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Reuters Annual Results Reveals Revenue Rise for Trading Systems Division

Reuters Trading Systems (RTS), the transactions and order routing technology subsidiary of Reuters, has “recovered well from the millennium slow-down”, according to the company’s annual results statement for the year ending 31 December 2000. RTS’s overall annual revenues rose 5% to £822 million; with Dealing 3000, Dealing 2000-2 and Automated Dealing System (formerly known as TIB Mercury FX) all cited as successful revenue generators.

The largest percentage growth in under-lying revenue came from RTS’s relatively new retail solutions business, which grew 24% last year. Reuters notes, however, that this figure starts from “a relatively low base”. Middleware and order routing technology also did well, rising 9% in terms of underlying revenue.

Underlying revenues from transaction products dropped by 2%, due in part to lower sales of the vendor’s older conversational dealing systems. In contrast, Dealing 2000-2 experienced “good growth”, as did Reuters’ next-generation Dealing 3000 trading platform. “The rollout of Dealing 3000 is progressing well. Approximately 20% of the installed Dealing base had been upgraded by the end of the year,” says the annual report.

RTS’s revenue growth was echoed in Reuters’ other divisions: the vendor’s over-all revenue was £3.592 billion, some 15% higher than the previous year’s figure of £3.192 billion. However, this revenue growth was offset by the “business trans-formation costs” of Reuters’ strategic switch to Internet technology, leading to a 25% drop in operating profits from £549 million to £411 million.

The vendor spent £138 million on business transformation costs last year, the first tranche of what is expected to be a £500 million programme. “The Internet and its technologies remain a powerful driver for us, permitting us to improve the way we work and help our customers to enhance their performance,” said Peter Job, chief executive of Reuters, in the statement.

“The collapse of the valuation bubble around Internet stocks has not affected our strategy, which goes forward as stated last year. We are confident this technology revolution will continue to open up many new opportunities for the group,” he added. Despite the drop in operating profits, Reuters’ profits before taxation rose 4% to £657 million, thanks in part to £271 million raised from the flotation of Tibco Software.

In accordance with US reporting regulations, the annual report also lists various “risk factors” that could adversely impact on the company’s revenues. These factors include “losses from broker activities” in the event of a counterparty failure, as well as “increased competition from new and existing information providers using Internet-based services”. Reuters’ investments in Internet technology companies also expose the vendor to a downturn in this market, the report adds.

Profit & Loss

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