Wolters Kluwer, first quarter 2021Trading update
May 5, 2021– Wolters Kluwer, global leader in professional information, software solutions, and servedçes, today releasedIt is scheduledfirst quarter 2021 negotiation update.
- Whole year 2021guidance reiterated: good start to the year.
- First quarterrecipes up4% in constant currencies and above 4% organically.
- Recurring revenue (81%) grew 3% organically; non-recurring revenues increased 7% organically.
- Digital and services revenues (92%) grew 4% organically.
- Specialized solutions (55%) grew 6% organically.
- First quarter adjusted operating profit Marchginside mencreased in 290 base points, benefiting from temporary savings on travel and other discretionary items costs.
- Adjusted free cash flow for the first quarter up to 115%inside constant currencies,reflecting widely moment of working capital movements.
- Net debt / EBITDA 1.5x on March 31, 2021.
- Progress in 2021 share buy back:€159million in intention to repurchase up to € 350 million completedinside The year tthrough may 42021.
Nancy McKinstry, CEO and Chairman of the Executive Board, commented: “The results for the first quarter were better than exPected,despite somefavorable time effects. Inside recentweeks, tHand new sales environment has Shownearly signs of improvement in selected areas.We stay focused in our strategyobjectives, including the advancement of our specialized solutions, supporting the well-being of our employees anddelivering value toour customers. We carry on for wait for recovery to pre-pandemic growth levels to be gradual but they are encouraged by The Good start the year.“
First quarter 2021 Developments
First quarter revenues fell 2% in the reporting currency, due to the devaluation of the US dollar compared to the previous year. Excluding the impact of exchange rate movements, first quarter revenues increased by 4%. The impact of the 2020 acquisitions on revenue and adjusted operating profit was almost offset by the impact of last year’s divestments. Organic growth was 4%, slightly better than expected in all four divisions. Recurring revenues (81% of revenues), which include subscriptions and other sources of recurring revenues, grew 3% organically (Q1 2020: 5%). Non-recurring revenues (19% of revenues) increased 7% organically (1Q 2020: 2% decrease), driven by a 24% organic increase in printed books (ordering time) and a 24% organic increase in transactional revenues of Financial Services (reflecting the volumes related to the 2021 US Paycheck Protection Program1) Non-recurring rates for software license and implementation services were practically stable in the quarter. The adjusted operating profit margin increased in all divisions, mainly due to temporary cost savings, as travel and face-to-face events remain restricted.
Health revenue grew 8% organically (1Q 2020: 5%) in the quarter. Clinical Solutions grew 6% organically against a difficult comparison (1Q 2020: 8%), driven by subscriptions to our decision support and drug information solutions. UpToDate Advanced has been enhanced with more content and functionality for EMR integrationtwo workflows. Health Learning, Research & Practice grew 11% organically, driven by the favorable moment of book resale orders (it is expected to revert in the coming quarters) and by the addition of the American Society of Clinical Oncology journals in medical research. Digital nursing solutions for education and practice have achieved strong double-digit growth, led by CoursePoint + and vSim.
Tax accounting revenues increased 5% in constant currencies, partly due to the acquisition of XCM Solutions in September 2020. Organic growth was 3% (1Q 2020: 5%). Corporate performance solutions (CCH Tagetik and TeamMate) delivered double-digit organic growth, driven by cloud and on-premises software products. In Professional Tax & Accounting, organic growth was muted due to the delayed start of the US tax filing season, which shifted banking income and other filing-related revenues into the second quarter. Market conditions for the sale of new software remain challenged.
Governance, Risk and Compliance revenues increased 6% in constant currencies, including the effect of the acquisition of eOriginal concluded in December 2020. Organic growth was 3% (1Q 2020: 4%). Organic growth in Legal Services was 2%, slower than a year ago, as a recovery at the end of March in transaction revenues partially offset the more moderate growth in recurring revenues. Financial Services delivered a 5% organic growth supported by steady growth in the maintenance of recurring software and cloud subscription revenues and an increase in transaction volumes related to the 2021 PPP in the USA.
Legal and regulatory revenues fell 2% in constant currencies due to the impact of divestments in 2020. Organic growth was 2% (1Q 2020: decrease of 1%). Software activities recorded single-digit organic growth after the impact of the pandemic on new sales in 2020. Information solutions (82% of divisional revenues) recorded organic growth of 2%, as digital information solutions supported good organic growth both in Europe and in the USA. benefited from a favorable publication schedule and a recovery in sales of legal education textbooks in the United States.
Cash FloÇ and net debt
Adjusted EBITDA for the first quarter increased 8% overall and 16% in constant currencies. The cash conversion was strong, benefiting from the moment of working capital in the quarter. Adjusted free cash flow increased 115% in constant currencies, despite higher cash taxes and financing costs compared to the same period last year.
Net cash expense on acquisitions, net of disposals, was negligible in the quarter. A total of € 122 million in cash was used to repurchase shares during the quarter.
As of March 31, 2021, net debt was € 2,200 million, compared to € 2,383 million on December 31, 2020. Net debt to EBITDA, based on twelve-month accumulated EBITDA, was 1.5x in the end of March 2021, compared to 1.7x at the end of the year 2020.
On March 30, 2021, we issued a new € 500 million Senior 7-year Eurobond with an attractive 0.25% coupon. The proceeds will be used for general corporate purposes.
As of March 31, 2021, the number of common shares issued in circulation (excluding 6.2 million treasury shares) was 261.3 million.
Approximately 95% of Wolters Kluwer’s 19,200 employees remain working from home. In the first quarter, we launched a series of virtual webinars and training to continue to support well-being, belonging and involvement.
Dividends and share buybacks
At the April Annual General Meeting, shareholders approved a total dividend of € 1.36. The final dividend will therefore be € 0.89 per share, to be paid on May 19, 2021 (ADRs: May 26, 2021). The provisional dividend for 2021 will be set at 40% of the previous year’s total dividend.
Year-to-date, Wolters Kluwer repurchased 2.3 million common shares for a total value of € 159 million (average share price € 69.66). For the period from 6 May 2021 to 2 August 2021 inclusive, we contracted a third party to execute € 70 million in share repurchases on our behalf, within the limits of the relevant laws and regulations (in particular Regulation (EU) 596 / 2014) and Statutes of Wolters Kluwer. Share repurchases will be used for capital reduction purposes and to fulfill obligations arising from stock-based incentive plans.
Outlook for the entire year 2021
Due to the continuing nature of the COVID-19 pandemic, we continue to expect economic activity and spending patterns to moderate over most of 2021, with a gradual recovery starting in the second half of the year. In the second quarter of 2021, we faced a comparable challenge in Governance, Risk and Compliance, as we expect lower PPP-related revenues in 2021 compared to 2020. Overall, we remain in a strong position to respond to new challenges, should they arise. We reiterate our specific guidance for the 2021 adjusted operating profit margin, adjusted free cash flow, return on invested capital (ROIC) and diluted adjusted EPS. See the table below.
|Outlook for the entire year 2021|
|Performance indicators||Orientation 2021||2020|
|Adjusted operating profit margin||24.5% – 25.0%||24.4%|
|Adjusted free cash flow||€ 875- € 925 million||€ 907 million|
|Diluted adjusted EPS||Half digit growth||€ 3.13|
|The guidance for adjusted operating profit margin and ROIC is in reported currencies and assumes an average EUR / USD rate in 2021 of € / $ 1.21. The guidance for adjusted free cash flow and diluted adjusted EPS is in constant currencies (€ / $ 1.14). The guidance reflects share buybacks for up to € 350 million in 2021.|
If current exchange rates persist, the US dollar exchange rate will have a negative effect on the 2021 results reported in euros. In 2020, Wolters Kluwer generated more than 60% of its revenues and adjusted operating profit in North America. As a general rule, based on our 2020 currency profile, each US 1 cent movement in the average € / $ exchange rate for the year causes an opposite change of approximately 2 euro cents in the diluted adjusted EPS.
We have included restructuring costs in the adjusted operating profit. We expect restructuring costs to be in the range of € 10 to € 15 million in 2021 (AF 2020: € 49 million). We expect adjusted net financing costs of approximately € 65 million in constant currencies3, including approximately € 10 million in lease interest charges. We expect the benchmark tax rate on pre-tax adjusted earnings to be in the range of 23.0% -24.0% for 2021. Capital expenditures should be within our normal range of 5.0% -6, 0% of total revenue (AF 2020: 5.0%). Cash repayments of lease liabilities are expected to be in line with the depreciation of assets with right of use (AF 2020: € 73 million). We expect the year-round cash conversion rate to be in the range of 95% -100% in 2021 (AF 2020: 102%).
Any guidance we provide does not imply any significant additional changes in the scope of operations. We may make other acquisitions or disposals that may dilute margins and profits in the short term.
2021 Outlook by Division
Health: We expect year-round organic growth to improve from 2020 levels and the adjusted operating profit margin will be stable year on year as temporary cost savings decrease.
Tax accounting: We expect organic growth to improve over 2020 levels and the adjusted operating profit margin to decrease due to the absence of unique benefits and the disappearance of temporary cost savings.
Governance, Risk and Compliance: We now expect the organic growth rate to be broadly in line with 2020 levels, as lower PPP transaction volumes are offset by a higher level of legal services transactions. We continue to expect the adjusted operating profit margin to improve due to the reduction in restructuring and provisions.
Legal and regulatory: We continue to expect the division to return to positive organic growth driven by digital information and software revenues. We expect the adjusted operating profit margin to improve as a result of the lesser restructuring.
About Wolters Kluwer
Wolters Kluwer (WKL) is a global leader in professional information, software solutions and healthcare services; tax and accounting; governance, risk and compliance; and legal and regulatory sectors. We help our customers make critical decisions every day by providing specialized solutions that combine deep domain knowledge with technology and services.
Wolters Kluwer reported annual revenues in 2020 of € 4.6 billion. The group serves customers in more than 180 countries, maintains operations in more than 40 countries and employs approximately 19,200 people worldwide. The company is based in Alphen aan den Rijn, The Netherlands.
Wolters Kluwer shares are listed on the Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt (ADR) program. ADRs are traded on the US over-the-counter market (WTKWY).
For more information visit www.wolterskluwer.com, Follow us on Twitter, Facebook, LinkedIn, and YouTube.
May 5, 2021 – First quarter 2021 trading update
May 19, 2021 Payment date: common shares of the final 2020 dividend
May 26, 2021 Payment date: ADRs for final 2020 dividend
Results of August 4, 2021 semiannual of 2021
August 31, 2021 Ex-dividend date: 2021 interim dividend
September 1, 2021 Registration date: 2021 provisional dividend
September 23, 2021 Payment date: 2021 intermediate dividend common shares
September 30, 2021 Payment date: 2021 provisional dividend ADRs
November 3, 2021 – Nine months update to 2021
February 23, 2022 Results for the full year 2021
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Forward-looking statements and other important legal information
This report contains forward-looking statements. These statements can be identified by words such as “expect”, “should”, “could”, “should” and similar expressions. Wolters Kluwer warns that such forward-looking statements are qualified by certain risks and uncertainties that could cause actual results and events to differ materially from what is covered by the forward-looking statements. Factors that may cause actual results to differ from these forward-looking statements may include, without limitation, general economic conditions; conditions in the markets in which Wolters Kluwer is involved; behavior of customers, suppliers and competitors; technological developments; the implementation and execution of new ICT or outsourcing systems; and legal, tax and regulatory rules that affect Wolters Kluwer’s business, as well as risks related to mergers, acquisitions and divestments. In addition, financial risks such as currency movements, interest rate fluctuations, liquidity and credit risks may influence future results. The previous list of factors should not be considered exhaustive. Wolters Kluwer disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
The elements of this press release contain or may contain privileged information about Wolters Kluwer within the meaning of Article 7 (1) of the Market Abuse Regulation (596/2014 / EU).
The mentioned trademarks are owned by Wolters Kluwer N.V. and its subsidiaries and may be registered in several countries.
1 Hereinafter referred to as PPP. The US Small Business Association (SBA) Payment Check Protection Program was established by the U.S. CARES Act 2020. Wolters Kluwer Compliance Solutions (part of Governance, Risk and Compliance) supports bank customers in loans under this program. A new installment of the US PPP program was launched by the SBA in January 2021.
two Electronic medical records systems.
3 The projection for net financing costs adjusted in constant currencies excludes the impact of exchange rate movements on foreign exchange hedge and on intercompany balances.
- 2021.05.05 Wolters Kluwer First quarter trading update (https://ml-eu.globenewswire.com/Resource/Download/29c7aba9-8356-42ed-b7ee-4d4feca453a0)