Thomson Reuters Debuts Amid Market Jitters

By Georgina Prodhan

LONDON (Reuters UK) - News and information publisher Thomson Reuters (TRIL) reaffirmed its full-year outlook on Thursday although it said the financial crisis hitting many customer banks would hurt the company in the short term.

Chief Executive Tom Glocer said that while the credit crunch gripping world financial markets would affect the company in the short to medium term, it represented a long-term opportunity as banks would need the company's products as they consolidated.

Thomson Reuters (TRI), whose markets division is exposed to financial services and brings in 59 percent of group sales, said it expected 2008 revenue growth of 6 to 8 percent, almost all organic, and an underlying profit margin of 19 to 21 percent.

The company reiterated its target to generate free cash flow of 11 to 12 percent of sales and its plan for capital expenditure of 8 to 9 percent of revenue.

"You've got to say this is a negative short to middle term," Glocer said of the financial crisis at a London investor day, but added that banking consolidation would present a chance.

"There's a lot of compensating work that needs to be done now to stitch together all these trading operations," he said, adding that the legal and health professional product businesses inherited from Thomson would help the company weather the storm.

Thomson Reuters shares were up 2.5 percent in London at 10:43 a.m., underperforming a 3.2 percent rise in the DJ European media index .

"Thomson Reuters trades on 12x 2009E EPS putting it on a par with Reed Elsevier (REL). However, the earnings risk is significantly greater and we remain cautious about weakening momentum in the Markets unit," UBS analyst Polo Tang wrote.

Reed Elsevier, which publishes trade journals and books for professionals and also has the world's largest exhibitions business, is considered relatively defensive due to its low exposure to the financial services sector.

CHALLENGED

The company said it had completed its refinancing needs for Thomson's acquisition of Reuters earlier this year through long-term debt offerings in June, and said it had a $2.5 billion (1.4 billion pound) credit facility on which it had not drawn.

Thomson Reuters said it targeted a ratio of 2 for net debt to earnings before interest, tax, depreciation and amortisation, down from a trailing ratio of 2.4 as of June.

Devin Wenig, CEO of the Markets division, said the company's foreign exchange business had had its best month ever in September but admitted he could not predict how long it would take until conditions for the division as a whole would improve.

"We certainly are not viewing this through rose-coloured glasses. We've never seen a market like this," he said. "There are parts of our business that are really challenged right now."

But he said growth in some regions of the world would help offset current difficulties, and said the company would remain ready for whenever demand improved.

"Those opportunities may cool if the global economy continues to cool but they're not going to go away," he said.

(Reporting by Georgina Prodhan; Editing by Richard Hubbard)