If ever it needed an endorsement of its business strategy, Link Group produced another strong result as its UK acquisition kicked in just at the right time, with regulatory changes starting to impede growth in the core super admin business.
The result for the six months to December, announced last Friday, was the first time that almost 50 per cent of the company’s revenue was derived outside of Australia and New Zealand. Operating EBITDA was up 25 per cent to $185.4 million as revenue jumped 42 per cent to $714.4 million. Link paid about A$1.5 billion in November 2017 for UK-based international fund manager administrator Capita, now known as Link Administration Services. Link had previously moved into the field with the acquisition of the much smaller White Outsourcing in Australia.
Arguably a greater strategic diversification is Link’s holding in PEXA, acquired by a consortium including Commonwealth Bank and Morgan Stanley. Link increased its holding to 44.2 per cent last month. PEXA (Property Exchange of Australia) is a technology platform for conveyancing.
John McMurtrie has been the driving force behind the former private equity-backed Link almost since it was established in 2005 as a joint venture with the NZ Stock Exchange. That deal was quickly followed by a string of other acquisitions including Perpetual’s share registry venture with the ASX and the big super fund admin company Australian Administration Services. Link listed in 2015 which helped it pay for the acquisition of the client base of SuperPartners a few months earlier. SuperPartners was owned by the big industry funds, some of which have maintained shareholdings in the merged group.
McMurtrie said last week that he struggles to know what industry Link Group is in. “We don’t fit neatly in any one industry group,” he said. “We are a company which connects our clients with their shareholders and customers and provides them with other services, such as analytics.”
Link has about 7,000 employees across 18 jurisdictions. Like its main competitors in the Australian super market – Mercer and Sunsuper – Link will suffer from a decline in membership for its client funds when mandatory transfers to the ATO for low account balances kick in this year.
Greg Bright is publisher of Investor Strategy News (Australia)