Thomson Reuters revenue up on legal and tax business

The company expects revenue to grow in the low single digits for the year, and sees underlying operating profit margin between 16.5 and 17.5 per cent.

Adjusted earnings for the quarter were roughly flat from a year ago at $569 million, or 48 cents per share – ahead of analysts’ expectations of 44 cents.

“Our second-quarter performance was consistent with our full-year expectations,” said CEO James Smith, pictured. “I am pleased with the progress we continue to make despite challenging market conditions, particularly in the banking and legal sectors.

“We continue to make consistent, tangible progress across the business and we expect the company’s performance in the second half of the year will be better than the first half.”

In recent quarters he has expressed growing confidence that his turnaround plan for the company is gaining traction – especially for the division that caters to the financial industry.

Financial & Risk, which accounts for 53 per cent of the group’s total revenue, has been struggling in recent years because customers were slow to adopt its new flagship desktop data product Eikon while banks made deep cost cuts in the wake of the financial crisis.

Revenue at Financial & Risk was down one per cent to $1.6 billion. Eikon desktops amounted to about 61,000 at the end of the second quarter, up 30 per cent from the end of the previous quarter – a slower rate than the 38 per cent rise in the first quarter.

Total revenue from ongoing business rose two per cent before currency changes to $3.1 billion, which was in line with analysts’ expectations.

Legal revenue increased five per cent to $846 million, while Tax and Accounting revenue rose seven per cent to $288 million.

Smith later told Reuters: “Everything that is in our control remains on track. We expect the second half to remain better than the first half.”

He said the trends continue to remain positive but added: “Unfortunately, so do the challenges facing the financial industry as a whole and particularly in Europe.”

Banks, especially those in Europe, are still cutting costs. Thomson Reuters has been making progress in Asia and Japan, where net sales for its financial division have turned positive in the second quarter. The Americas has also improved.

Smith has previously said he expects net sales at the Financial & Risk division to turn positive in the second half of this year. Net sales – an important metric because it points to future revenue – strip out cancellations and lag revenue by about 12 months.

Today he called meeting that goal “challenging” and said it “comes down to a handful of contracts with larger banks – we are that close.”

Analyst Claudio Aspesi told investors he expects organic revenue growth to be muted. “Despite management describing 2012 as a ‘watershed’ for the division, we remain cautious on the turnaround story,” he wrote in a note.

Shares of Thomson Reuters fell about 2.5 per cent in late morning trading after hitting a two-year high on Monday. Its New York-listed shares are trading at $34.48 and its Toronto-listed shares are trading at C$35.50.

Thomson Reuters news release

Transcript of Thomson Reuters earnings call with analysts ■