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Equiniti swings to loss in 'very challenging' year
1st Apr 2021 08:27
(Sharecast News) - Equiniti Group reported a 15.1% fall in revenue amid a "very challenging environment" in its final results on Thursday, to £471.8m, as disruption to capital markets and the wider economy caused by the Covid-19 pandemic significantly impacted its performance.
It also announced that chief financial officer John Stier was stepping down and retiring from the company after six years in the position.
The London-listed finance and administration outsourcer said underlying EBITDA was 32.6% lower year-on-year for the 12 months ended 31 December at £91.7m, while its underlying EBITDA margin narrowed by 5.1 percentage points to 19.4%.
It swung to a loss before tax of £6.6m, from profits of £39.8m in 2019, while diluted losses per share came in at 0.5p, compared to earnings of 8.4p per share a year earlier.
Underlying earnings per share were 49.7% weaker at 9.1p, as the board declared no dividend for 2020.
Net debt narrowed to £307.9m from £343.6m during the year, as its leverage rose to 3.4x from 2.5x.
Operationally, Equiniti reported a "significant" reduction in higher-margin market-paid and discretionary projects as market activity paused during the year, with central bank action driving a £16.9m reduction in interest income earned across the group.
The fourth quarter was slower than expected, due to extended sales cycles and economic pressures towards the year-end, although the board did describe a "resilient" underlying business performance, with major new client wins and client retention standing at 99%.
It said its order book was building, with new order intake 10% ahead of last year.
Equiniti said it took "swift action" to reduce costs and preserve cash across all areas of the business amid the coronavirus crisis, with its cost efficiency programmes delivering savings of £15m in 2020.
A further £15m of cost savings had been identified for 2021, as action taken in 2020 flowed to trading and further initiatives were identified to manage the cost base.
Looking ahead, Equiniti said long-term structural growth drivers remained intact, underpinned by strong customer relationships, digitisation and its continued cost focus.
There was, however, ongoing revenue uncertainty around the timing of the return of market-paid activity, particularly in its EQ Digital operations.
It also flagged further impact on interest income as hedging unwound, offset by cost reduction activity, and added that it was focussed on business simplification, a reduction of leverage and the generation of free cash flow.
Equiniti said it was planning for a return to profitable growth as market conditions normalised.
"Our financial results for 2020 have been significantly impacted by the challenging macro environment," said chief executive officer Cheryl Millington.
"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."
Millington said the company's focus was on driving performance and market share, while reducing the group's debt and delivering cost initiatives to offset reduced interest income in a low interest rate environment.
On the retirement of CFO John Stier, Equinit's board said it would now undertake a recruitment process to identify his successor.
Stier would remain in his role until the process was complete, and a smooth handover implemented.
"We are very grateful to John for all his hard work and commitment to the company, including during the initial public offering in 2015," the directors said in a statement.
"We anticipate a smooth transition between John and his successor and will provide a further update on this process in due course."
At 0821 BST, shares in Equiniti Group were down 6.23% at 121.15p.
It also announced that chief financial officer John Stier was stepping down and retiring from the company after six years in the position.
The London-listed finance and administration outsourcer said underlying EBITDA was 32.6% lower year-on-year for the 12 months ended 31 December at £91.7m, while its underlying EBITDA margin narrowed by 5.1 percentage points to 19.4%.
It swung to a loss before tax of £6.6m, from profits of £39.8m in 2019, while diluted losses per share came in at 0.5p, compared to earnings of 8.4p per share a year earlier.
Underlying earnings per share were 49.7% weaker at 9.1p, as the board declared no dividend for 2020.
Net debt narrowed to £307.9m from £343.6m during the year, as its leverage rose to 3.4x from 2.5x.
Operationally, Equiniti reported a "significant" reduction in higher-margin market-paid and discretionary projects as market activity paused during the year, with central bank action driving a £16.9m reduction in interest income earned across the group.
The fourth quarter was slower than expected, due to extended sales cycles and economic pressures towards the year-end, although the board did describe a "resilient" underlying business performance, with major new client wins and client retention standing at 99%.
It said its order book was building, with new order intake 10% ahead of last year.
Equiniti said it took "swift action" to reduce costs and preserve cash across all areas of the business amid the coronavirus crisis, with its cost efficiency programmes delivering savings of £15m in 2020.
A further £15m of cost savings had been identified for 2021, as action taken in 2020 flowed to trading and further initiatives were identified to manage the cost base.
Looking ahead, Equiniti said long-term structural growth drivers remained intact, underpinned by strong customer relationships, digitisation and its continued cost focus.
There was, however, ongoing revenue uncertainty around the timing of the return of market-paid activity, particularly in its EQ Digital operations.
It also flagged further impact on interest income as hedging unwound, offset by cost reduction activity, and added that it was focussed on business simplification, a reduction of leverage and the generation of free cash flow.
Equiniti said it was planning for a return to profitable growth as market conditions normalised.
"Our financial results for 2020 have been significantly impacted by the challenging macro environment," said chief executive officer Cheryl Millington.
"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."
Millington said the company's focus was on driving performance and market share, while reducing the group's debt and delivering cost initiatives to offset reduced interest income in a low interest rate environment.
On the retirement of CFO John Stier, Equinit's board said it would now undertake a recruitment process to identify his successor.
Stier would remain in his role until the process was complete, and a smooth handover implemented.
"We are very grateful to John for all his hard work and commitment to the company, including during the initial public offering in 2015," the directors said in a statement.
"We anticipate a smooth transition between John and his successor and will provide a further update on this process in due course."
At 0821 BST, shares in Equiniti Group were down 6.23% at 121.15p.