November 12, 2008 / 3:13 PM / 9 years ago

UPDATE 4-Thomson Reuters Q3 results beat expectations

* Q3 adjusted EPS $0.48 beats Wall Street view $0.34

* Markets division organic revenue growth slows to 5 pct

* Professional organic revenue growth steady at 6 pct

* Shares rise as much as 5.5 pct in London (Adds professional division background, updates share move)

By Robert MacMillan and Georgina Prodhan

NEW YORK/LONDON, Nov 12 (Reuters) - Thomson Reuters Corp TRIL.L (TRI.TO) reported stronger-than-expected quarterly results as gains in its professional division more than offset slowing growth in the business that serves financial institutions, sending its shares up as much as 5.5 percent.

The news and information publisher, which was formed by Thomson Corp’s purchase of Reuters Group Plc in April, did not provide financial forecasts for 2009, but affirmed its 2008 outlook for revenue and operating profit margin.

“If you look at our average monthly net sales, they’re positive again through October and positive in the third quarter,” Chief Executive Thomas Glocer said in a phone interview. “If you want to start thinking about growth for next year, that’s a good thing.”

The company’s London shares closed up 4.6 percent at 1,125 pence on Tuesday after trading as high as 1,135 pence.

The shares are down nearly 30 percent since April as the financial crisis has brought down giant institutions such as Bear Stearns and Lehman Brothers LEHMQ.PK, the kinds of businesses that are among the company’s biggest customers.

More than 100,000 jobs have disappeared in the global financial industry since mid-2007.

Third-quarter net income was $380 million, or 46 cents a share, compared with $2.97 billion or $4.61 per share a year ago. Excluding nonrecurring items, discontinued operations and other items, profit was 48 cents a share, beating the average analyst forecast of 34 cents, according to Reuters Estimates.

Last year’s net income included $2.7 billion in discontinued operations, primarily related to its sale of Thomson Learning’s higher education assets.

Pro forma revenue rose 8 percent to $3.33 billion, topping Wall Street forecasts of $3.24 billion. Pro forma figures assume the Thomson Reuters deal had closed on Jan. 1, 2007.

“The numbers look slightly ahead,” said Alex DeGroote, a media analyst at Panmure Gordon in London, adding that Thomson Reuters was “not too bearish on ‘09 markets growth potential.”

Thomson Reuters stood by its forecast for 2008 revenue growth of 6 to 8 percent excluding currency effects, and affirmed its forecast for an underlying operating profit margin of between 19 and 21 percent.

“NOT DISCRETIONARY GOODS”

The company raised its forecast for 2008 free cashflow margin to between 13 percent and 15 percent of revenue, excluding synergy and integration costs.

“We went out in February and said, in a company where there were a million moving pieces moving into an awful market, we would do 6-8 percent growth,” Glocer said.

“The fact that we don’t have to change that is a very good thing. Ditto the margin,” he said.

“Our products are not discretionary goods,” he added on a conference call, reiterating that the markets division, which serves financial institutions, could see positive growth in 2009.

Organic revenue growth at the markets division was 5 percent in the third quarter, slowing from 7 percent in the second quarter.

Investors watch this number because the unit accounts for about 60 percent of total revenue and 45 percent of profits.

Several analysts have said that Thomson Reuters revenue could fall in 2009, when the company is expected to bear the brunt of the impact from budget cutbacks and payroll cuts among the financial services companies that buy its news and data.

“Markets organic revenue growth came in slightly ahead,” UBS analyst Polo Tang wrote in a research note, referring to average analyst expectations of 5 percent organic growth.

“However, there is little color on the outlook into Q4 and beyond and we remain wary that the impact from heavy investment banking job cuts has yet to feed through into markets (division) revenues and clearly downside risk remains.”

The professional division, which sells databases and other deep information reservoirs to lawyers, accountants, scientists and the healthcare industry, reported 6 percent organic revenue growth, flat with the rise in the second quarter.

The unit represents about 40 percent of Thomson Reuters revenue and 55 percent of profits.

Investors have been worried that steady demand for professional division products such as Westlaw and PatentWeb would fail to provide a bulwark against shaky performance among its markets customers.

Investors will watch for similar signs at other electronic data publishers such as Reed Elsevier (REL.L), which is scheduled to report a trading update on Thursday.

Glocer said there had been a softening in sales of legal products to government, but the business was generally robust.

Thomson Reuters said the integration of the two companies was ahead of plan and had achieved $550 million of run rate savings through Sept. 30.

It said it remained committed to its dividend policy. (Reporters and editors involved in writing and editing this report may own Thomson Reuters securities and are bound by a Code of Conduct that restricts dealing in securities in companies on which a journalist is reporting.) (Editing by Tiffany Wu and Ted Kerr)

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