May 7, 2009 / 6:05 PM / 9 years ago

Thomson Reuters profit beats, growth slows

LONDON/NEW YORK (Reuters) - Thomson Reuters Corp TRIL.L (TRI.TO) reported a higher-than-expected quarterly profit due mainly to cost controls, but revenue growth slowed in the financial industry downturn.

The news and financial data publisher reaffirmed its expectation of a revenue increase in 2009, although this was not enough to prevent investors from taking profits after a more than 20 percent run-up in the share price this year.

Revenue in the group’s Professional division, which supplies information to lawyers, scientists, accountants and the healthcare industry, rose 5 percent after excluding the impact of the strong dollar, to $1.27 billion.

But revenue at the Markets division, which supplies news and data to financial institutions, grew only 0.4 percent on a constant-currency basis to $1.85 billion, hurt by lower transaction volumes and job cuts.

Sentiment in financial markets is “quite good,” Chief Executive Tom Glocer said in an interview on Thursday.

“I can’t really call exactly where the bottom is. There can be false dawns,” he said.

Thomson Reuters’ New York- and Toronto-traded shares fell about 5 percent. The London-listed shares closed down 2.4 percent in weaker European markets, though the stock is still up more than 20 percent so far this year.

“With the banking sector apparently reaching a point of stability, we think the risk of a major disappointment in the Markets division is receding, thus removing a major plank of the bear case,” said Colin Tennant, head of media research at Nomura.

“That said, organic revenue in the Professional division has slowed down somewhat, which could become a concern.”

The company, formed by Thomson Corp’s purchase of Reuters Group Plc in April 2008, said underlying operating profit, excluding amortization, integration costs and other items, rose 2 percent to $588 million, or 40 cents per share.

That beat the average analyst forecast of 34 cents per share, according to Reuters Estimates.

COST SAVINGS ON TRACK

Thomson Reuters reaffirmed its outlook for revenue to grow in 2009, and for underlying operating margin and free cash flow to be comparable to 2008, supported by revenue growth and the expected savings from integration programs. It said it was on track to achieve its target of $975 million by year end.

“They confirmed their outlook for the full year and savings targets are on track, so I would view these as a very good, very encouraging set of numbers,” said Paul Richards, analyst at brokerage Numis.

“Operating profit was slightly ahead of consensus and our expectations, which is good. If you then work down the P&L, reorganization charges, interest and tax were all lower than we expected,” he said.

Revenue from ongoing businesses dropped 3 percent to $3.12 billion. Excluding the impact of a stronger dollar, revenue actually rose 3 percent, compared with a 5 percent rise in the fourth quarter. Analysts on average were expecting revenue of $3.17 billion, according to Reuters Estimates.

Thomson Reuters is regarded by some analysts as the riskiest bet among professional information providers, due to its exposure to the financial sector, which has been hit by mergers and deep job cuts. The sector accounts for about 60 percent of group revenue.

“Clients have been placing orders. Clearly other clients have been canceling activity or some clients have been going out of business totally,” Glocer told Reuters Financial Television.

A high proportion of subscription and digital revenues, and the resilience of the Professional unit have helped drive the London-traded shares up 23 percent in the year to date.

Thomson Reuters stock trades at about 16 times expected 2009 earnings, according to Reuters data, a considerable premium to fellow professional publishers Reed Elsevier (REL.L) at 10.5 times, Pearson (PSON.L) at 12 times and Wolters Kluwer (WLSNc.AS) at about 9 times.

Reed Elsevier and Pearson have both said they expect to increase or at least match 2008 earnings this year, and Wolters Kluwer expects to keep its operating margin at around 20 percent.

Additional reporting by Kate Holton; Editing by Ted Kerr

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