THE London Stock Exchange admitted it faced "very challenging times" in 2009, as news it was freezing its £500 million share buyback programme overshadowed strong trading results yesterday.
More than 10 per cent was wiped off the London exchange's share price as chief executive Clara Furse said it was "sensible" to conserve cash in such difficult times.
Furse, who was unveiling a 30 per cent increase in the LSE's pre-tax profits to £
127m in the six months to end-September, said the buyback programme had been unveiled in "very different" trading conditions than existed now.
She also played down the 70 per cent fall in the group's share price in the past year. Furse said: "Our share price has to be seen in terms of what is happening in the market environment."
Shares in the New York Stock Exchange were down nearly 5 per cent in morning trade in the US yesterday, while shares in Nasdaq were off 4.7 per cent.
"What looked like just a financial recession six months ago has changed into something that is likely to be an economic recession. There is some logic to the market coming down," Furse said.
The LSE froze the return to shareholders, which increases the earnings of the fewer shares left circulating, after buying back £52m of shares in its latest trading half and £45m in its previous full financial year – less than a fifth of the projected £500m total.
However, the exchange's chief financial officer, Doug Webb, said the group would "continue to use market share buybacks to maintain an appropriate financial structure for the prevailing market conditions and expected investment opportunities" when they were in shareholders' interests.
Investors in the LSE did benefit yesterday from a 5 per cent rise in the dividend to 8.4p.The shares closed down 60p at 519.5p.
MF Global analyst Mamoun Tazi said: "The LSE will be facing a decline in earnings per share and we expect that (full-year] consensus estimates are too high."
In the latest trading period the exchange made underlying operating profit before amortisation and exceptionals of £179.9m – up 5 per cent assuming for pro-forma purposes that its merger with Borsa Italiana had gone through in April 2007. The LSE generated revenues of £345.5m, up 5 per cent, also assuming the Italian exchange had been acquired in April 2007.
Trading revenue, however, inched down 1.25 per cent on lower traded volumes, a worry for the LSE as it faces increased competition after the introduction of new European Union financial rules, known as Mifid.
Rival share-trading platforms such as Chi-X, Turquoise, Nasdaq OMX and Bats now account for over 25 per cent of trading in FTSE 100 stocks, and the LSE cut tariffs by about 10 per cent in September.
Trading on the LSE's electronic trading platform Sets continued to grow, with volumes up 33 per cent. However, the value of trades declined 2 per cent.
Flotations on the LSE in the period slumped 56 per cent to 114 against the troubled equities backcloth.
The full article contains 520 words and appears in The Scotsman newspaper.
