By Jennifer Saba
April 30 Thomson Reuters Corp
reported on Tuesday a 7 percent decline in first-quarter
operating profit because of severance costs and a decrease in
revenue at its Financial & Risk division, which caters to
Shares of the global news and information company fell 2.6
percent in morning trading, even as Thomson Reuters stood by its
outlook for the remainder of the year. The company reaffirmed
its forecast for 2013 revenue growth in the low single digits.
"We have seen improving sales trends now for the last
several quarters," Thomson Reuters Chief Executive James Smith
said in an interview.
Excluding the severance charges, first-quarter profit topped
Wall Street's expectations, helped by operating expenses that
fell 8 percent. Revenue was in line with analysts' forecasts, up
2 percent to $3.1 billion before currency changes, on the
strength of the company's Legal and Tax & Accounting divisions.
"The good news is they are ahead on their cost savings
plans," said Claudio Aspesi, a senior analyst at Sanford
Bernstein & Co.
"On the flip side, revenue is fundamentally showing little
progress. You need good revenue growth to justify a premium to
Thomson Reuters competes for financial customers against
main competitor Bloomberg LP, as well as News Corp's
Dow Jones unit, FactSet Research Systems Inc and
Interactive Data Corp.
The banking industry has been slashing costs and headcount,
putting pressure on companies that target the sector.
"We have at least stemmed the tide of losses in market
share," Smith said on a call with analysts. "We are in a very
Bloomberg maintains a slight lead over Thomson Reuters for
2012 in the global market data analysis space at 30 percent and
29 percent, respectively, according to Burton-Taylor
Sales figures that strip out cancellations, known as net
sales, are an important metric for the company. Smith said that
net sales for the Financial & Risk division are still on track
to turn positive during the second half of the year. Revenue
lags net sales by about 12 months.
Earlier in the year, Thomson Reuters said there would be
$100 million in severance costs related to about 2,500 job cuts.
It spent $78 million on severance in the period,
and also booked a tax charge of $235 million.
EIKON DESKTOPS UP 38 PERCENT
Thomson Reuters is in the middle of a turnaround after
Thomson Corp's $17 billion acquisition of Reuters Group Plc in
2008, which coincided with the financial crisis.
Adding to the challenge was the company's premature roll out
to its financial clients of its flagship desktop product Eikon.
By the end of the first quarter, Eikon desktops totaled
nearly 47,000, up 38 percent from the end of last year, the
company said. Between the third and fourth quarters of 2012, the
total number of Eikon desktops rose 33 percent.
"We are executing better, we have great new products out
there, and those products are gaining customer acceptance,"
Revenue at Financial & Risk, after subtracting acquisitions,
divestitures, and currency changes fell 3 percent. This is
because the division had negative net sales from the
cancellation of subscriptions in 2012, the company said.
By region, the company had its strongest performance for its
financial products in the Americas, where revenue was up 2
percent. Revenue for Europe, the Middle East and Africa fell 3
percent while it declined 2 percent in Asia.
The Legal division, which makes up about a quarter of the
overall business and competes with Reed Elsevier and
Wolters Kluwer, posted a 4 percent rise in revenue to
about $800 million.
"They are doing the work behind the scenes where they can
... to protect their earnings numbers," said Ryan Bushell,
portfolio manager for the IA Clarington Canadian Conservative
Equity Fund at Leon Frazer, which holds 2.5 million of Thomson
On a net basis, Thomson Reuters reported a loss of 4 cents
per share compared with earnings of 35 cents in the year-earlier
period. On an adjusted basis, the company reported earnings per
share of 38 cents compared with analysts' forecast of 32 cents
Shares of Thomson Reuters touched a year high at $33.74 on
the New York Stock Exchange on Monday. The stock was down about
2.5 percent at $32.90 in New York and C$33.13 in Toronto by