Thomson Reuters beats the Street, CEO sees banks hiring
NEW YORK/LONDON (Reuters) - Thomson Reuters Corp (TRI.TO)TRIL.L reported a better-than-expected quarterly profit on Thursday, helped by cost cuts, and said it expected 2009 revenue to grow as the financial industry recovered.
The news and financial data publisher stood by its forecast that revenue would grow in 2009 and that its profit margin would be similar to last year's as markets stabilize.
"Quite a few banks are saying, 'Oh, we cut too deeply and we're finding business is so good, we need to hire people to handle the volume,'" CEO Tom Glocer said in an interview.
"I couldn't imagine six months ago that people would be talking about guaranteed bonuses over multiple years to hire people," he said.
Nevertheless, he said the fallout from the financial crisis would likely squeeze the Markets division, where competitors include Bloomberg LP and the Dow Jones division of News Corp (NWSA.O).
"It's only logical to assume that in the second half of the year, the (division's) reported revenue growth will go below the zero line rather than above it," he said.
Overall second-quarter underlying operating profit rose 11 percent to $793 million from $713 million a year earlier.
Earnings per share rose to 58 cents from 39 cents, beating analysts' expectations of 43 cents per share, according to Reuters Estimates.
Revenue from ongoing businesses, excluding the impact of foreign exchange rates, rose 2 percent to $3.28 billion, in line with market expectations.
The company attributed its underlying operating profit growth to cost controls, currency benefits and savings from Thomson Corp's purchase of Reuters Group Plc last year.
"They did a great job at getting costs down," said Benchmark Co analyst Ed Atorino. "I don't think the second half will be a mirror of the second quarter, but they will do much better than the Street expected for the rest of the year."
Markets division revenue, excluding currency adjustments, was flat in the second quarter at $1.9 billion.
Revenue in the Professional division, which includes products for lawyers, accountants and healthcare professionals, rose 4 percent, before currency adjustments, to $1.4 billion.
In the media sector, which is part of Markets, revenue fell 6 percent, hurt by continued declines in the professional publishing and consumer businesses. The core news agency business declined 4 percent as a result of cutbacks and consolidation among traditional media outlets.
The company said it expected to get $1 billion of annual savings by the end of 2009. The target is $1.4 billion in annual savings by 2011. Corporate expenses in the quarter fell by $20 million to $255 million.
Thomson Reuters shares, which closed 6 percent higher in London, were up 5 percent up in Toronto and 4 percent on the New York Stock Exchange.
Anglo-Dutch professional publisher Reed Elsevier (REL.L) (ELSN.AS) last week reported a softening of business at its LexisNexis legal unit, which competes with Thomson Reuters' Westlaw.
It expects revenue at LexisNexis, its biggest unit, to show a "modest" fall this year as government, corporate and academic markets declined.
Dutch rival Wolters Kluwer (WLSNc.AS) showed small declines at its legal information businesses in the first half, which it blamed on weak economic conditions and longer sales cycles.
Shareholders will vote Friday on a proposal to delist the company's shares from the London exchange, marking the end of an era of sorts. Reuters shares had traded on the exchange since 1984, and the company began operating in London in 1851.
The shares will continue to trade in Toronto and also in New York, where the company's headquarters are located following Thomson Corp's acquisition of Reuters.
Thomson Reuters has been listed on two continents since the purchase, but the London shares have traded at a discount to the North American shares, and the company was largely unable to convince investors that they were of equal value.
"The share quotes really bemused everybody. No one could really work out why there should be such a big discount," said Alex DeGroote, media analyst at brokerage Panmure Gordon.
Investors have narrowed the gap as the Friday vote approaches, anticipating that shareholders will approve the delisting.
At real currency exchange rates on June 22, before the company announced its intention to delist the London shares, the Canadian-listed shares were trading at a 13.6 percent premium to the London shares.
By Wednesday's close, the premium had narrowed to 2.7 percent.
(Reporting by Robert MacMillan in New York and Georgina Prodhan in London; editing by Ted Kerr)
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