| NEW YORK
NEW YORK Global news and information company
Thomson Reuters Corp forecast 2008 revenue growth of 6 to 8
percent and lifted its estimate of merger-related cost savings,
sending its shares up about 3 percent on Thursday.
In its first earnings report as a combined company, Thomson
Reuters forecast $1.0 billion in annual cost savings by the end
of 2010 and $1.2 billion by the end of 2011, a schedule that
the company said was earlier than it anticipated.
Included in those estimates is $750 million of
integration-related cost savings, up from the $500 million that
Thomson Reuters had forecast earlier.
"The results themselves seem to be in line with
expectations, but what the market likes about them is the fact
that they have increased their cost-savings target," said
Charles Stanley analyst Sam Hart.
Thomson, a Canadian publisher of professional services
databases and financial information, bought Reuters on April 17
for about $16 billion in cash and stock, hoping the merged
company would be better positioned to ride out volatile global
Analysts asked Thomson Reuters Chief Executive Tom Glocer
on a conference call if he saw a "massive cliff" ahead, given
the thousands of layoffs among clients. He also was asked if
the financial services sector was a "ticking time bomb."
"Thomson Reuters is certainly not immune to the business
cycle," Glocer responded. "But I think the fear around the
financial services business has been overstated, in part
because we're well positioned and in part because of the work
both companies have done over the past five years to steer
The company said its pro forma first-quarter underlying
operating profit was $579 million, a rise of 37 percent from a
year ago, assuming that Thomson and Reuters had been one
company at the time.
Pro forma revenue for the quarter ended March 31 rose 12
percent from a year ago to $3.3 billion.
UNDERLYING PROFIT MARGIN
Thomson Reuters forecast its underlying profit margin to be
between 19 and 21 percent for 2008, with free cash flow margin,
excluding synergy and integration costs, to be between 11 and
12 percent of revenue.
UBS analyst Polo Tang said the results and 2008 outlook
exceeded expectations because of higher-than-anticipated growth
in Thomson Reuters' markets and tax and accounting units.
"This implies the company (is) assuming the strong growth
in markets continues throughout the year, which we believe is
optimistic given heavy cuts in investment banking head count in
(the second quarter)," Tang wrote in a note to investors.
In the first quarter, the markets division -- which
includes the Reuters and Thomson news operations, as well as
their financial services data and tools -- reported operating
profit of $353 million, up 69 percent from a year earlier.
The professional division, which includes databases and
tools for accountants, lawyers and tax professionals, reported
operating profit of $299 million, up 6 percent.
"The key thing from my vantage point was the fact that they
had positive organic growth in almost every single sector,"
said Michael Sprung, president of Sprung & Co Investment
Counsel, which owns Thomson Reuters shares.
"Our view on this stock and buying it is sort of a three-
to five-year outlook," said Sprung. "The fact that in the
interim we might be having a slowdown in financial services is
not really what we're concentrating on."
ABN AMRO analyst Justin Diddams said, however, he thought
people are "a bit over-excited about the cost savings number."
"The results are very much in line with expectations, and
in the medium term there's still pressure on bums on seats (in
the financial services industry)," he said.
The company has said it would cut some jobs as part of its
cost-savings effort, but has not announced a number.
London-listed shares of Thomson Reuters closed up 3.3
percent at 1,589 pence. Toronto-listed shares rose 2.3 percent
to C$38.15 in afternoon trading.
(Additional reporting by Michael Taylor in London; Editing
by Brian Moss)