Computershare feels investors’ pain

Computershare Limited (ASX: CPU) today released its financial results for the 2012 financial year, with profits falling 41% to US$156.5m from US$264m in 2011. That was despite reporting a 14% increase in revenues to US$1.8 billion. Earnings per share fell from 47.5 US cents to 28.2 US cents.

The soft economic environment was blamed for most of the fall with the company taking a US$64m impairment on its European operations. Weak corporate activity in the areas of mergers and acquisitions was partly to blame. A reduction in share market floats and capital raisings were also to blame, leading to “corporate actions” revenue, falling US$23.4m to US$156m, the lowest level since 2004.

The company’s CEO, Stuart Crosby said, “The Group remains well placed to benefit from any improvement in corporate activity and interest rates in our major markets, however we are not banking on this occurring in any significant way in financial year 2013.”

He added, “We do not expect material improvement to the current difficult operating environment for our market-related businesses. However, we do expect continued strong contributions from recent acquisitions.”

The company did expect to increase management earnings per share, (a measure of EPS that the company believes permits better analysis of the company’s performance), to be between 10-15% higher in financial year 2013 than in 2012.

Gross debt has increased to US$1.7 billion, in 2012 from US $1 billion as at 30 June 2011, with the majority of the funds used on acquisitions.

In April 2011, Computershare acquired the Shareowner Services Business unit from The Bank of New York Mellon Corporation for US$550m in cash. Then in September 2011, the company bought Serviceworks Group for A$54.3m, and Specialized Loan Servicing, LLC for US$113.6m.

While the company’s debt level remains an issue, in a pleasing sign, the company is not due to repay any debt facilities until 2014, and the $1.7 billion of debt is due to mature over several years, out to 2024. The company should be able to meet its debt repayments comfortably, based on its current cash flows.

Margin income has been increasing each year, as the company earns interest on customers’ funds. In 2012, the company earnt more than US$200m in interest. Computershare takes in customers’ funds, but may not pay them out for some time.

The company is currently the largest share registry services business in Australia, with some estimates putting its market share at around 60%. With its recent acquisitions in the US, it is slowly becoming the dominant force in the world’s largest stock market, if not already.

Like other financial market reliant businesses, Advanced Share Registry (ASX: ASW), Macquarie Group Limited (ASX: MQG) and IRESS Market Technology (ASX: IRE), Computershare has seen its shares underperform the market over the past 12 months. Should corporate activity improve, these companies look set to reap the benefits.

If you’re in the market for some high yielding ASX shares, look no further than our ”Secure Your Future with 3 Rock-Solid Dividend Stocks” report. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

More reading

Motley Fool writer/analyst Mike King doesn’t own shares in any company mentioned.  The Motley Fool ‘s purpose is to help the world invest, better.  Take Stock  is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  Click here now  to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Top 3 ASX Blue Chips To Buy For 2019

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked…

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of The Motley Fool’s Top 3 Blue Chip Stocks for 2019.

Each one pays a fully franked dividend. The names of these Top 3 ASX Blue Chips are included in a specially prepared FREE report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

See the 3 blue chip stocks

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.