LA Private

Link’s UK misadventure

Link Administration Holdings (ASX:LNK) is set to report a massive loss for the year ending June 30, primarily due to a dud deal in the UK.

Link joins a long list of Australian companies to lose heavily in UK expansion moves – they include, AMP, National Australia Bank, Wesfarmers (hardware), Insurance Group Australia, and the former Slater and Gordon legal group.

All racked up losses in the hundreds of millions – or billions in a couple of cases – dollars.

Link told the ASX on Thursday that it will report a bottom-line loss of $418 million for the year ending June 30 because of heavy one-offs and provisions stemming mainly from a messy exit from its troubled United Kingdom business called “Fund Solutions”.

The 2022-23 loss will follow a small statutory loss for 2021-22 of $67.7 million.

The superannuation administrator and share registry company released its preliminary unaudited results on Thursday, outlining the dramatic expense of extricating itself from a disastrous UK acquisition made six years ago, along with other one-offs.

Excluding the costs associated with the UK move, Link’s 2022-23 update showed a reasonable performance for the 12 months.

Link said it “expects to report FY23 Group Revenue of approximately $1.23 billion, up 4.5% on the previous year.

“Link Group expects to report FY23 Group Operating EBIT of approximately $178.1 million which is up ~15.7% on the previous year and ~3.5% above the top-end of the guidance range of $169 – $172 million.

“FY23 Operating NPATA excluding PEXA is expected to be approximately $89.3 million, up ~1.2% on the previous year, the company told the ASX on Thursday.

And then there was the bad news for shareholders to digest.

“Link Group refers to its announcement dated 20 April 2023, where it confirmed that it had reached a conditional agreement with the (UK) Financial Conduct Authority (FCA) to settle its investigation into Link Fund Solutions Limited (LFSL) in respect of LFSL’s role as an authorized corporate director (ACD) of the LF Woodford Equity Income Fund (now known as the LF Equity Income Fund) (WEIF) (the Settlement).

“The expected sale of the FS (Fund Solutions) business to Waystone Group and the announcement of the Settlement will occur across two financial years.

“In line with the Australian Accounting Standards (AASB), we are required to recognize the asset (any receivable in respect of the FS Sale and the proposed UK creditors’ scheme of arrangement addressing WEIF related redress and claims against LFSL (the Scheme) only when Link Group ceases to control the FS business (which will occur on completion of the FS sale, which is expected to be in October 2023), and the Scheme is implemented.

“We expect to recognize a provision of approximately $390.9 million (net of tax) related to the announcement of the Settlement and associated redress in 2H FY23. In FY24, we expect to recognize a gain of approximately $280.3 million (net of tax) on completion of the FS sale.”

Link said it, therefore, expects to report a 2022-23 Statutory Loss (after-tax) of approximately $417.7 million. In addition to the provision above, the statutory results will also be impacted by several factors that include the following:

Gain of approximately $406.8 million on the PEXA sell-down and in-specie distribution (net of tax);

Non-cash impairment charge of $(368.6) million related to the sale of FS assets (which is $80.3 million lower than the $448.9 million impairment recognized in 1H23) given the buyer did not assume certain liabilities under transaction documents in respect of the FS Sale;

Non-cash impairment charge of $25.3 million related to BCM (its Banking & Credit Management) goodwill; Fair value write-down of approximately $31.1 million to the carrying value of the Smart Pension investment (net of tax); premises impairment (non-cash) of approximately $34.5 million on surplus real-estate footprint, and approximately $(34.6) million of cost (net of tax) related to acquisitions, divestments, transactions, and other one-off items.