Interim Results
London Stock Exchange
19 October 2000
Interim Results for London Stock Exchange plc
for the six months ended 30 September 2000
LONDON STOCK EXCHANGE REPORTS STRONG RESULTS
The London Stock Exchange published its unaudited interim results today
showing an 89 per cent increase in operating profits for continuing operations
before exceptional items. These results cover the first half-year period
following demutualisation in March this year.
Highlights for continuing operations for the six months to September 2000 are:
* Turnover up 20 per cent to £90.6 million, with growth in all major
divisions
* Operating profit before exceptional items up 89 per cent to £29.1
million
* Operating margin before exceptional items up to 33 per cent from 21 per
cent last year
* Adjusted earnings per share, before exceptional items, up 73 per cent to
76.4 pence per share
* Interim dividend declared of 10 pence per share
The Chairman of the London Stock Exchange, Don Cruickshank, commented: 'An
excellent set of results has been recorded in the first half of the year. We
have continued to build on the strengths of our existing businesses during a
period of significant growth in the UK equity market and strong performances
from AIM and techMARK.
'It is to the great credit of the management team and all our staff that these
results have been achieved in the first period following demutualisation,
which has been a turbulent and challenging time for the Exchange.'
For further information
London Stock Exchange
Kay Dixon 020 7797 1222
Jeremy Hughes
Brunswick
Derek Bainbridge 020 7404 5959
David Brewerton
Schroder Salomon Smith Barney, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for London Stock Exchange
plc and no one else in connection with the offer by OM and will not be
responsible to anyone other than London Stock Exchange plc for providing the
protections afforded to its customers or for providing advice in relation to
the offer by OM. Schroder Salomon Smith Barney has approved this press release
for the purposes of Section 57 of the Financial Services Act 1986.
Chairman's statement
Building on our strengths
In March, shareholders overwhelmingly endorsed our proposals to move to a
commercial basis of operation by voting to become a public limited company and
allowing shares to be transferable. From that time, the London Stock Exchange
has been able to focus on its primary objective - to maximise shareholder
value through the provision of high quality, competitively priced services to
companies, intermediaries and investors.
We have continued to build on the strengths of our existing businesses during
a period of significant growth in the UK equity market and strong performances
from AIM and techMARK.
Financial results
An excellent set of results has been recorded in the first half of the year.
Turnover from continuing operations was £90.6 million, an increase of 20 per
cent over the same period last year with strong performances from each of our
major revenue streams.
Operating profit from continuing operations, before exceptional items,
increased by 89 per cent from £15.4 million in 1999 to £29.1 million. Earnings
per share for continuing operations before exceptional items were 76.4 pence
compared with 44.1 pence per share for the same period last year.
After tax of £10.1 million, profit was £10.3 million and the Board will pay an
interim dividend in January 2001 of 10.0 pence per share to shareholders on
the register on 8 December 2000.
Company services
We continue to improve both the structure of our markets and the services we
offer to companies.
More than 50 companies have joined techMARK since its inception in November
1999. techMARK companies have accounted for a third of all money raised from
equities on the main market during this period.
In February, the London Stock Exchange successfully introduced the second of
its attribute markets, extraMARK, incorporating the first Exchange Traded Fund
product, the iShares plc iFTSE 100.
Trading services
The London Stock Exchange's markets have accommodated average trading volumes
of 148,000 bargains a day - more than 40 per cent higher than during the same
period last year.
We have expanded access to our trading systems for customers of information
vendors such as Bloomberg and Thomson Financial (Global TOPIC), bringing the
London market within easy reach of a wider range of investors.
Following extensive consultation with customers, we are working towards the
introduction of the UK central counterparty. This initiative, in conjunction
with CRESTCo and the London Clearing House, will make a significant
contribution to reducing risk and, in the longer term, will reduce trading
costs.
Information services
London Stock Exchange data is currently available on over 104,000 terminals
worldwide.
In September, the Regulatory News Service was successfully upgraded to allow
companies to make announcements securely via the internet. We believe this
will become the normal procedure for making and viewing company announcements
in the future, widening access to information, to the particular benefit of
private investors. Details of forthcoming and recent initial public offerings
are also now available on our website.
We are continuing to introduce new information products for companies and
private client brokers to meet the needs of their customers. In addition, many
private investors are also taking advantage of our delayed news and prices
services, available free through our website. Overall, our website now has
around 340,000 user sessions, with approximately three million page
impressions, per month.
Board changes
I was pleased to join the Board as a non-executive director and then chairman
in May after Sir John Kemp-Welch's retirement. Following the Annual General
Meeting in September, Gavin Casey resigned as chief executive. We are grateful
to him for his progressive leadership during the last four years. In the
interim, before his successor is appointed, I have accepted the Board's
request to take over executive responsibilities. I look forward to working
with our strong management team to meet the challenges that lie ahead.
In order to strengthen the Board further, we believe it is a priority to
ensure that the majority of non-executive directors are independent, in
accordance with the UK Corporate Governance model.
Current trading and prospects
The first half financial performance was broadly in line with the directors'
expectations and trading at the start of the second half continues to be
satisfactory. The directors view the prospects for the London Stock Exchange
with confidence.
Don Cruickshank
Chairman
19 October 2000
Consolidated profit and loss account
Six months ended 30 September 2000
Six months Year
ended ended
30 September 31
March
2000 1999 2000
£m £m £m
Notes Restated
Turnover
Group and share of joint venture
Continuing operations 90.6 75.3 164.0
Discontinued operations 1.2 5.9 11.7
Gross turnover 91.8 81.2 175.7
Less: share of joint venture's
turnover
Continuing operations (2.7) (2.1) (4.5)
Net turnover 2 89.1 79.1 171.2
Administrative expenses
Operating costs (59.2) (61.0) (124.2)
Exceptional items 3 (13.8) - (5.1)
(73.0) (61.0) (129.3)
Operating profit
Continuing operations - before 29.1 15.4 41.8
exceptional items
- after exceptional 15.3 15.4 36.7
items
Discontinued operations 0.8 2.7 5.2
16.1 18.1 41.9
Share of operating profit of joint venture and
income
from other fixed asset investments 0.3 0.2 0.3
Net interest receivable 4 4.0 3.0 6.3
Profit on ordinary activities before taxation 20.4 21.3 48.5
Taxation on profit on ordinary activities 5 (10.1) (6.3) (14.6)
Profit for the financial period 10.3 15.0 33.9
Dividend (3.0) - -
Retained profit for the financial period 7.3 15.0 33.9
Earnings per share 6 34.7p 50.5p 114.1p
Adjusted earnings per share 6 76.4p 44.1p 119.2p
Dividend per share 10.0p - -
Statement of total recognised gains and losses
Profit for the financial period 10.3 15.0 33.9
Other recognised gains and losses for the period
Prior period adjustments - 9.7 13.4
Total recognised gains for the period 10.3 24.7 47.3
Note: Prior year comparatives have been restated due to a change in accounting
policy, made in the financial statements for the year ended 31 March
2000, to meet the requirements of FRS 15 on tangible fixed assets. This
has resulted in the surplus for the six months to 30 September 1999 being
reduced from £18.6 million to £15.0 million.
Consolidated balance sheet
At 30 September 2000
30 September 31 March
2000 1999 2000
£m £m £m
Notes Restated
Fixed assets
Tangible assets 110.7 112.7 114.4
Investments 2.7 1.0 2.5
113.4 113.7 116.9
Current assets
Debtors: amounts falling due within one 32.3 28.3 35.7
year
Deferred tax due after more than one year 1.9 0.6 1.2
Investments - term deposits 208.0 196.0 196.0
Cash at bank 4.1 5.2 4.4
246.3 230.1 237.3
Creditors: amounts falling due within one (67.1) (59.2) (59.1)
year
Net current assets 179.2 170.9 178.2
Total assets less current liabilities 292.6 284.6 295.1
Creditors: amounts falling due after more (30.0) (30.0) (30.0)
than one year
Provisions for liabilities and charges 7 (30.0) (33.5) (31.0)
Net assets 232.6 221.1 234.1
Capital and reserves
Called up share capital 8 1.5 - -
Reserves
Revaluation reserve 48.7 50.6 49.6
Capital redemption reserve - 14.7 8.8
Trade compensation reserve 15.0 15.0 15.0
Profit and loss account 167.4 140.8 160.7
Total shareholders' funds 232.6 221.1 234.1
Consolidated cash flow statement
Six months ended 30 September 2000
Six months ended Year ended
30 September 31 March
2000 1999 2000
£m £m £m
Notes Restated
Net cash inflow from operating activities 10 31.5 18.7 45.0
Returns on investments and servicing of
finance
Interest received 6.0 4.5 10.6
Interest paid (1.5) (1.5) (3.0)
Dividends received - - 0.1
Net cash inflow from returns on investments 4.5 3.0 7.7
and servicing of finance
Taxation
Corporation tax paid (9.7) 0.4 (12.1)
Capital expenditure and financial
investments
Payments to acquire tangible fixed assets (5.8) (2.6) (14.7)
Receipts from sale of tangible fixed assets - 1.1 1.2
Receipts from sale of fixed asset - - 0.1
investments
Net cash outflow from capital expenditure (5.8) (1.5) (13.4)
and financial investments
Acquisitions and disposals
Payments to acquire shares in joint venture - - (1.5)
Net cash inflow before use of liquid 20.5 20.6 25.7
resources and financing
Management of liquid resources
Increase in term deposits (12.0) (2.0) (2.0)
Financing
Redemption of A shares (8.8) (19.9) (25.8)
Decrease in cash in the period (0.3) (1.3) (2.1)
Notes to the financial information
1. Basis of preparation
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year
ended 31 March 2000, and are unaudited. The interim financial statements do
not constitute statutory financial statements within the meaning of section
240 of the Companies Act 1985.
Comparative figures for the year ended 31 March 2000 are an abridged
version of the Group's full accounts which carried an unqualified audit
report and have been delivered to the Registrar of Companies.
2. Analysis of turnover
Six months ended Year ended
30 September 31 March
2000 1999 2000
£m £m £m
Restated
Continuing operations
Company services 15.5 12.1 25.7
Trading services 29.6 22.5 54.1
Information services 40.4 35.3 72.9
Other income 5.1 5.4 11.3
90.6 75.3 164.0
Discontinued operations
Competent authority 1.2 5.9 11.7
Gross turnover 91.8 81.2 175.7
Less: share of joint venture's turnover (2.7) (2.1) (4.5)
Net turnover 89.1 79.1 171.2
3. Exceptional items
Exceptional items are for costs in respect of the Company reorganisation
and demutualisation in the year to 31 March 2000, and in the current year
for the proposed merger with Deutsche Borse and in defence of the bid
from OM Gruppen.
4. Interest
Interest receivable
Bank deposits 6.4 5.4 11.1
Interest payable
On bank and other loans repayable after five (1.5) (1.5) (3.0)
years
Interest on discounted provision for (0.9) (0.9) (1.8)
leasehold properties
Total (2.4) (2.4) (4.8)
Net interest receivable 4.0 3.0 6.3
5. Taxation
Six months ended Year ended
30 September 31 March
2000 1999 2000
£m £m £m
Restated
Corporation tax for the period at 30% 11.4 8.0 17.8
Deferred taxation (0.7) (1.7) (3.1)
Adjustment for previous years:
Corporation tax (0.7) - (1.0)
Deferred taxation - - 0.8
Joint venture 0.1 - 0.1
Taxation charge 10.1 6.3 14.6
The effective rate of taxation in the six months to 30 September 2000 is
higher than the standard rate of taxation primarily because certain
expenses are disallowed for tax purposes.
6. Earnings per share
Earnings per share of 34.7p (1999, restated 50.5p, year ended 31 March
2000, 114.1p) are based on profit for the financial period of £10.3m
(1999, restated £15.0m, year ended 31 March 2000, £33.9m) and a weighted
average number of Ordinary shares in issue of 29.7m.
Adjusted earnings per share are in respect of continuing operations before
exceptional items. Adjusted earnings per share of 76.4p (1999, restated
44.1p, year ended 31 March 2000, 119.2p) are based on adjusted earnings
for the financial period of £22.7m (1999, restated £13.1m, year ended 31
March 2000, £35.4m) and a weighted average number of Ordinary shares in
issue of 29.7m.
7. Provisions for liabilities and charges
Pensions Property Total
£m £m £m
1 April 2000 1.3 29.7 31.0
Utilised during the period (0.1) (1.6) (1.7)
Interest on discounted provision - 0.9 0.9
Surplus provision released - (0.2) (0.2)
30 September 2000 1.2 28.8 30.0
Pensions
The pensions provision represents a pension surplus which first arose in
1990 and is being released to the profit and loss account over the
expected remaining service lives of scheme members in accordance with the
accounting policy for pension costs.
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 for those properties which are surplus to
business requirements. The leases have a maximum term of 14 years to
expiry.
8. Share capital
30 30 31
September September March
2000 1999 2000
Authorised
Ordinary shares of 5p each - number 40,000,000 - -
- £ 2,000,000 - -
A shares of 5p each - number - 5,601 5,601
- £ - 280 280
B shares of 5p each - number - 14,399 14,399
- £ - 720 720
Issued, called up and fully paid
Ordinary shares of 5p each - number 29,700,000 - -
- £ 1,485,000 - -
A shares of 5p each - number - 1,477 880
- £ - 74 44
B shares of 5p each - number - 14,399 14,399
- £ - 720 720
All outstanding A shares were redeemed with effect from 12 April 2000. On
12 April 2000, the B shares held by the share trustee were purchased by the
Company and cancelled, each remaining B share was reclassified as an
Ordinary share and there was a bonus issue of 99,999 Ordinary shares for
every Ordinary share held. This increased the number of shares in issue to
29.7m.
9. Reconciliation of movements in
shareholders' funds
Six months ended Year ended
30 September 31 March
2000 1999 2000
£m £m £m
Restated
Profit for the financial period 10.3 15.0 33.9
Dividend (3.0) - -
Redemption of A shares during the period (8.8) (19.9) (25.8)
Net addition to shareholders' funds (1.5) (4.9) 8.1
Opening shareholders' funds 234.1 226.0 226.0
Closing shareholders' funds 232.6 221.1 234.1
10. Note to the consolidated cash flow
statement
Reconciliation of operating profit to
net cash inflow from operating
activities
Operating profit 16.1 18.1 41.9
Depreciation of tangible assets 9.5 12.0 22.2
Decrease/(increase) in debtors 3.8 0.3 (7.6)
Increase/(decrease) in creditors 3.8 (9.9) (8.5)
Provisions utilised during the period (1.7) (1.8) (3.0)
Net cash inflow from operating 31.5 18.7 45.0
activities
Independent review report to London Stock Exchange plc
Introduction
We have been instructed by the company to review the financial information set
out on pages 4 to 9 and we have read the other information contained in the
interim report for any apparent misstatements or material inconsistencies with
the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The Listing
Rules of the Financial Services Authority (which the company applies as if its
shares were listed) require that the accounting policies and presentation
applied to the interim figures should be consistent with those applied in
preparing the preceding annual accounts except where any changes, and the
reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board. A review consists principally of
making enquiries of management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities
and transactions. It is substantially less in scope than an audit performed in
accordance with Auditing Standards and therefore provides a lower level of
assurance than an audit. Accordingly we do not express an audit opinion on the
financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2000.
PricewaterhouseCoopers
Chartered Accountants
London
19 October 2000
Letter from PricewaterhouseCoopers on the interim results for the six months
ended 30 September 2000
PricewaterhouseCoopers
Southwark Towers
32 London Bridge Street
London SE1 9SY
The Directors
London Stock Exchange plc
Old Broad Street
London EC2N 1HP
The Directors
Schroder Salomon Smith Barney
33 Canada Square
London E14 5LB
19 October 2000
Dear Sirs
We have reviewed the basis of compilation and the accounting policies for the
interim results of London Stock Exchange plc (the 'Company') for the six
months ended 30 September 2000 (the 'Interim Results'), for which the
directors of the Company are solely responsible, as set out on pages 22 to 30
of the Company's Circular dated 19 October 2000.
We conducted our work in accordance with the Statements of Investment Circular
Reporting Standards issued by the Auditing Practices Board.
In our opinion, the Interim Results have been properly compiled on the basis
stated in note 1 thereto and the basis of accounting is consistent with the
accounting policies of the Company.
Our work in connection with the Interim Results has been undertaken solely for
the purpose of reporting to the directors of the Company and of Schroder
Salomon Smith Barney. We accept no responsibility to any offeror or its
shareholders or any other person in respect of, arising out of or in
connection with that work.
PricewaterhouseCoopers
Chartered Accountants
Letter from Schroder Salomon Smith Barney on the interim results for the six
months ended 30 September 2000
Schroder Salomon Smith Barney
Citigroup Centre
33 Canada Square
Canary Wharf
London E14 5LB
19 October 2000
The Directors
London Stock Exchange plc
Old Broad Street
London EC2N 1HP
Dear Sirs
We refer to the unaudited interim results for London Stock Exchange plc (the
'Company') for the period ended 30 September 2000 (the 'Interim Results') set
out on pages 22 to 30 of the Company's Circular dated 19 October 2000.
We have discussed the Interim Results and the basis on which they have been
prepared with you as Directors of the Company. We have also discussed the
accounting policies and calculations for the Interim Results with
PricewaterhouseCoopers, auditors to the Company, and we have considered their
letter of today's date addressed to yourselves and to ourselves on this
matter.
On the basis of the foregoing, we consider that the Interim Results, for which
you as directors are solely responsible, have been prepared by the Directors
with due care and consideration.
Yours faithfully,
For and on behalf of
Schroder Salomon Smith Barney
Philip Robert-Tissot
Managing Director
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