Computershare’s sales rise but profits sink

Shares of Computershare (ASX: CPU), the investor, business and technology services provider, have risen 2% this morning after the company released its interim results, which showed revenues up a whopping 26% but net profits down by 15%. Earnings per share came to 17 cents, or US $94.6 million in total.

Gains, losses and a dividend announcement

Led by contributions from the company’s Specialised Loan Servicing, Serviceworks and Shareowner segments – all of them recent acquisitions — and from the UK and Indian businesses, Computershare sales nearly reached US $1 billion for the half.

However, weaker results in the Hong Kong, Irish and Canadian registry businesses weighed on profits. Also contributing to decreased profits were costs related to acquisitions and integration.  This should come as no surprise — the company’s margins have been under pressure for the last several years, as management has sought to grow the company’s service offerings while addressing challenges to the high-margin, core transactions business.

An interim divided for the 2012/2013 year will be 14 cents a share, franked to 20% vs. last year’s 60%, in line with recent company statements which predicted a decrease in the percentage of the dividend which would carry franking credits.

The Foolish Bottom Line

No one likes to see profits fall but this is a high quality company that’s attempting, and succeeding, in growing its service offerings and its overall business. Investors with a long-term mindset should be encouraged rather than spooked by these results. Over the last ten years,Computershare shares have trounced the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), rising over 400% vs. the index’s 60% rise. Going forward, the much-anticipated resurgence in market activity should help Computershare grow, along with the likes of the ASX (ASX: ASX) itself, as well as fund managers like Platinum Asset Management (ASX: PTM) and Perpetual (ASX: PPT).

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More reading

The Motley Fool’s purpose is to help the world invest, better.  Click here now  for your free subscription to Take Stock, 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.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Catherine Baab-Muguira does not own shares in any of the companies mentioned here. 

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