financial results for the fourth quarter of 2006, with net income
rising to $41 million, compared with a loss of $53 million in the
same period a year ago, and net revenues rising by 17.2 percent to
reach $839 million, partly due to increased fees on international
purchases, which contributed 1.9 percent of the increase in
revenues for the quarter. MasterCard’s share price quickly surged
to a 52-week high following the results announcement, but soon fell
by 11 percent due to investor concerns about the company’s profit
margins in 2007.
MasterCard’s higher revenue in the fourth quarter versus the same
period in 2005 was driven by growth in gross dollar volume (GDV),
which increased 13.8 percent, on a local currency basis, to $532
billion; a 17.4 percent increase in the number of transactions
processed to 4.4 billion; and a restructuring of cross-border
transaction pricing which was implemented in April 2006. However,
in a conference call with investors and analysts, MasterCard CFO
Chris McWilton stated that the company had “no significant pricing
increase plan” for 2007, leading to the drop in the company’s share
price.
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For the fourth quarter, worldwide purchase volume rose 16.7
percent, on a local currency basis, to $391 billion, driven by
increased cardholder spending on a growing number of MasterCard
cards. As of 31 December 2006, MasterCard customers had issued 817
million MasterCard cards, an increase of 12.3 percent compared with
the year-ago period.
Total operating expenses decreased 2.6 percent to $793 million
during the fourth quarter of 2006 compared with the same period in
2005. Excluding the impact of litigation settlements, operating
expenses increased 0.5 percent, primarily driven by a $14.5 million
cash contribution to the MasterCard Foundation, as part of
MasterCard’s previously disclosed intention to contribute up to $40
million in cash to the foundation over four years; higher
professional fees related to legal costs to defend outstanding
litigation; and an increase in personnel costs related to the
hiring of additional staff. Offsetting this increase was an 8.5
percent decrease in advertising and market development expenses
compared with the same period last year, due to a shift in the
typical annual pattern of marketing spend to support the World Cup
football events.
Robert Selander, MasterCard president and chief executive officer,
said: “Cardholders around the world used their MasterCard cards for
transactions totalling almost $2 trillion in 2006 – doubling the
GDV we reported only five years ago, as the pace at which we are
driving commerce in markets around the world gains momentum. Our
success in displacing paper-based forms of payment reflects the
strength of our brand and network as well as the opportunities to
implement innovative payment programmes in both emerging and
developed economies.”
Net revenues for the 12 months ended 31 December 2006 were $3.3
billion, a 13.2 percent increase year-on-year. Total operating
expenses increased 21.7 percent to $3.1 billion compared with the
same period in 2005.
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By GlobalDataJoe Dickerson, analyst at investment research company Atlantic
Equities, commented: “The key deltas to our numbers were lower than
expected marketing expenses, and $24 million of other income. Net
revenue growth was light in our view, totalling $839 million in Q4,
compared with our expectation for $862 million. Total revenue
growth was 17 percent year-over-year, with a 1.9 percent tailwind
from currency and a 5 percent benefit from cross-border pricing
initiatives implemented in Q2.”
