Wolters Kluwer S/Adr

Hello, everyone, and welcome to our VultrSchooler half-year 2024 results presentation. Today's earnings release and the presentation are available on our website for download, vultrschooler.com. On the call with me today are Nancy McKinstry, our CEO, and Kevin Entrichen, our CFO. We're dialing in to this call from various locations, so thank you in advance and understanding in case we experience any delays. Nancy and Kevin will shortly discuss the important features of our first half results. Following their comments, we'll open the call to your questions. Before we start, I'll remind you that some statements we make today may be forward-looking. We caution that these statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the statements. Factors that could affect our future financial results are discussed in Note 2 of today's release and in our 2023 Anna report. As usual in the presentation today, we'll refer to adjusted profits, which exclude non-benchmark items. We'll refer to growth in constant currencies, which excludes the effect of exchange rate movements. And we'll refer to organic growth, which excludes both the effect of currency and the effect of acquisitions and disposals. Reconciliations to IFRS can be found in Note 4 of today's release. At this time, I would like to hand the call over to our CEO, Nancy McKinstry.

Thank you, Meg, and hello, everyone, and thank you for joining us on this call. In keeping with the usual practice, I will start with the highlights of the first half and then turn it over to Kevin, who will discuss the financial results in more detail. After that, I'll come back and discuss our divisional developments and the progress that we're making against our strategic goals. And then following this, I'll conclude with an outlook for the remainder of the year. So let's get started with the highlights on slide four. I'm pleased to say that we had a good start to the year, and we are on track to meet our full-year guidance. In the first half, we sustained organic growth of 6% and improved our adjusted operating profit margin. Diluted adjusted EPS increased 11% in constant currencies. Adjusted free cash flow declined, but this was largely due to timing. Return on invested capital increased to 17.5%. Our balance sheet remains strong, and we've made significant returns to shareholders. We've also made good progress in advancing towards our strategic and ESG goals. Expert solutions grew 8% organically and now make up 59% of total Walter Schroer's revenues. Across the group, recurring cloud-based software grew 16% organically. We sustained high levels of innovation spend, and we have now integrated GenAI features into a number of our platforms. This week's acquisition of European Software Solutions will further advance our cloud capabilities in tax and accounting Europe. Over the past two years, we have centralized core functions, and we are now focused on driving scale economies and operational excellence. At the same time, we continue to focus on advancing our sustainability performance. With that, I'd now like to hand it over to Kevin, who will take you through the financials.

Thank you, Nancy. Let's start with the highlights on slide six. First half revenues were €2,891,000,000, an increase of 6% in constant currencies. Organic growth was 6%, in line with the prior period. Adjusted operating profit was €765,000,000, an increase of 8% in constant currencies. As a result, the margin improved by 40 basis points to 26.5%. The higher adjusted operating profit helped drive an 11% increase in diluted adjusted earnings per share in constant currencies. Adjusted free cash flow was 445 million euros. The decrease was largely due to timing of large vendor payments. Net debt to EBITDA was 1.6 times, slightly higher than a year ago. And lastly, we drove a further improvement in return on invested capital to 17.5%. Let's look at revenues more closely on the next few slides, beginning with divisional trends. Overall organic growth was 6%, with growth across all divisions. Health grew 6% organically, in line with the prior period, with recurring revenues up 7% organically. Tax and accounting grew 7% organically, slowing modestly as expected. Growth continued to be driven by double-digit organic growth in our cloud and hybrid cloud solutions in North America and Europe. Financial and corporate compliance delivered 4% organic growth compared to 1% a year ago. Recurring revenues sustained 5% organic growth, while transactional revenues started to stabilize after declining last year. Legal and regulatory achieved 5% organic growth compared to 4% in the prior period. Growth benefited from a pickup in our legal software businesses. And finally, corporate performance in ESG grew 7% organically compared to 10% a year ago. Recurring cloud-based software revenues grew 21% organically, but non-recurring on-premise software and services had more mixed results. Let's take a look at revenues by type on slide eight. The chart on the left of this slide shows organic growth for our recurring revenue streams. These make up 82% of total revenues. The most important component, digital and service subscriptions, shown by the blue line, sustained a steady 8% organic growth. Trends in print subscriptions and other recurring revenues were broadly in line with where they were a year ago. The chart on the right hand shows organic growth for our non-recurring revenue streams. These make up 18% of total revenue. In aggregate, non-recurring revenues increased 2% organically compared to a decline of 1% in the prior year. Transactional revenues in our financial and corporate compliance division, the dotted line that shows the swing downwards, increased 3% organically, showing signs of stabilization after a drop of 7% a year ago. These transactions are linked to M&A and IPO activity, mortgage originations, and other lending activity, all of which are still volatile month-to-month and still subdued in the environment of higher interest rates. Transactional revenues in our legal and regulatory division, which relate to ELM solutions legal invoice volumes, grew 11% organically, reflecting recent onboarding and upramping of new clients. Print book revenues, which make up only 2% of revenues, grew 2% organically. Other non-recurring revenues, which represent just under 10% of revenues and is primarily made up of software licenses and implementation fees, grew 1% organically in line with a year ago, but with divergent trends by division. Let's turn to margins on slide 9. As noted, the adjusted operating profit margin increased by 40 basis points to 26.5%. This margin improvement was driven by financial and corporate compliance and legal and regulatory. We continue to guide to an increase in our full-year margin in the range of 26.4% to 26.8%. Now moving to the next slide. Adjusted net finance costs increased to €25 million. The increase was due to a higher level of debt and a higher effective cost of debt, In addition, we recorded 6 million euro non-cash net foreign exchange lost on the translation of intercompany balances. A year ago, we had a foreign exchange gain of 5 million euros. Adjusted pre-tax profits with 741 million euros, up 7% in constant currencies. The benchmark tax rate on adjusted pre-tax profit increased to 23.6% as guided. This reflects higher limitations on finance costs in the Netherlands and the application of the Global Minimum Tax Code. After-tax adjusted net profit was €566 million, up 7% in constant currencies. Due to the ongoing share buyback, the weighted average shares outstanding reduced by 3%. As a result, diluted adjusted EPS increased 11% in constant currencies to 2 euros and 36 euro cents. Let's turn to cash flow on slide 11. Adjusted operating cash flow declined 7% in constant currencies, and the cash conversion ratio thereby decreased to 82% from 95% a year ago. This was directionally as expected and includes the timing of large vendor payments. Network and capital outflows were 117 million euros compared to 11 million inflow in the comparable period. We fully expect this to reverse in the second half and to reach our full year guidance of around 95% cash conversion for the full year. CapEx declined modestly. This is temporary due to the timing of various projects. We continue to expect CapEx to be closer to the top end of our range of 5% to 6% of revenues for the full year. Net interest paid of 23 million euros was slightly higher than a year ago, while taxes paid were 171 million euros, slightly lower than a year ago. Adjusted free cash flow of 445 million euros was down 10% in constant currencies, and as noted, largely due to the timing of a few large vendor payments. Now a few comments on the uses of cash on slide 12. Acquisition spending was €2 million. Dividends paid amounted to €276 million. Cash deployed for share buybacks totaled €516 million in the first half. All in all, net debt increased by €320 million compared to year-end 2023, increasing to €2.9 billion. we remain in a robust financial position with a leverage ratio of 1.6 times. We continue to have ample room to pursue our strategic investments while continuing to deliver cash returns to shareholders. Let me now touch on the interim dividend and update you on our progress with this year's share buyback on slide 13. As a matter of policy, the interim dividend for 2024 was set at 40%, of the prior year total dividend. This means we will pay out 83 euro cents per share to shareholders in September. As of this week, we've completed just over half of our share buyback of 1 billion euros, having spent 603 million euros to date. For the remainder of this year, we have third-party mandates in place to execute the remaining 397 million euros in share buybacks on our behalf. Now let me sum up before I hand it back to Nancy, turning to slide 14. We are on track to meet our guidance for the year. Organic growth was 6% with growth across all divisions. We delivered an increase in the margin to 26.5%. Diluted adjusted EPS increased 11% in constant currencies. The decline in adjusted free cash flow reflects timing of large vendor payments. Return on invested capital reached 17.5%. Our balance sheet remains robust with a net debt to EBITDA of 1.6 times. Now I'd like to hand it back to Nancy to cover the divisional developments.