The year 2014 has been good for the oldest independent exchange in Europe. The share price hit an all-time high, the company reported a 50% jump in annual profits in May, and in June the firm announced the acquisition of Russell Investments.
The first-quarter figures showed a ‘strong financial performance’. Operating profit increased by 36% and revenue was 20% higher than the same period in the previous year. An increase in market volatility and IPO’s boosted income, which puts the company on track for a good first-half.
The explosion in equity markets this year saw a raft of companies floating on the stock market and up until August, £7.4 billion was raised on the LSE. The bourse is on track to exceed 2011’s record of £8.7 billion. LSE’s little brother, the AIM, saw 55 new companies list, and the average capital raised was £32 million per floatation which was the highest in its 19-year history.
The LSE has expanded its business into the US through the acquisition of Russell Investments during the summer. The firm paid $2.7 billion for the Seattle-based asset manager and indices provider. LSE had its sights on the US as it is the largest market for exchange traded funds in the world. Since the takeover, LSE in the now the second largest provider of ETFs in the US, and the third largest in the world.
The large drop in the share price of the LSE in September relates to a rights issue, which gave existing shareholders the right to purchase three additional shares for every 11 held at a discounted price of £12.95. The popularity of the rights issues conveys the confidence investors have in the company.
Equity analysts are moderately bullish on the stock. Out of the 15 recommendations, six are buys, seven are holds and two are sells. The average target price is £20.23 which is a touch lower than the current price, which suggests analysts are reluctant to change their target price ahead of the results.
LSE will report its full-year figures in May of next year, and traders are expecting revenue of £1.24 billion and adjusted net income of £312 million. The forecasts represent a 14% increase in revenue and an 8% rise in adjusted net income. The share price has struggled to hold above £20 for a prolonged period and is acting as support for now. The immediate target is £21 and beyond that £22. To the downside, a drop below £20 puts the 200-day moving average of £19.42 in sight, and support is likely to come in at £19.