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Thomson Reuters shares drop after fourth quarter misses analyst expectations

TORONTO - Tightened expenses at global financial institutions left Thomson Reuters Inc. feeling the pain in its fourth-quarter results, which fell short of analyst expectations.

The quarterly results delivered Wednesday by Thomson Reuters (TSX:TRI) showed the company, which provides professional information and owns the Reuters news agency, is still trying to improve its operations while facing pressure from outside its operations.

Shares of the company closed down more than six per cent, or $2.47 to $37.75 in heavy trading on the Toronto Stock Exchange.

Major financial institutions around the world dramatically reduced their employee numbers during the economic downturn, which left Thomson Reuters with fewer paying clients for its specialized data, targeted at banks, brokers and other financial companies.

The company has been focused on trimming its costs and size to respond to the current market demand, which remains unsteady.

Thomson Reuters chief executive officer James Smith said in a conference call that banks are still under pressure from higher capital constraints and increasing regulation.

"We cannot control external markets and, like many, we are disappointed with the softening we saw in the fourth quarter, particularly in the European banking sector and in emerging markets," said Smith.

The company's adjusted earnings were 49 cents per share, below analyst estimates of 52 cents a share, according to estimates compiled by a Thomson Reuters subsidiary.

Operating profit declined 50 per cent to $302 million from $607 million in the same quarter last year.

"We continue to face challenges, but the trajectory is positive and I am confident the actions we have taken and will continue to take will enable us to improve growth and profitability," Smith said.

Thomson Reuters announced plans in October to recognize $350 million of charges, mostly in the fourth quarter, related to cost-savings efforts. It said on Wednesday that it now expects $395 million of charges in total, including $120 million still to be recognized in 2014.

Most of those savings come from its financial and risk business segment, which accounts for more than half of its revenue.

About 3,000 layoffs were announced when the company revealed the savings plan last year, which came in addition to cuts of about 2,500 announced earlier in 2013.

"Thomson Reuters is in a position where we can drive costs out and profitability and free cash flow up by pulling the levers we have to transform the company into a more integrated and efficient organization," Smith said.

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