Stock soars 10% after results

Visa. It is something that gets you into a country. The company however has its roots in a town by the name of Fresno (California), anyone who has watched the DreamWorks Animation animated movie Monsters versus Aliens will recall the place. Yes, it used to be my youngest daughters favourite movie that one. The annual report of Visa last year : Our business traces its roots to 1958, when an innovation center run by Bank of America began to mail cards to its customers ... where it did business with about 45 percent of the families living there. At the same time, the bank met with local retailers and explained that many local families would soon have these cards. In a short space of time, a network was created that would benefit both parties.


Fast forward to the last quarter, the fourth quarter of their financial year to end September 2014, which also means that the yearly numbers hit the screens too. The company can process an astonishing 56 thousand transactions a second and operates in over 200 countries around the world. There is of course the real time network too, VisaNet, which has processed over 12 thousand transactions a second during the peak season. What is most impressive about their network is that it is very hard to replicate, once built and trusted, it is hard to use something else that is unknown. Besides, as the Apple Pay platform and payment system is rolled out further, it is Visa and Mastercard (and others) that handle the payments, the existing infrastructure works.


Straight into the numbers themselves for the full year. Adjusted full year earnings per share growth of 19 percent (9.07 Dollars per share) on net income of 5.7 billion Dollars (an increase of 15 percent) on total operating revenues of 12.7 billion Dollars. The margins are absolutely fabulous in this business, operating margins of 61 percent here. Yowsers, what most businesses would give for half of that!! Spend, well that was flat for the year, the only noticeable line was a 450 million Dollar deposit into a litigation escrow account, companies of this sort are prone to the prying eye of regulators looking to protect the "poor" consumer. The company also announced guidance that was ahead of the market consensus and then also announced that they would embark on another 5 billion Dollar repurchase, which is around three and a half percent of the share in issue, at current values.


In all their territories it was the US that experienced the strongest growth for the three months to end September, an extension of the strong US economy. What is interesting to note is that overall, the international segment of the Visa Debit programs is equal to that of the US, the US blows the international segment away in Visa Credit program growth.

Visa will continue to attract more and more swipes from many more customers across the world. There are whole programs to eliminate the use of cash, it is easy to see why, cash has no paper trail whatsoever. Plus, as a result of the anonymity of cash (making it more likely to be stolen) the holding costs are higher for the individuals involved. In other words, banks will charge you more and more for cash. I know for retailers this is a double edged sword, more cash has a holding cost, more electronic swipes equal more fees for them to pay. Governments and other institutions want a trail, regulation has to be balanced.


A ten percent move northwards in the share price last evening was nothing short of epic. That must have been scary for the geared shorts, yowsers. Whilst the upside for the full year looks rather muted, there is no doubting the quality of the company, a must own in any portfolio.