Why global transformation programs can turn around an investment story- A look at Link Administration

  • Nov 18, 2019 AEDT
  • Team Kalkine
Why global transformation programs can turn around an investment story- A look at Link Administration

In the Australian market, some companies are operating globally, and some are looking for global transformation programs to provide the services to consumers in a broader network. The investment in the stocks which are operating at the global level could offer good returns to the investors. As the companies are moving towards global transformation programs, it would drive consistency in delivering stronger business performance.

In this article, we are highlighting Link Administration (ASX: LNK) which is planning to transform its business globally and has fix plan & strategy for its upcoming fiscal year (FY2020).

Let’s zoom the lens for LNK

Link Administration Holdings Limited (ASX: LNK)

An ASX listed company Link Administration Holdings Limited (ASX: LNK) is an Australia based technology service provider of outsourced administration services to superannuation funds and companies. The company is engaged in delivering services related to fund administration, shareholder management, along with IT services and data analytics. Link has provided its services to 14 jurisdictions at the end of the financial year 2019 to over 6,000 clients on a global scale and has more than 6,500 employees worldwide. Link Administration was listed in Australian Securities Exchange (ASX) in 2015 and since then it has been focusing on transforming its business on a global level.

In June 2019, Link Administration announced that the company had created a new operating model and organisation structure which will reflect the more integrated business, comprising global business divisions and global functions, with a regional coordination overlay. These business divisions are as follows-

  • Corporate markets
  • Retirement & superannuation solutions
  • Fund solutions
  • Banking & credit management
  • Technology & operations

Link Administration Holdings Limited Source: Company’s Report

On 15 November 2019 Link announced the results of its annual general meeting (AGM). It notified the market that all the resolutions included in 2019 notice of AGM were passed by the shareholders during the meeting.

Partnership with Smart Pension-

According to another ASX announcement on 13 November 2019, the company unveiled about its global strategic partnership with a leading workplace pension platform- Smart Pension in the United Kingdom. This partnership is a plausible and robust market entry point into the rapidly growing UK pension administration market.

Financial year 2019 key highlights (year ended 30 June 2019)

  • Link’s five strategic pillars of FY2019-
    • Growing alongside its clients in attractive markets
    • Product & service innovation
    • Client, product & regional expansion
    • Integration & efficiency benefits
    • Identifying adjacent market opportunities
  • The company generated revenue of $1,403 million, which was up by 17% as compared to the financial year 2018.
  • The recurring revenue was at $1,123 million, which increased by 18% as compared to the fiscal year 2018.
  • The company’s operating EBITDA for the fiscal year 2019 was $356 million, which was up by 6% from the previous corresponding period (pcp).
  • The operating EBITDA margin was 25% for the fiscal year 2019.
  • The company’s statutory Net Profit After Tax (NPAT) was approximately $320 million 123% from the financial year 2018.
  • The Operating NPATA for the financial year 2019 was $202 million, down by 3% as compared to FY2018.
  • The fully franked final dividend of 12.5 cents per share for FY2019.
  • The total fiscal year 2019 fully franked dividend was 20.5 cents per share.
  • During the financial year 2019, the company rolled out many new initiatives designed for supporting self-service access and digitisation of various processes across its business-
    • New mobile apps for retail shareholders.
    • A consolidated data analytics hub.
    • Artificial intelligence (AI) and machine learning technologies
    • Fund Management Centre
LNK’s Actioned/underway initiative-
  • The company’s global transformation program would deliver savings of at least $50 million by the end of the fiscal year 2022.
  • Link’s on market share buyback of up to 10% of the issued capital.
  • The company is looking for portfolio optimisation which would include sale of Corporate Private Client Services (CPCS) and Link market services (LMS) South Africa.
  • Link’s UK pensions strategy to become a new engine of growth for the company.
Outlook-

Link has planned following important initiatives for the upcoming financial year-

  • The company will continue moving to common global operating systems, data sources and platform to provide better productivity and consumer experience.
  • Link will identify continuous improvement opportunities to tackle technology and innovation.
  • The company will develop its centres of excellence and will continue its initiative for cloud transformation.
  • For FY2020, especially in the second half of the year, the company is expecting a robust operating EBITDA.
  • The expected revenue for the financial year 2020 is $480- 500 million.
  • Link is expecting an operating EBITDA of $60-70 million in the fiscal year 2020.
  • The company’s global transformation is expected to deliver $50 million of annual savings by the end of the financial year 2022.
Stock Performance

The company’s stock was trading at $5.900 on 18 November 2019 (at AEST 2:22 PM) with the daily volume of approximately 2,088,038 and a market cap of nearly $3.23 billion. The stock has a 52 weeks high price of $7.900 and a 52 weeks low price of $4.500. The stock has delivered a return of 29.55 per cent in the last three months, with 533.39 million outstanding shares. The annual dividend yield of the LNK stock stands at 3.39%.


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