Equiniti says first half was strongest period ever

Management expressed confidence in the FTSE 250-listed group's ability to grow sustainably in the UK, where the business is underpinned by "dependable revenues from resilient clients", and was "increasingly excited" by the "significant opportunity" offered by its entry into the US market after the acquisition on 1 February of Wells Fargo Shareowner Services, which has been rebranded EQ USA.

Chief executive Guy Wakeley said full year earnings were now expected to be towards the top end of market expectations.

Revenue grew 30.4% to £254m in the six months ended 30 June, helped by the US acquisition, with organic growth of 7.7%.

Growth was supported by the renewal of all UK registration clients including Carnival, easyJet, GlaxoSmithKline, Prudential and QinetiQ, and an increased UK market share underpinned by new name business wins including Bodycote, Hiscox, and Low & Bonar.

It also said it saw 70% of new company listings including Acacia Pharma, Avast, IntegraFin Holdings and KRM 22, and won major renewals in the US including CVS, General Electric, JP Morgan, 3M and MDU.

New client wins were seen across all divisions including CNPP, Persimmon and Ulster Bank, with Equiniti also seeing “strong growth” in Intelligent Solutions, with contraction in Pension Solutions said to be in line with expectations.

The acquisition of Boudicca Proxy was completed on 27 April, and has already been cross-sold to seven registration clients, with continued traction also seen in estate management including a 'tell us once' pilot for six major UK banks.

Underlying EBITDA growth was 31.6%, with an increased margin of 21.7%, which the board said was driven by “strong” performances in Investment Solutions and Intelligent Solutions, and continued operational improvement.

There was a lower reported EBIT of £10.6m, with profit after tax of £2.7m, which reflected £14.1m of non-operating charges arising from the Well Fargo acquisition.

Net debt stood at £308.3m, which was said to be inclusive of acquisition-related debt and costs of £170.4m with year-on-year leverage maintained at 2.8x.

The board declared an interim dividend 11.6% higher at 1.83p per share.

“The first half of 2018 has been our strongest reporting period yet, with accelerating organic growth supplemented by the successful completion of the high quality shareowner services business from Wells Fargo Bank,” said chief executive Guy Wakeley.

“Our UK business remains the undisputed market leader for registration and share plans, with more new clients choosing Equiniti.

“The deployment of these core capabilities into the US, along with proprietary technologies for payments, pensions, credit and analytics, creates multiple opportunities for future growth.”

Wakeley said the company was continuing to make “good progress” against the board’s long-term strategy, with sustainable organic growth, progressive margin and dividend expansion, and the utilisation of strong cash flow to invest in new capabilities whilst strengthening the balance sheet.

“We remain committed to disciplined capital allocation into our best performing assets to sustain continued earnings growth.

“We have been pleased with performance in the first half, and expect full year earnings to be towards the top end of market expectations.”

Shares in Equiniti rose more than 15% to 239.75p by 1030 BST on Friday.

House broker Liberum said that in addition to a strong set of interim results, it believed "the increased level of disclosure will help allay current investor concerns", as well as the company’s decision to reduce the use of its factoring facility and absorb the restructuring costs within its pension business within the underlying result. Even despite the latter, the guidance has been lifted towards the high end of consensus forecasts.

"Whilst some investors might require further evidence that the integration of WFSS has been sufficiently derisked, we believe these results will help reverse much of the recent decline in the share price."