Thomson Reuters Corp (TRI)

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Thomson Reuters Corporation (TRI)

Q2 2009 Earnings Call

August 6, 2009 10:00 am ET


Frank Golden – Senior Vice President, Investor Relations

Tom Glocer – Chief Executive Officer

Bob Daleo – Chief Financial Officer


Drew McReynolds - RBC Capital Markets

Colin Tennant - Nomura International PLC

Vince Valentini - TD Newcrest

Thomas Singlehurst - Citigroup

Paul Steep - Scotia Capital

Sami Kassab - Exane BNP Paribas

Patrick Wellington - Morgan Stanley

Tim Casey - BMO Capital Markets

Richard Jones - Goldman Sachs



Ladies and gentlemen, thank you for standing by. Welcome to the Thomson Reuters second quarter 2009 earnings call. (Operator Instructions) As a reminder, today’s call is being recorded.

I’ll now turn the conference over to Mr. Frank Golden, Senior Vice President, Investor Relations. Please go ahead sir.

Frank J. Golden

Good morning and thank you for joining us. We’ll begin today with our CEO Tom Glocer, who will be followed by our CFO Bob Daleo. Following their presentations, we’ll open the call for questions.

Before we begin let me point out that this marks the first quarter Thomson Reuters is reporting under international financial reporting standards, or IFRS. For those of you who were unable to join our webcast last month when we described the changes to our financial statements resulting from converting to IFRS from Canadian GAAP, let me direct you to our website where you will find that presentation including the 2008 quarterly P&L on a consolidated basis, and for the Markets and Professional divisions also on a quarterly basis. Finally, you will also find our balance sheet for 2008 and first quarter 2009 reflecting IFRS standards.

Today’s presentation contains forward-looking statements. Actual results may differ materially due to a number of risks and uncertainties [inaudible] some reports and filings we provide to regulatory agencies. You can access these documents on our website or by contacting our Investor Relations department.

I would now like to introduce the Chief Executive Officer of Thomson Reuters, Tom Glocer.

Tom Glocer

Thanks for joining us today. I plan to copy, to cover three topics in our session. First, I’ll discuss our results for the quarter. Second, I’ll provide an update on current market conditions. And third I’ll provide an update on our unification proposal.

So I’m pleased to report that halfway through the year we continue to perform well in what remains a challenging economic environment. The global economy is still fragile, but things are no longer getting worse and the outlines of the post crisis, reset world can begin to be seen. Government interventions around the world have helped stabilize the financial system, and layoffs at large law firms are down significantly from levels seen in the first quarter.

Despite the challenges, our business has held up well over the past year. We’ve continued to grow, and have further solidified our competitive position. Not surprisingly, our rate of growth has slowed compared to last year, but our strategy of continuing to invest in our businesses in good times and bad has enabled us to outperform the market through the cycle.

Let’s now look at the results for the second quarter, keeping in mind that when we compare our 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 performance of the company for the second quarter, as total revenue rose 2% with the Professional division up 4% and the Markets division just positive. Moreover, Markets recurring revenue, which excludes recoveries, and core Westlaw revenue both grew 4% and together represent over 50% of total company revenues. This performance is a testament not only to the balance of our businesses, but also the strength of our franchises in the challenging financial services and legal markets.

The resilient Professional division performed well, given the more challenging economic landscape and tough year ago comps, when revenue increased 6% organically. Our Professional products remain in demand as evidenced by growth of 9% in Tax and Accounting, 7% in Healthcare and Science and 2% in Legal. The performance in Legal is notable given the wave of law firm layoffs in the first quarter, a continuing decline in ancillary revenues and softening demand for print. The Markets division’s organic revenue was up 0.2 of 1% for the quarter against tough Q2 ’08 comps when we grew 7% organically. While massive government intervention literally saved the financial markets, and zero real interest rates are boosting profits and helping rebuild stretched balance sheets, the recovery is not evenly distributed.

Consolidated underlying profit rose 11% and the margin was up over 300 basis points, primarily due to integration related savings, strong cost controls across the company and the benefit of currency, which Bob will discuss in further detail in a moment.

The integration and legacy efficiency programs continue to go very well, with run rate savings totaling $925 million at quarter end. Given the progress we continue to make with these programs, we now expect run rate savings of at least $1 billion by year end 2009, up from our previous target of $975 million. And adjusted earnings per share for the quarter was $0.58 compared to $0.39 a year ago, benefiting from higher underlying profit and lower integration related costs. Given our year-to-date results and our expectations for the remainder of the year, we’re again confirming our 2009 outlook.

The resiliency and the diversity of our Professional businesses was again on display in Q2. We continued to deliver above market growth due to our balanced portfolio and leading franchises. In fact, online, software and services, which are 80% of the divisions’ revenues, grew 5%. Our deep understanding of our markets has allowed us to defend and grow our core business and gain share while tightly managing costs to drive profitability. We continue to face many of the same challenges we saw in the first quarter. While Legal grew 2% overall in the quarter, we saw a decline in ancillary, practice management software which is elite, and consulting related revenues as well as continued weakness in print revenues. Large law firm revenues were flat reflecting layoffs in the first quarter, but we’re encouraged by the significant slowing in large law firm layoffs in Q2 as compared to Q1.

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