Half Year Results PresentationFor the period ended 31 December 2019
27 February 2020
1
Link Group – 1H 2020 Results Presentation 2
Important notice
This presentation has been prepared by Link Administration Holdings Limited (Company) together with its related bodies corporate (Link Group). The material contained in this presentation is
intended to be general background information on Link Group and its activities.
The information is supplied in summary form and is therefore not necessarily complete. It should be read in conjunction with Link Group’s other periodic and continuous disclosure
announcements filed with the Australian Securities Exchange, and in particular, Link Group’s Interim Financial Report for six months ended 31 December 2019. It is not intended that it be relied
upon as advice to investors or potential investors, who should consider seeking independent professional advice depending upon their specific investment objectives, financial situation or
particular needs. The material contained in this presentation may include information derived from publicly available sources that have not been independently verified. No representation or
warranty is made as to the accuracy, completeness or reliability of the information.
All amounts are in Australian Dollars unless otherwise indicated.
Unless otherwise noted, financial information in this presentation is based on A-IFRS. Link Group uses certain measures to manage and report on its business that are not recognised under
Australian Accounting Standards or IFRS. These measures are collectively referred to in this presentation as ‘non-IFRS financial measures’ under Regulatory Guide 230 ‘Disclosing non-IFRS
financial information’ published by ASIC. Management uses these non-IFRS financial measures to evaluate the performance and profitability of the overall business and Link Group believes that
they are useful for investors to understand Link Group’s financial condition and results of operations. Non-IFRS measures are defined in Appendix 6A. The principal non-IFRS financial measures
that are referred to in this presentation are Operating EBITDA, Operating EBIT, Operating EBITDA margin and Operating EBIT margin. Management uses Operating EBITDA to evaluate the
operating performance of the business and each operating segment prior to the impact of significant items, the non-cash impact of depreciation and amortisation and interest and tax charges,
which are significantly impacted by the historical capital structure and historical tax position of Link Group. Management uses Operating EBITDA to evaluate the cash generation potential of the
business because it does not include significant items or the non-cash charges for depreciation and amortisation. However, Link Group believes that it should not be considered in isolation or as
an alternative to net operating cash flow. Other non-IFRS financial measures used in the presentation include Recurring Revenue, gross revenue, EBITDA, EBITA, EBIT, Operating NPATA,
working capital, capital expenditure, net operating cash flow, net operating cash flow conversion ratio and net debt. Significant items comprise business combination costs, integration costs, IT
business transformation and client migration costs. Unless otherwise specified those non-IFRS financial measures have not been subject to audit or review in accordance with Australian
Accounting Standards.
Forward-looking statements are statements about matters that are not historical facts. Forward-looking statements appear in a number of places in this presentation and include statements
regarding Link Group’s intent, belief or current expectations with respect to business and operations, market conditions, results of operations and financial condition, including, without limitation,
future loan loss provisions, financial support to certain borrowers, indicative drivers, forecasted economic indicators and performance metric outcomes.
This presentation contains words such as ‘will’, ‘may’, ‘expect’, 'indicative', ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘probability’, ‘risk’, ‘forecast’, ‘likely’, ‘estimate’, ‘anticipate’,
‘believe’, or similar words to identify forward-looking statements. These forward-looking statements reflect Link Group’s current views with respect to future events and are subject to change,
certain risks, uncertainties and assumptions which are, in many instances, beyond the control of Link Group, and have been made based upon Link Group’s expectations and beliefs concerning
future developments and their potential effect upon us. There can be no assurance that future developments will be in accordance with Link Group’s expectations or that the effect of future
developments on Link Group will be those anticipated. Actual results could differ materially from those which Link Group expects, depending on the outcome of various factors. Factors that may
impact on the forward-looking statements made include, but are not limited to, general economic conditions in Australia; exchange rates; competition in the markets in which Link Group will
operate and the inherent regulatory risks in the businesses of Link Group.
When relying on forward-looking statements to make decisions with respect to Link Group, investors and others should carefully consider such factors and other uncertainties and events. Link
Group is under no obligation to update any forward-looking statements contained in this presentation, where as a result of new information, future events or otherwise, after the date of this
presentation.
Link Group – 1H 2020 Results Presentation
1. Overview
2. Financial information
3. Proforma financial information
4. Closing
5. Q&A
6. Appendices
3
Contents
Link Group – 1H 2020 Results Presentation
1. Overview
4
Link Group – 1H 2020 Results Presentation
Global
5
FY 2020 - a transitional year for Link Group
Link Group’s revenue profile is diverse across jurisdiction and service offering, whilst Recurring
Revenue of over 80% provides resilience
Diverse1
Resilient
LINK GROUP PROFILE
(1H 2020 Revenue)
Revenue
(A$ millions)
APAC /
EMEA
Recurring
Revenue %
Revenue
Contribution1
Retirement and
Superannuation Solutions259.6
pcp: 275.988% 32%
Corporate Markets 183.0pcp: 191.9
70% 23%
Fund Solutions 86.1pcp: 79.6
91% 11%
Banking and Credit
Management83.8
pcp: 88.691% 10%
Technology and
Operations188.7
pcp: 167.431% 24%
External revenue
100%
47%53%
100%
APAC EMEA
32%
23%11%
10%
24% RSS
CM
FS
BCM
T&O
84%
16%
Recurring
Non-recurring
59%
41%APAC
EMEA$624m
$624m
$624mPEXA2 79.0
pcp: 51.3
BU
SIN
ES
S U
NIT
PR
OF
ILE
Eq
uit
y
Inv
estm
en
t
1. Divisional revenue contribution
percentage based on Gross Revenue
prior to eliminations.
2. Reflects 100% of PEXA revenue
(Link Group ownership 44.2%).
100%
90%
80%
Link Group – 1H 2020 Results Presentation 6
Proactive diversification strategy
At the time of listing Link Group predominantly operated in APAC with revenue heavily weighted to
RSS. It has since diversified both geographically and by service offering, further broadened by PES
PEXA
Revenue: $4.5m2
Ownership: 12.0%
PEXA
Revenue: $136.8m2
Ownership: 44.2%
+
+
FY 2016 Revenue1 LTM (Dec-19) Revenue1,3
APAC - 59% EMEA - 41%
1. Percentages represent divisional revenue contribution based on Gross Revenue prior to eliminations.
2. Reflects 100% of PEXA revenue.
3. LTM reflects proforma (exc. CPCS).
Fund Solutions
Banking and Credit
Management
Technology &
Operations
Corporate Markets
Retirement &
Superannuation
Solutions
APAC - 94%
Operating EPS: 30.7 cps Operating EPS: 32.4 cps
EMEA – 6%
58% 34%
20%23%
21%
22%
10%
11%
776.0
1,243.2
A$ millions A$ millions
Link Group – 1H 2020 Results Presentation
pcp: Proforma3 pcp
Revenue $624 million $714 million $648 million (down 4%)
Operating EBITDA1 $163 million $205 million $183 million (down 11%)
Operating EBIT1 $109 million $156 million $138 million (down 20%)
Operating NPATA1 $81 million $106 million $91 million (down 11%)
Recurring Revenue2 $522 million $570 million $525 million (down 1%)
Net Operating Cash Flow $181 million $159 million not quantifiable
Statutory NPAT $29 million $185 million $174 million (down 84%)
Operating earnings per share1 15.2 cents 20.1 cents 17.2 cents million (down 11%)
Interim dividend declared
100% franked
6.5 cents
per share8.0 cents per share
PEXA Revenue (100%) $79 million $51 million
PEXA Operating NPATA (100%) $26 million loss of $6 million
7
Key financial metrics
FY2020 is a transitional year. Lower financial measures compared to the pcp reflect the divestment
of CPCS in June 2019, and the impact of regulatory change and client losses in RSS
1. Operating EBITDA, Operating EBIT, Operating NPATA and Operating earnings per share exclude significant items. See Appendix 6A for a reconciliation of Operating EBITDA, Operating EBIT and
Operating NPATA to statutory NPAT.
2. See Appendix 6A for definitions for non-IFRS measures. Non-IFRS measures have not been audited or reviewed in accordance with Australian Accounting Standards.
3. Proforma excludes the divested CPCS business.
Link Group – 1H 2020 Results Presentation 8
Distilling 1H 2020 earnings performance
Regulatory change and historical client losses in RSS are impacting FY 2020 earnings, whilst
PEXA and T&O are providing positive momentum
Revenue
Operating NPATA
1H 2020 commentary
PEXA and T&O are providing positive
momentum to Operating NPATA
As highlighted in FY 2019, regulatory
change (i.e. Protecting Your
Superannuation “PYS” & Putting
Members’ Interests First “PMIF”) and
historical client losses in RSS are
impacting FY 2020 revenues
Taking account of known factors,
underlying revenue growth was
modestly positive, with overall revenue
growth offset by soft capital market
activity in Corporate Markets – EMEA
647.5 618.8 624.2
16.1
(21.8) (6.9)(10.7)
66.9
714.4
1H 2019 RSSNet wins / (losses /
mergers)
RSSPYS recurring
revenue impact
Rebased CMUK market based
revenue
Growth 1H 2020
A$ millions
Proforma CPCS (divested)
Known factors impacting 1H 2020 Revenue (inline with guidance)
0.7 9.3 0.211.4 0.4 6.2
(26.0)(9.2) (3.2)91.2
81.1
15.2
106.4
1H 2019(Proforma)
RSSEBIT
CMEBIT
FSEBIT
BCMEBIT
T&OEBIT
Groupcost
PEXA(OperatingNPATA)
Interest Tax 1H 2020
A$ million
Proforma CPCS (divested)
Inline with guidance
Link Group – 1H 2020 Results Presentation 9
Shareholder value initiatives
Executing on a series of initiatives to drive shareholder value in both short and medium term
Expansion of BCM with acquisition
of Pepper European Servicing
(“PES”) announced1
Entry into UK pensions market with
investment in SMART Pension
Potential PEXA capital returns and
share buy-back optionality
Further international expansion of
RSS
Further geographic expansion of FS
and BCM
Future options under considerationActioned/underway initiatives
Global Transformation - broadly on
track, delivering $11.5 million of
benefit in 1H 2020 ($50m target)
1. Subject to regulatory approval.
Link Group – 1H 2020 Results Presentation 10
Outlook
Medium term growth potential remains strong, whilst managing through existing challenges
1. Change to revised guidance reflects the application of AASB 16 Leases.
Link Group Outlook
Balancing the positive contribution from PEXA, trading to date and expectations for the second half, Link Group expects
Operating NPATA to be at least $160 million for the full year ended 30 June 2020. Whilst medium term growth potential
remains strong, the FY 2020 Operating EBITDA for the continuing business is expected to be approximately 10% lower than
the prior year
Lower earnings for the continuing business (excluding CPCS) reflects the full year impact of PYS, previously announced client
losses, subdued capital markets activity, weaker new business pipeline in Europe and remediation efforts in LFS (i.e. ex
Woodford fund)
Further buyback activity
Remains a key element of capital management, taking account of impacts to the leverage profile, including the PES acquisition
and potential return of capital from PEXA
Global Transformation program on track
On track to deliver $50m of annualised savings by end of FY 2022, with $11.5m delivered to date
RSS guidance FY 2020 reaffirmed
Revenue of $480m-$500m and Operating EBITDA of $75m-$85m1
Link Group – 1H 2020 Results Presentation
$101$197
Link Groupclients
Industry average(exc. Link)
Average admistration fee per account ($ per annum)2
275.9 259.6
56.6 30.6
1H 2019 1H 2020
30 June year end, A$ million
Revenue Operating EBIT
Retirement and Superannuation Solutions: Overview
Strong member growth in Australia and international opportunity supports medium term outlook.
Regulatory change, client exits and fund consolidation affecting near term financial performance
Financials
Strategy
Key focus
Underlying strength
Link Group is well positioned to benefit from an evolving global
landscape and capture scale benefits…Positive member growth of Link Group clients’ underpinning
resilient base of Recurring Revenue. Increased member growth
following Royal Commission (excluding impact of PYS)
1. Underlying members of Link Group’s clients exclude client wins/losses, ERFs, redundancy trusts and the impact of PYS related member account movements (to either ERFs or the ATO).
2. Link Group analysis of APRA Fund-level Superannuation Statistics (June 2019 edition).
Revenue $480m to $500m
Operating EBITDA $60m to $70m
11
0.5%0.9% 1.2%
0.8%
2.3%2.9%
3.9%
5.2%
Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19
Underlying 12 month member growth1
Client losses and PYS
impacting earnings in
1H 2020
• Supporting clients through challenging regulatory change
programs (i.e. PYS & PMIF)
• Supporting clients’ member growth strategies
• Securing opportunities in market post regulatory change
program
• Continuing to reinvest to strengthen client offering
• Building on presence in the UK and exploring further
international opportunities
Link Group supports
member outcomes
Fragmented market = Opportunity
34%
48%
10%
Superannuation administration (Australia) by members2
Link
Inhouse
Mercer
Other (3%)
SMSF (5%)
Link Group – 1H 2020 Results Presentation
•
191.9 183.0
44.1 34.9
1H 2019 1H 2020
30 June year end, A$ million
Revenue Operating EBIT
Corporate Markets: Overview
Continued success in growing value added services, offset by softer market conditions impacting
European operations
Financials
Strategy
Key focus
Underlying Strength
Cross selling of service offerings continues to provide growth Increase penetration in each jurisdiction, by offering a globally
standardised suite of services
Registry
Company Secretarial
Employee share plans
Investor Relations
12
• Providing value added services to existing and new clients
• Continuing to add new clients to drive volume growth (i.e. IPO
mandates)
• Providing high levels of customer service supporting client
retention
• Global coordination to support multinational entities
• Global alignment of operations to drive efficiencies
• Enhancing customer experience through innovation and
technology led solutions
Further
opportunity for
cross sell
Service offerings: Registry, Employee share plans, Company Secretarial & Investor Relations
Lower market related
activity impacting
revenue
• South Africa • Australia
• PNG
• India• Hong Kong
• GermanyIreland · • UK
New Zealand ·
• UAE
France
Singapore ·
Clients using: Australia UK
1 service offering 57% 54%
2 service offerings 26% 40%
3+ service offerings 17% 6%
Link Group – 1H 2020 Results Presentation
79.6 86.1
14.0 14.7
1H 2019 1H 2020
30 June year end, A$ million
Revenue Operating EBIT
Fund Solutions: Overview
Revenue growth supported by increased AuM of existing clients and jurisdictional expansion
Financials
Strategy
Key focus
Underlying Strength
13
Support deep client relationships and leverage
strong market network
Explore expansion of existing service offering
across new jurisdictions
Deliver the benefit of operational excellence,
location and transformation strategy
Growth in outsourced AuM underpinning resilient base of
Recurring Revenue
-
500
1,000
1,500
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2015 2016 2017 2018 2019
Au
M £
bill
ion
s
UK AFM Assets under Management
AuM hosted / outsourced % (LHS) Total AuM (RHS)
Source: Management information
• Expansion of Luxemburg operation
• Capitalise on increased propensity for outsourcing
• Capture broader benefits of the Local Government Pension Schemes
• Improving profitability of Australian business (complete new platform
implementation)
• Remediation of ex Woodford fund: first distribution remitted end of
January 2020 of £2.1 billion (representing 75.5% of the AUM at the
time of distribution). Working proactively with regulator
Link Group – 1H 2020 Results Presentation
88.6 83.8
11.5 8.3
1H 2019 1H 2020
30 June year end, A$ million
Revenue Operating EBIT
Banking and Credit Management: Overview
Diversification of service offering and jurisdictional expansion broadens opportunity and
strengthens resilience through debt cycles
Financials Key focus
Underlying Strength
14
Diversification of service offering and jurisdictional expansion
strengthens resilience through debt cycles
Strategy
UKIreland
Netherlands
Italy
16%
54%
30%
1H 2020 - Revenue mix
Bank Outsourcing
PortfolioManagement (NPLs)
New LendingServices
• Scale operations in Italy and the Netherlands
• Exploring further expansion into new jurisdictions with
attractive characteristics
• Expanding end-to-end lending proposition
• Global alignment of operations to drive efficiencies
• PES integration planning commenced. Completion expected in
FY 2021
Acquisition
of PES
Attractive deal
economics
Complementary
fit to BCM
Positioned for
growth
Combination
of talent
1 2
3 4
Acquisition of PES creates a leading independent pan-European
servicer with scale and diversification, accelerating existing BCM
growth strategy
Link Group – 1H 2020 Results Presentation
167.4 188.7
16.8 26.1
1H 2019 1H 2020
30 June year end, A$ million
Revenue Operating EBIT
46.3 58.9
121.1 129.8
167.4 188.7
28% 31%
1H 2019 1H 2020
30 June year end, A$ million
External Revenue Internal Revenue External Revenue %
Technology & Operations: Overview
External revenues continue to grow. Global Transformation program driving alignment of
processes and systems, to provide further efficiencies
Financials
Strategy
Key focus
Underlying strength
Standardised systems and approach across the globe, establish
Centres of Excellence (“CoE”)
• Info Security CoE• Data Analytics CoE
• Coding Development CoE• High volume, low customer
contact processes
• Cloud CoE• Workflow CoE
External revenue continues to grow with an expanded product offering
15
• Delivery of Global Transformation program
• Over 100 FTE already in Mumbai (capacity for 1200+)
• New Leeds CoE now complete, facilitating premises
consolidation in the UK
• Investment in core technology (contact centre, CRM, data hub and
miraqle)
• Continuing growth of external revenue
Link Group – 1H 2020 Results Presentation
PEXA (equity accounted investment – Link Group share 44.2%)
PEXA beginning to make a material contribution to Link Group’s financial results as volumes
continue to grow and operational leverage is realised
Financials1
Revenue and transaction volumes
Highlights
Underlying strength
• Volumes continue to grow as the industry embraces PEXA’s effective service
and technology offering, driving record Member satisfaction (NPS +52)
• Continued investment in security and innovation, with 80 platform
enhancements in the past year, facilitating $382B of settlement value on the
platform
• Fostered an extensive network of members connecting over 8,000 legal and
conveyancing firms, 150 financial institutions, multiple land registries and
government offices
• Operating across five largest states representing 96% of national property
transactions, an estimated 70% of all transfers settled on-line
PEXA contributed to the Link Group result as an equity accounted
investment
PEXA continues to perform strongly
Included in
Link Group
result
Note: above figures reflect Property Exchange Australia Limited (PEXA) results for 6
months ending 31 December 2019 and 31 December 2018
16
Network effect driving increased transaction volumes
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
-
250
500
750
1,000
1,250
1,500
1,750
2,000
1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY20
PE
XA
ex
chan
ge r
ev
enu
e ($M
)
PE
XA
tra
ns
ac
tio
ns
(0
00
's)
Exchange transactions (LHS)
Exchange Revenue (RHS)
30 June year end, A$ million 1H 2020 1H 2019
PEXA exchange transactions (000s) 1,196 842 355 42%
PEXA Revenue 79 51 28 54%
PEXA Operating EBITDA 27 4 23 597%
PEXA Operating NPATA 26 (6) 32 nmf
Year on year change
1. Refer to page 21 for a reconciliation of Operating NPATA to Statutory NPAT.
30 June year end, A$ millionPEXA
(100%)
Link
(44.2%)
Revenue 79
Statutory NPAT (9) (4)
Operating NPATA1 26 11
1H 2020
Link Group – 1H 2020 Results Presentation
PEXA continues to invest in security, innovation and customer service
Since inception PEXA has completed more than 3.9 million transactions. Today more than 70% of
all property settlements nationally are completed online
Continuous investment in the platform Delivering exceptional experience
Protecting the property industry and
homebuyers and sellers
In 2019:
• $382B settled on the platform
• 395,000 home buyers benefited from a safer and
more efficient property settlement
• 12,500 consumers registered for secure-app
PEXA Key
Continuous innovation
• 80 platform enhancements in the past year
• Improved User Interface
• Expansion into ACT
• Launch of PEXA Key
• Creation of self-help tools
Better for members
• Exchange Net Promoter Score: +52
• Platform availability: 99.99%
• Member satisfaction: 95%
• Calls answered within a minute: 91%
Better for PEXA’s people
• 94% of employees consider PEXA members in
their day-to-day role1
• 92% of employees feel part of an inclusive team*
• Recipient of the HRD2 Innovative Teams 2020
Diversity and Inclusion Award
“It’s refreshing to spend time with
a company that genuinely
understands their role in our
profession and goes to so much
trouble to try and have a positive
impact for their members”
Jacob Corbett, Director,
Bradley & Bray Solicitors
1. 2019 PEXA staff engagement survey.
2. Human Resources Director magazine.
17
Link Group – 1H 2020 Results Presentation
2. Financial information
18
Link Group – 1H 2020 Results Presentation
Financial overview
Revenue is resilient in challenging markets. Global Transformation program is broadly on track,
addressing costs and margin compression
19
RSS result tempered by the impact of regulatory change and previously announced client losses and fund mergers, partly mitigated by strong
underlying member growth and project revenues
Non-recurring Revenue in Corporate Markets impacted by lower market related activity in the UK (Brexit)
Increased FUM in FS driving higher revenue
Solid growth in T&O revenue and operating EBITDA
Lower new business activity levels for BCM in UK and Ireland
1. Financial highlights
2. Transformation and Investment
Capex of $48.8 million building foundations for future products and services, and platform refreshes to maintain technology led positioning
in key markets
Global Transformation on track to deliver annualised savings of $50 million by the end of FY 2022, with $11.5 million realised to date
3. Future growth drivers
PEXA continues to grow strongly
Entry into the UK pensions market, with investment in SMART Pension market and a good pipeline of new business opportunities
Positioned well to benefit from super fund consolidation and outsourcing opportunities in Australia
Expansion of BCM through the acquisition of Pepper European Servicing (subject to regulatory approval)
Link Group – 1H 2020 Results Presentation
Financial summary
Revenue, EBITDA and NPATA lower than pcp, mostly reflecting the divested CPCS business and
the impact of previously announced client losses and regulatory change in RSS
20
Profit & loss statement 1H 2020 commentary
Comparative information has been restated to reflect
the application of AASB 16 Leases
Lower operating EBITDA performance compared to
the pcp, mostly reflects the divestment of the CPCS
business in June 2019 and the impact of regulatory
change and previously announced client losses in
RSS
Increased D&A reflects the flow through impact of
higher levels of capex, and higher contract fulfilment
cost amortisation. FY 2020 D&A (excluding acquired
amortisation and ROU asset amortisation) is expected
to be between $85 million and $90 million
The effective tax rate for 1H 2020 is 33.1% (pcp
29.4%), impacted by PEXA earnings (non taxable)
and non deductible acquisition related cost. The
underlying effective tax rate is 25.1% (excluding PEXA
earnings and significant items). The expected effective
tax rate for FY 2020 is c.25%
Summary of depreciation and amortisation
30 June year end, A$ million 1H 2020 1H 2019
Revenue 624.2 714.4 (90.2) (13%)
Operating cost (460.8) (509.4) 48.6 10%
Operating EBITDA 163.4 205.0 (41.6) (20%)
Depreciation and amortisation (53.9) (49.1) (4.8) (10%)
Operating EBIT 109.4 155.8 (46.4) (30%)
Significant items (other) (21.1) (27.5) 6.3 23%
Acquired amortisation (24.0) (26.0) 2.0 8%
EBIT 64.3 102.3 (38.1) (37%)
Net finance expense (17.6) (17.1) (0.5) (3%)
Gain on assets held at fair value 0.2 177.6 (177.4) n/a
Share of PEXA loss (3.9) - (3.9) n/a
NPBT 42.9 262.8 (219.9) (84%)
Income tax expense (14.2) (77.3) 63.2 82%
NPAT 28.7 185.5 (156.7) (85%)
Add back acquired amortisation after tax (inc. PEXA) 33.3 20.6 12.7 62%
NPATA 62.0 206.0 (144.0) (70%)
Add back significant items after tax 19.1 (99.6) 118.7 (119%)
Operating NPATA 81.1 106.4 (25.3) (24%)
Operating earning per share (cents) 15.2 20.1 (4.8) (24%)
Dividend per share (cents) 6.5 8.0 (1.5) (19%)
Year on year change
30 June year end, A$ million 1H 2020 1H 2019
ROU asset amortisation (AASB 16) (15.6) (16.2)
Other Depreciation and amortisation (38.3) (33.0)
TOTAL Depreciation and amortisation (53.9) (49.1)
Link Group – 1H 2020 Results Presentation
Statutory reconciliation
Reconciling items identified are in line with expectations
21
1H 2020 EBIT 1H 2020 commentary
1H 2020 NPAT
Major drivers of significant items are:
− Global Transformation cost $15.3 million
− Acquisition related cost $4.5 million
(predominantly related to the PES acquisition
and the investment in SMART Pension)
Expectation of c.$30-35 million in 2H 2020,
reflecting PES acquisition, RSS international
new business tenders and Global
Transformation program
Statutory NPAT down 85% on the pcp, primarily
reflects the one off gains related to revaluation
of the PEXA investment (non cash) in 1H 2019
PEXA
PEXA is an equity accounted investment with
the following components included in the Link
Group result:
1. The Operating NPATA for PEXA takes into account available unrecognised tax losses.
30 June year end, A$ millionPEXA
(100%)
Link
(44.2%)
Statutory NPAT (8.9) (3.9)-
add back Significant items (after tax) 1.2 0.5
add back Acquired amortisation (after tax) 33.5 14.8
Operating NPATA1 25.8 11.4
1H 2020
109.4
64.388.9
21.1
24.0
13.4
102.3
Operating EBIT Significant Items(other)
Acquired amortisation Statutory EBIT(1H 2020)
Statutory EBIT(1H 2019)
A $ million
Link (exc. CPCS) CPCS (divested)
81.1 62.028.7 50.0
19.133.3
124.3
11.2
185.5
Operating NPATA SignificantItems
after tax
NPATA Acquiredamortisation
after tax
Statutory NPAT(1H 2020)
Statutory NPAT(1H 2019)
A $ million
Link (exc. CPCS) PEXA revaluation (after tax) CPCS (divested)
Link Group – 1H 2020 Results Presentation
Cash flow
Strong operating cash flow
22
Cash flow statement 1H 2020 commentary
Net operating cash flow
Improved cash flow conversion mostly reflects timing of
receipt of investment management fee invoices in the FS
business
Working capital improvement reflects:
− Timing on receipt of investment management fee invoices
(payables); partially offset by
− Weaker performance on trade and other receivables; and
− Trade and other creditors (seasonality)
Capital expenditure
Increased capex spend relates to new systems and
technology refresh programs (CRM, contact centre platform,
BCM platform) and Leeds/Mumbai office fit-out. Capex spend
is weighted to first half, overall FY 2020 spend expected to
be 7-8% of revenue
Dividend
Higher dividend paid in cash reflects full year inclusion of
LAS for the FY 2019 final dividend vs 8 months for the FY
2018 final dividend
Other financing cash flow
$324.3 million net movement in borrowings, largely reflects
the application of CPCS sales proceeds to debt
Buyback $17.5 million
30 June year end, A$ million 1H 2020 1H 2019
Operating EBITDA 163.4 205.0 (41.6) (20%)
Changes in fund assets & liabilities (0.2) (8.6) 8.4 98%
Changes in net working capital 17.5 (37.5) 54.9 147%
Net operating cash flow 180.7 158.9 21.8 14%
Cash impact of significant items (22.1) (24.1) 2.0 8%
Tax (28.7) (45.3) 16.6 37%
Interest (17.6) (15.3) (2.2) (14%)
Net cash provided by operating activities 112.4 74.2 38.2 52%
Capital expenditure (48.8) (39.3) (9.5) (24%)
ROU asset payments (14.1) (15.6) 1.6 10%
Free cash flow (available for capital
management)49.5 19.2 30.3 158%
Acquisitions / divestments (40.2) (39.5) (0.8) (2%)
Dividends paid (66.7) (51.8) (15.0) (29%)
Other financing activities (342.1) - (342.1) nmf
Net increase / (decrease) in cash (399.6) (72.0) (327.6) nmf
Net operating cash flow conversion % 111% 78% 33%
Year on year change
Link Group – 1H 2020 Results Presentation
Global Transformation
Global Transformation broadly on track, delivering $11.5 million of savings in 1H 2020
23
Program plan
Initiatives Benefits realised to
dateFY 2020 FY 2021 FY 2022 TOTAL Program
Vendor consolidation /
centralised sourcing$5.6M $10M
Premises consolidation $0.0M $3M
Centres of excellence $0.2M $23M
Operational efficiencies $5.7M $14M
TOTAL PLAN $11.5M $15-20M $30-35M $50M $50M
60%
40%
Project plan Progress
One-off cost of $15.3 million incurred in 1H 2020 (total program cost of $50-60 million remains)
Premises consolidation and Centre of Excellence (CoE) initiatives are tracking slower than planned, overall expectation remains in place
Mumbai CoE established with first staff in place from August 2019, currently over 120 FTE
Link Group – 1H 2020 Results Presentation
Fin
an
ce
Ris
k &
Co
mp
lian
ce
HR
& B
ran
din
g
Leg
al
Global Transformation
Standardisation across the globe
24
• Operations CoE opened in Mumbai
• UK Northern hub opened in LeedsRetirement and Superannuation Solutions
Fund Solutions
Banking and Credit Management
Corporate Markets
Centr
alis
ed T
echnolo
gy a
nd O
pera
tions
function s
erv
ing a
ll busin
ess u
nits
Exte
rnal
custo
mers
Cen
trali
sed
sh
are
d s
erv
ices
:
Mumbai CoE complete - approximately 1,200 seat
capacity with over 120 FTE currently in place
New Leeds CoE complete - facilitating premise
consolidation in the UK. Approximate 750 seat capacity
with over 400 FTE currently in place
Technology and Operations
Hubs established in Mumbai and LeedsGlobally aligned business units
Centralised shared services in place
Link Group – 1H 2020 Results Presentation
3. Proforma financial information
25
Link Group – 1H 2020 Results Presentation
Proforma reconciliation
Link Group has re-presented historical comparatives to align with current reporting
26
Financials
Link Group Proforma reflects the following adjustments to Link Group Reported:
− Exclusion of the CPCS result in 1H 2019, following divestment in June 2019
− FY 2018 (depicted in subsequent charts) includes pre acquisition LAS result for the period 1 July 2017 to 31 October 2017 and excludes CPCS
Link Group Proforma revenue growth is negative 3.6%, on a constant currency basis revenue growth is negative 4.5%
Link Group Proforma Operating EBITDA growth is negative 10.7%, on a constant currency basis Operating EBITDA growth is negative 11.1%
Link Group Proforma Operating EBIT growth is negative 20.4%, on a constant currency basis Operating EBIT growth is 20.7%
30 June year end, A$ million 1H 2020 1H 2019 1H 2020 1H 2019 1H 2020 1H 2019
Revenue 624.2 714.4 - (66.9) 624.2 647.5 (23.3) (3.6%)
Operating costs (460.8) (509.4) - 44.9 (460.8) (464.5) 3.7 0.8%
Operating EBITDA 163.4 205.0 - (22.0) 163.4 183.0 (19.6) (10.7%)
Depreciation and amortisation (53.9) (49.1) - 3.7 (53.9) (45.4) (8.5) (18.7%)
Operating EBIT 109.4 155.8 - (18.3) 109.4 137.5 (28.1) (20.4%)
Operating EBIT margin 17.5% 21.8% n/a 27.3% 17.5% 21.2% (3.7%)
Year on year change
Link Group Reported Adjustments Link Group Proforma
CPCS (divestment)
Link Group – 1H 2020 Results Presentation
Revenue summary
Recurring Revenue remains an important feature, underpinning the business’ resilience.
Recurring Revenue represents 84% of 1H 2020 Revenue
27
Revenue profile 1H 2020 commentary
Revenue movement by business unit
Lower Recurring Revenue mostly reflects the impact
of client losses / mergers and partial impact of
regulatory change in RSS, partially offset by growth
in CM, FS and T&O
Lower Non-recurring Revenue mostly reflects lower
levels of market related activity in CM UK (Brexit
related), lower BCM revenue (on lower new loan
portfolios on boarded), partially offset by growth in
RSS, FS and T&O
APAC - 59% EMEA - 41%
APAC vs. EMEA (1H 2020 Revenue)
RSS CM FS BCM T&O Group
Recurring Revenue 525.3 (19.4) 2.1 4.8 (0.9) 20.0 (10.3) 521.6
Non-recurring Revenue 122.1 3.1 (10.9) 1.7 (3.9) 1.4 (10.8) 102.6
Revenue 647.4 (16.3) (8.9) 6.4 (4.8) 21.3 (21.1) 624.2
1H 2019 1H 2020Movement
30 June year end, A$ million
497 525 522
113122 103
609647
624
81% 81% 84%
1H 2018 1H 2019 1H 2020
30 June year end, A$ million
Recurring Revenue Non-recurring Revenue
Link Group – 1H 2020 Results Presentation
62 5731
6552
126
108
FY 2018 FY 2019 FY 2020
30 June year end, A$ million 1H
2H
Segment results – Retirement & Superannuation Solutions
Previously announced client losses and partial impact of PYS weighing on 1H 2020 result.
Underlying member growth and project revenue remain strong
28
Financials 1H 2020 commentary
Operating EBIT
1H 2020 Revenue
contribution132%
Reduced revenue reflects lower Recurring Revenue,
partially offset by increase Non-recurring Revenue
Excluding the impact of PYS (negative $6.9 million vs
pcp) and net client losses (negative $21.8 million vs
pcp), Recurring Revenue grew by $9.3 million (5.0%)
Strong underlying member growth of 5.2%
Increases in the cost base driven by:
− Volume related cost supporting additional project
revenue
− Elevated cost of c.$3.5 million related to regulatory
change programs
− Partially offset by Global Transformation benefits
and slightly lower costs associated with exited
clients
1. Divisional revenue contribution percentage based on Gross Revenue prior to eliminations.
30 June year end, A$ million 1H 2020 1H 2019
Revenue 259.6 275.9 (16.3) (5.9%)
Operating expenses (222.6) (212.7) (9.9) (4.6%)
Operating EBITDA 37.1 63.2 (26.1) (41.3%)
D&A (6.5) (6.6) 0.1 2.0%
Operating EBIT 30.6 56.6 (26.0) (45.9%)
Recurring Revenue % 88% 90% (1.8%)
Operating EBITDA margin % 14% 23% (8.6%)
Operating EBIT margin % 12% 21% (8.7%)
Year on year change
Link Group – 1H 2020 Results Presentation
Segment results – Retirement & Superannuation Solutions
29
Revenue profile 1H 2020 commentary
APAC vs. EMEA (1H 2020 Revenue)
1H 2020 Revenue
contribution132%
APAC - 100%
Recurring Revenue reduction reflects the full and part
year impact of client wins / losses and PYS, and
growth from underlying members and contracted
price escalators
Higher Non-recurring Revenue benefiting from
regulatory change projects (including PYS)
Underlying member growth 5.2% year on year (to
December)2
Underlying resilience remains, supported by strong member growth and project related revenue.
FY 2020 guidance reaffirmed, Operating EBITDA in the range of $75 to $85 million
1. Divisional revenue contribution percentage based on Gross Revenue prior to eliminations.
2. Excludes client wins/losses, ERFs, redundancy trusts and impact of PYS related member account movements (to either ERFS of the ATO).
Revenue bridge
FY 2020 guidance
Revenue for FY 2020 is expected to be in the
range of $480 million to $500 million
Operating EBITDA for FY 2020 is expected to be
in the range of $75 million to $85 million
(adjusted to take account of AASB 16 Leases)
0.5%0.9% 1.2%
0.8%
2.3%2.9%
3.9%
5.2%
Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19
Underlying 12 month member growth1
275.9 259.6
3.19.3
(21.8)(6.9)
1H 2019 Net wins /(losses / mergers)
PYS recurringrevenue impact
Project revenue Growth 1H 2020
Revenue (A$ millions)
253 248 229
31 2831
284 276260
89% 90% 88%
1H 2018 1H 2019 1H 2020
30 June year end, A$ million
Recurring Revenue Non-recurring Revenue Recurring Revenue %
Link Group – 1H 2020 Results Presentation
39 4435
41 36
80 80
FY 2018 FY 2019 FY 2020
30 June year end, A$ million 1H
2H
Segment results – Corporate Markets
Slower market related revenue in the UK weighing on the result, partially mitigated by a stronger
performance across APAC jurisdictions
30
Financials 1H 2020 commentary
Operating EBIT
1H 2020 Revenue
contribution1
23%
Revenue was down by $8.9 million compared to the
pcp, with a $10.9 million drop in Non-recurring
Revenue (predominantly UK), partially offset by a
$2.1 million increase in Recurring Revenue (further
detail overleaf)
The cost base was broadly flat reflecting:
− Volume related increases supporting Recurring
Revenue growth across most jurisdictions
(including India acquisitions)
− Offset by lower costs, resulting from realisation of
Global Transformation benefits
The margin decline is mostly due to the impact of
lower Non-recurring Revenue (higher margin)
The previously announced divestment of LMS South
Africa is pending regulatory approval
1. Divisional revenue contribution percentage based on Gross Revenue prior to eliminations.
30 June year end, A$ million 1H 2020 1H 2019
Revenue 183.0 191.9 (8.9) (4.6%)
Operating expenses (137.9) (137.5) (0.4) (0.3%)
Operating EBITDA 45.1 54.3 (9.3) (17.1%)
D&A (10.2) (10.2) 0.1 0.8%
Operating EBIT 34.9 44.1 (9.2) (20.8%)
Recurring Revenue % 70% 66% 4.3%
Operating EBITDA margin % 25% 28% (3.7%)
Operating EBIT margin % 19% 23% (3.9%)
Year on year change
Link Group – 1H 2020 Results Presentation
Segment results – Corporate Markets
Moderate growth in Recurring Revenue, through a combination of client wins and increased
production penetration
31
Revenue profile 1H 2020 commentary
Non-recurring revenue historical range
1H 2020 Revenue
contribution1
23%
APAC - 47% EMEA - 53%
APAC vs. EMEA (1H 2020 Revenue)
Growth in Recurring Revenue largely resulting from
new client wins and increased product penetration
across most jurisdictions
New business continues to bolster Recurring
Revenue in a competitive environment. Pricing
remains under pressure and is offset by increased
volumes
Decline in Non-recurring Revenue mostly due lower
market related activity in the UK (Brexit)
Won 30% of IPOs on the ASX and 32% of IPOs that
have gone live on the LSE between 1 July 2019 and
31 December 2019
Link Group’s hybrid AGM technology hit a new record
in Australia & NZ with almost 1.8 million eligible
voting members provided access for RACQ AGM
Launched micro investing app (ShareMeUp) for NZX
listed stocks, allowing retail investors to a dollar cost
averaging investment strategy
1. Divisional revenue contribution percentage based on Gross Revenue prior to eliminations.
119 126 128
5766 55
176192 183
67% 66% 70%
1H 2018 1H 2019 1H 2020
30 June year end, A$ million
Recurring Revenue Non-recurring Revenue Recurring Revenue %
5766 66
53 55
1H 2018 2H 2018 1H 2019 2H 2019 1H 2020
30 June year end, A$ million
Link Group – 1H 2020 Results Presentation
Segment results – Fund Solutions
Strong performance underpinned by growth in AUM resulting from new clients, new funds and
growth in existing funds
32
Financials 1H 2020 commentary
Operating EBIT
1H 2020 Revenue
contribution1
11%
Strong revenue growth, with Recurring Revenue up
$4.8 million (6.5%) and Non-Recurring Revenue up
$1.7 million
Ex-Woodfood fund generated a $2.7 million drag in
1H2020 v’s pcp (reflecting foregone revenue and
increased costs)
Increases in the cost base driven by:
− Volume related cost supporting additional revenue
− Elevated costs related to remediation activity,
which will continue in 2H 2020
− Partially offset by Global Transformation benefits
1. Divisional revenue contribution percentage based on Gross Revenue prior to eliminations.
1114 15
11
12
21
26
FY 2018 FY 2019 FY 2020
30 June year end, A$ million 1H
2H
30 June year end, A$ million 1H 2020 1H 2019
Revenue 86.1 79.6 6.4 8.1%
Operating expenses (68.2) (63.0) (5.2) (8.3%)
Operating EBITDA 17.8 16.6 1.2 7.3%
D&A (3.1) (2.6) (0.5) (19.5%)
Operating EBIT 14.7 14.0 0.7 5.0%
Recurring Revenue % 91% 93% (1.4%)
Operating EBITDA margin % 21% 21% (0.1%)
Operating EBIT margin % 17% 18% (0.5%)
Year on year change
Link Group – 1H 2020 Results Presentation
Segment results – Fund Solutions
Strong revenue growth driven by the addition of new funds and increased AUM for existing funds
33
Revenue profile 1H 2020 commentary
APAC vs. EMEA
1H 2020 Revenue
contribution1
11%
APAC - 10% EMEA - 90%
Recurring Revenue growth reflects a combination of
new clients, increased funds administered for existing
clients and growth in underlying AUM
Total AUM across EMEA increased from £96.6 billion
at 30 June 2019 to £105.9 billion at 31 December
2019
Over £6 billion of AUM growth from the on-boarding
of new client funds
LGPS schemes continue to provide momentum in
AUM growth as local government assets are
consolidated
Increased outsourcing in the UK AFM market,
supporting revenue growth
UK AFM Assets under management2
-
500
1,000
1,500
0.0%
2.5%
5.0%
7.5%
10.0%
2015 2016 2017 2018 2019
AuM
£bill
ions
AuM hosted / outsourced % (LHS) Total AuM (RHS)
1. Divisional revenue contribution percentage based on Gross Revenue prior to eliminations.
2. Source: Management information.
68 74 79
46
77180
86
95% 93% 91%
1H 2018 1H 2019 1H 2020
30 June year end, A$ million
Recurring Revenue Non-recurring Revenue Recurring Revenue %
Link Group – 1H 2020 Results Presentation
Segment results – Banking and Credit Management
European expansion continues with strong revenue growth in Italy and acquisition related growth
in the Netherlands, partially offsetting lower revenues in the UK and Ireland
34
Financials 1H 2020 commentary
Operating EBIT
1H 2020 Revenue
contribution1
10%
Revenue was down by $4.8 million on the pcp,
reflecting softer revenue in the UK and Ireland
partially offset by promising organic growth in Italy
and the impact of acquisitions in the Netherlands
Non-recurring revenue decreased on lower
disbursements
Operating costs were down, reflecting:
− Realisation of Global Transformation benefits
− Volume related decreases in Non-recurring
revenue
− Partial offset of increased cost supporting current
and future organic revenue growth in Italy and
cost of the acquired business in the Netherlands
1. Divisional revenue contribution percentage based on Gross Revenue prior to eliminations.
10 128
10
21
12
FY 2018 FY 2019 FY 2020
30 June year end, A$ million 1H
2H
30 June year end, A$ million 1H 2020 1H 2019
Revenue 83.8 88.6 (4.8) (5.4%)
Operating expenses (69.3) (72.9) 3.6 4.9%
Operating EBITDA 14.4 15.6 (1.2) (7.7%)
D&A (6.1) (4.1) (2.0) (47.4%)
Operating EBIT 8.3 11.5 (3.2) (27.5%)
Recurring Revenue % 91% 87% 3.9%
Operating EBITDA margin % 17% 18% (0.4%)
Operating EBIT margin % 10% 13% (3.0%)
Year on year change
Link Group – 1H 2020 Results Presentation
Segment results – Banking and Credit Management
BCM continues to add new NPL portfolios, which partially offset run-off on existing books
35
Revenue profile 1H 2020 commentary
1H 2020 Revenue
contribution1
10%
Revenue by service
APAC vs. EMEA (1H 2020 Revenue)
EMEA - 100%
Good contribution to revenue from Italy and
Netherlands
Revenue in the UK and Ireland were lower mostly as
a result of portfolio run-off and the sale of a debt
portfolio, partially offset by the on-boarding of a new
client portfolio
Lower bank outsourcing revenue follows the sale of a
large bank portfolio which was previously
administered by BCM under an outsourcing
arrangement
AUM decreased from £82.7 billion at 30 June 2019 to
£72.7 billion at 31 December 2019
The business announced the acquisition of PES in
January 2020. The acquisition is a highly
complimentary fit, diversifying revenue and providing
greater growth opportunities in Europe. The
acquisition remains subject to regulatory approval
and is expected to complete in FY 2021
23%
47%
30%
1H 2019 - Revenue
Bank Outsourcing
Portfolio Management (NPLs)
New Lending Services
16%
54%
30%
1H 2020 - Revenue
1. Divisional revenue contribution percentage based on Gross Revenue prior to eliminations.
6377 76
11
12 874
8984
85% 87% 91%
1H 2018 1H 2019 1H 2020
30 June year end, A$ million
Recurring Revenue Non-recurring Revenue Recurring Revenue %
Link Group – 1H 2020 Results Presentation
Segment results – Technology and Operations
Strong revenue performance with solid internal and external revenue growth, Global
Transformation driving improved margins
36
Financials 1H 2020 commentary
Operating EBIT
1H 2020 Revenue
contribution1
24%
Overall revenue growth reflects strong performance
on both internal and external revenue
Increases in the cost base driven by
− Volume related cost growth supporting additional
external revenue
− Ongoing cost associated with increased
technology support following a shift to the cloud
− Cost related to internal restructure (further
consolidation of IT services into T&O from other
business units)
− Partially offset by Global Transformation savings
Strong margin performance reflects the impact of
Global Transformation savings, together with
improved margins on communication and analytics
services
1. Divisional revenue contribution percentage based on Gross Revenue prior to eliminations.
2217
26
2428
45 45
FY 2018 FY 2019 FY 2020
30 June year end, A$ million 1H
2H
30 June year end, A$ million 1H 2020 1H 2019
Revenue 188.7 167.4 21.3 12.8%
Operating expenses (134.6) (128.9) (5.8) (4.5%)
Operating EBITDA 54.1 38.5 15.6 40.5%
D&A (28.0) (21.7) (6.3) (29.0%)
Operating EBIT 26.1 16.8 9.3 55.4%
External Revenue % 31% 28% 3.6%
Operating EBITDA margin % 29% 23% 5.7%
Operating EBIT margin % 14% 10% 3.8%
Year on year change
Link Group – 1H 2020 Results Presentation
Segment results – Technology and Operations
Revenue growth driven by stronger internal and external demand. External revenue representing
31% of total revenue
37
Revenue profile 1H 2020 commentary
APAC vs. EMEA (1H 2020 Revenue)
1H 2020 Revenue
contribution1
24%
APAC - 80% EMEA - 20%
External revenue grew by 28% on the pcp mostly on
larger volumes for communication services, analytics
and fee for service projects
Internal revenue increase reflects a combination of
increased support related to a shift to the cloud and
the impact of restructure (further consolidation of IT
services into T&O from other business units)
Recently announced partnership with Port Adelaide
Football Club, helping develop a cloud-based
integrated data platform, supporting data driven
analysis and decision-making
1. Divisional revenue contribution percentage based on Gross Revenue prior to eliminations.
116 121130
39
46
59155
167
189
25% 28% 31%
1H 2018 1H 2019 1H 2020
30 June year end, A$ million
Internal Revenue External Revenue External Revenue %
Link Group – 1H 2020 Results Presentation
Capital management
Link will remain prudent in its capital management
38
Net debt 1H 2020 commentary
Dividend and franking summary
Net debt
Increased net debt since 30 June 2019, reflects:
− Investments ($40.2 million) (including SMART Pension)
− Share buyback ($17.5 million)
− Capex ($48.8 million) and Global Transformation ($15.2 million)
Current leverage is 2.3x, which is within the guidance range of 1.5x
to 2.5x
On a proforma basis (inclusion of PES) leverage increases to 2.7x,
which sits above the guidance range. Interest cover ratio remains
over 10x
Dividend
Directors have declared an interim dividend of 6.5 cents per share
(1H 2019: 8.0 cents per share) equating to a total dividend of $34.5
million (1H 2019: $42.6 million)
The dividend will be 100% franked
Moving forward we expect there will be a reduced level of franking,
reflecting the increased weight of non Australian based earnings
Capital management
To date 3.1 million shares purchased for $17.5 million (average
price of $5.59 per share)
Potential PEXA capital returns and further share buy back activity
provide optionality
30 June year end 1H 2020 1H 2019
Interim dividend declared (cents per share) 6.5 8.0
% Franking 100% 100%
1. Leverage calculated in accordance with Link Group’s debt agreement. Net debt excludes ROU liabilities (AASB 16).
Total debt excludes ROU liabilities.
30 June year end, A$ million Dec 19
Total debt 855.9
Cash and cash equivalents (148.8)
Net debt 707.1
Net debt / LTM Proforma Operating EBITDA1 2.27x
Link Group – 1H 2020 Results Presentation
4. Closing
39
Link Group – 1H 2020 Results Presentation
Priorities
Continued focus on client retention and investment in new products. Global Transformation to
drive efficiency
40
Retain existing clients, increase
cross sell of value added services
and win new business in all markets
Capital management, including
potential PEXA capital returns
Capitalise on investment in SMART
Pension to grow UK pensions
business
Continue to invest in development
of new innovative products and
services
Global Transformation program
Further jurisdictional expansion for
LFS and BCM
Link Group – 1H 2020 Results Presentation
5. Q&A
41
Link Group – 1H 2020 Results Presentation
6a. Appendix: Additional financial information
42
Link Group – 1H 2020 Results Presentation
Constant currency
Strengthening GBP/AUD during 1H 2020 provided a slight benefit to result
43
30 June year end, A$ million1H 2020
Actual
1H 2020
Constant
1H 2019
Actual
Variance
Actual
Currency
Impact
REVENUE
Retirement & Superannuation Solutions 259.6 259.6 275.9 (16.3) 0.0 (16.3) (6%)
Corporate Markets 183.0 180.3 191.9 (8.9) 2.7 (11.6) (6%)
Fund Solutions 86.1 84.9 79.6 6.4 1.2 5.2 7%
Banking and Credit Management 83.8 82.1 88.6 (4.8) 1.6 (6.5) (7%)
Technology & Operations 188.7 188.1 167.4 21.3 0.6 20.7 12%
Group (177.0) (176.8) (155.9) (21.1) (0.2) (20.9) 13%
TOTAL LINK GROUP 624.2 618.2 647.5 (23.3) 6.0 (29.2) (5%)
OPERATING EBITDA
Retirement & Superannuations Solution 37.1 37.1 63.2 (26.1) (0.0) (26.1) (41%)
Corporate Markets 45.1 44.2 54.3 (9.3) 0.9 (10.2) (19%)
Fund Solutions 17.8 17.6 16.6 1.2 0.3 1.0 6%
Banking and Credit Management 14.4 14.0 15.6 (1.2) 0.4 (1.6) (10%)
Technology & Operations 54.1 54.7 38.5 15.6 (0.6) 16.2 42%
Group (5.1) (4.8) (5.3) 0.2 (0.3) 0.5 (10%)
TOTAL LINK GROUP 163.4 162.7 183.0 (19.6) 0.7 (20.3) (11%)
OPERATING EBIT
Retirement & Superannuations Solution 30.6 30.6 56.6 (26.0) (0.0) (26.0) (46%)
Corporate Markets 34.9 34.2 44.1 (9.2) 0.8 (10.0) (23%)
Fund Solutions 14.7 14.5 14.0 0.7 0.2 0.5 3%
Banking and Credit Management 8.3 8.0 11.5 (3.2) 0.3 (3.5) (30%)
Technology & Operations 26.1 26.7 16.8 9.3 (0.6) 9.9 59%
Group (5.2) (4.9) (5.5) 0.3 (0.3) 0.6 (11%)
TOTAL LINK GROUP 109.4 109.1 137.5 (28.1) 0.3 (28.4) (21%)
Constant currency
variance
Link Group – 1H 2020 Results Presentation
Detailed P&L statutory reconciliation for 1H 2020
44
$ million StatutoryBusiness
Combination costs
Global
transformation
Client migration
costs
Other
(non EBITDA)TOTAL Operating
RSS 259.6 - - - - - 259.6
CM 183.0 - - - - - 183.0
FS 86.1 - - - - - 86.1
BCM 83.8 - - - - - 83.8
T&O 188.8 - (0.1) - - (0.1) 188.7
CPCS - - - - - - -
Elimination/Recharges (176.9) - - - - - (176.9)
Revenue 624.3 - (0.1) - - (0.1) 624.2
Employee expenses (297.9) - 8.5 (0.0) - 8.5 (289.4)
IT expenses (55.5) - (0.0) - - (0.0) (55.5)
Occupancy expenses (12.0) - 1.3 - - 1.3 (10.7)
Other expenses (110.8) (0.0) 5.7 0.0 - 5.7 (105.2)
Net acquisition and capital management related expenses (4.5) 4.5 - - - 4.5 (0.0)
Total operating expenses (480.8) 4.5 15.4 (0.0) - 19.9 (460.8)
EBITDA 143.6 4.5 15.3 (0.0) - 19.8 163.4
Depreciation (8.9) - - - - - (8.9)
Amortisation (other) (27.7) - - - - - (27.7)
Contract fulfilment (3.1) - - - - - (3.1)
Right of use asset amortisation (15.6) - - - 1.3 1.3 (14.3)
EBITA 88.3 4.5 15.3 (0.0) 1.3 21.1 109.4
Acquired amortisation (24.1) - - - 24.1 24.1 -
EBIT 64.3 4.5 15.3 (0.0) 25.4 45.2 109.4
Net finance expense (17.6) - - - 1.0 1.0 (16.6)
Gain on assets held at fair value 0.2 - - - - - 0.2
Profit on disposal of subsidiaries - - - - - - -
Share of NPAT of equity accounted investments (3.9) - - - 15.3 15.3 11.4
NPBT 42.9 4.5 15.3 (0.0) 41.7 61.6 104.5
Income tax expense (14.2) (9.1) (23.3)
NPAT 28.7 52.4 81.1
Add back acquired amortisation (after tax) 18.5 (18.5) -
Add back PEXA acquired amortisation (after tax) 14.8 (14.8) -
NPATA 62.0 19.1 81.1
Significant Items
Link Group – 1H 2020 Results Presentation
Detailed P&L statutory reconciliation for 1H 2019
45
$ million StatutoryBusiness
Combination costs
Global
transformation
Client migration
costs
Other
(non EBITDA)TOTAL Operating
RSS 275.9 - - - - - 275.9
CM 191.9 - - - - - 191.9
FS 79.6 - - - - - 79.6
BCM 88.6 - - - - - 88.6
T&O 167.4 - - - - - 167.4
CPCS 70.6 - - - - - 70.6
Elimination/Recharges (159.6) - - - - - (159.6)
Revenue 714.4 - - - - - 714.4
Employee expenses (341.6) 0.0 13.6 0.7 - 14.3 (327.3)
IT expenses (57.3) - 0.5 0.1 - 0.6 (56.7)
Occupancy expenses (11.1) - 0.1 - - 0.1 (10.9)
Other expenses (117.2) 0.1 2.7 (0.0) - 2.8 (114.4)
Net acquisition and capital management related expenses (9.7) 9.6 - - - 9.6 (0.1)
Total operating expenses (536.9) 9.7 16.9 0.8 - 27.5 (509.4)
EBITDA 177.5 9.7 16.9 0.8 - 27.5 205.0
Depreciation (9.8) - - - - - (9.8)
Amortisation (other) (22.0) - - - - - (22.0)
Contract fulfilment (1.1) - - - - - (1.1)
Right of use asset amortisation (16.2) - - - - - (16.2)
EBITA 128.4 9.7 16.9 0.8 - 27.5 155.8
Acquired amortisation (26.0) - - - 26.0 26.0 -
EBIT 102.3 9.7 16.9 0.8 26.0 53.5 155.8
Net finance expense (17.1) - - - - - (17.1)
Gain on assets held at fair value 177.6 - - - (177.6) (177.6) -
Profit on disposal of subsidiaries - - - - - - -
Share of NPAT of equity accounted investments - - - - - - -
NPBT 262.8 9.7 16.9 0.8 (151.5) (124.0) 138.8
Income tax expense (77.3) 45.1 (32.3)
NPAT 185.5 (79.0) 106.4
Add back acquired amortisation (after tax) 20.6 (20.6) -
Add back PEXA acquired amortisation (after tax) - - -
NPATA 206.1 (99.6) 106.4
Significant Items
Link Group – 1H 2020 Results Presentation
Detailed cash flow statutory reconciliation for 1H 2020
46
$ million
Stat
uto
ry
Inte
rest
Tax
Ne
t o
pe
rati
ng
cash
flo
w a
fte
r
sign
ific
ant
ite
ms
Bu
sin
ess
Co
mb
inat
ion
co
sts
Glo
bal
tran
sfo
rmat
ion
cost
s
Clie
nt
mig
rati
on
cost
s
TOTA
L
Ne
t o
pe
rati
ng
cash
flo
w
NPAT 28.7
Income tax expense 14.2
Net finance expense (Inc. one-offs) 17.6
Gain on assets held at fair value (0.2)
Profit on disposal of subsidiaries -
Share of NPAT of equity accounted investments 3.9
Depreciation and amortisation 79.3
EBITDA 143.6 - 143.6 4.5 15.3 (0.0) 19.8 163.4
Net finance expense (17.6) 17.6 - - - - - - -
Income tax expense (14.2) - 14.2 - - - - - -
Equity-settled share based payment expense (0.3) - - (0.3) - - - - (0.3)
Unrealised foreign exchange loss/(gain) 1.6 (1.6) - - - - - - -
Unwinding discount on deferred acquisition 0.2 (0.2) - - - - - - -
Borrowing cost amortisation 0.7 (0.7) - - - - - - -
Change in trade and other receivables (9.9) - - (9.9) - - - - (9.9)
Change in other assets 2.4 - - 2.4 - - - - 2.4
Change in trade and other payables 26.4 2.4 - 28.8 2.4 (0.1) - 2.3 31.1
Change in employee provisions (3.7) - - (3.7) - - - - (3.7)
Change in provisions (2.1) - - (2.1) - (0.1) - (0.1) (2.2)
Change in current and deferred tax balances (14.5) - 14.5 - - - - - -
Total changes in working capital
(inc. Fund assets & liabilities)(1.4) 2.4 14.5 15.5 2.4 (0.2) - 2.3 17.8
Change in fund assets and fund liabilities (0.2) - - (0.2) - - - - (0.2)
Net operating cash flow 112.4 17.6 28.7 158.6 6.9 15.2 (0.0) 22.1 180.7
Significant Items
Link Group – 1H 2020 Results Presentation
Detailed cashflow statutory reconciliation for 1H 2019
47
$ million
Stat
uto
ry
Inte
rest
Tax
Ne
t o
pe
rati
ng
cash
flo
w a
fte
r
sign
ific
ant
ite
ms
Bu
sin
ess
Co
mb
inat
ion
co
sts
Glo
bal
tran
sfo
rmat
ion
cost
s
Clie
nt
mig
rati
on
cost
s
TOTA
L
Ne
t o
pe
rati
ng
cash
flo
w
NPAT 185.5
Income tax expense 77.3
Net finance expense (Inc. one-offs) 17.1
Gain on assets held at fair value (177.6)
Profit on disposal of subsidiaries -
Share of NPAT of equity accounted investments -
Depreciation and amortisation 75.2
EBITDA 177.5 - 177.5 9.7 16.9 0.8 27.5 205.0
Net finance expense (17.1) 17.1 - - - - - - -
Income tax expense (77.3) - 77.3 - - - - - -
Equity-settled share based payment expense 3.3 - - 3.3 - - - - 3.3
Unrealised foreign exchange loss/(gain) 1.2 (1.2) - - - - - - -
Unwinding discount on deferred acquisition 0.0 (0.0) - - - - - - -
Borrowing cost amortisation 0.8 (0.8) - - - - - - -
Change in trade and other receivables (5.7) - - (5.7) - - - - (5.7)
Change in other assets (6.6) - - (6.6) - - - - (6.6)
Change in trade and other payables (17.3) 0.3 - (17.1) (8.6) (0.1) 2.5 (6.2) (23.2)
Change in employee provisions (5.2) - - (5.2) - - - - (5.2)
Change in provisions (2.9) - - (2.9) - 2.8 - 2.8 (0.1)
Change in current and deferred tax balances 32.1 - (32.1) - - - - - -
Total changes in working capital
(inc. Fund assets & liabilities)(5.6) 0.3 (32.1) (37.4) (8.6) 2.7 2.5 (3.4) (40.7)
Change in fund assets and fund liabilities (8.6) - - (8.6) - - - - (8.6)
Net operating cash flow 74.2 15.3 45.3 134.8 1.1 19.7 3.3 24.1 158.9
Significant Items
Link Group – 1H 2020 Results Presentation
Balance sheet
48
30 June year end, A$ million31 December
2019
30 June
2019
Cash and cash equivalents 148.8 560.2
Trade and other receivables 257.0 244.8
Other assets 31.0 37.3
Current tax assets 15.1 0.2
Funds assets 481.2 985.9
Assets held for sale 6.9 -
Total current assets 940.2 1,828.5
Investments - equity accounted 698.7 702.6
Investments - other 93.9 51.3
Plant and equipment 247.4 268.9
Intangible assets 2,216.9 2,188.9
Deferred tax assets 49.1 52.0
Other assets 22.4 21.6
Total non-current assets 3,328.3 3,285.4
Total assets 4,268.5 5,113.9
Trade and other payables 296.4 261.3
Interest-bearing loans and borrowings 32.3 30.0
Provisions 13.0 14.8
Employee benefits 40.8 44.7
Current tax liabilities 6.1 7.8
Fund liabilities 480.3 985.6
Liabilities held for sale 1.7 -
Total current liabilities 870.7 1,344.2
Trade and other payables 17.5 29.2
Interest-bearing loans and borrowings 1,078.6 1,393.5
Provisions 40.4 39.9
Employee benefits 5.3 5.3
Deferred tax liabilities 150.2 150.4
Total non-current liabilities 1,291.9 1,618.3
Total liabilities 2,162.6 2,962.5
Net assets 2,105.8 2,151.4
Contributed equity 1,891.7 1,909.1
Reserves (42.2) 15.3
Retained earnings 252.0 223.7
Total equity attributable to equity holders of the parent 2,101.5 2,148.1
Non-controlling interests 4.3 3.2
Total equity 2,105.8 2,151.4
Link Group – 1H 2020 Results Presentation 49
Defined Terms
• IMPORTANT NOTICE: Link Group uses a number of non-IFRS financial measures in this presentation to evaluate the performance and profitability of the overall business. Although Link Group believes that these
measures provide useful information about the financial performance of Link Group, they should be considered as supplemental to the information presented in accordance with Australian Accounting Standards and not
as a replacement for them. Because these non-IFRS financial measures are not based on Australian Accounting Standards, they do not have standard definitions, and the way Link Group calculated these measures
may differ from similarly titled measures used by other companies. The principal non-IFRS financial measures that are referred to in this presentation are as follows:
• Recurring Revenue is revenue arising from contracted core administration servicing and registration services, corporate and trustee services, transfer agency, stakeholder engagement services, share registry services
and shareholder management and analytics services that are unrelated to corporate actions. Recurring Revenue is expressed as a percentage of total revenue. Recurring Revenue is revenue the business expects to
generate with a high level of consistency and certainty year-on-year. Recurring Revenue includes contracted revenue which is based on fixed fees per member, per client or shareholder. Clients are typically not
committed to a certain total level of expenditure and as a result, fluctuations for each client can occur year-on-year depending on various factors, including number of member accounts in individual funds or the number
of shareholders of corporate market clients.
• Non-recurring Revenue is revenue the business expects will not be earned on a consistent basis each year. Typically, this revenue is project related and can also be adhoc in nature. Non-Recurring Revenue includes
corporate actions (including print and mail), call centre, capitals markets investor relations analytics, investor relations web design, extraordinary general meetings, share sale fees, off-market transfers, employee share
plan commissions and and margin income revenue. Non-Recurring Revenue also includes fee for service (FFS) project revenue, product revenue, revenue for client funded FTE, share sale fees, share dealing fees,
one-off and other variable fees.
• Gross Revenue is the aggregate segment revenue before elimination of intercompany revenue and recharges such as Technology and Innovation recharges for IT support, client-related project development and
communications services on-charged to clients. Link Group management considers segmental Gross Revenue to be a useful measure of the activity of each segment.
• Operating EBITDA is earnings before interest, tax, depreciation and amortisation and Significant items. Management uses Operating EBITDA to evaluate the operating performance of the business and each operating
segment prior to the impact of Significant items, the non-cash impact of depreciation and amortisation and interest and tax charges, which are significantly impacted by the historical capital structure and historical tax
position of Link Group. Link Group also presents an Operating EBITDA margin which is Operating EBITDA divided by revenue, expressed as a percentage. Operating EBITDA margin for business segments is
calculated as Operating EBITDA divided by segmental Gross Revenue, while Link Group Operating EBITDA margin is calculated as Operating EBITDA divided by revenue. Management uses Operating EBITDA to
evaluate the cash generation potential of the business because it does not include Significant items or the non-cash charges for depreciation and amortisation. However, the Company believes that it should not be
considered in isolation or as an alternative to net Operating free cash flow.
• EBITDA is earnings before interest, tax, depreciation and amortisation.
• Operating EBIT is earnings before interest, tax and Significant items. Link Group also presents an Operating EBIT margin which is Operating EBIT divided by revenue, expressed as a percentage. Operating EBIT
margin for business segments is calculated as Operating EBIT divided by segmental Gross Revenue, while Link Group Operating EBIT margin is calculated as Operating EBIT divided by revenue.
• EBIT is earnings before interest and tax.
• Operating NPATA is net profit after tax and after adding back tax affected Significant items (including the discount expense on the un-winding of the Superpartners client migration provision) and acquired amortisation.
Acquired amortisation comprises the amortisation of client lists and the revaluation impact of acquired intangibles such as software assets, which were acquired as part of business combinations. Link Group
management considers Operating NPATA to be a meaningful measure of after-tax profit as it excludes the impact of Significant items and the large amount of non-cash amortisation of acquired intangibles reflected in
NPAT. This measure includes the tax effected amortisation expense relating to acquired software which is integral to the ongoing operating performance of the business. Link Group also presents Operating NPATA
margin which is Operating NPATA divided by revenue, expressed as a percentage. Operating NPATA margin is a measure that Link Group management uses to evaluate the profitability of the overall business.
• Operating earnings per share is Operating NPATA divided by the weighted average number of ordinary shares outstanding for the period. Link Group management considers Operating earnings per share to be a
meaningful measure of after-tax profit per share as it excludes the impact of Significant items and the large amount of non-cash amortisation of acquired intangibles reflected in basic earnings per share. This measure
includes the tax effected amortisation expense relating to acquired software which is integral to the ongoing operating performance of the business.
• Significant items refer to 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, IT business transformation (all above EBITDA) and finance charges and one-off gains/losses associated with the fair value measurement or sale of Link Group’s investments (all below EBITDA).
Link Group – 1H 2020 Results Presentation
6b. Appendix: Additional business information
50
Link Group – 1H 2020 Results Presentation
Link Group: Business Units
Link Group has a diverse service offering across 5 business units. In addition it holds a 44.2%
equity stake in PEXA, which services the property industry in Australia
51
Underlying stakeholders Key services Revenue model
Retirement and
Superannuation
Solutions
Approximately 9 million
superannuation and pension
account holders
Core administration
Compliance and regulatory services
Value-added digital and data services
Contract-based (typically 3 – 5 years)
Fees based on a combination of weekly fee per
member, fee per transaction and fixed fee
arrangements, dependant on client
Corporate MarketsApproximately 35 million
shareholders
Shareholder
management &
analytics
Employee share
plans
Share registry
Company secretarial
Stakeholder
engagement
Contract-based (typically 2 – 3 years)
Fund SolutionsInvestors / unit holders of
over £100 billion of FUM
AFM / management company (“ManCo”)
Fund administration and transfer agency
ISA plan management
Contract-based (typically 3 – 5 years)
Fees typically based on a % of AUM
Banking and Credit
Management
Borrowers of over £70 billion
AUM
Portfolio management (including liquidation and
recovery of non-performing loans)
New lending services
Bank outsourcing
Contract-based (typically 3-5 years)
Technology and
Operations
Over 45 million financial
records
Core systems development and maintenance
Digital communications and solutions
Data analytics
Revenue from supporting other divisions and
external clients
Fee-for-service and licence fees
PEXAOver 395,000 home buyers
using PEXA for settlement
Electronic property exchange platform
Lodgment and settlement services Fee per transaction
Link Group – 1H 2020 Results Presentation
224393 396
503714
624
44 49 54 55 65
221274 289 274 294 322 365
410
588
776 780
1,198
1,403
20%
24%
28% 29%28%
25% 24%
31%
34% 35% 36% 36%34%
25% 25%
28%
31%
28%26%
0%
5%
10%
15%
20%
25%
30%
35%
40%
-
200
400
600
800
1,000
1,200
1,400
1,600
FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
1H Revenue 2H Revenue (FY prior to FY2015) Operating EBITDA margin
1H Margin
Link Group: Historical profile
Link Group has grown to over $1 billion in Revenue, evolving from a share registry business to a
provider of technology-enabled outsourced services
52
1. FY 2013 – FY 2019 Operating EBITDA includes public company costs and excludes Significant items. AASB 16 Leases applied from FY 2018.
See Appendix 6A for non IFRS definitions. Non-IFRS measures have not been audited or reviewed in accordance with Australian Accounting Standards.
Revenue profile
2002: Corporate Markets focus Today: Technology-enabled outsourced services provider
Over 40 business combinations in the last 15 years
Over 90 superannuation fund migrations since 2008
FY 2002 – FY 2019 CAGR:
• Revenue: 23%
Link Group – 1H 2020 Results Presentation
Retirement and Superannuation Solutions: Market
Link Group is a market leading administrator of financial ownership data, underpinned by
investment in technology, people and processes
53
Global pension asset pools (2018) and last decade growth1 Total Australian superannuation industry size2, 3
1. Based on Towers Watson Global Pension Assets Study 2019. Presents 2018 data.
2. Based on FY 2004 to FY 2018 FuM in Australian Dollars.
3. Link Group analysis of APRA Fund-level Superannuation Statistics (June 2019 edition).
0
1
2
3
4
5
FY2004 FY2009 FY2014 FY2019 FY2024 FY2029
FUM
(A
$tn
)
Australian superannuation
administration providers
Fragmented market = Opportunity
Link Group is a low cost
administrator
24.7
3.1 2.9
1.9 1.6 1.50.9 0.7 0.6
0.2
7.7% (0.7%) 7.1% 10.2% 6.8% 5.9% 5.8% n/a 3.9% 2.6%
0
1
2
3
4
5
6
7
8
To
tal a
ss
et p
oo
l 20
18
US
$ tr
n
25
CY2008 to CY2018 CAGR (%)
34%
48%
10%
Superannuation administration (Australia) by members3
Link
Inhouse
Mercer
Other (3%)
SMSF (5%)
22%
62%
11%
Superannuation administration (Australia) by cost3
Link
Inhouse
Mercer
Other (5%)
Link Group – 1H 2020 Results Presentation
$1
01
Industry average (exc. Link): $197
Industry average (inc. Link): $163
Lin
k
Su
nsup
er
AM
P
In h
ou
se
Me
rce
r
CB
A
NA
B
Oth
er
Westp
ac
Su
ncorp
IO
OF
Ma
cq
ua
rie
Average administration fee per account ($ pa)1
Retirement and Superannuation Solutions: Market
Link Group is well positioned to benefit from increased outsourcing given our competitive
advantage from our proprietary technology, quality service offering and operating scale
54
Key outsourcing drivers Link proposition
Continually evolving and
increasingly complex superannuation system imposes
platform & administrative burdens
Link Group maintains control over its
proprietary technology. The cost of
regulatory change is disbursed across
all clients
Service benefits to
superannuation fund members is
paramount
Link Group’s clients have access to a
much broader array of product and
specialist providers
High level of public and
regulatory scrutiny on costs
Link Group’s clients benefit from
operating scale and genuine market
based pricing
Data security andredundancy
Link Group spends over
$200 million per annum supporting
and developing its technology
1. Link Group analysis of APRA Fund-level Superannuation Statistics (June 2019 edition).
Link Group is well placed to benefit from further
outsourcing
Link Group’s scale enables its clients to operate at the lower
end of the cost curve
Link Group – 1H 2020 Results Presentation
Corporate Markets: Market
Leading player in all key Corporate Markets geographies
55
Revenue Split:
Revenue by Service:
Share registry
Shareholder mgmt and analytics
Stakeholder engagementEmployee share plans
Company secretarial
Recurring Non-Recurring
Corporate Markets product suite, geographic footprint and market position1,2 Characteristics
Source: ASX / publicly available stock exchange data
1. Based on the number of companies serviced in the index as at May 2019.
2. Reflects Corporate Markets business unit from 1 July 2019.
Link Group – 1H 2020 Results Presentation
Fund Solutions: Market
Link operates in key European markets, and is well positioned to benefit from an ongoing
propensity to outsource
56
European market Outsourcing
United
States
Asia
UK
AUM approx.
£1.3 trillion
Ireland
AUM approx.
€3.0 trillion
Luxembourg
AUM approx.
€4.7 trillion
US fund managers
distribute to continental
Europe either through
Ireland or Luxembourg 77% of non-domestic funds
registered for distribution in
Hong Kong are Luxembourg-
domiciled funds
Asian fund managers
distribute to continental
Europe primarily though
Luxembourg
EU jurisdictions have ~€10T AUM, LFS operates in the largest of
these segmentsGrowth in outsourced AuM underpinning resilient base of
Recurring Revenue
-
500
1,000
1,500
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2015 2016 2017 2018 2019
Au
M £
bill
ion
s
UK AFM Assets under Management
AuM hosted / outsourced % (LHS) Total AuM (RHS)
• Growth in savings and investment in collective scheme to drive increase in AuM
• Investment managers increasingly outsource to reduce regulatory burden, drive cost efficiency, simplify cross border complexity and focus on investing activities and distribution
• Ongoing propensity to outsource accelerated by large wave of new complex regulation (UCITS V&VI, AIFMD, MiFID II, PRIPS, CP86, FCA AMMS)
• National regulators increasingly favouring independent governance acting as an extra layer of oversight
Europe
Link Group – 1H 2020 Results Presentation
Fund Solutions: Market
Due to growing levels of regulation there is an increasing propensity to outsource. Link Group
has specialist expertise to manage this challenge on behalf of clients
57
Depositary / Trustee
Safeguards assets,
Operational oversight
Sponsor
AFM
Retains legal and regulatory
responsibility for fund
Fund roles (some outsourced to third party
outsourcing providers)
Fund Administrator Transfer Agency
Investment Manager Distribution
LFS is Fund Administrator and/or Transfer Agent
for ~98% of its AFM clients
Law Firm
Advice on set-up
Accountant / Auditor
Yearly check of
books
LFS acts as AFM thereby responsible for the operations of the fund
LFS active
Depositary / Trustee
Safeguards assets,
Operational oversight
Fund Board of Directors
ManCo
ManCo appointed by Fund Board to take on
responsibility of the management of the fund,
appointing the investment manager, administrator
and the distributor
Fund roles (some outsourced to third party
outsourcing providers)
Fund Administrator Transfer Agency
Investment Manager Distribution
LFS is Fund Administrator and/or Transfer Agent
for 87% of its ManCo clients
Law Firm
Advice on set-up
Accountant / Auditor
Yearly check of
books
LFS owns a Management Company (ManCo) from which it can support third party
funds and provide AIFM services
LFS active
Onshore (i.e. UK) Offshore (i.e. Ireland)
Link Group – 1H 2020 Results Presentation
Banking and Credit Management: Market
Shifting market dynamics will create opportunity for both service and jurisdiction expansion. Link
Group is well positioned to take advantage of the market dynamics
58
European GDP growth of 1.6% forecast for 2020; general slowdown in Europe due to Global uncertainty
Developing regulatory landscape may provide opportunities
Bank Balance Sheet Clean-up - the ECB has set target dates for banks to make full provision for bad debts; potential to stimulate further NPL sales
Global economies at different phases of a recovery cycle
Increasing move towards automation and digitisation
Bank outsourcing increasing (post deleveraging) embracing new Fintech Digital solutions
€
€P
ort
folio
M
anag
em
en
tB
ank
Ou
tso
urc
ing
Ne
w L
en
din
g Se
rvic
es
• Jurisdictional expansion – follow the NPL curve around the globe
• Scaled growth in Italy
• Expansion into Greece
• Explore Indian and Chinese markets
• Outsourcing of non core activities
• Optimisation of current proposition by leveraging Fintech / Regtech capability
• Scale the Netherlands business
• Expand end-to-end lending proposition
• Partner with start up / challenger banks and non-bank lenders
Shifting market dynamics: Link Group opportunity:
Link Group – 1H 2020 Results Presentation
Banking and Credit Management : PES Transaction overview
59
Attractive
transaction
structure
Accretive
transaction
Efficiency
opportunities
• €165m (~A$266m) upfront cash consideration for 100% of PES and contingent cash
payments of €35m (~A$56m) over 3 years (based on pre-agreed milestones relating to
protection of existing AUM and achieving certain growth hurdles in Spain, Greece and
Cyprus - refer section 4)
• Structure designed to mitigate downside risk of existing contracts as well as execution risk
on achieving growth in the Mediterranean region
• Attractive acquisition multiple of ~8.2x normalised CY19 EBITDA (upfront) and ~6.0x
(including efficiency benefits and deferred payment for existing AUM protection)1
• Double digit accretive to Link Group Operating EPS2. Further realisation of efficiency benefits
will enhance accretion by 5% to 6%
• Aligns with Link’s focus on efficient capital allocation and maximising shareholder value
Notes: (1) Transaction multiple excludes the €20m deferred payment in relation to achieving growth hurdles in Spain, Greece and Cyprus given Link has attributed limited value upfront and this consideration will
only be paid if additional growth hurdles are achieved. (2) EPS accretion calculated on €180m cash consideration (including €15m of deferred payment related to protection of existing AUM).
• PES is highly complementary to BCM with overlapping footprint in UK & Ireland. Scope to
streamline the combined operating model under Link Group’s ownership
• Annual efficiency benefits estimated to be ~€10m (~A$16m) (pre-tax) to be realised over
the medium term (requires an estimated one-off investment spend of ~€15m (~$A24m) to
achieve the efficiency benefits)
Link Group – 1H 2020 Results Presentation
Banking and Credit Management : PES Business Overview
60
Notes: (1) based on unaudited management accounts for the year ended 31 December 2019 (as adjusted); Normalised EBITDA excludes one-off costs predominantly related to separation of the servicing business
from Pepper, technology upgrade and remediation projects.
16
20
Dec-18A Dec-19A
51% 45%
2%
2%
Total Dec-
19A AUM:
~€39bn
Overview
Solutions across the loan cycle from origination
support and on-boarding to account settlement
and arrears management
End-to-end
servicing
Complementary asset management services
including portfolio due diligence, valuation
services, panel management and real estate
advisory
Asset
management
& advisory
• The PES business within the Pepper Group provides end-to-end
loan servicing, advisory and asset management & advisory services
in Europe
• PES predominately operates in the UK and Ireland, with operations
also in Spain, Greece and Cyprus
• PES has a diversified customer base, consisting of a range of
investors, banks and non-bank financial institutions
• PES has AUM of ~€39bn and generated FY 2019 (ending 31
December 2019) revenue of ~€93m and normalised EBITDA of
~€20m1
Services
Financial snapshot
Revenue by geography (€ million)
UK Ireland Spain
Cyprus Greece
Group EBITDA (€ million)
+27%
+13%
29 29
40 51
6 5 6
3 1 4
82 93
Dec-18A Dec-19A
Link Group – 1H 2020 Results Presentation
Te
ch
no
log
y a
nd
Op
era
tio
ns
Technology & Operations: Market
T&O is the hub of technology and operations capability which services the Link Group business
units, and also provides services directly to external clients
61
In-house fund
administration
software
Data analytics
Digital solutions
Digital
communications
Proprietary software
Applications
Operations
Retirement and
Superannuation
Solutions
Corporate Markets
Fund Solutions
Banking and Credit
Management
Infrastructure
A single global business unit providing full technology and operational
capability across Link Group:
Inte
rna
l +
Ex
tern
al c
lie
nt
se
rvic
es
Inte
rna
l c
lie
nt
se
rvic
es
Standardised systems and approach across the globe,
establish centres of excellence (“CoE”)
• Info Security CoE• Data Analytics CoE
• Coding Development CoE• High volume, low customer
contact processes
• Cloud CoE• Workflow CoE
Technology and operations hubs that supporting Link
Group’s other divisions and providing services directly to
external clients
Innovation and data analytics capabilities that enable
Link Group to differentiate itself from competitors
T&O engages directly with external clients with value-
added services, implementation and licensing contributing
31% of T&O revenue in 1H 2020
Focus on scalability, high levels of automation, high
degree of operating leverage, flexibility, privacy and data
protection, and ability to interface with value-added
platforms and services
Link Group – 1H 2020 Results Presentation 62
Glossary
Terms
1H First half (6 months) ended 31 December
2H Second half (6 months) ended 30 June
APAC Asia Pacific
BCM Banking and Credit Management
CAGR Capitalised annual growth rate
CoE Centre of excellance
CM Corporate Markets
CPCS Corporate & Private Client Solutions
D&A Depreciation and Amortisation
EMEA Europe, Middle East, Africa
FS Fund Solutions
FY Fiscal year ended / ending 30 June
LAS Link Asset Services
Terms
LTM Last 12 months
PES Pepper European Servicing
pcp Prior corresponding period
pp Percentage point
PMIF Putting Members’ Interests First
PYS Protecting Your Superannuation legislation
RSSRetirement & Superannuation Solutions (formerly
Fund Administration
T&O Technology & Operations
Link Group – 1H 2020 Results Presentation
End
63