By Nandini Sukumar
May 20 (Bloomberg) -- London Stock Exchange Group Plc, the operator of the London and Milan bourses, reported an annual loss after the exchange wrote down its purchase of Borsa Italiana SpA.
The net loss for the 12 months ended March 31 was 338 million pounds ($523 million) compared with a profit of 168.3 million pounds the year before, LSE said in a Regulatory News Service statement today. The U.K. bourse took an impairment charge of 484 million pounds related to the acquisition of the Milan exchange.
LSE, led by Clara Furse who’s leaving today, bought Borsa Italiana in 2007 after rejecting five takeover approaches from rivals including Euronext NV, Deutsche Boerse AG and Nasdaq Stock Market Inc. The company, along with other traditional exchanges, is confronting declining profits as it contends with tumbling equity markets and fights alternative trading systems such as Bats Trading Inc. and Chi-X Europe Ltd. The bourse, which is replacing Furse with Xavier Rolet, has lost about 30 percent of its market share for FTSE 100 Index stocks to new competitors.
“The goodwill impairment arising from the all share merger is a technical accounting adjustment reflecting the major deterioration in current economic conditions,” Chairman Chris Gibson-Smith said in the statement. “Although market conditions are expected to remain testing, the board believes the group is well placed for the future.”
Writedowns
Companies are being forced to write down the value of acquisitions after global equity markets slid last year. LSE, which paid 1.63 billion euros ($2.2 billion) for Borsa Italiana, joins NYSE Euronext, which took a $1.59 billion charge resulting from the 2007 acquisition of Euronext in February.
Sanford C. Bernstein & Co. analysts Dirk Hoffmann-Becking and Richard Perrot had estimated LSE’s impairment at as much as 380 million pounds before today’s earnings report.
Total sales climbed 23 percent to 671.4 million pounds, Europe’s oldest independent bourse said today. Revenue from the issuer-services division, which makes money from companies listing on its markets and then paying to stay listed, rose 10 percent to 90.4 million pounds.
Sales from the trading-services division, consisting of the cash equities, derivatives and fixed-income trading, advanced 4 percent to 275.3 million pounds.
Revenue from information services added 27 percent to 182.9 million pounds. Post-trade sales more than doubled to 104 million pounds.
To contact the reporters on this story: Nandini Sukumar in London at nsukumar@bloomberg.net
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