3rd Quarter Results

27 November 2017

WORLDPAY GROUP PLC (Worldpay)

Merger update

Posting of Vantiv Proxy Statement

Results for the nine months ended 30 September 2017

On 9 August 2017, the boards of directors of Worldpay and Vantiv, Inc (Vantiv) announced that they had agreed the terms of a recommended merger of Worldpay and Vantiv (the Merger). In connection with the Merger, Vantiv is required to mail a definitive proxy statement to its shareholders (the Proxy Statement) and to publish a prospectus in respect of its standard listing on the London Stock Exchange (the Prospectus) and Worldpay is required to dispatch a circular to its shareholders (the Scheme Document). Certain financial information and commentary in respect of the Group's performance for the nine months ended 30 September 2017 compared with the equivalent period in the prior year will be included in the Vantiv Proxy Statement, the Prospectus and the Scheme Document. The information contained in the Proxy Statement, the Prospectus and the Scheme Document in respect of the nine months ended 30 September 2017 and 2016 will be extracted without material amendment from the information set out in this release.

Merger update

Since the Merger was announced, Vantiv and Worldpay have made good progress on all aspects of the transaction and integration planning has commenced. The Vantiv Proxy Statement is being published today and it is expected that the Prospectus and the Scheme Document will be published tomorrow. Vantiv and Worldpay anticipate that their respective shareholder meetings will be convened in early January 2018 and it is expected that the Merger will complete in mid-January 2018, subject to, amongst other things, the necessary shareholder approvals. The Scheme Document will contain a full timetable of anticipated events with respect to the Merger.

Financial and operational highlights

· Robust financial performance: net revenue up +7% in the quarter and 10% cumulatively; underlying EBITDA[1] up +8.5% in the quarter and 12% cumulatively; cash generated by operations of £305.9m in the nine months to September 2017 (2016: £292.5m)

· Strong performance in Global eCom; continued slower consumer spending and weaker sales in the UK market in Q3; and continuation of the US trends identified in H1 and the strengthening of Sterling against US Dollar adversely impacting net revenue

· Further strong progress across the business in technology acceleration, innovation and product development

· Continued successful boarding and migration of customers onto the new acquiring platform

Result of operations

The following tables set out the Group's financial performance for the periods indicated:

Reconciliation of operating profit for the period to Underlying EBITDA

Results of operations - three months ended 30 September 2017

The following tables set out the Group's segmental revenue, net revenue and underlying EBITDA for the three months ended 30 September 2017 and 2016.

Revenue and net revenue

Revenue increased by £98.4 million, or 8 percent, to £1,268.6 million in the three months ended 30 September 2017 from £1,170.2 million in the same period in 2016. This reflected a 7 percent increase in total transaction value driven by a 6 percent increase in total transactions. Average transaction value was unchanged year-on-year.

Net revenue increased by £19.8 million, or 7 percent, to £303.3 million in the three months ended 30 September 2017 from £283.5 million in the same period in 2016, despite a 26 percent increase in scheme fees which was not fully passed on to customers. The growth in net revenue reflects a 17 percent increase in the Global eCom business, a 2 percent increase in WPUK and a 2 percent increase in WPUS.

Global eCom: Net revenue for Global eCom increased by £16.0 million, or 17 percent, to £112.3 million in the three months ended 30 September 2017 from £96.3 million in the same period in 2016. This increase was driven by continued growth in all the division's product lines, especially net acquiring income, treasury management and foreign exchange services (generated from settling foreign currency transactions on behalf of customers in the currency and transfer mechanism of their choosing) and gateway services.

Transactions at 1.3 billion in the quarter were 11 percent up on the prior year period and continued to be impacted by the reduction of high volume, low transaction value business from three customers following the high capacity gateway outage in 2016, which affected settlement for a small number of customers. Excluding this, transaction volume increased by 16 percent. Average transaction values increased by 6 percent driven by the resultant change in customer mix. Global eCom's net revenue as a percentage of total transaction value remained strong at 0.32 percent, in line with the prior year.

WPUK: Net revenue for WPUK increased by £2.4 million, or 2 percent, to £111.5 million in the three months ended 30 September 2017 from £109.1 million in the same period in 2016 as the slowdown in consumer spending and weaker sales that we started to see at the end of the first half continued throughout the three months to 30 September 2017. Management believes this slowdown in consumer spending is, in part, driven by a shift of spending towards grocery and, as such, it has affected our SME and Small Corporate business disproportionately compared to our Large Corporate business, which is anchored in the more resilient grocery sector.

Transaction volumes were up 8 percent in the quarter to 1.6 billion, with the mix of growth more strongly driven by the Large Corporate business as a consequence of the consumer spending dynamics noted above. Total transaction value increased by 4 percent over the period, lagging transaction volume growth, as average transaction values continue to decrease due to the continued expansion of lower value contactless payments. WPUK's net revenue as a percentage of total transaction value remained at 0.21 percent, in line with the prior year.

WPUS: Net revenue for WPUS increased by £1.4 million, or 2 percent, to £79.5 million in the three months ended 30 September 2017 from £78.1 million in the same period in 2016 and included the reclassification of debit routing incentives from other cost of sales to net revenue (no impact at gross profit or underlying EBITDA level). Excluding this, net revenue fell year-on-year by 3 percent reflecting weaker US economic conditions, lower new business sales and some impact from the proposed merger with Vantiv.

Transactions at 1.1 billion were 1 percent lower than the prior year, as a result of the continued decline in the ATM business (-11 percent) and weaker trading in the Small Business Unit (-1 percent).  Transactions in the Corporate Business Unit were in line with the prior year. Total transaction value was up 2 percent reflecting the changing mix of the business and rising petrol prices. Net revenue as a percentage of total transaction value was in line with the prior period at 0.25 percent.

Underlying EBITDA

Underlying EBITDA increased by £10.2 million, or 8.5 percent to £130.1 million in the three months ended 30 September 2017 from £119.9 million in the same period in 2016, reflecting a 23 percent increase in Global eCom and a 2 percent increase in WPUK, offset by an 10 percent decrease in WPUS and a 9 percent increase in Corporate costs. Underlying EBITDA as a percentage of net revenue was 42.9 percent compared with 42.3 percent in the prior year.

Global eCom: Underlying EBITDA for Global eCom increased by £12.2 million, or 23 percent, to £65.3 million in the three months ended 30 September 2017 from £53.1 million in the same period in 2016. This increase was driven principally by the growth in net revenue noted above. Operating costs increased by 12 percent but included the allocation of costs associated with the running of the new acquiring platform in 2017 of £2.9 million. Excluding this, operating costs increased by only 3 percent.

WPUK: Underlying EBITDA for WPUK increased by £0.8 million, or 2 percent, to £50.6 million in the three months ended 30 September 2017 from £49.8 million in the same period in 2016, reflecting the net revenue growth noted above. Operating costs increased by 7 percent but included the allocation of costs associated with the running of the new acquiring platform in 2017 of £3.0 million. Excluding these, operating costs were broadly unchanged year-on-year reflecting improved operating efficiency and continued strong cost control.

WPUS: Underlying EBITDA for WPUS decreased by £2.3 million, or 10 percent, to £20.2 million in the three months ended 30 September 2017 from £22.5 million in the same period in 2016. This decrease was driven principally by the reduction in net revenue noted above. Operating costs increased by 4 percent year-on-year with continued controlled spend on commissions and third-party payables.

Results of operations - nine months ended 30 September 2017

The following tables set out the Group's segmental revenue, net revenue and underlying EBITDA for the nine months ended 30 September 2017 and 2016.

Revenue and net revenue

Revenue increased by £472.3 million, or 14 percent (9 percent on a constant currency basis[2]), to £3,778.1 million in the nine months ended 30 September 2017 from £3,305.8 million in the same period in 2016. This reflected a 10 percent increase in total transaction value driven by a 6 percent increase in total transactions and a 3 percent increase in average transaction value. The year-on-year increase also benefited from foreign currency translation on WPUS revenue of £156.0 million.

Net revenue increased by £80.6 million, or 10 percent (7 percent on a constant currency basis), to £903.8 million in the nine months ended 30 September 2017 from £823.2 million in the same period in 2016. The growth on a constant currency basis reflects a 17 percent increase in the Global eCom business, a 2 percent increase in WPUK and a 2 percent increase in WPUS.

Global eCom: Net revenue for Global eCom increased by £47.9 million, or 17 percent, to £333.5 million in the nine months ended 30 September 2017 from £285.6 million in the same period in 2016. This increase was driven by growth in all the division's product lines, especially treasury management and foreign exchange services (generated from settling foreign currency transactions on behalf of customers in the currency and transfer mechanism of their choosing) and gateway services. Global eCom also continued to see some benefit in the period from translation of non- Sterling trading and balances as a result of the weakening of Sterling, particularly against US Dollar. Revenue from treasury management and foreign exchange services increased by 19 percent as a result of continued increased volumes across the whole portfolio, with the strongest contribution coming from the Airlines, Digital Content and Retail verticals. Income from gateway services increased by 28 percent, driven predominantly by growth in the Digital Content vertical.

Net revenue from acquiring grew by 15 percent in the period with volume growth in Retail and Digital Content being partly offset by margin pressure as a result of expected re-prices and higher scheme fees.

Transactions increased 9 percent to 3.9 billion in the period and were impacted by the reduction of high volume, low transaction value business from three customers following the isolated incident that occurred with the high capacity gateway in 2016, which affected settlement for a small number of customers. Excluding this, transaction volume increased by 23 percent. Average transaction values increased by 8 percent driven by the resultant change in customer mix. Global eCom's net revenue as a percentage of total transaction value remained strong at 0.31 percent, in line with the prior year.

WPUK: Net revenue for WPUK increased by £7.2 million, or 2 percent, to £330.2 million in the nine months ended 30 September 2017 from £323.0 million in the same period in 2016, as the slowdown in consumer spending and weaker sales that we started to see at the end of the first half continued throughout the three months to 30 September 2017. Management believes this slowdown in consumer spending is, in part, driven by a shift of spending towards grocery and, as such, it has affected our SME and Small Corporate business disproportionately compared to our Large Corporate business, which is anchored in the more resilient grocery sector.

Net revenue growth in the period was also affected by the reorganisation within the Group's Small Corporate business and the SME sector sales teams to re-focus on value rather than volume. This led to a temporary drop in performance in the period due to staff re-training and embedding new practices. In addition, the loss of Visa Europe rebates in late 2016 (following the acquisition of Visa Europe by Visa Inc.) as well as significant increases in scheme fees year-on-year, and a one-off timing benefit from a reduction in interchange costs in the first half of 2016 have adversely impacted the year-on-year performance.

We continue to see strong transformational product income growth but the changes we made in 2016 to our product offering (which introduced new pricing tariffs for SME customers and removed some of the statement and management fee income) meant that ancillary income (which includes fees charged per transaction for providing gateway services, fraud and risk management services, float income, and charges levied for the acceptance of alternative payments) grew by only 5 percent in aggregate.

Transactions increased 9 percent to 4.6 billion during the period, driven by strong growth in the Large Corporate sector, in particular in Grocery where volumes have been strong. Total transaction value increased by 4 percent as average transaction values continued to fall (down 5 percent) due to the ongoing trend towards using contactless cards for lower-value transactions. WPUK's net revenue as a percentage of total transaction value at 0.21 percent was in line with the prior year.

WPUS: Net revenue for WPUS increased by £25.5 million, or 12 percent, to £240.1 million in the nine months ended 30 September 2017 from £214.6 million in the same period in 2016 and included the reclassification of debit routing incentives from other cost of sales to net revenue (no impact at gross profit or underlying EBITDA level). On a constant currency basis, and adjusting for the debit routing reclass, net revenue decreased by 1 percent reflecting weaker US economic conditions, lower new business sales and some impact from the proposed merger with Vantiv.

Transactions remained stable at 3.1 billion, as increases in the Corporate Business Unit (+1 percent) were offset by the continued decline in the ATM business (-12 percent). Total transaction value was up 2 percent reflecting the overall growth in the Corporate Business and rising petrol prices. Net revenue as a percentage of total transaction value was in line with the prior period at 0.25 percent.

Gross profit

Gross profit increased by £70.4 million, or 10 percent, to £789.7 million in the nine months ended 30 September 2017 from £719.3 million in the same period in 2016. On a constant currency basis the increase was 8 percent and reflects an 18 percent increase in Global eCom, a 3 percent increase in WPUK and a 1 percent decrease in WPUS.

Personnel expenses

Personnel expenses increased by £15.9 million, or 6 percent, to £265.3 million in the nine months ended 30 September 2017 from £249.4 million in the same period in 2016, due to the growth of the business and the inclusion for the first time from 1 April 2017, of the costs associated with the running of the new acquiring platform.

General, selling and administrative expenses

General, selling and administrative expenses increased by £6.3 million, or 3 percent, to £186.9 million in the nine months ended 30 September 2017 from £180.6 million in the same period in 2016. This increase reflects the inclusion for the first time from 1 April 2017, of the costs associated with the running of the new acquiring platform partly offset by the continued focus on cost control and operating efficiency together with lower costs of the IPO and lower reorganisation and restructuring costs.

Underlying EBITDA

Underlying EBITDA increased by £39.8 million, or 12 percent to £377.6 million in the nine months ended 30 September 2017 from £337.8 million in the same period in 2016. On a constant currency basis, the increase was 10 percent, reflecting a 21 percent increase in Global eCom, a 2 percent increase in WPUK and a 2 percent increase in WPUS, offset by a 9 percent increase in Corporate costs. Underlying EBITDA as a percentage of net revenue was 41.8 percent compared with 41.0 percent in the prior year.

Global eCom: Underlying EBITDA for Global eCom increased by £33.2 million, or 21 percent, to £192.4 million in the nine months ended 30 September 2017 from £159.2 million in the same period in 2016. This increase was driven principally by the growth in net revenue noted above. Operating costs increased by 14 percent but included the first-time allocation of costs associated with the running of the new acquiring platform of £5.8 million. Excluding this, operating costs increased by 8 percent reflecting higher headcount, commission costs and marketing spend to support the business growth as well as some adverse foreign currency translation (as some costs arise in currencies other than Sterling).

WPUK: Underlying EBITDA for WPUK increased by £2.3 million, or 2 percent, to £145.2 million in the nine months ended 30 September 2017 from £142.9 million in the same period in 2016 as the increase in net revenue noted above was partly offset by an increase in operating costs. The increase in operating costs was driven by the first-time allocation of costs associated with the running of the new acquiring platform of £6.0 million and a bad debt write-off of £3.3 million relating to the collapse of a travel merchant in the period. Excluding these, operating costs were down 1 percent, reflecting improved operating efficiency and continued strong cost control.

WPUS: Underlying EBITDA for WPUS increased by £5.8 million, or 11 percent (2 percent on a constant currency basis), to £58.0 million in the nine months ended 30 September 2017 from £52.2 million in the same period in 2016. This increase was driven principally by the growth in net revenue noted above. Operating costs (on a constant currency basis) were down 2 percent year-on-year due to continued controlled spend on commissions and third-party payables and lower bad debt charges.

Depreciation, amortisation and impairment

Depreciation, amortisation and impairment increased by £32.3 million, or 35 percent, to £124.6 million in the nine months ended 30 September 2017 from £92.3 million in the same period in 2016. This includes £35.5 million (2016: £37.5 million) of non-cash charge for amortisation of business combination intangible assets recognised on the divestment of the business from RBS, as well as subsequent strategic business acquisitions and the reduction period-on-period reflects the fact that some assets recognised as part of the divestment from RBS are now fully amortised. Excluding these, the increase in depreciation, amortisation and impairment reflects higher levels of capital expenditure as well as the commencement, in April 2017, of amortisation on the remaining components of the new acquiring platform which adds approximately £18 million this financial year to the Group's depreciation and amortisation charge.

Total costs incurred to 30 September 2017 on the new acquiring platform programme are £586.5 million, of which £381.1 million has been included within tangible and intangible assets on the balance sheet and is being depreciated, with the remainder charged directly to the income statement.

Finance income/(costs)

Finance income - Visa Europe was a gain of £95.9 million in the nine months ended 30 September 2017 compared with a gain of £275.5 million in the nine months ended 30 September 2016. This comprised fair value and FX gains in relation to the disposal of the Visa Europe shares in 2016, together with dividends received on the preference shares.

Finance costs - CVR liabilities was a loss of £73.0 million in the nine months ended 30 September 2017 compared with a loss of £163.4 million in the nine months ended 30 September 2016 and reflects the valuation of the related CVR liabilities.

Finance costs - other decreased by £28.6 million, or 36 percent, to £50.5 million in the nine months ended 30 September 2017 from £79.1 million in the same period in 2016. This decrease was due to lower net FX losses resulting from the period-end translation of the Group's external debt and internal funding denominated in currencies other than Sterling (excluding the assets and liabilities related to the Visa Europe disposal) which were £5.4 million in the nine months to 30 September 2017 compared with £34.8 million in the nine months to 30 September 2016. Excluding these, the remaining finance costs, which are largely associated with the servicing of the Group's debt and finance leases, remained broadly stable at £45.1 million in the nine months to 30 September 2017 compared with £44.3 million in the nine months ended 30 September 2016. The average cost of debt during the period was 3.0 percent.

Tax charge

The tax charge decreased by £72.0 million, or 56 percent, to a tax charge of £56.6 million in the nine months ended 30 September 2017 from a tax charge of £128.6 million in the same period in 2016, representing both current tax and deferred tax charges. The charge in the period includes £14.8 million relating to the disposal of the interest in Visa Europe compared with £92.2 million in the prior period. The tax charge in the period also included a tax credit of £16.0 million compared with £26.6 million in the prior period in relation to other specific one off items including costs in relation to the development of the new acquiring platform; IPO-related costs; restructuring costs; and business combination intangible amortisation.

Excluding these, the tax charge for the period decreased by £5.2 million, or 8 percent, to a charge of £57.8 million compared with a charge of £63.0 million in the prior period and has been calculated by applying an estimate of the effective tax rate for the full year of 23.2 percent to the adjusted profit before tax (adjusting for specific one off items, including the gain on the Visa Europe transaction; costs in relation to the development of the new acquiring platform; IPO-related costs; restructuring and business combination intangible amortisation). The charge is higher than the UK headline rate for the year of 19.25 percent primarily due to higher overseas tax rates and non-deductible costs.

Cash flow

The following table sets out the Group's cash flow for the periods indicated:

The net cash inflow from operating activities before working capital increased by £61.6 million, or 22 percent, to £346.6 million in the nine month period ended 30 September 2017 compared to £285.0 million in the same period in 2016. The increase reflects improvements to underlying trading.

The net movement in working capital outflow was £40.7 million compared with an inflow of £7.5 million in the prior period. The year-on-year change reflects the growth of the business and the timing of receipts and payments around the period end.

Tax paid in the period was £89.8 million compared with £31.5 million in the prior period. The current period includes £44.2 million of payments made in relation to the CVR holders' 90 percent share of the taxable gain; and payments on account in the UK of £31.5 million (of which £4.9 million relates to the tax paid in relation to the Group's share of the proceeds on disposal of Visa Europe); in the US of £7.6 million; and in the Netherlands of £7.3 million; partly offset by a tax refund in Canada of £0.8 million.

Expenditure on tangible fixed assets and software was £142.6 million compared with £118.3 million in the prior period. This includes the ongoing investment in software and licences for the new acquiring platform and gateways; the purchase of new terminals in the UK; and expenditure to develop a number of new customer propositions and improve data analytics capability to support the growth plans of operating divisions. The year-on-year increase was partly driven by the timing of significant payments around the year end 2016.

During the period, the Group made an additional investment of £1.7 million in Blue Star Sports Holdings Inc. to avoid dilution of its holding. Subsequently, it then partially disposed of the investment realising cash of £9.0 million. In addition, in August 2017, the Group invested a further £1.9 million in Pazien Inc., increasing our ownership to 63.75 percent; and in September 2017, the Group purchased, for £5.0 million, a 7.5 percent interest in Featurespace Limited, a leading machine learning fraud prevention company based in the UK.

Net cash used in financing activities was £59.1 million compared with £74.9 million in the prior period. This includes finance costs paid of £28.0 million compared with £28.2 million in the prior period and dividends paid of £26.8 million reflecting the cost of the final dividend of 1.35p per ordinary share in relation to the year ended 31 December 2016 which was paid to shareholders in June 2017. The 2017 interim dividend of 0.8p per share that was announced on 8 August 2017 was paid to shareholders on 23 October 2017. No dividends were paid in the prior period however there was the repayment of £40.0 million of drawing under the Group's revolving credit facility.

Net debt at 30 September 2017 (excluding the cash held in respect of the CVR holders) was £1,312.6 million (31 December 2016: £1,368.0 million). The reduction in the period reflects the net cash inflow in the period (excluding cash flows in respect of the CVR holders) and the impact of foreign exchange on net borrowings.

Outlook

The Group has made strong progress in the nine months to 30 September 2017, and is well positioned to deliver an underlying EBITDA margin improvement in the second half in line with previous guidance. We expect net revenue growth for FY 2017 to be at the lower end of our existing guidance range of 9-11 percent, subject to the assumptions set out in Appendix I. This is as a result of a combination of factors, namely, the consumer slowdown in the UK market, the continuation of the US trends identified in H1, and the strengthening of Sterling against US Dollar which has adversely impacted translation of our US net revenue. We expect the trends in the UK and the US that we have seen in the third quarter to continue into 2018.

The above statement constitutes the repetition of a profit forecast published prior to the receipt by Worldpay of an approach with regard to a possible offer for the purposes of the City Code on Takeovers and Mergers (the Code). The explanation of how this profit forecast was calculated, together with the basis of preparation and the assumptions on which it is based, are set out at Appendix I to this Announcement.

Principal risks and uncertainties

The principal risks and uncertainties facing the Group were reported under the heading 'Principal Risks and Uncertainties' on pages 36 to 45 of the Annual Report and Accounts for the year ended 31 December 2016, a copy of which is available on the Group's website: http://investors.worldpay.com.

The principal risks, including a description of the risk, the Group's risk appetite, risk indicators, potential impacts, mitigants and actions taken in 2016, are reported in the Annual Report and Accounts under the headings listed below:

· Industry;

· Legal, Compliance and Regulatory;

· Settlement;

· Credit;

· Data security;

· Technology;

· Scale of change;

· Third parties;

· People; and

· Competitive landscape.

As part of their ongoing review of risk, management and the Group Risk Committee concluded in June 2017 that, in addition to the principal risks and uncertainties disclosed in the above section of the Annual Report and Accounts, the Group also faced risks and uncertainties for the remaining six months of the current financial year in respect of regulation and compliance which warrants the separation of regulatory and compliance from the legal risk - increasing regulation in the payments sector could result in Worldpay inadvertently breaching of regulation resulting in fines, financial loss and reputational damage. 

To mitigate this risk, the Group has in place a number of key controls and is executing its strategy as described on pages 18 to 21 of the Annual Report and Accounts. The Board, having taken advice from the Group Risk Committee has approved the principal risks being faced by the Group and the above statement.

Following the announcement of the proposed merger with Vantiv, management is now also monitoring closely the impact of this on Worldpay trading and colleagues and has put in place a number of measures to manage this.

Responsibility statement

The Directors confirm that, to the best of their knowledge, this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the EU and that the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

· an indication of important events that have occurred during the first nine months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining three months of the financial year; and

· material related party transactions in the first nine months and any material changes in the related‐party transactions described in the last Annual Report and Accounts.

By order of the Board

Independent review report to Worldpay Group plc

We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the three month and nine month periods ended 30 September 2017 which comprise:

· The condensed consolidated income statement for the three month and nine month periods ended 30 September 2017;

· The condensed consolidated statement of comprehensive income for the three month and nine month periods ended 30 September 2017;

· The condensed consolidated balance sheet as at 30 September 2017;

· The condensed consolidated cash flow statement for the nine month period ended 30 September 2017;

· The condensed consolidated statement of changes in equity for the nine month period ended 30 September 2017; and

· The related explanatory notes. 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the three month and nine month periods ended 30 September 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the interim financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the DTR of the UK FCA.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the interim financial report in accordance with IAS 34 as adopted by the EU. 

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

The purpose of our review work and to whom we owe our responsibilities

John Bennett

for and on behalf of KPMG LLP

Chartered Accountants

15 Canada Square

London E14 5GL

CONDENSED CONSOLIDATED INCOME STATEMENT

For the period ended 30 September 2017

The accompanying notes form an integral part of these interim financial statements.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the period ended 30 September 2017

The accompanying notes form an integral part of these interim financial statements.

CONDENSED CONSOLIDATED BALANCE SHEET

As at 30 September 2017

The accompanying notes form an integral part of these interim financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the nine months ended 30 September 2017

The accompanying notes form an integral part of these interim financial statements.

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the nine months ended 30 September 2017

* Cash received from sale of Visa Europe in 2016 includes £407.5m held in relation to CVR holders, of which £383.9m was transferred to term deposits.

The accompanying notes form an integral part of these interim financial statements.

Note 1

General information and basis of preparation

General information

The comparative figures for the financial year ended 31 December 2016 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Basis of preparation

The condensed set of interim financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union.

The condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published Consolidated Financial Statements as at and for the year ended 31 December 2016, except that separately disclosed items have not been shown on the face of the income statement. In preparing the condensed set of financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements as at and for the year ended 31 December 2016.

Net revenue, which is defined as revenue after deducting interchange and scheme fees, is presented on the face of the income statement as the Directors believe that this best reflects the relationship between revenue and profitability. 

The Group's cash flow statement is presented excluding merchant float. Merchant float represents surplus cash balances that the Group holds on behalf of its customers when the incoming amount from the card schemes or networks precedes when the funding to customers falls due. The funds are held in a fiduciary capacity and cannot be utilised by the Group to fund its own cash requirements. The merchant float is also subject to significant period by period fluctuations depending on the day of the week a period end falls. For these reasons, the Directors have excluded the merchant float from the cash flow statement to allow a better understanding of the Group's underlying own cash flows.

Going concern

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed set of financial statements.

Note 2

Segmental information

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker (the Executive Committee) to allocate resources and assess performance. For each identified operating segment, the Group has disclosed information for the key performance indicators that are assessed internally to review and steer performance.

The Directors of Worldpay Group plc have presented the performance measure underlying EBITDA as they monitor this performance measure at a segment level and they believe this measure is relevant to an understanding of Worldpay Group plc's financial performance. Underlying EBITDA is calculated by adjusting profit for the period to exclude the impact of taxation, total finance income/(costs), depreciation, amortisation and impairment, gain on disposal of investment and subsidiary share of results of joint venture and associate and separately disclosed items. Separately disclosed items are costs or income that have been recognised in the income statement which the Directors believe, due to their nature or size, should be excluded from the segmental analysis to give a more comparable view of the year-on-year underlying financial performance of each of the operating segments (see Note 3).

Underlying EBITDA is not a defined performance measure in IFRS. Worldpay Group plc's definition of underlying EBITDA may not be comparable with similarly titled performance measures and disclosures by other entities.

The Group reports four segments: Global eCom, WPUK, WPUS and Corporate.

Three months ended 30 September 2017

Nine months ended 30 September 2017

Three months ended 30 September 2016

Note 2 (continued)

Nine months ended 30 September 2016

Reconciliation of profit for the period to Underlying EBITDA

Segmental information by revenue streams

The Group's revenue is generally consistent with the geographical locations of the operating segments, with the exception of the Global eCom business, whose revenue is derived from worldwide sources. No individual customer accounts for more than 10% of Group revenue.

Note 3

Separately disclosed items

Separately disclosed items are costs or income that have been recognised in the income statement which the Directors believe, due to their nature or size, should be disclosed separately to give a more comparable view of the year-on-year underlying financial performance. They are presented in their relevant income statement category, but highlighted through separate disclosure. The following table gives further details of the items included.

Separately disclosed items affecting EBITDA amounted to £40.1m (2016: £48.5m) and comprised platform-related and other costs incurred in the separation from RBS, IPO-related costs, reorganisation and restructuring costs, and other costs.

Platform-related separation costs of £16.0m (2016: £21.5m) are non-capitalised costs associated with the upgrade and migration of the Group's core systems from RBS. They are principally staff and maintenance costs and decommissioning costs payable to RBS.

Other costs related to the separation from RBS of £11.3m (2016: £12.8m) principally relate to the costs of interim staff required to test and double-run systems throughout the migration period.

The costs of IPO of £1.1m (2016: £6.0m) comprise the costs of the one-off share awards granted to management as part of the IPO offset by the release of an accrual no longer required.

Reorganisation and restructuring costs of £2.1m (2016: £5.1m) include the residual costs of the WPUS transformation together with the costs associated with the restructuring and relocation of parts of our Group Technology and Engineering division.

Other costs of £9.6m (2016: £3.1m) include the costs incurred in relation to a number of M&A projects (including costs incurred to date in relation to the proposed merger with Vantiv), litigation expenses and a reserve for a potential historic US compliance breach.

Note 4

Finance (costs)/income

Note 5

Gain/(loss) on disposal of investment and subsidiary

In April 2017, part of the investment in Blue Star Sports Holdings Inc. was sold for $11.3m, reducing the investment from 6.5% to 1.47%. Tax of £2.8m was charged on the gain on disposal.

On 31 May 2017, 100% of the share capital of Worldpay Sweden AB with net assets of £0.5m was sold to GVC holdings plc for £1.

Note 6

Visa Europe

Disposal of Visa Europe shares

On 21 June 2016, the Group disposed of its interest in Visa Europe to Visa Inc. and received a mixture of cash and non-cash consideration valued at €1,051.3m. The consideration is made up of €589.7m up-front cash, €405.4m of Series B preferred stock in Visa Inc. and €56.2m deferred cash which will be paid in three years. €547.5m of the up-front cash consideration and all of the preferred stock may be reduced by any final settlement of potential liabilities relating to ongoing interchange-related litigation involving Visa Europe. On disposal of the Visa Europe shares, the Group, along with the other former members of Visa Europe, entered into a Litigation Management Deed (LMD). Under this arrangement, potential losses from Visa Europe interchange litigation will be set against the preferred stock, through adjusting the ratio of conversion to ordinary stock. A Loss Sharing Agreement (LSA) entered into by Worldpay, along with the ten other largest UK members of Visa Europe, provides a second level of protection to Visa Inc., capped at the €547.5m of up-front cash consideration.

Contingent Value Rights ('CVRs')

The holders of the CVRs (a separate class of shares in the Company) are entitled to 90% of the net post-tax proceeds of the disposal in accordance with the terms of the CVRs (subject to the Company's right of retention), with Worldpay retaining 10% of the net proceeds. The settlement of the CVR liabilities could take up to 12 years depending on the settlement of the claims under the LSA.

The CVRs are non-voting and are not convertible into Ordinary Shares. Given the nature of the CVRs, they are classified as financial liabilities recognised initially at fair value and subsequently at amortised cost, with the gain or loss recognised in "Finance costs - CVR liabilities" in the Group's income statement. Further details of the CVRs are set out in Worldpay's 2016 Annual Report and Accounts.

Visa Europe asset

The Visa Europe asset was recognised in the Group's balance sheet at 31 December 2015 as a fair value through profit and loss financial asset. On disposal, it has been derecognised from the Group's balance sheet with the net gain on disposal recognised in "Finance income - Visa Europe" in the Group's income statement.

Consideration from disposal of Visa Europe shares

''Own cash and cash equivalents'' includes £372.8m (30 September 2016: £83.7m; 31 December 2016: £401.4m) in relation to the CVR holders. The deferred cash consideration has been included in non-current "Deferred consideration - Visa Europe". All balances have been revalued to period end rates in the Group balance sheet as at 30 September 2017.

The preference stock received on disposal of our interest in Visa Europe has been recognised as a financial asset under the non-current "Financial assets - Visa Inc. preference shares" category. It has been recognised at fair value initially and has been classified as fair value through profit and loss. Subsequent movements on the fair value of the preferred stock are recognised in "Finance income - Visa Europe" and the movement on the CVR liabilities is recognised in ''Finance costs - CVR liabilities'' in the Group's income statement. The valuation of the Visa Inc. preference shares is based on the expected conversion ratio. The conversion ratio will be adjusted by Visa Inc. based on the potential losses from Visa Europe interchange litigation under the LMD. The conversion ratio has been adjusted by Visa Inc. from the original ratio of 13.952 preference shares to Ordinary shares to 13.077 as Visa Inc. incurs costs in settling claims. Any excess of the potential losses from Visa Europe interchange litigation under the LSA has been included in "Provisions" within current liabilities.

Note 6 (continued)

The Visa Inc. preference shares, based on the conversion ratio to Ordinary shares, are entitled to the quarterly Ordinary dividend declared by Visa Inc..

When measuring the fair values of the financial asset - Visa Inc. preference shares as well as the LSA liability, the Group uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Visa Inc. preference shares are classified as Level 3 as the valuation is dependent upon both the value of Visa Inc. ordinary shares, which have a quoted price, and the conversion ratio which will be adjusted for potential losses from Visa Europe interchange litigation under the LMD, for which there are no identical transactions with regularly available market prices. The LSA liability is classified as Level 3 due to the lack of identical transactions with regularly available market prices.

In order to fair value the Visa Inc. preference shares and the LSA liability as at 30 September 2017, the Directors have considered a range of potential outcomes, including the likely value of the potential level of losses from Visa Europe interchange litigation that the Group may be liable for, and calculated a weighted average. It is reasonably possible that if the Visa Europe interchange litigation progresses and more information becomes available about the likely value of the potential losses, changes in assumptions determining the fair value could require a material adjustment to the carrying amount of the Visa Inc. preference shares and the LSA liability. The uncertainties inherent in the determination of the fair value of the Visa Inc. preference shares and the LSA liability will not be resolved until the obligations under the LMD and the LSA are extinguished which is dependent upon final resolution of all related claims.

CVR liabilities

The CVR liabilities have been classified as financial liabilities at amortised cost based on a re-estimation of future cash flows, with any changes being recognised in "Finance costs - CVR liabilities" in the income statement.

Note 6 (continued)

Conclusion

Based on the above, the following has been recognised in the financial statements:

Note 7

Tax

The tax charge for the three month and the nine month period arising on the underlying profit before tax has been calculated by applying an estimate of the underlying effective tax rate for the full year of 23.2% (adjusting for specific one-off items including: the net gain on the Visa Europe transaction; costs in relation to the development of the new acquiring platform; IPO-related costs; restructuring and business combination intangible amortisation). The charge is higher than the UK headline rate for the year of 19.25% primarily due to higher overseas tax rates and non-deductible costs.

The tax charge for the nine month period included a charge of £14.8m (2016: £92.2m) relating to the disposal of the interest in Visa Europe. There is also an unrecognised deferred tax asset of £47.1m (2016: £46.3m) in relation to the LSA with respect to the Visa Europe transaction. The deferred tax asset has not been recognised as, depending on the timing of the final resolution on the indemnity position, the availability of tax relief will be conditional on HMRC accepting a concessionary treatment.

Note 8

Earnings per share

Basic earnings per share amounts are calculated by dividing the profit for the period attributable to shareholders of Worldpay Group plc by the weighted average number of ordinary shares in issue during the financial period.

Diluted earnings per share amounts are calculated by dividing the profit for the period attributable to shareholders of Worldpay Group plc by the weighted average number of ordinary shares in issue during the financial period, adjusted for the effects of potentially dilutive options. The dilutive effect is calculated on the full exercise of all potentially dilutive ordinary share options granted by the Group, including performance-based options which the Group considers to have been earned.

Note 9

Other intangible assets

During the nine month period ended 30 September 2017, additions to other intangible assets amounted to £79.9m (nine month period ended 30 September 2016: £115.8m; year ended 31 December 2016: £170.1m). As at 30 September 2017, the net book value of other intangible assets was £831.0m (30 September 2016: £784.0m; 31 December 2016: £813.6m), of which £94.3m are under the course of construction and are not yet being amortised (30 September 2016: £305.4m; 31 December 2016: £291.5m).

Note 10

Property, plant and equipment

During the nine month period ended 30 September 2017, additions to property, plant and equipment amounted to £40.8m (nine month period ended 30 September 2016: £27.5m; year ended 31 December 2016: £33.8m). As at 30 September 2017, the net book value of property, plant and equipment was £93.1m (30 September 2016: £124.1m; 31 December 2016: £124.7m) of which £9.6m are under the course of construction and are not yet being amortised (30 September 2016: £49.2m; 31 December 2016: £49.8m).

Note 11

Note to cash flow statement

Cash and cash equivalents comprises cash and demand deposits with banks, together with short-term highly liquid investments that are readily convertible to known amounts of cash and subject to insignificant risk of change in value. Merchant float is excluded from the cash flow statement.

The table below reconciles the profit for the period before tax to cash generated by operations:

Note 12

Net debt and borrowings