EML Payments — Considering its options

EML Payments (ASX: EML)

Last close As at 22/02/2024

AUD0.95

0.01 (1.06%)

Market capitalisation

AUD357m

More on this equity

Research: TMT

EML Payments — Considering its options

EML Payments’ H123 results reflected the changing mix of revenue (lower establishment fees and breakage, higher interest income), the effect of the ongoing remediation of regulatory issues in the European and UK PFS businesses and the restructuring of the group. With the Irish regulator raising additional concerns post results and applying a more stringent growth cap to EML’s Irish subsidiary, PFS Card Services Ireland Limited (PCSIL), the board has initiated a strategic review of the business.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

EML Payments

Considering its options

H123 results

Software and comp services

14 April 2023

Price

A$0.585

Market cap

A$219m

Net debt (A$m) at end H123

6.8

Shares in issue

374.0m

Free float

93%

Code

EML

Primary exchange

ASX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

33.0

(9.3)

(80.1)

Rel (local)

29.2

(9.1)

(79.4)

52-week high/low

A$2.91

A$0.41

Business description

EML Payments is a payment solutions company managing thousands of programmes across 32 countries in Europe, North America and Australia. It provides payment solutions for banking, credit and disbursement services, earned wage access, gifts, incentives and rewards, and open banking and FX.

Next events

Q323 update

May

Analyst

Katherine Thompson

+44 (0)20 3077 5700

EML Payments is a research client of Edison Investment Research Limited

EML Payments’ H123 results reflected the changing mix of revenue (lower establishment fees and breakage, higher interest income), the effect of the ongoing remediation of regulatory issues in the European and UK PFS businesses and the restructuring of the group. With the Irish regulator raising additional concerns post results and applying a more stringent growth cap to EML’s Irish subsidiary, PFS Card Services Ireland Limited (PCSIL), the board has initiated a strategic review of the business.

Year end

Revenue
(A$m)

PBT*
(A$m)

NPATA** (A$m)

Diluted EPS* (c)

DPS
(c)

P/E
(x)

EV/EBITDA***
(x)

06/21

192.2

30.2

21.0

6.6

0

8.9

4.3

06/22

232.4

16.0

19.3

3.4

0

17.2

4.5

06/23e

240.3

(23.1)

(22.0)

(4.9)

0

N/A

8.7

06/24e

253.2

2.0

3.0

0.4

0

135.7

7.9

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **NPATA = net profit after tax, excluding acquisition-related costs. ***Based on underlying EBITDA.

H123 results reflect focus on compliance

For H123, EML reported gross debit volume (GDV) growth of 55% y-o-y (7% excluding Sentenial, which was acquired midway through H122), revenue growth of 2% (-0.6% organic) and an underlying EBITDA decline of 50%. Lower breakage and non-recurring revenues in Gifting and lower establishment fees in General Purpose Reloadable (GPR) due to the regulatory remediation programme were partially offset by higher interest income on float. Overheads increased on an underlying basis to support the increased focus on compliance and one-off costs of $21.6m included regulatory remediation, litigation, fraud losses and restructuring.

Regulatory challenges; strategic review launched

Post results, the Central Bank of Ireland (CBI) wrote to EML expressing dis-satisfaction with the remediation programme and raising the prospect of a more stringent growth cap for PCSIL. This growth cap has since been applied, effective 31 March 2023 to 31 March 2024. A board sub-committee has been formed, chaired by new non-executive director, Peter Lang, to oversee the remediation programme. A strategic review of the business has also been launched. EML maintains guidance for underlying EBITDA of A$26–34m in FY23. We have revised our forecasts to reflect H123 results and the new growth cap, which combined reduce our FY24 revenue forecast by 6.7% and EBITDA by 26.5%.

Valuation: Reflects increased uncertainty

EML is trading at a substantial discount to global payment processor and prepaid card peers on an EV/sales and EV/underlying EBITDA basis. Evidence of positive progress with the Irish and UK regulators as well as the outcome of the strategic review could trigger upside from this point.

Review of H123 results

We summarise EML’s H123 performance in Exhibit 1. Group revenue grew 2% y-o-y, group underlying gross profit increased 5% y-o-y and underlying EBITDA declined from A$26.9m in H122 to A$13.4m in H123. In Exhibit 2, we summarise the key adjustments to reach EML’s underlying EBITDA and NPATA measures.

Exhibit 1: Half-yearly performance

H123

H122

y-o-y

GDV (A$bn)

Gifting

1.1

0.9

16%

GPR

6.5

6.3

4%

Digital Payments

41.8

24.4

71%

Group GDV

49.4

31.6

55%

Yield (bp)

Gifting

321

408

-87

GPR

110

111

-1

Digital Payments

3

3

0

Group yield

24

36

Revenue (A$m)

Gifting

34.0

37.1

-8%

GPR

72.1

69.6

4%

Digital Payments

10.5

7.7

37%

Group revenue

116.6

114.4

2%

Gross profit

70.4

75.4

-7%

Gross margin

60.3%

65.9%

Underlying gross profit*

78.9

75.4

5%

Underlying gross margin

67.6%

65.9%

EBITDA

(8.2)

14.2

N/A

Underlying EBITDA

13.4

26.9

-50%

Source: EML Payments. Note: *Adjusted for fraud losses of A$8.5m.

Exhibit 2: Reconciliations from reported to underlying profit measures

A$m

H123

H122

H123

H122

EBITDA

(8.232)

14.203

NPATA

(15.992)

3.961

Regulation remediation & class action costs

8.502

12.659

7.102

9.101

Fraud losses

8.476

0.000

6.357

0.000

Restructuring costs

4.627

0.000

3.239

0.000

Underlying EBITDA

13.373

26.862

Underlying NPATA

0.706

13.062

Source: EML Payments

The company impaired goodwill by a total of A$121.4m during H123, split as A$86.2m for PFS and A$35.1m for Sentenial. EML also reduced the estimated contingent consideration payable for Sentenial from A$28.9m at the end of FY22 to A$10.7m at the end of H123 resulting in a one-off credit of A$19.3m at the net finance cost level. An earn-out of up to €40m is payable based on revenue achieved by Sentenial’s Nuapay business in CY23. The maximum pay-out requires CY23 revenue of least €30m and the earn-out is structured on a sliding scale to reward growth from the €3m base level at acquisition. As the Sentenial deal took longer to close than expected, delaying the investment by EML of sales and marketing resource, the likelihood of achieving the maximum pay-out is low.

EML closed H123 with cash of A$79.2m and net debt of A$6.8m (excluding leases). During H123, the company received A$10.9m in cash for the sale of its stake in Interchecks.

Divisional performance

Gifting: Incentives growth outpaced mall card growth

The Gifting division saw 16% growth in GDV year-on-year, with incentives growing at a faster rate than malls (31% versus 7%). An employee benefits programme in Ireland that leveraged the Small Benefits Scheme was a key contributor to growth. The division reported less breakage this year than last year as the effects of COVID-19 related mall closures have been worked through. The division reclassified A$2.2m of H122 revenue from breakage to non-recurring revenue to reflect the one-off nature of the work. Yield declined due to lower breakage and a higher proportion of incentives cards in the mix. Interest income increased from A$0.1m in H122 to A$1.1m in H123, reflecting rises in interest rates globally. Gross margin was materially in line with the prior year.

GPR: Interest income increased materially

GPR GDV increased 4% y-o-y, despite the effect of regulatory remediation in the PFS business, which reduced the ability to launch new programmes. Salary packaging volumes in Australia were up 8% y-o-y. Yield was essentially flat year-on-year, with establishment income down 27% y-o-y but interest income increasing significantly from A$2.2m in H122 to A$8.0m in H123. Gross margin was flat year-on-year at 56%; excluding A$2.4m in one-off fraud costs underlying gross margin was 59%.

Digital Payments (DP): Sentenial fraud weighed on gross margin

DP GDV increased 71% y-o-y reflecting a full six-month contribution from Sentenial versus three months in H122. Sentenial contributed GDV of A$36.5bn, of which c A$0.7bn (+19% y-o-y pro-forma) came from Nuapay’s open banking service. The original DP business grew GDV 6% y-o-y. Sentenial contributed revenue of A$5.6m in the period versus A$2.7m a year ago. Yield was flat year-on-year at 3bp. The previously disclosed fraud in the Sentenial business cost A$6.1m at the gross profit level, bringing the gross margin down to 28.0% compared to 81.5% in H122. Excluding this loss, the underlying gross margin was 89%.

Board changes

In early February, the company confirmed that it was refreshing the board, with three directors (David Liddy, Melanie Wilson and Tony Adcock) resigning on or before the 2023 AGM. On 22 February, the company announced it had appointed three new independent non-executive directors who will stand for election at the 2023 AGM, with the three previous directors stepping down with immediate effect. The new directors are:

Dr Luke Bortoli: previously he was CFO of Afterpay (2018–21), held senior roles at Aristocrat (2015–18), and prior to that was an investment banker at UBS. The board has appointed Dr Bortoli as chairman.

Peter Lang: worked at McMillan Shakespeare in various executive roles.

Connor Haley: nominee director from the company’s 8.14% shareholder, Alta Fox Capital.

Regulatory update; strategic review launched

Post H123 results on 22 February, PCSIL, EML’s Irish subsidiary, received a letter from the CBI. On 24 February the company disclosed that the CBI considers that PCSIL has made limited remediation progress to date with significant and ongoing deficiencies remaining in PCSIL’s AML/CFT control framework. It is also not satisfied with PCSIL’s remediation plan and timetable for completion.

EML had previously expected to complete the remediation programme and third-party assessment by the end of CY23, but now considers that this timeframe is at risk and is subject to further engagement by PCSIL with the CBI.

The CBI noted that it was considering applying a new growth cap to payment volumes for the period 31 March 2023 to 30 March 2024, allowing no growth from the level processed in the period January to December 2022. This compares to the existing 10% cap applied to the 12-month period to 8 December 2023. The CBI gave PCSIL the opportunity to provide it with submissions by 10 March for its consideration. On 31 March, EML announced that the CBI had imposed the 0% growth cap from that date and also confirmed that there was no change to the FY23 guidance given on 22 February.

The growth cap only applies to the European general purpose reloadable programmes covered by PCSIL’s e-money institution licence, which made up c 30% of group revenue for H123. The company took an impairment charge for PFS in H123 but may need to increase this now that the more stringent growth cap has been applied.

A board sub-committee has been set up to oversee the issue, headed by Peter Lang. The company has also launched a strategic review of the business.

Outlook

At H123 results, the company revised its FY23 guidance slightly, reducing the revenue range from A$240–260m to A$235–245m but also reducing the overheads range from A$135–145m to A$133–140m resulting in unchanged underlying EBITDA guidance of A$26–34m. It also guided to underlying NPATA of a loss of A$4m to a profit of A$4m.

The company noted that interest income was A$2.5m in January and rates have risen again since then. Just using the January level for the rest of the year would result in interest income of A$24.1m for FY23, compared to A$5.1m for FY22.

We have revised our forecasts to reflect H123 results and to factor in slower growth for GPR in FY24 due to the more stringent growth cap.

Exhibit 3: Changes to forecasts

FY23e

Old

FY23e

New

Change

y-o-y

FY24e

Old

FY24e

New

Change

y-o-y

Revenues

A$m

240.9

240.3

-0.3%

3.4%

271.3

253.2

-6.7%

5.4%

Gross profit

A$m

161.5

154.1

-4.6%

-2.3%

183.8

172.4

-6.2%

11.9%

Gross margin

67.0%

64.1%

-2.9%

-3.8%

67.8%

68.1%

0.3%

4.0%

Underlying gross profit

A$m

161.5

162.4

0.5%

2.9%

183.8

172.4

-6.2%

6.2%

Underlying gross margin

67.0%

67.6%

0.5%

-0.3%

67.8%

68.1%

0.3%

0.5%

EBITDA

A$m

10.5

(0.2)

-102.0%

-100.6%

39.2

28.8

-26.5%

-13850.6%

EBITDA margin

4.4%

-0.1%

-4.4%

-14.8%

14.4%

11.4%

-3.1%

11.5%

Add back one-off costs

A$m

16.0

26.6

66.3%

N/A

0.0

0.0

N/A

N/A

Underlying EBITDA

A$m

26.5

26.4

-0.4%

-48.4%

39.2

28.8

-26.5%

9.0%

Underlying EBITDA margin

11.0%

11.0%

0.0%

-11.0%

14.4%

11.4%

-3.1%

0.4%

Normalised operating profit

A$m

7.1

(19.4)

-374.1%

-205.3%

16.1

5.8

-64.1%

-129.9%

Normalised operating margin

2.9%

-8.1%

-11.0%

-16.0%

5.9%

2.3%

-3.6%

10.3%

Reported operating profit

A$m

(31.4)

(158.9)

405.4%

N/A

(6.4)

(13.7)

113.9%

-91.4%

Reported operating margin

-13.0%

-66.1%

-53.1%

-66.2%

-2.4%

-5.4%

-3.1%

60.7%

Normalised PBT

A$m

3.3

(23.1)

-794.3%

-244.4%

12.4

2.0

-83.4%

-108.9%

Reported PBT

A$m

(35.2)

(143.9)

309.1%

42224.5%

(10.1)

(17.5)

72.0%

-87.9%

Normalised net income

A$m

2.7

(18.5)

-794.3%

-244.4%

9.9

1.6

-83.4%

-108.9%

NPATA

A$m

(8.1)

(22.0)

170.6%

-213.8%

11.9

3.0

-74.4%

-113.8%

Add back one-off costs

A$m

12.8

20.7

0.0

0.0

Underlying NPATA

A$m

4.7

(1.3)

-128.4%

-104.1%

11.9

3.0

-74.4%

-329.3%

Reported net income

A$m

(28.1)

(144.3)

412.9%

2906.3%

(8.1)

(14.0)

72.0%

-90.3%

Normalised basic EPS

A$

0.01

(0.05)

-793.8%

-243.2%

0.03

0.00

-83.5%

-108.9%

Normalised diluted EPS

A$

0.01

(0.05)

-804.5%

-245.5%

0.03

0.00

-83.5%

-108.7%

Reported basic EPS

A$

(0.08)

(0.39)

412.6%

2882.3%

(0.02)

(0.04)

71.8%

-90.3%

NPATA/share

A$

(0.02)

(0.06)

170.4%

-212.9%

0.03

0.01

-74.5%

-113.8%

Dividend per share

A$

0.00

0.00

N/A

N/A

0.00

0.00

N/A

N/A

Net debt/(cash)

A$m

(4.5)

(1.7)

-61.7%

-117.6%

16.8

18.8

12.3%

-1203.3%

GDV

A$bn

100.5

99.3

-1.2%

23.7%

107.2

102.0

-4.9%

2.7%

Yield

bp

24

24

0

-5

25

25

0

1

Divisional data

GDV

G&I

A$bn

1.4

1.5

3%

11%

1.6

1.6

3%

10%

GPR

A$bn

13.1

13.3

2%

8%

14.4

13.7

-5%

3%

Digital Payments

A$bn

85.9

84.5

-2%

27%

91.2

86.6

-5%

3%

Revenue

G&I

A$m

74.7

68.2

-9%

0%

82.2

77.5

-6%

14%

GPR

A$m

142.7

150.8

6%

2%

158.5

151.2

-5%

0%

Digital Payments

A$m

23.3

21.0

-10%

27%

30.4

24.3

-20%

15%

Gross profit

G&I

A$m

59.0

54.2

-8%

64.9

61.6

-5%

GPR

A$m

82.8

87.5

6%

93.5

90.0

-4%

Digital Payments

A$m

19.5

12.2

-37%

25.2

20.6

-18%

Gross margin

G&I

79.0%

79.5%

79.0%

79.5%

GPR

58.0%

58.0%

59.0%

59.5%

Digital Payments

83.7%

57.9%

82.8%

84.9%

Source: Edison Investment Research

Exhibit 4: Financial summary

A$m

2017

2018

2019

2020

2021

2022

2023e

2024e

30-June

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

58.0

71.0

97.2

121.0

192.2

232.4

240.3

253.2

Cost of Sales

(13.7)

(17.7)

(24.2)

(32.9)

(63.8)

(74.6)

(86.2)

(80.8)

Gross Profit

44.2

53.3

73.0

88.1

128.4

157.8

154.1

172.4

EBITDA

 

 

14.5

21.0

29.7

32.5

42.2

34.3

(0.2)

28.8

Normalised operating profit

 

 

11.9

18.1

25.6

22.4

31.6

18.4

(19.4)

5.8

Amortisation of acquired intangibles

(8.9)

(7.2)

(7.5)

(11.1)

(20.2)

(16.5)

(17.0)

(17.0)

Exceptionals

0.2

(0.3)

(3.0)

(13.6)

(11.2)

1.4

(120.0)

0.0

Share-based payments

(5.3)

(5.0)

(4.2)

(6.1)

(5.0)

(3.0)

(2.5)

(2.5)

Reported operating profit

(2.1)

5.6

10.9

(8.5)

(4.8)

0.3

(158.9)

(13.7)

Net Interest

0.0

(0.1)

(0.0)

(0.7)

(1.4)

(2.4)

(3.7)

(3.7)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

(0.5)

(1.8)

1.3

(17.1)

1.8

18.7

0.0

Profit Before Tax (norm)

 

 

11.9

17.9

25.6

21.6

30.2

16.0

(23.1)

2.0

Profit Before Tax (reported)

 

 

(2.1)

5.0

9.0

(7.9)

(23.3)

(0.3)

(143.9)

(17.5)

Reported tax

2.1

(2.8)

(0.6)

0.7

(5.4)

(4.5)

(0.4)

3.5

Profit After Tax (norm)

8.9

14.4

20.5

17.2

24.1

12.8

(18.5)

1.6

Profit After Tax (reported)

0.0

2.2

8.5

(7.1)

(28.7)

(4.8)

(144.3)

(14.0)

Minority interests

0.0

0.0

(0.2)

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

8.9

14.4

20.3

17.2

24.1

12.8

(18.5)

1.6

Net income (reported)

0.0

2.2

8.3

(7.1)

(28.7)

(4.8)

(144.3)

(14.0)

Basic ave. number of shares outstanding (m)

245

246

249

304

360

371

374

374

EPS - basic normalised (A$)

 

 

0.036

0.058

0.081

0.056

0.067

0.035

(0.049)

0.004

EPS - normalised fully diluted (c)

 

 

3.559

5.674

7.812

5.489

6.579

3.398

(4.942)

0.431

EPS - basic reported (A$)

 

 

0.000

0.009

0.033

(0.023)

(0.080)

(0.013)

(0.386)

(0.037)

Dividend (A$)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

148.6

22.5

36.9

24.4

58.9

20.9

3.4

5.4

Gross Margin (%)

76.3

75.1

75.1

72.8

66.8

67.9

64.1

68.1

EBITDA Margin (%)

25.1

29.6

30.6

26.9

21.9

14.8

-0.1

11.4

Normalised Operating Margin

20.5

25.4

26.4

18.5

16.4

7.9

-8.1

2.3

BALANCE SHEET

Fixed Assets

 

 

90.6

108.0

162.9

872.1

685.3

827.3

839.7

850.0

Intangible Assets

60.1

65.8

104.6

371.7

350.1

448.5

322.2

307.0

Tangible Assets

2.8

3.5

5.4

14.6

11.2

12.7

10.2

12.5

Investments & other

27.6

38.7

53.0

485.8

323.9

366.1

507.3

530.4

Current Assets

 

 

96.9

131.6

313.8

1,008.6

1,603.5

1,855.1

1,980.4

2,030.0

Stocks

10.3

12.6

18.2

22.3

16.4

21.5

13.2

14.1

Debtors

6.3

8.9

14.4

21.7

22.0

35.8

33.0

34.8

Cash & cash equivalents

39.9

39.0

33.1

118.4

141.2

73.7

85.1

44.6

Other

40.4

71.1

248.2

846.2

1,424.0

1,724.1

1,849.1

1,936.5

Current Liabilities

 

 

(62.8)

(90.5)

(299.0)

(1,357.8)

(1,792.8)

(2,100.1)

(2,391.3)

(2,490.3)

Creditors

(23.8)

(21.2)

(33.9)

(47.5)

(62.9)

(65.7)

(78.4)

(73.1)

Tax and social security

(0.0)

0.0

(0.8)

(2.6)

(6.0)

(2.8)

(2.8)

(2.8)

Short term borrowings

0.0

0.0

(15.0)

0.0

(1.4)

(1.8)

(1.8)

(1.8)

Other

(39.0)

(69.3)

(249.4)

(1,307.7)

(1,722.5)

(2,029.8)

(2,308.4)

(2,412.6)

Long Term Liabilities

 

 

(4.2)

(19.3)

(33.5)

(82.6)

(81.1)

(145.2)

(125.2)

(97.6)

Long term borrowings

0.0

0.0

0.0

(35.8)

(36.9)

(81.6)

(81.6)

(61.6)

Other long term liabilities

(4.2)

(19.3)

(33.5)

(46.8)

(44.2)

(63.6)

(43.5)

(35.9)

Net Assets

 

 

120.6

129.8

144.2

440.2

414.9

437.1

303.6

292.1

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

120.6

129.8

144.2

440.2

414.9

437.1

303.6

292.1

CASH FLOW

Op Cash Flow before WC and tax

13.1

19.7

28.4

31.2

41.2

33.3

(1.2)

27.8

Working capital

4.9

(9.2)

2.0

3.6

31.7

(68.4)

26.0

(14.3)

Exceptional & other

(0.8)

(1.2)

(0.7)

(12.7)

(17.3)

0.4

1.0

0.0

Tax

2.1

(2.8)

(0.6)

0.7

(5.4)

(4.5)

(0.4)

3.5

Net operating cash flow

 

 

19.3

6.5

29.2

22.8

50.2

(39.2)

25.3

17.0

Capex

(2.9)

(5.3)

(5.8)

(11.0)

(12.6)

(14.1)

(18.9)

(21.2)

Acquisitions/disposals

0.0

(0.7)

(44.0)

(142.5)

(3.5)

(57.1)

10.6

(10.7)

Net interest

0.0

(0.1)

(0.0)

(0.7)

(1.4)

(2.4)

(3.7)

(3.7)

Equity financing

0.2

0.0

0.4

240.8

0.6

0.0

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

(3.6)

(0.6)

(0.4)

(7.0)

(11.0)

(1.9)

(1.9)

(1.9)

Net Cash Flow

13.0

(0.2)

(20.6)

102.3

22.2

(114.6)

11.4

(20.5)

Opening net debt/(cash)

 

 

(26.9)

(39.9)

(39.0)

(18.1)

(82.5)

(103.0)

9.7

(1.7)

FX

(0.0)

(0.6)

(0.3)

(2.0)

0.6

(1.1)

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

(35.8)

(2.4)

3.0

(0.0)

0.0

Closing net debt/(cash)

 

 

(39.9)

(39.0)

(18.1)

(82.5)

(103.0)

9.7

(1.7)

18.8

Source: EML Payments, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by EML Payments and prepared and issued by Edison, in consideration of a fee payable by EML Payments. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by EML Payments and prepared and issued by Edison, in consideration of a fee payable by EML Payments. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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