Final Results

London Stock Exchange 25 May 2000 Financial results for the London Stock Exchange for the year ended 31 March 2000 Highlights * Profits up by £26.2 million to £48.5 million * Record levels of UK and international trading * Strong fourth-quarter performance Gavin Casey, Chief Executive of the Exchange, said: 'This was a year of significant progress for the Exchange, with business at record levels in both UK and international equities and buoyant market conditions, particularly in the fourth quarter. In March, shareholders voted in favour of our proposals to demutualise. Since the year end, we have announced further proposals for a merger with Deutsche Borse, to form iX-international exchanges, and to enter into a joint venture with Nasdaq, to create a pan-European high growth market.' Exchange Reports Strong Performance 1999-2000 Preliminary Results Announcing preliminary results for the year ended 31 March 2000 the Exchange today reported a year of strong financial performance and significant progress in its development. Trading and capital raising Record trading volumes were recorded on the Exchange's markets, with UK equities business up 42 per cent at £1.6 trillion (1999: £1.2 trillion) and international equities business up 12 per cent at £2.7 trillion (1999: £2.4 trillion). These record volumes were due, in part, to the rapid growth of trading in technology stocks, both on the main market and AIM. The launch of techMARK in late November, together with the increasing use of the internet by private investors, contributed to significantly increased levels of trading in the final quarter of the year. techMARK is the first of the Exchange's new attribute markets, grouping together technology companies. A second attribute market - extraMARK - was launched in February, providing a focus for innovative new products offering benefits for professional and private investors. Domestic companies raised £113 billion in new capital, an increase of 56% over last year, while capital raised by international companies was up 31% at £103 billion. 285 new companies joined the Exchange's markets - an increase of 21% on the previous year. Of the new listings, 32 were international companies, including a number from South Africa, India and Japan, reinforcing the Exchange's position as one of the most international markets in the world. Financial results The financial performance showed a significant improvement over last year. Turnover from continuing operations was up £20.0 million to £164.0 million, while operating profit from continuing operations was £36.7 million (1999: £8.6 million). Buoyant trading volumes, particularly during the final quarter, led to an increase of £13.6 million in Trading Services revenue to £54.1 million. The favourable market conditions also contributed to growth in Company Services revenue. Profit before tax was £48.5 million, with profit after tax of £33.9 million. Earnings per share were 114.1 pence (1999: 49.5 pence). Demutualisation At an Extraordinary General Meeting in March, an overwhelming majority of the Exchange's 'B' shareholders approved the proposals to move to a new ownership structure. The decision to demutualise, coupled with the Exchange's strong market standing, has placed it in an ideal position from which to play a leading role in the consolidation of European and other international markets. Merger with Deutsche Borse and joint venture with Nasdaq On 3 May, the Exchange announced plans to merge its business with that of Deutsche Borse AG to form iX-international exchanges. The new company, which will be headquartered in London, will be the world's leading integrated exchange, operating the largest capital market in Europe and the biggest derivatives market in the world. In addition to the proposed merger, the Exchange and Deutsche Borse have signed a Memorandum of Understanding with Nasdaq to create a pan-European high growth market. Shareholders' Meetings Detailed proposals for the merger are being drawn up in conjunction with the Exchange's advisers and will be sent to shareholders in July. Shareholders will be asked to vote on the merger proposals at an Extraordinary General Meeting to be held in the autumn. This year's Annual General Meeting will be held on the same day as the Extraordinary General Meeting. Chairman Sir John Kemp-Welch retires today as Chairman of the London Stock Exchange. His successor is Don Cruickshank who formally took over as Chairman following the meeting of the board of directors held today. For further information please contact: Jeremy Hughes: 020 7797 1395 After hours: duty press officer available on 020 7797 1000 GROUP PROFIT AND LOSS ACCOUNT Year ended 31 March 2000 2000 1999 1999 £m £m £m restated Turnover Group and share of joint - Continuing 164.0 144.0 144.0 venture operations - Discontinued 11.7 9.2 9.2 operations ________________________________ Gross turnover 175.7 153.2 153.2 Less: share of joint venture's turnover - Continuing (4.5) (3.4) (3.4) operations ________________________________ Net turnover (note 1) 171.2 149.8 149.8 Administrative expenses (129.3) (137.3) (130.5) ________________________________ Operating profit - Continuing 36.7 8.6 14.7 operations - Discontinued 5.2 3.9 4.6 operations ________________________________ - Total 41.9 12.5 19.3 Provisions for restructuring and SETS - 1.8 1.8 Share of operating profit of joint venture 0.3 0.4 0.4 and income from other fixed asset investments Net interest receivable 6.3 7.6 7.6 ________________________________ Profit on ordinary activities before 48.5 22.3 29.1 taxation Taxation on profit on ordinary activities (14.6) (7.6) (9.7) ________________________________ Profit for the financial year 33.9 14.7 19.4 ================================ Earnings per equity share (note 3) 114.1p 49.5p 65.3p ________________________________ STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Profit for the financial year 33.9 14.7 19.4 Other recognised gains and losses for the year: Prior year adjustments (note 2) 13.4 12.1 12.1 ________________________________ Total recognised gains and losses since 47.3 26.8 31.5 last annual report ================================ SUMMARISED GROUP BALANCE SHEET 31 March 2000 2000 1999 £m £m restated Fixed assets Tangible assets 114.4 123.2 Investments 2.5 0.8 ___________________ 116.9 124.0 Current assets Debtors due within one year 35.7 27.7 Deferred tax due after more than one year 1.2 - Investments - term deposits with banks 196.0 194.0 Cash at bank 4.4 6.5 Creditors due within one year (59.1) (58.5) ___________________ Net current assets 178.2 169.7 ___________________ Total assets less current liabilities 295.1 293.7 Creditors due after more than one year (30.0) (30.0) Provisions for liabilities and charges (31.0) (37.7) ___________________ Net assets 234.1 226.0 =================== ___________________ Capital and reserves 234.1 226.0 =================== SUMMARISED GROUP CASH FLOW STATEMENT Year ended 31 March 2000 2000 1999 £m £m restated Net cash inflow from operating activities 45.0 36.0 Net cash inflow from returns on investments and 7.7 10.0 servicing of finance Taxation paid (12.1) (3.1) Capital expenditure and financial investments Payments to acquire tangible fixed assets (14.7) (25.6) Receipts from sale of tangible fixed 1.3 0.1 assets and fixed asset investments ____________________ (13.4) (25.5) Acquisitions - investment in joint venture (1.5) - ____________________ Net cash inflow before use of liquid resources 25.7 17.4 and financing Management of liquid resources (2.0) (16.6) Financing Redemption of 'A' shares (note 4) (25.8) (1.7) ____________________ Decrease in cash in the year (2.1) (0.9) ==================== Notes 1. Turnover 2000 1999 £m £m Continuing operations Company services 25.7 20.4 Trading services 54.1 40.5 Information services 72.9 71.8 Other income 11.3 11.3 ____________________ 164.0 144.0 Discontinued operations Competent authority 11.7 9.2 ____________________ Gross turnover 175.7 153.2 Less: share of joint venture's turnover Information services (4.5) (3.4) ____________________ Net turnover 171.2 149.8 ==================== 2. Change in accounting policy The 1999 figures above have been restated following the implementation of FRS 15, the new financial reporting standard on tangible fixed assets. The Company has changed its accounting policy in respect of software development costs during the year. Previously the Company charged all software development costs to the profit and loss account as incurred. The Company now capitalises software development costs within tangible fixed assets. The cost capitalised is amortised over the asset's estimated useful life. The effect of this change in accounting policy was to increase shareholders' funds by £13.4m as at 31 March 1999 and to reduce profit before tax by £0.8m for the current year (1999, reduction in profit before tax of £6.8m). 3. Earnings per share Earnings per equity share of 114.1p (1999, restated 49.5p and prior to restatement 65.3p) are based on profit for the financial year of £33.9m (1999, restated £14.7m and prior to restatement £19.4m) and a weighted average number of Ordinary shares in issue of 29.7m (1999, 29.7m). The weighted average number of Ordinary shares in issue is the actual number of Ordinary shares in issue at the date of these abridged accounts and reflects the number of 'B' shares in issue on the reorganisation of the Company as adjusted for the bonus issue on 12 April 2000 of 99,999 Ordinary shares for each Ordinary share (previously 'B' share) held. 4. Redemption of 'A' shares During the year 2,579 'A' shares of 5p each were redeemed for a total consideration of £25.8m. Following approval of the Company reorganisation proposals, the remaining 880 'A' shares were redeemed on 12 April 2000. 5. Post balance sheet event On 3 May 2000 the Company announced plans to merge with Deutsche Borse, subject to shareholders' approval. It is proposed that the merged company will consist of all of the Exchange's and Deutsche Borse's businesses, except for Deutsche Borse's 50 per cent stake in Clearstream. Information on the proposed merger, including financial information on the Exchange and Deutsche Borse, will be provided to shareholders for approval in due course. 6. Abridged accounts These abridged accounts do not constitute, but have been extracted from, the Company's statutory financial statements. The statutory financial statements, which include an unqualified audit report, will be delivered to the Registrar of Companies in due course.

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