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Thomson Reuters operating profit slips, pressure on trading

Thomson Reuters' third quarter operating profit fell 15 per cent because of declining revenue and higher costs at its division that serves the financial industry, the company reported on Friday.

The drop underscored problems facing some clients, such as banks and brokerages that are reducing staff and trimming costs to cope with increased regulation and the struggling global economy.

At the same time, Thomson Reuters is investing in customer service for its flagship product Eikon, which targets the financial sector.

Chief executive James Smith, pictured, warned that revenue growth still faces a “challenging environment”. But he expects further operational improvements to make the group’s businesses more efficient, helping to meet its full-year financial targets. The statement was not more explicit about any plans to control costs. In February, Smith forecast 2012 revenue growth in the low single-digits and underlying operating profit margin of between 18 and 19 per cent.

The group reaffirmed its 2012 forecast, but its underlying operating profit, which excludes divestitures, fell to $585 million from $690 million. The corresponding margin slipped to 18.5 per cent from 21.6 per cent in the same period a year ago. In the third quarter last year, its underlying profit margin was “the high-water mark” for 2011, it said.

Third-quarter revenue from ongoing businesses this year rose one per cent before currency changes to $3.2 billion – in line with analysts’ expectations. Stripping out acquisitions, divestitures and currency changes, revenue fell one per cent.

Thomson Reuters’ Eikon desktops increased to 25,600 at the end of the third quarter, up about 35 per cent from the end of the second quarter.

The company’s trading business within its Financial & Risk operation, which includes Reuters news agency, recorded an eight per cent decline in revenue to $816 million in the quarter. Before currency effects it dropped four per cent.

Thomson Reuters reported adjusted earnings per share of 54 cents for the quarter, unchanged from a year ago. ■

Thomson Reuters