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Press Release


Francis Berthomier – Chief Financial Officer
+44 (0) 20 7426 7130

Michael March – Director, Corporate Communications
+44 (0) 20 7426 7234

LCH.Clearnet Group results and announcements

London 29 April 2008 – LCH.Clearnet today announced its results for the year ended 31 December 2007

Financial highlights

1 Percentage changes are on an annualised basis compared to the year ended 31 December 2006.
2 Measured on a like-for-like basis.

Commenting on the Group’s performance, LCH.Clearnet’s Chief Executive Roger Liddell said:

“I opened my Review last year by saying that 2006 had been a challenging year for the Group. 2007 was certainly no different.  A period of enormous change in the industry, coupled with ever greater levels of clearing activity across all sectors, presented us with very considerable opportunities as well as a number of threats to our pre-eminence in European central counterparty clearing.  At the same time, the Group has delivered a very robust financial performance.

LCH.Clearnet achieved a new record in clearing activity, with 1.72 billion contracts cleared, an increase of 36% over the 1.27 billion contracts cleared in 2006.  These reflected a traded value of €616 trillion, 23% up on 2006.

Clearing revenue increased by 11.1% over 2006 to €404.3 million, despite an average reduction of 7% in clearing fees across all classes.  Growth was primarily due to the very high levels of activity in several of our business areas, but particularly in the equity, energy and freight markets during the year, and resulted in a higher proportional increase in transaction revenue than in overall volumes.  Treasury revenues grew very considerably, driven by not only high levels of cash and non-cash margin commitments, but also by very high demand for short term investment following the general deterioration in capital markets in the second half of the year. Cash margins and default fund contributions under Treasury management peaked in December at €19.7 billion, against an average over the year of €16.4 billion.  Interest payments to members, in respect of cash and collateral margin payments, increased by 16.3% to €769.7 million, again reflecting the size of balances arising from these high activity levels. Administrative expenditure increased by 11.4% to €243.2 million reflecting the increase in staff numbers in 2007 and the renewal of some IT infrastructure which has reinforced headcount and the resilience of the systems as well as enhanced the capacity to deliver significant projects to customers, particularly in the second half of 2007.”

Financial Review

Summarised consolidated income statement for LCH.Clearnet Group

Total Revenue1,362.71,234.9
Interest expense and similar charges(862.1)(733.3)
Fees payable and similar charges-(57.9)
Net Revenue500.6443.7
Administrative expenditure(243.2)(218.3)
Write off of capitalised development costs-(47.8)
Operating costs(243.2)(266.1)
Operating profit257.4177.6
Net finance income/(cost)4.54.2
Profit before taxation261.9181.8
Taxation expense(83.0)(58.2)
Profit for the year178.9123.6

Total Revenue

Gross clearing fees404.3363.911.1
Interest income from cash and collateral margin847.1728.816.2
Interest earned on Default fund82.662.033.2
Other income28.722.328.7
Total Revenue1,362.71,177.015.8

*Clearing fees in 2006 have been adjusted to deduct fees payable and similar charges to be comparable to 2007.

Group turnover from continuing operations, on a like-for-like basis, increased by 15.8% to €1,362.7 million.

Interest income from cash and collateral margin balances increased by €118.3 million (16.2%) to €847.1 million  (2006: €728.8 million) principally due to the substantially higher cash and collateral margin balances arising from increased levels of market activity during the year, along with rising sterling and euro interest rates.

Default Fund interest earnings increased by €20.6 million (33.2%) to €82.6 million (2006: €62.0 million) due to the rising sterling interest rate.

Other income has increased by €6.4 million (28.7%) to €28.7 million (2006: €22.3 million). Other income includes annual fees charged to members, recovery of settlement fees and transfer fees.

Interest payments to clearing members

Interest expense and similar charges have risen by €128.8 million (17.6%) to €826.1 million (2006: €733.3 million). This includes interest payments to clearing members in respect of cash and collateral margins that have increased by €108.1 million (16.3%) to €769.7 million (2006: €661.6 million) and interest paid in respect of contributions to the Default Funds that have increased by €20.7 million (28.9%) to €92.4 million (2006: €71.7million).

Fees payable and similar charges

Since 1 January 2007, the Group is transparently acting as a collection agent for fees that are transferred to NYSE Euronext. Previously these retrocession fees had passed through the Group’s income statement.

Administrative expenditure

Administrative expenditure has risen by €24.9 million (11.4%) to €243.2 million (2006: €218.3 million).

The rise reflects an increase in staff numbers in 2007, in particular within the IT department, and the renewal of some IT infrastructure. This follows the recruitment of a new IT management team in late 2006. The effect of this has been to reinforce headcount and the resilience of the systems as well as to enhance the capacity to deliver a significant number of projects to customers, particularly in the second half of 2007.

Write-off of capitalised development costs

In 2006 the Group wrote off €47.8 million, which substantially related to assets from the Generic Clearing System (GCS) within its technology strategy. The programme was fully written off in 2006.

Operating profit

Strong trading volumes across all markets enabled the business to implement a programme of tariff reductions in 2007, which has continued into 2008. This has also resulted in an increase in operating profit of €79.8 million (44.9%) to €257.4 million (2006: €177.6 million after allowing for the write off of capitalised development costs of €47.8 million).

LCH.Clearnet Group Limited

Extracts from the 2007 Annual Report and Consolidated Financial Statements

Consolidated income statement for the year ended 31 December 2007

Interest income929,713790,798
Interest expense and similar charges(862,084)(733,278)
Net interest income67,62957,520
Clearing Fees404,279421,844
Other Income28,71422,254
Fees payable and similar charges-(57,926)
Net revenue500,622443,692
Costs and Expenses
Employee benefits expense(81,486)(71,929)
Depreciation and amortisation charge(11,684)(14,639)
Write-off of capitalised development costs-(47,822)
Other operating expenses(150,064)(131,667)
Total costs and expenses(243,234)(266,057)
Operating profit257,388177,635
Finance income20,56414,262
Finance costs(16,094)(10,032)
Profit before taxation261,858181,865
Taxation expense(82,934)(58,216)
Profit for the year178,924123,649

Consolidated balance sheet as at 31 December 2007

Non-current Assets
Intangible fixed assets516,616520,261
Property, plant and equipment13,2657,616
Other financial assets       -15,000
Deferred taxation12,11018,821
Current assets
Cash and short-term deposits16,823,83115,701,719
Derivative financial assets4,683 
Debtors and other receivables52,72570,563
Balances with clearing members278,041,605257,779,047
TOTAL ASSETS295,464,835274,113,027
Capital and reserves
Called up share capital80,116100,116
Capital reserves15,327376,371
Capital redemption reserves20,000       - 
Translation reserve       -      5,263
Retained earnings     603,515243,358
Non-current liabilities
Interest bearing loans and borrowings223,961225,840
Default Funds1,540,8621,732,671
Employee benefits7,86946,953
Current liabilities
Interest bearing loans and borrowings5,2761,249
Derivative financial liabilities 278          - 
Income tax payable24,927     30,413
Creditors and other payables110,31582,949
Balances with clearing members292,832,389271,267,844
TOTAL EQUITY AND LIABILITIES295,464,835274,113,027


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