EQN.L Regulatory News (EQN)

29 July 2021

EQUINITI GROUP PLC RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2021

Equiniti Group plc ("EQ" or "the Group"), an international technology-led services and payments specialist, today publishes its results for the six months to 30 June 2021.

Summary

· Performance impacted by continued disruption to capital markets and the wider economy

· A mixed performance with some divisions gaining positive momentum whilst others continued to be impacted by lockdown restrictions

· New business wins in all divisions and 99% client retention

· Market share gains in EQ Boardroom and EQ US

o 9 share registration transfers, 18 IPO mandates and 36 share plans in EQ Boardroom

o 16 transfer agency wins, 14 IPO mandates and 21 equity compensation wins in EQ US

· EQ Paymaster and EQ Digital impacted by a delay in project work and slower decision-making on new business

· Low interest rate environment has resulted in a £6.4m decline in interest income

· Free cash flow to equity holders of £53.4m, benefitting significantly from the disposal of the EQi direct-to-consumer business, together with improved underlying cash performance

· Net debt reduction of 27.9% to £256.0m, resulting in a reduction in leverage of 0.1x to 2.9x

· Continued focus on cost management, on track to deliver £15.0m of cost savings in FY 2021

· Recommended offer of £1.80 per share by Siris Capital, approved by shareholders on 19 July 2021

Commenting on the Group's results, Paul Lynam, Chief Executive, said:

"Since my arrival as Chief Executive, I have been very impressed by the unstinting commitment of our people and their absolute focus on delivering the best possible service to customers, notwithstanding the COVID-19 related challenges. I commend and thank them for all their hard work over the last 6 months.

"The Group's overall performance for the first half of 2021 was mixed. EQ US has delivered a good underlying performance as has EQ Boardroom, the latter winning 18 IPO mandates in the period, a new record. Less positively, the sustained lockdown restrictions significantly impacted business volumes in EQ Digital, and EQ Paymaster suffered from a lack of project work. The UK Bank and US Fed rates have remained at historic lows which have continued to weigh heavily on our earnings.

"On 19 July 2021, shareholder approval was granted to the proposal for Siris Capital to acquire the entire share capital of Equiniti Group plc for £1.80 per share. Assuming regulatory change of control approvals are granted, I am looking forward to working with Siris who are committed to investing in EQ's existing business to accelerate organic growth through initiatives such as cross-selling from the U.K. into the U.S. The proposal from Siris can deliver clear benefits to all our stakeholders, and provide support for EQ's future development through continuing investment in the people, technology and products so critical to our loyal clients."

Analyst and Investor presentation

EQ's management will host a virtual meeting for analysts and investors at 9.15am UK time today. The meeting will be broadcast live on EQ's website, www.equiniti.com and an archive version of the presentation will be available on the website later today.

For further information please contact: 

Forward-looking statements

This announcement contains forward-looking statements regarding EQ. 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 EQ'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. EQ 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

The external environment remains challenging with the disruption to capital markets and the wider economy continuing to impact the Group's financial performance. Revenue decreased by 11.9% to £214.0m (H1 2020: £243.0m) during the period whilst revenue adjusted for acquisitions and foreign exchange rates declined organically by 9.4%. Underlying EBITDA decreased by 8.0% to £38.2m (H1 2020: £41.5m).

The trends outlined in the Group's 2020 full year results announcement on 1 April 2021 have continued in the period with some divisions gaining positive momentum whilst others continued to be impacted by lockdown restrictions. EQ Boardroom delivered solid growth driven by its high fidelity client base, an increased level of corporate actions, and increasing market share in registration and share plan services. Similarly, EQ US performed well with market share gains offset by a lower level of corporate actions and the continuing negative impact of the COVID-19 related interest rate cuts. In EQ Digital, the external environment remained challenging with many client offices remaining closed impacting project work and commitment to new licence sales. EQ Paymaster continued to be impacted by slower decision-making on new business and delays in some project work, particularly for Government.

Interest income in the UK, including interest rate hedges, was 29.8% lower at £4.0m (H1 2020: £5.7m) on average client balances of £1.9bn (H1 2020: £1.7bn) reflecting the declining interest rates in the UK. At 30 June 2021, the Group held interest rate swaps totalling £745.0m (H1 2020: £1.0bn) to hedge the exposure of UK interest rates. In the US, revenue from interest income, including interest rate hedges, was 47.4% lower at £3.0m (H1 2020: £5.7m) on average interest-bearing client balances of £517.0m (H1 2020: £484.7m) reflecting lower interest rates in the US and the unwinding of the interest rate swaps in March 2021. Total interest-related income earned across the Group reduced by £6.4m including the impact on SAYE balances held in EQ Boardroom and corporate actions in the US.

Central costs in the period decreased by 13.7% to £8.2m (H1 2020 £9.5m). H1 2020 central costs were higher as they included £1.2m untaken annual leave provision.

The Group has recorded net non-operating items of £9.5m as follows:

The Group delivered a significant increase in free cash flow to equity holders to £53.4m, benefitting significantly from the disposal of the EQi direct-to-consumer business together with improved underlying cash performance.

Net debt reduced by 27.9% to £256.0m (H1 2020: £355.3m) with a reduction in leverage of 0.1x to 2.9x (H1 2020: 3.0x).

Cost measures

The Group continued to proactively manage its cost base. Cost efficiency programmes delivered savings of £14.6m in 2020 and are on track to deliver a further £15.0m of savings in full year 2021 with c56% of the full year target delivered to date, primarily driven by lower staff, property and contractor costs.

Strategic Review

As previously announced, Paul Lynam, appointed EQ's Chief Executive in April 2021, has undertaken a strategic review of EQ and its businesses.

The strategic review has confirmed the EQ Board's belief in the strength of EQ's core share registrar businesses in the UK and the US, and the need to simplify the EQ Group further in order to support EQ's vision to become a global share registrar, offering complementary services to its client base.

The future strategy of the EQ Group, were it to remain as a standalone listed entity, would be aimed at rebuilding underlying profit and returning the business to underlying growth as and when EQ's markets begin to recover. The strategy envisages a continuing simplification of the business, sustained organic revenue growth based on the EQ Group's competitive advantages in its core markets, allocating capital to areas where EQ has strong competitive positions and scale, initially organically and when possible by acquisition, rebuilding employee engagement, targeting a prudent level of gearing and positioning the EQ Group to benefit from increased economic activity and rising interest rates. As the various elements of the strategy gain traction, the strategy also envisages geographic expansion of the EQ Group from a position of strength.

The US market would remain a key priority for growth and new product offerings would continue to be developed for this market whilst the re-engineering of its core IT platform in EQ US is completed. Strong and quality customer service, high levels of employee engagement and development as a responsible corporate citizen with a coherent ESG strategy would be at the heart of EQ's operating philosophy.

The EQ Board believes the strategic review reaffirms that, whilst EQ will recover strongly under new leadership as its markets return to better levels, taking into account the risks and uncertainties inherent in the trajectory and extent of the recovery of EQ's financial performance, the terms of the acquisition by Siris Capital appropriately recognise the value today of EQ's recovery potential, including taking into account the future strategy of the EQ Group.

Annual General Meeting - votes against Resolution 2

At the Annual General Meeting (AGM) held on 26 May 2021, a number of votes (29.96%) were voted against Resolution 2 which was to approve the Directors' Remuneration Report.

In the announcement providing the voting results of the AGM, the Company said it would continue to engage with its shareholders on Directors' remuneration and consider all feedback. Since the AGM, the Chairman of the Company has spoken to shareholders who, between them, hold over 50% of the issued share capital. Their views have been noted and will be considered when drafting the next iteration of the Directors' Remuneration Policy which is due to be put before shareholders in 2022, subject to the Company remaining a listed company.

OPERATIONAL REVIEW

The Group serves its clients through four divisions: EQ Boardroom, EQ Digital, EQ Paymaster and EQ US. The integrated nature of the client base and strong client relationships result in shared clients across the Group. This provides the opportunity to continually enhance performance through cross-selling and up-selling. The entry point is often the provision of share registration services, with clients taking further services over time.

In addition to its four divisions, the Group earns interest income on balances administered on its clients' and customers' behalf.

EQ Boardroom

EQ Boardroom 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 1.3 million employees. The division also provides share dealing, wealth management and international payments to corporate clients and their employees.

Revenue in EQ Boardroom increased by 9.7% to £71.1m (H1 2020: £64.8m) with an increase in corporate action revenue to £6.4m (H1 2020: £3.2m). Underlying EBITDA increased by 13.2% to £21.4m (H1 2020: £18.9m). Growth was driven by a higher level of corporate actions, strong client retention and significant market share gains.

EQ Digital

EQ Digital 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 EQ Digital decreased by 31.6% to £48.6m (H1 2020: £71.1m) whilst underlying EBITDA decreased by 11.9% to £11.9m (H1 2020: £13.5m). The decline was driven by a reduction in remediation volumes and delayed software sales and project work partially offset by cost reductions.

EQ Paymaster

EQ Paymaster 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.

Revenue in EQ Paymaster declined by 9.0% to £52.3m (H1 2020: £57.5m) whilst underlying EBITDA declined by 10.5% to £5.1m (H1 2020: £5.7m). The decline was due to slower decision-making on new business and continued delays in some project work, particularly for Government.

EQ US

EQ US offers a range of transfer agent services that enable its clients to manage share registers, communicate with shareowners and undertake significant corporate actions - simply and effectively.

EQ US Reported revenue change at constant foreign exchange rates is (4.8%) and underlying EBITDA is (24.5%).

Revenue in EQ US declined by 13.4% to £38.0m (H1 2020: £43.9m) whilst underlying EBITDA declined by 44.4% to £4.0m (H1 2020: £7.2m). Whilst the underlying business performed well with strong client retention and continued market share gains, this was offset by a lower level of corporate activity the impact of reduced interest rates and strengthening of the pound sterling. Changes to foreign exchange and interest rates reduced underlying EBITDA by £4.0m. Revenue from corporate actions declined by 28.6% to £1.5m (H1 2020: £2.1m) as a result of lower corporate activity and reduced interest rates. Revenue from interest income, including interest rate hedges, was 47.4% lower at £3.0m (H1 2020: £5.7m) on average interest-bearing client balances of £517.0m (H1 2020: £484.7m) reflecting lower interest rates and the unwinding of the interest rate swaps in March 2021.

FINANCIAL REVIEW

Group Income Statement

Revenue

Revenue decreased by 11.9% to £214.0m (H1 2020: £243.0m) during the year whilst organic revenue declined by 9.4%. Organic revenue growth is reported revenue growth adjusted for acquisitions and disposals, and changes to foreign exchange rates, to compare growth on a like-for-like basis. Here we adjust 2020 for 2021 acquisitions had they been in place in 2020 and remove 2020 disposals from 2020 results (as Charter and HR solutions were 2020 disposals) to create a like-for-like comparison of year-on-year progress. This is calculated as follows:

1Acquisition of Monidee

2Disposal of Charter Systems

3Disposal of HR Solutions

4FX movement

Underlying EBITDA

Underlying EBITDA prior to non-operating items of £9.5m decreased by 8.0% to £38.2m (H1 2020: £41.5m) reflecting a lower level of higher-margin activity.

EBIT prior to non-operating items

EBIT prior to non-operating items was £2.6m (H1 2020: £6.5m), reflecting a lower level of underlying EBITDA in the period.

Non-operating items

Non-operating items are defined as income and expense items, which if included in EBIT, would otherwise obscure the understanding of the underlying performance of the Group. The Group recognised a net gain on non-operating items of £9.5m.

Advisory costs on the acquisition of Equiniti Group PLC by Siris Capital

On 19 July 2021, shareholder approval was granted to the proposal for Siris Capital to acquire the entire share capital of Equiniti Group plc for £1.80 per share. Accordingly, the Group has incurred costs in relation to legal fees, professional services and financial and corporate broking advice in getting to this point. The Group has recognised £4.3m (including irrecoverable VAT) of advisory costs in relation to this transaction in the six months to 30 June 2021.

The Group's external advisors have a number of fees which are contingent on the transaction completing with all the regulatory approvals. These fees are expected to be c£17.6m, excluding irrecoverable VAT.

The aggregate fees and expenses consist of the following categories:

· Financial and corporate broking advice: c£16.2m (the variable component of these fees comprises elements of fees which are payable by EQ at its discretion or which are contingent upon the acquisition becoming effective);

· Legal advice: c£3.0m (the variable component of these fees comprise elements of fees which are payable by EQ at its discretion or which are contingent upon the acquisition becoming effective);

· Public relations advice: c£0.5m;

· Other professional services: c£2.1m; and

· Other costs and expenses: c£0.1m.

EBIT

EBIT remains an important measure of the Group's performance, reflecting profit before net finance costs and taxation. In H1 2021, EBIT was £12.1m (H1 2020: £6.5m).

Net finance costs

Group net finance costs decreased by £1.9m to £5.3m (H1 2020: £7.2m) reflecting a lower level of debt and lower interest rates.

Taxation

A profit before tax of £6.8m for the period at the UK corporation tax rate of 19% gives an expected total tax charge of £1.3m. The actual total tax credit for the period is £3.8m. This difference is largely due to the impact of the change of UK tax rates on the UK net deferred tax asset.

An increase in the UK corporation rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021. This will increase the Group's future current tax charge accordingly. The net deferred tax asset at 30 June 2021 that relates to the UK has been calculated based on these rates, reflecting the expected timing of reversal of the related temporary differences (2020: 19%).

Taxes paid in the period were £0.7m. Taxes paid include £0.5m of payments on account of taxation in the UK. The balance relates to payments on account made in Poland, India and the Netherlands.

The Group has recognised deferred tax on £736.2m 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 £116.7m, on which a net deferred tax asset of £27.3m has been recognised at the relevant local statutory rate.

The gross tax attributes totalling £736.2m are represented by:

Future tax deductions on tax losses carried forward £222.8m

Future tax deductions on intangible assets £438.6m

Future tax deductions on property, plant and equipment £19.0m

Future tax deductions on employee benefits and other timing differences £55.8m

The tax impact of these attributes is recognised as deferred tax on the balance sheet. Included within the intangible assets tax attribute is the customer relationship and goodwill intangibles related to the acquisition of the trade and assets of EQ US from 1 February 2018.

The full year forecast cash effective tax rate is expected to be 4%, rising to c15% thereafter. The rate was revised downwards in the short-term to reflect the impact of the difficult recent market on the profitability and expected cash tax outflows for the Group for this and subsequent years. The cash tax rate is determined through a detailed calculation of the future expected cash tax liabilities of the Group against its profit forecasts, adjusting for known variables such as changes in tax rates, changes in tax legislation (loss restriction rules) and 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.

Profit/(loss) attributable to ordinary shareholders

The Group made a profit attributable to ordinary shareholders of £10.2m (H1 2020: loss of £0.1m).

EPS

Basic EPS of 2.8  pence (H1 2020: 0.0 pence) is based on the weighted average number of shares totalling 368.9m (H1 2020: 368.4m). Diluted EPS of 2.8 pence (H1 2020: 0.0 pence) is based on the weighted average number of shares totalling 370.0m (H1 2020: 368.9m).

Diluted underlying EPS declined by 13.3% to 2.6 pence compared to the prior period of 3.0 pence.

Capital structure

The Group's consolidated statement of financial position at 30 June 2021 is summarised as follows:

Current assets include £75.7m of trade receivables and accrued income at 30 June 2021(30 June 2020: £86.3m). Accrued income represents revenue earned but not yet billed and is driven by mix in business including corporate actions, software sales and remediation services. No income is accrued without a contract in place.

Cash flow

The Group generated a free cash flow attributable to equity holders of £53.4m (H1 2020: cash outflow of £2.5m), and delivered an operating cash flow conversion of 85% (H1 2020: 68%). The main movements in cash flow are summarised below:

The Group has access to a £20.0m receivables financing facility of which £8.0m (H1 2020: £8.0m) was utilised at the end of the period and included within cash balances. The facility allows the Group to manage its credit exposure and to help match receipts against costs, especially where clients require extended payment terms. The facility, which affords the Group credit protection, is with Lloyds Banking Group at a rate of 1.75% over LIBOR.

Reconciliation of underlying EBITDA to total cash generated from operations

Capital expenditure

Net expenditure on tangible and intangible assets was £15.1m (H1 2020: £22.4m). This represents 7.1% of revenue (H1 2020: 9.2%). Non-essential capital expenditure and discretionary projects were suspended in light of the uncertain market environment, however customer facing and efficiency investment continues.

Net interest costs

Net interest costs paid in the period were £3.9m (H1 2020: £5.4m) reflecting lower interest rates as well as the effect of lower balances.

Investment in current and prior year acquisitions

Net cash outflow on current and prior year acquisitions was £3.4m (H1 2020: £5.6m).

Free cash flow attributable to equity holders

Free cash flow attributable to equity holders represents 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. The Group earned free cash flow to equity holders of £53.4m (H1 2020: cash outflow of £2.5m), benefitting significantly from the disposal of the EQi direct-to-consumer business, together with improved underlying cash performance

Bank borrowings and financial covenants

At 30 June 2021, net debt was lower at £256.0m (30 June 2020: £355.3m), representing a ratio of 2.9x net debt/underlying EBITDA (30 June 2020: 3.0x).

The Group has committed Senior Debt Facilities of £520.0m term loan and revolving credit facility running to July 2024. At 30 June 2021, the Group had liquidity of £293.0m consisting of £53.0m of cash and £240.0m of undrawn revolving credit facility. The net debt-related financial covenant attached to the committed facility is net debt/underlying EBITDA excluding lease liabilities should be no more than 4.0x at 30 June 2021, 3.75x at 31 December 2021 and 3.50x in 2022.

Divestments

On 8 March 2021, the Group announced the sale of its EQi direct-to-consumer (D2C) business to interactive investor (ii), for consideration of, up to, £48.5m. Up until its sale, EQi was part of the Group's EQ Boardroom division.

The sale of the D2C business is covered by two agreements.

The first agreement relates to the sale of the core business for £47.2m which was payable on completion, and included additional consideration of, up to, £1.0m which is dependent on migrating additional customers to the ii platform. The additional consideration meets the definition of a financial asset, as defined in IAS 32 Financial Instruments: Presentation (IAS 32). Such financial assets would be measured at fair value through profit or loss. However the Directors considered the fair value of the additional consideration to be £nil on the completion date, as they cannot reliably estimate if, or when, the additional customer would be migrated to ii.

The second agreement relates to the migration of specific customer accounts for £0.3m. These specific accounts have not been migrated to ii's platform at 30 June 2021. This work is expected to complete in the second half of 2021.

In addition to the gain on disposal shown above, the Group incurred £3.2m of administrative costs as a consequence of the disposal and recorded an impairment change of £3.8m in relation to software assets that primarily related to the EQi business. These costs were not included as part of the transaction.

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 disposals, 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.

EBITDA and underlying EBITDA

EBITDA is 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 items. These are defined as 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 people costs including untaken annual leave as colleagues took materially less holiday in the period, and costs that are transformational in nature.

Underlying EBITDA margin

Underlying EBITDA margin is earnings before interest, tax, depreciation, amortisation and non-operating items as a percentage of revenue. This is a key measure of Group profitability and demonstrates 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 9 for calculation.

Free cash flow attributable to equity holders

Free cash flow attributable to equity holders represents 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.

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 value re-measurements of certain financial liabilities that are dependent on external market factors rather than the Group's core operations.

Cash tax rate

The cash tax rate is determined through a detailed calculation, estimating the future expected cash tax liabilities of the Group against 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. The Group considers 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.

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.

Underlying profit attributable to ordinary shareholders

See below for calculation of underlying profit attributable to ordinary shareholders.

Underlying EPS

Underlying EPS represents underlying EBITDA, less depreciation of property, plant and equipment, amortisation of software, net interest costs, cash tax and minority interests.

PRINCIPAL RISKS AND UNCERTAINTIES

The Directors have considered the principal risks and uncertainties affecting the Group's financial position and prospects in 2021. As described on pages 51 to 55 of the Group's Annual Report for 2020, 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: data protection; information technology; market; security; strategy and business risk; people; organisational resilience; purchasing, supply and outsourcing; regulatory requirements: conduct; and material change.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that these condensed interim financial statements have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

· an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The Directors of the Group announced on 19 July 2021 that shareholder approval was granted to the proposal for Siris Capital to acquire the entire share capital of Equiniti Group plc for £1.80 per share.

The Directors do not have direct visibility of the plans or the intentions of Siris Capital. The potential consequences of the acquisition indicate the existence of a material uncertainty which may cast significant doubt about the Group's and Company's plans or ability to continue as a going concern. The Group and Company financial statements do not include the adjustments that would result if the Group and Parent Company were no longer to be considered a going concern.

Notwithstanding this uncertainty, the Directors are satisfied that the going concern basis remains appropriate for the preparation of the financial statements.

By order of the Board

Paul Lynam John Stier

Chief Executive Chief Financial Officer

29 July 2021

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED INCOME STATEMENT - UNAUDITED

FOR THE SIX MONTHS ENDED 30 JUNE 2021

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - UNAUDITED

FOR THE SIX MONTHS ENDED 30 JUNE 2021

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION - UNAUDITED

AS AT 30 JUNE 2021

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - UNAUDITED

FOR THE SIX MONTHS ENDED 30 JUNE 2021

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2021

1) General information

Equiniti Group plc (the Company) 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 Company's registered office address is Sutherland House, Russell Way, Crawley, West Sussex, RH10 1UH.

The financial information in these condensed interim financial statements has been reviewed but not audited by the Company's auditor, PricewaterhouseCoopers LLP.

The condensed interim 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 2020 have been delivered to the Registrar of Companies. The external auditor has reported on the 2020 statutory 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.

2) Basis of preparation

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted international accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. The Group transitioned to UK-adopted international accounting standards in its consolidated financial statements on 1 January 2021. There was no impact or changes in accounting policies from the transition.

This condensed consolidated interim financial report for the half-year reporting period ended 30 June 2021 has been prepared in accordance with the UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

The interim report does not include all of the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the Group's Annual Report and Accounts 2020, which has been prepared in accordance with both "international accounting standards in conformity with the requirements of the Companies Act 2006" and "international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union", and any public announcements made by the Group during the interim reporting period.

New standards adopted by the Group

There were no new standards or amendments adopted by the Group in the period.

In April 2021, the IFRS Interpretations Committee (IFRIC) issued a final agenda decision in relation to configuration and customisation costs in cloud computing arrangements. The IFRIC decided that in many cases configuration and customisation costs would not usually meet the definition of intangible assets under IAS 38, Intangible Assets (IAS 38). As a result, the Group's cloud computing arrangements may not give rise to an intangible asset under IAS 38 as they do not give the Group the power to control the cloud-based software to obtain the future economic benefits flowing from the asset, and to restrict the access of others to those benefits. Given the proximity of this decision to the interim reporting date, the Group has not had sufficient time to fully assess the impact on the Group's financial position and results. Therefore the impact cannot be reasonably estimated at 30 June 2021, although the impact may be material. A thorough review of the Group's cloud computing arrangements will commence in the second half of 2021. The costs under review are included within intangible software assets which have a carrying value £87.6m at 30 June 2021.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE SIX MONTHS ENDED 30 JUNE 2021

2) Basis of preparation (continued)

The Interest Rate Benchmark Reform

Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 became effective on 1 January 2021. The interest earned on cash balances, including client and corporate cash, is based on floating interest rates largely driven by changes in the Bank of England base rate and the US Federal Reserve benchmark rate. The Group's debt facilities comprise USD and GBP term loans and a multi-currency revolving credit facility and are subject to LIBOR floating rates. The interest rate payable by the Group on the term loans has been fixed using interest rate swaps. Both the term loans and the associated interest rate swaps will be affected by the forthcoming reforms to GBP LIBOR at the end of 2021 and USD LIBOR in 2023.

The Group's treasury function is managing the IBOR transition plan to ensure that all of the necessary documentation is updated prior to the index cessation effective dates. It is assumed that the new reference rates and credit adjustments spreads will be aligned across both the interest rate swaps and the term loans. At 30 June 2021 none of the Group's financial instruments, which are dependent on IBORs, have transitioned to an alternative benchmark rate.

Therefore the impact of IBOR reform is not expected to materially impact the Group's financial position, performance or accounting policies for the year ended 31 December 2021.

The Group has applied the following reliefs in its financial statements that were introduced by the amendments made to IFRS 9 in September 2019;

- when considering the highly probable requirement, the Group has assumed that the GBP and USD LIBOR interest rates on which the Group's debt are based do not change as a result of IBOR reform;

- in assessing whether the hedge is expected to be highly effective the Group has assumed that the GBP and USD LIBOR interest rates on which the cash flows of the hedged debt and the associated interest rate swaps are not altered by IBOR reform;

- the Group has not recycled the cash flow hedge reserve relating to the period after the expected index cessation effective dates.

Judgements and estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that effect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

Estimates

In preparing these condensed interim financial statements, the significant estimates made by management in applying the Group's accounting policies were the same as those applied to the consolidated financial statements for the year ended 31 December 2020.

Judgements

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies were the same as those applied to the consolidated financial statements for the year ended 31 December 2020.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE SIX MONTHS ENDED 30 JUNE 2021

2) Basis of preparation (continued)

Going concern

The interim financial statements are prepared on a going concern basis as the Directors are satisfied that the Group has the resources to continue in business for the foreseeable future (which has been taken as at least 12 months from the date of approval of the financial statements).

The Group has a large and diverse client base, including c70 of the FTSE 100 and c120 of the FTSE 250 and average relationships with FTSE 100 share registration clients of more than 29 years. The Group meets its day to day working capital and financing requirements through the generation of cash flows from its operating activities and the availability of long term committed bank facilities. 2021 continues to be a year of uncertainty, with the COVID-19 pandemic impacting results. Despite this the Group has remained resilient generating £24.9m of net cash inflows from operating activities and reduced net debt from £307.9m to £256.0m at the reporting date.

At 30 June 2021, the Group had £28.0m of unrestricted cash together with additional borrowing capacity of £202.0m under its committed bank facilities, which are available to the Group through to July 2024. The facilities are subject to one bank covenant under which adjusted net debt to consolidated EBITDA (as defined in the loan agreement) must be less than 4.00:1 for the 12 month period to 30 June 2021, 3.75x for the 12 month period to 31 December 2021, and 3.50:1 at each reporting date thereafter. Latest forecasts suggest compliance with the requirements for the foreseeable future.

The Directors have reviewed the financial forecasts for the Group, prepared by management, which set out sufficient trading and cash generation to allow the business to meet its obligations as they fall due. The forecasts, which have been updated for the expected continued impact of COVID-19 and related economic stress, indicate a recovery through 2022 and assume:

· revenue growth starting to return, supported by recovery in the IPO market and other economic trends and increased cross-selling into our customer base;

· modest margin improvement versus 2020, driven by operating leverage, offshoring, automation, property rationalisation and increasing mix of software licences.

Consideration has been given to severe and plausible downside scenarios, including one under which there is a continued reduction in discretionary spend by our client base and reduced corporate activity. In each scenario that we have considered, sufficient cash is forecast to be available to meet liabilities as they fall due without the requirement to take significant mitigating actions.

In addition, mitigating actions within the control of the Group have been identified that would preserve cash and reduce operating costs, if needed. In the downside scenarios considered, the risk of a covenant breach is considered remote.

As such, the Directors remain confident that the Group will continue to meet its obligations as they fall due, maintain significant funding headroom and meet its covenant obligations.

In May 2021, the Directors of the Equiniti Group plc (EQ) announced that EQ had received an offer from Siris Capital LLC (Siris) for the acquisition of the entire issued, and to be issued, share capital of EQ. Subsequently, at a Court Meeting and General Meeting of EQ shareholders on 19 July 2021, a resolution on the recommended acquisition was passed. However completion of the acquisition remains subject to regulatory approvals. The intentions of Siris and their plans for the Group, should the acquisition complete, have not been announced and are unclear at the time of reporting. The unknown consequences of the acquisition is a condition that indicates the existence of a material uncertainty which may cast significant doubt on the Group's plans or ability to continue as a going concern.

Notwithstanding this uncertainty, the Directors are satisfied that the going concern basis remains appropriate for the preparation of the financial statements with the Group being well funded, profitable and generating cash. 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE SIX MONTHS ENDED 30 JUNE 2021

3) Seasonality

Whilst the business is not highly seasonal, there is some margin bias towards the second half of the year. The business delivers more contracted, lower margin activities such as running of AGMs, administering dividend payments and issuing pension statements in the first six months and there tends to be more discretionary, higher margin project work in the second half of the year. In addition, employee benefit expense tends to be higher in the first half of the year where more paid leave is taken during the summer months in the second half of the year.

4) Operating segments

The Group's operating segments have been identified as EQ Boardroom, EQ Digital, EQ Paymaster, EQ US and Interest, in line with how the Group runs and structures its business. There have been no changes to the way the Group identifies its operating segments in the period.

Revenue and underlying EBITDA are key measures of the Group's performance. Underlying EBITDA represents earnings before interest, tax, depreciation and amortisation, adjusted for significant, incremental gains or losses that are one-off in nature. The underlying 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.

Included within the EQ US division, is £3.0m (June 2020: £6.3m) of revenue derived from interest which is reported and managed within the EQ US results. 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE SIX MONTHS ENDED 30 JUNE 2021

4) Operating segments (continued)

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.

EBITDA is used by management to monitor the sustainable operating performance of the Group and its respective divisions. The EBITDA shown below for June 2021 and June 2020 reflects underlying EBITDA. Underlying EBITDA is adjusted for non-operating items which obscure the understanding of the underlying performance of the Group and its respective divisions. Non-operating items include the net gain from the disposal of the EQi business, costs in relation to the proposed takeover by Siris Capital, restructuring costs and a significant movement in the holiday pay accrual that has occurred in reaction to COVID-19 related restrictions.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE SIX MONTHS ENDED 30 JUNE 2021

4) Operating segments (continued)

5) Administrative costs

6) Earnings per share

* Adjusted for vested share options, not yet exercised, and shares held in the employee benefit trust.

7) Dividends

The Board has not recommended an interim dividend payable in respect of the period ended 30 June 2021 (30 June 2020: £nil). The Group did not pay a final dividend in respect of the year ended 31 December 2020.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE SIX MONTHS ENDED 30 JUNE 2021

8) Business disposals

EQi

On 8 March 2021, the Group announced the sale of its EQi direct-to-consumer (D2C) business to interactive investor (ii), for consideration of, up to, £48.5m. Up until its sale, EQi was part of the Group's EQ Boardroom division.

The sale of the D2C business is covered by two agreements.

The first agreement relates to the sale of the core business for £47.2m which was payable on completion, and included additional consideration of, up to, £1.0m which is dependent on migrating additional customers to the ii platform. The additional consideration meets the definition of a financial asset, as defined in IAS 32 Financial Instruments: Presentation (IAS 32). Such financial assets would be measured at fair value through profit or loss. However the Directors considered the fair value of the additional consideration to be £nil on the completion date, as they cannot reliably estimate if, or when, the additional customer would be migrated to ii.

The second agreement relates to the migration of specific customer accounts for £0.3m. These specific accounts have not been migrated to ii's platform at 30 June 2021. This work is expected to complete in the second half of 2021.

In addition to the gain on disposal shown above, the Group incurred £3.2m of administrative costs as a consequence of the disposal and recorded an impairment change of £3.8m in relation to software assets that primarily related to the EQi business. These costs were not included as part of the transaction.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE SIX MONTHS ENDED 30 JUNE 2021

9) Intangible assets

Software predominately relates to investment in enhancing the functionality of the Group's main operating platforms. Included within additions in the year is £10.1m (December 2020: £19.6m) 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.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE SIX MONTHS ENDED 30 JUNE 2021

9) Intangible assets (continued)

Impairment testing

Goodwill is tested at least annually for impairment and when indicators of impairment are identified. 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 business.

Cash flows

As part of the annual financial planning process, the Groups Divisions (CGUs) are required to submit budgets for the next year and financial forecasts for the following years. These plans are approved by the Board and represent management's best view of future revenue and cash flows.

During the year management review the results of the business against the financial forecasts to determine whether there are any indications of impairment. Where there is an indication that an impairment may be required, financial forecasts are updated to test for whether an impairment is required.

The revenue growth rate applied beyond the approved forecast period is in line with long term UK and US macroeconomic forecasts, adjusted by the Directors, where appropriate, to reflect their expectations of long term growth for relevant CGU, for example an uplift is applied in the US for the specific market opportunities.

The key assumptions within the Group's financial forecasts by CGU include:

EQ Boardroom

· Mid-single digit per annum revenue growth, supported by market trends, customer fidelity and increased cross-selling into our customer base.

· Corporate actions return to pre Covid-19 levels.

EQ Digital

· Remediation volumes recover to pre Covid-19 levels and PPI revenues are replaced with new opportunities in this market.

· Growth in software licences as a result of competitive advantage in the market.

EQ Paymaster

· Ongoing renewal of MyCSP contract and adequate replenishment of the existing customer base.

· Steady margin improvement, driven by operating leverage, offshoring, automation and property rationalisation.

EQ US

· Gain in market share and successful leverage of capabilities developed in the UK into the US market

· Implementation of new operating platforms and realisation of operating synergies expected at the time of acquisition come through intact

Discount rates

The projected cash flows are discounted using a weighted average cost of capital, which reflects the long-term target gearing ratio for the Group and current market assessments equity ratios of similar businesses. The discount rate is based on the risk-free rate for Government bonds and are adjusted for a risk premium to reflect the size and nature of the CGU.

The cost of equity has been calculated using the capital asset pricing model informed by market observed data points (such as the beta and risk-free rate) where available. 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE SIX MONTHS ENDED 30 JUNE 2021