RESULTS FOR SIX MONTHS ENDED 30 JUNE 2016
DISCLAIMER This presentation may contain ‘forward -looking As a result, the Group’s actual future financial statements’ with respect to certain of the Group’s condition, performance and results may differ plans and its current goals and expectations materially from the plans, goals and expectations relating to its future financial performance set forth in the Group’s forward-looking condition, performance, results, strategic initiatives statements. and objectives. Generally, words such as “may”, “could”, “will”, “expect”, “intend”, “estimate”, Forward-looking statements in this presentation are “anticipate”, “aim”, “outlook”, “believe”, “plan”, currently only as of the date on which such “seek”, “continue” or similar expressions identify statements are made. The Group undertakes no ‘forward -looking statements’ . obligation to update any forward-looking statements, save in respect of any requirement These forward-looking statements involve risk and under applicable law or regulation. Nothing in the uncertainty because they relate to future events presentation should be construed as a profit and circumstances which are beyond the Group’s forecast. control, including amongst other things, UK domestic and global economic business conditions, market-related risks such as fluctuation in interest rates, the policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation or regulations in the jurisdictions in which the Group operates. 2 | Equiniti Group plc 2016
Agenda 01 02 03 04 05 INTRODUCTION & FINANCIAL OPERATIONAL & SUMMARY & Q & A KEY HIGHLIGHTS RESULTS STRATEGIC REVIEW OUTLOOK GUY WAKELEY JOHN STIER GUY WAKELEY GUY WAKELEY 3 | Equiniti Group plc 2016
Key Highlights
H1 2016 KEY HIGHLIGHTS – DELIVERING ON OUR COMMITMENTS REVENUE £191.9m +5.9% Full year ORGANIC GROWTH 4.3% guidance maintained EBITDA £41.2m +7.0% FREE CASH FLOW TO EQUITY HOLDERS £18.5m + 134.2% Reduced from proforma LEVERAGE 2.9x 3.0x at 31.12.15 Dividend 1.64p In line with stated dividend policy REVENUE VISIBILITY SUPPORTS MAINTENANCE OF FULL YEAR GUIDANCE 5 | Equiniti Group plc 2016
H1 2016 – KEY TRENDS CHALLENGES POSITIVES ↑ Compliance and regulation ↓ Slowing in Pensions & MyCSP, continue to drive growth although structural growth remains ↑ Strong demand in employee share ↓ Market sentiment suppression of plans and international payments dealing volumes ↑ Corporate activity, e.g. Royal Dutch ↓ Uncertain balance between IPOs and Shell takeover of BG Group M&A activity ↑ Integration of acquisitions ↑ Further progress in offshoring Business fundamentals BUSINESS FUNDAMENTALS REMAIN SOUND remain sound 6 | Equiniti Group plc 2016
BREXIT PERSPECTIVES CHALLENGES DEFENCES ↑ Sole UK focus ↓ Interest rate reduction Largely hedged ↑ Non-discretionary long-term revenue model 25bps drop has £2-3m impact ↑ Focus on complex regulated markets ↓ Retail investor sentiment ↑ Increased order intake from technology Already in run-rate services Some uptick evident ↑ Small exposure to government ↓ New IPO Issuance No material impact in year Market share increased OPPORTUNITIES ↑ Inbound UK M&A activity ↑ Increased demand for Reg Tech solutions ↑ Government focus on personal savings agenda INCREASED UNCERTAINTY… BUT… FUNDAMENTALS STRONG WITH OVERALL GROWTH AND GUIDANCE FOR FY 2016 REMAINS UNCHANGED 7 | Equiniti Group plc 2016
Financial Results 8 | Equiniti Group plc 2016
DELIVERING ON OUR FINANCIAL COMMITMENTS Reported Reported* Reported Organic H1 2016 H1 2015 Change % Change % REVENUE (£m) Investment Solutions 62.1 56.2 10.5 8.0 Intelligent Solutions 58.4 49.5 18.0 15.0 Pension Solutions 65.6 72.0 (8.9) (8.9) Interest Income 5.8 3.5 65.7 Equiniti Group 191.9 181.2 5.9 4.3 EBITDA prior to exceptional items (£m) Investment Solutions 18.1 15.6 16.0 Intelligent Solutions 12.8 10.3 24.3 Pension Solutions 11.0 14.0 (21.4) Interest Income 5.8 3.5 65.7 Central Costs (6.5) (4.9) 32.7 Equiniti Group 41.2 38.5 7.0 EBITDA margin prior to exceptional items (%) Investment Solutions 29.1 27.8 1.3 Intelligent Solutions 21.9 20.8 1.1 Pension Solutions 16.8 19.4 (2.6) Equiniti Group 21.5 21.2 0.3 *Company Secretariat business transferred from Investment Solutions to Intelligent Solutions (£1.6m revenue, £0.1m EBITDA) 9 | Equiniti Group plc 2016
INVESTMENT SOLUTIONS Reported Reported* Reported Organic H1 2016 H1 2015 Change % Change % Revenue (£m) 62.1 56.2 10.5 8.0 EBITDA prior to exceptional items (£m) 18.1 15.6 16.0 EBITDA margin prior to exceptional items (%) 29.1 27.8 1.3 *Company Secretariat business transferred from Investment Solutions to Intelligent Solutions (£1.6m revenue, £0.1m EBITDA) • Revenue and EBITDA progress driven by strong organic growth • Margins progressed due to corporate actions, project work and offshoring progress • Corporate actions revenue increased to £5.6m (2015: £1.3m); delivered majority of FY 2016 target • Good performance across all service lines – Registration Services – New mandates, e.g. Metro Bank, Joules, Time Out – Investment Services – Strong growth in international payments offset by slowing trading volumes – Employee Services – Continued growth in SAYE and SIP schemes 10 | Equiniti Group plc 2016
INTELLIGENT SOLUTIONS Reported Reported* Reported Organic H1 2016 H1 2015 Change % Change % Revenue (£m) 58.4 49.5 18.0 15.0 EBITDA prior to exceptional items (£m) 12.8 10.3 24.3 EBITDA margin prior to exceptional items (%) 21.9 20.8 1.1 *Company Secretariat business transferred from Investment Solutions to Intelligent Solutions (£1.6m revenue, £0.1m EBITDA) • Strong organic revenue growth driven by increase in remediation services and technology sales • Continued growth in software business and focus on cost base, strengthening margins • Decline in PPI more than offset by growth in rest of business underpinned by regulation 11 | Equiniti Group plc 2016
PENSION SOLUTIONS Reported Reported Reported Organic H1 2016 H1 2015 Change % Change % Revenue (£m) 65.6 72.0 (8.9) (8.9) EBITDA prior to exceptional items (£m) 11.0 14.0 (21.4) EBITDA margin prior to exceptional items (%) 16.8 19.4 (2.6) • Revenue and EBITDA declined as expected due to MyCSP concluding the roll-out of software to the Civil Service • New client wins, e.g. first generation life & pensions outsourcing contract with Retirement Advantage 12 | Equiniti Group plc 2016
EXCEPTIONAL ITEMS/INTEREST INCOME/CENTRAL COSTS Reported Reported £m H1 2016 H1 2015 Exceptional Items (2.4) (4.5) Interest Income 5.8 3.5 Central Costs (6.5) (4.9) • Continued reduction in exceptional items in line with guidance – broadly halved in the period – Costs incurred as we conclude the roll-out of our offshore model and build scale in Chennai • Interest revenue increased due to: – Higher cash balances – Benefit of fixed rates until August 2018, underpinning ⅔ of interest receivable • Higher central costs due to: – Plc infrastructure and share plans – Investment in growth, particularly our sales function – Strengthening our compliance and risk functions 13 | Equiniti Group plc 2016
GROUP NORMALISED PROFIT £m H1 2016 H1 2015 Change % 191.9 181.2 5.9 Revenue 41.2 38.5 7.0 EBITDA prior to exceptional items (2.5) (2.1) 19.0 Depreciation Amortisation – software (8.3) (8.8) (5.7) Net finance expense - proforma (6.5) (6.4) 1.6 23.9 21.2 12.7 Normalised PBT Cash tax of 15% (3.6) (3.2) 12.5 20.3 18.0 12.8 Normalised PAT Non controlling interest (0.9) (3.2) (71.9) Normalised profit attributable to ordinary shareholders 19.4 14.8 31.1 6.5 4.9 32.7 Normalised earnings per share (pence) Proforma results adjust for IPO related costs and our ongoing funding structure Normalised profit excludes exceptional items and amortisation of acquisition related intangible assets and includes finance expenses on a proforma basis 14 | Equiniti Group plc 2016
CASH FLOW STATEMENT Reported Reported £m H1 2016 H1 2015 EBITDA (prior to exceptional items) 41.2 38.5 Working capital movement (3.0) 1.1 Free cash flow 38.2 39.6 Cash flow conversion (%) 93 103 (2.8) (5.5) Exceptional items Capital expenditure (10.5) (8.3) Net interest costs (5.0) (16.7) Taxes paid (1.2) (0.9) Other (0.2) (0.3) Free cash flow to equity holders 18.5 7.9 Net change in borrowings (6.0) 15.0 IPO related costs (18.3) - Investment in current year acquisitions (12.1) (17.6) Payment of deferred consideration (0.4) (3.7) Dividends paid (5.3) (2.0) Net cash movement (23.6) (0.4) • Interest payable rates fixed at 3% to October 2018 15 | Equiniti Group plc 2016
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