Thomson Reuters operating profit tops Wall Street estimates

NEW YORK (Reuters) - Thomson Reuters Corp TRI.NTRI.TO, parent of Reuters News, reported higher-than-expected quarterly operating profit on Thursday and said it would raise its dividend payout ratio and buy back more shares.

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Chief Executive Jim Smith said the company had spent just over half the $2 billion it had set aside for acquisitions to expand its main divisions and would love to spend the rest.

Operating profit rose to $262 million, or 27 cents a share, in the third quarter, from $173 million or 12 cents a share a year ago. Analysts, on average, expected profit of 19 cents a share, according to Refinitiv.

Thomson Reuters affirmed its 2019 and 2020 sales and earnings outlook. It said it intended to increase its dividend payout ratio to 50% to 60% of free cash flow, from 40% to 50% previously.

The company, controlled by Canada’s Thomson family, also said its board had approved a new buyback worth $200 million of shares both this year and next.

Revenue rose 10% to $1.41 billion in the quarter, slightly below estimates of $1.43 billion. So-called organic sales growth was 4%, matching the pace of the second quarter, driven by subscription sales to legal, corporate and other customers.

Its Toronto- and New York-listed shares dipped about 0.9 percent. They have each gained more than 30 percent in 2019.

The news and information provider posted single-digit sales increases in each of its three largest divisions, Legal Professionals, Corporates and Tax & Accounting Professionals. The Reuters News division saw organic revenue rise 3%.

The increase in operating profit reflected the revaluation of warrants the company holds in Refinitiv, which the London Stock Exchange (LSE) LSE.L has agreed to buy, Thomson Reuters said in its statement.

Thomson Reuters sold a majority stake in its financial-data business last year to a consortium led by Blackstone Group Inc BX.N. The LSE agreed on Aug. 1 to buy the financial-data business, now called Refinitiv, from Blackstone for $27 billion in an all-share deal.

Thomson Reuters will hold a 15% stake in the LSE on completion of the Refinitiv deal, which is expected in the second half of 2020, the companies said. A Thomson Reuters representative will also sit on the LSE board.

Under the agreement, Thomson Reuters can sell a third of its shares in each of the third and fourth years after completion, and the rest thereafter.

Thomson Reuters has set aside $2 billion of the $17 billion proceeds from the Blackstone deal for purchases to help expand its Legal, Tax & Accounting and Corporates businesses.

“We’re about just over half of the $2 billion that we have set aside for acquisitions,” CEO Smith said in an interview. “I’d love to find a way to spend the other half.”

During the quarter, the company acquired events company FC Business Intelligence (FCBI), which hosts exhibitions and conferences in sectors including pharmaceuticals, energy and transport, to help promote its Reuters News brand.

Additional reporting by Kenneth Li in New York; Writing by Nick Zieminski; Editing by David Clarke