Wolters Kluwer First-Quarter 2023 Trading Update
Alphen aan den Rijn,
Highlights
- Full-year 2023 guidance reiterated.
- First-quarter revenues up 5% in constant currencies and up 6% organically.
- Recurring revenues (82%) up 7% organically; non-recurring revenues up 2% organically.
- Digital & services revenues (94%) grew 7% organically; print revenues declined 5% organically.
- Expert solutions revenues (58%) grew 7% organically.
- First-quarter adjusted operating profit margin decreased 270 basis points.
- Personnel costs and personnel-related expenses increased, as expected.
- First-quarter adjusted free cash flow decreased 23% in constant currencies, mainly due to lower working capital inflows related to timing of payments.
- Net debt-to-EBITDA was 1.3x as of
March 31, 2023 . - Progress on 2023 share buyback: €303 million of intended share buyback of up to €1 billion completed in the year through
May 1, 2023 .
First-quarter 2023 developments
First-quarter revenues increased 5% in constant currencies, reflecting organic growth of 6% (1Q 2022: 8%), partly offset by the impact of net divestitures. In the first quarter, the average EUR/USD rate was favorable (averaging 1.07 in 1Q 2023 versus 1.12 in 1Q 2022). Recurring revenues (82% of revenues), which include subscriptions and other repeating revenue streams, increased 7% organically (1Q 2022: 8%). Non-recurring revenues (18% of revenues) rose 2% organically, marking an expected slowdown from a year ago (1Q 2022: 9%). Of non-recurring revenues, Governance, Risk & Compliance transactional revenues declined 1% organically (1Q 2022: 1% increase). Print book trends were mixed. Other non-recurring revenues, mainly comprised of on-premise software licenses and implementation fees, rose 2% organically against a tough comparable (1Q 2022: 14% organic growth). The adjusted operating profit margin declined 270 basis points in the first quarter, reflecting the expected increase in personnel costs and personnel-related expenses such as office and travel costs.
In March, we implemented the new five-division structure announced on
Health revenues grew 5% organically (1Q 2022: 9%). Clinical Solutions grew 6% organically (1Q 2022: 9%), led by our clinical decision support solution, UpToDate, and patient engagement solution, Emmi. Clinical drug information revenues returned to mid-single digit organic growth. Learning, Research & Practice grew 3% organically against a challenging comparable (1Q 2022: 9%). Digital subscription revenues for medical research and nursing solutions grew 4% organically, while print books, journal advertising, and other non-recurring revenues declined.
Tax & Accounting revenues grew 11% organically (1Q 2022: 9%). Our North American professional Tax & Accounting business sustained double-digit organic growth, mainly driven by cloud software, including the CCH Axcess suite. The North American business benefitted from continued strength of outsourced professional services and a favorable print book publishing schedule. Professional Tax & Accounting in
Governance, Risk & Compliance revenues were flat on an organic basis against a tough comparable (1Q 2022: 8%), largely as expected. A 6% decline in non-recurring revenues (37% of division revenues) was offset by 4% organic growth in recurring revenues. In Legal Services, organic growth was 2% (1Q 2022: 7%), as solid growth in recurring subscriptions was partly offset by a 2% organic decline in Legal Services transactional revenues. In Financial Services, organic revenues declined 3% (1Q 2022: organic growth of 8%), as momentum in recurring revenues slowed and non-recurring revenues declined. Lien Solutions and mortgage transaction volumes declined while on-premise software license and implementation fees were lower than a year ago.
Legal & Regulatory revenues grew 7% organically (1Q 2022: 6%). Legal & Regulatory Information Solutions (74% of divisional revenues) delivered stable 3% organic growth (1Q 2022: 3%), as digital and services subscriptions increased 8% organically (1Q 2022: 7%), more than compensating for a decline in training and other non-recurring products. The Enablon EHS/ORM1 platform delivered double-digit organic growth in both recurring cloud subscriptions and non-recurring software license fees in the quarter. In constant currencies, divisional revenues declined 3% due to the divestment on
Cash flow and net debt
First-quarter adjusted free cash flow declined 23% in constant currencies, due to lower working capital inflow in the quarter as a result of timing of payments. In addition, capital expenditure increased due to investments in innovation. Paid financing cost and paid tax were lower than a year ago. Net cash spend on acquisitions was €24 million, mainly related to the acquisition of NurseTim on
As of
In early April, we issued a new €700 million Eurobond with an 8-year term and 3.750% annual coupon.
Dividends and share buybacks
In the year to date (through
For the period starting
At the Annual General Meeting to be held on
ESG developments
In the first quarter, we made progress in advancing our ESG performance. In the area of human capital, we continued efforts to attract and retain talent and to support employee engagement and belonging. A range of initiatives around training and career development are planned for 2023. Efforts to reduce our Scope 1 and Scope 2 emissions continued, with our global real estate team on track to deliver a further reduction in absolute square meters of office space in 2023. Our program of decommissioning on-premise servers continued as we migrated applications and customers to energy-efficient cloud platforms. As reported previously, in early 2023, we submitted near-term targets to the Science Based Targets initiative (SBTi) for validation, to reduce absolute Scope 1 and 2 greenhouse gas (GHG) emissions by 50% and absolute Scope 3 GHG emissions by 30% by the year 2030 from a 2019 base year. We are continuing our review of the new EU Corporate Sustainability Reporting Directive (CSRD) in preparation for its application in 2024.
Full-year 2023 outlook
Our guidance for 2023 is provided below. We continue to expect full-year organic growth to be in line with the prior year and the adjusted operating profit margin to improve. We continue to expect first half 2023 organic growth to be slower compared to the prior year period, most notably in Governance, Risk & Compliance and Health. We continue to expect the adjusted operating margin to decline in the first half before improving in the second half.
Full-year 2023 outlook | ||
Performance indicators | 2023 Guidance | 2022 Actual |
Adjusted operating profit margin* | 26.1%-26.5% | 26.1% |
Adjusted free cash flow** | Around €1,200 million | €1,220 million |
ROIC* | 16.5%-17.0% | 15.5% |
Diluted adjusted EPS growth** | High-single-digit | 8% |
*Guidance for adjusted operating profit margin and ROIC is in reporting currency and assumes an average EUR/USD rate in 2023 of €/ |
If the current
We include restructuring costs in adjusted operating profit. We expect 2023 restructuring costs to be in the range of €10-€15 million (FY 2022: €6 million).
We expect adjusted net financing costs3 in constant currencies to be approximately €40 million. We expect the benchmark tax rate on adjusted pre-tax profits to be in the range of 23.0%-24.0% (FY 2022: 22.6%).
Capital expenditure is expected to increase but to remain within our normal range of 5.0%-6.0% of total revenues (FY 2022: 5.4%). We expect full-year cash conversion ratio to be approximately 100% (FY 2022: 107%).
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, earnings, and ROIC in the near term.
The impact of discontinuing activities in
2023 Outlook by division
Health: we expect full-year organic growth to be in line with prior year and the full-year adjusted operating profit margin to be stable.
Tax & Accounting: we expect full-year organic growth to be in line with prior year and the full-year adjusted operating profit margin to be stable.
Governance, Risk & Compliance: we expect full-year organic growth to be in line with prior year and the full-year adjusted operating profit margin to improve modestly.
Legal & Regulatory: we expect full-year organic growth to be in line with prior year and full-year adjusted operating profit margin to improve modestly.
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Financial calendar
May 10, 2023 Annual General Meeting of Shareholders
May 12, 2023 Ex-dividend date: 2022 final dividend
May 15, 2023 Record date: 2022 final dividend
June 6, 2023 Payment date: 2022 final dividend ordinary shares
June 13, 2023 Payment date: 2022 final dividend ADRs
August 2, 2023 Half-Year 2023 Results
August 29, 2023 Ex-dividend date: 2023 interim dividend
August 30, 2023 Record date: 2023 interim dividend
September 21, 2023 Payment date: 2023 interim dividend
September 28, 2023 Payment date: 2023 interim dividend ADRs
November 1, 2023 Nine-Month 2023 Trading Update
February 21, 2024 Full-Year 2023 Results
Media Investors/Analysts
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Forward-looking statements and other important legal information
This report contains forward-looking statements. These statements may be identified by words such as “expect”, “should”, “could”, “shall” and similar expressions.
Elements of this press release contain or may contain inside information about
1 EHS/ORM = environmental, health & safety and operational risk management.
2 This rule of thumb excludes the impact of exchange rate movements on intercompany balances, which is accounted for in adjusted net financing costs in reported currencies and determined based on period-end spot rates and balances.
3 Adjusted net financing costs include lease interest charges. Guidance for adjusted net financing costs in constant currencies excludes the impact of exchange rate movements on currency hedging and intercompany balances.
Attachment
- 2023.05.03 Wolters Kluwer First-Quarter 2023 Trading Update
Source:
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