interim results chief executive officer tom glocer 23 july 2002
TRANSCRIPT
Interim ResultsInterim Results
Chief Executive OfficerChief Executive Officer
Tom GlocerTom Glocer
23 July 200223 July 2002
H1 overviewH1 overviewReal progress despite tough marketsReal progress despite tough markets
• Reshaping the business
• Instinet back on track
• Underlying financials resilient
Reshaping the business to deliver sustainable, double digit earnings growthReshaping the business to deliver sustainable, double digit earnings growth
First phase:‘Self Help’
Second phase:Second phase:Revenue GrowthRevenue Growth
• Margin-driven earnings growth
- Cost savings
- Getting the right products
- Getting the right business mix
• Revenue-driven earnings growthRevenue-driven earnings growth
- Segment strategies take hold- Segment strategies take hold
- Market upturn- Market upturn
- Continued margin improvement- Continued margin improvement
Strategy and five year plan – October 2001Strategy and five year plan – October 2001
Differentiated strategy which Differentiated strategy which
• Meets customer needsMeets customer needs
• Beats the competitionBeats the competition
• Plays to our core Plays to our core competenciescompetencies
• Achieves profitable growthAchieves profitable growth
2002 update2002 update
• Cost savingsCost savings
• Right productsRight products- Win the premium desktopWin the premium desktop- Next generation architectureNext generation architecture- Win the enterprise: sell Win the enterprise: sell
solutionssolutions
• Right business mixRight business mix- Growing the business Growing the business
outside financial servicesoutside financial services- Optimise portfolio Optimise portfolio
compositioncomposition
Portfolio Portfolio compositioncomposition
OutsideOutsidefinancial servicesfinancial servicesSolutionsSolutionsNextNext
generationgenerationPremiumPremiumDesktopDesktop
RIGHT PRODUCTS RIGHT MIXCOST SAVINGSCOST SAVINGS
Cost savingsCost savingsBusiness transformation & other savingsBusiness transformation & other savings
£0
£50
£100
£150
£200
£250
£300
£350
FY 2000 FY 2001 FY 2002 FY 2003
£m£m
Business transformation & 2001 restructuring 2002 restructuring
1515
2020
100100
235235
185185
6565
205205
335335
Portfolio Portfolio compositioncomposition
OutsideOutsidefinancial servicesfinancial servicesSolutionsSolutionsNextNext
generationgenerationPremiumPremiumDesktopDesktop
COST SAVINGS RIGHT PRODUCTS RIGHT MIX
Right productsRight productsMarket frameworkMarket framework
Premium Growth : low
• Power Users
• 3000 Xtra, BridgeStation
• Dealing 3000
Mid TierGrowth : high
• Multiple user segmentsthroughout the enterprise
• Reuters Plus, RDL,Next Generation Products
Lower TierGrowth : high
potential
• Corporate users, retail investors
• Reuters InvestorWeb Services
• Trusted content
• Openness
• Integration
• Standards
Differentiation Differentiation throughthrough
Portfolio Portfolio compositioncomposition
OutsideOutsidefinancial servicesfinancial servicesSolutionsSolutionsNextNext
generationgenerationPremiumPremiumDesktopDesktop
COST SAVINGSCOST SAVINGS RIGHT PRODUCTS RIGHT MIX
Right productsRight productsWin the Premium DesktopWin the Premium Desktop
Objective: Protect and grow market share
Two key initiatives
1) Make 3000 Xtra best value for Power Users
2) Build User Communities
Total accessible market: 125,000+ positions
H1 02 sales: 67,000 positions
H1 02 installs: 44,000 positions
Portfolio Portfolio compositioncomposition
OutsideOutsidefinancial servicesfinancial servicesSolutionsSolutionsNextNext
generationgenerationPremiumDesktop
COST SAVINGSCOST SAVINGS RIGHT PRODUCTS RIGHT MIX
Progress
Customer Customer satisfaction index satisfaction index now establishednow established
Make 3000 Xtra best Make 3000 Xtra best value for Power Usersvalue for Power Users
Milestones
All customers upgraded All customers upgraded to Version 4 by year endto Version 4 by year end
Right productsRight productsWin the Premium DesktopWin the Premium Desktop
Portfolio Portfolio compositioncomposition
OutsideOutsidefinancial servicesfinancial servicesSolutionsSolutionsNextNext
generationgenerationPremiumDesktop
COST SAVINGSCOST SAVINGS RIGHT PRODUCTS RIGHT MIX
• PersonalisationPersonalisation
• Customer serviceCustomer service
New Customer New Customer Segment displays, Segment displays, applicationsapplications
60 new trainers in 60 new trainers in place nowplace now
120 new client trainers 120 new client trainers by year endby year end
Customer satisfaction Customer satisfaction improvementimprovement
Right productsRight productsWin the Premium DesktopWin the Premium Desktop
60,000 Reuters 60,000 Reuters Messaging users via Messaging users via MindAlignMindAlign
170 firms signed up for 170 firms signed up for Reuters Messaging betaReuters Messaging beta
175,000 Reuters 175,000 Reuters Messaging users by Messaging users by year endyear end
Build User Build User CommunitiesCommunities
Right productsRight productsWin the Premium DesktopWin the Premium Desktop
Portfolio Portfolio compositioncomposition
OutsideOutsidefinancial servicesfinancial servicesSolutionsSolutionsNextNext
generationgenerationPremiumDesktop
COST SAVINGSCOST SAVINGS RIGHT PRODUCTS RIGHT MIX
Progress Milestones
Instinet and Bridge Instinet and Bridge Institutional Order Institutional Order Entry available on Entry available on XtraXtra
• Introduce trade Introduce trade management and management and order routing order routing capabilitiescapabilities
• Launch Reuters Launch Reuters MessagingMessaging
Right productsRight productsRelease new products on next generation architectureRelease new products on next generation architecture
New ProductsNew Products
• Reuters KnowledgeReuters Knowledge- Initial addressable market of 30,000 in corporate financeInitial addressable market of 30,000 in corporate finance- Launch Q1 03Launch Q1 03
• Reuters Intelligent AdvisorReuters Intelligent Advisor- Initial addressable market of 175,000 in wealth managementInitial addressable market of 175,000 in wealth management- Launch Q2 03Launch Q2 03
• European Securities ProductEuropean Securities Product- Under developmentUnder development
New products expected to add >£100m in 2004New products expected to add >£100m in 2004
Portfolio Portfolio compositioncomposition
OutsideOutsidefinancial servicesfinancial servicesSolutionsSolutionsNext
generationPremiumPremiumDesktopDesktop
COST SAVINGSCOST SAVINGS RIGHT PRODUCTS RIGHT MIX
•Scaleable
•Best of breed
•Lower cost to deliver
•Flexible
•Re-usable
Right productsRight productsRelease new products on next generation architectureRelease new products on next generation architecture
Portfolio Portfolio compositioncomposition
OutsideOutsidefinancial servicesfinancial servicesSolutionsSolutionsNext
generationPremiumPremiumDesktopDesktop
COST SAVINGSCOST SAVINGS RIGHT PRODUCTS RIGHT MIX
Right productsRight productsRelease new products on next generation architectureRelease new products on next generation architecture
Streamlining the product lineStreamlining the product line
• Product announcements issued to customers todayProduct announcements issued to customers today• 25% - core product set25% - core product set• 25% - minor enhancements only25% - minor enhancements only• 50% - withdrawn from sale50% - withdrawn from sale
• Migration and support plans for customers in placeMigration and support plans for customers in place
• Minimal revenue impactMinimal revenue impact
• Major benefit is operational efficiencyMajor benefit is operational efficiency
Portfolio Portfolio compositioncomposition
OutsideOutsidefinancial servicesfinancial servicesSolutionsSolutionsNext
generationPremiumPremiumDesktopDesktop
COST SAVINGSCOST SAVINGS RIGHT PRODUCTS RIGHT MIX
Global consolidationGlobal consolidation
Cost ReductionCost Reduction
DifferentiationDifferentiation
Operational riskOperational risk
Advice vs. productAdvice vs. product
Integrated desktopIntegrated desktop
OutsourcingOutsourcing
Trade managementTrade management
Risk managementRisk management
Tools for advisorsTools for advisors
Customer relationship management
Customer trendsCustomer trends Customer spendingCustomer spending US$mUS$m
7,0007,000
10,00010,000
2,5002,500
1,5001,500
3,0003,000
8,0008,000Source: TowerGroup, Yankee Group 2002 estimates
Right productsRight productsWin the enterprise: Selling SolutionsWin the enterprise: Selling Solutions
Portfolio Portfolio compositioncomposition
OutsideOutsidefinancial servicesfinancial servicesSolutionsNextNext
generationgenerationPremiumPremiumDesktopDesktop
COST SAVINGSCOST SAVINGS RIGHT PRODUCTS RIGHT MIX
Right productsRight products Win the enterprise: Selling SolutionsWin the enterprise: Selling Solutions
• Tibco Active EnterpriseTibco Active Enterpriselicenses + Kondor risklicenses + Kondor riskmanagementmanagement $1.6m$1.6m
• MaintenanceMaintenance $0.25m $0.25m p.a.p.a.
• ConsultingConsulting $0.6m$0.6m
• 220 x 220 x 3000 Xtra3000 Xtra $$2.1m p.a.2.1m p.a.
Portfolio Portfolio compositioncomposition
OutsideOutsidefinancial servicesfinancial servicesSolutionsNextNext
generationgenerationPremiumPremiumDesktopDesktop
COST SAVINGSCOST SAVINGS RIGHT PRODUCTS RIGHT MIX
Goals: Goals: grow outright revenuepull through recurring revenueintegrate our products into customers’ workflow.
Large global buy side institution
Knowledge management portal toshare internal and external data
Leading US investment bank
Cross asset transaction portal toserve institutional clients
• Tib Portal Builder LicencesTib Portal Builder Licences $1m$1m
• ConsultingConsulting $11m$11m
• Bespoke systemBespoke systemmaintenancemaintenance $2m $2m p.a.p.a.
• £150m revenue business
• 7% year-on-year growth in TV subscription revenue
MediaMedia
• £60m revenue business with growth potential in existing and new markets
• Key assets
• Trusted brand
• High end research companies– Tower & Yankee
• Global scale and reach
• Reuters Editorial & data groups
• Factiva - channel to corporates
• Instinet - channel to financial services
ResearchResearch
• £120m revenue business
• Solutions revenue doubled in H1 02
• Interesting opportunities in STP
Commodities & EnergyCommodities & Energy
Right business mixRight business mixBuilding our presence outside the financial marketsBuilding our presence outside the financial markets
Portfolio Portfolio compositioncomposition
Outsidefinancial servicesSolutionsSolutionsNextNext
generationgenerationPremiumPremiumDesktopDesktop
COST SAVINGSCOST SAVINGS RIGHT PRODUCTS RIGHT MIX
Getting the right business mixGetting the right business mixOptimising portfolio compositionOptimising portfolio composition
Portfolio composition
OutsideOutsidefinancial servicesfinancial servicesSolutionsSolutionsNextNext
generationgenerationPremiumPremiumDesktopDesktop
COST SAVINGSCOST SAVINGS RIGHT PRODUCTS RIGHT MIX
TechnologyTechnology CommunicationsCommunications
TradingTrading
ContentContent
Build a presence outside the financial marketsBuild a presence outside the financial markets
Drive value from the portfolio into Reuters operating linesDrive value from the portfolio into Reuters operating lines
Improve customer service Improve customer service
Improve our competitive positionImprove our competitive position
Deliver new productsDeliver new products
Simplify the product lineSimplify the product line
Introduce performance cultureIntroduce performance culture
Re-organise the business to improve customer focusRe-organise the business to improve customer focusand harness global scaleand harness global scale
Deliver cost savings and headcount reductionDeliver cost savings and headcount reduction
Bridge integrationBridge integration
ProgressProgressWe said …We said …
SummarySummary
Outlook for ReutersOutlook for Reuters
Continued improvement inContinued improvement in
• MarginsMargins
• CompetitivenessCompetitiveness
• Operational gearingOperational gearing
Recurring revenueRecurring revenue• Confirm H2 guidanceConfirm H2 guidance
- 5-6% underlying decline - 5-6% underlying decline• Growth in actual terms, drivenGrowth in actual terms, driven
by Bridgeby Bridge
Outright revenueOutright revenue• Likely to be around 2001 levels despite a Likely to be around 2001 levels despite a
strong sales pipelinestrong sales pipeline
Operating marginOperating margin• On track to deliver 12% On track to deliver 12% in 2002 before net in 2002 before net
impact of restructuringimpact of restructuring• Anticipate further margin improvement in Anticipate further margin improvement in
20032003• Assuming market upturn, margin Assuming market upturn, margin targettarget
remains 17-20% remains 17-20%