February 24, 2009 5:44 pm

Thomson Reuters shines in wake of merger

From his vantage point on the 30th floor of Thomson Reuters’ Times Square headquarters, Tom Glocer overlooks the shimmering building into which The New York Times moved in 2007.

On recent occasions, the most venerable name in the New York media has seemed to shrink, as it staggered under a debt load which has forced it to suspend its dividend and seek a $250m loan from a Mexican billionaire.

The turmoil in newsrooms around the world has hit Thomson Reuters’ newswire business, but The Times could be forgiven for looking on midtown Manhattan’s other media resident with envy. As advertising revenues evaporate elsewhere in the media sector, the Anglo-Canadian group’s focus on essential information for professionals from tax lawyers to traders has allowed it to report continued growth and even raise its dividend.

Since soon after Thomson Corporation announced its takeover of Reuters in May 2007, investors have fretted about how the new company’s markets division, which combined Reuters with Thomson Financial, would fare as traders’ and investment bankers’ desks emptied from Wall Street to the City of London.

Mr Glocer has been at pains to emphasise that part of the rationale for the deal was to embed Reuters in a larger, more stable business less exposed to headcount swings in the financial markets.

That benefit became clearer on Tuesday, as did the boost to the bottom line from stripping out costs from the overlapping Reuters and Thomson Financial businesses and a few early signs of revenue potential from offering newswires and other data from the markets division to the other businesses.

The professional operations – legal, tax and accounting, scientific and healthcare – almost all produced stronger top-line growth and some steep margin improvements, although some were flattered by technical factors such as lower acquisition amortisation in the tax business.

Concern over the outlook for financial services still drives investors’ perception of the stock, and helps explain the wide variation in perceptions of the company in Toronto, where professional assets such as WestLaw are better known, and London, where City sentiment pervades investors’ views of the company. The London listing was trading at a 15 per cent discount to the North American quotes on Tuesday morning, but Mr Glocer expressed no urgency about resolving this by ending the dual-listed company structure.

“This is one we haven’t had to spend any time on,” he said. “Either people will buy in [to the growth story] locally [in London] and it solves itself or the shareholder register turns more North American and it solves itself.”

His message, instead, was that Thomson Reuters can stand out from much of the sector in which its shares are categorised. “We can invest at a time when a lot of pure media companies are cutting back,” he said.

Asked by one of his own reporters whether such investment might include an interest in one of the newspaper companies whose valuations have suffered dramatically, Mr Glocer was clear that he had little appetite for consumer media.

In theory, the $1.8bn of free cashflow reported by last year would be enough to buy The New York Times, but Mr Glocer cautioned: “I’m not convinced we know how to run a newspaper any better than the ones who are running them today, and boy it looks a tough struggle.”

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