Revenue recovers and losses narrow at Elavon Europe

Losses at Elavon’s European operations narrowed in 2021, according to documents deposited at Companies Registration Office Ireland. Although revenues picked up from their pandemic lows, the bounce back was not yet strong enough to cover fixed costs. Elavon has a large market share in the travel sector and was hit harder than most of its competitors by the lockdowns. 

Elavon is a unit of US Bancorp and trades in Europe as Elavon Financial Services DAC, based in Dublin. 80% of revenues are from merchant acquiring and related products. The remainder are generated by Global Corporate Trust Services. 

Merchant services volume rose 23% in 2021, having fallen 24% in 2020. This still leaves volumes running 6% below 2019 levels. Nevertheless, management believes the business is “well positioned for opportunities as economies recover.” 

Elavon gives two measures of geographical breakdown of its operations by branch booking location for merchant and issuer receivables. These indicate that 55%-85% of its merchant services business is booked in UK/Ireland with the remainder in Poland, Germany and Norway.

Total operating income (net revenue) rose 24% to €330m. 

Merchant services fee and leasing income rose 17% to €248m of which 90% was processing fees. This number is net of interchange, scheme fees and partner commissions. Equipment rental rose 7% to €26m.

Operating expenses rose 14% to €389m. Staff numbers were down slightly at 2,184 but average costs per employee grew 13% to €90K each.

Losses before tax narrowed to €59m from €76m in 2020, a negative EBIT margin of -18%.

Strategic goals include completing the integration of Opayo, the former Sage Pay business, bought for £232m in March 2020. This acquisition brought £40bn gateway transaction volume and 50,000 merchant customers in UK and Ireland. Opapyo boosts Elavon’s eCommerce merchant services capability “as well as giving access to a broader client base, particularly in the SME sector.” The integration of Opayo is said to be well advanced and its new owner is optimistic. The annual report says: “Together with increasing merchant services acquiring volumes as COVID 19 restrictions are lifted, [Opayo] is expected to drive revenue and net profit growth in future years.” 

Operating in the travel sector, Elavon needs strong risk controls. The value of airline tickets processed but not delivered was €2.3bn at the end of 2021, up slightly on 2020. This represents significant potential liability in the event of airline business failure. To mitigate this, Elavon is demanding more security from its customers. Merchant escrow deposits rose 35% to €151m at the end of 2021 although unrecovered losses remained relatively low at just €3.5m – 59% below 2020. 

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