AGM Statement

RNS Number : 3394P

London Stock Exchange Group PLC

14 July 2010

 



LONDON STOCK EXCHANGE GROUP PLC

Annual General Meeting

Wednesday 14 July 2010

Chairman's statement by Chris Gibson-Smith

Introduction

Good afternoon ladies and gentlemen and welcome to Plaisterers Hall for the 2010 annual general meeting of the London Stock Exchange Group.

There have been three changes to the Board during the year.  We had a number of directors who had reached the Combined Code nine year milestone, and so have begun to refresh the membership of the Board.

Also, the CEO of Borsa Italiana resigned and has been replaced by Raffaele Jerusalmi. Gay Huey Evans and Paul Heiden joined the Board as Non-Executive Directors, replacing Oscar Fanjul and Nigel Stapleton.

On behalf of the Board, I would like to express my gratitude for the contribution Oscar and Nigel have made to the Group.  I have valued their counsel both as members of the Board, and of the committees on which they have served.

I would also like to thank Massimo Capuano, who left the company this April, both for his role in leading Borsa Italiana and his work in the enlarged Group following the merger.

Analysis of year and strategy

As there is a quorum present, we can start.

This has been a year of significant challenge and change for the Group as well as for the market, and this meeting gives us the chance to set out our results and our strategy for the future direction of your company.

The last year was economically difficult, with the global economy shrinking 1 per cent for the first time in over 60 years.

And within this context, the EU economy fell 4 per cent, and the UK economy fell 4.8 per cent.

Although the initial impact of the crisis on company valuations has passed, with the FTSE100 rising 64 per cent from its March 2009 low to a high in April of this year of 5790, the economic outlook remains very uncertain, both domestically and internationally, and markets are still showing great volatility, with the FTSE100 falling 17 per cent from its April high to 4800 in early July.

Also capital markets in Europe have grown much more competitive as the effects of MiFID - the Markets in Financial Instruments Directive have led to a greater number of trading venues in the European equity markets space and the opening up of securities markets in general.   In this general poor environment, trading volumes have remained comparatively low.

So I would like to talk about four key actions the Group has taken in response to this challenging environment, and the added competition we now face:

First, we have strengthened the management team to add skills and experience in key areas such as technology, capital markets and post trade. 

In particular, Kevin Milne joined the Group to lead our Post Trade division, Antoine Shagoury joined as Chief Information Officer, and through the acquisition of MillenniumIT Tony Weeresinghe has joined as Director of Global Development. 

These management additions have enhanced the Group's ability to respond to the new environment, to make full use of our significant inherent advantages, and to expand our services to reach as broad a customer base as possible.

Second, we have enhanced the scale and reach of our business both through building on our existing assets, and by making acquisitions.

Chief amongst these have been:

·        The purchase of MillenniumIT in October of last year

·        The acquisition of Turquoise, one of the MTFs - Multilateral Trading Facilities - permitted by MiFID; and

·        The launch of a retail bond market in the UK based on our Italian bond market which is already the Number 1 exchange-based bond market in Europe.  

MillenniumIT are an innovative Sri Lankan software company who give us the ability to develop outstanding, highly scaleable, electronic trading platforms for our customers.  As a result, we are now in a position to make significant improvements to most of our services.

We will migrate our UK and Italian equity trading platforms onto the high performance trading systems offered by MillenniumIT from October.

This acquisition also allows us to enhance the scope of our business. As well as offering cost effective trading platforms, MillenniumIT offers a range of services from market surveillance to post trade technology which can be sold all around the world.

We have accelerated our time to market for new products and improvements literally reducing years to months, allowing us to be a far more agile competitor, at a far lower cost.

Additionally, we will move our derivatives trading platforms onto a new system by the end of this year, allowing our customers to benefit from the most latency effective platform in the world for derivatives

Third, we have improved our relationship and partnership with our clients, including through our partnership with 12 leading international banks to operate the Turquoise market.

As a result of this deal, we now have a pan-European trading presence for the first time, giving us the opportunity for further growth, and the ability to trade 2000 securities across 19 European countries.

Already the dark pool trading platform on this market has grown from a third the size of the market leader to post the most value traded in June and therefore become the European number 1.

Fourth, we have made significant savings in the cost base.

Reductions in our workforce will deliver annualised savings of £15 million per year from what is our most significant area of expense.

The purchase of MillenniumIT will allow us to reduce our technology costs by an initial £10 million pounds per annum, and we have worked with post trade operators to reduce their fees.

We have already begun to see the value of this strategy, with trading fees to our customers reduced by £20 million since September alone.

Financials

So, with that as a background, now let me summarise the financial results for the past year.  Your Company remains strongly profitable, reflecting the changes made by the management team, and the continuing strength of our business model.  However, we haven't been immune to the continued effects of the financial markets crisis, and finding growth has been difficult:

·        Our revenues were £605 million, 6 percent less than last year

·        Our underlying cost base before exceptionals was reduced by 8 per cent

·        Our adjusted operating profit declined 10% to £305.6 million, excluding the one off costs of the replacement of TradElect by MillenniumIT

·        Cash generated from operations remained strong at £301.2 million

·        Overall, adjusted earnings per share were 60.1p reduced by 19% on last year.

This financial performance reflects much of the additional costs of actions taken to improve our competitive position, and to prepare for the future.  We expect that in future years our results will reflect the benefits of these actions.

The Board has proposed a final dividend of 16 pence per share, making a total of 24.4 pence for the year, in line with last year.  We believe that this conservative approach is appropriate given continuing market uncertainty.  The dividend will be paid on 16 August to shareholders on the register on 23 July.

Q1

This morning, we released revenues for the first quarter of FY2011.  In summary:

·        Revenue increased 1% on Q1 last year - to £158 million - and up 2% at constant currency; a resilient performance overall which reflects the Group's diversified business streams

·        We saw revenue increases in fixed income trading, in our clearing operations, in non real time data businesses and in our technology division

·        In terms of outlook, we are planning on market conditions remaining mixed, therefore management action will continue to improve business efficiency, and on development of new services to grow the business.

Conclusion

In conclusion, we continue to find opportunities for further development and innovation, and we remain deeply committed to serving the changing needs of our customers for whom this environment is equally challenging.

And by taking the steps I have outlined, improving the costs, the efficiency and the scale of our business, we remain well placed to take advantage of the many changes taking place in the financial sector. 

Further information is available from:

London Stock Exchange	Patrick Humphris - Media	020 7797 1222
	Paul Froud - Investor Relations	020 7797 3322

 

END

 

 

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