The global share registry and financial services group Computershare (CPU) slipped a $40 million write-off out yesterday, and the shares took it in their stride, finishing 0.3% higher.
The shares ended at $12.53, despite the wider market losing ground for a second day in a row.
The write-down strangely enough won’t affect earnings per share, according to the company – but will impact the company’s ‘statutory profit, according to yesterday’s statement.
News of the write-down was surprise news and it seems to be more a case of an internal review of the company’s ‘core’ and ‘non-core’ businesses turning up some problems that needed addressing.
The write-down came as longstanding CEO Stuart Crosby prepares to hand over to new CEO in Stuart Irving, who has said the company would recognise where its acquisition-led growth strategy has not worked.
CPU 1Y – Computershare in $40m writedown
The write-down was due to a combination of factors, as the company explained in yesterday’s release:
"Computershare’s Highlands Insurance Solutions LLC business, which is located in California, has been sold, as has the Company’s 50% ownership stake in Chelmer Limited, located in Auckland and the Pepper business – located in Germany, Singapore and United States. Highlands Insurance and Chelmer have been sold at a premium to book value and so will realise profits. Pepper has been sold at a loss.
"A sales process in relation to VEM Aktienbank AG – located in Germany – is underway and that asset will be classified as held for sale as at 30 June. In accordance with applicable accounting standards, the carrying value will be written down to fair value.
"The Digital Post Australia joint venture between Computershare and Zumbox Inc. is being closed due to the absence of market support for this mail channel. It is expected to cease operating on 31 July 2014. This will also result in a write-off.
"Consistent with past practice, those profits and losses will be reflected in Computershare’s statutory profits but not its management earnings per share."
In the statement Mr Crosby said, “No further write-downs from the review are anticipated and more detail relating to today’s announcement will be provided at the FY14 results release on 13 August 2014."
"While none of the assets being sold or otherwise exited are particularly large in terms of the Computershare group as a whole, it is important that management is able to focus on the company’s core activities.
"It is also worth noting that the swings and roundabouts of accounting gains and losses take no account of capacities and knowledge that remain with the group as a result of having owned businesses like Pepper, VEM, Highlands Ranch and the association with Chelmer," Mr Crosby told the ASX.
Incoming CEO Stuart Irving said, “We have been commenting over the past twelve months on our prioritised clean-up aspirations. The actions undertaken over the past year or so and those announced today largely deal with that list of assets.
"Whilst Computershare has had a very successful history of expansion by acquisition and trying new initiatives, it’s equally important that we recognise when things have not worked out as we might have hoped and that we then take the necessary steps in the long term interests of stakeholders.”
Mr Irving also re-affirmed that Computershare’s management earnings per share for FY14 are expected to be between 5% to 10% higher than FY13 results – that’s before the $40 million write-down.
