London Stock Exchange plc today reports results for the six months ended 30 September 2002.

Highlights:

• Turnover up 12 per cent to £119.5 million
  
• Operating profit up 18 per cent to £40.5 million
  
• Adjusted earnings per share up 17 per cent to 10.5 pence per share
  
• Interim dividend up 18 per cent to 1.3 pence per share

Commenting on the six months ended 30 September 2002, Don Cruickshank, Chairman of the Exchange, said:

"The Exchange continues to build upon its proven business model. During the period, we produced robust financial results and are recommending an 18 per cent increase in the interim dividend to shareholders. Overall, the Directors expect a satisfactory outturn for the year given current market conditions.

“As one of the leading exchanges in the world, keen to compete effectively, we continue to push for open markets, particularly across Europe. We welcome the recent move by Euroclear and CrestCo to merge, creating Europe’s largest settlement organisation - a major step towards delivering a single, user-owned, user-governed, exchange-neutral system across Europe. But we are disappointed by progress on the Financial Services Action Plan. Indeed the Prospectus Directive denies us the opportunity to compete.”

Clara Furse, Chief Executive, said:

"The first half results show the resilience of our business and our revenue streams. Turnover rose 12 per cent, whilst adjusted earnings per share increased 17 per cent. In a period of record market volatility, we have demonstrated the strength of our competitive position and quality of our customer and product base.

"We continue to focus on expanding our business through initiatives such as covered warrants, the RSP Gateway and Crest Network. By developing our core services, we are securing future growth."

Further information is available from:

London Stock Exchange	John Wallace - Media	020 7797 1222
	Paul Froud - Investor Relations	020 7797 3322
	Ruth Anagnos - Investor Relations	020 7797 3322
Finsbury	James Murgatroyd	020 7251 3801
	Melanie Gerlis	020 7251 3801

Chairman’s statement

The London Stock Exchange has delivered robust financial results for the half year and continues to make progress against the backdrop of difficult market conditions.

We continue to upgrade our systems and introduce new markets, products and services to benefit our customers. We now account for three quarters of all Western European Initial Public Offerings (IPOs), while SETS continues to attract record volumes. The internationalisation of our markets goes on apace with collaboration with the Hong Kong Stock Exchange and a local presence in the Nordic region.

We continue to shape changes in market infrastructure. In particular, we encouraged and supported the recent move by Euroclear and CrestCo to merge, creating Europe’s largest settlement organisation.

Financial results

Unless otherwise stated, all figures referenced below are before exceptional items and refer to the six months ended 30 September 2002 and the corresponding period last year.

Financial performance in the first six months of the year has been robust, despite economic uncertainty and unsettled markets. Turnover increased to £119.5 million, up 12 per cent (2001: £106.8 million). Administrative expenses increased seven per cent to £73.4 million (2001: £68.4 million), reflecting additional IT support costs relating to the Exchange’s new high capacity communications network and the roll out of new products. This resulted in an 18 per cent increase in operating profit to £40.5 million (2001: £34.2 million).

During the period, a net exceptional gain of £2.3 million was recognised. Profit after tax including the net exceptional gain increased to £32.3 million (2001: £22.6 million).

Adjusted earnings per share increased 17 per cent to 10.5 pence per share (2001: 9.0 pence per share). Earnings per share increased to 11.1 pence per share from 7.7 pence per share.

For the six months, operating cash flows were £53.8 million, up 30 per cent (2001: £41.5 million). At 30 September 2002, cash balances were £237.1 million (2001: £173.0 million).

Issuer Services

Despite a weak IPO market, Issuer Services contributed 16 per cent of total turnover for the half year, increasing from £13.8 million to £19.2 million. This increase largely reflected selective tariff changes which took effect on 1 April 2002.

The number of companies on our markets at 30 September 2002 was 2,849 (2001: 2,919). The Exchange receives an annual fee from each company on its markets and for the half year, annual fees contributed 55 per cent of Issuer Services’ turnover (2001: 45 per cent).

The number of new listings on the Exchange’s markets decreased 25 per cent to 128 (2001: 170). Nevertheless, a total of £12 billion of new capital was raised on the Exchange’s markets during the half year and the Exchange accounted for over 75 per cent of the IPOs in Western Europe, demonstrating the continued relative attractiveness of the Exchange’s markets (2001: 58 per cent). In particular, AIM, our international market for growing companies, continued to attract new participants, including seven North American companies and PRI Group, the largest IPO in the seven year history of AIM. At 30 September 2002, 686 companies were traded on AIM, up 13 per cent over the same period last year (2001: 606).

During the half year, Issuer Services continued to make progress on extending the reach of the Exchange’s markets. In particular, the Exchange announced a listing facilitation collaboration with the Hong Kong Stock Exchange and established a local presence in the Nordic region. Based in Stockholm, the office opened on 1 October 2002 and aims to accelerate the growth of the Exchange’s Nordic business.

Broker Services

At £43.7 million, Broker Services’ turnover for the half year increased 10 per cent (2001: £39.9 million) and accounted for 37 per cent of total turnover. This increase in turnover reflected high levels of trading activity on our markets, particularly on our electronic order book SETS.

During the first half of the year, the total number of equity bargains rose 11 per cent to 26.4 million (2001: 23.8 million), a daily average of 210,000 bargains (2001: 191,000). The total value of these bargains decreased 14 per cent to £2.4 trillion (2001: £2.8 trillion). In the same period, the daily average number of bargains transacted on SETS increased 59 per cent to 97,000 (2001: 61,000) and the average value of a SETS bargain decreased 29 per cent to £29,000 (2001: £41,000).

During the half year, over 60 per cent of the value traded in SETS listed securities was traded on the SETS order book. SETS contributed approximately 55 per cent of Broker Services’ income for the half year (2001: 47 per cent).

The growth in SETS was off-set in part by a decline in the number of off book and international bargains reported to the Exchange. The daily average number of off book and international bargains was 54,000 (2001: 62,000) and 59,000 (2001: 68,000) respectively.

Broker Services continued to develop a number of initiatives including:

• Covered Warrants – successfully launched on 28 October 2002, the covered warrants market broadens the Exchange’s product range and widens the investment choice of private investors. There are currently 170 warrants traded on the Exchange’s markets through four issuers;

• RSP Gateway – first customers went live in July 2002. From 31 October 2002, brokers have access to prices in equities which account for over 76 per cent of retail trading by value, including all FTSE 100 securities, 120 FTSE 250 securities and covered warrants. During November, the service will be expanded to include trading in bonds; and

• Crest Network Service – successfully launched in July 2002, utilises Extranex, the Exchange’s new high capacity internet protocol network, to provide brokers secure access to both the Exchange’s trading system and the Crest settlement system using a single electronic link. The new service could reduce connection costs to Crest by up to 50 per cent.

Information Services

At £50.7 million (2001: £47.2 million), Information Services was the largest contributor to turnover for the half year, representing 42 per cent of total turnover.

During the first half of the year, the number of terminals fell from 105,000 to 100,000 (2001: 109,000). Of those, approximately 94,000 terminals were attributable to our professional customer base, down from 96,000 at the end of the last financial year (2001: 101,000). The decline in terminals was off-set by demand for the Exchange’s other information products. In particular, the Regulatory News Service (RNS) contributed £3.4 million to Information Services’ turnover following the start of commercial operations in April 2002 (2001: £1.0 million). RNS has secured a significant share of the highly competitive regulatory news distribution market, with over 90 companies in the FTSE 100 using RNS to release regulatory announcements.

In addition Information Services benefited from the income received from the Exchange’s joint venture, FTSE. For the six months, the Exchange’s share of FTSE turnover was £5.6 million, an increase of 33 per cent over the corresponding period last year (2001: £4.2 million).

During the period, the Exchange began development of the Corporate Data Warehouse, its new technology infrastructure aimed at exploiting strong market demand for Exchange originated data. The first phase of the new infrastructure, scheduled to be rolled out in the next financial year, will broaden the Exchange’s existing information products by offering customers enhanced value added real time and historical UK equities market data.

Exceptional Items

During the period, a net exceptional gain of £2.3 million was recognised. This reflects an exceptional VAT credit of £9.3 million off-set in part by a £7.0 million exceptional property charge.

Following successful negotiations with Customs and Excise, a retrospective change in the method for calculating VAT recoverable on expenditure has been agreed. This allowed for the recovery of VAT paid between 1997 and 2001 amounting to £9.3 million. This gain was off-set in part by a £7.0 million increase in provision for leasehold properties in respect of space to be sublet in our new headquarters at Paternoster Square, reflecting the widely reported decline in rental values in the commercial property market in recent months.

Interim Dividend

The Directors propose an interim dividend of 1.3 pence per share (2001: 1.1 pence per share) to those shareholders on the register on 6 December 2002, for payment on 6 January 2003.

Board of Directors

In October, I announced that I would not seek to extend my term as Chairman beyond the next Annual General Meeting in 2003. Ian Salter, Deputy Chairman and Chairman of the Board’s Nominations Committee, will lead the process of finding my successor.

Current trading and prospects

Since 30 September 2002, the Exchange’s trading performance has been good despite uncertain market conditions. In particular:

• Issuer Services’ turnover continues to be impacted by the weak IPO market with a 22 per cent decrease in the number of new and further issues on the Main Market compared to the previous October. The Exchange is however well positioned to benefit from any upturn;

• SETS trading volumes have remained strong, although current market volatility makes it difficult to forecast future trading activity; and

• although demand for other information products has been generally stable, there are no indications to suggest the recent rate of decline in terminal numbers has slowed.

Overall, the Directors expect a satisfactory outturn for the year given current market conditions.

Don Cruickshank
Chairman
7 November 2002

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