Thomson Reuters raises outlook, grows fastest since financial crisis

By Georgina Prodhan and Matt Scuffham

LONDON/NEW YORK (Reuters) - Thomson Reuters Corp raised its sales and core profit outlook for 2019 and 2020 on Thursday after reporting 4% organic revenue growth in the second quarter, which it said was its best since 2008 and ahead of its expectations.

Growth was driven by recurring revenues at all three of its biggest units since the news and information provider sold a majority in its Financial and Risk business, now known as Refinitiv, to Blackstone (NYSE:BX) last year - Legal, Corporates and Tax & Accounting.

The company said that it and Blackstone had agreed to sell Refinitiv, which provides data and news to financial customers, to London Stock Exchange in a $27 billion all-share deal.

Thomson Reuters will hold a 15-percent stake in the London Stock Exchange on completion of the deal, which is expected in the second half of 2020, the companies said. A Thomson Reuters representative will also sit on the LSE board.

Under the agreement, Thomson Reuters cannot sell its LSE stake for two years following completion of the deal. It can sell a third of its shares in each of the third and fourth years after completion, and the rest thereafter.

Chief Executive Officer Jim Smith told Reuters the company will decide whether to sell its shares as the lock-up expires.

"Over the course of time, we would likely see that investment shifted behind our core businesses," he said.

Smith said the deal would "create a great deal of value" for Thomson Reuters shareholders.

A $10-billion share buyback and the launch of new products following the Blackstone deal have propelled Thomson Reuters stock 85 percent higher since May last year, and the shares hit an all-time high of C$90.04 this week.

The company said it expects 2019 and 2020 revenue growth and adjusted earnings before interest, tax, depreciation and amortization (EBITDA) to each be at the upper end of the guidance ranges previously provided.

Smith said the launch of legal research product Westlaw Edge last year had been a key driver of growth in the company's legal division, its biggest business.

"It's been a very, very solid performer for us and continues to gain a lot of traction," he said.

The parent of Reuters News had forecast 2019 revenue growth of 7% to 8.5% before the effect of currency, and growth of about half that pace in 2020.

For EBITDA (earnings before interest, tax, depreciation and amortization), Thomson Reuters had forecast $1.4-$1.5 billion for 2019, up from $1.4 billion in 2018, and an EBITDA margin of 30-31 percent for 2020.

Thomson Reuters set aside $2 billion of the $17 billion proceeds from last year's Blackstone deal for acquisitions. The company has made three acquisitions so far and has about half of the funds left for more deals, Smith said in an interview.

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"We see a lot of opportunity there and we're looking at a lot of things," Smith said. "We're considering a number of further options but one can never predict the timing of M&A."

In the second quarter, revenue rose to $1.42 billion from $1.31 billion a year ago as Thomson Reuters gained from payments it received from Refinitiv for its news service. Adjusted earnings per share of 29 cents were ahead of analyst estimates of 18 cents, according to IBES from Refinitiv.