Reuters Plans Cutbacks In Marketing, Says Renfrew

Reuters Holdings PLC has placed caps on marketing and research and development expenses, managing director Glen Renfrew told a New York meeting of security analysts.

R&D expenditures will remain at current levels, but there will be cutbacks in marketing, Renfrew said. He declined to quantify the cutbacks, noting that "things must be done before being discussed."

Reuters held the meeting with analysts to discuss its first-half results. In the six months ended June 30, earnings per American Depository Share advanced 23.4% to 77 cents from 63 cents in the year-ago period. Each ADS represents three class B shares traded on the International (London) Stock Exchange.

Pre-tax profit rose 26.2% to 102.9 million pounds sterling ($176 million) from 81.6 million pounds ($139.5 million). Revenues gained 17.7% to 471.4 million pounds ($806.1 million) from 400.4 million pounds ($684.7) million.

Europe provided 58% of total revenues, Asia accounted for 20%, North America 16% and overseas 4%, Renfrew said. At the end of June, Reuters had 160,347 terminals, compared with 141,260 at the end of 1987.

Reuters is experiencing a high level of cancellations, Renfrew said, but is also obtaining new subscribers at a record rate. The net result is a substantial number of new orders, although they are below last year's level.

Because major banks and brokerage firms in New York and London are putting in the cancellations, Reuters is reducing its dependence on traditional large subscribers, he said.

The market for trading room systems supplied by Reuters' Rich Inc. subsidiary has been weak in both the U.S. and U.K. However, business is good in Continental Europe, Renfrew said. Rich has also been winning business from the Tokyo branches of foreign companies, he said.

Through the end of June, Rich received 33 new orders in North America and 37 in the international market. This compares with 26 new orders in North America and 51 in the international area during the first half of 1987. The figures for Rich represent outright sales during the period.

At the analysts' meeting, Renfrew introduced Robert Ethrington as international marketing manager for transaction products. Ethrington gave a presentation on Dealing 2000, the new transactional system that Reuters plans for the foreign exchange and government securities markets.

Unlike the Reuter Monitor Dealing Service, which is a two-way conversational device, Dealing 2000 features a centralized facility for matching buy and sell orders from several parties. Reuters said it received 200 letters of intent after demonstrating Dealing 2000 at the Forex '88 conference in Hawaii.

Banks will start live testing of Dealing 2000 in two months and electronic trading is scheduled to begin in spring 1989. Globex, the Chicago Mercantile Exchange after-hours trading system that will use Dealing 2000, will be launched in the third quarter of 1989, said Andre F.H. Villeneuve, president of Reuters North America.

In his presentation, Ethrington said that Reuters estimates daily volume in foreign exchange market to be $300 billion, with 40% of the business being done in London, 35% in Tokyo and 20% in New York.

The Reuter Monitor accounts for between 30% and 40% of total foreign exchange trading, Ethrington said. During June, about 850,000 trades a week were done on Monitor, compared with about 650,000 at the end of 1987.