Reuters reports slashed profits

By NICK GOODWAY FOR MAILONLINE
Updated:

 

WORLDWIDE news and business information group Reuters saw profits fall by a third last year as it sought to cut costs in tough financial markets. The fall was worse than most analysts had expected, and Reuters shares fell 38 1/2p to 552p.

So-called normalised profits, which include restructuring costs but not goodwill write-downs, fell by 24% to £304m on revenues up by 8% at £3.88bn in the year to December.

Finance director David Grigson said profits were down 'largely because restructuring costs were greater than we told the market they would be in October. But we found more opportunities to take out headcount, removing 1,800 jobs rather than the 1,600 predicted'.

Reuters' new chief executive Tom Glocer said that cost cutting would 'help us to increase our operating margin from 7% to approximately 12%' in 2002 but he warned: 'The current trading environment is difficult. But I see that there is a certain amount of pent-up business demand out there so I am not unoptimistic about the future.'

Glocer forewarned he would cut the dividend from 16p to 10p when announcing the group's third-quarter figures in October. But he said the extra cost cuts would push targeted annual savings up from £150m to £235m in 2003.

Reuters has reorganised its business, firstly to move most of it to the internet and secondly so that it is 'customer facing' addressing four markets - investment banks, treasury, asset management and corporates or media.

Grigson said: 'It's not been good in 2001 and we don't expect it to get much better in early 2002. Subscription revenues will probably fall by 2% to 3% in the first half. But despite the fact that the financial services industry is in severe retrenchment at the moment, we assume there will be an upturn and revenues should start to grow again in high single digits.'

Instinet, Reuters' 83%-owned electronic share market, said last night in New York that it would take a further $25m restructuring charge and lose up to a further 200 staff or 10% of its workforce in a bid to cut costs as its revenues tumbled.

Fourth-quarter revenues fell by 11% to $350m as its share of trades on Nasdaq, New York's technology stock market, declined from 13.9% a year ago to 11.1% in the last quarter. Profits rose from $36m to $45.7m, but earnings were up only one cent to 18 cents, falling to 14 cents after restructuring costs.

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