Wolters Kluwer N.V. · EURONEXT:WKL
Wolters Kluwer — FY2004 Earnings Presentation
69 slides from Wolters Kluwer's earnings presentation, Mar 2, 2005
Slide 1: 2004 Results
Wolters Kluwer 2004 Results Nancy McKinstry Boudewijn Beerkens Chairman Executive Board/CEO Member Executive Board/CFO 2 March 2005 - Amsterdam
Slide 2: Agenda
Agenda ¾ Highlights ¾ Key Performance Indicators ¾ Divisional Operating Performance ¾ Results ¾ Achievements ¾ 2005 Focus ¾ Outlook ¾ Financial Performance ¾ A Closer Look at Health ¾ Outlook & Summary ¾ Q&A Full Year 2004 Results - March 2, 2005 Amsterdam 1
Slide 3: Highlights
Highlights Nancy McKinstry Chairman Executive Board/CEO
Slide 4: Accomplishments
Accomplishments Delivered on all targets Restored top-line growth Cost savings ahead of schedule Reorganization complete Strong renewal performance Momentum Building in 2005 Full Year 2004 Results - March 2, 2005 Amsterdam 3
Slide 5: Highlights
Highlights ¾ Clear progress on all fronts; reaping benefits from new strategy ¾ 2004 Key Financials ¾ Reversal of organic revenue growth of -2% in 2003 to +1% ¾ Ordinary EBITA margin of 16% ¾ Structural cost savings ahead of expectations at €70 million ¾ Over delivered on FTE reductions ¾ Product de
Slide 6: On Target to Achieve 45% Electronic Revenues
On Target to Achieve 45% Electronic Revenues 45 35 30 31 25 27 17 22 17 18 18 17 16 16 18 20 13 13 10 6 2 1999 2000 2001 2002 2003 2004 2006E Internet Revenues Other Electronic Revenues Full Year 2004 Results - March 2, 2005 Amsterdam 5
Slide 7: Restructuring Ahead of Plan
Restructuring Ahead of Plan Business unit restructuring Global content platform Off-shoring - increased bandwidth SAP implementation / F&A consolidation Data Center consolidation Supporting the integrated businesses Full Year 2004 Results - March 2, 2005 Amsterdam 6
Slide 8: All 2004 Targets Achieved or Exceeded
All 2004 Targets Achieved or Exceeded Key Operational Measures 2003 Target 2004 Actual 2004 Revenue growth* 0% 0-1% √ 1% Ordinary EBITA margin 18% 14-16% √ 16% (After exceptional items) 15% 13-15% √ 15% Cash conversion 109% 100-110% √ 126% Key Financial Measures Ordinary free cash flow €393mln ≥ €30
Slide 9: Divisional Operating Performance
Divisional Operating Performance Nancy McKinstry Chairman Executive Board/CEO
Slide 10: Health
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Slide 11: Health Results
Health Results Profe ssiona l & Pha rm a Solutions 18% Educa tion 32% Clinical Tools ¾ Organic growth of 3.3% (2003=flat) 7% ¾ Strong 4th quarter with 6% organic growth Me dical Resea rch 43% ¾ Strong growth at Pharma Solutions and Professional & Education ¾ On-line Revenues at Ovid (MR) grew by 11%
Slide 12: Health Achievements
Health Achievements ¾ Growth in all business units ¾ Robust content creation program ¾ Expansion and enhancement of online resources via the Ovid platform ¾ Growth and investments in the pharmaceutical information market Full Year 2004 Results - March 2, 2005 Amsterdam 11
Slide 13: Health Focus 2005
Health Focus 2005 Society Services ¾ Service level improvements ¾ Improved retention rates ¾ Enhance product & service offerings Ovid ¾ Content enhancements ¾ Platform enhancements Point-of-Care ¾ Optimizing relationships with EMR partners ¾ Meet demand from EMR vendors asking for POC transactional
Slide 14: Corporate & Financial Services (CFS)
Corporate & Financial Services (CFS)
Slide 15: CFS Results
CFS Results F ina ncia l Serv ice s ¾ Organic growth of 5% 36% Corporate Le ga l Se rv ices 64% ¾ Strong performance at Corporate Legal Services ¾ Financial services had a particularly strong second half Change (million) Acquisition/ Million 2004 2003 Organic Currency Total Divestment Revenues (USD)
Slide 16: CFS Achievements
CFS Achievements ¾ Strong growth in core and adjacent markets ¾ Significant new product development: launched on-line solutions and product enhancements in corporate legal and UCC services ¾ Acquired Summation Legal Technologies, Inc. ¾ Responded to new and complex financial services regulations ¾ S
Slide 17: CFS 2005 Focus
CFS 2005 Focus Expand Workflow Solutions ¾ Corporate Legal Services ¾ Banking – leveraging PCi acquisition ¾ Expansion of UDS product line Extend E-billing and Litigation Support Services ¾ Provide flexible product & price modules (ASP) ¾ Expand sales coverage Continue Expere Rollout ¾ Continue move
Slide 18: Tax, Accounting & Legal (TAL)
Tax, Accounting & Legal (TAL)
Slide 19: TAL Results
TAL Results Le gal 34% ¾ Flat organic growth overall due to Tax & Accounting deliberate pruning of Legal ($23 million) 66% ¾ Tax & Accounting showed good organic growth of 3% driven by strong sales in tax and accounting software ¾ Savings achieved through shared services initiatives and real estate
Slide 20: TAL Achievements
TAL Achievements ¾ Strong growth in tax and accounting software solutions continued, driven by Prosystem fx Tax and Engagement sales ¾ Positive penetration of accounting software and research (ARM) solidifies CCH’s position as the premier player in the accounting market ¾ Investment in platform enha
Slide 21: TAL Focus 2005
TAL Focus 2005 Globalization ¾ Versioning products for different market segments ¾ Global offering ProSystemFX ¾ Continue adding new products to the PFX office suite ¾ Penetrate small-firm market Continue Launch of Integrated Content Libraries ¾ Expand specialty legal libraries ¾ Launch integrated t
Slide 22: Legal, Tax & Regulatory Europe (LTRE)
Legal, Tax & Regulatory Europe (LTRE)
Slide 23: LTRE Results
LTRE Results UK 13% SC 3% FR 17% BEL 9% IT/SP ¾ Improved organic growth on last year; 16% still declining with continued weak NL 21% GER/AUS/ CEE TLR market conditions 5% 16% ¾ Restructuring continues in the Netherlands, UK, and Belgium ¾ Market share gains in Italy, France, Spain, Poland, Czech Rep
Slide 24: LTRE Achievements
LTRE Achievements ¾ Expansion of on-line products continues in all countries on single platform ¾ Investments in content management databases all over Europe to realize an increase in online offerings and cost savings ¾ Restructuring of the Netherlands and Belgium well underway ¾ Cost restructuring
Slide 25: LTRE Focus 2005
LTRE Focus 2005 Fix & Transform ¾ Restructuring in the Netherlands, Belgium and acceleration of the UK plan ¾ Alignment of resources to improve product development, sales & marketing and linkage between software and services business ¾ Centralizing software and on-line platform development, explorin
Slide 26: Education
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Slide 27: Education Results
Education Results Germany / Aus Other 8% 15% UK ¾ Organic growth of 1% 16% Netherlands 39% ¾ Strong performance in the Netherlands Sweden 22% with upturn of purchase cycle in secondary education ¾ Continued difficult markets ¾ Good control of costs Change (million) Acquisition/ Million 2004 2003 Org
Slide 28: Education Achievements
Education Achievements ¾ Grew market shares despite weak markets and modest product pruning ¾ Maximized purchase cycle upturn in the Netherlands through innovative new products ¾ Growing inclusion of blended learning solutions in core textbooks ¾ Testing and assessment products for teachers launched
Slide 29: Education Focus 2005
Education Focus 2005 ICT Expansion ¾ Further expand traditional textbook business with ICT components ¾ Use of common ICT / development architecture and platforms Adjacent Market Expansion ¾ Testing & Assessment ¾ Corporate E-learning / digitalspirits.com Full Year 2004 Results - March 2, 2005 Amste
Slide 30: Outlook
Outlook Nancy McKinstry Chairman Executive Board/CEO
Slide 31: 2005 Outlook
2005 Outlook ¾ Continued investments Deliver stronger growth ¾ New products ¾ Stronger customer relationship ¾ Support the integrated business Execute Restructuring ¾ Shared services; Global Platform, SAP, Off-shoring ¾ Data Center consolidation ¾ Health Extend positions in ¾ CFS highest return mark
Slide 32: Divisional Outlook 2005
Divisional Outlook 2005 Division Organic Revenue Growth Health 3-5% Corporate & Financial Services 3-5% Tax, Accounting & Legal 2% Legal, Tax & Regulatory Europe -1%* Education 1-2% Wolters Kluwer 1-2% * Including ~ € 20 million pruning Full Year 2004 Results - March 2, 2005 Amsterdam 31
Slide 33: Impact of Restructuring 2003-2006
Impact of Restructuring 2003-2006 EUR Million 2003 2004 2005E 2006E Total Non-Exceptional - 25 30 10 restructuring costs ~ 215 Exceptional 96 44 10 - restructuring costs FTE reductions 521 724 400 200 ~ 1800 110 Total cost savings 29 70 80-90 100-110 (run-rate) Restructuring Ahead of Plan Full Year
Slide 34: 2005 Outlook
2005 Outlook Key Operational Measures 2003 Actual 2004 Target 2005* Organic revenue growth -2% 1% 1-2% Ordinary EBITA margin 18% 16% 15-16% (After exceptional items) 15% 15% 14-15% Cash conversion 109% 126% 95-105% Key Financial Measures Ordinary free cash flow €393mln €456mln ~ €250mln ROIC %** 7%
Slide 35: Financial Performance
Financial Performance 2004 Boudewijn Beerkens Member Executive Board/CFO
Slide 36: Financial Highlights 2004
Financial Highlights 2004 ¾ All KPI’s achieved ¾ Reversal of organic revenue growth of -2% in 2003 to +1% ¾ Ordinary EBITA margin of 16% at high end of the guidance range ¾ Strong free cash flow of €456 million (€393 million in 2003) ¾ Net income improved from -€69 million to + €135 million ¾ Net de
Slide 37: Key Financials
Key Financials Actual Constant Organic EUR Million 2004 2003 Currencies Currencies Growth % % % Revenues 3,261 3,436 (5) (1) 1 Ordinary EBITA 521 610 (15) (10) (6) Ordinary EBITA margin % 16 18 EBITA margin % 15 15 Ordinary Net Income 311 349 (11) (4) Ordinary EPS (fully diluted) €1.04* €1.18 (12) (
Slide 38: Profit & Loss
2004 EUR 2004 Ordinary Million Revenues EBITA Profit & Loss Health 623 103 CFS 437 83 EUR Million 2004 2003 TAL 596 139 LTRE 1,296 183 Revenues 3,261 3,436 Education 309 52 Ordinary EBITA 521 610 Corporate (39) Ordinary EBITA margin % 16 18 Total 3,261 521 Exceptional items (44) (96) EBITA 477 514 ¾
Slide 39: Profit & Loss (cont.)
Profit & Loss (cont.) EUR Million 2004 2003 Net income 135 (69) Amortization of intangibles 238 423 Taxation on amortization (21) (46) Results on divestments (70) (20) (after tax) Exceptional items (after tax) 29 61 Ordinary Net Income 311 349 Ordinary EPS (fully diluted) €1.04 €1.18 Weighted averag
Slide 40: Consolidated Balance Sheet
Consolidated Balance Sheet EUR Million 2004 2003 Total fixed assets 2,944 3,299 Total current assets 1,852 1,745 Total current liabilities (1,704) (1,353) Working capital 148 392 Capital Employed 3,092 3,691 Shareholders’ equity 775 861 Long-term liabilities 2,093 2,521 Minority interests 6 3 Provis
Slide 41: Cash Flow from Operating Activities
Cash Flow from Operating Activities EUR Million 2004 2003 Ordinary EBITA 521 610 Depreciation 103 112 Autonomous movements in working capital 149 34 Payments US & NL pension funds (42) - Cash Flow from Operations 731 756 Financing costs (62) (134) Paid corporate income tax (83) (106) Appropriation o
Slide 42: Cash Flow from Investments
Cash Flow from Investments EUR Million 2004 2003 Cash Flow from Operating Activities 534 500 Capital expenditure fixed assets (73) (92) Appropriation acquisition provisions (5) (15) Acquisition spending (56) (97) Divestment of activities (5) 500 Cash Flow Investments (139) 296 Movement in loans (65)
Slide 43: Free Cash Flow
Free Cash Flow EUR Million 2004 2003 Cash flow from operating activities 534 500 Cash flow investments (139) 296 Cash flow financing (111) (676) Net Cash Flow 284 120 Cash and cash equivalents as at Jan. 1 404 293 Exchange differences on cash equivalents (1) (9) Cash and Cash Equivalents as at Dec.
Slide 44: Working Capital Development
Working Capital Development (Organic Trend) Analysis of contribution (+) absorption of (-) Cash Flow EUR Million 2004 2003 04/03 Inventories 9 17 (8) Trade debtors 70 4 66 Other debtors (3) 11 (14) Deferred income 6 19 (13) Trade creditors 65 (5) 70 Other short-term liabilities 2 (12) 14 Increase/(D
Slide 45: Acquisitions and Divestments 2004
Acquisitions and Divestments 2004 ¾ Acquisitions ¾ Total acquisition spending €56 million (including mainly earn outs and increased stake in Cedam) ¾ Summation (US), Telesoftware (Spain), Beam (Education), Sian (US) ¾ Total considerations of these four acquisitions is €32 million; annualized revenue
Slide 46: International Financial Reporting Standards (IFRS)
International Financial Reporting Standards (IFRS) Net Income Equity (EUR Million) (EUR Million) 31 Dec. 2004 Dutch GAAP 135 775 Adjustments Goodwill and intangible assets (IFRS 3) 155 155 Pension expense / liabilities (IAS 19) (1) 11 Share option expense (IFRS 2) (3) - Deferred tax (IAS 12) 25 (196
Slide 47: 2005 Outlook
2005 Outlook Actual Target Lower Free Cash Key Operational Measures 2004 2005* Flow 2005 ¾ Non-recurring working Organic revenue growth 1% 1-2% capital improvement of €149 mln in 2004 Ordinary EBITA margin 16% 15-16% ¾ Increased CAPEX spending (After exceptional items) 15% 14-15% ¾ First coupon paym
Slide 48: Financial Overview
Financial Overview Working Capital (EUR Million) Free Cash Flow (EUR Million) 456 386 400 393 363 328 149 34 23 -12 1999 2000 2001 2002 2003 2004 1999 2000 2001 2002 2003 2004 - 39 -54 Net Debt (EUR Million) Debt Maturity Profile (EUR Million) 2821 2614 2664 975 2363 1900 687 645 1527 375 236 232 5
Slide 49: Financial Summary
Financial Summary Strong Financial Position Supporting Operational Performance Enabling Strong Returns to Investors Full Year 2004 Results - March 2, 2005 Amsterdam 48
Slide 50: A Closer Look at Health
A Closer Look at Health Jeff McCaulley CEO WK Health
Slide 51: Our Vision and Mission
Our Vision and Mission The Professional’s First Choice To provide current, accurate and expert information, leading-edge technology solutions, and services to help professionals and organizations make critical decisions effectively and efficiently Customers Served ¾ Physicians and Medical Students ¾
Slide 52: Built Primarily Through Acquisitions
Built Primarily Through Acquisitions: 1985 1990 1996 1998 2000 2001 2003 Raven Press Springhouse Silver Platter Employees: 108 Employees: 338 Employees: 370 Employees: 325 Employees: 284 Employees: 170 Employees: 12 Employees: 70 Employees: 164 Employees: 170 Little Brown Employees: 55 Today Rev: $7
Slide 53: Strong Brands and Market Position in Each Customer Segment
Strong Brands and Market Position in Each Customer Segment Leading Market Positions Professional & Medical Research Pharma Solutions Clinical Tools Education ¾ On-line medical ¾ Medical education ¾ Drug information ¾ Referential drug research globally publications: 30% journals and drug information
Slide 54: In Markets with Favorable Dynamics
In Markets with Favorable Dynamics Market Overview ¾ $5 billion market (2004), growing at 2-5% (2004-06) ¾ Continued opportunities for consolidation, with many small players ¾ Strong growth in pharma, clinical decision support, payors, allied health, nursing segments ¾ Emerging opportunities (e.g.,
Slide 55: Executing on WK Strategic Imperatives
Executing on WK Strategic Imperatives 1 Invest ¾ Build and acquire proprietary content ¾ Accelerate new titles and journals ¾ Reinforce and extend leadership in institutional research, including investments in Ovid platform ¾ Develop integrated clinical decision support tools for the point of care ¾
Slide 56: 2004 Growth Initiatives
2004 Growth Initiatives Business Unit 2004 ¾ Introduced Books@Ovid Medical Research ¾ Created Communities@Ovid ¾ Expanded Society Services program ¾ Published 357 new books Professional and ¾ Launched Nursing Made Incredibly Easy – First new general nursing Education journal in 25 years ¾ Launched 5
Slide 57: Leading to Solid Organic Growth
Leading to Solid Organic Growth 2004 Highlights WK Health Historical Performance (USD) ¾ Organic growth of 1000 3.3% (6% in Q4) 900 2000-2004 CAGR 800 747 750 775 Revenue: 7.7% ¾ Solid performances EBITA: 5.3% from all business 700 645 575 units 600 500 ¾ Double-digit EBITA 400 growth in 3 of 4 300
Slide 58: Market Dynamics Support a Broad Growth Strategy for WK Health
Market Dynamics Support a Broad Growth Strategy for WK Health ¾ Broader Health information market exceeds $30 billion − Six times WK Health’s current addressable markets − Contains adjacent segments growing >10% annually ¾ Significant market shifts creating new growth opportunities for information p
Slide 59: Growth Strategy
Growth Strategy Grow the Core Extend the Core ¾ Continue to build proprietary content ¾ Increase investment in new product development ¾ Reinvest in leading technology platforms ¾ Focus on emerging markets and growth areas including ¾ Leverage content assets more effectively + − Nursing and Allied H
Slide 60: 2005 Growth Initiatives
2005 Growth Initiatives Grow the Core Extend the Core ¾ Introduce 300 new books ¾ Broaden presence in allied ¾ Expand in Germany, Japan, health Content and Spanish markets ¾ Acquire must-have content ¾ Invest in local content in key markets ¾ Launch next generation ¾ Accelerate development of Ovid p
Slide 61: Summary
Summary ¾ WK Health business is well positioned for future growth ¾ Delivered solid performance in 2004 ¾ Good organic growth Æ Strong profitability ¾ Current markets are attractive and growing (~2-5%) ¾ Opportunities exist to expand offerings/services to grow share ¾ Resources and ability to expand
Slide 62: Outlook & Summary
Outlook & Summary Nancy McKinstry Chairman Executive Board/CEO
Slide 63: 2005 Outlook & Beyond
2005 Outlook & Beyond Target 2007 Key Operational Measures 2003 Actual 2004 2005* onwards* Organic revenue growth -2% 1% 1-2% 4% Ordinary EBITA margin 18% 16% 15-16% 19-20% (After exceptional items) 15% 15% 14-15% Cash conversion 109% 126% 95-105% ~ 100% Key Financial Measures Ordinary free cash flo
Slide 64: Summary
Summary Momentum to deliver stronger growth New strategy yielding results on all fronts Cost savings ahead of expectations Long-term outlook raised to 4% organic growth and 19-20% margins Fulfilling the Promise to be… Full Year 2004 Results - March 2, 2005 Amsterdam 63
Slide 65: The Professional's First Choice
The Professional’s First Choice Provide information, tools and solutions to help professionals make their most critical decisions effectively and improve their productivity
Slide 66: Appendix
Appendix
Slide 67: Health - Q4 CFS - Q4
Health - Q4 Change (million) Acquisition/ Million 2004 2003 Organic Currency Total Divestment Revenues (USD) 218 206 (EUR) 168 173 11 (1) (15) (5) EBITA (USD) 40 44 (EUR) 30 37 (4) - (3) (7) EBITA margin% 18 21 CFS - Q4 Change (million) Acquisition/ Million 2004 2003 Organic Currency Total Divestmen
Slide 68: TAL - Q4 LTRE - Q4
TAL - Q4 Change (million) Acquisition/ Million 2004 2003 Organic Currency Total Divestment Revenues (USD) 187 192 (EUR) 143 162 (5) (2) (12) (19) EBITA (USD) 33 43 (EUR) 25 36 (11) - - (11) EBITA margin% 17 22 LTRE - Q4 Change (million) Acquisition/ Million 2004 2003 Organic Currency Total Divestmen
Slide 69: Education - Q4
Education - Q4 Change (million) Acquisition/ Million 2004 2003 Organic Currency Total Divestment Revenues (EUR) 55 53 1 - 1 2 EBITA (EUR) (7) (1) (6) - - (6) EBITA margin% (11) (2) Full Year 2004 Results - March 2, 2005 Amsterdam 68