Thomson Reuters Corp reported a lower quarterly profit and signaled that cutbacks by financial customers last year would continue to hurt revenue in 2010, sending its shares down 2 percent.

But the company also said net sales were positive in the fourth quarter, and it forecast a return to revenue growth in the second half of 2010. The impact of net sales on revenue is delayed because of the company's subscription model.

We've already seen the net sales picture improve significantly through the last quarter and into the first quarter of this year, Chief Executive Thomas Glocer said in an interview.

The company forecast 2010 revenue to be flat or slightly lower, and underlying free cash flow to be slightly down from 2009 as it continues to invest in new products and platforms.

Fourth-quarter underlying profit fell 16 percent to $661 million. Adjusted earnings per share slipped to 44 cents from 50 cents a year earlier, but this was a cent above the average Wall Street estimate, according to Thomson Reuters I/B/E/S.

Revenue from ongoing businesses, rose 1 percent to $3.35 billion, versus the average analyst forecast of $3.32 billion.

Excluding the impact of foreign exchange rates, revenue fell 3 percent.

The revenues were soft as expected. The earnings were maybe fractionally better, said Peter Appert, analyst at Piper Jaffray.

It's kind of a replay of what we've been seeing. The company's making very good progress in terms of the cost management side of the equation in the context of what's been a challenging environment.

Citi analyst Thomas Singlehurst characterized the company's outlook as solid. The most encouraging element is the commentary on net sales in the fourth quarter, which were evidently back in positive territory, he said.

We believe this sets the scene for a return to positive group organic revenue growth by the second half.

MARKETS REV DOWN, PROFESSIONAL FLAT

Revenue in the Markets division, which serves financial industry customers and competes with companies such as Bloomberg LP and Rupert Murdoch's News Corp , fell 5 percent, excluding the impact of foreign exchange rates.

Revenue in the Professional division, which sells databases and other information reservoirs to lawyers, accountants, scientists and healthcare workers, rose 1 percent, excluding the impact of foreign exchange rates.

The legal unit, the largest part of the Professional division by revenue and operating profit, reported a 1 percent increase in revenue before currency adjustments.

Earlier on Wednesday, Dutch publisher Wolters Kluwer NV , which competes with Thomson Reuters in providing information services to healthcare professionals, lawyers and accountants, reported earnings that missed analysts expectations. Its shares fell 2.7 percent.

Last week, Reed Elsevier , the other big player in the sector, reported roughly flat 2009 sales and operating profit, citing weak demand for legal services in the corporate, government and academic sectors.

Glocer said he was confident that 2009 was the bottom of the sales cycle. I expect that we will return to revenue growth in the second half of 2010, he said in a statement.

He added that 2010 would be the final year of heavy integration spending in Markets.

The year ahead will also see the release of new products such as WestlawNext in Legal and Project Utah in Markets, as well as investments in emerging markets, and in the tax and accounting and healthcare divisions, he said.

These investments would have a short-term impact on the operating margin, but Glocer said he expected the margin to rebound in 2011.

Annualized savings from the April 2008 merger of Thomson Corp and Reuters Group Plc reached $1.1 billion last year, $300 million more than estimated when the deal closed.

The company also raised its 2011 annualized savings target by $200 million to $1.6 billion. It said $1.2 billion of that would come savings associated with integrating the company, and the rest from older savings programs.

The Thomson Reuters board approved a 4 cent-per-share increase in the annual dividend to $1.16 per share.

The New York-listed shares of the company fell 1.8 percent to $34.42 in early trading, while the Toronto shares fell 2.2 percent to C$36.27. The U.S. shares are up more than 50 percent from their 12-month low in March 2009. Reed Elsevier shares were down 0.10 percent in London trade.

(Reporting by Robert MacMillan and Tiffany Wu; Editing by Ted Kerr)

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