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Reuters 2006 Profit in Line, to Extend Buyback

Reuters Group posted an as expected 8% fall in trading profit on Thursday, extended its share buyback and said it will boost underlying revenue by at least 6% this year.

Reuters Chief Executive Tom Glocer said 2007 had got off to a "strong start" and that he expected the company to deliver 17-20% trading margins over the medium term. In 2007 he expects trading margins of 13-14%.

The global news and information provider said trading profit in the year to end-December fell to 308 million pounds ($603.3 million) from 334 million pounds last year.

The figure includes 77 million pounds invested in the ongoing Core Plus investment and savings strategy.

Group revenue rose 6.5% to 2.566 billion pounds and 6.2% on a constant currency basis. The company had previously forecast revenues on a constant currency basis at the top end of 5% to 6%.

Analysts had been expecting trading profit of 307.5 million pounds and revenue of 2.556 billion pounds, according to an average of 10 profit and 11 revenue forecasts.

Adjusted earnings per share was up 24% at 17.1 pence, compared with an average 16.7 pence forecast polled by Reuters from 10 analysts. The final dividend was boosted 12% to 6.9 pence, bringing the full-year payout to 11 pence.

Reuters said currency effects had a negligible effect on its 2006 trading profit, but sterling's strength against the euro and the dollar is expected to be more material this year if current rates persist. The majority of Reuters revenue is generated outside the UK.

The company said that based on current exchange rates a 5 cent weakening or strengthening in the dollar or euro would cut or boost its trading profit by around 10 million pounds.

Reuters said it expects to increase its share buyback this year to 400-425 million pounds, which includes 250 million pounds of the remaining 1 billion pound buyback that was scheduled to end mid-year.

The ongoing buyback programme has partly been funded by proceeds raised from the 2005 sale of its majority stake in institutional brokerage Instinet.

Given Reuters relatively low debt, high interest cover and lack of major acquisition opportunities many analysts had been expecting the company to announce a capital restructuring move.

The company said it wanted to maintain a strong investment grade rating of BBB+/Baa1 and that future buybacks would depend on the performance of the business and investment opportunities.