Interim Results
London Stock Exchange Group PLC
15 November 2007
15 November 2007
LONDON STOCK EXCHANGE GROUP plc
ANNOUNCEMENT OF RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007
London Stock Exchange Group plc (the 'Exchange') today reports results for the
six months ended 30 September 2007. The merger with Borsa Italiana was completed
after the half year-end and consequently the interim results do not include
contributions from this business.
Financial Highlights:
• Revenue up 24 per cent to £203.1 million
• Operating profit up 41 per cent to £114.7 million
• Basic (and adjusted) EPS up 48 per cent to 35.7 pence
• Interim dividend per share up 33 per cent from 6.0 pence to 8.0 pence per
share reflecting continued excellent results and confidence in future
growth prospects for the enlarged group
Operational Highlights:
• Broker Services delivered 77 per cent growth in SETS volumes to 555,000
bargains per day, facilitated by successful introduction of new technology
platform - TradElect - during the period
• Issuer Services saw an 89 per cent increase in Main Market new issues to
72, including a near four-fold increase in international new issues
• Information Services increased the number of terminals receiving
real-time market data by 17,000 to 126,000 year on year, including a 12,000
increase in number of professional users to 103,000
Corporate Highlights:
• London Stock Exchange and Borsa Italiana agreed merger - successfully
completed early October, valuing the Milan exchange at £1.3billion
• The Exchange returned approximately £94 million to shareholders through
a share buyback programme, and announced further return of £500 million
Commenting on the six months, Clara Furse, Chief Executive said:
'The Exchange has produced an excellent first half performance, with revenue up
24 per cent and earnings per share increasing by 48 per cent. This result
reflects very strong performances in each division, particularly in Broker
Services with the continued growth of trading on our SETS electronic order book,
following the launch of our new TradElect trading platform in June.
'The quality of our technology, products, market model and regulatory integrity,
plus our ability to provide best execution, means we are well placed to continue
to compete successfully and meet the evolving needs of increasingly
international market users. The integration of the Borsa Italiana business has
started well, to create further opportunities and efficiencies for the market,
and in so doing deliver increased value for shareholders.'
Chris Gibson-Smith, Chairman of the Exchange, said:
'This is another highly satisfactory result. Highlights of the half year include
continued strong growth in each of our divisions; the successful introduction of
TradElect, bringing with it faster and more efficient trading for the market;
and completion of the merger with Borsa Italiana. Our very strong performance
for the year so far and the contribution from Borsa Italiana in the second half
supports our confidence in a good outcome for the full year.'
Further information is available from:
London Stock Exchange John Wallace - Media 020 7797 1222
Patrick Humphris - Media 020 7797 1222
Paul Froud - Investor Relations 020 7797 3322
Finsbury James Murgatroyd 020 7251 3801
Chairman's statement
The Exchange has produced an excellent set of results for the first half. Set
against a backdrop of heightened activity in financial markets associated with
credit market liquidity events, Broker Services continues to be the principal
driver of growth, with 31 per cent revenue growth in the period. The SETS
electronic order book delivered volume growth of 77 per cent, achieving new
record trading levels over the summer and exceeding one million trades per day
for the first time, assisted by the introduction of our new trading platform,
TradElect. Issuer Services enjoyed a good start to the year with strong growth
in UK and international Main Market activity. The Information Services division
also produced another strong performance, with an increase in the number of
terminals receiving our real-time trading data.
We have made significant progress in realising our vision to be the world's
capital market. The increase in the number of overseas companies on our markets,
the growth in trading and the demand for our market data on an increasingly
international basis all demonstrate the success of our strategy. The merger with
Borsa Italiana has now been successfully completed, and integration work has
started well, to deliver strategic and commercial benefits. It enhances our
unique strategic position and will accelerate the growth of the business.
Financial results
Unless otherwise stated, all figures below refer to the six months ended 30
September 2007. Comparative figures are for the corresponding period last year.
The merger with Borsa Italiana was completed after the half year-end and
consequently the interim results do not include contributions from this
business.
The Exchange produced an excellent performance in the first six months of the
financial year, with revenue up 24 per cent to £203.1 million (2006: £163.3
million). Operating costs increased as expected, reflecting higher spend in a
number of areas as the business grows, rising 8 per cent to £88.4 million (2006:
£82.0 million). Operating profit for the period increased 41 per cent to £114.7
million (2006: £81.3 million).
Both basic and adjusted earnings per share were 35.7 pence, an increase of 48
per cent over basic earnings of 24.2 pence per share last year.
Cash flows from operating activities increased 28 per cent to £127.2 million,
(2006: £99.7 million), with cash balances at 30 September 2007 standing at £77.5
million (31 March 2007: £72.9 million), retained principally for regulatory
purposes.
At 30 September 2007 borrowings amounted to £462.8 million, mainly comprising a
£250 million 10 year sterling bond issued in 2006, and bank borrowings of £200.7
million, principally including £48 million on a £200 million 5 year revolving
credit facility, and £154 million on a £250 million bridge facility repayable by
July 2009.
Net liabilities at 30 September 2007 were £324.8 million, compared to net
liabilities of £349.9 million at 31 March 2007.
Issuer Services
Issuer Services enjoyed a strong first half, as revenue increased 24 per cent to
£35.5 million (2006: £28.7 million), contributing 17 per cent of total turnover.
The number of Main Market new issues almost doubled to 72 (2006: 38), including
27 international companies, a near four-fold increase over the same time last
year (2006: 7). AIM, the world's most successful market for smaller companies,
also performed well, with 163 companies joining the market during the period
(2006: 209). In total there were 236 new issues on the Exchange's markets (2006:
247), including 1 on the Professional Securities Market.
The total amount of new capital raised on the Exchange's markets during the
first six months of the financial year was £25.9 billion (2006: £25.7 billion).
This strong performance reflects the strength of London as a global financial
centre, and in particular the efficient and low cost of capital raising on the
Exchange, attracting a significant number of overseas companies to our markets.
In total, the number of international new issues increased 30 per cent to 79
(2006: 61), with the Exchange again outperforming other major exchanges in
Europe and North America. We achieved 52 international IPOs on the Exchange's
markets during the period exceeding those on NYSE Euronext, Nasdaq and Deutsche
Borse put together.
At 30 September 2007 the total number of companies on our markets reached 3,297
(30 September 2006: 3,212), including 1,682 companies traded on AIM (2006:
1,590).
During the period, we announced the launch of the Specialist Fund Market (SFM),
launched on 1 November 2007. SFM will be the Exchange's regulated market for
highly specialised investment entities that wish to target institutional,
professional and highly knowledgeable investors. It is expected to appeal to
large hedge funds, private equity funds, and certain emerging market and
specialist property funds seeking admission to a public market in London.
RNS, the Exchange's financial communications service performed well, with a 75
per cent market share of all regulatory announcements and over 90 companies in
the FTSE 100 using RNS in the half year. RNS, together with training and
consultancy services, contributed £6.5 million to Issuer Services revenue (2006:
£6.0 million).
Broker Services
Broker Services produced an excellent performance, with revenue for the half
year rising 31 per cent to £99.4 million (2006: £76.1 million), accounting for
49 per cent of total turnover.
Trading on SETS, the electronic order book, was again the primary driver of this
very strong growth as volumes increased 77 per cent to a total 69.4 million
bargains (2006: 39.3 million). The daily average number of bargains increased by
a similar amount to 555,000 (2006: 314,000). Increased market volatility over
the summer added to the already strong growth experienced during the earlier
part of the financial year. Strong trading associated with credit market
liquidity events and heightened activity in financial markets continued in
September, with the month registering the second highest level of average
trading volumes, following the records set in August.
Value traded on SETS during the first half of the financial year increased 48
per cent to £1.1 trillion (2006: £744 billion), a daily average of £8.7 billion
(2006: £6.0 billion). The average value of a SETS bargain decreased to £15,700
(2006: £18,900) with the yield per bargain reducing as expected during the
period, to £0.99 (2006: £1.38). Overall, trading on SETS contributed 85 per cent
of Broker Services' revenue, including order charges (2006: 83 per cent).
The introduction of TradElect, our new trading platform launched in June, played
a critical role in stimulating electronic order book growth. The greatly
increased capacity and improved latency resulting from the new system
facilitated the significant uplift in trading volumes during the latter part of
the period, in particular enabling customers to trade at much higher frequencies
at times of peak demand and heightened market activity. TradElect is the final
major phase of our four year technology investment programme, although further
enhancements will continue to increase performance and launch new services. A
new release took place in October, to further upgrade system latencies and
capacity, and to introduce new pan-European products following changes arising
from the introduction of MiFID this month.
Our strong results during the period also reflect a continuation of the secular
change in equities trading we have noted on previous occasions. Such
developments include the continued and high level investment by market users in
technology, stimulating growth of algorithmic/black box trading, coupled with a
trend toward greater direct market access. Trading has also increased as
derivatives traders increasingly use our market to hedge exposure in over the
counter equity markets.
Trading levels have also increased as a consequence of actions taken by the
exchange to facilitate more efficient trading. Our volume discount pricing
scheme rewards high levels of trading on the order book and reduces the
incremental costs of trading. SETSmm, which trades 777 mid-cap, small-cap and
large UK AIM securities on the electronic order book, continues to reduce
spreads and improve liquidity, with volumes averaging 149,000 bargains per day
(2006: 67,000) - an increase of 122 per cent over the same period last year.
The Exchange has introduced a number of new products and services, to help
market users meet new reporting and execution requirements under MiFID. For
example, SETSqx, a trading platform for securities less liquid than those traded
on SETS or SETSmm, was launched in June and expanded in October, for all Main
Market and EU AIM equity securities not already traded on a full order book.
SETSqx combines a periodic electronic auction book (four times each day) with
standalone quote driven market making.
The total value of UK equity bargains for the period increased 40 per cent to
£2.1 trillion (2006: £1.5 trillion) while the total number of UK equity bargains
rose 70 per cent to 75.5 million (2006: 44.4 million), a daily average of
604,000 bargains (2006: 355,000).
Information Services
Information Services delivered a very good performance with a 14 per cent
increase in revenues to £58.1 million (2006: £50.9 million), comprising 29 per
cent of total income.
The total number of terminals taking our real time price and trading data
increased by 17,000 to 126,000 as at 30 September 2007 (2006: 109,000). Included
in this number were 103,000 terminals attributable to professional users, up
7,000 on the number at the start of the financial year and up 12,000 on the
comparable period (2006: 91,000). The strong increase in professional terminals
reflects an increase in market users outside the UK accessing our market data.
During the period, the number of international terminals increased by 3,000 to
23,000. Proquote, the Exchange's provider of financial market software and data,
performed well, increasing the number of installed screens to 3,800 (2006:
3,300).
SEDOL, the Exchange's service providing unique identification for a range of
global tradable securities, also made good progress with growth in the number of
users of this service.
Derivatives Services
Derivatives Services, mainly comprising EDX London, the Exchange's equity
derivatives business, increased revenues to £5.7 million in the half year (2006:
£4.4 million). The total number of contracts traded on EDX during the period
rose by 41 per cent to 21.5 million (2006: 15.3 million). Of this total, the
trading of Scandinavian equity derivatives contracts rose 21 per cent to 18.5
million (2006: 15.3 million) while trading in Russian derivatives amounted to
3.1 million contracts, having been launched at the end of 2006.
Borsa Italiana
On 25 June 2007, the Exchange and Borsa Italiana S.p.A. announced an agreement
to merge. Following overwhelming shareholder support at both companies' EGMs,
the merger was completed on 1 October, just after the Exchange's half year end,
valuing Borsa Italiana at £1,308 million (€1,878 million).
The merger creates the leading diversified exchange group in Europe and the
platform for additional strong growth on a European and global scale. As the
European exchange leader in the listing and trading of equities and the leader
in electronic trading of ETFs, securitised derivatives and fixed income
products, the combination will provide significant benefits for customers and
shareholders.
Borsa Italiana's financial performance for the six months to 30 September 2007
is provided as an attachment to this report.
Board of Directors
A number of changes to the London Stock Exchange Group Board have taken place,
principally reflecting the agreed structure arising from the successful
completion of the merger with Borsa Italiana. We are pleased to welcome Sergio
Ermotti, Paolo Scaroni and Andrea Munari, along with Angelo Tantazzi as Deputy
Chairman and Massimo Capuano as Deputy Chief Executive.
As announced in September 2007, Peter Meinertzhagen and Gary Allen both stood
down from the Board, and we thank them for their substantial contribution during
their long service. Both have seen the company through demutualisation and
listing, providing invaluable guidance and advice as members of Board Committees
appointed during the Exchange's successful bid defences.
Since the half year end, Jonathan Howell has announced his intention to leave
the company in January. Over his eight years as Director of Finance, Jonathan
has been instrumental in the delivery of exceptionally strong shareholder value,
developing the Exchange's financial strategy and putting it to the forefront of
the sector for balance sheet efficiency. We wish him well in his new role.
Share Buyback Programme
The Exchange made good progress on its capital return programme, making
on-market purchases of 7.2 million shares during the first half of the year at
an average price of £13.04, amounting to £94 million. As at 30 September 2007,
the Exchange had completed £154 million of the £250 million share buyback
commitment announced in January 2007.
In July 2007 the Exchange announced an increase to its programme of capital
return, indicating a further £500 million would be returned to shareholders
following the completion of the Borsa Italiana merger (including the outstanding
£96 million from the earlier £250 million programme). The Board has reviewed
options for the Company's capital structure and announces it intends to resume
its programme of on-market share repurchases, subject to this being in the best
interests of shareholders.
Interim Dividend
The Directors have declared an interim dividend of 8.0 pence per share,
representing a 33 per cent increase in interim dividend per share (2006: interim
dividend 6.0 pence). This increased payment reflects the Exchange's excellent H1
financial performance and underscores the Board's confidence in the prospects
for the new enlarged business. The Board remains committed to sustainable,
progressive dividends, with payment on an approximate one third/two third basis
between the interim and the final dividend.
The interim dividend will be paid to those shareholders on the register on 7
December 2007, for payment on 4 January 2008.
Outlook
The Exchange has delivered an excellent first half result with each of the main
business areas performing well. Looking ahead, overall trends remain good, in
particular with trading in the secondary markets continuing strongly:
• the primary market remains active though new issues are lower than in
recent months, with the number of Main Market new issues in October at 10
compared with 13 for the same period last year;
• trading on SETS continues strongly, with 73 per cent growth in daily
bargains in October over the same period last year; and
• demand for real time pricing and trading data remains good.
As stated at the time of announcing the merger with Borsa Italiana, we expect
the effects of the combination to be earnings neutral to positive in the current
financial year. We remain confident of maintaining good progress in the second
half of the financial year, with continued topline growth, including Borsa
Italiana, though interest costs will rise. Overall, we expect a good outcome for
the new enlarged group for the full year.
Chris Gibson-Smith
Chairman
15 November 2007
Further information
The Exchange will host a presentation of its Interim Results for analysts and
institutional shareholders today at 9.30am at 10 Paternoster Square, London EC4M
7LS. The presentation will be accessible via live web cast which can be viewed
at www.londonstockexchange-ir.com, or listened to on +44 (0)20 7162 0025 (UK /
Europe) or +1 334 323 6201 (US Local Connect). For further information, please
call the Exchange's Investor Relations department at 020 7797 3322.
A conference for members of the Press will be held at 11:15am.
15 November 2007
CONSOLIDATED INCOME STATEMENT
Six months ended 30 September 2007
Six months ended Year ended
30 September 31 March
____________________ ______________
2007 2006 2007
Unaudited Unaudited
Continuing operations Notes £m £m £m
______________________________________________________________________________________________________________________
Revenue 203.1 163.3 349.6
Expenses
___________________________________________
Operating expenses before exceptional items 2 (88.4) (82.0) (164.0)
Exceptional expenses 3 - - (11.4)
___________________________________________
Total (88.4) (82.0) (175.4)
______________________________________________________________________________________________________________________
Operating profit 2 114.7 81.3 174.2
______________________________________________________________________________________________________________________
Analysed as:
Operating profit before exceptional items 114.7 81.3 185.6
Exceptional items - - (11.4)
______________________________________________________________________________________________________________________
Operating profit 2 114.7 81.3 174.2
Net finance costs 4 (13.8) (5.4) (14.6)
Share of profit after tax of joint venture 0.9 0.8 1.9
______________________________________________________________________________________________________________________
Profit before taxation 101.8 76.7 161.5
Taxation 5 (30.3) (22.4) (50.9)
______________________________________________________________________________________________________________________
Profit for the financial period 71.5 54.3 110.6
______________________________________________________________________________________________________________________
Profit attributable to minority interest 0.2 0.2 1.0
Profit attributable to equity holders 71.3 54.1 109.6
______________________________________________________________________________________________________________________
71.5 54.3 110.6
______________________________________________________________________________________________________________________
Basic earnings per share 6 35.7p 24.2p 50.5p
Diluted earnings per share 6 35.0p 23.9p 49.4p
Dividend per share in respect of financial period: 7
Dividend per share paid during the period 12.0p 8.0p 14.0p
Dividend per share proposed for the period 8.0p 6.0p 18.0p
______________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Six months ended 30 September 2007
Notes £m £m £m
______________________________________________________________________________________________________________________
Profit for the financial period 71.5 54.3 110.6
___________________________________________
Defined benefit pension scheme actuarial gain, net of tax 6.4 1.4 0.2
Cash flow hedging 8 (3.5) - -
Tax allowance on share options/awards in excess of expense recognised 2.8 3.4 4.9
___________________________________________
5.7 4.8 5.1
______________________________________________________________________________________________________________________
Total recognised income and expense for the financial period 77.2 59.1 115.7
______________________________________________________________________________________________________________________
Attributable to minority interest 0.2 0.2 1.0
Attributable to equity holders 77.0 58.9 114.7
______________________________________________________________________________________________________________________
77.2 59.1 115.7
______________________________________________________________________________________________________________________
CONSOLIDATED BALANCE SHEET
30 September 2007
30 September 31 March
____________________ ______________
2007 2006 2007
Unaudited Unaudited
Notes £m £m £m
______________________________________________________________________________________________________________________
Assets
Non-current assets
Property, plant and equipment 54.6 60.0 58.8
Intangible assets 57.8 52.4 55.8
Available for sale investments 0.4 0.4 0.4
Other assets 9 16.6 - -
Investment in joint venture 10 2.1 2.1 1.9
Deferred tax assets 12.9 15.2 15.9
______________________________________________________________________________________________________________________
144.4 130.1 132.8
______________________________________________________________________________________________________________________
Current assets
Trade and other receivables 11 69.7 53.1 61.4
Cash and cash equivalents 77.5 78.8 72.9
______________________________________________________________________________________________________________________
147.2 131.9 134.3
______________________________________________________________________________________________________________________
Total assets 291.6 262.0 267.1
______________________________________________________________________________________________________________________
Liabilities
Current liabilities
Trade and other payables 12 94.2 71.6 129.4
Current tax 22.8 12.9 20.6
Derivative financial instruments 8 3.5 - -
Borrowings 13 214.5 114.7 171.4
Provisions 14 4.9 11.6 8.0
______________________________________________________________________________________________________________________
339.9 210.8 329.4
______________________________________________________________________________________________________________________
Non-current liabilities
Borrowings 13 248.3 248.8 248.7
Retirement benefit obligations 15 3.5 17.0 15.0
Provisions 14 24.7 24.3 23.9
______________________________________________________________________________________________________________________
276.5 290.1 287.6
______________________________________________________________________________________________________________________
Total liabilities 616.4 500.9 617.0
______________________________________________________________________________________________________________________
Net liabilities (324.8) (238.9) (349.9)
______________________________________________________________________________________________________________________
Equity
Capital and reserves attributable to the Company's equity holders
Share capital 16 13.8 253.5 253.0
Retained losses 16 (323.3) (239.0) (351.7)
Other reserves 16 (18.1) (255.2) (253.8)
______________________________________________________________________________________________________________________
(327.6) (240.7) (352.5)
Minority interest in equity 16 2.8 1.8 2.6
______________________________________________________________________________________________________________________
Total equity (324.8) (238.9) (349.9)
______________________________________________________________________________________________________________________
CONSOLIDATED CASH FLOW STATEMENT
Six months ended 30 September 2007
Six months ended Year ended
30 September 31 March
____________________ ______________
2007 2006 2007
Unaudited Unaudited
Notes £m £m £m
______________________________________________________________________________________________________________________
Cash flow from operating activities
Cash generated from operations 17 127.2 99.7 180.4
Interest received 1.3 4.4 6.1
Interest paid (16.0) (3.2) (14.8)
Corporation tax paid (25.2) (13.9) (33.5)
______________________________________________________________________________________________________________________
Net cash inflow from operating activities 87.3 87.0 138.2
______________________________________________________________________________________________________________________
Cash flow from investing activities
Purchase of property, plant and equipment (1.0) (2.9) (6.0)
Purchase of intangible assets (6.3) (7.7) (13.9)
Purchase of other assets (see note 9) (1.0) - -
Dividends received 1.0 0.7 2.0
______________________________________________________________________________________________________________________
Net cash outflow from investing activities (7.3) (9.9) (17.9)
______________________________________________________________________________________________________________________
Cash flow from financing activities
Dividends paid to Shareholders (23.8) (20.5) (33.2)
Cash impact of capital return - May 2006, including redemption of B (1.9) (496.8) (497.9)
Shares
Proceeds from bond issue - July 2006 - 249.2 249.2
Net proceeds from unsecured borrowings 45.5 98.0 155.4
Purchase of own shares by ESOP trust - (32.5) (47.8)
Share buyback (98.5) (26.3) (105.3)
Proceeds from exercise of employee share options 3.3 3.8 5.4
______________________________________________________________________________________________________________________
Net cash outflow from financing activities (75.4) (225.1) (274.2)
______________________________________________________________________________________________________________________
Increase/(decrease) in cash and cash equivalents 4.6 (148.0) (153.9)
Cash and cash equivalents at beginning of period 72.9 226.8 226.8
______________________________________________________________________________________________________________________
Cash and cash equivalents at end of period 77.5 78.8 72.9
______________________________________________________________________________________________________________________
NOTES TO THE FINANCIAL INFORMATION
The interim report for London Stock Exchange Group plc ('the Company') for the
six months ended 30 September 2007 was approved by the Directors on 15 November
2007.
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
This interim financial information has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Services Authority and in
accordance with International Accounting Standard ('IAS') 34 - 'Interim
Financial Reporting'.
The accounting policies used are consistent with those set out on pages 49 to 51
of the Annual Report for London Stock Exchange Group plc for the year ended 31
March 2007, as supplemented by the derivative financial instruments and cash
flow hedging accounting policy which henceforth also applies to the hedging of
interest rate exposures using cashflow interest rate derivatives.
In order to qualify for hedge accounting, a transaction must meet strict
criteria as regards documentation, effectiveness, probability of occurrence and
reliability of measurement. Effectiveness testing is conducted at each reporting
date and at the commencement and conclusion of any hedge in order to verify that
the hedge continues to satisfy all the criteria for hedge accounting to be
maintained.
The following new standards, amendments to standards or interpretations are
mandatory for the first time for the financial year ending 31 March 2008.
On 1 April 2007 the Group adopted International Financial Reporting Standard
('IFRS') 7 - 'Financial Instruments: Disclosures' and IAS 1, 'Amendments to
capital disclosures'. As this interim report contains only condensed financial
information, only disclosures of events or transactions that are material to
understanding the current interim period have been disclosed. The full IFRS 7
disclosures, including sensitivity to market risk and capital disclosures
required by the amendment to IAS 1 will be given in the annual financial
statements.
The preparation of the Interim Report requires management to make estimates and
assumptions that affect the reported income and expense, assets and liabilities
and disclosure of contingencies at the date of the Interim Report. Although
these estimates and assumptions are based on management's best judgement at the
date of the Interim Report, actual results may differ from these estimates.
The statutory accounts of London Stock Exchange Group plc for the year ended 31
March 2007, which carried an unqualified audit report, have been delivered to
the Registrar of Companies.
The interim financial information is unaudited but has been reviewed by the
auditors and their review opinion is included in this report.
The interim financial information does not constitute statutory financial
statements within the meaning of section 240 of the Companies Act 1985.
2. SEGMENT INFORMATION
Segmental disclosures for the six months ended 30 September 2007 are as follows:
Issuer Broker Information Derivatives
Services Services Services Services Other Corporate Group
£m £m £m £m £m £m £m
______________________________________________________________________________________________________________________
Revenue 35.5 99.4 58.1 5.7 4.4 - 203.1
______________________________________________________________________________________________________________________
Expenses
Depreciation and amortisation (1.4) (5.5) (3.6) (0.4) (0.1) (0.3) (11.3)
Other expenses (16.6) (22.9) (23.6) (4.3) (3.9) (5.8) (77.1)
______________________________________________________________________________________________________________________
Total expenses (18.0) (28.4) (27.2) (4.7) (4.0) (6.1) (88.4)
______________________________________________________________________________________________________________________
Operating profit 17.5 71.0 30.9 1.0 0.4 (6.1) 114.7
Share of profit after tax of joint
venture - - 0.9 - - - 0.9
______________________________________________________________________________________________________________________
Comparative segmental disclosures for the six months ended 30 September 2006 are as follows:
Issuer Broker Information Derivatives
Services Services Services Services Other Corporate Group
£m £m £m £m £m £m £m
______________________________________________________________________________________________________________________
Revenue 28.7 76.1 50.9 4.4 3.2 - 163.3
______________________________________________________________________________________________________________________
Expenses
Depreciation and amortisation (1.5) (5.8) (4.9) (0.2) (0.1) (0.3) (12.8)
Other expenses (16.4) (20.0) (20.9) (3.7) (3.2) (5.0) (69.2)
______________________________________________________________________________________________________________________
Total expenses (17.9) (25.8) (25.8) (3.9) (3.3) (5.3) (82.0)
______________________________________________________________________________________________________________________
Operating profit 10.8 50.3 25.1 0.5 (0.1) (5.3) 81.3
Share of profit after tax of joint
venture - - 0.8 - - - 0.8
______________________________________________________________________________________________________________________
Comparative segmental disclosures for the year ended 31 March 2007 are as follows:
Issuer Broker Information Derivatives
Services Services Services Services Other Corporate Group
£m £m £m £m £m £m £m
______________________________________________________________________________________________________________________
Revenue 63.2 163.8 105.9 9.3 7.4 - 349.6
______________________________________________________________________________________________________________________
Expenses
Depreciation and amortisation (2.9) (10.6) (9.6) (0.4) - (0.6) (24.1)
Exceptional costs (see note 3) - - - 3.1 - (14.5) (11.4)
Other expenses (32.5) (39.6) (43.8) (7.4) (6.5) (10.1) (139.9)
______________________________________________________________________________________________________________________
Total expenses (35.4) (50.2) (53.4) (4.7) (6.5) (25.2) (175.4)
______________________________________________________________________________________________________________________
Operating profit 27.8 113.6 52.5 4.6 0.9 (25.2) 174.2
Share of profit after tax of joint
venture - - 1.9 - - - 1.9
______________________________________________________________________________________________________________________
Revenue from the Other segment represents property letting and activities not directly related to the main four
business segments. Corporate expenses are for corporate services which cannot reasonably be allocated to business
segments. Principal operations and customers of the Group are in the United Kingdom.
3. EXCEPTIONAL ITEMS
Six months ended Year ended
30 September 31 March
____________________ ______________
2007 2006 2007
£m £m £m
______________________________________________________________________________________________________________________
Fees in respect of potential offers for the Company - - (13.5)
Impairment loss and provision in respect of EDX London Ltd - - 3.1
Restructuring costs - - (1.0)
______________________________________________________________________________________________________________________
Total exceptional items - - (11.4)
______________________________________________________________________________________________________________________
4. NET FINANCE COSTS
Six months ended Year ended
30 September 31 March
____________________ ______________
2007 2006 2007
£m £m £m
______________________________________________________________________________________________________________________
Finance income
Bank deposit and other interest 2.2 2.9 4.7
Expected return on defined benefit pension scheme assets (see
note 15) 6.2 5.9 11.9
Investment Income 0.2 0.3 0.3
______________________________________________________________________________________________________________________
8.6 9.1 16.9
______________________________________________________________________________________________________________________
Finance costs
Interest payable on bank and other borrowings (13.9) (7.9) (17.8)
Other finance costs (1.5) - (0.5)
Interest on discounted provision for leasehold properties (see note
14) (0.7) (0.7) (1.4)
Defined benefit pension scheme interest cost (see note 15) (6.3) (5.9) (11.8)
______________________________________________________________________________________________________________________
(22.4) (14.5) (31.5)
______________________________________________________________________________________________________________________
Net finance costs (13.8) (5.4) (14.6)
______________________________________________________________________________________________________________________
5. TAXATION
Six months ended Year ended
30 September 31 March
____________________ ______________
2007 2006 2007
Taxation charged to the income statement £m £m £m
______________________________________________________________________________________________________________________
Current tax:
Corporate tax for the period at 30% (2006: 30%) 31.1 22.0 49.6
Adjustments in respect of previous years (0.4) (5.1) (5.1)
______________________________________________________________________________________________________________________
30.7 16.9 44.5
Deferred tax:
Deferred tax for the period (0.4) 0.4 1.3
Adjustments in respect of previous years - 5.1 5.1
______________________________________________________________________________________________________________________
Taxation charge 30.3 22.4 50.9
______________________________________________________________________________________________________________________
Six months ended Year ended
30 September 31 March
____________________ ______________
2007 2006 2007
Taxation on items charged/(credited) to equity £m £m £m
______________________________________________________________________________________________________________________
Current tax credit:
Tax allowance on share options/awards in excess of expense
recognised (2.3) (1.9) (2.3)
Deferred tax charge/(credit):
Defined benefit pension scheme actuarial gains 2.7 0.6 0.1
Tax allowance on share options/awards in excess of expense
recognised (0.5) (1.5) (2.6)
______________________________________________________________________________________________________________________
Factors affecting the tax charge for the period
The income statement tax charge assessed for the period differs from the standard rate of corporation tax in the UK
of 30% (2006: 30%). The variations are explained below:
Six months ended Year ended
30 September 31 March
____________________ ______________
2007 2006 2007
£m £m £m
______________________________________________________________________________________________________________________
Profit before taxation 101.8 76.7 161.5
______________________________________________________________________________________________________________________
Profit multiplied by standard rate of corporation tax in the UK of
30% 30.5 23.0 48.5
Expenses not deductible/income not taxable 0.5 (0.4) 3.0
Share of joint venture consolidated at profit after tax (0.3) (0.2) (0.6)
Adjustments in respect of previous years (0.4) - -
______________________________________________________________________________________________________________________
Taxation charge 30.3 22.4 50.9
______________________________________________________________________________________________________________________
The tax rate applied is the expected rate for the full financial year.
6. EARNINGS PER SHARE
Earnings per share is presented on three bases: basic earnings per share; diluted earnings per share; and adjusted
basic earnings per share. Basic earnings per share is in respect of all activities and diluted earnings per share
takes into account the dilution effects which would arise on the conversion or vesting of share options and share
awards under the Employee Share Ownership Plan (ESOP). Adjusted basic earnings per share excludes exceptional items to
enable comparison of the underlying earnings of the business with prior periods.
Six months ended Year ended
30 September 31 March
____________________ ______________
2007 2006 2007
______________________________________________________________________________________________________________________
Basic earnings per share 35.7p 24.2p 50.5p
Diluted earnings per share 35.0p 23.9p 49.4p
Adjusted basic earnings per share 35.7p 24.2p 56.2p
£m £m £m
______________________________________________________________________________________________________________________
Profit for the financial period attributable to equity holders 71.3 54.1 109.6
Adjustments:
Exceptional items - - 11.4
Tax effect of exceptional items - - 0.6
Exceptional items and taxation attributable to minority interest - - 0.5
______________________________________________________________________________________________________________________
Adjusted profit for the financial period attributable to equity
holders 71.3 54.1 122.1
______________________________________________________________________________________________________________________
Weighted average number of shares - million 199.5 223.8 217.2
Effect of dilutive share options and awards - million 3.9 2.3 4.6
______________________________________________________________________________________________________________________
Diluted weighted average number of shares - million 203.4 226.1 221.8
______________________________________________________________________________________________________________________
The weighted average number of shares excludes those held in the ESOP, reducing the weighted average number of shares
to 199.5m (September 2006: 223.8m; March 2007: 217.2m).
7. DIVIDENDS
Six months ended Year ended
30 September 31 March
____________________ ______________
2007 2006 2007
£m £m £m
______________________________________________________________________________________________________________________
Second interim dividend for 2006 paid May 2006: 8.0p per Ordinary
share - 20.5 20.5
Interim dividend for 2007 paid January 2007: 6.0p (2006: 4.0p) per
Ordinary share - - 12.7
Final dividend for 2007 paid August 2007: 12.0p per Ordinary share 23.8 - -
______________________________________________________________________________________________________________________
Total dividends 23.8 20.5 33.2
______________________________________________________________________________________________________________________
An interim dividend relating to the six months ended 30 September 2007 of 8.0p, amounting to an estimated £22.0m, is
proposed. This interim dividend, which is due to be paid in January 2008, is not reflected in this financial
information. The right to non-cumulative preference dividends on the remaining redeemable Class B shares is discussed
in note 13 below.
8. DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses cash flow hedging to mitigate interest rate risk and foreign exchange risk. In the six months to
30 September 2007, the amount recognised in equity which represents the cumulative fair value adjustment recognised in
respect of cash flow hedges and undertaken during the period in accordance with hedge accounting principles was £3.5m
(2006: £nil). Derivative financial instruments in this item represent the current portion of derivatives designated
as hedging instruments that hedge accounting is applied to.
9. OTHER ASSETS
Other assets relates to advisory fees and other transaction costs in relation to the Borsa Italiana S.p.A.
transaction. The majority of these assets will be reclassified as part of the cost of acquisition in the opening
balance sheet following the completion of the transaction on 1 October 2007. A small amount of the costs related to
the issue of equity shares as consideration for the acquisition will be charged to the merger reserve arising on the
issue of the Company's shares on 1 October 2007.
10. INVESTMENT IN JOINT VENTURE
The Group owns 50% of the 1,000 £1 issued equity shares in FTSE International Ltd, a company incorporated in Great
Britain which distributes financial information. FTSE International Ltd is a joint venture owned together with The
Financial Times Ltd, a subsidiary of Pearson plc. The Group investment of £2.1m (30 September 2006: £2.1m, 31 March
2007: £1.9m) represents the Group's share of the joint venture's net assets. The Group is entitled, under a
shareholders' agreement, to receive royalties from FTSE International Ltd, as set out below.
The following amounts represent the Group's 50% share of the revenue and expenses and total equity of FTSE
International Ltd for the six months to 30 September 2006 and 2007 and for the year ended 31 March 2007:
Six months ended Year ended
30 September 31 March
____________________ ______________
2007 2006 2007
£m £m £m
______________________________________________________________________________________________________________________
Revenue 11.8 9.7 21.0
Profit after taxation 0.9 0.8 1.9
Total equity at period end 2.1 2.1 1.9
______________________________________________________________________________________________________________________
Amounts recognised in the financial information of the Group:
Royalties receivable 3.2 2.6 5.7
Dividends receivable 0.7 0.4 1.7
______________________________________________________________________________________________________________________
11. TRADE AND OTHER RECEIVABLES
30 September 31 March
____________________ ______________
2007 2006 2007
£m £m £m
______________________________________________________________________________________________________________________
Current
Trade receivables 33.6 22.5 26.9
Other receivables 0.2 0.4 0.2
Prepayments and accrued income 35.9 30.2 34.3
______________________________________________________________________________________________________________________
Total trade and other receivables 69.7 53.1 61.4
______________________________________________________________________________________________________________________
12. TRADE AND OTHER PAYABLES
30 September 31 March
____________________ ______________
2007 2006 2007
£m £m £m
______________________________________________________________________________________________________________________
Trade payables 2.1 1.6 3.3
Social security and other taxes 4.0 4.5 2.1
Other payables 6.0 2.6 7.0
Share buyback programme - - 60.0
Accruals and deferred income 82.1 62.9 57.0
______________________________________________________________________________________________________________________
Total trade and other payables 94.2 71.6 129.4
______________________________________________________________________________________________________________________
13. BORROWINGS
30 September 31 March
____________________ ______________
2007 2006 2007
£m £m £m
______________________________________________________________________________________________________________________
Current
Bank borrowings 200.7 97.6 155.7
Redeemable Class B shares 13.8 16.5 15.7
Other borrowings - 0.6 -
______________________________________________________________________________________________________________________
214.5 114.7 171.4
______________________________________________________________________________________________________________________
Non-current
Bond issue 248.3 248.3 248.2
Other borrowings - 0.5 0.5
______________________________________________________________________________________________________________________
248.3 248.8 248.7
______________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________
Total borrowings 462.8 363.5 420.1
______________________________________________________________________________________________________________________
Current borrowings
The Company has in place a multicurrency revolving loan facility of £200m, available up to 9 February 2011. Borrowings
under the loan facility are unsecured and currently bear interest at a floating rate of LIBOR plus 40 basis points.
£48m has been drawn down from this facility at 30 September 2007. The interest margin applicable to borrowings under
the loan facility is dependant upon the Group net debt: EBITDA ratio.
At 30 September 2007 the Company also had a bridge facility of £250m which is available for drawdown up to 31 December
2007, repayable by 17 July 2009, to fund any return of capital to the Company's shareholders. Borrowings under the
loan facility are unsecured and currently bear interest at a floating rate of LIBOR plus 75 basis points. The interest
margin increases based on the length of time that the facility has been drawn. £154m of this facility has been drawn
down to 30 September 2007.
At 30 September 2007 the Company also had a bridge facility of £460m for the purposes of refinancing borrowings of
Borsa Italiana S.p.A., or if this is not required, any return of capital to the Company's shareholders, repayable by 22
June 2009. This facility has not been drawn down at 30 September 2007.
The Company has Redeemable Class B shares. Holders of B shares who elected to retain their B shares are entitled to a
non-cumulative preference dividend based on 75% of six month LIBOR on 1 June and 1 December each year until 1 June 2009
and may redeem their B shares for 200 pence each on those dates. Any outstanding B shares will be redeemed on
1 June 2009.
Non-current borrowings
In July 2006 the Company issued a £250m bond. The bond is unsecured and is due for repayment in 2016, with a 5.875%
coupon, interest to be paid semi-annually in arrears. The issue price of the bond was £99.679 per £100 nominal.
The coupon on the bond is dependant on the Company's credit rating. As a result of a change in the Company's credit
rating from Moody's in October 2007 from Baa2 to Baa3 the coupon will increase by 25 basis points to 6.375% from
January 2008.
Other borrowings
Other borrowings represented unsecured loans from a minority shareholder.
14. PROVISIONS
Property Other Total
£m £m £m
______________________________________________________________________________________________________________________
30 September 2006 29.9 6.0 35.9
Utilised during the period (1.9) (0.7) (2.6)
Exceptional charges during the period - 1.0 1.0
Released during the period - (3.1) (3.1)
Interest on discounted provision 0.7 - 0.7
______________________________________________________________________________________________________________________
31 March 2007 28.7 3.2 31.9
______________________________________________________________________________________________________________________
Utilised during the period (1.7) (1.3) (3.0)
Interest on discounted provision 0.7 - 0.7
______________________________________________________________________________________________________________________
30 September 2007 27.7 1.9 29.6
______________________________________________________________________________________________________________________
Non-current 23.6 1.1 24.7
Current 4.1 0.8 4.9
______________________________________________________________________________________________________________________
27.7 1.9 29.6
______________________________________________________________________________________________________________________
Property
The property provision represents the estimated net present value of the future costs for lease rentals and
dilapidation costs less the expected receipts from sub-letting space which is surplus to business requirements. The
leases have between seven and 21 years to expiry.
Other
Other provisions relate to the one off implementation costs arising from the cost saving programme announced in
February 2006.
15. RETIREMENT BENEFIT OBLIGATIONS
The Group operates separate defined benefit and defined contribution schemes. The assets of the defined benefit and
defined contribution schemes are held separately from those of the Group.
30 September 31 March
____________________ ______________
2007 2006 2007
Defined benefit assets and obligations £m £m £m
______________________________________________________________________________________________________________________
Fair value of assets 225.5 224.0 224.6
Present value of funded obligations (229.0) (241.0) (239.6)
______________________________________________________________________________________________________________________
Balance sheet liability (3.5) (17.0) (15.0)
______________________________________________________________________________________________________________________
Six months ended Year ended
30 September 31 March
____________________ ______________
2007 2006 2007
Movement in defined benefit net liability during the period £m £m £m
______________________________________________________________________________________________________________________
1 April 2007 (15.0) (20.3) (20.3)
Current service cost (0.6) (0.7) (1.4)
Net finance (cost)/income (0.1) - 0.1
Contributions paid 3.1 2.0 6.3
Actuarial gain 9.1 2.0 0.3
______________________________________________________________________________________________________________________
30 September 2007 (3.5) (17.0) (15.0)
______________________________________________________________________________________________________________________
16. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the Company
______________________________________________________________________________________________________________________
Other reserves
______________________________________________________________________________________________________________________
Retained Capital Reverse Hedging
Share Share (loss)/ redemption acquisition reserve Minority Total
capital premium earnings reserve reserve interest equity
£m £m £m £m £m £m £m £m
______________________________________________________________________________________________________________________
1 April 2006 14.9 4.3 268.0 - - - 1.6 288.8
Scheme of arrangement - May 2006 238.7 (4.3) (491.7) 257.3 (512.5) - - (512.5)
Equity transaction costs - - (1.0) - - - - (1.0)
Total recognised income and expense for
the financial period - - 58.9 - - - 0.2 59.1
Second interim dividend relating to year
ended 31 March 2006 - - (20.5) - - - - (20.5)
Share buyback (0.1) - (26.2) - - - - (26.3)
Employee share schemes and own shares - - (26.5) - - - - (26.5)
______________________________________________________________________________________________________________________
30 September 2006 253.5 - (239.0) 257.3 (512.5) - 1.8 (238.9)
Equity transaction costs - - (0.1) - - - - (0.1)
Redemption of B shares - - (0.8) 0.8 - - - -
Total recognised income and expense for
the financial period - - 55.8 - - - 0.8 56.6
Interim dividend relating to the year ended
31 March 2007 - - (12.7) - - - - (12.7)
Share buyback (0.5) - (143.7) 0.6 - - - (143.6)
Employee share schemes and own shares - - (11.2) - - - - (11.2)
______________________________________________________________________________________________________________________
31 March 2007 253.0 - (351.7) 258.7 (512.5) - 2.6 (349.9)
Redemption of deferred shares (238.7) - - 238.7 - - - -
Total recognised income and expense for
the financial period - - 80.5 - - (3.5) 0.2 77.2
Final dividend relating to year ended 31
March 2007 - - (23.8) - - - - (23.8)
Share buyback (0.5) - (33.9) 0.5 - - - (33.9)
Employee share schemes and own shares - - 5.6 - - - - 5.6
______________________________________________________________________________________________________________________
30 September 2007 13.8 - (323.3) 497.9 (512.5) (3.5) 2.8 (324.8)
______________________________________________________________________________________________________________________
During the current period the Company re-purchased, and subsequently cancelled 7.2m ordinary shares at an average price
of £13.04 per share. The total consideration was £93.9m. The excess of the consideration over the nominal value has
been charged against retained earnings.
In July 2007 the company redeemed all 119.4m of the outstanding deferred shares, in accordance with the Scheme
circular issued to shareholders in March 2006. This resulted in an increase of £238.7m in the capital redemption
reserve set up as a result of the £512.5m capital return.
The £3.5m hedging reserve represents the cumulative fair value adjustment recognised in respect of cash flow hedges
undertaken during the period in accordance with hedge accounting principles.
For the year ended 31 March 2007 under the court-approved scheme of arrangement effected on 15 May 2006 the Company
issued 43 new ordinary shares for every 51 existing ordinary shares in London Stock Exchange plc and one B share with a
nominal value of 200 pence per share for every one existing ordinary share in London Stock Exchange plc. On 17 May
2006 the nominal value of the Company's new ordinary shares was reduced and the merger reserve created by the Scheme
was capitalised through an issue of shares, and subsequently cancelled through a court-approved capital reduction,
creating sufficient distributable reserves to enable the return of £512.5 million to shareholders, leaving
approximately £2 billion at the Company level after the return.
For the year ended 31 March 2007 the Scheme and capital reduction resulted in the creation of a reverse acquisition
reserve of (£512.5m) in the consolidated accounts and a capital redemption reserve of £257.3m.
For the year ended 31 March 2007 256.2m B shares were issued as the mechanism to facilitate the capital return,
through: an initial dividend of 200 pence per share; an immediate 200 pence redemption per share; or retention of the
B shares with the right to redeem semi-annually up to June 2009 (see note 13 above). Payments totalling £496.0m
relating to the initial dividend and immediate redemption were made in May 2006.
The immediate redemption was paid in respect of 128.6m B shares, which were immediately redeemed and cancelled
creating a £257.3m capital redemption reserve. On 1 December 2006, 0.4m B shares were redeemed and cancelled resulting
in a further increase in the capital redemption reserve of £0.8m. On 1 June 2007, a further 1.0m B shares were redeemed
and cancelled resulting in an increase in the capital redemption reserve of £2.0m. Consequently there were 6.9m B
shares in issue at 31 March 2007, with aggregate nominal value of £13.8m. The prior year initial dividend was paid in
respect of 119.4m B shares, which were immediately reclassified as deferred shares. As noted above, these were
redeemed in July 2007.
17. NET CASHFLOW GENERATED FROM OPERATIONS
Six months ended Year ended
30 September 31 March
____________________ ______________
2007 2006 2007
£m £m £m
______________________________________________________________________________________________________________________
Profit before taxation 101.8 76.7 161.5
Depreciation and amortisation 11.3 12.8 24.1
Impairment loss and provision for EDX London Ltd - - (3.1)
Provision for restructuring costs - - 1.0
Net finance costs 13.8 5.4 14.6
Share of profit after tax of joint venture (0.9) (0.8) (1.9)
Increase in trade and other receivables (8.1) (5.9) (13.5)
Increase in trade and other payables 9.5 16.1 6.0
Defined benefit pension obligation - contributions in excess of
expenses charged (2.6) (1.3) (4.9)
Provisions utilised during the period (3.0) (5.3) (7.9)
Share scheme expense 5.4 2.0 4.5
______________________________________________________________________________________________________________________
Cash generated from operations 127.2 99.7 180.4
______________________________________________________________________________________________________________________
Comprising:
Ongoing operating activities 127.2 104.3 198.6
Exceptional items (see note 3) - (4.6) (18.2)
______________________________________________________________________________________________________________________
127.2 99.7 180.4
______________________________________________________________________________________________________________________
18. TRANSACTIONS WITH RELATED PARTIES
Transactions with FTSE International Ltd during the period are summarised in note 10. The nature and contractual terms
of key management compensation and inter-company transactions with subsidiary undertakings during the period are
consistent with the disclosure in note 30 of the Annual Report for the year ended 31 March 2007.
19. POST BALANCE SHEET EVENTS
On 1 October 2007, the Company completed its acquisition of 99.9% of the Ordinary shares of Borsa Italiana S.p.A. The
Company issued 79,449,753 new Ordinary shares as consideration for this transaction. Based on the Company's opening
share price of 1,646 pence on 1 October 2007, total consideration paid to shareholders amounted to £1,308 million.
Following completion of this transaction, the Company is currently in the process of performing a fair valuation
exercise of Borsa Italiana S.p.A. as at 1 October 2007, disclosure of which will be set out in the Company's financial
statements for the year ending 31 March 2008.
20. COMMITMENTS AND CONTINGENCIES
Cassa di Compensazione e Garanzia S.p.A. ('CC&G') is a subsidiary of Borsa Italiana S.p.A. acquired by London Stock
Exchange Group plc on 1 October 2007. The primary business of CC&G is to act as a central clearing house. In the
operation of such clearing services, CC&G is exposed to the risk of default by its clearing members.
PRINCIPAL RISKS
The achievement of the Company's business objectives is assisted by appropriately managing its business, operational,
financial and compliance risks via an internal control framework.
The Company's principal risks and uncertainties are consistent with those set out in Part 2 of the Circular notifying
shareholders of the proposed merger with Borsa Italiana S.p.A. The Company's internal control policies are consistent
with those set out in the Annual Report for London Stock Exchange Group plc for the year ended 31 March 2007.
The principal risks and uncertainties foreseen will include the following specific risks in the second six months of
the year.
As a result of a recent EU directive, UK terms of business will liberalise further with the introduction of the Market
in Financial Instruments Directive ('MiFID') on 1 November. The Company is well positioned to compete as a result of
steps it has taken, for example new products and services and development of advanced trading and information
technology.
London Stock Exchange Group plc ('LSEG group') has completed its merger with Borsa Italiana on 1 October. The enlarged
Group is committed to the delivery of synergy benefits and will apply a comprehensive programme management approach to
assist in delivery of the integration of London Stock Exchange with Borsa Italiana.
Key services depend on technology which is secure, stable and performs to high levels of availability and throughput.
The failure of these systems could adversely impact revenue and customer goodwill. The Group maintains alternative
computer facilities to reduce the risk of system disruptions and applies rigorous methodologies to minimise risk.
DIRECTORS RESPONSIBILITY STATEMENT
Statement of directors' responsibilities
The directors' confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as
adopted by the European Union, and that the interim management report herein includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8.
The directors of London Stock Exchange Group plc are listed in the Annual Report for 31 March 2007, with the exception
of the following changes in the period: On 24 September 2007 Mr Gary Allen and Mr Peter Meinertzhagen resigned from the
board. On 1 October 2007 Messrs Sergio Emotti, Paolo Scaroni, Andrea Munari, Angelo Tantazzi and Massimo Capuano were
appointed to the board. A list of current directors is maintained and is available for inspection at the Company's
registered office located at 10 Paternoster Square, London EC4M 7LS.
By order of the Board
INDEPENDENT REVIEW REPORT
TO LONDON STOCK EXCHANGE GROUP PLC
INTRODUCTION
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 September 2007, which comprises the income statement, statement of recognised
income and expense, balance sheet, cash flow statement and related notes. We have read the other information contained
in the half-yearly financial report and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial statements.
DIRECTORS' RESPONSIBILITIES
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of
the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRS's as adopted
by the European Union. The condensed set of financial statements included in this half-yearly financial report has
been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by
the European Union.
OUR RESPONSIBILITY
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the
half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only
for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for
no other purposes. We do not, in producing this report, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior
consent in writing.
SCOPE OF REVIEW
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review
of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards
on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 September 2007 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the
Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
PRICEWATERHOUSECOOPERS LLP
Chartered Accountants
15 November 2007
London
______________________________________________________________________________________________________________________
The following Attachment sets out the consolidated results of Borsa Italiana S.p.A. and its subsidiary undertakings
for the six months ended 30 September 2007. This information has been prepared by the Directors of Borsa Italiana
S.p.A. and relates to a period when Borsa Italiana S.p.A. was not part of the London Stock Exchange Group. Accordingly
the Directors of London Stock Exchange Group take no responsibility for the contents of this information.
BORSA ITALIANA GROUP
ANNOUNCEMENT OF RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007
Borsa Italiana S.p.A. today reports results for the six months ended 30
September 2007.
The details presented below are the responsibility of the Directors of Borsa
Italiana S.p.A., and have been disclosed for information purposes only. There
are no legal or regulatory requirements for this information to be presented.
This information has been prepared based on internal management information and
has not been audited. Following the completion of the merger with London Stock
Exchange Group plc on 1 October 2007, the Directors of Borsa Italiana S.p.A. do
not intend to produce separate interim financial statements in the future.
Unless otherwise stated, all figures below refer to the six months ended 30
September 2007. Comparative figures are for the corresponding period last year.
Financial results
Borsa Italiana S.p.A. and its subsidiaries ('the Borsa Italiana Group') produced
a very strong performance in the six months to 30 September 2007, with revenue
up 23 per cent to €150.6 million (2006: €122.1 million). Operating costs were
well controlled during the period, increasing by 11 per cent to €80.6 million
largely reflecting acquisitions made during the period. Consequently, operating
profit (before exceptional items) increased by 41 per cent to €70.0 million.
The acquisitions of 90% of Servizio Titoli S.p.A. ('Servizio Titoli') and the
remaining 51% of MBE Holding S.p.A. ('MBE') were completed during the six months
to 30 September 2007, contributing to the success of the period. Servizio Titoli
provides company secretarial services to listed companies. MBE owns 60.37 per
cent of MTS S.p.A. and its subsidiary undertakings ('MTS'), which operates the
leading regulated electronic trading platform for European wholesale government
bonds and other types of fixed income securities.
Issuer Services
Issuer Services delivered a strong performance, with total revenues increasing
by 50 per cent to €21.7 million (2006: €14.5 million).
Annual fee income benefited from an increase in the number and market
capitalisation of companies listed to 339 and €771.8 billion respectively
2006: 299 and €742.3 billion respectively).
The Borsa Italiana Group demonstrated the quality of its markets, with a
substantial increase in the number of securitised derivatives to 5,402 as at 30
September 2007 (2006: 4,122) and 19 IPOs in the period (2006: 10), which
together resulted in an increase in admission fees.
Issuer Services also benefited from the acquisition on 5 April 2007 of 90 per
cent of the issued equity share capital of Servizio Titoli for €29.3 million.
Trading Services
Cash Services volumes increased significantly, with the number of trades up from
30.0 million to 40.6 million, partly due to market volatility in August 2007.
This resulted in a 21 per cent increase in revenues to €29.5 million (2006:
€24.4 million).
The increase in revenues from Derivatives Services was also volume driven, with
a 17 per cent increase in the number of contracts to 19.6 million (2006: 16.7
million).
The Borsa Italiana Group acquired the remaining 51 per cent stake of MBE for
€100 million on 14 September 2007 (having acquired its initial 49 per cent stake
in November 2005). Consequently, MBE was fully consolidated from this date
(having been previously equity accounted).
Information Services
Information Services delivered a 15 per cent increase in revenues to €23.2
million (2006: €20.2 million). This resulted from significant growth in the
number of professional and private users of its DDM services (which provides
real time market information) to 153,700 and 719,200 respectively (2006: 143,500
and 623,650 respectively) and in the number of its market connect professional
users (to whom real time information on non Italian markets is supplied) to
16,147 (2006: 4,180).
Post Trade Services
The Clearing business produced an exceptional performance, with revenues
increasing by 45 per cent to €25.7 million (2006: €17.7 million). This success
was primarily achieved from an increased volume of clearing transactions, with
the number of equity and derivative contracts growing by 38 and 17 per cent
respectively.
The Clearing business also benefited from an increase in cash deposit handling
fees resulting from higher levels of deposits and more favourable treasury
conditions.
Settlement customers benefited from the introduction of a new pricing structure
on pre settlement contracts in 2007, with a flat fee being charged per contract.
Custody revenues increased by 4 per cent to €21.8 million (2006: €20.9 million),
with growth in the average value of securities from €2.6 billion to €2.8
billion.
Current Trading and Prospects
The Borsa Italiana Group enjoyed very strong growth in the last six months.
This performance is coupled with the successful acquisitions of 90 per cent of
Servizio Titoli and 51 per cent of MBE.
There has been an encouraging start to the second half period, with the number
of securitised derivatives increasing to 5,770 as at 31 October 2007, and 5.8
million equity trades and 3.6 million derivative contracts in that month.
CONSOLIDATED INCOME STATEMENT
Six months ended 30 September 2007 Six months ended Year ended
30 September 31 December
____________________ ______________
2007 2006 2006
Unaudited Unaudited
Notes €m €m €m
______________________________________________________________________________________________________________________
Revenue
Ongoing revenue 2 150.6 122.1 249.5
Expenses
Operating expenses before exceptional items (80.6) (72.5) (149.3)
Exceptional items 3 (29.7) - -
______________________________________________________________________________________________________________________
Total (110.3) (72.5) (149.3)
______________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________
Operating profit 40.3 49.6 100.2
______________________________________________________________________________________________________________________
Analysed as:
Operating profit before exceptional items 70.0 49.6 100.2
Exceptional items 3 (29.7) - -
______________________________________________________________________________________________________________________
Operating profit 40.3 49.6 100.2
___________________________________________
Finance income 2.1 1.4 2.9
Finance costs (2.6) (2.0) (3.9)
___________________________________________
Net finance costs (0.5) (0.6) (1.0)
Share of profit after tax of joint venture 1.4 1.2 2.9
______________________________________________________________________________________________________________________
Profit before taxation 41.2 50.2 102.1
Taxation (17.3) (19.7) (40.0)
______________________________________________________________________________________________________________________
Profit for the financial period 23.9 30.5 62.1
______________________________________________________________________________________________________________________
Profit attributable to minority interest 2.3 1.0 2.2
Profit attributable to equity holders of Borsa Italiana S.p.A. 21.6 29.5 59.9
______________________________________________________________________________________________________________________
NOTES TO THE FINANCIAL INFORMATION
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The special purpose interim consolidated financial information (the 'financial information') of Borsa Italiana S.p.A.
and its current subsidiaries (the 'Borsa Italiana Group') for the six months ended 30 September 2007 has been prepared
in accordance with the bases and policies used by the London Stock Exchange Group plc ('the Company') in preparing the
consolidated financial statements of the Company for the year ended 31 March 2007 ('the Company's accounting policies')
and in accordance with the accounting policies set out in Part 4: Financial Information on Borsa Italiana S.p.A. to
the Circular to the Company's shareholders on the proposed merger of the Company and Borsa Italiana S.p.A.
(the 'Circular'). This financial information has been prepared on a voluntary basis and does not include all
disclosures required by IAS 34 'Interim Financial Reporting'.
The income statements for the six month periods ended 30 September 2006 and 2007 have been compiled by extracting
information for the three months ended 31 March 2006 and 2007 from that of the nine months ended 30 September 2006
and 2007, and have then been subject to adjustments to conform to the Company's accounting policies. The income
statement for the year ended 31 December 2006 has been extracted from the financial information included in the
Circular.
The Borsa Italiana Group's financial statements are prepared under the historical cost convention as modified by the
revaluation of assets held at fair value, including assets and liabilities of the Central Counterparty clearing
business and are expressed in million of Euros.
The main activities of the Borsa Italiana Group are the establishment, organisation, management and running of the
financial markets with the principal objective of developing and optimising liquidity, transparency, competition and
efficiency. The services offered to intermediaries and issuers include the admission to listing of financial
instruments, the trading of these instruments, clearing, settlement and custody activities, the sale of information
products and services, IT services and the management of the Congress and Training Centre of Palazzo Mezzanotte in
Milan.
Cassa di Compensazione e Garanzia S.p.A. ('CC&G'), a subsidiary of Borsa Italiana S.p.A., operates the Italian Central
Counterparty clearing business which guarantees the clearing of sales and purchases of equities, bonds and
derivatives between authorised clearing members and in doing so, CC&G assumes the counterparty risk on such
transactions.
As set out in the Circular, revenue is recognised in the period when the service or supply is provided. For interim
periods during the financial year, including the six month periods ended 30 September 2006 and 2007, some invoiced
revenue in respect of certain trading, settlement and clearing activities is deferred as a result of regressive
pricing arrangements with a number of large customers. Under these arrangements the price levels per trade for the
year reduce as progressively larger volume targets are achieved by these customers. The deferral is calculated at
interim period ends based on the latest estimate at that time of the full year's volumes of trades from each relevant
customer.
The Borsa Italiana Group acquired the remaining 51 per cent stake of the issued equity share capital of MBE Holding
S.p.A. ('MBE'), the holding company of the MTS S.p.A. group, and MTS S.p.A. acquired the remaining 33 per cent stake
of the issued equity share capital of MTSNext, together for €100 million, on 14 September 2007, and has fully
consolidated the results of MBE and MBE's subsidiary undertakings ('the MBE Group') since that date, with the share of
profits of the 39.63 per cent of MTS S.p.A. not owned by the Borsa Italiana Group included in profits attributable to
minority interests. The Borsa Italiana Group had equity accounted for the MBE Group during the period between the
acquisition of its initial 49 per cent stake in November 2005 and the acquisition of the remaining 51 per cent stake.
As part of the purchase price allocation exercises the Borsa Italiana Group is currently in the process of identifying
and determining the fair values to be assigned to the cost of acquisition and the relevant assets and liabilities in
relation to the acquisitions of the remaining 51 per cent of the MBE Group and 90 per cent of Servizio Titoli
(acquired for €29.3 million on 5 April 2007). The final fair values, including those of any intangible assets, have
not yet been determined and under IFRS 3 'Business Combinations' the Borsa Italiana Group has up to 12 months to
complete the fair valuation adjustments and to determine the final goodwill amounts. Once this exercise has been
completed it is possible that additional intangible assets will be recognised which will need to be amortised over
their estimated economic life; no adjustment has been recognised in the consolidated financial information for
such amortisation charges.
The preparation of the consolidated financial information for the period requires management to make estimates and
assumptions that affect the reported income and expense, assets and liabilities and disclosure of contingencies at
the date of the announcement of the consolidated financial information. Although these estimates and assumptions are
based on management's best judgement at this date, actual results may differ from these estimates.
The interim financial information is unaudited.
2. REVENUE ANALYSIS
Six months ended Year ended
30 September 31 December
____________________ ______________
2007 2006 2006
€m €m €m
______________________________________________________________________________________________________________________
Revenue
Issuer Services 21.7 14.5 29.8
Trading Services
Cash Services 29.5 24.4 52.4
Derivatives Services 11.8 10.3 20.7
Fixed Income Services 2.3 - -
Information Services 23.2 20.2 40.1
Post Trade Services
Clearing 25.7 17.7 35.2
Settlement 15.0 15.2 32.1
Custody 21.8 20.9 40.6
Other 15.5 11.4 24.3
Consolidation adjustments (15.9) (12.5) (25.7)
______________________________________________________________________________________________________________________
Group 150.6 122.1 249.5
______________________________________________________________________________________________________________________
Elimination adjustments are performed on consolidation in respect of intragroup services.
3. EXCEPTIONAL ITEMS
Exceptional items comprise fees and other costs relating to the merger with London Stock Exchange Group plc which
completed on 1 October 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 2nd August 2024
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