Results for 6 Months Ended 30 June 2018 Delivering on our long-term - - PowerPoint PPT Presentation

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Results for 6 Months Ended 30 June 2018 Delivering on our long-term - - PowerPoint PPT Presentation

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Results for 6 Months Ended 30 June 2018 Delivering on our long-term strategy Agenda 01 02 03 Introduction Key Highlights Group Financials 04 05 06 Divisional Review Outlook Q&A 2 | Equiniti Group plc 2018 Strong Financial

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SLIDE 1

Results for 6 Months Ended 30 June 2018

Delivering on our long-term strategy

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SLIDE 2

2 | Equiniti Group plc 2018

01 Introduction 02 Key Highlights 03 Group Financials 04 Divisional Review 05 Outlook 06 Q&A

Agenda

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3 | Equiniti Group plc 2018

Strong Financial Performance Underpins Expectations for FY 2018

Growth

Revenue

£254.0m

+ 30.4%

Underlying EBITDA

£55.0m

+ 31.6%

Earnings

Underlying EPS

7.7p

+13.2%

Dividend

1.83p

+ 11.6%

Cash

Operating cash flow conversion

102%

(7)pts

Leverage

2.8x

–

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SLIDE 4

4 | Equiniti Group plc 2018

Group Financials

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5 | Equiniti Group plc 2018

£m Reported H1 2018 Reported H1 2017 Reported Change % Reported FY 2017 Revenue 254.0 194.8 30.4 406.3 Underlying EBITDA 55.0 41.8 31.6 98.2 Depreciation (3.1) (3.0) 3.3 (5.7) Amortisation - software (11.6) (7.7) 50.6 (18.3) Amortisation – acquired intangibles (15.6) (13.3) 17.3 (26.7) EBIT 24.7 17.8 38.8 47.5 Non-operating charges (14.1) (3.9) 261.5 (10.5) Reported EBIT 10.6 13.9 (23.7) 37.0 Finance costs (6.9) (5.4) 27.8 (11.7) Profit before tax 3.7 8.5 (56.5) 25.3 Tax (1.0) (1.5) (33.3) (10.0) Profit from continuing operations 2.7 7.0 (61.4) 15.3 Non-controlling interest (1.8) (1.6) 12.5 (3.7) Profit attributable to ordinary shareholders 0.9 5.4 (83.3) 11.6 Earnings per share (pence) – Basic 0.2 1.7 (88.2) 3.6 Earnings per share (pence) - Underlying 7.7 6.8 13.2 16.9

Group Income Statement

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SLIDE 6

6 | Equiniti Group plc 2018

£m Reported H1 2018 Reported H1 2017 Reported Change % Organic Change % Revenue Investment Solutions 68.9 64.2 7.3 6.7 Intelligent Solutions 78.3 55.2 41.8 34.8 Pension Solutions 65.4 70.7 (7.5) (7.5) Interest Income 6.0 4.7 27.7 27.7 Total UK & Europe 218.6 194.8 12.2 10.3 EQ USA 35.4

  • (6.3)

Total Revenue 254.0 194.8 30.4 7.7 Underlying EBITDA Investment Solutions 22.2 20.2 9.9 Intelligent Solutions 17.6 13.2 33.3 Pension Solutions 9.6 10.5 (8.6) Interest Income 6.0 4.7 27.7 Total UK & Europe 55.4 48.6 14.0 EQ USA 7.5

  • Divisional Total

62.9 48.6 29.4 Central Costs (7.9) (6.8) 16.2 Total Underlying EBITDA 55.0 41.8 31.6 Underlying EBITDA margin % 21.7 21.5 0.2

Divisional Performance

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7 | Equiniti Group plc 2018

Investment Solutions

  • Strong corporate

action activity across a range of clients (£8.1m vs. £4.7m), double-digit growth in international payments and growth in share trading

Intelligent Solutions

  • Very good

performance in large scale remediation projects and new client wins in customer on- boarding and credit services

Pension Solutions

  • Revenue contraction

as anticipated following contract loss (Mineworkers) and reduction in scope (NHS) in 2017

Interest

  • Benefit of UK rate

rise in 2017

EQ USA

  • Benefit of rising

interest rate environment, but muted corporate action activity has resulted in a (6.3)% pro-forma reduction in revenue

  • EBITDA growth of 5.6%

Central Costs

  • Increased share-

based payments charge

Revenue Reported growth 30.4% / organic growth 7.7% Underlying EBITDA Reported growth 31.6%

194.8 4.7 23.1 (5.3) 1.3 35.4 254.0 H1 2017 H1 2018 Investment Solutions Intelligent Solutions Pension Solutions Interest EQ USA H1 2017 H1 2018 Investment Solutions Intelligent Solutions Pension Solutions Interest EQ USA 41.8 2.0 4.4 (0.9) 1.3 7.5 (1.1) 55.0 Central Costs

Trading Performance

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8 | Equiniti Group plc 2018

£m Reported H1 2018 Reported H1 2017 Reported FY 2017 Underlying EBITDA 55.0 41.8 98.2 Working capital movement 0.9 4.0 (6.5) Operating cash flow prior to non-operating charges 55.9 45.8 91.7 Operating cash flow conversion (%) 102 109 93 Non-operating charges (11.4) (1.9) (8.3) Capital expenditure (18.1) (16.4) (31.0) Net interest costs (4.3) (4.5) (9.0) Taxes paid

  • (2.5)

(3.7) Other

  • (0.4)
  • Free cash flow to equity holders

22.1 20.1 39.7 Net financing cash flows 133.6 20.1 (56.7) Net proceeds from Rights Issue

  • 114.2

Investment in current and prior year acquisitions (170.4) (14.9) (19.1) Payment of deferred consideration (2.0)

  • (1.9)

Dividends paid (including payment to non-controlling interest) (13.6) (12.4) (17.7) Net cash movement (30.3) 12.9 58.5

Cash Flow

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9 | Equiniti Group plc 2018

Cashflow Generation and Distribution Since IPO (2016 – H1 2018)

  • Non-Operating charges: £12.5m WFSS integration costs, £11.5m WFSS

transaction costs, £5.7m restructuring and transformation costs and excludes IPO related costs in 2016. Rounding to nearest £1m for simplicity

246

EBITDA Working Capital Operating Cash Non-operating Charges Capital Expenditure Net Interest Costs Minority Dividends Rights Issue/Borrowings/ Acquisitions Net Cash Generation Ordinary Dividends Net Cash Movement

(5) 240 (30) (77) (6) (10) 117 (23) (55) (32) 8

Tax Paid

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10 | Equiniti Group plc 2018

£m Reported H1 2018 Reported H1 2017 Reported FY 2017 Underlying EBITDA 55.0 41.8 98.2 Working capital movement 0.9 4.0 (6.5) Operating cash flow 55.9 45.8 91.7 Operating cash flow conversion (%) 102 109 93

Working Capital

29 29 38 28 33 46 54 55 60

  • 10

20 30 40 50 60 70

  • 10

20 30 40 50 60 70 80 90 100 FY 2016 FY 2017 H1 2018 Trade receivables - £'m Accrued income - £'m Days Sales Outstanding

  • Receivable financing facility balance reduced from £19.9m to £14.0m with downward trend
  • Accrued income represents amounts recognised as revenue but not yet billed
  • No income is accrued without a contract in place
  • Given the blue chip nature of client base, there are minimal bad debts (H1 2018:

£0.1m; FY 2017: £0.3m)

  • Accrued income increased in 2018 due to
  • Expansion into the US market
  • An increase in remediation projects which are invoiced a month in arrears
  • Growing software sales with billing milestones, e.g. 1/3 on signing, 1/3 on

software configuration, 1/3 on go-live

  • Growth in corporate action income
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11 | Equiniti Group plc 2018

£m Reported H1 2018 Reported H1 2017 Reported FY 2017

Transaction costs (5.2) (3.0) (6.3) Integration costs (8.9) (0.4) (3.6) Restructuring and transformation costs

  • (0.5)

(0.6) Contingent consideration release

  • Total Non-Operating Charges

(14.1) (3.9) (10.5) £m Reported H1 2018 Reported H1 2017 Reported FY 2017 Property (1.0) (0.8) (1.1) Software development (13.8) (15.6) (29.2) EQ USA Integration (3.3)

  • (0.7)

Total capital expenditure (cash) (18.1) (16.4) (31.0) As % of Group revenues 7.1% 8.4% 7.6%

Non-Operating Charges and Capital Expenditure

  • Transaction costs reflect deal advisory and legal fees which were contingent on

successful completion of the WFSS transaction

  • Integration costs only relate to the US and include programme delivery, the

development of standalone functions and delivery of systems and processes to run the business

  • Previously announced FY 2018 restructuring and transformation costs of £2m in

respect of Pensions Solutions absorbed into underlying EBITDA

  • In H1 2018, £0.8m of this charge was absorbed into Pension Solutions EBITDA
  • Post completion of the US integration programme, expectation is that non-
  • perating charges will be zero in the absence of any transformational

transactions

  • Property spend driven by the consolidation and improvement of our sites

supporting the Credit Services business in Intelligent Solutions

  • Internal software development reduction due to lower regulatory spend

following the successful completion of MiFID II

  • US Integration spend reflects IT server purchases and software development to

enable the business to operate on a standalone basis

  • Post completion of the US integration programme, the expectation is that capex

will stabilise to 6-7% of revenue each year

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12 | Equiniti Group plc 2018

£m H1 2018 Future tax deductions on tax losses carried forward Future tax deductions on intangible assets Future tax deductions on property, plant and equipment 229.0 516.0 33.0 Total tax assets 778.0

Tax Assets

  • The Group has £778.0m of tax attributes that reduce the cash tax effective rate compared to the profit and loss account effective rate
  • The tax impact of these attributes is recognised as deferred tax on the balance sheet, for which tax relief is available
  • Included within the intangible assets tax attribute is the customer relationship and goodwill intangibles related to the acquisition of the trade and

assets of EQ USA from 1st February 2018

  • The forecast cash tax effective rate over the next few years is estimated to be c13% for 2018 and 2019 and c17% from 2020 onwards, reflecting

completion of the integration and growth in EQ USA

  • We consider the cash tax effective 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 will unwind and reduce our overall tax liabilities

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13 | Equiniti Group plc 2018

£m As at 30 June 2018 As at 30 June 2017 As at 31 December 2017 Term loan 320.3 250.0 250.0 Revolving credit facility 71.4 76.0

  • Other

1.6 1.8 1.7 Cash and cash equivalents (85.0) (69.6) (115.2) Total net debt 308.3 258.2 136.5 Net debt/EBITDA prior to non-operating charges 2.8 2.8 1.4

Leverage and Net Debt

  • At 30 June 2018, net debt was higher at £308.3m (30 June 2017: £258.2m), reflecting the acquisition of EQ USA
  • The Group has substantial liquidity to support its growth ambitions and ongoing working capital requirements
  • Cash balances and undrawn RCF facilities at 30 June 2018 were £212.6m (30 June 2017: £143.7m)
  • Net debt/EBITDA adjusted for a full year of EQ USA earnings was 2.5x at 30 June 2018
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14 | Equiniti Group plc 2018

Restated (£m) Underlying EBITDA (£m) Division 2017 reported IFRS 15 adjustment 2017 restated 2017 reported IFRS 15 adjustment 2017 restated Investment Solutions 64.2

  • 64.2

20.2

  • 20.2

Intelligent Solutions 55.4 (0.2) 55.2 13.4 (0.2) 13.2 Pension Solutions 70.5 0.2 70.7 10.5

  • 10.5

Interest 4.7

  • 4.7

4.7

  • 4.7

Total UK and Europe 194.8

  • 194.8

48.8 (0.2) 48.6 EQ USA

  • Central costs
  • (6.8)
  • (6.8)

Group Total 194.8

  • 194.8

42.0 (0.2) 41.8

Restated results for six months ended 30 June

IFRS 15 – No Material Change

Transitional services

  • Where transitional services over a long life contract do not represent a

distinct performance obligation, revenue from this service will be recognised

  • ver the life of the contract rather than over the transition period and the

supporting costs will be deferred and also spread over the contract duration

Software licenses

  • Term licence revenue to be recognised at point in time under IFRS 15

compared with over time under IAS 18 where delivery of the licence fulfils the performance obligation

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15 | Equiniti Group plc 2018

Divisional Review

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16 | Equiniti Group plc 2018

Progress against strategy Strategy by division

01 02

USA integration Outlook

03 04

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17 | Equiniti Group plc 2018

Progress against strategic objectives

Grow sales to existing clients

  • Renewal of all UK

registration clients including Carnival, Prudential and EasyJet

  • Major renewals in the

US including CVS, General Electric, JP Morgan, 3M and MDU

  • Continued cross-selling
  • f fintech capabilities
  • Large scale

remediation and fulfilment projects now running with major UK banks

  • Nine new mandates for

registration and/or share plans including Arrow Global, National Grid and Rentokil

  • 70% of new company

listings including Anexo, Avast and Urban Exposure

  • Pension administration

to Combined Nuclear Pension Plan, Sussex & Surrey Police and UK Atomic Energy

  • US transfer agency

capability in place following 1st February completion of EQ USA

  • Boudicca Proxy

Services acquired in April 2018

  • Estate management

model growing, including ‘tell-us-once’ pilot for six major UK banks

  • Blockchain registration

and proxy solicitation now running in test

  • More than 800 IT and
  • perations staff now
  • ffshore in Chennai

and committed to a new 400-seat technology centre in Bangalore

  • Continuing efficiency

gains in the UK business with further margin expansion

  • Multiple automation

and digitisation

  • pportunities arising

from MiFID II

  • Operating cash flow

conversion ahead of 95% target

  • Continuing investment

in development capex for core operating platform and new fintech products

  • Pipeline of late-stage

bolt-on acquisitions under evaluation

Win new B2B Clients Develop & acquire new capabilities Reinvest strong cash flows Operating leverage

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18 | Equiniti Group plc 2018

Digitisation Regulation Customer Experience Efficiency

Common themes across the Group

Data Technology Talent

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19 | Equiniti Group plc 2018

Revenue by business line

Investment Solutions (incl US) – 41% Interest Income – 2% Intelligent Solutions – 31% Pension Solutions – 26%

Revenue visibility beginning of year

Project – 30% To secure – 10% Transactional – 10% Contracted – 50%

Revenue by geography

UK – 86% US – 14%

Balanced Divisional Portfolio

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20 | Equiniti Group plc 2018

Market Leader in Investment Solutions

#1 #1

Registrar to

c50%

  • f the

FTSE 100 >60 years’

experience as Registrar

29 years’

average client relationship Administer

>1.2m

SAYE and SIP plans Manage

>23m

shareholder accounts Make

£30bn

in dividend payments each year

Make payments in

130 currencies

to around

180 countries

600,000+

Proxy instructions processed per annum

Share Registration

Employee Share Plans

Revenue mix

Transactional – 10% Project – 20% Contracted – 70%

34.5 37.5 43.5 20.2 22.2

EBITDA £m

FY 15 FY 16 FY 17 H1 17 H1 18

116.1 124.0 132.3 64.2 68.9

Revenue £m

FY 15 FY 16 FY 17 H1 17 H1 18

+9.9% +7.3%

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21 | Equiniti Group plc 2018

Client Transfers

The Investment Co.

(Link Asset Services) (Link Asset Services) (Link Asset Services) (Computershare) (Equatex) (Link Asset Services) (Link Asset Services)

IPOs 70% of new mandates including M&A Activity Product Development

Proxy Solicitation Bereavement Services Bereavement Services

Underpinning future growth

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22 | Equiniti Group plc 2018

Intelligent Solutions

#3

Remediation & Regulatory Services

Revenue mix

Contracted – 30% Project – 70%

21.5 28.3 32.7 13.2 17.6

EBITDA £m

FY 15 FY 16 FY 17 H1 17 H1 18

92.3 109.3 124.4 55.2 78.3

Revenue £m

FY 15 FY 16 FY 17 H1 17 H1 18

+33.3% +41.8%

Regulatory Remediation

End-to-end complex remediation and complaints management, deploying technology and people

Credit Services

End-to-end loan servicing platform to financial institutions,

  • ffering unrivalled

depth of functionality in a single, integrated, scalable solution

KYC

KYC technology and services provider to leading financial institutions and banks, including

  • nboarding and

PEP / sanctions screening

Data Analytics

Data solutions including access to consumer, business and targeted online data

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23 | Equiniti Group plc 2018

Pension Solutions

#1 #2

Public Sector 3rd Party Admin

Revenue mix

Transactional – 10% Project – 20% Contracted – 70%

26.8 29.9 24.6 10.5 9.6

EBITDA £m

FY 15 FY 16 FY 17 H1 17 H1 18

142.5 151.3 139.5 70.7 65.4

Revenue £m

FY 15 FY 16 FY 17 H1 17 H1 18

  • 8.6%
  • 7.5%

Support over

9m

pension scheme members Pay over

£31bn

a year to 3.5m customers Veterans paid for over

180 years

Our Compendia platform has won

  • ver 10

industry awards in the past 2 years

We pay around

20%

  • f the UK Pensioners

Over 600

pension schemes administered

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24 | Equiniti Group plc 2018

EQ USA

#2 #3

By Shareholders Served By Issuers Served

Revenue mix

Interest – 10% Transactional – 30% Contracted – 60%

7.1 7.5

EBITDA £m

H1 17 H1 18

37.8 35.4

Revenue £m

H1 17 H1 18

+5.6%

  • 6.3%

1,200

Public and Private Companies Rich heritage since

1929

Relationships with

c15%

  • f the NYSE

Average

c20 years’

industry experience

92m

shareholder records processed Highest rated

Transfer Agent

Interaction with

5m

active shareholders

99%

Retention of corporate clients

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25 | Equiniti Group plc 2018

EQ USA – Integration Update

July 2017 – Feb 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Completion (including regulatory approval and funding Day 1 Operational transition Implementation of HR, Finance and CRM Systems Data centres in place Second operating site Separation from Wells Bank Launch of new products

Synergies – $10m by end 2019 Project Spend – £42m

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26 | Equiniti Group plc 2018

Outlook

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27 | Equiniti Group plc 2018

Full year expectations towards upper end

  • f consensus

Continuing market leadership in the UK with emerging

  • pportunities in

the US

01 02

Further transformation and margin expansion

  • pportunities exist

Continuing organic growth, cash generation and resilience

03 04

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28 | Equiniti Group plc 2018

Questions and Answers

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29 | Equiniti Group plc 2018

Appendix

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30 | Equiniti Group plc 2018

£m As at June 2018 As at June 20171 As at December 2017 Assets Non-current assets 874.6 726.9 713.7 Current assets 236.8 183.4 216.0 Total assets 1,111.4 910.3 929.7 Liabilities Non-current liabilities 436.4 372.9 290.0 Current liabilities 159.8 138.8 128.0 Total liabilities 596.2 511.7 418.0 Net assets 515.2 398.6 511.7 Total equity 515.2 398.6 511.7

  • At 30 June 2018, net debt was higher at £308.3m (30 June 2017: £258.2m), reflecting the acquisition EQ USA
  • The Group has substantial liquidity to support its growth ambitions and ongoing working capital requirements
  • Cash balances and undrawn RCF facilities at 30 June 2018 were £212.6m (30 June 2017: £143.7m)
  • Net debt/EBITDA adjusted for a full year of EQ USA ownership was 2.5x
1Restated to reflect changes in accounting standards

Balance Sheet

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31 | Equiniti Group plc 2018

£m H1 2018 H1 2017 Underlying EBITDA Less: Depreciation of property, plant and equipment Less: Amortisation of software Less: Net finance costs 55.0 (3.1) (11.6) (6.9) 41.8 (3.0) (7.7) (5.4) Underlying profit before tax 33.4 25.7 Cash tax at 13% / 14% (4.3) (3.6) Underlying profit after tax 29.1 22.1 Non-controlling interests (1.8) (1.6) Underlying profit after tax 27.3 20.5 Weighted average number of shares adjusting for timing of rights issue (m) Employee share options (m) 353.7 1.9 300.1 1.1 Diluted weighted average of shares in issue, adjusting for timing of rights issue (m) 355.6 301.2 Underlying tax rate 13.0% 14.0% Basic underlying earnings per share (p) Diluted underlying earnings per share (p) 7.7 7.7 6.8 6.8

Underlying Earnings Per Share

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32 | Equiniti Group plc 2018

This presentation may contain ‘forward-looking statements’ with respect to certain of the Group’s plans and its current goals and expectations relating to its future financial performance condition, performance, results, strategic initiatives and objectives. Generally, words such as “may”, “could”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “aim”, “outlook”, “believe”, “plan”, “seek”, “continue” or similar expressions identify ‘forward-looking statements. These forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the Group’s control, including amongst other things, UK domestic and global economic business conditions, market-related risks such as fluctuation in interest rates, the policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation or regulations in the jurisdictions in which the Group operates. As a result, the Group’s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in the Group’s forward looking statements. Forward-looking statements in this presentation are currently only as of the date on which such statements are made. The Group undertakes no obligation to update any forward-looking statements, save in respect of any requirement under applicable law or regulation. Nothing in the presentation should be construed as a profit forecast.

Disclaimer