Computershare (ASX:CPU) share price on watch after FY21 guidance beat

Here's how this stock transfer company is performing…

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The Computershare Ltd (ASX: CPU) share price will be one to watch on Wednesday.

This follows the after market release of the stock transfer company's full year results.

Computershare share price on watch after beating its guidance in FY 2021

  • Full year management revenue fell 0.8% to US$2.3 billion
  • Management revenue excluding margin income (MI) up 3.6% to US$2.2 billion
  • Margin income down 47.7% to US$104.3 million
  • Management earnings before interest and tax (EBIT) excluding MI up 12.6% to US$336.4 million.
  • Management earnings per share down 7.3% to 52.03 US cents per share (compared to guidance for an 8% decline)
  • Final dividend flat at 23 Australian cents per share

What happened in FY 2021 for Computershare?

All eyes will be on the Computershare share price tomorrow after it delivered a result slightly ahead of guidance. This was driven by a significant improvement in the company's operating performance during the second half of FY 2021, with earnings increasing 39% half on half.

Management advised that this was driven by a positive performance from its key operating businesses of Issuer Services and Employee Share Plans. They have been benefitting from higher activity levels and stronger equity markets. In addition, thanks to disciplined cost controls, its margins expanded when excluding the impact of low interest rates, which continue to drag on its margin income.

What did management say?

Computershare's CEO, Stuart Irving, was pleased with the way the company finished the financial year.

He said: "Computershare has delivered an improved operating performance in the second half of the year, with a 39% increase in earnings compared to the first half. This enabled us to report Management earnings per share (EPS) for the full year in line with the upgraded guidance we provided in February."

"A highlight of the year was the announcement in March of our agreement to acquire the assets of Wells Fargo Corporate Trust Services, a leading US provider of trust and agency services to government and corporate clients. On track to complete later this year, the acquisition accelerates our scale in the attractive US corporate trust market. It also provides Computershare with greater exposure to long term growth trends in trust and securitisation products as well as the interest rate environment. The business is to be renamed Computershare Corporate Trust (CCT)," he added.

What's next for Computershare?

Potentially giving the Computershare share price a boost on Wednesday will be its outlook for FY 2022.

Mr Irving expects the company to deliver earnings growth in FY 2022. This is thanks to the positive progress it is making in executing its growth strategies despite the challenges it is facing in some of its business lines.

He said: "Management EPS is expected to increase by around 2% in constant currency, after accounting for the impact of the rights issue. Guidance assumes over 4% EPS growth in our existing business lines. The CCT acquisition is expected to complete in October/November. Accretive on an annualised basis, it should add over 4 cps to earnings in FY22, given its partial second-half weighted contribution to the year. The rights issue will impact us by around 5.6 cps in FY22."

Computershare share price performance

The Computershare share price is up 13% in 2021. This is roughly in line with the performance of the ASX 200 index over the same period.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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