Stock Exchange profits slashed

By TOM MCGHIE
Updated:

 

THE LONDON Stock Exchange will disclose next month that its profits last year were virtually halved.

The bill for its failed attempt to merge with the Frankfurt-based Deutsche Borse, plus the cost of repelling a bid from Sweden's OM Group, came to about £14m. It was also forced to set aside about £26m to repay a loan.

The costs mean that when the Exchange's accounts are published for the year to the end of last month, they are likely to show that pre-tax profits tumbled from almost £49m to about £26m.

The attempt by LSE chairman Don Cruickshank to merge with Deutsche Borse - a move that opened the way for the assault by OM - drew widespread criticism when it was first mooted a year ago.

The £40m one-off costs have had a devastating effect on the Exchange's profits. But the underlying business appears to have had a bumper year.

According to a report by an adviser close to the Exchange, operating profits before exceptional costs are expected to come in at about £60m - a healthy increase on the £42m made in the 12 months to March 2000.

Business has been good, with trading levels for the second half matching the first half's spectacular performance, when operating profits rose by nearly 90% to £29m. And Clara Furse, brought in as the new chief executive by Cruickshank in February, can look forward to an even more prosperous first year at the helm.

According to the report, the Exchange will make a £64m pre-tax profit next year and will have £180m on its balance sheet.

In the coming year, profits will be affected by the Exchange having to resume payments into a pension scheme. The Exchange will spend an extra £2m to ensure that the pension fund has enough cash to meet its liabilities.

It also faces the possibility of a £6.2m compensation payment to the Deutsche Borse for the collapse of the merger, which was fully backed by the Exchange board. The Exchange is fighting the claim. There is likely to be a further bill for redeeming high-yielding debt.

It is likely next month that Furse will announce that the Exchange is ready to call an extraordinary general meeting to allow a vote on the abolition of a rule which limits individual shareholdings to 4.9%.

The vote is expected go in the Exchange's favour now that Apcims (Association of Private Client Investment Managers and Stockbrokers) has dropped its opposition to lifting the limit. Furse has gone out of her way to improve relationships with Apcims.

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