Revenue increased 5% to £3,032 million in 1998. Excluding the impact of currency movements, revenue grew 9%, in line with growth at comparable rates in 1997.

Fourth quarter revenue grew 8% at actual rates, and 9% at comparable exchange rates.

Operating profit, which includes the amortisation of goodwill, grew 2% to £550 million at actual exchange rates and 14% at comparable rates. This compares with an 8% decline at actual rates in 1997 which principally reflected the impact of currency, and 8% growth at comparable rates. Operating margin in 1998 was 18.2%, compared to 18.8% in 1997. However, excluding the impact of currency movements, operating margin improved by 0.9%.

External costs related to the Millennium and Euro Programmes increased to £37 million in 1998, compared with £11 million in 1997. See further details of these programmes.

Goodwill amortisation remained constant at £51 million. Of this, £5 million related to investments in associates during the year which was charged against the group’s share of associates’ profits.

Earnings before interest, tax, depreciation and amortisation (EBITDA) grew 2% at actual rates to £927 million, and 10% at comparable rates compared with 8% in 1997.

The sale of a number of investments in high technology companies held in the Reuters Greenhouse Fund resulted in an exceptional profit of £26 million in 1998.

Net interest receivable was £2 million compared with £80 million in 1997 reflecting ten months’ worth of net borrowings in 1998 following the return of £1.5 billion to shareholders in February. Net interest income in the first half of 1998 was £11 million, offset in part by a net interest charge of £9 million in the second half of the year. Net debt at the end of 1998 was £3 million.

Profit before tax of £580 million was down 7% at actual exchange rates but up 2% at comparable exchange rates, despite the fall in interest income.

The effective rate of tax for 1998 was 33.8% compared with 37.7% in 1997. Excluding goodwill amortisation and costs charged in 1997 relating to the return of capital to shareholders, the effective tax rate for both years was unchanged.

Earnings per share increased 11% in 1998 to 26.7p from 24.0p in 1997. 1997 earnings per share fell 12% from 27.3p in 1996, principally reflecting the decline in operating profit due to currency and once-off tax costs related to the return of capital to shareholders.

The final dividend per share has been increased by 11% to 11.0p resulting in a total dividend for the year of 14.4p, also up 11% on 1997. Dividend cover decreased to 1.9 in 1998 from 2.1 in 1997.

Investment in the business continued with £296 million spent on capital expenditure, £200 million on development and £157 million on acquisitions and investments.

Free cash flow increased 9% to £490 million. Free cash flow per share was 34.1p, up 23% from 27.7p in 1997, reflecting the lower number of shares in issue following the capital re-organisation.

Operating profit in the second half of 1998 at £272 million decreased by £6 million compared with the first half of the year.

Phasing of costs associated with the Millennium Programme, new initiatives following the acquisition of Lipper Analytical Services Inc. and Liberty SA, new investment at Instinet and costs in connection with the reorganisation of the company offset the impact of stronger revenue growth in the second half of the year. Costs associated with these initiatives and investments will continue through 1999. Benefits from the reorganisation are expected to flow through in the second half of the year.

Sterling remained strong during the first three quarters but weakened in the fourth quarter. The sterling trade weighted index was 99.7 at the end of 1998 compared to 104.4 at the end of 1997. If 1998 year end exchange rates had prevailed throughout 1998, £31 million would have been added to operating profit before currency hedging.

Currency hedging gains were £45 million for the full year compared to £56 million in 1997. At the end of 1998, the currency hedging book had an unrealised loss of £3 million in respect of 1999.

Revenue growth in the fourth quarter was 9% at comparable exchange rates. Instinet grew 19% at underlying rates helped by record volumes in the US market and very strong growth outside the US. Other transaction products revenue decreased 2%, reflecting a small decline in the number of accesses to our foreign exchange dealing services. Revenue from information products grew 9% in the quarter. Outright revenue was up 17%, helped by good sales of Risk Management and TIBCO products.

Price increases taking effect in January 1999 will be offset by a decline in new orders for subscription products in the last quarter of 1998, as clients reacted to the sudden emerging markets crisis at the onset of autumn. The sale of Information Management Systems and Risk Management products was not affected but our business in Russia suffered a sharp though not unexpected setback. Demand in Asia continues to be weak but this is offset by an encouraging performance in Japan, where we are making progress in penetrating domestic markets. We continue to make steady progress in rolling out the 3000 product line and the Reuters Plus domestic equities product in the United States. The disposal of Reuters Health Information practice management systems and Reuters Voice Systems will have some impact on revenue growth this year.

Revenue by type

	Year to 31 December
(£m)	1998	1997	1996
Recurring	2,170	2,147	2,232
Usage	621	511	478
Outright sales	241	224	204
Total	3,032	2,882	2,914

Recurring revenue, which is principally derived from the sale of subscription services, represented 72% of group revenue in 1998, compared with 74% in 1997. Usage-based revenue, principally derived from Instinet and Dealing 2000–2, represented 20% of total revenue compared to 18% in 1997. Outright revenue, which comprises once-off sales of information management systems and risk management software, represented 8% of group revenue in both 1997 and 1998.

Revenue by product

	Year to 31 December
(£m)	1998	1997	1996
Financial information	1,949	1,852	1,892
Transaction	882	828	813
Media/Professional	201	202	209
Total	3,032	2,882	2,914

The proportion of revenue derived from each product group was at similar levels in each of the last three years.