Post on 30-Dec-2015
Wolters Kluwer Strategy UpdateWolters Kluwer Strategy Update
DELIVERING VALUE FROM
LEADING POSITIONS
DELIVERING VALUE FROM
LEADING POSITIONS
AgendaAgenda
Opening Remarks
Overview
Corporate Strategy
– Growth Plan
– Cost Restructuring
– Organization
Division Profiles and Strategies
Measuring Performance and Financials
Summary
3January 2004
The Professional’s First ChoiceProvide information, tools and solutions to
help professionals make their most critical decisionseffectively and improve their productivity
The Professional’s First ChoiceProvide information, tools and solutions to
help professionals make their most critical decisionseffectively and improve their productivity
Our Vision:
Large and profitable markets with potential to create value for customers
Leading and distinct positions in key professional segments
Emerging customer needs and technologies create opportunities to build new products and services
Build on proven capabilities in content development, technology and customer service
4January 2004
What Will Be Different:
Going Forward
Growth by investing in leading market positions, guided by ROIC
Integrated, customer focused divisions, managed with operational and financial rigor
Alignment of investments around leading market positions
Six Key Performance Measures linked to shareholder value
Past
Acquisitions cornerstone of strategy
Fragmented, decentralized managed business
Investments applied broadly across many opportunities
Multiple performance measures for corporate, cluster and operating units
5January 2004
Overview
Invest in growth around leading market positions
Reduce costs through structural improvements to deliver growth and improve manageability
Reorganize the business to deliver growth
Establish clear and transparent financial targets tied to shareholder value
Maintain dividend at € 0.55 per share for 2003
Reduce debt position through sizeable bond buy back
3-Year Plan To Deliver Improved Value To Shareholders
6January 2004
Accelerate Investments In Growth by €200 Million To A Cumulative Level of €800 Million Over The Next 3 Years
Keep current portfolio, but manage it differently and in line with growth expectations
Strengthen and expand customer relationships
Deliver end to end solutions
Invest in on-line growth and migration to achieve 45% of 2006 revenues from electronic products (currently 30%)
Pursue acquisitions, only selectively
ROIC Is The Key Financial Measure Of All Actions
7January 2004
Reduce €240 Million In Cost Base From 2003 To 2006 Through Structural Improvements
Develop shared services in Finance, HR and select Technology functions
Consolidate real estate
Rationalize back office functions within operating companies and across divisions
Standardize and consolidate technology platforms, data centers and increase use of off-shore development and IT outsourcing
Total FTE Reductions from 2003 to 2006:1600 FTEs (~ 8%)
8January 2004
Reorganize Business To Deliver Growth
Organize business into five divisions, focused on distinct customer segments
Manage the business differently and in line with shareholder interests
- Integrate units into larger, less fragmented businesses
- Drive operational performance at corporate and divisions with commitment and urgency
- Set high standards of performance centered on company values of customer value, accountability, and value creation
- Establish realistic, bottom up targets, tied to shareholder value
- Link long term executive compensation to improvements in TSR
- Strengthen management team
9January 2004
Revenue growth
EBITA margin
After exceptional items
Cash conversion
Free cash flow
ROIC
EPS
Key Operational Measures
Key Financial Measures
0-1%
14-15%
13-14%
85%
Target 2004
€ 150-200 mln
Moving towards WACC*
0.99
3-4%
19-20%
85-90%
2007 onwards
> € 300 mln
Above WACC*
> 1.40
Strategy Will Increase Shareholder Value
* WACC is currently 8% after tax
10January 2004
Actions To Date Support New Strategic Direction
Restructuring begun at Health, North America and Europe
Turnaround underway in the UK, Belgium and Aspen
Aggressive cost reduction plans in place for 2003
Much tighter, more disciplined acquisition policy
Significant management changes and new governance model
AgendaAgenda
Opening Remarks
Overview
Corporate Strategy
– Growth Plan
– Cost Restructuring
– Organization
Division Profiles and Strategies
Measuring Performance and Financials
Summary
12January 2004
Our Strategy:
Invest in growth around leading positions
22 Reduce costs through structural improvements
11
Reorganize the business to deliver growth33
13January 2004
Our Strategy:
Invest in growth around leading positions
22 Reduce costs through structural improvements
11
Reorganize the business to deliver growth33
14January 2004
ROIC is the Key Financial Measure of All Actions
Pursue Selected Acquisitions
Invest In Online Growth and Migration
Manage Portfolio In Line With Growth Opportunities
Deliver End-To-End Solutions
Strengthen and Expand Customer Relationships
Invest In Growth: Key Actions
15January 2004
Portfolio Of Five Significant Businesses With Powerful Brands
Corporate & Financial Services
Health EducationLegal, Tax &
Regulatory Europe
Tax, Accounting & Legal
(US & Asia Pacific)
16January 2004
WK's Market Position
13%
45%
16%
33%
87%100%
55%
84%
67%
Tax, Accounting
& Legal
€ 772 mln€173 mln
Legal, Tax &
Regulatory Europe
€1,355 mln€239 mln
Corporate & Financial
Services
€526 mln€166 mln
Health
€749 mln€131 mln
Education
€300 mln€56 mln
2002:Total Revenues €3,895 mlnTotal EBITA €777 mln*
Leading Market Positions
#1 or 280%
Not #1 or 2
20%
ProRata new divisions; excluding divested non-core Revenues €193 mln; EBITA €49 mlnSources: Company financials, analyst reports, WK analysis
RevenuesEBITA
* Including Corporate Charge €37 mln
17January 2004
Wolters Kluwer’s Key Sources of Growth
Prune Product Line or Divest: €125-150 million with limited profit potential
Moderate GrowthTax, Accounting & Legal
(North America & Asia Pacific)
Steady Growth Education
Manage Portfolio In Line With Growth Opportunities
Legal, Tax and RegulatoryEurope
High Growth Health Corporate & Financial Services
18January 2004
Key Growth Areas: Health, Corporate & Financial Services
DivisionMarket
Size
Market Growth
(2004-2006)Key Growth Investments
Health $ 5.3 bln 2-5%Clinical tools innovationContent expansionInternational expansion
Corporate and Financial Services
$ 1.1 bln 3-5%
Corporate legal department workflow suiteLarge bank market expansionPatriot Act compliance and fraud managementInsurance and securities workflow tools
Tax, Accounting & Legal (US & Asia Pacific)
$ 2.9 bln 2-3%Integrated content productsNew content and forms platformTax compliance and practice management suite
Legal, Tax & Regulatory Europe
€ 4.1 bln 2-3%European Internet Platform / On-line productsForms, services, workflow tools
Education € 1.4 bln 1-3%Additional textbook positionsSchool services
Sources: Company financials, analyst reports, WK analysis
19January 2004
Tax Compliance: An Example Of Growth
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%O
rgan
ic G
row
th
Organic Grow th 5.0% 6.0% 7.0% 7.0%
2000 2001 2002 HY2003
20January 2004
Example Ovid
Strengthen And Expand Customer Relationships
Value Added ProductsResearchers
Workflow Integration
Value Added ProductsContent Creators
Ovid@Hand
SkolarMD@Ovid
Society Membership Module
Society Portal Creation
MS Office Research Pane
HP Medical Desktop
Pay Per View Access
Paperless Workflow
Peer Review Tracking Software
Portal Toolkit
LinkSolver
Higher Retention Rates
Broader Distribution
Increased Revenue and Profit
OvidResearcher
Article Pre-publication
21January 2004
HealthMedi-Span, e-prescribing,
PDA products, SkolarMD@Ovid, Clineguide,
Medical Communications
Point-of-care Systems, Pharma Databases, Business Intelligence
Text and Reference, SkolarMD@Ovid, Other CME
LWW Text and Reference, LWW and Adis Journals, OVID, Medi-Span, Facts &
Comparisons
Corporate & Financial Services
Expere, CCH Wall Street, Actimize, hCue, Representation, Corporate and UCC compliance services, ARTA Lending, ARTA
Deposit, eForms, IRA Center, Patriot Act Compliance
BSI Compliance Training, Learn@CT,
CLE Accredited Seminars
Primary and secondary content in corporate securities, banking, insurance and trade
regulations
Professional/ Other Education
Research/ Reference
Workflow Productivity
Business/Practice Management
Growth Area
EducationCurriculum-based
Publishing,Distance Learning
Deliver End-to-End Solutions:
Tax, Accounting &
Legal
Tax compliance systems and forms and systems, paperless
audit tool
Tax compliance, time and billing, web site building and
hosting, Client Relate
Aspen Legal and Paralegal Education, CCH Learning Center
Primary and secondary legal, tax , accounting, audit health and human resources content
Legal, Tax, & Regulatory
Europe
Forms, Compliance & Expert Software, Workflow Tools, Consulting Services (e.g.,
Croner) and Teleroute
Practice Management Software (primarily
Legal and Tax)
Training, Seminars
Primary and Secondary Content on print, electronic
and on-line media
General school services: ‘rent-a-teacher’, risk
assessment, teacher training, school management products
Testing/ assessment quality assurance, ICT components,
Learning Management Systems, corporate e-learning,
22January 2004
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
Invest In Electronic Growth & Migration: 45% Of Revenues By 2006
23January 2004
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 & Organizational Fit
Transaction Relevant Size Ease Of Execution Regulatory Constraints
Financial Investment Requirements Risk exposure Incentivized earn-outs ROIC above hurdle rates
(Current WACC 8% after tax)
Pursue Selected Acquisition Opportunities
24January 2004
Accelerate Investments In Growth by €200 Million To A Total Level of €800 Million 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
25January 2004
Our Strategy:
Invest in growth around leading positions
22 Reduce costs through structural improvements
11
Reorganize the business to deliver growth33
26January 2004
Total FTE Reductions from 2003 to 2006:1600 FTEs (~ 8%)
Consolidate real estate
Standardize and consolidate technology platforms, data centers and increase use of off-shore development and IT outsourcing
Rationalize back office functions within operating companies and divisions
Develop shared services for Finance, HR and some Technology functions
Reduce Costs Through Structural Improvements: Key ActionsReduce Costs Through Structural Improvements: Key Actions
27January 2004
Cost Savings Over Three Years Will Be €240 Million
Division
Education
Selective Shared Services
Real Estate Consolidation
Back Office and System
Rationalization
IT Rationalization
Restructuring Costs* ’03-’06
€ mln
Cost Savings’03-’06€ mln
Tax, Accounting & Legal
Tax, Legal & Regulatory Europe
40 50
80 80
Health
Corporate & Financial Services
35 40
45 55
15 15
TOTAL ~ 215 ~ 240* Shared services initiatives may cause divisional differences
28January 2004
A Restructured Operating Base Reduces Costs And Improves Execution
Provides permanent savings to fund growth initiatives
Simplifies our business to improve customer relationships and speed decision-making
Creates larger and more integrated businesses
Provides a more flexible cost structure
29January 2004
Impact of Restructuring 2003-2006
RestructuringCosts* (€ mln)
FTEReductions
Total Cost Savings (€ mln)
2003 2004 2005 2006
100 80 25 10
500 500 400 200
20 40 80 100
TOTAL
~ 215
~ 1600
~ 240
Beyond 2006, annualized cost savings of about €100 million
* Of which € 150 mln will be charged as exceptional items
30January 2004
Our Strategy:
Invest in growth around leading positions
22 Reduce costs through structural improvements
11
Reorganize the business to deliver growth33
31January 2004
Reorganize The Business To Deliver Growth
Organize business into five divisions, which become primary operating units
– Organize 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
32January 2004
Organisation Structure
* Asia Pacific will report to Jean-Marc Detailleur in 2004
Health
Christopher Ainsley
Health
Christopher Ainsley
Education
Harry Sterk
Education
Harry Sterk
Tax, Accounting & Legal
(US & Asia Pacific*)
Tax, Accounting & Legal
(US & Asia Pacific*)
ChairmanNancy McKinstry
ChairmanNancy McKinstry
Shared Services Europe
Shared Services Europe
Corporate & Financial Services
Christopher Cartwright
Corporate & Financial Services
Christopher Cartwright
Legal, Tax & Regulatory Europe
Rolv Eide
Legal, Tax & Regulatory Europe
Rolv Eide
Create two divisions within LTBNA
Merge Asia Pacific into US Tax, Accounting & Legal division
Create shared services in North America and in Europe
Shared Services North America
Shared Services North America
33January 2004
Strengthen Management Team
External Appointments(Last 12 months)
Current Role Experience
Bob Becker CEO LegalJupiter Media MetrixThe Thomson Corporation
Rolv Eide CEO Legal, Tax & Regulatory EuropeTele AtlasDun and Bradstreet
Kevin Entricken CFO Aspen Reed Elsevier
Fred Grainger MD Nelson ThornesGlobalenglish CorporationThe Thomson Corporation
Arjen Holl MD Wolters NoordhoffReed Elsevier
Andres Sadler Senior VP StrategyAccentureBooz, Allen & Hamilton
Erik Tamboryn MD Wolters PlantijnVNUUnilever
Boudewijn Beerkens Member Executive Board / CFO PricewaterhouseCoopers
Gustavo Dobles VP Operations & IT AspenAOL Time Warner Little Brown Publishing
AgendaAgenda
Opening Remarks
Overview
Corporate Strategy
– Growth Plan
– Cost Restructuring
– Organization
Division Profiles and Strategies
Measuring Performance and Financials
Summary
Health DivisionHealth Division
36January 2004
Health Market Size ($5.3 bln) Key Trends & Dynamics
Health – Attractive Market
$ 5.3 bln market growing at 2-5% per year
Medical research: Growing medical budgets
Professional & Education: Growth in allied health and nursing
Pharma Solutions: Increased spend on R&D data and tools
Clinical Tools: Demand for evidence based medical tools.
High Growth (>5%) Moderate Growth (2-5%) Flat to Declining (<2%)
Source: Company financials, analyst reports, Outsell, Verispen, Pharmaceutical Executive, WK information, WK analysis
Medicine $317 mln
Nursing $245 mln
Health Professionals$173 mln
AnatomicalCharts $38 mln
Referential DrugInformation $346 mln
Integrated DrugInformation $66 mln
Business & ClinicalIntelligence $125 mln
MedicalCommunications
$1,250 mln
Detail Aids$600 mln
Teaching Hospitals$521mln
Private Hospitals$624 mln
ResearchOrganizations
$1,021 mln
Professional & Education
Medical Research Clinical Tools
Pharma Solutions
37January 2004
Strong Share In WK Market Segments
Market ShareMarket = $ 5.3 bln
Reed17%
Thomson9%
WK13%
Other59%
McGraw Hill 1%Pearson 1%
WK Highlights
Leading global online medical platform
Three of the top ten titles in all critical specialties in medical and nursing
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, WK information, WK analysis
38January 2004
Health Strategy
Reduce CostsReduce Costs Develop shared services in finance and HR Consolidate production, fulfillment and distribution22
Reorganize Reorganize Organize around four customer segments Enhance presence in select international markets33
InvestInvest11
Drive penetration and use of on-line platform
Strengthen core text and reference business
Pursue growth in pharmaceutical and clinical tools
Drive penetration and use of on-line platform
Strengthen core text and reference business
Pursue growth in pharmaceutical and clinical tools
39January 2004
Corporate & Financial Services Division
40January 2004
Corporate & Financial Services — A High Growth Potential Market
A $1.1 bln market growing at 3-5% per year
Increasing need for compliance, risk management and outsourcing solutions
Positive impact of regulations
Stable representation market
Growth in end-to-end automation of client work
Addressable Market Size* ($ 1.1 bln) Highlights
Sources: Annual Report of the Jurisdictions, Representation Data from Delaware, Lieberman Research Group, Hase –Shannen ResearchFind/SVP, TowerGroup, Hoovers, D&B, Celente, Company financials, analyst reports, WK information
Representation, Corporate, UCC
Search and Filing$743 mln
(70%)
Banking and Financial
Compliance$324 mln
(30%)
* Excludes national bank market where BSI has share of <3%, securities and insurance
41January 2004
Strong Market Share In Corporate & Financial Services
Corporate Legal Services Market ShareAddressable market = $743 mln
Legal Information
Services40%
Regional Players36%
CSC24%
Financial Compliance Services Market ShareAddressable market = $324 mln(*)
BSI46%
Others33%
Harland21%
#1 position in the communitybanks, credit unions and
mortgage lenders segment
Corporate
Representation leader since 1892
Registered agent to 200K businesses
Representing 80% of Fortune 1000
CT is the law firm’s preferred provider
Largest compliance services provider to the National Law Journal top 250
Financial
Limited direct competition in banking compliance
#1 position in community banks and mortgage segments
Aggressively pursuing regional/national segments
WK Highlights
Includes:GulfPak, CSI, CUNA Mutual, Greatland
Sources: Annual Report of the Jurisdictions, Representation Data from Delaware, Lieberman Research Group, Hase –Shannen ResearchFind/SVP, TowerGroup, Hoovers, D&B, Celente, Company financials, analyst reports, WK information
* Excludes national bank market where BSI has share of <3%, securities and insurance
42January 2004
Corporate & Financial Services Strategy
Reduce CostsReduce Costs Outsource select technology functions Streamline/automate service fulfillment workflows Consolidate real estate
22
Reorganize Reorganize Realign into customer-facing units Increase sales force effectiveness33
InvestInvest11
Strengthen position in corporate legal workflow tools
Build integrated solutions for banking, brokerage and insurance
Expand banking compliance – large banks / insurance
Strengthen position in corporate legal workflow tools
Build integrated solutions for banking, brokerage and insurance
Expand banking compliance – large banks / insurance
43January 2004
Tax, Accounting & Legal Division
44January 2004
Tax, Accounting & Legal Addressable Market ($2.9 bln) Key Trends & Dynamics
Tax, Accounting & Legal Markets — Fundamentally Attractive For WK
$2.9 bln Market
Tax and Accounting:
– Demand for more integrated research and compliance offerings
– Growth of tools for CPAs
– Expanding new services market
Legal
– Demand for specialty content associated with top authors/titles
– Lawyers requiring more integrated primary and secondary offerings
– Small law market growing and under-penetrated
Growth: 2-3%
Tax andAccounting$1,345 mln
Legal$1,542 mln
2-3%
Growth: 2-3%
Source: Company Reports, YE Company Reportgs, MSDW, UBS Warburg, Lehman Brothers, WK Analysis
Accounting, research &
software
Tax research & software
Small law firm
Law school textbook & study
aids
Secondary legal research content
$265 mln
$1,080 mln
$108 mln$80 mln
$1,354 mln
45January 2004
WK Is # 1 In TaxUS Tax Market Share
Addressable Market*: $1,080 mln
WK32%
Intuit 17%
BNA5%
Other22%
Thomson24%
US Legal Research Market ShareAddressable Market**: $1,542 mln
Other10%
West44%
BNA8%
Reed19%
ASPEN/CCH Legal
19%
WK Highlights
Leading position in tax research and compliance markets
Top Tax Compliance Product - #1 in 5 out of 10 offerings
94 of the top 100 US accounting firms are CCH and/or tax compliance customers
#1 in Securities law and other speciality areas
* Excludes accounting market, Asia Pacific and Canada ** Includes specialized legal content and law school marketSource: Company Reports, YE Company Reports, MSDW, UBS Warburg, Lehman Brothers, WK Analysis
46January 2004
Tax, Accounting & Legal Strategy
Reduce CostsReduce Costs Outsource select technology functions Consolidate real estate Develop shared services in Finance and HR
22
Reorganize Reorganize Realign into customer-facing units Merge Asia Pacific under this unit33
InvestInvest11
Fix Aspen
Expand #1 position in tax and rapidly build position in accounting
Deliver integrated content and software suites
Strengthen content delivery platform
Fix Aspen
Expand #1 position in tax and rapidly build position in accounting
Deliver integrated content and software suites
Strengthen content delivery platform
47January 2004
Legal, Tax & Regulatory Europe Division
48January 2004
Market Size (€ 4.1 bln) Key Trends & Dynamics
Legal, Tax & Regulatory, Europe — A Large, Moderate Growth Market For WK
A € 4.1 bln market
Country differences drive demand for local content/offerings across all markets
Mostly local competitors
Growing demand for more integrated tax and accounting workflow and compliance tools
Legal market driven primarily by secondary content and tools – slower online platform adoption
Regulatory markets expanding at the local, country and EU levels
By Market Segment (€ mln)
Other103
(3%)
SC148 (4%)
CE155 (4%)
UK230 (6%)
Spain 255 (6%)
Belgium 278 ( 7%)
NL289 (7%)
EHS298 (7%)
Transport183 (4%)
Tax & Accounting
1,213(30%)
HR508
(12%)
Public &Social
705(17%)
Legal1,209(30%)
Italy543
(13%)
France632
(15%)
Germany1,483(35%)
By Country (€ mln)
Source: Company Reports, D&B estimates, Analyst Reports and MSDW
49January 2004
Highlights
A Clear Leader In Europe:
Leading provider of information, software tools and services for European tax and accounting, legal and regulatory markets
Balanced national presence
Deeply rooted local brands and recognized content quality
#1 or #2 player in almost every core market and geography
Strong penetration and market shares
* Environment, Health & SafetySource: Company Reports, D&B estimates, Analyst Reports, MSDW, WK information and analysis
WK LTR Europe Market Position
NL F UK B I G S CE SC
Legal
Tax
HR
EHS*
Public/Social
Trans.
1 2 1 2 4 2 1 1
1 3 2 1 1 4 1 1 3
1 1 1 1 1 3 1 4 5
3 2 1 1 2 3 1 5 2
1 1 1 2 1 1 1 2
1 1
50January 2004
Reduce CostsReduce Costs Consolidate content delivery / software development Develop shared back-office services22
Reorganize Reorganize Establish Chief Publishing Officer (CPO) and Chief Services Officer (CSO) role in all countries33
InvestInvest11 Grow on-line penetration in all core markets
Extend into software tools and forms
Strengthen weaker positions opportunistically
Fix UK, Belgium and the Netherlands
Grow on-line penetration in all core markets
Extend into software tools and forms
Strengthen weaker positions opportunistically
Fix UK, Belgium and the Netherlands
Legal, Tax & Regulatory Europe Strategy
51January 2004
Education Division
52January 2004
Market Size (€ 1.4 bln) Market Attractiveness and Share Position
WK Is The Leader In European Education
Germany25%
Netherlands26%
U.K.21%
Sweden20%
Belgium 5%Austria 3%
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
Share
#1 in the Netherlands, Sweden, Belgium
#3 in the U.K.
#1 in Germany, in vocational; strengthening presence in primary
Source: Company Reports, D&B estimates, Analyst Reports, MSDW, WK information and analysis
53January 2004
Reduce Costs Develop shared back-office services
Right-sizing in country operations
Develop shared back-office services
Right-sizing in country operations22
Reorganize Strengthen senior management team33
Invest11 Reinforce text book publishing leadership position
Expand market share - mixed-media learning solutions
Pursue growth in adjacent markets
Reinforce text book publishing leadership position
Expand market share - mixed-media learning solutions
Pursue growth in adjacent markets
Education Strategy
AgendaAgenda
Opening Remarks
Overview
Corporate Strategy
– Growth Plan
– Cost Restructuring
– Organization
Division Profiles and Strategies
Measuring Performance and Financials
Summary
Q&A
55January 2004
Revenue growth
EBITA margin
After exceptional items
Cash conversion
Free cash flow
ROIC
EPS
Key Operational Measures
Key Financial Measures
0-1%
14-15%
13-14%
85%
Target 2004
€ 150-200 mln
Moving towards WACC*
0.99
3-4%
19-20%
85-90%
2007 onwards
> € 300 mln
Above WACC*
> 1.40
Strategy Will Increase Shareholder Value
* WACC is currently 8% after tax
56January 2004
Modify Short Term Incentive Plan
- Measures aligned to Key Performance Measures (KPMs) (e.g. ROIC, Personnel costs as percentage of sales)
- Top 220 managers
Create New Long Term Incentive Plan*
- Replaces existing stock option program
- Total Shareholder Return (TSR) and Return On Invested Capital (ROIC) are key performance measures of new plan
- Performance shares earned over 3 years
- Top 80 executives
Executive Compensation Tied To Shareholder Interests:
* AGM approval needed in April for Executive Board compensation
57January 2004
Financials
Reiterate Outlook 2003
EBITA margins 2003 at 17% (before exceptional items)
€ 100 million restructuring charge in 2003
Maintain Dividend at € 0.55 per share for 2003
58January 2004
Prudent Balance Sheet Management
1. Reduce Debt - Tender Offer for:
6.125% Bonds due 2005 and 5.50% Bonds due 2006
1.000% Convertible Bonds 2001 due 2006
2. Extend Debt Majurity - Euro denominated bond issue
Benchmark Euro offering - 10 year
Rationale:
Reduce re-financing risk in 2005 and 2006
Smooth the maturity profile and improve duration
Efficiently utilize existing cash position
Current low interest rate environment and strong, stable markets
Proactively address the redemption obligations of 2005/2006 and efficiently utilise cash
59January 2004
Transaction Summary
Tender offers: straight bonds and convertible
Success rate on the straight bond tender approx. 70% and the convertible tender 30%
We significantly reduced the debt redemption in 2005/2006 with approx. EUR 1.1 bln
New bond issue:
With the successful issue of EUR 700 mln 10.1 year notes due Jan. 2014, we prudently termed out our debt, significantly increasing our duration
60January 2004
OutcomeTender: Face/nominal value
Senior bond’05 € 550 mln: Tender, 69% buy € 380 mln
Senior bond’06 € 750 mln: Tender, 71% buy € 536 mln
Convertible ’06 € 700 mln: Tender, 30% buy € 210 mln
Total buy back: approx. € 1,125 mln
Sources: New senior bond € 700 mln Surplus cash € 425 mln
Total: approx. € 1,125 mln
Debt maturity profile
182
732
1.450
227
227
225182
227
227
700
225
704
352
-
200
400
600
800
1.000
1.200
1.400
1.600
2003 2004 2005 2006 2007 2008 2009 2013 2014+
Debt
in E
UR m
ln
Pre Sting
Post Sting
AgendaAgenda
Opening Remarks
Highlights / Executive Summary
Corporate Strategy
– Growth Plan
– Cost Restructuring
– Organization
Division Profiles and Strategies
Measuring Performance and Financials
Summary
62January 2004
Our Strategy Will Deliver Value To Shareholders
Invest in growth around leading market positions
Reduce costs through structural improvements to fund growth and increase flexibility
Reorganize the business to deliver growth by getting closer to our markets and customers
Manage the business in a fundamentally different way
– Operational focus and rigor
– Clear financial targets focused on ROIC
– Tighter alignment of management and shareholder interests
– Optimize financial structure and working capital
Now is the time to put this strategy in place. We have the people and processes in place to make this happen. We are determined to succeed.
AgendaAgenda
Opening Remarks
Overview
Corporate Strategy
– Growth Plan
– Cost Restructuring
– Organization
Division Profiles and Strategies
Measuring Performance and Financials
Summary
The Professional’s First ChoiceThe Professional’s First Choice
AppendixAppendix
66January 2004
EBITA Margin Development 2003-2004
Underlying Business
EBITA MarginIncluding Impact of Additional Product
Development Spend
Impact of Restructuring
2003 2004
17% 16-17%*
14-15%
14% 13-14%
*Effect of one-off cost savings in 2003
67January 2004
2002 EBITA (€ 777 mln)**2002 Revenues (€ 3,895 mln)
Wolters Kluwer
Non-Core*€ 340 mln
Education€ 300 mln
LTB Asia Pacific
€ 65 mln
LTB Europe€ 1,228 mln
LTB North America€ 1,214 mln
Health€ 748 mln
* non-core includes KAP, Ten, Hagen& Stam, ISBW** including corporate costs (excluding = € 814 mln) and before exceptional items
Non-Core*
€ 62 mln
Education€ 56 mln
LTB Asia Pacific€ 9 mln
LTB Europe€ 230 mln
LTB North America€ 326 mln
Health€ 131 mln
68January 2004
Definitions KPMs
Revenue growthThe outcome of total (recognized) revenue divided by the revenue of the previous period
EBITA marginEarnings before exceptional items, interest, tax, and amortization divided by revenue
Cash conversionCash flow from operations less net expenditure fixed assets / EBITA before exceptional items
Free cash flowCash flow from operating activities minus net expenditure in fixed assets and the release/appropriation of the acquisition provisions
ROIC (Return on Invested Capital)Full year EBITA before exceptional items and after tax, divided by average invested capital adjusted for cumulative goodwill amortization and goodwill charged to equity
Adjusted EPSEarnings (benchmark net income) divided by the fully diluted weighted average number of shares