Wolters Kluwer N.v. · EURONEXT:WKL
Wolters Kluwer — H1 2020 Earnings Presentation
50 slides from Wolters Kluwer's earnings presentation, Aug 5, 2020
Slide 1: Wolters Kluwer 2020 Half-Year Results
Wolters Kluwer 2020 Half-Year Results Nancy McKinstry – CEO Kevin Entricken – CFO August 5, 2020 2020 Half-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 2020 Appendices 2020 Half-Year Results 3
Slide 4: COVID-19
COVID-19 Since mid-March, we have been focused on protecting our employees and supporting our customers in extraordinary circumstances Employees: ensuring health and safety Customers: providing access and tools Global work-from-home: approx. 95% of Health: Supporting the global medical community
Slide 5: Financial results
Financial results First half 2020 results speak to the resilience of our digital businesses and the agility of our response to the crisis Grow Organic growth Increased adjusted Expert +3% free cash flow in Solutions constant currencies Advance Increased adjusted Strong balance Domain operating margi
Slide 6: Agenda
Agenda Introduction Financial Review Operating and Strategic Review Outlook 2020 Appendices 2020 Half-Year Results 6
Slide 7: Half-year 2020 results
Half-year 2020 results Organic growth +3%; revenue, margin and cash flow benefitted from one-time factors (€ million, unless otherwise stated) HY 2020 HY 2019 ∆ ∆ CC ∆ OG Revenues 2,294 2,204 +4% +3% +3% Adjusted operating profit 577 497 +16% +14% +14% Adjusted operating profit margin 25.2% 22.5% Di
Slide 8: Revenues by division
Revenues by division All four divisions affected by COVID-19; GRC growth reflects revenues associated with the PPP* (€ million) HY 2020 HY 2019 ∆ ∆ CC ∆ OG Health 581 552 +5% +3% +3% Tax & Accounting 713 684 +4% +3% +3% Governance, Risk & Compliance 564 518 +9% +6% +6% Legal & Regulatory 436 450 -3%
Slide 9: Revenues by media format
Revenues by media format COVID-19 caused steep declines in print revenues in the first half (€ million) HY 2020 HY 2019 ∆ ∆ CC ∆ OG Digital 1,878 1,736 +8% +7% +6% Services 244 259 -6% -8% -5% Print 172 209 -18% -19% -18% Total revenues 2,294 2,204 +4% +3% +3% ∆: % Change; ∆ CC: % Change in constant
Slide 10: Revenues by type
Revenues by type Digital & services subscriptions (71%) sustained 6% organic growth; non-recurring revenues declined 8% organically excluding PPP solution Organic Growth (%) Organic Growth (%) Recurring Revenue Types (81% of total) Non-Recurring Revenue Types (19% of total) 15% 15% 71% of total reve
Slide 11: Adjusted operating profit
Adjusted operating profit Across the group, margins benefitted from temporary cost reductions, lower restructuring and other one-time factors Margin Margin (€ million) HY 2020 HY 2019 ∆ ∆ CC ∆ OG HY 2020 HY 2019 Health 162 139 +17% +14% +15% 27.9% 25.2% Tax & Accounting 219 193 +14% +12% +12% 30.8%
Slide 12: COVID-19 response on costs
COVID-19 response on costs Rapid second-quarter response yielded temporary cost reductions; second half programs require investment but will help protect the full year margin Temporary Cost Reductions Long-Term Sustainable Cost Actions 2Q 2020 Actions 2H 2020 Programs Froze all travel and put a ho
Slide 13: Adjusted net profit and EPS
Adjusted net profit and EPS Diluted adjusted EPS up +18% in constant currencies, mainly driven by higher adjusted operating profit (€ million, unless otherwise stated) HY 2020 HY 2019 ∆ ∆ CC Revenues 2,294 2,204 +4% +3% Adjusted operating profit 577 497 +16% +14% Adjusted operating profit margin 25.
Slide 14: Adjusted free cash flow
Adjusted free cash flow Cash conversion impacted by increased capital expenditure and working capital outflows (€ million, unless otherwise stated) HY 2020 HY 2019 ∆ ∆ CC Adjusted operating profit 577 497 +16% +14% Depreciation and amortization of other intangibles 103 100 Depreciation of right-of-u
Slide 15: Movement in net debt
Movement in net debt Leverage improved despite increased cash returned to shareholders (€ million, unless otherwise stated) HY 2020 FY 2019 HY 2019 Net debt at start of period (2,199) (2,249) (2,249) Adjusted free cash flow 336 807 300 Dividends paid (210) (280) (174) Acquisition spending, net of ca
Slide 16: Dividends and share buybacks
Dividends and share buybacks Interim dividend €0.47; share buyback progressing; €175 million completed year to date Dividend per Share (€) Share Buybacks (€ million) 3-Yr Program 550 Intended 1.18 Completed 0.98 0.79 0.85 350 350 0.79 0.64 0.75 300 200 0.47 140 200 200 175 0.34 0.39 Interim dividend
Slide 17: Results summary
Results summary Results reflect a resilient business, agile operations, and a strong balance sheet Organic growth Adjusted operating Diluted adjusted +3% margin 25.2% EPS Organic growth +2% Margin reflects temporary +18% excluding PPP solution cost reductions, lower in constant currencies restructur
Slide 18: Agenda
Agenda Introduction Financial Review Operating and Strategic Review Outlook 2020 Appendices 2020 Half-Year Results 18
Slide 19: Health
Health Organic growth +3%; margin reflects temporary cost reductions and lower restructuring charges Clinical Solutions € million HY 2020 HY 2019 Δ Δ CC Δ OG Organic growth +7% Revenues 581 552 +5% +3% +3% UpToDate and drug information grew well Adjusted Patient engagement and software results
Slide 20: Tax & Accounting
Tax & Accounting Organic growth +3% amidst more challenging conditions; margin increase reflects temporary cost reductions, operational gearing, and one-off factors € million HY 2020 HY 2019 Δ Δ CC Δ OG Corporate Performance Solutions Organic growth +12%, supported by cloud versions Revenues 713 6
Slide 21: Governance, Risk & Compliance
Governance, Risk & Compliance Organic growth +1% excluding PPP solution; margin reflects temporary cost reductions, lower restructuring, and one-time factors € million HY 2020 HY 2019 Δ Δ CC Δ OG Legal Services Organic decline -1% Revenues 564 518 +9% +6% +6% Recurring revenue growth more than o
Slide 22: Legal & Regulatory
Legal & Regulatory Organic decline -2%; margin reflects temporary cost reductions and operational gearing in EHS/ORM software EHS/ORM & Legal Software € million HY 2020 HY 2019 Δ Δ CC Δ OG Organic growth +11% Revenues 436 450 -3% -3% -2% EHS/ORM software saw strong organic growth in Adjusted clo
Slide 23: Strategic priorities 2019-2021
Strategic priorities 2019-2021 We remain committed to the strategic priorities that we set out at the start of 2019 Sustain organic product development at 8-10% of Grow Drive scale by extending the offerings and broadening revenues (CAPEX + OPEX) distribution via existing and new channels, includi
Slide 24: Journey to the cloud
Journey to the cloud Cloud software revenues have nearly doubled in the last three years. COVID-19 is stimulating increased interest in cloud solutions FY 2019 Revenues by FY 2019 Software Media Format Revenues €1.8 billion Top Software Suites Cloud Benefits Cloud Mobility CCH Axcess Security
Slide 25: Grow expert solutions
Grow expert solutions Finance, Risk & Reporting investing in hosted version of OneSumX Regulatory Reporting GRC: Finance, Risk & Reporting OneSumX SaaS Regulatory Reporting Solution Client Benefits: Secured and fine-tuned by Wolters Kluwer cloud experts Server provisioning by Wolters Kluwer 3
Slide 26: 2020 progress on ESG
2020 progress on ESG We are launching a new Code of Business Ethics and laying the foundations for environmental targets New Code of Business Ethics Formalized Green is Green program The new Code of Business Ethics replaces Program launched in 2018 to encourage the Business Principles local offi
Slide 27: Agenda
Agenda Introduction Financial Review Operating and Strategic Review Outlook 2020 Appendices 2020 Half-Year Results 27
Slide 28: Outlook
Outlook In view of continued uncertainty due to COVID-19, our specific guidance for 2020 remains suspended Outlook Full-Year 2020 We expect recurring revenues for digital information, software and services subscriptions to show resilience, but note that new sales of subscription products have been
Slide 29: Appendix: 2020 Financial Supplement
Appendix: 2020 Financial Supplement 2020 Half-Year Results 29
Slide 30: Revenues by type
Revenues by type (€ million) HY 2020 HY 2019 ∆ ∆ CC ∆ OG Digital and services subscriptions 1,623 1,501 +8% +7% +6% Print subscriptions 90 102 -11% -12% -12% Other recurring 141 153 -8% -10% -7% Recurring revenues 1,854 1,756 +6% +4% +4% Print books 49 69 -28% -29% -27% LS transactional 117 122 -4%
Slide 31: Revenues by region
Revenues by region (€ million) HY 2020 HY 2019 ∆ ∆ CC ∆ OG North America 1,438 1,356 +6% +4% +4% Europe 686 679 +1% +1% +2% Asia Pacific & ROW 170 169 0% 0% 0% Total revenues 2,294 2,204 +4% +3% +3% ∆: % Change; ∆ CC: % Change in constant currencies (€/$ 1.12); ∆ OG: % Organic growth. HY 2020 Revenu
Slide 32: IFRS profit and diluted EPS
IFRS profit and diluted EPS (€ million, unless otherwise stated) HY 2020 HY 2019 ∆ Adjusted operating profit 577 497 +16% Amortization of acquired intangibles (75) (73) Results on divestments of operations 0 0 Acquisition-related costs and other non-benchmark items1) (2) (1) Operating profit 500 423
Slide 33: Reconciliation: adjusted net financing costs to financing results
Reconciliation: adjusted net financing costs to financing results (€ million) HY 2020 HY 2019 Adjusted net financing costs (25) (31) Employee benefits financing component (1) (2) Change in fair value of financial assets - - Result on divestment of financial assets - 2 Divestment related results on e
Slide 34: Balance sheet
Balance sheet (€ million, unless otherwise stated) June 30, 2020 Dec. 31, 2019 June 30, 2019 Goodwill and intangible assets 5,654 5,694 5,767 Property, plant and equipment 99 95 88 Right-of-use assets 341 341 311 Deferred tax and other non-current assets 160 169 166 Total non-current assets 6,254 6,
Slide 35: Debt maturity profile
Debt maturity profile Debt Maturity Profile – June 30, 2020 (€ million) Net debt breakdown: € million Gross financial debt 2,862 Lease liabilities 370 Total gross debt 3,232 Less: Cash & cash equivalents; derivatives 985 1,072 Net debt 2,247 985 Netting of cash and overdrafts in 463 759 463 pooling
Slide 36: Currency impact
Currency impact HY 2020 Revenues by Currency British pound 2% Other 7% Euro 24% U.S. dollar 67% Impact in € million on Adjusted Average rates Revenues operating profit 1 Euro HY 2020 HY 2019 HY 2020 HY 2020 U.S. dollar 1.10 1.13 38 12 British pound 0.87 0.87 0 0 Canadian dollar 1.50 1.51 0 0 Austral
Slide 37: Growth rates analysis
Growth rates analysis ∆ ∆ CC ∆ OG % % Change % Net Effect % % Currency in Constant Acquisitions Organic HY 2020 HY 2019 Change Impact Currencies & Disposals Growth Revenues Health 581 552 +5% +2% +3% 0% +3% Tax & Accounting 713 684 +4% +1% +3% 0% +3% Governance, Risk & Compliance 564 518 +9% +3% +6%
Slide 38: Appendix: ESG Metrics
Appendix: ESG Metrics 2020 Half-Year Results 38
Slide 39: Contents
Contents ESG Ratings Environmental: energy and water Social: employee culture Social: gender diversity Social: UN Sustainable Development Goals Governance: stewardship Governance: board skills Governance: pay peer groups Governance: management pay (STIP) Governance: management pa
Slide 40: ESG Ratings
ESG Ratings MSCI ESG Rating Sustainalytics ESG Risk Rating AAA 0 5 10 15 20 25 AA A Wolters Kluwer 9.4 BBB IHS Markit 24.1 BB Pearson 9.1 B RELX 7.7 CCC Sage Group 16.5 Thomson Reuters 9.3 2015 2016 2017 2018 2019 2020 MSCI: AAA is the highest quality score Sustainalytics: A score of 0 denotes the l
Slide 41: Environmental: energy & water
Environmental: energy & water Electricity from Renewable Sources CO2 Emissions Tons CO2 Emissions/FTE 20% 2.0 15% 16% 16% 16% 14% 15% 1.8 1.7 1.7 1.6 1.6 10% 1.0 5% 2015 2016 2017 2018 2019 0.0 2015 2016 2017 2018 2019 Water Consumption CO2 Emissions m3 Water Consumption/FTE Tons CO2 Emissions/Reven
Slide 42: Social: employee culture
Social: employee culture Employee Engagement Score Employees with Access to Learning Wolters Kluwer High Performing Norm Management Employees 100% 100% 100% 100% 73% 71% 70% 72% 72% 100% 83% 100% 100% 100% 52% 50% 50% 71% 75% 76% 76% 77% 52% 56% 0% 0% 2015 2016 2017 2018 2019 2015 2016 2017 2018 201
Slide 43: Social: gender diversity
Social: gender diversity Supervisory Board Members: % Female Executive Board Members: % Female 80% 80% 50% 50% 50% 50% 50% 43% 43% 43% 40% 29% 40% 17% 0% 0% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Operating Division CEOs: % Female Total Workforce: % Female 100% 80% 75% 75% 75% 75% 75% 50%
Slide 44: Social: UN SDGs
Social: UN SDGs United Nations Sustainable Development Goals Our products help Our solutions improve patient outcomes and reduce error rates protect and Our well-being programs encourage employees to make positive enhance people’s health choices health Our Health business ranks in the Healthca
Slide 45: Governance: stewardship
Governance: stewardship Innovation & Product Development Spend Employee Compliance Training (includes ethics, data privacy, IT and cybersecurity) % of Total Revenues % of Employees Completed 12% 100% 99% 97% 97% 99% 99% 10% 50% 8% 6% 0% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 % Independent
Slide 46: Governance: board skills
Governance: board skills Supervisory Board Skills Experience & Competencies Committees Outside Boards Independent Cybersecurity Technology & Development Organization, Management Social Policy, Marketing & Information Commercial Accounting, Gender General Finance Tenure AC= Audit Audit, Mgmt Legal Ag
Slide 47: Governance: pay peer groups
Governance: pay peer groups Category 2019 Pay Peer Benchmark Group 2020-2022 LTIP TSR Peer Group GICS Sub-Industry - John Wiley & Sons Publishing IHS Markit Ltd. IHS Markit Ltd. Research & Consulting Services Informa Plc Informa Plc Advertising Wolters Kluwer Intuit Inc. - Application Software Compe
Slide 48: Governance: management pay (STIP)
Governance: management pay AGM 2020: proposed policy received 52% of votes in favor, but not the three-quarters majority required to pass. Changes proposed in 2020 in green Short Term Incentive Plan (STIP) Parameter Existing Policy Proposed Policy & Application (AGM 2020) Participants: CEO, CFO CEO,
Slide 49: Governance: management pay (LTIP)
Governance: management pay AGM 2020: proposed policy received 52% of votes in favor, but not the three-quarters majority required to pass. Changes proposed in 2020 in green Long-Term Incentive Plan (LTIP) Parameter Existing Policy Proposed Policy & Application (AGM 2020) Participants: CEO, CFO CEO,
Slide 50: Notes
Notes 2020 Half-Year Results 50