Computershare released strong 1H FY19 results and revised FY19 guidance

CPU

On 13 February 2019, Computershare Limited (ASX: CPU) announced the trading Update. Based on the constant currency terms, the company expected (in November 2018) that the Management EPS for FY19 would grow around 10% on FY18. However, the company now expects its Management EPS for FY19 to increase by 12.5% on FY2018 in constant currency terms.

The company on 13 February 2019, shared its updated guidance which included certain essential assumptions. It stated that the equity market is assumed to remain at current levels and the interest rate markets to stay in line with the current market expectations. The second assumption stated that the group tax rate in FY2019 would be slightly lower than the group tax rate of FY2018. In FY2018, the group tax rate was 28.3%, and the company expects it to be approximately 27.5% in FY2019. 

It also included that the revenue in the 2H FY2019 excluding the margin income is expected to be lower from Corporate Actions and event-based activities as compared to the previous corresponding period. The company also expected that the client balance is expected to be lower in 2H FY2019 as compared to 1H FY2019. For comparison of constant currency, the average exchange rate will be used for translating FY2019 earnings to USD. For comparison, the base Management EPS for FY2019 will be 63.38 cents.

On 13 February 2019, Computershare Limited also shared its 1H FY2019 results where the company’s revenue increased by 1.7% to $1,146.5 million. EBITDA was up by 14.3% AT $335.4 million. The earnings per share also rose by 15.5% to 35.37 cents. The company declared an interim dividend of AU 21 cents. The statutory EPS increased by 52% and Return on Equity (ROE) increased by 40 bps.

The strategic priorities which included growth, profitability and capital management were the driving factors for a strong return.

During the period, CPU completed the acquisition of Equatex. The company is pleased with the early performances of CPU, capabilities and customer engagement. Employee Share Plans’ revenues prove resilient during peak market volatility.

The group EBITDA margin increased by 29.3%. The client balances during the period were $21.0 billion, out of which $12.9 billion was exposed to the interest rate. There was also an improvement in the Margin income as it went up by 59%. The balance sheet of the company remained strong even after the funding acquisitions and growth initiatives. The net debt to EBITDA was 1.88x and was below the mid-point of the target range. The company generated $77.2m post-tax revenue by disposing of Karvy completely.

The total revenue through mortgage services increased by 8.8% and EBITDA by 5.7% as compared to the previous corresponding period. The EBITDA margin increased by 330 bps.

By the end of 1H FY2019, the company made a profit of $262.503 million with basic EPS of 47.77 cents. The net asset increased during the period as a result of an increase in the total asset. The company’s current assets increased, and its current liabilities decreased during the period. There was also an increase in the retained earnings during the period. The total shareholders’ equity was worth A$1,474.133 million.

Post the announcement, by the end of the trading on 13 February 2019, the closing price of the share was A$18.850 which was up by 5.899%. The stock is currently trading at A$18.655, down by 1.034% with the market capitalization of A$10.23 billion and approximately 542.96 million outstanding shares (as at 1:59 PM AEST, 14 February 2019).


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