15ANNUAL REPORT 2015
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Equiniti keeps things
running smoothly
for some of the UK's
best known brands
and public sector
organisations.
2
CONTENTS
STRATEGIC
REPORT
01
BUSINESS OVERVIEW
OUR MARKETS
BUSINESS MODEL
STRATEGY
KEY PERFORMANCE
INDICATORS
CHAIRMAN'S
STATEMENT
CHIEF EXECUTIVE’S
STATEMENT
CASE STUDY
OPERATIONAL REVIEW
FINANCIAL REVIEW
PRINCIPAL RISKS AND
UNCERTAINTIES
RESOURCES AND
RELATIONSHIPS
08
16
18
20
22
24
26
28
30
36
42
48
GOVERNANCE
FINANCIAL
STATEMENTS
ANNUAL GENERAL
MEETING
04
NOTICE OF 2016
ANNUAL GENERAL
MEETING
GLOSSARY
COMPANY
INFORMATION
176
183
186
02
03
CORPORATE
GOVERNANCE REPORT
COMPLIANCE
STATEMENT
BOARD OF DIRECTORS
62
63
64
BOARD AND
COMMITTEE STRUCTURE 68
REPORT OF THE
NOMINATIONS
COMMITTEE
REPORT OF THE AUDIT
COMMITTEE
REPORT OF THE RISK
COMMITTEE
75
76
79
DIRECTORS’
REMUNERATION REPORT 82
DIRECTORS’ REPORT
97
INDEPENDENT
AUDITOR'S REPORT
102
CONSOLIDATED
FINANCIAL STATEMENTS 110
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS 117
INDEPENDENT AUDITOR'S
REPORT ON THE
COMPANY'S FINANCIAL
STATEMENTS
COMPANY FINANCIAL
STATEMENTS
NOTES TO THE
COMPANY'S FINANCIAL
STATEMENTS
161
162
165
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SECTION 01STRATEGIC REPORT
Highlights
£369.0m
REVENUE
2014: £292.3m
£86.2m
EBITDA PRE-EXCEPTIONAL ITEMS
2014: £70.0m
23.4%
EBITDA MARGIN
PRE-EXCEPTIONAL ITEMS
2014: 23.9%
£10.2m
EARNINGS BEFORE INTEREST
AND TAX
2014: £21.7m
£97.6m
FREE CASH FLOW1
2014: £72.5m
113%
FREE CASH CONVERSION1
2014: 104%
13.5p
NORMALISED2 EPS
2014: 10.7p
2.8X
LEVERAGE
2014: 6.5x
1 For definition see
financial review on
page 39
2 Normalised profit
is defined within
the financial review
on page 38
4
THIS HAS BEEN A STANDOUT YEAR FOR
EQUINITI. OUR IPO HAS GIVEN US A NEW
CAPITAL STRUCTURE AND NEW INVESTORS,
AND LAUNCHES US INTO THE PUBLIC
MARKETS WE SERVE ON THE SAME STANDING
AS THE MANY LISTED CLIENTS WE SUPPORT
YEAR AFTER YEAR.”
GUY WAKELEY, CHIEF EXECUTIVE OFFICER
FINANCIAL HIGHLIGHTS
OPERATIONAL HIGHLIGHTS
OUTLOOK
2016 will be our first full year as a
public company and we will continue
to implement our well defined strategy.
We will remain focused on our core
markets in the UK, providing specialist
technology and services for clients
facing the challenges of tightening
compliance and regulation, and the
need to find new service models to
manage their customers in a digital age.
We maintain our guidance set out at
the time of the IPO. We aim to achieve
annual organic revenue growth of 5%,
supplemented by further acquisitions,
while expanding our margins through
our efficiency programme and
de-leveraging the Group.
• Revenue growth of 26%; underpinned
by 7% organic revenue growth and
growth across all divisions
• 12% revenue growth from cross-
selling and up-selling to our top
24 accounts
• Pre-exceptional EBITDA growth of
• Key new client wins including
23%, with margins of 23.4%, reflecting
investment in growth offset by
regulatory costs
17 new share registration clients
such as Virgin Money, Shawbrook,
Aldermore and Worldpay
• EBIT of £10.2m after the impact of
• Retained all FTSE 350 share
exceptional costs primarily associated
with our listing on the London Stock
Exchange
• Free cash conversion of 113%; free
cash flow increased by 35% to £97.6m
• Net debt/EBITDA significantly
reduced to 2.8x following
restructuring of the balance sheet,
strong working capital management
(reduction of £11m) and timing of the
payment of some IPO fees paid in
2016 (£16m)
• Normalised earnings per share grew
to 13.4p from 10.7p on a like-for-like
basis. Basic and diluted loss per share
was 93p
• Recommend dividend of 0.68p per
share, pro-rated full year proforma
dividend of 4.08p per share, in line
with our stated policy
registration clients during the year
• Completed the strategic acquisitions
of Selftrade and TransGlobal Payment
Solutions
• Developed new capabilities,
including an estate administration
and bereavement service, a loan book
management solution, white label
share dealing and foreign payments
processing
• Launched technology products such
as Compendia mobile for pensions, a
Selftrade mobile app and technology
to manage reputations on social
media
• Improved operational efficiencies
though the increased scale and
resilience of our centre in Chennai
and rationalising our property
footprint
• Premium listed on the main market
of the London Stock Exchange in
October 2015
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SECTION 01STRATEGIC REPORT
EQUINITI DELIVERED AN EXCEPTIONAL SERVICE. THEY
LISTENED TO WHAT WE WANTED, UNDERSTOOD WHAT WAS
IMPORTANT TO US THEN SET OUT HOW WE COULD ACHIEVE
IT WITHIN TIGHT TIMESCALES. THEY HAVE DELIVERED A
FANTASTIC SOLUTION WHICH MATCHES OUR GLOBAL
ASPIRATION AND ALLOWS ALL OF OUR EMPLOYEES TO
HOLD AND TRANSACT SHARES ELECTRONICALLY IN THE
GLOBAL NOMINEE. I WOULD HIGHLY RECOMMEND THEM.”
VICTORIA HAMES, INTERIM COMPANY SECRETARY. WORLDPAY
Making the future
today for our financial
services clients
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01
Strategic
Report
BUSINESS OVERVIEW
OUR MARKETS
BUSINESS MODEL
STRATEGY
KEY PERFORMANCE INDICATORS
CHAIRMAN’S STATEMENT
CHIEF EXECUTIVE’S STATEMENT
CASE STUDY
OPERATIONAL REVIEW
FINANCIAL REVIEW
08
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18
20
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28
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PRINCIPAL RISKS AND UNCERTAINTIES 42
RESOURCES AND RELATIONSHIPS
48
BUSINESS OVERVIEW
WHAT WE DO
Equiniti provides sophisticated administration, processing
and payment services, as well as smart technology solutions,
for increasingly complex and regulated markets.
Our activities are often mission-critical
to our clients but not core to their
organisations. By taking care of these
services, we free our clients to focus
on what matters most to them. The
services we provide, alongside our
systems and technology, mean we
build deep and lasting relationships
that allow us to continue to innovate
and add value to our clients, who
include 70% of the FTSE 100 and
large public sector organisations.
We also provide services to millions
of individuals, enabling them to
manage their company benefits,
such as employee share schemes
and pension schemes, and to
trade through our execution-only
investment services platform. Our
services and platforms are used by
27 million UK citizens, reaching half
of the economically active population.
WE BUILD LASTING
RELATIONSHIPS THAT
ALLOW US TO CONTINUE TO
INNOVATE AND ADD VALUE
OUR DIVISIONS
WE SERVE OUR CLIENTS THROUGH THREE DIVISIONS
INVESTMENT SOLUTIONS
INTELLIGENT SOLUTIONS
PENSIONS SOLUTIONS
32%
of 2015 revenues
27%
of 2015 revenues
38%
of 2015 revenues
Investment Solutions encompasses
our Registration Services, Investment
Services and Employee Services
businesses. The division offers a broad
range of business to business and retail
services, including share registration for
around half the FTSE 100, SAYE scheme
administration and share incentive plan
administration for 1.1 million employees,
and bereavement services. Investment
Services also provides sharedealing,
wealth management and international
payments to corporate clients, their
employees and direct to around 350,000
retail customers.
Intelligent Solutions targets complex
or regulated activities to help manage
customer, citizen and employee
interactions. It offers enterprise workflow
solutions that automate processes such
as case, complaints, document and
people management. It provides credit
services, including credit origination
and loan administration, as well as
specialist resource for rectification and
remediation and company secretarial
support. The division also works with
clients to ingest, cleanse and analyse
large volumes of data, creating a single
view of the customer and opening up
opportunities to monetise data archives.
Intelligent Solutions’ proprietary
technology includes MADE for loan
calculations and MMX for complaints
management and social media triage.
Pension Solutions offers administration
and payment services to pension
schemes, pension software, data
solutions and life and pensions
administration. The division is a scale
provider of pension technology, with
its proprietary Compendia platform
securing six awards for technology in
2015, including FSTech’s “Tech provider
of the year”, Gold winner at the 2015
App Design Awards and the prestigious
“Best Fintech App” at the Appsters
awards. Pension Solutions operates
some of the largest pension schemes
in the UK, including the National Health
Service scheme with more than 2.6
million members and the Armed Forces
Veterans, which we have continuously
served since 1836.
The remaining 3% of 2015 revenues relate to the interest income we earn on balances we administer on our clients’ behalf.
8
BUSINESS OVERVIEW
KEY FACTS
RELATIONSHIPS WITH
1,700 c70
CORPORATE
CLIENTS
OF THE FTSE 100
£90bn
PAYMENTS MADE
EACH YEAR
70m
SHAREHOLDER
RECORDS HELD
1.1m
SHARE PLAN
INVESTORS
c4,000
EMPLOYEES
INTERACTIONS WITH
27mSHAREHOLDERS
AND PENSIONERS
27%
INTELLIGENT
SOLUTIONS
32%
INVESTMENT
SOLUTIONS
INTEREST INCOME
3%
of 2015 revenues
In addition to our three
divisions, we earn interest
income on balances we
administer on our
clients’ behalf
38%
PENSIONS
SOLUTIONS
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SECTION 01STRATEGIC REPORT
BUSINESS OVERVIEW
OUR CLIENTS
Our clients include many of the UK’s best-known brands and public sector
organisations. We have a broadly spread client base, combining long-
standing relationships and new client wins. Our average relationship
with FTSE 100 share registration clients is more than 20 years.
POWERING PENSION
ADMINISTRATION FOR
2.6m
NHS SCHEME MEMBERS
WORKING WITH BAE
SYSTEMS FOR OVER
29
YEARS
DIVERSE CUSTOMER BASE –
% OF TOTAL REVENUE BY CUSTOMER TYPE
P O R ATES
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UNTS
Top 24
Corporates
Government
Consumer
WHEN DEVELOPING BUSINESS ESSENTIALS, WE
NEEDED A SOLUTION THAT COULD PROVIDE THE
BEST CUSTOMER EXPERIENCE. WE WANTED TO
ENSURE THAT THE PROCESS WAS USER-FRIENDLY
FOR OUR CUSTOMER SERVICE TEAM AND NIMBLE
ENOUGH FOR BUSINESS CUSTOMERS APPLYING
ONLINE. EQUINITI PANCREDIT WAS THE PERFECT FIT.”
PAUL LAWTON, GENERAL MANAGER OF SMB AT O2
10
70
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LONG-STANDING CLIENT RELATIONSHIPS
AVERAGE CLIENT RELATIONSHIP
>20 YEARS
Financial
Aerospace
& Defence
Oil & Gas
Telecomms
Travel &
Leisure
Retail
Healthcare
Publishing
Postal
Energy
Pharmaceuticals
Equiniti clients
1 year or less
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BUSINESS OVERVIEW
OUR TECHNOLOGY PLATFORMS
Proprietary technology is a key enabler
for our business. It drives us forward,
in a world increasingly focused on
digital relationships, straight-through
processing and using data strategically.
OUR TECHNOLOGY IS:
WELL INVESTED AND WHOLLY OWNED
Since 2007, we have invested more than £100m
in strengthening our market-leading platforms.
SCALABLE
We have capacity across all our platforms, resulting
in low marginal costs as growth accelerates.
FLEXIBLE
We have developed our proprietary platforms to
meet specific client needs. We use these platforms
to run our own operations and to provide software
as a service and platform as a service for clients.
SECURE AND RESILIENT
Our infrastructure is on-shore and configured
for security, resilience and scale.
12
CUSTODY AND SETTLEMENT,
INVESTMENT AND WEALTH
MANAGEMENT
BUSINESS OVERVIEW
OUR FOUR MAIN PLATFORMS
COMPENDIA PENSION
ADMINISTRATION AND PAYROLL
SHARE REGISTRATION,
DIVIDEND AND SHAREPLAN
ADMINISTRATION
More information on our technology
can be found on page 52.
ENTERPRISE WORKFLOW
AND CASE & COMPLAINTS
MANAGEMENT
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BUSINESS OVERVIEW
OUR INVESTMENT PROPOSITION
EQUINITI CHARTER GIVES US A CLEAR RECORD OF ANY
COMPLAINTS THAT HAVE BEEN RAISED, WHAT THE ISSUE
WAS, WHO THE CLIENT WAS, WHAT THE ROOT CAUSE WAS
AND THE FINAL DECISION, AND WE HAVE SEEN A REAL
TURNAROUND IN THE WAY WE HANDLE COMPLAINTS AS
A RESULT OF THIS IMPLEMENTATION. ONE OF THE KEY
REASONS WHY WE CHOSE EQUINITI CHARTER WAS BECAUSE
THEIR PLATFORM IS HIGHLY INTUITIVE AND USER FRIENDLY.
HOWEVER THE REAL VALUE IS THE RICHNESS OF THE DATA
AND MANAGEMENT INFORMATION WE CAN MINE FROM IT.
WE CAN EXTRAPOLATE ANY DATA WE WANT AT ANY GIVEN
TIME TO SEE WHAT THE ISSUES ARE THAT WE ARE FACING.”
RICHARD FLORY, HEAD OF COMPLETE
CUSTOMER CARE OF ACENDEN
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BUSINESS OVERVIEW
OUR INVESTMENT PROPOSITION
Equiniti has a clear investment proposition,
based on the following key strengths.
We have:
DELIVERING THE GROUP STRATEGY
1
2
3
4
5
GROW SALES
TO EXISTING
CLIENTS
WIN NEW B2B
CLIENTS
DEVELOP AND
ACQUIRE NEW
CAPABILITIES
OPERATING
LEVERAGE
REINVEST
STRONG
CASH-FLOWS
5% ORGANIC GROWTH
2% ACQUISITIVE
GROWTH
25 BPS
PER ANNUM
C.5% REVENUE
REINVESTED IN CAPEX
REGULATED SERVICES FOR UK BASED FTSE 350 AND GOVERNMENT
15
SECTION 01Equiniti Group plc Annual Report 2015STRATEGIC REPORT• Leadership positions in large and growing markets, giving us significant growth opportunities and strong momentum (see pages 16 to 17)• Long-term contracts with high-fidelity, blue-chip clients, contributing to high revenue visibility and organic growth• The opportunity to enhance our offerings to clients, increasing our revenue with them over time (see pages 48 to 59) • Well-invested and scalable proprietary technology, which gives us a competitive advantage and supports our growth (see page 52)• A strong M&A track record, adding capabilities to boost our growth• Increasing profitability, through operational leverage and cost improvement• Robust cash generation, providing the funds to invest whilst reducing debt and growing our dividend OUR MARKETS
EQUINITI OPERATES IN LARGE AND GROWING MARKETS
We believe our addressable market in the
UK is worth around £3.9bn. As we continue
to develop our business and acquire new
capabilities, our addressable market will
expand further, particularly as we diversify
our regulatory, payments and compliance
propositions.
The main drivers of market growth are expected to be:
• Macro-economic recovery, rising
interest rates and increased investor
confidence, driving demand for
investment-linked products and
an increase in flotations, mergers
and acquisitions, rights issues and
buybacks.
• Long-term structural trends that
result in greater cost and complexity
for clients, in particular increasing
regulation, technological advances
and demand for high-quality and
convenient services. These trends in
turn are contributing to rising cost-
consciousness among clients.
These long-term structural trends,
which are described in more detail here,
create compelling incentives for clients
to outsource non-core services.
More information on developments in our
markets during 2015 can be found in the
operational review on pages 30 to 35
INCREASING REGULATION
There is ongoing pressure to protect
consumers’ interests through greater
regulation and enhanced regulatory
focus in the financial services sector
on overseeing welfare reform, pensions
and financial services products. The
cost of compliance and the need to
upgrade technology in response to
new regulations encourages public
and private sector organisations to
outsource to third-party experts,
such as Equiniti. Organisations who
fail to meet their regulatory obligations
also face more investigations, which
accelerates demand for remediation
services.
CONTINUING TECHNOLOGICAL
ADVANCES
Innovation allows services that are
traditionally people-based to be
outsourced using technology. This
expands the addressable market
for service providers such as
us, who have well-invested and
scalable technology platforms and
the experience of bringing in new
technology through acquisition.
INCREASING DEMAND FOR
QUALITY AND CONVENIENCE
Consumers increasingly expect to
receive high-quality service and want
to manage their affairs online. This
requires extensive investment in
websites, portals and mobile apps,
which can be difficult and expensive
for clients to do themselves. This
drives demand for technology-based
services and creates valuable digital
relationships for us with our clients’
employees and customers, opening
up further opportunities for growth.
INCREASING COST-
CONSCIOUSNESS AND FOCUS
ON THE CORE
Companies and government agencies
are increasingly aiming to do more
with less, requiring them to focus
on their core operations and to be
more efficient. Outsourcing non-core
functions allows them to simplify their
operations and reduce their fixed
costs, while technology-led solutions
create further scope for operational
efficiencies. Both of these enablers
increase demand for our services.
16
OUR MARKETS
OUR MARKET-LEADING POSITIONS
WE ARE LEADERS IN MANY OF OUR MOST IMPORTANT MARKETS:
#1
CERTIFICATED TRADING
#1
SHARESAVE, SHARE INCENTIVE
AND EXECUTIVE SHARE PLANS
#1
SHARE REGISTRATION AND
CORPORATE ACTIONS
OUR COMPETITIVE ENVIRONMENT
The UK share registration market is
primarily supported by three companies,
Equiniti, Capita and Computershare.
In registration services we have a market
leading position, working with around
50% of the FTSE100.
Other markets we operate in are largely
fragmented and we typically face a
different set of competitors in each.
While we encounter competition in each
market, we believe we are well placed
to succeed. In markets where we have
leadership positions, we benefit
from our:
• customer loyalty, which leads to
relationships lasting many years
• proprietary, and scalable technology
• expertise in handling high volumes
of complex and sensitive data.
#2
PENSION ADMINISTRATION
AND PENSION SOFTWARE
In markets where we have challenger
positions, we are differentiated by
our proven ability to process data and
payments securely and accurately.
Clients in many of our markets tend to
be risk averse, given the critical nature
of the services we supply, which means
that operational excellence is critical
for winning and retaining their business.
#4
EXECUTION-ONLY
INVESTING
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SECTION 01STRATEGIC REPORT
Business model
WHAT WE DO
Equiniti makes complex things simple.
By combining market-leading technology with
experienced and specialist people, we assure delivery
to our clients, and in turn to their customers, who are
typically their employees, pensioners, shareholders
and consumers. We also have significant experience
of operating in regulated environments, helping our
clients to meet their regulatory obligations and
protect their stakeholders’ interests.
COMPLEXITY
Client
INNOVATION
18
REGULATION
THE VALUE WE ADD
Our activities are often non-core but
mission-critical to our clients. They
rely on us for highly accurate, flexible
and effective services, helping them
to manage increasing regulation
and complexity, and to meet their
stakeholders’ evolving needs.
The quality of our delivery creates
long-term relationships with our clients’
senior decision makers. We then work
with them to identify other issues or
non-core activities, where we can deliver
value and innovation by providing an
improved outsourced solution. Our
scale means we can make investments
in technology and people that our
clients could not make themselves.
This allows us to deliver services more
efficiently than clients could in-house,
saving them money and giving them
the flexibility to adjust the resources
deployed throughout the year.
SUSTAINING OUR ADVANTAGE
Equiniti owns all of the technology,
software and infrastructure required to
run our core operations. Our technology
platforms give us a distinct competitive
advantage. They underpin our service
delivery and form a barrier to entry,
given the substantial experience, time
and money required to build them. We
continually invest in our platforms, to
add functionality and ensure they keep
pace with changing regulatory and fiscal
requirements, and bring in innovative
new platforms through acquisitions.
Our people are also vital. Their expertise
enables us to provide sophisticated,
high-margin services that are protected
from commoditisation. We look to
develop our people and offer career
paths and interesting work, helping us
achieve high retention rates. To ensure
we are as efficient as possible, we have
expanded our offshore capability in
India, strengthening our technology
development capabilities and providing
testing and support facilities.
DELIVERING RETURNS
Extending the services we provide to
existing clients is a key driver of our top
line growth (see the Clients section of
Resources and Relationships on page
54 for more information). Our market
leadership positions also make us a
natural choice for new clients. Multi-year
contracts and long-term relationships
give us high visibility of future revenues.
Our technology platforms provide
significant operational leverage, which
allows us to increase profits as we grow
revenue. High free cash flow conversion
provides funds to invest in growth and
to further reduce our debt.
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STRATEGY
OUR STRATEGY IS DESIGNED PRIMARILY TO DRIVE ORGANIC GROWTH, BY LEVERAGING
OUR TECHNOLOGY PLATFORMS TO BROADEN THE RANGE OF SERVICES WE PROVIDE TO
OUR CLIENTS. THE KEY COMPONENTS OF OUR STRATEGY ARE SET OUT BELOW.
STRATEGY
PROGRESS IN 2015
1
INCREASE PENETRATION OF
EXISTING CLIENTS, THROUGH
UP-SELLING AND CROSS-
SELLING
Our long-term relationships with
around 1,700 clients give us the
opportunity to offer them additional
services as we learn more about their
requirements. This process is also
stimulated by increasing regulation
and clients’ need to improve
efficiency and manage complexity.
Our entry point is often providing
share registration services, with
clients taking further services
from us over time.
Our key accounts programme
enabled us to deliver revenue
growth of 12% through cross-selling
and up-selling to our top 24 clients
in 2015.
We have achieved an average
‘X-factor’ of five times for our
key accounts, demonstrating our
ability to up-sell and cross-sell. The
‘X-factor’ is the number of times we
have grown the value of the original
contract we signed with a client
(see page 54 for more information).
Among many examples of
successful up-selling and cross-
selling during the year were:
• the migration of Santander’s
retail sharedealing service to
our platform
• the provision of a complaints and
remediation platform to Lloyds
Banking Group
• the selling of share plan services
to new share registration clients,
such as Worldpay, Virgin Money,
Shawbrook and Metro Bank
2
3
WIN NEW CLIENTS THROUGH
SALE OF CORE PRODUCTS
Key new client wins in the year
included:
We leverage our brand, domain
expertise and reputation for high-
quality service to win new clients.
• 17 share registration clients,
including those noted above, as
well as HSS, John Laing and DFS
• white label sharedealing services
for Saga
• loan administration and credit
origination for clients such as
Telefonica
• international payments services
for activpayroll, CloudPay and
MarTrust
DEVELOP AND ACQUIRE NEW
CAPABILITIES
We create new products in existing
and adjacent markets, which allow
us to leverage our technology
platforms and specialist capabilities
in complex outsourcing. We also
make acquisitions that bring new
services and technology platforms
into the Group, reinforcing our
organic growth platform.
During 2015, we successfully
launched:
We also completed two strategic
acquisitions, with the purchases of:
• an estate administration and
bereavement service, aimed at
executors or representatives of
the deceased
• a new loan book management
solution, for banks and financial
institutions
• white label sharedealing services
• life validation and enhanced data
analysis services
• Selftrade, which significantly
increased the scale of our
execution-only sharedealing
platform
• TransGlobal Payment
Solutions (TransGlobal),
which gave us ownership of
the technology underpinning
Equiniti International Payments,
strengthening our market offering
We delivered free
cash flow of
£97.6m
Representing free cash
conversion of
113%
Reducing working
capital by
£11.4m
20
STRATEGY
STRATEGY
PROGRESS IN 2015
4
5
LEVERAGE THE BUSINESS TO
BUSINESS TO CONSUMER
(B2B2C) AND DIRECT TO
CONSUMER (D2C) CHANNELS
We interact with millions of our
clients’ shareholders, pensioners and
employees, as well as having around
350,000 direct retail customers for
our sharedealing services. We see
opportunities to provide additional
services to these individuals, through
existing channels.
FOCUS ON THE UK,
FOCUS ON TECHNOLOGY
Equiniti has leading market positions
in the UK in share registration,
certified trading, share plan
administration, pension administration
and pension software. Our proprietary
and scalable technology drives
us forward, in a world increasingly
focused on digital relationships,
straight-through processing and using
data strategically.
6
IMPROVE AND MAXIMISE
OPERATIONAL EFFICIENCIES,
INCLUDING OFFSHORING
We invest in our people to maintain
their skills and specialisms, and
to continue to build the capacity
and resilience of our operational
centre in Chennai, India. In addition,
we continually look to improve
efficiency and reduce costs through
improvement programmes across
the Group.
USE STRONG CASH FLOW
TO INVEST IN THE BUSINESS,
REDUCE LEVERAGE & DRIVE
SHAREHOLDER RETURNS
Our high-quality profits and focus
on managing working capital enable
us to deliver strong cash flows, which
we use for capital expenditure,
to reduce debt and support
shareholder returns.
7
We build relationships directly
with consumers across a number
of channels:
• 316,000 of our retail investors,
who we connect with every month
through our digital newsletter –
an increase in circulation of 46%
from the previous year
• 448,000 pensioners, via the
pensioner affinity group Club
Together, which has permissions
to market financial, lifestyle, travel
and insurance products
• the Selftrade mobile app,
which we launched in 2015
During the year, we retained our
focus on the UK and continued to
invest in the technology platforms
that drive our business.
• regulatory change in the UK
continues to drive our business
with changes to pensions
regulation, reform of the annuity
market and increasing burden of
regulation upon financial services
• since 2007, we have invested more
than £100m in strengthening our
market-leading platforms
• launched technology products
such as Compendia mobile for
pensions, the RetireMe app
and technology to manage
reputations on social media
• recognised with multiple awards
for technology including the Best
FinTech App at the 2015 Appsters
Awards
During 2015, we:
• continued to invest in training our
people, developing talent and
managing performance
See the people section on
pages 48 to 51 for more information
• continued to deliver operational
efficiencies, for example by
replacing high-cost contractors
with permanent staff
• rationalised our property
footprint, closing seven
properties during the year
• further increased the scale
and resilience of our centre
in Chennai, which provides
IT functions and back-office
processing
In 2015, we delivered free cash flow
of £97.6m, representing a free cash
conversion of 113%. We invested
£18.4m in capital expenditure,
equivalent to 5% of our revenue.
At the year end, we had net debt of
£246m and a net debt to EBITDA
ratio of 2.8 times. We aim to reduce
our leverage over the medium term
to 2-2.5 times.
We will also pay our maiden dividend
in 2016. This will be on a proforma
basis for our period of public
ownership in 2015. The dividend has
been declared at 0.68p per share,
representing 4.08p per share on a
full-year basis.
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KEY PERFORMANCE INDICATORS
We use the following key performance indicators to track our progress, each of
which links to one or more parts of our strategy, as described on pages 20 to 21.
We have also set medium-term targets for our key financial metrics, which are
described below:
KPI
RELEVANCE TO STRATEGY
PERFORMANCE
TREND
REVENUE GROWTH
Revenue is the invoiced value of services and
software provided to clients in the year, plus
interest income.
Revenue and EBITDA prior to exceptional items has been
adjusted in 2013-2014 to reflect the impact in fundamental
changes to the business, as outlined in the Group's prospectus.
No adjustments have been made to 2015 results.
PRE-EXCEPTIONAL EBITDA MARGIN
Earnings before interest, tax, depreciation,
amortisation and exceptional items, as a
percentage of revenue.
Revenue and EBITDA prior to exceptional items has been
adjusted in 2013-2014 to reflect the impact in fundamental
changes to the business, as outlined in the Group's prospectus.
No adjustments have been made to 2015 results.
FREE CASH FLOW CONVERSION
Free cash flow (pre-exceptional) EBITDA less the
change in working capital, adjusted for the impact
of exceptional items) as a percentage of pre-
exceptional EBITDA.
Delivering organic revenue growth is at the heart of our strategy.
We supplement this with growth from acquisitions.
Links to the following strategy elements:
1
2
3
4
5
TARGETS: ANNUAL REVENUE GROWTH OF 5% ORGANIC
AND 2% FROM ACQUISITIONS
Total revenue grew by 26.2% during the year. Organic
revenue growth was at 6.8%, with growth from acquisitions
of 19.4%.
The pre-exceptional EBITDA margin reflects the quality
of the new business we win and our ability to improve our efficiency.
Links to the following strategy elements:
1
2
3
4
5
6
TARGET: GRADUAL MARGIN IMPROVEMENT
Our pre-exceptional EBITDA margin was 23.4% (2014: 23.1%),
reflecting investment in growth and regulatory costs.
Our strategy requires us to generate cash to fund investment,
reduce leverage and support shareholder returns.
Links to the following strategy element:
7
TARGET: CASH CONVERSION OF MORE THAN 95%
In 2015, we again delivered a strong cash flow performance,
with cash conversion of 113% (2014: 104%).
LEVERAGE
The ratio of net debt to (pre-exceptional) EBITDA.
A strong balance sheet is important for giving us the capacity
to invest organically and in acquisitions.
Links to the following strategy elements:
7
TARGET: LEVERAGE OF 2-2.5 TIMES IN THE MEDIUM TERM
At 31 December 2015, our leverage was 2.8 times,
reflecting a substantial reduction over the last 12 months.
CLIENT SATISFACTION
Three key measures:
1. Net Promoter Score (NPS), measured half yearly
via on-line and paper surveys
2. Customer Effort Score (CES), measured via
on-line, paper and interactive voice response
surveys
3. Contact centre customer satisfaction score
Client satisfaction shows how well we are meeting their needs, which
is essential for protecting our existing business and our ability to grow,
both through selling more to existing clients and through attracting
new clients.
Links to the following strategy elements:
1
2
5
TARGET: NPS OF 40 IN THE MEDIUM TERM, CES 95%,
CONTACT CENTRE CUSTOMER SATISFACTION 97%
1. NPS – 35
deal with us*
2. CES – 89% of customers find it very easy or easy
3. Contact centre customer satisfaction – 93%**
* Industry bench-mark is 70% (Institute of Customer Services)
** Industry bench-mark is 77%
These KPI's were introduced in 2015
22
KEY PERFORMANCE INDICATORS
KPI
REVENUE GROWTH
interest income.
Revenue is the invoiced value of services and
We supplement this with growth from acquisitions.
software provided to clients in the year, plus
Links to the following strategy elements:
Delivering organic revenue growth is at the heart of our strategy.
Revenue and EBITDA prior to exceptional items has been
adjusted in 2013-2014 to reflect the impact in fundamental
changes to the business, as outlined in the Group's prospectus.
No adjustments have been made to 2015 results.
PRE-EXCEPTIONAL EBITDA MARGIN
Earnings before interest, tax, depreciation,
amortisation and exceptional items, as a
percentage of revenue.
Revenue and EBITDA prior to exceptional items has been
adjusted in 2013-2014 to reflect the impact in fundamental
changes to the business, as outlined in the Group's prospectus.
No adjustments have been made to 2015 results.
RELEVANCE TO STRATEGY
PERFORMANCE
TREND
TARGETS: ANNUAL REVENUE GROWTH OF 5% ORGANIC
AND 2% FROM ACQUISITIONS
Total revenue grew by 26.2% during the year. Organic
revenue growth was at 6.8%, with growth from acquisitions
of 19.4%.
The pre-exceptional EBITDA margin reflects the quality
of the new business we win and our ability to improve our efficiency.
Links to the following strategy elements:
TARGET: GRADUAL MARGIN IMPROVEMENT
Our pre-exceptional EBITDA margin was 23.4% (2014: 23.1%),
reflecting investment in growth and regulatory costs.
FREE CASH FLOW CONVERSION
Our strategy requires us to generate cash to fund investment,
Free cash flow (pre-exceptional) EBITDA less the
reduce leverage and support shareholder returns.
change in working capital, adjusted for the impact
of exceptional items) as a percentage of pre-
exceptional EBITDA.
Links to the following strategy element:
TARGET: CASH CONVERSION OF MORE THAN 95%
In 2015, we again delivered a strong cash flow performance,
with cash conversion of 113% (2014: 104%).
LEVERAGE
A strong balance sheet is important for giving us the capacity
The ratio of net debt to (pre-exceptional) EBITDA.
to invest organically and in acquisitions.
Links to the following strategy elements:
TARGET: LEVERAGE OF 2-2.5 TIMES IN THE MEDIUM TERM
At 31 December 2015, our leverage was 2.8 times,
reflecting a substantial reduction over the last 12 months.
2015
2014
2013
2015
2014
2013
2015
2014
2013
2015
2014
2013
£369.0m
£291.4m
£252.5m
23.4%
23.1%
25%
113%
104%
109%
2.8x
6.5x
5.6x
CLIENT SATISFACTION
Three key measures:
1. Net Promoter Score (NPS), measured half yearly
via on-line and paper surveys
new clients.
Client satisfaction shows how well we are meeting their needs, which
is essential for protecting our existing business and our ability to grow,
both through selling more to existing clients and through attracting
Links to the following strategy elements:
2. Customer Effort Score (CES), measured via
on-line, paper and interactive voice response
surveys
3. Contact centre customer satisfaction score
TARGET: NPS OF 40 IN THE MEDIUM TERM, CES 95%,
CONTACT CENTRE CUSTOMER SATISFACTION 97%
1. NPS – 35
2. CES – 89% of customers find it very easy or easy
deal with us*
3. Contact centre customer satisfaction – 93%**
* Industry bench-mark is 70% (Institute of Customer Services)
** Industry bench-mark is 77%
These KPI's were introduced in 2015
23
SECTION 01Equiniti Group plc Annual Report 2015STRATEGIC REPORT CHAIRMAN'S STATEMENT
KEVIN BEESTON, CHAIRMAN
Delivering
our strategy
I am pleased to report good
results for Equiniti’s first period
since listing as a public company.
During the year, we grew revenue
by 26.2%, pre-exceptional EBITDA
by 23.1% and normalised1 profit by
25.5%, benefiting from both organic
growth and the impact of strategic
acquisitions. Free cash conversion prior
to exceptional items remained strong
at 113%. Equiniti’s consistently high cash
generation gives us the funds to invest
in the business while continuing to
reduce leverage, which is an important
focus for the Board, as well as to
support shareholder returns.
The Board has proposed a dividend,
subject to shareholder approval, of
0.68p per share for the period from
admission on 30 October 2015 to the
year end. This will be paid on 10 May
2016 to shareholders on the register at
1 April 2016. Going forward, we intend
to adopt a progressive dividend policy,
which will see us distribute around 30%
of our normalised profit each year.
AN ATTRACTIVE BUSINESS
This annual report builds on the
detailed disclosures in the prospectus
we issued in October and which is
available from our website. Together,
these documents set out why we believe
Equiniti is an attractive proposition for
investors. In addition to our strong cash
generation, we benefit from market
leadership positions, well-invested
proprietary technology, blue chip clients
and high levels of recurring revenue.
These recurring revenues are the
result of long-standing contracts and
relationships, together with the non-
discretionary nature of many of
our services.
We also know that our continued
success depends on our ability to
add value for all our stakeholders.
This includes providing high-quality,
dependable services to our clients and
retail customers, offering satisfying
careers, personal development and fair
rewards to our people, and meeting
our regulatory obligations by ensuring
strong governance and effective
management of both the Group and
our regulated businesses. Ultimately,
delivering for these stakeholders
underpins our ability to create long-
term value for our shareholders.
ROBUST GOVERNANCE
Equiniti has a high-quality Board,
which we developed during our period
of private ownership to ensure we
started life as a public company with
robust and experienced governance
in place. The importance of managing
risk in our business is reflected in
our establishment of a separate Risk
Committee, in addition to the Audit,
Nominations and Remuneration
Committees. Each committee is
chaired by a different Director,
with relevant experience.
The Board recognises that as well as the
right governance structures, business
success requires the right culture and
values throughout the Group. Equiniti’s
culture is based on service excellence,
innovation, transparency and doing
the right thing. This supports working
in regulated markets and providing
mission-critical services for our clients,
involving substantial volumes of
payments and assets. We understand
the significance of our culture and the
need for the Board to set the tone
from the top, and have developed our
agenda to ensure the Board provides
appropriate oversight.
1 Normalised profit is defined within the financial
review on page 36.
24
CHAIRMAN'S STATEMENT
KEVIN BEESTON, CHAIRMAN
DURING THE YEAR WE GREW
REVENUE BY
26.2%
PRE-EXCEPTIONAL EBITDA BY
23.1%
NORMALISED PROFIT BY
25.5%
LOOKING AHEAD
The growth drivers for our business remain
compelling. Increasing regulation, our strategy of
utilising our proprietary technology to cross-sell
new and additional services to our excellent client
base, winning new high-quality accounts and our
ability to add to our offering through acquisition
will all contribute to good top line growth. At the
same time, we have the opportunity to enhance
our margins, both by operating more efficiently and
further offshoring. Taken together, we believe these
factors give us strong prospects.
Finally, I would like to thank our clients for their
continued relationship with Equiniti, our previous
owners and current shareholders, Advent
International, for their support over the past eight
years, and the Board, our management and all of
our employees for their efforts in achieving
a successful listing and for giving us a solid
foundation for the years ahead.
Kevin Beeston, Chairman
7 March 2016
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SECTION 01STRATEGIC REPORT
CHIEF EXECUTIVE'S STATEMENT
GUY WAKELEY, CHIEF EXECUTIVE
A watershed year
This has been a standout year for
Equiniti. Our IPO has given us a new
capital structure and new investors,
and launches us into the public markets
we serve on the same standing as the
many listed clients we support year
after year.
Organic growth is at the heart of our strategy and
our technology platforms are key, giving us the ability
to cross-sell and up-sell our services. Throughout
the year we have broadened our capabilities and
deepened our specialisms, increasing our focus on
regulated markets. As just one example, this year we
provided a complaints and remediation platform to
Lloyds Banking Group, which has been a client for
nearly 60 years. At the same time, our key accounts
programme is leading to deeper client relationships
and increased client fidelity, with one or more
services provided to 70 of the FTSE 100 companies
and to the majority of UK retail banks. Retention of
our FTSE 350 clients remained at 100% and in total,
we had an order intake of £209.7m in 2015 (2014:
£200.6m) excluding transactions and short term
project income.
Technology also opens up multiple revenue channels
with our clients, allowing us to reach through to
their employees, pensioners and customers and
build lasting digital relationships. With the addition
of Selftrade in January 2015, we have substantially
expanded our retail share-dealing platform and
become one of the UK’s largest retail stockbrokers.
As well as providing new growth opportunities for
us in the B2B2C and D2C spaces, we are increasingly
able to white label these services for our clients.
Notable wins during the year included white label
share-dealing services for Saga and the migration
to us of a number of legacy books from established
clients including Santander.
WE INCREASED REVENUE BY
26.2% £369.0m
TO
(2014:£292.3m)
26
CHIEF EXECUTIVE'S STATEMENT
GUY WAKELEY, CHIEF EXECUTIVE
In 2015, we saw the benefits of our strategy coming
through in our financial performance. We increased
revenue by 26.2% to £369.0m (2014: £292.3m),
with diversification of our revenue streams leading
to organic growth of 7% – around twice the rate
of some of our larger competitors. Acquisitions
contributed £56.0m to 2015 revenue, with a full year
from our 2014 acquisitions and initial contributions
from Selftrade and TransGlobal, which we bought
in January and September respectively. EBITDA
pre-exceptional items was £86.2m (2014: £70.0m),
an increase of 23.1%, resulting in a pre-exceptional
EBITDA margin of 23.4%, compared with 23.9%
in 2014. EBIT declined to £10.2m (2014: £21.7m)
primarily as a result of the costs relating to our IPO.
ADDING TO OUR TECHNOLOGY PLATFORMS
TransGlobal provides foreign exchange payments
through a proprietary cloud-based platform,
servicing a global portfolio of corporate clients.
It follows a series of capability enhancing acquisitions
for us, focused on technology.
We intend to continue adding to our offerings
by acquiring niche technology companies, with
a particular focus on compliance, regulation and
customer service in the financial services sector.
We have developed a healthy pipeline of potential
targets, which we will transact if they meet our
disciplined financial criteria.
We also continue to invest in our existing platforms,
to add to their functionality and ensure we keep pace
with the needs of our clients and the expectations of
their customers, who increasingly want to self-serve
and transact online. Our technology platforms are a
major source of competitive advantage for us and an
important strategic focus.
STRENGTHENED LEADERSHIP
Over the last two years we have substantially
enhanced our senior management team, to give
us the leadership we need to take advantage of
the opportunities in front of us. We were delighted
to appoint John Stier as Chief Financial Officer
in 2015. John joined us after 12 years as CFO of
Northgate Information Solutions, a global software
and outsourcing business. We also recruited senior
THIS YEAR WE PROVIDED A
COMPLAINTS AND REMEDIATION
PLATFORM TO LLOYDS BANKING
GROUP, WHICH HAS BEEN A
CLIENT FOR NEARLY 60 YEARS.
specialists in information security and pensions.
Equiniti now has a fully established executive
and leadership team, with each member having
considerable talent and industry experience in
their area.
The IPO gave us the opportunity to launch our own
LTIP and SAYE schemes, to enable our people to
benefit from our future success and to align their
interests with those of our shareholders. We were
thrilled by the take-up of the SAYE scheme, with
more than 53% of our staff signing up.
Efficiency remains an important theme for us.
We have worked hard to increase the resilience
and scale of our offshore facilities in Chennai,
India, where we now have capacity for c700 people.
The resilience of the Equiniti operating model
was demonstrated in December 2015, when the
severe flooding in Chennai caused us to suspend
operations at our principal offshore location. All
offshore activities were rolled back to mainland UK
locations, with no interruptions to delivery and with
all service levels sustained. I am very grateful to our
UK and Indian teams for their extraordinary efforts
during this time of particular disruption.
We have also continued to invest in recruitment
and training for our onshore centres, where customer
satisfaction levels remain high at 90% and net
promoter scores have increased to 35. This compares
to an average in financial services of zero, supporting
the quality of work we deliver to clients.
A CONFIDENT OUTLOOK
2016 will be our first full year as a public
company and we will continue to implement our
well defined strategy. We will remain focused on
our core markets in the UK, providing specialist
technology and services for clients facing
the challenges of tightening compliance and
regulation, and the need to find new service
models to manage their customers in a digital
age. We maintain our guidance set out at the
time of the IPO. We aim to achieve annual
organic revenue growth of 5%, supplemented
by further acquisitions, while expanding our
margins through our efficiency programme and
de-leveraging the Group.
Guy Wakeley, Chief Executive Officer
7 March 2016
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CASE STUDY
CITIGROUP
Citigroup and Equiniti began working
together in 2006. In 2015 Citigroup
adopted Equiniti as a technology
vendor in EMEA to leverage our suite
of smart technology solutions.
CITIGROUP
Citigroup, the leading global financial
services company, has approximately
200 million customer accounts and does
business in more than 160 countries and
jurisdictions. Citigroup provides consumers,
corporations, governments and institutions
with a broad range of financial products and
services, including consumer banking and
credit, corporate and investment banking,
securities brokerage, transaction services,
and wealth management.
28
CASE STUDY
CITIGROUP
EQUINITI AND CITIGROUP
Building a partnership
for success with Citigroup
WE HAVE BUILT A STRONG
RELATIONSHIP WITH EQUINITI OVER
THE YEARS. WE KNOW THE BUSINESS,
WE KNOW THE PEOPLE AND WE HAVE
A GOOD UNDERSTANDING OF HOW
TO SUPPORT THEIR GROWTH.”
EMEA REGION HEAD, TREASURY AND TRADE
SOLUTIONS, CITIGROUP
The partnership covers a strategic proposition for
international payments as well as the delivery of
Equiniti’s services to Citigroup for life validation,
skilled complaint management resource and the
management of legacy accounts. These solutions
are provided by our Investment Solutions and
Intelligent Solutions divisions.
The international payments proposition
incorporates technology and administration
processing from Equiniti, combined with Citigroup's
unrivalled payments network. Equiniti makes
around 800,000 international payments with a value
of £1 billion each year, including the payment of
pensions, salaries, share dividends and proceeds
from corporate actions, to overseas residents as well
as to organisations in the public and private sector
overseas. In 2015 we have seen particular growth
in the area of international remuneration payments.
We work with Citi in their provision of innovative
value add services. Equiniti supports Citi’s Life
Validation solution using the Group’s data
management and business processing skills. We
have developed a campaign management system to
support this service and a pensioner portal. Equiniti
and Citi continue to work together to enhance and
digitise this proposition. Equiniti also runs a digital
archive and retrieval service for divested and closed
book accounts, covering 7.4 million UK account
customers across ten banking products, including
former Egg and Diners Club brands.
29
SECTION 01Equiniti Group plc Annual Report 2015STRATEGIC REPORT OPERATIONAL REVIEW
INVESTMENT SOLUTIONS
INVESTMENT SOLUTIONS
INCREASED ITS REVENUE BY
24.7%
MARKET DEVELOPMENTS IN 2015
The listing of businesses on the main market
continued to stimulate new business for Equiniti
during the year, in particular in the financial
services sector.
The timetable for dematerialisation of shareholder
records was clarified, with the EU mandating that
electronic records must by implemented by 2023
for new securities and 2025 for existing ones. The
UK government must now implement the directive
through legislation, which we expect will be in
2017 at the earliest. The Department for Business,
Innovation & Skills intends to conduct a market
consultation during 2016. Although a mid-term
trend, this welcome news provides opportunity
for future market efficiency and cost-reduction.
THE MAXIMUM SAVING INTO
SHARESAVE SCHEMES HAS
DOUBLED TO
£500
PER MONTH
30
Increased limits for sharesave schemes
and share incentive plans (SIPs) has had
a significant benefit in this market. The
maximum saving into sharesave schemes
has doubled to £500 per month, while the
investment limit for SIPs has increased
by £25 per month. This has the potential
to materially increase the balances we
administer on behalf of clients.
Although the execution-only brokerage
market was affected by a general downturn
in trading volumes in the second half of
the year, we have taken the opportunity to
diversify our product mix, in particular the
provision of lower-case asset classes such
as exchange traded funds.
PERFORMANCE
Investment Solutions increased its
revenue by 24.7% to £118.3m (2014:
£94.9m), benefiting from organic growth,
a full year of the JP Morgan Corporate
Dealing Service, which we acquired on
1 September 2014, and the acquisitions
of Selftrade, which completed on 23
January 2015, and TransGlobal, which
completed on 3 September 2015.
Excluding the impact of acquisitions,
organic growth was 9.8%. Pre-
exceptional EBITDA rose by 21.2% to
£35.5m (2014: £29.3m). This represented
a margin of 30.0%, compared with
30.9% in 2014, with the decline due to
product mix, the impact of the Selftrade
acquisition and ongoing investment to
support further growth and meet our
regulatory obligations.
Registration Services
Revenue in Registration Services
increased by 16.5% to £47.4m (2014:
£40.7m). The business had a good
year, continuing to win more than its
market share of registration contracts for
main-market IPOs. We were delighted
to build on our strength in the financial
services sector with new mandates
from Shawbrook, Aldermore, Virgin
Money, Metro Bank, One Savings
Bank, Worldpay and TSB. As a result,
Registration Services ended the year
with a 50% share of the FTSE 100
and retained all of its FTSE 350 share
registration clients.
Registration Services supported a
number of clients undertaking corporate
actions during the year, including
Royal Dutch Shell’s acquisition of BG
Group, which will create the largest
listed company on the London Stock
Exchange by market capitalisation.
The business also benefited from
a number of major clients carrying
out dividend-related projects. Most
significantly, one of the largest share
registers in the UK, Lloyds Banking
Group, returned to paying dividends
in 2015. Registration Services also
launched an innovative dividend
scheme for Marks & Spencer, enabling
retail investors to receive an enhanced
dividend in the form of vouchers or
payment to their card, rather than cash.
OPERATIONAL REVIEW
INVESTMENT SOLUTIONS
Following a pilot in 2014, Equiniti
launched its new bereavement service,
to help families obtain probate on
their relatives’ estates. Since the end
of the financial year, the business has
won its first client to provide white-
label bereavement services to their
customers.
Other initiatives in 2015 included further
investment in the Shareview platform,
to add mobile capability and a new app
for launch in 2016.
Registration Services continued to
receive industry recognition for the
quality of its service. In 2015, it won
Best Registrar at the Shares Awards,
for the fourth consecutive year. It also
won Best Registrar in the Investors
Chronicle & Financial Times Investment
Management & Wealth Management
awards.
Investment Services
Revenue in Investment Services
increased by 52.5% to £40.1m (2014:
£26.3m). The division benefited from
the acquisitions of Selftrade and
TransGlobal. Selftrade is now fully
integrated and has retained the number
of customer accounts and volume of
trading it had at the time of acquisition.
Investment Services added a number
of new corporate accounts in the year,
including white label sharedealing
services for Saga and the migration
of Santander’s sharedealing service.
The business also increased its presence
in the IPO market, completing the
retail offering for more than ten IPOs
including Equiniti.
The growth in Investment Services’
client numbers required it to invest
in its governance and controls, to
ensure it continued to meet regulatory
requirements impacting margin in
2015. It has also continued to invest in
its technology platforms to support its
growth ambitions including relaunching
its direct to consumer website and
introducing its first shareholder app.
Investment Services’ international
payments business grew substantially,
winning new contracts and commencing
the sizeable Martrust contract it won
in 2014. The acquisition of TransGlobal
further increases its offering in the
international payments market, giving
it ownership of the technology that
already underpinned its service.
Investment Services’ Wealth Solutions
business provides administration
and technology services to wealth
managers and stockbrokers. It won Best
Outsourcing Service 2015 at the Systems
in the City Awards, which honours
leading suppliers to the regulated
financial community.
Employee Services
Revenue in Employee Services increased
by 10.4% to £30.8m (2014: £27.9m).
Employee Services benefited from the
doubling of the amount employees can
pay into SAYE schemes, as well as a
number of one-off projects in corporate
actions and flexible benefits. However,
the low interest rate environment
continued to weigh on sharesave fees
and difficult equity markets reduced
sharetrading activity in the second half.
Major wins included share plans for
Worldpay, which utilised Employee
Services’ new global nominee product.
Other new clients included Virgin
Money, Shawbrook and Metro Bank,
as the business benefitted from cross-
selling with Registration Services.
Employee Services also undertook
international sharesave roll-outs for
clients including BT, Pearson and Smith
& Nephew, which included the use of its
newly introduced multilingual website
capability. The business also supported
Equiniti’s own flotation and shareplan,
which saw employee demand well
ahead of expectations.
Equiniti Premier, which is Employee
Services’ executive and discretionary
shareplan business, won significant
amounts of work during 2015, again
benefiting from cross-selling with other
parts of the division. The business
has invested in its senior leadership,
including a new managing director and
head of client relationship management,
to support growth.
Clients including BT, British Land and
DS Smith all won industry awards for
their share plans administered by
Employee Services. In addition, Equiniti
won Best Flexible Benefits Strategy at
the 2015 VIB awards, for its approach to
enhancing flexible benefits for its
own employees.
31
SECTION 01Equiniti Group plc Annual Report 2015STRATEGIC REPORT MARKET DEVELOPMENTS IN 2015
The trend for greater regulation and
compliance was an important driver of
Intelligent Solutions’ markets in 2015.
Notable changes included greater
FCA oversight of providers of high-
cost, short-term credit, who are seeking
support from outsourcers to help them
meet their need to lend responsibly.
More generally, consumer lending in
the UK is seeing the emergence of
new models such as peer-to-peer, with
lenders requiring platforms, people,
advice and data management services,
in response to regulation and changing
consumer behaviours. Banks are also
under pressure to demonstrate that they
are dealing with the right people and
that they are successfully preventing
activities such as money laundering,
which has led to increasing demand for
services that prove identity.
The rectification and remediation
market is seeing growth, with credit
cards, packaged bank accounts and
pensions mis-selling stimulating
demand for outsourced services,
specialist resource and technology.
Mis-sold payment protection insurance
(PPI) remains a significant driver of
activity. The FCA is consulting on a
two-year time bar for PPI cases, which
could result in a short-term increase in
cases, and is also consulting on rules
and guidance for the fair handling of
PPI complaints, which could increase
remediation activity over the next
two years.
Pension reform is driving further
demand for specialist resource. From
April 2016, pension schemes will no
longer be able to contract out of SERPS
or the state second pension. This will
result in work for schemes, who will
have to reconcile data to ensure their
calculations were based on accurate
information by 2018.
OPERATIONAL REVIEW
INTELLIGENT SOLUTIONS
Other significant changes affecting our
markets include the Consumer Rights
Act 2015, which updated existing laws
and introduced some new rights for
consumers. This creates the potential for
increased work in customer service and
complaints management. In addition,
the FCA’s Policy Statement PS15/19 sets
out new rules for complaints handling
by financial services firms.
Another important trend is the rise
of social media, which is both an
opportunity and a threat for clients.
While businesses can use social media
to communicate effectively to large
audiences, they also need to manage
their online reputations. This is creating
demand for our Charter platform, which
monitors activity within the social sphere
and enables operators to review trends
and respond to queries, comments and
complaints in real time.
Looking further ahead, the FCA is
conducting a review of the annuity
market, which could lead to an industry-
wide review of annuities mis-selling.
This in turn could create new demand
for customer service, rectification and
remediation services.
PERFORMANCE
Revenue in Intelligent Solutions
increased by 10.4% to £98.9m (2014:
£89.6m). This was the result of organic
growth of 1.3%, driven by demand for
our software solutions in complaints
management and credit solutions, offset
by the rest of the division's businesses
seeing a slight decline. The full year
impact of Pancredit Systems and Invigia,
which were acquired on 18 March 2014
and 1 September 2014 respectively,
contributed to reported growth.
EBITDA prior to exceptional items
increased by 39.3% through strong
revenue growth, an increasing
proportion of sales coming from
software licences and the benefit of
focusing on our cost base, which is
driving efficiency across the divisions.
Intelligent Solutions won a broad range
of work with different types of clients
during the year. Among the many
examples were a PPI rework project for a
major bank; the provision of software to
help police forces manage their highly
sensitive, confidential information;
a contract to improve collaboration
between police forces; the provision
of a hosted software lending platform
for Telefonica; and a deal with ATOS to
support the extension of its service to
National Savings & Investments.
INTELLIGENT SOLUTIONS WON
A BROAD RANGE OF WORK
WITH DIFFERENT TYPES OF CLIENTS
DURING THE YEAR. AMONG THE
MANY EXAMPLES WERE A PPI
REWORK PROJECT
FOR A MAJOR BANK…
Intelligent Solutions continued to
evolve its organisational structure
during 2015. Having started the year
with five business units focused on
specific markets, the business has
created three areas of capability
which are in place from 2016. These
are enterprise workflow solutions,
for the automation of business
processes such as case, complaints,
document and people management;
credit services, which includes credit
origination and loan administration; and
specialist resource for rectification and
remediation and company secretarial
support. This will enable the business to
apply these capabilities for the benefit
of all its clients, rather than in particular
sectors. Intelligent Solutions also
strengthened its leadership, adding new
heads of technology and transformation
and change.
32
OPERATIONAL REVIEW
INTELLIGENT SOLUTIONS
Among a number of important initiatives in 2015,
Intelligent Solutions launched MMX, an enterprise
workflow system based on the Charter platform to
help companies manage workflow through their
businesses. Clients are currently using the platform
for complaints management, customer service and
customer feedback.
During the year, Intelligent Solutions launched a
rapid deployment tool for Sharepoint. This allows
users to create an intranet portal quickly and cost
effectively and is proving popular with clients.
I
S
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O
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2
0
1
5
33
REVENUE IN INTELLIGENT
SOLUTIONS INCREASED BY
10.4%
£98.9m
TO
OPERATIONAL REVIEW
PENSION SOLUTIONS
MARKET DEVELOPMENTS IN 2015
A number of changes affected the Pension
Solutions’ market during the year. Notably, the
impending cessation of contracting out has led
to growing demand for Guaranteed Minimum
Pension (GMP) reconciliation work, which will
extend through to 2018.
The trend to outsource continues, with the downturn
in annuity sales leading to further outsourcing
opportunities as annuity providers look to reduce
their cost base. Fewer major companies are
administering their pension schemes in-house and
instead are either outsourcing their administration
or ‘co-sourcing’, which involves outsourcing some
aspects such as pensioner payroll services. There
has also been an increase in companies transferring
their pension liabilities to life companies, through
the bulk-purchase annuity market. This leads to
opportunities for Equiniti to work with the insurers
on the transfers and ongoing administration.
THE SERVICE WE RECEIVE FROM EQUINITI
SHOWS AN EXCELLENT UNDERSTANDING
OF OUR NEEDS AND GOING THAT
EXTRA MILE MAKES A DIFFERENCE FOR
THE BAA PENSION SCHEME AND ITS
MEMBERS. PROMPT WEBSITE UPDATES
DEMONSTRATE THEIR AWARENESS AND
COMMITMENT TO MAKING APPROPRIATE
USE OF TECHNOLOGY TO ENGAGE WITH
MEMBERS EFFECTIVELY.”
ALASTAIR KNOWLES, SCHEME SECRETARY,
BAA PENSION TRUST LTD
34
PENSION SOLUTIONS
CONTINUED TO INVEST
TO ENHANCE THE
CAPABILITY AND REACH
OF ITS AWARD-WINNING
COMPENDIA PLATFORM.
THE OUTSTANDING QUALITY
OF THIS TECHNOLOGY
WAS RECOGNISED WITH
NUMEROUS AWARDS…
OPERATIONAL REVIEW
PENSION SOLUTIONS
renewed contracts during the year,
and generally did so on improved terms.
Key achievements in 2015 included
successfully delivering major
transformation projects for public
sector clients. Pension Solutions
simultaneously implemented a new
pension administration platform for
the NHS and supported the introduction
of the Hutton reforms, which base
members’ pensions on a career average
rather than final salary. The NHS
pension scheme is the largest in Europe,
with more than 2.6 million members,
making this a significant and complex
task. MyCSP also delivered the alpha
scheme, which is the equivalent scheme
for civil servants.
During the year, Pension Solutions
continued to invest to enhance the
capability and reach of its award-
winning Compendia platform. The
outstanding quality of this technology
was recognised with numerous awards,
including Pension Technology Provider
of the Year at the European Pensions
Awards; Best Fintech App at the
2015 Appsters Awards; Best Pensions
Administration Software at the FT’s
Pensions and Investment Provider
Awards; the Pensions Age award for
Pensions Technology Firm of the Year;
and FSTech Magazine’s award for
Technology Provider of the Year.
Pension Solutions strengthened its
leadership in 2015, adding senior
industry people to the team. These
included a new director of pension
administration and strategy, recruited
from Capita, and a new managing
director recruited from AON Hewitt
to lead Data Solutions, which provides
data analytics and rectification services.
Pension Solutions also opened its
training academy, which provides a
mix of face-to-face and online learning.
The academy is used for induction
training and specific courses to enhance
the skills and capabilities of Pension
Solutions’ employees.
The introduction of pension freedoms
in April 2015, which allow savers
significantly more flexibility in relation
to how they use their pension pots,
has led to product innovation from fund
providers and life insurance companies,
as they look to attract savers with funds
that provide retirement income. As a
result, products that these providers
previously considered core are
becoming ‘legacy’ products, creating
opportunities for service providers
such as Equiniti to administer them.
From 2016, Solvency II requirements
will apply to both UK and European
annuity providers, while insurance
companies from outside the EU are
showing interest in entering the market
and in partnering with companies like
Equiniti to provide their administration
capability.
PERFORMANCE
Revenue in Pension Solutions increased
by 40.7% to £142.5m (2014: £101.3m).
This was the result of organic growth
of 8.0% and the full year effect of
consolidating MyCSP, following the
acquisition of a further holding on 30
September 2014 taking our investment
to 51%. We spent £8m acquiring this
additional 11% interest in MyCSP.
EBITDA prior to exceptional items
increased by 23.5% to £26.8m as a result
of revenue growth. Margins declined
due to a higher proportion of revenue
coming from MyCSP which is lower
margin than the rest of our pension
operations, coupled with continued
investment in the MyCSP intellectual
property.
Pension Solutions saw strong growth
in clients taking GMP reconciliation
services, as a result of the cessation
of contracting out at the end of 2016.
The business is working with schemes
with more than 4 million members,
representing around 20% of the market.
Pension Solutions also successfully
retained a number of clients who
35
SECTION 01Equiniti Group plc Annual Report 2015STRATEGIC REPORT Financial Review
OVERVIEW
The Group made good progress against its strategic
objectives during the year, including listing on the London
Stock Exchange, reducing net debt, upselling to strategic
clients and progressing the offshoring of activities and
resources to Chennai. During 2015 our FTE headcount in
Chennai grew 33% to 402 people. The centre continues to
grow and work towards 25% of our staff being offshore over
the medium term. Equiniti also concluded two acquisitions
in 2015, namely the assets of Selftrade and the share capital
of TransGlobal, for a total consideration of £23.0m.
Reported revenue grew by 26.2% to £369.0m (2014: £292.3m)
during the year, with organic revenue growth of 6.8%. EBITDA
prior to exceptional items increased by 23.1% to £86.2m
(2014: £70.0m). EBITDA post exceptional items for the year
was £53.4m (2014: £57.4m).
The Group’s free cash flow was £97.6m, resulting in an free
cash flow conversion of 113% before capital expenditure.
We continued to focus on working capital management,
which along with strong trading and restructuring our balance
sheet has helped our net debt to reduce to £246.0m at year
end (2014: £458.2m).
PROFORMA INCOME STATEMENT
This represented a ratio of 2.8 times net debt to EBITDA at
31 December 2015 (2014: 6.5 times) which is the lowest level
of debt held by the Group since its formation in 2007. This
level of debt was also helped by the timing of some of our
IPO fees, with £16.0m being paid out after the year end.
INCOME STATEMENT
The key lines of the income statement for the year are
summarised below and include analysis of revenue, EBITDA
prior to exceptional items, exceptional items, EBIT and profit
before tax. Proforma adjustments have been made to remove
IPO, related exceptional costs and record finance costs in
relation to the new debt structure, to enable us to compare
like for like performance. An adjustment to income tax has
been made to reflect the Group’s expected ongoing effective
tax rate of 15%.
Revenue
EBITDA prior to exceptional items
Depreciation
Amortisation – software
Amortisation – acquired intangibles
EBIT prior to exceptional items
Exceptional items excluding IPO costs
Reported EBIT prior to IPO costs
IPO-related exceptional operating
costs
Reported EBIT
IPO-related exceptional finance costs
Net finance costs1
Gain on disposal of associate
Share of profit in associate
Profit before tax
Taxation2
Profit/(loss) from continuing activities
Non-controlling interest
Profit attributable to ordinary
shareholders
* unaudited
36
2015
Reported
£m
369.0
86.2
(4.4)
(15.8)
(23.0)
43.0
(10.3)
32.7
(22.5)
10.2
(21.2)
(60.7)
–
–
(71.7)
25.9
(45.8)
(4.6)
(50.4)
Adjustment*
£m
2015*
Proforma
£m
2014
Reported
£m
Adjustment*
£m
–
–
–
–
–
–
–
–
22.5
22.5
21.2
47.7
–
–
91.4
(28.9)
62.5
–
62.5
369.0
292.3
86.2
(4.4)
(15.8)
(23.0)
43.0
(10.3)
32.7
–
32.7
–
(13.0)
–
–
19.7
(3.0)
16.7
(4.6)
12.1
70.0
(3.8)
(11.0)
(20.9)
34.3
(12.6)
21.7
0.0
21.7
0.0
(71.8)
9.8
1.7
(38.6)
1.7
(36.9)
(2.1)
(39.0)
–
–
–
–
–
–
–
–
–
–
–
56.9
–
–
56.9
(4.4)
52.5
–
52.5
2014*
Proforma
£m
292.3
70.0
(3.8)
(11.0)
(20.9)
34.3
(12.6)
21.7
–
21.7
–
(14.9)
9.8
1.7
18.3
(2.7)
15.6
(2.1)
13.5
FINANCIAL REVIEW
REVENUE
Revenue for the year was £369.0m, with growth across all
segments of the business. Investment Solutions saw growth
organically through corporate actions and project work with
existing customers, supplemented by acquisitive growth
from the purchases of Selftrade and TransGlobal. There was
growth in Pensions Solutions through an increase in project
work and the full year impact of the acquisition of MyCSP.
Intelligent Solutions also saw revenue grow, benefitting from
the acquisitions of Pancredit and Invigia in 2014 and organic
growth. Interest revenue increased due to higher interest
earning balances and improved treasury management.
Investment Solutions
Revenues increased by 24.7% to £118.3m, compared to
2014, with strong organic growth including corporate action
activity (2015: £6.2m, 2014: £3.2m) and the contribution of
acquisitions. Revenue grew organically by 9.8%.
EBITDA prior to exceptional items grew by 21.2%, driven by
the increase in revenue but at a slightly lower margin due to
the change in the product mix. Within Investment Solutions,
the Investment Services business grew strongly, supported by
the acquisition of Selftrade.
Intelligent Solutions
EBITDA PRIOR TO EXCEPTIONAL ITEMS
EBITDA prior to exceptional items is a key measure of the
Group’s performance. It reflects profit before finance costs,
taxation, depreciation and amortisation and exceptional
items. EBITDA prior to exceptional items of £86.2m increased
by 23.1% in 2015, reflecting the impact of acquisitions made
in the current and prior year, organic growth, and improved
cost management.
Revenues increased by 10.4% to £98.9m, compared to 2014,
driven by full year contributions from the Pancredit and
Invigia acquisitions we made in 2014, which created sales
of complaints management contracts to financial services
clients, and strong demand for our credit administration
software. Organic revenue growth was 1.3%, with strong
organic growth from Invigia and Pancredit being offset by
a small decline in other revenue.
REPORTABLE SEGMENTS
The Group reports its results in four segments: Investment
Solutions, Intelligent Solutions, Pension Solutions and Interest
Income, supported by central functions. The Board monitors
the performance of the four segments through revenue and
pre-exceptional EBITDA. The results of these segments were
as follows:
2015
£m
2014
£m
Reported
Growth
%
Organic
Growth
%
Reportable segments
Revenue
Investment Solutions
Intelligent Solutions
118.3
98.9
94.9
89.6
24.7%
10.4%
40.7%
9.8%
1.3%
8.0%
Pensions Solutions
142.5
101.3
Interest Income
9.3
6.5
43.1%
13.4%
Total revenue
369.0
292.3
26.2%
6.8%
EBITDA pre
exceptional
Investment Solutions
Intelligent Solutions
Pensions Solutions
Interest Income
Central costs
Total EBITDA
pre exceptional
35.5
22.7
26.8
9.3
(8.1)
86.2
29.3
16.3
21.7
6.5
(3.8)
70.0
21.2%
39.3%
23.5%
43.1%
113.2%
23.1%
EBITDA prior to exceptional items increased by 39.3%
through strong revenue growth, an increasing proportion
of sales coming from software licences and the benefit
of focusing on our cost base, driving efficiency across the
division.
Pension Solutions
Revenues increased by 40.7% to £142.5m, compared to 2014,
due to the full year impact of the increased shareholding in
MyCSP plus an increase in long term project income from
existing customers. Revenue grew organically by 8.0%, with
clients spending more on projects caused by the constant
change to UK pension rules.
EBITDA prior to exceptional items increased by 23.5% to
£26.8m as a result of revenue growth. Margins declined due
to a higher proportion of revenue coming from MyCSP, which
is a lower margin business than the majority of our pension
operations. The latter owns a lot more intellectual property
that we continue to invest in.
Interest
Revenue from interest was 43.1% higher than the prior year,
due to higher average client cash balances of £1,296m
(2014: £835m), and includes the benefit that the Group has
secured through entering into three-year interest rate swaps
at a blended rate of 1.03%, relating to £650.0m of cash
balances which expire in July and August 2018.
1 Proforma net finance costs has been presented to better reflect the
cost that would have been incurred had the Group’s current debt structure
been in place throughout the current and prior year including the associated
swap agreements.
2 Proforma taxation has been presented to better reflect the tax charge that
would have been incurred had the Group’s current debt structure been in
place throughout the current and prior year at an estimated effective tax rate
for the Group of 15%.
37
SECTION 01Equiniti Group plc Annual Report 2015STRATEGIC REPORT FINANCIAL REVIEW
EARNINGS BEFORE INTEREST AND TAX
EBIT
EBITDA prior to exceptional items
Depreciation
Amortisation – software
Amortisation – acquired intangibles
2015
£m
86.2
(4.4)
(15.8)
(23.0)
2014
£m
70.0
(3.8)
(11.0)
(20.9)
%
23.1%
15.8%
43.6%
10.0%
EBIT prior to exceptional items
43.0
34.3
25.4%
Exceptional items –
non-IPO related
(10.3)
(12.6)
-18.3%
EBIT prior to IPO costs
32.7
21.7
50.7%
EBIT remains an important measure of the Group’s
performance, reflecting profit before finance costs and
taxation. In 2015, reported EBIT prior to IPO related
exceptional costs was £32.7m, an increase of £11.0m (50.7%)
compared with the prior year (£21.7m). Reported EBIT growth
was partially offset by an increase in amortisation of acquired
intangibles, which rose through our acquisition programme.
Exceptional items
Operating costs
Acquisition related expenses
Restructuring and other costs
Property costs
IPO-related costs
Operating costs – exceptional items
Finance costs
Write off of unamortised fees of previous
finance arrangement
Other financing fees
Finance costs – exceptional items
2015
£m
2014
£m
2.2
8.1
–
10.3
22.5
32.8
12.3
8.9
21.2
2.6
8.1
1.9
12.6
–
–
–
–
NET FINANCE COSTS
Group net finance costs before exceptional items fell by
£11.1m to £60.7m (2013: £71.8m) reflecting the benefits of
the Group’s new capital structure and loan agreements. On
an unaudited proforma basis, which reflects interest on a like
for like basis under the new loan arrangements, net finance
costs fell to £13.0m from £14.9m in 2014.
LOSS BEFORE TAX
The Group made a loss for the year from continuing
operations of £71.7m, compared to £38.6m in 2014. On an
unaudited proforma basis, the Group’s profit before tax
increased from £18.3m in 2014 to £19.7m in 2015.
EARNINGS PER SHARE
Earnings per share
Basic loss per share
2015
£m
2014
£m
Loss attributable to shareholders (£m)
(50.4)
(39.0)
Weighted average shares (million)
Basic loss per share (£)
54.3
5.0
(0.93)
(7.80)
The Group made a basic loss per share of £0.93 (2014: £7.80)
which is based on weighted average shares of 54.3 million
(2014: 5.0 million).
NORMALISED EARNINGS PER SHARE (UNAUDITED)
Normalised earnings per share
12.6
EBITDA prior to exceptional items
Depreciation
Amortisation – software
Net finance expense – proforma
Normalised PBT
Cash tax
Normalised PAT
Non-controlling interest
Normalised profit attributable
to ordinary shareholders
2015
£m
86.2
(4.4)
(15.8)
(13.0)
53.0
(8.0)
45.0
(4.6)
40.4
2014
£m
70.0
(3.8)
(11.0)
(14.9)
40.3
(6.0)
34.3
(2.1)
32.2
25.5%
Number of shares (million)
300.0
300.0
Normalised earnings per share (p)
13.5
10.7
Exceptional operating costs of £32.8m (2013: £12.6m) include
legal, advisory, banking and other costs incurred in respect of
the change of control of the Group that resulted in our listing
on the London Stock Exchange. In addition, exceptional
costs include costs of moving work offshore and costs related
to our acquisitions in the year. These relate primarily to the
integration of Selftrade in the first half of the year.
Exceptional finance costs of £21.2m include the write down
of the remaining unamortised fees that were capitalised
following the arrangement of the Group’s finance facilities in
2013 and other financing fees incurred as a result of the new
debt facility.
38
FINANCIAL REVIEW
As defined in the price range prospectus, the Group’s stated
dividend policy is a payout of around 30% of normalised
profit. Normalised profit excludes exceptional items and
amortisation of acquisition related intangible assets and
includes finance expenses on a proforma basis. Tax is
deducted at 15%, to reflect the Group’s estimated effective
tax rate. This better allows the assessment of operational
performance, the analysis of trends over time, the comparison
of different businesses and the projection of future
performance.
Normalised earnings per share was 13.5p compared to the
prior year adjusted earnings per share of 10.7p, based on the
number of shares in issue at 31 December 2015.
DIVIDEND
The recommended dividend payable in respect of the year
ended 31 December 2015 is £2.0m or 0.68p per share (2014:
£nil). This is in line with the Group’s stated policy. The amount
payable has been pro-rated for the timing of the Group’s
admission to the market in October 2015. This equates to
£12m or 4.08p per share on a full year basis.
Free cash flow
Free cash flow is EBITDA plus the change in working capital,
both prior to exceptional items, and is a key performance
indicator. The movement in working capital of £11.4m
excludes cash flows relating to exceptional items and is
indicative of the Group’s commitment to improve its working
capital position through automating invoice generation and
improving payment terms.
Capital expenditure
Net expenditure on tangible and intangible assets was
£18.4m (2014: £20.8m). This represents 5.0% of revenue (2014:
7.1%) reflecting the Group’s commitment to developing
industry leading software.
Net interest costs
Net interest paid decreased by £1.6m to £29.4m (2014:
£31.0m) as we started to see savings from the change in
capital structure in October 2015. Total interest bearing loans
decreased from £485.5m to £320.0m, at a lower rate
of interest.
Exceptional items
CASH FLOW
The Group generated a free cash flow of £97.6m (2014:
£72.5m) representing a conversion of EBITDA prior to
exceptional items to free cash flow of 113% (2014: 104%).
The main movements in cash flow are summarised below:
Exceptional items relate to costs associated with the business
listing on the London Stock Exchange, offshoring work and
acquisitions. £16.0m of IPO fees were also paid after the
year end.
Net increase in borrowings
Cash flow summary
EBITDA prior to exceptional items
Working capital movement
Free cash flow
Cash flow conversion
Capital expenditure
Net interest costs
Proceeds from issue of share capital
Net increase in borrowings
Repayment of loans
Exceptional items – refinancing
Exceptional items
Investment in acquisitions
Taxes paid
Other cash flows
Net cash movement
2015
£m
86.2
11.4
97.6
113%
(18.4)
(29.4)
495.0
274.5
(706.9)
(14.8)
(24.2)
(19.9)
(1.5)
(5.6)
46.4
The Group raised £250.0m by way of a new bank loan and
increased its revolving credit facility by £25.4m to £150.0m
of which £70.0m has been drawn down at the year end.
Net refinancing cash flows
On listing on the London Stock Exchange, the Group repaid
its bond loan notes, PIK loans, preferences shares and other
loans to related parties.
Investment in current year acquisitions
Net cash outflow on current year acquisitions was £19.9m
(2014: £30.3m). Details of acquisitions are given later in this
financial review.
2014
£m
70.0
2.5
72.5
104%
(20.8)
(31.0)
–
45.2
Tax paid
MyCSP and our Indian operation pay tax on their activities.
No tax is payable by the rest of the Group in 2015 or 2014.
–
–
(18.7)
(30.3)
(2.6)
0.4
14.7
39
SECTION 01Equiniti Group plc Annual Report 2015STRATEGIC REPORT FINANCIAL REVIEW
Both the ICS and Paymaster pension schemes are undergoing
their triannual valuations, which will result in a funding plan
being agreed to clear the pension deficits over a number of
years.
TAXATION
Equiniti Group plc is a UK based group, with some support
services based in India.
Under its pre IPO finance structure, the Group only paid tax
on its Indian and MyCSP operations, due to losses being
available to offset most of the Group’s trading profits. £1.2m
was paid in 2015 and £2.6m in 2014
Post IPO, interest payable has reduced by c£13m pa which
will increase the pre-tax profit in the Group. Equiniti still has
the following tax assets to utilise, however:
• Schedule D1 trading losses of £224m (2014: £194m)
• Intangible and tangible tax assets of £400m (2014: £395m)
• Other tax assets of £33m (2014: £44m)
This will allow the Group to benefit from a low effective tax
rate for the foreseeable future. For 2016, this is estimated at
approximately 15% of pre-tax profit.
A deferred tax asset of £20.0m has been recognised as at
31 December 2015 as a result of the group refinancing in
October 2015 which reduced the forecast group annual
interest charge, with the result that previously unrecognised
losses have now been recognised as it is reasonably probable
that they will be utilised by the Group over the next five years.
The losses have been valued at 19%, the forecast rate for
them to be used over the next five years.
ACCOUNTING POLICIES
During the year the Group reviewed its accounting policies.
This has led to the period intangible assets are amortised over
being standardised at five years. The effect of this is explained
in note 2.1 of the accounts. No other accounting policies were
changed in the financial year.
John Stier,
Chief Financial Officer
7 March 2016
BANK BORROWINGS AND FINANCIAL COVENANTS
At the end of December 2015, net debt was £246.0m
(2014: £458.2m).
Net debt
Cash and cash equivalents
Senior debt
Revolving credit facility
Other
2015
£m
(76.5)
2014
£m
(30.1)
250.0
440.0
70.0
2.5
45.5
2.8
246.0
458.2
Debt reduced in the year by £212.2m to £246.0m, through
strong cash flow and the conclusion of our Initial Public
Offering, which included a refinancing and resulted in the
business’s admission to the London Stock Exchange in
October 2015. This refinancing has reduced the Group’s
weighted cost of debt from 7.6% at the end of 2014 to 3.1%
at the end of 2015, a rate that is fixed under swap contracts to
October 2018.
The fully drawn senior term debt facility and the revolving
credit facility are available for a five year term to October
2020. £80m of the £150m revolving credit facility was undrawn
at the year end. The Group has substantial liquidity to support
its growth ambitions and ongoing working capital needs.
ACQUISITIONS
During the year the Group completed two acquisitions.
On 23 January 2015, the Group completed the acquisition
of the assets and customer portfolio of Selftrade, an online
execution-only stockbroker, for total consideration of £17.6m,
paid on completion. Selftrade has approximately 104,000
stockbroking clients holding £3.9 billion in assets. This
business sits within the Investment Solutions segment.
On 3 September 2015, the Group purchased the entire issued
share capital of TransGlobal Payment Solutions Limited for
total consideration of £5.2m. £2.9m was paid on completion
of the deal with up to £3.0m payable (discounted to £2.3m)
as contingent consideration. TransGlobal is the technology
company that powers the platform for the Group's foreign
exchange payments business, Equiniti International Payments.
This company sits within the Investment Solutions segment.
Both acquisitions will widen our product set allowing us to
cross sell in to our client base to drive organic growth.
RETIREMENT BENEFITS
The Group operates three defined benefit pension schemes,
which are all closed to new members. These are the Paymaster
Pension Scheme, the ICS Pension Scheme and the MyCSP
Limited Pension Scheme.
The aggregate deficit across all three schemes is £13.5m
(2014: £15.5m) The Group is currently exploring its ability to
close all schemes to future accrual, as well as consolidating its
defined contribution pension plans into a single provider.
40
FINANCIAL REVIEW
ADJUSTED* REVENUE (£M)
FREE CASH CONVERSION
NORMALISED EPS (UNAUDITED)
380.0
360.0
340.0
300.0
280.0
260.0
240.0
220.0
200.0
369.0
291.4
262.5
243.8
120%
110%
100%
90%
80%
70%
60%
50%
112%
109%
104%
113%
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
13.5
10.7
2012
2013
2014
2015
2012
2013
2014
2015
2012
2013
2014
2015
* Normalised EPS has not been stated before 2014
with the business operating under a fundamentally
different capital structure before then, making
comparisons meaningless
ADJUSTED* REVENUE GROWTH
LEVERAGE – NET DEBT: EBITDA
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
26.6%
11%
7.7%
6.5x
5.5x
5.6x
2.8x
7.0x
6.0x
5.0x
4.0x
3.0x
2.0x
1.0x
0.0x
2012
2013
2014
2015
2012
2013
2014
2015
ADJUSTED* EBITDA PRIOR
TO EXCEPTIONAL ITEMS (£M)
ADJUSTED* EBITDA MARGIN
86.2
65.5
67.3
61.4
90.0
85.0
80.0
75.0
70.0
65.0
60.0
55.0
50.0
45.0
40.0
25.5%
25.0%
24.5%
24.0%
23.5%
23.0%
22.5%
22.0%
25.2%
25.0%
23.1%
23.4%
2012
2013
2014
2015
2012
2013
2014
2015
Financial history has been provided for the financial
years from 2012, where the metric is available, to
correspond with the financial history presented in
the Equiniti Group plc prospectus for the Initial
Public Offering in 2015. This will expand to a five
year history in future reporting periods.
* Revenue and EBITDA have been adjusted in
2012-2014 to reflect the impact of fundamental
changes to the business, as outlined in the
Group's prospectus. No adjustments have been
made to 2015 revenue and EBITDA.
41
SECTION 01Equiniti Group plc Annual Report 2015STRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES
Principal Risks and Uncertainties
Equiniti has a particular focus on identifying, managing and mitigating risk. The
complex administration and payment services we provide, and the trust placed
in us by our clients to deliver them accurately and effectively, mean that we face
wider and more complex risk management challenges than many businesses.
This position of trust sits on top of the
risks commonly faced by businesses
that depend on their software and
technology platforms, and provides
an extra dimension to defining and
managing our risk appetite and control
systems.
OUR RISK MANAGEMENT
FRAMEWORK
We have an enterprise-wide risk
management (EWRM) framework,
which is defined by our Group Risk
Management Policy and summarised in
the diagram below. At each stage of the
risk management framework, we look
to establish clear accountability and
responsibility for risk, to drive a culture
of transparency and openness.
The Board has ultimate responsibility
for our system of risk management
and internal control. It delegates
responsibility for oversight and directing
development of the EWRM to the Risk
Committee and then to our risk owners,
who are the managing directors (MDs)
of our businesses, operations and
information technology. Each MD has
two senior risk leaders, who oversee
the risk process in their area. The Group
Chief Risk Officer oversees the risk
management system as a whole, while
the Head of Operational Risk oversees
the group-wide risk process.
The Board approves our risk appetite,
which is the amount and type of risk
we are willing to take in pursuing our
strategic objectives and value creation.
The Board risk appetite directs our
businesses to apply resources wherever
we deem that risk is above our appetite,
enabling us to bring risk within our
appetite. The statement articulates
the aggregate level and types of risk
we are willing to assume and includes
qualitative statements as well as
quantitative measures of impact,
for example in relation to our profits.
Our MDs are required to establish
appropriate and explicit mechanisms
for identifying, assessing and managing
risks in their area, in accordance with
the EWRM. They identify and define
the risks they face, plot the risks’ impact
against the probability of them arising,
and log them in a divisional risk register.
RISK APPETITE
RISK
MANAGEMENT
CATEGORIES
OF RISK
CULTURES &
RESOURCES
C
O
A
F
T
E
R
I
G
S
O
K
R
I
E
S
C
R
U
E
L
S
T
O
U
R
U
E
R
S
C
E
&
S
R
I
S
K
M
A
N
A
G
E
M
E
N
T
R
I
S
K
A
P
P
E
T
I
T
E
GOVERNANCE
G
O
V
E
R
N
A
N
C
E
Shared values,
attitudes, beliefs and
knowledge which
supports EQ's ability to
embed EWRM
Commonly agreed
language to enable us
to clearly and effectively
communicate causes
and effects of risk
Approach to
identifying, assessing,
mitigating and
accepting risk to
support proactive and
cost effective decision
making
42
The amount and type
of risk that Equiniti is
willing to take in pursuit
of value and strategic
objectives
The approach to
making decisions and
putting them into
practice
PRINCIPAL RISKS AND UNCERTAINTIES
PRINCIPAL RISKS AND
UNCERTAINTIES
The tables on pages 44 to 45
set out the principal risks and
uncertainties facing the Group.
These are divided into ‘annual
cycle’ risks, which are risks that
could materialise within the next
12 months, and a number of risks
that could affect our business in
the longer term.
The EWRM framework sets out common
language for describing risk, enabling
us to consistently categorise and
communicate risk across the Group.
The Risk Committee reviews and
challenges all risk logs each quarter and
undertakes detailed reviews of specific
areas. For example, where risk exposure
is expected to increase due to external
events and where the Committee
requires further understanding of
mitigations in place to manage a
material risk.
Risk is also considered as part of our
monthly Group Performance Review
sessions, which are led by the Chief
Executive and Chief Financial Officer
(CFO) and involve all divisional MDs
and finance directors.
We also have an Internal Audit function
that reports directly to the Chair of the
Audit Committee. Its role is to oversee
the ongoing challenge of the design
and operation of our risk framework
to provide comfort that the framework
is effective, and to raise any necessary
remediating actions.
We recognise that every employee
has a role to play in managing risk.
Policies and risk appetite statements are
communicated throughout the Group,
encouraging employees at all levels to
consider risk in their decision making
and to be personally accountable for
the risks they take. This encourages the
early escalation of risks and the creation
of mitigation plans as appropriate.
RISK MANAGEMENT AND
GOVERNANCE OF REGULATED
ENTITIES
Equiniti Financial Services Limited
(EFSL) is the Group’s most significant
FCA-regulated entity. It must ensure
that it can meet its regulatory capital
requirements and has sufficient liquidity
to meet its liabilities as they fall due. It
must also comply with a range of other
regulatory obligations, such as the FCA’s
conduct of business rules and the need
for periodic regulatory supervisory visits.
To help it meet these requirements,
EFSL has implemented its own
governance structure. This includes a
Board with an independent chair, who
also chairs EFSL’s Audit Committee.
One of the Group’s independent non-
executive Directors, Dr Tim Miller, is also
a non-executive Director of EFSL and
chairs its Risk Committee.
EFSL has monthly Board meetings and
quarterly Risk and Audit Committee
meetings, with its Remuneration and
Nominations Committees meeting
periodically. EFSL’s Risk Committee
reviews and challenges the Company’s
risk assessment and log, which flow up
from its executive management and risk
processes. This is reviewed by the Chief
Risk Officer to ensure risk management
is consolidated across all of Equiniti.
A detailed description of EFSL’s risk
management approach, risk governance
and risk appetite can be found in its
Pillar 3 disclosures, which are available
on our website at https://equiniti.
com/about/statutory-and-regulatory-
reports/2015/04/capital-requirements-
directive-2015
43
SECTION 01Equiniti Group plc Annual Report 2015STRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES
ANNUAL CYCLE RISKS
RISK
Corporate actions
We earn revenue from our clients’ corporate
actions, such as initial public offerings, mergers,
acquisitions and share buybacks. The level of
corporate actions in any given year is hard to
predict, as corporate actions vary in size and
frequency, and fluctuate according to factors
such as macroeconomic conditions.
IT security breach
We rely on our systems to process a large number
of complicated transactions each day. These
systems contain confidential information about
our clients and their employees, shareholders,
pensioners and customers. Breaches of our IT
security could lead to unauthorised access to or loss
of this information, or prevent us from using our
systems to provide services to clients.
Loss of key clients
While our business is spread across 1,700 clients,
we have a small number of clients that are material
to our business. Our largest single client provided
7.5% of our 2015 revenues and our top ten clients
made up 35.5% of our 2015 revenues between
them. We could lose a key client when its contract
with us comes up for renewal or if a client is
acquired by a company that we do not serve.
Increased regulatory burden
There is an ongoing trend for greater regulation
in our markets. For example, the EU Directive
on Markets in Financial Instruments and its
accompanying regulation (MiFID II) introduces
a number of changes, including more extensive
supervisory powers for regulators, greater
market infrastructure and transaction reporting
requirements, and more robust investor protection.
Attraction and retention of high-calibre employees
We depend on the knowledge, expertise and
efforts of our people, including our senior
executives and other senior management,
Key Account relationship managers and key IT
personnel. These individuals are instrumental
in setting our strategic direction, operating our
business, identifying, recruiting and training
other key personnel and identifying business
opportunities.
44
IMPACT
MITIGATION
The level of corporate actions is both an
opportunity and a risk for us, and means
that a proportion of our revenue is likely to
remain cyclical.
This is less than 2.5% of our overall
revenue. We have sufficient growth
opportunities to offset any short-term
cyclical downside in this area.
Links to the following strategy elements:
1
2
An IT security breach could
result in loss of business, damage to
our reputation, litigation and regulatory
investigation and penalties.
Links to the following strategy elements:
1
2
4
5
6
Loss of a key client could significantly affect
our results from operations.
Links to the following strategy elements:
1
4
The Group’s data centres have
been specifically configured to be
both secure and resilient, with data
replicated between the live and
secondary data centres on a real-time
basis.
Continued investment in information
security personnel, tools and services
is strengthening our approach to
information security, in line with
the technological changes and the
requirements of the marketplaces in
which we operate. In an ever-changing
risk landscape, this serves to protect
the information that we are entrusted
with and the services we provide. This
is crucial in maintaining the trust of
clients and our ability to attract and
retain business.
Our client relationships are very deep
and longstanding, leading to high cost
of change for clients should they move
to an alternative service provider. In
addition, clients often take a number
of services, spread across a number of
contracts, reducing our reliance to any
one service line with a client.
Increasing regulation is both a risk and
an opportunity for Equiniti. For example,
MiFID II has the potential to increase
our compliance costs and introduces the
possibility of higher fines for infringements.
We are able to offset the costs of
regulation with client pricing and
upselling new services, driven
by the growing UK regulatory
environment.
Conversely, the growing regulatory
burden on our clients encourages them to
outsource to providers such as us.
Links to the following strategy elements:
1
2
3
6
The loss of one or more key individuals
could impair our business and its
development, until we find qualified
replacements. Failure to attract and retain
motivated people with the right skills could
limit our ability to grow and to provide
clients with high-quality and competitive
services, with a corresponding impact on
our business, financial condition and results
of operations.
Links to the following strategy elements:
1
2
3
4
5
6
Equiniti is protected by the service
contracts in place with key executives.
We also offer competitive packages
to recruit the right talent, including an
LTIP programme to align management
and shareholder interests.
PRINCIPAL RISKS AND UNCERTAINTIES
RISK
Change and transformation
We have an ongoing change and transformation
programme to improve our efficiency and reduce
our costs, including increasing the volume of back-
office processing and IT functions carried out in our
centre in Chennai, India.
While we are undergoing this change, there
is always a risk to service delivery.
Links to the following strategy elements:
6
IMPACT
MITIGATION
Change in regulatory trends
Our business has benefited in recent years from
FCA action requiring remediation by clients, and
in particular the remediation of mis-sold PPI. Any
reduction of the FCA’s remediation requirements
could lower demand for our services.
Loss of remediation business, affecting our
results from operations.
Links to the following strategy elements:
1
2
We carefully manage our change
and transformation programme, to
minimise the risk to the service delivery.
We undertake detailed planning and
dual running before we fully transfer
any services to India. If this shows any
impact on service delivery, we address
the issues before the service goes live.
Regulation and remediation to protect
consumers is a growing trend in the
UK. As one area such as PPI declines,
others such as current account or
pensions mis-selling emerge, causing
the overall market to grow.
LONGER-TERM RISKS
RISK
Outsourcing trends
A number of trends are driving demand for our
services, as described in the markets section on
pages 16 to 17 of this report. Any reversal of these
trends, leading to less outsourcing or a reduction
in spending on outsourcing, could correspondingly
affect demand for our services.
IMPACT
MITIGATION
Reduction in growth or loss of revenues,
affecting our results of operations.
Links to the following strategy elements:
1
2
3
5
Client interest
We earn interest on some balances we hold on
clients’ behalf. In 2015, this accounted for 10% of
our EBITDA. A change in regulation could require
us to pass through interest received to our clients.
Loss of revenue and profits from interest
income.
Links to the following strategy elements:
1
2
Dematerialisation of share certificates
Equiniti is the UK’s largest broker for certificated
trades. The UK government intends to implement
the European Directive on dematerialisation of
paper share certificates. As a result, shareholder
records currently held by UK registrars in paper
form will be replaced by an electronic format.
Dematerialisation will result in an
opportunity to create an electronic
relationship with shareholders. However,
dematerialisation could also affect our
sharedealing volumes and revenues, as we
would be unable to charge fees for services
relating to lost share certificates.
Links to the following strategy elements:
1
These are long-term trends that show
no sign of abating. Many clients
continue to perform services in-house
that can be performed more efficiently
with an outsourcing partner like
Equiniti. We therefore expect this to
support growth for the foreseeable
future.
Our charging mechanisms are clear
to all clients in the contracts we sign
and this is part of our pricing structure.
If regulation affected our ability to
continue with this, we would price our
services in a different way so we can
continue investing in the technology
and services needed to support clients.
This is not due to take effect until
2023 for new securities and 2025 for
existing ones, as per EU regulation.
Implementation will reduce our costs of
delivering this service. We also believe
that setting an electronic relationship
with paper-driven clients will lead to
revenue opportunities afforded by
digital relationships with shareholders,
which will increase our D2C customer
base and overall be positive for the
Group.
45
SECTION 01Equiniti Group plc Annual Report 2015STRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES
Viability Statement
1. ASSESSMENT OF PROSPECTS
Equiniti conducts a significant portion of its business through
recurring revenue secured through long term contracts. It has
recently arranged long term financing facilities as a result of
the IPO and has a stated modest growth strategy, evidenced
both by its past performance and resilience and the position it
occupies in the market. As such, a three year period sits within
these parameters and has been deemed to be a suitable
timeframe for the viability statement.
The Group’s strategy is well documented: a leading provider
of technology and solutions for complex and regulated
administration, serving blue-chip enterprises and public sector
organisations. As such, the key factors affecting the Group’s
prospects are:
• The underlying mix and quality of our client base: we serve
70% of the companies in the FTSE 100, and our revenues
are distributed: c.40% derived from our top 25 private
clients, a further 39% from other private clients and another
c.21% from our public sector clients. As such, we have a
resilient underlying portfolio of clients. We normally provide
multiple services under many contracts to each client which
diversifies our risk further
• Market position: the Group is the leading provider of share
registration and corporate action services, and the number
two provider by the number of pension scheme members.
The underlying tenure of FTSE100 clients for share
registration extends beyond 20 years
• Platforms and technology: the Group has invested
continuously in developing and acquiring platform
technology that is both proprietary and well recognised
in the Industry and by its clients
• Modest but realistic growth aspirations: the Group operates
in a market that has expected growth of c.5-6% p.a. In 2015
we have delivered c7% organic growth
2. THE ASSESSMENT PROCESS AND KEY
ASSUMPTIONS
The Group’s prospects are assessed primarily through its
strategic and financial planning process. This includes a
detailed annual review of the ongoing plan, led by the Group
Chief Executive and CFO in conjunction with divisional and
functional management teams. The Board participates fully in
the annual process by means of an extended Board meeting.
The output of the annual review process is a set of objectives,
detailed financial forecasts and a clear explanation of the
key assumptions and risks to be considered when agreeing
the plan. The latest updates to the plan were finalised in
December 2015. This considered the Group’s current position
and its prospects over the next five years, and reaffirmed the
Group’s stated strategy.
The detailed financial forecasts are prepared for the five year
period to 2020, so that four years and ten months remain at
the time of approval of this year’s annual report. The first year
of the financial forecasts form the Group’s operating budget
and is subject to a rolling forecast process throughout the
year. Year two to five of the forecasts are extrapolated from
the first year, based on the overall content of the strategic
plan. Progress against financial budgets and key objectives
are reviewed in detail on a monthly basis by both the Group’s
executive team and Board. Mitigating actions are taken
whether identified through actual trading performance or the
rolling forecast process.
The key assumptions within the Group’s financial forecasts
include:
• 5% per annum revenue growth, supported by market trends
and increased cross selling into our customer base
• Modest margin improvement driven by operating leverage,
offshoring, automation and property rationalisation
• No change in the stated dividend policy
• No change in capital structure given the Group has secured
term debt and an RCF facility out to October 2020
3. ASSESSMENT OF VIABILITY
Although the output of the Group’s strategic and financial
planning process reflects the Directors’ best estimate of the
future prospects of the business, the Group has also assessed
the financial impact of a number of alternative scenarios.
These represent stresses which include the following potential
scenarios:
• Depressed market activity leading to a prolonged reduction
in Corporate Action revenue
• Reduction in revenue growth to only 1% p.a. for a
prolonged period of time, with a lag in cost reduction
action of up to nine months
• Significant change programmes (offshoring/automation/
property rationalisation) only deliver 50% of anticipated
benefits
• 20% reduction in planned EBITDA across a three year
period
The results of the stress testing, including a combination
of the individual scenarios, demonstrated that due to the
Group’s high cash generation and access to additional funds
that it would be able to withstand the impact in each case.
Mitigants considered as part of this stress testing included
cost reduction programmes, dividend cuts and a reduction
in capital expenditure.
4. VIABILITY STATEMENT
Based on the results of the analysis, the Directors have a
reasonable expectation that the Company will be able to
continue in operation and meet its liabilities as they fall due
over the 3 year period of their assessment.
46
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HAVING A TEAM AS PROFESSIONAL AS
EQUINITI (AND VERY MUCH PART OF
OUR TEAM) SUPPORTING OUR AGM
ALLOWS COLLEAGUES AND MYSELF
TO DEAL WITH ALL THE OTHER
MATTERS THAT ARISE.”
TIM GEORGE, DEPUTY COMPANY SECRETARY,
CARILLION PLC
RESOURCES AND RELATIONSHIPS
This section describes the
resources and relationships
that underpin our business
success. It sets out how
we develop our people
and technology platforms,
how we manage our
relationships with clients,
suppliers, communities
and charities, and how
we work to reduce our
environmental impact.
People
People are at the heart of the
sophisticated services we offer
to clients. This means that our
business success depends on
attracting the best people and
enabling them to reach their
potential. We therefore need
to effectively manage talent,
succession and performance,
drive engagement and ensure
we share common values that
inform our behaviour.
OUR PEOPLE STRATEGY
In 2015, we continued to
implement our people strategy,
which supports our overall
business strategy. It has the
following elements:
BECOMING A HIGH-
PERFORMANCE ORGANISATION
ASSURING EXCELLENCE
BUILDING CAPABILITY
LEVERAGING TALENT
PEOPLE ARE AT THE HEART OF
THE SOPHISTICATED SERVICES WE
OFFER TO CLIENTS.
Pictured above: Lydia Ambrose
48
RESOURCES AND RELATIONSHIPS
BECOMING A HIGH-
PERFORMANCE ORGANISATION
This requires us to employ robust
performance management techniques,
so we can help all our people to perform
to their potential.
Our performance management
framework assesses both what our
people do and how they do it. This
means measuring performance against
our business objectives and ensuring
behaviours align to our values (see
page 51). Issues identified during
performance management are linked
to the individual’s development needs.
Our approach strengthens the link
between performance and reward,
so we appropriately recognise good
performance.
In 2015, we once again moderated the
performance of our top three levels of
management, as well as other people
eligible for the management bonus or
sales incentive schemes.
High performance also requires
engaged people, who understand our
strategy and their part in achieving
our goals. A key focus in 2015 was to
improve internal communications.
We have established a site champion
community, to help us communicate
our transformation programmes.
As Equiniti has been through a
significant amount of change in
2015, we did not conduct our planned
employee engagement survey. We
now intend to run this during 2016, to
enhance our understanding of what our
employees value about working for us
and where we can improve.
ASSURING EXCELLENCE
Assuring excellence means effectively
managing costs and reward, and
ensuring strong governance around
HR. A major focus of 2015 was
investing in and transforming our HR
function. The HR team also spent
considerable time supporting our wider
business transformation and efficiency
improvements.
We have continued to invest in
growing our footprint and capability
offshore, with an increase in HR, IT and
operational roles conducted from our
centre in Chennai.
PEOPLE
Our HR function has moved its back-
office recruitment, payroll and end-to-
end employee lifecycle administration
offshore. Having established a payroll
services division to support Equiniti, we
are now also offering this as a service to
clients, through our Intelligent Solutions
division.
As planned, we moved our HR function
onto our new Microsoft Dynamics
platform during 2015. The transition
went smoothly and was completed
on time and to budget. The new
platform ensures we have consistent
HR processes throughout the business
and provides much better management
information, helping us to manage our
people and the related costs more
effectively.
Another key initiative in the year
was building a new UK HR team
and establishing four centres of
excellence around reward, learning and
development, resourcing, and internal
communications and engagement.
This gives us an HR function that can
help drive business performance
and support talent and learning and
development through cost-effective
in-house teams.
Operational efficiency has been an
important theme across the Group in
2015. As part of this, HR led a project to
ensure the business was appropriately
resourced, with the right balance of
permanent staff and contractors. Using
contractors gives us flexibility but it
can result in knowledge ultimately
leaving the business. Long- term
reliance on contractors is also more
expensive than using permanent staff.
We have therefore reviewed our use of
contractors and where roles are required
on a long-term basis have either
converted contractors to employees or
replaced contractors with permanent
recruits. We now track this monthly as
part of our headcount forecasting, to
ensure we maintain the best use of our
resources. In addition, we enter 2016
with a cap on our onshore headcount
and a focus on offshoring to ensure we
leverage the efficiencies we can deliver
through using less expensive resources.
BUILDING CAPABILITY
We aim to enhance our capability
through effective resourcing, learning
and development.
In 2015, we placed significant focus on
hiring talent, looking at our leadership
and management teams and ensuring
we have the capability to deliver our
strategy and business plans. This
recruitment has taken account of where
and how we want to grow the business
and the capabilities we need to do
so. Increases in headcount have been
concentrated in sales, our business units
and in technology.
We also enhance our capability
through training. During the year we
invested in our core regulatory training
programmes, which cover key areas
such as anti-money laundering and
data protection. These programmes are
available online and have been rolled
out to all employees in the UK and India,
to ensure we meet our regulatory and
governance requirements. 16,459 online
compliance training modules have been
completed by all UK employees, with a
further 2,000 online compliance modules
completed by employees in our
Chennai office.
LEVERAGING TALENT
To reach our growth targets, we need
to make the most of our talent. This
means moving talent through the
business, having the right leadership
development and learning culture, and
putting in place mentoring and coaching
programmes.
In 2015, we continued to work on our
talent pipelines, identifying the talent
we have in the business and developing
pilot programmes which we will launch
in the first quarter of 2016.
We have also focused on putting in
place excellent leadership development
training, which can be accessed by staff
at all levels but is particularly useful for
more junior staff and talent at the early
stage of their careers. We have done
this in conjunction with Skillsoft, creating
learning portals covering leadership,
our sales academy and our people
manager academy.
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RESOURCES AND RELATIONSHIPS
PEOPLE
DIVERSITY
We recognise the value of a diverse workforce and look to offer
equal opportunities to everyone. Equiniti has an excellent gender
balance, with 50% of our employees being females and c50% male.
The diagram below shows our gender diversity at the year end.
2014
BOARD
8
BOARD
1
SENIOR
MANAGEMENT
21
SENIOR
MANAGEMENT
6
OTHER
EMPLOYEES
1666
OTHER
EMPLOYEES
1693
TOTAL
1695
TOTAL
1701
2015
BOARD
7
BOARD
1
SENIOR
MANAGEMENT
31
SENIOR
MANAGEMENT
7
OTHER
EMPLOYEES
2061
OTHER
EMPLOYEES
2099
TOTAL
2099
TOTAL
2107
HUMAN RIGHTS
Protecting human rights is important but we do not believe it is a
significant issue for our business. We ensure we protect the rights of
our people by adopting suitable employment practices, as described
in the Employees section of the Directors’ report. We also aim to act
ethically in all our business dealings.
50
RESOURCES AND RELATIONSHIPS
PEOPLE
c4,000
OUR VALUES
TRUST
EXCELLENCE
CLIENT FOCUS
BELIEF
PEOPLE
We act with
integrity and
openness in
our dealings
with others
We work hard
to get it right
first time and
keep our
promises and
commitments
to others
We add value
and build true
partnerships
We have
passion and
belief in what
we do and who
we are
We are
positive,
enthusiastic
and supportive
of one another
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RESOURCES AND RELATIONSHIPS
TECHNOLOGY PLATFORMS
Technology platforms
We deliver our services and solutions through a suite of
proprietary platforms, which provide state-of-the art technology
and functionality to our clients and give us a significant
competitive advantage.
Our platforms are well-invested, with
no major software rewrites required
over the next five years. Their flexibility
underpins our strategy of expanding
our service offering, while adapting
to changing client and regulatory
requirements. Because they are
proprietary, we can use them to
provide white label services to clients.
The platforms’ scalability supports
our business growth, with significant
capacity to process increasingly large
volumes of data and transactions.
We also have a track record of making
targeted acquisitions of companies
with exciting technology, which open
up new growth areas for us.
OUR FOUR PRIMARY PLATFORMS ARE SIRIUS, XANITE, COMPENDIA AND CHARTER
Compendia is our award-winning
pension administration and payroll
platform. It is used to manage records
and payments for over 7 million UK
pension scheme members. As well as
using Compendia in our own Pension
Solutions business, we also provide the
platform as a software solution to in-
house pension teams, either as an
on-premise installation or hosted in
our data centre.
Compendia offers self-service
functionality to scheme members,
through our mobile app and responsive
web design. This improves members’
experience, helps them to plan their
retirements, increases their engagement
with the scheme and improves efficiency
for the schemes themselves.
Charter is our case and complaints
management platform. It supports
Intelligent Solutions’ offering,
processing more than 4.5 million
complaints on behalf of clients. It is
a highly customisable solution, which
supports automated FCA reporting,
root cause analysis and secure data
management. It gives our employees
a wide variety of business-critical data
in a single view, enabling swift and
efficient processes.
OTHER KEY TECHNOLOGY
PLATFORMS
Our other key technology platforms
include Centive, our executive share
plans platform, and Pancredit, which
supports our loan administration
services.
Sirius is our core register management
platform, supporting our registration,
dividend payment and share plan
administration services. It can handle
vast processing volumes, managing
over 70 million data records on behalf
of 18.7 million shareholders and making
payments of £39 billion each year. Sirius
receives approximately 1 million internal
website hits each day and delivers an
average response time of less than
0.5 seconds.
Xanite is our custody and settlement
wealth management platform. Through
its interface with SWIFT and CREST, it
supports sharedealing for both retail
investors and corporate clients, as well
as our outsourcing services for wealth
managers. The platform also enables us
to provide asset custody services and
supports our growing D2C business,
which we deliver through the Selftrade
web and mobile offering.
52
RESOURCES AND RELATIONSHIPS
TECHNOLOGY PLATFORMS
THE PLATFORMS’ SCALABILITY
SUPPORTS OUR BUSINESS
GROWTH, WITH SIGNIFICANT
CAPACITY TO PROCESS
INCREASINGLY LARGE VOLUMES
OF DATA AND TRANSACTIONS.
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RESOURCES AND RELATIONSHIPS
CLIENTS
Clients
Our strategy is focused on organic growth, driven by cross-selling and up-selling
services to existing clients and bringing new clients into the Group. To do this,
we need to develop and maintain strong relationships with our clients.
We continue to benefit from the key
accounts programme we introduced
in 2014. It focuses on growing revenue
from our top 24 clients, by identifying
opportunities to up-sell and cross-
sell other solutions. This programme
is closely managed by two of our
executive Directors, David Beresford
and Paul Matthews, who have a cross-
business view of our clients’ activity. In
2015, this enabled us to deliver revenue
growth of 12% from the top 24.
The importance of cross-selling and
up-selling is shown by what we call our
‘X-factor’. Many clients join us initially
for share registration services. Through
cross-selling and up-selling we have
been able to increase the average
revenue for FTSE 100 clients to more
than 5 times the revenue of the
original service.
THE 'X-FACTOR'
AVERAGE REVENUE PER FTSE 100 CLIENT WAS APPROXIMATELY 5X SHARE REGISTRATION REVENUES1
TOTAL
C.5X
SHARE
REGISTRATION
1X
TOTAL
100%
B2B
46%
PENSION
SOLUTIONS
CROSS SELLING
AND UP SELLING
ACROSS
SERVICES1
OTHER REG.
SERVICES
CROSS SELLING
AND UP SELLING
ACROSS
CHANNELS1
INVESTMENT
SERVICES
EMPLOYEE
SERVICES
4%
SHARE DEALING
D2C
50%
SAYE/EXECUTIVE
B2B2C
Beyond our key accounts programme,
each of our divisions has specialist sales
teams who work with our clients and
potential clients to win new business.
We also have a bid support team, which
helps us to prepare tenders and to price
our contracts.
Source: Management
information
1. Based on 2014 sales
54
RESOURCES AND RELATIONSHIPS
SUPPLIERS
Suppliers
We have a small number of key suppliers.
These include:
• Lloyds Banking Group, which provides
savings carrier services and execution
and processing services
• Experian, which provides bankers’
automatic clearing gateway services
for payments
• CREST, which provides settlement
services for our sharedealing services
• Citigroup, which provides overseas
payment services
We have multi-year contracts with
our key suppliers. While they provide
services that are important to our
delivery to clients, the loss of any one
supplier would not have a material
effect on our business and we could
replace our suppliers without materially
disrupting our business.
Industry and trade bodies
Equiniti employs c4,000 people and provides services
that are important to millions of people across the country.
We therefore look to take an active role in protecting and
shaping the direction of our industry and the sustainable
development of our markets, and to give our senior leaders
a voice in key industry forums.
We joined the CBI in 2014 and have
committed to maintain our relationship
in 2016. We are full members of CSIT,
the Centre for Secure Information
Technologies at the Queen’s University
of Belfast, where we sit alongside
some of the world’s largest technology
companies including IBM, Infosys
and McAfee.
Markets where we are actively
involved with trade bodies include:
• Wealth management: the Wealth
Management Association, Securities
Industry Management Association,
Tax Incentivised Savings Association
and the London Stock Exchange
• Employee Services: IfsProshare, FEAS
and the Global Equity Organization
• Pension Solutions: Pension
Management Institute, Pension
& Lifetime Savings Association,
International Longevity Centre
• Information technology insight
and advisory: Gartner
• Information industry: Information
and Records Management Society
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RESOURCES AND RELATIONSHIPS
COMMUNITIES
WE OFFER UP TO
Communities
We believe we have a duty of care to the communities in which we
operate. In particular, we focus on supporting youth and education,
helping to identify the next generation of talent in our industry and
giving young people the opportunity to experience the world of work.
We offer work shadowing to young people,
along with graduate placements and
apprenticeship schemes. Our Belfast office's
innovative IT internship programme is in its
fourth year. It offers students, at an earlier
stage of their education, the opportunity to
obtain practical experience alongside the
BTEC level 3 qualification. The programme
helps to promote IT awareness, identify IT
talent among young people and generate
jobs for the unemployed. Each year we offer
three to four internship opportunities, with
the aim of placing graduates into suitable
permanent roles within Equiniti or preparing
them for alternative employment.
Our Worthing IT Apprenticeship scheme
is also in its fourth year and has seen all
apprentices move into permanent roles
within Equiniti, with a number of staff
progressing to roles of higher seniority
or responsibility.
We are delighted to have been invited
to participate in the Movement to Work
scheme. Spearheaded by Equiniti client
Marks and Spencer, the scheme is an
employer led initiative providing work
experience to unemployed young people
and giving support to help get young
people back into the workplace. Working
with The Prince’s Trust, we will pilot the
scheme in 2016.
Our Fintech Centre in Cardiff has long been
a supporter of Cardiff University and has an
ongoing graduate recruitment programme
for young developers. In 2015, we started a
four-year research programme in partnership
with the University, looking at the future of
investment decision tools. In 2016, we are
working towards the roll out of a Group wide
graduate programme.
56
RESOURCES AND RELATIONSHIPS
CHARITIES
Providing the infrastructure to support local
charitable activity across our locations benefits
the communities in which we operate and
empowers our staff to make contributions that
are meaningful and rewarding for them.
Equiniti’s national charity in 2015, as selected by
staff, was Winston’s Wish. Across our offices staff
have been raising funds through a range of locally
run activities, such as quiz nights, competitions,
dress down days and cake sales.
In addition, individuals, teams and offices across
the Group chose a number of charities throughout
the year, with fundraising activity often reaching
in excess of £150 per week. Many staff also give
valuable time to charities and we have long-standing
relationships with Chestnut Tree House and Queen
Alexandra Hospital Home.
SOME OF THE CHARITIES WE
SUPPORTED IN 2015:
EQUINITI STAFF HAVE RAISED
MORE THAN
£12,000
FOR CHARITY IN 2015
In 2016, we will continue to support local and staff
led initiatives which enhance the communities in
which we operate, the personal fulfilment of our
staff and the development of our team.
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SECTION 01Equiniti Group plc Annual Report 2015STRATEGIC REPORT RESOURCES AND RELATIONSHIPS
ENVIRONMENT
Environment
We believe in the need for
businesses to contribute to
reducing the global carbon
footprint, for the long-term
benefit of the environment.
We take this responsibility
seriously and look for areas
of opportunity beyond
meeting our minimum
obligations.
We await the outcome of a government
review of the solar panelling scheme
to inform our decision. Our recently
launched car scheme only includes
vehicles with CO2 emissions below
130g/km.
Through better management, we have
been able to divert 99% of the waste
we generate away from landfill.
Equiniti is committed to positively
managing energy use and to meeting
the reporting requirements for its
Carbon Reduction Commitment.
Over the last reported year, from April
2014 to March 2015, our consumption
of electricity and gas reduced by 3%.
As an eligible participant for the Energy
Savings Opportunity Scheme, we have
begun a review of our energy use, with
a view to further reducing our carbon
footprint and energy cost. As part of
this, we are considering installing solar
panelling at suitable premises across
the UK.
58
OUR CONSUMPTION
OF ELECTRICITY AND
GAS REDUCED BY
3%
RESOURCES AND RELATIONSHIPS
ENVIRONMENT/OUR APPROACH TO CSR
GHG EMMISSION
2015
2014
CHANGE %
Our approach to corporate
social responsibility (CSR)
VEHICLES
(BUSINESS TRAVEL)
324
292
11%
5,719
5,889
(3%)
TOTAL
BUILDINGS
AIR TRAVEL
TONNES
CO2 PER £M
TURNOVER
TURNOVER
£M
325
310
5%
CARBON INTENSITY
2015
2014
CHANGE %
17.3
22.2
(22)
369
292
26%
Vehicle business travel has been based on the use of a medium
sized car of average value, from the financial records each year
ending 31 December. Overall business travel by car has increased
by 11%, total miles covered 1,072k, up from 966k in 2014. MyCSP
is an estimate based on the yearly cost.
Buildings emmissions are based on data for the years ended
31 March 2014/15. Overall the emissions from our buildings usage
has shown a 3% reduction year on year. Electricity emissions are
down by 2% from 5,262 tonnes in 2014. Gas emissions have
reduced by 7% from 627 tonnes in 2014.
Air Travel has increased by 5% from 2014, up from 1,515k miles.
Long distance number of flights have increased by 5%, distance
covered on these flights is up by 9%. When calculating the
emissions it has been assumed that all flights are at economy
class. MyCSP is an estimate based on the yearly cost.
We believe we have a duty of care to the
communities and environment in which we
operate. There are also commercial benefits
to adopting an active and integrated CSR
policy. It helps to provide a prosperous
economic environment for us to work in,
increases staff loyalty, protects and enhances
our brand, and helps us to win business.
The four cornerstones of our CSR policy are people,
environment, charity and community. In managing our
corporate responsibilities, we aim to ensure that we:
• comply with, and where practicable exceed, all applicable
legislation, regulations and codes of practice
• integrate corporate responsibility considerations into
every business decision, where possible
• make all staff fully aware of our corporate responsibility
approach and our commitment to implementing and
improving it
• minimise the impact of our office activities and
transport use
• make clients and suppliers aware of our policies and
encourage them to adopt sound and sustainable
management practices
• review our performance, so we can continually improve
During 2015, we began a review of our CSR policy, which
we will conclude in 2016. The review is considering how
we can best deliver our CSR ambitions in a sustainable and
meaningful way, for the benefit of our business and our
wider stakeholder community.
The strategic report was approved
by order of the Board
Guy Wakeley
Chief Executive
7 March 2016
Registered Number: 7090427
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59
JIMMY CHOO HAS WORKED WITH A VARIETY
OF DIFFERENT TEAMS AND PEOPLE AT
EQUINITI SINCE OUR LAUNCH ON THE
LONDON STOCK EXCHANGE IN 2014.
EQUINITI ARE VERY RESPONSIVE AND WORK
CLOSELY WITH US TO ENSURE THEY ADAPT TO
OUR NEEDS AS THEY EVOLVE.”
JIMMY CHOO PLC
Making the future
today for our
retail clients
60
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61
02
Governance
CORPORATE GOVERNANCE REPORT
COMPLIANCE STATEMENT
BOARD OF DIRECTORS
BOARD AND COMMITTEE STRUCTURE
REPORT OF THE NOMINATIONS
COMMITTEE
REPORT OF THE AUDIT COMMITTEE
REPORT OF THE RISK COMMITTEE
DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REPORT
62
63
64
68
75
76
79
82
97
EQUINITI GROUP PLC
CORPORATE GOVERNANCE REPORT
Dear Shareholder
In our first annual report as a Listed Public Company, I am
pleased to take the opportunity to make a statement on
Equiniti’s approach to Corporate Governance.
Prior to the IPO, funds controlled by Advent International had
a controlling interest in Equiniti. Equiniti was considered a
portfolio company as defined in the Walker Report (Guidelines
for Disclosure and Transparency in Private Equity) with
which Equiniti was fully compliant. As a result, Equiniti had
robust governance structures in place in accordance with
UK Corporate Governance Code (“the Code”) compliance.
The Board had well established formal Board Committees
comprising the Audit, Risk, Remuneration and Nominations
Committees whose members were either entirely or largely
comprised non-executive Directors.
The Board recognises that good Corporate Governance is
critical in building a successful business that is sustainable for
the longer term. This is especially true because of the highly
regulated markets in which we operate.
2015 was a progressive year for Equiniti in terms of its
governance structures as we transitioned from private equity
to public ownership. The IPO allowed the Board, together
with our professional advisers, to review and build on our
existing governance arrangements. This process ensured
they were in line with established best practice for Listed
Companies set out in the Code. These changes included:
• Reviewing, in conjunction with our remuneration
consultants, the remuneration of our Directors and
moving the remuneration packages of our executive
Directors to typical practice for a listed company
(additional details are contained in the Directors'
Remuneration Report on pages 82 to 96
• Further strengthening the governance of our principal
regulated subsidiary, Equiniti Financial Services Limited,
with the appointment of Mark Lund as independent non-
executive Chairman and Dr Tim Miller as an independent
non-executive Director
These changes and policy reviews are part of an ongoing
process and proactive commitment to manage Equiniti’s
governance, diversity and effectiveness so that it continues to
reflect best practice and meets the changing requirements of
the business.
The report on Corporate Governance sets out the processes,
which ensure that we comply with all applicable laws and
regulations. It also outlines how we will create the necessary
internal culture to enable us to meet the requirements of
our shareholders and wider stakeholders, deliver long-term
sustainable growth and increasing investor returns.
The Board believes the culture within which all of our
businesses operate is as equally important as the effective
operation of the Board and is the bedrock that underpins our
governance structures.
• Appointment of a further new independent non-executive
Director, Dr Tim Miller, in February 2015
Conclusion
• Retirement of James Brocklebank and Oliver Niedermaier
as Directors of the Board at the IPO
• Ensuring that the Audit, Risk, Nominations and
Remuneration Committees comprised only independent
non-executive Directors and disbanding the Operating
Committee in favour of additional Board meetings
• Appointment of Victoria Jarman as Senior Independent
non-executive Director in addition to her role as chair of
the Audit Committee
• Reviewing Equiniti’s governance policies and formalising
arrangements for the division of responsibilities between
Guy Wakeley as Chief Executive Officer and myself as
Chairman
• Refreshing matters reserved for the decision of the Board
and adopting additional governance policies such as
dealing restrictions for Directors, senior executives and staff
with price sensitive information
It has been an evolutionary year and we have made excellent
progress enhancing Equiniti’s governance to provide a solid
platform from which to manage the three trading divisions.
I am sure this will help continue to drive performance and
enable us to stay aligned with best practice over the
coming years.
Throughout the past year, I have greatly valued the diverse
and complementary range of skills and experience of my
fellow Board members. All of our discussion and debate
has taken place within an environment of openness, mutual
trust and respect. I would like to extend thanks to all Board
members, past and present, for their exceptionally valuable
support and commitment during the course of 2015.
I look forward to reporting to you next year on how our
governance arrangements have continued to evolve. This will
include a review of Board effectiveness in the first year since
our IPO and any actions we undertake in response to this.
Kevin Beeston
Chairman
7 March 2016
62
EQUINITI GROUP PLC
THE UK CORPORATE GOVERNANCE CODE – COMPLIANCE STATEMENT
CORPORATE GOVERNANCE OVERVIEW
The UK Corporate Governance Code
“Corporate governance is the system by which companies are
directed and controlled. Boards of directors are responsible
for the governance of their companies. The shareholders’
role in governance is to appoint the directors and the auditors
and to satisfy themselves that an appropriate governance
structure is in place. The responsibilities of the Board include
setting the company’s strategic aims, providing the leadership
to put them into effect, supervising the management of the
business and reporting to shareholders on their stewardship.
The board’s actions are subject to laws, regulations and the
shareholders in general meeting.” – Introduction to the 1992
UK Corporate Governance Code.
The Code is the distillation of the key components and
consensus of best practice that are the hallmark of an efficient
board. The Code operates at two levels. At the first level
are the main and supporting principles of good governance
being: accountability, transparency, probity and focus on the
sustainable success of the company over the longer term. At
the second level there are Code provisions, which are specific
requirements, that companies are expected to comply with.
All Listed companies are required by the Listing Rules of
the Financial Conduct Authority (FCA) to describe how they
apply the principles of the Code and to specifically state in
their annual report whether the company complies with the
Code provisions. The Code recognises that the principles
and provisions contained in the Code will not be suitable
for every company or every situation and where any Code
provisions are not complied with an explanation of the
reasons for non-compliance must be set out in the annual
report compliance statement.
Our compliance statement is:
THE UK CORPORATE GOVERNANCE CODE
– COMPLIANCE STATEMENT
The Corporate Governance Report sets out how Equiniti has
applied the main principles of the Code for the period from
its admission to the Main Market to 31 December 2015.
At the time of his appointment, Advent International
managed the funds that ultimately owned Equiniti and
following Admission, Advent International together with
those funds, other Advent companies and Kevin Beeston,
became our controlling shareholders.
The Board considers that Equiniti has been compliant with
the Code provisions except as noted below.
We have not complied with Code provision A.3.1 as our
Chairman did not meet the independence criteria set out in
the Code at the time of his appointment. The explanation
for this non-compliance is explained below.
Our Chairman, Kevin Beeston, is not considered
independent due to his role as an Operating Partner
at Advent International.
Kevin Beeston does not act on behalf of Advent
International in respect of its investment in Equiniti and
receives no remuneration from Advent International in
respect of its investment in the business or his role with us.
We were not subject to the Code at the time of Kevin’s
appointment as Chairman and the Board is unanimously of
the view that Kevin Beeston is an extremely valuable asset
to Equiniti. He brings with him a wealth of experience in
publicly listed companies, an understanding of technology
and service businesses as well as being independent in
character and judgement.
A copy of the UK Corporate Governance Code may be downloaded from
the corporate governance pages of the Financial Reporting Council website
(https://www.frc.org.uk/Our-Work/Codes-Standards/Corporate-governance.aspx)
63
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
BOARD OF DIRECTORS
Board of Directors
BOARD LEADERSHIP AND EFFECTIVENESS
The Board has six non-executive and two executive Directors assisted by an executive committee.
The members of the Board, the executive committee and the Company Secretary are:
KEVIN BEESTON
CHAIRMAN (53)
GUY WAKELEY
CHIEF EXECUTIVE
OFFICER (45)
JOHN STIER
CHIEF FINANCIAL
OFFICER (49)
VICTORIA JARMAN
SENIOR INDEPENDENT
DIRECTOR (43)
Guy joined the Board as Chief
Executive Officer in January
2014. Prior to that, he was Chief
Executive of Morrison plc for five
years. He is a member of the CBI’s
Public Services Strategy Board
and is an FCA Approved Person.
Previously Guy has held divisional
leadership positions with Amey,
The Berkeley Group, General
Electric and Rolls-Royce. He holds
an MA in Engineering Science from
the University of Cambridge and
a PhD in applications of artificial
intelligence to engineering design.
He is a Chartered Engineer, a
Fellow of the Royal Institution of
Chartered Surveyors, a commercial
pilot and flight instructor and
examiner.
E
Kevin joined the Board as non-
executive Chairman in September
2011. He is also Chairman of FTSE
100 developer and homebuilder
Taylor Wimpey plc, a non-
executive Director of FA Premier
League Limited and an Operating
Partner of Advent International.
Prior to this Kevin was Chairman
of Serco Group plc, having held
the roles of Chief Executive
and Finance Director during a
25-year career with the company.
He has been a non-executive
Director of engineering group
IMI plc, Chairman of Domestic
and General Group Limited and
Partnerships in Care Group Limited
as well as a Director of Ipswich
Town Football Club. Kevin’s other
previous roles include Chairman
of the CBI’s Public Services
Strategy Board and commissioner
for the TUC’s Commission on
Vulnerable Employment. Kevin
is an accountant by background.
He is the Chairman of Equiniti’s
Nominations Committee.
John joined Equiniti in June
2015 from Northgate Information
Solutions Ltd (“NIS”) where he
was the Chief Financial Officer for
over ten years. NIS was a FTSE
250 organisation until 2007 when
the business was acquired by KKR,
the US private equity firm. Prior
to this, he was the Chief Financial
Officer of Subterra Ltd; a subsidiary
of Thames Water Plc. John is a
fellow of the Institute of Chartered
Accountants and has a background
in corporate finance.
E
Victoria joined the Board as a non-
executive Director in May 2014 and
became the Senior Independent
non-executive Director on
8 October 2015. Victoria is a
qualified chartered accountant
with an early career at KPMG and
latterly eleven years in corporate
finance at Lazard where she was
Chief Operating Officer. During her
time at Lazard she successfully led
the restructuring of UK operations,
sat on the Lazard London Board
and European Management
Committee and opened Lazard’s
Dubai office. She holds non-
executive Directorships at De La
Rue plc and Hays plc where she
chairs their Audit Committee.
Victoria holds a Mechanical
Engineering degree from Leicester
University. She is Chairman of
Equiniti’s Audit Committee and a
member of the Risk, Remuneration
and Nominations Committees.
A
R
Rm N
N
64
EQUINITI GROUP PLC
BOARD OF DIRECTORS
A
R
Audit Commitee
Risk Commitee
N
Nominations
Commitee
Rm
Remuneration
Commitee
E
Executive
Commitee
SIR ROD ALDRIDGE
NON-EXECUTIVE
DIRECTOR (68)
HARIS KYRIAKOPOULOS
NON-EXECUTIVE
DIRECTOR (38)
DR TIM MILLER
NON-EXECUTIVE
DIRECTOR (58)
JOHN PARKER
NON-EXECUTIVE
DIRECTOR (60)
Haris joined the Board as a
non-executive Director in August
2013. He is a Director at Advent
International plc (“Advent”),
where he has worked since 2008.
Prior to joining Advent, Haris
worked in investment banking
with Goldman Sachs’ UK Mergers
and Acquisitions team, in strategy
consulting in New York with First
Manhattan Consulting Group, and
at a telecommunications start-up
in Athens with Tellas. Haris has
participated in several Advent
investments including KMD, The
Priory Group, Towergate and DFS
as well as Equiniti. Haris holds
a BSc with honours in Electrical
Engineering from the University
of Pennsylvania, and an MBA with
honours from the Wharton School.
Sir Rod joined Equiniti in 2007
following his retirement from the
Capita Group as Chairman in
July 2007, a company that he was
founder of and led from a start-up
in 1984 to becoming a member
of the FTSE 100 index. Prior to
Capita, Sir Rod was Technical
Director of the Chartered Institute
of Public Finance and Accountancy
(CIPFA) which he joined in 1974
having worked in local government
for ten years, where he qualified
as a chartered public accountant.
In July 2006, Sir Rod established
the Aldridge Foundation and he
was awarded a knighthood in 2012
for services to young people. Sir
Rod is a Patron of the Prince’s Trust
and Founder Chair of Vinspired,
a charity launched in May 2006.
He is also chairman of The
Lowry, a Director of Cornerstone
and a Director of Constellation
Healthcare Technologies. Sir Rod
was chairman of the CBI’s Public
Services Strategy Board from its
inception in 2003 until July 2006.
He is a member of Equiniti’s Audit,
Nominations and Remuneration
Committees.
A
Rm
Tim joined the Board as an
independent non-executive
Director in February 2015. Tim has
extensive experience as a board
level executive across a range of
sectors. During his fourteen years
at Standard Chartered Bank, he
held a number of director level
positions with global responsibility
for areas including human
resources, compliance, audit,
assurance, financial crime and
legal. He is currently non-executive
Director of Otis Gold Corporation,
a Toronto Stock Exchange Listed
company. Recently he held non-
executive Director roles including
acting as non-executive Chairman
of the Girls Day School Trust and
Chairman of the Governing Body
of the School of Oriental and
African Studies. Tim is Chairman
of Equiniti’s Remuneration
Committee, a member of the
Audit, Risk and Nominations
Committees and a non-executive
Director of EFSL.
A
R
Rm N
John joined the board in January
2014 following his retirement
as managing director of the
registration services division.
John was with Lloyds TSB Group
for 30 years, holding a range
of management roles in retail,
commercial and corporate
banking. He joined Equiniti in
1997 (when it was Lloyds TSB
Registrars) and held a number
of senior management roles.
John is Chairman of Equiniti’s
Risk Committee, a member
of the Audit and Nominations
Committees and Chairman of
the Global Share Alliance (GSA).
Although a former employee of
Equiniti, the Board is unanimously
of the view that John is an
extremely valuable asset bringing
with him a wealth of experience
in share registration as well as
long standing relationships with
many of our larger corporate share
registration clients. John also
brings with him an understanding
of the wealth management industry
and business development as well
as being independent in character
and judgement.
A
R
N
65
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
BOARD OF DIRECTORS
Executive
Committee
Company
Secretary
DAVID BERESFORD
DIRECTOR OF STRATEGY AND
BUSINESS DEVELOPMENT (49)
ADAM GREEN
CHIEF RISK OFFICER (37)
PAUL MATTHEWS
EXECUTIVE DIRECTOR,
CORPORATE MARKETS (54)
DOUG ARMOUR
COMPANY SECRETARY (53)
David joined Equiniti in 2014
and is responsible for our growth
strategy: to deliver specialist-
outsourcing services, underpinned
by leading proprietary technology,
to meet the needs of Financial
Services & FTSE 350 companies
and Government. During his
career, David has worked on
various plc and executive boards
focussing on strategy, M&A and
business development in the UK,
Europe and Asia. He started his
career with Andersen Consulting,
working in both the London and
Paris offices, and was global head
of Serco’s consulting business until
2013. He holds a first class degree
in French and Economics from
Loughborough University.
E
Adam joined Equiniti as the Chief
Risk Officer in 2015, working as
part of the executive leadership
team. He has a wide range of
experience in financial services,
risk management, regulation
and business change. Adam
was previously interim head
of UK Compliance for BUPA
and prior to that managed a
core transition work stream
at the Financial Services
Authority as they established
the Financial Conduct Authority
and Prudential Regulatory
Authority. He has also worked at
PricewaterhouseCoopers helping
boards, management teams and
change programmes to deliver
complex risk and regulatory
requirements, which followed his
time as a major group’s regulator
at the Financial Services Authority.
E
Paul joined Equiniti in 2011 as
Managing Director, Corporate
Markets. Paul is responsible for
working with the UK’s leading
businesses to deliver successful
transactions including IPOs and
corporate actions for a client base
covering 50% of the FTSE 100
and circa 40% of the FTSE 250.
Paul’s stock market experience
spans 30 years and he currently
leads Equiniti’s partnership
with the Global Share Alliance.
Prior to joining Equiniti, Paul
was a Managing Director at
the investment bank JPMorgan
Cazenove, where he had a
successful career spanning over
25 years.
E
Doug was appointed as
Company Secretary in January
2015. Prior to this Doug was
a Director of Equiniti David
Venus, which was acquired by
Equiniti in 2009. With more
than 30 years at Equiniti David
Venus he has experience
in all aspects of company
secretarial and corporate
governance compliance for
companies of all sizes, from
owner managed private
organisations to FTSE100
companies. Doug continues
to write company secretarial
practice reference works
including The ICSA Company
Secretary’s Handbook and The
ICSA Company Secretary’s
Checklists.
66
EQUINITI GROUP PLC
BOARD OF DIRECTORS
THE BOARD
As Chairman, Kevin Beeston is responsible for ensuring that
the Board has an appropriate balance of skills, independence
and knowledge and that Board meetings are effective
and efficient.
The role of the independent non-executive Directors is
to offer guidance and advice to the Board as a whole and
the executive Directors in particular, drawing on their wide
experience across many industries. They also provide scrutiny,
challenge and oversight, in particular through the operation
of the Board committees, to the executive Directors and
senior management.
The Chairman has implemented a process, supervised by
the Company Secretary, to ensure that sufficiently detailed
papers support matters being brought to the Board for
decision. These provide the Directors with relevant background
information, the action being requested from the Board, the
benefit and risks of the proposed action or in action and any
relevant financial information to allow a constructive discussion
of the matter at hand and to reach an informed decision.
The Company Secretary acts as secretary to the Board and
its Committees and attends all meetings as well as board
meetings of EFSL, its regulated subsidiary.
The Board receives and reviews regular reports on overall,
division and individual business unit performance, financial
position, health & safety, regulatory compliance, HR,
corporate compliance and governance issues, legal matters
and investor relations.
Whilst routine business decisions are delegated to the
executive management team, there is a schedule of matters
reserved for the Board decision together with a delegated
authority framework to ensure that unusual or material
transactions are brought to the board for approval. Decisions
reserved for the Board include approval of strategic plans
and annual budgets, acquisitions, audited accounts and
the appointment of additional Directors. The delegated
authority schedule sets out primarily financial parameters
for the delegation of authority, covering all areas of the
Group’s activities below Board level to the executive
Directors, divisional MDs and business unit managers.
Certain authorities such as approval of capital expenditure
have different delegated authority limits depending on
whether the particular expenditure was included in the
annual budget or is an additional item of expenditure where
a higher degree of oversight and approval is appropriate.
The Board agrees an annual budget together with corporate
goals to underpin that budget. The corporate goals form the
basis of the Chief Executive's and CFO's personal objectives
and these goals and objectives are cascaded down to the
senior management team informing divisional and business
unit goals and management objectives.
The Board is responsible for setting Equiniti’s culture and for
determining our values and standards. The cascade of goals
and objectives is used by the Board as the framework to
establish and guide a unified culture throughout Equiniti.
The Board has adopted and reviews on a regular basis a
number of policies and codes of conduct, to ensure that
Equiniti’s obligations to its investors and other stakeholders
are clear, understood and observed.
During 2015, the Board remained focused on ensuring that
Equiniti’s risk management and internal control systems are
effective. In 2016, the Board will continue to monitor how this
culture is embedded throughout Equiniti to support effective
risk management and internal control, including through our
operating model and business plan. Effective risk management
and internal controls are particularly relevant to our regulated
activities and supports the development and implementation
of significant changes required to meet enhanced regulatory
supervision and reporting being introduced by MiFID II and
MAR among other regulatory changes.
DIVISION OF RESPONSIBILITIES
During the year the Board reviewed and amended the
structure for the delegation of financial, commercial and
operational authorities reflecting our move from private
equity to public ownership. The extent of the roles and
authorities of the Chairman, Chief Executive Officer, CFO
and senior executive management were also reviewed
and clearly defined.
CONFLICTS OF INTEREST
The Board has an established framework for the identification,
approval and recording of actual or potential conflicts of
interest of its Directors and subsidiary company Directors.
All conflicts of interest must be declared to the Board and
are recorded in Equiniti’s register of Directors’ interests.
The Companies Act 2006 and Equiniti’s articles of association
contain detailed provisions for the proper management of
conflicts of interest. The circumstances in which the Board can
approve the ongoing participation by a conflicted Director in
any discussions or decisions of the Board, where the Director
is or may have a conflict, are clearly defined.
The Board maintains oversight of each Directors’ external
interests to ensure that they continue to be able to devote
sufficient time to discharge their duties and responsibilities
effectively and efficiently. Where there are external
commitments, the Board is satisfied that they do not have
any adverse effect on Equiniti or the ability of any particular
Director to discharge their duties fully.
67
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
BOARD & COMMITTEE STRUCTURE
BOARD AND EXECUTIVE COMMITTEES
The Board has established four Board committees,
comprising only non–executive Directors. These committees
assist with the following:
In preparation for the IPO, the composition of the Board and
the structure of the committees was reviewed. This led to the
Board Operating Committee being disbanded and replaced
by additional Board meetings.
• the detailed oversight of Equiniti’s internal and external
audit work
• identification and management of risk
• establishing the remuneration policy and overseeing
implementation for Equiniti as a whole and the Directors
and senior managers in particular
• establishing appropriate succession and contingency plans
for the Directors and senior managers and undertaking
appropriate searches for new Directors as required
In addition to the oversight provided by the Board and
Board Committees noted above the executive Directors
are supported by a number of executive management
committees that help them discharge their duties. These
include monthly reviews with the senior and divisional
management teams covering areas such as business
performance and development, financial management, risk
management, HR, IT and operational performance.
The Board and executive management committee structure
is set out below and more information about the Executive
and Operating Committee is available on page 71.
BOARD
Audit
Commitee
Risk
Commitee
Remuneration
Commitee
Nominations
Commitee
Reviews the integrity, adequacy
and effectiveness of Equiniti’s
system of internal control and risk
management and the integrity
of Equiniti’s financial reporting,
whistleblowing and anti-bribery
and corruption obligations.
Reviews and assesses risks
facing Equiniti and recommends
mitigating actions and tests the
robustness of operating processes
through a programme of review.
Sets, reviews and recommends
Equiniti’s overall remuneration
policy and strategy and monitors
their implementation.
Evaluates and makes
recommendations regarding
Board and Committee
composition, succession planning
and Directors’ potential conflicts
of interest.
Executive
Commitee
Weekly reviews of performance,
allocation of resources and directs
activity to deliver business plan.
Sales & Bid
Committee
Investment & Projects
Committee
Compliance & Risk
Committee
Operating
Committee
Monthly review of all sales
submissions, tenders and
renewals.
Monthly review of all capital
expenditure and acquisitions.
Assure performance of business in
accordance with policies, relevant
legislation and risk appetite.
Challenge and review of P&L
performance, business planning
and resourcing, budgeting, central
costs and overhead.
68
EQUINITI GROUP PLC
BOARD & COMMITTEE STRUCTURE
During 2015, six routine Board meetings were held. Partly due
to the disbanding of the Board Operating Committee ten Board
meetings are scheduled to be held in 2016. Details of meetings
and meeting attendance in 2015 are set out on page 70.
The following documents are available to review on our
website http://investors.equiniti.com/investors/shareholder-
services/corporate-governance
• Schedule of matters reserved for the decision of the Board
• Terms of reference of the committees of the Board that set out
their objectives, responsibilities and any delegated authority
As part of the IPO process a formal Insider Dealing Code
was adopted setting out dealing restrictions and procedures
to ensure persons discharging management responsibilities
(“PDMRs”) and Company Insiders seek clearance for dealing
in Equiniti shares. This new policy works in conjunction with
the pre-existing Personal Account Dealing Policy, which sets
out restrictions and procedures to obtain clearance to deal in
client company shares.
BOARD & COMMITTEE BALANCE
It is a core feature of good corporate governance that Board
and Committee membership have an appropriate balance of
skills, experience, independence and knowledge to enable the
effective discharge of their duties and responsibilities whether
individual or collective. Part of the role of the Chairman and
the Nominations Committee is to keep the balance of skills
and expertise on the Board and its Committees under review
and make recommendations to the Board where changes are
appropriate to maintain that balance. The Board considers that
the range of skills, experience and background of each of the
Directors is sufficiently relevant and complimentary to allow
appropriate oversight, challenge and review of Equiniti’s progress
in achieving its corporate goals. The individual experience and
background of each Director is set out on pages 64 and 65.
It is Equiniti’s policy, in line with the Code, that proposed
appointments to the Board follow an open and transparent
recruitment process and that candidates are assessed on merit
against an objective criteria.
DIVERSITY
The Board notes and supports the aims of the Davies Report
and the aspiration to achieve at least 25% representation of
women on its Board where appropriate. The Board, supported
by the Nominations Committee, values diversity in its broadest
sense and when considering new non-executive Director
appointments will, in addition to considering gender, age,
disability, ethnicity or experience, look to maintain within the
boardroom the appropriate balance of skills, experience,
independence and knowledge of Equiniti and the industry as
a whole. Further details on Equiniti’s gender diversity statistics
as at 31 December 2015 are set out on page 50.
The work of the Board Committees is set out in detail on
pages 75 to 96.
BOARD ACTIVITIES – 2015 AND PRIORITIES FOR 2016
Board achievements in 2015
• Delivered successful IPO
• Delivered revenue and earnings growth
• Completed the integration of recently acquired businesses
to accelerate growth
• 100% of key clients retained
• Strengthened governance, risk management, compliance
and internal audit
Board Priorities in 2016
• Deliver or exceed 2016 business plan delivering sustainable
earnings growth
• Expand the Group’s addressable markets and service
capabilities
• Develop and enhance the digitisation and automation
of back office systems
• Optimise operating efficiencies through better alignment
of employees, technologies and locations
• Develop employee learning and development, skills, and
succession planning and improving employee engagement
BOARD DEVELOPMENT, SUPPORT AND EVALUATION
Newly appointed Equiniti Directors, including non-executive
Directors, receive a formal induction from the Company
Secretary. This includes formal training on their rights and
duties as Directors under the Companies Act 2006, Listing
Rules and FCA requirements (where appropriate) together
with familiarisation with Equiniti’s businesses, strategy,
operations and systems.
During 2015, the Board received specific training on
regulatory compliance matters, rights and duties of Directors
and responsibilities of Directors of listed companies. In
addition, the Company Secretary provides an overview of
changes to relevant legislation and best practice guidance as
a regular agenda.
Our independent advisers provide additional briefings
where appropriate. All Directors have access to the
advice of the Company Secretary and procedures are in
place whereby Directors may take relevant independent
professional advice at Equiniti’s expense in order to
discharge their duties as Directors.
During 2015, the Board took advice from Weil, Gotshal
& Manges, Norton Rose, N M Rothschild & Sons Limited,
Deloitte, New Bridge Street and PwC in connection with its
IPO and Admission to the Main Market. The Audit Committee
took advice from PwC on a number of accounting issues
and a review of the effectiveness of Equiniti's internal audit,
compliance and risk functions.
69
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
BOARD & COMMITTEE STRUCTURE
The Remuneration Committee took advice from New Bridge
Street on the design of Equiniti’s remuneration policy as a
Listed Company and the appropriate level of remuneration for
the executive Directors.
The Board receives regular briefings on the activities of
its principal subsidiaries, EFSL and MyCSP, through the
monthly reporting process, and through the relevant Audit
and Risk Committees, allowing the Board to ensure that
sufficient resources are available to EFSL and MyCSP to
meet obligations.
BOARD & COMMITTEE ATTENDANCE DURING 2015
Board
Audit
Risk
Remuneration Nominations
5
4
2
Director
Scheduled Meetings in 2015
Sir Rod Aldridge1
Kevin Beeston2
James Brocklebank3
Lucy Dimes4
Martyn Hindley5
Victoria Jarman6
Haris Kyriakopoulos
Dr Tim Miller7
Oliver Niedermaier8
John Parker
John Stier9
Guy Wakeley
Committee
appointments
Audit,
Remuneration,
Nominations
Nominations
Audit, Risk,
Remuneration,
Nominations
Remuneration,
Risk, Audit,
Nominations
Risk, Audit,
Nominations
6
6/6
6/6
4/4
3/3
1/1
6/6
6/6
4/5
3/4
6/6
4/4
6/6
4
4/4
4/4
4/4
3/5
3/3
4/4
5/5
2/2
2/2
2/2
3/3
1/1
1/1
2/2
3/3
2/2
1 Sir Rod Aldridge was appointed to the
4 Lucy Dimes was appointed as a Director on
Remuneration Committee on 2 October 2015.
1 February 2015 and resigned as a Director on
31 July 2015.
7 Dr Tim Miller was appointed as a Director on
1 February 2015, Dr Tim Miller was unable to
attend one meeting due to ill health.
2 Kevin Beeston resigned from the Remuneration
Committee on 8 October 2016.
5 Martyn Hindley resigned as a Director on
3 James Brocklebank resigned from the
remuneration committee on 18 February 2015
and resigned as a Director on 21 September 2015.
20 February 2015.
6 Victoria Jarman was appointed to the
Remuneration Committee on 8 October 2015,
Victoria Jarman was unable to attend two Risk
Committee meetings due to a meeting conflict.
8 Oliver Niedermaier resigned as a Director on
21 September 2015, Oliver Niedermaier was
unable to attend one meeting due to a conflict.
9 John Stier was appointed as a Director on
19 June 2015.
70
EQUINITI GROUP PLC
BOARD & COMMITTEE STRUCTURE
BUSINESS MANAGEMENT
The Chief Executive is responsible for delivering Equiniti’s
agreed strategy and prepares the annual budget, which is
subject to formal scrutiny and approval by the Board. Progress
in meeting this annual budget is reported on at each Board
meeting.
Monthly business forecasts are prepared by the operating
divisions to identify variances against the annual budget at the
earliest opportunity, reflecting changes in expectations and
market conditions. Negative variances to budget are subject
to rigorous challenge at Operating Committee meetings.
There are clear policies outlining delegated authority limits
for all types of business transaction and associated authorised
signatories. These policies are reviewed at least annually
to ensure they continue to be set at appropriate levels.
The authority limits and processes are verified by reviews
undertaken by compliance and internal audit. Additional
detail on the work of the compliance and internal audit
functions is set out on pages 79 to 81.
All employees undergo an objective based personal appraisal
process with individual objectives derived from corporate
strategy and objectives of their line managers and set within
the context of Equiniti’s corporate goals and annual budget.
ACCOUNTABILITY
During 2015, internal controls were reviewed and
enhancements made in a number of areas including revision
of the risk management framework and the process for
evaluating risks. The Internal Audit function was restructured
and a co-sourcing arrangement with Grant Thornton
introduced to boost resources and bring best practice to the
function. Details of the changes to the Internal Audit function
are set out in the Audit Committee report on pages 76 to 78.
The introduction of new processes have improved the
timeliness and quality of financial information and analysis
tools provide automated real time management reporting.
Equiniti’s Accounting Manual has been reviewed, updated and
expanded ensuring compliance with agreed Equiniti standards.
ANNUAL RE-ELECTION OF THE BOARD
In compliance with the Code, all Directors will retire and offer
themselves for re-election or re-appointment as appropriate
at each year’s Annual General Meeting. At our first Annual
General Meeting to be held on 26 April 2016 all the Directors,
regardless of their date of appointment or length of service,
will offer themselves for re-election as a Director.
Full details of the resolutions, together with explanatory notes
and supporting biographies, are set out in the notice of the
Annual General Meeting on pages 176 to 182.
As part of the IPO and Admission process the Board reviewed
and re-affirmed that it considers each of the independent
non-executive Directors to be independent in character and
judgement and that there are no relationships that might
prejudice this independence.
EXECUTIVE MANAGEMENT COMMITTEES
Executive Committee
The Chief Executive Officer leads Equiniti’s operational
management, supported by an Executive Committee.
The Executive Committee is the most senior executive
management committee and consists:
Guy Wakeley – Chief Executive Officer
John Stier – Chief Financial Officer
David Beresford – Director of Strategy and Business
Development
Adam Green – Chief Risk Officer
Paul Matthews – Executive Director, Corporate Markets
(Biographies of this senior management team are set on
page 66).
The Executive Committee meets weekly to review
performance, allocation of resources and directs activity
to deliver the business plan.
The Executive Committee is supported by four management
committees.
The Operating and Sales & Bid Committees, chaired by the
Chief Executive, are held monthly and review performance
against P&L budgets and forecast, planning, resourcing and
costs, reviews of sales submissions, tenders and contract
renewals.
The Investment and Projects Committee chaired by the CFO
also meets monthly and reviews capital expenditure requests
and acquisition targets.
The Compliance and Risk Committee is also chaired by the
CFO and meets at least quarterly to ensure performance of
the business is in accordance with policies, legislation and
agreed risk appetite.
71
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
BOARD & COMMITTEE STRUCTURE
DISCLOSURE STATEMENTS
Financial Statements and Accounting Records
The directors are responsible for preparing the Annual
Report, the Directors’ Remuneration 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 company
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 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
company will continue in business
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the 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 and the Directors’ Remuneration Report comply
with the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation. 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. A copy of the financial statements is available on
Equiniti’s website.
DIRECTORS’ RESPONSIBILITY STATEMENT
Pursuant to Rule 4.1.12 of the Disclosure and Transparency
Rules each of the Directors, the names and functions of whom
are set out on pages 64 and 65, confirm that to the best of his
or her knowledge:
The Groups' financial statements, which have been prepared
in accordance with International Financial Reporting
Standards, as adopted by the European Union, give a true and
fair view of the assets, liabilities, financial position and profit or
loss of the Group.
The strategic report includes a fair review of the development
and performance of the business and the position of the
Company, together with a description of the principal risks
and uncertainties that the Company faces.
The Directors have concluded that the annual report
and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company’s performance, business
model and strategy in accordance with the UK Corporate
Governance Code.
STATEMENT OF DISCLOSURE OF INFORMATION TO
AUDITORS
As required by Sections 418 and 419 of the Act, each Director
has approved this report and confirmed that, so far as they
are aware, there is no relevant audit information (being
information needed by the auditors in connection with
preparing their audit report) of which the Company’s auditors
are unaware. They have also confirmed that they have taken
all the steps they ought to as a Director to make themselves
aware of any relevant audit information and to establish that
the Company’s auditors are aware of that information.
GOING CONCERN
Equiniti’s business activities, together with factors likely to
affect its future development, performance and position, are
set out in the Strategic report on pages 8 to 59. The financial
position of the Company, its cash flows, liquidity position
and borrowing facilities, as well as the Company’s objectives,
policies and processes for managing capital, are described
on pages 134 to 139. Financial risk management objectives,
details of financial instruments and hedging activities, and
exposures to credit risk and liquidity risk are described in
notes 6.9 to 6.12, pages 141 to 145. The Directors consider
that the Company’s business activities and financial resources
ensure that it is well placed to manage its business risks
successfully.
The Directors are satisfied that:
• The Company’s activities are sustainable for the foreseeable
future, and that the business is a going concern
• It is appropriate to continue to adopt a going concern basis
in the preparation of the financial statements
72
EQUINITI GROUP PLC
BOARD & COMMITTEE STRUCTURE
THE BOARD’S REVIEW OF THE SYSTEM OF INTERNAL
CONTROL
The Board has responsibility for Equiniti’s overall approach
to risk management and internal control and considers their
effectiveness fundamental to the achievement of Equiniti’s
strategic objectives. During 2015, the Board reviewed with
management the process for identifying, evaluating and
managing the principal risks faced by Equiniti.
The Board, with the input of the of the Audit Committee,
has reviewed Equiniti’s risk management and internal controls
systems for the period 1 January 2015 to the date of this
report, and is satisfied that they are effective and that Equiniti
complies in this respect with the Financial Reporting Councils
(FRC) guide 'Risk Management, Internal Control and Related
Financial and Business Reporting'.
Continued focus on our control enhancement programme
will be provided by the Audit Committee in 2016, which is
designed to refresh accountabilities with respect to financial
controls assurance and testing.
DIRECTORS’ REMUNERATION
Full details of Equiniti’s remuneration policy and the
implementation of that policy together with details of the
remuneration of the Directors is set out on pages 82 to 96.
RELATIONS WITH SHAREHOLDERS
The Board has launched a program to promote engagement
with its major institutional shareholders. It supports the aims
of the Code and the UK Stewardship Code to promote
engagement and interaction between listed companies and
their major shareholders.
The Board welcomes the opportunity for investors and
shareholders to engage directly with the Chairman and Senior
Independent Director in addition to the Chief Executive and
CFO. We intend to establish an appropriate range of investor
relations events around the publication of the full year and
half year results. An experienced head of investor relations
has been appointed to establish and manage this process,
including regular updates to the Board.
The Annual General Meeting will be held on 26 April 2016
and is an opportunity for shareholders to vote on aspects of
the business in person. The Board values the Annual General
Meeting as an opportunity to meet with shareholders and
to take their questions. Full details of the resolutions to be
proposed at the Annual General Meeting, shareholders’
rights with respect to attendance, participation in the meeting
and the process for submission of proxy votes in advance of
the meeting are set out in the notice of meeting on pages
176 to 182.
Additional information for shareholders is contained on
our website http://investors.equiniti.com/investors
CONTROLLING SHAREHOLDERS AND RELATIONSHIP
AGREEMENT
Any person who exercises or controls 30% or more of the
votes able to be cast on all or substantially all matters at
our general meetings, whether on their own or together
with any person with whom they are acting in concert,
are known as ‘controlling shareholders’. The Listing Rules
require companies with controlling shareholders to enter
into a written and legally binding agreement intended to
ensure that the controlling shareholder complies with certain
independence provisions.
On 14 October 2015, Equiniti, Equiniti (Luxembourg) S.a.r.l.
and the Chairman entered into a Relationship Agreement,
which took effect from Admission.
The Relationship Agreement regulates the continuing
relationship between Equiniti (Luxembourg) S.a.r.l., the
Chairman, Advent International plc, various other Advent
Companies, the Advent Funds (and its and their respective
associates) (the “Controlling Shareholders”) and Equiniti
following Admission. The Relationship Agreement also
imposes obligations on Equiniti (Luxembourg) S.a.r.l. to
procure compliance by the Advent Companies and the
Advent Funds, who are controlling shareholders of Equiniti
for the purpose of the Listing Rules, with the independence
obligations contained in the Relationship Agreement.
The Chairman is subject to the same terms and has given
an undertaking to procure that his associates comply with
those terms.
The Controlling Shareholders have a combined total holding
of approximately 31% of Equiniti’s voting rights.
The Board confirms that, since the entry into the Relationship
Agreement on 30 October 2015 until 7 March 2016 (being the
latest practicable date prior to the publication of this annual
report and accounts)
• Equiniti has complied with the independence provisions
included in the Relationship Agreement
• So far as Equiniti is aware, the independence provisions
included in the Relationship Agreement have been
complied with by the Controlling Shareholders
• So far as Equiniti is aware, the procurement obligation
included in the Relationship Agreement has been
complied with by the Controlling Shareholders
73
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
BOARD & COMMITTEE STRUCTURE
BOARD COMMITTEES
To allow the Board to operate effectively, a number of Board
Committees have been established. The Audit Committee,
chaired by Victoria Jarman, and the Risk Committee, chaired
by John Parker, replaced the Audit & Risk Committee during
2014. Summaries of each Board Committee’s terms of
reference are set out below.
Risk Committee
The Committee establishes, implements and maintains
effective, comprehensive and proportionate policies and
processes to identify, manage, monitor and report the risks
to which Equiniti is or might be exposed. The Committee
exercises competent and independent judgement when
making recommendations to the Board.
Remuneration Committee
The Committee reviews Equiniti’s remuneration policy
and makes recommendations to the Board, including
the remuneration of the executive Directors and the
Chairman. It also sets and monitors performance criteria
for all incentive schemes. The non-executive Directors’
remuneration is reserved to the Board as a whole. In addition
to remuneration, the Committee oversees any major changes
in Equiniti’s employee benefit structures.
The Committee reports set out the responsibilities and
activities of the Committees. The terms of reference of each
Committee are documented and agreed by the Board and
are available in the governance section of our website:
http://investors.equiniti.com/investors
The Chair of each Board Committee formally reports
to the Board on each Committee meeting.
Details of Directors’ attendance at Board and Board
Committee meetings is set out on page 70.
Nominations Committee
The Committee reviews the structure, size and composition
of the Board and Board Committees including their balance
of skills, knowledge, experience and diversity and makes
recommendations to the Board with regard to any changes.
The Committee is also responsible for establishing and
reviewing plans and policies covering succession plans for
Directors and other senior executives, Board diversity and
staff vetting policies.
Audit Committee
The Committee monitors the integrity of Equiniti’s financial
statements, including its annual and half-yearly reports,
and any other formal announcement relating to its financial
performance. It also reviews and reports to the Board
on significant financial reporting issues and judgements,
regarding matters communicated by the external auditor.
The Committee recommends to the Board any appointment,
re-appointment or removal of an external auditor. If the
external auditor were to resign, the Committee would
investigate the issues leading to this and take action where
required.
The Committee reviews the adequacy and effectiveness of
our internal financial controls and internal control and risk
management systems. This includes the manner in which
management ensures and monitors the adequacy of the
extent, effectiveness and nature of our internal controls.
The Committee reviews Equiniti’s whistleblowing and
anti-bribery and corruption policies and the adequacy of
arrangements to allow proportionate and independent
investigation and follow up of any matters reported.
74
EQUINITI GROUP PLC
REPORT OF THE NOMINATIONS COMMITTEE
Dear Shareholder
I am pleased to take this opportunity as Chairman of the
Nominations Committee to outline the objectives and
responsibilities of the Committee and the work that has
been carried out during 2015 together with its plans for
the coming year.
The role of the Committee is to develop and maintain a
formal, rigorous and transparent procedure for making
recommendations on appointments and re-appointments
to the Board. In addition, it is responsible for reviewing the
succession plans and contingency plans for the executive
Directors and the non-executive Directors.
During the year, we undertook searches and made
recommendations for the appointment of an additional
independent non-executive Director and a new Chief
Financial Officer, reviewed the make-up of the Board
Committees in preparation for the IPO and admission to
the London Stock Exchange, and undertook a review of short-
term contingency succession plans within the Board and the
Executive Management Team. Following the review of Board
Committees, a number of changes were made to ensure the
Committees met the requirements of the Code.
For the coming year the Committee will monitor the balance
of the Board to ensure that there remains an appropriate
range of skills, experience and diversity and will continue
its work to ensure succession plans for Directors and senior
executives are relevant and up to date.
Kevin Beeston
Chairman of the Nominations Committee
7 March 2016
DUTIES & ACTIVITIES
The role of the Nominations Committee is to develop
and maintain a formal, rigorous and transparent procedure
for making recommendations on appointments and re-
appointments to the Board. In addition, it is responsible
for reviewing the succession plans for the executive Directors
and the non-executive Directors.
MEMBERSHIP AND MEETINGS
The Committee comprises the non-executive Directors.
Biographies of the Committee’ members are set out on pages
64 to 65. The Chairman of the Committee is Kevin Beeston.
The Committee discharges its responsibilities through a series
of scheduled meetings during the year.
During the year, Dr Tim Miller was appointed as an additional
independent non-executive Director and John Stier was
appointed as CFO. Both appointments were made following
an external search process against formal role specifications
and interviews with the Chairman and Chief Executive.
Details of the Board's diversity policy are set out on page 69.
Kevin Beeston is also chairman of Taylor Wimpey plc and
a non-executive director of FA Premier League Limited.
The Board has considered these appointments and do not
consider that they impose any restriction on his ability to
perform his duties to Equiniti.
For 2016, the Committee will continue to review succession
planning, with an emphasis on long-term succession
planning, and establishing a diversity policy.
75
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
REPORT OF THE AUDIT COMMITTEE
Dear Shareholder
I am pleased to present the report of the Audit Committee
for the period ended 31 December 2015. This report
describes the Committee’s ongoing responsibilities and key
activities over the year.
In advance of the IPO, the Committee reviewed the
appropriateness of the accounting policies and the
additional disclosure requirements required to be made by
a Listed Company. The Board has been supported by the
Committee in ensuring the annual report is fair, balanced
and understandable and in confirming that the viability
statement is appropriate.
During the year the Committee has devoted significant
time to reviewing the Company’s system of internal audit.
The recent growth experienced by the Company, both
organic and by acquisition, has required a fundamental
review of the Company’s Internal Audit function. As a result,
we took the opportunity to re-define our audit universe
and our resourcing. This will allow us to more effectively
manage the Internal Audit plan, improving Equiniti’s overall
risk management. A co-sourced arrangement with Grant
Thornton has been implemented to provide assistance.
The Committee provides oversight of the risk management
processes and continues to be satisfied that the Board
maintains sound risk management and internal controls.
The Committee is assisted in this oversight role by the Risk
Committee.
Our priorities for 2016 include the implementation of the
internal audit plan and the conclusion of a process to
review the level of audit and non-audit fees with the aim
of identifying those services that should no longer be
undertaken by the auditors and to reduce the ratio of audit
to non-audit fees initially to 1:1 and ultimately 1:0.7. I look
forward to reporting on the improvements made to Equiniti’s
systems and controls in next year’s report.
Victoria Jarman
Chairman of the Audit Committee
7 March 2016
MEMBERSHIP AND MEETINGS
The Committee comprises independent non-executive
Directors. The Chairman of the Committee and its financial
expert, Victoria Jarman, is a Chartered Accountant, who
also chairs the Audit Committee of De La Rue plc and of
Hays Group PLC. Sir Rod Aldridge is qualified as a chartered
public accountant and prior to establishing Capita Group
was Technical Director of the Chartered Institute of Public
Finance and Accountancy (CIPFA). Dr Tim Miller has held a
number of Director level positions at Standard Chartered Bank
with global responsibility for compliance, audit, assurance
and financial crime. John Parker is a fellow of the Chartered
Institute of Bankers and held a range of management roles in
retail, commercial and corporate banking while at Lloyds TSB
Group. All Committee members are financially literate.
The Committee discharges its responsibilities through a series
of scheduled meetings during the year, the agenda of which is
linked to events in the financial calendar of the Company.
The Committee commissions reports, from external advisers,
the Head of Internal Audit, or executive management to
enable it to discharge its duties. The CFO and the Group
Financial Controller attend its meetings, The Chairman is also
invited to, and regularly attends, Committee meetings.
The internal and external auditors each meet the Committee
without executive Directors or employees being present.
ROLE OF THE COMMITTEE
The Committee’s terms of reference are available on the
investor section of the Equiniti website.
http://investors.equiniti.com/investors/shareholder-services/
corporate-governance
The Audit Committee provides an independent overview of
the effectiveness of the internal financial control systems and
financial reporting processes. Its principal responsibilities are:
• Monitor Equiniti’s financial statements, including annual
and half year results and announcements and reporting
to the Board on significant financial reporting issues and
judgments
• Monitor and Review and, where appropriate, make
recommendations to the Board on the adequacy and
effectiveness of Equiniti’s internal control and risk
management systems
• Review the content of the annual report and advise the
Board whether it is fair, balanced and understandable
• Recommend to the Board for approval by shareholders,
the appointment, reappointment or removal of the
external Auditor; including the agreement of the terms of
engagement at the start of each audit, the audit scope and
the external audit fee
• Review the effectiveness and objectivity of the external
audit and the Auditor’s independence; including
consideration of fees, audit scope and terms of
engagement and the provision of non-audit services
and monitor compliance
• Monitor the effectiveness of Equiniti’s whistleblowing,
anti-bribery and corruption procedures
76
EQUINITI GROUP PLC
REPORT OF THE AUDIT COMMITTEE
ACTIVITIES
During the period, the Audit Committee met on four
occasions and dealt with the following matters:
• Group financial results for publication
• Principal judgemental accounting matters affecting the Group
• External audit plans and reports
• Progress of the annual audit and the audit required in
connection with the IPO
• Commissioning and reviewing an Internal Audit
Effectiveness Review
• Proposals to enhance regulatory systems and controls
within EFSL, the Company’s principal regulated entity
• The revised Internal audit plan and reviewed the work
of the internal audit team
• Revisions to the Company’s Internal Audit Charter
• Non-audit services provided by the external auditor
• External auditor effectiveness, independence,
re-appointment and fees
• Group disclosure and whistleblowing policy
In carrying out these activities, the Committee places reliance
on regular reports from executive management, internal audit
and from the Company’s external auditors.
EXTERNAL AUDITOR
Re-appointment
PwC has been Equiniti’s auditor since 2010. The Audit
Committee will assess annually the qualification, expertise,
resources and independence of the external auditors and the
effectiveness of the audit process. Their performance is kept
under regular review by the Board and the Audit Committee
and during the year the Committee undertook a formal
assessment of the performance of the external auditor in the
form of a questionnaire issued to Directors and executives
involved in the audit process. The Committee recommended
to the Board, which in turn is recommending to shareholders,
that PwC be re-appointed as the Company’s auditors at the
2016 Annual General Meeting.
Tender
Under EU audit regulations, the Company must put its audit
arrangements out to tender no later than 2023. The Committee
presently intends to keep the matter under regular review,
taking into account the annual performance review conducted
by the Committee. There are no contractual restrictions on the
Company’s selection of its external auditor.
Independence and objectivity of external auditors
The Audit Committee has a formal policy in line with the
Code on whether the Company’s external auditor should
be employed to provide services other than audit services.
In this, the first period following the Company’s admission
to the London Stock Exchange, the Committee intends
to undertake a thorough review of all non-audit services
provided by PwC with the intention of reducing the ratio
of audit to non-audit fees in line with Financial Reporting
Council recommendations.
During 2015, PwC undertook work carried out in connection
with the Company’s IPO. The Committee is satisfied that the
carrying out of that work did not impair their independence.
As a result, the value of non-audit services work was £2.4m
in 2015 as set out in Note 7.4 to the Accounts on page
148. It should be noted that due to the work undertaken in
anticipation of and in connection with the IPO fees for non-
audit services provided by the auditor were considerably
higher in 2015 than in previous years. During 2014, fees for
non-audit services were £455k representing 108% of the audit
fee in that year.
INTERNAL AUDIT
The Audit Committee is responsible for overseeing the work
of the internal audit function. It reviews and approves the
scope of the internal audit annual plan and assesses the quality
of internal audit reports, along with management’s actions
relating to findings and the closure of recommended actions.
During the year, the Audit Committee recommended a
review of the internal audit function, the review was initiated
following a sustained period of growth, in particular within
its regulated business. As a result of the review, the structure
of the Internal Audit function has been changed with a co-
sourced model adopted. After a competitive tender process,
Grant Thornton was appointed as the co-source partner.
A new position of Group Chief Audit Executive was created
and appointed in January 2016.
RISK MANAGEMENT & INTERNAL CONTROLS
The Board supported by the Audit and Risk Committee
members, consider the nature and extent of the Company’s
risk management framework and that the risk appetite is
appropriate. Further details on the Company’s principal risks
and uncertainties are in the Strategic Report on pages 42 to 45.
The Committee has oversight of the Company’s system of
internal controls, including its design, implementation and
effectiveness. Further details of risk management and internal
control are set out on pages 80 to 81.
During the year, the Committee considered the review and
reassessment of Equiniti’s major risks and risk appetite, reports
from the compliance function of reviews of controls relating to
external payments and internal expenses payments, outsourced
print management and client money bank accounts.
77
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
REPORT OF THE AUDIT COMMITTEE
In arriving at their conclusion, the Audit Committee also
noted that internal reporting aligned to the KPIs, key financial
measures and narrative themes as presented in the annual
report.
The Audit Committee therefore concluded that the annual
report and Accounts are presented in a fair, balanced and
understandable manner, allowing shareholders to assess the
Group’s performance, strategy, risk and business as a whole.
SIGNIFICANT ISSUES
The items noted below reflect those issues which were
considered most significant in preparing the annual report.
These items are also consistent with the reference in the fair,
balanced and understandable section.
• Revenue recognition was carefully assessed to ensure
it met our accounting policies and accorded with
international accounting standards. Where major projects
spanned the year end, such as corporate actions, we
ensured the accounting policy used to arrive at our
judgement of revenue recognition was documented
and reviewed
• Presentation of Exceptional Items. The Group incurred
significant costs through our IPO process and also from
integrating Selftrade, closing properties and driving our
efficiency agenda. These have been shown separately
in the financial statements to allow an appropriate
understanding of our underlying results
• The values recorded against the Groups intangible assets
are reviewed to ensure they align to accounting policies
and are appropriately stated. Specifically: the Group
capitalises its own software development costs to the
extent they meet the criteria set out in IAS38; intangible
assets arising from acquisitions are determined by applying
consistent and recognised valuation methodologies to the
future expected earnings; goodwill is tested annually for
impairment and all other intangibles are assessed for any
impairment indicators, none of which were identified
GREENHOUSE GAS EMISSION DATA.
The Committee is satisfied that the judgements made
by management are reasonable, and that appropriate
disclosures have been included in the accounts.
WHISTLEBLOWING AND ANTI-BRIBERY
The Audit Committee has reviewed the adequacy and
security of the Company’s arrangements for its employees
and contractors to raise concerns, in confidence, about
possible wrongdoing in financial reporting or other matters.
During the year, no such concerns were raised.
ACCOUNTING POLICIES
The Audit Committee assesses whether suitable accounting
policies have been adopted and whether management
has made appropriate estimates and judgements. In
assessing the exercise of management judgements, the
Audit Committee reviews accounting papers prepared by
management and the external auditors.
FAIR, BALANCED AND UNDERSTANDABLE
In line with provision C.1 of the Code, the Audit Committee
has been requested by the Board to consider whether
they support the view that the Company’s annual report
and Accounts, when taken as a whole, is fair, balanced and
understandable and, further, that it provides shareholders the
information necessary to assess the company’s position and
performance, business model and strategy.
In forming their view, the Audit Committee has considered the
processes undertaken to prepare for, and produce, the annual
report and how consideration was given for each of the fair,
balanced and understandable criteria in the compilation of
the narrative and presentation of the numbers, themes and
highlights. To support this, the Audit Committee received a
detailed briefing note as an integral part of the annual report
sign off process, which set out how this had been achieved by
the internal teams who prepared the report. Further, the Audit
Committee received briefings and updates during the course
of the year, appraising them of the process, Code requirements
and business performance. The Audit Committee was
presented with a draft of the annual report with sufficient time
to review, challenge and provide feedback. The briefing note:
• Explained how the process of preparing and compiling the
report was collaborated across the business’ internal teams
(Investor Relations, Finance and Company Secretary) and
also involved specialist advisors with the requisite skills to
structure and review the report
• Allowed the Committee to ensure a fair picture was
presented by drawing out the key judgements formed in
preparing the accounts and where any challenges lay
• Demonstrated that the report was put together in a
balanced manner, with the narrative aligning to the
business model, strategy and financial performance.
This was achieved through our business leaders reviewing
and signing off on the report content
• Explained how the report was designed to be
understandable, with consistent presentation of key
messages throughout the report
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EQUINITI GROUP PLC
REPORT OF THE RISK COMMITTEE
Dear Shareholder
Key areas for 2016 are to:
• Follow up actions from the implementation of the revised
EWRM framework and re-assessment of risks and additional
actions identified to mitigate risks
• Monitor progress in implementing changes being brought
in by the MAR and MiFID II, as well as other relevant
regulatory and legislative changes
• Give oversight, in conjunction with EFSL’s Risk Committee,
on progress to develop and improve its regulatory
processes and controls
I look forward to reporting on developments to Equiniti’s
systems and controls in next year’s Committee report.
John Parker
Chairman of the Risk Committee
7 March 2016
I am pleased to be able to take this opportunity as
Chairman of the Risk Committee to outline the objectives
and responsibilities of the Committee and the work that has
been carried out during 2015 together with its plans for the
coming year.
The role of the Committee is to advise the Board and the
Audit Committee on the establishment and appropriate
risk management framework and provide oversight on its
operation in the light of the Board's established risk appetite,
tolerance and strategy. In doing this, the Committee takes
account of the current and forecast macroeconomic and
financial environment. The Committee, in conjunction with
EFSL’s risk committee, advises the Board on the amount
of regulatory capital that should be held commensurate
with Equiniti’s risk profile, business needs, working capital
requirements and regulatory obligations. The Committee
will recommend periodically, for approval, the strategies and
policies for taking up, managing, monitoring and mitigating
the risks Equiniti is or might be exposed to within the defined
risk tolerances.
An appropriate risk framework has been implemented to
ensure that Equiniti’s risk exposure is dynamically measured
against the risk appetite approved by the Board, and that
the efficiency of risk mitigation strategies can be kept under
continued and regular review. In 2015, particular attention has
been paid to business certainty and disaster recovery and the
combined threats posed by cyber security and financial crime.
The Committee meetings are routinely attended by the
Chief Executive, CFO, and the Chief Risk Officer by invitation.
The key agenda items that the Committee considered in
2015 included:
• Review of routine updates of Equiniti’s policies relating to
competition and high level business principles and conduct
• Review of the 2016 compliance testing plans
• Review of reports and follow up actions on the
effectiveness of external payment and expenses payments
controls, outsourced print management and the risk control
framework and Enterprise Wide Risk Management (EWRM)
structure
• Review of reports from the compliance function and
following up actions into controls around external supplier
payments, internal expenses payment, outsourced print
management systems and client money bank accounts
• Receiving reports relating to cyber risk exposure, 4th
Anti Money Laundering Directive, and future changes to
Market Abuse Regulations (MAR) and Markets in Financial
Instruments and Derivatives (MiFID II) which are likely to
impact Equiniti’s activities and in particular its transaction
reporting responsibilities
79
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
REPORT OF THE RISK COMMITTEE
MEMBERSHIP AND MEETINGS
The Committee comprises independent non-executive
Directors. Biographies of the Committee’s members are
set out on page 64 and 65. The Chairman of the Committee
is John Parker.
The Committee discharges its responsibilities through a series
of scheduled meetings during the year.
RISK MANAGEMENT AND INTERNAL CONTROL
Equiniti has established risk management policies and the
Audit and Risk Committees oversee how management
monitors compliance with these. With these policies and
procedures, we review the adequacy of our risk management
framework in relation to the risks Equiniti faces.
The Chief Executive and CFO form part of Equiniti’s first
line of defence and attend Risk Committee meetings by
invitation, to respond to any matters that arise. The Chief
Risk Officer also attends Committee meetings by invitation,
as part of our second line of defence. They are responsible
for taking forward actions that the Committee delegates to
them. The Chief Risk Officer oversees the closure of these
actions. The Risk Committee is assisted in its oversight role
by the compliance monitoring function that undertakes
themed regulatory reviews and reports the results to the
Risk Committee.
Various aspects of Equiniti’s activities are regulated, either
directly or indirectly. As such, Equiniti’s risk management
systems are longstanding, standardised and robust. We have
a strong risk management framework, which uses a “three
lines of defence” model, namely:
• Line 1: Operational management’s proactive risk
identification and application of systems and controls
in line with policy
• Line 2: Risk and Compliance oversight and challenge,
including independent compliance monitoring and
escalation (the second line owns the development and
maintenance of Equiniti’s policies, which are approved by
the Risk Committee)
• Line 3: Independent assessment of the completeness
and effectiveness of line 1 and line 2 by our independent
internal audit function
Equiniti assesses its risk and risk profile using its EWRM
model, which covers financial soundness, liquidity, market
and credit exposure, legal and regulatory compliance, fraud
exposure, business continuity, financial crime, reputation,
change management, major projects and operational risks
within its business units.
During 2015, a comprehensive review of Equiniti’s risk
management framework was undertaken together with a
bottom up review and re-assessment of risks at business unit
and central support service level. These risks were assessed,
consolidated and combined to inform an updated risk log
and risk heat map.
During the year, EFSL, Equiniti’s principal regulated
subsidiary, established its own Risk Committee to oversee its
regulatory compliance. At the same time, EFSL established
a new compliance function in the form of a CASS Oversight
office specifically tasked with the oversight of all regulated
client assets held by EFSL.
In addition, we have a well-established business continuity
management (“BCM”) framework, which determines
criticality of each activity to clients and customers, our
clients’ customers, other external stakeholders and us.
Once assessed and independently challenged, we require
each business unit to apply a range of business continuity
tests, which increase in line with the level of critical activity
undertaken. We actively track our compliance with this BCM
testing programme.
During 2015, we undertook a successful Equiniti wide BCM
test scenario relating to a cyber security event combined with
a major corporate action.
Our principal risks and mitigations are discussed in the
Strategic Report on pages 44 and 45. Our approach to
financial risk management is discussed below.
FINANCIAL RISK MANAGEMENT
Our operations expose us to a variety of financial risks,
including credit risk, liquidity risk and the effects of changes
in interest rates on debt and cash balances. We have a risk
management programme that seeks to limit the adverse
effects on our financial performance, by monitoring levels of
cash and debt finance and the related financial impact.
Our principal financial instruments comprise sterling cash and
bank deposits, a bank term loan and revolving credit facility,
together with trade debtors and trade creditors that arise
directly from our operations.
CASH FLOW INTEREST RATE RISK
We are exposed to interest rate risk in three main respects
and protected against this as outlined below:
• Floating rates are generally earned on client and corporate
balances, which are partially mitigated by interest rate
derivatives and run to July and August 2018
• Expense relating to the UK Sharesave (SAYE) product,
and ultimately payable to savers at fixed rates, is protected
by notional fixed rate interest rate swap agreements
• Expense relating to our bank debt term loan. The variable
rate on our £250m term facility is fixed by an interest rate
swap, which expires in October 2018. We have not hedged
the revolving credit facility as this is a flexible instrument
and the drawn proportion of the facility is offset by cash
we hold for day to day trading matters
80
EQUINITI GROUP PLC
REPORT OF THE RISK COMMITTEE
CREDIT RISK
Credit risk is the risk of financial loss if a customer or
counterparty to a financial instrument fails to meet its
contractual obligations to us. Our principal financial assets are
bank balances, cash and trade debtors. These represent our
maximum exposure to credit risk in relation to financial assets.
We have strict controls around, and regularly monitor, the
credit ratings of institutions with which we enter transactions,
either on our own behalf or for clients. Although our credit
risk arises mainly from our receivables from clients, this risk is
not significant because it is spread across a large and diverse
client base and the majority of our trade receivables are with
FTSE 350 companies and public sector organisations. The
amounts presented in the consolidated financial statements
of financial position are net of allowances for doubtful
debts, which are estimated by management based on prior
experience and an assessment of the current economic
environment. Losses have only occurred infrequently in
previous years and have never been material with the
business mainly trading with FTSE 350 organisations and
UK Government.
FOREIGN CURRENCY RISK
We are not exposed to material foreign currency risk, but we
monitor foreign currency denominated costs, particularly in
relation to our Indian based operations.
PRICE RISK
Price risks result from changes in market prices such as
interest rates, foreign exchange rates and equity dealing
prices, which influence our income or the value of its financial
instruments.
Our financial instruments are mainly in sterling; therefore
foreign exchange movements do not have a material effect
on our performance. We do not hold positions in traded
securities and are only involved in receiving and transmitting
transactions on behalf of clients.
Equiniti earns income in relation to client and investor
deposits, as well as interest on its own deposits. We are
therefore exposed to movements in the interest rate in
both our intermediary fee revenue and net finance costs.
Intermediary fee revenue is linked to bank base rate, while
both our term facility and revolving credit facility are linked
to Libor. As noted above interest swaps are used to manage
medium term exposure to movements in interest rates.
As detailed above, in 2015 Equiniti entered into interest rate
swaps for a total of £650m, agreeing to receive fixed rate
income in exchange for variable rates for a period of 3 years
to July and August 2018.
We continually review these risks and identify suitable
instruments where applicable.
CAPITAL RISK MANAGEMENT
During the IPO, funds were raised to reduce the overall
level of debt. Our objectives when managing capital are to
maximise shareholder value while safeguarding our ability to
continue as a going concern. We will continue to proactively
manage our capital structure, while maintaining flexibility to
take advantage of opportunities 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.
PRUDENTIAL CAPITAL RISK
Two subsidiaries are subject to FCA regulatory capital
requirements where, as set against its regulated trading
permissions, they must maintain minimum levels of capital
in order to manage their affairs. EFSL is categorised as a P2
prudentially significant firm, which means that its disorderly
failure would have a significant impact on the functioning
of the market in which it operates. Paymaster (1836) Limited
(“P1836L”) is categorised as a P3 prudentially non-significant
firm, which means that its failure, even if disorderly, would be
unlikely to have a significant impact.
As an IFPRU MiFID qualifying firm, EFSL must comply with
the Capital Requirements Directive. It does so under the
FCA framework consisting of its three “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 equiniti.com.
As a MiFID exempt firm, EFSL must comply with the Capital
Requirements Directive. P1836L does, however, assess its
capital requirements and is subject to Equiniti’s EWRM and
three lines of defence risk management model.
LIQUIDITY RISK AND GOING CONCERN
Liquidity risk is the risk that Equiniti will be unable to meet
its financial obligations as they fall due. Our approach to
managing liquidity is to ensure, as far as is possible, Equiniti
will have sufficient liquidity to meet its liabilities when due,
under both normal and stressed conditions.
We have used our business plan as the basis for projecting
cash flows and measured the resulting outcomes on cash
availability and bank covenant test points for the next three
years. Equiniti has a very high level of client retention, which
gives us a high degree of comfort about the certainty of our
revenue income.
Our principal uncertainties about our income relate to
activities that are more difficult to predict, such as corporate
action income. These depend on the specific activities
of corporate clients which may, in turn, be influenced by
underlying market conditions.
During the planned period we expect to remain compliant
with all covenants. As such, the Board are satisfied that
Equiniti 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.
81
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
ANNUAL STATEMENT FROM THE CHAIRMAN OF THE
REMUNERATION COMMITTEE
Dear Shareholder
On behalf of the Board of Directors, I am pleased to present
you with our first Directors’ Remuneration Report, for the year
ended 31 December, 2015.
The report is comprised of three parts:
1. This annual statement which summarises the key decisions
made by the Committee during the year and forms part of
the annual report on Remuneration
2. The Directors’ Remuneration Policy on pages 83 to 91
which describes the key principles of our approach and
which will be subject to a binding shareholder vote at the
Annual General Meeting being held on 26 April 2016
3. The annual report on Remuneration on pages 91 to 96
which sets out the details of key payments to executive
and non-executive Directors in respect of the 2015 year,
and which will be subject to an advisory vote at the AGM
The strategic context
Equiniti listed on the London Stock Exchange in October
2015. Our IPO has resulted in a new capital structure and new
investors, with the company now listed on the same public
markets as the clients we support year after year.
At the same time, performance of the business has been
strong, with revenue growth of 26% and pre-exceptional
EBITDA growth of 23%. This has been driven by a combination
of organic growth, strategic acquisitions and a number of new
client wins. We have launched new services and invested in
our technology, platforms and people.
In preparation for our listing on the Stock Exchange in October
2015, a detailed review of remuneration for executive and
non-executive Directors took place, to reflect the size and
complexity of Equiniti after flotation. The remuneration
arrangements established for the Directors were outlined in
Equiniti’s listing prospectus dated 14 October, 2015 and are
explained in detail in the Policy Report that shareholders will
be asked to approve at our AGM in April.
Key pay outcomes during the 2015 year
The post-IPO remuneration arrangements for executives
were reviewed at the time of IPO and consist of:
• Salaries set at a broadly mid-market level against
comparable sized companies
• Competitive and cost-effective pension and benefits
provision
• An annual bonus with bonus deferral in shares for three
years (for bonuses in respect of 2016 and subsequent years)
subject to recovery and withholding
• A Performance Share Plan (PSP) with a two year post-
vesting holding requirement
• The opportunity to participate in all-employee share plans
• Share ownership guidelines
• Directors contracts that are in-line with current best
practice
The first awards under the PSP were granted shortly after IPO,
with a face value of approximately 450% of salary for both the
Chief Executive and Chief Financial Officer (CFO). Vesting
of these awards is subject to achievement of Normalised
Earnings Per Share (“EPS”) growth (50% of the award) and
relative total shareholder return (“TSR”) (50% of the award)
performance conditions, measured at the end of the 2017
financial year and third anniversary of the date of Admission,
respectively.
Bonuses of 98.1% and 57.5% of salary were awarded to
the Chief Executive and CFO respectively for the 2015
financial year in accordance with the arrangements in
place prior to the IPO and will therefore all be paid in cash.
This reflected performance against the financial targets
that were delivered in line with market consensus, individual
performance objectives that were achieved and IPO objectives
that were exceeded.
An overview of objectives, performance indicators and the
resultant bonuses paid to the executive Directors can be
found on page 92.
Remuneration policy for 2016
No structural changes to the policy outlined on pages 83 to
91 are proposed for the coming year.
Salaries for the executive Directors will remain unchanged for
2016.
Conclusion
This has been a year of significant change for Equiniti which
is likely to continue well into 2016. We are committed to
ensuring that remuneration practices attract and retain the
best people, and reward performance that is aligned with
outcomes for shareholders.
Dr Tim Miller
Chairman of the Remuneration Committee
7 March 2016
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EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
WHAT IS IN THE DIRECTORS’ REMUNERATION
REPORT?
This report describes the details of the remuneration policy
for our executive Directors and non-executive Directors, sets
out how this new policy will be used in the year ahead and the
amounts paid under the previous policy for the year ended
31 December, 2015.
WHAT IS THE COMMITTEE’S REMUNERATION POLICY?
When setting the policy for Directors’ remuneration, the
Committee takes into account the overall business strategy
and risk tolerance, considering the long term interests of
Equiniti with a view to adequately attracting, retaining and
rewarding skilled individuals, as well as delivering rewards
to shareholders.
The report has been prepared in accordance with the
provisions of the Companies Act 2006 and The Large and
Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008 (as amended). The report has also
been prepared in line with the recommendations of the UK
Corporate Governance Code (the Code).
DIRECTORS’ REMUNERATION POLICY
This part of the Remuneration Report sets out Equiniti’s
remuneration policy for its executive and non-executive
Directors. The policy has been developed taking into account
the principles of the Code, guidelines from major investors
and guidance from the PRA and FCA on best practice. The
Directors’ Remuneration Policy will be put to a binding
shareholder vote at the AGM on 26 April, 2016 and, subject to
shareholder approval, will take formal effect from that date.
WHAT IS THE ROLE OF THE REMUNERATION
COMMITTEE?
The Remuneration Committee (the “Committee”) has
responsibility for determining Equiniti’s overall pay policy.
Consistent with these principles, the Committee has agreed
a remuneration policy for senior management, including
executive Directors, which will:
• Promote the long-term success of the business
• Attract, retain and motivate executives and senior
management, in order to deliver Equiniti’s strategic goals
and business objectives
• Provide an appropriate balance between fixed and
performance related pay, supporting a high-performance
culture
• Provide a simple remuneration structure which is easily
understood by all stakeholders
• Adhere to the principles of good corporate governance
and appropriate risk management
• Align senior managers with the interests of shareholders
and other external stakeholders
• Consider the wider pay environment both internally and
In particular, the Committee is responsible for:
externally
• Encourage widespread equity ownership across Equiniti
In line with the Investment Association's Guidelines on
Responsible Investment Disclosure, the Committee will
ensure that the incentive structure for executive Directors
and senior management will not raise environmental, social
or governance (“ESG”) risks by inadvertently motivating
irresponsible behaviour.
More generally, with regard to the overall remuneration
structure, there is no restriction on the Committee that
prevents it from taking into account corporate governance
on ESG matters.
In addition, the Committee will regularly review the
remuneration packages for Equiniti’s executive Directors
and senior management, via liaison with the Risk and Audit
Committees and Equiniti’s risk function, to ensure that they
do not encourage inappropriate risk-taking.
• Approving the framework or broad policy for the
remuneration of the Chairman, the executive Directors,
and certain other senior executives
• Approving their remuneration packages and service
contracts
• Reviewing and approving decisions made in relation
to Code Staff by the Remuneration Committee of EFSL
• Reviewing the ongoing appropriateness and relevance
of the remuneration policy
• Approving the design of, and determining targets for,
all performance related pay schemes operated by Equiniti
and approving the total annual payments made under
such schemes
• Reviewing the design of all share incentive plans for
approval by the Board and shareholders. For any such
plans, the Committee determines each year whether
awards will be made and, if so, the overall amount of such
awards, the individual awards to executive Directors and
other senior management, and the performance targets
to be used
The Committee’s terms of reference are available on our
website, (http://investors.equiniti.com/investors/shareholder-
services/corporate-governance) or are available in hard copy
on request from the Company Secretary.
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SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
ARE THE VIEWS OF SHAREHOLDERS TAKEN INTO
ACCOUNT?
Equiniti values and is committed to dialogue with its
shareholders. The Committee will consider investor feedback
and the voting results received in relation to relevant AGM
resolutions each year. In addition, the Committee will
engage pro-actively with shareholders and will ensure that
shareholders are consulted in advance, where any material
changes to the Directors’ Remuneration Policy are proposed.
WHAT DOES THE COMMITTEE TAKE INTO ACCOUNT
WHEN SETTING REMUNERATION?
A review of remuneration is undertaken annually to
ensure reward levels are competitive with the external market,
taking account of the duties and responsibilities of the roles.
In line with Equiniti’s broader remuneration framework, which
is intended to ensure consistency and common practice
across Equiniti, and in determining the overall levels of
remuneration of the executive Directors, the Committee
also pays due regard to pay and conditions elsewhere in the
organisation.
The Committee seeks to ensure that the underlying principles
which form the basis for decisions on executive Directors’
pay are consistent with those on which pay decisions for the
rest of the workforce are taken. For example, the Committee
takes into account the general salary increase for the broader
employee population when conducting the salary review for
the executive Directors.
However, there are some structural differences in the
executive Directors’ Remuneration Policy (as set out opposite)
compared to that for the broader employee base, which the
Committee believes are necessary to reflect the differing
levels of seniority and responsibility. A greater weight is
placed on performance-based pay through the quantum
and participation levels in incentive schemes. This ensures
the remuneration of the executive Directors is aligned with
the performance of Equiniti and therefore the interests of
shareholders.
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EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
WHAT ARE THE ELEMENTS OF THE EXECUTIVE DIRECTORS’ PAY?
Element
Base Salary
Benefits
Purpose and link
to policy
Provides a competitive
and appropriate level
of basic fixed pay to
help attract and retain
Directors with the
skills and experience
required to deliver
Equiniti’s strategic goals
and business objectives.
Reflects an individual’s
experience,
performance and
responsibilities within
Equiniti.
Provides a competitive,
appropriate and cost
effective benefits
package.
Operation (including framework
used to assess performance)
Set at a level which provides a fair reward for
the role and which is competitive amongst
relevant peers.
Normally reviewed annually with any changes
taking effect from 1 April each year.
Set taking into consideration individual and
Equiniti performance, the responsibilities and
accountabilities of each role, the experience
of each individual, his or her marketability and
Equiniti’s key dependencies on the individual.
Reference is also made to salary levels
amongst relevant peers and other companies
of equivalent size and complexity.
The Committee considers the impact of any basic
salary increase on the total remuneration package.
The main benefits provided currently include
a company car allowance, private medical
insurance and life assurance.
The benefits provided may be subject to
minor amendment from time to time by the
Committee within this policy. In addition,
executive Directors are eligible for other
benefits which are introduced for the wider
workforce on broadly similar terms. Equiniti may
also reimburse any reasonable business related
expenses (including tax thereon) incurred in
connection with their role, if these
are determined to be taxable benefits.
Opportunity
There is no formal maximum, however,
increases will normally be in line with the
general increase for the broader employee
population. More significant increases may be
awarded from time to time to recognise, for
example, development in role and change in
position or responsibility.
Current salary levels are disclosed in the
annual report on Remuneration.
A car allowance of £15,000 is provided.
The cost of the provision of other benefits
varies from year to year depending on the
cost to Equiniti and there is no prescribed
maximum limit. However, the Committee
monitors annually the overall cost of the
benefits provided to ensure that it remains
appropriate.
Pension
Provides a competitive,
appropriate and cost
effective pension
package.
Each executive Director has the right to
participate in one of Equiniti’s defined
contribution pension plans or elect to be paid
some or all of their contributions in cash.
Pension contributions and/or cash allowances
in lieu of pension contributions are capped at
15% of salary.
Annual Bonus Incentivises the
execution of key annual
goals by driving and
rewarding performance
against individual and
corporate targets.
Compulsory deferral
of a proportion
into Equiniti shares
provides alignment with
shareholders.
Paid annually the bonus is subject to
achievement of a combination of stretching
corporate financial and personal performance
measures. Financial measures determine the
majority of the annual bonus opportunity.
From the 2016 Financial Year, 30% of bonus
earned will be deferred into awards over
shares under the Deferred Annual Bonus Plan
(“DABP”), with awards normally vesting after
a three-year period. The Committee has the
discretion to increase the deferral percentage
if required.
In respect of the annual bonus for Financial
Year 2016 and future years, in the case of gross
misconduct, fraud, material misstatement
of Equiniti’s results or accounts or error
made in assessing the satisfaction of any
bonus conditions, recovery and withholding
mechanisms apply for a period of three years
from the date of grant.
The on-target bonus payable to executive
Directors is 100% of base salary with 150%
of base salary the maximum payable.
The bonus payable at the minimum level of
performance varies from year-to-year and is
dependent on the degree of stretch.
Dividends may accrue on DABP share awards
over the vesting period and be paid out either
as cash or as shares on vesting in respect of
the number of shares that have vested.
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SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
Opportunity
Other than the Initial PSP Awards, under
which awards over shares worth up to 450%
of the executives’ basic annual salary could be
granted, the maximum opportunity is 150% of
base salary. In exceptional circumstances, this
may be increased to 300%.
Dividends may accrue on PSP awards over
the vesting period and be paid out either as
cash or as shares on vesting, in respect of the
number of shares that have vested.
Element
Performance
Share Plan
(“PSP”)
Purpose and link
to policy
Rewards the
achievement of
sustained long-term
financial performance
and shareholder returns
and is therefore aligned
with the delivery of
value to shareholders.
Facilitates share
ownership to provide
further alignment with
shareholders.
Granting of annual
awards aids retention.
Operation (including framework
used to assess performance)
Annual awards of performance shares1,
normally vest after three years, subject to
performance conditions and continued service.
Performance is normally tested over a period
of at least three financial years but, in the
case of the initial PSP awards, tested over the
periods described below.
Awards are subject to a financial growth
measure and total shareholder return (“TSR”)
relative to the constituents of a relevant
comparator index or peer group. The measures
for the Initial PSP Awards are based on average
normalised earnings per share (“EPS”) growth
over the Financial Years 2016 and 2017 (50%)
and TSR vs. the FTSE 250 index (excluding
investment trusts but including Equiniti) on the
date of Admission over a three year period to
the third anniversary of the date of Admission
(50%).
25% vests at threshold under the EPS condition
and 25% vests at median for the relative
TSR condition. There is straight-line vesting
for performance between threshold and
maximum.
Following vesting, a further two-year holding
period will apply to the awards whereby
executive Directors will be restricted from
selling the net of tax shares which vest.
In the case of gross misconduct, fraud, material
misstatement of Equiniti’s results or accounts
or error made in assessing the satisfaction
of a performance condition, recovery and
withholding mechanisms apply for at least
three years from the date on which an award
vests.
All-employee
share plans
Shareholding
guideline
Encourages employee
share ownership and
therefore increases
alignment with
shareholders.
Equiniti may from time to time operate
tax-approved share plans (such as HMRC-
approved Save As You Earn Option Plan and
Share Incentive Plan) for which executive
Directors are eligible.
The schemes are subject to the limits set by
HMRC from time-to-time.
Encourages
executive Directors
to build a meaningful
shareholding in
Equiniti, so as to further
align interests with
shareholders.
Each executive Director must build up and
maintain a shareholding in Equiniti equivalent
to 200% of base salary within five years of their
appointment to the Board.
Not applicable.
1 Awards may be structured as nil-cost options which will be exercisable
until the tenth anniversary of the grant date or as conditional awards.
86
EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
WHAT DISCRETIONS DOES THE COMMITTEE RETAIN
IN OPERATING THE INCENTIVE PLANS?
The Committee operates various incentive plans according
to their respective rules. To ensure the efficient operation and
administration of these plans, the Committee retains discretion
in relation to a number of areas. Consistent with market
practice, these include (but are not limited to) the following:
• Selecting the participants
• The timing of grant and/or payment
• The size of grants and/or payments
(within the limits set out in the policy table overleaf)
• The extent of vesting based on the assessment
of performance
• Determination of a good leaver and where relevant the
extent of vesting in the case of the share based plans
• Treatment in exceptional circumstances such as a change
of control, in which the Committee would act in the best
interests of Equiniti and its shareholders
• Making the appropriate adjustments required in certain
circumstances (such as rights issues, corporate restructuring
events, variation of capital and special dividends)
• Cash settling awards
• The annual review of performance measures, weightings
and setting targets for the discretionary incentive plans
from year to year
Any performance conditions may be amended or substituted
if one or more events occur which cause the Committee to
reasonably consider that the performance conditions would
not without alteration achieve its original purpose. Any varied
performance condition would not be materially less difficult
to satisfy in the circumstances.
HOW DOES THE COMMITTEE CHOOSE
PERFORMANCE MEASURES AND SET TARGETS?
The Annual Bonus is based on performance against a
combination of stretching financial and non-financial
performance measures. The financial measures are set taking
account of Equiniti’s key operational objectives but will
typically include measures of revenue, profitability and a cash
flow metric as these are KPIs aligned with Equiniti's strategy.
In addition, executive Directors and members of the senior
management team are assessed on personal objectives as
agreed by the Committee at the beginning of the year. The
Committee reviews the focus each year and varies them as
appropriate to reflect the priorities for the business in the
year ahead.
A sliding scale of targets is set for each financial measure
to encourage continuous improvement and challenge the
delivery of stretch performance and budgeted performance
against the financial metrics. Overall pay-outs may then be
subject to scale-back to ensure bonuses are self funding.
The performance conditions for the initial and 2016 PSP
award are based on a financial growth measure and TSR
performance. Relative TSR has been selected as it reflects
comparative performance against a broad index of
companies. It also aligns the rewards received by executives
with the returns received by shareholders. For the Initial PSP
awards, average growth in normalised EPS has been used
as a performance measure as it rewards improvement in
Equiniti’s underlying financial performance and is a measure
of Equiniti’s overall financial success.
A sliding scale of challenging performance targets is set for
both of these measures and further details of the targets to
be applied are set out in the annual report on Remuneration.
The Committee will review the choice of performance
measures and the appropriateness of the performance
targets and TSR peer group prior to each PSP grant.
Different performance measures and/or weightings may
be applied for future awards as appropriate. However, the
Committee will consult in advance with major shareholders
prior to any significant changes being made.
WHAT ABOUT PRE-EXISTING ARRANGEMENTS?
In approving this Directors’ Remuneration Policy, authority is
given to Equiniti to honour any commitments entered into
with current or former Directors that pre-date the approval of
the policy. Details of any payments to former Directors will be
set out in the annual report on Remuneration as they arise.
WHAT WOULD A NEW EXECUTIVE DIRECTOR BE PAID?
Can their pay package on appointment differ to the policy?
The ongoing remuneration package for a new executive
Director would be set in accordance with the terms of the
approved remuneration policy at the time of appointment
and the maximum limits set out therein.
Salaries may be set below market level initially with a view
to increasing them to the market rate subject to individual
performance and developing into the role by making phased
above inflation increases.
Benefits will be provided in line with those offered to other
executive Directors, although these may be varied for an
overseas appointment taking account of local market practice.
What would the incentive arrangements be for a newly
appointed Director?
Currently, for an executive Director, Annual Bonus payments
will not exceed 150% of base salary and PSP payments will
not normally exceed 150% of base salary (not including any
arrangements to replace forfeited entitlements).
Where necessary, specific Annual Bonus and PSP targets and
different vesting and/or holding periods may be used for an
individual for the first year of appointment if it is appropriate
to do so to reflect the individual’s responsibilities and the
point in the year in which they joined the Board. A PSP award
can be made shortly following an appointment (assuming
Equiniti is not in a close period).
87
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
What payments could an executive Director receive beyond
the policy?
The Committee retains flexibility to offer additional cash and/
or share based awards on appointment, to take account
of remuneration or benefit arrangements forfeited by an
executive on leaving a previous employer. If shares are used,
such awards may be made under the terms of the PSP or as
permitted under the Listing Rules.
Such payments would take into account the nature of awards
forfeited and would reflect (as far as possible) performance
conditions, the expected value foregone and the time over
which they would have vested or been paid. Awards may be
made in cash if Equiniti is in a prohibited period at the time
an executive joins.
The Committee may agree that Equiniti will meet certain
relocation, legal, tax equalisation and any other incidental
expenses as appropriate so as to enable the recruitment of
the best people including those who need to relocate.
What about an internal appointment?
In the case of an internal executive Director appointment, any
variable pay element awarded in respect of the prior role may
be allowed to pay out according to its terms, and adjusted as
relevant to take into account the appointment. In addition, any
other ongoing remuneration obligations existing prior
to appointment may continue.
WHAT ARE THE EXECUTIVE DIRECTORS’ TERMS
OF EMPLOYMENT?
What are their notice periods?
The executive Directors have entered into service agreements
with an indefinite term that may be terminated by either party
on 12 months’ written notice. Contracts for new appointments
will be terminable by either party on a maximum of 12 months'
written notice.
An executive Director’s service contract may be terminated
summarily without notice and without any further payment
or compensation, except for sums accrued up to the date
of termination, if they are deemed to be guilty of gross
misconduct or for any other material breach of the obligations
under their employment contract.
The executive Directors may be suspended or put on a period
of garden leave, during which they will be entitled to salary,
benefits and pension.
What payments will an executive Director receive when they
leave Equiniti?
If the employment of an executive Director is terminated in
other circumstances, compensation may include base salary
due for any unexpired notice period, pro-rata bonus (subject to
the performance conditions having been achieved) in respect
of the proportion of the financial year worked and any amount
assessed by the Committee as representing the value of other
contractual benefits and pension which would have been
received during the period. Any bonus paid to a departing
executive would normally be paid in cash, at the normal
payment date, and reduced pro-rata to reflect the actual
period worked. Equiniti may choose to continue providing
some benefits instead of paying a cash sum representing
their cost.
Any statutory entitlements or sums to settle or compromise
claims in connection with a termination (including, at the
discretion of the Committee, reimbursement for legal advice
and provision of outplacement services) would be paid as
necessary.
Executive Directors’ service contracts are available for
inspection at Equiniti’s registered office during normal business
hours and will be available for inspection at the AGM.
How are outstanding share awards treated when an executive
Director leaves Equiniti?
Any share-based entitlements granted to an executive Director
under Equiniti’s share plans will be treated in accordance with
the relevant plan rules. Usually, any outstanding awards lapse
on cessation of employment. However, in certain prescribed
circumstances, such as death, injury, disability, retirement
with the consent of the Committee, the sale of the entity that
employs him/her by Equiniti or any other circumstances at
the discretion of the Committee, ‘good leaver’ status may be
applied.
For good leavers under the PSP, outstanding awards will
normally vest at the original vesting date to the extent that the
performance condition has been satisfied, and would normally
be reduced on a pro-rata basis to reflect the period of time
which has elapsed between the grant date and the date on
which the participant ceases to be employed by Equiniti. The
Committee retains the discretion to vest awards (and measure
performance accordingly) on cessation and/or to disapply time
pro-rating. However, it is envisaged that this would only be
applied in exceptional circumstances. For good leavers under
the DABP, unvested awards will vest at the original vesting
date unless the Committee exercises its discretion and allows
the award to vest in full on or shortly following the date of
cessation.
In determining whether a departing executive Director should
be treated as a ‘good leaver’, the Committee will take into
account the performance of the individual and the reasons for
their departure.
What happens to their outstanding share awards if there
is a takeover or other corporate event?
Outstanding awards on a takeover, winding up or other
corporate event will vest early to the extent that the
performance condition has been satisfied, and would normally
be reduced on a pro-rata basis to reflect the period of time
which has elapsed between the grant date and the date on
which the participant ceases to be employed by Equiniti. The
Committee would retain discretion to waive time pro-rating if
it felt it was in the interests of shareholders to do so.
88
EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
In the event of an internal corporate reorganisation, awards
will be replaced by equivalent new awards over shares in a new
holding company, unless the Committee decides that awards
should vest on a basis which would apply in the case
of a takeover.
ARE THE EXECUTIVE DIRECTORS ALLOWED TO HOLD
EXTERNAL APPOINTMENTS?
Executive Directors are permitted to accept one external
appointment with the prior approval of the Chairman and
where there is no impact on their role with Equiniti. The Board
will determine on a case-by-case basis whether the executive
Directors will be permitted to retain any fees arising from such
appointments, details of which will be provided in the annual
report on Remuneration.
HOW MUCH COULD AN EXECUTIVE DIRECTOR EARN
UNDER THE REMUNERATION POLICY?
Under the Directors’ Remuneration Policy, a significant
proportion of total remuneration is linked to Equiniti
performance. The following charts illustrate how the executive
Directors’ total pay package varies under three different
performance scenarios: fixed pay only, on-target and at
maximum. These charts are indicative as share price movement
and dividend accrual have been excluded. All assumptions
made are noted below the chart.
Assumptions:
• Minimum = fixed pay only (2016 salary + estimated value
of ongoing benefits + pension of 15% of salary)
• On-target = fixed pay plus two thirds payout of the
maximum Annual Bonus opportunity (100% of base salary)
+ 25% of maximum PSP award (37.5% of salary)
• Maximum = fixed pay plus 100% payout of the Annual
Bonus (150% of base salary) + PSP awards (150% of
base salary)
The executive Directors can participate in all-employee share
schemes on the same basis as other employees. The value
that may be received under these schemes is subject to tax
approved limits. For simplicity, the value that may be received
from participating in these schemes has been excluded from
the above charts and in accordance with the Regulations, no
assumption is made as to future share price movements.
£2,500,000
£2,000,000
£1,500,000
£1,000,000
£500,000
£-
£2,500,000
£2,000,000
£1,500,000
£1,000,000
£500,000
£-
CHIEF EXECUTIVE
£1,178,000
15%
39%
46%
£546,000
100%
£1,926.000
36%
36%
28%
Minimum
Target
Maximum
PSP
Annual Bonus
Fixed Pay
CFO
£787,000
14%
39%
47%
£368,000
100%
£1,283,000
36%
36%
28%
Minimum
Target
Maximum
PSP
Annual Bonus
Fixed Pay
89
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
HOW ARE THE NON-EXECUTIVE DIRECTORS PAID?
Element
Purpose and link
to policy
Operation (including framework
used to assess performance)
Opportunity
Non-executive
Director fees
To attract and retain a
high-calibre Chairman
and non-executive
Directors by offering
market competitive fee
levels.
The fees are subject to maximum aggregate
limits as set out in Equiniti’s Articles of
Association (£2m).
The Committee is guided by the general
increase for the broader employee
population, but on occasions may need
to recognise, for example, changes in
responsibility, and/or time commitments.
Current fee levels are disclosed in the annual
report on Remuneration.
The Chairman is paid a single consolidated
fee. The non-executives are paid a basic
fee with the Chairmen of the main board
committees and the Senior Independent
Director paid additional fees to reflect their
extra responsibilities and time commitments.
If there is a temporary yet material increase
in the time commitments for non-executive
Directors, the Board may pay extra fees on
a pro-rata basis to recognise the additional
workload.
The level of fees is reviewed periodically by
the Committee and Chief Executive for the
Chairman and by the Chairman and executive
Directors for the non-executive Directors and
set taking into consideration market levels in
comparably sized FTSE companies, the time
commitment and responsibilities of the role
and to reflect the experience and expertise
required.
The Chairman and the non-executive
Directors are not eligible to participate in
incentive arrangements or to receive benefits
save that they are entitled to reimbursement
of reasonable business expenses and tax
thereon and the Chairman is provided with
private medical insurance benefits. They may
also receive limited travel or accommodation
related benefits in connection with their role
as a Director.
WHAT WOULD A NEW CHAIRMAN OR
NON-EXECUTIVE DIRECTOR BE PAID?
For a new Chairman or non-executive Director, the fee
arrangement would be set in accordance with the approved
remuneration policy in force at that time.
WHAT ARE THE TERMS OF APPOINTMENT FOR THE
CHAIRMAN AND NON-EXECUTIVE DIRECTORS?
All non-executive Directors have letters of appointment
with Equiniti for an initial period of three years (save for Sir
Rod Aldridge who has been appointed for a one-year term)
subject to annual re-election at the annual general meeting.
The appointment of each non-executive Director may be
terminated at any time with immediate effect if he/she is
removed as a Director by resolution at a general meeting or
pursuant to the Articles. At other times three months' notice
is required from either party. The non-executive Directors are
not entitled to receive any compensation on termination of
their appointment.
Directors’ letters of appointment are available for inspection
at Equiniti’s registered office during normal business hours
and will be available for inspection at the AGM.
90
EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
DATES OF DIRECTORS' SERVICE CONTRACTS/
LETTERS OF APPOINTMENT
Executive Directors
Date of service
Unexpired term
contract/appointment
of contract at 31
December 2015
Guy Wakeley
7 September 2015
Rolling contract
John Stier
11 September 2015
Rolling contract
Non-executive
Directors
Kevin Beeston
27 October 2015
2 years 10 months
Sir Rod Aldridge
27 October 2015
10 months
Victoria Jarman
27 October 2015
2 years 10 months
Haris Kyriakopoulos
27 October 2015
2 years 10 months
Dr Tim Miller
27 October 2015
2 years 10 months
John Parker
27 October 2015
2 years 10 months
ANNUAL REPORT ON REMUNERATION
This part of the Directors’ Remuneration Report sets out a
summary of how the Directors’ Remuneration Policy was
applied over the financial year ending 31 December 2015
and will be subject to an advisory vote at the AGM. Details
of the remuneration earned by executive and non-executive
Directors and the outcomes of the incentive schemes,
together with the link to Equiniti’s performance, are provided
in this section.
Various disclosures about the Directors’ remuneration set out
below have been audited by Equiniti’s independent auditors,
PricewaterhouseCoopers LLP. Where information has been
audited, this has been clearly indicated.
What did the Directors earn in relation to the 2015
financial year and the previous year? (Audited)
The following tables report the total remuneration receivable
by each Director during the year and previous year:
£’000
Executive
Guy Wakeley
John Stier5
Marytn Hindley6
Lucy Dimes7
Non-Executive
Kevin Beeston
Sir Rod Aldridge
Victoria Jarman
Haris Kyriakopoulos
Dr Tim Miller8
John Parker
Oliver Neidermaier
2015
2014
2015
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2015
2014
2015
2014
Salary and
fees
Benefits1
Annual
Bonus2
PSP3
SAYE
SIP
Employer Pension
Contribution4
Other9
Total
368
19
343
318
18
168
181
10
179
73
275
183
–
4
14
12
–
168
1
165
100
100
67
43
–
–
73
151
10
65
74
100
0
–
–
–
–
–
–
–
–
–
–
–
105
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
38
25
8
6
25
19
–
–
–
–
–
–
–
–
–
–
–
–
–
1,975
2,743
–
528
1,385
1,763
–
–
–
83
419
214
–
1,444
1,613
–
–
–
165
100
100
99
165
–
–
–
–
–
–
–
43
–
–
73
151
65
74
100
1 Benefits include car allowance, private medical insurance, life assurance and
directors' and officers' liability
2 For 2015, annual bonus is paid in cash and not deferred
3 The first awards under the PSP were made in the year and therefore no awards
vested during the year.
4 Prior to IPO Guy Wakeley received a cash allowance of 11% of salary and John Stier
received no pension. After IPO, both received 15% of salary.
5 John Stier joined Equiniti on 1 June 2015 and as part of the terms of his joining
agreement received a payment of £150k. He was appointed to the Equiniti Board
on 19 June 2015
6 Martyn Hindley’s remuneration in 2015 is for the period he was in post as CFO
7 2015 remuneration for Lucy Dimes is from 1 February 2015 when she was
appointed to the Equiniti Board
8 Dr Tim Miller joined Equiniti on 1 February 2015
9. Other remuneration includes the value of shares transferred to certain directors of
the Group by Advent on IPO in recognition of their contribution and management
of the IPO process. The shares were immediately vested but are subject to lock-
up. As previously disclosed in the Prospectus and later in this report, interest
free loans were granted to the Directors to fund their tax and national insurance
liabilities arising from the transaction. The loans are to be repaid within three years
or on their departure from Equiniti. As defined by current accounting standards
and policies, if the loans are held for a period of greater than nine months, they
will be treated as a benefit in kind for income tax purposes with the benefit in kind
value included in the single figure in future years.
10. Prior to the IPO John’s Parker’s fee consisted of an annual retainer of £50,000 plus
an additional per diem fee if his time commitment exceeded an agreed level.
During 2015, his time commitment significantly exceeded that level and as a result
his total fees amounted to £151,000. On IPO his fee arrangements were brought in
line with those of the other NEDs
91
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
How was the Annual Bonus payment determined? (Audited)
The bonus arrangements for 2015 were put in place when the
Company was in private ownership. As such the majority of
targets that were set reflect its then unlisted status.
Since that time, the Company has undergone very
considerable change and new bonus arrangements
have been put in place for 2016 and future years that are
appropriate for a its listed status. For 2015, however, the
annual bonus for the executive Directors was subject to a
target opportunity of 100% of salary and no bonus payable
unless a threshold level of financial performance was
achieved. Payment of the 2015 bonus is entirely in cash.
Performance targets included corporate financial, personal
and IPO metrics. The corporate financial targets comprised a
scorecard of EBITDA, Free Cash Flow and Order Book targets;
personal targets included a mix of financial and non-financial
measures; and the IPO element was conditional on successful
completion of the IPO or a sale of the business. The outturn
against these targets is largely the result of performance over
the 10 months before the Company listed and, as noted
above, they were set by a previous Remuneration Committee
at a time when the Company was privately owned. As a result,
corporate financial and IPO targets are commercially sensitive
and therefore only a qualitative summary of performance against
each of the three elements of the bonus is provided below, with
detailed disclosure of the targets provided only for the personal
objectives. Going forward annual bonus targets and performance
against them will be disclosed in full (subject exceptionally to
commercial sensitivity) following the financial year.
Following the end of the financial year, the Committee
assessed performance against each of the objectives.
Financial performance for the year was in-line with consensus
and the financial targets were determined to have been
partially achieved. Performance against the personal
objectives was in line with target and the IPO objectives
were exceeded as management was instrumental in
delivering an IPO in challenging market conditions.
Target
Opportunity
% salary
Corporate
objectives
Personal
objectives
IPO
objectives
Actual %
of Target
Guy Wakeley
John Stier1
100% Partially achieved
100% Partially achieved
Achieved
Achieved
Exceeded
Exceeded
98.1%
98%
1 John Stier's bonus is based on his pro rata salary from 1 June 2015 to 31 December 2015
Total
awarded
£343,340
£179,360
Guy Wakeley
Objective
Deliver the 2015
financial plan
Sales and
earnings growth
Cost reduction
and operations
transformation
Equity free cash-
flow
Evidenced by
• Monthly operating EBITDA and cash
budgets
Score
Achieved
• Improve monthly reforecasting
• Consistent divisional performance
• Performance in bond reporting and
trading and investor relations
• Quarterly revenue progression
• Organic growth
• New client wins
• Sales cover
• Increased use of offshore capability
• Net promoter scores
• Monthly operating cash targets
• Capital programme delivered on
budget
• Budgeted exceptional costs
• Growth delivered within working
capital headroom
Achieved
Exceeded
Achieved
Regulatory
development
• Strengthen Internal Audit,
Compliance and Risk
Achieved
• Develop governance structure to
improve regulatory oversight
• Regulatory compliance
• Improve regulatory resilience in
regulated businesses
Strengthen
finance function
• Appointment of CFO and new
Treasurer
Exceeded
• Development of data warehouse
solution
• Strengthen Group financial reporting
• Offshoring of group HR support
function
Achieved
Strengthen HR
function
• Replatform HR systems
• Succession planning
• Creation of a learning &
development function
92
John Stier
Objective
Balance sheet
Treasury
Management
information
and reporting
Evidenced by
• Reduction in net debt / EBITDA
leverage by the end of 2015
• Reduce work in progress and
debtors
• Deliver the interest income budget
improving yield where possible
• Appointment of new treasurer
• Develop and implement an interest
rate hedging strategy for deposit
balances and debt facilities
• Create an integrated suite of
financial MI to support operations,
business development and account
management
• Create a data warehouse to enable
real-time analytics and reporting
Score
Achieved
Exceeded
Achieved
Finance team
• Business case for offshoring of
finance functions to Chennai created
Achieved
• New treasurer and FP&A team
recruited
Cash generation
• Operating cash targets consistently
achieved month-on-month
Achieved
• Capital programme delivered within
budget within £18m
• Continuing growth supported
without additional absorption of
working capital
• Cash reporting provided for IT and
operations function
EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
What equity awards have been granted since IPO?
On 3 November 2015, the following PSP awards were granted to executive Directors:
Guy Wakeley
John Stier
Type of
award
Number of
shares2
Face value3 Face value as
a % of salary1
Threshold
vesting as %
of maximum2
End of performance
period2
PSP
SAYE
PSP
SAYE
1,254,545
£2,069,999
2,834
£5,016
831,818
£1,372,500
2,834
£5,016
450%
2%
450%
3%
25%
n/a
25%
n/a
27 October 2018
n/a
27 October 2018
n/a
1 PSP awards were granted at a share price of 165p being the share price at
IPO. The maximum permitted face value for initial PSP awards was 450% of
salary. The normal maximum for future awards is 150% of salary. SAYE awards
were granted at a share price of 127p being the three day average closing
price of the shares for the first three trading days less a discount of 20%.
2 Half of the initial PSP awards will be subject to average annual growth in
Equiniti’s fully diluted normalised earnings per share (“EPS”) for financial years
2016 and 2017 measured from a proforma EPS for the financial year ending
December 2015 of 13.0p. If average growth in EPS over the two financial
years is 6% or more, 25% of the award will vest. The award will vest in full for
average growth of 12% with payment on a sliding scale in between these
points. No award would be made if growth is below 6%. Half of the initial PSP
awards will be subject to TSR performance over three years from the date
of Admission relative to the constituent companies of the FTSE 250 Index
(excluding investment trusts) on the date of Admission. Vesting of 25% of the
award will occur for median ranking and the award will vest in full for upper
quartile or above ranking, with straight line vesting in between these points
based on ranking. No awards will vest if TSR ranks below the median.
What pension payments were made in 2015? (Audited)
Were any payments for loss of office made during 2015? (Audited)
The table below provides details of the executive Directors’
pension benefits:
Total contributions
to DC-type pension
plan £’000
Cash in lieu of
contributions to
DC-type pension
plan £’000
Guy Wakeley
John Stier
n/a
n/a
38
8
Each executive Director has the right to participate in one of
Equiniti’s defined contribution pension plans or elect to be paid
some or all of their contributions in cash. Pension contributions
and/or cash allowances are capped at 15% of salary.
Were any payments made to past Directors during 2015? (Audited)
There were no payments made to any past Directors during
the year.
Martyn Hindley ceased to be a Director of Equiniti Holdings
Ltd on 20 February 2015. On termination he received a
payment of £388,500 as full settlement of his legal and
contractual rights.
Lucy Dimes ceased to be a Director of Equiniti Holdings Ltd
on 31 July 2015. On termination she received a payment of
£275,000 as full settlement of her legal and contractual rights.
What are the Directors’ shareholdings and is there a guideline?
(Audited)
To align the interests of the executive Directors with
shareholders, each executive Director must build up and
maintain a shareholding in Equiniti equivalent to 200% of
base salary. Executives must meet the guideline shareholding
requirement within five years of appointment to the Board.
Details of the Directors’ interests in shares are shown in the
table below.
Director
Guy Wakeley
John Stier
Kevin Beeston
Sir Rod Aldridge
Victoria Jarman
Haris
Kyriakopoulos
Dr Tim Miller
John Parker
Beneficially
owned shares at
31 December 2015
Beneficially
owned shares at
7 March 2016
Shareholding
guideline achieved
1,260,003
747,945
875,218
1,525,749
31,713
–
63,291
57,020
1,260,003
747,945
875,218
1,525,749
31,713
–
63,291
57,020
Yes
Yes
n/a
n/a
n/a
n/a
n/a
n/a
Outstanding awards
PSP
DABP
1,254,545
831,818
–
–
SAYE
2,834
2,834
SIP
Total
4,587,566
4,587,566
2,086,363
–
5,668
93
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
What are the Directors’ outstanding incentive scheme interests? (Audited)
The tables below summarises the outstanding awards made to the executive Directors:
Guy Wakeley
Scheme
Interests
at 31
December
2014
Granted
in year
Lapsed
in year
Exercised
in year
Interests
at 31
December
2015
Date of
grant1
Exercise
price (£)
Vesting
date
Expiry
Date
PSP
DSBP
SAYE
SIP
1,254,545
–
2,834
–
–
–
–
–
–
–
–
–
–
–
–
1,254,545
3 Nov 2015
nil
27 Oct 2018
2 Nov 2025
–
–
–
–
–
2,834
4 Dec 2015
£1.27
1 Jan 2019
30 Jun 2019
nil
–
John Stier
Scheme
Interests
at 31
December
2014
Granted
in year
Lapsed
in year
Exercised
in year
Interests
at 31
December
2015
Date of
grant1
Exercise
price (£)
Vesting
date
Expiry
Date
PSP
DSBP
SAYE
SIP
831,818
–
2,834
–
–
–
–
–
–
–
–
–
–
–
–
831,818
3 Nov 2015
nil
27 Oct 2018
2 Nov 2025
–
–
–
–
–
2,834
4 Dec 2015
£1.27
1 Jan 2019
30 Jun 2019
nil
–
1 Vesting of the PSP awards made in November 2015, is based half on fully
diluted normalised earnings per share growth and half on relative TSR
performance as described earlier in this report.
The closing share price of Equiniti’s ordinary shares at
31 December, 2015, was 182p and the closing price range
from admission to the year end was 157p to 186.5p.
Assuming that all awards made under Equiniti’s share plans
vest in full, Equiniti will have utilised 3.58% of the 10% in
10 years dilution limits for all schemes and 2.05% of the
5% in 10 years dilution limits for discretionary schemes.
Have there been any loans made to Directors?
As previously disclosed Advent transferred shares to
certain Directors of the Group on IPO in recognition of their
contribution and management of the IPO process. The shares
are subject to lock up arrangements, as disclosed in the price
range prospectus. As the shares vested immediately and were
therefore taxable at the point of grant, the Group lent three of
those Directors who received the shares monies to cover their
PAYE and NI liabilities. These loans were all subject to relevant
approvals through the IPO process and are treated as a benefit
in kind to the receiving individuals if not settled within nine
months of issuance; all benefiting individuals have entered into
a loan agreement with the Group. These loans must be repaid
no later than October 2018. Loans were made to three of the
directors for the following amounts: £928,050, £678,732
and £580,031. All of the loans remain outstanding as at
31 December 2015.
94
EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
Total Shareholder Return
Source: Thomson Reuters
How does Equiniti’s share performance
compare to the FTSE 250 index?
This graph shows a comparison of
Equiniti’s total shareholder return (share
price growth plus dividends paid) with
that of the FTSE 250 Index (excluding
investment trusts) since admission.
Equiniti has selected this index as it
comprises companies of a comparable
size and complexity and provides a
good indication of Equiniti’s relative
performance.
115.00
110.00
115.00
110.00
95.00
Equiniti
FTSE 250 (excl. Inv Trusts)
90.00
27/10/2015
31/12/2015
How does the Chief Executive's pay compare to past
performance?
The total remuneration of the Chief Executive's over the last
two years is shown in the table below.
Total remuneration (£000)
Annual Bonus (as a % of
target opportunity)
PSP vesting (as a % of
maximum opportunity)
Year Ending 31 December
2014
528
56%
n/a
2015
2,743
98.1%
n/a
How does the change in the Chief Executive's pay compare
to that for Equiniti employees?
The table below shows the percentage change in each of the
Chief Executive's salary, taxable benefits and Annual Bonus
earned in 2014 and 2015, compared to that for the average
employee of Equiniti (on a per capita basis). The Chief
Executive’s salary was increased on IPO (along with those
of a number of other employees) to reflect the increased
responsibilities of the role following listing.
Guy Wakeley,
Chief Executive
Average Employee
% change
% change
Salary
Benefits
Annual Bonus
16%
8%
105%
4%
-15%1
5%
1. Total benefits across the group have increased year on year and individual
benefits have not been reduced. The reduction reflects the increase in the
number of employees in the Group with a different set of benefits, including
those in India and in acquisitions.
How much does Equiniti spend on pay?
Equiniti’s actual spend on pay for all employees in 2014 was
£114.6m, and in 2015 was £147.4m, a change of 29%, driven
by growth in Equiniti. There were no dividends or ordinary
share buy backs in the period.
Who are the members of the Remuneration Committee?
The Committee is made up exclusively of independent
non-executive Directors. The Committee is chaired by
Dr Tim Miller and its other members are Sir Rod Aldridge
and Victoria Jarman.
What advice did the Committee receive?
New Bridge Street, (“NBS”), part of Aon plc, is retained as
the independent adviser to the Remuneration Committee.
NBS has also been appointed as advisor to the Remuneration
Committee of Equiniti Financial Services Limited.
NBS have been appointed by the Committee to provide advice
and information. NBS is a signatory to the Remuneration
Consultants’ Code of Conduct which requires that its advice be
objective and impartial. The Committee will review annually the
performance and independence of its advisors.
The total fees paid to NBS for providing advice and
information related to remuneration and employee share
plans to the Committee during the year were £141,733.
The fees charged are predominantly charged on the basis
of hourly rates.
The Chairman normally attends meetings except when his
own remuneration is being discussed.
The Chief Executive and other senior management were
invited to attend meetings as the Committee considered
appropriate, but did not take part in discussions directly
regarding their own remuneration.
The Committee’s terms of reference are available on our
website or are available in hard copy on request from the
Company Secretary.
95
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION REPORT
HOW WILL THE DIRECTOR’S REMUNERATION POLICY
BE OPERATED IN THE 2016 FINANCIAL YEAR?
What are the current base salaries?
Salaries were adjusted on IPO from £350,000 to £460,000 for
Guy Wakeley to take account of the change in the scope of
his role and from £313,000 to £305,000 for John Stier, with
part of his previous salary replaced by the introduction of
a cash allowance in lieu of pension. The average increase
for all employees will be 1.5% with effect from 1 April
2016, however, salaries for executive Directors will not be
increased until April 2017.
Guy Wakeley
John Stier
1 April 2016
Base salary
27 October 2015
Base salary
£460,000
£305,000
£460,000
£305,000
How will the Annual Bonus operate in 2016?
As in 2015, annual bonuses for executive Directors will be
determined based on a scorecard of corporate financial and
personal objectives related to their role. For 2016 a bonus of
up to 150% of salary may be earned with 30% of any award
deferred in shares for three years. The corporate financial
metrics will be Profit before Tax, Revenue and Cash Flow with
equal weightings. The personal metrics are commercially
sensitive but will be disclosed following the year end.
The Committee has chosen not to disclose, in advance, the
performance targets for the forthcoming year as these include
items which the Committee considers commercially sensitive.
A detailed explanation of bonus pay-outs and performance
achieved will be provided in next year’s annual report on
Remuneration.
Outcome of performance against individual non-financial
metrics will act as a multiplier with annual bonus calculated
using the following formula:
Annual Bonus = Salary x On Target Bonus Opportunity x
Corporate Financial Outcome x Individual Multiplier
How will the PSP operate in 2016?
The award levels under the PSP for the 2016 financial year
will be a maximum of 150% of base salary for both executives.
The awards made in 2016 will be subject to the following
performance conditions, measured over the three financial
years to 31 December 2018:
1. Half of the 2016 PSP awards will be subject to average
annual growth in Equiniti’s fully diluted normalised earnings
per share (“EPS”) for financial years 2016, 2017 and 2018
measured from a proforma EPS for the financial year ending
December 2015 of 13.0p. If average growth in EPS over the
three financial years is 6% or more, 25% of the award will
vest. The award will vest in full for average growth of 12%
with payment on a sliding scale in between these points.
No award would be made if growth is below 6%.
2. Half of the 2016 PSP awards will be subject to TSR
performance relative to the constituent companies of the
FTSE 250 Index (excluding investment trusts) on the date
of grant. Vesting of 25% of the award will occur for median
ranking and the award will vest in full for upper quartile or
above ranking, with straight line vesting in between these
points based on ranking. No awards will vest if TSR ranks
below the median.
What are the current non-executive Board fees?
2016
2015
%
Change
Board Chairman
£210,000
£210,000
Basic fee
Additional fee for
Senior Independent
Director
Additional fee for
Committee Chairman
0%
0%
0%
£55,000
£55,000
£10,000
£10,000
£10,000
£10,000
0%
Where:
1. Individual Multiplier ranges from 0 to 1.5 determined
through Remuneration Committees’ review of performance
against personal objectives, with a multiplier of 1.0 for
on-target performance
APPROVAL
This report was approved by the Board of Directors on
7 March 2016 and signed on its behalf by:
Dr Tim Miller
Chairman of the Remuneration Committee
2. Assuming target performance against both the corporate
7 March 2016
and personal elements, 75% of the on-target bonus
opportunity will be payable
A cap on the overall bonus pool will apply to ensure that
bonus payments which are above target do not exceed
40% of incremental profit in excess of budget.
96
EQUINITI GROUP PLC
DIRECTORS’ REPORT
The Directors have pleasure in presenting the Directors’
report, together with the audited accounts of the Company
the year ended 31 December 2015.
The Directors’ report comprises pages 97 to 99, and
incorporates by reference those sections of the annual report
set out below:
Political donations
Equiniti does not make any political donations and does not
incur any political expenditure. As a precautionary measure
authority is to be sought at the Annual General Meeting to
make limited political donations or incur political expenditure
and there is a full explanation in note 18 to the Notice of
Meeting on page 182.
Dividend
The Board is recommending an ordinary dividend of 0.68p
per share totalling £2.0m representing a pay-out ratio of 30%
of normalised profit after tax for the period from admission
to 31 December 2015. The ordinary dividend, which is subject
to shareholder approval at the Annual General Meeting to be
held on 26 April 2016, will be paid on 10 May 2016.
The Board has adopted a progressive dividend policy
reflecting Equiniti’s long-term earnings and cash flow
potential with a target pay-out ratio of 30% of normalised
profit attributable to ordinary shareholders and split
approximately one-third and two-thirds between interim
and final dividends respectively.
Directors in year
Sir Rod Aldridge
Kevin Beeston
James Brocklebank
Lucy Dimes
Martyn Hindley
Victoria Jarman
Haris Kyriakopoulos
Dr Tim Miller
Oliver Niedermaier
John Parker
John Stier
Guy Wakeley
Resigned: 21/09/2015
Appointed: 1/02/2015
Resigned: 31/07/2015
Resigned: 20/02/2015
Appointed: 1/02/2015
Resigned: 21/09/2015
Appointed: 19/06/2015
Biographical details of the Directors are set out on
pages 64 and 65.
Section
Financial instruments and financial risk
management
Greenhouse gas emissions
Corporate governance report
Employee equality and diversity
Employee involvement
Relationship Agreement
Directors responsibility statements
Going concern statement
Viability statement
Pages
80, 81
59
63
50
48, 49
73
72, 73
72
46
In accordance with Listing Rule LR 9.8.4C, the information to
be included in the annual report, where applicable, under LR
9.8.4, is set out in this Directors’ report, with the exception of
details of transactions with controlling shareholders which is
set out in note 7.4 to the accounts on page 148.
The annual report have been drawn up and presented in
accordance with UK company law and the liabilities of the
Directors in connection with the report shall be subject to
the limitations and restrictions provided by such law.
Equiniti Group plc, formerly Equiniti Group Limited,
incorporated is incorporated as a public limited company and
is registered in England with the registered number 7090427.
Equiniti Group plc’s registered office is Sutherland House,
Russell Way, Crawley, West Sussex, RH10 1UH. Our registrars
are Equiniti Limited who are situated at Aspect House,
Spencer Road, Lancing, West Sussex, BN99 6DA.
Charitable donations
Equiniti supports our national charity partner, Winston’s Wish.
In addition our employees raise money for organisations
that have a personal relevance to them or their communities,
ranging from primary schools to Children in Need.
Equiniti aims to promote economic and social wellbeing
around all of our locations and is active in supporting local
community projects and initiatives, including supporting a
number of local schools and investing in young talent.
97
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE
EQUINITI GROUP PLC
DIRECTORS’ REPORT
Directors’ share interests
The interests of the Directors at 31 December 2015 and at 7 March 2016 were:
Unvested Vested but not
exercised
Exercised
during the
year
Total of all
options held1
Number of
shares held
Total
Sir Rod Aldridge
Kevin Beeston
Victoria Jarman
Haris Kyriakopoulos
Dr Tim Miller
John Parker
John Stier
Guy Wakeley
-
-
-
-
-
-
834,652
1,257,379
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1 Includes both unexercised vested interests and unvested interests at 7 March 2016.
-
-
-
-
-
-
834,652
1,525,749
1,525,749
875,218
31,713
-
63,291
57,020
747,945
875,218
31,713
-
63,291
57,020
1,582,597
2,517,382
1,257,379
1,260,003
Retirement, re-election & removal of Directors
All the Directors will retire and offer themselves for re-election
at the Annual General Meeting to be held on 26 April 2016.
Equiniti’s Articles of Association regulate the appointment and
removal of Directors, as does the Companies Act 2006 and
related legislation. In general the Directors may fill any casual
vacancy in the number of Directors subject to re-appointment
by shareholders at the next Annual General Meeting.
The Articles of Association contain authority for shareholders
by ordinary resolution to remove any Director from office
regardless of the terms of their appointment. The Articles of
Association may only be amended by special resolution of the
shareholders. The powers of the Directors are described in
the Corporate Governance Report on page 67.
3rd party indemnity
Equiniti has made qualifying third party indemnity provisions
for its Directors in relation to certain losses and liabilities they
may incur in the course of acting as Directors, its subsidiaries
or associates, which remain in force at the date of this report.
Auditor
PricewaterhouseCoopers LLP, Equiniti’s auditors, have
indicated their willingness to continue in office and, on the
recommendation of the Audit Committee and in accordance
with section 489 of the Companies Act 2006, a resolution to
re-appoint them will be put to shareholders at the Annual
General Meeting to be held on 26 April 2016.
AGM
An explanation of the resolutions to be put to shareholders at
the 2016 Annual General Meeting, and the recommendation of
the Directors is relation to them, is set out on pages 180 to 182
Equiniti’s first Annual General Meeting will be held at the
offices of Weil, Gotshal & Manges LLP, 110 Fetter Lane,
London, EC4A 1AY at 11.00a.m. on 26 April 2016. The notice
of Meeting is set out on pages 176 to 182.
Share Capital
Equiniti’s share capital at 31 December 2015 comprised
ordinary shares of £0.001 each which rank equally in all
respects.
The rights attaching to the ordinary shares are set out in
Equiniti’s Articles of Association.
There are no restrictions on the transfer of shares or on the
exercise of voting rights, except in circumstances where:
i. Equiniti has exercised its right to suspend the voting rights
or to prohibit the transfer of shares as a result of the failure
by the shareholder to provide us with information requested
by us in accordance with part 22 of the Companies Act
2006; or
ii. The shareholder is prohibited from exercising voting rights
by the Listing Rules or the City Code on Takeovers and
Mergers
As set out in the Report of the Remuneration Committee on
pages 82 to 96 Equiniti operates a share incentive scheme.
Any shares held by the Employee Benefit Trust trustees
abstain from voting.
Except as noted above any shares acquired through a share
incentive scheme rank equally with existing ordinary shares
and have no additional or special rights.
At the year-end, the Directors had authority to allot up to
100,000,000 additional ordinary shares subject to certain
restrictions. In addition, the Directors have authority to allot
up to 15,000,000 of those additional ordinary shares on a non
pre-emptive basis subject to certain restrictions. Resolutions
to renew these authorities will be put to shareholders at the
2016 Annual General Meeting and further explanation of the
resolutions is set out on page 181.
98
EQUINITI GROUP PLC
DIRECTORS’ REPORT
Except as set out in the Relationship Agreement described
on page 73 the Directors are not aware of any agreements
or rights between shareholders that place restrictions on the
transfer of shares or exercise of voting rights.
Changes to Share Capital
Equiniti undertook a reorganisation of its issued share capital
immediately prior to Admission. It consisted of the following
steps:
a) the existing issued A ordinary, B ordinary, C ordinary,
D ordinary and E ordinary shares of £0.05 each were
converted into deferred shares of £0.05 each;
b) new ordinary shares of £0.001 were issued to Equiniti
(Luxembourg) S.a.r.l. and certain other third parties in
consideration for:
(i) 4,506,718 new ordinary shares as repayment of a loan of
a principal amount of £9,901,000 (plus accrued interest
thereon) owed by Equiniti PIK Cleanco Limited (an
indirect subsidiary) to Equiniti (Luxembourg) S.a.r.l.;
(ii) 37,785,165 new ordinary shares as repayment of all
outstanding loan notes comprising £39,999,999 of loan
notes (plus interest accrued thereon) issued by Equiniti
X2 Mezz Cleanco Limited (an indirect subsidiary) to
Equiniti (Luxembourg) S.a.r.l. and certain other third
parties; and
(iii) 21,344,482 new ordinary shares in consideration of the
purchase of all preference shares issued by Equiniti
X2 Enterprises Limited (a direct subsidiary) to Equiniti
(Luxembourg) S.a.r.l. and certain other third parties
Research & Development
Equiniti continues to commit resources to the development of
new and improved technologies and capabilities, in order to
derive new solutions and to enhance our client and customer
experiences, improve our services and products and meet the
ever-changing regulatory requirements for the services we
provide. Expenses incurred are capitalised when it is probable
that future economic benefits will be attributable to the asset
and that costs can be measured reliably.
Change of control
In the event of a takeover, a scheme of arrangement (other
than a scheme of arrangement for the purposes of creating
a new holding company) or certain other events, unvested
executive Director and employee share awards may in certain
circumstances become exercisable. Such circumstances
may but do not necessarily depend on the achievement of
performance conditions or the discretion of the Remuneration
Committee. Equiniti does not have any agreements with any
Director or officer that provide for compensation for loss of
office or employment resulting from a takeover.
Equiniti has facility arrangements with its bank lenders which
contain provisions giving those lenders certain rights on a
change of control.
Save as otherwise disclosed above, there are no other
significant agreements to which Equiniti is a party that take
effect, alter or terminate upon a change of control following
a takeover bid.
(c) The deferred shares were bought back at nil consideration
Post balance sheet events
and cancelled.
Following Admission Equiniti carried out a court approved capital
reduction by cancelling its share premium account to create
distributable reserves to support Equiniti’s dividend policy.
Substantial shareholdings
At 7 March 2016, Equiniti had been notified in accordance
with the Disclosure and Transparency Regulations, or was
otherwise aware, that the following held, or were beneficially
interested in, 3% or more of Equiniti’s issued ordinary shares
at that date:
Equiniti (Luxembourg) S.a.r.l.
92,982,821
30.99
Number of
ordinary shares
% of voting
rights
Citadel Advisers LLC
Odey Asset Management
River & Mercantile Asset
Management
Newton Investment Management
Limited
Standard Life Investments
Schroder Investment Management
Pelham Capital Management
Sanlam Four Investments UK
17,653,382
14,108,850
12,196,260
11,246,807
10,588,237
10,560,840
9,400,000
9,215,373
5.88
4.70
4.07
3.75
3.53
3.52
3.13
3.07
In the first quarter of 2016, the Group completed two
acquisitions in Financial Services technology for a total
consideration of c£16m, with a further earnout payment
of up to c.£10m in 2019, dependent on growth.
On 3 March 2016, the Group acquired the entire share capital
of KYCnet BV. KYCnet provides cutting edge workflow
technology for on-boarding and monitoring of commercial
and retail clients and has broad applicability across financial
services as well as retail, travel and legal services.
On 4 March 2016, the Group acquired RiskFactor, a UK based
provider of credit decisioning and risk profiling software
for commercial lending, with deep client relationships and
broad applicability across lending products. RiskFactor
complements the Group’s other ‘control risk’ capabilities
within the Intelligent Solutions division. RiskFactor was
acquired by purchasing the entire share capital of its holding
company, Information Software Solutions Limited.
On behalf of the Board
Doug Armour
Company Secretary
7 March 2016
99
SECTION 02Equiniti Group plc Annual Report 2015GOVERNANCE WE HAVE WORKED WITH EQUINITI FOR EIGHT YEARS
DELIVERING AN OUTSTANDING SERVICE TO OUR TRUSTEES
AND MEMBERS. EQUINITI ARE A TRUSTED PARTNER
PROVIDING BOTH A TIMELY AND FAST CHANGING
ENVIRONMENT. WE HAVE HAD A NUMBER OF KEY PROJECTS
OVER THE YEARS WHERE OUR PARTNERSHIP WITH EQUINITI
HAS MEANT WE COULD DELIVER ON TIME AND TO BUDGET.”
PETER HARRIS, PENSIONS DIRECTOR, TELENT
Making the future
today for our
technology clients
100
I
S
E
C
T
O
N
0
3
I
F
N
A
N
C
A
L
I
S
T
A
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S
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q
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n
i
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i
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o
u
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n
n
u
a
l
l
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e
p
o
r
t
2
0
1
5
101
03
Financial
Statements
INDEPENDENT AUDITOR'S REPORT
102
CONSOLIDATED FINANCIAL
STATEMENTS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S
REPORT ON THE COMPANY'S
FINANCIAL STATEMENTS
COMPANY FINANCIAL STATEMENTS
NOTES TO THE COMPANY'S
FINANCIAL STATEMENTS
110
117
161
162
165
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF EQUINITI GROUP PLC
REPORT ON THE GROUP
FINANCIAL STATEMENTS
OUR OPINION
In our opinion:
• Equiniti Group plc’s group financial statements (the
“financial statements”) give a true and fair view of the
state of the group’s affairs as at 31 December 2015 and
of the group’s loss and the group’s cash flows for the
year then ended;
• the group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards (“IFRSs”) as adopted by the European
Union;
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as
regards the group financial statements, Article 4 of the IAS
Regulation.
WHAT WE HAVE AUDITED
The financial statements, included within the annual report,
comprise:
• the consolidated statement of financial position as
at 31 December 2015;
• the consolidated income statement and the consolidated
statement of comprehensive income for the year then
ended;
• the consolidated statement of cash flows for the year
then ended;
• the consolidated statement of changes in equity 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 the
preparation of the financial statements is applicable law and
IFRSs as adopted by the European Union and, as regards the
company financial statements, as applied in accordance with
the provisions of the Companies Act 2006.
OUR AUDIT APPROACH
Overview
MATERIALITY
• Overall group materiality: £2.1m which represents 2.5%
of EBITDA prior to exceptional items.
• Of the Group’s 26 trading entities, we performed full
scope audit procedures on five statutory entities.
AUDIT
SCOPE
• Specific audit procedures on certain balances were
performed at a further four statutory entities.
• Overall, this accounted for 84% of Group revenue and
68% of Group EBITDA prior to exceptional items.
AREAS
OF FOCUS
• Determination of purchase price allocation
for acquisitions.
• Risk of impairment on goodwill.
• Revenue recognition for corporate actions.
• Classification of non-IPO exceptional costs.
102
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF EQUINITI GROUP PLC
REPORT ON THE GROUP FINANCIAL STATEMENTS
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements.
In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting
estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits
we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of
bias by the directors that represented a risk of material misstatement due to fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort,
are identified as “areas of focus” in the table below. We have also set out how we tailored our audit to address these specific
areas in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our
procedures should be read in this context. This is not a complete list of all risks identified by our audit.
AREA OF FOCUS
HOW OUR AUDIT ADDRESSED THE AREA OF FOCUS
Determination of purchase price allocation
for acquisitions
For each of the acquisitions:
• we identified and assessed the methodologies used by the Group to
During the year the Group made two
acquisitions comprising; the trade and
assets of Selftrade and the share capital
of TransGlobal Payment Solutions Limited.
(see note 4.1)
Accounting for the purchase price
allocation is complex and judgemental
with a number of assumptions involved
in allocating the consideration to specific
assets such as customer relationships and
software.
Risk of impairment on acquired goodwill
IAS 36 requires management to prepare
annual impairment reviews for any
indefinite lived intangible assets. Equiniti
has one such intangible asset, goodwill,
amounting to a book value of £407.6m at
31 December 2015. The calculations require
a number of judgements and assumptions
to be made by management which can
have a material effect on the results of
the Group. (see note 4.3)
identify the acquired identifiable tangible assets and liabilities, and identify
previously unrecognised intangible assets, which we considered reasonable.
• we tested the valuations of identified acquired intangible assets prepared
by the Group by assessing the appropriateness of the valuation method
used, and by comparing the assumptions used, for example, attrition rates,
customer income, asset lives and contingent considerations, to market data,
empirical data from the business acquired and our experience of similar
transactions, with support from PwC specialists and found no material
differences.
• we challenged management’s assumption whether other intangible assets
should be recognised, such as brands, and determined based on the nature
of the acquisitions that there were no other material intangible assets to
recognise.
We obtained the Group’s future cash flow forecasts and evaluated the process
by which they were prepared. We checked that the forecasts were consistent
with the latest Board approved budgets.
We tested a number of key assumptions including:
• growth rates for revenue and costs by comparing them to historical results,
existing contracts and sales pipeline as well as external market data and long
term forecasts of GDP growth;
• the discount rate used by assessing the cost of capital for the Group, using
our knowledge of the Group’s businesses, external market data and PwC
specialists; and
• working capital, capital expenditure, interest cost and tax cost assumptions
by considering historical trends of the business, and the funding and tax
position of the Group.
We found each of the key assumptions to have been assessed on a
supportable basis by management.
We tested management’s sensitivity analysis on these assumptions by
assessing whether a reasonable range of sensitivities had been used. In
addition we performed a number of our own sensitivities to understand the
level of changes to key assumptions needed to cause an impairment to arise.
We found that the level of changes to management’s assumptions that would
be required for an impairment to arise is extensive and as a result we assessed
that management’s conclusion that there was no impairment at 31 December
2015 was appropriate.
103
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF EQUINITI GROUP PLC
REPORT ON THE GROUP FINANCIAL STATEMENTS
AREA OF FOCUS
HOW OUR AUDIT ADDRESSED THE AREA OF FOCUS
Revenue Recognition for corporate actions
Corporate actions are significant projects
where Equiniti execute large shareholder
related tasks, which can include complex
dividend payment arrangements and
the support required by corporates with
shareholders in merger situations over an
extended period.
The revenue associated with an individual
corporate action can be material and where
it is ongoing at the year end management
make a judgement about the amount of
revenue to recognise.
We assessed the Group’s disclosed accounting policy as well as the detailed
methods used to apply those policies to confirm compliance with both the
accounting policy and the requirements of accounting standards.
We performed testing to determine whether revenue for ongoing corporate
actions at the year end has been recognised appropriately, reflecting amongst
other things the amount of worked performed as a proportion of the total
work required and the extent of the customers payments and whether they
are non – refundable.
We sensitised assumptions over future costs to complete the project to
assess whether a reasonable change in these costs would materially affect the
revenue recognised to date.
We found that the assumptions and the amount of revenue recognised for the
corporate actions ongoing at the year end were appropriate
Classification of non- IPO exceptional
costs – note 3.3
We assessed the disclosed accounting policy for compliance with accounting
standards and for consistency of application.
Costs of £10.3m have been classified
as exceptional items (excluding those
associated with the IPO) in the current year
financial statements.
One of the Groups financial reporting KPIs
is EBITDA pre-exceptional costs. There
is a risk that could some of the recurring
costs have been incorrectly included as
exceptional costs, it might make a key
performance indicator misleading.
We tested whether exceptional items were non-recurring in nature and
recognised and presented in accordance with the disclosed accounting policy
by gaining an understanding as to why the amounts have been treated as
exceptional. We tested a sample of items to confirm amounts and the nature
of the cost to supporting evidence.
In areas where similar costs had occurred in the previous year we considered
whether it was appropriate to continue to classify such costs as exceptional
costs.
We scanned the listing of costs for any items that appeared unusual to us in
the context of the exceptional items accounting policy and tested whether
such items were appropriately treated.
We considered whether the disclosures included within the financial
statements provided sufficient detail to enable an understanding of the nature
of the exceptional costs.
Our testing did not identify any material misstatements in the amounts
or classification of exceptional costs.
104
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF EQUINITI GROUP PLC
REPORT ON THE GROUP FINANCIAL STATEMENTS
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the organisational structure of the group, the accounting processes and controls,
and the industry in which the group operates.
The Group is organised into three operating divisions (Investment Solutions, Pension Solutions and Intelligent Solutions), each
of which is made up of a different numbers of statutory entities, and our Group audit approach was aligned with this structure.
Within these divisions operate 26 trading entities and 20 holding entities. All but two of these are based in the UK and Northern
Ireland, both of which are immaterial to the Group. We performed full scope audit procedures on five statutory entities which
accounted for 84% of Group revenue and 68% of Group EBITDA pre-exceptional items.
Specified audit procedures in relation to external debt, cash and deferred income were performed at a further four statutory
entities. Desktop reviews were performed for all entities which were not in full scope.
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £150,000
(2014: £90,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Overall group materiality
£2.1m (2014: £1.8m) based on application of a consistent benchmark
where the Group performance has increased in the current year.
How we determined it
2.5% of EBITDA prior to exceptional items.
Rationale for benchmark applied
We considered that EBITDA prior to exceptional items to be the most
appropriate measure in assessing the performance of the Group given
the transition of the business from a highly geared Private Equity owned
business to a UK Listed plc during the latter part of the year.
Going concern
Under the Listing Rules we are required to review the directors’ statement, set out on page 72, in relation to going concern.
We have nothing to report having performed our review.
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation
to the directors’ statement about whether they considered it appropriate to adopt the going concern basis in preparing the
financial statements. We have nothing material to add or to draw attention to.
As noted in the directors’ statement, the directors have concluded that it is appropriate to adopt the going concern basis in
preparing the financial statements. The going concern basis presumes that the group has adequate resources to remain in
operation, and that the directors intend it to do so, for at least one year from the date the financial statements were signed.
As part of our audit we have concluded that the directors’ use of the going concern basis is appropriate. However, because not
all future events or conditions can be predicted, these statements are not a guarantee as to the group’s ability to continue as a
going concern.
105
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF EQUINITI GROUP PLC
OTHER REQUIRED
REPORTING
CONSISTENCY OF OTHER INFORMATION
Companies Act 2006 opinion
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.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
Information in the annual report is:
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge
of the Group acquired in the course of performing our audit; or
• otherwise misleading.
We have no exceptions
to report.
the statement given by the directors on page 72, in accordance with provision C.1.1 of the
UK Corporate Governance Code (the “Code”), that they consider the annual report taken as
a whole to be fair, balanced and understandable and provides the information necessary for
members to assess the Group’s position and performance, business model and strategy is
materially inconsistent with our knowledge of the Group acquired in the course of performing
our audit.
We have no exceptions
to report.
the section of the annual report on page 77, as required by provision C.3.8 of the Code,
describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
We have no exceptions
to report.
106
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF EQUINITI GROUP PLC
OTHER REQUIRED REPORTING
THE DIRECTORS’ ASSESSMENT OF THE PROSPECTS OF THE GROUP AND OF THE PRINCIPAL RISKS
THAT WOULD THREATEN THE SOLVENCY OR LIQUIDITY OF THE GROUP
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in
relation to:
the directors’ confirmation on page 42 of the annual report, in accordance with provision
C.2.1 of the Code, that they have carried out a robust assessment of the principal risks facing
the Group, including those that would threaten its business model, future performance,
solvency or liquidity.
We have nothing material to
add or to draw attention to.
the disclosures in the annual report that describe those risks and explain how they are
being managed or mitigated.
We have nothing material to
add or to draw attention to.
the directors’ explanation on page 46 of the annual report, in accordance with provision
C.2.2 of the Code, as to how they have assessed the prospects of the Group, over what
period they have done so and why they consider that period to be appropriate, and
their statement as to whether they have a reasonable expectation that the group will be
able to continue in operation and meet its liabilities as they fall due over the period of
their assessment, including any related disclosures drawing attention to any necessary
qualifications or assumptions. We have nothing to report having performed our review.
We have nothing material to
add or to draw attention to.
Under the Listing Rules we are required to review the directors’ statement that they have carried out a robust assessment
of the principal risks facing the Group and the directors’ statement in relation to the longer-term viability of the Group.
Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the
directors’ process supporting their statements; checking that the statements are in alignment with the relevant provisions
of the Code; and considering whether the statements are consistent with the knowledge acquired by us in the course
of performing our audit.
ADEQUACY OF 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.
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 these responsibilities.
We have no exceptions to report arising from this
responsibility.
CORPORATE GOVERNANCE STATEMENT
Under the Listing Rules we are required to review the part of
the Corporate Governance Statement relating to ten further
provisions of the Code. We have nothing to report having
performed our review.
107
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF EQUINITI GROUP PLC
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
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 72, 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.
WHAT AN AUDIT OF FINANCIAL STATEMENTS
INVOLVES
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:
We test and examine information, using sampling and other
auditing techniques, to the extent we consider necessary to
provide a reasonable basis for us to draw conclusions. We
obtain audit evidence through testing the effectiveness of
controls, substantive procedures or a combination of both.
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.
OTHER MATTER
We have reported separately on the Company financial
statements of Equiniti Group plc for the year ended
31 December 2015 and on the information in the Directors'
Remuneration Report that is described as having been
audited.
Graham Lambert (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
• whether the accounting policies are appropriate to the
Gatwick
group’s and the company’s circumstances and have been
consistently applied and adequately disclosed;
7 March 2016
• the reasonableness of significant accounting estimates
made by the directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the
directors’ judgements against available evidence, forming
our own judgements, and evaluating the disclosures in the
financial statements.
108
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109
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2015
CONTINUING OPERATIONS
Revenue
Operating costs before exceptional costs, depreciation and amortisation
EBITDA* prior to exceptional items
Operating costs – exceptional items
EBITDA*
Depreciation of property, plant and equipment
Amortisation of software
Amortisation of acquisition related intangible assets
Total operating costs
Earnings before interest and tax (EBIT)
Finance income
Finance costs before exceptional items
Finance costs – exceptional items
Net finance costs
Gain on disposal of associate
Share of profit of associate
Loss before income tax
Income tax credit
Loss for the year
Loss for the year attributable to:
– Owners of the parent
– Non-controlling interests
Loss for the year
Note
3.1,3.4
3.2
3.4
3.3
4.2
4.3
4.3
3.2
6.1
6.1
6.1
4.5
8.1
2015
£m
369.0
2014
(Restated)
£m
292.3
(282.8)
(222.3)
86.2
(32.8)
53.4
(4.4)
(15.8)
(23.0)
(358.8)
10.2
0.7
(61.4)
(21.2)
(81.9)
–
–
70.0
(12.6)
57.4
(3.8)
(11.0)
(20.9)
(270.6)
21.7
0.6
(72.4)
–
(71.8)
9.8
1.7
(71.7)
(38.6)
25.9
(45.8)
(50.4)
4.6
(45.8)
1.7
(36.9)
(39.0)
2.1
(36.9)
Basic and diluted loss per share (in £) attributable to owners of the parent:
Basic and diluted loss per share (in £)
6.4
(0.93)
(7.80)
*Earnings before interest, tax, depreciation, amortisation and the impact of associate undertakings
The notes on pages 117 to 160 form part of these financial statements.
110
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2015
Loss for the year
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Fair value movement through hedging reserve
Change in value of available-for-sale financial assets
Items that will not be reclassified to profit or loss
Defined benefit plan actuarial gain/(loss)
Deferred tax (charge)/credit on other comprehensive income
Note
9.3
8.2
2015
£m
(45.8)
2014
(Restated)
£m
(36.9)
2.0
–
2.0
2.6
(0.4)
2.2
1.5
4.9
6.4
(5.8)
1.0
(4.8)
Total comprehensive (loss)/profit for the year
(41.6)
(35.3)
Total comprehensive (loss)/profit attributable to:
– Owners of the parent
– Non-controlling interests
Total comprehensive loss for the year
The notes on pages 117 to 160 form part of these financial statements.
(46.4)
4.8
(41.6)
(37.4)
2.1
(35.3)
111
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2015
Note
4.2
4.3
4.5
9.1
8.2
5.1
6.8
6.6
6.7
9.3
5.3
9.2
8.2
5.2
9.3
5.3
9.2
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associates
Other financial assets
Deferred income tax assets
Current assets
Trade and other receivables
Agency broker receivables
Cash and cash equivalents
Total assets
LIABILITIES
Non-current liabilities
External loans and borrowings
Preference shares and loans due to ultimate controlling party
Deferred consideration
Employee benefits
Provisions for other liabilities and charges
Other financial liabilities
Deferred income tax liabilities
Current liabilities
Trade and other payables
Agency broker payables
Employee benefits
Income tax payable
Provisions for other liabilities and charges
Other financial liabilities
Total liabilities
Net assets/(liabilities)
The notes on pages 117 to 160 form part of these financial statements.
112
2015
£m
11.4
637.2
–
1.8
20.0
670.4
70.5
15.9
76.5
2014
(Restated)*
1 Jan 2014
(Restated)*
£m
£m
12.6
638.2
–
11.2
–
662.0
64.7
19.5
30.1
10.7
557.5
14.3
7.7
–
590.2
56.7
8.2
15.4
80.3
162.9
114.3
833.3
776.3
670.5
314.3
–
–
13.5
4.5
0.5
–
623.7
277.8
4.0
15.5
5.8
0.7
7.7
559.1
257.2
–
10.1
7.0
3.9
3.5
332.8
935.2
840.8
97.8
15.9
–
1.8
4.1
0.4
120.0
68.5
19.5
0.4
0.8
3.4
0.4
93.0
49.0
8.2
0.4
–
3.9
0.4
61.9
452.8
1,028.2
902.7
380.5
(251.9)
(232.2)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2015
EQUITY
Equity attributable to owners of the parent
Share capital
Share premium
Capital contribution reserve
Hedging reserve
Share-based payments reserve
Accumulated retained earnings/(losses)
Non-controlling interest
Total equity
Note
6.2
6.2
6.3
6.3
7.2
2015
£m
0.3
–
181.5
1.8
0.2
176.7
360.9
20.0
380.5
2014
(Restated)*
1 Jan 2014
(Restated)*
£m
£m
5.0
3.5
–
(0.2)
–
(277.9)
(269.6)
17.7
(251.9)
5.0
3.5
–
(1.7)
–
(239.0)
(232.2)
–
(232.2)
*Comparative years have been restated due to a change in accounting policy to align the useful life of software to five years (see note 2.1).
The notes on pages 117 to 160 form part of these financial statements.
The financial statements on pages 110 to 160 were approved by the Board of directors on 7 March 2016 and were signed on its behalf by:
J Stier
Director
113
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015
Share
capital
Share
premium
Capital
contribution
reserve
Hedging
reserve
Share-based
payments
reserve
Accumulated
retained
losses
Non-
controlling
interest
Total
equity
Balance at 31 December 2013
(as previously reported)
Effect of change in accounting policy
(see note 2.1)
£m
5.0
£m
3.5
–
–
Balance at 1 January 2014 (Restated)
5.0
3.5
Comprehensive (loss)/income
(Loss)/profit for the year per the statement
of comprehensive income
Other comprehensive income/(expense)
Changes in fair value of cash flow hedges
Change in value of available-for-sale
financial assets
Actuarial losses on defined benefit
pension plans
Deferred tax on defined benefit pension plans
Total other comprehensive income/(loss)
Total comprehensive income/(expense)
Non-controlling interest arising on business
combination
Transactions with non-controlling interests
Transaction with owners recognised
directly in equity
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 December 2014 (Restated)
5.0
3.5
The notes on pages 117 to 160 form part of these financial statements.
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£m
(1.7)
–
(1.7)
–
1.5
–
–
–
1.5
1.5
–
–
–
(0.2)
£m
£m
£m
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(190.8)
–
(184.0)
(48.2)
–
(48.2)
(239.0)
–
(232.2)
(39.0)
2.1
(36.9)
–
4.9
(5.8)
1.0
0.1
–
–
–
–
–
1.5
4.9
(5.8)
1.0
1.6
(38.9)
2.1
(35.3)
–
–
–
16.3
16.3
(0.7)
(0.7)
15.6
15.6
(277.9)
17.7
(251.9)
114
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2015
Share
capital
Share
premium
Capital
contribution
reserve
Hedging
reserve
Share-based
payments
reserve
Accumulated
retained
(losses)/
earnings
Non-
controlling
interest
Total
equity
£m
£m
£m
£m
£m
£m
£m
£m
Balance at 1 January 2015
5.0
3.5
–
(0.2)
–
(277.9)
17.7
(251.9)
Comprehensive (loss)/income
(Loss)/profit for the year per the statement
of comprehensive income
Other comprehensive income/(expense)
Changes in fair value of cash flow hedges
Actuarial gains on defined benefit
pension plans
Deferred tax on defined benefit pension plans
Total other comprehensive income/(loss)
Total comprehensive income/(expense)
–
–
–
–
–
–
–
–
–
–
–
–
Issue of share capital
Capital reduction
0.3
494.7
(4.8)
(498.2)
–
–
–
–
–
–
–
–
Buy back of own shares
(0.2)
Capital contribution
Dividends
Transactions with non-controlling interests
Share-based payments expense
Transaction with owners recognised
directly in equity
–
–
–
–
–
0.2
181.3
–
–
–
–
–
–
–
(4.7)
(3.5)
181.5
–
2.0
–
–
2.0
2.0
–
–
–
–
–
–
–
–
Balance at 31 December 2015
0.3
–
181.5
1.8
The notes on pages 117 to 160 form part of these financial statements.
–
–
–
–
–
–
–
–
–
–
–
–
0.2
0.2
0.2
(50.4)
4.6
(45.8)
–
2.4
(0.4)
2.0
–
0.2
2.0
2.6
–
(0.4)
0.2
4.2
(48.4)
4.8
(41.6)
–
503.0
–
–
–
–
–
–
–
–
–
(1.1)
(1.4)
495.0
–
–
181.3
(1.1)
(1.4)
–
0.2
503.0
(2.5)
674.0
176.7
20.0
380.5
115
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2015
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
Proceeds from disposal of a business
Investment in an associate
Payment relating to prior year acquisition
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Proceeds from new bank loans
Increase in RCF facility
Repayment of loan notes
Repayment of PIK loans
Repayment of preference shares
Payment of finance lease liabilities
Interest paid
Dividends paid to non-controlling interests
Transactions with non-controlling interests
Loan fees paid and other finance costs
Refinancing fees paid
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Note
9.5
6.1
6.1
4.5
4.1
4.5
6.6
6.6
6.6
2015
£m
72.2
72.2
0.4
0.3
–
2014
£m
51.2
51.2
0.2
0.4
1.7
(19.9)
(30.3)
–
–
(3.9)
(2.9)
(15.5)
(41.5)
495.0
250.0
24.5
(440.0)
(161.9)
(105.0)
(0.3)
(30.1)
(1.1)
(1.2)
–
(14.2)
15.7
46.4
30.1
1.5
(2.5)
(0.7)
(3.8)
(17.0)
(50.5)
–
–
45.5
–
–
–
(0.3)
(29.3)
–
–
(1.9)
–
14.0
14.7
15.4
Cash and cash equivalents at 31 December
76.5
30.1
The notes on pages 117 to 160 form part of these financial statements.
116
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
1 GENERAL INFORMATION
Equiniti Group plc, formerly Equiniti Group
Limited, (the “Company”) is a public limited
company which is listed on the London Stock
Exchange, incorporated and domiciled in
the United Kingdom. The Company and its
subsidiaries (collectively, the “Group”) provide
complex administration and payment services
supported by technology platforms to a wide
range of organisations. The registered office
is Sutherland House, Russell Way, Crawley,
West Sussex, RH10 1UH. The group financial
statements consolidates those of the Company
and its subsidiaries.
2 BASIS OF PREPARATION
2.1 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of preparation
The principal accounting policies applied in
the preparation of the consolidated financial
statements are set out below. These policies
have been consistently applied to all the
periods presented unless otherwise stated.
These financial statements have been prepared
in accordance with International Financial
Reporting Standards as adopted by the
European Union (‘‘IFRS’’), IFRS Interpretation
Committee (‘‘IFRS IC’’) interpretations as
adopted by the European Union (the ‘‘EU’’)
and the Companies Act 2006 applicable
to companies reporting under IFRS. The
consolidated financial statements have
been prepared on the going concern basis
and under the historical cost convention, as
modified by the revaluation of financial assets
and financial liabilities (including derivative
instruments) at fair value through profit or
loss. The Groups functional and presentational
currency is the British Pound (“£”).
During the current year the Directors
reconsidered the estimated useful lives of
some of the Group’s software platforms and
concluded that the lives over which the assets
are being amortised should be shorter than
previously estimated. For this reason the
amortisation charge has been recalculated
for prior years and the changes have been
retrospectively applied to the financial
statements. The effect of the restatement has
been a credit to the amortisation charge in
the year ended 31 December 2014 of £5.0m.
The carrying values of the intangible assets
in the statement of financial position have
consequently been reduced by £48.2m
as at 1 January 2014 and £43.2m as at
31 December 2014.
In the prior year, the Group’s investment in
shares of Euroclear plc were revalued based
on the trade price of recent transactions and a
gain of £4.9m was recognised and booked to
exceptional items in the income statement. In
the current year financial statements, the gain
has been reclassified to other comprehensive
income. The reclassification did not impact the
statement of financial position.
Basis of consolidation
Subsidiaries are all entities (including
structured entities) over which the Group has
control. The Group controls an entity when
the Group is exposed to, or has rights to,
variable returns from its involvement with the
entity and has the ability to affect those returns
through its power over the entity. Subsidiaries
are fully consolidated from the date on which
control is transferred to the Group. They are
deconsolidated from the date that control
ceases.
The acquisition 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.
Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business
combination are measured initially at their
fair values at the acquisition date. The Group
recognises any non-controlling interest in
the acquiree on an acquisition-by-acquisition
basis, either at fair value or at the non-
controlling interest’s proportionate share of
the recognised amounts of the acquiree’s
identifiable net assets.
Acquisition related costs are expensed as
incurred and included within exceptional items.
Associates are all entities over which the
Group has significant influence but not control,
generally accompanying a shareholding of
between 20% and 50% of the voting rights.
Investments in associates are accounted for
using the equity method of accounting. Under
the equity method, the investment is initially
recognised at cost, and the carrying amount
is increased or decreased to recognise the
investor’s share of the profit or loss of the
investee after the date of acquisition. The
Group’s investment in associates includes
goodwill identified on acquisition. The Group’s
share of post-acquisition profit or loss is
recognised in the income statement, and its
share of post-acquisition movements in other
comprehensive income is recognised in other
comprehensive income with a corresponding
adjustment to the carrying amount of the
investment.
Going Concern
The Group meets its day-to-day working
capital and financing requirements through its
cash generated from operations and its bank
facilities. The Directors, after making enquiries
and on the basis of current financial projections
and the facilities available at the reporting
date believe that the Group has adequate
financial resources to continue in operation for
the foreseeable future. For this reason, they
continue to adopt the going concern basis in
preparing the historical financial information.
Investments in subsidiaries
Investments in subsidiaries are carried
at historical 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.
Leases in which the Group assumes substantially
all the risks and rewards of ownership of
the leased asset are classified as finance
leases. Where land and buildings are held
under leases the accounting treatment of
the land is considered separately from that
of the buildings. Leased assets acquired by
way of finance lease are stated at an amount
equal to the lower of their fair value and the
present value of the minimum lease payments
at inception of the lease, less accumulated
depreciation and impairment losses. Lease
payments are accounted for as described below.
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 2 – 50 years
• Office equipment
2 – 10 years
• Fixtures and fittings
3 – 20 years
Intangible assets and goodwill
Other intangible assets
Other intangible assets that are acquired by
the Group are stated at cost less accumulated
amortisation and impairment losses.
Customer relationships are valued based on
the net present value of the excess earnings
generated by the revenue streams over their
estimated useful lives.
117
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
2.1 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Order books are valued based on expected
revenue generation and Brand valuation is
based on net present value of estimated
royalty returns.
Software
Costs associated with maintaining computer
software programmes are recognised as an
expense as incurred. Development costs
that are directly attributable to the design,
development 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:
• Software development
3 – 5 years
• Other intangible assets
1 – 20 years
Goodwill
Goodwill arises on the acquisition of subsidiaries
and represents the excess of the consideration
transferred, the amount of any non-controlling
interest in the acquiree and the acquisition-date
fair value of any previous equity interest in the
acquiree over the fair value of the identifiable
net assets acquired. If the total of consideration
transfered, non-controlling interest recognised
and previously held interest measured at fair
value is less than the fair value of the net assets
of the subsidiary acquired, in the case of a
bargain purchase, the difference is recognised
directly in the income statement.
For the purpose of impairment testing,
goodwill acquired in a business combination
is allocated to each of the cash generating
units (“CGUs”) that is expected to benefit from
the synergies of the combination. Each unit
to which the goodwill is allocated represents
the lowest level within the entity at which the
goodwill is monitored for internal management
purposes. Goodwill is monitored at the
operating segment level.
Goodwill impairment reviews are undertaken
annually or more frequently if events or
changes in circumstances indicate a potential
impairment. The carrying value of the CGU
containing the goodwill is compared to the
recoverable amount, which is the higher
of value in use and the fair value less costs
of disposal. Any impairment is recognised
immediately as an expense and is not
subsequently reversed.
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.
Classification of financial instruments issued
by the Group
The Group classifies its financial assets in the
following categories; at fair value through profit
or loss, loans and receivables, and available for
sale. The classification depends on the purpose
for which the financial assets were acquired and
management determine the classification of its
financial assets on initial recognition.
Other financial assets include loans and
receivables, derivatives and investment in
shares. Derivatives are explained below. 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.
The Group classifies debt and equity
instruments as either financial liabilities or
as equity in accordance with the substance
of the contractual arrangement. An equity
instrument is any contract that evidences
a residual interest in the assets of the
Group after deducting all of its liabilities.
Equity instruments issued by the Group are
recognised at the proceeds received, net of
direct issue costs.
Under IAS 32, financial instruments issued
by the Group are treated as equity only to
the extent that they meet the following two
conditions:
(a) they include no contractual obligations
upon the Group to deliver cash or other
financial assets or to exchange financial assets
or financial liabilities with another party under
conditions that are potentially unfavourable to
the Group; and
(b) where the instrument will or may be settled
in the Group’s own equity instruments, it
is either a non-derivative that includes no
obligation to deliver a variable number of
the Group’s own equity instruments or is a
derivative that will be settled by the Group’s
exchanging a fixed amount of cash or other
financial assets for a fixed number of its own
equity instruments.
To the extent that this definition is not met, the
proceeds of issue are classified as a financial
liability.
Finance payments associated with financial
liabilities are dealt with as part of finance
expenses. Finance payments associated with
financial instruments that are classified in
equity are treated as distributions and are
recorded directly in equity.
Derivative financial instruments and hedging
activities
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
118
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
derivatives qualify for hedge accounting,
recognition of any resultant gain or loss
depends on the nature of the item being
hedged (see cash flow hedges 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.
The full fair value of a hedging derivative is
classified as a non-current asset or liability
when the remaining maturity of the hedged
item is more than 12 months, and a current
liability when the remaining maturity of the
hedged item is less than 12 months.
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.
Trade receivables
Trade receivables are stated initially at fair
value and subsequently measured at amortised
cost using the effective interest method 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 receivable and the
estimated future cash flows discounted where
appropriate. Any impairment is recognised in
the statement of comprehensive income within
operating costs.
Agency broker balances
Where the Group acts as an agency broker
for retail investors, balances owed by or to
the retail investor and the market maker are
recognised within other receivables and other
payables until the settlement date when these
balances are eliminated.
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 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 the financial year which are unpaid. The
amounts within trade payables are unsecured.
Trade payables are recognised initially at fair
value and subsequently measured at amortised
cost using the effective interest method.
Assets and liabilities held for sale
Assets and liabilities (or disposal groups) are
classified as held for sale when their carrying
amount is to be recovered principally through a
sale transaction and a sale is considered highly
probable. On classification as held for sale,
they are stated at the lower of carrying amount
and fair value less costs to sell. Impairment
losses are included in the income statement,
as are any gains and losses on subsequent
re-measurement.
Employee benefits
Defined contribution plans
A defined contribution plan is a pension
plan under which the Group pays fixed
contributions to a separately administered
fund. The Group has no further payment
obligations once the contributions have been
paid. The contributions are recognised as
employee benefit expense in the statement of
comprehensive income as incurred. Prepaid
contributions are recognised as an asset to the
extent that a cash refund or reduction in future
payments is available.
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.
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.
Current service costs reflect the increase in
the defined benefit obligation resulting from
employee service in the current year, benefit
curtailments and settlements. Payments are
recognised as employee benefit expense in the
statement of comprehensive income.
Past-service costs, which arise as a result of
current changes to plan arrangements affecting
the obligation for prior periods, are recognised
immediately as employee benefit expense in
the statement of comprehensive income.
The net interest cost is calculated by applying
the discount rate to the net balance of the
defined benefit obligation and the fair value
of the plan assets. The net cost is included
within finance costs in the statement of
comprehensive income.
Short-term benefits
Short-term employee benefit obligations are
measured on an undiscounted basis and are
expensed as the related service is provided.
119
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
2.1 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
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
Equity settled:
The Group operates a number of equity-
settled, share based compensation plans,
under which the entity receives services
from employees as consideration for equity
instruments (options) of the Group. The fair
value of the employee services received
in exchange for the grant of the options is
recognised as an expense. The total amount to
be expensed is determined by reference to the
fair value of the options granted:
– including any market performance conditions
(for example, an entity’s share price);
– excluding the impact of any service and non-
market performance vesting conditions (for
example, profitability, sales growth targets and
remaining an employee over a specified period
of time); and
– including the impact of any non-vesting
conditions (for example, the requirement for
employees to save or hold shares for a specific
period of time).
At the end of each reporting date, the Group
revises its estimates of the number of options
that are expected to vest based on the
non-market vesting conditions and service
conditions. It recognises the impact of the
revisions to original estimates, if any, in the
statement of comprehensive income, with a
corresponding adjustment to equity.
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
costs to revert leased premises back to a
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.
Foreign currency translation
The results and financial position of all Group
entities having a different functional currency
from the presentational currency are translated
into the presentational currency as follows:
• assets and liabilities for each balance sheet
presented are translated at the closing rate
at the date of that balance sheet;
• income and expenses for each income
statement are translated at average
exchange rates; and
• all resulting exchange differences are
recognised in other comprehensive income.
Foreign currency transactions are translated
into the functional currency using the
exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and
losses resulting from the settlement of such
transactions and from the translation at year
end exchange rates of monetary assets and
liabilities denominated in foreign currencies
are recognised in the income statement within
finance income or costs.
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 as the services are performed.
Hardware sales and software licences are
recognised when goods and perpetual licences
are delivered. Technical support revenues and
periodic 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.
Revenue with respect to long term contracts,
where delivery of a service spans more than
one accounting period, is recognised using
the ‘percentage of completion’ method. The
stage of completion is measured by reference
to the contract costs incurred up to the end
of the reporting period as a percentage of
the total estimated cost for the contract. 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.
This approach also applies to corporate actions.
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.
Revenue includes variable margin intermediary
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 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
Leases in which a significant portion of the
risks and rewards of ownership are retained by
the lessor are classified as operating leases.
120
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
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 or 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.
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.
2.2 NEW STANDARDS AND
INTERPRETATIONS NOT YET
ADOPTED
The following new and amended standards
have been adopted by the Group in all periods
of the consolidated financial statements:
• IAS 32 (amendment) Financial instruments:
presentation
• IAS 36 (amendment) Impairment of assets
• IAS 39 (amendment) Financial instruments:
Recognition and measurement
A number of new standards and amendments
to standards and interpretations are effective
for annual periods beginning after 1 January
2015, 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, except the
following set out below:
IFRS 9, ‘Financial instruments’, addresses the
classification, measurement and recognition
of financial assets and financial liabilities. The
complete version of IFRS 9 was issued in July
2014. It replaces the guidance in IAS 39 that
relates to the classification and measurement
of financial instruments. IFRS 9 retains but
simplifies the mixed measurement model
and establishes three primary measurement
categories for financial assets: amortised
cost, fair value through other comprehensive
income and fair value through P&L. The
basis of classification depends on the
entity’s business model and the contractual
cash flow characteristics of the financial
asset. Investments in equity instruments
are required to be measured at fair value
through profit or loss with the irrevocable
option at inception to present changes in
fair value in other comprehensive income
not recycling. There is now a new expected
credit losses model that replaces the incurred
loss impairment model used in IAS 39. For
financial liabilities there were no changes to
classification and measurement except for
the recognition of changes in own credit risk
in other comprehensive income, for liabilities
designated at fair value through profit or
loss. IFRS 9 relaxes the requirements for
hedge effectiveness by replacing the bright
line hedge effectiveness tests. It requires an
economic relationship between the hedged
item and hedging instrument and for the
‘hedged ratio’ to be the same as the one
management actually use for risk management
purposes. Contemporaneous documentation
is still required but is different to that currently
prepared under IAS 39. The standard is
effective for accounting periods beginning
on or after 1 January 2018. Early adoption is
permitted subject to EU endorsement. The
Group is yet to assess IFRS 9’s full impact.
IFRS 15, ‘Revenue from contracts with
customers’ deals with revenue recognition
and establishes principles for reporting useful
information to users of financial statements
about the nature, amount, timing and
uncertainty of revenue and cash flows arising
from an entity’s contracts with customers.
Revenue is recognised when a customer
obtains control of a good or service and thus
has the ability to direct the use and obtain
the benefits from the good or service. The
standard replaces IAS 18 ‘Revenue’ and
IAS 11 ‘Construction contracts’ and related
interpretations. The standard is effective for
annual periods beginning on or after 1 January
2018 and earlier application is permitted
subject to EU endorsement. The Group is
assessing the impact of IFRS 15.
There are no other IFRSs or IFRS -
Interpretations Committee interpretations that
are not yet effective that would be expected to
have a material impact on the Group.
2.3 CRITICAL ACCOUNTING ESTIMATES
AND JUDGEMENTS
The Group makes estimates and assumptions
concerning the future, the results of which
may affect the carrying values of amounts
in the financial statements. Estimates and
assumptions are continually evaluated and
are based on historical experience and other
factors, including expectations of future events
that are believed to be reasonable under the
circumstances.
The estimates and judgements that have a
significant risk of causing a material adjustment
to the carrying values of assets and liabilities
within the next financial year are described
overleaf.
121
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
Judgements in applying the entity’s
accounting policies
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 the Directors. Exceptional
items includes costs in relation to business
integration and reorganisation as well as
potential and aborted acquisitions, costs
incurred against investigated and completed
acquisitions, onerous contract provision
expenses and any income related to
reversal of onerous contract and contingent
consideration provisions.
2.3 CRITICAL ACCOUNTING ESTIMATES
AND JUDGEMENTS (CONTINUED)
Accounting estimates and assumptions
Fair value of intangible assets
Fair values of intangible assets recognised
on acquisitions have been calculated by
estimating the net present value of future
revenues generated by the assets over their
estimated useful lives.
Estimated impairment of goodwill
The Group tests annually whether goodwill has
suffered any impairment, in accordance with the
accounting policy stated in note 2.1 above. The
recoverable amounts of cash-generating units
have been determined based on value-in-use
calculations. These calculations require the use
of estimates which are disclosed in note 4.3.
Fair value of derivative financial instruments
Third party valuations are used to fair value the
Group’s derivatives. The valuation techniques
use inputs such as interest rate yield curves and
currency prices/yields, volatilities of underlying
instruments and correlations between inputs.
Deferred tax assets
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.
The Group has provided for a deferred tax
liability on consolidated intangible fixed
assets that exclude goodwill of £10.9m
(2014: £14.4m). The group has provided
for a deferred tax asset in respect of losses
within Equiniti Limited of £8.5m (2014:
£10.3m) to the extent that possible deferred
tax liabilities may arise from the impairment
of intangible fixed assets within Equiniti
Limited. As a result of the Group refinancing
in October 2015 the Group has provided
for a deferred tax asset in respect of losses
of £24.4m (2014: £nil) as they are expected
to be used against forecast future profits
within the Group over the next 5 years. The
forecast rate for the utilisation of the losses
over the next 5 years is 19%. The Group
restatement of intangible fixed assets will
generate further tax losses that are not
provided within these accounts as it is not
certain the Group will use them over the next
5 years (losses £32.2m, deferred tax asset at
18% £5.8m). The Group has not recognised a
further £20.8m of losses that are not forecast
to be used over the next 5 years (losses
£20.8m, deferred tax asset at 18% £3.7m).
Pension assumptions
The present value of the net defined benefit
pension obligation is dependent on a number
of factors that are determined on an actuarial
basis using a number of assumptions. These
assumptions which are set out in note
9.3 Employee benefits include salary rate
increases, interest rates, inflation rates, the
discount rate and mortality assumptions. Any
changes in these assumptions will impact the
carrying value of the pension obligation and a
sensitivity analysis is disclosed in note 9.3.
The discount rate used for calculating the
present value of future pension liability cash
flows is based on interest rates of high-quality
corporate bonds that have terms to maturity
approximating to the terms of the related
pension obligation.
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 the period
end as assessed by a chartered surveyor with
reference to current market rates.
Provisions for deferred consideration have
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.
Provisions for onerous leases have been made
for unused property space on operating leases
for the period up until the space is estimated
to become used or the break clause in the
lease, whichever comes earlier.
Revenue recognition
The Group uses the percentage of completion
method in accounting for its fixed-price
contracts to deliver services, including
corporate actions. Use of the percentage
of completion method requires the Group
to estimate the services performed to date
as a proportion of the total services to be
performed.
122
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
3 OPERATING PROFIT
3.1 REVENUE
Revenue from continuing operations:
Rendering of services
Interest income
Total revenue
3.2 OPERATING COSTS
Expenses by nature:
Employee benefit expense (note 3.5)
Direct costs
Bought in services
Premises costs
Operating lease costs
Other general business costs
Operating costs before exceptional costs, depreciation and amortisation
Exceptional items (note 3.3)
Depreciation of tangible assets and amortisation of software (notes 4.2 and 4.3)
Amortisation of acquisition related intangible assets (note 4.3)
2015
£m
359.7
9.3
369.0
2015
£m
147.4
66.3
18.0
5.8
6.3
39.0
282.8
32.8
20.2
23.0
2014
£m
285.8
6.5
292.3
2014
(Restated)
£m
114.6
54.6
7.7
8.6
5.6
31.2
222.3
12.6
14.8
20.9
Total operating costs for continuing operations
358.8
270.6
3.3 OPERATING COSTS – EXCEPTIONAL ITEMS
Included in the profit for the year are the following:
Acquisition related expenses
Change of control costs
Property costs
Restructuring and other costs
Total exceptional items
2015
£m
2.2
22.5
–
8.1
32.8
2014
(Restated)
£m
2.6
–
1.9
8.1
12.6
Acquisition related expenses represent fees paid to third party advisors and transaction fees in respect of acquisitions completed in the period,
as well as costs incurred on further potential acquisitions and disposals not completed. This is presented net of income recognised on reversal
of a contingent consideration provision on an historic acquisition.
Change of control costs relate to legal, advisory, banking and other fees in relation to the Group’s change in ownership which resulted in the
Group’s listing on the London Stock Exchange.
Property costs relate to the provision for rent and related expenses on onerous leases.
Restructuring and other costs primarily relate to costs associated with building an offshore centre in Chennai and driving the Group’s efficiency agenda.
123
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
3.4 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 Investment Solutions, Intelligent Solutions, Pension Solutions and Interest in line with how
the Group runs and structures its business.
Revenue
Year ended 31 December 2015
Investment Solutions
Intelligent Solutions
Pension Solutions
Interest
Total revenue
Revenue
Year ended 31 December 2014
Investment Solutions
Intelligent Solutions
Pension Solutions
Interest
Total revenue
EBITDA prior to exceptional items
Investment Solutions
Intelligent Solutions
Pension Solutions
Interest
Total segments
Central costs
EBITDA prior to exceptional items
Total
revenue
Inter–segment
Reported
revenue
£m
126.2
112.2
157.2
9.3
404.9
£m
(7.9)
(13.3)
(14.7)
–
(35.9)
£m
118.3
98.9
142.5
9.3
369.0
Total
revenue
Inter–segment
Reported
revenue
£m
99.8
101.6
112.0
6.5
319.9
£m
(4.9)
(12.0)
(10.7)
–
(27.6)
£m
94.9
89.6
101.3
6.5
292.3
2015
2014
£m
35.5
22.7
26.8
9.3
94.3
(8.1)
86.2
£m
29.3
16.3
21.7
6.5
73.8
(3.8)
70.0
Central costs principally include corporate overheads. The EBITDA prior to exceptional items of each segment is reported after charging certain
central costs based on the business segments’ usage of central facilities and services.
124
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
Reconciliation to loss before tax
EBITDA prior to exceptional items
Exceptional items
EBITDA
Depreciation of property, plant and equipment
Amortisation of software
Amortisation of acquisition related intangible assets
Finance costs – net
Gain on disposal of associate
Share of profit of associate
Loss before tax
Other segmental disclosures
Year ended 31 December 2015
Investment Solutions
Intelligent Solutions
Pension Solutions
Total segments
Central
Total
Other segmental disclosures
Year ended 31 December 2014
Investment Solutions
Intelligent Solutions
Pension Solutions
Total segments
Central
Total
2015
£m
86.2
(32.8)
53.4
(4.4)
(15.8)
(23.0)
(81.9)
–
–
2014
(Restated)
£m
70.0
(12.6)
57.4
(3.8)
(11.0)
(20.9)
(71.8)
9.8
1.7
(71.7)
(38.6)
Depreciation
and
amortisation
Exceptional
items
Share of profit
on associates
Capital
expenditure
£m
(19.0)
(1.8)
(5.1)
(25.9)
(17.3)
(43.2)
Depreciation
and
amortisation
(Restated)
£m
(16.5)
(1.5)
(5.8)
(23.8)
(11.9)
(35.7)
£m
(4.3)
(2.7)
(1.8)
(8.8)
(24.0)
(32.8)
£m
–
–
–
–
–
–
£m
(6.9)
(3.0)
(3.5)
(13.4)
(5.4)
(18.8)
Exceptional
items
Share of profit
on associates
Capital
expenditure
£m
(8.6)
(0.1)
(2.5)
(11.2)
(1.4)
(12.6)
£m
–
–
1.7
1.7
–
1.7
£m
(3.2)
(2.5)
(6.9)
(12.6)
(9.4)
(22.0)
Capital expenditure consists of additions to property, plant, equipment and software.
125
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
3.5 STAFF NUMBERS AND COSTS
The average monthly number of persons employed by the Group (including directors) during the year was as follows:
Number of employees – by function:
Operations
Support functions
Sales and marketing
Total employees
Number of employees – by operating segment:
Investment Solutions
Intelligent Solutions
Pensions Solutions
Central
Total employees
Number of employees – by geography:
United Kingdom
India
Total employees
At the year end date, the total number of employees based in India was 402 (2014: 301).
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Pension costs
Share-based payment expense
Total employee benefit expense
126
2015
2014
Number
Number
3,829
212
108
4,149
3,022
185
82
3,289
2015
2014
Number
Number
1,278
479
1,721
671
4,149
1,186
388
1,163
552
3,289
2015
2014
Number
Number
3,788
361
4,149
2015
£m
129.1
11.2
6.9
0.2
2,986
303
3,289
2014
£m
98.9
9.1
6.6
–
147.4
114.6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
4 INVESTMENTS
4.1 ACQUISITIONS OF BUSINESSES
Selftrade
On 23 January 2015, the Group completed the acquisition of the assets and customer portfolio of Selftrade, an online execution-only stockbroker.
Selftrade has approximately 104,000 stockbroking clients holding £3.9 billion in assets.
Since the date of acquisition the business contributed £7.9m of revenue and £2.2m of net profit. If the business had been acquired on 1 January
2015 it would have contributed an additional £1.0m of revenue to the Group results. As this was a trade and assets acquisition, it is impracticable
to calculate the impact on net profit from this acquisition prior to the date it was acquired.
On acquisition intangible assets have been recognised relating to customer contracts and related relationships with a combined attributable
value of £14.0m. The amounts relating to the intangible assets and goodwill are provisional and subject to further evaluation and adjustment,
in accordance with accounting standards. The value of goodwill reflects amounts in relation to the expected benefit of the ability to generate
new streams of revenue and expected synergies of combining the operations of Selftrade and the Group.
Recognised amounts of identifiable assets acquired and liabilities assumed
Intangible assets
Net identifiable assets and liabilities
Goodwill on acquisition
Total consideration and cash outflow in the year
£m
14.0
14.0
3.6
17.6
Costs of acquiring and integrating the business, which include legal and due diligence fees, amounted to £2.1m and these are reflected within
exceptional items in the income statement.
TransGlobal Payment Solutions Limited
On 3 September 2015, the Group purchased the entire issued share capital of TransGlobal Payment Solutions Limited (“TPS”) for £5.2m, consisting
of £2.9m cash on completion and up to £3.0m of contingent consideration, discounted to £2.3m. The business had net assets on that date of £3.2m
including a cash balance of £0.6m. TPS is the technology company that powers the platform for the Group’s foreign exchange payments business,
Equiniti International Payments.
Since the date of acquisition the company contributed £0.6m of revenue and £0.3m of net profit. If it had been acquired on 1 January 2015 it
would have contributed an additional £0.8m of revenue and £0.2m net profit to the Group’s reported results for the year ended 31 December 2015.
On acquisition intangible assets have been recognised relating to customer contracts and related relationships with a combined attributable
value of £0.3m. The amounts relating to the intangible assets and goodwill are provisional and subject to further evaluation and adjustment, in
accordance with accounting standards. The value of goodwill reflects expected synergies from combining the operations and expertise of TPS
and the Group and to enable future market development.
Recognised amounts of identifiable assets acquired and liabilities assumed
Software
Other intangible assets
Trade and other receivables
Cash
Trade and other payables
Deferred tax
Net identifiable assets and liabilities
Goodwill on acquisition
Total consideration
Cash acquired
Contingent consideration
Net cash outflow in the period
£m
2.3
0.3
3.9
0.6
(3.8)
(0.1)
3.2
2.0
5.2
(0.6)
(2.3)
2.3
127
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
4.1 ACQUISITIONS OF BUSINESSES (CONTINUED)
As at 31 December 2015, the minimum amount of contingent consideration payable is £nil and the maximum amount is £3.0m. The final amount to
be paid will be determined based on the acquiree’s financial performance over the qualifying period and is only payable if the business grows in line
with its business plan.
Costs of acquiring and integrating the business amounted to £0.3m in the year ended 31 December 2015 and these are reflected within exceptional
items in the income statement.
Prior year acquisitions
At 31 December 2014, the fair value adjustments made against net assets acquired during 2014 were provisional. The accounting in respect of
these acquisitions has since been finalised. The adjustments to net assets acquired and goodwill of all acquisitions made during 2014 are as follows:
Fair value of 2014 acquisitions
Software
Net identifiable assets and liabilities
Goodwill on acquisition
Total consideration
£m
(0.1)
(0.1)
0.1
–
128
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
4.2 PROPERTY, PLANT AND EQUIPMENT
Leasehold
improvements
Office
equipment
Fixtures
& fittings
Cost
Balance at 1 January 2014
Acquisition of business
Additions
Disposals
Balance at 31 December 2014
Balance at 1 January 2015
Additions
Reclassification
Balance at 31 December 2015
Accumulated depreciation
Balance at 1 January 2014
Depreciation charge for the period
Disposals
Balance at 31 December 2014
Balance at 1 January 2015
Depreciation charge for the period
Balance at 31 December 2015
Net book value
Balance at 31 December 2014
Balance at 31 December 2015
£m
5.4
0.2
0.5
–
6.1
6.1
0.8
0.3
7.2
2.9
0.8
–
3.7
3.7
1.0
4.7
2.4
2.5
£m
£m
21.4
0.2
4.1
(3.6)
22.1
22.1
2.3
(0.3)
24.1
15.3
2.6
(3.6)
14.3
14.3
2.7
17.0
7.8
7.1
4.5
0.5
0.2
(0.4)
4.8
4.8
0.1
–
4.9
2.4
0.4
(0.4)
2.4
2.4
0.7
3.1
2.4
1.8
Included within office equipment are assets held under finance lease with a cost of £2.6m as of 31 December 2015 (2014: £1.8m).
As at the 31 December 2015 year end these assets had a net book value of £0.8m (2014: £0.7m).
Total
£m
31.3
0.9
4.8
(4.0)
33.0
33.0
3.2
–
36.2
20.6
3.8
(4.0)
20.4
20.4
4.4
24.8
12.6
11.4
129
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
4.3 INTANGIBLE ASSETS
Cost
Balance at 1 January 2014
Acquisition of business
Additions
Balance at 31 December 2014
Balance at 1 January 2015
Acquisition of business
Additions
Reclassification
Disposals
Goodwill
Software
development
Acquisition
related
intangible
assets
Total
£m
£m
£m
£m
363.0
38.9
–
401.9
401.9
5.7
–
–
–
143.3
16.1
17.2
176.6
176.6
2.2
15.6
(0.8)
(0.3)
255.8
40.4
–
296.2
296.2
14.3
–
0.8
–
762.1
95.4
17.2
874.7
874.7
22.2
15.6
–
(0.3)
Balance at 31 December 2015
407.6
193.3
311.3
912.2
Accumulated amortisation
Balance at 1 January 2014 (restated)
Amortisation for the year (restated)
Balance at 31 December 2014 (restated)
Balance at 1 January 2015
Amortisation for the year
Disposals
Balance at 31 December 2015
Net book value
Balance at 31 December 2014 (restated)
Balance at 31 December 2015
–
–
–
–
–
–
–
401.9
407.6
112.6
11.0
123.6
123.6
15.8
(0.3)
139.1
92.0
20.9
112.9
112.9
23.0
–
135.9
204.6
31.9
236.5
236.5
38.8
(0.3)
275.0
53.0
183.3
638.2
54.2
175.4
637.2
Software development predominately relates to the Group’s main operating platforms.
Acquisition related intangible assets consist primarily of customer lists arising from business combinations.
Goodwill is the only intangible asset with an indefinite life.
The prior year amortisation of software has been restated in these financial statements. See note 2.1 for further details.
130
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
4.3 INTANGIBLE ASSETS (CONTINUED)
Goodwill
Goodwill arose initially on the acquisition of the Lloyds TSB Registrars business and subsequently through equity and trade and asset acquisitions.
For goodwill on current year acquisitions see note 4.1. Goodwill is monitored by management in line with the Group’s operating segments;
Investment Solutions, Intelligent Solutions, Pensions Solutions and Interest.
Year ended 31 December 2015
Investment Solutions
Intelligent Solutions
Pension Solutions
Total goodwill
Year ended 31 December 2014
Investment Solutions
Intelligent Solutions
Pension Solutions
Total goodwill
Impairment testing
Opening
balance
Acquisitions
£m
283.2
31.5
87.2
401.9
£m
5.7
–
–
5.7
Opening
balance
Acquisitions
£m
277.5
16.1
69.4
363.0
£m
5.7
15.4
17.8
38.9
Closing
balance
£m
288.9
31.5
87.2
407.6
Closing
balance
£m
283.2
31.5
87.2
401.9
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 revenue 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.
The outcome of the impairment assessment has been that the directors do not consider that the goodwill has been impaired, given that the
value in use is greater than the carrying value of goodwill.
Period on which management approved forecasts are based
Revenue growth rate applied beyond approved forecast period
Discount rate pre tax
2015
£m
3 years
2.0%
10.2%
2014
£m
3 years
2.0%
13.0%
The discount rate used for impairment testing fell during the year due to the Group restructuring its balance sheet that in turn reduced its
cost of capital. The revenue growth rate applied beyond the approved forecast period is in line with underlying UK macro economic forecasts.
In the opinion of the Directors there are no reasonable possible changes to key assumptions which would cause the carrying value to exceed
the recoverable amounts.
131
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
4.4 INVESTMENTS IN SUBSIDIARIES
The directors consider the value of the investments to be supported by their underlying assets. The Group has the following investments in subsidiaries:
Class of
shares held
Country of
incorporation
and principal
place of
business
Principal activities
31 Dec 2015
31 Dec 2014
Ownership
Name of controlled entity
Direct Investments
Equiniti Enterprises Limited
Equiniti X2 Enterprises Limited
Equiniti Holdings Limited
Indirect Investments
Charter Systems Limited
Charter UK Limited
Claybrook Computing Limited
Connaught Secretaries Limited
Custodian Nominees Limited
David Venus (Health & Safety) Limited
Equiniti 360 Clinical Limited
Equiniti Cleanco Limited
Equiniti Corporate Nominees Limited
Equiniti David Venus Limited
Equiniti Debtco Limited
Equiniti Financial Services Limited
Equiniti ICS India (Private) Limited
Equiniti ICS Limited
Equiniti ISA Nominees Limited
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
India
UK
UK
Equiniti Jersey Limited
Channel Islands
Equiniti Limited
Equiniti NewCo 2 Plc
Equiniti Nominees Limited
Equiniti PIK Cleanco Limited
Equiniti PIKco Limited
Equiniti Registrars Nominees Limited
Equiniti Savings Nominees Limited
Equiniti Services Limited
Equiniti Share Plan Trustees Limited
Equiniti Shareview Limited
Equiniti Solutions Limited
Equiniti X2 Cap Limited
Equiniti X2 Cleanco Limited
Equiniti X2 Holdings Limited
Equiniti X2 Inv Limited
Equiniti X2 Limited
Equiniti X2 Mezz Cleanco Limited
Equiniti X2 Mezzco Limited
Equiniti X2 Services Limited
Equiniti X2 Solutions Limited
132
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
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
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Holding company
Holding company
Holding company
Software service provider
Software service provider
Ordinary
Computer software consultancy
Dormant
Holding company
Dormant
Business process outsourcing
Holding company
Non trading
Company secretarial
Holding company
Financial services
Technology enabled services
Business process outsourcing
Non trading
Registrars
Registrars
Holding company
Non trading
Holding company
Holding company
Non trading
Non trading
Holding company
Trustee company
Non trading
Pensions administration
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Holding company Dissolved Jan 2015
Holding company Dissolved Jan 2015
Holding company Dissolved Jan 2015
Holding company Dissolved Jan 2015
Holding company Dissolved Jan 2015
Holding company
100
Holding company Dissolved Jan 2015
Holding company Dissolved Jan 2015
Holding company Dissolved Jan 2015
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
4.4 INVESTMENTS IN SUBSIDIARIES (CONTINUED)
Name of controlled entity
Class of
shares held
Country of
incorporation
and principal
place of
business
Principal activities
31 Dec 2015
31 Dec 2014
Ownership
Invigia Limited
UK
Ordinary
Software service provider
Killik Employee Services (PTY) Limited
South Africa
Ordinary Computer software development
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
LR Nominees Limited
MyCSP Limited
MyCustomerFeedback.com Limited
Pancredit Systems Limited
Paymaster (1836) Limited
Peter Evans & Associates Limited
Peter Evans Limited
Prism Communications
& Management Limited
Prism Cosec Limited
Prosearch Asset Solutions Limited
SLC Corporate Services Limited
SLC Registrars Limited
TransGlobal Payment Solutions Limited
Trust Research Services Limited
Wealth Nominees Limited
4.5 INVESTMENTS IN ASSOCIATES
Balance at 1 January
Additions
Share of profit
Other comprehensive income
Dividend received
Deemed disposal of associate
Balance at 31 December
Holding company Dissolved Feb 2015
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Non trading
Pensions administration
Software service provider
Business process outsourcing
Pensions administration
Business process outsourcing
Company secretarial
Non trading
Asset recovery
Dormant
Dormant
Ordinary
International payment services
Ordinary
Ordinary
Non trading
Non trading
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
2015
£m
–
–
–
–
–
–
–
100
100
100
51
100
100
100
100
100
100
100
100
100
100
–
100
100
2014
£m
14.3
2.5
1.7
–
(1.7)
(16.8)
–
The Group acquired its 40% interest in MyCSP Limited in May 2012 by way of a cash contribution and the provision of executive management
and project implementation services including development of a core operating platform.
On 29 September 2014, the Group increased its investment in MyCSP Limited from 40% to 51% for an additional £8.0m consideration. £4.0m
of this has been paid with the balance due in 2016. In accordance with IFRS10, MyCSP Limited became consolidated as a subsidiary and the
investment in associate was treated as a disposal. There has been no change in 2015.
133
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
5 WORKING CAPITAL
5.1 TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments
Total trade and other receivables
2015
£m
29.0
33.0
8.5
70.5
At the year end trade receivables are shown net of an allowance for doubtful debts of £0.3m (2014: £0.1m). The impairment loss recognised
in the period was £nil (2014: £nil).
Excluding trade receivables, none of these financial assets are either past due or impaired.
Credit risk
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
Total trade receivables
2015
£m
22.0
5.3
1.1
0.6
29.0
Trade receivables not past due of £22.0m (2014: £26.0m) 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 (2014: £0.1m) in respect
of trade receivables. Where impairment allowances are made these are for the full value of the impaired debt.
Movement in the year on the Group provision for impairment on trade receivables is as follows:
2014
£m
36.1
23.4
5.2
64.7
2014
£m
26.0
7.2
1.9
1.0
36.1
2015
2014
£m
0.1
0.2
–
0.3
£m
0.3
0.1
(0.3)
0.1
Balance at 1 January
New provisions made in year
Release against receivables written off
Balance at 31 December
134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
5.2 TRADE AND OTHER PAYABLES
Trade payables
Accruals
Deferred income
Other payables
Total trade and other payables
2015
2014
£m
18.8
52.8
14.6
11.6
97.8
£m
9.1
37.2
13.7
8.5
68.5
The Group is subject to regulatory supervision by the Financial Conduct Authority, and in the ordinary course of business is subject to regulatory
reviews with its regulator. All matters arising from these discussions are evaluated on a regular basis. At the date of these accounts the Directors
do not believe there are any matters in progress which would have a material impact on the Group’s financial position or operations.
5.3 PROVISIONS FOR OTHER LIABILITIES AND CHARGES
Balance at 1 January 2015
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Unwinding of discounted amount
Balance at 31 December 2015
Non-current
Current
Total provisions
Contingent consideration
Contingent
consideration
Property
provisions
Other
provisions
Total
provisions
£m
5.0
2.4
(1.3)
(0.4)
0.3
6.0
2.4
3.6
6.0
£m
3.9
–
(1.4)
–
0.1
2.6
2.1
0.5
2.6
£m
0.3
–
(0.3)
–
–
–
–
–
–
£m
9.2
2.4
(3.0)
(0.4)
0.4
8.6
4.5
4.1
8.6
A provision for contingent consideration as at 31 December 2015 of £6.0m (2014: £5.0m) relates to various requirements to be met following the
Group’s acquisitions. This is management’s best estimate of the amount likely to be paid. The minimum value of these provisions could be £nil
up to a maximum of £6.8m. These were discounted at an appropriate post-tax discount rate at the time of the acquisitions, 9%, and are provided
within provisions due to their uncertainty. Management regularly reconsiders the appropriateness of the discount rate used and updates when
appropriate. The remaining balance is expected to be utilised over periods between 2016 and 2018.
Property provisions
Property provisions includes a provision for onerous leases for unused property space on an operating lease as at 31 December 2015 of £0.6m
(2014: £1.9m), of which £1.0m was utilised during the year (2014: £0.5m). In the year to 31 December 2014, an onerous lease provision of £0.4m
was acquired with the acquisition of MyCSP. This provision has been fully utilised during 2015.
Also included in property provisions is a provision in respect of dilapidations as at 31 December 2015 of £2.0m (2014: £2.0m).
Other provisions
Provisions held in relation to exceptional irrecoverable costs incurred on complex long term contracts as at 31 December 2015 are nil (2014: £0.3m).
135
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
6 CAPITAL STRUCTURE
6.1 FINANCE INCOME AND COSTS
Finance income
Interest income
Dividend income
Total finance income
Finance costs – ordinary
Interest cost on senior secured loan notes
Interest on senior secured borrowings
Interest cost on revolving credit facility
Interest cost on payment in kind ("PIK") loan
Interest on preference shares classified as liabilities
Interest cost on loans from related parties
Amortised fees
Net finance cost relating to pension scheme
Unwinding of discounted amount in provisions
Cost of interest rate swap against financial liabilities
Other fees and interest
Total finance costs – ordinary
Finance costs – exceptional
Write off of unamortised fees of previous finance arrangement
Early termination of bond notes
Total finance costs – exceptional
2015
2014
£m
0.4
0.3
0.7
£m
0.2
0.4
0.6
2015
2014
£m
24.9
1.2
2.3
10.8
12.2
5.0
2.8
0.6
0.4
0.5
0.7
£m
29.9
–
0.8
15.4
15.1
5.6
2.9
0.5
0.4
0.7
1.1
61.4
72.4
2015
£m
12.3
8.9
21.2
2014
£m
–
–
–
Exceptional finance costs relate to costs incurred by putting new financing arrangements into place during 2015. These costs include the write off of
unamortised arrangement fees that related to the refinancing exercise that took place in 2013 and the break costs for the early termination of the
Group’s senior secured notes.
136
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
6.2 SHARE CAPITAL AND SHARE PREMIUM
Share capital
Allotted, called up and fully paid
Shares of £0.001 each (2014: £1 each)
Share premium
Total share capital and share premium
Share capital
Ordinary shares of £0.001 each (2014: £1 each) – in millions of shares
On issue – fully paid
2015
£m
0.3
–
0.3
2014
£m
5.0
3.5
8.5
2015
2014
Number
Number
300.0
5.0
On 24 September 2015, the Company undertook a share capital reduction by reducing the nominal value of its Ordinary A, B, C, D and E shares to
£0.05 each. On 30 October 2015, the Company undertook a share consolidation, sub-division, reclassification and buyback of shares resulting in
only one class of Ordinary shares of £0.01 each.
Prior to the reorganisation the share capital comprised A, B, C, D and E ordinary shares of £1 each. The A ordinary shares were primarily held by
the holding company. The B, C, D and E shares were primarily held by senior management. The B, C, D and E shares were entitled to share in the
proceeds of a sale or a listing of the Group.
On 27 October 2015, the Group issued 63.6m ordinary shares to its immediate parent, Equiniti (Luxembourg) Sarl, and to other shareholders for the
settlement of various debts including preference shares and loan notes as stated in notes 6.6 and 6.7. The excess of the share capital issued and the
value of the settled debts has been recorded in the share premium account.
On 27 October 2015, the Group admitted its shares on the London Stock Exchange for primary proceeds of £390m which has been reflected by
an increase in the share capital and share premium accounts.
On 2 December 2015, the Group undertook a court approved capital reduction which involved cancellation of share premium to the value of
£494.7m.
137
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
6.3 OTHER RESERVES
Capital contribution reserve
The capital contribution reserve arose on IPO where the Group issued equity instruments to settle non-current financial liabilities with shareholders.
Hedging reserve
The hedging reserve comprises the effective portion of changes in the fair value of cash flow swaps that have not yet occurred.
6.4 EARNINGS PER SHARE
Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the company by the weighted average number
of shares in issue during the year. As the Group is loss making in the current and prior year, the conversion of share options does not have a dilutive
effect on earnings per share.
Loss from continuing operations attributable to owners of the parent
2015
£m
(50.4)
2014
£m
(39.0)
Weighted average number of ordinary shares in issue (thousands)
54,301
5,000
Basic and diluted loss per share (in £)
(0.93)
(7.80)
6.5 DIVIDENDS
Amounts recognised as distributions to equity holders of the parent in the year
Proposed final dividend for year ended 31 December 2015
2015
£m
2.0
2.0
2014
£m
–
–
The recommended dividend payable in respect of the year ended 31 December 2015 is £2.0m or 0.68p per ordinary share (2014: £nil). This is in line
with the Group’s stated policy of a payout ratio of around 30% of adjusted normalised profit after cash tax. The amount payable has been pro-rated
for the timing of the Group’s admission to the market in October 2015. This equates to £12m or 4.08p per share on a full year basis. The proposed
dividend has not been accrued as a liability as at 31 December 2015.
138
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
6.6 EXTERNAL LOANS AND BORROWINGS
Non-current liabilities
Senior secured notes
Senior secured loan
Revolving credit facility ("RCF")
Payment in kind ("PIK") facility
Unamortised cost of raising finance
Non secured loan
Total external loans and borrowings
2015
£m
–
250.0
70.0
–
(5.7)
–
314.3
2014
£m
440.0
–
45.5
151.1
(14.9)
2.0
623.7
On 27 October 2015, the Group admitted its shares to the London Stock Exchange which raised proceeds of £495.0m. The Group subsequently
refinanced its debt by repaying the senior secured notes, the RCF and the PIK facility, whilst obtaining a new term loan of £250m and new RCF
of £150m, of which £70m is drawn down as at 31 December 2015.
Due to the refinancing, unamortised costs of raising finance of £12.3m held on the balance sheet in respect of the previous debt structure have
been expensed to the income statement to exceptional finance costs. Costs of raising the new financing arrangement of £5.9m were capitalised
in the period and will be amortised over the maturity of the loan. During the year ended 31 December 2015, £2.6m was recognised within finance
costs (note 6.1) in respect to amortised fees under the previous debt structure and £0.2m was recognised in respect to amortisation of fees under
the current debt structure. In the year ended 31 December 2014, £2.9m was recognised in finance costs as amortised fees.
Terms and debt repayment schedule
Senior secured loan
Revolving credit facility
Currency
Closing
interest rate
Year of
maturity
Sterling
Libor + 2.0%
Sterling
Libor + 2.0%
2020
2020
The Group’s Bank facility, which matures in full in 2020, contains one financial covenant only, namely a maximum ratio of Net Debt to EBITDA (as
defined in the loan agreement) which is tested half yearly and at year end. Net Debt to EBITDA must be no more than 4.50:1 for the periods to 31st
December 2017 and 4.00:1 thereafter. The Group was in compliance with this covenant at year end 2015. The margin payable on both the term
loan and RCF is determined based on the ratio of Net Debt to EBITDA, where the margin payable ranges from a maximum of 2.25% to a minimum
of 1.25%. In December 2015, the Group entered into an interest rate swap agreement for a 3 year period to exchange variable rate interest
expense to fixed rate on the £250m bank term loan. No debt is repayable before the end of our current funding agreement in 2020.
6.7 PREFERENCE SHARES AND LOANS DUE TO ULTIMATE CONTROLLING PARTY
Non-current liabilities
Preference shares classified as debt
Non secured loan from related party
Total loans due to ultimate controlling party
2015
£m
–
–
–
2014
£m
204.0
73.8
277.8
On 27 October 2015, the Group admitted its shares to the London Stock Exchange which raised proceeds of £495.0m. The Group subsequently
refinanced its debt by repaying the preference shares classified as debt and the non secured loan from a related party.
139
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
6.8 CASH AND CASH EQUIVALENTS
Cash and cash equivalents per statement of financial position
Cash and cash equivalents per statement of cash flows
2015
£m
76.5
76.5
2014
£m
30.1
30.1
In addition to the above, the Group holds certain cash balances with banks in a number of segregated accounts. These balances represent client
money under management and hence are not included in the Group’s consolidated balance sheet. The number of accounts and balances held vary
significantly throughout the year.
6.9 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 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 and were immaterial.
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 credit ratings assigned by international
credit-rating agencies are accepted, with 96% of cash balances at the year end being held in banks and financial insitutions with a rating of A
or higher.
140
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
6.9 FINANCIAL RISK MANAGEMENT (CONTINUED)
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.
The maximum exposure to liquidity risk at the reporting dates was as follows:
31 December 2015
Trade and other payables
Other financial liabilities
Senior secured loan
Revolving credit facility
Total
31 December 2014
Derivatives used for hedging
Trade and other payables
Employee benefits
Other financial liabilities
Senior secured notes
Senior secured floating rate notes
Revolving credit facility
Payment in kind ("PIK") facility
Preference shares classified as debt
Non secured loan from related party
Non secured loan
Total
Carrying
Amount
Total
contractual
cash flows
97.8
0.9
250.0
70.0
97.8
1.1
287.6
70.0
Note
5.2
9.2
6.6
6.6
Within
1 year
97.8
0.5
7.2
–
418.7
456.5
105.5
1-2
years
2-5
years
Over
5 years
–
0.3
7.6
–
7.9
–
0.3
272.8
70.0
343.1
–
–
–
–
–
Carrying
Amount
Total
contractual
cash flows
Note
Within
1 year
1-2
years
2-5
years
Over
5 years
9.2
5.2
9.3
9.2
6.6
6.6
6.6
6.6
6.7
6.7
6.6
0.4
68.5
0.4
0.7
250.0
190.0
45.5
151.1
204.0
73.8
2.0
0.5
68.5
0.4
0.7
320.5
237.1
45.5
239.3
249.9
109.4
2.0
0.5
68.5
–
0.5
17.0
11.4
–
–
–
109.4
2.0
–
–
–
0.2
17.9
11.9
–
–
–
–
–
–
–
–
–
285.6
213.8
45.5
239.3
–
–
–
–
–
0.4
–
–
–
–
–
249.9
–
–
986.4
1,273.8
209.3
30.0
784.2
250.3
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 9.3.
Loans from related parties are repayable on demand.
Liquidity risk mitigation
The Group regularly updates forecasts for cash flow and covenants to ensure it has sufficient funding available. It maintains significant cash balances
to meet future cash funding requirements and has £76.5m of cash at 31 December 2015. The Group also has revolving credit facilities of £150.0m
available of which £80.0m is undrawn as at 31 December 2015.
141
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
6.9 FINANCIAL RISK MANAGEMENT (CONTINUED)
Market risk
Market risk is the risk that changes in market prices such as interest rates, foreign exchange rates and equity prices will affect the Group’s income
or the value of its financial instruments.
a) Interest rate risk
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 bank loan and the RCF 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. Interest rate hedges are agreed by the board
and have the objective of reducing 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.
Following the successful conclusion of the IPO process, the Group entered into an interest rate swap of its £250m term loan, exchanging variable
based interest charges for fixed rate for a period of 3 years. This fixes our interest costs at c3% until October 2018.
The Group does not enter into speculative transactions in financial instruments or derivatives. Further quantitative disclosures are included
throughout these consolidated financial statements.
Interest rate risk mitigation
The £250m bank term loan accrues interest based on a margin over LIBOR, a swap has been taken out to fix this rate until October 2018,
the group has not entered into a hedge of its outstanding RCF commitments.
Interest rate risk is managed across the Group’s companies by monitoring its interest linked revenues which are derived based on the UK’s Bank
Base rate. The Group has entered into interest rate swaps totalling £650.0m for a 3 year period to July and August 2018 swapping the variable rate
derived interest rate income to fixed rates.
The directors monitor the overall level of borrowings, leverage ratio and interest costs to limit any adverse effects on financial performance of the
Group.
Sensitivity analysis
In managing interest rate and currency risks the Company and Group aims to reduce the impact of short-term fluctuations on the Company and
Group's earnings. Over the longer-term, however, permanent changes in foreign exchange and interest rates would have an impact on consolidated
earnings.
It is estimated that going forwards a 1% increase in interest costs would increase interest payable by c£2.5m per annum on our term loan
and RCF facility. This would also increase our revenue and profit from client deposits by c£12m per annum.
The sensitivity analysis above ignores the effect of the interest rate swaps held by the Group.
An increase of one percentage point in interest rates with the debt structure as at 31 December 2015 constant throughout all of 2015 would have
increased finance costs for the Group by £0.7m, payable on the RCF, and increased interest revenue by £1.7m, yielding a net increase in equity after
tax of £0.8m. This includes the impact of interest rate swaps which reduce the fluctuations resulting from interest rate movements. Had no hedging
been in place for this example of a 1% increase in interest rates, the net increase to equity after tax would be £4.8m.
b) Foreign exchange rate risk
The Group’s financial instruments are currently in sterling, hence foreign exchange movements do not have a material effect on the Group’s
performance.
c) Equity price risk
The Group does not hold its own position in trading securities, being involved only in arranging transactions on behalf of its clients.
142
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
6.10 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.
The Group has reduced its total debt outstanding as a result of the IPO process and as at 31 December 2015 has a lower level of net debt to
total equity since listing; 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 previous borrowing facilities; repaid in October 2015, contained various covenants and restrictions. Under the terms of the new loan agreement
signed in October 2015, the Group has one covenant, a minimum ratio of Net Debt to EBITDA.
Management of capital:
Equity
Interest-bearing loans and borrowings
Cash and cash equivalents
Total equity plus net debt
6.11 FINANCIAL INSTRUMENTS
Note
6.6
6.8
2015
£m
380.5
314.3
(76.5)
618.3
2014
(Restated)
£m
(251.9)
623.7
(30.1)
341.7
The carrying amounts of financial assets and liabilities are classified as per IFRS 7 ‘Financial instruments: Disclosures’ according to the
following categories:
Financial assets
Derivatives used for hedging
Derivative financial instruments
Loans and receivables
Trade and other receivables
Cash and cash equivalents
Total financial assets
Note
2015
£m
2014
£m
6.12
1.8
0.2
5.1
6.8
62.0
76.5
140.3
59.5
30.1
89.8
143
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
6.11 FINANCIAL INSTRUMENTS (CONTINUED)
Financial liabilities
Derivatives used for hedging
Derivative financial instruments
Other financial liabilities at amortised cost
Trade and other payables
Employee benefits
Other financial liabilities
Secured bank loans
Secured loan notes
Revolving credit facility
Payment in kind ("PIK") facility
Preference shares classified as debt
Non secured loan from related party
Non secured loan
Total financial liabilities
Fair value hierarchy
Note
6.12
5.2
9.3
9.2
6.6
6.6
6.6
6.6
6.7
6.7
6.6
97.8
–
0.9
250.0
–
70.0
–
–
–
–
418.7
The following table presents the Group’s financial assets and liabilities that are measured at fair value.
Assets
Derivatives used for hedging
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
–
1.8
1.8
–
–
–
–
–
–
2015
£m
2014
£m
–
0.4
68.5
0.4
0.7
–
440.0
45.5
151.1
204.0
73.8
2.0
986.4
Total
£m
1.8
1.8
–
–
There were no transfers between Levels during the periods.
Valuation techniques used to derive Level 2 fair values
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 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 six months, in line with the Group’s 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.
144
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
6.12 DERIVATIVES
Following the successful conclusion of the IPO process, the Group entered into an interest rate swap of its £250m term loan, exchanging variable
based interest charges for fixed rate for a period of 3 years. This fixes costs at c3% until October 2018.
The Group has also entered into interest rate swaps totalling £650m for a 3 year period to July and August 2018 swapping the variable rate derived
interest rate income to fixed rates.
The following tables indicate 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;
31 December 2015
Assets
Total
31 December 2014
Assets
Liabilities
Total
Carrying
Amount
Total
contractual
cash flows
Within
6 months
6-12
months
1.8
1.8
1.8
1.8
1.0
1.0
0.7
0.7
Carrying
Amount
Total
contractual
cash flows
Within
6 months
6-12
months
0.2
(0.4)
(0.2)
0.2
(0.5)
(0.3)
0.3
(0.6)
(0.3)
0.2
0.1
0.3
1-2
years
0.1
0.1
1-2
years
(0.3)
–
(0.3)
2-5
years
–
–
2-5
years
–
–
–
145
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
7 GOVERNANCE
7.1 DIRECTORS’ REMUNERATION
The following costs are either paid by the subsidiary Equiniti Holdings Limited or Equiniti Services Limited:
Directors’ emoluments (including compensation for loss of office)
Company contributions to money purchase pension plans
Share-based payment expense
Total directors’ remuneration
Highest paid director:
Director emoluments
Total
Number of directors accruing retirement benefits under money
purchase schemes:
7.2 SHARE-BASED PAYMENTS
2015
2014
£m
3.3
0.1
0.1
3.5
£m
1.6
–
–
1.6
2015
2014
£m
0.8
0.8
£m
0.6
0.6
2015
2014
Number
Number
–
1
The Group operates several share-based award and option plans, the terms of which and the movements in the number of share options during
the year are summarised below.
Performance Share Plan (“PSP”)
Share options are granted to directors and selected employees at nil cost. For share options granted under the PSP scheme, they are conditional
on a minimum 6% earnings per share growth and median total shareholder return over a three year vesting period. Granted options can be
exercised up to a period of ten years.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
2015
2014
Number
of options
Thousands
–
6,158
6,158
Weighted
average
exercise price
Number
of options
Weighted
average
exercise price
£
–
£0.00
£0.00
Thousands
–
–
–
£
–
£0.00
£0.00
Outstanding at 1 January
Granted
Outstanding at 31 December
146
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
7.2 SHARE-BASED PAYMENTS (CONTINUED)
Out of the 6,158,000 (2014: nil) outstanding options at the end of the year, none (2014: none) were exercisable. Share options outstanding at the
end of the year have the following expiry date and exercise prices:
Grant date / Vest date
Expiry Date
Exercise price
2015
2014
2015 – 2018
Year
2028
£
Number
Number
Thousands
Thousands
£0.00
6,040
6,040
–
–
The fair value of options granted during the year which was determined using the Black-Scholes valuation model was £1.01 per option. The significant
inputs into the model were share price of £1.65 at the grant date, exercise price shown above, volatility of 15% (based on the three year historical share
price volatility of peer group companies), dividend yield of 2.5%, an expected option life of three years and an annual risk-free interest rate of 0.9%.
The total charge to the income statement for the year relating to this scheme was £0.2m.
Sharesave Plan
Share options are granted to full time directors and employees who enter into Her Majesty’s Revenue & Customs (“HMRC”) approved share savings
scheme. Participants can save a maximum of £500 per month over three to five years. The number of shares over which an option is granted is such
that the total option price payable for those shares corresponds to the proceeds on maturity of the related savings contract. The exercise price is
calculated as 80% of the average share price over the three preceding days or, in relation to new issue shares, the nominal value of a share.
Granted options vest over the maturity of the savings contract and can be exercised up to a period of 6 months after vesting.
Outstanding at beginning of year
Granted
Outstanding at end of year
2015
2014
Number of
options
Thousands
–
4,595
4,595
Weighted
average
exercise price
Number
of options
Weighted
average
exercise price
£
–
£1.27
£1.27
Thousands
–
–
–
£
–
–
–
Out of the 4,595,000 (2014: nil) outstanding options at the end of the year, none (2014: none) were exercisable. Share options outstanding at the
end of the year have the following expiry date and exercise prices:
Grant date / Vest date
Expiry Date
Exercise price
2015
2014
2015 - 2018
Year
2019
£
Number
Number
Thousands
Thousands
£1.27
4,599
4,599
–
–
The fair value of options granted during the year which were determined using the Black-Scholes valuation model was £0.41 per option. The significant
inputs into the model were share price of £1.75 at the grant date, exercise price shown above, volatility of 15% (based on the three year historical share
price volatility of peer group companies), dividend yield of 2.5%, an expected option life of three years and an annual risk-free interest rate of 0.9%.
Management share scheme
A number of the Group’s senior management were 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 2015 566,596 (2014: 566,596) shares
had been issued for a consideration of £1,271,000.
Prior to the Group’s listing on the London Stock Exchange in October 2015, all management shares were repurchased by the Group and B, C, D
and E ordinary shares were cancelled. Therefore, there is no remaining liability at 31 December 2015.
The charge relating to the arrangement in the current and prior year is nil.
147
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
7.3 RELATED PARTY TRANSACTIONS
During the year, interest of £5.0m (2014: £5.5m) accrued on a loan bearing interest at 8% from Equiniti (Luxembourg) Sarl up until the date when
the loan was repaid in full leaving a balance outstanding at the year end of £nil (2014: £73.8m).
Transactions with key management personnel
The compensation of key management personnel (including the directors) is as follows:
Key management emoluments including social security costs
Company contributions to money purchase pension plans
Share based payments
Total
2015
2014
£m
4.3
0.1
0.1
4.5
£m
2.8
0.1
–
2.9
Key management are the directors of the Group (includes non-executives), as well as the senior non-statutory director of each of the major
subsidiaries, who have authority and responsibility to control, direct or plan the major activities within the Group.
As part of the IPO process, shares were issued to certain employees of the group as a result of an incentive agreement with the then controlling
shareholder, Advent. The shares were treated as an income tax event for the receiving individuals and are subject to lock up arrangements, as
disclosed in the prospectus. As a consequence, the Group lent those individuals who received the shares monies to cover their PAYE and NI
liabilities. These loans were all subject to relevant approvals through the IPO process and are treated as a benefit in kind to the receiving individuals
if not settled within nine months of issuance; all benefiting individuals have entered into a loan agreement with the Group. These loans must be
repaid no later than October 2018. The total value of loans made to key management personnel at 31 December 2015 was £2.7m.
As detailed in note 6.2, key management were entitled to subscribe for a combination of B, C, D and E ordinary shares.
These shares were redeemed prior to listing on the London Stock Exchange. The value of shares held is as follows;
Opening balance
Sales by key management
Closing balance
7.4 AUDITORS’ REMUNERATION
Services provided by the Company’s auditor
Fees payable to Company's auditor and its associates for other services:
– Audit of the parent company and consolidated financial statements
– Audit of the Company's subsidiaries
– Tax advisory and compliance services
– Other services
Total
2015
£m
0.2
(0.2)
–
2015
£m
0.2
0.2
0.1
2.3
2.8
2014
£m
0.2
–
0.2
2014
£m
0.2
0.2
0.2
0.3
0.9
Other services includes work undertaken in relation to acquisitions in the year of £0.1m (2014: £0.3m), work around the Group's pension scheme
arragements of £0.4m (2014: £nil) and work undertaken as part of the Group’s listing on the London Stock Exchange in the year of £1.5m (2014:
£nil) which have both been included in exceptional costs.
148
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
8 TAXATION
8.1 INCOME TAX CREDIT
Recognised in the statement of comprehensive income in the year:
Current tax:
Current period
Adjustment in respect of prior periods
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Impact of rate changes on opening deferred tax balances
Adjustment in respect of prior periods
Total deferred tax
Total income tax credit
Reconciliation of effective tax rate:
Loss for the year
Total tax credit
Loss before tax
Tax using the UK corporation tax rate of 20.25% (2014: 21.5%):
Non-deductible expenses
Non-taxable income
Previously unrecognised tax assets
Effect of tax rate change
Unrecognised deferred tax on overseas interest paid
Adjustment in respect of prior periods
Total income tax credit
2015
£m
2.2
0.2
2.4
(27.2)
(0.8)
(0.3)
(28.3)
(25.9)
2015
£m
(45.8)
(25.9)
(71.7)
(14.5)
10.9
(0.1)
(20.3)
0.7
(2.6)
–
(25.9)
2014
£m
1.0
0.1
1.1
(0.3)
–
(2.5)
(2.8)
(1.7)
2014
£m
(36.9)
(1.7)
(38.6)
(8.3)
4.7
(2.8)
7.1
–
–
(2.4)
(1.7)
The standard rate of corporation tax in the UK is 20% with effect from 1 April 2015 (2014: 21%). The taxation credit for the year ended
31 December 2015 is calculated by applying the estimated annual Group effective rate of tax to the loss for the year. Accordingly the Group’s
losses for the accounting year ended 31 December 2015 are taxed at an effective rate of 20.25% (2014: 21.5%).
A number of changes to the UK corporation tax system were announced in the Chancellor’s Budget on 8 July 2015. These include reductions to
the main rate of corporation tax to 19% from 1 April 2017 and to 18% from 1 April 2020. These rates were substantively enacted during the year.
149
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
8.2 DEFERRED INCOME TAX ASSETS AND LIABILITIES
Recognised assets
Deferred income tax assets are attributable to the following:
Property, plant and equipment
Employee benefits
Tax value of losses carried forward
Tax assets
Net of tax liabilities
Net tax assets
Recognised liabilities
Deferred income tax liabilities are attributable to the following:
Intangible assets
Tax liabilities
Net of tax assets
Net tax liabilities
2015
2014
£m
4.1
2.7
34.9
41.7
(21.7)
20.0
2015
£m
21.7
21.7
(21.7)
–
£m
2.9
2.9
10.5
16.3
(16.3)
–
2014
£m
24.0
24.0
(16.3)
7.7
Deferred income tax assets amounting to £9.4m at 18% (2014 (restated): £24.2m at 20%) arising on temporary timing differences of £52.0m
(2014 (restated): £121.6m) in respect of unrecognised deferred tax assets have not been recognised as their future economic benefit is uncertain.
The analysis of deferred tax assets and deferred tax liabilities is as follows:
Deferred tax assets:
Deferred tax assets to be recovered after more than 12 months
Deferred tax assets to be recovered within 12 months
Deferred tax liabilities:
Deferred tax liabilities to be recovered after more than 12 months
Net tax assets/(liabilities)
150
2015
£m
40.4
1.3
41.7
(21.7)
(21.7)
20.0
2014
£m
16.3
–
16.3
(24.0)
(24.0)
(7.7)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
Movements in deferred tax during the year:
Property, plant and equipment
Intangible assets
Employee benefits
Tax value of losses carried forward
Property, plant and equipment
Intangible assets
Employee benefits
Tax value of losses carried forward
1 Jan 2014
Acquisitions
Recognised
in income
Recognised
in equity
31 Dec 2014
£m
8.2
(19.8)
1.9
6.2
(3.5)
£m
–
(8.1)
–
–
(8.1)
£m
(5.3)
5.9
–
2.3
2.9
£m
–
–
1.0
–
1.0
£m
2.9
(22.0)
2.9
8.5
(7.7)
1 Jan 2015
Acquisitions
Recognised
in income
Recognised
in equity
31 Dec 2015
£m
2.9
(22.0)
2.9
8.5
(7.7)
£m
–
(0.5)
–
0.3
(0.2)
£m
1.2
2.8
0.2
24.1
28.3
£m
–
–
(0.4)
–
(0.4)
£m
4.1
(19.7)
2.7
32.9
20.0
As a result of the group refinancing in October 2015 the forecast group annual interest charge has reduced and previously unrecognised losses
have now been recognised as it is reasonably probable that they will be utilised by the group over the next 5 years. The losses have been valued
at 19%, the forecast rate for them to be used over the next 5 years.
151
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
9 OTHER DISCLOSURES
9.1 OTHER FINANCIAL ASSETS
Non-current
Shares held in Euroclear plc
Derivatives used for hedging (note 6.12)
Total
2015
£m
–
1.8
1.8
2014
£m
11.0
0.2
11.2
During the year, the shares in Euroclear plc were disposed of at book value. In the prior year, the shares were revalued based on the trade price
of recent transactions and a gain of £4.9m was recognised and booked to exceptional items in the income statement. In the current year financial
statements, the gain has been reclassified to other comprehensive income. The reclassification did not impact the statement of financial position.
Derivatives used for hedging are classified as a non-current asset as the remaining maturity of the hedged item is more than 12 months.
9.2 OTHER FINANCIAL LIABILITIES
Non-current
Derivatives used for hedging (note 6.12)
Finance lease liabilities
Total
Current
Finance lease liabilities
Total
2015
2014
£m
–
0.5
0.5
0.4
0.4
£m
0.4
0.3
0.7
0.4
0.4
Derivatives used for hedging are classified as a non-current liability as the remaining maturity of the hedged item is more than 12 months.
9.3 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.
In October 2015, the scheme was cash settled as the preference shares were repaid following the Group’s listing on the London Stock Exchange.
As at 31 December 2015, there are no remaining units in the co-investment plan and the scheme is closed.
Number
of units
2015
In millions
0.4
(0.4)
–
Carrying
amount
2015
£m
0.4
(0.4)
–
Number
of units
2014
In millions
0.4
–
0.4
Carrying
amount
2014
£m
0.4
–
0.4
Balance at beginning of year
Redemption of units
Balance at end of year
152
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
9.3 EMPLOYEE BENEFITS (CONTINUED)
Defined contribution pension plans
The Group operates a number of defined contribution pension plans. The total expense relating to these plans in the period was £4.0m
(2014: £4.5m).
Defined benefit pension plans
The Group operates three funded defined benefit pension schemes in the UK. All of the plans are final salary pension plans and provide benefits
to members in the form of a guaranteed level of pension payable for life.
The Group is currently exploring its ability to close all defined benefit pension schemes to future accrual and to better match assets to movements
in interest rates and inflation. They have been closed to new members for a number of years. This is expected to reduce the financial risks
associated with these plans going forwards. The Group is also in the process of agreeing the actuarial triennial valuation of the ICS and Paymaster
pension plans with the relevant trustees with a supporting payment plan to reduce the recorded deficits over time.
The liability under all schemes is based on final salary and length of service to the company and contributions are paid in by both the employer
and the scheme member. The assets of the funded schemes are held independently of the Group’s assets in separate trustee administered funds.
The trustees of the pension fund are required by law to act in the interest of the fund and of all relevant stakeholders. The net liability of the three
schemes is set out below.
Equiniti ICS Limited
Paymaster (1836) Limited
MyCSP Limited
Total defined benefit pension plan liability
2015
£m
1.1
12.4
–
13.5
2014
£m
2.0
13.4
0.1
15.5
The present value of the defined benefit obligation consists of approximately £31.2m relating to active employees, £16.2m relating to deferred
members and £20.2m relating to members in retirement.
Defined benefit plan – Equiniti ICS Limited
A full actuarial valuation was carried out at 30 November 2012 and has since been updated each year end to 31 December 2015 by a qualified
independent actuary.
153
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
9.3 EMPLOYEE BENEFITS (CONTINUED)
Present value of obligations
Fair value of plan assets
Recognised liability for defined benefit obligations
Movement in present value of defined benefit obligation
Defined benefit obligation at 1 January
Current service cost
Interest cost
Actuarial (gain)/loss
Benefits paid
Defined benefit obligation at end of year
Movement in fair value of plan assets
Fair value of plan assets at 1 January
Interest income
Actuarial loss
Employer contributions
Benefits paid
Fair value of plan assets at end of year
Actual return on plan assets
154
2015
£m
(10.4)
9.3
(1.1)
2014
£m
(11.1)
9.1
(2.0)
2015
2014
£m
11.1
0.1
0.4
(1.0)
(0.2)
10.4
£m
9.9
0.1
0.4
1.2
(0.5)
11.1
2015
2014
£m
9.1
0.3
(0.1)
0.2
(0.2)
9.3
2015
£m
0.2
£m
9.0
0.4
–
0.2
(0.5)
9.1
2014
£m
0.4
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
9.3 EMPLOYEE BENEFITS (CONTINUED)
Expense recognised in statement of comprehensive income
Current service cost
Interest cost
Interest income
Total expense
Actuarial gains and losses recognised in other comprehensive income
Cumulative loss at beginning of the year
Actuarial gains/(losses) recognised in other comprehensive income
Cumulative loss at end of the year
Plan assets – weighted average asset allocations at year end:
Equities
Corporate bonds
Cash
Weighted average assumptions used to determine benefit obligations:
Discount rate
Rate of compensation increase
Rate of increase in payment of currently accruing pensions (Post 6 April 2006)
Rate of increase in payment of currently accruing pensions (Pre 6 April 2006)
Rate of increase in pensions in deferment
Inflation assumption
2015
2014
£m
0.1
0.4
(0.3)
0.2
2015
£m
(3.5)
0.9
(2.6)
£m
0.1
0.4
(0.4)
0.1
2014
£m
(2.3)
(1.2)
(3.5)
2015
2014
87%
9%
4%
87%
9%
4%
100%
100%
2015
£m
3.80%
3.95%
2.10%
2.90%
1.95%
2.95%
2014
£m
3.60%
3.90%
2.10%
2.90%
2.20%
2.90%
Weighted average life expectancy for mortality tables (S2PMA CMI_2015_M, S2PFA CMI_2015_F, 1% long term trend) used to determine benefit
obligations at 31 December 2015:
Member age 65 (current life expectancy)
Member age 45 (life expectancy at 65)
Contributions
Male
86.9
88.1
Female
88.8
90.3
Contributions to the ICS plan will be assessed as part of the current triennial valuation that is expected to conclude in 2016.
155
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
9.3 EMPLOYEE BENEFITS (CONTINUED)
Defined benefit plan – Paymaster (1836) Limited
A full actuarial valuation was carried out at 6 April 2012 and has since been updated each year end to 31 December 2015 by a qualified
independent actuary.
Present value of obligations
Fair value of plan assets
Recognised liability for defined benefit obligations
Movement in present value of defined benefit obligation
Defined benefit obligation at 1 January
Current service cost
Interest cost
Actuarial (gain)/loss – experience losses
Actuarial (gain)/loss – change in financial assumptions
Benefits paid
Defined benefit obligation at end of year
Movement in fair value of plan assets
Fair value of plan assets at 1 January
Interest income
Actuarial (loss)/gain
Employer contributions
Benefits paid
Fair value of plan assets at end of year
Actual return on plan assets
Expense recognised in statement of comprehensive income
Current service cost
Interest cost
Interest income
Total expense
156
2015
£m
(47.4)
35.0
(12.4)
2015
£m
47.9
0.9
1.7
(0.2)
(1.6)
(1.3)
47.4
2014
£m
(47.9)
34.5
(13.4)
2014
£m
40.6
0.7
1.9
0.2
5.6
(1.1)
47.9
2015
2014
34.5
1.2
(0.6)
1.2
(1.3)
35.0
2015
£m
0.6
31.4
1.4
1.5
1.3
(1.1)
34.5
2014
£m
2.9
2015
2014
£m
0.9
1.7
(1.2)
1.4
£m
0.7
1.9
(1.4)
1.2
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
9.3 EMPLOYEE BENEFITS (CONTINUED)
Actuarial gains and losses recognised in other comprehensive income
Cumulative loss at beginning of the year
Actuarial gains/(losses) recognised in other comprehensive income
Cumulative loss at end of the year
Plan assets – weighted average asset allocations at year end:
Equities
Corporate bonds
Cash
Weighted average assumptions used to determine benefit obligations:
Discount rate
Rate of compensation increase
Rate of increase in payment of currently accruing pensions
Rate of increase in pensions in deferment (Pre 6 April 2009)
Rate of increase in pensions in deferment (Post 6 April 2009)
Inflation assumption
2015
£m
(14.5)
1.2
(13.3)
2015
£m
71%
17%
12%
100%
2015
£m
3.80%
1.50%
3.15%
3.15%
2.50%
3.15%
2014
£m
(10.2)
(4.3)
(14.5)
2014
£m
67%
21%
12%
100%
2014
£m
3.60%
1.75%
3.05%
3.05%
2.50%
3.05%
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 2015:
Member age 65 (current life expectancy)
Member age 45 (life expectancy at 65)
Contributions
Male
86.4
87.8
Female
89.9
91.5
Contributions will be assessed as part of the current triennial valuation of the Paymaster (1836) Limited pension plan that is expected to
conclude in 2016.
157
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
9.3 EMPLOYEE BENEFITS (CONTINUED)
Defined benefit plan – MyCSP Limited
A full actuarial valuation was carried out at 31 December 2012 and has since been updated each year end to 31 December 2015 by a qualified
independent actuary.
Present value of obligations
Fair value of plan assets
Recognised liability for defined benefit obligations
Movement in present value of defined benefit obligation
Defined benefit obligation at 1 January
Defined benefit obligation acquired
Current service cost
Interest cost
Member contributions
Actuarial gain/(loss) – change in financial assumptions
Benefits paid
Defined benefit obligation at end of year
Movement in fair value of plan assets
Fair value of plan assets at 1 January
Fair value of plan assets acquired
Interest income
Actuarial (loss)/gain
Employer contributions
Member contributions
Benefits paid
Administration expenses
Fair value of plan assets at end of year
Actual (loss)/gain on plan assets
158
2015
£m
(9.8)
9.8
–
2014
£m
(8.5)
8.4
(0.1)
2015
2014
£m
8.5
–
1.9
0.3
0.2
(0.9)
(0.2)
9.8
£m
–
7.4
0.4
0.1
–
0.6
–
8.5
2015
2014
8.4
–
0.3
(0.4)
1.6
0.2
(0.2)
(0.1)
9.8
2015
£m
(0.1)
–
7.6
0.1
0.3
0.4
–
–
–
8.4
2014
£m
0.4
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
9.3 EMPLOYEE BENEFITS (CONTINUED)
Expense recognised in statement of comprehensive income
Current service cost
Administration expenses
Interest cost
Interest income
Total expense
Actuarial gains and losses recognised in other comprehensive income
Cumulative loss at beginning of the year
Actuarial gains/(losses) recognised in other comprehensive income
Cumulative loss at end of the year
Plan assets – weighted average asset allocations at year end:
UK equities
Overseas equities
Corporate bonds
Diversified growth fund
Cash
Weighted average assumptions used to determine benefit obligations:
Discount rate
Rate of compensation increase
Rate of increase in payment of currently accruing pensions
Rate of increase in pensions in deferment
Inflation assumption
2015
2014
£m
1.9
0.1
0.3
(0.3)
2.0
2015
£m
(0.3)
0.5
0.2
£m
0.4
–
0.1
(0.1)
0.4
2014
£m
–
(0.3)
(0.3)
2015
2014
17%
18%
40%
25%
0%
17%
17%
40%
24%
2%
100%
100%
2015
£m
3.80%
3.75%
2.25%
2.25%
3.25%
2014
£m
3.60%
3.60%
2.40%
2.40%
3.10%
Weighted average life expectancy for mortality tables (101% SAPS S2PMA, 88% SAPS S2PFA, 1% long term trend) used to determine benefit
obligations at 30 June 2015:
Member age 65 (current life expectancy)
Member age 45 (life expectancy at 65)
Contributions
Male
86.9
88.1
Female
88.8
90.3
MyCSP Limited expects to contribute £1.3m to its pension plan in 2016. This will be assessed once the scheme is closed to future accrual.
Sensitivity analysis
Assumptions are used in calculating the pension obligation. The total effect on all schemes of an increase in the life expectancy shown above
by one year would be to increase the employee benefit liability as at 31 December 2015 by £2.0m (2014: £1.3m). A 0.5% decrease in the discount
rate used would increase the employee benefit liability as at 31 December 2015 by £6.4m (2014: £4.4m).
159
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
9.4 OPERATING LEASES
Future aggregate minimum lease payments relating primarily to the Group’s premises are payable as follows:
Less than one year
Between one and five years
More than five years
Total
9.5 RECONCILIATION OF LOSS TO CASH GENERATED FROM OPERATIONS
Continuing operations
Loss before income tax
Adjustments for:
Depreciation and amortisation of software
Amortisation of acquisition related intangibles
Gain on disposal of associate
Share of profit of associate
Finance income
Finance costs
Share based payment charge
Changes in working capital:
Decrease in trade and other receivables
Increase in trade and other payables
Decrease in provisions
Tax paid
2015
£m
4.5
13.8
8.0
26.3
2015
£m
(71.7)
20.2
23.0
–
–
(0.7)
82.6
0.2
(1.9)
24.2
(2.2)
(1.5)
2014
£m
4.6
12.2
8.0
24.8
2014
£m
(38.6)
14.8
20.9
(9.8)
(1.7)
(0.6)
72.4
–
(1.2)
0.4
(2.8)
(2.6)
Total cash generated from operations
72.2
51.2
9.6 EVENTS AFTER THE BALANCE SHEET DATE
In the first quarter of 2016, the Group completed two acquisitions in Financial Services technology for a total consideration of c£16m, with a further
earnout payment of up to c.£10m in 2019, dependent on growth.
On 3 March 2016, the Group acquired the entire share capital of KYCnet BV. KYCnet provides cutting edge workflow technology for on-boarding
and monitoring of commercial and retail clients and has broad applicability across financial services as well as retail, travel and legal services.
On 4 March 2016, the Group acquired RiskFactor, a UK based provider of credit decisioning and risk profiling software for commercial lending,
with deep client relationships and broad applicability across lending products. RiskFactor complements the Group’s other ‘control risk’ capabilities
within the Intelligent Solutions division. RiskFactor was acquired by purchasing the entire share capital of its holding company, Information Software
Solutions Limited.
160
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EQUINITI GROUP PLC
FOR THE YEAR ENDED 31 DECEMBER 2015
REPORT ON THE COMPANY FINANCIAL
STATEMENTS
OUR OPINION
In our opinion, Equiniti Group plc company
financial statements (the “financial
statements”):
• give a true and fair view of the state of the
company’s affairs as at 31 December 2015
and of its loss and cash flows for the year
then ended;
• have been properly prepared in accordance
with International Financial Reporting
Standards (“IFRS”) 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, included within the
annual report, comprise:
• the Statement of financial position
as at 31 December 2015;
• the Statement of comprehensive income
for the year then ended;
• the Statement of cash flows for the year
then ended;
• the Statement of changes in equity
for the year then ended; and
• the notes to the financial statements, which
include a summary of significant accounting
policies and other explanatory information.
Certain required disclosures have been
presented elsewhere in the annual report,
rather than in the notes to the financial
statements. These are cross-referenced from
the financial statements and are identified as
audited.
The financial reporting framework that has
been applied in the preparation of the financial
statements is applicable law and IFRS as
adopted by the European Union.
OTHER REQUIRED REPORTING
CONSISTENCY OF OTHER INFORMATION
Companies Act 2006 opinion
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.
ISAs (UK & Ireland) reporting
Under International Standards on Auditing
(UK and Ireland) (“ISAs (UK & Ireland)”) we are
required to report to you if, in our opinion,
information in the Annual Report is:
• materially inconsistent with the information
in the audited financial statements; or
•
• apparently materially incorrect based on, or
materially inconsistent with, our knowledge
of the parent company acquired in the
course of performing our audit; or
• otherwise misleading.
We have no exceptions to report arising from
this responsibility.
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 by the parent company, or returns
adequate for our audit have not been
received from branches not visited by us; or
• the financial statements and the part of
the Directors’ Remuneration Report to
be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from
this responsibility.
This report, including the opinions, has been
prepared 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.
WHAT AN AUDIT OF FINANCIAL
STATEMENTS INVOLVES
We conducted our audit in accordance
with 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
DIRECTORS’ REMUNERATION
• the overall presentation of the financial
Directors’ remuneration report –
Companies Act 2006 opinion
In our opinion, the part of the Directors’
Remuneration Report to be audited has been
properly prepared in accordance with the
Companies Act 2006.
Other Companies Act 2006 reporting
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 of Directors'
responsibilities statement set out on page
72, 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.
statements.
We primarily focus our work in these areas
by assessing the directors’ judgements
against available evidence, forming our own
judgements, and evaluating the disclosures in
the financial statements.
We test and examine information, using
sampling and other auditing techniques, to
the extent we consider necessary to provide
a reasonable basis for us to draw conclusions.
We obtain audit evidence through testing
the effectiveness of controls, substantive
procedures or a combination of both.
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.
OTHER MATTER
We have reported separately on the Group
financial statements of Equiniti Group plc for
the year ended 31 December 2015.
Graham Lambert (Senior Statutory Auditor) for
and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Gatwick
7 March 2016
161
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2015
2015
2014
Note
£m
£m
ASSETS
Non-current assets
Investments in subsidiaries
Investments
Other financial assets
Current assets
Trade and other receivables
Income tax receivable
Other financial assets
Cash and cash equivalents
Total assets
LIABILITIES
Non-current liabilities
Other financial liabilities
Current liabilities
Trade and other payables
Other financial liabilities
Total liabilities
Net assets
EQUITY
Equity attributable to owners of the parent
Share capital
Share premium
Capital redemption reserve
Share-based payment reserve
Accumulated profit
Total equity
8
9
10
11
14
10
12
15
13
15
16
16
212.6
–
–
212.6
0.2
0.1
459.0
–
459.3
8.5
11.0
2.8
22.3
0.5
0.3
–
2.6
3.4
671.9
25.7
–
–
9.4
174.9
184.3
184.3
487.6
0.3
–
0.2
0.1
487.0
487.6
13.7
13.7
–
0.2
0.2
13.9
11.8
5.0
3.5
–
–
3.3
11.8
The notes on pages 165 to 172 form part of these financial statements.
The financial statements on pages 162 to 172 were approved by the Board of directors on 7 March 2016 and were signed on its behalf by:
J Stier
Director
162
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015
Share
capital
Share
premium
Capital
redemption
reserve
Share-
based
payments
reserve
Accumu-
lated
(deficit)/
profit
(Restated)
Total
equity
£m
£m
£m
£m
£m
£m
Balance at 1 January 2014
5.0
3.5
Comprehensive (loss)/income
Loss for the year per the statement of comprehensive
income
Change in value of available-for-sale financial assets
Total comprehensive income
–
–
–
–
–
–
Balance at 31 December 2014 (Restated)
5.0
3.5
Balance at 1 January 2015
5.0
3.5
Comprehensive loss
Loss for the year per the statement of comprehensive
income
Total comprehensive expense
Issue of share capital
Capital reduction
Buy back of own shares
Share-based payments expense
Transaction with owners recognised directly in equity
–
–
–
–
0.3
494.7
(4.8)
(0.2)
–
(4.7)
(498.2)
–
–
(3.5)
–
–
–
–
–
–
–
–
–
–
0.2
–
0.2
–
(0.7)
7.8
–
–
–
–
–
–
–
–
–
–
0.1
0.1
(0.9)
(0.9)
4.9
4.9
4.0
4.0
3.3
11.8
3.3
11.8
(19.3)
(19.3)
(19.3)
(19.3)
–
495.0
503.0
–
–
–
–
0.1
503.0
495.1
Balance at 31 December 2015
0.3
–
0.2
0.1
487.0
487.6
The notes on pages 165 to 172 form part of these financial statements.
163
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2015
Note
Cash flows from operating activities
(Loss)/profit before income tax
Adjustments for:
Finance income
Financial expense
Changes in working capital:
Decrease/(increase) in other financial assets
Increase in trade and other payables
Group tax relief
Net cash outflow from operating activities
Cash flows from investing activities
Dividends from investment
Net cash inflow from investing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
12
The notes on pages 165 to 172 form part of these financial statements.
2015
£m
(19.5)
(0.4)
1.3
6.4
9.4
0.2
(2.6)
–
–
(2.6)
2.6
–
2014
£m
4.0
(5.5)
0.9
(0.2)
–
–
(0.8)
0.4
0.4
(0.4)
3.0
2.6
164
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
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.
2.2 NEW STANDARDS AND
INTERPRETATIONS NOT YET ADOPTED
The new standards and interpretations not
yet adopted are discussed in note 2.2 of the
consolidated financial statements.
2.3 CRITICAL 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.
1 GENERAL INFORMATION
Cash and cash equivalents
Equiniti Group plc, formerly Equiniti Group
Limited, (the “Company”) is a public limited
company which is listed on the London Stock
Exchange, incorporated and domiciled in the
United Kingdom. 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.
2 BASIS OF PREPARATION
2.1 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Statement of compliance
These financial statements have been prepared
in accordance with International Financial
Reporting Standards as adopted by the
European Union (‘‘IFRS’’), IFRS Interpretation
Committee (‘‘IFRS IC’’) interpretations as
adopted by the European Union (the ‘‘EU’’)
and the Companies Act 2006 applicable to
companies reporting under IFRS. The financial
statements have been prepared under the
going concern basis.
Basis of preparation
These financial statements have been prepared in
accordance with International Financial Reporting
Standards as adopted by the European Union
(‘‘IFRS’’), IFRS Interpretation Committee (‘‘IFRS
IC’’) interpretations as adopted by the European
Union (the ‘‘EU’’) and the Companies Act 2006
applicable to companies reporting under IFRS.
The consolidated financial statements have been
prepared on the going concern basis and under
the historical cost convention, as modified by
the revaluation of financial assets and financial
liabilities (including derivative instruments) at
fair value through profit or loss. The Company’s
functional and presentational currency is the
British Pound (“£”).
The prior year financial statements have been
restated for the reclassification of a revaluation
gain. See note 2.1 of the consolidated financial
statements for further details.
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
£19.3m (2014: restated loss of £0.9m).
Investments in subsidiaries
Investments in subsidiaries are carried
at historical cost less any provisions for
impairment.
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 of the statement
of financial position and the statement of
cash flows.
Trade payables
Trade payables represent liabilities for goods
and services received by the Group prior to
the end of the financial year which are unpaid.
The amounts within trade payables are
unsecured. Trade payables are recognised
initially at fair value and subsequently
measured at amortised cost using the
effective interest method.
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 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
165
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
3 FINANCIAL RISK MANAGEMENT
The Company has exposure to the following risks from its use of financial instruments:
– credit risk
– liquidity risk
Risk management policies are established for the Equiniti Group plc of companies (the “Group”) including Equiniti Group plc 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. Internal
Audit 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, and arises principally from the Company’s receivables from customers.
The Company establishes an allowance for impairment that represents its exposure to specific overdue balances.
The maximum exposure to credit risk at the reporting date was:
Carrying amount:
Trade and other receivables
Cash and cash equivalents
Total credit risk
Note
11
12
2015
2014
£m
0.2
–
0.2
£m
0.5
2.6
3.1
Cash and cash equivalents are only held with AA rated institutions.
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.
The maximum exposure to liquidity risk at the reporting date was:
Carrying amount:
Other payables
Total liquidity risk
All trade and other payables are expected to be paid in 6 months or less.
Loans from related parties are repayable on demand.
Note
13
2015
£m
9.4
9.4
2014
£m
–
–
166
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
4 CAPITAL RISK MANAGEMENT
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 in the balance sheet.
Management of capital:
Equity
Cash and cash equivalents
Total equity plus net debt
5 AUDITORS’ REMUNERATION
2015
£m
487.6
–
487.6
The audit fees for these financial statements of £1,250 (2014: £nil) were borne by a fellow group company.
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 in the year:
Current tax:
Group relief credit
Adjustment in repsect of prior periods
Total income tax credit
Reconciliation of effective tax rate:
(Loss)/profit for the year
Total tax credit
(Loss)/profit before tax
Tax using the UK corporation tax rate of 20.25% (2014: 21.5%)
Non-deductible expenses
Adjustment in repsect of prior periods
Total income tax credit
2015
£m
(0.1)
(0.1)
(0.2)
2015
£m
(19.3)
(0.2)
(19.5)
(3.9)
3.8
(0.1)
(0.2)
2014
£m
11.8
(2.6)
9.2
2014
£m
(0.3)
–
(0.3)
2014
£m
4.0
(0.3)
3.7
0.8
(1.1)
–
(0.3)
The standard rate of corporation tax in the UK is 20% with effect from 1 April 2015 (2014: 21%). The taxation credit for the year is calculated by
applying the estimated annual effective rate of tax to the loss (2014: profit) for the year. Accordingly the Company’s losses for the accounting year
ended 31 December 2015 are taxed at an effective rate of 20.25% (2014: profit taxed at an effective rate of 21.5%).
Future tax changes
A number of changes to the UK corporation tax system were announced in the Chancellor’s Budget on 8 July 2015. These include reductions to the
main rate of corporation tax to 19% from 1 April 2017 and to 18% from 1 April 2020. These rates were substantively enacted during the year.
167
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
8 INVESTMENTS IN SUBSIDIARIES
The Company has the following investments in subsidiaries:
Cost and net book value
At beginning of the year
Purchase of subsidiary
Conversion of preference shares to ordinary shares
Purchase of share capital from share options
Total investment in subsidiaries
2015
£m
8.5
169.2
34.8
0.1
212.6
2014
£m
8.5
–
–
–
8.5
In December 2015, subsequent to listing on the London Stock Exchange, the subsidiary company, Equiniti X2 Enterprises Limited, converted its
preference share capital of £34.8m to ordinary share capital
Also in December 2015, the Company purchased the entire share capital of Equiniti Holdings Limited from Equiniti Debtco Limited for £169.2m
by way of intercompany transaction.
The directors consider the value of the investments to be supported by their underlying assets. The company has the following investments
in subsidiaries:
Ownership %
Country of
incorporation and
principal place of
business
Class of
shares held
Principal
activities
31 Dec
2015
31 Dec
2014
Equiniti Enterprises Limited
Equiniti X2 Enterprises Limited
Equiniti Holdings Limited
UK
UK
UK
Ordinary
Ordinary
Ordinary
Holding
company
Holding
company
Holding
company
100
100
100
A full list of the company's direct and indirect investments is included in note 4.4 to the consolidated financial statements.
9 INVESTMENTS
The Company has the following investments:
Shares in Euroclear plc
Total investments
10 OTHER FINANCIAL ASSETS
Non-current
Intra-group interest bearing assets classified as loans and receivables due from related parties
Total non-current other financial assets
Current
Non-interest bearing receivables due from related parties
Total current other financial assets
168
2015
£m
–
–
2015
£m
–
–
2015
£m
459.0
459.0
100
100
–
2014
£m
11.0
11.0
2014
£m
2.8
2.8
2014
£m
–
–
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
11 TRADE AND OTHER RECEIVABLES
Other receivables
Total trade and other receivables
None of these financial assets are either past due or impaired.
12 CASH AND CASH EQUIVALENTS
Cash and cash equivalents per statement of financial position
Cash and cash equivalents per statement of cash flows
13 TRADE AND OTHER PAYABLES
Accruals
Total
14 GROUP TAX RELIEF RECEIVABLE
Group tax relief receivable
2015
2014
£m
0.2
0.2
2015
£m
–
–
2015
£m
9.4
9.4
2015
£m
0.1
£m
0.5
0.5
2014
£m
2.6
2.6
2014
£m
–
–
2014
£m
0.3
169
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
15 OTHER FINANCIAL LIABILITIES
Non-current
Intra-group interest bearing assets classified as loans and receivables due from related parties
Total non-current financial liabilities
Current
Payables due to related parties
Total current financial liabilities
16 SHARE CAPITAL
Allotted, called up and fully paid
On issue at 1 January
Capital reduction
Buy-back of own shares
New equity share capital issued
On issue at 31 December
Ordinary shares (million)
On issue at 1 January
New equity share capital issued
On issue at 31 December
2015
£m
–
–
2015
174.9
174.9
2014
£m
13.7
13.7
2014
£’000
0.2
0.2
2014
£m
3.5
–
–
–
3.5
2015
2014
Number
Number
5.0
295.0
300.0
5.0
–
5.0
Share capital
Share premium
2015
£m
5.0
(4.8)
(0.2)
0.3
0.3
2014
£m
5.0
–
–
–
5.0
2015
£m
3.5
(498.2)
–
494.7
–
During the year the Company issued 295.0m ordinary shares at a par value of 0.001p each for total consideration of £495.0m. The share premium
account increased by £494.7m as a result.
17 SHARE BASED PAYMENTS
The Group has equity-settled share-based option plans in place being the conditional allocations of Equiniti Group plc shares. Share-based
payments disclosures relevant to the Company are presented within note 7.2 to the consolidated financial statements.
170
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
18 FINANCIAL INSTRUMENTS
The carrying amounts of financial assets and liabilities are classified as per IFRS 7 ‘Financial instruments: Disclosures’ according to the following
categories:
Financial assets
Loans and receivables
Trade and other receivables
Loans and receivables due from related parties
Cash and cash equivalents
Total financial assets
Financial liabilities
Other financial liabilities at amortised cost
Trade and other payables
Loans and receivables due to related parties
Total financial liabilities
The fair values and the carrying values of financial assets and liabilities are not materially different.
19 RELATED PARTY TRANSACTIONS
Interest payments during the year
To fellow Group companies
Total
Interest receipts during the year
From fellow Group companies
Total
Receivable at the year end
From fellow Group companies
Total
Payable at the year end
To fellow Group companies
Total
Note
11
10
12
Note
13
15
2015
£m
0.2
459.0
–
459.2
2015
£’000
9.4
174.9
184.3
2014
£m
0.5
2.8
2.6
5.9
2014
£’000
–
13.9
13.9
2015
2014
£m
0.2
0.2
£m
0.2
0.2
2015
2014
£m
0.9
0.9
2015
£m
459.0
459.0
2015
£m
174.9
174.9
£m
0.9
0.9
2014
£m
2.8
2.8
2014
£m
13.9
13.9
The proceeds from the Company’s listing on the London Stock Exchange were passed to other group companies by way of intercompany transaction.
171
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
20 DIVIDENDS
Amounts recognised as distributions to equity holders in the year
Proposed final dividend for year ended 31 December 2015
2015
£m
2.0
2.0
2014
£m
–
–
The recommended dividend payable in respect of the year ended 31 December 2015 is £2.0m or 0.68p per ordinary share (2014: £nil). This is in line
with the Group’s stated policy of a payout ratio of around 30% of adjusted normalised profit after cash tax. The amount payable has been pro-rated
for the timing of the Group’s admission to the market in October 2015. This equates to £12m or 4.08p per share on a full year basis. The proposed
dividend has not been accrued as a liability as at 31 December 2015.
21 POST BALANCE SHEET EVENTS
There have been no events subsequent to the balance sheet date which require disclosure in or adjustment to the financial statements.
172
173
SECTION 03Equiniti Group plc Annual Report 2015FINANCIAL STATEMENTS 174
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175
04
Annual
General
Meeting
NOTICE OF 2016 ANNUAL
GENERAL MEETING
GLOSSARY
COMPANY
INFORMATION
176
183
186
EQUINITI GROUP PLC
(INCORPORATED IN ENGLAND AND WALES WITH REGISTERED NO. 07090427)
If you are in any doubt as to the action you should take, you are recommended to seek your own professional advice from
your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial
Services and Markets Act 2000 if you are resident in the United Kingdom or, if not, from another appropriate adviser.
If you have sold or otherwise transferred all of your ordinary shares in Equiniti Group plc (the “Company”), please forward this
document and the accompanying document(s) as soon as possible to the purchaser or transferee or to the stockbroker, bank
or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee.
NOTICE OF
2016 ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN THAT the first Annual General
Meeting of the Company will be held at 11.00 a.m. on 26
April 2016 at the offices of Weil, Gotshal & Manges LLP at 110
Fetter Lane, London, EC4A 1AY to consider and, if deemed
fit, to pass Resolutions 1 to 15 and 18 as ordinary resolutions
and Resolutions 16, 17 and 19 special resolutions:
ORDINARY RESOLUTIONS
1. To receive and adopt the annual report of the Company for
the year ended 31 December 2015.
2. To approve the Directors’ Remuneration Report for the
financial year ended 31 December 2015, excluding the
Directors’ Remuneration Policy set out on pages 91 to 96
of the Directors’ Remuneration Report within the 2015
Annual report.
3. To approve the Directors’ Remuneration Policy in the form set
out on pages 83 to 91 of the Directors’ Remuneration Report
in the Company’s annual report for the year ended
31 December 2015.
4. To approve the recommendation of the directors that a final
dividend of 0.68p per ordinary share be declared in respect
of the year ended 31 December 2015.
5. To reappoint Sir Rodney Aldridge as a Director.
6. To reappoint Kevin Beeston as a Director.
7. To reappoint Victoria Jarman as a Director.
8. To reappoint Haris Kyriakopoulos as a Director.
9. To reappoint Dr Timothy Miller as a Director.
10. To reappoint John Parker as a Director.
11. To reappoint John Stier as a Director.
12. To reappoint Guy Wakeley as a Director.
13. To reappoint PricewaterhouseCoopers LLP as auditors of the
Company, in accordance with Section 489 of the Companies
Act 2006 (‘the 2006 Act’), until the conclusion of the next
Annual General Meeting of the Company.
14. To authorise the Audit Committee of the Board to determine
the remuneration of the Auditors.
15. THAT the Directors be generally and unconditionally
authorised to allot equity shares (as defined in the Companies
Act 2006) in the Company and to grant rights to subscribe
for or convert any security into shares in the Company:
a. up to a nominal amount of £100,000 (such amount to be
reduced by the nominal amount of any equity securities
allotted under paragraph (b) below, in excess of £100.000);
and
b. comprising equity securities up to a nominal amount of
£200,000 (such amount to be reduced by any shares and
rights to subscribe for or convert any security into shares
allotted under paragraph (a) above) in connection with an
offer by way of a rights issue:
i. to ordinary shareholders in proportion (as nearly as
may be practicable) to their existing holdings; and
ii. to holders of other equity securities as required by
the rights of those securities or as the Directors
otherwise considers necessary;
and so that the Directors may impose any limits or restrictions
and make any arrangements which it considers necessary or
appropriate to deal with treasury shares, fractional entitlements,
record dates, legal, regulatory or practical problems in, or under
the laws of, any territory or any other matter, such authorities
to apply until the end of the Annual General Meeting of the
Company in 2017 (or, if earlier, until the close of business on 26
July 2017) but, in each case, so that the Company may make
offers and enter into agreements during this period which would,
or might, require shares to be allotted or rights to subscribe for
or convert securities into shares to be granted after the authority
ends; and the Board may allot shares or grant rights to subscribe
for or convert securities into shares under any such offer or
agreement as if the authority had not ended.
SPECIAL RESOLUTIONS:
16. THAT, conditional on the approval of resolution 15 above,
the Board be given the power to allot equity securities
(as defined in the Companies Act 2006) for cash under the
authority given by that resolution and/or to sell ordinary
shares held by the Company as treasury shares for cash, free
of the restriction in Section 561 of the Companies Act 2006,
such power to be limited:
a. to the allotment of equity securities and sale of treasury
shares for cash in connection with an offer of or invitation
to apply for equity securities (but in the case of the
authority granted under paragraph (b) of resolution 15,
by way of a rights issue only):
176
EQUINITI GROUP PLC
(INCORPORATED IN ENGLAND AND WALES WITH REGISTERED NO. 07090427)
i. to ordinary shareholders in proportion (as nearly as
may be practicable) to their existing holdings; and
ii. to holders of other equity securities, as required
by the rights of those securities, or as the Board
otherwise considers necessary;
and so that the Board may impose any limits or restrictions
and make any arrangements which it considers necessary or
appropriate to deal with treasury shares, fractional entitlements,
record dates, legal, regulatory or practical problems in, or under
the laws of, any territory or any other matter; and
b. in the case of the authority granted under paragraph
(a) of resolution 15 and/or in the case of any sale of
treasury shares for cash, to the allotment (otherwise than
under paragraph (a) above) of equity securities up to a
nominal amount of £15,000 such power to apply until the
conclusion of the Annual General Meeting of the Company
in 2017 (or, if earlier, until the close of business on 26 July
2017), but during this period the Company may make
offers, and enter into agreements, which would, or might,
require equity securities to be allotted (and treasury shares
to be sold) after the power ends; and the Board may allot
equity securities (and sell treasury shares) under any such
offer or agreement as if the power had not ended.
17. That the Company be authorised for the purposes of Section
701 of the Companies Act 2006 to make market purchases
(within the meaning of Section 693(4) of the Companies Act
2006) of the ordinary shares of 0.1p each of the Company
(‘ordinary shares’), provided that:
a. the maximum number of ordinary shares hereby authorised
to be purchased shall be 30,000,000;
b. the minimum price which may be paid for ordinary shares is
0.1p per ordinary share;
ORDINARY RESOLUTION
18. THAT, in accordance with sections 366 and 367 of the Act,
the Company and all companies that are subsidiaries of the
Company, at the date on which this Resolution 17 is passed
or during the period when this Resolution 17 has effect, be
generally and unconditionally authorised to:
a. make political donations to political parties or independent
election candidates not exceeding the amount of £50,000 in
total;
b. make political donations to political organisations other
than political parties not exceeding the amount of £50,000
in total; and
c. incur political expenditure not exceeding the amount of
£50,000 in total,
(as such terms are defined in the Act) during the period
beginning with the date of the passing of this Resolution 17
and ending at the end of the Company's next Annual General
Meeting or, if earlier, on 26 July 2017 provided that the
authorised sum referred to in paragraphs (a), (b) and (c) above,
may be comprised one or more amounts in different currencies
which, for the purposes of calculating the said sum, shall be
converted into pounds sterling at the exchange rate published in
the London edition of the Financial Times on the date on which
the relevant donation is made or expenditure incurred (or the
first business day thereafter) or, if earlier, on the day in which the
Company enters into any contract or undertaking in relation to
the same provided that, in any event, the aggregate amount of
political donations and political expenditure made or incurred
by the Company and its subsidiaries pursuant to this Resolution
shall not exceed £150,000.
For the purposes of this Resolution 18, the terms "political
donations", "political parties", "independent election
candidates", "political organisation" and "political expenditure"
have the meanings set out in Part 14 of the 2006 Act.
c. the maximum price (exclusive of expenses) which may be
19. THAT a general meeting, other than an Annual General
paid for an ordinary share is the highest of:
Meeting, may be called on not less than 14 clear days’ notice.
i. an amount equal to 105% of the average of the middle
market quotations for an ordinary share (as derived
from the London Stock Exchange Daily Official List) for
the five business days immediately preceding the date
on which such ordinary share is purchased; and
ii. the higher of the price of the last independent trade
and the highest independent bid on the trading
venues where the purchase is carried out;
d. the authority hereby conferred shall expire at the earlier
of the conclusion of the Annual General Meeting of the
Company in 2017 and 26 July 2017 unless such authority is
renewed prior to such time; and
e. the Company may make contracts to purchase ordinary
shares under the authority hereby conferred prior to the
expiry of such authority which will or may be executed
wholly or partly after the expiry of such authority, and
may purchase ordinary shares in pursuance of any such
contracts, as if the authority conferred by this resolution
had not expired.
Recommendation
Your Directors are of the opinion that the resolutions to be
proposed at the Annual General Meeting are in the best interests
of the Company and its shareholders as a whole and recommend
you to vote in favour of them. Each Director will be doing so in
respect of all of his or her own beneficial shareholding.
BY ORDER OF THE BOARD
Doug Armour
Company Secretary
7 March 2016
Registered Office: Sutherland House, Russell Way,
Crawley, West Sussex, RH10 1UH
Registered in England and Wales No. 07090427
177
SECTION 04Equiniti Group plc Annual Report 2015ANNUAL GENERAL MEETING
EQUINITI GROUP PLC
(INCORPORATED IN ENGLAND AND WALES WITH REGISTERED NO. 07090427)
Notes to the Notice of
Annual General Meeting:
ENTITLEMENT TO ATTEND AND VOTE
1. Only those shareholders registered in the Company's register
of members at 6.00 p.m. on 24 April 2016; or if this meeting
is adjourned, at 6.00 p.m. on the day two days prior to the
adjourned meeting, shall be entitled to attend and vote
at the meeting. Changes to the register of members after
the relevant deadline shall be disregarded in determining
the rights of any person to attend and vote at the meeting.
Shareholders who are deemed to be controlling shareholders
(as defined in LR 6.1.2AR of the Listing Rules) as at 6.00 p.m.
on 24 April 2016 shall not be entitled to vote in respect of the
separate approval of Resolutions 5,7,9 and 10 by shareholders
who are not controlling shareholders in accordance with LR
9.2.2ER (2) of the Listing Rules.
WEBSITE GIVING INFORMATION REGARDING THE
MEETING
2. Information regarding the meeting, including the information
required by section 311A of the Companies Act 2006, can be
found at www.equiniti.com on the “Investors” pages.
ATTENDING IN PERSON
3. The doors will open at 10.00 a.m. and you may wish to arrive
by 10.30 a.m. to enable you to take your seat in good time.
4. If you have any special needs or require wheelchair access
to the AGM venue, please contact Ceri Charles at company.
secretary@equiniti.com or 01903 706160 in advance of the
meeting.
APPOINTMENT OF PROXIES
5. A shareholder who wishes to appoint a proxy should complete
the Form of Proxy which accompanies this Notice of AGM
and which includes full details of how to appoint a proxy. If
you do not have a Form of Proxy and believe that you should
have one, or if you require additional Forms of Proxy, please
contact Equiniti’s helpline on 0371 384 2030 (+44 121 415 7047
if calling from overseas) (Lines are open between 8.30am and
5.30pm Monday to Friday). As an alternative to completing
a hard copy Form of Proxy, proxies may be appointed
electronically in accordance with note 7.
6. A copy of this Notice has been sent for information only to
persons who have been nominated by a shareholder to enjoy
information rights under section 146 of the Companies Act
2006 (a ‘Nominated Person’). The rights to appoint a proxy
cannot be exercised by a Nominated Person; they can only
be exercised by a shareholder. However, a Nominated Person
may have a right under an agreement with the shareholder by
whom they were nominated to be appointed as a proxy for
the AGM. If a Nominated Person does not have such a right or
does not wish to exercise it, they may have a right under such
an agreement to give instructions to the shareholder as to the
exercise of voting rights.
7. In order to be valid, a proxy appointment must be returned
(together with any authority under which it is executed or a
copy of the authority certified in ink by a bank, a stockbroker
or a solicitor) by one of the following methods:
• online at www.sharevote.co.uk where full instructions on the
procedure are given. The Voting ID, Task ID and Shareholder
Reference Number printed on the Form of Proxy will be
required to use this electronic proxy appointment system.
Alternatively, shareholders who have already registered with
Equiniti Registrars’ online portfolio service, Shareview, can
appoint their proxy electronically by logging on to their
portfolio at www.shareview.co.uk and clicking on the link
to vote
• in hard copy form by post, by courier or by hand to the
Company’s registrar at the address shown on the Form
of Proxy
• in the case of CREST members, by utilising the CREST
electronic proxy appointment service in accordance with
the procedures set out in note 9
The appointment of a proxy in each case must formally be
received by the Company’s registrar by no later than 11.00 a.m.
on 24 April 2016.
8. To change your proxy instructions you may return a new proxy
appointment using the methods set out above. Where you
have appointed a proxy using the hard copy Form of Proxy
and would like to change the instructions using another hard
copy Form of Proxy, please contact Equiniti as set out in Note
5. The deadline for receipt of proxy appointments (see note 7)
also applies in relation to amended instructions. Any attempt
to terminate or amend a proxy appointment received after
the relevant deadline will be disregarded. Where two or more
valid separate appointments of proxy are received in respect
of the same share in respect of the same meeting, the one
which is last sent shall be treated as replacing and revoking
the other or others. If the Company is unable to determine
which is last sent, the one which is last received shall be so
treated. If the Company is unable to determine either which
is last sent or which is last received, none of them shall be
treated as valid in respect of the relevant share(s).
9. CREST members who wish to appoint a proxy or proxies by
utilising the CREST electronic proxy appointment service
may do so by utilising the procedures described in the
CREST Manual on the Euroclear website (www.euroclear.
com). CREST Personal Members or other CREST sponsored
members, and those CREST members who have appointed
a voting service provider(s), should refer to their CREST
sponsor or voting service provider(s), who will be able to
take the appropriate action on their behalf. In order for a
proxy appointment made by means of CREST to be valid, the
178
EQUINITI GROUP PLC
(INCORPORATED IN ENGLAND AND WALES WITH REGISTERED NO. 07090427)
appropriate CREST message (a ‘CREST Proxy Instruction’)
must be properly authenticated in accordance with Euroclear
UK & Ireland Limited’s (‘EUI’) specifications and must contain
the information required for such instructions, as described
in the CREST Manual. The message regardless of whether it
constitutes the appointment of a proxy or an amendment to
the instruction given to a previously appointed proxy must, in
order to be valid, be transmitted so as to be received by the
issuer’s agent (ID number RA19) by 11.00 a.m. on 24 April 2016
(the latest time(s) for receipt of proxy appointments specified
in this Notice of AGM). For this purpose, the time of receipt
will be taken to be the time (as determined by the timestamp
applied to the message by the CREST Applications Host)
from which the issuer’s agent is able to retrieve the message
by enquiry to CREST in the manner prescribed by CREST.
The Company may treat as invalid a CREST Proxy Instruction
in the circumstances set out in regulation 35(5) (a) of the
Uncertificated Securities Regulations 2001.
accompanied by a statement setting out the grounds for
the request.
WEBSITE PUBLICATION OF AUDIT CONCERNS
13. Shareholders satisfying the thresholds in section 527 of the
Companies Act 2006 can require the Company to publish a
statement on its website setting out any matter relating to (a)
the audit of the Company’s accounts (including the Auditor’s
report and the conduct of the audit) that are to be laid before
the AGM; or (b) any circumstances connected with an Auditor
of the Company ceasing to hold office, that the shareholders
propose to raise at the AGM. The Company may not require
the shareholders requesting the publication to pay its
expenses. Any statement placed on the website must also be
sent to the Company’s Auditor no later than the time it makes
its statement available on the website. The business which
may be dealt with at the AGM includes any statement that
the Company has been required to publish on its website.
VOTING
14. Voting on all resolutions will be conducted by way of a poll
rather than on a show of hands. As soon as practicable
following the AGM, the results of the voting at the meeting
and the numbers of proxy votes cast for and against and the
number of votes actively withheld in respect of each of the
Resolutions will be announced via a Regulatory Information
Service and also placed on the Company’s website: www.
equiniti.com on the “Investors” pages.
DOCUMENTS ON DISPLAY
15. Copies of the service contracts of the executive Directors
and the non-executive Directors' contracts for services are
available for inspection at the Company's registered office
during normal business hours and at the place of the meeting
from at least 15 minutes prior to the meeting until the end of
the meeting.
COMMUNICATION
16. Except as provided above, shareholders who have general
queries about the meeting should use the following means of
communication (no other methods of communication will be
accepted):
• calling our shareholder helpline as set out in Note 5
• by email to company.secretary@equiniti.com
• by post to Equiniti Group plc, Sutherland House, Russell Way,
Crawley, West Sussex, RH10 1UH
You may not use any electronic address provided in this Notice
of Meeting to communicate with the Company for any purposes
other than those expressly stated.
ISSUED SHARES AND TOTAL VOTING RIGHTS
10. As at 7 March 2016, the Company's issued share capital
comprised 300,000,000 ordinary shares of 0.1p each. Each
ordinary share carries the right to one vote at a general
meeting of the Company and, therefore, the total number
of voting rights in the Company as at 7 March 2016 is
300,000,000.
The website referred to in note 2 above will include
information on the number of shares and voting rights.
11. Under section 319A of the Companies Act 2006, the
Company must answer any question relating to the business
being dealt with at the AGM which is put by a shareholder
attending that meeting, except in certain circumstances,
including if it is undesirable in the interests of the Company
or the good order of the meeting that the question be
answered or if to do so would interfere unduly with the
preparation for the AGM or involve the disclosure of
confidential information or if the answer has already been
given on a website in the form of an answer to a question.
12. Under sections 338 and 338A of the Companies Act 2006,
members meeting the threshold requirements in those
sections have the right to require the Company (i) to give,
to members of the Company entitled to receive notice of
the meeting, notice of a resolution which may properly be
moved and is intended to be moved at the meeting; and/or
(ii) to include in the business to be dealt with at the meeting
any matter (other than a proposed resolution) which may be
properly included in the business. A resolution may properly
be moved or a matter may properly be included in the
business unless (a) (in the case of a resolution only) it would,
if passed, be ineffective (whether by reason of inconsistency
with any enactment or the Company’s constitution or
otherwise), (b) it is defamatory of any person, or (c) it is
frivolous or vexatious. Such a request may be in hard copy
form or in electronic form, must identify the resolution of
which notice is to be given or the matter to be included in
the business, must be authorised by the person or persons
making it, must be received by the Company not later than
the date six clear weeks before the meeting, and (in the case
of a matter to be included in the business only) must be
179
SECTION 04Equiniti Group plc Annual Report 2015ANNUAL GENERAL MEETING EQUINITI GROUP PLC
(INCORPORATED IN ENGLAND AND WALES WITH REGISTERED NO. 07090427)
Explanatory notes
on the resolutions:
RESOLUTION 1
The directors must present to shareholders the accounts and
the reports of the directors and auditors in respect of each
financial year.
of the Final Dividend for 2015 (unless varied beforehand
by shareholders) and all future dividends until such time as
you withdraw from the DRIP or the DRIP is suspended or
terminated in accordance with the Terms and Conditions.
RESOLUTIONS 2 AND 3
Resolution 2 gives shareholders the opportunity to cast an
advisory vote on the Directors’ Remuneration Report for
the year ended 31 December 2015 and, separately under
Resolution 3, to approve the Directors’ Remuneration Policy,
also contained in the Directors’ Remuneration Report.
The Directors’ Remuneration Report on pages 91 to 96 of
the 2015 annual report sets out details of the Directors’
remuneration for the year ended 31 December 2015.
The Directors’ Remuneration Policy on pages 83 to 91 of
the 2015 annual report sets out the Company’s proposed
policy on Directors’ remuneration. The vote on the Directors’
Remuneration Policy is binding in that the Company may
not make a remuneration payment or payment for loss of
office to a person who is, is to be, or has been a Director
of the Company unless that payment is consistent with
the approved Directors’ Remuneration Policy, or has been
approved by a resolution of shareholders.
The Directors’ Remuneration Policy, if approved, will take
effect from 26 April 2016 and will apply until replaced by
a new or amended Policy. Shareholder approval must be
renewed at least every three years.
RESOLUTION 4
The directors are proposing the payment of a final dividend
of 0.68 pence per share, which requires approval from the
shareholders. The proposed dividend is in line with the
dividend policy as set out on page 97 of the 2015 annual
report. If approved the dividend will be paid on 10 May 2016.
Shareholders may elect to receive their dividend in the form
of additional shares rather than in cash.
DIVIDEND RE-INVESTMENT PLAN
Subject to shareholders approving the dividend as set out
in Resolution 4, the Company will be offering a Dividend
Re-Investment Plan (DRIP). The DRIP is provided and
administered by the DRIP plan administrator, Equiniti
Financial Services Limited, which is authorised and regulated
by the FCA.
The DRIP offers shareholders the opportunity to elect to
invest cash dividends received on their ordinary shares, in
purchasing further ordinary shares of the Company. These
shares would be bought in the market, on competitive
dealing terms. The DRIP will operate automatically in respect
IMPORTANT: PLEASE READ: ACTION MAY BE
REQUIRED:
It is very important to note that a DRIP election or the
revocation of a DRIP election, received or already in place
15 days before a dividend payment date will apply to all
future dividends, whether interim, final or special dividends,
until such time as a valid new election or revocation of an
election is received.
To assist, please note the following important dates:
Final dividend: Record date – 1 April 2016
Last day for DRIP elections (to apply, or to revoke an election,
to the 2015 Final Dividend) – 18 April 2016
Pay date – 10 May 2016
Please note than an election or revocation of an election
applies to all dividends thereafter until such time as further
instructions are received.
CREST
For shares held in uncertificated form (CREST), please note
that elections continue to apply only to one dividend and a
fresh election must be made, via CREST, for each dividend.
Full details of the terms and conditions of the DRIP and
the actions required to make or revoke an election, both in
respect of Maintenance Dividends (i.e. in this case, the 2015
Final Dividend) and any Special Dividends, are available
at www.shareview.co.uk/info/DRIP or on request from the
Registrar, Equiniti Limited, Aspect House, Spencer Road,
Lancing, West Sussex BN99 6DA, secure email via
help.shareview.co.uk Equiniti’s helpline on 0371 384 2030
(+44 121 415 7047 if calling from overseas) (Lines are open
between 8.30am and 5.30pm Monday to Friday).
RESOLUTION 5 TO 12
As this is the Company’s first AGM the Company's articles of
association require that all the directors retire at the AGM
and offer themselves for reappointment.
Biographies and Committee memberships of all the
Company’s Directors can be found on pages 64 to 65 of
the 2015 annual report and on the Company’s website
www.equiniti.com. The Board considers that each of
the independent non-executive Directors proposed for
reappointment meet the independence criteria set by the
UK Corporate Governance Code and are independent of
management in character, judgement and opinion.
180
EQUINITI GROUP PLC
(INCORPORATED IN ENGLAND AND WALES WITH REGISTERED NO. 07090427)
There are no existing or previous relationships, transactions
or arrangements that any of the proposed independent
non-executive Directors has or had with the Company, its
Directors, its controlling shareholder or any of the controlling
shareholder’s associates which are considered to affect their
independence.
The Board believes that the considerable and wide-ranging
experience of all the Directors will continue to be invaluable
to the Company and recommends their re-election.
Under the Listing Rules a company which has a ‘controlling
shareholder’ must, for the purposes of the election, re-
election or reappointment of an independent director, pass
both an ordinary resolution of all shareholders and a separate
ordinary resolution of those shareholders who are not
controlling shareholders (the ‘Independent Shareholders’).
If the ordinary resolution to approve the election, re-election
or reappointment of an existing independent director
is passed, but separate approval by the Independent
Shareholders is not given, the Listing Rules permit an existing
independent director to remain in office pending a further
ordinary resolution of all the shareholders to approve the
election, re-election or reappointment of that director. Such a
resolution may only be voted on within the period of between
90 days and 120 days following the date of the original vote.
Each of Sir Rod Aldridge, Victoria Jarman, Dr Tim Miller and
John Parker are considered by the Board to be Independent
non- executive Directors. Accordingly, for each of Resolutions
5, 7, 9 and 10 the Company intends to seek separate
approval of its Independent Shareholders. Such approval will
be sought following the vote on each of those resolutions
by all the Company’s shareholders and will be calculated
by discounting from the result of the vote on each such
resolution the votes of those shareholders who are identified
as controlling shareholders of the Company as at 6.00 p.m.
on 24 April. As at 7 March 2016, Equiniti (Luxembourg) S.a.r.l.
held 92,982,821 ordinary shares, representing 32% of the
Company’s issued share capital.
The Company will, on announcing the result of the AGM,
announce, in respect of Resolutions 5, 7, 9 and 10, the result
of both the vote of all the Company’s shareholders and the
vote of the Independent Shareholders.
RESOLUTION 13
The Company is required to appoint its Auditor at each
general meeting at which accounts are laid before the
Shareholders, to hold office until the conclusion of the
next such meeting. PricewaterhouseCoopers LLP has
confirmed its willingness to stand for re-appointment. The
Board, on the recommendation of the Audit Committee,
proposes under Resolution 13, the re-appointment of
PricewaterhouseCoopers LLP as Auditor to hold office
until the conclusion of the next AGM of the Company.
RESOLUTION 14
Resolution 14 authorises the Audit Committee to agree the
remuneration of the Auditor.
RESOLUTION 15
The Directors authority to allot unissued shares in the
Company expires at the conclusion of this Annual General
Meeting. The guidelines of the Investment Association (‘IA’)
on directors’ authority to allot shares state that IA members
will regard as routine an authority to allot up to two thirds of
the existing issued share capital, provided that any amount in
excess of one third of existing issued share capital is applied
to fully pre-emptive rights issues only. The Board considers
it appropriate that the Directors should have this authority
to allot shares in the capital of the Company. Accordingly
Resolution 15 authorises the Board (a) under an open offer
or in other situations up to an aggregate nominal amount
of £100,000 (representing one third of the Company’s share
capital as at 7 March 2016) and (b) under a rights issue up to
an aggregate nominal amount of £200,000 (representing two
thirds of the Company’s issued share capital at that date).
The authorities sought by Resolution 15 will expire at the
AGM of the Company to be held in 2017 or if earlier 26 July
2017. The Directors have no present intention to exercise
either of the authorities sought under this resolution.
However, if they do exercise the authorities, the Directors
intend to follow IA recommendations concerning their use.
RESOLUTION 16 (TO BE PROPOSED AS A SPECIAL
RESOLUTION)
The Directors authority to allot unissued shares in the
Company for cash otherwise than to existing shareholders pro
rata to their holdings expires at the conclusion of this Annual
General Meeting. The Board wishes to renew this authority.
Resolution 16, which will be proposed as a special resolution,
would give the Directors the authority to allot ordinary shares
(or sell any ordinary shares which the Company elects to hold
in treasury) for cash without first offering them to existing
shareholders in proportion to their existing shareholdings.
This authority would is limited to allotments or sales in
connection with pre-emptive offers and offers to holders of
other equity securities if required by the rights of those shares
or as the Board otherwise considers necessary, or otherwise
up to an aggregate nominal amount of £15,000 (representing
15,000,000 ordinary shares). This aggregate nominal amount
represents 5% of the issued ordinary share capital of the
Company as at 7 March 2016. In respect of this aggregate
nominal amount, the Directors confirm their intention to
follow the provisions of the Pre-Emption Group’s Statement
of Principles regarding cumulative usage of authorities
within a rolling three-year period. The authorities sought by
Resolution 15 will expire at the AGM of the Company to be
held in 2017 or if earlier 26 July 2017. The Directors have
no present intention to exercise the authority sought under
this resolution.
181
SECTION 04Equiniti Group plc Annual Report 2015ANNUAL GENERAL MEETING EQUINITI GROUP PLC
(INCORPORATED IN ENGLAND AND WALES WITH REGISTERED NO. 07090427)
The Company and the Group do not make any donations
to political parties or organisations and do not intend to in
future, but do support certain industry-wide bodies and allow
employees time to undertake union activities. Whilst the
Board does not regard this as political in nature, in certain
circumstances such support together with donations made
for charitable or similar purposes could possibly be treated
as a donation to a political organisation under the relevant
provisions of the Companies Act 2006.
RESOLUTION 19 (TO BE PROPOSED AS A SPECIAL
RESOLUTION)
The Companies (Shareholders’ Rights) Regulations 2009
increase the notice period required for general meetings
of the Company to 21 days unless shareholders approve a
shorter notice period, which cannot however be less than 14
clear days. Resolution 19 seeks approval of a notice period of
not less than 14 clear days to apply to general meetings other
than an AGM. It is intended that the shorter notice period
would not be used as a matter of routine, but only where the
flexibility is merited by the business of the meeting and is
thought to be in the interests of shareholders as a whole.
If approved, the authority will expire at the AGM of the
Company to be held in 2017.
RESOLUTION 17 (TO BE PROPOSED AS A SPECIAL
RESOLUTION)
Shareholders’ approval is sought to authorise the Company
to buy back its own ordinary shares in the market as
permitted by the Companies Act 2006. The authority limits
the maximum number of shares that could be purchased to
30,000,000 (representing 10% of the Company’s issued share
capital as at 7 March 2016) and sets minimum and maximum
prices at which shares may be purchased by the Company
under this authority. If approved, the authority will expire at
the AGM of the Company to be held in 2017 or if earlier
26 July 2017.
The Directors have no present intention of exercising this
authority. The authority would be exercised only if the
Directors believed that to do so would be in the interests
of shareholders generally. Any purchases of ordinary shares
would be by means of market purchases on a recognised
investment exchange.
A listed company purchasing its own shares may hold those
shares in treasury and make them available for re-sale as an
alternative to cancelling them. Accordingly, if this resolution
is passed, the Company will have the option of holding,
as treasury shares, any of its own shares that it purchases
pursuant to the authority conferred. No dividends are paid
on, and no voting rights are attached to, shares held in
treasury. The Company does not hold any shares in treasury,
but it is intended that any shares which might be purchased
under this authority will be held in treasury, rather than being
cancelled.
The Company had options and awards outstanding over
4,594,489 ordinary shares, representing 1.53% of the
Company’s issued share capital, as at 7 March 2016. If the
authority conferred by Resolution 17 were to be exercised in
full, these outstanding options and awards would represent
1.51% of the issued share capital of the Company.
RESOLUTION 18
Under the Companies Act 2006 a company wishing to make
political donations or incur political expenditure in excess of
£5,000 in any 12 month period, must first obtain authorisation
from its shareholders by ordinary resolution.
In order to comply with its obligations under the Companies
Act 2006 and to avoid any inadvertent infringement of that
Act, the Board wishes to renew its existing authority for a
general level of political donation and/or expenditure.
The Companies Act 2006 requires this authority to be
divided into three heads (as set out in Resolution 17) with a
separate amount specified as permitted for each. An amount
not exceeding £50,000 for each head of the authority has
been proposed. The authority sought extends to all of the
Company’s subsidiaries. This authority will expire at the
conclusion of the Annual General Meeting of the Company
in 2017.
182
EQUINITI GROUP PLC
GLOSSARY OF TERMS
GLOSSARY
The following definitions apply throughout the annual report unless the context requires otherwise:
Advent Companies
Advent Funds
Advent International
Articles
Audit Committee
Auditors or PwC
B2B
B2B2C
BPO
Business Day
CASS
CEO
CES
CFO
Chairman
Companies Act or the Act
Company
Controlling Shareholders
CREST
Knight (Cayman) Limited, Equiniti (Cayman) Holdings Limited, Equiniti (Cayman)
Limited, Equiniti Group (Luxembourg)
S.à r.l., Advent International plc and Advent International Corporation
Advent International GPE V Limited Partnership, Advent International GPE
V-A Limited Partnership, Advent International GPE V-B Limited Partnership,
Advent International GPE V-C Limited Partnership, Advent International GPE
V-D Limited Partnership, Advent International GPE V-E Limited Partnership,
Advent International GPE V-F Limited Partnership, Advent International GPE V-G
Limited Partnership, Advent International GPE V-H Limited Partnership, Advent
International GPE V-I Limited Partnership, Advent International GPE V-J Limited
Partnership, Advent Partners GPE V Limited Partnership, Advent Partners GPE V-A
Limited Partnership, Advent Partners GPE V-B Limited Partnership and Advent
Partners III Limited Partnership, which are managed by Advent International
Advent International Corporation, a private equity firm
the articles of association of the Company
the audit committee of the Board
PricewaterhouseCoopers LLP
business to business
business to business to consumer
business process outsourcing;
Good Friday or a bank holiday in the UK
the Client Assets sourcebook
chief executive officer
Customer effort score
chief finance officer
Kevin Beeston
the Companies Act 2006, as amended
Equiniti Group plc incorporated in England and Wales with registered number
7090427
Equiniti (Luxembourg) S.à r.l, the Chairman, the Advent Companies
and the Advent Funds
the electronic transfer and settlement system for the paperless settlement of trades
in listed securities operated by Euroclear UK & Ireland Limited
CREST Regulations
the Uncertificated Securities Regulations 2001 (SI 2001/3755), as amended
D2C
DC
Defined Benefit Schemes
Directors or Board
EBITDA
EFSL
direct to customer
defined contribution
the MyCSP Pension Scheme
the directors of the Company
earnings before interest, tax, depreciation and amortisation
Equiniti Financial Services Limited
183
SECTION 04Equiniti Group plc Annual Report 2015ANNUAL GENERAL MEETING EQUINITI GROUP PLC
GLOSSARY OF TERMS
Enterprise Wide Risk Management
the methods and processes applied by an organisation across its entire enterprise
to identify and manage risks that could affect the achievement of its objectives;
EPS
European Union or EU
Executive Directors
FCA
FSMA
FTE
£ and pounds sterling
GMP
Group or Equiniti
earnings per share
an economic and political union of 27 Member States which are located in Europe
Guy Wakeley and John Stier, each a Director as at the date of this annual report
the Financial Conduct Authority
the Financial Services and Markets Act 2000, as amended
Full time employee
the lawful currency of the UK
Guaranteed minimum pension
the Company and its subsidiary undertakings
Independent non-executive Directors
the non-executive Directors, excluding the Advent Director and the Chairman
Initial Public Offering
the listing rules made by the UK Listing Authority under Part VI of FSMA,
as amended
London Stock Exchange plc
Long term incentive plan
the revised EU Market Abuse Regulation(Regulation 596/2014) and Directive
(2014/57/EU)
the revised EU Directive on Markets in Financial Instruments(2014/65/EU)
and the accompanying Regulation(Regulation 600/2014)
the model code published in Annex I to LR 9 of the Listing Rules
the nomination committee of the Board
Kevin Beeston, the Chairman of the Board as at the date of this annual report
the non-executive Directors of the Company, being Sir Rod Aldridge, Victoria
Jarman, Haris Kyriakopoulos, Tim Miller and John Parker as at the date of this
annual report
net promoter score
the ordinary shares of 0.1p each in the capital of the Company
payment protection insurance
the Prudential Regulation Authority
Equiniti Limited incorporated in England and Wales with registered number
6226088
Equiniti Financial Services Limited, Pancredit Systems Ltd., TransGlobal Payment
Solutions Limited and Paymaster (1836) Limited
the relationship agreement, dated 14 October 2015, between the Company,
the Chairman, and the Advent Shareholder
the remuneration committee of the Board
the Company’s Save As You Earn option scheme
IPO
Listing Rules
London Stock Exchange
LTIP
MAD II
MiFID II
Model Code
Nomination Committee
Non-Executive Chairman
Non-executive Directors
NPS
Ordinary Shares
PPI
PRA
Registrar
Regulated Entities
Relationship Agreement
Remuneration Committee
SAYE scheme
184
EQUINITI GROUP PLC
GLOSSARY OF TERMS
a holder of Ordinary Shares
an HMRC-approved share-based SAYE scheme in which employees of corporate
clients contract to make monthly deposits into a savings account over three, five
or seven year periods
senior independent non-executive Director
share incentive plan
TransGlobal Payment Solutions Limited
Shareholder
Sharesave
SID
SIP
TPS
UK Corporate Governance Code
UK Listing Authority
the UK Corporate Governance Code dated September 2014 issued
by the Financial Reporting Council
the FCA acting in its capacity as the competent authority for the purposes
of Part VI of FSMA
Website
www.equiniti.com
185
SECTION 04Equiniti Group plc Annual Report 2015ANNUAL GENERAL MEETING EQUINITI GROUP PLC
COMPANY INFORMATION
COMPANY INFORMATION
Company Secretary
Doug Armour
Bankers
Lloyds Bank plc
Head of Investor Relations
Solicitors
Frances Gibbons
Company number
7090427
Registered Office
Sutherland House
Russell Way
Crawley
West Sussex
RH10 1UH
Website
Investors.equiniti.com/investors
Weil, Gotshal & Manges LLP
Auditor
PricewaterhouseCoopers LLP
Financial Advisors
N M Rothschild & Sons Limited
Joint Brokers
Barclays Bank plc
Citibank plc
Liberum Capital Limited
Registrar
Equiniti Limited
186
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