Reuters axes 650 to save £100m
SHARES in information giant Reuters tumbled to eight-and-a-half-year lows today as it warned that trading remained 'challenging'. A further cost-cutting cull of management 'old guard' to save £100m a year did little to settle investors' nerves, and the shares slid 56p to 347 1/2p. They have not been at those levels since 1993. The peak was 1620p in the early months of 2000 at the height of the dotcom boom.
Analysts said the latest job cuts suggested trading was worse than feared. 'People are not giving them the benefit of the doubt,' said analyst Andrew Gordon-Brown of investment bank JP Morgan.
The latest slide will increase the pressure on chief executive Tom Glocer, who has been wrestling to get a grip on the group's two hi-tech investments, US software company Tibco and electronic share trader Instinet. Earlier this month Tibco, in which Reuters has a 51.4% stake, warned that its earnings would not meet expectations.
The cost-cutting moves announced today involve the loss of 650 senior and middle management jobs up to departmental head level and beyond. They are spread throughout the group and relatively few will fall in London. The job cuts will result in savings of about £100m a year. Cost savings this year will be about £20m, and there will be a one-off redundancy charge of about £100m, an average of £150,000 per head.
The company said the move was aimed at improving long-term efficiency as much as crude cost-cutting. 'This is not a knee-jerk reaction to the latest market downturn,' said a company spokesman. The cuts had been identified following a review of the company initiated by Glocer earlier this year. Some of the jobs are likely to be replaced, and the cull will also allow the promotion of talented executives in their 30s.
The latest round of redundancies brings to 2,750 the job losses announced since Glocer took over last year, although the net figure after recruitment is likely to be about only 2,300. Glocer said: 'While market conditions remain challenging, I see tangible progress being made towards meeting our 2002 targets for installing the 3000 Xtra, deploying Reuters' instant messaging and trade management tools and improving customer service.'
He added: 'The accelerated cost saving initiatives we announce today will improve our 2003 margin beyond 12% in advance of a general market recovery. We remain committed to our long-term margin target.'
