Link Administration Holdings Limited (ASX: LNK) is headquartered in Sydney and provides unique technology solutions to its clients. It delivers technology-enabled administration solutions. LNK caters to companies, large asset owners and trustees around the world. Its core business is Fund administration. Besides this, it deals with corporate markets, technology and innovation and asset services.
On 31st May 2019, the company provided an update on its trading and earnings. It stated that for the year ending 30th June 2019, LNK is anticipating recording an operating EBITDA to range between $350 million and $360 million. Last year, in 2018, it stood at $335.3 million. The operating NPATA (excluding any impact from equity accounting of PEXA) is expected to be between $195 million and $205 million. It stood at $206.7 million in 2018. The results, however, would be based on the external audit process of the FY2019 financial statements.
The earnings of 2H FY2019 would be influenced by a few factors. These are as discussed below:
- Link Asset Services- The Brexit result in the UK is affecting the company’s business sentiment and its operating performance in its European operations. The uncertainty is adding on to the depletion of business-related activity, share dealing revenues, capital markets, conversion of new business wins and eventually, the revenue growth. Integration and transformational activities in the asset services are otherwise progressing, and the company is anticipating earning a £15 million of efficiency benefits, in the medium term. However, this would not include the Corporate and Private Clients business, the divestment of which is most likely to be completed within the next quarter, depending on one final regulatory approval.
- Fund administration- Change of regulations in the superannuation sector is of prime focus to the industry. The Treasury Laws Amendment Act 2019 would be effective from 1st July 2019. The initial impact of the account consolidation initiatives would be experienced in FY2019, given that few funds would move to transfer identified inactive member accounts to an ERF for early consolidation. The principal impact would be felt in FY2020. The regulatory change, member communication programs and adjustments to various fund product offerings have triggered activities across LNK. The workforce has been provided added resources to meet the increased demand in 2H FY2019.
Additional costs related to the remediation of the client migration activity last year had lingered for longer than anticipated. LNK expects them to continue even in 1H FY2020. The Rest contract is intact at the advanced stages of negotiation, whereas the Realisation of the Superpartners synergy benefits is in sync with LNK’s expectations.
- Other factors- Corporate markets still work in a competitive pricing environment, affecting the Operating EBITDA margins. In ANZ and EMEA, the company witnessed lower than anticipated levels of capital markets-related activity in 2H19. The Technology and Innovation department and PEXA are in sync with expectations.
LNK’s full year FY2019 results would be announced on 29th August 2019.
Earlier this year in February, LNK announced its interim financial report for six months ending 31st December 2018. The revenue was up 42% and was recorded at $714 million.
Financial performance (Source: Company’s report)
The stock of the company, by the end of the trading session, was at A$5.970, down by 23.067% from its previous close.
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