GROUP
ANNUAL REPORT
2012
Equiniti Group Limited
Registered Number: 07090427
equiniti.com
Contents
Foreword
Welcome to Equiniti
2012 highlights
Key Performance Indicators
Chief Executive’s Statement
A clear direction
Acquisitions and developments
A business model for growth
Overview of the market
Operational focus
Our people
Corporate responsibility
Outlook for 2013
Board of directors
Advent International
Directors’ report
Auditors’ report
Page
3
4
6
7
8
10
12
14
15
16
20
22
26
28
30
31
38
Financial statements
39-88
We strive for
excellence in
everything
we do
Kevin Beeston
Chairman
CHAIRMAN’S FOREWORD
The Equiniti Group Limited (Equiniti) produced
an excellent performance in 2012, delivering
profitable growth and extending its capabilities.
Equiniti, led by Chief Executive Wayne Story, grew its turnover by 10.1% to £266.5m and
increased EBITDA before exceptionals by 7.7% to £81.1m. The Group is a leading Business
Process Services (BPS) provider, focused on delivering complex administration, payment
solutions and service excellence to its strong and diverse client base.
Three strategic investments were made during the year that extend Equiniti’s core capabilities
and leadership position in key markets. Selected as the private sector partner to pensions
administrator MyCSP, Equiniti has taken a 40% stake in the first Mutual Joint Venture to be
launched by the Government. It will work with MyCSP to develop innovative new ways of
working with the public sector, deliver efficiencies and seek access to wider commercial
opportunities. The Group also acquired Prism Cosec, extending its company secretarial
offering, and peterevans, the leading technology provider for financial services businesses.
As part of its strategy to develop a compelling BPS offering, the Group agreed to sell the
Xafinity pensions consulting business and move to a single integrated brand in 2013. Equiniti
continues to drive synergies across its businesses, supporting service innovation and cost
effectiveness. The average number of service lines taken up by its clients has increased
strongly and the business has delivered £97.2m total contract value in new sales and renewals
during the year. Its contracts are now typically for five or more years, resulting in a high level
of recurring revenue.
During the year Equiniti restructured the sales teams to increase the focus given to key
accounts ensuring they can benefit from the full suite of products and services the group
can provide. Equiniti has also established a team focused on the increasing number of BPS
opportunities coming to the market from both the private and public sectors. This is a
significant change in emphasis with a resulting investment to support the strategy which is
expected to yield results in the latter part of 2013.
This is a business which is fully committed to delivering exceptional services to its clients and
their customers. I would like to thank all our people for the great job they continue to do and
the exceptional service they deliver to and on behalf of our clients. As we look ahead the
Group remains well positioned to continue to deliver profitable growth in 2013 and beyond.
Kevin Beeston
Chairman
2 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 3
FOREWORD WELCOME TO EQUINITI
23
locations
2,737
colleagues
£266 m
.5
turnover
Each year we manage
2.6m
enquiries
10.1%
YoY revenue
growth
£400m
contracted
revenue
88m
documents
£72bn
payments
Every superhero
needs a great sidekick
Equiniti is a business services partner to the best
known brands and public services in the UK.
We are chosen by around
1,600
organisations
Our mission is simple – we’re here
to help our clients be extraordinary.
As trusted sidekick to the UK’s
leading companies and public sector
institutions, we know what it takes
to be the best support team in the
world.
We excel at providing specialist
support where administration
complexity, payments processing
or market regulation mean assured
delivery is critical to our clients,
to their employees and to their
customers. That is why we put
effectiveness, quality assurance and
customer service excellence at the
heart of everything we do.
Top 30
clients
81%
PRIVATE
SECTOR
19%
PUBLIC
SECTOR
We support
27%
UK work-based pension
schemes members
We pay around
20%
pensioners
in the UK
We are the registrar for
We provide shareplans for
46%
FTSE100
companies
27%
FTSE100
companies
We’re selected by
10%
NHS trusts for
revalidations
4 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 5
WELCOME
HIGHLIGHTS
KEY PERFORMANCE INDICATORS
10.1%
YoY
revenue
growth
We have delivered an excellent
performance with 10.1% revenue
growth to £266.5m.
We continue to deliver high (98%)
client renewal rates and new business
wins across our core markets.
By effectively using capabilities
from across the Group, we have
successfully grown our cross-sales.
We have increased the average
number of service lines delivered
to our larger clients*, rising to 12.5
(from 9.7 in 2011), resulting in 10%
CAGR for this segment. We have a
healthy sales pipeline at Group and
operational level and continue to
strengthen our Big Ticket team.
With substantial levels (up to 75%) of
contracted income, we start 2013 with
£139m revenue already contracted.
* Clients spending £1m+ per year
We were selected as the private
sector partner to pension
administrator MyCSP - the first
Mutual Joint Venture to be launched
by the Government. As a result, we
will be able develop innovative new
ways of working with the public
sector, delivering efficiencies through
scale and access to wider commercial
opportunities.
BPS focus
As part of our strategy to build a
focused BPS offering, we agreed to
sell the Xafinity Consulting business.
This enables us to concentrate on
our core capabilities in complex
administration and payment
processing. It also allows us the
move to a single integrated Equiniti
brand from 2013, further enhancing
our cross-selling opportunity and
leading market position.
+47.3%
cashflow
We increased operating cashflow to
£92.6m thanks to enhancements in
the sales invoicing cycle and process
improvements.
As a highly cash generative company,
this has meant that we have been
able to fund acquisitions during the
year from our existing operations.
Revenue
+10.1%
EBITDA
Pre exceptional items
+7.7%
£266.5m
£81.1m
Operating
Profit
+10.8%
£31.4m
Operating
Cashflow
+47.3%
£92.6m
+4%
Capex Ratio
4.7%
Cash Conversion
+37%
114%
Client
Satisfaction
+
91%+ Excellent or good service quality rating
Staff Retention
+2%
87%
†
3 new
acquisitions
We invested in three acquisitions
during the year. We acquired the
leading financial services technology
provider peterevans. We expanded
Equiniti’s current company secretarial
offering with the acquisition of Prism
Cosec. We took a 40% share in
MyCSP, the the first Mutual Joint
Venture to be launched by the
Government.
† Excludes acquisitions by the Xafinity Consulting
business, which was disposed of during the year
The Group made a loss for the year from continuing operations of £28.1m compared to £37.6m in 2011. The year on year reduction is
mainly down to improved profit from operating activities as well as a significant decrease in finance costs.
All figures exclude Xafinity Consulting, disposed of during the year
6 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 7
2012
CHIEF EXECUTIVE’S STATEMENT
The Equiniti Group achieved strong growth in
2012 with total revenue up 10.1% to £266.5m
and EBITDA before exceptionals up 7.7% to
£81.1m.
“The outlook for
Equiniti is very
positive”
We have had a very positive year,
resulting in strong sustainable revenue
growth and the business coming
together behind a common ambition to
deliver a differentiated Business Process
Services (BPS) proposition. It is a credit
to all our colleagues across Equiniti
who have together driven synergies,
championed product innovation and
responded to customer needs.
As part of our strategy to develop a
focused BPS offering, we agreed to sell the
Xafinity Consulting business in November
2012 subject to FSA approval. The
transaction completed on 21st February
2013. Having considered the strategic
alternatives, we believe that separating
the Xafinity Consulting business now
was the right course of action for both
Xafinity Consulting and the wider Equiniti
Group. We fully expect both businesses
to continue to work in close partnership
in key areas of mutual interest in the
pensions market.
The sale of Xafinity Consulting enables us to move to a single
integrated Equiniti brand from 2013, further enhancing our cross-
selling opportunity and leading market position. Therefore the
figures quoted are for the continuing business.
We have delivered an excellent performance with 10.1%
revenue growth to £266.5m (£242.1m in 2011) and 7.7% EBITDA
improvement to £81.1m before exceptionals (£75.3m in 2011).
The success of our strategy means that this robust growth has
been achieved against a background of continued low interest
rates and subdued conditions in some of our core markets, such as
Corporate Actions.
New sales and renewals in the year came to £97.2m total contract
value, with major highlights such as wins with Fresnillo, Imagination
Technologies, Segro, Lloyds Banking Group, Citigroup, Prudential
and the Armed Forces. Contract periods are now typically five or
more years and contracted income accounts for around 75% of
revenue in our main business lines. Our clients have also sought
to benefit from broader Group propositions, with the average
number of service lines delivered to our larger clients rising to 12.5
(from 9.7 in 2011), resulting in 10% CAGR for this segment. We
have a healthy sales pipeline at Group and operational level. We
continue to strengthen our Big Ticket, bid and sales teams as we
seek further growth opportunities from our BPS activities.
At operational level, Pension Solutions delivered 31% EBITDA
growth to £24.6m before exceptionals and 17% revenue increase
to £130m. The Hazell Carr operation performed particularly
strongly in response to increased market demand in specialist
complaints handling. Our Shareholders Solutions operation
maintained a strong overall performance with notable business
wins in the FTSE100 and FTSE250 markets, despite subdued
market conditions. This resulted in a 4% increase in revenue
to £115.8m and 4% increase in EBITDA to £54.6m before
exceptionals. The Commercial Solutions operation, which achieved
a 6% revenue growth to £20.7m and an EBITDA decrease before
exceptional items to £4.7m, integrated our IT services operation
to create a scale IT and BPS platform with leading on-shore, near-
shore and far-shore capabilities. We delivered a further £4m of
cost improvements across the Group from operational integration
and achieved increased cash conversion to 114% (2011: 83%)
largely from enhancements in the sales invoicing cycle.
We made three strategic acquisitions and investments during
the period that fit our core growth strategy and extend our
capabilities. As the private sector partner to pension administrator
MyCSP - the first Mutual Joint Venture to be launched by the
Government - we will be able to develop innovative ways of
working with the public sector, delivering efficiencies through scale
and access to wider commercial opportunities.
We acquired peterevans, the leading technology provider for
financial services firms. We had worked with peterevans for
a number of years and had always been impressed by their
cutting-edge technology offering. The acquisition will allow us
to collaboratively enhance the existing offering and create an
extended range of services in this important market. We also
expanded Equiniti’s current company secretarial offering with the
acquisition of Prism Cosec, who work with UK and international
companies to establish and maintain excellent standards of
corporate governance.
Building on a strong heritage of supporting the UK’s best known
brands and public services, we have laid down the foundations to
accelerate growth and develop our business as a leading Business
Process Services provider. Equiniti is a highly cash generative
business with a high proportion of recurring income and long term
contracts. We have an expanding pipeline of opportunities and a
broadening service offer targeting growth markets.
The outlook for 2013 is positive. We anticipate increased market
opportunities for our specialist business processing services in
both the public and private sectors. We continue to invest both
in our business and our people to drive sales growth and service
improvements.
Wayne Story
Chief Executive Officer
8 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 9
A CLEAR DIRECTION
Equiniti specialises in providing complex administration and
payments processing solutions, with expertise in delivering the
service quality demanded by regulated markets.
With continued market pressure to find efficiencies, companies are increasingly looking for
more effective solutions to non-core-processes. Legislative changes are further increasing
the administrative burdens and complexity of most organisations, particularly in the
pensions, banking and financial services sectors.
The Government continues to drive reform in many areas of public spending, with an
increasing emphasis on more flexible delivery models. Outsourcing, joint ventures and
shared service delivery provide opportunities to drive increased value for UK citizens and
improve service levels.
Our established expertise in these critical areas and the scale of our capabilities put us in
a strong position to respond to these market opportunities during 2013. We will move
towards a single integrated brand and continue to invest in our Big Ticket sales team,
targeting key outsourcing markets where we have a strong heritage including banking and
financial services, the health sector and central government. We continue to extend the
range of services we provide to our substantial client base and have successfully increased
the the average number of service lines delivered to top tier clients* to 12.5 (from 9.7 in
2011), resulting in 10% CAGR for this segment.
We also have a tight focus on cash conversion and on maintaining the quality of our
recurring contract revenues.
Every champion
needs a great
pit crew
Empowering our
partners through
business process
outsourcing
solutions
As every champion knows, having
the right pit strategy can mean the
difference between first and second
place.
That’s where we come in. With
our world-class support team in
tow, our clients are free to focus
on the finishing line while we take
care of the details. It’s what we
do for around 1,600 of the UK’s
leading businesses and public sector
institutions. Whether it’s refining
an existing service infrastructure
or designing bespoke technology
solutions, our business process
outsourcing services help keep our
clients on track and front of the
pack.
* Clients spending £1m+ per year
10 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 11
DIRECTION We continuously enhance
our capabilities through
acquisitions and product
development.
ACQUISITIONS AND DEVELOPMENTS
MyCSP mutual joint venture
Prism Cosec
MyCSP, the first mutual joint venture business created from a
central government service, was launched by Francis Maude,
Minister for the Cabinet Office. Equiniti Group’s Paymaster
business was selected as the private sector partner taking a 40%
stake. Former Cabinet Minister, Lord Hutton of Furness, was
appointed as the first Chairman of MyCSP Ltd. The innovative
Mutual Joint Venture model gives employees a 25% ownership
stake, representation at board level and a share in profits. The
new enterprise administers pensions for the 1.5million members
of the Civil Service scheme. The Government retains a 35% stake
so taxpayers benefit as the business grows in value. Working in
partnership with MyCSP, we will be able develop innovative new
ways of working with the public sector, delivering efficiencies
through scale and access to wider commercial opportunities.
Since its launch in April 2012, MyCSP has secured 12 new contract
wins.
peterevans
The Equiniti Group acquired the leading technology provider for
financial services firms, peterevans. As part of the Group, the
business will be able to further develop its cutting-edge technology
offering in order to create an extended range of services to both
current and prospective clients looking to outsource their services.
Clearly focused on the securities and investment market, peterevans
extends Equiniti’s platform and offering in the financial services
market.
The acquisition of Prism Cosec – a respected corporate governance
and company secretarial services provider - will expand Equiniti’s
current company secretarial offering complementing that
provided by Equiniti David Venus. Prism Cosec works with UK
and international companies to establish and maintain excellent
standards of corporate governance and have significant expertise
and experience working with international companies, particularly
those looking to list in the UK.
Auto-enrolment
October 2012 saw the introduction of major pension reforms in
the UK. To enable employers to overcome the processing and
communication challenges of Auto Enrolment, fully comply with
legislation and do so in an efficient and cost effective way, we
introduced CompendiaAE. Based on the award-winning Compendia
pensions administration platform and utilising its system independent
web self service tools, CompendiaAE simplifies the administration and
reduces the costs involved with auto-enrolment.
This robust and intelligent platform can interface with an employer’s
HR and payroll systems to interrogate the databases for the whole
workforce and automatically enrol, at outset and ongoing, all eligible
jobholders into the employer’s Qualifying Scheme(s) or NEST.
Paymaster International Payments
Paymaster International Payments is an alliance between Equiniti,
one of the largest global banks and TransGlobal Payment Solutions
for the provision of the online payment platform PayFac.
It is a best in class international payments service and a high quality
foreign exchange service that has smarter work processes, delivers
in the local currency and guarantees accurate payments.
Consolidated technology platform
In 2012, we consolidated the strength of our Belfast-based ICS
business with Equiniti’s IT services unit, a leading provider of large
scale complex systems. The enlarged offering provides our clients
with innovative first class on-shore, near-shore and off-shore
technology solutions.
.
Acquisitions by the Xafinity Consulting business are not
included as this business was disposed of during the year
We have a strong
pipeline of potential
acquisitions
12 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 13
Our recurring
revenues allow us
to invest in further
service improvements,
acquisitions and new
products. We maintain
a leading share in our
core markets and look
to further grow our BPS
services.
A BUSINESS MODEL FOR GROWTH
OVERVIEW OF THE MARKET
Market drivers and opportunities
Effective management of costs remains a strong focus for most
organisations across the public and private sectors.
technologies to meet the increased
challenges they face. Our capabilities in
the pensions market span software and
administration services, establishing the
Group in a unique position to continue to
succeed and innovate in this sector.
As the private sector partner to the first
Mutual Joint Venture to be launched by
the Government - MyCSP - we are well
placed to develop innovative new ways of
working with the public sector, delivering
efficiencies through scale and access to
wider commercial opportunities.
The market’s appetite for corporate
actions has remained relatively subdued.
While the low level of activity in this
market is expected to continue, our
recurring contracted revenues underpin
our Shareholder Solutions operations
and have allowed us to invest in further
service improvements, acquisitions and new
products. We maintain a leading share in
the FTSE100 and look to grow our service
range within the small cap sector.
In order to deliver both cost savings
and continued service improvements,
organisations are focusing ever more on the
longer term commercial fit of outsourcing
partners, where market knowledge and
operational synergies can play to a more
successful outcome.
Equiniti has an unrivalled heritage in the
large corporate, banking, financial services
and public services sectors, delivering
complex financial administration and
business services in regulated markets. We
have seen increased activity in our broader
outsourcing activities and are well placed
to respond to the needs of organisations
in these key markets. Developments in the
financial services sector, such as the widely
publicised PPI issues, have driven demand
for our specialist complaints management
solutions.
Legislative changes and reforms in the
pensions market, including auto-enrolment,
continue to place additional pressures
on organisations. Being able to adapt
quickly and cost effectively to these
changes is critical to our clients. As a result
of this increased complexity, demand
for outsourced services in this field is
anticipated to grow over the coming years.
We have worked closely with our clients to
develop existing approaches and implement
a range of innovative new services and
We have a robust
business model focused
on unlocking growth
potential for the Group.
Big Ticket
Our Big Ticket function leads major contract bids, Group wide sales initiatives and taking
new services to market. By drawing on our broad capabilities, we have the flexibility and
scope to spearhead growth from cross sales, new markets and new services.
Market facing teams
The business is structured into three market-focused sales teams each with in-depth
expertise in their sectors, ensuring we maintain the leadership in our core markets:
Shareholder Solutions, Pension Solutions and Commercial Solutions.
Client framework
Our 1,600 clients are held within the Group’s Key Account framework. This provides a
comprehensive platform to cultivate deeper commercial relationships across our clients’
large and often complex organisations, facilitating opportunity identification and closer
partnership working.
Shared centres of excellence
For maximum effectiveness and efficiency, all our critical platforms and support functions
are delivered through Shared Service Centres. This ensures each function has the scale
and depth of expertise to deliver market-leading service excellence to our clients across
the sectors in which we operate.
14 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 15
OPERATIONAL FOCUS
PENSION SOLUTIONS
SHAREHOLDER SOLUTIONS
1,009*
colleagues
Our Pension Solutions operation is one of the UK’s leading
specialist providers of pension administration and payments
expertise.
Our Shareholder Solutions operation is a strategic partner to
leading businesses, delivering complete commercial solutions
in share registration, employee benefits and investment
services.
1,318*
colleagues
£130m
revenue
+17%
£24.6m
EBITDA
+31%
27%
work-based
schemes
members
supported
£13bn
payments
We have extended our capabilities with
the acquisition of peterevans, the leading
technology provider for financial services
firms. This will enable us to collaboratively
enhance the existing offering and create an
extended range of services in this important
market. We also expanded our company
secretarial offering with the acquisition
of Prism Cosec, who work with UK and
international companies to establish and
maintain excellent standards of corporate
governance.
Committed to service excellence, we
achieved CCA accreditation for the third
year running and improved scores in all
categories of the Capital Analytics Registrars
benchmarking survey. We also won the Best
Shareholder Services category at the Shares
Awards and Most Innovative Technology
for our ESP Portal at the Financial Services
Awards.
Our Pension Solutions operation delivered
an excellent 31% EBITDA pre exceptional
items growth to £24.6m (2011: £18.8m),
with the Hazell Carr operation performing
exceptionally strongly as a result of their
ability to respond to market requirements
for specialist complaints handling,
reaching a milestone of 1,000 contractor
placements. Sales revenue rose 17% to
£130.0m (2011: £111.2m).
As part of our strategy to develop a
focused BPS offering, we agreed to sell
the Xafinity Consulting business. We
believe that separating the business now
is the right course of action for both
Xafinity Consulting and the wider Equiniti
Group. We fully expect both businesses
to continue to work in close partnership
in key areas of mutual interest in the
pensions market.
We have also integrated our pension
software operation, Equiniti Claybrook,
into the Pension Solutions business to
enable greater operational synergies to be
achieved.
We will now move to a single integrated
Equiniti brand from 2013, further
enhancing our cross-selling opportunity
and leading market position.
We pay around
20%
pensioners
in the UK
Equiniti Paymaster won the first
mutual joint venture out of UK Central
Government - MyCSP, and we have
already helped them make a difference
to their business in terms of operations,
infrastructure, brand and IT.
Together we provide pensions software,
outsourced administration and payment
services to 7.3 million scheme members.
This represents 27% of occupational
pension scheme members in the UK. We
pay over £13 billion to 2.3m pensioners
and annuitants in over 180 countries each
year.
By effectively using capabilities from across
the Group, we have successfully grown
our Key Accounts including Lloyds Banking
Group, Citigroup and Prudential. We
have also ensured our relationship with
the Armed Forces has been secured for
at least a further seven years as well as
maintaining our record of winning Pension
Awards over the last decade, with two
awards for our Compendia software in
2012.
The Shareholder Solutions operation
maintained a strong overall sales
performance with £115.8m revenue
(2011: £111.4m) with a 4% EBITDA pre
exceptional items increase to £54.6m in 2012
(2011:£52.3m) despite continued depressed
conditions, low levels of Corporate Actions
and prolonged low interest rates.
The Investment Services business
performed exceptionally well during the
period, achieving 46% EBITDA growth to
£12.7m (2011: £8.7m) from increased share
dealing activity. Our Employee Benefits
and Shareplan business also delivered 5%
EBITDA growth to £17.7m. It has seen a high
take up of our Employee Benefits Portal
by over 100 major corporate clients. This
unique portal allows employees to manage
their shareholdings and benefits through one
online solution.
The business, which is the leading provider
to FTSE100 and FTSE250 companies, is
highly cash generative with substantial levels
(73%) of contracted income. We continue
to deliver high (95%) client renewal rates
and new business wins including Fresnillo,
Imagination Technologies and Segro. Our
contract periods are typically for five or
more years.
8,000
daily trades
* number of colleagues as at December 2012.
* number of colleagues as at December 2012.
£115.8m
revenue
+4%
£54.6m
EBITDA
+4%
46%
FTSE100
18m
accounts
£23bn
dividends
16 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 17
OPERATIONAL OPERATIONAL FOCUS (CONTINUED)
410*
colleagues
£20.7m
revenue
+6%
£4.7m
EBITDA
-4%
COMMERCIAL SOLUTIONS
Our Commercial Solutions operation is focused on developing
the wider BPS market and is underpinned by a range of IT
services and software solutions.
We handle
2.6 million calls
each year
In the Commercial Solutions operation,
the core areas of IT services and payroll
achieved 6% growth over last year.
Overall the business delivered £20.7m
revenue (2011: £19.5m) and 4% EBITDA
pre exceptional items decrease to £4.7m
(2011: £4.9m). Amongst the successes
were Barnett Enfield and Haringey and
North Middlesex Hospital NHS Trusts
for payroll services and a major IT
development contract for Central Bank
of Ireland. Equiniti 360 Clinical recorded
an impressive 35 new contract wins for
its recently launched doctor revalidation
software system.
The second half of 2012 also saw the
merging of Group IT with the IT services
business of Equiniti ICS to form a new
£35m IT business. Providing services
to the Group as well as the public and
private sectors, the new entity is now well
positioned to take advantage of the rapidly
growing market for outsourced IT services.
We have been selected by
10%
NHS trusts to provide
doctor revalidations
on-shore
near-shore
off-shore
33m
documents
processed
* number of colleagues as at December 2012.
18 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 19
OUR PEOPLE
Our people are at the heart of the quality of service and market
innovations we deliver.
Our people are central to our success. We share a common ambition
and values across the Group and we continue to invest in training and
personal development at all levels, underpinning our focus on delivering
excellent customer service and driving growth.
Through our acquisition programme, we were joined by new colleagues
in centres across the UK. These teams have been welcomed into our
existing operations, enhancing our expertise in key areas like software
development and executive share programmes.
With market leading skill sets in HR software, employee benefits
and pensions, we ensure that the reward proposition available to
our people is best in class. We offer an engaging flexible benefits
programme and have aligned our reward mechanism to our business
goals.
2,737
colleagues
23
locations
87%
staff
retention
Trust
Excellence
Client focus
Belief
People
We act with integrity and
openness in our dealings
with others
OUR
VALUES
We work hard to get it right
first time and keep our
promises and commitments
to others
We add value and build
We have passion and belief
true partnerships
in what we do and who we
are
We are positive,
enthusiastic and
supportive of one another
20 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 21
CORPORATE RESPONSIBILITY
The Equiniti Group is committed to being a
responsible company and supportive of the
communities in which it operates.
Corporate Responsibility is about how we align our behaviour
with the expectations and needs of our stakeholders - not
just customers and investors, but also employees, suppliers,
communities, regulators, special interest groups and society as
a whole.
We are
committed
to continual
improvement
Environment
Equiniti Group recognises the importance of protecting the
environment and the impact of commerce on environmental
issues. It is an area which requires a sustainable and proactive
strategy to ensure we protect the environment for future
generations and we are committed to continual improvement
in energy efficiency and avoidance of waste.
Equiniti Group continually assesses its premises needs and
these have been optimised by a series of measures, including
space planning, upgrading to more efficient plant where
required, continual review of run-times as part of our drive
to reduce energy consumption, installation of energy saving
control systems and a comprehensive planned maintenance
programme on all of our plant and machinery. Space planning
has enabled us to maximise the use of buildings across the
portfolio and has led to significantly reduced square footage
and co-location of operations, where possible and appropriate.
We are registered as a Group with the Carbon Reduction
Commitment and have featured strongly in the published
league tables for the first two years of that initiative.
In 2012 we attained the Carbon Trust Standard across our
entire Group portfolio, a significant endorsement of our
carbon management programme.
A considerable amount of capital has been allocated to projects
in our Property and IT teams to enable carbon reduction
measures to be implemented. Examples of this include the
installation of voltage optimization equipment and smart
metering in key buildings, helping to both reduce consumption
and increase visibility of data, to enable us to make further in-
roads to reducing our carbon footprint. Ongoing and continual
reviews - and subsequent implementation programmes - of
our IT hardware have led to a significant reduction in power
consumption across the Group.
Equiniti Group uses state of the art printers which duplex
print and use environmentally friendly paper and toner. This
has halved the quantity of paper used and further reduced our
environmental impact. We recycle all toner cartridges. We also
run a recycling programme and have implemented a policy of
removing waste bins at each desk and installing recycling bins
in our premises, helping to ensure that our people sort and
recycle right across the business. Through the use of modern
video conferencing technology, we have reduced the number of
business miles travelled and thereby also reduced our carbon
footprint.
22 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 23
CORPORATE RESPONSIBILITY (CONTINUED)
Training and Development
Charity and Communities
Training and development is an ongoing part of daily life in many
of our offices and operations. There is significant commitment
to people learning with access online to a range of training
modules designed to support our values and behaviours across
the Group. Allied to this are our own Training Academies
across the business, which focus on enhancing technical skills,
competencies and knowledge, which are specific to our
business.
Over the last year we have also invested in a variety of
development programmes that have enabled people to grow,
learn new skills and improve business performance. For
example, more than 600 people have participated in external
courses, covering topics from Project Management to how to
build their personal confidence, credibility and charisma. A new
initiative introduced in 2012 was Whole-Brain Thinking profiling.
This tool helps understand how individuals prefer to think and
work, and has been significant in helping support Organisational
Development and Change initatives across the organisation
in 2012. To date over 200 people have participated in this
assessment programme including our Leadership Team and
50 top managers. This has enabled our people to gain a better
understanding of their own and other’s thinking styles and to
use this knowledge to enhance the impact and value of their
interactions and communication with others across the Group.
We have a history of fundraising for good causes. Our people
care passionately about helping others and throughout the year
raise money both individually and through the efforts of our
Charity Committees.
During 2012 we continued to work with our national charity
partner, ABF The Soldiers’ Charity. This was the second year
of our partnership with The Soldiers’ Charity and throughout
the year we raised both funds and awareness for the charity
through charity days, events such as quiz nights and car boot
sales, and providing teams of people to support with events
such as the London Marathon and The Ideal Home Exhibition.
ABF The Soldiers’ Charity supports service men and women
who are in need with individual grants and support packages.
They have more demand than ever for their services with
continued military action overseas. They also provide support
to other associated charities who provide different levels of
support than that available through The Soldiers’ Charity. With
our history of working with the MoD this is a great choice of
charity for the business and one which is well supported in
many of our offices. Over the course of our partnership we
have raised over £25,000 for the charity and have committed
to continuing our support through 2013.
We also support Red Nose Day in March each year, and the
Children in Need appeal day in November. Most of our offices
and locations are involved for these two great causes and in
2012 we raised over £25,000 between the two days alone.
As well as supporting national charity partnerships, we have a
local approach to charity support with most of our local offices
nominating a local charity partner each year. These charities
are often personal to our people and fund raising for these is a
regular part of local office life.
Efforts from staff including internal events including cake sales,
raffles, competitions, sponsored sporting events and dress
down days saw our UK-based offices raise over £20,000 for
Our people raised
£45,000
for local and national good causes
their local charities in 2012, in addition to the
support for our National Charity Partner and
the two Charity days outlined above.
We are active in supporting local community
projects and initiatives, including supporting a
number of local schools. We are committed to
working with young people to engage in business
principles and functional expertise, with a focus of
developing and investing in young talent, such as
Young Enterprise. In 2012 we strengthened our
links with a local High School by providing one day
insight sessions for GCSE business students, as well
as a week long work experience for one business
student. Our people visit careers fairs and events
at a local college to raise awareness of future
career options as well as of the Equiniti Group.
In 2012 we ran our first formal Apprenticeship
programme with apprentices joining the
Group mainly in IT roles. We will continue this
programme in 2013.
24 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 25
OUTLOOK FOR 2013
The Equiniti Group is highly cash generative and is in a strong
position to deliver continued profitable growth into 2013 and
beyond.
The outlook for 2013 is very positive.
Our core businesses have robust levels of recurring contracted income, allowing us to
invest in new service developments and growing our capability. £139m revenue is already
contracted for 2013.
We anticipate increased market opportunities for our specialist business processing
services in both the public and private sectors. We continue to invest both in our business
and in our people to support a strong focus on sales growth. In particular, our growing
business process services and IT capability allows us to focus on selective opportunities
in the growing private and public sector outsourcing markets. Our successes in this
area include being selected as the private sector partner to MyCSP, the first mutual
joint venture launched in May 2012. This puts us in an ideal position to support further
opportunities in the public sector and the broader BPS market. With 1,600 clients and
a high retention rate, we pride ourselves on the relationship we have with our existing
customers. We will continue to work closely with our client base to enhance our offering
and service excellence.
We will move to a single integrated Equiniti brand from 2013, further enhancing our cross-
selling opportunity and leading market position.
Tight control on costs remains a priority for the Group. Our drive to integrate our
operations effectively will ensure we maximise the benefits for our clients and for the
business.
26 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 27
BOARD OF DIRECTORS
The board comprises two executive and five non-executive directors
NON-EXECUTIVE DIRECTORS
EXECUTIVE DIRECTORS
Wayne Story
Martyn Hindley
Chief Executive Officer
Chief Financial Officer
Wayne joined the Equiniti Enterprises
Group in 2008 as the UK Managing
Director responsible for all operations and
for overseeing the business entering the
BPO market. Wayne was appointed the
CEO of the Equiniti Group in January 2010.
Wayne has a track record of growing
businesses and significant experience in
the BPO market including a successful spell
as Managing Director of the HR business
at Capita, growing revenue and achieving
triple digit growth. Wayne has also held
senior roles at TSB Group, PPP Healthcare,
PA Consulting Group and CSG. Wayne
is also an Associate of the Chartered
Institute of Banking.
Martyn Hindley is the Chief Financial
Officer of the Equiniti Group, a role he
was appointed to in December 2012.
He joined the Equiniti Group from Emap
where he held the position of CFO. Emap
is a private equity owned international
business to business media group. His
sector experience also includes publishing,
marketing, business support services,
supply chain and logistics.
Prior to this Martyn held senior positions
with PwC, Blenheim Group PLC, and
Northcliffe Media
In his previous roles, Martyn was involved
in driving transformational change and
leading complex transactions including
M&A activity.
Kevin Beeston
Chairman
Kevin joined the Equiniti Board as Chairman
in September 2011. He was the Chairman
of Serco Group plc from 2002 to 2010,
having previously served as Serco Group’s
Chief Executive and Finance Director. An
accountant by training, Kevin joined Serco
in 1985 and contributed to the company
developing from a small UK technical services
business to a leading FTSE100 international
outsourcer.
Kevin holds a number of non-executive
roles and is Chairman of UK developer and
homebuilder Taylor Wimpey plc, Chairman
of warranty services provider Domestic
and General, Chairman of the independent
provider of secure mental health services
Partnerships in Care Limited.
From 2006-2009 Kevin chaired the
CBI’s Public Services Strategy Board,
which promotes the role of business in
transforming UK public services, and he
was also a Commissioner for the TUC’s
Commission on Vulnerable Employment.
Kevin is Chairman of the Nomination
Committee, a member of the Remuneration
and Audit Committees.
Sir Rodney Aldridge, OBE
Non-Executive Director
Sir Rod was the founder and Chairman of
the Capita Group until his retirement in
2006. During his tenure he led the group
from its formation in 1984 within the
Chartered Institute of Public Finance and
Accountancy (CIPFA) to being a FTSE 100
Company. Sir Rod was Chairman of the
CBI’s Public Services Strategy Board from its
inception in 2003 until 2006. Prior to Capita,
Sir Rod worked in local government for ten
years, where he qualified as a chartered
public accountant.
He joined CIPFA in 1974, ultimately
becoming its Technical Director. In
2006, Sir Rod established the Aldridge
Foundation to continue with his work on
public service reform and to focus on his
charitable activities involving educational
underachievement and social exclusion.
Sir Rod is a Patron of the Prince’s Trust and
Chair of ‘v’, a charity launched in May 2006
which aims to inspire and engage over one
million new youth volunteers. He is also
Chairman of The Lowry, a theatre and arts
venue in Salford and a member of the Lab
Board at NESTA. Sir Rod is a member of
the Audit Committee.
Oliver Niedermaier, PhD
Non-Executive Director
Oliver is currently President and Chief
Executive Officer of King Worldwide.
Most recently, Oliver was Chief Executive
Officer of Georgeson, a subsidiary of
Computershare, a world-leading provider
of strategic solutions to corporations and
shareholder groups.
Oliver joined the Computershare group
executive committee following its 2004
acquisition of Pepper Technologies AG, an
international CRM software and consultancy
business which he founded in 1998.
He was responsible for corporate strategic
development during an active period in
Computershare’s international expansion.
In 2007, Oliver co-founded with The
Riverside Company, Sage Holdings – now
DF King Worldwide. Oliver is also a non-
executive board member of the LMU
Entrepreneurship Center at the University
of Munich.
Oliver graduated from Ludwig Maxmilians
University, Munich, with a Master’s in
Business Administration. While teaching
Strategic Management at the University of
Munich, Oliver completed his coursework
for a PhD and graduated Magna Cum
Laude. Oliver was recently honoured by the
World Economic Forum as a 2010 Young
Global Leader. Oliver is a member of the
Nomination and Remuneration Committees.
Nick Rose
Non-Executive Director
(Investor Representative)
Nick joined Advent in 2005 from Bain
and Company where he worked in their
private equity practice on both pre and
post acquisition work. Nick’s sector focus
at Advent is on business and financial
services, with a particular emphasis on
specialty finance, insurance, and outsourcing
companies. During his time at Advent he
has been involved in the sale of Financial
Dynamics and, in addition to Equiniti,
investments in Domestic and General,
WorldPay and the Towergate Partnership
plc. Nick is also an NED of the Towergate
Partnership plc. He has an MA in philosophy,
politics and economics from Oxford
University. Nick is Chairman of the Audit
Committee.
James Brocklebank
Non-Executive Director
(Investor Representative)
James joined Advent in 1997, moving from
the London office of investment bank Baring
Brothers where he advised clients on various
international mergers and acquisitions.
James led or has participated in a number
of Advent’s investments including Equiniti,
WorldPay, Monext, Tertio Limited and
MACH, and is head of Advent’s European
business and financial services sector team.
James has an MA in geography, specialising
in economic and political geography, from
Cambridge University. James is Chairman
of the Remuneration Committee and is a
member of the Nomination Committee.
James is also NED of WorldPay.
28 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 29
ADVENT INTERNATIONAL
DIRECTORS’ REPORT
Advent International is one of the world’s largest and longest
established private equity groups, with over US$26 billion in
cumulative capital raised. Since their founding in 1984, Advent
International has made over 600 investments in 41 countries,
achieved over 140 IPOs on major stock exchanges worldwide
and established a network of advisory offices and affiliates,
operating in over 20 countries.
James Brocklebank and Nick Rose are the Advent executives with oversight of the Equiniti
Group and both serve as board directors.
The directors present their directors’ report and financial
statements for the year ended 31 December 2012.
Principal activities
The Equiniti Group is a business services partner to leading businesses, delivering complete
commercial solutions in share registration, employee benefits, investment services, pension and
employee benefit consulting, pension administration, pension software systems, business software
systems and business process outsourcing.
The Equiniti Group manages the spectrum of business processes that are critical to organisations,
from administrating share registers and corporate actions to managing employee payrolls,
providing flexible benefit schemes, providing pension software systems and the related
administration of the underlying process or running outsource functions. The scale of specialist
capability across the Equiniti Group’s brands and our focus on quality mean that, when it really
matters, the UK’s leading companies trust the Equiniti Group to deliver. The Equiniti Group is
split into three operating solutions: Shareholder Solutions, Pension Solutions and Commercial
Solutions. These business lines all provide a unique and bespoke service to clients and are aligned
to the financial reporting and management structure of the Equiniti Group.
In November 2012 the Group agreed to sell the Xafinity Consulting business which delivers
consultancy support across the complex spectrum of pension, actuarial, trustee and investment
activities. The sale completed in February 2013. Following the sale of Xafinity Consulting a number
of group subsidiaries changed their names as set out in note 15 of the consolidated financial
statements.
At the core of the Equiniti Group’s business is an absolute focus on outstanding service; we put
our clients at the centre of everything we do and our values are the driving force behind our
commitment to providing a service which is world class, professional and adds value to our clients’
businesses through a range of commercial outsourcing solutions.
Equiniti Group Limited acts as a holding company.
30 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 31
DIRECTORS’ REPORT (CONT’D)
Business review
The audited results for the year are set out from page 39 onward. The
detailed overview of the market and operational focus is set out in pages
15 to 19. Disclosures of principal risks and uncertainties affecting the
business are set out in note 1. Subsequent to the balance sheet date,
the Group disposed of the Xafinity Consulting business after a strategic
review.
Key Performance Indicators
Our key performance indicators (KPIs) are the core measures used
by the group to assess its own performance and allow shareholders
and other internal and external stakeholders to see how the group is
performing. Our KPIs are regularly reviewed by the Executive Directors
and Equiniti’s Board of Directors.
Financial
Total revenue
EBITDA
(before exceptional items)
Operating profit
Operating cash flow
Cash conversion
Capital expenditure ratio
Non-Financial
Staff retention
Client satisfaction
£m
£m
£m
£m
%
%
%
%
2012
2011
266.5
242.1
81.1
75.3
31.4
28.4
92.6
62.9
114.2% 83.5%
4.7%
4.5%
87.2%
85.4%
91.0%
91.0%
Financial KPIs
The Directors regard the financial KPIs of the business to be total
revenue, EBITDA pre exceptional items, operating profit, operating cash
flow, cash conversion and the capital expenditure ratio.
Total revenue
Total revenue for the year was £266.5m. This has a high recurring
component and less reliance on project based revenue.
Earnings before interest, tax, depreciation, and
amortisation (EBITDA) pre exceptional items
EBITDA pre exceptional items is a key earnings indicator due to its
impact on financial covenants. It reflects profit before finance costs,
taxation, depreciation and amortisation and exceptional items. In 2012
EBITDA pre exceptional items was £81.1m, an increase of £5.8m (7.7%)
compared with the prior year (£75.3m). This represents a margin of
30% which is consistent with the prior year’s margin. The directors are
satisfied with this result due to the reasons mentioned in the business
review.
Operating profit
Operating profit remains a key earnings indicator, reflecting profit
before finance costs and taxation. In 2012 operating profit was £31.4m,
an increase of £3.0m (11%) compared with the prior year (£28.4m). This
represents a margin of 12%, comparable with the prior year’s margin.
The directors consider this to be a positive result.
Operating cash flow
Operating cash flow is a key earnings indicator, reflecting the cash
generated from trading activities. In 2012 operating cash flow was
£92.6m, an increase of £29.7m (47%) compared with the prior year
(£62.9m). The directors consider that this highlights the Group’s ability to
generate cash from each of its operating solutions.
Cash conversion
Cash conversion relates to the amount of operating cash flow
generated as a percentage of EBITDA pre exceptional items. The result
for this year continues to demonstrate the strength of the Group to
generate cash.
Capital expenditure ratio
As part of the Group’s ongoing efforts to improve cash flow, capital
expenditure is managed effectively. Capital expenditure ratio consists
of expenditure on tangible and intangible assets, as a percentage of
revenue.
Non-financial KPIs
Performance against non-financial KPIs is reflected in the following:
Staff retention
Staff retention measures the number of staff who remained employed
in the Group throughout the year as a percentage of total staff at the
year end. The Directors believe this continues to reflect the high level of
commitment from the Group’s employees.
Client satisfaction
The KPIs reported for client satisfaction cover excellent or good service
quality ratings from our clients. This KPI is consistent with 2011.
Exceptional items
Exceptional items of £11.8m (2011: £11.4m) include costs incurred in
respect of the integration of the businesses to form the Equiniti Group,
other restructuring and corporate development costs and a provision
against exceptional irrecoverable costs incurred on a complex long term
contract.
Capital expenditure
Capital additions for the year amounted to £12.5m (2011: £12.7m), of
which £12.5m was paid in cash (2011: £10.9m). This comprised £3.1m
(2011: £4.3m) of property, plant and equipment and £9.4m (2011:
£8.4m) of software and other intangible assets.
Finance costs
Group net finance costs were £66.9m (2011: £74.8m); of this a net
interest cost of £31.9m (2011: £37.8m) was payable in cash. The
remaining £35.0m (2011: £37.0m) is all non-cash charges and includes
£18.4m (2011: £17.5m) of accrued bank and shareholder loan interest,
£12.9m (2011: £12.0m) dividends accrued on preference shares and
£3.7m (2011: £7.5m) amortisation of finance costs.
Loss for the year
The Group made a loss for the year from continuing operations of
£28.1m compared to £37.6m in 2011. The year on year reduction is
mainly down to improved profit from operating activities as well as a
significant decrease in finance costs.
Cashflow
The Equiniti Group remains highly cash-generative. During the year
to 31 December 2012 net cash inflow from operating activities was
£92.6m (2011: £62.9m). Of this cash inflow from operating activities,
£12.5m (2011: £10.9m) was reinvested into capital expenditure, £31.9m
(2011: £37.8m) was utilised to meet the net cash interest and other
financing costs of the Equiniti Group’s borrowings, business acquisitions
of £10.6m (2011: £8.2m) and debt repayment of £15.0m (2011: £13.0m).
Xafinity Consulting cash balances were reclassified as assets held for sale
as at 31 December. This and the items mentioned above resulted in a
net increase in cash and cash equivalents of £22.6m (2011: decrease of
£7.6m) over the year.
Bank borrowings and financial
covenants
At the end of December 2012, net bank debt was £643.1m (2011:
£641.1m) and shares classified as debt was £174.9m (2011: £162.0m).
The Equiniti Group’s bank borrowings are available under senior
interest paying and payment in kind (“PIK”) facilities and reside in Equiniti
X2 Inv Limited and Equiniti Enterprises Limited (which mirror the two
banking groups). The Equiniti Enterprises senior loans mature between
2015 and 2017 whilst the PIK facility matures at the end of 2017, and the
Equiniti X2 Inv Group senior loans mature in 2017. Both of these lending
facilities require the Equiniti Group to comply with certain financial
covenants, which are applied to each banking group independently.
The covenants include annual controls on capital expenditure and the
maintenance of certain minimum ratios of earnings before interest,
taxes, depreciation and amortisation on both net interest payable and
net debt. In addition, there is a requirement that the net operating
cash flows generated are not less than the Equiniti Group’s cash cost of
funding the bank debt. The facilities are secured by fixed and floating
charges over Group assets. Further detail on the Equiniti Group’s
borrowing is set out in note 22 of the consolidated financial statements.
The Group complied with its covenants in respect of both banking
group’s facilities at the year ended 31 December 2012.
The Equiniti Group has a revolving credit facility of £12.6m, which was
not used in the year, it is available to finance working capital and for
general corporate purposes.
Liquidity risk and going concern
The principal uncertainties which the Equiniti Group faces relate to
certain revenue activities that are more difficult to predict, such as
corporate action income. These are dependent on the specific activities
of corporate clients which may in turn be influenced by underlying
market conditions.
Liquidity risk is the risk that the Equiniti Group will not be able to meet
its financial obligations as they fall due. The Equiniti Group’s approach to
managing liquidity is to ensure, as far as possible, that the Equiniti Group
will have sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions.
We have used the Equiniti Group’s three year business plan as the basis
for projecting cash flows, and measured resulting outcomes on cash
availability and bank covenant test points. The Equiniti Group has a very
high level of client retention giving a high degree of comfort on certainty
of revenue income.
32 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 33
DIRECTORS’ REPORT (CONT’D)
rates on debt. The Equiniti Group has established a risk management
programme that seeks to limit the adverse effects on the financial
performance of the business by monitoring levels of debt finance and
the related finance costs.
The Equiniti Group’s principal financial instruments comprise sterling
cash and bank deposits, bank loan and overdrafts, other loans together
with trade debtors and trade creditors that arise directly from its
operations.
Cash flow interest rate risk
The Equiniti Group is exposed to interest rate risk in three main
respects. Firstly, income relating to client balances is generally at floating
rates. This risk is currently largely mitigated by an interest rate derivative
which runs to October 2016. Secondly, expense relating to the UK
Sharesave (SAYE) product and ultimately payable to savers at fixed rates
is protected by fixed rate income agreements. Thirdly, interest expense
arising on floating rate loans is mitigated via interest rate derivatives
(swaps); these run to October 2016 and March 2013 for the Equiniti
Enterprises Limited and Equiniti X2 Inv Limited Groups respectively.
Credit risk
The Equiniti Group’s principal financial assets are bank balances, cash and
trade debtors, which represent the maximum exposure to credit risk in
relation to financial assets.
The Equiniti Group has strict controls around and regularly monitors
the credit ratings of institutions with which it enters into transactions
on its own behalf and for its clients. The Equiniti Group is not exposed
to significant customer credit risk due to the risk being spread across a
large and diverse client base.
Credit risk is the risk of financial loss to the Equiniti Group if a customer
or counterparty, including brokers, to a financial instrument fails to
meet its contractual obligations, and arises principally from the Equiniti
Group’s receivables from customers. Losses have occurred infrequently
over previous years. Due to the nature of the business the majority
of the trade receivables are with FTSE 350 companies. The amounts
presented in the consolidated statement of financial position are net
of allowances for doubtful debts, estimated by management based
on prior experience and an assessment of the current economic
environment.
During this period the Equiniti Group is not forecast to require drawing
down the revolving credit facility and we expect to remain compliant
with all financial covenants. As such, the Directors are satisfied that the
Group has adequate resources to continue in operational existence for
the foreseeable future. For this reason, the going concern basis has been
adopted in the preparation of these accounts.
Risk management
Various aspects of the Equiniti Group’s activities are regulated directly
or indirectly. As such, the Equiniti Group’s risk management systems
are longstanding and robust. The Equiniti Group has a strong risk
management framework where it utilises a “three lines of defence”
model, namely: operational management’s application of systems and
controls, the development and deployment of business conduct rules
and regulatory policies, and the independent assessment of these two
defences by the Equiniti Group’s independent internal audit function.
The business assesses its risk and risk profile using the enterprise wide
risk management model which covers strategy, change, customer
treatment, financial soundness, market and credit exposure, legal and
regulatory compliance, internal and external fraud exposure, change
and operations. It is a combination of these risk assessments that derive
the formulation of the Equiniti Group’s risk appetite.
In addition, the Equiniti Group has a well established business continuity
management (BCM) framework which determines how business
critical each activity is to clients, customers, other external stakeholders
and the Equiniti Group. Once assessed and independently challenged,
each business unit is required to apply a range of business continuity
tests which increase in line with the level of critical activity undertaken.
The Equiniti Group actively tracks its compliance with its BCM testing
programme.
Financial risk management
The Equiniti Group has established risk management policies and
the Equiniti Group Audit Committee oversees how management
monitors compliance. With these policies and procedures we review
the adequacy of the risk management framework in relation to the risks
faced by the Equiniti Group. The Equiniti Group Audit Committee is
assisted in its oversight role by Internal Audit. Internal Audit undertakes
both regular and ad hoc reviews of risk management controls and
procedures, the results of which are reported to the Group Audit
Committee.
The Equiniti Group’s operations expose it to a variety of financial risks,
including credit risk, liquidity risk and the effects of changes in interest
34 » Equiniti Group annual report 2012
Foreign currency risk
The Equiniti Group is exposed to foreign currency risk, primarily
arising from its IT business partnering arrangement. It is our policy to
hedge against material currency fluctuations where this is felt to be
advantageous.
Price risk
Price risks are the changes in market prices such as interest rates, foreign
exchange rates and equity prices which impact the Equiniti Group’s
income or the value of its financial instruments.
The Equiniti Group’s financial instruments are mainly in sterling; hence
foreign exchange movements do not have a material effect on the
Equiniti Group’s performance. The Equiniti Group does not hold
its own position in traded securities, being involved in receiving and
transmitting transactions on behalf of its clients.
The Equiniti Group earns fee income in relation to client and
shareholder deposits as well as interest on its own deposits. The Equiniti
Group’s senior debt and PIK loan rates are linked to Libor.
The Equiniti Group is exposed to movements in the interest rate in both
its intermediary fee revenue and net finance costs. Intermediary fee
revenue is linked to bank base rate, whilst both the senior debt and the
PIK loan rates of the Group are linked to Libor.
In 2011 the company hedged at existing market rates the monthly
intermediary fee income by receiving a fixed rate against base rate that
continues until 2016. This was against an underlying level of £400m of
assets reducing by £80m over the term.
Also in 2011, a swap, fixing monthly interest payable rates against LIBOR
on Enterprises Group’s levels of external borrowings was taken out that
also continues until 2016. This was against an initial liability level of £425m
reducing by £125m over the term. This effectively hedges the Group’s
exposure to the difference between Bank Base Rate and LIBOR over
the five years from October 2011.
In addition, the Equiniti X2 Inv Limited Group has taken out a derivative
to fix the variable (LIBOR) element of its borrowings (for £74m
reducing to £63m for three years through to March 2013, fixing 3
month LIBOR to 2.29%).
The Equiniti Group continually reviews these risks and will identify
suitable instruments where applicable.
Capital risk management
The Equiniti Group’s objectives when managing capital is to maximise
shareholder value while safeguarding the Equiniti Group’s ability to
continue as a going concern. We will continue to proactively manage
our capital structure whilst maintaining flexibility to take advantage of
opportunities which arise to grow our business. One element of our
strategy is to make targeted, value-enhancing acquisitions. The availability
of suitable acquisitions, at acceptable prices is, however, unpredictable.
In common with other private equity portfolio companies, the
Equiniti Group carries a high level of net debt compared to equity.
Total capital is calculated as total equity as shown in the consolidated
statement of financial position, plus net debt. Net debt is calculated as
the total of “other interest bearing loans and borrowings” as shown
in the consolidated statement of financial position, less cash and cash
equivalents.
Principal risks and uncertainties
Legislative risks
The Equiniti Group trades within regulated sectors of the UK economy
and is required to comply with all relevant regulations, which it manages
through ongoing regulatory assessment, robust systems and controls,
qualified staff and independent compliance personnel.
Operational risks
Operational risk is the risk of direct or indirect loss resulting from
inadequate or failed internal processes, people and systems, or from
external events arising from day-to-day operating activities. The
Equiniti Group has put in place and tested mitigation plans to minimise
the impact of these risks crystallising. It has invested in training and
implemented processes and procedures to reduce the likelihood
of occurrence. Coupled with this, the Equiniti Group maintains a
comprehensive insurance programme tailored to the demands of the
business.
Contractual arrangements
The Equiniti Group has contractual arrangements with all of its clients.
These contracts range between one and five years, and are essential
to the business. However, the details of these contracts are also
commercially confidential, and consequently have not been reported
in this review. The Equiniti Group continues to develop key supplier
partnerships to support the long term aims of its customers and the
Equiniti Group annual report 2012 « 35
DIRECTORS’ REPORT (CONT’D)
business. The Equiniti Group’s policy is to establish trading arrangements
which are made following an open non-discriminatory competitive
bidding process.
Other risks and uncertainties
The nature of the company’s services means that occasionally a claim
for professional service shortcomings can arise which could result in
compensation payable. To mitigate this risk the company maintains
professional indemnity insurance, which is in place across the Equiniti
Group.
Proposed dividend
The directors do not recommend the payment of a dividend on
ordinary shares but there are amounts accruing on preference shares
included in finance expenses.
Supplier payment policy
The Equiniti Group’s policy is to settle terms of payment with suppliers
by agreeing the terms of each transaction, ensuring the suppliers are
made aware of the terms of payment and abiding by the terms of
payment. Trade creditor days of the Equiniti Group for December 2012
were 35 days (2011: 35).
Directors
The Directors of the Company who were in office during the year and
up to the date of signing the financial statements were as follows:
Sir Rodney Aldridge
Kevin Beeston
James Brocklebank
Martyn Hindley
Alasdair Marnoch
Oliver Niedermaier
Nick Rose
Wayne Story
Appointed 3 December 2012
Resigned 31 May 2012
The Directors have the benefit of an indemnity which is a qualifying
third party indemnity provision as defined by Section 234 of the
Companies Act 2006. The indemnity was in force throughout the last
financial year and is currently in force. The Group also purchased and
maintained throughout the financial year Directors and Officers’ liability
insurance in respect of itself and its Directors and Officers.
36 » Equiniti Group annual report 2012
The directors are responsible for the maintenance and integrity of the
company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
By order of the Board
M Hindley
Director
29 April 2013
Registered Number:
07090427
Employees
The Equiniti Group is committed to providing an environment
which fosters involvement by all our employees. Regular briefings
through meetings and publications keep all employees up to date
with employment practices, health and safety as well as the business
objectives of the Equiniti Group. The Equiniti Group gives full and fair
consideration to employment applications from disabled persons,
having regard to their particular aptitude and abilities. Where existing
employees become disabled, it is the Equiniti Group’s policy to provide
continuing employment under normal terms and conditions wherever
practicable, providing training, career development and promotion to
disabled employees where appropriate.
Going concern
The directors are satisfied that the Equiniti Group has adequate
resources to continue in operational existence for the foreseeable
future. For this reason, the going concern basis has been adopted in
preparing the accounts.
Political and charitable donations
The Equiniti Group did not make any political donations or incur any
political expenditure during the year. Charitable donations of £45,000
(2011: £50,000) were made during the year to a mixture of local and
national charities.
Disclosure of information to auditors
The directors who held office at the date of approval of this directors’
report confirm that, so far as they are each aware, there is no relevant
audit information of which the Equiniti Group’s auditors are unaware;
and each director has taken all the steps that he ought to have taken
as a director to make himself aware of any relevant audit information
and to establish that the Equiniti Group’s auditors are aware of that
information.
Directors’ Responsibilities
The directors are responsible for preparing the annual report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements
for each financial year. Under that law the directors have prepared the
group and parent financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the company and of the
profit or loss of the Group for that period. In preparing these financial
statements, the directors are required to:
■
select suitable accounting policies and then apply them
consistently;
■ make judgements and accounting estimates that are
reasonable and prudent;
■
■
state whether applicable IFRSs as adopted by the European
Union and IFRSs as issued by the International Accounting
Standards Board (IASB), have been followed, subject to any
material departures disclosed and explained in the financial
statements;
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group or
company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
company’s transactions and disclose with reasonable accuracy
at any time the financial position of the company and the Group
and enable them to ensure that the financial statements comply
with the Companies Act 2006. They are also responsible for
safeguarding the assets of the company and the Group and hence
for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
Equiniti Group annual report 2012 « 37
independent auditors’ report to the
memBers of equiniti Group limited
Consolidated statement of
Comprehensive inCome
for the year ended 31 december 2012
We have audited the group financial statements of Equiniti Group Limited for the year ended 31 December 2012 which comprise the Group
statement of Comprehensive income, the Consolidated statement of financial position, the Consolidated statement of Changes in equity,
the Consolidated Cash Flow Statement and the related notes. The financial reporting framework that has been applied in their preparation
is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Respective responsibilities of directors and auditors
as explained more fully in the directors’ responsibilities statement set out on page 37, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us
to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
this report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the group’s circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial
statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the group financial statements:
•
give a true and fair view of the state of the group’s affairs as at 31 December 2012 and of its loss and cash flows for the year then
ended;
have been properly prepared in accordance with ifrss as adopted by the european union; and
have been prepared in accordance with the requirements of the Companies Act 2006.
•
•
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the group financial statements are prepared is
consistent with the group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies act 2006 requires us to report to you if, in our
opinion:
•
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited
by us; or
the financial statements are not in agreement with the accounting records and returns; or
•
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the parent company financial statements of Equiniti Group Limited for the year ended 31 December 2012.
Keith Evans (Senior Statutory Auditor)
for and on behalf of pricewaterhouseCoopers llp
Chartered accountants and statutory auditors, reading
8 may 2013
Continuing operations
revenue
operating costs before exceptional costs, depreciation and amortisation
earnings before interest, tax, depreciation and amortisation (eBitda) prior to exceptional items
operating costs - exceptional items
earnings before interest, tax, depreciation and amortisation (eBitda)
depreciation of property, plant and equipment
amortisation of intangible assets
total operating costs
Profit from operating activities
finance income
finance costs
Net finance costs
Share of profit of associates
loss before income tax
income tax credit
note
2012
£’000
2011
£’000
5
7
7
6
13
14
7
10
10
11
266,544
242,139
(185,434)
81,110
(11,776)
69,334
(3,518)
(34,376)
(166,803)
75,336
(11,363)
63,973
(4,003)
(31,596)
(235,104)
(213,765)
31,440
28,374
973
(67,882)
(66,909)
1,180
(75,982)
(74,802)
288
-
(35,181)
(46,428)
12
7,048
8,813
loss for the year from continuing operations
(28,133)
(37,615)
discontinued operations
Profit for the year from discontinued operation
(attributable to owners of the parent)
21
9,712
8,807
loss for the year attributable to owners of the parent
(18,421)
(28,808)
other comprehensive income
fair value movement through hedging reserve
Defined benefit plan actuarial loss
deferred tax credit on other comprehensive income
total comprehensive loss for the year attributable to owners of the parent
The notes on pages 43 to 78 form part of these financial statements.
24
(2,742)
(2,541)
584
(23,120)
419
(3,856)
964
(31,281)
38 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 39
Consolidated statement
of finanCial position
as at 31 december 2012
Consolidated statement
of ChanGes in equity
for the year ended 31 december 2012
assets
non-current assets
property, plant and equipment
intangible assets
investments in associates
Other financial assets
Current assets
tax receivable
trade and other receivables
Cash and cash equivalents
Assets of disposal group classified as held for sale
total assets
equity and liabilities
equity attributable to owners of the parent
share capital
share premium
hedging reserve
Accumulated deficit
total equity
liabilities
non-current liabilities
interest-bearing loans and borrowings
Employee benefits
provisions for other liabilities and charges
Other financial liabilities
deferred income tax liabilities
Current liabilities
interest-bearing loans and borrowings
trade and other payables
Employee benefits
income tax payable
provisions for other liabilities and charges
Other financial liabilities
Liabilities of disposal group classified as held for sale
total liabilities
total equity and liabilities
note
2012
£’000
2011
£’000
13
14
11
16
19
20
21
26
26
22
24
25
17
18
22
23
24
25
17
21
10,753
611,741
9,370
6,122
637,986
1,835
55,844
57,818
115,497
85,605
11,577
698,076
-
6,122
715,775
-
70,919
46,845
117,764
-
839,088
833,539
5,000
3,495
(3,402)
(134,025)
(128,932)
5,000
3,495
(660)
(113,647)
(105,812)
853,510
6,268
8,787
886
8,587
878,038
29,446
38,966
428
-
3,381
4,053
76,274
13,708
842,335
3,978
11,390
1,353
18,469
877,525
20,842
38,795
451
9
-
1,729
61,826
-
968,020
939,351
839,088
833,539
Balance at 1 January 2011
Comprehensive income
share
capital
£’000
share
premium
£’000
hedging accumulated
deficit
reserve
£’000
£’000
total
equity
£’000
5,000
3,495
(1,079)
(81,947)
(74,531)
loss for the year per the statement of comprehensive income
other comprehensive income
Changes in fair value of cash flow hedges
Actuarial losses on defined benefit pension plans
Deferred tax on defined benefit pension plans
total comprehensive income
-
-
-
-
-
-
-
-
-
-
-
(28,808)
(28,808)
419
-
-
-
(3,856)
964
419
(3,856)
964
419
(31,700)
(31,281)
Balance at 31 december 2011
5,000
3,495
(660)
(113,647)
(105,812)
Balance at 1 January 2012
Comprehensive income
5,000
3,495
(660)
(113,647)
(105,812)
loss for the year per the statement of comprehensive income
other comprehensive income
Changes in fair value of cash flow hedges
Actuarial losses on defined benefit pension plans
Deferred tax on defined benefit pension plans
total comprehensive income
-
-
-
-
-
-
-
-
-
-
-
(18,421)
(18,421)
(2,742)
-
-
-
(2,541)
584
(2,742)
(2,541)
584
(2,742)
(20,378)
(23,120)
Balance at 31 december 2012
5,000
3,495
(3,402)
(134,025)
(128,932)
The notes on pages 43 to 78 form part of these financial statements.
These financial statements were approved by the Board of directors on 29 April 2013 and were signed on its behalf by
m hindley
director
40 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 41
Consolidated statement
of Cash floWs
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
note
2012
£’000
2011
£’000
1 Accounting policies
Cash flows from operating activities
Cash generated from operations
Net cash inflow from operating activities
Cash flows from investing activities
proceeds from sale of property, plant and equipment
interest received
Business acquisitions net of cash acquired
Business acquisitions net of cash acquired and held for sale
acquisition of an associate
payment relating to prior year acquisition
acquisition of property, plant and equipment
acquisition of software
Net cash outflow from investing activities
Cash flows from financing activities
repayment of loans
interest paid
loan fees paid
Net cash outflow from financing activities
net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 december
Represented by:
32
92,603
62,876
92,603
62,876
4
21
11
21
468
(899)
(575)
(9,082)
(100)
(3,047)
(9,437)
18
357
(8,191)
-
-
(500)
(2,566)
(8,353)
(22,651)
(19,235)
(15,013)
(31,733)
(597)
(13,016)
(37,913)
(287)
(47,343)
(51,216)
22,609
46,845
(7,575)
54,420
69,454
46,845
Included in cash and cash equivalents per the statement of financial position
included in the assets of the disposal group
20
21
57,818
11,636
46,845
-
Cash and cash equivalents at 31 december
69,454
46,845
Equiniti Group Limited (the “Company”) is a limited company incorporated and domiciled in the UK. The principal activity of the Company
is that of a holding company. The registered office is Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH. The group financial
statements consolidate those of the Company and its subsidiaries (together referred to as the “Group”).
These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European
Union (IFRSs as adopted by the EU), IFRS - IC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared under the going concern basis.
The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed at the end of
this section.
Accounting policies have been consistently applied, except where new policies have been adopted and disclosed in the financial statements.
Measurement convention
The financial statements are prepared on the historical cost basis except that liabilities for cash-settled share based payment arrangements
and hedging agreements are stated at their fair value.
Basis of consolidation
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating
policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights
that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
Going Concern
Whilst a total comprehensive loss of £23.1m arose increasing net liabilities to £128.9m during the course of the year, the Group traded
strongly, generating £104.4m of cash inflow from operating activities before net exceptional items of £11.8m leading to a net increase of
£92.6m in the year. This current level of cash generation, combined with the three year business plan assessment provides the Directors
with the comfort and expectation that the Group will be able to meet all of its commitments as they fall due and attain the covenant
thresholds required under the term of the banking arrangements both during the year and in the three year business plan and, as such, allow
the financial statements to be presented on a going concern basis.
The Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future. For this
reason, the going concern basis has been adopted in preparing the financial statements.
Classification of financial instruments issued by the Group
Under IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they meet the following
two conditions:
(a) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial
liabilities with another party under conditions that are potentially unfavourable to the Group; and
(b) where the instrument will or may be settled in the Group’s own equity instruments, it is either a non-derivative that includes no
obligation to deliver a variable number of the Group’s own equity instruments or is a derivative that will be settled by the Group’s
exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability.
Finance payments associated with financial liabilities are dealt with as part of finance expenses. Finance payments associated with financial
instruments that are classified in equity are treated as distributions and are recorded directly in equity.
42 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 43
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
1 Accounting policies (continued)
Derivative financial instruments and hedging
Derivative financial instruments
Derivative financial instruments are recognised at fair value. The gain or loss on remeasurement to fair value is recognised immediately in
profit or loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of
the item being hedged (see below).
the fair value of interest rate swaps is the estimated amount that the Group would receive or pay to terminate the instruments at the
statement of financial position date, taking into account current interest rates and the current creditworthiness of the swap counterparties.
Third party valuations are used to fair value the Group derivatives. The valuation techniques use inputs such as interest rate yield curves and
currency prices/yields, volatilities of underlying instruments and correlations between inputs.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the statement of comprehensive
income within finance costs.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example,
when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps hedging variable
rate borrowings is recognised in the statement of comprehensive income within finance costs. When a hedging instrument expires or is
sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in
equity until the hedged item occurs.
Investments in subsidiaries
Investments in subsidiaries are carried at cost less any provisions for impairment.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. For items acquired as part of
a business combination, cost comprises the deemed fair value of those items at the date of acquisition. Depreciation on those items is
charged over their estimated remaining useful lives from that date.
3 – 10 years
2 – 50 years
depreciation is charged to the statement of comprehensive income on a straight-line basis over the estimated useful lives of each part of an
item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:
■ leasehold improvements
■ Office equipment
■ Fixtures and fittings
Intangible assets and goodwill
ifrs 3 (revised), ‘Business combinations’ is effective prospectively to business combinations for which the acquisition date is on or after
the beginning of the first annual reporting period beginning on or after 1 July 2009. The revised standard continues to apply the acquisition
method to business combinations but with some significant changes compared with IFRS 3. For example, all payments to purchase a business
are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the
statement of comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the
acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs
are expensed.
3 – 20 years
Goodwill represents amounts arising on acquisition, being the difference between the cost of the acquisition and the net fair value of the
identifiable assets and liabilities acquired. Identifiable intangibles are those which can be sold separately or which arise from legal rights
regardless of whether those rights are separable.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units for the purposes of
impairment testing and is not amortised. It is tested annually for impairment.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
1 Accounting policies (continued)
Software is valued based on replacement costs valuations where identifiable or where this has not been ascertainable, using relief from
royalty valuation over the estimated useful life.
Customer relationships are valued based on the net present value of the excess earnings generated by the revenue streams over their
estimated useful lives.
Order books are valued based on expected revenue generation and Brand valuation is based on net present value of estimated
royalty returns.
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that
are directly attributable to the design and testing of identifiable and unique software products controlled by the group are recognised as
intangible assets when the following criteria are met:
■ it is technically feasible to complete the software product so that it will be available for use;
■ management intends to complete the software product and use or sell it;
■ there is an ability to use or sell the software product;
■ it can be demonstrated how the software product will generate probable future economic benefits;
■ adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and
■ the expenditure attributable to the software product during its development can be reliably measured.
directly attributable costs that are capitalised as part of the software product include the software development employee costs and an
appropriate portion of relevant overheads. Other development expenditures that do not meet these criteria are recognised as an expense
as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
15 years
3 – 10 years
4 – 20 years
amortisation is charged to the statement of comprehensive income on a straight-line basis over the estimated useful lives of intangible
assets. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:
■ shareholder registration system
■ other software
■ Customer relationships
■ Order book
■ Brands
Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill or intangible assets not ready for use, are not subject to amortisation and
are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and
value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of
the impairment at each reporting date.
5 - 10 years
1 year
Other financial assets
Other financial assets include loans and receivables, derivatives and investment in shares. Derivatives are explained above. Loans and
receivables are non-derivative financial assets with fixed or determinable payments, that are not quoted in an active market. They are
recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for
impairment and are included in non-current assets as their maturity is greater than 12 months after the end of the reporting period.
Investment in shares are non-derivative available for sale financial assets recognised initially at fair value with any subsequent changes in fair
value being recognised through other comprehensive income. They are included in non-current assets as management do not intend to
dispose of them within 12 months of the end of the reporting date.
44 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 45
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
1 Accounting policies (continued)
1 Accounting policies (continued)
Trade receivables
Trade receivables are stated initially at fair value then measured at amortised cost less provisions for impairment. Provisions for impairment
are recognised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of
the receivables. The impairment recorded is the difference between the carrying value of the receivables and the estimated future cash flows
discounted where appropriate. Any impairment required is recorded in the statement of comprehensive income within operating costs.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral
part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the statement of
financial position and the statement of cash flows.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-
bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the statement
of comprehensive income over the period of the borrowings on an effective interest basis. On borrowings extinguished, any difference
between the cash paid and the carrying value is recognised in the statement of comprehensive income.
Trade payables
Trade payables represent liabilities for goods and services received by the Group prior to the end of financial year which are unpaid. The
amounts within trade payables are unsecured.
Employee benefits
Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of comprehensive income
as incurred.
Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of
defined benefit pension plans is calculated by estimating the amount of future benefit that employees have earned in return for their service
in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets (at bid price)
are deducted. The liability discount rate is the yield at the statement of financial position date on AA credit rated bonds denominated in the
currency of, and having maturity dates approximating to the terms of the Group’s obligations. The calculation is performed by a qualified
actuary using the projected unit credit method.
When the calculation results in a benefit to the Group, the recognised asset is limited to the present value of benefits available in the form
of any future refunds from the plan, reductions in future contributions to the plan or on settlement of the plan and takes into account the
adverse effect of any minimum funding requirements.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A
provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal
or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Share-based payment transactions
the fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognised as an
expense, with a corresponding increase in liabilities, over the period in which the employees become unconditionally entitled to payment.
The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised as
personnel expense in the statement of comprehensive income.
Provisions
A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a
past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions
are determined by discounting the expected, risk adjusted, future cash flows at a pre-tax risk-free rate.
Dilapidations provisions relate to estimated cost to put leased premises back to required condition expected under the terms of the lease.
these include provisions for wear and tear along with provisions where leasehold improvements have been made that would require
reinstatement back to original status on exit. These are uncertain in timing as leases may be terminated early or extended. To the extent
that exits of premises are expected within 12 months of the end of the year they are shown as current.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as
a deduction, net of tax, from the proceeds.
Revenue
revenue, which excludes value added tax, represents the invoiced value of services and software supplied and is almost entirely attributable
to the United Kingdom. The Group is one of the largest providers of outsourced financial services in the UK, covering pension administration,
pensions payroll, annuity services, complaints handling and resourcing services. Professional services revenue is recognised when earned.
Hardware sales and software licences are recognised when goods and licences are delivered. Technical support revenues are recognised
rateably over the term of the maintenance agreement.
Amounts recognised as revenue but not yet billed are reflected in the statement of financial position as accrued income. Amounts billed in
advance of work performed are deferred in the statement of financial position as deferred income.
In the case of long term contracts, revenue is recognised proportionately as the contract is performed. Total costs incurred under contracts
in progress net of amounts transferred to the statement of comprehensive income, are stated less foreseeable losses and payments on
account. The statement of comprehensive income reflects the proportion of the work carried out at the accounting date.
Revenues also comprise fixed periodic administration fees, transaction processing fees, fees for managing corporate actions, fees for
professional and IT services and fees earned on the administration of client funds and are stated net of value added tax.
Periodic administration fees are recognised evenly over the contract period. Transaction based fees are recognised at the time of processing
the related transactions. Revenues from corporate actions are recognised in line with the stage of completion and fees in relation to
administration of client funds are recognised as they accrue.
Revenues includes variable margin fee income earned on funds under administration of the Group.
Out of pocket expenses recharged to clients are recognised in revenue when they are recoverable from the client, net of the related
expense.
Government grants
Grants that compensate the Group for expenses incurred are recognised in profit or loss in the statement of comprehensive income in
the same periods in which the expenses are recognised. Grants relating to employment are recognised in profit and loss in the statement
of comprehensive income as they are earned. Grants relating to intangible assets are netted against the related expenditure prior to
capitalisation and amortisation over the useful life of the asset.
Expenses
Operating lease payments
payments made under operating leases are recognised in the statement of comprehensive income on a straight-line basis over the term of
the lease. Lease incentives received are recognised in the statement of comprehensive income as an integral part of the total lease expense.
Exceptional items
Exceptional items are items which due to their size, incidence and non-recurring nature have been classified separately in order to
draw them to the attention of the reader of the financial statements and, in management’s judgement, to show more accurately the
underlying profits of the group. Such items are included within the statement of comprehensive income caption to which they relate,
and are separately disclosed either in the notes to the consolidated financial statements or on the face of the consolidated statement of
comprehensive income. This includes costs in relation to business integration / reorganisation as well as potential and aborted acquisitions
and includes all costs incurred against investigated and completed acquisitions.
46 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 47
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
1 Accounting policies (continued)
1 Accounting policies (continued)
Net finance costs
Net finance costs comprise interest payable, interest receivable on own funds, dividend income and foreign exchange gains and losses that
are recognised in the statement of comprehensive income and the interest cost of defined pension scheme liabilities net of the expected
return on plan assets.
interest income and interest payable is recognised in the statement of comprehensive income as it accrues, using the effective interest
method. Dividend income is recognised in the statement of comprehensive income on the date the entity’s right to receive payment is
established.
Taxation
Tax on the loss for the year comprises current and deferred tax. Tax is recognised in the statement of comprehensive income except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
statement of financial position date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill,
the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination and
differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax
rates enacted or substantively enacted at the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset
can be utilised.
New standards and interpretations not yet adopted
a) new and amended standards adopted by the Group
There are no IFRSs or IFRS - IC interpretations that are effective for the first time for the financial year beginning on or after 1 January 2012
that would be expected to have a material impact on the Group.
b) new standards and interpretations not yet adopted
Fair values of intangible assets
fair values of intangibles have been calculated by estimating the net present value of future revenues generated by the assets over their
estimated useful lives.
Third party valuations are used to fair value the Group’s derivatives. The valuation techniques use inputs such as interest rate yield curves
and currency prices / yields, volatilities of underlying instruments and correlations between inputs.
Deferred tax
Under IAS 12 “Income taxes” deferred tax assets are recognised to the extent that taxable profits will be available against which the
deductible temporary differences can be utilised. As at the year end the directors consider that the IAS 12 recognition criteria are satisfied.
Pension assumptions
Assumptions used in calculating the net defined benefit pension obligation are set out in note 24, Employee benefits. The calculation of the
defined benefit obligation is sensitive to the mortality assumptions set out in that note. As the actuarial estimates of mortality continue to be
refined, an increase of one year in the lives shown in note 24 is considered possible in the next financial year. The effect of this change would
be to increase the employee benefit liability by £1,018,000 (2011: £885,000). A 0.5% decrease in the discount rate used would increase the
employee benefit liability by £4,060,000 (2011: £3,892,000).
Provisions
Dilapidations provisions have been made for properties which the Group currently lease based upon the cost to make good the property
in accordance with lease terms where applicable, if we were to vacate at 31 december 2012 as assessed by a chartered surveyor with
reference to current market rates. Provision has also been made in respect of commercial claims in the Xafinity Consulting business for
which the Group maintains professional indemnity insurance which includes an annual insurance excess. Each claim is assessed on a case
by case basis giving consideration to the probable outcome and to the amounts involved including consultation with legal counsel where
appropriate.
the constructive compliance provision is managements best estimate of the cost of meeting the change in requirement of payment systems
of which the Group is contractually required. The exact requirements are being finalised and so could require additional or less cost.
Provisions for deferred consideration has been made in relation to acquisitions the Group has made. There are various criteria that need to
be satisfied in order for a payment to be made, the Group have made provisions as appropriate based on the relevant accounting standards
and management’s best estimate of the criteria for settlement being fulfilled.
a number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January
2012, and have not been applied in preparing these financial statements. Other than IAS19 (revised), as described below, none of these is
expected to have a significant effect on the financial statements of the Group.
Exceptional items
Exceptional items are recognised to the extent that they meet the definition outlined in the accounting policy above. This requires a certain
amount of judgement that is applied consistently by management.
IAS 19, ‘Employee benefits’, was amended in June 2011. The impact on the Group will be as follows: to immediately recognise all past service
costs; and to replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount
rate to the net defined benefit liability (asset). The Group has assessed the full impact of the amendments and concluded that the effect will
be limited to a £54,000 increase in finance income and a corresponding increase in actuarial losses of £54,000.
IFRS 10, ‘Consolidated financial statements’, builds on existing principles by identifying the concept of control as the determining factor in
whether an entity should be included within the financial statements of the parent company. The standard provides additional guidance to
assist in the determination of control where this is difficult to assess. The Group does not expect IFRS 10 to have a material impact and
intends to adopt IFRS 10 no later than the accounting period beginning on or after 1 January 2013.
there are no other ifrss or ifrs - iC interpretations that are not yet effective that would be expected to have a material impact on the
Group.
Accounting estimates and judgements
Cash-settled share based payments
measured as the higher of amount subscribed plus the attributable share or the fair value of the business on an exit event, over the
expected vesting period. The valuation at the date of grant and the probability of an exit event are therefore key judgements.
The value is based on an estimate of a multiple of adjusted EBITDA, based on an equivalent market value for a “debt free” private company.
2 Financial risk management
The Group has exposure to the following risks from its use of financial instruments:
- credit risk
- liquidity risk
- market risk
Risk management policies are established for the Equiniti Group Limited group of companies (the “Group”) and the Group Audit
Committee oversees how management monitors compliance with these policies and procedures and reviews the adequacy of the risk
management framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by
Internal Audit and Compliance Monitoring. Internal Audit and Compliance Monitoring undertakes both regular and ad hoc reviews of risk
management controls and procedures, the results of which are reported to the Group Audit Committee.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty, including brokers, to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s receivables from customers.
48 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 49
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
2 Financial risk management (continued)
4 Acquisitions of businesses
due to the nature of the business the majority of the trade receivables are with large institutions, including many ftse 350 companies and
losses have occurred infrequently over previous years.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing
liquidity is to ensure, as far as possible, that the Group will have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions.
Market risk
Market risk is the risk that changes in market prices such as interest rates, foreign exchange rates and equity prices will effect the Group’s
income or the value of its financial instruments.
The Group’s financial instruments are currently in sterling, hence foreign exchange movements do not have a material effect on the Group’s
performance.
The Group does not hold its own position in trading securities, being involved only in arranging transactions on behalf of its clients.
The Group is exposed to movements in interest rate in both its intermediary fee revenue and its net finance costs. Intermediary fee revenue
is linked to Bank Base Rate, whilst both the senior debt and the PIK loan rates are linked to Libor. The Group also earns fee income in
relation to client and shareholder deposits as well as interest income on its own deposits.
Exposure to interest rate fluctuations are partly managed through the use of interest rate swaps. Objectives are established by the board so
as to seek to reduce the impact of variations in interest rates on the group’s profit and cash flow.
A movement in interest rates which negatively affects the net finance costs, would have a positive effect on revenue, and vice versa.
During the year a significant proportion of the group’s bank debt was covered by fixed interest rates for varying periods up to three years,
achieved by way of a financial instrument (interest rate swap). The balance of bank debt interest is at current market rates.
The group does not engage in holding speculative financial instruments or derivatives. Further quantitative disclosures are included
throughout these consolidated financial statements.
3 Capital risk management
The Group is focused on delivering value for its shareholders whilst ensuring the Group is able to continue effectively as a going concern.
Value adding opportunities to grow the business are continually assessed, although strict and careful criteria are applied.
as is common with many other private equity portfolio companies, the Group carries a high level of net debt to total equity; total capital
comprises total equity plus net debt, as shown in the consolidated statement of financial positions. Net debt equates to the total of other
interest bearing loans, less cash and cash equivalents, as shown in the consolidated statement of financial position.
The policies for managing capital are to increase shareholder value by maximising profits and cash. The policy is to set budgets and forecasts
in to the short and medium term that the Group ensures are achievable. The process for managing capital are regular reviews of financial
data to ensure that the Group is tracking the targets set and to reforecast as necessary based on the most up to date information whilst
checking that future covenant test points are met.
the borrowing facilities require the Group to comply with certain covenants, which place limits on annual capital expenditure, the
maintenance of certain minimum ratios of earnings before interest, taxes, depreciation and amortisation on both net interest payable and
net debt and a requirement for net operating cash flows to be no less than the Group’s cash cost of funding the bank debt. These continue
to be met and have been achieved over the last 12 months.
On 31 July 2012, the Group acquired the share capital of Peter Evans Limited and its subsidiary Peter Evans & Associates Limited.
Recognised amounts of identifiable assets acquired and liabilities assumed
property, plant and equipment
intangible assets
Cash
trade and other receivables
trade and other payables
tax payable
deferred tax liability relating to intangible assets
Net identifiable assets and liabilities
Goodwill on acquisition
total consideration
Cash acquired
Contingent consideration
Net cash outflow in the year
£’000
174
875
756
799
(817)
(78)
(216)
1,493
1,092
2,585
(756)
(1,072)
757
provisionally, on acquisition further intangible assets have been recognised relating to customer contracts and related relationships as well
as software with a combined attributable value of £875,000. Due to the timing of the transaction the value relating to the other intangible
assets is provisional and subject to further review.
The value of goodwill reflects amounts in relation to the benefit of the expectation of the ability to generate new streams of revenue,
expected synergies, future market development and the assembled workforce of Peter Evans Limited. The revenue included in the
consolidated statement of comprehensive income since the acquisition date was £1,158,000. The associated profit was £281,000. The
external transaction costs for the year was approximately £130,000.
On 30 November 2012, the Group acquired the share capital of Prism Communications & Management Limited (known as Prism Cosec).
Recognised amounts of identifiable assets acquired and liabilities assumed
property, plant and equipment
intangible assets
Cash
trade and other receivables
trade and other payables
deferred tax liability relating to intangible assets
Net identifiable assets and liabilities
Goodwill on acquisition
total consideration
Cash acquired
Contingent consideration
Net cash outflow in the year
£’000
5
350
358
153
(134)
(86)
646
433
1,079
(358)
(579)
142
provisionally, on acquisition further intangible assets have been recognised relating to customer contracts and related relationships with a
combined attributable value of £350,000. Due to the timing of the transaction the value relating to the other intangible assets is provisional
and subject to further review.
The value of goodwill reflects amounts in relation to the benefit of the expectation of the ability to generate new streams of revenue,
expected synergies, future market development and the assembled workforce of Prism Cosec. The revenue included in the consolidated
statement of comprehensive income since the acquisition date was £70,000. The associated profit was £11,000. The external transaction
costs for the year was approximately £70,000.
50 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 51
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
5 Revenue
Included in the loss for the year are the following:
revenue from continuing operations
discontinued operations
total revenue
6 Exceptional items
Included in the loss for year are the following:
integration project
Contract costs
Costs relating to transferring services off-shore
other exceptional costs
total exceptional costs
2012
£’000
266,544
43,007
309,551
2012
£’000
4,792
4,225
-
2,759
11,776
2011
£’000
242,139
39,990
282,129
2011
£’000
9,742
-
901
720
11,363
exceptional costs include costs incurred by the Group relating to resources applied in a major programme of Group integration activities
between Equiniti and Xafinity businesses. These principally comprise consulting, property and IT rationalisation and severance costs,
together with rationalisation of off-shore activities.
Provision has been made against exceptional irrecoverable costs incurred on a complex long term contract.
other exceptional costs represent fees paid to third party advisors and transaction fees in respect of acquisitions completed in the year, as
well as costs incurred of further potential acquisitions and disposals not completed.
other exceptional costs also contain a provision relating to deferred consideration which was transferred to a subsidiary, equiniti services
Limited, prior to the year end. This is classified as an exceptional expense in the year for the Group.
7 Summary results and operating costs
Included in the loss for year are the following:
summary results of continuing operations by operating solutions
31 December 2012
revenue
pre-exceptional costs
pre-exceptional eBitda
exceptional items
eBitda
31 December 2011
revenue
pre-exceptional costs
pre-exceptional eBitda
exceptional items
eBitda
expenses by nature
Employee benefit expense (note 8)
depreciation and amortisation
direct costs
Bought in services
premises costs
exceptional items (see note 6)
other general business costs
total operating costs for continuing operations
auditors’ remuneration
Audit of these financial statements
audit of Company’s subsidiaries
tax services
audit related assurance services
all other services
£’000
£’000
£’000
pensions shareholder Commercial
solutions
solutions
115,807
130,024
(61,216)
(105,427)
54,591
24,597
20,713
(15,986)
4,727
solutions
£’000
Central
£’000
total
-
(2,805)
(2,805)
266,544
(185,434)
81,110
(4,225)
20,372
(682)
53,909
-
4,727
(6,869)
(9,674)
(11,776)
69,334
£’000
Pensions
Solutions
111,225
(92,427)
18,798
£’000
Shareholder
Solutions
111,383
(59,104)
52,279
£’000
Commercial
Solutions
19,531
(14,578)
4,953
£’000
Central
£’000
Total
-
(694)
(694)
242,139
(166,803)
75,336
-
18,798
(720)
51,559
-
4,953
(10,643)
(11,337)
(11,363)
63,973
2012
£’000
96,623
37,894
37,752
16,598
11,762
11,776
22,699
2011
£’000
88,714
35,599
35,326
13,554
10,317
11,363
18,892
235,104
213,765
2012
£’000
10
204
110
28
237
589
2011
£’000
9
166
167
44
124
510
52 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 53
Included in audit fees is £30,000 (2011: £25,000) relating to Xafinity Consulting, the business that the Group sold in February 2013.
Other services include work undertaken in relation to acquisitions and disposals of £237,000 (2011: £26,000), work undertaken as part of
the Group’s integration programme of £nil (2011: £69,000) which has been included in exceptional costs and £nil (2011: £29,000) relates to
services in respect of debt finance.
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
8 Staff numbers and costs
10 Finance income and costs
The average monthly number of persons employed by the Group (including directors) during the year was 2,665 (2011: 2,620).
By function *:
operations
administration
Sales and marketing
By business type *:
shareholder solutions
pensions solutions
Commercial solutions
Group
number of employees
2011
2,296
268
56
2012
2,351
258
56
2,665
2,620
Group
number of employees
1,322
957
386
2,665
1,293
951
376
2,620
interest income
foreign exchange gain
Income from interest rate swap against financial liabilities
finance income relating to pension scheme
finance income
amortised fees
other fees and interest
interest cost on loans from related parties
Interest cost on bank loans*
Interest on preference shares classified as liabilities
foreign exchange loss
finance cost relating to pension scheme
Cost of interest rate swap against financial liabilities
finance costs
* The number of colleagues quoted in the Operational Focus section of the annual report are the number of employees as at 31 December
2012, as stated, the figures above are the monthly average.
* Includes £14,609,000 (2011: £13,315,000) interest accrued on the PIK facility.
The aggregate payroll costs of these persons were as follows:
11 Investments in associates
Wages and salaries
social security costs
other pension costs
2012
£’000
83,269
8,290
5,064
96,623
2011
£’000
76,137
7,783
4,794
88,714
at 1 January
additions
Share of profit
at 31 december
2012
£’000
468
33
472
-
973
3,754
1,045
4,837
38,787
12,956
-
163
6,340
67,882
2011
£’000
297
-
662
221
1,180
7,518
308
4,437
38,190
11,996
152
-
13,381
75,982
2012
£’000
-
9,082
288
9,370
2011
£’000
-
-
-
-
Payroll costs includes severance costs of £883,000 (2011: £2,181,000) in relation to the integration project further explained in note 6.
In addition to the above there are 372 employees (2011: 360) employed by Xafinity Consulting, the business that the Group sold in February
2013. The associated costs for the year, not included above, were £21,181,000 (2011: £20,168,000).
Associate investments are initially recorded at cost which is the fair value of the consideration paid.
The Group’s share of the results of its principal associates and its aggregated assets and liabilities, are as follows:
9 Directors’ remuneration
the following costs are either paid by the subsidiary equiniti limited or equiniti services limited;
Directors’ emoluments (including compensation for loss of office)
Company contributions to money purchase pension plans
Name
31 december 2012
MyCSP Limited
2012
£’000
1,358
35
2011
£’000
1,661
40
% interest held
Assets
£’000
Liabilities
£’000
Revenues
£’000
Profit
£’000
40%
7,806
7,806
1,334
1,334
9,209
9,209
288
288
Retirement benefits are accrued under money purchase schemes to 2 of the directors (2011: 2 of the directors).
The emoluments of the highest paid director was £739,000 (2011: £440,000). Company contributions to defined contribution pension
schemes for the highest paid director amounted to £28,000 (2011: £28,000).
MyCSP Limited is incorporated in England & Wales. The Group acquired its interest in MyCSP Limited in May 2012.
The Group holds more than 20% of the equity shares of MyCSP Limited and exercises significant influence by virtue of its contractual
right to appoint directors to the board of Directors and has the power to participate in the financial and operating policy decisions of
MyCSP Limited.
54 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 55
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
12 Income tax credit
recognised in the statement of comprehensive income
Current tax charge / (credit) for the Group
Current year
adjustment for prior years
deferred tax credit
origination and reversal of temporary differences
adjustment for prior years
total income tax credit
represented by;
Continuing operations per the statement of comprehensive income
non current assets held for sale and discontinued operations
note
21
reconciliation of effective tax rate
loss for the year
total tax credit
loss excluding taxation
Tax using the UK corporation tax rate of 24.5% (2011: 26.5%)
non-deductible expenses
unrecognised tax assets
adjustment for prior years
difference in overseas tax rates
effect of tax rate change
total income tax credit
2012
£’000
95
10
(3,558)
(273)
(3,726)
2011
£’000
-
(398)
(5,225)
(784)
(6,407)
(7,048)
3,322
(3,726)
(8,813)
2,406
(6,407)
2012
£’000
(18,421)
(3,726)
(22,147)
2011
£’000
(28,808)
(6,407)
(35,215)
(5,426)
4,161
(905)
(263)
(51)
(1,242)
(3,726)
(9,332)
4,237
1,532
(1,182)
(25)
(1,637)
(6,407)
13 Property, plant and equipment
Group
Cost
Balance at 1 January 2011
additions
disposals
Balance at 31 december 2011
Balance at 1 January 2012
acquisition of business
additions
disposals
Assets of disposal group classified as held for sale
Balance at 31 december 2012
accumulated depreciation
Balance at 1 January 2011
depreciation charge for the year
disposals
Balance at 31 december 2011
Balance at 1 January 2012
depreciation charge for the year
disposals
Assets of disposal group classified as held for sale
Balance at 31 december 2012
Net book value
Balance at 31 december 2011
Balance at 31 december 2012
Leasehold
improvements
£’000
Office
equipment
£’000
Fixtures &
fittings
£’000
5,445
287
(912)
4,820
4,820
-
329
(38)
-
5,111
1,842
914
(911)
1,845
1,845
489
(38)
-
2,296
13,056
3,529
(324)
16,261
16,261
174
2,132
(139)
(453)
17,975
8,268
2,359
(324)
10,303
10,303
2,595
(139)
(332)
12,427
4,538
516
(232)
4,822
4,822
5
586
(653)
(540)
4,220
1,511
882
(215)
2,178
2,178
610
(632)
(326)
1,830
Total
£’000
23,039
4,332
(1,468)
25,903
25,903
179
3,047
(830)
(993)
27,306
11,621
4,155
(1,450)
14,326
14,326
3,694
(809)
(658)
16,553
2,975
5,958
2,644
11,577
2,815
5,548
2,390
10,753
The standard rate of corporation tax in the UK changed from 26% to 24% with effect from 1 April 2012. Accordingly the Group’s profits for
this accounting year are taxed at an effective rate of 24.5%.
Factors affecting future tax charges
During the year, as a result of the changes in the UK corporation tax rate to 24%, which was substantively enacted on 26 March 2012 and
was effective from 1 April 2012; and to 23%, which was substantively enacted on 3 July 2012 and will be effective from 1 April 2013, the
relevant deferred tax balances have been remeasured.
A further reduction to the UK corporation tax rate has been announced. The change proposes to reduce the rate to 22% from 1 April 2014.
The change had not been substantively enacted at the balance sheet date and, therefore, is not recognised in these financial statements.
Included within office equipment are assets held under finance lease with a cost of £1,798,000 (2011: £1,798,000). As at the year end these
assets had a net book value of £982,000 (2011: £1,404,000).
56 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 57
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
14 Intangible assets (continued)
The recoverable amounts of the cash generating units (“CGUs”) are determined from value in use calculations. The key assumptions for the
value in use calculations are those regarding discount rates and growth rates. The Group derives cash flows from its most recent business
plans over a three year period. The projected cash flows are discounted using a weighted average cost of capital, reflecting current market
assessments on debt/equity ratios of similar businesses and risks specific in the CGUs.
In the past, there have been two main business combinations (Equiniti and Xafinity) that have been used as CGUs. Operations of these two
business combinations have been increasingly consolidated and in the future the Directors will run the business as one CGU.
the outcome of the impairment assessment has been that the directors do not consider that the goodwill has been impaired, given that the
fair value less costs to sell is greater than the carrying value of goodwill.
period on which management approved forecasts are based
Growth rate applied beyond approved forecast period
Discount rate pre tax
2012
3 years
3%
9.0%
2011
3 years
3%
9-11%
In the opinion of the Directors there are no reasonably possible changes to key assumptions which would cause the carrying value to exceed
the recoverable amounts.
14 Intangible assets
Group
Cost
Balance at 1 January 2011
acquisition of business
additions
disposals
Balance at 31 december 2011
Balance at 1 January 2012
acquisition of business
additions
disposals
Assets of disposal group classified as held for sale
Balance at 31 december 2012
accumulated amortisation
Balance at 1 January 2011
amortisation for the year
Balance at 31 december 2011
Balance at 1 January 2012
amortisation for the year
disposals
Assets of disposal group classified as held for sale
Balance at 31 december 2012
Net book value
Balance at 31 december 2011
Balance at 31 december 2012
Goodwill
software
development
£’000
£’000
390,308
7,345
743
(2,175)
396,221
396,221
1,525
-
-
(42,907)
354,839
-
-
-
-
-
-
-
-
110,188
64
8,353
-
118,605
118,605
-
9,437
(20)
(459)
127,563
25,632
11,124
36,756
36,756
13,387
(19)
(395)
49,729
other
intangible
assets
£’000
278,097
5,954
-
-
total
£’000
778,593
13,363
9,096
(2,175)
284,051
798,877
284,051
1,225
-
-
(32,071)
798,877
2,750
9,437
(20)
(75,437)
253,205
735,607
42,450
21,595
64,045
64,045
22,170
-
(12,078)
68,082
32,719
100,801
100,801
35,557
(19)
(12,473)
74,137
123,866
396,221
81,849
220,006
698,076
354,839
77,834
179,068
611,741
Other intangible assets relates to the fair value of assets acquired including customer relationships and order books as well as brands. The
amortisation charge is shown as a separate line item in the statement of comprehensive income.
Impairment testing
Goodwill arose on the acquisitions of the lloyds tsB registrars business from lloyds tsB Group plc, prosearch asset solutions limited,
David Venus & Company Limited, ICS Computing Limited, 360 Clinical Limited, NatWest Stockbrokers and the Xafinity Group (Equiniti X2
Group) in prior years. For goodwill on acquisitions in Peter Evans Limited, Peter Evans & Associates Limited and Prism Communication &
Management Limited, see note 4. Goodwill is tested annually for impairment, the recoverable amount of cash-generating units for the above
periods has been determined in accordance with IAS 36 “Intangible assets”. This is determined by assessing the present value of net cash
flows generated by the business over the period over which the management expects to benefit from the acquired business.
58 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 59
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
15 Investments in subsidiaries
15 Investments in subsidiaries (continued)
The directors consider the value of the investments to be supported by their underlying assets. The Group has the following investments in
subsidiaries:
name of controlled entity
Country of
incorporation
Class of
shares held
principal ownership
2012
activities
%
2011
%
name of controlled entity
Country of
incorporation
Class of
shares held
principal ownership
2012
activities
%
2011
%
direct investments
Equiniti Enterprises Limited
* Equiniti X2 Enterprises Limited
indirect investments
* Equiniti X2 Mezz Cleanco Limited
* Equiniti X2 Mezzco Limited
* Equiniti X2 Cleanco Limited
* Equiniti X2 Inv Limited
* Equiniti X2 Holdings Limited
Equiniti PIK Cleanco Limited
Equiniti PIKco Limited
Equiniti Cleanco Limited
Equiniti Debtco Limited
Equiniti Holdings Limited
Equiniti Limited
Equiniti Financial Services Limited
equiniti Jersey limited
Prosearch Asset Solutions Limited
Equiniti Share Plan Trustees Limited
Equiniti David Venus Limited
Equiniti ICS Limited
equiniti iCs india (private) limited
Equiniti 360 Clinical Limited
CES 2011 Limited
Equiniti Registrars Nominees Limited
Trust Research Services Limited
Equiniti ISA Nominees Limited
Equiniti Nominees Limited
Equiniti Savings Nominees Limited
Equiniti Corporate Nominees Limited
Wealth Nominees Limited
LR Nominees Limited
Equiniti Shareview Limited
SLC Registrars Limited
SLC Corporate Services Limited
Connaught Secretaries Limited
Peter Evans Limited
Peter Evans & Associates Limited
Prism Communications & Management Limited
Prism Cosec Limited
David Venus (Health & Safety) Limited
* Equiniti X2 Limited
* Equiniti X2 Solutions Limited
* Equiniti X2 Cap Limited
UK
UK
Ordinary
Ordinary
Holding company
Holding company
100
100
100
100
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Channel islands
UK
UK
UK
UK
india
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Holding company
Ordinary
Holding company
Ordinary
Holding company
Ordinary
Holding company
Ordinary
Holding company
Ordinary
Holding company
Ordinary
Holding company
Ordinary
Holding company
Ordinary
Holding company
Ordinary
Holding company
Ordinary
Registrars
Ordinary
Financial services
Ordinary
registrars
ordinary
Asset recovery
Ordinary
Trustee company
Ordinary
Ordinary
Company secretarial
Ordinary Business process outsourcing
information technology
ordinary
enabled services
Ordinary Business process outsourcing
Non trading
Ordinary
Non trading
Ordinary
Non trading
Ordinary
Non trading
Ordinary
Non trading
Ordinary
Non trading
Ordinary
Non trading
Ordinary
Non trading
Ordinary
Non trading
Ordinary
Non trading
Ordinary
Non trading
Ordinary
Non trading
Ordinary
Non trading
Ordinary
Ordinary
Holding company
Ordinary Business process outsourcing
Company secretarial
Ordinary
Non trading
Ordinary
Non trading
Ordinary
Holding company
Ordinary
Holding company
Ordinary
Holding company
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
100
100
100
100
indirect investments
* Equiniti X2 Services Limited
* Equiniti Services Limited
Paymaster (1836) Limited
> Xafinity Consulting Limited
> HR Trustees Limited
> XPT Limited
> Entegria Limited
Claybrook Computing (Holdings) Limited
Claybrook Computing Limited
* Equiniti Software Limited
* Equiniti Solutions Limited
> Xafinity Pensions Consulting Limited
> Xafinity Trustees Limited
Hazell Carr Software Services Limited
InformationLog.com Limited
> Xafinity SIPP Services Limited
> Hazell Carr (PN) Services Limited
> Xafinity Pension Trustees Limited
> Hazell Carr (ES) Services Limited
> hazell Carr (sa) services limited
> Hazell Carr (SG) Services Limited
> hazell Carr (at) services limited
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Scotland
UK
UK
UK
scotland
UK
scotland
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
ordinary
Ordinary
ordinary
Holding company
Holding company
Pensions administration
Employee benefit
consultancy
Corporate trustee
Corporate trustee
Dormant
Holding company
Computer software
consultancy
Dormant
Pensions administration
Pensions consulting
Dormant
Dormant
Dormant
Pensions administration
Dormant
Dormant
Dormant
dormant
Dormant
pensions administration
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
> In February 2013 these companies were disposed of as part of the sale of the Xafinity Consulting group.
* These companies changed their name in February 2013 when the Xafinity Consulting group was sold.
16 Other financial assets
non-current
shares held in euroclear plc
2012
£’000
6,122
6,122
2011
£’000
6,122
6,122
The investment in Euroclear plc is recorded at cost as Euroclear plc is unquoted and a fair value cannot be reliably determined.
60 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 61
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
17 Other financial liabilities
18 Deferred income tax assets and liabilities (continued)
non-current
derivatives
finance lease liabilities
Current
derivatives
finance lease liabilities
18 Deferred income tax assets and liabilities
recognised liabilities
Deferred income tax liabilities are attributable to the following:
intangible assets
rollover relief in respect of a gain
tax liabilities
net of tax assets
net tax liabilities
recognised assets
Deferred income tax assets are attributable to the following:
property, plant and equipment
Employee benefits
provisions
tax value of loss carry-forwards
tax assets
net of tax liabilities
net tax assets
2012
£’000
-
886
886
3,672
381
4,053
2011
£’000
64
1,289
1,353
1,337
392
1,729
liabilities
2012
£’000
25,811
-
25,811
(17,224)
Liabilities
2011
£’000
30,623
3,125
33,748
(15,279)
8,587
18,469
assets
2012
£’000
6,271
1,455
-
9,498
17,224
(17,224)
-
Assets
2011
£’000
7,283
1,258
77
6,661
15,279
(15,279)
-
31 december 2011
property, plant and equipment
intangible assets
rollover relief in respect of a gain
Employee benefits
provisions
tax value of loss carry-forwards
31 december 2012
property, plant and equipment
intangible assets
rollover relief in respect of a gain
Employee benefits
provisions
tax value of loss carry-forwards
19 Trade and other receivables
trade receivables
receivables due from related parties
other receivables and prepayments
1 January
2011
£’000
5,069
(30,340)
(3,375)
878
157
1,572
(26,039)
On
acquisitions
£’000
-
597
-
-
-
-
Recognised
in income
£’000
2,214
(880)
250
(584)
(80)
5,089
Recognised 31 December
2011
£’000
7,283
(30,623)
(3,125)
1,258
77
6,661
in equity
£’000
-
-
-
964
-
-
597
6,009
964
(18,469)
1 January acquisitions
/ disposals
£’000
(131)
2,723
2,875
-
-
-
2012
£’000
7,283
(30,623)
(3,125)
1,258
77
6,661
recognised
in income
£’000
(881)
2,089
250
(387)
(77)
2,837
recognised 31 december
2012
£’000
6,271
(25,811)
-
1,455
-
9,498
in equity
£’000
-
-
-
584
-
-
(18,469)
5,467
3,831
584
(8,587)
2012
£’000
24,341
390
31,113
55,844
2011
£’000
28,847
446
41,626
70,919
At 31 December 2012 trade receivables are shown net of an allowance for doubtful debts of £647,000 (2011: £621,000). The impairment
loss recognised in the year was £469,000 (2011: £169,000)
Trade and other receivables of £9,954,000 have been transferred as held for sale (see note 21).
Deferred income tax assets amounting to £11,714,000 (2011: £13,761,000) arising on temporary timing differences of £50,929,000 (2011:
£55,044,000) in respect of unrecognised deferred tax assets have not been recognised as their future economic benefit is uncertain.
20 Cash and cash equivalents
Cash and cash equivalents per statement of financial position
Cash and cash equivalents per statement of cash flows
2012
£’000
57,818
57,818
2011
£’000
46,845
46,845
The Group holds certain balances with banks in a number of segregated accounts. These balances are appropriately not included in the
Group’s consolidated balance sheet. The number of accounts and balances held vary significantly throughout the year.
Cash and cash equivalents of £11,636,000 have been transferred as held for sale (see note 21)
62 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 63
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
21 Non current assets held for sale and discontinued operations
22 Interest-bearing loans and borrowings
The assets and liabilities related to Xafinity Consulting group of businesses have been presented as held for sale following approval of the
Group’s management and shareholders in November 2012 to sell Xafinity Consulting in the UK. The sale completed in February 2013
following regulatory approval.
Group
Operating cash flows
Investing cash flows
Financing cash flows
Total cash flows
a) Assets of disposal group classified as held for sale
property, plant and equipment
Goodwill
intangible assets
other current assets
Cash and cash equivalents
total
2012
£’000
8,955
(631)
(13)
8,311
2012
£’000
335
43,048
20,632
9,954
11,636
85,605
2011
£’000
8,799
(358)
(410)
8,031
2011
£’000
-
-
-
-
-
-
Included in the figures above is £141,000 in goodwill and £575,000 in intangible assets relating Xafinity SIPP Services Limited’s acquisition of
Hazell Carr (AT) Services Limited during 2012.
b) Liabilities of disposal group classified as held for sale
provisions
deferred income tax liabilities
Current income tax liabilities
trade and other payables
total
2012
£’000
484
5,908
1,889
5,427
13,708
2011
£’000
-
-
-
-
-
Analysis of the result of discontinued operations, and the result recognised on the re-measurement of assets or disposal group is as follows:
revenue
expenses
Profit before tax of discontinued operations
tax
Profit after tax of discontinued operations
Profit for the year from discontinued operations
2012
£’000
43,007
(29,965)
13,034
(3,322)
9,712
2011
£’000
39,990
(28,393)
11,213
(2,406)
8,807
9,712
8,807
non-current liabilities
Secured bank loans
Unamortised cost of raising finance
Shares classified as debt
non secured loan from related party
non secured loan
2012
£’000
2011
£’000
619,586
(5,976)
174,909
63,238
1,753
646,791
(12,806)
161,952
44,777
1,621
853,510
842,335
Costs of raising finance are being amortised over a period between 2 and 8 years. In the year £3,757,000 (2011: £7,518,000) has been
recognised in finance expenses - amortised fees, in note 10.
Current liabilities
Secured bank loans
Unamortised cost of raising finance
non secured loan from related party
terms and debt repayment schedule
Equiniti Enterprises bank loan
Xafinity Investments bank loan
Equiniti Enterprises payment in kind (“PIK”) facility
Shares classified as debt
Non secured loan from related party
Non secured loan
23 Trade and other payables
trade payables
accruals and deferred income
other payables
2012
£’000
32,861
(3,415)
-
29,446
2011
£’000
7,431
(342)
13,753
20,842
amount £’000 Currency
year of
nominal
maturity
interest rate
2015-2017
Sterling Libor + 3.2%
2013-2017
Sterling 5.25% - 8.5%
2017
Sterling Libor + 9.5%
8.0%
Sterling
-
8.0% 2018 - 2020
Sterling
2020
8.0%
Sterling
416,480
113,688
122,279
174,909
63,238
1,753
892,347
2012
£’000
3,620
30,365
4,981
38,966
2011
£’000
5,500
22,372
10,923
38,795
Other current liabilities of £5,427,000 have been transferred as held for sale (see note 21).
64 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 65
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
24 Employee benefits
24 Employee benefits (continued)
Employee co-investment plan
Prior to October 2007 all employees in Equiniti Enterprises Limited had the opportunity to purchase units under the co-investment plan. A
unit being a notional unit share equal in proportion to the ordinary share and preference shares held by Advent International Corporation.
Defined contribution plans
The Group operates a number of defined contribution pension plans. The total expense relating to these plans in the year was £5,128,000
(2011: £4,860,000).
the units will only vest on the occurrence of a return of capital to the entire business and the value of each unit will be determined in
relation to the value of the ordinary shares and preference shares at that time. The proportion of ordinary shares and preference shares is
5% and 95% respectively. Unpaid dividends on preference shares accrue at 8% per annum and compounded annually.
a unit shall lapse on the earlier of the tenth anniversary of the scheme, an exit, the cessation of a persons employment, a participants
bankruptcy or on notice of a voluntary winding up of the Company. Unless there has been an occurrence of a return of capital and the value
of a unit has been determined to have increased, the repayment will be the grant price.
Defined benefit plan - Summary of schemes
equiniti iCs limited
paymaster (1836) limited
Total of defined benefit plans as at 31 December
2012
£’000
1,099
5,169
6,268
2011
£’000
1,648
2,330
3,978
as at 1 January
repayments to participants at the grant price
as at 31 december
no of units
2012
in thousands
451
(23)
428
Carrying
amount
2012
£’000
451
(23)
428
No of units
2011
In thousands
453
(2)
Carrying
amount
2011
£’000
453
(2)
451
451
at the balance sheet date the units have been valued at £1 which, in the opinion of the directors, is the higher of the subscription amount
and the fair value of the units.
management share scheme
A number of the Group’s senior management are entitled to subscribe for a combination of B, C, D and E ordinary shares. Since the
inception of the scheme a total of 250,910 B ordinary shares have been issued at a price of £1.43, 15,738 C ordinary shares at price of £3.33,
144,943 D ordinary shares at a price of £3.33 and £1.00 and 155,005 E ordinary shares at a price of £3.33. In total at 31 December 2012
566,596 shares had been issued for a consideration of £1,271,000.
The terms of the investment define “Good” and “Bad” leavers. A Bad leaver is an employee leaving the Group by dismissal. A Good leaver
receives the value of the market value or subscription price.
During the year 58,070 E ordinary shares (2011: nil), 8,598 D ordinary shares (2011: 6,879), 926 C ordinary shares (2011: 689) and nil
B ordinary shares (2011: 15,555) were disposed of by leavers at the subscription amount of £225,000 (2011: £47,000), and acquired by
Appleby Trust Jersey Limited. This company holds shares temporarily pending their purchase by authorised senior management. At 31
december 2012 the appleby trust held approximately 56,000 d ordinary shares and 58,000 e ordinary shares at a consideration of
£380,000.
During the year no shares were acquired (2011: 59,500) by senior management, for a consideration of £nil (2011: £59,500), from shares held
by the Appleby Trust.
at the balance sheet date all shares were carried at an amount which, in the opinion of the directors, is the higher of the subscription
amount and the fair value of the shares.
the charge relating to the arrangement in the year and the prior year is not material and as such no charge has been recognised in the
period, nor the prior year.
Defined benefit plan - Equiniti ICS Limited
The Group operates a defined benefit pension plan in the UK in its subsidiary Equiniti ICS Limited. A full actuarial valuation was carried out
at 30 November 2009 and updated to 31 December 2012 by a qualified independent actuary.
present value of obligations (funded)
fair value of plan assets
Recognised liability for defined benefit obligations
plan assets
The weighted average asset allocations at year end were as follows:
Equities
Corporate bonds
Cash
actual return on plan assets
2012
£’000
(8,684)
7,585
(1,099)
2011
£’000
(8,371)
6,723
(1,648)
2012
85%
8%
7%
100%
2012
£’000
746
2011
85%
9%
6%
100%
2011
£’000
(133)
to develop the expected long term rate of return on assets assumption, the Company considered the current level of expected returns on
risk free investments (primarily government bonds), the historical level of the risk premium associated with other asset classes in which the
portfolio is invested and the expectations of future returns of each asset class. The expected return for each asset class was then weighted
based on the target asset allocation to develop the expected long term rate of return on assets assumption for the portfolio. This resulted in
the selection of a 5.87% assumption for the overall expected rate of return on assets.
66 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 67
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
24 Employee benefits (continued)
Movement in present value of defined benefit obligation
Defined benefit obligation at 1 January
Current service cost
interest cost
plan participants’ contributions
actuarial (gain) / loss
Benefits paid
Defined benefit obligation at 31 December
movement in fair value of plan assets
fair value of plan assets at 1 January
expected return on plan assets
actuarial gain / (loss)
employer contribution
member contributions
Benefits paid
fair value of plan assets at 31 december
expense recognised in statement of comprehensive income
Current service cost
interest cost
expected return on plan assets
2012
£’000
8,371
93
398
56
(98)
(136)
8,684
2012
£’000
6,723
398
348
196
56
(136)
7,585
2012
£’000
93
398
(398)
93
2011
£’000
7,425
81
402
59
503
(99)
8,371
2011
£’000
6,700
473
(606)
196
59
(99)
6,723
2011
£’000
81
402
(473)
10
The current service cost is recognised in administrative expenses in the statement of comprehensive income. Interest costs and the
expected return on plan assets are recognised in other finance charges in the statement of comprehensive income.
actuarial gains and losses recognised in other comprehensive income
Cumulative loss at beginning of the year
actuarial gains / (losses) recognised in other comprehensive income
Cumulative loss at end of the year
2012
£’000
(3,046)
446
(2,600)
2011
£’000
(1,937)
(1,109)
(3,046)
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
24 Employee benefits (continued)
Weighted average assumptions used to determine benefit obligations at:
Discount rate
Rate of compensation increase
Rate of increase in payment of currently accruing pensions (Post 6.4.06)
Rate of increase in payment of currently accruing pensions (Pre 6.4.06)
Rate of increase in pensions in deferment
Inflation
Weighted average life expectancy for mortality tables used to determine benefit obligations at 31 December 2012:
2012
2011
4.60%
3.90%
2.10%
2.90%
2.20%
2.90%
4.75%
4.00%
2.50%
3.00%
3.00%
3.00%
male
86.5
88.4
female
89.1
90.9
Member age 65 (current life expectancy)
Member age 45 (life expectancy at 65)
five year history
period ended
Benefit obligation at end of year
fair value of plan assets at end of year
Deficit
Experience gains / (losses) on scheme assets:
- amount (£’000)
- % of scheme assets
Experience (losses) / gains on scheme liabilities:
- amount (£’000)
- % of scheme liabilities
Contributions
december december
2011
£’000
8,371
6,723
2012
£’000
8,684
7,585
december
2010
£’000
7,425
6,700
december
2009
£’000
7,026
5,763
(1,099)
(1,648)
(725)
(1,263)
march
2009
£’000
5,545
4,174
(1,371)
348
5%
(606)
(9)%
353
5%
1,334
23%
(1,753)
(42)%
-
0%
(5)
0%
465
6%
-
0%
-
0%
Equiniti ICS Limited expects to contribute £201,000 to its pension plan in 2013.
Defined benefit plan - Paymaster (1836) Limited
The Group operates a defined benefit pension plan in the UK in its subsidiary Paymaster (1836) Limited. A full actuarial valuation was
carried out at 6 April 2010 and updated to 31 December 2012 by a qualified independent actuary.
present value of obligations
fair value of plan assets
Recognised liability for defined benefit obligations
2012
£’000
(35,148)
29,979
2011
£’000
(30,541)
28,211
(5,169)
(2,330)
68 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 69
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
24 Employee benefits (continued)
plan assets
The weighted average asset allocations at year end were as follows:
Equities
Corporate bonds
Cash
actual return on plan assets
2012
63%
26%
11%
100%
2012
£’000
1,693
2011
60%
29%
11%
100%
2011
£’000
176
24 Employee benefits (continued)
expense recognised in statement of comprehensive income
Current service cost
interest cost
expected return on plan assets
2012
£’000
783
1,521
(1,359)
945
2011
£’000
855
1,509
(1,661)
703
The current service cost is recognised within operating costs in the statement of comprehensive income. Interest costs and the expected
return on plan assets are recognised in other finance charges in the statement of comprehensive income.
actuarial gains and losses recognised in other comprehensive income
to develop the expected long term rate of return on assets assumption, the Group considered the current level of expected returns on
risk free investments (primarily government bonds), the historical level of the risk premium associated with other asset classes in which
the portfolio is invested and the expectations of future returns of each asset class. The expected return for each asset class was then
weighted based on the target asset allocation to develop the expected long term rate of return on assets assumption for the portfolio. At 31
December 2012 the equity out performance allowance has remained the same as the previous year at 3.25%. This reflects the fact that gilt
yields are at record lows, partly due to the effects of quantitative easing inflating gilt prices. As the long term outlook for equities will not be
so effected it is believed that an increased allowance for extra return is justified and 3.25% is such a reasonable allowance. This has resulted
in the selection of a 4.69% (2011: 4.81%) assumption for the overall expected rate of return on assets.
Movement in present value of defined benefit obligation
Defined benefit obligation at 1 January
Current service cost
interest cost
plan participants’ contributions
actuarial loss
Benefits paid
Change in assumptions, actuarial loss
Defined benefit obligation at 31 December
movement in fair value of plan assets
fair value of plan assets at 1 January
expected return on plan assets
actuarial gain / (loss)
employer contribution
members’ contributions
Benefits paid
fair value of plan assets at 31 december
2012
£’000
30,541
783
1,521
55
1,447
(1,073)
1,874
35,148
2012
£’000
28,211
1,359
334
1,093
55
(1,073)
29,979
2011
£’000
27,826
855
1,509
60
909
(972)
354
30,541
2011
£’000
27,784
1,661
(1,484)
1,162
60
(972)
28,211
Cumulative loss at the beginning of the year
actuarial loss recognised in other comprehensive income
Cumulative loss at the end of the year
Weighted average assumptions used to determine benefit obligations at:
Discount rate
Rate of compensation increase
Rate of increase in payment of currently accruing pensions
Rate of increase in pensions in deferment (Pre 6.4.09 service)
Rate of increase in pensions in deferment (Post 6.4.09 service)
Inflation assumption
2012
£’000
(3,241)
(2,987)
(6,228)
2012
4.60%
1.75%
2.90%
2.50%
2.90%
2.90%
2011
£’000
(494)
(2,747)
(3,241)
2011
5.00%
1.75%
3.00%
2.30%
3.00%
3.00%
Weighted average life expectancy for mortality tables (PMA92, PFA92, Medium Cohort) used to determine benefit obligations at
31 December 2012:
Member age 60 (current life expectancy)
Member age 45 (life expectancy at 65)
year ended
Benefit obligation at end of year
fair value of plan assets at end of year
Deficit
Experience gains / (losses) on scheme assets:
- amount (£’000)
- % of scheme assets
Experience (losses) / gains on scheme liabilities:
- amount (£’000)
- % of scheme liabilities
Contributions
Paymaster (1836) Limited expects to contribute £1,100,000 to its pension plan in 2013.
male
88.7
90.8
female
89.8
91.9
2012
£’000
(35,148)
29,979
(5,169)
2011
£’000
(30,541)
28,211
(2,330)
2010
£’000
(27,826)
27,784
(42)
334
1%
(1,484)
(5)%
(1,447)
(4)%
(909)
(3)%
890
3%
63
0%
70 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 71
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
25 Provisions for other liabilities and charges
Balance at 1 January 2012
provisions made during the year
provisions used during the year
provisions reversed during the year
amounts arising from acquisitions
unwinding of discounted amount
Liabilities of disposal group classified as held for sale (see note 21)
Balance at 31 december 2012
non-current
Current
Contingent
consideration
£’000
2,983
-
(100)
-
1,788
398
-
other
provisions
£’000
8,407
1,581
(14)
(2,391)
-
-
(484)
total
provisions
£’000
11,390
1,581
(114)
(2,391)
1,788
398
(484)
5,069
7,099
12,168
2,559
2,510
5,069
6,228
871
7,099
8,787
3,381
12,168
A provision for contingent consideration of £5,069,000 (2011: £2,983,000) relates to various requirements to be met following the
Group’s acquisitions. The minimum value of these provisions could be £nil up to a maximum of £5,069,000. These were discounted at
an appropriate discount rate at the time of the acquisitions, 9%, and are provided within provisions due to their uncertainty. Management
regularly reconsider the appropriateness of the discount rate used and update when appropriate. These are expected to be utilised over
periods up to 2015.
A provision of £871,000 has been made against exceptional irrecoverable costs incurred on a complex long term contract. This is expected
to be utilised in 2013.
other provisions relate to constructive compliance obligations in existence on the acquisition of the ltsB registrars business in 2007 for
£2,500,000 (2011: £2,746,000), provisions for dilapidations on this and subsequent acquisitions of £3,059,000 (2011: £5,300,000).
A provision of £669,000 relates to the remaining potential balances payable on an acquisition in 2010. This is expect to be finalised by 2014.
26 Share capital
in thousands of shares
on issue at 1 January – fully paid
on issue at 31 december – fully paid
allotted, called up and fully paid
shares of £1 each
ordinary
shares
2012
5,000
Ordinary
shares
2011
5,000
5,000
5,000
ordinary
shares
2012
£’000
share
premium
2012
£’000
5,000
5,000
3,495
3,495
total
2012
£’000
8,495
8,495
26 Share capital (continued)
Share capital comprises A, B, C, D and E ordinary share of £1 each. The A ordinary shares are primarily held by the holding company. The B,
C, D and E shares are primarily held by senior management.
The B, C, D and E shares are entitled to share in the proceeds of a sale or a listing of the Group.
All shares are entitled to receive dividends from profits available for distribution pro rata to the nominal value of each share.
Each share has equal voting rights.
27 Financial instruments
Credit risk
The maximum exposure to credit risk at the reporting date was:
trade and other receivables
Cash and cash equivalents
Credit risk mitigation
note
19
20
2012
£’000
55,844
57,818
113,662
2011
£’000
70,919
46,845
117,764
Trade and other receivables are due from primarily FTSE listed companies and major UK public bodies both of which historically have few
occurrences of defaults in the past.
For cash, cash equivalents and derivative financial instruments, only banks and financial institutions with a minimum rating of A are accepted.
The ageing of trade receivables at the reporting date was:
not past due
past due 0-30 days
past due 31-90 days
past due more than 90 days
2012
£’000
15,569
5,576
1,741
1,455
24,341
2011
£’000
20,997
5,259
1,834
1,378
29,468
Trade receivables not past due of £17,616,000 (2011: £20,997,000) are all existing customers with no defaults in the past.
Based on historic performance of these contracts, the Group has made an impairment allowance of £647,000 (2011: £621,000) in respect of
trade receivables. Where impairment allowances are made these are for the full value of the impaired debt.
Group impairment losses
Balance at 1 January
new provisions made in year
release against receivables written off
provisions no longer required
Transfer to disposal group classified as held for sale
Balance at 31 december
2012
£’000
621
469
(159)
-
(284)
647
2011
£’000
741
169
(146)
(143)
-
621
72 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 73
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
27 Financial instruments (continued)
Liquidity risk
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
27 Financial instruments (continued)
The Group’s policy is to maintain other borrowings at fixed rates to fix the amount of future interest cash flows.
The maximum exposure to liquidity risk at the reporting date was:
Carrying Amount
Interest rate risk is managed across the Group’s companies by monitoring its interest linked revenues.
trade and other payables
Employee benefits
Other financial liabilities
derivatives
Secured bank loans
Unamortised cost of raising finance
Shares classified as debt
non secured loan from related party
non secured loan
note
23
24
17
17
22
22
22
22
22
2012
£’000
38,966
428
1,267
3,672
652,447
(9,391)
174,909
63,238
1,753
2011
£’000
38,795
451
1,681
1,401
654,222
(13,148)
161,952
58,530
1,621
927,289
905,505
All trade and other payables are expected to be paid in 6 months or less.
Employee benefits become repayable when the units lapse, as described in note 24.
The contractual cash flows including interest payments for the interest-bearing loans and borrowings and derivatives are shown in the table
in this note 27, under interest rate risk below.
Liquidity risk mitigation
The Group regularly updates forecasts for cash flow and covenants to ensure it has sufficient funding available. The Group also has
revolving credit facilities of £12.6m available.
Capital risk
the Group’s objectives when managing capital is to maximise shareholder value whilst safeguarding the Group’s ability to continue as a going
concern. Total capital is calculated as total equity as shown in the balance sheet, plus net debt. Net debt is calculated as the total of interest
bearing loans and borrowings as shown in the balance sheet, less cash and cash equivalents.
management of capital
equity
interest-bearing loans and borrowings
Cash and cash equivalents
Interest rate risk
2012
£’000
(128,932)
882,956
2011
£’000
(105,812)
863,177
696,206
710,520
Interest bearing assets comprise cash and bank deposits, all of which earn interest at a variable rate.
The interest rates on the bank loans are at market rates and the Group’s policy is to keep these loans within defined limits to help mitigate
the risk that could arise from a significant change in interest rates.
The Group maintains a policy of fixing bank interest rates for the medium term. During the year a minimum of two thirds of the Group’s
bank debt was covered by fixed interest rates for varying periods up to three years. The balance of bank debt interest is at current
market rates.
The directors monitor the overall level of borrowings and interest costs to limit any adverse effects on financial performance of the group.
Effective interest rates and repricing analysis
The following are the contractual maturities of interest bearing financial liabilities including interest payments;
31 december 2011
Group
Amount in £’000’s
Effective interest rate %
Carrying amount
0-1 years
1-2 years
2-5 years
5 years and over
Total contracted cash flows
31 december 2012
Group
Amount in £’000’s
Effective interest rate %
Carrying amount
0-1 years
1-2 years
2-5 years
5 years and over *
Total contracted cash flows
Equiniti
Equiniti
enterprises Enterprises PIK
loan
Xafinity
investments
secured
bank loan
5.25% - 8.5%
120,014
(17,232)
(35,018)
(31,288)
(94,032)
secured
bank loan
4.0%
423,724
(24,687)
(37,604)
(338,526)
(80,835)
10.0%
110,484
-
-
-
(199,269)
Shares
classified
as debt
8.0%
161,952
-
-
-
(249,873)
Total
816,174
(41,919)
(72,622)
(369,814)
(624,009)
(177,570)
(481,652)
(199,269)
(249,873)
(1,108,364)
Equiniti
Equiniti
enterprises Enterprises PIK
loan
Xafinity
investments
secured
bank loan
5.25% - 8.5%
113,688
(15,474)
(14,631)
(130,198)
-
secured
bank loan
4.0%
416,480
(39,396)
(24,530)
(392,038)
-
10.0%
122,279
-
-
(196,091)
-
Shares
classified
as debt
8.0%
174,909
-
-
-
(249,873)
Total
827,356
(54,870)
(39,161)
(718,327)
(249,873)
(160,303)
(455,964)
(196,091)
(249,873)
(1,062,231)
* The shares classified as debt are redeemable on a change of control of the business but do not confer any rights of redemption no any
right to vote. They have the right to a fixed dividend of 8%. Unpaid dividends accrue and are compounded annually.
The Equiniti Enterprises PIK loan is repayable in 2017 and has an interest rate of Libor plus 9.5%. Interest accrues and is
compounded annually.
In addition non current non secured loans with a carrying value of £50,134,000 (2011: £46,398,000) including a loan to related parties
of £48,381,000 (2011: £44,777,000) with an interest rate of 8% are repayable on exit with a contracted cash flow of £77,922,000 (2011:
£73,631,000). Current non secured loans due to related parties of £14,857,000 (2011: £13,753,000) with an interest rate of 8% are
repayable on demand and have a contracted cash flow of £23,576,000 (2011: £13,753,000).
The following tables indicates the periods in which the cash flows associated with derivatives that are cash flow hedges are expected to
occur and are expected to impact the profit and loss;
74 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 75
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
27 Financial instruments (continued)
28 Operating leases (continued)
31 december 2011
amount in £’000’s
Carrying amount
Expected cash flows
6 months or less
6-12 months
1-2 years
2-5 years
Total contracted cash flows
31 december 2012
amount in £’000’s
Carrying amount
Expected cash flows
6 months or less
6-12 months
1-2 years
2-5 years
Total contracted cash flows
interest rate swaps
assets
1,107
1,107
353
468
286
-
1,107
liabilities
(2,508)
(2,577)
(1,013)
(664)
(230)
(670)
(2,577)
interest rate swaps
assets
78
78
78
-
-
-
78
liabilities
(3,750)
(3,783)
(947)
(552)
(996)
(1,288)
(3,783)
total
(1,401)
(1,470)
(660)
(196)
56
(670)
(1,470)
total
(3,672)
(3,705)
(869)
(552)
(996)
(1,288)
(3,705)
Interest rate liabilities relate to two separate swaps. The first hedges monthly interest payable on secured bank loans based on Libor against
a fixed rate, the second hedges monthly fee income earned on funds under the administration of the group on bank base rate against a fixed
rate which runs through to October 2016.
Interest rate assets and liabilities also relate to a swap in place that hedges monthly interest payable on secured bank loans based on Libor
against a fixed rate, which runs through to March 2013.
sensitivity analysis
At the balance sheet date it is estimated that an increase of one percentage point in interest rates would increase the finance costs for
the Group by an estimated £1.4m, £1.1m of which is payable in kind on the PIK facility per annum and give rise to an estimated increase in
revenue across the Group of £0.5m, yielding a net reduction to equity of £0.7m after tax.
The sensitivity analysis above is calculated after taking account of the effect of the interest rate swaps the Group holds.
fair values
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.
28 Operating leases
Future aggregate minimum lease payments relate primarily to the Group’s premises and are payable as follows:
less than one year
Between one and five years
More than five years
2012
£’000
5,411
13,923
10,001
29,335
2011
£’000
5,421
15,831
11,596
32,848
During the year £6,012,000 (2011: £5,314,000) was recognised as an expense in the statement of comprehensive income in respect of
operating leases.
Included in operating leases are £719,000 (2011: £234,000) due within one year and £546,000 (2011: £1,738,000) due between two and five
years which relates to Xafinity Consulting, the business that the Group sold in February 2013.
29 Related party transactions
During the year interest of £4,744,000 (2011: £4,243,000) accrued on a loan bearing interest at 8% from Equiniti (Luxembourg) Sarl, leaving
a balance outstanding at the year end of £63,762,000 (2011: £59,018,000).
During the year interest of £93,000 (2011: £84,000) accrued on a loan bearing interest at 8% from key management personnel, leaving a
balance outstanding at the year end of £1,228,000 (2011: £1,135,000).
Transactions with key management personnel
The compensation of key management personnel (including the directors) is as follows:
Key management emoluments including social security costs
Company contributions to money purchase pension plans
Compensation for loss of office
share based payments
2012
£’000
2,599
99
293
-
2,991
2011
£’000
2,480
103
-
-
2,583
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 detailed in note 24, key management are entitled to subscribe for a combination of B, C, D and E ordinary shares. The value of shares
held is as follows;
opening balance
Purchases by key management
Sales by key management
Closing balance
2012
£’000
583
-
(193)
390
2011
£’000
562
43
(22)
583
advent international plc
See page 30 for information about the ultimate controlling party, Advent International plc. £90,000 (2011: £82,000) has been paid to various
companies of the ultimate parent company for services received.
30 Ultimate parent company and controlling party
The Company is a wholly owned subsidiary of Equiniti (Luxemburg) Sarl, a Company incorporated in Luxemburg. The ultimate controlling
party relationship lies with the funds managed by Advent International Corporation, a group incorporated in the United States of America.
76 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 77
notes to the Consolidated
finanCial statements
for the year ended 31 december 2012
31 Post balance sheet events
Subsequent to the balance sheet date, the Group disposed of the Xafinity Consulting division in February 2013 following regulatory approval.
32 Reconciliation of profit / (loss) to cash generated from operations
Continuing operations
Adjustments for:
loss for the year
depreciation and amortisation
Share of profit of associates
finance income
finance costs
income tax credit
Changes in working capital
decrease / (increase) in trade and other receivables
increase in trade and other payables
decrease in provisions
Decrease in employee benefits
Group relief received
discontinued operations
Adjustments for:
Profit for the year
depreciation and amortisation
finance income
finance costs
income tax charge
Changes in working capital
increase in trade and other receivables
increase in trade and other payables
decrease in provisions
tax paid
Cash generated from operations
2012
£’000
2011
£’000
(28,133)
36,537
(288)
(973)
67,882
(7,048)
(37,615)
35,599
-
(1,180)
75,982
(8,813)
6,073
4,647
(687)
(274)
(13,034)
5,805
(3,759)
(647)
5,912
83,648
1,739
54,077
2012
£’000
2011
£’000
9,712
1,357
(5)
13
3,322
8,807
1,275
(1)
385
2,406
(191)
785
(222)
(5,816)
(192)
164
(1,494)
(2,551)
8,955
8,799
92,603
62,876
independent auditors’ report to
the memBers of equiniti Group limited
We have audited the financial statements of Equiniti Group Limited for the period ended 31 December 2012 which comprise the Company
statement of financial position, the Company statement of changes in equity, the Company statement of cash flows and the related notes.
The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Respective responsibilities of directors and auditors
as explained more fully in the statement of directors’ responsibilities set out on page 37, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on
the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require
us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
this report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
whether the accounting policies are appropriate to the Group’s and parent Company’s circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation
of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material
inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we
consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
•
•
•
give a true and fair view of the state of the Company’s affairs as at 31 December 2012 and of its result and cash flows for the year then ended;
have been properly prepared in accordance with ifrss as adopted by the european union; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial period for which the financial statements are prepared is
consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
•
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited
by us; or
the financial statements are not in agreement with the accounting records and returns; or
•
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Keith Evans (Senior Statutory Auditor)
for and on behalf of pricewaterhouseCoopers llp
Chartered accountants and statutory auditors
reading
8 may 2013
78 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 79
Company statement
of finanCial position
as at 31 december 2012
Company statement
of ChanGes in equity
for the year ended 31 december 2012
assets
non-current assets
investments in subsidiaries
Other financial assets
Current assets
tax receivable
trade and other receivables
Cash and cash equivalents
Total assets
equity and liabilities
equity
share capital
share premium
Retained earnings
Total equity
liabilities
Current liabilities
Group relief payable
Other financial liabilities
Total liabilities
Total equity and liabilities
note
2012
£’000
2011
£’000
Balance at 1 January 2011
share
capital
£’000
5,000
share
premium
£’000
3,495
retained
earnings
£’000
121
total
equity
£’000
8,616
Profit after tax and total comprehensive income for the year
-
-
230
230
Balance at 31 december 2011
5,000
3,495
351
8,846
Balance at 1 January 2012
5,000
3,495
351
8,846
loss after tax and total comprehensive income for the year
-
-
(351)
(351)
Balance at 31 december 2012
5,000
3,495
-
8,495
8
9
11
12
13
13
10
8,495
7,375
15,870
8,495
5,560
14,055
75
256
4,198
4,529
-
-
5,920
5,920
20,399
19,975
5,000
3,495
-
8,495
5,000
3,495
351
8,846
-
11,904
11,904
95
11,034
11,129
11,904
11,129
20,399
19,975
The notes on pages 83 to 88 form part of these financial statements.
These financial statements were approved by the board of directors on 29 April 2013 and were signed on its behalf by:
m hindley
director
80 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 81
Company statement
of Cash floWs
for the year ended 31 december 2012
notes to the Company finanCial
statements
for the year ended 31 december 2012
note
2012
£’000
2011
£’000
1 Accounting policies
Cash flows from operating activities
(Loss) / profit for the year
Adjustments for:
finance income
financial expense
income tax expense
increase in trade and other receivables
Group relief paid
Net cash outflow from operating activities
Cash flows from investing activities
interest received
Net cash inflow from investing activities
Cash flows from financing activities
loans from related parties
loans to related parties
Net cash outflow from financing activities
net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
(351)
230
(465)
770
(75)
(121)
(256)
(377)
(95)
(472)
71
71
(359)
-
129
-
-
-
-
-
75
75
99
(1,420)
-
(2,451)
(1,321)
(2,451)
(1,722)
5,920
(2,376)
8,296
Cash and cash equivalents at 31 december
12
4,198
5,920
Equiniti Group Limited (the “Company”) is a limited company incorporated and domiciled in the UK. The principal activity of the Company
is that of a holding company. The registered office is Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH.
These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European
Union (IFRSs as adopted by the EU), IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The
financial statements have been prepared under the going concern basis.
The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 18.
The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual
statement of comprehensive income and related notes. The loss for the year was £351,000 (2011: profit of £230,000).
Measurement convention
The financial statements are prepared on the historical cost basis.
Investments in subsidiaries
Investments in subsidiaries are carried at cost less any provisions for impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral
part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose only of the statement of
financial position and the statement of cash flows.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as
a deduction, net of tax, from the proceeds.
Net finance costs
Net finance costs comprise interest payable, interest receivable on own funds, dividend income and foreign exchange gains and losses that
are recognised in the statement of comprehensive income.
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Dividend income is
recognised in the statement of comprehensive income on the date the entity’s right to receive payments is established.
Taxation
Tax on the profit for the year comprises current and deferred tax. Tax is recognised in the statement of comprehensive income except to
the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
statement of financial position date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill,
the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination and
differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax
rates enacted or substantively enacted at the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset
can be utilised.
new standards and interpretations not yet adopted
a) new and amended standards adopted by the company
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 January 2012 that
would be expected to have a material impact on the company.
82 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 83
notes to the Company finanCial
statements
for the year ended 31 december 2012
notes to the Company finanCial
statements
for the year ended 31 december 2012
1 Accounting policies (continued)
b) new standards and interpretations not yet adopted
a number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January
2012, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the
financial statements of the company.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the company.
2 Financial risk management
Financial risk management
The Company has exposure to the following risks from its use of financial instruments:
- credit risk
- liquidity risk
- market risk
Risk management policies are established for the Equiniti Group Limited group of companies (the “Group”) including Equiniti Group Limited
and the Group audit Committee oversees how management monitors compliance with these policies and procedures and reviews the
adequacy of the risk management framework in relation to the risks faced by the Company. The Group Audit Committee is assisted in its
oversight role by Internal Audit and Compliance Monitoring. Internal Audit and Compliance Monitoring undertakes both regular and ad hoc
reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty, including brokers, to a financial instrument fails to meet
its contractual obligations.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to
managing liquidity is to ensure, as far as possible, that the Company will have sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions.
Market risk
Market risk is the risk that changes in market prices such as interest rates, foreign exchange rates and equity prices will effect the Company’s
income or the value of its financial instruments.
The Company does not engage in holding speculative financial instruments or their derivatives. Further details in relation to financial risk
management are contained in note 14 to these financial statements.
3 Capital risk management
equiniti Group limited is focused on delivering value for its shareholders whilst ensuring the Company is able to continue effectively as a
going concern. Value adding opportunities to grow the business are continually assessed, although strict and careful criteria are applied.
4 Auditors’ remuneration
Auditors’ remuneration of £1,250 (2011: £1,250) was borne by a subsidiary company.
5 Staff numbers and costs
The Company has no employees other than the directors. Services to the Company are provided by staff employed by other companies
within the Group.
6 Directors’ remuneration
The costs of the directors are borne by subsidiaries of the Company. There are no costs to the Company for their services.
7 Income tax (credit) / expense
recognised in the statement of comprehensive income
Current tax (credit) / expense for the Company
Group relief (receivable) / payable
adjustments for prior years
total tax in the statement of comprehensive income
reconciliation of effective tax rate
(Loss) / profit for the year
total tax (credit) / expense
(Loss) / profit excluding taxation
Tax using the UK corporation tax rate of 24.5% (2011: 26.5%)
non-deductible expenses
prior year adjustments
total tax (credit) / expense
2012
£’000
(75)
-
(75)
2012
£’000
(351)
(75)
(426)
(104)
29
-
(75)
2011
£’000
95
34
129
2011
£’000
230
129
359
95
-
34
129
The standard rate of corporation tax in the UK changed from 26% to 24% with effect from 1 April 2012. Accordingly the Company’s profits
for this accounting year are taxed at an effective rate of 24.5%.
factors affecting future tax charges
During the year, as a result of the changes in the UK corporation tax rate to 24%, which was substantively enacted on 26 March 2012 and
was effective from 1 April 2012; and to 23%, which was substantively enacted on 3 July 2012 and will be effective from 1 April 2013, the
relevant deferred tax balances have been remeasured.
A further reduction to the UK corporation tax rate has been announced. The change proposes to reduce the rate to 22% from 1 April 2014.
The change had not been substantively enacted at the balance sheet date and, therefore, is not recognised in these financial statements.
84 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 85
notes to the Company finanCial
statements
for the year ended 31 december 2012
notes to the Company finanCial
statements
for the year ended 31 december 2012
8 Investments in subsidiaries
The Company has the following investments:
Cost and net book value
At beginning of year
At end of year
2012
£’000
8,495
8,495
2011
£’000
8,495
8,495
The directors consider the value of the investments to be supported by their underlying assets. The Company has the following direct
investments in subsidiaries:
name of controlled entity
Country of
incorporation
Class of
shares held
Equiniti Enterprises Limited
*Equiniti X2 Enterprises Limited
UK
UK
Ordinary Holding company
Ordinary Holding company
principal ownership
2012
activities
%
100
100
Ownership
2011
%
100
100
12 Cash and cash equivalents
Cash and cash equivalents per statement of financial position
Cash and cash equivalents per statement of cash flows
13 Share capital and reserves
in thousands of shares
on issue at beginning of year
on issue at 31 december – fully paid
A more comprehensive listing of indirectly owned subsidiaries is provided in the consolidated financial statements of Equiniti Group Limited.
* The company changed its name from Xafinity Enterprises Limited to Equiniti X2 Enterprises Limited following the sale of the Xafinity
Consulting business in February 2013.
allotted, called up and fully paid
shares of £1 each
9 Other financial assets
non-current
intercompany loan due from related parties
10 Other financial liabilities
Current
Loans classified as other financial liabilities due to related parties
11 Trade and other receivables
other receivables and prepayments
2012
£’000
7,375
7,375
2011
£’000
5,560
5,560
2012
£’000
11,904
11,904
2011
£’000
11,034
11,034
2012
£’000
2011
£’000
256
256
-
-
14 Financial instruments
Credit risk
The maximum exposure to credit risk at the reporting date was:
loans and receivables due from related parties
trade and other receivables
Cash and cash equivalents
Credit risk mitigation
No amounts were past due, the company holds no collateral as security.
For cash and cash equivalents, only banks and financial institutions with a minimum rating of A are accepted.
2012
£’000
4,198
4,198
2011
£’000
5,920
5,920
ordinary
shares
2012
ordinary
shares
2011
5,000
5,000
5,000
5,000
ordinary
shares
2012
£’000
share
premium
2012
£’000
5,000
5,000
3,495
3,495
total
total
2012
£’000
8,495
8,495
2011
£’000
8,495
8,495
note
9
11
12
Carrying
amount
2012
£’000
Carrying
amount
2011
£’000
7,375
256
4,198
11,829
5,560
-
5,920
11,480
86 » Equiniti Group annual report 2012
Equiniti Group annual report 2012 « 87
notes to the Company finanCial
statements
for the year ended 31 december 2012
14 Financial instruments (continued)
Liquidity risk
The maximum exposure to liquidity risk at the reporting date was:
loans from related parties
Loans from related parties are repayable on demand.
Capital risk
Carrying
amount
2012
£’000
11,904
Carrying
amount
2011
£’000
11,034
11,904
11,034
the Company’s objectives when managing capital is to maximise shareholder value whilst safeguarding the Company’s ability to continue as
a going concern. Total capital is calculated as total equity as shown in the balance sheet.
management of capital
equity
15 Related party transactions
Company
2012
£’000
8,495
8,495
2011
£’000
8,846
8,846
An interest bearing loan of £11,000,000 (2011: £11,000,000) accrued interest of £770,000 (2011: £nil) in the year. In the previous year the
Company borrowed the funds from Equiniti PIKco Limited and £11,770,000 was outstanding at the year end.
During the year group relief of £95,000 (2011: £34,000) was transferred from its subsidiary, Equiniti Limited, which was paid during the year.
Further charges of £133,000 were incurred and are outstanding at the year end.
During the year interest of £212,000 (2011: £198,000) accrued on a loan made to its subsidiary company, Equiniti Inv Limited (formerly
Xafinity Investments Limited). £3,234,000 (2011: £3,022,000) was outstanding at the year end.
During the year the Company loaned £1,420,000 (2011: £2,451,000) to its subsidiary company, Equiniti Services Limited (formerly Xafinity
Limited). Interest of £182,000 (2011: £86,000) accrued on these loans. £4,139,000 (2011: £2,537,000) was outstanding at the year end.
16 Ultimate parent company and controlling party
The Company is a wholly owned subsidiary of Equiniti (Luxemburg) Sarl, a company incorporated in Luxemburg. The ultimate controlling
party relationship lies with the funds managed by Advent International Corporation, a group incorporated in the United States of America.
17 Post balance sheet event
There have been no events subsequent to the balance sheet date which require disclosure in, or adjustment to, the financial statements. As
referred to in the consolidated financial statements, the Equiniti Group disposed of Xafinity Consulting in February 2013.
18 Accounting estimates and judgements
There are no accounting policies where the use of assumptions and estimates are determined to be significant to the financial statements.
88 » Equiniti Group annual report 2012
EQUINITI GROUP LIMITED
Registered Number: 07090427
HEAD OFFICE
3 Minster Court,
Mincing Lane,
London
EC3R 7DD
REGISTERED ADDRESS
Sutherland House
Russell Way
Crawley
West Sussex
RH10 1UH
www.equiniti.com