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EML - EML PAYMENTS LIMITED


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  • 6 years later...
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This week, we highlight WAM Active's (ASX: WAA) holding in financial services company EML Payments (ASX: EML). EML provides instant and secure payment solutions across 21 countries in North America, Europe and Australia.

 

On Monday, the company announced the acquisition of Irish financial technology company Prepaid Financial Services for $423 million, providing EML with a suite of digital banking services.

 

We first invested in EML as we were attracted to the growth profile and operating leverage of the business and have seen an improvement in the competitive landscape as banks have exited the space. We remain attracted to the acquisition opportunities for EML and see a strong earnings growth profile. Shares in EML closed up 14.7% for the week.

- bold move for a small cap to take on another player half it's size

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  • 9 months later...
EML Payments says COVID19 has prompted it to accelerate its diversification strategy to ensure it is not overly reliant on supplying gift cards in shopping malls. This includes making equity investments in fintechs that could use its payments as a service offerings. EML, which operates in 28 countries and was an ASX darling before the pandemic struck, saw revenue hit hard in gift cards provided to retailers in physical shopping centres across Europe and the United States.

 

Gross debit volume plunged by 90 per cent in April as shops were shuttered and over the fourth quarter was down 33 per cent on the comparable period.

 

Despite signs of recovery in June and July, the approach to mall reopenings has been a "mish-mash" which makes it very difficult to predict Christmas trading, chief executive Tom Cregan said on Wednesday. We did not want to come out of COVID as the largest mall card provider in the world. We have taken the opportunity to reimage what the business will look like in three years and we have hit the ground running., he said.

 

EML has created an accelerator, called FinLabs, that will invest $10 million to $15 million over the next two years in disruptive fintechs, which EML can integrate with or cross-sell to. Its first, $2 million investment is in interchecks, a US-based disbursement tool. It will also look for investments to help it tokenise transactions on Visa's network.

 

EML has been seeking to diversify for several years, including through the acquisition of Prepaid Financial Services, which was finalised in April. This propelled EML to record levels of revenue, transaction value, EBITDA and net profit for the full year, despite the pandemic also curtailing disbursement volume in its sports betting operations and reducing global travel, pushing down multi-currency services.

 

Gross debit volume was up 54 per cent to $4.23 billion, EBITDA was up 10 per cent to $32.5 million and net profit was 17 per cent higher at $24 million, on revenue up 25 per cent to $121.6 million. Shares in the $1.1 billion company fell 4 per cent to $3.14.

 

EML has been pushing into general purpose reloadable cards which are being used by corporates and government departments for payroll or salary packaging services.

 

It has also got a longterm ambition to become fintech to the fintechs by creating a variety of as..a..service solutions, including for the buy now, pay later sector, where it counts ASX-listed Sezzle, and soon to list Laybuy as customers. These multiregional fintech partnerships are what we want to see more of, and what we want to compete more often for, Mr Cregan said. We will generate long-term shareholder value by partnering with fintechs disrupting their own industries who will be using EML, in part, to support the payments aspect of their business and that disruption.

 

EML is also working with MoneyMe, Coinjar, revsto, Hammock, Paygo and Scalapay.

 

A key risk for EML is its reliance on revenue from breakage, or the unused amount left by consumers on reloadable gift cards. EML can share this with retailers, although it is possible regulators may require unspent funds to be returned to shoppers. EML said breakage continues to fall as a percentage of group revenue, now comprising 23 per cent, down from 33 per cent in FY19, and it is expected to represent a lower percentage of group revenue in FY21 with further growth in the [general purpose reloadable card] segment.

 

the last para about sums this mob up.

 

 

EML is working with MoneyMe, Coinjar, revsto, Hammock, Paygo and Scalapay (!) No wonder the banks are scared!!

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  • 6 months later...

almost recovered from the Covid plunge; EML above $5.00 again

 

($’000s) ............. H1 FY20 .... H1 FY21 ... GROWTH

TOTAL REVENUE ....... 59,156 ... 95,329 .. 61%

Revenue conversion .. 89bps ... 93bps .... 4%

GROSS PROFIT...... 44,803 .... 67,252 ..... 50%

GP margin .............76% ...... 71% ....... (5%)

 

 

 

The Group expects EBITDA to be in a range of A$50.0m – $54.0m for FY21

This represents growth of 54% to 66% over PCP of $32.5m

 

A key risk for EML is its reliance on revenue from breakage, or the unused amount left by consumers on reloadable gift cards. EML can share this with retailers, although it is possible regulators may require unspent funds to be returned to shoppers. EML said breakage continues to fall as a percentage of group revenue, now comprising 23 per cent, down from 33 per cent in FY19, and it is expected to represent a lower percentage of group revenue in FY21 with further growth in the [general purpose reloadable card] segment

 

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  • 2 months later...

bad news for EML ... down 40%

 

EML advises that its Irish regulated subsidiary, PFS Card Services (Ireland) Limited, has received correspondence from the Central Bank of Ireland, including a letter received on Friday 14 May 2021 (Australian time) raising significant regulatory concerns. The CBI is the relevant regulator in Ireland.

 

The CBI's concerns relate to PCSIL's Anti-Money Laundering / Counter Terrorism Financing, risk and control frameworks and governance. The Correspondence states that the CBI is minded to issue directions to PCSIL pursuant to section 45 of the Central Bank (Supervision and Enforcement) Act 2013.

EML came out re-iterating guidance "excluding costs and impacts" but that is like a bit pregnant. Doesn't happen like that. There are going to be costs, and enquiries.

 

One commentator spells it out: In the worst case scenario, their PFS business is done and dusted, and this action will force regulators in Australia and the USA to take a close look at the company's operations. .

 

.https://arichlife.com.au/eml-payments-asx-eml-share-price-plunges-on-central-bank-of-ireland-investigation/

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  • 4 months later...

bad news for EML .... down 15%

EML Payments has warned that the Irish Central Bank the CBI wants limits applied to the EML Prepaid Financial Services business.

 

EML said the CBI demands could materially impact the European operations of its Prepaid Financial Services business, but did not provide any specific financial estimate.

EML completed a deal to buy Prepaid Financial Services in a deal valued at around $226 million.

 

EML said the rest of its Australian and European operations are unaffected.

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  • 4 months later...

James Marlay: Okay. Shane, have you got a stock that delivered what you thought was a good result, but the market yawned at?

Shane Fitzgerald (Monash Investors ) : Yes today, EML. I thought EML had a good result today. It was in line with market expectations. It was in line with company guidance and its stock got sold off 10% at one point today, which I thought was crazy. When you look at EML, it has had a rough time the last nine months due to regulatory intervention in Ireland, the COVID impact in their gifts and incentive business. But underneath it, what you see in EML is its earnings in the gifts and incentive business has at least $10 million in benefit to come through when malls reopen again fully.

A 1% increase in interest rates at $15 million EBIT. How big is that? That is a 20% increase, right? So there is plenty of earnings growth in EML, and the real kicker here was this company did 20% top line revenue growth when it was constrained on growth because of the regulatory intervention. Once they have got the wind behind their sails, the growth rate in this business will be quite impressive. We think it looks fantastic at moment.

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  • 2 months later...

EML has made surprise downgrades to revenue and earnings and cut its net profit forecast by 7 per cent.

The Update pointed to elevated costs and lower than expected new customer revenue. Regulators last year put the brakes on its European business, where it earns 60 per cent of revenue.

Following the purchase in 2019 of Prepaid Financial Sevices, the Central Bank of Ireland raised concerns about the composition of the EML board, amid tougher scrutiny of foreign payment companies.

It questioned the number and background of PFS board directors, the board governance methodology and processes, and the controls and responsibilities of the EML compliance leadership.

It has been forced to hire new leadership in Europe, including a group chief operating officer, CFO, general counsel, compliance and regulatory director, head of compliance and head of risk.


And down 37% to $1.68. SP has not been that low since 2019

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