UK: Reuters cautious despite return to profit

Reuters, the electronic information group, blamed a sluggish performance in Europe for its maintenance of a cautious outlook for the rest of the year, says the Financial Times

Tom Glocer, chief executive, said that while the group had seen an improvement in its US businesses, Europe gave it particular cause to remain cautious about its sales prospects this year.

As a result, Mr Glocer narrowed Reuters' target for declines in annual recurring revenues to 11% from an earlier prediction of a 10-12% decline. The full-year outlook was more cautious than some investors had hoped for.

The group has been hit by a severe downturn in demand for its information-screen subscriptions to banks, brokerages and fund managers worldwide, as they slash costs in the face of three years of stockmarket decline.

Mr Glocer said that while Europe turned down six to nine months after the US, he did not necessarily expect a similar time lag in any recovery. This was because of "structural differences" between the two markets such as ease with which US financial institutions had reduced headcounts.

"I do not see the motor that will bring it back in Europe the same way," he told analysts on a conference call.

Nevertheless, all of the group's short-term targets were either unchanged or improved as it beat market expectations on Tuesday with a return to underlying profit. This was despite a continued erosion of its core subscription revenues.

The world's leading provider of news and market data reported pre-tax profits before amortisation and exceptionals of £87.3m (US$139.7m) in the first half, compared with a loss of £10m last year, despite recurring revenues falling 10% to £1.26bn, in line with expectations. Total revenues were 12% lower, at £1.35bn.

Mr Glocer said the improvement was due to "real discipline in managing the cost base and favourable currency movements".

He said the group's Fast Forward costs savings plan was ahead of schedule, with £30m of the £45m forecast this year already delivered. As a result, he raised this year's target to £55m. He also said he expected to better last year's 13.1% margin figure.

Reuters said restructuring, which included several hundred redundancies, cost £79m in the first six months of the year--representing half the target for the full year.

The group also reported improvement at Instinet, its partly owned New York brokerage company, where cost cutting helped reduce pre-tax losses to £25m from £83m. Revenues fell to £275m from £301m, but the second quarter showed an 11% improvement on the previous three months.

Reuters also had better news in its battle with US rival Bloomberg, as it clinched big contracts with Goldman Sachs and Lehman Brothers.

The shares were 5.6% lower, at 206p, in early afternoon trading.

(c) 2003 Financial Times Information Limited.

Source: Financial Times.