By: Bruce Stanley, AP Business Writer
(AP) Financial news and information provider Reuters Group PLC posted its first annual loss since becoming a publicly traded company and announced Tuesday it would cut 3,000 jobs, or nearly 19% of its work force.
Poor market conditions and a sharp drop in revenues for its electronic brokerage business, Instinet, contributed to a net loss of 394 million pounds ($630 million) for 2002 compared to a net profit of 46 million pounds in 2001. The results were in line with analysts’ expectations.
Annual sales fell by 8% to 3.58 billion pounds ($5.73 billion) from 3.89 billion pounds in 2001.
The decline in sales accelerated in the fourth quarter ending Dec. 31, with quarterly sales tumbling by 14% to 882 million pounds ($1.41 billion) from 1.03 billion for the same three months of 2001. Reuters did not release a fourth-quarter profit or loss figure.
“We’re in a terrible down cycle for the financial services industry that it hasn’t seen since the 1970s or maybe even the 1940s. Add to that the really significant structural forces rolling through the markets. There’s overcapacity,” chief executive Tom Glocer said.
The company plans to reduce its work force from 16,000 to 13,000 over the next three years but didn’t specify where it would make the job cuts. Reuters has already eliminated almost 2,500 jobs since Glocer took over in July 2001.
Reuters’ shares fell 12% to 135.50 pence ($2.17) in afternoon trading on the London Stock Exchange.
The company said its core operations remained profitable and blamed its loss on restructuring charges of 208 million pounds ($333 million) and a writedown in the value of assets for both Instinet and Reuters’ information services.
Reuters said it would respond by simplifying its product line, sharpening its focus on content and trading and messaging services, and adopting the use of a single technology platform. It aims to speed up a five-year turnaround strategy announced in October 2001 that it hopes will generate annual cost savings of 440 million pounds ($704 million).
Reuters forecast further deterioration in sales during the first half of 2003. Sales were expected to fall by 9% in the first quarter and even more sharply in the second quarter, it said.
Despite Instinet’s losses of 370 million pounds ($592 million), Reuters aid it had no plans to sell its 63% stake in the business.
Reuters became a publicly traded company in 1984.
Separately, Reuters announced it had concluded a $224 million deal for the remaining 94% of New York-based Multex.com Inc., which offers financial information on more than 25,000 companies worldwide and earnings estimate data on more than 16,000 companies.
Allowing for Multex’s estimated cash and Reuters’ existing 6% stake, Reuters said its cash outlay would be about $195 million.
“We plan a quick and full integration that we expect to yield cost savings within both organizations and that will enable us to take Multex’s business to scale with the help of Reuters global distribution infrastructure,” Glocer said.