Thomson Reuters first quarter in line, financial revenues slip on flat markets
30 April 2014 | 1766 views | 0
Source: Thomson Reuters
Thomson Reuters (TSX / NYSE: TRI) today reported results for the first quarter ended March 31, 2014.
Revenues from ongoing businesses grew 1% before currency to $3.1 billion
Adjusted EBITDA increased 8% to $820 million with a margin of 26.2%, up from 24.4% in the prior-year period
Underlying operating profit increased 14% to $528 million with a margin of 16.9%, up from 14.9% in the prior-year period
Adjusted earnings per share were $0.46 versus $0.38 in the prior-year period, up 21%
$1.1 billion returned to shareholders through share repurchases and dividends since $1 billion share repurchase program announced in the fourth-quarter of 2013
2014 Outlook affirmed
"We are off to a solid start and the first-quarter's performance is consistent with our full-year expectations," said James C. Smith , chief executive officer of Thomson Reuters. "Overall, I am pleased with the trajectory of the business."
"We continue to make progress, building out a scalable platform for sustainable growth."
Revenues from ongoing businesses were $3.1 billion , a 1% increase before currency.
Adjusted EBITDA increased 8%, and the corresponding margin was 26.2% versus 24.4% in the prior-year period. The increase was primarily due to lower charges compared to the prior-year period.
Underlying operating profit increased 14%, and the corresponding margin was 16.9% versus 14.9% in the prior-year period primarily due to lower charges compared to the prior-year period.
Charges (primarily related to severance) of $10 million were incurred in the quarter compared to $78 million in the prior-year period.
Adjusted EPS was $0.46 compared to $0.38 in the prior-year period.
Free cash flow was negative $135 million versus negative $231 million in the prior-year period with the first quarter historically being the weakest of the year. For the full year, the company continues to expect to achieve free cash flow of between $1.3 billion and $1.5 billion .
First-Quarter Business Segment Highlights
Unless otherwise noted, all revenue growth comparisons in this news
Unless otherwise noted, all revenue growth comparisons in this news release are before the impact of foreign currency as Thomson Reuters believes this provides the best basis to measure the performance of its business.
As the Financial & Risk segment progresses toward operating on a unified platform, further integrating and simplifying its business, the segment no longer has separate Trading, Investors, Marketplaces and Governance, Risk & Compliance units, and therefore will no longer report on that basis.
Financial & Risk
Revenues were down 1% due to the impact of negative net sales in 2013. Organic revenues declined 3%.
Recurring revenues decreased 2% (down 3% organic) due to negative net sales in 2013. Transactions-related revenues increased 3% but were down 4% organically primarily due to lower trading volumes in the foreign exchange market. Recoveries revenues were down 1%.
By geography, revenues in Europe , Middle East and Africa (EMEA) were down 3%, revenues in the Americas were flat (down 2% organic) and revenues in Asia were up 1%.
EBITDA increased 11% primarily due to lower severance charges compared to the prior-year period. The margin was 24.1% compared to 21.5% in the prior-year period.
Operating profit increased 20% primarily due to lower severance charges compared to the prior-year period. The margin was 14.5% compared to 11.9% in the prior-year period.
During the quarter, Eikon 4.0 was launched and the Reuters 3000Xtra product was discontinued with users upgraded to Eikon.
Revenues increased 2% (flat organic) due to contributions from acquisitions.
Growth businesses - 44% of Legal revenues - grew 7% (4% organic), driven by strong growth from Elite, Practical Law and FindLaw. Growth businesses represent all of Legal's revenue excluding US print and online legal information.
US online legal information - 41% of Legal revenues - declined 2%.
US print - 15% of Legal revenues - declined 3% and is expected to decline mid-to-upper single digit for the full year.
EBITDA increased 3% due to revenue flow-through and timing of expenses. The margin was 35.4% compared to 34.8% in the prior-year period.
Operating profit increased 7% with a margin of 26.8% versus 25.3% in the prior-year period. The increase in the margin reflected lower depreciation and amortization.
Tax & Accounting
Revenues increased 13% (10% organic) driven by strong growth across the business including the Corporate business, up 22% (14% organic), and the Professional business, up 10%.
EBITDA increased 17% with a margin of 33.0% compared to 30.9% in the prior-year period. The margin increase was primarily due to flow-through from increased revenues.
Operating profit increased 22% and the margin was 24.1% compared to 21.8% in the prior-year period.
Small movements in the timing of revenues and expenses can impact margins in any given quarter for the Tax & Accounting business. Full-year margins are more reflective of the segment's underlying performance.
Intellectual Property & Science
Revenues increased 4% (3% organic), driven by recurring revenue growth of 5% and transaction revenue growth of 3%. IP Solutions grew 2%, Life Sciences increased 5% and Scientific & Scholarly Research increased 9%.
EBITDA increased 3% due to revenue flow-through. The margin was 29.6%, down 40 basis points, compared to the prior-year period due to the dilutive effect of acquisitions made in 2013.
Operating profit was flat. The margin was 21.0% compared to 21.9% in the prior-year period.
Small movements in the timing of revenues and expenses can impact margins in any given quarter for the Intellectual Property & Science business. Full-year margins are more reflective of the segment's underlying performance.
Corporate & Other (Including Reuters News)
Reuters News revenues for the first quarter of 2014 were $79 million , down 1% from the prior-year period. Corporate & Other costs for the first quarter of 2014 were $62 million , compared to $59 million in the prior-year period.
Business Outlook (Before Currency)
Thomson Reuters today reaffirmed its full-year business outlook for 2014 which was previously communicated in February 2014 . The company continues to expect:
revenues to be comparable to 2013;
adjusted EBITDA margin to range between 26% and 27%;
underlying operating profit margin to range between 17.0% and 18.0%; and
free cash flow to range between $1.3 billion and $1.5 billion in 2014.
The company's 2014 outlook includes the impact of $120 million of previously announced charges expected to be incurred this year. The estimated aggregate amount of these charges is $395 million , $275 million of which was incurred in 2013. The free cash flow outlook for 2014 reflects the estimated impact of the charges incurred in 2013 and 2014 as well as the impact of the loss of free cash flow from disposals (approximately $375 million in aggregate).