EQN.L Regulatory News (EQN)

 7 March 2018

EQUINITI GROUP PLC RESULTS FOR THE YEAR ENDED 31 DECEMBER 2017

Equiniti Group plc ("Equiniti" or "the Group"), the multinational specialist technology outsourcer providing non-discretionary payment and administration services, today publishes its full year results for the twelve months to 31 December 2017.

A YEAR OF STRONG PROGRESS

· Revenue growth of 6.1%; underpinned by 2.9% organic8 revenue growth and an accelerated H2 performance:

o 100% retention of FTSE clients, with new wins across all divisions

§ New share registration clients including Howdens Joinery, Jardine Lloyd Thompson, Rentokil Initial and J Sainsbury

§ New client wins including Aon Hewitt, British Bankers' Association and House of Fraser

§ New mandates including Arix Bioscience, Pelatro, Sabre Insurance and Xafinity

o Renewal or extension of relationships with clients including

§ Imperial Brands, Lloyds Banking Group, Prudential, Royal Mail and Smiths Group

· New capabilities established:

o Consolidation of Gateway2Finance and Nostrum with Equiniti's existing loans software business creating full end-to-end credit origination and servicing capabilities

o Establishment of EQData, providing cyber security and data analytics from our new south west TechHub

· Successful entry to the US market with the acquisition of the Wells Fargo Shareowner Services business (WFSS), completed on 1 February 2018

· Underlying EBITDA growth of 6.6% with margin increased to 24.3%, reflecting our platform characteristics and a continuing focus on operational improvement

· Profit after tax of £15.6m, reflecting £10.5m non-operating charges mainly related to the WFSS acquisition, and a tax charge of £10.0m versus a tax credit of £4.9m in the previous year

· Recommended final dividend of 2.73 pence per share, giving a total dividend for the year of 4.48 pence per share with underlying full year dividend per share growth of 6.3%, in line with progressive dividend policy

Commenting on the Group's results, Guy Wakeley, Chief Executive, said:

"We are pleased with progress against our strategic objectives during 2017, having delivered accelerating organic growth during the second half, whilst securing a landmark entry into the exciting US market.

"Despite the challenging operating environment, we have grown revenue and profit ahead of expectations whilst demonstrating our consistent ability to grow operating margins whilst delivering strong cash generation.

"Our acquisition of Wells Fargo Shareowner Services creates a truly multinational opportunity both for core share registration products as well as our broader suite of technology and share plan solutions in a large and growing market.

"Equiniti operates in an environment characterised by significant change, driven by regulation, digitisation and cost reduction. The relevance of our services and automated technology capabilities has never been greater, and through 2018 our intent remains to deliver organic revenue growth, supplemented by growth from capability enhancing acquisitions whilst integrating our new US operations, creating a platform for significant future growth."

Analyst and Investor presentation

Equiniti's management will host an analyst and investor presentation at 9.15am UK time today. There will be a conference call and webcast of the event. This will be broadcast live on Equiniti's website, www.equiniti.com and an archive version of the presentation will be available on the website later today.

Conference call details:

Please dial into the call in time to allow for registration.

Participant dial-in: +44 (0) 20 3003 2666 Password: Equiniti

For further information please contact: 

Analyst/Investor enquiries:

Equiniti Group plc Guy Wakeley, Chief Executive +44 (0) 207 469 1811 

John Stier, Chief Financial Officer Frances Gibbons, Head of Investor Relations

Media enquiries:

Temple Bar Advisory Alex Child-Villiers + 44 (0) 7795 425580Will Barker + 44 (0) 7827 960151

Forward-looking statements

This announcement contains forward-looking statements regarding Equiniti. These forward-looking statements are based on current information and expectations, and are subject to risks and uncertainties, including market conditions and other factors outside of Equiniti's control. Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. Equiniti undertakes no obligation to publicly update any forward-looking statement contained in this release, whether as a result of new information, future developments or otherwise, except as may be required by law. 

GROUP RESULTS

Overview

Equiniti has delivered a strong set of results in a challenging operating environment as we have continued to make progress against our strategic objectives. Long-term client relationships are a key strength of our business and once again we have retained 100% of our FTSE clients whilst extending and expanding a number of major relationships. Our performance in winning new clients was equally strong as we continued to gain market share with a record number of share registration clients choosing to move from our competitors. We have also grown our client base through the IPO market, securing 17 mandates from newly listed companies. The Group has delivered revenue and profit ahead of expectations, reduced leverage whilst continuing to deliver strong and dependable cash generation, enabling the Group to invest in growth and supports our progressive dividend policy.

The most significant event during the year was our acquisition of WFSS which was announced in July 2017 and completed on 1 February 2018. The acquisition combines the number one UK and number three US share registrars to create a multinational share registration and services business spanning the world's deepest capital markets. Since completion, we have made good progress on integration activities, having undertaken extensive planning and preparation since announcement in July 2017 and we are on track to commence the migration of WFSS clients to our proprietary Sirius platform during 2018.

Reported revenue increased by 6.1% to £406.1m (2016: £382.6m) during the year whilst proforma revenue adjusted for acquisitions grew organically by 2.9%. After a relatively slower first half, organic growth in the second half accelerated to 6.4%. Acquisitions made in the period have progressed well, contributing to growth.

Investment Solutions delivered strong revenue growth supported by the fidelity of our client base, whilst increasing market share and win rates. Intelligent Solutions also delivered strong growth, benefitting from product development in Credit Services, along with organic growth reflecting progress across all service lines. Modest revenue growth in Pension Solutions was a result of new client wins despite a challenging operating environment leading to a reduction in higher margin project and software work.

Revenue from interest was 9.8% lower than the prior year with average cash balances 12.6% lower at £1,675m (2016: £1,917m) and our hedging programme reducing the impact of the interest rate cut. The interest receivable is partially fixed with instruments secured to August 2018 (£650m) and July 2020 (£380m).

Underlying EBITDA increased by 6.6% to £98.5m (2016: £92.4m) reflecting Equiniti's platform characteristics and a continuing focus on operational improvement.

Free cash flow to equity holders was £39.7m (2016: £42.4m), a decrease of 6.4 %, reflecting a working capital outflow and an increase in capital expenditure as we continued to invest in proprietary technologies. Underlying net debt of £242.9m (2016: £251.2m) represents a ratio of 2.5x underlying net debt/underlying EBITDA (2016: 2.7x), excluding the proceeds of the WFSS rights issue. Pleasingly we have continued to work towards and are now within our leverage target of net debt/underlying EBITDA of 2.0-2.5x with strong cash flow supporting a progressive dividend policy.

The Board has proposed a final dividend of 2.73 pence per share which, subject to shareholder approval at the Annual General Meeting on 3 May 2018, will result in a full year dividend of 4.48 pence per share (including the interim dividend of 1.75 pence per share). The final dividend will be paid on 17 May 2018 to shareholders on the register of members at close of business on 13 April 2018. This represents growth of 6.3% adjusting for the dilution of the rights issue. Any shareholder wishing to participate in the Equiniti Dividend Reinvestment Plan should submit their election to do so by 25 April 2018. We maintain our progressive dividend policy which will see us distribute around 30% of our underlying profit attributable to ordinary shareholders each year.

Board changes

Philip Yea joined the Board as a non-executive Director on 3 July 2017 and succeeded Kevin Beeston as Chairman on 29 September 2017. John Parker also retired from the Board, stepping down as a non-executive Director on 30 September 2017.

On 1 November 2017, Darren Pope became Chair of the Audit Committee in succession to Vicky Jarman.

On 5 March 2018, we announced the appointment of Alison Burns to the Board as an independent non-executive Director effective from 1 April 2018. Alison will become a member of the Audit, Nomination, Remuneration and Risk Committees.

Vicky Jarman has notified the Board that she has decided to step down as an independent non-executive Director at the Company's Annual General Meeting in May 2018. Darren Pope, in succession to Vicky, will become the Senior Independent Director following her retirement.

OPERATIONAL REVIEW

We serve our clients through three divisions: Investment Solutions, Intelligent Solutions and Pension Solutions. The broad nature of our client base and our strong client relationships result in shared clients across the Group. This enables us to continually enhance our performance through cross-selling and up-selling. Our entry point is often providing share registration services, with clients taking further services from us over time.

In addition to our three divisions, we earn interest income on balances we administer on our clients' behalf.

Investment Solutions

Investment Solutions offers a broad range of services, including share registration for around half of the FTSE 100, and the administration of SAYE schemes and share incentive plans for approximately 1.2 million employees. The division also provides share dealing, wealth management and international payments to corporate clients and their employees, as well as direct to retail customers.

Revenue in Investment Solutions increased by 6.7% to £132.3m (2016: £124.0m), driven by our high fidelity client base whilst increasing market share and win rates. Underlying EBITDA grew by 16.0% to £43.5m driven by strong revenue growth, higher margin project work and continued focus on operating leverage.

Share registration had a strong year with an unusually high number of contract renewals secured during the course of 2017 with successful retention of 100% of its clients, including a new eight-year contract with Lloyds Banking Group, which is the Group's largest client, as well as renewals with FTSE 100 companies such as Imperial Brands, Marks & Spencer, Prudential and Smiths Group. The division was also highly successful at winning mandates from newly listed companies and was appointed by 17 of those coming to market including Arix Bioscience, Pelatro, Sabre Insurance, Group Ten Lifestyle, Velocity Composites and Xafinity. In addition, there was a significant number of mandates awarded by clients moving from existing service providers, including Abcam, Arrow Global, Howdens Joinery, Jardine Lloyd Thompson, Rentokil Initial and J Sainsbury. It was also a significant year for corporate action revenue, with revenue growth of 19.0% to £9.4m (2016: £7.9m), delivering the expected acceleration in the second half of the year.

Our International Payments business had a good year, building on a strong performance in the previous period. As well as delivering underlying growth, it continued to win new clients including a white-labelling contract with Santander to strengthen the banks' international payments offering. Selftrade, the division's execution-only brokerage service, had a successful year despite muted market conditions continuing to gain new customers and to win a greater share of business from existing customers. Selftrade benefitted from significant investment during 2017, resulting in the launch of its new online dealing platform towards the end of 2017 that we expect to drive further growth.

Our shareplans services had a credible year despite a challenging environment, retaining all of its share plan clients and winning a number of new clients, including Euromoney, Jardine Lloyd Thompson, J Sainsbury and L'Oréal. With 160,000 employees, J Sainsbury was the largest share plan to change provider since 2009. This was against a backdrop of interest rates on SAYE balances declining in 2016.

Bereavement and end-of-life estate management represents an important opportunity for the division and has continued to gain traction. The contract secured with Lloyds Banking Group in 2016 went live in the first half of the year. A pilot project was also secured with six banks through the British Bankers' Association which commenced towards the end of 2017, creating a 'tell-us-once' service for retail banking.

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.

Revenue in Intelligent Solutions increased by 14.1% to £124.7m (2016: £109.3m). This was the result of organic growth of 2.8%, with growth across all service offerings and strong growth in the second half of the year. The acquisition of Gateway2Finance in January 2017 and Nostrum in May 2017 contributed to reported growth in the period and widened our product offering.

Underlying EBITDA increased by 16.6% to £33.0m as a result of strong revenue growth, driving efficiencies and high margin project work.

Intelligent Solutions had a strong year with growth underpinned by a wide range of contract wins and specialist resourcing and remediation delivering double digit growth during the second half. There was strong demand for customer remediation as the division extended relationships with clients including Santander. There were also significant wins with Home Retail Group and Lloyds Banking Group, providing both software and services to create an end-to-end offering.

Gateway2Finance and Nostrum have been fully integrated with the division's existing credit business, creating full end-to-end credit origination and servicing capabilities. This has resulted in new wins including a contract with mobile network Three to service its mobile handset financing, as well as new projects with Green Deal Finance Company and Sainsbury's Bank.

The acquisition of Marketing Source towards the end of 2016 bolstered Intelligent Solutions capability in data analytics through its combination with the division's existing Prosearch business. Notable wins during the year included contracts with Admiral Insurance and Green Deal Finance Company, two existing credit services clients, who are now taking data analytic products.

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.

Revenue in Pension Solutions increased by 0.7% to £139.0m (2016: £138.1m) with a decrease in underlying EBITDA of 11.2% to £24.6m. This was due to a reduction in higher margin project and software work. MyCSP delivered in line with expectations and has seen its financial results stabilise over the year.

Despite a challenging market environment, the division continued to win new clients including House of Fraser, Shawbrook, Magnox, TUI, University Hospitals of Leicester and Leicester Partnership Trust. In addition, the division was awarded contracts to manage GMP reconciliation and rectification for Tayside, Clwyd Pension Fund and SSE plc.

IFRS 15 - REVENUE FROM CONTRACTS WITH CUSTOMERS

IFRS 15 is effective for accounting periods commencing 1 January 2018 and will require comparative numbers to be restated. We have performed a review of our contracts to determine any differences in revenue recognition and associated costs. The key areas of impact for the Group are:

· Software licences - term licence revenue to be recognised at a point in time under IFRS 15 (compared with over time under IAS 18) where the delivery of the licence fulfils the performance obligation.

· Transitional services - where transitional services over a long life contract do not represent a distinct performance obligation, revenue from this service will be recognised over the life of the contract rather than over the transition period.

Whilst these changes will impact Pension Solutions and Intelligent Solutions, the impact on the 2017 Group results are non-material.

OUTLOOK

We are confident in our ability to grow sustainably in the UK, where we have an excellent business with exceptional clients. We are also increasingly excited by our entry into the US market. The US presents a significant level of opportunity that Equiniti can harvest by leveraging the strengths we have developed in the UK, allowing us to add value for clients and shareholders alike whilst maintaining our disciplined focus on regulation and payments.

Our objective remains to deliver organic revenue growth supplemented by growth from capability enhancing acquisitions. The dependability of our revenues, the platform nature of our operations and progressive deleveraging should enable us to grow underlying profits and earnings ahead of revenue, irrespective of the uncertainties in our operating environment.

We continue to make progress with our strategy, have the resources, technology and specialists to respond to opportunities as they are presented, and see multiple drivers of growth for the future.

FINANCIAL REVIEW

Group Income Statement

Revenue

Reported revenue increased by 6.1% to £406.1m (2016: £382.6m) during the year whilst proforma revenue adjusted for acquisitions grew organically by 2.9%. Organic revenue growth is reported revenue growth adjusted for acquisitions on a like-for like basis. Here we restate 2016 for the period acquisitions have been owned in 2017 to create a like-for-like comparison of year-on-year progress. This is calculated as follows:

1Acquisition of KYC, Marketing Source, Nostrum, Risk Factor and Top Level.

Underlying EBITDA

Underlying EBITDA increased by 6.6% to £98.5m (2016: £92.4m) reflecting platform characteristics and a continuing focus on operating leverage.

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 £10.5m (2016: £5.0m) mainly relate to the acquisition of the WFSS business.

Reported EBIT

Reported EBIT remains an important measure of the Group's performance, reflecting profit before finance costs and taxation. In 2017, reported EBIT decreased 8.4% to £37.3m (2016: £40.7m) due to £10.5m of non-operating charges mainly arising from the acquisition of WFSS.

Net finance costs

Net finance costs fell by £0.5m to £11.7m (2016: £12.2m) as we reduced debt in the business.

Taxation

The tax charge for the year consists of a current tax charge of £5.9m (2016: £4.7m) and a deferred tax charge of £4.1m (2016: tax credit of £9.6m). The Group benefitted in the two prior years from recognising tax credits on unutilised accumulated tax losses as a result of the loss making debt structure in place prior to the Group's listing in 2015. All unutilised tax losses have now been recognised and 2017 is the first year reflecting a total tax charge under the new debt structure.

The current year total tax charge is also adversely impacted by the change in the deferred tax rate, effective from April 2020, from 18% to 17%, in addition to non-tax deductible expenditure in 2017 in relation to the WFSS acquisition.

Profit from continuing operations

The Group made a profit for the period from continuing operations of £11.9m (2016: £30.5m).

Earnings per share 

Basic earnings per share of 3.6 pence (2016 restated: 9.5 pence) is based on weighted average shares of 331.6m (2016 restated: 320.3m).

Underlying earnings per share grew 7.0% to 16.9 pence per share compared to the prior period of 15.8 pence per share, based on the number of shares in issue at 31 December 2017.

Capital structure

The Group's Consolidated Balance Sheet at 31 December 2017 is summarised as follows:

Current assets increased by £65.7m, mainly due to a higher cash balance at year end as a result of cash proceeds from the rights issue. Non-current liabilities decreased by £56.1m, mainly due to full repayment of the revolving credit facility balance from the proceeds of the rights issue.

Cash flow

The Group generated a free cash flow to equity holders of £39.7m (2016: £42.4m) and delivered an operating cash flow conversion of 93% (2016: 100%). The main movements in cash flow are summarised below:

The Group has access to a £20.0m receivables financing facility of which £19.9m (2016: £4.2m) was utilised at the end of the period and included within cash balances. Our operating cash flow conversion in 2016 would have been 117% had we used a similar quantum of invoice factoring to 2017.

Reconciliation of underlying EBITDA to total cash generated from operations (statutory cash flow statement)

Operating cash flow

Operating cash flow is underlying EBITDA plus the change in working capital, both prior to non-operating charges, and is a key performance indicator. The movement in working capital of £(6.8m) excludes cash flows relating to non-operating charges and arose through the timing of client receipts as we grew the business.

Capital expenditure

Net expenditure on tangible and intangible assets was £31.0m (2016: £28.2m). This represents 7.6% of revenue (2016: 7.3%) and was driven by timing of major regulatory projects such as MiFID II and the launch of a new portal for our Selftrade business.

Net interest costs

Net interest costs in the period was £9.0m (2016: £9.5m). Total interest bearing loans decreased from £306.0m to £250.0m.

Investment in current and prior year acquisitions

Net cash outflow on acquisitions was £19.1m (2016: £12.0m). A further £1.9m (2016: £7.3m) was spent on deferred consideration for prior year acquisitions.

Tax paid

Taxes paid are primarily due to the Group's operations in the UK which have moved into a tax paying position in the year ended 31 December 2017, and the Group's operations in India. The Group has the following tax attributes that reduce the cash tax effective rate compared to the profit and loss account effective rate:

· Future tax deductions on tax losses carried forward - £224.0m

· Future tax deductions on intangible assets - £288.0m

· Future tax deductions on property, plant and equipment - £104.0m

The tax impact of these attributes is recognised as deferred tax assets.

The forecast cash tax rate over the next few years is estimated to be around 13%.

We consider the cash tax rate to be an appropriate measure to use as it best reflects the economic flows from the business, taking into account our assessment of how our tax attributes, will unwind and reduce our overall tax liabilities.

Bank borrowings and financial covenants

At the end of December 2017, underlying net debt was £242.9m (2016: £251.2m) excluding the proceeds from the WFSS rights issue and associated transaction and integration costs. The term debt facility does not include scheduled debt repayments and together with the revolving credit facility is available for a five-year term to October 2020. 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 6 January 2017, the Group acquired Gateway2Finance for a total consideration of £200k with a further earn-out of up to £1.0m payable in 2020, dependent on growth. Gateway2Finance is a consumer finance intermediary, securing loans for clients referred by financial services companies and price comparison websites.

On 26 May 2017, the Group took control of The Nostrum Group Limited ("Nostrum") for a total consideration of up to £6.0m with a further earn-out of up to £7.0m, dependent on growth.

Nostrum is a provider of end-to-end loan management technology that helps banks, finance companies and retail brands provide innovative credit solutions to their customers. The acquisition strengthens our position in the lending sector and consolidates our strategy of providing technology-enabled loan and mortgage solutions to meet the requirements of this fast-moving market place, building on the technology platforms of Pancredit and the loan, mortgage and insurance servicing permissions of Gateway2Finance.

Events occurring post reporting period

On 12 July 2017, the Group announced the proposed acquisition and carve out of WFSS. The acquisition was approved at a General Meeting held on 28 September 2017 with 99.99% of shareholders voting in favour of the acquisition and a 97.43% uptake of the associated rights issue. The acquisition completed on 1 February 2018 for a total cash consideration of $227.0m (£159.6m) and a further £9.8m in settlement of a deal contingent forward used to hedge the acquisition. This gives a total outflow of £169.4m related to the acquisition of WFSS.

The acquisition combines the number 1 UK and number 3 US share registrars to create a multinational share registration and services business spanning the world's deepest capital markets, which will create a more diversified, multinational Group. The business combination is expected to generate c£8m of cost synergies by 2020 through introducing our Sirius platform and using this to automate processes.

The overall integration spend for WFSS remains unchanged at £42m. Capital expenditure is now a lower proportion of overall spend at £17m and integration costs will be £25m. 80% of this will be incurred in 2018. In addition there will be £5m of further transaction costs in 2018 post completion of the acquisition related to legal and advisory fees, which brings our overall transaction costs to our original guidance of £17m.

ALTERNATIVE PERFORMANCE MEASURES

Alternative performance measures used to manage the Group are EBITDA, underlying EBITDA and underlying earnings per share.

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 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, would otherwise obscure the understanding of the underlying performance of the Group. These items primarily represent material restructuring, integration and acquisition related expenses.

Transaction costs in 2017 relate to the acquisition of WFSS and includes expenses incurred for M&A advisory, due diligence and legal services. Included within this are £1.1m of internal staff costs. Integration costs reflects the cost of setting up a standalone operation in the US, including IT re-platforming onto our Sirius platform. Included within this are £1.2m of costs in relation to permanent project staff, which on completion of the integration project will be absorbed into vacant positions, redeployed onto other projects or leave the business and £0.6m of change costs to upskill posts to ensure they have the right skills and experience to manage the Group on an international basis. Restructuring costs incurred in 2017 reflect the first stage of a transformation programme within Pension Solutions of c£2.5m - £3.0m to improve the operating performance of the division. The costs in 2016 related to third party fees supporting acquisitions, setting up our Shared Service Centre in Chennai and a reduction in a contingent consideration payment arising from a change in performance and earn-out criteria.

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. Given the timing of the WFSS acquisition and the related rights offering then the number of issued shares used in the calculation excludes both the bonus element and new share issuance for ease of comparability to prior year results.

PRINCIPAL RISKS AND UNCERTAINTIES

The Directors have considered the principal risks and uncertainties affecting the Group's financial position and prospects in 2017. As described on pages 44 to 47 of the Group's Annual Report for 2016, the Group continues to be exposed to a number of risks and has well established systems and procedures in place to identify, assess and mitigate those risks. The principal risks include those arising from change in client demand; reduction in Bank of England rates; information security breach; loss of key clients; regulatory risk; attracting and retaining high calibre employees; change, transformation and mobilistion; adverse legislative and environmental changes; and disruption to client servicing. The Directors continue to review the principal risks on an ongoing basis and, with the acquistion of WFSS competed post year end, have added an additional risk associated with entry to the US market.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that, to the best of their knowledge, the extracts from the consolidated financial statements included in this report, which has been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company taken as a whole, and that the management report contained in this report includes a fair view of the development and performance of the business.

By order of the Board

Guy Wakeley John Stier

Chief Executive Chief Financial Officer

6 March 2018

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2017

1The comparative income statement has been re-presented to reflect exceptional items, which were previously reported separately, within administrative costs.

2Restated to reflect the bonus element of the rights issue associated with the WFSS acquisition.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2017

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2017

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2017

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2017

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2017

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2017

1) General information

Equiniti Group plc is a public limited company which is listed on the London Stock Exchange and incorporated and domiciled in the United Kingdom. The company and its subsidiaries (collectively, the Group) provide complex administration and payments services, supported by technology platforms, to a wide range of organisations. The registered office address is Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH.

The condensed financial information set out herein does not constitute the Group's statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2016 have been delivered to the Registrar of Companies and those for the 2017 year end will be delivered following the Group's Annual General Meeting to be held on 3 May 2018. The external auditor has reported on the 2016 accounts and its reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

These condensed financial statements have been prepared on the basis of the accounting policies as set out in the previous statutory financial statements.

2) Operating segments

The Group's operating segments have been identified as Investment Solutions, Intelligent Solutions, Pension Solutions and Interest, in line with how the Group runs and structures its business. Revenue, 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 segments' usage of corporate facilities and services. Central costs principally include corporate overheads.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2017

2) Operating segments (continued)

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 acquisition-related expenses.

3) Administrative costs

4) Earnings per share

1The prior year's dividend per share has been restated to reflect the bonus element of the rights issue associated with the WFSS acquisition.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2017

4) Earnings per share (continued)

1Cash tax rate reflects the cash tax payable on the underlying profit after tax. It is calculated based on the Group's estimated forecast cash tax rate of around 13% (2016: 14%) which is lower than the profit and loss account effective tax rate due to the benefit of future tax deductions on trading losses, intangible assets and tangible assets.

We consider underlying earnings to be an appropriate measure to use to assess progress in the Group as it best reflects the economic flows from the business.

5) Dividends

1The prior year's dividend per share has been restated to reflect the bonus element of the rights issue associated with the WFSS acquisition.

The recommended final dividend payable in respect of the year ended 31 December 2017 is £9.9m or 2.73p per share (2016: £9.3m). This is in line with the Group's stated policy of a payout ratio of around 30% of adjusted underlying profit after cash tax. The proposed dividend has not been included as a liability as at 31 December 2017.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2017

6) Acquisitions of businesses

Gateway2Finance

On 6 January 2017, the Group purchased the entire issued share capital of Gateway 2 Finance Limited and Refresh Personal Finance Limited (Gateway2Finance) for £0.2m plus contingent consideration of up to £1.0m, discounted to £0.9m, payable in 2020. Gateway2Finance is an FCA authorised entity acting as a consumer finance intermediary, securing loans for clients referred by financial services companies and price comparison websites.

The Group took control of Gateway2Finance on 6 January 2017. On this date the business had net assets of £0.2m. The results of the business have been consolidated since the date of control and Gateway2Finance has contributed £0.4m of revenue and £0.2m net loss to the Group results in 2017.

On acquisition, intangible assets relating to software and to customer contracts and related relationships have been re-evaluated, resulting in a combined upward adjustment of £0.3m to the book value. The amounts relating to the intangible assets and goodwill are provisional and subject to further evaluation and adjustment, in accordance with accounting standards. The value of goodwill reflects amounts in relation to the expected benefit of the ability to generate new streams of revenue and expected synergies of combining the operations of Gateway2Finance and the Group.

As at 31 December 2017, the minimum amount of contingent consideration payable is £nil and the maximum amount is £1.0m. 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.

Nostrum

On 3 July 2017, the Group purchased the entire issued share capital of The Nostrum Group Limited and icenet Limited (Nostrum) for £12.5m. Nostrum is a provider of end-to-end loan management technology that assists banks, finance companies and retail brands provide credit solutions to their customers, delivering services that support the whole lifecycle of lenders' operations from front-end lead generation and application processing through to customer servicing.

The purchase consideration of £12.5m consists of up to £7.0m contingent consideration, discounted to £2.0m payable in September 2018 and £4.5m payable in September 2020, cash on legal completion of £3.9m and £2.1m payable in monthly instalments to December 2018.

The Group took control of Nostrum on 26 May 2017. On this date the business had net assets of £2.4m, including a cash balance of £0.8m. The results of the business have been consolidated since the date of control and Nostrum contributed £5.7m of revenue and £2.3m net profit to the Group results in 2017. If the business had been acquired on 1 January 2017 it would have contributed an additional £2.8m of revenue and £0.3m net loss to the Group's results in 2017.

On acquisition, intangible assets relating to software and to customer contracts and related relationships have been re-evaluated, resulting in a combined upward adjustment of £3.8m to the book value. The amounts relating to the intangible assets and goodwill are provisional and subject to further evaluation and adjustment, in accordance with accounting standards. The value of goodwill reflects amounts in relation to the expected benefit of the ability to generate new streams of revenue and expected synergies of combining the operations of Nostrum and the Group.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2017

6) Acquisitions of businesses (continued)