The London Stock Exchange, which has fought off four takeover attempts in two years, beat average forecasts with a 55 percent rise in annual profits on the back of strong trading volumes and cost cuts.
Europe's largest share market said on Wednesday operating profit before exceptional items was 185.6 million pounds ($367.0 million) for the year to March 31, up from 120.1 million the year before, on revenue up 20 percent at 349.6 million. Analysts had on average forecast operating profit of 179.6 million pounds, according to 12 analysts polled by the company.
"Trading remains strong, with positive momentum carrying forward into the current financial year," Chief Executive Clara Furse said in the results statement. "We are confident of delivering another year of strong growth, as we continue to evaluate opportunities for strategic development to realise in full our vision to be the world's capital market," she added.
"Volume growth is strong, but so are pricing pressures due to new competition," analyst Daniel Garrod of Citigroup said in a note, reiterating his "Hold" rating on the stock. "On an 18.8 times estimated calendar 2008 price/earning ratio, the stock already trades at a 6 percent premium to the European sector average," he added.
Average yield per SETS bargain slipped to 1.32 pounds from just over 1.50 pounds the previous year. "We planned for yields to reduce ... It's the flipside of very strong volume growth," Furse told reporters on a conference call.
The LSE said the number of trades on its electronic order book, SETS, rose by 58 percent to 353,000 a day in the year to end-March, before jumping 64 percent in April to 465,967.
The exchange had a target to achieve at least 480,000 in the current financial year, but there were no plans to raise it. "We're reaching that target rather quickly, and I think the key thing to watch is what happens when TradElect goes live ... When we have in the past done anything that has made the market more efficient, that has brought more trading," Furse said.
The exchange has spent four years investing in technology to create the most efficient trading system to win business in an increasingly competitive market, and this culminates in the launch of its new trading platform, TradElect, in June.
"We believe that TradElect will be the most efficient and reliable trading system of any major exchange in the world when it goes live in June, and we're very confident that we will be able to deliver best execution in the future," Furse said. The LSE faces competition from a group of big investment banks which are developing a new trading platform called Project Turquoise to compete with exchanges.
"It's another competitor in a landscape that is evolving ... The reason that we have the success story that we have today in the London market is that we've always had to compete for order book growth," Furse told reporters. The company proposed a full-year dividend of 18 pence per share, up 50 percent from the previous year.
The LSE fended off a hostile 2.7 billion pound bid from Nasdaq Stock Market in February. Nasdaq, which holds a stake of 30 percent in the LSE, had offered 1,243p a share. There has been little contact between the two parties since. "They haven't called us, and we haven't called them," Furse said.
However, the LSE will monitor all market opportunities. "We continue to explore all routes to growth in addition to the organic growth that underpins our excellent performance to date," Furse told reporters. The LSE and the Tokyo Stock Exchange agreed in February to work together to share technology information and possibly develop new products.
Comments
Comments are closed.