EML Payments — Improving outlook

EML Payments (ASX: EML)

Last close As at 10/10/2024

AUD0.64

0.00 (0.00%)

Market capitalisation

AUD236m

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Research: TMT

EML Payments — Improving outlook

In H122, EML Payments saw recovering demand in its Gift & Incentives (G&I) division as COVID risk recedes, strong underlying demand in its GPR division, and the inclusion of Sentenial in Digital Payments from Q222. EBITDA and NPATA were affected by EML’s investment in strengthening its compliance function and undertaking the remediation plan to meet the Central Bank of Ireland’s requirements. The company expects a stronger performance in H222 with the benefit of rising interest rates, and action taken to reduce certain costs and introduce new sources of revenue. Our forecasts continue to sit at the lower end of unchanged guidance for FY22.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

EML Payments

Improving outlook

H122 results

Software & comp services

1 March 2022

Price

A$2.66

Market cap

A$993m

$0.72:€0.64:£0.54:A$1

Net cash (A$m) at end H122

0.2

Shares in issue

373.4m

Free float

93%

Code

EML

Primary exchange

ASX

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(18.9)

(33.1)

(51.7)

Rel (local)

(19.5)

(30.6)

(54.2)

52-week high/low

A$5.75

A$2.35

Business description

EML Payments is a payment solutions company managing thousands of programmes across 27 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

Q3 trading update

May (est)

Analyst

Katherine Thompson

+44 (0)20 3077 5730

EML Payments is a research client of Edison Investment Research Limited

In H122, EML Payments saw recovering demand in its Gift & Incentives (G&I) division as COVID risk recedes, strong underlying demand in its GPR division, and the inclusion of Sentenial in Digital Payments from Q222. EBITDA and NPATA were affected by EML’s investment in strengthening its compliance function and undertaking the remediation plan to meet the Central Bank of Ireland’s requirements. The company expects a stronger performance in H222 with the benefit of rising interest rates, and action taken to reduce certain costs and introduce new sources of revenue. Our forecasts continue to sit at the lower end of unchanged guidance for FY22.

Year end

Revenue (A$m)

PBT*
(A$m)

NPATA** (A$m)

Diluted EPS*
(c)

DPS
(c)

P/E
(x)

EV/EBITDA
(x)

06/20

121.0

21.6

21.0

5.5

0.0

48.5

29.2

06/21

192.2

30.2

21.0

6.6

0.0

40.4

22.5

06/22e

235.1

28.7

20.1

6.1

0.0

43.7

20.8

06/23e

286.1

61.1

51.5

12.9

0.0

20.7

11.4

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Net profit after tax, excluding acquisition-related costs.

H122: Progress made despite headwinds

In H122, EML reported GDV growth of 209% y-o-y (18% organic), revenue growth of 20% (17% organic) and an EBITDA decline of 49% (4% excluding one-off costs). The GPR division generated 29% GDV growth despite trading limits related to the ongoing regulatory issues and the G&I division grew GDV 21% even with the emergence of Omicron in the crucial Christmas trading period. The Sentenial acquisition was consolidated from the start of Q222, contributing GDV of $19.5bn, revenue of $2.7m and EBITDA of $0.2m. EML continues to work with the Irish regulator and targets end FY22 for completion/review of its remediation plan.

Reasons to be more cheerful in H222

Sitting on A$2.7bn of cardholder funds, EML should be a beneficiary of interest rate rises. As PCSIL comes to the end of its remediation plan, COVID risk recedes in the mall gift card business and dormant fees in GPR add a new recurring revenue stream, GDV and revenue growth should improve. Joint prepaid/open banking contract wins could add further upside. On the cost side, EML should benefit from reduced scheme fees and moving processing in house. We have revised our forecasts to reflect H122 performance, increasing our estimates for G&I and GPR while reducing our expectations for Digital Payments.

Valuation: Resolving regulatory issues key to upside

In FY23, EML is trading at a discount to global payment processor peers on all metrics. Having previously traded at a premium, it is now trading at a discount to prepaid card peers on an EV/Sales basis and only a small premium on an EV/EBITDA basis. Prior to the Central Bank of Ireland (CBI) issue, EML was trading on an FY23e EV/ EBITDA of 21.4x and an FY23e P/E of 37.5x. If the regulatory issue is successfully resolved without imposing material growth constraints on the European business, we would expect the stock to re-rate upwards.

Review of H122 results

Exhibit 1 summarises EML Payment’s H122 performance. We discuss the performance on a divisional basis below. The 209% y-o-y growth in gross debit volume (GDV) reflects the addition of Sentenial from 1 October 2021, contributing GDV of $19.5bn, which implies organic GDV growth of 18% y-o-y. As Sentenial has a much lower yield, its consolidation had a smaller impact on revenue, contributing only 2.8% of the 20% y-o-y growth at the group level. Two factors weighed on group gross profit: a lower level of interest income earned on cardholder stored value (A$2.7m lower year-on-year/2.4pp impact on gross margin) and reduced establishment fees in GPR due to the ongoing regulatory issues.

Group EBITDA of A$14.2m declined 49% y-o-y, reflecting lower gross margin, the increase in underlying overheads (+24% y-o-y to A$48.5m) as the company strengthened its compliance function (investing in people, technology and controls) and the addition of Sentential overheads. It also reflects an additional $12.7m in costs incurred dealing with regulatory issues (for more detail see section on page 3). Stripping out the one-off regulatory costs, underlying EBITDA decreased 4% y-o-y. The company’s preferred profit measure, NPATA, declined 68% y-o-y due to the same issues. Adding back the after-tax cost of dealing with regulatory issues, underlying NPATA grew 6% y-o-y.

The company closed H122 with a net cash position of A$0.2m, made up of A$86.2m in cash offset by the $39.2m present value of the loan notes owing to PFS and debt of $46.8m put in place to fund the Sentenial acquisition during H1. Cash flow in H122 was affected by several items:

The company had already disclosed that in July it injected A$27.8m in cash into segregated funds to cover accelerated recognition of breakage in PFS prior to acquisition (see page 4 of Moving forward for further explanation).

Two debtors were overdue at the end of H122, making up A$8.6m of accounts receivable. 75% of this has already been received in Q322.

Exhibit 1: H122 results highlights

H122

H121

y-o-y

H122

H121

y-o-y

GDV (A$m)

G&I

0.91

0.75

21%

EBITDA (A$m)

14.2

28.1

-49%

GPR

6.27

4.87

29%

EBITDA margin

12.4%

29.4%

Digital Payments

24.38

4.59

431%

One-off regulatory costs

12.7

0.0

N/A

Group GDV

31.56

10.21

209%

Underlying EBITDA

26.9

28.1

-4%

Yield (bp)

Underlying EBITDA margin

23.5%

29.4%

G&I

408

466

-58

NPATA* (A$m)

4.0

12.4

-68%

GPR

111

112

-1

One-off regulatory costs

9.1

0.0

N/A

Digital Payments

3

13

-10

Underlying NPATA

13.1

12.4

6%

Group yield

36

93

Net cash (A$m)

0.2

100.3

-100%

Revenue (A$m)

G&I

37.1

35.0

6%

GPR

69.6

54.4

28%

Digital Payments

7.7

5.8

33%

Net interest contribution

0.0

0.1

Group revenue

114.4

95.3

20%

Gross profit

75.4

67.3

20%

Gross margin

G&I

81.0%

82.3%

GPR

56.2%

62.6%

Digital Payments

81.5%

73.3%

Group gross margin

65.9%

70.5%

Source: EML Payments. Note: *NPATA = net profit after tax adjusted for all acquisition-related costs.

Gift & Incentives (G&I) – growth despite Omicron

The G&I division reported a stronger performance than a year ago, reflecting the fact that for much of H122, lockdown restrictions were lifted allowing mall footfall to improve. GDV increased 21% year-on-year, with mall GDV up 26% y-o-y. Compared to the pre-COVID period of H120, GDV was up 9% for the division and up 6% for the malls business. With the emergence of the Omicron variant just before Christmas, governments in Canada, Germany and the UK re-introduced some restrictions and consumers also self-policed, unwilling to catch COVID in the days running up to Christmas. The company estimates that this temporary reduction in footfall probably cost it c A$100m in GDV which would have dropped through to c A$6m in revenue and c A$5m in gross profit. The reward and incentives business grew GDV only 4% y-o-y, reflecting a very strong period in H121 for COVID-19 programmes. Divisional revenue grew 6% year-on-year; in H121, the company reported elevated breakage revenue of A$5m, which did not repeat in H122 as mall volumes reverted to more normal levels.

GPR – good volume and revenue growth, despite CBI issue

GPR GDV grew 29% y-o-y, with strong demand from gaming disbursements and salary-as-a-service and, as the yield was essentially flat y-o-y, revenue grew 28% y-o-y. The company noted that it was implementing opportunities to reduce dormant state balances and during H122 recognised revenue of A$5.0m on its commencement. Gross margin declined by 6.4pp due to a combination of lower establishment fees (see below) and lower interest income.

Regulatory update – ongoing progress

The company continues to work through its remediation plan to deal with the issues raised by the CBI regarding PFS Card Services Ireland Limited (PCSIL). PCSIL is the Irish subsidiary through which the GPR division manages European business. The company expects to complete the plan by the end of Q322, after which it will seek an external party review of its work. Currently, the CBI has placed limits on the amount of growth PCSIL can generate – this restriction is in place until December. To ensure PCSIL can still grow during this period without hitting the limit, the company is phasing out some high-volume/low-yielding programmes to make room for more attractive programmes. It previously provided for costs of A$10m relating to this issue; in H122, it incurred/provided an additional $2.2m in costs and used A$2.8m of the provision.

As certain programme launches were put on hold and the company sought fewer new contracts in this division, the growth of establishment fees was lower than transaction-related revenue (18% and 23% y-o-y growth respectively). Establishment fees for programmes on hold were recognised in FY21 and the lower level of new contracts in H122 could not compensate for this. By December 2021, PCSIL was able to start launching programmes again and managed to launch 22 by the end of H122.

Class action suit – EML vigorously defends, provides for costs

In December 2021, Shine Lawyers filed group proceedings in the Supreme Court of Victoria, claiming that EML did not comply with disclosure obligations and engaged in misleading and deceptive conduct regarding disclosure of the CBI issue. The company disputes this but has provided $10.5m for fees to fight the case, with an expected timeframe of three years or so. Management intends to seek an order for security from Shine to cover a fee award if EML wins its case. EML does have an insurance policy in place to cover this issue but has not yet met the criteria required for it to be recognised; this is unlikely to be the case until FY23.

Digital Payments – Sentenial acquisition boosts GDV

Sentenial was consolidated into this division from 1 October 2021. Divisional GDV grew 431% y-o-y or 7% on an organic basis. Of the $19.5bn contributed by Sentenial, $19.12bn was from direct debit and $0.33bn from open banking. The company noted that open banking volumes increased 30% in H122 versus H121 on a pro forma basis. Sentenial contributed A$2.7m of divisional revenue, implying an organic divisional revenue decline of 14%. As Sentenial earns a much lower yield (c 1.4bp) than the original Digital Payments business (12bp in FY21), the overall divisional yield has fallen to 3bp and will decline further in H222 as Sentenial is included for a full six months.

Management noted that the integration of Sentenial’s technology with EML’s platform is underway and it has started targeting prospects with combined prepaid/open banking solutions, with the first such contract win expected in Q322.

New contracts and programme launches

Across the group, and excluding Sentenial, EML signed 33 new contracts in H122 and implemented 85 new programmes. This included 22 new programmes in GPR in Europe. The company has maintained its 40% pipeline conversion rate and has contracts in the pipeline that could be worth annual GDV of $13.6bn by the third or fourth year of the contract (up from A$10.5bn at the end of FY21).

Outlook and changes to forecasts

The company has pointed to several factors that should benefit gross margin in H222:

Increasing interest rates. In February, the Bank of England increased the base rate from 0.25% to 0.5%. This has an immediate effect on interest income from the c £700m in stored float cash. It is likely that other central banks will follow. With stored value float worth the equivalent of A$2.7bn at the end of H122 (A$2.3bn in cash, A$0.4bn in bonds), the company estimates that a 1% increase in rates across all jurisdictions based on current banking arrangements would result in incremental EBITDA of A$14–15m pa. Management noted that funds held in the US do not pay extra interest income until the rate exceeds 2%. The company plans to increase the size of its low-risk bond portfolio in H222 to offset negative interest rates on euro balances.

Reduced scheme costs. The company renegotiated a contract with Mastercard, which should result in lower scheme fees.

Dormant fees. The company introduced these in the GPR business during H122. This should generate a new recurring revenue stream as well as non-recurring catch-up revenue.

In H222, the company will also start to transition two major customers onto its TRACE proprietary processing platform. This is expected to result in savings of c A$3m in FY23.

While the investment in strengthening the compliance function has had a short-term impact on EBITDA profitability, the company believes that this positions it well as volumes grow. In addition, this level of investment creates a barrier to entry for potential competitors.

The company has maintained its FY22 guidance (see Exhibit 2). We have revised our forecasts to reflect H122 performance and guidance (see Exhibit 3). We have increased our GDV, revenue and gross profit forecasts for the GPR and G&I divisions, based on better-than-expected performance in H122 and measures being taken to improve H222 performance. We have revised down our Digital Payments GDV forecasts reflecting slower growth in the Sentenial business, although at a much lower yield, this has a much smaller impact at the revenue level. Overall, our forecasts remain at the lower end of company guidance for FY22.

Exhibit 2: FY22 guidance

A$m

Group

Sentenial

Prepaid

GDV

81–88

59–64

22–24

Revenue

230–250

8–12

222–238

Overheads

103–112

10–14

91–98

Underlying EBITDA

58–65

0 to -3

58–65

Underlying NPATA

27–34

Gross margin

c 69%

Source: EML Payments

Exhibit 3: Changes to forecasts

FY22e

FY23e

FY24e

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Revenues

A$m

234.2

235.1

0.4%

22.3%

284.6

286.1

0.5%

21.7%

327.6

320.5

-2.2%

12.0%

Gross profit

A$m

162.0

162.5

0.3%

26.5%

203.6

203.8

0.1%

25.4%

238.0

231.3

-2.8%

13.5%

Gross margin

69.2%

69.1%

-0.1%

2.3%

71.5%

71.2%

-0.3%

2.1%

72.6%

72.2%

-0.5%

0.9%

EBITDA

A$m

58.9

45.7

-22.4%

8.4%

85.3

83.5

-2.2%

82.6%

110.0

100.5

-8.7%

20.4%

EBITDA margin

25.2%

19.4%

-5.7%

-2.5%

30.0%

29.2%

-0.8%

9.7%

33.6%

31.4%

-2.2%

2.2%

Add back CBI costs

A$m

2.0

12.7

0.0

0.0

0.0

0.0

Underlying EBITDA

A$m

60.9

58.4

-4.1%

9.1%

85.3

83.5

-2.2%

42.9%

110.0

100.5

-8.7%

20.4%

Underlying EBITDA margin

26.0%

24.8%

-1.2%

-3.0%

30.0%

29.2%

-0.8%

4.3%

33.6%

31.4%

-2.2%

2.2%

Normalised operating profit

A$m

44.1

31.8

-27.8%

0.7%

65.8

64.9

-1.4%

104.0%

86.9

78.3

-9.9%

20.6%

Normalised operating margin

18.8%

13.5%

-5.3%

-2.9%

23.1%

22.7%

-0.4%

9.2%

26.5%

24.4%

-2.1%

1.7%

Reported operating profit

A$m

12.1

(2.9)

-124.1%

-39.7%

43.3

42.4

-2.1%

N/A

64.4

55.8

-13.4%

31.6%

Reported operating margin

5.1%

-1.2%

-6.4%

1.3%

15.2%

14.8%

-0.4%

16.0%

19.6%

17.4%

-2.2%

2.6%

Normalised PBT

A$m

41.5

28.7

-30.9%

-5.0%

62.8

61.1

-2.6%

113.4%

83.9

74.5

-11.1%

21.9%

Reported PBT

A$m

9.5

(10.3)

-208.8%

-55.8%

40.3

35.8

-11.3%

-447.3%

61.4

49.9

-18.7%

39.5%

Normalised net income

A$m

33.2

22.9

-30.9%

-5.0%

50.2

48.9

-2.6%

113.4%

67.1

59.6

-11.1%

21.9%

NPATA

A$m

29.6

20.1

-32.1%

-4.5%

52.2

51.5

-1.4%

156.4%

69.1

62.1

-10.2%

20.5%

Add back CBI costs

A$m

1.6

9.1

0.0

0.0

0.0

0.0

Underlying NPATA

A$m

31.2

29.2

-6.2%

-9.8%

52.2

51.5

-1.4%

76.2%

69.1

62.1

-10.2%

20.5%

Reported net income

A$m

7.6

(10.3)

-236.0%

-64.1%

32.2

28.6

-11.3%

-377.8%

49.1

39.9

-18.7%

39.5%

Normalised basic EPS

A$

0.09

0.06

-30.9%

-7.6%

0.13

0.13

-2.6%

111.7%

0.18

0.16

-11.1%

21.9%

Normalised diluted EPS

A$

0.09

0.06

-30.9%

-7.5%

0.13

0.13

-2.6%

111.7%

0.18

0.16

-11.1%

21.9%

Reported basic EPS

A$

0.02

(0.03)

-236.0%

-65.1%

0.09

0.08

-11.3%

-375.7%

0.13

0.11

-18.7%

39.5%

NPATA/share

A$

0.08

0.05

-32.1%

-7.1%

0.14

0.14

-1.4%

154.4%

0.18

0.16

-10.2%

20.5%

Dividend per share

A$

0.00

0.00

N/A

N/A

0.00

0.00

N/A

N/A

0.00

0.00

N/A

N/A

Net debt/(cash)

A$m

(48.4)

(50.0)

3.2%

-51.5%

(97.3)

(82.3)

-15.4%

64.7%

(99.3)

(102.6)

3.3%

24.7%

GDV

A$bn

83.0

83.7

0.8%

325.4%

122.1

121.0

-0.9%

44.6%

139.2

133.3

-4.2%

10.2%

Yield

bp

28

28

0

-71

23

24

0

-4

24

24

0

0

Divisional data

GDV

G&I

A$bn

1.3

1.33

3%

1.4

1.5

3%

1.6

1.6

3%

GPR

A$bn

11.8

12.3

4%

13.6

14.1

4%

14.9

15.5

4%

Digital Payments

A$bn

69.9

70.1

0%

107.1

105.4

-2%

122.7

116.2

-5%

Revenue

G&I

A$m

77.0

77.6

1%

84.7

87.2

3%

93.1

95.9

3%

GPR

A$m

134.7

136.3

1%

149.1

155.3

4%

164.0

170.8

4%

Digital Payments

A$m

22.3

21.0

-6%

50.5

43.3

-14%

70.2

53.5

-24%

Gross profit

G&I

A$m

61.6

62.1

1%

67.7

69.8

3%

74.5

76.7

3%

GPR

A$m

82.2

83.1

1%

94.7

98.6

4%

106.6

111.0

4%

Digital Payments

A$m

18.0

17.0

-5%

40.9

35.2

-14%

56.6

43.3

-23%

Gross margin

G&I

80.0%

80.0%

80.0%

80.0%

80.0%

80.0%

GPR

61.0%

61.0%

63.5%

63.5%

65.0%

65.0%

Digital Payments

80.9%

81.2%

80.9%

81.2%

80.6%

81.0%

Source: Edison Investment Research

Valuation

In FY23 (when we expect the first positive contribution from Sentenial, NY in the table), EML is trading at a discount to global payment processor peers on an EV/EBITDA and P/E basis, reflecting the profitability and scale of peers. Having previously traded at a premium, it is now trading at a discount to prepaid card peers on an EV/Sales basis and only a small premium on an EV/EBITDA basis. Prior to the CBI issue, EML was trading on an FY23e EV/EBITDA of 21.4x and an FY23e P/E of 37.5x. If the regulatory issue is successfully resolved without imposing material growth constraints on the European business, we would expect the stock to re-rate upwards.

Exhibit 4: Peer valuation metrics

Currency

Market

EV/Sales (x)

EV/EBITDA (x)

P/E (x)

Div yield (%)

cap (m)

CY

NY

NY+1

CY

NY

NY+1

CY

NY

NY+1

CY

NY

EML Payments

A$

907

4.0

3.3

3.0

16.3*

11.4

9.5

43.7

20.7

16.9

0.0

0.0

Payment processors

Adyen

55,728

38.0

28.3

20.7

59.8

43.8

32.1

85.5

62.7

46.0

0.0%

0.0%

FIS

US$

59,094

5.2

4.9

4.5

11.7

10.6

9.8

13.3

11.8

10.5

1.9%

2.2%

Fiserv

US$

63,948

5.2

4.8

4.5

12.1

11.0

9.8

15.2

13.2

11.6

0.0%

0.0%

Global Payments

US$

38,796

5.8

5.3

4.9

12.2

11.0

10.3

14.5

12.6

11.3

0.7%

0.7%

PayPal Holdings

US$

129,246

4.4

3.7

3.1

17.0

13.8

11.2

23.8

19.0

15.3

0.0%

0.0%

Block

US$

69,503

3.7

3.0

2.4

76.5

46.1

33.7

72.6

50.5

39.1

0.0%

0.0%

Worldline

12,689

3.6

3.3

3.1

14.7

12.6

11.1

18.7

16.3

13.8

0.0%

0.0%

Average

9.4

7.6

6.2

29.1

21.3

16.8

34.8

26.6

21.1

0.4%

0.4%

Prepaid card companies

Appreciate Group

£

48

0.5

0.5

0.4

5.7

4.5

3.8

8.5

6.5

5.5

6.2%

8.0%

Edenred

10,208

6.1

5.5

5.0

14.6

13.1

11.8

26.5

23.4

20.2

2.3%

2.6%

Euronet Worldwide

US$

6,827

1.9

1.6

N/A

10.3

8.0

N/A

19.0

14.2

N/A

0.0%

0.0%

Fleetcor Technologies

US$

19,316

7.4

6.7

6.0

13.5

11.9

10.4

15.5

13.6

11.8

0.0%

0.0%

Green Dot Corp

US$

1,470

2.4

2.2

2.0

14.9

12.7

11.2

11.5

9.5

9.0

0.0%

0.0%

WEX

US$

7,424

4.8

4.4

4.0

10.7

9.5

8.3

14.5

12.8

11.1

0.0%

0.0%

Average

3.8

3.5

3.5

11.6

10.0

9.1

15.9

13.3

11.5

1.4%

1.8%

Australian fintechs

FlexiGroup

A$

436

6.3

5.5

4.8

42.5

34.3

N/A

8.7

8.0

5.6

3.5%

3.9%

Zip Co

A$

1,301

5.2

3.6

2.9

N/A

237.2

37.5

N/A

N/A

N/A

0.0%

0.0%

Average

5.7

4.6

3.8

42.5

135.8

37.5

8.7

8.0

5.6

1.7%

2.0%

Source: Edison Investment Research, Refinitiv (as at 28 February). Note: *Based on underlying EBITDA.

Exhibit 5: Financial summary

A$m

2018

2019

2020

2021

2022e

2023e

2024e

30-June

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

71.0

97.2

121.0

192.2

235.1

286.1

320.5

Cost of Sales

(17.7)

(24.2)

(32.9)

(63.8)

(72.6)

(82.3)

(89.1)

Gross Profit

53.3

73.0

88.1

128.4

162.5

203.8

231.3

EBITDA

 

 

21.0

29.7

32.5

42.2

45.7

83.5

100.5

Normalised operating profit

 

 

18.1

25.6

22.4

31.6

31.8

64.9

78.3

Amortisation of acquired intangibles

(7.2)

(7.5)

(11.1)

(20.2)

(20.0)

(20.0)

(20.0)

Exceptionals

(0.3)

(3.0)

(13.6)

(11.2)

(4.7)

0.0

0.0

Share-based payments

(5.0)

(4.2)

(6.1)

(5.0)

(10.0)

(2.5)

(2.5)

Reported operating profit

5.6

10.9

(8.5)

(4.8)

(2.9)

42.4

55.8

Net Interest

(0.1)

(0.0)

(0.7)

(1.4)

(3.2)

(3.7)

(3.7)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

(0.5)

(1.8)

1.3

(17.1)

(4.2)

(2.9)

(2.1)

Profit Before Tax (norm)

 

 

17.9

25.6

21.6

30.2

28.7

61.1

74.5

Profit Before Tax (reported)

 

 

5.0

9.0

(7.9)

(23.3)

(10.3)

35.8

49.9

Reported tax

(2.8)

(0.6)

0.7

(5.4)

0.0

(7.2)

(10.0)

Profit After Tax (norm)

14.4

20.5

17.2

24.1

22.9

48.9

59.6

Profit After Tax (reported)

2.2

8.5

(7.1)

(28.7)

(10.3)

28.6

39.9

Minority interests

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

Net income (normalised)

14.4

20.3

17.2

24.1

22.9

48.9

59.6

Net income (reported)

2.2

8.3

(7.1)

(28.7)

(10.3)

28.6

39.9

Basic ave. number of shares outstanding (m)

246

249

304

360

371

373

373

EPS - basic normalised (A$)

 

 

0.058

0.081

0.056

0.067

0.062

0.131

0.16

EPS - diluted normalised (A$)

 

 

0.057

0.078

0.055

0.066

0.061

0.129

0.16

EPS - basic reported (A$)

 

 

0.009

0.033

(0.023)

(0.080)

(0.028)

0.077

0.11

Dividend (A$)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

22.5

36.9

24.4

58.9

22.3

21.7

12.0

Gross Margin (%)

75.1

75.1

72.8

66.8

69.1

71.2

72.2

EBITDA Margin (%)

29.6

30.6

26.9

21.9

19.4

29.2

31.4

Normalised Operating Margin

25.4

26.4

18.5

16.4

13.5

22.7

24.4

BALANCE SHEET

Fixed Assets

 

 

108.0

162.9

872.1

685.3

947.0

983.8

1,014.9

Intangible Assets

65.8

104.6

371.7

350.1

461.7

443.9

425.0

Tangible Assets

3.5

5.4

14.6

11.2

7.7

3.9

4.9

Investments & other

38.7

53.0

485.8

323.9

477.7

536.0

585.0

Current Assets

 

 

131.6

313.8

1,008.6

1,603.5

1,875.9

2,145.0

2,294.1

Stocks

12.6

18.2

22.3

16.4

19.6

21.5

23.7

Debtors

8.9

14.4

21.7

22.0

29.1

35.4

39.6

Cash & cash equivalents

39.0

33.1

118.4

141.2

136.4

168.7

120.9

Other

71.1

248.2

846.2

1,424.0

1,690.8

1,919.5

2,110.0

Current Liabilities

 

 

(90.5)

(299.0)

(1,357.8)

(1,792.8)

(2,204.5)

(2,486.4)

(2,717.9)

Creditors

(21.2)

(33.9)

(47.5)

(62.9)

(78.1)

(82.5)

(89.5)

Tax and social security

0.0

(0.8)

(2.6)

(6.0)

(6.0)

(6.0)

(6.0)

Short term borrowings

0.0

(15.0)

0.0

(1.4)

(1.4)

(1.4)

(1.4)

Other

(69.3)

(249.4)

(1,307.7)

(1,722.5)

(2,118.9)

(2,396.6)

(2,620.9)

Long Term Liabilities

 

 

(19.3)

(33.5)

(82.6)

(81.1)

(149.0)

(141.9)

(48.2)

Long term borrowings

0.0

0.0

(35.8)

(36.9)

(85.0)

(85.0)

(16.9)

Other long-term liabilities

(19.3)

(33.5)

(46.8)

(44.2)

(64.0)

(56.9)

(31.4)

Net Assets

 

 

129.8

144.2

440.2

414.9

469.4

500.5

542.9

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

129.8

144.2

440.2

414.9

469.4

500.5

542.9

CASH FLOW

Op Cash Flow before WC and tax

19.7

28.4

31.2

41.2

45.7

83.5

100.5

Working capital

(9.2)

2.0

3.6

31.7

8.4

(14.0)

(5.6)

Exceptional & other

(1.2)

(0.7)

(12.7)

(17.3)

(32.9)

0.0

0.0

Tax

(2.8)

(0.6)

0.7

(5.4)

0.0

(7.2)

(10.0)

Net operating cash flow

 

 

6.5

29.2

22.8

50.2

21.2

62.4

84.9

Capex

(5.3)

(5.8)

(11.0)

(12.6)

(14.0)

(17.1)

(19.3)

Acquisitions/disposals

(0.7)

(44.0)

(142.5)

(3.5)

(55.9)

(8.0)

(40.3)

Net interest

(0.1)

(0.0)

(0.7)

(1.4)

(3.2)

(3.7)

(3.7)

Equity financing

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

Other

(0.6)

(0.4)

(7.0)

(11.0)

(1.2)

(1.2)

(1.2)

Net Cash Flow

(0.2)

(20.6)

102.3

22.2

(53.0)

32.3

20.3

Opening net debt/(cash)

 

 

(39.9)

(39.0)

(18.1)

(82.5)

(103.0)

(50.0)

(82.3)

FX

(0.6)

(0.3)

(2.0)

0.6

0.0

0.0

0.0

Other non-cash movements

0.0

0.0

(35.8)

(2.4)

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(39.0)

(18.1)

(82.5)

(103.0)

(50.0)

(82.3)

(102.6)

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 2022 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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 2022 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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