EQUINITI GROUP PLC UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2018

Transcription

1 27 July 2018 EQUINITI GROUP PLC UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2018 Equiniti Group plc ( Equiniti or the Group ), the multinational specialist technology outsourcer providing nondiscretionary payment and administration services, today publishes its interim results for the six months to 30. STRONG RESULTS: CONTINUED MOMENTUM AND DELIVERY OF OUR LONGTERM STRATEGY Financial Highlights H H1 1 Change % Revenue ( m) Underlying EBITDA 2 ( m) Underlying EBITDA margin (%) pts Operating cash flow conversion 3 (%) (7) Reported EBIT (23.7) Profit after tax (61.4) Earnings per share 4 (EPS) (pence) (88.2) Underlying 5 EPS (pence) Dividend per share 6 (pence) Net debt ( m) Leverage (x) Strong doubledigit revenue and underlying EBITDA growth, ahead of expectations, including EQ USA Revenue growth of 30.4%, with strong organic growth of 7.7% 7, supported by: o Renewal of all UK registration clients including Carnival, EasyJet, GSK, Prudential and QinetiQ; o Increased UK market share underpinned by new name business wins including Bodycote, Hiscox, and Low & Bonar; o 70% of new company listings including Acacia Pharma, Avast, IntegraFin Holdings and KRM 22; o Major renewals in the US including CVS, General Electric, JP Morgan, 3M and MDU; o New client wins across all divisions including CNPP, Persimmon and Ulster Bank; o Strong growth in Intelligent Solutions; and o Pension Solutions contraction in line with expectations New capabilities established, including: o Wells Fargo Shareowner Services (EQ USA) acquisition successfully completed on 1 st February with operations transitioned and integration underway; o Acquisition of Boudicca Proxy completed on 27 th April, crosssold to seven registration clients; and o Continued traction with estate management including a tell us once pilot for six major UK banks Underlying EBITDA growth of 31.6% with margin increased to 21.7%, driven by strong performances in Investment Solutions and Intelligent Solutions, and continued operational improvement Lower reported EBIT of 10.6m with profit after tax of 2.7m reflecting 14.1m of nonoperating charges arising from the acquisition of EQ USA Net debt of 308.3m inclusive of acquisitionrelated debt and costs of 170.4m with yearonyear leverage maintained at 2.8x Interim dividend growth of 11.6% to 1.83 pence per share, in line with progressive dividend policy Commenting on the Group s results, Guy Wakeley, Chief Executive, said: The first half of 2018 has been our strongest reporting period yet, with accelerating organic growth supplemented by the successful completion of the high quality Shareowner Services business from Wells Fargo Bank. Our UK business remains the undisputed market leader for registration and share plans, with more new clients choosing Equiniti. The deployment of these core capabilities into the US, along with proprietary technologies for payments, pensions, credit and analytics, creates multiple opportunities for future growth. We continue to make good progress against our longterm strategy with sustainable organic growth, progressive margin and dividend expansion, and the utilisation of strong cash flow to invest in new capabilities whilst strengthening the balance sheet. We remain committed to disciplined capital allocation into our best performing assets to sustain continued earnings growth. We have been pleased with performance in the first half, and expect full year earnings to be towards the top end of market expectations 8. Equiniti Group plc Results for the six months 30 Page 1 of 40

2 1 Restated for changes in accounting standards (IFRS 9 and IFRS 15) see note 2 for details. 2 For definition of underlying EBITDA, see page Operating cash flow conversion is calculated after allowing for use of a receivables financing facility the Group has in place, details of which can be found on page 9. 4,6 EPS and dividend have been restated to reflect the bonus element of the rights issue associated with the EQ USA acquisition. See page 40 for calculation of restated dividend. 5 For definition of underlying EPS, see page For definition of organic growth, see page 7. 8 For market expectations, see page 6. Analyst and Investor presentation Equiniti 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, and an archive version of the presentation will be available on the website later that day. Conference call details: Participant dialin : +44 (0) Password : Equiniti For further information please contact: Analyst/Investor enquiries: Equiniti Group plc Guy Wakeley, Chief Executive +44 (0) John Stier, Chief Financial Officer Frances Gibbons, Head of Investor Relations Media enquiries: Temple Bar Advisory Alex ChildVilliers + 44 (0) Will Barker + 44 (0) Forwardlooking statements This announcement contains forwardlooking statements regarding Equiniti. These forwardlooking 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 forwardlooking statements contained herein, which speak only as of the date hereof. Equiniti undertakes no obligation to publicly update any forwardlooking statement contained in this release, whether as a result of new information, future developments or otherwise, except as may be required by law. Equiniti Group plc Results for the six months 30 Page 2 of 40

3 GROUP RESULTS Reported H Reported H1 Reported Change % Organic Change % Revenue ( m) Investment Solutions Intelligent Solutions Pension Solutions (7.5) (7.5) Interest Income Total UK & Europe EQ USA 35.4 (6.3) Equiniti Group Underlying EBITDA ( m) Investment Solutions Intelligent Solutions Pension Solutions (8.6) Interest Income Total UK & Europe EQ USA Divisional Total Central Costs (7.9) (6.8) 16.2 Total Underlying EBITDA Underlying EBITDA margin (%) Investment Solutions Intelligent Solutions (1.4) Pension Solutions (0.2) Total UK & Europe EQ USA Equiniti Group OVERVIEW Equiniti has delivered a strong set of results, building on the momentum established in the prior period. Our client relationships are a core strength of the Group and we have retained all of our FTSE clients. The Group has continued to win market share with a number of share registration and share plan clients choosing to move to us from competitors. We have grown our client base, securing 70% of newly listed companies and winning new clients across all divisions. The Group has made progress against its strategic objectives, delivering revenue and profit ahead of expectations, generating strong cash, and increasing the interim dividend whilst maintaining leverage on a proforma basis. Reported revenue increased by 30.4% to 254.0m (H1 : 194.8m) during the period whilst proforma revenue adjusted for acquisitions grew organically by 7.7%. The acquisition of our US business completed successfully on 1 st February 2018 with operations transitioned and integration progressing within budget. The acquisition of Boudicca Proxy on 27 th April 2018 has been fully integrated and has already crosssold into the registration client base. Investment Solutions delivered strong revenue growth supported by the high fidelity of our client base, whilst increasing market share and win rates. Intelligent Solutions also delivered strong growth, with increasing regulation creating multiple opportunities in financial services remediation. As expected, the Pension Solutions business contracted versus the prior period and we continued to actively manage the cost base and drive efficiencies. Revenue from interest was 27.7% higher on average client cash balances of 1.7bn (H1 : 1.7bn) as the Group benefitted from the 25bps increase in UK interest rates in November. Two thirds of the balances are hedged with instruments secured to August 2018 ( 650m) and July 2020 ( 380m). Underlying EBITDA, which excludes nonoperating charges of 14.1m relating to the acquisition and integration of EQ USA, increased by 31.6% to 55.0m (H1 : 41.8m) reflecting a strong performance in Investment Solutions and Intelligent Solutions along with the impact of acquisitions made in the period. Operating free cash flow conversion was 102% (H1 : 109%) despite a 29.6% reduction in the receivables financing facility from 19.9m at 31 to 14.0m at 30. This facility is forecast to reduce further subject to commercial requirements. Free cash flow to equity holders was 22.1m (H1 : 20.1m). Net debt of 308.3m (30 June : 258.2m) represents a ratio of 2.8x net debt/ebitda (30 June : 2.8x), and is net of acquisitionrelated debt and costs of 170.4m. Net debt/ebitda adjusted for a full year of EQ USA earnings was 2.5x at 30. See page 40 for adjusted calculation. Equiniti Group plc Results for the six months 30 Page 3 of 40

4 The Board has declared an interim dividend of 1.83 pence per share, representing growth of 11.6% (H1 : 1.64 pence per share). The interim dividend is to be paid on 26 th October 2018 to shareholders on the register of members at close of business on 14 th September Any shareholder wishing to participate in the Equiniti Dividend Reinvestment Plan ( DRIP ) needs to have submitted their election to do so by 5 th October We maintain our progressive dividend policy which targets the distribution of around 30% of our normalised profit attributable to ordinary shareholders each year. OPERATIONAL REVIEW We serve our clients through four divisions: Investment Solutions, Intelligent Solutions, Pension Solutions and EQ USA. The integrated nature of our client base and strong client relationships result in shared clients across the Group. This provides the opportunity for us to continually enhance our performance through crossselling and upselling. Our entry point is often the provision of share registration services, with clients taking further services from us over time. In addition to our four divisions, the Group earns interest income on balances we administer on our clients and customers 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. H H1 Reported Change % Revenue ( m) Underlying EBITDA ( m) Underlying EBITDA margin (%) Revenue in Investment Solutions increased by 7.3% to 68.9m (H1 : 64.2m) with organic growth of 6.7%, driven by our high fidelity client base, increasing market share and win rates, along with good growth in stock market activity and double digit growth in International Payments. It was also a significant period for corporate action activity, with revenue growth from fees of 72.3% to 8.1m (H1 : 4.7m). Underlying EBITDA increased by 9.9%, with margin of 32.2% as a result of organic revenue growth, an increase in higher margin project work and continued focus on operating leverage. Share registration delivered a strong performance, renewing all clients in the period including Carnival, GSK, EasyJet, QinetiQ and Prudential. The division continued to make excellent progress with competitor wins and was appointed as registrar and/or share plan provider to clients including Arrow Global, Bodycote, Hiscox, Low & Bonar, National Grid and Rentokil. The division was also highly successful at winning IPO mandates, securing 70% of those coming to market including Anexo, Avast, KRM 22, Mind Gym and Urban Exposure. There has been good traction with our estate management offering, with the tellusonce pilot with six major UK banks now live. The acquisition of Boudicca Proxy on 27 th April has been fully integrated and already crosssold into the Group s registration client base. Equiniti Group plc Results for the six months 30 Page 4 of 40

5 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, onboarding new clients and specialist resource for rectification and remediation. H H1 Reported Change % Revenue ( m) Underlying EBITDA ( m) Underlying EBITDA margin (%) (1.4) Revenue in Intelligent Solutions increased by 41.8% to 78.3m (H1 : 55.2m) underpinned by strong organic growth of 34.8% and a strong performance across all service offerings. Underlying EBITDA increased by 33.3% to 17.6m as a result of strong organic growth driven by remediation services. The division won a wide range of work during the period with new client wins across all service lines including customer onboarding services to Ulster Bank, credit services to MotoNovo, data analytics to Neilson and IT solutions to the Information Commissioner s Office. There was strong demand for remediation services with client wins including multiple large scale remediation and fulfilment projects now underway with major UK Banks. 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 H H1 Reported Change % Revenue ( m) (7.5) Underlying EBITDA ( m) (8.6) Underlying EBITDA margin (%) (0.1) As expected, revenue in Pension Solutions decreased by 7.5% to 65.4m (H1 : 70.7m) with a decrease in underlying EBITDA of 8.6% to 9.6m as a result of a competitive environment and a small number of contract losses and scope changes at the end of. The previously announced 2.0m of restructuring and transformation costs in respect of Pension Solutions will be expensed this financial year. 0.8m is therefore reflected in underlying EBITDA in H We continue to focus on stabilising the trading performance by managing the cost base with initiatives on plan to conclude at the end of Despite a challenging market environment the division renewed all relationships in the period and continued to win new clients including the UK Atomic Energy Authority and Surrey & Sussex Police, and a 10year contract to administer the Combined Nuclear Pension Plan. MyCSP continued to deliver in line with expectations and we anticipate that the contract will now run until at least Equiniti Group plc Results for the six months 30 Page 5 of 40

6 EQ USA EQ USA provides creative solutions for shareowner management. The division offers a range of transfer agent services that enable our clients to manage share registers, communicate with shareowners and undertake significant corporate actions simply and effectively. H H1 * Proforma Change % Revenue ( m) (6.3) Underlying EBITDA ( m) Underlying EBITDA margin (%) * 1 February to 30 June The acquisition of EQ USA successfully completed on 1 st February 2018 and results were consolidated into the Group from this date. Prior period performance is shown here to reflect the underlying performance of this division. Revenue in the period decreased by 6.3% to 35.4m (: 37.8m) reflecting the H2 bias of the business and a reduction in corporate action revenue to 2.0m (H1 : 3.3m). Revenue from interest income increased by 9.5% to 4.6m (: 4.2m) on average cash balances of 563m. Underlying EBITDA grew by 5.6%, with margin progression of 2.4pts as a result of treasury strategy and good cost discipline. Whilst there has been some attrition amongst smaller clients during the period prior to completion, the division has retained all of its major clients including a fiveyear extension with General Electric and our foundation contract with MDU, a client of the Group since Other major renewals include CVS, JP Morgan and 3M. There has been early success with selling our UK credit services to our US client base including wins with Advanced Partners, Baron Finance and Capital Business Credit. New client wins in the period have also been encouraging with wins including CPS, Mastercard and NBH. Our integration of EQ USA is proceeding well. We are prioritising the delivery of those system features which accelerate the digitisation of client services and reconfirm the delivery of the programme is within the previously disclosed costs and benefits. OUTLOOK We are confident in our ability to grow sustainably in the UK where we have a differentiated business underpinned by dependable revenues from resilient clients. We are also increasingly excited by our entry into the US market which presents significant opportunity that we shall harvest by leveraging our core strengths, allowing us to add value for clients and shareholders alike whilst maintaining our disciplined focus on regulation and payments. Our objective remains to deliver organic revenue growth supplemented by growth from capability enhancing acquisitions. The dependability of our revenues, the platform nature of our operations and progressive deleveraging enable us to grow underlying profits and earnings ahead of revenue, insulated from the uncertainties in our operating environment. We continue to make progress with our strategy, have the resources, technology and specialists to respond to opportunities as they are presented, and see multiple drivers of growth for the future. We have been pleased with performance in the first half and expect full year earnings to be towards the top end of market expectations market expectations* Revenue : 475.0m to 499.0m Underlying EBITDA : 116.0m to 122.9m *Source: Company Compiled Equiniti Group plc Results for the six months 30 Page 6 of 40

7 FINANCIAL REVIEW Group Income Statement m H H1 Revenue Underlying EBITDA Depreciation (3.1) (3.0) Amortisation software (11.6) (7.7) Amortisation acquired intangibles (15.6) (13.3) EBIT Nonoperating charges (14.1) (3.9) Reported EBIT Net finance costs (6.9) (5.4) Profit before tax Taxation (1.0) (1.5) Profit from continuing operations Noncontrolling interest (1.8) (1.6) Profit attributable to ordinary shareholders Earnings per share (pence) Basic Underlying Revenue Reported revenue increased by 30.4% to 254.0m (H1 : 194.8m) during the year whilst proforma revenue adjusted for acquisitions increased by 7.7%. Organic revenue growth is reported revenue growth adjusted for acquisitions on a likefor like basis. Here we restate for the prior period acquisitions had they been owned in to create a likeforlike comparison of yearonyear progress. This is calculated as follows: Revenue ( m) H1 Reported H1 Adjustment H1 Proforma Investment Solutions Intelligent Solutions Pension Solutions Interest Income Total UK & Europe EQ USA Acquisition of Boudicca Proxy Acquisition of Nostrum Group Acquisition of EQ USA at constant exchange rates Underlying EBITDA Underlying EBITDA prior to nonoperating charges of 14.1m (H1 : 3.9m) increased by 31.6% to 55.0m (H1 : 41.8m) reflecting a strong performance in Investment Solutions and Intelligent Solutions along with the impact of acquisitions made in the period. Nonoperating charges Nonoperating charges are defined as expense items, which if included, would otherwise obscure the understanding of the underlying performance of the Group. Nonoperating charges of 14.1m incurred in the period (H1 : 3.9m) comprise 5.2m of transaction costs and 8.9m of integration costs and relate entirely to the acquisition of the EQ USA business. Included within this are 2.5m of costs in relation to permanent project staff, which on completion of the integration project will be absorbed into vacant positions, replace contractors in the business or otherwise leave the Group. The total costs to integrate EQ USA into the Group are unchanged at 42.0m and are expected to deliver $10m of annualised synergies in the second full year of ownership. The synergies relate to the automation and digitisation of services and improved third party procurement. Of the total 42.0m of integration costs, 12.5m have been incurred to date (H1 2018: 8.9m, FY 3.6m). After completion of the US integration programme, no further nonoperating charges are anticipated. Equiniti Group plc Results for the six months 30 Page 7 of 40

8 Reported EBIT Reported EBIT remains an important measure of the Group s performance, reflecting profit before finance costs and taxation. In 2018, reported EBIT was 10.6m (H1 13.9m), reflecting EQ USA transaction costs of 14.1m. Net finance costs Group net finance costs before nonoperating charges increased by 1.5m to 6.9m (H1 : 5.4m). Profit from continuing operations The Group made a profit for the period from continuing operations of 2.7m (H1 : 7.0m). Earnings per share (EPS) Basic EPS of 0.2 pence (H1 : 1.7 pence) is based on a weighted average number of shares of 366.4m (H1 : 321.5m, restated to reflect the bonus element of the rights issue associated with the EQ USA acquisition). Excluding the impact of nonoperating charges, there was strong growth in underlying EPS of 13.2% to 7.7 pence (H1 : 6.8 pence). Dividend per share The Board has declared an interim dividend of 1.83 pence per share, representing growth of 11.6% (H1 : 1.64 pence per share). The interim dividend is to be paid on 26 th October 2018 to shareholders on the register of members at close of business on 14 th September Any shareholder wishing to participate in the Equiniti Dividend Reinvestment Plan ( DRIP ) needs to have submitted their election to do so by 5 th October We maintain our progressive dividend policy which targets the distribution of around 30% of our normalised profit attributable to ordinary shareholders each year. Capital structure The Group s Consolidated Balance Sheet at 30 is summarised as follows: m June 1 Assets Noncurrent assets Current assets Total assets 1, Liabilities Noncurrent liabilities Current liabilities Total liabilities Net assets Total equity Restated to reflect changes in accounting standards (IFRS 9 and IFRS 15). Current assets include 84.1m of debtors and accrued income at 30 (30 June : 52.3m). Accrued income represents amounts recognised as revenue but not yet billed and is driven by mix in business including corporate actions, software sales and remediation services. No income is accrued without a contract in place and, combined with the blue chip nature of our client base, results in minimal bad debts being recorded and traded income reversing out of the accounts. Debtors and accrued income increased in 2018 following our expansion into the US market and an increase in large BPO projects which are invoiced a month in arrears. See Note 10 of the financial statements for further detail. Equiniti Group plc Results for the six months 30 Page 8 of 40

9 Cash flow The Group generated free cash flow to equity holders of 22.1m (H1 : 20.1m) with an operating cash flow conversion of 102% (H1 : 109%). The main movements in cash flow are summarised below. m H H1 Underlying EBITDA Working capital movement Operating cash flow prior to nonoperating charges Operating cash flow conversion (%) Nonoperating charges (11.4) (1.9) Capital expenditure (18.1) (16.4) Net interest costs (4.3) (4.5) Taxes paid (2.5) Other (0.4) Free cash flow to equity holders Net financing cash flows Investment in current and prior year acquisitions (170.4) (14.9) Payment of deferred consideration (2.0) Dividends paid (including payment to noncontrolling interest) (13.6) (12.4) Net cash movement (30.3) 12.9 The Group has access to a 20.0m receivables financing facility of which 14.0m (H1 : 13.5m) was utilised at the end of the period and included within cash balances. This is used to match receipts against costs, especially where clients require ext payment terms and is driven by project flow in Intelligent Solutions. The facility is with Lloyds Banking Group at a rate of 1.75% over LIBOR. The facility draw down has reduced by 29.6% since 31 when it stood at 19.9m and is forecast to reduce further subject to commercial requirements. Reconciliation of EBITDA to total cash generated from operations (statutory cash flow statement) m H H1 Underlying EBITDA Operating working capital movements: Net increase in receivables (12.5) (0.7) Net increase in payables Decrease in provisions Sharebased payments expense Other Operating cash flow prior to nonoperating charges Nonoperating charges: Nonoperating P&L expense Net increase in nonoperating payables Nonoperating sharebased payments expense Other (14.1) (3.9) 2.0 (0.4) Total cash generated from operations Capital expenditure Net expenditure on tangible and intangible assets was 18.1m (H1 : 16.4m). This represents 7.1% of revenue (H1 : 8.4%). Included within capital expenditure is 3.3m associated with the establishment and integration of EQ USA relating to IT servers and software development to enable the business to operate on a standalone basis. Net interest costs paid Net interest costs paid in the period was 4.5m (H1 : 4.5m). Total interest bearing loans increased from 326.0m to 391.7m. Equiniti Group plc Results for the six months 30 Page 9 of 40

10 Investment in current and prior year acquisitions Net cash outflow on prior and current year acquisitions was 170.4m (H1 : 14.9m) relating mainly to the acquisition of the EQ USA business. 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 10.0% to 22.1m (H1 : 20.1m) in the period and is pre acquisitionrelated debt and costs of 170.4m. Tax paid Taxes paid in the period are primarily due to MyCSP Limited (UK) as well as the Group s operations in India and the US. During the period, amounts totalling 1.8m were received relating to repayments of overpaid 2016 taxes and payable R&D expenditure credits which will be used to fund further payments of UK corporation tax in the second half of the year. The Group has the following tax attributes that reduce the cash tax effective rate compared to the profit and loss account effective rate: Future tax deductions on tax losses carried forward 229m Future tax deductions on intangible assets 516m Future tax deductions on property, plant and equipment 33m The tax impact of these attributes is recognised as deferred tax on the balance sheet. Included within the intangible assets tax attribute is the customer relationship and goodwill intangibles related to the acquisition of the trade and assets of the EQ USA from 1 February 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 anticipated 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. Bank borrowings and financial covenants m H H1 Cash and cash equivalents (85.0) (69.6) Senior debt Revolving credit facility Other Net debt Net debt/underlying EBITDA (times) At 30, net debt was higher at 308.3m (30 June : 258.2m), reflecting the acquisition of the EQ USA business and associated costs. The term debt facility does not include scheduled debt repayments and together with the revolving credit facility is available for a fiveyear term to October The Group has substantial liquidity to support its growth ambitions and ongoing working capital requirements. Cash balances and undrawn RCF facilities at 30 were 212.6m (30 June : 143.7m). Net debt/ebitda adjusted for a full year of EQ USA ownership was 2.5x. Equiniti Group plc Results for the six months 30 Page 10 of 40

11 Acquisitions The Group completed two acquisitions in the period. On 1 February 2018, the Group completed on the acquisition of the trade and assets of the Wells Fargo Shareowner Services business (EQ USA) for a total cash consideration of $227.0m ( 159.6m), deferred consideration settled in June of $0.1m ( 0.1m), plus 9.8m in settlement of a deal contingent forward used to hedge the position. EQ USA is a share registration business based in the United States. On 27 April 2018, the Group purchased the entire issued share capital of Boudicca Proxy Limited (Boudicca Proxy) for 1.1m plus contingent consideration of up to 0.8m payable in 2019 and 1.5m payable in Boudicca Proxy is a specialist shareholder engagement company providing expertise in the areas of progressive proxy solicitation, shareholder communications, corporate governance advisory, share ownership analysis and global equity intelligence. Equiniti Group plc Results for the six months 30 Page 11 of 40

12 ALTERNATIVE PERFORMANCE MEASURES Alternative performance measures used to manage the Group are EBITDA, underlying EBITDA, underlying earnings per share, operating cash flow conversion, underlying net debt and cash tax effedtive rate. EBITDA and underlying EBITDA EBITDA is considered to be the most suitable indicator to explain the operating performance of the Group. The definition of EBITDA is earnings before net interest costs, income tax, depreciation of property, plant and equipment, amortisation of software and amortisation of acquired intangible assets. Underlying EBITDA is used to explain the sustainable operating performance of the Group and its respective divisions, where EBITDA is adjusted for nonoperating charges which are defined as expense items, which if included, would otherwise obscure the understanding of the underlying performance of the Group. These items primarily represent material restructuring, integration and acquisition related expenses. m H H1 Profit before income tax Plus: Depreciation of property, plant and equipment Plus: Amortisation of software Plus: Amortisation of acquisition related intangible assets Less: Finance income Plus: Finance costs (0.2) (0.5) 5.9 EBITDA Adjustment for nonoperating charges: Plus: Transaction costs Plus: Integration costs Underlying EBITDA Transaction costs of 5.2m mainly relate to deal advisory and legal fees which were contingent on successful completion of EQ USA which completed in February. Integration costs of 8.9m relate entirely to the US business and include programme delivery, the development of standalone functions and delivery of systems and processes to run the business. Included within this are 2.5m of costs in relation to permanent project staff, which on completion of the integration project will be absorbed into vacant positions, replace contractors in the business or otherwise leave the Group. Post completion of the US integration programme, there will be no further nonoperational charges absent transformational transactions. Underlying earnings per share Underlying earnings per share represents underlying EBITDA, less depreciation of property, plant and equipment, amortisation of software, net interest costs, cash tax and minority interests. The shares in issue for the purpose of underlying EPS have been am to match the rights issue shares to the start date of the EQ USA acquisition. m H H1 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 Cash tax at 13% / 14% (4.3) (3.6) Underlying profit after tax Noncontrolling interests (1.8) (1.6) Underlying profit attributable to ordinary shareholders Weighted average number of shares adjusting for timing of rights issue (m) Employee share options (m) Diluted weighted average of shares in issue, adjusting for timing of rights issue (m) Underlying tax rate 13.0% 14.0% Basic underlying earnings per share (p) Diluted underlying earnings per share (p) Equiniti Group plc Results for the six months 30 Page 12 of 40

13 PRINCIPAL RISKS AND UNCERTAINTIES The Directors have considered the principal risks and uncertainties affecting the Group s financial position and prospects in As described on pages 44 to 47 of the Group s Annual Report for, 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 Chief Executive John Stier Chief Financial Officer 26 July 2018 Equiniti Group plc Results for the six months 30 Page 13 of 40

14 Independent review report to Equiniti Group plc Report on the condensed consolidated financial statements Our conclusion We have reviewed Equiniti Group plc's condensed consolidated financial statements (the "interim financial statements") in the Equiniti Group plc results for the 6 Months 30. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom s Financial Conduct Authority. What we have reviewed The interim financial statements comprise: the condensed consolidated statement of financial position as at 30 ; the condensed consolidated income statement and consolidated statement of comprehensive income for the period then ; the condensed consolidated statement of cash flows for the period then ; the condensed consolidated statement of changes in equity for the period then ; and the explanatory notes to the interim financial statements. The interim financial statements included in the Equiniti Group plc results for the 6 Months 30 June 2018 have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom s Financial Conduct Authority. As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. Responsibilities for the interim financial statements and the review Our responsibilities and those of the directors The Equiniti Group plc results for the 6 Months 30, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Equiniti Group plc results for the 6 Months 30 in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom s Financial Conduct Authority. Our responsibility is to express a conclusion on the interim financial statements in the Equiniti Group plc results for the 6 Months 30 based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom s Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Equiniti Group plc Results for the six months 30 Page 14 of 40

15 What a review of interim financial statements involves We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. We have read the other information contained in the Equiniti Group plc results for the 6 Months 30 June 2018 and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements. PricewaterhouseCoopers LLP Chartered Accountants Gatwick 26 July 2018 a) The maintenance and integrity of the Equiniti Group plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website. b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Equiniti Group plc Results for the six months 30 Page 15 of 40

16 CONDENSED CONSOLIDATED INCOME STATEMENT UNAUDITED FOR THE SIX MONTHS ENDED 30 JUNE 2018 June (Represented 1 / Restated 2 ) Year (Restated 2 ) Note m m m Revenue Administrative costs 5 (213.1) (156.9) (318.6) Depreciation of property, plant and equipment (3.1) (3.0) (5.7) Amortisation of software (11.6) (7.7) (18.3) Amortisation of acquisition related intangible assets (15.6) (13.3) (26.7) Finance income Finance costs 13 (7.1) (5.9) (12.5) Profit before income tax Income tax charge 17 (1.0) (1.5) (10.0) Profit for the period Profit for the period attributable to: Owners of the parent Noncontrolling interests Profit for the period Earnings per share attributable to owners of the parent: Basic earnings per share (pence) Diluted earnings per share (pence) The comparative income statement has been represented to reflect nonoperating charges, which were previously reported separately, within administrative costs. 2 Restated for changes in accounting standards see note 2 for details. 3 Restated to reflect the bonus element of the rights issue associated with the EQ USA acquisition. Equiniti Group plc Results for the six months 30 Page 16 of 40

17 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME UNAUDITED FOR THE SIX MONTHS ENDED 30 JUNE 2018 June Year m m m Profit for the period Other comprehensive income/(expense) Items that may be subsequently reclassified to profit or loss Fair value movement through hedging reserve 2.9 (2.8) (12.2) Deferred tax on movement in hedging reserve (0.6) 0.8 Net exchange gain/(loss) on translation of foreign operations 6.7 (0.3) (0.1) 9.0 (3.1) (11.5) Items that will not be reclassified to profit or loss Defined benefit plan actuarial gain 0.8 Deferred tax on defined benefit plan actuarial gain (0.1) 0.7 Other comprehensive income/(expense) for the period 9.0 (3.1) (10.8) Total comprehensive income for the period Total comprehensive income attributable to: Owners of the parent Noncontrolling interests Total comprehensive income for the period Restated for changes in accounting standards see note 2 for details. Equiniti Group plc Results for the six months 30 Page 17 of 40

18 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION UNAUDITED AS AT 30 JUNE 2018 June Note m m m Assets Noncurrent assets Goodwill Intangible assets Property, plant and equipment Other financial assets Deferred income tax assets Current assets Trade and other receivables Contract fulfilment assets Agency broker receivables Other financial assets Cash and cash equivalents Total assets 1, Liabilities Noncurrent liabilities External loans and borrowings Postemployment benefits Provisions for other liabilities and charges Other financial liabilities Current liabilities Trade and other payables Contract fulfilment liabilities Agency broker payables Income tax payable Provisions for other liabilities and charges Other financial liabilities Total liabilities Net assets Equity Share capital Share premium Capital contribution reserve Hedging reserve (4.2) 2.1 (6.5) Sharebased payments reserve Translation reserve Retained earnings Equity attributable to owners of the parent Noncontrolling interest Total equity Restated for changes in accounting standards see note 2 for details. Equiniti Group plc Results for the six months 30 Page 18 of 40

19 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY UNAUDITED FOR THE SIX MONTHS ENDED 30 JUNE 2018 Year 31 Balance at 1 January as originally presented Share capital Share premium Capital contribution reserve Hedging reserve Sharebased payments reserve Translation reserve Retained earnings Noncon trolling interest Total equity m m m m m m m m m Changes in accounting standards Restated balance at 1 January Comprehensive income Profit for the year per the income statement (restated) Other comprehensive (expense)/income Changes in fair value through hedging reserve Deferred tax on movement through hedging reserve Net exchange loss on translation of foreign operations Actuarial gains on defined benefit pension plans Deferred tax on defined benefit pension plans Total other comprehensive (expense)/income Total comprehensive (expense)/ income Issue of share capital, net of transaction costs (12.2) (12.2) (0.1) (0.1) (0.1) (0.1) (11.4) (0.1) (10.8) (11.4) (0.1) Dividends (14.6) (1.5) (16.1) Transactions with noncontrolling interests (1.5) (1.5) Sharebased payments expense Deferred tax relating to share option schemes Transactions with owners recognised directly in equity (14.6) (3.0) Balance at (6.5) Equiniti Group plc Results for the six months 30 Page 19 of 40

20 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY UNAUDITED FOR THE SIX MONTHS ENDED 30 JUNE 2018 Six months 30 June Balance at 1 January as originally presented Share capital Share premium Capital contribution reserve Hedging reserve Sharebased payments reserve Translation reserve Retained earnings Noncon trolling interest Total equity m m m m m m m m m Changes in accounting standards Restated balance at 1 January Comprehensive income Profit for the period per the income statement (restated) Other comprehensive expense Changes in fair value through hedging reserve Net exchange loss on translation of foreign operations Total other comprehensive expense Total comprehensive (expense)/income (2.8) (2.8) (0.3) (0.3) (2.8) (0.3) (3.1) (2.8) (0.3) Issue of share capital Dividends (9.3) (1.5) (10.8) Sharebased payments expense Deferred tax relating to share option schemes Transactions with owners recognised directly in equity (9.3) (1.5) (8.9) Balance at 30 June Six months 30 Balance at 31 as originally presented Share capital Share premium Capital contribution reserve Hedging reserve Sharebased payments reserve Translation reserve Retained earnings Noncon trolling interest Total equity m m m m m m m m m (6.5) Changes in accounting standards Restated balance at 1 January 2018 Comprehensive income Profit for the period per the income statement Other comprehensive income Changes in fair value through hedging reserve Deferred tax on movement through hedging reserve Net exchange gain on translation of foreign operations (6.5) (0.6) (0.6) Total other comprehensive income Total comprehensive income Issue of share capital Dividends (9.9) (1.8) (11.7) Sharebased payments expense Transactions with owners recognised directly in equity (9.9) (1.8) (8.2) Balance at (4.2) Equiniti Group plc Results for the six months 30 Page 20 of 40

21 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS UNAUDITED FOR THE SIX MONTHS ENDED 30 JUNE 2018 June Year Note m m m Profit before income tax Adjustments for: Depreciation of property, plant and equipment Amortisation of software Amortisation of acquisition related intangibles Finance income (0.2) (0.5) (0.8) Finance costs Sharebased payments expense Changes in working capital: Net increase in receivables (12.5) (0.7) (6.6) Net increase in payables Decrease in provisions (1.3) Total cash generated from operations Interest paid (4.5) (4.7) (9.8) Income tax paid (2.5) (3.7) Net cash inflow from operating activities Cash flows from investing activities Interest received Business acquisitions net of cash acquired 8 (170.4) 0.7 (3.5) Payment relating to prior year acquisitions (2.0) (15.6) (17.5) Payments for property, plant and equipment (5.0) (1.3) (6.2) Payments for software development (13.1) (15.1) (24.8) Net cash outflow from investing activities (190.3) (30.8) (51.2) Cash flows from financing activities Proceeds from issue of share capital, less transaction costs paid (0.8) Proceeds from new bank loans 64.9 Increase/(decrease) in revolving credit facility balance (56.0) Payment of loan set up fees (0.8) (2.6) Payment of finance lease liabilities (0.4) (0.3) (0.7) Dividends paid (9.9) (9.3) (14.6) Dividends paid to noncontrolling interests (1.8) (1.5) (1.5) Transactions with noncontrolling interests (1.9) (1.6) (1.6) Net cash inflow from financing activities Net (decrease)/increase in cash and cash equivalents (30.3) Foreign exchange gains 0.1 Cash and cash equivalents at 1 January Cash and cash equivalents at 30 June/ Restated for changes in accounting standards see note 2 for details. Equiniti Group plc Results for the six months 30 Page 21 of 40

22 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE ) 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 Statutory accounts for the year 31 have been delivered to the Registrar of Companies. The external auditor has reported on the 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 ) Basis of preparation These condensed interim financial statements for the six months 30 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 31 which are available at 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, and the adoption of two new accounting standards IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers, which are set out below. New and am standards adopted by the Group A number of new and am standards became applicable for the Group for the year commencing 1 January 2018, however only the following resulted in changes to accounting policies and the restatement of prior period results. IFRS 9 Financial Instruments (IFRS 9) Accounting policy IFRS 9 Classification The Group classifies its financial assets in the following measurement categories: At fair value through profit or loss At fair value through other comprehensive income (OCI) At amortised cost The classification depends on the business model for managing the financial assets and the contractual terms of the cash flows and management will determine the classification on initial recognition. Measurement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transactions costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets held at fair value through profit or loss are recognised within the income statement. Trade receivables and contract assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost, less provision for impairment. Other financial assets includes derivatives which are recognised at fair value through profit or loss, unless the derivatives qualify for hedge accounting, in which case the recognition of any gain or loss is recognised in OCI. Equiniti Group plc Results for the six months 30 Page 22 of 40