CorporateInvestorsFebruary 24, 2016

Wolters Kluwer 2015 Full-Year Report

Wolters Kluwer released its 2015 full-year results.

Wolters Kluwer, a global leader in professional information services, today released its 2015 Full-Year Results. Download the full report.


  • Revenues up 3% in constant currencies and up 3% organically.
    • Digital & services revenues grew 5% organically (83% of total revenues).
    • Recurring revenues grew 3% organically (76% of total).
    • North America and Asia Pacific drove organic growth.
    • Leading, high growth positions grew 7% organically (51% of total).
  • Adjusted operating profit margin improves to 21.4%, in line with guidance.
  • Diluted adjusted EPS €1.96, up 5% in constant currencies, in line with guidance.
  • Adjusted free cash flow €647 million, up 7% in constant currencies, better than expected.
  • Return on invested capital increased to 9.3% (2014: 8.5%).
  • Net-debt-to-EBITDA improved to 1.7x at year-end (2014: 2.1x).
  • Proposed full-year total dividend of €0.75 per share, up 6%.
  • Outlook 2016: diluted adjusted EPS expected to grow at mid-single-digit rate in constant currencies.
  • Announcing intention to buy back up to €600 million shares over three years (2016-2018), including anti-dilution buyback.

Nancy McKinstry, CEO and Chairman of the Executive Board, commented“I am pleased to report we accelerated organic growth to 3%, despite the tough comparable we faced in the fourth quarter and the challenges that remain in some of our European markets. Our strategy of expanding our leading, high growth positions, delivering innovations that help our customers excel, and driving efficiencies, has supported our growth and increased margins and returns. We are confident we can deliver another year of margin improvement and earnings growth in 2016.”

Key figures 2015 full-year – year ended December 31 

€ million, unless otherwise stated 2015 2014 ∆ CC ∆ OG
Business performance – benchmark figures
Revenues 4,208 3,660 +15% +3% +3%
Adjusted operating profit 902 768 +17% +2% +3%
Adjusted operating margin 21.4% 21.0%
Adjusted net profit 583 470 +24% +4%
Diluted adjusted EPS (€) 1.96 1.57 +25% +5%
Adjusted free cash flow 647 516 +26% +7%
Net debt 1,788 1,897 -6%
Return on invested capital (ROIC) 9.3% 8.5%
IFRS results
Revenues 4,208 3,660 +15%
Operating profit 667 569 +17%
Profit for the year 423 474 -11%
Diluted EPS (€) 1.42 1.58 -10%
Net cash from operating activities 843 663 +27%

∆: % Change; ∆ CC: % Change constant currencies (EUR/USD 1.33); ∆ OG: % Organic growth. Benchmark (adjusted) figures are performance measures used by management. See Note 5 for a reconciliation from IFRS to benchmark figures. IFRS: International Financial Reporting Standards as adopted by the European Union.

Full-year 2016 outlook

Our guidance for full-year 2016 is provided in the table below. We expect to deliver margin improvement and to grow diluted adjusted EPS at a mid-single-digit rate in constant currencies this year.

2016 outlook

Performance indicators 2016 Guidance
Adjusted operating profit margin 21.5%-22.0%
Adjusted free cash flow €600-€625 million
Return on invested capital > 9%
Diluted adjusted EPS Mid-single-digit growth

Guidance for adjusted free cash flow and diluted adjusted EPS is in constant currencies (EUR/USD 1.11). Guidance for EPS growth assumes the announced share repurchases are equally spread over 2016-2018. Adjusted operating profit margin and ROIC are in reported currency.

Our guidance is based on constant exchange rates. In 2015, Wolters Kluwer generated more than half of its revenues and adjusted operating profit in North America. As a rule of thumb, based on our 2015 currency profile, a 1 U.S. cent move in the average EUR/USD exchange rate for the year causes an opposite change of approximately one and a half euro-cents in diluted adjusted EPS.

Restructuring costs, which are included in adjusted operating profit, are expected to start returning to normal levels: we expect these costs to be around €15-€25 million in 2016 (2015: €46 million). We expect adjusted net financing costs of approximately €105 million, excluding the impact of exchange rate movements on currency hedging and intercompany balances. We expect the benchmark effective tax rate to return to the range of 27%-28% in 2016. We expect a cash conversion ratio of approximately 95%, with capital expenditure rising to around 5% of total revenue.

Our guidance assumes no significant change in the scope of operations. We may make further disposals which could be dilutive to margins and earnings in the near term. 

2016 outlook by division

The outlook below reflects the new divisional structure introduced in August 2015.

  • Health: We expect another year of good organic revenue growth in Health, supported by robust organic growth in Clinical Solutions (the Clinical Effectiveness and Clinical Software Solutions units) and a gradually improving trend in Health Learning, Research & Practice. Margins are expected to improve slightly as we continue to invest to drive organic growth.
  • Tax & Accounting: We expect underlying revenue growth to improve slightly in 2016, driven by continued mix shift towards software solutions. The first half is, however, expected to see more muted growth due to normal seasonal sales patterns. Margins are expected to ease in the first half, but to be maintained for the full year.
  • Governance, Risk & Compliance: We expect positive, but slower organic growth in 2016, as the division faces challenging comparables for transactional and non-recurring license and implementation fees, particularly in the first half. Margins are expected to improve slightly.
  • Legal & Regulatory: For the full-year, we expect organic revenue decline to be similar to 2015, with print trends continuing to outweigh growth in digital. Organic growth in the first half is expected to benefit from timing and one-off factors. Margins are expected to improve due to lower restructuring costs. Efficiency savings are expected to fund wage inflation and increased product investment.

Strategic priorities 2016-2018

Every three years, we review and update our strategic priorities and this year we are commencing our strategic plan for 2016-2018. This plan builds on the strategic direction we have been following in the past three years during which we prioritized capital allocation towards specific leading, high growth businesses and focussed on delivering solutions that bring insights and productivity benefits to our customers. We also stepped up efforts to drive operating efficiencies. This strategy has delivered accelerated organic growth in the past two years and has improved operating margins and return on invested capital in 2015. Our 2016-2018 strategic plan aims to sustain and, in the long run, further improve our organic growth rate, margins and returns as we continue to focus on growing value for customers, employees and shareholders. Our strategic priorities for the next three years are:

  • Expand market coverage: We will continue to allocate the majority of our capital towards leading growth businesses and digital products, and extend into market adjacencies and new geographies where we see the best potential for growth and competitive advantage. Expanding our market reach will also entail allocating funds to broaden our sales and marketing coverage in certain global markets. We intend to support this organic growth strategy with value-enhancing acquisitions whilst continuing our program of small non-core disposals.

  • Deliver expert solutions: Our plan calls for increased focus on expert solutions that combine deep domain knowledge with specialized technology and services to deliver expert answers, analytics and productivity for our customers. To support digital growth across all divisions, we intend to accelerate our ongoing shift to global platforms and to cloud-based integrated solutions that offer mobile access. Our plan is to also expand our use of new media channels and to create an all-round, rich digital experience for our customers. Investment in new and enhanced products will be sustained in the range of 8-10% of total revenues in coming years.

  • Drive efficiencies and engagement: We intend to continue driving scale economies while improving the quality of our offerings and agility of our organization. These operating efficiencies will help fund investment and wage inflation, and support a rising operating margin over the long term. Through increased standardization of processes and technology planning, and by focusing on fewer, global platforms and software applications, we expect to free up capital to reinvest in product innovation. Supporting this effort are several initiatives to foster employee engagement.

Leverage target and financial policy

Wolters Kluwer uses its cash flow to invest in the business organically or through acquisitions, to maintain optimal leverage, and provide returns to shareholders. We regularly assess our financial position and evaluate the appropriate level of debt in view of our expectations for cash flow, investment plans, interest rates and capital market conditions. Over the past four years, our leverage has improved significantly and we finished 2015 with net-debt-to-EBITDA of 1.7x, below our target of 2.5x. While we may temporarily deviate from our leverage target at times, we continue to believe that, in the longer run, a net-debt-to-EBITDA ratio of around 2.5x remains appropriate for our business given the high proportion of recurring revenues and resilient cash flow.

Dividend policy and 2015 dividend

Wolters Kluwer has a progressive dividend policy under which the company aims to increase the dividend per share each year.

In July 2015, we announced our intention to move to semi-annual dividend frequency, starting with an interim dividend for 2015. The 2015 interim dividend was set at 25% of the prior year’s total dividend, or €0.18 per ordinary share, and was distributed on October 12, 2015.

In light of our current below-target leverage and our strong 2015 operating performance, we will propose a final dividend of €0.57 per ordinary share at the 2016 Annual General Meeting of Shareholders. If approved, this will bring the total dividend over the 2015 financial year to €0.75 per share, an increase of 4 eurocents per share or 6% compared to the dividend for the 2014 financial year (2014: €0.71). If approved, the 2015 dividend will mark the 10 th consecutive annual increase in dividend per share.

Under our progressive dividend policy, we remain committed to increase the total dividend per share each year, with the annual increase dependent on our financial performance, market conditions, and our need for financial flexibility.

For 2016, we intend to again set the interim dividend at 25% of prior year total dividend.

Dividend dates for 2016 are provided on page 34. Shareholders can choose to reinvest both interim and final dividends by purchasing additional Wolters Kluwer shares through the Dividend Reinvestment Plan (DRIP) provided by ABN AMRO Bank NV.

Anti-dilution policy and share buyback program

Wolters Kluwer has a policy to offset the dilution caused by our annual performance share issuance with share repurchases. Including these anti-dilution repurchases, we announce today our intention to buy back shares for up to €600 million over the period 2016-2018. Assuming global economic conditions do not deteriorate substantially, we believe this level of cash return will leave us ample headroom for investment in the business, including acquisitions.

Full-year 2015 results

Benchmark figures

Group revenues increased 15% overall to €4,208 million, up 3% in constant currencies. Excluding both the impact of exchange rate movements and the effect of acquisitions and divestitures, organic revenue growth was also 3%, an improvement on the prior year (2014: 2%). The effect of 2014 and 2015 acquisitions on revenues was almost entirely offset by the effect of disposals.

Revenues from North America (59% of total revenues) increased 5% organically (2014: 3%) with all divisions delivering improved organic growth in this region. Revenues from Europe (33% of total revenues) declined 1% on an organic basis (2014: 0%). Revenues from Asia Pacific and Rest of World (8% of total revenues) grew 4% organically (2014: 7%).

Adjusted operating profit increased to €902 million, up 17% overall and up 2% in constant currencies. The adjusted operating margin increased 40 basis points to 21.4% (2014: 21.0%), in line with our guidance range (21.0%-21.5%). The margin improvement reflects favorable mix shift, efficiency savings and currency, partially offset by increased restructuring, investment and other costs. Full-year restructuring costs increased to €46 million (2014: €36 million), higher than we had previously estimated (€35 million) as additional measures were initiated in the fourth quarter. Approximately 65% of restructuring costs in 2015 were in Legal & Regulatory, with the remainder spread across the other divisions.

Adjusted net financing costs rose to €119 million (2014: €113 million), reflecting a €17 million loss on currency hedging and revaluation of intercompany balances, due primarily to the appreciation of the U.S. Dollar to EUR/USD 1.09 at year-end 2015. As a reminder, adjusted net financing costs exclude the financing component of employee benefits, results of investments available-for-sale, and book gains/losses on equity-accounted investees.

Adjusted profit before tax was €783 million, up 3% in constant currencies (2014: €654 million). The benchmark effective tax rate on adjusted profit before tax was 25.5% (2014: 27.6%), reflecting a one-time favorable adjustment relating to deferred tax assets. We expect the benchmark tax rate to return to 27%-28% in 2016.

Diluted adjusted EPS was €1.96, up 25% overall and up 5% in constant currencies.

IFRS reported figures

Reported operating profit increased 17% to €667 million (2014: €569 million), reflecting the increase in adjusted operating profit, lower acquisition-related costs, higher amortization of acquired intangibles, and a loss recorded on the disposal of the Russian business (55% interest) partly offset by a net book profit on the sale of certain non-core UK assets.

Reported financing results amounted to a negative €125 million (2014: negative €56 million) and included adjusted net financing costs of €119 million, the financing component of employee benefits (€5 million), and a €1 million net loss on the disposal of equity-accounted investees. Profit before tax increased 6% to €542 million (2014: €512 million).

The reported effective tax rate increased to 21.9% (2014: 7.4%). In 2014, the tax rate reflected a non-taxable revaluation gain on Datacert and a positive tax impact relating to previously divested assets partly offset by a tax charge on internal asset transfers. In 2015, the tax rate reflects a one-time favorable adjustment relating to deferred tax assets. Due to the higher tax rate, total profit for the year declined 11% to €423 million (2014: €474 million) and diluted EPS declined 10% to €1.42 per share (2014: €1.58).

Cash flow

Adjusted operating cash flow was €903 million (2014: €764 million), up 4% in constant currencies. The cash conversion ratio was 100%, better than expected due to strong working capital inflows in the final weeks of the year. Following outflows in the first half, the full year saw a net autonomous working capital inflow of €18 million (2014: €4 million). Capital expenditures were €188 million (4.5% of revenues), up 13% in constant currencies, reflecting increased investment in product development, particularly in Health and Tax & Accounting.

Adjusted free cash flow was €647 million, up 7% in constant currencies. Paid financing costs decreased to €101 million (2014: €135 million). This benefit was partly offset by higher corporate income tax paid of €141 million (2014: €98 million), reflecting timing of tax payments.

Acquisition spending, net of cash acquired, was €179 million (2014: €178 million), including €21 million related to earn-outs on past acquisitions. The majority of 2015 acquisition spending related to the purchase of Learner’s Digest International, a U.S. continuing medical education provider (September 2015). Smaller acquisitions included SBS Software in Germany (January 2015), SureTax in the U.S. (June 2015) and Effacts in the Netherlands (July 2015).

Cash proceeds from disposals, net of cash disposed, were €24 million (2014: €11 million), relating mainly to the divestment of our interest in the Russian business (September 2015) and certain non-core UK assets (December 2015).

Dividends paid to shareholders totaled €263 million (2014: €209 million) and consisted of the dividend over 2014 (€211 million), paid in May 2015, and the 2015 interim dividend (€52 million) paid in October 2015. Share repurchases totaled €140 million.

Balance sheet, net debt and leverage

Net debt reduced to €1,788 million as of December 31, 2015, compared to €1,897 million at December 31, 2014. The leverage ratio net-debt-to-EBITDA was 1.7x at year-end 2015, improving from 2.1x at year-end 2014. 

Financial calendar

February 24, 2016
Full-Year 2015 Results
March 9, 2016 Publication of 2015 Annual Report
March 9, 2016 Publication of 2015 Sustainability Report
April 21, 2016 2016 Annual General Meeting of Shareholders
April 25, 2016
Ex-dividend date: 2015 final dividend
April 26, 2016
Record date: 2015 final dividend
May 11, 2016 First-Quarter 2016 Trading Update
May 12, 2016 Payment date: 2015 final dividend ordinary shares
May 19, 2016 Payment date: 2015 final dividend ADRs
July 29, 2016
Half-Year 2016 Results
August 29, 2016 Ex-dividend date: 2016 interim dividend
August 30, 2016 Record date: 2016 interim dividend
September 14, 2016 Payment date: 2016 interim dividend ordinary shares
September 21, 2016 Payment date: 2016 interim dividend ADRs
November 2, 2016 Nine-Month 2016 Trading Update 
February 22, 2017 Full-Year 2016 Results 

About Wolters Kluwer

Wolters Kluwer (EURONEXT: WKL) is a global leader in information, software solutions and services for professionals in healthcare; tax and accounting; financial and corporate compliance; legal and regulatory; corporate performance and ESG. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with technology and services.

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