“In another year of challenge and change, Link Group's leadership team and staff have once again demonstrated a high level of resolve and client focus to provide service excellence to all our clients, for which the Board and I are deeply appreciative.”
Our key results for FY2022 were as follows:
- Revenue of $1.18 billion;
- Operating EBIT1 of $154 million;
- Operating NPATA1 of $121 million; and
- Statutory net loss after tax (NPAT) of $(68) million
The last two years have seen a high level of corporate activity for Link Group while contending with the impact of the global pandemic and market volatility associated with higher inflation and higher interest rates. Despite these factors, it has been very pleasing to see the resilience of our people and stability of our businesses reflected in our financial performance.
Link Group delivered revenue growth of 1.3% in FY2022 and Operating EBIT of $154 million which was up 9.1% on FY2021. Net Operating Cash Flow conversion for FY2022 was healthy at approximately 81% but lower than management expectations, negatively impacted by the factors noted previously. We ended FY2022 with net debt of $688 million and a leverage ratio of 2.6x. Recurring revenue also remained steady at 84%.
PEXA continues to perform ahead of expectations buoyed by the favourable property market, contributing $33.1 million to Link Group’s Operating NPATA1 in FY2022. Link Group retains a 42.8% equity stake in PEXA and the market value of Link Group’s equity interest in PEXA is approximately $1.095 billion (as at 15 September 2022). The organisation has continued to grow and deliver on our client commitments. Link Group now connects over 100 million people across the globe with their financial assets and services over 6,000 clients globally.
Retirement and Superannuation Solutions (RSS) has over 10 million superannuation and pension members across three jurisdictions, up 10% on FY2021. Corporate Markets supported seven of the 10 largest IPOs in Australia in FY2022, with a 58% market share for IPOs in India from our Link Intime business. Our Fund Solutions business holds 48% of the UK independent ACD market and our Banking & Credit Management (BCM) team is the top mortgage servicer for the Buy-to-Let mortgage market in the Netherlands, as well as having been recently appointed to support the First Home Scheme for first-time buyers and eligible homebuyers in the Republic of Ireland.
1 See Appendix 1 of FY2022 Investor Presentation for a reconciliation of Non-IFRS measures and definitions for non-IFRS measures. Non-IFRS measures have not been audited or reviewed in accordance with Australian Accounting Standards. Operating EBITDA, Operating NPATA, Operating earnings per share and Net Operating Cash Flow exclude Significant Items.
Overview of Transactions
For a substantial period of FY2022, the management team and Board of Directors were heavily engaged in the proposed acquisition of Link Group by Dye & Durham Corporation (Dye & Durham), following an agreement to enter into a Scheme Implementation Deed (SID) with Dye & Durham on 22 December 2021.
The complex transaction required much of the Board’s time and attention, as we managed changing financial markets and sought shareholder and Court approval, certain regulatory approvals (including ACCC and UK Financial Conduct Authority approval) and other customary conditions.
We received strong shareholder support at the Scheme Meeting and Special General Meeting on 22 August 2022, as well as obtaining approvals from the Dutch Financial Markets Authority, Guernsey Financial Services Commission, Isle of Man Financial Services Authority, the UK Competition and Markets Authority, the Securities and Exchange Board of India, the Jersey Financial Services Commission, the Australian Foreign Investment Review Board, the Australian Competition & Consumer Commission (ACCC) and the UK Financial Conduct Authority (FCA). However, the FCA's approval contained certain conditions which were not met.
There were three conditions precedent necessary to implement the Scheme that were not satisfied (together, the Outstanding Conditions Precedent), being:
- the Woodford Matters condition;
- the UK Financial Conduct Authority condition; and
- the Luxembourg Commission de Surveillance du Secteur Financier condition.
Under the Scheme Implementation Deed between Link Group and Dye & Durham, the time for satisfaction of the Outstanding Conditions Precedent expired. Accordingly, on 23 September 2022 at the Second Court Hearing, the Court declined to make orders approving the Scheme and dismissed the proceedings. As a result, we were disappointed to inform shareholders that despite Link Group working diligently over an extended period and using its best efforts, the proposed Scheme with Dye & Durham involving Base Cash Consideration of $4.81 per Link Group share which Link Group shareholders approved in August would not be proceeding.
As the Scheme is not proceeding, Link Group intends to evaluate alternatives for the business to maximise value for shareholders. As previously announced to the ASX, this may include an in-specie distribution of a minimum of 80% of Link Group’s shareholding in PEXA, as well as considering proceeding with the divestment of BCM, and conducting a strategic review of all aspects of our portfolio.
Link Group has determined to pay a fully franked special dividend of 8 cents per Link Group share. This is in addition to the half year dividend of 3 cents per Link Group share which was paid in April 2022. The half year dividend and special dividend of 11 cents per Link Group share compares to the FY21 dividend of 10 cents per Link Group share partially franked at 82%.
In FY2022, we were also involved in a number of other corporate actions including the receipt of non-binding, indicative offers for the acquisition of Link Group’s BCM and RSS businesses. These discussions did not result in any binding agreement for the sale of either of these businesses.
Link Fund Solutions Limited (LFSL) is in ongoing confidential discussions with the UK Financial Conduct Authority (FCA) regarding matters relating to LFSL in its role as authorised corporate director to the LF Woodford Equity Income Fund (now known as the LF Equity Income Fund) (the Woodford Investigation).
On 20 September 2022, the FCA issued a draft warning notice to LFSL in respect of the Woodford Investigation (Draft Notice). The Draft Notice states that the FCA has assessed the appropriate penalty as £50,000,000 (prior to taking into account any available discount), in addition to a restitution payment of £306,096,527.
The draft warning notice is not a final decision but signals the start of the FCA’s settlement decision process. LFSL will explore all options, including engaging in settlement discussions with the FCA, challenging any Warning Notice that may be issued at the Regulatory Decisions Committee and further through the Upper Tribunal. Link Group remains supportive of LFSL considering all such options, and notes that LFSL continues to trade profitably with a leading position in its market.
Link Group has not made any commitment to fund or financially support LFSL. Link Group considers that any liabilities relating to the Woodford Matters will be confined to LFSL.
Building a sustainable business
In FY2022 we maintained a balanced representation across management levels and the wider organisation, including a 50:50 representation at the Executive Leadership Team level. Gender equity remains a key pillar in the organisation’s Diversity and Inclusion strategy, which has the full support of the Board and management team.
The Board also remains committed to sustainable and responsible business practices and we have pleasingly made good progress in this area during FY2022.
The sustainability strategy continues to align to the Paris Agreement and four of the 17 UN Sustainable Development Goals (SDGs), with committed short, medium, and long‑term targets that focus on reducing GHG emissions, including a target to achieve net zero emissions by FY2030. With a plan and roadmap in place, we are currently on track to meet these targets. We are also pleased to have reduced absolute scope 2 emissions by 25% from the FY2019 baseline, and have also achieved 94% coverage of our business for ISO27001:2013 certification, meeting these goals ahead of the targeted timeframe.
We are proud that the Australian Council of Superannuation Investors continues to rate Link Group at the highest level of reporting (being “Comprehensive”), for our environmental, social and governance reporting, following their annual review of the ASX200’s reporting as at June 2022.
During FY2022, we evolved the Link Group operating model with the four businesses now operating with end‑to‑end responsibility for their performance. This will provide increased transparency and accountability of both business and financial performance as we move further into FY2023.
The Link Group executive and team remain firmly focused on servicing our clients and supporting our people to the very best of their abilities.
I would like to thank my fellow non-executive directors for their support and hard work during what has been a very busy year. On behalf of the Board, I would also like to thank the Link Group team for their continued focus and efforts during the year, and our clients and shareholders for your continued support.