| NEW YORK
NEW YORK Thomson Reuters Corp (TRI.N)(TRI.TO) 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 Reuters I/B/E/S.
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 (BARC.L), Britain's third-biggest bank, said on Tuesday it would slash 12,000 jobs this year.
"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 than anticipated."
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 January 31, 2014, compared with 96,000 at September 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 (NWSA.O) Dow Jones in serving financial institutions.
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 books.
"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 "market-perform" rating.
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 year.
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)