Wolters Kluwer N.V. · EURONEXT:WKL
Wolters Kluwer — FY2018 Earnings Presentation
46 slides from Wolters Kluwer's earnings presentation, Feb 20, 2019
Slide 1: Wolters Kluwer 2018 Full-Year Results
Wolters Kluwer 2018 Full-Year Results Nancy McKinstry – CEO Kevin Entricken – CFO February 20, 2019 2018 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 2019 ◼ Appendices 2018 Full-Year Results 3
Slide 4: Introduction
Introduction 2018: good organic growth, improved margins and cash flow Good organic Improved adjusted Double-digit growth operating margin growth in diluted +4% +30 bps* adjusted EPS in constant currencies Increased cash Strong balance Increased returns conversion sheet to shareholders Improved ROIC
Slide 5: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2019 ◼ Appendices 2018 Full-Year Results 5
Slide 6: Full-year 2018 results
Full-year 2018 results Revenues up +4% organically; margins and cash flow increased (€ million, unless otherwise stated) FY 2018 FY 2017* ∆ ∆ CC ∆ OG Revenues 4,260 4,368 -2% +1% +4% Adjusted operating profit 980 970 +1% +5% +10% Adjusted operating profit margin 23.0% 22.2% Diluted adjusted EPS €2.4
Slide 7: Revenues by division
Revenues by division All four divisions delivered positive organic growth (€ million) FY 2018 FY 2017* ∆ ∆ CC ∆ OG Health 1,110 1,166 -5% -1% +5% Tax & Accounting 1,295 1,234 +5% +9% +7% Governance, Risk & Compliance 975 1,054 -7% -3% +4% Legal & Regulatory 880 914 -4% -3% +1% Total revenues 4,260 4
Slide 8: Revenues by type
Revenues by type Recurring revenues up +5% organically; non-recurring trends mixed (€ million) FY 2018 FY 2017* ∆ ∆ CC ∆ OG Digital and services subscriptions 2,793 2,806 0% +3% +6% Print subscriptions 209 234 -11% -9% -7% Other recurring 288 292 -1% +4% +5% Recurring revenues 3,290 3,332 -1% +2% +5
Slide 9: Adjusted operating profit
Adjusted operating profit Margin increase supported by efficiency programs, mix shift, and net positive one- time items Margin Margin (€ million) FY 2018 FY 2017* ∆ ∆ CC ∆ OG FY 2018 FY 2017* Health 302 297 +2% +6% +14% 27.3% 25.5% Tax & Accounting 328 320 +3% +6% +6% 25.3% 25.9% Governance, Risk &
Slide 10: Adjusted net profit and EPS
Adjusted net profit and EPS Diluted adjusted EPS up +16% in constant currencies, benefitting from lower interest cost and reduced shares outstanding (€ million, unless otherwise stated) FY 2018 FY 2017* ∆ ∆ CC Revenues 4,260 4,368 -2% +1% Adjusted operating profit 980 970 +1% +5% Adjusted operating
Slide 11: IFRS profit and diluted EPS
IFRS profit and diluted EPS Reported net profit reflects disposal gains and higher effective tax rate (€ million, unless otherwise stated) FY 2018 FY 2017* ∆ Adjusted operating profit 980 970 +1% Amortization of acquired intangibles (175) (187) Results on divestments of operations 159 60 Acquisition
Slide 12: Adjusted free cash flow
Adjusted free cash flow Increased cash conversion helped offset expected increase in cash tax payments (€ million, unless otherwise stated) FY 2018 FY 2017* ∆ ∆ CC Adjusted operating profit 980 970 +1% +5% Depreciation, amortization and impairment of intangibles 220 209 Adjusted EBITDA 1,200 1,179 +
Slide 13: Movement in net debt
Movement in net debt Including disposal proceeds, we returned over €750 million to shareholders in 2018 (€ million, unless otherwise stated) FY 2018 FY 2017* Net debt at January 1 (2,069) (1,927) Adjusted free cash flow 762 746 Dividends paid (277) (232) Acquisition spending, net of cash acquired, i
Slide 14: Dividends and Share Buybacks
Dividends and Share Buybacks Proposing total dividend €0.98 (+15%) and announcing new share buyback for 2019 of up to €250 million Dividend per Share (€) Share Buybacks (€ million) 3-Yr Program Completed Total 550 0.98 dividend Intended 0.85 0.79 0.75 0.68 0.69 0.70 0.71 300 250 200 135 140 100 Inte
Slide 15: Results summary
Results summary 2018 results met or exceeded our guidance Good organic growth Improved adjusted Double-digit +4% operating margin growth in diluted Positive organic growth in 23.0% adjusted EPS all four divisions +80 bps +16% +30 bps excluding one- in constant currencies time benefits Increased cash
Slide 16: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2019 ◼ Appendices 2018 Full-Year Results 16
Slide 17: Health
Health Organic growth +5%; margin up 180 bps due to mix shift, efficiencies, and positive one-time items Clinical Solutions € million 2018 2017* Δ Δ CC Δ OG ▪ Revenues up +9% organically Revenues 1,110 1,166 -5% -1% +5% ▪ Integrated UpToDate, drug information and patient Adjusted operating engagemen
Slide 18: Tax & Accounting
Tax & Accounting Organic growth +7%; margin impacted by restructuring and one time items Professional Tax & Accounting € million 2018 2017* Δ Δ CC Δ OG ▪ North America revenues up +6% organically; Revenues 1,295 1,234 +5% +9% +7% launched CCH Axcess iQ Adjusted operating 328 320 +3% +6% +6% ▪ Europe
Slide 19: Governance, Risk & Compliance
Governance, Risk & Compliance Organic growth +4%; margin up 170 bps due to efficiencies and disposals Legal Services € million 2018 2017* Δ Δ CC Δ OG ▪ Revenues up +5% organically Revenues 975 1,054 -7% -3% +4% ▪ CT buoyed by transactional volumes Adjusted operating 290 295 -2% +3% +7% ▪ ELM up +6%,
Slide 20: Legal & Regulatory
Legal & Regulatory Organic growth turned positive (+1%); margin up 50 bps due to one-time benefits Legal & Regulatory Information Solutions € million 2018 2017* Δ Δ CC Δ OG ▪ Organic revenues stable, with digital products (+3%) Revenues 880 914 -4% -3% +1% partly offset by print decline Adjusted ope
Slide 21: Recent plan has delivered value
Recent plan has delivered value We have successfully executed on our most recent three-year strategic plan 2016-2018 Strategic Priorities ▪ Allocate majority of capital to leading, growing businesses ▪ Extend into adjacent market segments and new geographies Expand ▪ Broaden our global sales and mar
Slide 22: Improved financial KPI's
Improved financial KPI’s Strategy has delivered improved organic growth, margins, and ROIC Organic Growth (%) Adjusted Operating ROIC (%) Profit Margin (%) 5% 24% 12% 4% 11% 23% 3% 10% 22% 2% 9% 21% 8% 1% 0% 20% 7% 2013 2014 2015 2016 2017 2018 2016 2013 2014 2015 2017 2018 2013 2014 2015 2016 2017
Slide 23: 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 24: Grow expert solutions
Grow expert solutions CCH Axcess: deep domain expertise combined with advanced technology to improve outcomes and productivity for our professional tax customers Our Customers: CCH Axcess Ecosystem Their Clients: Tax Professionals Individuals & Businesses Workstream Financial Prep CCH Tax profession
Slide 25: Advance information products
Advance information products ONE: next-generation research solution, leveraging common platforms and advanced technologies, delivering practical, actionable content into workflow Legal & Regulatory Italy Other modules ONE Ecosystem in development Legal professionals ONE ONE ONE ONE GDPR: gain mobili
Slide 26: Agenda
Agenda ◼ Introduction ◼ Financial Review ◼ Operating and Strategic Review ◼ Outlook 2019 ◼ Appendices 2018 Full-Year Results 26
Slide 27: Guidance 2019
Guidance 2019 Performance indicators 2019 Guidance 2018 (IFRS 16) Adjusted operating profit margin 23.0%-23.5% 23.1% Adjusted free cash flow €750-775 million €762 million Return on invested capital 10.5%-11.5% 10.6% Diluted adjusted EPS Around 10% growth €2.45 Note: Guidance for adjusted operating p
Slide 28: Divisional Outlook 2019
Divisional Outlook 2019 ▪ Organic growth to be in line with 2018 Health ▪ Adjusted operating profit margin to decline, due to the absence of prior year one-time benefits and increased investment ▪ Organic growth to moderate from 2018 levels Tax & Accounting ▪ Adjusted operating margin to improve on
Slide 29: Appendix: 2018 Supplement
Appendix: 2018 Supplement 2018 Full-Year Results 29
Slide 30: Revenues by region
Revenues by region (€ million) FY 2018 FY 2017* ∆ ∆ CC ∆ OG North America 2,588 2,693 -4% +1% +4% Europe 1,329 1,335 0% 0% +4% Asia Pacific & ROW 343 340 +1% +5% +7% Total revenues 4,260 4,368 -2% +1% +4% ∆: % Change; ∆ CC: % Change in constant currencies (€/$ 1.13); ∆ OG: % Organic growth. *2017 re
Slide 31: Revenues by media format
Revenues by media format (€ million) FY 2018 FY 2017* ∆ ∆ CC ∆ OG Digital 3,274 3,318 -1% +2% +6% Services 471 480 -2% +3% +5% Print 515 570 -10% -8% -5% Total revenues 4,260 4,368 -2% +1% +4% ∆: % Change; ∆ CC: % Change in constant currencies (€/$ 1.13); ∆ OG: % Organic growth. *2017 restated for I
Slide 32: Reconciliation: Adjusted net financing costs to financing results
Reconciliation: Adjusted net financing costs to financing results (€ million) FY 2018 FY 2017 Adjusted net financing costs (70) (109) Employee benefits financing component (3) (5) Change in fair value of financial assets (1) - Result on divestment of financial assets 3 - Divestment related results o
Slide 33: Balance sheet
Balance sheet (€ million, unless otherwise stated) Dec. 31, 2018 Dec. 31, 2017* Goodwill and intangible assets 5,785 5,581 Equity-accounted investees and financial assets 51 27 Other non-current assets 219 211 Total non-current assets 6,055 5,819 Cash and cash equivalents 783 1,020 Other current ass
Slide 34: Debt maturity profile
Debt maturity profile Debt Maturity Profile – December 31, 2018 (€ million) 817 750 698 497 397 258 158 9 8 36 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 >2029 Cash and cash equivalents, derivatives, and divestment receivable1) 1) Includes cash and cash equivalents of €783 million p
Slide 35: Currency impact
Currency impact FY 2018 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 2018 FY 2017 FY 2018 FY 2018 U.S. dollar 1.18 1.13 (129) (37) British pound 0.88 0.88 (1) 0 Canadian dollar 1.53 1.46 (3)
Slide 36: Growth rates
Growth rates ∆ ∆ CC ∆ OG % % Change % Net Effect % % Currency in Constant Acquisitions Organic 2018 2017 Change Impact Currencies & Disposals Growth Revenues Health 1,110 1,166 -5% -4% -1% -6% +5% Tax & Accounting 1,295 1,234 +5% -4% +9% +2% +7% Governance, Risk & Compliance 975 1,054 -7% -4% -3% -7
Slide 37: Appendix: 2018 ESG Metrics
Appendix: 2018 ESG Metrics 2018 Full-Year Results 37
Slide 38: ESG Metrics
ESG Metrics Innovation & Product Development Spend Employee Engagement Score % of Revenues High Performing Norm Wolters Kluwer 12% 100% 71% 75% 76% 76% 10% 50% 8% 6% 0% 2015 2016 2017 2018 2015 2016 2017 2018 General Compliance Training Energy Consumption % of Employees Completed Tons CO2 Emissions/
Slide 39: ESG Metrics
ESG Metrics % Female Supervisory Board Members % Female Division CEOs 80% 80% 67% 67% 67% 50% 43% 43% 40% 29% 40% 17% 0% 0% 2015 2016 2017 2018 2015 2016 2017 2018 % Employee Turnover % of Employees with Access to Learning 20% 100% 100% 100% 83% 100% 100% 15.3% 14.4% 15.5% 15.1% 52% 10% 50% 52% 56%
Slide 40: Appendix: IFRS 16 Lease Accounting
Appendix: IFRS 16 Lease Accounting 2018 Full-Year Results 40
Slide 41: IFRS 16 Lease Accounting
IFRS 16 Lease Accounting New accounting standard effective January 1, 2019 ◼ IFRS 16: Lease Accounting – IFRS 16 will be applied by EU listed companies for accounting periods starting after January 1, 2019 and supersedes IAS 17. – With IFRS 16, all lease contracts with a term exceeding 12 months wil
Slide 42: Balance sheet
Balance sheet IFRS 16 increases total assets by approximately €230 million (€ million, unless otherwise stated) Dec. 31, 2018 IFRS 16 Restatement Dec. 31, 2018 Goodwill and intangible assets 5,785 - 5,785 Property, plant & equipment 94 (5) 89 Right-of-use assets - 232 232 Deferred tax assets 106 1 1
Slide 43: Adjusted income statement
Adjusted income statement IFRS 16 raises adjusted operating profit slightly, but this is largely offset by the lease interest charge FY 2018 IFRS 16 FY 2018 (€ million, unless otherwise stated) Reported Restatement Restated Revenues 4,260 1 4,261 Adjusted operating expenses (3,280) 5 (3,275) Adjuste
Slide 44: Adjusted free cash flow
Adjusted free cash flow IFRS 16 raises EBITDA, but has no impact on adjusted operating cash flow or adjusted free cash flow FY 2018 IFRS 16 FY 2018 (€ million, unless otherwise stated) Reported Restatement Restated Adjusted operating profit 980 6 986 Depreciation, amortization and impairment of inta
Slide 45: Selected financial ratios
Selected financial ratios IFRS 16 has a modest impact on key financial ratios FY 2018 FY 2018 Key ratio IFRS 16 Impact Reported Restated Organic growth* 4% - 4% Adjusted operating profit margin 23.0% 23.1% Benchmark tax rate 25.1% 25.1% Adjusted EBITDA 1,200 1,275 Adjusted EBITDA margin 28.2%
Slide 46: Notes
Notes 2018 Full-Year Results 46