Hanging on in there

22 July 2003

Thanks to cost cuts, the information group has beaten margin targets and delivered a firsthalf profit despite a 10% fall in sales. It looks like Reuters has a difficult situation well under control. Its share price recovery looks amply justified.

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Reuters has announced a firsthalf profit of £87m, excluding amortisation, which compares to a £10m loss in the same period a year ago. By generating savings from its "Fast Forward" restructuring programme faster than expected, the information provider increased its core operating margin to 14.7%. That exceeded its previous guidance of 12%.

But Reuters' revenues fell dramatically, as expected. Sales were down 12% on an underlying basis at core Reuters, recurring revenues fell in line with guidance, by 10%. Its trading platform subsidiary Instinet saw sales down 9% although the market rally has helped Instinet increase revenue 11% in the second quarter of the year compared to the first.

Despite announcing new business wins among its investment bank customers, Reuters said it expected further headcount reductions in the financial services industry that could affect its business. The group faced its biggest revenue fall of 17% in its investment banking segment, which accounts for over a quarter of sales. Although the rate of cancelled subscriptions was falling in the US, giving hopes that the market was bottoming, the outlook for financial services employment in Europe continued to be negative, a person familiar with Reuters said.

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