18ANNUAL REPORT 2018 Equiniti is a leading global provider of technology and solutions for complex and regulated data and payments, serving blue-chip enterprises and public sector organisations Our mission is to combine our technology and specialists to help businesses prosper We are a Superbrand! 2 Inside this year's Annual Report 01 02 STRATEGIC REPORT GOVERNANCE HIGHLIGHTS 6 GOVERNANCE REPORT 56 OUR BUSINESS MODEL 8 BOARD OF DIRECTORS 58 OUR MARKETS 12 EXECUTIVE COMMITTEE 60 STRATEGY 14 BOARD AND EXECUTIVE COMMITTEE STRUCTURE 66 KEY PERFORMANCE INDICATORS 16 AUDIT COMMITTEE REPORT 72 CHAIRMAN’S STATEMENT 18 RISK COMMITTEE REPORT 80 CHIEF EXECUTIVE’S NOMINATION COMMITTEE STATEMENT 20 REPORT 86 OPERATIONAL REVIEW 22 DIRECTORS' REMUNERATION REPORT 92 FINANCIAL REVIEW 30 DIRECTORS' REPORT 118 SUSTAINABILITY 38 PRINCIPAL RISKS AND UNCERTAINTIES 48 VIABILITY STATEMENT 52 03 04 FINANCIAL STATEMENTS ADDITIONAL INFORMATION INDEPENDENT AUDITORS' SHAREHOLDER REPORT 124 INFORMATION 200 CONSOLIDATED FINANCIAL STATEMENTS 132 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 139 COMPANY FINANCIAL STATEMENTS 190 plc Annual Report 2018 Equiniti Group NOTES TO THE COMPANY FINANCIAL STATEMENTS 192 3 Best Investor Education Voted for by investors and shareholders 4 SECTION 01 STRATEGIC REPORT STRATEGIC 01 Strategic Report HIGHLIGHTS 6 OUR BUSINESS MODEL 8 OUR MARKETS 12 STRATEGY 14 KEY PERFORMANCE INDICATORS 16 plc Annual Report 2018 Equiniti Group CHAIRMAN’S STATEMENT 18 CHIEF EXECUTIVE’S STATEMENT 20 OPERATIONAL REVIEW 22 FINANCIAL REVIEW 30 SUSTAINABILITY 38 PRINCIPAL RISKS AND UNCERTAINTIES 48 VIABILITY STATEMENT 52 5 Highlights Underlying earnings before interest Revenue Underlying EBITDA* Underlying EBITDA margin* and tax (EBIT)* £530.9m £122.3m 23.0% £39.9m 2017 CHANGE 2017 CHANGE 2017 CHANGE 2017 CHANGE £406.3m 30.7% £98.2m 24.5% 24.2% (1.2pts) £37.0m 7.8% Profit after tax Diluted earnings per share (EPS) Underlying EPS* Full year dividend per share £20.7m 4.7p 17.9p 5.32p 2017 CHANGE 2017 CHANGE 2017 CHANGE 2017 CHANGE £15.3m 35.3% 3.5p 34.3% 16.8p 6.5% 4.37p 21.7% Operating cash flow conversion* Net debt Leverage 102% £309.5m 2.5x 2017 CHANGE 2017 CHANGE 2017 CHANGE 93% 9pts £242.9m 27.4% 2.5x – FINANCIAL HIGHLIGHTS OPERATIONAL HIGHLIGHTS • Revenuegrowthof30.7%reflectingacquisitionofEQUSand • 100%retentionofFTSEclientsincludingrelationshipswith strongorganicgrowthof7.3% BAESystems,Carnival,EasyJet,GSK,IHGandQinetiQ • UnderlyingEBITDAgrowthof24.5%reflectingstrongorganic • MajorrenewalsintheUSincluding3M,CVS,Honeywell growthandcontributionfromEQUS;UnderlyingEBITDA andJPMorgan growthof10.6%excludingthecontributionofEQUS • Newclientwinsacrossalldivisions Margindeclineof1.2ptsto23.0%,drivenbyachangein • • NewshareregistrationclientsincludingBodycote,Hiscox, businessmixduetoanincreaseinlowermarginremediation WmMorrisonsandNationalGrid projects • NewcompanylistingsincludingAstonMartin,Avastand • Operatingcashflowconversionof102%,includingareduction FundingCircle inthereceivablesfinancingfacilityto£10.3mfrom£19.9m • OthernewclientwinsincludingCombinedNuclearPension at31December2017,anddrivenbystrongworkingcapital Plan,Mastercard,NationalBankHoldingsandOfcom management • Newcapabilitiesandstrategicdisciplinesestablished, • UnderlyingEBITgrowthof7.8%aftertheimpactof£20.8m including: ofnon-operatingchargesarisingfromtheacquisitionofEQ US,withprofitaftertaxgrowthof35.3%,benefittingfroma • WellsFargoShareownerServices(EQUS)acquisition reducedtaxcharge successfullycompletedon1February2018,withmultiple growthopportunitiesinNorthAmerica • Recommendedfinaldividendof3.49pencepershare, givingatotaldividendfortheyearof5.32pencepershare, • IntegrationontrackwithfullseparationfromWellsFargo representinggrowthof21.7%,inlinewithprogressive progressingwell dividendpolicy • Thedivisionreturnedtogrowthinthesecondhalfwith newclientwinsincludingAbbVie,BeyondMeatand • Netdebtof£309.5m,resultinginleverageof2.5x,reflecting Mastercard theacquisitionoftheEQUSbusinessandassociatedcosts • NewproductsnowlaunchedintheUSforprivatecompany 2017numbersarerestatedforchangesinaccountingstandards(IFRS9and M&A,Riskfactorandproxysolicitationservices IFRS15)–seenote2.1fordetails. • IntegrationofBoudiccaProxydeliveredandsuccessfully *TheGroupusesalternativeperformancemeasurestoprovideadditional cross-soldto21registrationclients informationontheunderlyingperformanceofthebusiness.Keypointsforeaseof referenceareprovidedbelow.FurtherexplanationisprovidedintheAPMsection • AcquisitionofAquilacompletedon31October,enhancing oftheStrategicReport. ourtechnologyandservicesforinsuranceandthelifesector OperatingcashflowconversioniscalculatedasunderlyingEBITDAplusthechange inworkingcapitalasa%ofunderlyingEBITDA. • ExtensionoftheMyCSPcontractfortheCivilService 2017EPSanddividendhavebeenrestatedtoreflectthebonuselementofthe PensionSchemeuntilDecember2021,andthepurchaseof rightsissueassociatedwiththeEQUSacquisition. theCabinetOffice's24%shareholding,increasingourstake Netdebtat31December2017excludesthenetproceedsof£114.2mfromthe from51%to75%anddemonstratingourcommitmenttothis rightsissueon17October2017,whichwasusedtofundtheacquisitionofEQUS. jointventure Operatingcashflowconversion,underlyingnetdebtandunderlyingleverageare calculatedafterallowingforuseofareceivablesfinancingfacilitytheGrouphasin place,ofwhich£10.3m(2017:£19.9m)wasutilisedattheendoftheperiod,details ofwhichcanbefoundonpage33. 6 About Equiniti Equiniti is a leading global provider of technology SECTION 01 and solutions for complex and regulated data and payments, serving blue-chip enterprises and REPORT STRATEGIC public sector organisations. Wedeliverourservicesthroughfourdivisions,eachunderpinnedbyproprietary technologyplatformsandpositionsofscaleinourchosenmarkets: INVESTMENT SOLUTIONS INTELLIGENT SOLUTIONS HIGHLIGHTS/ABOUT EQUINITI 27% 31% OF 2018 REVENUES OF 2018 REVENUES InvestmentSolutionsoffersabroadrange IntelligentSolutionstargetscomplexor ofservices,includingshareregistration regulatedactivitiestohelporganisations foraroundhalftheFTSE100,andthe managetheirinteractionswithcustomers, administrationofSAYEschemesand citizensandemployees.Thedivision shareincentiveplansfor1.2million offersenterpriseworkflowforcaseand employees.Thedivisionalsoprovides complaintsmanagement,creditservices, sharedealing,wealthmanagementand on-boardingfornewclients,specialist internationalpaymentstocorporate resourceforrectificationandremediation clientsandtheiremployees,aswellas anddataanalyticsservices. directlytoretailcustomers. PENSION SOLUTIONS EQ US 24% 16% OF 2018 REVENUES OF 2018 REVENUES PensionSolutionsoffersadministrationand EQUSprovidescreativesolutionsfor paymentservicestopensionschemes,as shareholdermanagement.Thedivision wellaspensionsoftware,datasolutions, offersarangeoftransferagentservices andlifeandpensionsadministration.The thatenableourclientstomanageshare divisionisascaleproviderofpension registers,communicatewithshareowners technologyandoperatessomeofthe andundertakesignificantcorporateactions largestpensionschemesintheUK.These –simplyandeffectively. includetheNationalHealthServicescheme, whichhasmorethan2.6millionmembers, andtheArmedForcesVeterans,whichwe haveservedcontinuouslysince1836. Equiniti Group plc Annual Report 2018 Equiniti Group INTEREST INCOME 2% OF 2018 REVENUES Inadditiontoourfourdivisions,weearninterestincomeasafee fortheadministrationofcertainclientandcustomerbalances. 7 Our business model The inputs to our business model We rely on the following assets to create value for our stakeholders: PROPRIETARY SPECIALIST RELATIONSHIPS KNOWLEDGE FINANCIAL TECHNOLOGY PEOPLE RESOURCES Wehavewell-invested Weemploypeople Webuildexcellent Wehavemanyyears’ Wecarefullymanage andscalableproprietary whoareexpertsin long-termandmutually experienceofproviding ourbalancesheetand technologyplatforms, theirfields.Attheyear beneficialrelationships complexservicesin cashflows,givingus whichgiveusa end,wehadover5,100 withourclients,which regulatedmarkets.We thefinancialresources competitiveadvantage employees,including includec70oftheFTSE alsohaveastrongtrack weneedtoinvest andformabarrier c900atouroffshore 100andc120ofthe recordofidentifyingand inourtechnology toentry,giventhe facilitiesinChennai. FTSE250.Ouraverage acquiringnewplatforms platformsandto substantialexperience, relationshipwithFTSE andcapabilities continueourgrowth. timeandmoney 100shareregistration tocross-selltothe requiredtobuildthem. clientsisc29years. existingclientbase. OUR VALUE CREATION MODEL The outputs from our business model FOR OUR FOR OUR FOR OUR FOR OUR FOR CLIENTS SHAREHOLDERS PEOPLE SUPPLIERS SOCIETY Ourclientsreceive Ourshareholdersgain Ourpeoplebenefit Oursuppliersareable Themajorityofour high-qualityservices fromrisingprofits frominterestingwork togrowtheirbusinesses activitieshaveadirect andtechnologythatfree andcashflows,which inagrowingbusiness, alongsideours,aswe socialbenefit,whether themtofocusonwhat supportaprogressive wheretheycandevelop workinpartnership thatisensuringpeople mattersmosttothem. dividendpolicy. theircareersandfulfil withthem. receivetheirpensions theirpotential. ontimeorhelping clientstogrowand createjobsthrough ourdataanalytics.We alsoworkinanethical andsustainableway, andseektocreate sustainablevalue forthelong-term. 8 SECTION 01 STRATEGIC REPORT STRATEGIC Our value creation model THE VALUE WE ADD Wecombineproprietarytechnologywithexperiencedand Ourpeoplearevital.Theirexpertiseenablesustoprovide specialistpeople,toprovideaccurate,flexibleandefficient sophisticated,high-marginservicesthatareprotectedfrom services.Theseservicesareoftennon-corebutbusiness-critical