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Link Administration Holdings Ltd – Better Than Expected Result

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

Link Administration Holdings Ltd (ASX: LNK) administers financial ownership data, mainly fund administration (such as superannuation funds) and share registry services. Its key businesses are located in Australia and the United Kingdom (UK). Link has a market capitalisation of A$2.6 billion.

Link Administration Holdings - Results

What are the results from Link FY19?

Today (Thursday 29 August 2019) Link released its FY19 annual results. The main points are as follows:

  • Revenue for FY19 is $1.403 billion, up 17 per cent from FY18.
  • Operating net profit after tax and amortization for FY19 is $202 million, down 3 per cent from FY18.
  • Operating earnings per share for FY19 is 37.9 cents, down 9 per cent from FY18.
  • Final dividend of 12.5 cents per share declared (100% franked), taking the full year dividend to 20.5 cents, in line with the prior year.

Specific results on company operations are as follows:

  • Revenue for Retirements and Superannuation Solutions (RSS) for FY19 is A$550.8 million, down 1.6 per cent from FY18.
  • Revenue for Link Asset Services (excluding Corporate & Private Client Services, which has now been sold), for FY19 is A$262.8 million, up 3.8 per cent from FY18.
  • Revenue for Corporate Markets for FY19 is A$223.9 million, up 4.2 per cent from FY18.
  • Revenue for Technology and Innovation for FY19 is A$258.8 million, up 12.2 per cent from FY18.


What were the drivers of this result?

Retirements and Superannuation Solutions:

The slightly reduced revenue for RSS section of Link is mainly reflects lower recurring revenue. Also, this result was caused due to increases in regulatory costs associated with client losses and mergers.

Link Asset Services: 

The slightly positive result from this section of Link was driven by the new business (LFS – MitonOptimal; LMS – AJ Bell, Smithson Investment Trust Plc, Finablr Plc). Also, Link has made efforts to expand further into Europe into countries such as Luxembourg and Ireland.

Corporate Markets:

The slightly positive result for this section was driven by strong revenue performance, resulting from increased recurring revenue.

Technology and innovation:

The result in this section was driven by volume related cost growth in communications services and digital solutions businesses.


What is the outlook for Link?

Link’s management notes, “FY20 Operating EBITDA of the continuing business (excluding CPCS and LMS South Africa) is expected to be stronger in 2H and overall, broadly in-line with FY 2019. Growth in businesses other than RRS is projected to offset a lower contribution from RSS” and “RSS guidance FY20 of revenues of $480m-$500m and Operating EBITDA of $60m-$70m”.

Also, Link management notes, “Global transformation to deliver $50m of annualised savings by end of FY 2022”.


What is the market reaction?

The initial market reaction to Link FY19 is positive. Link share price is up around 10 per cent and is currently trading at around A$5.42 (2.40pm, 29 August). Link has a P/E ratio in the low-teens and an annual dividend yield of around 4 per cent (fully franked).




This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

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ASR has no position in any of the stocks mentioned.

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