Wolters Kluwer Full-Year 2008 Results
Resilient results: strong profitability and cash flow; good earnings growth and solid performance from subscription businesses
Amsterdam (February 25, 2009) - Wolters Kluwer, a market leading global information services and publishing company focused on professionals, today released its full-year 2008 results, which reflect a resilient company, supported by a strong financial foundation and a growing online and software portfolio designed to drive long-term profitable growth.
Highlights
- Ordinary EBITA margin improved 60 basis points to 20.1%
- Free cash flow improved 3% to €415 million in constant currencies (€395 million at actual rates)
- Diluted ordinary EPS rose 10% to €1.52 in constant currencies, at actual rates EPS rose 7% to €1.47
- 3% revenue growth in constant currencies; organic revenue growth flat
- Ordinary net income grew 4% in constant currencies
- 9% growth in higher margin electronic product revenue in constant currencies; electronic products now comprise 49% of total revenue, up from 47% in the prior year
- Increased dividend proposal to €0.65 per share
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Key Figures 2008
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(All amounts are in millions of euros unless otherwise indicated) |
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Twelve months ended December 31 |
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2008 |
2007 |
∆ |
∆ CC |
∆ OG |
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Revenue |
3,374 |
3,413 |
(1%) |
3% |
0% |
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Electronic revenue % of total |
49% |
47% |
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Operating profit |
503 |
546 |
(8%) |
(5%) |
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Ordinary EBITA |
678 |
667 |
2% |
5% |
0% |
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Ordinary EBITA margin (%) |
20.1% |
19.5% |
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Ordinary net income |
423 |
421 |
0% |
4% |
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Diluted EPS continuing operations |
1.09 |
1.08 |
1% |
4% |
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Diluted ordinary EPS (€) |
1.47 |
1.38 |
7% |
10% |
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Free cash flow |
395 |
405 |
(2%) |
3% |
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∆ - % Change; ∆ CC - % Change constant currency (EUR/USD 1.37); ∆ OG – Organic growth % |
Nancy McKinstry, CEO and Chairman of the Executive Board, commented on the company’s full-year performance:
“Wolters Kluwer delivered strong profitability and cash flow during 2008, despite challenging economic conditions. The results demonstrate the strong fundamentals of our business. We saw significant growth in our online and software solutions, strengthened our leading market positions with strategic acquisitions and launched enhanced technology platforms to provide further opportunities to embed our solutions in customer’s workflow. Our initiatives around operational efficiency, including Springboard, also provided support for our profitability.
“While market contractions were felt in all geographies, the company benefited from a resilient portfolio with a majority of revenue streams derived from subscription and other non-cyclical products, driven by legislative change, medical discoveries, and the increasing productivity needs of the professionals the company serves. Two thirds of revenues are subscription based with improving retention rates. The balance of the portfolio is comprised of transactional products including books, mortgage and corporate lending-based products, advertising and promotional services, and training. It is in these transactional areas that Wolters Kluwer experienced the pressure of the economic slow down.
“While we anticipate economic conditions will remain weak during 2009, we currently expect our ordinary EBITA margin to be broadly in line with 2008 levels and our ordinary diluted earnings per share to be between €1.41 and €1.46. This performance will be supported by our strong subscription base and growing online and software portfolio. We will continue to manage the business for the long term. Our strong commitment to our customers as well as our strong balance sheet supports our long-term strategy for growth.”
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Division overview (continuing operations) |
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(All amounts are in millions of euros unless otherwise indicated) |
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Twelve months ended December 31 |
2008 |
2007 |
∆ |
∆ CC |
∆ OG |
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Revenues |
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Health |
687 |
761 |
(10%) |
(3%) |
(5%) |
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Corporate & Financial Services (CFS) |
480 |
522 |
(8%) |
(1%) |
(2%) |
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Tax, Accounting & Legal (TAL) |
879 |
881 |
0% |
8% |
3% |
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Legal, Tax & Regulatory Europe (LTRE) |
1,328 |
1,249 |
6% |
6% |
2% |
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Total revenues |
3,374 |
3,413 |
(1%) |
3% |
0% |
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Ordinary EBITA |
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Health |
86 |
112 |
(24%) |
(24%) |
(28%) |
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Corporate & Financial Services (CFS) |
133 |
144 |
(8%) |
(1%) |
0% |
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Tax, Accounting & Legal (TAL) |
223 |
197 |
13% |
22% |
12% |
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Legal, Tax & Regulatory Europe (LTRE) |
274 |
253 |
9% |
8% |
3% |
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Corporate |
(38) |
(39) |
(4%) |
(4%) |
(4%) |
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Total Ordinary EBITA
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678 |
667 |
2% |
5% |
0% |
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∆ - % Change; ∆ CC - % Change constant currency (EUR/USD 1.37); ∆ OG – Organic growth % |
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Revenue growth components (continuing operations) |
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(All amounts are in millions of euros unless otherwise indicated) |
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Twelve months ended December 31 |
2008 |
2007 |
Change |
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Subscription & other non-cyclical revenues |
2,441 |
2,373 |
3% |
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Book revenues |
380 |
385 |
(1%) |
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Cyclical revenues |
622 |
655 |
(5%) |
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Impact of wholesaler de-stocking actions in healthcare |
(19) |
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Impact of loss of one significant pharmaceutical data contract |
(11) |
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Organic revenues1 |
3,413 |
3,413 |
0% |
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Net acquisition impact1 |
114 |
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Revenues (constant currencies)1 |
3,527 |
3,413 |
3% |
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Currency impact |
(153) |
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Reported revenues |
3,374 |
3,413 |
(1%) |
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1At constant currency (EUR/USD 1.37) |
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Wolters Kluwer revenue totaled €3,374 million in 2008, compared to €3,413 million in 2007, a rise of 3% at constant currencies. Organic revenue was in line with the previous year, while key strategic acquisitions contributed growth of 3%. The negative currency effect of 4% resulted in a reported revenue decline of 1%. Organic revenue growth in the subscription and other non-cyclical product portfolio, representing approximately 71% of group revenues, was 3%. In addition, customer demand for integrated workflow and software solutions continued to drive electronic revenue growth to 9%, in constant currencies. These results were offset by the adverse impact of the weakening economy on transaction volumes in mortgage and other corporate lending and business formation products, on customer spending for advertising and promotional products, and on demand for book products, particularly in the fourth quarter. Additionally, organic growth was impacted by two previously announced one time items, namely, reduced textbook orders by wholesalers as the channel adjusted inventory levels to reflect shifts in buying behavior and the loss of one significant pharmaceutical data contract.
Despite challenging market conditions the company’s profitability improved. Ordinary EBITA grew by 5% in constant currencies and the ordinary EBITA margin improved 60 basis points to 20.1% from 19.5% in 2007. This improvement was driven by strong growth in higher margin, online and software products, which now represent approximately half of total revenues, as well as the benefit of structural improvements made in prior years and operational excellence programs, including project Springboard. As a result of these improvements and the effect of the 2007 share buy-back program, ordinary diluted earnings per share grew 10% in 2008 to €1.52 in constant currencies.
In 2008, free cash flow, in constant currencies, totaled €415 million representing 3% growth. The resilient portfolio and strong cash generation continue to support a solid financial position. Debt refinancing of greater than €900 million completed early in 2008 at attractive rates extended the maturity profile out beyond 2013, ensuring a strong liquidity position and sufficient year-end headroom in excess of the company’s €500 million policy minimum.
Dividend
Wolters Kluwer will propose at the 2009 Annual General Meeting of Shareholders a dividend distribution of €0.65 per share over 2008, a 2% increase over last year, to be paid on May 4, 2009. A dividend of €0.65 corresponds with a dividend yield of 4.8% over the closing share price of December 31, 2008.
2009 Outlook is based on current market conditions
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Key Performance Indicators |
2009 Guidance |
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Ordinary EBITA margin |
Broadly in line with 2008 |
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Free cash flow1 |
± €350 million |
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Return on invested capital (after tax) |
≥ 8% |
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Ordinary diluted EPS1 |
€1.41 to €1.462 |
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¹ At constant currencies (EUR/USD = 1.47) |
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2 2008 EPS in 2007 constant currency (€1.52) has been restated to €1.43 using 2008 constant currency rate of 1.47 (2007 constant currency rate: 1.37 ). |
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