London Stock Exchange Group plc · LSE:LSEG
London Stock Exchange — H1 2005 Earnings Presentation
37 slides from London Stock Exchange's earnings presentation, Nov 3, 2005
Slide 1: London Stock Exchange Interim Results
London Stock Exchange Interim Results 3 November 2005
Slide 2: Agenda
Agenda Introduction Chris Gibson-Smith Chairman Financial Review Jonathan Howell Director of Finance CEO Overview Clara Furse Chief Executive Officer Q&A
Slide 3: Introduction
Introduction • Excellent H1 trading performance • Competition Commission findings validate horizontal business model • Our strategic objectives: – extend lead in domestic and international equity markets – leverage core strengths to diversify business – promote the growth of capital markets • Confid
Slide 4: Jonathan Howell, Director of Finance
Jonathan Howell Director of Finance
Slide 5: Strong trading performance
Strong trading performance Highlights • Turnover - up 15% to £136.1m • Operating profit - up 24% to £50.8m1 • Adjusted earnings per share - up 40% to 15.7 pence1 • Interim dividend - up 100% to 4 pence per share 1 Before exceptional items
Slide 6: Overview of results
Overview of results Six months ended Year ended 30 September 31 March 2005 2004 Change 2005 £m £m % £m Turnover 136.1 118.3 15 244.4 Operating costs1 (85.3) (77.4) 10 (159.8) Operating profit1 50.8 40.9 24 84.6 Operating margin1 37% 35% 35% Exceptional items (25.7) 4.5 - (0.1) Profit before tax 29.4
Slide 7: Sources of turnover growth
Sources of turnover growth £m 140.0 135.0 2.7 0.3 (0.3) 130.0 8.3 125.0 136.1 155.5 6.8 120.0 118.3 115.0 H1 2004/05 Issuer Broker Information Derivatives Other H1 2005/06 Services Services Services Services Income
Slide 8: Issuer Services turnover
Issuer Services turnover Significant increase in new issues Key metrics • Total new issues up from 214 to 306 £26.8m – 47 Main Market (H1 2004/05: 30) £5.0m – 259 AIM (H1 2004/05: 184) £20.0m £3.7m £9.9m • Annual fee income up 15% and Admission fee income up 55% £8.6m reflecting increase in new issu
Slide 9: Broker Services turnover
Broker Services turnover Record trading volumes Key metrics • Average daily equity bargains up 29% to 317,000 £56.9m – SETS bargains up 30% to 201,000 per day £48.6m £18.5m £16.6m – Off book bargains down 4% to 44,000 £27.1m £48.3m £16.9m per day – International bargains up 60% to 72,000 per day £38
Slide 10: Order book
Order book £40.9m Track record of strong growth m £bn 14 300 • Bargains per quarter up 43% from Q1 2004/05 12 250 • Value traded per quarter up 36% 10 200 over the same period 8 • Average yield per bargain in H1 150 2005/06 of £1.50 6 100 4 2 50 0 0 Q1 Q2 Q3 Q4 Q1 Q2 FY 2004/05 H1 2005/06 Bargains p
Slide 11: Information Services turnover
Information Services turnover Further uplift in professional terminals Key metrics • Terminal population 98,000 (H1 2004/05: 90,000) £45.1m £42.4m • Professional investor terminals at 85,000 (H1 2004/05: 80,000) £7.5m £6.2m • 2,900 Proquote screens (H1 2004/05: 2,300) • SEDOL turnover up £1m to £4m
Slide 12: Derivatives Services turnover
Derivatives Services turnover Steady improvement Key metrics • Turnover up 8% to £3.9m (H1 2004/05: £3.6 million) • 10.1 million contracts traded (H1 2004/05: 9.2 million) • Average daily contracts traded 78,000 (H1 2004/05: 73,000) • Goodwill impairment of £23m
Slide 13: Operating and development costs
Operating and development costs • 2004/05 comparative costs weighted £85.3m to H2 £77.4m £13.4m • Increases relate to higher IT and staff £13.2m spend • Depreciation stable • Costs remain closely managed - £64.2m £71.9m expect costs in FY 2006/07 remain at levels of FY 2005/06 H1 2004/05 H1 2005/06
Slide 14: Summarised cash flow
Summarised cash flow Continued strong cash generation Six months ended Year ended 30 September 31 March 2005 2004 2005 £m £m £m Net cash inflow from operating activities (before exceptionals) 77.9 59.0 100.9 Taxation (12.5) (11.7) (24.3) Capital expenditure (14.4) (26.2) (40.8) Ordinary dividends pa
Slide 15: Summarised balance sheet
Summarised balance sheet Financial flexibility 30 September 31 March 2005 2005 £m £m Non-current assets 135.9 154.1 Current assets - debtors 79.1 81.9 - cash 166.1 124.4 Current liabilities (89.8) (76.8) Non-current liabilities (44.1) (47.3) Net assets 247.2 236.3
Slide 16: Dividends
Dividends Step-up in payout • Interim dividend per share for H1 2006 double H1 last year, reflecting: – strong performance – confidence in future – re-setting dividend payout 4.0p • Sustainable dividend growth – not constrained by 3-5 times earnings 2.0p 1.3p 1.4p 1.1p • CAGR of Interim dividend sin
Slide 17: Capital Return
Capital Return Reflects strong trading performance and cash flow generation ● Capital position regularly reviewed - £163m special dividend August 2004 ● Today announcing: – £250m return after end of Offer period, or as soon as circumstances allow – Share buyback programme to follow ● Cash of £166m a
Slide 18: Current trading and prospects
Current trading and prospects • Good momentum in core business • Positive trends continuing into H2: – New issue activity strong – average size of Main Market new issues in October more than double last year – SETS continuing to perform strongly – bargains/day up 32% to 229,000 – Demand for real tim
Slide 19: Clara Furse, Chief Executive Officer
Clara Furse Chief Executive Officer
Slide 20: Introduction
Introduction • Building the world’s capital market by: – Attracting new and international companies – Maximising trading liquidity – Safeguarding the integrity of our markets • Depth of international capital and expertise in London • Intelligent regulatory environment
Slide 21: Achievements
Achievements • Culture – commercial, client-focussed • Business lines – re-priced and repositioned • Marketing focus – international • Pre and post-trade market structures – increasingly pro-competitive
Slide 22: Our strategy is delivering growth
Our strategy is delivering growth • H1 trading performance – operating profit up 24% • Announcement of £250m capital return and share buy-back • Significant increase in interim dividend – up 100% to 4p/share
Slide 23: Primary market: Main Market
Primary market Leveraging our brand • New issues up 43% in H1 2005/06 to 306 Main Market
Slide 24: Primary market: outperforming our peers
Primary market Outperforming our peers Number of International IPOs (Six months ended 30 September 2005) Number of International IPOs 42 8 0 0 LSE US Market Euronext Deutsche Bőrse
Slide 25: Europe's capital raising centre
Our market Europe’s capital raising centre – 69% of Western European IPOs Share of Western European IPOs Percentage share of Western European IPOs 69% 19% 10% 2% LSE Others Euronext Deutsche Bőrse
Slide 26: International focus
International focus • 65 international new issues in H1: – 8 on the Main Market – 57 on AIM – nearly double last year • Healthy new issue pipeline
Slide 27: AIM – world's leading market for smaller companies
Primary market AIM – world’s leading market for smaller, growing companies Number of AIM companies listed (as at 30 September) Number of AIM Companies 1,311 936 686 718 606 471 294 314 332 213 81 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 • AIM provides a solution to Europe’s SME funding
Slide 28: Information: extending our global reach
Information Extending our global reach Terminal numbers • Data taken in 100+ countries Number of terminals • Terminals up 8,000 to 98,000 95,000 • New products: 90,000 – SEDOL is global – Proquote is international 85,000 80,000 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Total Terminals
Slide 29: Secondary market
Secondary market Mutual advantage drives growth Lower explicit • Virtuous circle costs – Understanding our clients 1 – Product innovation Improved Increased economies technical – Lower pricing of scale trading • Improves liquidity, leading to: 3 2 – Lower spreads Improved liquidity And lower market
Slide 30: SETSmm spreads
Basis points 60 80 100 120 140 160 180 Oc t-0 No 3 v- 0 SETSmm De 3 c- 03 Ja n- 0 Fe 4 b- 0 M 4 ar -0 4 Ap r-0 M 4 ay -0 Ju 4 n- 04 Ju l-0 Au 4 g- 0 Se 4 63% reduction in SETSmm spreads p- 04 Oc t-0 No 4 v- 0 De 4 c- 04 Ja Average spread (basis points) n- 0 Fe 5 b- 0 M 5 Spreads of SETSmm mid-cap se
Slide 31: Turnover velocity
Turnover velocity Relative growth Turnover velocity 138% 131% 130% 118% 113% 112% 100% 84% 70% 2001 YTD 2005 1 LSE Deutsche Bőrse Euronext • Velocity is up 35% since 2001 1 To end August 2005 Source: WFE
Slide 32: SETS
SETS 30% growth in SETS bargains/day '000 193 151 123 87 52 31 2000 2001 2002 2003 2004 2005 Average SETS bargains per day (twelve months ended 30 September)
Slide 33: Technology: the growth platform
Technology The growth platform 2000 Units 1000 593 Units Units 300 Units 186 Units 100 Units SETS Go-Live Upgrade Upgrade Trading New TRM (Oct 97) (Nov 01) (Jan 03) Capacity Trading Upgrade (Early 07) (Oct 05)
Slide 34: Financial Times October 2005
Financial Times 24 October 2005
Slide 35: Technology: a step change in scalability
Technology A step change in scalability and flexibility • TRM will sharpen our competitive edge • Scale upgrades will cost a fraction of pre-TRM cost • Multi-asset class functionality available at much lower cost
Slide 36: Market Structure
Market Structure London market model • Shaping FSAP and lobbying to open up post-trade infrastructure • MiFID – architecture based on open London model – requires focus on clients and extensive best execution rules – facets of our market – early mover advantage for Exchange
Slide 37: Building the world's capital market
Building the world’s capital market Market data taken in 100+ countries 348 Member firms in 38 countries 519 international companies from 58 countries
London Stock Exchange Group — H1 2005 Earnings Presentation on 6ix