Morningstar | Narrow-Moat Wolters Kluwer Produces a Solid FY 2018 Result
Narrow-moat publisher Wolters Kluwer delivered a set of full-year results in line with our and the Street’s estimates, with organic revenue growth hitting decade highs of 4%. We do not expect to make any material changes to our forecasts, nor to our EUR 44.50 fair value estimate on the back of these results. We believe, however, that recent investor enthusiasm for the company, which has lifted the share price by almost a third in the last year, has now pushed the share price into overvalued territory.While there was a little ebb and flow in the divisional performance toward the end of the year, growth rates were very much in line with the patterns we have seen over the last few years. Health continues to perform strongly, led by analytical tools, particularly in the clinical solutions space, which represents 50% of the division and grew by 9% organically. Legal & regulatory, the laggard of the group due to its high exposure to legacy print businesses, performed slightly better than our expectations of flat growth. The company continues to divest slower-growing businesses in favour of more digital/analytical higher-growth products that can be scaled. The effect of this policy was particularly evident in the performance of the tax & accounting business, in which recent acquisitions such as CCH Tagetik and adsolut helped push organic revenue growth to 7% compared with the 4% level delivered in 2017.
Ultimately, Wolters Kluwer is one of the most consistent performers in the business services universe, with positive organic revenue growth and year-over-year operating margin improvement for a decade now. Structurally, the company is also moving in the right direction, with recurring revenue now comprising more than three fourths of the total and legacy print revenue just 11%.
Wolters Kluwer operates through four divisions: Health is a global provider of information for medical and health professionals; Financial & Compliance Services is a U.S. provider risk management, compliance, finance, and audit professionals the services they need to optimize risk and business performance, and ensure compliance with local, regional, and global regulation; Tax & Accounting is a provider of tax, accounting, and audit information, and services; and Legal & Regulatory provides customers with expert content, software, and services in the areas of law, business, and regulatory compliance in Europe, North America and Asia Pacific.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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