's correct. We had a 4.6% revenue growth in H1 and 5.5% in the second quarter, so a solid acceleration there. And given that about 2/3 of our revenues are recurring subscriptions, we expect to see some persistence, some continuation of that solid trajectory into the second half. However, the second half, we've got some comparables to last year where there were some significant volumes around the period where vaccines were being perceived to be successful, some of the U.S. election news, et cetera. So not going to give any change in our guidance for the remaining 5 months of this year, but the 5% to 7% revenue CAGR that we've put out there for future years, that is the right range. And we feel we're very well positioned both in terms of what we're doing with our business but also in terms of the positioning of the business to take advantage of some of these large structural changes and drivers across the industry. So we feel very good about that. We feel good about that range.

Great. Thank you. And we've got a question in multi parts, as the next ones, so let me break it down into individual questions and we'll go to each in turn. So this is from Haley at Crédit Suisse. So the first question is on cost synergies. You've raised the 2021 run rate from GBP 88 million to GBP 125 million, yet no change to the total GBP 350 million target, so the increase in '21, is that simply due to a faster achievement? Or are you finding some additional sources of synergies in the near term?

Thanks for that, Paul. So our guidance for synergy delivery is unchanged at around GBP 350 million in total. And actually we haven't changed the phasing, so we expect to deliver 70% of that by 2023, but you're right. We've started out of the gate really well. I'm really pleased with our progress in the first half. And we're looking in -- we're outperforming at the full year. So the way I'd think about this is we're 6 months into what is a 5-year integration plan that we've laid out, started really well but no change to guidance at this stage.

All right. Thank you. The next part of the question is on revenue growth. So good. There's acknowledgment for the improved quarterly revenue disclosures. Thank you, Haley. Is there any beneficial impact in the rollout of Workspace on the Q2 revenues versus Q1, or is this something we really expect to see in Q3 and Q4 this year?

So thanks for that question. I think, the way you should think about the rollout of Workspace, these are multiyear migrations and across a number of different customers, so you shouldn't expect to see a meaningful impact on revenue or revenue growth in quarter this year -- in the second half of this year. That, as I said, multiyear migrations across a number of customers.

Okay. All right, we're going to move on to CapEx. It's part of the question. So can you clarify the CapEx guidance? And particularly, you're saying it's going to taper after '23, so is there any guidance you can give beyond that either as a ratio or some directional numbers?

Yes. So our CapEx guidance is GBP 650 million to GBP 700 million of ongoing CapEx for '21, '22 and '23. Beyond that, we've said it will reduce, but I'm not going to give a number as to what to. The CapEx that we're spending over this period is the CapEx that we need to deliver the transformation that you've heard David and [ Andrea ] lay out. And it will deliver that incremental, sustainable growth in our revenues; and it will allow us to ensure that our platform is more scalable and reliable going forward. And it's actually why I'm confident to look to a further margin expansion beyond 2023, but no, I'm not going to give you a number, I'm afraid.

Okay. So there's a little bit more detailed questions around the actual numbers, so Haley, we'll take that off-line, but on Slide 37: GBP 730 million of costs to achieve, of which 30% is CapEx. So the question here is, does this mean that actually we're going through most of the CapEx spend in the first year, about GBP 150 million, and then the remainder for '22?

Yes, that's exactly right. So total cost to achieve is GBP 730 million. We've said 30% of that is CapEx. That gets you to about GBP 220 million. We're planning to spend GBP 150 million this year, so you can see that we will be spending the rest sooner rather than later. So weighted to '22 rather than '23.

Okay. And then just one last part of the question. And this is the last of the written questions, so far, because after this, we'll go to the phone lines, but the last part of the question, I think it's quite straightforward, is about clarifying depreciation guidance of the GBP 790 million. Is this constant currency?

That's easy: Yes, it is.

Great. So with that, we can now turn it over to the operator and we can open up the phone lines, please.

[Operator Instructions] And our first question is coming from Ian White.

Three from me, please. Just firstly, on cost synergies, what exactly has driven the outperformance you're seeing there in the first half, please? The savings achieved are obviously meaningfully better than your guidance suggested just 5 months ago. Second, if I've understood correctly, it seems that a number of cost growth drivers will abate from 2023, but obviously the synergy savings will continue for a while longer. Do you therefore think we should be expecting an overall rate of cost growth below low single digit beyond 2023, please? And just a final one, please, on net finance costs. Are there any significant one-offs that are not being adjusted out in the first half? I think your guidance implies quite a sharp fall in the run rate expense there in 2H. And I'm basically wondering if that 2H run rate is what we should be using as a baseline for 2022 expectations, please.

Do you want me to have a go at those? So the first one, cost synergies, what's driven the outperformance. We have a really clear plan around cost synergies. And you saw us share some of the detail of that with respect to the properties that we are consolidating, the consolidation -- duplication of roles, the procurement contracts, the data colos that we're consolidating. What we've done effectively is execute on that better and faster across the board. So it's not one thing that has driven an outperformance in cost synergies. And actually, I find that quite pleasing because that says that out of the gate, across the board, we've just done incrementally better on all the things that we had laid out in our plan. Costs beyond 2023. So I'm not going to guide on cost growth beyond 2023, just because it's a long way away, and there's a lot of moving parts. I think I've laid out the drivers of our cost base. And you're right, there will be some incremental synergy benefit beyond then. And I am guiding to margin expansion as we look to incrementally make our business more scalable. But I'm not going to give you an exact number on that, I'm afraid. Net finance costs. You're right, the first half has got some bridge costs in it. So the second half is a more representative run rate as we look forward to the second -- to next year.

Ian, I think that answers your questions. So we move to the next question in the queue, please.

Our next question is coming from Philip Middleton.

Thanks very much for the presentation and the added disclosure. I wonder if you could please come back to Slide 18. You set out 5 different items here, which is very helpful, but we don't know the quantum of any of these. So how much -- how big are the blocks of your running costs, revenue synergy, operating costs and such like that you expect to drop away after 2023? Because if that's GBP 1, it doesn't matter. If that's GBP 100 million, it does matter. So how big are these?

So I'm not going to quantify them individually for you, albeit you've got some data around a good number of them actually to allow you to work your way through modeling that, the synergy cost, the acquisition cost, for example. They wouldn't be on the slide, unless they were material enough to be driving our cost base. The most important thing though is taken in aggregate, the visibility that we have on these costs underpins the guidance that we've given you, which is 5% for this year, dropping to low single digits for the next couple of years. And as I say, I do feel that we have good visibility on our cost base. And the first half gives me a lot of confidence around our execution and control of that.

Okay. Thank you, Philip. Should we move on to the next question, please.

Our next question is coming from Bruce Hamilton.

Thanks very much for the slides, et cetera. Three questions, if I may. So firstly, just on the progress on sort of net debt deleveraging and thinking about possible sort of M&A opportunities from here. Could you outline which sort of areas look quite interesting? Should we thinking third-party risk that the industry is quite fragmented there? Or are there other parts within data where there could be opportunities for bolt-ons? How do we think about that sort of capital management as we move to 2022 and beyond? Secondly, on the growth in ESG AUM, 187%, obviously, that's fairly impressive. How much of that is sort of new client wins versus presumably some as reclassification? And maybe just looking forward, how do we think about sort of the pipeline of business wins and how to think about growth in that asset base going forward? And then finally, just quickly on the sort of latest on the EU-U.K. discussions around equivalents, which obviously is okay until the middle of next year, but hopefully, we need a decision by then.

Thanks, Bruce. So let me take each of those in turn. On the net debt deleveraging. You're absolutely right, we've made good progress on that. We announced today that we brought it down to 2.2x. We are continuing to focus on bringing our leverage down, and we are continuing to focus on our integration. So those are our priority areas. We want to get the leverage down to that 1 to 2x net debt-to-EBITDA target range. Might we consider bolt-on opportunities, as you suggested? Potentially, but our focus at this point is really on bringing the leverage down and on the integration. If we were to do any bolt-ons, it would be opportunities that meet our financial criteria and meet our strategic criteria. So I'm not going to speculate on anything that we might do at this point. I would say we have a lot of great organic growth opportunities within our business. We're investing in those. But if anything to do on the inorganic front, it would be consistent with what we've done in the past, which has been some very strong, I'll say, shrewd M&A that has fit our strategic and financial criteria. On the ESG question. First, I should just point out that, that data comes from year-end 2020, and we've seen significant progress since then in terms of additional customer wins and moves into that area. I don't think that I would classify it. I think you used the word as reclassifications. I think these are AUM that are affiliated with ESG index products. So I wouldn't put anything in the category of reclassifications. But we've already had some wins in the first half of this year in that area and expect to see continued strong growth in that. We're seeing that across the business, not just in terms of index products, but in terms of our core data set, in terms of our issuance platform, et cetera. Third question on EU equivalents. I would say no real update there at this point. We continue to engage with the stakeholders in the EU, whether that's the European Commission, ESMA, the European Central Bank and, of course, our many members and clients across the EU who rely on LCH for their clearing and who have been pretty vocal about the fact that they don't want to see a fragmentation of liquidity pools. They don't want to lose access to the ability to net their positions across one clearing house. So we are optimistic and hopeful that there will be a clear, clean resolution and a granting of permanent recognition in advance of next year's -- it's the June 2022 deadline for this round of temporary recognition, but I don't have anything further to add than that.

Thank you. Thanks, Bruce. There are no further written questions so we're going to stay with the phone lines for now. So can we have the next question, please?

Our next question is coming from Andrew Coombs.

Two questions from me, please. Firstly, just returning to Slide 18. I just want to clarify the guidance on the EBITDA margin. Previously, I think you've always said that this is a medium-term target. I think you've now nailed your colors to the mast. I think you said 2023 in your earlier commentary. Can you just clarify, is that 2023 for the full year? Or is that the exit run rate for 2023, given the previous commentary on synergy recognition has been on the exit run rate timing. That will be the first question. And the second question is pertaining to Data & Analytics. I think, Wealth, you explained with the weaker [ beat to ] revenues, I just wanted to come back to Enterprise Data. That's a business that have been growing 4% to 5%, growing 2.5% year-on-year, so a bit below the historic run rate. I know the Real-time Data has been a bit soft, but could you just elaborate there where you think the step change will come through in Enterprise Data and why it's been a bit softer in the first half?

Do you want to do the EBITDA margin?

Sure.

So the guidance, we absolutely have nailed our colors to the mast around 2023. And it's an exit run rate figure, but of course, we target getting there as quickly as possible. Do you want to do the enterprise data or...

Sure. With respect to Enterprise Data, as we spent some time on this a month ago in our investor education event, you have the Real-time data in there and then the non-Real-time the pricing and reference data in there. And we have seen attractive growth in the Pricing and Reference Data in sort of 6-plus percent zone. In terms of the Real-time, as we mentioned a month ago, there have been some very aggressive competitive pricing dynamics in that space, where some of our competitors were effectively trying to, I'll say, buy that business from customers. We have both stabilized that, and the outlook is significantly improving. And in fact, we're seeing some customers return given their, I'll call it, their preference for our services. So we're continuing to invest in both parts of Enterprise Data, the Real-time and the Pricing and Reference. And we think that, that has attractive prospects going forward.

Thanks, David. Thank you, Andrew, for the questions. Sticking with the phone lines, we'll go to the next one, please.

Next question is coming from Kyle Voigt.

A few questions for me. First, on cost synergy realization. It's good to see those cost synergies coming in faster than expected. However, if there's been an acceleration in the synergy realization in both 1H and 2H of this year, I'm just wondering why that's not flowing through into a change in that plus 5% cost guidance for the full year? So that's the first question. Second question, you noted there was a slowing decline in the Eikon Premium Desktop. I guess, do you think you have a clear line of sight to seeing that fully -- to fully stopping that decline? And then the third question is just related to something that was said in the prepared remarks on Data & Analytics growth accelerating in 2Q versus 1Q. You specifically cited that this is due to changes that you're making. Can you just go into that a bit more or give examples of what you've seen in 2Q specifically as a result of your actions that are beginning to have an impact?

Sure. Do you want to take the cost synergy?

So the first one on cost synergy and why we don't see the guidance change. I guess a couple of points. The number we're quoting for cost synergies is a run rate number. And so it's the value of the synergies we've achieved at the end of the year. It does give us a P&L benefit in the year, but not as great as the absolute run rate step up. Look, why is our guidance unchanged? Because the impact of that is not huge and because we're going a little bit faster on modernizing some of our tech, because that will give us a more scalable, more efficient business going forward. So really, I think this is about great execution in our cost base, and I mean that in 2 ways. Firstly, in discipline and focus around the delivery of our synergies. But then secondly, about tackling some of these areas where we can make our cost base more efficient going forward.

And then on your other 2 questions, with respect to Eikon Premium. So correct, slowing decline there. I would attribute that to greater focus, both on the customers using it and improving our retention rates, as well as continued investment in the product and the capabilities. And that includes -- will include, over time, as we roll out other products, other capabilities and, over time as well, Workspace. On the question around specifics on what we're doing in terms of driving some of the growth in Data & Analytics. I would say a lot of this is about better execution. It's about real focus with respect to our sales team; real focus, execution and discipline with respect to our customer service team and focusing on customer retention. And then there's continued investment in new product areas. So just to give you one example of that. We are seeing good take-up in terms of the various IBOR replacement products. And so a number of different areas where we're focused on sales discipline, sales execution, customer retention, execution, and then making sure that we continue to invest in our content.

Okay. Thank you for the questions there, Kyle. So we'll -- I think we've got 4 more left in the queue. So if we go to the next one, please.

Our next question is coming from Arnaud Giblat.