Computershare posts record profit

Computershare, the world’s biggest share registry company, has reported a 13pc rise in annual net profit.

Computershare chief executive Stuart Irving. Supplied.

Computershare, the world’s biggest share registry company, reported a 13 per cent rise in annual net profit underpinned by growth in mortgage services, cost savings and a rebound in global M & A.

Computershare (CPU) said its net profit totalled $US300.1 million in the year through June, compared with $US266.4 million a year earlier. The company declared a final dividend of 21 cents a share, bringing the total payout to 40 cents.

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.

The company said its Management EPS was 62.1 cents, up 14 per cent on year and beating earlier guidance for 12.5 per cent growth.

“This is a record profit for Computershare, and the fastest rate of earnings growth since FY09,” said chief executive Stuart Irving.

Still, Computershare forecast a more subdued growth outlook in the new fiscal year, projecting Management EPS growth of around 10 per cent.

“We expect stronger contributions in particular from Mortgage Services, Employee Share Plans and margin income,” Mr Irving said. “We will continue to execute our cost out programs, while the outlook for Corporate Actions and some of the large events fee income at this stage looks slightly more subdued than in FY18.”

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, which accounts for around half of Computershare’s management revenue and earnings, was in June placed on a more-aggressive trajectory for interest rates. Federal Reserve officials voted then to raise their benchmark federal-funds rate by a quarter-percentage point to a range between 1.75 per cent and 2 per cent. They also released new economic projections showing a narrow majority of them favoured raising rates a total of at least four times this year, up from the three increases they anticipated in March.

Other central banks are also raising rates in response to stronger economic activity. Last month, the Bank of Canada said a strong labour market and on-target inflation supported its decision to raise the benchmark interest rate by a quarter of a percentage point to 1.50 per cent, marking its fourth such increase since mid-2017. Many analysts expect the Bank of England also to raise rates at its August meeting.

“EBITDA margins increased by 150 basis points to 27.1 per cent. Margin income assisted, rising to $US175.5 million, up 28.9 per cent. This demonstrates our significant leverage to rising interest rates,” Mr Irving said.

However, economists also fear an escalation of trade tensions, especially between the US and China, will make central banks leery of raising rates too quickly and spur a more patient approach. Those frictions have helped keep a lid on Computershare’s share price, which has been broadly flat since its first-half result in February.

Computershare has been expanding through mergers and acquisitions in recent months, including May’s agreement to buy Switzerland-based Equatex Group Holding, formerly the European share-plans business of UBS Wealth Management, for 354.5 million euros. The company expects the deal to boost its Management EPS in the 2019 fiscal year.

Dow Jones Newswires