Thomson Reuters profit beats forecasts, sees 2009 revenue growth

The company also said it expected its underlying operating margin this year to be comparable to 2008, supported by revenue growth and higher savings from integration.

"I think the good thing is that we're giving outlook at all. I've seen so many companies with supposedly decent visibility into their business this year pull back and say, 'Well it's too hard,'" chief executive Tom Glocer said in an interview with Reuters.

Thomson Reuters reported 2008 Q4 net income of $656 million, or 79 cents a share, compared with $432 million, or 67 cents a share, a year earlier.

Profit from ongoing businesses, excluding special items, was 57 cents per share, beating the average analyst forecast of 39 cents.

Revenue in the company's closely watched markets division, which serves financial institutions, fell two per cent to $1.9 billion. Overall revenue was flat at $3.4 billion.

"I think it's going to continue to do better than people expect," Glocer said, referring to the markets division.

"It is hard to see anything else outside the doom and gloom in the two financial and media capitals," he said. "It's going to be a tough year, but when you put it all together, we still think the company will be able to show growth."

The professional division, which sells databases and other information to lawyers, accountants, scientists and the healthcare industry, reported revenue of $1.5 billion in Q4, up three per cent. The rise came in part from online, software and services revenue growth of 10 per cent.

The board has approved an increase in the dividend by four cents per share on an annualised basis. The quarterly dividend payable on March 26 is 28 cents per share.

Thomson Reuters raised its forecast for annualised cost savings from the merger to $1 billion by the end of 2011, up from $750 million projected in May 2008.

The integration plan does not include any new rounds of layoffs, Glocer said.

Pressed to comment on the rate of cancellations seen so far this year, Glocer said: "The one thing I can guarantee is there will be cancellations and there will be new recurring subscription sales, and actually the year isn't off badly on that score.”

Glocer attributed the results to Thomson's basic business model, providing "must-have" information to people who are willing to pay for it.

"This is not a luxury good or discretionary purchase," he said during a conference call. "This is must-have information that our customers need to run their businesses."

Glocer also said the integration of Thomson and Reuters was moving more quickly than expected, helping to cut costs.

The Financial Times said concern over the outlook for financial services still drives investors’ perception of the stock, and helps explain the wide variation in perceptions of the company in Toronto, where professional assets such as WestLaw are better known, and London, where City sentiment pervades investors’ views of the company.

“The London listing was trading at a 15 per cent discount to the North American quotes on Tuesday morning, but Mr Glocer expressed no urgency about resolving this by ending the dual-listed company structure,” the FT said.

“This is one we haven’t had to spend any time on,” he said. “Either people will buy in [to the growth story] locally [in London] and it solves itself or the shareholder register turns more North American and it solves itself.”

His message, instead, was that Thomson Reuters can stand out from much of the sector in which its shares are categorised. “We can invest at a time when a lot of pure media companies are cutting back,” he said.

“Asked by one of his own reporters whether such investment might include an interest in one of the newspaper companies whose valuations have suffered dramatically, Mr Glocer was clear that he had little appetite for consumer media,” the FT said.

In theory, the $1.8 billion of free cashflow reported by last year would be enough to buy The New York Times, the FT said, but Glocer cautioned: “I’m not convinced we know how to run a newspaper any better than the ones who are running them today, and boy it looks a tough struggle.”

Glocer said the company was on course to see revenues rise next year, driven by forecast growth in Asia, the Gulf and Latin America.

"We're definitely going to be prioritising markets where there's strong growth," he said. "Tactically, it's easier to push on an open door than slam against one."

The £8.7 billion merger of Thomson and Reuters was expected to produce cost-savings of $750 million but the company said annualised benefits would now be closer to $1 billion from 2011.

"Our markets division is entirely a legitimate concern given what we've seen at companies like RBS, Lloyds and Citi," Glocer said. "But what analysts don't appreciate when they're at the heart of the financial crisis in London or New York, is that in many markets around the world - in Asia, the Gulf and Latin America - there is less gloom."

Thomson Reuters shares closed 11.56 per cent higher in New York, 11.47 per cent higher in Toronto, 10.39 per cent higher on NASDAQ and 6.58 per cent higher in London.

The FT said the persistence of a yawning gap between the group’s North American and London-listed shares is embarrassing.

“The 18 per cent discount at which the London listing trades to the US and Canadian listings is an operational irrelevance. Mr Glocer – without referring to it on Tuesday’s results call – probably helped narrow the gulf by announcing a better-than-expected fourth quarter for the markets division. If UK-based investors were expecting the financial data operations to take a heavy hit from the financial crisis (as they did when markets turned down earlier this decade), the division’s resilience should improve sentiment towards the London shares. Familiarity with the more stable Thomson businesses and satisfaction with the improved savings from integrating the two companies are only increasing.

“But it may take more than good housekeeping by Mr Glocer and his team to bridge the Atlantic. The controlling Thomson family has the tools for this job. Its investment vehicle, Woodbridge, has already in effect ‘bought’ UK stock with Canadian paper. Those operations could, and probably should, be restarted...

“Thomson and Reuters deserve credit for not abolishing the London listing at the time of the merger. That would have put UK investors’ noses out of joint. But some 60 per cent of the UK shares are now held by North American investors, who rightly figure that what looks good for Woodbridge is probably good for them. British investors are at liberty to buy back into the group on fundamentals if they wish to benefit from the relative re-rating. But if the UK share of the London listing drops below 20 per cent, they should expect to lose it. ■