Thomson Reuters Corp (TRI)

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Thomson Reuters Corporation (TRI)

Q1 2009 Earnings Call

May 07, 2009 10:00 am ET


Frank Golden - SVP of IR

Tom Glocer - CEO

Bob Daleo - CFO


Mark Braley - Deutsche Bank

Drew McReynolds - RBC Capital Markets

Paul Gooden - RBS

Paul Steep - Scotia capital

Sami Kassab - Exane BNP Paribas

Peter Appert - Piper Jaffray

Colin Tennant - Nomura

Vince Valentini - TD Newcrest

Patrick Wellington - Morgan Stanley

Jeffrey Fan - UBS Securities

Giasone Salati - Execution

Randal Rudniski - Credit Suisse



Ladies and gentlemen, thank you for standing by. Welcome to Thomson Reuters first-quarter 2009 Earnings Call. (Operator Instructions) As a reminder, this call is being recorded. I would now like to turn the conference over to our host, Mr. Frank Golden, Senior Vice President of Investor Relations. Please go ahead.

Frank Golden

Good morning and thank you for joining us. We will begin today with our CEO, Tom Glocer, who will be followed by Bob Daleo, our CFO. Following their presentations, we will open the call for questions. I would ask that you please limit yourself to one question each.

Today's presentation contains forward-looking statements. Actual results may differ materially due to a number of risks and uncertainties discussed in reports and filings that we provide to regulatory agencies.

You can access these documents on our website or by contacting our Investor Relations department. It is my pleasure to now introduce the Chief Executive Officer of Thomson Reuters, Tom Glocer.

Tom Glocer

Thank you, Frank, and thank you to all of you for joining us. I plan to cover two topics today. First, I'll discuss our results for the quarter; and second, I will provide an update on current market conditions.

I'm pleased to report that we are off to a good start for the year. Despite the continuing decline in the global economy and deep disruption in financial markets, our businesses continue to grow, gain share, and further solidify their competitive position.

We serve a wide variety of customers with a single, tested business model. It is the same in our Markets Division as in our Professional Division. We provide must have content and services to professionals on a recurring subscription basis, creating a business that is highly cash flow generative, and enabling us to maintain leading and scalable positions in our chosen markets.

Now, we have certainly been affected by the economic downturn as our rate of growth has slowed compared to last year. However, we are growing, and believe this will continue in 2009, even though we see few signs of any near-term recovery, other than a bit of a lighter feeling in market sentiment out there.

Let's look at our results for the first quarter. Keeping in mind that when we compare performance year-on-year, we look at revenue growth rates before currency, as we believe this provides the best basis to measure the performance of our business.

I'm pleased with the operating performance of the company for the first quarter, as total revenue rose 3%, with the Professional Division up 5% and the Markets Division still positive.

The resilient Professional Division performed well given a more challenging economic landscape, and a tough year-ago comps, when revenue increased 8% organically. Our Professional products are still in demand, as evidenced by growth of 7% in Healthcare & Science; 10% in Tax & Accounting; and 3% in Legal.

The performance in Legal is notable given the wave of law firm layoffs, a significant decline in ancillary revenues, and very weak demand for print. The Markets Division organic revenue was up four-tenths of 1% for the quarter due to continued retrenchment in the financial markets, and tough first quarter '08 comps, when we grew 9% organically.

The consolidated underlying profit margin was up 100 basis points, primarily due to favorable currency movement and the benefits of integration related savings. The Reuters integration and legacy efficiency programs continued to go very well, with run rate savings equal to $850 million at quarter end, on their way to the higher $1.4 billion target we announced in February.

Adjusted earnings per share for the quarter was $0.40 per share, compared to $0.44 per share a year ago, benefiting from higher underlying profits, offset by higher integration-related costs amounting to some $0.07 per share. Given the subscription nature of our business, and the visibility, but not the clairvoyance that this affords us, we are affirming our 2009 outlook.

For several quarters now, I've been highlighting the resilience of our Professional businesses. Our balanced portfolio and leading franchises enable us to continue to deliver above market growth.

In fact, online, software, and services, which are 80% of the Division's revenues, grew 7%, of which 4% was organic. Our deep understanding of markets has allowed us to defend and grow our core business, gain share, while tightly managing costs to drive profitability.

Yes, we're facing challenges. Legal has seen a decline in ancillary, Bar Review, and consulting related revenues, as well as a softening in print revenues; and attorneys are expecting 2009 to be a difficult year.

In fact, in a recent survey of major law firm partners, 60% expect 2009 billings to decrease. However, 63% expect a rebound in 2010, and the same percentage expects litigation work to increase over the next year. Despite these circumstances, Legal is continuing to grow and take share, thanks to its diverse portfolio of businesses and loyal customer base.

US Westlaw was up 6%. Our international legal businesses continued to do well, up 7%. FindLaw rose 17%, and sales to government, an increasingly important customer across our businesses was up 14% in Legal. So the picture is an appropriately balanced one for the legal world.

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