Link Group, the increasingly diversified fund and share registry administration company, has lifted its operating earnings despite flat revenue growth off the back of integration synergies from its acquisitions, growth in the Informational Digital and Data Services business and growth in corporate markets.
The net results also benefitted from what Link refers to as “business combinations”, which involve cross-selling products, and also looking for “adjacent markets” to take its current capabilities into. Both of these activities tend to improve operating margins. An example of expanding into an “adjacent market” last year, which would not appear obvious at first glance, was the establishment of a data analytics service for professional sports groups, complementing the service provided to big super funds.
While group revenue was up only 1 per cent to $780.0 million, operating EBITDA was up 15 per cent to $219.0 million and operating NPATA was up 21 per cent to $123.8 million.
But the big deal which is yet to impact on the Link results was the proposed acquisition of the UK-based Capita Asset Services (CAS), which will cost the company about A$1.45 billion, funded through a mix of new capital and debt, when completed later this year or early next year subject to regulatory approvals in the UK and Ireland and in several European jurisdictions.
John McMurtrie, Link’s managing director, said: “Link Group continues to make good progress. This is reflected in the solid financial and operating result Link is reporting for the full year and is demonstrated by the earnings momentum which underpins the business…
“We are investing across all lines of our business to deepen relationships with our clients and continue to see great opportunity through organic growth. This includes additional penetration into existing markets and the development of innovative product and services as well as those bolt-on and adjacent market opportunities that both complement and add value to our existing business.
“Consistent with Link Group’s growth strategy, we also deepened our investment in two key areas during the year. In Australia, we lifted Link Group’s investment in PEXA [a property transactions ‘e-conveyancing’ business] to 19.7 per cent [from 11.4 per cent, for $64 million]. We also entered into a binding agreement to acquire [CAS] in UK and Europe. Both investments provide Link Group with an expanded array of growth opportunities going forward.
The CAS business was a strong strategic fit for Link with a defensive earnings profile and leading market positions in Europe, he said. “We are very appreciative of the support our shareholders provided in the recent capital raising to help fund the acquisition of CAS and we are confident that this transaction will have a positive impact on Link Group in the future.”
On the outlook for 2018 and beyond, he said, Link enjoyed leadership positions in each of the markets in which it operated. “We will continue to reinvest in our existing businesses to expand our pipeline of opportunities as well as retaining a disciplined approach to cost management.”
The acquisition of SuperPartners in December 2014 and now the proposed acquisition of CAS have been, or will be, very important for Link’s future. But a couple of other smaller acquisitions in the last 12 months are worth mentioning because they take the firm into new fields.
Link bought White Outsourcing – renamed Link Fund Solutions – in December last year to take it into funds management administration in Australia. This will be complemented by CAS’s funds management admin business in the UK and Ireland.
And this year it moved into the important area of robo advice and digital support for super funds with the purchase of Adviser Network. Link also invested in start-up Moneysoft, which provides personal financial advice tools for advisors and their clients.
Link also has a small business across the Tasman after absorbing the rump of Aon NZ superannuation administration clients last year.
Greg Bright is publisher of Investor Strategy News (Australia)