Wolters
Kluwer 2017 Nine-Month Trading Update
November 1, 2017 - Wolters
Kluwer, a global leader in professional information services, today
released its scheduled 2017 nine-month trading update.
Highlights
-
Full-year 2017 guidance
reaffirmed.
-
Nine-month revenues up 5% in
constant currencies and up 3% organically.
-
Digital & services revenues grew 5%
organically (88% of total revenues).
-
Recurring revenues sustained 4% organic growth
(77% of total revenues).
-
All main geographic regions delivered improved
organic growth.
-
Nine-month adjusted operating
profit up 10% in constant currencies.
-
Nine-month adjusted free cash
flow increased overall and in constant currencies.
-
Net-debt-to-EBITDA ratio 1.9x
as of 30 September, 2017.
-
Recent agreements to divest
Corsearch and certain Swedish assets.
-
Share buyback program: on track
to repurchase €300 million in 2017.
Nancy McKinstry, CEO and Chairman
of the Executive Board, commented:
"The year is progressing well, with recurring
revenues sustaining good organic growth. Non-recurring revenue
trends improved in the third quarter, but remained subdued as
expected. Operational excellence programs are helping to improve
our adjusted operating profit margin while also allowing us to
increase organic investment. Across the group, we are investing to
enhance our expert solutions to deliver more insights and
productivity to our customers. We are making progress on
integrating recent acquisitions and have further sharpened our
strategic focus with two recent disposal agreements. I am pleased
to reaffirm our outlook for the full year."
Nine Months to September 30,
2017
Nine-month revenues increased 5% overall and 5% in
constant currencies. Organic growth was 3% (9M 2016: 2%) following
improvement in the third quarter against an undemanding comparable.
The effect of acquisitions, mainly from Tagetik, Enablon and Emmi,
more than offset the impact of disposals on revenues for the first
nine months. All geographic regions delivered improved organic
growth in the first nine months. North America (62% of total
revenues) saw organic growth of 4% (9M 2016: 3%), despite slower
growth in Governance, Risk & Compliance in this region. Europe
(30% of total revenues) posted organic growth of 2% (9M 2016: 1%),
with all divisions sustaining or improving momentum in this region.
Asia Pacific & Rest of World (8% of total revenues) improved
organic growth to 3% (9M 2016: 2%). Total recurring revenues (77%
of total revenues) sustained 4% organic growth in the first nine
months (9M 2016: 4%), supported by all divisions. Printed book
revenues declined, but at a more moderate rate than a year ago due
to timing factors. The trend in other non-recurring revenues
improved modestly, mainly driven by Tax & Accounting and Legal
& Regulatory.
Nine-month adjusted operating profit increased 10%
at constant currency, supporting a solid margin increase. Adjusted
operating profit margins increased in Health, Governance Risk &
Compliance, and Legal & Regulatory. Restructuring costs were
stable year-on-year. We now expect restructuring costs to total
approximately €25 million for the full year, at the top end of our
previously indicated range.
Health: Nine-month organic growth was 6%, marking
an improvement on the comparable period a year ago (9M 2016: 5%).
Clinical Solutions performed well across the board, delivering 10%
organic growth overall. Patient engagement provider Emmi is on
track to deliver robust growth for the full year. Health Learning,
Research & Practice grew 1% organically, in line with the
comparable period, with lower subscription growth and advertising
weakness offset by a more moderate decline in printed books. For
the full year, we continue to expect good organic growth,
comparable to 2016, and improved margins driven by efficiency
savings, lower restructuring costs, and the benefits of the ongoing
mix shift towards Clinical Solutions.
Tax & Accounting: Nine-month organic growth
was 4%, an improvement on the comparable period (9M 2016: 3%) due
to favorable timing of non-recurring filing fees and software
license and implementation fees, expected to reverse in the fourth
quarter. Software solutions for professional firms, corporations
and governments continued to drive the division's organic growth.
Print formats, online research and learning tools saw decline, as
expected. In Corporate Performance Solutions, TeamMate delivered
double-digit organic growth driven by increased software
maintenance fees and strong new software sales in the third
quarter. CCH Tagetik, acquired in April 2017, is performing to
plan. On September 1, the division acquired Adsolut, a small
provider of tax and accounting solutions for advisors in Belgium.
For the full year, we expect solid organic growth, broadly in line
with 2016. The full-year margin is expected to be stable, despite
the inclusion of Tagetik and increased product investment.
Governance, Risk & Compliance: Nine-month
organic growth was 2%, in line with the comparable period (9M 2016:
2%). Recurring revenues (58% of divisional revenues) sustained 3%
organic growth across the division, while trends in transactional
and other non-recurring revenues were mixed, generally as expected.
Legal Services (LS) delivered 4% organic growth (9M 2016: 3%) with
LS transactional revenues firmer than anticipated in the third
quarter, due mainly to elevated law firm activity at CT and higher
invoice volumes in Enterprise Legal Management (ELM). Financial
Services (FS) recorded organic growth of 1% (9M 2016: 2%),
supported by good performance in Lien Solutions and Finance, Risk
& Reporting. This was dampened by a market-wide decline in
mortgage-related FS transactional revenues in Compliance Solutions,
against a challenging comparable. For the full year, organic growth
is expected to be broadly similar to 2016, albeit to a minor extent
dependent on certain larger contracts being signed before year-end.
The full-year adjusted operating profit margin is expected to
increase due to operating efficiencies. On October 23rd, 2017, we
announced an agreement to divest Corsearch, the trademark solutions
unit (2016 revenues: approximately €50 million).
Legal & Regulatory: Nine-month organic growth
rounded to 0%, an improvement on the comparable period (9M 2016:
decline of 2%). Our Legal & Regulatory Information Solutions
unit in the U.S. achieved positive organic growth, partly due to
favorable timing of distributor orders for U.S. legal textbooks,
expected to reverse in the fourth quarter. Information solutions in
Europe continued to see organic revenue decline, with growth in
digital products still outweighed by print declines. Our Legal
& Regulatory Software group delivered good organic momentum
driven by practice management tools (Kleos and Effacts). Enablon
achieved positive growth and its inclusion in organic growth in the
third quarter benefitted the division's performance. On September
29, 2017, we completed the sale of certain U.K. publishing assets
(2016 revenues: approximately €29 million). For the full year, we
continue to expect organic revenue decline, in line with 2016
trend, due to more moderate growth in digital products following a
large customer migration in 2016. The full-year margin is expected
to be stable, as efficiency savings are offset by increases in
wages, product investment and restructuring expenses. On October
25, 2017 we announced an agreement to divest certain Swedish
publishing and trade services assets (2016 revenues: approximately
€22 million).
Cash Flow and Net Debt
Nine-month operating cash conversion was 96% (9M
2016: 93%), reflecting lower capital expenditures partly offset by
higher working capital outflows. For the full year, we continue to
expect cash conversion of around 95%. Corporate income tax paid
increased substantially, as expected. Nine-month adjusted free cash
flow increased overall and in constant currencies. We now expect
full-year adjusted free cash flow to be near the upper end of our
guidance range for 2017: €675-€725 million in constant
currencies.
Total dividends paid amounted to €220 million in
the first nine months (2016 final dividend and 2017 interim
dividend). Acquisition spending, net of cash acquired and
deal-related costs, amounted to €311 million in the first nine
months, primarily in relation to the acquisition of Tagetik (April
2017). Divestiture proceeds, net of cash disposed, amounted to €85
million and relate to the disposal of Transport Services (June
2017) and certain U.K. publishing assets (September 2017). Share
repurchases totalled €216 million in the first nine months of the
year. The diluted weighted average share count in the nine-month
period was 288.6 million shares. Twelve months' rolling
net-debt-to-EBITDA was 1.9x as of September 30, 2017, compared to
1.8x a year ago and 1.7x at year-end 2016.
Share Buyback Program
On February 24, 2016, we announced a three-year
(2016-2018) share buyback program of up to €600 million, including
repurchases made to offset performance share issuance. In 2016, we
completed €200 million in share buybacks under this program.
On July 28, 2017, the program was expanded by €100 million in 2017
in order to mitigate the earnings dilution from the sale of
Transport Services and certain U.K. publishing assets, increasing
the total program to €700 million (2016-2018). In 2017 to date,
Wolters Kluwer has spent €250 million on share repurchases (6.6
million ordinary shares; average price €37.82). We are committed to
completing €300 million in share buybacks by year-end 2017 (for
which purpose a mandate has been given to a third party).
In October, we announced agreements to sell
Corsearch (trademark solutions) for $140 million (approximately
€119 million) and certain Swedish publishing assets for SEK 656
million (approximately €68 million), both subject to post-closing
adjustments. Assuming these transactions complete, Wolters Kluwer
intends to deploy the proceeds towards additional share repurchases
in 2018 in order to mitigate the expected earnings dilution from
these planned divestments.
Repurchased shares are added to and held as
treasury shares, and will be used for capital reduction purposes or
to meet obligations arising from share based incentive plans. On
September 25, 2017, we completed the cancellation of 11.6 million
treasury shares, as approved by shareholders.
Full-Year 2017 Outlook
Our full-year 2017 outlook is unchanged. We expect
to deliver solid organic growth, to drive further margin
improvement, and to grow diluted adjusted EPS at a mid-single-digit
rate in constant currencies. Our guidance for full-year 2017 is
provided in the table below.
Full-Year 2017 Outlook |
|
Performance indicators |
Guidance |
Adjusted operating
margin |
22.5%-23.0% |
Adjusted free cash
flow |
€675-€725 million |
ROIC |
9.5%-10.0% |
Diluted
adjusted EPS |
Mid-single-digit growth |
Guidance for adjusted free cash flow and diluted adjusted EPS
is in constant currencies (€/$ 1.11). Guidance for EPS growth
includes an assumption regarding share buybacks as announced for
2017. Guidance for adjusted operating profit margin and ROIC is in
reported currency and assumes an average EUR/USD rate in the range
of EUR/USD 1.05/1.10. |
Our guidance for adjusted free cash flow and
diluted adjusted EPS is based on constant exchange rates. In 2016,
Wolters Kluwer generated more than 60% of its revenues and adjusted
operating profit in North America. As a rule of thumb, based on our
2016 currency profile, each 1 U.S. cent move in the average €/$
exchange rate for the year causes an opposite change of
approximately two euro cents in diluted adjusted EPS.
Restructuring costs are included in adjusted
operating profit. We expect these costs to total approximately €25
million this year (2016: €29 million). We expect adjusted net
financing costs of approximately €110 million, excluding the impact
of exchange rate movements on currency hedging and intercompany
balances. We expect the benchmark effective tax rate to increase to
approximately 27.5%. Capital expenditure is expected to be in the
range of 5%-6% of total revenues (2016: 5.2%) with the cash
conversion ratio anticipated at approximately 95%.
Our guidance assumes no significant further change
to the scope of operations. We may make further disposals which can
be dilutive to margins and earnings in the near term.
About Wolters
Kluwer
Wolters Kluwer is a global leader in information
services and solutions for professionals in the areas of health,
tax & accounting, finance, risk and compliance, and legal. 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 2016 annual revenues of
€4.3 billion. The group serves customers in over 180 countries,
maintains operations in over 40 countries, and employs
approximately 19,000 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 about our
products and organization, visit www.wolterskluwer.com and follow
us on Twitter, Facebook, LinkedIn, and YouTube.
Financial Calendar |
|
February
21, 2018 |
Full-Year
2017 Results |
March 7,
2018 |
Publication of 2017 Annual Report |
April 19,
2018 |
Annual
General Meeting of Shareholders |
April 23,
2018 |
Ex-dividend date: 2017 final dividend |
April 24,
2018 |
Record
date: 2017 final dividend |
May 9,
2018 |
First-Quarter 2018 Trading Update |
May 17,
2018 |
Payment
date: 2017 final dividend ordinary shares |
May 24,
2018 |
Payment
date: 2017 final dividend ADRs |
August 1,
2018 |
Half-Year
2018 Results |
August
27, 2018 |
Ex-dividend date: 2018 interim dividend |
August
28, 2018 |
Record
date: 2018 interim dividend |
September
19, 2018 |
Payment
date: 2018 interim dividend |
September
26, 2018 |
Payment
date: 2018 interim dividend ADRs |
October
31, 2018 |
Nine-Month 2018 Trading Update |
Media |
Investors/Analysts |
Annemarije Pikaar |
Meg
Geldens |
Global
Brand & Communications |
Investor
Relations |
t + 31
(0)172 641 470 |
t + 31
(0)172 641 407 |
info@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;
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).
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Source: Wolters Kluwer N.V. via Globenewswire
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