SOURCE: Wolters Kluwer NV

February 24, 2010 02:14 ET

Wolters Kluwer 2009 Full-Year Results; Strong Financial Performance with Positive Outlook for 2010

ALPHEN AAN DEN RIJN, NETHERLANDS--(Marketwire - February 24, 2010) - Wolters Kluwer, a market- leading global information services company focused on professionals, today released its 2009 full-year results. Highlights include growing revenues, a solid operating margin, and strong free cash flow.

Financial Highlights

* Revenue growth of 2% to EUR3,425 million; underlying revenue down 3% reflecting the economy's impact on transactional and cyclical product lines

* Electronic revenues grew 8% and now represent 52% of total revenues

* Ordinary EBITA margin of 20% in line with guidance

* Springboard program delivered an incremental EUR68 million in savings, exceeding expectations

* Free cash flow up 7% with strong cash conversion of 96%, exceeding guidance

* Diluted ordinary earnings per share were EUR1.45 (EUR1.41 in constant currencies in line with guidance)

* Net debt reduced by 11%, net-debt-to-EBITDA ratio reduced to 2.9 times

* Proposed dividend up 2% to EUR0.66 per share

Looking Forward

* Strategy 2010-2012Maximizing Value for Customers sets path to capture growth opportunities

* Outlook for 2010: Good growth in electronic revenues continues, improving ordinary EBITA margin, strong free cash flow, and diluted ordinary earnings per share of EUR1.41-EUR1.45 at constant currencies.

  Key figures 2009 full-year
  (All amounts are in millions of euros unless otherwise indicated)

  Full Year                         2009    2008       D       D CC

  Revenues                         3,425   3,374      2%         0%

  Electronic revenues % of total     52%     49%

  Ordinary EBITA                     682     678      1%         0%

  Ordinary EBITA margin (%)        19.9%   20.1%

  Ordinary net income                427     423      1%         0%

  Diluted EPS (EUR)                 0.40    1.09   (63%)      (65%)

  Diluted ordinary EPS (EUR)        1.45    1.47    (1%)       (2%)

  Free cash flow                     424     395      7%         2%

  D - % Change; D CC - % Change constant currency (EUR/USD = 1.47)

Nancy McKinstry, CEO and Chairman of the Executive Board, commented on the performance:

"Wolters Kluwer delivered good operating performance in 2009 despite continued challenging economic conditions. Our resilient subscription portfolio delivered good performance underpinned by stable retention rates and solid growth in electronic and services subscription revenues. Our strong growth in cash flow and solid operating margins supports our continued investment of 8-10% of our revenues in future growth opportunities.

2009 marked the completion of our 2006-2009 strategy. We have successfully transformed our portfolio by growing online and software solutions, extending our market positions in high-growth adjacent segments, and leveraging our global scale to achieve operating efficiencies.

Looking forward, we expect 2010 to be characterized by a slow but steady economic recovery. In this context, electronic revenues are expected to continue to deliver good growth as our customers increasingly demand intelligent workflow tools, pressures on our transactional and cyclical revenueswill ease with better market conditions, and our Springboard operational excellence program will continue to deliver further benefits, supporting continuous improvement in our operating performance. Our clear strategic focus as well as our strong balance sheet supports our long-term strategy for growth."

Revenue growth components
(All amounts are in millions of euros unless otherwise indicated)

Full Year                      % of Total  2009  2008     D  D CC      D OG

Electronic & service subscription     46% 1,588 1,430   11%    9%        3%

Print subscription                    16%   563   606  (7%)  (7%)      (7%)

Other non-cyclical                     9%   293   277    6%    5%      (3%)

Total recurring revenues              71% 2,444 2,313    6%    4%        0%

Books                                 10%   331   341  (3%)  (4%)      (4%)

Cyclical product lines                19%   650   720 (11%) (11%)     (11%)

Total revenues                       100% 3,425 3,374    2%    0%      (3%)

D - % Change; D CC - % Change constant currency (EUR/USD = 1.47); D OG - %
Organic growth

Wolters Kluwer revenues grew 2% in 2009. Key strategic acquisitions contributed growth of 3% while underlying revenues declined 3%, largely reflecting the economy's impact on transactional and cyclical product lines and soft new sales. The positive impact of currencies as compared to the prior year contributed 2% to total growth.

Underlying recurring revenues, which include subscription and other non- cyclical revenues (approximately 71% of total revenues), were broadly in line with the prior year. With stable retention rates across the business, subscription revenues showed a solid performance compared with the previous year, including 3% organic growth in electronic and services revenues. This growth helped to mitigate the impact of print subscription decline and soft new sales for subscriptions and other non-cyclical products, due to recessionary market conditions. Other non-cyclical products include services related to software.

Cyclical product lines (approximately 19% of total revenues) declined by 11%, due to a contraction in advertising and pharma promotional revenues, declining transaction volumes in corporate lending and business formation products, and weakness in other cyclical product lines including training and consulting. Underlying book revenues declined 4% driven by soft demand in Europe and North American legal and tax and accounting markets and the order timing impact of moving distribution from a traditional wholesaler to a direct online partner in Health & Pharma Solutions.

Despite these conditions, customers continue to demand integrated online and software solutions which drove 8% growth in electronic products, including subscription and transactional product lines. Electronic revenues now comprise 52% of total revenues up from 49% in the prior year.

The company delivered consistent profitability notwithstanding the impact of the economy on high-margin cyclical product lines. Ordinary EBITA was in line with the previous year and the ordinary EBITA margin remained a resilient 20%. This performance was driven by growth in electronic and service subscription products, the contribution of high-margin acquisitions, tight controls on personnel and other costs, and operational excellence programs, including Springboard. As a result, diluted ordinary earnings per share were EUR1.45 (EUR1.41 in constant currencies in line with guidance).

In 2009, free cash flow totaled EUR424 million, representing 7% growth overall and 2% growth in constant currencies. This performance was largely driven by strong year-end cash collections across all divisions and diligent management of working capital. Wolters Kluwer's resilient portfolio and strong cash generation continue to support a solid financial position. Year-end net debt was reduced to EUR2,007 million (2008: EUR2,254 million) representing a net-debt-to-EBITDA ratio of 2.9 (2008: 3.2).

The reduction in the net-debt-to-EBITDA ratio was in line with management's intention to move closer to its target of 2.5 times net-debt-to-EBITDA over the medium term. Prior year debt refinancing at attractive rates extended the maturity profile out beyond 2013, ensuring a strong liquidity position and sufficient headroom in excess of the company's EUR500 million policy minimum.


At the 2010 Annual General Meeting of Shareholders, Wolters Kluwer will propose a dividend distribution of EUR0.66 per share, a 2% increase over last year, to be paid on May 4, 2010.


The progress of the Springboard operational excellence program during the year exceeded expectations. Total cost savings increased by EUR68 million to EUR84 million for the full year (2008: EUR16 million). Related exceptional costs totaled EUR70 million. The expansion and acceleration of supply management initiatives in Europe contributed positively to the program results as did further business optimization initiatives in France, the Netherlands, the United Kingdom, and Law & Business.

Annualized run rate savings estimates for the full program are expected to reach EUR140-160 million by 2011. The program is designed to further optimize the business resulting in sustainable margin improvement. Savings are expected to result largely from standardized technology platforms and consolidated IT infrastructure, streamlined content manufacturing processes, expanded global sourcing programs, and increased use of offshore service centers for software development and testing, content production, and back-office support functions.

Non-recurring program costs of EUR220-240 million over the four-year period will be treated as exceptional and include costs related to IT system migration and implementation, outsourcing migration costs, costs related to reengineering the content creation process, and also include severance and property consolidation costs.

Springboard summary savings and costs

EUR millions (pre tax)      2008     2009      2010       2011      Total
                           Actual   Actual   Estimate   Estimate   Estimate

Cost savings                 16       84        125    140-160    140-160

Exceptional program costs    45       70         70      35-55    220-240

2010 Outlook

 Key Performance Indicators 2010 Guidance

 Ordinary EBITA margin      20-21%

 Free cash flow[1]          > / = EUR400 million

 Return on invested capital > / = 8%

 Diluted ordinary EPS[1]    EUR1.41 to EUR1.45[2]

 [1]In constant currencies (EUR/USD = 1.39)
 [2]2009 diluted ordinary EPS in 2008 constant currencies (EUR1.41) has
    been recalculated to EUR1.43 using 2009 constant currencies rate of
    EUR/USD = 1.39 (2008 constant currency rate: EUR/USD = 1.47).

Wolters Kluwer began to see stabilizing market conditions at the close of 2009. While customers continue to be cautious and selective with incremental spending, the negative trends experienced in cyclical product lines over the last eighteen months began to ease. Fourth-quarter transaction volumes in corporate lending and business formation products were largely in line with the prior year.

Looking forward to 2010, Wolters Kluwer expects market conditions will continue to stabilize with a slow but steady recovery expected. North American business units are likely to see an earlier recoverycompared to Europe, where improvements in trading conditions continue to be uneven. Northern and Central and Eastern Europe will likely see a return to normalized economic conditions ahead of Southern Europe.

2010 recurring revenues, including subscription and other non-cyclical revenues, are expected to benefit from resilient retention rates partially offset by the impact of weaker 2009 new sales. Cyclical revenues (approximately 19% of the portfolio) are expected to stabilize in 2010 with the exception of advertising where continued weakness is expected, particularly in Europe. Book products (approximately 10% of the portfolio) are also expected to show stability. Electronic revenues are expected to continue to show good growth as customers demand online information and software solutions to drive efficiency.

The ordinary EBITA margin is expected to be 20-21% in 2010. Improving margins will be underpinned by the migration of revenues to more profitable electronic products and the continuing contribution of the Springboard program. These efforts are expected to offset wage and other inflationary expenditures. As in prior years, management will continue to invest approximately 8-10% of revenues in new products and platforms to drive future growth.

Free cash flow will continue to be strong and is expected to be EUR400 million or greater. Diluted ordinary earning per share is expected to be between EUR1.41 and EUR1.45 in constant currencies and will be impacted by a higher effective tax rate of 25% (2009: 24%) as higher tax rate markets are expected to lead in the recovery. Finance expenses in 2010 are expected to be approximately 10% higher than 2009, which benefited from favorable foreign currency movements.

2010-2012 Strategy

The 2010-2012 strategy for Maximizing Value for Customers is an important next step for Wolters Kluwer. The strategy is focused on helping professionals deliver better results by providing them with superior information and intelligent software solutions. These solutions provide value by reducing complexity, enhancing the accuracy of critical decisions, and improving the productivity of the professional. Also, the company can capitalize on key growth opportunities and expand its leading global market positions.

The company will achieve this objective by delivering against three strategic priorities:

* Deliver Value at the Point-of-Use by helping customers manage complex decisions and transactions to produce accurate results. While high- quality proprietary information will remain at the core of its products, the company is building tools and solutions that are designed to help customers manage critical processes and increase the effectiveness of their results.

* Expand Solutions across Processes, Customers, and Networks by following the transaction flow of the professional customers and delivering solutions across key activities. Over time, these products are evolving towards intelligent solutions and collaborative networks, essentially products which incorporate the company's superior content into the customer's workflows and through innovative technology facilitate the communication and collaboration of customers with their clients, government agencies, and other constituents.

* Raise Innovation and Effectiveness through Global Capabilities by aligning Wolters Kluwer businesses and operations with its strong global market positions to create four global divisions: Legal & Regulatory, Tax & Accounting, Health & Pharma Solutions, and Financial & Compliance Services. In addition, the company will further strengthened its position in Asia Pacific through continued investments in these markets. This organization change will support innovation and efficiencies by sharing technology platforms and global products, while supporting the global expansion of the Springboard program.

Medium-Term Outlook

Over the medium term,professionals will continue to demand productivity solutions. Beyond information, they will seek intelligent solutions that provide answers and results. Traditional print revenues are expected to continue to decline as customers adopt Wolters Kluwer's innovative solutions. The company anticipates double-digit growth in online and software revenues over the medium term. Online, software, and services revenues are expected to grow to represent at least 75% or more of total revenues.

As a result of the shift toward higher margin electronic solutions and the additional contribution from operational excellence initiatives including the Springboard program, the company expects to deliver steadily improving operating margin performance over the medium term. Ordinary EBITA and diluted ordinary earnings per share will improve continuously over the period in constant currencies. Free cash flow is expected to be equal to or greater than EUR400 million per annum in constant currencies reflecting the resilient and growing subscription base. Return on invested capital will exceed 8%.

Key Performance Indicators           Mid-term outlook

Revenue growth/ portfolio            * Double-digit online & software
composition                            growth

                                     * Online, software & services revenues
                                       > / = 75% of total revenues

Ordinary EBITA                       * Continuous improvement

Diluted ordinary EPS[1]              * Continuous improvement

Free cash flow[1]                    * > / = 400 million per annum

Return on invested capital           * > / = 8%

[1]In constant currencies (EUR/USD = 1.39)

The full press release on the 2009 full-year results is available here: (PDF version)


Wolters_Kluwer_Full-Year_2009_Results (PDF):

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