Thomson Reuters affirms guidance as Q2 sales soar, earnings fall to US$172 million
Published Tuesday August 12th, 2008
TORONTO - Thomson Reuters Corp. (TSX:TRI) expects "momentum to moderate" in the second half of the year as a result of the current credit crunch, but affirmed its annual financial guidance after reporting second quarter profit fell, but revenues were up.
Tom Glocer, chief executive of the recently merged information services firm, said second quarter results were strong in both market and professional divisions "from the top line to the bottom line."
"Given our strong first half results and continued positive sales momentum across the company we're confident in confirming our full year guidance," Glocer told a conference call Tuesday.
Glocer said Thomson Reuters continues to expect pro forma revenue growth of six-to-eight per cent this year, compared to 2007.
However, due to the worldwide credit crisis, he said the company expects "momentum to moderate in the second half of the year."
The tightening in the corporate financing markets, which began in August last year as a result of the subprime mortgage crisis in the U.S., had led to layoffs and bailouts in the financial services sector.
Glocer said the layoffs have led to a one per cent decline in business for the company, compared to a year ago.
Momentum, he said, "continued in the second quarter with solid revenue growth," with sales up 11 per cent, seven per cent of that organic.
The strong top line growth combined with $490 million of savings achieved through integration of services also led to solid year-to-date underlying margin improvement, he said.
"Our integration programs and related savings are on target," said Glocer, adding the management team is "very pleased with our success and our pace to date" after roughly the first 100 days since the April closing of Thomson's acquisition of Reuters PLC.
Despite the volatility in the credit markets during the quarter, Glocer said the company raised about $3 billion in the U.S. and Canadian debt markets "at attractive interest rates."
This enabled the company to fully take out the bridge loan used to complete Thomson's acquisition of Reuters last year.
Both of these issuances were heavily oversubscribed, said Glocer, which he believes shows confidence in the company's business plan.
Earlier Tuesday, the Toronto-headquartered media and specialized data giant reported that earnings attributable to common shares fell to US$172 million, 22 cents per share, compared with $375 million, or 58 cents per share, in the same period in 2007.
Thomson One Analytics had forecast earnings per share of 36 cents, with a low of 31 cents and a high of 41 cents.
Thomson Reuters said revenues rose to US$3.4 billion on a pro forma basis or US$3.1 billion on a GAAP basis, up 73 per cent from a year before.
The company, which provides a variety of information services to professionals in the financial, health, legal and scientific communities, said it had achieved merger-related savings at an annualized rate of $490 million as of June 30.
Net earnings fell mainly because the company took $443 million in charges on its books for amortization, depreciation, asset impairment and other expenses in the latest quarter, compared with $173 million for the same 2007 quarter.
Going forward, said Glocer, as a result of the credit crisis, the company has seen some softening among its largest global customers and to a lesser extent in the Americas.
The international parts of the business, however, are flourishing, he said. Asia is up 15 per cent, and the Middle East 30 per cent.
With the growth of the middle class in countries like China, India and in the Middle East, Glocer said the company sees lots of room for growth as the demand for financial, legal, tax, accounting, science and health care services will continue to increase.
This, he said, will require "more professionals in these disciplines who will in return require more of our products and solutions to help meet that growth."
On merging the operations of the two companies, he said, so far progress has exceeded expectations as about $490 million in annual savings have been achieved.
"We have already completely integrated our accounting teams so that everyone of our customers around the world has a single account manager."
The newly merged entity has also introduced new product and content improvements aimed at speeding up the delivery of news and specialized financial data to customers, he said.
By early next year, he said, the management team will begin to "rationalize what we sell and rebrand our products and will start the migration to two strategic desktop platforms," one for financial data and the other for specialized financial advice for the investment and corporate communities.
Said Glocer, "we believe we're well-positioned as we look to 2009 and beyond."
On Tuesday, Thomson Reuters shares were trading up 20 cents at C$37 on the Toronto Stock Exchange.
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