Thomson Reuters says Europe business worse than expected

Tue Jul 31, 2012 4:50pm EDT
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By Jennifer Saba

(Reuters) - Thomson Reuters Corp TRI.N TRI.TO said it expects net sales to financial institutions to continue to decline for the rest of this year as conditions in Europe have deteriorated more than anticipated and major banks are still slashing costs.

Shares of the company fell about 3 percent after it said net sales in its Financial & Risk division were still negative in the second quarter and likely to remain so through the fourth quarter. Net sales, which are total sales minus cancellations, are an important indicator because of Thomson Reuters' subscription-based business model. Its revenue typically lags sales by about 12 months.

"It is fair to say the external environment is worse than we had expected at the beginning of the year, particularly in Europe and with the big global banks," Chief Executive James Smith told analysts on a conference call.

"While we remain confident in the trajectory of our business, achieving positive net sales in the fourth quarter will be challenging as the market environment continues to deteriorate," he said.

In the second quarter, Europe accounted for approximately 40 percent of Financial & Risk revenue.

The global news and information provider said on Tuesday that revenue from ongoing businesses rose 3 percent before currency changes to $3.2 billion in the second quarter, which was in line with analysts' expectations. (Click here for a graphic:

Financial & Risk, which serves banks and other financial institutions, reported a 1 percent drop in organic revenue to $1.8 billion. Organic revenue strips out acquisitions, divestitures and currency changes.

"I thought it was a pretty weak quarter," said Evercore Partners analyst Doug Arthur. "Clearly a big benchmark for them all year has been returning to net sales growth for Financial & Risk by year end."   Continued...