Wolters Kluwer N.V. · EURONEXT:WKL
Wolters Kluwer — FY2007 Earnings Presentation
49 slides from Wolters Kluwer's earnings presentation, Feb 27, 2008
Slide 1: 2007 Full-Year Results
2007 Full-Year Results February 27, 2008 - Amsterdam Nancy McKinstry CEO and Chairman of the Executive Board Boudewijn Beerkens CFO and Member of the Executive Board Jack Lynch Member of the Executive Board
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 Accomplishments & Highlights Key Performance Indicators Divisional Operating Performance Financial Performance Springboard: Operational Excellence Update Outlook & Summary Q&A February 27, 2008 - Amsterdam 3
Slide 4: Our Strategy for Accelerating Profitable Growth
Our Strategy for Accelerating Profitable Growth 1 2 Grow Our Capture Leading Key Adjacent Positions Markets 4 3 Institutionalize Exploit Operational Global Excellence Scale and Scope February 27, 2008 - Amsterdam 4
Slide 5: Accomplishments 2007
Accomplishments 2007 Delivered on 2007 Key Performance Indicators Organic Revenue Growth Accelerated Ordinary EBITA Margin Accelerated Expanded Electronic Product Offerings Strengthened Leading Positions/ Expanded High-Growth Adjacent Markets Strong Shareholder Returns February 27, 2008 - Amsterdam
Slide 6: Highlights FY 2007
Highlights FY 2007 Organic Growth Ordinary EBITA Margin 20% 4% +1% +300 bps 3% 17% 2006 2007 2006 2007 Free Cash Flow Ordinary Diluted EPS €423 €1,48 +6% +35% €399 €1,09 2006 Millions 2007 2006 2007 At c onstant c urrenc ies EUR/ USD 1.26 At c onstant c urrenc ies EUR/ USD 1.26 February 27, 2008 - A
Slide 7: Strong Growth: 6% Growth in Constant Currencies and 4% Organic Growth
Strong Growth: 6% Growth in Constant Currencies and 4% Organic Growth 2007 Revenue: €3,413 million ∆% Legal, Tax Health Full year 2007 ∆% Constant Organic Currencies1 & €761 Growth Regulatory Health 1% 1% Europe €1,249 CFS 6% 5% TAL 14% 6% Corporate LTRE 4% 4% & Financial Services Wolters Kluwer2 6%
Slide 8: Double-digit Growth: 27% Growth in Constant Currencies with 20% Ordinary EBITA Margin
Double-digit Growth: 27% Growth in Constant Currencies with 20% Ordinary EBITA Margin 2007 Ordinary EBITA: €667 Million Legal, Tax Health Ordinary ∆% Constant €112 Full year 2007 EBITA & Currencies1 Margin Regulatory Europe Health 2% 15% €253 CFS 35% 28% Corporate & Financial TAL 47% 22% Services LT
Slide 9: Execution of Strategy has Yielded Clear Results in Performance
Execution of Strategy has Yielded Clear Results in Performance Organic Revenue Growth Ordinary EBITA Margin 4% 20% 3% 2% 17% 16% 16% 1% 2004 2005 2006 2007 2004 2005 2006 2007 February 27, 2008 - Amsterdam 9
Slide 10: Portfolio of Wolters Kluwer is Significantly Transformed
Portfolio of Wolters Kluwer is Significantly Transformed 2003 Revenue 2007 Revenue Print Online/ Online/ Workflow Tools Print Workflow Tools 31% 38% 55% 47% 14% 15% Services Services February 27, 2008 - Amsterdam 10
Slide 11: Driven by Double-digit Revenue Growth from Online and Workflow Tools
Driven by Double-digit Revenue Growth from Online and Workflow Tools Percent of Wolters Kluwer Revenue from Online/ Work Flow Tools 4-year CAGR 12% 47% Other 31% Electronic 4-year Online CAGR 17% Online 2003 2007 February 27, 2008 - Amsterdam 11
Slide 12: Limited Cyclical Exposure – Growing Subscription Base with Improving Retention Rates
Limited Cyclical Exposure – Growing Subscription Base with Improving Retention Rates Subscription Revenue as a Revenue Components % of Total Revenue 66% Non- Cyclical 80% 60% Other Training Advertising Cyclical 4% 2% 14% 2003 2007 February 27, 2008 - Amsterdam 12
Slide 13: Continuing Delivery on Commitments to Enhance Shareholder Value
Continuing Delivery on Commitments to Enhance Shareholder Value Actual Actual Actual Actual Target Actual Key Performance Indicators 2003 2004 2005 2006 2007 2007 Organic Revenue Growth -2% 1% 2% 3% 4% 4% Ordinary EBITA Margin 18% 16% 16% 17% 19-20% 20% Cash Conversion 109% 126% 106% 99% 95-105% 91%
Slide 14: Health Highlights
Health Highlights Clinical Solutions Pharma Clinical Solutions – Double-digit growth 8% Solutions 29% Medical Research – Good growth driven by launch Professional & of OvidSP and strong subscription sales Education Medical Pharma Solutions – Double-digit growth in brand 45% Research analytics
Slide 15: CFS Highlights
CFS Highlights Corporate Legal Services - Strong renewals and Financial new sales in Compliance & Governance. Services 34% Corporate Double-digit growth in UCC, litigation support and Legal Services e-billing solutions 66% Deceleration in M&A and IPO transaction volumes in second half tempered
Slide 16: TAL Highlights
TAL Highlights Strong new sales and retention rates of tax and Law & accounting software and workflow tools and new Business Tax and software releases Accounting 41% Small Firm Services group contributed to overall 59% growth Good growth in publishing businesses, particularly legal education a
Slide 17: LTRE Highlights
LTRE Highlights SC BEL 3% FR Growth was driven by online offerings gaining 9% 19% momentum, new workflow solutions and software NL products as well as expansion of training and other 18% IT/SP services TLR 27% 6% Italy, Spain, and Central and Eastern Europe GER/CEE delivered very strong growth t
Slide 18: Financial Performance
Financial Performance February 27, 2008 - Amsterdam Boudewijn Beerkens CFO and Member of the Executive Board
Slide 19: Financial Highlights FY 2007
Financial Highlights FY 2007 Organic Growth Ordinary EBITA Margin 20% 4% +1% +300 bps 3% 17% 2006 2007 2006 2007 February 27, 2008 - Amsterdam 19
Slide 20: Financial Highlights FY 2007
Financial Highlights FY 2007 Net Income (Continuing Operations) Net Debt/ EBITDA Ratio €330 3.2 1 +18% 25% €279 2.4 Millions 2006 2007 2006 2007 1 2.9 before reclassification of Education to discontinued operations Ordinary Diluted EPS Dividend Recommendation €1,38 +10% €0,64 +25% €0,58 €1,10 2006 2
Slide 21: Statement of Profit & Loss
Statement of Profit & Loss Full Year (€ millions) 2007 2006 ∆% ∆% CC1 Revenue 3,413 3,377 1% 6% Ordinary EBITA 667 556 20% 27% Ordinary EBITA Margin (%) 20% 17% Amortization (121) (121) - 7% Financing Results (102) (104) (1%) (2%) Taxation on income (100) (68) 46% 49% Other (14) 16 Net income (Conti
Slide 22: Growth Rates Impacted by Movement of EUR/USD Exchange Rate
Growth Rates Impacted by Movement of EUR/USD Exchange Rate Components of Growth Revenue by Region 3% 1% North 6% Europe America 45% 52% 4% 5% Asia Pacific 3% 1% Currencies Currency Rates Divestments Organic Growth Total Growth Acquisitions Constant February 27, 2008 - Amsterdam 22
Slide 23: Reconciliation Ordinary Net Income/EPS
Reconciliation Ordinary Net Income/EPS Full Year (€ millions) 2007 2006 Net Income to Shareholders 329 278 Amortization of Intangibles 121 121 Taxation on Amortization (46) (47) Results on Disposals 17 (8) Ordinary Net Income 421 344 Ordinary Diluted EPS 1.38 1.10 Weighted Average # Diluted Shares 3
Slide 24: Consolidated Balance Sheet
Consolidated Balance Sheet December 31st (€ millions) 2007 2006 Non-Current Assets 3,995 4,388 Operating Working Capital (644) (663) Non-Operating Working Capital (877) (906) Working Capital (1,521) (1,569) Capital Employed 2,474 2,819 Equity 1,214 1,196 Long Term Debt 986 1,232 Non-Current Liabilit
Slide 25: Free Cash Flow
Free Cash Flow December 31st (€ millions) 2007 2006 ∆% ∆% CC1 EBITDA 747 635 18% 24% Autonomous Movements in Working Capital (18) 9 Financing Charges (108) (126) Paid Corporate Income Tax (106) (17) Other (3) (16) Cash Flow from Operating Activities 512 485 6% 11% Capital Expenditures (125) (93) 34%
Slide 26: 2007 Cash Flow Sources and Uses
2007 Cash Flow Sources and Uses Cash Sources: €1,165 million Cash Uses: €1,147 million € 95 € 198 € 193 € 665 € 111 € 645 € 405 Free Cash Flow Education Divestments/ Acquisitions Debt Reduction Dividend Share Buy-back Other February 27, 2008 - Amsterdam 26
Slide 27: Share Buy-back Concluded in December 2007 Returning €645 Million
Share Buy-back Concluded in December 2007 Returning €645 Million in Value to Shareholders 1st Program 2nd Program 2007 Total Total Number of Shares Purchased 21.9 million 7.9 million 29.8 million Total Consideration Paid €475 million €170 million €645 million Average Gross Purchase Price €21.71/ Sha
Slide 28: All Acquisitions are Accretive to Ordinary EPS in Year 1
All Acquisitions are Accretive to Ordinary EPS in Year 1 and are Expected to Cover their Cost of Capital within 3-5 Years 2007 Acquisitions Health ProVation Medical ¨ Earn-out payments Desert Documents ¨ Mortgage Wholesale Segment CFS Banconsumer Services ¨ Indirect Lending AppOne ¨ Solutions for in
Slide 29: Solid Financial Position
Solid Financial Position Working Capital (EUR million) Free Cash Flow (EUR million) 456 393 399 405 351 149 34 30 9 (18) 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 Figures prior to 2006 include Education Net Debt (EUR million) Debt Maturity Profile (EUR million) 983 918 2,050 1,900 1,793 1,63
Slide 30: Looking Forward: Strengthening Financial Position and Improving Financial Flexibility
Looking Forward: Strengthening Financial Position and Improving Financial Flexibility Bilateral private loan agreement Amount: ¥20 billion (approximately €126 million) Term: 30 years Signed: February 26, 2008 Cost of Funds: Attractive rate (6%) Denominated in ¥ (Japanese Yen) - swapped t
Slide 31: Springboard: Operational Excellence Update
Springboard: Operational Excellence Update February 27, 2008 - Amsterdam Jack Lynch Member of the Executive Board
Slide 32: Overview
Overview What is Springboard? Why now? What are the benefits? February 27, 2008 - Amsterdam 32
Slide 33: The Transformation of Wolters Kluwer has Produced Four Consecutive Years of Improved Top-line Performance
The Transformation of Wolters Kluwer has Produced Four Consecutive Years of Improved Top-line Performance Results of Transformation Organic Growth Improvement Plan 4% 9 Profitable top-line growth 3% 9 Four customer facing divisions 9 ROI-based capital allocation 2% 9 Sustained investment in products
Slide 34: Wolters Kluwer Improved its Operating Performance Through Scale Leveraging Initiatives
Wolters Kluwer Improved its Operating Performance Through a Number of Scale Leveraging Initiatives Reduced our spend on outside suppliers greater than €30 million by aggregating our purchasing power in North America and Europe. Consolidated our data centers from 39 to 2 in North America with 10%
Slide 35: Springboard is the Cornerstone of our Strategy to Institutionalize Operational Excellence
Springboard is the Cornerstone of our Strategy to Institutionalize Operational Excellence Decentralized Consolidated Integrated Design Opportunity Rationalize Diversified Consolidate Holding Company Operating Company February 27, 2008 - Amsterdam 35
Slide 36: The Transformation Plan laid the Foundation for the Next Wave of Value Creation
The Transformation Plan laid the Foundation for the Next Wave of Value Creation - Our Strategy to Accelerate Profitable Growth Grow Our Capture Leading Key Adjacent Positions Markets Institutionalize Exploit Operational Global Scale Excellence and Scope February 27, 2008 - Amsterdam 36
Slide 37: …and Will Drive the Next Level of Operational Efficiencies
…and Will Drive the Next Level of Operational Efficiencies for Wolters Kluwer over the Next Four Years Opportunity Multi- Rationalize portfolio of 3,000 applications and Generational save 8-12% of current IT spend through Technology Plan consolidation and simplification Goal: 2011 Run Rate Savings:
Slide 38: The MGTP Opportunity is to Rationalize the Application Portfolio
The MGTP Opportunity is to Rationalize the Application Portfolio to Reduce Cost and Improve Business Agility Diverse Portfolio of 3,000 Applications Rationalized Application Business Solution Portfolio Opportunity Development Business Solution Opportunity Development Enablement Application Fixed Ope
Slide 39: Optimizing Content Supply Chain is Focused on Unlocking the Full Value of our Content Assets
Optimizing Content Supply Chain is Focused on Unlocking the Full Value of our Content Assets Current State Future State Definitions Processes Repositories Products Definition Process Repository Products A A B B C C February 27, 2008 - Amsterdam 39
Slide 40: Online Inventory Storage & Distribution Costs Insignificant: The Long Tail
Online Inventory Storage & Distribution Costs Insignificant Making it Economically Viable to Sell Relatively Low Volume Products to Niche Segments €10.0M Sales Core Market Segments Niche Market Segments €0.5M The Long Tail 1 1 50 51 1,000 Products Ranked by Sales Volume 1 Coined by Chris Anderson in
Slide 41: Goal: Transfer Best Practices from Wolters Kluwer Businesses to Optimize the Content Supply Chain
Goal: Transfer Best Practices from Wolters Kluwer Businesses to Optimize the Content Supply Chain across the Company Example: Wolters Kluwer Spain Before After Time to Market 45 Days 12 Days New Products 234 440 Organic Growth -3% 8% EBITA Margin 14% 22% February 27, 2008 - Amsterdam 41
Slide 42: Today: 40% of a €1.3 Billion Supplier Spend is Addressed with our Sourcing Programs
Today: 40% of a €1.3 Billion Supplier Spend is Addressed with our Sourcing Programs… Significant savings have been achieved from “low hanging fruit” Net New systems, processes Financial required to access Benefits more difficult categories current desired maturity range maturity range 0 1 2 3 4 5 St
Slide 43: Our Goal is to Increase the Number of FTEs Working Offshore by 50% in 2011
Our Goal is to Increase the Number of FTEs Working on our Behalf Offshore by 50% in 2011 India Software Development Total Spending: $ 50M FTE’s: 1,000 Russia/Eastern Content Production Total Spending: $ 10M Europe FTE’s: 600 Software Development Total Spending: $ .2M FTE’s: 15 China Content Producti
Slide 44: In Summary… Springboard includes 4 Major Initiatives
In Summary… Springboard includes 4 Major Initiatives Content Supply Supply Offshoring: Multi-Generational Chain Re- Management Increase Scope of Technology Plan Engineering Program Expansion program Building on a successful business transformation, Springboard is the cornerstone of our strategy to i
Slide 45: Outlook
Outlook February 27, 2008 - Amsterdam Nancy McKinstry CEO and Chairman of the Executive Board
Slide 46: 2008 Outlook Reflects Continued Enhancement to Shareholder Value
2008 Outlook Reflects Continued Enhancement to Shareholder Value Actual Actual Actual Actual Actual Target Key Performance Indicators 2003 2004 2005 2006 2007 2008 Organic Revenue Growth -2% 1% 2% 3% 4% 4% Ordinary EBITA Margin 18% 16% 16% 17% 20% 20% Free Cash Flow €393m €456m €351m €399m €405m ±€4
Slide 47: Divisional Outlook Supports Overall 2008 Guidance
Divisional Outlook Supports Overall 2008 Guidance Organic Revenue Growth Health 1-3% CFS 3-5% TAL 4-6% LTRE 3-5% Wolters Kluwer 4% February 27, 2008 - Amsterdam 47
Slide 48: Since Wolters Kluwer Embarked on its Transformation, it has Created Significant Shareholder Value
Since Wolters Kluwer Embarked on its Transformation, it has Created Significant Shareholder Value Total Shareholder Return 178% From October 31, 2003 to December 31, 2007 112% 90% 72% 61% 56% 56% 42% 39% 39% 32% 32% 28% 5% 3% Re W Jo Re UB AE Pe Gr Mc Em La Do Mo T& Th ol ga hn up ut ed X ar w M Gr
Slide 49: Accelerating Profitable Growth
Accelerating Profitable Growth 1 2 Grow Our Leading Positions Capture Key Adjacent Markets 4 3 Institutionalize Operational Excellence Exploit Global Scale and Scope Enhanced value for customers, shareholders, and employees February 27, 2008 - Amsterdam 49