First quarter developments
First quarter revenues for the continuing operations were stable at constant currencies, and declined 1% on an organic basis, reflecting tough comparables in a number of areas. In the quarter, revenues contributed by acquisitions made in 2012 were partly offset by revenue associated with divestitures made last year. Digital products achieved good growth on an organic basis. Recurring revenues saw positive organic growth, but this was offset by declines in books and other transactional and cyclical revenues. The ordinary EBITA margin eased in the quarter compared to a year ago, due to product mix, investments in growth initiatives, and increased restructuring expenses. Restructuring, which was mainly severance, is expected to yield benefits in the second half of the year.
- Legal & Regulatory: Our North American operation saw good organic growth, due to Corporate Legal Services (CLS). CLS transactional revenue increased, despite difficult comparables and lower M&A-related filings and trademark searches. Trends in our European Legal & Regulatory business remain challenging, as expected, with print products, training, and public sector revenues seeing continued pressure. Year to date, the division has made two divestitures in North America: Best Case Solutions and the minority stake in AccessData. For the full year, we continue to expect growth in North America but weakness in Europe and divisional margin contraction.
- Tax & Accounting: Seasonal revenue and margin patterns are similar to 2012, as anticipated. Our North American Tax & Accounting business achieved good organic growth in software revenues, but this was offset by declines in bank product fees and continued weakness in print publishing revenue. Our European Tax & Accounting revenues were broadly stable on an organic basis, showing good growth in software but declines in print products and cyclical services, such as training. Asia Pacific revenue was impacted by lower book sales.
- Health: Performance in the first quarter was muted, however stronger revenue growth and margin development is expected as the year progresses. Clinical Solutions continued to deliver double digit organic growth, driven by strong performances from UpToDate, Pharmacy OneSource, and Medicom. The acquisition of Health Language, a pioneer in medical terminology management, was completed in January; the business is on pace to achieve double digit organic growth in 2013. Medical Research revenues were lower reflecting weaker advertising, reprint, and print journal subscription revenues. Professional & Education, which has a seasonally small first quarter, was impacted by the timing of book orders in addition to weak markets for print products in both U.S. and international markets.
- Financial & Compliance Services: Faced tough comparables in Originations and Audit, and challenging market conditions in European transport services, as anticipated in our outlook provided in February. Originations saw lower mortgage transactional volumes and fewer new customer implementations than a year ago. Audit achieved solid growth with its core internal audit software TeamMate, but this was largely offset by revenue attrition related to migrating Axentis customers. Finance, Risk & Compliance, including FRSGlobal, achieved good organic growth. In the year to date, the division has acquired iSentry, a software and workflow solutions provider in the U.K., and has increased its interest in AccessMatrix, a technology partner in India.
Cash flow, acquisitions, divestitures, and net debt
First quarter cash conversion was lower than in the same period a year ago, due to less favorable working capital movements as anticipated. Ordinary free cash flow declined in the quarter but remains on track with our full year expectations. In the year to date, a number of disposals have raised pre-tax proceeds of approximately €90 million, removing annual EBITA of approximately €7 million. The largest divestment was Best Case Solutions. In the year to date, net acquisition spending was approximately €100 million, including Health Language and a number of smaller investments. The impact of acquisitions and divestitures made in the year to date is expected to be slightly dilutive to earnings in 2013 due to the margins of the disposals.
In March, we succesfully completed a €700 million 10-year Eurobond issue, with a coupon of 2.875%. Proceeds will be used to redeem the 6.875% perpetual cumulative subordinated bonds in May 2013 and our 5.125% bonds which mature in early 2014. The listing of the perpetual bonds on Euronext Amsterdam will be terminated as of May 14, 2013. Twelve month rolling net-debt-to-EBITDA was 2.3 at the end of the first quarter, improving further from year-end 2012 (2.4) and better than our leverage target of 2.5.
In line with our progressive dividend policy, a dividend of €0.69 per share will be paid in cash on May 16, 2013.
