Wolters Kluwer N.v. · EURONEXT:WKL
Wolters Kluwer — FY2019 Earnings Presentation
51 slides from Wolters Kluwer's earnings presentation, Feb 26, 2020
Slide 1: Wolters Kluwer 2019 Full-Year Results
Wolters Kluwer 2019 Full-Year Results Nancy McKinstry – CEO Kevin Entricken – CFO February 26, 2020 2019 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 2020 ◼ Appendices 2019 Full-Year Results 3
Slide 4: Introduction
Introduction 2019: Another year of good organic growth and improved margin and ROIC Grow Good organic Adjusted Expert growth +4% free cash flow Solutions €807 million Advance Improved adjusted Strong balance sheet Domain operating margin Expertise Improved ROIC Drive Diluted adjusted Substantial ret
Slide 5: Strategic progress
Strategic progress In 2019, we made progress on growing expert solutions and driving agility ▪ Sustained investment in expert solutions, adding innovation, Grow extending global reach, and delivering +7% organic growth Expert ▪ Worked to strengthen distribution partnerships Solutions ▪ Entered selec
Slide 6: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2020 ◼ Appendices 2019 Full-Year Results 6
Slide 7: Full-year 2019 results
Full-year 2019 results Results met or exceeded our guidance for the year (€ million, unless otherwise stated) FY 2019 FY 2018* ∆ ∆ CC ∆ OG Revenues 4,612 4,259 +8% +5% +4% Adjusted operating profit 1,089 986 +11% +5% +7% Adjusted operating profit margin 23.6% 23.1% Diluted adjusted EPS €2.90 €2.45 +
Slide 8: Revenues by division
Revenues by division Organic growth 4%, with significant improvement in Legal & Regulatory (€ million) FY 2019 FY 2018* ∆ ∆ CC ∆ OG Health 1,186 1,109 +7% +2% +4% Tax & Accounting 1,413 1,295 +9% +6% +6% Governance, Risk & Compliance 1,068 975 +10% +4% +4% Legal & Regulatory 945 880 +7% +6% +3% Tota
Slide 9: Revenues by type
Revenues by type Recurring revenues grew +5% organically; non-recurring trends were mixed (€ million) FY 2019 FY 2018* ∆ ∆ CC ∆ OG Digital and services subscriptions 3,087 2,793 +11% +7% +7% Print subscriptions 202 209 -3% -5% -5% Other recurring 292 288 +1% -4% 0% Recurring revenues 3,581 3,290 +9%
Slide 10: Adjusted operating profit
Adjusted operating profit Margin improvement despite challenging comparable, driven by Tax & Accounting and Governance, Risk & Compliance Margin Margin (€ million) FY 2019 FY 2018* ∆ ∆ CC ∆ OG FY 2019 FY 2018* Health 320 305 +5% 0% +3% 27.0% 27.5% Tax & Accounting 388 329 +18% +14% +14% 27.4% 25.4%
Slide 11: Adjusted net profit and EPS
Adjusted net profit and EPS Diluted adjusted EPS up +11% in constant currencies, benefitting from reduced interest expense, favorable tax rate, and lower share count (€ million, unless otherwise stated) FY 2019 FY 2018* ∆ ∆ CC Revenues 4,612 4,259 +8% +5% Adjusted operating profit 1,089 986 +11% +5%
Slide 12: IFRS profit and diluted EPS
IFRS profit and diluted EPS Reported net profit up 2% as lower tax rate helps offset absence of disposal gains (€ million, unless otherwise stated) FY 2019 FY 2018* ∆ Adjusted operating profit 1,089 986 +11% Amortization of acquired intangibles (144) (166) Impairment of acquired intangibles (38) (9)
Slide 13: Adjusted free cash flow
Adjusted free cash flow Lower interest payments compensated for a working capital outflow (€ million, unless otherwise stated) FY 2019 FY 2018* ∆ ∆ CC Adjusted operating profit 1,089 986 +11% +5% Depreciation and amortization of other intangibles 220 220 Depreciation of right-of-use assets 73 68 Adj
Slide 14: Movement in net debt
Movement in net debt Over 70% of adjusted free cash flow returned to shareholders in 2019 (€ million, unless otherwise stated) FY 2019 FY 2018* Net debt at January 1 (1,994) (2,069) IFRS 16 Restatement (255) (242) Net debt at January 1, restated for IFRS 16 (2,249) (2,311) Adjusted free cash flow 80
Slide 15: Dividends and share buybacks
Dividends and share buybacks Proposing total dividend €1.18 (+20%); announcing up to €350 million buyback for 2020 Dividend per Share (€) Share Buybacks (€ million) 3-Yr Program Completed Total 550 1.18 dividend Intended 0.98 0.85 350 350 0.71 0.75 0.79 0.68 0.69 0.70 300 200 135 140 100 Interim 0.3
Slide 16: Results summary
Results summary 2019 results met or exceeded our guidance Good organic growth Improved adjusted Double-digit +4% operating margin growth in diluted 23.6% adjusted EPS +50 bps +11% in constant currencies Cash conversion Strong balance sheet Substantial returns 96% Net-debt-to-EBITDA 1.6x to sharehold
Slide 17: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2020 ◼ Appendices 2019 Full-Year Results 17
Slide 18: Health
Health Organic growth +4%; margin decline reflects lower net positive one-time items Clinical Solutions € million 2019 2018* Δ Δ CC Δ OG ▪ Revenues up +6% organically, led by UpToDate up +9% Revenues 1,186 1,109 +7% +2% +4% ▪ Progress on cross-selling drug information Adjusted operating ▪ Roll-out U
Slide 19: Tax & Accounting
Tax & Accounting Organic growth +6%; margin increase mainly reflects efficiency savings, operational gearing, and lower restructuring Corporate Performance Solutions € million 2019 2018* Δ Δ CC Δ OG ▪ Revenues up +17% organically Revenues 1,413 1,295 +9% +6% +6% ▪ CCH Tagetik grew through new and ex
Slide 20: Governance, Risk & Compliance
Governance, Risk & Compliance Organic growth +4%; margin driven by efficiencies and net positive one-time items Legal Services € million 2019 2018* Δ Δ CC Δ OG ▪ Revenues up +5% organically Revenues 1,068 975 +10% +4% +4% ▪ CT Corporation saw strong growth, including better than expected transaction
Slide 21: Legal & Regulatory
Legal & Regulatory Organic growth +3%; margin reflects one-time items, acquisitions and increased investment EHR/ORM & Legal Software € million 2019 2018* Δ Δ CC Δ OG ▪ Revenues up +14% organically Revenues 945 880 +7% +6% +3% ▪ Enablon drove exceptional growth in new license Adjusted operating sale
Slide 22: 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 23: Growing expert solutions
Growing expert solutions Enablon/eVision: an intelligent, open and mobile-enabled platform, helping customers reduce risks, increase safety, raise productivity, and achieve compliance Enablon / eVision Solutions Digital Plant ▪ Global leader in Environmental, Health & Connected workers Safety (EHS)
Slide 24: Driving agility
Driving agility Across Wolters Kluwer, we made progress on streamlining our IT infrastructure, moving to the cloud, and leveraging advanced technology ◼ Evolving towards fewer, globally scalable product platforms ̶ Italian legal research solution ONE built on Global Atlas and Apollo technology stack
Slide 25: Progress on sustainability
Progress on sustainability Progress on employee engagement and on reducing ESG risks in our supply chain Employee Engagement Employee Compliance Training Supplier Code of Conduct (includes ethics, data privacy, IT and cybersecurity) Wolters Kluwer No. of Suppliers % of Employees Completed High Perfo
Slide 26: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2020 ◼ Appendices 2019 Full-Year Results 26
Slide 27: Guidance 2020
Guidance 2020 Performance indicators 2020 Guidance 2019 Adjusted operating profit margin 23.5%-24.0% 23.6% Adjusted free cash flow €800-€825 million €807 million Return on invested capital Around 12% 11.8% Diluted adjusted EPS Mid- to high single-digit growth €2.90 Note: Guidance for adjusted operat
Slide 28: Divisional outlook 2020
Divisional outlook 2020 ▪ Organic growth to be broadly in line with 2019 Health ▪ Adjusted operating profit margin to be broadly stable. Investment expected to weigh on first-half 2020 margin ▪ Organic growth to moderate from 2019 levels due to a challenging Tax & Accounting comparable ▪ Adjusted op
Slide 29: Appendix: 2019 Supplement
Appendix: 2019 Supplement 2019 Full-Year Results 29
Slide 30: Revenues by region
Revenues by region (€ million) FY 2019 FY 2018* ∆ ∆ CC ∆ OG North America 2,814 2,587 +9% +3% +4% Europe 1,420 1,329 +7% +6% +5% Asia Pacific & ROW 378 343 +10% +8% +5% Total revenues 4,612 4,259 +8% +5% +4% ∆: % Change; ∆ CC: % Change in constant currencies (€/$ 1.18); ∆ OG: % Organic growth. *2018
Slide 31: Revenues by media format
Revenues by media format (€ million) FY 2019 FY 2018* ∆ ∆ CC ∆ OG Digital 3,604 3,274 +10% +6% +6% Services 513 470 +9% +4% +4% Print 495 515 -4% -6% -6% Total revenues 4,612 4,259 +8% +5% +4% ∆: % Change; ∆ CC: % Change in constant currencies (€/$ 1.18); ∆ OG: % Organic growth. *2018 restated for I
Slide 32: Reconciliation: adjusted net financing costs to financing results
Reconciliation: adjusted net financing costs to financing results (€ million) FY 2019 FY 2018* Adjusted net financing costs (58) (77) Employee benefits financing component (4) (3) Change in fair value of financial assets - (1) Result on divestment of financial assets 2 3 Divestment related results o
Slide 33: Balance sheet
Balance sheet (€ million, unless otherwise stated) Dec. 31, 2019 Dec. 31, 2018* Goodwill and intangible assets 5,694 5,785 Equity-accounted investees and financial assets 47 57 Other non-current assets 558 446 Total non-current assets 6,299 6,288 Cash and cash equivalents 899 783 Other current asset
Slide 34: Debt maturity profile
Debt maturity profile Debt Maturity Profile – December 31, 2019 (€ million) Net debt breakdown: € million 1,005 Gross financial debt 2,748 917 Lease liabilities 368 Gross debt: 3,116 Less: cash & cash equivalents; derivatives 917 754 Net debt 2,199 Lease liabilities 515 430 Gross financial debt 177
Slide 35: Currency impact
Currency impact FY 2019 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 2019 FY 2018 FY 2019 FY 2019 U.S. dollar 1.12 1.18 155 48 British pound 0.88 0.88 1 0 Canadian dollar 1.49 1.53 2 1 Austra
Slide 36: Growth rates
Growth rates ∆ ∆ CC ∆ OG % % Change % Net Effect % % Currency in Constant Acquisitions Organic 2019 2018* Change Impact Currencies & Disposals Growth Revenues Health 1,186 1,109 +7% +5% +2% -2% +4% Tax & Accounting 1,413 1,295 +9% +3% +6% 0% +6% Governance, Risk & Compliance 1,068 975 +10% +6% +4% 0
Slide 37: Financial KPIs
Financial KPIs Organic Growth (%) Adjusted Operating ROIC (%) Profit Margin (%) 5% 24% 13% 4% 12% 23% 11% 3% 22% 10% 2% 9% 21% 1% 8% 0% 20% 7% 2013 2014 2015 2016 2017 2018 2019 2014 2013 2015 2016 2017 2018 2019 2014 2013 2015 2016 2017 2018 2019 Note: 2013-2016 data as reported. 2017 margin and RO
Slide 38: Appendix: 2019 ESG Metrics
Appendix: 2019 ESG Metrics 2019 Full-Year Results 38
Slide 39: ESG Metrics
ESG Metrics ◼ Environmental: energy, water & climate ◼ Social: employee culture ◼ Social: gender diversity ◼ Social: UN SDGs ◼ Governance: stewardship ◼ Governance: board skills 2019 Full-Year Results 39
Slide 40: 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 41: 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% 75% 76% 76% 77% 100% 83% 71% 100% 100% 100% 52% 50% 50% 52% 56% 0% 0% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Employee Turnover
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% 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 43: 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 44: 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 45: Governance: board skills
Governance: board skills Supervisory Board Skills Experience & Competencies Outside Boards Committees Independent Cybersecurity Technology & Management Marketing & Development Organization, Commercial Information Accounting, Social Policy, Gender General Finance Tenure Audit, Mgmt Legal AC= Audit Ag
Slide 46: Appendix: Business Profiles
Appendix: Business Profiles 2019 Full-Year Results 46
Slide 47: Wolters Kluwer Health
Wolters Kluwer Health At a glance Wolters Kluwer Health is one of the world’s largest Clinical Solutions providers of trusted content and technology solutions Customers and users supporting healthcare professionals. Clinical Solutions ▪ Hospitals, clinics – physicians, nurses and other supports prof
Slide 48: Wolters Kluwer Tax & Accounting
Wolters Kluwer Tax & Accounting At a glance Corporate Performance Solutions Wolters Kluwer Tax & Accounting is a leader in tax, Customers and users accounting, and audit software and information for ▪ Corporations – tax, accounting, audit professionals professional accounting firms of all sizes. We
Slide 49: Governance, Risk & Compliance
Governance, Risk & Compliance At a glance Wolters Kluwer Governance, Risk & Compliance (GRC) Legal Services offers market-leading software and services to Customers and users professionals in corporations, banks and law firms, ▪ Corporations & SMEs – general counsels, legal and enabling them to bett
Slide 50: Legal & Regulatory
Legal & Regulatory At a glance EHR/ORM & Legal Software: Wolters Kluwer Legal & Regulatory provides legal and Customers and users regulatory information and software to legal and ▪ Corporations – EHR/ORM professionals compliance professionals in law firms and corporations, ▪ Law firms and corporatio
Slide 51: Notes
Notes 2019 Full-Year Results 51