Ahead of receiving shareholder approval for its merger with Deutsche Börse in July, London Stock Exchange (LSE) spent the first half of the year further diversifying its income stream. Investing in all three of its principal business areas - capital markets, post-trade services and information services - supported income growth across the board. However, it also meant operating costs grew 9 per cent to £373m, taking a slice out of pre-tax profit.
In post-trade, LCH launched products including a rates portfolio margining service, LCH Spider, which identifies derivative positions to be offset. The business also gained recognition as a clearing house in Singapore for swaps, forex trades and forward freight agreements, and in Japan for non-yen interest rate derivatives. Sales were up 8 per cent at constant currency to £167m. Elsewhere, FTSE Russell Indexes is the gift that keeps giving. Sales at the recently unified business grew 7 per cent to £194m and boosted sales at information services by the same proportion.
Volatile markets had a mixed impact on the capital markets division. While trading of equities and derivatives increased, activity on the primary markets was subdued. The number of new issues on the UK main market, junior market and Borsa Italiana declined a fifth in total, while money raised fell by almost half to £11.8bn.
Analysts at Numis expect pre-tax profit of £611m for the 12 months to December 2016, giving EPS of 118p (from £525m and 104p in 2015).
LONDON STOCK EXCHANGE (LSE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,766p | MARKET VALUE: | £9.69bn | |
| TOUCH: | 2,765-2,767p | 12-MONTH HIGH: | 2,960p | low: 2,083p |
| DIVIDEND YIELD: | 1.3% | PE RATIO: | 31 | |
| NET ASSET VALUE: | 823p* | NET DEBT: | 26% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 663 | 176 | 33.4 | 10.8 |
| 2016 | 722 | 164 | 27.4 | 12 |
| % change | +9 | -7 | -18 | +11 |
Ex-div: 25 Aug Payment: 20 Sep *Includes intangible assets of £4bn, or 1,147p a share | ||||
