• Management EPS: $0.653, up 18.7%.
• Revenue Growth: Up 6.4% against pro forma PCP.
• EBIT: $563.9 million, up 3.3% on PCP and 6.5% on pro forma PCP.
• EBIT XMI Margin: Expanded to 15.5%, a rise of 230 basis points on pro forma PCP.
• Issuer Services Revenue: Increased by 2.5%, EBIT up 3.6% to $215 million.
• Corporate Trust Revenue: Increased by 7%, EBIT improved to $260 million.
• Employee Share Plans Revenue: Increased by nearly 17%, EBIT up 39% to $95 million.
• Margin Income: $393 million, down less than 1% compared to pro forma PCP.
• Average Client Balances: $30.2 billion, with a yield of 2.6%.
• Debt Leverage: Expected to be around 0.5 times by year-end.
• Interim Dividend: Increased by 12.5% to 45 Aussie cents per share.
• Management ETR: Lowered to 24%, expected to settle at around 25%.
• Share Buyback Program: $290 million Aussie still to go, expected to complete by year-end.

• Warning! GuruFocus has detected 7 Warning Signs with SHSE:688981.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Computershare Ltd (CMSQF) reported a strong performance, exceeding expectations with an 18.7% increase in Management EPS to $0.653.
• The company upgraded its full-year earnings guidance, reflecting continued business momentum and a positive outlook.
• Revenue growth was driven by a 6.4% increase in group revenues, with significant contributions from recurring client fees and event and transaction revenues.
• Margin income remained resilient despite interest rate cuts, supported by a strong balance sheet and multiple earnings drivers.
• The company demonstrated effective cost management, with EBIT XMI margins expanding by 230 basis points to over 15%.

Negative Points

• Despite positive results, the company faces challenges from interest rate cuts, which are expected to lower margin income in the second half of the year.
• Corporate action volumes were broadly flat, with a decline in the US, although the pipeline of deals looks promising.
• The sale of US mortgage services impacted revenue comparisons, requiring adjustments for a clear performance view.
• Stranded costs from the US mortgage servicing business disposal remain, with $20 million in costs expected to be eliminated over the next 18 months.
• The company anticipates higher tax expenses in the second half due to Canadian withholding tax expenses.

Q & A Highlights

Q: Can you provide insights into the momentum in the US Corporate Trust business, particularly regarding issuance growth and potential for further rebound? A: Stuart Irving, CEO: The revenue growth in Corporate Trust was driven by new deals coming to market. Debt issuance in the US, particularly in mortgage-backed securities and asset-backed securities, has shown strong year-on-year growth. This is partly due to a declining rate environment, which has spurred issuance. We are also seeing higher average deal sizes, which positively impacts our pricing. There is still room for recovery in the Corporate Trust business, and we are optimistic about its continued growth.

Q: Regarding transactional and event revenues, what is the outlook for fee changes and volume growth in the coming periods? A: Stuart Irving, CEO: Some structural fee increases were implemented in FY24, but their impact was more pronounced in the first half of FY25 due to increased volumes. In Issuer Services, transactional revenue is influenced by a broader range of drivers beyond equity markets, such as shareholder sales and dividend reinvestment plans. This diversity gives us confidence in sustaining growth into the second half and FY26.

Q: How are investments in technology and systems expected to impact market share and cost efficiency? A: Stuart Irving, CEO: We are investing in new platforms and technologies to enhance client services and reduce costs. This includes deploying AI tools for call centers and improving entity management systems. These investments aim to improve service quality, reduce operating costs, and expand market share, particularly in our core businesses.

Q: What is the expected trajectory for operating costs and margin expansion beyond FY25? A: Nicholas Oldfield, CFO: Over the medium term, we aim for operating costs to grow just below inflation, supported by ongoing cost-out programs. Revenue growth will drive additional costs, but we expect margins to expand as we continue to optimize operations and invest strategically.

Q: Can you elaborate on the expected net debt to EBITDA levels for the second half of FY25 and into FY26? A: Nicholas Oldfield, CFO: We anticipate the net debt to EBITDA ratio to be around 0.5 times by the end of FY25, reflecting the completion of our share buyback program. This strong financial position provides flexibility for future investments and growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.