Link (ASX:LNK) share price outperforms today as guidance boosted

Management offered a bullish medium-term outlook.

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Key points

  • Link share price supported by guidance lift
  • Fully franked dividend declared
  • The company continues to invest in new technology platforms

The Link Administration Holdings Ltd (ASX: LNK) share price is down 0.2% in afternoon trading.

Link shares closed yesterday trading at $5.30 and are currently trading for $5.29.

While that's dipped into the red, the Link share price is handily beating the 2.8% loss posted by S&P/ASX 200 Index (ASX: XJO) at this same time.

The technology focused company provides outsourced administration services for superannuation fund administration and corporate markets, among others.

Below we look Link's financial results for the half year ending 31 December (1H FY22).

Link share price outperforms on guidance lift

  • Revenue of $593.6 million, down 0.6% year-on-year
  • Operating earnings before interest and tax (EBIT) slipped 11% from 1H FY22 to $70.2 million
  • Statutory net profit after tax (NPAT) came in at a loss of $81.7 million compared to a profit of $29.4 million in the prior corresponding period
  • Dividend of 3 cents declared, fully franked, down from 4.5 cents in 1H FY21

What else happened during the half year?

The company reported that its Global Transformation Program (GTP) delivered $63 million of gross annual cost savings. It now expects gross annualised benefits to reach $75 million by the end of the 2022 financial year.

The first half also saw Link enter into exclusive talks with LC Financial Holding in relation to its Banking & Credit Management business.

Another big event for Link shareholders during the half was Link's $101.7 million on-market share buyback.

Overall, the company reported a "strong level of client retention" across all of its business units, along with "healthy levels of uptake of new solutions" as it managed to boost its cross sell to clients.

As at 31 December, Link had a net debt of $656 million. The company's leverage ratio stood at 2.6 times. That's within the guidance range of 2 to 3 times.

What did management say?

Commenting on the results, Link's CEO Vivek Bhatia said:

Link Group continues to deliver in a challenging operating environment. 1H FY22 Operating EBIT of $70.2 million was ahead of our guidance and net operating cash flow conversion continues to remain very healthy at 106%. Our RSS and CM businesses have delivered good underlying revenue growth and our global business remains in sound shape…

Our strong balance sheet and cash flow conversion has allowed us to invest further in technology and our people to cement our leadership positions in RSS and CM, and drive revenue and profit growth in FY23 and beyond.

What's next?

The Link share price could be getting some extra support today after the company reaffirmed its revenue growth guidance of low single digit growth in FY22.

With year-to-date trading exceeding management's expectations, Link lifted its FY22 EBIT guidance, saying it now expects this to come "at least" 5% higher than the prior year.

"Underpinned by the strength of our scale, expertise of our people and proprietary technology platforms we are confident that all the factors are in place for a stronger medium-term outlook," Bhatia said.

Link share price snapshot

The Link share price is down 5.1% so far in 2022. That compares to a year-to-date loss of 7.7% posted by the ASX 200.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Link Administration Holdings Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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