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

  1. Slide 1: London Stock Exchange Preliminary results 15 May 2003

    London Stock Exchange Preliminary results 15 May 2003

  2. Slide 2: Agenda

    Agenda Introduction Don Cruickshank Chairman Financial Review Jonathan Howell Director of Finance CEO Overview Clara Furse Chief Executive Officer Q&A

  3. 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

  4. Slide 4: Jonathan Howell, Director of Finance

    Jonathan Howell Director of Finance

  5. 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

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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.

  13. 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

  14. Slide 14: Clara Furse, Chief Executive Officer

    Clara Furse Chief Executive Officer

  15. 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

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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%

  21. 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

  22. 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

  23. Slide 23: Appendix

    London STOCK EXCHANGE

  24. 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

  25. 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%) -

  26. 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/

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