Computershare lifts annual net profit 2.4pc

Computershare says acquisitions and contract wins to expand its mortgage services business are performing as hoped.

Computershare founder Chris Morris. Picture: David Geraghty, The Australian.

Computershare, the world’s biggest share registry company, reported a 2.4 per cent rise in annual net profit and said recent acquisitions and contract wins to expand its mortgage services business are performing in line with hopes.

Computershare said its net profit totalled $US157.3 million in the year through June, compared with $US153.6 million a year earlier. The company (CPU) declared a final dividend of 17 cents a share, bringing the total payout to 33 cents, up 6.5 per cent on the 2015 financial year.

Computershare operates in around 20 countries, counting three quarters of companies on Hong Kong’s benchmark share index and two-thirds of Australia’s top 200 companies as customers.

Management-adjusted net profit, which strips out one-off items, fell 8.8 per cent to $US303.5 million from $US332.7 million in the 2015 financial year. The company said its Management EPS was 55.09 cents, down 7.9 per cent on year but in line with earlier guidance.

“In constant currency, Computershare expects FY17 Management EPS to be slightly up on FY16,” it said.

Much of Computershare’s earnings come from margin income — interest earned for funds held for dividends. So, when interest rates go up, the company can make more money.

The US Federal Reserve’s decision to raise its benchmark interest rate in December after a seven-year experiment with a near-zero rate appeared positive for Computershare’s business. That’s because Computershare’s US business accounts for 45 per cent of revenue and 40 per cent of earnings before interest, tax, depreciation and amortisation.

In June, however, Fed officials lowered projections for how much they will raise interest rates in coming years, a sign persistently slow economic growth and low inflation are forcing the central bank to rethink how fast it can lift borrowing costs. That view appeared to solidify as a result of market mayhem and a strengthening US dollar following the UK’s decision to leave the European Union.

“Computershare delivered Management EPS in line with guidance that had anticipated falling yields on client balances and the stronger U.S. dollar impacting translated earnings,” chief executive Stuart Irving said. “The group’s underlying business continues to show resilience.”

Stuart Irving.

In May, Computershare said it had been hired by UK Asset Resolution Ltd. to handle mortgage servicing activities. The seven-year outsourcing contract will cover £30 billion of UKAR mortgages. Computershare said its UK business also had entered a separate contract for the servicing of £11 billion in assets bought from UKAR last November by Cerberus Capital Management.

Analysts have voiced concerns that Computershare is ramping up its UK business at a time when the British pound is weakening due to the Brexit vote.

Mr Irving said today the UKAR contract was performing as planned at this early stage.

- Wall Street Journal

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