Together we achieve…
Annual Report 2018
Our global presence
Together we achieve… Link Group delivers secure, simple-
to-use products and services
designed to help you achieve your
goals. We are the experts in providing
efficient administration and innovative
financial solutions.
Our purpose is to help our clients,
their customers and our people
achieve their goals.
Together we achieve…
Contents
Chair’s Message
Managing Director’s Report
Business Overview
Our Growth Story
Financial Highlights FY2018
Our Approach to Integration and Transformation
Key Highlights from Around the Globe
Our Culture of Innovation
Our People
Our Approach to Governance
and Sustainability
Financial Report
Additional Shareholder Information
Three-Year Summary
2
4
10
12
14
16
18
20
24
31
36
158
160
1
Link Group • Annual Report 2018 Chair’s Message
Welcome to Link Group’s Annual Report for the
financial year ended 30 June 2018, our third since
listing on the ASX.
Following what was a transformational year for Link Group,
we are pleased to report another strong earnings result.
Having undertaken expansion in the United Kingdom and
Europe as well as growth across the 18 jurisdictions in which
we operate around the world, Link Group has delivered:
• Revenue of $1,198.4 million, up 54%
on the prior year;
• Operating EBITDA1 of $335.3 million,
up 53% on the prior year;
• Operating NPATA1 of $206.7 million,
67% higher than the prior year; and
• Statutory Net Profit After Tax (NPAT) of $143.2
million, 68% up on the prior year.
The Board is pleased to announce a final dividend of 13.5
cents per share, which is 100% franked. Together with
the interim dividend of 7 cents per share, this represents
60% of NPATA, which is at the top end of the Board’s
dividend policy of paying between 40% and 60% of NPATA.
These results reflect our continued commitment to our
client relationships and disciplined execution of our
strategy. As a scaled provider across multiple markets
and jurisdictions with a demonstrated capacity to evolve
and innovate, Link Group remains well placed to achieve
further growth.
Link Group completed the purchase of Capita Asset
Services (renamed Link Asset Services, or LAS) for
£909 million ($1,548 million) from London Stock Exchange-
listed Capita plc on 3 November 2017.
The acquisition of LAS demonstrates our strategy to
grow through further penetration of attractive markets,
enabling us to provide an expanded range of products
and services to our clients in these jurisdictions.
LAS materially expands our footprint in Europe in business
lines we understand well, such as share registry and fund
solutions. In addition, LAS brought with it a new line of
business for Link Group: Banking and Credit Management.
LAS enjoys leading market positions in the 10 jurisdictions
in which it operates, servicing almost 7,000 clients and
safeguarding more than £600 billion held in funds, entities
and other instruments.
The LAS acquisition has had a strong positive impact
on Link Group. Both Operating EBITDA and Operating
NPATA benefited from its inclusion in our results for the
eight months since the acquisition. We remain confident
in achieving efficiency benefits of at least £15 million per
annum over the medium term.
“
Together, we will achieve great things.
1 Unless otherwise stated, results throughout this report are presented on an Operating basis. See page 71 for Non-IFRS definitions of Operating EBITDA
and Operating NPATA.
2
”
Together we achieve… $335m
Reflecting our expanded global presence, in March, the
Link Group Board:
• welcomed UK-based director Andrew (Andy)
Green as an additional Independent Non-Executive
Director. Andy brings to Link Group extensive
international governance experience, notably in
digital development and technology, and is a highly
valued addition to the Board;
• held its first meeting in the UK, coinciding with its
annual strategy session with the Executive team.
The visit also included a successful function at the
Australian High Commission in London, hosted by
LAS for its clients and broader network; and
• organised a visit to our Mumbai and Johannesburg
offices for the Chair of our Risk & Audit Committee.
Our earnings results were also buoyed by progress on
our broader integration and efficiency objectives and a
strong operating performance in Technology & Innovation
(formerly Information, Digital & Data Services).
Link Group continues to realise operational efficiencies
from the Superpartners integration and we remain on
track to achieve targeted synergies of $45 million in Fund
Administration and Technology & Innovation by FY2020.
With the markets we serve subject to the global trends
of increased complexity and greater governance
oversight, Link Group remains well placed to help our
clients manage the changing regulatory landscape and
deliver improved outcomes for members, trustees and
employers. This presents revenue opportunities and a
competitive advantage for Link Group due to our size, our
investment in technology and our expertise in managing
regulatory changes.
Link Group invests significantly across all our business
lines to deepen relationships with our clients. We continue
to pursue opportunities to work with them to support their
growth. We remain focused on the delivery of service
excellence, innovation and the retention of the high level
of trust placed in our business. We service more than
35 million individual shareholders per year, answer more
UP
53%FROM
FY2017
than 5 million calls per year and provide services for over
50 superannuation funds, which have more than $400
billion of funds under management.
As Link Group continues to grow, it is critical that our
people around the world are engaged in creating success
and value for our clients and shareholders. We recognise
that our people are integral to both our achievements and
our overall success as an organisation. In the Engagement
Survey undertaken in November 2017, our people shared
with us that they wanted to contribute more to the wider
Link Group. Given our significant expansion over the past
five years, it is essential that all our employees across all
business areas have a clear understanding of our purpose.
Earlier this year, we embarked on a journey to create
the Link Group Purpose Statement, which connects
employees and clients globally and supports further
growth of our innovative products and services. Link
Group’s Purpose Statement – “Together we achieve…”
– reflects our DNA and encapsulates the collaborative
way we work together with each other, clients and third
parties to help everyone achieve success, including
our shareholders.
On behalf of the Board, I would like to thank our
shareholders for their participation in the $883 million
equity raising in July 2017, proceeds of which partly funded
the acquisition of Link Asset Services. A further $300
million equity placement in April 2018 has Link Group well
positioned to pursue other strategic opportunities. We
greatly appreciate your continuing support.
As the Board looks forward to FY2019, my fellow Directors
and I, together with the Executive team, will continue
to focus on the delivery of value for all our clients, their
members and investors. We whole-heartedly believe that
together we will achieve great things.
Michael Carapiet
Chair
3
EBITDAOperating Link Group • Annual Report 2018
Managing Director’s Report
FY2018 is the year Link Group became a truly
global company. Over the past decade, we have
expanded in selected international locations – in
large and growing markets – via acquisitions and
organic growth.
Today, Link Group is a market-leading provider of
technology-enabled administration solutions, with over
7,000 employees working across 18 jurisdictions. We
have significant operations within our four divisions:
Fund Administration, Corporate Markets, Technology &
Innovation and Link Asset Services (LAS). Our clients
include some of Australia’s largest superannuation funds
as well as the world’s largest corporations.
Up until FY2018, our international activities had been
largely concentrated in Corporate Markets, with operations
in New Zealand, the Philippines, Hong Kong, India, Dubai,
Papua New Guinea, South Africa, Germany, France and
the United Kingdom. We had also established a Fund
Administration operation in New Zealand.
We have built strong market positions in all these locations
as well as a base from which further growth can occur.
Revenue generated from our international operations
was under 10% of total revenue in FY2017; in FY2018,
this figure has grown to around 40%.
Link Asset Services – a Transformational Acquisition
In June 2017, we signed a sale-and-purchase agreement
to acquire LAS, a major provider of back-office solutions
to the financial services industry. As the Chair notes in
his message, the LAS acquisition was completed on
3 November 2017 for a purchase price of £909 million
($1,548 million).
LAS is a substantial existing business with strong historical
growth credentials and provides a large-scale platform for
Link Group’s further growth in the UK and Europe. LAS
operates businesses in Corporate Markets, Fund Solutions
and Corporate and Private Client Solutions – all of which
are areas well known to Link Group. Banking and Credit
Management is a new activity, with promising growth
opportunities in a number of markets across Europe.
The acquisition of LAS is strongly aligned with our growth
strategy. It offers a natural expansion of our operations in
markets into which we first entered more than a decade
ago and have been looking to expand for many years,
as well as new markets with attractive growth prospects.
4
Together we achieve… UP
67%FROM
FY2017
$207m
With £331 million of revenue and £73 million of EBITDA for
the 12 months ended 30 June 2018, the LAS businesses
are well positioned for growth. While two thirds of LAS’
revenue is generated in the UK, it also has operations
in a range of locations across Europe, providing strong
strategic bases from which to grow. With LAS well
represented in Dublin, Amsterdam and Luxembourg,
we have a series of geographic options in the European
Union which are well positioned to deal with any adverse
impacts from Brexit.
As part of the acquisition, we also welcomed over 3,000
LAS employees to Link Group. The LAS team has
continued to enjoy success by winning new business
since joining Link Group and I’ve been very impressed
with their professionalism and commitment.
Revenue by
Region
Other
Overseas
17%
Australia &
New Zealand
60%
Since becoming a part of Link Group, LAS has continued
to grow its operations across Europe and the UK.
In FY2018, LAS:
• acquired the debt-servicing business Novalink
in Amsterdam, strengthening its position in
the Netherlands and providing a full range of
commercial and residential servicing options for
clients in one of our key European markets;
• opened the debt-servicing business, Link ASI
Limited, in Milan to support LAS’ expansion into
Italy; and
• won large mandates with UK local government after
being appointed by Wales Pension Partnership
to establish an investment vehicle for eight local
authority pension funds in Wales. It has also been
appointed pension pool operator by LGPS Access,
which had combined assets of approximately £41
billion in 2017.
In July 2018, we also made an investment in Leveris, a
European-based supplier of ‘next generation’ core banking
platform software.
UK & Channel
Islands
23%
Together with the expanded European platform, each of
our businesses remains well placed to capture further
opportunities in the markets in which they operate.
We have established a Transformation Office in London.
There are many tasks involved in separating the business
from the former parent and integrating various functions
into Link Group. I’m pleased to report that progress is
positive as we migrate HR, payroll, finance and risk and
compliance systems onto Link Group platforms. We
are avoiding duplication of effort inside business layers
5
Link Group • Annual Report 2018NPATAOperating by centralising functions such as IT and Finance. The
migration of systems will continue throughout FY2019,
providing the platform for extracting efficiencies and
supporting our approach to global sourcing and vendor
management. In addition, our property location strategy
will rationalise our UK premises while facilitating efficient
workplace environments and improved amenities for our
people over the medium term.
Opportunities in India and Hong Kong
As well as our further expansion into the UK and Europe
with LAS, Link Group continues to grow with other exciting
initiatives in selected jurisdictions around the world.
These have included further expansion in India and Hong
Kong. We have been present in India for 10 years and
in this time have built a leading market position in the
share registry space. In May, we added to this by signing
an agreement1 to merge our business with that of TSR
Darashaw. TSR Darashaw has a strong client list of
Indian companies, including members of the Tata group.
Market conditions in India have been positive with IPOs
still attracting a lot of investor interest. We have a great
management team based in Mumbai and a capacity for
further growth.
In Hong Kong, we opened a share registry business on
8 August 2018. We have been present in Hong Kong
since 2008 with our Orient Capital business having built
a leading position in the market. With this platform well
established, we see strong growth prospects for the
expansion into share registry.
Our Growth Strategy
Our continued expansion in selected jurisdictions around
the world is in line with our growth strategy:
•1
•20
•3
•40
•50
We seek growth alongside our clients in
attractive markets.
We create product and service innovations and
use our expertise in technology to strengthen
our competitive advantage.
We pursue expansion through alliances and
acquisitions in our existing markets.
We are realising the synergies from the
integration of acquired businesses, including
LAS and Superpartners.
We pursue opportunities in attractive markets
adjacent to those in which we now operate.
Following our clients into attractive markets as they
expand internationally is mutually beneficial. We can
share systems on a global basis and offer a consistent
approach to the use of technology, which helps control
costs for our clients and ourselves. Our clients can
grow on a single platform around the world without
having to implement and manage disparate systems in
different jurisdictions.
“
As well as our further expansion into the UK
and Europe, Link Group continues to grow with
other exciting initiatives in selected jurisdictions.
1 Subject to regulatory approval by the Securities and Exchange Board of India (SEBI).
6
Together we achieve…”
I thank our shareholders for the strong support they have
shown for our growth strategy. This support is evident
in the $883 million equity raising in July 2017 – a fully
underwritten, pro-rata, accelerated and renounceable
entitlement offer – for the LAS acquisition. This was
followed by a fully underwritten $300 million placement
in April 2018 that provides Link Group with the capacity
to continue to pursue strategic opportunities. Our
shareholders have helped make FY2018 a successful one
for Link Group as we further expanded our global footprint.
Financial Position and Key Achievements in FY2018
Our FY2018 financial results are positive and include
eight months of contribution from LAS. Our record of
uninterrupted Operating EBITDA growth since 2002
continued in FY2018. We exceeded our performance of
the previous year across key financial measures:
• Operating EBITDA was $335.3 million,
up 53% on the prior year; and
• Operating NPATA was $206.7 million,
68% higher than the previous year.
In addition, we continue to realise post-migration
synergies and operational efficiencies from the
Superpartners integration.
Regulatory Challenges and Opportunities
The Australian Government announced changes to
superannuation in its 2018-19 Federal Budget that look
to reduce the number of inactive and duplicate accounts,
cap fees on low-balance super accounts and ban super
fund exit fees. While we estimated the unmitigated
full-year revenue impact of these changes would be
approximately $55 million as at 30 June 2018, we consider
the effects of the Government’s proposed changes on
Link Group will be mitigated. Many of our client funds
are working to actively engage with their members,
which may materially reduce the number of accounts
transferred to the Australian Taxation Office under the
proposed changes (which are currently expected to
take effect from October 2019). In addition, in the event
that there is a material decrease in member numbers, at
that time, volume protection clauses are expected to be
triggered in the majority of Fund Administration contracts.
The recently released Productivity Commission’s draft
report on superannuation focuses on how the industry
can be more efficient and competitive. As the report is
considered by the Australian Government, Link Group
remains in a good position to respond to the draft report’s
findings. We believe we are part of the solution in helping
achieve efficiency in the system and we aim to provide both
the best value for money and the most innovative services
to the superannuation industry. Our platforms and value-
added services provide a competitive advantage to our
clients and allow them to operate at the lowest end of
the cost curve.
Our People Make a Difference
Our people are paramount to our success and we strive
to create an environment where our employees can thrive
and innovate. In recognition of this, we conducted our
first Employee Engagement Survey in late 2017, where
we asked our people globally about their experience
of working for Link Group, their perceptions of our
strengths and where we could improve, and their sense
of involvement in our strategies. A key takeout from this
exercise was a strong desire from our people to feel a
deeper sense of connection to our strategies and goals,
and the role they play in achieving them. As we have
continued to expand our business globally, I recognise the
importance and reliance placed on our people in taking
the business forward. Our people, our culture and our
purpose have never been more important to Link Group
to achieve our growth strategy. To make this connection
more tangible, we launched LinkPurpose, a program of
employee-led consultations and workshops held across
our organisation, to identify a Purpose that connects our
people to our business strategy and acknowledges the
partnerships with our clients and shareholders that make
us who we are today. The essence of our Purpose is
“Together we achieve...”
This year, we also launched our Graduate Internship, a
two-year program where graduates can gain experience
across our Corporate Markets, Fund Administration and
Technology & Innovation divisions. We’ve had nine
graduates join the inaugural program based in Sydney, with
future programs to be rolled out nationally from FY2019.
7
Link Group • Annual Report 2018 Another area where our people make a difference is
through support of community initiatives via our Corporate
Social Responsibility (CSR) program. They drive our
activities and how we support the communities in which
Link Group operates. We take an active approach to
CSR initiatives to help our people assist charities and
not-for-profit organisations that they identify with and are
passionate about. During FY2018, I’ve been proud of the
commitment shown by our people to support a number
of charities including:
• Steptember, the global charity that asks individuals
to take 10,000 steps a day for 28 days to raise
money for the Cerebral Palsy Alliance;
•
•
the Humpty Dumpty Foundation, which provides
life-saving medical equipment for sick and injured
children in neonatal and paediatric wards; and
the Mother’s Day Classic, an annual charity event
that raises funds and awareness to improve the
treatment and detection of breast cancer.
Embracing Innovation
Link Group is committed to creating products and services
for the benefit of our clients and their stakeholders and
members. Over the past 10 years, we have invested
approximately $300 million into developing platforms
that drive user engagement, analysis and insight. We
continued to innovate our services in FY2018.
In July 2017, Orient Capital, our investor relations business,
teamed up with global financial data provider, Factset, to
expand the breadth of financial data, particularly around
international markets, available to listed companies from
Orient Capital’s online platform, miraqle®. The online
platform has been revamped and is now a ‘one-stop shop’
for our clients’ investor relations needs. In addition, our
miraqle® for iPhone app won Financial Services App of the
Year at the 2018 Financial Standard Marketing, Advertising
and Sales Excellence (MAX) Awards, following our win
of the same award in 2017 for the Cbus Employer app.
8
Meeting our new colleagues at LAS
Link Group is also at the forefront of virtual meeting
technology. Our hybrid Annual General Meeting (AGM)
services let companies deliver their own annual general
meetings to shareholders in remote locations. Our
proprietary technology allows shareholders to view the
proceedings of the meeting via video link, ask questions,
and vote using our LinkVote App on personal devices or
via our interactive web-based technology online. And
it’s not just listed companies that can benefit from this
technology, with NRMA, Australia’s largest member
organisation, utilising our hybrid meeting technology to
allow its members to virtually attend its 2017 AGM.
In what has been a transformational year for Link Group, I
want to thank our people for their hard work across each
of our business divisions and our clients for making us a
trusted partner. Link Group enjoys leadership positions
in each of the primary markets in which we operate. We
have a strong balance sheet with robust cash flow and
good earnings momentum moving into FY2019. I believe
that our people, our demonstrated capacity to innovate,
our market-leading technology platforms and our expertise
in managing change, position us well to deliver on our
growth plan in the coming years.
I look forward to reporting back to you on our progress.
John McMurtrie
Managing Director
Together we achieve… Link Group
services
APPROX
10m
super accounts
employs over
7,000
staff globally
services
+
35m
individual
shareholders
operates in
delivers over
18
jurisdictions
60
investor
relations
websites
services over
10k
clients globally
electronically
processes over
9m
employer
contributions
per annum
answers
+
5m
calls
per annum
maintains over
15
mobile apps
9
Business Overview
Link Group is a market-leading provider of technology-enabled administration
solutions. Our core businesses of fund administration, asset services and
securities registration are complemented by our expertise and innovation in
digital solutions and data analytics. Link Group comprises four divisions.
Fund Administration
Corporate Markets
Our Fund Administration division delivers a comprehensive
financial data solution to superannuation clients.
It services an underlying stakeholder base of approximately
10 million superannuation account holders across 50
funds, with over $400 billion of funds under management.
By leveraging technology, the division is able to enhance
member engagement and provide clients with a service
that is both high quality and value for money.
In 2018, we started the process of bringing our main
superannuation administration operating brand, Australian
Administration Services, into line with the rest of the
organisation by rebranding it Link Fund Administration.
Link Fund Administration assists clients at every step
of their operations, including: data management,
member communication, contribution and statement
processing, call centres, client accounting, insurance claim
administration, online portals and regulatory reporting.
Value-added services include predictive data analysis,
integrated clearing house, financial advice delivered by Link
Advice, direct investment options and trustee services.
Our Corporate Markets division assists issuers in
connecting with their stakeholders. It is a market-leading
administrator of financial ownership data and the IPO
manager of choice for six of the top 10 IPOs in Australia
over the last three financial years. The division services
some 35 million shareholders and over 1,800 clients,
including some of the world’s largest corporations.
It operates from offices in 11 countries throughout
Australasia, Asia, Africa, the Middle East and Europe.
The division provides shareholder management and
analytics through Orient Capital; stakeholder engagement
through D.F. King and Orient Capital; and share registry
through Link Market Services and Link Intime. The
division’s employee share plan arm is Equity Plan
Solutions, while the corporate governance advisory and
company secretarial business is operated by Company
Matters. Link Fund Solutions handles outsourcing of
middle- and back-office administration for managed
funds, fund accounting services and custodial and unit
registry services.
10
Asset
Services
Together we achieve… Technology & Innovation
Link Asset Services
Formerly known as Information, Digital & Data Services,
our Technology & Innovation division provides a range
of technology, digital, software, data management, data
analytics and communications solutions that enhance
customer productivity and profitability. The division is
also responsible for group-wide information and data
security, and recently had its ISO27001 certification
renewed in 2018.
For clients, the division offers end-to-end solutions as
well as value-added services that help clients to automate
wealth-management workflows, manage large consumer
and member bases, enhance the end-user experience
through mobile, digital and e-communications solutions
and obtain data insights through predictive analytics. These
include our fund administration platform, share registry
and database management platform for maintaining
the share records of listed companies, and shareholder
management and analytics platform that connects issuers
to their stakeholders. Empirics provides market-leading
data integration and analytics solutions, while web-based
and mobile-based communications are delivered through
Link Digital Solutions. Link DigiCom specialises in direct
engagement with members and shareholders for both
essential and marketing communication campaigns.
Our newest division was established through an acquisition
completed in FY2018. With almost 7,000 clients, Link
Asset Services is a leading asset-servicing platform
operating across 10 European jurisdictions. It provides
the infrastructure through which assets are secured or
deployed in both regulated and unregulated markets,
safeguarding over £600 billion of assets and protecting
over five million investors. It has market-leading positions
across its four business lines.
The division’s Link Market Services arm helps
issuers connect with their stakeholders, providing
share-registration, share-plan and treasury services,
while Link Fund Solutions delivers authorised Fund
Manager/Management Company solutions, third-party
administration and transfer-agency services to international
asset managers and investment funds. With a strong focus
on the ever-changing international regulatory landscape,
Corporate & Private Clients undertakes entity and business
management services including company secretarial
services through Company Matters, and finance and
accounting outsourcing through Throgmorton. Banking
& Credit Management focuses on providing servicing
and administration solutions to debt funds, retail and
investment banks, pension funds and insurers.
Asset
Services
11
Link Group • Annual Report 2018 Our Growth Story
1
Growing alongside our
clients in attractive markets
2
Product and
service innovation
3
Client, product and
regional expansion
4
Integration and
efficiency benefits
5
Identifying adjacent
markets opportunities
Activity
since IPO*
* Calendar year
12
10+ years
of uninterrupted
Operating EBITDA
growth
40+
business
combinations in
the last 15 years
89
94
117
104
130
138
148
335
219
191
67
n
o
i
l
l
i
m
$
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2015
2016
2017
2018
• Link Group lists on the Australian
• Invested in Moneysoft, a technology
• Acquired Capita Asset Services, a
• Acquired Novalink, a mortgage
• Launched Link Market Services share
Securities Exchange – 27 October 2015.
• Acquired HCE Haubrok, a specialist
provider of AGM services in Germany.
Renamed Link Market Services Munich.
provider of personal fi nancial
management tools.
• Acquired White Outsourcing, a
provider of middle- and back-offi ce
administration, fund accounting,
custodial and unit registry services.
Renamed Link Fund Solutions.
provider of a broad range of fi nancial
servicing business in the Netherlands.
registry in Hong Kong.
• Expanded Banking and Credit
• Invested in Leveris, a European-based
Management business line into Italy.
supplier of ‘next generation’ core
banking platform software.
and administrative services in the UK
& Europe. Renamed Link Asset
Services.
• Acquired Adviser Network, a provider
of digital and advice services to a
large number of Australia’s leading
superannuation funds.
• Increased our investment in Property
Exchange Australia Limited (PEXA).
• Partnered with Stone & Chalk, Asia’s
largest fi ntech innovation hub.
• Acquired registry business of Sharex
Dynamic India Private Limited.
• Signed acquisition agreement with
TSR Darashaw, a share registry
business based in Mumbai, India
(pending regulatory approval).
Together we achieve… 10+ years
of uninterrupted
Operating EBITDA
growth
40+
business
combinations in
the last 15 years
1
Growing alongside our
clients in attractive markets
2
Product and
service innovation
3
Client, product and
regional expansion
4
Integration and
efficiency benefits
5
Identifying adjacent
markets opportunities
67
n
o
i
l
l
i
m
$
89
94
117
104
130
138
148
335
219
191
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2015
2016
2017
2018
• Link Group lists on the Australian
• Invested in Moneysoft, a technology
• Acquired Capita Asset Services, a
• Acquired Novalink, a mortgage
• Launched Link Market Services share
Securities Exchange – 27 October 2015.
provider of personal fi nancial
• Acquired HCE Haubrok, a specialist
management tools.
provider of AGM services in Germany.
• Acquired White Outsourcing, a
Renamed Link Market Services Munich.
provider of middle- and back-offi ce
administration, fund accounting,
custodial and unit registry services.
Renamed Link Fund Solutions.
provider of a broad range of fi nancial
and administrative services in the UK
& Europe. Renamed Link Asset
Services.
• Acquired Adviser Network, a provider
of digital and advice services to a
large number of Australia’s leading
superannuation funds.
• Increased our investment in Property
Exchange Australia Limited (PEXA).
• Partnered with Stone & Chalk, Asia’s
largest fi ntech innovation hub.
servicing business in the Netherlands.
registry in Hong Kong.
• Expanded Banking and Credit
• Invested in Leveris, a European-based
Management business line into Italy.
• Acquired registry business of Sharex
Dynamic India Private Limited.
• Signed acquisition agreement with
TSR Darashaw, a share registry
business based in Mumbai, India
(pending regulatory approval).
supplier of ‘next generation’ core
banking platform software.
13
Link Group • Annual Report 2018 Financial
Highlights FY2018
This year, we exceeded
our performance of the
previous year across
key financial measures,
including Revenue,
Operating EBITDA and
Operating NPATA.
14
Revenue
Statutory NPAT
Operating NPATA
$1,198m
up 54% on FY2017
$143m
up 68% on FY2017
$207m
up 68% on FY2017
Operating
EBITDA
$335m
up 53% on FY2017
Recurring Revenue
$954m
up 36% on FY2017
Operating
EBITDA Margin
28%
consistent with FY2017
Net Debt
$557m
representing 1.52 times
FY2018 Pro-forma
Operating EBITDA
Final Dividend
declared
13.5
cents per share*
*100% Franked
Net Operating
Cash fl ow Conversion
96%
Strong Cash flow
Conversion
Revenue
Statutory NPAT
Operating NPATA
$1,198m
up 54% on FY2017
$143m
up 68% on FY2017
$207m
up 68% on FY2017
Operating
EBITDA
$335m
up 53% on FY2017
Recurring Revenue
$954m
up 36% on FY2017
Operating
EBITDA Margin
28%
consistent with FY2017
Net Debt
$557m
representing 1.52 times
FY2018 Pro-forma
Operating EBITDA
Final Dividend
declared
13.5
cents per share*
*100% Franked
Net Operating
Cash fl ow Conversion
96%
Strong Cash flow
Conversion
15
Our Approach to Integration and Transformation
The ability to integrate and transform newly acquired businesses is one of Link
Group’s core competencies – and one that plays a crucial and ongoing role in
our growth.
We have demonstrated this on more than 40 occasions
in recent years, perhaps most notably following the
acquisition of superannuation administrator Superpartners.
Integration and transformation activities are significantly
advanced in respect of Superpartners and are underway
following completion of the LAS acquisition. Our success
in this area comes from leveraging our experience,
scale and investment in technology to deliver efficiency
benefits, at the same time as being focused on providing
excellent service.
Fund Administration and Technology & Innovation
Link Group acquired superannuation administration
provider Superpartners in December 2014 and completed
the last of five large client migrations in December
2016. Since the Superpartners acquisition, we have
seen Operating EBITDA margin recovery in both Fund
Administration and Technology & Innovation from 17% and
21% respectively in FY2016 to 22% and 32% respectively
in FY2018, reflecting the success of our integration and
transformation program to date.
In June 2017, we announced that we were targeting a
further $45 million in integration benefits over the three-
year period ending in FY2020 and are pleased to report
that we have delivered more than 50% ($25.7 million) of
this target in FY2018. We are well on track to achieve
our target by FY2020, with the one-off costs to achieve
this expected to be in the range of $8 million-$15 million.
Key deliverables achieved as part of this program include:
• elimination of duplicate head office functions;
•
integration of operational teams;
• decommissioning of legacy systems;
• archiving of historical data;
• consolidation of data centres and
third-party vendors; and
•
reducing the number of premises
from 10 to four.
Link Asset Services (LAS)
LAS was acquired by Link Group from Capita plc in
November 2017. As with the Superpartners program,
we have adopted a phased approach to integration and
transformation in relation to LAS. There are three separate
but interdependent work streams involving separation
(from Capita), integration and transformation. These work
streams involve dedicated teams who have developed
bottom-up project plans with specific milestones to deliver
the efficiency benefits.
We are targeting at least £15 million in annual efficiency
benefits over the medium term from integration and
transformation activities in LAS, with one-off costs to
complete of £23 million. In the eight months since the
acquisition, we can report that annual operating cost
savings of £0.5 million have been realised (with a one-
off cost of £6 million) and we remain confident that these
targets will be achieved.
Separation
The immediate focus of this program is to successfully
complete the separation of LAS from Capita including the
migration of shared services functions such as human
resources, finance and risk and compliance. Successful
separation will see the removal of the remaining Capita
transition service agreements and facilitate stand-alone
and lower-cost operations.
We have already achieved a number of key separation
milestones. These include rebranding the business
to Link Asset Services, establishing new stand-alone
functions and arranging new or transitional supplier and
service arrangements as we separate functions previously
provided by Capita, while ensuring no adverse impacts
on customer service or service provision.
In FY2019, we plan to migrate finance, human resources
and risk and compliance systems from Capita to Link
Group systems and to remove the remaining Capita
transition services agreements.
16
Together we achieve… Timetable for Separation, Integration and Transformation activities
2H’18
1H’19
2H’19
FY20
FY21
FY22
Separation
Shared services integration
Operational efficiencies
Premises consolidation
Vendor consolidation and centralised sourcing
Revenue growth opportunities
Centres of excellence/offshoring
Integration
Concurrently, we have also commenced integration and
transformation activities across a range of activities, which
are set out in the high-level timetable above.
The integration of shared services including Finance,
Human Resources, Information Technology and Risk and
Compliance is underway to facilitate the centralisation
of core group functions into two hubs (Australia and the
UK) over the medium term. This will ensure common
systems, policies and processes are in place, governance
frameworks are aligned and employee interactions
standardised. It will also deliver benefits through global
technology management and vendor sourcing. Teams
from both the UK (and other LAS jurisdictions) and Australia
have developed detailed project plans with milestones
tracked weekly to complete these activities.
Transformation
Transformation, which involves reducing the underlying
cost base and accelerating revenue growth, covers a
range of activities, including:
• operational efficiencies, including leveraging existing
Link Group technology such as productivity and
workflow tools;
• premises consolidation, particularly focused
on the UK;
• vendor consolidation and centralised sourcing,
especially in respect of global vendors;
•
revenue growth opportunities; and
• centres of excellence and offshoring.
While still early days, progress has already been made
through the consolidation of offices in smaller jurisdictions
such as Dubai and the relocation of staff from Dublin to
Maynooth, Ireland. We have centralised global sourcing
and vendor management for our largest IT vendors,
which is already yielding benefits across Link Group.
Consolidation of operational teams has commenced with
the merging of existing shareholder management and
analytics teams in the UK. We have also commenced
planning the consolidation of existing offshore teams
in Mumbai, India to drive efficiency and scale benefits.
Detailed project plans are in place and efforts are underway
across a wide range of other work streams, with new
opportunities continuing to be identified.
In the medium term, we believe there is an opportunity to
introduce other Link Group products to UK and European
markets to help accelerate growth, including our pension
fund administration services and data analytics products.
We also see an opportunity to introduce LAS’ products
into Australia, New Zealand and other jurisdictions in
which we have traditionally operated.
17
Link Group • Annual Report 2018 Key Highlights
Around the Globe
18
D.F. King
• Provided specialist cross-border support
on Oi SA, Latin America’s largest ever
corporate debt restructuring
• Debt team supported more than 145
projects in FY2018 across 29 countries
• Proxy team supported £85 billion
in M&A transactions in FY2018
Orient Capital EMEA
• Broker client base
increased to 19 UK
corporate brokers,
making OC the largest
shareholder-analysis
provider globally
Link Market Services
Germany
• Hosted ‘Impact of Activist
Shareholders’ client
forum
• Developed electronic
admission ticket system
for client AGM with
> 4,500 attendees
Link Market Services
South Africa
• Successfully executed Old
Mutual’s Managed Separation,
the largest of its kind to be
handled in South Africa
• Maintained highest B-BBEE
rating among share registrars
in South Africa
Link Asset Services
• Acquired the
debt-servicing business
Novalink in Amsterdam
• Opened the debt-
servicing business Link
ASI Limited in Milan, Italy
• Won large mandates with
UK local government and
appointed pension pool
operator by LGPS Access
Link Intime India
• Completed the allotment
of the fourth-largest IPO
in India’s history (approx.
$2 billion)
• Signed share purchase
agreement to acquire 75%
stake in TSR Darashaw
Limited, adding 70 listed
and 50 unlisted clients
along with 5 million
investor accounts
Link Market Services
Hong Kong
• Launched new share
registry service in Hong
Kong on 8 August 2018
Link Fund Administration
• Migrated all clients onto
Link Group platforms
Link Market
Services Australia
• Won registry business
of S&P/ASX20 company
Woolworths Limited
• Won 27 out of 38 IPOs
that raised >$50 million
during FY2018
Link Market Services
New Zealand
• Significantly enhanced
information on online
annual tax statements
making this an
informative and valuable
document to investors
• Continued to roll out
virtual AGM services and
options, holding 10 virtual
meetings during FY2018
Together we achieve… D.F. King
• Provided specialist cross-border support
on Oi SA, Latin America’s largest ever
corporate debt restructuring
• Debt team supported more than 145
projects in FY2018 across 29 countries
• Proxy team supported £85 billion
in M&A transactions in FY2018
Orient Capital EMEA
• Broker client base
increased to 19 UK
corporate brokers,
making OC the largest
shareholder-analysis
provider globally
Link Market Services
Germany
• Hosted ‘Impact of Activist
Shareholders’ client
forum
• Developed electronic
admission ticket system
for client AGM with
> 4,500 attendees
Link Market Services
South Africa
• Successfully executed Old
Mutual’s Managed Separation,
the largest of its kind to be
handled in South Africa
• Maintained highest B-BBEE
rating among share registrars
in South Africa
Link Asset Services
• Acquired the
debt-servicing business
Novalink in Amsterdam
• Opened the debt-
servicing business Link
ASI Limited in Milan, Italy
• Won large mandates with
UK local government and
appointed pension pool
operator by LGPS Access
Link Intime India
• Completed the allotment
of the fourth-largest IPO
in India’s history (approx.
$2 billion)
• Signed share purchase
agreement to acquire 75%
stake in TSR Darashaw
Limited, adding 70 listed
and 50 unlisted clients
along with 5 million
investor accounts
Link Market Services
Hong Kong
• Launched new share
registry service in Hong
Kong on 8 August 2018
Link Fund Administration
• Migrated all clients onto
Link Group platforms
Link Market
Services Australia
• Won registry business
of S&P/ASX20 company
Woolworths Limited
• Won 27 out of 38 IPOs
that raised >$50 million
during FY2018
Link Market Services
New Zealand
• Significantly enhanced
information on online
annual tax statements
making this an
informative and valuable
document to investors
• Continued to roll out
virtual AGM services and
options, holding 10 virtual
meetings during FY2018
19
Link Group • Annual Report 2018 Our Culture of Innovation
We live in an age when rapid technological change and disruptive business
models have become commonplace. To survive, flourish and grow, modern
companies must not only deliver what the market wants today, but have a focus
on innovation and continually anticipate better, smarter solutions that clients will
need in the future.
Link Group fully understands this. We are always looking
for ways to improve our own use of technology and to
develop and deliver cutting-edge solutions that help
expand the businesses of our clients. One of the key ways
we add value is to support our clients with products and
solutions that help them meaningfully engage and interact
with their members and shareholders. Our apps, web
services and analytical tools are designed to help clients
to build stronger relationships with their target markets
and differentiate themselves from their competitors.
As we deliver these products and solutions, our aim is
always to provide a full, end-to-end suite of solutions
that address the entire range of challenges our clients
face in doing business, instead of just a single app or
web service. We firmly believe that a targeted, cohesive
package of technologies delivers significantly more value
than the sum of its parts.
FY2018 saw Link Group roll out, further develop, or receive
recognition for a wide range of technologies that assisted
clients in Corporate Markets and Fund Administration.
Corporate Markets
Investors lie at the very heart of our financial ecosystem.
Link Group’s technologies are continuing to make it easier
for them to access and manage their investments and
participate in meetings.
Launched mid-2018, our Investor Centre App provides a
secure mobile platform for retail investors to access and
manage their investments online.
Once downloaded onto a mobile phone or other mobile
device, the app allows users to quickly retrieve information
about their holdings, update their account details,
confirm payment instructions and select communication
preferences. They can also view their payment history,
access details of upcoming AGMs and submit votes
online. Security for the app is supported by fingerprint
authentication and PIN options. As well as providing
investors with more choice about how they manage their
portfolio, the app is designed to increase their engagement
in, and connection to, the companies in which they invest.
In the coming financial year, we will continue to enhance
the app, building on its functionality and allowing richer
engagement with investors and employees.
Meanwhile, our Virtual Meeting Technology continues
to make it easier for investors to engage in AGMs. Link
Group made corporate governance history in 2016 by
becoming the first S&P/ASX 200 company incorporated
in Australia to hold a hybrid (physical and virtual) AGM.
The technology has continued to win converts, with more
than 20 listed companies now having used the facility in
Australia and New Zealand.
In April 2018, OZ Minerals (OZL) became the first ASX-listed
company in South Australia to hold a virtual AGM. Link
Group provided the online platform for the AGM, which was
held at Adelaide Oval. Some 114 shareholders and guests
attended the physical meeting, while a further 93 attendees
used the virtual meeting platform. The AGM webcast was
watched by both Australian and international audiences.
20
Together we achieve… “
We wanted to take the organisation to our members, rather
than asking them to come to us.
NRMA Company Secretary
Nick Mowat
The technology has also proved its worth with Australia’s
largest member organisation – the NRMA. In November
2017, Link Group provided the online platform for the 2017
NRMA AGM, which was held in Newcastle on the mid-
north coast of NSW. Some 99 NRMA members attended
the meeting in person while 76 members attended online.
NRMA Company Secretary, Nick Mowat, explained,
“We wanted to take the organisation to our members,
rather than asking them to come to us. This innovative
technology allowed us to open up a convenient channel
that enables members to attend our meeting from the
comfort of their own home.”
Link Group also supports the work of company secretaries
and investor relations professionals. This year we won
the Financial Services App of the Year award at the 2018
Financial Standard MAX awards. The honour recognised
the miraqle® app, a product available to clients of our
investor relations company, Orient Capital, which allows
listed-company executives to better manage their
interactions with shareholders, even while travelling.
Executives are able to track and manage their meetings
with existing investors, or target potential investors, both
online and offline.
Virtual Meeting Technology
”
This is the second year in a row that Link Group has won
this award following last year’s success with the Cbus
Employer app.
Our work in the area of share registries was also
recognised in the JP Morgan Australian Registry & ESP
Provider Survey Report. Conducted annually to assess
the performance of companies providing share registry
services, the 2018 report included responses representing
46% of S&P/ASX 200 companies by market capitalisation.
The results provided a clear endorsement of our
strategy of adding value and innovating, with Link Group
receiving a score of 100%, as respondents rated our
overall performance as good, outstanding, or above
expectations. Meanwhile, in a reflection of our introduction
of innovations such as hybrid AGM technology and the
Link Vote app, some 77% of respondents agreed that
Link Group added value. There was also praise for our
account management, quality of product, willingness to
innovate and cost of services.
Link Group also supports HR Directors through a range
of innovative solutions. One of these is Empirics People &
Travel – a product that makes it simple to analyse the cost
of the entire employee travel process. Developed by Link
Group company Empirics, the product underwent further
development in FY2018 and now unites multiple data
sources to provide a single-screen overview of all travel
costs. Additional functionality currently being developed
will also provide industry-leading insights into employee
wellness and the impacts of travel on health, effectiveness
and productivity.
Empirics People & Travel’s strength lies in being able to
pull together all relevant data sources from within the
organisation or from external sources including travel
agency information, expense card data, company policy
parameters, HR records, and expenses and claims. Its
Key Metrics module provides an executive-level overview
of costs on one screen, while the Travel Spend Analysis
module identifies usage patterns with hotels and airlines
to allow for improved rate negotiation. The Credit Card
Expense module identifies which parts of the company are
spending more on expenses such as taxis and restaurants,
21
Link Group • Annual Report 2018 Interactive Statements are another way we add value
for Fund Administration customers. Despite advances
in digital technology, many funds continue to use paper
statements or static PDFs for this important communication
channel. Link Group business Link DigiCom has provided
an innovative interactive alternative, delivered via the web,
which engages fund members, increases their awareness
of their financial position and helps build the relationship
with the fund. Members who click into an Interactive
Statement are able to choose between viewing their full
annual statement or a quick, point-in-time snapshot of
their account. Their account information can be securely
accessed, allowing for projections and calculations that
are customised to the individual’s circumstances.
The service is fully integrated with the fund’s online
Member Centre and is adapted to individual fund branding.
The statements are mobile responsive for optimal viewing
on smart phones and tablets. This technology also has
potential in other sectors where statements form a key
part of company-to-customer communication, such as
banking and insurance.
Providing financial advice is an increasingly important
tool for superannuation funds wanting to engage their
member base. To facilitate this, Link Group business
Link Advice released Super Blueprint 3.0, a digital advice
application for fund members. The mobile-first technology
is designed to be distributed by funds and allows members
to access advice on subjects as diverse as investment
choice, retirement adequacy, intra-fund superannuation
options and insurance.
We continue to create innovative services for clients.
while the Total Cost of Trip looks at all expenses on a
journey. The Global Mobility module, meanwhile,
focuses on travel safety and tax obligations, while the
planned Employee Wellness & Productivity module will
correlate employee wellness metrics (including stress
levels and travel fatigue) against employee effectiveness
and productivity.
Fund Administration
Our extensive range of technology solutions for pension
and superannuation administration helps our clients to add
value at almost every interaction with their own customers.
Solutions include mobile apps, push notifications, online
portals, personalised videos and digital membership
cards, all of which allow for increased engagement, provide
differentiation opportunities and build relationships.
This comprehensive suite of solutions was further
broadened in FY2018 with a number of new solutions,
including our new Micro Investing App. Under proposed
changes in the May 2018 Federal Budget, ‘inactive’
superannuation accounts with balances under $6,000
are to be transferred to the ATO, presenting a potential
economic challenge to many Link Group superannuation
fund customers. The new app aims to help address this
by providing super funds with a tool for ensuring that
accounts remain active and for connecting with younger,
more mobile customers. Launched in FY2018, the app
rounds up users’ everyday banking transactions to the
nearest dollar (or other chosen amount) and invests
this additional spare change into their nominated super
account. There are major benefits to both the fund and
end user, with even small weekly contributions having
the potential to positively impact a member’s outcome
at retirement.
22
Together we achieve… Thought Leadership
As well as delivering cutting-edge technology, part of
our approach to continuous improvement is to provide
thought leadership that inspires customers and others
within the business community to innovate and to achieve
their goals.
LAS’ Dividend Monitor is an example of this. Published
quarterly, it reports comprehensive trends and analysis
on dividends paid out by companies listed on the UK
Main Market. With more than 30 issues now published,
Dividend Monitor is regularly referenced in national
and trade press and has also become LAS’ lynchpin
publication in the equities market. It forms the basis of
a series of dividends-related content featured across
the LAS website, including a series of videos on equity
market issues that have been viewed thousands of times.
Another example of our thought leadership is the Link
Lecture series. In India during FY 2018, Link Intime hosted
the second such lecture, featuring economist and thought
Designed to increase financial literacy, a key feature of
the app is that it allows members to access financial
information at a time and location that suits them. The
Super Blueprint 3.0 app is based around a comprehensive
dynamic algorithm and it integrates with Link Group’s
administration platform to pre-populate key pieces
of information.
This streamlines the process for members to get a
quick snapshot of their fund account. And interactive
dashboards powered by Link Group company Empirics
allow funds to see how members are using the
digital advice they receive. This allows them
to be aware of proactive changes in
member behaviour related to
contributions and investments.
Link Group • Annual Report 2018
LAS’ Dividend Monitor
leader, S. Gurumurthy. More than 250 invitees attended
including staff from client companies, stock exchanges
and depositories, as well as investment bankers, practising
company secretaries and chartered accountants.
Meanwhile, LAS also runs the Ahead program that
provides platforms for both governance professionals
and Alternative Investment Market (AIM) professionals
to discuss issues that affect them, to explore industry
developments, and to gain insights from other peers and
experts. The program is run around a series of regular
events that provide opportunities for professionals to
connect with peers and access Ahead updates. The
events are also complemented with governance-focused
thought leadership, webinars and regulatory news and
insights. The Ahead program benefits Link Group and
its shareholders by allowing strong relationships to be
developed with the two communities so that they become
sponsors for Link Asset Services within their organisations.
The Super Blueprint 3.0 app
23
Our People
Link Group has long understood that its people are its greatest asset. Having
a committed and engaged workforce that enjoys coming to work each day
helps us provide customers with the high standards of service and innovation
they expect. This, in turn, helps to grow our business and brings greater value
to shareholders. It is a true win-win proposition.
The three key strategies to emerge from the survey are: the
creation of a LinkPurpose Statement; the development of
a OneLink program aimed at increasing cohesion across
our four business divisions; and the development of a
FutureLink program to ensure our technology and skills
remain at the cutting edge.
OneLink Program
Link Group has grown in recent years through a number of
strategic acquisitions that have expanded our global reach
and our offering to customers. The OneLink program
aims to ensure that employees in different organisations
across the world understand our comprehensive products
and services to support our clients and stakeholders.
Plans are underway to further develop our employees’
understanding of the wider business through a new
Re-Onboarding program. Based on a similar model to
our successful Customer First course for new employees,
the program will familiarise existing staff with the broad
range of Link Group companies, products and services,
and support them with team building.
We believe the key to employee engagement lies in
ongoing communication with staff and regularly assessing
their connection to our core values and goals. We also
invest heavily in training and education, actively strive to
have a diverse and inclusive workforce and maintain a
Corporate Social Responsibility (CSR) program of which
employees, customers and shareholders can be proud.
Global Workforce
In FY2018, the LAS acquisition helped to grow the total
number of Link Group employees to more than 7,000 – up
from about 4,300 a year earlier. We now have operations
in 18 jurisdictions including Australia, New Zealand, Hong
Kong, the Philippines, Papua New Guinea, India, South
Africa, the UAE, the United Kingdom, Ireland, Jersey,
France, Luxembourg, the Netherlands, Germany, Hungary,
Switzerland and Italy.
Employee Engagement Survey
As part of our efforts to constantly improve our workplace
culture and involve employees in the task of developing
our business, we undertook an Employee Engagement
Survey in FY2018. This involved asking staff in each of
Link Group’s offices globally about their experience of
working for us, their perceptions of our strengths and
where we could improve, and their sense of involvement
in our strategies. It was an enlightening exercise that
provided us with an excellent baseline for planned future
Employee Engagement Surveys. The results also helped
us to create a clear roadmap for further developing our
culture, growing our people, and ensuring we have the
skills and equipment to continue to thrive.
24
We developed our LinkPurpose Statement in consultation with our people.
Together we achieve…
LinkPurpose Statement
For our employees, having a clear understanding of our
purpose and shared goals is essential for them to be
able to perform at their peak and support our clients
and stakeholders. After comprehensive consultation
across the organisation, a purpose statement was
developed and approved by the Board in 2018. Our
LinkPurpose Statement – “Together we achieve…” –
articulates the partnership we have with our employees,
clients and other stakeholders in achieving goals that help
everyone succeed. The key focus areas that underpin the
statement are that Link Group provides quality service
to its customers, protects the data of its customers as
FutureLink Program
Link Group understands that its future success is
dependent on investment in people and remaining at the
forefront of technology and data security. The FutureLink
program, introduced in FY2018, is working to facilitate this
by ensuring we have the equipment and technological
knowledge necessary to remain an industry leader.
The FutureLink program also involves a significant
investment in our people. Link Group will launch a
Learning Academy to further develop the skillset of our
top managers. Work will be carried out over the next
two to three years to develop the academy, which will
cater for our senior leaders across Link Group globally.
Other Training
A key initiative in FY2018 was the creation of the Growth
Academy. One outcome of the new academy has been
an increased emphasis on cross-team collaboration.
Greater numbers of staff are now working together on
projects, proposals and client opportunities. This has
resulted in Link Group winning more new business and
receiving positive feedback from clients, prospects, bids
and other external engagement points. So far, more than
if it were its own, and provides expertise and value-add
services to its clients and customers. The essence of the
Link Group Purpose Statement reflects our DNA:
“
Together we
achieve... ”
500 days of Growth Academy training has been delivered
and some 80% of senior leaders and sales teams have
been through the program in the UK. The plan is to roll
out the model in Australia in FY2019.
Beyond our planned and existing academies, Link Group
continues to invest in a number of training programs for
staff. In FY2018, the Client Excellence program was
rolled out to the Corporate Markets division, supporting
employees to learn from their own experiences and
expectations and improve accountability for professional
delivery aligned to client needs.
The past 12 months have also seen more than 56,000
training hours dedicated to our compliance training
program, an average of 7.5 hours per employee. The
program ensures that staff follow Link Group’s internal
policies and that they fully comply with the local laws and
regulations wherever we operate. This approach allows
us to continue to foster a professional environment and
to ensure that our behaviour towards our employees,
clients and shareholders is aligned to our core values.
25
Link Group • Annual Report 2018 Diversity and Inclusion
Link Group understands that diverse groups – comprising
people with different experiences, ethnicities, genders
and sexualities – tend to be more productive than
homogeneous ones. We are continually striving to ensure
that our employee base reflects the make-up of the
companies we serve as well as their end customers, both
throughout Australia and the rest of the world, and have
recently appointed a dedicated Diversity and Inclusion
Manager to support this commitment.
As at FY2018 end, our Board is 37.5% female, putting
it ahead of the 30% target set for female directors in
S&P/ASX 200 companies by the Australian Institute of
Company Directors. At the executive level, 40% of the
senior executive team is female. Link Group’s targets
which were set in 2016 are for 42% of senior leaders, 33%
of senior technical specialists and 45% of line managers
to be women by FY2019.
We have a process of continually reviewing pay data
for gender parity across similar positions and make
adjustments where necessary. Our parental leave scheme
supports both mothers and fathers who wish to take time
off after the birth of a child.
Premises
State-of-the-art, healthy workplaces make a significant
contribution to the satisfaction and productivity of
employees, as well as to their ability to engage with the
needs of clients. Link Group has a focus on creating
excellent amenities and on building centralised hubs
where staff can come together to work. Our refurbished
George Street premises in Sydney reopened in the second
half of 2017, providing staff with a bright, comfortable
working space.
Link Group has also recently secured new premises
in Parramatta Square, with our Rhodes operations
scheduled to relocate there in mid-2021. In keeping with
our offices globally, the new Parramatta Square premises
will continue to encourage innovation and collaboration
with our clients. The premises will feature the third of
our LinkLabs, a technologically advanced space for
ideation, product development and client forums. We
conducted extensive research that showed Parramatta
has become a location of choice for our people, thanks
to its proximity to transport and desirable amenities,
coupled with a significant government-led infrastructure
program currently underway.
Wellbeing and Safety
One in five Australians experience mental illness in any
given year, with serious flow-on effects for both business
productivity and an individual’s personal happiness. To
help promote better mental health in the workplace, Link
Group has begun a pilot program in partnership with
Smiling Mind, a not-for-profit organisation promoting
mindfulness. Program participants have taken part in four
interactive workshops and are now using a dedicated app
to help them develop skills to manage their minds more
effectively, to enhance resilience skills and to improve
social connections. The outcomes will be analysed with
a view to rolling the program out to the wider organisation.
Corporate Social Responsibility (CSR)
Employees regularly speak of our CSR efforts as one
of the highlights of working at Link Group. Both senior
management and staff across the organisation play a
role in choosing the causes that form the core of our
CSR efforts. It is crucial to both that our work in this area
benefits the communities in which we operate and the
people whom we serve.
26
Together we achieve… Key initiatives in the past 12 months included:
Steptember
Link Group supports the Cerebral Palsy Alliance’s (CPA)
Steptember event as way of helping people who face
physical challenges to become independent. Staff across
the globe take part in the event, which asks individuals
to take 10,000 steps a day for 28 days to raise money
for the CPA. In 2017, more than 150 Link Group teams
took part, raising a total of $66,500 and covering 97,619
kilometres – some 128 million steps.
Coding For Kids
Coding for Kids
One of Link Group’s core skill needs going forward is for
talented people with science, technology, engineering
and mathematics (STEM) aptitudes. We are also eager
to encourage women to enter what are traditionally
male-dominated sectors. In 2018, we introduced a pilot
program aimed at encouraging both girls and boys to
learn computer coding. Just under 40 children of staff
members attended workshops in Sydney and Melbourne
run by Code Rangers, with equal numbers of both
genders represented.
Steptember Skinny Skywalkers
Mother’s Day Classic
Link Group is a National Gold sponsor of the Mother’s Day
Classic, an annual fun run and walk that raises money for breast
cancer research and treatment. In 2018, our staff raised over
$44,000 for the cause, putting Link Group into second place
on the best overall fundraiser ladder.
27
Link Group • Annual Report 2018 CSR around the globe
Elsewhere around the globe our offices took part in a
range of initiatives to help local and international charities
do their important work.
Our Link Asset Services team donated a large number of
playing and training soccer outfits to the Jersey 2 Africa
4 Football Foundation. The foundation uses the world
game in the poorest areas of Nairobi to enable children
to develop life skills and find a path out of poverty. LAS
also held a fundraising day in support of Epilepsy Action,
a charity committed to a better life for everyone affected
by epilepsy.
In India, Link Intime donated funds to various organisations
to improve education outcomes and provide medical aid
for financially vulnerable people.
Our people in Hong Kong gave back to their local
community by taking part in a local beach clean-up
as well as donating items to the Salvation Army ahead
of Christmas.
Link Intime - India
Beach cleaning was an activity undertaken by our New
Zealand staff too, plus planting trees and weeding native
forest reserves. Link New Zealand also supported local
charity Grandparents Raising Grandchildren, which helps
grandparents who are left to care for their grandchildren
when the parents are struggling with alcohol and
drug addictions.
Over in London, 15 team members from Orient Capital
and D.F. King joined 100 LAS runners at the JP Morgan
Corporate Challenge, a prestigious annual charity race.
Real results from our CSR support
Link Group lends its support to children’s
charity the Humpty Dumpty Foundation
as a way of caring for sick and injured
children in our community. The foundation
raises funds to buy medical equipment for
paediatric, neonatal and maternity wards
and for emergency departments. In
FY2018, General Counsel and Company
Secretary, Janine Rolfe raised over $47,000
by walking the Kokoda Trek with Humpty.
Link Group was also a Gold Sponsor of the
Foundation’s Balmoral Burn fundraiser, and
leaders throughout the business donated
funds to purchase an oxygen analyser for
The Children’s Hospital at Westmead.
According to former Australian Rugby
international and current Humpty Dumpty
Foundation ambassador, Phil Kearns, our
support has made a major difference to
children’s lives, as well as their families.
“If that oxygen analyser is used just once
a week, then over a year that’s 52 children
whose lives Link Group has helped save or
whose health it has improved,” he says. “And
if the machine is around for 10 years, there’s
520 kids on whose lives Link Group has had
an impact.”
28
Together we achieve… Landcare Australia
The 2017 Link Group Landcare Grants Program run
through Landcare Australia supported the Pages Creek
Wetland Restoration Project initiative at Lane Cove National
Park in Sydney. With Link Group’s assistance, Landcare
was able to rehabilitate a degraded wetland by controlling
weeds and improving the local water quality, habitat values
and vegetation structure. Our people also took part in
Landcare initiatives such as mulching and native tree
planting at locations in Melbourne, Brisbane and Perth.
Room to Grow
Link Group’s ambitious growth strategy is designed to
deliver significant benefits to our shareholders. And Link
Group employees are also beneficiaries of this culture
of expansion thanks to increased opportunities for self-
development and the chance to gain new skills.
Take the case of Ieisha Sparks. A Link Group Client
Relationship Manager, Ieisha joined us through an
acquisition in 2008 and has since seen many of her
colleagues move from the Corporate Markets side of the
business to the Fund Administration side, and vice versa.
“There is such a diverse range of roles available, and
within those roles you are exposed to more activities and
experiences than what you think you will be,” she says.
“ Link Group allows me the
flexibility to be present at
those really important times.”
Ieisha Sparks
Native tree planting in Melbourne
“So, there are always exciting opportunities to learn and
develop.”
Ieisha says the road to her current position within the
Client Relationship Group in Corporate Markets has been
exciting in itself. The mother of three young boys has had
three maternity leave stints during her Link Group career
since taking on her first role as a Business Development
and Implementation Manager.
“This is where Link Group is brilliant,” Ieisha says. “With
kids you’ve got commitments and activities at school you
need to attend occasionally, and Link Group allows me
the flexibility to be present at those really important times.”
29
Link Group • Annual Report 2018 “ It’s been a huge learning curve so
far and I can’t wait to see what the
rest of the program has in store.”
Kabir Bhardwaj
Winning the War for Talent
Skilled people are at the heart of Link Group’s approach
to business. With the global war for talent becoming
increasingly intense, the Link Group Graduate Program
is one of the ways we are using to attract – and retain –
the best people available in the fields in which we operate.
After his current stint with the Business Planning team,
Kabir will rotate through various roles in Fund Admin-
istration throughout the rest of 2018 before spending six
months each in our Corporate Markets and Technology
& Innovation divisions next year.
Twenty-three-year-old accountant, Kabir Bhardwaj, is
part of our inaugural graduate intake. After seeing an
advertisement for our Graduate Program in late 2017, he
turned down a role in continuous improvement with a
major bank to apply for and then take part in the program.
“There are plenty of expectations on me and the other
eight graduates in this year’s intake, but we’re given so
much support from people across the business and the
management team at Link Group is really approachable,”
he says.
“It’s been a huge learning curve so far and I can’t wait to
see what the rest of the program has in store.”
“It was a big decision,” Kabir explains. “But there was
something about Link Group and the type of work they
do across different industries that convinced me it was
somewhere I wanted to be. Since starting in February
this year, I really haven’t looked back.”
In only a few short months, Kabir has been hands-on
in the Client Partnership team in Fund Administration
and worked closely on Link Group’s relationship with
the Retirement Benefits Fund following its transition into
our business.
30
Together we achieve… Our Approach to Governance
and Sustainability
Our clients and shareholders place enormous trust in Link Group. We work
hard to earn and keep their trust by utilising a high degree of information
security, deploying innovative new products and maintaining stringent corporate
governance practices and oversight.
At the same time, we strive to understand and manage the
risks posed to Link Group by globalisation, technological,
regulatory and demographic change, developments in
business and evolving community expectations. We
also seek to capture the opportunities these create.
Our clients want a partner who understands the rapidly
changing business landscape and shares their values.
As a leader in our sector, we believe it is our responsibility
to use our business and technological skills to respond
proactively to changes in society and to contribute to the
wider community.
We present and analyse our sustainability performance
in the 18 jurisdictions in which we operate in our FY2018
Sustainability Report, available on the Link Group website
at www.linkgroup.com.
Our Governance
Link Group recognises that a strong corporate governance
culture underpins sustainable value creation for
shareholders and all of our stakeholders.
While the Board is ultimately accountable for implementing
and overseeing an effective corporate governance
framework, Executive Management and all Link Group
people are responsible for upholding the high corporate
governance standards that we set.
These standards are set through our core values of
Professionalism, Integrity, Respect, Commitment and
Teamwork and in the Group Policy Framework, including
our Code of Conduct and Ethics.
Governance structure: The Board’s role includes
providing leadership and guiding Link Group’s strategic
direction, driving its performance and overseeing the
activities of Management and the operation of Link Group.
Separate committees for Risk & Audit; Technology &
Innovation; Human Resources & Remuneration; and
Nomination assist the Board in carrying out its role by
providing detailed oversight in these specialist areas.
Management, through the Managing Director, is
accountable to the Board for the day-to-day management
of Link Group. In turn, Management is supported by a
number of governance, risk and operationally focused
committees with specific responsibilities.
Central to this structure is a two-way flow of open,
constructive discussion between and amongst the Board
and Management.
31
Link Group • Annual Report 2018 Key areas of governance focus during FY2018: We
adopt a continuous improvement approach to our
corporate governance framework. During the year,
the Board and its Committees undertook the following
governance-focused activities:
• participated in the development of, and approved,
Link Group’s Purpose Statement, which we see
as key to enhancing and protecting employee and
stakeholder engagement;
• commenced a review of our Risk Appetite
Statement to ensure that it remains appropriate
following the acquisition of LAS;
• considered and approved a revised Approvals
Framework and Group Policy Framework, with
a focus on clarity and effective Management
decision-making within appropriate limits;
• established a LAS Advisory Forum, to exercise
focused oversight of LAS as it continues its
integration into Link Group;
• appointed Andrew (Andy) Green as an Independent
Non-Executive Director. Andy is based in the UK
and brings valuable international experience to the
deliberations of the Board and the LAS Advisory
Forum; and
• employed Cassandra Hamlin, a dedicated
Company Secretary with considerable ASX-listed
governance experience.
We comply with the ASX Corporate Governance Council’s
Principles and Recommendations (Third Edition).
For more on our corporate governance practices,
see our 2018 Corporate Governance Statement
and related key governance documents at
http://linkgroup.com.
Privacy-related complaints
during FY2018
Fines/sanctions for non-compliance
during FY2018
Complaints substantiated (Australia only):
69 (out of around 25 million transactions
on behalf of 40 million account holders and
shareholders.)
No Link Group-controlled entity faced/
suffered criminal or civil sanctions for
non-compliance.
We are not aware of any significant
corruption risk in any of the
18 jurisdictions.
There were no confirmed incidents
of corruption during the year.
32
Together we achieve… Emissions intensity
Emissions per FTE employee in FY2018:
1.62 tonnes CO2e per person
Energy-efficient office space
Proportion of ‘green’ office space,
FY2018: 58%
Emissions per $million of revenue:
10.26 tonnes CO2e per $ million
Total emissions
Total emissions, FY2018:
10,846 tonnes CO2e
This figure includes office energy usage and air travel
globally. (NB for some serviced offices we have
estimated energy use.)
Office energy use and emissions
Energy consumed, FY2018:
11.1 million kW-h
Emissions:
7,312 tonnes CO2e
Our Environment
Link Group is a service-based company that sells
intangible products, operates from leased offices and
makes limited use of physical resources. Despite having
a small energy-and-resources use footprint compared
to companies producing physical products, we take
our environmental responsibilities seriously. This year,
we report across the expanded Link Group for the first
time, and we are now working to introduce suitable 2023
targets for our emissions next year and to introduce
further appropriate environmental targets in future years.
Office energy use: Almost all energy consumed in our
offices comes from the grid. During FY2018, we closed our
Newcastle, NSW, office and consolidated it into Rhodes;
moved our Brisbane office into a new 4.5-star NABERS
energy-rated office; and amalgamated two Dubai offices
into one. Over time we will continue to consolidate offices
where we can and take more space in energy-efficient
buildings to help us continue to reduce our power bills
and emissions.
Air travel: Our major impact from travel is emissions
from commercial airline flights, with a small amount from
ground travel. We do not purchase offsets on flights.
Total emissions: The key types of energy consumed
in our offices are electricity and a small amount of gas.
Green office space: We report for the first time this year
on the proportion of office space defined as ‘green’ (see
definition in our Sustainability Report).
Emissions intensity: We are again reporting our
emissions intensity, both emissions per full-time employee
and emissions per $million of revenue.
Office paper: We use paper in our own offices and on
behalf of our clients for their mailings. We encourage
clients and other stakeholders to embrace electronic
communications. We are seeking to reduce paper use
in our offices, to use more recycled and carbon-neutral
paper and to recycle more.
Other materials: For the first time, we have estimated the
amount of our IT hardware disposed of through recycling
or reuse at end of life, and our non-paper personal
(office) waste.
33
Link Group • Annual Report 2018 Our Community
Our Supply Chain
We undertake a range of activities to assist people, the
environment and the wider community in which we
operate. We focus on education, health, the environment,
overcoming both physical and economic disadvantages
and cultural inclusiveness. Senior Executives champion
specific initiatives and employees are encouraged to
propose programs that align with our values and objectives.
Our overall goal is to promote good health and wellbeing,
to work towards gender equality, to ensure inclusive and
quality education for all and to promote lifelong learning.
We encourage engagement and participation in programs
through a number of activities, including:
• workplace giving: through payroll and as part of the
One Million Donors initiative;
• volunteering: employees are entitled to one day of
leave per year to attend a Link Group-organised
charitable activity or to support a charity of the
employee’s choice;
• employee fundraising; and
• corporate donations: cash donations, sponsorship,
in-kind donations or branded merchandise.
Fundraising for Mother’s Day Classic
34
Suppliers play a crucial role in Link Group’s business
success. They can make a significant contribution
towards improving our overall environmental footprint
and can potentially expose us to reputational or other risks.
For these reasons, we analyse and report on our supply
chain in Australia and plan to report on the supply chain
in other jurisdictions in which we operate in future years.
Some 85% of our annual supplier spend is contracted
through larger suppliers. We believe that higher-risk
practices are less likely to occur among our own direct
suppliers and more likely to occur further up the supply
chain. By working with our direct, tier-one and tier-
two suppliers, we seek to influence them to make a
positive change.
For this second year of reporting on our supply chain,
we have extended our coverage into our tier-two supplier
list. In all, the suppliers we have covered represent
$170.8 million or 69% of our total non-labour operating
costs of $247.4 million (Australia only). Our intention
is to work with suppliers to understand the risks they
face that could impact on Link Group, and to support
them in managing these risks through a process of
continuous improvement. To assist us, we ask them to
complete a sustainability questionnaire covering issues
such as company policy, risk management, management
systems, business continuity planning, public reporting
and labour standards. This dialogue will continue into
the foreseeable future.
We expect our suppliers to adopt standards similar to
our own and to seek continuous improvement in their
sustainability performance, just as we do. Currently, our
Vendor Management Framework promotes a structured
approach that is designed to ensure our suppliers meet
the performance and value standards we expect. We
are separately working with our Procurement teams to
write sustainability requirements into our supplier tenders
and significant contracts to reinforce which issues are
most important to us and to help drive positive change.
Together we achieve… Business continuity and disaster recovery: Our
Business Continuity and Disaster Recovery plans are
reviewed and tested at least annually. Under almost all
likely scenarios we expect to be able to resume operations
from alternative locations within contractual requirements.
Ethical standards: Acting ethically is a fundamental
requirement of anyone working with us. Our Code of
Conduct and Ethics is complemented by a series of
policies and practices. While we believe that ethical
issues such as bribery, corruption and fraud are at limited
risk of happening to Link Group, we stringently apply
our risk management frameworks to prevent or mitigate
such risks and expect all employees to undertake annual
ethics training.
Shared values: We seek to work with clients and
suppliers who share our values and commitment to
ethical behaviour. We seek to limit risks to our business,
reputation and existing clients by undertaking due
diligence on prospective suppliers and clients in potentially
sensitive sectors or countries and by protecting the
interests of our clients in our daily work.
Training and development performance
(Australia/New Zealand only)
In FY2018, the total time spent on
formal and compliance training was
91,913 hours. The average
total training per employee
was 18 hours.
Our Clients
Our relationships with clients are critical to the future of
Link Group and our stakeholders, and we work hard to
build and maintain high levels of trust.
Innovative technology: We continuously seek to enable
clients, their fund members, employers and shareholders
to access information and transact on their accounts
by providing user-friendly, secure and, in some cases,
award-winning platforms that offer a choice of ways to
access services.
For listed company clients we provide: The Investor
Centre desktop platform and mobile site; the miraqle®
investor-relations desktop platform, tablet and mobile
apps; client-branded investor relations websites; a mobile
voting app that allows direct shareholder voting; and
virtual AGMs, which let investors view meetings live and
ask questions.
For superannuation fund clients we offer: Member
portals so members can access accounts and transact
via desktop and mobile sites; a mobile app with full
transactional capability; employer portals; and a custom
employer app and Compliance Payment Checker app.
Security and privacy: The security of member and
investor data is critical to Link Group and we make stringent
efforts to protect it, with ISO27001 certification, strict
policies and procedures, significant system protections,
limited access and mandatory compliance training
for all employees. Privacy is equally important and all
staff receive regular training on their legislated privacy
obligations, with processes to promote compliance.
Our IT security controls include: Utilisation of the latest
cyber security tools; restricting access to systems and
data; having to authorise transactions; protecting assets;
maintaining and upgrading our systems; reducing recovery
times from system interruptions; monitoring compliance;
and monitoring suppliers.
35
Link Group • Annual Report 2018 Financial Report
Link Administration Holdings Limited
and its controlled entities
30 June 2018
Contents
Section 1 – Directors’ Report
Directors and Company Secretaries ............................................................................................................................................................................................................................................ 38
Executive Key Management Personnel (KMP) ................................................................................................................................................................................................................42
Principal Activities ................................................................................................................................................................................................................................................................................................... 43
Dividends ............................................................................................................................................................................................................................................................................................................................ 43
Review of Operations ......................................................................................................................................................................................................................................................................................... 43
Operating and Financial Review ......................................................................................................................................................................................................................................................... 44
Remuneration Report .........................................................................................................................................................................................................................................................................................73
Other Information ..................................................................................................................................................................................................................................................................................................... 98
Auditor’s Independence Declaration .........................................................................................................................................................................................................................................100
Section 2 – Financial Statements
Consolidated Statement of Profit or Loss and Other Comprehensive Income ..............................................................................................................101
Consolidated Statement of Financial Position ..............................................................................................................................................................................................................103
Consolidated Statement of Changes in Equity ...........................................................................................................................................................................................................104
Consolidated Statement of Cash Flows................................................................................................................................................................................................................................106
Section 3 – Notes to the Financial Statements
Preparation of this Report
General information ...........................................................................................................................................................................................................................................................................................107
Basis of preparation ..........................................................................................................................................................................................................................................................................................107
Operating Results
Operating segments .........................................................................................................................................................................................................................................................................................109
Administrative and general expenses....................................................................................................................................................................................................................................... 112
Earnings per share .............................................................................................................................................................................................................................................................................................. 112
Taxation .............................................................................................................................................................................................................................................................................................................................. 113
Operating Assets and Liabilities
Trade and other receivables .................................................................................................................................................................................................................................................................. 118
Trade and other payables .......................................................................................................................................................................................................................................................................... 118
Fund assets and liabilities ......................................................................................................................................................................................................................................................................... 119
Provisions ........................................................................................................................................................................................................................................................................................................................ 119
Employee benefits ...............................................................................................................................................................................................................................................................................................120
Plant and equipment ........................................................................................................................................................................................................................................................................................121
Intangible assets ....................................................................................................................................................................................................................................................................................................123
Notes to the statement of cash flows .......................................................................................................................................................................................................................................126
Capital Structure, Financing and Risk Management
Interest-bearing loans and borrowings...................................................................................................................................................................................................................................127
Finance costs .............................................................................................................................................................................................................................................................................................................128
Contingent liabilities ..........................................................................................................................................................................................................................................................................................128
Investment and financial risk management ......................................................................................................................................................................................................................129
Contributed equity...............................................................................................................................................................................................................................................................................................135
Reserves ...........................................................................................................................................................................................................................................................................................................................136
Retained earnings ................................................................................................................................................................................................................................................................................................138
Share-based payment arrangements ......................................................................................................................................................................................................................................138
Group Structure
Business combinations ................................................................................................................................................................................................................................................................................140
Parent entity disclosures ............................................................................................................................................................................................................................................................................142
Controlled entities ................................................................................................................................................................................................................................................................................................143
Other disclosures
Related parties .........................................................................................................................................................................................................................................................................................................147
Auditor’s remuneration ..................................................................................................................................................................................................................................................................................147
Commitments ............................................................................................................................................................................................................................................................................................................148
Subsequent events ............................................................................................................................................................................................................................................................................................148
New standards and interpretations not yet adopted ...........................................................................................................................................................................................148
Section 4 – Directors’ Declaration ..............................................................................................................................................................................................................................................150
Section 5 – Independent Auditor’s Report ....................................................................................................................................................................................................................151
Link Group • Annual Report 2018
37
Directors and Company Secretaries
Directors
The Directors present their report together with the consolidated financial statements of Link Group, being
Link Administration Holdings Limited (the Company) and its Controlled Entities, for the year ended 30 June 2018 and
the auditor’s report thereon.
The Directors of the Company at any time during or since the end of the financial year are:
Link Group Board (from left): John McMurtrie, Peeyush Gupta, Sally Pitkin, Anne McDonald, Andy Green, Michael Carapiet, Glen Boreham and Fiona Trafford-Walker.
Director
Experience and background
Michael Carapiet was appointed as a Director and Chair of the Company in 2015.
Michael is a member of the Human Resources & Remuneration Committee and Technology &
Innovation Committee.
Michael is Chair of Insurance & Care NSW (icare) and was previously Chair of SAS Trustee Corporation,
the trustee entity for NSW State Super.
Michael is the Chair of Smartgroup Corporation Limited and Adexum Capital Limited.
Michael was previously a Director of Southern Cross Media Group Limited.
Michael has also served on Commonwealth Government boards including Infrastructure Australia,
Clean Energy Finance Corporation and Export Finance Insurance Corporation.
Michael has over 30 years of experience in banking and financial services and holds a Master of
Business Administration from Macquarie University, Sydney.
John McMurtrie joined Link Group in 2002 as Managing Director.
John’s previous senior appointments include Executive General Manager of ASX’s Investors and
Companies division and Chief Executive Officer of UBS Australia.
John was previously Chair of Sydney Water Corporation and was the inaugural Chair of the National
Electricity Code Administrator (NECA).
John has over 40 years of business experience, more than 35 of which have been in the financial
services industry, covering both the public and private sectors.
John holds a Master of Economics and Bachelor of Economics (Hons) from the University of Adelaide.
Michael Carapiet
Independent Chair and
Non-Executive Director
Appointed 26.06.2015
John McMurtrie
Executive Director and
Managing Director
Appointed 16.02.2007
38
Together we achieve…1. Directors’ Report Directors and Company Secretaries [ CONTINUED ]
Director
Experience and background
Glen Boreham was appointed a Non-Executive Director of the Company in 2015.
Glen is Chair of the Technology & Innovation Committee and a member of the Human Resources &
Remuneration Committee.
Glen is a Director of Cochlear Limited and Southern Cross Media Group Limited and Chair of the
Advisory Board of IXUP Limited.
Previously, Glen was the Managing Director of IBM Australia and New Zealand. He has also previously
served as Chair of Screen Australia, Advance and the Industry Advisory Board for the University of
Technology, Sydney, as well as Deputy Chair of the Australian Information Industry Association and
as a Director of the Australian Chamber Orchestra.
Glen holds a Bachelor of Economics from the University of Sydney and an honorary doctorate from
the University of Technology Sydney. In January 2012, he was awarded a Member of the Order of
Australia for services to business and the arts.
Andy Green was appointed a Non-Executive Director of the Company in March 2018.
Andy is Chair of the LAS Advisory Forum.
Andy is currently Chairman of IG Group plc, a FTSE-listed global leader in online trading, and Digital
Catapult, a UK-based technology innovation centre.
Andy is also Senior Independent Non-Executive Director of Avanti Communications Group plc,
a listed global broadband satellite operator.
Andy is President of UK Space, serves on the President’s Committee of the Confederation
of British Industry and is a Commissioner at the UK’s National Infrastructure Commission.
Andy’s earlier career at BT Group (formerly British Telecom) spanned more than 20 years, including as
CEO of Global Services. He also previously served as Group Chief Executive of IT and management
consultancy company Logica plc, and as Senior Independent Director at ARM Holdings plc.
Andy holds a Bachelor of Science in Chemical Engineering with first class honours from Leeds University.
Peeyush Gupta was appointed Non-Executive Director of the Company in 2016.
Peeyush is a member of the Risk & Audit Committee.
With over 30 years of experience in the wealth management industry, Peeyush was previously
co-founder and the inaugural CEO of IPAC Securities Limited, a wealth management firm spanning
financial advice and institutional portfolio management.
Peeyush has extensive corporate governance experience, having served as a Director on listed
corporate, not-for-profit, trustee and responsible entity boards since the 1990s.
Peeyush is currently the Chair of Charter Hall Direct Property Management Limited and Long Wale
REIT and a Non-Executive Director of National Australia Bank, Insurance & Care NSW (icare), SBS
and Quintessence Labs Pty Ltd.
Peeyush is also Governor, Western Sydney University.
Peeyush holds a Masters of Business Administration (Finance) from the Australian Graduate School of
Management and has completed the Advanced Management Program at Harvard Business School.
He is a Fellow of the Australian Institute of Company Directors.
Glen Boreham, AM
Independent
Non-Executive Director
Appointed 23.09.2015
Andrew (Andy) Green
Independent
Non-Executive Director
Appointed 09.03.2018
Peeyush Gupta
Independent
Non-Executive Director
Appointed 18.11.2016
39
Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Directors and Company Secretaries [ CONTINUED ]
Director
Experience and background
Anne McDonald was appointed a Non-Executive Director of the Company in 2016.
Anne is a member of the Risk & Audit Committee.
Previously a partner at Ernst & Young for 15 years, Anne has over 35 years of business experience
in finance accounting, auditing, risk management and governance. Anne is an experienced director
and has pursued a fulltime career as a Non-Executive Director since 2006.
Anne is the Chair of Specialty Fashion Group and Water New South Wales. She is a Non-Executive
Director of Spark Infrastructure Group and St Vincent’s Health Australia Limited, and was previously
a Non-Executive Director of GPT Group and a number of other businesses.
Anne is a Chartered Accountant, a graduate of the Australian Institute of Company Directors and
holds a Bachelor of Economics from the University of Sydney.
Dr Sally Pitkin was appointed a Non-Executive Director of the Company in 2015.
Sally is Chair of the Human Resources & Remuneration Committee and a member
of the Risk & Audit Committee.
Sally has 20 years of experience as a Non-Executive Director and board member across a wide
range of industries in both private and public sectors, including listed companies, highly regulated
industries, professional services and commercialisation of new technology.
Sally is Chair of Super Retail Group Limited and a Non-Executive Director of The Star Entertainment
Group Limited.
Sally is a Director of the Australian Institute of Company Directors and a Member of the Senate of
the University of Queensland.
Formerly a senior corporate partner at a national legal firm, Sally has extensive corporate and
banking law experience. She holds a PhD in Governance from the University of Queensland
and a Master and Bachelor of Laws from the Queensland University of Technology.
Fiona Trafford-Walker was appointed a Non-Executive Director of the Company in 2015.
Fiona is Chair of the Risk & Audit Committee and a member of the Technology & Innovation Committee.
Fiona is an Investment Director at Frontier Advisors, heads the firm’s Governance Advisory
team and is a member of the Investment Committee.
Fiona was the inaugural Managing Director at Frontier Advisors and played a critical role in growing
the firm.
Fiona has over 25 years of experience in advising institutional investors on investment and governance-
related issues.
Fiona is a Director of Prospa Advance Pty Ltd, and Chair of its Audit and Risk committee.
Fiona will also be appointed as a Director of Victorian Funds Management Corporation, with effect
from 26 August 2018.
Fiona holds a Master of Finance from RMIT University and a Bachelor of Economics from James Cook
University. Fiona is also a Graduate of the Australian Institute of Company Directors.
Anne McDonald
Independent
Non-Executive Director
Appointed 15.07.2016
Sally Pitkin
Independent
Non-Executive Director
Appointed 23.09.2015
Fiona Trafford-Walker
Independent
Non-Executive Director
Appointed 23.09.2015
40
Together we achieve…1. Directors’ Report [ CONTINUED ] Directors and Company Secretaries [ CONTINUED ]
Company Secretaries
Janine Rolfe was appointed General Counsel and Company Secretary on 1 May 2017. In 2006, Janine established Company
Matters Pty Limited, a wholly-owned subsidiary of Link Group, which specialises in the provision of outsourced company secretarial
services to clients. Prior to this, Janine was a company secretary and legal counsel at Qantas Airways Limited and before that a
solicitor at Mallesons Stephen Jaques (now King & Wood Mallesons). Janine holds a Bachelor of Economics and a Bachelor of
Laws (Hons) from the University of Sydney.
Cassandra Hamlin was appointed Company Secretary on 9 March 2018. Cassandra has more than 10 years’ corporate governance
experience, having previously been Group Company Secretary of Qantas Airways Limited and a Senior Company Secretary at
AMP Limited. Cassandra’s prior Qantas roles included General Manager Investor Relations and Financial Reporting Manager.
Cassandra holds a Bachelor of Commerce from the University of Wollongong, is a Fellow of the Governance Institute of Australia
and is a Chartered Accountant.
John Hawkins was appointed Company Secretary on 23 September 2015 and retired as Company Secretary on 9 March 2018.
Details about John’s qualifications and experience are set out in the Executive KMP section on page 42 of this report.
Directors’ Meetings
The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each of
the Directors of the Company during the financial year are:
Board
Risk and Audit
Committee
Human Resources
and Remuneration
Committee
Technology
and Innovation
Committee
Nomination
Committee
H
9
9
9
3
9
9
9
9
A
9
9
9
3
8
9
9
9
H
-
-
-
-
4
4
4
4
A
3*
3*
-
-
3
4
4
4
H
5
-
5
-
-
-
5
-
A
5
5*
5
2*
-
4*
5
5*
H
3
-
3
-
-
-
-
3
A
3
3*
3
2*
2*
2*
3*
3
H
3
3
3
-
3
3
3
3
A
3
3
3
-
2
3
3
3
M Carapiet
J McMurtrie
G Boreham
A Green
P Gupta
A McDonald
S Pitkin
F Trafford-Walker
H:
number of meetings held during the period in which the Director or Committee Member was appointed to the Board or Committee. All Directors are entitled
to attend Committee meetings in an ex-officio capacity and attendance in an ex-officio capacity has been noted with an asterisk (*).
A:
number of meetings attended by the Director.
The Managing Director, John McMurtrie is a Member of the Nomination Committee but is not a Member of any other Committee
given he is an Executive Director.
41
Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Executive Key Management Personnel (KMP)
The Executive KMP of the Company at any time during or since the end of the financial year are:
Executive KMP
Experience and background
See Directors section for more detail.
John McMurtrie
Executive Director and
Managing Director
John Hawkins
Chief Financial Officer
Paul Gardiner
Chief Executive Officer,
Corporate Markets
Chief Executive Officer,
Technology & Innovation
Anthony O’Keeffe
Chief Executive Officer,
Link Asset Services
John Hawkins joined Link Group as Chief Financial Officer in 2001.
John has extensive commercial, accounting and financial experience from various roles with Optus,
Perpetual and KPMG (Australia and the United Kingdom).
John has over 30 years’ professional experience, with over 15 years in financial services.
John is a member of the Institute of Chartered Accountants in Australia and holds a Bachelor of
Science (Computer Science) and a Bachelor of Commerce from The University of Queensland.
Paul Gardiner was appointed Chief Executive Officer of Technology & Innovation in 2015, and Chief
Executive Officer of Corporate Markets in 2016.
Paul joined Link Group in 2006 when Orient Capital, which he joined in 2001, was acquired by Link
Group from ASX Limited.
Paul has over 15 years of experience in operations, data analytics and digital technology.
Paul holds a Bachelor of Commerce and a Higher Diploma in Marketing Practice from the National
University of Ireland, Galway.
Paul holds a Masters of Business Studies (Management Information Systems) from University
College, Dublin.
Anthony O’Keeffe is the Chief Executive Officer of Link Asset Services.
Anthony joined Link Group in November 2017 when Capita Asset Services was acquired by
Link Group from Capita plc.
Anthony has over 25 years’ experience in the financial services industry via his previous employment
with Royal & Sun Alliance and subsequently Capita. He previously sat on the Capita Plc Executive
Board as Executive Officer of Capita Asset Services.
Anthony holds a BA (Hons) Degree in Business Studies and is professionally qualified as a member
of the Institute of Internal Auditors.
The Executive KMP of the Company that ceased employment since the end of the financial year is:
Executive KMP
Experience and background
Suzanne Holden
Chief Executive Officer,
Fund Administration
• 25 years of management experience.
• Appointed CEO Fund Administration 1 January 2015.
• Ceased employment 2 August 2018.
42
Together we achieve…1. Directors’ Report [ CONTINUED ] Principal Activities
The principal activity of Link Group during the course of the financial year was that of a market leading provider of technology-enabled
administration solutions. Link Group’s core businesses of fund administration and securities registration are complemented by
expertise in digital solutions and data analytics. Link Group provides technology solutions customised to the unique requirements
of each and every client.
On 3 November 2017, Link Group acquired 100% of Link Asset Services (LAS, formerly Capita Asset Services) from Capita plc.
LAS provides Link Group with established market positions in the UK, Jersey and Ireland, and a growth platform in Europe across
its various business segments including Link Market Services, Link Fund Solutions, Corporate & Private Client Services and
Banking & Credit Management.
There were no other significant changes in the nature of the activities of Link Group during the year.
Dividends
Dividends paid by the Company during the financial year were:
Final 2017
Interim 2018
Cents
per share
8.0
7.0
Total
amount
Franked/
Unfranked
Date of
payment
$39,250,933
100% franked
18.10.2017
$34,478,217
100% franked
30.04.2018
In addition, dividends declared or paid by the Company since the end of the financial year were $71,488,284, which equates
to 13.5 cents per share, 100% franked (2017: $39,250,933). The record date for determining entitlements to the final dividend is
23 August 2018. Payment of the final dividend will occur on 10 October 2018.
Link Group’s Dividend Reinvestment Plan (DRP) will operate in respect of the 2018 financial year final dividend. The DRP election
deadline is 24 August 2018.
Review of Operations
The net profit of Link Group for the financial year was $143.2 million (2017: $85.2 million). This result includes 8 months of contribution
from the acquisition of LAS on 3 November 2017.
Total Operating EBITDA, which excludes certain significant items for the financial year ended 30 June 2018 was $335.3 million
(2017: $219.0 million). A reconciliation of Operating EBITDA to the net profit of Link Group is included in Note 3 to the financial
statements and further explanation of the results is included in the Operating and Financial Review section within this report.
43
Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Operating and Financial Review
1. Highlights
Link Group’s financial results include the following key highlights:
• Revenue of $1,198.4 million;
• Operating EBITDA of $335.3 million;
• Operating NPATA of $206.7 million;
• Statutory NPAT of $143.2 million; and
• Earnings per share of 28.6 cents.
REVENUE*
($M)
1,198.4
780.0
OPERATING EBITDA*
($M)
OPERATING NPATA*
($M)
335.3
219.0
206.7
123.8
+
54%
FY
2018
FY
2017
+
53%
FY
2017
FY
2018
+
67%
FY
2017
FY
2018
*Includes 8 months contribution from LAS
2. Basis of preparation
This Operating and Financial Review1 (OFR) is designed to assist shareholders’ understanding of Link Group’s business performance
and the factors underlying our financial results and financial position. It complements the financial disclosures in the audited Financial
Statements. The OFR covers the period from 1 July 2017 to 30 June 2018 (FY2018), including a comparative prior year (FY2017).
A full reconciliation of the adjustments made to the statutory results is disclosed in more detail in Section 5.2.
Consistent with previous disclosures, Link Group uses certain measures to manage and report on the business that are not
recognised under Australian Accounting Standards or International Financial Reporting Standards (IFRS), collectively referred to
as ‘non-IFRS financial measures’. These non-IFRS financial measures are summarised in Appendix 1 of this OFR.
Given the extent of Significant items in the current and prior year statutory results, the Directors believe it will assist the readers’
understanding of performance to compare year-on-year results on an Operating before Significant items basis (Operating basis).
Therefore, unless otherwise stated, all of the analysis is presented on an Operating basis, with reconciliation back to statutory
results provided in Section 5.2.
1 All financial amounts contained in this OFR are expressed in Australian Dollars and rounded to the nearest $0.1 million, unless otherwise stated. Some
numerical figures included have been subject to rounding adjustments. Any discrepancies between totals and sums of components in figures or tables
contained in this OFR are due to rounding.
44
Together we achieve…1. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
3. Overview of results
The net profit of Link Group for FY2018 was $143.2 million, which was up 68% on FY2017’s net profit of $85.2 million.
During FY2018, we significantly expanded our global operations with the acquisition of Link Asset Services (LAS)
on 3 November 2017. This transformational acquisition provided immediate scale, a leadership position in the UK market and
a growth platform for further expansion into Europe. LAS is a strong strategic fit with the existing Link Group businesses and its
management team has overseen a positive track record of revenue and earnings growth.
Link Group’s revenue by geographic region (as illustrated below in Figure 1) reflects our evolution into a more diversified global
business with revenue derived from outside ANZ increasing from 8% in FY2017 to 40% in FY2018. This will increase further in
FY2019 with a full-year contribution from LAS.
Figure 1: Revenue by region
External Revenue by Region
FY2017
%
6
2
FY2018
%
17
Australia & NZ
UK & Channel Islands
Other Overseas
23
Australia & NZ
UK & Channel Islands
Other Overseas
92
60
Link Group continued to execute on other elements of our growth strategy in FY2018 as follows:
•
Increased sales of products and services to existing clients across all business units helping to mitigate the impact of the
rebased Superpartners contracts in Fund Administration and competitive pressures in Corporate Markets.
• New investment in technology platforms and innovative products and services with capital expenditure increasing by 84% to
$66 million during the year.
• An expansion of our global footprint into new markets including Italy and the Netherlands (Banking & Credit Management
(BCM)), Luxembourg (Link Fund Solutions) and Hong Kong (Corporate Markets – share registry).
•
Integration benefits continued to be realised and are on track to achieve forecast operating cost reductions by FY2020.
• We increased our investment in Property Exchange Australia Limited (PEXA) and subsequent to year end made an investment
in Leveris, a European based supplier of ‘next generation’ core banking platform software.
We completed a $300 million institutional equity raising in April 2018 to strengthen the balance sheet and provide flexibility to pursue
future growth opportunities. With our balance sheet strength and solid free cash flows, Link Group has considerable flexibility to
continue to pursue organic growth opportunities both domestically and internationally. With pro forma leverage2 of circa 1.5 times
(the bottom of our guidance range), we are also well positioned to take advantage of future acquisition opportunities.
2 Pro forma leverage is calculated as Net Debt/Operating EBITDA (including 12 months of LAS results).
45
Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
4. Growth strategy
Link Group is focused on working with our clients and all our stakeholders to achieve success. To do this, we are committed to
growing the business by creating secure, simple to use products and services specifically designed to help our clients achieve
their goals.
Link Group’s growth strategy remains focused on five major drivers:
1. Growing with our clients in attractive markets.
2. Product and service innovation.
3. Client, product and regional expansion.
4. Integration and efficiency benefits.
5. Identifying adjacent market opportunities.
Our track record of growth across multiple economic cycles demonstrates the success of our strategy. As illustrated in Figure 2,
Link Group has achieved uninterrupted Operating EBITDA growth since FY2009, with a Compound Annual Growth Rate (CAGR)
of 16% between FY2009 and FY2018. Operating EBITDA growth in the last financial year was $116 million, which is
broadly equivalent to our total operating EBITDA for the year ended 30 June 2012.
Figure 2: Link Group Operating EBITDA (FY2009-2018) ($M)
335
219
191
89
94
104
117
130
138
148
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
46
Together we achieve…1. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
4.1 Overview of growth strategy
Growing with our clients in attractive markets
Fund
Administration
The Fund Administration business operates in Australia and New Zealand, where we are the leading
administrator in the fourth largest pension pool globally. The combined ANZ market size based on
funds under management is around $2.7 trillion and has grown at circa 6% per annum over the last
10 years.
As seen over the last year, the market is experiencing increasing regulatory complexity coupled with
an increased focus on data security. As an example, the recent May 2018 Federal Budget announced
some significant changes to superannuation, in particular the treatment of low balance member
accounts where there have been no contributions for 13 months or more. Whilst these changes
may result in short term adverse impacts on our clients’ member numbers and our revenue in turn,
over the medium to longer term, Link Group remains well placed to recover any revenue decline
through underlying member growth across our client base. We also stand ready to assist our clients
to manage the impact of these changes whilst ensuring that they meet implementation timeframes
if legislation is passed.
We continue to see many opportunities to work with our existing clients to support their growth ambitions
and offer our range of competitive products and services to prospective new clients including those
who currently insource administration activities.
Our clients enable our Fund Administration business to grow its market position through:
• underlying member growth; and
•
increasing demand for value-added products and services to support their growth aspirations
including the provision of value-added projects and innovative products delivered by our Technology
& Innovation division.
Additionally, annual indexation-linked price increases and volume protection clauses around member
losses support ongoing Recurring Revenue. In FY2018, overall client member growth3 was 2.4%, whilst
our top 5 clients’ (representing 78% of total members) member growth was 3.7%, which was ahead
of overall employment growth for the year. We also successfully migrated a new client, Retirement
Benefits Fund (RBF) onto our platform in February 2018 and announced new business win, Energy
Super, who will migrate in first half FY2019.
Together, the increased revenue from value added services, member growth and indexation helped offset
the scheduled impact on Recurring Revenue from the full-year impact of the rebased Superpartners’
contracts coupled with some client exits and fund mergers.
3 Member growth defined as growth in total billable members excluding redundancy trusts, eligible rollover funds and lost clients.
47
Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
Corporate
Markets
Corporate Markets operates in 11 jurisdictions around the world and provides an integrated service
offering to more than 1,800 corporate clients and over 35 million individual shareholders. Over the
past 15 years we have built strong market positions in the markets we operate in, and grow with our
clients by:
• supporting our clients as they grow with provision of new products and services
(including support for various capital markets activities); and
• winning new business in existing jurisdictions.
Link Group’s ability to cross-sell the products and services in its Corporate Markets offering is a key
driver of further market penetration in the geographies in which it operates. We were able to increase
the penetration of our products to the existing client base during the period by successfully cross-
selling two or more products or services to 47% of new clients4 in Australia during FY2018. This
helped mitigate the ongoing competitive pricing pressure in both the local and overseas markets in
which we operate. These markets are also demanding from a technology and service perspective
and we have invested in refreshing our customer facing platforms and portals over the last year to
remain a leader in innovation and service delivery.
In FY2018, Link Group added 226 net new clients5 across its existing jurisdictions and increased the
average products per client in Australia from 1.4 to 1.6. We won new business with Domain Holdings
and REA Group in Australia and Lupin and Castrol in India, and benefited from the full year contribution
of Link Fund Solutions (acquired in December 2016). We also supported corporate actions activities
across our various jurisdictions; most notably in South Africa where we helped our client, Old Mutual,
successfully complete a de-merger in June 2018.
Technology &
Innovation
Our Technology & Innovation business is the technology and innovation hub for the Group, providing
the proprietary technology platforms that support Link Group’s other divisions and services directly
to external clients.
Technology & Innovation is able to grow with its clients through:
• partnering with Fund Administration and Corporate Markets to support the delivery of various projects;
• sales of new innovative products to existing clients; and
• winning new business across value added services including digital and print communications,
software implementation and licensing and digital solutions.
In FY2018, Technology & Innovation was successful in selling new products and services to existing
clients as demonstrated by sales of new products and services into the Fund Administration and
Corporate Markets’ client bases. In addition, new client wins were achieved across a range of its value
added services (including digital and print communications, software implementation and licensing)
helping to mitigate some client losses in data analytics.
This resulted in year-on-year growth in external revenue of 10% and an increase in external revenue
as a % of overall revenue from 32% to 33%. Growth in external revenue remains a key focus area for
us and we see further opportunities to increase sales of products and services through continued
investment and identification of appropriate new business targets.
4 New clients is defined as new share registry wins from competitors and new IPO wins (which raised >$50 million).
5 Net new clients is defined as net growth in recurring clients and is measured across all jurisdictions.
48
Together we achieve…1. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
Link Asset
Services
Link Asset Services (LAS) is a leading asset servicer operating across 10 highly regulated European
jurisdictions. It has market leading positions across its 4 business lines and services more than 7,000
customers including some of the world’s largest corporations. We administer and safeguard over £600
billion ($1.0 trillion) of assets and operate in very large markets with significant growth opportunities.
LAS’ clients include asset managers, asset owners, corporates and investors and we grow with these
clients via the breadth, quality and flexibility of services we offer including:
increasing the penetration of products and services provided to existing clients; and
•
• winning new business in existing jurisdictions.
In FY2018, LAS was successful in selling new products and services to existing and new customers
including introducing collective pension vehicles to UK local government authorities, winning large
bank outsourcing contracts and entering into new territories (e.g. Italy and the Netherlands) with key
client relationships in order to support the expansion of client activity.
As a result, LAS Recurring Revenue growth for the 12 month period ended 30 June 2018 (including
eight months under Link ownership) compared to the previous 12 month period was 5.7%.
Product and service innovation
Technological change is a significant underlying feature of all of the markets in which Link Group operates. Our clients’ needs
are constantly adapting to the significant change heralded by technology and to be successful on a sustainable basis, all market
participants need to invest in innovative products and services. Ultimately, technology harnessed through innovative products
and services is about making it easier for our clients and their customers to achieve their goals.
Product and service innovation is a core capability of Link Group and is designed to help customers to build stronger relationships
with their target markets and differentiate themselves from their competitors. FY2018 saw Link Group roll out, further develop,
and receive recognition for a wide range of technologies that assisted customers across Corporate Markets, Fund Administration
and LAS.
Revenues from Link Group’s existing clients increase with the number and complexity of the services that we provide. In Fund
Administration, increasing competition between superannuation funds to attract and engage with members is driving increased
demand for the value-added services and product enhancements we offer. In Corporate Markets, the strength of our fully integrated
product suite resulted in sales growth in employee share plans and company secretarial services. Technology & Innovation is
focused on providing value-added products and services for Link Group and in FY2018 this was demonstrated by the growth in
revenue from the sale of value added products and services.
Link Group, primarily through Technology & Innovation, has invested more than $300 million in our systems, infrastructure and
innovation over the last 10 years. This reinvestment is a core feature of our business model and it continues to boost client
engagement and enrich client partnerships. With the addition of LAS, Link Group now earmarks more than $200 million per annum
for technology, including both IT operating costs and capital expenditure. During FY2018, we also migrated the remaining Fund
Administration clients administered on third party systems to our proprietary technology, such that as at 30 June 2018 all these
clients are administered on Link Group proprietary systems.
49
Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
Client, product and regional expansion
A core competency of Link Group is the successful execution of business combinations. These have delivered important incremental
growth through client, product and regional expansion. Our scalable operating model provides a platform for extracting synergies
from many business combinations. Our approach has allowed us to expand the revenue and earnings growth from business
combinations through cross-selling and product expansion. Link Group has successfully completed over 40 business combinations
in the last 15 years.
During FY2018, we added immediate scale and leadership in the UK through the acquisition of LAS. LAS provides a significant
opportunity for Link Group to achieve further growth, particularly in Europe where it is already represented in seven countries
including most recently a ‘greenfield’ expansion into Italy for the BCM business. This augments an expansion into the Netherlands
for this business via the acquisition of Novalink in January 2018 and prior to that, the entry of the Link Fund Solutions business
into the attractive Luxembourg market.
In addition, we launched our share registry business in Hong Kong on 8 August 2018, building on our existing shareholder
management, analytics and stakeholder engagement presence in that market. In India, a further consolidation of the market was
achieved through the acquisition of TSR Darashaw (a share registry business based in Mumbai, India) which is pending regulatory
approval at the date of this OFR and expected to complete in first half FY2019. This acquisition builds on the earlier Indian acquisition
of Sharex (a small share registry business based in Mumbai), which was completed in March 2018. We continue to seek to identify
further acquisition and organic expansion opportunities to expand our global reach.
Integration and efficiency benefits
Link Group has a long history of acquiring, integrating (including the migration of clients onto our platforms) and transforming
businesses through the implementation of various efficiency programs. During FY2018, we continued to realise post-migration
synergies relating to the Superpartners business combination by completing an archiving program and significantly progressing a
decommissioning program. This included the archiving of all legacy data to a proprietary archive system, the decommissioning of
many separate legacy IT systems, the closure of a data centre and related IT infrastructure and consolidation of vendor contracts
to deliver savings.
Synergies are progressively being realised in both Fund Administration and Technology & Innovation, reflected in the margin
improvements achieved in FY2018. Link Group estimates that the value of remaining annual synergies to be realised by FY2020
is approximately $19.3 million after realising $25.7 million in FY2018. This includes substantial savings from the archiving and
decommissioning project (discussed above) together with further savings from post-migration operational efficiencies and vendor
consolidation initiatives.
Link Group estimates that the value of efficiency benefits achieved through the acquisition of LAS to be realised over the medium
term is approximately £15 million per annum, with estimated costs to achieve these savings totalling approximately £23 million.
Detailed plans exist across a number of initiatives covering significant components of the cost base and are being progressively
executed. In FY2018, efficiency benefits of £0.5 million were achieved with an associated one-off cost of £6.1 million. Whilst the
LAS integration and transformation program is still in its initial phase, benefits achieved to date are in line with expectations.
Identifying adjacent market opportunities
Link Group has a history of identifying and executing opportunities in adjacent markets that match our core competencies.
Characteristics of adjacent market opportunities that we target include strong market position in an industry with attractive
fundamentals and compatibility with our core competencies in data management, technology leadership and process design.
The acquisition of LAS added a new product line to Link Group’s suite of services, BCM, which provides loan administration and
asset management services to banks and debt investors across various European jurisdictions. During FY2018, this business
expanded into Italy to take advantage of an attractive client opportunity in that market and has additional future growth opportunities
in both European and other international markets. Post balance date, Link Group made an investment in Leveris, a European
supplier of banking software already being used in our BCM business, for which we see significant opportunities in the challenger
banking market in Europe.
Link Group also increased our investment in PEXA in FY2018 by $4.4 million to $132.3 million in September 2017. In 2018, PEXA
commenced a dual track trade sale/IPO process, which was in progress at the date of this report. Link Group, as a 19.8%
shareholder in PEXA, is well placed to hold, deepen or reduce our position in PEXA as a result of this process.
With our strong balance sheet and pro forma leverage6 of circa 1.5 times, we are well positioned to explore and take advantage of
future potential adjacent market opportunities.
6 Pro forma leverage is calculated as Net Debt/Operating EBITDA (including 12 months of LAS results).
50
Together we achieve…1. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
5. Solid financial results and platform for further growth
Link Group has delivered solid financial results for FY2018, with growth in revenue, Operating EBITDA, Operating NPATA and
Earnings per Share. These results are underpinned by a focus on maintaining cost discipline across the business and in particular
realising synergies from the Superpartners and LAS business combinations.
Complementing the strong earnings performance was the maintenance of a prudent financial position. The financial year ended
with comfortable leverage and high levels of cash-flow generation. Consistent with our stated objectives and the needs of the
market and client base, Link Group continued to invest in our technology platforms and product and service innovation during
FY2018. Table 1 below contains an overview of Link Group’s financial results.
Table 1: Statutory & Operating financial results
IN $M
Revenue
Statutory
Results
Profit before tax
Statutory NPAT
Operating
Results
Earnings per share (cents)
Operating EBITDA
EBITDA after significant items
NPATA
Operating NPATA
FY2018
1,198.4
192.1
143.2
28.6
335.3
290.3
176.1
206.7
FY2017
Variance (%)
780.0
123.5
85.2
22.6
219.0
190.6
101.7
123.8
54%
56%
68%
26%
53%
52%
73%
67%
5.1 Statutory NPAT
Statutory Net Profit after Tax (Statutory NPAT) was $143.2 million compared to a prior year Statutory NPAT result of $85.2 million.
The stronger Statutory NPAT result in FY2018 reflects:
•
the first-time contribution from LAS;
• continued realisation of synergies from the Superpartners business combination; and
•
increases in revenue from organic growth, offset by cost growth.
51
Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
5.2 Operating NPATA
Link Group considers Operating NPATA to be a meaningful measure of after-tax profit as it excludes the impact of Significant items
and the large amount of non-cash amortisation of acquired intangibles reflected in NPAT. The measure includes the tax-effected
depreciation and amortisation expense relating to all capital expenditure and the original cost of acquired software that is integral
to the ongoing operating performance of the business.
Figure 3: Reconciliation of Operating NPATA to Statutory NPAT ($M)
206.7
30.6
176.1
32.9
143.2
85.2
Operating NPATA
Significant items
after tax
NPATA
Acquired amortisation
after tax
Statutory
NPAT
Statutory NPAT
(FY2017)
5.3 Financial Performance by Division
Link Group’s Operating EBITDA result was $335.3 million, which was up 53% on the prior year result of $219.0 million. This
performance reflects an initial, eight-month contribution from LAS of $93.8 million combined with double-digit growth from existing
business units of $22.5 million. Operating EBITDA margins held relatively steady at 28.0% compared to 28.1% in FY2017
reflecting the margin dilutive impact of consolidating the lower margin LAS results since acquisition.
210
200
190
180
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
52
Together we achieve…1. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
Table 2: FY2018 Revenue and Operating EBITDA by reporting segment
IN $M
Revenue
Fund Administration
Corporate Markets
Technology & Innovation
Link Asset Services
Gross Revenue
Eliminations
Total Revenue
Recurring Revenue %
Operating EBITDA
Fund Administration
Corporate Markets
Technology & Innovation
Link Asset Services
Head Office
Total Operating EBITDA
Operating EBITDA margin %
FY2018
FY2017
Variance (%)
560.0
214.8
230.7
404.9
1,410.4
(211.9)
1,198.4
80%
123.1
54.9
72.9
93.8
(9.3)
335.3
28%
562.3
198.4
215.9
-
976.7
(196.7)
780.0
90%
118.1
50.7
55.0
-
(4.8)
219.0
28%
-
8%
7%
nmf
44%
(8%)
54%
4%
8%
32%
nmf
(94%)
53%
% of Gross
Revenue
29
16
Fund Aministration
Corporate Markets
T&I
LAS
40
% of Operating
EBITDA*
36
Fund Aministration
Corporate Markets
T&I
LAS
27
21
15
16
*Excludes Group Costs and Intercompany eliminations
In addition to the LAS contribution, Operating EBITDA growth in FY2018 reflects the benefits of scale, as synergies continue to
be realised from the integration of the Superpartners business across both the Fund Administration and Technology & Innovation
divisions. These synergies include savings achieved across all operating cost categories as efficiency benefits are realised from
the rationalisation and standardisation of systems and processes together with savings from archiving, decommissioning, and
premises and vendor consolidation activities.
53
Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ]
Operating and Financial Review [ CONTINUED ]
5.3.1 Fund Administration
As per our guidance, Fund Administration revenue remained largely flat year-on-year at $560.0 million resulting from a reduction
in Recurring Revenue, which was largely offset by strong growth in Non-recurring Revenue.
Notwithstanding some disappointing client losses that took effect or were announced during the year, overall client retention7
remained above 95%.
Table 3: Fund Administration Revenue and Operating EBITDA
IN $M
Revenue
Operating Expenses
Operating EBITDA
Recurring Revenue %
Operating EBITDA margin %
FY2018
560.0
(436.9)
123.1
89%
22%
FY2017
562.3
(444.2)
118.1
92%
21%
Variance (%)
-
2%
4%
Recurring Revenue of $498.3 million (or 89% of the total Fund Administration revenue) was down $18.1 million or 4% on the prior year.
Key contributing factors in FY2018 include:
•
indexation-linked price increases;
• growth in in overall member numbers of 2.4%8 and an increase in our top five clients’ members (who represented approximately
78% of the total) of 3.7%;
•
full-year impact of rebased contracts for the five former shareholders of Superpartners;
• part-year impact of some client exits and mergers with non-Link Group administered funds; and
•
insourcing of various functions by some clients (such as financial advice and IT support services) and reduction in volumes of
print and mail (largely offset by lower print and mail costs).
Non-recurring Revenue of $61.7 million represents 11% of total Fund Administration revenue and grew by 34% compared to the
prior year. The growth achieved in FY2018 comes on top of growth in the prior year of 56%, which means over the last 2 years,
Non-recurring Revenue has more than doubled, reflecting strong demand for value added products and services.
Funds regularly work with Link Group to enhance their product offering and boost engagement with members or to meet regulatory
and compliance objectives. These activities are referred to as fee-for-service projects and represent the bulk of Non-recurring
Revenue in Fund Administration.
Fee-for-service revenue projects completed during FY2018 included significant regulatory and legislative change programs,
unitisation, insurance changes and redesign and digital programs.
Fund Administration Operating EBITDA grew to $123.1 million, which was $5.0 million or 4% higher than the prior year. The growth
on the prior year reflects the full-year impact of cost savings from synergies achieved in the prior year and the part-year impact
of cost outs made during FY2018. Synergy benefits realised in FY2018 included savings in staff costs from the application of
technology – such as productivity software and smart automation – coupled with additional cross-skilling and straight-through
processing capability in operational units. The full-year benefit of premises consolidation activity completed during FY2017 was
also realised in FY2018. These efficiency benefits helped offset reductions to recurring revenue (as discussed above).
7 Client retention represents the proportion of annual revenue from clients that have not been lost in the last 12 months.
8 Based on growth in total billable members excluding lost clients, eligible rollover funds and redundancy trusts from 1 July 2017 to 30 June 2018.
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Operating and Financial Review [ CONTINUED ]
5.3.2 Corporate Markets
The Corporate Markets revenue model is centred on providing an integrated suite of products and services to Corporate Markets
clients across the various jurisdictions where Link Group has a presence, with overseas jurisdictions accounting for approximately
34% of total Corporate Markets revenue in FY2018 (FY2017: 33%).
Table 4: Corporate Markets Revenue and Operating EBITDA
IN $M
Revenue
Operating Expenses
Operating EBITDA
Recurring Revenue %
Operating EBITDA margin %
FY2018
214.8
(159.9)
54.9
81%
26%
Variance (%)
8%
(8%)
8%
FY2017
198.4
(147.7)
50.7
86%
26%
During FY2018, Corporate Markets revenue was $214.8 million. That was 8% higher than the prior year reflecting modest growth
in organic and acquired Recurring Revenue combined with an increase in Non-recurring Revenue from capital markets activity in
some jurisdictions.
Recurring Revenue of $173.6 million was up 2% on the previous year and as a proportion of Total Revenue it decreased to 81%
from 86% in FY2017. Recurring Revenue growth can be attributed mainly to the following factors:
• first full-year contribution from Link Fund Solutions (previously White Outsourcing Pty Limited);
•
robust net client growth5 of 226 across all jurisdictions;
• strong client retention7 of >95%; and
•
impact of continuing price pressure across several markets.
Corporate Markets services approximately 4,000 clients across all of its jurisdictions as at 30 June 2018. In Australia, Corporate
Markets won 83 net new clients from both competitors and from new IPOs. In particular, Link Group secured new clients (REA
Group and Domain Holdings), migrated the share register of Woolworths Limited (building on the existing employee share plans
business), and won 27 out of 38 IPOs that raised more than $50 million. In India, we were successful in winning 53 net new clients
and now service over 1,277 clients, representing more than 23.7 million shareholders. In New Zealand, we continued to roll out
our innovative virtual AGM product to now service 10 clients.
Non-recurring Revenue of $41.2 million increased by $13.6 million or 49% on the previous year, driven by:
• activity relating to the managed separation of Old Mutual plc in South Africa; and
• an uplift in proxy activity in both Australia and the UK.
Operating EBITDA increased to $54.9 million, which was $4.2 million or 8% up on the previous year, driven by the Recurring and
Non-recurring Revenue movements described above, partly offset by higher staff and IT costs from the first full year of operations
by the Link Fund Solutions business and other volume related increases. Operating EBITDA margins of 26% were flat on the
previous year.
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Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ]
Operating and Financial Review [ CONTINUED ]
5.3.3 Technology & Innovation
Technology & Innovation revenue of $230.7 million comprises internal revenue (from IT recharges to Fund Administration and
Corporate Markets) of $155.5 million and external revenue of $75.2 million from value-added services (including data analytics,
digital solutions and digital communications) and licensing in-house administration software.
Table 5: Technology & Innovation Revenue and Operating EBITDA
IN $M
Revenue
Operating Expenses
Operating EBITDA
External Revenue %
Operating EBITDA margin %
FY2018
230.7
(157.8)
72.9
33%
32%
Variance (%)
7%
2%
32%
FY2017
215.9
(160.9)
55.0
32%
25%
Technology & Innovation total revenue grew to $230.7 million which was 7% higher than the previous year. The growth on the
prior year is due to a combination of internal revenue growth and growth in external revenue from increased sales of products and
services to both existing and new customers across its various business lines, including:
•
•
increase in fee-for-service project-related work especially in the NZ market;
increased volumes of both new e-communications and traditional print services coupled with new business wins; and
• a full-year revenue contribution from the acquisition of Adviser Network in June 2017.
As a percentage of overall Technology & Innovation revenue, external revenue increased by 1% to 33%.
Technology & Innovation Operating EBITDA grew to $72.9 million, which was $17.9 million or 32% higher than the prior year.
The increase in Operating EBITDA compared to the prior year reflects the synergy benefits of cost-out initiatives arising from the
Superpartners integration coupled with the margin benefits derived from external revenue growth of 10%. Synergy benefits realised
in FY2018 included decommissioning legacy systems and vendor consolidation and sourcing initiatives coupled with additional
staff cost savings from further restructuring and consolidation of IT functions.
Operating EBITDA margins of 32% are up on FY2017 margins of 25%, reflecting the impact of the above factors.
5.3.4 Link Asset Services
LAS’ results reflect eight months of trading since acquisition on 3 November 2017.
Table 6: Link Asset Services Revenue and Operating EBITDA
IN $M
Revenue
Operating Expenses
Operating EBITDA
Operating EBITDA margin %
FY2018
404.9
(311.1)
93.8
23%
FY2017
Variance (%)
-
-
-
-
nmf
nmf
nmf
nmf
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Operating and Financial Review [ CONTINUED ]
Revenue for the eight-month period of $404.9 million represents strong contributions from all four business lines including:
• Link Market Services (LMS) which provides share registration, share dealing, employee share plans and treasury management
activities. During the period, LMS was successful in winning 34 new corporate clients and retaining a further 29 clients.
• Link Fund Solutions (LFS) which provides governance, administration and transfer agency services to investment fund managers
in the UK and Ireland. During the period, LFS earned revenue from 8 new fund launches and won future new operator service
business with Wales Pension Partnership and ACCESS (Local Government Pension Schemes). Assets under management
as at 30 June 2018 amounted to £76.4 billion and reflect LFS’s position as the leading independent authorised fund manager
in the UK. LFS also recently opened an office in Luxembourg to service this large and growing fund management market.
• Corporate & Private Client Services (CPCS) which provides corporate and regulatory services, accounting and tax and company
secretarial services to 5,314 individual entity structures. During the period, CPCS won 671 new business mandates across the
seven UK and European markets in which it operates. Average revenue per entity amounted to £14,685.
• Banking and Credit Management (BCM) which provides debt servicing activities in the UK and Ireland. During the period,
BCM expanded into attractive new markets in the Netherlands (assisted by the acquisition of Novalink in January 2018) and
Italy where we opened a new office in May 2018. New business wins included a major bank in Ireland and 2 service contract
wins in Italy. Average assets under administration amounted to £81.5 billion.
LAS’ operating EBITDA for the period was $93.8 million which represented a margin of 23%, which was 1% above the margin
achieved in the calendar year ended 31 December 2017. Included in operating costs are additional ‘stand-alone’ costs of insurance,
some head office functions, and accruals for staff bonuses and annual leave (not accounted for under previous ownership).
5.4 Significant items
Total Significant items expense of $37.6 million was 41% higher than the prior year of $26.7 million.
Table 7: Summary of Significant Items
IN $M
Significant Items
Business Combinations Costs
LAS Integration Costs
Other Integration Costs
Client Migration Costs
Total Significant Items (impacting EBITDA)
Gain on Assets Held at Fair Value
Discount on Provision Unwind
Total Significant Items
FY2018
FY2017
Variance (%)
16.9
10.9
2.2
15.1
45.0
(7.4)
-
37.6
16.0
-
4.7
7.7
28.5
(5.1)
3.3
26.7
(5%)
nmf
54%
(95%)
(58%)
47%
nmf
(41%)
The increase in Significant items was largely due to LAS integration costs incurred in FY2018 and costs associated with migrating
clients onto Link Group’s proprietary platforms, partially offset by lower non-LAS integration costs reflecting staff cost reductions
achieved through natural attrition.
The gain on assets held at fair value of $7.4 million reflects the net realised gain on a forward foreign exchange hedge related to
the acquisition of LAS, which was closed out once the acquisition was completed in November 2017.
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Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ]
Operating and Financial Review [ CONTINUED ]
5.5 Other expenses below EBITDA
Depreciation and Amortisation
Depreciation and amortisation expense increased by 35% to $47.2 million compared with the prior year largely due to the impact
of the LAS acquisition, which brought with it associated depreciation and amortisation. This is partly offset by assets reaching
the end of their useful lives such as Superpartners legacy systems that were retired during both the current year and prior year.
Acquired amortisation reflects the amortisation of client lists and the revaluation impact of acquired intangible assets resulting from
business combinations. Acquired amortisation increased by 77% to $41.9 million compared with the prior year. This reflected
the impact of additions to acquired intangibles (including software and client lists) arising from the LAS acquisition, partly offset by
other assets from previous acquisitions reaching the end of their useful lives in FY2017 and FY2018.
Net finance expense
Net finance expense of $16.5 million is up $5.7 million on the previous year’s net finance expense due to higher average net debt
following the settlement of the LAS acquisition, which was partly funded by a new £485 million debt facility.
Tax expense
Tax expense of $48.9 million is 27% higher than the prior year’s tax expense reflecting an increase in profit before tax of 56%,
coupled with a larger number of non-deductible LAS acquisition-related costs, partially offset by lower applicable tax rates for
European earnings and utilisation of unrecognised tax losses. The effective tax rate of 25% is lower than the prior year reflecting
the part-year impact of lower tax rates applying to income generated in European jurisdictions.
Table 8: Other expenses below EBITDA
IN $M
EBITDA after Significant Items
Depreciation and Amortisation
EBITA
Acquired Amortisation
EBIT
Net Finance Expense
Discount on Provision Unwind
Gain on Assets Held at Fair Value
NPBT
Tax Expense
NPAT
Add Back: Acquired Amortisation After Tax
NPATA
Add Back Significant Items After Tax
Operating NPATA
FY2018
290.3
(47.2)
243.1
(41.9)
201.3
(16.5)
-
7.3
192.1
(48.9)
143.2
32.9
176.1
30.6
206.7
FY2017
Variance (%)
190.6
(34.9)
155.7
(23.7)
132.0
(10.8)
(3.3)
5.6
123.5
(38.3)
85.2
16.5
101.7
22.1
123.8
52%
(35%)
56%
(77%)
52%
(53%)
nmf
32%
56%
(27%)
68%
100%
73%
38%
67%
6. Strong balance sheet and cash flow conversion
Link Group maintained a strong balance sheet in FY2018 with a low level of gearing providing significant flexibility for future
growth opportunities.
We successfully completed an $883 million equity raising in July 2017 and drew down GBP and AUD denominated debt in November
2017 to fund the acquisition of LAS. In April 2018, we undertook a $300 million equity raising, with the proceeds partly used to
repay Australian Dollar denominated debt and the balance remaining in cash to provide flexibility to support organic growth as
well as future acquisitions.
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Together we achieve…1. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
The business generates high levels of cash while also maintaining a substantial ongoing investment in enhancing our proprietary
systems and in new products and services.
6.1 Balance sheet
The cash balance of $265.5 million as at 30 June 2018 has increased from the 30 June 2017 position largely due to the capital
raising in April 2018, part of which remains in cash deposits. This was supplemented by cash held by LAS. In addition, cash is
retained to cover short-term investment management payables related to the Link Fund Solutions business in LAS.
Table 9: Summary Balance Sheet
IN $M
Assets
Cash
Trade & Other Receivables
Other Current Assets
Total Current Assets
Deferred Tax Asset
Other Non-Current Assets
Total Non-Current Assets
TOTAL ASSETS
Liabilities
Trade & Other Payables
Interest Bearing Liabilities
Other Current Liabilities
Total Current Liabilities
Interest Bearing Liabilities
Deferred Tax Liability
Other Non-Current Liabilities
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Contributed Equity
Reserves
Retained Earnings
Non-Controlling Interest
TOTAL EQUITY
As at 30 June
FY2018
FY2017
265.5
302.3
618.7
1,186.5
52.7
2,693.4
2,746.1
3,932.6
284.1
0.5
687.3
972.0
821.9
111.4
127.3
1,060.6
2,032.6
1,900.0
1,875.5
17.4
5.0
2.0
1,900.0
18.2
98.7
19.7
136.5
42.4
1,055.0
1,097.4
1,233.9
101.1
0.2
83.3
184.6
312.9
56.4
62.7
432.0
616.6
617.4
689.4
(77.8)
5.0
0.8
617.4
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Operating and Financial Review [ CONTINUED ]
Net working capital (trade and other receivables less trade and other payables) as at 30 June 2018 was $18.2 million. This reflects
both organic growth and the acquisition of Link Asset Services.
Other current assets and other current liabilities have grown significantly compared to the previous year. This reflects the impact
of recognising gross funds receivable and funds payable relating to the LAS Link Fund Solutions business where it acts on behalf
of instructions from investors to buy and sell units in funds that it manages.
Other non-current assets have increased by $1,638.4 million compared with the prior year. This largely reflects the acquisition
of assets at net book value and recognition of goodwill, client relationships and software upon acquisition of LAS, partially offset
by amortisation.
Interest-bearing liabilities have increased by $509.3 million compared with the prior year. This reflects increases in debt drawn
to fund the acquisition of LAS, partially offset by voluntary repayments of debt over the period. All Australian Dollar denominated
debt was repaid in FY2018 with the only drawn debt at 30 June 2018 denominated in British Pounds.
Total equity increased to $1,900.0 million from $617.4 million in the prior year largely related to equity raisings in July 2017 and April
2018 used to partially fund the acquisition of LAS and to reduce debt.
6.2 Cash flow
Cash flow conversion continues to be a key focus of the business and Link Group achieved an operating cash conversion rate of
96%, slightly down on the previous year. Working capital consumption of $32.7 million in FY2018 reflects the following:
• higher receivables owing to longer billing cycles in some parts of the LAS business;
• higher fee for service project billings in Fund Administration and higher corporate actions billings in Corporate Markets driving
a higher receivables balance;
•
•
increase in prepayments due to new multi-year IT maintenance agreements and higher insurance costs; and
increase in the net creditor position of investment management balances in LAS.
Capital expenditure is a key driver of future productivity, product growth and cost efficiency. The business uses a benchmark of
3-5% of Link Group revenue to guide capital expenditure initiatives. In FY2018, capital expenditure was $66.3 million, representing
5.5% of revenue and slightly above our benchmark guidance. The main reasons for the increase in capital expenditure relate to
the following:
• acquisition of LAS;
•
increased scope and complexity of enhancements to proprietary systems to on-board new clients in Fund Administration;
• development of the Corporate Markets proprietary registry system to facilitate entry into the Hong Kong market; and
•
investment in miraqle® and investor centre platform refresh programs to ensure that they remain current.
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Together we achieve…1. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
Table 10: Summary Cash flow
IN $M
Operating EBITDA
Non-Cash Items in Operating EBITDA
Changes in Fund Assets & Liabilities
Changes in Working Capital
Net Operating Cash Flow
Cash Impact of Significant Items
Net Free Cash Flow after Significant Items
Tax
Interest
Net Cash Provided by Operating Activities
Capital Expenditure
Other Investing Cash flow
Dividends Paid
FY2018
335.3
2.6
15.1
(32.8)
320.3
(58.8)
261.6
(40.5)
(12.9)
208.1
(66.3)
(1,470.9)
(46.9)
Net Cash Flow Before Other Financing Activities
(1,376.0)
Net Cash Used in Other Financing Activities
Net (decrease)/increase in Cash
Net Operating Free Cash Flow
Net Operating Cash flow Conversion
Net Operating Free Cash flow Conversion
1,640.1
264.1
254.0
96%
76%
FY2017
Variance (%)
53%
(65%)
nmf
nmf
48%
(6%)
63%
nmf
(27%)
40%
(84%)
nmf
7%
nmf
nmf
nmf
41%
219.0
7.4
-
(10.0)
216.5
(55.6)
160.9
(2.4)
(10.2)
148.3
(36.1)
(92.9)
(50.6)
(31.3)
20.3
(11.0)
180.4
99%
82%
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Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ]
Operating and Financial Review [ CONTINUED ]
6.3 Net debt
The pro forma Net Debt/Operating EBITDA ratio has increased slightly to 1.52 times9. This reflects an increase in net debt required
for the acquisition of LAS offset by improved Operating EBITDA performance. The Operating EBITDA/net interest cost ratio has
decreased to 15.88 times, reflecting higher net interest costs offsetting higher Operating EBITDA performance.
Link Group has total committed and available facilities of $1,440.8 million with a further $250.0 million as an uncommitted accordion
facility. This level of available facilities provides significant capacity for future potential acquisitions.
Table 11: Summary of net debt
IN $M
Cash and Cash Equivalents
Total Debt
Net Debt
Pro forma debt ratios
Net Debt / Operating EBITDA9
Operating EBITDA / Net Interest Costs
FY2018
(265.5)
822.4
556.9
1.52
15.88
FY2017
(18.2)
313.1
295.0
1.35
20.34
7. Pro-active management of risks
Link Group continually strives to improve our risk culture, systems and practices. Our risk management system is specifically
designed to identify and effectively respond to the effects of uncertainty on Link Group’s objectives.
By way of example, since listing on the ASX, Link Group has reported client concentration as a key risk. As an outcome of Link
Group’s maturing risk profile and the execution of our growth strategy, Link Group has been able to address the concentration
risk and achieve transformational growth/change. The acquisition of LAS, which is based in the United Kingdom and Europe
in FY2018, has reduced Link Group’s concentration risk by providing diversification of clients, revenue, industries, currency and
geography. However, the acquisition also had the effect of increasing Link Group’s principal risk and the number of regulatory
stakeholders. This provides a good illustration of the continuously evolving nature of Link Group’s risk profile and the importance
of proactively managing risks.
Risk Management Framework
The Link Group risk management framework is aligned to international risk management guidelines (ISO 31000:2018). The
framework promotes the achievement of Link Group’s objectives by integrating policies, processes, procedures and systems with
our structures and people. The Board’s Risk and Audit Committee oversees, reviews and supervises the framework, as well as
promoting a risk management culture.
The framework provides a consistent approach for identifying, analysing, evaluating, treating and monitoring risks at all levels of the
organisation. It fosters an open and transparent culture, where risk discussion and awareness are supported. It also provides a
necessary appreciation of the risk environment within which Link Group operates. The application of the framework enables, and
assures, that critical risks are systematically identified and effectively managed within approved risk tolerances. These expectations
and risk outcomes are embedded into key performance indicators.
9 Net Debt/Operating EBITDA is stated on a pro forma basis (i.e. including 12 months of LAS results). On a debt covenant calculation basis, this figure was
1.50 times.
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Operating and Financial Review [ CONTINUED ]
The ‘3 Lines of Defence’
Link Group employs the ‘3 Lines of Defence’ model to manage risk:
Line
1 (First Line)
2 (Second Line)
3 (Third Line)
Responsibility
Manage Risk
Oversight and Support
Independent Assurance
Role
Identify, analyse, assess,
record, prioritise, treat
and monitor risks, in
line with risk tolerances
defined in the Risk
Appetite Statement.
Provide the risk and
compliance management
frameworks, tools, systems
and expertise to support
effective management of risk
and internal control.
Provide assurance to
the Link Group Board
and Management on the
effectiveness business
process, governance,
risk management and
internal controls.
Accountability
Business Management
Group Risk & Compliance
Internal / External Audit
Key Elements of the Risk Management Framework
• Oversight and Governance – The risk management framework is overseen by the Risk and Audit Committee of the Board.
Senior Executives drive execution of the framework and the management of risk. Various management and corporate governance
forums promote a risk culture, enable responsible decision-making, provide executive oversight and require accountability for
achieving organisational objectives and risk outcomes. A further description of risk governance at Link Group is set out in the
Corporate Governance Statement.
• Risk Appetite Statement (RAS) – The Board-approved RAS sets out the nature and amount of risk that Link Group is willing
to accept in the pursuit of our strategic and business objectives. The Board has identified risk tolerances for each category
of risk. The RAS guides/limits Management decision-making and drives appropriate action to reduce risk exposure to within
the set tolerances. Regular reporting of key risk indicators enables both Management and the Board, to each monitor risk
exposure compared to the RAS.
• Ownership and Accountability – Management are responsible for identifying and managing the risks and opportunities
within their business, supported by the Line 2 Risk & Compliance functions. Residual risks are monitored so that any potential
exposures are within the expectations and limits of the Board-approved RAS. The Line 2 Risk & Compliance functions provide
appropriate management challenge so that risks are owned and managed. Both Line 1 and Line 2 functions are held accountable
through embedded key performance indicators and governance oversight.
• Process and Tools – The Risk & Compliance function supports Management to manage risk and achieve business objectives.
This is achieved through the provision of education, training and tools that enable risks to be identified, analysed, assessed,
recorded and reported. The tools and processes also enable independent oversight and timely reporting of relevant risk
information, to enhance informed decision-making.
Changes to the Risk Profile from previous year
As noted in prior sections, FY2018 was a year of transformational change for Link Group, primarily resulting from the acquisition
of LAS. While this acquisition has reduced client concentration risk, when coupled with changes in the regulatory landscape, it
has altered Link Group’s risk profile.
Historically, Link Group had modest principal risk. LAS acts in a principal capacity with additional fiduciary responsibilities and
duty of care across a number of its businesses, which has increased the Group’s principal risk exposure.
In addition, the introduction of the General Data Protection Regulation (GDPR) requires enhanced data privacy protection of subjects
domiciled in the United Kingdom and Europe. Furthermore, the frequency and sophistication of financial crimes continues to
increase globally.
Link Group has responded to these challenges through additional controls, governance and oversight. Plans to mitigate these
risks are monitored, regularly reviewed and re-assessed.
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Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
Key Risks
There are inherent risks that all businesses face (for example - business resilience, financial crime, operational errors/omissions).
Link Group considers these risks when designing and operating our frameworks. Some of the more significant risks faced by Link
Group and how they are being managed are outlined below. This is not a comprehensive list of the risks or mitigating actions.
Risk category
Description of the risk and its impact
How we respond
Information
security
Description
Link Group’s core products and services
inherently involve appropriate management
of information.
Link Group has in place an information security
management system aligned to the international
best practice standard ISO27001, certified in
Australia. Some key controls include:
Link Group’s ability to ensure the availability,
integrity and security of information that it holds,
may provide a competitive advantage or may
be detrimental to Link Group, as it attempts to
enable efficient and secure businesses.
Impact
Clients expect Link Group to securely store and
make use of accurate information. Failure to
meet these expectations may result in breach
of confidence, contract or regulation, which
may have a negative impact on Link Group’s
reputation, financial performance and ability
to achieve our strategic objectives.
• mandatory privacy and information security
training to all staff at least annually;
• employing ‘privacy by design’ principles in the
design, development and deployment of policies,
processes, procedures, systems, infrastructure,
products and services;
• proactive management of identified vulnerabil-
ities, with controls in place to prevent, detect,
mitigate and report breaches, including privacy
and data breach response plans and regulatory
reporting mechanisms;
• monitoring of internal and external system traffic;
• regular external penetration testing; and
• user access controls to restrict access to
premises, information and systems.
Link Group maintains close ties with the information
security community and government authorities.
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Together we achieve…1. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
Risk category
Description of the risk and its impact
How we respond
Political and
regulatory
environment
Description
Link Group’s business is influenced and
affected by laws, regulatory compliance and
government policy in each of the jurisdictions
in which it operates.
Political and/or regulatory change, and Link
Group’s ability to comply with regulations, could
enable or inhibit our business objectives.
Impact
Changes could affect the ability to achieve
business objectives and financial performance.
For example, by:
limiting or removing authority to operate;
•
• changing how a business operates; or
• altering resource requirements, operating
efficiency and profitability.
For example:
1. Brexit - the uncertainty of impacts arising
as a result of the United Kingdom’s decision
to exit the European Union.
2. Legislation change in Superannuation
- in the May 2018 Federal Budget, the
Australian Government proposed changes
relating to the treatment of inactive
superannuation accounts (i.e. from 1 July
2019, Member accounts with balances
less than $6,000 and no contribution in
the past 13 months, will have their balance
transferred to the Australian Tax Office, and
their account closed). In its current form,
the proposal may have a material impact
on the number of members administered
by Link Group and therefore negatively
impact future revenue expectations of the
Fund Administration division.
Link Group:
• engages with government, regulatory
authorities and peak industry bodies;
• actively monitors, assesses and manages the
impacts of changes to laws, regulation and
government policy;
• designs processes, procedures and systems
consistent with the stated policy principles
within each jurisdiction;
• works with clients to assist in preparation for,
and mitigation of, the impact of change; and
• has a diversified geographic and
jurisdictional presence.
Link Group’s businesses are supported by
specialist Risk & Compliance professionals,
internal and external legal counsel and expert
third party advisors, as required.
For example:
1. Brexit – Link Group has presence in other
jurisdictions within the European Union to
facilitate continuity of service provisioning to
our clients.
2. Legislative change in Superannuation –
• collaborating with clients to increase
engagement with their members and
optimise opt-in processes for life insurance,
which may materially reduce the number
of impacted accounts; and
• commercial contractual protections
(i.e. Volume clauses).
Well-established divisional regulatory change
processes that closely monitor changes to
the regulatory environment, impacts on Link
Group (and its stakeholders) and supports
clients to prepare for and mitigate the impact of
proposed change.
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Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
Risk category
Description of the risk and its impact
How we respond
Link Group manages this risk through:
• dedicated client relationship managers;
• management of contracted service delivery,
including prompt rectification of issues;
• development of long-term relationships
premised on strategic partnership;
• commercial contractual protections;
• competitive, diversified and integrated product
and service offerings;
• market and product benchmarking and
evaluations; and
reputation and brand equity.
•
Link Group actively monitors and invests in
innovation and new technologies. It has invested
over $300M in delivering technology-driven
solutions for our clients and continues to partner
with industry leaders to expand the range of value-
added services for clients to further enhance
competitive advantage.
Link Group mitigates this risk through:
risk management framework;
• compliance management framework;
•
• skilled and qualified staff;
• documented processes and procedures;
• assurance programs and Internal Audit function;
• professional lines of insurance;
• engagement with regulators;
•
in the case of LAS, governance mechanisms
and processes are in place to assess the
performance of the Investment Managers and
monitor the fulfilment of the fiduciary obligations;
• at least annual compliance training for
•
impacted staff; and
internal complaints mechanism and
dispute resolution systems to identify
consumer concerns.
Client base,
retention and
arrangements
Principal
risk
Description
Link Group may experience greater or less
success in attracting new clients and retaining
existing clients on commercial terms than
expected/desired.
Some factors may include:
• scope and quality of service;
•
increased competition;
• business and regulatory environment;
• strength of relationships;
• perception, bias and preference; and
•
technological disruption and innovation.
Impact
The key industries that Link Group operates in
are all competitive markets and are expected
to remain competitive. This may affect organic
growth capability and the scope and quality of
products and services. It may also influence
resourcing, margins and financial performance.
Description
Link Group’s ability to comply with relevant
obligations may result in regulatory and
consumer exposures, contrary to our
objectives to operate profitable, risk managed,
compliant businesses.
Impact
Link Group primarily provides services to/for
clients as an agent (indirectly accountable), but
also provides primary services to customers
as principal (directly liable). LAS increases the
level of principal risk. This risk provides a high
barrier to entry, which could be a competitive
advantage for Link Group. However, material
failure by Link Group to discharge our principal
obligations may negatively affect financial
performance (compensation, pecuniary
penalties, lost earnings) and reputation. It may
also give rise to regulatory penalties or removal
of authority to operate the relevant business.
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Together we achieve…1. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
Risk category
Description of the risk and its impact
How we respond
Growth
Description
There are a number of factors that may impede
or enhance Link Group’s ability to identify and
execute opportunities to continue to grow and
strengthen the organisation and our businesses.
Examples of some factors may include:
• capacity limitations;
• adverse market conditions;
•
•
• opportunity cost (of pursuing one
lack of available/appropriate opportunities;
regulatory constraints; and
opportunity over another).
Impact
This risk significantly affects the likelihood of
achieving Link Group’s strategic objectives.
Link Group adopts a diversified growth strategy:
• growth with our clients in attractive markets;
• product and service innovation;
• client product and regional expansion;
integration and efficiency benefits; and
•
identif ying and exploiting adjacent
•
market opportunities.
Link Group manages issues within our control.
For example, we aim to optimise each specific
opportunity by closely monitoring relevant business
environments, working collaboratively with industry
and regulators, partnering with organisations
and employing people with appropriate skills,
expertise, and experience.
Acquisition,
Integration and
transformation
Description
The benefits from an acquisition, integration or
transformation could be less than or greater
than expected.
Having successfully executed and integrated more
than 40 business combinations over the past
15 years, Link Group has significant experience
delivering on the expected benefits.
Some factors may include:
This is achieved principally through:
• appropriateness of each plan;
• accuracy of
the calculation of
expected benefits;
• quality and efficiency of execution;
• market conditions; and
• unexpected intervening events.
Impact
The extent to which expected synergies and
other benefits are realised can affect Link
Group’s financial performance, organisational
efficiency, allocation of resources and
strategic plans.
• established and
robust processes
encapsulating people, systems, products
and clients;
• par tnering with organisations and
employing people with appropriate skills,
expertise, and experience to optimise each
specific opportunity;
• disciplined project governance controls;
initial strategic and financial analysis;
•
• contingency factoring;
• sound due diligence practices; and
• contractual protections.
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Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
Risk category
Description of the risk and its impact
How we respond
Systems and
Technology
Description
The performance of systems and technology
that Link Group provides may exceed or fall short
of expectations to provide contracted services.
Impact
Technology is the key enabler of Link Group’s
services. Link Group and our clients depend
on the effective performance, reliability
and availability of Link Group’s technology
platforms, software, third-party data centres
and communications systems.
Counter-party
risk
Description
Link Group relies on the strength and sound
performance of key third party providers to
avoid financial loss, to maintain reputation and
to achieve our objectives.
For example:
•
third-party suppliers of material products,
systems, hardware and software that Link
Group requires to operate our businesses;
• sub-contractors of Link Group, for whose
services Link Group may be liable for; and
• financial institutions that have custody of
corporate and client assets.
Impact
Any failure of a key counter-party has the
potential to negatively affect Link Group’s
provision of services, relationship with clients
and customers. It may also have a negative
impact on Link Group’s reputation, performance
and strategic objectives.
Link Group seeks to:
• utilise best-in-class infrastructure and IT
vendors;
• house infrastructure owned and licensed by
Link Group in data centres;
• develop proprietary applications using industry
standards and methodology, which conform to
standard multi-tier architecture conventions;
• regularly monitor and optimise performance;
and
• maintain current and reliable infrastructure
assets.
In addition, Link Group has:
• robust project initiation control;
• an enterprise project management office; and
• change management and change control
processes.
Link Group mitigates this risk through:
• corporate governance;
• contingency planning;
• diversification and multiple preferred suppliers;
• relationship and contract management;
• insurance arrangements;
• vendor management;
• conflict of interest policies;
• due diligence in tender and requests for proposal
processes;
• sourcing and procurement functions; and
• assurance programs and Internal Audit function.
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Together we achieve…1. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
Risk category
Description of the risk and its impact
How we respond
Access to
finance on
commercial
terms
Foreign
currency
Description
Prevailing market conditions and Link Group’s
relative standing (perception, performance and
credit rating) could increase, reduce or limit
access to funding on more or less favourable
terms than expected, as and when required.
Impact
Link Group operates in competitive markets.
The terms on which Link Group is able to access
funding can affect our financial performance,
equity value and capacity to pursue strategic
growth objectives.
Description
Link Group operates in jurisdictions across
Europe, Africa and the Asia-Pacific, with each
operation trading in their local currency.
Prevailing exchange rates could positively
or negatively affect Link Group’s financial
performance.
Impact
Link Group’s largest currency exposure
is British Pounds as a result of the LAS
acquisition. Unmanaged large exposures to
exchange rates could materially affect Link
Group’s AUD earnings and net asset position.
Ability to attract
and retain key
personnel
Description
Link Group may experience greater or less
success than expected in attracting, retaining
and developing the most appropriate personnel
needed to achieve organisational objectives.
Impact
Although Link Group is a technology-enabled
organisation, it is ultimately a provider of
services. Therefore, people are critical to our
success.
This risk may affect Link Group’s efficiency,
performance and capacity to pursue and
achieve its strategic objectives. It may also affect
the quality and availability of future leadership of
the Group, which in turn may have a negative
impact on reputation and performance.
Link Group mitigates this broad risk through:
tightly monitoring our balance sheet;
•
• staggered debt maturity profile;
• prudent leverage ratios;
• compliance with all debt covenants;
• engagement with the investor communities;
• building strong long-term relationships with a
range of financiers globally; and
• compliance with the ASX corporate
governance principles and continuous
disclosure obligations.
Link Group:
• proactively secured a debt facility in British
pounds, to partially fund the acquisition of
LAS. This results in a ‘natural hedge’ for
the investment in LAS, as foreign exchange
movements in debt balances offset those
related to the net investment;
• uses the foreign currency translation reserve
to capture exchange differences recognised
on consolidation of foreign operations; and
regularly repatriates foreign earnings after tax
to mitigate the risk of exchange rate fluctuations
on earnings from overseas operations.
•
Link Group continues to invest in the development
of our people and culture.
We do this through:
• an open management style;
• development of an effective corporate culture
and values;
• ongoing investment in modern, state of the
art office environments;
•
investment in innovation and new technology;
• providing tools to manage the deployment,
productivity and performance of our people;
• competitive market remuneration coupled with
appropriate performance targeted financial
incentives; and
• providing staff benefits such as career
development support, leave policies, health
and wellness programmes and related benefits.
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Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
8. FY2019 outlook
Operations
• Good organic pipeline of opportunities across the business combining with good momentum already from a number of
client wins in FY2018 (particularly in LAS).
• Continued focus on supporting Fund Administration clients through this period of heightened regulatory focus. The
unmitigated negative revenue impact from the announced budget changes is estimated at ~$55 million as at 30 June 2018.
• REST contract continues to roll on a monthly basis – long term contract remains in advanced stages of negotiation.
• Continued earnings momentum through ongoing disciplined cost management.
Integration activities
Integration activities in Australia are progressing well and remain on track to achieve targeted efficiencies.
•
•
Integration activities in UK have ramped up with the immediate focus on transitioning the business onto Link Group platforms.
• Steps are already being taken to refocus the LAS business to accommodate a shared services model and introduce
uniform technologies to increase group efficiency.
• Benefits from the LAS integration expected to start flowing in FY2019.
Capital Management
• Pro forma leverage of ~1.5 times net debt / Pro forma Operating EBITDA – at the bottom of the guidance range, providing
flexibility for further growth.
• Dividend reinvestment plan remains in place for shareholders.
• Continue to assess a range of opportunities to complement existing operations.
70
Together we achieve…1. Directors’ Report [ CONTINUED ] Operating and Financial Review [ CONTINUED ]
Appendix 1 – Non-IFRS definitions
Link Group uses a number of non-IFRS financial measures in this OFR to evaluate the performance and profitability of the overall
business. The principal non-IFRS financial measures that are referred to in this OFR are as follows:
FY
is financial year ended 30 June (in the applicable year).
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 per 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, capital 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. Additionally, Non-recurring Revenue 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
Operating
EBITDA
is the aggregate segment revenue before elimination of intercompany revenue and recharges
such as Technology & Innovation recharges for IT support, client-related project development and
communications services on-charged by Fund Administration or Corporate Markets to their clients.
Link Group management considers segmental Gross Revenue to be a useful measure of the activity
of each segment.
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,
Link Group 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.
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Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ]
Operating and Financial Review [ CONTINUED ]
Operating
NPATA
Significant
items
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.
refer to revenue or expense items which are considered to be material to NPAT and not part of the
normal operations of the Group. These items typically relate to events that are considered to be ‘one-
off’ and are not expected to re-occur. Significant items are used in both profit and loss and cash
flow presentation. Significant items are broken down into; business combination costs, integration
costs, client migration costs (all above EBITDA) and gain on assets held at fair value and some finance
charges (below EBITDA).
Although Link Group believes that these measures provide useful information about the financial performance of Link Group, they
should be considered as supplementary 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.
72
Together we achieve…1. Directors’ Report [ CONTINUED ] Remuneration Report
Remuneration Report
Introduction from the Chair of the Human Resources & Remuneration Committee
Dear Shareholder,
On behalf of the Board, I present the Remuneration Report for the year ended 30 June 2018. This Report has been
prepared on a consistent basis to the previous year for ease of reference.
Our Remuneration Report received positive shareholder support at the 2017 AGM, with a vote in favour of 99.48%. We thank
you for your support. Our aim is to align remuneration structures and decisions to sustainable shareholder value creation.
FY2018 was a transformational year for Link Group acquiring Link Asset Services (LAS), thereby significantly increasing
the scale, complexity and geographical reach of our business.
In FY2018, Operating EBITDA was $335.3 million, an increase of 53% on the prior year. This Operating EBITDA performance
exceeded the Short Term Incentive (STI) target and therefore the gateway for STI payments was met. The stretch STI
opportunity for achieving Operating EBITDA of at least 110% of target was not reached in FY2018. Performance against
individual Key Performance Indicators (KPIs) of Executive KMP was also strong with individual outcomes at 90% of target
STI opportunities.
In FY2018, the following key remuneration issues were addressed:
• Revised the STI Gateway Operating EBITDA target to account for the contribution from LAS towards the achievement
of overall Operating EBITDA. Further information can be found in Section 3.
•
Introduction of a requirement for Executive KMP to defer part of earned STI into share rights until their minimum
shareholding requirement is met. Further details can be found in Section 3.
• As foreshadowed in the FY2017 Remuneration Report, the Total Shareholder Return (TSR) comparator group under
the Omnibus Equity Plan was amended for FY2018 grants from the S&P/ASX200 (with exclusions) to the S&P/ASX100
(with exclusions) to reflect our growth and market position as a S&P/ASX100 company.
• The Board reviewed the Earnings per Share (EPS) targets in relation to unvested long-term incentive (LTI) awards
following the LAS transaction and determined that no changes to existing targets should be made. The Board’s
decision is explained in Section 1.3.
• On completion of the acquisition of LAS, Anthony O’Keeffe was included as a Key Management Personnel (KMP).
The Board has reviewed remuneration for all Executive KMP as well as Board composition and fees for FY2019 in the
context of the scale, complexity and geographic reach of Link Group, and against benchmark data. Proposed changes
in remuneration for KMP are set out in Section 1.3.
We welcome your feedback on our Remuneration Report.
Yours sincerely,
Sally Pitkin
Human Resources & Remuneration Committee Chair
73
Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] About this Remuneration Report
The Remuneration Report (Report) summarises the remuneration of Link Group’s KMP; namely Directors and Executive KMP
that are named in this Report for the financial year ended 30 June 2018. This Report has been prepared in accordance with the
requirements of section 300A of the Corporations Act 2001 and has been audited.
1. Overview of the Executive KMP remuneration approach
1.1 Remuneration principles & philosophy
Link Group follows the following principles when developing and implementing remuneration decisions. The decisions made
about remuneration should:
• support competitive market pay;
• support the attraction and retention of capable and committed employees;
• align behaviours and outcomes to Link Group values and strategic imperatives;
• align remuneration with sustainable shareholder value creation and returns;
• align remuneration with prudent risk taking and Link Group’s long term financial soundness;
• motivate individuals to pursue Link Group’s long-term growth and success;
• demonstrate a clear relationship between Link Group’s overall performance and the performance of individuals;
• support gender pay equity; and
• comply with all relevant legal, tax and regulatory provisions.
1.2 FY2018 remuneration framework
Link Group’s remuneration framework is designed to reward Executive KMP for achievement of Link Group strategy and shareholder
value creation. Figure 1 outlines the components of Executive KMP remuneration and their purpose.
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Remuneration Report [ CONTINUED ]Together we achieve…1. Directors’ Report [ CONTINUED ] Figure 1: FY2018 Executive KMP remuneration framework
FY2018 EXECUTIVE KMP REMUNERATION FRAMEWORK
Fixed Remuneration
Cash, superannuation,
non-monetary
STI
received as Cash
(50% - 100%
of earned STI)
STI
Deferred share rights subject to a minimum
2 year holding lock (where minimum
shareholding not yet met)
LTI
Performance rights vesting after 3 years (50%)
1 Year
holding lock
(25%)
2 Year
holding lock
(25%)
Year 1
Year 2
Year 3
Year 4
Year 5
FY2018 EXECUTIVE KMP REMUNERATION COMPONENTS
Fixed
Variable “at risk”
Fixed remuneration
Short-term incentive (STI)
Long-term incentive (LTI)
A tool to attract and retain
key talent to Link Group.
Fixed remuneration is targeted around
the median of the market, defi ned as
Australian listed companies of similar
size and/or industry. For roles in the
UK, consideration is also given to
publicly listed companies in the UK
with revenue similar to LAS.
Fixed remuneration may deviate
from the market median depending
on individual alignment to corporate
values, experience, capabilities,
performance and location.
PURPOSE AND ALIGNMENT
To drive achievement of the
short-term fi nancial and pre fi nancial
strategic and operational objectives
as agreed by the Board.
Deferral (where minimum
shareholding not yet met) supports
alignment to creation of sustainable
shareholder value.
VALUE TO INDIVIDUAL DETERMINED BY
Operating EBITDA gateway
determines capacity to pay.
Awards based on Link Group and
business unit fi nancial performance
and individual performance against
specifi ed KPIs. KPIs include fi nancial
and pre-fi nancial targets.
Board discretion to moderate
awards for factors such as alignment
to corporate values and prudent
risk taking.
Stretch STI up to 200% of target
based on stretch Operating
EBITDA targets.
To reward and incentivise Executive
KMP whilst supporting the
sustainable creation of shareholder
value, within Link Group’s prudent
risk management framework.
Vesting is based on achievement of:
Earnings per share performance
against targets (75% of opportunity)
Total shareholder return relative to
constituents of a S&P/ASX index (25%
of opportunity).
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Remuneration Report [ CONTINUED ] Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] 1.3 Key questions about KMP remuneration
This section provides an overview of the key questions our shareholders may have in relation to our KMP remuneration arrangements.
Executive KMP remuneration in FY2018
What changes to
Executive KMP
remuneration structures
have been made
in FY2018?
In FY2018, the Board introduced the requirement for Australian-based Executive KMP to
defer a portion of earned STI into equity until their minimum shareholding requirement is
met. Deferred STI will be delivered in the form of deferred share rights which automatically
convert to deferred shares soon after grant. These shares are subject to a holding lock for
a minimum of 2 years following conversion. Further details can be found in Section 3 of this
Report. This requirement will be extended to all Executive KMP in FY2019.
As foreshadowed in the FY2017 Remuneration Report, the TSR comparator group under
the Omnibus Equity Plan was amended for FY2018 grants from the S&P/ASX200 (with
exclusions) to the S&P/ASX100 (with exclusions) to reflect our growth and market position
as a S&P/ASX100 company.
Have there been any
changes to the Executive
KMP remuneration levels
in FY2018?
The Board reviewed Executive KMP remuneration levels and taking into consideration
market remuneration levels, role responsibilities, and the LAS acquisition, the following
changes to fixed remuneration were made from 1 October 2017:
John McMurtrie
Managing Director
12.5% increase as part of a phased approach to
lift fixed and total remuneration to the median
of the benchmarking group, and in recognition
of the international role responsibilities with the
LAS acquisition.
John Hawkins
Chief Financial Officer
3% increase in line with market remuneration levels,
as identified through market benchmarking data.
Paul Gardiner
CEO Corporate Markets,
CEO Technology & Innovation
20% increase due to increase in role scope covering
Corporate Markets following David Geddes’ retirement,
in addition to role as CEO Technology & Innovation
and commensurate with market remuneration levels
of Heads of similar-sized business units.
Suzanne Holden
CEO Fund Administration
Unchanged.
As STI and LTI opportunity is derived as a percentage of fixed remuneration, increases in
those opportunities were commensurate with increases in fixed remuneration.
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Remuneration Report [ CONTINUED ]Together we achieve…1. Directors’ Report [ CONTINUED ] Executive KMP remuneration in FY2018
How is Link Group’s
performance
reflected in FY2018
remuneration outcomes?
In FY2018 the Operating EBITDA gateway on the STI was achieved. Performance against
individual KPIs for Executive KMP was strong with individual outcomes at 90% of target
STI opportunities. The stretch STI opportunity was not available in FY2018 as the stretch
target was not met.
Further detail on STI outcomes is provided in Section 2.2.
What are
Anthony O’Keeffe’s
remuneration
arrangements?
How is fixed
remuneration
determined?
And how is it positioned
relative to the market?
Anthony O’Keeffe is CEO of LAS and an Executive KMP. Mr O’Keeffe’s remuneration as
detailed in this Report includes:
• A short-term Incentive payment received in April 2018, awarded for meeting LAS
financial performance targets for the period 1 January to 31 December 2017. As Mr
O’Keeffe joined Link Group on 3 November 2017, the amount reported reflects the
portion relevant to the period 3 November to 31 December 2017.
• A payment received in April 2018 in relation to participation in a retention incentive
arrangement, payable over three years until FY2020. The aim of the retention incentive
is to reward Mr O’Keeffe’s ongoing commitment to LAS and Link Group through the
integration period.
• Link Group has continued a tax equalisation arrangement that was in place prior to Link
Group acquiring the business. The arrangement is designed to make tax a neutral factor
for certain employees who are required to work cross-border. The arrangement means
that Mr O’Keeffe is no better or worse off for having worked part of the year in the UK.
In FY2018, Mr O’Keeffe was eligible to participate in the Link Group STI Plan for the
period 1 January to 30 June 2018. Further detail in relation to Mr O’Keeffe’s STI
outcomes is provided in Section 2.2.
•
• A payment to be received in October 2018, following Mr O’Keeffe’s agreement to reduce
his STI opportunity from and including FY2018, which will assist to align the percentage
of remuneration given as a short term incentive with other Executive KMP. The amount
of the payment is the difference between the STI payment Mr O’Keeffe was contractually
entitled to earn prior to the reduction and the reduced STI entitlement. Mr O’Keeffe is
required to remain employed at Link Group until October 2018 to receive this payment.
• Mr O’Keeffe was awarded a grant of Performance Share Rights (PSRs) under the Link
Group LTI Plan in November 2017. Further detail in relation to Mr O’Keeffe’s LTI grant
is provided in Section 3.5.
Fixed remuneration generally includes base salary, superannuation and may include non-
monetary benefits.
Fixed remuneration is targeted at the median of the market. The market is defined as
Australian-listed companies of similar size and/or industry. Consideration is generally
given to S&P/ASX200 companies with market capitalisation 50% to 200% of Link Group’s
12-month average market capitalisation. This comparator group was chosen as most
appropriate given the significant increase in Link Group’s market capitalisation over the
same 12-month period, and also includes entities which are comparable to Link Group.
Where a role match was available, consideration was also given to specific peer companies.
From FY2019, consideration will also be given to UK market data, being defined as publicly
listed companies in the UK with revenue similar to LAS’ 12-month revenue.
Fixed remuneration is generally reviewed against the market annually, however, there is
no guaranteed annual increase.
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Remuneration Report [ CONTINUED ] Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Executive KMP remuneration in FY2018
What proportion of
target remuneration is
‘at risk’ and why is it
considered appropriate
for the business?
Target total remuneration is positioned between the median and 75th percentile of the
market, in line with market norms. The market is as defined in the above section on
fixed remuneration.
A significant portion of Executive KMP remuneration is ‘at risk’ subject to both short and
long-term performance hurdles. The ‘at risk’ components directly align executive pay with
our strategic imperatives and shareholder value creation.
The proportion of total target remuneration ‘at risk’ for Executive KMP ranges from 60%
to 71%.
What is the
STI gateway?
An Operating EBITDA gateway must be met before any STI is paid. The Board determines an
annual Operating EBITDA target, taking into consideration our longer-term growth strategy.
Operating EBITDA is a key measure of success for our business and part of our growth
strategy and is defined on page 33. Including Operating EBITDA as a gateway ensures
affordability of the plan in a given year. Operating EBITDA excludes Significant items.
Payments made under the STI plan are subject to the achievement of a balanced scorecard
of relevant corporate, business unit (where relevant) and individual measures comprising
a combination of Operating EBITDA, Operating NPATA and individual goals.
Goals are aligned to our strategic imperatives. Goals vary by role and across financial
years but broadly fall under the categories of strategic priorities, divisional finance targets,
key divisional objectives, governance and risk, transition and integration of new business
acquisitions, continuous improvement and people.
Strategic goals align to our growth and innovation strategy and in FY2018 included objectives
such as successful acquisition execution and integration, retention of existing clients, new
client wins, developing and launching innovative new products and continuing to explore
growth opportunities.
60% of the STI is weighted towards achieving Operating EBITDA and Operating NPATA
targets. The remaining 40% is weighted towards individual strategic goals which can
include both financial and pre-financial metrics.
The Board has discretion to moderate payment for factors such as alignment to corporate
values and prudent risk taking.
Further detail is included in Section 2.2.
Target opportunity: The target STI opportunity for Executive KMP represents an opportunity
to earn around 30% of total target remuneration. Target STI ranges from 75% to 100%
of fixed remuneration.
Stretch opportunity: The on-target STI may be increased if Link Group achieves at least
110% of the Operating EBITDA target. In addition, an individual must have achieved at
least 80% on their individual strategic goals to receive any stretch STI.
Executive KMP have the opportunity to earn up to 200% of their target STI where the
Operating EBITDA is 150% of target. This represents the maximum STI.
A sliding scale applies between 110% and 150% achievement of the Operating EBITDA target.
What are the
performance measures
for the STI plan?
How do they align with
business strategy?
What is the target and
maximum STI opportunity
each Executive KMP can
earn under the STI plan?
How is this determined?
78
Remuneration Report [ CONTINUED ]Together we achieve…1. Directors’ Report [ CONTINUED ] Executive KMP remuneration in FY2018
In what circumstances is
STI deferred?
In FY2018, the Board introduced the requirement to defer a portion of earned STI into
equity for Australian-based Executive KMP in cases where the minimum shareholding
requirement has not yet been achieved. Deferral is into share rights which automatically
convert to deferred shares soon after grant. These shares are subject to a holding lock
for a minimum period of two years after conversion.
The Board also allows participants to voluntarily elect to sacrifice up to 100% of their
STI outcomes, on a pre-tax basis, in return for a grant of deferred share rights to the
equivalent value.
From FY2019, deferral of a portion of earned STI into equity will be mandatory for all
Executive KMPs in cases where the minimum shareholding requirement has not been
achieved. Link Group is currently considering the design of this scheme taking into account
local tax laws as applicable.
What is the LTI
performance period?
The Omnibus Equity Plan measures performance over a three-year period. Awards lapse
at the end of three years to the extent performance measures are not met. There is no
retesting of awards.
One-half of any vested award is available to the participant at the end of the performance
period. A holding lock applies to the remaining 50%; one-half of which is then available after
a further one and two years, respectively. The Board has determined that the combination
of the three-year vesting period and subsequent two-year holding lock provides alignment
between Executive KMP and Link Group’s long-term growth strategy.
What are the
performance measures
for the LTI plan? How
do they align with
business strategy?
The Omnibus Equity Plan delivers performance rights to participants, subject to the
achievement of EPS targets (75%) and relative TSR performance targets (25%) against a
comparator group of companies. Both measures support the aim of the plan in supporting
our growth and innovation strategies and drive the creation of sustainable shareholder value.
Further detail is included in Section 3.
Why does relative TSR
have a lower weighting
than EPS?
Our key focus is on delivering long-term earnings growth to our shareholders. Link Group
acknowledges that TSR performance relative to a basket of constituents is important to
some investors.
However, in the absence of a sizeable group of comparable industry peers, we also
acknowledge that comparison to a broad S&P/ASX index constituents group can give
arbitrary results that are not reflective of Link Group’s performance, hence the lower
weighting on TSR.
What comparator
group(s) are the LTI
performance measures
assessed against?
The relative TSR component of the LTI for the FY2018 award is compared to the constituents
of the S&P/ASX100, excluding materials, utilities, industrials and energy companies. This
provides a base of 62 companies for the FY2018 grant, before any corporate actions are
considered during the performance period.
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Remuneration Report [ CONTINUED ] Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Executive KMP remuneration in FY2018
Was consideration given
to LTI EPS targets in light
of the LAS acquisition?
The Board reviewed the EPS targets in relation to outstanding LTI awards (FY2017 and
FY2018 awards) following the LAS transaction and determined that no changes to existing
targets should be made.
As a framework for the LAS and future transactions, the Board determined a number of
principles against which to assess the impact of a transaction on the LTI:
1. preserve the value of the awards held by employees;
2. reward for the success of the transaction;
3. maintain the level of stretch expected when the original targets were set;
4. be consistent with general market/shareholder expectations; and
5. maintain the integrity of each year’s remuneration as awarded.
In applying these principles to the LAS acquisition, the Board considered:
• The strategic alignment of the LAS transaction to Link Group’s strategy, with growth
through acquisition one of the five key drivers of growth.
• That FY2018, when the transaction occurred, is not a vesting year for any LTI awards.
• That the capital raisings in July 2017 and April 2018 have operated to retain Link Group’s
conservative leverage profile post the LAS transaction, and limited any influence from
debt leverage in assessing EPS outcomes.
• Participant entitlements were diluted by an estimated 4%. No adjustment to outstanding
awards were made to address the dilution impact.
The Board is satisfied that, on balance, retaining the existing EPS targets is appropriate.
The Board will further consider the impact of LAS on EPS plus other appropriate inputs to
determine targets for future grants of LTI.
What are the minimum
shareholding
requirements for
Executive KMP? Have
Executive KMP met
the requirements?
Executive KMP are required to hold a minimum shareholding of one year’s fixed remuneration
within three years of the date they first become a participant in the Omnibus Equity Plan.
All Executive KMP are in compliance with the minimum shareholding requirement, with
the exception of Anthony O’Keeffe. As noted previously, Mr O’Keeffe joined Link Group
and became a KMP in November 2017 and is required to meet the minimum shareholding
by November 2020.
See Table 12 for further detail.
80
Remuneration Report [ CONTINUED ]Together we achieve…1. Directors’ Report [ CONTINUED ] Executive KMP remuneration in FY2019
Are there any changes
to Executive KMP
remuneration proposed
in FY2019?
The Board has reviewed remuneration for the Executive KMP for FY2019 in the context of
the scale, complexity and geographical reach of Link Group, and market benchmarking
data. The following changes to fixed remuneration for the following Executive KMP will
be made from 1 October 2018:
John McMurtrie
Managing Director
22% increase as part of a continuing phased approach
to position fixed remuneration at the median of the
market (as defined previously).
Paul Gardiner
CEO Corporate Markets,
CEO Technology & Innovation
12% increase due to increase in role scope to include
responsibility for LAS information technology.
As STI and LTI opportunity is derived as a percentage of fixed remuneration, increases in
those opportunities will be commensurate with increases in fixed remuneration.
There will be no changes to remuneration for the other Executive KMP.
Non-Executive Director (NED) remuneration levels were adjusted in FY2018. NED base
and committee fees were increased by 2.5% from 1 October 2017.
In addition, the Chairman’s fee was expressed as a single payment, with no additional fees
paid for committee membership.
The Board appointed Andy Green as a Non-Executive Director in March 2018. Mr Green
is based in the UK and accordingly is remunerated in GBP. See Table 10 for further details.
The Board has reviewed remuneration for NEDs for FY2019 in the context of benchmarking
data and the changes in the scale, complexity and geographic reach of Link Group. As a
result, NED base fees will increase 2.5% from 1 July 2018.
There will be no changes to the NED fee pool in FY2019.
Non-Executive Directors
Were there any changes
to Non-Executive
Director remuneration in
FY2018?
Are there any proposed
changes in FY2019?
What are the minimum
shareholding
requirements for Non-
Executive Directors?
Have Non-Executive
Directors met
the requirements?
NEDs are required to hold a minimum shareholding of one times the NED annual base fee
(not including Committee membership or the higher fee for the Committee Chair) within
three years after the date of their appointment.
At the time of publication of this Report, all NEDs are in compliance with the minimum
shareholding requirement, with the exception of Andy Green. As noted above, Andy
Green joined the Board in March 2018 and is required to meet the minimum shareholding
by March 2021.
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Remuneration Report [ CONTINUED ] Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] 2. Summary information
2.1 Key Management Personnel
The names and titles of KMP are set out below. There have been no other changes to KMP following the end of the financial year.
Name
Position
Non-Executive Directors
Michael Carapiet
Independent Chair and Non-Executive Director
Glen Boreham, AM
Independent Non-Executive Director
Andy Green
Independent Non-Executive Director (appointed 9 March 2018)
Peeyush Gupta
Independent Non-Executive Director
Anne McDonald
Independent Non-Executive Director
Sally Pitkin
Independent Non-Executive Director
Fiona Trafford-Walker
Independent Non-Executive Director
Executive KMPs
John McMurtrie
Executive Director and Managing Director
John Hawkins
Chief Financial Officer
Paul Gardiner
Chief Executive Officer, Corporate Markets;
Chief Executive Officer, Technology & Innovation
Anthony O’Keeffe
Chief Executive Officer, Link Asset Services (effective 3 November 2017)
Suzanne Holden
Chief Executive Officer, Fund Administration (ceased employment effective
2 August 2018)
David Geddes
Chief Executive Officer, Corporate Markets (retired 31 August 2017)
2.2 FY2018 Overview – alignment between performance and Executive KMP remuneration
In FY2018, our Executive KMP remuneration consisted of fixed remuneration, cash-based short-term incentives and a grant of
Performance Share Rights (PSRs) under the long-term incentive plan. The short and long-term incentive plans align remuneration
outcomes to Link Group’s strategic objectives, and reward superior business performance and sustainable shareholder value
creation. In addition to the above elements, the Executive KMP presently hold an estimated 3% of Link Group’s share capital.
FY2018 was another successful year for Link Group as we consolidated our position as a listed company and grew our market
capitalisation to position us in the S&P/ASX100. Operating EBITDA (which excludes the impact of Significant items), a key strategic
measure for Link Group, was $335.3 million and the gateway for STI payments was met.
The original Operating EBITDA target set by the Board excluded any contribution from LAS. Following completion of the LAS
acquisition on 3 November 2017, the Operating EBITDA target was increased to $333.6 million. This revised target applied to all
Executive KMP, with the exception of Anthony O’Keeffe, whose STI target of £52.8 million appropriately reflected LAS’ contribution
to Link Group’s performance for the eight months of trading since acquisition.
Operating EBITDA performance for the financial year ended 30 June 2018 of $335.3 million, including LAS, exceeded the STI
target of $333.6 million. In addition, the Operating EBITDA performance for the financial year ended 30 June 2018, excluding LAS,
was $241.5 million, which was $22.5 million or 10.3% higher than the Operating EBITDA performance for the prior financial year
ended 30 June 2017 of $219.0 million.
82
Remuneration Report [ CONTINUED ]Together we achieve…1. Directors’ Report [ CONTINUED ] Figure 2 demonstrates our performance and the associated STI outcomes.
Figure 2. Group financial performance vs average STI outcome
Group financial performance vs average STI outcome
n
o
i
l
l
i
M
$
400
300
200
100
0
FY2016
FY2017
FY2018
Operating EBITDA
Operating NPATA
Average STI
GATEWAY BASED ON OPERATING EBITDA TARGET OF $333.6 MILLION
110
105
100
95
90
85
80
d
e
v
e
i
h
c
a
I
T
S
%
Total target
remuneration
Individual
STI target
Operating
EBITDA outcome
(60%)
KPI
outcome
(40%)
Individual
STI award
Tables 1, 2 and 3 outline further detail of our performance against our strategic goals in FY2018.
Table 1: FY2018 STI Outcomes
Gateway
Met
Strategic Goals
Executive KMP10
Operating
EBITDA
Divisional
Finance
Business
Development
and Innovation
Transition &
Integration
Governance
People
Total STI
Achieved
John McMurtrie
John Hawkins
Paul Gardiner
Anthony O’Keeffe
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
90%
90%
90%
90%
10 Suzanne Holden ceased employment with Link Group effective 2 August 2018, prior to the Board assessing KPI performance and prior to when the Board
approved payments of STI awards.
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Remuneration Report [ CONTINUED ] Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ]
Table 2: KPI Performance of Executive KMP
Measure
Description
Company Financial
Performance
Operating EBITDA and Operating NPATA performance continued our consistent growth
trajectory in FY2018. Link Group reported Operating EBITDA was $335.3 million in FY2018,
up from $219.0 million in FY2017. Operating NPATA was $206.7 million in FY2018, up from
$123.8 million in FY2017.
Divisional Financial
Divisional financial performances are key drivers in achieving Operating EBITDA and
Operating NPATA.
Corporate Markets Operating EBITDA grew from $50.7 million in FY2017 to $54.9 million
in FY2018 due to increasing products and services provided to existing clients as well as
winning new business in existing jurisdictions. Non-recurring Revenue growth of $13.6
million or 49%, was a key driver of growth reflecting capital markets activities in overseas
markets including South Africa and the UK.
Technology & Innovation Operating EBITDA grew from $55.0 million in FY2017 to $72.9 million
in FY2018, due to the synergy benefits of cost out initiatives arising from the Superpartners
integration coupled with the margin benefits from external revenue growth.
LAS Operating EBITDA for the period was £52.7 million (AUD $93.8m11) representing a
margin of 23% which was 1 percentage point above the margin achieved in the calendar
year ended 31 December 2017.
Transition and Integration
Due to our strategic focus on acquisitions and expansion, transition and integration
performance measures have been included in the STI award metrics.
These transition and integration performance measures included:
• Continued integration of Superpartners to achieve synergies and cost reductions of
$25.7 million.
• During the year, all remaining Fund Administration clients administered on 3rd party
systems were migrated onto Link Group platforms.
• Achieved appropriate regulatory approvals in relation to the LAS transaction.
• Completed development and application of LAS integration planning objectives including
a transition of LAS from Capita plc to Link Group, implementing a people integration
plan, transition into the Link Group culture and other integration objectives focused on
alignment of the two businesses across policies, practices, systems and frameworks.
• Development of a LAS transformation plan to deliver efficiency savings over the
mid-term.
11 GBP figures have been converted to AUD using the prevailing GBP/AUD exchange rates that were used to prepare the financial statements for FY2018.
84
Remuneration Report [ CONTINUED ]Together we achieve…1. Directors’ Report [ CONTINUED ] Measure
Description
Business Development
and Innovation
Business development through new clients, new services and acquisitions are key
drivers of Link Group’s growth strategy. Key highlights included:
• Corporate Markets: Link Group was successful in winning the registry business of
REA Group and Domain Group, and won 27 out of 38 IPOs in Australia during FY2018.
Business wins in overseas markets included winning 53 new clients in India, increased
proxy activity in the UK and corporate actions activity related to the managed separation
of Old Mutual plc in South Africa.
• LAS: LAS was successful in selling new products and services to existing and new
customers including introducing collective pension vehicles to the local government
authorities; winning large bank outsourcing contracts and entering into new territories
with key client relationships in order to support the expansion of client activity.
• Technology & Innovation: Link Group was successful in selling new products
and services into the Fund Administration and Corporate Markets’ client bases. In
addition, new client wins were achieved across a range of value added services
(including digital and print communications, software implementation and licensing).
• Fund Administration: An increased take-up in value-added products and
services, such as unitisation, digital programs and support for regulatory
change helped to offset some disappointing client losses. Link Group was
also successful in winning a new Fund Administration client, Energy Super,
and signed a new five-year contract with existing client, Intrust Super.
Key governance objectives achieved in FY2018 included implementation of a governance
regime for LAS, achievement of all required reporting deadlines including quarterly risk
management reporting, and execution of the Link Group corporate governance framework
to drive good corporate governance principles in how we operate to create sustainable
value for all our stakeholders.
Link Group recognises its people are paramount to the ongoing success of the business.
Key people objectives achieved during the year included:
• Mapping of key talent and development planning, and development of succession
plans for core roles.
• Progress on Diversity and Inclusion Targets by FY2019 including addressing gender
pay gaps.
• Undertaking our first whole of organisation Employee Engagement Survey,
with project plans in place to address key areas of feedback.
Governance
People
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Remuneration Report [ CONTINUED ] Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ]
Short-Term
Incentive Target
($)
Short-Term
Incentive achieved
(% of target)
Short-Term
Incentive
forfeited (%)
Short-Term
Incentive stretch
component
Short-Term
Incentive to be
paid in cash ($)
Table 3: STI amounts awarded
Executive KMP
John McMurtrie
John Hawkins
Paul Gardiner
$900,000
$540,000
$450,000
Anthony O’Keeffe
$267,59312
Suzanne Holden13
$450,000
90%
90%
90%
90%
N/A
10%
10%
10%
10%
N/A
Table 4 outlines the financial performance of Link Group.
Table 4: Five-year performance of Link Group.
Operating EBITDA ($millions)
Net Profit/(loss) after tax ($millions)
Change in share price to 30 June ($)
Declared Dividends (cps)
2018
335.3
143.2
(0.57)
20.5
2017
219.0
85.2
0.03
14.0
2016
190.6
42.5
1.80
8.0
0%
0%
0%
0%
N/A
2015
150.5
3.3
N/A14
N/A14
$810,000
$486,000
$405,000
$240,834
N/A
2014
140.0
(25.2)
N/A14
N/A14
12 Anthony O’Keeffe is based in Jersey and accordingly is remunerated in GBP. His STI target for the period 1 January to 30 June 2018 is £151,250, which has
been converted to AUD using the prevailing GBP/AUD exchange rates that were used to prepare the financial statements for FY2018. This amount does not
include the retention bonus or the one-off STI payment payable to Mr O’Keeffe as part of an agreement to align his STI percentage with the rest of Link Group.
13 Suzanne Holden ceased employment with Link Group effective 2 August 2018, prior to the Board assessing KPI performance and prior to when the Board
approved payments of STI awards.
14 Not applicable: Link Administration Holdings Limited listed on the ASX on 27 October 2015.
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Remuneration Report [ CONTINUED ]Together we achieve…1. Directors’ Report [ CONTINUED ] 2.3 Actual cash remuneration received
Table 5 shows the actual cash remuneration paid or payable to Executive KMP in FY2018 and FY2017. The information in Table 5
differs from the statutory information in Section 2.4 (which is based on the Australian Accounting Standards) as Table 5 includes
the realised value of deferred STI (in FY2018, 25% of the FY2016 deferred STI was realised) and does not include the accounting
value of equity that was expensed, but not realised, under the LTI.
Table 5: Actual remuneration received in FY2018 and FY2017
Executive KMP
John McMurtrie
John Hawkins
Paul Gardiner
Anthony O’Keeffe15
Suzanne Holden
David Geddes18
Year
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Salary
& fees
$
Current year
STI awarded
$
Cash impact of deferral
(from FY2016)
$
Total
remuneration
$
854,951
780,384
644,951
630,384
574,776
488,696
363,128
N/A
579,951
580,384
93,834
480,384
810,000
800,000
486,000
487,500
405,000
302,273
796,53416
N/A
N/A17
450,000
N/A
254,546
160,000
1,824,951
160,000
1,740,384
97,500
97,500
62,500
62,500
N/A
N/A
75,000
75,000
62,500
62,500
1,228,451
1,215,384
1,042,276
853,469
1,159,662
N/A
654,951
1,105,384
156,334
797,430
15 Anthony O’Keeffe is based in Jersey and accordingly is remunerated in GBP. Mr O’Keeffe’s remuneration received from Link Group in FY2018 has been
translated into AUD throughout this Report, using the prevailing GBP/AUD exchange rates that were used to prepare the financial statements for FY2018.
16 Anthony O’Keeffe’s STI amount includes a retention bonus of £166,333, an STI payment of £36,776 in relation to LAS’ financial performance in CY2017
and an STI payment of £136,125 in respect of the period 1 January to 30 June 2018. Mr O’Keeffe will also receive a one-off payment in October 2018 of
£181,500 as part of an agreement to align his STI percentage with other Executive KMP. As this payment is conditional on Mr O’Keeffe remaining employed
by Link Group for the period 1 January 2018 to 25 October 2018, 60% of the payment, being £110,985 has been accrued in FY2018, with the remaining
40% to be accrued in FY2019.
17 Suzanne Holden ceased employment with Link Group effective 2 August 2018, prior to the Board assessing KPI performance and prior to when the Board
approved payments of STI awards.
18 David Geddes retired on 31 August 2017. The Board determined to retain existing awards on-foot including the 2016 Deferred STI component.
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Remuneration Report [ CONTINUED ] Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] 2.4 Executive KMP statutory remuneration table
Table 6 presents the remuneration for Executive KMP for FY2018 and comparative information for FY2017. The information
presented in Table 6 has been prepared in accordance with the Australian Accounting Standards and accordingly differs from the
information presented in the actual remuneration received in Table 5 in Section 2.3.
Table 6: Executive KMP Statutory remuneration
Short-term benefits
Name
Year
Salary
and fees
$
STI19
$
Other
benefits
$
Post
-employment
benefits
Other
long-term
benefits
Super-
annuation
benefits
$
Long
service
leave
$
LTI
$
Total
$
Proportion of
remuneration
related to
performance
Value of
PSRs as a
proportion of
remuneration
John
McMurtrie
John
Hawkins
Paul
Gardiner
2018
854,951
863,333
11,149
25,000
40,919
621,617
2,416,969
36%
2017
780,384
933,333
12,697
19,616
-
195,333
1,941,363
48%
2018
644,951
518,500
11,566
20,049
18,848
299,016
1,512,930
34%
2017
630,384
568,750
12,892
19,616
11,705
103,120
1,346,467
42%
2018
574,776
425,833
11,576
20,049
39,530
225,570
1,297,334
33%
2017
488,696
354,356
13,369
19,616
9,004
67,304
952,345
37%
Anthony
O’Keeffe20
2018
2017
Suzanne
Holden
David
Geddes24
363,128
990,66121 115,01922
37,950
-
180,299
1,687,057
18%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2018
579,951
25,000
11,325
20,049
15,481
260,90823
912,714
N/A
3%
2017
580,384
512,500
12,639
19,616
12,492
95,18723
1,232,818
42%
2018
93,834
20,833
1,748
25,000
2017
480,384
306,629
13,116
34,616
-
-
85,298
226,713
9%
67,304
902,049
34%
Total
2018
3,111,591 2,844,160
162,383
148,097
114,778 1,672,708
8,053,717
27%
2017
2,960,232 2,675,568
64,713
113,080
33,201
528,248
6,375,042
42%
26%
10%
20%
8%
17%
7%
11%
N/A
29%23
8%23
38%
7%
21%
8%
19 All STIs are subject to the Board approving payments in accordance with the STI Plan Rules. The STI described here also includes a deferral component
from the FY2016 STI (with the exception of Anthony O’Keeffe).
20 Anthony O’Keeffe is based in Jersey and accordingly is remunerated in GBP. Mr O’Keeffe’s Actual remuneration received from Link Group in FY2018 has
been translated into AUD using the prevailing GBP/AUD exchange rates that were used to prepare the financial statements for FY2018.
21 Anthony O’Keeffe’s STI amount includes an accrued and cash retention bonus of £166,333, an STI payment of £36,776 in relation to LAS’ financial performance
in CY2017 and an STI payment of £136,125 in respect of the period 1 January to 30 June 2018. Mr O’Keeffe will also receive a one-off payment in October
2018 of £181,500 as part of an agreement to align his STI percentage with other Executive KMP. As this payment is conditional on Mr O’Keeffe remaining
employed by Link Group for the period 1 January 2018 to 25 October 2018, 60% of the payment, being £110,985 has been accrued in FY2018, with the
remaining 40% to be accrued in FY2019
22 Includes an accrual for tax equalisation arrangement as described in Section 1.3.
23 Suzanne Holden ceased employment with Link Group effective 2 August 2018 and all outstanding PSRs (being unvested PSRs) lapsed on this date in
accordance with the terms of the Omnibus Equity Plan Rules.
24 Mr Geddes retired on 31 August 2017. The Board determined to retain existing awards on-foot including the 2016 Deferred STI component, FY2017 LTI and
escrowed shares in relation to the IPO until the ordinary course of payment / vesting.
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Remuneration Report [ CONTINUED ]Together we achieve…1. Directors’ Report [ CONTINUED ]
3. Detailed remuneration information
3.1 Detail of Executive KMP remuneration framework
Table 7 outlines the detail of the FY2018 STI and LTI arrangements.
Table 7: FY2018 approach
STI
Opportunity
The STI delivers a cash payment, subject to the achievement of annual targets.
The target STI opportunity for Executive KMP represents an opportunity to earn around 30% of total
target remuneration. Target STI ranges from 75% to 100% of fixed remuneration.
The on-target STI may be increased if Link Group achieves at least 110% of the Operating EBITDA target.
In addition, an individual must have achieved at least 80% on their individual strategic goals to receive
any stretch STI.
Executive KMP have the opportunity to earn up to 200% of their target STI where the Operating EBITDA
is 150% of target. This represents the maximum STI.
A sliding scale applies between 110% and 150% achievement. No additional payment is made between
100% and less than 110% achievement.
The STI stretch opportunity was not available in FY2018, as the stretch target was not met.
Gateway
A minimum level of Operating EBITDA must be achieved before any STI is paid. This level is set by the
Board annually once the Budget is approved.
In FY2018, the Board revised the STI Gateway Operating EBITDA target to $333.6 million to account for
the contribution from LAS towards the achievement of overall Operating EBITDA. This revised targets
applied to the Executive KMP, with the exception of Anthony O’Keeffe, whose STI target of £52.8 million,
appropriately reflects LAS’ contribution to Link Group performance for the 8 months of trading since the
acquisition on 3 November 2017.
It is intended that the STI Gateway targets for FY2019 will be the same for all Executive KMP.
Performance
measures
Allocation of the STI is by achievement of a balanced scorecard of relevant corporate, business unit
(where relevant) and individual measures aligned to our strategic objectives comprising a combination
of Operating EBITDA, Operating NPATA and individual strategic goals.
Goals vary by role and across financial years but broadly fall under the categories of strategic priorities,
divisional finance targets, key divisional objectives, governance and risk, transition and integration of
new business acquisitions, continuous improvement and people.
In providing a final assessment of performance against goals, the Board may in their discretion also take
into consideration the Executive KMP’s alignment to Link Group’s core values and culture, behaviours,
internal and external stakeholder relationship management, and prudent risk taking. The Board may in
their discretion also take into consideration the impact of circumstances either positive or negative that
arise through the reviewing period such as an acquisition or disposal event, fraud, information security
or privacy breach, reputational damage, client wins or losses and other events.
For FY2018, the weighting of financial versus pre-financial goals was 60% financial metrics (Operating
EBITDA and Operating NPATA) and 40% individual strategic goals, which are a mix of financial or pre-
financial metrics as outlined in Section 2.2.
89
Remuneration Report [ CONTINUED ] Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] STI
Deferral
In FY2018, deferral of a portion of earned STI into equity is mandatory for Australian-based Executive
KMPs in cases where the minimum shareholding requirement has not yet been achieved. Deferral is into
share rights which automatically convert to deferred shares soon after. The deferred amount is subject
to a holding lock for a minimum period of two years after conversion.
From FY2019, deferral of a portion of earned STI into equity will be mandatory for all Executive KMPs
in cases where the minimum shareholding requirement has not been achieved. Link Group is currently
considering the design of this scheme taking into account local tax laws as applicable.
Clawback
The Board has the ability to claw back STI payments in circumstances where there has been a material
misrepresentation of the financial outcomes on which the payment had been assessed and/or the individual
has acted fraudulently or dishonestly or is in material breach of his or her obligations to Link Group.
LTI – Omnibus Equity Plan
Opportunity
(grant value
at maximum)
Performance
period and
holding lock
The maximum grant value of LTI opportunities represents 30% to 43% of the total target remuneration
package for Executive KMP, or 75% to 148% of fixed remuneration.
Performance is measured over a three-year period. Awards lapse at the end of three years to the extent
performance measures are not met. There is no retesting of awards.
One-half of any vested award is available to the participant at the end of the performance period. A
holding lock applies to the remaining 50%; one-half of which is then available after a further one and
two years respectively. Shares are delivered upon PSRs vesting and are held by a trustee while the
holding lock applies.
Award
vehicle
Awards are delivered in the form of Performance Share Rights (PSRs). No dividends are paid during the
performance period. Participants are entitled to receive dividends and to exercise voting rights attaching
to those shares post-vesting while the shares are subject to the holding lock.
A cash-settled alternative (through the issue of indeterminate rights) is included in the Omnibus Equity Plan.
Performance
measures
In FY2018, the Board reviewed the appropriateness of the EPS targets relating to outstanding LTI awards
for FY2017 and FY2018 in light of the LAS acquisition.
As a framework for the LAS and future transactions, the Board determined a number of principles against
which to assess the impact of a transaction on the LTI:
1. preserve the value of the awards held by employees.
2. reward for the success of the transaction.
3. maintain the level of stretch expected when the original targets were set.
4. be consistent with general market/shareholder expectations; and
5. maintain the integrity of each year’s remuneration as awarded.
In applying these principles to the LAS acquisition, the Board considered:
• The strategic alignment of the LAS transaction to Link Group’s strategy, with growth through acquisition
one of the five key drivers of growth.
• That FY2018, when the transaction occurred, is not a vesting year for any LTI awards.
• That the capital raisings in July 2017 and April 2018 have operated to retain Link Group’s conservative
leverage profile post the LAS transaction, and limited any influence from debt leverage in assessing
EPS outcomes.
• Participant entitlements were diluted by an estimated 4%. No adjustment to outstanding awards
were made to address the dilution impact.
90
Remuneration Report [ CONTINUED ]Together we achieve…1. Directors’ Report [ CONTINUED ] LTI – Omnibus Equity Plan
Performance
measures
(cont.)
The Board is satisfied that, on balance, retaining the existing EPS targets is appropriate. Therefore, the
following performance measures apply for FY2018 grants under the LTI:
EPS (75%) – EPS is calculated by dividing Link Group’s Operating NPATA by the undiluted weighted average
number of shares on issue throughout the performance period. The Board has discretion to include or
exclude items from the calculations. Operating NPATA is a measure consistently used internally and by
which both Management and the market tracks Link Group’s performance. While an internal measure,
it receives assurance at each level within the business. PSRs are subject to a compound annual growth
rate in EPS of between a threshold target of 7% and a stretch target of 12%.
The vesting schedule for the EPS portion is as follows:
EPS performance outcome
Percentage of performance
rights that will vest
Compound annual growth rate of less than 7%
Compound annual growth rate of 7%
0%
50%
Compound annual growth rate between 7% and 12%
Pro-rata between 50% and 100%
Compound annual growth rate of 12% or more
100%
TSR (25%) – relative to the constituents of the S&P/ASX100, excluding materials, utilities, industrials and
energy companies. Our starting comparator group, before consideration of any corporate actions during
the vesting period, is 62 companies for the FY2018 grant.
TSR takes into account the change in Link Group’s share price over the relevant performance period, as
well as the dividends paid (dividends are assumed to be reinvested in Link Group shares). Section 1 of
this Remuneration Report outlines the changes to the TSR comparator group for FY2018.
The vesting schedule is as follows:
Link Group’s relative TSR ranking
Link Group ranks below the 50th percentile
Link Group ranks at the 50th percentile
Percentage of performance
rights that will vest
0%
50%
Link Group ranks between the 50th and 75th percentile
Pro-rata between 50% and 100%
Link Group ranks at or above the 75th percentile
100%
Both the EPS and TSR measures support the aim of the LTI principles in supporting our growth and
innovation strategy and driving the creation of sustainable shareholder value.
Our key focus is on delivering earnings growth to our shareholders. Link Group acknowledges that TSR
performance relative to a basket of constituents is important to some investors.
However, in the absence of a sizeable group of comparable industry peers, we also acknowledge that
comparison to a broad S&P/ASX index constituents group can give arbitrary results that are not reflective
of the Company’s performance, hence the lower weighting on TSR.
Change of
control
The Board has the discretion to vest outstanding awards taking into account the portion of the vesting
period and performance against hurdles at the time of the change of control and any replacement equity
offered by third parties. There is no acceleration of awards in respect of a potential change of control.
91
Remuneration Report [ CONTINUED ] Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] LTI – Omnibus Equity Plan
Cessation of
employment
Remuneration
mix
(percentage
of total target
remuneration)
that was set
for FY2018
Clawback
Hedging
policy
Minimum
shareholding
requirement
In the event of a cessation of employment for a “qualifying reason” (for example, death, serious injury,
disability or illness, genuine retirement or retrenchment), equity will be retained ‘on-foot’ and will be tested
against performance hurdles at the original vesting date alongside other participants, having regard to
the portion of the performance period served, unless otherwise determined by the Board.
Total Fixed
Remuneration
%
Target
STI Cash
%
LTI
Grant
%
Total Variable
Remuneration
%
Executive KMP
John McMurtrie
John Hawkins
Paul Gardiner
30%
38%
40%
Anthony O’Keeffe
29%
Suzanne Holden
40%
30%
31%
30%
29%25
30%
40%
31%
30%
42%
30%
70%
62%
60%
71%
60%
Under the Omnibus Equity Plan, the Board has the ability to claw back equity (whether vested or not) in
circumstances where the individual has acted fraudulently or dishonestly or is in material breach of his
or her obligations to Link Group.
Executive KMP are not permitted to hedge unvested award nor awards subject to a holding lock.
Executive KMP are required to hold a minimum of one year’s annual fixed remuneration within three years
of the date they become a participant in the Omnibus Equity Plan.
All Executive KMP are in compliance with the minimum shareholding policy, with the exception of Anthony
O’Keeffe. As noted previously, Mr O’Keeffe joined Link Group and became a KMP in November 2017
and is required to meet the minimum shareholding by November 2020.
25 This amount does not include the retention bonus or the one-off STI payment payable to Mr O’Keeffe as part of an agreement to align his remuneration with
the rest of Link Group.
92
Remuneration Report [ CONTINUED ]Together we achieve…1. Directors’ Report [ CONTINUED ] 3.2 Key terms of employment contracts
The key employment terms for the Executive KMP are summarised in Table 8. All Executive KMP have continuing contracts.
Table 8: Employment terms
Executive KMP
John McMurtrie
John Hawkins
Paul Gardiner
Anthony O’Keeffe
Suzanne Holden
All employment contracts contain:
Employment term and leave entitlement
Notice period
Annual leave entitlement
Company and Employee
6 weeks
5 weeks
4 weeks
6 weeks
4 weeks
12 months
12 months
12 months
12 months
12 months
•
total remuneration packages (including mandatory superannuation or pension contributions), plus car parking and any related
FBT liability (where applicable);
the opportunity to participate in the short-term incentive plan;
•
• eligibility to participate in the long-term incentive plan;
• express provisions protecting Link Group’s confidential information and intellectual property; and
• post-employment restrictions covering non-competition, non-solicitation of clients and non-poaching of employees for a maximum
of 12 months.
In addition, Anthony O’Keeffe’s employment contract contains:
• a car allowance;
• eligibility to participate in LAS’ life insurance, private medical and permanent health insurance schemes; and
• a tax equalisation arrangement that is designed to make tax a neutral factor for certain employees who are required to work
cross-border. The arrangement means that Mr O’Keeffe is no better or worse off for having worked part of the year in the UK.
Under the terms of all employment contracts, either party is entitled to terminate employment by giving 12 months’ written notice.
Link Group may, at its election, make a payment in lieu of that notice based on the Executive KMP’s base remuneration package.
Link Group can also terminate the employment contract on 12 months’ written notice where an Executive KMP becomes incapacitated
by illness or injury for an accumulated period of more than six months in any 12-month period or where Link Group is advised by
an independent medical officer that, due to physical or mental ill health, the relevant individual is unable to perform their duties on
a permanent basis. Link Group may also terminate employment immediately and without further payment where the employee
commits serious misconduct and on other similar grounds.
Any termination payments are paid within applicable legislative requirements.
93
Remuneration Report [ CONTINUED ] Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] 3.3 Non-Executive Director fees and statutory remuneration table
Non-Executive Director fee policy
The pool for payment of Non-Executive Directors’ (NED) fees is capped by the Company at $2 million per annum. NED fees were
set at the time of IPO, with reference to relevant market data. The Board reviews fees annually and seeks benchmarking data
using the same comparator groups used for the Executive KMP, being Australian-listed companies of similar size and/or industry.
Consideration is given to S&P/ASX200 entities with market capitalisation 50% to 200% of Link Group’s 12-month average market
capitalisation and specific peer companies. The Board also reviews NED remuneration with reference to the scale, complexity
and geographical reach of Link Group.
NEDs receive an annual fee for Board membership and for service as the Chair or a Member of Board Committees. The Chair
of the Board does not receive any fees for serving as a Member of Board Committees and NEDs do not receive fees for serving
on the Nominations Committee. NEDs do not participate in any variable or incentive plans and do not receive retirement benefits
other than superannuation.
NED base and committee fees were increased in FY2018 by 2.5%. NED fees are set out in Table 9:
Table 9: Non-Executive Director fees26
Base fees
Committee
Risk and Audit Committee
Human Resources and Remuneration Committee
Technology & Innovation Committee
Nominations Committee
Chair fee
$356,70027
$35,875
$28,700
$28,700
-
Member fee
$164,000
$17,938
$14,350
$14,350
-
26 Amounts are exclusive of GST and inclusive of any required superannuation payments (where applicable).
27 The Chairman’s fee is delivered as a single payment. The Chairman receives no additional fees for any Committee work undertaken.
94
Remuneration Report [ CONTINUED ]Together we achieve…1. Directors’ Report [ CONTINUED ] Fees paid to NEDs during FY2018 and FY2017 were:
Table 10: Statutory remuneration for Non-Executive Directors
Name
Michael Carapiet
Cameron Blanks
Glen Boreham
Andy Green28
Peeyush Gupta
Paul McCullagh
Anne McDonald
Sally Pitkin
Fiona Trafford-Walker
Total
Year
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Fees
$
Superannuation
benefits
$
354,525
355,668
N/A
28,227
205,788
202,000
82,829
N/A
165,140
98,208
N/A
31,314
165,140
155,414
209,354
193,893
195,995
187,968
1,378,771
1,252,692
-
-
N/A
2,682
-
-
-
N/A
15,688
9,330
N/A
2,975
15,688
14,764
-
11,607
16,924
21,032
48,300
62,390
Total
$
354,525
355,668
N/A
30,909
205,788
202,000
82,829
N/A
180,828
107,538
N/A
34,289
180,828
170,178
209,354
205,500
212,919
209,000
1,427,071
1,315,082
Minimum shareholding requirements
The Board has adopted a Minimum Shareholding Policy to assist in aligning the interests of all Directors with our shareholders.
Each NED must hold a minimum number of shares, equivalent to one times the NED annual base fee (not including Committee
membership or the higher fee for the Committee Chair). The minimum shareholding requirement must be met within three years
after the date of their appointment.
At the time of publication of this Report, all NEDs are in compliance with the minimum shareholding requirements, with the
exception of Andy Green. As noted previously, Andy Green joined the Board in March 2018 and is required to meet the minimum
shareholding by March 2021.
28 Andy Green is based in the UK and accordingly is remunerated in GBP. His annual fee for serving as a Director of the Company is £100,000. In addition,
he receives a travel allowance of £3,000 for each return trip to Australia to attend Board meetings. Mr Green also receives a fee of £40,000 for serving as
Chairman of the LAS Advisory Forum, which advises the Board on strategic, operational and risk matters in relation to the Link Asset Services business.
95
Remuneration Report [ CONTINUED ] Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] 3.4 Remuneration governance
The Human Resources & Remuneration Committee (the Committee) assists the Board with:
• oversight of Link Group’s Human Resources strategy and supporting policies and practices for our employees and NEDs and
monitoring the implementation and effectiveness of the strategy, policies and practices; and
• oversight of remuneration policies and practices for our employees and NEDs, and monitoring the implementation and
effectiveness of the policies and practices.
Figure 3 outlines the relationship between the Board, Committee, Management and external advisors. The Committee comprises
independent NEDs appointed by the Board.
Figure 3
Board
Oversees Non-Executive Director and Executive KMP remuneration
Reviews and approves recommendations from Human Resources & Remuneration Committee
Human Resources & Remuneration Committee
Is responsible for ensuring the:
• alignment of remuneration policies and practices with the human resources strategy;
• attraction and retention of capable and committed employees and Directors;
• continuing development of a “pay for performance” culture and oversight of overall
organisation culture and risk; and
• alignment of Executive KMP remuneration to sustainable shareholder returns, and
Link Group’s strategic and operational imperatives.
The Committee:
• makes recommendations to the Board on Link Group’s remuneration strategy and
framework;
• makes recommendations on Non-Executive Director remuneration;
reviews and approves Senior Executives’ terms of employment; and
•
• considers recommendations from Management.
External Advisors
• provide independent advice to the
Committee and / or Management on
remuneration market data, market
practice and other remuneration
related matters; and
• provide independent advice to
the Committee on Management
proposals.
Management
Makes recommendations to the Committee on the Group’s remuneration strategy and framework
During FY2018, Link Group received external advice from EY related to market remuneration benchmarking, market remuneration
insights around remuneration structures and assistance with the drafting of this Remuneration Report.
No remuneration recommendations were provided by any external advisors.
96
Remuneration Report [ CONTINUED ]Together we achieve…1. Directors’ Report [ CONTINUED ] 3.5 Additional required disclosures
Grants of PSRs to Executive KMP at 30 June 2018
Table 11 outlines the grant of share rights for Executive KMP in FY2018.
Table 11: Share Rights
Total number
of PSRs as at
1 July 2017
PSRs
granted in
FY2018
Grant
date
Expiry date
for PSRs
granted in
FY2018
Exercise Price
for PSRs granted
in FY2018
Fair value of PSRs
granted in FY2018
EPS
TSR
Total number
of PSRs as at
30 June 2018
John McMurtrie
127,992
157,720
20.11.17
20.11.24
John Hawkins
58,496
70,974
20.11.17
20.11.24
Paul Gardiner
38,179
59,145
20.11.17
20.11.24
Anthony O’Keeffe
-
101,363
20.11.17
20.11.24
Suzanne Holden
53,996
59,145
20.11.17
20.11.24
David Geddes
38,179
-
20.11.17
20.11.24
Nil
Nil
Nil
Nil
Nil
Nil
$7.74
$5.24
285,712
$7.74
$5.24
129,470
$7.74
$5.24
97,324
$7.74
$5.24
101,363
$7.74
$5.24
113,141
$7.74
$5.24
38,179
All PSRs granted during FY2018 vest over a service period covering 1 July 2017 to 30 June 2020. No share rights vested or lapsed
during the year. Suzanne Holden ceased employment with Link Group effective 2 August 2018 and all outstanding PSRs (being
unvested PSRs) lapsed on this date in accordance with the terms of the Omnibus Equity Plan Rules.
Movements in shareholdings
The movement during the reporting period in the number of ordinary shares in Link Administration Holdings Limited held, directly,
indirectly or beneficially, by each KMP, including their related parties, is set out in Table 12.
Table 12: Shareholding movement
Balance at
1 July 2017
Received on
exercise of
options / rights
Purchased/
Acquired
Disposed
Michael Carapiet
1,008,450
Glen Boreham
Andy Green
Peeyush Gupta
Anne McDonald
Sally Pitkin
70,643
-
31,397
19,500
44,745
Fiona Trafford-Walker
20,946
John McMurtrie
12,688,180
John Hawkins
Paul Gardiner
3,192,234
395,280
Anthony O’Keeffe
-
Suzanne Holden
356,167
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
438,710
27,557
-
12,248
12,362
16,272
8,170
1,043,650
200,037
150,594
57,440
-
-
-
-
-
-
-
-
-
-
136,029
-
-
Balance at
30 June 2018
1,447,160
98,200
-
43,645
31,862
61,017
29,116
13,731,830
3,392,271
409,845
57,440
356,167
97
Remuneration Report [ CONTINUED ] Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ] Other Information
Loans to Key Management Personnel and their related parties
There were no loans to KMP during the year.
Other transactions with Key Management Personnel
A number of Link Group’s NEDs are directors of other entities, which will, from time to time, transact with Link Group. The terms
and conditions of the transactions with these entities were no more favourable than those available, or which might reasonably
be expected to be available, on similar transactions to non-key management personnel-related entities on an arm’s length basis.
Those transactions are the provision of Link Group services to companies of which some of the NEDs were directors, such as
registry services.
From time to time, Directors of Link Group, or their related entities, may purchase services from Link Group. These purchases are
on the same terms and conditions as those entered into by other Link Group employees or customers and are engaged on an arm’s
length basis. These services relate to some NEDs being members of superannuation funds to which Link Group provides services.
Other Information
Significant Changes in State of Affairs
Link Asset Services
• Link Group successfully completed an institutional and retail entitlement offer in July 2017, issuing a further 130,839,343
ordinary shares, raising $883.2 million.
• The proceeds were used, along with a new debt facility (£485 million, drawn to £465 million) to complete the acquisition of Link
Asset Services from Capita plc for $1,548.0 million (£909.5 million) on 3 November 2017. The consideration paid included a
capital charge and other minor adjustments which together amounted to £21.5 million, in addition to the £888 million purchase
price previously disclosed.
• The acquisition of Link Asset Services has broadened Link Group’s geographical presence providing immediate scale in the
UK, Jersey and Ireland, and provides a growth platform in Europe.
Other changes in state of affairs
On 18 August 2017 the Directors approved the introduction of the Link Group Dividend Reinvestment Plan (DRP). The DRP allows
shareholders to reinvest some or all of their dividend in new shares rather than receiving their dividend as a cash payment. The
DRP resulted in a further 1,909,296 ordinary shares valued at $14.0 million being issued in October 2017 and 1,566,181 ordinary
shares valued at $13.0 million being issued in April 2018.
Link Group completed an institutional placement in April 2018 and related share purchase plan in May 2018, issuing a further
35,294,118 and 136,587 ordinary shares, respectively. The combined $301.2 million proceeds were used to repay $177.8 million
in Australian Dollar denominated interest bearing loans and borrowings. The residual proceeds remain held in cash and cash
equivalents at 30 June 2018 and provide Link Group with balance sheet flexibility to continue to pursue strategic opportunities.
In the opinion of the Directors, aside from the matters described above, there were no other significant changes in the state of the
affairs of the Company or Link Group that occurred during the financial year ended 30 June 2018.
Events Subsequent to Reporting Date
In the opinion of the Directors, there has not arisen in the interval between the end of the financial year and the date of this report
any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect
significantly the operations of Link Group, the results of those operations, or the state of affairs of Link Group, in future financial years.
Likely Developments
Further information about the likely developments in the operations of Link Group and the expected results of those operations
in future financial years has not been included in this report because disclosure of the information would be likely to result in
unreasonable prejudice to Link Group.
Environmental Regulation
Link Group’s operations are not subject to any significant environmental regulations under either Commonwealth or State legislation.
The Board believes Link Group has adequate systems in place for the management of its environmental requirements and is not
aware of any breach of those environmental requirements as they apply to Link Group.
98
Remuneration Report [ CONTINUED ]Together we achieve…1. Directors’ Report [ CONTINUED ] Indemnification and Insurance
The Company has agreed to indemnify, to the extent permitted by the Corporations Act 2001, each Director and officer in respect
of certain losses and liabilities (including all reasonable legal expenses) which the Director or officer may incur as a result of, or by
reason of being a Director or officer of Link Group or a related body corporate.
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company
or any related entity against a liability incurred by the auditor.
In accordance with the provisions of the Corporations Act 2001, the Company has a Directors’ and officers’ liability policy which
covers all Directors and officers of Link Administration Holdings Limited and its Controlled Entities. The terms of the policy specifically
prohibit disclosure of details of the amount of the insurance cover and the premium paid.
During the financial year, the Company has not paid any premium in respect of a contract to insure the auditor of the Company
or any of the auditor’s related entities.
Corporate Governance
The Board is committed to implementing the highest standards of corporate governance appropriate to Link Group, taking into
account the Company’s size, structure and nature of its operations. Link Group’s Corporate Governance Statement reports against
the Third Edition of the ASX Corporate Governance Council’s Principles and Recommendations. The Corporate Governance
Statement is approved by the Board and is available on the Link Group website at http://linkgroup.com/about-us.html.
Rounding Off
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, and in
accordance with that Instrument amounts in the financial statements and Directors’ Report have been rounded off to the nearest
thousand dollars, unless otherwise stated.
Non-audit Services
During the year KPMG, Link Group’s auditor, performed certain other services in addition to the audit of the financial statements
amounting to $247,715 (2017: $615,458). The Board has considered the non-audit services provided during the year by the auditor
and in accordance with written advice provided by resolution of the Risk and Audit Committee, is satisfied that the provision of
those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
• All non-audit services were subject to the corporate governance procedures adopted by Link Group and have been reviewed
by the Risk and Audit Committee to ensure they do not impact the integrity and objectivity of the auditor; and
• The non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting
in a management or decision making capacity for Link Group, acting as an advocate for Link Group or jointly sharing risks
and rewards.
Details of the amounts paid to KPMG for audit and non-audit services provided during the year are disclosed in Note 27 to the
financial statements.
Lead Auditor’s Independence Declaration
The Lead Auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page
100 and forms part of the Directors’ Report for the financial year ended 30 June 2018.
Signed in accordance with a resolution of the Board of Directors.
Dated 17 August 2018 at Sydney.
Michael Carapiet
Chair
John McMurtrie
Managing Director
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Remuneration Report [ CONTINUED ] Link Group • Annual Report 20181. Directors’ Report [ CONTINUED ]
100
Together we achieve…1. Directors’ Report [ CONTINUED ]
Revenue – rendering of services
Expenses:
Employee expenses
Occupancy expenses
IT costs
Administrative and general expenses
Acquisition and capital management related expenses
Depreciation expense
Intangibles amortisation expense
Gain on financial assets held at fair value through profit and loss
Finance income
Finance costs
Net finance costs
Profit before tax
Tax expense
Profit for the year
Other comprehensive income
Items that will never be reclassified to profit or loss:
Defined benefit re-measurement
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences for foreign operations, net of tax
Other comprehensive income, net of tax
Total comprehensive income for the year
Note
2018
$’000
2017
$’000
3
4
12
13
16
1,198,416
779,976
(580,208)
(350,907)
(49,655)
(89,267)
(172,089)
(16,875)
(908,094)
(16,399)
(72,666)
(89,065)
(31,281)
(77,110)
(113,200)
(16,929)
(589,427)
(13,278)
(45,276)
(58,554)
7,322
5,567
4,626
(21,105)
(16,479)
776
(14,834)
(14,058)
192,100
123,504
6(a)
(48,874)
(38,336)
143,226
85,168
(25)
(43)
23,104
23,079
(774)
(817)
166,305
84,351
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the notes to the financial statements.
101
Consolidated Statement of Profit or Loss and Other Comprehensive Income for the financial year ended 30 June 2018 Link Group • Annual Report 20182. Financial Statements Profit attributable to:
Owners of the Company
Non-controlling interest
Profit for the year
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interest
Total comprehensive income for the year
Earnings per share
Basic earnings per share
Diluted-earnings per share
Note
2018
$’000
2017
$’000
141,660
84,632
1,566
143,226
536
85,168
164,778
83,857
1,527
494
166,305
84,351
Cents per
Share
Cents per
Share29
28.56
28.48
22.59
22.56
5
5
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the notes to the financial statements.
29 Prior year comparative earnings per share have been restated due to the bonus element of new shares issued at a discount to market value during the year.
Refer to Note 5.
102
Consolidated Statement of Profit or Loss and Other Comprehensive Income for the financial year ended 30 June 2018 [ CONTINUED ]Together we achieve…2. Financial Statements [ CONTINUED ] Consolidated Statement of Financial Position
as at 30 June 2018
Current assets
Cash and cash equivalents
Trade and other receivables
Derivative financial assets
Other assets
Current tax assets
Fund assets
Total current assets
Non-current assets
Investments
Plant and equipment
Intangible assets
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Provisions
Employee benefits
Current tax liabilities
Fund liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Provisions
Employee benefits
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity attributable to equity holders of the parent
Non-controlling interest
Total equity
Note
14(b)
7
18
9
18
12
13
6(d)
8
15
10
11
9
8
15
10
11
6(d)
19
20
21
30 June 2018
$’000
30 June 2017
$’000
265,512
302,301
-
36,112
6,544
576,016
1,186,485
144,230
91,734
2,457,153
52,727
251
18,162
98,691
2,413
17,079
163
-
136,508
138,689
66,023
850,146
42,437
130
2,746,095
1,097,425
3,932,580
1,233,933
284,144
530
18,835
47,551
31,630
589,312
972,002
73,268
821,907
48,247
5,761
111,399
1,060,582
101,071
241
15,358
39,195
28,711
-
184,576
47,833
312,892
8,121
6,781
56,379
432,006
2,032,584
616,582
1,899,996
617,351
1,875,538
17,421
4,999
1,897,958
2,038
689,372
(77,772)
4,999
616,599
752
1,899,996
617,351
The consolidated statement of financial position is to be read in conjunction with the notes to the financial statements.
103
Link Group • Annual Report 20182. Financial Statements [ CONTINUED ] Consolidated Statement of Changes in Equity
as at 30 June 2018
Share
capital
Reserves
Retained
earnings
$’000
$’000
$’000
Total equity
attributable to
equity holders
of the parent
$’000
Non-
controlling
interest
Total
equity
$’000
$’000
Balance at 1 July 2017
689,372
(77,772)
4,999
616,599
752
617,351
-
141,660
141,660
1,566
143,226
(25)
23,143
23,118
-
-
-
(25)
23,143
23,118
-
(39)
(39)
(25)
23,104
23,079
23,118
141,660
164,778
1,527
166,305
141,660
(141,660)
-
-
-
Net profit
Defined benefit re-measurement
Foreign currency translation
differences, net of tax
Total other comprehensive
income, net of income tax
Total comprehensive income
for the year
Transfer from retained
earnings to reserves
Transactions with shareholders
Dividends declared during the year
Equity settled share based
payments
Issue of share capital, net of costs
of raising capital and tax
Total contributions by and
distributions to owners
-
-
-
-
-
-
-
-
(73,729)
4,144
1,186,166
-
1,186,166
(69,585)
-
-
-
-
(73,729)
(241)
(73,970)
4,144
1,186,166
-
-
4,144
1,186,166
1,116,581
(241)
1,116,340
Balance at 30 June 2018
1,875,538
17,421
4,999
1,897,958
2,038
1,899,996
The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements.
104
Together we achieve…2. Financial Statements [ CONTINUED ] Consolidated Statement of Changes in Equity
as at 30 June 2018 [ C O N TIN U ED ]
Share
capital
Reserves
Retained
earnings
$’000
$’000
$’000
Total equity
attributable to
equity holders
of the parent
$’000
Non-
controlling
interest
Total
equity
$’000
$’000
Balance at 1 July 2016
689,004
(112,417)
4,999
581,586
Net profit
Defined benefit re-measurement
Foreign currency translation
differences, net of tax
Total other comprehensive
income, net of income tax
Total comprehensive income
for the year
Transfer from retained
earnings to Reserves
Transactions with shareholders
Dividends declared during the year
Equity settled share based
payments
Acquisition of non-controlling
interest in a subsidiary
-
-
-
-
-
-
-
-
-
Change in estimate of tax
associated with equity raising costs
368
-
84,632
84,632
(43)
(732)
(775)
-
-
-
(43)
(732)
(775)
476
536
-
(42)
(42)
582,062
85,168
(43)
(774)
(817)
(775)
84,632
83,857
494
84,351
84,632
(84,632)
-
-
-
(50,372)
(225)
(50,597)
(50,372)
1,170
(10)
-
-
-
-
-
-
1,170
(10)
368
(48,844)
Total contributions by and
distributions to owners
368
(49,212)
Balance at 30 June 2017
689,372
(77,772)
4,999
616,599
The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements.
-
7
-
1,170
(3)
368
(218)
752
(49,062)
617,351
105
Link Group • Annual Report 20182. Financial Statements [ CONTINUED ] Consolidated Statement of Cash Flows
for the financial year ended 30 June 2018
Cash flows from operating activities
Cash receipts in the course of operations
Cash payments in the course of operations
Business combination/acquisition costs paid
Integration costs paid
Client migration costs paid
IT business transformation costs paid
Interest received
Dividends received
Borrowing costs paid
Income taxes paid
Net cash provided by operating activities
14(a)
Cash flows from investing activities
Payments for plant and equipment
Payments for software
Acquisition of subsidiary, net of cash acquired
Proceeds from settlement of derivatives
Payments for investments
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment of borrowing transaction costs
Proceeds from the issue of shares
Payment of costs related to the issue of equity
Dividends paid to owners of the Company
Dividends paid to non-controlling interest
Proceeds from transactions with non-controlling interest
Net cash provided by/(used in) financing activities
Note
2018
$’000
2017
$’000
1,324,924
(1,004,628)
320,296
(25,008)
(16,877)
(16,835)
-
4,239
369
(17,559)
(40,497)
208,128
(15,420)
(50,902)
(1,475,689)
9,847
(5,077)
(1,537,241)
1,048,282
(561,272)
(4,649)
1,184,327
(26,613)
(46,668)
(241)
-
856,998
(640,452)
216,546
(7,168)
(17,334)
(30,587)
(536)
226
386
(10,846)
(2,431)
148,256
(11,046)
(25,053)
(24,342)
-
(68,512)
(128,953)
98,000
(77,696)
-
-
-
(50,372)
(225)
33
1,593,166
(30,260)
Net increase/(decrease) in cash and cash equivalents
264,053
(10,957)
Cash and cash equivalents at the beginning of the financial year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the financial year
14(b)
18,162
(16,703)
265,512
30,153
(1,034)
18,162
The consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements.
106
Together we achieve…2. Financial Statements [ CONTINUED ] Preparation of this Report
1. General information
Link Administration Holdings Limited (the “Company”) is a company incorporated and domiciled in Australia. The Company’s
registered office and principal place of business is Level 12, 680 George Street, Sydney NSW 2000, Australia. The consolidated
financial statements of Link Group as at and for the year ended 30 June 2018 comprise the Company and its subsidiaries and Link
Group’s interest in associates and jointly controlled entities. Link Group is a for-profit entity. Link Group is a market leading provider
of technology-enabled administration solutions. Link Group’s core businesses of fund administration and securities registration
are complemented by expertise in digital solutions and data analytics. Link Group provides technology solutions customised to
the unique requirements of each and every client.
2. Basis of preparation
(a) Statement of compliance
The consolidated financial statements are general purpose financial statements which have been prepared in accordance with
Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations
Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRS) adopted by the
International Accounting Standards Board (IASB). The consolidated financial statements have been prepared on a going concern
basis. The Directors of the Company consider it probable that Link Group will continue to fulfil all obligations as and when they
fall due for the foreseeable future and accordingly consider that Link Group’s financial statements should be prepared on a going
concern basis.
The consolidated financial statements were approved by the Board of Directors on 17 August 2018.
(b) Basis of measurement
The financial statements have been prepared on the historical cost basis except for financial instruments designated at fair value
through profit or loss, which are measured at fair value.
(c) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency and the
functional currency of the majority of Link Group entities.
(d) Use of estimates and judgements
Preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised and in any future periods affected.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements are disclosed in the following notes to the financial statements:
• Note 6 (e) Utilisation of tax losses
• Note 10 Provisions
• Note 13 Key assumptions in impairment testing for cash generating units (CGU) containing goodwill
• Note 18
Fair value of level 3 financial instruments
• Note 22 Share based payments; and
• Note 23 Business combinations
107
Link Group • Annual Report 20183. Notes to the Financial Statements Preparation of this Report [ CONTINUED ]
(e) Changes in accounting policies
Link Group has consistently applied the same accounting policies to all periods presented in these consolidated financial statements.
Link Group has applied the following standards and amendments for the first time for their annual reporting period commencing
1 July 2017:
• AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107 Statement
of Cash Flows. The amendments to AASB 107 require disclosure of changes in liabilities arising from financing activities, see
Note 14(c).
The adoption of these amendments did not have any impact on the amounts recognised in prior periods and will also not affect
the current or future periods.
(f) Foreign currency
(i) Foreign currency transactions
Transactions, assets and liabilities in foreign currencies are translated to the respective functional currencies of Link Group entities
using the following applicable exchange rate:
Foreign currency amount
Transactions
Monetary assets and liability
Applicable exchange rate
Date of transaction
Reporting date
Non-monetary assets and liability measured at fair value
Date fair value is determined
Foreign currency differences arising on translation are recognised in profit or loss.
(ii) Foreign operations
The assets and liabilities of foreign operations are translated to Australian dollars at the following applicable exchange rates:
Foreign currency amount
Asset and liabilities
Income and expenses
Applicable exchange rate
Reporting date
Date of transaction
On consolidation, foreign exchange differences arising from the translation of any net investment in foreign entities are recognised
in other comprehensive income and presented in equity in the Foreign Currency Translation Reserve. Foreign exchange gains and
losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned
nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised in
other comprehensive income and presented in equity in the Foreign Currency Translation Reserve.
(g) Rounding off
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, and in
accordance with that Instrument all financial information presented in Australian dollars has been rounded to the nearest thousand
unless otherwise stated.
108
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Operating Results
3. Operating segments
(a) Reportable segments
Link Group has four reportable segments, as described below, which are Link Group’s key divisions. Each of the divisions offer
different products and services and are managed separately because they require different technology and business strategies to
service their respective markets and comply with relevant legislative or other requirements. Financial information for each division
is provided regularly to Link Group’s Managing Director (the chief operating decision maker). The following summary describes
the operations in each of Link Group’s reportable segments:
• Fund Administration (“FA”) – provides core member and employer administration services, combined with a full range of
value-added services including an integrated clearing house, financial planning and advice, direct investment options and
trustee services.
• Corporate Markets (“CM”) – provides a uniquely integrated range of corporate markets capabilities including shareholder
management and analytics, stakeholder engagement, share and unit registry, employee share plans, company secretarial
support, as well as various specialist offerings such as insolvency solutions.
• Technology and Innovation (“T&I”) – formerly known as Information, Digital and Data Services, T&I provides core services
of development and maintenance of proprietary IT systems and platforms, and value-added services of data analytics, digital
solutions and digital communications. T&I supports the FA and CM segments, as well as a number of external clients.
• Link Asset Services (“LAS”) – provides a broad range of financial and administrative services in the UK and Europe across
the following businesses:
• Link Market Services – share registration, share plan services and treasury solutions to corporate clients.
• Link Fund Solutions – third-party administration and transfer agency services to asset managers and a variety of investment funds.
• Corporate & Private Client Services – finance and accounting, company secretarial, entity management, trust and company
services, including inter-generational transfers.
• Banking & Credit Management – loan origination and servicing, debt work-out, compliance and regulatory oversight.
109
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Operating Results [ CONTINUED ]
Revenues from external customers, revenues from transactions with other segments, measure of profit or loss (Operating EBITDA)
and total assets are presented below for each reportable segment.
For the year ended
30 June 2018
FA
CM
T&I
LAS30
Total
reportable
segments
Head
office
$’000
$’000
$’000
$’000
$’000
$’000
Total
Link
Group
$’000
Segment revenue
559,975
214,774
230,655
404,946
1,410,350
Inter-segment eliminations
Revenues from external
customers
-
(4,527)
(207,407)
-
(211,934)
559,975
210,247
23,248
404,946
1,198,416
-
-
-
1,410,350
(211,934)
1,198,416
Operating EBITDA
123,084
54,897
72,889
93,799
344,669
(9,327)
335,342
Total assets at year end
466,666
403,331
209,711
2,491,198 3,570,906
361,674 3,932,580
For the year ended
30 June 2017
Segment revenue
562,348
198,420
215,902
Inter-segment eliminations
Revenues from external
customers
Operating EBITDA
-
(2,519)
(194,175)
562,348
195,901
118,113
50,698
21,727
55,029
Total assets at year end
455,498
396,273
195,649
-
-
-
-
-
976,670
(196,694)
779,976
-
-
-
976,670
(196,694)
779,976
223,840
(4,819)
219,021
1,047,420
186,513
1,233,933
30 Represents LAS’s results for 8 months ended 30 June 2018, following its acquisition on 3 November 2017.
110
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Operating Results [ CONTINUED ]
A reconciliation of information provided on reportable segment measures of profit or loss to the consolidated net profit after tax
is provided below.
Operating EBITDA
Significant items:
- Business combination/acquisition costs
- Integration costs
- Client migration costs
- LAS integration costs
Total significant items
Depreciation expense
Intangibles amortisation expense – non-acquisition related
Intangibles amortisation expense – acquisition related
Gain on financial assets held at fair value through profit and loss
Finance income
Finance expense
Profit before tax
Income tax expense
Net profit after tax
2018
$’000
2017
$’000
335,342
219,021
(16,877)
(2,161)
(15,104)
(10,878)
(45,020)
(16,399)
(30,800)
(41,866)
7,322
4,626
(21,105)
192,100
(48,874)
143,226
(16,043)
(4,680)
(7,749)
-
(28,472)
(13,278)
(21,583)
(23,693)
5,567
776
(14,834)
123,504
(38,336)
85,168
(b) Geographic information
Historically, Link Group operated predominantly in Australia (country of domicile) and New Zealand. Following the acquisition
of Link Asset Services on 3 November 2017, Link Group had total revenue and non-current assets attributed to the following
geographic locations.
Revenue
2018
$’000
Non-current assets
2017
$’000
2018
$’000
2017
$’000
Australia and New Zealand
723,823
714,976
885,333
869,470
United Kingdom and Channel Islands
Other countries
277,328
197,265
1,198,416
17,005
47,995
779,976
1,078,483
585,322
2,549,138
3,115
43,714
916,299
In presenting the geographic information, revenue and non-current assets are allocated based on the country in which the legal
entity is domiciled.
(c) Major clients
Link Group had one (2017: two) major client in the Fund Administration division, which generated revenues of $140.6 million (2017:
combined revenues of $235.9 million). The reduction in major clients during the year ended 30 June 2018 was due to Link Group’s
increased consolidated revenue following the acquisition of Link Asset Services.
111
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Operating Results [ CONTINUED ]
Segment reporting
Segment results that are reported to Link Group’s Managing Director (the chief operating decision maker) include items directly
attributable to a segment as well as those that can be allocated on a reasonable basis.
Revenue
Revenue is earned from rendering of services to customers and is recognised on an accruals basis in the period in which it is
earned, to the extent that it is probable that the economic benefits will flow to Link Group and the revenue can be reliably measured.
4. Administrative and general expenses
Costs recharged to clients
Professional & consulting expenses
Office expenses
Insurance costs
Travel expense
Other expenses
5. Earnings per share
2018
$’000
(75,981)
(31,028)
(11,458)
(10,024)
(10,709)
(32,889)
(172,089)
2017
$’000
(64,118)
(11,602)
(11,323)
(6,385)
(6,280)
(13,492)
(113,200)
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares outstanding during the period. Ordinary shares on issue have been adjusted for the
bonus element of new shares issued at a discount to market value during the year.
2018
$’000
2017
$’000
Profit for the year attributable to owners of the Company
141,660
84,632
Weighted average number of ordinary shares (basic)
Issued ordinary shares at the beginning of the financial year
Effect of allotment and issuances
Effect of bonus entitlement offer on ordinary shares
Weighted average number of ordinary shares (basic)
Number of
shares31
’000
Number of
shares31
’000
359,797
135,073
1,101
495,971
359,797
-
14,797
374,594
31 The weighted average number of ordinary shares used in the Basic and Diluted earnings per share calculation for the current and comparative year were
adjusted retrospectively in accordance with AASB 133 Earnings per Share following the issue of new shares at a discount to market value during the year.
When new shares are issued at a discount to market value (“bonus element”), there is a resulting theoretical dilution of existing ordinary shares on issue,
leading to a decrease in basic and diluted earnings per share.
112
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Operating Results [ CONTINUED ]
(b) Diluted earnings per share
Diluted earnings per share is determined by adjusting the profit and loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares, which comprise Performance
Share Rights (PSRs) granted to employees. Dilutive securities have been adjusted for the bonus element of new shares issued at
a discount to market value during the year.
2018
$’000
2017
$’000
Profit for the year attributable to owners of the Company
141,660
84,632
Weighted average number of ordinary shares (diluted)
Basic weighted average number of ordinary shares
Effect of dilutive PSRs
Effect of bonus entitlement offer on dilutive PSRs
Number of
shares32
’000
Number of
shares32
’000
495,971
1,436
3
374,594
488
20
Weighted average number of ordinary shares (diluted)
497,410
375,102
Basic earnings per share (cents)
Diluted earnings per share (cents)
6. Taxation
(a) Income tax expense
Current tax expense
Current year
Adjustment for prior years
Deferred tax (expense)/benefit
Origination and reversal of temporary differences
Adjustment for prior years
28.56
28.48
22.59
22.56
2018
$’000
2017
$’000
(55,439)
(352)
(55,791)
6,581
336
6,917
(34,960)
(756)
(35,716)
(4,092)
1,472
(2,620)
Tax expense from continuing operations
(48,874)
(38,336)
32 The weighted average number of ordinary shares used in the Basic and Diluted earnings per share calculation for the current and comparative year were
adjusted retrospectively in accordance with AASB 133 Earnings per Share following the issue of new shares at a discount to market value during the year.
When new shares are issued at a discount to market value (“bonus element”), there is a resulting theoretical dilution of existing ordinary shares on issue,
leading to a decrease in basic and diluted earnings per share.
113
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Operating Results [ CONTINUED ]
Profit before income tax
Prima facie income tax expense calculated
at 30% on operating profit from ordinary activities:
Effect of tax rates in foreign jurisdictions
Non-deductible expenses
Non-assessable income
Recognition/(de-recognition) of previously unrecognised/(recognised) tax losses
Over provision of tax in respect of prior years
Income tax expense
Movement in temporary differences
Utilisation of recognised tax losses
Income tax payable on current year profits
(b) Effective tax rates for Australian and overseas operations
2018
$’000
2017
$’000
192,100
123,504
(57,630)
(37,051)
5,107
(5,885)
5,224
4,327
(17)
340
(5,213)
478
2,394
716
(48,874)
(38,336)
(6,581)
8,889
(46,566)
3,298
5,687
(29,351)
Profit
before tax
2018
Income tax
expense
Effective
tax rate
Profit
before tax
2017
Income tax
expense
Effective
tax rate
$’000
$’000
$’000
$’000
Australian operations
Overseas operations
Total
120,058
72,042
192,100
(36,138)
(12,736)
(48,874)
30.10%
17.68%
25.44%
118,779
4,725
123,504
(36,866)
(1,470)
(38,336)
31.04%
31.11%
31.04%
(c) Tax recognised in other comprehensive income and equity
Foreign Currency
Translation Reserve
Before
tax
$’000
2018
Tax
expense
$’000
Net of
tax
$’000
26,275
26,275
(3,171)
(3,171)
23,104
23,104
Before
tax
$’000
(946)
(946)
2017
Tax
benefit
$’000
172
172
Net of
tax
$’000
(774)
(774)
114
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ]
Operating Results [ CONTINUED ]
(d) Deferred tax assets/(liabilities)
Deferred tax asset:
Provisions
Accruals
Business/acquisition related costs
Deferred income
Cash flow hedge
Other
Tax losses
Deferred tax liability:
Intangible assets
Plant, equipment & software
Other
2018
$’000
2017
$’000
32,387
30,875
728
6,410
1,091
-
576
11,535
52,727
(86,333)
(17,857)
(7,209)
(111,399)
917
9,565
1,187
(724)
78
539
42,437
(36,590)
(12,226)
(7,563)
(56,379)
Deferred tax asset:
Provisions
Accruals
Business/acquisition related costs
Deferred income
Cash flow hedge
Other
Tax losses
Deferred tax liability:
Intangible assets
Plant, equipment & software
Other
Balance at
1 July
2017
Acquired
in business
combinations
Recognised
in profit or
loss
Recognised
in OCI
Recognised
directly in
equity
Balance at
30 June
2018
$’000
$’000
$’000
$’000
$’000
$’000
30,875
587
917
9,565
1,187
(724)
78
539
42,437
-
-
-
-
220
20,279
21,086
637
(196)
(4,545)
(96)
724
(71)
(8,809)
(12,356)
288
7
-
-
-
349
(474)
170
-
-
1,390
-
-
-
-
1,390
32,387
728
6,410
1,091
-
576
11,535
52,727
(36,590)
(12,226)
(7,563)
(53,653)
(8,490)
-
7,151
2,958
355
(3,241)
(99)
(1)
(56,379)
(62,143)
10,464
(3,341)
-
-
-
-
(86,333)
(17,857)
(7,209)
(111,399)
115
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Operating Results [ CONTINUED ]
Deferred tax asset:
Provisions
Accruals
Business/acquisition related costs
Deferred income
Cash flow hedge
Other
Tax losses
Deferred tax liability:
Intangible assets
Plant, equipment & software
Other
Balance at
1 July
2016
Acquired
in business
combinations
Recognised
in profit or
loss
Recognised
in OCI
Recognised
directly in
equity
Balance at
30 June
2017
$’000
$’000
$’000
$’000
$’000
$’000
36,857
979
12,474
1,527
-
743
3,264
55,844
(38,865)
(15,097)
(6,562)
(60,524)
256
-
-
-
-
-
-
256
(1,384)
-
-
(1,384)
(6,071)
(62)
(3,277)
(340)
(724)
(665)
(2,716)
(13,855)
3,678
2,871
(1,001)
5,548
(167)
-
-
-
-
-
(9)
(176)
(19)
-
-
(19)
-
-
368
-
-
-
-
30,875
917
9,565
1,187
(724)
78
539
368
42,437
-
-
-
-
(36,590)
(12,226)
(7,563)
(56,379)
(e) Unrecognised tax losses
As at 30 June 2018 Link Group had carried forward tax losses unrecognised for deferred tax purposes, available to offset against
taxable income in future years, in the following jurisdictions:
• Australian tax losses of $212.1 million (2017: $225.5 million);
• UK tax losses of $13.3 million (2017: $0.3 million); and
• Other jurisdiction tax losses of $0.2 million (2017: $1.2 million).
The tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these losses
because it is not probable that conditions will permit their utilisation in the foreseeable future.
Significant accounting estimate and judgement
Judgement is required in determining whether it is probable future conditions will permit utilisation of carried forward tax
losses. Deferred tax assets in respect of Link Group’s carried forward tax losses have not been recognised to the extent it is
not probable that conditions will permit their utilisation in the foreseeable future.
(f) Franking credits
Amount of franking credits available to shareholders for subsequent financial years
2018
$’000
4,420
2017
$’000
637
The ability to use the franking credits is dependent on the ability to declare dividends. The Company seeks to maintain a surplus
franking credit balance at 30 June each year by considering the amount of current year income tax related payments when
determining the franking of dividends.
116
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Operating Results [ CONTINUED ]
Current tax
Current tax is the expected tax payable on the taxable income for the current year, using tax rates enacted or substantively enacted
at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised
for the following temporary differences:
•
•
the initial recognition of goodwill;
the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting
nor taxable profit; and
• differences relating to investments in subsidiaries and jointly controlled entities to the extent it is probable that they will not
reverse in the foreseeable future.
The measurement of deferred tax reflects the tax consequences that would follow the manner in which Link Group expects, at the
end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on
the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised for unused tax
losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be realised.
The United Kingdom corporation tax rate will decrease to 17% from 1 April 2020. Deferred tax balances in respect to the Link
Group’s United Kingdom subsidiaries have been adjusted to reflect the tax rate expected to be applicable when the temporary
difference is reversed.
Offsetting deferred tax balances
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they
relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to
settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Tax consolidation or grouping
Australia
The Company and its wholly-owned Australian subsidiaries are part of a tax consolidated group. As a consequence, all members
of the tax-consolidated group are taxed as a single entity. The head entity within the tax consolidated group is Link Administration
Holdings Limited. Members of the Australian tax-consolidated group have entered into a tax sharing agreement that requires
wholly-owned subsidiaries to make contributions to the head entity for current tax liabilities. Under the tax funding agreement,
the subsidiaries reimburse the Company for their portion of Link Group’s current tax liability and recognise this payment as an
inter-entity payable/receivable in their financial statements. The Company reimburses the subsidiaries for any deferred tax asset
arising from unused tax losses and/or tax credits.
Overseas
The Company also has wholly-owned subsidiaries in the following foreign jurisdictions which have made the following elections
with the relevant local taxation authority:
• United Kingdom and Jersey subsidiaries have elected to apply tax grouping rules to share tax losses and/or tax payments
in the United Kingdom and Jersey; and
• Other countries subsidiaries have elected to form a tax group (or adopt fiscal unity) in relevant European countries.
117
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Operating Assets and Liabilities
7. Trade and other receivables
Trade receivables
Less: provision for impaired amounts
Investment management debtors
Other debtors
2018
$’000
222,653
(4,292)
218,361
65,392
18,548
302,301
2017
$’000
96,654
(1,654)
95,000
-
3,691
98,691
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised costs less provision for doubtful
debts. Trade receivables are generally due after 14 to 30 days.
Link Group reviews the collectability and recoverability of trade receivables. A provision for doubtful debts has been made for the
estimated non recoverable trade receivable amounts arising from services provided.
Investment management debtors consist of amounts due from authorised funds, receivable by Link Fund Solutions Limited (the
Authorised Corporate Director) in respect of managing these authorised funds.
8. Trade and other payables
Current
Trade creditors
Investment management creditors
Deferred consideration
Accrued operational expenses
Other creditors and accruals
Non-current
Deferred consideration
Indemnified payables
Other creditors and accruals
2018
$’000
2017
$’000
18,720
88,008
9
65,893
111,514
284,144
444
16,542
56,282
73,268
17,547
-
2,547
17,056
63,921
101,071
-
-
47,833
47,833
Trade and other payables
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost.
Investment management creditors consist of amounts due to authorised funds, payable by Link Fund Solutions Limited (the
Authorised Corporate Director) in respect of managing these authorised funds.
118
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Operating Assets and Liabilities [ CONTINUED ]
9. Fund assets and liabilities
Fund assets
Fund receivables
Fund liabilities
Fund payables
2018
$’000
2017
$’000
576,016
576,016
(589,312)
(589,312)
-
-
-
-
Fund assets and liabilities
These balances relate to investors’ purchase or redemption of units in authorised funds of which Link Fund Solutions Limited (Link
Asset Services’ collective investment scheme administration business) is the Authorised Corporate Director. Link Fund Solutions
Limited acts in the role of principal in the transactions, and the balances are due to and from the investors and investment funds. As
at 30 June 2018, $13.3 million ($589.3 million liabilities net of $576.0 million assets) of net cash was due to investors and investment
funds. The net payable position arose because Link Fund Solutions Limited was yet to fund settlement with some investors and/
or funds. The majority of funds need to be settled within a 4 day settlement period.
10. Provisions
Current
Provisions
Non-current
Provisions
2018
$’000
2017
$’000
18,835
15,358
48,247
8,121
A reconciliation of the carrying amount of each material class of provisions is set out below:
Claims
Integration
Migration
related
Onerous
contracts
Indemnified
redress
Other
Total
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2017
15,968
2,964
1,701
1,948
-
898
23,479
Incurred/acquired through business
combinations
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Foreign exchange translation
difference
Balance at 30 June 2018
Current
Non-current
38,019
6,972
(7,196)
(3,857)
1,647
51,553
13,864
37,689
-
671
-
-
5,078
104,404
8,087
155,588
-
-
489
8,132
(1,336)
(1,649)
(2,544)
(110,170)
(480)
(123,375)
(712)
(38)
1,549
561
988
-
(52)
-
-
-
-
-
(50)
(4,619)
215
4,697
3,416
1,281
5,766
339
7,877
-
-
-
9,283
67,082
994
8,289
18,835
48,247
119
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ]
Operating Assets and Liabilities [ CONTINUED ]
Significant accounting estimate and judgement
Judgement is required in determining the expected outflow of economic benefits required to settle provisions. Provisions are
based on expected obligations at reporting date under current legal and contractual requirements and using estimates based
on past experience.
Provisions
A provision is recognised if, as a result of a past event, Link Group has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability. The unwinding of the discount is treated as a finance expense.
Claims: Link Group recognises a provision for claims arising from processing errors and other events associated with the handling
of administration activities for and on behalf of clients. Provisions are measured at the cost that Link Group expects to incur in
settling the claim. The provision also includes an estimate of claims that have been incurred but are not yet reported.
Integration: The integration provision includes restructuring costs. The restructuring provision is based on estimates of the future
costs associated with redundancies. The provision calculation includes assumptions around the timing and costs of redundancies.
A provision for restructuring is recognised when Link Group has approved a detailed and formal restructuring plan and the
restructuring either has commenced or has been announced publicly. Future operating costs are not included in the provision.
Migration related: The migration provisions represent contractual liabilities incurred through business combinations and other
related liabilities. The migration provision recognised on acquisition is stated at fair value based on estimates of the costs required
to perform the migration procedures contractually required under the agreements.
Onerous contracts: A provision for onerous contracts is recognised when the expected benefits to be derived by Link Group
from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at
the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the
contract. Before a provision is established, Link Group recognises any impairment loss on the assets associated with that contract.
Indemnified redress: The indemnified redress provision was acquired as part of the Link Asset Services and was a contractual
liability to make indemnified redress payments where the timing or amount of the payments was uncertain. The provision related
to redress amounts payable to former investors of the Connaught Income Series 1 Fund, of which Link Fund Solutions was the
operator until September 2009. Link Group was indemnified for the value of the payments, and also recognised a receivable of
$104.4 million on acquisition of LAS in respect of this matter.
Other: Other provisions are for contractual make-good obligations. Make good provisions relate to Link Group’s future obligation
to remove fixtures and fittings or reinstate leaseholds back to original condition.
11. Employee benefits
Current
Employee entitlements
Non-current
Employee entitlements
2018
$’000
2017
$’000
47,551
39,195
5,761
6,781
Long-term employee benefits
Link Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned
in return for their service in the current and prior periods plus related on-costs; that benefit is discounted to determine its present
value and the fair value of any related assets is deducted.
Short-term employee benefits
Liabilities for employee benefits for wages, salaries, and annual leave represent present obligations resulting from employees’
services provided to reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that
the Company wholly expects to pay as at the reporting date including related on-costs, such as workers compensation insurance
and payroll tax (where applicable).
120
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Operating Assets and Liabilities [ CONTINUED ]
12. Plant and equipment
Cost
Balance at 1 July 2017
Acquisitions through business combinations
Additions
Effects of movements in exchange rates
Disposals/write offs
Balance at 30 June 2018
Depreciation and impairment losses
Balance at 1 July 2017
Depreciation charge for the period
Effects of movements in exchange rates
Disposals/write offs
Balance at 30 June 2018
Plant &
equipment
Fixtures and
fittings
$’000
$’000
Total
$’000
112,730
20,813
20,447
1,894
(448)
55,734
8,290
14,491
932
(443)
79,004
56,996
12,523
5,956
962
(5)
76,432
155,436
(28,327)
(10,371)
(562)
372
(18,380)
(6,028)
(411)
5
(46,707)
(16,399)
(973)
377
(38,888)
(24,814)
(63,702)
Carrying amount at 30 June 2018
40,116
51,618
91,734
Cost
Balance at 1 July 2016
Additions
Effects of movements in exchange rates
Disposals/write offs
Balance at 30 June 2017
Depreciation and impairment losses
Balance at 1 July 2016
Depreciation charge for the period
Effects of movements in exchange rates
Disposals/write offs
Balance at 30 June 2017
62,999
13,215
(65)
(20,415)
55,734
(39,799)
(8,939)
33
20,378
(28,327)
50,839
18,942
(73)
(12,712)
56,996
(26,755)
(4,339)
2
12,712
(18,380)
113,838
32,157
(138)
(33,127)
112,730
(66,554)
(13,278)
35
33,090
(46,707)
Carrying amount at 30 June 2017
27,407
38,616
66,023
121
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Operating Assets and Liabilities [ CONTINUED ]
Recognition and measurement
Items of plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost
includes expenditures that are directly attributable to the acquisition of the asset. Purchased software that is integral to the
functionality of the related equipment is capitalised as part of that equipment.
The expected useful life and the depreciation methods are listed below:
Item
Office equipment
Fixture and fitting
Useful life
3 – 8 years
2 – 10 years
Leased plant and equipment
3 – 10 years
Depreciation method
Straight-line
Straight-line
Straight-line
Depreciation methods, useful lives and residual values are reassessed at the reporting date.
During the financial year ended 30 June 2017, Link Group retired $32.6 million of fully depreciated assets following relocation and/
or re-fitout of some of its office locations.
122
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Operating Assets and Liabilities [ CONTINUED ]
13. Intangible assets
Cost
Balance at 1 July 2017
Acquisitions through business combinations
Additions
Transfers
Effects of movements in exchange rates
Disposals/Assets written off
Balance at 30 June 2018
Amortisation and impairment losses
Balance at 1 July 2017
Amortisation charge
Effects of movements in exchange rates
Disposals/Assets written off
Balance at 30 June 2018
Goodwill
$’000
Client
relationships
$’000
Software
$’000
Brand
Names
$’000
Total
$’000
613,014
1,120,050
221,027
306,259
-
-
-
-
47,948
13,821
-
-
350,092
130,675
55,813
-
6,974
-
4,272
1,188,405
-
-
-
194
-
1,556,984
55,813
-
68,937
-
1,781,012
541,107
543,554
4,466
2,870,139
(2,512)
(99,579)
(234,219)
(1,949)
(338,259)
-
-
-
(32,059)
(40,286)
(542)
(1,432)
-
-
(321)
(87)
-
(72,666)
(2,061)
-
(2,512)
(132,180)
(275,937)
(2,357)
(412,986)
Carrying amount at 30 June 2018
1,778,500
408,927
267,617
2,109
2,457,153
Cost
Balance at 1 July 2016
Acquisitions through business combinations
Additions
Transfers
Effects of movements in exchange rates
Disposals/Assets written off
Balance at 30 June 2017
Amortisation and impairment losses
Balance at 1 July 2016
Amortisation charge
Effects of movements in exchange rates
Disposals/Assets written off
Balance at 30 June 2017
594,546
18,370
-
-
98
-
217,200
322,646
4,476
1,138,868
4,562
-
-
(735)
-
267
27,180
-
(1)
-
-
-
-
(204)
-
23,199
27,180
-
(842)
-
613,014
221,027
350,092
4,272
1,188,405
(2,500)
-
(12)
-
(85,455)
(14,806)
(204,081)
(30,158)
(1,670)
(293,706)
(312)
(45,276)
682
-
20
-
33
-
723
-
(2,512)
(99,579)
(234,219)
(1,949)
(338,259)
Carrying amount at 30 June 2017
610,502
121,448
115,873
2,323
850,146
123
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Operating Assets and Liabilities [ CONTINUED ]
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the cost of the acquisition over Link Group’s interest
in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. Subsequent to initial measurement,
goodwill is measured at cost less accumulated impairment losses.
Client relationships
Client relationships acquired in business combinations are recognised initially at fair value, and are subsequently amortised according
to the expected useful life of these relationships.
Software
Link Group capitalises in-house developed software that meets business and client needs and enables operational efficiencies
to be achieved.
Development expenditure is capitalised only if development costs are directly attributable, can be measured reliably, the product or
process is technically and commercially feasible, future economic benefits are probable and Link Group intends to, and has sufficient
resources to, complete development and to use or sell the asset. Other software development costs are expensed as incurred.
Brand Names
Brand names acquired in business combinations are recognised initially at fair value, and are subsequently amortised according
to the expected useful life of the brand name.
Amortisation
Amortisation is charged on a straight-line basis over the estimated useful lives of intangible assets, except when another systematic
basis measuring the pattern in which the economic benefits of a software asset are consumed can be reliably measured. In such
cases, amortisation is charged on that systematic basis over the estimated useful life of that asset. The estimated useful lives for
the current and comparative periods are as follows:
Item
Software
Client relationships
Brand Names
Useful life
2 – 15 years
3 – 20 years
5 – 10 years
Significant accounting estimate and judgement
Judgement is required in estimating recoverable amounts of cash generating units (CGUs) to which intangible assets with an
indefinite useful life (goodwill) are allocated. All key assumptions applied in value in use calculation were determined using the
past experiences of Link Group and management. Where possible, assumptions were validated against external sources
of information.
Impairment testing for CGUs containing goodwill
For the purpose of impairment testing, goodwill is allocated to Link Group’s operating divisions. The aggregate carrying amounts
of goodwill allocated to each CGU are as follows:
Fund Administration
Corporate Markets Australia and New Zealand
Corporate Markets Overseas
Technology and Innovation
Link Asset Services
Total goodwill
124
2018
$’000
279,212
251,501
42,046
39,275
1,166,466
1,778,500
2017
$’000
279,262
252,244
39,721
39,275
-
610,502
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Operating Assets and Liabilities [ CONTINUED ]
The carrying amounts of Link Group’s goodwill and intangible assets are tested annually for impairment.
For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the cash inflows of other assets or CGUs. The goodwill and any other intangible
assets with indefinite lives acquired in a business combination, for the purpose of impairment testing, is allocated to CGUs that are
expected to benefit from the synergies of the combination.
An impairment loss is recognised in profit and loss if the carrying amount of an asset or its CGU exceeds its recoverable amount.
Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the
units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
The recoverable amounts of CGUs were determined through value in use calculations. The value in use calculations applied a
post-tax discounted cash flow model, based on a five year budget approved by the Board and an appropriate terminal value. Cash
flows after the fifth year were projected at growth rates of:
Fund Administration
Corporate Markets Australia and New Zealand
Corporate Markets Overseas
Technology and Innovation
Link Asset Services
2018
2.5%
2.5%
2.8%
2.5%
1.9%
2017
2.5%
2.5%
3.4%
2.5%
n/a
The value in use calculations employed a range of pre-tax discount rates from 9.38% to 11.34% (2017: 10.00% to 11.86%).
These rates relate to the risks in the respective segments and countries in which they operate. The discount rate used reflects
management’s estimate of the time value of money and Link Group’s weighted average cost of capital (WACC), which is calculated
separately for each CGU.
Management is of the opinion that other reasonable changes in the key assumptions on which the recoverable amount of Link
Group’s goodwill is based would not cause Link Group’s carrying amount to exceed its recoverable amount.
125
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Operating Assets and Liabilities [ CONTINUED ]
14. Notes to the statement of cash flows
(a) Reconciliation of net profit after tax to net cash inflow from operating activities
Net profit after income tax
Add/(less) non-cash items
Depreciation
Amortisation
Unrealised foreign exchange loss
Unwinding discount on provisions and deferred consideration
Borrowing cost amortisation
Loss on disposal/write off of plant and equipment
Gain on financial assets held at fair value through profit & loss
Net cash inflow from operating activities
before changes in assets and liabilities
Change in operating assets and liabilities
Change in trade and other receivables
Change in other assets
Change in fund assets and fund liabilities
Change in trade and other payables
Change in employee benefits
Change in provisions
Change in current and deferred tax balances
Net cash inflow from operating activities
(b) Reconciliation of Cash
Cash and cash equivalents
2018
$’000
2017
$’000
143,226
85,168
16,399
72,666
211
114
1,230
71
(7,322)
13,278
45,276
536
2,855
647
37
(5,567)
226,595
142,230
(34,930)
(7,341)
15,141
5,989
4,005
(9,709)
8,378
208,128
(9)
(3,515)
-
15,981
(808)
(41,572)
35,949
148,256
265,512
18,162
(c) Reconciliation of movement in liabilities to cash flows arising from financing activities
Non-cash
30 June
2017
Financing
cash flows
$’000
$’000
Borrowing
cost
amortisation
$’000
Foreign
exchange
movement
$’000
Interest-bearing loans and borrowings - Current
Interest-bearing loans and borrowings - Non-current
Total liabilities from financing activities
241
312,892
313,133
295
482,920
483,215
-
1,230
1,230
(6)
24,865
24,859
30 June
2018
$’000
530
821,907
822,437
126
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Capital Structure, Financing and Risk Management
15. Interest-bearing loans and borrowings
Current
Finance lease
Non-current
Finance lease
Loans
Financing Arrangements
Total facilities available:
Non amortising term loan facility
Working capital facility
Non amortising term loan facility
Working capital facility
Facilities utilised at reporting date:
Non amortising term loan facility
Working capital facility
Non amortising term loan facility
Working capital facility
Facilities not utilised at reporting date
Non amortising term loan facility
Working capital facility
Non amortising term loan facility
Working capital facility
2018
$’000
2017
$’000
530
530
22
241
241
288
821,885
821,907
312,604
312,892
Notional
currency
Interest
rate at 30 June
2018 (p.a.)
AUD
AUD
GBP
GBP
AUD
AUD
GBP
GBP
AUD
AUD
GBP
GBP
3.3%-3.6%
1.7%-3.6%
2.3%
1.7%-2.3%
n/a
1.7%
2.3%
1.7%
0.6%-0.7%
0.7%
0.7%
0.7%
550,000
30,000
825,346
35,499
550,000
30,000
-
-
1,440,845
580,000
-
13,030
825,346
185
838,561
550,000
16,970
-
35,314
602,284
313,500
13,221
-
-
326,721
236,500
16,779
-
-
253,279
Facilities utilised at reporting date includes $13.0 million (2017: $13.2 million) of guarantees provided to external parties, which have
not been drawn down. Refer to Note 17.
Link Group also has access to an uncommitted facility of $250.0 million under the Syndicated Loan Facility. This is an uncommitted
revolving credit facility for general corporate purposes to fund acquisitions permitted under the facility (and related advisory fees,
costs and expenses) and growth capital expenditure and to refinance existing debt of an acquired target.
Link Group signed an Amendment and Restatement Deed on 16 June 2017, with respect to the existing Syndicated Loan Facility
dated 18 September 2015, the terms and conditions of which are substantially unchanged. The amendment added the following
additional facilities; a $825.3 million (£465.0 million) non amortising loan facility and a $35.5 million (£20.0 million) working capital facility.
127
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Capital Structure, Financing and Risk Management [ CONTINUED ]
16. Finance costs
Loan interest expense
Amortisation of capitalised borrowing costs
Foreign exchange (gain)/loss
Other
2018
$’000
19,744
1,230
(17)
148
21,105
17. Contingent liabilities
Link Group has granted bank guarantees, letters of credit and performance guarantees in the favour of:
Type/Counterparty
Beneficiary
Reason
Bank guarantee – Westpac
Pacific Custodians Pty Limited
Regulatory financial licence
Letter of credit – Westpac
STRATE Limited
Regulatory financial licence
Letter of credit – Westpac
Railway Pension Nominees
Limited
Property lease
Bank guarantee – Westpac
ASX Settlement & Transfer Corp Contractual obligation
2018
$’000
10,000
887
623
500
2017
$’000
10,468
647
779
2,940
14,834
2017
$’000
10,000
906
795
500
Bank guarantee – Westpac
GESB Superannuation
Contractual obligation
1,000
1,000
Letter of credit – Westpac
Australian Securities &
Investments Commission
Contractual obligation
Bank guarantee – HSBC
Kryalos Societa di Gestione
del Risparmio S.p.A
Property lease
Bank guarantee – CBA
GormanKelly
Property lease
Performance guarantee
CHAMA S.A.
Property lease
Performance guarantee
Primost S.A.
Property lease
20
185
287
932
567
20
-
287
-
-
Australian Financial Services Licence (AFSL) Performance Bond
A Guarantee for $10 million (2017: $10 million) is held with Westpac on behalf of a subsidiary of Link Group, Pacific Custodians Pty
Limited, as a requirement of the subsidiary’s Australian Financial Services Licence (AFSL) requirements (AFSL Performance Bond).
128
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Capital Structure, Financing and Risk Management [ CONTINUED ]
18. Investment and financial risk management
Investments
Listed equity securities – at fair value through profit or loss
Unlisted investments – at fair value through profit or loss
2018
$’000
3,157
141,073
144,230
2017
$’000
3,274
135,415
138,689
The equity securities have been designated at fair value through profit or loss because they are managed on a fair value basis and
their performance is actively monitored.
During the year Link Group made a further equity investment of $4.4 million into Property Exchange Australia Limited (“PEXA”).
Link Group’s total ownership of PEXA is 19.8% (2017: 19.7%). The investment in PEXA is carried within unlisted investments at a
fair value with gains or losses recognised through profit or loss given Link Group does not have significant influence over PEXA.
The investment has a fair value of $132.3 million (2017: $127.9 million) at year end.
Significant accounting estimate and judgement
Judgement is required in measuring level 3 investments at fair value. All key assumptions applied in fair value measurements
were determined using the past experiences of Link Group and management. Where possible, assumptions were validated
against external sources of information.
Derivative financial assets
Derivative financial assets – at fair value through profit or loss
2018
$’000
-
2017
$’000
2,413
Derivative financial instruments consisted of foreign currency forward contracts, measured at fair value with gains or losses
recognised through profit or loss. The derivative financial asset was settled on 2 November 2017.
Financial Risk Management Overview
Link Group has exposure to the following risks arising from financial instruments:
• credit risk
•
liquidity risk
• market risk
Risk Management Framework
The Company’s Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.
Link Group has established risk management policies that identify and analyse the risks faced by Link Group, set appropriate risk
limits and controls, and monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly.
129
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Capital Structure, Financing and Risk Management [ CONTINUED ]
Credit Risk
Credit risk is the risk of financial loss to Link Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The carrying amount of financial assets less any provisions for impairment represents Link Group’s maximum
credit exposure.
Link Group’s exposure to credit risk arises predominantly through its cash and cash equivalents, trade and other receivables, and
fund assets.
• Cash and cash equivalent amounts as well as transactions involving derivative financial instruments are all held or maintained
by banks and financial institutions with high credit ratings.
• Trade Receivables are monitored in line with Link Group’s credit policy. The credit quality of customers is assessed by taking
into account their financial position, past experience and other relevant factors. Based on the above process, Link Group
considers that all unimpaired trade and other receivables are collectible in full.
• Fund assets relate to investors’ purchase or redemption of units in investment funds of which Link Fund Solutions Limited (Link
Asset Services’ collective investment scheme administration business) is an Authorised Corporate Director. Link Group has a
limited exposure to credit risk as fund assets and fund liabilities are usually settled within four business days. Link Group has
rights regarding net settlement, enabling uncollectable balances to be recovered, refer to Note 9.
The maximum exposure to credit risk for trade and other receivables at the end of the reporting period was as follows:
Neither past due nor impaired
Past due 1 - 30 days
Past due 31 - 60 days
Past due over 61 days
2018
$’000
269,249
15,059
9,476
8,517
302,301
2017
$’000
87,398
6,939
2,777
1,577
98,691
Movements in the allowance for impairment in respect of trade and other receivables during the year are disclosed in Note 7.
Liquidity Risk
Liquidity risk is the risk that Link Group will encounter difficulties in meeting the obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset. Link Group manages its liquidity risk by maintaining adequate cash
reserves and available committed credit lines combined with continuous monitoring of actual and forecast cash flows on a short,
medium and long term basis. See Note 15 for details of Link Group’s unused facilities at year end.
Remaining contractual maturities at the end of the reporting period of financial liabilities, including estimated interest payments
were as follows. The amounts include both interest and principal cash flows undiscounted and based on contractual maturity and
therefore the totals will differ from those disclosed in the statement of financial position. It is noted that the interest repayments are
based on forward interest rates and as such these amounts could vary, however it is not expected that they will do so significantly
from the amounts stated below.
130
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Capital Structure, Financing and Risk Management [ CONTINUED ]
Carrying
amount
Total
< 1 year
1-2 years
2-5 years
> 5 years
$’000
$’000
$’000
$’000
$’000
$’000
30 June 2018
Non-derivative liabilities
Non-interest bearing
Trade and other payables
357,412
357,412
284,144
23,667
20,172
29,429
Fund liabilities
Interest bearing
589,312
589,312
589,312
-
-
Loans and borrowings
822,437
895,639
144,436
181,612
569,591
-
-
Total non-derivative liabilities
1,769,161
1,842,363
1,017,892
205,279
589,763
29,429
30 June 2017
Non-derivative liabilities
Non-interest bearing
Trade and other payables
148,904
148,904
101,071
5,789
14,863
27,181
Interest bearing
Loans and borrowings
313,133
334,886
10,976
281,098
Total non-derivative liabilities
462,037
483,790
112,047
286,887
42,812
57,675
-
27,181
The Company and a number of the subsidiaries are guarantors to Link Group’s loans and borrowings.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect
Link Group’s income or carrying value of its holdings of financial instruments as at the year end.
Foreign currency risk
Foreign currency risk is the risk that the carrying value or future cash flows associate with a financial instrument will fluctuate
because of changes in foreign exchange rates.
Specific foreign currency items
On 2 November 2017, Link Group drew down £465 million from a term loan facility (refer Note 15), which was used to acquire
Link Asset Services. Link Group designated the term loan facility as a hedge of the net investment in the UK subsidiary. The fair
value and carrying amount of the term loan facility at 30 June 2018 was $825.3 million (2017: $nil). An unrealised foreign exchange
loss of $24.9 million (2017: $nil) on translation of the term loan facility to AUD at the end of the financial year is recognised in other
comprehensive income and accumulated in the foreign currency translation reserve on consolidation. The hedge was considered
100% effective throughout the year.
Link Group entered into a foreign currency derivative on 26 June 2017 to hedge against movements in the AUD/GBP exchange rate
in the period between the equity raise on 26 June 2017 (denominated in AUD) and settlement of the Link Asset Services acquisition
on 3 November 2017 (denominated in GBP). The transaction did not qualify for hedge accounting at that time due to uncertainty
regarding the regulatory approvals required for and timing of settlement. Link Group recognised a fair value gain of $7.4 million
(2017: $2.4 million) resulting from the derivative financial instrument, which was settled on 2 November 2017.
131
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Capital Structure, Financing and Risk Management [ CONTINUED ]
Other foreign currency items
In addition to the specific items mentioned above, entities within Link Group typically enter into transactions and recognise assets and
liabilities that are denominated in their functional currency. Whilst a number of entities within Link Group hold financial instruments
in a currency which is not their local functional currency, these balances are not considered material and do not expose Link Group
to significant foreign currency risk.
Link Group is exposed to foreign currency risk when net investments in foreign subsidiaries are translated to Link Group’s reporting
currency, the Australian Dollar (AUD). The effects of any exchange rate movements in respect of the net investment in foreign
subsidiaries are recognised in the foreign currency translation reserve on consolidation.
Sensitivity testing was performed by flexing the value of the AUD against foreign currencies to which Link Group is exposed by
10% (2017: 10%). The assumed 10% change was chosen based on historical and reasonably possible movements of official
exchange rates.
AUD +10%/GBP
AUD -10%/GBP
AUD +10%/EUR
AUD -10%/EUR
AUD +10%/Other currencies
AUD -10%/Other currencies
Profit/(loss)
2018
$’000
(2,736)
2,737
160
(160)
(741)
741
2017
$’000
(55)
55
79
(79)
(229)
230
Net assets
2018
$’000
(36,405)
36,410
(42,963)
42,962
(4,506)
4,508
2017
$’000
31
(32)
(1,595)
1,595
(1,211)
1,218
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair value of financial
instruments. Link Group is exposed to interest rate risk attaching specifically to Link Group’s financial assets and liabilities as well
as through the maintenance of paying agent and escrow bank accounts administered on behalf of clients. Link Group’s primary
financial assets impacted by changes in variable interest rates include cash and cash equivalents. Link Group’s primary financial
liabilities impacted by interest rate movements include interest bearing loans and borrowings.
A sensitivity analysis was performed to assess the impact interest rates have on Link Group’s statement of financial performance,
including the impact of hedging and escrow bank accounts. Sensitivity testing was performed by increasing interest rates by
0.5% (2017: 1%) as at reporting date which would result in a favourable impact on Link Group’s profit before tax of $2.6 million
(2017: adverse impact of $0.5 million). A decrease of 0.5% (2017: 1%) would have an adverse impact on Link Group’s profit before
tax of $0.5 million (2017: favourable impact of $0.5 million). The assumed 0.5% (2017: 1%) change was chosen based on historical
and reasonably possible movements of official interest rates. The method of calculation has not changed from the prior period.
Price risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
prices. Link Group’s exposure to price risk arises primarily from the listed and unlisted equity securities it holds, which have been
designated at fair value through profit or loss.
A 5% increase (2017: 5%) in the fair value of Link Group’s listed and unlisted investments would increase Link Group’s profit before
tax by $7.2 million (2017: increase of $6.9 million). The assumed 5% change was chosen based on historical and reasonably
possible movements in equity markets.
Capital management
The Board’s policy is to maintain a capital base so as to provide shareholder and other stakeholder confidence and to sustain
future development of the business. Capital consists of total equity less amounts accumulated in equity in relation to cash flow
hedges, dividend reserves and other reserves.
Link Group monitors the ratio of net financial indebtedness to operating earnings before interest, tax, depreciation and amortisation,
(Operating EBITDA). Net debt is calculated as interest bearing liabilities less cash and cash equivalents. Link Group also monitors
the interest cover ratio, which is calculated by dividing Operating EBITDA by interest expense.
132
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Capital Structure, Financing and Risk Management [ CONTINUED ]
Fair value of financial instruments
The following table details Link Group’s fair value amounts of financial instruments categorised by the following levels:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
30 June 2018
Assets
Listed investments designated
at fair value through profit and loss
Unlisted equity securities designated
at fair value through profit and loss
30 June 2017
Assets
Derivative financial assets
at fair value through profit and loss
Listed investments designated
at fair value through profit and loss
Unlisted equity securities designated at fair value
through profit and loss
3,157
-
3,157
Level 1
$’000
-
4,451
4,451
Level 2
$’000
-
2,413
3,274
-
3,274
-
4,075
6,488
-
3,157
136,622
136,622
Level 3
$’000
-
-
131,340
131,340
141,073
144,230
Total
$’000
2,413
3,274
135,415
141,102
There have been no assets transferred between levels during the year (2017: none).
Level 1 investments consist of financial instruments traded in active markets, and are valued based on quoted market prices at
the end of the reporting period.
Level 2 investments consist of unlisted managed investment schemes and derivative financial instruments. Unlisted managed
investment schemes are valued based on daily quoted unit redemption prices derived using observable market data. Derivative
financial instruments are valued using quoted forward exchange rates at the reporting date and present value calculations based
on high credit quality yield curves in the respective currencies.
Level 3 investments include unlisted investments held by Link Group, the valuation for which is deemed to have one or more
significant inputs which are not based on observable market data.
Management has assessed the fair value of the investment in Property Exchange Australia Limited (PEXA) to be $132.3 million
(2017: $127.9 million) based on the pricing of an arm’s length capital raising completed during the financial year.
Significant increases or decreases in future cash flows would increase or decrease, respectively, the fair value of the investments.
133
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Capital Structure, Financing and Risk Management [ CONTINUED ]
Reconciliation of movements in level 3 investments
Opening level 3 investments at the beginning of the financial year
Acquisitions
Fair value gain recognised in profit or loss
Closing level 3 investments at the end of the financial year
2018
$’000
2017
$’000
131,340
5,282
-
136,622
60,529
68,157
2,654
131,340
The following table sets out the carrying amount and fair value of those financial assets and financial liabilities held at fair value:
Fair value vs carrying amounts
Assets
Financial assets measured at fair value
Held at fair value through profit and loss
Derivative financial assets
Designated at fair value through profit and loss
Investments
Financial Assets not measured at fair value
Loans and Receivables
Cash and cash equivalents
Trade and other receivables
Fund assets
Liabilities
Financial liabilities not measured at fair value
Other Financial Liabilities
Trade and other payables
Interest bearing loans and borrowings
Fund liabilities
2018
Fair
value
$’000
Carrying
amount
$’000
2017
Fair
value
$’000
Carrying
amount
$’000
-
-
2,413
2,413
144,230
144,230
138,689
138,689
265,512
302,301
576,016
1,288,059
265,512
302,301
576,016
1,288,059
18,162
98,691
-
257,955
18,162
98,691
-
257,955
357,412
822,437
589,312
357,412
822,437
589,312
148,904
313,133
-
148,904
313,133
-
1,769,161
1,769,161
462,037
462,037
The fair values of interest bearing loans and borrowings are not materially different to their carrying amounts since the interest
payable on those borrowings is floating at current market rates.
Financial instruments – Recognition/derecognition
A financial instrument is recognised when Link Group becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised if Link Group’s contractual rights to the cash flows from the financial assets expire or if Link
Group transfers the financial asset to another party without retaining control or substantially all the risks and rewards of the asset.
Financial liabilities are derecognised if Link Group’s obligations specified in the contract expire or are discharged or cancelled.
Measurement
Financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly
attributable transaction costs. Subsequent to initial recognition, financial instruments are measured as described below.
Financial assets at fair value through profit or loss
Financial instruments at fair value through profit or loss are measured at fair value, with changes recognised in the statement of
comprehensive income under “gains or losses on financial assets held at fair value through profit and loss”.
134
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Capital Structure, Financing and Risk Management [ CONTINUED ]
Other
Other financial instruments are subsequently measured at amortised cost using the effective interest method, less any impairment losses.
Trade and other payables and interest-bearing loans and borrowings are classified as financial liabilities. Trade and other receivables
and cash and cash equivalents are classified as loans and receivables. Cash and cash equivalents comprise cash balances and
call deposits.
Impairment
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. Any
impairment losses are recognised in profit or loss.
19. Contributed Equity
Issued and paid-up capital
Balance at the beginning of the year
Equity issued for cash
Equity issued under dividend reinvestment plan
Equity raising costs, net of tax
Balance at the end of the year
Number of shares issued:
Balance at the beginning of the year
Equity issued for cash
Equity issued under dividend reinvestment plan
Balance at the end of the year
2018
$’000
2017
$’000
689,372
1,184,327
27,061
(25,222)
1,875,538
2018
’000
359,797
166,270
3,476
529,543
689,004
-
-
368
689,372
2017
’000
359,797
-
-
359,797
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares are recognised
as a deduction from equity, net of any related income tax benefit.
Ordinary shares
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid.
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at shareholders’ meetings.
135
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Capital Structure, Financing and Risk Management [ CONTINUED ]
20. Reserves
Consolidated
Share
Compen-
sation
reserve
$’000
Distri-
butable
profits
reserve
$’000
Foreign
Currency
Translation
reserve
$’000
Acquisition
reserve
Defined
Benefit
Reserve
$’000
$’000
Pre-
acquisition
Profits Paid
reserve
$’000
Total
$’000
Balance at 1 July 2017
4,314
64,157
(6,786)
(8,572)
(1,152)
(129,733)
(77,772)
Other comprehensive income
Total comprehensive income
for the year
Transactions with shareholders
Transfer from retained
earnings to reserves
Dividends declared from distributable
profits reserve
-
-
-
-
-
-
23,143
23,143
141,660
(73,729)
-
-
-
Equity settled share based payments
4,144
-
-
-
-
-
-
(25)
(25)
-
-
-
-
-
-
-
-
23,118
23,118
141,660
(73,729)
4,144
Balance at 30 June 2018
8,458
132,088
16,357
(8,572)
(1,177)
(129,733)
17,421
Consolidated
Share
Compen-
sation
reserve
$’000
Distri-
butable
profits
reserve
$’000
Foreign
Currency
Translation
reserve
$’000
Acquisition
reserve
Defined
Benefit
Reserve
$’000
$’000
Pre-
acquisition
Profits Paid
reserve
$’000
Total
$’000
Balance at 1 July 2016
3,144
29,897
(6,054)
(8,562)
(1,109)
(129,733)
(112,417)
Other comprehensive income
Total comprehensive income
for the year
Transactions with shareholders
Transfer from retained
earnings to reserves
Dividends declared from distributable
profits reserve
Equity settled share based payments
Acquisition of non-controlling interest
in a subsidiary
-
-
-
-
1,170
-
-
-
(732)
(732)
84,632
(50,372)
-
-
-
-
-
-
-
-
-
-
-
(10)
(43)
(43)
-
-
-
-
-
-
-
-
-
-
(775)
(775)
84,632
(50,372)
1,170
(10)
Balance at 30 June 2017
4,314
64,157
(6,786)
(8,572)
(1,152)
(129,733)
(77,772)
136
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Capital Structure, Financing and Risk Management [ CONTINUED ]
Share compensation reserve
The reserve for own shares represents the cost of ordinary shares held by an equity compensation plan that will be issued to
settle entitlements under share based payment plans. No gain or loss is recognised in profit or loss on the purchase, sale, issue
or cancellation of the Company’s own equity instruments.
Distributable profits reserve
The distributable profits reserve is available to enable the payment of future dividends.
Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial
statements of foreign operations where their functional currency is different to the presentation currency of Link Group. Where
Link Group hedges foreign currency risk on net investments in foreign subsidiaries, foreign exchange gains/losses on translation
of the hedging instrument are recognised in other comprehensive income and accumulated in the foreign currency translation
reserve on consolidation.
Acquisition reserve
The acquisition reserve represents the purchase of non-controlling interests where there is no change in control. The accounting
standards prescribe that the value of such acquisitions should be accounted for as equity transactions instead of accounting for
them as an adjustment to Goodwill.
Defined benefit reserve
The defined benefit reserve represents the re-measurement of the net defined benefit liability and comprises the actuarial gains
and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest).
Pre-acquisition profits paid reserve
The pre-acquisition profits paid reserve represents dividends paid on consolidation from pre and post-acquisition profits in a
prior period.
Dividends
Dividend cents per share
Franking percentage
Total dividend ($’000)
Record date
Payment date
2018 interim
2017 final
2017 interim
2016 final
7.0
100%
34,478
28.03.2018
30.04.2018
8.0
100%
39,251
21.09.2017
18.10.2017
6.0
-
21,588
21.03.2017
03.04.2017
8.0
18.70%
28,784
29.09.2016
10.10.2016
Dividends are recognised as a liability in the period in which they are declared. The final 2018 dividend has not been declared at
the reporting date and therefore is not reflected in the consolidated financial statements.
On 17 August 2018, the Directors declared a final dividend of $71.5 million, which equates to 13.5 cents per share, franked at 100%
in respect of the financial year ended 30 June 2018. The record date for determining entitlements to the dividend is 23 August
2018. Payment of the dividend will occur on 10 October 2018.
137
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Capital Structure, Financing and Risk Management [ CONTINUED ]
21. Retained earnings
Retained earnings at the beginning of the financial year
Net profit attributable to equity holders
Transfer from retained earnings to reserves
Retained earnings at the end of the year
2018
$’000
4,999
141,660
(141,660)
4,999
2017
$’000
4,999
84,632
(84,632)
4,999
22. Share-based payment arrangements
The fair value of the share based payments is determined at grant/service commencement date and is recognised as an expense,
with a corresponding increase in reserves, over the vesting period. The amount expensed is adjusted based on the related
service and non-market performance conditions which are expected to be met, resulting in the amount recognised being based
on the number of awards that meet the related service and non-market performance conditions at the vesting date. The impact
of any changes to the estimates of non-market vesting conditions are adjusted each reporting period to reflect the most current
expectation of vesting.
(a) Description of share-based payment arrangements
At 30 June 2018, Link Group had the following shared-based payment arrangements.
Performance share rights (PSRs)
The issue of further securities under the Omnibus Equity Plan (OEP - a long-term incentive) was approved by shareholders at Link
Group’s 2017 Annual General Meeting. The OEP entitles Executive KMPs, Senior Executives and Senior Leaders to receive PSRs,
which may be converted into shares in the Company subject to the satisfaction of service-based conditions and performance
hurdles, which will, if vested, allow participants to receive fully paid ordinary shares in the Company. During the financial year and
in accordance with the OEP, PSRs were granted to Executive KMPs, Senior Executives and Senior Leaders on 20 November 2017
following the Annual General Meeting.
The PSRs are divided into 2 tranches of 75% and 25% and subject to testing against an earnings per share (EPS) target and relative
total shareholder return (relative TSR) respectively.
The terms and conditions of the PSRs granted during the financial year ended 30 June 2018 were as follows:
Grant date/employees entitled
Number of PSRs granted
Vesting conditions
Contractual life of PSRs
Executive KMPs, Senior
Executives and Senior
Leaders on 20 November 2017
1,247,638
75% against an EPS
target and 25% against
relative TSR for the three-
year performance period
commencing 1 July 2017.
Seven years, with last
exercise occurring 9
September 2024 (unless
the PSRs lapse earlier in
accordance with the terms
of the invitation).
The number of PSRs issued to each participant was calculated with reference to the 5 day Volume Weighted Average Price (VWAP)
following the release of the 2017 full year results and accounted for at fair value in accordance with accounting standards from
grant date.
The expense recognised in the consolidated statement of profit or loss and other comprehensive income in relation to the OEP
during the year ended 30 June 2018 was $4.1 million (2017: $1.2 million).
Broad-based employee share plan
All Australian based qualifying employees of Link Group are entitled to participate in the Tax Exempt Share Plan (Exempt Plan),
which gives the employees the right to be issued up to $1,000 worth of fully paid ordinary shares for $nil financial consideration.
The Exempt Plan enables qualified employees to receive ordinary shares free of income tax provided conditions in the current
Australian tax legislation are satisfied. These shares cannot be sold until the earlier of three years after the date of issue or the
time the employee ceases employment with Link Group.
The expense recognised in the consolidated statement of profit or loss and other comprehensive income in relation to the Exempt
Plan during the year ended 30 June 2018 was $2.2 million (2017: $1.8 million).
138
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Capital Structure, Financing and Risk Management [ CONTINUED ]
(b) Measurement of grant date fair values
Significant accounting estimate and judgement
Judgement is required in determining the fair value of PSRs, which was determined at grant date based upon an independent
valuation. The amount expensed is adjusted based on the related service and non-market performance conditions which
are expected to be met.
The following inputs were used in the measurement of the fair values at grant date of the PSRs issued during the year ended
30 June 2018:
Executive KMP, Senior Executives and
Senior Leaders
Fair value at grant date:
i) EPS tranche at grant date
ii) TSR tranche fair value at grant date
Share price at grant date
Exercise price
Expected volatility (weighted average volatility)
PSR life (expected weighted average life)
Holding lock discount:
i) 1 year
ii) 2 years
Expected dividends
Risk-free interest rate (based on government bonds)
$7.74
$5.24
$8.73
-
20%
3 years
5%
7.5%
2.17%
2.44%
The fair value of services received in return for PSRs is based on the fair value of PSRs granted, measured using a Monte Carlo
valuation model.
Expected volatility is estimated taking into account historic average share price volatility of the Company and certain other ASX
listed companies.
(c) Reconciliation of performance share rights
The number of performance share rights on issue during the financial year ended 30 June 2018 was as follows:
On issue at beginning of the year
Granted during the year
Lapsed during the year
On issue at the end of the year
2018
Number of PSRs
’000
2017
Number of PSRs
’000
679
1,248
(12)
1,915
-
679
-
679
139
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Group Structure
23. Business combinations
In addition to organic growth, Link Group seeks to grow through acquisitions and leverage the existing systems, skillsets and
processes to improve client satisfaction and obtain synergies to drive positive returns for shareholders.
All business combinations are accounted for by applying the acquisition method. Judgement is applied in determining the acquisition
date and determining whether control is transferred from one party to another.
Link Group measures goodwill as the fair value of the consideration transferred including the recognised amount of any non-
controlling interest in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and
liabilities assumed, all measured as at the acquisition date.
Consideration transferred includes the fair values of the assets, liabilities and contingent liabilities, including liabilities incurred by Link
Group to the previous owners of the acquiree and equity interests issued by Link Group. Consideration transferred also includes
the fair value of any contingent consideration and share-based payment awards of the acquiree that are replaced mandatorily in
the Business Combination.
Significant accounting estimate and judgement
Judgement is required in measuring the fair value of identifiable assets acquired and liabilities assumed for each acquisition.
All key assumptions applied in fair value measurements were determined using the past experiences of Link Group and
management. Where possible, assumptions were validated against external sources of information.
Acquisitions
On 3 November 2017, Link Group acquired 100% of Link Asset Services (LAS, formerly Capita Asset Services) from Capita plc.
The acquisition involved Link Group acquiring 100% of the shares and voting interests in 10 companies domiciled across the UK,
Ireland and Jersey, and a further 95 subsidiaries domiciled across the UK, Ireland, Jersey and other locations, predominantly in
Europe. The acquisition of LAS has broadened Link Group’s geographical presence providing immediate scale in the UK, Jersey
and Ireland, and provides a growth platform in Europe. LAS provides Link Group with established market positions in business
segments that extend the reach of Link Group’s current services with Link Fund Solutions, Link Market Services, Corporate &
Private Client Services and Banking & Credit Management.
In the period from acquisition on 3 November 2017 to 30 June 2018, LAS contributed revenue of $404.9 million and net profit after
tax of $27.9 million to Link Group’s results. If the acquisition had occurred on 1 July 2017, management estimates that consolidated
revenue would have been $1,371.8 million, and consolidated net profit after income tax for the period would have been $162.3
million. In determining these amounts, management has assumed that the fair value adjustments, determined provisionally, that
arose on the date of acquisition would have been the same if the acquisition had occurred on 1 July 2017.
The goodwill is attributable mainly to the skills and technical talent of LAS’ work force, LAS’s established business processes, and
the synergies expected to be achieved from integrating LAS into Link Group’s existing business. None of the goodwill recognised
is expected to be deductible for tax purposes.
Other business combinations undertaken by Link Group during the year were individually and in aggregate considered not significant
and have been grouped below.
140
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Group Structure [ CONTINUED ]
Provisional acquisition accounting
The provisional acquisition accounting has been accounted for in the consolidated financial statements as follows:
Agreed purchase price (cash consideration paid)
Less: purchase price adjustment – indemnified amounts
Purchase consideration
Less: fair value of net identifiable assets acquired
Goodwill
Identifiable assets acquired and liabilities assumed:
Cash and cash equivalents
Trade and other receivables
Other assets
Current tax assets
Fund assets
Investments
Plant and equipment
Client relationships
Software
Deferred tax assets
Trade and other payables
Interest-bearing loans and borrowings
Provisions
Employee entitlements
Current tax liabilities
Fund liabilities
Deferred tax liabilities
Net assets
Link Asset
Services
$’000
1,547,313
(88,560)
1,458,753
(341,478)
1,117,275
77,437
162,920
10,460
10,407
582,971
434
20,712
305,014
130,660
21,078
(176,100)
(318)
(155,588)
(3,279)
(2,412)
(581,126)
(61,792)
341,478
Others
$’000
4,454
-
4,454
(1,679)
2,775
831
551
94
35
-
13
101
1,245
15
8
(862)
-
-
(1)
-
-
(351)
1,679
Total
$’000
1,551,767
(88,560)
1,463,207
(343,157)
1,120,050
78,268
163,471
10,554
10,442
582,971
447
20,813
306,259
130,675
21,086
(176,962)
(318)
(155,588)
(3,280)
(2,412)
(581,126)
(62,143)
343,157
The fair values of the following assets and liabilities have been recognised on a provisional basis as at 30 June 2018, whereby the
accounting balances for the acquisition may be revised in accordance with AASB 3 – Business Combinations:
•
intangible assets (excluding goodwill), predominantly software and client relationships, have been determined provisionally
pending completion of fair value calculations;
• provisions (including contingent liabilities) have been determined provisionally pending completion of a detailed review of existing
contracts at the date of acquisition; and
•
the fair value of net identifiable assets acquired may be impacted by the completion of Link Asset Services subsidiaries’
31 December 2017 financial statement audits and tax returns.
Where new information obtained within one year of the acquisition about the facts and circumstances that existed at the date of
acquisition identifies adjustments to the above amounts, or any additional provisions that existed at the date of acquisition, the
accounting for the acquisition will be revised.
141
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Group Structure [ CONTINUED ]
24. Parent entity disclosures
In accordance with the Corporations Act 2001, these consolidated financial statements present the results of the consolidated
entity only.
As at, and throughout, the financial year ended 30 June 2018 the ultimate parent entity of Link Group was Link Administration
Holdings Limited.
Result of parent entity
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Contributed equity
Share compensation reserve
Distributable profits reserve
Accumulated losses
Total equity
2018
$’000
2017
$’000
141,660
-
141,660
686
1,975,103
28,700
28,700
1,875,538
8,458
132,088
(68,995)
84,632
-
84,632
613
714,409
25,561
25,561
689,372
4,314
64,157
(68,995)
1,947,089
688,848
Other than those disclosed in Note 17, the parent entity has no contingent liabilities, contractual commitments or guarantees with
third parties as at 30 June 2018 (2017: none).
142
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Group Structure [ CONTINUED ]
25. Controlled entities
Subsidiaries
Australia and New Zealand
Link Administration Pty Limited
Link Digital Solutions Pty Limited
Link Market Services Group Pty Limited
Link Market Services Holdings Pty Limited
Link Market Services Limited
Pacific Custodians Pty Limited
Link MS Services Pty Limited
Link Share Plan Pty Limited
Orient Capital Pty Limited
Corporate File Pty Limited
Open Briefing Pty Limited
Australian Administration Services Pty Limited
AAS Superannuation Services Pty Limited
aaspire Pty Limited
Atune Financial Solutions Pty Limited
Primary Superannuation Services Pty Limited
The Superannuation Clearing House Pty Limited
Complete Corporate Solutions Pty Limited
Company Matters Pty Ltd
The Australian Superannuation Group (WA) Pty Ltd
Link DigiCom Pty Limited
Link Business Services Pty Ltd
Link Administration Services Pty Limited
Link Advice Pty Limited
Link Super Pty Limited
PSI Superannuation Management Pty Limited
Empirics Marketing Pty Limited
FuturePlus Financial Services Pty Limited
Link Property Pty Limited
FuturePlus Legal Services Pty Limited
Accrued Holdings Pty Limited
Synchronised Software Pty Limited
Link Administration Support Services Pty Limited
Superpartners Pty Limited
Link Administration Resource Services Pty Limited
Link Fund Solutions Pty Limited
Adviser Network Pty Limited
Link Land Registry Services Pty Limited
Link Land Registries Holdings Pty Limited
Link Market Services (New Zealand) Limited
Pacific Custodians (New Zealand) Limited
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
% Ownership
interest
consolidated
2018
% Ownership
interest
consolidated
2017
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51.3
100
100
100
51.3
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51.3
100
100
100
51.3
100
100
100
100
100
100
100
100
100
100
143
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Group Structure [ CONTINUED ]
Subsidiaries
United Kingdom and Channel Islands
Link Market Services (EMEA) Limited
D.F. King Limited
Orient Capital Limited
Link Group Corporate Director Limited
Link Group Corporate Director 2 Limited
Link Group Corporate Secretary Limited
Asset Checker Limited
CFAC Payment Scheme Limited
Crown Northcorp Limited
Jessop Fund Managers Limited
LFI (Nominees) Limited
Link (LLRP) Trustee Limited
Link Alternative Fund Administrators Limited
Link ASOP Limited
Link Asset Services (Holdings) Limited
Link Asset Services (London) Limited
Link Asset Services (UK) Limited
Link ATL Pension Trustees Limited
Link Company Matters Limited
Link Consortium Nominees No. 2 Limited
Link Consortium Nominees No. 3 Limited
Link Consortium Nominees No.1 Limited
Link Corporate Services Limited
Link Corporate Trustees (UK) Limited
Link Financial Group Limited
Link Financial Investments Limited
Link Fund Administrators Limited
Link Fund Solutions Limited
Link KWS Limited
Link Market Services Limited
Link Market Services Trustees (Nominees) Limited
Link Market Services Trustees Limited
Link Mortgage Services Limited
Link Pension Secretariat Limited
Link Pension Trustee Company (1997) Limited
Link Pension Trustees Limited
Link Share Plan Services Limited
Link Treasury Services Limited
Link Trust Corporate Limited
Link Trust Nominees No. 1 Limited
Link Trust Nominees No.2 Limited
Link Trust Secretaries Limited
Northern Registrars Limited
Pacific Quay Nominees No. 1 Limited
Pacific Quay Trustees No. 1 Limited
Personal Pension Management Ltd
144
Country of
incorporation
% Ownership
interest
consolidated
2018
% Ownership
interest
consolidated
2017
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
100
100
100
100
100
100
50
33.3
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Group Structure [ CONTINUED ]
Subsidiaries
Rooftop Mortgages Limited
Royal Exchange Trust Company Limited
Royal Exchange Trustee Nominees Limited
Sinclair Henderson Fund Administration Limited
Stentiford Close Registrars Limited
Throgmorton Nominees LLP
Throgmorton Secretaries LLP
Throgmorton UK (No.2) Limited
Throgmorton UK Limited
Whale Rock Accounting Limited
Whale Rock Company Secretariat Limited
Whale Rock Directors Limited
Whale Rock Secretaries Limited
White City Property Nominee Limited
White City Property Trustees Limited
Financial Administrators (Guernsey) Limited
Link Alternative Fund Services (Guernsey) Limited
Link Market Services (Guernsey) Limited
Link Nominees 1 Limited
Link Nominees 2 Limited
Braltrust Limited
Forbrit Corporate Director 1 Limited
Forbrit Corporate Director 2 Limited
Forbrit Corporate Director 3 Limited
Forbrit Corporate Director 4 Limited
Forbrit Trustees Limited
Link Alternative Fund Services (Jersey) Limited
Link Asset Services (Jersey) Limited
Link Corporate Services (Jersey) Limited
Link EP Limited
Link Foundations Services Limited
Link Market Services (Jersey) Limited
Link Nominee Services 2 Limited
Link Nominee Services 3 Limited
Link Nominee Services Limited
Link Secretaries Limited
Link Treasury Services (Jersey) Limited
Link Trustee Services (Jersey) Limited
Link Trustees (Jersey) Limited
Seaton Trustee Services Ltd
Seaton Trustees Limited
Buri Leasing Limited
Country of
incorporation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
Jersey
% Ownership
interest
consolidated
2018
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
% Ownership
interest
consolidated
2017
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
145
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Group Structure [ CONTINUED ]
Subsidiaries
Europe
Link Market Services GmbH
Link Market Services (Frankfurt) GmbH
Link ASI Limited
Link CTI Limited
Link Fund Administrators (Ireland) Ltd
Link Fund Manager Solutions (Ireland) Limited
Link IFS Limited
Link IRG (BC) Limited
Link Registrars Limited
Link TSI Limited
Link Corporate Services (Schweiz) GmbH
Link Asset Services GmbH
Link Hungary Corporate Services LLC
Immo Guillaume Schneider S.A.
Link Corporate Services (Luxembourg) S.A.
Link Corporate Services S.A.
P.A.L. Management Services Sarl
Link Administrative Services B.V.
Link Asset Services BV
Link Corporate Services B.V.
Link Corporate Services Group B.V.
NHS Corporate and Fiduciary Services B.V.
NHS Outsourcing B.V.
Link Market Services (Isle of Man) Limited
Novalink B.V.
Other countries
Link Investor Services Pty Limited
Link Market Services South Africa (Pty) Limited
Pacific Custodians (Nominees) (RF) Pty Limited
Link Intime India Private Limited
Sharex Dynamic (India) Pvt Ltd
PNG Registries Pty Limited
Link Market Services (Hong Kong) Pty Limited
Link Asset Services Pte Limited
Country of
incorporation
Germany
Germany
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Switzerland
Germany
Hungary
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Isle of Man
Netherlands
South Africa
South Africa
South Africa
India
India
Papua New Guinea
Hong Kong
Singapore
% Ownership
interest
consolidated
2018
% Ownership
interest
consolidated
2017
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
74.85
74.85
74.85
100
100
100
100
100
100
100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
74.85
74.85
74.85
100
-
100
100
-
Subsidiaries are entities controlled by the Company. Control exists when Link Group has the power to govern the financial
and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control commences until the date that control ceases.
The accounting policies of subsidiaries have been changed on acquisition when necessary to align them with the policies
adopted by Link Group.
146
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Other Disclosures
26. Related parties
Key Management Personnel compensation
The aggregate Key Management Personnel (“KMP”) compensation comprised the following:
Short term employee benefits
Post-employment benefits
Other long term benefits
Share based payments
27. Auditor’s remuneration
Audit of the financial statements
Auditor of the Company – KPMG Australia
Other network firms – KPMG international
Audit related services
Auditor of the Company – KPMG Australia
Other network firms – KPMG international
Other services
Auditor of the Company – KPMG Australia
Other network firms – KPMG international
2018
$
2017
$
7,496,905
6,953,205
196,397
114,778
1,672,708
9,480,788
175,470
33,201
528,248
7,690,124
2018
$
2017
$
971,753
1,237,427
740,000
162,810
734,914
80,619
560,698
-
6,783
240,932
615,458
-
3,272,428
2,078,966
“Other services” includes accounting and consultancy work provided during the financial year.
Auditor’s remuneration relating to entities acquired in a business combination during the financial year is disclosed only in respect
of the period those entities were controlled by Link Group.
147
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] Other Disclosures [ CONTINUED ]
28. Commitments
Non-cancellable operating lease commitments
Operating lease rentals are payable as follows:
Not later than one year
Later than one year but not later than five years
More than five years
2018
$’000
2017
$’000
45,267
162,151
145,195
352,613
29,574
128,268
164,906
322,748
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease
incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
29. Subsequent events
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event
of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of Link
Group, the results of those operations, or the state of affairs of Link Group, in future financial years.
30. New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July
2018 and have not been applied in preparing these consolidated financial statements. Those which may be relevant to Link Group
are set out below. Link Group does not intend to adopt these standards early.
(a) AASB 9 Financial Instruments
AASB 9 Financial Instruments replaces the existing guidance in AASB 139 Financial Instruments: Recognition and Measurement.
AASB 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss
model for calculating impairment on financial assets and new general hedge accounting requirements. It also carries forward
the guidance on recognition and derecognition of financial instruments from AASB 139. AASB 9 is effective for annual reporting
periods beginning on after 1 January 2018. An assessment of the new standard is ongoing, however it is not expected to result
in a change to any classifications of financial instruments or have a material impact on Link Group.
(b) AASB 15 Revenue from Contracts with Customers
AASB 15 Revenue from Contracts with Customers replaces existing revenue recognition guidance under Australian Accounting
Standards. The core principle of AASB 15 is to recognise revenues when control of goods or services is transferred to customers
in an amount that reflects the consideration that is expected to be received for those goods or services. AASB 15 defines a five
step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the
revenue recognition process than required under existing Australian Accounting Standards. AASB 15 also allows costs incremental
to obtaining a contract to be capitalised as an asset and expensed consistently with the pattern of revenue recognition arising from
the contract. On transition, these are not expected to be material for Link Group.
AASB 15 requires mandatory application by Link Group for the financial year ended 30 June 2019. On initial application, AASB 15
permits either full retrospective or a modified retrospective application approach. Link Group does not expect AASB 15 to result
in any significant change to the recognition and measurement of service revenue, given Link Group’s current policy is to recognise
revenue as clients receive the benefits of those services. Project related revenue is currently being assessed. Link Group currently
anticipates the transition adjustment on 1 July 2018 to decrease retained earnings by $0.5 million, consisting of a $2.8 million
adjustment to defer service revenue, offset by a $2.3 million adjustment to defer related expenses and tax.
Where applicable, AASB 15 will require new disclosures including disaggregated revenue, information on unsatisfied performance
obligations and detailed information regarding contract assets and liabilities.
148
Together we achieve…3. Notes to the Financial Statements [ CONTINUED ] Other Disclosures [ CONTINUED ]
(c) AASB 16 Leases
AASB 16 Leases removes the distinction between operating and finance leases for lessees and will require nearly all leases to
be accounted for as both an asset and liability on the statement of financial position. There is also new guidance on when an
arrangement would meet the definition of a lease. AASB 16 is effective for annual reporting periods beginning on or after 1 January
2019, with early adoption permitted where AASB 15 Revenue from Contracts with Customers is adopted at the same time.
Link Group is assessing the potential impact of the application of AASB 16 on its financial statements, including the potential impact
of the various transition provisions available to Link Group. Using approximate values, if Link Group were to adopt AASB 16 as at
30 June 2018, the present value of the future minimum lease payments for non-cancellable operating leases disclosed in Note 28
would be recognised as a financial liability in the statement of financial position, and under the transition provisions available, Link
Group would also recognise a corresponding amount as a right-of-use asset. The new standard is also likely to result in a reduction
in occupancy expenses as lease costs will instead be allocated against the lease liability. The lease asset will be amortised over
the life of the lease resulting in a depreciation and amortisation charge. The depreciation and amortisation charge is expected to
approximate the reduction in occupancy expenses.
149
Link Group • Annual Report 20183. Notes to the Financial Statements [ CONTINUED ] 1.
In the opinion of the Directors of Link Administration Holdings Limited (the Company):
(a)
the consolidated financial statements and notes that are set out on pages 101 to 149 and the
Remuneration Report on pages 73 to 98 in the Directors’ Report are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of Link Group’s financial position as at 30 June 2018 and of its
performance for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
2.
3
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001
from the Managing Director and the Chief Financial Officer for the financial year ended 30 June 2018.
The Directors draw attention to Note 2(a) to the consolidated financial statements, which includes a
statement of compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors.
Dated 17 August 2018 at Sydney.
M Carapiet
Chairman
J M McMurtrie
Managing Director
150
Together we achieve…4. Directors’ Declaration
151
Link Group • Annual Report 2018 5. Independent Auditor’s Report 152
Together we achieve…5. Independent Auditor’s Report [ CONTINUED ] 153
Link Group • Annual Report 20185. Independent Auditor’s Report [ CONTINUED ] 154
Together we achieve…5. Independent Auditor’s Report [ CONTINUED ] 155
Link Group • Annual Report 20185. Independent Auditor’s Report [ CONTINUED ] 156
Together we achieve…5. Independent Auditor’s Report [ CONTINUED ] We have audited the Remuneration Report
included in pages 73 to 98 of the report for the year
ended 30 June 2018.
157
Link Group • Annual Report 20185. Independent Auditor’s Report [ CONTINUED ] Additional information required by the Australian Securities Exchange (ASX) and not shown elsewhere in this report is as follows.
The information is current at 24 August 2018.
Distribution of Shareholders
Ordinary Shares
Number of Holders
Number of Shares
1 - 1,0001
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
TOTAL
4,319
6,407
1,464
901
95
13,186
1,991,564
15,943,950
10,437,872
20,421,834
480,747,627
529,542,847
There are no other classes of quoted equity securities on issue.
Top Twenty Shareholders (Ungrouped)
Name
Number of Ordinary Shares
137,090,012
116,993,554
60,814,016
33,949,026
33,359,964
16,001,950
8,274,750
6,572,526
6,406,751
5,302,687
4,495,972
4,104,841
3,374,642
3,200,000
3,039,643
2,776,000
2,475,809
1,898,252
1,529,350
1,507,103
%
25.89
22.09
11.48
6.41
6.30
3.02
1.56
1.24
1.21
1.00
0.85
0.78
0.64
0.60
0.57
0.52
0.47
0.36
0.29
0.28
453,166,848
85.58
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
Boston & Baxter Pty Limited
Citicorp Nominees Pty Limited
Custodial Services Limited
John Menzies McMurtrie
UBS Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
Brispot Nominees Pty Ltd
Australian Foundation Investment Company Limited
William John Hawkins
BNP Paribas Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
Advanteos Investments Limited
Mr Leigh Mervyn Bull
AMP Life Limited
Total Top 20
1 106 shareholders hold less than a marketable parcel of shares.
158
Together we achieve…Additional Shareholder Information Substantial Shareholders
Name
AustralianSuper Pty Ltd
Challenger Limited
Ellerston Capital Limited
Number of Shares
% of Interest
40,797,732
38,602,641
27,376,787
Date of Last Substantial
Shareholder Notificaion
1 November 2017
27 April 2018
29 June 2018
15 August 2018
8.28%
7.31%
5.17%
5.46%
Pinnacle Investment Management Group Limited
28,905,654
On-Market Buy Back
There is no current on-market buy back.
Voting Rights
Each holder of ordinary shares is entitled to one vote per share (on a poll) or one vote (on a show of hands) at shareholder
meetings.
Unquoted equity securities
Link Administration Holdings Limited has 1,780,212 unquoted equity securities.
Securities subject to Voluntary Escrow
Number of Securities
subject to Escrow
Period Escrow Ends
Management (2)
600,000
29 June 2020
Securities purchased on-market
During FY2018, a total of 286,881 ordinary shares were acquired on-market for the Link Group Tax Exempt Employee Share Plan
and the average price per share purchased was $7.50.
Stock Exchange Listing
Link Administration Holdings Limited securities are only listed on the ASX under the symbol LNK.
Annual General Meeting
Link Administration Holdings Limited’s 2018 Annual General Meeting will be held on Friday, 16 November 2018.
Corporate Information
Australian Company Number
Company Secretaries
Registered Office and Principal Administrative Office
120 964 098
Cassandra Hamlin
Janine Rolfe
Address:
Level 12, 680 George Street
Sydney NSW 2000
Australia
Telephone Number: +61 2 8280 7100
Website: www.linkgroup.com
159
Link Group • Annual Report 2018Additional Shareholder Information [ CONTINUED ]
Three-Year Summary
Summary Information since Initial Public Offering
Financial performance
Revenue
Operating EBITDA ($m)
Operating EBITDA margins %
Profit before tax ($m)
NPAT (statutory) ($m)
NPATA ($m)
Operating NPATA ($m)
Other financial performance information
Recurring Revenue %
Revenue ANZ %
Revenue Rest of World %
% of Gross Revenue Fund Administration
% of Gross Revenue Corporate Markets
% of Gross Revenue Technology & Innovation
% of Gross Revenue Link Asset Services
Financial position ($m)
Assets
Liabilities
Net assets
Net (debt)/cash
Total Equity
Share information
Market capitalisation ($m)
Ordinary shares at period end (million shares)
Dividends per share (cents per share)
Interim (cents per share)
Final (cents per share)
Total dividends ($m)
Dividend franking %
Share price – 30 June closing price ($)
Ratios
Dividend payout ratio (Dividends / NPATA)
Net operating free cashflow conversion %
Net debt/Operating EBITDA
Operational metrics
Total FTE (period end)
160
FY2018
1,198.4
335.3
28.0%
192.1
143.2
176.1
206.7
80%
60.4%
39.6%
39.7%
15.2%
16.4%
28.7%
3,932.6
2,032.6
1,900.0
(556.9)
1,900.0
3,882
529.5
20.5
7.0
13.5
106.0
100%
7.33
60.2%
76.0%
1.52
FY2017
FY2016
780.0
219.0
28.1%
123.5
85.2
101.7
123.8
90%
91.7%
8.3%
57.6%
20.3%
22.1%
-
1,233.9
616.6
617.4
(295.0)
617.4
2,842
359.8
14.0
6.0
8.0
60.8
64.5%
7.90
59.8%
82.0%
1.35
775.9
190.6
24.6%
59.9
42.5
95.1
102.7
90%
92.1%
7.9%
58.2%
20.4%
21.4%
-
1,154.9
572.9
582.1
(262.0)
582.1
2,832
359.8
8.0
-
8.0
28.8
18.7%
7.87
30.3%
81.0%
1.37
7,506
4,133
4,395
Together we achieve… This page left blank intentionally.
Annual Report prepared by Fallon Dasey – FallonDasey.com