Computershare Limited just revealed 14% profit growth

Computershare Limited (ASX: CPU) just revealed its result for the half-year to 31 December 2017.

Computershare runs a number of different operations including investor services, plan services, communication services, business services, stakeholder relationship management services and technology services.

Computershare operates in many different countries, so currency changes can have a big effect. Computershare reports statutory figures which accounts for currency changes and ‘management’ figures which are expressed in constant currency terms.

Here are some of its statistics compared against the prior corresponding period:

Statutory revenue increased by 12.4% to $1.123 billion, whereas management revenue increased by 10.8% to $1.112 billion.

Management earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 20% to $289.6 million.

Statutory net profit after tax (NPAT) attributable to shareholders increased by 14% to $171.2 million. Management NPAT increased by 17.1% to $164.6 million.

Statutory earnings per share (EPS) increased by 14.4% to 31.43 cents. Management EPS increased by 17.4% to 30.22 cents.

Free cash flow increased by 10.9% and the dividend increased by 11.8% to 19 cents per share.

The net debt to EBITDA ratio was slightly down to 1.58x from 1.6x, excluding non-recourse SLS advance debt. The sale of Computershare’s interest in Karvy is expected to close in the second half of FY18, management expect proceeds of around $90 million.

Management said that EBITDA grew strongly thanks to good progress in US mortgage services, increased event activity in the stakeholder relationship management and class actions, cyclical recovery in corporate actions & margin income and disciplined cost management.

The company said that exploration of possible acquisition opportunities is ongoing, the business is looking to leverage core strengths and align with Computershare’s core competencies, as long as the opportunity would be financially accretive.

Management expect that the share buy-back will continue in March after the payment of the FY18 interim dividend.


At November’s AGM the company said that constant currency EPS was expected to increase by around 10% in FY18. Management now believe that after the strong half-year result it expects constant currency EPS to increase by 12.5% ‘with a positive bias’.

This guidance assumes that the Karvy sale completes in the second half of the year.

Computershare CEO, Stuart Irving, said ‘1H18 was a busy and productive period at Computershare. We delivered 20% EBITDA growth and strong free cash flow. Having purposefully designed these strategies to sustain multi year earnings growth, it is pleasing to deliver these results and upgrade our full year management EPS guidance.”

Foolish takeaway

This seems like a solid result from Computershare, particularly as management have now upgraded guidance for the rest of the year. It seems that Computershare is benefiting strongly from the global economy’s growth.

The upcoming year could be quite good for Computershare as international economies grow in unison. Personally, I wouldn’t be a buyer of Computershare at today’s prices because it’s not my ‘type’ of business, but it could be a good performer nonetheless from here.

Computershare isn’t the only business growing overseas, this top stock is expanding in Asia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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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