The past year has been a transformative one for Link Group. There have been many positive strategic and operational initiatives undertaken and completed during the year. These include the acquisition of a larger stake in PEXA, the separation of Link Asset Services (LAS, our UK and European business) from Capita plc and subsequent, progressive integration of Link Group’s shared services functions and the divestment of the Corporate & Private Clients Services (CPCS) business. However, the organisation has also faced several headwinds that have impacted our financial performance.
These headwinds include aggressive competitor activity, higher business integration costs, regulatory change in the Australian superannuation sector and a more uncertain business environment in the UK.
Against this backdrop, we have delivered a satisfactory FY2019 financial performance and remain confident of delivering on our medium to long term strategic growth plans.
Financial performance
Our results for FY2019 were as follows:
- Final dividend of 12.5 cents per share, which is 100% franked,
- Revenue of $1,403 million, up 17% on the prior year,
- Operating EBITDA of $356 million, up 6% on the prior year,
- Operating NPATA of $202 million, 3% lower than the prior year,
- Statutory Net Profit After Tax (NPAT) of $320 million, 123% up on the prior year.
Our FY2019 financial performance mostly reflects the impact of client losses and superannuation fund mergers in Retirement & Superannuation Solutions, continued competitive pricing pressures in Corporate Markets and a suppressed capital market and other activity related to new business in the UK due to the uncertainty of Brexit.
Year in review
In January 2019 Link announced, that alongside our consortium partners Commonwealth Bank of Australia (CBA) and Morgan Stanley Infrastructure (MSI), we were successful in acquiring PEXA. This electronic conveyancing platform has transformed the Australian property settlement industry and is on track to establish itself as a key piece of market infrastructure. This transaction took our equity ownership in PEXA from 19.8% to 44.2%.
We also expanded our operations in Hong Kong, India, Italy, the Netherlands and Luxembourg. All these jurisdictions are experiencing increased complexity and greater regulatory oversight, which may present future revenue opportunities as we help our clients navigate and manage this changing regulatory landscape.
Following a review of our businesses, we divested our CPCS business to Apex Group Ltd for a cash-free, debt-free consideration of £240 million (A$434 million), with the transaction completing in late June 2019. The sale of CPCS simplifies Link Group’s operations and allows us to focus on the businesses that will benefit more readily from our technology and core administration capabilities. The transaction will also provide Link Group with additional balance sheet flexibility.
The outlook
We have moved to a global operating model and organisational structure that better reflects the increasingly global nature and scale of our business, with central shared systems and services.
We have also renewed the Executive Leadership Team (ELT) and made several key external appointments in Human Resources & Brand, Risk & Compliance, Retirement & Superannuation Solutions as well as internal promotions in other executive roles. These changes have added greater strength, depth and global experience to the senior executive team, as we continue to seek growth opportunities and respond to changing business, economic and political environments.
While we expect to benefit over the medium to long term from the foundations that we have put in place this past year, we do expect some of the headwinds that presented themselves in FY2019 to remain a challenge in FY2020.
The Board remains committed to the continued development of a diverse workforce, inclusive culture, maintaining our corporate governance practices, delivering on our clients’ expectations, remaining vigilant about information security and data privacy and delivering satisfactory returns to shareholders.
On behalf of the Board, I would also like to thank our loyal clients and shareholders and acknowledge the dedication of the entire Link Group team and my fellow Board members. I look forward to all of us working together in FY2020 and delivering the best possible outcome for our stakeholders.
Michael Carapiet
Chair