19EQUINITI ANNUAL REPORT 2019
EQUINITI IS AN INTERNATIONAL
PROVIDER OF TECHNOLOGY
AND SOLUTIONS
for complex and regulated data
and payments, serving blue-chip
enterprises and public sector
organisations.
Contents
01
STRATEGIC REPORT
HIGHLIGHTS
ABOUT EQUINITI
OUR BUSINESS MODEL
OUR MARKETS
OUR STRATEGY
OUR KEY PERFORMANCE INDICATORS
CHAIRMAN’S STATEMENT
CHIEF EXECUTIVE’S STATEMENT
OPERATIONAL REVIEW
FINANCIAL REVIEW
SUSTAINABILITY
PRINCIPAL RISKS AND UNCERTAINTIES
VIABILITY STATEMENT
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40
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02
GOVERNANCE
GOVERNANCE REPORT
BOARD OF DIRECTORS
EXECUTIVE COMMITTEE
BOARD AND EXECUTIVE COMMITTEE
STRUCTURE
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
DIRECTORS' REMUNERATION REPORT
DIRECTORS' REPORT
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90
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120
3
We are a Superbrand
OUR MISSION AND VISION
• Our mission is for our people and platforms to connect businesses with
markets, engage customers with their investments and allow organisations
to grow and transform.
• Our vision is to help businesses and individuals succeed, creating positive
experiences for the millions of people who rely on us for a sustainable future.
OUR PURPOSE
• Our purpose is to care for every customer and simplify each and every transaction.
•
•
Skilled people and technology-enabled services provide continuity, growth and
connectivity for businesses across the world.
Designed for those who need them the most, our accessible services are
for everyone.
03
04
FINANCIAL STATEMENTS
ADDITIONAL INFORMATION
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF EQUINITI GROUP PLC
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
COMPANY STATEMENT OF FINANCIAL POSITION
COMPANY STATEMENT OF CHANGES IN EQUITY
126
SHAREHOLDER INFORMATION
196
134
135
136
138
140
141
188
189
2
EQUINITI EMPLOYEES FEATURED THROUGHOUT THE PHOTOGRAPHY
NOTES TO THE COMPANY FINANCIAL STATEMENTS
190
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3
Best Share Registrar at the Shares Awards
– Voted for by investors and shareholders
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01
Strategic
Report
HIGHLIGHTS
ABOUT EQUINITI
OUR BUSINESS MODEL
OUR MARKETS
STRATEGY
OUR KEY PERFORMANCE INDICATORS
CHAIRMAN’S STATEMENT
CHIEF EXECUTIVE’S STATEMENT
OPERATIONAL REVIEW
FINANCIAL REVIEW
SUSTAINABILITY
PRINCIPAL RISKS AND UNCERTAINTIES
VIABILITY STATEMENT
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HIGHLIGHTS
Revenue (£m)
Underlying EBITDA3 (£m)
£555.7m
20181
£530.9m
CHANGE2
4.7%
£136.0m
20181
£129.5m
CHANGE2
5.0%
Profit before tax
Profit after tax
£39.8m
20181
£24.3m
CHANGE2
63.8%
£32.4m
20181
£20.4m
CHANGE2
58.8%
Dividend per share
(pence)
5.49p
20181
5.32p
CHANGE2
3.2%
Operating cash flow
conversion4 (%)
91%
20181
102%
CHANGE2
(11%)
Underlying EBITDA
margin (%)
24.5%
20181
24.4%
CHANGE2
0.1%
Diluted earnings per
share (EPS) (pence)
8.4p
20181
4.6p
Net debt (£m)
CHANGE2
82.6%
£343.6m
20181
£352.0m
CHANGE2
(2.4%)
Earnings before interest
and tax (EBIT)3 (£m)
£55.9m
20181
£41.1m
CHANGE2
36.0%
Underlying EPS3 (pence)
18.1p
20181
17.8p
Leverage (x)
2.5x
20181
2.7x
CHANGE2
1.7%
CHANGE2
(0.2x)
FINANCIAL PROGRESS
• Revenue growth of 4.7% including a full year of North
American5 operations, with organic revenue3 growth of
1.4%, underlying EBITDA growth of 5.0% and an increase
in underlying EBITDA margin of 0.1% to 24.5%
• Delivery of synergies in line with plan, with $5m achieved
in 2019 and $10m in sight for 2020
• Continued strong client retention and new wins across all
UK divisions:
• Share registration renewals including Associated British
• Solid financial progress in a challenging market environment:
Foods, Centrica and RSA Group
• Global slowdown in corporate activity impacting both
• More new share registrations commenced than in any
Investment Solutions and EQ US
• US interest rate cuts
• Reduction in trading volumes in our execution-only
brokerage service as a result of the uncertain equity
market trading conditions
• An expected price reduction relating to the MyCSP
contract in Pension Solutions
• Intelligent Solutions performing below its recent trend
suppressed by the delay in commissioning of new projects
over the UK election period
• Strong EBIT and profit after tax growth of 36.0% and 58.8%
respectively, driven by underlying business growth, margin
advancement and completion of EQ US acquisition
• Operating cash flow conversion of 91% with strong cash flow
in H2 offset by the end of the beneficial US TSA arrangements
and a further reduction in the use of the receivables financing
facility from £10.3m in 2018 to £8.0m in 2019
• Leverage of 2.5x on a post-IFRS 16 basis (31 December 2018:
2.7x) 2.3x pre-IFRS 16 (31 December 2018: 2.5x)
STRATEGIC PROGRESS
• Separation of North American operations from Wells Fargo
completed in May 2019:
• Successful new product launches generated wins in private
company M&A and equity compensation plans with strong
pipeline for 2020
• Retention of all clients with key renewals including Comcast,
Hewlett Packard and Proctor & Gamble, with strong service
underpinning recurring revenues
• New client wins including Cincinnati Financial, Change
Healthcare and Listo Solutions with a number of material
competitive bids underway for 2020
• New operating capacity launched with additional facilities in
Milwaukee, Wisconsin, creating scale for further growth
prior period including AFI Development, Deltex Medical,
Marshalls, National Grid, Petrofac, Vitec Group and
WM Morrison
• New IPO mandates including DWF, Trainline and Watches
of Switzerland with several mandates for early 2020
• New client wins in Intelligent Solutions for both software
and services including Bamboo Finance, Roland Berger
and J Sainsbury
• Pleasing progress in Pension Solutions with revenue
stabilised and renewed or extended relationships including
Aviva, Fidelity and HP, and new clients wins including a 10
year contract to provide outsourced administration to an
international reinsurance company, a software licence sale
to The Sovereign Group and a large calculation automation
project with Diligenta
• A nearshore technology centre established in Krakow, Poland,
accelerating development of web and mobile applications
• A second offshore operations and technology centre launched
in Bangalore, India, increasing operational resilience and scale
• Continued selective acquisition of new capabilities:
• Richard Davies Investor Relations (RD:IR), an independent
investor relations business based in London, providing
the UK’s most advanced mobile enabled investor relations
platform for issuers, banks and IR professionals
• Corporate Stock Transfer Inc. (CST), a transfer agent
in Denver, Colorado, providing capability for the
micro-cap space
USE OF CAPITAL
• £48.5m of capital investment relating to the separation of our
North American business, new office openings (Bangalore,
Milwaukee and Krakow), a high level of IT projects and
investing in new portals and asset tracing services in the US
• Recommended final dividend of 3.54 pence per share, to give
a total dividend of 5.49 pence per share, representing growth
of 3.2% in line with progressive dividend policy
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HIGHLIGHTS
6
About Equiniti
We deliver our services through four divisions,
underpinned by technology platforms and positions
of scale in our chosen markets:
27%
OF 2019
REVENUES
31%
OF 2019
REVENUES
23%
OF 2019
REVENUES
17%
OF 2019
REVENUES
2%
OF 2019
REVENUES
INVESTMENT SOLUTIONS
Investment Solutions offers a broad range of services, including share registration
for around half the FTSE 100, and the administration of SAYE schemes and share
incentive plans for 1.2 million employees. The division also provides share dealing,
wealth management and international payments to corporate clients and their
employees, as well as directly to retail customers.
INTELLIGENT SOLUTIONS
Intelligent Solutions targets complex or regulated activities to help organisations
manage their interactions with customers, citizens and employees. The division
offers enterprise workflow for case and complaints management, credit services,
on-boarding new clients, and specialist resource for rectification and remediation.
PENSION SOLUTIONS
Pension Solutions offers administration and payment services to pension schemes,
as well as pension software, data solutions, and life and pensions’ administration.
The division is a scale provider of pension technology and operates some of the
largest pension schemes in the UK. These include the National Health Service
scheme, which has more than 2.6 million members, and the Armed Forces Veterans,
which we have served continuously since 1836.
EQ US
EQ US offers a range of transfer agent services that enable our clients to manage
share registers, communicate with shareowners and undertake significant corporate
actions – simply and effectively. It continues to add to its offering, with recent
launches including equity compensation plans and proxy services.
INTEREST INCOME
In addition to our four divisions, we earn interest income as a fee for the
administration of certain client and customer balances.
1 The Group has applied IFRS 16 for the year beginning 1 January 2019 and has adopted the modified retrospective approach, which means that comparatives in the
consolidated financial statements have not been restated. To provide like-for-like comparators for the prior period, comparatives throughout this Strategic Report
have been presented as if IFRS 16 had applied throughout 2018 – see pages 37 to 39 for further details.
² Change at actual foreign exchange rates. Reported revenue change at constant foreign exchange rates is 4.0% and underlying EBITDA is 4.5%.
3 The Group uses alternative performance measures to provide additional information on the underlying performance of the business. See pages 35 to 36
for further details.
4 Operating cash flow conversion is calculated after allowing for use of the Group’s £20.0m receivables financing facility, of which £8.0m (31 December 2018: £10.3m)
was utilised at the year end. Details of the facility can be found on page 33.
5 The acquisition of EQ US completed on 1 February 2018 and its results were consolidated into the Group from that date. Prior period performance is therefore from
1 February 2018 to 31 December 2018.
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OUR BUSINESS MODEL
THE INPUTS TO OUR BUSINESS MODEL
OUR VALUE CREATION MODEL
We rely on the following assets to create
value for our stakeholders:
PROPRIETARY TECHNOLOGY
We have well-invested and scalable proprietary technology
platforms, which give us a competitive advantage and form
a barrier to entry, given the substantial experience, time
and money required to build them.
SPECIALIST PEOPLE
We employ people who are experts in their fields. At the
year end, we had over 5,200 employees.
RELATIONSHIPS
We build excellent long-term and mutually beneficial
relationships with our clients, which include c70 of the FTSE
100, c120 of the FTSE 250 and c700 US corporate clients.
Our average relationship with FTSE 100 share registration
clients is c29 years with similar tenure with US clients.
KNOWLEDGE
We have many years’ experience of providing complex
services in regulated markets. We also have a strong track
record of identifying and acquiring new platforms and
capabilities to cross-sell to the existing client base.
FINANCIAL RESOURCES
We carefully manage our balance sheet and cash flows,
giving us the financial resources we need to invest in our
technology platforms and to continue our growth.
THE VALUE WE ADD
We combine proprietary technology with experienced and
specialist people, to provide accurate, flexible and efficient
services. These services are often non-core to our clients but
also business-critical to them. Our experience of operating
in regulated environments helps our clients to meet their
regulatory obligations and protect their stakeholders’ interests.
Our scale and broad client base mean we can make
investments in technology and people that our clients would
not economically choose to make themselves. This allows us
to provide services more efficiently than clients could in-house,
delivering cost efficiencies and giving them the flexibility to
adjust the resources deployed throughout the year.
ENSURING A SUSTAINABLE BUSINESS MODEL
Our strategy is designed to ensure our business model is
sustainable for the long-term. High-quality delivery supports
long-term relationships with our clients’ senior decision makers.
Our strategic account directors then work with them to identify
other areas where we can deliver value and innovation. As a
result, our key accounts typically take more than 10 services
from us and some take more than 20. This cross-selling and up-
selling drives our top line growth. Our market-leading positions
also make us a natural choice for new clients. In addition, we
look to turn major clients into true partners, where we are
each other’s supplier and customer and jointly deliver new
opportunities, making these relationships even stronger.
We provide business-critical services to our clients, often in
highly regulated and complex environments. As we grow, our
business and our risk environment also become more complex.
Managing risk effectively is fundamental to delivering our
strategy and to us operating successfully. We believe that a
robust risk management culture is vital for sustainable growth
and must be at the centre of everything we do. For more detail
on how we manage risk see pages 52 to 55.
We own the core technology, software and infrastructure
required to run our operations, and continually invest in our
platforms to add functionality and keep pace with changing
laws and regulations. We also bring on board innovative new
platforms through acquisitions, along with new capabilities
that are relevant to our existing clients. Strong operating cash
flow conversion funds this investment, while further reducing
our debt.
Our people are vital to us. Their expertise enables us to provide
sophisticated, high-margin services that are protected from
commoditisation. We develop their skills and offer career paths
and interesting work.
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OUR BUSINESS MODEL
DELIVERING RETURNS
Our services generate revenues in different ways. The
proportion generated by multi-year contracts and predictable
project and trading activity, combined with our long-term
relationships, gives us high visibility of future revenues. For the
Group as a whole, at the start of each year, we typically have
visibility of c90% of revenue for that year and c80% for the
following year.
Our revenue visibility comes from the
following sources:
THE OUTPUTS FROM OUR BUSINESS
MODEL
FOR OUR CLIENTS
Our clients receive high-quality services and technology
that free them to focus on what matters most to them.
c50%
from long-term contracted
income;
c30%
from dependable project
income, which relates to tasks
and change work undertaken
for long-standing clients on our
core platforms; and
c10%
from transactional income,
which happens every month
but is not contracted, such
as foreign exchange from the
payment of overseas pensions
and interest income
FOR OUR SHAREHOLDERS
Our shareholders gain from rising profits and cash flows,
which support a progressive dividend policy.
FOR OUR PEOPLE
Our people benefit from interesting work in a growing
business, where they can develop their careers and fulfil
their potential.
FOR OUR SUPPLIERS
Our suppliers can grow their businesses alongside ours,
as we work in partnership with them.
FOR CUSTOMERS AND SOCIETY
Most of our activities have a direct social benefit, whether
that is ensuring people receive their pensions on time or
helping clients to grow and create jobs through our data
analytics. We also work in an ethical and sustainable way,
and seek to create sustainable value for the long-term.
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OUR TECHNOLOGY PLATFORMS
We deliver our services
and solutions through
a suite of platforms
which provide resilient enterprise grade technology
and functionality to our clients and give us
a significant competitive advantage.
This technology underpins our strategy of expanding our
service offering, while adapting to changing client and
regulatory requirements. Our infrastructure is onshore and
configured to be secure and resilient.
The scalability of the platforms supports our business growth.
We process increasingly large volumes of data and transactions,
making payments of £115bn in 2019. We also have a track
record of making targeted acquisitions of companies with
exciting technology, which open new growth areas for us.
Our primary technology platforms
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 clients a wide variety of business-critical data in
a single view, enabling swift and efficient processes.
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Compendia is our award-winning pension administration and
payroll platform. It is used to manage records and payments for
around 9 million UK pension scheme members. As well as using
Compendia in our own business, we provide the platform as
a software solution to in-house pension teams, either on-
premise or as a managed service solution.
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.
OUR TECHNOLOGY PLATFORMS
We have a number of other proprietary
platforms that are important to our business
These include:
our life and pensions’ technology platform
our executive share plans platform
our loan administration platform
our client on-boarding and anti-money-laundering platform
our fraud detection platform
Sirius is our core share 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 19 million
shareholders and making payments of £70bn in 2019. Sirius
receives approximately one million internal website hits
each day and delivers an average response time of less
than one second.
Xanite is our custody and settlement wealth management
platform. Through its interface with SWIFT and CREST, it
supports share dealing 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 direct-to-consumer business, which
we deliver through our EQi web and mobile offering.
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OUR MARKETS
Equiniti has large
addressable markets
in the UK and US
In the short-term, activity in our markets is driven by macroeconomic conditions including
confidence levels among businesses and institutional investors and the level of interest rates.
These factors influence demand for investment-linked products and the number of Initial Public
Offerings (IPOs), mergers, acquisitions, share issues and buybacks. Additionally, our business
has strong counter-cyclical characteristics with opportunities from capital restructuring and
fund-raising often occurring during downturns.
We also increase our addressable market over time by adding
capabilities to the Group, expanding our client base via IPO
wins and cross-selling into that expanded client base. This is
particularly important in the US, as we transfer capabilities
developed in the UK to serve EQ US’s clients.
The longer-term growth of our markets is the result of powerful
structural trends. These are:
• increasing regulation;
• continued digitisation; and
• increasing cost-consciousness.
These challenge our clients, encouraging them to turn to us
for support.
INCREASING REGULATION
There is ongoing pressure to protect consumers’ interests
through greater regulation, particularly in the pensions, banking
and financial services, and healthcare industries. There is also
ever-increasing focus on issues such as money laundering, which
is a global problem.
New regulations are therefore a feature of our clients’ markets.
More regulation results in both public and private sector
organisations facing rising compliance costs and the need to
upgrade technology to cope. Many are also contending with
past regulatory issues at the same time. Organisations who fail
to meet their regulatory obligations face more investigations,
increasing demand for remediation services.
While Equiniti is also affected by compliance costs this trend
is positive for us overall, creating new opportunities to serve
our clients.
CONTINUING DIGITISATION
Consumers expect to receive high-quality services and to be
able to manage their affairs online. Shorter product lifecycles
are also requiring organisations to build customer journeys
more quickly. These pressures require organisations to invest
extensively in websites, portals and mobile apps, which can
be difficult to do in-house. At the same time, they are often
struggling with legacy technology, particularly in the banking
sector, making it more difficult to respond.
The growth of digitisation is also creating vast quantities of
proprietary and third-party data for our clients. They often
need specialist help to analyse this data and extract customer
insights, so they can improve their customer offer. This is
particularly critical for clients with large customer bases.
INCREASING COST-CONSCIOUSNESS
In a period of subdued economic growth, companies are
under real pressure to cut costs, to enable them to compete
effectively and protect their margins. Intense pressure on public
finances also forces governments and their agencies to do
more with less. This requires companies and the public sector
to focus on their core operations and be more efficient.
Technology-led solutions help them to transform their
operations and deliver efficiencies.
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OUR MARKETS
The trends outlined on page 12 have several implications for us.
Our strategy (see pages 14 to 15) is designed to respond to these dynamics.
IMPLICATIONS FOR EQUINITI
OUR STRATEGIC RESPONSE
The changing environment means existing clients need more
of our services, so they can manage change effectively.
We grow sales to existing clients by cross-selling and
up-selling, so they take a greater number of our solutions
over time.
Prospective clients have an ever-increasing range of needs,
opening up new ways of winning their business.
We win new clients requiring core services such as share
registration and through new routes such as software sales.
As the world becomes more complex, both new and existing
clients require us to offer new capabilities.
We stay ahead by understanding our clients’ evolving
needs and either developing or acquiring new capabilities
to meet them.
Complexity tends to increase costs, so we must focus
rigorously on our own efficiency.
We continue to grow our offshore and nearshore presence,
find other opportunities to increase efficiency, and benefit
from the operational leverage of our platforms.
Our technology is a key enabler of change for our clients. We
need to ensure it remains best in class.
We use our attractive cash flows to reinvest in our technology
platforms, while continuing to strengthen our balance sheet.
OUR COMPETITIVE ENVIRONMENT
We have both market-leading and challenger positions across
our portfolio of services.
In Investment Solutions, we have number one positions in
share registration and employee share plans. The division
also has challenger positions in custody nominee and flexible
benefits services.
In Intelligent Solutions, we have a number one position in
remediation services and strong positions in regulatory
services, loan technology, know-your-customer (KYC) –
customer on-boarding, risk assessment, data analytics
and consumer credit.
Pension Solutions is number one in public sector administration
and number two in third-party administration, serving
approximately seven million pension scheme members.
In markets where we have challenger positions, we are
differentiated by our proven ability to process data and
payments securely and accurately. Many clients are risk-averse
and given the critical nature of our services, operational
excellence is essential for winning and retaining their business.
In the US shareholder services market, we rank second by the
number of shareholders served. By number of issuers served
we rank third.
UK
#1
US
#2
Share Registration
By Shareholders Served
#3
By Issuers Served
Employee Share Plans
Remediation Services
Public Sector Pension
Administration
#2
Third-party Pension
Administration
#4
Execution-only Retail
Share Dealing
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OUR STRATEGY
Equiniti has a five-part strategy, designed
to drive organic growth by leveraging our
technology platforms.
The key components of our strategy are set out below.
Strategy
1. GROW SALES TO EXISTING
CLIENTS
2. WIN NEW CLIENTS
The majority of our organic growth
comes from cross-selling and up-selling
to existing clients. To achieve this, we
need to:
• employ great people and develop
them, so they deliver consistently
excellent service, helping to ensure
we retain our existing client base; and
• invest time to understand clients’
needs and continue to develop our
key accounts management.
To win new clients, we need to:
• target clients requiring core services,
in particular share registration;
• attract clients through new routes, such
as software sales; and
• maintain our reputation for service
excellence, both with our clients and
the millions of customers we reach
through them.
Progress in 2019
Long-term client relationships are the
foundation of our business. Client
retention remains very strong across
all of our divisions and we are pleased
to have retained all clients in share
registration, both in the UK and the US.
Notable examples of cross-selling and
up-selling this year included:
• share plan services to FirstGroup, Next,
During the year we transferred in 15
new share registration clients. We
also excelled in the IPO market with
the majority of main market IPOs
choosing Equiniti as their registrar, and
progressing to use our platforms for
their share plans. We also launched 60
new share plans for 33 clients.
New wins in the year included:
Rentokil Initial and TheWorks.co.uk;
• share registration mandates for Deltex
• EQ Insider to a number of share
registration clients including
J Sainsbury; and
• Equity compensation services to the US
market with seven new clients won and
channel partnerships agreed with Wells
Fargo and Vanguard.
Our key accounts now take an average of
more than 10 products from us.
Medical, Marshall of Cambridge,
Morgan Advanced Materials,
Petrofac and Vitec Group;
• share plan mandates including
AstraZeneca, Compass, Next and
Santander;
• UK main market listings, including DWF,
Trainline and Watches of Switzerland;
• 36 new license sales including Bamboo
Finance Credit Servicing, DXC, MYJAR,
Roland Berger and Yorkshire Building
Society; and
• wins in the US including Cincinnati
Financial, Change Healthcare and
Listo Solutions.
14
2
OUR STRATEGY
3. DEVELOP AND ACQUIRE NEW
CAPABILITIES
As our environment changes and opens
up new opportunities for us, we need to
keep ahead by broadening our offering.
This means:
• ensuring we understand our clients’
needs, so they can lead our product
development;
• developing new capabilities that meet
those needs, through organic
investment; and
• making carefully targeted acquisitions
that give us new technology to meet
those needs.
We continued to broaden our
capabilities during the year. In
particular we:
• acquired RD:IR, an independent
investor relations business in the UK;
• acquired US-based CST, providing
niche capability in the small and
micro-cap space; and
• launched new products including EQ
Insider, to administer PDMR dealing;
Checksafe, an employee verification
tool; and EQ Unified, an asset
reunification and tracing platform.
4. DRIVE OPERATING LEVERAGE
Our scalable platforms give us
operational leverage as we grow.
In addition, we continue to:
• increase the scale of our nearshore
and offshore operations; and
• look for other opportunities to
improve our efficiency, including
premises consolidation and supplier
rationalisation.
5. REINVEST STRONG CASH
FLOWS
Equiniti’s business has attractive cash
flow characteristics. This enables us to
continue investing in our technology
platforms, ensuring they remain
best-in-class, while reducing
leverage.
During the year we:
In 2019 we:
• opened a technology centre in
• delivered free cash flow to equity
Krakow, Poland, a second offshore
site in Bangalore, India, and another
operating site for EQ US, in
Milwaukee, Wisconsin; and
• continued to derive efficiency gains
in the UK business by rationalising
our property footprint, consolidating
Aquila’s team into Equiniti’s Crawley
office and downsizing the Bristol
operation.
holders of £37.1m;
• invested £48.5m in capital expenditure
to develop our core platforms and new
fintech products and invest in our US
business; and
• at the year end, we had net debt of
£343.6m and net debt to underlying
EBITDA of 2.5x on a post-IFRS
16 basis. Pre-IFRS 16, net debt to
underlying EBITDA was 2.3x.
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RELEVANCE TO STRATEGY
LINKS TO THE
STRATEGY ELEMENTS
PERFORMANCE
TREND
OUR KEY PERFORMANCE INDICATORS
We use the following key performance indicators (KPIs) to track our strategic
progress. Each KPI links to one or more elements of our strategy, as described on
pages 14 to 15. We have also set medium-term targets for our key financial metrics,
which are described below:
KPI
REVENUE GROWTH
The value of services and software provided to clients
in the year, plus interest income.
Delivering organic revenue growth is at the heart
of our strategy. We supplement this with growth
from acquisitions.
UNDERLYING EBITDA MARGIN
Earnings before interest, tax, depreciation, amortisation
and non-operating charges, as a percentage of revenue.
Underlying EBITDA margin is a key measure of our
profitability and demonstrates our ability to improve
our efficiency, as well as the quality of work we win.
OPERATING CASH FLOW CONVERSION
Underlying EBITDA plus the change in working capital,
as a percentage of underlying EBITDA.
Our strategy requires us to generate cash to fund
investment.
LEVERAGE
The ratio of net debt to underlying EBITDA.
A strong balance sheet gives us the capacity to invest
organically and in acquisitions.
CLIENT SATISFACTION
We use the following industry recognised measures
to monitor client satisfaction:
Net Promoter Score (NPS).
Customer Effort Score (CES).
Customer Experience Centre Satisfaction (CSAT*).
Client satisfaction shows how well we are meeting
our clients’ needs, which is essential for retaining our
existing business and our ability to grow, both through
selling more to existing clients and through attracting
new clients.
EMPLOYEE TURNOVER
The number of employees who voluntarily leave Equiniti
during the year, as a percentage of employees at the
start of the year.
Employee turnover is an indicator of our ability to retain
the talented people who are crucial to our success.
1 Underlying, excluding the benefit of the £114.2m of net proceeds from the rights
2 Proforma, adjusting net debt at 31 December 2015 for IPO costs paid in the first
issue on 17 October 2017.
half of 2016.
* Previously referred to as CCCS – Contact Centre Customer Satisfaction
16
1
2
3
4
5
5
1
2
1
2
3
MEDIUM-TERM TARGET: Organic revenue growth of 3 – 7%
per annum, supplemented by capability enhancing acquisitions
In 2019, total revenue grew by 4.7%, with organic growth
of 1.4%.
MEDIUM-TERM TARGET: Gradual margin improvement
of c25 basis points (pts) per annum.
In 2019, underlying EBITDA margin was 24.5%, up 0.1%.
MEDIUM-TERM TARGET: Average operating cash flow
conversion of c95%.
In 2019, cash flow conversion was 91%.
MEDIUM-TERM TARGET: Leverage of 2.0 – 2.5x, post-IFRS 16
At 31 December 2019, net debt was £343.6m resulting in
leverage of 2.5x post-IFRS 16. IFRS 16 increased leverage
by 0.2x for both 2019 and 2018.
TARGETS: NPS of 40 in the medium-term, CES of 95%,
CSAT of 97%.
In 2019, we further improved customer satisfaction.
NPS increased from 39 to 46.
CES increased from 96% to 97%, against an industry
benchmark of 70%.
benchmark of 77%.
CSAT increased from 97% to 98%, against an industry
TARGET: 16% employee turnover in the UK.
Employee turnover in the UK was 16.4%.
OUR KEY PERFORMANCE INDICATORS
KPI
REVENUE GROWTH
The value of services and software provided to clients
in the year, plus interest income.
from acquisitions.
Delivering organic revenue growth is at the heart
of our strategy. We supplement this with growth
UNDERLYING EBITDA MARGIN
Earnings before interest, tax, depreciation, amortisation
and non-operating charges, as a percentage of revenue.
Underlying EBITDA margin is a key measure of our
profitability and demonstrates our ability to improve
our efficiency, as well as the quality of work we win.
OPERATING CASH FLOW CONVERSION
Our strategy requires us to generate cash to fund
Underlying EBITDA plus the change in working capital,
investment.
as a percentage of underlying EBITDA.
LEVERAGE
The ratio of net debt to underlying EBITDA.
A strong balance sheet gives us the capacity to invest
organically and in acquisitions.
CLIENT SATISFACTION
We use the following industry recognised measures
to monitor client satisfaction:
Net Promoter Score (NPS).
Customer Effort Score (CES).
Customer Experience Centre Satisfaction (CSAT*).
Client satisfaction shows how well we are meeting
our clients’ needs, which is essential for retaining our
existing business and our ability to grow, both through
selling more to existing clients and through attracting
new clients.
1
2
3
4
5
5
1
2
1
2
3
RELEVANCE TO STRATEGY
PERFORMANCE
TREND
MEDIUM-TERM TARGET: Organic revenue growth of 3 – 7%
per annum, supplemented by capability enhancing acquisitions
In 2019, total revenue grew by 4.7%, with organic growth
of 1.4%.
MEDIUM-TERM TARGET: Gradual margin improvement
of c25 basis points (pts) per annum.
In 2019, underlying EBITDA margin was 24.5%, up 0.1%.
MEDIUM-TERM TARGET: Average operating cash flow
conversion of c95%.
In 2019, cash flow conversion was 91%.
MEDIUM-TERM TARGET: Leverage of 2.0 – 2.5x, post-IFRS 16
At 31 December 2019, net debt was £343.6m resulting in
leverage of 2.5x post-IFRS 16. IFRS 16 increased leverage
by 0.2x for both 2019 and 2018.
TARGETS: NPS of 40 in the medium-term, CES of 95%,
CSAT of 97%.
In 2019, we further improved customer satisfaction.
NPS increased from 39 to 46.
CES increased from 96% to 97%, against an industry
benchmark of 70%.
CSAT increased from 97% to 98%, against an industry
benchmark of 77%.
EMPLOYEE TURNOVER
The number of employees who voluntarily leave Equiniti
during the year, as a percentage of employees at the
start of the year.
Employee turnover is an indicator of our ability to retain
the talented people who are crucial to our success.
TARGET: 16% employee turnover in the UK.
Employee turnover in the UK was 16.4%.
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
2019
2018
2017
2016
2015
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S
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T
A
S
C
£555.7m
£530.9m
£406.3m
£382.6m
£369.0m
24.5%
24.4%
24.2%
24.2%
23.4%
91%
102%
93%
100%
113%
2.5x
2.5x1
2.7x
2.7x
3.0x2
46
39
33
31
35
97%
96%
96%
90%
89%
98%
97%
97%
94%
93%
16.4%
15.1%
15.6%
17.8%
18.5%
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CHAIRMAN’S STATEMENT
PHILIP YEA, CHAIRMAN
This was another year of progress for Equiniti. We completed the separation of the
US business and delivered growth in that market, while continuing to expand in the UK,
as the non-discretionary nature of our products and services helped to insulate us to a
degree from an undoubtedly tougher external environment, particularly in the second half.
Revenue increased by 4.7% in the year with organic revenue
growth of 1.4%, and underlying EBITDA growth of 5.0%.
Progress was held back by a number of factors, notably a
slowdown in corporate activity impacting both Investment
Solutions and EQ US, and a reduction in US interest rates.
Trading volumes in our execution-only brokerage were
suppressed by the uncertain equity market trading conditions.
Elsewhere Intelligent Solutions grew below its recent trend,
suppressed by the delay in commissioning new projects over
the UK election period, and Pension Solutions was impacted by
the expected price reduction relating to the MyCSP contract.
Profit after tax increased by 58.8% driven by underlying
business growth, margin advancement and a significant fall in
non-recurring items as we completed the integration of our
US acquisition. The ratio of our net debt to underlying EBITDA
improved from 2.7x in 2018 to 2.5x at year end, both figures
reflecting the new accounting standard IFRS 16.
The US is the world’s largest capital market and the progress
EQ US has made this year has confirmed we are well on our way
to proving the investment case we set out when we acquired
the business. We are making further progress with cross-selling
our UK capabilities to US clients and have plans to continue
expanding the range of services we provide. We have also
bolstered our position in the US with the acquisition of CST in
November 2019. CST provides transfer agent services to micro-
cap companies, complementing our existing US operations.
Our strategy of acquiring small bolt-on technologies to
add new capabilities to the Group was also reflected in the
acquisition of RD:IR in the UK. This business offers a wide range
of investor relations related analysis, research and advisory
services and will provide our share registration business with a
proprietary technology platform for investor analytics, which is
relevant across our client base.
The Board remains fully engaged in evaluating our strategic
opportunities both organic and inorganic. Capital expenditure
has been maintained above its long-term trend to support our
US integration and further offshoring.
Small bolt-on acquisitions have delivered value and options
for further growth and are part of the investment thesis for our
core shareholder services businesses. Given shareholder caution
concerning debt ratios, we aim to demonstrate continued
progress in debt reduction without foregoing the most
value-accretive opportunities which can be delivered.
DIVIDEND
The Board continues to adopt a progressive dividend policy,
which targets distributing c30% of the Group’s underlying profit
attributable to shareholders each year. Having paid an interim
dividend of 1.95 pence per share, we are proposing a final
dividend of 3.54 pence per share. This will give a total dividend
for the year of 5.49 pence, up 3.2% on the 5.32 pence paid in
respect of 2018.
Subject to shareholder approval at the Annual General Meeting
on 7 May 2020, the final dividend will be paid on 26 May 2020,
to shareholders on the register at close of business on 17 April
2020. We continue to offer a dividend reinvestment plan and
any shareholders wishing to participate should submit their
election to do so by 1 May 2020.
BOARD AND GOVERNANCE
The composition of the Board was unchanged in 2019, after
the appointment of a number of non-executive Directors in the
previous year. Our Audit and Risk Committees are populated
with experienced directors who are actively involved in
monitoring key activities during a period of continued change
and heightened scrutiny of business and data security.
Towards the end of the year, we relaunched our employee
engagement forum. This has been combined with our
communications forum, to make it more communication
focused and more responsive to employee feedback. Dr
Tim Miller, our Board-appointed non-executive Director for
Employee Voice, attends the forum, ensuring the Board hears
directly from our people about their experience of working
for Equiniti.
18
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CHAIRMAN’S STATEMENT
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The Board recognises the crucial importance of culture to
sustainable business success. We continue to focus on the
Group’s culture and supporting the Chief Executive’s initiatives
in that regard. More information can be found in Guy’s
statement on the following pages, including a clear articulation
of the Group’s purpose in a new way which is intended to
resonate better with our people and clients and society
more broadly.
MANAGEMENT ORGANISATION
During the year, our Chief Executive, Guy Wakeley, made
some important changes to the organisation of our senior
leadership. The Executive Committee has been expanded with
the addition of a Chief Customer Officer and Chief Commercial
Officer and its remit has been adjusted so its primary focus is
on strategy rather than business performance. These changes
give broader collective ownership of the strategy and have the
added benefit of improving gender diversity on the Executive
Committee. We have also introduced a Business Committee,
made up of Guy, John Stier, our Chief Financial Officer, and our
divisional CEOs. Its purpose is to oversee our business planning
and performance, and to direct resources so we achieve our
business goals.
One of the more important changes in our organisation has
seen the re-orientation of our Intelligent Solutions business to
being market-led rather than product-led and the integration
of technology and support functions into the wider Group
functions. This allows the leadership to focus better on the
cross-selling opportunities that our wider geographic footprint
now offers.
On behalf of shareholders and the Board I want to thank the
executive team and all of our people for their dedication and
their contribution to the Group’s success this year.
LOOKING FORWARD
The Board remains positive about future prospects. The
long-term growth drivers of our markets remain unchanged
which, combined with our strong position with our major
clients, underpin the resilience of our principal businesses in
the UK. We remain enthusiastic about the level of opportunities
in the US and look forward to reporting further progress in the
coming years.
Our interest income will be affected by reductions in central
bank rates partially offset by hedging and a reduction in
interest payables, therefore weighing on organic growth.
Additionally, the unpredictable spread of the Covid-19 virus
introduces further uncertainty to the current year, particularly
from delays in corporate decision-making and financial market
volatility affecting corporate activity. However the recurring
nature of much of our revenue and the diversity of our client
base provide valuable stability as the wider economy reacts to
its inevitable effects.
Philip Yea
Chairman
12 March 2020
CHIEF EXECUTIVE’S STATEMENT
GUY WAKELEY, CHIEF EXECUTIVE
Since Equiniti floated in 2015, we have maintained a consistent strategy that continues to
deliver for us. As a result we made further strategic progress in 2019 and achieved a robust
financial performance.
Our strategy is focused upon the provision of specialised products and services into
regulated markets, where we can build defensive and recurring revenues into a broad base
of large corporate clients.
IMPLEMENTING OUR GROWTH STRATEGY
One of the most significant pieces of work in 2019 was
successfully completing the carve-out of EQ US in the first
half of the year. I am pleased to say that we are well on our
way to proving our investment thesis for North America,
with EQ US delivering organic growth supported by client
wins and the launch of new products into the US market,
particularly in respect of equity compensation and proxy
services. We are also realising the material synergies we
set out in our acquisition case, with $5m delivered in 2019
and we remain on track to deliver $10m in 2020. This is
contributing to significant profit growth in the US business.
At the same time, the UK business remains solid and resilient,
demonstrating that it is insulated from the cycle by generating
organic growth despite the challenging economic and political
environment. We have continued to retain all our major clients,
win new clients across all of our divisions and we have mobilised
some very substantial names in the core share registration
business including National Grid and WM Morrison. These are
sizeable employers, adding hundreds of thousands of people
to those we already serve through our share plans business.
The theme of increasing regulation also continues to benefit
us in the UK. Regulators are becoming more muscular
and interventionist as they prioritise consumer interests
over the interests of the market. We are therefore seeing
strong demand for our Fintech and Regtech capabilities
which help financial services clients in particular to manage
their regulatory burden. As a result, Intelligent Solutions
remains the fastest growing part of the UK business.
ENHANCING OUR RESILIENCE AND EFFICIENCY
Another important strand of our work this year was
industrialising our core capabilities and building our scale
and resilience as we opened three large operating sites. Our
new technology centre in Krakow, Poland, officially opened
in November 2019. It can draw on a huge pool of talent
in one of the world’s most exciting cities for technological
innovation. The centre complements our international
IT team and will develop best-in-class applications and
product delivery systems for all of our divisions.
Our offshore centre in Chennai, India, is well established
and we have added to our capacity and capability with the
launch of a second Indian location, in Bangalore. In addition,
we expanded our capabilities in the US with the opening of
a second operating site in Milwaukee, Wisconsin. The centre
supports our US clients through an inbound call centre, walk-
in service counter and additional client service operations.
STRENGTHENING THE BALANCE SHEET THROUGH
CASH GENERATION
The change we have delivered over the last two years has
had an appreciable cash cost, which has restricted our ability
to reduce debt and return cash to shareholders. With the US
separation completing in H1, we will deliver stronger cash
generation and a reduction in our leverage going forward.
The organic growth and rising margins we are targeting
over the coming years, coupled with our ability to turn a
high proportion of our profits into cash, will result in further
strengthening of our balance sheet. We will also continue
to invest for further organic growth, with the aim of
deploying around 6 – 7% of our revenues into capital
expenditure each year.
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CHIEF EXECUTIVE’S STATEMENT
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TRANSFORMING OUR CULTURE
We are in the initial stages of the cultural transformation of
Equiniti. The Group is often perceived as a business to business
provider of outsourcing and technology. However, through
our services we touch around half the economically active
population of the UK as well as millions more in the US. To drive
future growth, we need those customers to be advocates for us.
While we already achieve good net promoter scores, we have
decided to invest materially in the user experience, through
digital technology and customer service techniques, to produce
a step change in customer satisfaction and advocacy.
Enabling great customer service requires our people to have
a great employment experience. This includes investing in
our colleagues, enhancing engagement and increasing
flexibility, including in relation to reward and conditions.
During 2019, we also undertook a substantial outreach and
engagement exercise with both customers and colleagues,
which helped us to redefine our mission, vision and purpose
and re-articulate our values, in a way that is much more
customer and colleague focused.
REDEFINING OUR BRAND
Customer advocacy will also benefit from Equiniti having a
brand which resonates with our audience and represents us in
an authentic way. We are already doing well here, with Equiniti
having been awarded Superbrand status for the second year in
a row. However, to ensure we brand our business consistently
across our divisions and products, we are rolling out EQ as our
master brand, helping to reinforce our competitive advantage
in our markets.
OUTLOOK
The long-term growth drivers of our markets remain unchanged
which, combined with our strong position with our major
clients, underpin the resilience of our principal businesses in
the UK. We remain enthusiastic about the level of opportunities
in the US and look forward to reporting further progress in the
coming years.
Our interest income will be affected by reductions in central
bank rates partially offset by hedging and a reduction in interest
payables, therefore weighing on organic growth. Additionally,
the unpredictable spread of the Covid-19 virus introduces
further uncertainty to the current year, particularly from delays
in corporate decision-making and financial market volatility
affecting corporate activity. However the recurring nature
of much of our revenue and the diversity of our client base
provide valuable stability as the wider economy reacts to its
inevitable effects.
Our medium-term guidance remains as follows: organic
revenue growth of 3 – 7% per annum supplemented by
capability-enhancing acquisitions, with 2020 organic growth
comparable to 2019 held back by interest rates; gradual margin
improvement of c25 bps per annum; progressive dividend
policy which targets distributing c30% underlying profit
attributable to ordinary shareholders; cash tax rate of c15%
for 2020 and c17% thereafter; average cash conversion of
c95%; capital expenditure of 6 – 7% of revenue; and net debt/
underlying EBITDA ratio of 2.0 – 2.5x post-IFRS 16.
Guy Wakeley
Chief Executive
12 March 2020
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OPERATIONAL REVIEW
Investment Solutions
MARKET
Companies joining the stock market are an important source
of new business for our share registration and share plans
businesses. While political uncertainty did have an impact on
IPO activity towards the end of 2019, the volume of IPO capital
raised in London in the first nine months of the year was slightly
up on the same period in 2018 and London remained the
leading venue for cross-border IPOs. Similarly, the first half of
the year saw a robust level of corporate actions, although this
slowed in the second half. Businesses served by competitors
continued to seek new registration and share plan providers
during 2019, maintaining a positive trend for Equiniti. A number
of factors can encourage a client to switch providers, including
the desire to move to a single supplier for both registration
and share plans, or the need for technology-led solutions
that are backed by a strong support function. Consolidation
continued to be a feature of the share plans market in 2019
and this can contribute to companies looking to switch, while
acquirers integrate their purchases. More generally, companies
remain interested in using equity-based rewards to engage and
motivate their employees, creating demand for share
plan services.
In the retail share dealing market, there has been active
consolidation. While some participants have withdrawn from
the market, there are new entrants offering self-service trading
capabilities to customers. Owning a platform is advantageous
for product development and the pace of execution, while
quality of service and a strong web portal are essential in a
competitive marketplace. Consolidation of personal pension
plans into SIPP wrappers has been a notable area of growth in
the retail market.
PERFORMANCE
Investment Solutions had a solid year, with a 5.1% increase in
revenue to £149.7m (2018: £142.5m), including organic revenue
growth of 3.7%. The acquisition of RD:IR in September 2019
contributed to reported growth. Growth was primarily driven by
strong growth in registration and share plan services. Corporate
action revenue was lower at £11.6m (2018: £18.8m), reflecting
the uncertain economic environment in the second half of
the year.
Underlying EBITDA increased by 3.5% to £50.2m (2018:
£48.5m) driven by strong growth in share plans, with a margin
decline of 0.5% to 33.5% (2018: 34.0%) due to weaker higher-
margin corporate activity.
The share registration business performed well. Key renewals
in the year included Associated British Foods, Centrica, Draper
Esprit, Ferguson, Fresnillo, Iberdrola, Melrose and RSA Group.
The division also made further progress with competitor
wins and was either appointed or transferred registers for
clients including AFI Development, Deltex Medical, Marshall
of Cambridge, Morgan Advanced Materials, National Grid,
Petrofac, Vitec Group and WM Morrison. National Grid, which
transferred to Equiniti in April 2019, was the largest corporate
to change provider in the last decade, with c850k shareholders
on the register.
We were also successful in winning IPOs with new mandates
including Cameron Investors Trust, Distribution Finance Capital,
DWF, Essensys, Induction Healthcare, Trainline and Watches of
Switzerland.
Equiniti supported a number of significant corporate actions
during the year, including the conclusion of the Takeda/Shire
transaction, a rights issue on behalf of Marks & Spencer, the
demerger of M&G from Prudential (and appointment to provide
M&G with ongoing share registration and share plan services),
the Takeaway.com acquisition of Just Eat, Metro Bank’s non-
pre-emptive cash placing and the acquisition of RPC Group by
Berry Global International.
Our share plans services had an excellent year and cemented
its position as the leading provider in the UK market. Wins or
transfers in 2019 included AstraZeneca, Cobham, Compass,
DWF, Morgan Advanced Materials, National Grid, Next,
Rentokil Initial, Santander, TheWorks.co.uk, Trainline and WM
Morrison, and the launch of a global share plan for Dixons
Carphone. Renewals of existing mandates included BT,
Centrica and Scottish Power.
The division is benefiting from its capability enhancing
acquisitions. Boudicca Proxy, acquired in April 2018, is
performing strongly and continues to cross-sell into the
registration clients. It is also winning new business, including
clients in Europe. In September 2019, we completed the
acquisition of RD:IR, which offers a range of investor relations
services and has a proprietary investor analytics platform.
Boudicca and RD:IR, together with our Prism company
secretariat offering, give us a broad offering in the governance
market, supporting clients with shareholder identification and
proxy solicitation, and provide scope for expansion in European
markets as well as in the UK.
Investment Solutions continues to introduce new services and
to digitise existing services, generating both cost savings and
environmental benefits.
22
OPERATIONAL REVIEW
Revenue
£149.7m
Underlying EBITDA
£50.2m
Underlying EBITDA margin
33.5%
For example, the division serves approximately 1.2 million
participants of Dividend Re-Investment Plans. Digitising
quarterly statements has saved in excess of one million hard
copy statements from being mailed which is in addition to
the 12 million hard copy statements already saved annually
following the introduction of digital nominee statements
in 2018. The division also rolled out a new front end for
its executive share plan portal, which has been very well
received in the marketplace and has been a key reason
for new business wins. Another new service in the year
was a custodial solution for selling shareholders in IPOs.
In addition, Investment Solutions has successfully cross-
sold the new EQ Insider platform, developed by Intelligent
Solutions, to a number of its share registration clients.
Equiniti’s execution-only brokerage service delivered solid
profit growth despite the reduction in trading volumes as a
result of the uncertain equity market trading conditions as it
focused on investing in its own propositions and continues to
withdraw from offering back office solutions to third parties.
It introduced a flexible ISA product during the year and will
launch a lifetime ISA in Q1 2020. The business has also been
investing in its proprietary platform and in early 2020, the
business launched its new consumer brand, EQi. A refreshed
web presence using the EQi brand has improved functionality
and a smoother customer journey. In addition, the business has
expanded its offering for trading certificated shares. This was
previously only available for shares in companies where Equiniti
was the registrar and has now been opened up to any UK share.
Our international payments business, EQ Global, won
a notable contract with Lloyds Bank, demonstrating the
potential to win work with larger organisations than its
traditional SME and mid-sized corporate client base. Adding
capability to allow the business to transact any payment
and become platform agnostic will support the ability to
acquire major clients. In addition, the business announced
that it has partnered with SWIFT, the global provider of
secure financial messaging services. The collaboration,
which sees EQ Global join SWIFT Alliance, will deliver clients
a suite of products and services that include the widest
and most cost-effective range of payment methods.
Equiniti’s bereavement service continues to gain momentum,
with the majority of the UK’s largest banks now signed
up to the ‘tell us once’ service. The offering has received
positive media coverage and will continue to grow,
with new value-added services being developed.
Wins or transfers in 2019 included:
IPOS:
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OPERATIONAL REVIEW
Intelligent Solutions
MARKET
Intelligent Solutions has four areas of operation – rectification
and remediation, credit services, know your customer (KYC)
and data analytics. Strong underlying trends continue to drive
growth across all four areas.
In rectification and remediation, the deadline for consumers
to make claims in relation to mis-sold payment protection
insurance (PPI) passed in August 2019. However, with the large
backlog of claims, PPI will continue to generate work in H1
2020. In the meantime, new opportunities are opening up in
other sectors including pensions, utilities and motor finance.
An important driver in this market is the need for clients
to automate their processes, to reduce costs and increase
efficiency. This favours providers such as Equiniti, who can offer
an end-to-end service comprising both technology and people.
Demand for credit services is linked to the ongoing expansion
of consumer debt, which, whilst slowing in pace, is still
expected to increase by 3.4% over 2019 as a whole, according
to the latest research from the Finance and Leasing Association.
There was £225bn in outstanding consumer credit debt
(excluding mortgages) as of the end of Q3 2019 as reported by
the Bank of England (£1,660bn including mortgages). Lenders
of all types need to increase automation and efficiency to
maintain their profitability in the face of an ongoing squeeze
on their net interest margins. Equiniti’s technology helps
established lenders to defend their market share against new
entrants, who often have strong technology platforms of
their own.
The KYC market is driven by regulation. This requires numerous
organisations, from banks and financial services to solicitors
and accounting firms, to understand who they are doing
business with and to prevent money laundering. Globally, the
UN estimates that money laundering is between 2% and 5%
of GDP. Regulators are dealing with the issue by introducing
increasingly stringent new rules. This is pushing organisations
to adopt technology solutions to help them manage KYC issues
effectively and efficiently.
In order to grow their top line, companies increasingly need
specialist support to extract insights on existing and potential
customers from vast quantities of data. The introduction of
the General Data Protection Regulation has also increased the
focus on using third-party data and analytics. Other important
drivers of the data analytics market include cyber security and
asset reunification where individuals are reconnected with lost
assets such as pensions or savings accounts.
V
WINNER
engage19
EME A CUSTOMER
ANNUAL AWARDS
V E R I N T
Digital Engagement Award
Equiniti
EQ Global wins Payments Provider Award at The Rewards 2019.
Winner of Digital Engagement Award at the Verint EMEA Annual Customer Awards.
Equiniti Credit Services win the ‘Technology Partner of the Year’ at the Consumer Credit Awards.
Equiniti Credit Services wins ‘Fintech Initiative of the Year’ at the Yorkshire Financial Awards.
24
Revenue
£170.9m
Underlying EBITDA
£43.5m
Underlying EBITDA margin
25.5%
OPERATIONAL REVIEW
PERFORMANCE
Intelligent Solutions delivered modest growth despite a delay in
the commissioning of new projects over the UK election period.
Revenue increased by 3.0% to £170.9m (2018: £165.9m), with
underlying EBITDA up 5.8% to £43.5m (2018: £41.1m), to give
a margin of 25.5% (2018: 24.8%).
Remediation services remained a primary driver of the division’s
growth, with numerous large-scale remediation and fulfilment
projects with major UK banks. Other wins included a review of
store card fees and charges on behalf of a large retailer and a
re-review of closed complaints on behalf of a large automotive
services provider. The division also deployed its complaints
management system internationally for the first time, on behalf
of HSBC. This creates further opportunity for more business in
other English-speaking countries, particularly the US.
Credit services had a very good year with significant software
license sales. This included contracts with Bamboo Finance
Credit Servicing, DXC, Lloyds Banking Group, MBNA, MYJAR
Loans and Yorkshire Building Society. There was further traction
with our risk analytics platform as we continued to cross-sell
this technology into our US client base.
KYC continued to provide services to existing clients and won
its first client in Germany, Roland Berger. Although growth
in this service line was impacted by the completion of a
large project in the period, Intelligent Solutions sees further
opportunities for Northern European expansion in the
KYC market.
During the year, Intelligent Solutions launched the EQ Insider
platform as part of its data services offering. This technology
enables clients to administer Persons Discharging Managerial
Responsibilities dealing, and has now been cross-sold to
J Sainsbury and a number of other share registration clients.
The division also launched an employee verification tool,
Checksafe, during the year. Other investments included
enabling some of its platforms to be offered as software-
as-a-service. This will result in a shorter sales cycle, faster
deployment and increased revenue visibility.
In order to continue to enhance its efficiency and effectiveness,
Intelligent Solutions is actively looking to increase its use of
the Group’s nearshore and offshore centres. For example, it is
already developing software in Krakow. The division has also
carried out a thorough people review, to ensure resilience
through succession planning.
In the final quarter of the year, the division was restructured to
be market-led rather than product-led and the technology and
other support functions were integrated into the wider Group
functions. This allows the leadership to focus better on cross-
selling opportunities that our wider geographic footprint
now offers.
in Krakow, Poland
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license sales include:
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OPERATIONAL REVIEW
Pension Solutions
MARKET
The UK pensions market continued to be challenging in 2019.
Private sector clients were cautious about procurement, in part
because ongoing consolidation in the market, particularly at the
large-scale end, has made it more difficult for clients to run a
competitive tendering process. In the public sector, a landmark
court ruling known as the McCloud judgement stated that
changes made to firefighters’ and judges’ pension schemes in
2015 were age discriminatory. The ruling applies to all the main
public service pension schemes and has resulted in a hiatus
in both procurement and project work while the situation is
resolved. However, it should also create material medium-term
remediation opportunities for Pension Solutions.
Despite the challenging environment, there remain long-term
drivers of demand for Pension Solutions services. Companies
continue to look to de-risk their pension fund liabilities through
buy-in and buy-out transactions in the bulk purchase annuity
market, with the volume of transactions rising again in 2019.
This creates opportunities to support the insurance companies
who initiate those transactions, both during the transfer and
with ongoing software and administration. In addition, new
consolidators are entering the market to provide an alternative
de-risking approach for schemes that lack the capital for a
buy-in or buy-out. These also create opportunities to sell
technology and administration support. Similarly, there
is consolidation of legacy life insurance books by asset
accumulators, who look to external providers such as
Equiniti for administration and software services.
Technological solutions have an important role in delivering
improved outcomes for scheme members. Pressure from
scheme members for better functionality is increasingly leading
to clients requiring their providers to offer enriched self-service
and a better member experience.
The Department for Work and Pensions estimates that people
change employment up to 11 times in their lifetime which
can result in multiple pension pots with different employers.
To help people keep track of their pensions and reunite them
with forgotten schemes, online pensions dashboards are being
introduced with a pilot version being developed in early 2020.
This creates a pressing need for pension schemes to address
the quality of their data, to ensure they can provide accurate
information to scheme members. This will create opportunities
for providers with technology and data handling capabilities.
Innovation in the retirement products market is ongoing,
creating opportunities for service providers to administer legacy
products. New approaches are also required to support people
with defined contribution schemes who are drawing down their
pension pot, to help them understand their options and how
much they can withdraw, which will drive innovation in the way
services are provided.
PERFORMANCE
Revenue for Pension Solutions was £127.0m (2018: £129.0m),
a decline of 1.6%, with underlying EBITDA down 12.6% to
£19.5m (2018: £22.3m), representing a margin of 15.4% (2018:
17.3%). The decline was due to restructuring costs, the full-
year impact of the change in scope of the NHS contract, which
took effect in 2018, the expected price reduction relating to
the MyCSP contract, and a reduction in and delays to project
work. Action taken during the year has stabilised the division’s
revenue performance and, together with new client wins,
positions it for modest recovery during 2020.
During the year, Pension Solutions successfully renewed or
extended relationships with clients including Aon Hewit, Aviva,
Bank of England, Fidelity, HP, Leeds Building Society, Lloyds
Banking Group, MetLife, North West Anglia NHS Foundation
Trust, Royal Papworth Hospital, Sensata, TSB and UNUM.
However, the division did not renew its contract with GSK,
which will come to an end in April 2020.
The division also secured a number of new clients, in particular
as a result of the 2018 acquisition of Aquila, a UK-based life
and pensions’ technology provider. The business has generated
multiple sales of its Administrator platform, contributing to
market share gains. Significant Administrator wins included
a 10-year contract to provide outsourced administration to
an international reinsurance company, a software licence sale
to The Sovereign Group and a large calculation automation
project with Diligenta. In addition, the division secured an
outsourced administration contract and a significant license
sale on its EQ Compendia platform. The division also secured
several new contracts to provide flexible benefits and payroll
services through its HR Solutions business.
Pension Solutions actively managed its cost base in 2019 with
initiatives including the further integration of MyCSP and Aquila
into the wider Pension Solutions business. Pension Solutions
has also continued to rationalise its property footprint,
consolidating Aquila’s team into Equiniti’s Crawley office and
downsizing the Bristol operation.
During 2019, the division introduced the latest automation
technology for two clients won in 2018, giving it a benchmark
to provide similar automation for other clients. It has also
invested to deploy existing technology to more clients. In
particular, Pension Solutions has deployed its market-leading
self-service capability to several pension schemes, as part of its
commitment to evolve its service. It has also strengthened its
technology development and testing capabilities in Chennai
and in the new Krakow centre.
The MyCSP contract was due to run until the end of 2021. As
a result of the McCloud judgement, the re-procurement process
has been put on hold and Pension Solutions is in discussions
on a multi-year contract extension. Any remedy to the
discrimination identified in the McCloud judgement is likely to
require significant rectification work, which Pension Solutions
is well placed to support.
26
OPERATIONAL REVIEW
Revenue
£127.0m
Underlying EBITDA
£19.5m
Underlying EBITDA margin
15.4%
MyCSP wins Best Corporate Storyteller 2019, Best Use Of
Content With An Existing External Community and Best
Copy Style Or Tone Of Voice.
MyCSP wins silver award for Best Ongoing Commitment
to Internal Communications.
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OPERATIONAL REVIEW
EQ US
MARKET
The US shareholder services industry is mature and highly
concentrated. The top three players hold around 90% of the
market, with clients focused on transfer agent providers who
deliver superior service. As the number three player by number
of issuers served, EQ US has an opportunity to grow by taking
market share.
The division retained all of its major clients in 2019, with key
renewals including Apollo, Comcast, CTS, Hewlett Packard,
Otelco, Procter & Gamble, Wabtec and Zinpro. New client
wins included Change Healthcare, Cincinnati Financial, Listo
Solutions and Sprout Social. The division also supported clients
including Occidental Petroleum, Smith & Nephew, Bristol Myers
and CBS Corporation in large corporate actions.
The opportunities for EQ US to take market share fall into
two categories. First, it can target a wider range of clients.
Having completed the separation from Wells Fargo it is now
able to target banking and financial services clients which were
previously unavailable to it, and work for clients of all sizes,
rather than focusing on only the largest shareholder bases.
Second, EQ US can now offer a broader range of services to
existing and prospective clients. North American companies
are looking for their service providers to solve more of
their issues by offering an expanded range of products and
capabilities, allowing companies to work with fewer vendors.
However, the industry has underinvested in both technology
and range of product offerings in recent years, creating
opportunities for EQ US to draw on numerous capabilities
developed in the UK and offer those capabilities to US clients.
Along with the movement of UK developed products and
services to the US, EQ US launched four new products in 2019,
equity compensation, proxy, asset reunification and private
M&A services.
PERFORMANCE
The acquisition of EQ US completed on 1 February 2018
and its results were consolidated into the Group from that
date. The 2018 comparator period is therefore from 1 February
to 31 December 2018.
EQ US had a highly successful year, with revenue increasing
by 15.5% to £94.0m (2018: £81.4m), and includes £11.0m
from a full year of earnings and FX impact. Organic growth at
constant foreign exchange rates was 2.7%, driven by strong
growth in interest income and new product launches. Corporate
action revenue declined by 11.4% to £10.9m, (2018: £12.3m).
Notwithstanding the interest rate cuts in the second half of
the year, revenue from interest income increased by 37.8% to
£12.4m (2018: £9.0m) on average client balances of £534m
(2018: £453m).
Underlying EBITDA increased by 13.8% to £23.1m (2018:
£20.3m), representing a margin of 24.6% (2018: 24.9%).
This reflected strong revenue growth, an increase in interest
income, the stable client base and good cost discipline, offset
by continued investment for growth, interest rate cuts and
a lower level of corporate activity.
The separation of the business from Wells Fargo completed in
May 2019 and the division is now focused on innovation and
launching Equiniti’s technology capabilities. For example, the
new shareholder and issuer portals offer a much-enhanced
digital customer experience, with simplified journeys and
improved functionality, and are designed to be mobile first.
The division has also launched EQ Unified, an asset reunification
and tracing platform, and will follow it with an enhanced asset
location service. In 2020, EQ US will introduce a new portal
designed and built by our UK Intelligent Solutions division
to service private M&A transactions.
New products introduced to the client base have seen real
success. EQ US launched four new products in 2019 and those
products have been sold into 70 clients, 29 of which were new
client wins. The business has also recruited industry experts
to support both its proxy, asset reunification and equity
compensation businesses. The equity compensation business
launched in the year has also sold to clients including Dorman
Products and Johnson Outdoors. As well as offering equity
compensation services for US corporates, the business has
won work with UK-listed companies who want to offer a
sharesave-style plan to their US employees. Notable wins
here included BT.
In November 2019, EQ US acquired Corporate Stock Transfer,
Inc. (CST), a US transfer agent based in Denver, Colorado.
CST was founded in 1985 and acts primarily for domestic and
international micro-cap companies, which are those with market
capitalisations between $50m and $300m. CST offers a wide
range of services including record keeping, escrow, annual
meeting and paying agent services and maintains records
for over 700 clients. CST’s existing clients will benefit from
access to EQ US’s broad range of products. The acquisition
offers important benefits for EQ US. It expands the division’s
addressable market by opening up a new growth area in the
micro-cap client space.
The synergies outlined in Equiniti’s acquisition case for EQ
US are on track for delivery in their entirety. EQ US achieved
its planned synergies of $5m in 2019, with the full $10m per
annum set to be delivered in 2020. Cost savings are being
delivered from depositary insurance, IT, operations and back
office services, including the use of the Group’s second offshore
captive in Bangalore, its nearshore centre in Krakow and the
mobilisation of EQ US’s second centre in Milwaukee.
28
OPERATIONAL REVIEW
EQ US retained all of its major clients
in 2019
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Revenue
£94.0m
Underlying EBITDA
£23.1m
Underlying EBITDA margin
24.6%
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FINANCIAL REVIEW
Revenue grew by
4.7% to £555.7m
Underlying EBITDA increased by
5.0% to £136.0m
Profit after tax increased to
£32.4m
JOHN STIER, CHIEF FINANCIAL OFFICER
OVERVIEW
Revenue grew by 4.7% to £555.7m (2018: £530.9m) and
includes a full year of EQ US, with organic revenue growth
of 1.4%. Underlying EBITDA increased by 5.0% to £136.0m
(2018: £129.5m). We were pleased with this level of growth
as the operating environment presented us with a number of
significant challenges, particularly in the second half of the year.
Those challenges and impact on revenue can be summarised
as follows:
• a global slowdown in corporate activity impacting both
Investment Solutions and EQ US (£8m);
• US interest rate cuts (£3m);
ANALYSIS OF RESULTS
£m
Revenue
Underlying EBITDA
Depreciation
Amortisation – software
Amortisation – acquired
intangibles
• a reduction in trading volumes in our execution-only
brokerage service as a result of the uncertain equity market
trading conditions (£3m);
EBIT prior to non-operating charges
Non-operating charges
• an expected price reduction relating to the MyCSP contract
EBIT
in Pension Solutions (£2m); and
2019
2018
555.7
136.0
(12.9)
(29.9)
(31.8)
61.4
(5.5)
55.9
(16.1)
39.8
(7.4)
32.4
(1.6)
30.8
8.4
18.1
530.9
129.5
(12.0)
(23.9)
(31.7)
61.9
(20.8)
41.1
(16.8)
24.3
(3.9)
20.4
(3.2)
17.2
4.6
17.8
Net finance costs
Profit before income tax
Taxation
Profit from continuing operations
Non-controlling interests
Profit attributable to ordinary
shareholders
Earnings per share (pence)
Diluted
Underlying diluted
REVENUE
Revenue increased by 4.7% to £555.7m (2018: £530.9m) during
the year whilst organic revenue growth was 1.4%. Acquisitions
made in the period have progressed well, contributing to
growth.
• Intelligent Solutions performing below its recent trend
suppressed by the delay in commissioning of new projects
over the UK election period.
Profit after tax increased by 58.8% to £32.4m (2018: £20.4m)
with an increase in profit attributable to ordinary shareholders
of 79.1% to £30.8m (2018:17.2m) due to the significant
reduction in non-operating charges.
The Group generated a free cash flow attributable to equity
holders of £37.1m, and operating cash flow conversion of 91%,
with total cash generated from operations of £123.1m. Net
debt was £343.6m at 31 December 2018, representing a ratio
of 2.5x net debt to underlying EBITDA (31 December 2018: net
debt to underlying EBITDA of 2.7x).
RESULTS ANALYSIS AND USE OF ALTERNATIVE
PERFORMANCE MEASURES
Key items reported in the income statement such as revenue
and profit before tax are shown in the analysis of results.
In addition to this, alternative performance measures such as
underlying EBITDA (which excludes non-operating charges) are
also presented to allow a better understanding of the results
for the year. These measures are described further on pages
35 to 36.
30
FINANCIAL REVIEW
UNDERLYING EBITDA
Underlying EBITDA is a key measure of the Group’s
performance. It reflects profit before finance costs, taxation,
depreciation and amortisation, and non-operating charges.
Underlying EBITDA which excluded the final non-operating
charges of £5.5m relating to the integration of EQ US,
increased by 5.0% to £136.0m (2018: £129.5m).
ORGANIC REVENUE GROWTH
Organic revenue growth is reported revenue growth adjusted
for acquisitions and changes to foreign exchange rates to
compare growth on a like-for-like basis. Here we adjust 2018
for the prior period acquisitions had they been owned in 2018
to create a like-for-like comparison of year-on-year progress.
This is calculated as follows:
REPORTABLE SEGMENTS
The Group reports its results in five segments: Investment
Solutions, Intelligent Solutions, Pension Solutions, EQ US and
Interest Income, supported by central functions. The Board
monitors the performance of the five segments through
revenue and underlying EBITDA.
The results of these segments were as follows:
Reported
Change
%
Organic
Change
%
2019
2018
3.7
3.0
(5.5)
16.5
1.1
2.7
1.4
Revenue (£m)
Investment Solutions
149.7
142.5
Intelligent Solutions
170.9
165.9
Pension Solutions
127.0
129.0
Interest Income
14.1
12.1
Total UK & Europe
461.7
449.5
EQ US
94.0
81.4
Group Revenue
555.7
530.9
Underlying EBITDA (£m)
Investment Solutions
Intelligent Solutions
Pension Solutions
Interest Income
50.2
43.5
19.5
14.1
48.5
41.1
22.3
12.1
Total UK & Europe
127.3
124.0
EQ US
23.1
20.3
Divisional Total
150.4
144.3
Central Costs
(14.4)
(14.8)
Group Underlying
EBITDA
136.0
129.5
5.1
3.0
(1.6)
16.5
2.7
15.5
4.7
3.5
5.8
(12.6)
16.5
2.7
13.8
4.2
(2.7)
5.0
Reported change % is at actual foreign exchange rates. Organic change %
is at constant foreign exchange rates.
Reported revenue change at constant foreign exchange rates is 4.0% and
underlying EBITDA is 4.5%.
EQ US reported revenue change at constant foreign exchange rates is 11.0%
and underlying EBITDA is 10.5%.
The acquisition of EQ US completed on 1 February 2018 and results were
consolidated into the Group from that date. Prior period performance is from
1 February 2018 to 31 December 2018.
Revenue (£m)
Investment Solutions
Intelligent Solutions
Pension Solutions
Interest Income
Total UK & Europe
EQ US*
Equiniti Group
2018
Reported
2018
Adjustment
2018
Organic
142.5
165.9
129.0
12.1
449.5
81.4
530.9
1.81
–
5.42
–
7.2
10.13
17.3
144.3
165.9
134.4
12.1
456.7
91.5
548.2
1 Acquisition of Boudicca Proxy and RD:IR.
² Acquisition of Aquila.
³ Acquisition of Wells Fargo Shareowner Services and Corporate Stock Transfer.
* EQ US is translated at 2019 constant exchange rates to provide like-for-like
comparison.
Investment Solutions
Revenue increased by 5.1% to £149.7m with organic revenue
growth of 3.7%. The acquisition of RD:IR in September 2019
contributed to reported growth. Growth was primarily driven by
strong growth in registration and share plan services. Corporate
action revenue was lower at £11.6m (2018: £18.8m), reflecting
the uncertain economic environment in the second half of
the year.
Underlying EBITDA increased by 3.5% to £50.2m driven by
strong growth in share plans with a margin decline of 0.5%
due to weaker higher margin corporate activity.
Intelligent Solutions
Revenue increased by 3.0% to £170.9m whilst underlying
EBITDA increased by 5.8% to £43.5m with growth driven by
remediation services and software sales in credit services offset
by a delay in the commissioning of new projects over the UK
election period.
Pension Solutions
Revenue declined by 1.6% to £127.0m with a decrease in
underlying EBITDA of 12.6% to £19.5m representing a margin
of 15.4% (2018: 17.3%). The decline was due to restructuring
costs, the full-year impact of the change in scope of the
NHS contract which took effect in 2018, the expected price
reduction relating to the MyCSP contract, and a reduction in
and delays to project work.
Interest Income
Interest income was 16.5% higher than the prior year on
average cash balances of £1.7bn (2018: £1.7bn), as the Group
benefitted from the increased yield across the accounts which
includes the full year effect of the 25bps interest rate rise in
August 2018.
The interest receivable is partially fixed with instruments
secured to July 2020 (£380m), September 2021 (£215m),
September 2022 (£215m) and September 2023 (£215m).
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FINANCIAL REVIEW
EQ US
Revenue increased by 15.5% to £94.0m and included £11.0m
from a full year of earnings and FX impact. Organic growth at
constant foreign exchange rates was 2.7%, driven by strong
growth in interest income and new product launches. Corporate
action revenue declined by 11.4% to £10.9m (2018: £12.3m).
Notwithstanding the interest rate cuts in the second half of
the year, revenue from interest income increased by 37.8% to
£12.4m on average client balances of £534m (2018: £453m).
Underlying EBITDA increased by 13.8% to £23.1m reflecting
strong revenue growth, an increase in interest income, the
stable client base and good cost discipline, offset by a lower
level of corporate activity and interest rates cuts throughout the
second half of 2019.
Central Costs
Central costs in the period declined by 2.7% to £14.4m (2018:
£14.8m) as the Group aims to keep these costs broadly flat
over time.
EARNINGS BEFORE INTEREST AND TAX (EBIT)
£m
Revenue
Underlying EBITDA
Depreciation
Amortisation – software
Amortisation – acquired
intangibles
EBIT prior to non-operating
charges
Non-operating charges
EBIT
2019
555.7
136.0
(12.9)
(29.9)
(31.8)
61.4
(5.5)
55.9
2018
530.9
129.5
(12.0)
(23.9)
(31.7)
61.9
(20.8)
41.1
EBIT remains an important measure of the Group’s
performance, reflecting profit before finance costs and
taxation. In 2019, EBIT was £55.9m, an increase of £14.8m
(36.0%) compared with the prior year of £41.1m.
AMORTISATION OF SOFTWARE AND ACQUIRED
INTANGIBLES
Amortisation of software in the period increased to £29.9m
(2018: £23.9m) due to the completion of the development
of a number of significant projects, such as investment in the
US and MiFID II, where the work completed in 2018 and the
assets became available to use with amortisation of the assets
commencing.
Amortisation of acquired intangibles in the period was flat
at £31.8m (2018: £31.7m).
NON-OPERATING CHARGES
Non-operating charges are defined as expense items, which
if included, would otherwise obscure the understanding of
the underlying performance of the Group.
Non-operating charges of £5.5m (2018: £20.8m) relate to
the transaction and integration costs associated with the
acquisition of the US business. As the separation of the US
business completed in May 2019, there will be no further non-
operational charges absent any transformational transactions.
NET FINANCE COSTS
Group net finance costs decreased by £0.7m to £16.1m
(2018: £16.8m).
TAXATION
Profit before tax of £39.8m at the UK corporation tax rate of
19% gives an expected total tax charge of £7.6m. The actual
tax charge is £7.4m and the difference is largely explained by
a current tax benefit in respect of 2018, following claims to
accelerate tax relief on capitalised development costs.
Taxes paid in the period were £2.7m, of which £2.4m was
primarily due to UK payments on account. The remainder of the
taxes paid are overseas taxes relating to the Group’s operations
in India, the Netherlands and the US.
The Group also received £1.5m from HM Revenue & Customs
which represents a working capital benefit of the Group’s claim
to R&D expenditure credits.
The Group has recognised deferred tax on £767.1m of gross tax
attributes representing future tax deductions which will reduce
the cash effective tax rate as compared to the underlying
effective tax rate over time. Net future deductions are expected
to be in the region of £128.5m, on which a net deferred tax
asset of £20.3m has been recognised at the relevant local
statutory rate.
The gross tax attributes totalling £767.1m are represented by:
• Future tax deductions on tax losses carried forward £200.7m
• Future tax deductions on intangible assets £479.7m
• Future tax deductions on property, plant and equipment
£28.3m
• Future tax deductions on employee benefits and other timing
differences £58.4m
The tax impact of these attributes is recognised as deferred
tax on the statement of financial position. Included within the
intangible assets tax attribute are the customer relationship
and goodwill intangibles related to the acquisition of the trade
and assets of the EQ US from 1 February 2018. The future tax
deductions on employee benefits and other timing differences
has increased in the period due to the adoption of IFRS 16,
effective from 1 January 2019.
A cash effective tax rate of 12% applies for 2019 and is
estimated to be in the region of c15% for 2020 rising to c17%
thereafter, reflecting the completion of the integration, and
forecast growth, of EQ US. The cash tax rate is determined
through a detailed calculation, estimating the future expected
cash tax liabilities of the Group against our profit forecasts,
adjusting for known variables such as changes in tax rates,
changes in tax legislation and full implementation of the Group
transfer pricing policy.
We consider the underlying cash effective tax rate to be
an appropriate measure, as it best reflects the anticipated
economic outflows from the business, taking into account our
assessment of how our deferred tax attributes will unwind and
reduce our cash tax liabilities over time.
32
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FINANCIAL REVIEW
32
PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
The Group made a profit attributable to ordinary shareholders
of £30.8m (2018: £17.2m).
DILUTED EARNINGS PER SHARE
Profit attributable to ordinary
shareholders (£m)
Diluted weighted average number
of shares (m)
2019
30.8
2018
17.2
368.3
360.8
Diluted earnings per share (pence)
Underlying earnings per share (pence)
8.4
18.1
4.6
17.8
Diluted earnings per share of 8.4 pence (2018: 4.6 pence)
is based on the diluted weighted average number of shares
totalling 368.3m (2018: 371.8m).
Underlying earnings per share increased by 1.7% to 18.1 pence
compared to the prior period of 17.8 pence, suppressed by
higher amortisation of software costs and a higher share count
versus the prior period.
DIVIDEND
The recommended final dividend payable in respect of the year
ended 31 December 2019 is 3.54 pence per share, giving a
total dividend for the year of 5.49 pence per share representing
full year dividend growth of 3.2%, in line with our progressive
dividend policy.
CASH FLOW
The Group generated a free cash flow attributable to
equity holders of £37.1m (2018: £38.6m) and delivered an
operating cash flow conversion of 91% (2018: 102%). The
main movements in cash flow are summarised below:
The Group has access to a £20.0m receivables financing
facility of which £8.0m (2018: £10.3m) was utilised at the end
of the year and included within cash balances. This is used to
match receipts against costs, especially where clients require
extended payment terms and is driven by project flow in
Intelligent Solutions. The facility, which affords the Group credit
protection, is with Lloyds Banking Group at a rate of 1.75%
over LIBOR. The facility draw down has reduced by 22.3% since
31 December 2018 and is forecast to reduce further subject to
commercial requirements.
OPERATING CASH FLOW CONVERSION
Operating cash flow is underlying EBITDA plus the change
in working capital, both prior to non-operating charges, as a
percentage of underlying EBITDA, and is a key performance
indicator. The Group delivered operating cash flow conversion
of 91% with strong cash flow in H2 offset by the end of the
beneficial US TSA arrangements and a further reduction of
the receivables financing facility from £10.3m in 2018 to
£8.0m in 2019.
CAPITAL EXPENDITURE
Net expenditure on tangible and intangible assets was £48.5m
(2018: £39.8m). This represents 8.7% of revenue (2018: 7.5%).
Included within capital expenditure is £7.0m associated with the
establishment and integration of EQ US relating to IT servers
and software development to enable the business to operate
on a standalone basis. Excluding the US, capital expenditure
was 7.5% of revenue, slightly higher than our 6 – 7% guidance,
as a result of new office openings (Bangalore, Milwaukee and
Krakow) and a high level of IT projects being progressed such
as introducing Workday to the Group for all HR and finance
reporting, and investing in new portals and asset tracing
services in the USA. Going forward, we expect capex to
revert to our mid-term guidance.
£m
Underlying EBITDA
Working capital movement
Operating cash flow prior to non-operating
charges
2019
2018
136.0
129.5
(12.9)
2.3
123.1
131.8
FREE CASH FLOW TO EQUITY HOLDERS
The Group generated a free cash flow attributable to equity
holders of £37.1m (2018: £38.6m) with significant growth in the
second half reflecting completion of the separation of our US
business in May 2019.
NET INTEREST COSTS
Net interest costs paid in the period were higher at £16.9m
(2018: £10.3m) mainly due to fees paid relating to refinancing
of the Group’s Senior Debt Facilities.
INVESTMENT IN CURRENT AND PRIOR YEAR
ACQUISITIONS
Net cash outflow on current and prior year acquisitions was
£3.3m (2018: £177.6m). A further £8.2m (2018: £4.0m) was
spent on deferred consideration for prior year acquisitions.
Details of acquisitions are given in note 4 on pages 153 to 154.
Operating cash flow conversion
91% 102%
Cash outflow on non-operating charges
Capital expenditure
Net interest costs
Taxes paid
(11.0)
(48.5)
(16.9)
(2.7)
(17.6)
(39.8)
(10.3)
(4.5)
Employee benefit trust (EBT) – share purchase
–
(13.9)
Finance lease liabilities
Free cash flow attributable to equity holders
(6.9)
37.1
(7.1)
38.6
Net (reduction)/increase in borrowings
(21.4)
139.3
Net costs arising from rights issue
Investment in current and prior year
acquisitions
–
(0.8)
(3.3)
(177.6)
Payments relating to prior year acquisitions
(8.2)
(4.0)
Dividends paid (including payment to
non-controlling interest)
(21.9)
(20.2)
Net cash movement
(17.7)
(24.7)
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FINANCIAL REVIEW
BANK BORROWING AND FINANCIAL COVENANTS
£m
Term loan
Revolving credit facility
Lease liabilities
Cash and cash
equivalents
Net debt
Net debt/underlying
EBITDA (times)
Reported
2019
Proforma
2018
Reported
2018
260.1
115.0
41.1
(72.6)
322.6
322.6
76.7
43.6
76.7
1.1
(90.9)
(90.9)
343.6
352.0
309.5
2.5
2.7
2.5
At the end of December 2019, net debt was lower at £343.6m
(2018: £352.0m). As the transition of EQ US is now complete,
we expect the business to continue its deleveraging profile and
guidance on leverage is 2.0 – 2.5x post-IFRS 16.
In July 2019, the Group refinanced its Senior Debt Facilities to
provide ongoing committed funding beyond the October 2020
maturity. The £520.0m term loan and revolving credit facility
has been extended to July 2024 with an initial margin of 150pts
and fees of £3.6m paid in July 2019. The Group has substantial
liquidity to support its growth ambitions and ongoing working
capital requirements.
ACQUISITIONS
During the year the Group completed two acquisitions.
On 5 September 2019, the Group purchased the entire issued
share capital of Richard Davies Investor Relations Limited
(RD:IR) for cash consideration of £4.0m, plus contingent
consideration of up to £2.0m payable in 2021. RD:IR offers a
wide range of investor relations related analysis, research and
advisory services to its international client base.
On 31 October 2019, the Group purchased the entire issued
share capital of Corporate Stock Transfer, Inc. (CST) for cash
consideration of £0.2m ($0.2m), plus deferred consideration
of £3.2m ($4.3m) payable in 2020 and contingent consideration
of up to £1.6m ($1.8m) payable in 2022. CST is a share registrar
business based in Colorado, United States.
POST BALANCE SHEET ITEM
In February 2020, the Group purchased the entire issued
share capital of Monidee B.V. (Monidee). Initial consideration
of £3.3m (€4.0m) was paid in February 2020 and deferred
consideration of £3.3m (€4.0m) is payable in February 2021.
Monidee is a highly complementary share plans business that
currently services more than 200,000 employees across 210
corporate clients in 50 countries. This acquisition will allow us
to answer current client demand and provides us with a leading
proprietary platform to attract new international clients.
RETIREMENT BENEFITS
The Group operates three defined benefit pension schemes,
which are all closed to new members. These are the Paymaster
Pension Scheme, the Equiniti ICS Limited Pension Scheme
and the Prudential Platinum Pension – MyCSP Limited Pension
Scheme.
The aggregate deficit across all three schemes is £31.7m
(2018: £22.9m) with a funding plan in place to clear these
deficits over the next eight years. The Group has closed all
schemes to future accrual, with the exception of one small
(six member) section of the Paymaster Scheme, as well as
consolidating its defined contribution pension plans into a
single provider.
The Group contributed £1.4m to the schemes during 2019.
These contributions represent deficit repair payments as laid
out by the schemes’ Schedule of Contributions. The Group’s
exposure to future service costs is not considered to be
significant since the schemes are closed to future accrual. The
current service cost for the three schemes was £0.1m in 2019.
CHANGES IN ACCOUNTING STANDARDS
IFRS 16 Leases
The Group has applied IFRS 16 for the year beginning 1 January
2019 and has adopted the modified retrospective approach,
which means that comparatives in the consolidated financial
statements have not been restated. To provide like-for-like
comparators for the prior period, comparatives throughout
this Strategic Report have been presented as if IFRS 16 had
applied throughout 2018.
John Stier
Chief Financial Officer
12 March 2020
34
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FINANCIAL REVIEW
ALTERNATIVE PERFORMANCE MEASURES
The Group uses alternative performance measures (APMs) to
provide additional information on the underlying performance
of the business. Management use these measures to monitor
performance on a monthly basis and the adjusted performance
measures enable better comparability between reporting
periods.
The APMs used to manage the Group are as follows:
ORGANIC REVENUE GROWTH
Organic revenue growth is reported revenue growth adjusted
for acquisitions and changes to FX rates to compare growth
on a like-for-like basis. Part of the Group’s strategy is to deliver
growth and develop and acquire new capabilities. As such, a
measure of like-for-like growth is a key performance indicator.
See page 31 for calculation.
EBITDA AND UNDERLYING EBITDA
EBITDA is considered to be the most suitable indicator to
explain the operating performance of the Group. The definition
of EBITDA is earnings before net financing interest costs,
income tax, depreciation of property, plant and equipment,
amortisation of software and amortisation of acquired
intangible assets.
Underlying EBITDA is used to explain the sustainable
operating performance of the Group and its respective
divisions, where EBITDA is adjusted for non-operating charges
which are defined as expense items, which if included in
EBITDA, would otherwise obscure the understanding of the
underlying performance of the Group. These items represent
material restructuring, integration and any costs that are
transformational in nature.
Reconciliation of profit before tax to
underlying EBITDA (£m)
2019
2018
Profit before tax
Plus: Depreciation
Plus: Amortisation of software
Plus: Amortisation of acquisition-
related intangible assets
Less: Finance income
Plus: Finance costs
EBITDA
Adjustment for non-operating
charges:
Plus: Transaction costs
Plus: Integration costs
Underlying EBITDA
39.8
12.9
29.9
31.8
–
16.1
130.5
24.3
12.0
23.9
31.7
(0.2)
17.0
108.7
0.3
5.2
6.1
14.7
136.0
129.5
Transaction costs of £0.3m relate to deal advisory and legal
fees which were contingent on successful completion of EQ US
which completed in February 2018. Integration costs of £5.2m
relate entirely to the US business and represent programme
delivery, the development of standalone functions and delivery
of systems and processes to run the business. Included within
this were £1.9m of costs in relation to permanent project staff,
which on completion of the integration project have been
absorbed into vacant positions, replaced contractors in the
business or otherwise left the Group. Post completion of the
US integration programme, there will be no further non-
operating charges, absent any transformational transactions.
UNDERLYING EBITDA MARGIN
Underlying EBITDA margin is underlying EBITDA as a
percentage of revenue. This is a key measure of Group
profitability and demonstrates the ability to improve efficiency,
as well as the quality of work won.
OPERATING CASH FLOW CONVERSION
Operating cash flow conversion represents underlying
EBITDA plus change in working capital as a percentage of
underlying EBITDA. This measures the Group’s cash generative
characteristics from its underlying operations and is used to
evaluate the Group’s management of working capital.
See page 33 for calculation.
FREE CASH FLOW ATTRIBUTABLE TO EQUITY
HOLDERS
Free cash flow attributable to equity holders represents
our cash flow prior to any acquisition, refinancing or share
capital cash flows. It is a key measure of cash earned for the
shareholders of the Group. See page 33 for calculation.
EARNINGS BEFORE INTEREST AND TAX (EBIT)
EBIT is used to measure the financial performance of the
Group excluding expenses that are determined by capital
structure and tax regulations, instead of the underlying trading.
In addition to this, net interest costs are impacted by fair
valuation re-measurements of certain financial liabilities that
are dependent on external market factors rather than the
Group’s core operations. See page 32 for calculation.
CASH TAX RATE
The cash tax rate is determined through a detailed calculation,
estimating the future expected cash tax liabilities of the Group
against our profit forecasts, adjusting for known variables
such as changes in tax rates, changes in tax legislation
(loss restriction rules) and implementation of the Group
transfer pricing policy. We consider the cash tax rate to be
an appropriate measure, as it best reflects the anticipated
economic outflows from the business, taking into account
our assessment of how our deferred tax attributes will
unwind and reduce our cash tax liabilities over time.
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ALTERNATIVE PERFORMANCE MEASURES
LEVERAGE AND NET DEBT
Leverage represents the ratio of net debt to underlying
EBITDA. This is a key measure that evaluates the Group’s capital
structure and its ability to meet financial covenants. See page
34 for calculation of net debt.
UNDERLYING PROFIT ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS
The Group has a progressive dividend policy which targets
distributing c30% of underlying profit attributable to ordinary
shareholders each year.
UNDERLYING EARNINGS PER SHARE
Underlying earnings per share represents underlying
EBITDA, less depreciation of property, plant and equipment,
amortisation of software, net interest costs, cash tax and
minority interests.
Reconciliation to underlying
earnings per share (£m)
Underlying EBITDA
Less: Depreciation
Less: Amortisation of software
Plus: Finance income
Less: Finance costs
Cash tax at 12%
Minority interest
Underlying profit attributable to
ordinary shareholders
Diluted weighted average number
of shares (m)
Underlying earnings per share
(pence)
2019
2018
136.0
129.5
(12.9)
(29.9)
–
(12.0)
(23.9)
0.2
(16.1)
(17.0)
(8.9)
(1.6)
(9.2)
(3.2)
66.6
64.4
368.3
360.8
18.1
17.8
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ALTERNATIVE PERFORMANCE MEASURES
2018 PROFORMA FINANCIAL STATEMENTS ON
A POST-IFRS 16 BASIS
The Group has applied IFRS 16 for the first time to the period beginning 1 January 2019 and has transitioned by adopting
the modified retrospective approach which does not require restatement of the comparatives. In order to provide like-for-like
comparators for the prior period, comparatives throughout this Strategic Report have been presented as if IFRS 16 had applied
throughout 2018. A reconciliation has been provided below.
CONSOLIDATED INCOME STATEMENT
£m
Total Revenue
Underlying EBITDA
Investment Solutions
Intelligent Solutions
Pension Solutions
Interest Income
Total UK & Europe
EQ US
Divisional Total
Central Costs
Total Underlying EBITDA
Reported
2018
IFRS 16
Impact
Proforma
2018
530.9
–
530.9
47.3
39.8
19.7
12.1
118.9
19.2
138.1
(15.8)
122.3
1.2
1.3
2.6
–
5.1
1.1
6.2
1.0
7.2
48.5
41.1
22.3
12.1
124.0
20.3
144.3
(14.8)
129.5
Total Underlying EBITDA margin
23.0%
1.4%
24.4%
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Depreciation
Amortisation – software
Amortisation – acquired intangibles
EBIT
Non-operating charges
Reported EBIT
Finance costs
Profit before Tax
Tax
Profit after Tax
Minority interest
Net Income
KEY MEASURES
EPS – reported (p)
EPS – underlying (p)
DPS (p)
Net debt (£m)
Leverage (x)
122.3
(6.0)
(23.9)
(31.7)
60.7
(20.8)
39.9
(15.3)
24.6
(3.9)
20.7
(3.2)
17.5
7.2
(6.0)
–
–
1.2
–
1.2
(1.5)
(0.3)
–
(0.3)
–
(0.3)
129.5
(12.0)
(23.9)
(31.7)
61.9
(20.8)
41.1
(16.8)
24.3
(3.9)
20.4
(3.2)
17.2
Reported
FY 2018
IFRS 16
Impact
Proforma
FY 2018
4.8
17.9
5.32
309.5
2.5
(0.05)
(0.10)
–
42.5
0.2
4.8
17.8
5.32
352.0
2.7
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2018 PROFORMA FINANCIAL STATEMENTS ON
A POST-IFRS 16 BASIS
CONSOLIDATED STATEMENT OF CASH FLOWS
£m
Profit before income tax
Adjustments for:
Depreciation
Amortisation of software
Amortisation of acquisition-related intangibles
Finance income
Finance costs
Share-based payments expense
Changes in working capital:
Net increase in receivables
Net increase in contract assets
Net increase/(decrease) in payables
Net decrease in contract liabilities
Net decrease in provisions
Cash flows from operating activities
Interest paid
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Interest received
Business acquisitions net of cash acquired
Payments relating to prior year acquisitions
Acquisition of property, plant and equipment
Payments relating to developing and acquiring software
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of share capital, less transaction costs
Purchase of own shares
Proceeds from new bank loans
Proceeds from revolving credit facility balance
Payment of loan set-up fees
Payment of finance lease liabilities
Dividends paid
Dividends paid to non-controlling interests
Transactions with non-controlling interests
Net cash inflow from financing activities
Net decrease in cash and cash equivalents
Foreign exchange gains and losses
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
38
Reported
2018
IFRS 16
Impact
Proforma
2018
24.6
(0.3)
24.3
6.0
23.9
31.7
(0.2)
15.5
6.4
(12.0)
(3.1)
18.0
(2.4)
(1.3)
107.1
(10.5)
(4.5)
92.1
0.2
(173.6)
(4.0)
(9.5)
(30.3)
(217.2)
(0.8)
(13.9)
64.9
76.1
(0.8)
(0.9)
(16.5)
(1.8)
(5.9)
100.4
(24.7)
0.4
115.2
90.9
6.0
–
–
–
1.5
–
–
–
(0.1)
–
–
7.1
–
–
7.1
–
–
–
–
–
–
–
–
–
–
–
(7.1)
–
–
–
(7.1)
–
–
–
–
12.0
23.9
31.7
(0.2)
17.0
6.4
(12.0)
(3.1)
17.9
(2.4)
(1.3)
114.2
(10.5)
(4.5)
99.2
0.2
(173.6)
(4.0)
(9.5)
(30.3)
(217.2)
(0.8)
(13.9)
64.9
76.1
(0.8)
(8.0)
(16.5)
(1.8)
(5.9)
93.3
(24.7)
0.4
115.2
90.9
2018 PROFORMA FINANCIAL STATEMENTS ON
A POST-IFRS 16 BASIS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
£m
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Other financial assets
Deferred income tax assets
Current assets
Trade and other receivables
Contract fulfilment assets
Agency broker receivables
Income tax receivable
Other financial assets
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
External loans and borrowings
Post-employment benefits
Provisions
Other financial liabilities
Current liabilities
Trade and other payables
Contract fulfilment liabilities
Agency broker payables
Income tax payable
Provisions
Other financial liabilities
Total liabilities
Net assets
Equity
Equity attributable to owners of the parent
Share capital
Share premium
Other reserves
Retained earnings
Non-controlling interest
Total equity
Reported
2018
IFRS 16
Impact
Proforma
2018
836.4
21.9
0.2
23.6
882.1
64.1
46.2
12.4
0.7
0.5
90.9
214.8
1,096.9
395.2
22.9
12.8
4.2
435.1
112.2
16.4
12.4
–
9.1
0.5
150.6
585.7
511.2
0.4
115.9
182.4
203.2
501.9
9.3
511.2
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1
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S
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R
A
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E
G
C
R
E
P
O
R
T
I
I
f
N
A
N
C
A
l
R
E
v
E
w
I
–
36.2
–
–
36.2
–
–
–
–
–
–
–
836.4
58.1
0.2
23.6
918.3
64.1
46.2
12.4
0.7
0.5
90.9
214.8
36.2
1,133.1
–
–
–
36.8
36.8
(4.3)
–
–
–
–
5.7
1.4
(38.2)
(2.0)
–
–
–
(2.0)
(2.0)
–
(2.0)
395.2
22.9
12.8
40.4
471.3
107.9
16.4
12.4
–
9.1
6.2
152.0
623.9
509.2
0.4
115.9
182.4
197.0
499.9
9.3
509.2
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39
SUSTAINABILITY
GUY WAKELEY, CHIEF EXECUTIVE AND GROUP SPONSOR OF SUSTAINABILITY
Our approach to sustainability ranges from how we manage our
relationships with our clients, to ensuring we have the talent we
need to meet our ambitions, to looking after the interests of the
customers we reach through our services. It also incorporates
the relationships we have with other key stakeholders such as
our suppliers, regulators and shareholders.
This section incorporates by reference the key elements of our
Companies Act 2006 section 172 Statement, as outlined on
page 50.
Our corporate responsibility (CR) policy sets out what a socially
responsible organisation looks like, following the definition in
ISO26000. The policy commits us to:
DEVELOPING OUR CR STRATEGY
To find out what issues are most pertinent to our colleagues
and other stakeholders, we ran a materiality assessment at the
beginning of 2019. The aim was to help us:
• understand the economic, environmental and social
issues which have the greatest influence on our business,
stakeholders and society at large;
• gain an objective view of our strengths and weaknesses
in these areas; and
• find out how we benchmark against others.
The diagnostic process included:
• behave ethically and responsibly at all times;
• stakeholder mapping;
• be accountable for our impact on society, the economy
• a desktop review of internal and external sources;
and the environment;
• be transparent in our decisions and activities which impact
on society and the environment;
• respect, consider and respond to the interests of our
stakeholders; and
• make a positive impact on colleagues, the community and
the environment.
We manage many aspects of sustainability through our day-to-
day business operations. In addition, we have developed a CR
strategy, to ensure we address issues related to our business
that are important to our stakeholders. Implementing our CR
strategy supports our delivery of our purpose and connects to
our values, helping to make Equiniti the responsible and caring
business we want to be.
• stakeholder engagement, including internal and external
surveys and a series of in-depth interviews with key internal
and external stakeholders, seeking their views of the business
landscape, their perceptions of responsible business, and
their ranking of key economic, environmental and social
issues;
• stakeholder prioritisation;
• a business impact assessment of 23 topics, using a risk
and opportunity approach; and
• qualitative analysis.
40
SUSTAINABILITY
L
LOWER
H
HIGHER
MODERATE
HIGH
VERY HIGH
S
R
E
D
L
O
H
E
K
A
T
S
O
T
E
C
N
A
T
R
O
P
M
I
H
L
FINANCIAL
CUSTOMER
PROTECTION
MENTAL HEALTH
ENERGY
MANAGEMENT
GENDER DIVERSITY
RESPONSIBLE SUPPLY
CHAIN AND SOCIAL
MOBILITY
FINANCIAL INCLUSION
LOCAL COMMUNITY
INVESTMENT
WASTE
HUMAN RIGHTS
DIGITAL INCLUSION
BUSINESS TRAVEL
COMPETITIVE
BEHAVIOUR
LOCAL ECONOMIC
DEVELOPMENT
EMPLOYEE
WELLBEING
TREATMENT OF
VULNERABLE
CUSTOMERS
ENVIRONMENTAL
IMPACT OF PRODUCTS
AND SERVICES
DIVERSITY AND EQUAL
OPPORTUNITY
LEARNING AND
DEVELOPMENT
PHYSICAL IMPACTS OF
CLIMATE CHANGE
ATTRACTING AND
RETRAINING TALENT
DATA SECURITY AND
CUSTOMER PRIVACY
PRODUCT AND
SERVICE INNOVATION
IMPORTANCE TO THE BUSINESS
H
The findings of the materiality assessment are shown in the diagram above. These findings helped us to develop a CR strategy
which makes sense for our business and focuses on our most significant impacts.
VISION – TO DEMONSTRATE OUR COMMITMENT TO RESPONSIBLE BUSINESS
MARKETPLACE
WORKPLACE
COMMUNITY
ENVIRONMENT
Align responsible
business with
commercial
opportunities
Improve lives
through our
products and
services
Have a
positive impact
on employee
wellbeing
Support social
mobility and
education in our
communities
Manage the
environmental impact
of our products
and services
Financial Literacy
Vulnerable Customer
Data Security & Customer Privacy
Shareholder Engagement
Diversity & Inclusion
Schools Engagement
Learning & Development
Apprenticeships
Mental Health
Volunteer Days
Giving
Work Experience
Measuring and
reporting impact
Finding ways to
reduce impact
Climate Risk Policy
The following pages discuss how we manage our business in
relation to the marketplace, workplace, community and the
environment. Information on other elements of the marketplace
can also be found elsewhere in the Annual Report. In particular:
• data protection is a principal risk for the business and our
approach to mitigating this risk is described on page 52;
• the shareholder engagement aspect of the CR strategy
relates to the opportunity we have to support our clients’
engagement with their shareholders, through our Boudicca
Proxy business and the recent acquisition of RD:IR; and
• Equiniti’s engagement with its own shareholders is discussed
on page 44.
Financial literacy is not discussed as a separate topic as we
see this as inherently linked to how we look after vulnerable
customers, as outlined on page 42. We also see financial literacy
as important for our people and will consider ways we can
support this during the coming year.
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SUSTAINABILITY
MARKETPLACE
This section outlines our interactions with the key stakeholders
in our marketplace:
• Our clients – we provide technology and solutions directly
to the blue-chip enterprises and public sector organisation
we serve.
• The end customers – customers who use our services
indirectly through the services we provide for our clients
(e.g. shareholders, employees or pensioners), as well as
through our execution-only brokerage service.
• Our suppliers.
• The regulators who oversee aspects of our business.
• Our shareholders.
The Chief Executive and the Chief Financial Officer update
the Board on any matters pertaining to those stakeholders.
This section also covers important ethical issues related to
the marketplace, specifically protecting human rights and
preventing bribery and corruption.
Our Clients
Equiniti’s most significant impact on society is through the
day-to-day services we provide to our clients. The large majority
of our activities have a direct social benefit, whether that is
ensuring people receive their pensions on time or helping
clients to grow and create jobs through our data analytics.
Our strategy prioritises 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 client relationships. We continue to benefit
from strong key account coverage, which grows revenue from
our top clients by identifying opportunities to up-sell and cross-
sell other solutions.
Ultimately, our clients stay with us because we have outstanding
technology and deliver excellent service. The average length of
our UK share registration relationships is around 29 years but
we also have a good balance of longer relationships and clients
who are newer to the Group. We enjoy a similar quality of client
relationships in the US.
Engaging with Our Clients
We engage with our clients in a number of ways. For our largest
clients, we have a key accounts programme. This helps us
to solve more of their business issues and grow our revenue
by identifying opportunities to up-sell and cross-sell other
solutions.
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.
Equiniti runs a Client Insight programme where we send a
questionnaire twice a year to all client contacts across the
Group. This includes questions on NPS, CES and CSAT
which are industry standard metrics used to measure client
satisfaction. Based on the feedback we receive we are able
to gather direct feedback from our clients about the services
we provide. The aim of the programme is to look for ways to
further improve our services.
Following the closure of each programme, results are shared
with stakeholders across the Group along with conclusion and
next steps templates. This enables stakeholders to review the
feedback from clients and provides conclusions/next steps
which capture actions that will be added to a Group tracker and
which are monitored centrally for timely closure. All conclusions,
next steps and actions are then shared with the Executive
Committee and circulated to the wider business. The Group
objective is to have a sustained or improved score.
End Customers
Equiniti reaches many millions of customers, primarily through
the services we provide for our clients and through our
execution-only brokerage service. This means we have a large
number of customers who are potentially vulnerable. Indeed,
research by the Financial Conduct Authority (FCA) has shown
that half of UK adults display one or more characteristics of
being potentially vulnerable.
Protecting the needs of customers who may be vulnerable is
therefore a growing focus for us. Proposed FCA guidance has
steered how we are reshaping our approach, with a focus on
improved customer insight, being inclusive and accessible by
design, and creating more robust monitoring and evaluation
of our treatment of vulnerable customers.
We see the potential to grow our partnerships in this area, to
learn from and share best practice with others. We already have
strong links in the utilities and consumer credit sectors and are
keen to explore partnering with third-sector organisations, so
we can collaborate to create better outcomes for customers.
In connection with our vulnerable customers’ strategy, a
number of colleagues have been on dementia champion
training and have made 245 dementia friends.
Engaging with Our Customers
Equiniti runs a monthly Customer Insight programme and has
questionnaires in place across the Group to measure customer
satisfaction. Customers have the opportunity to participate in
a short questionnaire following an interaction with us. These
questionnaires include the NPS, CES and CSAT questions.
Based on feedback we receive, improvement opportunities
are identified to enhance the customer journey. Questionnaire
results are shared with the Executive Committee and the senior
team on a monthly basis.
Suppliers
Equiniti’s preferred suppliers provide us with technology,
human resources, print and mail services, facilities management,
travel and professional services. We segment our suppliers by
risk, to protect our business and our ability to deliver to our
clients and customers, using our Group-wide risk management
framework.
We oversee and take reasonable steps to ensure our
suppliers comply with our standards, such as those relating to
environmental responsibility, modern slavery, data protection,
human rights and ethics. To make our expectations of our
suppliers even clearer, we intend to introduce an Equiniti
Supplier Code of Conduct in 2020.
42
43
SUSTAINABILITY
Engaging with Our Suppliers
Engaging with our UK Regulators
In the UK, the FCA supervises and engages with the Group
firms it regulates through periodic and ad-hoc reporting on
conduct and financial resilience, thematic industry reviews
on ‘hot’ regulatory topics, responses to specific events, and
desk-based and on-site reviews. The Group also provides
feedback to the FCA, where appropriate, on its consultations
on proposed regulatory change either individually or through
its membership of recognised industry associations. We also
provide ad-hoc updates to HMRC, which may also carry out
desk-top reviews.
US Regulators
The Securities and Exchange Commission (SEC) is the Federal
regulator for the US transfer agent industry. Its focus is on
safety and soundness, ensuring that assets are protected and
secure. The SEC requires certain reporting by transfer agents
and performs examinations of regulated entities. It carries out
a risk analysis of all registrants and examines registrants on a
schedule based on that risk assessment.
The New York State Department of Financial Services (DFS)
oversees the trust company activities of Equiniti Trust Company.
Although Equiniti Trust Company is registered with the DFS
as a banking-type entity, its operations are limited to fiduciary
activities. The DFS requires reporting by regulated entities
and performs annual examinations of them, focusing on
information security, money laundering, sanctions and controls
over the safeguarding of assets. The DFS uses the work done
by the regulated business’s internal audit function to focus its
examinations.
As a trust company with operations in Minnesota and
Wisconsin, Equiniti Trust Company is also registered as a
foreign (out-of-state) trust company with those states. The
states of Minnesota and Wisconsin defer the oversight of
foreign trust companies to the home state of those entities,
which in our case is New York.
As part of the Group procurement strategy for 2019,
we launched a supplier relationship management (SRM)
programme, with an initial pilot being run from Q4 2019 until
Q1 2020. The SRM framework has been developed to provide
supplier relationship strategies, commensurate with the level of
risk and complexity of the relationship, optimising engagement
with critical and strategic suppliers.
The framework covers:
• Supplier Segmentation & Due Diligence
• Supplier Governance
• Performance Improvement
• Supplier Collaboration
We engage with suppliers at both a strategic and on a day-
to-day operational level. Risks associated with purchasing and
outsourcing are tracked through our risk governance framework
and reported up to Board level.
Regulators
The Group operates in regulated markets and looks to maintain
positive and open relationships with the relevant regulators.
UK Regulators
The FCA regulates the UK financial services industry. It
authorises several Group entities and oversees their conduct
and prudential management, when providing financial services
such as share dealing, safe custody of investment assets,
consumer credit information and administration, and
electronic money and payment services linked to foreign
currency exchange.
The Prudential Regulation Authority (PRA) supervises ‘high
impact’ firms in the UK, such as banks, building societies and
large insurers. While it does not directly regulate any Group
entity, many of our corporate banking and insurance clients are
PRA regulated and we are contractually bound by them to meet
certain governance standards required by PRA regulated firms,
when outsourcing regulated activities.
Her Majesty’s Revenue & Customs (HMRC) is one of 28
supervisors for people and businesses covered by the Money
Laundering Regulations. Several Group entities are registered
with HMRC, including our international payments and company
service providers.
The Pensions Regulator (TPR) has a number of statutory
objectives to protect UK workplace pensions and improve how
they are administered, by working with employers, trustees,
pension specialists and third-party administrators such as
Equiniti. TPR provides guidance and publishes codes of practice
for the industry.
The Information Commissioner’s Office (ICO) is the UK’s
independent body for ensuring that data protection rights
are upheld. It provides codes of practice and guidance for all
data protection, privacy and electronic communications, as
well as freedom of information and environmental information
requests. The ICO is responsible for ensuring UK entities
comply with the law via data audits and takes enforcement
action against any breaches.
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SUSTAINABILITY
Engaging with our US Regulators
We engage in regular interaction with both the SEC and DFS to
discuss areas of interest to them and to us, to obtain guidance
and assistance, and to provide them with our thoughts and
recommendations on what they are doing and looking at.
Anti-Bribery and Corruption
Equiniti has an anti-bribery and corruption (ABC) policy. It
describes the risks associated with bribery and corruption,
sets out the minimum controls that must be established to
prevent it (see below) and provides guidance on identifying,
preventing and reporting bribery and corruption. The policy is
supported by a whistleblowing process and, where necessary,
proportionate and independent investigation and follow up
of any matters reported. The ABC policy is one of a suite of
Equiniti policies which deal with different types of financial
crime, such as money laundering, terrorist financing and tax
evasion. The Audit Committee, in conjunction with the Risk
Committee, is responsible for approving our systems and
controls for preventing bribery and corruption, and for receiving
any reports on non-compliance. The Group’s key controls in its
dealings with actual or potential clients and suppliers, and any
other external parties, ensure that:
• we fully assess the risk of bribery or corruption before we
enter into any business arrangement in a new jurisdiction;
• we can identify suspected bribery or corruption either
internally or externally, escalate and report any suspected
incidents and cooperate with relevant authorities where
necessary;
• we review, assess and authorise any financial or other
advantage promised, given or received between any persons
directly associated with Equiniti;
• we have a written agreement in place that acknowledges
understanding and compliance with Equiniti’s ABC policy
before we enter into any third-party business arrangement;
and
• our staff receive the appropriate training, knowledge and
competence to effectively comply with this policy.
Our risk and compliance teams monitor compliance against
this policy and all employees must complete financial crime
training annually.
There have been no material instances of non-compliance
with the ABC policy reported this year.
Human Rights
Our human rights policy is guided by the international human
rights principles encompassed by the Universal Declaration
of Human Rights, including those contained within the
International Bill of Rights and the International Labour
Organisation’s 1998 Declaration on Fundamental Principles
and Rights at Work.
Within Equiniti, we ensure we protect the rights of our
people, including those with disabilities, by adopting suitable
employment practices. We also look to protect the rights of
those working within our supply chain. In 2019, we have worked
to raise colleague awareness of the risks of modern slavery and
human trafficking, in particular for colleagues with procurement
or outsourcing responsibilities. We also created a risk-based
Modern Slavery and Human Trafficking policy, which is the
first step for integrating this risk into our enterprise-wide risk
management framework. In addition, we are reviewing our
supply chain risk management processes.
We rely on the whistleblowing process to alert us to any
breaches and there have been no reported breaches of
our human rights policy during the year.
Shareholders
The Board is committed to openly engaging with our
shareholders, as we recognise the importance of effective
dialogue, whether with major institutional investors, private or
employee shareholders. It is important to us that shareholders
understand our strategy, objectives and performance, so we
look to explain them clearly, listen to feedback and properly
consider any issues or questions raised.
We have a comprehensive investor relations programme,
with the executive Directors regularly meeting investors
and analysts. The executive Directors are supported where
appropriate by the Chairman and the Chair of the Audit
Committee, who met a number of our institutional
shareholders during the year.
Our investor relations programme supports the aims of the
UK Corporate Governance Code and the UK Stewardship
Code to promote engagement and interaction between listed
companies and their major shareholders. With this in mind,
we welcome any opportunities for investors and shareholders
to engage directly with the Chairman and Non-executive
Directors, in addition to the Chief Executive and CFO. The
Board also receives non-attributable feedback from investors
via our corporate brokers following our trading updates,
interim and full year results.
44
45
SUSTAINABILITY
44
WORKPLACE
OUR VALUES
Offering a great experience for our employees is fundamental
to delivering the quality of customer service we aim for. To help
us achieve this, we have a people strategy based on five areas:
culture and leadership; engagement and experience; learning
and talent; diversity and inclusion; and performance and
reward. Our approach to the workplace also includes volunteer
days and corporate sponsorship for causes that are meaningful
to our people.
Culture and Leadership
Having the right culture, which aligns to our purpose and vision,
is vital for sustainable success. During 2019, we launched a
set of refreshed Group values derived from hundreds of our
employees’ stories about what we are like at our best. To
launch the campaign we created a bold new employee visual
brand, launched our Instagram culture channel Lifeateq and
invested time to engage with influencer groups throughout
the business. The subsequent multi-channel year-long
campaign saw the values embedded at grass roots level. The
ultimate measure of success has been their organic adoption
by our teams. For example, in our Birmingham Customer
Experience Centre, management have created values-themed
handwritten thank you cards and pins to give to colleagues
who demonstrate these behaviours, whilst our employee brand
and values language have been widely adopted by key internal
stakeholders such as the People and Operations functions.
The Excellence Awards at our leadership conference also have
a structure consistent with our values. More information on
our culture can be found in the Chief Executive’s Statement
on page 18 and the Chairman’s introduction to the Corporate
Governance Report on page 62.
Strength and depth of leadership is crucial for us. The Group
uses the Gallup leadership model, which is based on leaders
understanding their own strengths and the complementary
strengths they need in their team. We supported our leadership
through programmes such as our Leadership Development
Programme. This had three modules – leading self, leading
others and leading the business – which were aimed at
new, developing and experienced leaders respectively. The
programme gave our leaders the skills to build relationships,
lead teams and understand the strategic skills necessary to run
a business. In total, 210 leaders have been supported through
this programme. In addition, 73 leaders in India have benefited
from three structured e-learning modules, as part of the digital
academy programme (see Learning and Talent on pages
46 to 47).
We also ran a Sales Growth programme for our sales,
relationship and commercial teams. More than 120 sales and
growth leaders have been supported through the five modules
of this comprehensive programme. In addition, we delivered
targeted leadership programmes locally, to address specific
business requirements.
PERFORMANCE – WE’RE METICULOUS
Listen, take time and really care about getting things right.
Be accountable, make amends, learn and move on.
Deliver; on time, every time.
Use your sharp eye for detail to create great service
and solutions for customers.
GROWTH – WE’RE INVENTIVE
Test and develop new ideas.
Protect time to be creative.
Always explore fresh ways to do things and embrace
change.
Put common purpose first; we move quicker together.
CUSTOMERS – WE KEEP THINGS REAL
Communicate openly and behave with integrity.
Challenge the complicated and promote simplicity.
Support and connect with communities around us.
What you do matters – show pride.
COLLEAGUES – WE’RE TOGETHER
Think as one global team, empowered and stronger
together.
We all have a unique voice and it is listened to.
Know your role and how you contribute.
Lead by example and create ways for everyone to grow.
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SUSTAINABILITY
Engagement and Experience
We run an annual employee engagement survey, which helps
us to understand where we are doing well and where we need
to enhance our employees’ experience. In 2019, we adopted
the Gallup engagement model. This shorter and more focused
model is more specifically about engagement than our previous
model, with 12 key areas of questioning that assess our
people’s alignment to the business. It also complements our
leadership model and aligns more directly with our culture.
We have engagement champions in every location, who
ensure that our communications reach all of our people. The
Chief Executive’s Colleague Briefings are also an important
communication tool, with Guy Wakeley visiting every Equiniti
location around the world following the release of the half year
results. This allows our people to talk to Guy directly about our
strategy and progress.
Towards the end of the year, we relaunched our employee
engagement forum. This has been combined with our
communications forum, to make it more communication
focused and more responsive to employee feedback. The
forum, renamed the Global Colleague Forum, has a steering
group and a schedule of events for the year and includes
representatives from different locations and functions. It
meets at a different location each time and is hosted by local
employees, with the agenda focused on a wide range of issues
such has Group strategy, sustainability, diversity and inclusion,
and purpose, mission and values. Dr Tim Miller, our Board-
appointed non-executive Director for Employee Voice, attends
and chairs the forum, ensuring the Board hears directly from
our people about their experience of working for Equiniti. The
Board also receives regular updates on HR topics, feecback
from employees and discusses the results of the annual
engagement survey.
Learning and Talent
Our primary learning focus this year was on leadership and
management development, and supporting those teams
focused on business growth. We have completed phase 1 of
two Group programmes: Leadership and Management – Future
& Fundamentals and Sales & Business Growth. Over 400 of our
colleagues have attended some or all of these modules, with
an average engagement and practical application rating of 9.2
out of 10. We have also continued to invest in our e-learning
system. This allows our colleagues to easily complete the
compliance and regulatory learning requirements and also
select from a wide range of on-line training modules, designed
to focus on the skills required to both fulfil their current
roles confidently and also develop those skills required for
succession and career advancement. These modules include
core topics such as Managing Performance Conversations
and specific, technical skills such as Advanced Project
Management Techniques; covering a wide range of
business and development areas.
We continue to work extensively with our rising stars; offering
coaching, networking opportunities and workshops designed
to accelerate the progress of talented employees through
development, mentoring and stretch projects. We have also
focused heavily on diversity and gender support this year with
opportunities such as networking, lectures and forums through
our sponsorship of the FT Women in Business Forum, internal
workshops on diversity, inclusion and communication and a
range of mental health awareness coaching and buddy events.
Our apprenticeship programme achieved our first qualified
apprentices this year and we continue to develop this scheme
more widely across the Group.
46
47
SUSTAINABILITY
46
Each year, the Group runs people and talent reviews in all
divisions and functions worldwide. This allows us to build a
comprehensive understanding of our leadership and develop
a ‘talent map’, which supports succession planning. Diversity
considerations are at the heart of this process. The reviews have
helped us to make numerous internal promotions this year,
including four new members of the Executive Committee and
a further 15 senior appointments. In total, internal candidates
filled 35% of our vacancies in 2019.
Diversity and Inclusion
The Group has a formal global Diversity & Inclusion policy. This
reflects our recognition that we operate in increasingly diverse
communities, both in the UK and internationally. Equiniti
therefore needs to reflect this diversity and create an open
and inclusive culture able to support, sustain and develop our
diverse workforce, so we can in turn support our customers and
the markets we serve.
We take a ‘top down, bottom up’ approach to diversity
and inclusion, with direction set at the executive level and
implementation led by diversity networks comprising colleagues
from different levels and across the organisation. Our four main
diversity networks cover gender; wellbeing, mental health and
disability; multicultural; and LGBT+. Each network is chaired by
an Executive Committee member or other senior leader.
During 2019 we also created a Global Diversity Council, which
meets quarterly to support the networks’ key initiatives and
coordinate them globally where possible. The implementation
of Workday as our new HR data system in 2020 will give
colleagues the opportunity to submit their diversity data on a
voluntary and anonymous basis. This will enable us to analyse,
report and understand our workforce composition, forming the
basis of targeted initiatives to drive diversity and inclusion and
measure change.
Gender Diversity
The Gender Network was formed to nurture an environment
where everyone can succeed regardless of gender. The network
runs initiatives which support the development of women, while
being open to all employees. Equiniti works with a number of
organisations to support female talent, including Every Woman,
the 30% Club and the FT Women in Business Forum which
Equiniti joined during the year. The Forum encourages the
development of female middle managers and aims to
reduce the gender pay gap.
The table below shows Equiniti’s gender diversity at the
year end:
2019
2018
MEN WOMEN MEN WOMEN
Board
6
Senior management
77
3
51
6
71
3
44
Other employees
2,646
2,491
2,613
2,442
Total
2,729
2,545
2,690
2,489
The Group has a good gender balance overall and we continue
to work to increase the number of women in senior positions.
For example, it is mandatory for shortlists for our leadership
appointments to include female candidates. The internal
promotions described under Learning and Talent on page 46
mean that 30% of the Executive Committee is now female
and in total, eight of the 19 senior promotions were women.
Women were appointed to 51% of all vacancies across the
Group in 2019, up from 47% in 2018.
Whilst we continued to have a gender pay gap in 2019, we are
delighted to report a reduction in that gap from 2018. Reducing
the gender pay gap continues to provide the opportunity to
encourage the diversity, mobility and flexibility of our teams,
and remains an important corporate objective both for now
and the future. Further detail can be find on our website
https://equiniti.com/uk/about-us/corporate-responsibility/
policies/gender-pay-report/
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Our People Policies
Equiniti has a wide range of people policies, covering every
aspect of the employee lifecycle. This includes resourcing
and recruiting, from how candidates are vetted, through
to on-boarding and induction. A number of policies cover
issues such as holiday entitlement, sickness, maternity and
paternity arrangements, while a series of other polices relate
to the facilities our people make use of at work, such as data,
equipment and systems. Finally, we have policies outlining our
approach to informal complaints, grievances, whistleblowing
and disciplinary matters, as well as redundancy and termination.
The Compliance Team are the guardians of our policies, making
sure they are legally compliant and reflect best practice, so
we remain an attractive employer. Our People Policy Manager
is responsible for working through policy changes required,
for example due to new regulations, and for proactively
recommending changes where we believe our policies need
to advance.
All of our people have access to the full range of policies via
our intranet. We also run training and update sessions for key
policies, to ensure they are widely understood and upheld.
Our line managers are responsible for ensuring our policies are
complied with and they are supported by our People Services
team in Chennai. All contacts with the People Services team
are logged to track reported issues. This enables us to identify
issues in a particular location or to spot trends in particular
enquiries, which may indicate that we need to update policies
to match changing expectations among our people.
COMMUNITY
Our community activities look to support social mobility and
education. We run a successful apprenticeship programme
across a number of areas of the business. We also continue
to run Movement to Work with the Prince’s Trust, which
helps unemployed young people into work through training,
development and work experience.
We regularly support careers activities in schools. This
includes offering work experience placements, sponsoring
school fundraising activities, partnering with schools to run
employability workshops and jointly celebrating events
such as International Women’s Day. As we continue to build
relationships with local schools and enterprise partners, we will
look for opportunities to do more in this space.
Volunteer Days
All Equiniti colleagues can use two days per year out of the
office, in addition to their annual leave entitlement, to support a
charity or community project of their choice. This year has seen
increased take-up, with a total of 220 days taken. Supported
projects have ranged from gardening at a hospice to beach
cleans and a bone-marrow drive.
SUSTAINABILITY
Wellbeing, Mental Health and Disability
This network was formed to champion issues around disability
and mental health and raise awareness at Equiniti. The primary
focus is to create an inclusive workplace, in which employees
feel welcome and confident to propose ideas for improving
both physical and mental health at work.
The network has undertaken a wide range of events in 2019
and provided information and awareness communications to
support its agenda. Activities included taking part in Suicide
Prevention Day and World Mental Health Day, running sessions
for men to speak about their experiences of mental health, and
joining the Business Disability Forum. In addition, a further 16
mental health first aiders were trained this year, taking the total
to 28 across our UK sites. The mental health first aiders are very
visible to our people and numerous colleagues have used them
to access support.
We have 28 mental health
first aiders across
our UK sites”
Multicultural Network
The Multicultural Network was formed to promote and
celebrate the diverse nature of our workforce. It helps Equiniti
to become an employer of choice and to attract and retain
top talent, irrespective of race, ethnicity or culture. One of the
network’s objectives is to create awareness of various cultures,
which are representative of employees’ cultural backgrounds.
During the year, its initiatives included celebrating and raising
awareness of a number of cultural events, including Easter, Eid,
Raksha Bandhan, Diwali and Thanksgiving.
LGBT+ Network
The LGBT+ Network was formed to raise awareness of
issues faced by our LGBT+ community and to work towards
a fully inclusive workplace. The Network represents Equiniti
employees who identify as lesbian, gay, bisexual or transgender,
along with all other sexual and gender orientations. During the
year, members of the network took part in local Pride events,
attended conferences and training courses to broaden their
knowledge of LGBT+ topics, and published articles on our
intranet to celebrate events and raise awareness.
Performance and Reward
The People and Talent reviews also consider the performance
of our people. This enables us to identify and create plans to
address any underperformance, and to identify high performers
who are candidates for promotions and internal moves.
During the year, we introduced a new career and reward
framework. This assigns all of our people to one of nine
grades or levels, helping us to understand the composition
of our workforce and to manage personal development and
promotions more easily and transparently. The next phase of
this programme will be to create a methodology for managing
careers and rewards within this framework.
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SUSTAINABILITY
Giving
In 2019 we launched a sponsorship programme, which allows
colleagues to request support for activities in their local
areas. During the year, we provided sponsorship to charities
supporting former soldiers, homeless people and mental health.
Equiniti also has a JustGiving page, which raised £143k in 2019
and £252k to date.
We also endeavour to help our clients by digitising the services
we offer, generating both cost savings and environmental
benefits. As an example, digitising quarterly statements in our
Investment Solutions division has saved in excess of one million
hard copy statements from being mailed which is in addition
to the 12 million hard copy statements already saved annually
following the introduction of digital nominee statements
in 2018.
Equiniti has a JustGiving
page, which has raised
£252k to date”
ENVIRONMENT
The environmental impact of our products and services, and
the physical impacts of climate change on our business, were
highlighted as key issues for our business in our materiality
assessment. In particular, our colleagues are increasingly
interested in how we can deliver our services in ways which
minimise our environmental impact.
Environmental Policy and Risk Management
We have a Group-wide policy that sets out our environmental
control objectives, covering sustainability, resilience and the
physical impacts of climate change. Using our enterprise risk
framework, all of our business and support areas are required
to assess the design and effectiveness of these controls on a
regular basis, to ensure continual improvement. This helps us to
reduce our carbon footprint and to build further resilience into
our business processes to cater for the changing nature of our
weather.
Organisational resilience and business continuity has long been
a bedrock of our process management and in 2020 our theme
will be the effects of climate change. This will see increased
focus on testing and exercises, as all parts of the Group run
scenarios around climate-based events that affect our ability
to run our business.
Our Activities in 2019
Following our switch in 2018 to using renewable energy
wherever possible, this year we have focused on three key
areas. These are:
1. Improving how we measure and report our impacts, which
will enable us to set realistic targets in 2020 for reducing our
carbon emissions.
2. Embedding climate risk into our risk management
framework and practices.
3. Engaging with colleagues to make changes to how we
do things.
To encourage colleagues to get involved in reducing our
environmental impact, we have introduced an Eco Champion
network. Eco Champions collect ideas and support green
initiatives in their local offices. In 2019, the network
collaborated to share tips and expertise on recycling and
waste management and to reduce our reliance on using paper.
Throughout our operations we are constantly reducing our
reliance on paper, and upskilling our colleagues to find digital
alternatives to paper-based ways of working.
Our Environmental Performance
Greenhouse Gas Emissions (Tonnes of CO2)
2019
2018
2017
5,013
4,813
5,011
1,418
1,478
683
271
372
362
116
158
143
6,818
6,821
6,199
Buildings
Air travel
Vehicles
Rail travel
TOTAL
Carbon Intensity
CI
2019
2018
2017
Tonnes of CO2 per £m revenue
12.3
12.8
15.3
Turnover £m
556
531
406
Tonnes of CO2 per employee
1.29
1.31
1.37
Employees
5,274
5,179
4,511
While revenue in the year increased by 4.7% and number
of employees increased by 1.8%, the tonnes of CO2 per £m
revenue reduced by 3.9% and the tonnes of CO2 per employee
reduced by 1.5%.
Transport
Vehicle business travel is 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
decreased by 27.2% in 2019. Air travel is based on data from
financial records each year ending 31 December. Air travel
decreased by 4.1% in 2019.
Facilities
Buildings emissions are based on data for the years ended
31 March 2018/19. Overall the emissions from our building
usage has shown a 4.2% increase year-on-year. whilst employee
headcount increased at a higher rate of 14.8%.
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SUSTAINABILITY
Non-Financial Information Statement
The Companies Act 2006 requires us to disclose certain non-
financial information in the Annual Report and Accounts. This
information can be found on the following pages:
Some of the charities our employees
support
• environmental matters – page 49;
• employees – pages 45 to 48;
• social matters – pages 40 to 41;
• human rights – page 44;
• anti-bribery and corruption – page 44;
• business model – pages 8 to 9;
• principal risks and uncertainties – pages 52 to 55; and
• non-financial key performance indicators – pages 16 to 17.
Section 172(1) Statement
This statement describes how the Directors have taken
account of the matters set out in section 172(1) (a) to (f) of
the Companies Act 2006, when performing their duty to
promote the success of the company. Much of this content is
included in the Sustainability section of the Strategic Report,
as listed below.
The matters set out in section 172(1) (a) to (f) are:
(a) the likely consequences of any decision in the long-term
– see Key Decisions in 2019 (below);
(b) the interests of the company’s employees – pages 45 to 48;
(c) the need to foster the company’s business relationships with
clients, end customers, suppliers and regulators – pages 42
to 44;
(d) the impact of the company’s operations on the community
and the environment – page 49;
(e) the desirability of the company maintaining a reputation for
high standards of business conduct – see clients (page 42), anti-
bribery and corruption (page 44) and our values (page 45); and
(f) the need to act fairly between members of the company –
see Key Decisions in 2019 (below).
Key Decisions in 2019
The Board is fully aware of its duty under s172(1) of the
Companies Act 2006 to promote the success of the Company
for the benefit of members as a whole. The Group’s stakeholder
engagement activities help to inform the Board’s decisions, by
ensuring the Directors are aware of stakeholders’ interests. The
Board takes a long-term view in reaching key decisions, and,
when taking decisions, the Board looks to act in the interests of
stakeholders as a whole and to ensure all stakeholders are
fairly treated.
Key decisions and focus for the Board in 2019 are set out in
Board activities during the year on page 69.
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Our colleagues are
increasingly interested
in how we can deliver
our services in ways
which minimise our
environmental impact
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PRINCIPAL RISKS AND UNCERTAINTIES
We provide business-critical services to our clients, often in highly regulated and complex
environments. As we grow, our business and our risk environment also become more complex.
It is therefore vital that we effectively identify, evaluate, manage
and mitigate the current and emerging risks we face, and that
we continue to evolve our approach to risk management.
We recognise that a number of our principal risks, such as
increasing and changing regulation, also create opportunities
for us, as we can develop products and services that help our
clients to manage their own regulatory burdens. Information
about our risk management framework, including that for our
regulated entities, can be found in the Risk Committee Report
on pages 84 to 89.
technology which enabled us to move away from the Transition
Services Agreement with Wells Fargo. Our client retention in
the US remains strong and we are continuing to develop and
deliver new products and services to our US clients.
Opportunity and risk emanating from the US business is now
being assessed and reported as part of our integrated Group
reporting. The US business assesses risks at a local level and
these are then reviewed through the Group’s risk management
framework, and where applicable are captured within the
Group’s principal risks (for example, the resilience of our IT
infrastructure). A focus on embedding further the Group’s risk
management framework in the US business will continue over
the next 12 months.
OUR RISK PROFILE
Managing risk effectively is fundamental to delivering our
strategy and to us operating successfully. We believe that a
robust risk management culture is vital for sustainable growth
and must be at the centre of everything we do. Our approach
to risk is supported by a policy and control framework, which
guides and informs our colleagues’ work behaviours and the
decisions they make. Our risk culture and risk appetites support
effective decision-making and enable us to deliver against our
strategic priorities.
Although we have diversified geographically with the
acquisition of our US business and continue to develop growth
in the US, we remain predominantly a lower-risk, UK-focused
business. Whilst there is continuing uncertainty in the economic
and regulatory environment, particularly as a result of Brexit,
our overall operational risk profile has remained broadly stable
during 2019.
We do not consider that Brexit has a material direct operational
impact on our business. However, the influence that it could
potentially have on the UK economy and particularly on the
core markets through which the Group transacts for customers
in 2020 will require close monitoring. During 2019 we have
continued to undertake detailed assessments of the potential
Brexit scenarios that have emerged and their impact on the
Group, and have ensured that operational plans are in place to
mitigate areas of potential operational disruption. The ability
of the Group to manage a range of Brexit market stresses has
been reviewed during the year, and as part of the 2019 viability
statement on pages 56 to 58.
The establishment of the US business was completed
successfully in May 2019 through the launch of new supporting
PRINCIPAL GROUP RISKS
In response to the novel corona virus we have initiated our
Group-wide response programme. The executive crisis
management team, led by the Group Chief Risk Officer and
Group Chief Operating Officer, is overseeing the Group-wide
response. We are activity supporting colleagues who have a
risk of exposure in line with governance guidance, and have
ensured that all offices in the Group are following a high
level of hygiene, including managing travel risk. We have
undertaken scenario testing within all key departments to
ensure the active management of systems and processes under
a number of changing circumstances. Where practical, IT and
operational practices are able to support a range of remote
working options, which provides a greater level of flexibility and
resilience. We are working closely with key clients and suppliers
to ensure that core services are maintained under higher risk
scenarios.
OUR RISK APPETITE
The Board has defined risk appetite statements for the main
risks that we face during the normal course of business. By
assessing the level of each risk against our appetite for it,
we ensure that we focus appropriately on the risks that need
additional attention. Risks that are within our appetite require
no further mitigating actions, but we continue to actively
monitor them.
Given the nature of our services and the regulatory environment
we operate in, we have a lower risk appetite for many of the
risks we face and no appetite for breaches of policy or control
in certain critical areas, such as regulatory reporting or breaches
of our anti-money-laundering controls.
GROUP RISK CATEGORY
IMPACT
MITIGATION
TREND*
DATA PROTECTION
Risk of loss, corruption or
compromise of personal data
(also known as personally
identifiable information) which
can relate to customers, staff or
any other natural person.
The loss, corruption or
compromise of personal data
could lead to a poor customer
experience, customer detriment,
reputational harm, regulatory,
legal or financial sanction, loss
of customers and increased
costs.
• Dedicated Data Protection
Office.
• Staff training and awareness
programmes.
• First line ownership of data
protection risk.
• Deployment of security
software, encryption and data
back-up.
• Regular vulnerability
assessments undertaken.
• Third-party data security
evaluations and assurance.
Links to the following strategy element
1
2
3
4
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PRINCIPAL RISKS AND UNCERTAINTIES
GROUP RISK CATEGORY
IMPACT
MITIGATION
TREND*
SECURITY
Cyber risk, involving the
disruption or corruption of
systems and connectivity, or
loss or leakage of data from
accidental or malicious actions.
Risks arising from a physical
security breach including
property damage, staff injury,
theft or inappropriate access
to premises, systems or
information.
INFORMATION TECHNOLOGY
Risk of poor quality
infrastructure, software or
business tools, as a result of our
failure to upgrade or invest in
our systems as necessary.
ORGANISATIONAL RESILIENCE
Risk of slow or flawed recovery
following unexpected events,
such as loss of a key building or
a major IT system failure.
PRODUCT DEVELOPMENT,
CHANNEL AND PRICING
Risk of poor products that
fail to meet the demands of
our clients and prospective
clients or that do not comply
with our regulatory or legal
obligations. This risk also
includes the potential for poor
product distribution (so clients
or potential clients are unable
to access our products) and
inappropriate pricing strategies.
An information or physical
security breach could reduce
the quality of our services
to customers or result in us
breaching the law or our
contracts, which in turn could
damage our reputation, increase
our costs and reduce our
revenues.
The majority of our products
and services are enabled by a
resilient technical infrastructure.
Disruption to this systems
infrastructure could lead to
a failure of client service,
which in turn could result in a
failure to meet our contractual
obligations, cause detriment
for our customers, damage our
reputation and productivity,
increase our costs and lead to
financial penalties and potential
regulatory sanction.
Failure to effectively
plan for and manage
unexpected events could
lead to a poor customer
experience, customer detriment,
reputational harm, regulatory
sanction, loss of customers,
lower productivity, reduced
revenues and increased costs.
If Equiniti fails to provide
appropriate products,
propositions and services
to the market at suitable
prices, it could suffer lower
revenues or margins, customer
dissatisfaction or regulatory or
legal sanction.
• Ongoing investment in
internal and external cyber
security.
• ISO27001 aligned control
framework.
• Ongoing review of cyber
security capability and
emerging threats.
• Regular penetration testing.
• Security measures to prevent
unauthorised access to
systems and premises and to
protect personnel.
• Staff training and awareness
programmes.
• IT transformation programme
being deployed across key
systems.
• IT architecture plan in place
ensuring all key systems are
aligned.
• Continual performance
monitoring of the internal and
external IT environment.
• Operational planning
and prioritisation of IT
development.
• Business continuity and
disaster recovery plans in
place and tested regularly.
• Dual hosting of critical
servers, telecommunications
and applications.
• Separate business continuity
disaster recovery sites
available.
• Liaison with regulated clients
to ensure their own resilience.
• Executive and Board focus
on propositional design and
service enhancement.
• Dedicated resource focused
on customer proposition and
customer experience.
• Client engagement and
testing initiatives and
workshops.
• Group-wide product
governance policy and
controls deployed.
Our ongoing programme
of investment in improved
controls ensures we maintain
our position, in an environment
where the external threat
remains challenging
Links to the following strategy element
1
2
3
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Links to the following strategy element
1
2
3
4
Links to the following strategy element
1
2
4
Links to the following strategy element
1
2
3
4
5
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Key to the strategy elements
*Trend indicates perception of how risk has moved year-on-year.
1 Grow sales to
existing clients
2 Win new clients 3 Develop and
acquire new
capabilities
4 Drive operating
leverage
5 Reinvest strong
cash flows
Increasing
Decreasing
No change
GROUP RISK CATEGORY
IMPACT
MITIGATION
TREND*
REGULATORY
Risk of regulatory action
stemming from weaknesses or
failure in:
• analysis of regulations, laws
and codes;
• development of appropriate
policies, processes and
controls;
• training and education
of first-line teams;
• capacity to monitor and
respond to rate of change;
• effectiveness of first-line
surveillance in identifying and
preventing breaches;
• project management and
documentation of regulatory
issues;
• Board and senior
management governance and
engagement on regulatory
matters; and
• regulatory reporting
and disclosure.
PURCHASING, SUPPLY
AND OUTSOURCING
Risk of a business critical
partner, subcontractor or
supplier failing to deliver and/
or perform to the required
standards.
Failure by Equiniti to adhere
to any of its legal or regulatory
requirements could lead to
legal and regulatory sanctions,
redress costs, reputational risk,
contract breach and, ultimately,
loss of operating licences or
invalid contracts, resulting in
reduced revenues.
• Dedicated second-line risk
and compliance teams.
• Monitoring for upcoming
regulatory change.
• Capital investment
programme to manage
regulatory change.
• Training and awareness
programme for all staff
working in regulated areas.
• Separate legal entities used
for regulated activities
with their own Boards and
governance.
• Development of new services
and products to help clients
manage regulation.
Links to the following strategy element
1
2
3
Partner, subcontractor or
supplier failure could result in
Equiniti being unable to meet its
customer obligations or perform
critical business operations.
This could result in reputational
impact, reduced business agility,
customer detriment, increased
cost and lower revenue.
• Dedicated procurement
function.
• Procurement due diligence
policies and standards
deployed.
• Key supplier financial health
checks.
• Audit of key suppliers’
operational resilience plans.
• Supplier failure risk
Links to the following strategy element
considered as part of our own
resilience planning.
3
4
5
PEOPLE
Risk of low operating efficiency
stemming from poor staff
morale and experience,
higher staff attrition, increased
sickness, higher retention and
recruitment costs, and unfilled
positions.
Failure to attract or retain
the right people would limit
Equiniti’s ability to deliver its
business plan commitments and
its ability to grow.
• Strategy in place to attract,
retain and develop high-
calibre people.
• Promotion of the Group’s
values and behaviours to all
staff.
• Remuneration policies linked
to appropriate staff behaviour.
• Skills and resource
management aligned
with customer needs.
• Employee engagement
forum, surveys and action
plans.
• Diversity and inclusion
groups.
• Gender pay gap
management.
Links to the following strategy element
1
2
3
4
5
54
55
GROUP RISK CATEGORY
IMPACT
MITIGATION
TREND*
CHANGE AND DEVELOPMENT
Risk of disruptive change
leading to lower business agility,
lower productivity, regulatory
sanction, poor customer
relationships, increased costs
and lower revenues.
A continuing level of change
and development may lead
to material management and
resource stretch which in turn
could impact the Group’s ability
to achieve its key business
objectives.
Poor conduct could lead to
sub-optimal decision making,
customer detriment, poor staff
experience, legal or regulatory
sanction, increased counterparty
risk-based pricing, reduced
availability of counter parties
and reputational harm to us
and our clients. This in turn
could result in a loss of trust
and confidence amongst
our stakeholders.
CONDUCT
Risk of the business being
unable to demonstrate and
document good corporate, staff
or market conduct, for example:
• Board, executive and senior
management leadership of
the corporate culture;
• identifying and managing
conflicts of interest;
• controlling staff behaviour
which could result in potential
market abuse; or
• compliance with legal and
regulatory requirements.
Equiniti’s prospects and
growth strategy depend on us
retaining key customers and
taking opportunities to grow
and diversify our business. If
we do not respond effectively
to trends in our market, we
could lose key clients or fail to
win new business, which could
significantly affect our revenues
and profits.
MARKETS AND COMPETITION
Risk of lower corporate
performance stemming from:
• a failure to identify or
understand strategic market
opportunities;
• the emergence of alternative
competing markets, such as
digital transformation;
• a change in customer outlook
for example because of
economic conditions or geo-
political issues;
• an inability to identify and
analyse existing or emerging
competitors;
• longer-term increased
competitive pressures, due to
a failure to deliver technical
change or innovation; and
• short to medium-term
competitor tactics, such
as pricing.
Key to the strategy elements
• Key change projects aligned
with the Group’s principal risk
mitigation plans.
• Key change projects
supported by dedicated
programme management and
reporting.
• Investment in staff,
resource and expertise
to deliver change.
• Conduct risk measures which
demonstrate how products
and services perform for
customers.
• Root cause analysis of
operational errors and failures.
• Clear customer
accountabilities for staff.
• Staff reward driven by
customer-centric metrics.
• Framework in place to identify
and support vulnerable
customers.
• Monitoring for changes in
governance requirements and
standards.
• Measures in place to meet
the FCA’s Senior Managers
and Certification Regime
(which applied to the Group’s
UK regulated entities from
December 2019).
• A well-diversified client base
and portfolio of services.
• Client relationship
management and liaison.
• Monitoring for changes in
demand, the competitive
environment and new
technologies.
• A strong pipeline of
opportunities which we
actively manage.
• Development of new products
and services.
• Monitoring of trends in
corporate actions and other
market activity.
Links to the following strategy element
1
2
3
4
5
There remains an increasing
expectation from our markets
and customers to demonstrate
how we conduct our business
appropriately and ethically. We
are well placed to manage this
and during 2020 we will further
develop and enhance our
conduct training, policies
and associated controls
across the Group.
Links to the following strategy element
1
2
Market demand for cost-
effective outsourcing remains
stable. However, inherent risk
has increased as political and
economic factors may have an
adverse impact on this in the
short to medium-term.
Links to the following strategy element
1
2
3
5
*Trend indicates perception of how risk has moved year-on-year.
54
1 Grow sales to
existing clients
2 Win new clients 3 Develop and
acquire new
capabilities
4 Drive operating
leverage
5 Reinvest strong
cash flows
Increasing
Decreasing
No change
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55
VIABILITY STATEMENT
1. ASSESSMENT OF PROSPECTS
Equiniti conducts a significant portion of its business through
recurring revenue secured via long-term contracts and has a
stated modest growth strategy, evidenced both by its past
performance and resilience and the position it occupies in
the market. Business resilience has been strengthened by the
acquisition of Wells Fargo Shareowner Services in 2018. A
period of three years has been chosen to base the Viability
Statement on because, although forecasts are prepared for
longer periods, there is inevitably more uncertainty associated
with a longer time frame and the Directors have a reasonable
confidence over this time horizon. The viability assessment
reflects financial stress placed on the business arising from the
scenarios identified in the Principal Risks and Uncertainties
section of the Annual Report.
The Group’s strategy remains unchanged:
• Grow sales to existing clients
• Win new clients
• Develop and acquire new capabilities
• Expand margin through operating leverage
• Reinvest strong cash flows
The key factors supporting the Group’s prospects are:
Long-term, loyal, blue-chip clients – We have a large and
diverse client base, including c70 of the FTSE 100 and 120
of the FTSE 250. Our average relationship with FTSE 100
share registration clients is more than 29 years and our
clients typically take an average of 10 services from us.
Technology – Our well-invested and scalable proprietary
technology platforms give us a competitive advantage and
form a barrier to entry, given the substantial experience,
time and money required to build them. We have more than
30 platforms, all on UK-based infrastructure. Our primary
platforms are Sirius (share registration, dividend and share
plan management); Xanite (custody, investment and wealth
management); Compendia (pension administration and payroll);
and Charter (case and complaints management).
Leadership positions – We are leaders in large and growing
markets giving us significant growth opportunities and strong
momentum.
Scale – The scale of our business means we can successfully
handle the biggest transactions. In 2019, in the UK alone,
we made payments of £115 billion, interacted with c28
million shareholders and pensioners, and held c70m
shareholder records.
Equiniti had access to cash amounting to:
• £72.6m Cash and Cash Equivalents.
• £145.0m headroom on the Revolving Credit Facility –
£260m total less £115m utilised.
The leverage ratio at December 2019 was 2.2x excluding the
Finance Lease Liability debt (the leverage measure used in the
Senior Facilities Agreement). For Equiniti to breach the financial
covenant included in the Senior Facilities Agreement, the
leverage ratio would need to increase to 4.0x in 2020, 3.75x in
2021 and 3.50x in 2022. Debt of £343.6m as at December 2019
would need to increase by £200.2m to £544.0m (if underlying
EBITDA is £136.0m) for leverage to be 4.0x or underlying
EBITDA would need to decline to £85m. Both scenarios are
deemed highly unlikely.
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 Chief Financial Officer 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
2019. This considered the Group’s current position and its
prospects over the forthcoming years, and reaffirmed the
Group’s stated strategy.
Detailed financial forecasts are prepared, with the first year of
the financial forecast forming the Group’s operating budget
which is subject to a rolling forecast process throughout the
year. Subsequent years of the forecast are extrapolated from
the first year, based on the overall content of the strategic
plan. Progress against financial budgets and key objectives
is 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:
• low single-digit per annum revenue growth, supported
by market trends and increased cross selling into our
customer base;
Specialist people – We employ people who are experts in their
fields. At the year end, we had over 5,200 employees, with over
900 at our offshore facilities in India.
• modest margin improvement driven by operating leverage,
offshoring, automation, property rationalisation and
increasing mix of software licenses;
Strong acquisitions track record – We have a strong track
record of acquiring new platforms and capabilities, successfully
integrating them into the Group and generating growth from
them. Since 2007, we have completed 25 transactions.
Equiniti’s financial viability would be endangered either due to a
lack of funding or breaching the financial covenants included in
the Senior Facilities Agreement. The Group’s liquidity and debt
position as at December 2019 can be summarised as follows:
• no change in the stated dividend policy; and
• long-term access to liquidity. In July 2019, the Group
refinanced its Senior Debt Facilities to provide ongoing
committed funding. The £520.0m term loan and revolving
credit facility has been extended to July 2024. The Group
has substantial liquidity to support its growth ambitions and
ongoing working capital requirements
56
57
VIABILITY STATEMENT
The viability statement and projections carried out to support
it are made assuming the current business model and balance
sheet structure remain as is and future finance facilities, that
mature during the three-year period, will be refinanced on
similar terms.
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 range of alternative scenarios.
These represent stresses which include the following
potential six scenarios.
These scenarios have been derived by assuming one or more of
the Group’s Principal Risks occurs. The Group’s Principal Risks
are set out on pages 52 to 55.
The Viability Statement evaluates the following six scenarios:
1. Lower revenues and higher costs resulting from a change
in economic outlook that leads to: a) a higher cost to
service debt and b) a reduction in corporate actions due to
depressed market activity.
2. Reduction in revenue growth for a prolonged period of time
due to products that no longer meet the demands of the
Group’s clients, with a lag in cost reduction action.
3. Significant change programmes (offshoring/automation/
property rationalisation) do not deliver anticipated benefits
as a result of lower business agility and productivity.
4. Equiniti is subject to a cyber-attack resulting in the theft
of all of the 3.7m client data records held on Sirius and a
significant investment in capital expenditure to eliminate
future cyber security threats.
5. Scenarios 1 – 4 above all happening at the same time.
6. A number of financial shocks to the business leading to a
40% reduction in planned underlying EBITDA across a three
year period; the loss of all customer remediation work post
PPI, a reduction in interest rates (UK/US) of 75ps, a 30%
strengthening of the pound vs the dollar and 30% lower
trading in Investment Solutions.
We have not created a specific scenario for Covid-19 as it is an
emerging and evolving issue. However, we have considered
the overall scenarios presented and have concluded that they
sufficiently deal with examples of potential issues as complex
or impactful as Covid-19.
VIABILITY SCENARIOS AFFECTED BY EQUINITI’S PRINCIPAL RISKS
Change in
Economic
Outlook
Reduction in
revenue growth
for a prolonged
period of time
Cost programmes
do not deliver
anticipated
benefits
Equiniti
subject to cyber
attack
1 – 4 scenarios
happening
together
A number
of financial shocks
to the business
Principal risks and
uncertainties
Data Protection
Security
Information Technology
Organisational Resilience
Regulatory
Purchasing, Supply and
Outsourcing
People
Change and Development
Conduct
Markets and Competition
Product Development,
Channel and Pricing
56
Effect of Principal Risk on Viability scenarios:
High
Medium
Low
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VIABILITY STATEMENT
The results of the stress testing (including combining scenarios
1 – 4) demonstrate that due to the Group’s ability to generate
cash and access to additional funds Equiniti would be able to
withstand the impact in each case. Reductions considered as
part of this stress testing included cost efficiency programmes,
dividend reductions, cancellation of EBT share purchases and
a rationalisation of capital expenditure. The reductions are
considered reasonable as they are all within management and
Board direct control (for example, the Board approves each
interim and final dividend payment and management can
cancel or defer non-critical capital expenditure projects).
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 three-year period of their assessment.
5. GOING CONCERN
The Group is also required to confirm it has adopted the going
concern principle in preparing the accounts, which underpins
IAS 1. The Code requirement has narrowed this down to the
accounting purpose of going concern (Code C.1.3). As such,
there is no requirement to make reference to the going concern
in the Strategic Report, although good practice is taking the
form of a simple reference confirming the Directors consider
it appropriate to prepare the financial statements on the basis
of a going concern, as set out in the basis of preparation
on page 190.
The key points to consider in relation to asserting Equiniti’s
going concern status are:
• The Group has positive net assets.
• The Group’s three-year business plan demonstrates it is
able to generate significant cash flows in the next 12 months
to service its liabilities as they fall due and pay down debt,
based on modest growth and cost reduction ambitions.
• At 31 December 2019, the Group had total cash of £72.6m
together with available headroom of £145m under its
committed bank facilities. Net debt to underlying EBITDA
must be less than 4.0:1; it is currently 2.2:1 (excluding
property leases) and is expected to reduce below this
figure over the next 12 months.
• During 2019, the Group extended its Senior Facilities
Agreement to provide ongoing committed funding to
July 2024.
As such, we consider the going concern basis of preparing
the accounts to be applicable. With the analysis concluding
the Group has sufficient cash flow and undrawn debt facilities
for the next three years on a number of down side scenarios,
the Directors also have a reasonable expectation the business
will continue as a going concern for the next three years.
58
58
59
VIABILITY STATEMENT
58
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5959
Share Scheme Provider Of The Year
– the WSB Awards
60
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61
02
Governance
Report
GOVERNANCE REPORT
BOARD OF DIRECTORS
EXECUTIVE COMMITTEE
62
64
66
BOARD AND EXECUTIVE COMMITTEE STRUCTURE 70
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REPORT
76
84
90
94
120
CORPORATE GOVERNANCE REPORT
PHILIP YEA, CHAIRMAN
Chairman’s Introduction
to Governance
DEAR SHAREHOLDER
Strong corporate governance is fundamental to Equiniti’s
success and I remain determined that we will maintain the
highest standards. During the year, Equiniti complied in full
with the 2018 UK Corporate Governance Code (the Code).
This is the latest version of the Code and it became applicable
for us from 1 January 2019. Preparation for compliance began
in 2018. Since then we have implemented all the required
changes to our policies and practices. This has included,
for example, introducing a post-cessation element to our
remuneration policy, ahead of the approval of the policy at the
Annual General Meeting in May 2019. We also developed our
approach to understanding the Employee Voice (see below)
and monitoring whistleblowing matters that should be directed
to the Board.
BOARD VISITS
Members of the Board continued to visit a number of the
Group’s operations during the year, including our offices in
Minnesota, Poland and India. This allows the Directors to talk
directly to local management and see the Group’s products in
action. Attendees at these visits then provide feedback to the
Board as a whole. Through these visits we gain greater insight
into performance and how our teams are responding to clients’
needs, which informs our Board discussions and decision-
making when approving strategic initiatives.
PEOPLE, CULTURE AND EMPLOYEE VOICE
Visits to our sites also give the Board a feel for the culture
out in the business. As noted in my statement on page 18
and the Chief Executive’s statement on page 20, the Group is
undergoing a process of cultural change. The Board recognises
that this is a journey rather than an event, and we continue
to support Guy’s efforts in this regard. Diversity and inclusion
are fundamental parts of this cultural agenda and there is
62
considerable work going on across the Group to drive further
progress. More information can be found in the Strategic
Report on page 45.
In my report to you last year, I noted that we had designated
Dr Tim Miller as the non-executive Director responsible for
conveying Employee Voice to the Board. As part of this work, in
early 2019 we extended the existing Employee Forum in the UK
to create a Global Employee Forum, with members from India,
the US, the Netherlands and South Africa. We subsequently
merged this forum with the Communications Forum, to create
the Equiniti Global Colleague Forum (the Forum). The Forum’s
objectives are to build understanding of our strategy, promote
two-way discussion, build trust, improve performance and
shape the Group’s culture. Tim attends the Forum’s quarterly
meetings, as well as other forums below the Global one, and
reports to the Board after each meeting. During 2019, no
important issues emerged from these forums that the Board
was not already aware of.
BOARD EVALUATION
Towards the end of the year, we ran an internal evaluation
of the Board and its Committees, following the externally
facilitated evaluation in 2018.
The evaluation concluded that overall the Board functioned
very well but identified a number of areas for focus over the
coming year, including continued attention to progress with
our culture programme and to senior executive succession.
Directors are aware of the opportunity to improve shareholder
communications and address those areas where confidence
needs to be earned. The non-executive Directors requested
more regular reviews of competitors, and would welcome more
opportunity to interact with customers/clients.
CORPORATE GOVERNANCE REPORT
COMPLIANCE WITH THE UK CORPORATE
GOVERNANCE CODE
The Company applied the main principles and complied with
the relevant provisions set out in the UK Corporate Governance
Code 2018 (the Code) throughout the period under review.
Details demonstrating how the main principles and relevant
provisions of the Code have been applied can be found
throughout the Corporate Governance report, the Directors’
Report, each of the Board Committee reports and the
Strategic Report.
Directors had benefitted from site visits and felt it was
important to continue these, where appropriate on a less formal
basis. Greater access to product roadmaps was also a theme.
Appropriate steps have been agreed to address the above
points over the coming period. Further detail is provided on
page 73.
GOVERNANCE AND RISK
Our operating environment continues to evolve and it remains
critical for the Group to have a rigorous approach to identifying,
managing and mitigating risk. In 2019, the Risk Committee
has undertaken a detailed programme of work, including deep
dives to create longer-term strategic plans for managing a
number of our most significant risks. We have also continued
to embed our enterprise-wide risk management framework in
the business and have implemented the framework in EQ US,
ensuring it has the same risk-management toolkit as the rest
of the Group.
CONCLUSION
This has been another year of progress, as we have further
strengthened our corporate governance structure. We will
continue to evolve our governance structure, to help the
business deliver its strategy, create value and safeguard
our stakeholders’ interests.
Philip Yea
Chairman
12 March 2020
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63
BOARD OF DIRECTORS
PHILIP YEA
CHAIRMAN
Appointed: July 2017
(Independent upon
Appointment)
Philip was chief executive
of 3i Group plc from
2004 to 2009. A qualified
accountant, he is also a
former finance director of
Diageo plc and, as finance
director of Guinness PLC,
was closely involved in the
creation of Diageo through
Guinness's merger with
GrandMet in 1997.
Skills and Experience
Beneficial to the Company:
Philip is an experienced
Chairman with in-depth
knowledge of both the
quoted and private
equity sectors. With his
considerable executive
experience, he brings
valuable skills to the
Board. His knowledge of
the international business
environment will be of
particular importance as
Equiniti continues on the
next stage of its growth
and development as an
international business.
Other Appointments:
Non-executive Director
of Aberdeen Standard Asia
Focus plc
Non-executive Director
of Marshall of Cambridge
(Holdings) Ltd
Non-executive Director
and Chairman-designate
of Mondi plc
GUY WAKELEY
CHIEF EXECUTIVE
Appointed: January 2014
JOHN STIER
CHIEF FINANCIAL
OFFICER
Appointed: June 2015
A qualified accountant,
prior to joining the
Company John was the
Chief Financial Officer of
Northgate Information
Solutions Ltd for over 10
years. Prior to that, he
was the Chief Financial
Officer of Subterra Ltd,
a subsidiary of Thames
Water plc, which delivered
engineering services to
businesses across Europe.
Skills and Experience
Beneficial to the Company:
John’s considerable
finance experience, and
his extensive executive
experience, has been
invaluable in his role as
Chief Financial Officer, in
managing the Company’s
balance sheet and ensuring
it has the firm financial
foundation from which it
has grown from being a
private-equity run business
to a main market, FTSE 250
business.
Other Appointments:
None
Prior to joining the
Company, Guy was chief
executive of Morrison
plc for five years and
before that held divisional
leadership positions with
Amey, The Berkeley
Group, General Electric
and Rolls-Royce. Guy has
an MA in Engineering
Science from the University
of Cambridge and a PhD
in applications of artificial
intelligence to engineering
design.
Skills and Experience
Beneficial to the Company:
Guy is an experienced
chief executive, with
extensive IT experience.
This has enabled him to
forge a strong, focused,
management team for the
Company. This team, led
by Guy, has enabled the
Company to grow from a
private equity-run business
to a main market, FTSE
250 business, with a clear,
focused strategy for its
future growth.
Other Appointments:
Non-executive Director
of HgCapital Trust plc
Member of the CBI’s Public
Services Strategy Board
DARREN POPE
SENIOR INDEPENDENT
DIRECTOR
Appointed: December
2016
Darren is a qualified
accountant with over 30
years of experience in the
financial services industry,
the majority of which
has been spent in retail
financial services. Most
recently Darren served
as CFO of TSB Bank plc,
having led the initial stages
of its separation from
Lloyds Banking Group.
He was a non-executive
director of Virgin Money
Holdings (UK) plc prior to
its merger with CYBG plc.
Skills and Experience
Beneficial to the Company:
Darren’s considerable
accounting experience and
his in-depth knowledge
of the retail financial
services sector, a key
business sector for the
Group, is beneficial to
his role as Chair of the
Audit Committee and as a
member of the Board.
Other Appointments:
Non-executive Director
of Virgin Money UK PLC
Non-executive Director
of Network International
Holdings plc
ALISON BURNS
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed: April 2018
Alison has held executive
and non-executive roles
within Aviva plc, including
the position of CEO of
Aviva Ireland. She has
extensive financial services
experience, gained in
senior roles with Santander,
Lloyds TSB and AXA UK.
Skills and Experience
Beneficial to the Company:
Alison has in-depth
knowledge of the insurance
and financial services
sectors, two key markets
for the Group. Alison’s
experience has provided
her with an insight into
the customer’s viewpoint,
alongside operational
experience, which are skills
required by the Board.
Other Appointments:
Non-executive Director
of Hastings plc
Non-executive Director
of National House Building
Council
CHAIR
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BOARD OF DIRECTORS
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BOARD COMMITTEES
EXECUTIVE COMMITTEES
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Audit
Committee
Disclosure
Committee
Nomination
Committee
Remuneration
Committee
Risk
Committee
Executive
Committee
Business
Committee
Sales and Bid
Committee
Resource
Committee
Group Investment
and Change
Committee
Executive Risk
and Compliance
Committee
MARK BROOKER
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed: November
2018
Mark’s executive career
has involved senior roles
in technology-centric
businesses, including
Betfair where he was
COO and Trainline,
where he held a similar
role, providing strong
management and
operations experience.
He also spent 17 years
in investment banking,
with Rothschild, NatWest
Markets, Merrill Lynch and
Morgan Stanley.
Skills and Experience
Beneficial to the Company:
Mark brings strong
management and
operational experience
from technology-centric
businesses and his time
in investment banking
is very relevant to our
marketplace.
Other Appointments:
Non-executive Director
of AA plc
Non-executive Director
of William Hill plc
Non-executive Director
of Seedrs Limited
Non-executive Director
of Findmypast Limited
SALLY-ANN HIBBERD
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed: August 2016
DR TIM MILLER
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed: February 2015
Sally-Ann previously served
as COO of the international
division and latterly as
Group Operations and
Technology Director of
Willis Group, and held a
number of senior executive
roles at Lloyds TSB.
Skills and Experience
Beneficial to the Company:
Sally-Ann’s extensive
experience of the financial
services sector, together
with her experience of
the insurance sector,
two key business sectors
for the Group, has been
beneficial when conducting
her role as Chair of the
Risk Committee and as a
member of the Board.
Other Appointments:
Non-executive Director
of IG Group Holdings plc
Non-executive Board
member of Loughborough
University
Advisory Board member
of Go Beyond Partners
Non-executive Director of
The Co-operative Bank plc
During his 14 years at
Standard Chartered Bank,
Tim held a number of
director level positions
with global responsibility
for areas including human
resources, compliance,
audit, assurance, financial
crime and legal. Tim was
also a non-executive
Director of Page Group,
the recruitment services
provider, for nine years.
Skills and Experience
Beneficial to the Company:
Tim’s extensive experience
across a range of areas,
especially in human
resources, has assisted him
in his role of Chair of the
Remuneration Committee.
Tim’s experience made
him the ideal choice to be
appointed as the Board’s
designated non-executive
Director to engage with the
Group’s wider workforce.
Other Appointments:
Non-executive Director
of Equiniti Financial
Services Limited (the
Group’s most significant
FCA regulated entity in
the UK)
Non-executive Director
of Clarkson plc
Non-executive Director
of Scapa Group plc
Non-executive Director
of Otis Gold Corporation,
a Toronto Stock Exchange
listed company
CHERYL MILLINGTON
INDEPENDENT NON-
EXECUTIVE DIRECTOR
Appointed: November
2018
Cheryl’s experience has
been gained through her
senior leadership roles
in technology across a
variety of sectors, including
financial services and retail,
most recently as Chief
Digital Officer at both
Travis Perkins and Waitrose.
Her prior roles include
CIO at Asda and senior
line management roles in
retail at HBOS. Cheryl was
previously an independent
non-executive Director
of National Savings and
Investments.
Skills and Experience
Beneficial to the Company:
Cheryl brings deep
technological, business
leadership, and customer
centric experience
gained across a variety of
sectors, including financial
services and retail, which
is very relevant to our
marketplace.
Other appointments:
Non-executive Director
of Atom Bank plc
Non-executive Director
of Hays plc
Non-executive Director
of intu properties plc
KATHY CONG
COMPANY SECRETARY
Appointed: July 2016
Prior to joining the
Company, Kathy worked
at FTSE 250 specialist
banking group, Investec
plc, for over 13 years.
During her time at Investec,
Kathy worked closely
with senior management
and subsidiary directors
to ensure appropriate
governance systems
were established and
maintained, particularly
in relation to Directors’
duties, relevant regulatory
requirements and related
party transactions,
including FCA-regulated
firms.
Kathy is an active industry
contributor, having held
the position of Secretary of
the Association of Women
Chartered Secretaries and
the London Money Market
Association.
Other appointments:
Director of Equiniti Share
Plan Trustees Limited
Non-executive Director
of The Pioneer Academy
Company Secretary to
the Equiniti Group UK
subsidiary companies
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EXECUTIVE COMMITTEE
KEY
EXECUTIVE COMMITTEES
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Resource
Committee
B
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Committee
Group Investment and
Change Committee
SB
ERC
Sales and Bid
Committee
Executive Risk and
Compliance Committee
GUY WAKELEY
CHIEF EXECUTIVE
See page 64 for details
JOHN STIER
CHIEF FINANCIAL OFFICER
See page 64 for details
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THERA PRINS
CHIEF OPERATING OFFICER AND
CEO, EQ INVEST
(INVESTMENT SOLUTIONS DIVISION)
LINA BROWN
CHIEF COMMERCIAL OFFICER
AMY MADDEN
CHIEF CUSTOMER OFFICER
Joined the Group in November 2016
Joined the Group in July 2013
Joined the Group in May 2005
Thera is responsible for ensuring that the
Group has the resources and functions in
place to deliver the Board’s strategy. In
addition, she manages the division that
operates the various platforms that investors
can use to access the market and buy, sell and
hold investments in a cost effective way.
Prior to joining the Group, Thera spent 20
years in retail financial services working for
Visa Europe, Barclays and Lloyds Group,
where she specialised in customer services,
new product development solutions and
global expansion initiatives.
Lina leads a number of corporate functions:
Commercial, Legal, Sales Operations
and People. She is responsible for sales
operations, all pricing matters, contract
negotiations and all legal operations across
the Group. Since August 2019, on an interim
basis, she has been heading Equiniti’s global
People team, with full responsibility for global
resourcing, people operations, reward and
colleague engagement.
Prior to joining Equiniti, Lina held a variety
of senior commercial roles within FTSE 100,
FTSE 250 and Fortune 500 companies and
worked internationally.
Amy is the Chief Customer Officer for
Equiniti, championing customers, and driving
growth by embedding a culture of customer
satisfaction and advocacy across the business.
Amy knows Equiniti’s customers, and the
insights we gain from them, and leads
innovative programmes across brand and
creative, sales enablement and marketing,
communications and corporate responsibility.
She is passionate about sustainability and
inclusive growth.
Amy has been with Equiniti since 2005. As
Director of Marketing and Communications
during the Company’s 2015 IPO and 2018
expansion into the US market, she was part of
the team that led the business transformation,
bringing her strategic forward-thinking energy
to the programme of change. She spent
18 months in Minneapolis, positioning EQ
US as a leading industry force in customer
experience and service excellence.
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KEVIN O’CONNOR
CHIEF INFORMATION OFFICER
PAUL MATTHEWS
CEO, EQ BOARDROOM
(INVESTMENT SOLUTIONS DIVISION)
TODD MAY
CEO, EQ US
Joined the Group in January 2018
Joined the Group in February 2011
Joined the Group in February 2018
Kevin is responsible for leading the Group’s
digital and technology agenda. He has
extensive global experience in building and
leading teams that deliver and support high
performance and highly secure systems for
both the B2B and B2C markets, in both highly
regulated and unregulated markets, across
a range of industries including investment
banking, gaming and travel.
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 circa 50%
of the FTSE 100 and circa 40% of the FTSE
250. With over 30 years of experience, his
background and knowledge of the securities
industry brings an important skill set to the
Group’s senior team, helping shape the
Group’s offering to listed companies both in
the UK and globally.
Todd is responsible for leading the Group's
US transfer agent business. He joined Wells
Fargo Shareowner Services, now EQ US,
in 2007. Under his leadership, the business
implemented key regulatory changes,
executed significant enhancements to
issuer and shareowner websites in meeting
customer needs, and increased product
offerings while consistently being known as
a leading service provider. Todd has over 25
years’ experience in financial services and
corporate development.
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ADAM GREEN
CHIEF RISK OFFICER
DUNCAN WATSON
CEO, EQ PAYMASTER
(PENSION SOLUTIONS DIVISION)
ENRIQUE SACAU
CEO, EQ DIGITAL
(INTELLIGENT SOLUTIONS DIVISION)
Joined the Group in March 2015
Joined the Group in March 2015
Joined the Group in November 2017
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Adam is responsible for managing the
Group’s global risk profile. 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 workstream
at the Financial Services Authority, as it
established the Financial Conduct Authority
and Prudential Regulatory Authority.
Duncan is responsible for the
EQ Paymaster business lines and for
ensuring that its clients and their members,
policyholders and employees receive
outcomes that are of the highest quality.
Duncan joined the Group from Aon Hewitt
where he was UK Chief Operating Officer.
He is a Pensions Actuary who has worked
in financial services for 27 years and has
significant experience in both advising clients
and the delivery of change and operational
excellence.
Enrique is currently responsible for the EQ
Digital business lines. Prior to this position, he
was Head of Financial Services in Group Sales,
to lead business development. Previously he
was Managing Director Europe and ExCo
member at FNZ, the leading B2B wealth
management platform provider. Prior to this,
Enrique held senior customer-facing roles at
Xchanging (now DXC).
He has wide-ranging experience in growing
regulated technology and outsourcing
businesses, as well as M&A. Enrique has
deep expertise in international growth and
has worked in Europe, Asia and the USA.
His areas of focus are digital products,
international expansion and growth with new
industry verticals. He chairs EQ’s Diversity and
Inclusion Council.
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66
EXECUTIVE COMMITTEE
BOARD MEMBERSHIP AND ATTENDANCE
The Board comprises a non-executive Chairman, the Chief
Executive, the Chief Financial Officer and six independent non-
executive Directors. The members of the Board who served
during the year and as at the date of this report are shown in
the table below, together with their attendance at the 10 Board
meetings held during the year:
NAME
Philip Yea (Chairman)
Guy Wakeley (Chief Executive)
John Stier (Chief Financial Officer)
Darren Pope (Senior Independent Director)
Alison Burns
Mark Brooker
Sally-Ann Hibberd
Dr Tim Miller
Cheryl Millington
ATTENDED
10/10
10/10
10/10
10/10
10/10
10/10
10/10
10/10
10/10
Details of the Directors, including the skills and experience they
bring to the Board, can be found on pages 64 to 65.
GOVERNANCE
During the year, all procedures were updated to ensure
full compliance with the 2018 UK Corporate Governance
Code (the Code) by the end of 2019. The Code, which came
into effect on 1 January 2019, replaced the previous, 2016
Corporate Governance Code and placed a greater emphasis
on relationships between companies and their shareholders
and stakeholders. During 2018, we began the process of
implementing policies and procedures to enhance our
engagement with all of our stakeholders and developed a Code
Compliance dashboard that tracked the progress of actions
already undertaken, and those we needed to undertake to
ensure full compliance with the new Code. A copy of the Code
can be found on the Financial Reporting Council’s website at
www.frc.org.uk.
ROLE OF THE BOARD
The Board is collectively responsible for promoting the long-
term sustainable success of the business and generating value
for shareholders and contributing to wider society. The Board
delegates the day-to-day management of the business to the
executive management team. However, there is a schedule
of matters reserved for the Board’s decision, together with
a delegated authority framework, to ensure that unusual or
material transactions are brought to the Board for approval.
The schedule is reviewed regularly to ensure that it is kept up to
date with any regulatory changes and is fit for purpose. The last
review and revision was undertaken in June 2019.
The schedule of matters reserved for the Board includes,
amongst other things:
• approval of strategic plans;
• approval of annual budgets;
• approval of acquisitions and disposals;
• approval of treasury policies;
• ensuring a sound system of internal controls and risk
management is maintained throughout the Group’s
operations;
• approval of an appropriate method for engaging with
the workforce;
• approval of half-year and full-year results announcements;
• approval of the Company’s Annual Report and Accounts; and
• appointment or resignation of Directors and the Company
Secretary.
The delegated authority schedule sets out the financial
parameters of authority, covering the delegation of all areas
of the Group’s activities below Board level to the executive
Directors, divisional CEOs, or 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 may be appropriate.
DIVISION OF RESPONSIBILITIES
In line with the Code, the Board’s terms of reference state that
at least half of the Board should be made up of non-executive
Directors and this requirement was complied with throughout
the year.
The terms of reference also state that one of the non-executive
Directors should also be appointed as the Senior Independent
Director (SID). This role was undertaken by Darren Pope.
In addition, the terms of reference require that the roles
of the Chairman and Chief Executive should be exercised
independently of each other. The Chairman is responsible
for the leadership of the Board and the Chief Executive is
responsible for managing and leading the business. These
roles were carried out independently of each other
throughout the year.
Each Director has access to the advice and services of the
Company Secretary and can arrange for independent,
professional advice at the Company’s expense where they
judge it is necessary in order to discharge their responsibilities
as Directors. There is an agreed procedure enabling them to
do so, which is managed by the Company Secretary. No such
advice was sought during the year.
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EXECUTIVE COMMITTEE
68
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 (the Act) and the Company’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 does or may have
a conflict, are clearly defined.
As part of the framework referred to above, towards the
end of the year, each Director is provided with a copy of the
information held about them – personal information, declared
conflicts, shareholding in the Company, who their connected
persons are – requesting that they confirm that the details held
are still valid and up to date. This annual attestation process
ensures that the Director is aware of the details held on them
and that the details are correct.
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 makes sure it is satisfied that these
do not have any adverse effect on the Company or the ability
of any particular Director to discharge their duties fully.
More information about members of the Board and the
Executive Committee is available on pages 64 to 67.
BOARD ACTIVITIES DURING 2019
FOCUS
WHAT THE BOARD HAS CONSIDERED
Operational performance
For a detailed update on our
operational performance see
our Strategic Report on pages
22 to 29
• Chief Executive reports
• Market updates
• Business reviews: EQ Boardroom,
EQ Digital, EQ US, EQ Paymaster
and EQ Invest
• Strategy and business
transformation projects
• Operational transformation
updates
LINK TO STRATEGIC
DRIVERS
1
2
3
4
5
Financial performance
and risk
More information on our
financial performance and risk
can be found on pages 30 to
39, and 52 to 55
• Separation of EQ US from Wells Fargo
Shareowner Services
• Chief Financial Officer reports
• Review and approve new Debt
refinancing
• 2018 Annual Report and Accounts and
preliminary results
• H1 financial statements and interim
results announcements
• Workday implementation
• Interim and final dividends
• Group financial forecasts
• Group insurance renewal
• Group budget
3
4
5
Governance
• Regular updates from the Company
• Committee and subsidiary
For further details of the
evaluation of the Board’s
performance, see page 73
Secretary on key governance
developments, disclosure requirements
and recommendations
• Notice of 2019 AGM and arrangements
for 2019 Hybrid AGM
• Review of the structure of the Executive
Committee
updates
• Review of Schedule of Matters
Reserved to the Board
• Review of Group policies (AML
& ABC related policies, CSR
and Modern Slavery)
• 2019 Board and Committee
evaluation
1
2
3
4
5
Strategy
• Review of Strategy day discussion
• Review of competitor and
For an update on Strategy, see
our Strategic Report on pages
14 to 15
and re-confirmed 10 year vision and
strategic plan framework
• Monitoring of delivery of strategy
• Review of global registration
opportunities
• Review of corporate social responsibility
strategy
Culture and stakeholders
• Review of Culture and Values
More information on
stakeholder engagement can be
found on pages 40 to 50
programme
• Review of Company brokers
• Updates on investors and market
perspective
• Health and safety updates
• Results of employee survey
• Updates on the reward policy and
product cycle
• Regular strategic project updates
• Updates on IT transformation
plan
1
2
3
4
5
• Arrangements for UK and Global
Employee Engagement Forums
3
4
• Whistleblowing updates
• Employee Voice updates
• Cultural transformation plan
updates
• Customer experience update
• Review of customer complaints
gender pay gap reporting
reports
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BOARD AND COMMITTEE STRUCTURE
BOARD
The Board is collectively responsible for promoting the long-term sustainable success of the business and generating value
for shareholders and contributing to wider society. The Board delegates the day-to-day management of the business to the
executive management team.
Audit
Committee
Risk
Committee
Remuneration
Committee
Nomination
Committee
Composition:
Non-executive Directors
Composition:
Non-executive Directors
Composition:
Non-executive Directors
Composition:
Non-executive Directors
Purpose: 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
Purpose: Reviews the effectiveness
of Equiniti’s risk management and
processes to ensure that key risks
are adequately mitigated
Purpose: Establishes the
remuneration policy and oversees
implementation for the Group as
a whole, specifically the Directors
and senior leadership team
Purpose: Determines appropriate
succession and contingency plans for
the Directors and senior managers
and undertakes appropriate searches
for new Directors, as required
A
R
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N
Executive
Committee
Disclosure
Committee
Composition: see pages 66 to 67
Purpose: Meets monthly to review
performance and the allocation of
resources and directs activity to
deliver the business plan
E
Composition:
The Chairman, Chief Executive,
Chief Financial Officer and the
Company Secretary
Purpose: Oversees the Company’s
compliance with its obligations
(as laid down by the FCA’s Listing
Rules, Disclosure Guidance and
Transparency Rules and the Market
Abuse Regulation) in respect of
the disclosure and control of inside
information directly concerning
the Company
MANAGEMENT COMMITTEES
The Executive Committee is supported by five main management sub-committees
D
Executive Risk and
Compliance Committee
Chairman:
Chief Financial Officer
Group Investment and
Change Committee
Chairman:
Chief Financial Officer
Sales and Bid
Committee
Chairman:
Chief Executive Officer
Business
Committee
Chairman:
Chief Executive Officer
Resource
Committee
Chairman:
Chief Financial Officer
Frequency: at least
quarterly
Purpose: Ensures
performance of the
business is in accordance
with policies, legislation
and agreed risk appetite
Frequency: monthly
Frequency: monthly
Frequency: weekly
Frequency: weekly
Purpose: Reviews capital
expenditure requests,
key priority projects
and corporate
development activity
Purpose: Reviews sales
submissions, tenders and
contract renewals and sets
the commercial and pricing
strategy for the Group,
including brand, marketing
and new product launches
Purpose: Oversees
business planning and
performance and directs
resources during the month
to achieve business goals
Purpose: Oversees people
related resourcing and
travel policy decisions in the
UK and Europe, balancing
organisational effectiveness
and business requirements
against cost considerations.
US and India operate
their own resource
committee process
ERC
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B
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KEY
BOARD COMMITTEES
EXECUTIVE COMMITTEES
A
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ERC
Audit
Committee
Disclosure
Committee
Nomination
Committee
Remuneration
Committee
Risk
Committee
Executive
Committee
Business
Committee
Sales and Bid
Committee
Resource
Committee
Group Investment
and Change
Committee
Executive Risk
and Compliance
Committee
70
BOARD AND COMMITTEE STRUCTURE
BOARD COMMITTEES
More detailed explanations of the work of the Audit, Risk,
Nomination and Remuneration Committees can be found
on pages 76, 84, 90 and 94 respectively.
SECTOR EXPERIENCE
Life assurance
Pensions
EXECUTIVE COMMITTEES
In addition to the oversight provided by the Board and
Committees, the executive Directors are supported by a
number of executive management committees, which help
them to discharge their duties. These include preparation and
implementation of the Group strategic plan, delivery of the
budget and 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 Chief Executive leads the Group’s operational management
and is supported by the executive management team. The
executive management team gives strategic focus and is
responsible for managing the operational and financial
performance of the Group, by coordinating the work of the
specialist business areas. This enables the efficient and effective
day-to-day operation of the Group’s businesses.
The Board is kept up to date with developments in the
business, including the work of the senior and divisional
management teams, through the Chief Executive and Chief
Financial Officer’s regular reports, which are discussed in detail
at each Board meeting.
The Executive Committee is the most senior executive
management committee. Its members are listed on
pages 66 to 67.
BOARD SKILLS
It is a core feature of good corporate governance that the
Board and its Committees have an appropriate balance of skills
and experience, independence and knowledge, to enable the
effective discharge of their duties and responsibilities, whether
individually or collectively. Part of the role of the Chairman
and the Nomination 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 individual experience and background of each Director
are set out in their biographies on pages 64 to 65. The Board
considers that the range of skills, experience and background of
each of the Directors is sufficiently relevant and complementary
to allow appropriate oversight, challenge and review of the
Company’s progress in achieving its corporate goals.
The following charts illustrate the broad spectrum and depth
of experience that the nine members of the Board have and
how, collectively, they cover the sectors and businesses in
which the Group operates.
TECHNICAL SKILLS
Online marketing
Cyber security
Software development
2015
IT Infrastructure
2014
Insurance
2015
Retail financial
services
2014
Commercial banking
SALES SKILLS
Alliances
Joint ventures
Retail
2015
Brand & marketing
2014
Business development
FINANCE SKILLS
Equity markets
Debt financing
Audit
2015
Financial accounting
2014
Management
accounting
OTHER SKILLS
Organisational
development
HR & reward
Restructuring &
divestment
2015
Risk management
2014
M&A
KEY
BOARD SKILLS
Not
applicable
Not so
familiar
Somewhat
familiar
Very
familiar
Extremely
familiar
DIVERSITY
The Board, supported by the Nomination Committee, values
diversity in its broadest sense and when considering new non-
executive Director appointments will, in addition to considering
gender, age, disability, ethnicity, geography or experience,
look to maintain within the boardroom the appropriate balance
of skills, experience, independence and knowledge of the
Company and the industry as a whole.
The Board is currently comprised of nine Directors, three of
whom are women, and so has already reached the aims of the
Hampton-Alexander review and the aspiration to achieve at
least 33% representation of women on FTSE 350 boards by
2020. The Board continues to strengthen the pipeline of senior
female executives within the business, and to ensure that there
are no barriers to women succeeding at the highest levels
within the Group. Further details on the Company’s gender
diversity statistics as at 31 December 2019 and details of the
Group’s diversity and inclusion policy can be found on page 47.
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BOARD EVALUATIONS
BOARD AND COMMITTEE EVALUATIONS
2018 Key Recommendations – how did we address them?
KEY RECOMMENDATION
ACTION TAKEN
Timing of committee meetings
Integration of new non-executive Directors and composition
of committee memberships
Board to monitor closely the enhancement of the audit and
risk functions for EQ US
Directors to meet with a greater number of talented
employees below the senior management level
Certain committee meetings have been re-scheduled to be
held on a different day to Board meetings, to ensure sufficient
time is given to the meetings.
The induction process has been reviewed and provisions put
in place to ensure a smooth integration of new non-executive
Directors. The reorganisation of committee memberships has
provided flexibility and ensures full participation of committee
members at meetings.
There was increased focus at the Audit and Risk Committee
meetings on the monitoring of EQ US. Specifically, the
separation from Wells Fargo which completed in May 2019,
was made a standing agenda item to ensure that the Board
remained informed on the process.
Two Board dinners for Executive Committee members’ direct
reports and key talent identified two levels down, were
organised as well as a Directors’ visit to Chennai, with the
opportunity to meet the leadership team based in Chennai
and the Indian workforce.
Remuneration Policy to be communicated to shareholders
The Remuneration Policy was presented and approved by
shareholders at the Company’s AGM held on 2 May 2019.
Ensure that the new Remuneration Policy is applied, matching
reward to both performance and behaviour
The Remuneration Report on pages 94 to 119 sets out how
the new Remuneration Policy is applied, matching reward to
both performance and behaviour.
Develop a strategic view of the risk profile over the next four
to five years
Review of changes in corporate governance to ensure that the
Board and its Committees are compliant
Continued support and involvement in the programme
regarding the culture and behaviours of the Group
The Risk Committee has begun work on developing a strategic
view of the risk profile over the next four to five years and
evidence of this is set out in the Risk Committee report on
pages 84 to 89.
With the assistance of the Company Secretary, the necessary
changes as a result of the new UK Corporate Governance
Code have been implemented to ensure compliance. The
Company’s compliance statement is set out on page 63.
The Board programme for 2019 has included focused
presentations and updates from management on the
Company’s culture, employee engagement survey,
development of the corporate social responsibility strategy
and Employee Voice.
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BOARD EVALUATIONS
2019 Board and Committee Evaluations
An informal evaluation of the Board, its Committees and the
performance of the Chairman was undertaken during 2019.
Lintstock, an independent third-party provider of board
evaluation services, has again been engaged to assist with the
evaluation of the Board, its Committees and the Chairman’s
performance. Lintstock does not undertake any other services
for the Company. The evaluation followed the process
summarised above and expanded on below:
Questions
Analysis
Interviews
Evaluation
& Report
Discussion
Action
Points
2019 BOARD REVIEW
We engaged the services of Lintstock to assist with the
2019 review of Board performance. Lintstock is a corporate
governance advisory firm specialising in Board Reviews, and has
no other relationship with the Company.
The first stage of the review involved Lintstock engaging with
the Chairman and Company Secretary to set the context for
the evaluation and to tailor the survey content to the specific
circumstances of the Company. All Board members were then
invited to complete an online survey assessing the performance
of the Board and its Committees.
The exercise was weighted to ensure that core areas of Board
and Committee performance were addressed, as well as having
a particular focus on the following areas:
• the monitoring of culture and behaviours, the progress made
on the Culture Transformation Plan, and how the mechanisms
by which the Board engages with employees ought to
develop further;
• the adequacy of the organisational structure and the HR
function, the oversight of talent management and succession,
and the top people priorities facing the Group over the
coming years;
• the quality of investment proposals brought to the Board,
the Board’s review of the effectiveness of past decisions, and
events that have occurred over the past year from which the
Board could draw lessons to improve its own performance;
• the ability of the Board to oversee and direct challenge of
technological opportunities and threats, and the development
of the Board’s oversight of risk more widely;
• the Board’s focus on strategy and growth, in particular
organic and inorganic opportunities, and the understanding
of the capacity of the organisation to deliver the strategy;
• the clarity of the Group’s strategy, the level of ambition
expressed in the strategic plan, and the communication
of the strategy;
• the Board’s understanding of key stakeholder groups,
including investors, customers and employees; and
• the atmosphere and dynamics at Board meetings, the
standard of support, induction and training available to
Board members, and potential improvements that could
be made to the quality of the Board packs.
The composition of the Board, including key changes that
should be made to the Board over the next three to five years
in the context of the Group’s strategic goals.
Lintstock subsequently produced reports considering the
performance of the Board, the Committees and the Chairman.
The Chairman discussed the feedback on Board performance
with each Directors and the Company Secretary, while the
Senior Independent Director similarly discussed feedback on
the performance of the Chairman with each of the Directors
and the Company Secretary.
The output of the Board Review was discussed at the
January 2020 Board meeting.
KEY RECOMMENDATIONS FROM
THE 2019 EVALUATION:
• Both succession planning and talent and culture were
highlighted as important areas of focus in last year’s review
and it was agreed that these remain important topics for
2020.
• Some of our non-executive Directors felt that they would like
more exposure to employees and so appropriate site visits
will be organised.
• We will seek to maintain and improve the quality of
shareholder communications.
• We will look to improve the information we provide to
our non-executive Directors about our competitors and
allocate more time on our rolling strategy agenda to review
competitor strategies and performance.
• We will endeavour to find appropriate ways for our non-
executives to enjoy greater exposure to customers/clients,
perhaps through attendance at company events.
• Our non-executive Directors expressed a desire to have a
greater understanding of our Intelligence Solutions business,
and so we will ensure that this is addressed with appropriate
presentations in 2020.
• We will continue to monitor our governance activities to
ensure that they remain appropriate.
• We will ensure that we use our non-executive Directors’
considerable commitment and time in an efficient way
that is not duplicative and look to streamline some of the
information provided in Board packs.
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BUSINESS MANAGEMENT
The Chief Executive is responsible for delivering the Company’s
agreed strategy and, with the Chief Financial Officer, prepares
the annual budget, which is subject to formal scrutiny and
approval by the Board. Progress in delivering 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 executive business review meetings,
prior to progress updates being reported to the Board.
There are clear policies outlining delegated authority limits for
all types of business transactions and associated authorised
signatories. The authority limits and processes are verified by
reviews undertaken by compliance and Group internal audit.
Additional detail on the work of the compliance and internal
audit functions is set out on page 81.
All employees are required to undergo an objective-based
personal appraisal process, with individual objectives derived
from the corporate strategy and the objectives of their
line managers.
THE BOARD’S REVIEW OF THE SYSTEM OF
INTERNAL CONTROL
The Board has responsibility for the Company’s overall
approach to risk management and internal controls and
considers their effectiveness fundamental to the achievement
of the Company’s strategic objectives. During 2019, the Board,
through its Audit and Risk Committees, built upon its 2018
review of the process for identifying, evaluating and managing
the principal risks faced by the Group.
The Group internal audit function advises the executive
management team on the extent to which systems of internal
control are adequate and effective for managing business
risk, safeguarding the Company’s resources, and ensuring
compliance with Group policies and legal and regulatory
requirements, as well as advising on ways in which areas of risk
can be addressed. It provides objective assurance on risk and
controls to senior management, the Audit Committee and
the Board.
The Group internal audit’s work is focused on the Group’s
principal risks. The mandate and programme of work of the
Group internal audit team is considered and approved by the
Audit Committee. Based on the approved internal audit plan,
a number of internal audits took place across the Group’s
divisions to facilitate improvement of the Group’s internal
controls. Findings were reported to the relevant operational
management and the Audit Committee. Group internal audit
follows up on the implementation of recommendations and
reports on progress to senior management and to the
Audit Committee.
The Group Chief Audit Executive, reports regularly to the Chair
of the Audit Committee and attends each Audit Committee
meeting to present the internal control findings from the
internal audits performed. The Audit Committee reviews and
discusses the effectiveness of internal audits on an annual
basis with the Group Chief Audit Executive. This is done by
the review of the internal audit plan of work for the year and
monitoring progress against the plan and actions identified
by internal audit. The Group Chief Audit Executive meets with
the Audit Committee at least twice a year without executive
Directors present, and is a regular attendee at the Risk
Committee meetings.
REGULATED ACTIVITIES
A number of the Group’s businesses include regulated activities,
with several of the Company’s subsidiaries being regulated.
Two of these are major businesses within the Group.
The first such business is Equiniti Financial Services Limited
(EFSL), which has a Board consisting of two independent non-
executive Directors and five executive Directors. The EFSL
Board ensures that appropriate governance is followed in
respect of all FCA related activities and has the full support
of the Board in delivering against this requirement
The second such business is Equiniti Trust Company in the US.
This is governed by its own independent board (the US Board).
The Board maintains oversight of the US business by receiving
regular reports and presentations from the Chief Executive and
Chief Financial Officer, who are non-executive Directors of the
US Board, and also directly from the US senior management
team. In addition, copies of the US Board and committee
minutes are made available to the Board.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. The Directors have
prepared the Group financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted
by the European Union and 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 Company and of the profit or loss
of the Group and Company for that period. In preparing the
financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
74
• state whether applicable IFRSs as adopted by the European
Union have been followed for the Group financial statements
and IFRSs as adopted by the European Union have been
followed for the Company financial statements, subject to any
material departures disclosed and explained in the financial
statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Company will continue in business. A copy of the financial
statements is available on Equiniti's website: http://investors.
equiniti.com/investors
The Directors are also responsible for safeguarding the assets
of the Group and Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company's transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company
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.
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.
DIRECTORS' CONFIRMATIONS
The Directors consider 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 Group and Company’s position and performance, business
model and strategy.
Each of the Directors, whose names and functions are listed
in pages 64 to 65 confirms that, to the best of their knowledge:
• the Company financial statements, which have been prepared
in accordance with IFRSs as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial
position and profit of the Company;
• the Group financial statements, which have been prepared
in accordance with IFRSs as adopted by the European Union,
give a true and fair view of the assets, liabilities, financial
position and profit of the Group; and
• the Strategic Report includes a fair review of the development
and performance of the business and the position of the
Group and Company, together with a description of the
principal risks and uncertainties that it faces.
STATEMENT OF DISCLOSURE OF INFORMATION
TO EXTERNAL AUDITOR
As required by section 418 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 auditor in connection with preparing its audit
report) of which the Company’s auditor is 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 auditor
is aware of that information.
GOING CONCERN
The Company’s business activities, together with factors likely
to affect its future development, performance and position, are
set out in the Strategic Report on pages 20 to 29. 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 30 to 39. Financial risk management objectives, details
of financial instruments and hedging activities, and exposures
to credit risk and liquidity risk are described in note 6.11 to
the Accounts on pages 169 to 171.
During the year, the Directors assessed the viability of the
Company over a three-year period, taking into account the
Group’s current financial position and the principal risks,
particularly those that could threaten the business model and
the ability of the Group to renew its finance. 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 Group viability statement can be found
on page 56.
The Directors are satisfied that:
• the Company’s and the Group's activities are sustainable
for the foreseeable future, and that the business is a going
concern; and
• it is appropriate to continue to adopt a going concern basis
in the preparation of the financial statements.
Philip Yea
Chairman
12 March 2020
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75
AUDIT COMMITTEE REPORT
DARREN POPE, CHAIR OF THE AUDIT COMMITTEE
DEAR SHAREHOLDER
I am pleased to present the Audit Committee (the Committee)
report for the year ended 31 December 2019.
During the year, the Committee continued to focus on further
increasing disclosure and the transparency of the Company’s
external reporting and worked with the external Auditor to
ensure that the Group’s financial disclosures continued to be
aligned with best practice, the 2018 UK Corporate Governance
Code (the Code) and FRC recommendations.
There has additionally been an increased focus on the detail
of reports submitted to the Committee by management during
the year, to allow a more forensic analysis of management
judgements as well as the introduction of new accounting
standards.
2019 saw less progress than anticipated in reducing the
absolute number of overdue high-risk audit issues. This was
a direct consequence of the efforts required from our IT
colleagues to deliver the successful separation of the Wells
Fargo business earlier in the year. However, the average age of
overdue items has reduced. This remains a key focus of both
management and the Committee.
The Committee carried out its annual effectiveness review,
by way of completion of questionnaire by each Committee
member. Overall, the Committee was seen to be working
very effectively.
PRIORITIES FOR 2020
In addition to continuing to focus on the areas stated above,
we have commissioned an external review of the quality and
effectiveness of our Internal Audit function as set against
professional standards for internal auditors, which is to be
undertaken by BDO. We will report on the findings of this
review in next year’s report.
Now that separation of the US business has been completed
we will, during 2020, review the work of EQ US Examining
Committee, and the strength of the internal controls in the
newly separated business.
I would like to thank my fellow Committee members, the
finance and internal audit teams within the Group, and
the team at PwC for their work during the year.
Darren Pope
Chair of the Audit Committee
12 March 2020
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AUDIT COMMITTEE REPORT
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COMMITTEE MEMBERSHIP & ATTENDANCE
The Committee is made up exclusively of independent
non-executive Directors. The members of the Committee
who served during the year and as at the date of this report
are shown in the table below, together with their attendance
at the six committee meetings held during the year:
NAME
ATTENDED
Darren Pope (Committee Chair)
Alison Burns
Mark Brooker
Sally-Ann Hibberd
Cheryl Millington
6/6
6/6
6/6
6/6
6/6
GOVERNANCE
The Committee acts independently of management and
reports and makes recommendations directly to the Board.
The Committee structure requires the inclusion of at least
one member with significant, recent and relevant financial
experience and competence in accounting or auditing (or both).
The Committee Chair fulfilled this requirement during the year.
The Committee structure also requires the inclusion of at least
one member to also be a member of the Company’s Risk
Committee. Sally-Ann Hibberd is the Risk Committee Chair and
Darren Pope and Cheryl Millington are also members of the
Risk Committee. This facilitates efficient cross communication
between the two committees, which ensures that all audit and
risk issues are addressed effectively.
All Committee members are expected to be financially literate
and to have an understanding of key aspects of the Company’s
operations including the internal control environment, the
regulatory framework for the Company’s business and matters
which may influence the presentation of accounts
and key figures.
The Committee as a whole has competence relevant to the
sectors in which the Company operates.
The Committee invites the Chief Financial Officer, the Chief
Executive, the Chairman, Group Chief Audit Executive, Chief
Risk Officer and senior representatives of the external auditor
to attend its meetings in full, although it reserves its rights
to request any of those individuals to withdraw. Other senior
managers are invited to present such reports as are required for
the Committee to discharge its duties.
The Committee has unrestricted access to Company documents
and information, as well as to employees of the Company and
the external Auditor.
During the year, the Committee regularly met with the senior
representatives of the external Auditor, and also with the
Group Chief Audit Executive, without management and/or any
executive member of the Board being present.
The Committee may take independent professional advice on
any matters covered by its terms of reference, a copy of which
can be found in the investor section of the Company’s website:
http://investors.equiniti.com/investors/shareholder-services/
corporate-governance. During 2019 the Committee did not
seek independent professional advice other than from the
external Auditor.
ROLE OF THE AUDIT COMMITTEE
In accordance with its terms of reference, the Committee
provides an independent overview of the effectiveness of
the internal financial control systems and financial and
narrative reporting processes. Its responsibilities include:
FINANCIAL REPORTING
• monitoring the integrity of the financial and narrative
statements of the Company, including the annual and
half-year results announcements and other formal
announcements relating to its financial performance;
• reviewing the accounting principles, policies and practices
adopted throughout the period;
• reporting to the Board on any significant financial reporting
issues and judgements;
• monitoring and reviewing the appropriateness of the going
concern assumption and viability statement disclosures;
EXTERNAL AUDITOR
• monitoring and overseeing the relationship with the external
auditor;
• recommending their appointment, re-appointment and
removal to the Board for approval by shareholders;
• ensuring that at least every 10 years, in compliance with
all relevant legislation, that the external audit is put out to
tender;
• reviewing and approving the annual and half-year audit plans;
• recommending the external auditor’s remuneration;
• reviewing and approving the non-audit services policy
and fees;
• reviewing the effectiveness and objectivity of the audit
process on an annual basis, including the quality control
procedures and considering the expertise and resources
of the external auditor;
INTERNAL CONTROL
• in conjunction with the Risk Committee, reviewing the
adequacy and effectiveness of the Group’s internal financial
controls;
• reviewing the manner in which management ensure and
monitor the adequacy of the nature, extent and effectiveness
of internal controls;
• ensuring that the review covers all material controls including
financial, operational, and compliance;
INTERNAL AUDIT
• monitoring and reviewing the effectiveness of the Group’s
internal audit (GIA) function;
• reviewing and approving the internal audit programme
at least annually and when significant changes occur;
• reviewing the GIA reports and procedures to ensuring
implementation by management of audit recommendations;
• approving the charter of the GIA function and ensure
the function has the necessary resources and access to
information to enable it to fulfil its mandate, and is equipped
to perform to appropriate professional standards for internal
auditors; and
• monitoring the working relationship, co-ordination and
exchange of information between the external and internal
audit teams, ensuring there are no inappropriate restrictions.
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AUDIT COMMITTEE REPORT
COMMITTEE ACTIVITIES DURING 2019
The Committee met on six occasions during the year. At those meetings, the Committee carried out its remit, which primarily
included the following:
JANUARY
• reviewed the GIA report;
• approved and adopted a four-tier Internal Audit Report Rating System;
• reviewed an update on the GIA quality assurance programme;
• reviewed a PwC update on the 2018 Audit;
• reviewed the independence and objectivity of the external auditor;
• approved the exemption of audits for certain subsidiary companies under s479
of the Companies Act 2006 & UK GAAP FRS101;
• reviewed the key judgements and proposed sensitivities disclosures for the 2018
Annual Report;
• reviewed the FRC Thematic Reviews for the 2018 Annual Report;
• reviewed the progress made in producing the 2018 Annual Report;
• reviewed the report on UK payment practices and performance applied to relevant
subsidiaries within the Group; and
• reviewed the findings from the 2018 Audit Committee Effectiveness Review.
MARCH
• reviewed the GIA report;
• reviewed the assurance reports on the internal control environment, covering internal
audit outcomes, risk and compliance, and financial controls;
• reviewed tax implications and APMs, and analysed policies on IFRS15 compliance which
included the US;
• reviewed and approved letters of support to be issued to relevant subsidiaries;
• reviewed and approved the draft viability and going concern statements for inclusion
within the 2018 Annual Report;
• approved the significant judgements statement in the 2018 Annual Report;
• reviewed the external auditor’s audit findings report for the 2018 financial year;
• reviewed the 2018 Annual Report, including the financial statements, and recommended
their approval to the Board;
• reviewed the full-year results announcement and recommended its approval to the Board;
• reviewed and recommended a final dividend of 3.49 pence for approval; and
• reviewed the Committee’s Terms of Reference.
JUNE
• reviewed the GIA report;
• approved the annual update to the internal audit charter;
• approved the annual update to the internal audit methodology;
• reviewed payment practices report, analysis of intangible assets and supporting analysis
of value and H1 2019 key accounting judgements;
• reviewed the external auditor’s half-year review;
• reviewed the report on the effectiveness of the external auditor; and
• received the EFSL Audit Committee and EQ US Examining Committee reports.
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AUDIT COMMITTEE REPORT
JULY
• reviewed the GIA report;
• received an update on the GIA quality assurance programme;
• reviewed the H1 statement on basis of preparation;
• reviewed the external auditor’s interim review findings;
• reviewed the half-year results announcement and recommended its approval to the Board;
and
• reviewed the effectiveness of the external Auditor, which included the CASS audit for
EFSL which is a client asset assurance engagement that involves providing a Client Assets
Report to the FCA.
SEPTEMBER
• reviewed the GIA report;
• received an update on working capital management and receivables and income accruals
analysis;
• received a technical update from PwC on audit quality, corporate governance and
information security; and
• received the EFSL Audit Committee Report.
NOVEMBER
• reviewed the GIA report;
• approved the 2020 internal audit plan;
• received an update on business year-end readiness plan, accounting policies and potential
change to external reporting/cash KPIs;
• reviewed the external auditor’s year-end pre-planning approach;
• reviewed the Company’s year-end external audit plan; and
• received the EFSL Audit Committee and EQ US Examining Committee reports.
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SIGNIFICANT ISSUES RELATING TO THE FINANCIAL STATEMENTS
In considering the financial results contained in the 2019 Annual Report, the Committee reviewed the significant issues and
judgements made by management to determine those results and these are set out in the following table:
AREA OF FOCUS
WHY WAS THIS SIGNIFICANT?
Revenue recognition
The Group has entered into a number of revenue contracts.
These arrangements can include multiple performance
obligations, including licence delivery, and as a result
revenue recognition in connection with these contracts can
involve a significant degree of management judgement
around the allocation of revenue to performance obligations
and the timing of the revenue in accordance with IFRS15 and
the Group’s stated accounting policy for such items.
Software development
The Group exercises judgement in assessing whether
the costs of a particular project should be capitalised or
expensed. IAS 38 Intangible assets sets out five key criteria
that are required to be met in order for development costs
to be capitalised.
HOW DID THE COMMITTEE
ADDRESS THIS ISSUE?
Management presented the
accounting judgement relating to
material transactions that included
multiple performance obligations and
significant licences to the Committee.
Evidence was provided and discussed
to support the value and the timing
of these transactions and how they
aligned to the Group’s accounting
policy and IFRS 15.
Management presented the
accounting judgements relating
to the capitalisation of software
development costs to the Committee.
Evidence was provided and discussed
to show that the judgements satisfied
criteria under accounting standard IAS
38 and discussed the internal controls
around this.
Pensions
Contingent
consideration
The Group has three defined benefit pension schemes. 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 which include
salary rate increases, mortality rates and discount rates. The
defined benefit pension obligation is sensitive to changes in
assumptions, so judgement must be exercised to ensure that
these assumptions are reasonable.
The Committee discussed, and
agreed with the assumptions used
by management, as informed by the
Schemes’ actuaries, in determining
the net defined benefit pension
obligation.
The Group recognises contingent consideration in the
statement of financial position for acquisitions where
the level of consideration payable dependant on post-
acquisition performance.
In order to assess the amount of contingent consideration
payable, management estimates the future performance of
the acquired businesses to determine whether the required
thresholds for payment will be achieved.
Management presented the business
forecasts and the assumptions
around the calculation of contingent
consideration payable. Evidence was
provided to support the value of
contingent consideration recognised
in the statement of financial position
and how this complies with accounting
standard IAS 37.
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INTERNAL AUDIT
The Group has a dedicated in-house Internal Audit team
(GIA). This team is supported, when required, via a co-source
agreement with KPMG LLP, which provides additional specialist
expertise. GIA drew on this agreement to conduct a CASS-
related audit with CASS specialists from KPMG.
The Group Chief Audit Executive reports directly to the
Committee Chair and in addition reports on an administrative
basis to the Chief Financial Officer. GIA strengthened the
depth of the function with additional capabilities during 2018,
including a Deputy Chief Audit Executive and a new analytics
capability and leveraged these during 2019 to continue
to enhance the audit methodology and coverage. During
2019, the internal audit quality assurance and improvement
programme was further embedded, establishing a continuous
cycle of review and improvement within the function.
GIA principally reviews the design and effectiveness of
governance, risk management and controls operating within
the business by undertaking an agreed schedule of
independent audits each year.
The Committee determines the nature and scope of the
annual internal audit programme (which is derived from an
audit universe including financial and commercial processes,
governance considerations and key corporate risks) and
revises it from time to time, in response to changes to business
circumstances and risk profiles.
The findings of the internal audits are reported to executive
management, and any necessary corrective actions are
agreed and tracked. Summaries of these reports and resulting
themes and insights are presented to, and discussed with, the
Committee at each Committee meeting, along with details of
progress against management action plans as appropriate.
The Committee agrees the annual Internal Audit plan for
the year and ensures that GIA has appropriate resources
available to it to complete that plan. The Committee has
assessed the effectiveness of the internal audit function
as part of its effectiveness review, and is satisfied that
the current arrangements remain appropriate and effective
for the Company. The Committee will keep under review
the remit of the Internal Audit function.
The Committee remains very focused on timely completion
of agreed management action plans to address audit findings.
During 2019, progress on reducing the number of overdue
audit issues was disappointing, with no material change in
overdue medium and high-risk issues from the previous year.
Progress was primarily constrained by the demands on our IT
colleagues relating to the separation of Wells Fargo in the first
half of the year and the creation of a strategic IT delivery plan in
the second half of the year. Some older outstanding issues were
however resolved during 2019, which was more encouraging.
This remains a focus for the Committee during 2020. The same
constraints additionally caused some 2019 audit activity to be
deferred into 2020. However, this will not compromise the
2020 plan.
RISK MANAGEMENT AND INTERNAL CONTROLS
The Audit Committee and the Risk Committee both support
the Board when considering the nature and management of
the Group’s risks, its risk management framework and its
risk appetite.
Details of these are included within the Risk Committee report
which can be found on pages 84 to 89. Details of the Group’s
principal risks and uncertainties can be found in the Strategic
Report on pages 52 to 55.
The Committee has overall oversight of the Group’s systems
of financial controls, including their design, implementation
and effectiveness, and details of these controls can be found
on page 88 to 89.
Having considered reports from Risk, Finance and GIA, the
Committee is satisfied that the internal controls over financial
reporting and risk management systems were appropriately
designed and were operating effectively in all material respects
during 2019.
WHISTLEBLOWING AND ANTI-BRIBERY
The Group is committed to the highest standards of quality,
honest, openness and accountability.
Accordingly, the Group has whistleblowing, anti-bribery and
corruption risk policies in place. The Committee reviewed
the whistleblowing policy during the year. The Chair of
the Committee is responsible for overseeing the integrity,
independence and effectiveness of the whistleblowing
procedures and is informed of all reported cases. The Chair
of the Committee was content that management’s response
and handling of reported cases remained appropriate.
Further details on these policies can be found in the Strategic
Report on pages 44 and in the Risk Committee Report on
page 85.
EXTERNAL AUDITOR
The Committee is responsible for overseeing the
Group’s relationship with its external auditor,
PricewaterhouseCoopers LLP (PwC).
The Committee considers the nature, scope and results of
PwC’s work and reviews, develops and implements the policy
on the supply of any non-audit services that are to be provided
by PwC. The Committee receives and reviews reports from
PwC relating to the Company’s Annual Report and Accounts
and the external audit process.
EFFECTIVENESS AND INDEPENDENCE
During the year, an assessment of the quality and
effectiveness of the external audit process was undertaken
by GIA. The team sought the views of the divisional finance
directors, the Group finance team, the Chief Financial
Officer, the Chair of the Audit Committee, and members
of the Executive Committee who had interacted with
PwC, to assess whether the audit had been conducted in
a comprehensive, appropriate and effective manner.
The report was then discussed by the Committee at its meeting
in June 2019, with the Committee concluding that the audit
had been conducted in a professional, challenging and robust
manner and that the audit plan agreed by the Committee had
been followed. It was agreed that the new audit partner had
added significant value to the overall audit.
The Committee also reviewed PwC’s objectivity and
independence and confirmed that sufficient procedures
are in place to safeguard those.
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TENURE
The Committee undertook a full tender of the Company’s
external audit services in 2016, following which the
recommendation to approve the reappointment of PwC as
external auditor was approved by the Board and subsequently
by shareholders at the 2017 AGM. The Committee is not
looking to re-tender the external audit services in the near
term and will be recommending PwC be re-appointed as the
Company’s external auditor for a further year at the 2020
Annual General Meeting. Darren Meek was first appointed as
the lead audit partner for the 2018 audit, and in line with the
policy on lead partner rotation is anticipated to rotate off the
Group’s audit in 2024.
NON-AUDIT SERVICES POLICY AND FEES
While the insight gained as the Group’s auditor may sometimes
make it logical for PwC to undertake work outside of the
annual audit, the Committee recognises that its engagement
to provide non-audit services to the Group may impact on
perceptions of PwC’s independence.
Accordingly, the Group has established a policy which governs
the provision of any non-audit services. The policy specifies
services which cannot be carried out by PwC as external
auditor (primarily activities which would involve PwC taking up
management responsibilities) and sets the framework within
which non-audit work may be provided. The policy states that
PwC will only be able to perform non-audit work in limited
circumstances and where approved by the Committee.
The Group paid £584,000 in audit and audit-related fees,
and £334,000 in non-audit related fees, for the financial year
ended 31 December 2019. Non-audit work solely related to
independent assurance services primarily performed in relation
to the CASS audit of Equiniti Financial Services Limited (EFSL).
The Group has committed to maintain the ratio of non-audit
to audit fees to a maximum of 70% of the average statutory
audit fee. For further information on how the non-audit fees
are broken down, please see note 7.4 on page 177.
VIABILITY STATEMENT
The viability statement can be found on page 56. The
Committee reviewed management’s work in conducting a
robust assessment of the business model, the risks that could
threaten the model, and the future viability of the Company.
This assessment included assessing a reasonable time period
for the review, reviewing financial forecasts for that period,
identifying severe but plausible scenarios for each of our
principal risks, as well as considering their interdependencies
and scenarios involving multiple risks. To support the final
conclusion on viability, the assessment also took into account
the mitigations available to the Company to protect against
these downside scenarios and also the adequacy of the internal
control environment. Particular attention was paid to the
credibility of proposed mitigations in the most severe scenarios.
In all cases the mitigations were deemed to be achievable and
proportionate even under stress. Based on this analysis, the
Committee recommended to the Board that it could approve
and make the viability statement.
STATEMENT OF COMPLIANCE
Having tendered the audit in 2016, the Company confirms
that it has complied with the terms of The Statutory Audit
Services for Large Companies Market Investigation (Mandatory
Use of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014 (the Order) throughout the year.
In addition to requiring mandatory audit re-tendering at least
every 10 years for FTSE 350 companies, the Order provides
that only the Audit Committee, acting collectively or through
its Chair, and for and on behalf of the Board is permitted:
• to the extent permissible in law and regulation, to negotiate
and agree the statutory audit fee and the scope of the
statutory audit;
• to initiate and supervise a competitive tender process;
• to make recommendations to the Directors as to the auditor
appointment, pursuant to a competitive tender process;
• to influence the appointment of the audit engagement
partner; and
• to authorise an auditor to provide any non-audit services
to the Group, prior to the commencement of those
non-audit services.
FAIR, BALANCED AND UNDERSTANDABLE
The Board is committed to ensuring that all external financial
reporting presents a fair, balanced and understandable
assessment of the Group’s position and prospects. In line with
Section 27 of the Code, the Committee has been requested
by the Board to consider whether it supports 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 with the information necessary to assess
the Company’s position and performance, business model
and strategy.
In forming its view, the 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, with particular attention given to alternate
performance measures. To support this, the 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.
Furthermore, the Committee received briefings and updates
during the course of the year, appraising them of the Code
requirements and business performance. The Committee was
presented with a draft of the 2019 Annual Report with sufficient
time to review, challenge and provide feedback.
The briefing note:
• explained the process of preparing and compiling the report
across the business’s internal teams (Investor Relations,
Finance, HR and Company Secretariat) the involvement of
specialist advisors with the requisite skills to structure and
review the 2019 Annual Report;
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AUDIT COMMITTEE REPORT • explained how the 2019 Annual Report was designed to be
understandable, with consistent presentation of key messages
throughout the report. In arriving at their conclusion, the
Committee also noted that internal reporting aligned to
the KPIs, key financial measures and narrative themes as
presented in the 2019 Annual 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; and
• demonstrated that the 2019 Annual 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 content.
The Committee therefore concluded that the 2019 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.
Darren Pope
Chair of the Audit Committee
12 March 2020
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Fair, balanced and
understandable
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RISK COMMITTEE REPORT
SALLY-ANN HIBBERD, CHAIR OF THE RISK COMMITTEE
DEAR SHAREHOLDER
I am pleased to present the Risk Committee Report for 2019,
which details our work during the year.
In my report to you last year, I set out the following objectives
for 2019. These were to:
• continue to embed our Enterprise-wide Risk Management
(EWRM) Framework and risk management tool within the
Group;
• continue to enhance the corporate governance processes
within EQ US; and
• develop a long-term strategic view of the risk profile for the
next four to five years.
The Committee met all of these objectives during the year,
although we recognise that the first two in particular are multi-
year challenges. We continued to embed the EWRM framework
and bolstered the first line of our three lines of defence model
across the Group. This included clarifying responsibilities and
employing additional resource to ensure effective management
of first line risk.
In the US, completing the separation of the business from Wells
Fargo has materially reduced the overall risk profile, by giving
us complete control over the US operations and its underlying
systems. We have implemented our EWRM framework and are
in the process of refining and embedding it, ensuring the US
has the same risk management toolkit as the rest of the Group.
The Committee also developed its view of the longer-term
profile of a number of the Group’s principal risks. As part of this,
we conducted deep dives in four main areas: cyber security,
data protection, information technology and business continuity
management. This has enabled us to put in place a longer-term
strategic IT risk programme to address the root causes of those
risks, rather than responding to individual developments as they
arise. This allows us to align risk management with our capital
expenditure considerations, as part of our five-year planning
process.
Our work during the year also included a detailed review of
the potential impact of Brexit, including the effect on Euro
payments, market volatility and data location and transfer.
Our conclusion remains that Brexit will not have a material
impact on the Group, although it has the potential to affect the
macroeconomic environment and the decisions made by our
clients in areas such as mergers and acquisitions.
Other notable activities included the Group’s UK FCA-regulated
business undertaking a programme of work to ensure it was
compliant with the Senior Managers and Certification Regime
by the 9 December 2019 deadline. We also conducted a review
of the Group’s insurance provision, enabling us to increase
cover in specific areas.
EFFECTIVENESS OF THE RISK COMMITTEE
An internal evaluation of the Committee was undertaken
during the year, which concluded that the Committee continues
to operate effectively. Details of the evaluation and its results
can be found on page 73.
2020 PRIORITIES
In 2020, the Committee will focus on:
• ensuring that the strategic IT risk programme is delivering to
scope and effectiveness;
• increasing focus on risk from a product/service perspective;
and
• continuing to embed our EWRM framework and risk
management tool within the Group, including reviewing
the scope of the second line.
Sally-Ann Hibberd
Chair of the Risk Committee
12 March 2020
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COMMITTEE MEMBERSHIP AND ATTENDANCE
The Committee is made up exclusively of independent non-
executive Directors. The members of the Committee who
served during the year and as at the date of this report are
shown in the table below, together with their attendance at
the five committee meetings held during the year:
NAME
ATTENDED
Sally-Ann Hibberd (Committee Chair)
Tim Miller
Cheryl Millington
Darren Pope
5/5
5/5
5/5
5/5
GOVERNANCE
The Committee acts independently of management and reports
and makes recommendations directly to the Board.
The Committee’s Terms of Reference requires the participation
by the Chair of the Audit Committee and Darren Pope is a
member of the Committee. Sally-Ann Hibberd and Cheryl
Millington are also members of the Audit Committee. This
facilitates efficient cross-communication between the two
committees, which ensures that all audit and risk issues are
addressed effectively.
The Company Secretary acts as secretary to the Committee
and attends all meetings. The Committee invites the Chairman,
Chief Executive, Chief Financial Officer, Chief Risk Officer and
Group Chief Audit Executive to attend its meetings in full,
although it reserves its rights to request any of those individuals
to withdraw. Other senior managers are invited to present
such reports as are required for the Committee to discharge
its duties.
During the year, the Committee regularly met with the Chief
Risk Officer, without management and/or any executive
member of the Board being present.
The Committee has unrestricted access to Company documents
and information, as well as to employees of the Company.
The Committee may take independent professional advice
on any matters covered by its Terms of Reference. These
Terms of Reference were updated during the year to reflect
the new UK Corporate Governance Code 2018. A copy of the
Terms of Reference can be found in the investor section of the
Company’s website: http://investors.equiniti.com/investors/
shareholder-services/ corporate-governance.
ROLE OF THE RISK COMMITTEE
In accordance with its Terms of Reference, the Committee
provides an independent overview of the effectiveness of
the internal operational and financial control systems. Its
responsibilities include:
RISK STRATEGY
• advising the Board on the development of the Company’s
overall current and future risk appetite, tolerance and
strategy;
• overseeing and advising the Board on the current and
emerging risk exposures;
RISK ASSESSMENT
• in conjunction with the Audit Committee, keeping under
review the Company’s overall risk assessment process that
informs the Board’s decision making;
• regularly reviewing and approving the parameters used in
these measures and the methodology adopted;
• setting standards for the accurate and timely monitoring of
large exposures and certain risk types of critical importance;
• reviewing the Company’s ability to identify and manage new
risk types;
INTERNAL CONTROL
• in conjunction with the Audit Committee, reviewing the
adequacy and effectiveness of the Group’s internal controls:
• overseeing the Enterprise-Wide Risk Management (EWRM)
Framework;
• reviewing reports on any material breaches of risk limits and
the adequacy of proposed action;
• reviewing the manner in which management ensures and
monitors the adequacy of the nature, extent and effectiveness
of internal controls;
• reviewing 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;
• reviewing the Company’s procedures for managing material
compliance requirements, including fraud, bribery and
corruption, financial crime, data protection, health and safety,
and financial services regulatory compliance; and
• considering and approving the remit of the risk management
function and ensuring it has adequate resources and
appropriate access to information to enable it to perform
its function effectively.
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COMMITTEE ACTIVITIES DURING 2019
The Committee met on five occasions during the year. At those meetings, the Committee carried out its remit, which primarily
included the following:
FEBRUARY
• reviewed and discussed the Group’s principal risks;
• reviewed the quarterly report on risk and compliance;
• reviewed risk committee updates from the Executive Risk and Compliance Committee
(ERCC) (including the ERCC Risk Acceptance Report) and the EFSL Risk Committee;
• received a discussion paper on key Brexit risks;
• received and discussed management reports covering Data Protection, Financial Crime
and Information Security;
• reviewed the relevant sections of the 2018 Annual Report;
• received and discussed second line monitoring covering risk action and second line
assurances and subsequent management actions;
• reviewed the findings of the 2018 Committee evaluation exercise;
• reviewed a proposed 2019 agenda schedule; and
• reviewed governance developments for the reporting period.
JUNE
• reviewed and agreed amendments to the Committee’s Terms of Reference to bring it in
line with the new Corporate Governance Code 2018;
• reviewed risk committee updates from the ERCC, EFSL and ETC Examining Committees;
• received and discussed an in-depth presentation on Group Operations and Group IT risks;
• received and noted an update on Group Principal risks, including the US top risks;
• received and discussed a paper on Financial Crime and MLRO updates;
• received and noted an analysis of the Group Insurance Programme;
• received and noted a paper on Second Line Assurance;
• discussed and resolved to recommend to the Board policies on: Vulnerable Customers;
CSR; Risk Management; Policy Governance; and Whistleblowing;
• reviewed the Whistleblowing reports;
• received a Regulatory Horizon update on regulatory changes likely to impact the Group
and its clients up to 2022;
• received and noted the Risk Acceptances update;
• received and noted Cyber Security and Data Protection updates; and
• received a discussion paper around supplier contracts and client contracts.
SEPTEMBER
• reviewed and discussed a presentation paper on the principal risks across the Group;
• received an update on Group-wide IT risks;
• received and discussed a paper on US key risks;
• received the annual MLRO report for review;
• received and discussed an update on Brexit;
• received and noted a Regulatory update;
• discussed and resolved to recommend to the Board policies on: Legal Risk Management;
Public Relations; Responsible Business; Supplier Relationship Management; Corporate
Governance; Creative and Brand; Building and Physical Security; Competition Law;
Compliance; and Conflicts of Interest;
• received an update on assurance activities, including closure of overdue monitoring
actions; and
• reviewed risk committee updates from the ERCC and EFSL Risk Committees.
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NOVEMBER
• received and discussed an update on Group Principal Risks;
• reviewed and discussed a detailed presentation from the CIO on IT, Cybersecurity
and Data Protection;
• received a presentation on business continuity and resilience; and
• received and discussed an update on Brexit.
DECEMBER
• reviewed and discussed each of the Group’s material principal risks;
• reviewed risk committee updates from ERCC and the EFSL Risk Committee; and
• reviewed the Group’s Environmental Policy, Client Credit Risk Policy and Modern Slavery
and Human Trafficking Policy.
RISK MANAGEMENT AND INTERNAL CONTROLS
1. Our risk leaders are responsible for proactive risk
OUR APPROACH TO RISK MANAGEMENT
The Group operates an Enterprise Wide Risk Management
(EWRM) Framework; a single method which allows all areas
of the business and the supporting service lines to assess
and classify risk using a shared methodology. This provides
a structured way of thinking about the kind of risks and
opportunities the Group may experience.
The EWRM Framework is based on the following model:
THIRD LINE OF DEFENCE
Risk Committee
A committee report is created
providing a status of risk management.
SECOND LINE OF DEFENCE
Risk & Compliance Oversight and Challenge
Every quarter, the ERCC reviews and
challenges the top 10 risks for each business.
FIRST LINE OF DEFENCE
Operational Management
The businesses CEOs (our risk leaders) are
responsible for proactive risk identification and
application of systems and controls in line with policy.
identification and application of systems and controls
in line with the EWRM Framework. Using our online risk
management tool, risks are input and actions taken to
mitigate those risks are monitored to ensure they are on
track. The risk management tool also enables oversight of
those “accepted” risks which are outside the Group’s risk
appetite but where no mitigation is taking place.
2. Our risk leaders attend quarterly Executive Risk &
Compliance Committee (ERCC) meetings chaired by
the Chief Financial Officer and attended by the Chief
Executive, the Chief Risk Officer, the Group Chief Audit
Executive and divisionals CEOs. At these meetings, the
EWRM Framework is reviewed to ensure that it remains
effective, risks for each business are raised and discussed,
and actions to mitigate these risks approved. Where new
risks are identified, these are ranked from low to high in
probability and impact so that they can be included within
the EWRM Framework for ongoing tracking.
3. While the Board has ultimate responsibility for the system
of risk management and internal control, it has delegated
authority for overseeing and directing the EWRM
Framework’s development to the Committee. The Chief
Risk Officer oversees the risk management system as a
whole and, together with the Group Chief Audit Executive,
ensures that all parts of the business, with regards to
compliance monitoring and internal audit reviews, are
covered and regularly reviewed. Members of the ERCC
attend the Committee meetings and the Chief Risk Officer
presents his report to the Committee for its review.
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RISK COMMITTEE REPORT
PRINCIPAL RISKS AND UNCERTAINTIES
Details of our principal risks and uncertainties, both current
and emerging, are set out on page 52 to 55. These are linked
to KPIs and the Remuneration Committee reviews those KPIs
with the Chief Risk Officer when considering the remuneration
and bonuses of the executive Directors and members of the
Executive Committee.
GOVERNANCE OF UK REGULATED ENTITIES AND
PRUDENTIAL CAPITAL RISK
In the UK we have subsidiary companies which are subject to
FCA regulatory capital requirements, where they must maintain
minimum levels of capital in order to manage their affairs.
The Group’s most significant FCA regulated entity is Equiniti
Financial Services Limited (EFSL). 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. It must ensure that it can meet its
regulatory capital requirements and has sufficient liquidity to
meet its liabilities as they fall due, including under potentially
highly-stressed circumstances. 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 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 the EFSL Risk Committee.
EFSL has monthly Board meetings and quarterly Risk and Audit
Committee meetings, with its Remuneration and Nomination
Committees meeting biannually. EFSL’s Risk Committee reviews
and challenges EFSL’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 Capital
Requirement Directive “Pillar 3 disclosures”, which are available
on our website at https://equiniti.com/uk/about-us/statutory-
and-regulatory-reports/capital-requirements-directive-2019/
The second such subsidiary company is Paymaster (1836)
Limited (Paymaster). Paymaster 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 on the market in which it operates. As a MiFID exempt
firm, Paymaster is not bound to comply with the Capital
Requirements Directive.
Paymaster does, however, assess its capital requirements and
is subject to Equiniti’s EWRM and three lines of defence risk
management model.
In July 2018, the FCA granted Paymaster an e-money licence.
The licence enables the company to provide payment services
and issue digital cash alternatives, which can then be used to
make card, internet or phone payments globally. In February
2019, Equiniti Global Payments Limited also obtained an
e-money licence.
GOVERNANCE OF US REGULATED ENTITIES
In the US we have a subsidiary company, Equiniti Trust
Company (ETC) that is regulated by the New York State
Department of Financial Services (DFS). ETC is approved by
the DFS as a fully-licenced limited purpose trust company
bank under the New York State Banking Laws and has its
capital requirements set by the DFS. During July 2019, ETC
was examined by the DFS. Over a period of four weeks, the
DFS reviewed documentation and conducted interviews with
a number of employees, to gain an understanding of the
controls in place at ETC. At the conclusion of the examination,
a Confidential Report of Examination (Report) was issued. While
the Report identified areas that the DFS felt required additional
maturity, there were no areas that were cause for concern.
To help meet its regulatory requirements, ETC has its
own governance structure which includes a Board with
independent non-executive Directors; an Examination
Committee; a Risk Committee; and an Executive Committee.
ETC has monthly Board and quarterly Examination and Risk
Committee meetings which review risk, compliance and audit
matters. The Examination Committee is chaired by a senior
independent non-executive Director of ETC.
In November 2019, the Group purchased Corporate Stock
Transfer (CST) a US transfer agent based in Denver, Colorado.
This entity is regulated by the SEC.
FINANCIAL RISK MANAGEMENT
The Group’s operations expose it to a variety of financial risks,
including credit risk, liquidity risk and the effects of changes
in interest rates on debt and cash balances. The EWRM
Framework seeks to limit the adverse effects on the Group’s
financial performance, by monitoring levels of cash and debt
finance and the related financial impact.
The Group’s principal financial instruments comprise sterling
and US dollar cash and bank deposits, bank term loans and a
revolving credit facility, and a portfolio of interest rate swaps,
together with trade debtors and trade creditors that arise
directly from its operations.
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RISK COMMITTEE REPORT
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CASH FLOW INTEREST RATE RISK
The Group is exposed to interest rate risk in three main
respects and protected against this as outlined below:
• interest based on floating rates is generally earned on client
and corporate cash balances, this is partially fixed by interest
rate derivatives with maturities to September 2023;
• the mid-term risk of change in long-term interest rate swaps,
through which income is earned on our SAYE share-plan
products, is protected by notional fixed rate interest rate
swap agreements; and
• expenses relating to our bank term loans, which incur interest
at a variable rate and include the £190m and $92m term
facilities, are offset by interest income earned on unhedged
cash balances. The Group does not hedge the revolving
credit facility as this is a flexible instrument and the drawn
proportion of the facility is also offset by interest income
earned on unhedged cash balances.
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 the Group. The Group’s principal
financial assets are bank deposits, 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 into 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 as 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 Group
does have trade credit insurance against some key customers,
which underpins the use of the receivable facility. The amounts
presented in the consolidated statement 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.
FOREIGN CURRENCY RISK
There is some exposure to foreign currency risk, particularly in
relation to the Group’s operations in the US, Poland and India.
FX risk is actively managed by our Group Treasury. Natural
internal hedges are used where available, with all residual FX
risk managed via a structured programme of rolling forward
foreign exchange contracts.All defined material exposures are
completely hedged. The Group will continue to monitor both
its exposure to, and management of, this risk.
PRICE RISK
Price risk results from changes in market prices such as interest
rates, foreign exchange rates and equity dealing prices, which
influence our income or the value of our financial instruments.
The Group earns income in relation to client monies 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
primarily linked to the bank base rate, while both our term and
revolving credit facilities are linked to LIBOR.
As noted previously, interest rate swaps are used to manage
medium-term exposure to movements in interest rates.
In 2017 and 2018, Equiniti entered into interest rate swaps for
a total of $700m and £1,025m, agreeing to receive fixed rate
income in exchange for variable rates for a range of maturities
to September 2023.
We continually review these risks and identify suitable
instruments where applicable.
CAPITAL RISK MANAGEMENT
Our objectives when managing capital are to maximise
shareholder value while safeguarding our ability to continue as
a going concern. We continue to proactively manage our capital
structure (for example through debt repayment, share issuance
and repurchase or management of dividend payments), 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.
LIQUIDITY RISK AND GOING CONCERN
Liquidity risk is the risk that the Group 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, that we will have
sufficient liquidity at all times to meet the Group’s 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. The
Group has a very high level of client retention, which gives us
a high degree of comfort about the certainty of our revenue.
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, the timing of which may be influenced by underlying
market conditions.
During the three-year period covered by the business plan
we expect to remain compliant with all covenants. As such,
the Board is satisfied that the Group has adequate resources
to continue in operational existence for the foreseeable future.
For this reason, the going concern basis has been adopted
in the preparation of these accounts.
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NOMINATION COMMITTEE REPORT
PHILIP YEA, CHAIRMAN
DEAR SHAREHOLDER
I am pleased to present the Nomination Committee Report
or 2019. In my last report, I set out five main areas of focus
for the Committee. These were:
• continue developing and growing our talent pool;
• continue to assess, benchmark and develop our senior
executive team;
• monitor the progress of the culture transformation plan;
• assist management in managing the Group’s gender pay gap;
and
COMMITTEE MEMBERSHIP AND ATTENDANCE
The Committee comprises only non-executive Directors
and is chaired by the Chairman of the Board, Philip Yea.
The members of the Committee who served during the year
and as at the date of this report are shown in the table below,
together with their attendance at the Committee meetings
held during the year.
NAME
ATTENDED
Phillip Yea (Committee Chair)
• continue to monitor the progress with implementing the
Sally-Ann Hibberd
Dr Tim Miller
Darren Pope
2/2
2/2
2/2
2/2
Group’s Diversity and Inclusion Policy.
We have made progress in each of the areas and more detail
is set out in the body of the following report. However despite
the progress, much remains to be done and many of the
initiatives with respect to cultural change and diversity will
require a number of years to bear fruit.
We undertook an internal evaluation of the Nomination
Committee during the year, and concluded that the Committee
continues to operate effectively. Details of the broader Board
evaluation process and its results can be found on page 73.
In the coming year, the Committee will give particular focus to
maintaining progress with the culture transformation plan and
monitoring the progress with addressing the Group’s gender
pay gap issues, in addition to its regular agenda items.
I look forward to reporting again on our progress in the 2020
Annual Report and Accounts. I should like to close by thanking
members of the Committee for their support during the year.
Philip Yea
Chair of the Nomination Committee
12 March 2020
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GOVERNANCE
The Committee acts independently of management and reports
and makes recommendations directly to the Board.
The Committee’s Terms of Reference state that the Committee
shall be comprised of at least three independent non-executive
Directors and this was complied with throughout the year.
The Company Secretary acts as Secretary to the Committee
and attends all meetings. The Committee invites the Chief
Executive and the Chief People Officer to attend its meetings
in full, although it reserves its rights to request either of those
individuals to withdraw. During the year, the Committee Chair
met on several occasions with the Chief People Officer without
management and/or any executive member of the Board being
present. The Committee has unrestricted access to Company
documents and information, as well as to employees of the
Group.
The Committee may take independent professional advice on
any matters covered by its Terms of Reference, a copy of which
can be found in the investor section of Equiniti’s website: http://
investors.equiniti.com/investors/shareholder-services/corporate-
governance.
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NOMINATION COMMITTEE REPORT
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ROLE OF THE NOMINATION COMMITTEE
In accordance with its Terms of Reference, the Committee
develops and maintains a formal, rigorous and transparent
procedure for recommending appointments and
reappointments to the Board.
Its responsibilities include:
BOARD AND SENIOR LEADERSHIP TEAM STRUCTURE
AND COMPOSITION
• regularly reviewing the structure, size and composition of
the Board, to ensure it has an appropriate balance of skills,
independence, knowledge, experience and diversity;
• regularly reviewing the knowledge, skills and experience of
individual members of the Board;
• regularly considering the succession plans for Directors and
senior executives;
• identifying and nominating for approval of the Board,
candidates to fill Board and senior executive vacancies,
as and when they arise;
• ensuring the necessary due diligence and conflicts of
interest checks have been undertaken before an
appointment is made;
• ensuring that an annual evaluation is undertaken of the
effectiveness of the Board, each committee of the Board,
and the contribution of each Director, such evaluation to
be externally facilitated at least once every three years;
GROUP POLICIES AND BEST PRACTICES
• having regard to established and evolving best practice
corporate governance standards, including where relevant,
standards set by voting agencies and voluntary codes;
• monitoring whether satisfactory induction is provided for
new Directors, with respect to their Board and Committee
responsibilities;
• ensuring an appropriate ongoing training programme is in
place for existing Directors;
• in conjunction with the Remuneration Committee, monitoring
the progress with addressing the Group’s gender pay gap
issues; and
• conducting an annual review of the Group’s conflicts register.
DIRECTORS’ INDUCTION AND TRAINING
Following the appointment of two new non-executive Directors
last year, the composition of the Board did not change during
2019 and so no induction was necessary.
As part of the internal review of the Board’s effectiveness, the
Chairman discusses training requirements with each Director,
and also considers relevant meetings, site visits or other
information which might help Directors’ performance. As part
of their ongoing development, Directors are supplied with
appropriate information in a suitable format. All Directors have
access to the advice and services of the Company Secretary and
independent professional advice.
TALENT MANAGEMENT
The Committee recognises that the people strategy is
fundamental to achieving the Group’s strategic goals. The
Group’s people strategy was refreshed in 2019 and includes
an approach to managing learning and talent.
New talent is brought into the Group at apprentice level,
as well as through the recruitment of experienced people.
A number of programmes exist to accelerate the progress
of talented employees. The Committee is satisfied that
the learning and talent programmes are working well and
contributing to the strength and depth of the Group’s
talent pool.
More information on each of these areas can be found
on pages 45 to 47 of the Strategic Report.
ASSESSING, BENCHMARKING AND DEVELOPING OUR
SENIOR EXECUTIVE TEAM
During the year, the company ran a leadership evaluation
facilitated by Heidrick & Struggles, a major executive search
and consulting firm. Around 20 of our executives and other
senior leaders underwent the evaluation, allowing us to
document their strengths and future potential and identify
their development needs.
MONITORING THE PROGRESS OF OUR CULTURE
TRANSFORMATION PLAN
The Committee continued to monitor progress with the cultural
transformation of the Group, including assessing the results of
the employee engagement survey during the year. These results
indicated that while the Group’s culture is moving in the right
direction, there remains further to go to achieve the culture
we desire. More information on this can be found in the Chief
Executive’s Statement on page 21.
ASSISTING MANAGEMENT IN MANAGING THE
GENDER PAY GAP
At its November 2019 meeting, the Committee discussed the
commitments management had made to reducing the Group’s
gender pay gap and the progress against those commitments.
A key area of focus is addressing as far as possible the various
obstacles to placing more women into middle-management
positions.
The Group’s gender pay gap report can be found on our
website: https://equiniti.com/uk/about-us/corporate-
responsibility/policies/gender-pay-report/.
SUCCESSION PLANNING
One of the Committee’s key roles is to ensure that the Group
has appropriate plans for progressively refreshing the Executive
and Board.
The succession plan is linked to the talent development and
learning programmes described previously. The Committee
continued to review the succession plan during the year,
ensuring that both the Board and the Committee have visibility
of a wide range of individuals with leadership potential,
together with their individual development plans. This will
remain a focus area for 2020.
DIVERSITY AND INCLUSION
The Board and Committee recognise the benefits that a diverse
workforce brings. The Group is committed to ensuring that it
treats its employees fairly and with dignity. This includes being
free from any direct or indirect discrimination, harassment,
bullying or other form of victimisation. The Whistleblowing
Policy and associated policies encourage employees to speak
up about any inappropriate practices or behaviour, including
through an independent whistleblowing contact facility.
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NOMINATION COMMITTEE REPORT
The Board approved a Diversity and Inclusion (D&I) policy in
February 2017. During 2019, the Group continued to apply
the policy, with a range of initiatives across the Group. There
has been good engagement and awareness of the policy
throughout the Group and there are currently four employee
network groups, including a disability taskforce, run by staff
who are interested in supporting D&I. As D&I has become
more embedded within the Group, it has evolved and the
Committee is keen that the business adapts to accommodate
this. Accordingly, the Committee reviews the policy annually
and receives regular updates on the effectiveness of the
various D&I related initiatives and activities being undertaken
within the business.
During the year, the Committee received a report from the
Chief People Officer on diversity and inclusion in Equiniti.
This covered:
• the formation and operation of the new Global Diversity
& Inclusion Council;
• the work of the diversity and inclusion networks;
• enhancements to employee diversity monitoring, through
the planned implementation of the Workday platform;
• specific initiatives to improve gender diversity; and
• global diversity and inclusion events.
More information on diversity and inclusion activities can be
found on page 47.
BOARD DIVERSITY
The Board comprises nine Directors, three of whom are
women, representing 33% of the Board. The Board therefore
meets the 25% target established by the Davies Report and
the increased target of 33% by 2020 established by the
Hampton-Alexander Review.
In addition to considering gender, age, disability, ethnicity,
geography and experience, the Committee seeks to
ensure that the Board has an appropriate balance of skills,
experience, independence and knowledge of Equiniti and
the industry as a whole. A similar approach is used for the
senior leadership team.
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NOMINATION COMMITTEE REPORT
COMMITTEE ACTIVITIES DURING 2019
The Committee met twice during the year, in April and November. At those meetings, in line with its remit and the priorities
described above, the Committee addressed the following topics
APRIL
TOPIC
OUTCOME
Leadership, Succession
and Contingency
The Company had previously engaged Heidrick & Struggles to advise on succession planning
for the Group’s most senior roles. The Committee discussed the report and from that made
recommendations to the Board on succession planning.
Leadership
Development
Heidrick & Struggles was also engaged to assess the career aspirations of the Executive
Committee members and certain members of the senior leadership teams. The Committee
reviewed the report and made the appropriate recommendations to management with regards
to career development plans.
Cultural Transformation
update
The Committee received a presentation on the ongoing Culture and Values programme and
discussed its impact on the future corporate direction and strategy.
Diversity & Inclusion
update
The Committee reviewed the initiatives and activities undertaken in the first quarter and
requested status updates to track effectiveness. The Committee also reviewed the Diversity
& Inclusion policy.
Employment Screening
and Security vetting
The Committee approved the Group Employment Screening and Security Vetting Policy.
2018 Board Evaluation
Exercise
The Committee reviewed the findings of the Committee evaluation exercise and received
a presentation on Board skills, rotation and effectiveness and non-executive
Directors’ tenure.
Terms of Reference
Review
The Committee reviewed its own terms of reference to expand its purpose to ensure
compliance with the 2018 UK Corporate Governance Code and made recommendations
to the Board.
NOVEMBER
TOPIC
OUTCOME
Performance, Talent
and Succession
The Committee reviewed the outcome of the annual People and Talent review process, in
particular focussing on the level of internal promotions and strengthening of succession plans.
Leadership
Development
Gender Pay Gap
Reporting
The Committee reviewed the effectiveness of leadership development-related programmes
to address gender imbalance within middle management.
The Committee reviewed the approach on gender pay gap reporting and the activities to
address gender pay gap issues and requested that additional performance indicators be
developed to track effectiveness.
Diversity & Inclusion
update
The Committee reviewed the initiatives and activities undertaken in the second quarter and
the work of the Global Diversity & Inclusion Council.
Board tenure
The Committee reviewed each Directors’ tenure and decided to address long-term succession
plans, to ensure future Board retirements are appropriately staggered.
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DIRECTORS’ REMUNERATION REPORT
DR TIM MILLER, CHAIR OF THE REMUNERATION COMMITTEE
REMUNERATION COMMITTEE CHAIR’S ANNUAL
STATEMENT 2019
DEAR SHAREHOLDER
I am pleased to present the Directors’ Remuneration Report
for the year ended 31 December 2019 (the Report).
The Report includes the following:
• the Annual Report on Remuneration, which sets out details
of the remuneration paid to our Directors in 2019 and an
explanation of the link to Company performance; and
• the Directors’ Remuneration Policy (Policy) which was
approved at the Company’s AGM in 2019. The Committee
keeps the Policy under review to ensure that it continues to
meet our goals. We believe that the Policy continues to be
appropriate and has operated as intended over the year.
During the year, the Remuneration Committee focused
on the following priorities:
RENEWAL OF THE REMUNERATION POLICY
Following a comprehensive review of the approach to
remuneration for executive Directors and the senior leadership
team, an updated Policy was proposed for shareholder approval
at the AGM held on 2 May 2019. We were pleased that the
Policy was overwhelmingly approved by shareholders, with
99.86% of votes cast in favour. The Policy ensures that the
executive Directors and senior leadership are focused on the
delivery of the same objectives and that success is shared
appropriately. It also reflects the provisions of the 2018 UK
Corporate Governance Code, which applied to Equiniti
from 1 January 2019.
EFFECTIVENESS OF THE REMUNERATION COMMITTEE
During the year, an internal evaluation of the Board and its
Committees was undertaken, as described on page 73. This
found that the Remuneration Committee continued to operate
effectively.
The 2018 evaluation contained two recommendations for the
Committee. These were that the Company should ensure that:
• the proposed new Remuneration Policy is effectively
communicated to, and supported by, shareholders; and
• the proposed new Remuneration Policy is applied, matching
reward to both performance and behaviour.
The Committee met both recommendations during 2019.
In 2020, we will explore alternative incentive mechanisms for
the senior leadership team below the Board and will continue to
monitor remuneration arrangements within the wider workforce.
REMUNERATION FOR 2019
The Group made further strategic progress in 2019, in
particular the completion of the separation of the US business
and delivered growth in that market. This business is delivering
organic growth on the back of new client wins and the launch
of new products, while achieving the cost synergies expected
at the time of the acquisition. The UK business has remained
resilient, retaining all its major clients and winning important
new business across all of its divisions. Continued investment
in the Group’s infrastructure is increasing its resilience and
efficiency, with new operating sites opening in Poland, India
and the US. The Group has also continued to add to its
capabilities through bolt-on acquisitions.
Equiniti’s financial performance in the year was solid, in the
face of a challenging environment. Revenue was within the
range of market expectations, having grown by 4.7% in 2019.
Organic revenue growth was 1.4%. However, underlying profit
was at the bottom end of market expectations, with a good
performance in all divisions offset by the expected softness in
Pension Solutions. Operating cash flow conversion was robust
at 91%, compared with our medium-term target of 95%.
The Committee reviewed this performance against the targets
set for the annual bonus in 2019. As in previous years, these
targets were total revenue, profit before tax and operating cash
flow conversion, together with personal objectives agreed at
the start of the year. Based on performance achieved against
targets, and taking into account delivery against personal
objectives, the formulaic outcome of the annual bonus would
have resulted in an award of 33.8% of salary for the Chief
Executive and 43.7% of salary for the Chief Financial Officer.
This outcome was above the level of bonus funding for the
broader employee population, and the Committee therefore
decided to exercise its discretion to apply a downwards
adjustment to the bonus awards for both Executive Directors.
Therefore, the Chief Executive and Chief Financial Officer were
awarded bonuses for the year of 21.4% and 27.6% respectively
of salary. In line with our policy, 30% of the bonus will be
deferred for three years into shares.
The 2017 Performance Share Plan (PSP) award, which vests in
March 2020, was based on EPS and total shareholder return
performance. Based on performance delivered over the
three year period, 0% of this award will vest. The Committee
reviewed this outcome and no discretion was exercised in
respect of this award.
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DIRECTORS’ REMUNERATION REPORT
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REMUNERATION FOR 2020
There will be no change to the base salaries for the executive
Directors for 2020. Employees throughout the Group are
expected to receive an average increase of 2% across 2020.
There will also be no change in the maximum award levels
under the annual bonus or PSP for 2020. For the bonus, the
weighting of measures has been reviewed, together with the
specific targets which will apply under the PSP. In summary, the
only changes we are making for 2020 are to amend the cash
measure used under the annual bonus plan and the EPS targets
for the 2020 PSP. For the 2020 bonus, the cash element of the
bonus will be assessed based on Free Cash Flow to Equity
Holders to better align incentivisation with the cash generation
characteristics of the business. For the 2020 PSP, the threshold
EPS metric has been reduced to 4% per annum to reflect the
increasing challenging operating environment. There is no
change to the growth required for maximum payout against
this element of 12% p.a., which the Committee continues to
believe is a very stretching benchmark. In line with best practice
governance, the Committee will review the vesting outcome
from the scheme to ensure that it is considered appropriate
in the round.
The Committee believes that the current incentive structures
and performance measures continue to be aligned with
Equiniti’s strategy of driving organic growth and winning new
clients to deliver earnings growth and investor returns over the
medium to long-term.
Further details are set out in the ‘At a Glance’ table below.
UK CORPORATE GOVERNANCE CODE
Within the principle of best practice, the Committee reviews
its Terms of Reference on an annual basis. In anticipation of
the revised 2018 UK Corporate Governance Code (the Code),
a thorough appraisal was undertaken in 2018 where the Board
and Committees had spent considerable time reviewing the
new requirements as part of our Policy renewal at the
2019 AGM.
A number of amendments were made to our Policy last
year in light of the Code, including the introduction of post-
employment shareholding requirements, a reduction in pension
benefits for new executive Director appointments to the Board,
and the ability for the Committee to apply discretion to adjust
the formulaic outcome of PSP awards. The focus in 2019 was
to monitor compliance against the Code, which included
consideration by the Committee of the broader workforce
pay practices and policies.
We have also included our CEO pay ratio disclosure for the first
time on page 118.
WIDER WORKFORCE PAY ARRANGEMENTS
In my letter to you last year, I noted that the Committee would
be exploring ways in which we could have greater visibility of
the pay and policies relating to the Group’s wider workforce.
Throughout the year, the Committee debates and discusses
oversight of key people policy areas such as performance
management and diversity and inclusion, as well as gender pay
reporting and reward framework and budgets.
The Committee’s activities in this area includes the following:
• regular briefings on the implementation of a new international
job levels framework across the Group; and
• examining and discussing some of the local and divisional
remuneration schemes.
In addition, in my role as the Designated non-executive
Director, I have attended the new Global Colleague Forum
to listen to employee views on a range of topics. Part of this
discussion was to explain and discuss the Group’s remuneration
practices and how executive remuneration aligns with the wider
company pay policy.
SHAREHOLDER ENGAGEMENT
The Committee considers investor feedback and the AGM
voting results each year. We were pleased to continue to
receive a high level of support for the Remuneration Report,
with 99.95% of votes cast in favour at the AGM in May 2019.
I look forward to welcoming you to the 2020 AGM in May and
hope you will support the resolution relating to remuneration.
As always, I would like to thank my fellow Committee members,
and those who support the Committee, for their commitment
and guidance during the year.
Dr Tim Miller
Chair of the Remuneration Committee
12 March 2020
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DIRECTORS’ REMUNERATION REPORT
AT A GLANCE: IMPLEMENTATION OF REMUNERATION POLICY FOR 2020 AND KEY DECISIONS IN 2019
The table below summarises how key elements of the Remuneration Policy will be implemented in 2020 and key decisions taken by
the Committee in relation to base pay and incentives for executive Directors in respect of the year ended 31 December 2019.
ELEMENT
CHIEF EXECUTIVE
GUY WAKELEY
CHIEF FINANCIAL OFFICER
JOHN STIER
Base salary from 1 April 2020
£471,500
£ 328,000
Pension
Annual bonus
15% cash in lieu of pension
15% cash in lieu of pension
Maximum: 150%
Maximum: 150%
Annual bonus measures
• Financial: Reported profit before tax (40%); Total reported revenues (40%); and
Free cash flow to equity holders (20%).
• Non-financial: Performance against the individual non-financial metrics act as a multiplier
ranging from 0 to 150%, determined through the Committee’s review of performance
against personal objectives, with a multiplier of up to 100% for good performance.
• A cap on the overall bonus pool to ensure above target bonus payments do not exceed
40% of incremental profit in excess of budget.
• The targets and objectives are not prospectively disclosed as they are considered to
be commercial sensitive as a result of their alignment with Equiniti’s strategic goals
and objectives over the coming year. These will be disclosed in the 2020 Annual
Report and Accounts.
Deferred Annual Bonus Plan
30% of earned bonus is compulsorily deferred into an award over shares, which normally
vest after three years.
Performance Share Plan (PSP)
Maximum: 150%
Maximum: 150%
PSP measures
• Three-year performance period. 25% vests for threshold performance.
• EPS (50% of award) – average normalised EPS growth over three financial years. An EPS
growth range of 4% to 12% will apply to the 2020 PSP awards.
• TSR (50% of award) – relative to the FTSE 250 index (excluding investment trusts).
Holding requirement
Vested shares from the PSP to be held for two years post vesting (after payment of tax).
Shareholding requirement
• 200% of salary within five years of appointment to the Board.
• A post-employment shareholding requirement will also apply.
Malus and clawback
• Recovery and withholding mechanisms apply for a period of three years from the date of
payment for the annual bonus and in respect of PSP awards for a period of three years
of vesting.
• At the Committee’s discretion.
Changes for 2020
• Change in cash measure used under annual bonus for 2020.
• EPS growth range of 4% to 12% to be applied on the 2020 PSP awards.
Year-end decisions made:
1 April salary review
0%
2019 Bonus outcome:
• Value
• % of salary
• % of maximum
• % of deferred
2017 PSP outcome:
£100,932
21.4%
14.3%
30%
• Vesting (% of maximum)
0%
Non-executive Directors
No change
0%
£90,575
27.6%
18.4%
30%
0%
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DIRECTORS’ REMUNERATION REPORT
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HOW OUR REMUNERATION POLICY ALIGNS WITH THE 2018 UK CORPORATE GOVERNANCE CODE
In considering the Directors’ Remuneration Policy (the Policy) and its implementation for 2019 and 2020, the Committee has
considered the factors below:
Clarity
• The Policy is designed to support the financial and strategic objectives of the Company, taking
into account UK corporate governance expectations and best practice.
• We are committed to providing open and transparent disclosure of our approach to pay with
our stakeholders.
Simplicity
• Equiniti’s remuneration structure is simple, comprising three main elements: fixed pay (base salary,
benefits and pension); annual bonus; and performance share plan awards.
• The performance measures used to determine annual bonus awards are drawn from the Company’s
business plan.
• The reward structures for the executive Directors are consistent with those applied for the senior
leadership team below the Board.
Risk
• The Committee considers that the structure of incentive arrangements does not encourage
inappropriate risk-taking. Performance is based on a balance of metrics and, from 2019, the
Committee has the ability to apply discretion to PSP outcomes to take into account the broader
performance context, including risk.
• The Committee follows a robust process when setting performance targets to ensure that targets
are sufficiently stretching and balanced. Awards are capped and are not considered excessive.
• The use of deferral on the annual bonus, a holding period on the PSP and shareholding
requirements ensure that executive Directors are exposed to the long-term performance of the
Company. Variable pay awards are also subject to malus and clawback.
Predictability
• The Policy sets out the maximum opportunity levels for different elements of pay. Actual incentive
outcomes will vary depending on the level of performance achieved against specific measures.
Proportionality
• The remuneration framework does not reward poor performance and the Committee has the ability
to exercise discretion.
• Payment of the annual bonus and awards under the PSP are subject to the achievement of
stretching performance targets. The targets are considered annually and take account of business
expectations and strategic priorities at the time.
Alignment to culture
• When designing the Company’s variable incentive schemes, the overall purpose, values and
strategy of the Company is carefully considered. The Committee takes into account this broader
context when determining pay awards for the Directors.
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DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ REMUNERATION POLICY
The Directors’ Remuneration Policy was approved by shareholders at our 2019 AGM, with 99.86% of votes in favour
(the Policy). The full Policy is set out below.
POLICY TABLE
The following table sets out each element of reward and how it supports the Company’s short and long-term strategic objectives.
ELEMENT
PURPOSE AND LINK
TO POLICY
OPERATION (INCLUDING FRAMEWORK
USED TO ASSESS PERFORMANCE)
OPPORTUNITY
BASE SALARY
BENEFITS
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
the Group.
Provides a
competitive,
appropriate and
cost-effective benefits
package.
Set at a level which provides a fair reward for
the role and which is competitive amongst
relevant peers.
Normally reviewed (but not necessarily
increased) annually with any changes taking
effect from 1 April each year.
Set taking into consideration individual and
Group 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.
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 an
individual’s role and change
in position or responsibility.
Reference is also made to salary levels
amongst relevant peers and other companies
of equivalent size and complexity.
Current salary levels are
disclosed in the Annual
Report on Remuneration.
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.
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 contributions and/
or cash allowances in lieu of
pension contributions are
capped at 15% of salary for
current executive Directors.
Pension benefits for new
appointments will be
capped at 10% of salary, in
line with the level of benefit
for the wider workforce.
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.
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DIRECTORS’ REMUNERATION REPORT
ELEMENT
PURPOSE AND LINK
TO POLICY
OPERATION (INCLUDING FRAMEWORK
USED TO ASSESS PERFORMANCE)
OPPORTUNITY
The maximum bonus
payable to executive
Directors is 150% of
base salary.
The bonus payable at
the minimum level of
performance varies
from year- to-year and is
dependent on the degree
of stretch in the targets set.
The maximum opportunity
for executive Directors is
150% of base salary. In
exceptional circumstances,
this may be increased to
300% of salary.
ANNUAL BONUS
PERFORMANCE
SHARE PLAN
(PSP)
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.
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.
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.
The Committee has overall discretion to adjust
the extent to which bonuses are paid (in line
with the 2018 UK Corporate Governance
Code).
30% of bonus earned will be deferred into
awards over shares under the Deferred
Annual Bonus Plan (the DABP), with awards
normally vesting after a three-year period. The
Committee has the discretion to increase the
deferral percentage if required.
Awards are subject to malus and clawback
provisions, as set out in the notes to this table.
Annual awards of performance shares which
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. 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.
25% of the award vests at threshold, with
straight-line vesting for performance between
threshold and maximum.
From 2019 awards onwards, the Committee
has the discretion to adjust the extent to
which awards will vest (in line with the 2018 UK
Corporate Governance Code).
Following vesting, a further holding period
(normally two years) will apply to the awards,
whereby executive Directors will be restricted
from selling the net of tax shares which vest.
Awards are subject to malus and clawback
provisions, as set out in the notes to this table.
ALL-EMPLOYEE
SHARE PLANS
SHAREHOLDING
GUIDELINE
Encourages employee
share ownership and
therefore increases
alignment with
shareholders.
Equiniti may from time to time operate all-
employee share plans (such as the HMRC
approved Save As You Earn Option Plan and
Share Incentive Plan) for which executive
Directors are eligible to participate on the same
terms as other employees.
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.
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DIRECTORS’ REMUNERATION REPORT
MALUS AND CLAWBACK
Malus and clawback provisions apply to the annual bonus and PSP awards in the case of: gross misconduct; material misstatement
of Equiniti’s results or accounts; an error made in assessing the satisfaction of any performance conditions applicable to the award;
or other such adverse circumstances determined by the Committee (which might include fraud, material reputational damage and/
or corporate failure). These provisions apply in respect of annual bonus awards within three years of the date of payment (cash and
DABP), and in respect of PSP awards for a period up to three years post-vesting.
PERFORMANCE MEASURES AND TARGETS
The table below sets out the rationale for the performance conditions chosen for annual bonus and PSP and how the targets
are set.
ELEMENT
PERFORMANCE MEASURES AND RATIONALE
HOW TARGETS ARE SET
ANNUAL BONUS
Financial and personal performance measures.
PERFORMANCE
SHARE PLAN
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.
Personal performance objectives are agreed by the
Committee at the beginning of the year and will typically
include measures relating to risk, client and/or key
strategic goals, as well as individual conduct
and behaviours.
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.
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.
The Committee reviews the focus each
year and varies them as appropriate to
reflect the priorities for the business in
the year ahead.
A target range is set for each performance
measure to encourage continuous
improvement and challenge the delivery
of stretch performance and budgeted
performance against the financial metrics.
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.
USE OF DISCRETION
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);
• the form of awards (granting awards as conditional awards,
nil-cost options (exercisable up to the tenth anniversary of
the grant date), or equivalent instruments);
• the extent of vesting, based on the assessment of
performance and any other factors the Committee
considers relevant;
• 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 to awards required
in certain circumstances (such as rights issues, corporate
restructuring events, variation of capital and special
dividends);
• cash settling awards in exceptional circumstances, where it
is not commercially feasible to settle awards in shares; and
• 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 their original purpose. Any varied
performance condition would not be materially less difficult to
satisfy in the circumstances.
Awards granted under the Company’s share plans may
incorporate the right to receive the value of dividends, that
would have been paid on the shares that vest, in respect of
dividend dates occurring during the vesting period and where
awards are subject to a holding period. This amount will
normally be delivered in shares but may be delivered in cash in
exceptional circumstances, where it is not commercially feasible
to deliver in shares. The amount may be calculated assuming
the dividends had been reinvested in the Company’s shares.
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DIRECTORS’ REMUNERATION REPORT
100
LEGACY AWARDS
The Committee reserves the right to make any remuneration
payments and/or payments for loss of office (including
exercising any discretions available to it in connection with such
payments), notwithstanding that they are not in line with the
Policy, where the terms of the payment were agreed:
i.
before 26 April 2016 (the date on which the Company’s first
shareholder-approved Directors’ Remuneration Policy came
into effect);
principles which form the basis for decisions on executive
Director and senior management 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.
The range of information reviewed by the Committee on
broader workforce remuneration and related policies had been
extended during 2019, in line with the 2018 UK Corporate
Governance Code.
ii. before the Policy set out on pages 98 to 99 came into effect,
provided that the terms of the payment were consistent with
the shareholder-approved Directors’ Remuneration Policy in
force at the time they were agreed; or
iii. at a time when the relevant individual was not a Director
of the Company and, in the opinion of the Committee,
the payment was not in consideration for the individual
becoming a Director of the Company.
For these purposes ‘payments’ includes the Committee
satisfying awards of variable remuneration and, in relation to
an award over shares, the terms of the payment are ‘agreed’
at the time the award is granted.
REMUNERATION POLICY FOR OTHER EMPLOYEES
The Policy, described in the previous table, applies specifically
to the executive Directors of the Company. In practice, the
Committee also has responsibility for setting the policy for, and
determining the remuneration of, senior management roles
at Equiniti, being those roles on the Executive Committee,
including the Company Secretary. In all cases, the Committee
is mindful of the remuneration policy which applies for the
broader workforce and seeks to ensure that the underlying
The Committee believes that the structure of senior
management reward at Equiniti should be linked to Group
strategy and performance. A greater proportion of the package
for senior leadership roles is therefore based on performance-
based pay through the quantum and participation levels in
incentive schemes. This ensures that the remuneration of the
executive Directors and the senior leadership team is aligned
with the performance of Equiniti and therefore the interests of
shareholders.
For the broader workforce, we have a commitment to
responsible levels of pay in all of our geographies, including
a long-term commitment to paying the Real Living Wage in the
UK. All-employee share ownership is encouraged through the
use of all-employee share plans. In 2018, we launched a new
cycle of the Sharesave Plan, with participation extended to all
of our key international locations. Circa 66% of the Group’s
employees are currently participating in these all-employee
share plans.
The table below explains how the Policy has been cascaded
below executive Directors, to achieve alignment of policy
across the Company.
ELEMENT
DIFFERENCE IN REMUNERATION POLICY FOR OTHER EMPLOYEES
Base salary
The same principles and considerations that are applied to the executive Directors are, as far as
possible, applied to all employees.
Benefits
Equiniti has provisions for market-aligned benefits for all employees.
Pension
Annual bonus
The Group operates a number of defined benefit and defined contribution schemes. The maximum
company contribution under the defined contribution schemes is 10% of salary.
Approximately 600 members of the management team are eligible for a bonus award under The
Leadership Incentive Scheme.
Deferred Annual
Bonus Plan (DABP)
Members of the Executive Committee normally have 30% of their earned bonus deferred into an
award over shares, on the same terms as the executive Directors.
Performance Share
Plan (PSP)
The PSP is typically awarded to members of the Executive Committee and key individuals in the
senior leadership team. A select number of small discretionary awards will also be made to junior
employees identified as future talent.
Sharesave
An all-employee plan. Options are normally granted at a discount to the market value.
Share Incentive Plan
An all-employee plan. Employees can typically purchase up to £1,800 of partnership shares each year
from gross salary. For every three partnership shares participants purchase, they normally receive two
free matching shares, on the first £180 that they invest annually.
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DIRECTORS’ REMUNERATION REPORT
CONSIDERATIONS OF CONDITIONS ELSEWHERE
IN THE GROUP
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 did not consult directly with the broader
workforce on the 2019 Remuneration Policy. Following the
changes to the UK Corporate Governance Code, during 2019
the Board put in place arrangements to facilitate engagement
with the broader workforce on a range of matters including
remuneration, see page 46.
The Committee reviews the design of all share incentive
plans operated by Equiniti, for approval by the Board and
shareholders where appropriate. For 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 is responsible
for determining the proportion of share-based awards which
vest following the end of the relevant performance period.
The Committee also reviews the recommendations of Equiniti
Financial Services Limited’s Remuneration Committee and
approves, where appropriate, certain Code Staff bonus and
salary recommendations.
CONSIDERATION OF SHAREHOLDER VIEWS
Equiniti values and is committed to dialogue with its
shareholders. The Committee regularly considers investor
feedback and the voting results received in relation to relevant
AGM resolutions each year. As part of the development of
the Policy, the Committee engaged with a number of Equiniti’s
largest shareholders before finalising the proposed changes
and the views of those shareholders informed the final
Remuneration Policy.
APPROACH TO RECRUITMENT REMUNERATION
In the event of hiring a new executive Director, the ongoing
remuneration package would be set in accordance with the
terms of the approved Directors’ 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.
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). In all cases, PSP awards will be within the overall
300% of base salary exceptional limit in the plan.
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 after an appointment (assuming Equiniti is not in
a close period).
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 the
individual 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 close 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.
Where a new executive Director is an internal promotion, 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.
ELEMENT OF RECRUITMENT REMUNERATION
MAXIMUM PERCENTAGE OF SALARY
Maximum variable pay comprising:
300% (450% in exceptional circumstances)
• Annual bonus
150%
• Performance Share Plan (PSP)
150% (300% in exceptional circumstances)
• Pension
10% pension contributions / cash in lieu of pension
Note: Maximum percentage of salary for annual bonus and PSP excludes compensation for awards forfeited.
102
103
DIRECTORS’ REMUNERATION REPORT
102
SERVICE CONTRACTS AND LOSS OF OFFICE PAYMENTS
The policy for service contracts for executive Directors is shown in the table below. Copies of the 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.
PROVISION
DETAILED TERMS
Notice period
• 12 months’ notice from the Company
• 12 months’ notice from the executive Director
Termination payment
• An executive Director’s employment may be terminated by a payment in lieu of notice comprising:
• Base salary
• Benefits
• Pension allowance
• Any payment in lieu of notice may be paid in instalments and be subject to mitigation, should the
executive Director find alternative employment during any unexpired notice period.
• 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.
• 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 up to the date
of termination 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.
• 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.
• Any bonus paid to a departing executive Director would normally be paid in cash, at the normal
payment date, and reduced pro-rata to reflect the actual period worked.
• 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 when the individual ceases to be a director or employee of
the Group. 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 or her by Equiniti or any
other circumstances at the discretion of the Committee, ‘good leaver’ status may be applied.
• Where good leaver treatment applies under the PSP, outstanding unvested 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, as
a proportion of the vesting period.
• The Committee retains the discretion to vest awards (and measure performance accordingly) on
cessation and/or to dis-apply time pro-rating.
• If an executive Director leaves holding vested awards subject to a holding period, the holding period
will normally continue to apply to these awards, unless the Committee decides to bring the holding
period to a close.
• 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.
Treatment of annual
bonus on termination
under plan rules
Treatment of
unvested share-based
entitlements
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103
DIRECTORS’ REMUNERATION REPORT
PROVISION
DETAILED TERMS
Change of control
• Outstanding PSP awards on a takeover, winding up, or, if the Committee considers it appropriate,
any other corporate event which will materially affect the Company’s share price, will vest and be
released from any relevant holding period early to the extent that the performance condition, as
determined by the Committee in its discretion, has been satisfied, and could be reduced on a
pro-rata basis to reflect the period of time which has elapsed between the grant date and the
date of the relevant corporate event, as a proportion of the vesting period.
• The Committee would retain discretion to waive time pro-rating, if it felt it was appropriate to do so.
• DABP awards will vest in full at the time of the corporate event.
• 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.
Exercise of discretion
• 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.
POST-EMPLOYMENT SHARE INTERESTS
The Committee has a policy to promote interests in share awards following cessation of employment, to enable former executive
Directors to remain aligned with the interest of shareholders for an extended period after leaving the Company. Further details of
this policy are set out in the Annual Report on Remuneration on page 116.
THE CHAIRMAN AND NON-EXECUTIVE DIRECTORS’ FEES
The table below sets out the Remuneration Policy for the Chairman and non-executive Directors. 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.
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
fees.
The Chairman is paid a single consolidated fee.
The non-executive Directors are paid a basic fee, with
additional fees paid to reflect extra responsibilities and/or
time commitments, for example the Chairs of the main Board
committees and the Senior Independent Director.
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.
They may also receive limited travel or accommodation
related benefits in connection with their role as a Director
(including tax thereon if these are determined to be
taxable benefits).
The fees are subject
to maximum
aggregate limit of
£2m, as set out in
Equiniti’s Articles
of association.
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.
104
105
DIRECTORS’ REMUNERATION REPORT
104
CHAIRMAN AND NON-EXECUTIVE DIRECTOR TERMS OF APPOINTMENT
The Chairman and non-executive Directors have letters of appointment with Equiniti for an initial period of three years, subject to
annual re-election at the Company’s AGM.
The appointment of each non-executive Director may be terminated at any time with immediate effect if he or 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.
ILLUSTRATIVE OUTCOMES FOR EXECUTIVE DIRECTORS UNDER THE REMUNERATION POLICY
Under the Directors’ Remuneration Policy, a significant proportion of total remuneration is linked to Equiniti’s performance.
The following charts illustrate how the executive Directors’ total pay package varies under four different performance scenarios:
1. Fixed pay only
2. On-target performance
3. Maximum performance
4. Maximum performance with 50% share price growth
Under scenarios 1, 2 and 3 no share price growth is applied. Dividends are excluded under all scenarios.
All assumptions made under these scenarios are noted below:
FIXED PAY ONLY
ON-TARGET
MAXIMUM
MAXIMUM PLUS
50% SHARE PRICE
GROWTH
SALARY
2020 salary
2020 salary
2020 salary
2020 salary
BENEFITS
Estimated value of
ongoing benefits
Estimated value of
ongoing benefits
Estimated value of
going benefits
Estimated value of
ongoing benefits
PENSION
15% of salary
15% of salary
15% of salary
15% of salary
–
–
–
ANNUAL
BONUS
PSP
SHARE PRICE
GROWTH
APPLIED TO
PSP AWARD
75% of salary (budget
performance and 100%
multiplier)
100% payout
of maximum
opportunity (150%
of base salary)
100% payout of
maximum opportunity
(150% of base salary)
25% of maximum award
(37.5% of salary)
100% of maximum
award (150% of
salary)
100% of maximum
award (150% of salary)
0%
0%
50%
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105
DIRECTORS’ REMUNERATION REPORT
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 below charts.
CHIEF EXECuTIVE
£2,500,000
£2,000,000
£1,500,000
£1,000,000
£500,000
0
£2,328,350
£1,974,725
45.6%%
35.8%
£1,090,663
16.2%
32.4%
£560,225
35.8%
30.4%
100%
51.4%
28.4%
24.0%
FIXED PAY
ONLY
ON-
TARGET
MAXIMUM MAXIMUM
PLUS 50%
SHARE PRICE
GROWTH
CHIEF FINANCIAL OFFICER
£2,500,000
£2,000,000
£1,500,000
£1,000,000
£500,000
£395,200
100%
0
£1,625,200
£1,379,200
35.7%
45.4%
35.7%
30.3%
28.6%
24.3%
£764,200
16.1%
32.2%
51.7%
FIXED PAY
ONLY
ON-
TARGET
MAXIMUM MAXIMUM PLUS
50% SHARE
PRICE GROWTH
KEY
Fixed pay
Annual variable
Multi-period variable
106
107
DIRECTORS’ REMUNERATION REPORT
106
ANNUAL REPORT ON REMUNERATION
This part of the Directors’ Remuneration Report sets out how
the 2019 Directors’ Remuneration Policy was implemented
during the financial year ended 31 December 2019, including
the remuneration earned by executive and non-executive
Directors in respect of 2019, the outcome of the incentive
schemes, together with the link to the Company’s performance.
Where stated, disclosures regarding the Directors’ remuneration
have been audited by the Company’s external Auditor, PwC.
COMMITTEE MEMBERSHIP AND ATTENDANCE
The Committee comprises only independent non-executive
Directors and is chaired by Dr Tim Miller.
The members of the Committee who served during the year
and as at the date of this report are shown in the table below,
together with their attendance at the four committee meetings
held during the year or those held during their tenure:
NAME
ATTENDED
Dr Tim Miller (Committee Chair)
Mark Brooker
Alison Burns
Sally-Ann Hibberd
4/4
4/4
4/4
4/4
GOVERNANCE
The Committee acts independently of management and reports
and makes recommendations directly to the Board.
ROLE OF THE REMUNERATION COMMITTEE
In accordance with its Terms of Reference, the Committee
considers, agrees and recommends to the Board an overall
remuneration policy and governance framework for executive
Directors that is aligned to the Company’s long-term business
strategy and interests, business objective and values.
It sets the over-arching principles and parameters of the
policy and determines the remuneration of the Chairman, the
Board and senior executives. The Committee also determines
and recommends to the Board the remuneration strategy
of the Company as it applies to the broader workforce. The
Committee currently receives information on wider pay
practices and policies across the Group, but work will continue
on broadening the Committee’s understanding in this area.
Its responsibilities include:
REMUNERATION POLICY
• working with the Board, senior management and internal
teams (including human resources, risk and audit) to set,
approve and implement a remuneration policy for the Group’s
senior executives (executive Directors and members of the
Executive Committee);
• ensuring that it adopts a coherent approach to remuneration
in respect to the broader workforce;
• determining the contracts of employment, terms of service
and remuneration of the Board chairman and executive
Directors;
• determining the pensions policy for the broader workforce;
The Committee’s Terms of Reference state that the Committee
shall be comprised of at least three independent non-executive
Directors, one of whom should be Chairman of the Committee,
and this was complied with in full during the year.
• 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;
The Company Secretary, or their nominee, acts as Secretary
to the Committee and attends all meetings. The Committee
invites the Chief Executive, the Chief People & Transformation
Officer, the Chief Commercial Officer, the Rewards Consultant
and the external remuneration adviser to attend its meetings
in full, although it reserves its rights to request any of those
individuals to withdraw. Individuals are not present when their
own remuneration is discussed.
The Committee has unrestricted access to Company documents
and information, as well as to employees of the Group. It
can obtain assurances and, when appropriate, reports from
the directors of subsidiary companies which have appointed
separate remuneration committees.
The Committee may take independent professional advice on
any matters covered by its Terms of Reference, a copy of which
can be found in the investor section of Equiniti’s website:
http://investors.equiniti.com/investors/shareholder-services/
corporate-governance.
• 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;
• ensuring performance objectives for executive Directors are
transparent, stretching and rigorously applied and take due
account of risk;
• reviewing and approving decisions made by the
Remuneration Committee of Equiniti Financial Services
Limited (EFSL);
REMUNERATION POLICY MONITORING
• periodically reviewing, at least every three years, the overall
appropriateness and effectiveness of all remuneration policies
for the Company and its subsidiaries; and
• having regard to applicable good practices such as the
Investment Association and Pensions and Lifetime Savings
Association guidelines on executive contracts and severance
and taking into account the Group’s statutory duties in
relation to equal pay and non-discrimination.
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107
DIRECTORS’ REMUNERATION REPORT
COMMITTEE FOCUS IN 2019
The Committee met on four occasions during the year. At those
meetings, the Committee carried out its remit which included
the following:
• reviewing and approving the Committee terms of reference
to comply with the Code which includes the Committee’s
oversight of workforce remuneration and related policies and
the Company’s culture when setting the policy for incentives
and rewards;
• reviewing and approving the design of the Group reward
strategy;
• monitoring the roll-out of key elements related to the reward
strategy;
• reviewing the gender pay gap reporting and overseeing
timely submission;
• reviewing the wider workforce arrangements on pay policies
and reviews;
• reviewing and approving the reward structure for senior
management and wider workforce; and
• reviewing incentive performance conditions.
EXTERNAL REMUNERATION ADVISER
The Committee has access to external advice as required. The
renumeration adviser to the Committee is Deloitte, who were
appointed following a tender process in 2018. Deloitte is one of
the founding members of the Remuneration Consulting Group
and operates in accordance with the Code of Conduct, which
can be found at www.remunerationconsultantsgroup.com.
Deloitte has provided advice and support around the following
key areas:
• reviewing the implementation of the 2019 Remuneration
Policy and 2018 UK Corporate Governance Code
requirements;
• advising on the performance share plan and deferred annual
bonus plan;
• informing the Committee on market practice and governance
issues; and
• responding to general and technical queries.
The total fees paid to Deloitte in relation to advice to the
Committee in 2019 were £59,200.
The Committee considers the advice that it receives from
Deloitte to be independent. Deloitte has provided other tax
and share scheme related advice to the Group during the year.
108
108
109
109
DIRECTORS’ REMUNERATION REPORT
108
108
SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED INFORMATION)
FIXED PAY £’000
VARIABLE PAY £’000
SALARY
OR FEES
BENEFITS1
PENSION
CONTRIBUTIONS2
ANNUAL
BONUS3
PSP4 SAYE5
TOTAL
EXECUTIVE DIRECTORS
Guy Wakeley
John Stier
2019
2018
2019
2018
NON-EXECUTIVE DIRECTORS
Philip Yea
Mark Brooker
Alison Burns
Sally-Ann Hibberd
Dr Tim Miller 6
Cheryl Millington
Darren Pope
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
471.5
460
328
320
200
200
55
9
55
41
65
65
115
115
55
9
75
72
18
18
18
18
–
–
–
–
–
–
–
–
–
–
–
–
–
–
70
69
49
48
–
–
–
–
–
–
–
–
–
–
–
–
–
–
101
476
91
0
2,447
0
329
1,623
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4
4
4
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
665
3,474
490
2,342
200
200
55
9
55
41
65
65
115
115
55
9
75
72
1 Benefits – executive Directors are entitled to taxable benefits as described below:
£’000
CAR
ALLOWANCE
PRIVATE MEDICAL
INSURANCE
LIFE ASSURANCE
TOTAL
Guy Wakeley
John Stier
15
15
2
2
1
1
18
18
2 A cash allowance of 15% of base salary is received in lieu of pension contributions. No executive Director participates in, or is a deferred member of, an Equiniti
pension plan.
3 30% of the bonus shown above will be deferred into shares via our Group deferred annual bonus plan (DABP).
4 The PSP value is stated as zero, as both threshold target for EPS and TSR were not met. The value of the PSP in respect of 2018 has been updated to reflect the actual
share prices at vesting of £2.055 and £2.213.
5 Both executive Directors participate in the Sharesave Scheme and the first invitation matured on 1 January 2019. The value shown is that at the end of the three-year
savings period. There are no performance conditions for this Scheme save being an employee of the Group at the maturity date.
6 The fees for Dr Tim Miller include the £50,000 that he receives for serving on the board of EFSL.
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109
DIRECTORS’ REMUNERATION REPORT
ANNUAL NON-EXECUTIVE DIRECTOR FEES
2020
2019
% Change
Year Ending 31 December
Board Chairman
Basic Fee
Additional fee for Senior Independent Director
Additional fee for Committee Chair
VARIABLE PAY OUTCOMES (AUDITED INFORMATION)
£200,000
£200,000
£55,000
£10,000
£10,000
£55,000
£10,000
£10,000
0
0
0
0
ANNUAL BONUS
For the financial year ended 31 December 2019, annual bonuses for the executive Directors were based on corporate financial
and personal objectives. A bonus of up to 150% of salary could be earned. The Committee reviewed the achievements against
the targets for the year through the annual performance review process. The tables on pages 111 and 112 show the achievement
against the financial and personal performance measures and the resulting bonus payments.
CORPORATE FINANCIAL OBJECTIVES
The corporate financial metrics were based on profit before tax (40%), revenue (40%) and operating cash flow conversion (20%).
INDIVIDUAL PERSONAL OBJECTIVES AND
INDIVIDUAL MULTIPLIER
The individual personal objectives were set following
consultation between the Committee and each executive
Director, and are detailed in the table on page 112. The
individual multiplier ranges from 0 to 150%, determined
through the Committee’s review of performance against
personal objectives, with a multiplier of 100% for good
performance. The performance breakdown and resulting
multiplier is shown in the table opposite:
Performance Rating
Maximum multiplier
Outstanding
High
Good
Off track
Low
150%
125%
100%
50%
0
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.
OUTCOME OF PERFORMANCE AGAINST INDIVIDUAL PERSONAL OBJECTIVES ACTS
AS A MULTIPLIER WITH ANNUAL BONUS CALCULATED USING THE FOLLOWING FORMULA:
Salary
Target bonus
opportunity
Corporate
financial
outcome
Individual
multiplier
Annual
bonus
The executive Directors have a notional target bonus opportunity of 100% of salary. If budget performance is achieved against the
corporate financial measures together with an individual multiplier of 100% for good performance, this would result in a bonus
of 75% of salary.
110
111
DIRECTORS’ REMUNERATION REPORT
110
The table below sets out the performance measures and targets used to assess the corporate financial outcome
PERFORMANCE MEASURES
WEIGHTING
(%)
THRESHOLD
(£000)
BUDGET
(£000)
MAXIMUM
(£000)
0%
75%
125%
ACTUAL
PERFORMANCE
(£000)
% OF
TARGET
BONUS
PAYABLE
Profit before tax
Revenue
Operating cash flow conversion
Total
40
40
20
44,370
49,300
59,160
39,800
0.0
525,754
553,426
581,097
555,700
31.6
88.0%
93.0%
98.0%
91.0%
6.0
37.6
In addition to the above, the performance of each of the executive Directors was assessed through the annual performance review
process. Details of the objectives set and performance delivered are set out on the following page.
Based on their achievements, the Committee determined that performance in the year was ‘good’ and ‘high’, resulting in
multipliers for the Chief Executive of 90% and 116.1% for the Chief Financial Officer, respectively.
Taking into account the corporate and individual performance against the targets set, on a formulaic basis, the bonus outcome
for the executive Directors would have been an award of 33.8% of salary for the Chief Executive and 43.7% of salary for the
Chief Financial Officer.
As part of a consistent company-wide approach, the Committee decided to exercise discretion and applied a downward
adjustment to the bonus awards for both executive Directors. Following this exercise of discretion, the final bonus determined
for the year was as set out in the table below.
2019 BONUS
Bonus amount achieved as % of salary
Bonus amount achieved
Paid in cash (70%)
Deferred in shares (30%)
Guy Wakeley
John Stier
21.4%
27.6%
£100,932
£90,575
£70,652
£63,403
£30,279
£27,173
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DIRECTORS’ REMUNERATION REPORT
THE CHIEF EXECUTIVE AND THE CHIEF FINANCIAL OFFICER’S PERSONAL OBJECTIVES FOR 2019
GUY WAKELEY'S OBJECTIVES WERE TO:
EVIDENCED BY:
Deliver sustainable earnings growth and equity
re-rating
Sustainable earnings have been increased. The re-rating of Equiniti shares was
not achieved, however, there were external factors influencing this such as lower
corporate action income and interest rates.
Consolidate US market position through revenue
progression, delivery of synergies, technology
separation and new product launch
The US market position has been consolidated with in-year revenues delivered
from new products. We have now successfully achieved the technology separation
from Wells Fargo.
Sustain organic sales growth, key account
progression, and forward revenue cover
Full year organic growth achieved. Key account organic revenue growth met
expectations.
Materially improve the efficiency of operations and
the delivery of technology and change
Material efficiencies have been achieved with the movement of the control of
network operations to offshore locations. A funded programme to deliver global
cloud based telephony and chat solutions is on track. Our Milwaukee
and Bangalore sites are now fully operational.
Improve customer satisfaction and advocacy
for B2B and D2C customers, and advance the
digitisation of service
Customer satisfaction for the year is measured at 98% and the Group NPS
is at 55.
Lead the establishment of a clearly defined and
progressive corporate culture, underpinned by
consistent values and leadership behaviours
The Equiniti’s vision and values are now embedded into the business and underpin
all internal and HR communications. A 2019 colleague engagement survey was
insightful and follow up actions will take place in 2020.
Continue the development of the group risk
framework
There is now systemic use of the Risk Management Framework throughout the
Group. There has been an increased use of automated risk management tools
with improved reporting materials.
Create and execute upon a strategic plan for the
simplification of the Group
A number of initiatives have been identified and progressed to simplify the
Group structure.
JOHN STIER’S OBJECTIVES WERE TO:
EVIDENCED BY:
Support a material equity re-rating through
accounting transparency, quality of earnings, and
enhanced investor relations
Although the re-rating of Equiniti shares has not progressed during the year, this
has been influenced by known external factors. Good progress has been made to
improve accounting disclosures, drive additional investor engagement, resulting in
more coverage and new shareholders.
Deliver underlying earnings growth through focus
on profit and balance sheet efficiency
Sustained our return on capital at 9.8% despite a material investment and
transformation in North America. Increased profit attributable to shareholders by
30.8% to 17.2% and DSO is down from 59 to 56 days.
Lead the implementation of HR and finance systems
for the global business
The US billing system is now fully live, allowing us to move away from Wells
Fargo’s systems. Our new Finance and HR system, Workday, has been rolled out
and is progressing on plan and on budget.
Deliver a closing year net leverage position of
less than 2.4x inclusive of all exceptional and
transformation costs, with improved debtor days
Leverage closed at 2.5x net debt to EBITDA, debtor days reduced to 56 days.
Drive further benefit from group procurement
and property functions, with particular focus on
IT spend and strategic partners
Excellent progress has been made with the rationalisation of several UK offices
into one site. There have been savings on IT spend with Procurement exceeding
its target savings.
Support the development of an improved corporate
culture through strong leadership behaviours,
colleague development, and standardised
operating models
A successful, annual finance conference was held and quarterly global finance
briefings are in place. Succession plans are in place and is monitored regularly.
Ensure that compliance and audit findings are
closed on a definitive and timely basis
All finance reviews are complete. The Global Audit Plan progressed in line with
service level agreements (SLAs).
112
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DIRECTORS’ REMUNERATION REPORT
112
DEFERRED ANNUAL BONUS PLAN (AUDITED INFORMATION)
30% of the bonus awarded in respect of the 2018 financial year was deferred into shares for three years (subject to continued
service and malus and clawback) and is summarised along with previous awards in the table below.
Award and Vesting
date
1 January
2019
Granted
(number)1
Lapsed
(number)
31 December
2019
Market price at
date of grant
(pence)2
Guy Wakeley
28/03/19 – 28/03/22
–
71,282
21/03/18 – 21/03/21
52,329
21/03/17 – 21/03/20
34,429
–
John Stier
28/03/19 – 28/03/22
–
49,300
21/03/18 – 21/03/21
35,220
21/03/17 – 21/03/20
25,782
–
–
–
–
–
–
–
71,282
52,329
34,429
49,300
35,220
25,782
200.5
312.5
194
200.5
312.5
194
1 At the time of grant, the value of the number of shares awarded is equal to the gross value of the bonus deferred.
2 The market price at date of grant was calculated using the prior day’s closing price.
PERFORMANCE SHARE PLAN (PSP) (AUDITED INFORMATION)
The table below details the PSP awards granted to the executive Directors during the year, together with those which were
unvested at 31 December 2019.
MAXIMUM AWARD
SHARES VESTING
Award and
Vesting date
Number
of options
awarded1 % of salary
Face value at
grant £’000
Market price at
grant (pence)2
Threshold Maximum
End of
Performance
Period
Guy Wakeley
John Stier
28/03/19 –
28/03/22
21/03/18 –
21/03/21
21/03/17 –
21/03/20
28/03/19 –
28/03/22
21/03/18 –
21/03/21
21/03/17 –
21/03/20
344,139
150
£690
200.5
25%
100%
31/12/21
220,800
150
£690
312.5
25%
100%
31/12/20
379,833
150
£737
194
25%
100%
31/12/19
239,401
150
£480
200.5
25%
100%
31/12/21
148,608
150
£464
312.5
25%
100%
31/12/20
251,845
150
£489
194
25%
100%
31/12/19
1 Due to the rights issue in October 2017, the number of options awarded in 2017 were adjusted and increased in line with market practice.
² When PSP options are granted, the market price at date of grant is calculated using the prior day’s closing share price. This is used to calculate the number of options
to be granted to the participant and is not the price the participant has to pay to receive the options once they have vested. The options are ‘nil-cost’ options, which
means that there is no price to be paid to receive them once they have vested. However, the participant will have to pay income tax and national insurance at their
respective tax rate on the overall market value of the vested award, priced at the time of exercise.
3 Following vesting, a further two-year holding period applies to the PSP awards, details of which are provided in this report.
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DIRECTORS’ REMUNERATION REPORT
Awards granted under the PSP are nil-cost options and are subject to the following performance measures:
Performance
Measure
Weighting of
Measure
Performance Target
EPS growth
50%
Average annual growth in the Company’s fully diluted normalised earnings per share (EPS) over
three financial years. For 2017 and 2019 awards, if average annual growth in EPS over 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 will vest if
growth is below 6%. For 2018 awards only, the threshold EPS target over three financial years
was increased to 8%, to reflect the impact of the WFSS acquisition in the first year of
the performance period.
Relative TSR
50%
Total shareholder return (TSR) performance over three financial years relative to the constituent
companies of the FTSE 250 Index (excluding investment trusts) on 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 award
will vest if TSR ranks below the median.
VESTING OF 2017 PSP AWARD
The PSP awards granted in March 2017 will vest in March 2020. The Committee reviewed the performance conditions for the
award and determined that 0% of the award will vest in total. Performance against both conditions is summarised below. The EPS
performance condition was based on the average annual growth in the Company’s fully diluted normalised earnings per share over
the 2017, 2018 and 2019 financial years. The TSR performance condition was measured over three years from January 2017 to
December 2019.
Fully diluted
normalised EPS
for year ended
31 December 2019
Base
EPS
Average
annual
growth
% of this element
of the award
vesting
15.8p
18.1p
5.1%
0%
Measure
Weighting
Vesting scale
50%
Average
annual
growth in the
Company’s
fully diluted
normalised
EPS
No vesting if average EPS
growth is below 6%, 25%
vests if average EPS growth
is equal to 6%, 100% vests
if average EPS growth is
12% or more. Straight line
pro rata vesting from 25%
to 100% for average EPS
growth between 6% and
12%
114
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DIRECTORS’ REMUNERATION REPORT
114
Measure
Weighting
Vesting scale
Relative TSR
DR – page
122
50%
No vesting if TSR ranks below the
median. 25% vests if TSR is median
ranking, 100% vests if TSR is upper
quartile or above. Straight line pro
rata vesting from 25% to 100% for
TSR ranking between median and
upper quartile
TSR
performance
Relative
performance
achieved
% of this element of
the award vesting
24%
Below median
0%
As a result of the performance achieved, the 2017 PSP awards will lapse in full.
The number of shares that will lapse in March 2020 for each of the executive Directors as a result of this performance is shown
in the table below:
Number of shares
subject to award
% that vested based on
EPS and TSR performance
Number of shares that will
vest
Estimated value of
shares at vesting
Guy Wakeley
379,833
John Stier
251,845
0%
0%
0
0
£0
£0
POST-VESTING HOLDING PERIOD
Following vesting, a further two-year holding period would normally apply to the PSP awards, whereby executive Directors would
be restricted from selling their interest in the net of tax shares which vest. These vested shares would be held in an Equiniti
investment product for the duration of the holding period.
SAVE-AS-YOU-EARN SCHEME (SHARESAVE)
The Company offers a Sharesave scheme to all employees, including executive Directors. Participants can save a sum of money
each month for a period of three years. Under the tax-approved limits, the maximum that each participant can save each month
is £500. However, this can be reduced and capped if the Sharesave is oversubscribed. At the end of the three-year period, the
money saved can either be returned to the participant or used to acquire shares in the Company at a price set at a 20% discount to
a market price, being an amount equal to the average of the daily middle-market quotation of a share over the three dealing days
prior to the grant date.
2018 GRANT
The second grant under the Sharesave was made on 27 September 2018 (the 2018 Grant). Again, the Sharesave was
oversubscribed and the monthly limit was capped at £100 per month. The grant price is £1.77. The 2018 Grant will mature in 2021.
The 2018 Grant was offered to all of our employees, including those in India, the Netherlands, South Africa and the US. The terms
of the Sharesave were the same for all participants, except for those in the US. In the US, the savings period is only for a period
of two years. At the end of the two-year savings period, US employees are able to exercise their options, but are restricted from
dealing in the shares for a further 12 month period. The discount to the market price is also less for US participants (15%) and
therefore the grant price for US participants is £2.23.
SHARE INCENTIVE PLAN
Executive Directors may participate in the Company’s Share Incentive Plan on the same basis as all other eligible employees.
Employees can purchase up to £1,800 of partnership shares each year from gross salary. For every three partnership shares
participants purchase, they receive two free matching shares on the first £180 that they invest annually.
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115
DIRECTORS’ REMUNERATION REPORT
DIRECTORS’ SHAREHOLDING REQUIREMENTS AND SHARE INTERESTS (AUDITED INFORMATION)
To align the interests of the executive Directors with shareholders, each executive Director must build up and maintain a beneficial
shareholding, excluding share options, in the Company equivalent to 200% of base salary. Executive Directors must meet the
shareholding guideline within five years of appointment to the Board.
From 2019 onwards, executive Directors will normally be required to retain a shareholding in the Company for a period of
two years after leaving, at the lower of the shareholding requirement in place prior to departure or the actual shareholding
on departure.
This applies to shares acquired from incentive plans and may include the net value of outstanding DABP awards and PSP awards
subject only to a holding period. The Committee will have discretion to operate the policy flexibly and may waive part or all of
the requirement where considered appropriate, for example in compassionate circumstances. The policy is supported by the use
of nominee accounts.
As at 31 December 2019, the Chief Executive beneficially held shares with an equivalent value of 883% of his base salary and
the Chief Financial Officer beneficially held shares with an equivalent value of 695% of his base salary. Accordingly all executive
Directors have met the shareholding requirements.
DIRECTOR
BENEFICIAL SHARE INTEREST
UNVESTED SHARE OPTIONS
TOTAL INTEREST
At 31 Dec 19
Vested PSP
subject to
holding period
PSP with
conditions
DABP with
conditions
SAYE without
conditions
Guy Wakeley
1,215,802
1,840,542
944,772
158,040
2,033
4,161,189
John Stier
307,830
1,220,358
639,854
110,302
2,033
2,280,377
Philip Yea
180,000
Mark Brooker
Alison Burns
Sally-Ann Hibberd
–
–
–
Dr Tim Miller
157,713
Cheryl Millington
Darren Pope
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
180,000
–
–
–
157,713
–
–
There has been no grant of, or trading in, shares of the Company between 1 January 2020 and 12 March 2020.
116
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DIRECTORS’ REMUNERATION REPORT
PERFORMANCE GRAPH AND TABLE
The following graph shows the Company’s TSR performance from listing in October 2015 to the end of the 2019 financial year,
against the FTSE 250 index. The FTSE 250 (excluding investment trusts) has been selected as it comprises companies of
a comparable size and complexity and provides a good indication of the Company’s relative performance.
EQUINITI
FTSE 250 Excluding
Investment Trusts
120%
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
(10%)
(20%)
(30%)
(40%)
Oct
2015
May
2016
Nov
2016
May
2017
Nov
2017
Jun
2018
Dec
2018
Jun
2019
Dec
2019
CHIEF EXECUTIVE’S PAY IN THE LAST SIX FINANCIAL YEARS
The total remuneration of the Chief Executive over the last six years in shown in the table below:
Total Remuneration (£000)
Annual Bonus (as % of maximum opportunity)
PSP vesting (as % of maximum opportunity)
YEAR ENDED 31 DECEMBER
2019
2018
2017
2016
2015
2014
665
14%
3,530
3,106
69%
70%
0%
95%1
100%2
965
57%
N/A
2,743
65%
N/A
528
37%
N/A
1 2018 PSP vesting includes the weighted average of vesting outcomes for the TSR element of the 2015 PSP awards (100% of maximum) and 2016 PSP awards
(88.75% of maximum).
2 2017 PSP vesting includes the EPS element of the 2015 PSP awards.
PERCENTAGE CHANGE IN CHIEF EXECUTIVE’S REMUNERATION
The table below shows the percentage change in each of the Chief Executive’s salary, taxable benefits and annual bonus earned in
2019 and 2018, compared to that for the average employee of the Group (on a per capita basis):
Salary
Benefits
Annual Bonus
GUY WAKELEY, CHIEF EXECUTIVE
AVERAGE EMPLOYEE
% change
% change
2.5%
0%
(78.8)%
2.4%
0%
(56.3)%
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DIRECTORS’ REMUNERATION REPORT
CHIEF EXECUTIVE PAY RATIO
This section discloses the CEO’s pay compared to the pay of UK employees for the financial year ended 31 December 2019.
Equiniti has chosen to use Option A to calculate the CEO pay ratio, as it believes that it is the most robust way for it to calculate
the three ratios from the options available in the regulations.
Total remuneration for all UK employees of the Company as at 31 December 2019 has been calculated in line with the single figure
methodology, and reflects their full-time equivalent earnings received in the financial year ended 31 December 2019.
Year
2019
Method
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
Option A
29:1
20:1
12:1
Set out in the table below is the full-time equivalent fixed salary and total pay and benefits for the employees identified at each
of the percentiles. The Committee considers that this is representative of the employees of their pay levels.
Employee
75th percentile
50th percentile
25th percentile
Salary
Total pay and benefits
£46,200
£30,200
£17,800
£53,224
£32,712
£23,102
Salaries of all employees are set with reference to a range of factors, including market practice, experience and performance in
role. In reviewing the ratios, the Committee also noted that the CEO’s remuneration package is weighted more heavily towards
variable pay than the wider workforce, due to the nature of the role, and this means the ratio is likely to fluctuate depending on
the performance of the business and associated outcomes of the incentive plans in each year.
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below details the percentage change in dividends and overall expenditure on pay compared with the previous
financial year:
Total dividend paid
Total employee remuneration
PAYMENTS FOR LOSS OF OFFICE (AUDITED INFORMATION)
There were no payments for loss of office made in 2019.
PAYMENTS TO PAST DIRECTORS (AUDITED INFORMATION)
There were no payments made to any past Directors during the year.
2019 vs 2018
3.2%
1.2%
2019
5.49p
2018
5.29p
£222.5m
£219.8m
EXECUTIVE DIRECTORS SERVING AS NON-EXECUTIVE DIRECTORS
Since March 2018, Guy Wakeley has served as a non-executive director of HgCapital Trust plc, for which he received a fee
of £38,500 during the 2019 financial year. He retained this fee in full.
OTHER SHAREHOLDING INFORMATION (AUDITED INFORMATION)
SHARE PRICE
The closing share price of the Company’s ordinary shares at 31 December 2019 was 206.4p and the price range for the financial
year was 186.2p to 236.2p.
SHAREHOLDER DILUTION
Awards granted under the Company’s share plans may be satisfied by shares purchased in the market or by the issue of new shares
when awards vest. The Board monitors the number of shares issued under the various share plans and the impact on dilution limits.
The relevant dilution limits established by the Investment Association in respect of share plans is 10% in any rolling 10 year period
and in respect of discretionary share plans is 5% in any 10 year rolling period.
Based on the Company’s issued share capital as at 31 December 2019, and assuming that all current awards made under
the Company’s share plans as at that date vest in full, the dilution level was 4.59% against all share plans and 2.72% against
discretionary schemes.
118
119
DIRECTORS’ REMUNERATION REPORT
118
DIRECTORS’ SERVICE CONTRACTS
Date of appointment
Date of current contract/
letter of appointment
Notice from
Company
Notice from
Director
Unexpired period
of service contract
EXECUTIVE DIRECTORS*
Guy Wakeley
27 October 2015
7 September 2015
12 months
12 months
Rolling contract
John Stier
27 October 2015
11 September 2015
12 months
12 months
Rolling contract
NON-EXECUTIVE DIRECTORS**
Philip Yea
3 July 2017
30 June 2017
3 months
3 months
7 months
Mark Brooker
1 November 2018
16 October 2018
3 months
3 months
22 months
Alison Burns
1 April 2018
22 February 2018
3 months
3 months
15 months
Sally-Ann Hibberd
27 June 2016
26 April 2019
3 months
3 months
32 months
Dr Tim Miller
9 October 2015
23 April 2018
3 months
3 months
20 months
Cheryl Millington
1 November 2018
16 October 2018
3 months
3 months
22 months
Darren Pope
6 October 2016
26 April 2019
3 months
3 months
32 months
* Guy Wakeley joined the Group in January 2014 and John Stier joined the Group in June 2015. When the Company listed in October 2015, they entered into new
service contracts and their date of appointment to the listed company was 27 October 2015.
** Non-executive Directors are appointed for an initial term of three years, renewable for a subsequent term of three years.
STATEMENT OF VOTING
The voting outcome at the 2019 Annual General Meeting in respect of the 2018 Annual Report on Remuneration reflected very
strong shareholder support.
Shares voted
In Favour
Against
Withheld
282,526,426 77.50% of shares in issue
282,379,206
99.95% of shares voted
147,220
0.05% of shares voted
12,711
–
The Company’s current Remuneration Policy was approved by shareholders at the Company’s AGM held on 2 May 2019,
with a very strong majority vote in favour.
Shares voted
In Favour
Against
Withheld
Dr Tim Miller
Chair of the Remuneration Committee
12 March 2020
282,525,517 77.50% of shares in issue
282,140,183
99.86% of shares voted
385,334
0.14% of shares voted
127,751
–
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DIRECTORS’ REPORT
INTRODUCTION
Equiniti Group plc (the Company) is incorporated as a public
limited company, limited by shares, and is registered in England
with the registered number 07090427. The Company is the
holding company for the Equiniti Group of companies (the
Group). The Company’s registered office is Sutherland House,
Russell Way, Crawley, West Sussex, RH10 1UH and its registrar
is Equiniti Limited which is situated at Aspect House, Spencer
Road, Lancing, West Sussex, BN99 6DA.
The Directors’ present their Report for the year ended 31
December 2019, in accordance with section 415 of the
Companies Act 2006. The UKLA’s Disclosure Guidance and
Transparency Rules and Listing Rules also require the Company
to make certain disclosures, some of which have been included
in other appropriate sections of the Annual Report.
The Directors’ Report comprises pages 120 to 123, and the
following cross-referenced material is incorporated into this
Directors’ Report:
Future Developments of the Business
page 21
Viability Statement
Employees
Greenhouse Gas Emissions
Section 172(1) Statement
page 56
pages 40 to 49
page 49
page 50
Governance Report
pages 62 to 119
Compliance Statement
page 63
Directors’ Responsibility Statements
pages 74 to 75
Going Concern Statement
Disclosure of Information to External
Auditor
page 75
page 75
Financial Instruments and Financial Risk
Management
pages 88 to 89
The Annual Report and Accounts 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.
DIRECTORS
The Directors who have held office during the year ended
31 December 2019 and to date are as follows:
Philip Yea
Guy Wakeley
John Stier
Mark Brooker
Alison Burns
Sally-Ann Hibberd
Dr Tim Miller
Cheryl Millington
Darren Pope
Biographical details of the Directors are set out on pages
64 to 65.
DIRECTORS’ RETIREMENT AND REAPPOINTMENT
All of the current Directors will retire and offer themselves
for re-appointment at the 2020 Annual General Meeting
(2020 AGM).
The Company’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
reappointment by shareholders at the next Annual General
Meeting. The Articles of Association also 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 Governance Report on pages 68 to 69.
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THE DIRECTORS’ DUTIES
Directors of the Company, as those of all UK companies, must
act in accordance with a set of general duties. These duties are
detailed in section 172 of the UK Companies Act 2006 which
is summarised as follows:
‘a director of a company must act in the way they consider, in
good faith, would be most likely to promote the success of the
company for the benefit of its shareholders as a whole and, in
doing so have regard (amongst other matters) to:
• the likely consequences of any decisions in the long-term
• the interests of the company’s employees
• the need to foster the company’s business relationships with
suppliers, customers and others
• the impact of the company’s operations on the community
and environment
• the desirability of the company maintaining a reputation for
high standards of business conduct and
• the need to act fairly as between shareholders of the
company.’
As part of their induction, a Director is briefed on their duties
and they can access professional advice on these, either from
the Company Secretary or, if they judge it necessary, from an
independent adviser. It is important to recognise that in a large
organisation such as ours, the Directors fulfil their duties partly
through a governance framework that delegates day-to-day
decision-making to employees of the Company and details of
this can be found in our Governance Report on pages 70 to 71.
The following paragraphs summarise how the Directors’ fulfil
their duties:
RISK MANAGEMENT
We provide business-critical services to our clients, often in
highly regulated environments. As we grow, our business and
our risk environment also become more complex. It is therefore
vital that we effectively identify, evaluate, manage and mitigate
the risks we face, and that we continue to evolve our approach
to risk management.
For details of our principal risks and uncertainties, and on how
we manage our risk environment, please see pages 52 to 55
and our Risk Committee Report on pages 84 to 89.
OUR PEOPLE
The Company is committed to being a responsible business.
Our behaviour is aligned with the expectations of our people,
clients, investors, communities and society as a whole. People
are at the heart of our specialist services. For our business to
succeed we need to manage our people’s performance and
develop and bring through talent while ensuring we operate as
efficiently as possible. We must also ensure we share common
values that inform and guide our behaviour so we achieve our
goals in the right way.
For further details on our people, please see pages 45 to 49.
BUSINESS RELATIONSHIPS
Our strategy prioritises 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 client relationships. We value all of our suppliers
and have multi-year contracts with our key suppliers.
For further details on how we work with our clients and
suppliers, please see page 42.
COMMUNITY AND ENVIRONMENT
The Company’s approach is to use our position of strength to
create positive change for the people and communities with
which we interact. We want to leverage our expertise and
enable colleagues to support the communities around us.
For further details on how we interact with communities and
the environment, please see page 49.
CULTURE AND VALUES
The Board recognises the importance of having the right
corporate culture. Our long-term success depends on achieving
our strategic goals in the right way, so we look after the best
interests of our clients, people and other stakeholders. Through
the use of employee and management workshops, we have
identified five core values that govern how we act as a business
and details of these, plus further details on our corporate
culture, can be found on page 45.
SHAREHOLDERS
The Board is committed to openly engaging with our
shareholders, as we recognise the importance of a continuing
effective dialogue, whether with major institutional investors,
private or employee shareholders. It is important to us that
shareholders understand our strategy and objectives, so these
must be explained clearly, feedback heard and any issues or
questions raised properly considered.
For further details on how we engage with our shareholders,
please see page 44.
DIRECTORS’ INTERESTS
Details of the Directors’ share interests in the Company can
be found on page 115.
DIRECTORS’ INSURANCE
A Directors’ and Officers’ Liability Insurance policy is maintained
for all of our Directors and each Director has the benefit of a
Deed of Indemnity given by the Company.
THIRD-PARTY INDEMNITY
The Group 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 of the Company,
its subsidiaries or associates, which remain in force at the date
of this report.
DIVIDENDS
The Board has adopted a progressive dividend policy, reflecting
the Company’s long-term earnings and cash flow potential. We
target a pay-out ratio of 30% of underlying profit attributable
to ordinary shareholders, which is split one-third and two-thirds
between interim and final dividends respectively.
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DIRECTORS’ REPORT
The Board is recommending a final dividend of 3.54 pence
per share which, subject to shareholder approval at the 2020
AGM, will result in a full year dividend of 5.49 pence per share
(including the interim dividend of 1.95 pence per share). The
final dividend will be paid on 26 May 2020 to shareholders
on the register of members at close of business on 17 April
2020. Any shareholder wishing to participate in the Company’s
Dividend Reinvestment Plan needs to have submitted their
election to do so by 1 May 2020.
EMPLOYEES WITH DISABILITIES
The Company believes that people with health conditions
should have full and fair consideration for all vacancies and will
interview those people with disabilities who fulfil the minimum
criteria. For those employees in the workforce who become
disabled during employment, the Company will arrange
appropriate retraining and adjust employees’ environments
where possible to allow them to maximise their potential and
continue to work with the Company.
CHARITABLE DONATIONS
We are committed to being a responsible corporate
citizen through support for appropriate charitable projects,
organisations and charities. There are no Group sponsored
charities. However, there are numerous charitable efforts carried
out within the regions in which we are located. The Group
also 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.
POLITICAL DONATIONS
The Group does not make any political donations and does not
incur any political expenditure. As a precautionary measure,
authority is to be sought at the 2020 AGM to make limited
political donations or incur political expenditure and there is a
full explanation in the explanatory note of Resolution 18 to the
2020 AGM Notice.
RESEARCH AND DEVELOPMENT
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, the Group continues to commit resources
to the development of new and improved technologies and
capabilities. Expenses incurred are required to be capitalised
when it is probable that future economic benefits will be
attributable to the asset and that costs can be measured
reliably, in accordance with the relevant accounting standards
and our accounting policies.
CHANGE OF CONTROL/SIGNIFICANT AGREEMENTS
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.
The Company does not have any agreements with any Director
or officer that provide for compensation for loss of office or
employment resulting from a takeover. The Company 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 the Company is a party
that take effect, alter or terminate upon a change of control
following a takeover bid.
SUBSTANTIAL SHAREHOLDINGS
As at 12 March 2020, the latest practicable date before the
publication of this Annual Report, (the latest practicable date),
the Company was aware that the following shareholders held,
or were beneficially interested in, 3% or more of the Company’s
ordinary shares at that date:
SHAREHOLDER
NUMBER OF ORDINARY
SHARES
Mondrian Investment Partners
37,873,556
Paradice Investment Management
31,051,065
Aberdeen Standard Investments
GVQ Investment Management
Invesco
BNP Paribas Asset Management
BlackRock
Vanguard Group
CRUX Asset Management
30,182,658
22,034,058
19,338,452
15,275,510
14,795,258
13,081,690
12,876,177
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SHARE CAPITAL STRUCTURE
The Company has one class of share capital: ordinary shares
of £0.001 each (shares), which rank equally in all respects.
The rights attaching to the shares are set out in the Company’s
Articles of Association and details of the issued share capital
as at 31 December 2019 and of the movements during the
year are set out in note 6.2 to the Accounts on page 163.
There are no restrictions on the transfer of shares or on the
exercise of voting rights, except in circumstances where:
i.
the Company 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.
The Company operates a share incentive scheme open to all
employees. The Trustee of the Employee Benefit Trust (Trust)
abstains from voting the shares held in the Trust. Except as
noted above, any shares acquired through a share incentive
scheme rank equally with existing shares and have no additional
or special rights. As at 31 December 2019, 1,763,828 shares
are held by Estera Trust (Jersey) Limited, acting as trustee
of the Trust.
AMENDMENT TO THE COMPANY’S ARTICLES OF
ASSOCIATION
Any amendments to the Articles of Association may be made in
accordance with the provisions of the Companies Act 2006 by
way of a shareholders’ special resolution.
POST BALANCE SHEET EVENTS
In February 2020, the Group purchased the entire issued
share capital of Monidee B.V. (Monidee). Initial consideration
of £3.3m (€4.0m) was paid in February 2020 and deferred
consideration of £3.3m (€4.0m) is payable in February 2021.
Monidee is an employee share plans technology business
based in Amsterdam, Netherlands.
There have been no other material events between
31 December 2019 and the date of authorisation of the
consolidated financial statements that would require
adjustments of the consolidated financial statements
or disclosure.
EXTERNAL AUDITOR
Having conducted an independence and effectiveness
assessment during the year as described in the Audit
Committee Report on page 81, the Audit Committee
has recommended to the Board the reappointment of
PricewaterhouseCoopers LLP (PwC) as the Group’s external
Auditor. PwC has indicated its willingness to continue in office.
Following the recommendation of the Audit Committee and
in accordance with section 489 of the Companies Act 2006,
a resolution to reappoint PricewaterhouseCoopers LLP will
be put to shareholders at the 2020 AGM. The Audit Committee
will be responsible for determining the audit fee on behalf
of the Board.
AUTHORITY TO ALLOT AND PURCHASE SHARES
The Company was granted authority at our 2019 Annual
General Meeting to allot equity securities up to a nominal
amount of £121,512.22, subject to certain restrictions, and allot
equity securities up to a nominal amount of £18,226.83 on a
non-pre-emptive basis, subject to certain restrictions. At the
2019 Annual General Meeting, the Company was also granted
authority to make market purchases of up to 36,453,666 of its
own ordinary shares, as permitted by the Companies Act 2006.
Resolutions to renew these authorities and permit Directors to
allot equity securities up to a nominal amount of £121,512.22,
representing one third of the Company’s share capital as at
12 March 2020 (the latest practicable date), of which
£18,226.83, representing 5% of the Company’s issued share
capital as at the latest practicable date, could be allotted on a
non-pre-emptive basis, subject to certain restrictions, and make
market purchases of up to 36,453,666 of our own ordinary
shares, representing 10% of the Company’s issued share capital
as at the latest practicable date, will be put to shareholders at
the 2020 Annual General Meeting. A further explanation
of the resolutions is set out in the 2020 Notice of Annual
General Meeting.
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.
ANNUAL GENERAL MEETING
The Company’s 2020 AGM will be held at Worthing Town
Football Club Limited, Palatine Park, Palatine Road, Worthing
BN12 6JN at 4.00 p.m. on 7 May 2020. The Notice of Meeting
of the 2020 AGM will be available on our website:
http://investors.equiniti.com/investors.
An explanation of the resolutions to be put to shareholders at
the 2020 AGM, and the recommendation of the Directors in
relation to them, is set out in the 2020 AGM Notice.
The Directors’ Report was approved by the Board of Directors
on 12 March 2020.
By Order of the Board
Kathy Cong
Company Secretary
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Best Use of Print and Best Use of Content
in a Live or Experiential Setting
– Corporate Content Awards wins
for the MyCSP Communications team
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03
Financial
Statements
INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF EQUINITI GROUP PLC
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
COMPANY STATEMENT OF FINANCIAL POSITION
COMPANY STATEMENT OF CHANGES IN EQUITY
NOTES TO THE COMPANY FINANCIAL STATEMENTS
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF
EQUINITI GROUP PLC
Report on the audit of
the financial statements
OPINION
In our opinion, Equiniti Group plc’s group financial statements
and company financial statements (the financial statements):
• give a true and fair view of the state of the Group’s and of the
company’s affairs as at 31 December 2019 and of the Group’s
profit and the Group’s cash flows for the year then ended;
• have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the
European Union and, as regards the company’s financial
statements, as applied in accordance with the provisions of
the Companies Act 2006; and
• have been prepared in accordance with the requirements of
the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the
Annual Report, which comprise: the consolidated and company
statements of financial position as at 31 December 2019; the
consolidated income statement and consolidated statement
of comprehensive income, the consolidated statement of
cash flows, and the consolidated and company statements of
changes in equity for the year then ended; and the notes to
the financial statements, which include a description of the
significant accounting policies.
Our opinion is consistent with our reporting to the
Audit Committee.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under ISAs (UK) are further described
in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
INDEPENDENCE
We remained independent of the Group in accordance with
the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance
with these requirements.
To the best of our knowledge and belief, we declare that
non‑audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group or the company.
Other than those disclosed in the Audit Committee Report,
we have provided no non‑audit services to the Group
or the company in the period from 1 January 2019 to
31 December 2019.
OUR AUDIT APPROACH
Overview
MATERIALITY
• Overall group materiality: £3.3 million (2018: £2.5 million), representing 2.5% of Earnings
Before Interest Tax Depreciation and Amortisation “EBITDA”.
• Overall company materiality: £2 million (2018: £1.5 million), based on 1% of total assets.
• Full scope audits were performed in respect of five operating entities and also on a further two
holding companies.
• Additional specific audit procedures were performed on a number of financially insignificant
entities to achieve required levels of audit coverage. Procedures were performed over seven
entities in respect of revenue and one in respect of contract fulfilment liabilities.
• Overall, these audit procedures provided coverage of 82% of consolidated revenue and 64%
AUDIT
SCOPE
KEY AUDIT
MATTERS
of consolidated EBITDA.
• Revenue recognition.
• The carrying value of goodwill and related impairment assessments.
• The capitalisation of software development costs.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF
EQUINITI GROUP PLC
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THE SCOPE OF OUR AUDIT
As part of designing our audit, we determined materiality
and assessed the risks of material misstatement in the
financial statements.
• Assessment of matters reported on the Group’s
whistleblowing helpline and the results of management’s
investigation of such matters;
• Reading key correspondence with regulatory authorities,
CAPABILITY OF THE AUDIT IN DETECTING
IRREGULARITIES, INCLUDING FRAUD
Based on our understanding of the Group and industry, we
identified that the principal risks of non‑compliance with
laws and regulations related to breaches of data protection
regulations (see page 52 of the Annual Report), the Financial
Conduct Authority's regulations and the US Securities and
Exchange Commission’s regulations relating to registered
transfer agents, and we considered the extent to which
non‑compliance might have a material effect on the financial
statements. We also considered compliance with those laws
and regulations that have a direct impact on the preparation
of the financial statements such as the Companies Act 2006.
We evaluated management’s incentives and opportunities
for fraudulent manipulation of the financial statements
(including the risk of override of controls), and determined
that the principal risks were related to posting inappropriate
journal entries to increase revenue or reduce expenditure,
and management bias in accounting estimates. The Group
engagement team shared this risk assessment with the
component auditors so that they could include appropriate
audit procedures in response to such risks in their work. Audit
procedures performed by the Group engagement team and/or
component auditors included:
• Enquiries with management, internal audit and the Group’s
legal counsel, including consideration of known or suspected
instances of non‑compliance with laws and regulations and
fraud;
• Evaluation of management’s controls designed to prevent
and detect irregularities;
including the FCA;
• Challenging assumptions and judgements made by
management in their significant accounting estimates, in
particular in relation to the carrying value of goodwill (see
related key audit matter below); and
• Identifying and testing journal entries, in particular any journal
entries posted with unusual account combinations, unusual
words or those posted by senior management.
There are inherent limitations in the audit procedures
described above and the further removed non‑compliance
with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely we
would become aware of it. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the audit
of the financial statements of the current period and include the
most significant assessed risks of material misstatement (whether
or not due to fraud) identified by the auditors, including those
which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of
the engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed
in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. This is not a complete list of
all risks identified by our audit.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF
EQUINITI GROUP PLC
KEY AUDIT MATTER
Revenue Recognition (Group)
The Group’s business activities generate a number
of revenue streams, with differing characteristics
and revenue recognition points. The majority of
revenue results from fulfilment of single performance
obligations or straightforward multiple performance
obligations and therefore require relatively little
judgement. The volume and breadth of activities
performed by the Group's results in significant audit
effort being required.
The Group also enters into a number of contracts
involving multiple performance obligations in respect
of software licences, hosting and support services
and services for corporate actions which can straddle
accounting periods. These involve management
judgement relating to amount and the timing of
revenue recognition.
IFRS 15 Revenue from contracts with customers
specifies a five step approach to determine the
amount and timing of revenue recognition and
requires that an appropriate amount of revenue
(i.e. the fair value) should be recognised for each
separate performance obligation.
See note 2.4 to the financial statements.
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
We evaluated the design and implementation of the key controls operated by
management in respect of revenue recognition.
We evaluated management’s accounting policies and we assessed whether these policies
comply with the requirements of IFRS 15.
We performed substantive tests, validating revenue recognised by the Group, on
a sample basis, to underlying evidence, including contracts, correspondence with
customers, and cash payments. In doing so we assessed whether revenue recognised
complied with the Group’s accounting policy and IFRS 15.
For a sample of contracts with multiple performance obligations that included a software
licence sales, we also assessed whether the separate performance obligations had been
appropriately identified. We assessed whether the key terms had been agreed, for
example whether the customer had an enforceable right to use the licence at the year
end and whether Equiniti had an enforceable right to payment and, where necessary, we
asked management to provide additional evidence of agreement of terms, or delivery
and acceptance of the related deliverable. We performed testing over the fair value
attributed to each performance obligation by comparing the margins or selling prices
used in management’s calculations to those achieved on similar contracts when sold
separately. Where appropriate we sought and received additional confirmatory evidence
from the customer.
Our testing did not identify any material corporate actions that straddled the period end.
No material exceptions were noted.
The carrying value of goodwill and related
impairment assessments (Group)
We evaluated the design and implementation of the key controls operated by
management in respect of the impairment assessments.
We obtained management’s impairment assessment calculations and tested the
forecast cash flows used therein to the latest Board approved plans for the Group.
We evaluated the key assumptions in these forecasts and plans and considered the
evidence provided for these, principally focusing on evidence of estimated revenue
growth and cost savings, historical trends and actual performance during the year
ended 31 December 2019.
As part of our work we considered revenue forecasts including any growth rates applied,
the basis for any significant short and long term growth assumptions, cash outflows for
costs, and the discount rate applied to the forecast cash flows.
In assessing management’s impairment exercise we also evaluated the identification of
individual cash generating units by management, and whether these were appropriate
in relation to the way in which the Group’s business is run, and whether based on the
evidence provided, management’s approach to impairment testing was consistent with
the requirements of IAS 36.
We also considered whether the disclosures made by management in respect of
their annual goodwill impairment review were compliant with the requirements of
IAS 36. Based on the audit procedures performed we did not identify any material
misstatements.
IAS 36 Impairment of assets requires that
management perform an annual impairment
assessment for indefinite lived intangible assets such
as goodwill to determine whether there has been any
impairment to the carrying value.
When the Group purchases businesses, any goodwill
arising is attributed to one of the Group’s reporting
segments. These segments are then identified as
the cash generating units for future impairment
monitoring unless analysis at a more granular level
is appropriate.
Management’s annual impairment review of goodwill
did not identify any impairment of the carrying
value recorded in the financial statements as at 31
December 2019. We focused on this area given:
• the quantum of the goodwill recorded in the
financial statements; and
• the significance of the assumptions, such as
growth in cash flows in the forecast period, long
term growth rates, and the discount rate used in
management’s impairment assessment models.
Refer to note 4.4 which provides further detail
on the £529.5 million goodwill balance as at
31 December 2019 and the related impairment
testing disclosures.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF
EQUINITI GROUP PLC
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Capitalisation of software development costs (Group)
The Group invests significant amounts in purchasing
and developing software that is used, or sold or
licensed to customers. See note 4.4 to the financial
statements.
During the year the Group invested £44.8 million in
software development of which £21.9 million related
to internal development costs. As at 31 December
2019 the net book value of capitalised software
development amounted to £102.5 million.
We evaluated the design and implementation of the key controls operated by
management in respect of the capitalisation of software development.
We evaluated the Group’s accounting policy for capitalisation of software related costs,
and assessed whether it complies with the requirements of IAS 38.
We selected a sample of software development costs capitalised during the year and:
• Assessed management’s evaluation as to whether the IAS 38 criteria had been met.
This included obtaining evidence regarding technical feasibility, and the financial
forecasts prepared by management in assessing whether the assets would generate
economic benefits.
• Tested the amounts capitalised to underlying evidence, such as contracts with third
party contractors or, in the case of internal staff costs capitalised, records and other
evidence corroborating the time spent by relevant employees on development activity,
and assessed the reasonableness of the capitalisation rates used by management.
Our work also included analytical procedures to identify any unusual patterns in the
timing of amounts capitalised in order to assess whether we needed to obtain further
audit evidence.
We assessed the useful economic lives being used to amortise the capitalised costs
against the evidence obtained, and our understanding of the business plans for which
they are being used. We also compared them to the Group’s stated accounting policy.
We also considered management’s assessment as to whether there were any indicators
of impairment in respect of capitalised software costs, and we assessed management’s
conclusions as to whether any material impairment charges should be recorded in the
financial statements.
No exceptions were noted.
We determined that there were no key audit matters applicable to the company to communicate in our report.
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 structure of the Group and the company, the accounting processes and controls,
and the industry in which they operate.
The Group is organised into four main operating divisions (Investment Solutions, Intelligent Solutions, Pension Solutions and
EQ US) and operates primarily in the UK and US, with support functions performed by a shared service centre in India. It operates
through 36 entities, with significant trading activity in five of these.
Overall, these audit procedures provided coverage of 82% of consolidated revenue and 64% of consolidated EBITDA. Of the seven
full scope audits, six audits were performed by the Group engagement team based in the UK. For one entity, Equiniti US,
a separate PwC component audit team based in the USA performed the audit under instruction from the Group team.
The risks and proposed audit response for Equiniti US were agreed with the component team prior to the commencement of that
audit. The Group engagement team reviewed the work of the PwC component audit team in the US and attended the clearance
meeting to discuss the audit work and findings. As part of the review and supervision of the US component audit team, senior
members of the Group team visited the US to evaluate the work performed, including reviewing relevant audit working papers.
As part of our work we also considered the activities performed by the Group’s shared service centre in India to understand the
finance‑related processes that are relevant to the preparation of the financial statements. We visited the centre in India to meet
with management and evaluate the design and implementation of key controls relevant to our audit work.
Additionally, the Group engagement team performed audit work over tax balances, share based payments, and business
combinations including consideration of management’s goodwill impairment review and the financial reporting consolidation
as these areas are managed centrally.
A full scope audit was performed by the Group engagement team in relation to the financial information of the Company.
MATERIALITY
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 in aggregate on the financial statements as a whole.
128
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF
EQUINITI GROUP PLC
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Company financial statements
Overall materiality
£3.3 million (2018: £2.5 million).
£2 million (2018: £1.5 million).
How we determined it
2.5% of Earnings Before Interest Tax
Depreciation and Amortisation “EBITDA”.
1% of total assets.
Rationale for benchmark
applied
Consolidated EBITDA is an important
measure used by the shareholders to assess
the performance of the Group and this is
considered a generally accepted auditing
benchmark for the calculation of materiality.
Total assets is the primary measure used by
shareholders in assessing the performance
of the Company and is a generally accepted
auditing benchmark. Materiality for the
Company was capped to a level below the
overall materiality used in the audit of the
consolidated financial statements.
For each component in scope for Group audit purposes, we allocated a materiality that is less than the overall Group materiality
level. The range of materiality allocated across components was between £1.2 million and £2.3 million. Certain components were
audited to a local statutory audit materiality that was also less than the overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £175,000
(Group audit) (2018: £125,000) and £175,000 (Company audit) (2018: £125,000) as well as misstatements below those amounts
that, in our view, warranted reporting for qualitative reasons.
GOING CONCERN
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add
or draw attention to in respect of the Directors’ statement in
the financial statements about whether the Directors considered
it appropriate to adopt the going concern basis of accounting
in preparing the financial statements and the Directors’
identification of any material uncertainties to the Group’s and
the company’s ability to continue as a going concern over a
period of at least twelve months from the date of approval of
the financial statements.
We have nothing material to add or to draw attention to.
However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Group’s
and company’s ability to continue as a going concern. For
example, the terms of the United Kingdom’s withdrawal
from the European Union are not clear, and it is difficult to
evaluate all of the potential implications on the Group’s
trade, customers, suppliers and the wider economy.
We are required to report if the Directors’ statement relating
to Going Concern in accordance with Listing Rule 9.8.6R(3) is
materially inconsistent with our knowledge obtained in the audit.
We have nothing to report.
REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the
other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this
report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report, Directors’ Report and Corporate Governance Statement, we also considered whether the
disclosures required by the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006
(CA06), ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and
matters as described below (required by ISAs (UK) unless otherwise stated).
130
131
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF
EQUINITI GROUP PLC
STRATEGIC REPORT AND DIRECTORS’ REPORT
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Directors’ Report for the year ended 31 December 2019 is consistent with the financial statements and has been prepared
in accordance with applicable legal requirements. (CA06)
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In light of the knowledge and understanding of the Group and company and their environment obtained in the course
of the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
CORPORATE GOVERNANCE STATEMENT
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance
Statement (as set out on pages 62 – 123) about internal controls and risk management systems in relation to financial reporting
processes and about share capital structures in compliance with rules 7.2.5 and 7.2.6 of the Disclosure Guidance and Transparency
Rules sourcebook of the FCA (“DTR”) is consistent with the financial statements and has been prepared in accordance with
applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Group and company and their environment obtained in the course of the audit,
we did not identify any material misstatements in this information. (CA06)
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance
Statement (as set out on pages 62 – 123) with respect to the company’s corporate governance code and practices and about
its administrative, management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the
DTR. (CA06)
We have nothing to report arising from our responsibility to report if a corporate governance statement has not been prepared by
the company. (CA06)
THE DIRECTORS’ ASSESSMENT OF THE PROSPECTS OF THE GROUP AND OF THE PRINCIPAL RISKS THAT
WOULD THREATEN THE SOLVENCY OR LIQUIDITY OF THE GROUP
We have nothing material to add or draw attention to regarding:
• The Directors’ confirmation on page 75 of the Annual Report 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.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The Directors’ explanation on page 75 of the Annual Report 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 a review of the Directors’ statement that they have carried out a robust
assessment of the principal risks facing the Group and 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 UK Corporate
Governance Code (the “Code”); and considering whether the statements are consistent with the knowledge and understanding
of the Group and company and their environment obtained in the course of the audit. (Listing Rules)
OTHER CODE PROVISIONS
We have nothing to report in respect of our responsibility to report when:
• The statement given by the Directors, on page 75, that they consider the Annual Report taken as a whole to be fair, balanced
and understandable, and provides the information necessary for the members to assess the Group’s and company’s position
and performance, business model and strategy is materially inconsistent with our knowledge of the Group and company
obtained in the course of performing our audit.
• The section of the Annual Report on page 74 describing the work of the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee.
• The Directors’ statement relating to the company’s compliance with the Code does not properly disclose a departure from
a relevant provision of the Code specified, under the Listing Rules, for review by the auditors.
130
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF
EQUINITI GROUP PLC
DIRECTORS’ REMUNERATION
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006. (CA06)
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of the Directors’ Responsibilities, the Directors are responsible for the preparation of
the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view.
The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the Directors either intend to liquidate the Group or the company or to cease operations, or have no realistic alternative
but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
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.
132
133
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF
EQUINITI GROUP PLC
OTHER REQUIRED REPORTING
COMPANIES ACT 2006 EXCEPTION REPORTING
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
company, or returns adequate for our audit have not
been received from branches not visited by us; or
• certain disclosures of Directors’ remuneration specified
by law are not made; or
• the company 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.
APPOINTMENT
Following the recommendation of the Audit Committee, we
were appointed by the Directors on 11 February 2011 to audit
the financial statements for the year ended 31 December 2010
and subsequent financial periods. The period of total
uninterrupted engagement is 10 years, covering the years
ended 31 December 2010 to 31 December 2019.
Darren Meek (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Gatwick
12 March 2020
132
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CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
Revenue
Administrative costs
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of software
Amortisation of acquisition-related intangible assets
Finance income
Finance costs
Profit before income tax
Income tax charge
Profit for the year
Profit for the year attributable to:
– Owners of the parent
– Non-controlling interest
Profit for the year
Earnings per share attributable to owners of the parent:
Basic earnings per share (pence)
Diluted earnings per share (pence)
Note
3.1, 3.3
3.2
4.2
4.3
4.4
4.4
6.1
6.1
8.1
6.5
6.5
2019
£m
555.7
(425.2)
(6.8)
(6.1)
(29.9)
(31.8)
–
(16.1)
39.8
(7.4)
32.4
30.8
1.6
32.4
8.4
8.4
2018
£m
530.9
(429.4)
(6.0)
–
(23.9)
(31.7)
0.2
(15.5)
24.6
(3.9)
20.7
17.5
3.2
20.7
4.8
4.7
The Group adopted IFRS 16 Leases (IFRS 16) on 1 January 2019 and elected not to apply the new standard retrospectively. As a result, the
2018 results have not been restated for the impact of IFRS 16 and are reported under the previous accounting standard IAS 17 Leases (IAS 17).
Therefore the financial statements are shown on an IFRS 16 basis for 2019 and an IAS 17 basis for 2018. Further details on the impact of IFRS 16
are shown in note 2.2.
The notes on pages 141 – 187 form part of these financial statements.
134
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
Profit for the year
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Fair value movement through hedging reserve
Tax movement in hedging reserve
Net exchange (loss)/gain on translation of foreign operations
Items that will not be reclassified to profit or loss
Defined benefit plan actuarial losses
Deferred tax adjustment on actuarial losses
Other comprehensive (expense)/income for the year
Total comprehensive income for the year
Total comprehensive income attributable to:
– Owners of the parent
– Non-controlling interests
Total comprehensive income for the year
The notes on pages 141 – 187 form part of these financial statements.
Note
9.3
2019
£m
32.4
13.6
(2.1)
(5.5)
6.0
(9.8)
1.7
(8.1)
(2.1)
30.3
28.9
1.4
30.3
2018
£m
20.7
4.4
(0.9)
10.9
14.4
(0.2)
–
(0.2)
14.2
34.9
31.7
3.2
34.9
134
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Intangible assets
Other financial assets
Deferred income tax assets
Current assets
Trade and other receivables
Contract fulfilment assets
Agency broker receivables
Income tax receivable
Other financial assets
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
External loans and borrowings
Post-employment benefits
Provisions
Lease liabilities
Other financial liabilities
Current liabilities
Trade and other payables
Contract fulfilment liabilities
Agency broker payables
Income tax payable
Provisions
Lease liabilities
Other financial liabilities
Total liabilities
Net assets
Note
4.2
4.3
4.4
4.4
9.1
8.2
5.1
5.2
8.1
9.1
6.10
6.7
9.3
5.5
6.8
9.2
5.3
5.4
8.1
5.5
6.8
9.2
2019
£m
20.1
35.2
529.9
293.8
10.9
20.3
910.2
50.6
54.0
21.1
–
–
2018
£m
21.9
–
524.1
312.3
0.2
23.6
882.1
64.1
46.2
12.4
0.7
0.5
72.6
198.3
1,108.5
90.9
214.8
1,096.9
369.1
31.7
5.7
33.1
–
439.8
90.6
16.3
21.1
2.1
10.4
8.0
0.4
148.7
588.5
520.0
395.2
22.9
12.8
0.6
3.6
435.1
112.2
16.4
12.4
–
9.1
0.5
–
150.6
585.7
511.2
136
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
Equity
Equity attributable to owners of the parent
Share capital
Share premium
Other reserves
Retained earnings
Non-controlling interest
Total equity
Note
6.2
6.2
6.3
6.4
2019
£m
0.4
115.9
194.4
199.7
510.4
9.6
520.0
2018
£m
0.4
115.9
182.4
203.2
501.9
9.3
511.2
The Group adopted IFRS 16 Leases (IFRS 16) on 1 January 2019 and elected not to apply the new standard retrospectively. As a result, the
2018 results have not been restated for the impact of IFRS 16 and are reported under the previous accounting standard IAS 17 Leases (IAS 17).
Therefore the financial statements are shown on an IFRS 16 basis for 2019 and an IAS 17 basis for 2018. Further details on the impact of IFRS 16
are shown in note 2.2.
The notes on pages 141 – 187 form part of these financial statements.
The financial statements on pages 134 – 187 were approved by the Board of Directors on 12 March 2020 and were signed on its behalf by:
John Stier
Chief Financial Officer
12 March 2020
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Balance at 1 January 2018
Comprehensive income
Profit for the year per the income statement
Other comprehensive income/(expense)
Changes in fair value through hedging reserve
(note 6.3)
Deferred tax on movement through hedging
reserve (note 8.2)
Net exchange gain on translation of foreign
operations (note 6.3)
Actuarial losses on defined benefit pension plans
(note 9.3)
Total other comprehensive income/(expense)
Total comprehensive income
Issue of share capital, net of transaction costs
(note 6.2)
Purchase of own shares (note 6.3)
Own shares awarded to employees (note 6.3)
Dividends (note 6.6)
Transactions with non-controlling interests
(note 6.4)
Further acquisition of non-controlling interest in
MyCSP Ltd (note 6.4)
Share-based payment transactions (note 7.2)
Transactions with owners recognised
directly in equity
Share
capital
Share
premium
£m
0.4
£m
115.8
Other
reserves
£m
178.0
Retained
earnings
£m
197.9
Non-
controlling
interest
£m
19.6
Total
equity
£m
511.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
0.1
–
17.5
3.2
20.7
4.4
(0.9)
10.9
–
14.4
14.4
–
(13.9)
3.9
–
–
–
–
(10.0)
182.4
–
–
–
(0.2)
(0.2)
17.3
–
–
(3.9)
(16.5)
–
2.0
6.4
(12.0)
203.2
–
–
–
–
–
3.2
–
–
–
(1.8)
(1.7)
(10.0)
–
(13.5)
9.3
4.4
(0.9)
10.9
(0.2)
14.2
34.9
0.1
(13.9)
–
(18.3)
(1.7)
(8.0)
6.4
(35.4)
511.2
Balance at 31 December 2018
0.4
115.9
138
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Balance at 1 January 2019
Changes in accounting standards – IFRS 16
(note 2.2)
Comprehensive income
Profit for the year per the income statement
Other comprehensive income/(expense)
Changes in fair value through hedging reserve
(note 6.3)
Tax on movement through hedging reserve
(note 8.2)
Net exchange loss on translation of foreign
operations (note 6.3)
Actuarial losses on defined benefit pension plans
(note 9.3)
Deferred tax on defined benefit pension plans
(Note 8.2)
Total other comprehensive income/(expense)
Total comprehensive income
Purchase of own shares (note 6.3)
Share option awards to employees (note 6.3)
Dividends (note 6.6)
Transactions with non-controlling interests
(note 6.4)
Share-based payment transactions (note 7.2)
Deferred tax relating to share option schemes
(Note 8.2)
Transactions with owners recognised
directly in equity
Share
capital
Share
premium
£m
0.4
£m
115.9
Other
reserves
£m
182.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13.6
(2.1)
(5.5)
–
–
6.0
6.0
(3.8)
9.8
–
–
–
–
6.0
Balance at 31 December 2019
0.4
115.9
194.4
The notes on pages 141 – 187 form part of these financial statements.
138
Retained
earnings
£m
203.2
(1.6)
Non-
controlling
interest
£m
9.3
–
Total
equity
£m
511.2
(1.6)
I
S
E
C
T
O
N
0
3
30.8
1.6
32.4
–
–
–
(9.5)
1.6
(7.9)
22.9
–
(6.0)
(19.7)
–
1.6
(0.7)
(24.8)
199.7
–
–
–
(0.3)
0.1
(0.2)
1.4
–
–
–
(1.1)
–
–
(1.1)
9.6
13.6
(2.1)
(5.5)
(9.8)
1.7
(2.1)
30.3
(3.8)
3.8
(19.7)
(1.1)
1.6
(0.7)
(19.9)
520.0
I
F
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
C
O
N
S
O
L
I
D
A
T
E
D
S
T
A
T
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M
E
N
T
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F
C
H
A
N
G
E
S
I
N
E
Q
U
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Y
I
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E
q
q
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u
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p
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r
r
t
t
2
2
0
0
1
1
9
9
139
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019
Profit before income tax
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of software
Amortisation of acquisition-related intangibles
Finance income
Finance costs
Share-based payment expense
Changes in working capital:
Net decrease/(increase) in receivables
Net increase in contract assets
Net (decrease)/increase in payables
Net increase/(decrease) in contract liabilities
Net decrease in provisions
Cash flows from operating activities
Interest paid
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Interest received
Business acquisitions net of cash acquired
Payments relating to prior year acquisitions
Acquisition of property, plant and equipment
Payments relating to developing and acquiring software
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of share capital, less transaction costs
Purchase of own shares
Cash received on exercise of options
(Repayment of)/proceeds from bank loans
Proceeds from revolving credit facility
Payment of loan set up fees
Payments in respect of leases (including interest)
Dividends paid
Dividends paid to non-controlling interests
Transactions with non-controlling interests
Net cash (outflow)/inflow from financing activities
Net decrease in cash and cash equivalents
Net foreign exchange (losses)/gains
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
The notes on pages 141 – 187 form part of these financial statements.
Note
6.1
4.1
6.3
7.2
6.7
6.7
6.9
6.6
2019
£m
39.8
6.8
6.1
29.9
31.8
–
16.1
1.6
12.7
(7.8)
(24.0)
2.0
(2.9)
112.1
(13.2)
(2.7)
96.2
–
(3.3)
(8.2)
(1.8)
(46.7)
(60.0)
–
(3.8)
3.8
(60.0)
38.6
(3.7)
(6.9)
(19.7)
–
(2.2)
(53.9)
(17.7)
(0.6)
90.9
72.6
2018
£m
24.6
6.0
–
23.9
31.7
(0.2)
15.5
6.4
(12.0)
(3.1)
18.0
(2.4)
(1.3)
107.1
(10.5)
(4.5)
92.1
0.2
(173.6)
(4.0)
(9.5)
(30.3)
(217.2)
(0.8)
(13.9)
–
64.9
76.1
(0.8)
(0.9)
(16.5)
(1.8)
(5.9)
100.4
(24.7)
0.4
115.2
90.9
140
140
141
141
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1 GENERAL INFORMATION
Goodwill and intangible assets
Equiniti Group plc (the Company) is a public limited company,
limited by shares, which is listed on the London Stock Exchange
and is 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 of the Company is Sutherland House, Russell Way,
Crawley, West Sussex, RH10 1UH. The Group financial statements
consolidate 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 in note 2.2.
These financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU), IFRS Interpretation Committee (IFRS IC)
interpretations as adopted by 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
Group‘s presentational currency is the British Pound (£).
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.
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.
The Group has one bank covenant and was compliant with this at
the year end. For this reason, they continue to adopt the going
concern basis in preparing the historical financial information.
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
transferred, 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 (CGU)
that is expected to benefit from the synergies of the combination. Each
CGU to which the goodwill is allocated represents the lowest level at
which the goodwill is monitored for internal management purposes.
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 in
the income statement and is not subsequently reversed.
Software
Costs associated with maintaining computer software programmes
are recognised as an expense as incurred. Development costs
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.
The Group capitalises certain costs as software development
if it can demonstrate that the costs are directly attributable
to software development. These costs include employee
benefit expenses, along with an appropriate portion of relevant
overheads, and external consultancy costs. Other development
related costs that are not directly attributable or do not meet the
capitalisation 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.
Capitalised software costs include purchased licences, when the
expenditure satisfies the recognition criteria in IAS 38 Intangible
Assets (IAS 38). These items are capitalised at cost and amortised on
a straight line basis over their useful economic life or the term of the
contract.
Amortisation is charged to the income statement on a straight-line basis
over the estimated useful lives of the software asset, from the date it is
available for use. The estimated useful lives are as follows:
• Software
3 – 5 years
140
140
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
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A
A
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q
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A
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n
n
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n
n
u
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a
a
a
a
l
l
l
l
l
l
l
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p
p
p
p
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r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
141
141
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Acquisition-related intangible assets
Acquisition-related intangible assets consist of intangible
assets identified as part of a business combination. They are
stated at fair value at the date of acquisition less subsequent
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. Order books are valued
based on expected revenue generation. Brand valuation is
based on net present value of estimated royalty returns.
Amortisation is charged to the income statement on a
straight-line basis over the estimated useful lives of the assets.
Acquisition-related intangible assets are amortised from the
date of acquisition. The estimated useful lives are as follows:
• Customer relationships and order books
• Brands
1 – 20 years
10 years
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 on the date of acquisition. Depreciation on those items
is charged over their estimated remaining useful lives from that date.
Leases entered into before 1 January 2019, in which the Group
assumed substantially all of the risks and rewards of ownership,
were classified as “finance leases”. The Group previously recognised
finance leases for office equipment within property, plant and
equipment 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.
Depreciation is charged to the income statement on a straight-line
basis over the estimated useful lives of each part of an item of property,
plant and equipment. The estimated useful lives are as follows:
• Freehold improvements
• Leasehold improvements
• Office equipment
• Fixtures and fittings
Right-of-use assets
50 years
2 – 30 years
2 – 10 years
3 – 10 years
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 evaluated at the lowest levels for which
there are separately identifiable cash flows (CGU). Non-financial
assets, other than goodwill, that have suffered an impairment are
reviewed for possible impairment reversals at each reporting date.
Financial instruments
A financial asset or financial liability is only recognised in the statement
of financial position when the Group becomes party to the contractual
provisions of the instrument.
Classification and measurement
The Group classifies its financial assets in the following measurement
categories:
• at fair value through profit or loss
• at fair value through other comprehensive income
• at amortised cost
The classification depends on the business model for managing
the financial assets and the contractual terms of the cash flows and
management will determine the classification on initial recognition.
At initial recognition, the Group measures a financial asset at its fair
value plus, in the case of a financial asset not at fair value through
profit or loss, transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets
held at fair value through profit or loss are recognised within the
income statement.
Trade and other receivables (excluding prepayments) and contract
fulfilment assets that are held for collection of contractual cash
flows, where those cash flows represent solely payments of
principal and interest, are measured at amortised cost, less
provisions for impairment. Other financial assets include derivatives
which are recognised at fair value through profit or loss, unless
the derivatives qualify for hedge accounting, in which case any
gain or loss is recognised in other comprehensive income.
The Group classifies its financial liabilities in the following measurement
categories:
• at fair value through profit or loss
• at amortised cost
When a contract contains a lease, the Group recognises a right-of-use
asset, and a corresponding lease liability, at the lease commencement
date. The right-of-use asset is initially measured at the initial amount of
the lease liability, including any dilapidation provisions, and adjusted
for any lease payments made on or before the commencement date,
any initial direct costs incurred and any lease incentives received.
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.
Right-of-use assets are subsequently depreciated on a straight-
line basis from the lease commencement date to the earlier of
the end of the useful life of the right-of-use asset, determined on
the same basis as for property, plant and equipment, or the end
of the lease term. The estimated useful lives are as follows:
• Right-of-use assets
2 – 102 years
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.
Under IAS 32 Financial Instruments: Presentation (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.
142
142
143
143
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
To the extent that this definition is not met, the proceeds of issue are
classified as a financial liability. Financial liabilities not classified as
fair value through profit or loss, such as derivatives, are classified and
measured at amortised cost using the effective interest method.
Derecognition
The Group derecognises a financial asset when the rights to receive
cash flows from the financial asset expire or have been transferred,
and the Group has transferred substantially all the risks and rewards
of ownership. The Group derecognises a financial liability when
its contractual obligations are discharged, cancelled or expire.
Derivative financial instruments and hedging activities
Derivative financial instruments
The Group‘s derivatives, which include interest rate swaps and
forward currency contracts, are measured at fair value, being the
estimated amount that the Group would receive or pay to terminate
the instrument at the reporting date. Third party valuations are used
to fair value the Group‘s derivatives. The valuation uses inputs such
as interest rate yield curves and currency prices/yields, volatilities
of underlying instruments and correlations between inputs.
The fair value of a hedging derivative is classified as a non-current
asset or liability to the extent that it will be settled later than 12 months
after the end of the reporting period.
Cash flow hedges
The expected credit loss model applies a percentage, based on an
assessment of historical default rates and certain forward looking
information, against receivables that are grouped into certain age
brackets. Where there is objective evidence that the Group will not be
able to collect any amounts due according to the original terms of the
agreement with the customer, the receivable is fully impaired and the
loss is recognised within administrative costs in the income statement.
The Group has the ability to sell trade receivables on a non-recourse
basis. When this occurs, trade receivables are reduced by the cash
received.
Contract fulfilment assets
When services or software are supplied to a customer before
an invoice is issued, a contract fulfilment asset is recognised in
the statement of financial position, and represents the right to
receive consideration from the customer for goods or services
delivered. The asset is measured at the fair value of the goods or
services supplied. The Group‘s contracts with customers often
include a payment schedule which determines when invoices are
raised, and settlement is received, during the contractual term.
The incremental costs of obtaining or fulfilling a contract with a
customer are recognised as an asset only if the Group expects to
recover them. Those costs to obtain or fulfil a contract are included
in the statement of financial position within contract fulfilment assets.
These assets are subsequently charged to administrative costs
within the income statement over the expected contract period,
using a systematic basis that mirrors the pattern in which the Group
transfers control of the services or software to the customer.
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 income statement.
Contract fulfilment assets also include costs incurred to date and are
continually monitored through a monthly review process. If it becomes
apparent that contractual costs will exceed contractual revenue, the
loss is recognised immediately as an expense in the income statement.
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 transaction that is hedged takes
place). The gain or loss relating to the effective portion of interest
rate swaps hedging interest income is recognised within revenue
in the income statement. 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 forecast transaction occurs.
Net investment hedges
Gains or losses on a hedging instrument relating to the
effective portion of a hedge of a foreign operation are
recognised in other comprehensive income. Any ineffective
portion is recognised in the income statement within finance
costs. Gains or losses accumulated in equity are reclassified
to the income statement if the foreign operation is sold.
Trade receivables
Trade receivables represent amounts invoiced to customers, but
not yet paid. Trade receivables are stated initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less expected credit losses. Expected credit losses
are recognised using the simplified approach as set out in IFRS 9
Financial Instruments (IFRS 9) and consequently loss allowances are
measured at an amount equal to the lifetime expected credit loss.
Agency broker balances
Where the Company acts as an agency broker for retail investors,
whereby securities are purchased from one counterparty and
simultaneously sold to another counterparty, balances owed by
or to the retail investor and the market maker are recognised
within agency broker receivables and agency broker payables
until the balances are settled. Settlement of such transactions are
primarily on a delivered and paid basis and typically take place
within a few business days of the transaction date according to the
relevant market rules and conventions. The amounts due from and
payable to counterparties in respect of unsettled transactions are
shown as gross amounts in the statement of financial position.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.
Bank overdrafts that are repayable on demand, which form an integral
part of the Group‘s cash management, are included as a component
of cash and cash equivalents in the statement of financial position and
the statement of cash flows, where the Group has a legally enforceable
right to offset and there is an intention to settle on a net basis.
External loans and 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 income statement over the period of the
borrowings using an effective interest basis. When borrowings
are extinguished, any difference between the cash paid and
the carrying value is recognised in the income statement.
142
142
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
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q
q
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n
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i
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G
G
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r
o
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u
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p
p
p
p
p
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p
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c
c
c
c
A
A
A
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n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
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e
p
p
p
p
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o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
143
143
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
When the modification of borrowings does not lead to derecognition,
the revised cash flows under the modified terms are discounted at
the date of the modification at the original effective interest rate.
The difference between the carrying amount of the borrowings
immediately before the modification and the sum of the present value
of the cash flows of the modified borrowings discounted at the original
effective interest rate are recognised in the income statement as a
modification gain or loss.
Past-service costs, which arise as a result of current changes to
plan arrangements affecting the obligation for prior periods,
are recognised immediately as an employee benefit expense,
within administrative costs in the income statement.
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 interest cost is
included within finance costs in the income statement.
Equity settled share-based payment transactions
Trade payables
Trade payables represent liabilities for goods and services
received by the Group before the end of the reporting period,
which have been invoiced but 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.
Contract fulfilment liabilities
Contract fulfilment liabilities are recorded when the Group has
received consideration from customers, but still has an obligation to
deliver services or software to the customer and meet performance
obligations for that consideration. The liability is measured as
the fair value of the consideration received. The Group reviews
contract fulfilment liabilities at the end of each reporting period to
ensure that it is still appropriate to carry forward the consideration
received for recognition as revenue in a future period.
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 income statement 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) is deducted. The liability discount rate is the
yield at the reporting 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 asset
recognised 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 recognised 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 services in the current year,
benefit curtailments and settlements. Payments are recognised
as employee benefit expense in the income statement.
The Group operates a number of equity settled, share-based
compensation plans, under which the Group receives services
from employees in return for equity instruments (options) of
the Group. The fair value of the employee services received in
exchange for the grant of the awards is recognised as an expense
in the income statement. The initial amount to be expensed is
determined by reference to the fair value of the awards granted:
•
•
•
including any market performance conditions (for example, total
shareholder return);
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).
excluding the impact of any service and non-market performance
vesting conditions (for example, earnings per share growth targets
and remaining an employee over a specified period of time); and
At each reporting date, the Group revises its estimate of the
number of awards that are expected to vest, based on the service
and non-market performance vesting conditions. The impact
of revisions to original estimates, if any, are recognised in the
income statement, 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 the estimated cost 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 for leasehold improvements made that would
require reinstatement back to the 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 reporting period, the provision is shown as current.
Contingent consideration is provided for on the acquisition of a
business, where the monetary amount is dependent on the future
performance of the acquired business. A provision is initially
recognised as the discounted expected amount payable and is
unwound over the period to the legal date of settlement. The
amount payable is reviewed regularly. The subsequent fair value
is determined by reviewing the post-acquisition performance
of the acquired company, along with available budgets and
forecasts, against the earn-out arrangement in the share
purchase agreement, to determine the most likely outcome.
Changes to the fair value of the contingent consideration
resulting from additional information obtained post acquisition
about facts and circumstances that existed at the acquisition
date are recognised as an adjustment against goodwill
during the first 12 months following the acquisition. Any
other changes are recognised in the income statement.
144
144
145
145
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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.
Where the Group acquires its own ordinary shares, the consideration
paid is recorded as a deduction from equity within the reserve for
own shares.
Foreign currency translation
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 from the translation of monetary
assets and liabilities denominated in foreign currencies using
exchange rates at the end of the reporting period are recognised in
the income statement.
The Group distinguishes between revenue generated from the
rendering of goods and services and revenue representing interest
received on client monies held and administered by the Group
that are incidental to services delivered. This income is considered
to be ancillary to the underlying fee paid services delivered to the
Group‘s customers. Interest income received is an important source
of the Group‘s revenue and the Group seeks to maximise these
returns by holding funds in high-interest-bearing accounts, where
possible. However this revenue is not generated from the Group‘s
principal activities, which is why this is disclosed separately.
Out-of-pocket expenses recharged to customers are recognised
in revenue when they are recoverable from the client, net of the
related expense.
Revenue recognition
Revenue is recognised when, or as, the Group satisfies contractual
performance obligations by transferring promised goods or services
to its customers. Goods and services are considered to be transferred
when the customer obtains control of the good or service.
The results and financial position of all Group entities having a
different functional currency from the Group‘s presentational currency
are translated into the Group‘s presentational currency as follows:
Revenue is recognised either at a point in time, when the performance
obligation in the contract has been performed, or over time, as
control of the performance obligation is transferred to the customer.
•
•
•
assets and liabilities are translated at the closing rate on the date
of the statement of financial position;
income and expenditure included in the income statement is
translated at average exchange rates; and
all resulting exchange differences are recognised in other
comprehensive income and recorded within the translation reserve.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing exchange rate. Exchange differences
arising from retranslation at the closing rate are recognised in
other comprehensive income within the translation reserve.
Revenue
Revenue, which excludes sales taxes, represents the value of services
provided and software supplied to customers in the UK, Europe
and the US, and also includes interest received on funds under
administration of the Group.
Revenue classified as rendering of goods and services represents
amounts due to the Group as compensation for services performed
or goods delivered under contract. Revenue included within
rendering of services includes revenue generated from the majority
of the professional services which the Group offers to its customers.
It does not include any additional revenue generated from client
funds under administration, which are disclosed separately as
interest income to reflect the incidental nature of this revenue.
The arrangements used to pay for goods and services rendered can
vary between clients. Many contracts are structured so that any fees
are invoiced to the client either before, during or after performing
the contractual obligations. However some contracts are structured
to allow the Group to retain any interest income received from
processing the client‘s funds, instead of an invoiced fee. Such interest
income is specifically mentioned as the fee for performing contractual
tasks and obligations. Given that it is not incidental to the underlying
goods and services delivered, such revenue received is classified
as revenue generated from the rendering of goods and services.
The Group‘s principal revenue recognition policies are as follows:
Professional services
The Group is one of the largest providers of outsourced professional
services in the UK, covering pensions administration, pensions payroll,
annuity services, complaints handling, resourcing services, employee
share plan administration and share registration services.
Revenue from fixed-price contracts, which may span a number of
years, is recognised rateably over the expected life of the contract,
where the Group satisfies the over time revenue recognition criteria.
When the over time criteria are not satisfied, the Group recognises
revenue at a point in time when the contractual performance
obligations are delivered. Where the Group provides staff to
customers at hourly or daily rates, revenue is recognised on the
basis of time worked.
Many of the Group‘s contracts contain multiple deliverables to the
customer, for example contracts for the provision of outsourced
pension administration services will often include the provisions for
the delivery of special projects and pension accountancy services.
Management evaluates whether those promised goods and services
are distinct, which requires them to be accounted for as separate
performance obligations. If the goods and services are not distinct,
they are combined with other goods or services until a distinct
performance obligation can be identified in the contract. If a series of
distinct goods and services are substantially the same and have the
same pattern of transfer to the customer, the deliverables may
be combined and accounted for as a single performance obligation.
Software sales, hosting and support services
Software sales, hosting and support services are provided by
the Pensions Solutions and Intelligent Solutions businesses for
software such as Compendia, Charter and KYCnet. Revenue
for sales of hardware and software licences is recognised at a
point in time when the goods and licences are delivered to the
customer, where this results in the customer having the right
to use the licence and the performance obligation has been
delivered in full. Revenue for hosting and support services
is recognised rateably over the term of the agreement.
144
144
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
145
145
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
The following table illustrates revenue recognition policies
predominantly used in each reporting segment:
When products are bundled together for the purpose of sale,
the associated revenue, net of all applicable discounts, is
allocated between the constituent performance obligations on
a relative fair value basis. The Group has a systematic basis for
allocating relative fair values in these situations, which is based
on internal price lists and historic and current selling prices.
Transactional revenue
Transactional revenue is earned in the Investment Solutions and EQ
US businesses, representing commissions earned on the purchase
and sale of shares and on foreign exchange transactions.
Revenue is recognised at a point in time when the performance
or processing of the related transactions takes place.
Intermediary income
Intermediary revenue includes interest income earned on funds under
administration of the Group. Revenue is recognised as it is earned.
Further considerations in relation to long-term contracts
Where delivery of the services described above spans more than
one accounting period, revenue is either recognised over time or at
a point in time. Where the over time criteria in IFRS 15 Revenue from
Contracts with Customers (IFRS 15) are satisfied, the Group recognises
revenue using the ‘percentage of completion‘ method. This may occur
within the Investment Solutions business for the supply of corporate
actions related services and within the Intelligent Solutions business
for software hosting and support services.
These services typically take less than one year to perform. When the
service falls into two or more accounting periods, there is management
judgement around how much revenue to recognise in each period.
Where provided for under the terms of the contract, 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 income statement,
are stated less foreseeable losses and payments on account. Where
the over time criteria are not satisfied, and the contract requires,
revenue is recognised when all the performance obligations have been
delivered to the customer, which may not be until the end of
the contractual period.
In determining how much revenue to recognise, management is
required to make an assessment of the expected costs to complete
the contract. Forecasting contract costs involves judgements around
the number of hours to complete a task, cost savings to be achieved
over time, anticipated profitability of the contract, as well as contract-
specific KPIs. Where a contract is anticipated to make a loss, these
judgements are also relevant in determining whether or not an
onerous contract provision is required and how this is to be measured.
Contract revenue is measured as the fair value of the consideration
receivable. The fair value of consideration might vary due to variations
in a contract. A variation is only included when it is probable that the
customer will approve the variation and that the amount of revenue
can be reliably measured. An increase in scope of a contract will
increase both the total anticipated revenue and costs to complete
the contract.
Costs to date and costs to complete are continually monitored for
each project through a monthly review process. If it becomes apparent
that contract costs will exceed contract revenue, then the loss is
recognised immediately as an expense in the income statement.
Segment
Investment
Solutions
Intelligent
Solutions
Pensions
Solutions
EQ US
Interest
Professional
Services
Out-of-
pocket
expense
Software and
Support
Transactional
Fees
Intermediary
income
•
•
•
•
•
•
•
•
•
•
•
•
Costs arising prior to the Group being awarded a contract,
or achieving preferred bidder status, and mobilisation costs
are expensed to the income statement as incurred.
Once the Group is awarded a contract, the incremental costs
of obtaining or fulfilling the contract are recognised as an asset
only if the Group expects to recover them. These assets are
subsequently charged to the income statement over the expected
contract period using a systematic basis that mirrors the pattern
in which the Group recognises the contracted revenue.
Revenue recognised for goods and services, but not yet billed,
is reflected in the statement of financial position within contract
fulfilment assets. There can be a significant period of time between
revenue recognition and invoicing where revenue is recognised at a
point in time but the agreed payment schedule means that invoices
are raised over time. This is evident when the Group delivers term
licences, and where the performance obligation is fulfilled on delivery
of the licence but billing occurs throughout the contract term. Revenue
is only recognised when supported by a written client contract
and recoverability is expected in line with the supporting contract.
Amounts billed in advance of work being performed are deferred in
the statement of financial position as contract fulfilment liabilities.
Operating segments
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 the income statement in the same periods in which the
expenses are recognised. Grants relating to capital expenditure are
included within deferred income in the statement of financial position
and released to the income statement on a straight line basis over
the useful life of the related assets. Grants are recognised when the
Group has assurance that it will comply with the conditions attached
to the grant and it is confident that the funds will be received.
Leases
At the inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract provides
the right to use an asset for a period in exchange for consideration. To
assess whether a contract conveys the right to control the use of an
identified asset, the Group assesses whether the contract involves the use
of an identified asset, which may be specified explicitly or implicitly. The
Group also assesses whether the contract provides the right to obtain,
substantially, all of the economic benefits from use of the asset throughout
the period of use. The Group must also determine whether the contract
permits the right to direct the use of the asset, which flows from the ability
to decide how and for what purpose the asset is used.
146
146
147
147
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
When a contract contains a lease, the Group recognises a right-of-use
asset and a lease liability at the lease commencement date. The lease
liability is initially measured at the present value of the lease payments
that are not paid at the commencement date, discounted using the
interest rate implicit in the lease. When the interest rate implicit in the
lease cannot be readily determined, the lessee‘s incremental borrowing
rate is used as the discount rate. Extension and termination options
included within lease contracts are generally disregarded at the lease
commencement date, as the Group is not reasonably certain
of exercising them.
The lease liability is measured at amortised cost using the effective
interest method. The liability is remeasured when a change in the future
lease payments is recognised. A corresponding adjustment is also
made to the carrying amount of the right-of-use asset, or if the right-of-
use asset has been reduced to zero, recorded in the income statement.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease
liabilities for short-term leases that have a lease term of 12 months
or less and leases of low-value assets, including IT equipment.
The Group recognises the lease payments associated with these
leases as an expense on a straight-line basis over the lease term.
Net finance costs
Net finance costs comprise interest payable, interest receivable on own
funds, foreign exchange gains and losses 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 income
statement as it accrues, using the effective interest method.
Taxation
Tax on the profit for the year comprises current and deferred tax.
Tax is recognised in the income statement, 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 ADOPTED
New standards adopted by the Group
The Group has applied IFRS 16 for the first time to the period
beginning 1 January 2019 and has transitioned by applying the
modified retrospective method. Therefore right-of-use assets have
been calculated as if IFRS 16 had been applied since the lease
commencement date, discounted at the incremental borrowing
rate at the date of initial application. These amounts have been
depreciated to a ‘net book value‘ on 1 January 2019, which the Group
has recognised within right-of-use assets. Comparative balances
have not been restated and continue to be reported under IAS 17.
Transitioning to IFRS 16 using the modified retrospective method
diminishes the comparability of the financial statements, as
comparative balances are not restated. However the modified
retrospective method was chosen as it simplified the complexity of
transition and a fully retrospective approach would have required
extensive information to be available at the lease commencement
date. As the Group has acquired a number of new companies,
with many leases commencing more than 10 years ago, the
Group could not accurately present this information at the lease
commencement date. Additionally the Group would not have been
able to take advantage of the practical expedients in IFRS 16.
Impact of adoption – IFRS 16
The Group identified its leased properties as the main leases that
were impacted by this new standard. On 1 January 2019 the Group
recognised £36.2m as right-of-use assets and £42.5m of lease
liabilities for future lease payments in the statement of financial
position. The Group also reversed £4.3m included within trade
and other payables relating to lease incentives received from
lessors. The net adjustment recognised within retained earnings
in the statement of financial position was £1.6m, net of deferred
tax. Dilapidation provisions for leases in existence at the transition
date have been retained. Leases entered into after the transition
date will include an allowance for dilapidations in the right-of-use
asset, with the corresponding liability recognised in provisions.
Administrative costs have decreased as the Group no longer
recognises a rental expense on the majority of its properties.
However this has been offset by increased depreciation and
interest expenses since adopting IFRS 16. The depreciation
expense on the right-of-use assets for the year to 31 December
2019 was £6.1m and the interest expense was £1.5m.
The total cash outflows in respect of lease payments has not
changed under IFRS 16. However lease payments previously
recognised within cash flows from operating activities are
now classified as a cash flow from financing activities.
A reconciliation between the operating lease commitments as at
31 December 2018 and the lease liabilities as at 1 January 2019
is shown in note 9.7.
The new accounting policy applicable from 1 January 2019 is
shown in note 2.1. The previous policy is set out below:
Policy applicable before 1 January 2019
Contracts entered into before 1 January 2019 required the Group
to determine whether a contract was, or contained, a lease based
on the assessment of whether fulfilment of the arrangement
was dependent on the use of a specific asset or assets and
whether the arrangement conveyed a right to use the asset.
146
146
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
147
147
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
Provisions for contingent consideration are initially recognised at
fair value. These estimates are updated at each reporting date by
comparing the latest performance, budgets and forecasts of the
acquired business to the earn-out arrangement in the share
purchase agreement.
Budgets and forecasts require management‘s best estimate of the
future performance of the acquired business and on other key inputs,
such as growth rates and profitability. The fair value of contingent
consideration at 31 December 2019 was £14.8m (2018: £19.7m). If
forecast profits for each acquired business during the earn out period
was 30% lower than forecast this would lead to a £2.5m reduction in
the provision required. If forecast profits for each acquired business
during the earn out period was 10% higher than forecast this would
lead to an immaterial increase in the provision required.
Judgements in applying the Group‘s accounting policies
Revenue on contracts with multiple performance obligations
Where contracts have multiple performance obligations, such as the
delivery of software and implementation and support services to
be undertaken over the course of the contract, there is judgement
in determining whether the various components are separable
performance obligations. If the performance obligations are
separable, the consideration is required to be allocated between
each separable performance obligation identified based on a relative
stand-alone selling price basis.
This impacts the revenue profile of contacts. Revenue from the
delivery of a perpetual or term licence, as a separate performance
obligation, is recognised at a point in time, whereas revenue for
implementation and support services is recognised over time,
rateably, in line with the Group‘s performance throughout the term
of the agreement.
Software development
The Group capitalises certain staff costs as part of a software asset,
where, in management‘s judgement, the costs are incremental and
directly attributable to an asset, and it can be determined that the
Group has the ability to develop the asset and the project is technically
feasible. Management also exercises judgement to determine whether
the project will be completed and whether the asset will generate
future economic benefits that outweigh its cost.
During the year ended 31 December 2019, the Group capitalised
£21.9m of staff costs (2018: £16.2m). If, in management‘s judgement, it
cannot be determined that the recognition criteria will be satisfied, the
costs of the project are expensed to the income statement.
2.2 NEW STANDARDS AND INTERPRETATIONS ADOPTED
(CONTINUED)
Leases in which the Group assumed substantially all of the risks and
rewards of ownership of the leased asset were classified as finance
leases. Where land and buildings were held under leases, the
accounting treatment of the land was considered separately from
that of the buildings. Leased assets acquired by way of finance lease
were 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.
Assets held under other leases were classified as operating leases
and were not recognised in the Group‘s statement of financial
position. Payments made under operating leases were recognised
in the income statement on a straight-line basis over the term
of the lease. Lease incentives received were recognised in the
income statement as an integral part of the total lease expense.
There were no other new standards or interpretations
effective for the first time in 2019 that had a material impact
on the Group‘s consolidated financial statements.
2.3 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
There are no other new IFRSs or IFRS IC interpretations not yet
adopted which would be expected to have a material impact on the
financial statements of the Group.
2.4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes estimates and judgements concerning the future,
the results of which may affect the carrying values of assets and
liabilities at the year end, as well as the revenue and costs reported
for the period. 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 accounting estimates 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 below.
Accounting estimates
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, include salary rate increases, interest rates,
inflation rates, discount rates and mortality rates. Any changes in these
assumptions will impact the carrying value of the pension obligation
and a sensitivity analysis has been 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.
Contingent consideration
When the Group makes an acquisition, consideration for the business
can take the form of cash, deferred consideration and contingent
consideration. The contingent consideration payable is based on post-
acquisition targets of the acquired business. Deferred consideration is
not based on post-acquisition targets and is generally only dependant
on the passage of time before payment is made to the seller.
The criteria that must be met in order for a payment of contingent
consideration to be made can vary amongst the Group‘s acquisitions.
These can include revenue and EBITDA targets for the acquired
business or of the business unit that the acquired business is joining.
148
148
149
149
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
3 OPERATING PROFIT
3.1 REVENUE
Revenue from continuing operations:
Rendering of goods and services
Interest income
Total revenue
See note 3.3 for further analysis of the Group‘s revenue.
3.2 ADMINISTRATIVE COSTS
Expenses by nature:
Employee benefit expense (note 3.4)
Employee costs capitalised in respect of software development
Direct costs
Bought-in services
Premises costs
Short-term lease costs1
Government grants for research and development
Other general business costs
Total administrative costs
2019
£m
529.2
26.5
555.7
2019
£m
222.5
(21.9)
106.5
29.7
9.3
0.5
(0.8)
79.4
425.2
2018
£m
509.7
21.2
530.9
2018
£m
219.8
(16.2)
101.2
38.6
7.9
8.7
(0.5)
69.9
429.4
1 The prior year costs of £8.7m represent the Group‘s operating lease costs as defined, and accounted for, in accordance with IAS 17. This standard
was replaced by IFRS 16 on 1 January 2019 and the current year costs of £0.5m represents lease costs on short term leases with a remaining term
of less than 12 months. From 1 January 2019 lease costs, which are not classified as short term, are recognised as a reduction to the Group‘s
lease liability in the statement of financial position.
3.3 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, EQ US and Interest, in line
with how the Group runs and structures its business.
Revenue, EBITDA and underlying EBITDA are key measures of the Group‘s performance. EBITDA represents earnings before interest, tax,
depreciation and amortisation. The EBITDA of each segment is reported after charging relevant corporate costs based on the business segment‘s
usage of corporate facilities and services. Underlying EBITDA is adjusted for one-off items which obscure the understanding of the underlying
performance of the Group and its respective divisions. These items primarily represent material restructuring, integration and transformational
acquisition related expenses.
The inter-segmental revenue represents trading between the Group‘s operating divisions which is eliminated on consolidation. The Group‘s
divisions trade internally on an arms length basis.
Year ended 31 December 2019
Investment Solutions
Intelligent Solutions
Pension Solutions
Interest
UK and Europe
EQ US
USA
Total revenue
Total revenue
£m
152.5
182.8
137.7
14.1
487.1
94.0
94.0
581.1
Inter-segment
£m
(2.8)
(11.9)
(10.7)
–
(25.4)
–
–
(25.4)
Reported
revenue
£m
149.7
170.9
127.0
14.1
461.7
94.0
94.0
555.7
148
148
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
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E
M
M
E
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N
N
T
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S
S
N
O
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S
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O
T
H
E
C
O
N
S
O
L
I
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D
F
N
A
N
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A
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M
E
N
T
S
E
E
E
E
q
q
q
q
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n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
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i
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G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
149
149
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
3.3 OPERATING SEGMENTS (CONTINUED)
Year ended 31 December 2018
Investment Solutions
Intelligent Solutions
Pension Solutions
Interest
UK and Europe
EQ US
USA
Total revenue
Total revenue
£m
145.0
180.8
138.5
12.1
476.4
81.4
81.4
557.8
Inter-segment
£m
(2.5)
(14.9)
(9.5)
–
(26.9)
–
–
(26.9)
Reported
revenue
£m
142.5
165.9
129.0
12.1
449.5
81.4
81.4
530.9
Included within the EQ US division, is £12.4m (2018: £9.1m) of interest revenue which is reported and managed within the EQ US results.
Reported revenue by geographical market
UK and Europe
USA
Total revenue
Timing of revenue recognition
Point in time
Over time
Total revenue
2019
£m
461.7
94.0
555.7
2019
£m
128.3
427.4
555.7
2018
£m
449.5
81.4
530.9
2018
£m
114.2
416.7
530.9
Point in time revenue primarily relates to our share and foreign exchange dealing revenue streams where the performance obligation is fulfilled
when the transaction completes; corporate action fees, where these are dependent on transactions closing; and revenue from licences sold by the
Group, where revenue is recognised once licences have been delivered, accepted by the client and the Group‘s performance obligations satisfied
in full.
Over time revenue primarily relates to our share registration businesses, including corporate actions where the Group has a legal right to revenue
for work performed, our pensions administration business, our customer remediation business and software support services.
Unfulfilled performance obligations
The table below shows the aggregate amount of the Group‘s contracted revenue as at 31 December 2019 allocated to the contractual
performance obligations that are unsatisfied or partially satisfied. The Group anticipates recognising this revenue as, or when, the contractual
performance obligations are satisfied:
Less than one year
Between one and five years
More than five years
Investment
Solutions
£m
33.2
158.6
–
191.8
Intelligent
Solutions
£m
14.4
26.5
0.5
41.4
Pension
Solutions
£m
50.1
80.1
6.2
136.4
EQ US
£m
14.6
2.8
0.2
17.6
Total
£m
112.3
268.0
6.9
387.2
The table above represents the contractual consideration which the Group will be entitled to receive from customers. The total revenue that will
be earned by the Group will also include transactional revenue, new wins, scope changes and contract extensions. However these elements have
been excluded from the figures above, as they are not contracted and the revenue will be earned as the work is performed.
Many of the Group‘s contracts renew automatically until cancelled by the other party. At 31 December 2019, these contracts represented a
significant proportion of the Group‘s contractual revenues. However these contracts have not been included in the analysis above as the Group
typically has a contractual right to revenue for a period of 12 months or less.
In addition, the Group has taken the practical expedients under IFRS 15 and has excluded the following revenue:
– contracts with a life of less than one year,
– revenue that is earned and invoiced as the work is performed.
150
150
151
151
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
3.3 OPERATING SEGMENTS (CONTINUED)
Underlying EBITDA
Investment Solutions
Intelligent Solutions
Pension Solutions
Interest
UK and Europe
EQ US
USA
Total segments
Central costs
Total underlying EBITDA
Central costs principally include corporate overheads which cannot be allocated to a specific segment or segments.
Depreciation and amortisation
Investment Solutions
Intelligent Solutions
Pension Solutions1
EQ US
Total segments
Central1
Total
2019
£m
50.2
43.5
19.5
14.1
127.3
23.1
23.1
150.4
(14.4)
136.0
2019
£m
(26.1)
(12.7)
(16.9)
(10.8)
(66.5)
(8.1)
(74.6)
2018
£m
47.3
39.8
19.7
12.1
118.9
19.2
19.2
138.1
(15.8)
122.3
2018
£m
(23.6)
(12.0)
(14.7)
(5.7)
(56.0)
(5.6)
(61.6)
1 The prior year segmental split has been restated for amortisation of intangible assets relating to the Pension Solutions division, which were
previously classified as Central.
Reconciliation of underlying EBITDA to profit before tax
Underlying EBITDA
Non-operating charges
Depreciation and amortisation
Net finance costs
Profit before tax
2019
£m
136.0
(5.5)
(74.6)
(16.1)
39.8
2018
£m
122.3
(20.8)
(61.6)
(15.3)
24.6
Assets and liabilities per segment are not items which are reviewed by the Board of Directors and are therefore not disclosed within the segmental
reporting. However, capital expenditure is a key measure and is disclosed below. Capital expenditure consists of additions to property, plant,
equipment and software.
Capital expenditure
Investment Solutions
Intelligent Solutions
Pension Solutions
EQ US
Total segments
Central costs
Total
2019
£m
(9.5)
(8.8)
(5.4)
(11.1)
(34.8)
(15.5)
(50.3)
2018
£m
(6.9)
(6.4)
(4.1)
(21.0)
(38.4)
(7.6)
(46.0)
150
150
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
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A
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F
N
A
N
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A
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M
E
N
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E
q
q
q
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n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
151
151
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
3.4 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
EQ US
Central
Total employees
Number of employees – by geography:
UK
Rest of Europe
Asia
North America
Total employees
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Social security costs
Other pension costs
Share-based payment expense (note 7.2)
Total employee benefit expense
2019
Number
4,439
594
226
5,259
2019
Number
1,311
565
1,395
526
1,462
5,259
2019
Number
3,754
50
929
526
5,259
2019
£m
193.1
18.2
9.6
1.6
222.5
2018
Number
4,371
567
197
5,135
2018
Number
1,234
716
1,446
416
1,323
5,135
2018
Number
3,799
83
837
416
5,135
2018
£m
186.8
17.6
9.0
6.4
219.8
152
152
153
153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
4 INVESTMENTS
4.1 ACQUISITIONS OF BUSINESSES
RD:IR
On 5 September 2019, the Group purchased the entire issued share capital of Richard Davies Investor Relations Limited (RD:IR) for cash
consideration of £4.0m, plus contingent consideration of up to £2.0m payable in 2021. RD:IR offers a wide range of investor relations related
analysis, research and advisory services to its international client base.
The Group took control of the business on 5 September 2019. On this date the business had net assets with a fair value of £2.2m. The results of the
business have been consolidated since the date of control and RD:IR contributed £1.2m of revenue and £nil profit before income tax to the Group‘s
results in 2019. If the business had been acquired on 1 January 2019 it would have contributed an additional £2.0m of revenue and £0.8m net loss
before tax to the Group‘s results in 2019. The acquisition-related costs of acquiring RD:IR in the year, such as legal fees and stamp duty, amounted
to £0.2m. These costs have been included in administrative costs in the income statement.
On acquisition, intangible assets with a fair value of £2.2m relating to customer contracts and related relationships were identified. 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 RD:IR and the Group. The amounts relating to the intangible assets and goodwill are provisional and subject to
further evaluation and adjustment, in accordance with accounting standards.
Fair value of identifiable assets acquired and liabilities assumed
Intangible assets
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Provisions
Deferred income tax liabilities
Net identifiable assets and liabilities
Goodwill on acquisition
Total consideration
Cash acquired
Contingent consideration (discounted)
Net cash outflow in the year
£m
2.6
0.6
0.7
(1.2)
(0.1)
(0.4)
2.2
3.7
5.9
(0.7)
(1.9)
3.3
As at 31 December 2019, the minimum amount of contingent consideration payable was £0.5m and the maximum amount was £2.0m. 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.
152
152
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
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E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
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F
N
A
N
C
A
L
I
I
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A
T
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M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
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n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
153
153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
4.1 ACQUISITIONS OF BUSINESSES (CONTINUED)
CST
On 31 October 2019, the Group purchased the entire issued share capital of Corporate Stock Transfer, Inc. (CST) for cash consideration of £0.2m
($0.2m), plus deferred consideration of £3.2m ($4.3m) payable in 2020 and contingent consideration of up to £1.6m ($1.8m) payable in 2022.
CST is a share registrar business based in Colorado, United States.
The Group took control of CST on 31 October 2019. On this date the business had net assets with a fair value of £1.0m. The results of the business
have been consolidated since the date of control and CST contributed £0.3m of revenue and £nil profit before income tax to the Group‘s results
in 2019. If the business had been acquired on 1 January 2019 it would have contributed an additional £1.7m of revenue and £0.2m loss before
income tax to the Group‘s results in 2019. The acquisition-related costs of acquiring CST in the year, such as legal fees and stamp duty, amounted
to £0.2m. These costs have been included in administrative costs in the income statement.
On acquisition, intangible assets with a fair value of £1.5m relating to customer contracts and related relationships were identified. 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 CST and the Group. The amounts relating to the intangible assets and goodwill are provisional and subject to further
evaluation and adjustment, in accordance with accounting standards.
Fair value of identifiable assets acquired and liabilities assumed
Right-of-use assets
Intangible assets
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Contract fulfilment liabilities
Lease liabilities
Deferred income tax liabilities
Net identifiable assets and liabilities
Goodwill on acquisition
Total consideration
Cash acquired
Deferred consideration
Contingent consideration (discounted)
Net cash outflow in the year
£m
0.4
1.5
0.1
0.2
(0.3)
(0.2)
(0.4)
(0.3)
1.0
3.7
4.7
(0.2)
(3.2)
(1.3)
–
As at 31 December 2019, the minimum amount of contingent consideration payable was £nil and the maximum amount was £1.4m. 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.
154
154
155
155
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
4.2 PROPERTY, PLANT AND EQUIPMENT
Leasehold
improvements
£m
Freehold
improvements
£m
Office
equipment
£m
Fixtures &
fittings
£m
Cost
Balance at 1 January 2018
Acquisition of business
Additions
Disposals
Translation adjustment
Balance at 31 December 2018
Balance at 1 January 2019
Additions
Disposals
Translation adjustment
Balance at 31 December 2019
Accumulated depreciation
Balance at 1 January 2018
Depreciation charge for the year
Disposals
Balance at 31 December 2018
Balance at 1 January 2019
Depreciation charge for the year
Disposals
Translation adjustment
Balance at 31 December 2019
Net book value
Balance at 31 December 2018
Balance at 31 December 2019
10.3
1.1
1.9
(0.3)
0.2
13.2
13.2
1.6
(0.1)
(0.1)
14.6
5.8
1.3
(0.3)
6.8
6.8
1.5
(0.1)
(0.1)
8.1
6.4
6.5
0.8
–
–
–
–
0.8
0.8
–
(0.8)
–
–
–
–
–
–
–
–
–
–
–
0.8
–
33.8
0.1
5.8
(1.4)
0.2
38.5
38.5
4.2
(3.0)
(0.2)
39.5
21.9
4.1
(1.4)
24.6
24.6
4.9
(3.0)
–
26.5
13.9
13.0
4.6
0.4
0.2
(0.3)
–
4.9
4.9
0.1
(0.5)
–
4.5
3.8
0.6
(0.3)
4.1
4.1
0.4
(0.6)
–
3.9
0.8
0.6
Total
£m
49.5
1.6
7.9
(2.0)
0.4
57.4
57.4
5.9
(4.4)
(0.3)
58.6
31.5
6.0
(2.0)
35.5
35.5
6.8
(3.7)
(0.1)
38.5
21.9
20.1
Included within office equipment are assets held under finance leases, as defined by IAS 17, which have not been transferred into right-of-use
assets. On adopting IFRS 16, the Group relied on its previous assessment on whether these contracts were leases. These assets are included in
the table above with a cost of £2.8m as of 31 December 2019 (2018: £2.8m). These assets had a net book value as at 31 December 2019 of £0.7m
(2018: £1.1m).
154
154
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
155
155
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
4.3 RIGHT-OF-USE ASSETS
Cost
Balance at 1 January 2019
Acquisition of business
Additions
Disposals
Translation adjustment
Balance at 31 December 2019
Accumulated depreciation
Balance at 1 January 2019
Depreciation charge for the year
Disposals
Balance at 31 December 2019
Net book value
Balance at 31 December 2018
Balance at 31 December 2019
Property
£m
–
0.4
41.5
(0.7)
(0.2)
41.0
–
6.1
(0.1)
6.0
–
35.0
Office
equipment
£m
–
–
0.2
–
–
0.2
–
–
–
–
–
0.2
Total
£m
–
0.4
41.7
(0.7)
(0.2)
41.2
–
6.1
(0.1)
6.0
–
35.2
156
156
157
157
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
4.4 INTANGIBLE ASSETS
Cost
Balance at 1 January 2018
Acquisition of business
Additions
Translation adjustment
Balance at 31 December 2018
Balance at 1 January 2019
Acquisition of business
Additions
Disposals
Translation adjustment
Balance at 31 December 2019
Accumulated amortisation
Balance at 1 January 2018
Amortisation for the year
Translation adjustment
Balance at 31 December 2018
Balance at 1 January 2019
Amortisation for the year
Disposals
Translation adjustment
Balance at 31 December 2019
Net book value
Balance at 31 December 2018
Balance at 31 December 2019
Goodwill
Software
Acquisition-
related
intangible
assets
£m
453.8
64.3
–
6.0
524.1
524.1
8.4
–
–
(2.6)
529.9
–
–
–
–
–
–
–
–
–
524.1
529.9
£m
247.8
0.4
38.1
0.1
286.4
286.4
0.4
44.4
(1.2)
(0.8)
329.2
173.4
23.9
–
197.3
197.3
29.9
–
(0.2)
227.0
89.1
102.2
£m
326.8
104.0
–
12.4
443.2
443.2
3.7
–
–
(4.0)
442.9
188.0
31.7
0.3
220.0
220.0
31.8
–
(0.5)
251.3
223.2
191.6
Total
£m
1,028.4
168.7
38.1
18.5
1,253.7
1,253.7
12.5
44.4
(1.2)
(7.4)
1,302.0
361.4
55.6
0.3
417.3
417.3
61.7
–
(0.7)
478.3
836.4
823.7
Software predominately relates to investment in enhancing the functionality of the Group‘s main operating platforms. Included within additions in the
year is £21.9m (2018: £16.2m) of directly attributable employee staff costs that have been capitalised in respect of internal software development.
Acquisition-related intangible assets consist primarily of customer lists arising from business combinations.
Goodwill is the only intangible asset with an indefinite life.
156
156
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
157
157
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
4.4 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.
See note 4.1 for goodwill arising on acquisitions made in the current year. Goodwill is monitored by management in line with the Group‘s operating
segments: Investment Solutions, Intelligent Solutions, Pensions Solutions, EQ US and Interest.
Year ended 31 December 2019
Investment Solutions
Intelligent Solutions
Pensions Solutions
EQ US
Total goodwill
Opening
balance
Acquisitions
Adjustments
for prior year
acquisitions
£m
291.6
77.3
91.4
63.8
524.1
£m
3.7
–
–
3.7
7.4
£m
–
–
1.0
–
1.0
Transfers
between
segments1
£m
–
4.2
(4.2)
–
–
Translation
adjustment
Closing
balance
£m
–
(0.8)
–
(1.8)
(2.6)
£m
295.3
80.7
88.2
65.7
529.9
1 The transfer between segments relates to a correction of prior year balances between Intelligent Solutions and Pensions Solutions.
Year ended 31 December 2018
Investment Solutions
Intelligent Solutions
Pensions Solutions
EQ US
Total goodwill
Opening
balance
Acquisitions
Adjustments
for prior year
acquisitions
Transfers
between
segments
Translation
adjustment
Closing
balance
£m
289.4
77.2
87.2
–
453.8
£m
2.2
–
4.2
57.9
64.3
£m
–
–
–
–
–
£m
–
–
–
–
–
£m
–
0.1
–
5.9
6.0
£m
291.6
77.3
91.4
63.8
524.1
Impairment testing
Goodwill is tested annually for impairment. The recoverable amount of each CGU has been determined in accordance with IAS 36 Impairment of
Assets. This is determined from value-in-use calculations, being the present value of net cash flows generated by the business over the period for
which management expects to benefit from the acquired business.
The key assumptions for the value-in-use calculations are those regarding discount rates, the generation of free cash flows over the forecast period
and revenue and EBITDA growth rates. Each CGU derives cash flows from its approved business plans over a five-year period. The compound
annual growth rate for EBITDA used during the forecast period is 5.8% in the UK and Europe and 8.0% in the USA. 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 to 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 the net assets of the CGUs.
The revenue growth rate applied beyond the approved forecast period is in line with underlying UK and US macroeconomic forecasts.
Year ended 31 December 2019
Period on which management approved forecasts are based
EBITDA growth rate applied beyond approved forecast period
Discount rate pre-tax
Year ended 31 December 2018
Period on which management approved forecasts are based
EBITDA growth rate applied beyond approved forecast period
Discount rate pre-tax
UK & Europe
5 years
2.1%
6.9%
UK & Europe
5 years
2.1%
8.1%
USA
5 years
1.9%
9.4%
USA
5 years
1.8%
9.8%
Sensitivity analysis
A sensitivity analysis was carried out on the key assumptions made within the value-in-use model. Applying a 1% increase in the pre-tax discount
rate and a 1% reduction in the growth rate did not give an indication of impairment. In the opinion of the Directors, there are no reasonably
possible changes to these key assumptions which would cause the carrying value of any CGU to exceed its recoverable amount.
158
158
159
159
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
4.5 INVESTMENTS IN SUBSIDIARIES
The Directors consider the value of the investments to be supported by their underlying assets. The Company has the following investments in
subsidiaries:
Name of controlled entity
Registered office address
Principal
activities
Ownership
% on 31
December
2019
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
Direct Investments
Equiniti Holdings Limited
Equiniti Finance (Holdings) Ltd
Equiniti (UK) Finance Ltd
Indirect Investments
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Holding company
Holding company
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Non trading
Aquila International Limited
Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH, United Kingdom
Aquila Services UK Limited
Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH, United Kingdom
Aquila Software Limited
Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH, United Kingdom
Dormant
Dormant
Dormant
Boudicca Proxy Ltd
Charter.Net Limited
Charter Systems Limited
Charter UK Limited
Circle of Insight Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Proxy solicitation
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Dormant
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Software service
provider
Software service
provider
Dormant
Computer software
consultancy
Dormant
Claybrook Computing Limited
Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH, United Kingdom
Connaught Secretaries Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Corporate Stock Transfer, Inc.
3200 Cherry Creek Drive, S #430, Denver, CO 80209, United States
Stock transfer agent
Custodian Nominees Limited
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom
David Venus & Company LLP
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
EQ Tek SP. Z O. O.
Building C, Equal Business Park, Wielicka 28B, Kraków, Małopolskie, Poland
Equiniti Benefactor Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Equiniti 360 Clinical Limited
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom
Equiniti Corporate Nominees Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Dormant
Dormant
Technology enabled
services
Dormant
Business process
outsourcing
Dormant
Equiniti Data Limited
Equiniti David Venus Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Software service provider
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Company secretarial
Equiniti Delivery Services Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Software service provider
Equiniti Employee Services (PTY) Limited
102B Newlands Plaza, CNR Lois & Dely, Newlands, 00181, South Africa
Computer software
development
Equiniti Financial Services Limited
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom
Financial services
Equiniti Gateway Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Equiniti Global Payments Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Technology enabled
services
International payment
services
Equiniti HR Solutions Limited
Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH, United Kingdom
Non trading
Equiniti India (Private) Limited
DLF IT Park, 1/124, Mt Poonamalle High Road, Ramapuram, Chennai, Tamil Nadu 600 089, India
Equiniti ICS Limited
205 Airport Road West, Belfast, BT3 9ED, United Kingdom
Equiniti (Ireland) Finance Ltd
52–55 Sir John Rogerson‘s Quay, Dublin 2, D02 NA07, Republic of Ireland
Technology enabled
services
Business process
outsourcing
Non trading
158
158
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
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
159
159
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
4.5 INVESTMENTS IN SUBSIDIARIES (CONTINUED)
Name of controlled entity
Registered office address
Equiniti ISA Nominees Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Equiniti (Jersey) Limited
26 New Street, St Helier, JE2 3RA, Jersey
Equiniti KYC Solutions B.V.
Danzigerkade 23B, 1013 AP, Amsterdam, The Netherlands
Equiniti KYC Systems B.V.
Danzigerkade 23B, 1013 AP, Amsterdam, The Netherlands
Equiniti Limited
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom
Equiniti Nominees Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Principal
activities
Dormant
Registrars
Software service provider
Software service provider
Registrars
Dormant
Equiniti Pension Trustee Limited
Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH, United Kingdom
Dormant
Equiniti PMS Limited
Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH, United Kingdom
Software service provider
Equiniti Registrars Nominees Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Equiniti Savings Nominees Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Dormant
Dormant
Equiniti Services Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Holding company
Equiniti Share Plan Trustees Limited
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom
Trustee company
Equiniti Shareview Limited
Equiniti Solutions Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Equiniti Trust Company
25th Floor, 90 Park Avenue, New York, NY 10016, United States
Dormant
Non trading
Limited purpose
trust company
Equiniti (US) Holdings Inc
1209 Orange Street, Wilmington, Delaware, County of New Castle 19801, United States
Holding company
Equiniti (US) LLC
1209 Orange Street, Wilmington, Delaware, County of New Castle 19801, United States
Non trading
Equiniti (US) Services LLC
1209 Orange Street, Wilmington, Delaware, County of New Castle 19801, United States
Non trading
Information Software Solutions Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Holding company
icenet Limited
Invigia International Limited
Invigia Limited
KYCnet BV
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Dormant
Dormant
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Software service provider
Danzigerkade 23B, 1013 AP, Amsterdam, The Netherlands
Holding company
L R Nominees Limited
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom
Dormant
MyCSP Limited
Park Square, Bird Hall Lane, Stockport, SK3 0XN, United Kingdom
Pensions administration
MyCSP Trustee Company Limited
Park Square, Bird Hall Lane, Stockport, SK3 0XN, United Kingdom
Non trading
MyCustomerfeedback.com Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Software service provider
Pancredit Systems Ltd.
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Business process
outsourcing
Paymaster (1836) Limited
Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH, United Kingdom
Pensions administration
Peter Evans & Associates Limited
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom
Prism Communications & Management
Limited
Elder House, St Georges Business Park, 207 Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Business process
outsourcing
Company secretarial
Prism Cosec Limited
Elder House, St Georges Business Park, 207 Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Dormant
Prosearch Asset Solutions Limited
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom
Asset recovery
Refresh Personal Finance Ltd
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Software service provider
Richard Davies Investor Relations Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Investor relations
Riskfactor Solutions Limited
Riskfactor Software Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Software service provider
Software service provider
SLC Corporate Services Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Dormant
Ownership
% on 31
December
2019
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
75
75
100
100
100
100
100
100
100
100
100
100
100
100
160
160
161
161
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
4.5 INVESTMENTS IN SUBSIDIARIES (CONTINUED)
Name of controlled entity
Registered office address
SLC Registrars Limited
The Nostrum Group Limited
Toplevel Computing Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Principal
activities
Dormant
Software service provider
Software service provider
Toplevel Development Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Dormant
Toplevel Holdings Limited
Toplevel Software Limited
Trust Research Services Limited
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Holding company
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Elder House, St Georges Business Park, Brooklands Road, Weybridge, Surrey, KT13 0TS,
United Kingdom
Dormant
Dormant
Wealth Nominees Limited
Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, United Kingdom
Dormant
All the above investments are held in the Ordinary share capital of the company.
Ownership
% on 31
December
2019
100
100
100
100
100
100
100
100
Audit exemption guarantee
The following subsidiaries took advantage of the exemption from audit of their individual financial statements, under Section 479A of the
Companies Act 2006, for the year ended 31 December 2019:
Company name
Boudicca Proxy Ltd
Charter Systems Limited
Charter UK Limited
Claybrook Computing Limited
Equiniti 360 Clinical Limited
Equiniti Data Limited
Equiniti David Venus Limited
Equiniti Delivery Services Limited
Equiniti Finance (Holdings) Ltd
Equiniti HR Solutions Limited
Equiniti ICS Limited
Equiniti PMS Limited
Equiniti Services Limited
Equiniti Share Plan Trustees Limited
Equiniti (UK) Finance Ltd
Registration number
Company name
Registration number
07847924
06147539
02453655
01287205
04957851
05350329
06351754
08855189
11092909
11450921
NI036763
03613039
00756582
03925002
11092548
Information Software Solutions Limited
Invigia Limited
MyCSP Limited
Mycustomerfeedback.com Limited
Pancredit Systems Ltd.
Peter Evans & Associates Limited
03915585
03318315
07640786
06829521
02215760
01870532
Prism Communications & Management Limited
04352585
Prosearch Asset Solutions Limited
Refresh Personal Finance Ltd
Richard Davies Investor Relations Limited
Riskfactor Software Limited
Riskfactor Solutions Limited
The Nostrum Group Limited
Toplevel Computing Limited
Toplevel Holdings Limited
02158381
07369895
04557486
03923431
02767525
04274181
02341302
03270082
As a condition of the above exemption, the Group has guaranteed the year end liabilities of the relevant subsidiaries until they are settled in full.
The liabilities of the above subsidiaries at the year end date were £134.5m (2018: £116.2m).
160
160
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
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F
F
N
N
A
A
N
N
C
C
A
A
L
L
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T
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N
N
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M
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N
T
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E
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E
q
q
q
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n
n
n
n
i
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t
t
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i
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i
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G
G
G
G
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r
r
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p
p
p
p
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c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
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R
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p
p
p
p
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o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
161
161
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
5 WORKING CAPITAL
5.1 TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments
Total trade and other receivables
2019
£m
35.1
6.6
8.9
50.6
2018
£m
46.4
7.1
10.6
64.1
The Group holds trade receivables with the objective of collecting contractual cash flows. Settlement terms are generally 30 days from the date
of invoice. Excluding trade receivables, none of these financial assets are either past due or impaired. At the year end, trade receivables are shown
net of an expected credit loss allowance of £0.3m (2018: £0.2m).
Credit risk
The ageing of trade receivables at the reporting date was:
Not past due
Past due 1 – 30 days
Past due 31 – 90 days
Past due more than 90 days
Total trade receivables
2019
£m
23.4
7.1
2.0
2.6
35.1
2018
£m
29.0
12.6
3.0
1.8
46.4
Trade receivables not past due of £23.4m (2018: £29.0m) are all existing customers with no defaults in the past.
Based on historic performance of these contracts, the Group has an expected credit loss allowance in respect of trade receivables and accrued
income of £0.3m at the year end (2018: £0.2m). The impairment loss recognised in the year was £0.3m (2018: £0.2m). When impairment losses are
recognised, these are for the full value of the impaired debt.
Movement in the year in the Group‘s estimated credit loss allowance on trade receivables is as follows:
Balance at 1 January
Balances acquired from business acquisitions
New provisions made in year
Balances reversed in year
Balance at 31 December
2019
2018
£m
0.2
0.4
0.1
(0.4)
0.3
£m
0.4
0.2
0.1
(0.5)
0.2
Trade receivables past due but not impaired of £11.7m (2018: £17.4m) relate to a number of independent customers for whom there is no recent
history of default or expectation of such going forwards.
5.2 CONTRACT FULFILMENT ASSETS
Accrued income
Contract set up costs
Contract fulfilment assets
2019
£m
50.5
3.5
54.0
2018
£m
41.6
4.6
46.2
Accrued income represents the fair value of goods and services supplied to customers, for which the Group is entitled to recognise revenue,
which at the reporting date is not yet invoiced or paid. All such assets are supported by client contracts and agreed invoices and payment
schedules. This allows accrued income to be underpinned and recovered from clients even on the rare occasions that clients cease projects with
us permanently. The Group has recognised £50.5m of accrued income as at 31 December 2019 and anticipates invoicing clients for £38.2m of this
balance within 12 months. The Group intends to invoice the balance of £12.3m after 31 December 2020.
162
162
163
163
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
5.3 TRADE AND OTHER PAYABLES
Trade payables
Accruals
Deferred consideration
Other payables
Total trade and other payables
5.4 CONTRACT FULFILMENT LIABILITIES
Deferred income
Contract fulfilment liabilities
2019
£m
22.7
47.0
7.2
13.7
90.6
2019
£m
16.3
16.3
Deferred income represents consideration received in advance of the related services or goods being provided to the customer.
Revenue recognised in relation to contract fulfilment liabilities
Revenue recognised that was included in the contract liability balance as at 1 January
2019
£m
14.2
14.2
2018
£m
26.8
64.8
7.3
13.3
112.2
2018
£m
16.4
16.4
2018
£m
14.9
14.9
5.5 PROVISIONS
Balance at 1 January 2019
Balances acquired from business acquisitions
Additional provisions made during the year
Amounts utilised during the year
Amounts released during the year
Unwinding of discounted amount
Balance at 31 December 2019
Non-current liability
Current liability
Total provisions
Contingent consideration
Contingent
consideration
Property
provisions
Total provisions
£m
19.7
3.2
1.7
(4.9)
(5.3)
0.4
14.8
4.4
10.4
14.8
£m
2.2
0.1
0.1
–
(1.1)
–
1.3
1.3
–
1.3
£m
21.9
3.3
1.8
(4.9)
(6.4)
0.4
16.1
5.7
10.4
16.1
A provision for contingent consideration as at 31 December 2019 of £14.8m (2018: £19.7m) relates to various requirements to be met following
the Group‘s acquisitions. This is recognised at fair value through profit or loss and is derived from management‘s best estimate of the amounts
likely to be paid. The minimum value of these provisions could be £0.5m up to a maximum of £19.9m. These were discounted at an appropriate
post-tax discount rate at the time of the acquisitions and are provided within provisions due to the uncertainty of the amount to ultimately be paid.
Management regularly reconsiders the appropriateness of the amounts expected to be payable and the discount rate used and updates when
appropriate. The remaining balance is expected to be utilised over periods between 2020 and 2022.
Property provisions
Property provisions relate to management‘s best estimate of dilapidations in respect of leasehold properties. The balance will be utilised on
vacation of premises.
162
162
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E
E
C
C
T
T
O
O
N
N
0
0
3
3
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F
F
N
N
A
A
N
N
C
C
A
A
L
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M
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N
N
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O
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I
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N
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N
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A
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E
N
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E
E
q
q
q
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n
n
i
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G
G
G
G
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o
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u
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p
p
p
p
p
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p
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c
c
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A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
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R
R
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e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
163
163
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
5.6 CHANGES IN WORKING CAPITAL
Trade and other receivables
Contract fulfilment assets
Trade and other payables
Contract fulfilment liabilities
Provisions for other liabilities and charges
Post-employment benefits
Net working capital per the consolidated statement of financial position
Working capital acquired in business combinations
Movement in interest accrual
Movement in tax accrual
Movement in capital expenditure accrual
Movement in accruals relating to prior-year acquisitions
Movement in accruals relating to non-controlling interests
Movement in working capital relating to the transition to IFRS 16
Foreign exchange movement on translation of overseas subsidiaries
Defined benefit plan actuarial loss
Changes in working capital per the consolidated statement of cash flows
2019
£m
50.6
54.0
(90.6)
(16.3)
(16.1)
(31.7)
(50.1)
2018
£m
64.1
46.2
(112.2)
(16.4)
(21.9)
(22.9)
(63.1)
Movement
£m
(13.5)
7.8
21.6
0.1
5.8
(8.8)
13.0
3.0
(0.3)
1.8
(2.3)
(5.0)
1.0
(2.4)
1.1
10.1
20.0
164
164
PB
PB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
6 CAPITAL STRUCTURE
6.1 FINANCE INCOME AND COSTS
Finance income
Interest income
Total finance income
Finance costs
Interest cost on term loan borrowings
Interest cost on revolving credit facility
Amortisation of finance arrangement fees
Net finance cost relating to pension schemes
Interest cost on lease liabilities
Unwinding of discounted amount in provisions
Cost of interest rate swap against financial liabilities
Other fees and interest
Total finance costs
6.2 SHARE CAPITAL AND SHARE PREMIUM
Allotted, called up and fully paid
Balance at 1 January
Employee share options exercised
Balance at 31 December
Ordinary shares of £0.001 each
Balance at 1 January
Employee share options exercised
Balance at 31 December
2019
£m
–
–
2019
£m
8.5
3.2
1.8
0.6
1.5
0.4
–
0.1
16.1
Share capital
Share premium
2019
£m
0.4
–
0.4
2018
£m
0.4
–
0.4
2019
£m
115.9
–
115.9
2018
£m
0.2
0.2
2018
£m
8.1
2.4
2.2
0.6
0.1
0.8
1.2
0.1
15.5
2018
£m
115.8
0.1
115.9
2019
2018
Number
364,536,666
–
364,536,666
Number
364,434,283
102,383
364,536,666
The Group did not issue any shares in the current year. In the prior year, the Group issued 102,383 ordinary shares on exercise of employee share
options at a weighted average exercise price of £1.1893 per share, for proceeds of £0.1m.
PB
PB
I
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S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
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G
G
G
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u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
165
165
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
6.3 OTHER RESERVES
Balance at 1 January 2018
Changes in fair value through hedging reserve
Deferred tax on movement through hedging
reserve
Net exchange gain on translation of foreign
operations
Purchase of own shares
Share option awards to employees
Balance at 31 December 2018
Balance at 1 January 2019
Changes in fair value through hedging reserve
Tax on movement through hedging reserve
Net exchange loss on translation of foreign
operations
Purchase of own shares
Share option awards to employees
Balance at 31 December 2019
Capital
contribution
reserve
£m
181.5
–
–
–
–
–
181.5
181.5
–
–
–
–
–
181.5
Reserve for
own shares
Hedging
reserve
Translation
reserve
Total other
reserves
£m
–
–
–
–
(13.9)
3.9
(10.0)
(10.0)
–
–
–
(3.8)
9.8
(4.0)
£m
(6.5)
4.4
(0.9)
–
–
–
(3.0)
(3.0)
13.6
(2.1)
–
–
–
8.5
£m
3.0
–
–
10.9
–
–
13.9
13.9
–
–
(5.5)
–
–
8.4
£m
178.0
4.4
(0.9)
10.9
(13.9)
3.9
182.4
182.4
13.6
(2.1)
(5.5)
(3.8)
9.8
194.4
Capital contribution reserve
The capital contribution reserve arose on the Initial Public Offering in 2015, when the Group issued equity instruments to settle non-current
financial liabilities with shareholders.
Reserve for own shares
During the year, the Group purchased 1,801,167 (2018: 6,000,000) of its own ordinary shares for consideration of £3.8m (2018: £13.9m). The shares
are held in an employee benefit trust, which is controlled by the Group, and will be used to satisfy the vesting of awards under the Group’s share
option plans. During the year 4,340,246 (2018: 1,697,093) shares were used to satisfy the vesting of awards. Shares held by the trust are deducted
from equity and the trust has waived its right to receive dividends.
The market value of the 1,763,828 (2018: 4,302,907) shares held in trust at 31 December 2019 was £3.6m (2018: £9.3m).
Hedging reserve
The hedging reserve comprises the effective portion of changes in the fair value of interest rate swaps and forward foreign exchange contracts,
where the hedged transactions have not yet occurred.
Translation reserve
The translation reserve represents the foreign exchange movements arising from the translation of financial statements in foreign currencies to the
presentational currency of the Group.
6.4 NON-CONTROLLING INTEREST
The Group controls one non-wholly owned trading subsidiary, MyCSP Limited, by virtue of a 75% shareholding in the company. The summarised
financial information for MyCSP Limited, set out below, is prior to intercompany eliminations.
Summarised statement of financial position
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
2019
£m
3.6
28.9
(2.5)
(10.1)
19.9
2018
£m
1.3
33.6
(1.3)
(11.4)
22.2
166
166
167
167
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
6.4 NON-CONTROLLING INTEREST (CONTINUED)
Summarised statement of comprehensive income
Revenue
Profit for the year
Other comprehensive (expense)/income
Total comprehensive income
Transactions with non-controlling interests
2019
£m
34.6
5.1
(0.9)
4.2
2018
£m
40.1
5.9
0.1
6.0
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
25% of MyCSP Limited is owned by employees of MyCSP Limited via an employee benefit trust and their shares rank pari passu with the remaining
share capital, including the right to receive annual dividends when declared. The dividend declared on shares held by the employee benefit trust
has been waived in lieu of a bonus payment through payroll in the current and prior year. The bonus for the current year was £1.4m (2018: £2.1m)
and the tax saving was £0.3m (2018: £0.4m). The net amount of £1.1m (2018: £1.7m) is reflected within transactions with non-controlling interests
in the consolidated statement of changes in equity. MyCSP Limited accrues the bonus at the end of the year in the statement of financial position
and reflects the expense in its income statement.
6.5 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.
Shares held by the Equiniti Group Employee Benefit Trust are treated as treasury shares and deducted from equity. These shares are excluded
from the weighted average number of ordinary shares in issue until the shares are transferred to the option holder.
The diluted earnings per share calculation includes vested share options outstanding and other potential shares where the impact of these
is dilutive.
Profit from continuing operations attributable to owners of the parent
Basic weighted average number of ordinary shares in issue (millions)
Dilutive performance share plan options (millions)
Dilutive sharesave plan options (millions)
Diluted weighted average number of ordinary shares in issue (millions)
Basic earnings per share (pence)
Diluted earnings per share (pence)
6.6 DIVIDENDS
Amounts recognised as distributions to equity holders of the parent in the year
Interim dividend for year ended 31 December 2019 (1.95p per share)
Final dividend for year ended 31 December 2018 (3.49p per share)
Interim dividend for year ended 31 December 2018 (1.83p per share)
Final dividend for year ended 31 December 2017 (2.73p per share)
2019
£m
30.8
368.3
–
–
368.3
8.4
8.4
2019
£m
7.1
12.6
–
–
19.7
2018
£m
17.5
363.0
7.1
1.7
371.8
4.8
4.7
2018
£m
–
–
6.6
9.9
16.5
The Board recommends a final dividend payable in respect of the year ended 31 December 2019 of £12.9m (2018: £12.6m) or 3.54p per share
(2018: 3.49p per share). As this is subject to shareholder approval at the Annual General Meeting on 7 May 2020, no liability has been included in
these financial statements. The final dividend will be paid on 26 May 2020, to shareholders on the register at close of business on 17 April 2020.
The Equiniti Group Employee Benefit Trust has waived its right to receive dividends on shares held.
166
166
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
167
167
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
6.7 EXTERNAL LOANS AND BORROWINGS
Non-current liabilities
Term loan
Revolving credit facility
Unamortised cost of raising finance
Total external loans and borrowings
Terms and debt repayment schedule
Term loan
Term loan
Revolving credit facility
Revolving credit facility
2019
£m
260.1
115.0
(6.0)
369.1
2018
£m
322.6
76.7
(4.1)
395.2
Year of
maturity
2024
2024
2024
2024
Currency
Sterling
US dollar
Sterling
US dollar
Closing interest rate
GBP Libor + 1.50%
USD Libor + 1.50%
GBP Libor + 1.20%
USD Libor + 1.20%
The Group's debt facilities, which mature in full in 2024, contain one financial covenant, namely a maximum ratio of Net Debt to EBITDA (as
defined in the loan agreement) which is tested half yearly and at the year end. Net Debt to EBITDA must be no more than 4.00:1 for the years to
31 December 2020, no more than 3.75:1 between 30 June 2021 and 31 December 2021, and 3.50:1 thereafter. The margin payable on both the
term loan and revolving credit facility (RCF) is determined based on the ratio of Net Debt to EBITDA, where the margin payable ranges from a
maximum of 2.00% to a minimum of 0.60%. No debt is repayable before the end of the current funding agreement in 2024.
In 2019, the Group amended and extended its agreement with existing and new banks to restructure loan facilities, to comprise of term loans
of £190.0m and $92.0m and a £260.0m RCF. The extension of facilities became effective on 12 July 2019 when the Group benefited from lower
margins on both the term loans and RCF, based on the ratio of Net Debt to EBITDA at that date.
6.8 LEASE LIABILITIES
Current
Non-current
Total lease liabilities
2019
£m
8.0
33.1
41.1
2018
£m
0.5
0.6
1.1
In the previous year, the Group only recognised lease assets and lease liabilities in relation to leases that were classified as ‘finance leases’ under
IAS 17. The assets were presented in property, plant and equipment and the lease liabilities as part of other financial liabilities.
During the year, the Group recognised an expense of £0.5m relating to short-term leases in the income statement. In 2018 rental payments of
£8.7m were expensed in the income statement for leases classified as ‘operating leases’. These costs have been included within administrative
costs in the consolidated income statement.
6.9 FINANCIAL LIABILITIES ARISING FROM FINANCING ACTIVITIES
The movements during the year in financial liabilities relating to financing activities and a reconciliation to net debt are shown below:
Term loan
Revolving credit facility
Lease liabilities
Cash and cash equivalents
Net debt
2019
£m
260.1
115.0
41.1
(72.6)
343.6
2018
£m
322.6
76.7
1.1
(90.9)
309.5
168
168
169
169
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
6.9 FINANCIAL LIABILITIES ARISING FROM FINANCING ACTIVITIES (CONTINUED)
Liabilities from financing activities
Term loan
Revolving
credit facility
Lease liabilities
Other assets
Cash and cash
equivalents
Net debt at 1 January 2018
Cash flows
New leases acquired
Interest on lease liabilities
Foreign exchange movements
Net debt at 31 December 2018
Net debt at 1 January 2019
Cash flows
Lease liabilities recognised as a result of IFRS 16
New leases acquired
Modification of lease liabilities
Interest on lease liabilities
Foreign exchange movements
Net debt at 31 December 2019
6.10 CASH AND CASH EQUIVALENTS
£m
250.0
64.9
–
–
7.7
322.6
322.6
(60.0)
–
–
–
–
(2.5)
260.1
£m
–
76.1
–
–
0.6
76.7
76.7
38.6
–
–
–
–
(0.3)
115.0
£m
1.7
(0.9)
0.2
0.1
–
1.1
1.1
(6.9)
42.5
4.6
(0.7)
1.5
(1.0)
41.1
Cash and cash equivalents per statement of financial position
Cash and cash equivalents per statement of cash flows
£m
(115.2)
24.7
–
–
(0.4)
(90.9)
(90.9)
17.7
–
–
–
–
0.6
(72.6)
2019
£m
72.6
72.6
Total
£m
136.5
164.8
0.2
0.1
7.9
309.5
309.5
(10.6)
42.5
4.6
(0.7)
1.5
(3.2)
343.6
2018
£m
90.9
90.9
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 for third parties, and hence are not included in the Group’s consolidated balance sheet. The number of accounts and
balances held vary significantly throughout the year.
The Group has the ability to sell certain trade receivables in a receivables purchase agreement on a non-recourse basis. These balances are
therefore derecognised when sold under this arrangement. The Group has access to a £20.0m arrangement, of which £8.0m (2018: £10.3m) was
utilised at the end of the year and included within the cash balances above. Invoices sold are all covered by trade credit insurance. The trade
receivables shown in note 5.1 are reflected net of cash received at the year end.
6.11 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 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 Audit
Committee is assisted in its oversight role by internal audit, which 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 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 and contract fulfilment assets are with large institutions, including many
FTSE 350 companies and public sector organisations.
168
168
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
169
169
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
6.11 FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk mitigation
Credit risk on the Group's trade receivables and contract assets is mitigated as a high proportion of revenue is derived from large customers listed
on the major international stock exchanges and historical defaults have been infrequent and small. In addition credit insurance is in place
for invoices passed through our invoice discounting facility for up to £5.0m.
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 100% of cash balances at the year end being held in banks and financial institutions with a short-term
credit rating of A or higher.
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 2019
Trade and other payables
Term loan
Revolving credit facility
Lease liabilities
Derivatives used for hedging
Total
31 December 2018
Trade and other payables
Term loan
Revolving credit facility
Lease liabilities
Derivatives used for hedging
Total
Carrying
Amount
Total
contractual
cash flows
£m
90.6
260.1
115.0
41.1
0.4
507.2
£m
90.6
292.5
115.0
51.6
0.4
550.1
Carrying
Amount
Total
contractual
cash flows
£m
112.2
322.6
76.7
1.1
3.6
516.2
£m
112.2
342.9
76.7
1.3
4.7
537.8
Note
5.3
6.7
6.7
6.8
9.2
Note
5.3
6.7
6.7
6.8
9.2
Within
1 year
£m
90.6
7.0
–
7.5
0.4
105.5
Within
1 year
£m
112.2
10.0
–
0.5
2.5
125.2
1–2
years
£m
–
6.9
–
7.9
–
14.8
1–2
years
£m
–
332.9
76.7
0.5
1.5
411.6
2–5
years
£m
–
278.6
115.0
19.1
–
412.7
2–5
years
£m
–
–
–
0.3
0.7
1.0
After 5
years
£m
–
–
–
17.1
–
17.1
After 5
years
£m
–
–
–
–
–
–
All trade and other payables are expected to be paid in six months or less.
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 had £72.6m of cash at 31 December 2019. The Group also has revolving credit facilities
of £260.0m available, of which £145.0m was undrawn at 31 December 2019.
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 rates on both interest earned on segregated funds administered for third parties and its net
finance costs. Net finance costs include interest costs on the term loan and the RCF and interest income on the Group’s own deposits. Interest
costs payable are mostly linked to changes in Libor. Interest income receivable is largely driven by changes in the Bank of England base rate and
the US Federal Reserve benchmark rate.
A movement in interest rates which negatively affects net finance costs would have a positive effect on revenue, and vice versa.
170
170
171
171
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
6.11 FINANCIAL RISK MANAGEMENT (CONTINUED)
Interest rate risk mitigation
Exposure to interest rate fluctuations is partly managed through the use of interest rate swaps. Interest rate swaps, which are designated as
hedges under IAS 39 Financial Instruments: Recognition and Measurement, 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. The Group does not enter into speculative transactions in financial
instruments or derivatives.
The Group has entered into sterling denominated interest rate swaps with notional values of £1,025.0m to July 2020 (£380.0m), to September 2021
(£215.0m), to September 2022 (£215.0m) and to September 2023 (£215.0m) and $700.0m interest rate swaps to March 2021, exchanging the variable
rate derived interest income on segregated funds into fixed rates.
The term loans accrue interest based on a margin over Libor. The Group entered into an interest rate swap, exchanging variable based interest
charges for fixed rate for a period of three years. This swap expired in 2018 and has not been replaced. The Group has not entered into a hedge
of its outstanding RCF commitments.
The Directors monitor the overall level of borrowings, leverage ratio and interest costs to limit any adverse effects on the financial performance
of the Group.
Sensitivity analysis
In managing interest rate risks, the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the longer term,
however, permanent changes in interest rates would have an impact on consolidated earnings.
An increase of one percentage point in interest rates effective from the start of 2019 would have increased finance costs for the Group by £2.9m
(2018: £1.4m), and increased interest revenue by £11.5m (2018: £10.1m), yielding a net increase in profit after tax of £6.6m (2018: £6.8m). This
includes the impact of interest rate swaps, which reduce the fluctuations resulting from interest rate movements.
b) Foreign exchange rate risk
The Group has exposure to foreign exchange rate risk on cash flows in overseas operations which are affected by foreign currency movements.
The Group’s main risk is from the EQ US business which exposes the Group to foreign exchange rate movements between Sterling and the
US Dollar.
The Group also has foreign exchange rate risk arising from costs incurred in operating its service centres in India and Poland and this exposes
the Group to movements between Sterling, the Indian Rupee and Polish Złoty. The Group has implemented a hedging policy to reduce the risks
associated with movements in the Sterling/Indian Rupee exchange rate by entering into a series of forward contracts based on expected cash flows
to purchase Indian Rupee. These forward contracts are designated as hedges under IAS 39 Financial Instruments: Recognition and Measurement.
The Group has net investments in foreign operations in US Dollar, Euro, Indian Rupee and Polish Złoty, the re-translation of which on consolidation
gives rise to exposure to the carrying values of non-Sterling assets and liabilities. The Group has designated US$92.0m of term debt as a hedge of
a net investment in its EQ US business.
c) Equity price risk
The Group does not hold its own position in securities and is involved only in arranging share dealing transactions on behalf of its clients.
6.12 CAPITAL RISK MANAGEMENT
The Group is focused on delivering value for its shareholders whilst ensuring it 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.
Total capital comprises total equity plus net debt, as shown in the consolidated statement of financial position. Net debt equates to the total of external
interest bearing loans plus other lease liabilities, less cash and cash equivalents, as shown in the consolidated statement of financial position and note 6.9.
The policies for managing capital are to increase shareholder value by maximising profits and cash. The policy is to set budgets and forecasts in the
short and medium term that the Group ensures are achievable. The process for managing capital is 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 Group may also consider repayment of debt, issuance of new and repurchase of existing shares and adjusting dividend
payments to shareholders, to maintain an optimum capital structure. The Board regularly reviews the Group’s capital structure. The Board manages
the Group's capital so as to ensure it has sufficient funds to pay dividends, in line with the stated policies, for the foreseeable future.
Regulated entities
In the UK, the Group has one significant Financial Conduct Authority (FCA) regulated entity, Equiniti Financial Services Limited (EFSL), which
must maintain minimum levels of capital in order to manage its affairs. It must ensure that it can meet its regulatory capital requirements and
has sufficient liquidity to meet its liabilities as they fall due, including under potentially highly stressed conditions. EFSL has its own governance
structure and holds monthly Board meetings and quarterly Risk and Audit Committee meetings, to ensure its regulatory objectives are met.
In the US, the Group has an entity regulated by the New York State Department of Financial Services (DFS), Equiniti Trust Company (ETC). ETC is
approved by the DFS as a limited licensed bank under the New York State Banking Laws and has minimum capital requirements set by the DFS. To
help meet its regulatory requirements, ETC has its own governance structure which includes a Board with independent non-executive Directors;
an Examination Committee; an Audit Committee; and a Remuneration and Nominations Committee.
170
170
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
171
171
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
6.12 CAPITAL RISK MANAGEMENT (CONTINUED)
Management of capital
Equity
Term loan
Revolving credit facility
Lease liabilities
Cash and cash equivalents
Total equity plus net debt
6.13 FINANCIAL INSTRUMENTS
Note
6.7
6.7
6.8
6.10
2019
£m
520.0
260.1
115.0
41.1
(72.6)
863.6
2018
£m
511.2
322.6
76.7
1.1
(90.9)
820.7
The carrying amounts of financial assets and liabilities are classified as per IFRS 7 Financial Instruments: Disclosures according to the following
categories:
Financial assets
At amortised cost
Trade and other receivables
Contract fulfilment assets
Cash and cash equivalents
At fair value through profit or loss
Derivatives used for hedging
Total financial assets
Financial liabilities
At amortised cost
Trade and other payables
Contract fulfilment liabilities
Term loans
Revolving credit facility
Lease liabilities
At fair value through profit or loss
Derivative used for hedging
Total financial liabilities
Fair value hierarchy
Note
5.1
5.2
6.10
6.14
Note
5.3
5.4
6.7
6.7
6.8
6.14
The following table presents the Group’s financial assets and liabilities that are measured at fair value.
Assets
Derivatives used for hedging:
Interest rate swaps
Total assets
Liabilities
Derivatives used for hedging:
Interest rate swaps
Total liabilities
There were no transfers between levels during the year.
Level 1
£m
–
–
Level 1
£m
–
–
Level 2
£m
10.9
10.9
Level 2
£m
(0.4)
(0.4)
2019
£m
41.7
54.0
72.6
10.9
179.2
2019
£m
90.6
16.3
260.1
115.0
41.1
0.4
523.5
Level 3
£m
–
–
Level 3
£m
–
–
2018
£m
53.5
46.2
90.9
0.7
191.3
2018
£m
112.2
16.4
322.6
76.7
1.1
3.6
532.6
Total
£m
10.9
10.9
Total
£m
(0.4)
(0.4)
172
172
173
173
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
6.13 FINANCIAL INSTRUMENTS (CONTINUED)
Valuation techniques used to derive level 2 fair values
Level 2 hedging derivatives comprise interest rate swaps, deal contingency forwards and forward foreign exchange contracts. The interest rate swaps
are fair valued using forward interest rates extracted from observable yield curves and the deal contingency forwards and forward foreign exchange
contracts are fair valued using the future contracted exchange rates. 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.
The valuation technique used is a discounted cash flow model. There were no changes in valuation techniques during the year.
Group’s valuation processes
The Group’s finance department includes a team that monitors the values 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 instruments measured
at fair value are the derivatives.
6.14 DERIVATIVES
The Group has entered into sterling denominated interest rate swaps with notional values of £1,025.0m to July 2020 (£380.0m), to September 2021
(£215.0m), to September 2022 (£215.0m) and to September 2023 (£215.0m) and $700.0m interest rate swaps to March 2021, exchanging
the variable rate derived interest rate income to fixed rates.
The Group enters into forward foreign exchange contracts to hedge its exposure to adverse variations in the Sterling/Indian Rupee exchange rate.
All the above derivatives, which are effective at a Group level, have been designated as cash flow hedges and qualify for hedge accounting. They
are measured at fair value, with changes recognised within other comprehensive income.
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 2019
Assets
Interest rate swaps
Total
Liabilities
Interest rate swaps
Total
Carrying
amount
£m
10.9
10.9
(0.4)
(0.4)
Total
contractual
cash flows
Within 6
months
6–12 months
1–2 years
2–5 years
£m
10.9
10.9
(0.4)
(0.4)
£m
2.6
2.6
(0.3)
(0.3)
£m
3.1
3.1
(0.1)
(0.1)
£m
3.3
3.3
–
–
£m
1.9
1.9
–
–
Carrying
amount
Total
contractual
cash flows
Within 6
months
6–12 months
1–2 years
2–5 years
31 December 2018
Assets
Interest rate swaps
Forward foreign exchange contracts
Total
Liabilities
Interest rate swaps
Total
£m
0.3
0.4
0.7
(3.6)
(3.6)
£m
1.3
0.4
1.7
(4.7)
(4.7)
£m
0.6
0.4
1.0
(1.1)
(1.1)
£m
0.6
–
0.6
(1.4)
(1.4)
£m
0.1
–
0.1
(1.5)
(1.5)
£m
–
–
–
(0.7)
(0.7)
172
172
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
173
173
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
7 GOVERNANCE
7.1 DIRECTORS’ REMUNERATION
Directors’ emoluments
Share-based payment expense
Total directors’ remuneration
2019
£m
1.7
0.3
2.0
2018
£m
2.3
1.9
4.2
The executive Directors receive a cash payment in lieu of retirement benefits and therefore no benefits were accruing under money purchase
pension schemes at the year end. Full details of the Directors’ remuneration are set out in the Directors’ Remuneration Report on pages 94 – 119.
7.2 SHARE-BASED PAYMENTS
The Group operates several share-based award and option plans, the terms of which are summarised below, along with the movements in the
number of share options during the year. Options have been exercised throughout the year on the Performance Share Plan and Sharesave Plans
and the Group's average share price during the year was £2.14 (2018: £2.51).
Performance Share Plan (PSP)
Share options are granted to executive Directors and selected employees with a nil exercise price. The vesting of share options granted under the
PSP scheme is weighted equally on two performance conditions. The first condition requires a minimum of 6% average annual earnings per share
growth over the three year vesting period (except for the share options granted in 2018 which are conditional on a minimum of 8% average annual
earnings per share growth). The second condition is dependent on the median total shareholder return over an equivalent three year period.
Vested options can be exercised over a period of up to 10 years from the grant date.
Movements in the number of share options outstanding and their related weighted average exercise prices were as follows:
Outstanding at 1 January
Granted
Forfeited
Exercised
Outstanding at 31 December
2019
2018
Number of
options
10,679,430
3,351,506
(815,471)
(1,154,361)
12,061,104
Weighted
average
exercise price
£
£0.00
£0.00
£0.00
£0.00
£0.00
Number of
options
10,473,276
1,987,167
(83,920)
(1,697,093)
10,679,430
Weighted
average
exercise price
£
£0.00
£0.00
£0.00
£0.00
£0.00
Of the 12,061,104 (2018: 10,679,430) outstanding options at the end of the year, 5,519,603 (2018: 4,620,723) were exercisable. Share options
outstanding at the end of the year had the following expiry dates and exercise prices:
Grant date – Vest date
2015 – 2018
2016 – 2019
2017 – 2018
2017 – 2019
2017 – 2020
2018 – 2021
2019 – 2022
Expiry date
Exercise price
Year
2025
2026
2027
2027
2027
2028
2029
£
£0.00
£0.00
£0.00
£0.00
£0.00
£0.00
£0.00
2019
Number
3,830,137
1,342,265
247,467
99,734
1,911,352
1,452,978
3,177,171
12,061,104
2018
Number
4,231,452
2,108,573
389,271
147,223
2,144,649
1,658,262
–
10,679,430
174
174
175
175
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
7.2 SHARE-BASED PAYMENTS (CONTINUED)
The fair value of options granted during the year, which was determined using the Monte Carlo valuation model, was £1.18 per option. The
significant inputs into the model were the share price of £2.08 at the grant date, the exercise price shown above, volatility of 32.1% (based on the
historical share price volatility of Equiniti Group plc since listing in October 2015), an expected option life of three years and an annual risk-free
interest rate of 0.7%.
The total charge for the year relating to this scheme was £1.6m (2018: £5.6m).
Sharesave Plan 2015
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
Share options are granted to Directors and employees who enter into a 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 over a period of up to six months after vesting.
Movements in the number of share options outstanding and their related weighted average exercise prices were as follows:
Outstanding at 1 January
Granted
Forfeited
Exercised
Outstanding at 31 December
2019
2018
Number of
options
3,187,081
–
(14,209)
(3,172,872)
–
Weighted
average
exercise price
£
£1.19
£1.19
£1.19
£1.19
£1.19
Number of
options
3,507,110
–
(217,646)
(102,383)
3,187,081
Weighted
average
exercise price
£
£1.19
£1.19
£1.19
£1.19
£1.19
There were no share options outstanding at the end of the year. In the prior year, out of the 3,187,081 outstanding options at the end of the year,
22,542 were exercisable at a weighted average exercise price of £1.19. Share options outstanding at the end of the year had the following expiry
dates and exercise prices:
Grant date – Vest date
2015 – 2018
2015 – 2019
2017 – 2019
Expiry date
Exercise price
Year
2019
2019
2019
£
£1.19
£1.19
£1.19
2019
Number
–
–
–
–
2018
Number
22,542
2,962,854
201,685
3,187,081
The total charge for the year relating to this scheme was £nil (2018: £0.8m).
Sharesave Plan 2018
Movements in the number of share options outstanding and their related weighted average exercise prices were as follows:
Outstanding at 1 January
Granted
Forfeited
Exercised
Outstanding at 31 December
2019
2018
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
£
–
£1.78
£1.77
£1.77
£1.78
–
–
–
–
–
£
–
–
–
–
–
Number of
options
–
3,685,058
(581,833)
(12,054)
3,091,171
174
174
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
175
175
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
7.2 SHARE-BASED PAYMENTS (CONTINUED)
Of the 3,091,171 (2018: none) outstanding options at the end of the year, 30,393 (2018: none) were exercisable. Share options outstanding at the
end of the year had the following expiry dates and exercise prices:
Grant date – Vest date
2018 – 2021
2018 – 2022
Expiry date
Exercise price
Year
2021
2022
£
£2.23
£1.77
2019
Number
93,820
2,997,351
3,091,171
2018
Number
–
–
–
The fair value of options granted during the year, which was determined using the Black-Scholes valuation model was £0.94 per option. The
significant inputs into the model were share price of £2.66 at the grant date, exercise price shown above, volatility of 32.5% (based on the historical
share price volatility of Equiniti Group plc since listing in October 2015), dividend yield of 2.0%, an expected option life of three years and an
annual risk-free interest rate of 0.9%.
The total charge for the year relating to this scheme was £0.8m (2018: £nil).
Deferred Annual Bonus Plan
30% of the annual bonus for Directors and selected employees is delivered in shares which are deferred for three years from the date of the award.
Shares awarded under the deferred annual bonus plan are not subject to any performance conditions but can be forfeited, either in part or in full,
as they are subject to continued employment, unless deemed a good leaver by the Remuneration Committee. The number of shares awarded is
calculated using the market value of shares on grant date.
Movements in the number of shares outstanding were as follows:
Outstanding at 1 January
Granted
Forfeited
Outstanding at 31 December
2019
Number
349,217
200,628
(32,885)
516,960
2018
Number
142,626
206,591
–
349,217
Of the 516,960 (2018: 349,217) shares outstanding at the end of the year, none (2018: none) were exercisable. Shares outstanding at the end of the
year had the following expiry dates:
Grant date – Vest date
2017 – 2020
2018 – 2021
2019 – 2022
Expiry date
Year
2027
2028
2029
2019
Number
134,489
181,843
200,628
516,960
2018
Number
142,626
206,591
–
349,217
The total cash value of the Deferred Shares awarded during the year was £0.2m (2018: £0.6m).
7.3 RELATED-PARTY TRANSACTIONS
Transactions with key management personnel
The compensation of key management personnel (including the Directors) is as follows:
Key management emoluments
Company contributions to money purchase pension plans
Termination benefits
Share-based payment expense
Total
2019
2018
£m
4.7
0.1
0.4
0.5
5.7
£m
5.8
0.1
–
3.5
9.4
Key management are the Directors of the Group and the Executive Committee, who have authority and responsibility to control, direct or plan the
major activities within the Group.
176
176
177
177
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
7.4 AUDITOR'S REMUNERATION
Fees payable to Group’s external auditor, PricewaterhouseCoopers LLP, and its associates
were as follows:
– Audit of the parent company and consolidated financial statements
– Audit of the Company’s subsidiaries
Audit fees
Fees payable to Group’s auditor and its associates for non-audit services were as follows:
– Other assurance services required by regulation
– Other assurance services
Non-audit fees
Total
2019
£m
0.2
0.4
0.6
0.2
0.1
0.3
0.9
2018
£m
0.3
0.2
0.5
0.2
0.1
0.3
0.8
Other assurance services required by regulation includes £0.1m (2018: £0.2m) for services performed in the UK in relation to the CASS audit of
Equiniti Financial Services Limited. CASS audit fees are excluded from the ratio of audit to non-audit fees, and therefore the ratio for 2019 was
1:0.3 (2018: 1:0.2). The Audit Committee is committed to maintaining this ratio to a maximum of 70% of the average statutory audit fee.
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
176
176
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
177
177
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
8 TAXATION
8.1 INCOME TAX CHARGE
Recognised in the income statement in the year:
Current tax:
Current period
Adjustment in respect of prior periods
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Adjustment in respect of prior periods
Total deferred tax
Total income tax charge
Reconciliation of effective tax rate:
Profit for the year
Total tax charge
Profit before tax
Tax using the UK corporation tax rate of 19% (2018: 19%):
Non-deductible expenses
Recognised loss on derivative contract
Previously unrecognised tax assets
Effect of tax rate change
Effect of claims for research and development
Adjustment in respect of prior periods
Total income tax charge
2019
£m
4.4
(1.2)
3.2
4.3
(0.1)
4.2
7.4
2019
£m
32.4
7.4
39.8
7.6
0.8
–
0.2
(0.1)
0.2
(1.3)
7.4
2018
£m
3.5
(1.4)
2.1
0.2
1.6
1.8
3.9
2018
£m
20.7
3.9
24.6
4.7
0.9
(1.9)
0.1
(0.2)
0.1
0.2
3.9
The UK corporation tax rate of 19%, effective from 1 April 2017, was substantively enacted on 26 October 2015. A reduction to this rate to 17%,
effective from 1 April 2020, was substantively enacted on 6 September 2016. The deferred tax assets and liabilities at 31 December 2019 have
been calculated based on these rates. On 11 March 2020, the Government announced that it will legislate to retain the current 19% rate beyond
March 2020. The impact of this will be an increase to the net deferred tax assets of approximately £2.4m.
The prior year adjustment arises from the increased recognition of deductible temporary differences in respect of goodwill recognised on the
acquisition of EQ US.
The recognised loss on the derivative contract in the prior year related to a derivative loss on a deal contingency forward contract used to hedge
the purchase price consideration in US dollars for EQ US.
178
178
179
179
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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 and other timing differences
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
2019
£m
1.9
10.6
34.5
47.0
(26.7)
20.3
2019
£m
26.7
26.7
(26.7)
–
No deferred tax asset has been recognised in respect of £4.8m (2018: £4.8m) of gross tax losses, due to uncertainty in terms of future
recoverability. The Group has no other unrecognised deferred tax assets.
Movements in deferred tax during the year:
Year ended 31 December 2019
Property, plant and equipment
Intangible assets
Employee benefits and other timing differences
Tax value of losses carried forward
Year ended 31 December 2018
Property, plant and equipment
Intangible assets
Employee benefits and other timing differences
Tax value of losses carried forward
Opening
balance
£m
1.6
(23.4)
9.4
36.0
23.6
Opening
balance
£m
2.8
(22.2)
8.2
38.0
26.8
Recognised
Recognised
Acquisitions
in income
in equity
£m
–
(0.7)
–
–
(0.7)
£m
0.3
(2.6)
(0.4)
(1.5)
(4.2)
£m
–
–
1.6
–
1.6
Recognised
Recognised
Acquisitions
in income
in equity
£m
–
(0.2)
–
–
(0.2)
£m
(1.2)
(1.0)
2.4
(2.0)
(1.8)
£m
–
–
(1.2)
–
(1.2)
2018
£m
1.6
9.4
36.0
47.0
(23.4)
23.6
2018
£m
23.4
23.4
(23.4)
–
Closing
balance
£m
1.9
(26.8)
10.7
34.5
20.3
Closing
balance
£m
1.6
(23.4)
9.4
36.0
23.6
178
178
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
179
179
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
9 OTHER DISCLOSURES
9.1 OTHER FINANCIAL ASSETS
Non-current
Derivatives used for hedging (note 6.14)
Total
Current
Derivatives used for hedging (note 6.14)
Total
9.2 OTHER FINANCIAL LIABILITIES
Non-current
Derivatives used for hedging (note 6.14)
Total
Current
Derivatives used for hedging (note 6.14)
Total
9.3 POST-EMPLOYMENT BENEFITS
Defined contribution pension plans
2019
£m
10.9
10.9
2019
£m
–
–
2019
£m
–
–
2019
£m
0.4
0.4
2018
£m
0.2
0.2
2018
£m
0.5
0.5
2018
£m
3.6
3.6
2018
£m
–
3.6
The Group operates a number of defined contribution pension plans. The total expense relating to these plans in the year was £9.5m (2018: £8.5m).
Defined benefit pension plans
The Group operates three funded defined benefit pension plans 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 liability under all schemes is based on final salary and length of service
to the employer. The assets of the schemes are held independently of the Group’s assets, in separate trustee-administered funds. The Trustees of
the pension funds 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:
ICS Pension Scheme
Paymaster Pension Scheme
Prudential Platinum Pension – MyCSP Limited
Total defined benefit pension plan net liability
2019
£m
1.9
27.7
2.1
31.7
2018
£m
1.7
20.2
1.0
22.9
180
180
181
181
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
9.3 POST-EMPLOYMENT BENEFITS (CONTINUED)
Full actuarial valuations are performed every three years, which determine the funding required to eliminate the net pension plan liabilities. The
latest full valuations took place in 2018 and concluded in 2019.
All pension schemes have been closed to new members for a number of years and all schemes are now closed to future accrual, apart from a small
sub-section of the Paymaster Pension Scheme.
The present value of the defined benefit obligation consists of approximately £3.6m (2018: £3.4m) relating to active employees, £49.1m (2018:
£41.1m) relating to deferred members and £36.6m (2018: £32.5m) relating to members in retirement.
The investment strategy of the plans is set taking into account a number of factors including the profile and value of plan liabilities, the strength of
the employer covenant and the long-term funding objectives agreed with the employer. The schemes have a broad allocation of investments in
return-seeking assets with the remaining allocated to liability matching assets, designed to partially offset the movements in the scheme liabilities
caused by movements in interest rates and inflation. The asset split reflects the Trustees' view of the most appropriate investments balancing the
risk/reward characteristics of the funds the Scheme is invested in.
Pension plan assets are valued at fair value. Quoted equities and debt instruments on a recognised stock exchange are valued at the closing
market price as at the valuation date. Exchange traded and over-the-counter derivative instruments are valued at the settlement price or at the
latest valuation for such instruments on the valuation date. Cash and other illiquid assets will be valued at their face value plus accrued interest
at the valuation date.
The Group is exposed to a number of risks through its defined benefit pension plans, the most significant of which are described below:
•
•
•
•
Investment risk – Scheme growth assets are invested in a diversified portfolio of debt securities, equities and other return-seeking assets such
as pooled private market funds. If the assets underperform the discount rate used to calculate the defined benefit obligation, the net pension
plan liabilities will increase.
Interest rate risk – A decrease in corporate bond yields will increase plan liabilities, although this is likely to be partially offset by an increase in
the value of the plans’ bond/liability driven investment holdings.
Inflation risk – The majority of the liabilities are linked to inflation, although in most cases, caps on the level of inflation increases are in place
to protect the scheme against extreme inflation. An increase in inflation rates will lead to higher liabilities, although this is likely to be partially
offset by an increase in the value of some of the plans’ liability driven investments.
Longevity risk – The pension plans provide benefits for the life of the members, therefore increases in life expectancy will result in an increase
in the plans’ liabilities.
The Group and Trustees are aware of these risks and manage them through appropriate investment and funding strategies. The Trustees manage
governance and operational risks through a number of internal control policies, including a risk register.
Defined benefit plan – ICS Pension Scheme
A full actuarial valuation was carried out at 6 April 2018 and has since been updated to the year ended 31 December 2019 by a qualified
independent actuary.
Present value of obligations
Fair value of plan assets
Recognised liability for defined benefit obligations
2019
£m
(13.8)
11.9
(1.9)
2018
£m
(12.3)
10.6
(1.7)
180
180
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
181
181
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
9.3 POST-EMPLOYMENT BENEFITS (CONTINUED)
Movement in present value of defined benefit obligation
Defined benefit obligation at 1 January
Past service cost
Interest cost
Actuarial losses/(gains) – changes in financial assumptions
Actuarial gains – changes in demographic assumptions
Actuarial gains – other experience items
Benefits paid
Defined benefit obligation at 31 December
Movement in fair value of plan assets
Fair value of plan assets at 1 January
Interest income
Return/(loss) on plan assets
Employer contributions
Benefits paid
Fair value of plan assets at 31 December
Expense recognised in the income statement
Past service cost
Interest cost
Interest income
Total expense
Actuarial gains and losses recognised in other comprehensive income
Cumulative loss at 1 January
Actuarial losses recognised in other comprehensive income
Cumulative loss at 31 December
Plan assets are comprised of the following:
Equities
Corporate bonds
Diversified growth funds
Liability-driven investment funds
Illiquid assets
Cash
Fair value of plan assets at 31 December
2019
£m
12.3
–
0.3
1.4
–
–
(0.2)
13.8
2019
£m
10.6
0.3
1.1
0.1
(0.2)
11.9
2019
£m
–
0.3
(0.3)
–
2019
£m
(3.5)
(0.3)
(3.8)
2019
£m
3.0
1.1
1.8
2.6
2.6
0.8
11.9
2018
£m
13.1
0.2
0.3
(0.2)
(0.1)
(0.1)
(0.9)
12.3
2018
£m
11.6
0.3
(0.5)
0.1
(0.9)
10.6
2018
£m
0.2
0.3
(0.3)
0.2
2018
£m
(3.4)
(0.1)
(3.5)
2018
£m
2.4
1.0
–
2.9
2.4
1.9
10.6
182
182
183
183
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
9.3 POST-EMPLOYMENT BENEFITS (CONTINUED)
Weighted average assumptions used to determine benefit obligations:
Discount rate
Rate of increase for pensions in payment:
– CPI subject to a max of 3.0% pa.
– RPI subject to a max of 5.0% pa.
– RPI subject to a max of 2.5% pa.
Rate of increase for pensions in deferment
Inflation assumption
2019
1.94%
1.91%
2.88%
2.09%
2.13%
2.93%
2018
2.75%
1.93%
3.07%
2.17%
2.15%
3.15%
Weighted average life expectancy for mortality tables (100% SAPS S2PMA, 100% SAPS S2FA, 100% SAPS S2PA CMI 2018 with 0.5% adjustment,
1% long-term trend) used to determine benefit obligations at 31 December 2019:
Member age 65 (current life expectancy)
Member age 45 (life expectancy at 65)
Contributions
Equiniti ICS Limited expects to contribute £0.2m to its pension plan in 2020.
Male
86.9
88.0
Female
88.8
90.0
Defined benefit plan – Paymaster Pension Scheme
A full actuarial valuation was carried out at 6 April 2018 and has since been updated to the year ended 31 December 2019 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
Past service cost
Interest cost
Actuarial losses/(gains) – changes in financial assumptions
Actuarial losses – other experience items
Liabilities extinguished on settlements
Benefits paid
Defined benefit obligation at 31 December
2019
£m
(66.7)
39.0
(27.7)
2019
£m
57.5
0.1
–
1.7
9.7
0.6
(1.5)
(1.4)
66.7
2018
£m
(57.5)
37.3
(20.2)
2018
£m
59.6
0.1
0.2
1.6
(3.8)
1.6
–
(1.8)
57.5
182
182
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
183
183
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
9.3 POST-EMPLOYMENT BENEFITS (CONTINUED)
Movement in fair value of plan assets
Fair value of plan assets at 1 January
Interest income
Return/(loss) on plan assets
Assets distributed on settlements
Employer contributions
Benefits paid
Administration expenses
Fair value of plan assets at 31 December
Expense recognised in the income statement
Current service cost
Past service cost
Interest cost
Interest income
Total expense
Actuarial gains and losses recognised in other comprehensive income
Cumulative loss at 1 January
Actuarial losses recognised in other comprehensive income
Cumulative loss at 31 December
Plan assets are comprised of the following:
Private equity and diversified growth funds
Liability-driven investment funds
Illiquid assets
Cash and other
Fair value of plan assets at 31 December
Weighted average assumptions used to determine benefit obligations:
Discount rate
Rate of compensation increase
Rate of increase for pensions in payment
Rate of increase for pensions in deferment:
– Pre 6 April 2009 service
– Post 6 April 2009 service
Inflation assumption
2019
£m
37.3
1.1
1.9
(1.0)
1.3
(1.4)
(0.2)
39.0
2019
£m
0.1
–
1.7
(1.1)
0.7
2019
£m
(21.6)
(8.4)
(30.0)
2019
£m
19.4
11.6
6.4
1.6
39.0
2019
1.96%
1.50%
2.86%
2.06%
2.86%
2.86%
2018
£m
39.5
1.0
(2.4)
–
1.0
(1.8)
–
37.3
2018
£m
0.1
0.2
1.6
(1.0)
0.9
2018
£m
(21.4)
(0.2)
(21.6)
2018
£m
12.0
9.3
8.8
7.2
37.3
2018
3.00%
1.50%
3.10%
2.10%
3.10%
3.10%
Weighted average life expectancy for mortality tables (96% SAPS S2PMA, 84% SAPS S2PFA CMI 2018, 1% long-term trend, 0.5% initial addition)
used to determine benefit obligations at 31 December 2019:
Member age 65 (current life expectancy)
Member age 45 (life expectancy at 65)
Contributions
Paymaster (1836) Limited expects to contribute £1.6m of additional funding to its pension plan in 2020.
Male
86.8
88.0
Female
89.9
91.2
184
184
185
185
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
9.3 POST-EMPLOYMENT BENEFITS (CONTINUED)
Defined benefit plan – Prudential Platinum Pension – MyCSP Limited
The latest full actuarial valuation was carried out at 31 December 2018 and has since been updated to 31 December 2019 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
Interest cost
Actuarial losses/(gains) – changes in financial assumptions
Benefits paid
Defined benefit obligation at 31 December
Movement in fair value of plan assets
Fair value of plan assets at 1 January
Interest income
Return/(loss) on plan assets
Employer contributions
Benefits paid
Administration expenses
Fair value of plan assets at 31 December
Expense recognised in the income statement
Administration expenses
Interest cost
Interest income
Total expense
Actuarial gains and losses recognised in other comprehensive income
Cumulative loss at 1 January
Actuarial (losses)/gains recognised in other comprehensive income
Cumulative loss at 31 December
2019
£m
(8.8)
6.7
(2.1)
2019
£m
7.2
0.2
1.5
(0.1)
8.8
2018
£m
(7.2)
6.2
(1.0)
2018
£m
8.0
0.2
(0.8)
(0.2)
7.2
2019
2018
£m
6.2
0.2
0.4
–
(0.1)
–
6.7
2019
£m
–
0.2
(0.2)
–
2019
£m
(1.3)
(1.1)
(2.4)
£m
6.9
0.2
(0.7)
0.1
(0.2)
(0.1)
6.2
2018
£m
0.1
0.2
(0.2)
0.1
2018
£m
(1.4)
0.1
(1.3)
184
184
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
185
185
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
9.3 POST-EMPLOYMENT BENEFITS (CONTINUED)
Plan assets are comprised of the following:
Overseas equities
Corporate bonds
Diversified growth fund
Cash
Fair value of plan assets at 31 December
Weighted average assumptions used to determine benefit obligations:
Discount rate
Rate of increase for pensions in payment
Rate of increase for pensions in deferment
Inflation assumption
2019
2018
£m
1.7
2.7
2.2
0.1
6.7
2019
2.20%
1.96%
1.96%
2.76%
£m
1.5
2.8
1.8
0.1
6.2
2018
3.10%
2.07%
2.07%
3.07%
Weighted average life expectancy for mortality tables (100% SAPS S2PMA, 100% SAPS S2PFA, 100% SAPS S2PxA CMI 2018, 1% long-term trend,
0.5% initial addition) used to determine benefit obligations at 31 December 2019:
Member age 65 (current life expectancy)
Member age 45 (life expectancy at 65)
Contributions
MyCSP Limited expects to contribute £0.3m of additional funding to its pension plan in 2020.
Male
86.9
87.9
Female
88.7
90.0
Sensitivity analysis
Estimates of the discount rate, inflation rate and life expectancy are used in calculating the pension obligation. The total effect on the employee
benefit liability on all schemes as at 31 December 2019 of an increase in life expectancy by one year would be an increase of £3.7m (2018: £2.6m),
a 0.5% decrease in the discount rate used would be an increase of £8.2m (2018: £6.0m), and a 0.5% increase in the inflation assumption would
be an increase of £7.4m (2018: £6.0m). These individual sensitivity analyses are based on a change in one assumption whilst holding all other
assumptions constant.
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
2019
£m
–
–
–
–
2018
£m
7.0
26.1
21.3
54.4
Prior to 1 January 2019 the Group disclosed the future minimum lease payments as required by IAS 17. From 1 January 2019 the Group has
recognised right of use assets and lease liabilities for its leases of office premises, except for short-term and low-value leases, as required by
IFRS 16. See note 6.8 for the Group's lease liability as at 31 December 2019.
9.5 CONTINGENT LIABILITIES
The Company, along with other companies in the Group, has provided a guarantee in relation to a Senior Facilities Agreement comprising
term loans and a revolving credit facility made available to Equiniti Holdings Limited. The facilities comprise term loan facilities of £190.0m and
US$92.0m, and a multicurrency revolving credit facility of £260.0m, of which the drawn balance was £115.0m at 31 December 2019 (2018: £76.7m).
Both facilities are repayable in 2024.
186
186
187
187
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
9.6 EVENTS AFTER THE REPORTING DATE
In February 2020, the Group purchased the entire issued share capital of Monidee B.V. (Monidee). Initial consideration of £3.3m (€4.0m) was paid
in February 2020 and deferred consideration of £3.3m (€4.0m) is payable in February 2021. Monidee is an employee share plans technology
business based in Amsterdam, Netherlands.
There have been no material events between 31 December 2019 and the date of authorisation of the consolidated financial statements that would
require adjustments of the consolidated financial statements or disclosure.
I
I
S
S
E
E
C
C
T
T
O
O
N
N
0
0
3
3
9.7 RECONCILIATION BETWEEN OPERATING LEASES COMMITMENTS AND LEASE LIABILITIES
The Group’s finance lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as of 31 December 2018 as
follows:
Operating lease commitments as at 31 December 2018
Weighted average incremental borrowing rate as at 1 January 2019
Discounted operating lease commitments as at 1 January 2019
Less:
Short term leases exempt from IFRS 16
Adjustments as a result of a different treatment of extension and termination options
Add:
Contracts reassessed as lease contracts
Commitments relating to leases previously classified as finance leases
£m
54.4
3.47%
45.5
(0.2)
(3.4)
0.6
1.1
43.6
The Group recognised lease liabilities on 1 January 2019 of £43.6m. £1.1m related to lease liabilities previously classified as finance leases under IAS 17.
The remaining £42.5m relates to lease liabilities recognised as a result of transitioning to IFRS 16.
The adjustments resulting from the different treatment of extension and termination options relate to a lease which the Group had substantially
agreed for renewal at 31 December 2018. Therefore the lease was included in the Group’s operating lease commitments in 2018. However the
contract was delayed and was not executed until May 2019. Therefore the Group did not recognise a right of use asset and lease liability until
this date.
186
186
I
I
F
F
N
N
A
A
N
N
C
C
A
A
L
L
I
I
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
N
O
T
E
S
T
O
T
H
E
C
O
N
S
O
L
I
D
A
T
E
D
F
N
A
N
C
A
L
I
I
S
T
A
T
E
M
E
N
T
S
E
E
E
E
q
q
q
q
u
u
u
u
n
n
n
n
i
i
i
i
t
t
t
t
i
i
i
i
i
i
i
i
G
G
G
G
r
r
r
r
o
o
o
o
u
u
u
u
p
p
p
p
p
p
p
p
c
c
c
c
A
A
A
A
n
n
n
n
n
n
n
n
u
u
u
u
a
a
a
a
l
l
l
l
l
l
l
l
R
R
R
R
e
e
e
e
p
p
p
p
o
o
o
o
r
r
r
r
t
t
t
t
2
2
2
2
0
0
0
0
1
1
1
1
9
9
9
9
187
187
COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2019
Assets
Non-current assets
Investments in subsidiaries
Current assets
Amounts due from Group undertakings
Total assets
Liabilities
Current liabilities
Amounts due to Group undertakings
Total liabilities
Net assets
Equity
Equity attributable to owners of the parent
Share capital
Share premium
Capital redemption reserve
Reserve for own shares
Retained earnings
Total equity
Note
9
10
11
12
12
13
2019
£m
276.9
276.9
513.0
513.0
789.9
74.3
74.3
74.3
2018
£m
276.9
276.9
520.8
520.8
797.7
64.0
64.0
64.0
715.6
733.7
0.4
115.9
0.2
(4.0)
603.1
715.6
0.4
115.9
0.2
(10.0)
627.2
733.7
The Company's profit for the financial year was £nil (2018: loss of £96,000). The notes on pages 190 – 193 form part of these financial statements.
The financial statements of Equiniti Group plc (registered number: 07090427) on pages 188 – 193 were approved by the Board of Directors
on 12 March 2020 and were signed on its behalf by:
John Stier
Chief Financial Officer
12 March 2020
188
189
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Balance at 1 January 2018
Comprehensive expense
Loss for the year
Total comprehensive expense
Issue of share capital, net of transaction costs
(note 12)
Purchase of own shares (note 13)
Share option awards to employees (note 13)
Dividends (note 17)
Capital contribution in respect of share-based
compensation plans (note 14)
Transactions with owners recognised directly
in equity
Balance at 31 December 2018
Share
capital
Share
premium
£m
0.4
£m
115.8
Capital
redemption
reserve
£m
0.2
–
–
–
–
–
–
–
–
–
–
0.1
–
–
–
–
0.1
–
–
–
–
–
–
–
–
0.4
115.9
0.2
Reserve for
own shares
Retained
earnings
£m
–
–
–
–
(13.9)
3.9
–
–
(10.0)
(10.0)
£m
641.4
(0.1)
(0.1)
–
–
(3.9)
(16.5)
6.3
(14.1)
627.2
Total
equity
£m
757.8
(0.1)
(0.1)
0.1
(13.9)
–
(16.5)
6.3
(24.0)
733.7
Balance at 1 January 2019
0.4
115.9
0.2
(10.0)
627.2
733.7
Comprehensive income
Profit for the year
Total comprehensive income
Purchase of own shares (note 13)
Share option awards to employees (note 13)
Dividends (note 17)
Share-based payment transactions (note 14)
Transactions with owners recognised directly
in equity
Balance at 31 December 2019
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.4
115.9
0.2
–
–
(3.8)
9.8
–
–
6.0
(4.0)
–
–
–
(6.0)
(19.7)
1.6
(24.1)
–
–
(3.8)
3.8
(19.7)
1.6
(18.1)
603.1
715.6
The notes on pages 190 – 193 form part of these financial statements.
188
I
S
E
C
T
O
N
0
3
I
F
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
C
O
M
P
A
N
Y
S
T
A
T
E
M
E
N
T
O
F
C
H
A
N
G
E
S
I
N
E
Q
U
T
Y
I
E
E
q
q
u
u
n
n
i
i
t
t
i
i
i
i
G
G
r
r
o
o
u
u
p
p
p
p
c
c
A
A
n
n
n
n
u
u
a
a
l
l
l
l
R
R
e
e
p
p
o
o
r
r
t
t
2
2
0
0
1
1
9
9
189
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
At the end of each reporting period, the Company revises its estimate
of the number of awards that are expected to vest based on the non-
market vesting and service conditions. It recognises the impact of the
revisions to original estimates, if any, within equity in the statement
of financial position with a corresponding adjustment to amounts
recharged to subsidiary companies.
Taxation
Tax on the profit for the year comprises current and deferred tax. Tax
is recognised in the statement of comprehensive income, except to
the extent that it relates to items recognised directly in equity, in which
case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the
year, using tax rates enacted or substantively enacted at the statement
of financial position date, and any adjustment to tax payable in respect
of previous years.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition of
goodwill, the initial recognition of assets or liabilities that affect neither
accounting nor taxable profit other than in a business combination,
and differences relating to investments in subsidiaries, to the extent
that they will probably not reverse in the foreseeable future. The
amount of deferred tax provided is based on the expected manner
of realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the
statement of financial position date.
A deferred tax asset is recognised only to the extent that it is probable
that future taxable profits will be available against which the asset can
be utilised.
2.2 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
There are no new IFRSs or IFRS IC interpretations not yet adopted
which would be expected to have a material impact on the financial
statements of the Company.
2.3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
There are no accounting policies where the use of judgements and
estimates is determined to be significant to the financial statements.
1 GENERAL INFORMATION
Equiniti Group plc (the Company) is a public limited company, limited
by shares, which is listed on the London Stock Exchange and is
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 (IFRS) as adopted by
the European Union (EU), IFRS Interpretation Committee (IFRS IC)
interpretations as adopted by the EU and the Companies Act 2006
applicable to companies reporting under IFRS.
Basis of preparation
The principal accounting policies applied in the preparation of the
Company 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 on the going
concern basis and under the historical cost convention. The Company’s
functional and presentational currency is the British Pound (£).
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 Company
made no profit or loss in the year (2018: loss of £96,000).
A statement of cash flows has not been presented as the Company
did not have any cash flows during the current or prior period, nor
did it have any cash and cash equivalents at any time during the
period. Therefore the presentation of a statement of cash flows would
not provide any additional information. Dividends payable by the
Company are paid on its behalf by another entity within the Group.
Investments in subsidiaries
Investments in subsidiaries are carried at historical cost less any
provisions for impairment.
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.
Where the Company acquires its own ordinary shares, the
consideration paid is recorded as a deduction from equity.
Equity share-based payment transactions
The Company operates a number of equity-settled, share-based
compensation plans, under which companies within the Group receive
services from employees as consideration for equity instruments
(options). The fair value of the employee services received in exchange
for the grant of the options is recognised within equity in the
statement of financial position, and the cost is recharged to subsidiary
Group companies. The total amount recognised is determined by
reference to the fair value of the options granted:
•
•
•
including any market performance conditions (for example, total
shareholder return);
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).
190
191
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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 group of companies (the Group), including Equiniti Group plc. The
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 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.
Further information regarding the Group’s financial risks and risk management policies can be found in note 6.11 to the consolidated
financial statements.
4 CAPITAL RISK MANAGEMENT
The Company’s objectives when managing capital are 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:
2019
2018
Equity
Total equity
£m
715.6
715.6
£m
733.7
733.7
5 AUDITORS’ REMUNERATION
The audit fees for these financial statements of £1,250 (2018: £1,250) were borne by a fellow Group company.
6 STAFF NUMBERS AND COSTS
There were no persons employed directly by the Company, other than the Directors, and therefore no staff costs were incurred (2018: none).
7 DIRECTORS’ REMUNERATION
Full details of the Directors’ remuneration are set out in the Directors’ Remuneration Report on pages 94 – 119. The Directors were remunerated
for services to the Group as a whole and it is not possible to make an accurate apportionment of their remuneration in respect of services to the
Company. These costs were borne by fellow Group companies, without recharge to the Company.
8 INCOME TAX CHARGE
The Company incurred no income or expenses in the year (2018: loss of £96,000) and no tax charge or credit has been incurred.
The UK corporation tax rate of 19%, effective from 1 April 2017, was substantively enacted on 26 October 2015. A reduction to this rate to 17%,
effective from 1 April 2020, was substantively enacted on 6 September 2016.
9 INVESTMENTS IN SUBSIDIARIES
The Company has the following investments in subsidiaries:
Cost and net book value
At beginning of the year
Additions
Additions related to share-based compensation plans
Total investment in subsidiaries
2019
£m
276.9
–
–
276.9
2018
£m
174.6
96.0
6.3
276.9
The Directors consider the value of the investment to be supported by its underlying assets. The Company has the following direct investments in
subsidiaries:
Name of controlled entity
Equiniti Holdings Limited
Equiniti Finance (Holdings) Ltd
Equiniti (UK) Finance Ltd
Registered office address
Elder House, St Georges Business Park, Brooklands Road,
Weybridge, Surrey, KT13 0TS, United Kingdom
Elder House, St Georges Business Park, Brooklands Road,
Weybridge, Surrey, KT13 0TS, United Kingdom
Elder House, St Georges Business Park, Brooklands Road,
Weybridge, Surrey, KT13 0TS, United Kingdom
Principal
activities
Holding company
Holding company
Non trading
Ownership
% on 31
December
2019
100
100
100
The above investments are held in the Ordinary share capital of the companies. A full list of the Company’s indirect investments is included in note
4.5 to the consolidated financial statements.
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191
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
10 AMOUNTS DUE FROM GROUP UNDERTAKINGS
Current
Non-interest bearing receivables due from related parties
Total amounts due from Group undertakings
Balances due from related parties are repayable on demand.
11 AMOUNTS DUE TO GROUP UNDERTAKINGS
Current
Non-interest bearing payables due to related parties
Total amounts to Group undertakings
Balances due to related parties are repayable on demand.
12 SHARE CAPITAL
Allotted, called up and fully paid
Balance at 1 January
Employee share options exercised
Balance at 31 December
Ordinary shares of £0.001 each
Balance at 1 January
Employee share options exercised
Balance at 31 December
2019
£m
513.0
513.0
2019
£m
74.3
74.3
Share capital
Share premium
2019
£m
0.4
–
0.4
2018
£m
0.4
–
0.4
2019
£m
115.9
–
115.9
2018
£m
520.8
520.8
2018
£m
64.0
64.0
2018
£m
115.8
0.1
115.9
2019
2018
Number
364,536,666
–
364,536,666
Number
364,434,283
102,383
364,536,666
The Company did not issue any shares in the current year. In the prior year, the Company issued 102,383 ordinary shares on exercise of employee
share options during the year. The shares were issued at a weighted average exercise price of £1.19 per share. Proceeds of £0.1m were received by
a fellow Group company, Equiniti Holdings Limited, and the balance is reflected within receivables due from related parties.
13 RESERVE FOR OWN SHARES
During the year, the Company purchased 1,801,167 (2018: 6,000,000) of its own ordinary shares for consideration of £3.8m (2018: £13.9m). The
shares are held in an employee benefit trust, which is controlled by the Group, and will be used to satisfy the vesting of awards under the Group's
share option plans. During the year, 4,340,246 (2018: 1,697,093) shares were used to satisfy the vesting of awards. Shares held by the trust are
deducted from equity and the trust has waived its right to receive dividends.
The market value of the 1,763,828 (2018: 4,302,907) shares held in trust at 31 December 2019 was £3.6m (2018: £9.3m).
14 SHARE-BASED PAYMENTS
The Company has equity-settled share-based award 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.
192
193
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
15 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
Amortised cost
Loans and receivables due from related parties
Total financial assets
Financial liabilities
Amortised cost
Loans and receivables due to related parties
Total financial liabilities
Note
10
Note
11
The fair values and the carrying values of financial assets and liabilities are not materially different.
16 RELATED-PARTY TRANSACTIONS
Receivable at the year end
From fellow Group companies
Total
Payable at the year end
To fellow Group companies
Total
17 DIVIDENDS
Amounts recognised as distributions to equity holders in the year
Interim dividend for year ended 31 December 2019 (1.95p per share)
Final dividend for year ended 31 December 2018 (3.49p per share)
Interim dividend for year ended 31 December 2018 (1.83p per share)
Final dividend for year ended 31 December 2017 (2.73p per share)
Total dividend paid during the year
2019
£m
513.0
513.0
2019
£m
74.3
74.3
2019
£m
513.0
513.0
2019
£m
74.3
74.3
2019
£m
7.1
12.6
–
–
19.7
2018
£m
520.8
520.8
2018
£m
64.0
64.0
2018
£m
520.8
520.8
2018
£m
64.0
64.0
2018
£m
–
–
6.6
9.9
16.5
The Board recommends a final dividend payable in respect of the year ended 31 December 2019 of £12.9m (2018: £12.6m) or 3.54p per share
(2018: 3.49p per share). As this is subject to shareholder approval at the Annual General Meeting on 7 May 2020, no liability has been included in
these financial statements. The final dividend will be paid on 26 May 2020, to shareholders on the register at close of business on 17 April 2020.
The Equiniti Group Employee Benefit Trust has waived its right to receive dividends on shares held.
18 CONTINGENT LIABILITIES
The Company, along with other companies in the Group, has provided a guarantee in relation to a Senior Facilities Agreement comprising
term loans and a revolving credit facility made available to Equiniti Holdings Limited. The facilities comprise term loan facilities of £190.0m and
US$92.0m, and a multicurrency revolving credit facility of £260.0m, of which the drawn balance was £115.0m at 31 December 2019 (2018: £76.7m).
Both facilities are repayable in 2024.
192
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EQGlobal wins Payments Provider Award
at The Rewards 2019
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Additional
Information
SHAREHOLDER INFORMATION
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SHAREHOLDER INFORMATION
Registered Office
Equiniti Group plc
Sutherland House
Russell Way
Crawley
West Sussex
RH10 1UH
Company number 07090427
For enquiries regarding
ordinary shares, please contact
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Telephone
UK only 0371 384 2335
Non UK +44 121 415 7047
Shareholders can also access their holdings online by
visiting the website at www.shareview.co.uk
For corporate governance enquiries, please contact
the Company Secretary:
Kathy Cong
kathy.cong@equiniti.com
For investor relations enquiries, please contact
the Head of Investor Relations:
Frances Gibbons
frances.gibbons@equiniti.com
Financial calendar*
12 March 2020 Annual results for year ended
31 December 2019
7 May 2020
Annual General Meeting and Trading Update
30 July 2020
Interim results for six months ended
30 June 2020
* The financial calendar may be updated from time to time throughout the year.
Please refer to our website www.equiniti.com for up-to-date information.
DIVIDEND REINVESTMENT PLAN
Shareholders are able to take their dividend as cash, or in
shares through the DRIP (Dividend Reinvestment Plan). Further
details are available at www.shareview.co.uk.
The DRIP allows shareholders to use their cash dividends to buy
more shares in the Company. Rather than receiving a dividend
cheque through the post or having their bank account credited
with the dividend payment, shareholders can choose to use
their cash dividend to buy additional shares.
Whole shares are purchased with any residual money being
carried forward and added to the next dividend. However, if
the amount of the dividend, less any dealing costs incurred in
completing the purchase, is insufficient to buy a single share, no
charge is made and the dividend is carried forward.
E-COMMUNICATIONS
Using the Group’s website as the main method of distribution
for many statutory documents is part of our commitment to
reducing our environmental impact.
Shareholders can choose to receive communications, including
the Annual Report and Accounts and Notice of Meetings, in
electronic form rather than by post.
Shareholders can register through the online service at
www.shareview.co.uk.
The registration process requires the input of a shareholder
reference number (SRN), which can be found on the share
certificate.
To ensure that shareholder communications are received
in electronic form, “email” should be selected as the mailing
preference.
Once registered, shareholders will be sent an email notifying
them each time a shareholder communication has been
published on the Company website, and providing them with
a link to the page on the website where it may be found.
WARNING TO SHAREHOLDERS
Equiniti Group plc is legally obliged to make its share
register available to the general public. Consequently
some shareholders may receive unsolicited mail, including
correspondence from unauthorised investment companies.
Companies have become increasingly aware that their
shareholders have received unsolicited phone calls concerning
their shareholding. These calls are typically from overseas-based
brokers who target UK shareholders offering to sell what
often turn out to be worthless or high-risk shares in US or
UK investments. They can be very persistent and extremely
persuasive. Shareholders are advised to be very wary of any
unsolicited advice, offers to buy shares at a discount or offers
of free company reports.
If you receive any unsolicited investment advice:
• Ensure that you obtain the correct name of the person and
organisation;
• Check that they are properly authorised by the FCA before
becoming involved.
• You can check and report the matter to the FCA at
www.fca.org.uk.
196
ANALYSIS OF ORDINARY SHAREHOLDERS AS AT 31 DECEMBER 2019
Range
1 – 1,000
1,001 – 50,000
50,001 – 500,000
500,001+
Total
ADVISERS
AUDITOR
CORPORATE BROKERS
FINANCIAL ADVISER
FINANCIAL PR ADVISER
LEGAL ADVISER
REGISTRAR
No. of
Holders
504
335
140
95
% of
Holders
46.93
31.19
13.04
No. of
Shares
107,835
2,953,537
24,241,867
8.84
337,233,427
% of Share
Register
0.03
0.81
6.65
92.51
1,074
100.00
364,536,666
100.00
PricewaterhouseCoopers LLP
The Portland Building
25 High Street
Crawley, West Sussex
RH10 1BG
Barclays
5 The North Colonnade
London
E14 4BB
Citigroup Global Markets Ltd
Citigroup Centre
33 Canada Square
London
E14 5LB
Liberum
Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
Rothschild
New Court
St Swithin’s Lane
London
EC4N 8AL
Temple Bar Advisory Limited
60 Cannon Street
London
EC4N 6NP
Linklaters LLP
One Silk Street
London
EC2Y 8HQ
Equiniti Limited
Aspect House
Spencer Road
Lancing, West Sussex
BN99 6DA
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