Registry heavyweight feels pinch
SURGING global sharemarkets have yet to benefit share registry heavyweight Computershare, with three large acquisitions in the first half of 2012 dragging on profit in the second.
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 up-tick in equity markets as reflected in the higher index levels across the globe," Computershare 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," outgoing chief financial officer Peter Barker said.
Computershare derives 76 per cent of its revenue outside 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 despite Computershare management meeting their profit forecast, underlying revenue streams were displaying "softness".
"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. They also questioned the sustainability of margin income, which made up 65 per cent of pre-tax profit in the half year.
Computershare generates margin income on the $16.7 billion of client money it holds on any given day by investing on the short-term money market.
Mr Crosby said the company's focus for the past year had been the integration of its newly acquired businesses.
Incoming CFO Mark Davis, the former regional director of North America, said the integration of the Bank of New York Mellon business would be completed by June.
Mr Crosby said the company was looking at new acquisition targets.