Reuters stems sales slide; unveils growth strategy
26 July 2005 | 4714 views | 0
UK news and information group Reuters has unveiled a growth stategy that will succeed the current 'fast forward' cost-cutting programme after reporting its first rise in quarterly recurring revenue since Q3 2001.
Reuters' recurring revenue increased 0.4% to £547 million in the second quarter to the end of June.
Tom Glocer, Reuters chief executive, says: "It is a huge step forward for Reuters to see our most closely watched revenue measure - underlying recurring revenue - back in positive territory in Q2."
The vendor expects underlying recurring revenue growth of between one and two per cent in the second half of the year.
Reuters says its Fast Forward programme, which is due to complete at the end of this year, remains on track to deliver £440 million annualised cost savings in 2006.
But despite the positive news, Reuters shares had slipped 6.85% by mid-day after the vendor outlined future spending and growth plans.
The new strategy is expected to deliver three additional percentage points of revenue growth in 2008. There will also be an incremental £150 million of cost savings by 2010, taking total annualised cost savings since 2001 to over £1 billion.
The company plans to reduce the number of data centres it operates from 160 to just 10 globally by 2010. Glocer told reporters that "some" product development jobs may go although specific numbers were not disclosed.
The vendor says it will focus on electronic trading and will launch a multi-asset trading platform for markets including fixed income, derivatives, commodities and energy. The vendor says it will also concentrate on producing "high value" analytical content for the financial markets. Reuters is also targeting emerging markets and plans to scale up its operations in China and India.
Reuters is planning on spending an additional £40 million in the second half, with £25 million in restructuring. The restructuring costs will grow to around £70 million in 2006, £60 million in 2007 and £15 million in 2008.
The cost of investment will be £15 million in the second half of 2005, along with £50 million in 2006 and £20 million in 2007 which will be deducted from the firm's earnings.
Reuters also intends to buy back £1 billion of its own shares over the next two years, including the return of around $1 billion from the sale of Instinet.