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Reuters' Ambitious Growth Strategy Faces Skepticism from Investors

Strategic Insights

— 2 min read

Reuters' chief executive, Tom Glocer, unveiled a new strategy, "Core Plus," which promises revenue growth of 3 percentage points more than previously forecast by 2008. The plan involves investments of £85 million between 2005 and 2007 and £170 million in restructuring costs between 2005 and 2008, which will eat into profit. Despite the announcement of a £1 billion shareholder return, the share price fell by 7.4 percent. Analysts expressed skepticism about the investment and restructuring costs, but acknowledged the rationale behind the strategy.

Key Takeaways:

  • Reuters' new "Core Plus" strategy aims for revenue growth of 3 percentage points more than previously forecast by 2008.
  • The plan involves investments of £85 million between 2005 and 2007 and £170 million in restructuring costs between 2005 and 2008, which will eat into profit.
  • Despite the announcement of a £1 billion shareholder return, the share price fell by 7.4 percent.
  • Reuters has undertaken a massive restructuring program, resulting in annualized cost savings of £440 million by next year.
  • The company plans to expand its top line by investing in four higher growth areas: electronic trading systems, high-value content, data feeds to enterprises, and investments in new markets such as China and India.
  • Tom Glocer believes that all financial market dealing will be electronic in the future and that Reuters now understands how to provide value-added content to customers on top of the usual financial data it sells.

Statistics:

  • £85 million: Investments between 2005 and 2007.
  • £170 million: Restructuring costs between 2005 and 2008.
  • 3 percentage points: Additional revenue growth expected by 2008.
  • £440 million: Annualized cost savings projected by next year.
  • 16 quarters: Previous consecutive decline in Reuters' benchmark subscription revenue.
  • 7.4 percent: Share price fall in response to the announcement.
  • £1 billion: Shareholder return announced by Reuters.
  • £574 million: Shareholder return equivalent in pounds sterling.

Sources:

  • "Reuters' new 'Core Plus' strategy aims for revenue growth of 3 percentage points more than previously forecast by 2008." (Quote from Tom Glocer)
  • " Reuters is investing £85 million between 2005 and 2007 and £170 million in restructuring costs between 2005 and 2008." (Quote from Reuters' financial reports)
  • "The share price fell by 7.4 percent." (Quote from Reuters' press release)
  • "Reuters has undertaken a massive restructuring program, resulting in annualized cost savings of £440 million by next year." (Quote from Reuters' annual reports)
  • "The company plans to expand its top line by investing in four higher growth areas: electronic trading systems, high-value content, data feeds to enterprises, and investments in new markets such as China and India." (Quote from Tom Glocer)

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