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Equiniti revenue slides after shareholder approve takeover
29th Jul 2021 09:29
(Sharecast News) - Financial and administration outsourcing company Equiniti reported an 11.9% fall in revenue in its first half on Thursday, to £214m, with its performance impacted by ongoing disruption to capital markets and the wider economy.
The London-listed firm said its underlying EBITDA was 8% lower year-on-year for the six months ended 30 June, at £38.2m, while its underlying EBITDA margin was up 80 basis points at 17.9%.
Diluted underlying earnings per share were 13.3% lower at 2.6p, while the company's net debt narrowed by 27.9% to £256m.
That led to a leverage of 2.9x at period end, compared to the 3.0x it recorded at the end of the first half of 2020.
Operationally, Equiniti reported a "mixed performance", with some divisions gaining positive momentum while others continued to be impacted by lockdown restrictions.
It did report new business wins in all divisions, and client retention of 99%, with market share gains made in the 'EQ Boardroom' and 'EQ US' operations.
A total of nine share registration transfers, 18 initial public offering mandates and 36 share plans were made in EQ Boardroom in the period, while 16 transfer agency wins, 14 IPO mandates and 21 equity compensation wins were recorded for EQ US.
The 'EQ Paymaster' and 'EQ Digital' offerings were impacted by a delay in project work, and slower decision-making on new business.
Equiniti said its low interest rate environment had resulted in a £6.4m decline in interest income, while free cash flow to equity holders came in at £53.4m, compared to a negative flow of £2.5m a year earlier.
The board said that had benefited "significantly" from the disposal of the EQi direct-to-consumer business, together with improved underlying cash performance.
Its directors said the company was continuing to focus on cost management, adding that it was "on track" to deliver £15.0m of cost savings in the 2021 financial year.
The results came on the tail of a recommended offer of 180p per share from Siris Capital, which was approved by shareholders on 19 July.
"The group's overall performance for the first half of 2021 was mixed," said chief executive officer Paul Lynam.
"EQ US has delivered a good underlying performance as has EQ Boardroom, the latter winning 18 IPO mandates in the period, a new record.
"Less positively, the sustained lockdown restrictions significantly impacted business volumes in EQ Digital, and EQ Paymaster suffered from a lack of project work."
Paul Lynam noted that the Bank of England and US Federal Reserve rates had remained at historic lows, which had continued to "weigh heavily" on Equiniti's earnings.
"On 19 July, shareholder approval was granted to the proposal for Siris Capital to acquire the entire share capital of Equiniti Group for 180p per share.
"Assuming regulatory change of control approvals are granted, I am looking forward to working with Siris who are committed to investing in EQ's existing business to accelerate organic growth through initiatives such as cross-selling from the UK into the US," Lynam said.
"The proposal from Siris can deliver clear benefits to all our stakeholders, and provide support for EQ's future development through continuing investment in the people, technology and products so critical to our loyal clients."
At 0935 BST, shares in Equiniti were up 0.17% at 178.7p.
The London-listed firm said its underlying EBITDA was 8% lower year-on-year for the six months ended 30 June, at £38.2m, while its underlying EBITDA margin was up 80 basis points at 17.9%.
Diluted underlying earnings per share were 13.3% lower at 2.6p, while the company's net debt narrowed by 27.9% to £256m.
That led to a leverage of 2.9x at period end, compared to the 3.0x it recorded at the end of the first half of 2020.
Operationally, Equiniti reported a "mixed performance", with some divisions gaining positive momentum while others continued to be impacted by lockdown restrictions.
It did report new business wins in all divisions, and client retention of 99%, with market share gains made in the 'EQ Boardroom' and 'EQ US' operations.
A total of nine share registration transfers, 18 initial public offering mandates and 36 share plans were made in EQ Boardroom in the period, while 16 transfer agency wins, 14 IPO mandates and 21 equity compensation wins were recorded for EQ US.
The 'EQ Paymaster' and 'EQ Digital' offerings were impacted by a delay in project work, and slower decision-making on new business.
Equiniti said its low interest rate environment had resulted in a £6.4m decline in interest income, while free cash flow to equity holders came in at £53.4m, compared to a negative flow of £2.5m a year earlier.
The board said that had benefited "significantly" from the disposal of the EQi direct-to-consumer business, together with improved underlying cash performance.
Its directors said the company was continuing to focus on cost management, adding that it was "on track" to deliver £15.0m of cost savings in the 2021 financial year.
The results came on the tail of a recommended offer of 180p per share from Siris Capital, which was approved by shareholders on 19 July.
"The group's overall performance for the first half of 2021 was mixed," said chief executive officer Paul Lynam.
"EQ US has delivered a good underlying performance as has EQ Boardroom, the latter winning 18 IPO mandates in the period, a new record.
"Less positively, the sustained lockdown restrictions significantly impacted business volumes in EQ Digital, and EQ Paymaster suffered from a lack of project work."
Paul Lynam noted that the Bank of England and US Federal Reserve rates had remained at historic lows, which had continued to "weigh heavily" on Equiniti's earnings.
"On 19 July, shareholder approval was granted to the proposal for Siris Capital to acquire the entire share capital of Equiniti Group for 180p per share.
"Assuming regulatory change of control approvals are granted, I am looking forward to working with Siris who are committed to investing in EQ's existing business to accelerate organic growth through initiatives such as cross-selling from the UK into the US," Lynam said.
"The proposal from Siris can deliver clear benefits to all our stakeholders, and provide support for EQ's future development through continuing investment in the people, technology and products so critical to our loyal clients."
At 0935 BST, shares in Equiniti were up 0.17% at 178.7p.