Why Computershare Limited shares crashed on its half-year report

The Computershare Limited (ASX: CPU) share price today traded 8% lower following the release of its half-yearly results.

For the six-month period ended 31 December 2015, Computershare reported a 2.4% fall in revenue while management earnings per share, which exclude the effect of an impairment charge in last year’s results, came in at US25.98 cents, down 10% on the prior corresponding period.

Computershare experienced falls across all business lines. It said the stronger US dollar and lower yields on client balances impacted results “as anticipated.” Further, the group’s operating margin was impacted by the HML acquisition.

Computershare’s US and Asian businesses performed well.

Computershare CEO, Stuart Irving, said: “The company has articulated a clearer capital management strategy, we have made significant progress on the buyback initiated in September 2015 and we have increased the dividend over the prior corresponding period.”

The company’s board declared an interim dividend of 16 cents per share fully franked, up from last year’s 20% franked 15 cents per share dividend payment.

“Substantial inroads have been made on several strategically important areas that we expect will support future growth and improved shareholder returns,” Mr Irving said. “The underlying business performance was broadly in line with the prior period and our expectations.”

Looking ahead the company reiterated its full-year guidance of a 7.5% fall in management earnings per share, but added, “albeit we are seeing some softening in the operating environment.” 

Foolish takeaway

Given that Computershare’s earnings are geographically diversified yet it can only report results in one currency, the US dollar, a strengthening of that currency was expected to have a material impact on the results. While movements in global markets may also present as a challenge, I’d encourage long-term investors to look past these potentially short-term risks and make an assessment of the Computershare business model over time.

In summary, while today’s news isn’t particularly great news, I’d say the result was expected.

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Motley Fool writer/analyst Owen Raszkiewicz owns shares of Computershare. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn or you can follow him on Twitter @ASXinvest.

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Computershare. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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