Nine months to September 30, 2015
Nine-month revenues increased 17% overall due to the effect of exchange rate movements, in particular the depreciation of the euro against the U.S. dollar. In constant currencies, revenues grew 3%, including organic growth of 3%. The net effect of acquisitions and disposals in the first nine months was small, but nonetheless additive to both revenues and adjusted operating profits.
By geographic region, North America and Asia Pacific & Rest of World maintained organic growth of respectively 5% and 6% through September. Revenues generated in Europe declined 1% in the nine-month period. Total recurring revenues (77% of total revenues), which includes subscriptions and other recurring revenues, grew 3% organically in the first nine months. The rate of growth in Corporate Legal Services (CLS) transactional revenues and other non-recurring revenues slowed moderately in the third quarter, however the rate of decline in print books abated somewhat.
The nine-month adjusted operating profit margin increased, despite increased investment in new products, sales and marketing, and restructuring in this period. Over 70% of restructuring costs relate to initiatives in Legal & Regulatory Solutions.
Legal & Regulatory: Corporate Legal Services (CLS) delivered 7% organic growth in the first nine months, slowing in the third quarter. Service and software subscription revenues saw sustained organic growth, while CLS transactional revenue growth slowed to 6% in the third quarter. For the full year, we expect Corporate Legal Services to achieve organic revenue growth, albeit at a more moderate pace due to a challenging comparable in the fourth quarter. CLS margins are expected to be broadly stable for the full year. Legal & Regulatory Solutions saw organic revenue decline of 3% in the first nine months, a slight improvement on the trend seen in the first half of this year. Digital products achieved modest but positive organic growth, while print and services revenues continued to decline, as expected, particularly in Europe. The adjusted operating margin in Legal & Regulatory Solutions moved to the low teens, as a result of revenue trends, underlying cost inflation, and higher restructuring charges. For the full year, we continue to expect Legal & Regulatory Solutions organic revenue and margins to decline, with conditions in our legal markets remaining challenging. On September 16, we completed the disposal of a 55% interest in Wolters Kluwer Russia Publishing Holding.
Tax & Accounting: Nine-month organic growth was 3%, in line with our first half performance. Tax and accounting software solutions again delivered good organic revenue momentum in all regions of the world. Twinfield in Europe maintained double-digit growth ProSoft in Brazil saw organic growth moderate. Overall organic growth for the division continues to be tempered by weakness in print formats, training, and bank products. For the full year, we continue to expect organic growth to be similar to 2014, with growth in software solutions more than offsetting ongoing decline in print, services and bank products. We expect full year margins to improve. Lower restructuring costs are expected to be partly offset by increased investment in new products and sales and marketing.
Health: Nine-month organic growth was 6%, improving modestly from the first half. Clinical Solutions delivered double-digit organic growth in the first nine months, led by UpToDate. Health Learning, Research & Practice remained stable as the ongoing decline in print journals and books was offset by organic growth in digital products including Ovid online journals and digital learning solutions. For the full year, the Health division is on track to maintain good organic growth, driven by robust growth in Clinical Solutions. Margins are expected to rise despite increased product, sales and marketing investment, and first-half weighted restructuring. On August 31, we completed the acquisition of Learner’s Digest International, a provider of mobile-delivered continuing medical education to physicians.
Financial & Compliance Services: Organic growth for the first nine months was 6%, improving on the first half trend, mainly due to a strong third quarter for our Audit unit. Finance, Risk & Compliance maintained positive momentum, despite double-digit growth in the comparable period. Audit improved its organic growth for the first nine months, driven by stronger third quarter customer implementations. Originations sustained its recovery, driven by software upgrades and professional services to support customers around the new U.S. lending regulation, TILA RESPA, which became effective in October; Financial Services (FS) transactional revenues declined modestly in the first nine months. Transport Services in Europe saw its rate of revenue decline improve. For the full year, we expect positive organic growth driven by our Finance, Risk & Compliance, Audit and Orginations units, with comparables becoming more challenging in the fourth quarter, especially for Audit and Originations. Margins are expected to improve.
Cash flow, acquisitions, divestitures, and net debt
Nine-month operating cash conversion was 90%, ahead of 88% in the comparable period. For the full year, we continue to expect cash conversion to return to our historic average of around 95% (FY 2014: 100%). Nine-month adjusted free cash flow increased in constant currencies, as improved cash conversion and lower paid financing more than offset higher corporate taxes paid and net use of restructuring provisions. Our guidance for full-year 2015 adjusted free cash flow remains unchanged at ≥ €500-€525 million in constant currencies.
In the nine months to September 30, 2015, net acquisition spending, including earnouts, amounted to €182 million, including €134 million for Learners Digest International in the third quarter. Twelve month rolling net-debt-to-EBITDA was 2.0x as of September 30, 2015, compared to 2.5x a year ago.
Subsequent to the third quarter, we paid an interim dividend of €0.18 per ordinary share (€53 million in total). A final dividend remains planned for May 2016 and is subject to approval at the Annual General Meeting of Shareholders in April 2016.
Full-year 2015 outlook
Our guidance for the full year is unchanged. We note that comparables become more challenging in the fourth quarter, particularly for Corporate Legal Services and Financial & Compliance Services, and, as indicated in July, investments this year are second-half-weighted. Nonetheless, we expect the adjusted operating profit margin to increase in 2015. This includes restructuring costs which are expected to be approximately €35 million for the full year (2014: €36 million) and to occur mainly in Legal & Regulatory Solutions. The table below provides our guidance for the full-year.