Link Share Price Down 22.5% After Trading Update

Shares of Link Administration Holdings Ltd [ASX:LNK] are down 22.5% today after releasing a trading and earnings update on the ASX, revealing lowered expectations for upcoming financial results, set to be released on Thursday, 29 August 2019.

Link is a tech-enabled provider of outsourced administration services with three key divisions: Fund Administration, Corporate Markets and Information, Digital and Data Services (IDDS). Their shares are currently sitting at $6.025, with a negative one-year return of 12.54%.

Brexit bringing down Link earnings

As per the update, Link expect Operating NPATA (Net Profit After Tax and Amortisation) to be between $195–205 million for the year ending 30 June 2019, less than that achieved in the year prior ($206.7 million).

The company also predict an Operating EBITDA (earnings Before Tax, Depreciation and Amortisation) to reach $350–360 million. While this is higher than FY18’s EBITDA of $335.3 million, it is still less than previously anticipated.

The company says the turmoil around Brexit is ‘impacting business sentiment’ for the Group’s European operations. For instance, many IPO mandates in the UK Link Market Services business have been postponed because of the Brexit ordeal.

In addition, the ‘competitive pricing environment’ in the Corporate Markets sector is also affecting EBITDA results. Lower than expected levels of capital market-related activity were seen in 2H19 from Australia, New Zealand, Europe, the Middle East and Africa.

The worst hurdle is yet to come

Link assures investors that their Tech and Innovation sector and property settlements exchange business, PEXA, are both still performing ‘in line with expectations’.

But what remains the core focus of the business is their superannuation sector, as the Treasury Laws Amendment (Protecting Your Super Package) Act comes into effect on 1 July this year. Link are already experiencing ‘the initial impact of the account consolidation initiatives…as some funds move to transfer identified inactive member accounts to an eligible rollover fund’.

The main impact of the Act is set to hit come FY2020. But Link are highlighting strong member growth to prove to investors they are readying themselves for the blow.

It will be interesting to see how share price moves after official financial results are released.


Ryan Clarkson-Ledward

For Money Morning

PS: Speaking of superannuation, here are ‘5 Things You Can Do to Boost Your Retirement Pot’. Download your free report here.

Ryan Clarkson-Ledward is an Editor at Money Morning.

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