Wolters Kluwer
2021
Nine-Month Trading Update
November 3,
2021 – Wolters
Kluwer, a global leader in professional information, software
solutions and services, today releases its scheduled 2021
nine-month trading update.
Highlights
- Full-year 2021 outlook
increased.
- Nine-month
revenues up
6% organically.
- Recurring revenues (81% of total revenues) up 5% organically;
non-recurring revenues up 9%.
- Digital & services revenues (92% of total revenues) up 6%
organically; print up 5%.
- Expert solutions revenues (54% of total) up 6%
organically.
- Nine-month adjusted operating
profit up
14% in
constant currencies.
- Nine-month adjusted
free cash flow up
30% in
constant currencies.
- Net-debt-to-EBITDA ratio
1.5x
as of September
30,
2021.
- Share
buyback 2021: on track to
reach €350
million.
- Share buyback 2022:
mandate signed to buy back
up to €50
million in
January
and
February
2022.
Nancy McKinstry, CEO and Chairman of the Executive
Board, commented: “I am pleased to report that in the
first nine months of the year, we have seen consistent growth in
recurring revenues, led by subscriptions to cloud software and
other expert solutions. This performance continued to be enhanced
by a sharp post-pandemic rebound in non-recurring revenue streams,
against a low base in the prior period. Underlying operating costs
increased in the third quarter, as expected, as we invest in
recruiting and developing the talent to drive future growth.”
Nine Months to September 30,
2021
Total revenues increased 2%, due to the negative impact of
exchange rates (mainly the weaker U.S. dollar) during the first
nine months of the year. In constant currencies, revenues increased
7%, with the impact of disposals outweighed by the impact of
acquisitions. Excluding currency, acquisitions and disposals,
organic revenue growth was 6% (9M 2020: 3%). Subscriptions and
other recurring revenues (81% of total revenues) sustained 5%
organic growth (9M 2020: 5%), while non-recurring revenues
increased 9% organically (9M 2020: decline of 4%). Non-recurring
revenues include transactional revenues in Governance, Risk &
Compliance (GRC), print books, and other ad hoc revenues.
Digital and services formats grew 6% organically, with total
software revenues up 6%. Total print revenues rose 5% (9M 2020:
decline of 15%), mainly comprised of a 20% increase in print books
revenues (9M 2020: organic decline of 23%) and a 6% decline in
print subscriptions (9M 2020: decline of 10%). Revenues from North
America (62% of total revenues) grew 7% organically (9M 2020: 4%)
while revenues from Europe (31% of total) grew 6% (9M 2020: 2%).
Asia Pacific & Rest of World (7% of total) recorded organic
growth of 2% (9M 2020: 0%).
Nine-month adjusted operating profit increased 9% overall and
14% in constant currencies. The adjusted operating profit margin
was up 160 basis-points year-on-year, driven mainly by operational
gearing and lower restructuring costs. Nine-month margins increased
year-on-year in all divisions, except Tax & Accounting, where
investment was increased. In the third quarter, group-wide adjusted
operating costs before restructuring costs increased by 9% in
constant currencies compared to the third quarter of 2020,
reflecting the expected step up in hiring and investment to support
growth.
Health: Nine-month revenues increased 9% in constant currencies
and 9% on an organic basis (9M 2020: 4%). Clinical Solutions
delivered steady 7% organic growth in the first nine months, mainly
supported by renewals, upsells, and new customer wins for both
UpToDate and our drug information solutions. Patient engagement
revenues remained soft in the first nine months, while performance
in our clinical software unit was mixed. Health Learning, Research
& Practice recorded 11% organic growth (9M 2020: 2%), driven by
a strong rebound in print book sales (up 52% in the first nine
months) and the first-year inclusion of the American Society of
Clinical Oncology (ASCO) journal publishing contract. In addition,
digital products, such as medical research platform Ovid, sustained
good organic growth. Continuing medical education revenues were
weak against a challenging comparable.
Tax & Accounting: Nine-month revenues increased 8% in
constant currencies, with the contribution from acquisitions (XCM
Solutions acquired September 2020; Vanguard Software acquired May
2021) partly offset by the deconsolidation of ProSoft (divested
June 2021). Organic revenue growth was 6% (9M 2020: 4%). Corporate
Performance Solutions delivered double-digit organic growth, led by
by CCH Tagetik which grew 15% organically in the first nine months.
Tax & Accounting North America sustained 5% organic growth,
driven by strong organic growth in CCH Axcess cloud software. Tax
& Accounting Europe also maintained robust organic growth while
trends in Asia Pacific remained mixed.
Governance, Risk & Compliance (GRC): Nine-month revenues
increased 8% in constant currencies, including the contribution
from eOriginal (acquired December 2020). Organic growth was 5% (9M
2020: 4%). Legal Services (LS) recorded organic growth of 11% (9M
2020: decline of 1%), bouyed by a double-digit rebound in LS
transactional revenues at CT Corporation. Enterprise Legal
Management Solutions posted modest but improved organic growth.
Financial Services revenues declined 3% on an organic basis, as
expected, due to the challenging comparable created by PPP1
revenues in 2020. Excluding PPP, Financial Services organic growth
would have been 2%, supported by Lien Solutions which recorded
double-digit organic growth in transactional revenues. Finance,
Risk & Reporting recorded modest organic revenue decline as a
result of lower software license and implementation fees.
Legal & Regulatory: Nine-month revenues were stable in
constant currencies due to several small divestitures made in 2020.
Organic growth was 4% (9M 2020: decline of 2%). EHS/ORM2 and Legal
Software delivered 6% organic growth (9M 2020: 7%), with
double-digit growth in cloud-based software subscriptions partly
offset by a decline in on-premise software licenses and
implementation services. Legal & Regulatory Information
Solutions revenues increased 3% organically (9M 2020: decline of
3%), driven by robust growth in digital products for legal
research. While U.S. legal educational textbooks grew year-on-year,
overall print revenues declined. In September, the division
announced an agreement to sell the U.S. legal education assets for
$88 million in cash. This transaction is currently expected to be
completed around year-end 2021 and will result in a one-time,
non-benchmark capital gain. As previously indicated, following
completion, the after-tax proceeds (approximately €60 million) will
be deployed towards share repurchases.
Corporate costs declined 8% in constant currencies in the first
nine months, due to reduced costs related to projects.
Cash Flow and Net Debt
Nine-month adjusted operating cash flow increased 30% in
constant currencies, driven by strong and better-than-expected
working capital inflows compared to outflows in the comparable
period a year ago. Net cash spending on restructuring, financing
and tax increased. Adjusted free cash flow increased 30% in
constant currencies.
Total net dividends paid to shareholders amounted to €352
million in the first nine months. Total acquisition spending, net
of cash acquired and including transaction costs, was €100 million
in the first nine months, primarily relating to the acquisition of
Vanguard Software for $110 million in May 2021. Divestiture
proceeds, net of cash disposed and transaction costs, were €1
million. In the first nine months, €273 million in cashflow was
deployed towards the share repurchase program.
As of September 30, 2021, net debt stood at €2,309 million
(year-end 2020: €2,383 million). Twelve months’ rolling
net-debt-to-EBITDA was 1.5x compared to 1.7x at year-end 2020.
Environmental, Social & Governance
(ESG)
In August, we completed our first diversity, equity, and
inclusion (DE&I) survey, resulting in a baseline quantitative
measure of belonging, which indicates the extent to which employees
feel they can be authentic and fully accepted at work. The survey
highlights several areas of strength and opportunity that will
inform our integrated action plan to drive stronger belonging and
employee engagement results in 2022.
In September, we commenced our annual all-employee compliance
training program, covering general IT and cyber security, data
privacy, ethics, and our company values. As of the end of October,
99% of employees had completed the course.
Share Buyback Programs
On February 24, 2021, we announced our intention to repurchase
shares for up to €350 million during 2021, including repurchases to
offset incentive share issuance. In the year to date, as of
November 1, 2021, we have completed €299 million (3.9 million
ordinary shares; average price €77.45) of this 2021 program. On
November 2, we granted a mandate to a third-party to execute up to
€51 million in share buybacks on our behalf in the remainder of
this year (the period starting November 4, 2021, up to and
including December 29, 2021). When completed, this will bring total
share repurchases to €350 million in the full year.
We have also signed a second third-party mandate to execute up
to €50 million in share buybacks for the period starting January 3,
2022, up to and including February 21, 2022.
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.
In September 2021, we cancelled 5.0 million shares that were
held in treasury, as approved by shareholders at the AGM in April
2021. Following this cancellation, the number of issued ordinary
shares is currently 262,516,153. As of September 30, 2021, 259.6
million shares were outstanding and 3.0 million shares were held in
treasury.
Full-Year 2021
Outlook
We continue to expect all divisions to see a year-on-year
improvement in organic growth, partly reflecting a rebound in
non-recurring revenue streams. We expect organic growth to moderate
in the fourth quarter as trends in print books and other
non-recurring revenues reverse or slow. We continue to expect
underlying operating costs to rise in the fourth quarter and into
next year, as we step up investment and hiring to support growth,
and as we partly restore travel, promotion, and other costs that
were curtailed during the height of the pandemic. We have started
implementing plans for a gradual return to our offices (when and
where circumstances allow), with currently some around 15% of
employees back in office.
Due to better-than-anticipated cash conversion, we now expect
adjusted free cash flow to be around €975 million in constant
currencies, around the upper end of our previously guided range
(€925-€975 million). Including a one-time lower tax rate in 2021,
we now expect diluted adjusted EPS growth to reach low
double-digits in constant currencies. However, given current
exchange rates, we now expect a foreign exchange loss on
intercompany balances (compared to a gain in 2020) which we
anticipate will result in single-digit growth in diluted adjusted
EPS in reported currency.
Full-Year 2021 Outlook |
Performance indicators |
2021 Guidance |
Previous 2021 Guidance |
2020 Actual |
Adjusted operating profit margin |
Around 25.0% |
Around 25.0% |
24.4% |
Adjusted free
cash flow |
Around
€975
million |
€925-€975 million |
€907 million |
ROIC |
Around 12.5% |
Around 12.5% |
12.3% |
Diluted adjusted EPS |
Low double-digit growth |
High single-digit growth |
€3.13 |
Guidance for adjusted operating profit margin and ROIC is in
reported currencies and assumes an average EUR/USD rate in 2021 of
€/$1.18. Guidance for adjusted free cash flow and diluted adjusted
EPS is in constant currencies (€/$ 1.14). Guidance reflects share
repurchases for up to €350 million in 2021. |
If current exchange rates persist, the U.S. dollar rate will
have a negative effect on 2021 results reported in euros. In 2020,
Wolters Kluwer generated more than 60% of its revenues and adjusted
operating profit in North America. As a rule of thumb, based on our
2020 currency profile, each 1 U.S. cent move in the average €/$
exchange rate for the year causes an opposite change of
approximately 2 euro cents in diluted adjusted EPS3.
We include restructuring costs in adjusted operating profit. We
currently expect that restructuring costs will be in the range of
€10-€15 million in 2021 (FY 2020: €49 million). We expect adjusted
net financing costs of approximately €65 million in constant
currencies4, including approximately €10 million in lease interest
charges. Following the closure of tax audits, we now anticipate a
one-time release of tax contingencies this year, which will lower
our 2021 benchmark effective tax rate on adjusted pre-tax profits
to below our previously guided range (23.0-24.0%).
Capital expenditure is expected to be within our normal range of
5.0%-6.0% of total revenues (FY 2020: 5.0%). Cash repayments
of lease liabilities are expected to be in line with depreciation
of right-of-use assets (FY 2020: €73 million). We now expect the
full-year cash conversion ratio to be around 105% in 2021 (FY 2020:
102%).
Any guidance we provide 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.
2021 Outlook by Division
Health: We continue to expect organic growth to
improve over 2020 levels, despite a reversal in Health Learning,
Research & Practice print book trends in the fourth quarter. We
now expect the full-year adjusted operating profit margin to
improve due to operational gearing and a slower fading of temporary
cost savings.
Tax & Accounting: We continue to expect
organic growth to improve from 2020 levels and the adjusted
operating profit margin to decline due to the absence of one-time
benefits, the fading of temporary cost savings, and increased
investment to support growth.
Governance, Risk & Compliance: We continue
to expect organic growth to improve from 2020 levels, as a rebound
in Legal Services transactional revenues is now expected to more
than compensate for lower revenues associated with the PPP1. We
expect the full-year adjusted operating profit margin to improve on
the back of lower restructuring and provisions, despite rising
investment.
Legal & Regulatory: We continue to expect
the division to return to positive organic growth this year,
although the fourth quarter is expected to be negatively affected
by the timing of print publications. We expect the adjusted
operating profit margin to improve as lower restructuring more than
offsets increased investment.
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 technology and services.
Wolters Kluwer reported 2020 annual revenues of €4.6 billion.
The group serves customers in over 180 countries, maintains
operations in over 40 countries, and employs approximately 19,200
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
Twitter, Facebook, LinkedIn, and YouTube.
Financial CalendarFebruary 23, 2022
Full-Year 2021 Results
March 9,
2022 Publication
of 2021 Annual Report and ESG Data Overview
April 21, 2022
Annual General Meeting of Shareholders
April 25, 2022
Ex-dividend date: 2021 final dividend
April 26, 2022
Record date: 2021 final dividend
May 4, 2022
First-Quarter 2022 Trading Update
May 18, 2022
Payment date: 2021 final dividend ordinary shares
May 25, 2022
Payment date: 2021 final dividend ADRs
August 3,
2022 Half-Year
2022 Results
August 30, 2022
Ex-dividend date: 2022 interim dividend
August 31, 2022
Record date: 2022 interim dividend
September 22, 2022 Payment date: 2022
interim dividend
September 29,
2022 Payment date: 2022
interim dividend ADRs
November 2, 2022 Nine-Month
2022 Trading Update
Media
Investors/AnalystsGerbert van Genderen
Stort
Meg
GeldensGlobal Branding & Communications
Investor
Relationst + 31 (0)172 641 230
t + 31 (0)172
641
407 press@wolterskluwer.com
ir@wolterskluwer.com
Forward-looking Statements and Other Important Legal
Information
This 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 forward-looking 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; conditions created by global pandemics,
such as COVID-19; 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 PPP refers to the U.S. Small Business Association Paycheck
Protection Program established by the 2020 U.S. CARES Act. Wolters
Kluwer Compliance Solutions (part of Governance, Risk &
Compliance) supported its bank customers in lending under this
program.2 EHS/ORM: environmental, health & safety and
operational risk management.
3 Excludes the impact of exchange rate movements on intercompany
balances, which is included in adjusted net financing costs and
which is determined based on period-end spot rates and
balances.
4 Guidance for adjusted net financing costs in constant
currencies excludes the impact of exchange rate movements on
currency hedging and intercompany balances.
- 2021.11.03 Wolters Kluwer 2021 Nine-Month Trading Update
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