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Thomson Reuters revenue stagnates

11 February 2015  |  2372 views  |  0 Source: Thomson Reuters

Thomson Reuters (TSX / NYSE: TRI) today reported results for the full year and fourth quarter ended December 31, 2014.

The company achieved its 2014 Outlook and today provided a business outlook for 2015. Increases in earnings and profitability in both periods reflect lower charges (described below) than in the prior-year periods.

Revenues grew 1% for the full year and the fourth quarter, before currency
Organic revenue flat for the full year and up 1% in the fourth quarter
Financial & Risk net sales were positive for both the full year and the fourth quarter
First year of positive net sales since 2008
Adjusted EBITDA increased 8% for the full year and was up 30% for the fourth quarter
The margin for the full year was 26.3% vs. 24.5% in the prior year
Underlying operating profit increased 14% for the full year and was up 65% for the fourth quarter
The margin for the full year was 17.0% vs. 15.0% in the prior year
Full-year adjusted EPS was $1.85 vs. $1.54 in 2013 and fourth-quarter adjusted EPS was $0.43 vs. $0.21 in the prior-year period
Excluding charges from both periods, adjusted EPS was $2.00 for the full year and $0.53 for the fourth quarter
Foreign currency had a $0.02 negative impact on adjusted EPS for the full year and fourth quarter
Board approves $0.02 annual dividend increase to $1.34 per share, representing the 22nd consecutive annual increase

"2014 was a year of solid progress with good execution across the company, and marks the third consecutive year when we have met, or exceeded, our financial outlook," said James C. Smith , chief executive officer of Thomson Reuters. "Our Financial business recorded its first year of positive net sales since 2008, and our Professional businesses continued to build from a solid foundation and take advantage of attractive growth opportunities. I am pleased to say that we expect to return to organic revenue growth and achieve greater profitability in 2015."

Revenues from ongoing businesses were $12.6 billion , a 1% increase before currency.
Adjusted EBITDA increased 8% and the margin was 26.3% vs. 24.5% in the prior year. The increase was primarily due to lower charges compared to the prior year. Charges for 2014 were $135 million vs. $357 million in 2013.
Excluding charges from both periods, adjusted EBITDA was up 1% and the related margin was 27.4% vs. 27.3% in the prior year.
Underlying operating profit increased 14% and the margin was 17.0% vs. 15.0% in the prior year. The increase was also primarily due to lower charges in 2014.
Excluding charges from both periods, underlying operating profit increased 1% and the related margin was 18.0%, unchanged from the prior year.
Adjusted EPS was $1.85 compared to $1.54 in the prior year.
Excluding charges from both periods, adjusted EPS was $2.00 vs. $1.93 in the prior year.
Free cash flow was $1.4 billion vs. $1.2 billion in the prior year. The increase reflected a significant pension contribution in 2013, partially offset by higher severance payments in 2014.

Full-Year Business Segment Highlights
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.

Financial & Risk

Revenues were down 2% (down 3% organic) primarily due to the impact of negative net sales in 2013 and a 5% organic decline in transactions-related revenues. Recoveries revenues increased 1%.
Recurring revenues decreased 2% (down 3% organic) primarily due to the impact of negative net sales in 2013.
Transactions-related revenues were flat (down 5% organic) due to lower trading volumes in fixed income and foreign exchange markets.
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 flat (down 1% organic).
Net sales were positive for the full year, and were positive in the Americas and Asia but negative in EMEA.
EBITDA increased 9% primarily due to savings related to simplification programs and lower charges of $130 million compared to $245 million in the prior year. The margin was 24.3% vs. 21.9% in the prior year.
Excluding charges from both periods, the margin was 26.3%, up 70 basis points from the prior year.
Excluding charges from both periods and the negative impact of foreign currency, the margin was 26.7%, up 100 basis points from the prior year.
Operating profit increased 17%, primarily due to savings related to simplification programs and lower charges. The margin was 14.5% compared to 12.3% in the prior year.
Excluding charges from both periods, the margin was 16.5%, up 50 basis points from the prior year.
Excluding charges from both periods and the negative impact of foreign currency, the margin was 16.9%, up 80 basis points from the prior year.

Legal

Revenues increased 2% (1% organic). Excluding US print, revenues grew 3% (2% organic). Recurring revenues were up 4% (3% organic).
Solutions businesses (46% of Legal revenues) grew 7% (6% organic), driven by strong growth across the solutions offerings. Solutions businesses represent all of Legal's revenue excluding US print and US online legal information.
US online legal information (38% of Legal revenues) declined 1%.
US print (16% of Legal revenues) declined 7%.
EBITDA increased 4%. The margin was 36.6% compared to 35.6% in the prior year.
Excluding 2013 charges, the prior-year margin was 37.0%.
Operating profit increased 6% with a margin of 28.4% vs. 26.9% in the prior year.
Excluding 2013 charges, the prior-year margin was 28.3%.

Tax & Accounting

Revenues increased 12% (9% organic) with growth across each segment led by the Corporate and Professional businesses. Recurring revenues were up 12% (8% organic).
EBITDA increased 10% and the margin was 30.4%, unchanged from the prior year. Improvement resulting from lower charges than the prior year was offset by reinvestment in the business.
Operating profit increased 15% and the margin was 21.5% compared to 20.7% in the prior year.

Intellectual Property & Science

Revenues increased 3% (2% organic) driven by recurring revenue growth of 7% (77% of revenues), partially offset by a 6% decline in transactions-related revenues (23% of revenues).
EBITDA increased 8% with a margin of 32.4% compared to 31.0% in the prior year. The EBITDA margin increase was primarily due to lower charges than the prior year.
Operating profit increased 6% with a margin of 23.6% compared to 22.9% in the prior year. The operating profit margin increase was a result of lower charges than the prior year.

Corporate & Other (Including Reuters News)

Reuters News revenues were $319 million , down 1% from 2013.
Corporate & Other costs were $305 million compared to $320 million in 2013.

Revenues from ongoing businesses were $3.2 billion , a 1% increase before currency, reflecting 4% combined growth from the company's Legal, Tax & Accounting and Intellectual Property & Science businesses, which was offset by a 1% decline in Financial & Risk.
Adjusted EBITDA increased 30%, and the margin was 24.7% vs. 18.7% in the prior-year period, primarily due to savings related to simplification programs and lower charges.
Excluding charges from both periods, adjusted EBITDA was unchanged and the margin was 27.1%, up 50 basis points from the prior-year period.
Underlying operating profit increased 65%, and the margin was 15.5% vs. 9.2% in the prior-year period, primarily due to savings related to simplification programs and lower charges.
Excluding charges from both periods, underlying operating profit was unchanged and the margin was 17.9%, up 20 basis points from the prior-year period.
Adjusted EPS was $0.43 compared to $0.21 in the prior-year period with foreign currency having had a $0.02 negative impact on EPS in the quarter.
Excluding charges from both periods, EPS was $0.53 , up 8% from the prior-year period.

Fourth-Quarter Business Segment Highlights
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.

Financial & Risk

Revenues were down 1% (down 2% organic) primarily due to lower price realization resulting from the migration of some legacy foreign exchange and buy-side products to the Unified Platform. Recoveries revenues increased 5%.
Recurring revenues decreased 2% (down 3% organic) due to the lower price realization described above.
Transactions-related revenues were flat (down 3% organic) with increased trading volumes in foreign exchange markets offset by a decline in fixed income revenues.
By geography, revenues in EMEA were down 2%, revenues in the Americas were flat and revenues in Asia were down 2%.
Net sales were positive for the quarter, and were positive in the Americas and Asia but negative in EMEA.
EBITDA increased 47% primarily due to savings from simplification programs and lower charges ( $70 million ) compared to the prior-year period ( $172 million ). The margin was 22.4% vs. 14.6% in the prior-year period.
Excluding charges from both periods, the margin was 26.8%, up 190 basis points from the prior-year period.
Excluding charges from both periods and the negative impact of foreign currency, the margin was 27.3%, up 250 basis points from the prior-year period.
Operating profit increased by $112 million primarily due to savings related to simplification programs and lower charges. The margin was 12.1% compared to 4.8% in the prior-year period.
Excluding charges from both periods, the margin was 16.5%, up 100 basis points from the prior-year period.
Excluding charges from both periods and the negative impact of foreign currency, the margin was 17.3%, up 190 basis points from the prior-year period.

Legal

Revenues increased 2%. Excluding US print, revenues grew 4% (all organic), the fourth sequential quarter of improving organic revenue growth.
Solutions businesses (46% of Legal revenues) grew 8% (7% organic), driven by strong growth from Serengeti, Practical Law and Pangea3. Solutions businesses represent all of Legal's revenue excluding US print and US online legal information.
US online legal information (38% of Legal revenues) was flat.
US print (16% of Legal revenues) declined 6%.
EBITDA increased 10% due to lower charges than in the prior-year period. The margin was 34.3% compared to 31.3% in the prior-year period.
Excluding charges from the prior-year period, the 2013 margin was 35.6%.
Operating profit increased 15% with a margin of 26.1% vs. 22.9% in the prior-year period.
Excluding charges from the prior-year period, the 2013 margin was 27.2%.

Tax & Accounting

Revenues increased 10% (7% organic) driven primarily by the performance of the Corporate and Professional businesses.
EBITDA increased 4% and the margin was 33.2% compared to 34.5% in the prior-year period. The EBITDA margin decline was primarily related to organic reinvestment in the business.
Operating profit increased 6% and the margin was 25.9% compared to 26.4% 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 decreased 1% (down 1% organic) with subscription revenue growth of 6% (75% of revenues) offset by a 17% decline in transactions-related revenues (25% of revenues) compared to 16% transactions-related revenue growth achieved in the fourth quarter of 2013, making for a difficult comparison.
EBITDA increased 27% with a margin of 35.3% compared to 27.3% in the prior-year period. The EBITDA margin improvement primarily reflected lower charges than in the prior-year period.
Operating profit increased 33% with a margin of 26.8% compared to 19.6% in the prior-year period. The operating profit margin increase primarily reflected lower charges than 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 were $79 million , unchanged from the prior-year period.
Corporate & Other costs were $97 million compared to $129 million in the prior-year period.

Business Outlook (Before Currency)

Thomson Reuters today issued its business outlook for 2015. The company expects:

Positive organic revenue growth;
Adjusted EBITDA margin to range between 27.5% and 28.5%;
Underlying operating profit margin to range between 18.5% and 19.5%; and
Free cash flow to range between $1.550 billion and $1.750 billion in 2015.

The company's 2015 Outlook assumes a constant currency basis with no further acquisitions or divestitures. In light of the increased volatility we have recently seen in the foreign exchange markets, currency is likely to have a higher-than-usual impact on our results in 2015.

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