1) In 2008 constant currencies (EUR/USD 1.37)
Net finance costs were €118 million (2010: €129 million), supported by currency benefits. The effective tax rate on ordinary income before tax increased to 26.8%, higher than the expected 26%, as the mix of profits shifted to higher tax regions such as the United States.
Diluted ordinary EPS increased 3% to €1.47. In constant currencies (EUR/USD 1.33), diluted ordinary EPS was €1.51, at the upper end of the guidance range of €1.46-1.51. Diluted ordinary EPS including discontinued operations was €1.52 in constant currencies, in line with guidance of €1.50-€1.55.
Operating profit, which includes amortization of goodwill and exceptional items, declined to €436 million, and profit for the year to €242 million, largely due to the increase in exceptional costs relating to the Springboard program.
The cash conversion rate increased to 98% (2010: 96%) due to working capital improvements. Ordinary free cash flow was €443 million, up 1% at constant currencies, despite an increase in corporate income tax paid.
Net debt increased to €2,168 million (2010: €2,035 million) due to acquisition spending, cash dividends and share buy-backs, partly offset by solid cash flow from operating activities. As a result, the net-debt-to-EBITDA ratio increased to 3.1. This ratio includes the exceptional expenses of the Springboard program of €104 million. Excluding the exceptional expenses of the Springboard program, the net-debt-to-EBITDA ratio was 2.7 in 2011 (2010: 2.5). With Springboard now finalized, the company expects net-debt-to-EBITDA to reduce to 2.5 over the medium term.
Dividend and share buy-back
In accordance with its progressive dividend policy, at the 2012 Annual General Meeting of Shareholders, Wolters Kluwer will propose a dividend distribution of €0.68 per share, a 1.5% increase over last year, to be paid on May 15, 2012. On May 11, 2012, the stock dividend conversion rate will be set on the basis of the volume weighted average share price of Wolters Kluwer during the period from May 7 up to and including May 11, 2012.
In 2011, the company successfully executed a share buy-back program of €100 million with a total of 7.2 million of ordinary shares purchased at an average stock price of €13.88. The total number of shares outstanding as of 31 December 2011 was 296.6 million.
While solid cash flow performance continues to support the company’s objective to invest for long-term growth, it also presents an opportunity to provide additional shareholder returns. As such, the company announced its intention to execute a new share buy-back program of up to €100 million in 2012.
In July 2011, Wolters Kluwer announced the planned divestment of its pharma business and took an impairment charge on the value of the related assets. Profit for the year, including the results of discontinued operations, was €118 million (further details are provided on page 24). In December 2011, this divestment was partially completed with the sale of Marketing & Publishing Services (MPS). Disposal of the remaining assets is in process. Revenues and ordinary EBITA of the discontinued operations are shown below.