Benchmark Figures
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EUR million
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HY1 2001
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HY1 2000
pro forma restated 1)
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Change %
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Net Sales
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1,808
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1,690
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7%
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1,690
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EBITDA
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395
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406
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(3%)
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406
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EBITA
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344
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362
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(5%)
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362
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EBITA margin %
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19.0%
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21.4%
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21.4%
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Ordinary profit before tax and amortization of intangibles
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256
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278
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(8%)
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278
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Ordinary net income before amortization of intangibles
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173
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191
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(9%)
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191
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Ordinary EPS before amortization of intangibles 'fully diluted'
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Ordinary free cash flow
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47
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76
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(38%)
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76
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Ordinary free cash flow per share 'fully diluted'
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EUR 0.16
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EUR 0.28
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(43%)
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EUR 0.28
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| 1 Restated for changes in standards Dutch Council for Annual Reporting with respect to amortization of intangibles (see Appendix)
Rob Pieterse, Chairman of the Executive Board of Wolters Kluwer, about HY1-2001:
'Our businesses were able to realize further top-line growth, bringing sales to EUR 1,808 million, despite the divestment of Professional Training. Our strongest performer was Legal, Tax & Business North America. The fact that we were able to double our profitable Internet sales to EUR 175 million shows that our Internet policy is proving to be very successful. We expect our Internet sales to reach approximately EUR 350 million by year-end. Overall, our migration towards electronic products and services is well underway.
I am extremely pleased with the positive outcome of the portfolio review of Legal, Tax & Business Europe, which will lead to a concentration of our resources and attention on six rather than sixteen customer segments. This gives me confidence that the European cluster will further improve its performance. Our European activities will become more cost effective and will increase the speed and quality of product development.
The performance of International Health & Science was unsatisfactory. This cluster was confronted with a number of operational setbacks, partly originating from events in 2000. Under the leadership of my colleague Hugh Yarrington, actions are being taken to bring this cluster back on track towards the end of this year.
I am also delighted to report that our drive to create a more entrepreneurial and innovative culture has taken root within our organization. Aside from the additional (Internet) product development program, operating companies throughout the organization also are initiating programs to enhance their organic growth in the years to come.
We expect that our acquisition program aimed at smart information tools will also contribute to an acceleration of our growth.
In the light of the implementation of our strategy, focused on entrepreneurship and innovation, the Supervisory Board has asked me to consider an extension of my position beyond my retirement date of September 2002. I will be pleased to do so.
Despite challenging market conditions, we reiterate our outlook for the year 2001: ordinary net income before amortization of intangible fixed assets approximately 5% higher than in 2000, at constant currencies.'
Highlights Half-Year 2001
Portfolio review Legal, Tax & Business Europe. Over the past few months, the CEO of Legal, Tax & Business Europe has reviewed the European portfolio to prioritize the growth opportunities and sharpen its direction. As a result, Legal, Tax & Business Europe will focus on six rather than sixteen core customer segments across Europe. These core segments are: legal
fiscal/financial
human resources management
public & government administration
health, safety & environment
transport
These six core customer segments represent approximately 75% of cluster sales. The decision has been made to divest ten Hagen & Stam, our trade journal publisher in the Netherlands, with annual sales of approximately EUR 100 million.
The 'drive for change' message results in culture shift.
To empower the strategy focused on entrepreneurship and innovation of Wolters Kluwer, as announced in March of this year, a range of programs has been developed. These are aimed at improving organic growth and enhancing (Internet) product development. Furthermore, our acquisition program is increasingly focused on high growth smart information tool (software) and services companies. Incentive and remuneration programs have been developed to further strengthen the innovative culture within the company.
Clear focus on acquiring smart information tool (software) and services companies.
We successfully completed 13 transactions, with total annualized future sales of EUR 177 million. Nearly all acquisitions were smart information tool companies, active in the fields of legal, human resources, banking, logistics, accounting, and health. The three major acquisitions were:
Loislaw (annualized sales: EUR 23 million), the US provider of primary and secondary source material for legal research delivered on a subscription basis over the Internet, was integrated into Aspen Publishers;
CBF Systems (annualized sales: EUR 26 million) provides printed and automated forms and tools for mortgage lenders and commercial banks, and was integrated into BSI, a unit of CCH;
SilverPlatter (annualized sales: EUR 72 million), integrated into Ovid, provides secondary source bibliographic databases aimed at medical/academic markets.
Profitable Internet sales doubled to EUR 175 million.
We were able to increase profitable Internet sales to EUR 175 million (HY1-2000: EUR 89 million), reaping the benefits from our previous investments. These sales now represent 10% of the total (HY1-2000: 5%). We expect Internet sales to reach approximately EUR 350 million by year-end.
Benchmark ordinary net income before amortization of intangible fixed assets was EUR 173 million (HY1-2000: EUR 191 million), consistent with the full year 2001 forecast.
Group Financials
During the first half of 2001, sales increased by 7% from EUR 1,690 million to EUR 1,808 million (+5% at constant currencies). Acquisitions, net of 2% divestments, contributed 3% to the sales growth.
The benchmark ordinary net income before amortization of intangibles showed a 9% fall from EUR 191 million to EUR 173 million. The cash earnings per share were EUR 0.62 (HY1-2000: 0.69). Excluding the net effect of the additional (Internet) product development spending, the ordinary net income before amortization of intangibles would have risen by approximately 3%. Again we saw a strong shift from traditional print to electronic products and services.
Internet sales doubled from EUR 89 million in the first half of 2000 to EUR 175 million in the first six months of 2001, and now represent 10% of the total (HY1-2000: 5%). Electronic products (Internet, other online and CD-ROM), which are key to our future success, again put in excellent performance, rising by 37% overall and 20% organically. Demand continues to vary greatly among geographic regions and professions, but the relative importance of electronic and in particular Internet products will rise significantly in the years to come. We are confident that we will realize approximately EUR 350 million of Internet sales in the full year 2001. Underscoring this shift in customer preferences, paper-based products accounted for 72% of sales in the first half of 2001 (HY1-2000: 75%). This is a modest 3% points decline compared to the same period last year, largely due to lower demand for loose-leaf publications (21% of sales). More than half of our sales are subscription-based. For the Internet, upfront subscriptions represent approximately three quarters of sales. Advertising sales, which account for a mere 5% of the total, held up reasonably well in the first half.
The additional (Internet) product development program of EUR 250 million is now running at full speed. The expenditure related to this program was much higher (EUR 43 million) in the first half 2001 than the amount spent in the same period of last year (HY1-2000: EUR 8 million). This was in line with the forecast that the full year spending of approximately EUR 100 million (2000: EUR 47 million) would be spread more or less evenly over the two halves of 2001. In addition to projects funded from the EUR 250 million program, product development efforts and spending from the normal operating company budgets were stepped up.
As a result of these increased expenditures, which have been charged to the profit and loss account, the operating income before amortization of intangibles (EBITA) fell by 5% to EUR 344 million. Excluding this expenditure, the EBITA would have risen by 5% (up 2% at constant currencies), leading to a margin of 21.4% (HY1-2000: 21.9%). The reported EBITA margin, after additional Internet spending, fell from 21.4% in the first half of 2000 to 19.0% in the period under review. Acquisitions, net of 1% divestments contributed 4% to EBITA growth. No reorganization provisions were created. From the EUR 60 million of reorganization provisions created last year, EUR 14 million was used in the first half.
The effective tax rate on the basis of pre-tax profits before amortization of intangibles was 32.3% (HY1-2000: 30.4%).
Cash flow from operations increased from EUR 312 million to EUR 332 million, despite additional (Internet) product development spending. Trends in working capital improved due to favorable changes in inventories and debtors, and deferred income. Combined with an increased level of capital expenditure, the ordinary free cash flow moved from EUR 76 million to EUR 47 million or EUR 0.16 per share (full year 2000 ordinary free cash flow: EUR 363 million). Acquisition payments were EUR 342 million, in line with the first half of last year (HY1-2000: EUR 354 million).
The interest-bearing net debt position increased, as a result of our ambitious acquisition program, from EUR 2,614 million at end of last year to EUR 2,961 million. The funding of these acquisitions was derived from the free cash flow as well as the available headroom in our financing facilities. In May, we successfully launched a perpetual cumulative subordinated bond of EUR 225 million. We currently have credit ratings in the single A category. As standard practice, we are pursuing further financing opportunities to fund our ongoing acquisition program and to realize optimal financing costs.
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Sales by Media |
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HY1-2001
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In %
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HY1-2000
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In %
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Internet sales |
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175
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10
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89
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5
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Other online sales |
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24
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1
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23
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1
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Subtotal
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199
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11
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112
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6
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CD-ROM
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271
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15
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232
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14
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Total electronic sales |
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470
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26
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344
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20
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Print sales
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1,3
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72
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1,271
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75
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Training
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38
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2
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75
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5
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Total EUR million |
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1,808
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100
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1,69
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100
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Performance by cluster
Legal, Tax & Business Europe - focus on six core customer segmentsSales up 5% to EUR 658 million (HY1-2000: EUR 624 million) EBITA down 2% to EUR 119 million (HY1-2000: EUR 121 million)
Cluster management team installed and portfolio review concluded
Decision to focus on core customer segments accounting for some 75% of sales
Modest improvement organic sales growth, focus on operational excellence
Excellent performance France; substantial results improvement the Netherlands (amongst others ten Hagen & Stam)
Reorganizations in progress in notably the Netherlands, Belgium and Spain
Priority: focus resources on growth areas
During the first half-year, the cluster's core management team was established and the strategic direction, aimed at sustainable, profitable growth and operational excellence, was formulated. In order to identify the best opportunities for leadership and growth in our markets, an in-depth portfolio analysis was taken in hand by the new cluster CEO. As a result of this portfolio review, Legal, Tax & Business Europe will narrow its focus from sixteen to six core customer segments across Europe. These core segments are legal; fiscal/financial; human resources management; public & government administration; health, safety & environment (HSE) and transport. The six core customer segments represent approximately 75% of total cluster sales. The non-core operations will either be harvested or divested. Stemming from the portfolio review, it was decided to divest ten Hagen & Stam, our trade journal publisher in the Netherlands, with sales of approximately EUR 100 million. The activities of ten Hagen & Stam are focused on ICT, construction, and industry and no longer fit within Legal, Tax & Business Europe's new focus.
To realize common technology platforms and systems, corporate-wide contracts have been signed with leading companies for content and customer relation management. A partnership was formed with Atos Origin for local portals and the European Internet Platform. Although not yet at targeted performance, Wolters Kluwer Netherlands delivered a significant improvement in results compared to last year, and was able to sign important deals with large accountancy firms in the Netherlands. France was a growth accelerator with good performance across all activities and a successful product development program.
Jean-Marc Detailleur, Member of the Executive Board responsible for Legal, Tax & Business Europe, said:
'The cluster portfolio review identified opportunities and growth possibilities within the chosen core business areas. I have already seen many promising product development initiatives and I am confident that thanks to the new strategy, Legal, Tax & Business Europe will in the near future strengthen its competitiveness and market positions in our core business areas.'
Legal, Tax and Business North America - our strongest performer
Sales up 16% to EUR 584 million (HY1-2000: EUR 505 million)
EBITA up 1% to EUR 147 million (HY1-2000: EUR 146 million)
Electronic sales now 42% of total; Internet sales more than doubled to EUR 86 million or 15% of total sales
Legal Information Services (LIS) growing strongly, despite slowing business formations and trademark activities
Portfolio review: increased focus on compliance business for the banking, insurance and securities industries
Healthy flow of smart information tool acquisitions: Loislaw, CBF Systems, and TSoft
Integration Loislaw progressing well: on track for FY-2001 EBITA break-even target
Priority: extend leading market position into smart information tools and services
Legal, Tax & Business North America again reported double-digit sales growth and the cluster is further strengthening its leading position in its chosen markets. LIS realized good growth again, despite some effects from the slowing US economy.
Several acquisitions were completed. Loislaw and Emanuel were added to the portfolio of Aspen Publishers. CBF Systems, TSoft, and Compliance International became part of CCH. The integration of Loislaw, acquired to further develop the segment of small and medium-sized legal firms, into Aspen's operations is largely completed and proving a great commercial success. We are confident that the full year 2001 EBITA break-even target for Loislaw will be met. In addition to our activities in the areas of tax, legal, and human resources, this cluster will also increasingly focus on legal and transaction compliance for the banking, insurance and securities industries. The cluster strongly increased its Internet sales, which doubled to EUR 86 million and now represent 15% of total cluster sales.
Good progress has been made on Internet projects, with spending concentrated on the Legal Compliance Services Site and Tax and Accounting Destination Site. Other promising (electronic) products in the pipeline should deliver an additional boost to our growth opportunities during the course of 2002.
Nancy McKinstry, Member of the Executive Board responsible for Legal, Tax & Business North America, said:
'I am pleased that Legal, Tax & Business North America was again able to deliver strong growth. However, to make sure that we continue this in the years to come, we will increase our business in the area of legal and transaction compliance for the banking, insurance and securities industries, in addition to our existing core activities. I also am very excited that we were able to boost our Internet sales to EUR 86 million. And with promising Internet projects launched or well under way, a further improvement of profitable sales via the Web is expected.'
Legal, Tax and Business Asia Pacific - promising new products in the pipeline
Sales down 3% to EUR 31 million (HY1-2000: EUR 32 million) EBITA below last year at EUR 5 million (HY1-2000: EUR 6 million)
Sales of electronic products up 50%; Internet represents 13% of total sales
High organic growth of EBITA offset by negative currency impact
Double-digit organic sales growth for CCH Asia
Priority: further expansion into Asia
The cluster results were impacted by product delays that could not be fully offset by the strong sales growth in Asia. All operations, including the acquisitions MAUS and Access Communication, have promising new products in the pipeline.
Internet sales represent 13% of the total sales of this cluster. The success of our Internet strategy is based on recognizing and responding to each of the geographic markets. The additional Internet projects are doing well under the umbrella of eCCH Asia.
Hugh Yarrington, Member of the Executive Board responsible for Legal, Tax & Business Asia Pacific said:
'Although small in size compared to the other clusters, Legal, Tax & Business Asia Pacific is an important testing ground for Wolters Kluwer. In the areas of smart information tools, Internet syndication, and investment/partnering techniques, Legal, Tax & Business Asia Pacific will teach us a great deal that can be applied to the other clusters in the years to come.'
International Health & Science - expansion electronic activities and streamlining of business
Sales up 13% to EUR 382 million (HY1-2000: EUR 339 million),
EBITA down 6% to EUR 75 million (HY1-2000: EUR 80 million)
Acquisition of SilverPlatter (June 2001) further enhances Ovid's leading position as provider of databases and research tools for the medical and academic markets
Decision on single electronic delivery platform taken
Selective allocation of resources aimed at growth and electronic leverage
Priority: acceleration of electronic delivery of content and smart information tools
Sales and results of this cluster are affected by phasing of product dispatches to wholesalers at Lippincott Williams & Wilkins. This company also decided to discontinue certain 'society journals' business, which was faced with unprofitable renewals.
The strategic direction of International Health & Science is to become the leading provider of content-based productivity tools for key sectors of the health, pharmaceutical, and scientific markets. The coming months will see an aggressive program to position the cluster's companies to achieve this strategy and to fully realize their great potential. Our overall strategy of combining content, software, and essential services, using subscription-based business models, is readily applicable to the cluster. And, the drive to achieve this overall Wolters Kluwer strategy in the cluster will be intensified.
The integration into Ovid Technologies of SilverPlatter (deal closed in June), a global provider of medical and scientific databases and related software, is progressing well.
Hugh Yarrington, Member of the Executive Board responsible for International Health & Science said:
'Recent acquisitions, crisper managerial execution, and a tightening of our strategic vision for this cluster will make International Health & Science a significant contributor to Wolters Kluwer's growth and prosperity for years to come. The key market sectors in health, pharmaceutical, and science where we will focus our efforts all provide good opportunities for profitable growth, and the assets we have assembled in this cluster give us the strength we need to be market leaders.'
Education - in good shape
Sales at the same level, at EUR 115 million (HY1-2000: EUR 113 million),
EBITA 33% lower at EUR 7 million (HY1-2000: EUR 12 million)
High seasonality both in sales and costs
Strong performance in the Netherlands and Sweden, with favorable phasing towards the first half-year
Now ready to move forward with reorganization of Swedish operation, reducing the headcount
Priority: expand e-learning activities
Preparing for its main season, the Education cluster performed well with many cluster projects underway and strong performance in the Netherlands and Sweden. Especially good contributions came from Wolters-Noordhoff, which still enjoys the benefit of the new purchase cycle in secondary education. The business improvement plan for Sweden is well on track; it will reduce headcount and improve the competitive position.
A number of Internet/electronic projects are being developed within WKE Online and are currently in the execution phase. The commercial launch of Vespucci in the Netherlands, a ground breaking online learning environment, is scheduled for the new educational season.
Hugh Yarrington, Member of the Executive Board, responsible for Education said:
'Wolters Kluwer's Education cluster has the capabilities and assets necessary to extend its reach. In this respect, we are very interested in smart information tools and Internet applications for education. Books have been essential teaching tools for centuries, and we will always produce great educational books. Now, we have an opportunity to build electronic teaching tools like Vespucci and WKE Online for our education markets and to think about using them to serve the corporate training market as well. The search for a new CEO for this cluster is continuing.'
Professional Training
The sale of Professional Training was almost completed, with only ROVC and ISBW left to be sold. Wolters Kluwer will strive to sell ROVC before the end of this year and expects to sell ISBW during 2002.
Outlook Wolters Kluwer for 2001 unchanged
Results will be affected by the further acceleration of our additional (Internet) product development investment from EUR 47 million in 2000 to approximately EUR 100 million in 2001. This investment will be charged to the profit and loss account and will affect our 2001 profit growth as previously announced. We expect our year 2001 ordinary net income before amortization of intangible fixed assets to increase approximately 5%, measured in constant currencies.
Forward-Looking Statements
This press release contains forward-looking statements. These statements may be identified by words such as 'expect', 'should', 'could', 'shall' and similar expressions. These statements are subject to risks and uncertainties, and actual results and events could differ materially from what is expected presently.
Factors leading thereto may include without limitations general economic conditions, conditions in the markets in which Wolters Kluwer is engaged, behavior of customers, suppliers and competitors, technological developments, as well as legal and regulatory rules affecting Wolters Kluwer's business.
Note for the editor:
Wolters Kluwer is a multinational information services company with annual sales of approximately EUR 3.7 billion, employing approximately 19,000 people in Europe, North America and Asia Pacific. The company's core activities are Legal, Tax & Business, International Health & Science, and Education. The Wolters Kluwer shares are quoted on the Euronext Amsterdam. The financial results for the year 2001 will be announced on March 19, 2002.
Internet: www.wolterskluwer.com
For more information, please contact:
- Press: Eric Heres, tel. +31 20 6070 335 - Analysts/Investors: Annie Hull-Bom, tel. +31 20 6070 407
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