Wolters Kluwer N.V. · EURONEXT:WKL
Wolters Kluwer — FY2012 Earnings Presentation
49 slides from Wolters Kluwer's earnings presentation, Feb 20, 2013
Slide 1: Full-Year Results 2012
2012 Full-Year Results February 20, 2013 | Amsterdam Nancy McKinstry Chief Executive Officer and Chairman Boudewijn Beerkens Chief Financial Officer
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 Strategic Review 2013 Outlook Full-Year Results 2012 3
Slide 4: Highlights
Highlights Organic growth positive despite economic challenges in Europe – North America growth accelerates to 4% – Online, software and services revenue up 4% Ordinary EBITA margin improves to 21.8% Diluted ordinary EPS €1.58, up 1% in CC, in line with guidance Ordinary free cash flow €507
Slide 5: Agenda
Agenda Introduction Financial Review Strategic Review 2013 Outlook Full-Year Results 2012 5
Slide 6: Full-year 2012 results
Full-year 2012 results Results in line with guidance Continuing Operations (€ million) 2012 2011 ∆ ∆ CC ∆ OG Revenues 3,603 3,354 +7% +2% +1% Ordinary EBITA 785 728 +8% +2% 0% Diluted ordinary EPS (€) 1.58 1.47 +8% +1% Ordinary free cash flow 507 443 +15% +8% Net Debt/EBITDA 2.4x 3.1x ∆-% Change; ∆C
Slide 7: Revenues and EBITA by division
Revenues and EBITA by division Results supported by strong performance in Health and F&CS (€ million) 2012 2011 ∆ ∆ CC ∆ OG Revenue Legal & Regulatory 1,491 1,451 +3% -1% -2% Tax & Accounting 981 931 +5% +1% +1% Health 745 639 +17% +8% +5% Financial & Compliance Services 386 333 +16% +9% +5% Total R
Slide 8: Revenues by type
Revenues by type Electronic & service subscriptions continue to grow organically (€ million) 2012 2011 ∆ ∆ CC ∆ OG Electronic & service subscription 1,886 1,701 +11% +5% +3% Print subscription 445 472 -6% -8% -7% Other non-cyclical 342 301 +14% +7% +4% Recurring revenues 2,673 2,474 +8% +3% +1% CLS
Slide 9: Legal & Regulatory
Legal & Regulatory Corporate Legal Services partially offsets weakness in Europe North America accelerates to 5% organic growth, driven by Corporate Legal Services with 6% European revenues decline 6% on an organic basis. Successful cross- European product launches (Kleos, Navigator) Margins m
Slide 10: Tax & Accounting
Tax & Accounting Strong growth in software partially offset by publishing and bank products Software revenues up 4% organically, growing in all regions and segments US Publishing remains weak Europe: software growth offsets print decline Asia Pacific: acquisition of Acclipse advances our clo
Slide 11: Health
Health Organic growth accelerates to 5% and margin rises to group average Clinical Solutions sustains double-digit growth Medical Research sees 4% growth at Ovid offset by print subscription and advertising decline Professional & Education broadly flat Significant margin improvement due to o
Slide 12: Financial & Compliance Services
Financial & Compliance Services Organic growth of 5% driven by new and expanded customer contracts Finance, Risk & Compliance up 8% organically, supported by FRSGlobal Originations expands contracts for mortgage document services Audit sees double-digit organic growth due to new customer wins
Slide 13: Ordinary Net Income and EPS
Ordinary Net Income and EPS Diluted ordinary EPS up 1% in constant currencies despite increased tax rate Continuing operations (€ million) 2012 2011 ∆ ∆ CC Revenues 3,603 3,354 +7% +2% Ordinary EBITA 785 728 +8% +2% Ordinary EBITA margin (%) 21.8 21.7 Total financing results (121) (118) Equity-accou
Slide 14: IFRS Profit and Diluted EPS
IFRS Profit and Diluted EPS Diluted EPS up due to lower restructuring and prior year impairments (€ million) 2012 2011 ∆ Ordinary EBITA 785 728 +8% Amortization intangibles (192) (161) Non-benchmark costs (14) (139) Operating profit 579 428 +35% Total financing results (121) (118) Equity-accounted i
Slide 15: Ordinary free cash flow
Ordinary free cash flow Ordinary free cash flow up 8% in constant currencies Continuing operations (€ million) 2012 2011 ∆ ∆ CC Ordinary EBITA 785 728 +8% +2% Depreciation and amortization of other intangibles 120 106 Autonomous movements in working capital 15 23 Net capital expenditure (144) (143)
Slide 16: Movement in net debt
Movement in net debt Net debt reduced by increase in free cash flow and lower acquisition spend (€ million) 2012 FY 2011 FY Net debt at start of period (2,168) (2,035) Ordinary free cash flow from continuing operations 507 443 Springboard restructuring, net of tax (24) (39) Acquisition spending, inc
Slide 17: Acquisitions
Acquisitions Acquisitions meet or exceed financial criteria EPS accretive in Year ROIC exceeds Year Acquisitions, including: year 11) WACC 2008 MYOB, Addison, UpToDate, IntelliTax 2 2009 Coimbra, Axentis, Schleupen 1 Tax Compliance Software Solutions, FRSGlobal, 2010 3 Edital, Pharmacy OneSour
Slide 18: Balance Sheet
Balance Sheet Perpetual bond reclassified as short-term debt (€ million) Dec. 31, 2012 Dec. 31, 2011 Goodwill and intangible assets 4,651 4,729 Investment in equity accounted investees 59 65 Other non-current assets 265 311 Non-current assets 4,975 5,105 Current assets 1,581 1,586 Current liabilitie
Slide 19: Leverage
Leverage Net Debt/EBITDA ratio 2.4x, better than target of 2.5x Net Debt / EBITDA Ratio 3.2 3.1 2.9 2.7 2.4 2008 2009 2010 2011 2012 Full-Year Results 2012 19
Slide 20: Debt refinancing
Debt refinancing New benchmark size Eurobond announced; conditional call perpetual bond Financing Profile1) Intention to issue a benchmark size Eurobond 1,204 Intended use of proceeds: – Conditional call perpetual bond in H1 2013 701 – Refinance 2014 Eurobond Lower effective interest rate2.4 a
Slide 21: Dividend
Dividend Proposed increase to €0.69 for 2012 to be paid in cash Progressive dividend policy: seventh consecutive year of increase Moving to all cash dividend starting with 2012 dividend Dividend per share (€)1) 0.69 CAGR 3% 0.68 0.67 0.66 0.65 0.64 0.58 0.55 2005 2006 2007 2008 2009 2010 2011 20
Slide 22: Share buy-backs
Share buy-backs Intend to offset dilution from performance share issuance Scrip dividend ended 2012 share buy-back: €135 million completed in two tranches – Total of 10.1 million ordinary shares repurchased (average price €13.45) 2013 share buy-back of up to €20 million to offset dilution from
Slide 23: Summary
Summary Organic growth Increased margin +1% 21.8% Ordinary free cash flow1) Improved leverage +8% 2.4x 1) In constant currencies, 15% in reporting currencies Full-Year Results 2012 23
Slide 24: Agenda
Agenda Introduction Financial Review Strategic Review 2013 Outlook Full-Year Results 2012 24
Slide 25: Portfolio transformation
Portfolio transformation Wolters Kluwer, now focused on four global markets Acquired mainly digital businesses, incl. PCI, Provation, 2003 TeamMate, Addison, 2012 UpToDate, FRSGlobal, FinArch, Acclipse, Acquired Non-core Lexicomp, P1S revenue: €854 Education million Health 21% Tax & Acc LTB1) 27% He
Slide 26: Portfolio transformation
Portfolio transformation Today, 74% of our revenues come from electronic products and services, and we continue to balance and expand our geographic footprint Revenue by Media Format Revenue by Geography1) 31% 26% 36% 40% 44% 44% 48% 43% 52% 52% 16% 15% 15% 5% 6% 5% 13% 4% 4% 13% 54% 58% 54% 49% 51%
Slide 27: Financial performance
Financial performance Business transformation along with operational excellence programs are driving better financial performance Ordinary EBITA Margin (%) Ordinary free cash flow margin % 21.7% 21.8% 13.5% 13.2% 14.1% 19.5% 20.1% 19.9% 20.4% 11.8% 11.9% 11.7% 12.4% 15.5% 16.5% 10.1% 2005 2006 2007
Slide 28: Digital performance
Digital performance Our electronic products have proven to be resilient and growth is accelerating Organic growth electronic1) revenue 6% 5% 4% 4% 4% 2% 2007 2008 2009 2010 2011 2012 GDP growth2) 5.4% 2.8% -0.6% 5.1% 3.8% 3.3% 1) Electronic includes all online and software products 2) Source: IMF; 2
Slide 29: Our competitive advantage
Our competitive advantage Our integrated offerings allow us to deliver greater value to the customers we serve Integrated offerings Connected to our customers Answers Insights Productivity Full-Year Results 2012 29
Slide 30: Current market trends
Current market trends Today’s market trends remain favorable, especially for solutions that drive productivity Professionals face continued pressure to improve 1 efficiency and productivity Increase in volume and complexity of global regulation, 2 compliance and risk High growth of professionals in
Slide 31: Our Strategy
Our Strategy Our strategy aims to accelerate profitable growth Expand our leading, ■ Accelerate organic growth, high growth expand margin longer term, positions increase ROIC Deliver ■ Increase software, cloud, and solutions and mobile offerings insights ■ Increase proportion from faster growing geo
Slide 32: 1. Expand our leading, high growth positions
1. Expand our leading, high growth positions We will continue to allocate the majority of our investment to leading, high growth positions 2012 organic growth of units indicated % of Division Finance and Audit, Risk & +9% Financial & Compliance 49% Compliance1) Health 38% Clinical Solutions >10% Tax
Slide 33: 1. Expand our leading, high growth positions
1. Expand our leading, high growth positions We will continue to shift our geographic mix Rebalancing Europe Investment in fast-growing geographies - Investing in growth pockets: – Organic product development, e.g. • CLS Europe revenue up 23% • Online medical research in Chinese (Ovid) • Tax & A
Slide 34: 2. Deliver solutions and insights
2. Deliver solutions and insights Our investment is focused on solutions that drive productivity Increasingly Mobile Drives decisions and Tailored to the outcomes customer We will continue to invest 8-10% of revenue on innovation Near term priorities are in mobile and cloud-based applications, a
Slide 35: 2. Deliver solutions and insights
2. Deliver solutions and insights Three examples, all delivering increased productivity Increasingly Mobile Drives decisions and Tailored to the outcomes customer LWW Journals App program Global Integrator RBsource Health Tax & Accounting Legal & Regulatory 105 iPad apps to date Streamlines glob
Slide 36: 3. Drive efficiencies
3. Drive efficiencies Leveraging our excellent track in record in cost savings Springboard run-rate savings reached €217 million in 2012 Cumulative Springboard savings1,2) (€ million) 217 191 146 84 16 2008 2009 2010 2011 2012 1) Run rate savings in 2008 constant currencies (EUR/USD 1.37) 2) 2008-
Slide 37: 3. Drive efficiencies
3. Drive efficiencies We will continue to create global scale and savings in our operations Near term, cost savings expected to offset wage inflation and restructuring costs (included in ordinary EBITA) Sales Channel Process & Sourcing Technology Real Estate & Go to Market Organization Enhance g
Slide 38: Wolters Kluwer Strategy
Wolters Kluwer Strategy Our strategy is focused on realizing our growth potential We have successfully transformed to a digital business with global positions of strength Our strategy is focused on accelerating profitable growth: – Expand our leading, high growth positions – Deliver solutions an
Slide 39: Agenda
Agenda Introduction Financial Review Strategic Review 2013 Outlook Full-Year Results 2012 39
Slide 40: Divisional outlook 2013
Divisional outlook 2013 North America to see organic growth, driven by CLS Legal & Regulatory European markets to remain weak Margin contraction to be offset by other divisions Seasonal revenue pattern similar to 2012 Tax & Accounting Expect growth in tax software Margins broadly stable
Slide 41: Guidance 2013
Guidance 2013 Performance indicators FY2013 Guidance Ordinary EBITA Margin 21.5–22.0% Ordinary free cash flow ≥ €475 million Return on Invested Capital (after tax) ≥ 8% Diluted ordinary EPS Low single-digit growth Net financing result Approximately €130 million Benchmark tax rate Broadly in line wit
Slide 42: Thank you
Thank you Nancy McKinstry Chief Executive Officer and Chairman Boudewijn Beerkens Chief Financial Officer
Slide 43: Revised IAS19 Accounting Standard
Revised IAS19 Accounting Standard We will exclude pension financing credit or charge from ordinary figures Ordinary figures IFRS As Restated As Restated Reported for IAS19R1) Reported for IAS19R1) (€ million) 2012 Δ 2012 2012 Δ 2012 Ordinary EBITA/Operating profit 785 (8) 777 579 (8) 571 Margin (%)
Slide 44: Revenue and EBITA Breakdown
Revenue and EBITA Breakdown 2012 Revenues by division 2012 Ordinary EBITA1) 1) Excluding corporate costs of € 47 million Health Health 21% 20% Legal & Legal & Regulatory Regulatory F&CS F&CS 40% 9% 41% 11% Tax & Tax & Accounting Accounting 27% 31% 2012 Revenues by product type 2012 Revenues by media
Slide 45: Legal & Regulatory
Legal & Regulatory € million 2012 2011 Δ Δ CC Δ OG Revenues 1,491 1,451 +3% -1% -2% Ordinary EBITA 334 324 +3% -2% -4% Margin 22.4% 22.4% ∆-% Change; ∆CC-% Change constant currencies (EUR/USD 1.39); ∆OG–% Organic growth L&R Segments Media Formats Geographic Market AsiaPac & ROW CLS 1% 29% North Prin
Slide 46: Tax & Accounting
Tax & Accounting € million 2012 2011 Δ Δ CC Δ OG Revenues 981 931 +5% +1% +1% Ordinary EBITA 262 257 +2% -3% -3% Margin 26.7% 27.7% ∆-% Change; ∆CC-% Change constant currencies (EUR/USD 1.39); ∆OG–% Organic growth T&A Segments Media Formats Geographic Market Asia Pacific & ROW AsiaPac & 8% Print 14%
Slide 47: Health
Health € million 2012 2011 Δ Δ CC Δ OG Revenues 745 639 +17% +8% +5% Ordinary EBITA 163 126 +30% +19% +17% Margin 21.9% 19.7% ∆-% Change; ∆CC-% Change constant currencies (EUR/USD 1.39); ∆OG–% Organic growth Health Segments Media Formats Geographic Market AsiaPac & Profess'l & ROW Education Print Cl
Slide 48: Financial & Compliance Services
Financial & Compliance Services € million 2012 2011 Δ Δ CC Δ OG Revenues 386 333 +16% +9% +5% Ordinary EBITA 73 64 +15% +9% +2% Margin 19.0% 19.1% ∆-% Change; ∆CC-% Change constant currencies (EUR/USD 1.39); ∆OG–% Organic growth F&CS Segments Media Formats Geographic Market AsiaPac & Print ROW Trans
Slide 49: Revenues by region
Revenues by region Acceleration in North America offsets deterioration in Europe Revenues – Continuing (€ million) 2012 2011 ∆ ∆ CC ∆ OG North America 1,933 1,689 +14% +6% +4% Europe 1,439 1,474 -2% -3% -3% AsiaPac & ROW 231 191 +21% +12% +8% Total Revenues – Continuing operations 3,603 3,354 +7% +2