Thomson Reuters Corp. (Reuters) reported on Tuesday, May 5, 2020, that its yearly sales outlook for the current financial year fell short against Wall Street estimates due to a narrow decline in quarterly sales and operating profit.
With the lengthy disruption of its business operations due to the coronavirus outbreak, Reuters considered plans to sell the shares it owned in Refinitiv, a global provider of financial market data and infrastructure, to retain cash flow of the company.
Missed Sales Targets
Reuters, controlled by Canada’s Thomson family, forecast a 1%-2% total revenue growth this year, which was far below its February estimate of 4.5%-5.5%, since the company believed that its business of selling information and software solutions electronically was not immune to the recent global economic downturn.
Meanwhile, the company reported its subsidiary news and information unit, Reuters News witnessed a 2% rise in first-quarter (Q1) revenue to $1.52 billion, which was helped by gains in its legal and corporates businesses. It also reported that its operating profit rose 6% to $290 million in Q1. However, the quarterly sales and operating profit of the company fell compared to an expectation; as Refinitiv disclosed that the adjusted earnings of Reuters was 48 cents a share, compared to 1 cent by Wall Street expectations.
Meanwhile, the company reported that it was targeting a $100 million cost reduction program for its expenses adjustment despite it claimed that it had no debt due until 2023 and had enough liquidity for the next 12 months. Steve Hasker, Chief Executive Officer (CEO) of Reuters, said in an interview, “We don’t plan any layoffs at this point in time,” adding that “We are focused on investing in our business.”
Plans for Selling Refinitiv Shares
With this coronavirus impact on Reuters’ sales outlook, the executives of the company have said that they, besides aiming to cut discretionary expenses, also expected to sell its partly owned data company Refinitiv to close in the second half of the year. Meanwhile, the London Stock Exchange said last month that it was looking forwards to complete its $27-billion takeover of Refinitiv, in which Thomson Reuters has a 45% stake, in the second half of 2020, with no plans to revise its savings targets as a deep recession looms.
In February, Reuters appointed a new CEO, Hasker who was a former Nielsen president by succeeding Jim Smith. The former CEO, Smith, a former journalist who oversaw a period of major change at the company, will stay on for a transition period and become chairman of the Thomson Reuters Foundation.
The company has already invested $1.3 billion at the beginning of the year to consider purchasing while Hasker said any purchases of the company would be considered “bolt-ons” to existing businesses and not in new sectors. Michael Eastwood, Chief Financial Officer of Thomson Reuters, said the company would continue to seek buyout opportunities as part of a $2 billion acquisition budget.
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