LSE sees quiet summer after hitting revenue goal
LONDON, July 18 – The London Stock Exchange expects the slow trading that has hurt revenue in its markets unit to persist in the short term, offset by the newly acquired FTSE index business that helped it to hit quarterly growth targets.
The British exchange posted a 15 per cent drop in capital markets income today but still hit forecasts with quarterly revenue of £209.5 million (RM1.03 billion), mainly due to the FTSE index unit acquired late last year.
“The group has made a good start to the new financial year, although market conditions have remained weak and the summer period is expected to be quiet,” chief executive Xavier Rolet said.
The LSE, and rivals such as NYSE Euronext and Deutsche Boerse, draw revenue from the trades executed on their markets.
But these firms have struggled to sustain trading revenue this year as investors have pulled back, daunted by the relentless euro zone crisis and weakness in the world economy.
Research published on Monday by Berenberg Bank suggested key trading metrics fell 6 per cent year-on-year in June and are down 8 per cent year-to-date.
Any further trading slowdown in the coming months will look more stark by comparison with a particularly busy period last year, said Richard Perrott, an analyst at Berenberg.
“Year-on-year comparisons for European exchanges are set to get tougher, with a sluggish summer outlook versus tough comparisons last year as euro zone concerns led to frenzied trading,” he said.
The LSE, like its rivals, has sought to reduce its reliance on share trading in recent years by investing in functions such as selling data and clearing services to rivals and clients.
The LSE will see the last quarter’s revenue growth as a victory for the diversification strategy laid out by Rolet when he took over as LSE chief three years ago.
“The exchange has done well to position itself away from commoditising cash equities and towards faster growing information and post-trade services,” said Perrott.
The British exchange said today that revenue rose 10 per cent to £209.5 million in the three months to end-June, in line with an analyst forecast of £210.3 million.
Revenue from the LSE’s information services business increased 68 per cent to £75.3 million, of which an estimated £35 million came from FTSE.
This wiped out falls in the LSE’s markets business, which was off 15 per cent at £67.5 million, and post-trade services, which fell 12 per cent to £22.8 million. – Reuters