Having released its full year financial results back in the middle of August, global investor services and registry business Computershare’s (ASX: CPU) management is now heading off on a road show through Asia, the United States and United Kingdom to present the results to overseas-based investors.
While the statutory results were nothing to get excited about, based on “management results” (revenues and earnings adjusted for certain items to reflect management’s view of the underlying business), Computershare’s performance over the financial year would appear solid. Revenues grew 11.4% to US$2.025 billion, aided by the recent acquisitions of SLS, Serviceworks and Shareowner Services, and profits increased 11.8% to US$304.9 million. Some investors will of course be rightly sceptical of “management results” given that statutory results are significantly lower. Statutory profit fell 9.2% to US $157 million.
Computershare’s businesses currently span over 20 countries with over 70% of its revenues recurring. Commenting on the full year results, management noted that competition in the investor services segment had intensified and corporate action revenue remained subdued. Meanwhile, the business services segment continued to drive the revenue and earnings growth of the group. The USA region grew the strongest with revenues up 28.9%, followed by the Asian region, which grew by 5.8%. The poorest performing regions were Continental Europe and Canada, which recorded revenue falls of 2.8% and 5% respectively.
It’s hard to fault Computershare’s results. In a tough economic environment the company expanded revenues and earnings while creating shareholder value by producing a return on invested capital of 15.84% which is well above its weighted average cost of capital of 8.97%.
Computershare’s business model is enhanced by its use of technology and scale. The firm’s spending on information technology and its continually growing customer base reinforces the moat around the firm.
With an outlook for FY 2014 that “management earnings per share” should increase by around 5% on FY 2013, shareholders will be expecting EPS of about US $0.576. At the current exchange rate, that equates to a forecast of 63 cents per share in Australian dollars; with the stock trading at A $9.75, the forward price-to-earnings ratio is a very reasonable looking 15.5.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
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