Magazine article American Banker

TSYS Projections Change: Revenue Up, Profit Down

Magazine article American Banker

TSYS Projections Change: Revenue Up, Profit Down

Article excerpt

Total System Services Inc. expects to report higher revenue but lower profit for this year as a result of its pending spinoff from the banking company Synovus Financial Corp.

The card processor said Friday that it now expects to post a 1% revenue increase for 2007, to $1.9 billion, rather than the 2%-3% decline it had projected. But it said net income would probably fall 4%; it had said earnings would be flat with 2006's or increase by as much as 2%.

TSYS projected a 4%-6% increase in 2008 net income, to $249 million to $254 million, on revenue growth of 7% to 9%.

"There's a significant amount of spin-related cost we will be taking in the fourth quarter," M. Troy Woods, TSYS' president and chief operating officer, said Friday in a presentation in New York for its investment bank, Goldman Sachs Group Inc.

TSYS is to pay a one-time cash dividend of $600 million, with about $485 million of that going to Synovus, which owns 81% of TSYS' shares. The processor's board declared the dividend Friday, payable Dec. 31 to shareholders of record on Dec. 17. The spinoff is expected to be completed by yearend.

James B. Lipham, senior executive vice president at TSYS and its chief financial officer, said it expects to pay about $400 million of the dividend from cash on hand and is setting up a revolving credit facility that it will draw against for the remaining $200 million. TSYS also plans to maintain its quarterly dividend of 7 cents a share, he said.

Though processing for card issuers remains three-quarters of the company's business, TSYS, of Columbus, Ga., has expanded into Europe and Asia and into new lines of business, such as merchant processing and health-care payments, Mr. Woods said. "It takes away some of our concerns that we had about concentration 24 to 36 months ago."

He predicted stronger European growth in the next three years as Sepa - the Single Euro Payments Area - requires continent-spanning card systems by 2010. …

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