INDUSTRY REPORT for Thomson Reuters Corporation
Overview of Thomson Reuters and Business Activities Thomson Reuters Corporation provides intelligent information for companies and individuals seeking competitive advantage. It defines intelligent information as combining human intelligence, industry expertise and innovative technology in order to give decision-makers the knowledge they need to make decisions quickly. They have approximately 60,000 employees and operate in more than 100 countries. Its shares are listed on the Toronto Stock Exchange and New York Stock Exchange (symbol: TRI). Its headquarters is located at 3 Times Square, New York, New York 10036. Its main products are electronic content and services that are subscription based. It provides insight in four main business and professional areas: Financial & Risk Legal Tax & Accounting Intellectual Property & Science Ticker: TRI NAICS: 511120 Address: 3 Times Square, New York, New York, 10036 Website: http://thomsonreuters.com/ Phone: 416-360-8700 Fax: 416-360-8812 The products offered in the Financial & Risk unit include: critical news, information, analytics, operational risk management solutions, and tools to enable transactions, tools to bring professionals together to allow trading, investing and financial and corporate meetings. The Legal division offers online and print information, decision support tools, and software and services to support legal, investigation, business, and government professionals. Its Tax & Accounting unit offers tax compliance and accounting information, software and services for accounting firms, corporations, law firms and government. Finally, its Intellectual Property & Science unit offers intellectual property and scientific information, decision support tools and services for governments, academics, publishers, corporations and law firms to be innovative. 1
Domestic and International Operations The company s revenues are still highest in the Americas, followed by EMEA (Europe, the Middle East and Africa) and the Asian Pacific market. While revenues have dropped across all regions, the most precipitous has been in the EMEA markets. The company has noted that they will increase operations in the Middle East specifically as an area of growth, while concerns over the European market persist. Key Personnel and Directors The Executive Team is currently comprised of 15 individuals, while the Board of Directors is comprised of 13. Executive Team James C. Smith Stephane Bello Gus Carlson David W. Craig Richard H. King Gonzalo Lissarrague Neil Masterson Basil Moftah POSITION President and Chief Executive Officer Executive Vice President and Chief Financial Officer Executive Vice President and Chief Communications Officer President, Financial & Risk Executive Vice President and Chief Operating Officer, Technology President, Global Growth & Operations Executive Vice President and Chief Transformation Officer President, Intellectual Property & Science 2
Brian Peccarelli James T. Powell Andrew Rashbass Brian Scanlon Deirdre Stanley Susan Taylor Peter Warwick President, Tax & Accounting Executive Vice President and Chief Technology Officer Chief Executive Reuters Executive Vice President and Chief Strategy Officer Executive Vice President, General Counsel and Board Secretary President, Legal Executive Vice President and Chief People Officer Board of Directors David Thomson James C. Smith Manvinder S. Banga David W. Binet Mary Cirillo Steven A. Denning Lawton W. Fitt Sir Deryck Maughan Ken Olisa, OBE Vance K. Opperman John M. Thompson Peter J. Thomson Wulf von Schimmelmann POSITION Chairman President and Chief Executive Officer Operating Partner, Clayton Dubilier & Rice, LLC President and Chief Executive Officer, The Woodbridge Company Limited Corporate Director Chairman, General Atlantic LLC Corporate Director Senior Advisor, Kohlberg Kravis Roberts & Co. Corporate Director President & Chief Executive Officer, Key Investment, Inc. Corporate Director Chairman, The Woodbridge Company Limited Corporate Director Equity Information They currently offer Common Shares on the TSX and NYSE, Preference Shares on the TSX and Depository Interests (representing common shares). 3
As of 14 February, 2014, the TSX has listed 820,155,832 shares outstanding while the NYSE has listed 820,156,000 Basic Financials In the chart below we can see that overall revenues have dropped between 2011 and 2012. However, net debt has also decreased as have the company s long-term term financial liabilities, and the company has increased their free cash flow. Mergent has compiled a more detailed view from all Thomson Reuters Corporation reports published over the last three years: As Reported Annual Balance Sheet Report Date 12/31/2012 12/31/2011 12/31/2010 Currency USD USD USD Audit Status Not Qualified Not Qualified Not Qualified Consolidated Yes Yes Yes 4
Scale Thousands Thousands Thousands Cash & cash equivalents 1,301,000 422,000 864,000 Trade receivables 1,947,000 2,111,000 1,893,000 Less: allowance for doubtful accounts (64,000) (49,000) (39,000) Less: allowance for sales adjustments (71,000) (96,000) (95,000) Net trade receivables 1,812,000 1,966,000 1,759,000 Other receivables 23,000 18,000 50,000 Trade & other receivables 1,835,000 1,984,000 1,809,000 Other financial assets 72,000 100,000 74,000 Inventory 55,000 66,000 86,000 Prepaid expenses 350,000 372,000 434,000 Other current assets 236,000 203,000 392,000 Prepaid expenses & other current assets, net 641,000 641,000 912,000 Current assets excluding assets held for sale 3,849,000 3,147,000 - Assets held for sale 302,000 767,000 - Total current assets 4,151,000 3,914,000 3,659,000 Computer hardware & other property, gross 4,126,000 3,931,000 3,837,000 Total accumulated depreciation (2,703,000) (2,422,000) (2,270,000) Computer hardware & other property, net 1,423,000 1,509,000 1,567,000 Computer software, net 1,682,000 1,640,000 1,613,000 Other identifiable intangible assets, net 8,135,000 8,471,000 8,714,000 Goodwill 16,256,000 15,932,000 18,892,000 Other financial assets 360,000 425,000 460,000 Other non-current assets 515,000 535,000 558,000 Deferred tax 50,000 50,000 68,000 Total assets 32,572,000 32,476,000 35,531,000 Current indebtedness 1,008,000 434,000 645,000 Trade payables 461,000 508,000 519,000 Accruals 1,764,000 1,756,000 1,943,000 Provisions 190,000 232,000 203,000 Other current liabilities 218,000 179,000 259,000 Payables, accruals & provisions 2,633,000 2,675,000 2,924,000 Deferred revenue 1,224,000 1,379,000 1,300,000 Other financial liabilities 95,000 81,000 142,000 Liabilities associated with assets held for sale 35,000 35,000 - Total current liabilities 4,995,000 4,604,000 5,011,000 Long-term indebtedness 6,223,000 7,160,000 6,873,000 Provisions & other non-current liabilities 2,514,000 2,513,000 2,217,000 Other financial liabilities 37,000 27,000 71,000 Deferred tax 1,305,000 1,422,000 1,684,000 Total liabilities 15,074,000 15,726,000 15,856,000 Capital 10,371,000 10,288,000 10,284,000 Retained earnings 8,311,000 7,633,000 10,518,000 Accumulated other comprehensive income (1,537,000) (1,516,000) (1,480,000) (loss) Total shareholders' equity 17,145,000 16,405,000 19,322,000 5
Non-controlling interests 353,000 345,000 353,000 Total equity 17,498,000 16,750,000 19,675,000 Total liabilities & equity 32,572,000 32,476,000 35,531,000 Share Price Information Over the last three years, the share price of Thomson Reuters Corporation has had jumps and dives, but overall it has not moved noticeably. The shares reached a high of 42.15 in 2011 and a low of 30.66 in 2012. In a report published on 8 February, S&P has the company overvalued by $8.35 or 23% of $27.90. But the S&P recommendation is 4/5 stars as the 12-month target price is $42.00. Dividends have increased in each of the last three years reported. 6
Moving Forward: Critical Issues Moving forward, the company sees these issues as critical: Clients reducing head count: In Europe, in particular, large banks are reducing their head counts, which means decreased revenues from this sector. The company predicts that this trend will continue Security issues: The company s blogging platform has been hacked twice and false information posted on its website. Competition from rivals like Bloomberg L.P., FactSet Research System and Dow Jones A recent SWOT produced externally has noted these strengths and weaknesses: 7
Strengths Strong market position provides competitive advantage Significant contribution from recurring business is providing stability to operations Growth from strategic acquisitions Weaknesses Declining revenues across all geographies Intense competition Growing use of free online information sources CEO Biography The President and CEO of Thomson Reuters Corporation is James C. (Jim) Smith. He replaced Tom Glocer in the position in January 2012 after acting as Chief Operating Officer following a restructuring in September 2011. Smith began his career as a journalist with the Thomson Newspaper Group in 1987 and moved on to lead the company s academic division in 2005. When Thomson acquired Reuters Group Plc in April 2008, Smith was made the CEO of the combined company s Professional Division. The Chairman of Thomson Reuters, David Thomson, said Smith will provide strong leadership for Thomson Reuters at this juncture. Smith s current focus includes a cost-saving plan involving a cut of up to 9% of the company s workforce, reducing acquisition of other companies, growing their financial business and evolving the company s capital strategy to drive robust returns to shareholders. Born in 1960, Smith graduated from Marshall University with a BA in Journalism. Within the company he has also acted as global head of Human Resources and COO. 8
List of Sources TSX website http://web.tmxmoney.com/quote.php?qm_symbol=tri NYSE website http://www.nyse.com/about/listed/lcddata.html?ticker=tri Thomson Reuters website For key personnel, CEO bio, basic financials http://thomsonreuters.com/about-us/ For Letter to Shareholders and 2012 Annual Report: http://ar.thomsonreuters.com/home.html LexisNexis http://www.lexisnexis.com.myaccess.library.utoronto.ca/hottopics/lnacademic/ Boardroom Insiders: Executive Profile, James C. (Jim) Smith Lexis/Nexis Company Dossier Thomson Reuters Standard & Poor s Descriptions Plus News, January 18, 2014-02-14 SunGuard PowerData US Executive Compensation Database Mergent http://www.new.mergentonline.com.myaccess.library.utoronto.ca/companydetail.php?compnumber=5904 2 Thomson Reuters profile Business Source Premier MarketLine. Company Profile: Thomson Reuters Corporation. 15 November 2013. http://web.a.ebscohost.com.myaccess.library.utoronto.ca/ehost/detail?vid=3&sid=9a54b33d-b5a1-4ae7- a3a3-5f7519239d7b%40sessionmgr4002&hid=4204&bdata=jnnpdgu9zwhvc3qtbgl2zq%3d%3d#db=buh &AN=91262965 S&P NetAdvantage http://www.netadvantage.standardandpoors.com.myaccess.library.utoronto.ca/nasapp/netadvantage/si mplesearchrun.do?controlname=companiessimplesearch Thomson Reuters stock overview 9