More good news at Reuters

Computerised business information services will keep profits streaming in at news agency
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The Independent Online
IN MOSCOW, they queue for foreign exchange. In Bombay, they fight over it. In China, they tried to ban it. But whatever the local custom, buyers and sellers tend to check the price on a Reuters computer screen and increasingly use a Reuters computer system to do the deal itself.

As the company proudly declares: "Reuters informs the world instantly by the latest electronic means. We help our customers to analyse the facts and trade on them."

Yet until screen-based trading became widespread in the 1970s, Reuters was known simply as a news agency, gathering information and transmitting it mainly to newspapers and other media through old-fashioned tape machines installed in customers' offices.

The electronic revolution dramatically changed all that - and transformed the company's prospects as it added the world's banks and corporate treasurers to its customer lists.

"Nothing keeps the people who run Reuters awake at night," said an admiring Lorna Tilbian, media analyst at the stockbrokers Panmure Gordon. "The company is a solid, dependable, reliable cash generator with good dividends, good earnings, that still made record profits in the recession."

In many other businesses, such a record - combined with a net cash inflow of more than pounds 700m a year - would be an irresistible platform from which to launch an aggressive expansion programme of takeovers. Not Reuters.

Peter Job, the group's chief executive, said: "We spend about pounds 150m a year on research and development, and I must say probably our biggest problem is managing the development - not in the sense of spending the money but in ensuring our managers are in the right place.

"We are a management-stretched organisation, and that is why we don't make acquisitions."

However, it has diversified into other media, just as years ago it moved from carrier pigeons to morse code and more recently from tape machines to computer screens.

Last year, the group launched Reuters Financial Television in Europe, with Asia and North America following in 1995. But this is not and will not be available on the set in the corner of your living room. Instead, it can be summoned on to financial dealers' screens at moments of crisis - such as Britain's withdrawal from the European Exchange Rate System in 1992 - so that dealers can see events as they happen and react accordingly.

Mr Job admitted: "We are not used to dealing with consumers, who want to be entertained for a larger part of time than they want to be informed. We don't have that entertainment expertise, and it is not in the company's culture." This goes some way to explaining why Reuters has had such a torrid time managing London News Radio, the franchise successor to the popular LBC. The new station has been widely criticised since it went on air less than a year ago.

"It's quite difficult to run a successful broadcasting franchise," said Mr Job, who joined Reuters 32 years ago as a journalist. "You have to experiment with the product. And if you get it wrong, the audience vanishes before your eyes. There is no question that it has been a difficult learning curve for us."

But he is determined to stick with it. "In a multimedia world," he added, "it's the only involvement we have in audio, which is an art in itself. It's essential for anyone who wants to master the media to understand radio."

However, radio and the other media initiatives are still very small beer in the Reuters context, accounting for little more than a twentieth of turnover.

For many years, the main source of income will come from spreading the basic computerised information system into new territories, and in selling more sophisticated add-ons to existing customers. So while Americans, Asians and Europeans enjoy such toys as Ad Value, an advertising tracking system, and Muni Market for the US municipal bond market, the Third World is being introduced to the basic world of Reuters information and dealing.

"Information has its ups and downs," said Mr Job, "but what tends not to attract attention is very big places like Russia or China, where expansion is extremely rapid. They are having to devise their own market mechanisms to run their economies properly, control the money supply and so on. And they are often doing that using Reuters systems."

Once installed, Reuters tends to be there for life - or longer - and will later return to sell the local traders upgrades.

"That is why Reuters shares are much more stable than most media stocks," said Ms Tilbian. "It is the market leader in financial information in every country in the world."

While that is comforting for the conservative investor, the cautious way that Reuters is managed makes it less exciting than some media investments. However, like Mr Job and his co-directors, you do get to sleep at night.

Activities Information and transaction systems; communication networks; television and radio.

Share price 493p Prospective yield 2.4% Prospective price-earnings ratio 19.9 Dividend cover 2.6 1993 1994 1995* Income pounds 1.9bn pounds 2.3bn pounds 2.6bn Pre-tax profit pounds 440m pounds 510m pounds 585m Net profit pounds 299m pounds 347m pounds 398m Earnings per share 18p 21.7p 24.8p Dividend per share 6.5p 8p 9.5p (*forecast)