Wednesday 16 January 2019

Data-rich Wolters holds promise of more to come

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Sometimes I like to return to see what rash things even the most serious people said in the past about the internet.

For instance, two decades ago the highly regarded American commentator Noam Chomsky sniffily called it 'an elite organisation', given that most of the world's population at that time had never even made a telephone call. Others argued 'The Web' wasn't a new way of life, just a new activity. How wrong they've been. It has turned out to be as revolutionary as electricity, giving information a value few thought possible.

The company under scrutiny today proves my point. It is the 30-year-old Amsterdam-based Wolters Kluwer (Wolters), a global information service company that provides information, software and services for doctors, nurses, accountants, compliance and regulatory professionals, and lawyers. Revenues are generated from licence for use of its software and services. The services are used by almost all US academic medical centres, most top accountants, banks, insurance, law firms, even hedge funds. Wolters has customers in more than 150 countries, operations in 40 of them, has 18,200 employees, and is valued at €12bn.

Of course, information purveyors like this one do not appear out of the blue. Its origins go all the way back to 19th century publishing, but the task of meeting the demands of data-hungry modern business has helped turn Wolters into a world leader. It was largely done through astute acquisitions. Initially it expanded in Europe, but before the end of the last century the group entered the US market.

Today the US is Wolters' largest market, with almost two-thirds of revenue. Europe follows, but the rest of the world's sales is only 6pc. It has continued its fast-paced progress, fuelled by takeovers.

A significant change has been its transformation to electronic and online media from printed products, which now accounts for less than 12pc of revenues - five years ago it was 26pc.

Wolters has four global operating divisions: accounting/tax; health; legal; and governance, risk and compliance. Each contributes more than €1bn to group revenues. Its accounting/tax division is its largest and most profitable.

It provides digital information relating to auditing, tax and accounting for tax specialists, accounting and corporate finance firms and libraries. Compliance, risk and governance is Wolters' second-most profitable division, providing solutions for legal compliance, enterprise-wide legal problems and reporting solutions in financial markets.

The group's health business assists professionals deliver better outcomes for their patients and decision-making in the clinical, nursing and pharmacy areas. The legal and regulatory division helps professionals provide information, analysis and software for complex legal and regulatory compliance.

Customers include corporate legal departments, law firms, universities and government agencies.

Wolters is in a healthy financial position. Revenues last year totalled €4.5bn, up 20pc on the previous three years. Its digital business dominates, with 88pc of sales driven by its health and accounting/tax divisions.

Other areas of revenue include print and services. Its print format continues to decline, but services, which include consulting and training, is showing a slight increase.

Operating profits were €1bn and margins a healthy 22pc. The group's share price is €42.35 a share, slightly below its yearly high of €45, with a p/e of 20. The company has also completed a €500m share buyback in the last two years.

Wolters is a solid business with a sound strategy. It has the resources to acquire specialised companies to enhance its offering. It has upgraded as demand, innovation and technology dictates. It is a worthwhile share to buy with no exchange risk and a prominent spot on the Dow Jones Sustainability Index, which cannot be a bad thing.

Nothing in this section should be taken as a recommendation, either explicit or implicit to buy any of the shares mentioned.

Irish Independent

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