Computershare Limited

Good morning, and thanks for joining us for ComputerShare's 1H26 results conference call. As usual, Nick Oldfield, our CFO, is with me, along with Michael Brown from our IR team. We've released the presentation pack on our website, and I'll take you through the highlights on this call. Nick will then take you through the financials in more detail. Then we'll open the lines for Q&A. And just to remind you, we will be talking in U.S. dollars, constant currency and comparing to 1H FY25 unless we state otherwise. Now, there is a lot of detail in the results pack, but let me take you straight away to the key features of the result that matter on slide two. Business performance, EBIT XMI, which really talks to the underlyings of business results, was up 12%. And Nick will talk you through all the moving parts, but our BAU OPEX costs were contained below the rate of inflation. And excluding margin income, our margins expanded to 16%. I think we're well on our way to the 20% EBIT XMI margin target that we have called out. Now, the margin income result, you know, I thought was a standout. We knew that margin income was a headwind going into this year with the prospect of rate cuts, which actually came quicker than the curves predicted last August. And I know that U.S. cash rates have been a focus for many investors, and they did fall sharply in the half. U.S. cash rates were down over 17% compared to the PCP. However, computer shares margin income was only down 5%. So there's clearly more to this than cash rates alone. And computer shares' natural hedge worked, and I'll explain that a bit later. Event and transaction revenues were also a highlight, up almost 13%. And we are seeing increased corporate action activity in some areas, although not firing on all cylinders across all regions yet. Employee share plan transaction volumes continue to grow, which is really a reflection of the continuing growth in the use of equity and remuneration, and is really underpinned by increased issuance by companies. And finally, from a key points perspective... with a solid first half under our belts, stronger business performance and improved outlook for margin income. We are upgrading full year earnings guidance to 144 cents per share, and that's growth of 6% over the PCP. So these are the key points to start with, but let's move to page three, which is really a summary of the results. Management EPS was up 3.9% and we have delivered earnings growth and consistently high returns in a lower interest rate environment. ROIC was over 36% and our debt leverage reduced to 0.3 times. And you may remember that future buybacks are tax inefficient for computer share at the moment. So the board has stepped up the interim dividend to the top half of the payout ratio range. 55 obvious cents per share is a 22% increase in the interim dividend, and Nick has kindly tipped in a few of his franking credits for this one as well. Now let's move to slide four. This new chart shows the long-term track record for each of our three key business lines and their seven-year KGARs. The key point is that through organic growth and complementary acquisitions, All of our businesses have delivered solid revenue and EBIT growth over time. Now, we've come a long way and there's some impressive growth rates here. Employee Share Plans has delivered almost 10% revenue CAGR, underpinned by the issuance tailwind that we have spoken about. Issuer Services has been a consistent, high-quality performer as we leverage our strength and build out complementary product lines. Corporate Trust has delivered the fastest EBIT growth over the period, including that step-up from the Wells Fargo acquisition. And we expect to continue to deliver long-term growth across all our businesses. We will continue to strengthen their competitive positions, widen their competitive moats, and deploy new technologies to enhance customer value and, of course, efficiencies. Now, just going into a little bit more detail on each of the business lines for the half. Issuer services delivered the fastest rate of revenue growth across the group, with contributions from all business lines. Register maintenance revenues improved by over 4%, supported by new client wins across all our major markets. Corporate actions revenues are recovering with revenue growth of over 12% and while activity levels are still about 25% below peak 2021 levels, we have seen some strong improvement in some product lines since around November. IPOs in Hong Kong are a highlight. There's a sharp increase in completed deals and we have increased our market share of new listings. But here's a good example of the flow-on effect in our business. In Hong Kong, we have seen north of a 400% increase in retail participation and applications for these IPOs. These applicants become shareholders. Now, of course, we earn a corporate actions fee for the listing, but then we end up earning recurring fees for maintaining the register going forward. M&A volumes, on the other hand, are yet to fully recover, as I mentioned earlier on. The number of completed deals was down across all markets, apart from Australia. But based on the deal pipelines, the outlook is a little bit more positive, but it is hard to predict which half-year period it will actually land in. Elsewhere in issuer services, in January 25, we completed two small investor-related acquisitions, which were not in the PCP. Now, these businesses are small and the margins are lower as we build out scale and capability. We also touched on tokenization within issuer services at our AGM. Since then, we have continued to actively engage with regulators and market participants to help shape the structure of digital markets. And we see this as a long-term positive for us. Computershare has always, at its heart, been a technology company whose key role is to support and advise issuers. we have applied our deep understanding of the rationale and benefits of existing market structures to design a tokenization model which we call issuer-sponsored tokens or ISTs. We have been engaging with the digital task force at the SEC on this proposal and I think it's really encouraging to see that our pro-issuer stance is being reflected in the latest communications from the task force, and we really see that as an opportunity going forward. I mean, our goal is really to replicate the trust, compliance, and protections of traditional registered ownership, while enabling the benefits of digital transferability, interoperability, and, of course, approaching 24x7 accessibility. Now, moving to corporate trust. The business is performing well, fee revenue up over 12%. We are benefiting from increased issuance volumes across most product categories with strong volume growth in key structured products, RMBS, ABS and CMBS. As expected, higher activity levels are generating higher client balances. And we continue to strengthen our platform and capabilities as we patiently pursue acquisition targets. Employee share plans delivered another set of strong results. Revenues increased by 5%. Client wins across all markets drove higher fee revenues and transactional revenues grew. The plans book continues to grow with the increasing use of equity in employer remuneration. In Europe, for example, issuance of units increased by over 20%. Recognising the business has an element of sensitivity to equity markets, I do think we've built an impressive portfolio of multinational clients across diversified industry sectors. And it's really the size of that book that fuels the growth. And we see the number of units being administered increasing over time. Now let's move to slide five, where we talk a little bit about computer shares natural interest rate hedge. I do think that it's a very important part of computer shares model. But, you know, it allows us to really unwrap why margin income is so resilient at down 5% when the US cash rates for the period was down some 17%. And there are really several parts to this hedge. First of all, and we've been saying this for a while, lower rates stimulate more activity across our business lines. And as you will see, client balances are up. and higher balances can mitigate lower yields. And as a reminder, only about a third of our balances are fully exposed to short-term rate movements. And there's also another part to this hedge with lower interest costs on group debt. Now there are two drivers there, lower interest costs and reduced debt. All our debt is deliberately at floating rates. So we are also benefiting from the lower rates to the tune of some 14 million. Therefore, including interest rate savings, the net impact on lower rates of computer share overall in the first half was only $8 million. That's only about 1.5% of PBT. So when we combine higher balances, the benefit of our hedge book, and lower interest rate costs on a strengthening balance sheet. You can see that looking at lower cash rates alone sometimes misses the bigger picture. Let me now turn to the outlook on page 8. In August, we provided initial guidance for management EPS for FY26 to be up by around 4% to 140 cents per share. This assumed a full-year profit contribution from UK Mortgage Services, which we successfully divested and closed last week. Even without this additional contribution for the last five months of the year, we now expect to deliver management EPS of around 144 cents per share, up 6%. We do have momentum across our key business lines, lower interest costs, and of course the benefit of the share buyback we completed last year. But we will maintain our focus on executing our strategic plans to deliver a higher quality computer share that generates consistent results and enduring returns for shareholders. Nick, now over to you to go through some of the numbers in more detail.

Thank you Stuart, and good morning everyone. So as you've heard, we delivered 67.9 cents per share of management EPS in the first half of FY26. Now there's been some noise on costs overnight, so I want to start by clearing this up. First of all, BAU OPEX was up 2.6%. We have said consistently our objective is to manage BAU OPEX at or below inflation. This result is firmly in that target range. So what was the noise? Well, we calculate BAU OPEX as general cost increases less the cost-out benefits delivered around the group. Total cost-out benefits total $16.5 million. This was $6.2 million in operating synergies from Corporate Trust, whilst their ongoing Stage 5 cost-out program delivered $10.3 million in savings. The next component of cost is investment spend. This is really about the next stage of growth at Computershare. This added $25.7 million of cost. It includes $5 million for six months of new ownership of Engage, CMI2I and BNY Corporate Trust Canada. The remainder was investment in both technology and people to support ongoing product innovation and revenue growth, particularly in issuer services. investments to establish our corporate trust capabilities in Europe, and the launch of a social value fund in our UK deposit protection service. This does of course cut both ways. In the second half of FY26 you will see the benefits of lower cost from the divestment of UK mortgage services. Around 800 people have left the business as a result of that transaction. The third point is a slight delay in the benefits arising from our Stage 5 program. Estimated savings for FY26 have been reduced by about $6 million. $3.3 million of this reflects a slight delay in the timing of benefits. The other $3 million is simply the fact that we sold the UK mortgage services at the end of January before the savings could flow through. More details on the cost-out programs are included on slide 38. And today, we announced that these cost-out benefits will also extend to FY27. We now expect pre-tax cost savings from Stage 5 and corporate trust programs of $23.2 million in FY27. And the EBIT XMI margin will be higher again. I'd now like to touch on stranded cost. As you may recall, In August, I said that there was $40 million of stranded clock cost included in the FY25 cost base in the technology services and operations segment, and that these were to be reallocated out to the business lines in FY26. In 1H, FY26, around $19 million has been allocated, and the remainder will be allocated in the second half of FY26. To be clear, these costs existed in FY25 and they exist today. They're not an increase. They are stranded, simply as they represent costs we have to pay to support the business. And we've just reallocated the amount to the divisions. To manage overall costs, therefore, we focus on cost savings elsewhere. And so the $16.5 million of cost out I mentioned earlier offsets these stranded costs, almost one for one. Below the line costs were also lower. I said in August they'd be 40% lower in FY26, halve in FY27 and disappear by FY28. I now expect them to be 30% lower in FY26. This is what we achieved in the first half, and the second half of FY26 will be similarly reduced. Not quite the 40% I expected, but this is largely due to timing of some redundancy expense in the second half. I expect a 55% reduction in FY27 and still elimination by the first half of FY28. To reiterate, FY27 will be the last year of these below the line costs. This is all shown on slide 12. So let me now touch on MI and guidance before we move to questions. In FY26 we expect to generate around $730 million in MI, an upgrade of $10 million compared with the expectation of $720 million back in August. You can see this on slide 9. This is based on average balances of $30.8 billion in line with exit balances at the end of December. We expect a yield of 2.37% based on the assumption of one rate cut in the US in March and one rate cut in the UK in May. This is based on curves as at 9th February. Moving forward, I expect MI to continue to be resilient the hedged yield should increase further to over 3.5% in FY27, and as we've demonstrated in 1H26, if rates do fall further, and each 50 basis points in global rates is worth around $48 million in margin income, any negative impact can be materially constrained by growth imbalances, lower cost of debt, and increases in hedged yields. Turning to guidance, slide 13 shows the second half bridge. Relative to 2H FY25, there's 3 cents per share of organic business growth and cost out. This continues the momentum of the first half. Yes, EBIT XMI growth in absolute terms is a bit lower. But that's because the second half is always bigger. And because we're dealing with the sale of UK mortgage services. That would have contributed one cent per share in the second half had we not sold it. Around 2% of EBITXMI. Margin income is down 2 cents per share versus the PCP. Interest expense is down 4 cents per share. This is the natural hedge in action, powered by a full 6 months of benefit of paying off the USPP in November 2025. Tax is broadly neutral and there's one cent per share of buyback equation. We expect this to deliver us 76 cents per share of earnings in 2H FY26. This would be a record half for computer share. I'll now hand back to Stuart.

Thank you, Nick. I think we are, you know, really looking forward to some of the questions. So why don't we move straight to that?