Nancy McKinstry, CEO and Chairman of the Executive Board, commented on the company’s third quarter trading update: “I am pleased to announce the delivery of strong operating profitability and cash flow for the nine months ended September 2009. While challenging trading conditions in the third quarter changed little as compared to the first half of 2009, our portfolio continued to deliver resilient results. Subscription products delivered solid performance year-to-date while new sales and transactional revenues continue to be pressured from weak economic conditions. Despite these conditions, our professional customers continue to demand integrated workflow and software solutions driving 9% growth in electronic revenue. The ordinary EBITA margin was strong reflecting continued migration of revenues from print to electronic products, the contribution of prior year acquisitions, and the benefits of the Springboard operational excellence program. The Springboard program has exceeded expectations to date giving us further confidence in achieving our full-year ordinary EBITA margin guidance. Today we are announcing the expansion of the program which will generate higher run rate cost savings over the life of the program. Based on our performance for the first nine months of 2009, we are confident to reiterate each of the components of our full-year 2009 guidance.”
“Additionally, I am pleased to announce today our strategy for Maximizing Value for Customers, which focuses on generating even greater value for our customers and shareholders. Our strategy builds on the strong foundation of the transformation of Wolters Kluwer and leverages our global leading market positions. We are well positioned to drive growth by creating information-enabled solutions and networks that help our customers deliver results efficiently. Macro trends leading to increased regulation, more compliance complexity and greater focus on productivity of our customers, underpin the steadfast pursuit of our strategy to maximize value for customers and shareholders.”
Underlying subscription and other non-cyclical revenues, over 70% of total revenues, were materially in line with the prior year. Subscription revenues delivered solid performance with retention rates largely stable across the business. New subscription sales and other non-cyclical products, which include tax form clicks and related bank products, continued to be impacted by recessionary market conditions.
Transactional product revenues, which make up approximately 30% of total revenues, continue to remain under pressure. Cyclical revenues in the Corporate & Financial Services division make up approximately 5% of total Wolters Kluwer revenue and include products related to transaction volumes in the M&A, IPOs, UCC lending, mortgage, and indirect lending markets. As expected, these revenues continued to be under pressure due to reduced transaction volumes in the market as compared to the prior year, however, negative trends in the third quarter have eased slightly as compared to trends at the half year. Advertising and pharmaceutical promotion revenues, approximately 5% of total half year revenue, continued to be challenged in the Health business, France, and the Netherlands. Other cyclical revenues represent approximately 9% of total revenue and include training, consulting, and transport services. Performance in these product lines also continued to be weak. Book products which make up approximately 9% of revenues performed largely in line with the prior year.
Wolters Kluwer continues its commitment to invest approximately 8% to 10% of its revenues in new and enhanced products to support long-term profitable growth and as a result, several new products were launched in the third quarter of 2009. Health & Pharma Solutions released ProVation® Care Plans, software for nurses, pharmacists, and other caregivers, which provides actionable evidence needed to improve patient safety and demonstrate compliance with regulatory standards. Corporate & Financial Services strengthened its Wiz Sentri: Anti-Fraud solution to help U.S. and U.K. financial institutions prevent crimes tied to cash management activities. Tax, Accounting & Legal launched IntelliConnect China GOLD – Global Online Legal Database. Legal, Tax & Regulatory Europe launched Itinera Luris, a litigation management workflow solution that integrates with Pluris, the online legal database for professionals.