Morningstar | WKL Updated Forecasts and Estimates from 31 Dec 2018
Narrow-moat Wolters Kluwer published a solid nine-month trading update with organic revenue up 4% and full-year guidance unchanged, in line with our expectations for the full year. As such, we do not expect to make any changes to our numbers and reiterate our EUR 44.50 fair value estimate. After a strong run in the second half of this year, we now believe the shares are slightly overvalued.Divisionally, there were few surprises, as we’ve come to expect from Wolters Kluwer. The health business grew at 4% organically, a slight decline from the 6% rate achieved in full years 2016 and 2017; however, the 9% growth rate reported in the clinical solutions part of the business was encouraging, with the underperformance coming from the more print-focused area of the business. The tax and accounting business grew slightly ahead of our expectations, hitting 7% organic revenue growth over the period. Again here, the company’s analytic and higher value product suite, with products such as CCH Tagetik, were the drivers of growth, with double-digit rates reported for the period. The company’s balance sheet continues to strengthen, with net debt/EBITDA falling to 1.7 times, from closer to 2 times at the end of 2017.
Wolters Kluwer has managed the shift from print to digital very effectively over the past decade or so and its current focus on value-added services such as decision-making tool UpToDate should help it slowly improve margins in the medium to longer term and increase its exposure to recurring revenue, which currently stands at almost 80% of group revenue.
For more background on the shift in mix from print and database products to analytics, please see our Sept. 17 Select report "Analytics Point to a New Directions for Publishers."
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.
We have operations in 27 countries.
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