2020-04-04 11:31:541970-01-01 00:00:00

Industry News

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Link Administration Suspends Earnings Guidance


As of January 2020, Link Administration Holdings Limited (Link Group) has entered into an agreement to acquire Pepper European Servicing (PES) from Pepper Group. The acquisition will see an upfront payment of $266 million, and a subsequent $56 million should total Assets Under Management (AUM) growth milestones and thresholds are fulfilled.

PES is a provider of end-to-end loan servicing, asset and advisory management present in both commercial and residential sectors. The firm has gained its reputation in Ireland, and the United Kingdom attributed to longstanding customer relationships and is currently growing its presence in less-developed parts of the region such as Greece and Spain.

As of 31st December 2019, PES holds an excellent financial track record. The deal will be subjected to respective regulatory approvals and is due to complete in the second half of 2020. Upon completion, PES will fall under Link Group’s Banking and Credit Management (BCM) operations. From a broader point of view, the integration of PES and Link’s BCM will witness the creation of an asset service and loan provider under the leadership of exceptional management whose rich expertise will deliver robust client proposition across Europe.

As PES currently operates in areas which Link Group has deep knowledge in, Link Group will be a step closer in achieving its growth targets through the expansion of its footprint in the region. Consequently, the acquisition is expected to strengthen BCM’s revenue performance. Aside to the benefits, Macquarie analysts were of the view that moving forward, Link Group would need to make sure that the acquired business will yield enough organic growth to cover the natural run-off of default loans.

Presently, the synergies, as a result of the collaboration, is expected to yield $16 million.  Likewise, Morgan Stanley shared the same sentiment as both firms complemented each other to a high degree. The agreement also emerged as Pepper Group owner, Kohlberg Kravis Roberts intends to list the Australian sector of non-bank lender Pepper in 2020.

More recently, as a result of coronavirus pandemic, managing director John McMurtie has come out to assure investors that four-fifths of the group’s revenue are recurring in nature. Additionally, the group’s earnings are relatively defensive. Collectively, both factors will support the firm’s cash flow during this difficult time. Despite the update, investors will likely keep a close watch out on Link Group’s performance as it has announced today, 23rd March 2020 that the firm will withdraw earnings guidance.

Specifically, two of its businesses, Link Fund Solutions and Corporate Markets have been adversely affected due to volatility in the market. More notably, the key reason behind the dip in performance is due to the fact that its float businesses are now operating on reduced margin income. Nevertheless, the firm will continue to exercise caution in terms of spending, with the pending acquisition of PES to proceed as planned.

By Caroline Wong 

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