Tom Glocer, chief executive of Reuters, said that he would be making the cuts as he announced the company's third-quarter trading statement Tuesday. He said: "The cuts are being made across the board. We've told our staff that there is no 'get out of jail free' card, and that we will be making cuts on a proportionate basis where we can make the most savings with the least impact on the business." Reuters lowered its second-half revenue growth forecast from 3% to between 1% and 2%, sending its shares tumbling by 7%.
A Reuters spokesperson confirmed that the company will start laying off editorial staff, usually considered to be the "crown jewels" of the organisation. A spokesperson for Reuters said last month that no editorial staff would be made redundant, but Reuters now needs to cut costs by a further $30m (€33m) per quarter. It means that its original estimate of 1,100 redundancies has now risen to 1,600.
Reuters will write off as a one-off cost the $40m cost of severance packages related to the redundancies.
The Group has also cut its full-year dividend to 10p per share from 16p per share last year. Glocer said: "We have decided to retain a higher proportion of its earnings and cash flows which we hope to use to fund growth in the business." Reuters expects to adopt a progressive dividend policy with a goal for dividend cover of at least two times, based on the normalised earnings of the Reuters Group, excluding Instinet, which does not distribute dividends to its shareholders.
The cost cuts are being made as Reuters seeks to change its business from being product-focused to customer-focused. It will divide its business into four units consisting of investment banking and brokerage, corporate treasury, asset management and corporate and media. It will also have a consultancy division which will span all the other divisions.
Reuters' revenue for the third quarter of 2001 rose 4% to 920m from 888m for the same period last year. Underlying revenue, which excludes the impact of acquisitions, disposals and currency movements, increased 1%.
Reuterspace, the internet division of the company, has seen fewer sales since the middle of last year as many of its clients have closed their businesses. The division earns revenue from selling online versions of its content, but as the demise of internet-based companies has increased at speed, Reuters' ability to sell online content has diminished. Reuterspace revenue declined 5% to 62m at actual rates, falling 10% on an underlying basis.
Revenue in Reuters Financial rose 6% to 674m in the third quarter compared with the same quarter last year. Underlying revenue increased 5%, driven by strong once-off solution sales growth of 25% and recurring revenue growth of 3%.
Reuters Information revenue grew 5% to 461 million with underlying revenue also up 5%. Revenue growth was strong in the main economies of Europe and in the US. Sales of the flagship Reuters 3000 Xtra increased to 48,000 units.
Revenue from Reuters Trading Solutions grew 9% to 213m, or 4% on an underlying basis.
Instinet's revenue fell 1% to 187m in the third quarter compared with the same period last year, with underlying revenue down 5%. These figures take into account 12m in revenue lost when US markets were closed for four days following the September 11 attacks.