Wolters Kluwer N.v. · EURONEXT:WKL
Wolters Kluwer — FY2020 Earnings Presentation
49 slides from Wolters Kluwer's earnings presentation, Feb 24, 2021
Slide 1: Wolters Kluwer 2020 Full-Year Results
Wolters Kluwer 2020 Full-Year Results Nancy McKinstry – CEO Kevin Entricken – CFO February 24, 2021 2020 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 2021 ◼ Appendices 2020 Full-Year Results 3
Slide 4: Introduction
Introduction Our global team’s agile response to COVID-19 delivered strategic, financial, and ESG progress in 2020 2020 Financial Results 2020 ESG Progress Grow Positive organic growth Expert Solutions up 6% Expert +2% organically Solutions Increased adjusted Employee engagement 84% operating margin
Slide 5: Strategic priorities
Strategic priorities While the pandemic diverted us from our original financial plan, it has reinforced and validated our strategy Strategic Priorities 2019-2021 Sustain organic product development at 8-10% of Grow ▪ Drive scale by extending the offerings and broadening revenues (CAPEX + OPEX) distr
Slide 6: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2021 ◼ Appendices 2020 Full-Year Results 6
Slide 7: Full-year 2020 results
Full-year 2020 results Despite the challenges of 2020, we delivered organic growth of +2% and improved margins, free cash flow, and return on invested capital (€ million, unless otherwise stated) FY 2020 FY 2019 ∆ ∆ CC ∆ OG Revenues 4,603 4,612 0% +1% +2% Adjusted operating profit 1,124 1,089 +3% +5
Slide 8: Revenues by division
Revenues by division All divisions experienced slower growth in 2020 (€ million) FY 2020 FY 2019 ∆ ∆ CC ∆ OG Health 1,193 1,186 +1% +3% +3% Tax & Accounting 1,431 1,413 +1% +3% +2% Governance, Risk & Compliance 1,074 1,068 +1% +2% +2% Legal & Regulatory 905 945 -4% -3% -2% Total revenues 4,603 4,612
Slide 9: Revenues by media format
Revenues by media format Digital revenues grew 5%, more than offsetting print and services declines (€ million) FY 2020 FY 2019 ∆ ∆ CC ∆ OG Digital 3,736 3,604 +4% +5% +5% Services 454 513 -11% -10% -7% Print 413 495 -17% -15% -16% Total revenues 4,603 4,612 0% +1% +2% ∆: % Change; ∆ CC: % Change in
Slide 10: Revenues by type
Revenues by type Digital & services subscriptions (70% of total revenues) held up well. Non-recurring revenue types were most impacted by the pandemic Organic Growth (%) Organic Growth (%) Recurring Revenue Types (80% of total) Non-recurring Revenue Types (20% of total) 15% 70% of total 15% revenue
Slide 11: Adjusted operating profit
Adjusted operating profit Temporary and structural cost savings and one-off benefits allowed us to sustain investments, accelerate restructuring and deliver margin improvement Margin Margin (€ million) FY 2020 FY 2019 ∆ ∆ CC ∆ OG FY 2020 FY 2019 Health 343 320 +7% +9% +11% 28.7% 27.0% Tax & Accounti
Slide 12: Adjusted net profit and EPS
Adjusted net profit and EPS Diluted adjusted EPS up +7% in constant currencies, reflecting margin increase, lower tax rate, and reduced share count (€ million, unless otherwise stated) FY 2020 FY 2019 ∆ ∆ CC Revenues 4,603 4,612 0% +1% Adjusted operating profit 1,124 1,089 +3% +5% Adjusted operating
Slide 13: IFRS profit and diluted EPS
IFRS profit and diluted EPS Reported net profit up 8% supported by a higher operating profit (€ million, unless otherwise stated) FY 2020 FY 2019 ∆ Adjusted operating profit 1,124 1,089 +3% Amortization of acquired intangibles (144) (144) Impairment of acquired intangibles 0 (38) Results on divestme
Slide 14: Adjusted free cash flow
Adjusted free cash flow Favorable working capital movements drove higher cash conversion (€ million, unless otherwise stated) FY 2020 FY 2019 ∆ ∆ CC Adjusted operating profit 1,124 1,089 +3% +5% Depreciation and amortization of other intangibles 223 220 Depreciation of right-of-use assets 75 73 Adju
Slide 15: Movement in net debt
Movement in net debt Higher spend on acquisitions alongside increased cash returns to shareholders (€ million, unless otherwise stated) FY 2020 FY 2019 Net debt at start of period (2,199) (2,249) Adjusted free cash flow 907 807 Dividends paid (334) (280) Acquisition spending, net of cash acquired, i
Slide 16: Dividends and share buybacks
Dividends and share buybacks Proposing total dividend €1.36 (+15%), planning up to €350 million buyback in 2021 Dividend per Share (€) Share Buybacks (€ million) 550 Completed Total 1.36 dividend Intended 1.18 0.98 350 350 350 0.85 0.75 0.79 300 200 140 Interim 200 0.47 200 0.34 0.39 dividend 0.18 0
Slide 17: Results summary
Results summary Strong performance in challenging times Positive organic Increased adjusted Increased diluted growth, despite operating margin adjusted EPS COVID-19 24.4% +7% +2% in constant currencies Adjusted FCF Strong balance sheet Substantial returns €907 million, +16% Net-debt-to-EBITDA 1.7x t
Slide 18: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2021 ◼ Appendices 2020 Full-Year Results 18
Slide 19: Health
Health Organic growth +3%; margin increase reflects cost savings, lower restructuring, and the ongoing mix shift towards Clinical Solutions Clinical Solutions € million 2020 2019 Δ Δ CC Δ OG ▪ Revenues up +6% organically, led by UpToDate Revenues 1,193 1,186 +1% +3% +3% ▪ UpToDate Advanced now over
Slide 20: Tax & Accounting
Tax & Accounting Organic growth +2% driven by cloud software; margin reflects cost savings, operational gearing and one-offs Corporate Performance Solutions € million 2020 2019 Δ Δ CC Δ OG ▪ Revenues up +8% organically (2019: +17%) Revenues 1,431 1,413 +1% +3% +2% ▪ CCH Tagetik and TeamMate cloud so
Slide 21: Governance, Risk & Compliance
Governance, Risk & Compliance Organic growth +2% including PPP; margin decline mainly reflects increased restructuring and investment Legal Services € million 2020 2019 Δ Δ CC Δ OG ▪ Revenues down -2% organically, reflecting a 10% Revenues 1,074 1,068 +1% +2% +2% decline in CT transactional volumes
Slide 22: Legal & Regulatory
Legal & Regulatory Organic revenue decline; margin decline as increased investment and restructuring more than offset effect of cost savings EHS/ORM1 & Legal Software € million 2020 2019 Δ Δ CC Δ OG ▪ Organic growth +5%, driven by double-digit growth in Revenues 905 945 -4% -3% -2% cloud-based softw
Slide 23: Strategic progress
Strategic progress In 2020, we made progress on growing expert solutions and driving agility Grow ▪ Expert solutions reached 54% of total revenues and delivered +6% organic growth, including PPP Expert ▪ Acquired three software partners: CGE, XCM Solutions, and eOriginal Solutions ▪ Divested eight n
Slide 24: Cloud-based expert solutions
Cloud-based expert solutions Cloud software solutions drove double-digit organic growth FY 2020 Revenues by FY 2020 Software Top Software Suites Media Format Revenues €1.9 billion Organic growth Cloud software FY 2020: ▪ CCH Axcess Cloud software 28% Software: +6% ▪ CCH Tagetik (SaaS) revenues Cloud
Slide 25: CCH Tagetik
CCH Tagetik Corporate performance management platform to streamline finance workflows from consolidation and close to budgeting, planning, reporting and analytics Tax & Accounting CCH Tagetik for The Office of the CFO CCH Tagetik 2020 Performance ▪ Strong organic growth driven by double-digit growth
Slide 26: 2020 acquisitions
2020 acquisitions Acquisitions of two cloud software partners extend our leading positions into adjacent market segments Tax & Accounting Governance, Risk & Compliance XCM Solutions eOriginal ▪ Resource scheduling and planning software for ▪ Digital lending software enabling banks to perform profess
Slide 27: Employee engagement
Employee engagement Leadership focus on health, safety and connectivity drove record employee engagement in times of COVID-19 Employee Engagement ▪ In 2020, employee engagement score Wolters Kluwer High Performing Norm increased to 84% 100% ▪ Score was more than 10%-points above the 84% benchmark fo
Slide 28: Reducing carbon emissions
Reducing carbon emissions Migration to cloud platforms and increased virtual collaboration are helping to reduce our carbon emissions Migration to Cloud ▪ Data center consolidation program ̶ Migrating applications to energy-efficient cloud platforms ̶ In 2020, 11 data centers were consolidated ▪ Vir
Slide 29: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2021 ◼ Appendices 2020 Full-Year Results 29
Slide 30: Guidance 2021
Guidance 2021 Performance indicators 2021 Guidance 2020 Adjusted operating profit margin 24.5%-25.0% 24.4% Adjusted free cash flow €875-€925 million €907 million Return on invested capital Around 12% 12.3% Diluted adjusted EPS Mid-single-digit growth €3.13 Note: Guidance for adjusted operating profi
Slide 31: Divisional outlook 2021
Divisional outlook 2021 Health ▪ Organic growth to improve over 2020 levels ▪ Adjusted operating profit margin margin to be stable year-on-year as temporary cost savings fade ▪ Organic growth to improve moderately from 2020 levels Tax & Accounting ▪ Adjusted operating profit margin expected to decli
Slide 32: Appendix: 2020 Supplement
Appendix: 2020 Supplement 2020 Full-Year Results 32
Slide 33: Revenues by region
Revenues by region (€ million) FY 2020 FY 2019 ∆ ∆ CC ∆ OG North America 2,818 2,814 0% +2% +2% Europe 1,431 1,420 +1% +1% +2% Asia Pacific & ROW 354 378 -7% -4% -4% Total revenues 4,603 4,612 0% +1% +2% ∆: % Change; ∆ CC: % Change in constant currencies (€/$ 1.12); ∆ OG: % Organic growth. FY 2020 R
Slide 34: Revenues by type
Revenues by type (€ million) FY 2020 FY 2019 ∆ ∆ CC ∆ OG Digital and services subscriptions 3,218 3,087 +4% +6% +6% Print subscriptions 182 202 -10% -10% -9% Other recurring 280 292 -4% -2% -1% Recurring revenues 3,680 3,581 +3% +4% +4% Print books 150 212 -29% -27% -26% LS transactional 228 246 -7%
Slide 35: Reconciliation: adjusted net financing costs to financing results
Reconciliation: adjusted net financing costs to financing results (€ million) FY 2020 FY 2019 Adjusted net financing costs (46) (58) Employee benefits financing component (2) (4) Change in fair value of financial assets - - Result on divestment of financial assets - 2 Divestment related results on e
Slide 36: Balance sheet
Balance sheet (€ million) Dec. 31, 2020 Dec. 31, 2019 Goodwill and intangible assets 5,638 5,694 Property, plant and equipment 84 95 Right-of-use assets 319 341 Deferred tax and other non-current assets 159 169 Total non-current assets 6,200 6,299 Cash and cash equivalents 723 899 Trade and other re
Slide 37: Debt maturity profile
Debt maturity profile Debt Maturity Profile – December 31, 2020 (€ million) Net debt breakdown: € million Gross financial debt 2,759 Lease liabilities 348 Total gross debt 3,107 724 749 Less: Cash & cash equivalents; deferred receivable1 724 1 Net debt 2,383 Netting of cash and overdrafts in 531 520
Slide 38: Currency impact
Currency impact FY 2020 Revenues by Currency British pound Other 2% 8% Euro 25% U.S. dollar 65% Impact in € million on Adjusted Average rates Revenues operating profit 1 Euro FY 2020 FY 2019 FY 2020 FY 2020 U.S. dollar 1.14 1.12 (54) (16) British pound 0.89 0.88 (2) 0 Canadian dollar 1.53 1.49 (2) (
Slide 39: Growth rates
Growth rates ∆ ∆ CC ∆ OG % % Change % Net Effect % % Currency in Constant Acquisitions Organic 2020 2019 Change Impact Currencies & Disposals Growth Revenues Health 1,193 1,186 +1% -2% +3% 0% +3% Tax & Accounting 1,431 1,413 +1% -2% +3% +1% +2% Governance, Risk & Compliance 1,074 1,068 +1% -1% +2% 0
Slide 40: Financial KPIs
Financial KPIs Adjusted Operating Revenue (€billion) Organic Growth (%) 5.0 5% Profit Margin (%) 4.0 4% 25% 3.0 3% 20% 2.0 2% 15% 1.0 1% 0.0 0% 10% 2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020 Adjusted Earnings per Adjusted Free Cash ROIC (
Slide 41: Appendix: ESG Metrics
Appendix: ESG Metrics 2020 Full-Year Results 41
Slide 42: ESG Metrics
ESG Metrics ◼ ESG Ratings ◼ Social: employee culture ◼ Social: gender diversity ◼ Governance: stewardship ◼ Governance: board skills ◼ Governance: management remuneration ◼ Governance: remuneration peers 2020 Full-Year Results 42
Slide 43: ESG Ratings
ESG Ratings MSCI ESG Rating Sustainalytics ESG Risk Rating AAA 0 5 10 15 20 25 AA A Wolters Kluwer 9.6 BBB IHS Markit 23.6 BB S&P Global 12.7 B RELX 7.7 CCC Sage Group 16.3 Thomson Reuters 10.0 2016 2017 2018 2019 2020 MSCI: AAA is the highest quality score Sustainalytics: A score of 0 denotes the l
Slide 44: Social: employee culture
Social: employee culture Employee Engagement Score Access to Learning Wolters Kluwer High Performing Norm Management Employees 100% 100% 100% 100% 100% 75% 76% 76% 77% 84% 100% 83% 100% 100% 100% 100% 50% 50% 56% 0% 0% 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Employee Turnover Female Inclus
Slide 45: Social: gender diversity
Social: gender diversity Supervisory Board Members: % Female Executive Board Members: % Female 80% 80% 50% 50% 50% 50% 50% 43% 43% 43% 43% 40% 29% 40% 0% 0% 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Operating Division CEOs/MDs: % Female Total Workforce: % Female 100% 80% 75% 75% 75% 75% 49%
Slide 46: 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% 97% 99% 99% 99% 10% 50% 8% 6% 0% 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 % Independent B
Slide 47: Governance: board skills
Governance: board skills Supervisory Board Skills Experience & Competencies Outside Boards Committees Independent Cybersecurity Technology & Development Organization, Management Social Policy, Marketing & Information Commercial Accounting, Gender General Finance Tenure Audit, Mgmt Legal AC= Audit Ag
Slide 48: Governance: management remuneration
Governance: management remuneration We are proposing an updated remuneration policy to our 2021 AGM. After adoption, the following changes will be made to management remuneration Remuneration Peer Group ▪ Weighting of European companies in the remuneration peer group to increase from 50% to and Quan
Slide 49: Governance: remuneration peers
Governance: remuneration peers In 2021, five industry peers will be added to the pay peer group, shifting the weight of European companies to 60% European peers added in 2021 Category 2021 Pay Peer Group 2021-2023 LTIP TSR Peer Group GICS Sub-Industry - John Wiley & Sons Publishing IHS Markit Ltd. I