Results for 6 Months Ended 30 June GUIDANCE AFFIRMED - US MARKET ENTRY

Transcription

1 Results for 6 Months Ended 30 June GUIDANCE AFFIRMED - US MARKET ENTRY 1 Equiniti Group plc 2017

2 DISCLAIMER This presentation may contain forward-looking statements with respect to certain of the Group s plans and its current goals and expectations relating to its future financial performance condition, performance, results, strategic initiatives and objectives. Generally, words such as may, could, will, expect, intend, estimate, anticipate, aim, outlook, believe, plan, seek, continue or similar expressions identify forward-looking statements. These forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond the Group s control, including amongst other things, UK domestic and global economic business conditions, market-related risks such as fluctuation in interest rates, the policies and actions of regulatory authorities, the impact of competition, inflation, deflation, the timing impact and other uncertainties of future acquisitions or combinations within relevant industries, as well as the impact of tax and other legislation or regulations in the jurisdictions in which the Group operates. As a result, the Group s actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in the Group s forward looking statements. Forward-looking statements in this presentation are currently only as of the date on which such statements are made. The Group undertakes no obligation to update any forward-looking statements, save in respect of any requirement under applicable law or regulation. Nothing in the presentation should be construed as a profit forecast. 2 Equiniti Group plc 2017

3 1 INTRODUCTION 2 KEY HIGHLIGHTS 3 FINANCIAL RESULTS 4 5 OPERATIONAL & STRATEGIC REVIEW SUMMARY & OUTLOOK 6 Q&A 3 Equiniti Group plc 2017

4 DELEVERAGING EARNINGS GROWTH KEY HIGHLIGHTS Revenue 194.8m +1.5% EBITDA 42.0m +1.9% Underlying EPS* 6.9 pence +6.2% Dividend 1.75 pence +6.7% Cash flow conversion 109% 93% Leverage 2.8x 2.9x SOLID PROGRESS WITH EARNINGS AND DELEVERAGING *excludes the impact of exceptional items and amortisation of acquisition related intangible assets plus cash tax 4 Equiniti Group plc 2017

5 H KEY TRENDS POSITIVES CHALLENGES 100% client retention New client wins in all divisions Growing market share in registration services Growing share dealing volumes Expanding margins Strong cash flow MyCSP stabilised Interest rate headwind Base rate reduction August 2016 Pensions Lower margin project work Remediation services Phasing of projects; a major contract with a UK bank now underway Corporate actions More weighted to second half REVENUE VISIBILITY SUPPORTS AFFIRMATION OF FULL YEAR 2017 GUIDANCE 5 Equiniti Group plc 2017

6 FINANCIAL RESULTS

7 DELIVERING ON OUR FINANCIAL COMMITMENTS REVENUE ( m) Investment Solutions Intelligent Solutions Pension Solutions Interest Income H H Reported Change % (19.0) Organic Change % 2.7 (5.8) 2.3 (19.0) Equiniti Group (0.6) EBITDA prior to exceptional items ( m) Investment Solutions Intelligent Solutions Pension Solutions Interest Income Central Costs (6.8) (7.0) (16.0) (19.0) 2.9 Equiniti Group EBITDA margin prior to exceptional items (%) Investment Solutions Intelligent Solutions Pension Solutions (3.2) Equiniti Group Equiniti Group plc 2017

8 INVESTMENT SOLUTIONS H H Reported Change % Organic Change % Revenue ( m) EBITDA prior to exceptional items ( m) EBITDA margin prior to exceptional items (%) Revenue growth driven by new client wins, higher share dealing volumes and growth in employee share plans, offset by timing of corporate action income Corporate action revenue of 4.7m (2016: 5.6m); strong pipeline for H2 EBITDA and margin expansion driven by revenue growth, project work and continued focus on operating leverage Good performance across all service lines Share Registration New clients through competitive wins and IPOs, including Arrow Global, Ramsdens, J Sainsbury plc and Xafinity Share Dealing Return to growth in share trading volumes Share Plans Continued growth in SAYE and SIP schemes 8 Equiniti Group plc 2017

9 INTELLIGENT SOLUTIONS H H Reported Change % Organic Change % Revenue ( m) (5.8) EBITDA prior to exceptional items ( m) EBITDA margin prior to exceptional items (%) Revenue growth impacted by delay in commencement of remediation contract with a UK bank (now commenced) - Rest of the division has traded in line with trends seen in H Strong EBITDA and margin progression driven by growth in higher margin work and continuing drive on efficiency Continued mix shift selling proportionally more software and higher value project work, and proportionally fewer services 9 Equiniti Group plc 2017

10 PENSION SOLUTIONS H H Reported Change % Organic Change % Revenue ( m) EBITDA prior to exceptional items ( m) (16.0) EBITDA margin prior to exceptional items (%) (3.2) Revenue growth driven by project work, new client wins and MyCSP stabilising EBITDA and margin decline due to lower margin project work compared to our experience in prior periods. This work has required specialist resource and therefore generated a lower margin Action taken on the cost base at end of Q2 to underpin full year profit and margins New client wins included House of Fraser, Shawbrook, Magnox and a partnership with Aon Hewitt GMP reconciliation and rectification projects for Tayside, Clwyd Pension Fund and SSE plc Extended long-term relations with Hackney, the NHS and Metropolitan police 10 Equiniti Group plc 2017

11 OTHER KEY METRICS m H H Capital Expenditure (16.4) (10.5) Exceptional Items 11 Equiniti Group plc 2017 (3.9) (2.4) Interest Income Central Costs (6.8) (7.0) Tax assets Capital expenditure of 16.4m driven by timing of projects such as MiFID II and launch of a new portal for our Selftrade business Full year 2017 guidance remains at 7% of revenue, falling to 6% thereafter following completion of MIFID II requirements Exceptional items of 3.9m relate to acquisition costs incurred in the period Driven by proposed acquisition of the WFSS business Further costs will be incurred as the transaction progresses to completion Total transaction costs estimated at 17.0m of which 9.0m will be charged as exceptional costs in 2017 A further 4.0m of exceptional costs will be incurred in 2017 reflecting the initial stages of the integration programme Interest revenue decline due to Impact from interest rate cut in August 2016 ⅔ of rate fixed with instruments secured to August 2018 ( 650m) and July 2020 ( 380m) Tax c 635m tax assets to be utilised Cash tax rate of c14% sustainable for the foreseeable future (subject to impact of the WFSS acquisition)

12 GROUP INCOME STATEMENT m H H Change % Revenue EBITDA prior to exceptional items Depreciation Amortisation software Amortisation acquired intangibles 42.0 (3.0) (7.7) (13.3) 41.2 (2.5) (8.3) (12.7) (7.2) 4.7 EBIT prior to exceptional items Exceptional items 18.0 (3.9) 17.7 (2.4) Reported EBIT Finance costs 14.1 (5.4) 15.3 (6.5) (7.8) (16.9) Profit before tax Tax 8.7 (1.5) 8.8 (2.0) (1.1) (25.0) Profit from continuing operations Non-controlling interest 7.2 (1.6) 6.8 (0.9) Profit attributable to ordinary shareholders (5.1) Earnings per share (pence) Basic (5.0) Earnings per share (pence) Underlying Equiniti Group plc 2017

13 CASH FLOW STATEMENT m H H EBITDA (prior to exceptional items) Working capital movement Operating cash flow Cash flow conversion (%) Exceptional items Capital expenditure Net interest costs Taxes paid Other (1.9) (16.4) (4.6) (2.5) (0.2) 41.2 (3.0) (2.8) (10.5) (5.0) (1.2) (0.2) Free cash flow to equity holders Net change in borrowings IPO related costs Investment in current and prior year acquisitions Payment of deferred consideration Dividends paid (14.9) - (12.4) (6.0) (18.3) (12.1) (0.4) (5.3) Net cash movement 12.9 (23.6) Interest payable rates fixed at 3% to October Equiniti Group plc 2017

14 LEVERAGE m H H FY 2016 Cash and cash equivalents (69.6) (52.9) (56.7) Senior debt Revolving credit facility Other Net debt Net debt/ebitda 2.8x 2.9x 2.7x Leverage reduction versus H due to strong cash flow offset by investment in the business and payment of dividends Slight increase in leverage from FY 2016 due to 14.9m acquisition costs paid in H and seasonality of cash flow Annual bonus payment of c 5m paid in H1 12.4m dividends paid including total due to MyCSP paid in H1 Second half profit bias in business increases cash flow in H2 Net debt/ebitda target remains x 14 Equiniti Group plc 2017

15 OPERATIONAL & STRATEGIC REVIEW

16 GROUP STRATEGY Grow sales to existing clients Win new B2B Clients Develop & acquire new capabilities Operating leverage Reinvest strong cash flows Organic growth Acquisitive growth Margin growth Continued reinvestment in CAPEX Regulated platforms for FTSE 350 clients 16 Equiniti Group plc 2017

17 GROUP STRATEGY 1 Grow sales to existing clients Renewed/extended relationships Asset reunification Integrated complaints management solution A major UK bank 2 Win new B2B Clients New mandates Competitor wins Bereavement services 17 Equiniti Group plc 2017

18 GROUP STRATEGY 3 Data and analytics Credit servicing Cyber security Proposed acquisition of WFSS Develop & acquire new capabilities/entry to new markets 4 Operating leverage Growth in clients in Share Registration leverages our platform capabilities Focus on six sigma and offshoring 784 people in our offshore centre at Reinvest strong cash flows Strong cash flow conversion of 109% Building capability, differentiation and resilience REVENUE GROWTH PLUS MARGIN PROGRESSION DRIVE EARNINGS GROWTH AND DELEVERAGING 18 Equiniti Group plc 2017

19 REVENUE VISIBILITY 1 2.5% 16.8% 48.9% 31.8% Traded Sold (not traded) Recurring Pipeline VISIBILITY OF CONSENSUS REVENUE FOR FY Equiniti Group plc 2017

20 PROPOSED ACQUISITION OF WFSS BUSINESS Acquisition of WFSS for a consideration of $227m ( 176m) (1) combining the #1 UK and #3 (2) US share registrars 1 Highly compelling strategic and financial rationale Creates a stronger, more diversified, multi-national group combining local expertise with global reach 2 WFSS is a proven market leader with significant momentum, organic growth and market share capture Unique entry point into deep, highly active and concentrated US market 3 Excellent strategic fit and core competencies correlation with Equiniti Long-standing relationship and extensive exclusive due diligence process 4 Expected to be strongly earnings accretive in the first full year of ownership, and double digit earnings accretive by the end of year two (3)(4)(5)(6) Expected ROIC (post-tax) > WACC in the second full year of ownership (3)(4)(5) 5 Anticipated synergies of at least $10m ( 8m) (1) by the third full year of ownership Largely driven by migration from WFSS legacy system to Equiniti s market leading Sirius platform 6 Funded by existing and new debt facilities and a c. 122m proposed Rights Issue (7) (1) USD/GBP foreign exchange rate of used for transaction value, used for all other conversions. (2) By number of issuers served, market position by shareholders served is 2 nd. (3) Based on non-ifrs financial projections and may be subject to amendment by Equiniti in the prospectus when based on the Business projections under IFRS and / or IFRS-consistent accounting policies adopted by Equiniti. (4) This statement is not intended as a profit forecast and should not be interpreted to mean that earnings per share for Equiniti for the current or future financial years would necessarily match or exceed historical published earnings. (5) Adjusted profit to be acquired is after certain management normalisation and other adjustments to reflect the results of WFSS on a standalone basis, see page 18 for details. (6) On an underlying EPS basis. (7) The rights issue will be subject to shareholder approval of the acquisition and other customary conditions, including availability of the new debt facilities. Completion of the acquisition is conditional on shareholders approval. 20 Equiniti Group plc 2017

21 PROPOSED ACQUISITION OF WFSS BUSINESS COMBINING TWO LEADING BUSINESSES IN AN INCREASINGLY CONCENTRATED INDUSTRY Access to the largest market globally 18,464 4,884 3,583 3,037 2,576 2,434 2,055 1, US IND HK CH UK JP AUS GER SG SA NZ Combining two leading businesses (1) 60% 60% 0% Other 0% WFSS Other Source: FactSet, advisor rankings, management. (1) By number of issuers served, UK data is based on FTSE 100 companies. 21 Equiniti Group plc 2017

22 SUMMARY & OUTLOOK

23 SUMMARY & OUTLOOK DEFENSIVE CHARACTERISTICS 100% client retention Relationships with 70% of the FTSE 100 Average client relationship of 28 years Long-term contracts; high revenue visibility DIFFERENTIATED CAPABILITIES WFSS presents unique entry point to US market Differentiated technology in registration services, onboarding KYC, complaints and remediation Platform scalability supports our business growth STRONG CASH CONVERSION Strong cash flow conversion at 109% Supports investment in the business, M&A and deleveraging Progressive dividend policy OUTLOOK UK prospects remain strong Well positioned for international expansion Full year expectations affirmed 23 Equiniti Group plc 2017

24 QUESTIONS & ANSWERS