TIDMEQN
RNS Number : 3645M
Equiniti Group PLC
28 July 2017
28 July 2017
EQUINITI GROUP PLC RESULTS FOR THE 6 MONTHSED 30 JUNE 2017
Equiniti Group plc ("Equiniti" or "the Group"), the specialist
technology outsourcer providing non-discretionary payment and
administration services, today publishes its interim results for
the six months to 30 June 2017.
SOLID INTERIM RESULTS: IN LINE WITH EXPECTATIONS AND FULL YEAR
GUIDANCE AFFIRMED
Financial Highlights H1 2017 H1 2016 Change
%
Revenue (GBPm) 194.8 191.9 1.5
EBITDA(1) prior to exceptional
items (GBPm) 42.0 41.2 1.9
EBITDA margin prior to exceptional
items (%) 21.6 21.5 0.1pts
Operating cash flow(2) pre-exceptional
items 45.8 38.2 19.9
Free cash flow(3) to equity
holders (GBPm) 20.2 18.5 9.2
Cash flow conversion (%) 109 93 16.0pts
EBIT prior to exceptional
items 18.0 17.7 1.7
EBIT (GBPm) 14.1 15.3 (7.8)
Earnings per share (EPS) (pence) 1.9 2.0 (5.0)
Underlying(4) EPS (pence) 6.9 6.5 6.2
Dividend per share (pence) 1.75 1.64 6.7
Net debt (GBPm) 258.2 261.7 (1.3)
Leverage(5) (x) 2.8 2.9 (0.1)x
---------------------------------------- -------- -------- --------
-- Revenue progression of 1.5% (with a decline in organic growth
of 0.6%) despite interest rate headwind and H2 bias
o 100% client retention with new client wins across all
divisions
-- New share registration clients including Arrow Global, Howden
Joinery Group and J Sainsbury
-- New client wins including Aon Hewitt, British Bankers'
Association and House of Fraser
-- New mandates including Alpha FX, Arix Bioscience, Global
Ports, Ramsdens and Xafinity
o Renewal or extension of relationships with clients
including
-- DS Smith, Imperial Brands, Lloyds Banking Group and
Santander
-- New capabilities established:
o Credit bureau and credit servicing permissions secured
following the acquisitions of Marketing Source and
Gateway2Finance
o Increased scale and depth in the credit servicing market with
the acquisition of Nostrum
o Planned entry to the US market with the proposed acquisition
of Wells Fargo's Shareowner Services business to create a stronger,
more diversified Group
-- EBITDA prior to exceptional items growth of 1.9% with margin
of 21.6%; reflecting the impact of acquisitions made in the current
and prior period and an improved margin from our core
operations
-- EBIT of GBP14.1m reflecting the impact of GBP3.9m of
exceptional items, related to the proposed acquisition of the Wells
Fargo Shareowner Services business
-- Strong cash flow conversion of 109%; growth of 9.2% to
GBP20.2m in free cash flow to equity holders driven by strong
working capital management
-- Underlying EPS growth of 6.2% to 6.9 pence per share
-- Net debt of GBP258.2m post acquisition-related costs of GBP14.9m with leverage at 2.8x
-- Interim dividend growth of 6.7% to 1.75 pence per share, in
line with progressive dividend policy
Commenting on the Group's results, Guy Wakeley, Chief Executive,
said:
"We are pleased that Equiniti's strategy of deep specialisms in
regulated markets continues to generate underlying earnings growth
and shareholder value. Our market leading positions are a
foundation for further defensive revenue growth, whilst the quality
of our people and platforms provide continuing margin
progression.
"The proposed acquisition of Wells Fargo Shareowner Services,
announced on 12 July, provides an exciting opportunity to
springboard our products and capabilities into the largest global
equity market, allowing us to diversify our revenues with
multi-national clients.
"As we enter the second half of the year, we affirm our full
year guidance."
(1) EBITDA is earnings before interest, tax, depreciation and
amortisation.
(2) Operating cash flow is EBITDA plus the change in working
capital prior to exceptional items (page 7).
(3) Free cash flow to equity holders represents cash flow prior
to any acquisitions, refinancing or share capital cash flows and is
post exceptional items (page 7).
(4) Underlying EPS excludes the impact of exceptional items and
amortisation of acquisition related intangible assets plus cash tax
(note 6).
(5) Leverage is calculated as net debt/EBITDA on a rolling 12
month basis (page 9).
Analyst and Investor presentation
Equiniti's management will host an analyst and investor
presentation at 9.15am UK time today. There will be a conference
call and live webcast of the event. This will be broadcast live on
Equiniti's website, www.equiniti.com and an archive version of the
presentation will be available on the website later that day.
Conference call details:
Please dial into the call in time to allow for registration.
Participant dial-in : +44 (0) 20 3003 2666
Password : Equiniti
For further information please contact:
Analyst/Investor enquiries:
Equiniti Group plc Guy Wakeley, Chief Executive +44 (0) 207 469
1800
John Stier, Chief Financial Officer
Frances Gibbons, Head of Investor Relations
Media enquiries:
Temple Bar Advisory Alex Child-Villiers + 44 (0) 7795 425580
Will Barker + 44 (0) 7827 960151
Forward-looking statements
This announcement contains forward-looking statements regarding
Equiniti. These forward-looking statements are based on current
information and expectations, and are subject to risks and
uncertainties, including market conditions and other factors
outside of Equiniti's control. Readers are cautioned not to place
undue reliance on the forward-looking statements contained herein,
which speak only as of the date hereof. Equiniti undertakes no
obligation to publicly update any forward-looking statement
contained in this release, whether as a result of new information,
future developments or otherwise, except as may be required by
law.
GROUP RESULTS
Organic
H1 2017 H1 2016* Change Change
% %
------------------------ ---------- ----------- --------- ----------
Revenue (GBPm)
Investment Solutions 64.2 62.5 2.7 2.7
Intelligent Solutions 55.4 54.7 1.3 (5.8)
Pension Solutions 70.5 68.9 2.3 2.3
Interest Income 4.7 5.8 (19.0) (19.0)
------------------------- ---------- ----------- --------- ----------
Equiniti Group 194.8 191.9 1.5 (0.6)
------------------------- ---------- ----------- --------- ----------
EBITDA prior to exceptional items (GBPm)
Investment Solutions 20.2 17.8 13.5
Intelligent Solutions 13.4 12.1 10.7
Pension Solutions 10.5 12.5 (16.0)
Interest Income 4.7 5.8 (19.0)
Central Costs (6.8) (7.0) 2.9
------------------------- ---------- ----------- ---------
Equiniti Group 42.0 41.2 1.9
------------------------- ---------- ----------- ---------
EBITDA margin prior to exceptional items (%)
Investment Solutions 31.5 28.5 3.0
Intelligent Solutions 24.2 22.1 2.1
Pension Solutions 14.9 18.1 (3.2)
------------------------- ----------- ----------- ---------
Equiniti Group 21.6 21.5 0.1
------------------------- ----------- ----------- ---------
* See Appendix 1 on page 26 for detail of restated numbers
OVERVIEW
Equiniti has delivered a solid set of results as we continued to
make progress on our strategic objectives during the period. The
strength and longevity of our client relationships is a key asset
of the Group and we continue to retain 100% of our client
relationships, whilst extending and expanding a number of major
contracts. The Group continued to gain market share, winning a
number of clients from our competitors and securing new clients
across all divisions. The Group has delivered revenue, profit and
margin in line with expectations, continued to cross-sell to our
strategic clients and has increased our offshoring capability with
784 people in our centre in Chennai as at 30 June 2017.
Reported revenue increased by 1.5% to GBP194.8m (H1 2016:
GBP191.9m) during the period (with a slight decline in organic
growth) despite the interest rate headwind and second half bias of
the Group's trading. The acquisitions of Marketing Source and
Gateway2Finance have been fully integrated and add to the Group's
capabilities, having now secured credit bureau and credit servicing
permissions. The acquisition of Nostrum strengthens our scale and
depth in the credit servicing market. The proposed acquisition of
Wells Fargo's Shareowner Services business creates a stronger, more
diversified multi-national Group combining our local expertise with
global reach.
Investment Solutions delivered good revenue growth driven by new
client wins, higher share dealing volumes and growth in employee
share plans, offset by the timing of corporate action income, with
EBITDA and margin expansion driven by revenue growth, project work
and continued focus on operating leverage. Intelligent Solutions
revenue was impacted by the timing of project work in our
specialist resourcing business, with strong profit progression
driven by growth in higher margin work and a continuing drive for
efficiency. Pension Solutions revenue growth was driven by an
increase in project work, new client wins and MyCSP revenues
stabilising, offset with a decline in profit due to lower margin
project work and cost pressure for specialist projects.
Revenue from interest was 19.0% lower than the prior period due
to the impact of lower interest on average client cash balances of
GBP1.7bn (H1 2016: GBP1.7bn). Two thirds of the rate is fixed with
instruments secured to August 2018 (GBP650m) and July 2020
(GBP380m).
EBITDA prior to exceptional items increased by 1.9% to GBP42.0m
(H1 2016: GBP41.2m) reflecting the impact of acquisitions made in
the current and prior period and an improved margin from our core
operations.
Free cash flow to equity holders was GBP20.2m (H1 2016
GBP18.5m), an increase of 9.2%. Net debt of GBP258.2m (30 June
2016: GBP261.7m) represents a ratio of 2.8x net debt/EBITDA (30
June 2016: 2.9x), showing a reduction in leverage despite
acquisition-related costs of GBP14.9m.
The Board has declared an interim dividend of 1.75 pence per
share. The interim dividend is to be paid on 26 October 2017 to
shareholders on the register of members at close of business on 15
September 2017. Any shareholder wishing to participate in the
Equiniti Dividend Reinvestment Plan ("DRIP") needs to have
submitted their election to do so by 5 October 2017. We maintain
our progressive dividend policy which will see us distribute around
30% of our normalised profit attributable to ordinary shareholders
each year.
Board changes
As announced on 3 July 2017, Philip Yea joined the Board as a
non-executive director and will succeed Kevin Beeston as Chairman
in September 2017. Philip has considerable executive experience in
both the quoted and private equity sectors and his experience will
prove invaluable to the Board.
OPERATIONAL REVIEW
We serve our clients through three divisions: Investment
Solutions, Intelligent Solutions and Pension Solutions. The
integrated nature of our client base and strong client
relationships results in shared clients across the Group. This
enables us to continually enhance our performance through
cross-selling and up-selling to existing clients. Our entry point
is often providing share registration services, with clients taking
further services from us over time.
In addition to our three divisions, we earn interest income on
balances we administer on our clients' behalf.
Investment Solutions
Investment Solutions offers a broad range of services, including
share registration for around half the FTSE 100, and the
administration of SAYE schemes and share incentive plans for 1.2
million employees. The division also provides share dealing, wealth
management and international payments to corporate clients and
their employees, as well as direct to retail customers.
H1 2017 H1 2016* Change %
----------------------------- -------- --------- ---------
Revenue (GBPm) 64.2 62.5 2.7
EBITDA prior to exceptional
items (GBPm) 20.2 17.8 13.5
EBITDA margin prior to
exceptional items (%) 31.5 28.5 3.0
----------------------------- -------- --------- ---------
* See Appendix 1 on page 25 for detail of restated numbers
Revenue in Investment Solutions increased by 2.7% to GBP64.2m
(H1 2016: GBP62.5m) driven by new client wins, higher share dealing
volumes and growth in employee share plans, offset by the timing of
corporate action income. Corporate action revenue was GBP4.7m
(2016: GBP5.6m) with a strong pipeline of corporate activity to
support H2 2017.
EBITDA prior to exceptional items grew by 13.5%, with margin
progression of 3.0% as a result of revenue growth, an increase in
project work and continued focus on operating leverage.
Registration Services continued to win market share and was
appointed share registrar to Arrow Global, Howden Joinery Group and
J Sainsbury, replacing existing service providers. The bereavement
services contract secured with Lloyds Banking Group in the second
half of 2016 has now gone live and the division secured a further
pilot project for six banks through the British Bankers'
Association. The division won a number of mandates from newly
listed companies including Alpha FX, Arix Bioscience, Global Ports,
Ramsdens and Xafinity, and renewed or extended relationships with
clients such as DS Smith, Lloyds Banking Group, Imperial Brands,
JPM Investment Trusts, Metro Bank, National Express, Santander and
TalkTalk.
Intelligent Solutions
Intelligent Solutions targets complex or regulated activities to
help organisations manage their interactions with customers,
citizens and employees. The division offers enterprise workflow for
case and complaints management, credit services, on-boarding new
clients and specialist resource for rectification and
remediation.
H1 2017 H1 2016* Change %
------------------------------ -------- --------- ---------
Revenue (GBPm) 55.4 54.7 1.3
EBITDA prior to exceptional
items (GBPm) 13.4 12.1 10.7
EBITDA margin prior to
exceptional items (%) 24.2 22.1 2.1
------------------------------ -------- --------- ---------
* See Appendix 1 on page 26 for detail of restated numbers
Revenue in Intelligent Solutions increased by 1.3% to GBP55.4m
(H1 2016: GBP54.7m) with a decline in organic revenue growth of
5.8%, reflecting good progress across the division offset by the
delay of a major remediation contract with a retail bank which has
now commenced.
The acquisitions of Marketing Source and Gateway2Finance have
been fully integrated and add to the Group's capabilities having
secured credit bureau and credit servicing permissions. The
acquisition of Nostrum strengthens our scale and depth in the
credit servicing market.
EBITDA prior to exceptional items increased by 10.7% to GBP13.4m
as a result of growth in higher margin work and a continuing drive
on efficiency. We continue to see a mix shift in this division,
selling proportionally fewer resourcing services with more software
sales and high margin project work.
The division won a broad range of work during the period
including asset reunification on behalf of RBS and Royal Dutch
Shell, and new sales in complaints management to a number of
existing clients including a number of utilities companies.
Pension Solutions
Pension Solutions offers administration and payment services to
pension schemes, as well as pension software, data solutions, and
life and pensions administration. The division is a scale provider
of pension technology and operates some of the largest pension
schemes in the UK. These include the National Health Service
scheme, which has more than 2.6 million members, and the Armed
Forces Veterans which we have served continuously since 1836.
H1 2017 H1 2016* Change %
------------------------------ -------- --------- ---------
Revenue (GBPm) 70.5 68.9 2.3
EBITDA prior to exceptional
items (GBPm) 10.5 12.5 (16.0)
EBITDA margin prior to
exceptional items (%) 14.9 18.1 (3.2)
------------------------------ -------- --------- ---------
* See Appendix 1 on page 26 for detail of restated numbers
Revenue in Pension Solutions increased by 2.3% to GBP70.5m (H1
2016: GBP68.9m) driven by an increase in project work, new client
wins and revenue from MYCSP stabilising.
EBITDA prior to exceptional items decreased by 16.0% to GBP10.5m
with a decrease in margins of 3.2%. This was due to lower margin
project work with cost pressure for specialist work. Action taken
to adjust the cost base at the end of the second quarter will
underpin full year profit and margin.
The division continues to win new clients including House of
Fraser, Magnox, Shawbrook, and a partnership with Aon Hewitt, and
has renewed or extended long-term relationships with Hackney, the
NHS and the Metropolitan Police. The division has also been awarded
contracts to manage GMP reconciliation and rectification for
Tayside, Clwyd Pension Fund and SSE plc, and our early-mover
advantage in local authority GMP rectification will drive revenue
for H2.
OUTLOOK
Our objective remains to deliver organic revenue growth
supplemented by growth from capability enhancing acquisitions each
year. The dependability of our revenues, the platform nature of our
operations and progressive deleveraging will enable us to grow
underlying profits and earnings ahead of revenue.
We continue to make progress against this strategy with multiple
opportunities for future growth. As we enter the second half of the
year, we affirm our full year guidance.
FINANCIAL REVIEW
Group Income Statement
GBPm H1 2017 H1 2016
------------------------------------- -------- --------
Revenue 194.8 191.9
EBITDA prior to exceptional
items 42.0 41.2
Depreciation (3.0) (2.5)
Amortisation - software (7.7) (8.3)
Amortisation - acquired intangibles (13.3) (12.7)
------------------------------------- -------- --------
EBIT prior to exceptional items 18.0 17.7
Exceptional items (3.9) (2.4)
------------------------------------- -------- --------
Reported EBIT 14.1 15.3
Net finance costs (5.4) (6.5)
Profit before tax 8.7 8.8
Taxation (1.5) (2.0)
------------------------------------- -------- --------
Profit from continuing operations 7.2 6.8
Non-controlling interest (1.6) (0.9)
------------------------------------- -------- --------
Profit attributable to ordinary
shareholders 5.6 5.9
------------------------------------- -------- --------
Earnings per share (pence)
Basic 1.9 2.0
Underlying 6.9 6.5
------------------------------------- -------- --------
Revenue
Reported revenue increased by 1.5% to GBP194.8m (H1 2016:
GBP191.9m) during the year whilst proforma revenue adjusted for
acquisitions decreased organically by 0.6%.
Organic revenue growth is reported revenue growth adjusted for
acquisitions on a like-for like basis. Here we restate 2016 for the
prior period acquisitions had they been owned in 2017 to create a
like-for-like comparison of year-on-year progress. This is
calculated as follows:
H1 2016 H1 2016 H1 2016
Revenue (GBPm) Reported Adjustment Proforma
----------------------- ---------- ------------ ----------
Investment Solutions 62.5 - 62.5
Intelligent Solutions 54.7 4.1(1) 58.8
Pension Solutions 68.9 - 68.9
Interest Income 5.8 - 5.8
----------------------- ---------- ------------ ----------
Total Group 191.9 - 196.0
----------------------- ---------- ------------ ----------
(1) Acquisition of Risk Factor, Top Level, Marketing Source and
Nostrum.
EBITDA prior to exceptional items
EBITDA prior to exceptional items increased by 1.9% to GBP42.0m
(H1 2016: GBP41.2m) reflecting the impact of acquisitions made in
the current and prior year and overall improved margins across the
Group.
EBIT prior to exceptional items
EBIT remains an important measure of the Group's performance,
reflecting profit before finance costs and taxation. In 2017, EBIT
prior to exceptional items increased 1.7% to GBP18.0m (H1 2016:
GBP17.7m).
Exceptional items
Exceptional items of GBP3.9m incurred in the period (H1 2016:
GBP2.4m) relate to the proposed acquisition of the Wells Fargo
Shareowner & Services Business. Further costs will be incurred
as the transaction progresses to completion with total costs
estimated at GBP17.0m, of which GBP13.0m will be charged to
exceptional costs in FY 2017.
Net finance costs
Group net finance costs before exceptional items fell by GBP1.1m
to GBP5.4m (H1 2016: GBP6.5m).
Profit before income tax
The Group made a profit for the period from continuing
operations of GBP7.2m (H1 2016: GBP6.8m).
Earnings per share (EPS)
Basic EPS of 1.9 pence (H1 2016: 2.0 pence) is based on a
weighted average number of shares of 300m (H1 2016: 300m).
Excluding the impact of exceptional items, there was strong growth
in underlying EPS of 6.2% to 6.9 pence (H1 2016: 6.5 pence).
Dividend per share
The Board has declared an interim dividend of 1.75 pence per
share. The interim dividend is to be paid on 26 October 2017 to
shareholders on the register of members at close of business on 15
September 2017. Any shareholder wishing to participate in the
Equiniti Dividend Reinvestment Plan ("DRIP") needs to have
submitted their election to do so by 5 October 2017. We maintain
our progressive dividend policy which will see us distribute around
30% of our normalised profit attributable to ordinary shareholders
each year.
Capital structure
The Group's Consolidated Balance Sheet at 30 June 2017 is
summarised as follows:
GBPm As at As at
30 June 30 June
2017 2016
---------------------------- ---------- ---------
Assets
Non-current assets 726.9 695.7
Current assets 181.0 197.2
---------------------------- ---------- ---------
Total assets 907.9 892.9
---------------------------- ---------- ---------
Liabilities
Non-current liabilities 372.9 340.7
Current liabilities 137.6 162.4
---------------------------- ---------- ---------
Total liabilities 510.5 503.1
---------------------------- ---------- ---------
Net assets / (liabilities) 397.4 389.8
---------------------------- ---------- ---------
Total equity 397.4 389.8
---------------------------- ---------- ---------
Cash flow
The Group generated a free cash flow to equity holders of
GBP20.2m (H1 2016: GBP18.5m) representing a free cash flow
conversion of 109% (H1 2016: 93%). The main movements in cash flow
are summarised below.
GBPm H1 2017 H1 2016
------------------------------------- ---------- ----------
EBITDA prior to exceptional
items 42.0 41.2
Non-exceptional working capital
movement 3.8 (3.0)
------------------------------------- ---------- ----------
Operating cash flow pre-exceptional
items 45.8 38.2
Cash flow conversion (%) 109 93
Exceptional Items (1.9) (2.8)
Capital expenditure (16.4) (10.5)
Net interest costs (4.5) (5.0)
Taxes paid (2.5) (1.2)
Other (0.3) (0.2)
------------------------------------- ---------- ----------
Free cash flow to equity holders 20.2 18.5
Net change in borrowings 20.0 (6.0)
IPO related costs - (18.3)
Investment in prior and current
year acquisitions (14.9) (12.1)
Payment of deferred consideration - (0.4)
Dividends paid (including payment
to non-controlling interest) (12.4) (5.3)
Net cash movement 12.9 (23.6)
------------------------------------- ---------- ----------
Reconciliation of EBITDA to total cash generated from operations
(statutory cash flow statement)
GBPm H1 2017 H1 2016
-------------------------------------- ---------- ----------
EBITDA prior to exceptional
items 42.0 41.2
Non-exceptional working capital
movement 3.8 (3.0)
Exceptional Items (1.9) (2.8)
IPO related costs - (18.3)
Other (0.4) (0.3)
-------------------------------------- ---------- ----------
Total cash generated from operations 43.5 16.8
-------------------------------------- ---------- ----------
Capital expenditure
Net expenditure on tangible and intangible assets was GBP16.4m
(H1 2016: GBP10.5m). This represents 8.4% of revenue (H1 2016:
5.5%) and is driven by timing of major regulatory projects such as
MiFID II and the launch of a new portal for our Selftrade business.
Full year 2017 guidance remains at 7% of revenue, falling to 6%
thereafter following completion of MiFID II requirements.
Net interest costs
Net interest costs in the period was GBP4.5m (H1 2016: GBP5.0m).
Total interest bearing loans increased from GBP306.0m to
GBP326.0m.
Investment in current and prior year acquisitions
Net cash outflow on prior and current year acquisitions was
GBP14.9m (H1 2016: GBP12.1m) and relates to Marketing Source,
Gateway2Finance and Nostrum.
Free cash flow to equity holders
Free cash flow to equity holders represents our cash flow prior
to any acquisition, refinancing or share capital cash flows. It is
a key measure of cash earned for the shareholders of the Group.
Free cash flow to equity holders increased by 9.2% to GBP20.2m in
the period and is pre acquisition-related costs of GBP14.9m.
Tax paid
Taxes paid are primarily due to MyCSP Limited (UK) and the
Group's operations in India (Equiniti India Pvt Limited). The Group
has the following tax attributes that reduce the cash tax effective
rate compared to the profit and loss account effective tax
rate:
-- Future tax deductions on tax trading losses GBP232m
-- Future tax deductions on intangible assets GBP369m
-- Future tax deductions on tangible assets GBP34m
The tax impact of these attributes is recognised as deferred tax
assets.
The forecast cash tax rate over the next few years is estimated
to be around 14%.
We consider the cash tax rate to be an appropriate measure to
use as it best reflects the economic flows from the business,
taking into account our assessment of how our tax attributes, noted
above, will unwind and reduce our overall tax liabilities.
Bank borrowings and financial
covenants
H1 2017 H1 2016 FY 2016
GBPm
------------------------------- ---------- ---------- ----------
Cash and cash equivalents (69.6) (52.9) (56.7)
Senior debt 250.0 250.0 250.0
Revolving credit facility 76.0 64.0 56.0
Other 1.8 0.6 1.9
------------------------------- ---------- ---------- ----------
Net debt 258.2 261.7 251.2
------------------------------- ---------- ---------- ----------
Net debt/EBITDA prior to
exceptional items (times) 2.8 2.9 2.7
------------------------------- ---------- ---------- ----------
At 30 June 2017, net debt was lower at GBP258.2m (30 June 2016:
GBP261.7m) due to strong cash flow offset by investment in the
business and payment of dividends. The slight increase in leverage
from 31 December 2016 was due to acquisition costs paid in H1 2017
and the seasonality of our cash flow. In H1 we pay annual bonus
payments of cGBP5m and GBP12.4m of dividends (including the annual
dividend of MyCSP). We also tend to generate more profit in the
second half of the year which naturally leads to more operating
cash flow in this period.
The term debt facility does not include scheduled debt
repayments and together with the revolving credit facility is
available for a five-year term to October 2020. GBP74.0m of the
GBP150.0m revolving credit facility was not drawn at the period
end. The Group has substantial liquidity to support its growth
ambitions and ongoing working capital requirements.
Acquisitions
On 6 January 2017, the Group acquired Gateway2Finance for a
total consideration of GBP200k with a further earn-out of up to
GBP1.0m payable in 2020, dependent on growth. Gateway2Finance is an
FCA authorised entity acting as a consumer finance intermediary,
securing loans for clients referred by financial services companies
and price comparison websites.
On 26 May 2017, the Group took control of Nostrum Group Limited
and icenet Limited ("Nostrum") for a total consideration of up to
GBP12.5m, comprising GBP7.0m contingent consideration, with GBP2.0m
payable in September 2018 and GBP4.5m payable in September 2020,
cash on legal completion of GBP3.9m and a total of GBP2.1m payable
in monthly instalments to December 2018.
Nostrum is a provider of end-to-end loan management technology
that helps banks, finance companies and retail brands provide
innovative credit solutions to their customers. The acquisition
strengthens our position in the lending sector and consolidates our
strategy of providing technology-enabled loan and mortgage
solutions to meet the requirements of this fast-moving market
place, building on the technology platforms of Pancredit and the
loan, mortgage and insurance servicing permissions of
Gateway2Finance.
Events occurring post reporting period
On 12 July 2017, the Group announced the proposed acquisition
and carve out of the Wells Fargo Share Registration & Services
("WFSS") business for a total cash consideration of $227.0m
(cGBP176.0m) subject to certain customary closing adjustments and
conditions.
The acquisition combines the #1 UK and #3 US share registrars to
create a multi-national share registration and services business
spanning the world's deepest capital markets, which will create a
more diversified, multi-national Group. The business combination is
expected to generate GBP8m of cost synergies by 2020 through
introducing our Sirius platform and using this to automate
processes.
Founded in 1929, WFSS provides share registration, corporate
actions and investment plan services to c1,200 public and private
US companies and other global companies and c9.2 million
shareholder records processed in the US.
WFSS occupies a leading US market position and is growing market
share driven by strong organic revenue growth (c6% 2014-16 revenue
CAGR) from recent client wins and high profile corporate actions
business. In 2016 WFSS delivered revenues of $104.0m (cGBP81.0m)
and had adjusted profits to be acquired ("EBITDA") of $18.0m
(cGBP14.0m).
WFSS has a strong track record of organic growth and market
share capture with c650 clients including J.P.Morgan, Wells Fargo,
General Electric and Berkshire Hathaway.
The cash consideration and Equiniti's transaction expenses are
expected to be financed from a planned GBP122.0m (c$160.0m) fully
underwritten rights issue and GBP120.0m (c$155.0m) fully
underwritten new debt facilities.
The rights issue is expected to be launched in September 2017,
subject to the approval of the acquisition by shareholders and
other customary conditions, such as the availability of new debt
facilities. The rights issue will be used to pay deal fees of
GBP17m plus part fund the acquisition. The balance of the purchase
price (GBP70m) will be settled by the raising of the debt. The
remaining GBP50m of debt facilities will be used to fund
transformation costs and provide working capital to support
WFSS.
Transaction costs are expected to be GBP17m, of which GBP9m will
be charged as exceptional costs. These exceptional costs are
expected to be charged to the income statement in 2017 as the
transaction completes. The balance of GBP8m will be charged to the
share premium account or charged to interest payable over the term
of the new debt facility.
In addition to the above transaction costs a further GBP4m of
exceptional charges will be incurred in 2017 reflecting the initial
stages of the integration programme. Therefore the total
exceptional spend for 2017 is estimated to be GBP13m.
Total integration costs, which will be incurred by 2019 will be
around GBP42m, with exceptional costs in the region of GBP20m and
capital expenditure of GBP22m. These costs reflect the programme to
separate WFSS from the Wells Fargo Group and to introduce our own
technology to the business.
PRINCIPAL RISKS AND UNCERTAINTIES
The Directors have considered the principal risks and
uncertainties affecting the Group's financial position and
prospects in 2017. As described on pages 44 to 47 of the Group's
Annual Report for 2016, the Group continues to be exposed to a
number of risks and has well established systems and procedures in
place to identify, assess and mitigate those risks. The principal
risks include those arising from change in client demand; reduction
in Bank of England rates; information security breach; loss of key
clients; regulatory risk; attracting and retaining high calibre
employees; change, transformation and mobilistion; adverse
legislative and environmental changes; and disruption to client
servicing.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that, to the best of their knowledge
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting;
-- the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and a description of principal risks
and undertainties for the remaining six months of the year);
and
-- the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board
Guy Wakeley John Stier
Chief Executive Chief Financial Officer
28 July 2017
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE
2017
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
Note GBPm GBPm GBPm
==================================== ===== ========= ========= ==========
Revenue 4 194.8 191.9 382.6
Operating costs before
exceptional items, depreciation
and amortisation 5 (152.8) (150.7) (290.2)
==================================== ===== ========= ========= ==========
EBITDA(1) prior to exceptional
items 4 42.0 41.2 92.4
Operating costs - exceptional
items 6 (3.9) (2.4) (5.0)
==================================== ===== ========= ========= ==========
EBITDA(1) 38.1 38.8 87.4
Depreciation of property,
plant and equipment (3.0) (2.5) (5.4)
Amortisation of software (7.7) (8.3) (16.0)
Amortisation of acquisition
related intangible assets (13.3) (12.7) (25.3)
Total operating costs 5 (180.7) (176.6) (341.9)
------------------------------------ ----- --------- --------- ----------
Earnings before interest
and tax (EBIT) 14.1 15.3 40.7
Finance income 0.5 0.1 0.2
Finance costs (5.9) (6.6) (12.4)
Net finance costs 10 (5.4) (6.5) (12.2)
Profit before income tax 8.7 8.8 28.5
Income tax (charge)/credit 12 (1.5) (2.0) 4.9
Profit for the period 7.2 6.8 33.4
------------------------------------ ----- --------- --------- ----------
Profit for the period attributable
to:
- Owners of the parent 5.6 5.9 30.5
- Non-controlling interests 1.6 0.9 2.9
------------------------------------ ----- --------- --------- ----------
Profit for the period 7.2 6.8 33.4
------------------------------------ ----- --------- --------- ----------
Earnings per share attributable to
owners of the parent:
------------------------------------------------------ --------- ----------
Basic earnings per share
(pence) 7 1.9 2.0 10.2
Diluted earnings per share
(pence) 7 1.9 2.0 10.1
------------------------------------ ----- --------- --------- ----------
Underlying earnings per share(2) attributable
to owners of the parent:
--------------------------------------------------- ---- -----
Basic earnings per share
(pence) 7 6.9 6.5 15.9
Diluted earnings per share
(pence) 7 6.9 6.5 15.8
--------------------------------------- --- ----- ---- -----
(1) Earnings before interest, tax, depreciation and
amortisation
(2) Underlying earnings per share excludes the impact of
exceptional items and amortisation of acquisition related
intangible assets plus cash tax
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
FOR THE SIX MONTHSED
30 JUNE 2017
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
GBPm GBPm GBPm
====================================== ========= ========= ==========
Profit for the period 7.2 6.8 33.4
Other comprehensive (expense)/income
Items that may be subsequently
reclassified to profit or loss
Fair value movement through
hedging reserve (2.8) 5.8 3.1
Net exchange (loss)/gain on
translation of foreign operations (0.3) 0.1 3.1
(3.1) 5.9 6.2
Items that will not be reclassified
to profit or loss
Defined benefit plan actuarial
loss - - (11.3)
Deferred tax credit on
defined benefit plan - - 1.9
--------------------------------------- --------- --------- ----------
- - (9.4)
Other comprehensive (expense)/income
for the period (3.1) 5.9 (3.2)
Total comprehensive income
for the period 4.1 12.7 30.2
--------------------------------------- --------- --------- ----------
Total comprehensive income
attributable to:
- Owners of the parent 2.5 11.8 28.0
- Non-controlling interests 1.6 0.9 2.2
--------------------------------------- --------- --------- ----------
Total comprehensive income
for the period 4.1 12.7 30.2
--------------------------------------- --------- --------- ----------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 30 JUNE 2017
As at As at As at
June June December
2017 2016 2016
GBPm GBPm GBPm
================================== ====== ====== ==========
Assets
Non-current assets
Property, plant and equipment 16.4 13.4 17.1
Intangible assets 677.9 653.5 670.1
Other financial assets 4.5 12.0 7.8
Deferred income tax assets 28.1 16.8 29.1
726.9 695.7 724.1
Current assets
Trade and other receivables 74.8 76.8 75.4
Agency broker receivables 36.5 67.5 15.9
Other financial assets 0.1 - 0.2
Cash and cash equivalents 69.6 52.9 56.7
181.0 197.2 148.2
Total assets 907.9 892.9 872.3
----------------------------------- ------ ------ ----------
Liabilities
Non-current liabilities
External loans and borrowings 322.1 308.9 301.5
Post-employment benefits 23.9 13.5 23.9
Provisions for other liabilities
and charges 23.2 13.5 16.2
Other financial liabilities 3.7 4.8 4.5
372.9 340.7 346.1
Current liabilities
Trade and other payables 99.6 90.2 105.4
Agency broker payables 36.5 67.5 15.9
Income tax payable 1.0 1.0 2.2
Provisions for other liabilities - 3.5 -
and charges
Other financial liabilities 0.5 0.2 0.5
137.6 162.4 124.0
Total liabilities 510.5 503.1 470.1
----------------------------------- ------ ------ ----------
Net assets 397.4 389.8 402.2
----------------------------------- ------ ------ ----------
Equity
Equity attributable to
owners of the parent
Share capital 0.3 0.3 0.3
Share premium 0.1 - -
Capital contribution reserve 181.5 181.5 181.5
Hedging reserve 2.1 7.6 4.9
Share-based payments reserve 3.9 1.1 2.1
Translation reserve 2.8 0.1 3.1
Retained earnings 187.8 180.6 191.5
----------------------------------- ------ ------ ----------
378.5 371.2 383.4
Non-controlling interest 18.9 18.6 18.8
----------------------------------- ------ ------ ----------
Total equity 397.4 389.8 402.2
----------------------------------- ------ ------ ----------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
FOR THE SIX MONTHSED
30 JUNE 2017
Capital Share-based Trans- Non-con
Share Share contribution Hedging payments lation Retained -trolling Total
capital premium reserve reserve reserve reserve earnings interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================== ======== ======== ============= ======== =========== ======== ========= ========== =======
Balance at
1 January
2016 0.3 - 181.5 1.8 0.2 - 176.7 20.0 380.5
Comprehensive
income
Profit for
the year per
the income
statement - - - - - - 30.5 2.9 33.4
Other comprehensive
income
/(expense)
Changes in
fair value
through hedging
reserve - - - 3.1 - - - - 3.1
Net exchange
gain on
translation
of foreign
operations - - - - - 3.1 - - 3.1
Actuarial
losses on
defined benefit
pension plans - - - - - - (10.4) (0.9) (11.3)
Deferred tax
on defined
benefit pension
plans - - - - - - 1.7 0.2 1.9
------------------ -------- -------- ------------- -------- ----------- -------- --------- ---------- -------
Total other
comprehensive
income/(expense) - - - 3.1 - 3.1 (8.7) (0.7) (3.2)
Total
comprehensive
income - - - 3.1 - 3.1 21.8 2.2 30.2
Dividends - - - - - - (7.0) (1.6) (8.6)
Transactions
with
non-controlling
interests - - - - - - - (1.8) (1.8)
Share-based
payments expense - - - - 1.7 - - - 1.7
Deferred tax
relating to
share option
schemes - - - - 0.2 - - - 0.2
Transactions
with owners
recognised
directly in
equity - - - - 1.9 - (7.0) (3.4) (8.5)
Balance at
31 December
2016 0.3 - 181.5 4.9 2.1 3.1 191.5 18.8 402.2
------------------ -------- -------- ------------- -------- ----------- -------- --------- ---------- -------
Capital Share-based Trans- Non-con
Share Share contribution Hedging payments lation Retained -trolling Total
capital premium reserve reserve reserve reserve earnings interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================ ======== ======== ============= ======== =========== ======== ========= ========== =======
Balance at
1 January
2016 0.3 - 181.5 1.8 0.2 - 176.7 20.0 380.5
Comprehensive
income
Profit for
the period
per the income
statement - - - - - - 5.9 0.9 6.8
Other comprehensive
income
Changes in
fair value
through hedging
reserve - - - 5.8 - - - - 5.8
Net exchange
gain on
translation
of foreign
operations - - - - - 0.1 - - 0.1
Total other
comprehensive
income - - - 5.8 - 0.1 - - 5.9
Total
comprehensive
income - - - 5.8 - 0.1 5.9 0.9 12.7
Dividends - - - - - - (2.0) (1.6) (3.6)
Transactions
with
non-controlling
interests - - - - - - - (0.7) (0.7)
Share-based
payments
expense - - - - 0.9 - - - 0.9
================ ======== ======== ============= ======== =========== ======== ========= ========== =======
Transaction
with owners
recognised
directly in
equity - - - - 0.9 - (2.0) (2.3) (3.4)
Balance at
30 June 2016 0.3 - 181.5 7.6 1.1 0.1 180.6 18.6 389.8
---------------- -------- -------- ------------- -------- ----------- -------- --------- ---------- -------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
FOR THE SIX MONTHSED
30 JUNE 2017
Capital Share-based Trans- Non-con
Share Share contribution Hedging payments lation Retained -trolling Total
capital premium reserve reserve reserve reserve earnings interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================= ======== ======== ============ ======== =========== ======== ========= ========== =======
Balance at
1 January
2017 0.3 - 181.5 4.9 2.1 3.1 191.5 18.8 402.2
Comprehensive
income
Profit for
the period
per the income
statement - - - - - - 5.6 1.6 7.2
Other
comprehensive
expense
Changes in
fair value
through hedging
reserve - - - (2.8) - - - - (2.8)
Net exchange
loss on
translation
of foreign
operations - - - - - (0.3) - - (0.3)
Total other
comprehensive
expense - - - (2.8) - (0.3) - - (3.1)
----------------- -------- -------- ------------ -------- ----------- -------- --------- ---------- ---------
Total
comprehensive
(expense)/income - - - (2.8) - (0.3) 5.6 1.6 4.1
Issue of share
capital - 0.1 - - - - - - 0.1
Dividends - - - - - - (9.3) (1.5) (10.8)
Share-based
payments expense - - - - 1.5 - - - 1.5
Deferred tax
relating to
share option
schemes - - - - 0.3 - - - 0.3
Transactions
with owners
recognised
directly in
equity - 0.1 - - 1.8 - (9.3) (1.5) (8.9)
Balance at
30 June 2017 0.3 0.1 181.5 2.1 3.9 2.8 187.8 18.9 397.4
----------------- -------- -------- ------------ -------- ----------- -------- --------- ---------- ---------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE
2017
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
Note GBPm GBPm GBPm
=================================== ===== ========== ========= ==========
Cash flows from operating
activities
Cash generated from operations 18 43.5 16.8 64.0
Interest paid (4.7) (4.8) (9.7)
Income tax paid (2.5) (1.2) (2.2)
=================================== ===== ========== ========= ==========
Net cash inflow from operating
activities 36.3 10.8 52.1
=================================== ===== ========== ========= ==========
Cash flows from investing
activities
Interest received 0.5 0.1 0.2
Business acquisitions net
of cash acquired 9 0.7 (12.1) (12.0)
Payment relating to prior
year acquisitions (15.6) (0.4) (7.3)
Acquisition of property,
plant and equipment (1.3) (2.1) (8.3)
Acquisition of intangible
assets (15.1) (8.4) (19.9)
Net cash outflow from investing
activities (30.8) (22.9) (47.3)
=================================== ===== ========== ========= ==========
Cash flows from financing
activities
Proceeds from issue of
share capital 13 0.1 - -
Increase/(decrease) in
revolving credit facility 20.0 (6.0) (14.0)
Payment of finance lease
liabilities (0.3) (0.3) (0.4)
Dividends paid (9.3) (2.0) (7.0)
Dividends paid to non-controlling
interests (1.5) (1.6) (1.6)
Transactions with non-controlling
interests (1.6) (1.7) (1.7)
Net cash inflow/(outflow) from
financing activities 7.4 (11.6) (24.7)
========================================== ========== ========= ==========
Net increase/(decrease) in
cash and cash equivalents 12.9 (23.7) (19.9)
Foreign exchange gains on cash
and cash equivalents - 0.1 0.1
Cash and cash equivalents
at 1 January 56.7 76.5 76.5
Cash and cash equivalents at
30 June/31 December 69.6 52.9 56.7
------------------------------------------ ---------- --------- ----------
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 30 JUNE 2017
1) General information
Equiniti Group plc is a public limited company which is listed
on the London Stock Exchange and incorporated and domiciled in the
United Kingdom. The company and its subsidiaries (collectively, the
"Group") provide complex administration and payments services,
supported by technology platforms, to a wide range of
organisations. The
registered office address is Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH.
The financial information in these condensed interim financial
statements has been reviewed but not audited by the company's
auditor, PricewaterhouseCoopers LLP.
The condensed interim financial information set out herein does
not constitute the Group's statutory accounts within the meaning of
section 434 of the Companies Act 2006. Statutory accounts for the
year ended 31 December 2016 have been delivered to the Registrar of
Companies. The external auditor has reported on the 2016 accounts
and its reports were unqualified, did not draw attention to any
matters by way of emphasis without qualifying their report and did
not contain statements under section 498(2) or (3) of the Companies
Act 2006.
2) Basis of preparation
These condensed interim financial statements for the six months
ended 30 June 2017 have been prepared in accordance with the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority and with IAS 34, 'Interim financial reporting', as
adopted by the European Union. These interim financial statements
have been prepared on the basis of the accounting policies as set
out in the previous Annual Report and Accounts for the year ended
31 December 2016 which are available at www.equiniti.com, except
for taxes on income in interim periods which are accrued using tax
rates that are expected to be applicable for the full accounting
year.
Estimates
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
effect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these condensed interim financial statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those applied to the consolidated financial
statements for the year ended 31 December 2016. In addition, a
judgement has been made that there were no significant changes to
the pension assumptions used to calculate the net defined benefit
pension obligation and as a result, there were no material changes
to the obligation as at 30 June 2017.
Going concern
The Directors, after making enquiries and on the basis of
current financial projections and the facilities available at the
reporting date, believe that the Group has adequate financial
resources to continue in operation for the foreseeable future. For
this reason, they continue to adopt the going concern basis in
preparing the condensed consolidated interim financial
statements.
3) Seasonality
Whilst the business is not highly seasonal, there is some margin
bias towards the second half of the year. The business delivers
more contracted, lower margin activities such as running of AGMs,
dividend payments and pension statements in the first six months
and there tends to be more discretionary, higher margin project
work in the second half of the year.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE SIX MONTHSED 30 JUNE 2017
4) Operating segments
The Group's chief operating decision maker is the Board of
Directors. The Board of Directors have identified the Group's
operating segments as Investment Solutions, Intelligent Solutions,
Pension Solutions and Interest, in line with how the Group runs and
structures its business.
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
Reported revenue GBPm GBPm GBPm
======================== ========= ========= ==========
Investment Solutions 64.2 62.5 124.0
Intelligent
Solutions 55.4 54.7 109.3
Pension Solutions 70.5 68.9 138.1
Interest 4.7 5.8 11.2
Total revenue 194.8 191.9 382.6
-------------------------- --------- --------- ----------
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
EBITDA prior to exceptional items GBPm GBPm GBPm
====================================== ========= ========= ==========
Investment Solutions 20.2 17.8 37.5
Intelligent Solutions 13.4 12.1 28.3
Pension Solutions 10.5 12.5 27.7
Interest 4.7 5.8 11.2
--------------------------------------- --------- --------- ----------
Total segments 48.8 48.2 104.7
Central costs (6.8) (7.0) (12.3)
--------- ----------
EBITDA prior to exceptional items 42.0 41.2 92.4
------------------------------------- --------- --------- ----------
Central costs principally include corporate overheads. The
EBITDA prior to exceptional items of each segment is reported after
charging certain central costs based on the business segments'
usage of central facilities and services.
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
Reconciliation to profit before GBPm GBPm GBPm
income tax
===================================== ========= ========= ==========
EBITDA prior to exceptional
items 42.0 41.2 92.4
Operating costs -
exceptional items (3.9) (2.4) (5.0)
----------------------------------- --------- --------- ----------
EBITDA 38.1 38.8 87.4
Depreciation of property,
plant and equipment (3.0) (2.5) (5.4)
Amortisation of software (7.7) (8.3) (16.0)
Amortisation of acquisition
related intangible assets (13.3) (12.7) (25.3)
Net finance costs (5.4) (6.5) (12.2)
Profit before income
tax 8.7 8.8 28.5
----------------------------------- --------- --------- ----------
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE SIX MONTHSED 30 JUNE 2017
5) Operating costs
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
Expenses by nature GBPm GBPm GBPm
============================================ ========= ========= ==========
Employee benefit expense 84.2 81.2 160.1
Direct costs 37.4 35.6 69.4
Bought in services 9.6 8.9 15.8
Premises costs 3.5 3.2 6.6
Operating lease costs 3.4 3.7 7.2
Government grants for research
and development (0.9) - (1.9)
Other general business
costs 15.6 18.1 33.0
------------------------------------------- --------- --------- ----------
Operating costs before exceptional
items, depreciation and amortisation 152.8 150.7 290.2
Exceptional
items 3.9 2.4 5.0
Depreciation of property, plant
and equipment 3.0 2.5 5.4
Amortisation of software 7.7 8.3 16.0
Amortisation of acquisition
related intangible
assets 13.3 12.7 25.3
Total operating costs 180.7 176.6 341.9
-------------------------------------------- --------- --------- ----------
6) Operating costs - Exceptional items
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
Included in the profit for GBPm GBPm GBPm
the period are the following:
================================ ========== ========= ==========
Acquisition, restructuring
and other costs 3.9 2.4 5.0
Total exceptional items 3.9 2.4 5.0
-------------------------------- ---------- --------- ----------
Acquisition related expenses represent fees paid to third party
advisors and transaction fees in respect of acquisitions completed
in the period, as well as costs incurred on further potential
acquisitions and disposals not yet completed, including costs
incurred in relation to the proposed acquisition of the share
registration division of Wells Fargo & Company (note 19). It
also includes exceptional income in relation to the reversal of the
contingent consideration provision on historic acquisitions as a
result of a change in post-acquisition performance expectations or
other earn-out criteria.
7) Earnings per share
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
Basic and diluted earnings GBPm GBPm GBPm
per share
======================================= ========== ========= ==========
Profit from continuing operations
attributable to owners of the
parent 5.6 5.9 30.5
Weighted average number of
ordinary shares in issue (thousands) 300,044 300,000 300,002
Employee share options (thousands) 1,077 399 1,063
--------------------------------------- ---------- --------- ----------
Weighted average number of
ordinary shares in issue adjusted
for the effect of dilution
(thousands) 301,121 300,399 301,065
Basic earnings per share (pence) 1.9 2.0 10.2
Diluted earnings per share
(pence) 1.9 2.0 10.1
--------------------------------------- ---------- --------- ----------
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE SIX MONTHSED 30 JUNE 2017
7) Earnings per share (continued)
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
Underlying earnings per share GBPm GBPm GBPm
==================================== ========== ========= ==========
EBITDA prior to exceptional
items 42.0 41.2 92.4
Depreciation of property, plant
and equipment (3.0) (2.5) (5.4)
Amortisation of software (7.7) (8.3) (16.0)
Net finance costs (5.4) (6.5) (12.2)
Underlying profit before income
tax 25.9 23.9 58.8
Cash tax at 14%/15%(1) (3.6) (3.6) (8.2)
Underlying profit after tax 22.3 20.3 50.6
Non-controlling interests (1.6) (0.9) (2.9)
Underlying profit attributable
to ordinary shareholders 20.7 19.4 47.7
------------------------------------ ---------- --------- ----------
Number of shares in issue at
period end (thousands) 300,081 300,000 300,013
Employee share options (thousands) 1,077 399 1,063
==================================== ========== ========= ==========
Number of ordinary shares in
issue adjusted for the effect
of dilution (thousands) 301,158 300,399 301,076
Basic underlying earnings per
share (pence) 6.9 6.5 15.9
Diluted underlying earnings
per share (pence) 6.9 6.5 15.8
==================================== ========== ========= ==========
We consider underlying earnings to be an appropriate measure to
use to assess progress in the Group as it best reflects the
economic flows from the business.
(1) Cash tax rate reflects the cash tax payable on the
underlying profit after tax. It is calculated based on the Group's
estimated forecast cash tax rate of around 14% which is lower than
the profit and loss account effective tax rate due to the benefit
of future tax deductions on trading losses, intangible assets and
tangible assets.
8) Dividends
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
=====================================
Amounts recognised as distributions
to equity holders of the parent
in the period GBPm GBPm GBPm
===================================== ========== ========= ==========
Final dividend for year ended 9.3 - -
31 December 2016 (3.11p per
share)
Interim dividend for year ended
31 December 2016 (1.64p per
share) - - 5.0
Final dividend for year ended
31 December 2015 (0.68p per
share) - 2.0 2.0
9.3 2.0 7.0
------------------------------------- ---------- --------- ----------
The recommended interim dividend payable in respect of the
period ended 30 June 2017 is GBP5.3m or 1.75p per share (30 June
2016: GBP5.0m). This is in line with the Group's stated policy of a
pay-out ratio of around 30% of adjusted underlying profit after
cash tax. The proposed dividend has not been accrued as a liability
as at 30 June 2017.
The dividend of GBP9.3m paid in the period ended 30 June 2017
and disclosed in the Statement of Changes in Equity represents the
final ordinary dividend for the year ended 31 December 2016 of
3.11p per share.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE SIX MONTHSED 30 JUNE 2017
9) Acquisitions of businesses
Gateway2Finance
On 6 January 2017, the Group purchased the entire issued share
capital of Gateway 2 Finance Limited and Refresh Personal Finance
Limited ("Gateway2Finance") for GBP0.2m plus contingent
consideration of up to GBP1.0m payable in 2020. Gateway2Finance is
an FCA authorised entity acting as a consumer finance intermediary,
securing loans for clients referred by financial services companies
and price comparison websites.
The Group took control of Gateway2Finance on 6 January 2017. On
this date the business had net assets of GBP0.3m. The results of
the business have been consolidated since the date of control and
Gateway2Finance has contributed GBP0.2m of revenue and GBP0.1m of
net loss to the Group results in 2017.
On acquisition, intangible assets relating to software and to
customer contracts and related relationships have been
re-evaluated, resulting in a combined upward adjustment of GBP0.3m
to the book value. The amounts relating to the intangible assets
and goodwill are provisional and subject to further evaluation and
adjustment, in accordance with accounting standards. The value of
goodwill reflects amounts in relation to the expected benefit of
the ability to generate new streams of revenue and expected
synergies of combining the operations of Gateway2Finance and the
Group.
Recognised amounts of identifiable assets GBPm
acquired and liabilities assumed
=============================================== ======
Intangible assets 0.3
------------------------------------------------ ------
Net identifiable assets and liabilities 0.3
Goodwill on acquisition 0.8
-------------------------------------------- ------
Total consideration 1.1
Deferred consideration (0.1)
Contingent consideration (0.9)
Net cash outflow in the period 0.1
-------------------------------------------- ------
As at 30 June 2017, the minimum amount of contingent
consideration payable is GBPnil and the maximum amount is GBP1.0m.
The final amount to be paid will be determined based on the
acquiree's financial performance over the qualifying period and is
only payable if the business grows in line with its business
plan.
Nostrum
On 3 July 2017, the Group purchased the entire issued share
capital of The Nostrum Group Limited and icenet Limited ("Nostrum")
for GBP12.5m. Nostrum is a provider of end-to-end loan management
technology that assists banks, finance companies and retail brands
provide credit solutions to their customers, delivering services
that support the whole lifecycle of lenders' operations from
front-end lead generation and application processing through to
customer servicing.
The purchase consideration of GBP12.5m consists of up to GBP7.0m
contingent consideration, discounted to GBP2.0m payable in
September 2018 and GBP4.5m payable in September 2020, cash on legal
completion of GBP3.9m and GBP2.1m payable in monthly instalments to
December 2018.
The Group took control of Nostrum on 26 May 2017. On this date
the business had net assets of GBP3.4m, including a cash balance of
GBP0.8m. The results of the business have been consolidated since
the date of control and Nostrum contributed GBP0.8m of revenue and
GBP0.2m of net profit to the Group results in 2017. If the business
had been acquired on 1 January 2017 it would have contributed an
additional GBP2.8m of revenue and GBP0.3m net loss to the Group's
results in 2017.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE SIX MONTHSED 30 JUNE 2017
9) Acquisitions of businesses (continued)
On acquisition, intangible assets relating to software and to
customer contracts and related relationships have been
re-evaluated, resulting in a combined upward adjustment of GBP3.8m
to the book value. The amounts relating to the intangible assets
and goodwill are provisional and subject to further evaluation and
adjustment, in accordance with accounting standards. The value of
goodwill reflects amounts in relation to the expected benefit of
the ability to generate new streams of revenue and expected
synergies of combining the operations of Nostrum and the Group.
Recognised amounts of identifiable assets GBPm
acquired and liabilities assumed
=========================================== ======
Intangible assets 4.7
Trade and other receivables 1.4
Cash and cash equivalents 0.8
Trade and other payables (2.7)
Deferred income tax liabilities (0.8)
-------------------------------------------- ------
Net identifiable assets and liabilities 3.4
Goodwill on acquisition 9.1
-------------------------------------------- ------
Total consideration 12.5
Cash acquired (0.8)
Accrued consideration (6.0)
Contingent consideration (6.5)
Net cash inflow in the period (0.8)
-------------------------------------------- ------
As at 30 June 2017, the minimum amount of contingent
consideration payable is GBPnil and the maximum amount is GBP7.0m.
The final amount to be paid will be determined based on the
acquiree's financial performance over the qualifying period and is
only payable if the business grows in line with its business
plan.
Costs of acquiring and integrating the above businesses amounted
to GBP0.3m in the six months ended 30 June 2017 and these are
reflected within exceptional items in the income statement.
10) Finance income and costs
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
Finance income GBPm GBPm GBPm
============================================== ========== ========= ==========
Interest income 0.1 0.1 0.2
Net foreign exchange gains 0.4 - -
from forward contracts
Total finance income 0.5 0.1 0.2
------------------------------------------------- ---------- --------- ----------
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
Finance costs GBPm GBPm GBPm
============================================== ========== ========= ==========
Interest cost on senior secured borrowings 2.9 3.1 6.3
Interest cost on revolving credit facility 0.9 1.3 2.2
Amortised fees 0.6 0.6 1.2
Net finance cost relating to pension scheme 0.2 0.3 0.6
Unwinding of discounted amount in provisions 0.3 0.4 0.7
Cost of interest rate swap
against financial liabilities 0.8 0.8 1.4
Foreign exchange losses 0.1 - -
Other fees and interest 0.1 0.1 -
Total finance costs 5.9 6.6 12.4
------------------------------------------------- ---------- --------- ----------
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE SIX MONTHSED 30 JUNE 2017
11) Net debt
As at As at As at
June June December
2017 2016 2016
GBPm GBPm GBPm
=========================== ======= ======= ==========
Term loan 250.0 250.0 250.0
Revolving credit facility 76.0 64.0 56.0
Other 1.8 0.6 1.9
Cash and cash equivalents (69.6) (52.9) (56.7)
Total net debt 258.2 261.7 251.2
--------------------------- ------- ------- ----------
12) Income tax charge/(credit)
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
Recognised in the statement GBPm GBPm GBPm
of comprehensive income:
================================== ========== ========= ==========
Current tax charge 1.0 0.4 4.7
Deferred tax charge/(credit) 0.5 1.6 (9.6)
================================== ========== ========= ==========
Total income tax charge/(credit) 1.5 2.0 (4.9)
================================== ========== ========= ==========
The standard rate of corporation tax in the UK is 19% with
effect from 1 April 2017 (2016: 20%) and accordingly the profits
for the half year ended 30 June 2017 are taxed at 19%. The taxation
charge for the six months ended 30 June 2017 is based on an
estimated full year underlying effective tax rate of 17% (2016:
22%).
13) Share capital
As at As at As at
June June December
2017 2016 2016
Allotted, called up and fully GBPm GBPm GBPm
paid
=============================== ====== ====== ==========
Ordinary shares of GBP0.001
each 0.3 0.3 0.3
Total share capital 0.3 0.3 0.3
=============================== ====== ====== ==========
As at As at As at
June June December
2017 2016 2016
Ordinary shares of GBP0.001 Number Number Number
each - in thousands of shares
================================ ======== ======== ==========
On issue - fully paid 300,081 300,000 300,013
================================ ======== ======== ==========
The Group issued 68,001 ordinary shares on exercise of employee
share options during the six months ended 30 June 2017. The shares
were issued at an exercise price of GBP1.27 per share. Proceeds of
GBP0.1m were received resulting in an increase to the share premium
account.
14) Employee benefits
Defined benefit pension plans
The Group operates three funded defined benefit pension plans in
the UK; Equiniti ICS Limited, Paymaster (1836) Limited and MyCSP
Limited. The defined benefit obligation as at 30 June 2017 is
calculated on a year-to-date basis using the latest actuarial
valuation as at 31 December 2016 and has not been updated for the
half year statement in line with Group policy. This will be updated
as part of our normal year end processes on 31 December 2017.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE SIX MONTHSED 30 JUNE 2017
15) Financial risk management
The Group's activities expose it to a variety of financial
risks: credit risk, liquidity risk and market risk (including
interest rate risk, foreign exchange rate risk and equity price
risk). The condensed financial statements do not include all the
financial risk management information and disclosures required in
the annual financial statements and they should be read in
conjunction with the Annual Report and Accounts 2016. There have
been no changes in the risk management department or in any risk
management policies since the year end.
16) Financial instruments fair value disclosures
There are no material differences between the carrying value of
assets and liabilities and their fair value. The only financial
instruments measured at fair value are interest rate swaps and
foreign exchange forward contracts.
The following table presents the Group's financial assets and
liabilities that are measured at fair value:
As at As at As at
June June December
2017 2016 2016
Level GBPm GBPm GBPm
================================== ====== ====== ====== ==========
Financial assets
Derivative financial instruments 2 4.6 12.0 8.0
Financial liabilities
Derivative financial instruments 2 2.4 4.4 3.1
---------------------------------- ------ ------ ------ ----------
There were no transfers between levels during the period.
Valuation techniques used to value these financial instruments are
consistent with those used for the year ended 31 December 2016 as
disclosed in note 6.10 of the Annual Report and Accounts 2016.
17) Related party transactions
Transactions with key management personnel
The compensation of key management personnel (including the
Directors) is as follows:
6 months 6 months
ended ended Year ended
June June December
2017 2016 2016
GBPm GBPm GBPm
==================================== ========== ========= ===========
Key management emoluments 1.3 1.1 3.1
Company contributions to money
purchase pension plans - - 0.1
Share based payments 0.7 0.3 0.7
Total 2.0 1.4 3.9
----------------------------------- ---------- --------- -----------
Key management are the Directors of the Group (includes
non-executives), as well as the senior non-statutory Director of
each of the major subsidiaries, who have authority and
responsibility to control, direct or plan the major activities
within the Group.
As part of the IPO process in October 2015, shares were issued
to certain employees of the Group as a result of an incentive
agreement with the then controlling shareholder, Advent. The shares
were treated as an income tax event for the receiving individuals
and are subject to lock up arrangements, as disclosed in the
prospectus. As a consequence, the Group lent those individuals who
received the shares monies to cover their income tax and National
Insurance liabilities. These loans were all subject to relevant
approvals through the IPO process and are treated as a benefit in
kind to the receiving individuals. All benefiting individuals have
entered into a loan agreement with the Group. These loans must be
repaid no later than October 2018. The total value of loans made to
key management personnel outstanding at 30 June 2017 was GBP1.0m
(31 December 2016: GBP1.0m).
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
FOR THE SIX MONTHS ENDED 30 JUNE 2017
18) Reconciliation of profit to cash generated from
operations
6 months 6 months Year
ended ended ended
June June December
2017 2016 2016
GBPm GBPm GBPm
=== ================================= ========== ========= ==========
Profit before income tax 8.7 8.8 28.5
Adjustments for:
Depreciation of property, plant
and equipment 3.0 2.5 5.4
Amortisation of software 7.7 8.3 16.0
Amortisation of acquisition
related intangibles 13.3 12.7 25.3
Finance income (0.5) (0.1) (0.2)
Finance costs 5.9 6.6 12.4
Share-based payments expense 1.5 0.9 1.7
Changes in working capital:
(Increase)/decrease in trade
and other receivables (0.9) (4.9) 0.3
Increase/(decrease) in trade
and other payables 4.8 (17.0) (23.0)
Decrease in provisions - (1.0) (2.4)
--------------------------------------- ---------- --------- ----------
Total cash generated
from operations 43.5 16.8 64.0
-------------------------------------- ---------- --------- ----------
19) Events after the reporting period
On 12 July 2017, the Group announced the proposed acquisition
and carve out of the Wells Fargo Share Registration & Services
("WFSS") business for a total cash consideration of $227.0m
(cGBP176.0m) subject to certain customary closing adjustments and
conditions.
The cash consideration and Equiniti's transaction expenses are
expected to be financed from a planned GBP122.0m (c$160.0m) fully
underwritten rights issue and GBP120.0m (c$155.0m) fully
underwritten new debt facilities.
The rights issue is expected to be launched in September 2017,
subject to the approval of the acquisition by shareholders and
other customary conditions, such as the availability of new debt
facilities.
The anticipated exceptional charge for the year ended 31
December 2017 is GBP13.0m, with GBP3.9m recognised in the six
months ended 30 June 2017, mainly from advisory related activities.
The remaining expected exceptional charge will relate to the
completion costs of the deal and integration of the business,
including the provision of Equiniti's state-of-the-art Sirius
platform to the US share registry market.
APPENDIX 1
RESTATED SEGMENTAL ANALYSIS
H1 Re-org H1 H2 Re-org H2
2016 2016 2016 2016
Reported Restated Reported Restated
---------- ------- ---------- ---------- ------- ----------
REVENUE (GBPm)
Investment
Solutions 62.1 0.4 62.5 61.5 - 61.5
Intelligent
Solutions 58.4 (3.7) 54.7 58.0 (3.4) 54.6
Pension Solutions 65.6 3.3 68.9 65.8 3.4 69.2
Interest
Income 5.8 - 5.8 5.4 - 5.4
Central Costs - - - - - -
-------------------
Total Group 191.9 - 191.9 190.7 - 190.7
------------------- ---------- ------- ---------- ---------- ------- ----------
EBITDA prior to exceptional
items (GBPm)
Investment
Solutions 18.1 (0.3) 17.8 20.5 (0.8) 19.7
Intelligent
Solutions 12.8 (0.7) 12.1 16.7 (0.5) 16.2
Pension Solutions 11.0 1.5 12.5 13.3 1.9 15.2
Interest
Income 5.8 - 5.8 5.4 - 5.4
Central Costs (6.5) (0.5) (7.0) (4.7) (0.6) (5.3)
-------------------
Total Group 41.2 - 41.2 51.2 - 51.2
------------------- ---------- ------- ---------- ---------- ------- ----------
EBITDA margin prior to exceptional
items (%)
Investment
Solutions 29.1% 28.5% 33.3% 32.0%
Intelligent
Solutions 21.9% 22.1% 28.8% 29.7%
Pension Solutions 16.8% 18.1% 20.2% 22.0%
-------------------
Total Group 21.5% 21.5% 26.8% 26.8%
------------------- ---------- ------- ---------- ---------- ------- ----------
Figures have been restated to take
account of the following re-organisation:
Company Secretariat - moved from Intelligent
Solutions to Investment Solutions.
HR Payroll - moved from Intelligent
Solutions to Pension Solutions.
Flexible Benefits - moved from Investment
Solutions to Pension Solutions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GMGZNNNKGNZM
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