Welcome to the annual general meeting of shareholders of Wolters Kluwer NV. This is a hybrid meeting, and we welcome both shareholders attending in person here in Alphen and those participating remotely. During today's meeting, all members of the supervisory board and executive board are present, with Jeanette Horan joining us virtually from the United States. Our auditor, Mr. Savert of Deloitte Accountants, and our company's notary, Ms. Leemrijse of law firm A&O Shearman, are joining us here in Alphen as well. This is a hybrid meeting, which means that shareholders can participate either in person or remotely. This meeting is also being broadcast live via video webcast, and a recording will be made to correctly produce the minutes. We appreciate that many shareholders took the opportunity to exercise their voting rights by way of electronic or written proxy.
Similar to the last few years, we will conduct the meeting in English, for which we ask your understanding. We kindly request that shareholders who ask questions do so in English. We have complied with all statutory provisions and the provisions of our articles of association for convening this meeting, and therefore, resolutions may be validly adopted at this meeting on all of the agenda items. As soon as the exact number of shares present or represented is known, I will inform you. Let us now turn to the meeting agenda. I would like to discuss agenda items 2A, B, C, D, and 3A together. Item 2B, corporate governance, has been included in the agenda in line with the amended Dutch Corporate Governance Code, which took effect as of January 1, 2023.
In our 2023 annual report, we explained broadly our corporate governance structure and our compliance with the code. During 2023, we took the necessary steps to implement changes that followed from the new code. In particular, this included an update of the bylaws of the supervisory board and executive board, as well as the terms of reference of the audit committee and the selection and remuneration committee. To introduce items 2A, 2B, and 3A, I would now like to give the floor to Ms. McKinstry, CEO and Chair of the Executive Board.
Oh, thank you very much. Sorry. Thank you, Ann, for the introduction, and I'd like to welcome all of you here at the meeting. I will discuss our key achievements in 2023 and our track record for delivering financial and sustainability results. Then I'll also like to touch on a recent focus area of our investment, which is generative AI. I will finish up with a summary of our first-quarter trading update and an outlook for the remainder of 2024. So let's take a look at this slide, which highlights our key achievements in 2023. The economic and political backdrop posed a few challenges for us last year, but despite this, we achieved our guidance, delivering 6% organic growth and a further increase in our adjusted operating profit margin.
Benefiting from lower financing and tax expense, diluted adjusted earnings per share increased 12% in constant currencies. We held adjusted free cash flow broadly stable at EUR 1.2 billion, which was also in line with our guidance. Return on invested capital improved significantly to 16.8%. The balance sheet remains very strong, enabling us to not only invest in the business, but also to make substantial returns to our shareholders. The strategic highlight was that our expert solutions, which are products that deliver both trusted content and workflow automation, reached 58% of our total revenues last year. We invested in product development at record levels, spending 11% of our revenues to bring valuable innovation to our customers. We formed a new division last year and further centralized several key functions, which we expect will yield benefits in the years to come.
In terms of the ESG highlights, I'm proud to say we increased our employee engagement and belonging scores again last year, and our near-term emissions reduction targets were validated by SBTi. Now, let's look more closely at our strategic progress in the second year of our current plan. The first pillar of our strategy is to accelerate our expert solutions. Our expert solutions grew 8% organically last year and include some of our fastest-growing software products. This growth was supported by record levels of product development spending, amounting to more than EUR 600 million. We launched several products that utilize generative AI technology, notably in our health and legal markets. We also made significant investments to develop and launch offerings that support our customers with new regulations. The second pillar of our strategy is to expand our reach.
Here, the most notable development was the formation of our new division, Corporate Performance and ESG, which sets us up to expand our offerings that support companies with their sustainability reporting, analysis, and assurance. In health, we acquired two companies, both of which extend our reach into adjacent market segments. The third pillar is to evolve our core capabilities. This involves enhancing our own operations and advancing our own sustainability performance. We centralized nearly all of our product development teams, created a unified global branding organization, and centralized our worldwide finance organization. It was a busy year and one in which we are able to extend our long-term financial track record, as you will see on the next slide. As you see in the chart in the top left, organic growth was broadly in line with prior year at 6%.
The chart next to this shows that the organic growth of our recurring revenue streams was sustained at 7%, while non-recurring revenue slowed last year due to economic headwinds. Efforts to drive operational efficiencies helped us add another year of our history of annual increases in the adjusted operating profit margin, as you see in the chart in the top right. This, together with careful management of financing and tax expense and the effect of share buybacks, helped extend our track record of steady growth in diluted adjusted EPS. Efficient use of capital has helped us deliver steady increases of, in return on invested capital over the years, with ROIC reaching 16.8% in 2023. These financial achievements were delivered alongside several important sustainability efforts that we made last year, and I'd like to highlight just two of them on the next slide.
The first one is to mention the validation by the SBTi of our near-term emissions reduction targets. These targets set us on a path to reduce Scope One and Scope Two greenhouse gas emissions by 50% and Scope Three emissions by 30% by the year 2030. These reductions are off of a baseline from 2019. Streamlining our office footprint will be the most important driver to reducing our Scope One and Scope Two emissions in the coming years. The second achievement I'd like to highlight is the progress we've made on our sustainability reporting.
In preparation for the EU Corporate Sustainability Reporting Directive, we, which will become mandatory as of the financial year 2024, we carried out an extensive initial double materiality assessment in 2023 based on the guidelines of the European Sustainability Reporting Standards, which is the mandatory reporting framework under the CSRD. Following this exercise, we reframed our sustainability disclosures to start bringing them in line with the ESRS. Furthermore, we substantially increased the level of our ESG data disclosures. I hope you have had a chance to read the sustainability statements in our 2023 annual report. On the next slide, you can see a handful of non-financial measures which we track at Wolters Kluwer. We are aiming to join the top quartile of companies for both employee engagement and employee belonging. Every year, we conduct a global employee survey to measure these scores.
We've had two years of solid improvement, as shown in the two charts on the top left of this slide, which brings us closer to reaching our goals. We support engagement and belonging with a wide range of initiatives and programs throughout the year, which you can read about in our annual report. These programs have also contributed to the improvement in our employee turnover rate in what are still very highly competitive markets for top talent. The bottom right, you can see the track record of our real estate rationalization program. In 2023, we achieved a 5% underlying reduction in our global office footprint, which helped drive an 8% decline in Scope One and Scope Two emissions. Now, moving on to the next slide.
Our track record of driving continuous improvement has enabled us to make consistent organic investments in the business, whether to enhance security or drive product innovation. This investment is critical to driving organic growth and creating long-term sustainable value for our customers, our shareholders, and other stakeholders. This investment has also been key to maintaining a high standard of security, as you can see in the chart in the bottom left. One of the areas that we've been investing for over a decade in is embedding artificial intelligence into our products in a responsible, sustainable manner, adhering to our responsible AI principles. Some 50% of our digital revenues come from products that leverage some form of AI. In 2023, we rolled out our first Gen AI product applications.
One of the first to launch was our UpToDate AI Labs, which brings the power of Gen AI to our leading clinical decision support tool UpToDate. Today, this is a large beta test environment in which we are collaborating with over 100 US hospitals. AI Lab has access to all of the UpToDate evidence-based clinical content across more than 25 specialty areas. It is the only large language model powered by the UpToDate content. We are partnering with major technology providers, such as Microsoft and Google, for much of this work, and we're very excited about what is to come in 2024. Now, let me update you on our proposed dividend distribution and share buyback program. As noted, our balance sheet remains strong with a leverage ratio of 1.5 times at year-end 2023.
This allows us to invest organically in the business, make acquisitions, while also returning our shareholders cash. Today, we are proposing a 15% increase in the total dividend per share to EUR 2.08. This results in a final dividend of EUR 1.36 per share to be paid out in early June. The dividend proposal is subject to your approval today. In February of this year, we announced our plan to repurchase EUR 1 billion in shares during 2024, and so far this year, we've completed about a third of this buyback program. So now let's take a look at our share price performance. In addition to cash returns, our shareholders have also benefited from a 32% increase in the share price in 2023.
The chart on the left shows Wolters Kluwer's share price, price in blue since the end of 2020, compared to the Dutch AEX in orange, the STOXX Europe 600 index in black, and the blue-chip Euro Stoxx 50 index in red. Over the three-year period ending December 31st, 2023, Wolters Kluwer shares have increased 86% in value, significantly ahead of all three indices. Stock markets have had a strong start to 2024. As of Tuesday's closing prices, Wolters Kluwer shares are up 13% year to date, ahead of the STOXX Europe 600 and the Euro Stoxx 50, but slightly lagging the AEX. Now, a few words about our trading update for the first quarter. We've seen a good start to the year, and I'm pleased to reiterate the guidance we set out in February.
Organic growth was 6%, supported by recurring revenues, which grew 7% organically, and expert solutions, which grew 8% organically. Organic growth in non-recurring revenues increased 1% organically, compared to 2% a year ago. The adjusted operating profit margin increased, reflecting favorable timing of expenses. Adjusted free cash flow also increased in constant currencies, while cash conversion came down as expected, mainly due to favorable timing of financing costs and taxes paid. So now just a few words about our outlook. We continue to expect good organic growth in line with 2023 and a modest improvement in our adjusted operating profit margin to be between 26.4%-26.8%. We expect adjusted free cash flow will be broadly stable compared to the prior year in constant currency as cash conversion returns to historical levels of around 95%.
We continue to guide to further increases in return on invested capital to be between 17% and 18%. And finally, we expect diluted adjusted EPS to show mid- to high single-digit growth in constant currencies. If you take a look at the guidance by division, in health and legal and regulatory, we expect organic growth to be sustained in line with prior year. In tax and accounting, we expect organic growth to slow modestly for the full year, while in finance and corporate compliance and in the new corporate performance and ESG division, we expect full-year 2024 organic growth to be in line with or better than the prior year. The main areas for this year's margin increase are expected to be in health, legal and regulatory, and corporate performance and ESG.
In summary, a good start to the year, allowing us to reiterate our guidance for 2024. I want to thank all of you for listening and your continued support as shareholders. Now back to you, Ann.
Thank you for this presentation, Nancy. Jeanette Horan, Chair of the Selection and Remuneration Committee, dealing with remuneration matters, who is participating remotely today, has prepared an introduction on agenda item 2D, the advisory vote on the remuneration report as included in the 2023 annual report. This agenda item is submitted to you for an advisory vote in accordance with Dutch law. By voting, you can indicate whether, in your view, the 2023 remuneration report provides a clear and comprehensive overview of all remuneration awarded to individual members of the executive board and the supervisory board in the last financial year.
The remuneration report can be found on pages 77-88 of the 2023 annual report and is also separately posted on the company's website. I'd also refer you to note 37 of the financial statements, which can be found on page 200 of the annual report. Let's now go over to Jeanette.
Thank you, Ann. Related to agenda item 2D, which is the advisory vote on the 2023 remuneration report, I would like to provide a summary of how the company's performance against 1- and 3-year targets determined the remuneration outcome for 2023. This slide shows the short-term incentive plan measures, targets, and actual performance for the year 2023. The short-term incentive was linked to three financial measures and three non-financial or ESG measures, as shown in the table. The financial targets were weighted at a combined 90%, while the non-financial measures were weighted at 10% last year.... The committee notes that 2023 was marked by significant internal changes at Wolters Kluwer. Notably, the formation of a new fifth division and the centralization of key functions, such as technology development and finance.
As described in the annual report, performance for revenues and adjusted net profit were in line with target, while performance for adjusted free cash flow was 1% above target. In the case of the non-financial measures, performance was ahead of target in each case. The employee belonging score was improved by 2 points, which was ahead of the target, which called for a 1-point improvement compared to the prior year. The index cybersecurity maturity score was also above target. In this case, the target is set to maintain the score at or above the benchmark for high-tech companies. Finally, the number of on-premise services decommissioned last year was over 1,500, significantly exceeding the target, and this program has now reached a mature stage. More detail can be found in the remuneration report.
The report also sets out the change we have made for the 2024 short-term incentive, which was to replace the server decommissioning measure with a goal that incentivizes the team to reduce our scope one and two emissions related to our global office footprint. Let's turn to the long-term incentive plan performance on the next slide. The long-term incentive covered the three-year period of 2021 to 2023 and reflects the remuneration policy adopted in 2021. That policy established three key performance measures: relative TSR, diluted adjusted EPS, and return on invested capital. With respect to relative TSR performance over the three-year period, Wolters Kluwer ranked third among the TSR peers, as you can see in the chart on the left. This strong relative performance on TSR resulted in an above-target payout for TSR-related shares.
With respect to diluted adjusted EPS, Wolters Kluwer delivered a compound annual growth rate of 12.3% in constant currencies, which was ahead of the target of 8.3%. This overachievement resulted in an above-target payout for the EPS-related shares. With respect to return on invested capital, Wolters Kluwer achieved 16.9% ROIC in constant currencies, which was ahead of the target of 14.2%, set three years ago. This overachievement resulted in an above-target payout for the ROIC-related shares. Further detail, including prospective targets for these three LTIP measures, can be found in the remuneration report. Before I turn the proceedings back to the chair, I would like to say a few words. Today marks the end of my term as a supervisory board member for the company.
It has been an honor and a privilege to serve the company over the past eight years. I'd like to thank everyone at Wolters Kluwer for their commitment and dedication that led to the superb business results over that period. I would like to thank you, our shareholders, for your engagement and support as we navigated through COVID and the implementation of the Shareholder Rights Directive. Thank you. Back to you, Anne.
Thank you, Jeanette. The financial statements for the year 2023 have been audited by the independent external auditor, Deloitte, and their opinion can be found on pages 211 to 218 of the 2023 annual report. I would now like to invite Bas Savert, partner at Deloitte, to give a brief overview of the audit work performed by his firm. Bas, the floor is yours.
Thank you. Just a brief overview on the audit, and in accordance with the guidance also from the Association of Dutch Auditors, we present today the highlights of the audit, kind of the story of the audit in a few words, and I have also used a slide to present that. I will reflect on the key audit matters, as well as some of the more relevant topics of the audit, such as scope, the group audit, the use of specialists, materiality, our communication, as well as the responsibility to other information included in the annual report. First of all, I would like to refer to page 211 of the annual report, in which you will find the full auditor's report that was signed on the twentieth of February, 2024.
This report contains our conclusions reached, as well as other important information, including a description of our key audit matters and conclusions reached. Our audit is primarily aimed to conclude on the consolidated and company financial statements as included in the annual report, and we issued an unqualified auditor's opinion. Furthermore, there is additional information, such as the strategic report, the governance section, the sustainability statements, as well as other information. For that information, we have verified whether it complies with the requirements of Dutch law and if there are inconsistencies with the financial statements in accordance with the Dutch auditing standards. In our auditor's report, we have highlighted three key audit matters. The first one being the new structure, that was already explained a few moments ago, at the new segment.
And the other two key audit matters related to revenues and the valuation of goodwill, and these two key audit matters are relatively consistent with prior year. For the segmentation, the key audit matter was chosen because it led to a restatement of information, to and reallocation of goodwill, and also the need to add certain disclosures. And because this reallocation is relatively judgmental, we took an extra look to ensure that it was appropriate. Besides the key audit matters, there were also some other attention areas, such as those related to fraud risks, the risk of non-compliance, and ESG. And in assessing the risk of fraud and non-compliance and fraud, we involved forensic specialists.
We considered the risk of management override of controls, and we performed specific procedures in that area, such as making inquiries, testing journal entries, reading board minutes, and evaluating significant unusual transactions. Also, we reviewed whistleblower notifications, and we obtained representations. For ESG, we've also involved specialists in making inquiries and understanding elements contained in the sustainability statements. We have not been engaged to provide assurance over the ESG information, but we did cover the requirements, just as just mentioned, for other information. With regard to our scope, we reached a coverage of 79% of our consolidated revenues, and 89% of consolidated assets with our procedures performed. We involved component auditors in several countries, including those in Europe and the US.
During the audit, we were in frequent contact with those audit teams, and we performed reviews of their working papers, as well as the most important sections of their files. We use specialists in various areas, including for IT, tax, and for valuations. Our materiality was in line with last year, set at EUR 70 million. For consolidated subsidiaries that are audited, we use a lower materiality, up to EUR 30.8 million. We reported to management and the audit committee all entries or all proposed adjustments in excess of 5% of materiality level. We also looked at other considerations, qualitative considerations, in our reporting to those charged with governance. Our communication, our most important considerations, conclusions reached, are included in the auditor's report that I just referred to.
In addition to this, we also issued some more detailed reports, including an audit plan, a management letter, and a year-end report. Finally, we are in the process of planning the 2024 audit, which will be our last audit before rotation to a new audit firm. Our approach for the financial statements audit is expected to be largely consistent with the 2023 audit approach. Effective 2024, additional requirements will exist in relation to the CSRD reporting, and those will be subject to limited assurance procedures, and we are currently discussing the work on that. Also, we expect to spend adequate time to liaise with the new auditor on the rotation after 2024. That brings me to the end of my presentation. Thank you for your attention.
Thank you, Bas. We would now like to take questions relating to agenda items 2A, B, C, D, and 3A. Please note that these questions should be about the 2023 annual report, consisting of: the report of the Executive Board, corporate governance of the company, the report of the Supervisory Board, the remuneration report, and the 2023 financial statements. Are there any questions in the room? Ms. Langeres?
Oscar Langeres on behalf of the VBDO, the Dutch Association of Investors for Sustainable Development, would like to continue its engagement with Wolters Kluwer about sustainability performance. Thank you for this opportunity. This year, we would like to ask three questions on specific topics. Topic one, biodiversity. For the third consecutive year, the VBDO is engaging on the important topic of biodiversity. Unfortunately, VBDO was not able to find information on biodiversity in the annual report, except for the statement that biodiversity is not material for the company. Possible biodiversity risks and impacts for Wolters Kluwer could be related to the use of paper and mining of raw materials. Furthermore, data centers and e-waste thereof are known to impact land use, waste, and water use, which could affect biodiversity and natural resources.
Question one: How did Wolters Kluwer gain insight into the impacts of own operations and the value chain on biodiversity? Question two: What steps is Wolters Kluwer taking to gain additional insights into its impact and the risks on biodiversity in the supply chain, specifically beyond your tier one suppliers? Is Wolters Kluwer willing to report more in detail on this process in the next annual report? Topic two, living wage in the supply chain. This year, VBDO is renewing its engagement with companies on the crucial issue of living wage. VBDO is pleased to see that Wolters Kluwer has identified the ESRS S2 standard, workers in the value chain as a material topic, and your double materiality assessment, and adequate wages as a material sustainability matter. VBDO acknowledges that realizing a living wage for supply chain workers requires multi-stakeholder collaboration.
Furthermore, the upcoming Corporate Sustainability Due Diligence Directive, CSDDD, also recognized ensuring a living wage for supply chain workers as an important responsibility for companies. Question one: What steps has Wolters Kluwer taken in the journey towards ensuring a living wage for workers in the supply chain? Question two: What specific actions will Wolters Kluwer undertake next to advance its approach in realizing a living wage for supply chain workers, also in the light of compliance with the upcoming CSDDD? Topic three, lobbying and advocacy. At last year's annual meeting, Wolters Kluwer stated that the company would look into lobbying activities as part of the double materiality assessment. Furthermore, VBDO inquired about the possibility to conduct research into what industry associations Wolters Kluwer is a member of, support the Paris Agreement and report on this.
However, VBDO was unable to find information on lobbying activities in the annual report. Although lobbying and advocacy is not a material topic to Wolters Kluwer, stakeholders increasingly demand transparency on the position of companies regarding lobbying and advocacy. Wolters Kluwer has not included a statement of the company's position on lobbying and advocacy in the annual report or on the website. Through the inclusion of a position statement on lobbying and advocacy, Wolters Kluwer could demonstrate its commitment to responsible corporate citizenship and align its actions with the interest of stakeholders. Questions: Can Wolters Kluwer clarify its position on lobbying and advocacy with regulators, industry, and trade organizations? Will Wolters Kluwer include this position in the next annual report to enhance transparency? Will Wolters Kluwer include a list of the relevant trade and industry associations it is a member of in the next annual report? Thank you.
Nancy, would you like to address her questions?
Yeah. Thank you very much for your questions. So let's start with the topic of biodiversity. As I indicated, in 2023, we did an extensive assessment of our double materiality, and, of course, looked at not just our own impact on the environment, but also our top seven suppliers, as well as looked throughout our value chain in terms of additional suppliers. We also looked at our usage of raw materials and hardware, again, mostly through our IT supply chain. And what we determined from that assessment was that biodiversity was not a material topic for Wolters Kluwer, and so therefore, we are not reporting on it in any kind of extensive way. We will continue our efforts on two fronts, however.
One is, you know, we will continue to assess, and if it should become material, do more extensive reporting. Secondly, we will continue to work with our suppliers, to ensure that they are, abiding by our, focus on environmental standards. But you should not expect more extensive reporting as long as the topic remains not part of the materiality, topic. Second, on, living wage, this is... the adequate wages is a material topic that came out in our assessment. We at Wolters Kluwer, you know, are very committed to paying, adequate wages for our own employees. As it relates to our suppliers, we continue to evaluate them and set standards and and, assessments around living wage, wages.
Most of our suppliers, I will point out, are mostly IT service companies, and so highly, you know, educated, knowledgeable and skilled workers. So it's not a particular issue per se with our suppliers, but we are continuing to increase our monitoring and increasing looking at our standards to make sure that that that is addressed by all of our suppliers, and we will continue to report on that in our sustainability. And then finally, as it relates to lobbying, again, as we did our materiality assessment, this did not come up as a material issue. We are part of trade associations, primarily in our legal business and our health division, and a bit now with our new division in corporate performance and ESG.
But our lobbying efforts are rarely direct, so really through these associations and not material from a financial perspective, which is again, why you don't see that in our reporting. We will continue to monitor it from a materiality perspective, and we'll continue to think about how we might report more. But again, because of its very, very low materiality, you shouldn't expect a whole lot of additional disclosure at this stage. Thank you.
Are there any other questions? Yes.
Hi there. Good morning. My name is Eric van Huijstee, on behalf of European Investors, VEB. I have a couple of questions, so, maybe I'll leave it at the first three and then, give the opportunity to other people to ask questions. First question is a recurring theme, I would say. I always ask a question about legal and regulatory. And I wanna touch also on comments made in past AGMs. If we look at last year's financial performance, the margins improved on the back of higher operating profit, but lower revenue. Now, I noticed that you also mentioned a couple of disposals in Spain and France.
So my question is: if we look at the sort of medium-term ambition that you spoke about in the last AGMs of high teens, how much of this you could call organic, and how much of this is related to these disposals? And what does this mean for the trajectory going forward? Second question on the new operating segment, corporate and corporate performance and ESG. Yeah, it's a new segment. It's got relatively low margins, you could say. Margins actually fall back quite a bit last year. Now, you've noticed as that's due to personnel costs, but also investment in products, sales and marketing.
I was just wondering, can you give sort of an idea of the investment cycle, a timeline, and where this could grow to in terms of margins, if you look at, the other segments, of a couple of other segments being 30% or higher in terms of operating margins? Then the third question is a little bit on, on artificial intelligence. You mentioned that around 50% of your current, digital revenue, is, is leveraged by, artificial intelligence in some way. I was wondering, can you sort of quantify, and you're spending more money on this in terms of investments, can you sort of quantify how much of additional, revenue this, this actually brings in, in terms of being, yeah, additional, incremental, that sort of... That's it.
Great. Nancy?
Okay. Terrific, and then, Kevin, if you want to chime in on margin. So first, in terms of legal and regulatory, they grew 4% in 2023. That was the organic growth, getting above a 2% level to 4%, was the major driver of the margin improvement. The disposals in France and Spain did contribute positively on margin, but again, the bulk of the achievement was through organic growth. So the goal in the legal and regulatory division is to continue to drive very strong growth in digital information. We have high retentions there. That's been a product area that's been growing, you know, 6%-8%, so very high, and then to scale the software business.
So the software business today in legal and regulatory is below the margin level that represents a scaled business, and so that will be, again, a major contributor in the future as those product lines scale. In the CP and ESG, a similar story, in that some of our products in that new division are subscale. We're continuing to drive a lot of sales and marketing to penetrate the markets. We're expanding what we're doing on the ESG front, so a lot of innovation going on. So at this point, the focus is on growth in that division, and we know that as we continue to scale, the margins will be able to get up to sort of the group average and reflect more software-like margins, but that's more a medium-term objective.
And then on the AI side, you know, before the onset of GenAI, our focus in the AI arena was really on predictive analytics, machine learning, you know, natural language processing. Those were more the forms of AI that we invested in, and we continue to invest in. We're now investing incrementally in GenAI. It's still a bit early to say how the commercial... what the commercial impact will be of our incremental investments in GenAI. You know, we clearly believe it will support retention rates and drive, you know, more sales, which is our focus. But still early days in terms of fully quantifying what the impact will be.
Okay, thank you.
Thank you.
Maybe a little bit on the legal and regulatory. If you look at, of course, the past, it's sort of choppy-
Yeah
... with the margin development. And sometimes there, of course, there's also one-offs and disposals, et cetera. In the outlook, you also say this is gonna improve again, the margin this year. Can you sort of in-- Yeah, I, I know medium term is always sort of- ... like, vague, say, Mark.
Yeah.
Can you sort of let something know about what is medium term?
Yeah.
Is that, is that a three-year track, five-year track?
Yeah, maybe I'll turn it to Kevin for some more elaboration.
Yeah, I will say, it's not our practice to give longer-term guidance other than what we've given you in the press release back in February. But I can say what we are looking at in legal and regulatory is a business that is more and more digital, more and more developing in software areas. We do see expert solutions, in particular, being a very important investment for our organization, and those businesses tend to grow faster, and as they get mature, margins follow from that.
Yeah.
So it is more about how we are investing in technologies, expert solutions. I will say that legal and regulatory is a very diverse business unit, in that we operate in many different countries around Europe. So I don't necessarily expect that legal and regulatory will take on a margin similar to some of the other divisions, but I certainly do think there's room to improve.
Yeah. Yeah. Okay.
Thank you. Anybody else?
Yeah, otherwise, I'm still not much, but thank you.
Would you like to, would you like to go ahead?
Yes, please. Do we have the mic?
Yeah. Yes.
It's on its way.
... Hi. Great. Good morning, ladies and gentlemen. My name is Robert Vreeken of WeConnectU Public Affairs and Investor Relations. I'm delighted by the excellent financial results, and the good news is that my Wolters Kluwer shares increased by 380%. So I bought them about 10 years ago, and now the increase is 380%. That's wonderful. So it's good to be here. And I think, with these excellent results and the knowledge within Wolters Kluwer, we can put forward a few more challenges. An increase of more than 10% of the profit is possible, and turnover is possible, because Russia is at war with Ukraine. China is a major sponsor of Russia. North Korea is also a major sponsor of Russia.
Iran is a very big sponsor of Russia and supplies a large number of special drones and missiles. Iran is also the largest sponsor of terrorist organizations in the Middle East. The figurehead of Iran is Hamas. Hamas built 700 km of tunnels under Gaza with Iran. Hamas fired 7,000 rockets a day, and the U.S. and Europe are now hostage to Russia, China, North Korea, and Iran. This toxic combination is being popularized even faster by artificial intelligence. How can Wolters Kluwer dismantle this toxic combination with artificial intelligence? Because it's very important for the stability in the world. The more stable the world is, the higher the profits and the turnover of Wolters Kluwer is. Furthermore, they are also very good, this toxic combination in cybercrime.
That's a big, big threat for the US and Europe, and especially for Wolters Kluwer, because you are specialized in IT-driven solutions. Then sustainability. Investments in sustainability will triple to EUR 600 billion by 2030. And it's important, I think, I feel, that you create, set up a new division, sustainability, to benefit from this enormous growth. Furthermore, VBDO, they mentioned, I'm a member of VBDO, that diversity is very important for Wolters Kluwer and networks partners. And I wonder how much of the profit is invested in forests worldwide. In the Netherlands, we have, for example, Unilever, Van Lanschot, and De Telegraaf, who invest in forests.
And the more forests we have worldwide, the better it is for the climate, and the better it is for all the resource of big companies in the world. Then another item is, and that's quite important, pensions. In the Netherlands, we are like Dagobert Duck, with EUR 1,500 billion in pension funds, and 90% is invested abroad. In Sweden, 40% of the pension funds, they have some investments in Sweden. So by investing more in the Netherlands, the pension funds will invest more in Wolters Kluwer because your performance is excellent, so it's very important to do so. Hans Wijers, Ton Diesman and Feike Sijbesma, they are in favor of this proposal to invest much more in the Netherlands.
How can the board, the executive board, the supervisory board, and your network, because your network is excellent, how can you support this initiative? Because it, it's very easy that we spend next year EUR 100 million extra in the Netherlands. And the most important thing for the stability in this country, we have a vacancy for a new prime minister, and they were talking about Johan, Johan Remkes, but he feels that he is too old. But I think that Nancy McKinstry or Jack de Kreij or Chris F. H. Vogelzang, with their excellent track record, would be ideal for this vacancy. And, on the one hand, I'm making a joke, but I'm talking to all the board members in the Netherlands, and they have an excellent track record, much better than the politicians.
You'll know that the new team is looking for 50% members outside the government, so from businesses. That's a huge challenge, and altogether, you could help this party to do so. It's excellent for the share value if we have excellent captains in the Netherlands. Thank you. These are my questions.
Yeah. Yeah.
... So, thank you.
Yeah, I mean, thank you, thank you for your comments.
Yeah. So maybe I'll just make a few-
Yeah
... remarks, if I can, on some of your topics. So first, why don't I start with sustainability? We agree with your statement that there's a significant market around sustainability and ESG broadly. That is why we formed our new division, Corporate Performance and ESG, and we're quite focused very much on building out integrated solutions that will help our customers not only do the reporting, but also really drive operational changes that will improve, particularly carbon emissions, et cetera. So fully agree on that subject. Cyber, also a big effort around that to make sure that our products and services have the highest level of security.
We report and we set a goal of around a NIST Framework to ensure that a third party comes in and measures our efforts. We report on that in our annual report. We also tie remuneration to that as well. And on the question of Russia and AI, you know, we are not involved in anything in terms of serving the military, but what we do do is ensure that our own AI efforts are very focused on responsible AI principles, and we adhere very strongly to that to make sure that we can reassure our customers that, again, that the efforts that we're deploying on AI, you know, are ethical. So with that, yes.
Yes.
Yeah.
Yes. And I know you had a few more questions, but what I'd really like to do is to get through the agenda items, and then if we have time at the end, we'd be more than happy to take your questions. Okay? All right. Anybody else? All right, so I would now like to inform you that all shareholders, that the polls for all voting items are now open and will be closed after the last voting item on the agenda has been discussed, which is agenda item 10. Voting results will not be disclosed during the meeting. Only after we have dealt with agenda item 10 will we show the voting results.
Before we proceed and open the voting process for all agenda items, I will pass on the notary's formal observations, which are: according to the registration list, 5,352 shareholders are present or represented, who can jointly cast 188,170,810 votes, representing 78.71% of the issued and outstanding share capital. Before the meeting, 5,337 shareholders submitted a total of 188,132,590 votes to the notary by proxy. The voting operator confirms that the voting system is now activated for all voting items. I propose to acknowledge the report of the executive board and the report of the supervisory board for the record, and we discuss the company's corporate governance.
Agenda item 2 D, the remuneration report, as included in the 2023 annual report, will now be submitted to you for an advisory vote. You can choose to vote in favor of the proposal, against the proposal, or to abstain from voting. As mentioned, voting is now open, and as said, we will share the voting results only at the end of the meeting. This will include votes cast in advance by proxy to our notary. Shareholders may change their vote until the end of the meeting. I propose we now proceed to the next set of agenda items. Agenda item 3 A, the proposal to adopt the 2023 financial statements, which is a voting item, and Nancy already gave a summary of highlights, and Deloitte presented their views.
Item 3B, explanation of the dividend policy, and item 3C, the proposal to distribute a total dividend of EUR 2.08 per ordinary share, resulting in a final dividend of EUR 1.36 per ordinary share, for which you may vote as well. While you consider voting on items 3A and 3C, I will describe the company's progressive dividend policy. Wolters Kluwer aims to pay a higher dividend per share in euro each year compared to the prior year. The annual increase depends on factors such as our financial performance, market conditions, and our need for financial flexibility. It is also part of our policy to pay an interim dividend after the first six months of each year.
As in prior years, the supervisory board has carefully reviewed the financial situation of the company and feels confident that the company can indeed pay out the dividend as proposed without liquidity risks. I also refer to the earlier presentation of Nancy McKinstry in this respect. In line with this progressive dividend policy, we propose a total cash dividend of EUR 2.08 per ordinary share to be paid for the full financial year 2023, which represents an increase of 15% over the prior year. Since an interim dividend of EUR 0.17 per share was already paid in September 2023, the final dividend payable in June will amount to EUR 1.36 per share.
Upon your approval of the dividend proposal for 2023, this will be the 18th consecutive year in which the company has increased its dividend per share in euros under its progressive dividend policy. As in prior years, we intend to set the interim dividend for 2024, payable in September, at 40% of the prior year's dividend. I would now like to address any questions about the dividend policy and the proposed dividend of EUR 2.08 per ordinary share. While we discuss any questions on these agenda items, I'd like to remind you that you can already cast your vote on agenda items 3C, as well as all other voting items. Any questions? ... Thank you.
I would now like to discuss agenda item 4, the proposal to release the members of the executive board and the members of the supervisory board from liability. These are separate agenda items and will be voted on separately. However, I will deal with questions on agenda items 4A and 4B together. As a reminder, you can already cast your votes. Are there any questions on these items? I'll move to agenda item 5. As detailed in the explanatory notes to the agenda, the first four-year terms of Jack de Kreij and Sophie Vandebroek, and the second four-year term of Jeanette Horan as members of the supervisory board expire today. Regretfully, Jeanette has informed us that she is not available for reappointment. The supervisory board is currently searching for a new candidate to replace Jeanette on the supervisory board.
On behalf of the Supervisory Board, I would like to express our gratitude to Jeanette for her highly valued and appreciative contributions as a member of this board, and in particular, for the many years she served as Chair of the Remuneration Committee. We enjoyed working with you, and we wish you all the best. Thank you, Jeanette. In relation to Jeanette's retirement, I would like to inform you that we are looking for a new member of the Supervisory Board to bring the number of members back to seven, in line with the profile. Heleen Kersten will take over the role of Jeanette as co-Chair of the Selection and Remuneration Committee, dealing with remuneration matters. We are pleased to propose to you the appointment of David Sides as new member of the Supervisory Board.
David fulfills the vacancy, which was created due to the retirement of Bertrand Bodson in 2023. Upon his appointment, David will join the Selection and Remuneration Committee. David is an experienced leader with deep knowledge of the healthcare sector and extensive experience in leading innovative companies. I would like to give David the floor for a brief introduction.
Thank you, Ann. It's wonderful to be here in person with everyone. I'm deeply honored to be considered for the proposal to be appointed to the supervisory board of Wolters Kluwer. It's a company that's been around for 187 years, which I think is impressive, that it's evolved its technology, that many times over that time period and continued to be relevant in the industries and the communities and the lives of the people it serves. It's one of the. It's from its humble beginnings, it's become one of the world's leading technology companies. And please allow me to share a little bit about my own background and expertise. I've got a lot of experience leading large technology companies, many of which have the same challenges and interests of Wolters Kluwer.
Also, I have experience with and knowledge of the creation and application of technologies that drive growth. Whether it's navigating complex business landscapes in multiple countries, fostering strategic partnerships, or championing the values of transparency and accountability, I bring to the table a deep-seated passion for excellence and steadfast dedication to success. From a more personal perspective, I'm married. I have four children. I met my wife in Norway when we were both living in London. I now live in the U.S., outside New York City, in Greenwich, Connecticut. I've run public and private companies as CEO. I'm currently the CEO of a private company, NextGen Healthcare. That company makes extensive use of artificial intelligence in how we deliver medical results to clinicians and providers.
They have an electronic medical record, and we use the technology to augment, not replace, the providers in that relationship. As a member of the supervisory board, I'll uphold the highest degree of corporate standards, governance, act with integrity and transparency in all my dealings, and always put the interest of our shareholders, employees, customers, and other stakeholders above all else. Thank you for your consideration.
Thank you, David. As today, the first four-year terms of Jack de Kreij and Sophie Vandebroek expire, we are pleased that they are both available for reappointment. Jack is vice chair of our board and chair of the Audit Committee, and brings financial expertise and extensive international management experience. Jack is available for an additional period of two years. Sophie is a member of the Audit Committee and has broad international management experience with large technology companies, and a deep knowledge in the creation and application of technologies that drive growth. Sophie is available for an additional period of four years. Further information on the backgrounds of Jack and Sophie was provided to you in the explanatory notes to the agenda, and their more detailed bios were also made available in the meeting materials.
I would now like to open the floor for questions on agenda item 5, the proposals to appoint Mr. David Sides and to reappoint Mr. Jack de Kreij and Ms. Sophie Vandebroek as members of the supervisory board as from today, May 8, 2024. As there are no questions, I'd like to move to agenda item 6. Agenda item 6 includes two voting items proposed by the supervisory board. Agenda item 6 reflects the general supervisory board remuneration policy, which is in accordance with Dutch law and the European Shareholder Rights Directive, which must be submitted for adoption to the annual general meeting of shareholders at least every four years. Based on a recommendation of the Selection and Remuneration Committee, we have prepared the remuneration policy of the supervisory board for adoption by the 2024 annual general meeting of shareholders.
Subject to adoption by this meeting, this remuneration policy will apply to the Supervisory Board retroactively from January 1, 2024, and is intended to remain in force for four years. Different from other European countries where a majority vote is required for adoption, in the Netherlands, this vote requirement is a 75% majority. Except for a clarifying edit regarding the secondary comparator group, which ensures that a group will be comprised of a sufficient number of comparable companies, the policy is identical to the policy that was adopted back in 2020. Item 6B reflects the precise remuneration amounts for the Supervisory Board members for the financial year 2024 and onwards. The latest increase of Supervisory Board remuneration took place two years ago.
The proposed increase of EUR 5,000 relates to the members of the Supervisory Board, with the exception of the chair and the vice chair. Also, there is no recommendation for the increase of the fees for members of committees. The increase is in line with the remuneration policy. The agenda item 6A and 6B are separated for transparency purposes. The Supervisory Board compensation shall be determined by the General Meeting of Shareholders within the boundaries of the policy, based on separate proposals submitted to the General Meeting of Shareholders by the Supervisory Board. Are there any questions on item 6A or 6B? I would like to now discuss agenda items 7, 8, and 9 together. These are annual authorizations given to the Executive Board that return to the agenda each year.
Under agenda item 7A, it is proposed to extend the Executive Board's authority to issue shares and/or grant rights to subscribe, to subscribe for shares for 18 months as of today, up to a maximum of 10% of the share capital issued as of today. Agenda item 7B concerns the proposal to extend the Executive Board's authority to restrict or exclude the preemptive rights of holders of ordinary shares for 18 months as of today, up to a maximum of 10% of the share capital issued as of today. Agenda item 8 is proposed that the Executive Board be authorized for 18 months to acquire shares in the company, up to a maximum of 10% of the share capital issued as of today on the stock exchange or otherwise.
The Executive Board may purchase shares at a net price between the nominal stock value of the shares and 110% of the stock price in order to cover the company's obligations related to share-based payments, such as under the company's long-term incentive plan and restricted stock unit plan, and other obligations the company may have. Furthermore, the proposal intends to allow the Executive Board to repurchase shares for capital reduction purposes. Agenda item nine requests a resolution of the Executive Board, if it so wishes, to cancel the ordinary shares in the company's share capital that the company has purchased or will purchase on the basis of agenda item eight, up to a maximum of 10% of the share capital issued as of today.
For your information, in August 2023, the company completed a reduction in share capital by canceling 9 million ordinary shares that were held in treasury, representing less than 3.5% of the then issued share capital. The precise wording of the resolutions can be found in the agenda with its accompanying explanatory notes. I would now like to turn to any question on agenda items 7, 8, and 9. Thank you. For all shareholders, please be reminded to cast your vote for these agenda items as well as for all other agenda items as we are nearing the end of the meeting. I now turn to the final agenda item. Under this item, it is proposed to the General Meeting of Shareholders to amend the articles of association of the company in conformity with the proposal prepared by our notary, A&O Shearman, Amsterdam.
This proposal to amend the articles is provided on the website of the company. The main reason for the proposed amendment is the reduction of the authorized share capital of the company to make future share buybacks possible, reflecting the continued reduction of issued share capital over recent years and in order to observe statutory limitations. Furthermore, an absence and prevention to act provision has been added for members of the Supervisory Board. In the event that a situation of absence or prevention arises for all members of the Supervisory Board, the Executive Board will determine who will temporarily assume the tasks of the Supervisory Board and how this will happen. The inclusion of an absence and prevention to act provision for the Supervisory Board in the articles of association has become mandatory for January 1, 2024.
The other adjustments to the articles of association are purely technical. Further, the proposal includes the authorization for each member of the Executive Board and each civil law notary and employee of A&O Shearman to have the notarial deed of amendment to the articles of association executed. Are there any questions on agenda item ten? We have now concluded the last agenda item. May I request the voting operator to share with us the voting results for agenda items 2 A, 3 A, and 3 C? Thank you. The results are as follows: 94.7% of the votes have been cast in favor of agenda item 2 D. 99.89% of the votes have been cast in favor of agenda item 3 A, the proposal to adopt the 2023 financial statements. I hereby conclude that the 2023 financial statements have been adopted.
On behalf of the entire Supervisory Board, I would like to express our appreciation to the Executive Board and all employees for the work performed in 2023 and their efforts in support of the company. 99.93% of the votes have been cast in favor of agenda item 3 C, the payment of a total dividend of EUR 2.08 per ordinary share, resulting in a final dividend of EUR 1.36 per share. I hereby conclude that the meeting has resolved to pay a total dividend of EUR 2.08 per share, resulting in a final dividend of EUR 1.36 per ordinary share. May I request the voting operator to share with us now the voting results for agenda items 4 A, 4 B, 5 A, 5 B, and 5 C?
97.98% of the votes have been cast in favor of agenda item 4A, and therefore, the proposal to release the members of the Executive Board from liability for the exercise of their duties has been adopted.... 97.82% of the votes has been cast in favor of agenda item 4B, and hence the proposal to release the members of the Supervisory Board from liability for the exercise of their duties has also been adopted. 99.58% of the votes has been cast in favor of agenda item 5A. I hereby confirm that the meeting has appointed David Sides as member of the Supervisory Board for a period of four years, so until, until the annual general meeting of 2028. My congratulations, David.
91.66% of the votes have been cast in favor of agenda item 4B. I hereby confirm that the meeting has reappointed Jack de Kreij as member of the Supervisory Board for a period of two years, so until the annual general meeting of 2026. Jack will also continue to be Vice-Chair of the Supervisory Board. Congratulations, Jack. 97.93% of the votes has been cast in favor of agenda item 5C. I hereby confirm that the meeting has reappointed Sophie Vandebroek as member of the Supervisory Board for a period of four years, so until the AGM of 2028. My congratulations, Sophie.
Thank you.
May I request that the voting operator share with us the voting results for agenda item 6A, 6B, 7A, and 7B? 98.41% of the votes have been cast in favor of agenda item 6A, and therefore, the proposal to adopt the remuneration policy for the members of the Supervisory Board has been adopted. 98.46% of the votes has been cast in favor of item 6B, and therefore, the proposal has been adopted to amend the remuneration of the members of the Supervisory Board. Thank you. 98.69% of the votes has been cast in favor of agenda item 7A, and therefore, the proposal to extend the authority of the Executive Board to issue shares and/or grant rights to subscribe for shares has been adopted.
98.23% of the votes has been cast in favor of agenda item seven B, and therefore, the proposal has been adopted to extend the authority of the Executive Board to restrict or exclude statutory preemptive rights. May I request the voting operator to share with us the voting results for agenda items eight, nine, and ten? 99.330% of the votes has been cast in favor of agenda item eight, and therefore, the proposal to adopt, to authorize the Executive Board to acquire shares in the company has been adopted. 99.30% of the votes has been cast in favor of agenda item nine. I hereby conclude that the resolution to cancel shares held by the company itself has been adopted in accordance with the proposal.
And last but not least, 99.75% of the votes has been cast in favor of agenda item 10, and therefore, the proposal has been adopted to amend the articles of association of the company. I now proceed to the any other business section and handle any remaining questions.
Yeah, Erik van Huijstee on behalf of European Investors VEB. Two more quick questions, and everybody can have their drinks and snacks. If I look at the outlook and think, and Kevin already mentioned something on CNBC, the adjusted EBITDA growth this year is mid- to high-single-digit. If you look at last year, that's of course 12%. Kevin mentioned something about interest rates having impact, so I was wondering if you... And among other things, I was wondering if you can sort of like sort of a waterfall of why this is going from 12 towards more, yeah, mid- or even potentially mid-single-digit. And then second question is related to a little bit of dividend policy, but also the free cash flow.
If you look at the last past years, you've steadily increased the dividend at 15% . Free cash flow due to working capital and all sorts of elements has remained or actually declined last year. This year also, you're not seeing that increase a lot. If you look at the net debt ratio that you're targeting, 2.5x , last year was the first year that we actually saw that leverage ratio increase a little bit. I was wondering in your thinking, are you willing to let the debt ratio go up a little bit, since you can just do that, and free cash flow will probably follow in the years ahead? Thank you.
I will say first on the EPS guidance we've given you, mid-single digits, are a couple of things that we have factored into our thinking there. First of all, on interest rates, we have seen interest rate movements being particularly high in recent years. That has generated interest income for the company. If we expect interest rates to come down, obviously, we'll have less interest income, so that has been factored into our guidance. We've also taken a look at our effective tax rate, and we do expect to see a modest increase in the effective tax rate as we've given you in the guidance, largely due to Pillar Two compliance that we will go through next year. So that has everything to do with the guidance that we've given you on EPS.
With regard to free cash flow, free cash flow continues to be robust. We've given you guidance to expect in the neighborhood of 95% cash conversion. I think that that is the healthy cash conversion for a business such as ours. We've gone through a couple of years of very strong improvements in working capital, so that's why you've seen the cash conversion be slightly higher. But right now, I do think it's coming back to a more normalized 95% cash conversion. And finally, with net debt, indeed, we are at a net debt-to-EBITDA ratio at 1.5x at the end of last year. I'll remind you that our target is 2.5x , so we are meaningfully below our target. I will say that is a target.
It's not necessarily something I would say I'm looking to get to. I'm probably more comfortable below my target than above my target. But, you know, we would be very comfortable, you know, anywhere around that target range. So, I hope that addresses that question.
... So, so my interpretation is the bulk is interest rates on the EPS. Is that a correct understanding of?
I do expect if we see interest rates to come down, we will see-
Yeah
... less interest.
And I think they're still steady from the level of last year. So that would mean that if it doesn't happen, we know what... Yeah? It won't decline that much or it won't decelerate that much.
Well, I think you saw that in the first quarter, we did not see interest rates come down as some of,
Expected
... banks have estimated. But again, you know, it's hard to predict here today-
Yeah
... what they will be for the remaining, eight months.
Yeah. No, no, no, no, just to clarify that. And then second, on the... Yeah, I, I know, of course, if you look at the EPS movement and, let's say, free cash flow sort of follows, if you say, "Okay, working capital normalizes and doesn't... It does what it does in the past," and you have that conversion around 95-100%, then still probably dividend grows a little bit faster than EPS. So is that something that you're... Is it even a thing that you're thinking about, letting the debt levels maybe rise to, say, 2x, and you're still way, way below the 2.5x?
Well, I will say when we think about our priorities around cash flow, it's investing in our business, both organically and smaller, both on acquisitions-
Yeah
... you know, paying down debt and rewarding our shareholders. We do that not only with the dividend, but the share buyback program as well. We try to strike the right balance between those three. You know, I invite you to join us in February when we talk about the dividend for the future.
Yeah. No, but I was—it's just a thing that if we... I think we've had this discussion about maybe six or maybe even eight years, or maybe even ten years, that you're always noting 2.5 times is the leverage ratio we're targeting.
Mm-hmm.
We always get the answer, of course, "Yeah, we'd rather be below them than above them." Yeah, of course. Who wouldn't want to be? But then still, the question is, of course, and where actually are you moving towards? So that's-
Well, when we think about our priorities for cash flow, being below our target has allowed us to step up rewarding our shareholders-
Yeah
... largely through the progressive dividend policy, but also, over the last three years, you know, the meaningful share buyback programs that we've executed.
Okay. Thank you.
I believe there are no more questions, so I would like to proceed to close the meeting. Your participation and input today are greatly appreciated. Have a great remainder of your day. Thank you and goodbye.