Link share price marching higher on revenue boost

The admin services company did not declare a final or special dividend.

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Key points

  • The Link share price gains amid the release of the company's results
  • Link's revenue increased to $1.18 billion in FY22
  • Investors will be eyeing the proposed acquisition by Dye & Durham Corporation, approved by shareholders last week

The Link Administration Holdings Ltd (ASX: LNK) share price is up 0.93% in early trade.

Links shares closed yesterday at $4.32 a share and are currently trading for $4.36 each.

This comes after the company, which provides administration services to the financial services sector, released its full-year results for the 12 months ending 30 June (FY22).

Here are the highlights.

Link share price lifts on revenue growth

  • Revenue of $1.18 billion, up 1.3% from FY21
  • Operating earnings before interest, taxes, depreciation and amortisation (EBITDA) of $252.3 million, down 2% from the prior year
  • Statutory net loss after tax of $67.6 million, down from a $162.7 million net loss in FY21
  • Operating net profit after tax and amortisation (NPATA) of $121.3 million, up 7% year on year
  • Net debt of $687.9 million, and leverage ratio (net debt/EBITDA) at 2.6 times, in the middle of the guidance range of 2.0 times to 3.0 times.

What else happened during the year?

Link explained the divergence from its NPATA of $66.2 million (down 11% from the prior year) and its operating NPATA (up 7%) is because the company's FY21 earnings have been restated as a result of revised tax accounting within PEXA.

The company also highlighted the 8.8% year on year increase in operating EBIT, to $153.9 million.

Link also reported 10% growth of its customer base, administering more than 10 million superannuation and pension accounts across Australia, New Zealand, and the UK, and connecting more than 100 million people with their assets around the world.

And its Global Transformation Program (GTP) delivered $77.9 million of gross annualised cost saving, beating the goal of $75.0 million in savings.

Perhaps the biggest news, and one likely supporting the Link share price today, came after the end of the financial year. Namely that on 22 August, shareholders voted in favour of Link's proposed acquisition by Dye & Durham Corporation, which values Link at $4.81 per share.

What did management say?

Commenting on the results that are seeing the Link share price edging higher today, CEO Vivek Bhatia said:

Link Group has delivered on its upgraded FY 2022 guidance announced on 11 July 2022. The last two years have seen a high level of corporate activity for Link Group in addition to the global pandemic and market volatility associated with higher inflation and higher interest rates.

Despite these challenging and potentially distracting factors, it has been pleasing to see the resilience of our people and performance of our core businesses which are reflected in today's results.

What's next?

In FY23, Link forecasts revenue to increase "by a low single-digit percentage".

The company is expecting an 8% to 10% lift in operating EBITDA and a 10% to 12% increase in operating EBIT.

"The operating environment remains challenging with cost pressures from higher inflation, higher interest rates, challenging employment conditions and increased market volatility," Bhatia said. "We are confident that our businesses provide the diversity and resilience required to navigate these conditions."

Link share price snapshot

The Link share price is down 1% over the past 12 months. That compares to a 7% full-year loss posted by the S&P/ASX 200 Index (ASX: XJO).

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in 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 Scott Phillips.

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