Further fall in revenues adds to woes at Reuters

Reuters, the embattled news and financial information group, yesterday provided the first evidence it is stemming its flow of losses, but warned that conditions would continue to be tough in the coming months.

The company reaffirmed its expectations that this year's decline in subscription revenues would be between 10 and 12 per cent, assuming no further lurch downwards in financial markets.

The forecast gave the City confidence that the company has finally got to grips with the impact, on its business, of the slump in the financial services industry and intense competition from its rival Bloomberg.

Reuters said it did not think the downturn in financial services had yet come to an end. Investment banks are still slashing jobs, which means they are also cutting the number of Reuters information screens they need.

Reuters said income from investment banks fell 16 per cent to £178m in the first quarter. City asset managers are also suffering, which was reflected in a 9 per cent fall in revenue to Reuters over the same period.

The shares, which fell more than 70 per cent last year as it incurred its first loss since flotation, closed up 2.25p at 120p on relief that its trading statement did not contain worse news.

The company is also under pressure from Bloomberg. Reuters revealed that its market share by revenue increased by 2 percentage points during 2002 to 39 per cent, while Bloomberg grew by 4 percentage points to 42 per cent.

Tom Glocer, Reuters' chief executive, acknowledged that the threat from Bloomberg was a major challenge, but added: "We were pleased with the progress we made in this quarter in what continues to be a tough market. Revenues were in line with expectations and we saw some good sales wins."

Analysts said the 10 to 12 per cent range given for this year's fall in recurring revenues suggested the rate of cancellations would not deteriorate further.

David Grigson, Reuter's finance director, said: "The 12 per cent end of that range leaves some scope for the market to get worse so we are not trying to call the bottom."

Reuters has incurred the wrath of its shareholders over its sickly share price and that of its employees after it slashed thousands of jobs to try to cope with its ailing revenues. It cut a further 300 jobs in the past three months and plans to remove 3,000 people by 2006.

It is also facing the prospect of a stormy meeting with shareholders at its annual meeting today over its pay package for Mr Glocer. Shareholder groups including the National Association of Pension Funds have criticised Mr Glocer's remuneration, which included a £610,000 bonus last year and a two-year pay-off if he was fired, under which he would collect more than £2m.

Reuters will gradually reduce the value of this severance package from June so that if Mr Glocer is still there in 2005 he would be entitled to only a year's money if he was ousted.

The company will also face questions about whether it intends to sell some of its larger assets. There has been speculation Reuters wants to raise cash by selling some of its operations outside the core information business, including the financial software developer Tibco Software and its electronic trading subsidiary, Instinet.

Mr Glocer refused to rule out any sales of Reuters' major assets when he talked to analysts yesterday, although he noted that all of the company's asset sales last year had involved small operations. He also tried to ease fears that Reuters could be hit by UK regulatory proposals to ban "soft commissions" ­ whereby a broker entices fund managers to funnel their buy and sell orders through it by offering to pay for them to receive certain services, such as Reuters subscriptions.

Mr Glocer said soft commissions in the UK accounted for £13m in annual revenue. "Is some of that potentially at risk? I suppose so," he said, but added fund managers still needed information screens, even if their broker no longer paid for them.