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London Stock Exchange revenue falls 9% in third quarter, sees testing times ahead

During the third quarter ended 31 December 2009, the London Stock Exchange Group (LSE: LSE) said market conditions were not easy, with its cash equities business the worst affected. The division was pressured as reduced activity and continued competition from alternative venues led to a 29% drop in revenue compared with the previous year.

"Market conditions are expected to remain testing in the current quarter.  We continue to focus on improving the shape of the business, with actions clearly underway to reduce underlying operational costs, and improve business efficiency and our competitive position”, LSE chief executive Xavier Rolet said, “The agreement to acquire Turquoise and the acquisition of MillenniumIT are good steps to enhancing our trading offering.”  

During the three month period, revenues fell considerably compared to previous year, with the exception of the group’s IT businesses. At £154.9 million, overall group revenue fell 9% against the comparative period in 2008, however the figure represents a quarter-on-quarter improvement of 4%. The company’s cash equities business was particularly weak with trading revenues down a combined 29% in UK and Italy. Also revenues from the company’s ‘post trade’ service declined 13% due to an anticipated reduction in margin interest from in the clearing businesses, compared with the unusually high levels of 2008.

Elsewhere, the LSE’s Information & Technology Services revenues increased 3% with its first contributions from MillenniumIT. The company said revenues from its other data service and IT businesses were solid overall.

There was a continued focus on cost reduction in the third quarter with a further £3 million in annual savings made through sub-lease agreements, for surplus office-space at the company’s Paternoster Square site. The additional savings add to those made following headcount reductions in the summer.

Since the start of the 2010 calendar year, UK cash equities maintained similar levels to Q3, whilst in Italy volumes were down a further 10%. The company said According to the LSE it continues to work on ways of leveraging its assets to develop growth opportunities across the group. Looking ahead to the remainder of the financial year, market conditions are expected to remain testing but it will continue to reduce underlying operational costs and improve business efficiency.

Disclosure: The author holds no positions in the company