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Thomson Reuters Q3 profit beats forecast

5/11/2009 - 13:24
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By Robert MacMillan

NEW YORK (Reuters) - THOMSON (TMS.PA)Reuters Corp's quarterly revenue fell but profit beat Wall Street estimates, helped by foreign currency rates and cost cuts, and the company affirmed its 2009 outlook.

The news and financial data publisher reported on Thursday that revenue in its markets division, which serves the financial industry, fell 4 percent to $1.86 billion in the third quarter.

Revenue from ongoing businesses, excluding the impact of foreign exchange rates, fell 2 percent to $3.21 billion. That compared to the average analyst forecast of $3.23 billion.

"Financial firms are watching costs and being very careful on spending money, so a lot of discretionary expenses regarding services are being cut back," said Benchmark Co analyst Edward Atorino.

The company, formed last year by the merger of Thomson Corp and Reuters Group Plc, said underlying operating profit rose 3 percent to $711 million, from $690 million a year earlier.

Adjusted earnings per share fell to 43 cents from 47 cents, due to higher integration spending, but this beat the average analyst forecast of 40 cents per share, according to Thomson Reuters I/B/E/S.

"While the weak year-to-date net sales experienced in recent quarters are now flowing through into revenues, we expect this dip to be shallow and limited to the next few quarters," Chief Executive Thomas Glocer said in a statement.

He also said, "Our Tax and Accounting and Healthcare and Science businesses continued to perform very strongly, and sales of subscription products in our Markets and Legal units improved in Q3 over what we expect were their bottom in Q2."

Thomson Reuters affirmed its previous guidance, saying it expects revenue to grow in 2009 and underlying operating profit margin and free cash flow to be comparable to 2008.

The company expected the impact of weaker subscription sales in its markets and legal businesses in 2009 to continue to drag on revenue in the first half of 2010. But it said growth in other units, a focus on costs and benefits of the merger are expected to reduce the impact on operating profit.

PROFIT MARGIN UP

Thomson Reuters expects at least $1 billion in annual savings by the end of the year.

Underlying operating profit margin rose to 22.1 percent in the third quarter from 20.7 percent a year earlier.

In the professional division, which includes products for lawyers, accountants and healthcare professionals, revenue rose 2 percent before currency adjustments to $1.36 billion. Higher sales in tax and accounting, and healthcare and sciences offset a 1 percent decline in legal business revenue.

In the markets division, revenue from the media unit fell 10 percent before currency adjustments, amid consolidation among traditional media outlets such as newspapers.

Overall corporate expenses tripled from a year earlier to $163 million in the third quarter, due in part to integration costs.

The company's shares closed at C$34.52 in Toronto and $32.35 in New York on Wednesday.

(Reporting by Robert MacMillan, editing by Tiffany Wu and Ted Kerr)

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