By Matt Scuffham
TORONTO (Reuters) – Thomson Reuters on Tuesday reported a 9 percent rise in quarterly revenue, stripping out the impact of currency, and said it is continuing to look for acquisitions to bolster its Legal and Tax & Accounting businesses, where demand is up in part because of U.S. tax reforms.
The news and information provider reported fourth-quarter revenue of $1.52 billion, compared with $1.41 billion a year ago. That was just short of the average analysts forecast of $1.54 billion, according to IBES data from Refinitiv.
Earnings excluding special items were 20 cents per share, down from 22 cents per share a year ago. It was not immediately clear whether that was directly comparable to the 6-cent consensus estimate.
Thomson Reuters sold a 55-percent stake in its Financial & Risk (F&R) unit to private equity firm Blackstone (NYSE:) Group LP last October in a deal that valued the unit, now a standalone business called Refinitiv, at about $20 billion.
Thomson Reuters has set aside $2 billion of the $17 billion proceeds from the Blackstone deal to make purchases to help grow its legal, tax and corporates businesses.
“There are opportunities out there but I think market valuations are challenging for everyone,” Chief Executive Jim Smith said in an interview. “We have to make certain we find not only the right strategic fit but the fit that makes financial sense as well. It’s a pretty frothy M&A market at the moment.”
Legal and Tax & Accounting are the company’s two biggest units following the F&R deal.
Excluding exchange rate effects, Legal revenue rose by 4 percent during the quarter to $599 million. Tax & Accounting sales rose by 8 percent to $248 million. Sales to corporate clients rose by 7 percent to $315 million.
“We’ve ended the year with good momentum in the sales line, as strong a profit mix as we’ve had in quite some time, and some solid demand from our customers,” Smith said. “We feel confident about how we’re entering 2019.”
For 2019, the company is forecasting adjusted earnings of $1.4 billion to $1.5 billion, up from $1.4 billion in the current year.
Smith said U.S. tax reforms were helping stimulate demand for the company’s tax and accounting products.
“Rapid regulatory change is good for our business,” he said.
The company has retained a 45-percent stake in Refinitiv, which sells data and news primarily to financial customers. Under the agreement with Blackstone, Refinitiv will make minimum annual payments of $325 million to Reuters over 30 years, adjusted for inflation, to secure access to its news service, equal to almost $10 billion in all.
Thomson Reuters, controlled by Canada’s Thomson family, is the parent of Reuters News. Revenue from Reuters News more than doubled to $155 million, reflecting a first-time contribution from the Refinitiv deal.
For 2018 as a whole, Thomson Reuters reported overall revenue growth of 4 percent. Revenues excluding the impact of the Blackstone deal rose by 2.5 percent.
For 2019, the company is forecasting organic revenue growth of 3 to 3.5 percent. For 2020, it expects revenue growth of 3.5 percent to 4.5 percent, in line with guidance it gave last December.