Reuters Holdings Plc showed another modest growth in pre-tax profits and a slowdown in revenue growth, but the market took one look at the figures and savaged the share price, slicing 53 pence off at 1,097p. The performance is put down to the lower level of new orders taken this year, with no improvement seen in the forseeable future. According to chief executive Peter Job the small rise in overall order level was offset by measures aimed at strengthening Reuter’s long-term market position. These include incorporation of new facilities into existing services without any additional charge, where previously an extra charge would have been made; the maintenance of price stability and even a drop in price in some cases; and waiving of some charges made to improve the quality and breadth of data offered by Reuter services. The aim is to maintain faster growth in earnings than in revenue. Although both rationalisation of its product line and further company reorganisation are planned, funding will still be provided for new projects, over and above those launched in the first half of this year. The two major ones, the Dealing 2000 Phase 2 foreign exchange matching system, and Globex financial futures matching system, are said to be proving themselves technically, if not financially. As anticipated, trading volumes were low and no indication could be given as to when and by how much these systems would be able to contribute. Nonetheless, subscriber interest in the Dealing 2000 is said to have remained high and an improvement in cash flow is anticipated as the system begins to move to more sites. At present, it is available in Frankfurt, Zurich, New York and London. Likewise, Globex is expected to improve its trading volume once the big Chicago Mercantile Exchange and Chicago Board of Trade contracts are installed on the system. Nonetheless, business in the foreign exchange market remained poor, although the Reuter foreign exchange dealing systems did manage to keep busy. The Instinet equities trading product saw a 70% increase in activity, with 1,700m US shares changing hands. In geographical terms, the most marked improvement in business was in the Americas, where contribution to profits and revenue increased nicely.
Growth in Asia
Contribution here stood at UKP7.7m against losses of UKP2.5m a year ago, while revenue rose by 16.9% to UKP123.7m at actual exchange rates and by 13.3% at comparable rates. Turnover in the Asia/Pacific area rose 6.9% to UKP143.2m at actual exchange rates, but remained practically unchanged at comparable rates. Its contribution improved by 7.8% to UKP63.9m. Europe, the Middle East and Africa saw a growth in revenue of 4.6% to UKP455m at actual exchange rates, 4.4% at comparable rates, while contribution rose 5.1% to UKP159.6m. Overall, Reuters turned in pre-tax profits up 10.2% at UKP187.4m, on turnover that rose 6.1% to UKP748.4m. Although net profits fell by 9.6% to UKP103m, this was due mainly to a UKP24.6m out-of-court tax settlement with the Australian tax office. The settlement, which was reached in June, related to a tax claim on the sale of Reuter shares in 1986 by an Australian company that Reuters subsequently acquired. New shares issued since 1991 to support maturing employee share schemes increased the weighted average number of shares in issue by 2.4m to 421.5m. Profit after taxation and before this extraordinary item was less alarming at UKP127.4m, a rise of 11%. These results were said to be more or less in line with the company’s expectations.
