Thomson Reuters reveals $3bn goodwill charge

Thomson Reuters revealed a $3bn charge related to the declining value of its troubled market data business, swinging the company to a steep operating loss for the fourth quarter.

For the last three months of 2011, the media and financial information group reported an operating loss of $2.59bn, compared with a profit of $307m a year earlier.

The charge reflects the tumult at Thomson Reuters’ markets division, which competes with Bloomberg. Its flagship product, Eikon, was released last year but has not been embraced by businesses, leading the division to report quarterly revenues up just 2 per cent to $912m.

The company said on Thursday there were now 15,000 installations of Eikon, compared with 8,000 three months before. Bloomberg has more than 300,000 of its terminals installed at businesses around the world, compared with more than 400,000 Thomson Reuters terminals.

This is the first quarterly report under new chief executive Jim Smith, who took over from Tom Glocer in January after several management shake-ups. Thomson Reuters shares have fallen by a third in the past year. Shares were down less than 1 per cent on Thursday.

Mr Smith told the Financial Times the $3bn charge was a matter of “grounding ourselves in reality”. Calling it “an accounting exercise”, he said it reflected declining values in the industry. “It’s about putting the past in the past,” he said. “It doesn’t affect the cash-generative ability of the business. It doesn’t affect our long-term ambitions.”

The charge reduces the company’s goodwill from $18.9bn to $15.9bn.

Revenues for the quarter were up 5 per cent before currency changes to $3.35bn, thanks to strong sales in the company’s legal and tax and accounting businesses.

Mr Smith said he expected the number of Eikon installations to grow substantially in the coming quarters. However, he intended to measure its success not by the number of subscribers but by the product’s penetration in targeted industries.

Months of management upheavals and corporate restructuring had left the company in a more competitive position, Mr Smith said. “I couldn’t be more pleased with the management team we have in place.”

The company also said it intends to sell three business units that collectively had $155m in sales in 2011. Valued at about $700m, the sales are expected to complete in the first half of the year.

On Wednesday night, the company said it had come to a new pay agreement with its editorial staff in London, who had threatened to strike on Thursday. Editorial employees will receive a base 2.5 per cent raise, compared with the original offer of 1.75 per cent.

Thomson acquired Reuters in 2008 for about $15bn, and Mr Smith said the process of combining the companies was finally complete. “This is the last time you will hear us utter the word ‘integration’,” he said on the company’s earnings call.

Mr Smith said he expected 2012 revenues to grow in the low single-digits, with operating margins forecast to decrease to between 18 and 19 per cent. “Like everyone else, we anticipate headwinds this year,” he said.