Reuters Runs Into Market Slump

IN its early days in the mid-19th century, Reuters would use pigeons to fly stock market information to clients. Today, Reuters Holdings PLC, as the company is formally known, is the world's leading distributor of electronic information. The London-based company now faces slower sales growth and a front-office transition. In March, Peter Job will replace Glen Renfrew as chief executive officer. As Mr. Job admits, that will not be easy, given Mr. Renfrew's nearly four decades with Reuters, including 10 years as the company's top official.

Renfrew and Job were interviewed recently in Reuters' New York offices. Renfrew, conservatively attired in a suit, was somewhat philosophical and expansive in his responses - befitting an individual who has presided over the company's greatest period of growth. Job came to the interview in rolled-up shirt sleeves and preferred more rapid-fire, no-nonsense, responses.

``Mr. Job will be presiding over a far different environment than Mr. Renfrew,'' says Jim Dougherty, a financial analyst with County NatWest, an investment banking house. ``Renfrew's task was to shepherd rapid growth; Job will have to oversee a period of consolidation from rapid growth to total return as the main priority.''

Mr. Dougherty says that if any multimedia, financial-services company is well positioned for the next decade, it is Reuters. ``Their immediate problem will be the next year or so,'' since many hard-pressed brokerage houses and banks are canceling electronic trading services, including Reuters'. But Reuters' competitors, such as Dow Jones and Knight-Ridder Inc., also face some tough times these days, Dougherty says. And smaller electronic-transaction and information companies will face difficulty attracting new customers during recession. ``Reuters may come out of this period stronger than ever,'' says Dougherty.

In addition to transmitting stories from exotic datelines for the print and broadcast media, Reuters' 200,000 installed video terminals and teleprinters distribute financial data from over 160 exchanges and over-the-counter markets. Reuters has a news operation of 1,300 reporters, photographers, and cameramen. It has a controlling interest in Visnews, the international TV news agency.

A number of stock analysts say the company could well dominate financial information and market-transaction systems in the 1990s.

``Reuters has no major debt and is the finest communications network in the world,'' says Stuart Crane, an analyst with Gruntal & Co., an investment house.

Not all investors have been as upbeat, as Reuters shares have dipped from a high of 71 1/8 per American Depositary Receipt (a share) last summer to a low of 32 1/8 in October. But, says Renfrew, Reuters has faced market-related adversity before. As cancellations for services poured in, Reuters saw its stock value drop sharply with the 1987 market crash. But the shares, slightly less than half of which are owned by Americans, rebounded.

Now, Reuters' stock has once again been taking a battering, as financial institutions struggle to maintain their own profit margins. Reuters shares are traded on the London Stock Exchange and the NASDAQ market in the United States.

Part of the current caution by investors stems from difficulties by Reuters in introducing an upgraded foreign-exchange trading service. When completed, the new automated system will allow foreign-exchange traders to finish transactions on their individual terminals. Renfrew says he expects the delay to be ``about six months.'' Reuters is also developing an automated trading system for the futures and options market, in partnership with the Chicago Board of Trade.

Job, who started his 27-year career with Reuters as a news reporter, and became a well-traveled foreign correspondent, says that he sees his primary agenda as making sure that the long-range expansion plan left by Renfrew is properly implemented. This will be, he suggests, a period of consolidation and modest expansion.

Renfrew says he will be happy if Reuters posts 10 percent revenue growth during 1991, which he sees as a relatively difficult year. But 1992, he says, should look good. Pre-tax profits this year are expected to be around L 320 million (US$608 million), compared to L 283.1 million in 1989. (In 1980, before the fast-growth Renfrew years, Reuters had profits of L 3.7 million.)

Renfrew and Job expect the recent fairly large number of cancellations for the company's financial services to slow as the economy rebounds.

Job, who now heads the company's operations in Asia, notes that there are few parts of the world where Reuters is not a major presence. Still, he sees more growth in Asia as well as Eastern Europe. Reuters' Asia business, has tripled since the mid-1980s, a tribute, say analysts, to Job.