LSE shares fall despite profit growth

By Daisy Ku

LONDON (Reuters) - The London Stock Exchange Group (LSE.L) on Thursday reported a 56 percent annual operating profit growth but its shares fell about 5 percent on fears that growth rate would slow amid intensifying competition.

LSE shares, which have fallen about 48 percent since the start of the year, dropped as much as 7.73 percent to 1004p in early trading, making it the worst performing exchange stock globally as alternative trading platforms Chi-X, Turquoise and Nasdaq OMX's (NDAQ.O) new pan-European market come into sight.

"We are likely to see the launch of Turquoise, BATS and Nasdaq OMX in Europe. Management maintains that, through their investment in technology, they are well positioned to defend themselves but detail is scant and investors are likely to be cynical," said Citi analyst Daniel Garrod.

The LSE said it has made an encouraging start to the new financial year despite testing market conditions.

It generated earnings before interest, tax, amortisation and exceptionals of 289 million pounds for the year to March 31, up from 185.6 million pounds a year earlier, on strong volume growth and the acquisition of Borsa Italiana.

The result, the first to incorporate Borsa Italiana, was above a consensus forecast of 274.5 million pounds.

Proforma adjusted operating profit increased 26.5 percent to 343 million pounds, assuming the Milan bourse takeover completed in April 2006.

At 1035p each, LSE shares trade at 14 times adjusted basic earnings per share (EPS) of 73.1 pence each, up 30 percent from a year earlier.