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Equiniti

Equiniti Group PLC - TRADING & COVID-19 UPDATE

RNS Number : 6500J
Equiniti Group PLC
15 April 2020
 

Equiniti Group plc

Incorporated in England and Wales

Registration number: 07090427

LEI: 213800TS721HGE2JIV94

ISIN: GB00BYWWHR75

15 April 2020

EQUINITI GROUP PLC - TRADING & COVID-19 UPDATE

Equiniti Group plc ("EQ" or "the Group"), an international technology-led services and payments specialist, today announces an update on the impact which the COVID-19 outbreak has had on the business and its trading statement for the period since 31 December 2019 to date.  

 

COVID-19

During these difficult times, our priorities have been to support and protect the safety and welfare of the Group's employees and continuing to support EQ's clients and customers.

 

The Group's response has involved a rapid and coordinated demobilisation of our sites and an almost complete transition to home-working.  Aside from essential print and mail operations and the processing of original documents where legally required, all services and telephony are now delivered remotely, with more than 95% of colleagues operating from home.  All service lines have been continued without interruption, and service levels sustained where important. 

 

The strength and speed of the Group's response has resulted in some additional work from clients, where extra capacity or resilience in service or payments has been required. 

 

The COVID-19 crisis has led to many clients cancelling or suspending dividends, and changing the timing of other corporate events, often at the last minute.  Whilst the Group has responded to these operational issues without difficulty, it is inevitable that some revenues will be deferred until later in the year or beyond when normal conditions return.

 

Current trading and outlook

Whilst the Group's resilient business model is underpinned by a high degree of recurring revenue and enduring relationships with large listed corporates and Government, the unprecedented nature of the crisis has forced some clients to defer, or in some cases suspend, projects.  Whilst the underlying characteristics of our business model continue unchanged, trading has consequently been impacted in the short term.

 

In the UK, revenues in EQ Boardroom will be held back in the first half by lower corporate activity, fewer share-dealing programmes, and reduced dividend commissions, partially offset by increased share dealing and virtual annual meetings.  In EQ US, the underlying growth of this division will be held back in the near term by uncertainties in equity capital markets resulting in a lower level of corporate actions.  In EQ Digital, the sales pipeline for regulated software products is good, but with execution risk exacerbated by reduced remediation volumes as key clients close sites and defer projects in the short term.  In EQ Paymaster, there is some downside with projects being delayed.   Interest income will be impacted by reductions in central bank rates and by the unwinding of some hedging arrangements in 2020 and 2021.

 

In all of the Group's key markets our leadership positions are expected to be sustained, with a return to organic growth inextricably linked to the timing of the end of the crisis, market sentiment and the prospects of our clients.  Looking forward, the performance of the equity capital markets, for which the Group relies for share-based services, and the speed and timing of the broader economic recovery are unknowable.

 

Given the unprecedented uncertainty around the impact of COVID-19, it is not possible to assess with certainty the impact this will have on the Group's financial performance for the year. As such, the Group is withdrawing its previous guidance for the year ending December 2020.

 

Strong financial position and mitigating actions

In light of the evolving COVID-19 situation, the Group has moved quickly to protect profitability, liquidity and cash flow while seeking to ensure it is well placed to benefit when the recovery takes place.

 

The Group is proactively managing the cost base, with all non-essential capex and discretionary costs suspended.  Salary reviews for senior employees have been deferred, recruitment has been frozen and interim resources removed.  The overarching importance of the retention of jobs and skills is recognised, and Government support packages are being utilised where appropriate.  Whilst implementing these measures to contain our costs, the flexibility and performance of our operations has been sustained without interruption. 

 

In addition to reducing discretionary and capex costs, the Group is maintaining a strong focus on working capital and will, where permissible, defer tax payments in line with recent Government policies. The Group has also paused all acquisition activity and confirms that no acquisitions are contemplated for the remainder of the year.

 

The Group continues to generate cash and has a well-managed balance sheet with net debt to underlying EBITDA of 2.5x as at 31 December 2019 and significant headroom in its committed facilities of c£150m. The Group has strong relationships with a broad group of banks, and in July 2019, refinanced its Senior Debt Facilities to extend the £520.0m term loan and revolving credit facility to July 2024. The financial covenant attached to our committed facility is net debt/underlying EBITDA excluding the finance lease liability should be no more than 4.0x in 2020, 3.75x in 2021 and 3.50x in 2022.  This covenant ratio at 31 December 2019 was 2.2x, and excludes IFRS16 liabilities from the calculation. 

 

Full year 2019 dividend

Notwithstanding the relatively resilient trading position and the Group's strong liquidity, the macro economic environment is one of heightened uncertainty.  After due consideration the Board has decided it will no longer propose a final dividend for the year ended 31 December 2019 at the Annual General Meeting to be held on 7 May 2020.  The Board recognises the importance of dividends to shareholders and, as such, it intends to consider the appropriateness, quantum and timing of an additional interim dividend payment relating to the financial year ended 31 December 2019 when it has a clearer view of the effects of COVID-19 on the Group's business.

 

AGM

The Group's 2020 AGM is scheduled to be held on 7 May 2020.  In normal circumstances, the Board greatly values the opportunity to meet shareholders in person.  However, it fully supports the recent Government advice for people to avoid both mass gatherings and non-essential travel and social contact.  On this basis, the Board has concluded that it is appropriate to ask shareholders not to attend the AGM in person this year.  Instead, shareholders are encouraged to join the AGM electronically or use their right to appoint the Chair of the AGM as their proxy.

 

Commenting on today's announcement Guy Wakeley, Chief Executive, said:

"The response of our teams around the world has been strong and decisive, and I am immensely thankful for the dedication and resilience of our colleagues during these challenging times.  We are proud that our services have continued without interruption and that we continue to play an important part in the operation of the markets we serve.

 

"EQ is a strong and resilient diversified business offering many regulated and non-discretionary services to leading listed corporations and Governments.  Whilst the long-term prospects of the Group remain unchanged, the combination of reduced interest rates, depressed capital markets and the uncertainty brought by COVID-19 create unavoidable headwinds in the near-term.   However, we are taking appropriate actions on cost and cash flow and EQ remains a financially strong business with healthy liquidity and a capital structure that is well-placed to absorb an extended period of uncertainty."

 

This announcement contains inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.

 

 

For further information please contact: 

 

Analyst/Investor enquiries:

Equiniti Group plc       Guy Wakeley, Chief Executive                           +44 (0) 207 469 1811 

John Stier, Chief Financial Officer                     
Frances Gibbons, Head of Investor Relations    

 

 

Media enquiries:

Temple Bar Advisory    Alex Child-Villiers                                              + 44 (0) 7795 425580
 Will Barker                                                         + 44 (0) 7827 960151


 


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