The Wellcom Group Limited (ASX: WLL) share price could trade heavily this morning after the company updated its FY19 earnings per share (EPS) guidance figures in an after-market ASX update.
What did Wellcom announce yesterday?
Wellcom reported that it has traded in line with the expected EPS growth range of 10% to 15% it announced on 21 August 2018, and subsequently confirmed on 19 February 2019.
Following a number of recent non-trade performance related impacts, Wellcom now expects FY19 EPS growth on the prior year of between 30% and 35%.
According to management, the updated guidance is driven by the following factors:
- As of 30 June 2019, management has reached a buyout agreement with the landlord of Wellcom's existing US commercial property lease. The terms of the agreement are such that the group will recognise a net benefit before tax of approximately $6.7 million in the year ended 30 June 2019.
- At the same time as entering into the buyout agreement, management have entered into a new long-term commercial property lease in Brooklyn, New York, which will form the base for Wellcom's US operations for the years to come.
- Partially offsetting the gain on the property lease buyout are a number of non-recurring costs incurred during the period, including dilapidation costs relating to Wellcom London's former commercial property lease; acquisition costs including Brandsystems; and costs associated with the relocation of a major client from Columbus, Ohio, to New York.
Further information with respect to the financial result and outlook for the future will be provided during Wellcom's full-year results announcement on 20 August 2019, once full-year audited results are available.
How has the Wellcom share price performed in 2019?
While the temporary earnings increase could see the Wellcom share price climb higher this morning, the company's share price has been volatile and is currently trading at $5.39 per share.
The company's 52-week high of $5.70 per share isn't out of reach, but the share price remains only 6.9% higher since the start of January.
However, with a market cap of $211 million and a dividend yield of 3.90% per annum, a strong earnings season could put the Wellcom share price in the buy zone in the second half of the year.
