-Main Market new issues increased 39 per cent to 50 and there was a 68 per cent increase in the average size of each Main Market IPO
-Average daily SETS bargains up 57 per cent to 342,000, significantly outperforming the February 2006 SETS growth forecast
Total terminals up 14,000 since Q3 last year to a record 113,000 at end of December 2006, including an 8,000 rise in the number of professional terminalsReflecting this strong performance in Q3, financial results (excluding exceptional items) for the nine months ended 31 December 2006 show:
-Revenue up 20 per cent to £253.2 million
-Adjusted basic EPS up 53 per cent to 39.1 pence
Commenting on financial performance and prospects, Clara Furse, Chief Executive Officer, said:
“Very strong revenue and earnings growth has again highlighted the Exchange’s increasing operational and strategic value. Adjusted basic EPS was up 53 per cent for the nine months to 31 December. We are confident of an excellent outcome for the current financial year and continuing strong business fundamentals should ensure a strong performance for the next financial year ending 31 March 2008.
This excellent performance supports the Board’s rejection of Nasdaq’s offer which significantly undervalues the business and the Exchange’s unique strategic position. We believe that our strong growth prospects will continue to enhance the quality of our markets and the value of our international brand, delivering increasing value to our shareholders and our market.”
Financial Results
For the three months ended 31 December 2006, revenue was £89.9 million (2005: £80.9 million). Operating profit was £47.8 million (2005: £37.5 million) and basic EPS was 14.7 pence (2005: 11.1 pence). Before exceptional items, revenue grew 21 per cent to £89.9 million (£74.5 million) and operating profit increased 50 per cent to £48.6 million (2005: £32.4 million) while adjusted basic EPS showed growth of 53 per cent, rising to 15.0 pence (2005: 9.8 pence; forecast in shareholder circular dated 19 December: 14.5 pence).
For the nine months ended 31 December 2006, revenue was £253.2 million (2005: £217.0 million), an increase of 17 percent. Operating profit was £129.1 million (2005: £62.6 million) and basic EPS was 38.7 pence (2005: 20.7 pence per share). Before exceptional items, revenue rose 20 per cent to £253.2 million (2005: £210.6 million), operating profit climbed 56 per cent to £129.9 million (£83.2 million) and adjusted basic EPS increased 53 per cent to 39.1 pence (2005: 25.5 pence; forecast in shareholder circular dated 19 December: 38.6 pence).
For the 12 months ended 31 December 2006, adjusted basic EPS was up 60 per cent from 31.9 pence to 50.9 pence, higher than the forecast of 50.4 pence in last month’s shareholder circular, reflecting the sustained and very strong trading volumes and excellent new issue activity for the month of December. Basic EPS was 45.2 pence.
Issuer Services
Issuer Services produced a record performance in Q3 with revenue increasing 21 per cent to £18.8 million (2005: £15.5 million), reflecting the appeal of the London markets.
During the quarter there were a total of 183 new issues on the Exchange’s markets, up 9 per cent on the same period last year (2005: 168), including 50 on the Main Market (2005: 36). In the third quarter there was also a record number of international new issues, with 59 overseas companies joining the Exchange’s markets. Money raised in new and further issues increased 45 per cent to £17.6 billion (2005: £12.1 billion) and the average size of each Main Market IPO increased 68 per cent to £450 million.
The growth in the size of new and further issues for the first nine months of the financial year contributed to a 12 per cent rise in Issuer Services’ revenue to £47.5 million (2005: £42.3 million). During the period there were a total of 430 new issues (2005: 474), including 88 Main Market new issues (2005: 83). AIM performed strongly with 341 new issues (2005: 389), underlining its continuing appeal to both UK and overseas companies. As at 31 December 2006, the total number of companies on our markets increased to 3,256 (2005: 3,093), including 1,634 on AIM (2005: 1,399).
RNS, the Exchange’s financial communications service, contributed revenues of £2.4 million for the quarter (2005: £2.5 million). For the nine months of the financial year to date, revenue increased 10 per cent to £7.4 million, mainly reflecting an increase in the number of company announcements during the year.
Broker Services
Broker Services delivered another excellent result as revenue in Q3 increased 28 per cent to £39.5 million (2005: £30.9 million). While the total value traded during the period increased 29 per cent to £1.8 trillion (2005: £1.4 trillion), the average number of equity bargains per day increased 42 per cent to 487,000 (2005: 344,000).
With very strong trading volumes in October and November continuing through December, SETS, the Exchange’s electronic order book, remained the principal driver of Broker Services’ revenues. The average number of SETS bargains per day for the quarter grew strongly, reaching record levels at 342,000 (2005: 218,000), an increase of 57 per cent. Trading on SETSmm also increased significantly, with bargains per day rising 114 per cent to 79,000 (2005: 37,000), accounting for 23 percent of trading on SETS during the period.
Value traded on SETS increased 34 per cent to £392 billion (2005: £292 billion). For the quarter, the average value of a SETS bargain decreased 14 per cent to £18,000 (2005: £21,000), and the average yield per bargain reduced to £1.32 (2005: £1.54).
Overall, trading on SETS contributed 72 per cent of Broker Services’ revenue during the quarter.
In Q3, the average number of off-book bargains decreased to 42,000 per day (2005: 44,000) while the average number of international bargains rose to 103,000 per day (2005: 82,000).
For the nine months ended 31 December 2006, Broker Services’ strong performance was reflected in a 32 per cent increase in revenue to £115.6 million (2005: £87.8 million). During the period, the daily average number of equity bargains was 450,000 (2005: 326,000) and the daily average number of SETS bargains was 324,000 (2005: 206,000), a financial year to date increase of 57 per cent. The average value of a SETS bargain reduced over the same period last year at £19,000 (2005: £21,000) and the average yield per bargain reduced to £1.36 (2005: £1.51).
Information Services
Information Services performed well during the quarter. Revenue for Q3 rose 12 per cent to £27.3 million (2005: £24.4 million), with good growth in number of terminals as well as increased contributions from Proquote and SEDOL.
The overall number of terminals taking real time Exchange data increased to 113,000, up 14,000 since the same point last year (31 December 2005: 99,000), a new record high level. Included in this number were 94,000 terminals attributable to professional users, up 8,000 over the same time last year (31 December 2005: 86,000), and up 3,000 since the half year end. Proquote, the Exchange’s provider of financial market software and data, made good progress with 3,500 screens (31 December 2005: 3,000).
SEDOL, the Exchange’s service providing unique identification for a range of global tradable securities, continued to perform well with increasing demand for its services. The number of securities covered by SEDOL codes rose to 1.6 million (2005: 1 million).
Information Services’ revenue for the financial year to date, increased 13 per cent to £78.2 million (2005: £69.5 million), mainly attributable to the increase in number of terminals taking Exchange data and the success of other information products.
Current Trading and Prospects
The Exchange has built on the excellent performance seen in the first half of the year with strong trading in all main business divisions continuing into the second half. The Exchange’s position as a major international listing venue remains pre-eminent, trading volumes on SETS continue to significantly outperform targets set less than a year ago and demand for real time price and trading data remains strong, with a record number of terminals taking Exchange information.
The Exchange is confident of an excellent outcome for the current financial year and continuing strong business fundamentals should ensure a strong performance for the financial year ending 31 March 2008.
