Thomson Reuters profit falls on severance costs
REUTERS - Thomson Reuters Corp (TRI.TO) (TRI.N) reported a 7 percent decline in first-quarter operating profit because of severance costs and a decrease in revenue at its Financial & Risk division, which caters to banking clients.
That decline did not change the company's outlook for the remainder of the year and it reaffirmed its forecast for 2013 revenue growth in the low single digits.
"We have seen improving sales trends now for the last several quarters," Thomson Reuters Chief Executive James Smith said in an interview on Tuesday.
Sales figures that strip out cancellations, known as net sales, are an important metric for the company. Smith said that net sales for the Financial & Risk division are still on track to turn positive during the second half of the year. Revenue lags net sales by about 12 months.
Still, the global news and information company reported better-than-expected earnings mainly because of cost cutting. It spent $78 million on severance in the period and also booked a tax charge of $235 million.
Earlier in the year, Thomson Reuters said there would be $100 million in severance costs related to about 2,500 job cuts.
The company reported that revenue from ongoing businesses rose 2 percent to $3.1 billion before currency changes on the strength of its Legal and Tax & Accounting divisions. First-quarter revenue met analysts' expectations, according to Thomson Reuters I/B/E/S.
"The good news is they are ahead on their cost savings plans," said Claudio Aspesi, a senior analyst at Sanford Bernstein & Co.
"On the flip side, revenue is fundamentally showing little progress. You need good revenue growth to justify a premium to the market."
EIKON DESKTOPS UP 38 PERCENT
Thomson Reuters is the midst of a turnaround after Thomson Corp's $17 billion acquisition of Reuters Group Plc. The 2008 merger coincided with a financial crisis that prompted banks, which are core customers of Thomson Reuters, to slash costs and cut staff.
Adding to the challenge was the premature roll out to its financial clients of its flagship desktop product Eikon.
By the end of the first quarter, the company said that Eikon desktops totaled nearly 47,000, up 38 percent from the end of last year. That was a slightly larger increase than the 33 percent rise seen between the third and fourth quarters of 2012.
"We are executing better, we have great new products out there, and those products are gaining customer acceptance," Smith said.
Revenue at Financial & Risk, after subtracting acquisitions, divestitures, and currency changes fell 3 percent. This is because the division had negative net sales from the cancellation of subscriptions in 2012, the company said.
By region, the company had its strongest performance for its financial products in the Americas, where revenue was up 2 percent. Revenue for Europe, the Middle East and Africa fell 3 percent while it declined 2 percent in Asia.
On a net basis, Thomson Reuters reported a loss of 4 cents per share against earnings of 35 cents in the year-earlier period. On an adjusted basis, the company reported earnings per share of 38 cents compared with analysts' forecast of 32 cents.
Shares of Thomson Reuters touched a year high at $33.74 on the New York Stock Exchange on Monday. (Reporting by Jennifer Saba; Editing by Edward Tobin, Alden Bentley, Toni Reinhold)
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