Regulatory Story
Go to market news section View chart   Print
RNS
Equiniti Group PLC  -  EQN   

FULL YEAR RESULTS

Released 07:00 08-Mar-2017

RNS Number : 8000Y
Equiniti Group PLC
08 March 2017
 



 8 March 2017

 

EQUINITI GROUP PLC RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016

 

Equiniti Group plc ("Equiniti" or "the Group"), the specialist technology outsourcer providing non-discretionary payment and administration services, today publishes its full year results for the twelve months to 31 December 2016.

 

FULL YEAR RESULTS: CONTINUED EARNINGS QUALITY AND DELEVERAGING

 

Financial Highlights


2016

2015

Change

Revenue (£m)

382.6

369.0

3.7%

EBITDA prior to exceptional items (£m)

92.4

86.2

7.2%

EBITDA margin prior to exceptional items (%)

24.2

23.4

0.8pts

Free cash flow1 prior to exceptional items (£m)

92.6

97.6

(5.1)%

Cash flow conversion (%)

100

113

(13.0)pts

EBIT (£m)

40.7

10.2

£30.5m

Profit/(loss) before tax (£m)

28.5

(71.7)

£100.2m

Earnings per share2 (EPS) (pence)

10.2

(92.8)

103.0p

Underlying3 EPS (pence)

15.9

13.5

18.1%

Full year dividend per share (pence)

4.75

0.68

4.07p

Net debt (£m)4

251.2

262.7

(4.4)%

Leverage (x)4

2.7

3.0

(0.3)x

 

·      Revenue growth of 3.7%; underpinned by 2.1% organic5 revenue growth:

Excluding MyCSP, organic growth of 6.8%; MyCSP earnings now stabilised

13.5% revenue growth from cross-selling and up-selling to strategic clients

·      EBITDA growth of 7.2% prior to exceptional items, with margin strengthening to 24.2%, reflecting higher margin organic growth from technology sales and continuing operating leverage

·      Good cash flow conversion of 100%; operating cash flow of £92.6m

·      Strong underlying EPS growth of 18.1% to 15.9 pence per share

·      Net debt of £251.2m post acquisition-related costs of £19.3m; Leverage of 2.7x, down from proforma 3.0x at 31 December 2015

·      Recommend final dividend of 3.11 pence per share, giving a total dividend for the year of 4.75 pence per share, in line with our stated policy, with proforma dividend growth of 16.4%, reflecting strong earnings momentum

 

·      Key new contract wins included:

Share registration clients, including AA, Abcam, Ascential, Biffa, Domino's Pizza, Draper Esprit, GoCompare, Joules, Metro Bank and Time Out

A 10-year life and pensions outsourcing contract with Retirement Advantage

Software sales to new clients, including Admiral Insurance Group

·      Strategic acquisitions of KYCnet, RiskFactor, Toplevel Computing and Marketing Source, strengthening our platform and expected to drive organic growth

·      Gateway2Finance acquisition completed in January 2017, continuing momentum in the business

 

Commenting on the Group's results, Guy Wakeley, Chief Executive, said:

"2016 has been another encouraging year of further strategic progress and momentum, with the Group delivering margin accretion, cash conversion and leverage reduction all in line with market expectations.

 

"At its heart, our strategy is simple. We drive growth by providing technology-based services to large UK companies. Demand for our technology and compliance-led services remains robust as the majority of our products and services are non-discretionary.   This means that irrespective of the current levels of economic uncertainty, our clients will continue to buy services from us.

 

"Our target remains to deliver sustainable earnings growth supplemented by growth from acquisitions each year. The dependability of our revenues, our efficiency programme and progressive deleveraging, will enable us to grow profits and earnings ahead of revenue.

 

"We continue to make progress against the strategy with many opportunities for future growth."

 

 

 

 

 

1Free cash flow is EBITDA plus the change in working capital, prior to exceptional items.

22015 loss per share of 92.8 pence was a result of the Group having a different capital structure in place for the majority of the year, which changed when the Group listed on the London Stock Exchange in October 2015.

3For underlying earnings calculation, see page 7.

4Net debt and proforma leverage is calculated as net debt/EBITDA, adjusted for IPO costs paid in H1 2016.

5For definition of organic revenue growth calculation, see page 7.

 

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 Officer                  +44 (0) 207 469 1811 

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



 

Reported

2016

 

Reported*

2015

 

Reported

Change %

 

Organic

Change %

Revenue (£m)






  Investment Solutions


123.6

114.9

7.6

6.7

  Intelligent Solutions


116.4

102.3

13.8

8.9

  Pension Solutions


131.4

142.5

(7.8)

(7.8)

  Interest Income


11.2

9.3

20.4

17.9

  Equiniti Group


382.6

369.0

3.7

2.1







EBITDA prior to exceptional items (£m)

  Investment Solutions


38.6

35.1

10.0


  Intelligent Solutions


29.5

23.2

27.2


  Pension Solutions


24.3

26.7

(9.0)


  Interest Income


11.2

9.3

20.4


  Central Costs


(11.2)

(8.1)

38.3


  Equiniti Group


92.4

86.2

7.2








EBITDA margin prior to exceptional items (%)

  Investment Solutions


31.2

30.5

0.7pts


  Intelligent Solutions


25.3

22.7

2.6pts


  Pension Solutions


18.5

18.7

(0.2)pts


  Equiniti Group


24.2

23.4

0.8pts


 *2015 restated to reflect Company Secretariat business transfer from Investment Solutions to Intelligent Solutions (£2.7m revenue and £0.3m EBITDA)

 

Overview

Equiniti made good progress in 2016 as we continued to drive growth in relatively challenging market conditions. To a large extent, the non-discretionary nature of our services has insulated us from volatility and the lack of positive economic sentiment.  Our biggest asset is our client base, which we believe is the best in the industry. We retained 100% of our FTSE 100 clients and our average client relationship is over 20 years. We continued to deliver organic growth, continued to cross-sell to our strategic clients and increased our offshoring capability with 760 people in our Chennai centre.  Margin progression, cash conversion and leverage reduction continued in line with expectations.

 

Reported revenue increased by 3.7% to £382.6m (2015: £369.0m) during the year whilst proforma revenue adjusted for acquisitions grew organically by 2.1%. Acquisitions made in the period have progressed well, contributing to organic growth and, together with the acquisition made in Q1 2017, will fuel organic growth going forward.  Excluding MyCSP, revenues have grown organically by 6.8%.  MyCSP earnings have now stabilised.

 

Investment Solutions delivered strong growth benefitting from organic growth through corporate actions and project work with existing clients along with the full year impact of TransGlobal Payment Solutions ("TransGlobal") completed on 3 September 2015. Intelligent Solutions also delivered strong growth, benefitting from the acquisitions of KYCnet and RiskFactor in March 2016, the acquisition of Toplevel Computing in July 2016 and the acquisition of Marketing Source in December 2016, along with strong organic growth driven by an increase in remediation services and software sales in complaints management and credit solutions.  Pension Solutions revenue declined as anticipated, as a result of the conclusion of the MyCSP roll-out in the fourth quarter of 2015. Excluding MyCSP, the financial performance of the Pension Solutions business has been stable.    

 

Revenue from interest was 20.4% higher than the prior year due to higher average client cash balances of £1,917m (2015: £1,296m) and includes the benefit that the Group has secured through entering into three year interest rate swaps at a blended rate of 1.03% relating to £650.0m of cash balances.  The interest rate swaps expire in July and August 2018.

 

EBITDA prior to exceptional items increased by 7.2% to £92.4m (2015: £86.2m) reflecting the impact of acquisitions made in the current and prior year and the profit element of the organic growth at an improved margin. 

 

Central costs in the period were higher as expected and reflect our status as a plc, continued investment in growth, particularly our sales function, and further strengthening of our compliance and risk functions.

 

Operating free cash flow prior to exceptional items was £92.6m (2015: £97.6m), resulting in a cash flow conversion of 100% before capital expenditure (2015: 113%).  Net debt of £251.2m (2015: proforma £262.7m) represents a ratio of 2.7x net debt/EBITDA, down from proforma 3.0x at 31 December 2015.

 

 

 

The Board has proposed a final dividend of 3.11 pence per share which, subject to shareholder approval at the Annual General Meeting on 25 April 2017, will result in a full year dividend of 4.75 pence per share, including the interim dividend of 1.64 pence per share. The final dividend will be paid on 31 May 2017 to shareholders on the register of members at close of business on 21 April 2017. This represents growth of 16.4% on a proforma basis to our 2015 maiden dividend, driven by strong earnings growth in the business. Any shareholder wishing to participate in the Equiniti Dividend Reinvestment Plan ("DRIP") needs to have submitted their election to do so by 9 May 2017.  We maintain our progressive dividend policy which will see us distribute around 30% of our underlying profit attributable to ordinary shareholders each year.

 

Board changes

We continued to strengthen the Board this year, with the appointment of two independent non-executive Directors. Sally-Ann Hibberd joined on 1 August 2016. Sally-Ann is a member of the Audit, Nomination and Remuneration Committees and chairs the Risk Committee. Darren Pope joined on 1 December 2016 and is a member of the Audit, Nomination and Risk Committees. Both Sally-Ann and Darren have many years' experience in financial services, which will prove invaluable to the Board.

 

Sir Rod Aldridge stepped down as an independent non-executive Director on 1 August 2016, after nine years on the Board. On announcement of the share disposals by Equiniti (Luxembourg) S.a.r.l. ("the Advent Shareholder"), on 4 August 2016, Haris Kyriakopoulos, the nominee director of the Advent Shareholder, resigned from the Board. This was in accordance with the Relationship Agreement dated 14 October 2015 which required his resignation once the level of indirect shareholdings fell below 10% of the total issued share capital of the Group. In September 2016, the Advent Shareholder disposed of its entire holding in the Group.

 

 

OPERATIONAL REVIEW 

We serve our clients through three divisions: Investment Solutions, Intelligent Solutions and Pension Solutions.  The broad operating 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.

 




2016

2015

Change %

Revenue (£m)

123.6

114.9

7.6

EBITDA prior to exceptional items (£m)

38.6

35.1

10.0

EBITDA margin prior to exceptional items (%)

31.2

30.5

0.7pts

*2015 restated to reflect Company Secretariat business transfer from Investment Solutions to Intelligent Solutions (£2.7m revenue and £0.3m EBITDA)

 

Revenue in Investment Solutions increased by 7.6% to £123.6m (2015: £114.9m), benefitting from organic growth of 6.7%, along with the full year impact of TransGlobal, completed on 3 September 2015.  

 

EBITDA prior to exceptional items grew by 10.0% driven by strong organic growth.  Strong margin progression was as a result of a continued focus on offshoring, service innovation and lean methodologies. 

 

Registration Services won a number of mandates from newly listed companies including Ascential, Biffa, Draper Esprit, GoCompare, Metro Bank, Joules and Time Out. The division was appointed share registrar to AA, Abcam and Domino's Pizza, displacing existing service providers.  Investment Solutions also supported three of the largest corporate actions in UK history, the acquisition of BG Group by Royal Dutch Shell, the acquisition of ARM Holdings by Softbank, and the acquisition of SABMiller by AB InBev.

 

 

In Investment Services, slowing trading volumes was offset by strong growth in the International Payments business which benefitted from the prior year acquisition of TransGlobal, giving Investment Services ownership of the technology that already underpinned its international payments.  This allowed the division to drive growth in that business, which included a landmark transaction supporting Visa Europe through its €18.25bn acquisition by Visa Inc.  

 

Employee Services continued to benefit from the strong growth in SAYE and SIP schemes, as well as a number of one-off projects in corporate actions and flexible benefits.   The division won a number of share plan mandates with newly listed companies as it continued to benefit from cross-selling with Registration Services.  Activity from existing clients was also an important source of growth for Employee Services with BT's acquisition of EE adding c12,000 newly eligible employees to the BT share plan, and Tesco's payment of a turnaround bonus for c265,000 staff.

 

The bereavement service launched towards the end of 2015 had a promising first year. Prudential began a 12-month pilot programme in early 2016 and in November, Registration Services signed its first large bereavement service contract with Lloyds Banking Group.

 

 

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.



 


2016

2015

Change %

Revenue (£m)

116.4

102.3

13.8

EBITDA prior to exceptional items (£m)

29.5

23.2

27.2

EBITDA margin prior to exceptional items (%)

25.3

22.7

2.6pts

*2015 restated to reflect Company Secretariat business transfer from Investment Solutions to Intelligent Solutions (£2.7m revenue and £0.3m EBITDA)

 

Revenue in Intelligent Solutions increased by 13.8% to £116.4m (2015: £102.3m). This was the result of organic growth of 8.9%, driven by continued demand for technology solutions in complaints management.  The acquisitions of KYCnet and RiskFactor in March 2016, Toplevel Computing in July 2016 and Marketing Source in December 2016, contributed to reported growth, with KYCnet in particular seeing strong demand for its software and services.

 

EBITDA prior to exceptional items increased by 27.2% to £29.5m as a result of strong revenue growth and an increasing proportion of the business being driven by technology sales.

 

Intelligent Solutions won a broad range of work during the year including a contract to provide loan management and motor finance software to Admiral Group plc, which is a new client for the Group.  Other key wins included a five-year contract with TSB to provide a complaints platform, asset reunification projects on behalf of Royal Dutch Shell and Santander, and a five-year proof of life contract with the Italian social security and welfare institute (INPS), in partnership with Citi. The division is seeing increased opportunities in the utilities market for complaints management and secured a new contract and an extension with two major utility companies.   

 

RiskFactor, KYCnet, Toplevel Computing and Marketing Source all contributed to growth since their acquisition. RiskFactor signed a new contract with HSBC, while KYCnet secured contracts with Deutsche Bank and Bank of Ireland and has a very strong pipeline going into 2017. 

 

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.

 

 

 


2016

2015

Change %

Revenue (£m)

131.4

142.5

(7.8)

EBITDA prior to exceptional items (£m)

24.3

26.7

(9.0)

EBITDA margin prior to exceptional items (%)

18.5

18.7

(0.2)pts

 

Revenue in Pension Solutions decreased by 7.8% to £131.4m (2015: £142.5m) with a decrease in EBITDA prior to exceptional items of 9.0% to £24.3m.  This was due to the expected decline in project work in MyCSP with its software roll-out to the Civil Service concluding in Q4 2015. Excluding MyCSP, the financial performance of Pension Solutions was stable over 2016.  MyCSP earnings have now stabilised.

 

The division continued to win new clients, including a life and pensions outsourcing contract with Retirement Advantage, with a contract value of approximately £40m over 10 years. The contract saw Pension Solutions take on virtually all administrative services for the client, including processing new business. This is a first for the industry and the largest outsourcing deal in the life and pensions space in recent years.

 

Other notable successes included a contract with telent to administer its closed pension scheme for the life of the plan, expected to be for at least another 15 years, and renewals of contracts with Heathrow, Kimberley Clark and Inchcape.

 

 

OUTLOOK

Our target remains to deliver organic growth supplemented by growth from acquisitions each year. At the same time, we will expand margins through our efficiency programme and de-leveraging the Group, enabling us to grow profits and earnings ahead of revenue.

 

We continue to make progress against the strategy with many opportunities for future growth.

 

FINANCIAL REVIEW

 

Group Income Statement                                           

The key lines of the income statement for the year are summarised below and include analysis of revenue, EBITDA prior to exceptional items, exceptional items, EBIT and profit before tax. Proforma adjustments have been made to the prior year to remove IPO-related exceptional costs and record finance costs consistent with our new debt structure, to enable us to compare like-for-like performance. An adjustment to tax has been made to reflect the Group's expected ongoing effective cash tax rate of 14% (2015: 15%).





 

 

£m

2016

Reported

2015

Proforma

2015

Adjustment

2015

Reported

Revenue

382.6

369.0

-

369.0






EBITDA prior to exceptional items

92.4

86.2

-

86.2

Depreciation

(5.4)

(4.4)

-

(4.4)

Amortisation - software

(16.0)

(15.8)

-

(15.8)

Amortisation - acquired intangibles

(25.3)

(23.0)

-

(23.0)

EBIT prior to exceptional items

45.7

43.0

-

43.0

Exceptional items

(5.0)

(10.3)

-

(10.3)

Reported EBIT prior to IPO costs

40.7

32.7

-

32.7

IPO-related exceptionals - operating costs

-

-

22.5

(22.5)

Reported EBIT

40.7

32.7

22.5

10.2

IPO-related exceptionals - finance costs

-

-

21.2

(21.2)

Net finance costs1

(12.2)

(13.0)

47.7

(60.7)

Profit / (loss) before tax

28.5

19.7

91.4

(71.7)

Taxation2

4.9

(3.0)

(28.9)

25.9

Profit / (loss) after tax

33.4

16.7

62.5

(45.8)

Non-controlling interests

(2.9)

(4.6)

-

(4.6)

Profit / (loss) attributable to ordinary shareholders

30.5

12.1

62.5

(50.4)

 

12015 proforma net finance costs has been presented to better reflect the cost that would have been incurred had the Group's current debt structure been in place throughout the current and prior year including the associated swap agreements.

22015 proforma taxation has been presented to better reflect the tax charge that would have been incurred had the Group's current debt structure been in place throughout the current and prior year at an estimated effective tax rate for the Group of 15% in 2015.

 

 

 

Revenue

Reported revenue increased by 3.7% to £382.6m (2015: £369.0m) during the year whilst proforma revenue adjusted for acquisitions grew organically by 2.1%. Organic revenue growth is reported revenue growth adjusted for acquisitions on a like-for like basis.  Here we restate 2015 for the period acquisitions have been owned in 2016 to create a like-for-like comparison of year-on-year progress.  This is calculated as follows:

 

 

Revenue (£m)

2015

Reported

2015

Adjustment

2015

Proforma

Investment Solutions

114.9

0.91

115.8

Intelligent Solutions

102.3

4.62

106.9

Pension Solutions

142.5

-

142.5

Interest Income

9.3

0.23

9.5

Total Group

369.0

5.7

374.7

1 Acquisition of Selftrade

2 Acquisition of KYCNet, RiskFactor, Top Level and Marketing Source

3 Acquisition of Selftrade

 

EBITDA prior to exceptional items

EBITDA prior to exceptional items increased by 7.2% to £92.4m (2015: £86.2m) reflecting the impact of acquisitions made in the current and prior year and the profit element of the organic growth at an improved margin. 

 

EBIT

EBIT remains an important measure of the Group's performance, reflecting profit before finance costs and taxation. In 2016, reported EBIT increased to £40.7m (2015: £10.2m).

 

Exceptional items

Exceptional operating costs of £5.0m (2015: £32.8m) primarily relate to acquisition-related expenses, including transactional fees and changes in expected contingent consideration, restructuring and other costs related to building an offshore centre in Chennai, and driving the Group's efficiency.

 

Net finance costs

Group net finance costs before exceptional items fell by £48.5m to £12.2m (2015: £60.7m) reflecting the benefits of the Group's new capital structure and loan agreements from October 2015. 

 

Profit before tax

The Group made a profit for the period of £28.5m compared to loss of £71.7m in 2015.

 

Underlying results (Unaudited)

Underlying profit excludes exceptional items and amortisation of acquisition related intangible assets and includes finance costs on a proforma basis.  Cash tax is deducted at 14% (2015: 15%), to reflect the Group's estimated effective tax rate over the medium term.  This better allows the assessment of operational performance, the analysis of trends over time, the comparison of different businesses and the projection of future economic performance.

 

 


 

 

£m

 

2016

 

2015

 

Change %

Revenue

382.6

369.0

3.7





EBITDA prior to exceptional items

92.4

86.2

7.2

Depreciation

(5.4)

(4.4)

22.7

Amortisation - software

(16.0)

(15.8)

1.3

Net finance costs (2015 proforma)

(12.2)

(13.0)

(6.2)

Underlying profit before tax

58.8

53.0

10.9

Cash tax1

(8.2)

(8.0)

2.5

Underlying profit after tax

50.6

45.0

12.4

Non-controlling interest

(2.9)

(4.6)

(37.0)

Underlying profit attributable to ordinary shareholders

47.7

40.4

18.1

Underlying earnings per share (pence)

15.9

13.5

18.1

Basic earnings per share (pence)

10.2

(92.8)

-

1Cash tax of 14% in 2016 and 15% in 2014

 

 

 

Earnings per share 

Basic earnings per share of 10.2 pence (2015: loss per share of 92.8 pence) is based on weighted average shares of 300.0m (2015: 54.3m).

 

Underlying earnings per share grew 18.1% to 15.9 pence per share compared to the prior period of 13.5 pence per share, based on the number of shares in issue at 31 December 2016. 

 

Dividend per share

The Board has proposed a final dividend of 3.11 pence per share which, subject to shareholder approval at the Annual General Meeting on 25 April 2017, will result in a full year dividend of 4.75 pence per share, including the interim dividend of 1.64 pence per share. The final dividend will be paid on 31 May 2017 to shareholders on the register of members at close of business on 21 April 2017. Any shareholder wishing to participate in the Equiniti Dividend Reinvestment Plan ("DRIP") needs to have submitted their election to do so by 9 May 2017.  We maintain our progressive dividend policy which will see us distribute around 30% of our underlying profit attributable to ordinary shareholders each year.

 

 

Capital structure

The Group's Consolidated Balance Sheet at 31 December 2016 is summarised as follows:

 

 

£m

 

 

2016

 

 

2015

Assets



  Non-current assets

724.1

670.4

  Current assets

148.2

162.9

Total assets

872.3

833.3

Liabilities



  Non-current liabilities

346.1

332.8

  Current liabilities

124.0

120.0

Total liabilities

470.1

452.8

Total equity and liabilities

402.2

380.5

 

Cash flow

The Group generated a free cash flow of £92.6m (2015: £97.6m) representing a conversion of EBITDA prior to exceptional items to free cash flow of 100% (2015: 113%).  The main movements in cash flow are summarised below:

 

£m

 

2016

 

2015

EBITDA (pre-exceptional)

92.4

86.2

Working capital movement

0.2

11.4

Free cash flow

92.6

97.6

Cash flow conversion

100%

113%

Capital expenditure

(28.2)

(18.4)

Net interest costs

(9.9)

(29.4)

Proceeds from issue of share capital

-

495.0

Net increase / (decrease) in borrowings

(14.0)

274.5

Repayment of loans

-

(706.9)

Exceptional items - IPO / refinancing charges

-

(14.8)

Exceptional items / provisions - other, including IPO costs

(28.7)

(24.2)

Investment in current year acquisitions

(12.0)

(19.9)

Payment of deferred consideration

(7.3)

(3.9)

Dividends paid

(10.3)

-

Taxes paid

(2.2)

(1.5)

Other

0.1

(1.7)

Net cash movement

(19.9)

46.4

 

Free cash flow

The movement in working capital of £0.2m excludes cash flows relating to exceptional items and is indicative of the Group's commitment to improve the working capital position through automating invoice generation and improving payment terms.

 

Capital expenditure

Net expenditure on tangible and intangible assets was £28.2m (2015: £18.4m). This represents 7.3% of revenue (2015: 5.0%) demonstrating the Group's commitment to develop industry leading software.  75% of this sum is investment in our technology.

 

Net interest costs

Net interest costs in the period decreased by £19.5m to £9.9m (2015: £29.4m). Total interest bearing loans decreased from £320.0m to £306.0m at a lower rate of interest.

 

Investment in current year acquisitions

Net cash outflow on current year acquisitions was £12.0m (2015: £19.9m). A further £7.3m (2015: £3.9m) was spent on deferred consideration for prior year acquisitions.

 

 

Tax paid

Taxes paid relate to tax payable by MyCSP Limited and our business in India.  Equiniti has the following tax assets to utilise:

 

-     Schedule D1 trading losses of £236m (2015: £224m)

-     Intangible assets of £378m (2015: £400m)

-     Other tax assets of £35m (2015: £33m)

 

 

This will allow the Group to benefit from having an effective tax rate that is lower than the UK corporation tax rate for the foreseeable future, which is estimated at approximately 14% of pre-tax profit going forwards.

 

Bank borrowings and financial covenants

 

£m


 

Reported

2016

 

Proforma

2015

 

Reported

2015

Cash and cash equivalents


(56.7)

(58.2)

(76.5)

Senior debt


250.0

250.0

250.0

Revolving credit facility


56.0

70.0

70.0

Other


1.9

0.9

2.5

Net debt


251.2

262.7

246.0

Net debt/EBITDA prior to exceptional items (times)


2.7

3.0

2.8

 

At the end of December 2016, net debt was £251.2m (2015: £246.0m).  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. £94.0m of the £150.0m revolving credit facility was not drawn at year end.  The Group has substantial liquidity to support its growth ambitions and ongoing working capital requirements.

 

Acquisitions 

During the year, the Group made four acquisitions. It has also completed a further acquisition in January 2017.

 

On 3 March 2016, the Group acquired KYCnet for a total consideration of £17.2m, consisting of £8.5m cash on completion, £1.6m deferred consideration payable in March 2018, and up to £7.5m of contingent consideration, discounted to £7.1m, payable in March 2019.  KYCnet provides cutting edge workflow technology for on-boarding and monitoring of commercial and retail clients and has broad applicability across financial services as well as retail, travel and legal services. 

 

On 4 March 2016, the Group acquired RiskFactor for a total consideration of £9.9m, consisting of £5.2m cash on completion, £2.0m of deferred consideration, payable in April 2017, and up to £3.0m of contingent consideration, discounted to £2.7m, payable in March 2019.  RiskFactor is a UK-based provider of credit decisioning and risk profiling software for commercial lending, with deep client relationships and broad applicability across lending products.  RiskFactor complements our other 'control risk' capabilities within our Intelligent Solutions division. 

 

On 22 July 2016, the Group acquired Toplevel Computing for a total consideration of £3.5m, consisting of £3.3m cash on completion and £0.2m deferred consideration. Toplevel is a digital services technology provider of large-scale digital case management solutions.  This acquisition will add to our technology-based services and demonstrates progress on our strategy. Digitisation of the customer journey is a key focus for our clients and we see a material cross-sell opportunity into our extensive financial services client base.

 

The Group took control of Marketing Source on 1 December 2016 for a total consideration of £14.0m (net of cash acquired) with a further earn-out of up to £2.5m payable in 2019 and up to £4.7m payable in 2021, dependent on growth.  Marketing Source is a data analytics and cyber security business which helps clients mitigate risk and improve effective customer targeting through data analytics, identity checking and cyber security products.  For full year 2017, Marketing Source is expected to deliver c£5m of revenue and c£2m of EBITDA post acquisition costs.

 

In January 2017, the Group acquired Gateway2Finance for a total consideration of £200k with a further earn-out of up to £1.0m 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.  Post-acquisition costs, contribution from Gateway2Finance will be negligible for FY2017.

 

 

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 42 to 46 of the Group's Annual Report for 2015, 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 level of corporate actions, change complexity, interest rate reduction, IT security breach, loss of key clients and change in regulatory trends.

 

 

DIRECTORS' RESPONSIBILITY STATEMENT

 

The Directors confirm that, to the best of their knowledge, the extracts from the consolidated financial statements included in this report, which has been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company taken as a whole, and that the management report contained in this report includes a fair view of the development and performance of the business.

 

 

By order of the Board

 

 

 

 

 

Guy Wakeley                            John Stier

Chief Executive                          Chief Financial Officer

 

7 March 2017

 


 

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2016




 



2016

2015


Note

£m

£m





Revenue

2

382.6

369.0









Operating costs before exceptional costs, depreciation and amortisation

3

(290.2)

(282.8)

EBITDA* prior to exceptional items

2

92.4

86.2

Operating costs - exceptional items

4

(5.0)

(32.8)

EBITDA*


87.4

53.4

Depreciation of property, plant and equipment


(5.4)

(4.4)

Amortisation of software


(16.0)

(15.8)

Amortisation of acquisition related intangible assets


(25.3)

(23.0)









Total operating costs

3

(341.9)

(358.8)

Earnings before interest and tax (EBIT)


40.7

10.2





Finance income


0.2

0.7

Finance costs before exceptional items


(12.4)

(61.4)

Finance costs - exceptional items


-

(21.2)

Net finance costs

8

(12.2)

(81.9)





Profit/(loss) before income tax

2

28.5

(71.7)





Income tax credit

10

4.9

25.9

Profit/(loss) for the year


33.4

(45.8)





Profit/(loss) for the year attributable to:




 - Owners of the parent


30.5

(50.4)

 - Non-controlling interests


2.9

4.6

Profit/(loss) for the year


33.4

(45.8)





Earnings/(loss) per share attributable to owners of the parent:


Basic earnings/(loss) per share (pence)

5

10.2

(92.8)

Diluted earnings/(loss) per share (pence)

5

10.1

(92.8)





Underlying earnings per share attributable to owners of the parent:



Basic underlying earnings per share (pence)

5

15.9

13.5

Diluted underlying earnings per share (pence)

5

15.8

13.5

 

*Earnings before interest, tax, depreciation and amortisation

 



 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2016





 



2016

2015



£m

£m





Profit/(loss) for the year


33.4

(45.8)





Other comprehensive income/(expense)








Items that may be subsequently reclassified to profit or loss




Fair value movement through hedging reserve


3.1

2.0

Net exchange gain on translation of foreign operations


3.1

-



6.2

2.0

Items that will not be reclassified to profit or loss




Defined benefit plan actuarial (loss)/gain


(11.3)

2.6

Deferred tax credit/(charge) on other comprehensive income


1.9

(0.4)



(9.4)

2.2





Other comprehensive (expense)/income for the year


(3.2)

4.2





Total comprehensive income/(expense) for the year


30.2

(41.6)





Total comprehensive income/(expense) attributable to:




 - Owners of the parent


28.0

(46.4)

 - Non-controlling interests


2.2

4.8

Total comprehensive income/(expense) for the year


30.2

(41.6)

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION


AS AT 31 DECEMBER 2016





 



2016

2015


Note

£m

£m

Assets




Non-current assets




Property, plant and equipment


17.1

11.4

Intangible assets


670.1

637.2

Other financial assets


7.8

1.8

Deferred income tax assets

10

29.1

20.0



724.1

670.4

Current assets




Trade and other receivables


75.4

70.5

Agency broker receivables


15.9

15.9

Other financial assets


0.2

-

Cash and cash equivalents


56.7

76.5



148.2

162.9





Total assets


872.3

833.3





Liabilities




Non-current liabilities




External loans and borrowings


301.5

314.3

Post-employment benefits

11

23.9

13.5

Provisions for other liabilities and charges


16.2

4.5

Other financial liabilities


4.5

0.5



346.1

332.8

Current liabilities




Trade and other payables


105.4

97.8

Agency broker payables


15.9

15.9

Income tax payable


2.2

1.8

Provisions for other liabilities and charges


-

4.1

Other financial liabilities


0.5

0.4



124.0

120.0





Total liabilities


470.1

452.8





Net assets


402.2

380.5





Equity




Equity attributable to owners of the parent




Share capital


0.3

0.3

Capital contribution reserve


181.5

181.5

Hedging reserve


4.9

1.8

Share-based payments reserve


2.1

0.2

Translation reserve


3.1

-

Retained earnings


191.5

176.7



383.4

360.5

Non-controlling interest


18.8

20.0

Total equity


402.2

380.5

 

 


 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


FOR THE YEAR ENDED 31 DECEMBER 2016









 

 

 


Share capital

Share premium

Capital contri-

bution reserve

Hedging reserve

Share-based payments reserve

Trans-
lation reserve

Accumu-
lated retained (losses)/

earnings

Non-con-
trolling
interest

Total
equity


£m

£m

£m

£m

£m

£m

£m

£m

£m











Balance at 1 January 2015

5.0

3.5

-

(0.2)

-

-

(277.9)

17.7

(251.9)











Comprehensive

(expense)/income









(Loss)/profit for the year per the income statement

-

-

-

-

-

-

(50.4)

4.6

(45.8)









Other comprehensive

income/(expense)








Changes in fair value through hedging reserve

-

-

-

2.0

-

-

-

-

2.0

Actuarial gains on defined benefit pension plans

-

-

-

-

-

-

2.4

0.2

2.6

Deferred tax on defined benefit pension plans

-

-

-

-

-

-

(0.4)

-

(0.4)

Total other comprehensive income

-

-

-

2.0

-

-

2.0

0.2

4.2

Total comprehensive income/(expense)

-

-

-

2.0

-

-

(48.4)

4.8

(41.6)











Issue of share capital

0.3

494.7

-

-

-

-

-

-

495.0

Capital reduction

(4.8)

(498.2)

-

-

-

-

503.0

-

-

Buy back of own shares

(0.2)

-

0.2

-

-

-

-

-

-

Capital contribution

-

-

181.3

-

-

-

-

-

181.3

Dividends

-

-

-

-

-

-

-

(1.1)

(1.1)

Transactions with non-controlling interests

-

-

-

-

-

-

-

(1.4)

(1.4)

Share-based payments expense

-

-

-

-

0.2

-

-

-

0.2

Transactions with owners recognised directly in equity

(4.7)

(3.5)

181.5

-

0.2

-

503.0

(2.5)

674.0











Balance at 31 December 2015

0.3

-

181.5

1.8

0.2

-

176.7

20.0

380.5

 

 

 


Share capital

Share premium

Capital contri-bution reserve

Hedging reserve

Share-based payments reserve

Trans-
lation reserve

Accumu-
lated retained (losses)/

earnings

Non-con-
trolling
interest

Total
equity


£m

£m

£m

£m

£m

£m

£m

£m

£m











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

 


 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2016




 



2016

2015


Note

£m

£m





Cash flows from operating activities




Cash generated from operations

15

64.0

73.7

Interest paid


(9.7)

(30.1)

Income tax paid


(2.2)

(1.5)

Net cash inflow from operating activities


52.1

42.1





Cash flows from investing activities




Interest received


0.2

0.4

Dividends from investment


-

0.3

Business acquisitions net of cash acquired


(12.0)

(19.9)

Payment relating to prior year acquisition


(7.3)

(3.9)

Acquisition of property, plant and equipment


(8.3)

(2.9)

Acquisition of intangible assets


(19.9)

(15.5)

Net cash outflow from investing activities


(47.3)

(41.5)





Cash flows from financing activities




Proceeds from issue of share capital


-

495.0

Proceeds from new bank loans


-

250.0

(Decrease)/increase in revolving credit facility


(14.0)

24.5

Repayment of loan notes


-

(440.0)

Repayment of payment in kind loans


-

(161.9)

Repayment of preference shares


-

(105.0)

Payment of finance lease liabilities


(0.4)

(0.3)

Dividends paid


(7.0)

-

Dividends paid to non-controlling interests


(1.6)

(1.1)

Transactions with non-controlling interests


(1.7)

(1.2)

Refinancing fees paid


-

(14.2)

Net cash (outflow)/inflow from financing activities


(24.7)

45.8





Net (decrease)/increase in cash and cash equivalents


(19.9)

46.4

Foreign exchange gains on cash and cash equivalents


0.1

-

Cash and cash equivalents at 1 January


76.5

30.1





Cash and cash equivalents at 31 December


56.7

76.5

 

 

 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

 

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 condensed 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 2015 have been delivered to the Registrar of Companies and those for the 2016 year end will be delivered following the Group's annual general meeting to be held on 25 April 2017. The external auditor has reported on the 2015 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.

These condensed financial statements have been prepared on the basis of the accounting policies as set out in the previous statutory financial statements.

 

2)   Operating segments

The Group's operating segments have been identified as Investment Solutions, Intelligent Solutions, Pension Solutions and Interest, in line with how the Group runs and structures its business. 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.






2016

2015

Reported revenue





£m

£m

Investment Solutions





123.6

114.9

Intelligent Solutions





116.4

102.3

Pension Solutions





131.4

142.5

Interest





11.2

9.3

Total revenue





382.6

369.0













2016

2015

EBITDA prior to exceptional items




£m

£m

Investment Solutions





38.6

35.1

Intelligent Solutions





29.5

23.2

Pension Solutions





24.3

26.7

Interest





11.2

9.3

Total segments





103.6

94.3

Central costs





(11.2)

(8.1)

EBITDA prior to exceptional items




92.4

86.2













2016

2015

Reconciliation to profit/(loss) before tax and discontinued operations 

£m

£m

EBITDA prior to exceptional items



92.4

86.2

Operating costs - exceptional items



(5.0)

(32.8)

EBITDA



87.4

53.4

Depreciation of property, plant and equipment



(5.4)

(4.4)

Amortisation of software



(16.0)

(15.8)

Amortisation of acquisition related intangible assets



(25.3)

(23.0)

Net finance costs



(12.2)

(81.9)

Profit/(loss) before tax



28.5

(71.7)

 

 

3)    Operating costs







2016

2015

Expenses by nature:






£m

£m

Employee benefit expense


160.1

147.4

Direct costs






69.4

66.3

Bought in services






15.8

18.0

Premises costs






6.6

5.8

Operating lease costs






7.2

6.3

Government grants for research and development



(1.9)

-

Other general business costs 





33.0

39.0

Operating costs before exceptional costs, depreciation and amortisation

290.2

282.8

Exceptional items






5.0

32.8

Depreciation of property, plant and equipment

5.4

4.4

Amortisation of software



16.0

15.8

Amortisation of acquisition related intangible assets



25.3

23.0

Total operating costs

341.9

358.8

 

4)    Operating costs - Exceptional items







2016

2015

Included in the profit for the year are the following:



£m

£m

Change of control costs






-

22.5

Acquisition, restructuring and other costs


5.0

10.3

Total exceptional items




5.0

32.8

 

Change of control costs relate to legal, advisory, banking and other fees in relation to the Group's change in ownership which resulted in the Group's listing on the London Stock Exchange in October 2015.

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. 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.

Restructuring and other costs primarily relate to costs associated with building an offshore centre in Chennai with scale and driving the Group's efficiency agenda.

 

5)    Earnings per share







2016

2015

 Basic and diluted earnings per share 




£m

£m

Profit/(loss) from continuing operations attributable to owners of the parent

30.5

(50.4)




Weighted average number of ordinary shares in issue (thousands)

300,002

54,301

Employee share options (thousands)

1,063

-

Weighted average number of ordinary shares in issue adjusted for the effect of dilution (thousands)

301,065

54,301









Basic earnings/(loss) per share (pence)

10.2

(92.8)

Diluted earnings/(loss) per share (pence)

10.1

(92.8)

 

 

5)    Earnings per share (continued)



2016

2015

Underlying earnings per share


£m

£m

EBITDA prior to exceptional items


92.4

86.2

Depreciation of property, plant and equipment


(5.4)

(4.4)

Amortisation of software


(16.0)

(15.8)

Net finance costs - proforma


(12.2)

(13.0)

Underlying profit before income tax


58.8

53.0

Cash tax of 14%/15%


(8.2)

(8.0)

Underlying profit after tax


50.6

45.0

Non-controlling interests


(2.9)

(4.6)

Underlying profit attributable to ordinary shareholders


47.7

40.4





Number of shares in issue at year end (thousands)


300,013

300,000

Employee share options (thousands)


1,063

-

Number of ordinary shares in issue adjusted for the effect of dilution (thousands)

301,076

300,000





Basic underlying earnings per share (pence)

15.9

13.5

Diluted underlying earnings per share (pence)

15.8

13.5

 

6)    Dividends







2016

2015

Amounts recognised as distributions to equity holders of the parent in the year

£m

£m

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

-







7.0

-

 

The recommended final dividend payable in respect of the year ended 31 December 2016 is £9.3m or 3.11p per share (2015: £2.0m).  This is in line with the Group's stated policy of a payout ratio of around 30% of adjusted underlying profit after cash tax. The proposed dividend has not been accrued as a liability as at 31 December 2016.

7)    Acquisitions of businesses

KYCnet

On 3 March 2016, the Group purchased the entire issued share capital of KYCnet BV and its subsidiaries ("KYCnet") for £17.2m, consisting of £8.5m cash on completion, £1.6m of deferred consideration payable in April 2017, and up to £7.5m of contingent consideration, discounted to £7.1m payable in March 2019. KYCnet is based in the Netherlands and offers services and software to major financial institutions with a focus on client onboarding and customer due diligence processes.

On acquisition, the business had net assets of £4.0m, including a cash balance of £0.1m. The results of the business have been consolidated since the date of control and KYCnet contributed £5.7m of revenue and £1.4m of net profit to the Group results in 2016. If the business had been acquired on 1 January 2016 it would have contributed an additional £0.9m of revenue and £0.1m of net loss to the Group's results for the year ended 31 December 2016.

On acquisition, intangible assets relating to software and to customer contracts and related relationships were re-evaluated, resulting in a combined upward adjustment of £4.6m 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 KYCnet and the Group.

 

7)   Acquisitions of businesses (continued)

 

Recognised amounts of identifiable assets acquired and liabilities assumed


£m

Property, plant and equipment






0.1

Intangible assets






5.4

Trade and other receivables






0.7

Cash and cash equivalents






0.1

Trade and other payables





(1.5)

Deferred income tax liabilities






(0.8)

Net identifiable assets and liabilities





4.0

Goodwill on acquisition





13.2

Total consideration





17.2

Cash acquired





(0.1)

Deferred consideration






(1.6)

Contingent consideration






(7.1)

Net cash outflow in the period





8.4

 

As at 31 December 2016, the minimum amount of contingent consideration payable is £nil and the maximum amount is £7.5m. 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.

 

Riskfactor Group

On 4 March 2016, the Group purchased the entire issued share capital of Information Software Solutions Limited and its subsidiaries ("Riskfactor Group") for £9.9m, consisting of £5.2m cash on completion, £2.0m of deferred consideration, payable in March 2018, and up to £3.0m of contingent consideration, discounted to £2.7m payable in March 2019. Riskfactor provides software based risk management solutions to the commercial finance sector, which incorporate functionality such as potential fraud detection and workflow management.

On acquisition, the business had net assets of £3.8m, including a cash balance of £1.5m. The results of the business have been consolidated since the date of control and Riskfactor Group contributed £1.9m of revenue and £0.5m of net profit to the Group results in 2016. If the business had been acquired on 1 January 2016 it would have contributed an additional £0.4m of revenue and £0.1m of net profit to the Group's results for the year ended 31 December 2016.

On acquisition, intangible assets relating to software and customer contracts and related relationships were re-evaluated, resulting in a combined upward adjustment of £4.0m 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 expected synergies from combining the operations and expertise of Riskfactor and the Group and to enable future market development.

 

Recognised amounts of identifiable assets acquired and liabilities assumed


£m

Property, plant and equipment






0.1

Intangible assets






4.0

Trade and other receivables






0.8

Cash and cash equivalents





1.5

Trade and other payables





(1.9)

Deferred income tax liabilities





(0.7)

Net identifiable assets and liabilities





3.8

Goodwill on acquisition





6.1

Total consideration





9.9

Cash acquired





(1.5)

Deferred consideration






(2.0)

Contingent consideration






(2.7)

Net cash outflow in the period





3.7

 

As at 31 December 2016, the minimum amount of contingent consideration payable is £nil and the maximum amount is £0.3m.

7)   Acquisitions of businesses (continued)

 

Toplevel

On 22 July 2016, the Group purchased the entire issued share capital of Toplevel Holdings Limited and its subsidiaries ("Toplevel") for £3.5m, consisting of £3.3m cash on completion and £0.2m deferred consideration. Toplevel, a UK company, is a digital services technology provider of large-scale digital case management solutions.

On acquisition, the business had net assets of £2.0m, including a cash balance of £0.7m. The results of the business have been consolidated since the date of control and Toplevel contributed £1.0m of revenue and £0.1m of net profit to the Group results in 2016. If the business had been acquired on 1 January 2016 it would have contributed an additional £1.3m of revenue and £0.2m of net profit to the Group's results for the year ended 31 December 2016.

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 £1.6m 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 Toplevel and the Group.

 

Recognised amounts of identifiable assets acquired and liabilities assumed


£m

Property, plant and equipment






0.1

Intangible assets






1.6

Trade and other receivables






0.6

Cash and cash equivalents





0.7

Trade and other payables





(0.6)

Deferred income tax liabilities





(0.3)

Net identifiable assets and liabilities





2.1

Goodwill on acquisition





1.4

Total consideration





3.5

Cash acquired





(0.7)

Deferred consideration






(0.2)

Net cash outflow in the period





2.6

 

 

Marketing Source

On 6 January 2017, the Group purchased the entire issued share capital of Marketing Source Limited and its subsidiary ("Marketing Source") for £24.2m, consisting of £1.2m of deferred consideration, up to £6.0m of contingent consideration discounted to £1.2m payable in March 2019 and £4.2m payable in March 2021, and cash on legal completion of £14.0m (consisting of £17.6m purchase price less £3.6m cash on completion) which was paid in January 2017.

The Group took control of Marketing Source on 1 December 2016. On this date the business had net assets of £11.8m, including a cash balance of £2.8m. The results of the business have been consolidated since the date of control and Marketing Source contributed £0.9m of revenue and £0.6m of net profit to the Group results in 2016. If the business had been acquired on 1 January 2016 it would have contributed an additional £3.6m of revenue and £1.7m of net profit to the Group's results for the year ended 31 December 2016.

On acquisition, intangible assets relating to software and to customer contracts and related relationships have been re-evaluated, resulting in a combined adjustment of £6.3m 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 Marketing Source and the Group.

 

7)   Acquisitions of businesses (continued)

Recognised amounts of identifiable assets acquired and liabilities assumed


£m

Property, plant and equipment






0.9

Intangible assets






7.2

Trade and other receivables






2.9

Cash and cash equivalents





2.8

Trade and other payables





(1.0)

Deferred income tax liabilities





(1.0)

Net identifiable assets and liabilities





11.8

Goodwill on acquisition





12.4

Total consideration





24.2

Cash acquired





(2.8)

Accrued consideration





(17.6)

Deferred consideration






(1.2)

Contingent consideration






(5.4)

Net cash inflow in the period





(2.8)

 

As at 31 December 2016, the minimum amount of contingent consideration payable is £nil and the maximum amount is £6.0m. 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.

Gateway2Finance

In January 2017, the Group purchased the entire issued share capital of Gateway 2 Finance Limited and Refresh Personal Finance Limited ("Gateway2Finance") for £0.2m plus contingent consideration of up to £1.0m 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.

8)   Finance income and costs







2016

2015

Finance income






£m

£m

Interest income


0.2

0.4

Dividend income


-

0.3

Total finance income





0.2

0.7















2016

2015

Finance costs - ordinary






£m

£m

Interest cost on senior secured borrowings



6.3

1.2

Interest cost on revolving credit facility



2.2

2.3

Interest cost on senior secured loan notes



-

24.9

Interest cost on payment in kind loan



-

10.8

Interest on preference shares classified as liabilities



-

12.2

Interest cost on loans from related parties



-

5.0

Amortised fees



1.2

2.8

Net finance cost relating to pension scheme



0.6

0.6

Unwinding of discounted amount in provisions



0.7

0.4

Cost of interest rate swap against financial liabilities



1.4

0.5

Other fees and interest



-

0.7

Total finance costs - ordinary


12.4

61.4















2016

2015

Finance costs - exceptional



£m

£m

Write off of unamortised fees of previous finance arrangement


-

12.3

Early termination of bond notes



-

8.9

Total finance costs - exceptional


-

21.2

Exceptional finance costs relate to costs incurred by putting new financing arrangements into place during 2015. These costs include the write off of unamortised arrangement fees that related to the refinancing exercise that took place in 2013 and the break costs for the early termination of the Group's senior secured notes.

9)   Net debt







2016

2015







£m

£m

Term loan






250.0

250.0

Revolving credit facility





56.0

70.0

Other





1.9

2.5

Cash and cash equivalents





(56.7)

(76.5)

Total external loans and borrowings



251.2

246.0

 

10) Income tax credit







2016

2015

Recognised in the statement of comprehensive income in the year:

£m

£m

Current tax:




Current period


5.0

2.2

Adjustment in respect of prior periods


(0.3)

0.2

Total current tax






4.7

2.4

Deferred tax:




Origination and reversal of temporary differences


(11.3)

(27.2)

Impact of rate changes on opening deferred tax balances


1.1

(0.8)

Adjustment in respect of prior periods


0.6

(0.3)

Total deferred tax






(9.6)

(28.3)

Total income tax credit


(4.9)

(25.9)















2016

2015

Reconciliation of effective tax rate:




£m

£m

Profit/(loss) for the year






33.4

(45.8)

Total tax credit






(4.9)

(25.9)

Profit/(loss) before tax






28.5

(71.7)









Tax using the UK corporation tax rate of 20% (2015: 20.25%):


5.7

(14.5)

Non-deductible expenses


0.8

10.9

Non-taxable income


(0.5)

(0.1)

Previously unrecognised tax assets


(12.3)

(20.3)

Effect of tax rate change


1.1

0.7

Unrecognised deferred tax on overseas interest paid


-

(2.6)

Adjustment in respect of prior periods


0.3

-

Total income tax credit


(4.9)

(25.9)

 

The standard rate of corporation tax in the UK is 20% with effect from 1 April 2016 (2015: 20%). The taxation credit for the year ended 31 December 2016 is calculated by applying the estimated annual Group effective rate of tax to the profit for the year. Accordingly the Group's profits for the accounting year ended 31 December 2016 are taxed at an effective rate of 20% (2015: 20.25%).

 

 

10) Income tax credit (continued)

 

Movements in deferred tax during the year:




1 Jan 2015

Acquisitions

Recognised in income

Recognised in equity

31 Dec 2015




£m

£m

£m

£m

£m

Property, plant and equipment


2.9

-

1.2

-

4.1

Intangible assets


(24.0)

(0.5)

2.8

-

(21.7)

Employee benefits and other timing differences

2.9

-

0.2

(0.4)

2.7

Tax value of losses carried forward


10.5

0.3

24.1

-

34.9




(7.7)

(0.2)

28.3

(0.4)

20.0












1 Jan 2016

Acquisitions

Recognised in income

Recognised in equity

31 Dec 2016




£m

£m

£m

£m

£m

Property, plant and equipment


4.1

-

(0.7)

-

3.4

Intangible assets


(21.7)

(2.6)

2.6

-

(21.7)

Employee benefits and other timing differences

2.7

-

-

2.1

4.8

Tax value of losses carried forward


34.9

-

7.7

-

42.6




20.0

(2.6)

9.6

2.1

29.1

 

11) 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. All schemes were closed in the year to new members and also to future accrual of benefits, apart from a small sub-section of the Paymaster (1836) Limited scheme. The defined benefit obligation as at 31 December 2016 is calculated on a year-to-date basis using the latest actuarial valuation as at 31 December 2016.






2016

2015






£m

£m

Equiniti ICS Limited





1.6

1.1

Paymaster (1836) Limited





20.9

12.4

MyCSP Limited





1.4

-

Total defined benefit pension plan liability



23.9

13.5

 

12) 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.

 

13) 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 instrument measured at fair value is the interest rate swap.

The following table presents the Group's financial assets and liabilities that are measured at fair value:





2016

2015




Level

£m

£m

Financial assets





Derivative financial instruments

2

8.0

1.8

Financial liabilities




Derivative financial instruments

2

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.

 

14) Related party transactions

Transactions with key management personnel

The compensation of key management personnel (including the Directors) is as follows:






2016

2015






£m

£m

Key management emoluments


3.1

4.3

Company contributions to money purchase pension plans


0.1

0.1

Share based payments


0.7

0.1

Total


3.9

4.5

 

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 31 December 2016 was £1.0m (2015: £2.7m).

 

15) Reconciliation of profit to cash generated from operations






2016

2015





£m

£m

Profit/(loss) before income tax


          28.5

(71.7)

Adjustments for:




Depreciation and amortisation of software


21.4

20.2

Amortisation of acquisition related intangibles


25.3

23.0

Finance income


(0.2)

(0.7)

Finance costs


12.4

82.6

Share-based payments expense




1.7

0.2





Changes in working capital:




Decrease/(increase) in trade and other receivables


0.3

(1.9)

(Decrease)/increase in trade and other payables


(23.0)

           24.2

Decrease in provisions


(2.4)

(2.2)

Total cash generated from operations



64.0

73.7

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR KDLFBDXFBBBL
Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


FULL YEAR RESULTS - RNS