Transcript Wolters Kluwer Investor Presentation
Wolters Kluwer
Investor Presentation - Euro Benchmark Offering
Boudewijn Beerkens Member Executive Board Chief Financial Officer November 2003 George Dessing Vice President Corporate Treasurer
Overview of the Offering
Status : Ratings:
Moody’s S&P
Amount: Maturity: Use of Proceeds: Documentation: Law: Listing: Issuer: Wolters Kluwer nv
Senior, Unsecured Notes A3 (on review for possible downgrade) BBB+ (stable outlook)
Benchmark Size Target 10 years
Repurchase of existing debt and general corporate purposes Stand Alone Offering Memorandum Dutch Luxembourg, Amsterdam (Euronext)
Joint Bookrunners: Timing:
Roadshow Pricing ABN Amro, CSFB, Deutsche Bank Thursday 13th and Friday 14th of November Week of 17th November November 2003 Investor Roadshow
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Agenda
Overview of Wolters Kluwer
Review of Strategy Update
Financials
Liability Management Initiative
Summary
Agenda
Overview of Wolters Kluwer
Review of Strategy Update
Financials
Liability Management Initiative
Summary
Wolters Kluwer Overview
Leading Multi-media Professional Publisher with Excellent Market Positions and Strong Brands
– The largest legal and tax publisher in Europe and the leading tax publisher in the US. The world’s second largest medical publishing group. Leading positions in Europe in educational publishing – Established and diversified franchise operating in over 25 countries
High “Value-added” Proprietary Information
– Majority of revenues are generated from copyrighted proprietary content
“Must Have” Nature of Professional Product
– Limits exposure to cyclical fluctuations via subscription-based revenues – Information tools and end-to-end solutions to enhance client productivity
Stable Revenue & Free Cash Flow
– Approximately two thirds of revenue is subscription based (FY 2002) – Consistently generated FCF (after dividends) of €250m - €300m (1998-2002)
Strong Liquidity & Prudent Balance Sheet Management
– Solid cash position and committed bank facilities – Implementing a strategy to reduce refinancing risk and total debt November 2003 Investor Roadshow
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Serving our Customers
An International Company Customers and Personnel
Teachers and professors Lawyers HR managers Students
Education 1.500* Health 2.400* LTB Europe 7.700*
Insurance Health specialists Pharmaceuticals manufacturers Pharmacists Hospitals
LTB North 6.400* 6.400*
Nurses Scientists
(*) personnel
600* LTB Asia Pacific
Patrimony managers Banks Tax professionals And accounting professionals November 2003 Investor Roadshow
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Diversified Revenue and EBITA
2002 Revenues ( €3,895m) 2002 EBITA ( €777m) (2) Education 8% Education 7% Health 19% LTB North America 31% Health 16% Non-Core
(1)
9% LTB Europe 32% LTB Asia Pacific 1% LTB Asia Pacific 2% Legal Tax & Business 63%
(1) Non-core includes KAP, Ten, Hagen & Stam, ISBW (2) Including corporate costs (excluding = €814m) and before exceptional items
Non-Core (1) 8% LTB Europe 28% LTB North America 40% Legal Tax & Business 68%
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Legal, Tax and Business, Europe
Market = €4.1bn
By Market Segment ( €m)
EHS 298 (7%) Transport 183 (4%) Public & Social 705 (17%) HR 508 (12%) Tax & Accounting 1,213 (30%) Legal 1,209 (30%)
By Country ( €m)
Other 103 (3%) SC 148 (4%) CE 155 (4%) UK 230 (6%) Germany 1,483 (35%) Spain 255 (6%) Belgium 278 ( 7%) France 632 (15%) Italy 543 (13%) NL 289 (7%)
€m
Revenue % of Total Revenue EBITA EBITA Margin (%)
2001
1,179 30.9% 223 18.9%
Source: Company reports, D&B estimates, analyst reports
2002
1,228 31.5% 230 18.8%
Key Trends & Dynamics
#1 or #2 player in almost every core market and geography Country differences drive demand for local content/offerings across all markets Deeply rooted local brands and recognised content quality Growing demand for more integrated tax and accounting workflow and compliance tools Legal market driven primarily by secondary content and tools Regulatory markets expanding at the local, country and EU levels
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Legal Tax and Business North America
Market (1) : $1,080m Market (2) : $1,542m Highlights US Tax Market BNA 5% Other 22% Intuit 17% WK 32% Thomson 24% €m
Revenue % of Total Revenue EBITA EBITA Margin (%)
US Legal Research Market 2001
1,210 31.5% 340 28.1%
ASPEN/ CCH Legal 19% West 44% Other 10% BNA 8% Reed 19% 2002
1,214 31.2% 326 26.8%
Leading market positions in Legal publishing and Tax
Legal
#1 in Securities Law and other specialty areas
Tax
#1 in US Tax Market (tax research and compliance markets)
Business
Demand for higher margin specialty content and more integrated primary and secondary offerings
Registered Agent to 200k businesses (80% of Fortune 1,000)
#1 position in community bank, credit unions and mortgage segments
(1) Excludes accounting market, Asia Pacific and Canada (2) Includes specialised legal content and law school market Source: Company reports, YE company reports, analyst reports, Wolters Kluwer analysis
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Health - Strong Share in WK Market Segments
Market = $5.3bn
Highlights
#2 medical publisher globally Reed 17%
Leading global online medical platform Other 59% Thomson 9% WK 13%
Three of the top ten titles in the critical specialties in medical and nursing €m
Revenue % of Total Revenue EBITA EBITA Margin (%)
2001
680 17.7% 123 18.0%
McGraw Hill 1% Pearson 1% 2002
748 19.2% 131 17.4%
Largest repository of full text and bibliographic medical content Key publishing partner for more than 60 top medical societies
Source: Company financials, analyst reports, Outsell, Verispen, Pharmaceutical Executive, Wolters Kluwer information and analysis
November 2003 Investor Roadshow
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Education: WK is the Leader in European Education
Market = €1.4bn
Austria 3% Belgium 5% Sweden 20% Netherlands 26% UK 21% Germany 25% Key Trends & Dynamics Attractiveness
Stable, traditional text book business
Market-driven by multi-local content needs
Evolving electronic solutions
Attractive margins and stable cash flows; cycle improvement in next 3 years €m
Revenue % of Total Revenue EBITA EBITA Margin (%)
2001
308 8.0% 61 19.9%
2002
300 7.7% 56 18.7%
Share Position
#1 in the Netherlands, Sweden, Belgium
#3 in the UK #1 in Germany, in vocational; strengthening presence in primary
Source: Company reports, D&B estimates, analyst reports, Wolters Kluwer information and analysis
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Agenda
Overview of Wolters Kluwer
Review of Strategy Update
Financials
Liability Management Initiative
Summary
Strategy Update - What Will be Different
Past Going Forward
Acquisitions cornerstone of strategy
Growth by investing in leading market positions, guided by ROIC
Fragmented, decentralised managed business
Integrated, customer focused divisions, managed with operational and financial rigor
Investments applied broadly across many opportunities
Multiple performance measures for corporate, cluster and operating units
Alignment of investments around leading market positions Six Key Performance Measures linked to stakeholder value
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Five Significant Businesses with Powerful Brands
Health Corporate & Financial Services Tax, Accounting & Legal (US & Asia Pacific) Legal, Tax & Regulatory Europe Education
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Leading Market Positions
Wolters Kluwer's Market Position New Five Division Structure Not #1 or #2 20% 55% 84% 87% 100% 67% #1 or #2 80% Total Revenues: €3,895m (2002)
Sources: Company financials, analyst reports, Wolters Kluwer analysis
45% 33% 13% 16% Health €749m Corporate & Financial Services €535m Tax, Accounting & Legal €763m Legal, Tax & Business Europe €1,355m Education €300m
Note: ProRata revenues new divisions; not including divested non-core €193m Market share does not include LTB Asia Pacific
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Strategy Update - Overview of 3 Year Plan
1. Invest around leading market positions in line with high growth opportunities 2. Continue migration to electronic delivery 3. Reduce costs through structural improvements 4. Reorganise the business to improve customer focus and deliver growth 5. Establish clear and transparent financial targets 6. Selective, more disciplined acquisition policy 7. Restructure liabilities to reduce total debt and improve financial profile November 2003 Investor Roadshow
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1. Invest in Growth: Key Actions
Manage Portfolio in line with Growth Opportunities Strengthen and Expand Customer Relationships Deliver end-to-end Solutions Invest in Online Growth and Migration Pursue Selected Acquisitions
ROIC is the Key Financial Measure of all Actions
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Accelerate Investments in Growth...
...to a Total Level of €800m Over the Next 3 Years
All divisions investing to enhance core products and build new products to support customer demand for tools and solutions as well as changes in law, medicine and education Investments focused on Health and Corporate & Financial Services divisions Incorporates investments communicated previously for Europe and North America November 2003 Investor Roadshow
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2. Invest in Electronic Growth and Migration
Wolters Kluwer has in recent years invested significantly in online products and electronic compliance tools – Internet and other Electronic revenues growing rapidly – Represent 30% of current total revenues – Management projects to reach 45% of total revenues by 2006 2000 1800 1600 1400 1200 1400 1000 1200 800 1000 600 400 200 0 800 600 400 200 0
18% 18% 16% 16% 2% 2%
1999 1999
22% 22% 16% 16% 6% 6%
2000 2000
27% 27% 17% 17% 10% 10%
2001 2001
30% 17% 30% 17% 13% 13%
2002 2002
45% 25% 20%
2006E November 2003 Investor Roadshow
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3. Reduce Costs Through Structural Improvements
Key Actions
Develop shared services for Finance, HR and some Technology functions Consolidate real estate Rationalise back office functions within operating companies and divisions Standardise and consolidate technology platforms, data centres and increase use of off-shore development and IT outsourcing
Total FTE Reductions from 2003 to 2006: 1600 FTEs (~ 8%)
November 2003 Investor Roadshow
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Cost Savings Over Three Years will be €240m
Division Selective Shared Services Real Estate Consolidation Back Office and System Rationalisation IT Rationalisation Restructuring Costs* ’03-’06 €m Cost Savings ’03-’06 €m Health
35 40 Corporate & Financial Services Tax, Accounting & Legal Tax, Legal & Regulatory Europe
45 40 80 55 50 80 Education
15 15 TOTAL
* Shared services initiatives may cause divisional differences
~ 215 ~ 240
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Impact of Restructuring 2003-2006
2003 2004 2005 2006 TOTAL Restructuring Costs* ( €m) FTE Reductions 100 500 80 500 25 400 10 200 ~ 215 ~ 1,600 Total Cost Savings ( €m) 20 40 80 100 ~ 240
Beyond 2006, annualised cost savings of about €100m
* Of which €150m will be charged as exceptional items
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4. Reorganise the Business to Deliver Growth
Organise business into five divisions, which become primary operating units – Organise into customer driven businesses with distinct growth opportunities – Drive integration of operating units – Simplify businesses through consolidation of functions, elimination of management layers and combined locations – Provide day to day management Shift in Corporate Governance – Divisions report to Chairman of Executive Board – Formation of Executive Committee – Greater operational role for corporate office Strengthen corporate HR, Technology and Strategic Planning November 2003 Investor Roadshow
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5. Establish Clear and Transparent Financial Targets
Target 2004 2007 onwards
Key Operational Measures
Revenue growth 0-1% 3-4% EBITA margin After exceptional items 14-15% 13-14% 19-20% Cash conversion
Key Financial Measures
Free cash flow ROIC
(1) WACC is currently 8% after tax
EPS 85% €150-200m Moving towards WACC (1) 0.99
85-90% > €300m Above WACC (1) > 1.40
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6. Pursue Selected Acquisition Opportunities
Strategy
Attractive Market Strengthen Leading Positions Leverage/Enhance Scale Platform for Future Growth in Emerging Markets Integration
Short Term Viability More Rapid Integration Market/Product & Organisational Fit Transaction
Relevant Size Ease of Execution Regulatory Constraints Financial
Investment Requirements Risk Exposure Incentivised Earn-Outs ROIC Above Hurdle Rates (Current WACC 8% after tax)
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Actions to Date Support New Strategic Direction
Restructuring begun at Health, North America and Europe – Turnaround underway in the UK, Belgium and Aspen Integrated, customer focused divisions, managed with operational and financial rigor Aggressive cost reduction plans in place for 2003 Alignment of investments around leading market positions Growth by investing in leading market positions, guided by ROIC Much tighter, more disciplined acquisition policy Significant management changes and new governance model November 2003 Investor Roadshow
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Agenda
Overview of Wolters Kluwer
Review of Strategy Update
Financials
Liability Management Initiative
Summary
Financial Overview
FYE Sales ( €m)
CAGR 8.1% 3,837 3,664 3,895 3,081 1999 2000 2001
Free Cash Flow ( €m)
2002 386 400 363 328 1999 2000 2001 2002 November 2003 Investor Roadshow 813
FYE EBITDA ( €m)
CAGR 3.3% 919 878 895 1999 2000 2001 2,363
Net Debt ( €m)
2,821 2,614 2002 2,664 1999 2000 2001 2002
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2003 3rd Quarter Results €m 3rd Quarter
2003
Revenues EBITA (1) EBITA Margin (1) Benchmark Net Income (2) 2,431 377 16% 203
2002
2,832 520 18% 288
% Change
Euro Constant (3)
-14% -27% -5% -18% -30% -18% • • • Net debt reduced by 29% to €2.1bn for Q3 2003 (from €3.0bn for Q3 2002) YTD ordinary free cash flow improved 25% to €152m for Q3 2003 (from €122m for Q3 2002) Outlook full year 2003 reiterated
(1) Before exceptional items ( €21m) (2) Benchmark ordinary net income before amortisation of intangible fixed assets and exceptional items (3) Currency adjusted year-on-year growth (%)
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2002 Full Year Results €m
Revenues EBITDA EBITDA Margin EBITA EBITA Margin Financial Results Benchmark Net Income (1)
Full Year 2002
3,895 895 23% 777 20% 141
453
Full Year 2001
3,837 919 24% 812 21% 179 436
(1) Benchmark ordinary net income before amortisation of intangible fixed assets and exceptional items
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Key Financial Ratios
Net Debt to EBITDA (1)
HY 2003
2.8x
HY 2002
3.2x
Interest Bearing Debt to Shareholder’s Equity
2.0x
Net Interest Coverage EBITA EBITDA
5.3x
6.2x
2.3x
4.9x
5.6x
FY02
(2)
3.0x
FY01
3.1x
2.1x
5.5x
6.3x
2.0x
4.5x
5.1x
(1) 12 months rolling basis (2) Excludes pension charges of €98, and is before accounting charges of €8m
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Wolters Kluwer 2005 and 2006 Bond Performance
Wolters Kluwer Spreads to Midswap vs. Peers
340 300 260 220 180 140 100 60 20 Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Wolters Kluwer NV 6.125% due 15/12/05 VNU NV 6.625% due 30/05/07 Reed Elsevier 5.75% due 31/07/08 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Wolters Kluwer NV 5.5% due 22/09/06 Pearson Plc 6.125% due 01/02/07 LEI Media Index Oct-03
Source: CSFB
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Agenda
Overview of Wolters Kluwer
Review of Strategy Update
Financials
Liability Management Initiative
Summary
Capital Markets Transactions
1. Tender Offer for:
6.125% Bonds due 2005 and 5.50% Bonds due 2006 1.000% Convertible Bonds 2001 due 2006
2. Euro denominated bond issue
Benchmark Euro offering - 10 year target
Rationale:
Reduce re-financing risk in 2005 and 2006 Smooth the maturity profile and improve duration Efficiently utilise existing cash position Current low interest rate environment and strong, stable markets
Proactively address the redemption obligations of 2005/2006 and efficiently utilise cash
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Maturity Profile Impact of Capital Market Transaction
Maturity Profile Pre Capital Markets Transactions
2,000 1,500 1,000 500 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 '15+
Illustrative Post Capital Market Transaction Maturity Profile
Indicative Maturity Profile Post Capital MarketsTransactions
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 '15+ November 2003 Investor Roadshow
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Agenda
Overview of Wolters Kluwer
Review of Strategy Update
Financials
Liability Management Initiative
Summary
Credit Highlights
Leading multi-media professional publisher with excellent market positions and strong brands High value-added proprietary information (copyright protected) “Must have” nature of professional product Stable revenue and free cash flow Strong liquidity and prudent balance sheet management November 2003 Investor Roadshow
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Summary
Manage the business in a fundamentally different way – Operational focus and rigor – Clear financial targets focused on ROIC – Tighter alignment of management and investor interests – Optimise financial structure and working capital The strategy will lead to: – 3%-4% annual revenue growth – 19%-20% EBITA margins Continued focus on prudent balance sheet management and improvement of debt protection measures November 2003 Investor Roadshow
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Forward Looking Statements
This Document includes statements of future expectations and other forward looking statements that are subject to risks and uncertainties. These statements are based on the current views of the Issuer’s management and assumptions and involve known and unknown risks and uncertainties. Such statements include, in particular, statements about the Issuer’s plans, strategies and prospects under the heading “Wolters Kluwer N.V.”. When used in this Document, the words “may, “will”, “estimate”, “project”, “intend”, “anticipate”, “expect”, “should” and similar expressions are intended to identify such forward-looking statements. Prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. Important factors that could cause actual results to differ materially from the forward-looking statements made in this Document include, among other things, general economic conditions, conditions in the markets in which the Issuer is engaged, behaviour of customers, supplies and competitors, technological developments and legal and regulatory rules affecting the Issuer’s businesses. Save as required by the rules or regulations of any stock exchange on which the Bonds are listed, the Issuer does not undertake any obligation to publicly release any revisions of these forward-looking statements to reflect events or circumstances after the date of this Document or to reflect the occurrence of unanticipated events.
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