Welcome to Link Group’s Annual Report for the financial year ended 30 June 2017 (FY2017), our second since listing on the Australian Securities Exchange (ASX).
Link Group has enjoyed another strong earnings result, with the Company continuing to build momentum since its successful Initial Public Offering (IPO) in October 2015. Under the leadership of John McMurtrie and his executive team, Link Group has delivered:
The Board is pleased to announce a final dividend of 8 cents per share, which is 100% franked. Together with the interim dividend of 6 cents per share, this represents 60% of NPATA, which is at the top end of the Board’s dividend policy of paying between 40% and 60% of NPATA.
The delivery of our strategy and the development of innovative products and services were particularly pleasing elements of Link Group’s performance in FY2017. The Company’s operations in complementary and adjacent markets improved and added further value to our business.
Link Group is committed to reaching its goals using innovative technology, developing expertise and loyalty in our team members, and meeting our clients’ needs using efficient processes and market-leading solutions. We operate in 11 countries worldwide, process over $100 billion in payments per year and answer 4.3 million calls per year.
A highlight of the year was our first Annual General Meeting (AGM) as an ASX-listed company in November 2016. This event was special not only because it was our first AGM, but because it was also a showcase for Link Group’s ‘Day of AGM’ services and technology, which we provide to companies around the world to deliver their own AGMs. A first for an S&P/ASX200 company incorporated in Australia, the platform allowed eligible Link Group shareholders at remote locations to participate in the meeting ‘virtually’, to view the proceedings of the meeting via video link, ask questions, and vote using our LinkVote App on personal devices or via Link Group’s interactive webbased technology online.
In June 2017, Link Group announced it had entered into a binding agreement to acquire UK-based Capita Asset Services (CAS) for £888 million ($1,493 million) from London Stock Exchange-listed Capita plc.
The acquisition is subject to mandatory regulatory approvals and is expected to be completed by 31 December 2017. CAS is a strong strategic fit that aligns with our growth strategy. The acquisition of CAS exemplifies Link Group’s strategy to grow through further penetration of attractive markets, and expand its product and regional capabilities.
The acquisition of CAS marked the culmination of a busy year welcoming new businesses to the Company. These included Adviser Network Pty Limited and White Outsourcing Pty Limited – now Link Fund Solutions. In addition, Link Group increased its investment in Property Exchange Australia Limited (PEXA).
This year, the Board welcomed two new Independent Non-Executive Directors with extensive corporate governance experience. Peeyush Gupta comes to the Company with over 30 years of service in the wealth management industry, while Anne McDonald has over 35 years of business experience in finance, accounting and auditing, risk management and governance. I would like to acknowledge my fellow Board Directors for their hard work and dedication to delivering Link Group’s strategy for growth and innovation during FY2017.
The Company’s many achievements this year would not have been possible without the hard work and commitment of every member of the Link Group team and the ongoing support of our valued clients and loyal shareholders. On behalf of the Link Group Board, I would like to thank the Company’s shareholders for their participation in the recent Entitlement Offer, proceeds of which will partly fund the acquisition of CAS. We greatly appreciated your strong support.
The Board looks forward to the next year with great enthusiasm for delivering our commitment to innovation and service for our clients, their members and investors.
In 2017, Link Group delivered very pleasing financial and operational performance and made significant progress on the implementation of its growth strategies. This effort sees the Company well positioned to continue on its trajectory of sustainable growth.
Link Group has come a long way from its origins as a share registry business in an accounting practice more than 50 years ago. Today, it is a market-leading global administrator of financial ownership data that drives user engagement, insight and analysis through technology.
The Company operates on four continents, employs 4,300 people, and has significant operations within its three divisions: Fund Administration, Corporate Markets, and Information, Digital & Data Services (IDDS).
Over the past 12 months, Link Group has undertaken major acquisitions in the UK and Australia, delivered strong financial results, achieved significant growth, and deepened relationships with our valuable clients.
This strong performance is testament to the Company’s many attributes, including a diverse and multicultural workforce, a customer-first approach, and the enthusiastic adoption of sustainable solutions. Our 2017 performance also reflects Link Group’s commitment to innovation and the $100 million the Company spends in technology each year, including over $35 million invested in capital expenditure.
Link Group’s record of uninterrupted Operating EBITDA growth since 2002 continued in FY2017. We exceeded our performance of the previous year across key financial measures:
Link Group’s strategy continues to focus on five drivers of growth:
In June 2017, Link Group announced the £888 million ($1,493 million) acquisition of UK-based CAS, a major provider of back-office solutions to the financial services industry. We expect completion by 31 December 2017. The acquisition of CAS is strongly aligned with our stated growth strategy. It provides us with a wider geographic footprint within Europe and a great platform for further growth within Europe and the UK – markets into which we first entered more than a decade ago, and have been seeking to expand for many years.
I would like to commend the management team for their efforts on the acquisition process so far and for establishing a robust integration plan.
CAS provides us with established market positions in business segments that extend the reach of our current services within Fund Solutions, Shareholder Solutions and Corporate & Private Client Solutions. It also adds new services in the form of Banking & Debt Solutions.
CAS administers and safeguards approximately £600 billion ($985 billion) of assets and in 2016 managed approximately £45 billion ($74 billion) in annual payments for its customers. Once the acquisition is completed, Link Group will operate in 16 countries and employ more than 7,500 people.
The CAS deal was the latest acquisition in what was a busy year for Link Group. In December 2016, Link Group acquired White Outsourcing, a business that offers middle and back-office administration, fund accounting, custodial and unit registry services for fund managers, trustees and listed investment companies. With $43 billion in funds under administration, it is one of the largest locally-owned asset services specialists in Australia and now operates under the brand Link Fund Solutions.
In May 2017, Link Group acquired Adviser Network, a company that provides digital and advice services to many of Australia’s leading superannuation funds. Its services complement the existing product suite offered by Link Group’s IDDS and Fund Administration divisions.
Our investment during the year in technology solutions start-up Moneysoft Pty Limited, a provider of personal financial management tools that assist financial advisers and their clients to reach their financial goals, will enhance our product offering to our client base.
Link Group spends more than $100 million per annum applying technology that can drive user engagement, analysis and insight. As part of this expenditure, we invest over $35 million a year on capital expenditure – an increasing proportion of which goes towards developing innovations for the benefit of our clients and their stakeholders and members.
One example of this is LinkLabs, a new facility in our Collins Square office in Melbourne which allows our people and clients to collaborate on projects to promote the rapid prototyping of new ideas. It is a space where we can demonstrate some of our cutting-edge technology, including virtual reality equipment and eye-tracking technology to improve website development.
We are being recognised for our approach to innovation, too. Link Group won Financial Services App of the Year at the 2017 Financial Standard Marketing, Advertising & Sales Excellence (MAX) Awards for an employer app that we developed in partnership with Cbus Superannuation Fund (Cbus). The app allows small business operators to make super contributions, manage account administration, generate receipts and add new employees using their mobile phone.
Another example of our innovation is the iOS version of our miraqle® app, a tool that helps executives of listed entities manage investor relations. We first launched the app around the time Link Group listed on the ASX, so I was able to experience first-hand how useful it was in managing meetings with institutional shareholders and targeting potential investors, as well as in providing direct feedback to our development team. The miraqle® platform is now used by over 1,500 listed-entity clients worldwide and its functionality extends to booking Uber rides and restaurants, a useful function for executives when travelling to meet with investors around the globe.
The Superpartners data migration activity was completed in December 2016, when the final client fund was successfully migrated onto Link Group’s platforms. The migration project saw over five million individual superannuation member records from eight funds migrated in less than three years. It has provided Link Group with a range of new synergies that are already providing benefits. Link Group continues to pursue further integration synergies across both Fund Administration and IDDS.
While the financial figures tell part of the story, Link Group’s success in 2017 also involved advances related to our people, innovative technologies and our use of sustainable solutions. These core areas are crucial to driving the Company forward over the coming year and delivering greater value to our clients and shareholders.
Diverse teams are more productive and innovative, and so I am particularly pleased to see female representation on our board at 43%, well ahead of the 30% target set for S&P/ASX 200 companies by the Australian Institute of Company Directors. At the same time, the proportion of women in the senior leadership team grew to one-third. As I visit our various offices, I’m proud of the cultural diversity that I see in our teams, something that we celebrate during Harmony Day each year by encouraging our people to ‘Link Together’ by wearing their traditional dress and sharing a signature meal.
Behind the numbers in this annual report is our most important asset – our people. Wherever I go across the business globally, I’m always impressed by our people’s focus on delivering high-quality services for clients across our three divisions. Every team member contributes to our success and I would like to thank each of them for this.
In 2017, we formally identified Link Group’s cultural DNA in a Culture Statement approved by the Board. The statement re-affirmed what our customers and other stakeholders already know – that our employees are committed to enhancing Link Group through excellent service and a customer-first approach.
I was very proud to see Link Group recently recognised for creating a working environment in which our people can reach their full potential, with an Australian Business Award (ABA) Employer of Choice Award. Link Group received the ABA as we were able to demonstrate our achievements across several key areas including Organisational Culture and Leadership, Employee Education, Training and Development and Employee Health, Safety and Satisfaction.
Our new Collins Square office in Melbourne is an excellent example of our commitment to sustainability. The advanced design, which achieved the highest environmental rating, incorporates smart sustainability measures and technologies that will reduce our carbon footprint while also encouraging our people to collaborate and innovate.
Whether it is by reducing paper usage or taking space in energy-efficient buildings, we are continuing to seek more sustainable ways in which to operate.
I believe that our people, our investments, and our fiscal strength have all created good momentum for the years ahead across each of our business divisions. Link Group is well positioned to deliver on our growth plan in FY2018 and beyond.
I look forward to reporting back to you on our progress.