Reuters sees weak outlook

LONDON, April 22 (Reuters) - The world's biggest financial information provider, Reuters Group, reported first-quarter revenues near the bottom end of market forecasts on Monday and said its core subscription business faced tougher times ahead.

Reuters reported total revenues of 912 million pounds ($1.32 billion) for the three months ended March 31, reflecting a heavy fall in revenue from its electronic broking unit, Instinet Group Inc, which is cutting prices to meet stiff competition.

"The numbers have come in below expectations," said media analyst Andrew Gordon-Brown of investment bank J.P. Morgan, adding that the market was likely to lower its 2002 earnings forecasts.

Media analysts had been expecting, on average, revenues of 920 million to 930 million pounds. The result included a 39 percent fall in the contribution from Instinet, once the group's main growth engine, and a five percent rise in the group's core revenues to 762 million pounds.

Reuters' core business -- mainly the provision of news and data to financial institutions worldwide -- included revenue from recently acquired Bridge Information Systems, an ex-rival. Underlying revenue, which excludes Bridge, fell two percent.

The group forecast a five to six percent fall in underlying subscription revenues in the second half of this year, and held to its forecast of a two to three percent drop in the first. Underlying subscription revenues fell one percent in the quarter.

A sharp fall in financial markets over the past year, especially in the equities market, is finally catching up with Reuters. Its core business takes time to feel the impact of a

sustained downturn because many of its biggest customers are signed up to term contracts that can take time to unwind.

"Reuters sees no near-term turnaround in the depressed conditions affecting its financial services customers and, as a consequence, the rate of decline in the second half of the year is currently anticipated to be approximately five to six percent," the company said.

The stock has fallen by around half over the past year, underperforming its European media peers by 30 percent. It closed on Friday at 510 pence.

"Our first quarter revenue reflects the performance of the Reuters customer segments in line with our expectations and significantly reduced revenues in Instinet," Chief Executive Tom Glocer said in a statement.

"Despite challenging market conditions, we remain focused on margin enhancement at Reuters, with a 12 percent operating target in 2002."