EZINE > MAY 2013 INSIDE THIS ISSUE: PERSPECTIVE Paul Matthews surveys the IPO market 10 MINUTE GUIDE All you need to know about Bitcoin, the world’s fastest growing currency Q&A Director of Operations, Sam Halford talks quality UPDATE ● Changes to retirement provisions under the spotlight at our recent discussion forum ● The benefits of Equiniti’s acquisition of Prism Cosec ● Equiniti runs an innovative survey for Pearson
PERSPECTIVE
EQUINITI EZINE > MAY 2013
Paul Matthews, Managing Director of Corporate Markets, discusses the current IPO market and Equiniti’s recent success within it
GROWING CONFIDENCE In the last four years and in 2012 more particularly, we experienced one of the quietest periods for main market listings, with only £1 billion of funds raised. It was disappointing, but the market now looks more promising. In the first quarter of this year, the funds raised – over £1.25 billion so far – have already exceeded the total amount of 2012. This is due to four companies coming to market in the first quarter: insurance provider esure, cable management solutions supplier HellermannTyton, house builders Crest Nicholson and the real estate agent Countrywide. Each of these four companies was private equity backed, and this is the first time we’ve seen any private equity IPOs on the London market since 2010, clearly suggesting that PE houses see the market is open for business and that a successful exit can be achieved.
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PERSPECTIVE Although there was a lack of market activity in 2012, Direct Line Insurance floated last October and performed very well. This paved the way to reassure to other companies, allowing 2013 to see the return of IPOs. The increased activity is a sign of growing market confidence. The FTSE is trading at its highest level for a number of years and the violent swings in the volatility of the index are hopefully a less frequent occurrence. Post IPO performance has also been impressive as all four companies are trading well above their original flotation price since listing, which is great news. This change in confidence and sentiment will also hopefully attract companies from other jurisdictions. Informed sources suggest that a number of Middle Eastern and African companies are considering a London listing. In terms of Equiniti’s role in IPOs, most people’s perception of a registrar is that we only come on board once the company has listed, but there is so much more we can offer working with a company prior to listing. We now want to be seen as one of the company’s key partners in the run up to an IPO alongside the more traditional investment bank and lawyer
EQUINITI EZINE > MAY 2013
The months in advance of the IPO can be fraught, too much to do, too little time. We have the breadth of experience and the team to help companies through this challenging period.
roles, adding a complementary skill set that will continue in the listed world. This may involve us working with the company on matters such as corporate restructuring and governance, or as a welcome support to the company secretarial team. The months in advance of the IPO can be fraught, too much to do, too little time. We have the breadth of experience and the team to help companies through this challenging period. Additionally, more and more companies are looking at introducing different types of employee incentivisation with the offering, such as SAYE, SIP or Executive Plans. This in itself can be highly complex but important in terms of aligning the employees with the company’s evolution into listed life. Organising this process can never start too early and delivering a clear
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and concise message to employees, many of whom will never previously have participated in share plans, is vital. So far this year we have pitched for five IPOs and been appointed on all five. This is a fantastic result and validates the way we work with our listed companies both in the run up to listing and post the transaction. The pipeline in the third and fourth quarters of this year looks increasingly healthy and as market confidence rises, more companies will begin enquiring about listing. We look forward to partnering with these companies as they move into the listed world. Company Secretary of esure Group plc, Carolyn Gibson, said: “Equiniti’s support and guidance right from the start proved invaluable and they were a key contributor to the team during the Initial Public Offering process. They have proved an excellent appointment.”
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10
MINUTE GUIDE
EQUINITI EZINE > MAY 2013
Your beginner’s guide to the fastest growing currency in the world
BITCOIN What is it?
Bitcoin is an electronic currency, which allows peer-to-peer transactions to anyone, anywhere in the world. It operates with no central authority – like a central bank or government. Instead, bitcoins are issued and transactions are carried out collectively by the network of users. As it is decentralised, complex algorithms are effectively determining monetary policy.
How does it work?
It is one of the first implementations of a concept called crypto-currency and is designed around the idea of using cryptography to control the creation and transfer of money, rather than relying on central authorities. Encrytped bitcoins are sent between users’ addresses and each transaction is broadcast to the whole network and recorded in a virtual ledger called ‘the blockchain’ so that the bitcoins can’t be spent twice.
How are new bitcoins produced?
A network of tens of thousands of individuals compete to ‘mine’ new bitcoins using powerful computers to solve complex mathematical problems. The first to solve the problem gets the virtual money, which is effectively just a string of numbers, and they can buy things with them or sell them to non-miners who want an alternative currency. Bitcoins are produced at a pre-determined pace by the open-source computer programme so the supply grows gradually and no more than 21 million will ever be produced.
What is it worth?
At the start of the year one Bitcoin unit was worth around $15. By the start of May it was worth around $133. There are currently 11 million bitcoins in circulation.
Where can they be spent?
They are accepted currency on an increasing number of sites but are still far from
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10 MINUTE GUIDE mainstream. Recently, major sites including Reddit and Mega announced they would accept bitcoins and they are also accepted by some merchants in the real world. Bitcoin says it has not been made illegal by any jurisdiction and some regulators have taken steps to establish rules over how they should be used. There has been controversy about Bitcoin being used on the Silk Road – a hidden online black market.
Who started it?
In 2009 the first Bitcoin specification and proof of concept was published under the pseudonym Satoshi Nakamoto. Towards the end of 2010, Nakamoto, whose identity was never revealed, left the project and moved on to other things. There has been speculation that Satoshi Nakamoto may actually be a group of people rather than an individual. In September 2012, the Bitcoin Foundation was created in an effort to standardise, protect and promote Bitcoin.
EQUINITI EZINE > MAY 2013
THE EQUINITI VIEW Paul Matthews, Managing Director of Corporate Markets
“Given the turmoil that has impacted a large number of the world’s biggest banks, and the volatility of local currencies it is no surprise that speculators have devised new ways to transfer value. That said, the volatility of Bitcoin itself is a concern having reached a peak value of $266, it has now slumped back to $100. “Whether the concept will ever take off and become mainstream is questionable. Whilst used by some reputable merchants, it has also
been used in part by less reputable organisations and as a way of avoiding local laws such as the prohibition in the US on gambling. “There are some suggesting the gambling industry could become the biggest users of Bitcoin. If it’s true Ebay is considering if it can find a way of using this as a form of payment, this could be transformational. All that said, at the moment the risk means it’s probably not suitable for everyone.”
How is this different from normal currencies?
In a blog post, Nakamoto wrote: “With e-currency based on cryptographic proof, without the need to trust a third party middleman, money can be secure and transactions effortless.”
FIND OUT MORE For more information on this topic, visit www.bitcoinfoundation.org
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EQUINITI EZINE > MAY 2013
Sam Halford, Director of Operations at Equiniti, answers key questions on continuous improvement and quality
QUALITY COUNTS Q
Can you tell us about the main changes you have implemented in Operations in the last 12 months? One of the main improvements I have integrated across all the operational areas is a new quality and continuous improvement initiative. We have undergone some restructuring and I am very proud of our ’excellence team’, comprised of both quality and complaint handling functions. This team ensures excellent performance by making sure all the good practices are in place, are maintained and delivered.
so we can be confident our next team leaders inherit and benefit from such quality initiatives.
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All my teams are given the objective of improving their ‘continuous quality’ plans. Each quarter the team heads and their direct reports are then expected to communicate on things like how they have enhanced the customer experience, taken steps to maintain quality, further improvement initiatives and so on. We also make sure there is an active and effective succession plan for management development
A pet hate of mine is calling a helpline and being sent from switchboard to back office until you find the right area that can help you. Sometimes you may need to complete a form or write a letter and the whole process can take days or weeks and be totally frustrating. What I have implemented is a first touch process that means that our highly qualified staff can assist callers by dealing with the
What steps have you taken to improve the journey or experience for shareholders? In our Contact Centre, we deal with around 2.2 million calls per year, it’s incredible! We set a service level target of answering 80% of calls within 20 seconds. We’ve consistently met and exceeded that target level and are currently at around 88% with an extremely low abandonment rate.
A
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Q&A query right there and then. This could be changing an address or taking a payment, BACS details, etc. Of course, we need to ask several security questions and make identity checks in order to do this but it is so much more satisfying and efficient for the end user. Any associated complex processing can then be actioned by back office staff which may involve a number of operational areas working intelligently in combination.
Q
How does the Contact Centre ensure that we can deal with such a variety of queries? It’s all about the training we give and I believe in investing heavily in our training and support. All our agents start with a nine week training programme. This means three weeks ‘induction’ training in the classroom, followed by two weeks ‘academy’ training in a controlled environment supported by subject matter experts and coaches. In the final four weeks, of ‘graduation’, the agents continue to take calls but on a more varied client basis, allowing them to hone and finalise their effectiveness.
A
On-going support and training is then given (as things change continuously) providing us with multi-skilled staff. Our volumes fluctuate hugely
EQUINITI EZINE > MAY 2013
Our greatest resource is our people and the highest quality standards we passionately champion. Investment in continuous improvement and quality training is crucial to maintaining business as usual at busy times.
in peaks and troughs, as you would expect, and having multi-skilled and knowledgeable staff means that we can deal smoothly with demands whilst maintaining business as usual. We also have improved our knowledge of all our clients and exactly what they do. This means that when an employee rings up with a query we can contextualise their query and deal with it very specifically.
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How about improvements to the ‘client experience’? Another area where we have made really big changes to our processes is in ‘dividends’. We have improved service quality
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through automating more processes and providing a clear timetable of key dividend milestones for both the client and Equiniti. We process around £23 billion payments by BACS and completed well over 1000 dividend tasks per year. Therefore, our planning processes are critical so we have a dedicated dividend planning team that ensures things run smoothly. We have also updated and redesigned our planning and funding documentation that clients receive to make it more relevant and user-friendly. We have also listened to client feedback from our own quality surveys and are now planning to provide a single point of contact where clients can discuss dividend planning and document design with one contact rather than several contacts within the business.
Q A
What do you see as the main challenges to maintaining quality? The pressures of fluctuating inbound call volumes. However, our greatest resource is our people and the highest quality standards we passionately champion. Investment in continuous improvement and quality training is crucial to maintaining business as usual at busy times.
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Q&A One way we can ensure our quality is maintained is by using ‘mystery shop calls’. This really helps to drive quality service as we have to be prepared for any type of query from a shareholder. We have run 200 mystery shop calls in 2012 with a quality score of 90% and plan to continue with this successful initiative. We also make spot checks on all our outgoing correspondence leading to a huge increase in quality and a reduction in errors. We receive very few complaints: 0.02% in comparison to the number of transactions actually processed. In terms of complaint management, we are committed to a very quick and efficient turnaround. We acknowledge a complaint within two days and aim to resolve usually within 10 days. If we see a trend in complaints, then we will automatically investigate it. We use a system called CAPA (Corrective Action and Preventive Action) – a well-known and robust approach. It means we will stop a problem reoccurring. The system may highlight a letter that could be made clearer, a training need, IT solution or a process change. Once you know the root cause, you can deal with it so that it doesn’t repeat.
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Q A
What are your key priorities for 2013? In my role as Director of Operations, I am constantly looking at how we can improve our operational quality and welcome feedback from shareholders and clients. If any client wishes to visit our Contact Centre or any other operational area, such as document services, client task delivery or the dividend delivery team, they are more than welcome to visit and meet the great team of people I am so proud of. My key priorities are to deliver full integration of the various operational areas and to ensure that there is a continuous improvement plan in place for all teams that deliver effective cost management, optimise performance and effective service delivery. The development of a single-focussed operations management team will drive forward operational efficiency and improvements in support of our future business growth.
For more information on this topic please contact your relationship manager
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EQUINITI EZINE > MAY 2013
UPDATE
THE LATEST INDUSTRY NEWS FROM EQUINITI
DON’T GET CAUGHT OUT Changes to retirement provisions in the 2013 Finance Bill proved to be a hot topic at Equiniti’s Employee Share Plans discussion forum Equiniti recently held a discussion forum with its clients to help them prepare for changes being made to approved Employee Share Plans as a result of the Office of Tax Simplification’s (OTS) review. It gave attendees the opportunity to understand more about the OTS implications, hear what other companies are doing and discuss the practicalities of application. More than 20 participants attended the forum, which was hosted by Phil Ainsley, Managing Director of Employee Benefit Solutions and Mark Ife, Partner of Herbert Smith Freehills. Changes included in the 2013 Finance Bill will come into force when the Bill gains Royal Assent, which is likely to be in July. Many of these changes will apply automatically to existing Share Incentive Plans (SIP), Sharesave
(SAYE) and Company Share Option Plans (CSOP). Discussion topics included amendments to: ■■ Retirement provisions ■■ Alignment of good leaver reasons ■■ SIP accumulation periods ■■ SIP dividend reinvestment limits ■■ Use of restricted shares ■■ Cash takeovers and new tax relief It was useful to understand delegates’ thoughts about the impact on SIPs. The consultation paper in December 2012 included plans to remove the £1,500 limit on SIP dividend reinvestment along with the three year carry forward rule. A more recent addition to the proposed Bill gave companies flexibility to limit the amount of cash dividends that
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can be reinvested in SIP dividend shares. Companies will have the power to set a specified percentage of a cash dividend that can be reinvested in the SIP. The feedback from delegates on this topic was that they all intended to set that limit at 100% and allow all dividends to be reinvested. A further topic that generated lots of discussion related to retirement provisions. Current legislation sets out ‘retirement’ by reference to an age specified in plan rules and this age can differ between plans. This has led to the use of
The term ‘retirement’ in our modern world of work has morphed both in practice and in law, so we need to ensure impacts on existing reward structures are brought into line and don’t trip us up.
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UPDATE the term ‘early retirement’ where a participant has retired but not yet reached a specified age. The intention is to harmonise retirement rules across SIP, SAYE and CSOP to allow companies to align the definition of ‘retirement’ with their broader policy in this area and iron out any anomalies in its application. If changes come into force, plan rules will no longer contain a specified age. Instead tax benefits are available following the participant ceasing employment by reason of retirement, with the definition of ‘retirement’ being determined by companies. So far, so good. However, there was animated discussion about the use of the term ‘retirement’ and how to ensure consistency as a ‘good’ leaver reason. There is no formal definition of the term ‘retirement’ and HMRC guidance is needed to set out the general circumstances in which a presumption can be made that a participant is retiring. Feedback from delegates made it clear that there is no one-size-fits-all definition that can be applied. Companies will need to set out and then apply their own set of criteria – which is age neutral – to determine whether retirement has taken place. It should not be possible, though, for a leaver to have retired for the purposes of Employee Share Plans, but not for any other
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purpose. Summarising this topic, Phil Ainsley said: “The term ‘retirement’ in our modern world of work has morphed both in practice and in law, so we need to ensure impacts on existing reward structures are brought into line and don’t trip us up.”
reasons on HR/payroll/administration systems ■■ Agreeing any changes to the current use of an ‘early retirement’ code ■■ Reviewing any plan documentation that refers to ‘retirement’ or ‘early retirement’ These forums are great opportunities to share experiences, discuss different approaches and highlight issues. If you have any suggestions for topics for future forums, please let us know.
As a consequence of this, companies with approved share plans should be: ■■ Discussing what criteria is used to determine whether retirement has taken place and how that is communicated ■■ Establishing whether there will need to be any changes to the coding of participants’ leaver
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Progress of the Bill e e ing Stag e ing Stag e g g n d d i ing a ee tag a ee tag in d d e e d d a a R R a a S S e e tt tt Re ond Re ond mi or t rd R mi or t rd R t t m m s s i i p p c c Fir Se Co Re Th Fir Se Co Re Th ing
Bill started in the House of Commons
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Royal Assent
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UPDATE
EQUINITI EZINE > MAY 2013
FOCUS ON PRISM Equiniti’s acquisition of Prism Cosec boosts the Group’s international expertise Equiniti is no stranger to acquisitions. In recent years, we have expanded to increase our level of expertise in share registration and beyond. Completed in November 2012, Equiniti’s acquisition of Prism Cosec – a respected corporate governance and company secretarial services provider – will be beneficial to both parties. “Prism Cosec had grown steadily since it was founded in 2002, and as a result we had increased to a size where it was difficult to achieve more growth without changing our structure in some way,” explains Chris Stamp, Managing Director of Prism Cosec. “We wanted to continue to be a very delivery-focused company, but it was proving a challenge to achieve this and grow the business in the way that we wanted to. By having Equiniti on board, we are confident that we’ll get more exposure to new business opportunities as well as the back office support we need to continue to grow as a business.”
Prism Cosec had grown steadily since it was founded in 2002, and as a result we had increased to a size where it was difficult to achieve more growth without changing our structure in some way. Prism Cosec is able to offer its clients a senior level company secretarial and corporate governance advisory service. It has particular expertise and experience of working with international companies either already listed or looking to list in the UK. “Our focus is on FTSE 100 and FTSE 250 quoted companies, although we work with AIM and unquoted clients,” says Chris. “In a number of cases we act as the company secretary for clients. However, for a lot of our other clients, we provide additional support and even mentoring to company secretaries who are looking for
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support based on strong experience of the corporate governance requirements of the London market. This approach often appeals to Group Legal Counsels and to a lesser extent CFOs who also have the company secretary job title.”
So, how did Equiniti benefit from the acquisition of Prism Cosec?
“Our international expertise is a real benefit,” says Chris. “We have worked with a lot of companies coming into the market on IPOs, and we show them the way in terms of what
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UPDATE they need to do from a governance and listing rule compliance perspective and the processes involved. Given our reputation, I think it’s a plus point, when Equiniti is talking to companies who are thinking of listing in London, to be able to say that Prism Cosec can help.” Like other parts of the Equiniti Group, Prism Cosec offers company secretarial services, but Chris says Prism Cosec has a different focus. “We tend to focus more on listing rules and the UK corporate governance code element to company secretarial work, whilst covering the bases of UK company law requirements. On the other hand, the expertise of Equiniti David Venus – also a provider of outsourced company secretarial services – encompasses a broader UK company law consultancy, as well as listing rule and governance compliance,” says Chris.
EQUINITI EZINE > MAY 2013
Now that Prism Cosec is part of the Equiniti Group, what are the plans for the future? “We are keeping what Equiniti sees as a strong brand in the right place,” says Chris. “Firstly, we would like to get more exposure both in the UK and internationally and Equiniti will be able to help us do that. That will then lead to more opportunities, which will help us to significantly grow the business over the course of the next three years and beyond.”
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UPDATE
EQUINITI EZINE > MAY 2013
ASKING THE RIGHT QUESTIONS Equiniti helps leading global learning company Pearson to use an innovative new survey to gauge the engagement of their private shareholders Companies often find it easier to gain insight and feedback from institutional shareholders than from their important private shareholders, because there is already a programme of dialogue involving companies’ investor relations officials. Leading learning company Pearson wanted to go an important step further and quiz its shareholders on the success and importance of its reporting and chose Equiniti to conduct a new type of survey. The survey, which was carried out using the Shareview platform and smart survey software, explored what shareholders thought of Pearson’s annual report and its yearly corporate social report, entitled, ‘Our Impact on Society’, and asked what aspects they were most interested in. Two groups were surveyed, certificated shareholders and participants within the Sharestore (Pearson’s Corporate Sponsored Nominee), who must be current or former employees, to see if they generated different feedback.
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Pearson’s Head of Corporate Responsibility, Peter Hughes, says: “Shareholders are the primary audience of our annual reporting. We have detailed insight into the perspective of institutional shareholders, but wanted to explore the views of private small shareholders and ask them what they valued and what could be improved in terms of how we reported our performance to them. It was the first time we had done this.” The questions were supplied by Pearson - the world’s leading learning company with 48,000 people and a presence in more than 70 countries - and the email and the survey were put together by Equiniti, which contacted more than 4,600 shareholders via email. Pearson agreed to donate one book to the Pearson Foundation’s ‘We Give Books’ initiative for every survey completed and more than 300 responses were returned. “We were very happy with 300 responses as a significant and materially valid sample of people’s views,” says Peter.
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UPDATE
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“We discovered that the overwhelming interest is in the financial performance of the company. We asked about format – whether people liked printed or online information – and we found people liked everything. The sections that were of the most interest were the strategic overview, financial highlights and all-around performance. “We were pleased there was an endorsement of our reporting. A majority of our shareholders said our reporting was amongst the best they had seen.”
The survey also showed there was less awareness of Pearson’s corporate social responsibility report, which is published soon after April’s annual report.
and priorities. The survey highlighted a clear opportunity to do some better signposting.”
Peter says: “Learning has a social purpose. So, as a learning company, social responsibility is at the core of who we are. Part of our responsibility is to share how we are performing from a social perspective as well as a financial perspective. “A third of shareholders were aware of the report and were most interested in strategy
KEY FINDINGS Only 2% described themselves as avid readers of the annual report
The top areas of interest were: CEO strategic overview:
56% 64%
The survey was carried out from September 21 until October 12, 2012 in time to feed some of the findings into this year’s report design. Peter says: “We have a new CEO this year and we focused a lot more around the strategy section within the CEO statement, which reflected the demand from shareholders for more information on that. The survey therefore helped shape our report this year. “Equiniti had the means to reach out effectively to our small shareholders to allow us to explore what they are interested in and whether our reporting was meeting their needs. They were very efficient at putting it together and very supportive. It was as new to us as it was to them.” Pearson now plans to conduct the survey bi-annually.
Financial highlights: Just over half of respondents saw the Pearson Annual Report
One in three said they never read the annual report
Company performance:
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