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Reuters will marry Canadian information provider Thomson Corporation with quite a dowry - the former notched up a solid increase in revenue, and a hefty 43 per cent rise in underlying trading profit in 2007, its last year as a stand-alone entity. Strip out £85m worth of charges for goodwill amortisation and Thomson-related deal costs and adjusted pre-tax profits were 25 per cent higher at £345m.
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The merger with Thomson will be completed in April and Reuters chief executive Tom Glocer says that early indications for the honeymoon period look encouraging. "Despite the uncertain market environment...strong sales reflect our robust business mix." He is predicting underlying revenue growth of 9 per cent in the first quarter of 2008. Unlike many other media players, Reuters uses a subscription-based model, and does not rely on advertising, which is expected to be weak in 2008.
Emerging markets brought home the bacon for Reuters, with double digit underlying revenue growth, but there was also strong growth in transactions, enterprise information, and trade and risk management. Reuters' Core Plus strategy - to develop areas outside the core businesses - topped its own targets, delivering £50m in incremental cost savings, among other achievements.
Numis Securities rates Reuters as a stronger business now than in the last downturn, and believes that the merger could yield up to $1bn (£500m) of cost savings in its third year. The broker expects Reuters to report 2008 adjusted pre-tax profit of £415m and EPS of 27.9p (21.1p in 2007).
Click here for a guide to the terms used in IC results tables.
REUTERS (RTR) |
||||
|---|---|---|---|---|
| ORD PRICE: | 591p | MARKET VALUE: | £7.3bn | |
| TOUCH: | 590-591p | 12-MONTH HIGH: | 661p | LOW: 421p |
| DIVIDEND YIELD: | 2.0% | PE RATIO: | 34 | |
| NET ASSET VALUE: | 11p | NET DEBT: | 273% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2003 | 3.24 | 56 | 3.6 | 10 |
| 2004 | 2.34 | 396 | 26.0 | 10 |
| 2005 | 2.41 | 238 | 16.3 | 10 |
| 2006 | 2.57 | 313 | 22.6 | 11 |
| 2007 | 2.61 | 273 | 17.3 | 12 |
| % change | +2 | -13 | -23 | +9 |
Ex-div: 23 Mar Payment: 1 May |
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A marriage of equals is a good starting point for any corporate merger. Reuters and Thomson are a great match, as both have quality assets. However, Reuters is trading on a steep multiple of 21 times 2008 earnings estimates, which indicates that much of the merger's potential has already been factored into the share price.
Last IC View: Bid situation, 623p, 30 Jul 2007
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
