5th Apr 2016 10:52
5 April 2016
Worldpay Group plc(the "Company")
Annual Report and Accounts 2015 and Annual General Meeting 2016
The Company announces that today it has released the below listed documents:
· Annual Report and Accounts 2015 for the financial year ended 31 December 2015 ("Annual Report and Accounts 2015");
· Notice of the Annual General Meeting 2016 ("AGM"); and
· Form of Proxy for the AGM.
In accordance with Listing Rule 9.6.1R, these documents have been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/nsm.
The Annual Report and Accounts 2015 and the Notice of Meeting 2016 can also be viewed on the Company's corporate website at http://investors.worldpay.com.
The AGM is scheduled to be held at 14.00 on Tuesday 10 May 2016 at the offices of Allen & Overy LLP, 1 Bishops Square, London, E1 6AD.
The information contained in the Appendix below, which is extracted from the Annual Report and Accounts 2015, is included solely for the purposes of complying with Disclosure and Transparency Rule ("DTR") 6.3.5R. The information should be read in conjunction with the Company's Full Year Results Announcement made on 8 March 2016. This announcement and the Full Year Results Announcement together constitute the material required by DTR 6.3.5R to be communicated to the media in unedited full text. This material is not a substitute for reading the full Annual Report and Accounts 2015. Page numbers and cross references in the extracted information refer to page numbers and cross references in the Annual Report and Accounts 2015.
Enquiries: | |
Derek Woodward, Group Company Secretary | Tel: +44 (0) 7342 082 043 |
Media: | |
Claire Hardy, Head of External Communications | Tel: +44 (0) 203 664 4902 |
James Murgatroyd / James Fearnley / Andrew Hughes - Finsbury | Tel: +44 (0) 207 251 3801 |
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Analysts and investors: |
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Charles King, Investor Relations Director | Tel: +44 (0) 203 664 6171 |
Appendix
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report and Accounts and the Group and parent Company financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent Company financial statements in accordance with UK Accounting Standards, including FRS 101 Reduced Disclosure Framework.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to:
· Select suitable accounting policies and then apply them consistently;
· Make judgements and estimates that are reasonable and prudent;
· For the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;
· For the parent Company financial statements, state whether applicable UK Accounting Standards have been followed subject to any material departures disclosed and explained in the parent Company financial statements; and
· Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors' report, Directors' Remuneration report and Corporate governance statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:
· The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
· The Strategic report and the Directors' report include a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
The Strategic report and the Directors' report comprising pages 8 to 112 have been approved and are signed by order of the Board by Derek Woodward, Group Company Secretary, 8 March 2016.
Principal risks and uncertainties
Industry (Risk movement: no risk movement) |
The payments industry is constantly changing and sector developments, mandatory industry changes that are not correctly implemented or an inability to adhere to scheme rules could result in unanticipated or unbudgeted penalties.
Worldpay's acquiring business model is dependent upon licences from the international payment systems such as Visa and MasterCard. These are licences that are restricted in geographical scope and must be used in compliance with the rules and regulations set out by the relevant card franchise. Worldpay's ability to obtain licences to expand into new countries is reliant on the relevant card franchise's willingness to grant the licence. Similarly, changes in a card franchise's rules and regulations, or in its interpretation and enforcement of them, can result in Worldpay having to curtail its business in order to ensure compliance with the changes or revised interpretations.
As a member of Visa Europe, Worldpay is also currently entitled to receive certain rebates and/or other financial incentives that are determined by reference to the volume of transactions Worldpay processes through Visa Europe. Visa Inc. and Visa Europe announced in November 2015 a definitive agreement for Visa Inc. to acquire Visa Europe. The transaction is subject to regulatory approvals and is currently expected to close in the second quarter of 2016. In the event that Visa Europe demutualises and becomes owned by Visa Inc., these rebates and/or other financial incentives are expected to cease.
Risk appetite Worldpay will always seek to remain current and adhere to all regulations unless we are prevented from doing so by our system infrastructure. Where this is the case, Worldpay will apply for specific waivers pending full compliance.
Risk indicators · Compliance with industry guidelines and regulations · Success in influencing industry developments · Financial sanctions from payment networks · Maintenance of licences from payment networks
Potential impacts · Failure to meet payment network requirements for products and services may lead to reputational damage and to financial penalties from the payment networks · As a last resort, payment networks may revoke their franchise licences to Worldpay in existing markets or not grant new licences in prospective markets · Failure to operate franchise licences to required specifications may lead to lower acceptance rates and therefore potential reputational damage and customer impact
Mitigants · Specific team dedicated to support implementation of payment network requirements and central relationship management · Internal process to capture, review and implement payment network changes · Regular meetings with payment networks and attendance at payment network forums/training, e.g. the UK Acquirer Forum · Ongoing monitoring and oversight of our merchants to ensure compliance · Participation in industry forums
Actions in 2015 · Worked with the Regulator and payment schemes to understand and influence the direction of travel of new legislation and requirements · Created a Regulatory and Industry Affairs Group to work on EU and UK governmental initiatives · Introduced a horizon monitoring programme
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Legal and regulatory (Risk movement: no risk movement) |
Failure to adhere to legal, regulatory and financial crime requirements leads to financial and reputational damage.
Risk appetite Worldpay will obey the spirit and the letter of the laws and regulations that apply to us. In areas of uncertainty and ambiguity, we will have a robust justification for the choices we make and must be prepared to defend our choices with our regulators and, if necessary, publicly in the media.
Risk indicators · Complaints (General) · Complaints (Ombudsman) · Customer satisfaction (Net Promoter Score) · Reviews and audits on policy · Fines from Regulators · Breaches to identified legal and regulatory standards
Potential impacts · Failure to identify or understand the impacts of changing legislation may prevent Worldpay from trading in the relevant jurisdictions · May result in Worldpay or its customers unknowingly breaching regulations · May result in delays in providing services to our customers · Non-compliance may result in loss of business licence · Any regulatory breaches may result in reputational damage and loss of customers · Failure to prevent Worldpay being used to facilitate financial crimes · Risk that Worldpay is blocked or suspended from activities that are critical to its model
Mitigants · Dedicated Legal and Compliance functions and a network of external advisors who maintain a constant review of current and future legal and regulatory developments and their potential impacts · Policies and procedures implemented including contracting, anti-bribery and corruption, competition, data protection, anti-money laundering and sanctions · Dedicated transaction monitoring processes and reporting regarding fraud · Regular business risk meetings with attendance of Legal and Compliance to advise of changes required to address risks identified
Actions in 2015 · Produced an enhanced Gambling Product Heatmap and extended our external specialist Gambling Counsel Alert service · Continued to build a trusted relationship with FCA, PSR and CMA and responded to mandatory requests for information from regulators in a timely and accurate manner
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Settlement (Risk movement: no risk movement) |
Failure to settle with merchants due to lack of availability of funds as a result of scheme or systemic bank failure, or funds not processed correctly, resulting in financial loss (compensation) and severe reputational damage.
Risk appetite Worldpay has no appetite for the failure to settle with merchants.
Risk indicators · Payments and settlements processed within SLA · Average time to resolve investigation queries · Unreconciled items
Potential impacts Severe reputational damage and/or financial loss (compensation) due to a failure or delay to merchant settlement
Mitigants · Daylight overdraft facilities in place ready to be utilised in the event of non-receipt of funds from schemes · Card scheme balances are monitored daily to ensure that funds are received and sufficient cash flow is available for us to pay merchants · Daily reconciliation of all Worldpay merchant specific bank accounts · Daily cash management
Actions in 2015 · Implementation of automated reconciliation system · Enhanced monitoring and reporting
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Credit risk (Risk movement: no risk movement) |
Potential loss arising from the failure of a merchant or partner bank or alternative payments provider to meet its obligations in accordance with agreed terms.
Risk appetite Worldpay budgets for credit loss on an annual basis, however our risk appetite seeks to optimise a high level of return whilst achieving appropriate risk versus reward performance in line with Worldpay's growth strategy.
Risk indicators · Approval rate · Portfolio score · Investigations versus adverse action rate · Credit grades · Portfolio distribution · Top exposures · Credit Watch List
Potential impacts · Increase in credit exposure arising from failed Credit Risk Assessment/Autoscore processes leading to increase in loss · Rejection of applications caused by failed Credit Risk Assessment/Autoscore processes leading to a decrease in profitability · Merchant fails to provide goods/services to customers leading to an increase in chargebacks that cannot be passed on to a failed merchant, resulting in financial loss
Mitigants · Each application from a merchant or proposed partnership with a bank or alternative payment provider is risk assessed · Where approval is not automatic, the case is referred for a secondary review · A transaction monitoring system equipped with credit-specific rules and models scans each transaction and aggregates merchant behaviour · A Credit Watch List is used to identify at-risk merchants that may result in financial loss. Monthly review defines action plans to mitigate exposure and potential loss · Merchant Holding File maintained to assist in delaying/deferring settlement to merchants with funds held in suspense account
Actions in 2015 · The thresholds for Credit acceptance have been reviewed and monitored throughout 2015 · The automated monitoring system rules and models are subject to regular review and are tuned as appropriate. Quarterly service reviews of the system performance were conducted · A linked merchant system identifying links between different merchants was installed
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Data security (Risk movement: risk increased) |
Financial loss and reputational damage due to a breach of confidential data or technology disruption caused by internal/external attack to Worldpay or third-party suppliers/merchants.
Risk appetite Worldpay has no tolerance for the loss of, or otherwise unauthorised or accidental disclosure of, customer or other sensitive information. The operation of inadequate or ineffective security controls could expose Worldpay to the risk of violating statutory requirements and/or industry regulations, resulting in reputational damage and financial loss.
Risk indicators · Number of attempted security breaches · Number of security breaches · Number of breaches to policy · PEN testing results · Ethical hacking results · Number of identified security risks outstanding
Potential impacts · The loss of, or otherwise unauthorised or accidental disclosure of, customer or other sensitive information could result in regulatory or legal sanctions and/or significant reputational damage · Additional costs by way of compensation, litigation, fines and loss of sponsorship
Mitigants · Worldpay operates multi-layer cyber security defences which are monitored for effectiveness and to ensure they remain current · Extensive monitoring of attempts to breach the system takes place with detailed analysis to ensure all potential threats are identified and defendable
Actions in 2015 · Maintained Worldpay's PCI compliance groupwide and prepared for PCI v3.0 · Upgraded our core Data Centre DDoS (Distributed Denial of Service) protection and our US DDoS protection · Additional anti Malware deployed into production · Migrated Off Host applications/ services from RBS into Worldpay data centres
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Technology (Risk movement: risk decreased) |
Unscheduled system downtime impacts our service to merchants causing reputational damage and financial loss.
Risk appetite Worldpay is not willing to accept risks which compromise our ability to process merchant transactions.
Risk indicators · Availability of services · Reliability of components and services · Reduction in critical time failures
Potential impacts Any disruption to the availability of Worldpay's global payments platform or network could result in interruption of service to customers, loss of business and significant additional costs by way of lost revenue, contractual damages and operating expenses
Mitigants · Worldpay operates a full suite of monitoring tools to minimise system downtime · Dedicated support teams exist to support Worldpay core systems · Incident rating exists to ensure that faults are addressed based on their criticality to operations · There are two separate data centres providing fail over capability
Actions in 2015 · Off Host Migration - performed a full review of the products and services supporting the core platform running within the RBS infrastructure and initiated a project to migrate applications and services to Worldpay's data centres. Phase 1 of the project was completed in September 2015 · Completed enhancements to our Disaster Recovery sites · Banking robots, virtual machines and network access moved to the Worldpay Data Centres · Completed componentisation of the existing Gateway code base to measurably reduce the complexity
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Scale of change (Risk movement: no risk movement) |
The risk of loss of profit, opportunity, reputation or disruption to business activities as a result of our inability to manage the magnitude of change being undertaken.
Risk appetite Worldpay has no appetite for the failure to deliver high-priority projects on time, to budget and to expected quality.
Risk indicators · Ratio monitoring of permanent colleagues versus temporary/contractors to ensure key knowledge is retained in the business following implementation of changes · Monitor the completion of the new technology platform training to ensure all colleagues have undergone role specific and general training ahead of phased releases · Tracking of actual cost versus budget costs of projects · Prioritisation of resources on projects · Monitoring of the number of projects
Potential impacts · Failure to deliver high-priority projects impacting customer and/or reputation · Disruption to normal business activities · Development of single points of failure
Mitigants · Governance structure in place to manage information and decision making across the senior management. This includes local project meetings, Steering Committees and senior management reporting · An analysis of the impact on resources of business as usual change requests compared to the new technology platform plan is conducted to identify resource constraints
Actions in 2015 · Established and published Organisational and Readiness dashboards to track the new technology platform project at divisional level and Group level · Weekly Senior Management Report produced tracking top four initiatives and the progress made against delivery plans · Identified key roles needed to transition to, and then operate, the new technology platform. These have been resourced and we have retained subject matter experts · Timeline and delivery plan established to provide Group with both soft skills training to prepare colleagues for change in addition to specific technical training to manage changes brought about by the delivery of the new technology platform. This is being managed in house and bolstered by the appointment of an external training partner
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Third Parties (Risk movement: no risk movement) |
The risk of loss from reliance on third parties carrying out core business activities.
Risk appetite Worldpay is willing to accept the risk of working with third parties for core business activities. However, contracts and relationships with critical suppliers must be well-monitored, value for money and regularly reviewed. In addition, regulatory requirements relating to sourcing must be met.
Risk indicators · Core suppliers all contracted on a long-term basis to suit business strategy and need · Performance of core suppliers against agreed service levels · Issues identified in quarterly service reviews with the business and suppliers
Potential impacts · Suppliers critical to Worldpay's success are unable to meet the capability levels required · Non-compliance with FCA Regulation relating to Supplier Management · Inconsistent and/or undesirable approach to the sourcing and management of key suppliers
Mitigants · Worldpay has a dedicated procurement team staffed by purchasing professionals to manage external contractual arrangements · The in-house legal team is involved in all contractual discussions · SLAs and service reviews are held with all key external suppliers · We regularly monitor performance of core suppliers against agreed service levels
Actions in 2015 · Created a centralised contracts database · Contracts renegotiated, on service levels and terms and conditions, with strategically significant suppliers · Engaged Strategic Supplier Management and Procurement in all Worldpay sourcing activity · Sourcing regulatory requirements identified and communicated · Supplier Security Risk reviews undertaken by Enterprise Security
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UK leaving the EU |
The UK Government has announced that a referendum will be held on 23 June 2016 to decide whether the UK should remain in the European Union ('EU'). At Worldpay, we have analysed what this could mean for our business. A possible effect on Worldpay would be from macro-economic disruption, which may impact a proportion of the merchants we serve in the UK and Europe, and therefore our transactional flows. As a significant proportion of the regulatory regime we operate within comes from the EU, an exit may also change the framework applicable to our European operations.
However, given the global nature of our business and our experience working across multiple regulatory regimes, our current expectation is that this would not have a material effect on our business overall.
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Related Parties and Related Party Transactions
During the current year and prior to 16 October 2015, Ship Global 2 & Cy S.C.A., a company incorporated in Luxembourg, owned 100% of the Company's Ordinary Shares. The ultimate controlling parties are Advent International and Bain Capital.
On 16 October 2015, the Company's Ordinary Shares were admitted by the London Stock Exchange. Advent International and Bain Capital jointly retained 41.97% of the Company's Ordinary Shares and sold 58.03% to the free market.
Related party transactions and their impact on the consolidated statement of comprehensive income are set out in the table below:
| 31 December 2015 £m | Pro forma information for year ended 31 December 2014 £m | One month ended 31 December 2014 £m |
Interest payable to related parties |
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Ship Global 2 & Cy S.C.A. | 32.5 | 55.1 | 3.4 |
| 32.5 | 55.1 | 3.4 |
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Purchases from related parties |
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Advent International | 6.9 | 1.8 | 0.1 |
Bain Capital | 9.9 | 1.8 | 0.2 |
| 16.8 | 3.6 | 0.3 |
Balances with Group companies as at 31 December 2015 and 31 December 2014 are set out in the table below.
| 31 December 2015 £m | 31 December 2014 £m |
Amounts due from related parties |
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Ship Luxco Holding & Cy S.C.A. | - | 0.3 |
Ship Investor & Cy S.C.A. | - | 0.5 |
Ship Luxco 1 S.à r.l. | - | 0.2 |
Ship Global 2 & Cy S.C.A. | - | 0.5 |
- | 1.5 |
Amounts due to related parties |
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Advent International | 0.7 | 1.1 |
Bain Capital | - | 0.1 |
Ship Global 2 & Cy S.C.A. | - | 567.9 |
Employee Benefit Trust - Appleby Trust | - | 8.7 |
| 0.7 | 577.8 |
Key management
The Group's policy is for its subsidiary undertakings to bear the costs of their full-time staff. The Group also recharges subsidiaries for management fees which include an allocation of certain staff and administrative support costs.
Key management comprises the Directors of Worldpay Group plc. The emoluments of the Directors are met by the Group.
Related Shares:
Worldpay Group