Computershare forecasts earnings growth despite COVID pressure

Share registry company Computershare is forecasting operating profit growth this year and has maintained its final dividend at 23 cents a share despite a 44 per cent drop in net profit for the 2020 financial year.

The ASX-listed company's full year net profit came in at $232.7 million, compared to the $415.7 million profit recorded the year prior. Revenue for the period slumped 7.6 per cent to $2.3 billion.

Computershare said earnings before interest and tax (EBIT), excluding margin income, will be up around 10 per cent for the year ending June 30, 2021.

Computershare chief executive Stuart Irving said the company generated $506 million of free cash flow for the year and net debt was effectively unchanged.

Computershare chief executive Stuart Irving is forecasting earnings growth this year from the company’s core business.Credit:Fairfax Media

"This financial strength, coupled with our free cash flow, allows us to look after our shareholders during this uncertain period," he said.

"Encouragingly, all our business lines delivered improved performance over the last two months of the year, giving us grounds for some confidence that we will see further operating profit growth as we enter FY21."

Computershare slashed its earnings guidance in March due to the pandemic-induced interest rate cuts that the registry services group had not anticipated.

The company's earnings are sensitive to interest rate movements due to the fact that it derives margin income on cash held on behalf of its share registry clients before dividends and other distributions are made to the clients' shareholders.

Margin income declined 18.3 per cent to $201 million for 2020 while the group's revenue declined 1.9 per cent to $2.3 billion.

Margin income from cash balances was not the only business to take a COVID hit. Computershare said issuer services also recorded a decline in revenue due to lower shareholder activity in the US as well as lower stakeholder relationship management activity.

The company's shares closed 1 per cent lower at $13.67 on Tuesday before the after-market release of its full-year result.

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