LONDON Reuters Group PLC, the news and financial data provider, reported a 25 per cent increase in 2005 profits Thursday, but a disappointing 2006 outlook sent its shares down sharply.
Reuters shares closed 11.5 per cent lower at 399.5 pence ($6.70 U.S.) on the London Stock Exchange after it said underlying revenue growth for 2006 would be 3 per cent, rather than the previously forecast 4 per cent.
The London-based company said its profit increase was underpinned by the sale of its majority stake in the electronic trading platform Instinet and revenue growth from core subscribers — the first full year it has recorded such growth since 2001.
Reuters said net profit rose to 456-million pounds ($793-million U.S.) compared to 364-million pounds in 2004. Revenue rose 2.9 per cent to 2.41-billion pounds ($4.19-billion U.S.) from 2.34-billion pounds.
Underlying recurring revenue — subscriptions to terminals, which accounts for 93 per cent of Reuters' sales — was up 1 per cent for the year, including a 1.7 per cent gain in the second half.
The company recorded a net gain of 191-million pounds ($335-million U.S.) on the 1.1-billion-pound December sale of Instinet to the Nasdaq Stock Market Inc.
Analysts said the results were broadly in line with the market consensus, but said the outlook was disappointing.
“The shares have had a good run but numbers are at the bottom range of expectations and people were pricing upgrades into the market and those haven't been delivered,” said Numis analyst Paul Richards.
Reuters has struggled to increase sales against fierce competition from Bloomberg LP and Thomson Financial, while mergers and consolidations in the banking industry have reduced demand for its financial products among banks.
Chief executive Tom Glocer implemented a cost-cutting program in 2003 and last year started the Core Plus plan, which aims to boost revenues by targeting markets outside the traditional terminals business.
Mr. Glocer said that the Core Plus program was beginning to reap rewards, pointing to a new global contract with Citigroup Inc.
New services such as “tick history,” which provides intraday trading prices, and new transactional products would be the key new drivers of growth in 2006, he said. He also highlighted strong growth in revenues from emerging markets, especially India, which recorded a 19-per-cent lift in revenues during 2005.
Mr. Glocer said the company has achieved the objectives announced in 2003 for its Fast Forward restructuring and cost-savings program. Those steps are predicted to deliver 440-million pounds ($765-million U.S.) in savings on an annual basis by the end of this year.
“I am confident that in 2006 we will increase growth while reinforcing our hard-won cost discipline,” Mr. Glocer said in a statement.
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