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.
- Proceeds to be deployed towards additional share repurchases in
2018 in order to mitigate the earnings dilution expected from these
disposals.
- Share buyback program: on track to repurchase €300 million
in 2017.
- €250 million in share repurchases completed in 2017 to
date.
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
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 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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