February 13, 2013

NEW YORK -- Thomson Reuters' revenue forecast for 2013 failed to impress Wall Street and the shares fell 3 percent, overshadowing bullish remarks from Chief Executive James Smith that his turnaround plan was gaining traction.

The global news and information company posted a better-than-expected rise in quarterly profit on Wednesday and forecast that revenue would increase in the low single digits this year. The outlook was largely anticipated by analysts, who had forecast a 2 percent rise.

"It looks like another year where the overall growth will be muted," said Claudio Aspesi, a senior analyst at Sanford Bernstein & Co.

Smith said the company was halfway through his turnaround plan because of product improvements and stabilization in Europe and that he expects revenue to rebound. "The success we are having today doesn't start showing up until next year," Smith said in an interview. He later told analysts on a conference call, "It's like night and day. We are in a different place."

Smith said he expected Financial & Risk net sales to turn positive in the second half of the year. This an important gauge of future performance because subscription-based revenue typically lags sales by 12 months. Financial & Risk, which accounts for 54 percent of total revenue, has struggled in recent years following a troubled launch for its flagship desktop product Eikon, which is aimed at bankers, hedge fund managers, and other financial industry professionals.

[For more on the new search capability in the newest version of Thomson Reuters Eikon, read: Semantic Search Takes Thomson Reuters Eikon to New Levels.]

Cost cutting by banks after the financial crisis compounded the difficulties, especially in Europe. Smith said the company expects to cut 2,500 jobs in the Financial & Risk division, or about 4 percent of its total global staff, in 2013. The company said it plans to spend $100 million in severance costs this quarter.

UPSIDE SURPRISE

Thomson Reuters said revenue from ongoing businesses in the fourth quarter rose 2 percent before currency changes to $3.36 billion, roughly in line with expectations. It was not immediately clear what the change in costs was on the same basis. Adjusted earnings increased to $497 million, or 60 cents per share, from $445 million, or 54 cents per share, a year earlier, beating analysts' average forecast for 55 cents per share, according to Thomson Reuters I/B/E/S.

Profit in the quarter increased on the back of "continued cost containment and lower reorganization costs", the company said. Organic revenue was flat.

"They have worked very hard on cost and the efforts should be acknowledged," Aspesi said.

The number of Eikon desktops installed rose 33 percent in the fourth quarter from the previous quarter to 33,900. For the fourth quarter, revenue at the Financial & Risk division increased 1 percent due to growth in its Governance, Risk & Compliance business and its acquisition of electronic foreign exchange platform FXall.

Revenue in the division's Europe, Middle East and Africa region and in Asia was down 3 percent, respectively, while the Americas gained 6 percent.

Its Legal division, which includes WestlawNext, reported that revenue rose 2 percent in the quarter to $861 million. Thomson Reuters recently acquired London-based Practical Law Company, which provides guidance and analysis tailored to specific areas of the law.

The board approved a 2 cent annual dividend increase to $1.30 per share. Thomson Reuters' New York and Toronto listed shares were down 2.9 percent at $29.77 and C$29.81, respectively.

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