Thomson Reuters Corp reported that quarterly revenue in its markets and legal businesses fell as customers cut costs in the wake of the financial crisis, but its CEO said the worst was over.
The news and financial data publisher, whose shares fell about 1 percent, said on Thursday that third-quarter profit beat Wall Street estimates, helped by foreign currency rates and cost savings.
We think our markets are improving and our results in the business in the third quarter were better than the second, and we think that's a trend that continues, Chief Executive Thomas Glocer said on a call with reporters. We are past the nadir.
Revenue from ongoing businesses, excluding the impact of foreign exchange rates, fell 2 percent to $3.21 billion. That compared to the average analyst forecast of $3.23 billion.
Markets division third-quarter revenue fell 4 percent to $1.86 billion, excluding currency.
The legal unit, the largest part of the company's professional division by revenue and operating profit, posted a 1 percent decline in revenue.
Financial firms are watching costs and being very careful on spending money, so a lot of discretionary expenses regarding services are being cut back, said Benchmark Co analyst Edward Atorino.
The company, formed last year by the merger of Thomson Corp and Reuters Group Plc, said underlying operating profit rose 3 percent to $711 million, from $690 million a year earlier.
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 said in a statement.
Adjusted earnings per share fell to 43 cents from 47 cents, due to higher integration spending, but this beat the average analyst forecast of 40 cents per share, according to Thomson Reuters I/B/E/S.
PROFIT MARGIN RISES
Thomson Reuters affirmed its previous guidance, saying it expected revenue to grow in 2009 and underlying operating profit margin and free cash flow to be comparable to 2008.
The company expected the impact of weaker subscription sales in its markets and legal businesses in 2009 to continue to drag on revenue in the first half of 2010. But it said growth in other units, a focus on costs and benefits of the merger were expected to reduce the impact on operating profit.
The legal and financial sectors have been shedding thousands of jobs over the past two years. The number of legal services jobs in the United States has fallen 4.6 percent since May 2007, according to preliminary, seasonally adjusted figures from the Bureau of Labor Statistics. In the same period, the number of financial industry jobs has dropped 7.6 percent.
Thomson Reuters expects at least $1 billion in annual savings by the end of the year.
Underlying operating profit margin rose to 22.1 percent in the third quarter from 20.7 percent a year earlier.
In the professional division, which includes products for lawyers, accountants and healthcare professionals, revenue rose 2 percent before currency adjustments to $1.36 billion.
Higher sales in tax and accounting, and healthcare and sciences offset a 1 percent decline in legal business revenue.
The company said its WestLaw, FindLaw and international units recorded solid growth but that non-subscription services were weak, including enterprise software and consulting services and trademarks.
The professional unit's competitors in recent months have suffered too. Anglo-Dutch publisher Reed Elsevier said this summer that business softened at LexisNexis, which competes with Westlaw.
Dutch rival Wolters Kluwer reported first-half declines at its legal information businesses.
In the markets division, which competes with Bloomberg LP and News Corp's Dow Jones Newswires, sales and trading revenue fell 6 percent. Revenue in the investment and advisory business fell 5 percent.
Revenue from the media unit fell 10 percent before currency adjustments, amid consolidation among traditional media outlets such as newspapers.
Overall corporate expenses tripled from a year earlier to $163 million, due in part to integration costs.
The company's New York-traded shares fell 0.68 percent to $32.13 in morning trading. The Toronto-listed shares fell 0.96 percent C$34.16. In August, Thomson Reuters delisted its shares from the London Stock Exchange.
(Reporting by Robert MacMillan, editing by Tiffany Wu and Ted Kerr)