In a challenging year of uncertainty and rapid change, I am proud of how we tackled FY2020 as an organisation, with the health and well-being of our people being our top priority.
In spite of the disruption brought on by COVID-19, we have successfully continued to service our clients while seamlessly transitioning the majority of our people to work remotely, while maintaining our data security and privacy standards. We transitioned approximately 90% of our global workforce to this new way of working in a very short period of time and are pleased to report that this was done with minimal impact on our clients and the services we provide.
In addition to the maintenance of our core services, we also supported our clients to continue to meet their regulatory obligations with innovations such as our virtual meeting technology, holding online only and hybrid AGMs for companies such as Coca-Cola Amatil, GPT Group, Saga and National Bank AG, and facilitated the processing of over 1.2 million1 requests for early access to superannuation, on behalf of our superannuation fund clients in Australia.
In this environment of volatility and unprecedented pressure, we have delivered a satisfactory underlying financial performance. While there is much to play out in FY2021 in terms of the full impact of the pandemic on the global economy, we are confident that our medium to long term strategy remains appropriate. We have a sound business with solid fundamentals and diversified earnings and geographic profiles, which positions us well for both the current environment and will benefit us as economies start to recover.
1 As at 30 June 2020. Over 2 million requests processed as at 27 August 2020
Safely and securely connecting people with their assets
In FY2019, we took further steps towards becoming a resilient, global organisation. This included establishing the necessary structure and changes to our Executive Leadership Team (ELT) to operate as a more cohesive, integrated global business. We started to reap the benefits of this in FY2020, and anticipate further efficiencies in FY2021 as we continue to increasingly operate as a global business. This is consistent with our vision to be an organisation that is powered by technological innovation to connect millions of people across the globe with their financial assets.
The last few months of FY2020 was understandably overshadowed by the social, health and economic impacts of COVID-19. While this presented challenges in some parts of the business, it also opened opportunities for us in other areas.
With local Governments and health authorities imposing various lockdowns and physical distancing requirements, numerous organisations were faced with the dilemma of how to safely conduct their shareholder and member meetings without compromising the welfare of participants and abiding by COVID-19 requirements. Our Corporate Markets division provided a solution in the form of virtual meeting technology, facilitating either fully virtual or hybrid meetings during the annual reporting season, in lieu of large-scale face-to-face meetings.
As at 30 June 2020, our technology and meeting events team has facilitated over 100 entities, including the largest virtual meeting in Australasia (at the time of this report), to continue to meet their 2020 obligations while also benefitting from reduced operational costs, for example venues and catering. This technology allows for meetings to be held via video conference, teleconference,
physically distanced in-person, or a combination of the above while also supporting online voting of meeting resolutions and questions from shareholders anywhere in the world. A further 98 meetings have also been held during the period between 1 July and 27 August 2020.
Extending our UK and European footprint
The growth of our UK and European operations continued in FY2020, commencing with our partnership and investment in Smart Pension as announced in November 2019. This strategic partnership provides Link Group with an established entry point into the US$3.5 trillion UK pensions market, and we are actively working with the Smart Pension team on a joint pipeline of opportunities both in the UK and Australia. We are also bringing to market a number of new product innovations and technology solutions, particularly in the pension and retirement space.
Our BCM business has a scalable loan servicing platform with operational and jurisdictional expansion opportunities, as reflected in our expansion into Italy and the Netherlands over the last few years. In January 2020, we announced the acquisition of PES from Pepper Group for an upfront cash consideration of €165 million ($277 million) and up to a further €35 million consideration contingent on performance over three years. PES is a highly complementary fit to the BCM division, and allows us to create a leading pan-European asset servicer and manager, as well as further diversifying BCM’s revenues and client concentration. The transaction is subject to regulatory approval, which we expect to receive in FY2021.
Financial performance
Despite the impact of the market volatility due to the global pandemic, the business continued to deliver satisfactory underlying financial performance.
Our RSS division quickly and effectively responded to the early release of superannuation, while delivering a credible financial performance, notwithstanding the volatility of this year. With our expansion into the UK, new product development is a priority for us in the coming year, as is the identification of new market segments into which to enter.
Our Corporate Markets division had a number of client wins, including Tyro Limited and Home Consortium in Australia, Legend Holdings Corporation in Hong Kong and PPHE Hotel Group in the UK. While COVID-19 has reduced market-related activity, as previously outlined it has also presented new innovation opportunities such as virtual meetings.
LFS reported stable revenue for FY2020, in spite of the elevated level of costs largely associated with the former Woodford fund, LF Equity Income Fund, which continued its orderly windup and has been making distributions to investors since January 2020. We continue to see further opportunities for the LFS team particularly in the provision of Authorised Fund Manager (AFM/ “ManCo”) services in the broader European region.
As previously outlined, BCM will be focused on successfully integrating the PES business and team into the Group, once the acquisition of PES is complete. FY2020 performance has benefitted from our strategic decision to broaden our geographic footprint for BCM into Italy and the Netherlands.
Growth in these jurisdictions helped partially offset declining revenue in the more mature markets of Ireland and the UK.
The T&O business continues to perform strongly with good external revenue growth, representing 29% of total revenue for the division, driven largely by consistent demand for communications services and data analytics services.
Global transformation program
At the start of FY2020, we announced that we would be undertaking a global transformation program to deliver $50 million in annualised savings by the end of FY2022, driven primarily by initiatives in consolidating premises and vendors, centralising our sourcing, operational efficiencies and our global hub strategy.
As part of our global hub strategy, we are creating centres of excellence and strategic hubs in Australia, India, the UK and Ireland. This provides for a more consistent operations experience in all our locations, leverages economies of scale and the ability to quickly flex our services in line with our clients’ needs, as well as a “follow the sun” service model. These hubs will allow us to build greater capability within the organisation and provide specialised local services, supported by the strength and scale of Link Group’s global operations capability and knowledge base.
The program has progressed well in the first half of FY2020, with our Mumbai hub established and the first tranche of team members now operational and working from our hub, and a Director of Operations in place in India. Approximately $14.7 million in benefit was also delivered in the year. Unfortunately, COVID-19 has slightly delayed the progress of our transformation program, partly due to the inability to travel internationally and as we focused our attention on the health and welfare of our people and on business continuity programs. Progress on the transformation program has now re-commenced, is broadly tracking well and we remain confident of achieving our target cost savings. In fact, we now see the potential for further cost reduction opportunities in the form of additional reductions in our global premises’ footprint and in reduced levels of travel.
New ways of working
There is no doubt COVID-19 has changed the way that organisations across the world operate. As outlined earlier, we are proud of how quickly our people have pivoted and adapted to this new way of working.
Our people have adapted well to these new practices and ways of working. We anticipate that the majority of our workforce will move towards a blended model of working remotely and in the office, even after the COVID-19 pandemic has eased. This opens up access to an increased pool of resources and skillsets that are not location-bound, which should reduce staff attrition and the associated costs of recruitment and on-boarding. In addition, our premises requirements and travel expenditure should significantly reduce over the next few years, which will further support us in delivery of our global transformation program targets.
Continued investment in technology
Technology and innovation have always been at the heart of this organisation, as we utilise technology-enabled solutions to provide secure, accurate, scaled administration services and ancillary products to our clients. We spend over $250 million each year on supporting, maintaining and delivering our systems and platforms. This includes system refreshes of core applications such as our superannuation administration, share registry, miraqle and Investor Centre platforms, customer relationship and contact centre solutions, data analytic and connectivity platforms, as well as digital solutions.
Ongoing commitment to the community and sustainability
We continue to maintain our commitment to contribute to the communities in which we operate and to endeavour to be a responsible business that takes steps to continuously identify, respond to and manage the environmental, social and governance risks and opportunities that are important to us and our stakeholders.
This is the first year we have included our Sustainability Report within this Annual Report, a reflection of how this is an increasingly important part of our overall business strategy. We have also taken steps to better align our sustainability strategy with our purpose, which is connecting people across the globe with their assets. Our aim is to safely, securely and responsibly provide our services and products to our clients and their end customers, while being a good corporate citizen.
We continue to build capability in our people and systems, and diversity in our workforce to deliver best-inclass global client solutions while contributing to our communities in the form of financial and non-financial contributions. We also continue to identify ways to reduce our carbon footprint while innovating and developing technologies that enable us to provide our solutions to clients more efficiently, without compromising our strong commitment to information and data security.
We reinforce in our people the behaviours required for us to become a more sustainable, inclusive organisation through training programs and education, and encourage our suppliers and partners to uphold the same commitment to building a sustainable future.
This year COVID-19 limited the ability of our people to contribute in the form of volunteering and other non-financial contributions. Some of our key fundraising events were deferred or moved to virtual formats. In spite of this, we were able to contribute over $380,000 in both financial and non-financial support to our charitable and community partners and look forward to increasing our support this coming year. Further details on our sustainability and community initiatives can be found in the sustainability section of this report.
In closing
I would like to thank all our people for their resilience and hard work during what can only be described as an unprecedented year for everyone. It has been through working together that we have been able to navigate through the pandemic, while also continuing to deliver for our clients.
We also acknowledge all of our clients and thank them for their support in this challenging environment. It is moments like these that illustrate how important it is to work in close partnership with each other to ensure that we continue to deliver and meet our mutual commitments.
While we wait to see what the future holds in terms of the longer-term impact of COVID-19, we remain confident in our medium to long term strategy. The resilience displayed by our people in both maintaining business continuity while also focusing on innovation and delivering market-leading technology platforms and services, is key to achieving our long-term strategic goals.
As mentioned in the Chair’s message, I will be working closely with my successor, the Board, the Executive Leadership Team and the broader Link Group team to ensure a seamless transition over the next few months.
With this being my last report as the Managing Director, I would like to sincerely thank every single person at Link Group for their commitment and loyalty. It has truly been a privilege to lead this business for almost two decades and to have had the pleasure of meeting and working with some of the industry’s best.
While there are many others to thank for their support over my years at Link Group, I would like to take this opportunity to extend my personal thanks and appreciation to the Link Group Board, our clients and shareholders. Your support has helped build Link Group into the organisation that it is today.
I wish everyone a safe and successful year ahead.
John McMurtrie
Managing Director