A Year of Challenge and Change
"The ongoing impact of the global pandemic has resulted in unexpected and unprecedented challenges for all economies and societies. In these trying circumstances, Link Group’s leadership team and staff have done an extraordinary job to adapt and evolve how we work. We have responded quickly to changing conditions and remained focused on providing timely and reliable service to all our clients."
Financial Performance
Our key results for FY2021 were as follows:
- Revenue of $1.16 billion
- Operating EBIT of $141 million
- Operating NPATA of $113 million
- Statutory net loss after tax (NPAT) of $(163) million
- Operating earnings per share of 21.3 cents
- Total dividend of 10.0 cents per share (82% franked)
Link Group’s Operating EBIT margin was 12% for the year, which is below our aspiration for the business. However, we expect to see this margin improve as we benefit from our Global Transformation program and an anticipated recovery in business conditions in the UK and Europe, as well as future growth in our Retirement & Superannuation Solutions (RSS) business.
The pandemic has continued to impact some parts of our business, with Banking and Credit Management (BCM) being affected the most. The number of new non-performing loan portfolios coming to market has been lower than anticipated, particularly in Ireland which is a primary market for BCM. As a result, we have recorded a non-cash impairment charge of $183 million for this business unit for the FY2021 year.
In spite of these headwinds in FY2021, we continued to see high levels of recurring revenue at 85% and strong free cash flows. The diversity of our revenues and strong capital and cash conversion has provided resilience to the business. RSS has delivered and supported our clients to navigate another year of significant regulatory change in Australia, while Corporate Markets has experienced positive momentum, particularly in Australia and India, with higher shareholder numbers and increased virtual Annual General Meeting (AGM) activity.
In addition, we have continued to win new clients and grown Assets under Management in our Fund Solutions business and new mortgage origination services in BCM.
PEXA performed very strongly in FY2021, contributing a total of $32.7 million to Link Group Operating NPATA, which was up by $15.6 million or 91% on the prior period. During the year, we explored various options to best highlight PEXA’s underlying value for our shareholders. Together with the two other PEXA shareholders it was decided that an IPO would deliver the optimal outcome. Link Group received net proceeds of $179.4 million from the PEXA IPO and our 42.8% shareholding in PEXA1 remains a key asset for Link Group.
In early July 2021, we provided the market with a restatement of our FY2019, FY2020 and 1H2021 financial results to reflect the realignment of the Link Group business units and revised tax effect accounting within PEXA and its resultant impact on Link Group’s equity accounted share of PEXA’s1 profit and loss. Our reporting now reflects our four global business units: RSS, Corporate Markets, Fund Solutions and BCM. The Technology and Operations business unit has been dissolved, providing greater transparency in divisional financials and improved accountability in each business unit.
Overall, our strong operating cashflow, capital and cash conversion, high levels of recurring revenue and geographic and asset diversification has provided the Board with the ability to return value to our shareholders. I am pleased to report that we are returning a total dividend of 10.0 cents per shares to shareholders for FY2021. We also announced in August 2021 an on-market share buyback of up to $150 million, representing approximately 5% of our issued capital.
While our overall financial performance has remained sound, we recognise there is opportunity to further deliver value to our shareholders and remain confident that we can do so in the medium to longer term.
1 Link Group holds (via its wholly owned subsidiary Link Property Pty Ltd) a 42.8% interest in PEXA Group Limited (formerly known as Torrens Group Holdings Pty Ltd).
Overview of Transactions
During FY2021, we considered two conditional, non-binding indicative proposals to acquire 100% of the shares in Link Group, firstly from a consortium comprising Pacific Equity Partners and Carlyle Group which was received in October 2020, and secondly from SS&C Technology Holdings which was received in December 2020.
The Link Group Board prioritised the maximisation of shareholder value when considering these non-binding indicative proposals and carefully evaluated both proposals, including obtaining advice from our financial, tax and legal advisors. Although we did not consider either proposal to represent compelling value for shareholders, we provided both parties with due diligence information to enable them to develop a proposal that may have been capable of being recommended to shareholders. This did not materialise as neither party provided a binding proposal.
A New Chapter
After a short transition period, Vivek Bhatia commenced as CEO and Managing Director on 2 November 2020 and has demonstrated all of the positive qualities that we had expected him to bring to the role. We have begun to transform Link Group with a renewed strategic objective to simplify, deliver and grow the business. The leadership team has made progress on these objectives and the Board is pleased to see a reinvigoration in the business as we enter FY2022.
Link Group’s purpose is to connect people with their assets – safely, securely and responsibly. Our purpose is underpinned by our values: Client Focused, Adapt and Evolve, and Together We Achieve. These values are the standards by which we hold ourselves and each other to account and drive our ways of working to deliver on our purpose and strategy.
A Sustainable Link Group
The Board remains committed to sustainable and responsible business practices, and continued development of a diverse and inclusive culture and workforce. We have approved a refreshed corporate social responsibility strategy as well as updated sustainability and human rights policies. We have completed our combined Modern Slavery Statement for Australia and the UK, broadly aligned our strategy to the terms of the Paris Agreement and set a net zero carbon emissions target by FY2030.
Upholding strong corporate governance practices, including vigilance in respect of risk management through improved information security and data protection, highlights our ability to operate as a responsible business to help build a more sustainable future.
We also celebrate the diversity of our people and the richness that brings in perspectives and experience to Link Group. Pleasingly, we have a balanced gender representation across the Board and Executive Leadership Team and most levels of staff and leaders, and remain focused on improving representation of women across our cohort of senior leaders. Diversity is a key focus for us and the management team continues to refine people policies and processes to provide equity for all our people.
We are also pleased to advise that the Australian Council of Superannuation Investors assessed Link Group at a “Leading” level of environmental, social and governance reporting, following their annual review of reporting in the ASX200 for the period to 31 March 2021.
Looking Ahead
Although the year ahead will no doubt continue to see challenges associated with the pandemic, the Board and executive team will continue to focus on servicing our clients and supporting our people. We have clear strategic priorities and remain committed to ensuring we meet our goals, especially those in the medium to long term, so that we can deliver a resilient and sustainable business with a stronger financial performance for our shareholders.
I am most appreciative of the support and hard work of my fellow non-executive directors during another very challenging year. On behalf of the Board, I would like to thank Vivek and the entire Link Group team for their continued dedication and commitment throughout FY2021 and to our clients and shareholders for your ongoing support.
Michael Carapiet
Chair