First quarter developments
In the first quarter, revenues increased 2% at constant currencies and 3% on an organic basis. The effect of divestitures on revenues exceeded the effect of acquisitions in the first quarter. In reporting currency, revenues rose 3%, reflecting a 1% positive impact on revenues from currency, as the stronger U.S. Dollar (average EUR/USD 1.10 in the quarter) outweighed weakness in other currencies. Organic growth was supported by solid momentum in recurring revenues. Non-recurring revenues, in aggregate, advanced at a more moderate pace in the first quarter, largely as expected. The quarter saw deceleration in North America and Asia Pacific & ROW offset by improvement in Europe. The first-quarter adjusted operating profit margin increased compared to a year ago, supported by the ongoing shift in business mix, lower restructuring charges, the results of efficiency programs, and disposals of certain loss-making units.
- Health: Achieved good organic growth and increased its adjusted operating profit margin in the first quarter. Organic growth benefitted from phasing which will reverse in the second quarter. Clinical Solutions delivered strong organic growth, led by UpToDate. Health Learning, Research & Practice performed well on an organic basis, supported by growth in digital subscription revenues. For the full year, we continue to anticipate another year of good organic revenue growth for the division, supported by robust organic growth in Clinical Solutions and a gradually improving trend in Health Learning, Research & Practice. Margins are expected to improve slightly even as we continue to invest to drive organic growth.
- Tax & Accounting: Delivered modest organic growth, in line with our expectations, largely reflecting seasonal patterns and timing. Adjusted operating profit margins declined, in line with our guidance, due to increased product investment. Growth in software solutions continued to be partly offset by weakness in print formats, bank products and training, as anticipated. For the full year, we expect underlying revenue growth to slightly improve from 2015 levels, driven by continued mix shift towards software solutions. The first half is, however, expected to see slower growth due to seasonal sales patterns and timing effects. Margins are expected to ease in the first half, but to be maintained for the full year.
- Governance, Risk & Compliance: Delivered good organic growth, albeit slower than in the comparable quarter of 2015. Legal Services (the former Corporate Legal Services unit excluding CT Lien Solutions) saw recurring subscription revenues and transaction fees grow at a more moderate pace. Financial Services (which comprises all units serving financial services customers, including CT Lien Solutions) also experienced more temperate growth as it faced challenging comparables related to last year’s strong growth in software implementations and the enactment of the TILA RESPA regulation. Transport Services saw revenue decline as expected. For the full year, we continue to expect the division to deliver positive but slower organic growth, given demanding comparables for transactional and non-recurring license and implementation fees. The latter effect is expected to be more pronounced in the second quarter. Full-year margins are expected to improve slightly.
- Legal & Regulatory: Saw its rate of organic revenue decline improve compared to the comparable quarter. Digital solutions grew well, but this performance was, as expected, more than offset by lower revenues from print formats. Overall divisional revenues also reflect a number of divestitures completed in 2015. The divisional adjusted operating profit margin improved due to lower restructuring costs, operating efficiencies, and certain divestitures. For the full-year, we continue to expect the division’s 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. Full-year margins are expected to improve due mainly to lower restructuring costs; savings are expected to be reinvested in wage inflation and increased product investment.
Cash flow and net debt
Cash conversion was broadly stable in the first quarter compared to a year ago. Adjusted free cash flow increased in constant currencies, mainly as a result of higher adjusted operating profit. First quarter net acquisition spending, net of cash acquired, was €8 million. Twelve-months-rolling net-debt-to-EBITDA was 1.5x at the end of March and remains favorable to target (2.5x).
In February 2016, we announced a share buyback program for up to €600 million over three years (2016-2018). As of May 10, a total of 0.3 million ordinary shares have been repurchased for a total consideration of approximately €10 million.
A final dividend of €0.57 per share was approved at the Annual General Meeting of Shareholders in April and will be paid in the second quarter. The final dividend brings the total dividend over the 2015 financial year to €0.75 per share, an increase of 6% compared to the 2014 dividend. For 2016, the interim dividend will again be set at 25% of the prior year’s total dividend.
Full-year 2016 outlook
We reaffirm our full-year 2016 guidance. The table below provides our guidance for the full-year.