LSE reported a 52% rise in annual operating profits today,
primarily related to trading which, thanks to bulk discounting to market makers,
has doubled in the past year. Combine this with their acquisition of the Milan
Borsa Italiana and LSE’s Earnings Before Interest and Tax (EBIT) reached £265.2m
($520 million) for the year to March 31st, up from £174.2 million ($340 million)
a year ago.
These results might be even better if the LSE had their own integrated clearer
rather than using LCH.Clearnet, as margins should improve. This is one thing
they may change this year, through the acquisition of Borsa Italiana which gives
them a clearing operation as part of the deal.
Meanwhile, LSE’s shares are trading on a price/earnings ratio of 17.9, which
is slightly behind Deutsche Bourse at 19 and way behind the Chicago Mercantile
Exchange (CME) at 33.4.
However, the good times are going bad and, if I were them, I would be worried.