Wolters Kluwer N.V. · EURONEXT:WKL
Wolters Kluwer — FY2017 Earnings Presentation
43 slides from Wolters Kluwer's earnings presentation, Feb 21, 2018
Slide 1: Wolters Kluwer 2017 Full-Year Results
Wolters Kluwer 2017 Full-Year Results Nancy McKinstry – CEO Kevin Entricken – CFO February 21, 2018 2017 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 Strategic and Operating Review Outlook 2018 Appendix: IFRS 15 and 2017 Supplement 2017 Full-Year Results 3
Slide 4: Introduction
Introduction Solid 3% organic growth; improved profitability and cash flow Organic growth of +3% – Digital & services revenues up +5% organically – Recurring revenues up +4% organically Further improvement in profitability and cash flow – Adjusted operating profit up +8% organically – Adjusted f
Slide 5: Strategic progress
Strategic progress Optimizing portfolio, delivering innovation, and driving efficiencies ▪ Invested in key global products Expand ▪ Acquired Tagetik, extending into attractive, global adjacency Market Coverage ▪ Completed four disposals; announced sale of ProVation ▪ Rolled out new and enhanced prod
Slide 6: Agenda
Agenda Introduction Financial Review Strategic and Operating Review Outlook 2018 Appendix: IFRS 15 and 2017 Supplement 2017 Full-Year Results 6
Slide 7: Full-year 2017 results
Full-year 2017 results Revenues up +3% organically; increased margins and free cash flow (€ million, unless otherwise stated) FY 2017 FY 2016* ∆ ∆ CC ∆ OG Revenues 4,422 4,286 +3% +5% +3% Adjusted operating profit 1,009 950 +6% +8% +8% Adjusted operating profit margin 22.8% 22.2% Diluted adjusted EP
Slide 8: Revenues by division
Revenues by division Governance, Risk & Compliance and Legal & Regulatory improved organic growth (€ million) FY 2017 FY 2016* ∆ ∆ CC ∆ OG Health 1,168 1,106 +6% +8% +6% Tax & Accounting 1,257 1,162 +8% +10% +4% Governance, Risk & Compliance 1,080 1,091 -1% +1% +4% Legal & Regulatory 917 927 -1% 0%
Slide 9: Revenues by region
Revenues by region All three geographic regions delivered positive organic growth (€ million) FY 2017 FY 2016* ∆ ∆ CC ∆ OG North America 2,710 2,635 +3% +5% +4% Europe 1,368 1,320 +4% +4% +2% AsiaPac & ROW 344 331 +4% +6% +6% Total revenues 4,422 4,286 +3% +5% +3% ∆: % Change; ∆ CC: % Change constan
Slide 10: Revenues by type
Revenues by type Recurring revenues sustained +4% organic growth; 76% of total revenues (€ million) FY 2017 FY 2016* ∆ ∆ CC ∆ OG Digital and services subscriptions 2,814 2,687 +5% +6% +5% Print subscriptions 234 269 -13% -12% -10% Other recurring 310 333 -7% -5% +8% Recurring revenues 3,358 3,289 +2
Slide 11: Adjusted operating profit
Adjusted operating profit Governance, Risk & Compliance and Health increased margins Margin Margin (€ million) FY 2017 FY 2016* ∆ ∆ CC ∆ OG FY 2017 FY 2016* Health 293 271 +8% +11% +10% 25.0% 24.5% Tax & Accounting 339 315 +8% +10% +5% 27.0% 27.1% Governance, Risk & Compliance 319 309 +3% +5% +6% 29
Slide 12: Adjusted net profit and EPS
Adjusted net profit and EPS Margin increase and lower tax rate helped drive +13% growth in diluted adjusted EPS in constant currencies (€ million, unless otherwise stated) FY 2017 FY 2016* ∆ ∆ CC Revenues 4,422 4,286 +3% +5% Adjusted operating profit 1,009 950 +6% +8% Adjusted operating profit margi
Slide 13: IFRS profit and diluted EPS
IFRS profit and diluted EPS Reported diluted EPS includes disposal gain and one-time, non-cash revaluation of deferred tax position (€ million, unless otherwise stated) FY 2017 FY 2016 ∆ Adjusted operating profit 1,009 950 +6% Amortization of acquired intangibles (187) (181) Results on divestments o
Slide 14: Adjusted free cash flow
Adjusted free cash flow Increased FCF despite lower cash conversion and higher tax payments (€ million, unless otherwise stated) FY 2017 FY 2016 ∆ ∆ CC Adjusted operating profit 1,009 950 +6% +8% Depreciation and amortization of other intangibles 209 179 Adjusted EBITDA 1,218 1,129 +8% +10% Capital
Slide 15: Movement in net debt
Movement in net debt Returned over 70% of adjusted free cash flow to shareholders (€ million, unless otherwise stated) FY 2017 FY 2016 Net debt at January 1 (1,927) (1,788) Adjusted free cash flow 746 708 Dividends paid (232) (223) Acquisition spending, net of cash acquired, including costs1) (316)
Slide 16: Dividend
Dividend Proposing full-year total dividend of €0.85 per share, up +8% Dividend per Share (€)1) 0.85 0.79 0.75 0.70 0.71 0.65 0.66 0.67 0.68 0.69 0.64 0.58 Proposed 0.55 final dividend €0.65 Interim 0.18 0.19 0.20 dividend 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 interim
Slide 17: Share buybacks
Share buybacks Intend to repurchase up to €400 million in shares in 2018 Share Buybacks (€ million) as of February 19, 2018 In 2017, we repurchased 7.8 million Share Buyback Program ordinary shares for a total consideration Intended 2016-2018 of €300 million Completed For 2018, we currently inte
Slide 18: Summary
Summary Organic growth +3% Adjusted operating margin up +60 basis points to 22.8% Diluted adjusted EPS up +13% in constant currencies Adjusted free cash flow of €746 million, up +7% in constant currencies Net-debt-to-EBITDA ratio at 1.7x Proposing full-year total dividend of €0.85 per sh
Slide 19: Agenda
Agenda Introduction Financial Review Strategic and Operating Review Outlook 2018 Appendix: IFRS 15 and 2017 Supplement 2017 Full-Year Results 19
Slide 20: Health
Health Organic growth +6%; margin improved due to efficiency savings and mix shift € million FY 2017 FY 2016 Δ Δ CC Δ OG Clinical Solutions Organic growth +10% Revenues 1,168 1,106 +6% +8% +6% UpToDate delivered double-digit organic Adjusted 293 271 +8% +11% +10% growth operating profit Margin 2
Slide 21: Tax & Accounting
Tax & Accounting Organic growth +4%, driven by software; margin maintained € million FY 2017 FY 2016* Δ Δ CC Δ OG Tax & Accounting North America Good organic growth, driven by +5% growth Revenues 1,257 1,162 +8% +10% +4% in professional software Adjusted operating profit 339 315 +8% +10% +5% Res
Slide 22: Governance, Risk & Compliance
Governance, Risk & Compliance Organic growth improved to +4%; margin up 110 basis points driven by efficiency initiatives € million FY 2017 FY 2016 Δ Δ CC Δ OG Legal Services Organic growth up +4% (2016: +3%) Revenues 1,080 1,091 -1% +1% +4% CT drove 4% organic growth, supported by Adjusted 319
Slide 23: Legal & Regulatory
Legal & Regulatory Organic growth improved to -1%; margin stable despite increased restructuring € million FY 2017 FY 2016 Δ Δ CC Δ OG Legal & Regulatory Information Solutions In Europe, organic growth -2% (2016: -2%), Revenues 917 927 -1% 0% -1% as expected, with growth in digital solutions Adjus
Slide 24: Expand market coverage
Expand market coverage Expanding our global products and reshaping our portfolio Invested in global products — Health: invested to grow UpToDate and drug information outside the U.S. — Tax & Accounting: launched TeamMate+; extended CCH iKnow and CCH iFirm into new geographies — GRC: invested to en
Slide 25: Deliver expert solutions
Deliver expert solutions Two leading expert solutions that drove double-digit organic growth in 2017 Tax & Accounting Governance, Risk & Compliance CCH Axcess OneSumX Finance, Risk & Reporting First integrated cloud solution for professional tax and Leading global solution for integrated risk- a
Slide 26: Drive efficiencies
Drive efficiencies Driving front and back office savings; increasing technology standardization Driving operational excellence in front and back office $ — Launched collaborative sales programs, digital marketing tools and teams — Drove further savings from data center consolidation/migration to t
Slide 27: Agenda
Agenda Introduction Financial Review Strategic and Operating Review Outlook 2018 Appendix: IFRS 15 and 2017 Supplement 2017 Full-Year Results 27
Slide 28: Divisional Outlook 2018
Divisional Outlook 2018 Reflects IFRS 15 Expect good organic growth, similar to prior year levels, and a stable Health margin for the full year First half margin is expected to decline due to timing of investments Expect improved organic growth and a stable margin for the full year Tax & Accou
Slide 29: Guidance 2018
Guidance 2018 Reflects IFRS 15 Performance indicators 2018 Guidance 2017 (Under IFRS 15) Adjusted operating profit margin 22.5% - 23.0% 22.2% Adjusted free cash flow €725 - €750 million €746 million Return on invested capital 10.0% - 10.5% 9.8% Diluted adjusted EPS 10% - 15% growth €2.22 Guidance fo
Slide 30: Q&A
Q&A 2017 Full-Year Results 30
Slide 31: Appendix: IFRS 15
Appendix: IFRS 15 2017 Full-Year Results 31
Slide 32: IFRS 15: New accounting standard
IFRS 15 New accounting standard effective January 1, 2018 IFRS 15: Revenue from Contracts with Customers – IFRS 15 became effective January 1, 2018, replacing standards IAS 18 and IAS 11 – IFRS 15 defines transactions based on performance obligations satisfied over time or at a point in time and r
Slide 33: IFRS 15 minimal impact on revenue and profits
IFRS 15 IFRS 15 has minimal impact on the group’s revenue and profits and has no impact on cash flow When IFRS 15 is applied to 2017: – Revenue is 1% lower – Adjusted profits and diluted adjusted EPS are 4% lower – Adjusted operating margin is reduced to 22.2% IFRS 15 does not change adjusted fr
Slide 34: Adjusted income statement
Adjusted income statement IFRS 15 would reduce 2017 revenue by 1% and adjusted operating profit and EPS by 4% FY 2017 IFRS 15 FY 2017 (€ million, unless otherwise stated) Reported Restatement Restated Revenues 4,422 (52) 4,370 Adjusted operating expenses (3,413) 13 (3,400) Adjusted operating profit
Slide 35: Adjusted free cash flow
Adjusted free cash flow IFRS 15 would increase the cash conversion ratio to 100%, but would not change adjusted free cash flow FY 2017 IFRS 15 FY 2017 (€ million, unless otherwise stated) Reported Restatement Restated Adjusted operating profit 1,009 (39) 970 Depreciation and amortization of other in
Slide 36: Details by division
Details by division IFRS 15 would mainly affect Governance, Risk & Compliance and Tax & Accounting revenues, adjusted operating profit and margin FY 2017 Software Other Total Revenue Total Cost FY 2017 (€ million, unless otherwise stated) Reported Licenses Revenues Restatement Restatement Restated H
Slide 37: Appendix: 2017 Supplement
Appendix: 2017 Supplement 2017 Full-Year Results 37
Slide 38: Revenues by media format
Revenues by media format (€ million) FY 2017 FY 2016* ∆ ∆ CC ∆ OG Digital 3,362 3,153 +7% +8% +6% Services 485 491 -1% 0% +1% Print 575 642 -10% -9% -6% Total revenues 4,422 4,286 +3% +5% +3% ∆: % Change; ∆ CC: % Change constant currencies (€/$ 1.11); ∆ OG: % Organic growth. *2016 restated to treat
Slide 39: Revenues by media format and type
Revenues by media format and type FY 2017 Revenues Governance, Risk & Health Tax & Accounting Legal & Regulatory Compliance Services Print Print Print 4% 5% 16% 1% Services Digital Print 1% content Services 33% Digital: 17% 34% Tax & Digital Accounting 65% Digital Digital software 74% Services 60% 8
Slide 40: Reconciliation: Adjusted net financing costs to financing results
Reconciliation: Adjusted net financing costs to financing results (€ million) FY 2017 FY 2016 Adjusted net financing costs (109) (107) Employee benefits financing component (5) (6) Divestment related results on equity-accounted investees 6 0 Financing results (108) (113) 2017 Full-Year Results 40
Slide 41: Balance sheet
Balance sheet (€ million, unless otherwise stated) Dec. 31, 2017 Dec. 31, 2016* Goodwill and intangible assets 5,581 6,113 Equity-accounted investees and financial assets 27 40 Other non-current assets 194 235 Non-current assets 5,802 6,388 Cash and cash equivalents 1,020 940 Other current assets 1,
Slide 42: Debt maturity profile
Debt maturity profile Debt Maturity Profile (€ million) 1021 1050 697 497 397 249 151 7 6 36 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 >2028 Year-End Cash & cash equivalents plus derivatives1) 1) Cash and cash equivalents of €1,020 million plus €1 million in derivatives. As of Dece
Slide 43: Currency
Currency FY 2017 Revenues British pound Other 3% 8% Euro 24% U.S. dollar 65% Impact in € million on Adjusted operating Average rates Revenue profit 1 Euro FY 2017 FY 2016 FY 2017 FY 2017 U.S. dollar 1.13 1.11 (59) (19) British pound 0.88 0.82 (9) (1) Canadian dollar 1.46 1.47 0 0 Australian dollar 1