FY2019 was a tough year, with our business navigating both macro and regulatory pressures. However, our conviction remains strong that our medium to long term strategy remains appropriate. We have good businesses operating in growing markets, with good prospects for growth.
The past year saw us take several important steps towards becoming a resilient, global organisation. These steps include establishing the necessary structure to operate as a cohesive, integrated global business that will support improved execution and service delivery for our clients, which remains our key focus.
Operating environment
The past year has been a challenging operating environment, with a large volume of regulatory change and an unsettled political landscape in the UK.
In Australia, the Protecting Your Super legislation announced in the 2018–19 Federal Budget and legislated in March 2019, created some short-term challenges for the industry, as superannuation funds communicate these changes to their members and undertake account consolidation actions over a very short implementation timeframe. We worked closely with our clients to manage through these regulatory changes and were able to deliver the required changes to systems and processes on time for implementation on 1 July 2019.
Whilst there are some short-term impacts from the introduction of the legislation, regulatory change often provides opportunities for our business, as we assist our superannuation fund clients to meet new obligations.
In the UK, a longer than anticipated period of uncertainty over Brexit has impacted our European operations. The uncertainty has resulted in some clients delaying projects such as new listings and fund launches, while subdued capital markets saw a reduction in transaction related revenue. We continue to work with our clients to manage the full range of Brexit scenarios, with the diversity of our footprint providing us with the flexibility to offer solutions and services to our clients, irrespective of the Brexit outcome.
Financial position in FY2019
Against the backdrop of this operating environment, our business diversification has helped deliver a satisfactory financial performance.
- Operating EBITDA was $356 million up 6% on FY2018
- Operating NPATA was $202 million, 3% lower than FY2018
Our recurring revenues remains strong, representing over 80% of total revenue, with cashflow conversion remaining high at approximately 95%.
Connecting people with their assets
With more than 6,500 employees working across five key businesses, Link Group touches nearly all the major elements of household wealth — from retirement pension and superannuation, managed investments and equities, to debt and property.
Fundamentally, Link Group is a leading financial administrator that connects people with their assets. We do this by supporting clients who range from boutiques to some of the world’s largest listed companies, pension and superannuation funds and investment houses, who choose Link Group to support them in managing and administering their customers’ accounts securely and efficiently every day.
Our strength and scale enable us to provide high-volume financial transaction processing that complies with the relevant regulation and is supported by a strong focus on data security and privacy. We are pleased to report that our ISO27001 certification has been renewed again in FY2019.
Our technology platforms are designed to support our clients’ own strategic objectives by providing them with scaled administration and related services that can be personalised for their own customers by using other Link Group value-added services, such as data analytics, apps and customer-centric communications.
FY2019: Further positioning Link Group to become a global organisation
Following our expansion into Europe in FY2018 through the acquisition of LAS, we can now actively support all our clients across multiple jurisdictions.
We have also leveraged our footprint in existing markets to broaden our service offering in a number of countries. For example, this past year our Link Market Services business built and launched a new registry offering in Hong Kong, with our existing Orient Capital business providing an established operation and a largely common client base.
We also expanded our presence in Italy and the Netherlands for our Banking & Credit Management business, as well as a new Luxembourg office for our Fund Solutions business. Each of these jurisdictions is strategically important for Link Group, and the strength of our global operations has made this expansion possible.
As we continue to grow and evolve as a global organisation, we look forward to offering our teams mobility and learning and development opportunities. The diversity of our workforce continues to expand in line with our international growth, benefiting our organisation as we harness the views and perspectives of an inclusive culture into new, innovative ways of working.
FY2019: A year of integration
I am pleased to report that in FY2019, our LAS business successfully achieved full separation from Capita plc. While our people and teams have been operating under the Link Group brand since the acquisition, this past year we have focused on becoming an integrated organisation. To that end, we announced that LAS will be re-named and known as Link Group as we move forward.
From a business and revenue point of view, we have brought together our investor relations businesses in the UK including our existing Orient Capital business. We have also commenced bringing our retirement and superannuation administration expertise to the UK so we can develop a future growth strategy for the UK and European pension market.
From an operational perspective, integration of our group functions is now complete, with all our teams — including those in Europe — now operating on the same platforms for Finance, Human Resources, Payroll, and Risk & Compliance.
The rationalisation of some UK and European offices has begun, as has the fit-out of new, state‑of‑the‑art premises in Leeds with staff relocation to occur in FY2020. Designed to be a key operations hub servicing our European clients, our Leeds offices will be environmentally efficient and will offer our people improved amenities. We are also extending our operations hub in Mumbai, with this site also expected to be fully operational in FY2020.
We have also established global procurement and vendor management programs, commencing with our global insurance program and key technology vendors. This has led to increased value being shared across the organisation and the ability for our teams globally to access the technologies we need to facilitate faster speed to market for new products and services.
Targeted investment strategy
During the year, Link Group undertook several targeted investment and divestment actions focused on areas that best represent the greatest opportunity for long term strategic growth.
Alongside our consortium partners, we increased our stake in PEXA to become their largest investor, providing us with a unique exposure to the property sector. As Australia’s first electronic property exchange platform, we have been strong supporters of the business (having made our first investment in 2013). Its market-leading, cloud-based technology platform positions PEXA well to provide national infrastructure and continuing to assist the industry in the shift from a traditional, paper-based conveyancing property exchange market to a more efficient, digital, electronic exchange model utilising APIs.
We also completed our investment in Leveris, a company providing a next‑generation, modular, end‑to‑end digital banking platform. This technology complements our Banking & Credit Management business and facilitates our continued expansion into new and existing jurisdictions.
Consistent with our strategic focus, we divested the CPCS business. Notwithstanding the quality of the business, we felt that the CPCS business would have a better strategic fit with their new owner. The divestment streamlines our business and provides further balance sheet flexibility.
Innovation continues to be key
As we strive to continuously create new ways for people to connect with their assets through our clients, reinvestment and innovation in our business continues to be critical. Over the last ten years, we have invested more than $300 million in technology, in addition to our recent investments in PEXA and Leveris.
This investment has enabled us to bring to market innovations such as the Link Group Investor Centre mobile app, which we plan to roll out globally. I am pleased to say this app was voted Financial Services App of the Year Award at the 2019 Financial Standard Marketing, Advertising and Sales Excellence (MAX) Awards, our third successive win in this category.
We are also continuously reinvesting in our core transactional platforms so they remain highly scalable, while refreshing our key end-user platforms to ensure they are contemporary, relevant and functionality-rich for our clients. One example this year was our miraqle platform, where we rolled out globally a refreshed client relationship management module for investor relations professionals. We also began refreshing our self-service platform for superannuation fund members in Australia, a project that can also be leveraged by our European operations as we enter the market there.
In the UK, we created a LinkLabs facility in our London office, with the official launch taking place in the new financial year. This is our third innovation and design thinking space, with LinkLabs already established in Sydney and Melbourne. LinkLabs supports a culture of collaborative innovation by providing a dedicated technology space where our teams can work together with clients to find new solutions and refine existing services.
In closing
I would like to thank all our people for their hard work, commitment and dedication that has seen us work together through a challenging year for the business.
We acknowledge and thank all of our clients for continuing to entrust us with the critical role of servicing their own customers, and for working with us as a trusted partner.
Although we have some short term headwinds to navigate, I am confident that Link Group remains well-positioned to take advantage of future opportunities and that the steps taken to reshape our business in FY2019 will provide a sound foundation from which to do so.
I strongly believe that Link Group’s people, the diversification of our business lines and our demonstrated capacity to innovate and deliver market-leading technology platforms and services are at the heart of our business’ resilience. These attributes have been, and will continue to be, instrumental in our ability to achieve our long term strategic goals.
I look forward to reporting back to you on our progress.
John McMurtrie
Managing Director