Wolters Kluwer, a global leader in professional information services, today released its 2016 half-year results.

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Algemeen advies 29/07/2016 08:32
Highlights
Full-year outlook reiterated, with guidance for adjusted free cash flow raised.
Revenues up 2% in constant currencies and up 3% organically.
Digital & services revenues grew 5% organically (86% of total revenues).
Recurring revenues grew 4% organically (78% of total).
All main geographic regions delivered positive organic growth.
Adjusted operating profit margin improved to 20.0%, helped by lower restructuring charges.
Diluted adjusted EPS €0.88, up 6% in constant currencies.
Adjusted free cash flow €229 million, up 34% in constant currencies.
Net-debt-to-EBITDA 1.7x compared to 2.1x a year ago.
Interim dividend of €0.19 cash per share to be paid in September.

Interim Report of the Executive Board

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

“We were pleased with our first half results. We achieved 3% organic growth and improved our operating margins and cash flow. Better performance in Europe helped us overcome a challenging comparable in the U.S. and slower growth in Asia Pacific and Rest of World. We are continuing to see a positive response from customers to the innovative expert solutions we are bringing to the market. I am confident in our full year outlook.”

Key Figures 2016 Half-Year:
Six months ended June 30
(in millions of euros, unless otherwise stated)
2016 2015 ∆ ∆ CC ∆ OG
Business performance – benchmark figures

Revenues 2,042 2,015 +1% +2% +3%
Adjusted operating profit 408 391 +4% +5% +4%
Adjusted operating margin 20.0% 19.4%
Adjusted net profit 260 235 +10% +5%
Diluted adjusted EPS (€) 0.88 0.79 +12% +6%
Adjusted free cash flow 229 170 +35% +34%
Net debt 1,814 2,069 -12%

IFRS results
Revenues 2,042 2,015 +1%
Operating profit 317 281 +13%
Profit for the period 199 162 +23%

Diluted EPS (€) 0.67 0.55 +23%
Net cash from operating activities 326 267 +22%

∆: % Change; ∆ CC: % Change constant currencies (EUR/USD 1.11); ∆ 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 full-year 2016 outlook is unchanged, except that we have raised our guidance range for adjusted free cash flow by €50 million. We expect to deliver margin improvement and to grow diluted adjusted EPS at a mid-single-digit rate in constant currencies this year. Our guidance for full-year 2016 is provided in the table below.

2016 Outlook
Performance indicators
2016 guidance
Adjusted operating profit margin 21.5%-22.0%
Adjusted free cash flow €650-€675 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 be in 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 additional 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

Health: we expect another year of good organic revenue growth, similar to 2015, 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: we expect full-year underlying revenue growth to slightly improve on 2015 levels, driven by continued mix shift towards software solutions. Margins are expected to be maintained for the full year, despite higher investment.

Governance, Risk & Compliance: we continue to expect positive but slower organic growth in the full year, given demanding comparables for transactional and non-recurring license and implementation fees. Full-year margins are expected to improve slightly.

Legal & Regulatory: we expect full-year organic revenue decline to be similar to 2015, with print and services trends expected to deteriorate in the third and fourth quarter. Margins are expected to improve due mainly to lower restructuring costs. Efficiency savings are expected to fund wage inflation and increased product investment.

Strategic Priorities 2016-2018

In February 2016, we announced our strategic priorities for the next three years (2016-2018). Our plan is to build on the strategic direction we have been following in the past three years, by expanding our market coverage, increasing our focus on expert solutions, and continuing to drive efficiencies. 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.

As of June 30, 2016, our net-debt-to-EBITDA ratio was 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 2016 Interim Dividend

Wolters Kluwer has a progressive dividend policy under which the company aims to increase the dividend per share each year. We are committed to increasing the total dividend per share each year, with the annual increase dependent on our financial performance, market conditions, and our need for financial flexibility.

As announced on February 24, 2016, the interim dividend for 2016 was set at 25% of the prior year’s total dividend, or €0.19 per ordinary share. This interim dividend will be distributed on September 14, 2016.

Dividend dates for 2016 are provided on page 30. 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.

In February 2016, we announced our intention to buy back shares for up to €600 million over the three year period 2016-2018, including anti-dilution repurchases. Assuming global economic conditions do not deteriorate substantially, we believe this level of cash return leaves us with ample headroom for investment in the business, including acquisitions.

In the year to date, we repurchased 2.0 million ordinary shares for a total consideration of €70 million (average price €34.52), of which €3 million was settled in July, as part of this buyback program. The repurchased shares are added to and held as treasury shares. It remains our intention to buy back up to €600 million in shares in the period 2016-2018, spread evenly over the three years.

see and read more on
http://wolterskluwer.com/company/newsroom/news/2016/07/wolters-kluwer-2016-half-year-report.html

tijd 09.04
Wolters EUR 38,32 +57ct vol. 23.833



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