Earnings Call: H1 2017

Jul 28, 2017

Your Half Year twenty seventeen Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Meg Gildens, Vice President, Investor Relations. Please go ahead, Meg. Good morning, everyone. Welcome to our 2017 half year results webcast and conference call. Hopefully, you've had a chance to look at our earnings release this morning. The release and the slides for this call can be found on our website in the Investors section. We'll start today with a presentation of the results by Nancy McKinstry, our CEO and Kevin Entrekin, our CFO. At the end, we will open the call for questions. As a reminder, some of the statements we make on this call may be considered forward looking statements. We caution that actual results may differ materially from what is contemplated in these statements due to a number of risks and uncertainties, which you can find detailed in our annual report. Throughout the presentation, we'll refer mainly to constant currency and organic growth rates, which exclude the effect of exchange rate movements. We also refer to adjusted figures. You can find a reconciliation to IFRS reported figures in our release today. Now I would like to hand over this call to Nancy McKinstry, our CEO. Thank you, Meg, and welcome, everyone, on the webcast and conference call. Let me start with the highlights of our first half results and the strategic steps we've taken so far this year. Then Kevin will walk you through the financial results in more detail. I will then come back and review our divisional performance and provide you more color on how we are progressing against our strategy. I will close with the outlook for the full year and after that we can take questions. We were pleased with our first half performance. Revenue growth was fully in line with expectations for the first half and we delivered strong improvement in profitability and cash flow. Total revenues were up 4% at constant currencies and up 2% organically. Within that, recurring revenues sustained 4% organic growth. Our non recurring revenues and transactional revenues were subdued as expected. Our adjusted operating profit increased 7% in constant currencies, driving a 70 basis point margin improvement. The margin increase helped drive a 10% increase in adjusted EPS in constant currencies. Adjusted free cash flow was also strong, up 9% in constant currencies. We are on track for the full year and reiterate our guidance for the full year. You may have seen at the end of June, we completed the divestment of Transport Services. And this morning, we are announcing the sale of certain U. K. Publishing assets from our legal and regulatory division. As indicated in the release this morning, we intend to use the proceeds from these two disposals to mitigate the earnings dilution. Hence, we have increased our share buyback program by €100,000,000 Let me highlight some of the achievements so far this year against our strategic priorities. We took several key steps to support our first strategic priority, which is to expand our market coverage. We acquired Togetic, which extends our tax and accounting division into an attractive market segment that fits well with our existing leading position in internal audit software. We've made progress executing on certain non core disposals with the sale of Transport Services and certain U. K. Publishing assets. And we've also continued our organic investment in key global products such as UpToDate, iPharm, OneSumics and Clinical Drug Information. In terms of our second strategic priority, which is to invest in building and delivering expert solutions, I'm delighted to see a large number of innovations launched into the market in the first half of twenty seventeen. I will come back with two examples later, but the key point is that all 4 of our divisions have been very active on the innovation front. This can range from adding and enhancing content such as the new cybersecurity law offering just launched by our U. S. Legal and regulatory unit to tools that leverage artificial intelligence to bring real productivity benefits and cost savings to our customers such as the product CCH IQ. And finally, in terms of our 3rd priority, which is to drive efficiency and engagement, we have continued to drive savings in technology, real estate and editorial, which have supported the margin improvement we saw in the first half. Now let me turn it over to Kevin, who will present our financial results in detail. Thank you, Nancy. Let me start with a summary of our key figures on Slide 7. Our first half revenues increased 4% in constant currencies to €2,174,000,000 On an organic basis, revenue growth was 2%, in line with our expectations. As previously stated, we expect our organic growth to be slightly second half weighted this year. Adjusted operating profit increased 7% in constant currencies to €450,000,000 As a result, the adjusted operating profit margin rose 70 basis points to 20.7%. Diluted adjusted earnings per share was €0.99 up 10% in constant currencies. Adjusted free cash flow increased 9% in constant currencies to €257,000,000 And finally, our net debt to EBITDA ratio increased to 1.9x, mainly reflecting the acquisition of Togetic and the share buybacks completed in the first half. Let's take a closer look at revenues, starting with the divisions. Our Health and Tax and Accounting divisions delivered consistent organic growth. Health grew 5% organically, driven by 9% organic growth in Clinical Solutions and acceleration in our traditional medical information unit, Health, Learning, Research and Practice. Tax and Accounting delivered 3% organic growth, delivered by the continued strong performance of our Tax and Accounting and Audit Software products. Our governance, risk and compliance and legal and regulatory divisions recorded slower growth in the first half. Governance, risk and compliance grew by 2% organically. This was expected and was due to a slowdown in GRC's nonrecurring revenues. Legal and Regulatory revenues declined 2% organically. This was a deterioration compared to the prior year, which had benefited from one off timing factors. Now let's look at revenues by geographic market on Slide 9. North America grew 3% organically, slowing in Health and Governance, Risk and Compliance, but accelerating in Tax and Accounting and Legal and Regulatory. Europe saw a positive organic growth of 1%, in line with last year. Health and Tax and Accounting performed particularly well in Europe. We've now seen positive growth in Europe for 2 consecutive years. In Asia Pacific and the Rest of the World, we saw strong organic growth we saw organic growth slow to 1%. This was due to slower growth in tax and accounting due to Brazil, where the economy remains difficult, and India and China, where the division faces tough comparables. Now let me cover the different trends we saw in recurring and nonrecurring revenues. Recurring revenues, which accounts for 78% of our total revenues, sustained 4% organic growth. You can see on Slide 10, the largest component of recurring revenues is digital and services subscriptions, which grew 5% organically, consistent with the comparable period last year. The remaining 22% of our revenues are non recurring transactional in nature. We saw mixed trends as we expected. Print books revenues declined 6% organically. This was an improvement on last year, but that was partially due to favorable timing of orders from wholesalers and favorable book publishing schedules. Legal service transaction revenues growth moderated to 4% organically. This slowdown was due to lower law firm invoice volumes and lower M and A volumes. Financial Services transactional revenues saw market slowdown growth to 2% compared to 13% growth in the comparable period. Commercial lending markets were more subdued, and we saw a decline in mortgage refinance volumes. And last but not least, nonrecurring revenues, which consist primarily of perpetual and other software license fees and professional implementation fees, fell 5% organically. We continue to expect this category to improve in the second half due to the timing of larger software contracts. Now let's turn to profits. As mentioned, adjusted operating profit increased 7% in constant currencies to €450,000,000 The related margin increase, up by 70 basis points to 20.7%. The margin improvement was driven by our Health and Governance, Risk and Compliance divisions. The Health margin increased 280 basis points to 23.7%. This was driven by lower restructuring costs, efficiency savings and the ongoing mix shift towards Clinical Solutions as well as favorable timing of expenses. The underlying improvement more than compensated for the dilutive effect of bringing ME into the portfolio. The governance, risk and compliance margin increased 190 basis points to 28%, mainly as a result of savings from efficiency programs and timing of expenses. In our Tax Accounting and Legal and Regulatory divisions, the margin declined. This was as expected for both divisions and reflects increased investment in product development and in the case of Tax and Accounting, increased restructuring costs. In addition, for both divisions, the inclusion of recent acquisitions, Tagetik and Enabilon, was dilutive to margin. These newly acquired businesses currently have margins below their respective divisions average, but we expect that to improve over time. We continue to expect the full year margin for both divisions to be stable for the full year. Now let's turn to the rest of the income statement. Adjusted net financing costs were $55,000,000 up slightly from a year ago due to currency effect and the costs related to the bond issue in March this year. We issued a €500,000,000 bond with an annual coupon of 1.5%. These funds will go towards redeeming our €750,000,000 bond, which matures in April of 2018. The maturing bond has a coupon of 6.3 percent, so we expect to get a meaningful benefit in financing costs in 2018. Our benchmark tax rate was 27.3%, resulting in an after tax adjusted net profit of $287,000,000 up 11% overall and up 7% at constant currencies. The share buyback program reduced our average weighted shares outstanding to just over 289,000,000 shares. Diluted adjusted EPS increased 10% in constant currencies to €0.99 per share. I'll now cover reported earnings on Slide 13. Reported operating profits increased 25 percent overall to €396,000,000 The increase includes the effect of currency, but was mainly driven by a €52,000,000 net gain on divestments, largely related to the sale of our Transport Services unit. The reported tax rate declined 21 point declined to 21.2%, reflecting the tax exempt nature of this disposal gain. As a result, reported profit for the period increased 33% and reported EPS increased 36%. Now moving to cash flow on the next slide. As mentioned, our adjusted free cash flow increased to 9% at constant currencies. Our first half cash conversion ratio was 98%. Working capital outflows fell to €9,000,000 largely due to timing of collections and payments. Net capital expenditures declined to €96,000,000 As we indicated in the release, this included a €12,000,000 disposal related to our real estate consolidation program. Without this onetime benefit, CapEx would have been €108,000,000 or 5% of total revenues. For the full year, we continue to expect CapEx to fall between 5% and 6% of total revenues. Paid financing costs were stable at €81,000,000 and cash taxes paid increased as expected to €108,000,000 You may recall that in 2016, cash tax payments benefited from favorable timing of payments. As a result, adjusted free cash flow increased 12% overall and 9% in constant currencies to €257,000,000 Now let's turn to Slide 15 for the uses of cash flow. We paid dividends of €172,000,000 related to the final 2016 dividend. Cash spending on acquisitions was €303,000,000 largely related to the acquisition of Togetic in our Tax and Accounting division. Disposals, mainly transport services, raised cash proceeds, net of costs, of €73,000,000 We continued to execute on our share buyback program, spending €136,000,000 in the first half. I'll come back to share buyback program in just a moment. The other reconciling item at the bottom of this table includes €52,000,000 and the impact related currency translation of our intercompany debt, mainly denominated in U. S. Dollars and Canadian dollars at the balance sheet date. Altogether, we've had a net cash outflow of €330,000,000 increasing our net debt to just over €2,300,000,000 at the end of June. The net debt to EBITDA ratio was 1.9x compared to 1.7x a year ago. And now a few words on returns to shareholders, and let's start with dividends. In February, we indicated the interim dividend would be set at 25% of last year's total dividend. This means we will pay an interim dividend of €0.20 per ordinary share in September. Now let me update you on our share buyback program and the announcement we made this morning. In February 20 16, we announced a 3 year up to €600,000,000 share buyback program spread broadly equally over 3 years. Last year, we spent €200,000,000 under this program. So far this year, through July 25, we've spent a further €150,000,000 under this program, leaving about €50,000,000 to go for 2017. However, as you may have seen in our release today, we're announcing our intent to spend an additional €100,000,000 on share buybacks in order to mitigate the earnings dilution called by the disposal of Transport Services, which we've just completed, and the sale of certain U. K. Publishing assets that we announced this morning. We're therefore now expecting the spend in 2017 to be €300,000,000 in 20.17. Half of this has already happened, so we have up to €150,000,000 to go in the remainder of the year. The impact of this additional €100,000,000 on earnings per share is minimal in 2017, but it will help mitigate the dilution from disposals starting later starting next year. Now let me sum up before turning it back to Nancy. We've had a solid first half, and I'm confident in reiterating guidance for the full year. Organic growth was 2%. The adjusted operating profit margin increased by 70 basis points to 20.7%. Adjusted free cash flow increased 9% at constant currencies, and our net debt to EBITDA ratio was 1 point nine times. With that, I'd like to hand it back to Nancy. Thanks, Kevin. I'll begin with a review of the performance in key developments for each of our 4 divisions. So let's start with Health. Health achieved 5% organic growth and a significant increase in margin. Clinical Solutions continues to do well, delivering 9% organic growth. Our leading clinical decision support tool up to date, which now reaches over 1,300,000 users globally, realize double digit organic growth. We continue to see strong performance in the U. S. While continuing to invest to drive further penetration internationally. Today, about a third of UpToDate's revenues come from customers outside the U. S. Our Drug Information business also performed well, sustaining robust organic growth. Our new patient engagement solution, EMI, which we acquired in November of last year, is performing to plan and we've started working to bring this offering closer to our up to date and drug information products. We believe Wolters Kluwer can offer hospitals and practitioners a unique combination of tools which can improve medical outcomes at a lower cost. I'm pleased to say our more traditional medical publishing unit, Health, Learning, Research and Practice, improved organic growth to 2% compared to 1% a year ago. Digital revenues grew 6%, which more than offset the ongoing and expected decline in printed journals and books. Digital products include our medical research platform Ovid, our growing suite of digital nursing solutions and our continuing medical education business, Learner's Digest. Turning now to tax and accounting. Tax and accounting delivered a steady 3% organic growth, supported by 6% organic growth in software. The margin decline was related to the timing of product development and restructuring cost. As Kevin mentioned, we expect the tax and accounting margin to improve in the second half of this year and to be stable for the full year, including TEGetic. Our North American tax and accounting group sustained good organic growth. Our cloud solutions for professional firms are beginning to have a more material impact on our growth. Our cloud based professional tax suite, CCH Access, increased the number of users by more than 50% compared to last year. We've also just launched our cloud based practice management platform, CCH Ifirm, into Canada. In research and learning, revenues remain soft, but we're excited about the recent launch of CCH EnterConnect. This new platform offers a highly intuitive solution for professionals to quickly find answers on U. S. Federal and state tax issues. In Europe, tax and accounting continues to perform strongly. Organic growth was 5% with all countries delivering positive growth. Here we are focused on delivering cloud based collaborative solutions for accountants, tax advisors and their clients. In Asia Pacific and Rest of World, we saw revenues decline modestly. In Australia and New Zealand, growth in software was offset by a a decline in print revenues. Economic conditions in Brazil remained difficult, while the division's units in India and China faced challenging comparables. Last but not least, with the acquisition of TEGETIC in April, we've created a new global unit called Corporate Performance Solutions. This combined CCH Tagetik, a corporate performance management solution with TeamMate, our internal audit software. TeamMate continued to perform well, delivering double digit organic growth. We have extended this product to the cloud, which now enables us to reach new customer segments. It's only been a few months, but so far the integration of CCH Tagetik is progressing to plan. Revenues increased at a double digit rate on a pro form a basis. Next, governance, risk and compliance. Our GRC division achieved 2% organic growth, which was in line with our expectations for the first half. The adjusted operating margin improved significantly due to efficiency savings and favorable timing of expenses. The division's recurring revenue streams, which make up just under 60% of the division's total revenues, sustained a very solid 3% organic growth. As expected, GRC non recurring revenues were flat overall on an organic basis compared to 4% growth a year ago. Legal Services, which supports corporations and law firms, saw sustained organic growth of 3%. Growth in CT service subscriptions and other recurring revenues helped offset slower transactional growth and a decline in non recurring software sales in our enterprise legal management unit. Financial Services, which supports financial institutions with software and services, saw organic growth slow to 1%. Here too, recurring revenues showed good momentum, but this was dampened by the marked slowdown in transactional revenues largely associated with mortgage volumes and a decline in non recurring license fees. Across both legal and financial services, we expect non recurring software license and implementation fees to be second half weighted this year. Now let me finish up the divisional review with legal and regulatory. Legal and regulatory recorded a 2% organic decline in revenues. The adjusted operating profit margin eased slightly due to increased product investments and the inclusion of Enablon. Across the division, digital revenues grew 3% organically and now represents 61% of the total divisional revenues. As expected, print formats continued to decline. We are now presenting this division into 2 groups, information solutions and software. Information solutions saw 2% organic decline, but within this, digital revenues grew 3% organically. In Europe, market conditions remained subdued, but we continued to invest in digital solutions while driving savings in editorial and production and leveraging technology across jurisdictions. In the U. S, we saw modest but positive organic growth, which is encouraging. The U. S. Unit has been extremely active on the innovation front. Our legal research platform Cheetah performed strongly, expanding its content and adding innovative productivity tools. Legal software delivered high single digit organic growth. Within this, our practice management tool, Klayos, continued migrating and adding customers to its new platform. Enablon delivered overall positive organic revenue growth on a pro form a basis, driven by over 20% growth in recurring revenues, most of which is related to the cloud version of this product. We remain very positive with this acquisition, the quality of the product and the team and we were delighted to see that Enablon received the top rating by industry analyst Verdantec this week. Now let me dive a bit deeper into the progress that we've made in the 1st 6 months of this year against our strategic priorities. Our first priority is to expand our market coverage where we've made significant progress year to date. Since we've already discussed our portfolio moves, I want to highlight 2 investments we're making to drive global products. In health, we added sales resources, particularly in China, while expanding our content for international drug information business. For GRC, we enhanced our OneSumics product line with business analytics dashboards. Our second priority, as you know, is to build and deliver expert solutions, by which we mean workflow tools that combine our deep domain knowledge with technology and services to deliver insights, analytics and productivity benefits to our customers. I want to highlight 2 examples of recent innovations. The first one is M and A clause analytics, which was launched this month by our U. S. Legal and regulatory unit. This product combines state of the art artificial intelligence with expert insights to help lawyers draft and review M and A related documents. Derived from over 250 sample documents, we created a market standard and using AI machine learning, lawyers can easily compare clauses and agreements. It helps attorneys streamline the drafting process and ensures that nothing is missed. This boosts the efficiency and the quality of the documents. Early feedback from customers is very positive. The second example comes from ELM Solutions, which is a division, which is a unit within our GRC division. We developed the LegalView bill analyzer to help corporate legal and claims department simplify the invoice review process to control and reduce legal spend. The product leverages artificial intelligence and legal experts to manage and improve the legal invoicing review process to ensure compliance with guidelines and agreements. Although it's still early days, we're excited about this product as trials indicated that users can increase savings by 5 to 7 times compared with their existing bill review process. Our third priority is to drive efficiencies and to foster an agile organization. The efficiency and engagement programs we are running are starting to see results. You saw that in the first half of this year, our health and GRC divisions improved their margins while still investing in the business. At the center, we're driving programs to realize savings in shared services such as IT infrastructure, data centers, real estate and finance and accounting. When it comes to technology spend, we are driving efficiencies by standardizing on certain technology components, be that for cloud applications, e commerce, digital marketing or AI tools such as robotic process automation. And finally, we're making progress on integrating our recent acquisitions and driving synergies. The savings we are generating are helping to fund wage inflation and product investment, but also a rising operating margin over time. So now with that, I'd like to talk about the outlook for 2017. I will start again with the outlook by division. In Health, we foresee good organic growth comparable to 2016. Margins are expected to improve for the full year, driven by cost savings and the ongoing mix shift towards clinical solutions. We expect tax and accounting to deliver solid revenue growth similar to 2016 driven by software solutions. We expect margins to be stable for the full year. For GRC, we also expect organic growth to be in line with 2016. We expect margins to increase for the full year due to operating efficiencies. And finally, in legal and regulatory, we expect organic revenue decline in line with 2016 and stable margins. And finally, summing up with our financial guidance for 2017, we expect our full year adjusted operating profit margin to be between 22.5% 23%. We expect adjusted free cash flow to be between €675,000,000 €725,000,000 in constant currencies. We expect ROIC to be between 9.5% 10%. And finally, we expect EPS growth in mid single digits in constant currencies. So all in all, we're well on track to achieve our 2017 goals and remain confident in our growth prospects. Thank you all for your attention. We can now take questions. Operator, if you would please open the call for Q and A. Thank you, We'll now take our first question from Nick Stifel from Barclays. Please go ahead, sir. Yes, good morning. I've got three questions. First one, you referred to positive revenue growth at Enablon. I guess that sounds like it was maybe single digit growth. I know when you bought it, it was delivering double digit growth and that was absolutely what you were hoping for it to achieve. I understand it's moving fast to the cloud, but when do you expect that business to be seeing double digit growth in its entirety? That's the first question. Then in terms of margins in Health and GRC in the first half, you mentioned timing of expenses, Kevin, in both of those cases. Can you give us a rough sense how much of the 70 basis points of increase year on year in group margin in the first half relates to timing effects around expenses that will unwind in the second half? And the third question, just on the large software sales in GRC in the second half, can you give us a bit more help on the indication of the type of customer, the exact reasons why you get upfront revenues with sales like that and why you're confident that they will land in the second half? Okay. Kevin and I will sort of tag team Nick on your questions. First on Enablon, we fully expect that the second half revenues with Enablon will be stronger than the first half. That's been the pattern in that business like many of our software businesses throughout the portfolio. So you will see organic growth accelerate in the second half and we fully expect that they will achieve the goals that we have for this product line. I would say that we are seeing the mix shift continue to be more cloud based. So what that means is over time, the recurring revenue is of course building up and over time that will accelerate the organic growth in future years as more of that revenue is recognized. Kevin, do you want to talk about margins, timing effect? Certainly. In both GRC and in Health, we did see some margin improvement largely related to some of the restructuring efforts we did back in 2016. That certainly contributed to margin as well as in Health, in particular, the mix shift to Clinical Solutions. Those are probably the biggest drivers. I would say there is some timing on expenses that are improvements in those margins, but that would be a small part of that. It would not be the largest part. And then in terms of GRC, again, as you might imagine, these are large contracts with financial institutions that take have a long sales cycle. So there tends to be a building towards the end of the year, largely driven by the fact that customers have a certain budget that they're spending over the course of the year. And as the year is kind of evaporating, they know they need to spend it or the budgets get reset the next year. So we fully expect that the pace of sales will increase in the 3rd Q4. We saw that last year as well. Very good. Thank you. We will now take our next question from Samik Khabas from Exane. Please go ahead. Good morning, everyone. It's Sami at Exane. I also have three questions, please. The first one, you've increased restructuring costs within tax and accounting. Can you help me understand where or what part of the division you're restructuring, please? Secondly, can you elaborate on the decline in software sales within the ELM business? My understanding of ELM was that it used to be fast growing. You bought the data search business. And then since then, the tone came down and today we are talking about declining sales there. So can you help me understand whether it's a shift to cloud or something else that's driving the decline there, please, Nancy? And lastly, elaborate a little bit on Legal Analytics. We heard RedX talk a lot about and make sure acquisition Legal Analytics. You presented the M and A close analytics today. So can you comment as to whether this can be a way for you to restore growth in the L and R division? Thank you. Okay. So Kevin will take the first question on restructuring and then I can pick up on ELM and Legal Analytics. In the tax and accounting group, Sami, we are seeing some benefits of restructuring largely in the editorial processes in different parts of the business. So we're going to seize on some of the good work that we've done in the legal and regulatory group and bring that across into the tax and accounting group. So that's where we see some opportunity. And then in ELM, which is Enterprise Legal Management, we continue to have the leading position in that space. We're very excited about the legal bill view that we're launching, which is kind of an adjacent we'd see within the space. So overall, the business is performing in line with our expectations. What you saw in the first half is slower non recurring sales. Again, what's happening is customers are buying these products more and more on a subscription basis versus a perpetual license basis. And second, we had a tougher comparable coming out of 2016. So this business, again, you'll see sales and growth in the second half. And overall, the business will still deliver growth for the full year in line with our expectations. Thank you. Analytics? Yes, legal analytics, yes, very exciting this new product we've talked about, because what you see beginning to happen in the legal space is sort of 2 developments. 1 is that customers are more interested in productivity tools. The legal market, as you know well, Sami has been the last one of the later adopters of some of the tools that are already very mainstream in the accounting and health markets. So there's a big interest in productivity tools. Second thing is that now with more and more machine learning technology tools, we can provide improvements in some of our content products in a way that again sort of morphs those content products into really workflow tools. So what's great about this M and A example that I shared is that not only the big thing as people do agreements, right, is they want to make sure how standard is the clause that they're proposing in the agreement. So not only do we show them the standard language and they can do a compare and see the red line, but we also give them statistics on how close or how standard is this clause in the industry and how difficult is that particular clause relative to other parts of the agreement. So there's a lot of analytics on top of just improving their drafting. So I think this is the kind of future of the industry. We have a number. This is just one example. We have a number of products that are being launched. And I really see this as sort of next generation content tools. And that's exciting, particularly because the industry has been relatively slow to adopt some of the productivity tools. Thank you, Nancy. We will now take our next question from Matthew Walker from Credit Suisse. Please go ahead. Thanks, everyone. Good morning. A couple of questions, please. First one is, on UpToDate, you're investing a lot internationally. You mentioned a third of revenues come from international. Could you give us because you're also investing a lot in China, can you give us a sense of how big China is within international? And also what percentage is China of the actual cost base for up to date as well? The other question is on the UK assets that you're selling. Can you give us a sense of what margin that was generating and what organic growth that revenue stream was generating? And finally, on the dividend, are you trying to indicate the dividend will be roughly EUR0.80 for the year? If so, does that feel like a sort of slightly lower than expected number given it increased about €0.04 last year? Thanks. Kevin, you want to take those? Sure. I would say on up to date, yes, we are investing internationally in a couple of different areas, certainly in sales and marketing throughout the world and UpToDate. We see a lot of opportunity there. We're also investing in advanced clinical decision support, which we think will be the next wave of tools that will help clinicians get better outcomes. We have talked about our up to date investments in China, largely in a full blown Chinese translation of the up to date product there. We have launched that product. It's in the market, but it is early days right now. The investment in China is small as compared to the total investments up to date. So I wouldn't point it to a very material investment, but meaningful for us because we think there's opportunities there longer term. Yes. And revenues are relatively small today as well because it's, as Kevin mentioned, early days in terms of driving penetration in the market. Absolutely. And with regard to the disposals and some of our publishing assets in the UK, we haven't mentioned anything in margins, but I will say that the combination of both Transport Services and the assets we're assets we're divesting in the U. K. Will be dilutive on margin. However, as we've announced this morning, we intend to increase our share buyback program by another €100,000,000 as a way to mitigate that dilution. Won't really have a tremendous impact in 2017, but we do expect that mitigation to be fully effective in 2018. And finally, with dividend for the full year, we haven't given any guidance so far with our dividend. We'll have more to say about that in February, but you should count on an interim dividend of 25 percent of last year's dividend to be paid in the Q3. Just going back on the margins of the stuff that you're selling. When you say dilutive to margin, do you mean dilutive to earnings because presumably they were lower margin than the group? Dilutive to earnings, correct, yes. Enhancing to margins? Not necessarily, but I would say that they're probably in line with what we see overall. But dilutive to earnings, but we intend to mitigate that. We'll now take our next question from Chris Collett from Deutsche Bank. Please go ahead. Yes, good morning. Thanks for taking the questions. First of all, just had one on the interest expense and savings from the debt that you've issued and that you'll be redeeming. Just working that through, Kevin, it looks like that's about a €36,000,000 saving in interest on an annual basis. Is that around correct? Or perhaps you could help us there. 2nd, just in terms of the dilution from these from the asset sales that have been announced, could you just help us perhaps with what the pro form a effect on 2017 would be from that? And then last question was just coming back on Enablon. Remember when you bought it, there was a target of €55,000,000 of revenues. Have you reached that level? And if there is a shift to the cloud, which delaying revenue recognition, have you perhaps even got to that level just in terms of your sort of current book of business? Thanks. Okay. So Kevin will take the first two and then we can talk about Enablon. Yes. I would say that, Chris, you're probably in the right neighborhood with regard to your estimates on interest expense. I mean, if you wanted to just work it out, we're taking a €750,000,000 bond at a 6.375 coupon and replacing it with a smaller bond at 1.5%. So there will be a meaningful savings there. With regard to the dilution impact in 20 17, I would say with some of the share buyback programs we are intending to do or the increase in the program, I don't believe they'll be material to 2017. Clearly, we've reiterated our guidance for 2017 with regard to EPS. So I think you should use that in your models. And then in terms of Enablon Sorry, just interrupt on that. I meant I guess, actually, what I was getting at was what the sort of dilution on 2018 would be. But even if you understand you don't want to give us sort of specific guidance on 2018, but if you just thought about it in terms of pro form a, if you had completed those disposals at the beginning of 2017? What sort of impact would it have had? It would have had an impact of about €0.02 to €0.03 But as again, we intend to mitigate that with the additional share buyback of €100,000,000 this year. Chris, are you okay with that? We can move on to Enablon? Yes? Yes. Okay. So on Enablon, we don't disclose the individual numbers at this stage in the year, but it is again tracking to our expectations. It had positive organic growth. I think the key number to focus on is the 20% growth in recurring revenues because again as more of the market is shifting to cloud, that becomes your installed base over time. And that is clear. We had good growth in recurring revenues last year, good growth in the first half. You'll again see the growth even accelerate in the second half, which is again the typical pattern here. So we're excited about what this business is capable of delivering. They've launched a new sort of next generation platform. Customers are excited about that. They've got this very, very strong rating from this industry group, Vedantic, which is sort of the key industry gurus in the EHS market. So they're performing, as I say, in line with where we expect them to be this year. Great. Thanks. We will now take our next question from Konrad Zomer from ABN AMRO. Please go ahead. Hi, good morning. Just one question. I understand the restructuring charges in the first half were approximately €10,000,000 Are you willing to give us a split over the 4 divisions, please? Yes. Hi, Conrad. This is Kevin. No, we don't typically break that out across the 4 divisions. As we mentioned, we have done a little bit in tax and accounting. We've done some in legal and regulatory. Those are probably the two areas where we see the most impact this year. Okay. So no further guidance on, for example, the higher amount of restructuring charges in your tax and accounting business? Well, what we have said is we have spent about $10,000,000 in restructuring this year. I think that compares to about $8,000,000 we did last year. We are reiterating our guidance between for the full year between $15,000,000 $17,000,000 But I would say it is $15,000,000 $25,000,000 rather. But it is mostly right now in tax and accounting and legal and regulatory. Yes. So nothing the usual things that we're doing here, there's nothing sort of different than prior years on the restructuring, just a lower amount that we're planning. Okay. Thanks a lot. We will now take our next question from Giulia Tushuk from Morgan Stanley. Please go ahead. Good morning, everybody. It's Patrick Wellington from Morgan Stanley. Apologies, Giulia. I've got a couple of questions. Kevin and Nancy, you said that the year is going to be back end loaded. You've got a very easy comp in Q3, just off the published numbers of 0. You've got quite a tough comp in Q4 of 6%. So how do you see the shape of the second half going? Related to that, as I think Nick Dempsey was saying, you seem to be unusually for Wolters Kluwer confident about something that you can't fully predict, which is these software revenues arriving. And they would have to arrive, one presumes, against that very tough 6% comp in the Q4. So can you talk about the dynamic around that and the visibility? And then just I mean, there's a lot of questions about Enablon. Obviously, the revenue profile has shifted a bit on Enablon. It's not quite what you thought. But if you look at your big three acquisitions, you've spent, Nancy, euros 750,000,000 roughly on 3 acquisitions which are producing circa €10,000,000 of EBITA and are about 3% of group sales. So even if they grow fast, they're not actually going to make that much difference to the group. So when you look at Tagetik and Enablon and EMI, what's going on there? Is this strategic investment? Is this replacing some people who say internal software development by buying it in from outside? What's really behind these acquisitions? Thank you. So Kevin, do you want to take the question around the pipeline on the software in the 3rd Q4 and then I'll take the strategic question. Certainly. Patrick, when we did talk about we do expect organic growth to be slightly second half weighted. We are talking about some software sales in the second half of the year. We do, in fact, take a very, very close look at pipelines throughout the business, sales pipeline throughout the business and evaluate them, certainly in our Financial Risk and Reporting business, certainly in our ELM business. And we do expect that those pipelines will deliver based on the analysis that we're doing with our local management teams. So that really has to do with the second half performance that we do expect. And I think that covers your second question as well on software revenues in the 4th quarter. We do see a bit of a shift in 3rd quarter, 4th quarter with regard to easy comparables versus tough comparables, but we are confident that the pipelines will yield what we expect them to. And then we have the normal, as you very well know, Patrick, right, the normal kind of 4th quarter peak sales in some of our divisions, right, based on either the front list that's coming out are based on, again, customers using those remaining budget dollars. In terms of strategically, as you know, largely we're focused on organic growth. But as you point out, we've bought more or we spent more on acquisitions in the last couple of years than we had previously. And if you look at each of the 3 of Enablon, Tagetik and Emmy, what you should see is that we're investing in high growth segments in our top leading positions. So EMI is a natural extension of UpToDate. As you know, UpToDate has been one of our fastest growing areas within the portfolio. And what you see now happening in health, up to date is the core clinical tool that doctors and nurses use within a hospital. And what you see happening in medicine right now is that the only way hospitals can achieve better outcomes at a lower cost is if they take these decision tools that doctors use in combination with getting patients to actually comply with the regimens and comply with the treatment protocol. So EME fits very nicely. We are beginning to go to market in a way that we can demonstrate to hospitals that the combination of ME plus up to date plus our drug databases is really going to lead to better outcomes. And we're beginning to be able to really show them that in a demonstrable way. So this we see is very much a natural extension, again, putting capital in a fast growing area of clinical solutions. Tagetik is in a fast growing market in the CFO, office of the CFO. As you know, teammate has been one of our, again, stars within tax and accounting, delivering very sustained high single digit organic growth over many years to get it fits nicely with that portfolio. Again, it's both a fast growing market and connected to a place in our portfolio where we want to invest. And then when in Ablon, we had a small position in environmental health and safety, again, a fast growing area within legal and regulatory. And so this is a platform we believe we can build out on a global basis. And while we did not achieve the total revenues we expected last year because of the shift towards SaaS versus perpetual license, we fully expect that Enablon will be a growth engine for the legal and regulatory business over time. And we also fully expect that these three acquisitions will meet our financial hurdles that we've set. Nice answer, Nancy. Just coming back to the quarterly phasing, I'm just being a bit boring here. On a 2 year basis, Q1, you grew 5%, 3% in the Q1 2016, 2% in the Q1 2017. You did the same again in Q2, 3 plus 2 is 5%. You grew ostensibly at 0 in Q3 last year, so we might expect you to grow 5% in Q3 this year. But in Q4 last year, you grew 6%. So on the same sort of run rate basis, we would expect you actually to be sort of pretty flat in Q4. I mean, but you're intimating here that you think you see growth on strong growth in Q4. Is that roughly how you see life? Well, certainly, Patrick, on a recurring nature of our business, it's relatively smooth. But quarter to quarter, you can see some movements based on how transactional products are going to play out, how when a license, a software license sale lands in 1 quarter versus another quarter. So that is part of our business. What I would do is I would come back and say we're very comfortable reiterating our guidance that we've given you and we do expect a slightly improved organic growth in the second half. I'll be looking for a good Q3. Thanks, Kevin. Cheers. Thanks, Patrick. We will now take a follow-up question from Chris Collett from Deutsche Bank. Please go ahead. Hi there. Thanks for taking another question. It was actually it was just about your announcement from a few months ago about exploring strategic alternatives for Core Search. Can you just tell us a little bit about what has led you to consider that business and its position in the portfolio, particularly since I think it was actually quite a nice growing business? Thanks. Yes, it is a nice growing business. The reason we're looking at strategic alternatives is if you look at again where we want to take our GRC division, we very much want to continue to expand into areas within risk management and compliance and trademark doesn't quite fit that parameter. So we think it's the right time to look at alternatives. We're still underway in that process and certainly we'll come back once that process has been concluded. Great. Thank you, everyone, for dialing into the call. We're coming up to 11 o'clock and so we're going to close at this stage. I'm sure some of you have other questions, so feel free to contact us and we'll handle any further calls. Just contact me at Investor Relations. Thank you again.