LSE’s new boss stays upbeat despite punctured profits

High hopes: Xavier Rolet is optimistic about prospects for a strong recovery in flotations on the exchange

11 April 2012

The London Stock Exchange's (LSE) profits took a battering in the last six months as it fought against new, cut-price competitors jumping in with cheaper, rival electronic share-trading platforms.

But the exchange's new chief executive, rally-driving Xavier Rolet, sees light at the end of the tunnel and has high hopes for a strong recovery in companies floating on his stock market in the coming year.

Since the start of 2009 the LSE's market share of cash equities traded in London has fallen from 80% to just below 60%. In some big cap stocks its share is now below 50%.

But Rolet stated: "We can halt the decline in our market share. It will take time but we will do it and we have started to take actions which will have an effect."

He pinpointed three areas where the exchange must take on its competitors. The first is in technology where its recent purchase of MillenniumIT should allow it to launch a faster, cheaper electronic-trading platform next year. Secondly, Rolet wants to cut dealing charges again, having already cut them twice in the last three months. Finally, he wants a better deal with post -trade clearer Euroclear, allowing LSE users to be charged for net rather than gross trades.

Pre-tax profits fell by 37% to £79.4 million in the six months to the end of September on revenues 9% lower at £311 million. Profits were also hit by a one-off, £20.4 million charge for the purchase of MillenniumIT.

The interim dividend is being held at 8p a share, reflecting the continued uncertainty over underlying stock market conditions and continued fierce competition in share trading.

In October average equity trading values rose 8%, but in November levels have fallen back once again.

In the more immediate future, Rolet is pleased with the upturn in companies planning to float on the LSE.

He said: "We have seen quite a few listings in the last few months, both international companies coming from emerging markets to London and also firms using the equity market — particularly financial firms — to restructure their balance sheets. There is a very good pipeline of companies planning initial public offerings, including some very high-profile names."

Rolet would not give an update on how talks with Turquoise (one of the rival trading platforms set up by investment banks) were going, but said that he expected "things to move forward quite quickly."