The Thomson Reuters logo is seen on the company building in Times Square, New York. The news and information company reported a higher quarterly net profit on Feb. 9, 2017.Reuters
Thomson Reuters Corp. has reported steady fourth-quarter results as it emerges from a run of restructuring, and enters an uncertain year for global markets in 2017.
Earnings per share jumped by more than 470 per cent to $3.04 (U.S.) thanks to a $2-billion gain on the sale of the company's intellectual property and science business last year. But an anticipated restructuring charge of $212-million, recorded as the news and information giant cuts about 2,000 jobs, dragged down operating profit by 32 per cent.
The company boosted its annual dividend by 2 cents to $1.38, but its stock was trading down nearly 4 per cent on the Toronto Stock Exchange at midday on Thursday.
Looking ahead, Thomson Reuters is expecting revenue growth in the low single digits, and sees both promise and peril in a volatile global environment that should bring higher interest and a lighter regulatory burden, particularly in the U.S. since the election of Donald Trump as President, but also the likelihood of more protectionist sentiment and instability in Europe.
"Everyone's expecting that the world's going to change pretty fast, and there's a great deal of uncertainty about which direction that change will take," Jim Smith, president and chief executive officer of Thomson Reuters, said in an interview.
"So when I think about our business, we thrive in times of change. What we do is help our clients navigate that change," he added.
The process of shedding thousands of jobs in 39 countries has brought noticeable change inside the company as well, mostly in the financial and risk division and the enterprise, technology and operations centre, a group created last January.
"The new leaner team is functioning really well," Mr. Smith said.
At the same time, Thomson Reuters has been bulking up in Toronto, where it recently opened a new technology hub that should add about 400 jobs to the city over the next 18 months. "We're dead on track with where we'd hoped to be at this point," he said.
Net profit attributable to common shareholders was $2.22-billion in the fourth quarter, up from $408-million a year earlier, as a result of the gain from selling the IP and science business. Excluding certain items including the fourth-quarter charge, adjusted profit was 60 cents a share, up 9 per cent.
Fourth-quarter revenue was $2.86-billion, down 1 per cent from $2.89-billion in the same quarter last year. Excluding the restructuring charge and the effects of currency, revenue rose 1 per cent.
For the full fiscal year in 2016, profit was $3.1-billion or $4.14 a share, up from $1.26-billion or $1.60 a year earlier, thanks to the proceeds from the IP and science sale.
Revenue for the year was $11.17-billion, down from $11.26-billion in 2015.
"Reported operating results are largely in line with our estimates," Drew McReynolds, an analyst at RBC Dominion Securities Inc., said in a research note. "We believe guidance does point to continued steady improvement."
In the financial and risk arm, which is by far the company's largest, revenue was down 1 per cent, but excluding the impact of currency, it rose 1 per cent. Cancellations outstripped sales in the fourth quarter, snapping a streak of 10 consecutive quarters with positive net sales – a key metric. But the annual trend stayed positive for the third year in a row.
The prospect of a significant rollback of U.S. regulations contained in the Dodd-Frank Act, combined with an expected rise in trading volumes because of volatility in markets around the world, is fuelling optimism for the business this year.
"No one is anticipating that we'll go to a world in which the financial services industry isn't heavily regulated," Mr. Smith said. "I would say cautiously optimistic is the footing that I feel when I talk to our bank clients."
Results in the legal division, where revenue was down 2 per cent or flat excluding currency effects, fell short of expectations, partially due to a slowdown in activity among law firms, which led to lower transaction-related revenues.
In the typically high-growth tax and accounting division, revenue was up 1 per cent, but climbed 2 per cent excluding currency impacts, "which was somewhat disappointing," chief financial officer Stephane Bello said.
Revenue in the Reuters News division was up 5 per cent in the fourth quarter and 4 per cent for the year.
Thomson Reuters also made a $500-million contribution to its U.S. defined benefit pension plan, strengthening its capital structure and reaping a tax benefit of about $200-million.
And the company will buy back another $1-billion worth of shares in 2017, after spending $1.7-billion repurchasing stock last year.
"We're now focused on, how do we increase our growth?" Mr. Smith said, emphasizing that the company still has little appetite for large acquisitions. "An era of fixing things is over."