ANNUAL REPORT
2013
Extraordinary
Business Services
Support
Equiniti Group Limited
Registered Number: 07090427
Emily Burnell, Senior Pensions Administrator
equiniti.com
Contents
Welcome to Equiniti
Strategic report
Highlights
KPI’s
Chairman’s foreword
Market drivers and opportunities
Business model for growth
Chief executive’s statement
Case study: Royal Mail Group
Case study: Land and Property Services
Case study: Prudential
Developments and acquisitions
Operational review
Financial review
Our people and values
Corporate responsibility
Outlook for 2014
Board of directors
Advent International
Directors’ report
Auditors’ report
Financial statements
Page
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46
48
Business
services
partner to the
best known
brands and
public services
in the UK
Jade Jordan, Head of Equiniti Creative
DELIVERING BUSINESS SERVICES
Operating across
29 UK
locations
Services delivered by
2796
colleagues
£275m
turnover
Looking after
1600
clients
We pay around
20%of pensioners
in the uk
supporting
7.4m
pension scheme
members
Registrar for
50%of FTSE100
companies
18 m
shareholders
supported
Other
industry
Retail &
consumer
Energy &
utilities
Financial services
and banking
Health &
social services
Armed
forces
Other public
services
Extraordinary Support
For a world class performance
As a trusted partner to the UK’s leading companies
and public sector institutions, we know what it
takes to work in harmony with our clients.
We specialise in providing complex administration, processing and payment
services supported by leading technology to assure delivery to our clients,
their employees, pensioners and customers.
We are here with a range of services to help you hit the right note.
• Pension services
• Share registration
• Employee benefits
• Investment services
• IT & software
platforms
• Executive dealing
• Company secretarial
• International
payments
• HR & payroll
• Case management
• Complaints handling
• Contact management
• Data management
• Medical revalidation
• Insurance
administration
• AGMs & voting
• Corporate actions
• Loan servicing
2 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 3
EQUINITIEQUINITI
HIGHLIGHTS
KEY PERFORMANCE INDICATORS
A platform
for success
Financial
stability
We delivered 3% revenue growth
to £274.7m.
New sales and contract renewals
of £112m were secured including
significant contract wins with the
Prudential, CSC and Easyjet.
In addition to being appointed to
support Royal Mail Group for their
Initial Public Offering (IPO), we
executed high profile projects with
great success including with Barclays,
Crest Nicholson and BT.
Our focus on One Equiniti led to
an increase in the average number of
services delivered to larger clients.
Acquisition
The acquisition of Killik Employee
Services - a market leading provider
of employee and executive share
plan administration, has expanded
Equiniti’s employee benefits services.
With share plans covering 61 countries,
this acquisition strengthens
Equiniti’s global offering.
Equiniti refinanced its existing bank
debts and simplified the Group’s
corporate structure in order to support
growth strategies and investment in
service enhancements for clients. In
June 2013 Equiniti raised £440m Senior
Secured Notes and Floating Rate Notes
to replace banking debt and extend
maturities by three and a half years due
in 2018. At the same time, a revolving
credit facility of £75m will be used for
selective acquisitions to further enhance
the Group’s capabilities. The success
of the bond offer reflected the strong
endorsement from the public market of
our strategy and outlook.
Royal Mail
Group
Equiniti won the contract to provide
services to support one of the
highest-profile IPO’s to come to
market in recent years, the Royal Mail
Group. Equiniti acted as receiving
agent, delivered employee benefits,
managed the issue and allocation of
shares, ran the associated dealing
services and acts as the ongoing share
registrar. Equiniti managed record
volumes of investor queries and
trades, including a 90% increase in
call volumes and the sale of 14 million
shares. The IPO culminated in the
creation of a new FTSE 100 business
with over 400,000 shareholders. It
was a huge success and demonstrated
Equiniti’s capabilities for complex and
demanding projects.
One Equiniti
Having successfully completed the sale
of the Xafinity Consulting business,
the retained pension administration
and software businesses transferred
to One Equiniti - strengthening
our market recognition as a leading
business process services provider.
Award
winning year
Equiniti won a number of awards
across the year. In March we
won ‘Product of the Year’ for our
Employer ISA at the Pay and Benefits
Awards. Equiniti was crowned Best
Shareholder Services Provider at the
Shares Awards 2013 for the second
year in a row and our commitment
to customer service was recognised
when we were rated No.1 UK
Share Registrar in the annual Capital
Analytics 2013 benchmarking survey.
The Contact Centre has achieved
the CCA Global Standard award
for the fourth year running. Our
HR team won the Best Recognition
Strategy at the Benefit Excellence
Awards.
We also helped clients achieve
recognition with Smith & Nephew and
Edwards Group winning awards at the
Global Equity Organisation’s (GEO’s)
International Conference. Edwards
Group, IGas and Pearson won top
awards at the Employee Share
Ownership (ESOP) Centre Awards
and BT and IGas were honoured at ‘ifs
Proshare Annual Awards’.
Revenue
£274.7m
(2012: £266.5m)
Operating
Profit
£14.8m
(2012: £31.4m)
Operating
Cash Conversion*
78.1%
(2012: 114%)
* operating cashflow/pre-exeptions EBITDA
Client Satisfaction*
91%
(2012: 91%)
* overall satisfaction
Staff Retention
87%
(2012: 87%)
EBITDA*
£76.3m
(2012: £81.1m)
* Pre exceptional items
Operating
Cashflow
£59.6m
(2012: £92.6m)
Capex Ratio*
7%
(2012: £4.7%)
* capital expenditure/revenue
Equiniti provides
the right support
to give you a
clear run
4 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 5
STRATEGIC REPORT Kevin Beeston
Chairman
CHAIRMAN’S FOREWORD
Equiniti recorded a robust performance in 2013, refinancing bank debt with
the issuance of £440m of senior secured notes, delivering profitable growth
and continuing to deliver it’s strategy.
As a leading provider of business critical services, Equiniti supports some of the best known
brands and public sector organisations in the UK. In 2013 the Group delivered revenues
of £274.7m up 3% and an EBITDA before exceptional items of £76.3m down 5.9% on the
previous year as a result of a reduction of interest income and the impact of the Lloyds
TSB stock broking service contract being in-sourced by Lloyds from June 2013. The Group
refinanced its bank borrowings in June issuing £250m senior secured notes and £190m senior
secured floating rate notes together with obtaining a £75m revolving credit facility. This is
an important milestone for the Group providing it with increased balance sheet capacity
and a public debt investor profile. Profit from operating activities dropped to £14.8m
reflecting exceptional costs of £25m incurred as part of the refinancing, completion of the
management integration programme and termination costs incurred relating to a contract in
the UK Pensions business.
Equiniti began to benefit from improved equity market conditions in the second half of 2013,
successfully winning contracts to support clients’ corporate actions including high profile
flotations and rights issues. The business further supported clients in regulated markets in
responding to change with customer service, technology and processing solutions. MyCSP,
the mutual joint venture with the UK Cabinet Office in which Equiniti is a 40% shareholder,
has made significant progress delivering service improvements and efficiency gains for the
administration of public sector pensions and also delivered its first dividend.
Equiniti’s focus on intelligent solutions for complex administration and payments resulted in
significant contract renewals in both the public and private sectors. The business continued
to invest in the technology platforms which underpin these solutions implementing Xanite, a
platform acquired with the peterevans business, to support share dealing activities. Further
new services were launched in 2013 including the UK’s first back office outsourcing solution
for wealth managers. The Group’s range of services was extended through the acquisition of
Killik Employee Services in October, a provider of employee and executive global share
plan administration. This capability has already been instrumental in winning new
registrar contracts.
During the year in which it celebrated its sixth birthday, Equiniti also picked up a range of
awards for industry excellence, customer service, product innovation and HR best practice
reflecting the hard work of its employees and dedication to delivering an excellent service.
There have been a number of senior management changes. Following the successful
refinancing, previous CEO Wayne Story decided to move on from the Group. I am delighted
with the appointment of Equiniti’s new CEO, Guy Wakeley, who will build on Wayne’s legacy
and brings with him the energy, experience and focus on sales which will lead Equiniti into its
next phase of growth.
John Parker (MD Shareholder Solutions), after 15 years’ service in the Registrars business,
decided to retire at the end of 2013. He leaves behind a transformed business which has
rightly been recognised as the number one registrar in the annual Capital Analytics survey
and delivered a strong financial performance in 2013. We are delighted that John has agreed
to remain on the Group Board as a Non-executive Director.
Paul Bingham (MD Pensions Solutions) has also decided to seek new challenges after 10 years
building the pensions business and left the Group in March 2014.
We look ahead to 2014 and beyond with the Group increasingly well positioned to deliver
sustained profitable growth through a combination of targeted structural growth, acquisitive
growth and a generally optimistic economic outlook.
Kevin Beeston
Chairman
6 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 7
STRATEGIC REPORT MARKET DRIVERS AND OPPORTUNITIES
With continued market pressure to find efficiencies,
companies and public sector institutions are increasingly
looking for more effective solutions to non-core processes.
Legislative changes are further increasing the administrative
burden and complexity for organisations, particularly in the
pensions, banking and financial services sectors.
Building from a strong base, we have successfully expanded
our employee benefits and executive share dealing offer. The
acquisition of Killik Employee Services, renamed Equiniti Premier,
has extended our capability in this market while the roll-out
of Equiniti’s Employee Benefits Portal provides a platform for
continued growth. We have also launched a platform to support
the broker market, where we see growth opportunities for our
specialist back-office services.
The pension administration market continues to be characterised
by increased complexity and cost pressures. As a result, demand
for outsourced services in this field is expected to grow over the
coming years across the public and private sectors.
The strong recurring contracted revenues which underpin our
core operations have allowed us to invest in further service
improvements, in new products and in value-added acquisitions.
We will continue to actively extend our service range and market
footprint organically and through strategic acquisitions. We also
have a tight focus on cash conversion and on maintaining the
quality of our recurring contract revenues.
The Government is sustaining its drive to reform many areas of
public spending, with an increasing emphasis on more flexible
delivery models. Outsourcing, joint ventures and shared service
delivery provide opportunities to deliver increased value for UK
citizens and improve service levels.
Equiniti has an unrivalled heritage of delivering complex financial
administration and business services in the large corporate,
banking, financial services and public services sectors. Our
substantial client base includes over 50% of FTSE100 companies
as well as some of the largest public service organisations.
We maintain a leading share in our core markets including
shareholder services, executive and employee share plans,
pension administration and pension software.
We work closely with our clients to develop existing products
and implement a range of innovative new services and
technologies to meet the increased challenges they face. Our
clients are increasingly seeking to benefit from this broader
range of products, with larger clients now using over 12 separate
service lines on average. We will continue to seek, through One
Equiniti focus, delivery of this broader range of competencies to
our client base.
The market’s appetite for corporate actions and IPOs grew during
the second half of 2013, after several years of low activity. These
included the Barclays rights issue and the Royal Mail IPO, the first
major flotation by Government in the digital age. We anticipate
activity in these markets to continue to rise in 2014 as confidence
in the economic recovery returns.
Extraordinary
Support at every
stage
BUSINESS MODEL
FOR GROWTH
We are focussed on unlocking the
growth potential of the Group.
Leveraging existing partnerships
Growing partnerships with Equiniti’s existing range of significant public sector and FTSE clients is a key component of our growth
strategy. A clear account management framework, strengthened and expanded in 2013, provides a comprehensive platform to
cultivate deeper and wider commercial relationships across our clients’ organisations. This approach enables us to collaborate more
closely with our clients, delivering value by helping them to achieve their objectives. This activity is led by our account teams who have
in-depth knowledge of our clients’ businesses and the market challenges they face.
Growing new services and markets
During 2013, we identified a range of new products and services which meet the requirements of existing and new clients and where
growth prospects are good. Examples are loan servicing, middle office solutions to the wealth management industry and validation
services to central government in areas such as error, fraud and debt. All these services are close to our existing capabilities and
leverage our expertise in providing complex administration solutions in regulated or highly controlled environment to FTSE 350
companies and Government.
We have placed resources behind these growth plans and expect to make good progress over the medium term as we help clients
respond to market and regulatory challenges. Our aim is to be the partner of choice in complex environments, creating lasting value for
clients and improving service outcomes for end-users.
8 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 9
STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT
“Together we can
look forward to 2014
with enthusiasm and
with optimism.”
international payments. New sales and contract renewals of
£112m were secured with average contract tenures of five
years, creating an order-book of £526m in addition to our
project and transactional revenues. The pipeline of new business
opportunities remains strong at £1.9bn, of which £0.4bn is
qualified opportunities. Our group-wide account management
functions continue to improve customer satisfaction and fidelity.
EBITDA pre exceptional items for 2013 was £76.3m (2012:
£81.1m) reflecting continuing low interest rates and subdued
corporate activity especially in the first half of the year. EBITDA
pre exceptional items was also impacted by the expected transfer
of the Lloyds TSB stock broking contract back to an in-house
team. Increased underlying performance in the second half of
2013 has created positive momentum for increased bottom
line performance in the year ahead. Operating profit declined
to £14.8m reflecting the exceptional costs of £25m incured
during the year. Operating cash conversion (Operating cash
flow / pre exceptional EBITDA) remained strong at 78.1% (2012:
114.2%). Net cash flow during the year was impacted by the 2013
refinancing, the acquisition of Killik and investment in product
development offset by reductions in working capital.
In June Equiniti’s debt was refinanced through the placing of £440m
of senior secured notes and floating rate notes supplemented
by a £75m revolving credit facility. This fundraising has enabled
the Group to repay all existing banking facilities and simplify the
corporate structure. With a stronger balance sheet the Group is
equipped for further investment and growth.
In the year that it celebrated its sixth birthday, Equiniti was once
again confirmed as the UK’s top registrar in the Capital Analytics
Survey. The successful delivery of the Royal Mail Group IPO and
Employee Share Scheme – the first Government privatisation of
the digital age – firmly establishes our position as the registrar of
choice for complex flotations with a retail offering.
Work has continued to simplify the corporate structure and
strengthen operational resources. Following the 2013 refinancing
and the disposal of the Xafinity pension consulting business, all
operations have now been unified under a common Equiniti brand
including the Equiniti Paymaster pension administration business and
Equiniti Claybrook, a provider of pensions software. Elsewhere, our
commercial solutions business has broadened its range of solutions
provided to Government and our employee share dealing capability
has been augmented through the acquisition and successful
integration of the Killik Employee Services now renamed Equiniti
Premier. Investment has continued in the creation of a common
operational platform, with customer contact and bulk mail and print
now co-ordinated by a single business-wide function. Further work
is underway to support the scaleabilty and resilience required to
mobilise significant corporate actions at short notice. These on-
shore facilities have been supported by the significant expansion of
our IT operations and support functions in Chennai, India, where
up to 450 specialist staff are now based in a new custom-built
facility. This capability enables testing and development activities to
progress over an extended time window and reduces product cycle
times and development costs.
The outlook for 2014 is positive. Increased corporate activity is
expected to accelerate growth in our core registration market,
supported by a strong sales pipeline across the entire service
portfolio. We are delighted to complete the acquisition of
Pancredit in March 2014 which strengthens our capabilities in loan
servicing. Additionally, work is underway to identify and integrate
businesses with complementary capabilities and it is anticipated
that acquisitions will further support our underlying growth.
A business succeeds through the strength of its people and I offer
my thanks and heartfelt appreciation to our talented and dedicated
teams who have worked tirelessly to make 2013 a success. Together
we can look forward to 2014 with enthusiasm and with optimism.
Guy Wakeley
Chief Executive Officer
I took up my position with Equiniti
in January 2014 and am delighted to
be joining the business at a time of
accelerating investment and growth. I am
grateful to my colleagues for the warm
welcome I have received. I have been
impressed with the energy and enthusiasm
with which our teams serve their clients
and customers, and with the significant
potential of Equiniti to do more.
Equiniti’s mission is the creation and
implementation of intelligent solutions
for complex administration tasks in the
financial, public and other regulated
sectors. We aim to be the partner of
choice in complex environments where
only the best will do and create significant
lasting value for our clients by locking
in efficiency and improving service
outcomes for clients and end-users.
Our client base is broad, covering more
than 50% of FTSE100 companies, and in
total 1600 organisations including listed
companies, Government departments
and financial institutions.
Our 2013 performance evidences
continuing revenue growth, with revenue
of £274.7m (2012 in £266.5m) driven
primarily by increased corporate action
activity and demand for regulatory and
compliance services, new sales and
income from new revenue lines including
Guy Wakeley, CEO
10 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 11
STRATEGIC REPORT CASE STUDY: ROYAL MAIL GROUP
This was the biggest
online share offer that
we have ever done and
great teamwork and
dedication ensured
its success.
Claire Vaughan, Equiniti
Equiniti did more than successfully handle
the privatisation of Royal Mail. It also opened
doors for the future.
Here are five different Equiniti perspectives on the project and
what it meant for them to be involved.
In 2013 one of the most recognisable
British brands – the Royal Mail Group –
floated. It was one of the highest-profile
initial public offerings (IPO) to come to
market in recent years and was supported
by services from Equiniti.
Equiniti was selected by Royal Mail
Group and the Department for Business,
Innovation & Skills, following a competitive
tender process, to provide services
above and beyond share registration in
support of the IPO. These covered acting
as receiving agent, employee benefits
including the allocation of free shares and
the Employee Priority Offer, the issue
and allocation of shares following the IPO,
associated dealing services and ongoing
share registration.
Drop-in clinics were
held at 109 Royal
Mail sites covering
8,000 employees to
support the Employee
Priority Offer
Answered an additional
140,000 calls in a single
month – an increase
of nearly 90% on the
monthly call level
Bob Birkhead, Senior
Service Delivery
Manager, Employee
Benefit Solutions
Working on a project as high profile
as this was very rewarding. When the
project started, a lot of the finer details
needed to be established, including
around the Employee Priority Offer and
exactly how Royal Mail employees would
be awarded 10% of the business in shares.
So we had to work simultaneously on
four different scenarios, until our client,
the Government, chose to use the Share
Incentive Plan (SIP). Following this, I was
the lead on the employee share plan
dealing, so I worked closely with different
Royal Mail work streams to coordinate
the process.
In addition to written communications, we
participated in drop-in clinics over a three-
week period at 109 Royal Mail sites. To
accommodate employees’ shift patterns,
we worked with Royal Mail representatives
to hold these clinics from early in the
morning until late in the evening. In total
we saw around 8,000 people.
This project went really well and we have
had some great feedback from our client.
This was the biggest IPO we have worked
on in a very long time and the success of
it is sure to open doors for us.
Claire Vaughan, Senior IT
Project Manager
The IT team was made up of a number
of workstreams to deliver the systems
supporting this project. It was vital that
milestones were met in each area to
provide an integrated system solution
for each stage of the offer. This meant
working closely with many internal
and external workstreams, as well as
multiple third-party suppliers to establish
timelines, implement infrastructure,
coordinate data exchanges and align
delivery of various components.
We provided the marketing and
application websites, which needed to
cater to high volumes of users and surges
in demand. As well as the websites that
the public and Royal Mail employees
used, there was also a great deal of work
going on to provide back-end systems.
We needed to deliver solutions to scan
paper applications received and capture
the PDF applications downloaded from
the website. We also had to make sure
our systems provided the functionality
to reconcile the applications and online
payments, apply the correct allocations
and produce all of the print files for the
email notifications, share certificates,
refund cheques and welcome packs.
Great teamwork and dedication ensured
our success.
12 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 13
STRATEGIC REPORT CASE STUDY: ROYAL MAIL GROUP
(CONTINUED)
Processed over 56,000
sale instructions,
selling over 14 million
shares
Dynamic web system
resulted in thousands
of online applications
per second with real-
time 24/7 application
data being available
Darren Charles, Contact
Centre Manager
The Contact Centre was involved in the
Royal Mail IPO process from tender right
through to completion of the project.
Given the size of the task, we didn’t have
a point of reference in the marketplace
when planning for potential call volumes.
As a result we had to use the expertise
we have at Equiniti to build models and
work with our client, the Government, to
make reasonable assumptions as to what
the interest and call volumes would be
following the flotation.
This task provided us with the
opportunity to implement new ways of
customer contact. Royal Mail were keen
to have a web chat feature, which was
implemented and staffed from 6am until
11pm to accommodate Royal Mail staff’s
working hours. We also created a social
media presence via Twitter, open for
eligible employees wanting information on
the ESO (employee share offering) and
fielded vital enquiries via this channel.
Naturally, our call volumes increased
significantly. We normally handle 160,000
calls a month, but when the IPO was
in progress, we answered an additional
140,000. Even so we still retained our
excellent customer satisfaction rate of 93%.
That was a tribute to the commitment of
staff across the Contact Centre.
Neill Sullivan, Senior
Manager, Investment
Services
On the back of the Royal Mail IPO, we
provided a number of different share
dealing services for shareholders, one of
which was a new facility: an automated
telephone instruction (ATI) channel. This
service allowed shareholders to sell their
shares by placing an instruction through
an automated telephone service.
Royal Mail were keen to offer
shareholders a range of ways to place
their share instructions. We responded
with ATI, which as well as helping with
the huge volume of calls we anticipated,
was also designed to be easy to use,
especially for people who had little
experience in share dealing services. By
the end of the task we had successfully
processed over 56,000 sale instructions,
selling over 14 million shares.
We are renowned for our customer
service. To make sure that our service levels
remained high, we reviewed our operational
structure and took on additional resource
to support us throughout this project. ATI
also helped minimise the impact on business
as usual activity.
This was a really exciting project and
there was a lot of thinking on your feet
and responding quickly as the client’s
requirements evolved. As a team, we
were flexible and adaptable and I was very
proud of how committed my team was.
The exceptional
teamwork and our
technology offering
were what made this
project such a great
success.
Gavin Lane, Equiniti
This IPO culminated in the creation of
a new FTSE 100 share register. Being
involved in such a large task and seeing the
great partnerships formed was incredibly
rewarding. The exceptional teamwork and
our technology offering were what made
this project such a great success.
A bright future lies ahead
Winning the Royal Mail IPO allowed
Equiniti to demonstrate that it could
handle a task on such a grand scale. Not
only did it meet the demands of a high-
profile client, but Equiniti also showed
that it could balance a very demanding
project and still deliver the levels of
service that its customers have come to
expect. Teamwork, commitment and
Equiniti’s expertise has resulted in the
Royal Mail IPO being a huge success
and will undoubtedly create further
opportunities of this scale in the future.
Gavin Lane, Senior
Manager, Corporate
Actions
After 17 years of working within the
Corporate Actions team, it was a
fantastic opportunity to be responsible
for the operational design and delivery of
the Royal Mail IPO. Our team’s combined
experience of delivering a number of
large corporate events over the past five
years meant that we had the expertise to
successfully manage this project.
With no major online IPO precedence to
assist with forecasting application volumes,
we needed to take full advantage of our
online capabilities to be operationally
effective. Our dynamic web system resulted
in thousands of online applications per
second with real-time 24/7 application data
being available. We also applied scanning
technology with character recognition
software to record new shareholder
registration details for all paper applications.
We welcomed a very strong team of
individuals from a number of different
areas of our business and around 130
agency staff members joined us. This
ensured we were adequately resourced
to successfully deliver this task.
14 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 15
STRATEGIC REPORT CASE STUDY: LAND AND PROPERTY
SERVICES
Land and Property Services (LPS) collects rates on 785,000
properties in Northern Ireland and collects cash totalling
around £1 billion per annum. It also administers many benefits
and reliefs. Equiniti provides rate collection and managed
services to LPS.
CASE STUDY: THE PRUDENTIAL
Equiniti announced a 10 year renewal to its contract
with Prudential for the administration of pension schemes.
Prudential has a longstanding relationship with the Group
and is a trusted partner. This partnership cultivates deeper
commercial relationships and delivers greater value to
both Prudential and Equiniti.
A satisfied customer with
a market leading service
This project brought together the
capabilities from across the Group
– data management, software and
managed services to deliver a fantastic
solution to a client, which is fit for the
future and supports revenue generation
and cost savings.
Equiniti has provided
LPS with a solution
that has proved to be
flexible during a time
of radical change
for the organisation.
The fully integrated
system replaces several
disparate systems
allowing LPS to handle
the additional business
complexity resulting
from a substantial
programme of rating
reforms and significant
organisational change.
The solution from
Equiniti has ensured
that we have continued
to maintain an
operational service in
very challenging times.
Anne Johnston,
Programme Manager, LPS
Growing efficiencies
Equiniti’s solutions addressed the need
to update the rating software which was
outdated, heavily customised and unable to
meet requirements for regulatory reform.
Our solution included assessment and
collection software, a sophisticated accounts
package, workflow, business intelligence
software, security administration, disaster
recovery and on-going technical and
application support. As part of the system,
Equiniti also provided a solution to help LPS
deal with the task of tracing unpaid debtors.
Equiniti’s managed service includes the
provision of 400,000 documents per
annum with rate bills, reminders and
enforcements printed through a
secure facility.
Generating new revenues
As part of the project, LPS needed to
trace a large number of records on its
database for which it had incomplete or
missing personal information. Equiniti
verified and traced 84.5% of accounts
with outstanding debt, helping LPS to
generate new rate demands to 27,478
properties equating to £13.5 million in
additional cash for them.
The project enabled LPS to meet its debt
reduction targets.
Equiniti has introduced a technically
resilient system capable of supporting
change in the future. The switch to a
new, modern fund series has helped
reduce operating costs and enhances
member choice and engagement.
This may lead to future business for
Prudential as scheme members embark
on their retirement journey. By providing
great service during the accumulation
period, Prudential will be viewed in a
positive light by those members seeking
to purchase an annuity.
Excellence in delivery
for our customers has
to be as important to
our partners as it is to
us. Everything we do
well builds on the trust
our customers place
in us so our extension
of this partnership
is a recognition of
Equiniti’s technical
and administrative
expertise.
Tracy Harris, Customer
Service Director
at Prudential
Addressing legacy issues
As part of the contract, Equiniti took
over the operation and administration
of legacy Defined Contribution (DC)
closed book pension schemes, upgrading
the outmoded administration system to
achieve operational resilience. This was in
addition to providing continuous servicing
and settlement of benefits for around
35,000 account holders.
The transition was achieved by ‘lifting
and shifting’ the supporting systems from
the legacy platform to Equiniti’s modern
technology and by introducing a new,
highly motivated team of administrators.
Equiniti administers the portfolio of closed
book pension schemes using experienced
and qualified staff. This is supported by the
Compendia platform, which provides the
complete range of pensions administration,
reporting and communication services to
meet the needs of trustees, employers
and members.
Oliver Dubeck, Corporate Affairs Analyst
Jenny Hodgkins, Project Manager
16 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 17
STRATEGIC REPORT DEVELOPMENTS AND ACQUISITIONS
Discontinuance
Reuniting investors with lost millions
Equiniti offers discontinuance services to administer the transfer of
legal liability away from pension trustees when a pension scheme is
approaching the end of its life. The service is delivered to pension
scheme trustees and the UK Government via Equiniti’s place on
the Pension Protection Funds (PPF) Specialist Administration
Services Panel. Combined with project work prior to full scheme
wind up, including data quality and Guaranteed Minimum Pension
(GMP) record checks, the service has doubled its revenues in 2013.
In the last five years Equiniti has reunited half a million investors
and shareholders with almost £540m through its asset
reunification services delivered through the brands Prosearch
and Equiniti Data Services. The three biggest reasons for assets
going unclaimed are death, emigration and change of address.
During the year we saw a rise in demand for this service as
companies take a more proactive stance to “do the right thing”
by investors and beneficiaries.
MyCSP mutual joint venture
Killik Employee Services
Equiniti is the private sector partner in the first Mutual Joint
Venture to be launched by the Government - MyCSP. As a result
of this partnership Equiniti’s relationship with Government has
strengthened along with the knowledge of the public sector
market. Only a year in, MyCSP’s service levels have improved
and employee engagement has grown. The foundations have
been set for a future profitable business. The success in creating a
commercially focussed business has delivered dividends to Equiniti,
in respect of its 40% ownership, of £0.5m in 2013. Further, we
have recorded £1.6m in our income statement in 2013 in respect
of our 40% share of MyCSP’s profit after tax.
The acquisition of Killik Employee Services, a market leading
provider of employee and executive share plan administration,
has expanded Equiniti’s employee benefits services. With an
international executive share plan and share trading solution
with employees covering 61 countries, this acquisition
strengthens Equiniti’s global offering and will support the
growing Global Share Alliance partnership. The ‘Centive’
software platform enhances our employee benefits technology
and a new operational centre of excellence in Ipswich provides
the opportunity for synergies. The business rebranded to
Equiniti Premier in 2014.
Enhanced offshore IT capabilities
Pancredit Systems Limited
Equiniti opened its Centre of Excellence for IT development
and offshore BPO capabilities in Chennai, which became fully
operational from March 2014. The centre, which builds on our
existing presence in India, will deliver scaleable and cost effective
development and testing resource to support the platform
development needs of the Group. The aim is to accelerate
the speed of new products to market supporting the focus on
innovation in 2014.
In March 2014 Equiniti acquired Pancredit Systems Limited, an
innovative and fast-growing lending software business which
supports banks, intermediaries and price comparison sites with
intelligent loan administration and origination services. This
strengthens the range of services offered by the Group to the
UK’s leading financial services and public sector organisations,
capitalising on market opportunities.
Continuing to
evolve to meet a
changing market
Trevor Smith, Director, Strategic Clients
18 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 19
STRATEGIC REPORT OPERATIONAL REVIEW
£134.6m
revenue
£22.2m
EBITDA
+ pre exceptional items
PENSION SOLUTIONS
SHAREHOLDER SOLUTIONS
Our Pension Solutions division provides pensions software,
outsourced administration and payment services to 7.3 million
scheme members in the UK.
Our Shareholder Solutions division is a strategic partner
to leading businesses, delivering solutions in share
registration, employee benefits and investment services.
Strong relationships with global
organisations such as Citi and Prudential
have enabled us to develop these
clients across the wider Group, helping
to enhance Equiniti’s position as a
significant force in the Business Process
Services sector.
Our continuous improvement programme
is delivering results with software and
administration more closely aligned. This
integrated unit will allow us to deliver
larger implementations for our clients,
develop market-leading technology
solutions and provide greater capacity for
winning new business in the future.
The Pension Solutions business delivered
increased revenues to £134.6m (£130.0m
in 2012). This was driven by a good
performance from Hazell Carr which
responded to market requirements
for specialist complaints handling and
placed graduates into contract roles.
Our international payments business,
Paymaster International Payments
grew its client base by 150%. Growing
opportunities in the insurance market also
contributed to new revenues.
EBITDA pre exceptional items was down
to £22.2m (£24.6m in 2012) the result
of lower project income, an investment
in additional sales capacity and
operational costs.
Client retention remains strong with
the Armed Forces, Prudential, ITN, HP
and Hays all renewing contracts. Our
investment in MyCSP and commitment to
its game-changing ownership model has
seen it go from strength to strength, with
the business on track and delivering its
first dividend in 2013.
of our Employee Benefits Portal, Equiniti
is enabling employees across the globe
to manage shareholdings and benefits
easily online.
Our Investment Services business
performed well during the year increasing
revenue to £31.4m (£27.6m in 2012)
and continued to invest in platform and
service enhancements. Following the
acquisition of peterevans in 2012, we
have now integrated their market leading
software with our offer to strengthen the
products and services delivered to the
wealth management market.
Committed to service excellence, we
were confirmed as the leading provider in
the Capital Analytics Registrars industry
benchmarking survey and were named
Best Shareholder Service Provider at the
Share Awards.
The Shareholder Solutions business
delivered increased revenue to £118.0m
(£115.8m in 2012). This was driven by
higher share dealing activity and increased
revenue from corporate actions in the
latter part of the year which enabled the
business to successfully offset the ongoing
impact of lower interest rates.
EBITDA pre exceptional items was down
to £50.9m (£54.6m in 2012) the result
of lower interest income and the loss of
Lloyds TSB stock broking contract.
The Registration Services business,
which supports around half of FTSE100
companies, delivered strong growth
with £55.9m of revenue in the year
(£47.1m in 2012). The business had some
notable business wins including Esure,
Hellermann Tyton and Crest Nicholson.
Equiniti successfully won and supported
the majority of large IPOs which came
to market during the year, the largest of
which was the Royal Mail, the first major
Government flotation of the digital age.
Our Employee Benefits and share plan
business achieved revenue of £25.4m
(£26.3m in 2012) and continues to invest
in growth. We acquired Killik Employee
Services in October, a market leading
provider of discretionary employee and
executive share plan administration.
Supported by continued developments
£118.0m
revenue
£50.9m
EBITDA
+ pre exceptional items
20 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 21
STRATEGIC REPORT OPERATIONAL REVIEW (CONTINUED)
£22.1m
revenue
£5.7m
EBITDA
+ pre exceptional items
COMMERCIAL SOLUTIONS
Our Commercial Solutions division is focused on developing
the wider BPS market and is underpinned by a range of IT
services and software solutions.
The Commercial Solutions business
delivered increased revenue to £22.1m
(£20.7m in 2012) and EBITDA pre
exceptional items increased by 21.2% to
£5.7m (£4.7m in 2012).
Successful wins in the period for the
business included NHS Wales, Civil
Aviation Authority, Buckinghamshire NHS
Trust and APCOA Parking. Our Equiniti
360 Clinical doctor revalidation software
system continues to see strong take-up
rates in this growing market. Commercial
Solutions also provides a range of
solutions including Case Management,
HR and Payroll services and bespoke
software development.
We have invested in building our IT
capabilities, including a substantial
expansion of our operation in India which
will continue to grow in 2014. The division
provided services to the Group as well as
to external clients across both the public
and private sectors. It is well positioned
to take advantage of the market for
outsourced IT services.
We believe in the
power of people
to keep moving
forward
Tierney Stockwell, Relationship Manager
22 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 23
STRATEGIC REPORT FINANCIAL REVIEW
The audited results for the year are set out from
page 48 onward. The detailed overview of the
market and operational focus is set out in pages
20 to 23. Disclosures of principal risks and
uncertainties affecting the business are set out
in the Directors Report on page 44.
Income statement
The summarised income statement for the year ended
31 December 2013 is as follows:
Income statement
Revenue
EBITDA pre-exceptional
Exceptional items
EBITDA
Depreciation and amortisation
Operating profit
Net finance costs (pre-exceptional)
Exceptional finance cost
Share of profit in associate
Loss before tax
Taxation
Loss from continuing activities
2013
£m
274.7
76.3
(25.0)
51.3
(36.5)
14.8
(65.7)
(12.4)
1.6
(61.7)
4.3
(57.4)
2012
£m
266.5
81.1
(11.8)
69.3
(37.9)
31.4
(66.9)
-
0.3
(35.2)
7.0
(28.1)
Revenue
Revenue for the year grew by 3.1% to £274.7m with growth in
corporate actions reflecting a general improvement in market
conditions, with a significant rights issue and IPO during the year
offsetting the loss of a stock broking contract. Excluding the full
year impact of the acquisitions of peterevans, Prism Cosec and
Killik Employee Services, revenue for the year was £5.1 million
(1.9%) higher. Pension Solutions revenue saw strong revenue
growth in its actuarial discontinuance business. Commercial
Solutions has built on cross selling opportunities to offer
solutions to a key banking client.
EBITDA
EBITDA pre-exceptional items is a key performance indicator.
It reflects profit before finance costs, taxation, depreciation
and amortisation and exceptional items. In 2013 EBITDA pre-
exceptional items was £76.3m, a decrease of £4.8m (5.9%)
compared with the prior year (£81.1m). A step down in the
interest rate hedges led to a reduction in income received which
combined with a loss in revenue from a Lloyds TSB stock broking
contract resulted in most of the decline. Additional costs were
also incurred to increase service levels within Pension Solutions
who also saw a decline in project revenue. These impacts were
offset in part by an increase in corporate actions and share dealing
transactions in Shareholder Solutions.
Exceptional items
Exceptional items of £25.0m (2012: £11.8m) include costs
incurred in respect of the refinancing of the Group’s loans,
integration and management restructuring of the business to align
the Group, other restructuring and corporate development costs
and a provision against a contract to provide the administrative
services to support the launch of a new business model for auto-
enrolment that is being terminated by mutual agreement given
the significant costs incurred in providing these services.
Exceptional items
Refinancing costs
Integration project
Contract termination costs
Other exceptional items
Acquisition related expenses
2013
£m
10.2
10.1
4.4
-
0.3
25.0
2012
£m
-
4.8
4.2
2.8
-
11.8
Operating profit
Operating profit remains a key earnings indicator, reflecting profit
before finance costs and taxation. In 2013 operating profit was
£14.8m, a decrease of £16.6m (52.9%) compared with the prior year
(£31.4m). Operating profit before exceptional items was £39.8m
(2012: £43.2m). The operating profit has been adversely affected by
an increase of £13.2m in one off exceptional costs in the year.
Net finance costs
Group net finance costs were £78.1m (2012: £66.9m); which
included £12.4m (2012: £nil) of exceptional finance costs. Net
interest costs of £29.4m (2012: £31.2m) were paid in cash.
Interest costs increased due to the Group refinancing its bank
debt issuing £440m of senior secured notes. These notes were
initially placed into escrow whilst clearance was sought from the
Financial Conduct Authority to restructure the Group, resulting
in additional interest costs being incurred for a period of time. In
addition there was a one off cost for the break cost of a financial
derivative on the existing debt which was no longer required
given the reduction in the level of debt paying interest at a
variable rate.
Exceptional finance costs are as follows:
Exceptional finance costs
Write off of amortised fees
Break cost and interest
2013
£m
6.6
5.8
12.4
2012
£m
-
-
-
24 » Equiniti Group annual report 2013
24 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 25
Equiniti Group annual report 2013 « 25
STRATEGIC REPORT
FINANCIAL REVIEW (CONTINUED)
The Group focuses on improving working capital through
automating the invoice generation and improving payment terms.
Capital expenditure has increased since 2012 mainly due to an
upgrade of the share dealing platform and investment in the Indian
base to create a Centre of Excellence for IT development and
offshore BPO capabilities.
Refinancing
On 11 June 2013 the Group completed a refinancing of its existing
bank debt through a £440m issue of senior secured notes via a
newly incorporated entity, Equiniti Newco 2 plc. This consisted
of £250m secured senior loan notes, maturing in 2018 bearing
an interest rate of 7.125%, together with £190m senior secured
floating rate loan notes at three-month LIBOR plus 5.75, also
maturing in 2018. These notes do not contain any maintenance
covenants. The notes were issued to repay existing bank debt. To
facilitate the refinancing, the corporate structure of the Group was
simplified. A swap was taken out against the floating rates notes to
fix three-month LIBOR at 0.9135% until June 2016.
The Group entered into a committed revolving credit facility of
£75m at the same time, maturing in 2018. This was not drawn
during the year, but was drawn in March 2014 to fund the
Pancredit acquisition. It is available to finance working capital and
for general corporate purposes. It is anticipated that its primary
use will be to finance future acquisitions of the Group.
Share of profit in associate
The Group’s investment in MyCSP continues to perform well,
adding £1.6m (2012: £0.3m) to Group profits for the year.
MyCSP also paid its first dividend to the Group of £0.5m during
the year with their employees receiving £0.3m.
Loss for year
The Group made a loss for the year from continuing operations
of £57.4m compared to £28.1m in 2012 due to financing and
exceptional costs exceeding the significant EBITDA generated
from existing qoperations.
Cash flow
The Group generated a free cash flow of £51.7m (2012: £82.4m)
representing a conversion of EBITDA to free cash flow of
68% (2012: 102%). The main movements in cash flow are
summarised below:
Cash flow summary
EBITDA
Working capital movement
Capital expenditure
Free cash flow
Net interest costs
Free cash flow after interest
Taxes paid
Exceptional items - refinancing
Exceptional items - other
Loan repayments
Investment in MyCSP
MyCSP dividend
Investment in acquisitions
Disposal of Xafinitiy Consulting
Discontinued operations
Net cash movement
2013
£m
76.3
(5.3)
(19.3)
51.7
(29.4)
22.3
1.8
(16.9)
(17.2)
(90.7)
(4.0)
0.5
(12.5)
74.3
-
(42.4)
2012
£m
81.1
13.8
(12.5)
82.4
(31.2)
51.2
-
-
(9.9)
(15.6)
(9.1)
-
(1.7)
-
7.7
22.6
Nadia Hussini, PR Executive
26 » Equiniti Group annual report 2013
26 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 27
Equiniti Group annual report 2013 « 27
STRATEGIC REPORT
FINANCIAL REVIEW (CONTINUED)
The existing “payment in kind” facilities were extended until 2019
with the interest accruing at the current rate of 9.5% over LIBOR
until 2017, and then at 12.5% thereafter.
Finance risk mitigation
The Group is exposed to interest rate risk in three main respects.
Further detail on the Equiniti Group’s borrowing is set out in
note 23 of the consolidated financial statements.
The Group complied with its covenants in respect of the old
banking facilities during the year.
At the end of December 2013, net debt was £427.1m (2012:
£476.2m). Leverage is a key performance indicator and on a
proforma basis, adjusting for the acquisition of Killik, stood at 5.5
times adjusted EBITDA at 31 December 2013. In addition, shares
classified as debt was £188.9m (2012: £174.9m) and the Payment
in Kind facility was £135.0m (2012: £122.3).
Net debt
Cash and cash equivalents
Senior secured debt
Senior bank debt
Finance lease
Accrued interest
2013
£m
(15.4)
440.0
-
1.0
1.5
427.1
2012
£m
(57.8)
-
530.2
1.3
2.5
476.2
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 at 0.7%.
Secondly, interest relating to intermediary fee revenue and
ultimately payable to savers at fixed rates is protected by fixed
rate income agreements.
Thirdly, interest expense arising on floating rate borrowings is
mitigated via interest rate derivatives. An existing swap was
settled in June 2013 as part of refinancing at a market cost of
£5.1m with a new swap being entered into against the £190m
floating rate bond issued against three-month LIBOR.
During 2013 the Group also put in place forward foreign
exchange derivatives against 2014 expected project and
operational exposures in India as a result of the establishment
of its share service centre in Chennai. These derivatives are
equivalent to £2.6m of spend in 2014.
Retirement benefits
The Group’s defined benefit schemes are the Paymaster Pension
Scheme and the ICS Pension Scheme.
The amended IAS 19 standard, which came into effect on 1 January
2013, changed the method of calculating the net interest related
to the defined benefit pension schemes from one which uses the
expected return on scheme assets to one based on the discount
rate. The full year 2012 figures have been restated to reflect the
change resulting in an increase in finance costs of £21,000.
The movements in the pension scheme liability is shown below:
Defined benefit liability
At 1 January
Current service cost
Contributions received
Interest
Change in actuarial assumptions
At 31 December
2013
£m
6.3
0.8
(1.1)
0.3
3.8
10.1
2012
£m
4.0
0.9
(1.3)
0.2
2.5
6.3
Acquisitions and disposals
In February 2013 the Group completed the disposal of the
Xafinity pension consulting business. Consideration received
from disposal of businesses amounted to £74.3m and was used
to repay outstanding bank debt.
On 1 October 2013 the Group acquired the trade and assets of
Killik Employee Share Services Limited and part of the trade and
assets of Killik & Co LLP, a market leading provider of discretionary
employee and global executive share plan administration.
Subsequent to the balance sheet date, the Group purchased the
entire issued share capital of Pancredit Systems Limited for £14.5m,
with £12.0m payable in cash on completion and the balance one
year later. The business is expected to have net assets of £2.6m
on that date with cash balances of £3.2m. In the last full year prior
to acquisition, the business generated revenues of £4.6m and an
operating profit of £1.3m. The business sells and supports software
to manage unsecured loan administration. The acquisition has been
funded by drawing on the revolving credit facility.
The strategic report is approved by the Board.
On behalf of the Board.
Going concern
The Directors are confident that, on the basis of current financial
projections and the availability of the £75m revolving credit
facility, we have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. For this reason we continue to adopt the
going concern basis in preparing the financial statements.
Martyn Hindley
Chief Financial Officer
26 March 2014
28 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 29
STRATEGIC REPORT
OUR PEOPLE
Our people are at the heart
of the quality of service
and market innovations
we deliver.
2,796
colleagues
29 UK
locations
87%
staff retention
I am proud to
work at Equiniti
because...
of the fantastic
people I work
with every day.
Our people are central to our success. We share common values which underpin
the focus on delivering excellent customer service and driving growth. Equiniti is
a special place to work as demonstrated by high levels of employee retention and
strong and increasing engagement scores. We continue to invest in training and
personal development at all levels.
The approach to our people is to embed in a culture of “Customers Come First”.
We have done this by ensuring that our people understand how important the
services we provide are to the millions of people whose lives we touch.
The work we have done in recent years to ensure that our people are well
supported, are able to develop, and understand the importance of their roles
in the future success of our clients and Equiniti, means that we are proud of our
people proposition. And our people tell us they are proud too.
• “I am proud to work at Equiniti because no day is ever the same. Each day I
am presented with new challenges and situations, which really helps me to stay
focused and interested.”
• “I am proud to work at Equiniti because the culture is great. The environment
is incredibly empowering and the core values of the firm align with mine.”
• “I am proud to work at Equiniti because it’s a dynamic business founded on
excellent relationships internally and with clients.”
• “I am proud to work at Equiniti because of the people I work with, they are
hard-working and dedicated, and respect one another. It’s great working with a
team of talented people who genuinely enjoy what they do.”
Acquisitions are important to developing the depth and breadth of Equiniti’s
capabilities. As a result of the acquisition of Kililk in 2013, we were joined by
over 50 new colleagues in a number of centres across the UK. These teams
have been welcomed into our existing operations and support teams, enhancing
expertise in key areas such as software development and executive share
programmes.
We work hard to ensure that new teams understand Equiniti’s culture and
approach to people, as well as looking closely at what we can learn from the
culture of the businesses we have acquired. As we grow, our culture continues
to evolve – with people at the heart of all we do.
Equiniti’s market leading skills in HR software, employee benefits and pensions
ensures that the reward proposition available to our people is best in class. We
offer an engaging flexible benefits programme and have aligned our reward
mechanisms to business goals. In 2013 and 2014 our approach to employee
benefits and communications won us industry recognition. We are proud that
our people are able to benefit from the excellent products and services we
provide to our clients. Our people are our best advocates of the work we do.
Equiniti knows what it takes to be the best support team in the world – we
are here to ensure that in complex environments we provide the best service
outcomes for clients and end users.
OUR
VALUES
Trust
We act with integrity and
openness in our dealings
with others
Excellence
We work hard to get it right
first time and keep our
promises and commitments
to others
Client focus
We add value and build
true partnerships
Belief
We have passion and
belief in what we do and
who we are
People
We are positive, enthusiastic
and supportive of one
another
Vijay Sidhaparg, MI Analyst
Carly Mures, Personal Assistant
30 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 31
STRATEGIC REPORT CORPORATE RESPONSIBILITY
Equiniti is committed to being a responsible Group and
is supportive of the communities in which it operates.
We align our behaviour with the expectations and needs
of our customers and investors, employees, suppliers,
communities, regulators, special interest groups and
society as a whole. A core part of our approach as a
business is how we impact on the world and people
around us – and the work of our CSR committee and
champions is something we are passionate about.
At Equiniti we are continually developing our approach and
framework for CSR. Equiniti is based on sound business ethics and
our CSR approach is the same. We define our responsibilities
around four pillars, each supported by our business policies, and
each one active in every area of our operation.
The four pillars are:
People
Environment
Charity
Communities
The CSR Committee is chaired by Clancy Murphy, our People
and Change Director. Clancy has been actively involved in both
establishing and supporting all CSR activity at Equiniti for the
past five years. Working with an active and substantial steering
committee, with representation from across the Group in all
pillars, there is a clear CSR agenda to ensure we maintain our
focus as a business on this important activity. Our commitment
to CSR is now a clear part of our culture, and we encourage all
our people to act on our promises and build CSR activities into
the day to day operations.
Equiniti 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 reduced our carbon footprint by an
impressive 14.7% in 2013.
Environment
Equiniti 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 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
with the Carbon Reduction Commitment and have featured
strongly in the published league tables for the first two years of
that initiative. In 2013 we attained the Carbon Trust Standard
across our entire portfolio, a significant endorsement of our
carbon management programme.
32 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 33
Ian Leak, Relationship Director
STRATEGIC REPORT CORPORATE RESPONSIBILITY
(CONTINUED)
Thanks to our colleagues we are able to help make a difference
to the lives of children across the UK and 2013 and saw Equiniti
raise over £17,000.
As well as supporting national charity partnerships, our people also
raise money for a wide range of organisations that have personal
relevance to them or their communities. Efforts from staff include
internal events such as cake sales, raffles, competitions, sponsored
sporting events and dress down days saw our UK-based offices
raise over £15,000 for their local charities.
Charity
ABF The Soldiers Charity is a lifetime support to serving and
retired soldiers and their families and Equiniti has raised over
£45,000 for ABF during the three years we have supported
them. After a three year relationship as our national charity
partner, we took the step of asking our people to vote for who
they would like to support from 2014. From 1 January 2014 we
have chosen Winstons Wish as our national charity partner.
To support our culture of team working we have signed up to
the UK Challenge. The UK Challenge is one of the UK’s leading
corporate team building events, offering an “epic, adrenalin-
fuelled adventure that challenges teams intellectually, strategically
and physically”. From 3-6 July we’ll be taking 18 volunteers to
Snowdonia to compete against 67 other corporate teams. The
Challenge combines physical adventure with strategic decision-
making and problem solving where Equiniti staff will learn new
skills whilst developing new relationships with people from across
the business, outside the usual workplace environment. All money
raised will go to our national charity partner Winstons Wish.
BBC Children in Need is a cause that is well recognised by our
colleagues and clients. Its aim is to make a positive difference to
children and young people, so that every child in the UK has a safe,
happy and secure childhood and the chance to reach their potential.
Community
We are active in supporting local community projects and
initiatives, including supporting a number of local schools.
2013 saw management staff from Equiniti going to local schools
to introduce profession and career choices to students and give
them opportunities to reflect on what they might become.
We are continually committed to working with young people
to engage in business principles and functional expertise, with
a focus on developing and investing in young talent, such as
Young Enterprise.
We have provided work experience placements to a number
of young people at our site in Worthing through our links with
local schools and colleges, and have a growing apprenticeships
programme across Equiniti, drawing on links with local colleges.
Working together on joint projects outside of work is a great
way to encourage team working. A number of teams across
our locations have taken time out in 2013 to work together to
provide practical support to local charities and support groups
– with work ranging from painting to gardening. These initiatives
are close to the heart of our people in local offices as well as
providing vital support to some very worthy causes. We are
looking at extending this programme in 2014.
Thanks to our
colleagues
we are able
to help make
a difference
to the lives
of children
across the UK
34 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 35
STRATEGIC REPORT THE OUTLOOK FOR 2014
The Equiniti Group is in a good position to deliver
continued profitable growth into 2014 and beyond.
The outlook for 2014 is positive.
We anticipate increased market opportunities for our specialist
business processing services in both the public and private sectors.
Continued market pressure to find efficiencies mean businesses and
public sectors institutions are increasingly looking for more effective
solutions to non-core processes. Legislative changes are further
increasing the administrative burden and complexity for organisations,
particularly in the pensions, banking and financial services sectors.
Our core businesses remain leaders in their markets and have robust
levels of recurring contracted income, allowing us to invest in new
service developments and growing our capability. With 1,600 clients
and a high retention rate, we pride ourselves on the relationship we
have with our existing customers.
We continue to invest both in our business and in our people to
support a strong focus on sales growth. We anticipate the market’s
appetite for corporate actions and IPOs will continue to grow in 2014
as confidence in the economic recovery returns. Equiniti is well placed
to meet the markets requirements. In the public sector, our work with
MyCSP puts us in an ideal position to support further opportunities in
this space and the broader BPS market.
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.
The world is
changing –
and Equiniti is
poised to take
advantage of the
opportunities
which lie ahead,
building on the
foundations of
our fantastic
business to make
2014 the most
successful yet.
Guy Wakeley,
Chief Executive
Ghalib Supple, Senior Relationship Manager
Robert Hemming, Head of Relationship and Business Development - Investor Analyst
36 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 37
BOARD OF DIRECTORS
The board comprises two executive and five non-executive directors
EXECUTIVE DIRECTORS
Guy Wakeley
Martyn Hindley
Chief Executive Officer
Chief Financial Officer
Guy joined the Equiniti Board as Chief
Executive Officer in January 2014.
Guy joins from Morrison plc. the property
services provider to the public and private
sector, where he was CEO for 5 years.
During his tenure he transformed the
level of client service and innovation,
grew the business rapidly and delivered
consistent strong cash generation.
Prior to this Guy was Managing Director
of the Built Environment division at
Amey, the infrastructure services
provider to the public and private sector.
Guy previously worked for The Berkeley
Group, General Electric and Rolls-Royce.
He holds an MA in Engineering Science
from the University of Cambridge, a PhD
in applications of artificial intelligence,
and is a Chartered Engineer.
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.
NON-EXECUTIVE DIRECTORS
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 Chairman and CEO of
Tau Investment Management, an investment
firm he founded in 2012 focusing on
turnaround and growth equity investments
in the transformation of global supply chains.
Prior to that he was a member of the
Computershare Global Executive Board
and a founder and CEO of King Worldwide
and earlier in his career of Pepper
Technologies (acquired by Computershare).
Oliver graduated from Ludwig-Maximilians-
University, Munich, Germany with a PhD in
Strategic Management (magna cum laude).
In 2010 he was honoured by the World
Economic Forum as Young Global Leader
and he serves on several non-profit boards
including the World Policy Institute and the
National Museum of the American Indian
in New York. Oliver is a member of the
Nomination and Remuneration Committees.
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.
Haris Kyriakopoulos
Non-Executive Director
(Investor Representative)
Haris Kyriakopoulos joined Advent
International in August 2008. Prior to joining
Advent, Haris worked in investment banking
in London with Goldman Sachs’ UK Mergers
and Acquisition team, in strategy consulting
in New York with First Manhattan Consulting
Group, and at a startup in Athens with
Tellas, the fixed line telecom startup that was
subsequently acquired by Wind Hellas.
Haris holds a BSc with honours in Electrical
Engineering from the University of
Pennsylvania, and an MBA with honours
from the Wharton School.
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.
John Parker
Non-Executive Director
John was Managing Director of Equiniti
Shareholder Solutions, having been at the
forefront of the businesses transformation.
John worked at Lloyds TSB Group for 30
years, holding a range of management roles
in retail. He is a fellow of the Chartered
Institute of Bankers.
38 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 39
ADVENT INTERNATIONAL
DIRECTORS’ REPORT
Equiniti Group Limited is a company owned by funds managed
by Advent International Corporation.
Founded in 1984, Advent International is one of the largest and most experienced global
investors dedicated solely to private equity. Since inception, the firm has invested in
more than 290 buyout transactions in 39 countries, and today has $32.2 billion in assets
under management. With offices on four continents, Advent has established a globally
integrated team of over 170 investment professionals across North America, Europe,
Latin America and Asia. The firm focuses on growth and traditional buyout and strategic
repositioning transactions across five core sectors, including business and financial
services; healthcare; industrial; retail, consumer and leisure; and technology, media and
telecoms. After 30 years dedicated to international investing, Advent remains committed
to partnering with management teams to deliver sustained revenue and earnings growth
for portfolio companies.
James Brocklebank, Haris Kyriakopoulos and Nick Rose are the Advent executives with
oversight of the Equiniti Group and serve as Board Directors.
The Directors present their Directors’ report
and financial statements for the year ended 31
December 2013. The performance of the Group
for the year is discussed in the strategic report
on pages 4 to 35.
Principal activities of the Group
Employees
Equiniti Group Limited is a parent company with subsidiaries and
an associated undertaking. The principal activities of the Group
comprise the provision of complex administration, processing and
payment services supported by leading technology to assure delivery
to the Group’s clients, their employees, pensioners and customers.
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
Oliver Niedermaier
Nick Rose
Haris Kyriakopoulos
Wayne Story
John Parker
Guy Wakeley
Appointed 3 September 2013
Resigned 31 October 2013
Appointed 1 January 2014
Appointed 20 January 2014
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.
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.
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 donations
The Equiniti Group did not make any political donations or incur
any political expenditure during the year.
Future developments
The Group is expected to increase its market share through
organic growth in the pensions solutions, shareholder solutions
and commercial solutions markets, and through acquisitions to
enter new markets and to improve the Group’s existing presence
in these markets.
40 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 41
DIRECTORS’ REPORT (CONT’D)
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, standardised 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 and Compliance Monitoring functions. The
business assesses its risk and risk profile using an 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 support the formulation of the
Equiniti Group’s risk assessment.
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 CEO and CFO form part of the Group’s first line of
defence and attend Audit Committee meetings in order to
respond to relevant matters that arise. They are responsible
for taking forward actions that are delegated to them by the
Committee and the Compliance & Risk Director provides
oversight on the closure of these actions. The Equiniti
Group Audit Committee is assisted in its oversight role by
Internal Audit and Compliance Monitoring functions. Internal
Audit undertakes both regular and ad hoc reviews of risk
management controls and procedures whilst Compliance
Monitoring undertakes themed regulatory reviews 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 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, floating rates are generally earned on client
and corporate balances, which are 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 the floating
rate notes is mitigated via interest rate derivative which runs to
October 2018.
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
and public sector organisations. 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.
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 dealing 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 income in relation to client and investor
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 the Group’s levels of external borrowings was taken
out until 2016. This was settled at refinancing in 2013 and a new
swap taken out matching the terms of the new £190m floating
rate notes.
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 its cash and cash equivalents.
Prudential Capital Risk
Two entities within the Equiniti Group are subject FCA
regulatory capital requirements where each is required as set
against its regulated trading permissions to maintain minimum
levels of capital in order to manage its affairs. Equiniti Financial
Services Limited (EFSL) is categorised as a P2 prudentially
significant firm where its disorderly failure would have a
significant impact on the functioning of the market in which it
operates. Paymaster (1836) Limited (P(1836)L) is categorised as
a P3 prudentially non-significant firm where its failure, even if
disorderly, is unlikely to have a significant impact.
As an IFPRU MiFID qualifying firm EFSL is required to comply
with the Capital Requirements Directive and does so under the
FCA framework consisting of its there “Pillars” approach where
EFSL assesses its minimum capital requirement for its credit,
market and operational risk and whether its minimum capital
is adequate to meet its risks, and discloses specific information
relating to underlying risk management controls, capital position
and remuneration at www.equiniti.com.
P(1836)L as a MiFID exempt firm is not required to comply with
the Capital Requirements Directive. The firm does however
undertake an assessment of its capital requirements and is subject
to the Equiniti Group’s EWRM and three lines of defence model.
42 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 43
DIRECTORS’ REPORT (CONT’D)
Liquidity risk and going concern
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 is possible,
that the Equiniti Group will have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions.
The Equiniti Group’s three year business plan has been used
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.
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.
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 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.
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. The Equiniti Group complies with its FCA ICAAP and
CASS obligations.
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 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.
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.
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
Martyn Hindley
Chief Financial Officer
26 March 2014
Registered Number: 07090427
44 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 45
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF EQUINITI GROUP LIMITED
REPORT ON THE FINANCIAL STATEMENTS
Our opinion
In our opinion the financial statements, defined below:
•
•
•
give a true and fair view of the state of the group’s affairs as at 31 December 2013 and of the group’s loss and the group’s cash flows for
the year then ended;
have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union
and as applied in accordance with the provisions of the Companies Act 2006; and
have been prepared in accordance with the requirements of the Companies Act 2006.
This opinion is to be read in the context of what we say in the remainder of this report.
What we have audited
The group financial statements (the “financial statements”), which are prepared by Equiniti Group Limited, comprise:
•
•
•
•
•
the consolidated statement of comprehensive income for the year ended 31 December 2013;
the consolidated statement of financial position as at 31 December 2013;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.
The financial reporting framework that has been applied in their preparation comprises applicable law and IFRSs as adopted by the European Union.
In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of
significant accounting estimates. In making such estimates, they have made assumptions and considered future events.
What an audit of financial statements involves
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). 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 and to identify any information that is apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
OPINION ON OTHER MATTER PRESCRIBED
BY THE COMPANIES ACT 2006
In our opinion the information given in the Directors’ Report and Strategic Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
OTHER MATTERS ON WHICH WE ARE REQUIRED
TO REPORT BY EXCEPTION
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit.
We have no exceptions to report arising from this responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified
by law are not made. We have no exceptions to report arising from this responsibility.
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
AND THE AUDIT
Our responsibilities and those of the directors
As explained more fully in the Directors’ Responsibilities Statement, 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 ISAs (UK & 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.
Graham Lambert (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Gatwick
26th March 2014
46 » Equiniti Group annual report 2013
46 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 47
Equiniti Group annual report 2013 « 47
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 31 December 2013
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
as at 31 December 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 - before exceptional items
Finance costs - exceptional items
Net finance costs
Share of profit of associates
Loss before income tax
Income tax credit
Loss for the year from continuing operations
Discontinued operations
Profit for the year from discontinued operations
(attributable to owners of the parent)
Note
2013
£m
2012
£m
5.7
274.7
266.5
7
6
14
15
8
11
11
11
12
13
(198.4)
76.3
(25.0)
51.3
(4.0)
(32.5)
(185.4)
81.1
(11.8)
69.3
(3.5)
(34.4)
(259.9)
(235.1)
14.8
1.0
(66.7)
(12.4)
(78.1)
1.6
31.4
1.0
(67.9)
-
(66.9)
0.3
(61.7)
(35.2)
4.3
7.1
(57.4)
(28.1)
22
3.7
9.7
Loss for the year attributable to owners of the parent
(53.7)
(18.4)
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Fair value movement through hedging reserve
Share of other comprehensive income of associates
Items that will not be reclassified to profit or loss
Defined benefit plan actuarial loss
Deferred tax credit on other comprehensive income
Total comprehensive income for the year attributable to owners of the parent
The notes on pages 52 to 90 form part of these financial statements.
1.7
(0.2)
1.5
(3.8)
0.8
(3.0)
(55.2)
(2.7)
-
(2.7)
(2.5)
0.6
(1.9)
(23.0)
25
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
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
14
15
12
17
20
21
22
27
27
23
25
26
18
19
23
24
25
26
18
22
2013
£’000
10.7
605.7
14.3
6.1
636.8
-
64.9
15.4
80.3
-
717.1
5.0
3.5
(1.7)
(190.8)
(184.0)
816.3
10.1
7.0
0.6
3.5
837.5
-
57.2
0.4
3.9
2.1
63.6
-
2012
£’000
10.8
611.7
9.4
6.1
638.0
1.8
55.8
57.8
115.5
85.6
839.1
5.0
3.5
(3.4)
(134.0)
(128.9)
853.5
6.3
8.8
0.9
8.6
878.0
29.4
39.0
0.4
3.4
4.1
76.3
13.7
901.1
968.0
717.1
839.1
The notes on pages 52 to 90 form part of these financial statements.
The financial statements on pages 48 to 90 were approved by the Board of directors on 26 March 2014 and were signed on its behalf by:
Martyn Hindley
Director
48 » Equiniti Group annual report 2013
48 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 49
Equiniti Group annual report 2013 « 49
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
for the year ended 31 December 2013
CONSOLIDATED STATEMENT
OF CASH FLOWS
for the year ended 31 December 2013
Balance at 1 January 2012
Comprehensive income
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
Balance at 31 December 2012
Balance at 1 January 2013
Comprehensive income
Share
capital
£’000
Share
premium
£’000
Hedging Accumulated
deficit
reserve
£’000
£’000
Total
equity
£’000
5.0
3.5
(0.7)
(113.6)
(105.8)
-
-
-
-
-
-
-
-
-
-
5.0
5.0
3.5
3.5
-
(18.4)
(18.4)
(2.7)
-
-
-
(2.5)
0.6
(2.7)
(2.5)
0.6
(2.7)
(20.3)
(23.0)
(3.4)
(133.9)
(128.8)
Cash flows from operating activities
Cash generated from operations
Net cash inflow from operating activities
Cash flows from investing activities
Interest received
Dividends from investment
Dividends from associate
Business acquisitions net of cash acquired
Business acquisitions net of cash acquired and held for sale
Proceeds from disposal of a division
Acquisition of an associate
Payment relating to prior year acquisition
Acquisition of property, plant and equipment
Acquisition of software
Note
2013
£’000
2012
£’000
33
4
12
59.6
59.6
0.6
0.4
0.5
(10.9)
-
74.3
(4.0)
(1.6)
(3.9)
(15.4)
92.6
92.6
0.5
-
-
(0.9)
(0.6)
-
(9.1)
(0.1)
(3.0)
(9.5)
(3.4)
(133.9)
(128.8)
Net cash inflow / (outflow) from investing activities
40.0
(22.7)
Loss for the year per the statement of comprehensive income
Other comprehensive income
Changes in fair value of cash flow hedges
Share of other comprehensive income of associates
Actuarial losses on defined benefit pension plans
Deferred tax on defined benefit pension plans
Total comprehensive income
-
-
-
-
-
-
-
-
-
-
-
-
-
(53.7)
(53.7)
1.7
-
-
-
-
(0.2)
(3.8)
0.8
1.7
(0.2)
(3.8)
0.8
1.7
(56.9)
(55.2)
Cash flows from financing activities
Repayment of loans
Increase in borrowings
Interest paid
Loan fees paid and other finance costs
Refinancing fees paid
Net cash outflow from financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Balance at 31 December 2013
5.0
3.5
(1.7)
(190.8)
(184.0)
Cash and cash equivalents at 31 December
The notes on pages 52 to 90 form part of these financial statements.
Represented by:
Included in cash and cash equivalents per the statement of financial position
Included in the assets of the disposal group
21
22
Cash and cash equivalents at 31 December
The notes on pages 52 to 90 form part of these financial statements.
(530.7)
440.0
(30.5)
(5.8)
(15.0)
(142.0)
(42.4)
57.8
15.4
15.4
-
15.4
(15.0)
-
(31.7)
(0.6)
-
(47.3)
22.6
46.8
69.4
57.8
11.6
69.4
50 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 51
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
1 Accounting policies
1 Accounting policies (continued)
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”).
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:
Basis of preparation
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.
The presentation of the consolidated financial statements has been changed to round results to the nearest £0.1m whereas previously they
were rounded to the nearest £1,000. This change has required the 2012 figures to be restated and as a result there are some immaterial
inconsistencies between the restated rounded 2012 figures in the 2013 financial statements compared to the same figures disclosed to the
nearest £1,000 in the 2012 financial statements. In addition there may be immaterial rounding inconsistencies between the notes to the
financial statements and the primary statements for the 2012 figures.
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.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured
as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly
attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of
acquisition over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is
less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the statement of comprehensive
income.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are
also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Going Concern
The Group refinanced its bank facilities in June 2013 following the sale of Xafinity Consulting Limited for £74.3m, issuing £440m of fixed and
floating rate notes repayable in 2018. This removed all maintenance covenants and extended the repayment date on the Group’s debt. The
Group also raised a £75m revolving credit facility which remained undrawn at the year end date.
Whilst a total comprehensive loss of £55.2m arose increasing net liabilities to £184.0m during the course of the year, the Group traded
strongly, generating £59.6m of cash inflow from operating activities 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 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.
(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.
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.
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
2 – 50 years
3 – 20 years
3 – 10 years
52 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 53
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
1 Accounting policies (continued)
1 Accounting policies (continued)
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.
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.
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.
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
■ Brand
5 - 10 years
4 – 20 years
3 – 10 years
15 years
1 year
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.
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.
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.
54 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 55
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
1 Accounting policies (continued)
1 Accounting policies (continued)
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in
other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in income.
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 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.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The
chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been
identified as the Group’s Board of Directors.
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.
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
The following standards have been adopted by the Group for the first time for the financial year beginning 1 January 2013 and have a
material impact on the Group:
Amendments to IAS 1, ‘Financial statement presentation’ regarding other comprehensive income. The main change resulting from these
amendments is a requirement for entities to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are
potentially reclassifiable to profit or loss subsequently.
56 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 57
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
1 Accounting policies (continued)
1 Accounting policies (continued)
IAS 19, ‘Employee benefits’, was amended in June 2011. The changes on the Group’s accounting policies has been 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.
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.
IFRS 12, ‘Disclosures of interests in other entities’ includes the disclosure requirements for all forms of interests in other entities, including
joint arrangements, associates, structured entities and other off balance sheet vehicles. The standard is not mandatory for the Group until
1 January 2014; however the Group has decided to early adopt the standard as of 1 January 2013.
IFRS 13, ‘Fair value measurement’, aims to improve consistency and reduce complexity by providing a precise definition of fair value and
a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned
between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its
use is already required or permitted by other standards within IFRSs.
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
2013, 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 Group.
IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in
November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9
requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The
determination is made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the
contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change
is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded
in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The group is yet to assess IFRS 9’s full
impact. The Group will also consider the impact of the remaining phases of IFRS 9 when completed by the Board.
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.
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.
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 2013 as assessed by a chartered surveyor with
reference to current market rates.
The constructive compliance provision is management’s 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 uncertain as to the timing 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.
Provisions for contract costs have been made for the exceptional irrecoverable costs associated with a complex long-term contract that has
been terminated by mutual agreement.
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.
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.
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.
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.
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.
Pension assumptions
Assumptions used in calculating the net defined benefit pension obligation are set out in note 25, 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 25 is considered possible in the next financial year. The effect of this change would
be to increase the employee benefit liability by £1.5m (2012: £1.0). A 0.5% decrease in the discount rate used would increase the employee
benefit liability by £4.1m (2012: £4.1m).
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.
58 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 59
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
2 Financial risk management (continued)
4 Acquisitions of businesses (continued)
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 variable loan notes 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.
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 Killik. The revenue included in the consolidated statement
of comprehensive income since the acquisition date was £1.0m. The associated profit was £0.4m.
Had Killik been consolidated from 1 January 2013, the consolidated statement of income would show pro-forma revenue of £277.7m and
loss for the year of £56.2m.
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.
5 Revenue
The Group does not engage in holding speculative financial instruments or derivatives. Further quantitative disclosures are included
throughout these consolidated financial statements.
Included in the loss for the year are the following:
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
facilities were re-paid in June 2013 and the covenants, which had been met, removed. The loan notes issued at the time do not contain any
maintenance covenants.
4 Acquisitions of businesses
On 1 October 2013, the Group acquired the trade and assets of Killik Employee Share Services Limited and part of the trade and assets of
Killik & Co LLP (together referred to as Killik).
Recognised amounts of identifiable assets acquired and liabilities assumed
Property, plant and equipment
Intangible assets
Net identifiable assets and liabilities
Goodwill on acquisition
Total consideration
Net cash outflow in the year
£m
0.1
2.6
2.7
8.2
10.9
10.9
Provisionally, on acquisition intangible assets have been recognised relating to customer contracts and related relationships as well as
software with a combined attributable value of £2.6m. Due to the timing of the transaction the value relating to the other intangible assets
is provisional and subject to further review.
Revenue from continuing operations:
Rendering of services
Revenue from discontinued operations
Total revenue
6 Exceptional items
Included in the loss for year are the following:
Refinancing costs
Integration project costs
Contract costs
Acquisition related expenses
Total exceptional costs
2013
£m
274.7
3.2
277.9
2013
£m
10.2
10.1
4.4
0.3
25.0
2012
£m
266.5
43.0
309.5
2012
£m
-
4.8
4.2
2.8
11.8
Refinancing costs are expenses incurred in connection with the Group’s refinancing exercise that completed in June 2013, and subsequent
legal entity restructuring. These include incremental staff costs and advisor fees that were not capitalised or treated as finance costs.
Integration project includes costs incurred by the Group relating to resources applied in a major programme of Group integration activities
between the Equiniti and Xafinity businesses. These principally comprise consulting, property and IT rationalisation and severance costs,
together with rationalisation and transition of off-shore activities to an in-house service.
A complex long-term contract to provide new services in the UK pensions market has been terminated by mutual agreement and a
provision has been made for the exceptional irrecoverable costs associated with that contract.
Acquisition related expenses 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. The movement in the year also included the
release of contingent consideration for acquisitions where certain requirements were not met.
60 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 61
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
7 Operating segments
In accordance with IFRS 8 ‘Operating Segments’, an operating segment is defined as a business activity whose operating results are reviewed
by the chief operating decision maker (‘CODM’) and for which discrete information is available. The Group’s CODM is the Board of
Directors.
The Group’s operating segments have been identified as Pension Solution, Shareholder Solutions, Commercial Solutions and Central.
Central costs principally includes corporate overheads. The EBITDA of each segment is reported after charging relevant corporate costs
based on the business segments’ usage of corporate facilities and services.
Revenue
31 December 2013
Pension solutions
Shareholder solutions
Commercial solutions
31 December 2012
Pension solutions
Shareholder solutions
Commercial solutions
Pre-Exceptional EBITDA
Pension solutions
Shareholder solutions
Commercial solutions
Central
Pre-Exceptional EBITDA
Reconciliation to loss before tax and discontinued operations
Pre-Exceptional EBITDA
Exceptional items
EBITDA
Depreciation
Amortisation
Finance costs - net
Share of profits from associates
Loss before tax and discontinued operations
Total segment
revenue
£m
Inter-segment
revenue
£m
144.9
119.6
24.2
288.7
10.3
1.6
2.1
14.0
Total segment
revenue
£m
Inter-segment
revenue
£m
Revenue from
external
customers
£m
134.6
118.0
22.1
274.7
Revenue from
external
customers
£m
139.8
118.6
21.9
280.3
9.8
2.8
1.2
13.8
2013
£m
22.2
50.9
5.7
(2.5)
76.3
2013
£m
76.3
(25.0)
51.3
(4.0)
(32.5)
(78.1)
1.6
(61.7)
130.0
115.8
20.7
266.5
2012
£m
24.6
54.6
4.7
(2.8)
81.1
2012
£m
81.1
(11.8)
69.3
(3.5)
(34.4)
(66.9)
0.3
(35.2)
7 Operating segments (continued)
Segmental assets and liabilities
Pension solutions
Shareholder solutions
Commercial solutions
Central
Held for sale
Total
Other profit and loss disclosures
31 December 2013
Pension solutions
Shareholder solutions
Commercial solutions
Central
Total
31 December 2012
Pension solutions
Shareholder solutions
Commercial solutions
Central
Total
31 December 2013
Liabilities
£m
(29.5)
(31.3)
(5.0)
(835.3)
-
Assets
£m
58.2
228.4
14.3
416.2
-
31 December 2012
Assets
£m
49.8
150.5
13.5
539.7
85.6
Liabilities
£m
(22.9)
(24.2)
(5.8)
(901.4)
(13.7)
717.1
(901.1)
839.1
(968.0)
Depreciation
and
amortisation
£m
4.7
21.3
1.2
9.3
Exceptional
items
£m
(5.9)
(4.5)
(0.6)
(14.0)
Share of
profit on
Capital
associates expenditure
£m
6.5
10.6
2.1
0.4
£m
1.6
-
-
-
36.5
(25.0)
1.6
19.6
Depreciation
and
amortisation
£m
3.5
21.0
0.8
12.6
Exceptional
items
£m
(4.2)
(0.7)
-
(6.9)
Share of
profit on
associates
£m
0.3
Capital
expenditure
£m
3.9
6.6
1.9
0.1
37.9
(11.8)
0.3
12.5
62 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 63
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
8 Summary results and operating costs
Included in the loss for year are the following:
Expenses by nature
Employee benefit expense (note 9)
Depreciation and amortisation (notes 13 and 15)
Direct costs
Bought in services
Premises costs
Other general business costs
Exceptional items (note 6)
Total operating costs for continuing operations
Auditors’ remuneration
Services provided by the Company’s auditor
During the year the Group obtained the following services from the Company’s auditor:
Fees payable to Company’s auditor and its associates for other services:
- Audit of Company’s subsidiaries
- Tax advisory and compliance services
- Other services
9 Staff numbers and costs (continued)
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Other pension costs
2013
£m
85.2
8.8
4.7
98.7
2012
£m
83.3
8.3
5.1
96.6
In addition to the prior year, there were 372 employees employed by Xafinity Consulting, the business that the Group sold in February 2013.
The associated costs for the year, not included above, were £21.2m.
10 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
2013
£m
4.0
0.1
2012
£m
1.4
-
Retirement benefits are accrued under money purchase schemes to 2 of the directors (2012: 2 of the directors).
The emoluments of the highest paid director was £2.2m (2012: £0.7m). Company contributions to defined contribution pension schemes for
the highest paid director amounted to £0.1m (2012: £nil).
2013
£m
98.7
36.5
42.5
17.1
12.3
27.8
25.0
259.9
2013
£m
0.3
0.3
0.7
1.3
2012
£m
96.6
37.9
37.8
16.6
11.8
22.7
11.8
235.1
2012
£m
0.2
0.1
0.2
0.6
Other services include work undertaken in relation to acquisitions and disposals of £nil (2012: £0.2m) and work undertaken as part of the
Group’s refinancing programme of £0.7m (2012: £nil) which has been included in exceptional costs.
9 Staff numbers and costs
The average monthly number of persons employed by the Group (including directors) during the year was 2,736 (2012: 2,665).
By function *:
Operations
Administration
Sales and marketing
By business type *:
Shareholder Solutions
Pensions Solutions
Commercial Solutions
Central
Group
Number of employees
2012
2013
2,351
2,396
258
281
56
59
2,736
2,665
Group
Number of employees
2012
2013
1,131
1,184
957
1,043
386
324
191
185
2,736
2,665
* The number of colleagues quoted in the Strategic Report section of the annual report are the number of employees as at 31 December
2013, as stated, the figures above are the monthly average.
64 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 65
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
11 Finance income and costs
12 Investments in associates
Interest income
Dividend income
Income from interest rate swap against financial liabilities
Finance income
Amortised fees
Other fees and interest
Interest cost on loans from related parties
Interest cost on senior secured loan notes
Interest cost on senior secured borrowings
Interest cost on payment in kind (“PIK”) loan
Interest on preference shares classified as liabilities
Finance cost relating to pension scheme
Unwinding of discounted amount in provisions
Cost of interest rate swap against financial liabilities
Finance costs - ordinary
Exceptional finance costs
Write off of unamortised fees of previous finance arrangement
Other fees and interest
Interest cost on senior secured borrowings
Finance costs - exceptional
Finance costs - total
2013
£m
0.6
0.4
-
1.0
3.1
0.8
5.2
16.4
10.3
13.3
14.0
0.2
0.4
3.0
66.7
6.6
5.3
0.5
12.4
79.1
2012
£m
0.5
-
0.5
1.0
3.8
1.0
4.8
-
27.0
11.8
13.0
0.2
-
6.3
67.9
-
-
-
-
67.9
Refinancing costs are expenses incurred in connection with the Group’s refinancing exercise that completed in June 2013. The charge for
the year includes the write off of unamortised fees under the previous finance arrangement plus non-capitalised fees and interest associated
with the set up of the new finance arrangement.
At 1 January
Additions
Share of profit
Other comprehensive income
Dividend received
At 31 December
2013
£m
9.4
4.0
1.6
(0.2)
(0.5)
14.3
2012
£m
-
9.1
0.3
-
-
9.4
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 associate and its aggregated assets and liabilities, are as follows:
Name
31 December 2013
MyCSP Limited
31 December 2012
MyCSP Limited
% interest held
Assets
£m
Liabilities
£m
Revenues Profit after tax
£m
£m
40%
40%
9.7
9.7
7.8
7.8
(2.4)
(2.4)
(1.3)
(1.3)
15.7
15.7
9.2
9.2
1.6
1.6
0.3
0.3
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.
66 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 67
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
13 Income tax credit
Recognised in the statement of comprehensive income
Current tax charge for the Group
Current year
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
Disposals and discontinued operations
Reconciliation of effective tax rate
Loss for the year
Total tax credit
Loss excluding taxation
Tax using the UK corporation tax rate of 23.25% (2012: 24.5%)
Non-deductible expenses
Unrecognised tax assets
Adjustment for prior years
Difference in overseas tax rates
Effect of tax rate change
Total income tax credit
Note
19
22
2013
£m
-
(4.0)
(0.3)
(4.3)
(4.3)
-
(4.3)
2013
£m
(53.7)
(4.3)
(58.0)
(13.5)
2.0
8.1
(0.3)
-
(0.6)
(4.3)
2012
£m
0.1
(3.6)
(0.3)
(3.8)
(7.1)
3.3
(3.8)
2012
£m
(18.4)
(3.8)
(22.2)
(5.4)
4.2
(0.9)
(0.3)
(0.1)
(1.3)
(3.8)
The standard rate of Corporation tax in the UK changed from 24% to 23% with effect from 1 April 2013. Accordingly the Group’s profits for
this accounting year are taxed at an effective rate of 23.25%.
Factors affecting future tax charges
During the year, as a result of the changes in the UK corporation tax rate to 21% from 1 April 2014 and to 20% from 1 April 2015, which
were substantially enacted on 2 July 2013, the relevant deferred tax balances have been remeasured.
14 Property, plant and equipment
Group
Cost
Balance at 1 January 2012
Acquisition of business
Additions
Disposals
Assets of disposal group classified as held for sale
Balance at 31 December 2012
Balance at 1 January 2013
Acquisition of business
Additions
Balance at 31 December 2013
Accumulated depreciation
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
Balance at 1 January 2013
Depreciation charge for the year
Balance at 31 December 2013
Net book value
Balance at 31 December 2012
Balance at 31 December 2013
Leasehold
improvements
£m
Office
equipment
£m
Fixtures &
fittings
£m
Total
£m
25.9
0.2
3.0
(0.8)
(1.0)
27.3
27.3
0.1
3.9
31.3
14.3
3.6
(0.7)
(0.6)
16.6
16.6
4.0
20.6
4.8
-
0.6
(0.7)
(0.5)
4.2
4.2
0.1
0.2
4.5
2.2
0.5
(0.6)
(0.3)
1.8
1.8
0.6
2.4
2.4
10.8
2.1
10.7
4.8
-
0.3
-
-
5.1
5.1
-
0.3
5.4
1.8
0.5
-
-
2.3
2.3
0.6
2.9
2.8
2.5
16.3
0.2
2.1
(0.1)
(0.5)
18.0
18.0
-
3.4
21.4
10.3
2.6
(0.1)
(0.3)
12.5
12.5
2.8
15.3
5.6
6.1
Included within office equipment are assets held under finance lease with a cost of £1.8m (2012: £1.8m). As at the year end these assets had
a net book value of £0.5m (2012: £1.0m).
68 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 69
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
15 Intangible assets (continued)
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
2013
3 years
3.0%
9.0%
2012
3 years
3.0%
9.0%
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.
15 Intangible assets
Group
Cost
Balance at 1 January 2012
Acquisition of business
Additions
Assets of disposal group classified as held for sale
Balance at 31 December 2012
Balance at 1 January 2013
Acquisition of business
Additions
Balance at 31 December 2013
Accumulated amortisation
Balance at 1 January 2012
Amortisation for the year
Assets of disposal group classified as held for sale
Balance at 31 December 2012
Balance at 1 January 2013
Amortisation for the year
Balance at 31 December 2013
Net book value
Balance at 31 December 2012
Goodwill
Software
development
£m
£m
Other
intangible
assets
£m
396.2
1.5
-
(42.9)
354.8
354.8
8.2
-
363.0
-
-
-
-
-
-
-
118.6
-
9.5
(0.5)
127.6
127.6
-
15.7
143.3
36.8
13.4
(0.5)
49.7
49.7
14.7
64.4
284.1
1.2
-
(32.1)
253.2
253.2
2.6
-
255.8
64.0
22.2
(12.0)
74.2
74.2
17.8
92.0
Total
£m
798.9
2.7
9.5
(75.5)
735.6
735.6
10.8
15.7
762.1
100.8
35.6
(12.5)
123.9
123.9
32.5
156.4
354.8
77.9
179.0
611.7
Balance at 31 December 2013
363.0
78.9
163.8
605.7
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, Prosearch Asset Solutions Limited, David Venus & Company
Limited, ICS Computing Limited, 360 Clinical Limited, Peter Evans Limited, Peter Evans & Associates Limited, Prism Communication &
Management Limited and NatWest Stockbrokers in prior years. For goodwill on the acquisition of Killik Employee Share Services and Killik
& CO LLP, 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.
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.
70 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 71
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
16 Investments in subsidiaries
16 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
2013
activities
%
2012
%
Name of controlled entity
Country of
Incorporation
Class of
shares held
Principal Ownership
2013
activities
%
2012
%
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
Indirect Investments
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
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
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
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
David Venus (Health & Safety) Limited
*Equiniti X2 Limited
*Equiniti X2 Solutions Limited
*Equiniti X2 Cap Limited
*Equiniti X2 Services Limited
*Equiniti Services Limited
Paymaster (1836) Limited
Claybrook Computing (Holdings) Limited
Claybrook Computing Limited
*Equiniti Software Limited
*Equiniti Solutions Limited
Hazell Carr Software Services Limited
InformationLog.com Limited
Equiniti Global Incentive Solutions Limited
Killik Employee Services (PTY) Limited
Custodian Nominees Limited
Equiniti NewCo 2 Plc
>Xafinity Consulting Limited
>HR Trustees Limited
>XPT Limited
>Entegria Limited
>Xafinity Pensions Consulting Limited
>Xafinity Trustees 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
South Africa
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
UK
UK
Ordinary
Ordinary
UK
Ordinary
UK
UK
UK
UK
UK
Scotland
UK
UK
UK
Scotland
UK
Scotland
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Non trading
Holding company
Holding company
Holding company
Holding company
Holding company
Pensions administration
Holding company
Computer software
consultancy
Dormant
Pensions administration
Dormant
Dormant
Non trading
Computer software
development
Holding company
Holding company
Employee benefit
consultancy
Corporate trustee
Corporate trustee
Dormant
Pensions consulting
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
0
0
0
0
0
0
0
0
0
0
0
0
0
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.
72 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 73
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
17 Other financial assets
Non-current
Shares held in Euroclear plc
2013
£m
6.1
6.1
2012
£m
6.1
6.1
The investment in Euroclear plc is recorded at cost as Euroclear plc is unquoted and a fair value cannot be reliably determined. The directors
consider that there are no impairment indications in relation to the investment.
18 Other financial liabilities
Non-current
Finance lease liabilities
Current
Derivatives
Finance lease liabilities
19 Deferred income tax assets and liabilities
Recognised liabilities
Deferred income tax liabilities are attributable to the following:
Intangible assets
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
Tax value of loss carry-forwards
Tax assets
Net of tax liabilities
Net tax assets
2013
£m
0.6
0.6
1.7
0.4
2.1
Liabilities
2013
£m
21.8
21.8
(18.3)
3.5
Assets
2013
£m
8.1
2.0
8.2
18.3
(18.3)
-
2012
£m
0.9
0.9
3.7
0.4
4.1
Liabilities
2012
£m
25.8
25.8
(17.2)
8.6
Assets
2012
£m
6.3
1.4
9.5
17.2
(17.2)
-
19 Deferred income tax assets and liabilities (continued)
Deferred income tax assets amounting to £18.8m (2012: £11.7m) arising on temporary timing differences of £93.9m (2012: £50.9m) in
respect of unrecognised deferred tax assets have not been recognised as their future economic benefit is uncertain.
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
31 December 2013
Property, plant and equipment
Intangible assets
Employee benefits
Tax value of loss carry-forwards
20 Trade and other receivables
Trade receivables
Receivables due from related parties
Receivable balances from brokers
Balances owed by customers who are purchasing shares
Other receivables and prepayments
1 January
2012
£m
7.3
(30.6)
(3.1)
1.2
0.1
6.7
(18.4)
Acquisitions
/ disposals
£m
(0.1)
2.7
2.9
-
-
-
Recognised
in income
£m
(0.9)
2.1
0.2
(0.4)
(0.1)
2.8
Recognised 31 December
2012
£m
6.3
(25.8)
-
1.4
-
9.5
in equity
£m
-
-
-
0.6
-
-
5.5
3.7
0.6
(8.6)
1 January Acquisitions
/ disposals
£m
-
-
-
-
2013
£m
6.3
(25.8)
1.4
9.5
Recognised
in income
£m
1.9
4.0
(0.3)
(1.3)
Recognised 31 December
2013
£m
8.2
(21.8)
1.9
8.2
in equity
£m
-
-
0.8
-
(8.6)
-
4.3
0.8
(3.5)
2013
£m
24.3
-
7.0
1.2
32.4
64.9
2012
£m
24.3
0.4
-
-
31.1
55.8
At 31 December 2013 trade receivables are shown net of an allowance for doubtful debts of £0.3m (2012: £0.6m). The impairment loss
recognised in the year was £0.2m (2012: £0.5m).
In the prior year, trade and other receivables of £10.0m were transferred to held for sale (see note 22).
21 Cash and cash equivalents
Cash and cash equivalents per statement of financial position
Cash and cash equivalents per statement of cash flows
2013
£m
15.4
15.4
2012
£m
57.8
57.8
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.
In the prior year, cash and cash equivalents of £11.6m were transferred to held for sale (see note 22).
74 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 75
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
22 Disposals and discontinued operations
22 Disposals and discontinued operations (continued)
Current assets
Current liabilities
Total net assets disposed
Total consideration
Net assets disposed
Disposal costs
Profit on disposal before taxation
Xafinity
Consulting
2012
£m
85.5
(13.7)
71.8
78.4
(71.8)
(2.8)
3.8
Total consideration included £2.5m of contingent consideration. The proceeds received in the cash flow statement are stated as total
consideration less unpaid contingent consideration and disposal costs. The contingent consideration is split in to two parts. The first part,
£1.0m was paid in May 2013 and was based on a successful segregation of discrete support activities being provided to Xafinity Consulting.
The second part, £1.5m, will be paid to the Group if no warranty claims are made by May 2014, and will be due for payment in May 2014.
Group
Operating cash flows
Investing 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
2013
£m
-
-
-
2013
£m
-
-
-
-
-
-
2012
£m
9.0
(0.6)
8.4
2012
£m
0.3
43.0
20.6
10.0
11.6
85.5
Revenue
Expenses
Profit before tax of discontinued operations
Tax
Profit after tax of discontinued operations
Profit on disposal of Group companies
Profit for the year from discontinued operations
23 Interest-bearing loans and borrowings
Non-current liabilities
Senior secured notes
Secured bank loans
Equiniti Enterprises payment in kind (“PIK”) facility
Unamortised cost of raising finance
Shares classified as debt
Non secured loan from related party
Non secured loan
2013
£m
3.2
(2.8)
0.4
-
0.4
3.3
3.7
2013
£m
440.0
-
135.0
(17.8)
188.9
68.3
1.9
816.3
2012
£m
43.0
(30.0)
13.0
(3.3)
9.7
-
9.7
2012
£m
-
497.3
122.3
(6.0)
174.9
63.2
1.8
853.5
Costs of raising finance are being amortised over a period between 5 and 6 years. In the year £9.7m (2012: £3.8m) has been recognised in
finance expenses - amortised fees, of which £6.6m is exceptional, per note 11
Current liabilities
Secured bank loans
Unamortised cost of raising finance
2013
£m
-
-
-
2012
£m
32.9
(3.4)
29.5
Included in the figures above for 2012 is £0.1m in goodwill and £0.6m in intangible assets relating Xafinity SIPP Services Limited’s acquisition
of Hazell Carr (AT) Services Limited during 2012.
Terms and debt repayment schedule
Amount £m
Currency
b) Liabilities of disposal group classified as held for sale
Provisions
Deferred income tax liabilities
Current income tax liabilities
Trade and other payables
Total
2013
£m
-
-
-
-
-
2012
£m
0.5
5.9
1.9
5.4
13.7
Senior Secured Notes
Senior Secured Floating Rate Notes
Equiniti Enterprises payment in kind (“PIK”) facility
Shares classified as debt
Non secured loan from related party
Non secured loan
250.0
190.0
135.0
188.9
68.3
1.9
834.1
Analysis of the result of discontinued operations, and the result recognised on the re-measurement of assets or disposal group is as follows:
The Group also has available to it a revolving credit facility of £75m which is available to be drawn until 2018 but had not been drawn at the
balance sheet date.
76 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 77
Nominal
Year
interest rate of maturity
2018
2018
2019
-
2020
2020
Sterling
7.125%
Sterling Libor + 5.75%
Sterling Libor + 10.4%
8.0%
Sterling
8.0%
Sterling
8.0%
Sterling
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
24 Trade and other payables
25 Employee benefits (continued)
Trade payables
Accruals and deferred income
Amounts owed to customers who have sold shares
Other payables
2013
£m
2.8
38.1
8.2
8.1
57.2
2012
£m
3.6
30.4
-
5.0
39.0
During the year 45,040 E ordinary shares (2012: 58,070), 22,537 D ordinary shares (2012: 8,598), 5,348 C ordinary shares (2012: 926) and
52,500 B ordinary shares (2012: nil) were disposed of by leavers at the subscription amount of £0.3m (2012: £0.2), and acquired by Appleby
Trust Jersey Limited. This company holds shares temporarily pending their purchase by authorised senior management. At 31 December
2013 the Appleby Trust held approximately 52,000 B ordinary shares, 6,000 C ordinary shares, 67,000 D ordinary shares and 92,000 E
Ordinary shares at a consideration of £0.7m.
During the year 12,000 shares were acquired (2012: nil) by senior management, for a consideration of £nil (2012: £nil), from shares held by
the Appleby Trust.
In the prior year, other current liabilities of £5.4m were transferred to held for sale (see note 22).
25 Employee benefits
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 was defined as a notional unit share equal in proportion to the ordinary share and preference shares held by Advent International
Corporation.
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 contribution plans
The Group operates a number of defined contribution pension plans. The total expense relating to these plans in the year was £4.7m (2012:
£5.1m).
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.
Defined benefit plan - Summary of schemes
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.
As at 1 January
Repayments to participants at the grant price
As at 31 December
No of units
2013
In millions
0.4
-
0.4
Carrying
amount
2013
£m
0.4
-
0.4
No of units
2012
In millions
0.5
(0.1)
0.4
Carrying
amount
2012
£m
0.5
(0.1)
0.4
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 2013
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.
2013
£m
0.9
9.2
10.1
2012
£m
1.1
5.2
6.3
Equiniti ICS Limited
Paymaster (1836) Limited
Total of defined benefit plans liability as at 31 December
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 2012 and updated to 31 December 2013 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
2013
£m
(9.9)
9.0
(0.9)
2013
85%
8%
7%
100%
2012
£m
(8.7)
7.6
(1.1)
2012
85%
8%
7%
100%
78 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 79
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
25 Employee benefits (continued)
25 Employee benefits (continued)
Actual return on plan assets
2013
£m
1.3
2012
£m
0.7
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.
Movement in present value of defined benefit obligation
Defined benefit obligation at 1 January
Current service cost
Interest expense
Plan participants’ contributions
Actuarial loss / (gain)
Benefits paid
Defined benefit obligation at 31 December
Movement in fair value of plan assets
Fair value of plan assets at 1 January
Interest income
Actuarial gain
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
Interest income
2013
£m
8.7
0.1
0.4
0.1
0.8
(0.2)
9.9
2013
£m
7.6
0.3
1.0
0.2
0.1
(0.2)
9.0
2013
£m
0.1
0.4
(0.3)
0.2
2012
£m
8.3
0.1
0.4
0.1
(0.1)
(0.1)
8.7
2012
restated
£m
6.7
0.3
0.4
0.2
0.1
(0.1)
7.6
2012
£m
0.1
0.4
(0.3)
0.2
The current service cost is recognised in administrative expenses in the statement of comprehensive income. Interest costs and interest
income 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 recognised in other comprehensive income
Cumulative loss at 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 (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 2013:
Member age 65 (current life expectancy)
Member age 45 (life expectancy at 65)
Contributions
Equiniti ICS Limited expects to contribute £0.2m to its pension plan in 2013.
Defined benefit plan - Paymaster (1836) Limited
2013
£m
(2.5)
0.2
(2.3)
2013
4.55%
4.30%
2.20%
3.20%
2.50%
3.30%
2012
£m
(3.0)
0.5
(2.5)
2012
4.60%
3.90%
2.10%
2.90%
2.20%
2.90%
Male
86.6
88.5
Female
89.2
91.0
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 2012 and updated to 31 December 2013 by a qualified independent actuary.
Present value of obligations
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
2013
£m
(40.6)
31.4
(9.2)
2013
63%
26%
11%
100%
2013
£m
1.5
2012
£m
(35.2)
30.0
(5.2)
2012
63%
26%
11%
100%
2012
£m
1.7
80 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 81
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
25 Employee benefits (continued)
25 Employee benefits (continued)
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 2013 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% (2012: 4.69%) 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 expense
Plan participants’ contributions
Benefits paid
Actuarial loss - experience losses
Actuarial loss - change in financial assumptions
Defined benefit obligation at 31 December
Movement in fair value of plan assets
Fair value of plan assets at 1 January
Interest income
Actuarial gain - return on plan assets
Employer contribution
Members’ contributions
Benefits paid
Fair value of plan assets at 31 December
Expense recognised in statement of comprehensive income
Current service cost
Interest cost
Interest income
2013
£m
35.2
0.7
1.6
-
(1.0)
0.1
4.0
40.6
2013
£m
30.0
1.4
0.1
0.9
-
(1.0)
31.4
2013
£m
0.7
1.6
(1.4)
0.9
2012
£m
30.5
0.8
1.5
0.1
(1.1)
1.5
1.9
35.2
2012
£m
28.2
1.4
0.3
1.1
0.1
(1.1)
30.0
2012
£m
0.8
1.5
(1.4)
0.9
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
2013
£m
(6.2)
(4.0)
(10.2)
2013
4.60%
1.75%
3.40%
3.40%
3.40%
3.40%
2012
£m
(3.2)
(3.0)
(6.2)
2012
4.60%
1.75%
2.90%
2.50%
2.90%
2.90%
Weighted average life expectancy for mortality tables (101% SAPS S1PMA, 88% SAPS S1PFA, 1% long term trend) used to determine benefit
obligations at 31 December 2013 (PMA92, PFA92, Medium Cohort at 31 December 2012):
Member age 60 (current life expectancy)
Member age 45 (life expectancy at 65)
Contributions
Paymaster (1836) Limited expects to contribute £1.2m to its pension plan in 2014.
26 Provisions for other liabilities and charges
Balance at 1 January 2013
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Unwinding of discounted amount
Balance at 31 December 2013
Non-current
Current
Male
86.6
88.2
Female
90.3
91.9
Contingent
consideration
£m
5.1
0.6
(1.8)
(1.7)
0.4
2.6
0.9
1.7
2.6
Other
provisions
£m
7.1
2.2
(1.0)
-
-
8.3
6.1
2.2
8.3
Total
provisions
£m
12.2
2.8
(2.8)
(1.7)
0.4
10.9
7.0
3.9
10.9
The current service cost is recognised within operating costs in the statement of comprehensive income. Interest costs and interest income
are recognised in other finance charges in the statement of comprehensive income.
Actuarial gains and losses recognised in other comprehensive income
Contingent consideration of £2.6m (2012: £5.1m) 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 £2.6m. 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.
82 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 83
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
26 Provisions for other liabilities and charges (continued)
28 Financial instruments (continued)
Other provisions include:
· A provision related to constructive compliance obligations in existence on the acquisition of the LTSB registrars business in 2007 for
£2.5m (2012: £2.5m), provisions for dilapidations on this and subsequent acquisitions of £3.0m (2012: £3.0m).
· A provision of £2.2m that has been made against exceptional irrecoverable costs incurred on a number of complex long term contract.
This is expected to be utilised in 2014.
· A provision of £0.6m relating to the remaining potential balances payable on an acquisition in 2010. This is expect to be finalised in 2014.
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
2013
£m
16.5
5.6
1.6
0.6
24.3
2012
£m
15.6
5.5
1.7
1.5
24.3
27 Share capital and share premium
In millions of shares
On issue at 1 January – fully paid
On issue at 31 December – fully paid
Allotted, called up and fully paid
Ordinary shares Ordinary shares
2012
2013
5.0
5.0
Share capital Share premium
2013
£m
2013
£m
5.0
5.0
3.5
3.5
5.0
5.0
Total
2013
£m
8.5
8.5
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.
28 Financial instruments
Credit risk
The maximum exposure to credit risk at the reporting date was:
Trade and other receivables
Cash and cash equivalents
Note
20
21
2013
£m
64.9
15.4
80.3
2012
£m
55.8
57.8
113.6
Credit risk mitigation
Trade and other receivables are due from primarily FTSE listed companies, their pension funds 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.
Trade receivables not past due of £16.5m (2012: £15.6m) 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 £0.3m (2012: £0.6m) 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
Transfer to disposal group classified as held for sale
Balance at 31 December
Liquidity risk
The maximum exposure to liquidity risk at the reporting date was:
Trade and other payables
Employee benefits
Other financial liabilities
Derivatives
Senior secured notes
Secured bank loans
Equiniti Enterprises payment in kind (“PIK”) facility
Unamortised cost of raising finance
Shares classified as debt
Non secured loan from related party
Non secured loan
2013
£m
0.6
0.2
(0.5)
-
0.3
2012
£m
0.6
0.5
(0.2)
(0.3)
0.6
Carrying Amount
2012
£m
39.0
0.4
1.3
3.7
-
530.2
122.3
(9.4)
174.9
63.2
1.8
2013
£m
57.2
0.4
1.0
1.7
440.0
-
-
(17.8)
188.9
68.3
1.9
741.6
927.4
Note
24
25
18
18
23
23
23
23
23
23
23
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 25.
The contractual cash flows including interest payments for the interest-bearing loans and borrowings and derivatives are shown in the table
in this note 28, under interest rate risk below.
84 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 85
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
28 Financial instruments (continued)
28 Financial instruments (continued)
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 £75.0m available.
31 December 2013
Group
Amount in £m’s
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
2013
£m
(184.0)
816.3
(15.4)
616.9
2012
£m
(128.9)
883.0
(57.8)
696.3
Interest rate risk
Interest bearing assets comprise cash and bank deposits, all of which earn interest at a variable rate.
£250m of the senior secured notes were issued at fixed interest rates. £190m are senior secured floating rate notes. Where the interest
rate is variable at a margin over LIBOR, a swap has been taken out to fix this rate until October 2016. For the payment in kind facilities
interest accrues at a variable rate at a margin over Libor and the Group policy is not to fix these as there is no cash flow in the immediate
term.
The Group’s policy is to maintain other borrowings at fixed rates to fix the amount of future interest cash flows.
Interest rate risk is managed across the Group’s companies by monitoring its interest linked revenues.
The directors monitor the overall level of borrowings, leverage ratio 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;
30 December 2012
Group
Amount in £m’s
Effective interest rate %
Carrying amount
0-1 years
1-2 years
2-5 years
5 years and over
Total contracted cash flows
Equiniti
Xafinity
Investments
Enterprises
secured bank secured bank
loan
4.0%
416.5
(39.4)
(24.5)
(392.0)
-
loan
5.25% - 8.5%
113.7
(15.5)
(14.6)
(130.2)
-
(160.3)
(455.9)
10.0%
122.3
-
-
(196.1)
-
(196.1)
8.0%
174.9
-
-
-
(249.9)
(249.9)
827.4
(54.9)
(39.1)
(718.3)
(249.9)
(1,062.2)
Effective interest rate %
Carrying amount
0-1 years
1-2 years
2-5 years
5 years and over *
Total contracted cash flows
30 December 2012
Carrying Amount
Expected cash flows
6 months or less
6-12 months
1-2 years
2-5 years
Total contracted cash flows
Amount in £m’s
Carrying Amount
Expected cash flows
6 months or less
6-12 months
1-2 years
2-5 years
Total contracted cash flows
Equiniti
Enterprises
PIK loan
Shares
classified
as Debt
Total
31 December 2013
Senior
Secured
Notes
7.125%
250.0
(17.0)
(17.8)
(303.5)
-
Senior
Secured
Floating
Rate Notes
6.25%
190.0
(11.4)
(11.9)
(225.7)
-
(338.3)
(249.0)
Equiniti
Enterprises
PIK loan
Shares
classified
as Debt
Total
10.9%
135.0
-
-
-
(239.3)
(239.3)
8.0%
188.9
-
-
-
(249.9)
763.9
(28.4)
(29.7)
(529.2)
(489.2)
(249.9)
(1,076.5)
* 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 2019 and has an interest rate of Libor plus 10.4%. Interest accrues and is compounded annually.
In addition non current non secured loans with a carrying value of £54.1m (2012: £50.1m) including a loan to related parties of £52.3m
(2012: £48.4m) with an interest rate of 8% are repayable on exit with a contracted cash flow of £85.9m (2012: £77.9m). Current non
secured loans due to related parties of £16.0m (2012: £14.9m) with an interest rate of 8% are repayable on demand and have a contracted
cash flow of £25.5m (2012: £23.6m).
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;
Interest rate swaps
Liabilities
(3.8)
(3.8)
(0.9)
(0.6)
(1.0)
(1.3)
Assets
0.1
0.1
0.1
-
-
-
0.1
(3.8)
Interest rate swaps
Liabilities
(3.3)
(3.4)
0.3
0.2
(1.0)
(2.9)
Assets
1.6
1.5
(0.4)
(0.2)
0.5
1.6
1.5
(3.4)
Total
(3.7)
(3.7)
(0.8)
(0.6)
(1.0)
(1.3)
(3.7)
Total
(1.7)
(1.9)
(0.1)
-
(0.5)
(1.3)
(1.9)
86 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 87
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
28 Financial instruments (continued)
29 Operating leases
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.
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 which is payable in kind on the PIK facility per annum and give rise to an estimated increase in revenue across
the Group of £0.6m, yielding a net reduction to equity of £0.6m after tax.
The sensitivity analysis above is calculated after taking account of the effect of the interest rate swaps the Group holds.
Fair value hierarchy
The following table presents the Group’s financial assets and liabilities that are measured at fair value at 31 December 2013.
Liabilities
Derivatives used for hedging
Total liabilities
There were no transfers between Levels during the year.
Valuation techniques used to derive Level 2 fair values
Level 1
£m
Level 2
£m
Level 3
£m
-
-
1.7
1.7
-
-
Total
£m
1.7
1.7
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
2013
£m
4.7
10.7
6.1
21.5
2012
£m
5.4
13.9
10.0
29.3
During the year £5.4m (2012: £6.0m) was recognised as an expense in the statement of comprehensive income in respect of operating
leases.
Included in operating leases are £nil (2012: £0.7m) due within one year and £nil (2012: £0.5m) due between two and five years which relates
to Xafinity Consulting, the business that the Group sold in February 2013.
30 Related party transactions
During the year interest of £5.1m (2012: £4.7m) accrued on a loan bearing interest at 8% from Equiniti (Luxembourg) Sarl, leaving a balance
outstanding at the year end of £68.9m (2012: £63.8m).
During the year interest of £0.1m (2012: £0.1m) accrued on a loan bearing interest at 8% from key management personnel, leaving a balance
outstanding at the year end of £1.3m (2012: £1.2m).
Level 2 hedging derivatives comprise solely interest rate swaps. These interest rate swaps are fair valued using forward interest rates
extracted from observable yield curves. The effects of discounting are generally insignificant for Level 2 derivatives.
The compensation of key management personnel (including the directors) is as follows:
Transactions with key management personnel
The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as of the date of the event or change in
circumstances that caused the transfer. There were no changes in valuation techniques during the year.
The valuation technique used is a discounted cash flow model.
Group’s valuation processes
The Group’s finance department includes a team that monitors and obtains the valuations of financial assets and liabilities required for
financial reporting purposes. This team ultimately reports to the Chief Financial Officer and the Audit Committee. Valuations are reviewed
at least once every quarter, in line with the Group’s quarterly reporting dates.
Fair value of financial assets and liabilities
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.
Key management emoluments including social security costs
Company contributions to money purchase pension plans
Compensation for loss of office
2013
£m
5.6
0.1
2.0
7.7
2012
£m
2.6
0.1
0.3
3.0
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 25, 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
Sales by key management
Closing balance
2013
£m
0.4
(0.1)
0.3
2012
£m
0.6
(0.2)
0.4
Advent International plc
See page 40 for information about the ultimate controlling party, Advent International plc. £0.1m (2012: £0.1m) has been paid to various
companies of the ultimate parent company for services received.
88 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 89
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 31 December 2013
INDEPENDENT AUDITORS’ REPORT TO
THE MEMBERS OF EQUINITI GROUP LIMITED
31 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.
32 Post balance sheet events
On 18 March 2014, the Group purchased the entire issued share capital of Pancredit Systems Limited for £14.5m, with £12.0m payable in
cash on completion and the balance one year later. The business is expected to have net assets of £2.6m on that date with a cash balance of
£3.2m. In the last full year prior to acquisition, the business generated revenues of £4.6m and an operating profit of £1.3m. The business sells
and supports software to manage unsecured loan administration. The acquisition has been funded by drawing on the revolving credit facility.
Our opinion
In our opinion the financial statements:
•
•
•
give a true and fair view of the state of the Company’s affairs as at 31 December 2013 and of its loss and cash flows for the year then
ended;
have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union;
and
have been prepared in accordance with the requirements of the Companies Act 2006.
What we have audited
The financial statements for the year ended 31 December 2013, which are prepared by Equiniti Group Limited, comprise:
33 Reconciliation of profit / (loss) to cash generated from operations
Continuing operations
Adjustments for:
Loss before income tax
Depreciation and amortisation
Share of profit of associates
Finance income
Finance costs
Changes in working capital
(Increase) / decrease 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 before tax
Depreciation and amortisation
Profit on disposal of subsidiaries
Changes in working capital
Increase in trade and other receivables
Increase in trade and other payables
Decrease in provisions
Tax paid
Total cash generated from operations
•
•
•
•
•
the statement of financial position;
the statement of changes in equity;
the statement of cash flows;
the Accounting Policies; and
related notes.
The financial reporting framework that has been applied in their preparation comprises applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of
significant accounting estimates. In making such estimates, they have made assumptions and considered future events.
What an audit of financial statements involves
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (ISAs (UK & Ireland)). 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 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 report of the directors and financial statements identify material
inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or
materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the implications for our report.
Opinion on matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Other matters on which we are required to report by exception
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
•
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.
We have no exceptions to report arising from this responsibility.
2013
£m
(61.7)
36.5
(1.6)
(1.0)
79.1
(7.7)
13.9
0.3
-
1.8
59.6
2013
£m
3.7
-
(3.7)
-
-
-
-
-
59.6
2012
£m
(35.2)
36.5
(0.3)
(1.0)
67.9
6.1
4.6
(0.7)
(0.3)
5.9
83.6
2012
£m
13.0
1.4
-
(0.2)
0.8
(0.2)
(5.8)
9.0
92.6
90 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 91
INDEPENDENT AUDITORS’ REPORT TO
THE MEMBERS OF EQUINITI GROUP LIMITED
COMPANY STATEMENT
OF FINANCIAL POSITION
as at 31 December 2013
Directors’ remuneration
Under the Companies Act 2006 we are required to report if, in our opinion, certain disclosures of directors’ remuneration specified by law
have not been made. We have no exceptions to report arising from this responsibility.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 47, 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 ISAs (UK & 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.
Graham Lambert (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Gatwick
26 March 2014
Assets
Non-current assets
Investments in subsidiaries
Investments
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
Other financial liabilities
Total liabilities
Total equity and liabilities
Note
2013
£m
2012
£m
8
9
10
12
13
14
14
11
8.5
6.1
8.8
23.4
-
0.5
3.0
3.5
8.5
-
7.4
15.9
0.1
0.2
4.2
4.5
26.9
20.4
5.0
3.5
(0.7)
7.8
5.0
3.5
-
8.5
19.1
19.1
11.9
11.9
19.1
11.9
26.9
20.4
The notes on pages 96 to 102 form part of these financial statements.
These financial statements on pages 93 to 102 were approved by the board of directors on 26 March 2014 and were signed on its behalf by:
Martyn Hindley
Director
92 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 93
COMPANY STATEMENT
OF CHANGES IN EQUITY
for the year ended 31 December 2013
Balance at 1 January 2012
Loss after tax and total comprehensive income for the year
Share
capital
£m
5.0
-
Share
premium
£m
3.5
-
Retained
earnings
£m
0.4
(0.4)
Balance at 31 December 2012
5.0
3.5
COMPANY STATEMENT
OF CASH FLOWS
for the year ended 31 December 2013
Total
equity
£m
8.9
(0.4)
8.5
8.5
(0.7)
Cash flows from operating activities
Loss before tax
Adjustments for:
Finance income
Financial expense
-
-
3.5
-
(0.7)
Balance at 1 January 2013
Loss after tax and total comprehensive income for the year
Balance at 31 December 2013
5.0
-
5.0
The notes on pages 96 to 102 form part of these financial statements.
3.5
(0.7)
7.8
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
Cash and cash equivalents at 31 December
13
The notes on pages 96 to 102 form part of these financial statements.
Note
2013
£m
2012
£m
(0.7)
(0.5)
(0.4)
1.1
-
(0.3)
(0.3)
0.1
(0.2)
-
-
(0.1)
(0.9)
(1.0)
(1.2)
4.2
3.0
(0.4)
0.8
(0.1)
(0.3)
(0.4)
(0.1)
(0.5)
0.1
0.1
0.1
(1.4)
(1.3)
(1.7)
5.9
4.2
94 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 95
NOTES TO THE COMPANY FINANCIAL
STATEMENTS
for the year ended 31 December 2013
1 Accounting policies
NOTES TO THE COMPANY FINANCIAL
STATEMENTS
for the year ended 31 December 2013
1 Accounting policies (continued)
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.
New standards and interpretations not yet adopted
a) New and amended standards adopted by the company
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 19.
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 £0.7m (2012: loss of £0.4m).
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 January 2013 that
would be expected to have a material impact on the company.
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
2013, 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.
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.
2 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 15 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.
96 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 97
NOTES TO THE COMPANY FINANCIAL
STATEMENTS
for the year ended 31 December 2013
NOTES TO THE COMPANY FINANCIAL
STATEMENTS
for the year ended 31 December 2013
4 Auditors’ remuneration
8 Investments in subsidiaries
Auditors’ remuneration of £1,250 (2012: £1,250) was borne by a subsidiary company.
The Company has the following investments in subsidiaries:
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.
Cost and net book value
At beginning of year
At end of year
2013
£m
8.5
8.5
2012
£m
8.5
8.5
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
Recognised in the statement of comprehensive income
Current tax credit for the Company
Group relief receivable
Total tax in the statement of comprehensive income
Reconciliation of effective tax rate
Loss for the year
Total tax credit
Loss excluding taxation
Tax using the UK corporation tax rate of 23.25% (2011: 24.5%)
Non-deductible expenses
Total tax credit
2013
£m
-
-
2013
£m
(0.7)
-
(0.7)
(0.2)
0.2
-
2012
£m
(0.1)
(0.1)
2012
£m
(0.4)
(0.1)
(0.4)
(0.1)
-
(0.1)
The standard rate of Corporation tax in the UK changed from 24% to 23% with effect from 1 April 2013. Accordingly the company’s profits
for this accounting year are taxed at an effective rate of 23.25%.
Factors affecting future tax charges
During the year, as a result of the changes in the UK corporation tax rate to 21% from 1 April 2014 and to 20% from 1 April 2015, which
were substantially enacted on 2 July 2013, the relevant deferred tax balances have been remeasured.
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
Equiniti Enterprises Limited
*Equiniti X2 Enterprises Limited
Country of
Class of
Incorporation shares held
Principal Ownership
2013
activities
%
100
100
Ownership
2012
%
100
100
UK Ordinary Holding company
UK Ordinary Holding company
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.
9 Investments
The company has the following investments
Shares held in Euroclear plc
2013
£m
6.1
6.1
During the year, the investment of shares in Euroclear plc were transferred from Equiniti Limited to Equiniti Group Limited at cost.
10 Other financial assets
Non-current
Intercompany loan due from related parties
2013
£m
8.8
8.8
2012
£m
-
-
2012
£m
7.4
7.4
98 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 99
NOTES TO THE COMPANY FINANCIAL
STATEMENTS
for the year ended 31 December 2013
NOTES TO THE COMPANY FINANCIAL
STATEMENTS
for the year ended 31 December 2013
11 Other financial liabilities
15 Financial instruments
Current
Amounts classified as other financial liabilities due to related parties
12 Trade and other receivables
Other receivables and prepayments
13 Cash and cash equivalents
Cash and cash equivalents per statement of financial position
Cash and cash equivalents per statement of cash flows
14 Share capital and reserves
In millions of shares
On issue at beginning of year
On issue at 31 December – fully paid
Allotted, called up and fully paid
Shares of £1 each
2013
£m
19.1
19.1
2013
£m
0.5
0.5
2013
£m
3.0
3.0
2012
£m
11.9
11.9
2012
£m
0.3
0.3
2012
£m
4.2
4.2
Ordinary
shares
2013
5.0
Ordinary
shares
2012
5.0
5.0
5.0
Total
2013
£m
8.5
8.5
Total
2012
£m
8.5
8.5
Share
capital
2013
£m
5.0
5.0
Share
premium
2013
£m
3.5
3.5
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
Note
10
12
13
Carrying
amount
2013
£m
8.8
0.5
3.0
12.3
Carrying
amount
2012
£m
7.4
0.3
4.2
11.8
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.
Liquidity risk
The maximum exposure to liquidity risk at the reporting date was:
Loans from related parties
11
Carrying
amount
2013
£m
19.1
19.1
Carrying
amount
2012
£m
11.9
11.9
Loans from related parties are repayable on demand.
Capital risk
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
2013
£m
7.8
7.8
2012
£m
8.5
8.5
100 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 101
NOTES TO THE COMPANY FINANCIAL
STATEMENTS
for the year ended 31 December 2013
16 Related party transactions
Company
An interest bearing loan from Equiniti PIKco Limited of £11.0m (2012: £11.0m) accrued interest of £0.9m (2012: £0.7m) in the year. Charges
of £0.1m were transferred to Equiniti PIKco Limited leaving £12.6m (2012: £11.8m) was outstanding at the year end.
During the year the Company incurred charges from Equiniti Enterprises Limited of £6.1m (2012: £nil). Interest of £0.2m (2012: £nil) was
charged leaving a balance outstanding at year end of £6.3m (2012: £nil)
During the year £1.0m was transferred to its subsidiary Equiniti Limited and amounts of £0.2m (2012: £0.1m) were charged. This left a
balance outstanding at the year end of £1.1m (2012: £0.1m owed to Equiniti Limited).
During the year interest of £0.2m (2012: £0.2m) accrued on loans made to its subsidiary company, Equiniti Inv Limited (formerly Xafinity
Investments Limited). £7.7m (2012: £3.2m) was outstanding at the year end.
During the year the Company received interest of £0.1m (2012: £0.2) from its subsidiary Equiniti Services Limited. The loans were settled
during the year leaving a balance outstanding of £nil (2012: £4.1m) at the year end.
17 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.
18 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.
19 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.
102 » Equiniti Group annual report 2013
Equiniti Group annual report 2013 « 103
Our people are at
the heart of the
market innovations
and quality of
service we deliver
Samantha John, HR Projects Partner
Joe Connolly, Senior Corporate Actions Officer
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