Wolters Kluwer 2019 Nine-Month Trading
Update
November 1, 2019 – Wolters Kluwer, a global
leader in professional information, software solutions and
services, today released its scheduled 2019 nine-month trading
update.
Highlights
- Full-year 2019 guidance reiterated.
- Nine-month revenues up 4% in constant currencies and up
4% organically.
- Digital & services revenues up 6% organically (90% of total
revenues).
- Recurring revenues up 5% organically (79% of total
revenues).
- Nine-month adjusted operating profit down 1% in
constant currencies.
- Margin decline due to one-time benefits in comparable period,
as expected.
- Nine-month adjusted free cash flow up 3% in constant
currencies.
- Net-debt-to-EBITDA ratio 1.7x as of September 30,
2019.
- Share buyback programs:
- Buyback 2019: expanded by €100 million; now intend to buy back
up to €350 million.
- Buyback 2020: now intend to buy back up to €50 million in
shares in January-February.
Nancy McKinstry, CEO and Chairman of the Executive
Board, commented: “I am pleased to see organic growth
supported by all four divisions and led by demand for our expert
solutions which deliver insights, analytics, and productivity to
our customers. We are making progress on key strategic
priorities—including enriching our digital information products
with tools to automate customer workflows and upgrading important
internal systems and infrastructure. We reiterate our outlook for
the full year.”
Nine Months to September 30, 2019
Revenues increased 9% overall, benefitting from the effect of
exchange rate movements, in particular the U.S. dollar rate, which
averaged $1.12/€ (9M 2018: $1.20/€) during the first nine months.
In constant currencies, revenues increased 4%, including a slight
net positive impact from acquisitions, net of disposals. Organic
growth was 4%, with all four divisions delivering positive organic
growth. Revenues from North America (60% of total revenues) grew 3%
organically while revenues from Europe (31% of total) increased by
5% organically. Asia Pacific & Rest of World (9% of total)
recorded organic growth of 6%. Recurring revenues (79% of total
revenues) were up 5% on an organic basis. Non-recurring revenue
trends remained mixed, with print books down 12% organically.
Adjusted operating profit for the first nine months declined 1% in
constant currencies. The adjusted operating profit margin declined,
as expected, due to the effect of one-time benefits in the
comparable period in 2018.
Health: Nine-month revenues increased 3% on an organic basis.
Clinical Solutions revenue increased 6% organically, led by our
clinical decision tool UpToDate which grew 9%. Our clinical drug
information products saw good organic growth, benefitting from
cross-selling by the recently integrated sales force. Our patient
engagement solution saw weak new sales and, following review, we
recorded an impairment charge of €38 million in the third quarter
(of which €2 million included in adjusted operating profit) to
reflect a more conservative outlook for this market segment. Health
Learning, Research & Practice revenues were flat on an organic
basis, as good organic growth in the Ovid medical research
platform, open access, and in e-learning solutions for nurses was
offset by decline in print journal subscriptions, continuing
medical education, and printed books. On September 4, 2019, we
divested a number of Allied Health book titles, recording a book
loss of €6 million.
Tax & Accounting: Nine-month revenues grew 6% organically
driven by software solutions for professionals at firms and
corporations. Print, training and other services revenues declined,
as expected. Our Corporate Performance Solutions unit (comprising
CCH Tagetik and TeamMate) delivered 16% organic growth, driven by
new sales and upgrades around the world. In the U.S. professional
firm segment, we recorded continued strong growth in our
cloud-based CCH Axcess suite from existing and new customers. Tax
& Accounting Europe grew 9% organically, with both on-premise
software and cloud-based collaborative solutions performing well
across the region. In Asia Pacific, digital revenue growth was
broadly offset by print declines. Our business in Brazil remains
challenged.
Governance, Risk & Compliance: Nine-month revenues grew 3%
organically, with recurring revenue growth sustained at 3% and
non-recurring revenue growth moderating slightly. Legal Services
delivered 5% organic growth, buoyed by better-than-expected Legal
Services transactional revenues driven by demand for search,
retrieval and filing from U.S. corporations and law firms.
Financial Services grew 2% organically, led by Finance, Risk &
Reporting which recorded high single-digit organic growth. Our
Compliance Solutions unit delivered improved growth in recurring
software maintenance revenues, offset by a decline in non-recurring
professional services revenues due to lengthening sales cycles.
Wolters Kluwer Lien Solutions saw organic growth moderate compared
to a year ago, with the effect of a slowdown in U.S. commercial
lending volumes partly offset by growth in our motor vehicle
solution.
Legal & Regulatory: Nine-month organic growth was 2%. Our
Legal & Regulatory Software businesses, achieved 20% organic
growth, led by Enablon’s environmental, health & safety and
operational risk management (EHS/ORM) solutions. In Legal &
Regulatory Information Solutions, organic growth was positive
overall and in line with first half 2019 trend. Improved growth of
digital information products and favorable phasing of loose leaf
publications compensated for an accelerated decline in print books
revenues over the nine-month period.
Corporate costs increased due to the absence of prior year net
positive one-time items and due to increased investment to
strengthen central functions and transform our global HR
systems.
Cash Flow and Net Debt
Nine-month operating cash flow declined slightly in constant
currencies. Cash conversion was 91%, below the comparable period
due to higher working capital outflows, as expected. Nine-month
adjusted free cash flow increased 3% in constant currencies,
benefitting from lower paid financing costs.
Total net dividends paid amounted to €264 million in the first
nine months. Divestiture proceeds, net of cash disposed and
disposal cost, were €39 million and relate to the sale of certain
Allied Health titles on September 4, 2019 and the sale of our 40%
stake in an Austrian information business on May 2, 2019.
Acquisition spending, net of cash acquired and including costs, was
€35 million in the first nine months, primarily relating to CLM
Matrix, acquired on May 7, 2019. In the first nine months, a total
of €162 million was spent on share repurchases. Net debt was
€2,305 million and twelve months’ rolling net-debt-to-EBITDA
was 1.7x as of September 30, 2019 (1.8x at year-end 2018).
Share Buyback Programs 2019 and 2020
On February 20, 2019, we announced our intention to repurchase
shares for up to €250 million during 2019, including repurchases to
offset incentive share issuance. In the year to date, we have made
significant progress on this buyback, having spent €190 million as
of October 30, 2019 (3.0 million ordinary shares; average price
€63.30).
Today we are announcing our intention to expand the total
intended 2019 buyback amount to €350 million. We have granted a
mandate to a third-party to execute the remaining €160 million
tranche between November 4, 2019 and December 27, 2019. In
addition, we announce today that we have signed a further
third-party mandate to execute up to €50 million in share buybacks
on our behalf in the period starting January 2, 2020, up to and
including February 24, 2020. Both mandates are governed by the
limits of relevant laws and regulations (in particular Regulation
(EU) 596/2014) and Wolters Kluwer’s Articles of Association.
Repurchased shares are added to and held as treasury shares and are
either cancelled or held to meet future obligations arising from
share-based incentive plans. We remain committed to our
anti-dilution policy which aims to offset the dilution caused by
our annual incentive share issuance with share repurchases.
As previously announced, on September 27, 2019, we completed the
cancellation of 6,700,707 shares held in treasury, a step approved
by shareholders in April 2019. Following this cancellation, the
number of issued ordinary shares is 273,016,153. Of this, 269.5
million shares were outstanding and 3.5 million shares were held in
treasury as of September 30, 2019.
Full-Year 2019 Outlook
Our full-year 2019 guidance, shown in the table below, is
overall unchanged. We continue to expect to deliver solid organic
growth and margin improvement for the full year. Including a
fourth-quarter one-time credit of approximately €16 million
(related to the modernization of our U.S. employee benefits) we now
expect the full-year adjusted operating profit margin to be at the
top end of our guided margin range. This credit will be recorded in
the units where we have U.S. employees. We continue to expect an
increase in diluted adjusted EPS in constant currencies and in
return on invested capital (ROIC).
Full-Year 2019 Outlook |
Performance indicators |
2019 Guidance |
2018 (Under IFRS 16) |
Adjusted operating profit margin |
23.0%-23.5% |
23.1% |
Adjusted free cash flow |
€750-€775 million |
€762 million |
ROIC |
10.5%-11.5% |
10.6% |
Diluted
adjusted EPS |
Around
10% growth |
€2.45 |
Note:
Guidance for adjusted operating profit margin and ROIC are in
reported currencies and assume a 2019 average U.S. dollar rate of
approximately €/$ 1.12. Guidance for adjusted free cash flow and
earnings per share are in constant currencies (€/$ 1.18).
Guidance for adjusted EPS includes the estimated effect of the
announced up to €250 million share buyback planned for 2019. 2018
comparatives are in reported currencies and restated for IFRS
16. |
Our guidance is based on constant exchange rates. In 2018,
Wolters Kluwer generated more than 60% of its revenues and adjusted
operating profit in North America. As a rule of thumb, based on our
2018 currency profile, each 1 U.S. cent move in the average €/$
exchange rate for the year causes an opposite change of
approximately 1.5 euro cents in diluted adjusted EPS.
Restructuring costs are included in adjusted operating profit.
As indicated in July 2019, we expect restructuring costs to be at
the upper end of our guided range of €10-€20 million in 2019 (2018:
€30 million). We expect adjusted net financing costs of
approximately €65 million in constant currencies1 including
approximately €10 million in IFRS 16 lease interest charges. We
expect the benchmark tax rate on adjusted pre-tax profits to be in
the range of 24.5%-25.5%.
Capital expenditure is expected to remain in the range of 5%-6%
of total revenues (2018: 5.2%, excluding the sale of real estate).
Cash repayments of lease liabilities are expected to be in line
with depreciation of right-of-use assets. We expect the cash
conversion ratio to be between 95%-100% in 2019 (2018: 103%
restated for IFRS 16). Our guidance assumes no additional
significant change to the scope of operations. We may make further
acquisitions or disposals which can be dilutive to margins and
earnings in the near term.
2019 Outlook by Division
Health: We now expect full-year 2019 organic
growth to be in line with first-half 2019 trend. We continue to
expect the full-year adjusted operating profit margin to decline
due to lower one-time benefits, higher restructuring costs, and
increased investment in sales & marketing and product
development.
Tax & Accounting: We continue to expect
full-year 2019 organic growth to moderate from 2018 levels due to a
challenging comparable. We continue to expect the full-year
adjusted operating profit margin to improve on the back of lower
restructuring costs, efficiencies, and favorable year-on-year
change in net one-time items.
Governance, Risk & Compliance: We expect
recurring revenues to show improved organic growth but
non-recurring revenue streams to show modest deceleration. We
expect the full-year adjusted operating profit margin to see an
improvement, partly due to efficiency initiatives.
Legal & Regulatory: As indicated in July
2019, we expect organic growth to show improvement on 2018. We
continue to expect the adjusted operating profit margin to decline
due to lower one-time benefits, increased investment, and the full
twelve-month inclusion of eVision.
About Wolters Kluwer
Wolters Kluwer (WKL) is a global leader in professional
information, software solutions, and services for the healthcare;
tax and accounting; governance, risk and compliance; and legal and
regulatory sectors. We help our customers make critical decisions
every day by providing expert solutions that combine deep domain
knowledge with specialized technology and services.
Wolters Kluwer reported 2018 annual revenues of €4.3 billion.
The group serves customers in over 180 countries, maintains
operations in over 40 countries, and employs approximately 18,600
people worldwide. The company is headquartered in Alphen aan den
Rijn, the Netherlands.
Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and
are included in the AEX and Euronext 100 indices. Wolters Kluwer
has a sponsored Level 1 American Depositary Receipt (ADR) program.
The ADRs are traded on the over-the-counter market in the U.S.
(WTKWY).
For more information, visit www.wolterskluwer.com, follow us on
LinkedIn, Twitter, Facebook, and YouTube.
Financial
Calendar 2020 |
|
February 26,
2020 |
Full-Year 2019
Results |
March 11,
2020 |
Publication of
2019 Annual Report |
April 23,
2020 |
Annual General
Meeting of Shareholders |
April 27,
2020 |
Ex-dividend date:
2019 final dividend |
April 28,
2020 |
Record date: 2019
final dividend |
May 6, 2020 |
First-Quarter
2020 Trading Update |
May 20, 2020 |
Payment date:
2019 final dividend ordinary shares |
May 27, 2020 |
Payment date:
2019 final dividend ADRs |
August 5,
2020 |
Half-Year 2020
Results |
September 1,
2020 |
Ex-dividend date:
2020 interim dividend |
September 2,
2020 |
Record date: 2020
interim dividend |
September 24,
2020 |
Payment date:
2020 interim dividend |
October 1,
2020 |
Payment date:
2020 interim dividend ADRs |
October 30,
2020 |
Nine-Month 2020
Trading Update |
Media |
Investors/Analysts |
Annemarije
Dérogée-Pikaar |
Meg Geldens |
Global Branding
& Communications |
Investor
Relations |
t + 31 (0)172 641
470 |
t + 31 (0)172 641
407 |
press@wolterskluwer.com |
ir@wolterskluwer.com |
Forward-looking Statements and Other Important Legal
InformationThis report contains forward-looking
statements. These statements may be identified by words such as
“expect”, “should”, “could”, “shall” and similar expressions.
Wolters Kluwer cautions that such forwardlooking statements are
qualified by certain risks and uncertainties that could cause
actual results and events to differ materially from what is
contemplated by the forward-looking statements. Factors which could
cause actual results to differ from these forward-looking
statements may include, without limitation, general economic
conditions; conditions in the markets in which Wolters Kluwer is
engaged; behavior of customers, suppliers, and competitors;
technological developments; the implementation and execution of new
ICT systems or outsourcing; and legal, tax, and regulatory rules
affecting Wolters Kluwer’s businesses, as well as risks related to
mergers, acquisitions, and divestments. In addition, financial
risks such as currency movements, interest rate fluctuations,
liquidity, and credit risks could influence future results. The
foregoing list of factors should not be construed as exhaustive.
Wolters Kluwer disclaims any intention or obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Elements of this press release contain or may contain inside
information about Wolters Kluwer within the meaning of Article 7(1)
of the Market Abuse Regulation (596/2014/EU).
Trademarks referenced are owned by Wolters Kluwer N.V. and its
subsidiaries and may be registered in various countries.
1 Guidance for net financing costs in constant currencies
excludes the impact of exchange rate movements on currency hedging
and intercompany balances.
- 2019.11.01 Wolters Kluwer 2019 Nine-Month Trading
Update.pdf
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