FY2020 has been an unprecedented year for people and businesses globally as the COVID-19 pandemic impacted everyone from a health, social and economic perspective.
The safety and well-being of our people across all our businesses and locations was, and remains, our key priority. We are proud of how the Link Group team has responded to this crisis by maintaining service levels for clients, while mobilising to enable the majority of our people to work remotely during COVID-19.
Teams across the business collaborated to deliver the technology required to accommodate new ways of working, and adjust and adapt business operations to provide continued service for our clients. In parallel, we put in place communications and wellbeing initiatives to ensure the health and safety of our people.
We also took early and proactive measures to manage our cash flow and reduce our cost base. These measures ensured that we continued to prudently manage our liquidity and overall financial position.
Pleasingly, PEXA, Australia’s first digital property settlement platform, continues to deliver significant growth and earnings. We remain confident about the future of PEXA as it expands and looks for new business opportunities. We also announced an agreement to acquire Pepper European Servicing (PES) from Pepper Group1, and entered the fast-growing UK pension administration market through a strategic global partnership and investment in Smart Pension, a leading workplace pension platform provider and master trust in the UK.
1 Subject to regulatory approval.
Our results for FY2020 were as follows:
- Revenue of $1.2 billion
- Operating NPATA of $144 million
- Statutory net loss after tax (NPAT) of $114 million
- Operating earnings per share of 27.1 cents
- Final dividend of 3.5 cents per share (50% franked)
Our financial performance mostly reflects the impact of regulatory changes in our Retirement and Superannuation Solutions (RSS) division and reduced capital markets activity, largely as a result of COVID-19. Additionally, the restrictions on international travel has, in part, slightly delayed our ability to deliver on some aspects of our global transformation program.
Year in review
FY2020 has been dominated by COVID-19. While it has thrown up some hurdles, the pandemic has also highlighted the resilience and agility of our people.
The work we do in connecting people with their financial assets across the world is an important part of the financial system. During COVID-19, our role was even more critical than normal so that our clients and their end-customers had continuity of service. The agility and scale of Link Group enabled us to pivot quickly and mobilise systems and resources to successfully adapt to the new environment.
This is highlighted by our RSS and Technology and Operations teams who responded to an enormous number of calls and established the required processes and systems associated with a Scheme announced by the Australian Government allowing people early access to their superannuation savings, in just a matter of weeks. As at 30 June 2020, Link Group has processed over 1.2 million1 such requests (over 2 million as at 27 August 2020) and been able to support our clients to meet the urgent needs of their members.
The collaborative nature of the Link Group team was further highlighted as teams across the globe worked together to enable approximately 90% of our staff to work remotely and provide continuity of business for our clients, all within a very short period of time.
Our new operations hub in Mumbai is a key part of our global transformation program. We now have people working from state-of-the-art premises in this hub, successfully providing operations processing for Corporate Markets and Link Fund Solutions, as well as technology services and support. Pleasingly, our Mumbai team has been able to recruit and on-board staff in the COVID-19 period. This played an important role as part of our globally co-ordinated response to the pandemic and the resultant shift in work practices. We expect this hub to continue to develop and grow in FY2021.
As announced in November 2019, Link Group entered the UK pension market through our partnership and investment in Smart Pension.
In January 2020, Link Group announced an agreement to acquire 100% of PES. PES is a highly complementary fit for Link Group’s Banking & Credit Management (BCM) division, increasing scale, revenue diversity and growth opportunities in the loan servicing market. This transaction is subject to certain commercial conditions precedent and regulatory approval.
In our Corporate Markets division, COVID-19 has presented us with the opportunity to better showcase our virtual meeting technology. In FY2020, this has been successfully used by over 100 organisations to facilitate virtual Annual General Meetings (AGMs) and general meetings in the UK, Germany, Austria, Australia, New Zealand and Papua New Guinea, replacing or complementing the traditional face to face model. We expect this to continue to grow in popularity and for more organisations across different jurisdictions to utilise this technology. Link Group’s own AGM will be held virtually on 27 October 2020 and we look forward to connecting with our shareholders in this format.
1 As at 30 June 2020.
A resilient business with sound fundamentals
FY2020 has demonstrated the resilience of the business in a period of change and challenge. While some of our businesses are adversely impacted by equity market volatility, overall the majority of our contracted revenue is from large institutions to whom we provide non-discretionary services. We have a resilient earnings profile supporting operating cash flow, with 83% of revenue recurring in nature. Debt serviceability and leverage is also comfortably within existing bank covenants.
The management team proactively took prudent steps relatively early in the COVID-19 period, to reduce costs and preserve cash flow in the form of liquidity management, mandatory annual leave and a temporary pay reduction program. This is in line with steps taken by other organisations and has set the business up to see through this uncertain period and emerge on the other side in a strong position.
A new chapter
In August 2020, we announced that John McMurtrie would retire as Managing Director, with Vivek Bhatia to succeed John as Managing Director and Chief Executive Officer of Link Group.
Ahead of our ASX listing in 2015, John made a personal commitment to guide the business through the first phase of its operation as a public company. As we enter our next chapter, the Board and John decided that it is an appropriate time for succession.
Driven by John’s vision and dedication, Link Group has evolved from a small Australian share registry business into a respected, market-leading global provider of technology-enabled administration solutions, with more than 6,500 employees and some of the world’s largest corporations, pension funds and financial institutions among its clients.
John’s successor Vivek, is an experienced chief executive with 22 years of experience in insurance, financial services, government and management consulting. Vivek brings extensive experience in strategy and transformation, digital, ventures and innovation.
John and Vivek are both committed to working with the Link Group Board and leadership team to ensure a seamless transition, and we warmly welcome Vivek to the organisation. On behalf of my fellow directors and the entire Link Group team, I would like to thank John for his almost two decades of service at Link Group, and his tireless dedication and commitment during this time.
The creation of long-term sustainable value remains of paramount importance at Link Group.
While it remains difficult to predict the length and severity of the pandemic, we are committed to our medium to longer term strategy and goals. Link Group will continue to strengthen our customer focus by expanding our range of services to existing customers as well as rolling out our existing services, products and technology to new customers.
We continue to prioritise the health and safety of our people, together with the continuity of service to our clients as we navigate through COVID-19.
In addition, the Board remains committed to the continued development of a diverse and inclusive culture and workforce, while maintaining strong corporate governance practices including vigilance about information security and data privacy.
On behalf of the Board, I would like to thank everyone in Link Group who has worked so tirelessly during this period, and all of our loyal clients and shareholders during an especially difficult time for everyone, both personally and professionally.
My fellow Board members and I look forward to FY2021 being a safe and positive year for all of us.