Reuters Holdings Plc’s finance director, Rob Rowley had a somewhat better story to tell than he might have expected six months ago. That was because the London-based news and information organization had a better fourth quarter than anticipated with pre-tax profits in the year to December up 18% to #599m, on turnover that rose 17% to #2,703m. This may be mainly attributed to the continued consolidation in its client base of banks and other financial institutions being offset by record volumes traded on its equities and foreign transaction systems. Acquisition expenditure was substantially down on the year before and contributed most to a #316m hike in cash balances at the year-end to #850m. Reuters is actively seeking ways of returning surplus cash to shareholders in the most tax- efficient way. However, that is far more difficult to do in the UK than in the US, where about one third of the equity is held, according to Job. He added that representations to the Inland Revenue and the Securities & Exchange Commission should be completed this year. Rowley and Job were extremely reluctant to speculate on what constituted surplus cash as there were a lot of constraints on what they could say while negotiations continued. Rowley said that since a similar share buy-in in 1993, he believed Reuters to be the only company to have been granted a tax credit for the shareholders from whom the shares were acquired, which is the issue at the centre of negotiations. The repurchase plans helped push the share price up 26 pence to 677 pence. In terms of products, transaction product revenues continue to be the fastest growing, with revenues up 27% to #671m. The major contributors to his rise were the Instinet share dealing and Dealing 2000 foreign exchange products. Information products revenue growth continued to decline as predicted with revenues up 14% to #1,879m in the year, compared to a 22% rise last time. This is the area affected most by the consolidation of the customer base. Media product revenues increased by 9% to #153m. Revenues from the Americas exceeded $1,000m for the first time, boosted mainly by Instinet, and Teknekron Software Systems, two of Reuters’ most successful acquisitions. Instinet revenues were up 31% to #243m and Teknokron achieved sales of #77m in its first full year as a Reuters company. Other US-based companies saw revenues up 8% to #417m. The contribution from the US actually fell 28% to #27m, partly because of increased expenditure at Quotron, the retail equities subsidiary, in order to integrate it into the group, which should ensure it breaks even in 1996. By contribution, Reuters means earnings after local costs but before costs incurred elsewhere in the world that also benefit the local company. Revenue from Europe, Middle East and Africa were up 18% to #1,475m, with UK and Eire turnover up 19% to #435m without the benefit of acquisitions. Job said Reuters had only spent about #500m on all its acquisitions since going public in 1984. Asia-Pacific revenues were up 9% to #471m, again without acquisitions and were up 6% in Latin America, the fall from 23% last time due mainly to continuing problems in Mexico, Argentina and Venezuela. Job expected to keep costs tightly under control this year, as research and development costs will be lower, with the 2000 product range reaching the end of its cycle, to be replaced by the 3000 range throughout the year. The savings on development will help pay for launch costs. Costs rose 16%, a shade under revenue growth, reversing the situation of the previous year. Losses from associate companies jumped to #12m, from #2m last time. Rowley said about half the increase was non- recurring. The final dividend of 7.5 pence, makes a total of 9.8 pence for the year, a 23% rise on last time. Job repeated his prediction that we cannot be assured of double-digit revenue growth this year, as the new 3000 range will not generate any sizeable revenue in 1996.
