PRESS RELEASE: Moody's Changes Wolters Kluwer Otlk To Stable
The following is a press release from Moody's Investors Service:
Moody's Changes Wolters Kluwer's Rating Outlook To Stable
London, 02 August 2007 -- Moody's Investors Service today changed the rating outlook for Wolters Kluwer NV (sr. unsecured ratings at Baa1) to stable. The outlook change is based on Moody's expectation that Wolters Kluwer will deliver an operational performance overall in line with current guidance, including organic revenue growth of 4% in total, aggregating growth from all continuing business divisions and margin improvement in 2007 to 19-20% (on an Ordinary EBITA basis as measured by Wolters Kluwer). The outlook change also factors in Moody's assumption that Wolters Kluwer can remain on a positive operating trajectory with continued visible organic growth and commensurate profit and margin development.
With key elements of its 2003-6 restructuring plan such as restructuring the cost base and introducing increased operational discipline, strengthening market positions and portfolio, re-allocating capital to higher growth markets and a return to organic growth for all divisions achieved, Wolters Kluwer's strategy, as laid out in a strategic update in September 2006, is now focused on further growth of leading market positions, a continued foray into customer segments and markets adjacent to Wolters Kluwer's existing activities, exploiting global scale and scope e.g. through using global platforms to provide local customization and institutionalizing operational excellence.
In June 2007 Wolters Kluwer completed the sale of Education division to Bridgepoint. The company is distributing Euro 475 of the Euro 665 million received in net proceeds to its shareholders by way of share repurchase. While acquisition activity has been modest in the first half of 2007 (total acquisition-related outflow was Euro 52 million) Moody's believes that add-on acquisitions will remain part of Wolters Kluwer's strategic arsenal and further share buy-backs also remain a possibility, in Moody's opinion, should suitable acquisitions not materialize. Against this background, our Baa1 rating with a stable outlook is based on the assumption that Wolters Kluwer will uphold its commitment to maintaining a Baa1 rating level and that debt protection measurements in line with the category (such as a ratio of RCF/Net Debt -- as defined by Moody's -- in the high teens) can be maintained. Moody's would also expect Wolters Kluwer to adhere to its stated leverage target of around 2.5 times Net Debt/EBITDA (as defined by the company i.e. without adjustments to leases, pensions etc.).
For the first half of 2007, Wolters Kluwer reported organic revenue growth of 3% (2% in HY06) to Euro 1,677 million. All of the divisions showed organic growth for the half year with particularly strong performances in Corporate & Financial Services (+7% organic growth). Encouragingly, Wolters Kluwer's largest division by sales, Legal, Tax & Regulatory Europe, also experienced good growth (+3% organic for HY07) with strong growth in electronic solutions and services. The overall organic revenue growth for the half year of 2007 was flat for the Health Division with strong growth in Clinical Solutions and Medical Research, offset by price compressions in Healthcare Analytics and also the timing of wholesale book orders at Profession and Education. Tax Accounting and Legal experienced organic revenue growth of 2% for the first half year of 2007 resulting from 5% organic revenue growth at Tax and Accounting in US somewhat offset by timing of publishing schedule for Law and Business and workflow solutions in Australia. The improvement in EBITA margin (18% from 15%) was due to operating leverage and cost control benefits, but also still reflects a considerable ongoing investment in products and marketing.
Wolters Kluwer is a leading global provider of key information and smart information tools to professionals in the Legal, Tax&Business and Health markets. The company is based in Amsterdam, the Netherlands.
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