TIDMEQN

RNS Number : 2205U

Equiniti Group PLC

01 April 2021

1 April 2021

EQUINITI GROUP PLC RESULTS FOR THE YEARED 31 DECEMBER 2020

Equiniti Group plc ("EQ" or "the Group"), an international technology-led services and payments specialist , today publishes its full year results for the twelve months to 31 December 2020.

WELL POSITIONED FOR IMPROVING MARKET CONDITIONS

 
 
                                                                  Change% 
   Financial Headlines                          2020     2019         (1) 
-------------------------------------------  -------  -------  ---------- 
 Revenue (2) (GBPm)                            471.8    555.7      (15.1) 
 Underlying EBITDA* (GBPm)                      91.7    136.0      (32.6) 
 Underlying EBITDA* margin (%)                  19.4     24.5       (5.1) 
 Operating cash flow conversion* (3) 
  (%)                                             97       91           6 
 Earnings before interest and tax (EBIT)*        5.8     55.9      (89.6) 
 (Loss)/profit before tax (GBPm)               (6.6)     39.8         N/A 
 (Loss)/profit after tax (GBPm)                (1.1)     32.4         N/A 
 Diluted earnings per share (EPS)* (pence)     (0.5)      8.4         N/A 
 Underlying EPS* (pence)                         9.1     18.1      (49.7) 
 Dividend per share (pence)                        -     5.49         N/A 
 Net debt (GBPm)                               307.9    343.6      (10.4) 
 Leverage (x)                                    3.4      2.5        0.9x 
-------------------------------------------  -------  -------  ---------- 
 

Summary

   --      Sales 

o Very challenging environment with disruption to capital markets and the wider economy significantly impacting performance

o Significant reduction in higher-margin market-paid and discretionary projects as market activity paused

o Central banks action drove GBP16.9m reduction in interest income earned across the Group

o Q4 slower than anticipated due to extended sales cycles and economic pressures towards the year end

o Resilient underlying business performance with major new client wins and 99% client retention

o Order book building with new order intake 10% ahead of last year

   --      Cash generation 

o Free cash flow to equity holders of GBP44.5m, an increase of 19.9%, benefitting from GBP7.5m VAT deferral and disposal proceeds of GBP14.8m

o Cash conversion of 97% benefitting from VAT deferral, good cash collection in Q4 and payment terms reverting to medium-term trend

o Net debt reduction of GBP35.7m resulting in leverage of 3.4x

o Proforma leverage (4) of 3.1x reflecting the divestment of the EQi direct-to-consumer business

o Non-essential capital expenditure and discretionary projects suspended; however customer facing and efficiency investment continues

   --      Cost management 

o Swift action taken to reduce costs and preserve cash across all areas of the business

o Cost efficiency programmes delivering savings of GBP15m in 2020

o A further GBP15m of cost savings identified for FY 2021 as action taken in 2020 flows to trading with further initiatives identified to manage the cost base

Outlook

-- Long-term structural growth drivers remain intact, underpinned by strong customer relationships, digitisation and continued cost focus

-- Continued revenue uncertainty regarding the timing of return of market-paid activity, particularly EQ Digital

   --      Further interest income impact as hedging unwinds, offset by cost reduction activity 
   --      Focus on business simplification, reduction of leverage and generation of free cash flow 
   --      Planning on return to profitable growth as market conditions normalise 

Commenting on the Group's results, Cheryl Millington, Chief Executive, said :

"Our financial results for 2020 have been significantly impacted by the challenging macro environment. However, the fundamental strengths of our business model remain and EQ is well positioned for an improvement in market conditions and economic and capital market recovery.

"While uncertainty continues, the outlook for capital market activity in 2021 is encouraging and we have started the year well with a number of important new business wins. Our focus is on driving performance and market share, while reducing the Group's debt and delivering on our cost initiatives to offset reduced interest income in a low interest rate environment.

"We look forward to welcoming Paul Lynam as CEO from 1 April. I would also like to thank all of my colleagues for their ongoing commitment in continuing to deliver a seamless service to our clients throughout the COVID-19 crisis. As CEO I have witnessed the consistency and quality of the service that EQ delivers, which has been so critical in these challenging times. The depth of our client relationships provides me with confidence as we look to the future."

(1) Change at actual foreign exchange rates. Revenue change at constant foreign exchange rates is (15.1%) and underlying EBITDA is (32.6%).

(2) Reported revenue declined by 15.1%. Organic revenue declined by 15.9%. Calculation of organic revenue can be found on page 12.

(3) Operating cash flow conversion is calculated after allowing for use of a GBP20.0m receivables financing facility the Group has in place of which GBP 8.0m

(2019: GBP8.0m) was utilised at the end of the period. Details of the facility can be found on page 14.

(4) Proforma leverage is calculated to include the divestment of the EQi direct-to-consumer business had it completed in FY 2020.

*The Group uses alternative performance measures to provide additional information on the underlying performance of the business. See pages 17 to 18 for further detail.

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.

 
 Conference call details: 
 Participant dial-in:       UK: +44 (0) 33 0551 0200 
                            US: +1 212 999 6659 
 Password:                  Equiniti 
 

For further information please contact:

 
 Analyst/Investor enquiries: 
  EQ 
  Cheryl Millington, Chief Executive 
  John Stier, Chief Financial Officer 
  Frances Gibbons, Head of Investor Relations      +44 (0) 7484 072 471 
 Media enquiries: 
  Tulchan Communications LLP 
  Martin Robinson 
  Olivia Peters                                  +44 (0) 20 7353 4200 
 

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.

CHAIRMAN'S STATEMENT

2020 has been dominated by COVID-19 and despite the considerable efforts of our colleagues and the continued loyalty of our customers has proved to be a very disappointing year for EQ's shareholders. The pandemic was starting to break in the UK just as we were finalising our Annual Report for 2019, and even though we were cautious at that stage, the way in which the effects of the pandemic have played out, and in particular the nature and timing of the measures taken by the regulators in response to the pandemic, have left EQ's financial performance much more exposed than expected.

Before the pandemic broke, the Board was confident that the Group was well placed for a positive 2020, targeting further growth in revenue and profit, a robust cash inflow and continued reduction in leverage. However, the disruption to capital markets and the wider economy has had an unprecedented and widespread impact on our markets. Quite understandably, corporate clients have been deferring projects, reducing or cancelling the level of their dividends and in the UK those fundraisings which they have undertaken have in many cases been structured directly through placings rather than the more usual rights issue. Actions taken by the authorities, such as the reduction in central bank interest rates and the temporary disapplication of pre-emption rights for certain share issues, were understandable from an economic and regulatory standpoint but have had a marked effect on our revenue. While our recurring business has proved resilient, around half of the discretionary and market-paid element of our revenues has been adversely impacted. Although there will inevitably be a recovery in certain market-paid revenues as the financial markets and economies recover, the reduction in central bank interest rates on which a significant part of Group revenues has depended can no longer be relied upon as a significant revenue source in the near term. Total interest-related income earned across the Group decreased by GBP16.9m in 2020 with a further reduction of GBP14m expected in 2021.

Total revenue fell by 15.1% to GBP471.8m, with an organic revenue decline of 15.9%. Given the inherent profitability of the revenue streams affected by the economic uncertainty, underlying EBITDA was 32.6% lower at GBP91.7m. The Group reported a loss after tax of GBP1.1m. Net debt continued to reduce during the year, but the lower EBITDA resulted in an increase in leverage, from 2.5x at 31 December 2019 to 3.4x at 31 December 2020. The Board remains committed to reducing leverage and we continue to target a range of 2.0x to 2.5x over the medium term to be delivered through a return to growth, ongoing cash flow and selected disposals.

There were many positives to the year, not least the leadership team's rapid response to the onset of the pandemic. We were able to protect our people by switching quickly to home working, while continuing to support our customers and clients. This in turn helped to maintain the client loyalty which is the cornerstone of our business. The cost reductions we have implemented also offset some of the impact on profitability this year and will provide a springboard for more rapid recovery in profits when market conditions allow.

It was also pleasing to see a record order intake during the year, with successes in renewals and new business across all parts of the Group. In the UK, EQ Boardroom continued to demonstrate that it is the provider of choice, winning business from both new issuers and established companies transferring from competitors. The trajectory in EQ Paymaster is positive, with key renewals secured, including MyCSP, the Group's largest contract, and a significant number of new client gains. EQ Digital faced continuing delays in customers' approval of new projects, although it had encouraging sales of certain new platforms as it continues to more closely integrate with the rest of the Group. EQ US faced into a difficult market where a lower level of corporate activity and reduction in interest rates weighed heavily on both fees and interest income. However, it also gained further market share and signed important new channel partnerships, which will accelerate growth in equity compensation plans.

Faced with the significant reduction in market-paid revenues and acknowledging that those elements of our revenue which are linked to central bank rates are unlikely to recover to pre-pandemic levels for many years, our leadership took urgent steps to reduce costs and prioritise capital expenditure whilst still supporting our long-term investment programmes. We have also taken steps to address concerns regarding the level of the Group's debt. The Group ended the year with lower debt due to strong underlying free cash flow, and this has been supported by disposals of non-core assets, part of a programme which has continued through year end with the disposal of EQi's direct-to-consumer business announced in March. The UK Government's deferral of VAT payments also contributed GBP7.5m of the GBP44.5m of free cash flow to equity holders.

DIVID

On 15 April 2020, in light of the economic uncertainty, we announced our decision to withdraw our final dividend for the year ended 31 December 2019.

With trading conditions continuing to be difficult and uncertainty remaining high, the Board decided not to declare an interim dividend with our half year results, nor are we proposing a final dividend for 2020. We recognise the importance of dividends to shareholders and intend to resume dividend payments once we are confident that increases in the order book are translating into profit growth, that leverage continues to track downwards and that generation of free cash flow to equity holders continues.

BOARD AND GOVERNANCE

This was an active year for the Board, as we held more regular meetings to ensure effective oversight of the Group's response to the pandemic. This included thorough debates over key issues such as the deferral of the dividend, our approach to furlough and accepting Government support.

On 5 January 2021, the Board announced the appointment of Paul Lynam as Chief Executive with effect from 1 April 2021, succeeding Guy Wakeley who had been in the role since 2014. Paul is an experienced business leader focused on customer satisfaction and staff engagement as key levers of business success. The Board thanks Guy for his committed and ambitious leadership, especially through the unprecedented challenges of 2020, and we wish him every success in the future. Cheryl Millington, an independent non-executive Director at EQ, has assumed the role of interim Chief Executive until Paul joins on 1 April 2021, and I should like to record the Board's gratitude for the way she has stepped in at short notice and the clear leadership she has provided during this period.

Today, the Board announces that in line with our normal succession timetable, Dr Tim Miller will not be seeking re-election as an independent non-executive Director at our next AGM and that Mark Brooker will be replacing Tim as Chair of the Remuneration Committee. On behalf of the Board, I should like to thank Tim for his valuable contribution over the six years he has served on the Board.

PEOPLE AND CULTURE

The pandemic has meant considerable uncertainty and upheaval for our people this year and I want to thank them for the way they have responded and their commitment to ensuring we continue to deliver for customers and clients. EQ is becoming an increasingly purpose-led organisation and our operational performance this year has shown we are translating that purpose into action. The appointment of Andrew Stephenson as our new Chief People Officer will help us to make further progress in 2021, given his deep understanding of how to help frontline teams succeed.

The Board engages directly with our people through our designated non-Executive Director, Dr Tim Miller. He has led an active programme of engagement, which continues to be beneficial. We were pleased to see a good improvement in engagement scores in this year's survey, which in part reflects the significant increase in the frequency and intensity of communications between management and colleagues during the pandemic. On Tim's retirement at the AGM, this role will be taken on by Cheryl Millington once she returns to being non-executive.

LOOKING FORWARD

EQ enters the new year with a leaner and more digitally focused business, which will support a recovery in profitability once revenues recover. The core strengths of our business remain intact. The actions taken over the last twelve months have set us up to return to growth once market conditions allow. The Group has strong liquidity and improving leverage ratios. I have every confidence that once our new management team has settled, we will be able to further simplify the Group both presentationally and operationally as key steps in restoring shareholder value.

Philip Yea

Chairman

1 April 2021

OUR RESPONSE TO COVID-19

Employees

Employee wellbeing was the top priority as the Group moved rapidly to home working. This successful transition was supported by the roll out in the first half of a desktop computing environment (GlobalOne) which provides a single working environment across the Group and helps employees to collaborate and share work seamlessly.

A key aim was to retain as many skills as possible during the pandemic. EQ has a long-tenured workforce, with colleagues who have been with the Group for many years. As a business of specialists, not generalists, it is important those skills are retained within the Group, benefitting clients, customers and shareholders. The Group therefore redeployed people where necessary and utilised Government support packages where appropriate. During this period the Group received GBP0.5m from the Government's job retention scheme. However, the Group ensured that all employees continued to receive their full pay. All furloughed colleagues had returned to work by the end of June 2020.

Anticipating the impact COVID-19 was likely to have on colleagues, and in order to help to insulate them from the impact of the pandemic, a pay rise of GBP400 was awarded to UK employees who earned under GBP30,000 per year. In addition, all colleagues who had been with the business since the start of the pandemic were offered GBP300 of free shares in EQ.

Clients

The seamless transition to home working, underpinned by GlobalOne, ensured an exemplary operational response, with all lines of business sustained without interruption. The quality of the service delivered since the start of the pandemic has resulted in strong client and customer satisfaction levels.

Accelerating programmes of service automation and digitisation will have important operational and efficiency benefits for EQ but will also support further improvements in client and customer experience, for example by ensuring services are simple and accurate and enabling self-service where possible.

Financial strength

The Group has a robust financial position and balance sheet, with a term loan and revolving credit facility (RCF) totalling GBP520.0m in place until July 2024. At 31 December 2020, we had undrawn funds of GBP202.0m available through the RCF and cash of GBP42.4m to support our operations.

Nonetheless, given the duration and impact of the pandemic were uncertain, the Group considered it prudent to preserve cash and liquidity during the crisis. In addition to suspending the dividend, the Group paused all acquisition activity and reprioritised capital expenditure to match market conditions, without affecting investment in core customer-facing technology and planned efficiency improvements.

Cost measures

The Group proactively managed its cost base, including cancelling salary reviews for senior employees, freezing recruitment and removing interim resources. Performance share plan awards for the executive leadership team were also reduced by 50%. In addition, the Group anticipated future working patterns and undertook an extensive review of its property portfolio. With more than 70% of colleagues identified as flexible workers, 17 out of 38 properties will be fully or partially closed. The total cost savings implemented are as follows:

 
                                   2020 
                                   GBPm 
------------------------------   ------ 
 Cost Savings 
  Consultancy and contractors       4.6 
  Third-party spend                 5.0 
  Incentives                        5.0 
 Cost avoidance 
  Hiring avoided                    4.0 
  Pay reviews                       2.4 
 Gross savings                     21.0 
-------------------------------  ------ 
 

Total operating expenditure reduced by 9.4% to GBP380.1m (2019: GBP419.7m). In addition a further GBP15m of cost savings is expected to flow into 2021 from initiatives the Group has commenced.

The Group has recorded non-operating items of GBP15.9m reflecting costs of GBP19.7m associated with COVID-19 and the Group's response, offset by a GBP3.8m gain on business disposals. Charges associated with COVID-19 and the restructuring activities performed as a result are as follows:

 
                             2020 
                             GBPm 
------------------------   ------ 
 Office consolidation        11.7 
 People severance costs       5.0 
 Untaken annual leave         3.0 
 Total charges               19.7 
-------------------------  ------ 
 

GROUP RESULTS

 
                                                        Reported            Organic 
                                      2020      2019    Change %           Change % 
 -------------------------------  --------  --------  ----------  ----------------- 
 Revenue (GBPm) 
 EQ Boardroom                        127.7     149.7      (14.7)             (17.1) 
 EQ Digital                          137.9     170.9      (19.3)             (19.3) 
 EQ Paymaster                        115.6     127.0       (9.0)              (8.7) 
 Interest Income                      10.0      14.1      (29.1)             (29.1) 
----------------------------      --------  --------  ----------  ----------------- 
 Total UK & Europe                   391.2     461.7      (15.3)             (16.0) 
  EQ US                               80.6      94.0      (14.3)             (15.5) 
----------------------------      --------  --------  ----------  ----------------- 
 EQ                                  471.8     555.7      (15.1)             (15.9) 
----------------------------      --------  --------  ----------  ----------------- 
 
   Underlying EBITDA (GBPm) 
 EQ Boardroom                         36.4      50.2      (27.5) 
 EQ Digital                           29.6      43.5      (32.0) 
 EQ Paymaster                         15.1      19.5      (22.6) 
 Interest Income                      10.0      14.1      (29.1) 
 Total UK & Europe                    91.1     127.3      (28.4) 
  EQ US                               14.2      23.1      (38.5) 
----------------------------      --------  --------  ---------- 
 Divisional Total                    105.3     150.4      (30.0) 
 Central Costs                      (13.6)    (14.4)       (5.6) 
----------------------------      --------  --------  ---------- 
 EQ                                   91.7     136.0      (32.6) 
----------------------------      --------  --------  ---------- 
 
 Underlying EBITDA margin (%) 
 EQ Boardroom                         28.5      33.5       (5.0) 
 EQ Digital                           21.5      25.5       (4.0) 
 EQ Paymaster                         13.1      15.4       (2.3) 
----------------------------  ------------  --------  ---------- 
 Total UK & Europe                    23.3      27.6       (4.3) 
  EQ US                               17.6      24.6       (7.0) 
----------------------------  ------------  --------  ---------- 
 EQ                                   19.4      24.5       (5.1) 
----------------------------  ------------  --------  ---------- 
 Reported change is at actual foreign exchange rates. Organic change 
  % is at constant foreign exchange rates. 
  Reported revenue change at constant foreign exchange rates is 
  (15.1%) and underlying EBITDA is (32.6%). 
  EQ US reported revenue change at constant foreign exchange rates 
  is (14.0%) and underlying EBITDA is (38.3%). 
  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. Here we adjust 2019 for 2020 
  acquisitions and disposals had they been in place in 2019 to create 
  a like-for-like comparison of year-on-year progress. 
 
 

Overview

2020 was a very challenging year with disruption to capital markets and the wider economy significantly impacting EQ's financial performance. Revenue declined by 15.1% to GBP471.8m (2019: GBP555.7m) during the year, whilst revenue adjusted for acquisitions, disposals and foreign exchange rates declined by 15.9%. Underlying EBITDA declined by 32.6% to GBP91.7m (2019: GBP136.0m) reflecting a reduction in higher margin market-paid and discretionary projects, and reduced interest rates. Q4 was slower than expected as the ongoing economic disruption resulted in extended sales cycles for a number of business opportunities.

Whilst the core business has proved resilient with strong client retention and new business wins in all divisions, the ongoing disruption to capital markets and the wider economy continued to hold back any material recovery in market-paid and discretionary revenues. These revenues arise mainly from commission and fee-based income from capital market activity, interest-related income and discretionary projects, and are higher margin in nature. EQ Boardroom was impacted by lower corporate activity, fewer share dealing programmes and reduced dividend commissions. EQ Digital was impacted by a lower level of software sales and reduced remediation volumes as some clients closed sites and deferred projects. In EQ Paymaster, there was some impact with projects being delayed in addition to the GBP2.2m price reduction relating to the MyCSP contract which was agreed as part of the September 2018 contract extension. There are no further price step downs as part of the latest contract extension from 2021 to the end of 2023. EQ US was impacted by uncertainty in capital markets resulting in a lower level of corporate actions and project work plus a lower interest rate environment.

Interest income in the UK, including interest rate hedges, was 29.1% lower at GBP10.0m (2019 (GBP14.1m) on average client balances of GBP1.6bn (2019: GBP1.7bn) reflecting the declining interest rates in the UK. At 31 December 2020, the Group held interest rate swaps totalling GBP645m (2019: GBP1,025m) to hedge the exposure of UK interest rates. In the US, revenue from interest income, including interest rate hedges, was 0.8% lower at GBP12.3m (2019: GBP12.4m) on average interest-bearing client balances of GBP445m (2019: GBP534m). At 31 December 2020, the Group held interest rate swaps totalling $700m (2019: $700m) to hedge the exposure of US interest rates. These expired in March 2021. Total interest-related income earned across the Group reduced by GBP16.9m to GBP24.8m (2019: GBP41.7m) reflecting the GBP10.1m decline in interest income and the GBP6.8m decline in corporate actions in the US, where the Group earns interest as fee income. Looking forward, total interest-related income earned across the Group is expected to reduce by a further GBP14m in 2021 as the hedges expire. However, trading is largely insulated from the potential detriment of negative interest rates through protections within the terms of our contracts.

Central costs in the period decreased by 5.6% to GBP13.6m (2019: GBP14.4m) and are in line with the Group's medium-term goal.

Operating cash flow conversion of 97% (2019: 91%) reflected stronger cash collection in Q4 as client payment terms returned to normal and the deferral of GBP7.5m of VAT of which GBP5.7m is deferred to 2021 and GBP1.8m is deferred to Q1 2022. Net debt reduced by GBP35.7m to GBP307.9m (2019: GBP343.6m) with leverage of 3.4x (2019: 2.5x), reflecting a lower level of underlying EBITDA.

OPERATIONAL REVIEW

The Group serves its clients through four divisions: EQ Boardroom (previously Investment Solutions), EQ Digital (previously Intelligent Solutions), EQ Paymaster (previously Pension Solutions), 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 we administer 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, as well as direct to retail customers.

 
                                2020    2019   Change % 
----------------------------  ------  ------  --------- 
 Revenue (GBPm)                127.7   149.7     (14.7) 
 Underlying EBITDA (GBPm)       36.4    50.2     (27.5) 
 Underlying EBITDA margin ( 
  %)                            28.5    33.5      (5.0) 
----------------------------  ------  ------  --------- 
 

Revenue in EQ Boardroom decreased by 14.7% to GBP127.7m (2019: GBP149.7m) with a decline in corporate action revenue of 29.3% to GBP8.2m (2019: GBP11.6m). Strong client retention and increased market share were offset by lower corporate activity, fewer share dealing programmes and reduced dividend commissions.

Underlying EBITDA decreased by 27.5% to GBP36.4m (2019: GBP50.2m) driven by the reduction in revenue which significantly impacted higher margin activity.

Whilst the underlying business proved resilient with strong client retention and new client wins, the discretionary revenues, which are mainly market-paid and significantly higher margin business, were severely impacted by the uncertain market environment. Market-paid revenues include commissions from share dealing, dividend reinvestment, and corporate actions. During the period, clients deferred or withdrew dividend payments and cancelled their share dealing programmes, and there was less corporate activity in the market as the large number of non-pre-emptive placings eliminated corporate actions in the period. The reduction in interest rates also impacted the divisional performance.

Our share registration business performed well with strong client retention and increased market share. There were a significant number of renewals in the period including Imperial Brands, Premier Foods and Spectris. The business also continued to win clients from other providers, with a further nine transferring from competitors, including Hastings, Paypoint and Vodafone.

The business was successful at securing mandates for IPOs, with eight won during the year. These included The Hut Group, Calisen and SourceBio International.

The share plans business also had a good year with new client wins including BAE Systems, Rentokil and Wincanton. The business has also seen a number of corporates launch COVID-specific share plans as a means to incentivise employees.

In February 2020, the division completed the acquisition of Monidee B.V (Monidee), a highly complementary share plans business servicing more than 200,000 employees across 210 corporate clients in 50 countries. The acquisition allows EQ to meet current client demand and provides a leading proprietary platform to attract new international clients. The business has secured four new global share plan clients. In addition, it has also gone live with a significant new client, utilising its system to provide a live order book and investor website for the listing of stocks and bonds for small and medium-sized enterprises in Europe.

The division's execution-only brokerage service delivered a solid performance. Whilst revenue from trading in certificated shares and postal dealing was lower in the period, the business earned higher revenue through its proprietary platform, as both new and experienced investors took advantage of lower share prices and switched away from cash following the reduction in interest rates.

EQPay, EQ's global payments business, had a slow year as a result of the reduction in transaction volumes during the pandemic.

Whilst the headwind from reduced interest rates in the UK remains, EQ Boardroom enters 2021 with its strongest pipeline of potential new business in several years. The division continues to gain market share with five share register transfers, 14 IPOs and 15 share plans secured year to date. With a significant pipeline in new business and fundraisings, and as corporates return to dividend payments, the division is well positioned for future growth.

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.

 
                                2020    2019   Change % 
----------------------------  ------  ------  --------- 
 Revenue (GBPm)                137.9   170.9     (19.3) 
 Underlying EBITDA ( GBPm)      29.6    43.5     (32.0) 
 Underlying EBITDA margin ( 
  %)                            21.5    25.5      (4.0) 
----------------------------  ------  ------  --------- 
 

Revenue in EQ Digital decreased by 19.3% to GBP137.9m (2019: GBP170.9m) whilst underlying EBITDA decreased by 32.0% to GBP29.6m (2019: GBP43.5m). The decline was driven by reduction in remediation volumes and delayed and cancelled software sales and project work.

Remediation services are driven by regulation and are often non-discretionary in nature. As clients reacted to the challenging environment, many remediation projects were delayed and this impacted both the sale of software and the provision of remediation as a service.

Elsewhere, a number of clients cancelled or deferred software purchases as their operational response to the lockdown delayed their own internal projects.

Credit services secured a number of software license sales in the year, including Development Bank of Wales and the launch of a flexible digital servicing solution for Hodge Bank, marking its entry into the mortgage market. This cost-effective loan servicing platform will allow mortgage lenders to quickly launch competitive new services, while ensuring they remain compliant with regulation.

Our risk analytics platform gained further traction, with all major UK high street banks now using the platform. During the year, the division won new business with ABN AMRO, Lloyds Banking Group and Austrian bank Raiffeisen. In addition, EQ Digital is now able to offer the platform as software as a service, enabling it to provide individual modules rather than the entire system. This has given the business more agility and increased interest from clients.

Our KYC business continued to successfully expand into Northern Europe and signed a technology deal with Dutch bank, FMO. In addition, the business launched a partnership with Encompass, to automate and use artificial intelligence to analyse data that helps build a dynamic picture of a company or individual in just minutes.

The EQ Insider platform, which was launched as part of the division's data services offering, continued to gain traction and is now supporting 22 J.P. Morgan investment trusts. Other wins in the period included a contract with Centrica to provide web forms for processing applications for delayed and cancelled services, and an ATOL claims platform for the Civil Aviation Authority.

EQ Digital continued to develop new propositions during the year. In addition to the launch of EQ Insider, the division introduced EQ Complaints Professional, a software as a service complaints management tool. EQ Digital has begun to offer standby facilities for major banks, under which EQ Digital would step in if one of the client's counterparties failed, to run essential services for that counterparty such as payments, administration and system continuity. The product has already gained good traction in the market.

The external environment remains challenging with many client offices remaining closed, impacting remediation project work, and PPI coming to an end in 2021. Whilst the division has a strong pipeline and is seeing an increased requirement for debt administration and credit services in particular, there has not been any step up in clients committing to deals. Corporates are waiting for economic market conditions to improve and a return to offices before making commitments to projects.

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.

 
                                2020    2019   Change % 
----------------------------  ------  ------  --------- 
 Revenue (GBPm)                115.6   127.0      (9.0) 
 Underlying EBITDA ( GBPm)      15.1    19.5     (22.6) 
 Underlying EBITDA margin ( 
  %)                            13.1    15.4      (2.3) 
----------------------------  ------  ------  --------- 
 

Revenue in EQ Paymaster declined by 9.0% to GBP115.6m (2019: GBP127.0m) whilst underlying EBITDA declined by 22.6% to GBP15.1m (2019: GBP19.5m). The decline was due to contract losses in previous years, the GBP2.2m price reduction in the MyCSP contract, which was agreed as part of the September 2018 contract extension, and a delay in some project work, particularly for Government.

The division had an extremely pleasing performance in respect of client retention and new business wins. It successfully renewed or extended relationships with clients including AXA, Bank of England, British Airways, Canada Life, HP, Hays, Irish Life, Prudential, Shell, SLOC and QinetiQ.

EQ Paymaster also agreed an extension to the MyCSP contract for the Principal Civil Service Pension Scheme with no further price reductions. This is the Group's largest single contract and the extension will see it run until at least the end of December 2023. In addition, MyCSP will partner with the Cabinet Office for its '2015 Remedy Programme', which will address the changes required in response to the McCloud Judgment. Completing this cycle of successful renewals, the majority of which have signed for the long term, will provide a stable underpin for revenue going forward.

EQ Paymaster secured a significant number of new wins in the year, including contracts with HSBC, Link and Royal London. The HSBC scheme is the largest workplace pension scheme to come to market for several years. This unprecedented intake of new business provides momentum for an expected return to growth for EQ Paymaster during 2021. EQ Paymaster also won a place on a framework to provide software to local authorities and on another to provide flexible benefits to public sector bodies, both of which should start to provide opportunities to win further new business in 2021.

The 2015 Remedy (McCloud) programme is starting to generate opportunities. However, progress has been slower than originally expected, in part as the relevant Government departments have prioritised their response to the COVID-19 pandemic.

Strong client retention and the significant new business wins in 2020 provide further momentum for an expected return to growth in 2021.

EQ US

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

 
 
                                 2020     2019     Change % 
----------------------------  -------  -------  ----------- 
 Revenue (GBPm)                  80.6     94.0       (14.3) 
 Underlying EBITDA (GBPm)        14.2     23.1       (38.5) 
 Underlying EBITDA margin ( 
  %)                             17.6     24.6        (7.0) 
----------------------------  -------  -------  ----------- 
 

EQ US Reported revenue change at constant foreign exchange rates is (14.0%) and underlying EBITDA is (38.3)%.

Revenue in EQ US declined by 14.3% to GBP80.6m (2019: GBP94.0m) whilst underlying EBITDA declined by 38.5% to GBP14.2m (2019: GBP23.1m), with market share gain and strong traction with new products offset by a lower level of corporate activity. Revenue from corporate actions declined by 64.2% to GBP3.9m (2019: GBP10.9m) as a result of lower corporate activity and reduced interest rates. Revenue from interest income declined by 0.8% to GBP12.3m (2019: GBP12.4m) on average client balances of GBP445m (2019: GBP534m). This was supported by interest rate swaps that expired in March 2021.

Whilst the underlying business performed well, with new client wins and strong client retention, the challenges of the reduction in interest rates, the suspension of dividend payments and plans, and the reduction in corporate activity significantly impacted the divisional performance.

Key client renewals in the period included Allete, Honeywell, J.P. Morgan and Wells Fargo. The division also gained significant market share, securing 21 transfer agency client wins in the period. New wins included American Midstream Partners, Arcutis, Diamond Hill Investments, Fulton Financial, NuSkin Enterprises Inc. and Richardson Electronics for transfer agency and 21 equity compensation clients including FS Bancorp, Vertex, and Sportsman's Warehouse. New IPO mandates included The Azek Company, Treeon Insurance, Vertex and ZoomInfo. EQ US's ability to offer clients attractive packages of services have supported its ability to win new business this year.

The division continued to benefit from the launch of new products. The equity compensation plans launched in 2019 have seen strong momentum and sales of share plan services are expected to accelerate through new partnerships signed with Vanguard and Principal Financial, two of America's largest financial services companies. These partnerships enable EQ US to leverage the significant sales resources of Vanguard and Principal Financial and have the potential to introduce other EQ US products over time.

In response to COVID-19, the division's virtual annual meeting service has seen strong growth with more than 50 shareholder meetings in the year, including 9 with competitors' clients. EQ US has invested to enhance the functionality of its virtual meetings product, which will help it to further increase its market share in 2021.

Sales of EQ US's asset reunification service are proceeding to plan and the division has worked on projects with a number of clients this year. EQ US has also launched a new platform to administer private M&A transactions, which was developed with the support of the EQ technology team in Krakow, Poland. Cross-selling of capabilities developed in the UK continues, with the division actively selling EQ Riskfactor into the client base.

In November 2019, EQ US acquired Corporate Stock Transfer, a US transfer agent based in Denver, Colorado. The acquisition offers important benefits for EQ US. It expands the division's addressable market by opening up a new growth area in the micro-cap client space.

Whilst the division will be impacted by the expiration of interest rate swaps in March 2021, continued traction with new product launches and market share gains in 2020 provide further momentum going forward. The division continues to gain market share with 16 transfer agent clients, 6 IPOs and 9 equity compensation plans secured year to date.

FINANCIAL REVIEW

Group Income Statement

 
 GBPm                                                    2020     2019 
------------------------------------------  ---  ---  -------  ------- 
 Revenue                                                471.8    555.7 
----------------------------------------------------  -------  ------- 
 Underlying EBITDA                                       91.7    136.0 
 Depreciation                                          (12.9)   (12.9) 
 Amortisation - software                               (30.4)   (29.9) 
 Amortisation - acquired intangibles                   (26.7)   (31.8) 
----------------------------------------------------  -------  ------- 
 EBIT prior to non-operating items                       21.7     61.4 
 Non-operating items (net)                             (15.9)    (5.5) 
----------------------------------------------------  -------  ------- 
 EBIT                                                     5.8     55.9 
 Net finance costs                                     (12.4)   (16.1) 
 
 (Loss)/profit before income tax                        (6.6)     39.8 
 Tax                                                      5.5    (7.4) 
----------------------------------------------------  -------  ------- 
 (Loss)/profit from continuing operations               (1.1)     32.4 
 Non-controlling interests                              (0.6)    (1.6) 
----------------------------------------------------  -------  ------- 
 (Loss)/profit attributable to ordinary 
  shareholders                                          (1.7)     30.8 
----------------------------------------------------  -------  ------- 
 EPS (pence) 
  Diluted                                               (0.5)      8.4 
  Underlying diluted                                      9.1     18.1 
----------------------------------------------------  -------  ------- 
 

Revenue

Revenue decreased by 15.1% to GBP471.8m (2019: GBP555.7m) during the year whilst organic revenue declined by 15.9%. 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 2019 for 2020 acquisitions and disposals had they been in place in 2019 to create a like-for-like comparison of year-on-year progress. This is calculated as follows:

 
                           2019          2019       2019 
   Revenue (GBPm)      Reported    Adjustment    Organic 
-------------------  ----------  ------------  --------- 
 EQ Boardroom             149.7       4.4 (1)      154.1 
 EQ Digital               170.9             -      170.9 
 EQ Paymaster             127.0     (0.4) (2)      126.6 
 Interest Income           14.1             -       14.1 
-------------------  ----------  ------------  --------- 
 Total UK & Europe        461.7           4.0      465.7 
 EQ US                     94.0       1.4 (3)       95.4 
-------------------  ----------  ------------  --------- 
 EQ                       555.7           5.4      561.1 
-------------------  ----------  ------------  --------- 
 

(1) Acquisition of Monidee

(2) Disposal of HR Solutions

(3) Acquisition of Corporate Stock Transfer

*EQ US is translated at 2020 constant exchange rates to provide like-for-like comparison.

Underlying EBITDA

Underlying EBITDA prior to non-operating items of GBP15.9m decreased by 32.6% to GBP91.7m (2019: GBP136.0m) reflecting a lower level of higher-margin activity.

EBIT prior to non-operating items

EBIT prior to non-operating items was GBP21.7m (2019: GBP61.4m), 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. Non-operating items of GBP15.9m incurred in the period (2019: GBP5.5m) comprise GBP19.7m associated with COVID-19 and the Group's response, offset by a GBP3.8m gain on business disposals. Non-operating items associated with COVID-19 and the restructuring activities performed as a result relate to office consolidation (GBP11.7m), people severance costs (GBP5.0m) and non-cash costs related to annual leave accrued by employees (GBP3.0m). Annual leave accrual is expected to unwind in 2021 as holiday patterns normalise.

EBIT

EBIT remains an important measure of the Group's performance, reflecting profit before net finance costs and taxation. In 2020, EBIT was GBP5.8m (2019: GBP55.9m).

Net finance costs

Group net finance costs decreased by GBP3.7m to GBP12.4m (2019: GBP16.1m) reflecting a lower level of debt and lower interest rates.

Taxation

A loss before tax of GBP6.6m at the UK corporation tax rate of 19% gives an expected total tax credit of GBP1.3m. The actual tax credit for the period was GBP5.5m and the difference is largely explained by the impact of prior year adjustments, non-taxable gains on business disposals in the period and the impact of a change of tax rates on the opening deferred tax balances.

Net taxes paid in the period were GBP0.3m which is net of a repayment of GBP1.3m relating to overpaid 2018 corporation tax. Taxes paid of GBP1.6m relate to payments on account of taxation in the UK, Poland and India.

The Group received GBP1.3m from HM Revenue & Customs which represents the Group's claim to R&D expenditure credits. The tax credits are recognised in receivables and the movement is reflected within changes in working capital.

The Group has recognised deferred tax on GBP743.0m of gross tax attributes representing future tax deductions which are available to 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 GBP123.8m, on which a net deferred tax asset of GBP23.3m has been recognised at the relevant local statutory rate.

The gross tax attributes totalling GBP743.0m are represented by:

Future tax deductions on tax losses carried forward GBP229.6m

Future tax deductions on intangible assets GBP438.6m

Future tax deductions on property, plant and equipment GBP19.0m

Future tax deductions on employee benefits and other timing differences GBP55.8m

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 future tax deductions on employee benefits and other timing differences has increased in the period due to the adoption of IFRS 16, effective from 1 January 2019.

A cash effective tax rate of 5% applies for 2020, rising to c15% thereafter. The rate has been 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 our 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.

(Loss)/profit attributable to ordinary shareholders

The Group made a loss attributable to ordinary shareholders of GBP1.7m (2019: Profit attributable to ordinary shareholders of GBP30.8m).

EPS

Basic EPS of (0.5) pence (2019: 8.4 pence) is based on the weighted average number of shares totalling 368.6m (2019: 368.3m). Diluted EPS of (0.5) pence (2019: 8.4 pence) is based on the weighted average number of shares totalling 369.4m (2019: 368.3m).

Underlying EPS decreased by 49.7% to 9.1 pence compared to the prior period of 18.1 pence.

Capital structure

The Group's consolidated statement of financial position at 31 December 2020 is summarised as follows:

 
 GBPm                        31 December   31 December 
                                    2020          2019 
--------------------------  ------------  ------------ 
 Assets 
  Non-current assets               884.7         924.4 
  Current assets                   149.8         184.1 
--------------------------  ------------  ------------ 
 Total assets                    1,034.5       1,108.5 
--------------------------  ------------  ------------ 
 Liabilities 
  Non-current liabilities          375.8         439.6 
  Current liabilities              141.2         148.9 
--------------------------  ------------  ------------ 
 Total liabilities                 517.0         588.5 
--------------------------  ------------  ------------ 
 Total equity                      517.5         520.0 
--------------------------  ------------  ------------ 
 

Current assets include GBP75.6m of trade receivables and accrued income at 31 December 2020

(31 December 2019: GBP85.6m). 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. The blue chip nature of our client base results in minimal bad debts being recorded and the expense incurred in 2020 was GBP0.7m (2019: GBP0.3m).

Cash flow

The Group generated a free cash flow attributable to equity holders of GBP44.5m (2019: GBP37.1m), benefitting from VAT deferral of GBP7.5m, disposal proceeds of GBP14.8m, and delivered an operating cash flow conversion of 97% (2019: 91%), which also benefitted from the VAT deferral, and reflects good cash collection in Q4 and payment terms reverting to medium-term trend. The main movements in cash flow are summarised below:

 
 GBPm                                            2020     2019 
--------------------------------------------  -------  ------- 
 Underlying EBITDA                               91.7    136.0 
 Working capital movement                       (3.2)   (12.9) 
--------------------------------------------  -------  ------- 
 Operating cash flow prior to non-operating 
  items                                          88.5    123.1 
 Operating cash flow conversion                   97%      91% 
 Cash inflow/(outflow) on non-operating 
  items                                           9.2   (11.0) 
 Capital expenditure                           (37.3)   (48.5) 
 Net interest costs                             (9.4)   (16.9) 
 Taxes paid                                     (0.3)    (2.7) 
 Finance lease liabilities                      (6.2)    (6.9) 
--------------------------------------------  -------  ------- 
 Free cash flow attributable to equity 
  holders                                        44.5     37.1 
 Net reduction in borrowings                   (57.0)   (21.4) 
 Investment in current and prior year 
  acquisitions                                 (15.2)   (11.5) 
 Dividends paid (including payment to 
  non-controlling interest)                     (1.4)   (21.9) 
 Net cash movement                             (29.1)   (17.7) 
--------------------------------------------  -------  ------- 
 

The Group has access to a GBP20.0m receivables financing facility of which GBP8.0m (2019: GBP8.0m) 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 u nderlying EBITDA to total cash generated from operations (statutory cash flow statement)

 
 GBPm                                              2020     2019 
 Underlying EBITDA                                 91.7    136.0 
 Change in receivables and accrued income          11.6      4.9 
 Change in operating payables and prepayments    (18.3)   (10.0) 
 Share-based payments expense                       2.5      1.6 
 VAT deferral                                       7.5        - 
 Management incentives                            (6.0)    (6.5) 
 Other                                            (0.5)    (2.9) 
 Operating cash flow prior to non-operating 
  items                                            88.5    123.1 
 Non-operating items: 
  Non-operating P&L expense                      (15.7)    (5.5) 
  Net change in non-operating payables             11.7    (5.5) 
 Total cash generated from operations              84.5    112.1 
 Interest paid                                    (9.4)   (13.2) 
 Income tax paid                                  (0.3)    (2.7) 
----------------------------------------------  -------  ------- 
 Net cash inflow from operating activities         74.8     96.2 
----------------------------------------------  -------  ------- 
 

Capital expenditure

Net expenditure on tangible and intangible assets was GBP37.3m (2019: GBP48.5m). This represents 7.9% of revenue (2019: 8.7%). The level of capital expenditure declined following completion of the US integration in H2 2019 and was 6.5% of revenue in H2 2020. Non-essential capital expenditure and discretionary projects were suspended in light of the uncertain market environment, however customer facing and efficiency investment continues. Going forward, we expect capex in 2021 to be broadly similar in absolute terms to 2020 before reverting in the mid-term to our guidance of c7% of revenue.

Net interest costs

Net interest costs in the period were GBP9.4m (2019: GBP16.9m) reflecting lower interest rates as well as the effect of lower balances. The 2019 figure also included the acceleration of certain fees in connection with the refinancing of the Group's facilities.

Investment in current and prior year acquisitions

Net cash outflow on current and prior year acquisitions was GBP15.2m (2019: GBP11.5m).

Free cash flow attributable to equity holders

Free cash flow attributable to equity holders represents our cash flow prior to any acquisition, refinancing or share capital cash flows. It is a key measure of cash earned for the shareholders of the Group. The Group earned free cash flow to equity holders of GBP44.5m (2019: GBP37.1m) which benefitted from GBP7.5m VAT deferral and disposal proceeds of GBP14.8m.

Bank borrowings and financial covenants

 
 
   GBPm                                     2020     2019 
---------------------------------------  -------  ------- 
 Term loan                                 257.8    260.1 
 Revolving credit facility                  58.0    115.0 
 Lease liabilities                          34.5     41.1 
 Cash and cash equivalents                (42.4)   (72.6) 
 Net debt                                  307.9    343.6 
---------------------------------------  -------  ------- 
 Net debt/underlying EBITDA (times)          3.4      2.5 
---------------------------------------  -------  ------- 
 

At 31 December 2020, net debt was lower at GBP307.9m (31 December 2019: GBP343.6m), representing a ratio of 3.4x net debt/underlying EBITDA (31 December 2019: 2.5x), reflecting the lower level of underlying EBITDA in the period.

The Group has committed Senior Debt Facilities of GBP520.0m term loan and revolving credit facility running to July 2024. At 31 December 2020, the Group had undrawn funds of GBP202.0m available through the revolving credit facility and cash of GBP42.4m. The financial covenant attached to the committed facility is net debt/underlying EBITDA excluding lease liabilities should be no more than 4.0x in 2020, 3.75x in 2021 and 3.50x in 2022.

Acquisitions

In February 2020, the Group purchased the entire issued share capital of Monidee B.V. (Monidee). Initial consideration of GBP3.4m (EUR4.0m) was paid in February 2020 and deferred consideration of GBP3.4m (EUR4.0m) is payable in 2021. Monidee is a highly complementary share plans business that currently services more than 200,000 employees across 210 corporate clients in 50 countries.

Divestments

During the year, the Group completed three divestments.

On 15 April 2020, the Group disposed of its Equiniti 360 business. Until its sale Equiniti 360 was part of EQ Digital. The consideration for the transaction was GBP0.1m. For FY 2020, Equiniti 360 would have generated revenue of GBP0.2m and underlying EBITDA of GBP0.2m.

On 2 December 2020, the Group disposed of its HR and payroll business, HR Solutions. Until its sale, HR Solutions was part of EQ Paymaster. The consideration for the transaction was GBP13.2m and the Group recognised an accounting profit of GBP3.4m on disposal, versus the previously estimated GBP9.3m, primarily driven by a further allocation of goodwill. For FY 2020, HR Solutions generated revenue of GBP5.9m and underlying EBITDA of GBP1.7m.

On 31 December 2020, the Group disposed of its Charter Systems business. Until its sale, Charter Systems was part of EQ Digital. The consideration for the transaction was GBP1.95m and the Group recognised an accounting profit of GBP0.3m on disposal. In 2020, Charter Systems generated revenue of GBP1.4m and underlying EBITDA of (GBP0.1m).

Post balance sheet item

On 8 March 2021, the Group announced that it had reached an agreement to sell its EQi direct-to-consumer business (D2C). Until its sale the D2C business was part of EQ Boardroom. The sale to interactive investor (ii) is anticipated to complete during the summer of 2021, following a customer migration exercise. The total consideration payable is up to GBP48.5m comprising GBP47.5m payable in cash at completion, and up to a further GBP1.0m payable contingent on the timing of migrating all customers to the ii platform. For full year 2020, the business generated revenue of GBP14.5m and EBITDA of GBP3.3m. EQ expects to report an accounting profit on the transaction of GBP13.0m and pay GBP2.1m of corporation tax in the year of disposal, after utilising available brought forward tax losses in the Group. Group interest costs will reduce by GBP0.4m following completion of the transaction as debt is reduced.

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. See page 12 for calculation.

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 year, and costs that are transformational in nature.

 
 Reconciliation of (loss)/profit before income              2020    2019 
  tax to underlying EBITDA (GBPm) 
-------------------------------------------------------  -------  ------ 
 (Loss)/Profit before income tax                           (6.6)    39.8 
  Plus: Depreciation of property, plant and equipment       16.9    12.9 
  Plus: Amortisation of software                            30.4    29.9 
  Plus: Amortisation of acquisition-related intangible      26.7    31.8 
   assets 
  Less: Finance income                                     (0.1)       - 
  Plus: Finance costs                                       12.5    16.1 
  Less: Net gain on business disposals                     (3.8)       - 
-------------------------------------------------------  -------  ------ 
 EBITDA                                                     76.0   130.5 
 Adjustment for non-operating items impacting 
  EBITDA 
  Plus: Charges and restructuring activities 
   associated with COVID-19 
   Office consolidation                                      7.7       - 
   People severance costs                                    5.0       - 
   Untaken annual leave                                      3.0       - 
  Plus: Transaction costs                                      -     0.3 
  Plus: Integration costs                                      -     5.2 
-------------------------------------------------------  -------  ------ 
 Underlying EBITDA                                          91.7   136.0 
-------------------------------------------------------  -------  ------ 
 

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 14 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. See page 14 for calculation.

Earnings before interest and tax (EBIT)

EBIT is used to measure the financial performance of the Group excluding expenses that are determined by capital structure and tax regulations, instead of the underlying trading. In addition to this, net interest costs are impacted by fair value re-measurements of certain financial liabilities that are dependent on external market factors rather than the Group's core operations. See page 12 for calculation.

Cash tax rate

The cash tax rate is determined through a detailed calculation, estimating the future expected cash tax liabilities of the Group against our profit forecasts, adjusting for known variables such as changes in tax rates, changes in tax legislation (loss restriction rules) and implementation of the Group transfer pricing policy. We consider the cash tax rate to be an appropriate measure, as it best reflects the anticipated economic outflows from the business, taking into account our assessment of how our deferred tax attributes will unwind and reduce our cash tax liabilities over time.

Leverage and net debt

Leverage represents the ratio of net debt to underlying EBITDA. This is a key measure that evaluates the Group's capital structure and its ability to meet financial covenants. See page 15 for calculation of net debt.

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.

 
 Reconciliation to underlying EPS (GBPm)               2020      2019 
--------------------------------------------  ---  --------  -------- 
 Underlying EBITDA                                     91.7     136.0 
  Less: Depreciation                                 (12.9)    (12.9) 
  Less: Amortisation of software                     (30.4)    (29.9) 
  Plus: Finance income                                  0.1         - 
  Less: Finance costs                                (12.5)    (16.1) 
 Cash tax at 5%/12%                                   (1.8)     (8.9) 
 Non-controlling interest                             (0.6)     (1.6) 
-------------------------------------------------  --------  -------- 
 Underlying profit attributable to ordinary 
  shareholders                                         33.6      66.6 
-------------------------------------------------  --------  -------- 
 Weighted average number of ordinary shares           369.4     368.3 
-------------------------------------------------  --------  -------- 
 Underlying EPS (pence)                                 9.1      18.1 
-------------------------------------------------  --------  -------- 
 

PRINCIPAL RISKS AND UNCERTAINTIES

The Directors have considered the principal risks and uncertainties affecting the Group's financial position and prospects in 2020. As described on pages 52 to 55 of the Group's Annual Report for 2019, 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 and development; information technology; markets and competition; data protection; regulatory requirements; product development, channel and pricing; conduct; security; purchasing, supply and outsourcing; business continuity and resilience; and people.

By order of the Board

   Cheryl Millington                                    John Stier 
   Chief Executive                                     Chief Financial Officer 

1 April 2021

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE YEARED 31 DECEMBER 2020

 
                                                             2020      2019 
                                                   Note      GBPm      GBPm 
================================================  =====  ========  ======== 
 Revenue                                            3       471.8     555.7 
 Administrative costs                               4     (395.8)   (425.2) 
 Depreciation and impairment of property, 
  plant and equipment                                       (7.3)     (6.8) 
 Depreciation and impairment of right-of-use 
  assets                                                    (9.6)     (6.1) 
 Amortisation of software                                  (30.4)    (29.9) 
 Amortisation of acquisition-related intangible 
  assets                                                   (26.7)    (31.8) 
 Net gain on business disposals                               3.8         - 
 Finance income                                     14        0.1         - 
 Finance costs                                      14     (12.5)    (16.1) 
------------------------------------------------  -----  --------  -------- 
 (Loss)/profit before income tax                    3       (6.6)      39.8 
 Income tax credit/(charge)                         18        5.5     (7.4) 
================================================  =====  ========  ======== 
 (Loss)/profit for the year                                 (1.1)      32.4 
================================================  =====  ========  ======== 
 
 (Loss)/profit for the year attributable 
  to: 
  - Owners of the parent                                    (1.7)      30.8 
  - Non-controlling interests                                 0.6       1.6 
================================================  =====  ========  ======== 
 (Loss)/profit for the year                                 (1.1)      32.4 
================================================  =====  ========  ======== 
 
 Earnings per share attributable to owners of the parent: 
-----------------------------------------------------------------  -------- 
 Basic earnings per share (pence)                   5       (0.5)       8.4 
 Diluted earnings per share (pence)                 5       (0.5)       8.4 
------------------------------------------------  -----  --------  -------- 
 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARED 31 DECEMBER 2020

 
                                                  2020    2019 
                                                  GBPm    GBPm 
=============================================   ======  ====== 
 (Loss)/profit for the year                      (1.1)    32.4 
 
 Other comprehensive (expense)/income 
 Items that may be subsequently reclassified 
  to profit or loss 
 Fair value movement through hedging 
  reserve                                          1.0    13.6 
 Tax on movement in hedging reserve                  -   (2.1) 
 Net exchange losses on translation of 
  foreign operations                             (3.1)   (5.5) 
                                                 (2.1)     6.0 
 Items that will not be reclassified 
  to profit or loss 
 Defined benefit plan actuarial losses           (0.7)   (9.8) 
 Deferred tax charge on actuarial losses           0.8     1.7 
----------------------------------------------  ------  ------ 
                                                   0.1   (8.1) 
 ---------------------------------------------  ------  ------ 
 Other comprehensive expense for the 
  year                                           (2.0)   (2.1) 
==============================================  ======  ====== 
 Total comprehensive (expense)/income 
  for the year                                   (3.1)    30.3 
==============================================  ======  ====== 
 
 Total comprehensive (expense)/income 
  attributable to: 
  - Owners of the parent                         (3.4)    28.9 
  - Non-controlling interests                      0.3     1.4 
==============================================  ======  ====== 
 Total comprehensive (expense)/income 
  for the year                                   (3.1)    30.3 
==============================================  ======  ====== 
 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2020

 
                                                   2020      2019 
                                         Note      GBPm      GBPm 
======================================  =====  ========  ======== 
 Assets 
 Non-current assets 
 Property, plant and equipment                     20.0      20.1 
 Right-of-use assets                               25.9      35.2 
 Goodwill                                 9       527.6     529.9 
 Intangible assets                        9       261.1     293.8 
 Contract fulfilment assets               11       16.9      14.2 
 Other financial assets                             9.9      10.9 
 Deferred income tax assets               18       23.3      20.3 
                                                  884.7     924.4 
 Current assets 
 Trade and other receivables              10       40.7      50.6 
 Contract fulfilment assets               11       35.8      39.8 
 Agency broker receivables                         26.5      21.1 
 Other financial assets                             4.4         - 
 Cash and cash equivalents                         42.4      72.6 
                                                  149.8     184.1 
 Total assets                                   1,034.5   1,108.5 
--------------------------------------  -----  --------  -------- 
 
 Liabilities 
 Non-current liabilities 
 External loans and borrowings            15      311.1     369.1 
 Post-employment benefits                 19       31.5      31.7 
 Provisions                               13        4.7       5.7 
 Lease liabilities                                 28.3      33.1 
 Other financial liabilities                        0.2         - 
                                                  375.8     439.6 
 Current liabilities 
 Trade and other payables                 12       77.9      90.6 
 Contract fulfilment liabilities          11       17.0      16.3 
 Agency broker payables                            26.5      21.1 
 Income tax payable                                 0.5       2.1 
 Provisions                               13       10.7      10.4 
 Lease liabilities                                  6.2       8.0 
 Other financial liabilities                        2.4       0.4 
                                                  141.2     148.9 
 Total liabilities                                517.0     588.5 
======================================  =====  ========  ======== 
 Net assets                                       517.5     520.0 
======================================  =====  ========  ======== 
 
 Equity 
 Equity attributable to owners of the 
  parent 
 Share capital                            17        0.4       0.4 
 Share premium                                    115.9     115.9 
 Other reserves                                   193.6     194.4 
 Retained earnings                                198.5     199.7 
--------------------------------------  -----  --------  -------- 
                                                  508.4     510.4 
 Non-controlling interest                           9.1       9.6 
======================================  =====  ========  ======== 
 Total equity                                     517.5     520.0 
======================================  =====  ========  ======== 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 31 DECEMBER 2020

 
                                       Share     Share      Other   Retained  Non-controlling    Total 
                                     capital   premium   reserves   earnings         interest   equity 
                                        GBPm      GBPm       GBPm       GBPm             GBPm     GBPm 
----------------------------------  --------  --------  ---------  ---------  ---------------  ------- 
Balance at 1 January 
 2019                                    0.4     115.9      182.4      203.2              9.3    511.2 
Changes in accounting 
 standards - IFRS 16                       -         -          -      (1.6)                -    (1.6) 
Comprehensive income 
Profit for the year 
 per the income statement                  -         -          -       30.8              1.6     32.4 
Other comprehensive income/(expense) 
Changes in fair value 
 through hedging reserve                   -         -       13.6          -                -     13.6 
Deferred tax on movement 
 through hedging reserve                   -         -      (2.1)          -                -    (2.1) 
Net exchange loss on 
 translation of foreign 
 operations                                -         -      (5.5)          -                -    (5.5) 
Actuarial losses on 
 defined benefit pension 
 plans                                     -         -          -      (9.5)            (0.3)    (9.8) 
Deferred tax on defined 
 benefit pension plans                     -         -          -        1.6              0.1      1.7 
Total other comprehensive 
 income/(expense)                          -         -        6.0      (7.9)            (0.2)    (2.1) 
----------------------------------  --------  --------  ---------  ---------  ---------------  ------- 
Total comprehensive 
 income                                    -         -        6.0       22.9              1.4     30.3 
Purchase of own shares                     -         -      (3.8)          -                -    (3.8) 
Share option awards 
 to employees                              -         -        9.8      (6.0)                -      3.8 
Dividends (note 6)                         -         -          -     (19.7)                -   (19.7) 
Transactions with non-controlling 
 interests                                 -         -          -          -            (1.1)    (1.1) 
Share-based payment 
 transactions                              -         -          -        1.6                -      1.6 
Deferred tax relating 
 to share option schemes                   -         -          -      (0.7)                -    (0.7) 
Transactions with owners 
 recognised directly 
 in equity                                 -         -        6.0     (24.8)            (1.1)   (19.9) 
----------------------------------  --------  --------  ---------  ---------  ---------------  ------- 
Balance at 31 December 
 2019                                    0.4     115.9      194.4      199.7              9.6    520.0 
----------------------------------  --------  --------  ---------  ---------  ---------------  ------- 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)

FOR THE YEARED 31 DECEMBER 2020

 
                                       Share     Share      Other   Retained  Non-controlling    Total 
                                     capital   premium   reserves   earnings         interest   equity 
                                        GBPm      GBPm       GBPm       GBPm             GBPm     GBPm 
==================================  ========  ========  =========  =========  ===============  ======= 
Balance at 1 January 
 2020                                    0.4     115.9      194.4      199.7              9.6    520.0 
Comprehensive income 
(Loss)/profit for the 
 year per the income 
 statement                                 -         -          -      (1.7)              0.6    (1.1) 
Other comprehensive income/(expense) 
Changes in fair value 
 through hedging reserve                   -         -        1.0          -                -      1.0 
Net exchange loss on 
 translation of foreign 
 operations                                -         -      (3.1)          -                -    (3.1) 
Actuarial losses on 
 defined benefit pension 
 plans                                     -         -          -      (0.3)            (0.4)    (0.7) 
Deferred tax on defined 
 benefit pension plans                     -         -          -        0.7              0.1      0.8 
Total other comprehensive 
 (expense)/income                          -         -      (2.1)        0.4            (0.3)    (2.0) 
----------------------------------  --------  --------  ---------  ---------  ---------------  ------- 
Total comprehensive 
 (expense)/income                          -         -      (2.1)      (1.3)              0.3    (3.1) 
Share option and share 
 awards to employees                       -         -        1.3      (1.0)                -      0.3 
Transactions with non-controlling 
 interests                                 -         -          -          -            (0.8)    (0.8) 
Share-based payment 
 transactions                              -         -          -        2.5                -      2.5 
Deferred tax relating 
 to share option schemes                   -         -          -      (1.4)                -    (1.4) 
Transactions with owners 
 recognised directly 
 in equity                                 -         -        1.3        0.1            (0.8)      0.6 
==================================  ========  ========  =========  =========  ===============  ======= 
Balance at 31 December 
 2020                                    0.4     115.9      193.6      198.5              9.1    517.5 
==================================  ========  ========  =========  =========  ===============  ======= 
 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEARED 31 DECEMBER 2020

 
                                                                          2020     2019 
                                                                 Note     GBPm     GBPm 
--------------------------------------------------------------  -----  -------  ------- 
 (Loss)/profit before income tax                                         (6.6)     39.8 
 
 Adjustments for: 
 Depreciation and impairment of property, plant and equipment              7.3      6.8 
 Depreciation and impairment of right-to-use assets                        9.6      6.1 
 Amortisation of software                                                 30.4     29.9 
 Amortisation of acquisition-related intangibles                          26.7     31.8 
 Finance income                                                          (0.1)        - 
 Finance costs                                                            12.5     16.1 
 Net gain on business disposals                                          (3.8)        - 
 Share-based payment transactions                                          2.5      1.6 
 Changes in working capital: 
 Net decrease in receivables                                              11.0     12.7 
 Net decrease/(increase) in contract assets                                0.6    (7.8) 
 Net decrease in payables                                                (6.6)   (24.0) 
 Net increase in contract liabilities                                      1.5      2.0 
 Net decrease in provisions                                              (0.5)    (2.9) 
--------------------------------------------------------------  -----  -------  ------- 
 Cash flows from operating activities                                     84.5    112.1 
 Interest paid                                                           (9.4)   (13.2) 
 Income tax paid                                                         (0.3)    (2.7) 
==============================================================  =====  =======  ======= 
 Net cash inflow from operating activities                                74.8     96.2 
==============================================================  =====  =======  ======= 
 
 Cash flows from investing activities 
 Business acquisitions net of cash acquired                       7      (2.9)    (3.3) 
 Payments relating to prior year acquisitions                           (12.3)    (8.2) 
 Acquisition of property, plant and equipment                            (6.5)    (1.8) 
 Payments relating to developing and acquiring software                 (30.8)   (46.7) 
 Disposal of businesses                                           8       14.8        - 
 Net cash outflow from investing activities                             (37.7)   (60.0) 
==============================================================  =====  =======  ======= 
 
 Cash flows from financing activities 
 Purchase of own shares                                                      -    (3.8) 
 Cash received on exercise of options                                        -      3.8 
 Repayment of bank loans                                                     -   (60.0) 
 (Repayment of)/proceeds from revolving credit facility                 (57.0)     38.6 
 Payment of loan set up fees                                                 -    (3.7) 
 Payments in respect of leases (including interest)                      (7.8)    (6.9) 
 Dividends paid                                                   6          -   (19.7) 
 Transactions with non-controlling interests                             (1.4)    (2.2) 
 Net cash outflow from financing activities                             (66.2)   (53.9) 
==============================================================  =====  =======  ======= 
 
 Net decrease in cash and cash equivalents                              (29.1)   (17.7) 
 Net foreign exchange losses                                             (1.1)    (0.6) 
 Cash and cash equivalents at 1 January                                   72.6     90.9 
==============================================================  =====  =======  ======= 
 Cash and cash equivalents at 31 December                                 42.4     72.6 
==============================================================  =====  =======  ======= 
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARED 31 DECEMBER 2020

   1)   General information 

Equiniti Group plc (the Company) is a public limited company, limited by shares, which is listed on the London Stock Exchange and is incorporated and domiciled in the United Kingdom. The 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 2019 have been delivered to the Registrar of Companies and those for the 2020 year-end will be delivered following the Group's Annual General Meeting to be held on 26 May 2021. The external auditor has reported on the 2020 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 

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

New standards adopted by the Group

   --      Amendments to IAS 1 and IAS 8 - changes to definition of 'material' 
   --      Amendments to IFRS 3 - changes to definition of a business 
   --      Amendments to IFRS 9, IAS 39 and IFRS 7 in respect of the Interest Rate Benchmark Reform 

The above standards came into effect in the reporting period and did not have any impact on the financial statements of the Group.

Going concern

The 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. 2020 was an unprecedented year, with the COVID-19 pandemic impacting results. Despite this the Group has remained resilient generating GBP74.8m of net cash inflows from operating activities and reduced net debt from GBP343.6m to GBP307.9m at the year end.

At 31 December 2020, the Group had GBP23.5m of unrestricted cash together with additional borrowing capacity of GBP202.0m 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 3.75:1 at both 30 June 21 and 31 December 21, and 3.5:1 at the relevant reporting dates thereafter The Group is currently well within the covenant requirement.

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 in 2021 and assume:

-- Revenue growth starting to return, supported by recovery in the IPO market, and other market 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; and

   --      Completing the sale of our EQi business, which is planned for June 2021. 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARED 31 DECEMBER 2020

   2)   Basis of preparation (continued) 

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 one where the completion of the sale of our EQi business to interactive investor does not complete until H2 2021. 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 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. The Directors have therefore adopted the going concern basis in preparing these financial statements.

   3)   Operating segments 

The Group's operating segments have been identified as EQ Boardroom (previously Investment Solutions), EQ Digital (previously Intelligent Solutions), EQ Paymaster (previously Pension Solutions), EQ US and Interest, in line with how the Group runs and structures its business.

Revenue, EBITDA and underlying EBITDA are key measures of the Group's performance. EBITDA represents earnings before interest, tax, depreciation and amortisation. The EBITDA of each segment is reported after charging relevant corporate costs based on the business segment's usage of corporate facilities and services. Underlying EBITDA is adjusted for one-off items which obscure the understanding of the underlying performance of the Group and its respective divisions. Central costs principally include corporate overheads which are not allocated to a specific segment or segments.

 
      4)                  2020    2019 
 Reported revenue         GBPm    GBPm 
------------------      ------  ------ 
 EQ Boardroom            127.7   149.7 
 EQ Digital              137.9   170.9 
 EQ Paymaster            115.6   127.0 
 Interest                 10.0    14.1 
----------------------  ------  ------ 
 UK and Europe           391.2   461.7 
 EQ US                    80.6    94.0 
 USA                      80.6    94.0 
----------------------  ------  ------ 
 Total revenue           471.8   555.7 
----------------------  ------  ------ 
 
 
                                       2020    2019 
 Timing of revenue recognition         GBPm    GBPm 
---------------------------------    ------  ------ 
 Point in time                        106.5   128.3 
 Over time                            365.3   427.4 
-----------------------------------  ------  ------ 
 Total revenue                        471.8   555.7 
-----------------------------------  ------  ------ 
 
 
                                  2020     2019 
 Underlying EBITDA                GBPm     GBPm 
---------------------------    -------  ------- 
 EQ Boardroom                     36.4     50.2 
 EQ Digital                       29.6     43.5 
 EQ Paymaster                     15.1     19.5 
 Interest                         10.0     14.1 
-----------------------------  -------  ------- 
 UK and Europe                    91.1    127.3 
 EQ US                            14.2     23.1 
-----------------------------  -------  ------- 
 USA                              14.2     23.1 
-----------------------------  -------  ------- 
 Total segments                  105.3    150.4 
 Central costs                  (13.6)   (14.4) 
-----------------------------  -------  ------- 
 Total underlying EBITDA          91.7    136.0 
---------------------------    -------  ------- 
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARED 31 DECEMBER 2020

   3)   Operating segments (continued) 
 
                                                               2020     2019 
 Reconciliation of underlying EBITDA to (loss)/profit 
  before income tax                                            GBPm     GBPm 
----------------------------------------------------------  -------  ------- 
 Underlying EBITDA                                             91.7    136.0 
 Non-operating items: 
 
   *    Office consolidation                                 (11.7)        - 
 
   *    People severance costs                                (5.0)        - 
 
   *    Untaken annual leave                                  (3.0)        - 
 
  *    Net gain on business disposals                           3.8        - 
 
   *    Transaction costs                                         -    (0.3) 
 
   *    Integration costs                                         -    (5.2) 
 Depreciation, impairment and amortisation (less 
  impairments within non-operating items)                    (70.0)   (74.6) 
 Net finance costs                                           (12.4)   (16.1) 
--------------------------------------------------------    -------  ------- 
 (Loss)/profit before income tax                              (6.6)     39.8 
--------------------------------------------------------    -------  ------- 
 
   4)   Administrative costs 
 
                                                                     2020     2019 
 Expenses by nature:                                                 GBPm     GBPm 
 Employee benefit expense                                           229.6    222.5 
 Employee costs capitalised in respect of software development     (19.6)   (21.9) 
 Direct costs                                                        82.9    106.5 
 Printing and postage                                                16.5     18.6 
 IT licences and maintenance                                         35.3     30.2 
 Bought-in services                                                   6.2     29.7 
 Premises costs                                                      16.1      9.3 
 Short-term lease costs                                               0.5      0.5 
 Government grants                                                  (2.1)    (0.8) 
 Other general business costs                                        30.4     30.6 
----------------------------------------------------------------  -------  ------- 
 Total administrative costs                                         395.8    425.2 
----------------------------------------------------------------  -------  ------- 
 
   5)   Earnings per share 
 
                                                             2020    2019 
 Basic and diluted earnings per 
 share                                                       GBPm    GBPm 
-------------------------------------------------------    ------  ------ 
 (Loss)/profit attributable to owners of the parent         (1.7)    30.8 
 
 Basic weighted average number of ordinary shares 
  in issue (millions)                                       368.6   368.3 
 Dilutive performance share plan options (millions)           0.8       - 
 Diluted weighted average number of ordinary shares 
  in issue (millions)                                       369.4   368.3 
---------------------------------------------------------  ------  ------ 
 Basic earnings per share (pence)                           (0.5)     8.4 
 Diluted earnings per share (pence)                         (0.5)     8.4 
---------------------------------------------------------  ------  ------ 
 
   6)   Dividends 
 
 Amounts recognised as distributions to equity                         2020     2019 
  holders of the parent in the year 
----------------------------------------------------------------- 
                                                                       GBPm     GBPm 
-----------------  ----  ----  ------  ------  ------------------  --------  ------- 
 Interim dividend for year ended 31 December 2019 
  (1.95p per share)                                                       -      7.1 
 Final dividend for year ended 31 December 2018 
  (3.49p per share)                                                       -     12.6 
                                                                          -     19.7 
      ---------------------------------------------------------------------  ------- 
 
 

The Board has not recommended a final dividend payable in respect of the year ended 31 December 2020 (2019: GBP12.9m). The dividend recommended in the prior year of GBP12.9m was withdrawn due to uncertainties caused by the COVID-19 pandemic.

The Equiniti Group Employee Benefit Trust has waived its right to receive dividends on shares held.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARED 31 DECEMBER 2020

   7)   Business acquisitions 

Monidee

On 19 February 2020, the Group purchased the entire issued share capital of Monidee B.V. (Monidee) for cash consideration of EUR4.0m (GBP3.4m), plus deferred consideration of EUR4.0m (GBP3.4m) payable in 2021. Monidee is an employee share plans technology business based in Amsterdam, Netherlands.

The Group took control of the business on 19 February 2020. On this date the business had net assets with a fair value of GBP3.0m. The results of the business have been consolidated since the date of control and Monidee contributed GBP3.1m of revenue and GBP0.6m of profit before income tax to the Group's results in 2020. If the business had been acquired on 1 January 2020 it would have contributed an additional GBP0.2m of revenue and GBPnil net profit before tax to the Group's results in 2020. The acquisition-related costs of acquiring Monidee in the year, such as legal fees and stamp duty, amounted to GBP0.1m. These costs have been included in administrative costs in the income statement.

On acquisition, intangible assets with a fair value of GBP3.3m relating to customer contracts and related relationships, were identified. The value of goodwill reflects amounts in relation to the expected benefit of the ability to generate new streams of revenue and expected synergies of combining the operations of Monidee and the Group. The amounts relating to the intangible assets and goodwill are provisional and subject to further evaluation and adjustment, in accordance with accounting standards.

 
 Fair value of identifiable assets acquired and liabilities          GBPm 
  assumed 
-----------------------------------------------------------------  ------ 
 Intangible assets                                                    4.0 
 Trade and other receivables                                          0.5 
 Cash and cash equivalents                                            1.0 
 Trade and other payables                                           (1.6) 
 Contract fulfilment liabilities                                    (0.1) 
 Deferred income tax liabilities                                    (0.8) 
-------------------------------------------------------------      ------ 
 Net identifiable assets and 
  liabilities                                                         3.0 
 Goodwill on acquisition                                              3.7 
-------------------------------------------------------------      ------ 
 Total consideration                                                  6.7 
 Cash acquired                                                      (1.0) 
 Deferred consideration                                             (3.4) 
---------------------------------------------------------------    ------ 
 Net cash outflow in the year                                         2.3 
---------------------------------------------------------------    ------ 
 

SAGA Personal Finance Limited

On 31 May 2020, the Group purchased the rights to SAGA's telephone and internet share dealing and nominee service, trading under the name 'Saga Share Direct', for consideration of GBP0.6m. On this date, intangible assets with a fair value of GBP0.6m relating to customer contracts and related relationships were identified.

 
 Fair value of identifiable assets acquired         GBPm 
------------------------------------------------   ----- 
 Intangible assets                                   0.6 
 Total consideration and net cash outflow 
  in the year                                        0.6 
-----------------------------------------------    ----- 
 

During the year ended 31 December 2019, the Group acquired Richard Davies Investor Relations Limited, an investor relations business based in the United Kingdom, and Corporate Stock Transfer, Inc., a share registrar business based in the United States. There were no changes to the fair value of identifiable assets acquired and liabilities assumed on acquisition during the year end 31 December 2020.

   8)   Business disposals 

Business disposals are businesses that have been exited during the year or are in the process of being disposed of. None of the Group's business exits in 2020 meet the definition of 'discontinued operations' as stipulated by IFRS 5, which requires disclosure and comparatives to be restated where the relative size of a disposal or business closure is significant, which is normally understood to mean a reported segment. Accordingly, the separate presentation described below does not fall within the requirements of IFRS 5 concerning discontinued operations.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARED 31 DECEMBER 2020

   8)   Business disposals (continued) 

Equiniti 360

On 15 April 2020, the Group sold its Equiniti 360 business to Premier IT Partnership Limited, for consideration of GBP0.1m. Up until its sale, Equiniti 360 was part of the Group's EQ Digital division.

 
 Gain on business disposal                     GBPm 
-------------------------------------------  ------ 
 Intangible assets                              0.1 
 Deferred income tax assets                     0.1 
 Contract fulfilment liabilities              (0.2) 
 Total net assets disposed                        - 
  of 
 Cash purchase consideration received           0.1 
 Gain on business disposal                      0.1 
-----------------------------------------    ------ 
 

HR Solutions

On 30 November 2020, the Group sold its HR and payroll business (HR Solutions) to Civica UK Limited, for consideration of GBP13.2m. Up until its sale, HR Solutions was part of the Group's EQ Paymaster division.

 
 Gain on business disposal                                          GBPm 
----------------------------------------------------------------  ------ 
 Intangible assets                                                   5.3 
 Trade and other receivables                                         0.8 
 Contract fulfilment assets                                          0.2 
 Trade and other payables                                          (0.2) 
 Contract fulfilment liabilities                                   (0.1) 
 Total net assets disposed 
  of                                                                 6.0 
 Cash purchase consideration 
  received                                                          13.2 
 Costs of disposal: 
 
   *    Transaction costs - paid                                   (0.5) 
 
   *    Transaction costs - accrued                                (0.6) 
 
   *    Impairment of right-of-use and property, plant and 
        equipment assets                                           (0.5) 
 
   *    Liabilities created by transaction                         (2.2) 
 Gain on business disposal                                           3.4 
--------------------------------------------------------------    ------ 
 

Charter Systems

On 31 December 2020, the Group sold its Charter Systems business to Northgate Public Services (UK) Limited, for consideration of GBP1.9m. Up until its sale, Charter Systems was part of the Group's EQ Digital division.

 
 Gain on business disposal                   GBPm 
-----------------------------------------  ------ 
 Intangible assets                            1.1 
 Trade and other receivables                  0.1 
 Contract fulfilment assets                   1.0 
 Trade and other payables                   (0.1) 
 Contract fulfilment liabilities            (0.6) 
 Deferred income tax liabilities            (0.1) 
 Total net assets disposed 
  of                                          1.4 
 Cash purchase consideration 
  received                                    1.9 
 Costs of disposal: 
 
   *    Transaction costs - accrued         (0.2) 
 Gain on business disposal                    0.3 
---------------------------------------    ------ 
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARED 31 DECEMBER 2020

   9)   Intangible assets 
 
                                                      Acquisition-related 
                                                               Intangible 
                                Goodwill   Software                assets     Total 
                                    GBPm       GBPm                  GBPm      GBPm 
-----------------------------  ---------  ---------  --------------------  -------- 
 Cost 
 Balance at 1 January 2020         529.9      329.2                 442.9   1,302.0 
 Acquisition of business             3.7        0.7                   3.3       7.7 
 Additions                             -       25.0                   0.6      25.6 
 Business disposals                (5.2)      (4.2)                 (0.9)    (10.3) 
 Disposals                             -      (4.1)                     -     (4.1) 
 Translation adjustment            (0.8)      (0.3)                 (3.4)     (4.5) 
 Reclassification                      -      (1.5)                     -     (1.5) 
-----------------------------  ---------  ---------  --------------------  -------- 
 Balance at 31 December 2020       527.6      344.8                 442.5    1314.9 
-----------------------------  ---------  ---------  --------------------  -------- 
 
 Accumulated amortisation 
 Balance at 1 January 2020             -      227.0                 251.3     478.3 
 Amortisation for the year             -       30.4                  26.7      57.1 
 Business disposals                    -      (2.9)                 (0.9)     (3.8) 
 Disposals                             -      (4.0)                     -     (4.0) 
 Translation adjustment                -          -                 (0.6)     (0.6) 
 Reclassification                      -      (0.8)                     -     (0.8) 
-----------------------------  ---------  ---------  --------------------  -------- 
 Balance at 31 December 2020           -      249.7                 276.5     526.2 
-----------------------------  ---------  ---------  --------------------  -------- 
 
 Net book value 
 Balance at 31 December 2019       529.9      102.2                 191.6     823.7 
-----------------------------  ---------  ---------  --------------------  -------- 
 Balance at 31 December 2020       527.6       95.1                 166.0     788.7 
-----------------------------  ---------  ---------  --------------------  -------- 
 

Software predominately relates to investment in enhancing the functionality of the Group's main operating platforms. Included within additions in the year is GBP19.6m (2019: GBP21.9m) 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.

10) Trade and other receivables

 
                                       2020   2019 
                                       GBPm   GBPm 
===================================   =====  ===== 
 Trade receivables                     26.6   35.1 
 Other receivables                      5.8    6.6 
 Prepayments                            8.3    8.9 
------------------------------------  -----  ----- 
 Total trade and other receivables     40.7   50.6 
------------------------------------  -----  ----- 
 

The Group holds trade receivables with the objective of collecting contractual cash flows. Settlement terms are generally 30 days from the date of invoice. Excluding trade receivables, none of these financial assets are either past due or impaired. At the year end, trade receivables are shown net of an expected credit loss allowance of GBP0.7m (2019: GBP0.3m).

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARED 31 DECEMBER 2020

10) Trade and other receivables (continued)

Credit risk

The ageing of trade receivables at the reporting date was:

 
                                2020   2019 
                                GBPm   GBPm 
============================   =====  ===== 
 Not past due                   17.7   23.4 
 Past due 1-30 days              3.7    7.1 
 Past due 31-90 days             1.6    2.0 
 Past due more than 90 days      3.6    2.6 
-----------------------------  -----  ----- 
 Total trade receivables        26.6   35.1 
-----------------------------  -----  ----- 
 

The movements in the year on the Group's estimated credit loss allowance on trade receivables is as follows:

 
                                                   2020    2019 
                                                   GBPm    GBPm 
==============================================   ======  ====== 
 Balance at 1 January                               0.3     0.2 
 Balances acquired from business acquisitions         -     0.4 
 New provisions made in the year                    0.7     0.1 
 Balances reversed in the year                    (0.3)   (0.4) 
 Balance at 31 December                             0.7     0.3 
-----------------------------------------------  ------  ------ 
 

Trade receivables past due but not impaired of GBP8.9m (2019: GBP11.7m) relate to a number of independent customers for whom there is no recent history of default or expectation of such going forwards.

11) Contract fulfilment assets and liabilities

 
                                      2020   2019 
                                      GBPm   GBPm 
==================================   =====  ===== 
 Accrued income                       49.0   50.5 
 Contract set up costs                 3.7    3.5 
-----------------------------------  -----  ----- 
 Total contract fulfilment assets     52.7   54.0 
-----------------------------------  -----  ----- 
 
 
 Non-current asset                    16.9   14.2 
 Current asset                        35.8   39.8 
-----------------------------------  -----  ----- 
 Total contract fulfilment assets     52.7   54.0 
-----------------------------------  -----  ----- 
 

Accrued income is invoiced over time in line with agreed contractual billing schedules. This may be over a period of greater than 12 months.

 
                                           2020   2019 
                                           GBPm   GBPm 
=======================================   =====  ===== 
 Deferred income                           17.0   16.3 
----------------------------------------  -----  ----- 
 Total contract fulfilment liabilities     17.0   16.3 
----------------------------------------  -----  ----- 
 

12) Trade and other payables

 
                                    2020   2019 
                                    GBPm   GBPm 
================================   =====  ===== 
 Trade payables                     13.6   22.7 
 Accruals                           38.0   47.0 
 Deferred consideration              3.6    7.2 
 Other payables                     22.7   13.7 
---------------------------------  -----  ----- 
 Total trade and other payables     77.9   90.6 
---------------------------------  -----  ----- 
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARED 31 DECEMBER 2020

13) Provisions for other liabilities and charges

 
                                                   Contingent     Property         Total 
                                                consideration    provision    provisions 
                                                         GBPm         GBPm          GBPm 
============================================  ===============  ===========  ============ 
 Balance at 1 January 2020                               14.8          1.3          16.1 
 Additional provisions made during the year                 -          6.8           6.8 
 Amounts utilised during the year                       (5.1)        (0.5)         (5.6) 
 Amounts released during the year                       (1.3)        (1.1)         (2.4) 
 Unwinding of discounted amount                           0.2            -           0.2 
 Translation adjustment                                   0.3            -           0.3 
--------------------------------------------  ---------------  -----------  ------------ 
 Balance at 31 December 2020                              8.9          6.5          15.4 
--------------------------------------------  ---------------  -----------  ------------ 
 
 
 Non-current liability    0.8   3.9    4.7 
 Current liability        8.1   2.6   10.7 
-----------------------  ----  ----  ----- 
 Total provisions         8.9   6.5   15.4 
-----------------------  ----  ----  ----- 
 

The minimum value of the contingent consideration provision could be GBP0.5m up to a maximum of GBP14.3m. The remaining balance is expected to be utilised over the periods between 2021 and 2023.

Certain entities in the Group are party to legal actions and claims which may arise in the normal course of business. The Directors apply judgement in determining the merit of litigation against the Group and the chances of a claim successfully being made. The Directors assess the likelihood of an outflow of economic benefits occurring and whether there is a need to disclose a contingent liability or whether a provision might be required. At any time there are a number of claims or notifications that require assessment across the Group. While there are inherent uncertainties in the outcome of such matters, the Directors are satisfied that they are not expected to have a material impact on the Group.

14) Finance income and costs

 
                                                2020   2019 
 Finance income                                 GBPm   GBPm 
---------------------------------------       ------  ----- 
 Interest income                                 0.1      - 
 Total finance                                   0.1      - 
  income 
---------------------------------------       ------  ----- 
 
                                                2020   2019 
 Finance costs                                  GBPm   GBPm 
---------------------------------------       ------  ----- 
 Interest cost on term loan borrowings           5.9    8.5 
 Interest cost on revolving credit 
  facility                                       2.5    3.2 
 Amortisation of finance arrangement 
  fees                                           1.3    1.8 
 Net finance cost relating to pension 
  schemes                                        0.6    0.6 
 Interest cost on lease liabilities              1.3    1.5 
 Unwinding of discounted amount 
  in provisions                                  0.2    0.4 
 Foreign exchange loss                           0.4      - 
 Net gain on derivatives not in                (0.2)      - 
  a hedging relationship 
 Other fees and interest                         0.5    0.1 
------------------------------------------    ------  ----- 
 Total finance costs                            12.5   16.1 
------------------------------------------    ------  ----- 
 

15) External loans and borrowings

 
                                          2020    2019 
                                          GBPm    GBPm 
=====================================   ======  ====== 
 Term loan                               257.8   260.1 
 Revolving credit facility                58.0   115.0 
 Unamortised cost of raising finance     (4.7)   (6.0) 
 Total external loans and borrowings     311.1   369.1 
--------------------------------------  ------  ------ 
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARED 31 DECEMBER 2020

16) Net debt

 
                                     2020     2019 
                                     GBPm     GBPm 
---------------------------       -------  ------- 
 Term loan                          257.8    260.1 
 Revolving credit 
  facility                           58.0    115.0 
 Finance lease liabilities           34.5     41.1 
 Cash and cash equivalents         (42.4)   (72.6) 
----------------------------      -------  ------- 
 Net debt                           307.9    343.6 
-----------------------------     -------  ------- 
 

17) Share capital

 
                                        2020   2019 
 Allotted, called up and fully paid     GBPm   GBPm 
====================================   =====  ===== 
 Ordinary shares of GBP0.001 each        0.4    0.4 
=====================================  =====  ===== 
 Total share capital                     0.4    0.4 
-------------------------------------  -----  ----- 
 
 
                                              2020      2019 
 Ordinary shares of GBP0.001 each - in      Number    Number 
  thousands of shares 
=======================================   ========  ======== 
 Balance at 1 January                      364,537   364,537 
========================================  ========  ======== 
 Employee share scheme issues                  846         - 
---------------------------------------   --------  -------- 
 Balance at 31 December                    365,383   364,537 
----------------------------------------  --------  -------- 
 
 
 Reconciliation of shares held in the employee benefit    Number 
  trust - in thousands of shares 
-------------------------------------------------------  ------- 
 Balance at 1 January 2020                                 1,764 
 Shares transferred to scheme participants                   566 
-------------------------------------------------------  ------- 
 Balance at 31 December 2020                               1,198 
-------------------------------------------------------  ------- 
 

18) Income tax (credit)/charge

 
                                                          2020    2019 
 Recognised in the income statement in the year:          GBPm    GBPm 
------------------------------------------------------  ------  ------ 
 Current tax: 
 Current period                                            1.0     4.4 
 Adjustment in respect of prior periods                  (2.4)   (1.2) 
-----------------------------------------------------   ------  ------ 
 Total current 
  tax                                                    (1.4)     3.2 
------------------------------------------------------  ------  ------ 
 Deferred tax: 
 Origination and reversal of temporary 
  differences                                            (2.3)     4.3 
 Impact of rate changes on opening deferred              (1.8)       - 
  tax balances 
 Adjustment in respect of prior periods                      -   (0.1) 
-----------------------------------------------------   ------  ------ 
 Total deferred 
  tax                                                    (4.1)     4.2 
------------------------------------------------------  ------  ------ 
 Total income tax (credit)/charge                        (5.5)     7.4 
-----------------------------------------------------   ------  ------ 
 
 
                                                                                            2020    2019 
 Reconciliation of effective tax rate:                                                      GBPm    GBPm 
--------------------------------------------------------------------------------------    ------  ------ 
 (Loss)/profit for the year                                                                (1.1)    32.4 
 Total tax (credit)/charge                                                                 (5.5)     7.4 
-------------------------------------------------------------------------------------     ------  ------ 
 (Loss)/profit before tax                                                                  (6.6)    39.8 
----------------------------------------------------------------------------------------  ------  ------ 
 Tax using the UK corporation tax rate of 19% (2019: 19%):                                 (1.3)     7.6 
 Non-deductible expenses                                                                     0.7     0.8 
 Non-taxable gains on business disposals                                                   (0.8)       - 
 Effect of unrecognised temporary differences                                                1.1     0.2 
 Effect of tax rate change                                                                 (1.8)       - 
 Difference in overseas tax rates                                                          (0.3)   (0.1) 
 Effect of claims for research and development and other tax incentives and reliefs        (0.7)     0.2 
 Adjustment in respect of prior periods                                                    (2.4)   (1.3) 
----------------------------------------------------------------------------------------  ------  ------ 
 Total income tax (credit)/charge                                                          (5.5)     7.4 
----------------------------------------------------------------------------------------  ------  ------ 
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARED 31 DECEMBER 2020

18) Income tax (credit)/charge (continued)

The UK corporation tax rate of 19%, effective from 1 April 2017, was substantively enacted on 26 October 2015. The UK corporation tax rate was expected to reduce from 19% to 17% on 1 April 2020, and deferred tax balances were recognised at 31 December 2019 on this basis. The cancellation of the planned reduction was substantively enacted on 17 March 2020, and deferred tax balances have been restated in the year accordingly. This gave rise to a deferred tax credit of GBP1.8m in the year.

On 3 March 2021, the Government announced that, with effect from 1 April 2023, the main rate of UK corporation tax will increase to 25%. As the proposal to increase the UK corporation tax rate had not been substantively enacted at the balance sheet date, its effects have not been reflected in the preparation of the financial statements. An estimate of the immediate financial impact cannot readily be made due to uncertainty over the timing of the reversal of temporary differences; it is however likely that the overall effect of the change will be to increase the group's future tax charge.

The current tax adjustment in respect of prior periods includes GBP1.9m relating to differences between the provision for tax made in the Group's consolidated 2019 financial statements and the filing position taken in the 2019 submitted tax computations. The adjustment primarily relates to the treatment of non-taxable provisions reversing in the period and the effectiveness of derivative financial instruments in the subsidiary statutory accounts, which both gave rise to reduced taxable profits in the final returns.

Movements in deferred tax during the year:

 
                                                            Opening  Acquisitions  Recognised  Recognised   Closing 
                                                            balance    /disposals   in income   in equity   balance 
 Year ended 31 December 2020                                   GBPm          GBPm        GBPm        GBPm      GBPm 
---------------------------------------------------------  --------  ------------  ----------  ----------  -------- 
 Property, plant and equipment                                  1.9             -       (1.9)           -         - 
 Intangible assets                                           (26.8)         (0.8)       (5.8)           -    (33.4) 
 Employee benefits and other timing differences                10.7             -         1.2       (0.3)      11.6 
 Tax value of losses carried forward                           34.5             -        10.6           -      45.1 
---------------------------------------------------------  --------  ------------  ----------  ----------  -------- 
                                                               20.3         (0.8)         4.1       (0.3)      23.3 
 --------  ----------------------------------------------  --------  ------------  ----------  ----------  -------- 
 
                                                            Opening  Acquisitions  Recognised  Recognised     Closing 
                                                            balance    /disposals   in income   in equity     balance 
 Year ended 31 December 2019                                   GBPm          GBPm        GBPm        GBPm        GBPm 
---------------------------------------------------------  --------  ------------  ----------  ----------  ---------- 
 Property, plant and equipment                                  1.6             -         0.3           -         1.9 
 Intangible assets                                           (23.4)         (0.7)       (2.7)           -      (26.8) 
 Employee benefits and other timing differences                 9.4             -       (0.3)         1.6        10.7 
 Tax value of losses carried forward                           36.0             -       (1.5)           -        34.5 
---------------------------------------------------------  --------  ------------  ----------  ----------  ---------- 
                                                               23.6         (0.7)       (4.2)         1.6        20.3 
----------------------------------  ---------------------  --------  ------------  ----------  ----------  ---------- 
 
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2020

19) Post-employment benefits

Defined benefit pension plans

The Group operates three funded defined benefit pension plans in the UK. All of the plans are final salary pension plans and provide benefits to members in the form of a guaranteed level of pension, payable for life. The liability under all schemes is based on final salary and length of service to the employer. The defined benefit obligation as at 31 December 2020 is calculated on a year-to-date basis using the latest actuarial valuation as at 31 December 2020.

 
                                                    2020   2019 
                                                    GBPm   GBPm 
   ---------------------------------------------   -----  ----- 
 ICS Pension Scheme                                  0.9    1.9 
 Paymaster Pension Scheme                           26.6   27.7 
 Prudential Platinum Pension - MyCSP Limited         3.6    2.1 
-------------------------------------------------  -----  ----- 
 Total defined benefit pension plan 
 net liability                                      31.1   31.7 
------------------------------------------------   -----  ----- 
 Other long-term employee benefits                   0.4      - 
------------------------------------------------   -----  ----- 
 Post-employment benefits                           31.5   31.7 
------------------------------------------------   -----  ----- 
 

20) Financial risk management

The Group's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate risk, foreign exchange rate risk and equity price risk). The condensed financial statements do not include all the financial risk management information and disclosures required in the annual financial statements and they should be read in conjunction with the Annual Report and Accounts 2020. There have been no changes in the risk management department or in any risk management policies since the year end.

There are no material differences between the carrying value of assets and liabilities and their fair value. The only financial instrument measured at fair value is the interest rate swap.

The following table presents the Group's financial assets and liabilities that are measured at fair value:

 
                                                2020    2019 
                                       Level    GBPm    GBPm 
 ----------------------------------   ------  ------  ------ 
 Financial assets 
 Derivative financial instruments        2      14.3    10.9 
 Financial liabilities 
 Derivative financial instruments        2     (2.6)   (0.4) 
------------------------------------  ------  ------  ------ 
 

There were no transfers between levels during the year. Valuation techniques used to value these financial instruments are consistent with those used for the year ended 31 December 2020 as disclosed in note 6.13 of the Annual Report and Accounts 2020.

21) Related party transactions

Transactions with key management personnel

The compensation of key management personnel (including the Directors) is as follows:

 
                                     2020   2019 
                                     GBPm   GBPm 
   ------------------------------   -----  ----- 
 Short-term employee benefits         4.0    4.7 
 Post-employment benefits             0.1    0.1 
 Termination benefits                 0.6    0.4 
 Share-based payment expense          0.9    0.5 
---------------------------------   -----  ----- 
 Total                                5.6    5.7 
---------------------------------   -----  ----- 
 

Key management are the Directors of the Group and the Executive Committee, who have authority and responsibility to control, direct or plan the major activities within the Group.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2020

22) Events after the reporting date

On 8 March 2021, the Group announced that it had reached an agreement to sell its EQi direct-to-consumer (D2C) business to interactive investor (ii), for a consideration of up to GBP48.5m. The sale to ii is anticipated to complete during the summer of 2021, following a customer migration exercise. The total consideration payable is up to GBP48.5m comprising GBP47.5m payable in cash on completion, and up to a further GBP1.0m contingent on the timing of migrating all customers to the ii platform.

At 31 December 2020, the D2C business had assets under administration of GBP5.3bn, including cash balances of GBP0.6bn, which did not form part of the Group's net assets. During the year ended 31 December 2020, the business generated revenue of GBP14.5m and profit before tax of approximately GBP3.3m. The results of this business forms part of the EQ Boardroom division. The Group's interest costs will reduce by GBP0.4m following completion of the transaction as debt is reduced.

At 31 December 2020, discussions around the sale of the business were not sufficiently advanced to be disclosed as assets held for sale as required by IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, as the transaction was not considered highly likely at that point.

There have been no other material events between 31 December 2020 and the date of authorisation of the consolidated financial statements that would require adjustments to the consolidated financial statements or disclosures.

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