(Adds analyst comment, details on financial division, updatesstock)
By Jennifer Saba
NEW YORK (Frankfurt: HX6.F - news) , Feb 12 (Reuters) - Thomson Reuters Corp forecast that revenue would be flat in 2014 andreported worse-than-expected fourth-quarter results, asfinancial customers in Europe and Asia cut back on spending andthe legal business weakened in Latin America.
Shares of the global news and information company fell morethan 5 percent to a four-month low on Wednesday afternoon, asWall Street analysts said it would likely take another year forthe business to turn around.
Thomson Reuters Chief Executive Officer Jim Smith saidheadwinds at the end of 2013 were stronger than anticipated, andhe expected financial markets to remain "challenged" for sometime to come as the global banking system restructures.
"It's still a volatile time everywhere," Smith said in aninterview. "We did see more weakness in Europe and in Asia thanwe expected in the fourth quarter."
The company reported a net loss of $343 million in thequarter, compared with a net profit of $368 million in theyear-earlier period. It attributed the loss to a $275 millionrestructuring charge from previously announced job cuts, ahigher tax rate, and a 3 percent drop in revenue.
Excluding the charge, earnings per share came to 49 cents,down from 54 cents a year ago. On that basis, it was below theaverage analyst estimate of 52 cents, according to ThomsonReuters I/B/E/S.
About one-half of Thomson Reuters (Frankfurt: TOC.F - news) revenues come from banksand other financial institutions, and about one-quarter from thelegal profession. Both sectors have been trimming costs andconsolidating. For instance, Barclays Plc (LSE: BARC.L - news) , Britain'sthird-biggest bank, said on Tuesday it would slash 12,000 jobsthis year.
"It appears that 2014 is going to be another year in theturnaround process," Piper Jaffray analyst Peter Appert said ofThomson Reuters. "It's taking longer and (is) a bit more painfulthan anticipated."
CEO Smith said despite the tough environment, the company'sfinancial products were "holding their own" against competitors."I do not believe we are losing market share," he told analystson a conference call.
Thomson Reuters said its flagship product for financialinstitutions, Eikon, was installed on 123,000 desktops as ofJan. 31, 2014, compared with 96,000 at Sept. 30, 2013.Fifty-five percent of the company's financial desktop revenuebase had been upgraded to Eikon, according to executives.
(Graphic on results: http://link.reuters.com/xaw76v)
NEGATIVE NET SALES
Thomson Reuters forecast 2014 revenue would be flat withlast year's $12.5 billion. In 2013, revenue grew 2 percent,excluding divestitures and currency changes.
The company expects this year's underlying operating marginto be between 17 percent and 18 percent, compared with 15percent in 2013.
In the fourth quarter, revenue in the Financial & Riskdivision, which caters to banks, retail brokers and other typesof firms, fell 2 percent to $1.6 billion as productcancellations outpaced new sales.
Smith declined to comment on new sales in the currentquarter, but said he was pleased with the way the year had begunand expected "gradually improving net sales to continue."
Thomson Reuters competes with privately held Bloomberg LPand News Corp's Dow Jones in serving financialinstitutions.
Dow Jones' institutional sales fell by $17 million in theDecember quarter, according to News Corp, which did not give atotal figure. Bloomberg LP said its 2013 revenue rose 5 percentto $8.3 billion but did not give a quarterly figure.
Thomson Reuters said revenue in the legal division, knownfor its Westlaw legal database, rose 2 percent to $868 million.But excluding acquisitions, divestitures and currency changes,revenue fell 2 percent, largely on weakness in Latin America anda drop in U.S. print revenue as law firms spent less on case lawbooks.
"Ultimately it's still a tough environment," said ClaudioAspesi, an analyst with Bernstein & Co. "The scrutiny of costsis high and spending levels are subdued."
In a note to investors, Aspesi said Thomson Reuters resultswere disappointing, but he praised the company for progress onmigrating customers to Eikon. He gave the stock a"market-perform" rating.
Thomson Reuters, which had employed about 60,000 peopleglobally, cut 3,000 positions in the fourth quarter as part of apreviously announced restructuring. The company said it expectsto take another $120 million in restructuring charges in 2014,bringing the total cost of the restructuring to about $395million versus its previous estimate of $350 million.
The company has told employees it will delay 2014 salaryincreases by three months - to July 31 from April 30 - for $40million in savings. Smith said the move will allow the companyto offer more "meaningful" pay increases, compared with lastyear.
In addition to cutting costs, Smith said Thomson Reuters isinvesting in areas of growth.
"We still have more work to do in order to achieve ourobjectives," Smith said on the call. "But the trajectory isencouraging and we are making real progress."
Thomson Reuters shares fell 6 percent to $34.43 on the NewYork Stock Exchange. In Toronto, the stock fell 6 percent toC$37.84. (Editing by Tiffany Wu and Jeffrey Benkoe)
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