2018 Half-Year Report
August 1, 2018 - Wolters Kluwer,
a global leader in professional information, software solutions,
and services, today releases its half-year 2018 results.
Revenues up 1% in constant
currencies and up 4% organically.
Digital & services revenues up 5%
organically (89% of total revenues).
Recurring revenues up 5% organically (79% of
Under IAS 18, organic growth would have been 4%
(HY 2017: 2%)
Adjusted operating profit €451
million, up 8% in constant currencies.
Adjusted operating profit margin of 22.3%, up
100 basis points.
Excluding one-time benefits, margin improved 40
Diluted adjusted EPS €1.06, up
22% in constant currencies.
Adjusted free cash flow €263
million, up 15% in constant currencies.
Net-debt-to-EBITDA 1.7x as of
June 30, 2018.
Interim dividend of €0.34 per
Share buyback: now intend to
spend a total of €550 million on buybacks in 2018.
Interim Report of
the Executive Board
Nancy McKinstry, CEO and Chairman
of the Executive Board, commented: "With a
sharpened portfolio and in favorable market conditions, we have
achieved further improvement in organic growth by continuing to
focus on customer-centric innovation and shifting our business mix
towards digital and expert solutions. We have delivered further
operating efficiencies, enabling us to increase investment in
product development, sales & marketing, and technology. We are
confident of meeting our full-year outlook."
Key Figures Half-Year 2018 (IFRS
|Six months ended June 30
|€ million (unless otherwise
Business performance - benchmark figures
Adjusted operating profit
Adjusted operating profit margin
Adjusted net profit
Diluted adjusted EPS (€)
Adjusted free cash flow
for the year
Diluted EPS (€)
|Net cash from operating activities
|Var.: % Change; Var. CC: % Change in constant currencies (€/$
1.13); Var. OG: % Organic growth. Benchmark (adjusted) figures are
performance measures used by management. See Note 5 for a
reconciliation from IFRS to benchmark figures. *2017 has been
restated for IFRS 15 (see Note 3 and Appendix 4 of this interim
report for details) and to treat customer credits for 'bank
product' services as a deduction to revenues and not as a cost of
Full-Year 2018 Outlook (Reflects
IFRS 15 Accounting Standard, Effective January 1, 2018)
Our guidance for full-year 2018 is provided in the
table below. We expect to deliver solid organic growth and margin
improvement. We expect to achieve an increase in diluted adjusted
EPS in constant currencies and improvement in return on invested
|Full-Year 2018 Outlook
||2017 (Under 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 of €550 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. Historical
2017 figures have been restated: please see Note 3 and Appendix 4
of this interim report for details on IFRS 15. 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 continue to 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 decline in net
financing costs reflects the redemption of the €750 million,
6.375% senior Eurobond that matured in April 2018. Following
further interpretation and clarification of the changes introduced
in the U.S. Tax Cuts and Jobs Act, we now expect the benchmark
effective tax rate to be in the range of 25%-26% for the full
Capital expenditure is expected to be in the range
of 5%-6% of total revenues, excluding any real estate disposals (FY
2017: 4.8%, or 5.0% excluding 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. We may make further disposals which may be dilutive to
margins and earnings in the near term.
2018 Outlook by Division
Health: 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
Tax & Accounting: for the
full year, we continue to expect improved organic growth and,
including one-time benefits recorded in the first half, we now
anticipate a modest increase in the adjusted operating margin for
the full year.
Governance, Risk &
Compliance: we continue to expect good organic growth and an
improved margin for the full year.
Legal & Regulatory: the
division faces a challenging comparable in the second half, and as
a result, we expect organic revenues to be flat to slightly
positive in full year 2018. Including one-time benefits realized in
the first half, we continue to expect the full-year margin to be
stable for the full year.
We are now in the final year of our current
three-year strategic plan 2016-2018. This plan (Growing our Value) prioritizes expanding our market
coverage, increasing our focus on expert solutions, and driving
further operating efficiencies and employee engagement. Our
strategy aims to sustain and, in the long run, further improve our
organic growth rate, margins, and returns as we focus on growing
value for customers, employees, and shareholders. Our priorities
Expand market coverage: We
will continue to allocate most of our capital towards our leading
growth businesses and digital products, and will extend into market
adjacencies and new geographies where we see the best potential for
growth and competitive advantage. Expanding our market reach also
entails allocating funds to broaden our sales and marketing
coverage in certain global markets. We intend to support this
organic growth strategy with value-enhancing acquisitions while
continuing our program of non-core disposals.
Deliver expert solutions:
Our plan calls for increased focus on expert solutions that combine
deep domain knowledge with specialized technology and services to
deliver expert answers, analytics, and productivity for our
customers. To support digital growth across all divisions, we
intend to accelerate our ongoing shift to global platforms and to
cloud-based integrated solutions that offer mobile access. Our plan
is also to expand our use of new media channels and to create an
all-round, rich digital experience for our customers. Investment in
new and enhanced products will be sustained in the range of 8-10%
of total revenues.
Drive efficiencies and
engagement: We intend to continue driving scale economies while
improving the quality of our offerings and the agility of our
organization. These operating efficiencies will help fund
investment and wage inflation, and support a rising operating
margin over the long term. Through increased standardization of
processes and technology planning, and by focusing on fewer, global
platforms and software applications, we expect to free up capital
to reinvest in product innovation. Supporting this effort are
several initiatives to foster employee engagement.
Leverage Target and Financial
Wolters Kluwer uses its cash flow to invest in the
business organically or through acquisitions, to maintain optimal
leverage, and provide returns to shareholders. We regularly assess
our financial position and evaluate the appropriate level of debt
in view of our expectations for cash flow, investment plans,
interest rates, and capital market conditions.
While we may temporarily deviate from our leverage
target at times, we continue to believe that, in the longer run, a
net-debt-to-EBITDA ratio of around 2.5x remains appropriate for our
business given the high proportion of recurring revenues and
resilient cash flow.
At June 30, 2018, the net-debt-to-EBITDA ratio,
based on rolling twelve-month EBITDA, was 1.7x (HY 2017:
Dividend Policy and 2018 Interim
Wolters Kluwer has a progressive dividend policy
under which the company aims to increase the dividend per share
each year. The annual increase is dependent on our financial
performance, market conditions, and our need for financial
flexibility. Our dividend policy takes into consideration the
nature of our business and our expectations for future cash flow
and investment needs.
As announced on February 21, 2018, the interim
dividend for 2018 was set at 40% of the prior year total dividend
(versus 25% in previous years). This results in an interim dividend
of €0.34 per share, to be distributed on September 19, 2018, to
holders of ordinary shares, or September 26, 2018, for holders of
Wolters Kluwer ADRs.
Shareholders can choose to reinvest both interim
and final dividends by purchasing additional Wolters Kluwer shares
through the Dividend Reinvestment Plan (DRIP) administered by ABN
AMRO Bank N.V.
Anti-Dilution Policy and
Share Buyback Program 2016-2018
Wolters Kluwer has a policy to offset the dilution
caused by our annual incentive share issuance with share
On February 24, 2016, we announced a three-year
share buyback program (2016-2018) which originally envisaged
spending up to €200 million in each year on share repurchases,
including amounts required to offset incentive share issuance. This
buyback program was subsequently expanded to include additional
repurchases intended to mitigate dilution caused by non-core
divestments made in 2017 and early 2018.
In 2016 and 2017, we completed respectively €200
million and €300 million in share buybacks under this program.
As of July 30, 2018, we have completed a further
€300 million of buybacks (6.8 million shares at an average price of
€44.42). We now intend to execute €250 million of buybacks in the
remainder of 2018, bringing the intended full-year 2018 total to
€550 million. For the period starting August 2, 2018, up to and
including December 27, 2018, we have engaged third parties to
execute such share buybacks on our behalf, within the limits of
relevant laws and regulations (in particular Regulation (EU)
596/2014) and the company's Articles of Association. Repurchased
shares are added to and held as treasury shares, and will be used
for capital reduction purposes or to meet obligations arising from
share-based incentive plans.
Assuming global economic conditions do not
deteriorate substantially, we believe this level of cash return
leaves us with ample headroom for investment in the business,
Cancellation of Ordinary
At the 2018 Annual General Meeting, shareholders
approved a resolution to cancel for capital reduction purposes any
or all ordinary shares held in treasury or to be acquired by the
company as authorized by shareholders, up to a maximum of 10% of
issued share capital on April 20, 2018. As authorized by
shareholders, the Executive Board has determined the number of
ordinary shares to be cancelled is 10.6 million. Wolters
Kluwer intends to cancel these shares in the second half of 2018.
Part of the shares held in treasury will be retained and used to
meet future obligations under share-based incentive plans.
Half-Year 2018 Results
Group revenues declined 7% overall to €2,020
million due to the impact of currency movements, most importantly
the depreciation of the U.S. dollar against the euro (average
EUR/USD 1.21 versus 1.08 in HY 2017). In constant currencies,
revenues increased 1%.
Organic growth, which excludes the impact of
exchange rate movements and the effect of acquisition and
disposals, was 4%. All four divisions delivered positive organic
growth in the first half. Had we continued to apply the IAS 18
accounting standard for revenue recognition, organic growth would
also have been 4% (an improvement on the 2% recorded in HY 2017
under IAS 18).
Revenues from North America (61% of total
revenues) grew 5% organically, with good momentum across all
divisions in this region of the world. Revenues from Europe (31% of
total revenues) increased 4% organically, mainly benefiting from an
improved organic growth rate in Legal & Regulatory. Revenues
from Asia Pacific and Rest of World (8% of total revenues) grew 6%
organically, principally supported by strong performance in
Adjusted operating profit was €451 million, up 8%
in constant currencies, and resulting in a margin of 22.3%.
Adjusted operating profit included €16 million (HY 2017: €4
million) of one-time benefits in two divisions and at the Corporate
level. Excluding these items, the adjusted operating margin would
have increased 40 basis points. The one-time items included a real
estate disposal of €6 million in Tax & Accounting, the release
of a €6 million provision in Legal & Regulatory, and one-time
benefits totaling €4 million at the Corporate level, mainly
relating to payroll taxes.
Included in adjusted operating profit were €7
million of restructuring costs (HY 2017: €10 million).
Adjusted net financing costs decreased to €49
million (HY 2017: €55 million), reflecting reduced interest costs
following the redemption of our €750 million, 6.375% senior
Eurobond. This refinancing benefit was partly offset by net foreign
exchange losses of €11 million. As a reminder, adjusted net
financing costs are defined as total financing results, excluding
the financing component of employee benefits, fair value changes in
financial assets, and net book gains or losses on any divestments
of non-controlled equity-interests.
Adjusted profit before tax was €402 million (HY
2017: €407 million), down 1% overall but up 12% in constant
The benchmark effective tax rate on adjusted
profit before tax was 25.5% (HY 2017: 27.9%), following further
interpretation and clarification of the changes introduced by the
U.S. Tax Cuts & Jobs Act. As a result, adjusted net profit
increased 2% overall and 19% in constant currencies to €299
Diluted adjusted EPS increased 5% overall and 22%
in constant currencies to €1.06 (HY 2017: €1.01), reflecting the
increase in adjusted net profit and a 3% reduction in the diluted
weighted average number of shares outstanding to 281.5 million.
As of June 30, 2018, the number of issued and
outstanding shares was 276.6 million (excluding 13.7 million
shares held as treasury shares).
IFRS Reported Figures
Reported operating profit rose 28% to €524 million
(HY 2017: €408 million), mainly reflecting €159 million of net book
gains on the disposal of certain Swedish assets and Corsearch in
January 2018 and the sale of ProVation in March 2018. Reported
operating profit also reflects lower amortization of acquired
intangibles and lower acquisition-related costs.
Reported financing results amounted to a cost of
€49 million (HY 2017: €58 million cost). Reported financing costs
include the financing component of employee benefits of
€2 million (HY 2017: €3 million). In addition, we recorded a
€3 million capital gain on the sale of a non-controlled equity
investment and a €1 million net fair value loss on non-controlled
The reported effective tax rate increased to 24.3%
(HY 2017: 22.3%), due to taxable gains on divestments. As a result,
total profit for the period increased 32% to €359 million (HY 2017:
€272 million) and diluted earnings per share increased 36% to €1.28
(HY 2017: €0.94).
Adjusted operating cash flow was €448 million (HY
2017: €441 million), an increase of 10% in constant currencies. The
cash conversion ratio improved to 99% (HY 2017: 95%).
Net capital expenditure was €88 million (HY 2017:
€96 million), or 4.4% of revenues. This amount included a €9
million benefit related to real estate disposals. Excluding these
disposals, capital expenditure as a percentage of revenues would
have been 4.8%.
Depreciation and amortization of internally
developed software and other assets was €95 million (HY 2017:
€96 million). Net working capital outflows were €10 million (HY
2017: outflow of €21 million).
Adjusted free cash flow was €263 million (HY 2017:
€257 million), up 2% overall and up 15% in constant currencies.
Paid financing costs increased to €84 million (HY 2017: €81
million) and included the final coupon on the €750 million senior
Eurobond which matured in April 2018. Corporate income taxes paid
increased 15% to €124 million, due to taxable gains on divestments
and the full utilization of remaining U.S. deferred tax assets
during the first half of 2018, as expected.
The net movement in restructuring provisions of €9
million related to cash spending of €12 million and additions of €3
million excluding non-benchmark items.
Dividends paid to shareholders during the first
half of 2018 totaled €182 million relating to the 2017 final
Acquisition spending, net of cash acquired and
including acquisition-related costs, was €21 million (HY 2017:
€303 million) relating to the acquisition of Firecracker in April
2018 and deferred payments and earnouts on acquisitions made in
prior years of €10 million.
Divestiture proceeds, net of cash disposed, were
€305 million (HY 2017: €77 million), relating to the disposals of
certain Swedish assets, Corsearch, ProVation, and a 10%-equity
interest in Medicom.
During the first six months, we settled €260
million of share buybacks.
Net Debt and Leverage
Net debt at June 30, 2018, was €1,957 million, a
reduction of €112 million since December 31, 2017, as a result of
free cash flow and disposal proceeds, partly offset by share
buybacks and dividends.
The leverage ratio, based on rolling twelve months
reported EBITDA, was 1.7x at June 30, 2018 (HY 2017: 1.9x).
About Wolters Kluwer
Wolters Kluwer (WKL) is a global leader in
professional information, software solutions, and services for the
health, tax & accounting, finance, risk & 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.
Ex-dividend date: 2018 interim dividend
date: 2018 interim dividend
date: 2018 interim dividend
date: 2018 interim dividend ADRs
Nine-Month 2018 Trading Update
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(0)172 641 470
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(0)172 641 407
Forward-looking Statements and
Other Important Legal Information
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.
Elements of this press release
contain or may contain inside information about Wolters Kluwer
within the meaning of Article 7(1) of the Market Abuse Regulation
PDF version of Press
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The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Wolters Kluwer N.V. via Globenewswire
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