The net profit of Link Group for FY2019 was $320.2 million, which was up 123% on FY2018’s net profit of $143.6 million.
During FY2019 substantial progress was made on the integration of Link Asset Services (LAS) culminating in the implementation of a global operating model that establishes a strong foundation for growth and further efficiency gains. At the same time, the business faced a number of external head winds which impacted on our financial performance and are discussed in more detail in this review.
Link Group’s revenue by geographic region (as illustrated below in Figure 1) reflects our diversification into a global business with revenue derived from outside ANZ increasing from 40% in FY2018 to 49% in FY2019 reflecting a full-year contribution from LAS.
Figure 1: Revenue by region
External Revenue by Region
Link Group continued to execute on other elements of our growth strategy in FY2019 as follows:
- Increased sales of products and services to existing clients helping to mitigate the impact of previously announced client losses in Fund Administration, competitive pressures in Corporate Markets and Brexit uncertainty in LAS.
- New investment in technology platforms and innovative products and services with capital expenditure increasing by 22% to $81 million during the year.
- Acquisitions of businesses in the Netherlands (Banking and Credit Management) and India (Corporate Markets) which adds scale to our existing operations in these markets.
- Integration and efficiency benefits continued to be realised.
- Increased investment in Property Exchange Australia Limited (PEXA) to 44.2% as part of a consortium with Morgan Stanley Infrastructure Inc. and Commonwealth Bank of Australia.
We also successfully completed the sale of the Corporate Private Client Services (CPCS) business. This provides Link Group with flexibility to pursue future growth opportunities. With our balance sheet strength and Operating cash flows, Link Group has considerable flexibility to continue to pursue organic growth opportunities both domestically and internationally. With pro forma leverage1 of circa 1.85 times (towards the bottom of our guidance range), we are also well positioned to take advantage of future acquisition and capital management opportunities.
1 Pro forma leverage is calculated as Net Debt/operating EBITDA (excluding 12 months of CPCS results).
Drivers of growth
Growing with our clients in attractive markets
Product and service innovation
Integration and efficiency benefits
Client, product and regional expansions
Identifying adjacent market opportunities
- Key client renewals (AusSuper / REST)
- Increased service across existing clients (e.g. 73 ASX 300 clients in Corporate Markets now consume more than 7 products (FY2017: 19)
- Continuing to win clients in LFS (UK and Australia)
- Voted financial services app of the year – 3rd year in a row
- CX data hub
- Company Matters UK – Service Provider of the year (2018 ICSA Awards)
- Delivered annual efficiency benefits of £8.6m to date in LAS
- c$40m invested in FY2019
- Implementation of company‑wide efficiency and cost‑out program targeting $50m in annual cost savings
- HK greenfield in Corporate Markets (clients won)
- FlexFront and NHL in the Netherlands
- Expansion of CM in India
- Acquisition of PEXA with consortium partners
FY2020 Strategic focus
- Capitalise on growth opportunities created by financial services Royal Commission in Australia
- Renew administration contracts with clients
- Deliver integrated and increased product suite in the UK
- Broaden the range of products per customer across business units
- Expansion of cost-out and efficiency program
- Implementation of new global operating model (realigned business units)
- Exploring retirement and pension opportunities in UK
- Further expansion of BCM and LFS businesses in Europe
- Continue to explore value accretive acquisitions