Wolters Kluwer N.v. · EURONEXT:WKL
Wolters Kluwer — H1 2021 Earnings Presentation
45 slides from Wolters Kluwer's earnings presentation, Aug 4, 2021
Slide 1: Wolters Kluwer 2021 Half-Year Results
Wolters Kluwer 2021 Half-Year Results Nancy McKinstry – CEO Kevin Entricken – CFO August 4, 2021 2021 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 2021 ◼ Appendices 2021 Half-Year Results 3
Slide 4: Introduction
Introduction Strong HY 2021: resilient growth in recurring revenues combined with a rebound in non-recurring revenues; progress on strategic, financial, and ESG goals Financial Results ESG/Operational Progress Grow Expert Organic growth +5% Grew expert solutions +6% organically, excl. PPP Solutions
Slide 5: Strategic priorities
Strategic priorities The pandemic 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) distribution via existing and new channels, including Expert
Slide 6: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2021 ◼ Appendices 2021 Half-Year Results 6
Slide 7: Half-year 2021 results
Half-year 2021 results Improved organic growth and temporary cost savings drove double-digit increases in adjusted earnings and free cash flow (€ million, unless otherwise HY 2021 HY 2020 ∆ ∆ CC ∆ OG stated) Revenues 2,280 2,294 -1% +6% +5% Adjusted operating profit 613 577 +6% +14% +13% Adjusted op
Slide 8: Revenues by division
Revenues by division Three divisions posted stronger organic growth. Excluding PPP, GRC also accelerated, due to a rebound in non-recurring transactional volumes (€ million) HY 2021 HY 2020 ∆ ∆ CC ∆ OG Health 579 581 0% +8% +8% Tax & Accounting 732 713 +3% +7% +6% Governance, Risk & Compliance 544 5
Slide 9: Revenues by type
Revenues by type Resilient growth in digital & services subscriptions (72%) combined with a rebound in non-recurring revenues drove improvement in organic growth Organic Growth (%) Organic Growth (%) Recurring Revenue Types (81% of total) Non-recurring Revenue Types (19% of total) 20% 72% of total 1
Slide 10: Adjusted operating profit
Adjusted operating profit Three divisions recorded margin increases, mainly supported by operational gearing and temporary cost savings Margin Margin (€ million) HY 2021 HY 2020 ∆ ∆ CC ∆ OG HY 2021 HY 2020 Health 181 162 +12% +23% +23% 31.2% 27.9% Tax & Accounting 229 219 +4% +10% +7% 31.3% 30.8% Go
Slide 11: Adjusted net profit and EPS
Adjusted net profit and EPS Diluted adjusted EPS up +19% in constant currencies driven mainly by increase in adjusted operating profit (€ million, unless otherwise stated) HY 2021 HY 2020 ∆ ∆ CC Revenues 2,280 2,294 -1% +6% Adjusted operating profit 613 577 +6% +14% Adjusted operating profit margin
Slide 12: Adjusted free cash flow
Adjusted free cash flow Higher cash conversion driven by favorable working capital movements (€ million, unless otherwise stated) HY 2021 HY 2020 ∆ ∆ CC Adjusted operating profit 613 577 +6% +14% Depreciation and amortization of other intangibles 102 103 Depreciation of right-of-use assets 35 36 Adj
Slide 13: Movement in net debt
Movement in net debt Balance sheet remains strong despite increased acquisition spending and increased returns to shareholders (€ million, unless otherwise stated) HY 2021 FY 2020 HY 2020 Net debt at start of period (2,383) (2,199) (2,199) Adjusted free cash flow 476 907 336 Dividends paid (233) (33
Slide 14: Dividends and share buybacks
Dividends and share buybacks Interim dividend €0.54; over 60% of intended share buyback completed year to date Dividend per Share (€) Share Buybacks (€ million) 550 Completed 1.36 Total dividend Intended 1.18 0.98 350 350 350 0.85 0.79 300 200 229 200 200 0.54 Interim 0.39 0.47 dividend 0.34 0.19 0.
Slide 15: Results summary
Results summary Improved organic growth and temporary cost savings drove strong HY 2021 performance Improved organic Increased adjusted Increased diluted growth +5% operating margin adjusted EPS 26.9%, +170bps +19% in constant currencies Adjusted FCF Strong balance sheet Increased cash €476 million,
Slide 16: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2021 ◼ Appendices 2021 Half-Year Results 16
Slide 17: Health
Health Organic growth +8% driven by rebound in non-recurring revenues and publishing contract; margin reflects operational gearing and temporary cost savings Clinical Solutions € million HY 2021 HY 2020 Δ Δ CC Δ OG ▪ Revenues up +6% organically, led by UpToDate and Revenues 579 581 0% +8% +8% clinic
Slide 18: Tax & Accounting
Tax & Accounting Organic growth +6% buoyed by timing of U.S. tax season; margin increase reflects operational gearing and temporary cost savings Corporate Performance Solutions € million HY 2021 HY 2020 Δ Δ CC Δ OG ▪ Revenues up +11% organically Revenues 732 713 +3% +7% +6% ▪ CCH Tagetik and TeamMat
Slide 19: Governance, Risk & Compliance
Governance, Risk & Compliance Organic growth +2% (+6% excl. PPP); margin reflects operational gearing and cost savings offset by increased investment and absence of one-time benefits Legal Services € million HY 2021 HY 2020 Δ Δ CC Δ OG ▪ Revenues up +9% organically (HY 2020: -1%), Revenues 544 564 -
Slide 20: Legal & Regulatory
Legal & Regulatory Organic growth +4%, driven by a rebound in print books and favorable timing; margin reflects operational gearing plus temporary and structural cost savings EHS/ORM1 & Legal Software € million HY 2021 HY 2020 Δ Δ CC Δ OG ▪ Organic growth +4%, with double-digit growth in cloud Reven
Slide 21: Strategic progress
Strategic progress Despite the pandemic, we advanced against our strategic priorities ▪ Expert solutions 55% of total revenues, up +6% organically excl. PPP Grow ▪ CCH Tagetik acquired Vanguard Software creating opportunities in Expert integrated planning Solutions ▪ Launched UpToDate and Emmi Conte
Slide 22: ESG progress
ESG progress Progress on material environmental, social and governance initiatives ▪ Migrated applications to the cloud: on track to achieve a reduction in number of on-premise servers by year-end Environment ▪ Reduced real estate footprint (m2) by 4% in HY 2021 by closing several smaller office loc
Slide 23: Cloud-based expert solutions
Cloud-based expert solutions Cloud software revenues sustained double-digit organic growth Organic growth HY 2021 (HY 2020): HY 2021 Revenues HY 2021 Software Revenues Total software: +5% (+8%) €2.3 billion €1.0 billion Total software excl PPP: +7% (+4%) Split by Media Format Cloud software: +17% (+
Slide 24: Lippincott CoursePoint+
Lippincott CoursePoint+ Market-leading virtual learning solution supports faculty in developing practice- ready nurses Lippincott CoursePoint+ 2021 Performance Wolters Kluwer Health ▪ Market-leading, integrated digital learning solution Nursing Education: Lippincott CoursePoint+ for nursing educatio
Slide 25: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2021 ◼ Appendices 2021 Half-Year Results 25
Slide 26: Guidance 2021
Guidance 2021 Guidance updated and increased Performance indicators 2021 Guidance Previous Guidance 2020 Adjusted operating profit Around 25.0% 24.5%-25.0% 24.4% margin Adjusted free cash flow €925-€975 million €875-€925 million €907 million Return on invested capital Around 12.5% Around 12% 12.3% D
Slide 27: Divisional outlook 2021
Divisional outlook 2021 With our markets recovering and new sales improving, we now expect all divisions to see year-on-year improvement in organic growth ▪ Organic growth to improve over 2020 levels Health ▪ Adjusted operating profit margin to be stable year-on-year as temporary cost savings fade a
Slide 28: Appendix: 2021 Supplement
Appendix: 2021 Supplement 2021 Half-Year Results 28
Slide 29: Revenues by type
Revenues by type (€ million) HY 2021 HY 2020 ∆ ∆ CC ∆ OG Digital and services subscriptions 1,637 1,623 +1% +7% +6% Print subscriptions 81 90 -11% -8% -4% Other recurring 133 141 -6% +2% +4% Recurring revenues 1,851 1,854 0% +6% +5% Print books 55 49 +11% +16% +16% LS transactional 126 117 +8% +18%
Slide 30: Revenues by media format
Revenues by media format (€ million) HY 2021 HY 2020 ∆ ∆ CC ∆ OG Software 974 962 +1% +7% +5% Other Digital 908 916 -1% +5% +6% Total Digital 1,882 1,878 0% +6% +5% Services 227 244 -7% +1% +5% Print 171 172 0% +4% +3% Total revenues 2,280 2,294 -1% +6% +5% ∆: % Change; ∆ CC: % Change in constant cu
Slide 31: Reconciliation: adjusted net financing costs to financing results
Reconciliation: adjusted net financing costs to financing results (€ million) HY 2021 HY 2020 Adjusted net financing costs (42) (25) Employee benefits financing component (1) (1) Change in fair value of financial assets - - Result on divestment of financial assets - - Divestment related results on e
Slide 32: IFRS profit and diluted EPS
IFRS profit and diluted EPS (€ million, unless otherwise stated) HY 2021 HY 2020 ∆ Adjusted operating profit 613 577 +6% Amortization of acquired intangibles & impairment (60) (75) Results on divestments of operations (30) 0 Other non-benchmark items1) (4) (2) Operating profit 519 500 +4% Financing
Slide 33: Balance sheet
Balance sheet (€ million, unless otherwise stated) June 30, 2021 Dec. 31, 2020 June 30, 2020 Goodwill and intangible assets 5,785 5,638 5,654 Property, plant and equipment 80 84 99 Right-of-use assets 323 319 341 Deferred tax and other non-current assets 143 159 160 Total non-current assets 6,331 6,
Slide 34: Debt maturity profile
Debt maturity profile Debt Maturity Profile – June 30, 2021 (€ million) Net debt breakdown: € million Gross financial debt 3,015 951 Lease liabilities 353 Total gross debt 3,368 Less: Cash & cash equivalents 951 755 Net debt 2,417 Netting of cash 556 and overdrafts in 522 506 pooling arrangement 442
Slide 35: Currency impact
Currency impact HY 2021 Revenues by Currency British pound 3% Other 7% Euro 25% U.S. dollar 65% Impact in € million on Adjusted Average rates Revenues operating profit 1 Euro HY 2021 HY 2020 HY 2021 HY 2021 U.S. dollar 1.21 1.10 (137) (45) British pound 0.87 0.87 0 0 Canadian dollar 1.50 1.50 0 0 Au
Slide 36: Growth rates
Growth rates ∆ ∆ CC ∆ OG % % Change % Net Effect % % Currency in Constant Acquisitions Organic HY 2021 HY 2020 Change Impact Currencies & Disposals Growth Revenues Health 579 581 0% -8% +8% 0% +8% Tax & Accounting 732 713 +3% -4% +7% +1% +6% Governance, Risk & Compliance 544 564 -3% -8% +5% +3% +2%
Slide 37: Appendix: ESG Metrics
Appendix: ESG Metrics 2021 Half-Year Results 37
Slide 38: ESG Metrics
ESG Metrics ◼ ESG Ratings ◼ Environmental: decarbonization ◼ Social: employee culture ◼ Social: gender diversity ◼ Governance: stewardship ◼ Governance: board skills ◼ Governance: management remuneration 2021 Half-Year Results 38
Slide 39: ESG Ratings 2021
ESG Ratings 2021 MSCI ESG Rating Sustainalytics ESG Risk Rating AAA 0 5 10 15 20 25 AA A Wolters Kluwer 9.5 BBB IHS Markit 23.6 BB S&P Global 12.7 B RELX 5.4 CCC Sage Group 16.3 Thomson Reuters 8.8 2015 2016 2017 2018 2019 2020 2021 MSCI score as of July 27, 2021. AAA is the highest quality score on
Slide 40: Environmental
Environmental Wolters Kluwer Decarbonization Programs Energy-related carbon emissions ▪ Server migration and data center consolidation Tons CO2 Emissions/FTE program 2.0 2.00 ̶ Migrating applications to energy-efficient cloud 1.70 1.67 1.79 1.59 platforms allows us to reduce on-premise server 1.0 nu
Slide 41: 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 42: 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 43: 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 44: Governance: board skills
Governance: board skills Supervisory Board Skills Experience & Competencies Outside Boards Independent Cybersecurity Technology & Development Committees Organization, Management Social Policy, Marketing & Information Commercial Accounting, Gender General Finance Tenure Audit, Mgmt Legal Age Member A
Slide 45: Governance: management remuneration
Governance: management remuneration Main changes made to management pay as part of remuneration policy approved at 2021 AGM Remuneration Peer Group ▪ Weighting of European companies in the remuneration peer group to increase from 50% to and Quantum approx. 60% STIP performance ▪ A pre-defined list o