(Adds analyst comment, details on financial division, updates
By Jennifer Saba
NEW YORK Feb 12 Thomson Reuters Corp
forecast that revenue would be flat in 2014 and
reported worse-than-expected fourth-quarter results, as
financial customers in Europe and Asia cut back on spending and
the legal business weakened in Latin America.
Shares of the global news and information company fell more
than 5 percent to a four-month low on Wednesday afternoon, as
Wall Street analysts said it would likely take another year for
the business to turn around.
Thomson Reuters Chief Executive Officer Jim Smith said
headwinds at the end of 2013 were stronger than anticipated, and
he expected financial markets to remain "challenged" for some
time to come as the global banking system restructures.
"It's still a volatile time everywhere," Smith said in an
interview. "We did see more weakness in Europe and in Asia than
we expected in the fourth quarter."
The company reported a net loss of $343 million in the
quarter, compared with a net profit of $368 million in the
year-earlier period. It attributed the loss to a $275 million
restructuring charge from previously announced job cuts, a
higher tax rate, and a 3 percent drop in revenue.
Excluding the charge, earnings per share came to 49 cents,
down from 54 cents a year ago. On that basis, it was below the
average analyst estimate of 52 cents, according to Thomson
About one-half of Thomson Reuters revenues come from banks
and other financial institutions, and about one-quarter from the
legal profession. Both sectors have been trimming costs and
consolidating. For instance, Barclays Plc, Britain's
third-biggest bank, said on Tuesday it would slash 12,000 jobs
"It appears that 2014 is going to be another year in the
turnaround process," Piper Jaffray analyst Peter Appert said of
Thomson Reuters. "It's taking longer and (is) a bit more painful
CEO Smith said despite the tough environment, the company's
financial products were "holding their own" against competitors.
"I do not believe we are losing market share," he told analysts
on a conference call.
Thomson Reuters said its flagship product for financial
institutions, Eikon, was installed on 123,000 desktops as of
Jan. 31, 2014, compared with 96,000 at Sept. 30, 2013.
Fifty-five percent of the company's financial desktop revenue
base had been upgraded to Eikon, according to executives.
(Graphic on results: link.reuters.com/xaw76v)
NEGATIVE NET SALES
Thomson Reuters forecast 2014 revenue would be flat with
last year's $12.5 billion. In 2013, revenue grew 2 percent,
excluding divestitures and currency changes.
The company expects this year's underlying operating margin
to be between 17 percent and 18 percent, compared with 15
percent in 2013.
In the fourth quarter, revenue in the Financial & Risk
division, which caters to banks, retail brokers and other types
of firms, fell 2 percent to $1.6 billion as product
cancellations outpaced new sales.
Smith declined to comment on new sales in the current
quarter, but said he was pleased with the way the year had begun
and expected "gradually improving net sales to continue."
Thomson Reuters competes with privately held Bloomberg LP
and News Corp's Dow Jones in serving financial
Dow Jones' institutional sales fell by $17 million in the
December quarter, according to News Corp, which did not give a
total figure. Bloomberg LP said its 2013 revenue rose 5 percent
to $8.3 billion but did not give a quarterly figure.
Thomson Reuters said revenue in the legal division, known
for its Westlaw legal database, rose 2 percent to $868 million.
But excluding acquisitions, divestitures and currency changes,
revenue fell 2 percent, largely on weakness in Latin America and
a drop in U.S. print revenue as law firms spent less on case law
"Ultimately it's still a tough environment," said Claudio
Aspesi, an analyst with Bernstein & Co. "The scrutiny of costs
is high and spending levels are subdued."
In a note to investors, Aspesi said Thomson Reuters results
were disappointing, but he praised the company for progress on
migrating customers to Eikon. He gave the stock a
Thomson Reuters, which had employed about 60,000 people
globally, cut 3,000 positions in the fourth quarter as part of a
previously announced restructuring. The company said it expects
to take another $120 million in restructuring charges in 2014,
bringing the total cost of the restructuring to about $395
million versus its previous estimate of $350 million.
The company has told employees it will delay 2014 salary
increases by three months - to July 31 from April 30 - for $40
million in savings. Smith said the move will allow the company
to offer more "meaningful" pay increases, compared with last
In addition to cutting costs, Smith said Thomson Reuters is
investing in areas of growth.
"We still have more work to do in order to achieve our
objectives," Smith said on the call. "But the trajectory is
encouraging and we are making real progress."
Thomson Reuters shares fell 6 percent to $34.43 on the New
York Stock Exchange. In Toronto, the stock fell 6 percent to
(Editing by Tiffany Wu and Jeffrey Benkoe)