S&P cuts Thomson Reuters outlook to negative

At the same time, S&P affirmed its ratings on the company, including its ‘A-’ long-term corporate credit rating.

S&P said the negative outlook reflected its view of the weaker than expected operating performance within the division and hurdles the company faces in returning the business to healthy and sustainable revenue growth given the slow economic recovery and intensely competitive operating conditions.

Thomson Reuters’ results for the first quarter showed a one per cent decline in financial & risk’s organic revenue, compared with the same quarter last year.

“The financial industry has undergone a dramatic change in market dynamics given the downturn in the global financial markets in the last recession, with Standard & Poor’s believing that financial institutions will continue to downsize,” it said. "The effect at Thomson Reuters, through its F&R segment, was more modest during the recession owing to the company’s high percent of recurring subscription revenues and business diversification, and the fact that the largest customer accounts for only about 1% of total consolidated revenue. However, the F&R business has yet to return to healthy organic revenue growth as we had expected. The segment’s revenue was up only 0.4% in the three months ended March 31, due to a 2.0% contribution from acquisitions, offset by a 1.0% decline in organic revenue and unfavorable foreign exchange effects. The decline in F&R’s organic revenue was driven by desktop losses and lower investment management revenue due to business execution issues and difficult financial sector conditions in Europe. We believe it will take some time for management to position this business for sustainable growth, which we expect will be driven by contributions from the new financial information platform, Thomson Reuters Eikon, as well as the Thomson Reuters Elektron network and other products.” ■