Full Year Results Presentation · 2020. 8. 26. · Link Group – FY 2020 Results Presentation 6 A...

Full Year Results PresentationFor the period ended 30 June 2020

27 August 2020

1

Link Group – FY 2020 Results Presentation 2

Important notice

This presentation has been prepared by Link Administration Holdings Limited (Company) together with its related bodies corporate (Link Group). The material contained in this presentation is intended to be general background information on Link Group and its activities.

The information is supplied in summary form and is therefore not necessarily complete. It should be read in conjunction with Link Group’s other periodic and continuous disclosure announcements filed with the Australian Securities Exchange, and in particular, Link Group’s Annual Financial Report for 12 months ended 30 June 2020. It is not intended that it be relied upon as advice to investors or potential investors, who should consider seeking independent professional advice depending upon their specific investment objectives, financial situation or particular needs. The material contained in this presentation may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information.

All amounts are in Australian Dollars unless otherwise indicated.

Unless otherwise noted, financial information in this presentation is based on A-IFRS. Link Group uses certain measures to manage and report on its business that are not recognised under Australian Accounting Standards or IFRS. These measures are collectively referred to in this presentation as ‘non-IFRS financial measures’ under Regulatory Guide 230 ‘Disclosing non-IFRS financial information’ published by ASIC. Management uses these non-IFRS financial measures to evaluate the performance and profitability of the overall business and Link Group believes that they are useful for investors to understand Link Group’s financial condition and results of operations. Non-IFRS measures are defined in Appendix 7A. The principal non-IFRS financial measures that are referred to in this presentation are Operating EBITDA, Operating EBIT, Operating EBITDA margin and Operating EBIT margin. Management uses Operating EBITDA to evaluate the operating performance of the business and each operating segment prior to the impact of significant items, the non-cash impact of depreciation and amortisation and interest and tax charges, which are significantly impacted by the historical capital structure and historical tax position of Link Group. Management uses Operating EBITDA to evaluate the cash generation potential of the business because it does not include significant items or the non-cash charges for depreciation and amortisation. However, Link Group believes that it should not be considered in isolation or as an alternative to net operating cash flow. Other non-IFRS financial measures used in the presentation include Recurring Revenue, gross revenue, EBITDA, EBITA, EBIT, Operating NPATA, working capital, capital expenditure, net operating cash flow, net operating cash flow conversion ratio and net debt. Significant items comprise business combination costs, integration costs, IT business transformation and client migration costs. Unless otherwise specified those non-IFRS financial measures have not been subject to audit or review in accordance with Australian Accounting Standards.

Forward-looking statements are statements about matters that are not historical facts. Forward-looking statements appear in a number of places in this presentation and include statements regarding Link Group’s intent, belief or current expectations with respect to business and operations, market conditions, results of operations and financial condition, including, without limitation, future loan loss provisions, financial support to certain borrowers, indicative drivers, forecasted economic indicators and performance metric outcomes.

This presentation contains words such as ‘will’, ‘may’, ‘expect’, 'indicative', ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘probability’, ‘risk’, ‘forecast’, ‘likely’, ‘estimate’, ‘anticipate’, ‘believe’, or similar words to identify forward-looking statements. These forward-looking statements reflect Link Group’s current views with respect to future events and are subject to change, certain risks, uncertainties and assumptions which are, in many instances, beyond the control of Link Group, and have been made based upon Link Group’s expectations and beliefs concerning future developments and their potential effect upon us. There can be no assurance that future developments will be in accordance with Link Group’s expectations or that the effect of future developments on Link Group will be those anticipated. Actual results could differ materially from those which Link Group expects, depending on the outcome of various factors. Factors that may impact on the forward-looking statements made include, but are not limited to, general economic conditions in Australia; exchange rates; competition in the markets in which Link Group will operate and the inherent regulatory risks in the businesses of Link Group.

When relying on forward-looking statements to make decisions with respect to Link Group, investors and others should carefully consider such factors and other uncertainties and events. Link Group is under no obligation to update any forward-looking statements contained in this presentation, where as a result of new information, future events or otherwise, after the date of this presentation.

Link Group – FY 2020 Results Presentation

1. Overview – John McMurtrie

2. Technology and Transformation – Paul Gardiner

3. Financial Information – Andrew MacLachlan

4. Proforma Financial Information – Andrew MacLachlan

5. Summary and Trading Update – John McMurtrie

6. Q&A

7. Appendices

3

Contents


1. Overview

4


Successfully delivering under extraordinary circumstances

Link Group’s scale, expertise and quick response during COVID-19 allowed us to keep our people safe, support government regulatory response and

continue to service our clients

OPERATIONAL• Managed more than 2.1 million or ~$16 billion

early release super payments for members. Approximately 96% of transactions processed in the 5-day recommended timeframe1

• Assisted 147 clients to raise capital in the June 2020 qtr ($17.8 billion of equity)

TECHNOLOGY• Early release of super system and process

developed and implemented in less than 4 weeks• Enabling ~ 90% of staff globally to work remotely

(including contact centre)• Virtual AGMs to facilitate physically distanced and

online annual general meetings for clients• PEXA facilitating uninterrupted property transaction

settlement

Continued delivery during unprecedented circumstances is reflected in positive client feedback and a resilient financial performance

1. As at 19 August 2020


A resilient financial performance in an unprecedented year

Successfully responded to COVID-19 with strong Recurring Revenue and a satisfactory financial result

Diverse1

Resilient2

1. Divisional revenue contribution percentage based on Gross Revenue prior to eliminations.2. See Appendix 7A for definitions for non-IFRS measures. Non-IFRS measures have not been audited or reviewed in accordance with

Australian Accounting Standards.3. Percentage movement uses proforma 2019 revenue which excludes the divested CPCS business.

Strong Revenue performance of $1.23 billion (down 3.1%3) demonstrating resilience through COVID-19. Diversity of business and jurisdiction provides further resilience through the economic cycle

PEXA transaction volumes continue to grow (up 37% in FY 2020), allowing the business to demonstrate the platform’s operational leverage. PEXA contributed $23.6 million to Link Group’s Operating NPATA (up from $2.0m in FY 2019)

Strong operating cash flow facilitating debt covenant leverage at 2.7x. PEXA returns will further reduce debt. Debt serviceability (interest cover ratio) remains high at 12.1x 33%

23%11%

10%

23% RSSCMFSBCMT&O

$1.2b

58%

42%APAC

EMEA$1.2b

LINK GROUP PROFILE(FY 2020 Revenue)

308.4 315.8 297.2 309.0

Q1 Q2 Q3 Q4

A$

milli

ons

FY 2020 Revenue


pcp: Proforma3 pcp

Revenue $1,230 million $1,403 million $1,270 million (down 3%)

Recurring Revenue1 $1,020 million $1,123 million $1,032 million (down 1%)

Operating EBITDA2 $294 million $395 million $354 million (down 17%)

Operating NPATA2 $144 million $198 million $172 million (down 16%)

Net Operating Cash Flow $319 million $383 million not quantifiable

Statutory NPAT ($114) million $318 million $303 million

Operating earnings per share2 27.1 cents 37.2 cents 32.4 cents million (down 16%)

Total dividend 10.0 cents per share 20.5 cents per share

PEXA Revenue (100%) $156 million $109 million

PEXA Operating NPATA (100%) $53 million $5 million

7

Key financial metrics

FY2020 was a challenging year. Lower financial metrics reflect the impact of regulatory change and historical RSS client losses as well as subdued trading conditions in capital markets

1. See Appendix 7A for definitions for non-IFRS measures. Non-IFRS measures have not been audited or reviewed in accordance with Australian Accounting Standards.2. Operating EBITDA, Operating EBIT, Operating NPATA and Operating earnings per share exclude significant items. See Appendix 7A for a reconciliation of Operating EBITDA, Operating EBIT and

Operating NPATA to statutory NPAT. 3. Proforma excludes the divested CPCS business.


172.4 144.0

21.6

(40.8) (9.2)

25.4

197.8

FY 2019(proforma)

RSSNet wins /

(losses / mergers)&

PYS recurringrevenue impact*

Link Group peformance(exc. known RSS factors)

PEXA FY 2020

A$ millions

Proforma CPCS (divested)

8

FY 2020 earnings performance

Rebased revenue and earnings in FY2020 reflect the run rate impact of regulatory change

Revenue

Operating NPATA

FY 2020 commentary

As highlighted in FY 2019, regulatory change (i.e. Protecting Your Superannuation “PYS” & Putting Members’ Interests First “PMIF”) and historical client losses in RSS impacted FY 2020 revenues

Taking account of these factors, underlying revenue growth was modestly positive, with overall revenue growth offset by soft capital market activity in Corporate Markets

Growth in Revenue was attributed to the FS, T&O and CM APAC businesses, with underlying growth also observed in RSS (excluding the factors mentioned above)

The Operating NPATA result was tempered by the flow-on impact of the the factors impacting RSS Revenue, together with lower revenue from other parts of the business, higher operating costs and D&A

PEXA is providing positive momentum to Operating NPATA

Note: * net of related operating expense reductions and tax (assumes 30% tax rate)

1,270.1 1,230.4

32.1

(37.1) (22.0) (12.7)

133.4

1403.5

FY 2019(proforma)

RSSNet wins / (losses /

mergers)

RSSPYS recurring revenue

impact

CMcapital markets

Growth FY 2020

A$ millions

Proforma CPCS (divested)

Known factors impacting FY 2020 Revenue

59.1


PEXA (equity accounted investment – Link Group share 44.2%)A world-first, digitising property settlements across Australia – fast, safe and efficient. Facilitating ongoing, uninterrupted settlements through COVID-19

Data as at end of FY June 2020

Market leader

Platform to launch growth

initiatives

Structural growth

Capital management

options

• Embedded in the property transaction ecosystem

• Processing 75% of all Australian property transactions (at end of June 2020)

• Adjacent market opportunities by supporting further digitalisation of the property ecosystem

• International opportunities by leveragingPEXA’s core capabilities in other Torrens-based jurisdictions

• Positive regulatory and market dynamic tailwinds supporting increasing adoption rates of electronic settlement (i.e. national footprint, population growth)

• Strong financial profile provides an opportunity to recapitalise the business to deliver capital returns to PEXA shareholders

Quality attributes driving valueBusiness model now proven,

connecting a broad network of participants across Australia

increase in refinance settlements completed

on PEXA between FY19 and FY20

increase in transfer settlements completed

on PEXA between FY19 and FY20


PEXA unrealised valuePEXA is a market leading platform, with further growth to be harnessed from increased penetration, adjacent services and international opportunities

10

1. Refer to page 18 for a reconciliation of Operating NPATA to Statutory NPAT.

Strong financial performance as operational leverage is realised Growth accelerates with increased uptake / mandating

PEXA refinance – process underway with a $950 million capital return financed by shareholder debt completed in July 2020

Capital return financed by shareholder debt

Procurement of external debt

Repayment of shareholder loans

Completed: July 2020 Target: 1H 2021 Target: FY 2021 and beyond

Additional surplus cash flow repatriated to shareholders

Target: 1H 2021

$950 million capital return financed by shareholder debt completed in July 2020 (Link Group share: $420 million)

Information memorandum issued to potential lenders

Targeting at least $300 million debt (Link Group share: at least $133 million)

Surplus cash generated by PEXA (operating cash flow & additional external debt) can be remitted to shareholders through shareholder loan repayments

Proceeds from external debt used to repay shareholder loans

30 June year end, A$ million FY 2020 FY 2019

12 months 12 months

PEXA exchange transactions (000s) 2,404 1,754 650.0 37%PEXA Revenue 155.6 109.1 46.5 43%PEXA Operating expenses (97.7) (102.5) 4.8 (5%)PEXA Operating EBITDA 57.9 6.6 51.3 778%PEXA Operating NPATA 53.4 4.5 48.9 1,087%PEXA Statutory NPAT (25.8) (28.2) 2.4 (9%)

12 months 5 months

Operating NPATA (Link Share) 23.6 2.0 21.6 1,087%Statutory NPAT (Link Share) (11.4) (12.5) 1.1 (9%)

Note: Link Share of FY 2019 results the 5 months to 30 June 2019 (post consortium acquisition)

Year on year change

Torr

ens

Gro

up

Hold

ings

(P

EXA)

100

%

Link

Sh

are

44.2

%


https://www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/2020/jul/European-Banking-Outlook-2020.pdf

https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/pensionssavingsandinvestments/bulletins/occupationalpensionschemessurvey/2018

https://www.pwc.lu/en/asset-management/docs/pwc-observatory-management-companies-barometer.pdf

11

Link Group has attractive market opportunities to drive medium term growth

Link Group has established credentials as a leading administration operator to grow in new and existing markets

BCM (Europe)

• European NPL volume expected to expand significantly

• Link Group / PES1 among the largest independent NPL loan servicers in Europe with ~€115B AuA

RSS (UK)

• UK is the 2nd largest pension market in the world (~US3.5 trillion AUM & >50m accounts)

• Regulatory framework supporting broad based pension programs (i.e. auto-enrolment)

• Link Group currently administers ~700k members in the UK

LFS (Luxembourg)

• Luxembourg is largest Manco/ACD market in Europe

• Link Group is a leading provider in UK & Ireland with ~£100b AuM

• Established greenfield operation in Luxembourg in 2019

RSS (Australia)

• Australia is the 4th largest pension market in the world ($2.9 trillion AUM & >20m accounts)

• Link Group is the leading administrator

• Member growth, retail wealth management changes & fund consolidation to drive organic growth

4%8%

10%

2017 2022(single

lockdown)

2022(second

lockdown)

NPL ratio forecast (Europe)

€4.7t

€3.0t€2.4t €2.0t €1.8t

LU IE DE FR UK

European Manco Market(Net Assets)

28 27 28 30 39

46

2008 2010 2012 2014 2016 2018

Total Membership in Occupational Pension Schemes

(millions)

Link34%

Inhouse48%

Others18%

Total members administered(% of total market)

1. Acquisition subject to regulatory approval and certain commercial conditions precedent


Scorecard: shareholder value initiatives

Link Group is executing on a series of initiatives to drive shareholder value

Build presence in UK pension administration market

Maximise value of portfolio investments

Progress Global Transformation

Support and retain existing customers

Identify and win new business

Expand core businesses through acquisition

• Established pension administration business in UK in 2020. Link Group currently administering over 700k members in the UK

• PEXA recapitalisation expected to complete in 1H 2021 and sale of LMS (South Africa) expected in 1H 20211

• $14.7 million efficiency benefits obtained in FY2020• Global transformation program on track but behind

expectations due to COVID-19 disruption

• Continuous client support through COVID-19. Important contracts renewed in FY20 (REST, HESTA, Prudential)

• Modest new business

• Executed PES transaction in January 20201, building on our European debt servicing business

STRATEGIC INITIATIVE

1. Subject to regulatory approval and certain commercial conditions precedent

PROGRESS


2. Technology and Transformation

13


T&O combining to deliver efficiencies, capability, capacity and resilience

We leverage the combination of technology and operations to continue to transform our business and deliver efficiencies as we safely and securely connect people with their financial assets

CENTRES OF EXCELLENCE• Initial CoEs in Information Security, cloud utilisation, robotics and workflow automation• Allows us to capture synergies and economies of scale from a single, consistent approach to

how we operate across all business units

INFORMATION SECURITY• Not an overnight journey, rather the result of 5 years of significant investment to increase

information security maturity• Certified under ISO27001, rated well against peers under NIST standards • Developing new products e.g. proprietary ALERT Fraud Protection Service which leverages

our knowledge and skills in risk, compliance and security with advanced data insights.

HUB STRATEGY• Centres of excellence will provide in-house, leading-edge knowledge, specialised skills,

advice and capabilities to all business lines globally• Substantial hubs now established in Maynooth, Leeds, Mumbai, Sydney and Melbourne• Shortened solution delivery time and faster re-engineering of processes• Ability to “flex up” capacity where required, operate across multiple time zones and process

work from alternate locations • Reduces vendor reliance and maximises use of a reduced premises footprint

CONTINUED INVESTMENT IN TECHNOLOGY• Over $250 million spent each year on supporting,

maintaining and delivering our systems and platforms• More than 1,200 staff in Technology roles

ROBUST CORE SYSTEMS – e.g. superannuation• Processing over 4.5 million contributions and 400,000 rollovers every month• Proprietary system processed over 60 million contributions in FY20• Over 5.5 million unique logins to our superannuation web portals in FY20• Over 2.1 million early release transactions as at 19 August 2020


Enabling our clients to transform their industriesCombining our advanced technology with our operational and administration expertise enabling our clients to digitise

Helping our clients to transform their businesses and the way they work

Prudential ISA• New digital platform for Prudential ISA – a world class digital proposition• Almost 80% of new investments now processed digitally

BCM BUY-TO-LET• Developed and delivered a new technology enabled end-to-end

distribution chain in the Dutch mortgage market• Enabled three loan originators to quickly get to market with a new “buy-

to-let” capability

VIRTUAL AGM TECHNOLOGY• Facilitating over 100 AGMs in FY20, including the largest in Australasia• Allowing listed entities to safely meet their reporting obligations during

COVID-19


3. Financial information

16


Financial summary

Revenue, EBITDA and NPATA lower than pcp, mostly reflecting the divested CPCS business and the impact of previously announced client losses and regulatory change in RSS

17

Profit & loss statement FY 2020 commentary

Comparative information has been restated to reflect the application of AASB 16 Leases

Lower operating EBITDA performance compared to the pcp, mostly reflects the divestment of the CPCS business in June 2019 and the impact of regulatory change and previously announced client losses in RSS, and subdued levels of activity in EMEA (Brexit & COVID-19)

Increased D&A reflects the flow through impact of higher levels of capex. FY 2021 D&A (excluding acquired amortisation) is expected to be between $130m and $135m

The effective tax rate for FY 2020 is impacted by number of non taxable elements in NPBT, including PEXA earnings, impairment of goodwill, FV losses, unrealised FX losses and acquisition related cost. The expected rate on the underlying business (excluding PEXA and Significant items) for FY 2021 is 28-29%

Impairment of goodwill relates to the Corporate Markets EMEA business. The FV loss relates to the Leveris investment, whose new business pipeline has been impacted by adverse operating conditions in EMEA (e.g. COVID-19 impacts)


ROU asset amortisation (AASB 16) (30.0) (33.1)Other Depreciation and amortisation (84.1) (70.1)

TOTAL Depreciation and amortisation (114.1) (103.2)

Summary of depreciation and amortisation


Revenue 1,230.4 1,403.5 (173.1) (12%)Operating cost (936.6) (1,008.8) 72.2 7%Operating EBITDA 293.8 394.6 (100.8) (26%)Depreciation and amortisation (114.1) (103.2) (10.9) (11%)Operating EBIT 179.7 291.5 (111.8) (38%)Significant items (other) (52.7) (58.7) 6.0 10%Acquired amortisation (52.9) (54.4) 1.5 3%Impairment of goodwill (107.8) - (107.8) n/aEBIT (33.7) 178.4 (212.1) (119%)Net finance expense (33.2) (37.4) 4.3 11%Gain / (loss) on assets held at fair value (23.2) 178.0 (201.2) n/aProfit on disposal of subsidiaries 0.0 107.4 (107.4) n/aShare of PEXA loss (11.4) (12.5) 1.1 n/aNPBT (101.4) 413.9 (515.3) (124%)Income tax expense (12.5) (95.7) 83.3 87%NPAT (113.9) 318.1 (432.0) (136%)Add back acquired amortisation after tax (inc. PEXA) and impairment of goodwill

76.1 56.4 19.8 35%

NPATA (37.8) 374.5 (412.3) (110%)Add back significant items after tax 181.8 (176.7) 358.4 (203%)Operating NPATA 144.0 197.8 (53.8) (27%)

Operating earning per share (cents) 27.1 37.2 (10.1) (27%)Dividend per share (cents) 10.0 20.5 (10.5) (51%)

Year on year change


Statutory reconciliation

Statutory EBIT and NPAT adversely impacted by impairment charge and Significant Items

18

FY 2020 EBIT FY 2020 commentary

FY 2020 NPAT

Major drivers of significant items are:

− Global Transformation cost $31.3 million

− Acquisition related cost $13.6 million (related to the PES acquisition, the investment in SMART Pension and sale of LMS SA

− Loss on assets held at fair value of $23.1 million relates to re-valuation of Leverisinvestment (below EBIT)

− Other one off costs of $7.8 million including onerous lease obligations and global client tender costs

Impairment of goodwill relates to Corporate Markets EMEA cash generating unit – reflects reduced non-recurring revenue expectations over 5 year future cash flow period

1. The Operating NPATA for PEXA takes into account available unrecognised tax losses.

PEXA

PEXA is an equity accounted investment with the following components included in the Link Group result:

30 June year end, A$ million PEXA(100%)

Link(44.2%)

Statutory NPAT (25.8) (11.4)

add back Significant items (after tax) 9.9 4.4

add back Acquired amortisation (after tax) 69.2 30.6

Operating NPATA1 53.4 23.6

FY 2020

179.7

(33.7)

52.7

52.9

107.8

OperatingEBIT

Significant Items(other)

Acquiredamortisation

Impairmentof goodwill

StatutoryEBIT

A $ million

144.0

(37.8)(113.9)

74.0107.8

76.1

OperatingNPATA

Significant Items(other) after tax

Impairment ofgoodwill

NPATA Acquiredamortisation

after tax

StatutoryNPAT

A $ million


Cash flow

Strong operating cash flow. Continuing to invest in technology and transformation to drive future benefits in the existing business, and additional investment to further grow the business

19

Cash flow statement FY 2020 commentary

Net operating cash flow

Improved cash flow conversion reflects a positive working capital performance

Investment in the business and shareholder payments

Substantial investment into the existing business through capex and Global Transformation to support future growth alongside targeted acquisitions into attractive markets (SMART + PES)

Elevated capex investment relates to:

Global Transformation – establishment of Leeds & Mumbai hubs, and workflow automation

Core system refresh programs – RSS: member centre, CRM, contact centre, BCM: platform, CM: UK registry platform, FS; Australia platform

New products – RSS: CX data hub, member centre white label app, BCM: Buy to Let functionality (Netherlands)

* Cash used for investing and shareholder payments (exc. movement in borrowings).


Operating EBITDA 293.8 394.6 (100.8) (26%)

Changes in fund assets & liabilities (0.8) (12.7) 11.9 94%

Changes in net working capital 25.6 1.5 24.2 1,642%

Net operating cash flow 318.6 383.4 (64.8) (17%)

Cash impact of significant items* (51.7) (49.4) (2.3) (5%)

Tax (44.7) (69.2) 24.5 35%

Interest (32.6) (35.0) 2.4 7%

Net cash provided by operating activities 189.6 229.8 (40.2) (17%)

Capital expenditure* (107.3) (80.7) (26.6) (33%)

ROU asset payments (29.8) (33.2) 3.3 10%Free cash flow (available for capital management) 52.5 115.9 (63.5) (55%)

Other investing activities* (87.0) (52.7) (34.3) (65%)

Dividends paid* (101.8) (81.3) (20.5) (25%)

Share buyback* (19.4) - (19.4) nmf

Other financing activities (130.2) 311.7 (441.8) nmf

Net increase / (decrease) in cash (285.8) 293.7 (579.5) nmf

Net operating cash flow conversion % 108% 97% 11%

Year on year change

30 June year end, A$ million FY 2020 Existingbusiness Acquisitive Shareholder

payments

Cash impact of significant items (51.7) (30.6) (21.1) -Capital expenditure (107.3) (107.3) - -Dividends paid (101.8) - - (101.8)Share buyback (19.4) - - (19.4)Other investing activities (87.0) - (87.0) -

Cash used for investing and financing activity (exc. movement in borrowings) (367.2) (137.9) (108.1) (121.2)

Investment in the business


4. Proforma financial information

20


Link Group – Proforma

Lower revenue largely reflecting the rebased revenue in RSS, and weaker markets conditions impacting EMEA. Operating expenses broadly flat

21

Financials FY 2020 commentary

Comparative information is presented on a Proforma basis, excluding CPCS, following divestment in June 2019. Refer to appendix 7 for a reconciliation

FY 2020 CC refers to constant currency, which reflects the FY 2020 result presented using the average currency rates for FY 2019, aiming to remove the impact of currency fluctuations. Commentary in this section compares FY 2020 CC and FY 2019

Revenue

Revenue decreased by 4.7%, largely due to the revenue rebasing in RSS (PYS & client losses) and soft capital market activity in Corporate Markets – EMEA (Brexit and COVID-19), partially offset by some modest growth in other parts of the business

Operating expenses

Operating expenses are broadly flat, reflecting:

Increased Cloud and IT security cost

Remediation cost in FS and BCM, and higher claims and doubtful debt provisioning

Largely offset by Global Transformation savings and other staff cost saving measures

D&A

Increased D&A reflects the flow through impact of higher levels of capex

Revenue profile

997 1,032 1,020

238 238 210

1,235 1,270 1,230

81% 81% 83%

FY 2018 FY 2019 FY 2020

30 June year end, A$ million

Recurring Revenue Non-recurring Revenue Recurring Revenue %

30 June year end, A$ million FY 2020 FY 2020 CC FY 2019 YoY change (CC)

Revenue 1,230.4 1,210.9 1,270.1 (4.7%)

Employee expense (583.3) (573.9) (596.6) 3.8%

Occupancy expense (21.6) (21.1) (19.8) (6.6%)

IT expense (116.2) (114.2) (97.2) (17.5%)

Other expenses (215.5) (211.1) (202.7) (4.2%)

Operating expenses (936.6) (920.3) (916.2) (0.5%)

Operating EBITDA 293.8 290.6 353.9 (17.9%)

D&A (114.1) (112.5) (94.3) (19.2%)

Operating EBIT 179.7 178.1 259.6 (31.4%)

Operating EBITDA margin % 24% 24% 28%

Operating EBIT margin % 15% 15% 20%


Global Transformation

Global Transformation on track to deliver $50 million of annual savings by FY 2022, tracking slightly behind for FY 2020

22

Benefits realised Program plan

Initiatives in year run rate FY 2020 FY 2021 FY 2022 TOTAL Program

Vendor consolidation / centralised sourcing $2.3 $2.3 $9.0

Premises consolidation $0.0 $0.0 $5.0

Centres of excellence $1.9 $3.8 $21.0

Operational efficiencies $10.5 $13.5 $15.0

TOTAL PLAN $14.7 $19.6 $19.6 $30-35.0 $50.0 $50.0

24%

9%

67%

Project plan Progress

One-off cost of $31.3 million incurred in FY 2020 (total program cost of $50-60 million remains)

Premises consolidation and Centre of Excellence (CoE) initiatives are tracking slower than planned, overall expectation remains in place

Mumbai CoE established with first staff in place from August 2019, currently over 200 FTE. Capacity for c.1,200 seats.

A$ million


58%

42%APAC

EMEA

33%

23%11%

10%

23% RSSCMFSBCMT&O

83%

17%

RecurringNon-recurring

Global

23

FY 2020 – resilient under pressureLink Group’s revenue profile is diverse across jurisdiction and service offering, whilst Recurring Revenue of over 80% provides resilience

Diverse1

Resilient

LINK GROUP PROFILE(FY 2020 Revenue)

Revenue (A$ millions)

APAC / EMEA

Recurring Revenue %

Revenue Contribution1

Retirement and Superannuation Solutions

518.6pcp: 550.8

87% 33%

Corporate Markets 358.0pcp: 368.8

70% 23%

Fund Solutions 173.0pcp: 162.7

92% 11%

Banking and Credit Management

165.7pcp: 168.7

89% 10%

Technology and Operations

372.2pcp: 334.0

29% 23%External revenue

100%

APAC EMEA

$1.2b

$1.2b

$1.2bPEXA2 155.6

pcp: 109.1

BU

SIN

ESS

UN

IT P

RO

FILE

Equi

ty

Inve

stm

ent

1. Divisional revenue contribution percentage based on Gross Revenue prior to eliminations.

2. Reflects 100% of PEXA revenue (Link Group ownership 44.2%).

100%

45%55%

89%

79%

99.6%


Segment results – Retirement & Superannuation Solutions

Underlying member growth and project revenue remain strong. Previously announced client losses and impact of PYS weighing on FY 2020 result.

24


Insight

FY 2020 Revenue contribution1

The chart below depicts Revenue movement for FY 2020

The impact of PYS was lower than forecasted due to the government’s delay of the final sweep to October 2020 (initially planned for April 2020). Further impacts of $11.8 million expected in FY 2021 and $2.1 million in FY 2022

Strong underlying growth reflects member growth, indexation and higher transaction volumes in Australia, and contribution from the newly established UK operation

The Early Release Super program (“ERS”) has resulted in c.83,000 account closures as at 19 August 2020

Higher Operating expenses mostly reflect:

Elevated cost supporting regulatory change programs (PYS, PMIF & ERS)

Higher IT recharges (cloud and information security)

Partially offset by Global Transformation benefits and other temporary cost saving measures

1. Divisional revenue contribution percentage based on Gross Revenue prior to eliminations.2. Excludes client wins/losses, ERF’s, redundancy trusts and impact of PYS related member

account movements (to either ERF’s or the ATO).

33%


Revenue 518.6 518.4 550.8 (5.9%)



D&A (13.0) (13.0) (13.2) 1.7%

Operating EBIT 65.4 65.4 108.3 (39.6%)

Recurring Revenue % 87% 87% 87%



550.8 518.6

28.3(37.1) (22.0) (1.4)

Wins / (losses) PYS Growth

FY2019 Recurring Revenue Non RecurringRevenue

FY 2020

A$ millions

3.7%0.5% 0.9% 1.2% 0.8%

2.3%2.9%

3.9%5.1% 4.3%

Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20

Underlying 12 month member growth2

ERS impact


Segment results – Corporate Markets

Lower market related revenue in the UK weighing on the result, partially mitigated by a stronger performance across APAC jurisdictions

25


Insight


Lower Revenue reflects:

A decrease of $3.4 million in Recurring Revenue, the result of:

− weaker performance across EMEA, particularly the UK, impacted by some client losses, partially offset by

− a strong performance across APAC on new client wins, increased product penetration, and the full year impact of India acquisitions

A decrease of $15.1 million in Non-recurring Revenue, largely reflects lower levels of activity in the UK, impacted by Brexit and COVID-19, partially offset by a stronger performance in Australia

Higher Operating expenses reflect:

Volume related increases supporting Recurring Revenue growth across APAC (including India acquisitions)

Higher IT recharges (cloud and information security)

Offset by lower costs, resulting from realisation of Global Transformation benefits and other cost reduction measures

The margin decline is mostly due to the impact of lower Non-recurring Revenue (higher margin)

The previously announced divestment of LMS South Africa is pending regulatory approval


23%


Revenue 358.0 350.3 368.8 (5.0%)



D&A (21.6) (21.0) (21.6) 2.6%

Operating EBIT 61.7 60.8 79.9 (23.9%)




123 119 107

FY 2018 FY 2019 FY 2020

Non-recurring Revenue

Non-recurring Revenue

Non-recurring Rev enue down $16.5 million since FY 2018 - higher margin resulting in

a large Operating EBIT impact


Segment results – Fund Solutions

Strong revenue performance supported by growth in AUM from new funds onboarded, proving resilient despite volatile market conditions which impacted AUM values through 2H 2020

26


Insight



11%

Higher Revenue reflects:

An increase of $4.8 million in Recurring Revenue, mostly driven by the on boarding of new funds in EMEA, including the addition of further LGPS funds

Total AUM for EMEA increased from £96.6 billion at June 2019 to £102.5 billion at June 2020. AUM values were impacted by volatile market conditions through 2H 2020, which tempered Recurring Revenue

Flat Non-recurring Revenue

Higher Operating expenses reflect:

Increased operating cost supporting additional funds onboarded

Remediation cost of $6.1 million (LF Equity Income Fund – see below)

Offset by lower costs, resulting from realisation of Global Transformation benefits


Revenue 173.0 167.3 162.7 2.8%



D&A (7.9) (7.6) (5.3) (42.9%)

Operating EBIT 22.1 21.1 26.4 (20.3%)




-

500

1,000

1,500

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

2015 2016 2017 2018 2019 2020

AuM

£bi

llion

sUK AFM Assets under Management

AuM hosted / outsourced % (LHS) Total AuM (RHS)

LF Equity Income Fund Update:• On 18 June 2019, the Financial Conduct Authority (FCA) notified LFS

that it was commencing an investigation into LFS as ACD to the LF Woodford Equity Income Fund (now the LF Equity Income Fund)

• FCA investigation remains ongoing - close engagement with regulator continues

• LFS continues to act in the best interests of investors as the orderly wind-up of the fund progresses - £2.45 billion of capital distributed to investors


Segment results – Banking and Credit Management

Strong growth in Netherlands and Italy, partially offsetting lower Ireland and UK revenue

27


Insight


Lower Revenue reflects:

A decrease of $4.6 million in Recurring Revenue, reflecting

− portfolio run-off impacting Ireland and the UK and client sale of a large debt portfolio (transferred to different administrator), partially offset by

− the on-boarding of new client portfolios in Ireland

− the impact of acquisitions in the Netherlands, together with strong organic growth in both the Netherlands and Italy

A decrease of $4.2 million in Non-recurring Revenue, mostly on lower disbursements

AUM decreased from €92.2 billion at 30 June 2019 to €80.6 billion at 30 June 2020

Lower Operating expenses mostly reflect

Removal of costs attaching to the transferred debt portfolio, lower disbursements cost, and other cost saving measures

Partially offset by increased cost supporting current and future organic revenue growth in Italy and cost of the acquired business in the Netherlands

PES acquisition

PES is expected to complete by the end of CY 2020, subject to regulatory approvals and certain commercial conditions precedent


10%


Revenue 165.7 159.9 168.7 (5.2%)

Operating expenses (143.7) (138.6) (145.4) 4.7%


D&A (13.8) (13.4) (11.4) (17.6%)

Operating EBIT 8.2 8.0 12.0 (33.4%)




37

118

6 831

104

7 18

UK Ireland Italy Netherlands

Revenue by region

FY 2019 FY 2020 CC


7591

110

24%27%

29%

0.2

0.3

0.4

-20.0

30.0

80.0

130.0

FY 2018 FY 2019 FY 2020

External Revenue

External Revenue External Revenue %

Segment results – Technology and Operations

Strong growth in External Revenue continues

28


Insight


Higher Revenue reflects:

An increase of $16.8 million in Internal Revenue, reflecting a combination of increased support related to a shift to the cloud and higher information security costs, and the impact of restructure (further consolidation of IT services into T&O from other business units)

An increase of $18.5 million (20.3%) in External Revenue, mostly on higher volumes for communication services, analytics and fee for service projects

Increases in operating expenses driven by

− Volume related cost growth supporting additional external revenue

− Ongoing cost associated with increased technology support following a shift to the cloud

− Increased IT security cost

− Cost related to internal restructure (further consolidation of IT services into T&O from other business units)

− Partially offset by Global Transformation savings and other cost saving measures

Increases in D&A are driven by higher levels of capex spend, and additional ROU amortisation (rent) related to the new Mumbai hub


23%


Revenue 372.2 369.3 334.0 10.6%


Operating EBITDA 91.1 91.2 87.6 4.1%

D&A (56.9) (56.7) (42.7) (32.8%)

Operating EBIT 34.2 34.6 44.9 (23.0%)

External Revenue % 29% 29% 27%




Capital management

Link remains prudent in its capital management

29

Net debt FY 2020 commentary

Dividend and franking summary

Cash

A higher cash balance reflects pre-emptive drawdowns, bolstering short term liquidity (conservative COVID-19 measure). The incremental cost of this conservative position is c.1.0% per annum

Leverage

Current leverage is slightly above the guidance range of 1.5x to 2.5x

Inclusion of PES and PEXA capital return on a proforma4 basis results in leverage of 2.7x, interest cover remains over 10x

Dividend

Directors have approved a final dividend of 3.5 cps, the dividend will be 50% franked. A DRP will be offered with a 1.5% discount

Future dividends are expected to retain a similar level of franking (i.e. 50-60%), reflecting the increased weight of non Australian based earnings

Capital management

3.6 million shares were purchased under the share buyback program, for consideration of $19.4 million. The share buyback program has now been cancelled.

1. Total debt excludes ROU liabilities (AASB 16).2. Leverage calculated in accordance with Link Group’s debt agreement. 3. Interest cover calculated in accordance with Link Group’s debt agreement.4. Proforma leverage calculation performed on the basis of PES acquisition and PEXA capital return occurring on 30 June 2020.

30 June year end FY 2020 FY 2019

Interim dividend declared (cents per share) 6.5 8.0

Final dividend declared (cents per share) 3.5 12.5

Total Dividend declared (cents per share) 10.0 20.5

% Franking 83% 100%

Total Dividend (A$ millions) 53.0 109.3

30 June year end, A$ million June 2020

Total debt1 1,014.5

Cash (264.1)

Net debt 750.4

Leverage 2 2.7x

Interest cover 3 12.1x


5. Summary

30


Summary & trading update

Delivering uninterrupted service to our clients. Focused cash flow management and prudent cost control

31

Service delivery• July 2020 trading continuing momentum from Q4 2020. Resilience remains a

feature

• Global transformation activity is progressing well, with a number of initiatives for FY2021 already in place

• Early Release Super program is expected to conclude by end of CY 2020. To date the program has resulted in c.83,000 account closures

• HESTA contract renewed

Global Transformation

Balance sheet and capital management

Priorities

John McMurtrie will retire as Managing Director of Link Group in early CY 2021 and will be succeeded by Vivek Bhatia

Execute on shareholder value initiatives

• PEXA: shareholders loans in place, cash returns expected 1H 2021

• BCM: PES expected to complete by end of CY2020, subject to ongoing regulatory approval process

• CM: South Africa divestment expected to complete 1H 2021, subject to regulatory approval

Trading update

Transaction update


6. Q&A

32


7a. Appendix: Additional financial information

33


Proforma reconciliation

Link Group has re-presented historical comparatives to align with current reporting

34

FinancialsFinancials

Link Group Proforma reflects the following adjustments to Link Group Reported:

− Exclusion of the CPCS result in FY 2019, following divestment in June 2019

− FY 2018 (depicted in subsequent charts) includes pre acquisition LAS result for the period 1 July 2017 to 31 October 2017 and excludes CPCS

FY 2020 CC reflects the FY 2020 result presented using constant currency, which removes the impact of currency movement by translating foreign currency figures using the average currency rates for FY 2019

30 June year end, A$ million FY 2020 FY 2019 FY 2020 FY 2019 FY 2020 FY 2020 CC FY 2019 YoY change (CC)

Revenue 1,230.4 1,403.5 - (133.4) 1,230.4 1,210.9 1,270.1 (4.7%)

Operating costs (936.6) (1,008.8) - 92.7 (936.6) (920.3) (916.2) (0.5%)

Operating EBITDA 293.8 394.6 - (40.7) 293.8 290.6 353.9 (17.9%)

Depreciation and amortisation (114.1) (103.2) - 8.8 (114.1) (112.5) (94.3) (19.2%)

Operating EBIT 179.7 291.5 - (31.9) 179.7 178.1 259.6 (31.4%)

Operating EBIT margin 14.6% 20.8% n/a 23.9% 14.6% 14.7% 20.4%

Operating NPATA 144.0 197.8 (25.4) 144.0 142.8 172.4 (17.2%)

Link Group Reported Adjustments Link Group Proforma

CPCS (divestment)


Detailed P&L statutory reconciliation for FY 2020

35

$ million StatutoryGlobal

transformation costs

Business combination / acquisition &

divestment costs

Global RSS tender costs

Other (non EBITDA) TOTAL Operating

RSS 518.6 ‐ ‐ ‐ ‐ ‐ 518.6

CM 358.0 ‐ ‐ ‐ ‐ ‐ 358.0

FS 173.0 ‐ ‐ ‐ ‐ ‐ 173.0

BCM 165.7 ‐ ‐ ‐ ‐ ‐ 165.7

T&O 372.2 ‐ ‐ ‐ ‐ ‐ 372.2

CPCS ‐ ‐ ‐ ‐ ‐ ‐ ‐

Elimination/Recharges (357.0) ‐ ‐ ‐ ‐ ‐ (357.0)

Revenue 1,230.4 ‐ ‐ ‐ ‐ ‐ 1,230.4

Employee expenses (599.2) 14.8 ‐ 1.0 ‐ 15.8 (583.4)

IT expenses (118.4) 2.0 0.0 0.2 ‐ 2.2 (116.2)

Occupancy expenses (28.4) 6.9 0.0 ‐ ‐ 6.9 (21.6)

Other expenses (224.6) 7.7 0.1 1.3 ‐ 9.1 (215.5)

Net acquisition and capital management related expenses (13.5) ‐ 13.4 ‐ ‐ 13.4 (0.0)

Total operating expenses (984.1) 31.3 13.6 2.6 ‐ 47.5 (936.6)

EBITDA 246.3 31.3 13.6 2.6 ‐ 47.5 293.8

Depreciation (20.4) ‐ ‐ ‐ 0.1 0.1 (20.3)

Amortisation (other) (57.2) ‐ ‐ ‐ 0.1 0.1 (57.1)

Contract fulfi lment (6.7) ‐ ‐ ‐ ‐ ‐ (6.7)

Right of use asset amortisation (35.0) ‐ ‐ ‐ 5.1 5.1 (30.0)

EBITA 127.0 31.3 13.6 2.6 5.3 52.7 179.7

Acquired amortisation (52.9) ‐ ‐ ‐ 52.9 52.9 ‐

Impairment expense (107.8) ‐ ‐ ‐ 107.8 107.8 ‐

EBIT (33.7) 31.3 13.6 2.6 165.9 213.4 179.7

Net finance expense (33.2) ‐ ‐ ‐ 1.8 1.8 (31.4)

Gain on assets held at fair value (23.2) ‐ ‐ ‐ 22.9 22.9 (0.2)

Profit on disposal of subsidiaries 0.0 ‐ ‐ ‐ ‐ ‐ 0.0

Share of NPAT of equity accounted investments (11.4) ‐ ‐ ‐ 35.0 35.0 23.6

NPBT (101.4) 31.3 13.6 2.6 225.6 273.1 171.7

Income tax expense (12.5) (15.2) (27.7)

NPAT (113.9) 257.9 144.0

Add back acquired amortisation (after tax) 45.5 (45.5) ‐

Add back PEXA acquired amortisation (after tax) 30.6 (30.6) ‐

NPATA (37.8) 181.8 144.0

Significant Items


Detailed P&L statutory reconciliation for FY 2019

36

$ million StatutoryGlobal

transformation costs

Business combination / acquisition &

divestment costs

Client migration costs

Other (non EBITDA) TOTAL Operating

RSS 550.8 ‐ ‐ ‐ ‐ ‐ 550.8

CM 368.8 ‐ ‐ ‐ ‐ ‐ 368.8

FS 162.7 ‐ ‐ ‐ ‐ ‐ 162.7

BCM 168.7 ‐ ‐ ‐ ‐ ‐ 168.7

T&O 334.0 ‐ ‐ ‐ ‐ ‐ 334.0

CPCS 140.7 ‐ ‐ ‐ ‐ ‐ 140.7

Elimination/Recharges (322.2) ‐ ‐ ‐ ‐ ‐ (322.2)

Revenue 1,403.5 ‐ ‐ ‐ ‐ ‐ 1,403.5

Employee expenses (692.4) 24.1 0.0 0.7 ‐ 24.8 (667.6)

IT expenses (108.9) 0.8 ‐ 0.1 ‐ 0.9 (107.9)

Occupancy expenses (22.9) 0.7 (0.0) ‐ ‐ 0.7 (22.3)

Other expenses (223.9) 13.1 (0.0) (0.0) ‐ 13.1 (210.9)

Net acquisition and capital management related expenses (18.5) ‐ 18.3 ‐ ‐ 18.3 (0.1)

Total operating expenses (1,066.6) 38.7 18.3 0.8 ‐ 57.8 (1,008.8)

EBITDA 336.8 38.7 18.3 0.8 ‐ 57.8 394.6

Depreciation (20.1) ‐ ‐ ‐ 0.0 0.0 (20.1)

Amortisation (other) (44.8) ‐ ‐ ‐ 0.0 0.0 (44.7)

Contract fulfilment (5.3) ‐ ‐ ‐ ‐ ‐ (5.3)

Right of use asset amortisation (33.9) ‐ ‐ ‐ 0.9 0.9 (33.1)

EBITA 232.8 38.7 18.3 0.8 0.9 58.7 291.5

Acquired amortisation (54.4) ‐ ‐ ‐ 54.4 54.4 ‐

Impairment expense ‐ ‐ ‐ ‐ ‐ ‐ ‐

EBIT 178.4 38.7 18.3 0.8 55.3 113.1 291.5

Net finance expense (37.4) ‐ ‐ ‐ 0.6 0.6 (36.9)

Gain on assets held at fair value 178.0 ‐ ‐ ‐ (178.0) (178.0) ‐

Profit on disposal of subsidiaries 107.4 ‐ ‐ ‐ (107.4) (107.4) ‐

Share of NPAT of equity accounted investments (12.5) ‐ ‐ ‐ 14.4 14.4 2.0

NPBT 413.9 38.7 18.3 0.8 (215.1) (157.3) 256.6

Income tax expense (95.7) 37.0 (58.8)

NPAT 318.1 (120.3) 197.8

Add back acquired amortisation (after tax) 43.1 (43.1) ‐

Add back PEXA acquired amortisation (after tax) 13.2 (13.2) ‐

NPATA 374.5 (176.7) 197.8

Significant Items


Detailed cash flow statutory reconciliation for FY 2020

37

$ million

Statutory

Interest

Tax

Net ope

ratin

g cash flow

after

significant items

Glob

al

transformation

costs

Busin

ess

combinatio

n /

acqu

isitio

n &

divestment costs

Glob

al RSS

tend

er costs

TOTA

L

Net ope

ratin

g cash flow

NPAT (113.9)

Income tax expense 12.5

Net finance expense 33.2

Gain on assets held at fair value 23.2Profit on disposal of subsidiaries (0.0)Share of NPAT of equity accounted investments 11.4

Depreciation and amortisation 172.3

Impairment of goodwill 107.8

EBITDA 246.3 ‐ ‐ 246.3 31.3 13.6 2.6 47.5 293.8

Net finance expense (33.2) 33.2 ‐ ‐ ‐ ‐ ‐ ‐ ‐Income tax expense (12.5) ‐ 12.5 ‐ ‐ ‐ ‐ ‐ ‐Equity‐settled share based payment expense 1.7 ‐ ‐ 1.7 ‐ ‐ ‐ ‐ 1.7Unrealised foreign exchange loss/(gain) (1.3) 1.3 ‐ ‐ ‐ ‐ ‐ ‐ ‐Unwinding discount on deferred acquisition 0.4 (0.4) ‐ ‐ ‐ ‐ ‐ ‐ ‐Borrowing cost amortisation 1.5 (1.5) ‐ ‐ ‐ ‐ ‐ ‐ ‐

Change in trade and other receivables 4.9 ‐ ‐ 4.9 ‐ ‐ ‐ ‐ 4.9Change in other assets (8.4) ‐ ‐ (8.4) ‐ ‐ ‐ ‐ (8.4)Change in trade and other payables 19.1 0.1 ‐ 19.2 4.7 5.0 ‐ 9.7 28.9Change in employee benefits (5.8) ‐ ‐ (5.8) ‐ ‐ ‐ ‐ (5.8)Change in provisions 9.8 ‐ ‐ 9.8 (5.4) ‐ ‐ (5.4) 4.4Change in current and deferred tax balances (32.2) ‐ 32.2 ‐ ‐ ‐ ‐ ‐ ‐

Total changes in working capital (exc. Fund assets & l iabil ities)

(12.6) 0.1 32.2 19.7 (0.7) 5.0 ‐ 4.3 24.0

Change in fund assets and fund l iabil ities (0.8) ‐ ‐ (0.8) ‐ ‐ ‐ ‐ (0.8)

Net operating cash flow 189.6 32.6 44.7 266.9 30.6 18.5 2.6 51.7 318.6

Significant Items

$25.6m


Detailed cash flow statutory reconciliation for FY 2019

38

$ million

Statutory

Interest

Tax

Net ope

ratin

g cash flow

after

significant items

Glob

al

transformation

costs

Busin

ess

combinatio

n /

acqu

isitio

n &

divestment costs

Client migratio

n costs

TOTA

L

Net ope

ratin

g cash flow

NPAT 318.1

Income tax expense 95.7

Net finance expense 37.4

Gain on assets held at fair value (178.0)Profit on disposal of subsidiaries (107.4)Share of NPAT of equity accounted investments 12.5

Depreciation and amortisation 158.5

Impairment of goodwill ‐

EBITDA 336.8 ‐ ‐ 336.8 38.7 18.3 0.8 57.8 394.6

Net finance expense (37.4) 37.4 ‐ ‐ ‐ ‐ ‐ ‐ ‐Income tax expense (95.7) ‐ 95.7 ‐ ‐ ‐ ‐ ‐ ‐Equity‐settled share based payment expense 2.4 ‐ ‐ 2.4 ‐ ‐ ‐ ‐ 2.4Unrealised foreign exchange loss/(gain) 0.2 (0.2) ‐ ‐ ‐ ‐ ‐ ‐ ‐Unwinding discount on deferred acquisition 0.0 (0.0) ‐ ‐ ‐ ‐ ‐ ‐ ‐Borrowing cost amortisation 1.5 (1.5) ‐ ‐ ‐ ‐ ‐ ‐ ‐

Change in trade and other receivables 28.2 ‐ ‐ 28.2 ‐ ‐ ‐ ‐ 28.2Change in other assets (13.3) ‐ ‐ (13.3) ‐ ‐ ‐ ‐ (13.3)Change in trade and other payables 0.9 (0.7) ‐ 0.1 (4.7) (5.3) 2.7 (7.3) (7.2)Change in employee benefits (1.9) ‐ ‐ (1.9) ‐ ‐ ‐ ‐ (1.9)Change in provisions (5.7) ‐ ‐ (5.7) (1.0) (0.1) ‐ (1.1) (6.8)Change in current and deferred tax balances 26.5 ‐ (26.5) ‐ ‐ ‐ ‐ ‐ ‐

Total changes in working capital (exc. Fund assets & l iabil ities)

34.7 (0.7) (26.5) 7.4 (5.7) (5.4) 2.7 (8.4) (1.0)

Change in fund assets and fund l iabil ities (12.7) ‐ ‐ (12.7) ‐ ‐ ‐ ‐ (12.7)

Net operating cash flow 229.8 35.0 69.2 334.0 33.0 12.9 3.5 49.4 383.4

Significant Items

$1.5m


Balance sheet

39

30 June year end, A$ million 30 June 2020

30 June 2019

Cash and cash equivalents 264.1 560.2 Trade and other receivables 238.9 244.8 Other assets 34.2 37.3 Current tax assets 18.5 0.2 Funds assets 617.0 985.9 Assets held for sale 5.9 - Total current assets 1,178.6 1,828.5 Investments - equity accounted 691.2 702.6 Investments - other 93.2 51.3 Plant and equipment 250.4 268.9 Intangible assets 2,042.2 2,188.9 Deferred tax assets 56.5 52.0 Other assets 27.3 21.6 Total non-current assets 3,160.8 3,285.4 Total assets 4,339.5 5,113.9 Trade and other payables 275.2 261.3 Interest-bearing loans and borrowings 35.9 30.0 Provisions 18.4 14.8 Employee benefits 38.6 44.7 Current tax liabilities 4.9 7.8 Fund liabilities 614.9 985.6 Liabilities held for sale 1.8 - Total current liabilities 989.7 1,344.2 Trade and other payables 8.6 29.2 Interest-bearing loans and borrowings 1,227.0 1,393.5 Provisions 48.1 39.9 Employee benefits 5.5 5.3 Deferred tax liabilities 145.4 150.4 Total non-current liabilities 1,434.5 1,618.3 Total liabilities 2,424.2 2,962.5 Net assets 1,915.3 2,151.4 Contributed equity 1,889.7 1,909.1 Reserves 16.7 15.3 Retained earnings 4.3 223.7 Total equity attributable to equity holders of the parent 1,910.7 2,148.1 Non-controlling interests 4.6 3.2 Total equity 1,915.3 2,151.4


Defined Terms

• IMPORTANT NOTICE: Link Group uses a number of non-IFRS financial measures in this presentation to evaluate the performance and profitability of the overall business. Although Link Group believes that these measures provide useful information about the financial performance of Link Group, they should be considered as supplemental to the information presented in accordance with Australian Accounting Standards and not as a replacement for them. Because these non-IFRS financial measures are not based on Australian Accounting Standards, they do not have standard definitions, and the way Link Group calculated these measures may differ from similarly titled measures used by other companies. The principal non-IFRS financial measures that are referred to in this presentation are as follows:

• Recurring Revenue is revenue arising from contracted core administration servicing and registration services, corporate and trustee services, transfer agency, stakeholder engagement services, share registry services and shareholder management and analytics services that are unrelated to corporate actions. Recurring Revenue is expressed as a percentage of total revenue. Recurring Revenue is revenue the business expects to generate with a high level of consistency and certainty year-on-year. Recurring Revenue includes contracted revenue which is based on fixed fees per member, per client or shareholder. Clients are typically not committed to a certain total level of expenditure and as a result, fluctuations for each client can occur year-on-year depending on various factors, including number of member accounts in individual funds or the number of shareholders of corporate market clients.

• Non-recurring Revenue is revenue the business expects will not be earned on a consistent basis each year. Typically, this revenue is project related and can also be adhoc in nature. Non-Recurring Revenue includes corporate actions (including print and mail), call centre, capitals markets investor relations analytics, investor relations web design, extraordinary general meetings, share sale fees, off-market transfers, employee share plan commissions and margin income revenue. Non-Recurring Revenue also includes fee for service (FFS) project revenue, product revenue, revenue for client funded FTE, share sale fees, share dealing fees, one-off and other variable fees.

• Gross Revenue is the aggregate segment revenue before elimination of intercompany revenue and recharges such as Technology and Innovation recharges for IT support, client-related project development and communications services on-charged to clients. Link Group management considers segmental Gross Revenue to be a useful measure of the activity of each segment.

• Operating EBITDA is earnings before interest, tax, depreciation and amortisation and Significant items. Management uses Operating EBITDA to evaluate the operating performance of the business and each operating segment prior to the impact of Significant items, the non-cash impact of depreciation and amortisation and interest and tax charges, which are significantly impacted by the historical capital structure and historical tax position of Link Group. Link Group also presents an Operating EBITDA margin which is Operating EBITDA divided by revenue, expressed as a percentage. Operating EBITDA margin for business segments is calculated as Operating EBITDA divided by segmental Gross Revenue, while Link Group Operating EBITDA margin is calculated as Operating EBITDA divided by revenue. Management uses Operating EBITDA to evaluate the cash generation potential of the business because it does not include Significant items or the non-cash charges for depreciation and amortisation. However, the Company believes that it should not be considered in isolation or as an alternative to net Operating free cash flow.

• EBITDA is earnings before interest, tax, depreciation and amortisation.

• Operating EBIT is earnings before interest, tax and Significant items. Link Group also presents an Operating EBIT margin which is Operating EBIT divided by revenue, expressed as a percentage. Operating EBIT margin for business segments is calculated as Operating EBIT divided by segmental Gross Revenue, while Link Group Operating EBIT margin is calculated as Operating EBIT divided by revenue.

• EBIT is earnings before interest and tax.

• Operating NPATA is net profit after tax and after adding back tax affected Significant items (including the discount expense on the un-winding of the Superpartners client migration provision) and acquired amortisation. Acquired amortisation comprises the amortisation of client lists and the revaluation impact of acquired intangibles such as software assets, which were acquired as part of business combinations. Link Group management considers Operating NPATA to be a meaningful measure of after-tax profit as it excludes the impact of Significant items and the large amount of non-cash amortisation of acquired intangibles reflected in NPAT. This measure includes the tax effected amortisation expense relating to acquired software which is integral to the ongoing operating performance of the business. Link Group also presents Operating NPATA margin which is Operating NPATA divided by revenue, expressed as a percentage. Operating NPATA margin is a measure that Link Group management uses to evaluate the profitability of the overall business.

• Operating earnings per share is Operating NPATA divided by the weighted average number of ordinary shares outstanding for the period. Link Group management considers Operating earnings per share to be a meaningful measure of after-tax profit per share as it excludes the impact of Significant items and the large amount of non-cash amortisation of acquired intangibles reflected in basic earnings per share. This measure includes the tax effected amortisation expense relating to acquired software which is integral to the ongoing operating performance of the business.

• Significant items refer to items which are considered to have a material financial impact and are not part of the normal operations of the Group. Significant items are used in both profit and loss and cash flow presentation. These items typically relate to events that are considered to be ‘one-off’ and are not expected to re-occur. Significant items are broken down into; Business combination/acquisition & divestment costs, Global Transformation costs, and other one-off costs


7b. Appendix: Additional business information

41


Link Group: Business Units

Link Group has a diverse service offering across 5 business units. In addition it holds a 44.2% equity stake in PEXA, which services the property industry in Australia

42

Underlying stakeholders Key services Revenue model

Retirement and Superannuation

Solutions

Approximately 9 million superannuation and pension

account holders

Core administration Compliance and regulatory services Value-added digital and data services

Contract-based (typically 3 – 5 years) Fees based on a combination of weekly fee per

member, fee per transaction and fixed fee arrangements, dependant on client

Corporate MarketsOver

50 million shareholders

Shareholder management & analytics

Employee share plans

Share registry Company secretarial Stakeholder

engagement

Contract-based (typically 2 – 3 years)

Fund Solutions Funds under management of over £100 billion of FUM

AFM / management company (“ManCo”) Fund administration and transfer agency ISA plan management

Contract-based (typically 3 – 5 years) Fees typically based on a % of AUM


Diverse loan owners of over €70 billion AUM

Portfolio management (including liquidation and recovery of non-performing loans)

New lending services Bank outsourcing

Contract-based (typically 3-5 years)

Technology and Operations

Supporting systems of for the business units / underlying

stakeholders

Core systems development and maintenance Digital communications and solutions Data analytics

Revenue from supporting other divisions and external clients

Fee-for-service and licence fees

PEXAOver 1.3 million home buyers

& sellers using PEXA for settlement

Electronic property exchange platform Lodgment and settlement services

Fee per transaction


Link Group: Historical profile

Link Group has grown to over $1 billion in Revenue, evolving from a share registry business to a provider of technology-enabled outsourced services

43

1. Operating EBITDA includes public company costs from FY 2013. AASB 16 Leases applied from FY 2018.See Appendix 7A for non IFRS definitions. Non-IFRS measures have not been audited or reviewed in accordance with Australian Accounting Standards.

Revenue profile

2002: Corporate Markets focus Today: Technology-enabled outsourced services provider

Over 40 business combinations in the last 15 years

Over 90 superannuation fund migrations since 2008

FY 2002 – FY 2020 CAGR:

• Revenue: 20%

Entry into Superannuation administration

Superpartners acquisition

LAS acquisition

CPCS divestment


24.7

3.5 3.4

2.1 1.9 1.71.0 0.8 0.5 0.3

7.8% 5.1% 0.1% 6.6% 5.6% 5.5% 6.1% 12.4% 1.0% 3.9%

012345678

Tota

l ass

et p

ool 2

019

US$

trn

25

CY2009 to CY2019 CAGR (%)

Retirement and Superannuation Solutions: Market

Link Group is a market leading administrator of financial ownership data, underpinned by investment in technology, people and processes

44

Global pension asset pools (2019) and last decade growth1 Total Australian superannuation industry size2, 3

1. Based on Towers Watson Global Pension Assets Study 2020. Presents 2019 data.2. Based on FY 2004 to FY 2018 FuM in Australian Dollars.3. Link Group analysis of APRA Fund-level Superannuation Statistics (June 2019 edition).

0

1

2

3

4

5

FY2004 FY2009 FY2014 FY2019 FY2024 FY2029

FUM (A

$tn)

Australian superannuation administration providers

Fragmented market = Opportunity

Link Group is a low cost administrator

34%

48%

10%

Superannuation administration (Australia) by members3

LinkInhouseMercerOther (3%)SMSF (5%)

22%

62%

11%

Superannuation administration (Australia) by cost3

Link

Inhouse

Mercer

Other (5%)


$101

Industry average (exc. Link): $197

Industry average (inc. Link): $163

Lin

k

Sun

supe

r

AM

P

In h

ouse

Mer

cer

CBA

NAB

Oth

er

Wes

tpac

Sun

corp

IOO

F

Mac

quar

ie

Average administration fee per account ($ pa)1

Retirement and Superannuation Solutions: Market

Link Group is well positioned to benefit from increased outsourcing given our competitive advantage from our proprietary technology, quality service offering, operating scale and transitions capability

45

Key outsourcing drivers Link proposition

Continually evolving and increasingly complex superannuation system imposes platform & administrative burdens

Link Group maintains control over its proprietary technology. The cost of regulatory change is disbursed across all clients

Service benefits to superannuation fund members is paramount

Link Group’s clients have access to a much broader array of product and specialist providers

High level of public and regulatory scrutiny on costs

Link Group’s clients benefit from operating scale and genuine market based pricing

Data security andredundancy

Link Group spends over $250 million per annum supporting and developing its technology. Managed over 90 transitions since 2008

1. Link Group analysis of APRA Fund-level Superannuation Statistics (June 2019 edition).

Link Group is well placed to benefit from further outsourcing

Link Group’s scale enables its clients to operate at the lower end of the cost curve


Recurring Non-Recurring

Share RegistryShareholder Management and AnalyticsStakeholder engagementEmployee Share PlansCompany Secretarial

Corporate Markets: Market

Leading player in all key Corporate Markets geographies outside of North America

46

Revenue Split:

Revenue by Service:

Corporate Markets product suite, geographic footprint and market position1,2Corporate Markets product suite, geographic footprint and market position1,2 CharacteristicsCharacteristics

Source: ASX / publicly available stock exchange data1. Based on the number of companies serviced in the index as at May 2019.2. Reflects Corporate Markets business unit from 1 July 2019.


Fund Solutions: Market

Link operates in key European markets, and is well positioned to benefit from an ongoing propensity to outsource

47

European marketEuropean market OutsourcingOutsourcing

United States

Asia

UKAUM approx.

€1.8 trillion

IrelandAUM approx. €3.0 trillion

LuxembourgAUM approx.

€4.7 trillion

US fund managers distribute to continental Europe either through Ireland or Luxembourg 77% of non-domestic funds

registered for distribution in Hong Kong are Luxembourg-domiciled funds

Asian fund managers distribute to continental Europe primarily though Luxembourg

Europe has ~€18T AUM, LFS operates in the largest of these segments Growth in outsourced AuM underpinning resilient base of Recurring Revenue

• Growth in savings and investment in collective scheme to drive increase in AuM

• Investment managers increasingly outsource to reduce regulatory burden, drive cost efficiency, simplify cross border complexity and focus on investing activities and distribution

• Ongoing propensity to outsource accelerated by large wave of new complex regulation (UCITS V&VI, AIFMD, MiFID II, PRIPS, CP86, FCA AMMS)

• National regulators increasingly favouring independent governance acting as an extra layer of oversight

Europe

-

500

1,000

1,500

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

2015 2016 2017 2018 2019 2020

AuM

£bi

llion

s

AuM hosted / outsourced % (LHS) Total AuM (RHS)


Fund Solutions: Market

Due to growing levels of regulation there is an increasing propensity to outsource. Link Group has specialist expertise to manage this challenge on behalf of clients

48

Depositary / TrusteeSafeguards assets,

Operational oversight

Sponsor

AFMRetains legal and regulatory

responsibility for fund

Fund roles (some outsourced to third party outsourcing providers)

Fund Administrator Transfer Agency

Investment Manager Distribution

LFS is Fund Administrator and/or Transfer Agent for ~80% of its AFM clients

Law FirmAdvice on set-up

Accountant / AuditorYearly check of

books

LFS acts as AFM thereby responsible for the operations of the fund

LFS active

Depositary / TrusteeSafeguards assets,

Operational oversight

Fund Board of Directors

ManCoManCo appointed by Fund Board to take on responsibility of the management of the fund,

appointing the investment manager, administrator and the distributor

Fund roles (some outsourced to third party outsourcing providers)

Fund Administrator Transfer Agency

Investment Manager Distribution

LFS is Fund Administrator and/or Transfer Agent for 87% of its ManCo clients

Law FirmAdvice on set-up

Accountant / AuditorYearly check of

books

LFS owns a Management Company (ManCo) from which it can support third party funds and provide AIFM services

LFS active

Onshore (i.e. UK)Onshore (i.e. UK) Offshore (i.e. Ireland and Luxembourg)Offshore (i.e. Ireland and Luxembourg)


Banking and Credit Management: Market

Shifting market dynamics will create opportunity for both service and jurisdiction expansion. Link Group is well positioned to take advantage of the market dynamics

49

COVID‐19 upheaval ‐ European NPL volume expected to expand significantly

Developing regulatory landscape may provide opportunities

Global economies at different phases of a recovery cycle

Increasing move towards automation and digitisation

Bank outsourcing increasing (post deleveraging) embracing new Fintech Digital solutions

€

Portfolio

Man

agem

ent

Bank

Outsourcing

New

Len

ding

Services

• Jurisdictional expansion – follow the NPL curve around the globe

• Scaled growth in Italy

• Expansion into Greece

• Explore Indian and Chinese markets

• Outsourcing of non core activities

• Optimisation of current proposition by leveraging Fintech / Regtech capability

• Scale the Netherlands business

• Expand end‐to‐end lending proposition

• Partner with start up / challenger banks and non‐bank lenders

Shifting market dynamics: Link Group opportunity:


Banking and Credit Management : PES Transaction overview

50

Attractive transaction structure

Accretive transactionAccretive

transaction

Efficiency opportunities

• A$277m upfront cash consideration for 100% of PES and contingent cash payments of €35m (~A$56m) over 3 years (based on pre-agreed milestones relating to protection of existing AUM and achieving certain growth hurdles in Spain, Greece and Cyprus)

• Structure designed to mitigate downside risk of existing contracts as well as execution risk on achieving growth in the Mediterranean region

• Attractive acquisition multiple of ~8.2x normalised CY19 EBITDA (upfront) and ~6.0x (including efficiency benefits and deferred payment for existing AUM protection)1

• Double digit accretive to Link Group Operating EPS2. Further realisation of efficiency benefits will enhance accretion by 5% to 6%

• Aligns with Link’s focus on efficient capital allocation and maximising shareholder value

Notes: (1) Transaction multiple excludes the €20m deferred payment in relation to achieving growth hurdles in Spain, Greece and Cyprus given Link has attributed limited value upfront and this consideration will only be paid if additional growth hurdles are achieved. (2) EPS accretion calculated on €180m cash consideration (including €15m of deferred payment related to protection of existing AUM).

• PES is highly complementary to BCM with overlapping footprint in UK & Ireland. Scope to streamline the combined operating model under Link Group’s ownership

• Annual efficiency benefits estimated to be ~€10m (~A$16m) (pre-tax) to be realised over the medium term (requires an estimated one-off investment spend of ~€15m (~$A24m) to achieve the efficiency benefits)


Banking and Credit Management : PES Business Overview

51Notes: (1) based on unaudited management accounts for the year ended 31 December 2019 (as adjusted); Normalised EBITDA excludes one-off costs predominantly related to separation of the servicing business from Pepper, technology upgrade and remediation projects.

16 20

Dec-18A Dec-19A

51% 45%

2% 2%

Total Dec-19A AUM:

~€39bn

Overview

Solutions across the loan cycle from origination support and on-boarding to account settlement and arrears management

End-to-end servicing

Complementary asset management services including portfolio due diligence, valuation services, panel management and real estate advisory

Asset management & advisory

• The PES business within the Pepper Group provides end-to-end loan servicing, and asset management & advisory services in Europe

• PES predominately operates in the UK and Ireland, with operations also in Spain, Greece and Cyprus

• PES has a diversified customer base, consisting of a range of investors, banks and non-bank financial institutions

• PES has AUM of ~€39bn and generated FY 2019 (ending 31 December 2019) revenue of ~€93m and normalised EBITDA of ~€20m1

Services

Financial snapshotRevenue by geography (€ million)

UK Ireland Spain

Cyprus Greece

Group EBITDA (€ million)+27%

+13%

29 29

40 51 6

5 6 3 1

4 82

93

Dec-18A Dec-19A


Tech

nolo

gy a

nd O

pera

tions

Technology & Operations: Market

T&O is the hub of technology and operations capability which services the Link Group business units, and also provides services directly to external clients

52

In-house fund administration

software

Data analytics

Digital solutions

Digital communications

Proprietary software

Applications

Operations

Retirement and Superannuation

Solutions

Corporate Markets

Fund Solutions


Infrastructure

A single global business unit providing full technology and operational capability across Link Group:

Inte

rnal

+ E

xter

nal c

lient

ser

vice

sIn

tern

al c

lient

ser

vice

s

Standardised systems and approach across the globe, establish centres of excellence (“CoE”)

• Info Security CoE• Data Analytics CoE

• Coding Development CoE• High volume, low customer contact processes

• Cloud CoE• Workflow CoE

Technology and operations hubs that supporting Link Group’s other divisions and providing services directly to external clients

Innovation and data analytics capabilities that enable Link Group to differentiate itself from competitors

T&O engages directly with external clients with value-added services, implementation and licensing contributing 29% of T&O revenue in FY 2020

Focus on scalability, high levels of automation, high degree of operating leverage, flexibility, privacy and data protection, and ability to interface with value-added platforms and services


PEXASince inception PEXA has completed more than 5.4 million transactions. Today ~75% of all property settlements nationally are completed online via PEXA

53

Delivering an exceptional experience for our people, our members, and the communityDelivering an exceptional experience for our people, our members, and the community

For our members• 9% growth in legal and conveyancing firms registered to transact online.

• 14,000 pieces of member feedback received through our in-platform feedback tool.

• Shortlisted for three nominations in CSIA1’s Australian Service Excellence Awards.

• Maintaining key metrics:

• Exchange Net Promoter Score: +63• Exchange Member Effort Score: +74• Platform availability: 99.99%

Through our people• 94%2 of employees consider PEXA members in their day-to-day role.

• Together, we’ve raised more than $126,000 in support of various charitable organisations around Australia.

• Introduced game changing diversity & inclusion policies including industry leading parental leave, heavily subsidised childcare, domestic violence support, wellness days and a learning and development budget for every employee.

• Recipient of the HRD3 Innovative Teams 2020 Diversity and Inclusion Award and shortlisted for the Australian HR Awards 2020 – Best Workplace Flexibility.

“Digital transacting is the way of the future, and soon we will all be

doing it. The PEXA representatives are outstanding, always available and willing to

help. We have never felt like we are in this ourselves.”

Matthew KeatingAssociate, Keir Steele Waldon

Lawyers

1. Customer Service Institute of Australia2. 2019 PEXA staff engagement survey.3. Human Resources Director magazine.


PEXAPEXA continues to invest in security, innovation and member experience

54

Growing and supporting the digitisation of property settlementsGrowing and supporting the digitisation of property settlements

Australia’s trusted digital property settlement partner

• In FY 2020, 2.4 million transactions flowed through the platform, equating to $453B in property value.

• More than 1.3 million home buyers benefited from a safe and more efficient property settlement experience.

• Delivered resilience to the property market during COVID-19, allowing property transactions to proceed, uninterrupted, preserving social distancing requirements and helping to ‘flatten the curve’

Member-led innovation

• PEXA integrates with 22 organisations, boosting efficiencies through APIs with up to 13 million ‘clicks’ eliminated.

• A culture of ‘listen and respond’ with 88% of the 264 platform enhancements delivered as a direct result of member feedback.

• PEXA members agree the system keeps getting better with a 17 point increase (+74) to PEXA’s Member Effort Score; a metric that tracks the ease of settling on PEXA.

• The launch of new industry tools and apps including PEXA Key, PEXA Tracker and PEXA Planner deliver the network increased efficiency and greater security.

• Delivering PEXA into new markets with detailed technical work underway to deliver homebuyers and sellers in ACT with the benefits of a digitised property settlement process.


GlossaryTermsTerms

1H First half (6 months) ended 31 December

2H Second half (6 months) ended 30 June

APAC Asia Pacific

BCM Banking and Credit Management

CAGR Capitalised annual growth rate

CoE Centre of excellence

CM Corporate Markets

CPCS Corporate & Private Client Services

CY Calendar year ended / ending 31 December

D&A Depreciation and Amortisation

EMEA Europe, Middle East, Africa

ERS Early Release Superannuation

FS Fund Solutions

TermsTerms

FY Fiscal year ended / ending 30 June

FY 2020 CC

Fiscal year ended / ending 30 June 2020 presented on a constant currency basis (underlying financial data converted using average FX rates for FY 2019)

LAS Link Asset Services

LTM Last 12 months

PES Pepper European Servicing

pcp Prior corresponding period

pp Percentage point

PMIF Putting Members’ Interests First

PYS Protecting Your Superannuation legislation

RSS Retirement and Superannuation Solutions

T&O Technology and Operations

YoY Year on year


End

56

Full Year Results Presentation · 2020. 8. 26. · Link Group – FY 2020 Results Presentation 6 A...

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