February 26, 2020 – Wolters Kluwer, a global leader in professional information, software solutions, and services, today releases its full-year 2019 results.
Highlights
- Revenues €4,612 million, up 5% in constant currencies and up 4% organically.
- Digital & services revenues up 6% organically (89% of total revenues).
- Recurring revenues up 5% organically (78% of total revenues).
- Adjusted operating profit €1,089 million, up 5% in constant currencies.
- Adjusted operating profit margin up 50 basis-points to 23.6%.
- Diluted adjusted EPS €2.90, up 11% in constant currencies.
- Adjusted free cash flow €807 million, up 1% in constant currencies.
- Return on invested capital (ROIC) improved to 11.8%.
- Balance sheet remains strong: net-debt-to-EBITDA 1.6x at year-end 2019.
- Proposing 2019 total dividend of €1.18 per share, up 20%.
- Share buyback:
- 2019: completed buyback of €350 million.
- 2020: announcing buyback of up to €350 million, of which €50 million already completed.
- Outlook 2020: expect mid- to high single-digit growth in diluted adjusted EPS in constant currencies.
Full-Year Report of the Executive Board
Nancy McKinstry, CEO and Chairman of the Executive Board, commented: “I am pleased to report that we sustained 4% organic revenue growth in 2019. We delivered an improvement in adjusted operating margin, overcoming a challenging comparable. It was a year when we made significant progress on improving enterprise systems and infrastructure to support operational agility. At the same time, we remained focused on delivering value to our customers by scaling our expert solutions and enhancing our information products, providing a strong foundation for 2020.”

Key Figures – Year Ended December 31, 2019
€ million, unless otherwise stated 2019 2018* ? ? CC ? OG
Business performance – benchmark figures
Revenues 4,612 4,259 +8% +5% +4%
Adjusted operating profit 1,089 986 +11% +5% +7%
Adjusted operating profit margin 23.6% 23.1%
Adjusted net profit 790 682 +16% +9%
Diluted adjusted EPS 2.90 2.45 +19% +11%
Adjusted free cash flow 807 762 +6% +1%
Net debt 2,199 2,249 -2%
Return on invested capital (ROIC) 11.8% 10.6%

IFRS reported results
Revenues 4,612 4,259 +8%
Operating profit 908 967 -6%
Profit for the period 669 656 +2%
Diluted EPS (€) 2.46 2.35 +4%
Net cash from operating activities 1,102 1,001 +10%
Note: ? % Change; ? CC % Change in constant currencies (€/$ 1.18); ? OG % Organic growth. Benchmark adjusted figures are performance measures used by management. See Note 4 for a reconciliation from IFRS to benchmark figures. *2018 figures restated for IFRS 16. See Note 3 and Appendix 4 for more information on IFRS 16.
Wolters Kluwer 2019 Full-Year Results Page 2 of 43
Full-Year 2020 Outlook Our overall guidance for full-year 2020 is provided in the table below. We expect to deliver another year of solid organic growth, supported by all four divisions. We expect to achieve an increase in the full-year adjusted operating profit margin, driven by Tax & Accounting and Legal & Regulatory.

Full-Year 2020 Outlook
Performance indicators 2020 Guidance 2019
Adjusted operating profit margin 23.5%-24.0% 23.6%
Adjusted free cash flow €800-€825 million €807 million
ROIC Around 12% 11.8%
Diluted adjusted EPS
Mid- to high single-digit growth €2.90
Note: Guidance for adjusted operating profit margin and ROIC are in reported currencies and assume a 2020 average U.S. dollar rate of approximately €/$ 1.11. Guidance for adjusted free cash flow and earnings per share are in constant currencies (€/$ 1.12). Guidance for adjusted EPS includes the estimated effect of the announced up to €350 million share buyback planned for 2020.
Our guidance is based on constant exchange rates. In 2019, Wolters Kluwer generated more than 60% of its revenues and adjusted operating profit in North America. As a rule of thumb, based on our 2019 currency profile, each 1 U.S. cent move in the average €/$ exchange rate for the year causes an opposite change of approximately 2 euro cents in diluted adjusted EPS.
Restructuring costs are included in adjusted operating profit. We expect restructuring costs to be in the range of €10-€15 million in 2020 (2019: €26 million). We expect adjusted net financing costs of approximately €60 million in constant currencies1, including approximately €10 million in lease interest charges. We expect the benchmark tax rate on adjusted pre-tax profits to be in the range of 24.0%-25.0% for 2020.
Capital expenditure is expected to increase, but stay within our normal range of 5%-6% of total revenues (2019: 4.9%). Cash repayments of lease liabilities are expected to be in line with depreciation of right-of-use assets (2019: €80 million). We expect the cash conversion ratio to be broadly in line with prior year, around 95% (2019: 96%). See Note 4 for the calculation of our cash conversion ratio. Our guidance assumes no additional significant change to the scope of operations. We may make further acquisitions or disposals which can be dilutive to margins and earnings in the near term.
2020 Outlook by Division
Health: We expect organic growth to be broadly in line with 2019, with Clinical Solutions continuing to drive the division’s growth. We expect the full-year adjusted operating profit margin to be broadly stable due to increased investment in sales & marketing and product development. Investment is expected to weigh on the first-half 2020 margin.
Tax & Accounting: We expect organic growth to moderate in 2020 due to a challenging comparable in Europe (following exceptionally strong growth in 2019) and due to some moderation in the U.S. We expect the full-year adjusted operating profit margin to see a further increase.
Governance, Risk & Compliance: We expect modest improvement in the division’s organic growth notwithstanding slight moderation in transactional volumes in 2020. We expect the adjusted operating profit margin to be marginally lower than in 2019 due to increased product investment and the absence of one-time benefits.
Legal & Regulatory: We expect organic growth to moderate slightly from 2019 levels due to a challenging comparable. We expect the adjusted operating profit margin to show improvement.
1 Guidance for net financing costs in constant currencies excludes the impact of exchange rate movements on currency hedging and intercompany balances.

Our Business and Strategy
Our mission is to empower our professional customers with the information, software solutions, and services they need to make critical decisions, achieve successful outcomes, and save time. We support professionals across four customer segments: health; tax & accounting; governance, risk & compliance; and legal & regulatory. All our customers face the challenge of increasing proliferation and complexity of information and the pressure to deliver better outcomes at a lower cost. Many of our customers are looking for mobility, flexibility, intuitive interfaces, and integrated open architecture technology to support their decision-making. We aim to solve their problems and add value to their workflow with our range of digital solutions and services, which we continuously evolve to meet their changing needs. Since 2003, we have been re-investing 8%-10% of our revenues in developing new and enhanced products and the supporting technology platforms.
Our fastest growing products continue to be our expert solutions, which combine deep domain knowledge with specialized technology and services to deliver answers, analytics, and improved productivity for our customers. Our business model is primarily based on subscriptions or other recurring revenues (78% of total revenues in 2019), augmented by implementation services revenues as well as volume-based transactional or other non-recurring revenues. Renewal rates for our digital information, software and service subscriptions are high and are one of the key indicators by which we measure our success. We have been evolving our technology towards fewer, globally scalable platforms, with reusable components. We are transitioning our solutions to the cloud and leveraging advanced technologies such as artificial intelligence, natural language processing, and predictive analytics to drive further innovation. We are standardizing tools, streamlining our technology infrastructure (including data centers) and improving our development processes using agile methods. It is our 19,000 employees who drive our achievements and we have been working to ensure we are providing engaging and rewarding careers.
Strategic Priorities 2019-2021
At the start of 2019, we launched our strategic plan for the three-year period 2019-2021. This plan aims to deliver continued good organic growth and further incremental improvements to our adjusted operating profit margin and our return on invested capital (ROIC). In this timeframe, we expect to maintain product development at between 8%-10% of total revenues. We expect to fund the modernization of back-office systems by deriving additional cost savings. The strategy is based on organic growth, although we may make further bolt-on acquisitions or non-core disposals to enhance our value and market positions. Acquisitions must fit our strategic direction, strengthen or extend our existing business, be accretive to diluted adjusted EPS in their first full year and, when integrated, deliver a return on invested capital above our weighted average cost of capital (8%) within three to five years. Our priorities are to:
- Grow Expert Solutions: We will focus on scaling our expert solutions by extending these offerings and broadening their distribution through existing and new channels, including strategic partnerships. We will invest to build or acquire positions in adjacent market segments.
- Advance Domain Expertise: We intend to continue transforming our information products and services by enriching their domain content with advanced technologies to deliver actionable intelligence and deeper integration into customer workflows. We will invest to enhance the user experience of these products through user-centric design and differentiated interfaces.
- Drive Operational Agility: We plan to strengthen our global brand, go-to-market and digital marketing capabilities to support organic growth. We will invest to upgrade our back-office systems and IT infrastructure. By 2021, we expect to complete the modernization of our Human Resources technology to support our efforts to attract and nurture talent.
In the first year of this plan, we made progress on several fronts. We sustained investment in our expert solutions, expanding the global reach of products such as UpToDate, TeamMate, CCH Tagetik, OneSumX,
Wolters Kluwer 2019 Full-Year Results Page 4 of 43
and Enablon, and working to strengthen key distribution partnerships. Expert solutions revenues grew 7% organically. We extended into the selected adjacencies of contract lifecycle management and barrier-based risk management with the acquisitions of CLM Matrix in May 2019 and CGE Risk Management in February 2020. We divested several small assets that no longer fit our long-term strategic direction. We stepped up investment in our digital information products, such as Ovid and our European legal research solutions, to enhance their content, functionality and user interfaces and to add capabilities that leverage artificial intelligence. We made significant progress on several key initiatives to drive operational agility: in 2019, we rolled out a new global HR technology platform, accelerated ongoing investments and programs to facilitate our cloud products, and extended the use of standardized technology platforms and components.
During 2019, our decisive response to the detection of ransomware in a portion of our IT environment led to a disruption in certain business activity for a few days, mainly in our Governance, Risk & Compliance and Tax & Accounting divisions. As reported previously, the financial impact on overall group results was not material.

Financial Policy, Leverage, and Capital Allocation
Wolters Kluwer uses its cash flow to invest in the business organically and 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. 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.
Net debt at December 31, 2019, was €2,199 million and the year-end net-debt-to-EBITDA ratio was 1.6x.

Dividend Policy
For more than 30 years, Wolters Kluwer has increased or maintained its annual dividend per share in euros (or euro equivalent). In 2007, the company established a progressive dividend policy and, since 2011, all dividends are paid in cash. In 2015, we introduced an interim dividend payment, aligning cash distributions closer to our seasonal cash flow pattern.
Wolters Kluwer remains committed to a progressive dividend policy, under which we aim to increase the dividend per share in euros each year, independent of currency fluctuations. The pay-out ratio2 can vary from year to year. Proposed annual increases in the dividend per share take into account our financial performance, market conditions, and our need for financial flexibility. The policy takes into consideration the characteristics of our business, our expectations for future cash flows, and our plans for organic investment in innovation and productivity, or for acquisitions. We balance these factors with the objective of maintaining a strong balance sheet.

2019 Dividend
In light of our strong financial position and in view of our expected capital needs for the duration of our current three-year strategic plan (2019-2021), we are proposing to increase the total dividend per share for financial year 2019 by 20%. We will therefore recommend a final dividend of €0.79 per share, bringing the total dividend to €1.18 per share (2018: €0.98). The 2019 final dividend is subject to approval of shareholders at the Annual General Meeting on April 23, 2020.
For 2020, we intend to maintain the interim distribution at 40% of prior year total dividend. Assuming the 2019 dividend is approved, this will result in a 2020 interim dividend of €0.47 per share.
Shareholders can choose to reinvest both interim and final dividends by purchasing additional Wolters Kluwer shares through the Dividend Reinvestment Plan (DRIP) administered by ABN AMRO Bank N.V.

2 Pay-out ratio: dividend per share divided by adjusted earnings per share.

Share Buybacks 2019 and 2020
As a matter of policy since 2012, Wolters Kluwer will offset the dilution caused by our annual incentive share issuance with share repurchases (Anti-Dilution Policy). In addition, from time to time when appropriate, we return capital to shareholders through further share buyback programs. Shares repurchased by the company are added to and held as treasury shares and are either cancelled or held to meet future obligations arising from share-based incentive plans.
During 2019, we spent €350 million on share buybacks, comprising 5.5 million shares at an average price of €63.80. Of this, 1.0 million shares were released in respect of share-based incentive plans.
Today, we are announcing our intention to spend up to €350 million on share repurchases during 2020, including repurchases to offset incentive share issuance. Of this, €50 million has already been completed in the period January 2, 2020, up to and including February 24, 2020.
Assuming global economic conditions do not deteriorate substantially, we believe this level of cash return leaves us with ample headroom to support our dividend plans, to sustain organic investment in innovation and productivity, and to make selective acquisitions. The share repurchases may be suspended, discontinued, or modified at any time.
For the period February 28, 2020, up to and including April 30, 2020, we have engaged a third party to execute €75 million in share buybacks on our behalf, within the limits of relevant laws and regulations (in particular Regulation (EU) 596/2014) and the company’s Articles of Association. The maximum number of shares which may be acquired will not exceed the authorization granted by the General Meeting of Shareholders. Repurchased shares are added to and held as treasury shares and will be used for capital reduction purposes or to meet future obligations arising from share-based incentive plans.
Developments 2020
On January 14, 2020, Wolters Kluwer Health signed an agreement to sell its remaining 45% interest in Chengdu Medicom, China. This interest has therefore been classified as an asset held for sale at December 31, 2019 in the 2019 financial statements.
On January 15, 2020, the Legal & Regulatory division completed the divestment of certain professional training assets in Belgium, with revenues of €13 million in 2019 and approximately 46 employees.
On February 10, 2020, we completed the acquisition of CGE Risk Management Solutions B.V. (CGE), a leading provider of risk management software, including the industry-standard BowTieXP solution. CGE joins the Environmental, Health & Safety and Operational Risk Management (EHS/ORM) software unit within Legal & Regulatory, which includes Enablon and eVision. CGE’s 2018 revenues were €5 million (un-audited).

Further information available on www.wolterskluwer.com

tijd 16.29
Wolters Kl. EUR 69,76 +2,36 vol. 597.000