Value emerges at Equiniti

Equiniti is engaged in pension and loan administration, share registration and investment services. The group is registrar to around 70 per cent of the FTSE 100 constituents and is one of the largest providers of outsourced pension administration in the UK. The group's proprietary offering extends across a wide range of services, ranging from HR and payroll administration to the Selftrade share trading platform.

Increased regulatory complexity feeds into the group's commercial proposition, along with the mandatory establishment of workplace pensions. The group actively seeks to embed itself within a given client's operations, resulting in high rates of recurring revenues and frequent opportunities to upsell through its proprietary technology platforms. Upselling services helped it produce 12 per cent more revenue from its top 24 accounts in 2015 and organic growth across the group came in at 7 per cent. Equiniti enjoys 90 per cent visibility on this year's revenues, with 80 per cent already accounted for in 2017.

The most significant progress reported in the company's maiden full-year results was a larger-than-expected drop in net debt from £458m to £246m. Net borrowings now represent 2.8 times underlying cash profits, easily within sight of the long-term target of 2-2.5 times. This was helped by a 35 per cent increase in underlying operating cash flow last year to £97.6m, representing a 113 per cent cash conversion rate - well ahead of the 95 per cent target. Meanwhile, refinancing has seen the cost of debt drop from 7.6 per cent to 3.1 per cent.

Equiniti's key Investment Solutions division, which accounts for nearly two-fifths of cash profits, delivered 10 per cent organic revenue growth in 2015 and 25 per cent growth after accounting for the acquisition of Selftrade and TransGlobal Payment Solutions. Management is confident that further growth will be generated through two acquisitions completed in the early part of this month: KYCnet provides workflow technology for on-boarding and monitoring of commercial and retail clients; and RiskFactor, a UK-based provider of credit scoring and risk profiling software for commercial lending. Equiniti's management will doubtless be hoping that new revenue generated from these bolt-ons will mitigate the falling contribution from services related to PPI claim handling at its Intelligent Solutions business, which accounts for almost a quarter of cash profit.

The group's pension solutions division - accounting for 28 per cent of cash profit - delivered 41 per cent revenue growth through an increase in project work and the full-year impact of the acquisition of a controlling interest in MyCSP - the first mutual joint venture to come from UK central government, now supplying administrative services to more than 200 employers.