Reuters Group Plc posted better than expected full-year profits on Wednesday thanks to disposals, cost cutting, improving sales and a return to profit at electronic trading unit Instinet, which it may sell. The news and information provider said group operating profits jumped 52 percent to 198 million pounds ($373 million) from 130 million in 2003. Revenues fell 11 percent year-on-year to 2.885 billion pounds, partly due to currency movements.
Underlying revenues for the core subscription products Reuters sells to banks, brokerages and fund managers have narrowed for the last six quarters, after they started declining at the end of 2001 and widened for nearly two years.
Analysts expect those revenues, which account for more than 90 percent of the company's total core revenues, will break into positive territory by the end of the year.
"We are pleased with the progress made by Reuters in 2004 and believe the group is well-positioned going into 2005," Numis media analysts wrote in a note.
Chief Executive Tom Glocer said in a statement that the company was beginning "to look beyond recovery to growth".
Reuters confirmed its forecast of a 1.5 percent decline in underlying revenue at its core subscription business for first quarter 2005 and said it expects "further gradual improvement" in the second quarter after good January net sales.
Subscription sales are a leading indicator of revenue, as Reuters recognises a sale when it signs up a new customer but does not record any revenue until the product is installed.
Core revenues, which excludes subsidiaries such as Instinet , were 2.361 billion pounds, ahead of the 2.338 billion forecast by a group of 11 analysts polled by Reuters.
Reuters shares were up 1.35 percent to 413-1/4 pence at 1223 GMT after dropping more than 3 percent on early concerns about a higher-than-expected 2005 restructuring charge and more planned cost cutting being pushed into 2006.
"The comments on the top line suggest to me that the story is still intact, but it's clearly getting harder to deliver the cost savings," ABN Amro analyst Paul Gooden said.
Reuters projected cost savings for its Fast Forward turnaround plan of 340 million pounds by the end of 2005, leaving 100 million for the final year of the programme.
Reuters had not previously provided a 2005 forecast, but market expectations had been about 10 percent higher.
Chief Financial Officer David Grigson told a conference call that some savings had been pushed back because of delays in finalising a deal to sell the Radianz unit to BT Group.
Cost cuts associated with Fast Forward were ahead of schedule last year, with 234 million pounds of savings delivered against a target of 220 million pounds.
Reuters core operating profits before amortisation of goodwill, intangibles, impairment and restructuring charges of 357 million pounds were slightly ahead of the 353 million analysts had been expecting. Margins fell to 15.1 percent in 2004, compared with 15.3 percent in 2003.
Core profit before taxes was 232 million pounds ahead of analyst expectations of 219 million and up from 212 million in 2003. Pretax profit for the year was 438 million pounds, up from 56 million pounds in 2003.
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