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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Equiniti Group Plc | LSE:EQN | London | Ordinary Share | GB00BYWWHR75 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 179.80 | 179.80 | 180.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMEQN
RNS Number : 8000Y
Equiniti Group PLC
08 March 2017
8 March 2017
EQUINITI GROUP PLC RESULTS FOR THE YEARED 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
Hot Features
Premium
2016 2015 Change
---------------------------------------- ------ ------- ----------
Revenue (GBPm) 382.6 369.0 3.7%
EBITDA prior to exceptional items
(GBPm) 92.4 86.2 7.2%
EBITDA margin prior to exceptional
items (%) 24.2 23.4 0.8pts
Free cash flow(1) prior to exceptional
items (GBPm) 92.6 97.6 (5.1)%
Cash flow conversion (%) 100 113 (13.0)pts
EBIT (GBPm) 40.7 10.2 GBP30.5m
Profit/(loss) before tax (GBPm) 28.5 (71.7) GBP100.2m
Earnings per share(2) (EPS) (pence) 10.2 (92.8) 103.0p
Underlying(3) EPS (pence) 15.9 13.5 18.1%
Full year dividend per share (pence) 4.75 0.68 4.07p
Net debt (GBPm)(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% organic(5) revenue growth:
o Excluding MyCSP, organic growth of 6.8%; MyCSP earnings now stabilised
o 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 GBP92.6m -- Strong underlying EPS growth of 18.1% to 15.9 pence per share
-- Net debt of GBP251.2m post acquisition-related costs of GBP19.3m; 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:
o Share registration clients, including AA, Abcam, Ascential, Biffa, Domino's Pizza, Draper Esprit, GoCompare, Joules, Metro Bank and Time Out
o A 10-year life and pensions outsourcing contract with Retirement Advantage
o 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."
(1) Free cash flow is EBITDA plus the change in working capital, prior to exceptional items.
(2) 2015 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.
(3) For underlying earnings calculation, see page 7.
(4) Net debt and proforma leverage is calculated as net debt/EBITDA, adjusted for IPO costs paid in H1 2016.
(5) For 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 Reported* Reported Organic
2016 2015 Change % Change %
------------------------ --- ----------- ------------ ----------- ---------------
Revenue (GBPm)
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 (GBPm)
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 (GBP2.7m revenue and GBP0.3m 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 GBP382.6m (2015: GBP369.0m) 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 GBP1,917m (2015: GBP1,296m) 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 GBP650.0m of cash balances. The interest rate swaps expire in July and August 2018.
EBITDA prior to exceptional items increased by 7.2% to GBP92.4m (2015: GBP86.2m) 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 GBP92.6m (2015: GBP97.6m), resulting in a cash flow conversion of 100% before capital expenditure (2015: 113%). Net debt of GBP251.2m (2015: proforma GBP262.7m) 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 (GBPm) 123.6 114.9 7.6
EBITDA prior to exceptional
items (GBPm) 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 (GBP2.7m revenue and GBP0.3m EBITDA)
Revenue in Investment Solutions increased by 7.6% to GBP123.6m (2015: GBP114.9m), 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 EUR18.25bn 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 (GBPm) 116.4 102.3 13.8
EBITDA prior to exceptional
items (GBPm) 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 (GBP2.7m revenue and GBP0.3m EBITDA)
Revenue in Intelligent Solutions increased by 13.8% to GBP116.4m (2015: GBP102.3m). 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 GBP29.5m 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 (GBPm) 131.4 142.5 (7.8)
EBITDA prior to exceptional
items (GBPm) 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 GBP131.4m (2015: GBP142.5m) with a decrease in EBITDA prior to exceptional items of 9.0% to GBP24.3m. 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 GBP40m 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%).
2016 2015 2015 2015
GBPm Reported Proforma Adjustment 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 costs(1) (12.2) (13.0) 47.7 (60.7)
Profit / (loss) before tax 28.5 19.7 91.4 (71.7)
Taxation(2) 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)
------------------------------------- ---------- ---------- ------------ ----------
(1) 2015 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.
(2) 2015 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 GBP382.6m (2015: GBP369.0m) 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:
2015 2015 2015
Revenue (GBPm) Reported Adjustment Proforma
----------------------- ---------- ------------ ----------
Investment Solutions 114.9 0.9(1) 115.8
Intelligent Solutions 102.3 4.6(2) 106.9
Pension Solutions 142.5 - 142.5
Interest Income 9.3 0.2(3) 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 GBP92.4m (2015: GBP86.2m) 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 GBP40.7m (2015: GBP10.2m).
Exceptional items
Exceptional operating costs of GBP5.0m (2015: GBP32.8m) 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 GBP48.5m to GBP12.2m (2015: GBP60.7m) 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 GBP28.5m compared to loss of GBP71.7m 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.
Change
GBPm 2016 2015 %
-------------------------------------- ----------------- ------- -----------
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 tax(1) (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:
GBPm 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 GBP92.6m (2015: GBP97.6m) 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:
GBPm 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 GBP0.2m 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 GBP28.2m (2015: GBP18.4m). 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 GBP19.5m to GBP9.9m (2015: GBP29.4m). Total interest bearing loans decreased from GBP320.0m to GBP306.0m at a lower rate of interest.
Investment in current year acquisitions
Net cash outflow on current year acquisitions was GBP12.0m (2015: GBP19.9m). A further GBP7.3m (2015: GBP3.9m) 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 GBP236m (2015: GBP224m) - Intangible assets of GBP378m (2015: GBP400m) - Other tax assets of GBP35m (2015: GBP33m)
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
GBPm Reported Proforma Reported
2016 2015 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 GBP251.2m (2015: GBP246.0m). 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. GBP94.0m of the GBP150.0m 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 GBP17.2m, consisting of GBP8.5m cash on completion, GBP1.6m deferred consideration payable in March 2018, and up to GBP7.5m of contingent consideration, discounted to GBP7.1m, 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 GBP9.9m, consisting of GBP5.2m cash on completion, GBP2.0m of deferred consideration, payable in April 2017, and up to GBP3.0m of contingent consideration, discounted to GBP2.7m, 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 GBP3.5m, consisting of GBP3.3m cash on completion and GBP0.2m 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 GBP14.0m (net of cash acquired) with a further earn-out of up to GBP2.5m payable in 2019 and up to GBP4.7m 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 cGBP5m of revenue and cGBP2m of EBITDA post acquisition costs.
In January 2017, the Group acquired Gateway2Finance for a total consideration of GBP200k with a further earn-out of up to GBP1.0m payable in 2020, dependent on growth. Gateway2Finance is an FCA authorised entity acting as a consumer finance intermediary, securing loans for clients referred by financial services companies and price comparison websites. 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 YEARED 31 DECEMBER 2016
2016 2015
Note GBPm GBPm
================================================ ====== ======== ========
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 YEARED 31 DECEMBER 2016
2016 2015
GBPm GBPm
=================================================== ======= =======
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 3.1 -
operations
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 GBPm GBPm
============================================== ===== ====== ======
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 YEARED 31 DECEMBER
2016
Accumu-
Capital lated
contri- Share-based Trans- retained Non-con-
Share Share bution Hedging payments lation (losses)/ trolling Total
capital premium reserve reserve reserve reserve earnings interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================== ======== ======== ========= ========= ============ ========= ========== ========= ========
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
------------------ -------- -------- --------- --------- ------------ --------- ---------- --------- --------
Accumu-
lated
Capital Share-based Trans- retained Non-con-
Share Share contri-bution Hedging payments lation (losses)/ trolling Total
capital premium reserve reserve reserve reserve earnings interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================== ======== ======== ============== ======== ============ ======== ========== ========= =======
Balance at 1
January 2016 0.3 - 181.5 1.8 0.2 - 176.7 20.0 380.5
Comprehensive
income
Profit for the
year per the
income statement - - - - - - 30.5 2.9 33.4
Other
comprehensive
income/(expense)
Changes in fair
value through
hedging reserve - - - 3.1 - - - - 3.1
Net exchange
gain on
translation
of foreign
operations - - - - - 3.1 - - 3.1
Actuarial losses
on defined
benefit
pension plans - - - - - - (10.4) (0.9) (11.3)
Deferred tax
on defined
benefit
pension plans - - - - - - 1.7 0.2 1.9
------------------ -------- -------- -------------- -------- ------------ -------- ---------- --------- -------
Total other
comprehensive
income/(expense) - - - 3.1 - 3.1 (8.7) (0.7) (3.2)
Total
comprehensive
income - - - 3.1 - 3.1 21.8 2.2 30.2
Dividends - - - - - - (7.0) (1.6) (8.6)
Transactions
with
non-controlling
interests - - - - - - - (1.8) (1.8)
Share-based
payments
expense - - - - 1.7 - - - 1.7
Deferred tax
relating to
share
option schemes - - - - 0.2 - - - 0.2
Transactions
with owners
recognised
directly in
equity - - - - 1.9 - (7.0) (3.4) (8.5)
Balance at 31
December 2016 0.3 - 181.5 4.9 2.1 3.1 191.5 18.8 402.2
------------------ -------- -------- -------------- -------- ------------ -------- ---------- --------- -------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2016
2016 2015
Note GBPm GBPm
============================================== ===== ======= ========
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 0.1 -
equivalents
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 YEARED 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 GBPm GBPm
------------------------------------------------ ------- -------
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 GBPm GBPm
items
------------------------------------------------- ------- -------
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 GBPm GBPm
discontinued operations
---------------------------------------------------- ------- -------
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: GBPm GBPm
-------------------------------------------------------- ------ ------
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 (1.9) -
and development
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 GBPm GBPm
year are the following:
----------------------------------------- ----- -----
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 GBPm GBPm
per share
---------------------------------------------------------- -------- -------
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 GBPm GBPm
------------------------------------------------- -------- --------
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 GBPm GBPm
holders of the parent in the year
----------------------------------------------------------- ----- -----
Interim dividend for year ended 31 December 2016 5.0 -
(1.64p per share)
Final dividend for year ended 31 December 2.0 -
2015 (0.68p per share)
7.0 -
------------------------------------------------- ----- -----
The recommended final dividend payable in respect of the year ended 31 December 2016 is GBP9.3m or 3.11p per share (2015: GBP2.0m). 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 GBP17.2m, consisting of GBP8.5m cash on completion, GBP1.6m of deferred consideration payable in April 2017, and up to GBP7.5m of contingent consideration, discounted to GBP7.1m 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 GBP4.0m, including a cash balance of GBP0.1m. The results of the business have been consolidated since the date of control and KYCnet contributed GBP5.7m of revenue and GBP1.4m 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 GBP0.9m of revenue and GBP0.1m 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 GBP4.6m 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 GBPm and liabilities assumed -------------------------------------------------------- ------ 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 GBPnil and the maximum amount is GBP7.5m. 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 GBP9.9m, consisting of GBP5.2m cash on completion, GBP2.0m of deferred consideration, payable in March 2018, and up to GBP3.0m of contingent consideration, discounted to GBP2.7m 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 GBP3.8m, including a cash balance of GBP1.5m. The results of the business have been consolidated since the date of control and Riskfactor Group contributed GBP1.9m of revenue and GBP0.5m 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 GBP0.4m of revenue and GBP0.1m 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 GBP4.0m 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 GBPm and liabilities assumed -------------------------------------------------------- ------ 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 GBPnil and the maximum amount is GBP0.3m.
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 GBP3.5m, consisting of GBP3.3m cash on completion and GBP0.2m 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 GBP2.0m, including a cash balance of GBP0.7m. The results of the business have been consolidated since the date of control and Toplevel contributed GBP1.0m of revenue and GBP0.1m 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 GBP1.3m of revenue and GBP0.2m 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 GBP1.6m 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 GBPm and liabilities assumed -------------------------------------------------------- ------ 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 GBP24.2m, consisting of GBP1.2m of deferred consideration, up to GBP6.0m of contingent consideration discounted to GBP1.2m payable in March 2019 and GBP4.2m payable in March 2021, and cash on legal completion of GBP14.0m (consisting of GBP17.6m purchase price less GBP3.6m 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 GBP11.8m, including a cash balance of GBP2.8m. The results of the business have been consolidated since the date of control and Marketing Source contributed GBP0.9m of revenue and GBP0.6m 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 GBP3.6m of revenue and GBP1.7m 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 GBP6.3m 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 GBPm and liabilities assumed -------------------------------------------------------- ------- 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 GBPnil and the maximum amount is GBP6.0m. 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 GBP0.2m plus contingent consideration of up to GBP1.0m payable in 2020. Gateway2Finance is an FCA authorised entity acting as a consumer finance intermediary, securing loans for clients referred by financial services companies and price comparison websites.
8) Finance income and costs
2016 2015
Finance income GBPm GBPm
------------------------------------------- ----- -----
Interest income 0.2 0.4
Dividend income - 0.3
Total finance
income 0.2 0.7
------------------------------------------------ ----- -----
2016 2015
Finance costs GBPm GBPm
- ordinary
------------------------------------------- ----- -----
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 GBPm GBPm
---------------------------------------------- ----- -----
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
GBPm GBPm
--------------------------- ------- -------
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 GBPm GBPm
in the year:
---------------------------------------------------------- ------- -------
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 GBPm GBPm
tax rate:
------------------------------------------------------- ------- -------
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 Acquisitions Recognised Recognised 31 Dec
2015 in income in equity 2015
GBPm GBPm GBPm GBPm GBPm
----------------------------- ------- ------------- ----------- ----------- -------
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 Acquisitions Recognised Recognised 31 Dec
2016 in income in equity 2016
GBPm GBPm GBPm GBPm GBPm
----------------------------- ------- ------------- ----------- ----------- -------
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
GBPm GBPm
------------------------------- ----- -----
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 GBPm GBPm
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
GBPm GBPm
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 GBP1.0m (2015: GBP2.7m).
15) Reconciliation of profit to cash generated from operations
2016 2015
GBPm GBPm
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
(END) Dow Jones Newswires
March 08, 2017 02:00 ET (07:00 GMT)
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