February 21, 2018 - Wolters Kluwer, a global leader in
professional information, software solutions, and services, today
releases its full-year 2017 results.
Highlights
- Revenues up 5% in constant currencies and up 3%
organically.
- Digital & services revenues up 5% organically (87% of total
revenues).
- Recurring revenues grew 4% organically (76% of total
revenues).
- Adjusted operating profit margin up 60 basis points to
22.8%.
- Diluted adjusted EPS €2.32, up 13% in constant
currencies.
- Adjusted free cash flow €746 million, up 7% in constant
currencies.
- Return on invested capital improved to 10.2%.
- Balance sheet remains strong: net-debt-to-EBITDA 1.7x at
year-end.
- Proposed full-year total dividend of €0.85 per share, up
8%.
- 2018 interim dividend to be set at 40% of prior year total
dividend (previously: 25%).
- Share buyback: current intention is to repurchase up to €400
million in shares in 2018.
- Includes proceeds from Corsearch and Swedish disposals, closed
in January 2018.
- Pending completion, ProVation disposal proceeds to be used for
additional share repurchases.
- Outlook 2018: expect diluted adjusted EPS to grow 10%-15% in
constant currencies.
- Guidance reflects IFRS15 accounting standard, effective in
2018. (See Note 14).
Full-Year Report of the Executive
Board
Nancy McKinstry, CEO and Chairman of the Executive Board,
commented: "I am pleased to report further improvement in
organic growth, margins, cash flow and ROIC in 2017. Sustained
investment is delivering products and services that our customers
value. Operational excellence programs are making our organization
more efficient and agile. We made significant progress on divesting
non-core assets and on integrating acquisitions-improving the
quality and growth potential of our business. We look forward to
the year ahead and remain focused on executing on our strategic
priorities."
Key Figures Full-Year 2017 (Under IAS 18):
Year ended December 31 |
€
million (unless otherwise stated) |
2017 |
2016* |
Var. |
Var. CC |
Var. OG |
Business performance
- benchmark figures |
|
|
|
|
|
Revenues |
4,422 |
4,286 |
+3% |
+5% |
+3% |
Adjusted operating
profit |
1,009 |
950 |
+6% |
+8% |
+8% |
Adjusted operating
profit margin |
22.8% |
22.2% |
|
|
|
Adjusted net
profit |
668 |
618 |
+8% |
+10% |
|
Diluted adjusted EPS
(€) |
2.32 |
2.10 |
+11% |
+13% |
|
Adjusted free cash
flow |
746 |
708 |
+5% |
+7% |
|
Net debt |
2,069 |
1,927 |
+7% |
|
|
Return on
invested capital (ROIC) |
10.2% |
9.8% |
|
|
|
IFRS
results |
|
|
|
|
|
Revenues |
4,422 |
4,286 |
+3% |
|
|
Operating profit |
869 |
766 |
+13% |
|
|
Profit for the
year |
671 |
490 |
+37% |
|
|
Diluted EPS (€) |
2.33 |
1.66 |
+40% |
|
|
Net cash
from operating activities |
940 |
927 |
+1% |
|
|
Var.: %
Change; Var. CC: % Change constant currencies (€/$ 1.11); Var. OG:
% Organic growth. Benchmark (adjusted) figures are performance
measures used by management. See Note 5 for a reconciliation from
IFRS to benchmark figures. IFRS: International Financial Reporting
Standards as adopted by the European Union. *2016 restated to treat
customer credits for 'bank product' services as a deduction to
revenues and not as a cost of sales. |
Full-Year 2018 Outlook (Reflects IFRS 15 Accounting Standard,
Effective in 2018)
Our guidance for full-year 2018 is provided in the table below.
We expect to deliver solid organic growth and margin improvement.
We expect to achieve an increase in diluted adjusted EPS in
constant currencies and improvement in return on invested capital
(ROIC). The first half operating profit is expected to see modest
improvement due to the phasing of investments and savings.
Full-Year 2018 Outlook |
Performance indicators |
2018
Guidance |
2017 (Under IFRS 15) |
Adjusted operating
profit margin |
22.5%-23.0% |
22.2% |
Adjusted free cash
flow |
€725-€750 million |
€746 million |
ROIC |
10.0%-10.5% |
9.8% |
Diluted
adjusted EPS |
10%-15%
growth |
€2.22 |
Guidance for
adjusted free cash flow and diluted adjusted EPS is in constant
currencies (€/$ 1.13). Guidance for EPS growth assumes share
repurchases for up to €400 million in 2018. Adjusted operating
profit margin and ROIC are in reported currencies and assume an
average EUR/USD rate around €/$ 1.20. |
Our guidance reflects the new IFRS 15 accounting standard, which
became effective on January 1, 2018. When applied to 2017, under
the method adopted by Wolters Kluwer, the adjusted operating profit
margin would be 22.2%, diluted adjusted EPS €2.22, and ROIC 9.8%.
IFRS 15 has no impact on free cash flow. Further details are
provided in Note 14 of this report.
Our guidance is based on constant exchange rates. In 2017,
Wolters Kluwer generated more than 60% of its revenues and adjusted
operating profit in North America. As a rule of thumb, based on our
2017 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 currently expect restructuring costs of €15-€25 million in 2018
(2017: €33 million). We expect adjusted net financing costs of
approximately €70 million (2017: €109 million), excluding the
impact of exchange rate movements on currency hedging and
intercompany balances. This reflects the redemption of our Eurobond
maturing in April 2018. We expect the benchmark effective tax rate
to be approximately 26%, subject to further interpretation and
clarification of the changes introduced in the U.S. Tax Cuts and
Jobs Act.
Capital expenditure is expected to be in the range of 5%-6% of
total revenues (2017: 4.8%, including benefit from real estate
dispositions). Under IFRS 15, we anticipate a cash conversion ratio
of approximately 100% in 2018. Our guidance assumes no additional
significant change to the scope of operations. We may make further
disposals which can be dilutive to margins and earnings in the near
term.
2018 Outlook by Division
Health: we expect good organic growth, similar to prior
year levels, and a stable margin for the full year. The first half
margin is expected to decline due to the timing of investments.
Tax & Accounting: we expect improved organic growth
and a stable margin for the full year. The first half margin is
expected to decline due to the timing of investments.
Governance, Risk & Compliance: we expect good organic
growth and an improved margin for the full year.
Legal & Regulatory: we expect underlying revenue to
be broadly flat in 2018. We expect the full-year margin to be in
line with 2017, as cost savings are reinvested in wage increases
and product development.
Strategic Priorities 2016-2018
Two years ago, we announced our strategic plan for 2016-2018.
This plan (Growing our Value) prioritizes expanding our market
coverage, increasing our focus on expert solutions, and driving
further operating efficiencies and employee engagement. Our
strategy aims to sustain and, in the long run, further improve our
organic growth rate, margins and returns as we focus on growing
value for customers, employees, and shareholders. Our priorities
are to:
- Expand market coverage: We will continue to allocate
most of our capital towards our leading growth businesses and
digital products, and will extend into market adjacencies and new
geographies where we see the best potential for growth and
competitive advantage. Expanding our market reach also entails
allocating funds to broaden our sales and marketing coverage in
certain global markets. We intend to support this organic growth
strategy with value-enhancing acquisitions while continuing our
program of non-core disposals.
- Deliver expert solutions: Our plan calls for increased
focus on expert solutions that combine deep domain knowledge with
specialized technology and services to deliver expert answers,
analytics, and productivity for our customers. To support digital
growth across all divisions, we intend to accelerate our ongoing
shift to global platforms and to cloud-based integrated solutions
that offer mobile access. Our plan is also to expand our use of new
media channels and to create an all-round, rich digital experience
for our customers. Investment in new and enhanced products will be
sustained in the range of 8-10% of total revenues.
- Drive efficiencies and engagement: We intend to continue
driving scale economies while improving the quality of our
offerings and the agility of our organization. These operating
efficiencies will help fund investment and wage inflation, and
support a rising operating margin over the long term. Through
increased standardization of processes and technology planning, and
by focusing on fewer, global platforms and software applications,
we expect to free up capital to reinvest in product innovation.
Supporting this effort are several initiatives to foster employee
engagement.
Leverage Target and Financial Policy
Wolters Kluwer uses its cash flow to invest in the business
organically or through acquisitions, to maintain optimal leverage,
and provide returns to shareholders. We regularly assess our
financial position and evaluate the appropriate level of debt in
view of our expectations for cash flow, investment plans, interest
rates, and capital market conditions.
While we may temporarily deviate from our leverage target at
times, we continue to believe that, in the longer run, a
net-debt-to-EBITDA ratio of around 2.5x remains appropriate for our
business given the high proportion of recurring revenues and
resilient cash flow.
At December 31, 2017, our net-debt-to-EBITDA ratio was 1.7x.
Dividend Policy and 2017 Dividends
Wolters Kluwer has a progressive dividend policy under which the
company aims to increase the dividend per share each year. The
annual increase is dependent on our financial performance, market
conditions, and our need for financial flexibility. Our dividend
policy takes into consideration the nature of our business and our
expectations for future cash flow and investment needs.
For 2017, we are proposing a total dividend of €0.85 per share
in cash, comprising the interim dividend of €0.20 (paid in
September 2017) and the final dividend of €0.65 (to be paid in May
2018). This represents an increase of 6 euro cents or 8% over the
prior year total dividend (2016: €0.79). The dividend is subject to
approval at the Annual General Meeting of Shareholders to be held
on April 19, 2018.
For 2018, we intend to set the interim dividend at 40% of prior
year total dividend (previously: 25%). This will result in a 2018
interim dividend of €0.34 (to be paid in September 2018).
Dividend dates for 2018 are provided on page 37. Shareholders
can choose to reinvest both interim and final dividends by
purchasing additional Wolters Kluwer shares through the Dividend
Reinvestment Plan (DRIP) administered by ABN AMRO Bank N.V.
Anti-Dilution Policy and Share Buyback Program
2016-2018
Wolters Kluwer has a policy to offset the dilution caused by our
annual incentive share issuance with share repurchases. In 2017,
approximately 1.4 million shares were repurchased under this
policy.
On February 24, 2016, we announced a three-year share buyback
program (2016-2018) which originally envisaged spending up to €200
million in each year on share repurchases, including amounts
required to offset incentive share issuance. This buyback program
was subsequently expanded to include additional repurchases
intended to mitigate dilution caused by divestments made in 2017
and early 2018.
In 2016, we completed €200 million in share buybacks under this
program. In 2017, we completed €300 million of repurchases (7.8
million shares at an average price of €38.62), including an
additional €100 million to mitigate the EPS dilution related to two
divestments completed in 2017 (Transport Services and certain U.K.
publishing assets).
Following completion of the divestments of Corsearch and certain
Swedish assets in January 2018, we now intend to execute up to €400
million in buybacks in 2018, including the proceeds of these
divestments.
In January 2018, Wolters Kluwer signed an agreement to divest
ProVation Medical. Assuming completion, Wolters Kluwer intends to
deploy the proceeds of this divestment towards additional share
repurchases of approximately €150 million in 2018 and 2019 to
mitigate the expected earnings dilution.
Repurchased shares are added to and held as treasury shares.
Part of the shares held in treasury will be retained and used to
meet future obligations under share-based incentive plans. At the
2018 Annual General Meeting of Shareholders, Wolters Kluwer will
propose cancelling any or all of the other shares held in treasury
or to be acquired under the share buyback program 2016-2018.
Assuming global economic conditions do not deteriorate
substantially, we believe this level of cash return leaves us with
ample headroom for investment in the business, including
acquisitions.
Full-Year 2017 Results
Benchmark Figures
Group revenues increased 3% overall to €4,422 million. Excluding
the effect of exchange rate movements, primarily the depreciation
of the U.S. dollar and British pound, revenues rose 5% in constant
currencies. Organic growth was 3% (2016: 3%), with all four
divisions achieving similar or better organic growth than in the
prior year. Organic growth excludes the impact of exchange rate
movements, accounting changes, and the effect of acquisitions and
divestitures.
Revenues from North America (61% of total revenues) sustained 4%
organic growth (2016: 4%), with clear improvement in our U.S. Legal
& Regulatory unit compensating for slightly slower growth in
Health and Governance, Risk & Compliance in this region.
Revenues from Europe (31% of total revenues) grew 2% organically
(2016: 1%), with the improvement on prior year driven by
Governance, Risk & Compliance. Revenues from Asia Pacific and
Rest of World (8% of total revenues) grew 6% organically,
accelerating across all divisions (2016: 3%).
Adjusted operating profit grew 6% overall and 8% in constant
currencies to €1,009 million. The adjusted operating profit margin
advanced by 60 basis points to 22.8% (2016: 22.2%), driven by
Health and Governance, Risk & Compliance. Included in adjusted
operating profits were €33 million of restructuring costs (2016:
€29 million). Restructuring expenses were higher than guided during
the year, as we fast-tracked several operational efficiency
initiatives in our Legal & Regulatory and Tax & Accounting
divisions, taking charges in the fourth quarter of 2017.
Adjusted net financing costs were €109 million (2016: €107
million). Adjusted net financing costs are defined as total
financing results excluding the financing component of employee
benefits, results of investments available-for-sale, and net book
gains or losses on equity-accounted investees.
Income from equity-accounted investees increased to €4 million,
mainly due to improvement at our 40%-owned Austrian affiliate.
Adjusted profit before tax was €904 million (2016: €845
million), an increase of 7% overall and 9% in constant
currencies.
The benchmark effective tax rate on adjusted profit before tax
decreased to 25.9% (2016: 26.8%), reflecting reduced U.S. state tax
charges and a one-time release of tax liabilities for closed tax
years. As a result, adjusted net profit increased 8% overall and
10% in constant currencies to €668 million.
Diluted adjusted EPS increased 11% overall to €2.32 (2016:
€2.10), reflecting the increase in adjusted net profit and a 2%
reduction in the weighted average number of shares outstanding. In
constant currencies, diluted adjusted EPS increased 13%.
IFRS Reported Figures
Reported operating profit rose 13% to €869 million (2016: €766
million), reflecting the increase in adjusted operating profit and
net capital gains of €60 million on the disposals of Transport
Services (July 2017) and certain U.K. publishing assets (September
2017). This gain was partly offset by an increase in amortization
of acquired intangibles and higher fair value changes of earn-out
liabilities.
Reported financing results amounted to a cost of €108 million
(2016: €113 million cost) including the financing component of
employee benefits of €5 million (2016: €6 million). We
realized a €6 million capital gain on the sale of our 50% interest
in Ipsoa Francis Lefebvre, an Italian publishing joint venture.
Reported profit before tax increased 17% to €765 million (2016:
€655 million).
At year-end 2017, we recorded a one-time non-cash revaluation to
our U.S. deferred tax position due to the lower U.S. corporate tax
rate introduced by the U.S. Tax Cuts and Jobs Act. This benefit was
partly offset by the mandatory repatriation tax introduced in this
U.S. tax reform. Including these year-end adjustments totaling €57
million, the reported effective tax rate was 12.3% (2016: 25.2%).
As a result, total profit for the year increased 37% to €671
million (2016: €490 million) and diluted earnings per share
increased 40% to €2.33 (2016: €1.66).
Cash Flow
Adjusted operating cash flow was €974 million (2016: €948
million), an increase of 3% overall and 5% in constant currencies.
The cash conversion ratio declined to 97% (2016: 100%) in line with
longer term average. Net capital expenditure was €210 million, and
included €13 million in proceeds from the disposition of several
real estate assets in the U.S. and Europe. Without that benefit,
capital expenditure as a percent of revenues would have reduced
slightly to 5.0% compared to the prior year (2016: 5.2%).
Depreciation and the amortization of internally developed software
and other assets rose to €209 million (2016: €179 million). Net
working capital outflows of €34 million (2016: inflows of €43
million) were largely due to a reduction in payables.
Adjusted free cash flow was €746 million (2016: €708 million),
up 5% overall and up 7% in constant currencies. Corporate income
taxes paid increased by €48 million to €156 million, the prior year
having benefitted from favorable timing of tax payments. Paid
financing costs declined to €87 million (2016: €100 million) due to
higher interest income on deposits and a cash result on currency
hedging contracts. The net movement in restructuring provisions of
€6 million related to cash spending of €27 million and additions of
€21 million excluding non-benchmark items.
Dividends paid to shareholders during the year totaled €232
million, comprising the 2016 final dividend and 2017 interim
dividend, and dividends paid to minority interests.
Acquisition spending, net of cash acquired and including
acquisition-related costs, was €316 million (2016: €461 million).
Most of our acquisition spending reflects the purchase of Tagetik
in Tax & Accounting (April 2017). Deferred payments on
acquisitions made in prior years, including earnouts, amounted to
€12 million.
Divestiture proceeds, net of cash disposed, were €94 million
(2016: €14 million) and relate primarily to the sale of Transport
Services and certain U.K. publishing assets.
During the year, we completed €300 million of share buybacks.
The cash outflow also reflects €2 million of share buybacks made in
2016 but settled in January 2017.
Net Debt and Leverage
Net debt at December 31, 2017, was €2,069 million, an increase
of €142 million since December 31, 2016, as a result of
acquisitions, share buybacks, and currency translation of cash and
cash equivalents. The net-debt-to-EBITDA ratio at year end 2017 was
unchanged at 1.7x.
In the second quarter of 2018, we will use cash and deposits to
redeem the principal of our €750 million, 6.375% senior Eurobond
which matures on April 10, 2018.
About Wolters Kluwer
Wolters Kluwer is a global leader in professional information,
software solutions, and services for the health, tax &
accounting, finance, risk & compliance, and legal 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 2017 annual revenues of €4.4 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
March 7, 2018 |
2017 Annual Report |
April 19, 2018 |
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 2017 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 |
February 20, 2019 |
Full-Year 2018
Results |
Media |
Investors/Analysts |
Annemarije
Dérogée-Pikaar |
Meg Geldens |
Corporate
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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