London Stock Exchange chief executive Xavier Rolet backs FCA review of listing rules that could pave way for Saudi Aramco IPO

The exchange announced its revenue was up 18 per cent (Source: Getty)

London Stock Exchange boss Xavier Rolet today defended the Financial Conduct Authority (FCA) review of listings rules that could pave the way for a Saudi Aramco mega-float.

The Institute of Directors this week joined the Investment Association and Royal London Asset Management in speaking out against the proposals, which would ease rules for state-owned companies like Aramco when they list in London.

Speaking after the stock exchange reported its half-year results today, Rolet backed the review, adding: “It should be a surprise to no one if listing rules are from time to time refreshed by the regulators to take into account the reality we live in.”

Read more: London Stock Exchange (LSE) and Deutsche Boerse timeline: How "merger of equals" stumbled over Brexit, shareholder votes and criminal investigations before European Commission veto

The figures

The LSE posted growth across all of its core business areas in the first half of 2017, showing it certainly didn't need Deutsche Boerse in order to thrive.

The exchange announced its revenue was up 18 per cent to £853m, as adjusted operating profit grew by 20 per cent to £398m.

It revealed it would boost the interim dividend by 20 per cent to 14.4p per share, and a £200m share buyback is still ongoing.

"The group has produced a strong financial performance, with good income growth across all of our core business areas," said chief executive Xavier Rolet.

"As well as continuing to deliver organic growth, during the period we announced the acquisition of The Yield Book and Citi Fixed Income Indices business."

The LSE also completed the acquisition of US data and analytics company Mergent.

Read more: London Stock Exchange Group buys Citigroup's Yield Book and fixed-income indices for $685m

​Why it's interesting

The FTSE Russell indexes and LCH over-the-counter clearing services saw particularly strong performance, with each business generating double-digit growth.

Underlying operating costs also increased by five per cent, but the LSE said it was "benefiting from ongoing cost savings and integration efficiencies".

Its adjusted net debt-to-earnings ratio showed 1.2-times leverage, which the exchange said was a "strong balance sheet position".

Perhaps in a bid to allay any Brexit fears, Rolet referenced the LSE's "open access" focus ahead of the implementation of the new Markets in Financial Instruments Directive (Mifid II).

Open access is one of the key elements of Mifid II, according to the LSE, including "the ability of investors to choose where to trade and clear their products, by preventing exchanges and clearing houses from operating a 'closed' silo model".

Read more: More than half of European traders fear increased regulation, while Brexit ranks as a minor concern

What the analysts said

"We maintain our 'outperform' rating based upon LSEG’s growth profile, balance sheet deployment, and cost base optionality," said Peter Lenardos at RBC Capital Markets.

"We remain confident in our forecasts, regardless of market conditions and regardless of the regulatory environment, mostly because it is our opinion that LSEG is exposed to structural growth drivers, such as mandatory central clearing and increased demand for benchmarks, analytics and data solutions."

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