Mr. James Smith reports
THOMSON REUTERS REPORTS FULL-YEAR AND FOURTH-QUARTER 2011 RESULTS
Thomson Reuters Corp. today released results for the full year and fourth quarter ended Dec. 31, 2011. Results include a $50-million charge primarily related to a reorganization of the former markets division incurred in the fourth quarter. The company also announced it had taken a $3.0-billion non-cash goodwill impairment charge related to its financial services business. This charge is excluded from adjusted earnings, adjusted EBITDA and underlying operating profit.
The company reported full-year revenues from continuing businesses of $12.9-billion, an increase of 5 per cent before currency from the prior year. Adjusted EBITDA increased 20 per cent from the prior year with the corresponding margin up 280 basis points to 26.4 per cent. Underlying operating profit increased 9 per cent from the prior year with the corresponding margin up 50 basis points to 20.0 per cent. The reorganization charge had a 40-basis-point negative impact on both the full-year adjusted EBITDA and underlying operating profit margins.
"Our results once again proved the resilience of our business," said James Smith, chief executive officer of Thomson Reuters. "The units in the former professional division continued to perform well and we made significant strides in kick-starting the growth engine in our former markets division.
"We have simplified our organization, we have strengthened our management team and we are making progress toward improving our execution capability," Mr. Smith said. "We are focused in 2012 on a series of product launches and service improvements across all our key customer groups."
CONSOLIDATED FINANCIAL HIGHLIGHTS --
FULL-YEAR RESULTS
(in millions of United States dollars,
except EPS and margins)
12 months
ended Dec. 31,
2011 2010
IFRS financial measures
Revenues $13,807 $13,070
Operating (loss) profit (705) 1,419
Diluted (loss) earnings per share
(EPS) (1.67) 1.08
Cash flow from operations 2,597 2,672
2011 2010
Non-IFRS financial measures (1)
Revenues from continuing businesses $12,916 $12,108
Adjusted EBITDA 3,412 2,852
Adjusted EBITDA margin 26.4% 23.6%
Underlying operating profit 2,579 2,356
Underlying operating profit margin 20.0% 19.5%
Adjusted earnings per share (EPS) 1.98 1.56
Free cash flow 1,602 1,563
(1) Adjusted EBITDA, underlying operating profit and
the related margins and adjusted EPS as disclosed in
this news release exclude the impact of the
company's $3.0-billion non-cash goodwill impairment
charge as the company believes removing this charge
will assist investors in assessing its underlying
operations. Additional information is provided in
the explanatory note at the end of this news
release.
Revenues from continuing businesses were $12.9-billion, a 5-per-cent increase before currency. Strong growth across the professional division, up 9 per cent, and a 2-per-cent increase in markets division revenues drove the overall increase. Adjusted EBITDA increased 20 per cent and the corresponding margin was 26.4 per cent against 23.6 per cent in the prior year. Excluding the reorganization charge, adjusted EBITDA increased 21 per cent and the corresponding margin increased 320 basis points to 26.8 per cent. Underlying operating profit increased 9 per cent and the corresponding margin was 20.0 per cent against 19.5 per cent in 2010. Excluding the reorganization charge, underlying operating profit increased 12 per cent and the corresponding margin increased 90 basis points to 20.4 per cent. Adjusted EBITDA growth and underlying operating profit growth across both divisions was due to flow through from higher revenues, integration savings and the benefit of currency. Adjusted EBITDA also benefited from lower integration expenses. Excluding currency, adjusted EBITDA increased 17 per cent and underlying operating profit increased 7 per cent. Adjusted EPS was $1.98 compared with $1.56 in the prior year. The increase was largely attributable to higher underlying operating profit and lower integration expenses. Adjusted EPS excluding the reorganization charge was $2.03. Currency had a six-cent favourable impact on adjusted EPS. Free cash flow was $1.6-billion, up 2 per cent. Corporate expenses were $273-million against $249-million in the prior year. The company incurred a $3.0-billion goodwill impairment charge in the fourth quarter. This non-cash charge was the result of the company's annual goodwill impairment testing required under IFRS and related to the company's financial services business. On an IFRS basis, EPS including the goodwill impairment charge was a diluted loss per share of $1.67 for the full year. This non-cash charge will not impact the company's normal business operations, nor will it affect liquidity, cash flow from operations or financial covenants under the company's outstanding public debt securities or syndicated credit facility.
CONSOLIDATED FINANCIAL HIGHLIGHTS --
FOURTH-QUARTER RESULTS
(in millions of U.S. dollars,
except EPS and margins)
Three months
ended Dec. 31,
2011 2010
IFRS financial measures
Revenues $3,577 $3,458
Operating (loss) profit (2,593) 307
Diluted (loss) earnings per share
(EPS) (3.11) 0.27
Cash flow from operations 942 1,003
2011 2010
Non-IFRS financial measures
Revenues from continuing businesses 3,355 3,201
Adjusted EBITDA 864 685
Adjusted EBITDA margin 25.8% 21.4%
Underlying operating profit 657 611
Underlying operating profit margin 19.6% 19.1%
Adjusted earnings per share (EPS) 0.54 0.37
Free cash flow 669 711
Revenues from continuing businesses were $3.4-billion, a 5-per-cent increase before currency. Strong growth across the professional division, up 9 per cent, and a 2-per-cent increase in the markets division revenues contributed to the overall increase. Adjusted EBITDA increased 26 per cent and the corresponding margin was 25.8 per cent against 21.4 per cent in the prior-year period, primarily due to flow-through from higher revenues, integration savings and lower integration expenses. Excluding the reorganization charge, adjusted EBITDA increased 33 per cent and the corresponding margin increased 580 basis points. Underlying operating profit increased 8 per cent and the corresponding margin was 19.6 per cent against 19.1 per cent in the prior-year period. Excluding the reorganization charge, underlying operating profit increased 16 per cent and the corresponding margin increased 200 basis points. Adjusted EPS was 54 cents compared with 37 cents in the prior-year period. The increase was largely attributable to higher underlying operating profit and lower integration expenses. Adjusted EPS excluding the reorganization charge was 59 cents. On an IFRS basis, EPS including the goodwill impairment charge was a diluted loss per share of $3.11 for the fourth quarter.
Full-year and fourth-quarter business segment highlights
Unless otherwise noted, all revenue growth comparisons in this news release are before the impact of foreign currency as Thomson Reuters believes this provides the best basis to measure the performance of its business. Results discussed in this news release reflect the company's organizational structure through Dec. 31, 2011. Effective Jan. 1, 2012, Thomson Reuters eliminated its professional and markets divisions and future results will be reported for its legal, tax and accounting, intellectual property and science, and financial and risk segments.
PROFESSIONAL DIVISION --
FULL-YEAR RESULTS
(in millions of U.S. dollars)
2011 2010
Revenues
Legal $3,434 $3,157
Tax and accounting 1,149 1,006
Intellectual property
and science 852 789
Professional division
Total 5,435 4,952
Adjusted EBITDA
Legal 1,233 1,161
Tax and accounting 359 307
Intellectual property
and science 296 263
Professional division
Total 1,888 1,731
Adjusted EBITDA
Margin 34.7% 35.0%
Operating profit
Legal 943 892
Tax and accounting 261 223
Intellectual property
and science 237 209
Professional division
Total 1,441 1,324
Operating profit
Margin 26.5% 26.7%
PROFESSIONAL DIVISION --
FOURTH-QUARTER RESULTS
(millions of U.S. dollars)
Three months
ended Dec. 31,
2011 2010
Revenues
Legal $907 $862
Tax and accounting 369 310
Intellectual property
and science 225 207
Professional division
Total 1,501 1,379
Adjusted EBITDA
Legal 318 307
Tax and accounting 145 132
Intellectual property
and science 80 65
Professional division
Total 543 504
Adjusted EBITDA
Margin 36.2% 36.5%
Operating profit
Legal 251 238
Tax and accounting 118 110
Intellectual property
and science 64 53
Professional division
Total 433 401
Operating profit
Margin 28.8% 29.1%
Full-year revenues increased 9 per cent, driven by solid growth across all businesses. Legal grew 8 per cent, tax and accounting increased 14 per cent, and intellectual property and science was up 7 per cent. Full-year EBITDA increased 9 per cent. The corresponding margin was 34.7 per cent, a decrease of 30 basis points as flow through from higher revenues was offset by a change in business mix in the legal segment and the dilutive effect of acquisitions. Full-year operating profit increased 9 per cent and the corresponding margin was 26.5 per cent, 20 basis points lower than the prior year, with acquisitions negatively impacting the margin by 80 basis points. Fourth-quarter revenues increased 9 per cent, driven by solid growth across all businesses. Legal grew 5 per cent, tax and accounting increased 19 per cent, and intellectual property and science was up 9 per cent. Fourth-quarter EBITDA increased 8 per cent. The corresponding margin was 36.2 per cent, a decrease of 30 basis points as flow through from higher revenues was offset by the change in business mix in the legal segment and the dilutive effect of acquisitions. Fourth-quarter operating profit increased 8 per cent. The corresponding margin was 28.8 per cent, 30 basis points lower than the prior-year period.
Legal
Full-year revenues increased 8 per cent. U.S. Law Firm Solutions grew 3 per cent as a 17-per-cent increase in Business of Law (FindLaw and Elite) was offset by a 2-per-cent decline in research-related revenues. Corporate, government and academic, and risk and compliance revenues, increased 13 per cent (4-per-cent organic). Global businesses grew 13 per cent (4-per-cent organic) with solid growth in Latin America. Full-year EBITDA increased 6 per cent and the corresponding margin was 35.9 per cent compared with 36.8 per cent in the prior year. Full-year operating profit increased 6 per cent and the corresponding margin was 27.5 per cent compared with 28.3 per cent in the prior year. The decline in operating margin was primarily due to a change in business mix and the dilutive effect of acquisitions. Fourth-quarter revenues increased 5 per cent. U.S. Law Firm Solutions grew 3 per cent (1-per-cent organic) as 17-per-cent growth in Business of Law (FindLaw and Elite) was partly offset by a 3-per-cent decline in core legal research revenues. Corporate, government and academic, and risk and compliance revenues, increased 11 per cent (2-per-cent organic). Global businesses grew 5 per cent (1-per-cent organic) with strong growth in Latin America offsetting declines in the United Kingom and Spain. U.S. print revenues declined 3 per cent. Fourth-quarter EBITDA increased 4 per cent and the associated margin declined 50 basis points to 35.1 per cent due to a change in business mix. Fourth-quarter operating profit increased 5 per cent and the associated margin was 27.7 per cent compared with 27.6 per cent in the prior-year period. WestlawNext has been sold to over 34,000 customers since its launch in February, 2010 -- representing 54 per cent of Westlaw's revenue base.
Tax and accounting
Full-year revenues increased 14 per cent, driven by growth in income tax software sales and electronic filing of tax returns and acquisitions. Full-year EBITDA increased 17 per cent and the corresponding margin increased 70 basis points to 31.2 per cent. Full-year operating profit increased 17 per cent and the corresponding margin increased 50 basis points to 22.7 per cent due to strong revenue flow through and efficiency initiatives, partly offset by the dilutive effect of acquisitions. Fourth-quarter revenues increased 19 per cent, led by growth in income tax software sales, Checkpoint and acquisitions. Fourth-quarter EBITDA increased 10 per cent and the related margin decreased 330 basis points to 39.3 per cent. Fourth-quarter operating profit increased 7 per cent and the related margin decreased 350 basis points to 32.0 per cent. The decrease was primarily due to the timing of expenses. Small movements in the timing of expenses can impact margins in any given quarter for the tax and accounting business. Full-year margins are more reflective of underlying performance.
Intellectual property and science
Full-year revenues increased 7 per cent. Growth was driven by IP solutions businesses. Scientific and scholarly research grew 5 per cent, related to higher Web of Knowledge subscriptions. Life sciences increased 12 per cent due to continued demand for biology and disease analytics products and acquisitions. Full-year EBITDA increased 13 per cent with the corresponding margin increasing 140 basis points to 34.7 per cent. Full-year operating profit increased 13 per cent with the corresponding margin increasing 130 basis points to 27.8 per cent. Increases in EBITDA and operating profit margins were primarily due to revenue flow through and expense management. Fourth-quarter revenues increased 9 per cent, attributable to the same factors as the full year. Fourth-quarter EBITDA increased 23 per cent with the corresponding margin increasing 420 basis points to 35.6 per cent. Fourth-quarter operating profit increased 21 per cent with the corresponding margin increasing 280 basis points to 28.4 per cent. Increases in EBITDA and operating profit margins were primarily due to revenue flow through and expense timing. Small movements in the timing of expenses can impact margins in any given quarter for the intellectual property and science business. Full-year margins are more reflective of underlying performance.
MARKETS DIVISION --
FULL-YEAR RESULTS
(in millions of U.S. dollars)
12 months
ended Dec. 31,
2011 2010
Revenues
Sales and trading $3,715 $3,543
Investment and advisory 2,208 2,208
Enterprise 1,235 1,093
Media 336 324
Markets division total 7,494 7,168
Adjusted EBITDA 1,992 1,808
Adjusted EBITDA margin 26.6% 25.2%
Operating profit 1,411 1,281
Operating profit margin 18.8% 17.9%
MARKETS DIVISION --
FOURTH-QUARTER RESULTS
(in millions of U.S. dollars)
Three months
ended Dec. 31,
2011 2010
Revenues
Sales and trading $912 $899
Investment and advisory 540 549
Enterprise 318 292
Media 87 86
Markets division total 1,857 1,826
Adjusted EBITDA 464 433
Adjusted EBITDA margin 25.0% 23.7%
Operating profit 311 298
Operating profit margin 16.7% 16.3%
Full-year revenues increased 2 per cent. Strong revenue growth in Enterprise and Tradeweb was partly offset by weakness in investment management and exchange-traded instruments. Full-year and fourth-quarter EBITDA and operating profit margins include a reorganization charge of approximately $44-million (which is part of the previously mentioned $50-million reorganization charge). Full-year EBITDA was $2.0-billion, an increase of 10 per cent with a related margin of 26.6 per cent. Full-year operating profit was $1.4-billion, an increase of 10 per cent, with a related margin of 18.8 per cent. Fourth-quarter recurring subscription-related revenues grew 1 per cent. Transaction-related revenues increased 4 per cent due to Tradeweb. Recoveries revenues declined 2 per cent and outright revenues rose 23 per cent. By geography, fourth-quarter revenues in Asia increased 3 per cent; revenues in Europe, Middle East and Africa (EMEA) rose 3 per cent; while revenues in the Americas declined 1 per cent. Fourth-quarter EBITDA was $464-million, an increase of 7 per cent, with a related margin of 25.0 per cent, and benefited from expense timing. Fourth-quarter operating profit was $311-million, an increase of 4 per cent, with a related margin of 16.7 per cent, and benefited from expense timing. Eikon desktops now total 15,000, up from 8,000 on Sept. 30, 2011.
Sales and trading
Full-year revenues increased 2 per cent, driven by 8-per-cent organic growth at Tradeweb and acquisitions. Revenue growth was partly offset by an 8-per-cent decline in recoveries. Excluding recoveries, revenues grew 4 per cent. Fourth-quarter revenues increased 2 per cent driven by 5-per-cent organic growth at Tradeweb and acquisitions. Revenue growth was partly offset by a 5-per-cent decline in recoveries. Excluding recoveries, revenues grew 3 per cent.
Investment and advisory
Full-year revenues declined 2 per cent. A 2-per-cent increase in corporates revenues was offset by flat investment-banking-related revenues and negative performance in investment management, which declined 6 per cent. Fourth-quarter revenues declined 3 per cent. A 1-per-cent increase in corporate revenues was offset by flat investment-banking-related revenues and an improving but negative performance in investment management, which declined 4 per cent. Fourth-quarter results were an improvement from the 8-per-cent decline in the third quarter and were the best quarterly results for the business since the second quarter of 2009.
Enterprise
Full-year and fourth-quarter revenues increased 10 per cent, driven by a continuing trend among customers to invest in pricing and reference data, low-latency data feeds, and hosting solutions. The enterprise content business grew 17 per cent in the fourth quarter, driven by growth in pricing and reference data. The Elektron real-time and enterprise platform business grew 7 per cent in the fourth quarter. Thomson Reuters Elektron continued to gain momentum as customers in established and emerging markets adopted its combination of hosted and deployed information and trading solutions. In total, 14 hosting centres are up and running.
Media
Full-year revenues were flat. Fourth-quarter revenues increased 1 per cent, with the news agency business up 1 per cent and the consumer business up 9 per cent due to strong on-line sales in the Americas.
Integration programs
At the end of 2011, the company completed the Reuters integration and achieved combined run-rate savings of $1.7-billion from the Reuters integration and legacy savings programs. An incremental $65-million in run-rate savings was achieved during the fourth quarter of 2011.
Integration-related costs totalled $64-million in the fourth quarter and $215-million for the full year.
Recent developments
Today, the company announced its intention to sell three businesses, which are expected to close by midyear. Those businesses are: tax and accounting's Property Tax Services, legal's Law School Publishing business, and financial and risk's eXimius business -- part of the retail wealth management organization. The three businesses collectively had approximately $155-million of revenues in 2011.
This news release includes the results of these disposals within continuing businesses for comparability purposes since the company owned and managed the businesses for the entire reporting period.
Results for previously announced disposals and the health care business are included within the other businesses line in the company's financial statements.
Business outlook (before currency)
Thomson Reuters expects its revenues to grow low single digits in 2012.
Thomson Reuters expects its adjusted EBITDA margin to range between 27 per cent and 28 per cent in 2012.
The company forecasts its underlying operating profit margin to range between 18 per cent and 19 per cent in 2012 due to higher depreciation and amortization expense.
Thomson Reuters expects reported free cash flow to grow 5 per cent to 10 per cent and free cash flow from continuing operations to grow 15 per cent to 20 per cent in 2012.
Dividend and share repurchases
The board of directors approved a four-cent-per-share increase in the annual dividend to $1.28 per share. A quarterly dividend of 32 cents per share is payable on March 15, 2012, to shareholders of record as of Feb. 22, 2012. This dividend increase marks the 19th consecutive annual dividend increase by the company.
In 2011, the company repurchased 10.8 million shares for a total purchase price of $326-million pursuant to its normal course issuer bid.
Non-IFRS financial measures
Thomson Reuters prepares its financial statements in accordance with international financial reporting standards (IFRS), as issued by the International Accounting Standards Board (IASB).
This news release includes certain non-IFRS financial measures. Thomson Reuters uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable with the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS.
Thomson Reuters will webcast a discussion of its full-year and fourth-quarter 2011 results today beginning at 8:30 a.m. Eastern Standard Time (EST). You can access the webcast by visiting the investor relations section of the company's website. An archive of the webcast will be available following the presentation.
CONSOLIDATED INCOME STATEMENT
(millions of U.S. dollars, except per share data)
Three months ended 12 months ended
Dec. 31, Dec. 31,
2011 2010 2011 2010
Revenues $3,577 $3,458 $13,807 $13,070
Operating expenses (2,604) (2,739) (9,997) (10,061)
Depreciation (114) (110) (438) (457)
Amortization of
computer software (178) (155) (659) (572)
Amortization of
other identifiable
intangible assets (166) (146) (612) (545)
Goodwill impairment (3,010) - (3,010) -
Other operating
(losses) gains, net (98) (1) 204 (16)
Operating (loss)
profit (2,593) 307 (705) 1,419
Finance costs, net
Net interest
expense (95) (96) (396) (383)
Other finance
income (costs) 4 8 (15) 28
(Loss) income before
tax and equity
method investees (2,684) 219 (1,116) 1,064
Share of posttax
earnings in equity
method investees 2 2 13 8
Tax benefit
(expense) 78 4 (293) (139)
(Loss) earnings from
continuing
operations (2,604) 225 (1,396) 933
Earnings from
discontinued
operations, net of
tax 2 - 4 -
Net (loss) earnings (2,602) 225 (1,392) 933
(Loss) earnings
attributable to
common
shareholders (2,572) 224 (1,390) 909
Non-controlling
interests (30) 1 (2) 24
Basic (loss)
earnings per share (3.11) 0.27 (1.67) 1.09
Diluted (loss)
earnings per share (3.11) 0.27 (1.67) 1.08
We seek Safe Harbor.
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