In a move sign-posted well in advance to the financial markets, Reuters confirmed today the scope of job losses arising from its business transformation programme. Some 1100 jobs will go over two years at Reuters, with a further 240 job losses at Instinet. In terms of future prospects, Reuters Financial division is expected to experience a reduced rate of growth, in both its subscription-based revenues and in solutions sales, in the second half of the year.

The interim results are effectively the swansong of Reuters long serving CEO, Peter Job, who formally handed over the role to Tom Glocer yesterday. After 38 years in the company, 10 of them as CEO, the recently knighted Job, would have preferred to sign off with a more upbeat headline. However despite the statement on job losses, Tom Glocer defended the interim results as demonstrating the resilience of Reuters core business. The short term price of the business transformation programme is positioned as the cost of protecting Reuters future profitability.

Interim results for the six months to June 30th, 2001 showed revenues up 14 per cent to £1.9 billion. While underlying revenue, stated at comparable exchange rates and excluding the impact of acquisitions and disposals, rose by 8 per cent.

Operating profit from Reuters various divisions rose 6% to £330 million (US$469 million), before the costs of the company's business transformation programme. Operating profit in Reuters Financial rose 6% to £262 million (US$372 million) and at Instinet increased by 28% to £108 million (US$152 million).

In a separate statement Instinet announced its own cost cutting programme, the goal of which is to take $70 million out of its cost base, a measure which may cause 240 job losses at Instinet.

During the first six months, expenditure on the business transformation programme was £74 million (US$105 million). Reuters estimates it will spend £165 million (US$234 million) on business transformation this year, compared to £139 million (US$197 million) in 2000. This is in line with the original estimate of £300 million (US$426 million) to be spent over two years. According to Reuters, the benefits of these initiatives are already coming through, with some £50 million (US$71 million) of cost savings expected this year, £105 million (US$149 million) in 2002 and £155 million (US$220 million) in 2003 and thereafter.

In terms of future prospects, Reuters expects to see growth from its core Reuters Financial business in the second half, although the rate will slow as a result of market conditions. Reuters Financial expects its recurring subscription-based revenues to grow 3% on an underlying basis in the second half compared to 5% in the first half. One-off solution sales, which grew by 20% in the first half, are more difficult to predict but Reuters is forecasting growth of around 10% in the second half based on a good sales pipeline.

For Reuters Financial, weak net orders this year are likely to impact growth into next year. However, Reuters expects that underlying profitability will be supported by faster implementation of the business transformation programme and the introduction of new cost saving measures.

The company is also implementing a new organisational structure intended to deliver revenue growth, higher margins and enhanced customer focus. This new organisation aims to simplify the company's operations, provide integrated solutions for customers and better exploit Reuters global scale and service capabilities. The new structure is built around four customer segments: Treasury, Investment Banking and Brokerage, Asset Management, and Corporates and Media.