SHARES IN the London Stock Exchange (LSE) fell the most in two months after analysts questioned chief executive Clara Furse's ability to achieve growth targets as competition increases.

LSE, Europe's biggest market by value of listed companies, dropped as much as 7.7 per cent. The shares are down 48 per cent this year.

The slide came despite the London exchange reporting record net income of £173.8 million for the fiscal year ended March 31st, up 59 per cent from a year earlier, it said in a statement.

Revenues rose 56 per cent to £546 million, boosted by the acquisition of Borsa Italiana which contributed £133.2 million. Operating profits were up 56 per cent to £289 million, including £57.5 million from Borsa Italiana.

Ms Furse said the exchange had delivered "excellent results" although trading conditions had become more difficult later in the year. "We are confident of achieving further growth this year," Ms Furse said.

Analysts were less certain. "Guidance was stronger than we expected and we question whether it will be achievable," said Dirk Hoffmann-Becking, a London-based analyst at Sanford C Bernstein. "Cyclical pressures are cutting into the primary and secondary market, and structural growth is topping out with increased competition."

LSE, NYSE Euronext and Deutsche Börse have profited from record trading volumes as oil prices reached new highs and credit-market turmoil triggered the biggest fluctuations in bonds, stocks and currencies in at least six years. LSE faces increasing competition from new trading alternatives and a possible end to the volatility that drove revenues.

"The numbers are fine, but the outlook for the company isn't," said Mamoun Tazi, an analyst at MF Global in London.

There are three issues hanging over the LSE. First, while trading volumes in its cash equities business are up 21 per cent this year, the value traded is down 14 per cent. That is because the market capitalisation of shares listed on the LSE has fallen in recent months and the size of the trades has shrunk because of the growth of algorithmically driven trading - rapid, computer-driven trades propelled by tiny changes in data.

Second, the LSE has yet to reveal the outcome of a strategic review into its post-trade arrangements, a decision that will arguably be more important than any of the initiatives taken in the past year.

And third, the emergence of new electronic trading platforms - known as multilateral trading facilities (MTFs) - is starting to eat into the LSE's market share in trading of some of the biggest UK stocks. - ( Bloomberg/Financial Times service)