|
|
|
|
|
|
|
|
(EUR million) |
|
|
1999
|
|
|
1998
|
|
|
variance in %
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
3,081
|
|
|
2,739
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- before amortization of goodwill |
|
|
781
|
|
|
668
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
- after amortization of goodwill |
|
|
692
|
|
|
600
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- before amortization of goodwill |
|
|
441
|
|
|
371
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
- after amortization of goodwill |
|
|
358
|
|
|
309
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
Cash flow |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- operating activities |
|
|
610
|
|
|
521
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
Per share (in Euro) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income on basis of 'fully diluted' |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- before amortization of goodwill |
|
|
1.58
|
|
|
1.34
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
- after amortization of goodwill |
|
|
1.29
|
|
|
1.12
|
|
|
15
|
|
|
|
|
|
Strategy Update
|
|
Base business very solid and extra investment of EUR 250 million (2000 - 2002) is needed to accelerate migration to Internet, build new products and attract new customers |
|
The company will realign its businesses in five operational clusters to help focus attention on specific customer groups and execute its Internet strategies (e.g. development of community sites for professionals) |
|
A corporate technology platform will be created to host and facilitate development of Internet activities |
|
Professional Training group to be divested
|
Financial Outlook
|
|
Advance of Internet usage in professional markets presents opportunities, but requires large investment and consequently an adjustment of financial goals (as presented in August 1999) |
|
Net profit (before amortization goodwill and book results on sale of non-core assets): flat in 2000 and 2001; significant earnings growth will resume in 2002 |
|
Substantial book profit expected on sale of non-core assets |
|
Funding of Internet investments through internal cash flow and sale of non-core assets |
Principal Financial Developments
Net sales increased 12% to EUR 3,081 million (1998: EUR 2,739 million) as a result of organic growth (+5%), acquisitions (+9%), divestments (-4%), and currency fluctuations (+2%).
Organic growth at 5% was in line with last year. Within Legal, Tax & Business - Europe strong organic growth was achieved in France (+6%) and the Netherlands (+8%), in North America at CCH Tax Compliance (+11%), CCH Legal Information Services (+9%) and Aspen Publishers (+7%), and in International Health & Science (+6%) and Educational Publishing (+8%).
In 1999, Wolters Kluwer acquired 28 (mainly small) companies, with annualized sales of approximately EUR 240 million. Most of the acquisitions were done in North America. In 1999, various activities were divested with annual sales of approximately EUR 100 million. The most significant were the Trade Book Publishers in the Netherlands and the UK children's book publisher Wayland.
Net sales by media
|
|
|
|
|
|
|
|
|
|
|
|
EUR million |
|
|
1999
|
|
|
1998
|
|
|
+/- %
|
|
|
1999
|
|
|
1998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Print |
|
|
2,072
|
|
|
1,91
|
|
|
8
|
|
|
67%
|
|
|
69%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronics |
|
|
552
|
|
|
411
|
|
|
34
|
|
|
18%
|
|
|
15%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services |
|
|
280
|
|
|
265
|
|
|
6
|
|
|
9%
|
|
|
10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Training |
|
|
177
|
|
|
153
|
|
|
16
|
|
|
6%
|
|
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
3,081
|
|
|
2,739
|
|
|
12
|
|
|
100%
|
|
|
100%
|
|
|
|
|
|
|
|
Print products - such as loose-leaf publications, journals, and books - showed a healthy growth of 8% and represent two-thirds of Wolters Kluwer's product portfolio. Revenues from loose-leaf products increased 4% to EUR 702 million. Journal and newsletter revenues grew substantially to EUR 643 million (+17%) mainly due to the acquisition in 1998 of journal-rich companies in International Health & Science. Revenues from online products (proprietary and Internet) and electronic compliance tools, such as tax software, which together account for 9% of total sales (EUR 278 million) and offline products (CD-ROM) continued to grow rapidly from EUR 411 million to EUR 552 million, an increase of 34%. Revenues from all subscription-based products amounted to 53% of total sales.
Operating income (before amortization goodwill) increased 17% to EUR 781 million and includes special items such as a gain on the divestment of the Trade Book Publishers of EUR 46 million, provisions for reorganizations of EUR 30 million (mainly in European countries), and an additional amount of EUR 8 million for accelerated development of new Internet products. Operating income as a percentage of sales increased from 24% (1998) to 25%.
Income before taxation increased 15% to EUR 546 million (1998: EUR 475 million). As a result of continuing acquisition activities, 'amortization of goodwill' and 'financing results' increased. The effective tax burden remained virtually unchanged at approximately 33%.
Net income (after amortization goodwill) improved 16% to EUR 358 million (1998: EUR 309 million). Fully diluted net earnings per share increased 15% from EUR 1.12 to EUR 1.29. Excluding the net effect of the amortization of goodwill, the earnings per share fully diluted increased 18% to EUR 1.58.
Development per cluster of activities
|
|
|
|
|
|
|
|
EUR million |
|
|
Sales 1999
|
|
|
Sales 1998
|
|
|
+/- %
|
|
|
|
|
|
|
|
|
|
|
Legal, Tax & Business Europe |
|
|
1,216
|
|
|
1,200
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Legal, Tax & Business North America |
|
|
789
|
|
|
662
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
Legal, Tax & Business Asia/Pacific |
|
|
56
|
|
|
52
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
Total Legal, Tax & Business |
|
|
2,061
|
|
|
1,914
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Health & Science |
|
|
599
|
|
|
439
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
Educational Publishing |
|
|
287
|
|
|
265
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
Professional Training |
|
|
134
|
|
|
121
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
3,081
|
|
|
2,739
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EUR million |
|
|
Operating Income 1999*
|
|
|
Operating Income 1998*
|
|
|
+/- %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal, Tax & Business Europe |
|
|
275
|
|
|
280
|
|
|
-2
|
|
|
|
|
|
|
|
|
|
|
Legal, Tax & Business North America |
|
|
255
|
|
|
219
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
Legal, Tax & Business Asia/Pacific |
|
|
10
|
|
|
13
|
|
|
-23
|
|
|
|
|
|
|
|
|
|
|
Total Legal, Tax & Business |
|
|
540
|
|
|
512
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International Health & Science |
|
|
152
|
|
|
105
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
Educational Publishing |
|
|
45
|
|
|
53
|
|
|
-15
|
|
|
|
|
|
|
|
|
|
|
Professional Training |
|
|
14
|
|
|
10
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
751
|
|
|
680
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Before corporate costs/book profit Trade Publishing
European total sales grew marginally by 1%, mainly because of the divestment of the trade publishing activities. Organic sales growth was 5% with good performances in the Netherlands and France. Acquisition sales contributed 4%, with important new additions in the United Kingdom and in the CEE countries. Operating income was affected negatively by reorganization costs, totaling EUR 15 million, in Belgium, Spain, Scandinavia and the Netherlands. These countries are in a transition process from being product focused to a more customer oriented business approach.
In North America, total sales grew by 15% at constant currencies. Organic sales growth was 4% and all North American operating companies strengthened their market position by acquisitions, which contributed 11% to the sales increase. The major new acquisition was Bankers Systems Inc., which has fortified the banking market position of CCH US Publishing. At the end of the year, CCH Legal Information Services also added some strategic acquisitions to its core business. Operating income developed in line with expectations.
While sales in Asia/Pacific operations showed solid 6% growth, operating income was affected negatively by restructuring charges in Australia and by investments in China. The companies in this cluster are in the migration process from print/folio publishers to providers of information solutions and workflow-based electronic products. Activities in the region were further expanded to China and Japan via joint ventures during the year.
The International Health & Science group was formed recently to provide focused management for this important business area. The group's collective results were strong. 1998 acquisitions, including Waverly, Ovid Technologies, Plenum Publishers, and Thomson Science had a substantial positive influence on the bottom line, while organic sales grew by 6%. Operating income developed in line with expectations and included extra investments in the Internet.
Sales of the Educational Publishing activities grew by 8% in 1999. This growth was fueled mainly by the curriculum changes in the Netherlands. The effects of divestments (Wayland) and acquisitions neutralized each other. Operating income was affected negatively by reorganization costs, totaling EUR 11 million. This provision is necessary to streamline various businesses in the group. In January 2000, Wolters Kluwer acquired the educational publisher Thomas Nelson (UK), which will be merged with Stanley Thornes into Nelson-Thornes. This will strengthen the UK market positions of the newly formed Educational Publishing cluster.
Financial results of the training companies improved substantially but remained below expectations. Professional Training is a small part of Wolters Kluwer and operates in a very different business. In the light of the concentrated effort to migrate publishing activities to the Internet, the Executive Board resolved that further improvement and expansion of training activities distracts too many resources from the core activities. Hence, the decision was made to find another owner for the Professional Training group, which had 1999 revenues of EUR 134 million.
Cash Flow/FinancingCash flow from operations increased 13% to EUR 870 million, and includes the net proceeds of the divestiture of the Trade Book Publishers.
Net investments in fixed assets in 1999 increased 58% to EUR 117 million (1998: EUR 74 million). The majority of those investments were related to developments in the field of information and communication technology, partly triggered by the year 2000 issue.
Acquisition expenditure amounted to EUR 353 million in 1999 and was substantially below 1998 (EUR 982 million) and more in line with the investments made in the past years. During 1999, EUR 61 million was spent for restructuring of businesses acquired during 1999 and in prior years (1998: EUR 76 million).
In order to broaden our access to international financial markets, we obtained credit ratings from Standard & Poor's and Moody's. The general credit rating for Standard & Poor's is "single A/stable outlook", - and for Moody's "A2/stable outlook".
After having obtained the credit ratings a EUR 750 million, 7-year senior bond loan with a coupon of 5.5% was launched successfully in September 1999. The proceeds from this bond issue were used to refinance existing bank facilities. Financing ratios were strengthened in 1999. Shareholders' equity to Total Assets increased from 21.3% (1998) to 26.1% per year-end 1999. The total amount of long-term loans as of December 1999 (EUR 2.3 billion) remained at the same level as for the previous year.
Increased financing costs resulted mainly from the high level of acquisition expenditure in 1998; the net interest coverage ratio improved from 5.2 (1998) to 5.4 over 1999.
Dividend
On the basis of the usual payout percentage of recent years of some 35% of net profit, we propose to distribute a dividend of EUR 0.46 (1998 restated four-for-one split EUR 0.40) in cash per ordinary share/depositary receipt for the financial year 1999. The option for dividend in shares at a discount of approximately 5% will be maintained. The cash dividend will be put before the Annual General Meeting of Shareholders on 14 April 2000, as will be the proposal for the stock dividend discount, after which shareholders will be asked to make their choice known. The stock dividend will be determined on 25 April 2000 (after close of trading). The cash dividend will be payable as from 27 April 2000.
Strategy and Organization
It always has been fundamental to Wolters Kluwer's business strategies that its businesses deliver superior products and services in any media and on any platform customers choose. Our traditional print products are strong performers. Strategies for continuously improving and strengthening these offerings and their underlying content are well known in the marketplace. Less well known have been the efforts in recent years to develop strategies for new media and platforms.
An increasing number of our customers are using the Internet as a platform for their work, and Wolters Kluwer, has made very significant efforts and investments in recent years to acknowledge and respond to this migration. These efforts and investments have been expensive, but have produced considerable progress. Electronic publishing revenues in 1999 were over EUR 550 million and were very profitable. Now it is time to consolidate and extend these efforts and to increase their pace.
Invest EUR 250 million
Wolters Kluwer will commit an additional EUR 250 million to execution of its Internet strategies over the course of the next three years. It is recognized that this is not a small sum, and Wolters Kluwer is determined to see it invested in thoughtful ways and managed and controlled with the same care that has been a hallmark of our business culture generally. A Euro spent on Internet opportunities is no less valuable or important than any other Euro the company is obligated to manage.
Realign business in five clustersWolters Kluwer will realign its businesses in five operational clusters to help focus our attention on specific customer groups. This should improve service to all customers and will facilitate the aggressive pursuit of cluster-specific online strategies. The following organizational structure will become effective in April 2000:
With the creation of five organizational clusters, Wolters Kluwer recognizes that each of these business groupings has unique Internet challenges and opportunities. So, the company has developed an individual Internet strategy for each cluster. These strategies envision quickly offering all existing content, services, and software on the Internet platform and moving beyond this extension of our existing business to the creation of new Internet-specific products, services, and productivity tools. The cluster-specific strategies also envision new web business and e-commerce activities for our professional communities.
The new organization structure will enable the better coordination of our investments across all Wolters Kluwer businesses and will facilitate a distinct branding, partnering, and e-business development strategy for each cluster.
Create central technology platformsRecently, Wolters Kluwer established a Corporate Technology Organization headed by a Chief Technology Officer. This technology organization assists the cluster organizations in implementing their Internet strategies. To that end, technology platforms will be created in North America and Europe. These standardized platforms will provide the essential hardware and software infrastructure and development services necessary to host and support the Internet activities of the five clusters.
One of Wolters Kluwer's goals is to be able to (a) identify all customers and potential customers, (b) differentiate it customers in relation to their life-time value, (c) communicate interactively with all customers, and (d) being capable of building custom products for all customers. The Corporate Technology Office is coordinating investments in front and back office technology upgrades capable of enabling these essential one-to-one marketing functions. This work will continue in each of the clusters during the course of the next three years.
Summary of cluster strategies
Legal, Tax & Business - Asia/Pacific
The Legal, Tax & Business - Asia/Pacific cluster will move quickly to develop regional legal, tax, and business portals for the professional communities that make up their collective subscriber bases. These portals will aggregate in one place all of the cluster's existing product offerings as well as new e-commerce activities and web-based businesses.
Legal, Tax & Business - North AmericaThe Legal, Tax & Business - North America cluster will benefit greatly from a centralized, standard technology platform that will be in place this Summer. The new strategy will unify these efforts by combining offerings from the various companies for tax professionals, legal and banking professionals, and health and human resource professionals (e.g. CT Advantage, CCH Tax Research Network). Vertical destination sites will be established for each of these groups and all pertinent content, software, and services assets of the North American businesses will be made available on them. An umbrella portal bringing together all of these professional customers will provide a great opportunity to explore web business and e-commerce opportunities to the fullest.
Legal, Tax & Business - Europe
The Legal, Tax & Business - Europe cluster will also benefit greatly from a centralized, standard technology platform that will be in place this Fall. This will facilitate the rapid build-out of country-specific websites for legal, tax, and business professionals. Country-specific content will be integrated to allow formation of a pan-European legal, tax, and business database and an umbrella web community for European professionals. Wolters Kluwer also has two unique Internet opportunities in Europe in JobNews and Teleroute. JobNews.com will be positioned to become the leading European career site and portal for human resource issues. Teleroute.com, the leading European freight exchange system, will be extended quickly to become the leading Internet portal for transport and logistics professionals.
International Health & Science
The International Health & Science cluster will leverage its vast audience of healthcare professionals by creating an umbrella portal that will be a convenient point of access to the rich content, services, and software sources of the cluster. In addition, the cluster Internet offerings under the umbrella will include websites targeted at specific professional groups (e.g., nurses, pharmacists, etc.), those interested in specific diseases and medical specialties (e.g., oncology, pediatrics, etc.), and journal sites in combination with medical societies. In the institutional environment, Wolters Kluwer will focus its energies on the point-of-care where patient and health professionals come together. Web enabled clinical productivity tools are under development and promise to enhance the quality, delivery and cost-effectiveness of healthcare. These tools represent only the beginnings of the cluster's opportunities in this area.
Educational PublishingThe Educational Publishing cluster initially will focus its development activities on online curriculum learning projects. Projects under way include a language training project in conjunction with the Goethe Institute (Germany), Liber Hermods, distance learning (Sweden), Vespucci, an on-line learning system for higher education (the Netherlands), a new learning site in the United Kingdom by Nelson-Thornes, aimed at pupils, teachers, and parents, and Skolgarten (edutainment) in Sweden. As there are significant cultural differences in education, these initiatives have a strong local flavor.
Financial Outlook For The Years 2000-2002
Wolters Kluwer has a solid base business that is built on strong recurring revenue streams. However, the pace of activity in the business-to-business information markets is accelerating and has forced the company to reconsider its position in the market and amend the profit expectations as communicated at the release of the half-year figures 1999. Recognizing the rapid advance of the Internet in the professional markets Wolters Kluwer is stepping up its Internet development activities. Therefore the company plans an additional investment of approximately EUR 250 million in the period 2000-2002 to fund the migration of the print and CD business and to create new (Internet) information products and e-commerce opportunities, which will be tailored to the individual needs of the customer.
As a consequence, for the years 2000 and 2001, Wolters Kluwer predicts net profit growth (before amortization of goodwill and book results on the sale of non-core assets) will be flat. However, significant earnings growth will begin in 2002. In addition, a substantial book profit is expected from the anticipated divestiture of the Professional Training group during this year.
Financial Agenda
27 March Publication of Annual Report
14 April Annual General Meeting of Shareholders
18 April Ex-dividend quotation
18-25 April Period allowed for notification of choice
25 April (After close of trading) Conversion ratio determined
27 April 1999 dividend payable and delivery of (depositary receipts for) shares (stock dividend)
8 August Announcement of 2000 first-half year results
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