Final Results
London Stock Exchange Plc
20 May 2004
20 May 2004
LONDON STOCK EXCHANGE PLC
ANNOUNCEMENT OF PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 MARCH 2004
Highlights:
• Turnover up six per cent to £250.4 million
• Operating profit up 17 per cent to £81.6 million
• Operating profit before exceptional items and goodwill amortisation up
two per cent to £83.2 million
• Earnings per share up 20 per cent to 21.7 pence
• Adjusted earnings per share up two per cent to 21.3 pence
• Final dividend of 3.4 pence per share bringing the total dividend for
the year to 4.8 pence per share, up 12 per cent
• Return of approximately £162 million surplus cash by way of a 55 pence
per share special dividend and share consolidation
Commenting on the results, Chris Gibson-Smith, Chairman of the Exchange, said:
"The Exchange has produced satisfactory results against a background of variable
market conditions. Turnover increased six per cent and adjusted earnings per
share grew two per cent with a proposed 13 per cent increase to the final
dividend.
"Strong cash generation, together with the anticipated proceeds from the Tower
disposal, results in the Exchange holding significant cash balances. The Board
is therefore recommending a special dividend to return surplus cash of
approximately £162 million to shareholders whilst maintaining the financial
flexibility to continue to pursue opportunities for growth."
Clara Furse, Chief Executive of the Exchange, said:
"Whilst market conditions in Information Services remained challenging,
performance in our Broker Services' division was good and our Issuer Services
business grew in the second half of the year. We also made progress in
diversifying and growing our business through the introduction of new services,
such as SETSmm and SEDOL Masterfile and the launch of our equity derivatives
business EDX London.
"The Exchange is pursuing all opportunities to expand its business by leveraging
its flexible trading model, leading technology through its Technology Roadmap
programme and strong relationships with a broadening customer base. With our
good ongoing cash flow enabling us to continue investment in new initiatives,
the Exchange is well positioned for the future."
Further information is available from:
London Stock Exchange John Wallace - Media 020 7797 1222
Paul Froud - Investor Relations 020 7797 3322
Ruth Anagnos - Investor Relations 020 7797 3322
Finsbury James Murgatroyd 020 7251 3801
Melanie Gerlis 020 7251 3801
Financial results
Financial performance for the year ended 31 March 2004 has been satisfactory
against a backdrop of variable market conditions. Turnover increased six per
cent to £250.4 million (2003: £237.3 million), with a nine per cent increase in
the second half of the year over the first half. Administrative expenses
excluding exceptional items increased eight per cent to £155.5 million
(2003: £144.3 million) due to the inclusion of EDX London from 30 June 2003 and
relocation to our new headquarters at Paternoster Square.
Operating profit increased 17 per cent to £81.6 million (2003: £70.0 million),
last year's profit having been impacted by an exceptional property charge.
Operating profit before exceptional items and goodwill amortisation rose two per
cent to £83.2 million (2003: £81.7 million). Profit before tax was £89.1 million
(2003: £79.5 million).
Earnings per share increased 20 per cent to 21.7 pence per share (2003: 18.1
pence per share). Adjusted earnings per share excluding exceptional items and
goodwill amortisation increased two per cent to 21.3 pence per share (2003: 20.9
pence per share).
For the year, operating cash flows before exceptional items were £105.4 million
(2003: £74.8 million). At £227.9 million, cash balances at 31 March 2004 were
£16.9 million higher than last year (2003: £211.0 million). This increase in
cash balances was achieved after capital expenditure of £54.2 million, including
significant one-off spend for the fit out of new offices at Paternoster Square.
The number of shares in issue at the year end was 297 million. During the year
the Exchange made no purchases of its own shares under the authority obtained at
the AGM in July 2003. The Exchange will seek renewal of this authority at the
forthcoming Annual General Meeting (AGM) on 14 July 2004.
Issuer Services
Turnover from Issuer Services increased seven per cent to £38.5 million (2003:
£36.0 million), contributing 15 per cent of total turnover for the year (2003:
15 per cent). The uplift reflects increases in both admission and annual fee
income.
The number of companies on our markets at 31 March 2004 was 2,693 (2003: 2,777),
with annual fee income, the revenue the Exchange receives from companies on its
markets, accounting for 56 per cent of Issuer Services' turnover (2003: 59 per
cent).
Equity new issue activity on the Exchange's markets over the year was mixed,
with AIM showing particularly strong growth. In total, new issues rose to 236
(2003: 202) as weak conditions in the first half of the year were offset by a
stronger overall performance in the second half, due to high levels of activity
in December and March. The growth in new issues was attributable to a 25 per
cent increase in AIM new issues to 193 whilst main market activity fell 10 per
cent to 43 new issues. The amount of new capital raised on the Exchange's
markets during the year rose 17 per cent to a total of £21.0 billion (2003:
£17.9 billion). The Exchange performed strongly compared to European
competitors, accounting for 85 per cent of the IPOs in Western Europe (2003: 69
per cent).
AIM, our international market for smaller, growing companies, enjoyed a
successful year. At 31 March 2004, 792 companies were traded on AIM, an increase
of 12 per cent (2003: 705). During the year the fast track route to AIM was
introduced, which allows companies from designated markets to take advantage of
a streamlined admission process. Eight companies, from countries including
Canada, Australia and Germany have used this service since launch in May 2003.
Broker Services
Broker Services' turnover increased eight per cent to £94.1 million (2003: £87.3
million), generating 38 per cent of total turnover (2003: 37 per cent). This
good performance is mainly attributable to the continued growth in the number of
bargains transacted on SETS, our electronic order book, which accounted for
approximately 64 per cent of Broker Services' revenue for the year (2003: 55 per
cent).
For the year ended 31 March 2004, the total number of equity bargains increased
nine per cent to 59.3 million (2003: 54.3 million), a daily average of 234,000
(2003: 215,000). During the same period, the number of SETS bargains grew 26 per
cent to a total of 34.7 million (2003: 27.5 million), representing a daily
average of 137,000 bargains (2003: 109,000). The daily average number of UK
off book bargains rose 12 per cent to 57,000 (2003: 51,000).
Partly offsetting the benefit of increased numbers of SETS bargains were i) a
continued decline in the average value of a SETS bargain, down 12 per cent to
£22,000 (2003: £25,000) and ii) a 27 per cent reduction in the number of
international bargains reported to the Exchange, to 40,000 per day (2003:
55,000).
During the year, two new initiatives were launched:
• Iceberg Orders - introduced in September, this service enables large
orders to be put through SETS in a more efficient manner, maintaining time
priority and reducing market impact; and
• SETSmm - introduced in November, this is a new order book for trading
mid-cap securities. This extension to SETS is a hybrid market supported by
continuous liquidity provision from market makers. An extra 221 securities
are now capable of being traded electronically, resulting in an increase of
over 30 per cent in the value of shares traded and a reduction in spreads
of nearly 40 per cent. In the last quarter of the year, volumes on SETSmm
averaged 11,000 bargains per day.
In January, the Exchange announced the introduction of progressive discounts for
member firms with SETS trading volumes above certain monthly levels. This new
discount scheme, effective from 1 April 2004, follows close consultation with
customers and is aimed at incentivising greater SETS trading volumes.
During the year we also announced EUROSETS, the trading service for liquid Dutch
securities, due for launch on 24 May 2004. This service offers the efficiency
and reliability of the UK SETS platform and has been set up to use the existing
post trade clearing and settlement infrastructure for the Dutch market.
Development of network connections and IT requirements is complete and we are
encouraged by the level of interest expressed by customers in this market.
Information Services
Information Services' turnover fell one per cent to £101.0 million (2003: £102.2
million), accounting for 40 per cent of total turnover (2003: 43 per cent).
The decline in revenue mainly reflects the continued fall in terminals receiving
real-time Exchange data, particularly the reduction in higher-yield professional
users. At 31 March 2004, there were 90,000 terminals taking Exchange data (2003:
94,000), of which approximately 80,000 terminals (2003: 88,000) were
attributable to professional users. This area of the Exchange's business is
"late cycle" compared to some of our other activities which are quicker to
benefit from recovery in equity markets.
Proquote, the Exchange's low cost financial markets software and real-time price
data company made good progress. The number of installed Proquote screens at
year end exceeded 1,800, almost doubling that at acquisition in February 2003
and achieved against a backdrop of falling overall terminal demand. The product
offering has been enhanced over the year, with expanded news and data services
and improved functionality.
RNS performed well in its second year of commercial operations, contributing
£7.2 million to turnover (2003: £6.8 million). With over 90 companies in the
FTSE 100 using RNS to release regulatory announcements, RNS remains the market
leader in the UK regulatory news distribution market.
FTSE, the joint venture indices business, increased turnover by 17 per cent to
£13.3 million (2003: £11.4 million). This growth reflects continued strong
demand for existing indices and associated market data and the launch of new
indices.
SEDOL Masterfile, the extension to the Exchange's previous securities
identifier, was launched in March 2004. This service aims to reduce the cost of
failed cross-border trades arising from incorrect instrument identification.
Market response has been positive, with reference data user groups recognising
SEDOL Masterfile as meeting all criteria for global securities identification.
Nearly 800 contracts have been signed for use of this new service.
The Corporate Data Warehouse, the first phase of the Exchange's Technology
Roadmap - a programme to fundamentally update its technology systems and
operations - was completed in May 2003. The remaining phases, including a new
information system for distribution of real time trading data and the
enhancement of the Sequence trading platform, are due to be completed by
December 2006. The Technology Roadmap will provide a flexible and scalable
platform that will increase current capacity, enable new products to be
developed more cost effectively and reduce overall profit and loss technology
costs by a target of 20 per cent in financial year 2007/08. It will be
implemented without major disruption for customers.
Derivatives Services
Derivatives Services, our new business division, contributed £6.1 million to
turnover, representing three per cent of total revenue.
The principal part of this division is EDX London, our 76 per cent owned equity
derivatives business, which commenced trading on 30 June 2003. For the first
nine months of operation, turnover was £5.9 million, with operating costs of
£7.1 million including spend on the development of new over the counter (OTC)
services. Migration of the central counterparty to LCH.Clearnet was successfully
carried out in February, and in March the preparations for a clearing service
for vanilla OTC equity derivatives were completed, with further services to
follow. Overall, the business has made good progress, with 13.7 million
contracts traded.
Trading in the Covered Warrants market has grown over the year following
improving underlying market conditions and growing investor awareness.
Tower Disposal
In April 2004, the Exchange announced that it had reached agreement to dispose
of the Tower site for total consideration of £67.0 million. Payment will
comprise an initial instalment of £33.8 million payable on completion, expected
in July 2004, and a deferred payment of £33.2 million on 31 December 2005. The
relocation to new Headquarters at Paternoster Square is on schedule to be
completed in June 2004 and 32,000 square feet of around 80,000 square feet of
surplus space in the new offices is now contracted or under offer to
sub-tenants.
Final dividend
The Directors propose a final dividend of 3.4 pence per share to those
shareholders on the register on 23 July 2004, for payment on 16 August 2004.
Combined with the interim dividend of 1.4 pence per share paid in January 2004,
this takes the total dividend for the year to 4.8 pence per share (2003: 4.3
pence per share), an increase of 12 per cent. Going forward, the Board remains
committed to a progressive dividend policy.
Special dividend and share consolidation
Continuing strong cashflows and the anticipated receipt of proceeds from the
disposal of the Tower results in the Exchange holding significant cash balances.
Accordingly, the Board believes that it is appropriate to return surplus cash of
approximately £162 million to shareholders. The Board remains committed to
maintaining the Exchange's financial flexibility to pursue opportunities for
further growth.
The Board proposes to carry out the return by way of a special dividend of
55 pence per share, payable to shareholders on the register on 23 July 2004, for
payment on 16 August 2004. The return will be accompanied by a consolidation of
the current shares in issue on the basis of six new shares for every seven
existing shares. The special dividend and share consolidation is conditional on
shareholder approval at the AGM on 14 July 2004.
Current trading and prospects
Trading conditions in the first few weeks of the new financial year reflect the
trends seen at the end of last year. Notably:
• AIM new issue activity remains strong and the level of main market new
issues remains broadly in-line with the preceding month, although it may
be too soon to determine a strong trend. Additionally, Issuer Services'
revenue will be impacted by lower tariffs, effective from 1 April 2004;
• trading volumes on SETS have remained strong, though slightly down on
levels seen in Q4; and
• the rate of decline of professional terminals continues to show signs of
slowing.
Investment in new initiatives will continue during the year. The Board remains
confident that these developments will position the Exchange well for the
future.
Further information
The Exchange will host a presentation of its Preliminary Results for members of
the press today at 09.30am at 10 Paternoster Square, London EC4M 7LS. For
further information, please call the Exchange's Press Office at 020 7797 1222.
The Exchange will also host a presentation of its Preliminary Results for
analysts and institutional shareholders today at 11.00am 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. For further information,
please call the Exchange's Investor Relations department at 020 7797 3322.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 31 March 2004
Existing
operations Acquisition Total
2004 2004 2004 2003
Notes £m £m £m £m
Continuing operations
____________________________________________________________________________________________________________________
Turnover
Group and share of joint venture 244.5 5.9 250.4 237.3
Less: share of joint venture's turnover (13.3) - (13.3) (11.4)
____________________________________________________________________________________________________________________
Net turnover 1 231.2 5.9 237.1 225.9
Administrative expenses - Operating costs (148.4) (7.1) (155.5) (144.3)
- Exceptional items 2 - - - (11.6)
--------------------------------------------
(148.4) (7.1) (155.5) (155.9)
Operating profit - Before exceptional items
and goodwill amortisation 83.8 (0.6) 83.2 81.7
- Before exceptional items 82.8 (1.2) 81.6 81.6
--------------------------------------------
- After exceptional items
and goodwill amortisation 82.8 (1.2) 81.6 70.0
Share of operating profit of joint venture and income
from other fixed asset investments 1.4 1.1
Net interest receivable 3 6.1 8.4
____________________________________________________________________________________________________________________
Profit on ordinary activities before taxation 89.1 79.5
Taxation on profit on ordinary activities 4 (25.7) (26.8)
____________________________________________________________________________________________________________________
Profit on ordinary activities after taxation 63.4 52.7
Minority interests 0.3 -
____________________________________________________________________________________________________________________
Profit for the financial year 63.7 52.7
Dividends (14.1) (12.5)
____________________________________________________________________________________________________________________
Retained profit for the financial year 49.6 40.2
____________________________________________________________________________________________________________________
Earnings per share 5 21.7p 18.1p
Diluted earnings per share 5 21.5p 17.9p
Adjusted earnings per share 5 21.3p 20.9p
Dividend per share 4.8p 4.3p
____________________________________________________________________________________________________________________
There were no other recognised gains and losses during the two years ended 31 March 2004.
____________________________________________________________________________________________________________________
BALANCE SHEET
31 March 2004
Group
--------------------
2004 2003
Notes £m £m
____________________________________________________________________________________________________________________
Fixed assets
Intangible assets - goodwill 6 24.3 14.1
Tangible assets 168.3 126.3
____________________________________________________________________________________________________________________
192.6 140.4
Investments
Investments in joint venture:
Share of gross assets 10.5 9.9
Share of gross liabilities (9.0) (8.4)
--------------------
1.5 1.5
Other investments 6.8 10.1
--------------------
8.3 11.6
____________________________________________________________________________________________________________________
200.9 152.0
Current assets
Debtors 61.1 64.3
Investments - term deposits 223.0 207.0
Cash at bank 4.9 4.0
--------------------
289.0 275.3
Creditors - amounts falling due within one year 78.9 64.0
--------------------
Net current assets 210.1 211.3
____________________________________________________________________________________________________________________
Total assets less current liabilities 411.0 363.3
Creditors - amounts falling due after more than one year 0.5 -
Provisions for liabilities and charges 7 38.4 41.6
____________________________________________________________________________________________________________________
Net assets 372.1 321.7
____________________________________________________________________________________________________________________
Capital and reserves
Called up share capital 14.9 14.9
Reserves
Revaluation reserve 42.1 44.0
Profit and loss account 314.1 262.6
____________________________________________________________________________________________________________________
Equity shareholders' funds 371.1 321.5
Equity minority interest 1.0 0.2
____________________________________________________________________________________________________________________
Total shareholders' funds 372.1 321.7
____________________________________________________________________________________________________________________
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 March 2004
2004 2003
Notes £m £m
____________________________________________________________________________________________________________________
Net cash inflow from continuing operations:
- Ongoing operating activities 9(i) 105.4 74.8
- Exceptional items 9(i) - 10.4
____________________________________________________________________________________________________________________
Net cash inflow from operating activities 105.4 85.2
Dividends from joint venture 0.7 1.2
Returns on investments and servicing of finance
Interest received 7.3 9.5
Dividends received 0.1 -
--------------------
Net cash inflow from returns on investments and servicing of finance 7.4 9.5
Taxation
Corporation tax paid (22.2) (25.2)
Capital expenditure and financial investments
Payments to acquire tangible fixed assets (54.2) (28.1)
Receipts from sale of fixed asset investments 2.2 0.7
--------------------
Net cash outflow from capital expenditure and financial investments (52.0) (27.4)
Acquisitions
Acquisition of subsidiary undertaking (15.5) (11.8)
Net cash acquired with subsidiary undertaking - 0.5
--------------------
Net cash outflow for acquisition (15.5) (11.3)
Dividends paid (12.9) (11.1)
____________________________________________________________________________________________________________________
Net cash inflow before use of liquid resources and financing 10.9 20.9
Management of liquid resources
Increase in term deposits (16.0) (21.0)
Financing
Issue of ordinary share capital to minority interest 1.1 0.2
Loans received from minority shareholder
due within one year 2.9 -
due after one year 0.5 -
Issue of loan notes 1.5 -
____________________________________________________________________________________________________________________
Increase in cash in the year 0.9 0.1
____________________________________________________________________________________________________________________
NOTES TO THE FINANCIAL STATEMENTS
1. Turnover
2004 2003
£m £m
____________________________________________________________________________________________________________________
Continuing operations
Issuer Services 38.5 36.0
Broker Services 94.1 87.3
Information Services 101.0 102.2
Derivatives Services 6.1 -
Other income 10.7 11.8
____________________________________________________________________________________________________________________
Gross turnover 250.4 237.3
Less: share of joint venture's turnover (13.3) (11.4)
____________________________________________________________________________________________________________________
Net turnover 237.1 225.9
____________________________________________________________________________________________________________________
Principal operations of the Group are in the United Kingdom.
2. Exceptional items
2004 2003
£m £m
____________________________________________________________________________________________________________________
VAT repayment - 10.4
Provision in respect of leasehold properties - (22.0)
____________________________________________________________________________________________________________________
- (11.6)
____________________________________________________________________________________________________________________
Taxation effect - 3.5
____________________________________________________________________________________________________________________
The VAT repayment represents a recovery of VAT paid between 1990 and 2001. Following
successful negotiation with Customs and Excise, a retrospective change in the method for
calculating VAT recoverable on expenditure was agreed, resulting in this repayment.
The increase in provision for leasehold properties was in respect of space to be sublet in
new headquarters at Paternoster Square.
3. Net interest receivable
2004 2003
£m £m
____________________________________________________________________________________________________________________
Interest receivable
Bank deposit and other interest 8.0 9.3
____________________________________________________________________________________________________________________
Interest payable
Interest on discounted provision for leasehold properties (see note 7) (1.7) (0.9)
Interest payable on other loans (0.2) -
____________________________________________________________________________________________________________________
Total (1.9) (0.9)
____________________________________________________________________________________________________________________
Net interest receivable 6.1 8.4
____________________________________________________________________________________________________________________
4. Taxation
2004 2003
£m £m
____________________________________________________________________________________________________________________
Current tax:
Corporation tax for the year at 30% (2003: 30%) 25.7 23.9
Adjustments in respect of previous years (3.6) -
Joint venture 0.4 0.4
____________________________________________________________________________________________________________________
22.5 24.3
Deferred taxation 3.2 2.5
____________________________________________________________________________________________________________________
Taxation charge 25.7 26.8
____________________________________________________________________________________________________________________
The adjustments for previous years' corporation tax are mainly in respect of assessments now
agreed with the Inland Revenue, including £2.7m for the allowance of expenditure reported as
exceptional items in prior years (see note 5).
Factors affecting the current tax charge for the year
The current tax assessed for the year is lower than the standard rate of corporation tax in the UK of 30% (2003:
30%). The variations are explained below:
2004 2003
£m £m
____________________________________________________________________________________________________________________
Profit on ordinary activities before tax 89.1 79.5
____________________________________________________________________________________________________________________
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% 26.7 23.9
Expenses disallowed for the purpose of tax provision (primarily professional fees and
depreciation on expenditure not subject to capital allowances) 2.8 3.0
Accounting deduction less than taxation allowance - timing differences (3.4) (2.6)
Adjustments to tax charge in respect of previous periods (3.6) -
____________________________________________________________________________________________________________________
Corporation tax charge 22.5 24.3
____________________________________________________________________________________________________________________
Factors that may affect future tax charges
The disposal of properties at their revalued amount would not give rise to a tax liability.
5. Earnings per share
Earnings per share is presented on three bases: earnings per share; diluted earnings per share; and adjusted
earnings per share. Earnings per share is in respect of all activities and diluted earnings per share takes into
account the dilution effects of share options and share awards under the Employee Share Ownership Plan
(ESOP). Adjusted earnings per share excludes exceptional items and amortisation of goodwill to enable
comparison of the underlying earnings of the business with prior periods.
2004 2003
____________________________________________________________________________________________________________________
Earnings per share 21.7p 18.1p
Diluted earnings per share 21.5p 17.9p
Adjusted earnings per share 21.3p 20.9p
£m £m
____________________________________________________________________________________________________________________
Profit for the financial year 63.7 52.7
Adjustments:
Exceptional items - 11.6
Amortisation of goodwill 1.6 0.1
Tax effect of exceptional items and amortisation of goodwill (2.9) (3.5)
Minority interest of exceptional items, goodwill and taxation (0.1) -
____________________________________________________________________________________________________________________
Adjusted profit for the financial year 62.3 60.9
____________________________________________________________________________________________________________________
Weighted average number of shares - million 293.0 291.9
Effect of dilutive share options and awards - million 2.7 3.0
____________________________________________________________________________________________________________________
Diluted weighted average number of shares - million 295.7 294.9
____________________________________________________________________________________________________________________
The weighted average number of shares excludes those held in the ESOP, reducing the weighted average
number of shares to 293.0 million (2003: 291.9 million).
The tax effect of exceptional items and amortisation of goodwill for 2004 includes an exceptional
tax credit of £2.7m in respect of previous years (see note 4).
6. Intangible assets Group
Goodwill
£m
____________________________________________________________________________________________________________________
Cost:
1 April 2003 14.2
Additions during the year (see note 11) 13.9
Reduction due to revised estimate of consideration payable (see note 7) (2.1)
____________________________________________________________________________________________________________________
31 March 2004 26.0
____________________________________________________________________________________________________________________
Amortisation:
1 April 2003 0.1
Charge for the year 1.6
____________________________________________________________________________________________________________________
31 March 2004 1.7
____________________________________________________________________________________________________________________
Net book values:
____________________________________________________________________________________________________________________
31 March 2004 24.3
____________________________________________________________________________________________________________________
1 April 2003 14.1
____________________________________________________________________________________________________________________
Goodwill arising on the acquisition of subsidiaries is being amortised on a straight line basis over
15 years from date of acquisition.
7. Provisions for liabilities and charges
Deferred
Property consideration Total
£m £m £m
____________________________________________________________________________________________________________________
1 April 2003 38.0 3.6 41.6
Utilised during the year (1.3) - (1.3)
Interest on discounted provision 1.7 - 1.7
Deferred consideration reduced - (2.1) (2.1)
Consideration met by issue of loan notes - (1.5) (1.5)
____________________________________________________________________________________________________________________
31 March 2004 38.4 - 38.4
____________________________________________________________________________________________________________________
Property
The property provision represents the estimated net present value of 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 10 and 24 years to expiry.
Deferred consideration
Deferred consideration relates to amounts payable for the acquisition of Proquote Ltd and the equity derivatives
business of OM London Exchange. The amounts payable to former shareholders of Proquote Ltd are contingent upon
Proquote Ltd achieving certain revenue targets. Following the issue of £1.5m of loan notes during the year, no
further consideration is estimated to be payable, although it could be up to a maximum of £9.5m, payable by May 2005.
For the acquisition of the equity derivatives business, no further consideration is estimated to be payable,
although it could be up to a maximum of £11.2m, payable by March 2006 (see note 11).
8. Reconciliation of movements in shareholders' funds
2004 2003
£m £m
____________________________________________________________________________________________________________________
Profit for the financial year 63.7 52.7
Dividends (14.1) (12.5)
____________________________________________________________________________________________________________________
Net addition to shareholders' funds 49.6 40.2
Opening equity shareholders' funds 321.5 281.3
____________________________________________________________________________________________________________________
Closing equity shareholders' funds 371.1 321.5
____________________________________________________________________________________________________________________
9. Notes to the consolidated cash flow statement
2004 2003
£m £m
____________________________________________________________________________________________________________________
i) Reconciliation of operating profit to net cash inflow from operating activities
Operating profit 81.6 70.0
Depreciation of tangible assets 21.9 19.0
Amortisation of goodwill 1.6 0.1
Decrease/(increase) in debtors 0.7 (19.2)
Increase/(decrease) in creditors 0.4 (1.6)
Increase in property provision - 22.0
Provisions utilised during the year (1.3) (5.9)
Amortisation of own shares 0.5 0.8
____________________________________________________________________________________________________________________
Net cash inflow from operating activities 105.4 85.2
____________________________________________________________________________________________________________________
Comprising:
Ongoing operating activities 105.4 74.8
Exceptional items (see note 2) - 10.4
____________________________________________________________________________________________________________________
Net cash inflow 105.4 85.2
____________________________________________________________________________________________________________________
At 1 April Cash At 31 March
2003 flows 2004
£m £m £m
____________________________________________________________________________________________________________________
ii) Analysis of changes in net funds
Cash in hand and at bank 4.0 0.9 4.9
Debt due within one year - (4.4) (4.4)
Debt due after more than one year - (0.5) (0.5)
Current asset investments 207.0 16.0 223.0
____________________________________________________________________________________________________________________
Total net funds 211.0 12.0 223.0
____________________________________________________________________________________________________________________
10. Pension costs
The Company operates one pension plan which includes separate defined benefit and defined contribution schemes.
The assets of the defined benefit and defined contribution schemes are held separately from those of the Company
and the funds are managed by Schroder Investment Management Limited and Legal & General Investment Management Limited
respectively.
In addition to the normal contributions to the defined benefit scheme, the Company made additional contributions
of £3.2m (2003: £15.0m) during the year. These additional contributions are treated as a prepayment in the accounts
and are charged to the profit and loss account over the expected remaining service lives of scheme members.
The Company continues to account for pension costs in accordance with SSAP 24 - Accounting for Pension Costs.
The following information is provided under the disclosure requirements of FRS 17 - Retirement Benefits.
The Accounting Standards Board has deferred the full adoption of FRS 17 until implementation of International
Accounting Standards in 2005.
The fair value of the assets and net position in the defined benefit scheme, with the assumed expected rates of
return at 31 March 2004 and 2003 are as follows:
Long term Long term
31 March expected 31 March expected
2004 rate 2003 rate
£m of return £m of return
_____________________________________________________
Equities 47.1 8.20% 35.9 8.00%
Bonds 130.7 4.86% 123.1 4.82%
____________________________________________________________________________________________________________________
Total market value of assets 177.8 159.0
Present value of liabilities 196.0 187.0
____________________________________________________________________________________________________________________
Deficit in the plan (18.2) (28.0)
Related deferred tax asset 5.5 8.4
____________________________________________________________________________________________________________________
Net pension liability (12.7) (19.6)
____________________________________________________________________________________________________________________
If the above amounts had been recognised in the financial statements, the Group's net assets and profit and loss
reserve at 31 March 2004 would have been reduced by £22.8m (2003: £29.6m) being the deficit of the pension scheme
based on assumptions at that date of £12.7m (2003: £19.6m) plus the prepaid pension contribution of £14.4m
(2003: £14.3m) and related deferred tax adjustment of £4.3m (2003: £4.3m).
The plan's assets are invested approximately 26 per cent in equities and 74 per cent in bonds at 31 March 2004
and the trustees of the plan intend to move gradually to 100 per cent investment in bonds over the longer term.
Under SSAP 24, the charge to the profit and loss relating to the defined benefit scheme was £4.4m (2003: £0.8m).
Under FRS17, the profit and loss charge comprising service and finance costs would be £2.9m (2003: £2.9m).
11. Acquisition
EDX London Ltd
On 30 June 2003, following approval as a Recognised Investment Exchange by the Financial Services Authority,
EDX London Ltd, a 76% subsidiary of the Company, acquired the Scandinavian equity derivatives business of
OM London Exchange. The initial consideration was £12.8m with an additional payment of up to £11.2m payable
dependent on the business achieving certain revenue targets by 31 December 2005. The book value of the assets
acquired and cost of acquisition are set out below; no fair value adjustments were required.
Fair value at
acquisition
£m
____________________________________________________________________________________________________________________
Fixed assets acquired 0.1
____________________________________________________________________________________________________________________
Purchase consideration
Cash 12.8
Costs of acquisition 1.2
____________________________________________________________________________________________________________________
Total 14.0
____________________________________________________________________________________________________________________
Goodwill arising 13.9
____________________________________________________________________________________________________________________
Net assets of EDX London Ltd at 31 March 2004 amounted to £4.3m.
12. Post balance sheet event
On 2 April 2004, the Company announced that Hammerson plc had agreed to acquire the Stock Exchange Tower site for
total consideration of £67 million. The expected profit is a minimum of £5 million and completion is
expected in July 2004.
13. 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.
This information is provided by RNS
The company news service from the London Stock Exchange
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