Wolters Kluwer 2023 Full-Year Report
Wolters Kluwer 2023 Full-Year
Report
Alphen aan den Rijn, February 21, 2024 – Wolters Kluwer,
a global leader in professional information, software solutions and
services, today releases its full-year 2023 results.
Highlights
- Revenues €5,584 million, up 5% in constant currencies
and up 6% organically.
- Recurring revenues (82% of total revenues) up 7%
organically.
- Digital & services revenues (94% of total revenues) grew 6%
organically.
- Expert solutions (58% of total revenues) grew 8%
organically.
- Cloud software (16% of total revenues) grew 15%
organically.
- Adjusted operating profit €1,476 million, up 6% in
constant currencies.
- Adjusted operating profit margin up 30 basis points to
26.4%.
- Diluted adjusted EPS €4.55, up 10% overall and up 12%
in constant currencies.
- Adjusted free cash flow €1,164 million, down 2% in
constant currencies.
- Net-debt-to-EBITDA of 1.5x; return on invested capital
(ROIC) improved to 16.8%.
- Proposed 2023 total dividend €2.08 per share, an
increase of 15%.
- Share buybacks:
- Completed 2023 share buyback of €1 billion.
- Announcing 2024 share buyback of up to €1 billion, of which
€100 million is completed.
- Outlook 2024: expect good organic growth and further
improvement in adjusted operating profit margin, with the increase
in diluted adjusted EPS to be dampened by higher financing cost and
tax.
Full-Year Report of the Executive
Board
Nancy McKinstry, CEO and Chair of the Executive Board,
commented: “We achieved 6% organic growth and a
year-on-year increase in adjusted operating margin, despite
macroeconomic and geopolitical headwinds. Strong momentum in
recurring revenues compensated for challenges in some of our
non-recurring revenue streams. We met our financial and
sustainability goals, while increasing investment in product
innovation, including in generative AI, to support future growth.
We look forward to delivering another year of good organic growth
and margin improvement in 2024.”
Key Figures – Year ended December 31 |
€ million (unless otherwise stated) |
2023 |
2022 |
∆ |
∆ CC |
∆ OG |
Business performance – benchmark figures |
|
|
|
|
|
Revenues |
5,584 |
5,453 |
+2% |
+5% |
+6% |
Adjusted operating profit |
1,476 |
1,424 |
+4% |
+6% |
+7% |
Adjusted operating profit margin |
26.4% |
26.1% |
|
|
|
Adjusted net profit |
1,119 |
1,059 |
+6% |
+7% |
|
Diluted adjusted EPS (€) |
4.55 |
4.14 |
+10% |
+12% |
|
Adjusted free cash flow |
1,164 |
1,220 |
-5% |
-2% |
|
Net debt |
2,612 |
2,253 |
+16% |
|
|
ROIC |
16.8% |
15.5% |
|
|
|
IFRS reported results |
|
|
|
|
|
Revenues |
5,584 |
5,453 |
+2% |
|
|
Operating profit |
1,323 |
1,333 |
-1% |
|
|
Profit for the period |
1,007 |
1,027 |
-2% |
|
|
Diluted EPS (€) |
4.09 |
4.01 |
+2% |
|
|
Net cash from operating activities |
1,545 |
1,582 |
-2% |
|
|
∆: % Change; ∆ CC: % Change in constant currencies (€/$ 1.05); ∆
OG: % Organic growth. Benchmark figures are performance measures
used by management. See Note 3 for a reconciliation from IFRS to
benchmark figures. |
Full-Year 2024 Outlook
Our group-level guidance for 2024 is shown in the table below.
We expect sustained good organic growth in line with prior year and
a further modest increase in the adjusted operating profit margin.
Margin improvement is expected to be realized in the second half of
the year, mainly due to timing of investments.
Full-Year 2024 Outlook |
Performance indicators |
2024 Guidance |
2023 Actual |
Adjusted operating profit margin* |
26.4%-26.8% |
26.4% |
Adjusted free cash flow** |
€1,150-1,200 million |
€1,164 million |
ROIC* |
17%-18% |
16.8% |
Diluted adjusted EPS growth** |
Mid- to high single-digit |
12% |
*Guidance for adjusted operating profit margin and ROIC is in
reporting currency and assumes an average EUR/USD rate in 2024 of
€/$1.11. **Guidance for adjusted free cash flow and diluted
adjusted EPS is in constant currencies (€/$ 1.08). Guidance
reflects share repurchases of €1 billion in 2024. |
In 2023, Wolters Kluwer generated over 60% of its revenues and
adjusted operating profit in North America. As a rule of thumb,
based on our 2023 currency profile, each 1 U.S. cent move in the
average €/$ exchange rate for the year causes an opposite change of
approximately 3 euro cents in diluted adjusted EPS1.
We include restructuring costs in adjusted operating profit. We
expect 2024 restructuring costs to be in the range of €10-15
million (FY 2023: €15 million). We expect adjusted net financing
costs2 in constant currencies to increase to approximately €60
million. We expect the benchmark tax rate on adjusted pre-tax
profits to increase and to be in the range of 23.0%-24.0% (FY 2023:
22.9%).
Capital expenditures are expected to remain at the upper end of
our guidance range of 5.0%-6.0% of total revenues (FY 2023: 5.8%).
We expect the full-year 2024 cash conversion ratio to be around 95%
(FY 2023: 100%) due to lower net working capital inflows.
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.
2024 outlook by division
Our guidance for 2024 organic revenue growth by division is
summarized below. We expect the increase in group adjusted profit
margin for 2024 to be driven primarily by our Health, Legal &
Regulatory, and Corporate Performance & ESG divisions. The Tax
& Accounting margin is expected to decline slightly due to
increased product investment.
Health: we expect full-year 2024 organic growth
to be in line with prior year (FY 2023: 6%).
Tax & Accounting: we
expect full-year 2024 organic growth to be slightly below prior
year (FY 2023: 8%), due to slower growth in non-recurring
outsourced professional services and the absence of one-off
favorable events in Europe.
Financial & Corporate
Compliance: we expect full-year 2024
organic growth to be in line with or better than prior year (FY
2023: 2%) as transactional revenues are expected to stabilize.
Legal Regulatory: we expect
full-year 2024 organic growth to be in line with prior year (FY
2023: 4%).
Corporate Performance &
ESG: we expect full-year 2024 organic
growth to be better than in the prior year (FY 2023: 9%) as
Finance, Risk & Reporting revenues stabilize.
Progress against 2022-2024 strategy
We are two years into our current three-year strategic plan,
which has three strategic priorities:
- Accelerate
Expert Solutions: we are focusing our
investments on cloud-based expert solutions while continuing to
transform selected digital information products into expert
solutions. We are investing to enrich the customer experience of
our products by leveraging advanced data analytics and artificial
intelligence.
- Expand Our
Reach: we are seeking to extend into
high-growth adjacencies along our customer workflows and to adapt
our existing products for new customer segments. We are working to
develop partnerships and ecosystems for our key software
platforms.
- Evolve Core
Capabilities: we are enhancing our
central functions to drive excellence and scale economies, mainly
in sales and marketing (go-to-market) and in technology. We plan to
advance our sustainability and ESG performance and capabilities and
to continue investing in diverse and engaged talent to support
innovation and growth.
A more detailed discussion of our strategy and business model
can be found in our annual report.
In 2023, we made important progress on our strategic plan.
Expert solutions, which include our software products and certain
advanced information solutions, accounted for 58% of total revenues
(FY 2022: 56%) and grew 8% organically (FY 2022: 9%).
Today, around 50% of our digital revenues are from products that
leverage artificial intelligence (AI) to drive enhanced value for
our customers. During 2023, we stepped up experimentation and
investment in large language models (LLMs) as generative LLMs
became scalable. We began testing dozens of use cases,
collaborating with selected customers, and launched beta versions
in Health and Legal & Regulatory markets. For much of this
work, we are partnering with Microsoft, Google, and other
technology suppliers.
Second, we also made progress on extending our reach into
high-growth adjacencies and geographies. The new Corporate
Performance & ESG division, formed in March 2023, set us on a
path to extend our enterprise software solutions into corporate
workflows for ESG data collection, analysis, reporting, and
auditing. In the Health division, the acquisition of NurseTim
bolstered our position in nursing education solutions and test
preparation while the acquisition of Invistics drug diversion
detection software broadened our offering in the hospital
market.
Third, we took significant steps in 2023 to evolve our core
capabilities. We centralized most of our product development teams,
more than doubling the number of FTEs that now report into our
global development organization, Digital eXperience Group (DXG). We
formed a unified branding and communications function and a unified
financial organization to support the company globally. With regard
to our specific ESG objectives, the most notable advances were the
validation by the SBTi of our near-term emission reduction targets
and improvements in key human capital metrics, including turnover,
engagement, and belonging.
Financial policy, capital allocation, net debt, and
liquidity
Wolters Kluwer uses its free cash flow to invest in the business
organically and through acquisitions, to maintain optimal leverage,
and to 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, 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 flows.
Dividend policy and proposed final dividend
2023
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 payout
ratio3 can therefore vary from year to year. Proposed annual
increases in the dividend per share consider our financial
performance, market conditions, and our need for financial
flexibility. The policy takes into account 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.
At the 2024 Annual General Meeting of Shareholders, we will
propose a final dividend of €1.36 per share, which would result in
a total dividend over the 2023 financial year of €2.08 per share,
an increase of 15%. Dividends are paid in cash. 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.
Share buybacks 2023 and 2024
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 share
buyback programs. Shares repurchased by the company are added to
and held as treasury shares and are either cancelled or utilized to
meet future obligations arising from share-based incentive
plans.
In 2023, we completed share repurchases of €1 billion (8.7
million shares at an average price of €114.44). See Note 8 for
further information on issued share capital.
Today, we are announcing our intention to repurchase shares for
up to €1 billion during 2024. In the year to date, up to and
including February 19, 2024, we have repurchased €100 million in
shares (732,722 shares at an average price of €136.48). Assuming
global economic conditions do not deteriorate substantially, we
believe this level of share buybacks leaves us with ample headroom
to support our dividend plans, to sustain organic investment, and
to make selective acquisitions. The share repurchase program may be
suspended, discontinued, or modified at any time.
For the period starting February 23, 2024, up to and including
April 29, 2024, we have mandated a third party to execute €205
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 repurchased will not exceed the
authorization granted by the Annual General Meeting of
Shareholders.
Net debt, leverage, credit facility, and liquidity
position
Net debt on December 31, 2023, was €2,612 million, up from
€2,253 million on December 31, 2022. The net-debt-to-EBITDA ratio
increased to 1.5x at year end 2023 (FY 2022: 1.3x). Gross debt
includes the €700 million Eurobond (8-year term; 3.750% annual
coupon) issued on April 3, 2023.
Our €600 million multi-currency credit facility remains fully
undrawn. As of December 31, 2023, net cash available was €989
million4.
Full-Year 2023 Results
Benchmark figures
Group revenues were €5,584 million, up 2% overall and up 5% in
constant currencies. Excluding the effect of currency and the net
effect of divestments and acquisitions, organic revenue growth was
6%, in line with the prior year (FY 2022: 6%).
Revenues from North America accounted for 64% of total group
revenues and grew 5% organically (FY 2022: 6%). Revenues
from Europe, 28% of total revenues, grew 7% organically (FY 2022:
6%). Revenues from Asia Pacific and Rest of World, 8% of total
revenues, grew 9% organically (FY 2022: 10%).
Adjusted operating profit was €1,476 million (FY 2022: €1,424
million), up 6% in constant currencies. The related margin
increased by 30 basis points to 26.4% (FY 2022: 26.1%), in line
with our full-year guidance range. The margin improvement follows a
margin increase in the fourth quarter driven by operational
gearing, mix shift, and the comparison to a more normalized cost
base in fourth quarter 2022. Personnel costs increased as expected
due to an increase in the number of employees and due to wage
inflation. In addition, there was an expected increase in
personnel-related expenses, such as business travel, events, and
training costs.
Product development spending (including capitalized spend)
increased in constant currencies and amounted to 11% of revenues in
2023 (FY 2022: 11%). Restructuring expenses, which are included in
adjusted operating profit, increased to €15 million
(FY 2022: €6 million), at the upper end of our
guidance range.
Adjusted net financing costs reduced to €27 million (FY 2022:
€56 million) due to higher interest income on our cash balances.
Included in adjusted net financing costs was a €7 million net
foreign exchange gain (FY 2022: €5 million net foreign exchange
loss) mainly due to the translation of intercompany balances.
Adjusted profit before tax was €1,450 million (FY 2022: €1,368
million), up 6% overall and up 8% in constant currencies. The
benchmark tax rate on adjusted profit before tax increased to 22.9%
(FY 2022: 22.6%), mainly due to lower prior year favorable
adjustments combined with the increased limitation on interest
deductibility in the Netherlands. Adjusted net profit was €1,119
million (FY 2022: €1,059 million), an increase of 7% in constant
currencies.
Diluted adjusted EPS was €4.55 (FY 2022: €4.14), up 12% in
constant currencies, reflecting the increase in adjusted net profit
and a 4% reduction in the diluted weighted average number of shares
outstanding to 246.0 million (FY 2022: 255.8 million).
IFRS reported figures
Reported operating profit declined 1% to €1,323 million (FY
2022: €1,333 million), mainly due to significantly lower divestment
results: we incurred a net disposal gain of €4 million in 2023
compared to a gain of €75 million in the prior year.
Amortization and impairments of intangible assets decreased 9% due
to reduced impairments in 2023.
Reported financing results amounted to a net cost of €27
million, significantly lower than in the prior period (FY 2022: €57
million cost) due to higher interest income on cash balances. The
reported effective tax rate increased to 22.4% as the prior year
included a significant tax-exempt divestment gain (FY 2022: 19.5%).
As a result, net profit for the year decreased 2% overall to €1,007
million (FY 2022: €1,027 million). Diluted EPS increased
2% to €4.09 (FY 2022: €4.01), benefitting from the lower weighted
average number of shares outstanding.
Cash flow
Adjusted operating cash flow was €1,476 million (FY 2022: €1,528
million), down 3% overall and down 1% in constant currencies. This
reflects a cash conversion ratio of 100% (FY 2022: 107%) returning
to historical levels (95%-100%). Working capital inflows of €98
million were significantly lower than in the prior year while
capital expenditures increased 8% overall and 10% in constant
currencies. Net capital expenditures were 5.8% of revenues (FY
2022: 5.4%). Cash payments related to leases, including lease
interest paid, were €74 million (FY 2022: €81 million).
Depreciation of physical assets, amortization and impairment of
internally developed software, and depreciation of right-of-use
assets totaled €299 million (FY 2022: €306 million).
Net interest paid, excluding lease interest paid, reduced to €17
million (FY 2022: €45 million), reflecting higher interest
income on cash and cash equivalents. Income tax paid increased to
€325 million (FY 2022: €289 million). The net cash outflow
related to restructuring was €1 million (FY 2022: outflow of €12
million). As a result, adjusted free cash flow was €1,164 million
(FY 2022: €1,220 million), down 2% in constant currencies.
Total acquisition spending, net of cash acquired and including
transaction costs, was €68 million (FY 2022:
€95 million), and primarily relates to the acquisitions of
NurseTim on January 9, 2023, Invistics on June 7, 2023, and tax
content and tools provider MFAS on October 31, 2023.
Dividends paid amounted to €467 million (FY 2022: €424 million).
The cash deployed towards share repurchases was as announced, €1
billion, and in line with prior year (FY 2022: €1 billion).
Sustainability and ESG achievements 2023
In 2023, we continued efforts designed to attract, engage,
develop, and retain talent globally. Our employee turnover rate
improved to 9.8% (FY 2022: 15.3%) despite still competitive markets
for technology talent. Our employee engagement score improved 1
point to 78 and our belonging score improved 2 points to 75.
In November 2023, the Science Based Targets initiative (SBTi)
validated our near-term emissions reduction targets under which we
intend 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.
Our annual scope 1 and 2 emissions, which are entirely accounted
for by our offices around the world, reduced by 8% in 2023 compared
to the prior year. At year-end 2023, our global office footprint
(m2) was reduced by 5% compared to year-end 2022, bringing the
cumulative reduction from 2019 baseline to 25%. Our server
decommissioning program led to the closure of 12 data center
locations and the decommissioning of 1,542 servers. In 2023, total
business travel related emissions returned to pre-pandemic absolute
levels, but business travel emissions per FTE were 16% below 2019
baseline level.
In preparation for compliance with the EU Corporate
Sustainability Reporting Directive and European Sustainability
Reporting Standards (ESRS), which become mandatory as of financial
year 2024, we have carried out an initial double materiality
assessment based on the ESRS and will be providing additional
disclosure in our annual report.
Our sustainability efforts were recognized with an improved 14.4
ESG risk rating from Morningstar Sustainalytics, which qualifies
Wolters Kluwer as top-rated and in the leading 5% of 1,109
companies in the Software & Services industry.
About Wolters Kluwer
Wolters Kluwer (EURONEXT: WKL) is a global leader in
information, software solutions and services for professionals in
healthcare; tax and accounting; financial and corporate compliance;
legal and regulatory; corporate performance and ESG. We help our
customers make critical decisions every day by providing expert
solutions that combine deep domain knowledge with technology and
services.
Wolters Kluwer reported 2023 annual revenues of €5.6 billion.
The group serves customers in over 180 countries, maintains
operations in over 40 countries, and employs approximately 21,400
people worldwide. The company is headquartered in Alphen aan den
Rijn, the Netherlands.
Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and
are included in the AEX, Euro Stoxx 50, and Euronext 100 indices.
Wolters Kluwer has a sponsored Level 1 American Depositary Receipt
(ADR) program. The ADRs are traded on the over-the-counter market
in the U.S. (WTKWY).
For more information, visit www.wolterskluwer.com, follow us on
LinkedIn, Facebook, YouTube and Instagram
Media Paul
Lyon External
Communications t
+ 44
(0)7765-391-824 press@wolterskluwer.com
Investors/AnalystsMeg GeldensInvestor
Relationst + 31
(0)172-641-407 ir@wolterskluwer.com
Forward-looking Statements and Other Important Legal
InformationThis report contains forward-looking
statements. These statements may be identified by words such as
“expect”, “should”, “could”, “shall” and similar expressions.
Wolters Kluwer cautions 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
contemplated by the forward-looking statements. Factors which could
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
engaged; conditions created by global pandemics, such as COVID-19;
behavior of customers, suppliers, and competitors; technological
developments; the implementation and execution of new ICT systems
or outsourcing; and legal, tax, and regulatory rules affecting
Wolters Kluwer’s businesses, 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 could influence future results. The foregoing list of
factors should not be construed as 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.Elements of this press
release contain or may contain inside information about Wolters
Kluwer within the meaning of Article 7(1) of the Market Abuse
Regulation (596/2014/EU). Trademarks referenced are owned by
Wolters Kluwer N.V. and its subsidiaries and may be registered in
various countries.
1 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.2 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.3 Dividend payout ratio: dividend per share
divided by adjusted earnings per share.4 Total cash and cash
equivalents of €1,135 million less overdrafts used for cash
management purposes of €146 million.
- 2024.02.21 Wolters Kluwer 2023 Full-Year Results
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