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Thomson Reuters Reports Second-Quarter 2018 Results

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Thomson Reuters Reports Second-Quarter 2018 Results

PR Newswire

TORONTO, Aug. 8, 2018 /PRNewswire/ -- Thomson Reuters (NYSE:TRI) today reported results for the second quarter ended June 30, 2018 and reaffirmed its full-year 2018 outlook provided on May 11, 2018. The company also announced that its planned sale of a 55% interest in its Financial & Risk (F&R) business to private equity funds managed by Blackstone is expected to close early in the fourth quarter of 2018.

Thomson Reuters logo. (PRNewsFoto/Thomson Reuters)

"I am pleased with our second-quarter and first-half results, which put us on track to deliver a solid year," said Jim Smith, president and chief executive officer of Thomson Reuters. "Following the close of our partnership with Blackstone, Thomson Reuters will be well positioned to strengthen and grow our business.  We have leading positions and must-have tools in our core markets. I believe we have a bright future doing what we do best: combining information, technology and human expertise to provide trusted answers."

Consolidated Financial Highlights - Three Months Ended June 30

Unless otherwise noted, all results are from continuing operations and exclude the results of the company's Financial & Risk business unit (F&R). For 2018 reporting purposes, F&R is classified as a discontinued operation, Reuters News is a reportable segment and prior-year results have been restated accordingly.





Three Months Ended June 30,  

(Millions of U.S. dollars, except for adjusted EBITDA margin and EPS)

(unaudited)


IFRS Financial Measures(1)

2018

2017

Change

Change at
Constant
Currency

Revenues

$1,311

$1,280

2%


Operating profit

$204

$218

-6%


Diluted earnings per share (EPS) (includes discontinued operations)

$0.88

$0.27

226%


Cash flow from operations (includes discontinued operations)

$803

$834

-4%


Non-IFRS Financial Measures(1)





Revenues

$1,311

$1,280

2%

2%

Adjusted EBITDA

$348

$380

-8%

-8%

Adjusted EBITDA margin

26.5%

29.7%

-320bp

-290bp

Adjusted EPS

$0.17

$0.19

-11%

-11%

Free cash flow (includes discontinued operations)

$555

$580

-4%



(1)       In addition to results reported in accordance with International Financial Reporting Standards
           (IFRS), the company uses certain non-IFRS financial measures as supplemental indicators of
           its operating performance and financial position. These and other non-IFRS financial measures
           are defined and reconciled to the most directly comparable IFRS measures in the tables
           appended to this news release.

Revenues increased 2% due to higher recurring revenues. Foreign currency had no impact on revenue growth.  

Operating profit decreased 6% primarily due to costs and investments incurred to reposition Thomson Reuters in anticipation of separating F&R from the company.

  • Adjusted EBITDA decreased 8% and the margin decreased to 26.5%, reflecting the same factors.

Diluted earnings per share (EPS) increased due to higher net earnings from the F&R business. Net earnings increased primarily because F&R assets held for sale are not depreciated, and also due to a benefit from fair value adjustments associated with foreign currency derivatives embedded in certain F&R customer contracts.    

  • Adjusted EPS, which excludes discontinued operations, was $0.17 and decreased $0.02 per share, or 11%, due to lower adjusted EBITDA. 

Cash flow from operations decreased $31 million primarily due to higher tax and interest payments.

  • Free cash flow decreased $25 million, reflecting the same factor.

Highlights by Business Unit – Three Months Ended June 30





(Millions of U.S. dollars, except for adjusted EBITDA margins)

(unaudited)

 




Three Months Ended




June 30,


Change



2018

2017


Total

Foreign 
Currency

Constant
Currency

Revenues








Legal(1)


$882

$858


3%

1%

2%

Tax & Accounting


359

350


3%

-1%

4%

Reuters News


72

74


-3%

2%

-5%

Eliminations


(2)

(2)





Revenues


$1,311

$1,280


2%

0%

2%









Adjusted EBITDA








Legal(1)


$321

$325


-1%

1%

-2%

Tax & Accounting


91

103


-12%

-2%

-10%

Reuters News


8

9


-11%

11%

-22%

Corporate


(72)

(57)


n/a

n/a

n/a

Adjusted EBITDA


$348

$380


-8%

0%

-8%









Adjusted EBITDA Margin








Legal(1)


36.4%

37.9%


-150bp

-10bp

-140bp

Tax & Accounting


25.3%

29.4%


-410bp

-30bp

-380bp

Reuters News


11.1%

12.2%


-110bp

100bp

-210bp

Corporate


n/a

n/a


n/a

n/a

n/a

Adjusted EBITDA margin


26.5%

29.7%


-320bp

-30bp

-290bp









n/a:    not applicable

(1)       Includes certain portions of the Risk business (Regulatory Intelligence and Compliance 
            Learning) that will be retained by the Legal segment in connection with the proposed 
            sale of 55% of the F&R business. These businesses generated approximately $69 
            million of annual revenues in 2017.


Unless otherwise noted, all revenue growth comparisons by business unit in this news release are at constant currency (or exclude the impact of foreign currency) as Thomson Reuters believes this provides the best basis to measure their performance.

Legal

Revenues increased 2% to $882 million.

  • Recurring revenues grew 4% (73% of total).
  • Global print revenues declined 5% (18% of total).
  • Transactions revenues were unchanged (9% of total).

Adjusted EBITDA decreased 1% to $321 million.

  • The margin decreased to 36.4% from 37.9% due to product and marketing investments, including costs related to the development and launch in July of Westlaw Edge, a new legal research platform that utilizes advanced artificial intelligence. In constant currency, the margin decreased 140 basis points.

Tax & Accounting

Revenues increased 4% to $359 million.

  • Recurring revenues grew 4% (77% of total).
  • Transactions revenues were unchanged (20% of total).
  • Print revenues grew 9% (3% of total).

Adjusted EBITDA decreased 12% to $91 million.

  • The margin decreased to 25.3% from 29.4%, primarily due to charges on a long-term contract in the Government business.
  • As a reminder, Tax & Accounting is a seasonal business and nearly 60% of its full-year revenues are historically generated in the first and fourth quarters. As such, the margin performance of this business is generally weaker in the second and third quarters as costs are incurred in a more linear fashion throughout the year. The company expects Tax & Accounting's full-year 2018 margin to be in line with, or marginally higher than, the prior-year margin.

Reuters News

Revenues were $72 million compared to $74 million in the prior-year period due to lower transactions revenues.

When the F&R transaction closes, Reuters News and the new F&R partnership will enter into a 30-year agreement for Reuters News to supply news and editorial content to the partnership for a minimum of $325 million per year. Reuters News revenues do not reflect any F&R payments until after the transaction closes.

  • Recurring revenues declined 2% (89% of total).
  • Transactions revenues declined 25% (11% of total).

Adjusted EBITDA was $8 million, down $1 million from the prior-year period.

  • The margin decreased to 11.1% from 12.2%. In constant currency, the margin decreased 210 basis points.

Corporate

Corporate costs at the adjusted EBITDA level were $72 million compared to $57 million in the prior-year period (up 26%). As previously announced, this is due to investments to reposition Thomson Reuters in anticipation of separating F&R from the company. These cash investments are expected to be incurred in 2018 and 2019.

Financial & Risk – Discontinued Operation





(Millions of U.S. dollars, except for adjusted EBITDA margin)

(unaudited)

 


Financial & Risk (Discontinued Operations)(1)


Three Months Ended





June 30,


Change



2018

2017


Total

Foreign 
Currency

Constant
Currency(2)

Revenues


$1,553

$1,501


3%

1%

2%

Adjusted EBITDA


$472

$458


3%

-1%

4%

Adjusted EBITDA margin


30.4%

30.5%


-10bp

-60bp

50bp

Cash flow from operations


$451

$452


0%



Free cash flow (non-IFRS measure)(2)


$289

$313


-8%



Capital expenditures


$138

$117


18%




(1)       Excludes certain portions of the Risk business (Regulatory Intelligence and Compliance Learning) that will be
            retained by the Legal segment in connection with the proposed sale of 55% of the F&R business. These
            businesses generated approximately $69 million of annual revenues in 2017.  

(2)       In addition to results reported in accordance with IFRS, the company uses certain non-IFRS financial measures
            as supplemental indicators of its operating performance and financial position. These and other non-IFRS
            financial measures are defined and reconciled to the most directly comparable IFRS measures in the tables
            appended to this news release.




 

Revenues increased 2% to $1.6 billion, including an impact from the adoption of a new accounting standard, IFRS 15.  On an organic basis, revenues increased 3%. 

  • Recurring revenues grew 2% (77% of total).
  • Transactions revenues grew 7% (15% of total). On an organic basis, transactions revenues grew 14%.
  • Recoveries revenues decreased 3% (8% of total). 

Adjusted EBITDA increased 3% to $472 million.

  • The margin decreased to 30.4% from 30.5%. In constant currency, the margin increased 50 basis points.
  • Adjusted EBITDA included $39 million of costs related to the separation of the business. Excluding these costs, adjusted EBITDA increased 13% and the margin increased 300 basis points, primarily due to higher transaction revenues.

Cash flow from operations was essentially unchanged from the prior-year period.

  • Free cash flow decreased 8% as higher adjusted EBITDA was offset by increased capital expenditures and deal costs related to the F&R transaction.

Consolidated Financial Highlights – Six Months Ended June 30

Six Months Ended June 30,  

(Millions of U.S. dollars, except for adjusted EBITDA margin and EPS)

(unaudited)

 

IFRS Financial Measures(1)

2018

2017

Change

Change at
Constant
Currency

Revenues

$2,690

$2,611

3%


Operating profit

$472

$492

-4%


Diluted EPS (includes discontinued operations)

$0.40

$0.67

-40%


Cash flow from operations (includes discontinued operations)

$1,222

$466

162%


Non-IFRS Financial Measures(1)





Revenues

$2,690

$2,611

3%

2%

Adjusted EBITDA

$778

$795

-2%

-2%

Adjusted EBITDA margin

28.9%

30.4%

-150bp

-140bp

Adjusted EPS

$0.44

$0.44

0%

0%

Free cash flow (includes discontinued operations)

$675

($5)

n/m


 

n/m – not meaningful

(1)       In addition to results reported in accordance with IFRS, the company uses certain non-
            IFRS financial measures as supplemental indicators of its operating performance and
            financial position. These and other non-IFRS financial measures are defined and
            reconciled to the most directly comparable IFRS measures in the tables appended to
            this news release.

Revenues increased 3% due to higher recurring revenues and a positive impact from foreign currency.  

  • At constant currency, revenues increased 2%.

Operating profit decreased 4% due to costs and investments incurred to reposition Thomson Reuters in anticipation of separating F&R from the company.

  • Adjusted EBITDA decreased 2% and the margin decreased to 28.9%, reflecting the same factor.

Diluted EPS decreased 40%, reflecting an $812 million deferred tax charge, most of which was recorded in the first quarter of 2018, associated with the proposed sale of a 55% interest in the F&R business. The tax charge is required to be recorded when a business is first considered held for sale, rather than when the sale is completed. The company estimates that a cash tax payment of approximately $300 million will arise later in 2018 in connection with the closing of the transaction, with the remainder deferred until such time as the company disposes of its 45% interest in the new partnership.

  • Adjusted EPS, which excludes discontinued operations, was $0.44, unchanged from the prior-year period.   

Cash flow from operations increased $756 million primarily because the prior-year period included a $500 million pension contribution as well as lower severance payments. 

  • Free cash flow increased $680 million, reflecting similar factors.

Highlights by Business Unit – Six Months Ended June 30





(Millions of U.S. dollars, except for adjusted EBITDA margins)

(unaudited)





Six Months Ended







June 30,


Change



2018

2017


Total

Foreign 
Currency

Constant
Currency

Revenues








Legal(1)


$1,754

$1,699


3%

1%

2%

Tax & Accounting


796

767


4%

0%

4%

Reuters News


144

148


-3%

3%

-6%

Eliminations


(4)

(3)





Revenues


$2,690

$2,611


3%

1%

2%









Adjusted EBITDA








Legal(1)


$640

$639


0%

0%

0%

Tax & Accounting


238

244


-2%

-1%

-1%

Reuters News


16

22


-27%

5%

-32%

Corporate


(116)

(110)


n/a

n/a

n/a

Adjusted EBITDA


$778

$795


-2%

0%

-2%









Adjusted EBITDA Margin








Legal(1)


36.5%

37.6%


-110bp

-10bp

-100bp

Tax & Accounting


29.9%

31.8%


-190bp

-30bp

-160bp

Reuters News


11.1%

14.9%


-380bp

30bp

-410bp

Corporate


n/a

n/a


n/a

n/a

n/a

Adjusted EBITDA margin


28.9%

30.4%


-150bp

-10bp

-140bp









n/a:    not applicable

(1)       Includes certain portions of the Risk business (Regulatory Intelligence and Compliance
            Learning) that will be retained by the Legal segment in connection with the proposed sale
            of 55% of the F&R business. These businesses generated approximately $69 million of
            annual revenues in 2017.




 

Financial & Risk – Discontinued Operation





(Millions of U.S. dollars, except for adjusted EBITDA margin)

(unaudited)



Financial & Risk (Discontinued Operations)(1)


Six Months Ended







June 30,


Change



2018

2017


Total

Foreign 
Currency

Constant
Currency(2)

Revenues


$3,136

$2,986


5%

2%

3%

Adjusted EBITDA


$998

$919


9%

2%

7%

Adjusted EBITDA margin


31.8%

30.8%


100bp

-20bp

120bp

Cash flow from operations


$661

$522


27%



Free cash flow (non-IFRS measure)(2)


$380

$269


41%



Capital expenditures


$246

$222


11%




(1)       Excludes certain portions of the Risk business (Regulatory Intelligence and Compliance Learning)
            that will be retained by the Legal segment in connection with the proposed sale of 55% of the F&R
            business. These businesses generated approximately $69 million of annual revenues in 2017.  

(2)       In addition to results reported in accordance with IFRS, the company uses certain non-IFRS
            financial measures as supplemental indicators of its operating performance and financial position.
            These and other non-IFRS financial measures are defined and reconciled to the most directly
            comparable IFRS measures in the tables appended to this news release.


 

Dividend & Share Repurchases; Financial & Risk Transaction Proceeds Update

In January 2018, the Thomson Reuters board of directors approved an annual dividend of $1.38 per common share for the year. A quarterly dividend of $0.345 per share is payable on September 17, 2018 to common shareholders of record as of August 16, 2018.

Thomson Reuters previously signed a definitive agreement to sell a 55% majority stake in the Financial & Risk business and enter into a strategic partnership with private equity funds managed by Blackstone. Canada Pension Plan Investment Board and an affiliate of GIC will invest alongside Blackstone. Thomson Reuters will receive approximately $17 billion in gross proceeds at closing (subject to purchase price adjustments) and will retain a 45% interest in the business. The transaction is expected to close early in the fourth quarter of 2018 and is subject to specified regulatory approvals and customary closing conditions. Substantially all required regulatory approvals have been received at this time.     

The company repurchased 9.1 million shares during the second quarter at a cost of $359 million under its $1.5 billion buyback program, which is being effected under the company's normal course issuer bid (NCIB). The company did not repurchase any shares in the first quarter.

The company currently expects to use between $9 billion and $10 billion of the estimated $17 billion of gross proceeds of the Financial & Risk transaction to return capital to its shareholders. A significant portion of this return is expected to be through a substantial issuer bid/tender offer made to all shareholders, which may be at a premium to the then-current market price of the company's shares.  The company's principal shareholder (Woodbridge) is expected to participate pro rata in the substantial issuer bid/tender offer. Repurchases in 2018 under the NCIB program prior to the closing of the transaction will be included in the contemplated $9 billion and $10 billion of shareholder returns.

The price that Thomson Reuters will pay for shares in open market transactions under its NCIB will be the market price at the time of purchase or such other price as may be permitted by the Toronto Stock Exchange. The amount of shares that Thomson Reuters buys back under the $1.5 billion repurchase program will be dependent on the timing of the closing of the transaction and other factors, such as market conditions, share price and other opportunities to invest capital for growth. Thomson Reuters may elect to suspend or discontinue share repurchases at any time, in accordance with applicable laws.

The company expects to use between $3.0 billion and $4.0 billion of proceeds from the proposed Financial & Risk transaction to repay debt, enabling it to remain substantially below its target leverage ratio (net debt/adjusted EBITDA) of 2.5:1.

As previously disclosed, the company intends to utilize the remaining $1.0 billion to $3.0 billion of proceeds to fund strategic, targeted acquisitions to bolster its positions in key growth segments of its Legal Professionals, Tax Professionals and Corporates businesses.

The company also expects to use between $1.5 billion and $2.5 billion for cash taxes, pension contributions, bond redemption costs, and other fees and outflows related to the transaction.  These funds include $500 million to $600 million of spend that the company views as necessary to eliminate stranded costs as well as investments to re-position the company following the separation of the businesses.

Organizational Changes

On July 1, 2018, Brian Peccarelli and Neil Masterson became Co-Chief Operating Officers. Mr. Peccarelli is overseeing the customer-facing operations including Legal Professionals, Tax Professionals and Corporates, as well as driving sales. Mr. Masterson is overseeing Operations & Enablement with responsibility for managing commercial and technology operations, including those around sales capabilities, digital customer experience and product and content development.

The company also announced it is transitioning from a product-centric structure to a customer-centric structure. This new structure is intended to move decision making closer to the customer and allow it to serve customers better with its full suite of offerings.  The company expects to begin reporting under the new organizational structure with its fourth-quarter 2018 results.

Business Outlook 2018 (At Constant Currency)

Thomson Reuters today reaffirmed its Outlook for 2018 as previously provided on May 11, 2018.

The company's 2018 Outlook assumes constant currency rates compared to 2017 and does not factor in the impact of acquisitions or divestitures that may occur, except for the planned F&R transaction. F&R is considered a discontinued operation for the full-year 2018 and is excluded from the company's 2018 Outlook.

For the full-year 2018, the company expects:

  • Low single-digit revenue growth (excludes any 2018 payments to Reuters News from F&R following the closing of the transaction)
  • Adjusted EBITDA to range between $1.2 billion - $1.3 billion (including the costs referred to below)
  • Total Corporate costs between $500 million and $600 million (including stranded costs and investments to reposition the company following the separation of the businesses)
  • Depreciation and amortization of computer software between $500 million and $525 million
  • Capital expenditures of approximately 10% of revenues
  • Effective tax rate on adjusted earnings between 14% - 16%

The information in this section is forward-looking and should be read in conjunction with the section below entitled "Special Note Regarding Forward-Looking Statements, Material Assumptions and Material Risks."

Thomson Reuters

Thomson Reuters is the world's leading source of news and information for professional markets. Our customers rely on us to deliver the intelligence, technology and expertise they need to find trusted answers. The business has operated in more than 100 countries for more than 100 years. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges (symbol: TRI). For more information, visit www.thomsonreuters.com.

NON-IFRS FINANCIAL MEASURES

Thomson Reuters prepares its financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

This news release includes certain non-IFRS financial measures, such as adjusted EBITDA and the related margin (other than at the business unit or segment level), free cash flow, adjusted EPS, and selected measures excluding the impact of foreign currency. Thomson Reuters uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS. Non-IFRS financial measures are defined and reconciled to the most directly comparable IFRS measures in the appended tables. The term "organic" refers to Thomson Reuters' existing businesses before the impact of acquisitions, dispositions and IFRS 15.

The company's business outlook contains various non-IFRS financial measures. For outlook purposes only, the company is unable to reconcile these non-IFRS measures to the most comparable IFRS measures because it cannot predict, with reasonable certainty, the 2018 impact of changes in foreign exchange rates which impact (i) the translation of its results reported at average foreign currency rates for the year, and (ii) other finance income or expense related to foreign exchange contracts and intercompany financing arrangements. Additionally, the company cannot reasonably predict the occurrence or amount of other operating gains and losses, which generally arise from business transactions that it does not anticipate.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS, MATERIAL ASSUMPTIONS AND MATERIAL RISKS

Certain statements in this news release, including, but not limited to, statements in the "Business Outlook 2018 (At Constant Currency)" section, Mr. Smith's comments, statements regarding the expected timing for the closing of the Financial & Risk transaction, the company's anticipated uses of proceeds from the F&R transaction and Tax & Accounting's expected full-year adjusted EBITDA margin, are forward-looking. As a result, forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. There is no assurance that a transaction involving all or part of the F&R business will be completed or that the events described in any other forward-looking statement will materialize. A business outlook is provided for the purpose of presenting information about current expectations for 2018. This information may not be appropriate for other purposes. You are cautioned not to place undue reliance on forward-looking statements which reflect expectations only as of the date of this news release. Except as may be required by applicable law, Thomson Reuters disclaims any obligation to update or revise any forward-looking statements.

The company's 2018 business outlook is based on various external and internal assumptions. Economic and market assumptions include, but are not limited to, GDP growth in most of the countries where Thomson Reuters operates, a continued increase in demand for high quality information and workflow solutions and a continued need for trusted products and services that help customers navigate changing geopolitical, economic and regulatory environments. Internal financial and operational assumptions include, but are not limited to, the successful execution of sales initiatives, ongoing product release programs, our globalization strategy and other growth and efficiency initiatives.

Some of the material risk factors that could cause actual results or events to differ materially from those expressed in or implied by forward-looking statements in this news release include, but are not limited to, changes in the general economy; actions of competitors; failure to develop new products, services, applications and functionalities to meet customers' needs, attract new customers and retain existing ones, or expand into new geographic markets and identify areas of higher growth; fraudulent or unpermitted data access or other cyber-security or privacy breaches; failures or disruptions of telecommunications, data centers, network systems or the Internet; increased accessibility to free or relatively inexpensive information sources; failure to meet the challenges involved in operating globally; failure to maintain a high renewal rate for recurring, subscription-based services; dependency on third parties for data, information and other services; changes to law and regulations; tax matters, including changes to tax laws, regulations and treaties; fluctuations in foreign currency exchange and interest rates; failure to adapt to organizational changes and effectively implement strategic initiatives; failure to attract, motivate and retain high quality management and key employees; failure to protect the brands and reputation of Thomson Reuters; inadequate protection of intellectual property rights; threat of legal actions and claims; downgrading of credit ratings and adverse conditions in the credit markets; failure to derive fully the anticipated benefits from existing or future acquisitions, joint ventures, investments or dispositions; the effect of factors outside of the control of Thomson Reuters on funding obligations in respect of pension and post-retirement benefit arrangements, risk of antitrust/competition-related claims or investigations; impairment of goodwill and other identifiable intangible assets; actions or potential actions that could be taken by the company's principal shareholder, The Woodbridge Company Limited; failure to complete the proposed Financial & Risk transaction; difficulties separating Financial & Risk from the company; and failure to realize the benefits of the strategic Financial & Risk partnership. These and other factors are discussed in materials that Thomson Reuters from time to time files with, or furnishes to, the Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission. Thomson Reuters annual and quarterly reports are also available in the "Investor Relations" section of www.thomsonreuters.com.

CONTACTS




MEDIA

David Crundwell

Senior Vice President, Corporate Affairs

+1 416 649 9904

david.crundwell@tr.com

INVESTORS

Frank J. Golden

Senior Vice President, Investor Relations

+1 646 223 5288

frank.golden@tr.com

Thomson Reuters will webcast a discussion of its second-quarter 2018 results today beginning at 8:30 a.m. Eastern Daylight Time (EDT).  You can access the webcast by visiting ir.thomsonreuters.com.  An archive of the webcast will be available following the presentation.

 

Thomson Reuters Corporation

Consolidated Income Statement

(millions of U.S. dollars, except per share data)

(unaudited)



Three Months Ended


Six Months Ended


June 30,


June 30,


2018

2017


2018

2017

CONTINUING OPERATIONS






Revenues

$1,311

$1,280


$2,690

$2,611

Operating expenses

(964)

(899)


(1,916)

(1,810)

Depreciation

(29)

(34)


(59)

(62)

Amortization of computer software

(100)

(93)


(198)

(189)

Amortization of other identifiable intangible assets

(28)

(35)


(57)

(70)

Other operating gains (losses), net

14

(1)


12

12

Operating profit

204

218


472

492

Finance costs, net:






     Net interest expense

(81)

(89)


(159)

(181)

     Other finance income (costs)

14

(60)


21

(88)

Income before tax and equity method investments

137

69


334

223

Share of post-tax earnings (losses) in equity method

   investments

2

(7)


4

(5)

Tax benefit (expense)

3

(15)


(24)

(26)

Earnings from continuing operations

142

47


314

192

Earnings from discontinued operations, net of tax

515

159


32

328

Net earnings

$657

$206


$346

$520







Earnings attributable to:






Common shareholders

625

192


286

489

Non-controlling interests

32

14


60

31







Earnings per share:






Basic and diluted earnings (loss) per share:






   From continuing operations

$0.20

$0.07


$0.44

$0.26

   From discontinued operations

0.68

0.20


(0.04)*

0.41

Basic and diluted earnings (loss) per share

$0.88

$0.27


$0.40

$0.67







Basic weighted-average common shares

709,674,170

721,009,957


710,215,950

724,088,186

Diluted weighted-average common shares

710,095,394

722,504,109


710,797,432

725,409,478



*     

Basic and diluted loss per share from discontinued operations reflects an $812 million deferred tax charge, most of which was recorded in the first quarter of 2018, associated with the proposed sale of a 55% interest in the Financial & Risk business. The tax charge is required to be recorded when a business is first considered held for sale, rather than when the sale is completed. The company estimates that a cash tax payment of approximately $300 million will arise later in 2018 in connection with the closing of the transaction with the remainder deferred until such time as the company disposes of its 45% interest in the new partnership.

 

Thomson Reuters Corporation

Consolidated Statement of Financial Position

(millions of U.S. dollars)

(unaudited)



June 30,  


December 31,

2018


2017

Assets




Cash and cash equivalents

$879


$874

Trade and other receivables

856


1,457

Other financial assets

48


98

Prepaid expenses and other current assets

380


548

   Current assets excluding assets held for sale

2,163


2,977

Assets held for sale

14,445


-

Current assets

16,608


2,977





Computer hardware and other property, net

502


921

Computer software, net

910


1,458

Other identifiable intangible assets, net

3,298


5,315

Goodwill

4,984


15,042

Other financial assets

40


83

Other non-current assets

586


605

Deferred tax

47


79

Total assets

$26,975


$26,480





Liabilities and equity




Liabilities




Current indebtedness

$2,595


$1,644

Payables, accruals and provisions

1,037


2,086

Deferred revenue

781


937

Other financial liabilities

1,106


129

   Current liabilities excluding liabilities associated with assets held for sale

5,519


4,796

Liabilities associated with assets held for sale

1,657


-

Current liabilities

7,176


4,796





Long-term indebtedness

4,936


5,382

Provisions and other non-current liabilities

1,204


1,740

Other financial liabilities

211


279

Deferred tax

1,285


708

Total liabilities

14,812


12,905





Equity




Capital

9,132


9,549

Retained earnings

6,375


7,201

Accumulated other comprehensive loss

(3,864)


(3,673)

Total shareholders' equity

11,643


13,077

Non-controlling interests

520


498

Total equity

12,163


13,575

Total liabilities and equity

$26,975


$26,480

 

 

Thomson Reuters Corporation

Consolidated Statement of Cash Flow

(millions of U.S. dollars)

(unaudited)



Three Months Ended

June 30,


Six Months Ended

June 30,


2018

2017


2018

2017

Cash provided by (used in):






Operating activities






Earnings from continuing operations

$142

$47


$314

$192

Adjustments for:






Depreciation

29

34


59

62

Amortization of computer software

100

93


198

189

Amortization of other identifiable intangible assets

28

35


57

70

Deferred tax

(30)

(16)


(25)

(12)

Other

11

151


58

211

Pension contribution

-

-


-

(500)

Changes in working capital and other items 

72

46


(100)

(219)

Operating cash flows from continuing operations

352

390


561

(7)

Operating cash flows from discontinued operations

451

444


661

473

Net cash provided by operating activities

803

834


1,222

466







Investing activities






Acquisitions, net of cash acquired

(1)

(5)


(28)

(5)

Proceeds from disposals of businesses and investments

-

-


-

10

Capital expenditures 

(131)

(124)


(310)

(232)

Proceeds from disposals of property and equipment

27

-


27

-

Other investing activities

18

9


18

15

Investing cash flows from continuing operations

(87)

(120)


(293)

(212)

Investing cash flows from discontinued operations

(138)

(100)


(246)

(383)

Net cash used in investing activities

(225)

(220)


(539)

(595)







Financing activities






Proceeds from debt

-

-


1,370

-

Repayments of debt

(870)

-


(870)

(550)

Net borrowings (repayments) under short-term loan facilities

1,313

(105)


61

150

Repurchases of common shares

(359)

(294)


(359)

(578)

Dividends paid on preference shares

-

-


(1)

(1)

Dividends paid on common shares

(239)

(241)


(475)

(483)

Other financing activities

1

11


1

16

Financing cash flows from continuing operations

(154)

(629)


(273)

(1,446)

Financing cash flows from discontinued operations

(24)

(22)


(35)

(31)

Net cash used in financing activities

(178)

(651)


(308)

(1,477)

Increase (decrease) in cash and bank overdrafts

400

(37)


375

(1,606)

Translation adjustments

(13)

3


(12)

5

Cash and bank overdrafts at beginning of period

844

800


868

2,367

Cash and bank overdrafts at end of period

$1,231

$766


$1,231

$766







Cash and bank overdrafts at end of period comprised of:






Cash and cash equivalents

$879

$771


$879

$771

Cash and cash equivalents in assets held for sale

356

-


356

-

Bank overdrafts

(4)

(5)


(4)

(5)


$1,231

$766


$1,231

$766

 

 

Thomson Reuters Corporation

Reconciliation of Earnings from Continuing Operations to Adjusted EBITDA(1)

(millions of U.S. dollars, except for margins)

(unaudited)




Three Months Ended



Six Months Ended



June 30,



June 30,




2018

2017

Change


2018

2017

Change









Earnings from continuing operations

$142

$47

202%


$314

$192

64%

Adjustments to remove:








Tax (benefit) expense

(3)

15



24

26


Other finance (income) costs

(14)

60



(21)

88


Net interest expense

81

89



159

181


Amortization of other identifiable intangible assets

28

35



57

70


Amortization of computer software

100

93



198

189


Depreciation

29

34



59

62


EBITDA

$363

$373



$790

$808


Adjustments to remove:








Share of post-tax (earnings) losses in equity 
     
method investments

(2)

7



(4)

5


Other operating (gains) losses, net

(14)

1



(12)

(12)


Fair value adjustments

1

(1)



4

(6)


Adjusted EBITDA

$348

$380

-8%


$778

$795

-2%

Adjusted EBITDA margin(1)

26.5%

29.7%

-320bp


28.9%

30.4%

-150bp














 

 

Thomson Reuters Corporation

Reconciliation of Net Earnings to Adjusted Earnings(2)

(millions of U.S. dollars, except for share and per share data)

(unaudited)



Three Months Ended

June 30,


Six Months Ended

June 30,




2018

2017

Change


2018

2017

Change

Net earnings

$657

$206

219%


$346

$520

-33%

Adjustments to remove:








Fair value adjustments

1

(1)



4

(6)


Amortization of other identifiable intangible assets

28

35



57

70


Other operating (gains) losses, net

(14)

1



(12)

(12)


Other finance (income) costs

(14)

60



(21)

88


Share of post-tax (earnings) losses in equity method
     
investments

(2)

7



(4)

5


Tax on above items

(6)

(18)



(11)

(20)


Tax items impacting comparability

(14)

6



(12)

6


Earnings from discontinued operations, net of tax

(515)

(159)



(32)

(328)


Interim period effective tax rate normalization(3)

(2)

3



2

(2)


Dividends declared on preference shares

-

-



(1)

(1)


Adjusted earnings

$119

$140

-15%


$316

$320

-1%

Adjusted EPS

$0.17

$0.19

-11%


$0.44

$0.44

0%

Foreign currency(4)



0%




0%

Constant currency(4)



-11%




0%









Diluted weighted-average common shares (millions)

710.1

722.5



710.8

725.4





Refer to page 14 for footnotes.

 

 

Thomson Reuters Corporation

Reconciliation of Earnings from Discontinued Operations to Financial & Risk Adjusted EBITDA(1)

(millions of U.S. dollars, except for margins)

(unaudited)



Three Months Ended



Six Months Ended



June 30,



June 30,



2018

2017

Change


2018

2017

Change









Earnings from discontinued operations

$515

$159

224%


$32

$328

-90%

Adjustments to remove:








Tax expense (benefit)

18

(10)



886

(12)


Other finance (income) costs

(5)

31



-

30


Net interest expense

2

6



6

7


Amortization of other identifiable intangible assets

-

85



28

169


Amortization of computer software

-

75



30

159


Depreciation

-

43



14

87


EBITDA

$530

$389



$996

$768


Adjustments to remove:








Other operating losses, net

19

20



60

29


Fair value adjustments

(83)

54



(65)

124


IP & Science discontinued operations

6

(5)



7

(2)


Financial & Risk discontinued operations adjusted

   EBITDA

$472

$458

3%


$998

$919

9%

Adjusted EBITDA margin(1)

30.4%

30.5%

-10bp


31.8%

30.8%

100bp



 

 

Thomson Reuters Corporation


Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow(5)

(millions of U.S. dollars)

(unaudited)




Three Months Ended


Six Months Ended

June 30,


June 30,


2018

2017


2018

2017

Net cash provided by operating activities

$803

$834


$1,222

$466

Capital expenditures

(131)

(124)


(310)

(232)

Proceeds from disposals of property and equipment

27

-


27

-

Capital expenditures from discontinued operations

(138)

(117)


(246)

(222)

Other investing activities

18

9


18

15

Dividends paid on preference shares

-

-


(1)

(1)

Dividends paid to non-controlling interests from discontinued operations

(24)

(22)


(35)

(31)

Free cash flow

$555

$580


$675

$(5)









 

.

Thomson Reuters Corporation

Reconciliation of Operating Cash Flows from Discontinued Operations to Financial &
Risk Free Cash Flow(5)

(millions of U.S. dollars)

(unaudited)



Three Months Ended


Six Months Ended


June 30,


June 30,


2018

2017


2018

2017

Operating cash flows from discontinued operations

$451

$444


$661

$473

Remove: Operating cash flows - IP & Science discontinued operations

-

8


-

49

Capital expenditures from discontinued operations

(138)

(117)


(246)

(222)

Dividends paid to non-controlling interests from discontinued operations

(24)

(22)


(35)

(31)

Free cash flow - Financial & Risk discontinued operations

$289

$313


$380

$269



Refer to page 14 for footnotes.

 

 

Footnotes


(1)

Thomson Reuters defines adjusted EBITDA for its business units as earnings from continuing operations, or for F&R as earnings from discontinued operations, before tax expense or benefit, net interest expense, other finance costs or income, depreciation, amortization of software and other identifiable intangible assets, Thomson Reuters share of post-tax (earnings) losses in equity method investments, other operating gains and losses, certain asset impairment charges, fair value adjustments and corporate related items. Consolidated adjusted EBITDA is comprised of adjusted EBITDA for its business units and Corporate. Adjusted EBITDA margin is adjusted EBITDA expressed as a percentage of revenues. Thomson Reuters uses adjusted EBITDA because it provides a consistent basis to evaluate operating profitability and performance trends by excluding items that the Company does not consider to be controllable activities for this purpose. Adjusted EBITDA also represents a measure commonly reported and widely used by investors as a valuation metric. Additionally, this measure is used by Thomson Reuters and investors to assess a company's ability to incur and service debt.

(2)

Adjusted earnings and adjusted EPS include dividends declared on preference shares but exclude the post-tax impacts of fair value adjustments, amortization of other identifiable intangible assets, other operating gains and losses, certain asset impairment charges, other finance costs or income, Thomson Reuters share of post-tax (earnings) losses in equity method investments, discontinued operations and other items affecting comparability. Thomson Reuters calculates the post-tax amount of each item excluded from adjusted earnings based on the specific tax rules and tax rates associated with the nature and jurisdiction of each item. Adjusted EPS is calculated using diluted weighted-average shares and does not represent actual earnings or loss per share attributable to shareholders. Thomson Reuters uses adjusted earnings and adjusted EPS as they provide a more comparable basis to analyze earnings and they are also measures commonly used by shareholders to measure the company's performance.

(3)

Adjustment to reflect income taxes based on estimated full-year effective tax rate. Earnings or losses for interim periods under IFRS reflect income taxes based on the estimated effective tax rates of each of the jurisdictions in which Thomson Reuters operates. The non-IFRS adjustment reallocates estimated full-year income taxes between interim periods, but has no effect on full-year income taxes.

(4)

The changes in revenues, adjusted EBITDA and the related margins, and adjusted earnings per share before currency (at constant currency or excluding the effects of currency) are determined by converting the current and prior-year period's local currency equivalent using the same exchange rates.

(5)

Free cash flow (includes free cash flow from continuing and discontinued operations) is net cash provided by (used in) operating activities, proceeds from disposals of property and equipment, and other investing activities less capital expenditures, dividends paid on the company's preference shares, and dividends paid to non-controlling interests from discontinued operations. Thomson Reuters uses free cash flow as it helps assess the company's ability, over the long term, to create value for its shareholders as it represents cash available to repay debt, pay common dividends and fund share repurchases and new acquisitions.

 

 

                                                                                                                    Supplemental

Thomson Reuters Corporation

Depreciation and Amortization of Computer Software by Business Segment

(millions of U.S. dollars)

(unaudited)




Three Months Ended


Six Months Ended

June 30,


June 30,


2018

2017


2018

2017

Legal

$65

$63


$128

$127

Tax & Accounting

37

32


74

64

Reuters News

4

5


8

9

Corporate

23

27


47

51

Total depreciation and amortization of computer software

$129

$127


$257

$251









 

 

 

Appendix A




The following supplemental information provides revised 2017 business segment information excluding the Financial & Risk (F&R) business, which was classified as a discontinued operation beginning in the first quarter of 2018. The information provided illustrates the company's business on a continuing operations basis. As it includes certain estimates, it is subject to revision until the proposed F&R transaction is completed.

 


Revised Business Segment Information


(Excluding the F&R Segment)


(millions of U.S. dollars except for per share amounts)


(unaudited)





Year Ended




Year Ended


December 31,
2017

Adjustments

December 31,
2017


Previously
Reported

Remove F&R
Segment
Results

Add Back
Retained
Businesses(3)

Other
Adjustments(4)

Revised
Excluding F&R

Revenues







Financial & Risk

$6,112

(6,112)

-

-

-


Legal

3,390

-

69

-

$3,459


Tax & Accounting

1,551

-

-

-

1,551


Reuters News(1)

296

-

-

-

296


Eliminations

(16)

7

-

-

(9)


Revenues from continuing operations

$11,333

(6,105)

69

-

$5,297









Adjusted EBITDA(2)







Financial & Risk

$1,916

(1,916)

-

-

-


Legal

1,279

-

28

-

$1,307


Tax & Accounting

495

-

-

-

495


Reuters News(1)

27

-

-

-

27


Corporate

(280)

-

-

36

(244)


Adjusted EBITDA

$3,437

(1,916)

28

36

$1,585









Adjusted earnings(2)







Adjusted EBITDA

$3,437

(1,916)

28

36

$1,585


Depreciation and amortization of computer software

(995)

581

(10)

(72)

(496)


Adjustments:







   Interest

(362)

-

-

4

(358)


   Tax

(205)

121

(2)

3

(83)


   Non-controlling interests

(64)

-

-

64

-


   Dividends declared on preference shares

(2)

-

-

-

(2)


Adjusted earnings

$1,809

(1,214)

16

35

$646









Adjusted EPS(2)

$2.51

(1.68)

0.02

0.05

$0.90














 

(1)

Effective January 1, 2018, Reuters News is a reportable segment.



(2)

Refer to the explanatory footnotes on page 14 for definitions of our non-IFRS measures. Refer to the company's 2017 Annual Report for a reconciliation of this non-IFRS financial measure to the most directly comparable IFRS measure.



(3)

Represents the Regulatory Intelligence and Compliance Learning businesses that will be retained by the company's Legal segment following the closing of the proposed F&R transaction.



(4)

Other adjustments include the following:


  • Adjusted EBITDA contains costs primarily for real estate optimization that relate to properties to be transferred with the Financial & Risk business.
  • Depreciation and amortization of computer software relates to assets that will not be transferred with the Financial & Risk business.
  • Non-controlling interests relates to third party shareholdings in Tradeweb that will be transferred with the Financial & Risk business.

 

 

Appendix A


The following supplemental information provides revised 2017 business segment information excluding the F&R business, which was classified as a discontinued operation beginning in the first quarter of 2018. The information provided illustrates the company's business on a continuing operations basis. As it includes certain estimates, periods subsequent to June 30, 2017 are subject to revision until the proposed F&R transaction is completed.


Revised Business Segment Information

(Excluding the F&R Segment)

(millions of U.S. dollars except for per share amounts and margins)

(unaudited)



2017


First    Quarter

Second Quarter

Third  Quarter

Fourth Quarter

Full Year

Revenues






Legal

$841

$858

$860

$900

$3,459

Tax & Accounting

417

350

341

443

1,551

Reuters News

74

74

73

75

296

Eliminations

(1)

(2)

(2)

(4)

(9)

Revenues from continuing operations

$1,331

$1,280

$1,272

$1,414

$5,297







Adjusted EBITDA(1)






Legal

$314

$325

$345

$323

$1,307

Tax & Accounting

141

103

95

156

495

Reuters News

13

9

7

(2)

27

Corporate

(53)

(57)

(60)

(74)

(244)

Adjusted EBITDA

$415

$380

$387

$403

$1,585







Adjusted earnings(1)






Adjusted EBITDA

$415

$380

$387

$403

$1,585

Depreciation and amortization of computer software

(124)

(127)

(117)

(128)

(496)

Adjustments:






   Interest

(92)

(89)

(89)

(88)

(358)

   Tax

(18)

(24)

(1)

(40)

(83)

   Dividends declared on preference shares

(1)

-

(1)

-

(2)

Adjusted earnings

$180

$140

$179

$147

$646

Adjusted EPS(1)

$0.25

$0.19

$0.25

$0.21

$0.90







Adjusted EBITDA margin(1)






Legal

37.3%

37.9%

40.1%

35.9%

37.8%

Tax & Accounting

33.8%

29.4%

27.9%

35.2%

31.9%

Reuters News

17.6%

12.2%

9.6%

n/m

9.1%

Corporate

n/a

n/a

n/a

n/a

n/a

Adjusted EBITDA margin

31.2%

29.7%

30.4%

28.5%

29.9%

n/m – not meaningful






n/a – not applicable













(1)      Refer to the explanatory footnotes on page 14 for definitions of our non-IFRS measures.

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/thomson-reuters-reports-second-quarter-2018-results-300693906.html

SOURCE Thomson Reuters

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