AGM Statement

RNS Number : 6847Y

London Stock Exchange Group PLC

09 July 2008

 



LONDON STOCK EXCHANGE GROUP PLC

Annual General Meeting

Wednesday 9 July 2008

Chairman's statement by Chris Gibson-Smith

For the next few minutes I would like to talk about last year's performance, which was outstanding, and then go on to address the current position and why the Board is confident about our future prospects.  

A year of major achievement

The past year has been one of major achievement for the London Stock Exchange, delivered against a background of significant financial market turbulence. And, briefly, these are a few of the highlights.

Following your overwhelming approval, we successfully completed the merger with Borsa Italiana on 1 October, creating Europe's leading diversified exchange business. The merger has increased our opportunities for growth in a dynamic global exchange sector, while bringing greater diversification of revenues. In addition to strengthening our equities and derivatives businesses, it has brought us fixed income products through MTS as well as highly efficient post trade services.  

For companies across the globe seeking to raise equity capital we remain the exchange of choice. In the year, we attracted a total of 84 international IPOs from 25 countries - more than Nasdaq, NYSE Euronext and Deutsche Börse combined. 

The launch last June of TradElect, our new electronic trading platform, redefined our capabilities, substantially increasing our trading capacity and speed. In TradElect's first year of operation, we saw for the first time more than 1 million trades in a single day. In fact this happened 9 times through the year, with a record of more than 1.4 million trades on 22 January 2008.

Our Information Services division produced a very strong performance across the Group with, for example, the total number of terminals taking LSE data up 22,000 to a record 138,000 and now more than half of these are outside the UK.  

Financial performance

Our strategic and operational progress is matched by strong financial performance. For your convenience I will give you pro forma figures, that is, figures as if Borsa Italiana was part of the Group since 1 April 2006.  The pro forma results for the year are as follows:

• Revenue was up 15 per cent to £667 million, reflecting, in particular, strong growth in Trading Services.  

• Adjusted operating profit increased 27 per cent to £343 million, resulting in operating margin of 51 per cent.

• Adjusted basic earnings per share for the year, excluding exceptional items and amortisation of purchased intangibles, was 73.1 pence, a 30 per cent increase over last year.  

Your Company continues to be highly cash generative and its balance sheet remains strong. Including Borsa Italiana for the second half of last year only, we generated over £110 million of free cash flow.

The integration of the Exchange and Borsa Italiana continues, with the merger well on track to deliver at least £40 million of synergies. Upcoming milestones include the migration of trading in Italian equities to TradElect in September and the launch of AIM Italia by the end of the year.

Q1 2009

This morning we released an interim statement for the three months to the end of June. Pro forma revenues were up 8 per cent to £178 million with notably good performances from Information Services and Post Trade Services with revenues up 19 and 20 per cent respectively.

In May, a record £24 billion was raised through new and further share issues on the London market. This was more than double the previous record set in July 2006 and shows that the Exchange can provide equity capital for the corporate sector when debt markets are difficult or even closed.

The average number of equity trades per day for the Group continued to grow, reaching 936,000, an increase of 17 per cent over last year.  

Confidence in the future

Looking to the future, there is a deep sense of pessimism in the market, and this is depressing current stock valuations, especially in the financial sector.  The market is now almost 20 per cent off its most recent peak and 16 per cent down this year, while the FTSE All Share Financials index has fallen 25 per cent in the first six months of this year. 

This is reflected in an eight per cent fall in value traded in the last three months, although we have held up well compared to Euronext and Deutsche Börse which fell 19 and 21 per cent respectively in the same period.

Despite the uncertainty created by the current financial market turmoil, and the emergence of new trading venues across Europe, we are well placed to meet the challenges and realise the opportunities ahead. We believe that the quality and resilience of our business model and our ability to innovate to meet changing customer needs will continue to deliver value to customers and therefore ultimately to shareholders.

As I mentioned earlier, our merger with Borsa Italiana has created new opportunities for growth, while diversifying our revenues geographically as well as by business line.

As the exchange of choice for international companies we both facilitate the international ambitions of the companies that join our market while benefiting from the continuing rapid growth in emerging economies.

Our equity order book continues to be the price formation venue for UK equities and by far the most liquid market. We are not complacent of course, but we do have a track record of competing successfully and delivering our promises. We continue to invest in technology and to review our pricing structures to ensure we are able to continue to stimulate further trading growth in our markets.  

We also continue to innovate and invest to strengthen our offering and grow our revenue base. Our current development pipeline includes:

• A joint venture with the Tokyo Stock Exchange to establish a growth market in Japan, which remains on track for launch by the end of this year.  

• In September, we will double our trading system capacity and then, in October, double the speed of trading again.  

• Next year we will launch the world's first combined cash equity and Contracts for Difference market, significantly cutting the cost of economic exposure to UK equities. 

• We will introduce energy derivatives on our Italian derivatives market later this year.

• Over the next year MTS will complete the migration of its markets onto the TradeImpact trading platform.

• And as we recently announced, we are also developing a new pan-European market in partnership with Lehman Brothers. The new platform will be a dark liquidity pool open to both buy and sell side with algorithmic trading and smart order routing to at least 22 locations in Europe. It will be called Baikal, and will be launched in the first quarter of 2009.  

Reflecting last year's strong performance, the company's financial strength and our confidence in the future, the Board is proposing a final dividend of 16 pence per share, making a total of 24 pence for the year, an increase of 33 per cent.  The dividend will be paid on 11 August to shareholders on the register on 18 July.

Further information is available from:

London Stock Exchange	Patrick Humphris - Media	020 7797 1222
	Paul Froud - Investor Relations	020 7797 3322
Finsbury	James Murgatroyd	020 7251 3801

This information is provided by RNS

The company news service from the London Stock Exchange

 

END

 

 

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