Computershare has reported a robust first half for FY25 with management EPS up 18.7% and upgraded its full-year EPS guidance to around 135 cps, reflecting strong recurring fee growth and resilient margin income despite lower yields.
- Management EPS increased 18.7% to 65.3 cps in 1H25
- Total revenue of $1.5 billion, down 6.9% due to disposals
- Return on Invested Capital (ROIC) improved to 31.9%
- FY25 EPS guidance upgraded to approximately 135 cps, a 15% increase
- Strong balance sheet supports innovation, acquisitions, and shareholder returns
Strong First Half Performance
Computershare delivered a solid start to FY25, reporting management earnings per share (EPS) of 65.3 cents per share (cps), marking an 18.7% increase compared to the prior corresponding period. This growth was driven primarily by an uptick in recurring fees and transactional revenues, underscoring the resilience of the company's capital-light, high-retention business model.
Despite a 6.9% decline in total revenue to $1.5 billion, largely attributable to strategic disposals such as the US Mortgage Services business, Computershare's return on invested capital (ROIC) rose significantly by 660 basis points to 31.9%. This improvement reflects enhanced operational efficiency and disciplined capital management.
Margin Income and Revenue Dynamics
Margin income, a critical component of Computershare's earnings, remained resilient at $392.7 million, down only 8.9% despite lower interest yields. The company benefited from higher client balances, which partially offset the impact of rate cuts across key markets. Notably, 55% of exposed client balances are hedged, locking in $1.8 billion of margin income irrespective of interest rate fluctuations, providing earnings stability.
Revenue growth was supported by a 6.4% increase in management revenue on a proforma basis, excluding the impact of disposals. Growth in high-quality recurring fees and market-sensitive transaction revenues contributed to this positive trend, reinforcing Computershare's leading positions in large, growing markets.
Upgraded FY25 Guidance and Strategic Outlook
Reflecting confidence in ongoing business momentum, Computershare upgraded its FY25 management EPS guidance to around 135 cps, representing a 15% increase over FY24 results and a significant uplift from the prior guidance of approximately 126 cps (+7.5%). This revision factors in expected EBIT growth of around 15% excluding margin income, with margin income forecasted at approximately $760 million supported by average client balances of $30.2 billion.
The company’s strong balance sheet and cash flow generation provide flexibility to fund innovation initiatives, pursue strategic acquisitions, and enhance shareholder returns. The interim dividend was increased by 12.5% to 45 Australian cents per share, signaling management’s commitment to rewarding investors.
Segment Performance and Cost Management
All major business segments contributed to earnings growth. Issuer Services and Corporate Trust segments saw EBIT increases of 33.7% and 27.9% respectively, while Employee Share Plans EBIT rose 39.1%, driven by higher fee revenues and improved margins. The company also achieved $32.1 million in cost-out benefits during 1H25, supporting margin expansion despite investments in technology and personnel.
Operating expenses rose 4.6% on a proforma basis, reflecting higher business volumes and strategic investments. However, disciplined cost management and synergy realisations from prior acquisitions helped maintain profitability.
Navigating Interest Rate Sensitivities
Computershare’s earnings remain sensitive to interest rate movements, particularly through margin income. The company’s hedging strategy mitigates volatility, with a weighted average life of hedges at 4.86 years. While 2H25 margin income is expected to be lower than 1H25 due to anticipated interest rate cuts, the overall FY25 margin income guidance reflects a balanced outlook.
Management highlighted that a $1 billion change in exposed non-hedged balances could impact profit before tax by approximately $19 million in the second half, underscoring the importance of balance sheet management in a fluctuating rate environment.
Looking Ahead
Computershare’s first half results and upgraded guidance reinforce its position as a high-quality, capital-light financial services provider with strong recurring revenues and robust client retention. The company’s strategic focus on technology innovation, market leadership, and disciplined capital allocation positions it well for continued growth and shareholder value creation.
Bottom Line?
With a strong balance sheet and upgraded guidance, Computershare is poised to capitalize on growth opportunities while managing interest rate headwinds.
Questions in the middle?
- How will ongoing interest rate cuts impact Computershare’s margin income in FY26 and beyond?
- What acquisition targets or innovation investments might Computershare pursue with its strong cash flow?
- How sustainable is the current level of recurring fee growth amid evolving market conditions?