The drop in core subscription revenue from £624 million in Q1 2003 to £556 million in the three months to end-March 2004 was an improvement on Reuters' forecast underlying decline of nine per cent or slightly better.

Tom Glocer, Reuters chief executive, comments: "In the first quarter, we saw a noticeable improvement in trading conditions, particularly in the US, where new sales over the quarter outpaced cancellations for the first time since March 2001."

Consolidation in the financial services sector is likely to lead to a more gradual recovery in the second half, he says.

With most of the improvement already priced into the stock, Reuters' shares slipped slightly on the news to 408.75 pence, down 1.5% on the overnight close of 4.15 pence.

The trading update is the first since Reuters restructured its reporting lines into four new customer segements: Sales & Trading; Research & Asset Management; Enterprise; Media.

Revenue from Sales & Trading, comprising 50% of group turnover, was down nine per cent to £300 million for the quarter. The firm says it successfully migrated a total of 7000 users of legacy 2000/3000 series products to next generation Reuters products, with the majority upgrading to Reuters 3000Xtra. The hosted version of 3000 Xtra, which enables customers at smaller sites to contain their infrastructure costs, also gained traction during the quarter, with nearly 1400 accesses installed, up from 500 at year end.

Renewed activity in foreign exchange markets led to a two per cent increase in users numbers for Reuters Dealing products. Spot and forward FX transactions systems both showed record volumes during the quarter, driving an eight per cent underlying increase in usage revenues in Sales & Trading.

Revenue from Research & Asset Management was £65 million, 11% of total revenue for the quarter. Revenue was up three per cent on an actual basis compared to the same period last year, reflecting the acquisition of Multex, but down five per cent on an underlying basis.

Enterprise revenue was £116 million, 19% of total revenue for the quarter. Revenue declined by 19% (15% on an underlying basis) compared to the same period last year, driven primarily by a fall in datafeed revenues. Reuters attributes the slippage to customer rationalisation of datafeed usage; lack of new outright sales in the market data systems software business; and withdrawal from consulting as part of the Fast Forward cost reduction programme.

The Enterprise Information Products division, which provide pricing and reference data to mid and back offices, saw growth of 46% on an underlying basis compared to the equivalent period last year, albeit off a small base. Wins in the quarter included a Reuters DataScope sale at State Street.