LSE's expansion drives 35% surge in earnings

THE LONDON Stock Exchange yesterday reported that full-year profits had risen a third as it expanded through acquisitions and focused on new markets such as clearing and technology sales.

For the year to March 31st, revenues rose 10 per cent to £679.8 million and pre-tax profits more than doubled from £238.2 million to £639.7 million as it made a one-off recognition of the value of its existing interest in FTSE International, the index compiler.

The bourse bought the 50 per cent of the longstanding venture it did not own for £450 million in December from Pearson, the education and information group that owns the Financial Times.

Excluding the one-off gain, adjusted profits rose 35 per cent to £401 million.

Total income at the LSE rose 21 per cent to £814.8 million as it benefited from the funding needs for Italian banks at its local clearing business, Cassa di Compensazione e Garanzia (CCG).

The figures helped its shares outperform a falling market, rising 5.4 per cent in afternoon trade in London.

The results illustrate a year of significant change at the LSE as regulation and investors’ trading preferences reshape the market.

Incoming regulation in the US and Europe is set to reshape the off-exchange derivatives market, fierce competition has cut profits in its core business of equities trading, while pension funds are increasingly looking to trade globally and use other asset classes, such as derivatives.

In his three years as chief executive, Xavier Rolet has diversified the business beyond trading of UK equities into fixed-income trading, technology sales, indices licensing and post-trade services such as clearing and trade reporting.

A deal to take a controlling stake in LCH.Clearnet, the privately-held clearing house, is awaiting clearance from British, Spanish and Portuguese regulators.

However a 3.6 billion Canadian dollar deal to merge with TMX Group, operator of Canadas largest bourse, failed last summer.

“We have made great progress this year,” Mr Rolet said. “We have seen strong performances across all four business divisions and made significant progress on our diversification strategy.” – (Copyright The Financial Times Limited 2012)