Acquisitions put dent in registry earnings

SURGING global sharemarkets have yet to benefit share registry heavyweight Computershare, with three large acquisitions in the first half of last year dragging on profit in the second half.

Computershare posted a net profit of $94.8 million in the six months to December 31, down 15.2 per cent. The company said profits rose 16.4 per cent if one-off costs of the acquisitions were excluded.

"We have witnessed a recent uptick in equity markets as reflected in the higher index levels across the globe," the chief executive, Stuart Crosby, said. "However, we are not seeing that in our business."

The company maintained an interim dividend of 14¢ a share, but the franking credit was cut from 60 per cent to 20 per cent.

"We will be disappointed if we won't be able to maintain that sort of [franking credit] level, and it depends on the profitability of our Australian business rather than our international business," the company's outgoing chief financial officer, Peter Barker, said.

Computershare derives 76 per cent of its revenue outside of Australia and last year doubled its presence in the North American market by spending $550 million to buy Bank of New York Mellon's share-owner services division.

Deutsche analysts said underlying revenue streams were displaying "softness" despite Computershare management meeting their profit forecast. "Revenues of $988 million were down 4 per cent versus Deutsche's [forecast] with weakness evident in registry and stakeholders management," analysts Kieren Chidgey and Shreyas Patel said in a research note to clients.

They also questioned the sustainability of margin income, which made up 65 per cent of pre-tax profit in the half year.

Mr Crosby said the company's focus for the past year had been the integration of its newly acquired businesses. Now the company was looking at new acquisition targets despite reaching its debt comfort level after its acquisitions last year. "We are certainly looking again," he said, "I don't think it is anything that is paradigm changing for us in contemplation at the moment."