REUTERS - FIRST QUARTER REVENUE STATEMENT
for the three months to 31 March 2004
The press release can be downloaded here.
London -- This statement refers to Reuters core revenues only. Instinet Group, the electronic brokerage in which Reuters has a 63% stake, will report its first quarter results on 28 April, after which Reuters will publish a consolidated Group revenue statement including a US to UK GAAP reconciliation for Instinet Group revenues.
- Reuters Q1 revenue of 598 million British pounds (2003: 670 million British pounds), down 8.2% on an underlying basis (10.7% on an actual basis)
- Reuters Q1 recurring revenue of 556 million British pounds(2003: 624 million British pounds), down 8.4% on an underlying basis, ahead of Reuters forecast underlying decline of 9% or slightly better
- Recurring revenue expected to decline between 6% and 6.5% on an underlying basis in the second quarter
Tom Glocer, Reuters Group Chief Executive, said: "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. We are continuing to build competitive momentum, with good sales wins in all three of our financial segments - for Reuters 3000 Xtra at Royal Bank of Canada and AIG, hosted Reuters 3000 Xtra at New Star Asset Management, Reuters Plus at SunTrust Robinson Humphrey, Reuters Knowledge for Investment Management at Lord Abbett and Mitsubishi Trust International and Reuters DataScope at State Street."
"Now that we have achieved a better than forecast sales performance in the first quarter, we expect that our second quarter underlying recurring revenue decline will improve to between 6% and 6.5%. We continue to foresee a more gradual rate of recovery in the second half."
Revenue review
Reuters revenue for the three months to 31 March 2004 was 598 million pounds, down 10.7% compared to the same period in 2003. On an underlying basis, adjusting for the impact of acquisitions, disposals and currency movements, this represents an 8.2% decline.
Recurring revenue, which represents 93% of Reuters core revenue for the three months to 31 March 2004, was 556 million British pounds, down 8.4% on an underlying basis, ahead of Reuters forecast underlying decline of 9% or slightly better.
Sales & Trading segment
Revenue from Sales & Trading was 300 million British pounds, 50% of total revenue for the quarter. Revenue was down 9% (6% on an underlying basis) compared to the same period last year but showed small underlying increases over the previous quarter for both recurring and usage revenue, reflecting recent market recovery and good competitive momentum.
Activity during the first quarter focused on three areas - migrating customers from legacy to new products, growing new revenues and strengthening Reuters Treasury franchise.
Reuters successfully migrated a total of 7,000 users of legacy 2000/3000 series products to next generation Reuters products, with the majority upgrading to Reuters 3000Xtra. Migrations are expected to be biased more towards the new Reuters Trader product as it gains sales momentum in the second half of this year.
Reuters continues to win new users of Reuters 3000 Xtra and BridgeStation Plus. These products saw strong revenue and access growth driven both by migration upgrades and new sales, mainly to large sell-side customers including Royal Bank of Canada. In addition, the hosted version of Reuters 3000 Xtra, which enables customers at smaller sites to contain their infrastructure costs, gained traction during the quarter, with nearly 1,400 accesses installed, up from 500 at year end.
The strength of Reuters franchise in Treasury, coupled with renewed interest in FX as an asset class, led to a return to growth in the size of Reuters Dealing community, which saw a 2% increase in user numbers over the same quarter last year. Reuters spot and forward FX transactions systems both showed record volumes during the quarter, driving an 8% underlying increase in usage revenues in Sales & Trading. Reuters also saw the first trades on its newly-launched Matching for Interest Rates product, which is the latest step towards capturing a greater proportion of Treasury trading flows.
Research & Asset Management segment
Revenue from Research & Asset Management was 65 million British pounds, 11% of total revenue for the quarter. Revenue was up 3% on an actual basis compared to the same period last year, reflecting the acquisition of Multex, but down 5% on an underlying basis.
The Research & Asset Management segment also saw good sales of Reuters 3000 Xtra, including to AIG and to New Star Asset Management, where the hosted version displaced Bloomberg. In addition, the strength of the Multex product line was demonstrated by the success of Reuters Knowledge for Investment Management (RKIM) including competitive displacements of Thomson at Lord Abbett and Mitsubishi Trust International. Wins for Reuters Plus included 200 accesses at SunTrust Robinson Humphrey.
The decline in Knowledge & Wealth Manager Family accesses during the first quarter was entirely attributable to the cancellation of a single European contract of Reuters Markets Monitor, with an annual revenue impact of £2 million.
Enterprise segment
Enterprise revenue was 116 million British pounds, 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, reflecting customers' rationalisation of datafeed usage; lack of new outright sales in the Market Data Systems software business, where Reuters large market share affords few new opportunities; and Reuters withdrawal from much of its consulting business as part of Fast Forward.
Reuters continued to see strong performance from Enterprise Information Products which provide pricing and reference data to mid and back offices. These products 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.
Media segment
Media revenue was 35 million British pounds, down 5% (2% on an underlying basis) compared to the same period last year, reflecting the relative resilience of the agency business, which provides news to traditional media outlets. Reuters recently announced its decision to strengthen the competitive advantage of news to its core business, including reuters.com, by limiting access to Reuters news via other financial news websites. This is expected to cause a modest decline in Media revenues in the second half of this year.
Recoveries
Revenue from Recoveries (not attributed to the Segments) was 82 million British pounds, down 14% (11% on an underlying basis) compared to the same period last year. Recoveries are charges incurred by Reuters for third party data, communications and installation costs, which are billed directly to customers. This revenue decline was largely driven by customers' reduction of discretionary data costs.
Currency
Currency movements had an adverse effect of 25 million British pounds (4%) on Reuters revenues in the first quarter of 2004, primarily driven by US dollar weakness against Sterling.
If current exchange rates were to persist throughout 2004, there would be a 1% negative impact on Reuters core full year operating margin, largely driven by the recent appreciation of Sterling against the Euro.
Reuters prospects
Following the improvement in its first quarter sales performance, Reuters is expecting an underlying recurring revenue decline of between 6% and 6.5% in the second quarter of 2004, compared to a decline of 8.4% in the first quarter.
Reuters is expecting a more gradual improvement in the rate of recurring revenue decline in the second half of 2004. This recognises the impact of further consolidation in financial services and of Reuters recently announced plans to limit access to Reuters news from other financial news websites.
Forward-looking statements
This document contains certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 with respect to Reuters Group's financial condition, results of operations and business, and management's strategy, plans and objectives for the Group. In particular, all statements that express forecasts, expectations and projections with respect to certain matters, including trends in results of operations, margins, growth rates, overall financial market trends, anticipated cost savings and synergies and the successful completion of restructuring programmes are all forward-looking statements. These statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to:
- Reuters ability to realise the anticipated benefits of its "Fast Forward" transformation programme
- Unfavourable conditions in financial markets
- The impact of currency and interest rate fluctuations on Reuters Group's reported revenue and earnings
- Difficulties or delays that Reuters Group may experience in developing or responding to new customer demands or launching new products
- The dependency of Reuters Group on third parties for the provision of certain network and other services
- Any significant failures or interruptions experienced by the networks or systems of Reuters Group and such networks' ability to accommodate increased traffic
- Reuters Group's exposure to a decline in the valuation of companies in which it has invested and of its lack of management control over all such companies
- The impact of significant competition on Reuters Group's business
- Changes in the regulatory or competitive environment
- Adverse governmental action in countries where Reuters conducts reporting activities
- The ability of the Group to realise the benefits of acquisitions
For additional information, please see "Risk Factors" in the Reuters Group PLC Annual Report and Form 20-F for the year ended 31 December 2003. Copies of the Annual Report and Form 20-F are available on request from Reuters Group PLC, 85 Fleet Street, London EC4P 4AJ. Any forward-looking statements made by or on behalf of Reuters Group speak only as of the date they are made. Reuters Group does not undertake to update any forward-looking statements.
Contacts
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Press - US
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Investors
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Notes
Reuters ( www.about.reuters.com ), the global information company, provides indispensable information tailored for professionals in the financial services, media and corporate markets. Our information is trusted and drives decision making across the globe based on our reputation for speed, accuracy and independence. We have 15,500 staff in 92 countries, including some 2,400 editorial staff in 197 bureaux serving approximately 130 countries, making Reuters the world's largest international multimedia news agency. In 2003, the Reuters Group had revenues of 3.2 billion British pounds.
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Notes to Analysts
This is the first time that Reuters has reported performance using its redefined customer segments: Sales & Trading; Research & Asset Management; Enterprise; Media. Background information and financial data on these new segments can be found at http://www.about.reuters.com, with financial data now updated to include Q1 revenues and accesses.
Underlying percentage change excludes acquisitions and disposals since 1 January 2003 and is stated at constant exchange rates.
This release includes certain non GAAP figures which are performance measures used to manage the business. Reconciliations to equivalent UK GAAP figures can be found at www.about.reuters.com, in the Investors section under Financial Data.