Computershare reports 11.3 percent lift in FY24 Management Earnings Before Interest and Tax of US$1.15 B.

About Computershare Limited

Computershare Limited (Computershare, the Group, ASX: CPU) was one of Melbourne’s early start-up technology companies when in 1978 it began to provide computer services to businesses seeking to automate processes.  This soon progressed to providing specialist computer bureau services to Australian share registrars. Computershare listed on the ASX in1994 when it managed 6 million shareholder accounts and employed 50 staff. Today the Group manages 75 million customer records with 12,000 staff across all major financial markets.

Strong FY24 core business performance

In addition to statutory results, Computershare reports Management results to enable shareholders and investors to assess underlying operating business performance. Management results exclude non-recurring costs related to restructuring programs and integration of acquisitions and profits and losses arising from the sale of businesses and investments. For example, such items in FY24 include a US$129 million loss on sale of the US Mortgage Services business, US$85 million of acquisition related integration expenses and amortisation of acquisition related intangible assets of US$70.5 million and major restructuring costs of US$47 million. Management adjustments in FY24 totalled US$355 million, resulting in a statutory Net Profit After Tax of US$352.6 million. Management Net Profit After Tax as reported to shareholders was US$708 million.

Computershare’s three core underlying businesses are Issuer Services (US$1,210 million revenue), Global Corporate Trust Services (US$939 million revenue) and Employee Share Plans (US$440 million revenue). FY24 Issuer Services revenue grew by 11 percent and Employee Share Plans revenue was 27 percent higher compared to FY23. Global Corporate Trust revenue was down 2 percent for the year. These amounts do not include Margin Income which is interest earned on cash held on behalf of clients. Examples include corporate transactions like Initial Public Offerings, Rights issues, and pre-funding of dividend payments where interest is earned on cash held by Computershare until transactions are closed and finalised. Computershare retains the interest earned on client funds which averaged US$29.2 billion in FY24, generating Margin Income of US$776 million.

Computershare reported FY24 Management Earnings Before Interest and Tax at US$1,149 million, an increase of 11.3 percent on FY23. This outcome represents an EBIT margin of 34.7 percent and Management NPAT of US$708.4 million, which is 8 percent higher than FY23.  Management earnings per share was US$1.17, up 9 percent compared with FY23. Computershare declared a final dividend of AUD42 cents unfranked, payable on 16 September 2024.  The full-year dividend is AUD82 cents in total, equivalent to a payout ratio of about 47 percent.

Sixty-two percent of Computershare’s revenue and forty-six percent of the Group’s EBITDA is earned in the US, compared to six percent of revenue and just one percent of EBITDA earned from the Group’s Australian operations. Clearly the level of interest rates and economic activity in the US are key factors in Computershare’s FY25 earnings.

Positive FY25 outlook

Computershare’s low Net Debt to EBITDA ratio at just 0.36 times is supportive of returns to shareholders through continuation of the existing on-market share buy-back program.  To date a total of AUD$370 million shares have been bought back under the current AUD$750 million program which is scheduled to complete in August 2025. Computershare intends to refresh the buy-back program in September 2025 for the same amount being AUD$750 million. In the absence of dividend franking, the buy-back is a sensible way to augment returns to shareholders.

Computershare has guided the market to Management earnings per share of around US$1.26, which is up 7.6 percent on FY24.  This estimate allows for lower interest rates in FY25 and assumes the existing AUD$750 million buy-back will be reinstated after completion of the remaining AUD$380 million shares to be bought back by August 2025.  Lower interest rates in FY25 mean less Margin Income earned on client funds, however if markets become more active, Issuer Services income should rise further than guidance.

Eighty-six percent of Computershare’s income is recurring revenue, gearing is low, and the likelihood of ongoing share buy-backs should support shareholder value accretion over the medium-term.