Markets drag on 'healthy' Thomson Reuters results

Second-quarter results released on Thursday followed a management shakeout that resulted in the sudden departure of the ailing division’s chief Devin Wenig and five other high-level executives last week.

Chief executive Tom Glocer assumed direct responsibility for a turnaround in the division, which competes with Bloomberg, Dow Jones and FactSet Research. Division revenue excluding the impact of currency changes rose one per cent from a year earlier, slowing from the first quarter's gain of two per cent.

Overall revenue and earnings per share were within ranges the company announced last week when it became clear that improving the performance of the markets division was a priority for the board and controlling shareholder, Canada's Thomson family.

Glocer called the results “healthy” but noted this was due to strong growth in the professional division serving legal, accounting and other professionals. That unit’s revenue rose eight per cent excluding the impact of exchange rate changes.

“Nonetheless, revenue growth in our markets division is below our expectations, and I have decided to accelerate the transformation in markets,” Glocer said in a statement. “I am confident that these changes will result in improved performance.”

Total revenue excluding divestitures was $3.2 billion, up four per cent before currency adjustments and slightly ahead of the average analyst forecast. Adjusted earnings per share rose to 51 cents from 41 cents. 

Many financial clients are still recovering from the global economic crisis, with job cuts and pullbacks in spending. This is hindering sales of Eikon, a new desktop platform which is aimed at pulling together dozens of disparate legacy products.

The company said it had sold more than 28,000 Eikon desktops since the launch last September. About 3,500 are to new users, meaning that only about 24,500 of the company's roughly 500,000 financial markets users have migrated to the new product.

Reuters’ own coverage of the results said the organisational changes have thrown into question how quickly Thomson Reuters can fast-track growth in markets, which accounted for 59 per cent of the company's revenue in the second quarter.

Glocer is preparing a plan to boost the division’s revenue growth rate and plans to present it to the board in the next two months, Reuters said. “He will have about a year to make it work, according to several people familiar with the board’s thinking.”

The markets shakeup dominated Glocer’s earnings call with analysts who wanted to know how and when things will turn around. He pleaded for some patience in fixing the division and discussed a 30-day plan, which involves reorganising the roles of its sales staff, and a 90-day plan, which entails repositioning the product line. On top of that, there is a year-plus plan that calls for developing a broader strategy around Eikon and Elektron, an ultra-high speed data distribution network.

“Any time you do this level of transformation, people need time to get their sea legs,” Glocer said. “So, in the short term, we expect some disruption. At the same time, we expect a lot of excitement on people moving forward with the new strategy in place.”

Asked if his direct management of markets is an interim measure or a permanent one, he said, “Permanent is a long time. I’m the ninth chief executive of Reuters in 160 years.”

Thomson Reuters shares, which have tumbled in recent days, rose by 3.5 per cent after today’s results. ■