London Stock Exchange Group

London Stock Exchange GroupPreliminary Results 25 May 2006

2

Agenda

Introduction Chris Gibson-Smith Chairman

Financial Review Jonathan HowellDirector of Finance

CEO Overview Clara Furse Chief Executive Officer

Q&A

3

Introduction

Strong progress in primary and secondary markets delivered an excellent financial performance:

Revenue1 up 19%

Adjusted EPS up 55%

Confidence in future growth prospects has enabled:

Return of more than 20% of market capitalisation in under two years

Commitment of up to £50m per annum share buyback

71% increase in full year dividend

Indications of interest from other parties not reflected growth prospects and unique strategic position

Confident that Exchange’s growth prospects built on firm foundations – will continue to explore options for additional shareholder value

1 Before exceptional items

Jonathan Howell Director of Finance

5

Strong trading performanceHighlights

Revenue1 - up 19% to £291m

Operating profit1 - up 42% to £120m

Adjusted earnings per share1 - up 55% to 37.4 pence

Full year dividend - up 71% to 12 pence per share


6

Overview of results


2006 2005 Change £m £m %

Revenue1 291.1 244.4 19

Issuer Services 56.9 43.3 31

Broker Services 125.5 100.6 25

Information Services 94.1 86.7 9

Derivatives Services 7.7 6.8 13

Other 6.9 7.0 (1)

Operating costs1(171.0) (159.8) 7

Operating profit1120.1 84.6 42

Operating margin1 41% 35%

Year ended 31 March

7

Overview of results (continued)


2 Including share of joint venture income

2006 2005 Change £m £m %

Operating profit 1 120.1 84.6 42

Net exceptional items (34.7) (0.1)

Net Finance and Investment Income2 8.1 7.7

Profit before tax 93.5 92.2 1

Tax (26.7) (27.7) (4)

Profit after tax 66.8 64.5 4

Basic earnings per share 27.8 24.2 15

Adjusted earnings per share1 37.4 24.2 55

Dividend per share 12.0 7.0 71

Year ended31 March

p p

p

p p

p

8

Strong revenue growthRevenue1 up £47m (19%) to £291m

200.0

210.0

220.0

230.0

240.0

250.0

260.0

270.0

280.0

290.0

300.0

2005 IssuerServices

BrokerServices

InformationServices

Other 2006

£m


244.4

13.6

24.97.4 0.8

291.1

Growth by division

2005 H1 H2 2006

£m

£m17.8

28.9

244.4

291.1

H1 vs. H2

H1118.3

H2126.1

H2155.0

H1136.1

£m

9

£17.4m £20.3m

£17.8m

£25.9m

£8.1m

£10.7m£43.3m

£56.9m

2005 2006

Annual Fees Admission Fees RNS/Other

Issuer ServicesBuoyant new issue activity

Up 31%

1 Including 5 issues on PSM

Key metrics

New issues up 108 to 6221 (2005: 514)of which:

– Main Market – 107 (2005: 82)

– AIM – 510 (2005: 432)

Total equity raised up 81% to £34.1bn(2005: £18.8bn)

Annual Fees represented 36% of IssuerServices revenue (2005: 40%)

3,141 companies (2005: 2,916)

including 1,473 on AIM (2005: 1,127)

RNS and Other revenue £10.7m (2005: £8.1m)

10

Broker ServicesRecord SETS volumes drive excellent growth

£34.3m£33.8m

£66.0m£86.5m

£34.6m

£39.0m£100.6m

£125.5m

2005 2006

Order Book Other

Up 25%

Key metrics

Average daily equity bargains up 29% to 349,000

– Order book bargains up 31% to223,000 per day

– Off book bargains down 2% to47,000 per day

– International bargains up 52% to79,000 per day

Total order book value traded up 35% to £1.2 trillion

Average SETS bargain size at £21,000and average SETS yield at c£1.50both unchanged

SETS contributed 69% of Broker Services

revenue (excluding order charges)

11

Information ServicesSteady improvement in terminal numbers


2 Includes Proquote

£60.2m £64.0m

£26.5m£30.1m

£86.7m£94.1m

2005 2006

Data charges Other

£15.3m

Up 9%1

2

Key metrics

Total terminals 104,000 (2005: 95,000)

Professional investor terminals 88,000 (2005: 83,000)

SEDOL revenue c£8m (2005: c£6m)

12

£43.8m £45.4m

£47.9m£57.2m

£39.4m£41.9m

£28.7m£26.5m

£159.8m£171.0m

2005 2006

Property/marketing/other Staff IT/Network Depn

Operating costsCosts held flat in H2

Cost/income ratio reduced to 59%Staff costs up mainly due toperformance-related pay

Year end headcount of 501(2005: 519)

IT costs up due to network upgradesand delivery of TRM

Depreciation lower, property/marketingup slightly

Cost efficiencies programme

– £7m in FY 2007

– Full run rate of £10m in FY 2008

13


2 Before interest and dividends received, share scheme and other funding items

31 March 2006 2005£m £m

Cash generated from ongoing operating activities1145.9 100.9

Taxation (29.0) (24.3)

Capital expenditure (25.8) (40.8)

Ordinary dividends paid (22.8) (15.1)

Free cash flow before one-off items 68.3 20.7

One-off items - Tower proceeds 33.2 32.3 - Other (11.5) (5.5) - Special Dividend - (162.5)

Free cash flow290.0 (115.0)

Year ended

Summarised Cash FlowStrong cash generation

14

Summarised Balance Sheet pre-capital returnFinancial flexibility

31 March 31 March

2006 2005£m £m

Non-current assets 137.6 154.1

Current assets - debtors 49.3 81.9 - cash 226.8 124.4

Current liabilities (78.7) (76.8)

Non-current liabilities (46.2) (47.3)

Net assets 288.8 236.3

15

£510m commitment in February 2006 - return complete 26 May 2006

Exchange at forefront of good capital management

Returned £673m, or more than 20% of market capitalisation in under two years (including £163m in 2004)

Ongoing share buyback programme of up to £50m per annum

Recognises strong cash generation and continues process of:

Managing cash position Improving balance sheet efficiency Enhancing shareholder value

Capital Return£510m return to shareholders

16

Current trading Trading conditions remain positive in core businesses

Total equity raised ahead of last year

Average daily value traded on SETS remain strong - up 78%

Demand for real time data by professional users remains healthy

Clara Furse

Chief Executive Officer

18

● Operational gearing is driving record performance

● Globalising our business

● Unique strategic position and rapidly increasing value

● Step change in our growth prospects

Creating increasing value for shareholders and customers

19

10

28

104

LSE US Markets ENXT DBAG11

The World’s capital market

409

64 62

1657

LSE Scandi ENXT DBAG Other

Listing venue of choice for Western Europe (FY 2006)

1 Source: PwC IPO Watch

• Venue of choice – London has unique attributes

• 622 new issues (including 409 IPOs) from 32 countries

1

Leading share of international IPOs (FY 2006)

20

1,473

1,127

792705641

550

385311310269

136

1996 1998 2000 2002 2004 2006

185

247

134

6850

4233221922

1996 1998 2000 2002 2004 2006

Total AIM companies at 31 March International AIM companies at 31 March

Another record year for AIMAn international growth story

21

● Real-time market data received in over 100 countries

● SEDOL – 1,100 licences – improving market efficiency on global scale

● Proquote goes international

Terminal Numbers ('000)

909090

95

98

104

Sep-03 M ar-04 Sep-04 M ar-05 Sep-05 M ar-06

Market data – key element of international story

22

Winning the battle for liquidityOrder book volume growth vs Index performance

Source : FESE Order Book trades

European exchanges FY 2004 to FY 2006

9% 9%

28%

146%

99%

65%

0%

20%

40%

60%

80%

100%

120%

140%

160%

DBAG ENXT LSE

CAGR - Order Book trades Index change 31/3/03 to 31/3/06 (DAX / CAC40 / FTSE100)

23

● SETS value traded up 58%

● SETS bargains up 38%

● Total revenue up 27%

● Operating profit up 73%

London Stock Exchange was the fastest growing listed exchange in calendar Q1 2006

FY 2006 – Q4 performance

24

• September 2005: Infolect launch

• October 2005: SETS capacity upgrade

• Investment banks significantly increase IT spend in equity trading

Next Generation Technology goes live

25

• New trading platform – to execute at under 10ms

• Speed of information dissemination – down to 2ms since September 2005

• Infolect’s latency improves trade to order ratio

Milliseconds matter

26

• Completing TRM in first half of 2007 with new trading platform go-live

InfolectRelease 2

SurveillanceRelease 3

New Trading PlatformRelease 4

DownstreamRelease 1

20072004 2005 20062003

Trading Capacity UpgradeRelease 4a

Technology Roadmap (TRM)

Today

Code CompleteDesign Complete Internal Testing Complete Migration Complete

New technology improves market efficiency

• 100% availability delivered for 6th consecutive year

27

0

1

2

3

4

5

6

7

Q1 Q2 Q3 Q4

Va

lue

tra

de

d p

er d

ay

(£

bn

)

0%

10%

20%

30%

40%

50%

60%

Gro

wth

Value traded per day Growth

Growth in SETS value traded (FY 2006)

Secular change in trading:Acceleration of growth on SETS

28

327

170

223

340

255

100

150

200

250

300

350

400

FY 2005 FY 2006 FY 2007 FY 2008

AverageSETS bargains per day

('000)

FY 2007 actuals to date

Forecast

Forecast

SETS growth vs February forecastWell ahead of FY 2008 target

29

Buy-side algorithmic trading grows

Source: Greenwich Associates, Lehman Brothers Research

Share trading volume - US and European buy-side 2005

8%

3%

0%

2%

4%

6%

8%

10%

12%

14%

Self-directed using algorithms

US institutions European institutions

30

FTSE 100 order entry rates for top 6 firms 2000-present

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Jan-

00

May

-00

Sep

-00

Jan-

01

May

-01

Sep

-01

Jan-

02

May

-02

Sep

-02

Jan-

03

May

-03

Sep

-03

Jan-

04

May

-04

Sep

-04

Jan-

05

May

-05

Sep

-05

Jan-

06

Ord

ers/

day

Capacity upgrade Capacity upgrade Infolect and capacity upgrade

Order entry rates improve post Infolect

31

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2001 2002 2003 2004 2005 2006

-

100,000

200,000

300,000

400,000

500,000

600,000

On exchange UK equity & index derivatives SETS

Strong positive correlation between cash and derivatives growth

SETS and equity derivatives trading

Source:LIFFE; WFE

On

ex

ch

an

ge

UK

eq

uit

y d

eri

va

tiv

es

(n

oti

on

al

va

lue

pe

r q

ua

rte

r, €

bn

)S

ET

S v

alu

e tra

de

d p

er q

ua

rter (€

bn

)

32

Volume growth outpaces growth at Eurex and Liffe

Growth in SETS value / volume vs Growth in derivatives contracts traded

45%

26%24%

58%

20%23%

20%17%

5%

27%

7%

14%

0%

10%

20%

30%

40%

50%

60%

70%

2006 Q120052004

Gro

wth

Liffe-contracts Eurex-contracts SETS value SETS trades

Source:Exchange websites, Factsheets

33

53%72%

95%115%

137%

311%337%

529%

Nordic Spain France UK Italy US Netherlands Germany

UK equity derivatives market remains underdeveloped

Ratio of on-exchange equity derivatives notional value traded to cash equities market capitalisation (2005)

Source:Eurex; Euronext; BIS; OCC; FESE; OMX; WFE; LSE analysis

34

Secular, not cyclical:Relative underperformance of UK market

Source:Datastream

58%

104%

140% 142%

0%

20%

40%

60%

80%

100%

120%

140%

160%

FTSE100 DOW DAX CAC40

10 year index growth to 30 April 2006

35

12.3%

4.6%

8.6%

(7.6%)

(2.3%)

6.2%

10.4% 10.7%

6.1%

3.7%

(10.0%)

(5.0%)

0.0%

5.0%

10.0%

15.0%

Trading volume growth Index growth

LSE1 Nasdaq2ENXT1 DBAG1 NYSE2

Secular, not cyclical:Our relative growth stands out

1 Order book volumes2 Total equity volumes

Volume vs index growth (January to March 2006)

36

Velocity - Order Book trading

30%

67%

53%

85%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2000 FY 2006

An

nu

al

tra

din

g v

Ye

ar

av

era

ge

Ma

rke

t C

ap

ita

lis

ati

on

LSE Average Europe

Source : FESE

Secular, not cyclical:Velocity gap continues to close

37

Increasingly valuable global business

● Combination of unique features:

– The defining exchange brand– Business philosophy and market structure– Next generation technology– London's deep pools of international capital– Intelligent principles-based regulation

The World’s Capital Market

Appendix

40

Segmental Information

1 Includes investment in joint venture

2 After exceptional items

3 After exceptional items, including profit on disposal of Stock Exchange Tower

2006 2005 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m £m £m

Issuer services 56.9 43.3 (33.0) (29.7) 23.9 13.6 19.0 21.5

Broker services 125.5 100.6 (56.0) (50.2) 69.5 50.4 75.2 57.8

Information services - ongoing 94.1 86.7 (55.0) (54.2) 45.5 32.5 61.1 1 73.2 1

- exceptional 6.4 -

Derivatives services - ongoing 7.7 6.8 (11.3) (11.5) (26.8) (4.7) 1.3 21.3 - exceptional (23.2) -

Other 6.9 7.0 (6.7) (5.9) 0.2 1.1 4.5 6.3

Corporate - ongoing - - (9.0) (8.3) (26.9) (8.4) 252.6 180.3 - exceptional (17.9) (6.8)

Group 297.5 244.4 (212.1) (166.6) 85.4 2 84.5 3 413.7 360.4

Assets

Year ended 31 March

Revenue Expenses Operating profit

41

Pro forma consolidated balance sheet

31 March 2006 Pre-return Movement Post-return £m £m £m Non-current assets 138 138 Current assets Trade & other receivables 49 49 Cash and cash equivalents 227 (160) 67 276 (160) 116 Total liabilities (125) (350) (475) Net assets 289 (510) (221) Ordinary share capital 15 15 Share premium 4 4 Reserves 268 (510) (242) Minority interest 2 2 Total shareholders’ funds 289 (510) (221)

Capital Return – balance sheet impact

● c£510m return funded by c£160m cash and c£350m debt

● c£70m cash retained to meet FSA requirements

● c£220m negative net assets on a consolidated basis

● However, company reserves for LSEG plc and LSE plc remain strong at c£2.2bn and c£270m respectively

Consolidated balance sheet

London Stock Exchange Group

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