Wolters Kluwer N.V. · EURONEXT:WKL
Wolters Kluwer — H1 2019 Earnings Presentation
44 slides from Wolters Kluwer's earnings presentation, Jul 31, 2019
Slide 1: Wolters Kluwer 2019 Half-Year Results
Wolters Kluwer 2019 Half-Year Results Nancy McKinstry – CEO Kevin Entricken – CFO July 31, 2019 2019 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 2019 ◼ Appendices 2019 Half-Year Results 3
Slide 4: Introduction
Introduction On track to meet full-year guidance ● Focused on 2019-2021 strategic plan Grow Good organic Increased Expert growth +4% adjusted Solutions free cash flow Advance Stable adjusted Strong balance Domain operating margin sheet Expertise Drive Diluted adjusted Returns to Operational EPS +9%
Slide 5: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2019 ◼ Appendices 2019 Half-Year Results 5
Slide 6: Half-year 2019 results
Half-year 2019 results 4% organic growth; stable margin; strong adjusted free cash flow (€ million, unless otherwise stated) HY 2019 HY 2018* ∆ ∆ CC ∆ OG Revenues 2,204 2,020 +9% +4% +4% Adjusted operating profit 497 454 +9% +3% +4% Adjusted operating profit margin 22.5% 22.5% Diluted adjusted EPS €
Slide 7: Revenues by division
Revenues by division All four divisions posted positive good organic growth (€ million) HY 2019 HY 2018* ∆ ∆ CC ∆ OG Health 552 512 +8% +1% +4% Tax & Accounting 684 623 +10% +6% +6% Governance, Risk & Compliance 518 470 +10% +4% +4% Legal & Regulatory 450 415 +8% +7% +2% Total revenues 2,204 2,020 +
Slide 8: Revenues by type
Revenues by type Recurring revenues up +5% organically; non-recurring trends mixed (€ million) HY 2019 HY 2018* ∆ ∆ CC ∆ OG Digital and services subscriptions 1,501 1,352 +11% +6% +6% Print subscriptions 102 102 -1% -3% -4% Other recurring 153 145 +6% 0% 0% Recurring revenues 1,756 1,599 +10% +5% +5
Slide 9: Adjusted operating profit
Adjusted operating profit Strong increase in Tax & Accounting margin offsets one-time items in prior period Margin Margin (€ million) HY 2019 HY 2018* ∆ ∆ CC ∆ OG HY 2019 HY 2018* Health 139 131 +6% -1% +3% 25.2% 25.6% Tax & Accounting 193 157 +23% +17% +17% 28.2% 25.1% Governance, Risk & Compliance
Slide 10: Adjusted net profit and EPS
Adjusted net profit and EPS Lower financing costs, tax rate, and share count help drive +9% constant currency increase in diluted adjusted EPS (€ million, unless otherwise stated) HY 2019 HY 2018* ∆ ∆ CC Revenues 2,204 2,020 +9% +4% Adjusted operating profit 497 454 +9% +3% Adjusted operating profit
Slide 11: Adjusted free cash flow
Adjusted free cash flow Lower cash interest drove an increase in adjusted FCF (€ million, unless otherwise stated) HY 2019 HY 2018* ∆ ∆ CC Adjusted operating profit 497 454 +9% +3% Depreciation and amortization of other intangibles 100 95 Depreciation of right-of-use assets 35 34 Adjusted EBITDA 632
Slide 12: Movement in net debt
Movement in net debt Net debt increased as a result of additional lease liabilities (€ million, unless otherwise stated) HY 2019 FY 2018* HY 2018* Net debt at January 1, as reported (1,994) (2,069) (2,069) IFRS 16 Restatement (255) (242) (242) Net debt at Jan 1, restated for IFRS 16 (2,249) (2,311)
Slide 13: Dividends and share buybacks
Dividends and share buybacks Interim dividend was set at 40% of prior year total; progress on share buyback Dividend per Share (€) Share Buybacks (€ million) 3-Yr Program Intended 550 Completed 0.98 0.85 0.79 0.75 0.71 0.64 300 250 200 0.39 Interim 140 200 200 0.34 dividend 0.19 0.20 25 115 0.18 25%
Slide 14: Results summary
Results summary On track to meet our full year guidance Good organic growth Stable adjusted Diluted adjusted +4% operating margin EPS Positive organic growth in 22.5% +9% all four divisions in constant currencies Adjusted FCF Strong balance Interim dividend +7% sheet €0.39 in constant currencies Net
Slide 15: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2019 ◼ Appendices 2019 Half-Year Results 15
Slide 16: Health
Health Organic growth +4%; margin reflects increased restructuring and investment € million HY 2019 HY 2018* Δ Δ CC Δ OG Clinical Solutions Revenues 552 512 +8% +1% +4% ▪ Organic growth +7%, led by UpToDate Adjusted ▪ Focused on cross-selling our range of clinical 139 131 +6% -1% +3% effectiveness t
Slide 17: Tax & Accounting
Tax & Accounting Organic growth +6%; margin increase of 310 bps reflects efficiencies and operational gearing € million HY 2019 HY 2018* Δ Δ CC Δ OG Corporate Performance Solutions ▪ Organic growth +20% Revenues 684 623 +10% +6% +6% ▪ Both CCH Tagetik and TeamMate drove strong cloud Adjusted solutio
Slide 18: Governance, Risk & Compliance
Governance, Risk & Compliance Organic growth +4%; margin reflects increased investment € million HY 2019 HY 2018* Δ Δ CC Δ OG Legal Services Revenues 518 470 +10% +4% +4% ▪ Organic growth +4% Adjusted ▪ CT recurring revenues accelerate; transactions 152 138 +10% +3% +3% remain buoyant operating prof
Slide 19: Legal & Regulatory
Legal & Regulatory Organic growth +2%; margin reflects prior period one-time benefits, acquisitions, and increased investment € million HY 2019 HY 2018* Δ Δ CC Δ OG Legal & Regulatory Information Solutions ▪ Organic growth +1% Revenues 450 415 +8% +7% +2% ▪ Digital revenues up 5% organically more th
Slide 20: Strategic priorities 2019-2021
Strategic priorities 2019-2021 Our plan aims to deliver good organic growth and further incremental improvement in adjusted operating profit margin and ROIC Sustain organic product development at 8-10% of Grow ▪ Drive scale by extending the offerings and broadening revenues (CAPEX + OPEX) distributi
Slide 21: Grow expert solutions
Grow expert solutions Driving scale in Clinical Solutions through product innovation and cross-selling Wolters Kluwer Health: Clinical Solutions Opioid Toolkit Decision Support Drug Information Patient Engagement UpToDate® Lexicomp® Emmi® Opioid Appropriate Use UpToDate Advanced® Medi-Span® ▪ UpToDa
Slide 22: Drive operational agility
Drive operational agility In June, we rolled out a major HR systems upgrade globally Global Integrated HR Technology Suite ✓ Implemented June 2019 ✓ Implemented June 2019 MyHR: PeopleDoc Workday ADP Global SaaS HR service & Global SaaS system of Global payroll document management record enabling sim
Slide 23: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2019 ◼ Appendices 2019 Half-Year Results 23
Slide 24: Divisional outlook 2019
Divisional outlook 2019 ▪ Organic growth to be in line with 2018 or slightly lower Health ▪ Adjusted operating profit margin to decline, due to the absence of prior year one-time benefits and increased investment in sales and marketing and product development ▪ Organic growth to moderate from 2018 l
Slide 25: Guidance 2019
Guidance 2019 Performance indicators 2019 Guidance 2018 (IFRS 16) Adjusted operating profit margin 23.0%-23.5% 23.1% Adjusted free cash flow €750-775 million €762 million Return on invested capital 10.5%-11.5% 10.6% Diluted adjusted EPS Around 10% growth €2.45 Note: Guidance for adjusted operating p
Slide 26: Appendix: 2019 Supplement
Appendix: 2019 Supplement 2019 Half-Year Results 26
Slide 27: Revenues by region
Revenues by region (€ million) HY 2019 HY 2018* ∆ ∆ CC ∆ OG North America 1,356 1,232 +10% +3% +3% Europe 679 635 +7% +7% +6% Asia Pacific & ROW 169 153 +10% +7% +3% Total revenues 2,204 2,020 +9% +4% +4% ∆: % Change; ∆ CC: % Change in constant currencies (€/$ 1.18); ∆ OG: % Organic growth. *2018 re
Slide 28: Revenues by media format
Revenues by media format (€ million) HY 2019 HY 2018* ∆ ∆ CC ∆ OG Digital 1,736 1,560 +11% +6% +6% Services 259 241 +8% +1% +2% Print 209 219 -5% -8% -8% Total revenues 2,204 2,020 +9% +4% +4% ∆: % Change; ∆ CC: % Change in constant currencies (€/$ 1.18); ∆ OG: % Organic growth. Service includes leg
Slide 29: IFRS profit and diluted EPS
IFRS profit and diluted EPS (€ million, unless otherwise stated) HY 2019 HY 2018* ∆ Adjusted operating profit 497 454 +9% Amortization of acquired intangibles (73) (84) Results on divestments of operations 0 159 Acquisition-related costs and other non-benchmark items1) (1) (2) Operating profit 423 5
Slide 30: Reconciliation: adjusted net financing costs to financing results
Reconciliation: adjusted net financing costs to financing results (€ million) HY 2019 HY 2018* Adjusted net financing costs (31) (52) Employee benefits financing component (2) (2) Change in fair value of financial assets 0 (1) Result on divestment of financial assets 2 3 Divestment related results o
Slide 31: Balance sheet
Balance sheet (€ million, unless otherwise stated) June 30, 2019 Dec. 31, 2018* June 30, 2018* Goodwill and intangible assets 5,767 5,785 5,639 Property, plant and equipment 88 89 83 Right-of-use assets 312 232 220 Deferred tax assets 106 107 96 Other non-current assets 60 72 64 Total non-current as
Slide 32: Debt maturity profile
Debt maturity profile Debt Maturity Profile – June 30, 2019 1) (€ million) Net debt breakdown: € million 844 2) Gross financial debt 2,826 3) Lease liabilities 336 760 Gross debt 3,162 698 Cash & cash equivalents and derivatives 844 Net debt 2,318 497 398 258 162 9 8 36 2019 2019 2020 2021 2022 2023
Slide 33: Currency impact
Currency impact HY 2019 Revenues by Currency British pound 2% Other 7% Euro 25% U.S. dollar 66% Impact in € million on Adjusted Average rates Revenues operating profit 1 Euro HY 2019 HY 2018 HY 2019 HY 2019 U.S. dollar 1.13 1.21 96 28 British pound 0.87 0.88 0 0 Canadian dollar 1.51 1.55 1 1 Austral
Slide 34: Growth rates analysis
Growth rates analysis ∆ ∆ CC ∆ OG % % Change % Net Effect % % Currency in Constant Acquisitions Organic HY 2019 HY 2018* Change Impact Currencies & Disposals Growth Revenues Health 552 512 +8% +7% +1% -3% +4% Tax & Accounting 684 623 +10% +4% +6% - +6% Governance, Risk & Compliance 518 470 +10% +6%
Slide 35: Appendix: ESG Metrics
Appendix: ESG Metrics 2019 Half-Year Results 35
Slide 36: Environmental
Environmental Electricity from Renewable Sources (%) Energy Consumption Tons CO2 Emissions/FTE 20% 15% 16% 16% 14% 15% 1.8 1.5 1.7 1.6 1.6 10% 5% 2015 2016 2017 2018 0.5 2015 2016 2017 2018 Suppliers Signed to Supplier Code Water Consumption of Conduct No. of Suppliers Target 2019 m3 Water Consumpti
Slide 37: Social
Social Employee Engagement Score % of Employees with Access to Learning High Performing Norm Wolters Kluwer Management Employees 100% 100% 100% 71% 75% 76% 76% 100% 83% 100% 100% 52% 50% 50% 52% 56% 0% 0% 2015 2016 2017 2018 2015 2016 2017 2018 % Employee Turnover % Female Division CEOs 20% 80% 67%
Slide 38: Governance
Governance Innovation & Product Development Spend General Compliance Training % of Revenues % of Employees Completed 12% 100% 99% 97% 97% 99% 10% 50% 8% 6% 0% 2015 2016 2017 2018 2015 2016 2017 2018 % Independent Board Members % Female Board Members 100% 80% 100% 100% 100% 100% 43% 43% 50% 40% 29% 1
Slide 39: Appendix: IFRS 16 Restatements
Appendix: IFRS 16 Restatements 2019 Half-Year Results 39
Slide 40: Balance sheet
Balance sheet (€ million, unless otherwise stated) HY 2018 - Reported IFRS 16 Restatement HY 2018 - Restated Goodwill and intangible assets 5,639 - 5,639 Property, plant & equipment 88 (5) 83 Right-of-use assets - 220 220 Deferred tax assets 95 1 96 Other non-current assets 62 2 64 Total non-current
Slide 41: Adjusted income statement
Adjusted income statement HY 2018 IFRS 16 HY 2018 (€ million, unless otherwise stated) Reported Restatement Restated Revenues 2,020 0 2,020 Adjusted operating expenses (1,569) 3 (1,566) Adjusted operating profit 451 3 454 Adjusted operating profit margin 22.3% 22.5% Adjusted net financing costs (49)
Slide 42: Adjusted free cash flow
Adjusted free cash flow HY 2018 IFRS 16 HY 2018 (€ million, unless otherwise stated) Reported Restatement Restated Adjusted operating profit 451 3 454 Depreciation, amortization and impairment of intangibles 95 - 95 Depreciation of right-of-use assets - 34 34 Adjusted EBITDA 546 37 583 Capital expen
Slide 43: Notes
Notes 2019 Half-Year Results 43
Slide 44: 2019 Half-Year Results
2019 Half-Year Results 44