London Stock Exchange grows despite noise from "industry-defining combination" with Deutsche Boerse

 
Oliver Gill
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LSE chief executive Xavier Rolet hailed the firm's annual results (Source: Getty)

The London Stock Exchange (LSE) this morning labelled its merger with Deutsche Boerse an "industry-defining combination" and is hopeful of agreeing a deal, despite staring down the barrel of a collapse.

The firm's share price fell nearly one per cent in trading this morning after making the statement as part of its annual results announcement: profits were up and shareholders received a 20 per cent hike in dividends.

The figures

Total income was up 17 per cent from £1.4bn to £1.7bn with gross profit rising seven per cent to £1.5bn.

Adjusted operating profit rose 10 per cent to £686m but after amortising non-recurring and intangible assets, headline operating profit increase by six per cent to £427m – but this was a fall of one per cent in constant currency terms.

Read more: The inside story of how the LSE's mega-merger was suddenly derailed

Basic earnings per share fell by 15 per cent to 63.8p but when adjusted for the aforementioned non-recurring items, this was actually up 21 per cent at 124.7p.

Dividends rose 20 per cent, with shareholders to receive 43.2p per share.

Why it's interesting

The LSE appears to have muddled along quite nicely over the year, despite all the noise about its mammoth £21bn merger with Deutsche Boerse.

Looking the numbers, boss Xavier Rolet was quite right in hailing the fact that "each of our business areas delivered year-on-year growth, highlighting the strength in the diversity of our business".

Read more: "We are not in a bazaar": German minister rules out exchange HQ compromise

But the LSE's Russell Investment Management division, classified as a "discountinued operation" did fall from generating £953m last year to just £389m in 2016 – it sold this business to TA associates in 2015 for $1.2bn.

The biggest percentage growth was from "Net treasury income through CCP [central counterparty] businesses", jumping 46 per cent to £125m of sales.

What the company said

Its statement on the merger with Deutsche Boerse...

The group has worked hard on our proposed merger with Deutsche Boerse, which received formal approval from both sets of shareholders.

This would be an industry-defining combination, expanding our presence as a global markets infrastructure group, anchored in Europe and we firmly believe that it would deliver significant customer and shareholder benefits through the acceleration of our complementary growth strategies, products, services and geographic footprint.

The next milestone is expected to be the outcome of European Commission Phase II process on or before 3 April 2017.

... and on the annual results:

Chief executive Xavier Rolet concentrated on the annual performance of the LSE rather than commenting on the seemingly doomed merger with Deutsche Boerse. He said:

The group continues to execute against its strategic objectives, driving both short and longer term growth through organic investment and selective inorganic opportunities.

This has resulted in another year of strong financial performance, with continued revenue growth, control of underlying expenses and a 21 per cent increase in adjusted earnings per share.

"FTSE Russell produced another good top line performance and the integration savings are now mostly achieved, ahead of schedule.

"We remain well positioned across all our businesses, underpinned by our Open Access approach and strong customer partnerships."

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