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London Stock Exchange Annual Profit Exceeds Estimates

May 15 (Bloomberg) -- London Stock Exchange Group Plc, the operator of Europe’s oldest independent bourse, reported annual profit that beat estimates as revenue increased.

Net income for the 12 months ended March 31 fell to 217 million pounds ($330 million) from 522 million pounds a year earlier when the company booked a one-time gain related to its stake in FTSE International Ltd., the London-based company said in a Regulatory News Service statement today. Analysts had projected profit of 204.1 million pounds, according to seven estimates compiled by Bloomberg.

“We are optimistic about the year ahead and we will continue to focus on building best-in-class capabilities, extending our global footprint and to developing opportunities,” Xavier Rolet, LSE’s chief executive officer, said in the statement.

Rolet is trying to diversify LSE’s business away from traditional equities trading after losing share to new market entrants. The exchange earlier this month completed its purchase of a majority stake in LCH.Clearnet Group Ltd. LSE previously scrapped a bid for TMX Group Inc., the operator of the Toronto stock exchange, after failing to win support from the Canadian company’s stockholders.

“LSE’s diversification strategy is showing its benefits with a broad-based beat,” Peter Lenardos, an analyst at RBC Capital Markets in London, wrote in a report. “It continues to be a story of diversification, transformation and acquisition. We believe the company is being exceptionally run, especially given the challenging market backdrop.”

LSE Shares

Shares in LSE rallied 5.3 percent to 1,406 pence at the close of trading in London, the biggest jump since November. They have rallied 29 percent in 2013.

LSE earns net treasury income from taking margin or deposits from traders who use its Italian central counterparty. The exchange holds the deposits, pays interest to the depositors and receives an income by investing the funds for the short term in the Italian interbank market.

Net treasury income declined 8 percent to 116.7 million pounds in the period. Revenue advanced 6.9 percent to 726.4 million pounds. So-called adjusted total income rose 5 percent to 852.9 million pounds.

Information-services revenue climbed 40 percent to 306.3 million pounds, while sales from technology services rose 6.7 percent to 56.1 million pounds. Sales from capital markets, where LSE makes money from company listings and trading, fell 11 percent to 267.5 million pounds. Revenue from post-trade services dropped 9.6 percent to 91.8 million pounds.

Speaking on the CNBC television network, Rolet said he sees “excellent signs of recovery” in the initial public offerings market in Europe.

Second-half net income dropped 75 percent to 101 million pounds, according to Bloomberg calculations. The company last year booked a one-time gain from the stake it already owned in FTSE International.

To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net; Nandini Sukumar in London at nsukumar@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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