As predicted by A-Team Group in August, the tough market conditions have caused a dip in Thomson Reuters’ third quarter results. However, the vendor’s Enterprise division has performed well overall in comparison to last year’s figures, which is indicative of the focus on data and risk management solutions in the market.
In August, CEO Tom Glocer and Markets division chief Devin Wenig cashed in 300,000 shares in the company, raising around £6 million between them. The moves to sell the stock, which came just four days after the company announced plans to delist from the London Stock Exchange and Nasdaq Stock Market, led to speculation at the time that Thomson Reuters’ strong earnings multiple was headed for a dip and the recent results have confirmed that fact.
Overall, Thomson Reuters’ figures for the third quarter ended 30 September indicate that revenues from ongoing businesses were US$3.2 billion, a decrease of 2% before currency and 4% after currency in comparison to the same period last year. The vendor has, however, managed to claw back some operating profit as a result of its integration activities.
“Our ongoing focus on the Reuters integration and close cost management across the company has enabled us to continue to grow underlying operating profit,” explains Glocer. Underlying operating profit for the quarter was therefore up 3% to US$711 million, with the related margin up 140 basis points, which Glocer puts down to the “benefits of currency, integration related savings and a continued commitment to strong cost management”.
The Markets division overall had a tough quarter with a decline in revenues of 4%, a revenue total of US$1.86 million for this year’s quarter versus US$1.98 million in 2008. The vendor claims this decline is due to flow through from weaker year to date net sales and strong prior period revenue growth of 5%. Subscription revenues also declined 0.7%, but remain up 2% year to date.
Revenues were impacted by softness in transaction, recoveries and outright revenues, says the vendor. “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,” Glocer contends.
Some geographies performed better than others: revenues in Asia were unchanged against the prior year period while revenues in Europe, Middle East and Africa (EMEA) and the Americas were down 3% and 6%, respectively. This is reflective of the recessionary trend in the market overall and indicative of why so many vendors are trying to launch their solutions in the Asian market this year.
However, although Markets overall had a tough quarter, the financial data focused Enterprise division, which is headed by Jon Robson, experienced a return to form. Revenues for the quarter increased 8% driven by the continued demand from customers for risk management and data solutions: the division achieved a total revenue of US$0.32 million for the quarter versus US$0.31 million for the same period in 2008.
The fastest growing business in Enterprise, Enterprise Information, grew 15%, which the vendor indicates was driven by strong customer demand for pricing and reference data and low latency feeds to power trading systems.
Overall, Thomson Reuters expects to achieve at least US$1.0 billion of run rate savings by the year end, largely as a result of the elimination of redundant positions and the retirement of legacy products.
Glocer is confident that the firm will eventually be back on form but recognises that this will largely be predicated on the health of the markets overall. “While we would welcome a quick return to revenue growth, we understand how to operate in challenging markets and we are confident that we are outperforming the competition,” he concludes.
Given Bloomberg’s recent initiative to give its underlying instrument data codes for free to the market, it will be interesting to see whether this statement holds water over the next quarter with regards to the Enterprise division’s profits.