Bloomberg News

LSE Increases Information, Technology Income

July 18, 2012

London Stock Exchange Group Plc (LSE) said fiscal first-quarter sales rose 10 percent, boosted by income from information and technology services.

Revenue for the three months ended June 30 increased to 179 million pounds ($280 million) from 162.4 million pounds in the same period a year earlier, according a Regulatory News Service statement today. Total income, which includes money earned from deposits at its central counterparty, gained 10 percent to 209.5 million pounds.

“Market conditions have remained weak and the summer period is expected to be quiet,” the exchange said in the statement today. “Notwithstanding continuing market and economic uncertainties, the group remains well positioned and will continue to focus on delivering benefits from recent transactions and its more diversified range of products and services.”

Chief Executive Officer Xavier Rolet is trying to diversify LSE’s business away from traditional equities after losing market share to alternative trading systems. In December, LSE agreed to buy the 50 percent of FTSE International Ltd. it didn’t already own from Pearson Plc (PSON) for 450 million pounds in cash. In March, LSE announced it would purchase a majority stake in LCH.Clearnet Group Ltd. LSE scrapped its bid for TMX Group Inc. last year after failing to win support from the Canadian company’s shareholders.

“It’s going to be a tough market with a quiet summer,” said Richard Perrott, exchange analyst at Berenberg Bank in London. “It’s positive that LSE has repositioned away from commoditizing cash equities and towards post-trade and info services. I’m still cautious given the exceptional nature of treasury income.” He has a hold recommendation on the stock.

Europe’s oldest independent bourse said in May that fiscal second-half profit quadrupled, boosted by money earned from deposits at its Italian central counterparty.

Net interest income, or income LSE earns from taking margin or deposits from traders who use its Italian central counterparty climbed 10 percent to 28.5 million pounds. The exchange takes the margin deposits, pays the depositors interest and itself earns an income by investing the funds for the short term in the Italian interbank market.

Rolet was awarded the maximum bonus of 1.52 million pounds last year for “excellent performance, resilient leadership and the delivery of strong financial results.” His base salary of 675,000 pounds for the 12 months starting April 1, 2012, will remain unchanged from last year, LSE said in its annual report.

Sales from capital markets, where LSE makes money from company listings and trading, fell 15 percent to 67.5 million pounds in the first quarter. Information-services sales climbed 68 percent to 75.3 million pounds.

Revenue from technology services increased 14 percent to 12.1 million pounds and post-trade services declined 12 percent to 22.8 million pounds.

The shares fell 1.9 percent to 994 pence at 10:34 a.m. in London.

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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