UPDATE 2-LSE shares surge on results, boosted by acquisition and IPO upturn

Thu Jul 18, 2013 10:40am EDT

* First quarter revenue up 39 pct to 249.7 million STG

* Revenue rises 8 pct on adjusted basis

* Shares up more than 7 pct, top gainer on FTSE 100

By Clare Hutchison

LONDON, July 18 (Reuters) - The London Stock Exchange comfortably beat expectations for its first quarter revenues on Thursday, following the acquisition of a clearing house and a stock market listings revival, sending its shares up more than 7 percent.

First quarter revenues leapt 39 percent to 249.7 million pounds ($378.87 million) in the three months to June 30, up from 179 million pounds a year ago.

Group revenues adjusted to strip out currency fluctuations and the impact of its acquisition of a majority stake in London-based LCH.Clearnet in May were up 8 percent.

The group said that LCH.Clearnet Chief Executive Ian Axe was to leave, but would remain in place for the time being to ensure a smooth handover of responsibilities.

The revenue figure topped a consensus estimate by 10 analysts for revenue of 233.4 million.

The LCH.Clearnet purchase was part of an LSE strategy to diversify its earnings into areas with strong growth potential to offset falling trading volumes in an uncertain economic climate and increased regulation, which have squeezed profits.

Shares surged on the results, rising by 7.8 percent to 1595.5 pence at 1437 GMT, making the group the top gainer on the FTSE 100. Shares have risen by 40 percent this year.

Analysts said the integration of LCH.Clearnet, where first quarter revenue rose by 17 percent according to historical figures provided by the LSE, should provide future growth.

Clearing houses have become increasingly important after global regulators phased in new rules to move more derivatives trading to clearing houses to protect investors should their trade counterparty go bust, and increase transparency.

An 18 percent jump in first quarter revenues at its FTSE International business, which has given the LSE a greater foothold in the derivatives market, was also seen as positive.

"Overall we like its more diversified earning streams," said Phil Dobbin of Espirito Santo. "Those areas where they have given themselves potential to grow in the future are performing well."

PARTNERSHIPS

Revenue at its more traditional capital markets division, which earns fees from companies listing and raising capital on its markets, increased 9 percent on an adjusted basis.

Chief Executive Xavier Rolet said this was due to a rise in both the number of firms listing on its markets and the amount of money firms raised.

Improving sentiment and rising share prices have helped spur a revival in new listings in London, with the amount raised from debuts on London's main stock market in the first half of 2013 more than four times the same period in 2012.

"We remain focused on delivering benefits from recent transactions, developing opportunities and expanding our global footprint," Rolet said in a statement.

The LSE said in May it was seeking partnerships with fast-growing exchanges and has been in talks about acquiring a stake in Istanbul's stock exchange in return for technology support.

In January it agreed a technology partnership with the Lima exchange and is helping to develop the stock exchange and capital markets infrastructure in resource-rich Mongolia.

The Group said its debt increased after buying LCH.Clearnet but remained at a comfortable level. The company has 823 million pounds in outstanding debt, according to Thomson Reuters data.

It said it was at an advanced stage of discussions with its banks to secure a new package of revolving credit facilities similar to its existing loans.

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