Wolters Kluwer N.v. · EURONEXT:WKL
Wolters Kluwer — FY2021 Earnings Presentation
46 slides from Wolters Kluwer's earnings presentation, Feb 22, 2022
Slide 1: Wolters Kluwer 2021 Full-Year Results
Wolters Kluwer 2021 Full-Year Results Nancy McKinstry – CEO Kevin Entricken – CFO February 23, 2022 2021 Full-Year Results 1
Slide 2: Forward-looking statements
Forward-looking statements This presentation 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 uncerta
Slide 3: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2022 ◼ Appendices 2021 Full-Year Results 3
Slide 4: Introduction
Introduction In the second year of the pandemic, our teams delivered on strategic, financial, and ESG goals 2021 Financial Results 2021 ESG Progress Grow Organic growth +6% Expert solutions up 6% Expert organically Solutions Increased adjusted operating margin 25.3% Employee engagement 74% above hig
Slide 5: Strategy 2019-2021
Strategy 2019-2021 We successfully rounded off our most recent three-year strategic plan ▪ Expert solutions averaged 6% organic growth (2019-2021) and Grow reached 55% of total revenues by 2021 Expert ▪ Acquired four software partners: CGE, XCM Solutions, eOriginal, and Solutions Vanguard Software ▪
Slide 6: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2022 ◼ Appendices 2021 Full-Year Results 6
Slide 7: Full-year 2021 results
Full-year 2021 results Strong performance on all financial metrics (€ million, unless otherwise stated) FY 2021 FY 2020 ∆ ∆ CC ∆ OG Revenues 4,771 4,603 +4% +6% +6% Adjusted operating profit 1,205 1,124 +7% +11% +10% Adjusted operating profit margin 25.3% 24.4% Diluted adjusted EPS €3.38 €3.13 +8% +
Slide 8: Revenues by division
Revenues by division All divisions delivered improved organic growth (€ million) FY 2021 FY 2020 ∆ ∆ CC ∆ OG Health 1,234 1,193 +3% +7% +7% Tax & Accounting 1,510 1,431 +6% +7% +6% Governance, Risk & Compliance 1,139 1,074 +6% +10% +6% Legal & Regulatory 888 905 -2% -1% +3% Total revenues 4,771 4,60
Slide 9: Revenues by media format
Revenues by media format Digital revenues sustained robust organic growth; services and print saw significantly improved trends (€ million) FY 2021 FY 2020 ∆ ∆ CC ∆ OG Digital 3,930 3,736 +5% +8% +6% Services 460 454 +1% +5% +10% Print 381 413 -8% -7% -4% Total revenues 4,771 4,603 +4% +6% +6% ∆: %
Slide 10: Revenues by type
Revenues by type Digital & services subscriptions saw accelerated momentum. Non-recurring revenues recovered from steep declines in 2020 Organic Growth (%) Organic Growth (%) Recurring Revenue Types (80% of total) Non-recurring Revenue Types (20% of total) 15% 71% of total 30% revenue 10% 8% 20% 7%
Slide 11: Adjusted operating profit
Adjusted operating profit Three divisions improved margins; Tax & Accounting margin declined due to increased investment Margin Margin (€ million) FY 2021 FY 2020 ∆ ∆ CC ∆ OG FY 2021 FY 2020 Health 360 343 +5% +9% +9% 29.2% 28.7% Tax & Accounting 430 431 0% +2% 0% 28.4% 30.1% Governance, Risk & Comp
Slide 12: Adjusted net profit and EPS
Adjusted net profit and EPS Diluted adjusted EPS up +17% in constant currencies, reflecting margin increase, lower tax rate, and reduced share count (€ million, unless otherwise stated) FY 2021 FY 2020 ∆ ∆ CC Revenues 4,771 4,603 +4% +6% Adjusted operating profit 1,205 1,124 +7% +11% Adjusted operat
Slide 13: IFRS profit and diluted EPS
IFRS profit and diluted EPS Reported net profit up 1% and diluted EPS up 3% (€ million, unless otherwise stated) FY 2021 FY 2020 ∆ Adjusted operating profit 1,205 1,124 +7% Amortization of acquired intangibles (131) (144) Impairment of acquired intangibles (33) 0 Results on divestments of operations
Slide 14: Adjusted free cash flow
Adjusted free cash flow Substantially higher working capital inflows drove higher cash conversion (€ million, unless otherwise stated) FY 2021 FY 2020 ∆ ∆ CC Adjusted operating profit 1,205 1,124 +7% +11% Depreciation, amortization, impairment other intangibles 237 223 Depreciation and impairment of
Slide 15: Movement in net debt
Movement in net debt We returned over 70% of adjusted free cash flow to shareholders in 2021 (€ million, unless otherwise stated) FY 2021 FY 2020 Net debt at start of period (2,383) (2,199) Adjusted free cash flow 1,010 907 Dividends paid (373) (334) Acquisition spending, net of cash acquired, inclu
Slide 16: Dividends and share buybacks
Dividends and share buybacks We are proposing a total dividend of €1.57 (+15%) and intend to repurchase up to €600 million in shares in 2022 Dividend per Share (€) Share Buybacks (€ million) Total Completed 1.57 dividend 600 550 Intended 1.36 1.18 1) 0.98 410 350 350 0.85 300 350 Interim 0.54 200 20
Slide 17: Results summary
Results summary Strong recovery in organic growth, leading to higher margins; substantial cash returns to shareholders Organic growth +6% Adjusted operating Diluted adjusted margin up 90 basis EPS +17% points to 25.3% in constant currencies Adjusted FCF Strong balance sheet Over 70% of adjusted €1 b
Slide 18: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2022 ◼ Appendices 2021 Full-Year Results 18
Slide 19: Health
Health Organic growth +7%; margin increase mainly reflects operational gearing and lower restructuring charges Clinical Solutions € million 2021 2020 Δ Δ CC Δ OG ▪ Revenues up +8% organically, with strong Revenues 1,234 1,193 +3% +7% +7% performance in all geographic regions Adjusted operating ▪ UpT
Slide 20: Tax & Accounting
Tax & Accounting Organic growth +6%; margin decline reflects increased investment to support growth in cloud-based software Corporate Performance Solutions € million 2021 2020 Δ Δ CC Δ OG ▪ Revenues up +10% organically, led by CCH Tagetik Revenues 1,510 1,431 +6% +7% +6% ▪ CCH Tagetik and TeamMate c
Slide 21: Governance, Risk & Compliance
Governance, Risk & Compliance Organic growth +6%; margin increase due to lower restructuring charges and provisions, partly offset by increased investment Legal Services € million 2021 2020 Δ Δ CC Δ OG ▪ Revenues up +12% organically, buoyed by Revenues 1,139 1,074 +6% +10% +6% transactional volumes
Slide 22: Legal & Regulatory
Legal & Regulatory Organic growth +3%; margin increase mainly reflects operational gearing, lower restructuring charges, and a one-time pension benefit EHS/ORM1) & Legal Software € million 2021 2020 Δ Δ CC Δ OG ▪ Organic growth +8%, driven by double-digit growth in Revenues 888 905 -2% -1% +3% recur
Slide 23: Strategy 2022-2024
Strategy 2022-2024 Our new strategic plan should deliver good organic growth, improved margins and returns, and advance sustainability over the coming three years Product development spend ▪ Drive investment in cloud-based expert solutions to be approximately 10% of Accelerate ▪ Transform selected d
Slide 24: Cloud-based expert solutions
Cloud-based expert solutions Investing in cloud-based solutions: almost a third of our software revenues are cloud-based and growing at a double-digit organic growth rate FY 2021 Revenues FY 2021 Software Organic growth FY 2021 (FY 2020): €4.8 billion Revenues €2.0 billion Total software: +6% (+6%)
Slide 25: Expanding our reach
Expanding our reach eOriginal extended our reach into a fast-growing market adjacency along our customers’ lending workflow Digital Lending Workflow ▪ eOriginal, acquired in December 2020, extended GRC Compliance Solutions into digital loan closing and storage adjacency ▪ eOriginal allows frictionle
Slide 26: Evolving core capabilities
Evolving core capabilities We aim to strengthen our core capabilities to drive value Central Functions ESG Talent ▪ Leverage sales & marketing ▪ Align with emerging ▪ Continue to support high data (e.g., Salesforce); build regulatory standards for employee engagement out e-commerce ESG reporting ▪ D
Slide 27: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2022 ◼ Appendices 2021 Full-Year Results 27
Slide 28: Guidance 2022
Guidance 2022 Performance indicators 2022 Guidance 2021 Adjusted operating profit margin 25.5%-26.0% 25.3% Adjusted free cash flow €1,025-€1,075 million €1,010 million Return on invested capital Around 14% 13.7% Diluted adjusted EPS Mid-single-digit growth €3.38 Note: Guidance for adjusted operating
Slide 29: Divisional outlook 2022
Divisional outlook 2022 ▪ Organic growth to slow from 2021 levels, mainly due to the absence of a Health contract win of the size of the ASCO titles ▪ Adjusted operating profit margin to improve modestly ▪ Organic growth to improve slightly from 2021 levels Tax & Accounting ▪ Adjusted operating prof
Slide 30: Appendix: 2021 Supplement
Appendix: 2021 Supplement 2021 Full-Year Results 30
Slide 31: Revenues by region
Revenues by region (€ million) FY 2021 FY 2020 ∆ ∆ CC ∆ OG North America 2,946 2,818 +5% +8% +7% Europe 1,470 1,431 +3% +3% +4% Asia Pacific & ROW 355 354 0% +1% +3% Total revenues 4,771 4,603 +4% +6% +6% ∆: % Change; ∆ CC: % Change in constant currencies (€/$ 1.14); ∆ OG: % Organic growth. FY 2021
Slide 32: Revenues by type
Revenues by type (€ million) FY 2021 FY 2020 ∆ ∆ CC ∆ OG Digital and services subscriptions 3,397 3,218 +6% +8% +7% Print subscriptions 157 182 -14% -13% -10% Other recurring 256 280 -9% -5% 0% Recurring revenues 3,810 3,680 +4% +6% +6% Print books 146 150 -2% -2% +1% LS transactional 266 228 +17% +
Slide 33: Reconciliation: adjusted net financing costs to financing results
Reconciliation: adjusted net financing costs to financing results (€ million) FY 2021 FY 2020 Adjusted net financing costs (78) (46) Employee benefits financing component (1) (2) Change in fair value of financial assets (5) - Result on divestment of financial assets - - Divestment related results on
Slide 34: Balance sheet
Balance sheet (€ million) Dec. 31, 2021 Dec. 31, 2020 Goodwill and intangible assets 5,800 5,638 Property, plant and equipment 75 84 Right-of-use assets 301 319 Deferred tax and other non-current assets 114 126 Total non-current assets 6,290 6,167 Cash and cash equivalents 1,001 723 Trade and other
Slide 35: Debt maturity profile
Debt maturity profile Debt Maturity Profile – December 31, 2021 (€ million) Net debt breakdown: € million Gross financial debt 2,801 Lease liabilities 331 1,001 Total gross debt 3,132 Less: Cash & cash equivalents; deferred receivable1 1,001 Net debt 2,131 759 522 556 506 451 158 81 37 29 16 9 8 Cas
Slide 36: Currency impact
Currency impact FY 2021 Revenues by Currency British pound Other 3% 7% Euro 25% U.S. dollar 65% Impact in € million on Adjusted Average rates Revenues operating profit 1 Euro FY 2021 FY 2020 FY 2021 FY 2021 U.S. dollar 1.18 1.14 (118) (43) British pound 0.86 0.89 4 1 Canadian dollar 1.48 1.53 2 1 Au
Slide 37: Growth rates
Growth rates ∆ ∆ CC ∆ OG % % Change % Net Effect % % Currency in Constant Acquisitions Organic 2021 2020 Change Impact Currencies & Disposals Growth Revenues Health 1,234 1,193 +3% -4% +7% 0% +7% Tax & Accounting 1,510 1,431 +6% -1% +7% +1% +6% Governance, Risk & Compliance 1,139 1,074 +6% -4% +10%
Slide 38: Financial KPIs
Financial KPIs Adjusted Operating Revenue (€billion) Organic Growth (%) Profit Margin (%) 5.0 6% 30% 4.0 5% 25% 4% 3.0 3% 20% 2.0 2% 1.0 15% 1% 0.0 0% 10% 2015 2015 2018 2021 2015 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 2016 2017 2019 2020 Adjusted Earnings per Adjusted Free Cash
Slide 39: Appendix: ESG Metrics
Appendix: ESG Metrics 2021 Full-Year Results 39
Slide 40: ESG Metrics
ESG Metrics ◼ ESG progress ◼ ESG Ratings ◼ Social: employee culture ◼ Social: gender diversity ◼ Governance: stewardship ◼ Governance: board skills ◼ Governance: management remuneration ◼ Governance: remuneration peers 2021 Full-Year Results 40
Slide 41: ESG progress
ESG progress ▪ Progress on decarbonization programs in 2021: ̶ On-premise server decommissioning ahead of plan Environment ̶ Real estate footprint reduced m2 by 7% organically ▪ Commenced project to start aligning with TCFD and set SBTi targets ▪ Achieved employee engagement score of 74%, above the
Slide 42: ESG Ratings
ESG Ratings MSCI ESG Rating Sustainalytics ESG Risk Rating AAA 0 5 10 15 20 25 AA A Wolters Kluwer 9.5 BBB IHS Markit 21.2 BB S&P Global 12.7 B RELX 5.4 CCC Sage Group 17.7 Thomson Reuters 9.2 2017 2018 2019 2020 2021 MSCI: AAA is the highest quality score Sustainalytics: A score of 0 denotes the le
Slide 43: Social: employee culture
Social: employee culture Employee Engagement Score Access to Learning Wolters Kluwer High Performing Norm Management Employees 100% 100% 100% 100% 100% 100% 77% 84% 76% 76% 74% 100% 83% 100% 100% 100% 100% 100% 50% 50% 56% 0% 0% 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021 Employee Turnove
Slide 44: Social: diversity
Social: diversity Supervisory Board Members: % Female Executive Board Members: % Female 80% 80% 50% 50% 50% 50% 50% 43% 43% 43% 43% 43% 40% 40% 0% 0% 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Total Workforce: % Female Belonging Score 2021 80% 48% 48% 47% 47% 46% 72 / 100 Belonging measures t
Slide 45: Governance: stewardship
Governance: stewardship Innovation & Product Development Spend Annual Compliance Training (includes ethics, data privacy, IT and cybersecurity) % of Total Revenues % of Employees Completed 12% 100% 97% 99% 99% 99% 99% 10% 50% 8% 6% 0% 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 % Independent B
Slide 46: Governance: board skills
Governance: board skills Supervisory Board Skills Experience & Competencies Outside Boards Committees Independent Cybersecurity Technology & Development Management Organization, Social Policy, Marketing & Information Commercial Accounting, Gender General Finance Tenure Mgmt. Audit, Legal AC= Audit A