London Stock Exchange Group plc · LSE:LSEG
London Stock Exchange — FY2003 Earnings Presentation
26 slides from London Stock Exchange's earnings presentation, May 15, 2003
Slide 1: London Stock Exchange Preliminary results 15 May 2003
London Stock Exchange Preliminary results 15 May 2003
Slide 2: Agenda
Agenda Introduction Don Cruickshank Chairman Financial Review Jonathan Howell Director of Finance CEO Overview Clara Furse Chief Executive Officer Q&A
Slide 3: Introduction
Introduction • Good results in difficult market conditions • Financial highlights: - Turnover up 10% - Operating profit up 16% - Full year dividend up 19% • Falling barriers to competition • Well placed for new commercial opportunities
Slide 4: Jonathan Howell, Director of Finance
Jonathan Howell Director of Finance
Slide 5: Overview of results
Overview of results Good turnover and profit growth Year ended 31 March 2003 2002 Change £m £m % Turnover Issuer services 36.0 26.9 34 Broker services 87.3 81.2 8 Information services 102.2 94.9 8 Other income 11.8 12.6 (6) Gross turnover 237.3 215.6 10 Net turnover 225.9 206.6 9 Administrative expe
Slide 6: Overview of results (continued)
Overview of results Good turnover and profit growth (continued) Year ended 31 March 2003 2002 Change £m £m % Operating profit* 81.7 70.5 16 Exceptional items VAT repayment 10.4 - Leasehold properties provision (22.0 ) - Introduction to Official List fees - (3.6 ) Total exceptional items (11.6 ) (3.6
Slide 7: Issuer Services
Issuer Services Selective tariff changes offset weak IPO market Turnover up 34% Key metrics £36.0m • At £21m, annual fees represented 59% of turnover (2002: 48%) £26.9m • New issues fell 30% from 289 to 202 • Companies: 2,777 (2002: 2,879) 2002 2003
Slide 8: Broker Services
Broker Services SETS continues to drive growth Turnover up 8% Key metrics £87.3m • Average daily equity bargains up 8% £81.2m to 215,000 - order book bargains up 58% to 109,000 per day - off book bargains down 16% to 51,000 per day - international bargains down 21% to 55,000 per day • SETS contribut
Slide 9: Information Services
Information Services Lower terminal numbers offset by resilience of other information income Turnover up 8% Key metrics £102.2m £94.9m • Terminal population: 94,000 (2002: 105,000) • Professional investor terminals at 88,000 (2002: 96,000) • RNS turnover £6.8m (2002: £2.1m) • FTSE JV – share of turn
Slide 10: Operating and development costs
Operating and development costs Improved cost/income ratio Cost/income* 66% 64% £144m £136m £19m • Total costs up 6% - reflecting new IP £18m network costs £41m £39m • Depreciation up following systems investment £79m £84m 2002 2003 Other operating costs Staff Depreciation * before exceptional items
Slide 11: Summarised Cash Flow
Summarised Cash Flow Positive free cash flow Year ended 31 March 2003 2002 £m £m Net cash inflow from: - ongoing operating activities* 89.8 82.4 Taxation (25.2) (15.8) Capital expenditure (28.1) (15.8) Dividends paid (11.1) (9.7) Free cash flow - pre one-off items 25.4 41.1 One-off items - exception
Slide 12: Summarised Balance Sheet
Summarised Balance Sheet Balance sheet remains healthy Year ended 31 March 2003 2002 £m £m Fixed assets Goodwill 14.1 - Tangible assets 137.9 129.0 Total fixed assets 152.0 129.0 Current assets - debtors 64.3 46.8 - cash 211.0 189.9 Creditors: due within one year (64.0) (62.7) Provisions (41.6) (21.
Slide 13: Financial summary
Financial summary 2003 • Resilience of business in difficult market conditions • Good growth in turnover and operating profit Outlook • IPO market remains weak • Strong SETS volumes but lower IEM bargains • Terminal numbers under pressure in tough market conditions
Slide 14: Clara Furse, Chief Executive Officer
Clara Furse Chief Executive Officer
Slide 15: Strategic Objectives
Strategic Objectives • To be the market of choice in the European time zone • To extend our services and broaden our product range • To build the scale and reach of our business • To promote the growth of capital markets
Slide 16: Market of Choice
Market of Choice Issuer Services • Turnover up 34% • 69% of Western Europe’s IPOs in a difficult year • £17.9 billion of new capital • 18 new international companies • First Russian share listing • c700 companies on AIM
Slide 17: Internationalising our business
Internationalising our business Issuer Services • Attracting more companies to our liquidity pool • Nordic Markets – Stockholm office • Developing new routes to market • Co-listing agreement with Hong Kong Stock Exchange
Slide 18: More and better services
More and better services Broker Services • Turnover up 8% • 58% growth in SETS trades • Tariff structure reviewed to reflect value added services • Reduction in off-book and international trades • Improved quality of trading services - RSP Gateway and CCP Netting
Slide 19: A broader product range
A broader product range Broker Services • Covered warrants launched October 2002 - Four issuers, c445 warrants listed • Introducing SETSmm this year - Support trading in FTSE 250 and some Irish securities • EDX London announced December 2002 - Entering the OTC equity derivatives market
Slide 20: More and better services
More and better services Information Services • Turnover up 8% • Decline in terminals offset by demand for other products • RNS turnover more than tripled; over 90 of FTSE 100 using RNS • FTSE JV contribution up 27%
Slide 21: A broader product range
A broader product range Information Services • Proquote acquired February 2003 - Over 1,000 screens • Corporate Data Warehouse services launch in June 2003 - Exploiting existing range of market data • Global SEDOL solution will launch beginning 2004 - Will increase efficiency of cross border trading
Slide 22: Outlook
Outlook • Important structural and regulatory change • Promotion of open competition in global capital markets • Pressing home the London advantage • Investing for growth
Slide 23: Appendix
London STOCK EXCHANGE
Slide 24: Pensions
Pensions • Mature defined benefit scheme - closed to new members July 1999 • Over 75% of assets held in bonds • Only c150 active members (c2,200 pensioners and deferred members) • New employees join defined contribution scheme Fund Deficit - FRS 17 • March 2003 valuation shows post-tax deficit of £1
Slide 25: Property Provision
Property Provision • Rapid deterioration of City property market over last 6 -12 months • Provision of £38m covers Paternoster Square (25 year lease from 2003) and Summit House (25 year lease from 1989) • Paternoster Square provision of £22m: - subletting c80,000 sq ft out of 220,000 sq ft (c40%) -
Slide 26: Half year revenue split
Half year revenue split 2002/03 2001/02 H1 H2 Full year H1 H2 Full year £m £m £m £m £m £m Issuer 19.2 16.8 36.0 13.8 13.1 26.9 Broker 43.7 43.6 87.3 39.9 41.3 81.2 Information 50.7 51.5 102.2 47.2 47.7 94.9 Other 5.9 5.9 11.8 5.9 6.7 12.6 Gross turnover 119.5 117.8 237.3 106.8 108.8 215.6 • H2 2002/
London Stock Exchange Group — FY2003 Earnings Presentation on 6ix