Reuters First-Quarter Underlying Revenue Rises 6.5%

Financial information and news provider Reuters posted a higher-than-forecast rise in first-quarter underlying revenue, but said actual revenue fell by 1.1% due largely to a weaker dollar.

Reuters said on Wednesday first-quarter revenue was 626 million pounds ($1.25 billion), compared with 633 million pounds a year ago.

Underlying revenue growth, which strips out the impact of acquisitions and disposals and is stated in constant exchange rates, was 6.5%, compared with 4% a year ago.

The company's Core Plus growth strategy contributed 15 million pounds, or two percentage points, to revenue growth. New revenue came from electronic trading, sales of data products and new initiatives in consumer media, China and India.

Analysts had been expecting first-quarter revenue of about 625 million pounds on a constant currency basis and underlying revenue growth of 6.1%.

Chief Executive Tom Glocer said the first-quarter revenue performance was bolstered by a record month in January.

"It was the best month in net sales terms since we started keeping data in this form in 1994, certainly the best in my era," he told reporters in a conference call.

Glocer also said the company had just sold 800 desktops to Barclays' wealth management division in a two-year deal including premium 3000 Xtra, Trader, Wealth Manager and Knowledge positions.

Reuters booked 47% of its revenue in dollars during the first quarter, a period during which the dollar weakened by 12% against sterling.

Numis Securities analysts said they were now factoring in a sterling-dollar rate of $2.00, rather than $1.95, and trimmed their 2007 pretax profit forecast by 10 million pounds to 305 million pounds as a result.

Finance Director David Grigson said he was "not uncomfortable" with current exchange rate levels. "We have reiterated our guidance again and clearly we are doing that against a backdrop of two dollars to the pound," he added.

Glocer said Reuters was "well positioned" to deliver on its full-year expectations. The company has previously said its 2007 organic revenue growth would be 6 percent or better.

Reuters said its share of the global financial information and services revenue market was 27% in 2006, a small improvement over 2005.

Its 50-50 FXMarketSpace joint venture with the Chicago Mercantile Exchange, launched on March 26, had seen good early progress, Glocer said.

FXM is the world's first centrally-cleared, global foreign exchange platform for the over-the-counter market. It is expected to break even in 2008.

Shares in Reuters were flat at 484 pence in early trading, valuing the company at around 6.1 billion pounds.

"With the share price having risen by 10% in the past month, and no significant upgrades coming through, we believe the share price is unlikely to race ahead today," said UBS media analyst Polo Tang in a note. "However, these Q1 results may be solid enough to prevent investors taking profits," he added.

Reuters shares were the best performers across the pan-European media sector in March, climbing 12% and outpacing an 8% rise in the European media sector.

The gains came after the full-year results on March 1 when the company forecast an increase in margins, raised its dividend and said revenues had been rising faster than anticipated.