Wolters Kluwer 2022 Nine-Month Trading
Update
November 2, 2022 – Wolters Kluwer (EURONEXT:
WKL), a global leader in professional information, software
solutions and services, today releases its scheduled 2022
nine-month trading update.
Highlights
- Full-year 2022 guidance reiterated.
- Nine-month revenues up 6% organically.
- Recurring revenues (81% of total revenues) up 7% organically;
non-recurring revenues up 4%.
- Digital & services revenues (93% of total revenues) up 7%
organically; print declined 4%.
- Expert solutions revenues (56% of total) up 9%
organically.
- Nine-month adjusted operating profit up 6% in constant
currencies.
- Nine-month adjusted operating profit margin up 50 basis
points.
- Nine-month adjusted free cash flow down 1% in constant
currencies.
- Net-debt-to-EBITDA ratio 1.3x as of September 30,
2022.
- Share buyback 2022: approx. 76% completed to date; on
track to reach €1 billion by year-end.
- Share buyback 2023: mandate signed to repurchase up to
€100 million in January and February 2023.
Nancy McKinstry, CEO and Chair of the Executive Board,
commented: “Through the first nine months of the year, we have seen
sustained strong organic growth in recurring revenues, led by our
expert solutions. As expected, organic growth in transactional and
other non-recurring revenues slowed in the face of challenging
comparables and deteriorating economic conditions. We are investing
at high levels in product innovation and in our talented workforce,
and I am confident in reiterating our outlook for the full
year.”
Nine Months to September 30, 2022
Total revenues increased 15%, driven to a large extent by the
stronger U.S. dollar (€/$1.06 vs. €/$1.20). In constant currencies,
revenues increased 6%, with the impact of disposals (mainly the
U.S. Legal Education business in December 2021) exceeding the
impact of acquisitions on revenues. Excluding currency,
acquisitions and disposals, organic revenue growth was 6% (9M 2021:
6%).
Recurring revenues (81% of total revenues) sustained recent
momentum, growing 7% organically in the first nine months (9M 2021:
5%). Non-recurring revenues, which include transactional revenues
in Governance, Risk & Compliance (GRC), on-premise software
licence and implementation fees, print books, and other ad hoc
revenues, grew 4% organically (9M 2021: 9%). Digital and services
revenues (93% of total revenues) grew 7% organically, led by expert
solutions revenues up 9%. Total print revenues decreased 4%
organically (9M 2021: 5% growth), with print subscriptions
down 7% (9M 2021: decline of 6%) and print books up 2%
(9M 2021: 20% growth).
Revenues from North America (64% of total revenues) grew 6%
organically (9M 2021: 7%) while revenues from Europe (28% of total)
grew 5% (9M 2021: 6%). Revenues from Asia Pacific & Rest of
World (8% of total) grew 15% organically (9M 2021: 2%), sustaining
the strong improvement seen in the first half.
Nine-month adjusted operating profit increased 17% overall and
6% in constant currencies. The adjusted operating profit margin
increased 50 basis points, largely driven by a favorable currency
mix and an improvement in the Legal & Regulatory margin.
Group-wide adjusted operating costs increased 14% overall and 6% in
constant currencies year-on-year, reflecting progress on hiring and
increased investment in product development and sales and
marketing.
Health: Nine-month revenues increased 5% in
constant currencies and 5% on an organic basis (9M 2021: 9%).
Clinical Solutions achieved 8% organic growth, supported by strong
renewals and new customer wins for UpToDate and our drug
information solutions. Patient engagement tool Emmi sustained high
single-digit organic growth driven by improved retention,
upselling, and new customer wins. Health Learning, Research &
Practice recorded 2% organic growth against a challenging
comparable (9M 2021: 11%) mainly related to the ASCO publishing
contract (which began in 2021). Print book organic revenue growth
moderated to 13%, reflecting a decline in the third quarter.
Medical research platform Ovid achieved good subscription renewals,
while journal advertising revenues exhibited softness in the third
quarter. On September 30, 2022, we acquired IJS Publishing Group, a
UK-based provider of peer-reviewed open access medical journals
focused on surgery.
Tax & Accounting: Nine-month revenues
increased 9% in constant currencies and 9% organically (9M 2021:
6%). Corporate Performance, which comprises CCH Tagetik and our
U.S. Corporate Tax unit, delivered 10% organic growth, driven by
cloud software subscriptions and implementation services. The North
American Professional Tax & Accounting business recorded 11%
organic growth, partly reflecting favorable timing and
non-recurring factors, but underpinned by continued strong
performance by our cloud-based CCH Axcess platform. TeamMate, our
internal audit solution, delivered robust single-digit organic
growth, driven by its cloud solution. Professional Tax &
Accounting Europe sustained 6% organic growth.
Governance, Risk & Compliance: Nine-month
revenues increased 6% in constant currencies, including the
acquisitions of LicenseLogix in October 2021 and IDS in April 2022.
On an organic basis, growth was 5% (9M 2021: 5%). Legal
Services recorded significantly slower organic growth of 4% (9M
2021: 11%), with recurring revenues up 6% but Legal Services
transactional revenues broadly flat against a challenging
comparable (9M 2021: 22%). Financial Services revenues
increased 6% on an organic basis (9M 2021: decline of 3%), driven
by recurring software maintenance and cloud subscription revenues
in Compliance Solutions, including at eOriginal. Financial Services
transactional revenues were flat (9M 2021: decline of 12%), as
sharply lower mortgage-related transaction volumes and the absence
of U.S. PPP1 transactional revenues were offset by double-digit
growth in transactional revenues in Lien Solutions. Finance, Risk
& Reporting recorded 4% organic growth, as growth in
professional services around customer implementations was partly
offset by the impact of discontinuing business in Russia and
Belarus.
Legal & Regulatory: Nine-month revenues
increased 1% in constant currencies, mainly reflecting the disposal
of the U.S. Legal Education business in December 2021. Organic
growth was 5% (9M 2021: 4%), lifted by sustained strong organic
growth in software. EHS/ORM2 and Legal Software grew 21% (9M 2021:
6%), driven by strong growth in cloud revenues across the board and
higher non-recurring on-premise license and implementation fees for
the Enablon EHS/ORM software. Legal & Regulatory Information
Solutions revenues grew 2% organically (9M 2021: 3%), with digital
solutions sustaining 7% organic growth, but print products
returning to historic rates of decline. The sale of our legal
publishing assets in Spain and France, agreed in December 2021 and
expected to complete in 2022, remains subject to the Spanish
antitrust process.
Corporate costs increased 10% in constant
currencies in the first nine months, due to higher personnel costs
and increased spending on market research and various projects.
Cash Flow and Net Debt
Nine-month adjusted operating cash flow was flat in constant
currencies due to lower cash conversion (103%) compared to a year
ago (108%), mainly as a result of higher capital expenditure and
lower working capital inflows. Adjusted free cash flow decreased 1%
in constant currencies, with higher cash taxes broadly offset by
lower net cash outflows related to restructuring.
Total cash dividends paid to shareholders amounted to €401
million in the first nine months. Total acquisition spending, net
of cash acquired and including transaction costs, was €69 million
in the first nine months, primarily relating to the acquisition of
IDS in April 2022. Divestiture proceeds, net of cash disposed and
transaction costs, were negligible. In the first nine months, €618
million in cash flow was deployed towards the 2022 share repurchase
program.
As of September 30, 2022, net debt stood at €2,243 million
(compared to €2,131 million at year-end 2021). Twelve months’
rolling net-debt-to-EBITDA was 1.3x compared to 1.4x at year-end
2021. In September, we issued a new €500 million Eurobond with a
4-year term and 3.0% annual coupon.
ESG Developments
In the year to date, we have made progress on several ESG
objectives. In September, we launched our annual all-employee
compliance training, covering IT and cybersecurity, data privacy,
and business ethics. As of the end of October, 99% of employees
globally have completed the training program. Our annual engagement
survey was kicked off in October. To support employee engagement
and diversity, equity, inclusion, and belonging3, we have launched
a 12-month inclusive leadership program for executives and people
managers and we have started piloting a series of voluntary,
employee-led global inclusion networks. On the environmental front,
we continued to execute on two key programs that reduce our
emissions: as of September 30, 2022, our real estate
rationalization program has achieved a 3% reduction in our global
office footprint (m2) compared to December 31, 2021, while our
cloud migration program has decommissioned approximately 750
on-premise servers. We have also made progress on the data
collection required to measure certain categories of Scope 3
emissions in line with our stated objectives of aligning to the
recommendations of the Taskforce on Climate-Related Financial
Disclosures (TCFD) and of ultimately setting science-based
targets.
Share Buyback Programs
Early in the year, we announced a 2022 share buyback program of
€600 million, which was later expanded to €1 billion on August 3,
2022. In the year to date, through October 31, 2022, we have
repurchased €756 million in shares (7.7 million shares at an
average price of €97.60). A third party mandate is in place to
complete the final tranche of €244 million in share buybacks in the
period starting November 3, 2022, up to and including December 28,
2022.
Looking ahead to 2023, we have this week signed a third-party
mandate to execute up to €100 million in share buybacks for the
period starting January 2, 2023, up to and including February 20,
2023.
Assuming global economic conditions do not deteriorate
substantially, we continue to believe this level of share buybacks
leaves us with ample headroom to support our dividend plans, to
sustain organic investment, and to make selective acquisitions. The
share repurchases may be suspended, discontinued, or modified at
any time. Third party mandates are governed by the limits of
relevant laws and regulations (in particular Regulation (EU)
596/2014) and Wolters Kluwer’s Articles of Association. Repurchased
shares are added to and held as treasury shares and are either
cancelled or held to meet future obligations arising from
share-based incentive plans. We remain committed to our
anti-dilution policy which aims to offset the dilution caused by
our annual incentive share issuance with share repurchases.
Share Cancellation 2022
On August 31, 2022, we cancelled 5.0 million shares that were
held in treasury, as approved by shareholders at the AGM in April
2022. Following this cancellation, the number of issued ordinary
shares is 257,516,153. As of September 30, 2022, 252.3 million
shares were outstanding and 5.2 million shares were held in
treasury.
Full-Year 2022 Outlook
We reiterate our full-year guidance as provided on August 3,
2022. See table below. Following clarification of new U.S. tax
rules on the capitalization of research and development expenses,
we now expect adjusted free cash flow in constant currencies to be
near the top of our guided range. We continue to expect organic
momentum to slow moderately in the fourth quarter, largely due to
challenging comparables.
Full-Year 2022 Outlook |
Performance indicators |
2022 Guidance |
2021 Actual |
Adjusted operating profit margin* |
26.0%-26.5% |
25.3% |
Adjusted free
cash flow |
€1,025-€1,075 million |
€1,010 million |
ROIC* |
14%-15% |
13.7% |
Diluted adjusted EPS growth |
Mid- to high-single-digit growth |
€3.38 |
*Guidance for adjusted operating profit margin and ROIC is in
reporting currency and assumes an average EUR/USD rate in 2022 of
€/$1.05. Guidance for adjusted free cash flow and diluted adjusted
EPS is in constant currencies (€/$ 1.18). Guidance reflects share
repurchases of €1 billion in 2022. |
If current exchange rates persist, the U.S. dollar rate will
have a positive effect on 2022 results reported in euros. In 2021,
Wolters Kluwer generated more than 60% of its revenues and adjusted
operating profit in North America. As a rule of thumb, based on our
2021 currency profile, each 1 U.S. cent move in the average €/$
exchange rate for the year causes an opposite change of
approximately 2 euro cents in diluted adjusted EPS4.
We include restructuring costs in adjusted operating profit. We
continue to expect that restructuring costs will be within our
normal range of €10-€15 million (FY 2021: €6 million). We continue
to expect adjusted net financing costs5 in constant currencies to
be approximately €55 million, reflecting higher interest income. In
addition, assuming current exchange rates persist, we would expect
to incur a (non-cash) foreign exchange loss (in net financing
result) of around €30 million on intercompany balances and hedging
at year-end.
We now expect the benchmark tax rate on adjusted pre-tax profits
to be at the lower end of our guided range of 23.0%-24.0% (FY 2021:
21.5%) due to an anticipated one-time release of a provision in the
fourth quarter. Capital expenditure is expected to increase
year-on-year but to remain within our normal range of 5.0%-6.0% of
total revenues (FY 2021: 5.0%). We continue to expect the full-year
cash conversion ratio to be in the range of 100%-105% (FY 2021:
112%).
Our guidance assumes no additional significant change to the
scope of operations. We may make further acquisitions or disposals
which can be dilutive to margins, earnings, and ROIC in the near
term.
2022 Outlook by Division
Health: we continue to expect organic growth to
slow from 2021 levels (mainly due to the absence of a contract win
of the size of the 2021 ASCO deal) and the adjusted operating
profit margin to improve.
Tax & Accounting: we continue to expect
organic growth to accelerate from 2021 levels and the adjusted
operating profit margin to improve.
Governance, Risk & Compliance: we continue
to expect organic growth to slow from 2021 levels, mainly due to an
expected decline in transactional revenues in the second half. We
expect the adjusted operating profit margin to improve for the full
year.
Legal & Regulatory: we continue to expect
organic growth to improve on 2021 levels. We expect the full-year
adjusted operating profit margin to decline modestly due mainly to
the absence of a one-off pension amendment recorded in 2021.
About Wolters Kluwer
Wolters Kluwer (EURONEXT: WKL) is a global leader in
professional information, software solutions, and services for the
healthcare; tax and accounting; governance, risk and compliance;
and legal and regulatory sectors. We help our customers make
critical decisions every day by providing expert solutions that
combine deep domain knowledge with technology and services.
Wolters Kluwer reported 2021 annual revenues of €4.8 billion.
The group serves customers in over 180 countries, maintains
operations in over 40 countries, and employs approximately 20,000
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, visit www.wolterskluwer.com, follow us on
Twitter, Facebook, LinkedIn, and YouTube.
Financial CalendarFebruary 22, 2023
Full-Year 2022 ResultsMarch 8,
2023
Publication of 2022 Annual ReportMay 3, 2023
First-Quarter 2023
Trading UpdateMay 10, 2023
Annual General Meeting of ShareholdersMay 12,
2023
Ex-dividend date: 2022 final dividend
May 15, 2023
Record date: 2022 final dividend
June 6, 2023
Payment date: 2022 final dividend ordinary shares
June 13, 2023
Payment date: 2022 final dividend ADRs
August 2, 2023
Half-Year 2023 Results
August 29, 2023
Ex-dividend date: 2023 interim dividend
August 30, 2023 Record
date: 2023 interim dividend
September 21, 2023 Payment date: 2023
interim dividend
September 28, 2023 Payment date: 2023
interim dividend ADRs
November 1, 2023 Nine-Month
2023 Trading Update
Media |
Investors/Analysts |
Gerbert van Genderen
Stort |
Meg Geldens |
Corporate
Communications |
Investor
Relations |
t +31 172 641
230 |
t +31 172 641
407 |
press@wolterskluwer.com |
ir@wolterskluwer.com |
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; conditions created by global pandemics,
such as COVID-19; 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 (596/2014/EU).
Trademarks referenced are owned by Wolters Kluwer N.V. and its
subsidiaries and may be registered in various countries.
1 PPP = U.S. Paycheck Protection Program of 2020 and 2021. GRC’s
Compliance Solutions supported banks in lending under this program.
2 EHS/ORM = environmental, health & safety and operational risk
management.3 Belonging measures the extent to which employees
believe they can bring their authentic selves to work and be
accepted for who they are. Belonging and engagement scores are
measured by a third party (Microsoft GLINT).4 This rule of thumb
excludes the impact of exchange rate movements on intercompany
balances, which is accounted for in adjusted net financing costs in
reported currencies and determined based on period-end spot rates
and balances.
5 Adjusted net financing costs include lease interest charges.
Guidance for adjusted net financing costs in constant currencies
excludes the impact of exchange rate movements on currency hedging
and intercompany balances.
- 2022.11.02 Wolters Kluwer 2022 Nine-Month Trading Update
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