LSE profits down, but progressing Clearnet takeover

The London Stock Exchange has produced a mediocre set of interims although it is making progress on its deal to buy clearing house LCH.Clearnet, with approval received from the French lead regulator.

Pre-tax profits were down by almost 8% at £165.4m (H1 2012: £179.7m) although total income was up 10% at £423.7m (H1 2012:£386.5m), with revenues for the first half ended September 30th increasing 7% to £349.8m (H1 2012: £328.1m).

The main reason for the drop in profitability appears to be an increase in expenses, which rose from £174.5m a year earlier to £206.5m, driven by higher costs for sales, employees and miscellaneous items.

Amortisation of purchased intangible assets also rose from £20m a year earlier, to £44.6m. Although as a non-cash item it won't affect cashflow.

Concerning the deal to acquire up to 60% of LCH.Clearnet, the LSE has made progress in navigating the regulatory and anti-trust red tape, with approval received from the French lead regulator, ACP.

In addition to the ACP, clearances have also been received from the Spanish competition authority, CNC. The competition authorities in the UK and Portugal are continuing to review the proposed transaction with decisions from the UK Office of Fair Trading and Portuguese competition authority expected before the end of 2012.

The LSE also said that it continues to discuss how to deal with the possible need to provide increased capital for LCH.Clearnet.

CM