Link Group’s John McMurtrie says COVID-19 is an 8.5 on the financial Richter scale

Listed financial conglomerate Link Group’s departing CEO says if the GFC and dot.com crash were 6 on the financial Richter scale, COVID-19 is 8.5.

Link Group CEO John McMurtrie. Picture: James Croucher

Listed financial services conglomerate Link Group believes it has “good medium-term prospects” but has declined to issue guidance due to the high level of COVID-19 uncertainty.

Ahead of his handover to Vivek Bhatia next year, chief executive John McMurtrie said 2020 was a year of multifaceted challenges.

“If you look at the 1987 crash, the 1990-91 recession, the dot.com crash, the Russian debt crisis and the global financial crisis, the worst of those rated about six on the Richter scale,” Mr McMurtrie told The Australian.

“This one (COVID-19) was about 8.5.”

Link unveiled a statutory net loss of $114m for 2020 compared to a $318m profit a year ago.

The loss was mostly driven by a $108m impairment of the corporate markets business, as well as costs related to business combinations, integration, migration of clients and gains or losses on investments.

Operating net profit was down 16 per cent to $144m, as Link said June-quarter momentum continued into July.

The final dividend, however, was slashed to a 50 per cent-franked 3.5c from 12.5c, after Link lowered its interim distribution from 8c to 6.5c.

The stock traded sharply lower in a stronger overall market.

While the result beat consensus, Citi analyst Nigel Pittaway said it was helped by a lower tax rate of 16 per cent.

Mr McMurtrie said Link continued to display resilience, with a satisfactory financial performance despite difficult trading conditions globally and previously announced regulatory changes and client losses in the retirement and superannuation solutions (RSS) unit.

“Against the backdrop of this challenging year, we have successfully delivered continuity of service for our clients, while also keeping our people safe during COVID-19,” he said.

“We continued our growth agenda and executed on a number of efficiencies and opportunities across the group.”

The group’s technology and scale helped it implement solutions for its clients at short notice, including news systems and processes for the early release of super scheme, and provision of virtual meeting technology.

Link also completed its transformation strategy of creating five global business units.

The pandemic delayed realisation of the expected benefits, with $14.7m of savings delivered in 2020

However, there were plans to reap $50m in annualised savings at the end of the 2022 financial year.

PEXA, the first national property settlement platform of its kind in the world which is 44 per cent-owned by Link, made an operating net profit of $53m, of which Link’s share was $24m.

More than 5m transactions have now been settled by PEXA.

Pre-COVID, the business had connected more than 150 financial institutions, over 8000 conveyancers, multiple land registries and state revenue and other government offices throughout the country.

This had significantly reduced costs within the system and enabled efficient and secure settlement of property transactions.

“The challenges of COVID-19 have further validated the benefits of PEXA as the property industry is able to safely and securely complete transactions digitally,” Link said.

The RSS business worked through a lot of regulatory change to deliver $519m in revenue.

While this was down six per cent, strong member growth saw underlying revenue growth of five per cent.

The business processed 2.15m applications worth $16.3bn under the early super release scheme, or more than 60 per cent of the total number of applications.

The average size of the applications was $7500.

In the corporate markets division, the financial result was hit by subdued economic conditions, including lower capital markets activity, particularly in Europe.

This, combined with lower interest rates and reduced transactional activity from shareholders, contributed to a three per cent fall in revenue to $358m.

Operating earnings before interest and tax fell $18m to $62m.

The challenging macroeconomic environment was the key contributor to the $108m impairment of the division’s intangible assets.