Reuters is to float its trading system subsidiary Instinet. The move to offer a minority stake in the company was announced as Reuters unveiled strong third quarter revenue, up by 16% to £888 million from £763 million for the same period last year.
Underlying revenue for the quarter increased by 11%, in line with the rate of growth in previous quarters this year. Reuters executives say the rate of underlying revenue growth reflects good performance in the core business combined with continued strong growth at Instinet and Reuterspace.
As expected, Reuters has decided in principle to float Instinet and has begun the preparatory work for an initial public offering (IPO) in the US of a minority stake. The company says an IPO will support Instinet’s geographic, customer and product expansion and provide an acquisition currency if required.
Peter Job, chief executive, says the vendor is reaping substantial rewards from its decision three years ago to offer lower-priced financial information feeds for distribution over the public network. "The vision of transforming the corporation for the Internet remains right in our minds and the spending programmes to achieve this are moving ahead.”
At Reuters Financial, revenue rose by 8% to £438 million (US$639 million) in the third quarter compared with the same quarter last year, with underlying revenue up 7%. Reuters flagship information product, 3000 Xtra, has now sold 14,000 accesses, the company reports. Over 60,000 accesses of ReutersPlus, the US domestic equity product, have also been sold. ReutersPro was launched this summer and uses the same infrastructure to extend the vendor's reach into higher tier segments including the institutional buyside.
Within Trading Solutions, revenue for RTS grew by 4% to £196 million (US$286 million); underlying revenue increased by 2%. Revenue from transaction products has held up well, says Job. The rate of cancellation of Dealing terminals has reduced significantly this year, the company states, whilst foreign exchange matching revenues have increased largely as a result of good performance in forwards. Application Enterprise Systems sales are also picking up as customers start to focus on new dealing room infrastructure after Y2K. Customer interest also is being shown for Retail Solutions, Reuters reports, which allow customers who want to use Internet technology and customised content to reach their clients directly.
Revenue for Instinet grew by 46% to £189 million (US$276 million); underlying revenue increased by 32%. "This good year-on-year performance reflects the growth of volumes in equities markets, especially in the US which accounted for over 75% of Instinet’s revenue in the quarter," the company states.
Instinet continued to spend heavily on expanding its structure and capabilities and on diversification of its product line. It plans to launch its retail product this quarter.