First-Quarter 2018 Trading Update
May 9, 2018 - Wolters Kluwer, a
global leader in professional information, software solutions, and
services, today released its scheduled first-quarter 2018 trading
Full-year 2018 guidance
First-quarter revenues up 2% in
constant currencies and up 4% organically.
Digital & services revenues grew 5%
Recurring revenues up 5% organically.
All main geographic regions delivered good
operating profit margin up slightly.
First-quarter adjusted free
cash flow declined slightly in constant currencies.
Net-debt-to-EBITDA ratio 1.4x
as of March 31, 2018.
Share buyback program on track:
€200 million executed as of May 7, 2018. Signed third-party mandate
committing us to a further €100 million in repurchases by July 30,
Nancy McKinstry, CEO and Chairman
of the Executive Board, commented:
"We have had a good start to the year, broadly in
line with our expectations. The group remains focused on delivering
expert solutions that support our customers' workflow and on
expanding the reach of our key global products. We are making
progress on fostering the development of recently acquired
businesses and have successfully completed several non-core
disposals in the first quarter. Across the group, efficiency
savings are helping to fund investment and support margins. I am
pleased to confirm we are on track to meet our full-year
First quarter revenues declined 8% in reporting
currency, reflecting a 10% impact from currency due to the
depreciation of the U.S. dollar against the Euro (average €/$ 1.23
in 1Q 2018 vs. €/$ 1.07 in 1Q 2017). Excluding the effect of
currency, revenues increased 2%, with organic growth of 4% partly
offset by the effect of net disposal activity. Subscription and
other recurring revenues grew 5% organically. The first-quarter
adjusted operating profit margin increased slightly compared to a
year ago. Increased investment in product development, the
inclusion of Tagetik (acquired April 2017), and the effect of
exchange rate movements were offset by the benefits of efficiency
Under IFRS 15, certain revenues and costs are
recognized more evenly throughout the year and over the life of the
related contracts. The accounting standard has minimal impact on
group revenues and profits and has no impact on adjusted free cash
flow. Had we continued to apply the IAS 18 standard, organic growth
would have been 4% and the adjusted operating profit margin would
have declined slightly in the first quarter.
Health achieved mid-single-digit organic growth,
as expected, and improved its adjusted operating profit margin.
Clinical Solutions delivered double-digit organic growth and
commenced the launch of UpToDate Advanced, a next-generation
decision tool that provides guided, patient-specific pathways.
Health Learning, Research & Practice revenues declined on an
organic basis, primarily due to a fall in print book revenues
following higher-than-expected returns. In the first quarter, we
reduced our interest in Medicom China from 55% to 45%. As a result,
Medicom (2017 revenues €8 million) will now be deconsolidated and
treated as an equity-accounted investee starting in April 2018. For
the full year, we continue to expect Health to deliver good organic
growth, similar to prior year levels, and a stable adjusted
operating profit margin. We now expect the first half adjusted
operating profit margin to improve (previously expected decline)
due to the timing of investments and savings.
Tax & Accounting recorded mid-single-digit
organic growth, as expected. The adjusted operating profit margin
declined, as expected, due to the inclusion of Tagetik and due to
increased investment in product development. Across the division,
software solutions for professionals and corporates saw sustained
high single-digit organic growth. Print formats, bank products and
other services showed improvement compared to a year ago. For the
full year, we continue to expect improved organic growth and a
stable adjusted operating profit margin. We continue to expect the
first half adjusted operating profit margin to decline due to the
timing of investments.
Governance, Risk & Compliance revenues
decreased by 18% overall due to recent disposal activity and the
impact of currency. Organic growth was 3% in the quarter. Recurring
revenues saw modest organic growth. Legal Services transactional
revenues were strong in the quarter, while Financial Services
transactional revenues declined as expected. Other non-recurring
revenues, which include software license and implementation fees,
posted high single-digit organic growth, benefitting from 2017
sales performance. For the full year, we continue to expect good
organic growth and a higher adjusted operating profit margin driven
by operating efficiencies and portfolio reshaping.
Legal & Regulatory revenues declined 7%
overall due to recent disposals and the impact of currency. On an
organic basis, the division recorded low single-digit organic
growth, reflecting portfolio changes, accelerated organic growth at
Enablon (included in organic since mid-2017), and a favorable
comparison base. The division faces more challenging comparables in
the second half, and as a result, we continue to expect the full
year to see flat underlying revenue and a stable adjusted operating
Cash Flow and Net Debt
First quarter cash conversion benefitted from
favorable timing of working capital movements. Adjusted free cash
flow declined 3% in constant currencies, reflecting higher cash tax
and financing costs paid. First quarter net acquisition spending,
net of cash acquired and including costs, was €12 million, mainly
associated with earnouts and the acquisition of Firecracker by the
Health division. Disposal proceeds amounted to €299 million,
including deal expenses and net of cash disposed. The divestments
included Corsearch, certain Swedish assets, ProVation, and a
portion of our interest in Medicom.
As of March 31, 2018, net debt was €1.7 billion
and net-debt-to-twelve-months-rolling-EBITDA ratio was 1.4x. In
April, we used our cash balances to redeem the €750
million, 6.375% Eurobond which matured on April 10, 2018.
Dividends and Share
At the Annual General Meeting in April,
shareholders approved a total dividend of €0.85. As a result, the
final dividend will be €0.65 per share, to be paid on May 17, 2018
(ADRs: May 24, 2018). As announced in February, starting in 2018,
the interim dividend will be set at 40% of the prior year total
dividend (previously 25%).
As of March 31, 2018, the number of shares
outstanding was 279.7 million. In the year to date, up to and
including May 7, 2018, Wolters Kluwer has repurchased 4.7 million
ordinary shares for a total consideration of €200 million. For the
period starting May 10, 2018, up to and including July 30, 2018, we
have engaged a third party to execute share buybacks for a maximum
of €100 million on our behalf, within the limits of relevant laws
and regulations (in particular Regulation (EU) 596/2014) and
Wolters Kluwer's Articles of Association. Our intention remains to
execute up to €400 million of share buybacks in 2018, including the
proceeds from the disposal of Corsearch and certain Swedish assets.
In addition, we also intend to deploy the proceeds from the sale of
ProVation (completed March 9, 2018) towards additional share
repurchases of €150 million in 2018 and 2019. Share repurchases
will be used for capital reduction purposes or to meet obligations
arising from share-based incentive plans.
Full-Year 2018 Outlook
We reaffirm our full-year 2018 guidance. We expect
to deliver solid organic growth and margin improvement for the
full-year. We expect to achieve an increase in full-year diluted
adjusted EPS in constant currencies and improvement in return on
invested capital (ROIC). The first half adjusted operating profit
margin is now expected to be broadly stable in reporting currency,
reflecting the phasing of investments and savings.
|Full-Year 2018 Outlook
||2017 (Restated for IFRS 15)
|Adjusted free cash
|Guidance for adjusted free cash flow and diluted adjusted EPS
is in constant currencies (€/$ 1.13). Guidance for EPS growth
assumes share repurchases for up to €400 million in 2018. Adjusted
operating profit margin and ROIC are in reported currencies and
assume an average EUR/USD rate around €/$ 1.20.
Our guidance reflects the new IFRS 15 accounting
standard, which became effective on January 1, 2018. When applied
to 2017, under the method adopted by Wolters Kluwer, the adjusted
operating profit margin would be 22.2%, diluted adjusted EPS €2.22,
and ROIC 9.8%. IFRS 15 has no impact on adjusted free cash
Our guidance is based on constant exchange rates.
In 2017, Wolters Kluwer generated more than 60% of its revenues and
adjusted operating profit in North America. As a rule of thumb,
based on our 2017 currency profile, each 1 U.S. cent move in the
average €/$ exchange rate for the year causes an opposite change of
approximately two euro cents in diluted adjusted EPS.
Restructuring costs are included in adjusted
operating profit. We currently expect restructuring costs of
€15-€25 million in 2018 (2017: €33 million). We expect adjusted net
financing costs of approximately €70 million (2017: €109 million),
excluding the impact of exchange rate movements on currency hedging
and intercompany balances. The expected reduction in net financing
cost reflects the redemption of our €750 million, 6.375% Eurobond
which matured on April 10, 2018. We expect the benchmark effective
tax rate to be approximately 26%, subject to further interpretation
and clarification of the changes introduced in the U.S. Tax Cuts
and Jobs Act.
Capital expenditure is expected to be in the range
of 5%-6% of total revenues (2017: 4.8%, including benefit from real
estate disposals). We anticipate a cash conversion ratio of
approximately 100% in 2018. Our guidance assumes no additional
significant change to the scope of operations, although we may make
further disposals or acquisitions which can have an effect on
margins and earnings in the near term.
About Wolters Kluwer
Wolters Kluwer is a global leader in information,
software solutions, and services for professionals in the health,
tax and accounting, finance, risk and compliance, and legal
sectors. We help our customers make critical decisions every day by
providing expert solutions that combine deep domain knowledge with
specialized technology and services.
Wolters Kluwer reported 2017 annual revenues of
€4.4 billion. The group serves customers in over 180 countries,
maintains operations in over 40 countries, and employs
approximately 19,000 people worldwide. The company is headquartered
in Alphen aan den Rijn, the Netherlands.
Wolters Kluwer shares are listed on Euronext
Amsterdam (WKL) and are included in the AEX and Euronext 100
indices. Wolters Kluwer has a sponsored Level 1 American Depositary
Receipt (ADR) program. The ADRs are traded on the over-the-counter
market in the U.S. (WTKWY).
For more information about our products and
organization, visit www.wolterskluwer.com and follow us on Twitter,
Facebook, LinkedIn, and YouTube.
date: 2017 final dividend ordinary shares
date: 2017 final dividend ADRs
Ex-dividend date: 2018 interim dividend
date: 2018 interim dividend
date: 2018 interim dividend
date: 2018 interim dividend ADRs
Nine-Month 2018 Trading Update
(0)172 641 470
(0)172 641 407
This report 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 uncertainties that could cause actual results and
events to differ materially from what is contemplated by the
forward-looking statements. Factors which could cause actual
results to differ from these forward-looking statements may
include, without limitation, general economic conditions;
conditions in the markets in which Wolters Kluwer is engaged;
behavior of customers, suppliers, and competitors; technological
developments; the implementation and execution of new ICT systems
or outsourcing; and legal, tax, and regulatory rules affecting
Wolters Kluwer's businesses, as well as risks related to mergers,
acquisitions, and divestments. In addition, financial risks such as
currency movements, interest rate fluctuations, liquidity, and
credit risks could influence future results. The foregoing list of
factors should not be construed as exhaustive. Wolters Kluwer
disclaims any intention or obligation to publicly update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise.
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Source: Wolters Kluwer N.V. via Globenewswire
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