Transaction processing company First Data Corp. on Thursday said it plans to spin off its Western Union consumer payments business as a separate public company. The company also posted a 14 percent drop in fourth-quarter profit due to unusual charges.
The company said it will retain its domestic card issuing business, and will organize its operations into three main segments after the tax-free spin-off. Its First Data Financial Institution Services segment will include the card issuing business, and the remaining two segments will consist of First Data Commercial Services and First Data International.
First Data said the alignment will help it increase its focus on the groups and improve sales and marketing.
The company said it expects to complete the separation in the second half of this year.
For the fourth quarter, First Data said net income slid to $397.9 million, or 53 cents per share, from $465.1 million, or 56 cents per share, the year before. Latest-quarter results included about 12 cents per share of restructuring, integration and other costs, as well as a 3-cent gain from selling part of its stake in a PNC alliance.
Without the one-time items, First Data’s adjusted earnings still fell short of the average view for 65 cents per share from analysts polled by Thomson Financial.
Revenue totaled $2.77 billion, a 3 percent increase from $2.69 billion a year earlier but missing the consensus target of $2.82 billion. Payment services revenue added 14 percent to $1.15 billion, while merchant services grew 9 percent to $804.9 million, the company said.
For the year, profit declined 15 percent to $1.59 billion, or $2.02 per share, from $1.88 billion, or $2.23 per share, in 2004. Earnings reflected 12 cents per share of integration expenses, 11 cents of other charges and the gain from the PNC sale.
Annual revenue of $10.49 billion rose 6 percent from $10.01 billion last year, the company said.
Looking forward, 2006 income from continuing operations is forecast at $2.35 to $2.42 per share, including about 7 cents of stock-option costs. Revenue is expected to grow by 10 percent to 13 percent, implying a range of $11.54 billion to $11.85 billion.
Analysts are currently predicting 2006 profit of $2.54 per share and $11.59 billion in revenue.