Last close As at 06/08/2026
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▲ 0.01 (1.54%)
Market capitalisation
AUD127m
Research: TMT
EML Payments (EML) has announced another government stimulus contract win, this time supporting Correos in Spain with the government’s plan to boost the cultural sector. While positive for the General Purpose Reloadable (GPR) business, the company noted that this contract would use much of the growth cap imposed by the Central Bank of Ireland (CBI) on EU-based business. We have taken the opportunity to revisit our forecasts, reducing the weighting of establishment and breakage/dormant account fees and increasing the weighting of volume-based revenue. This results in cuts to our FY23 and FY24 revenue, EBITDA and NPATA forecasts.
EML Payments |
Prepaid card contract win in Spain |
Contract announcement |
Software and comp services |
7 July 2022 |
Share price performance
Business description
Next events
Analyst
EML Payments is a research client of Edison Investment Research Limited |
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EML Payments (EML) has announced another government stimulus contract win, this time supporting Correos in Spain with the government’s plan to boost the cultural sector. While positive for the General Purpose Reloadable (GPR) business, the company noted that this contract would use much of the growth cap imposed by the Central Bank of Ireland (CBI) on EU-based business. We have taken the opportunity to revisit our forecasts, reducing the weighting of establishment and breakage/dormant account fees and increasing the weighting of volume-based revenue. This results in cuts to our FY23 and FY24 revenue, EBITDA and NPATA forecasts.
Year end |
Revenue (A$m) |
PBT* |
NPATA** (A$m) |
Diluted EPS* |
DPS |
P/E |
EV/EBITDA |
06/20 |
121.0 |
21.6 |
21.0 |
5.5 |
0 |
23.3 |
13.4 |
06/21 |
192.2 |
30.2 |
21.0 |
6.6 |
0 |
19.5 |
10.3 |
06/22e |
229.1 |
20.1 |
15.5 |
4.3 |
0 |
30.0 |
11.7 |
06/23e |
255.5 |
36.1 |
31.4 |
7.6 |
0 |
16.9 |
7.5 |
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.
New contract with Correos in Spain
EML announced a new contract with existing customer Correos, Spain’s national post office network, to support the government’s Bono Cultural Joven 2022 (Youth Cultural Bonus) programme. The government, via Correos, will load c 500k virtual cards with €400 per card and issue them to eligible 18 year olds, to be spent on cultural products and activities such as live music, films, museums, festivals, etc. The gross debit volume (GDV) is expected to be €210m/A$320m, which will contribute to FY23 revenue and EBITDA.
Revising estimates to reflect revenue mix
The company expects this programme to use a material proportion of the growth cap imposed by the CBI; the cap remains in place until December 2022 unless removed or amended by CBI before then. Reflecting lower establishment fees and a normalisation of dormant account fees in the GPR division and lower levels of breakage in Gift & Incentive (G&I), we have revised down our revenue, EBITDA and net profit after tax (NPATA) forecasts for FY23 and FY24. Our FY22 forecasts are unchanged.
Valuation: CBI resolution the key trigger
On FY23 estimates (when we expect more normalised EBITDA profitability), EML is trading at a discount to global payment processor peers on all metrics and at a discount to prepaid card peers on an EV/sales and EV/EBITDA basis. The share price was already depressed because of the CBI issue and has declined a further 53% since the Q3 update. If the regulatory issue is successfully resolved without imposing material growth constraints on the European business and the delayed operational improvement programmes start to benefit margins, a return to an upgrade cycle should improve confidence and drive a re-rating of the stock.
Changes to forecasts
The recent contract win with Correos highlighted that growth within the GPR division will be constrained in the short term by the cap put in place by the CBI. This is likely to limit the number of new programmes that can be launched and result in establishment fees making up a lower proportion of revenue. We have therefore reduced the yield for the division for FY23 and FY24. In the G&I division, we have also reduced our yield forecasts to reflect lower levels of breakage in FY23 and FY24 compared to FY21 and FY22. Our GDV and cost estimates for FY23 and FY24 are unchanged. This results in a reduction in our EBITDA and NPATA forecasts for both years.
As a reminder, the company expected its CBI remediation plan to be complete by the end of June, which is then to be followed by an independent review. The growth cap imposed by the CBI is in place until the end of December, subject to any decision to amend or remove it.
Exhibit 1: Changes to estimates
FY22e |
FY22e |
FY23e |
FY23e |
FY24e |
FY24e |
||||||||
Old |
New |
Change |
y-o-y |
Old |
New |
Change |
y-o-y |
Old |
New |
Change |
y-o-y |
||
Revenues |
A$m |
229.1 |
229.1 |
0.0% |
19.2% |
268.4 |
255.5 |
-4.8% |
11.5% |
305.4 |
294.2 |
-3.7% |
15.2% |
Gross profit |
A$m |
158.2 |
158.2 |
0.0% |
23.2% |
189.4 |
180.0 |
-5.0% |
13.8% |
218.9 |
210.4 |
-3.9% |
16.9% |
Gross margin |
69.0% |
69.0% |
0.0% |
2.2% |
70.6% |
70.4% |
-0.1% |
1.4% |
71.7% |
71.5% |
-0.2% |
1.1% |
|
EBITDA |
A$m |
37.1 |
37.1 |
0.0% |
-12.0% |
67.7 |
58.3 |
-13.9% |
57.1% |
86.9 |
78.4 |
-9.8% |
34.4% |
EBITDA margin |
16.2% |
16.2% |
0.0% |
-5.7% |
25.2% |
22.8% |
-2.4% |
6.6% |
28.4% |
26.6% |
-1.8% |
3.8% |
|
Add back CBI costs |
A$m |
15.0 |
15.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||||||
Underlying EBITDA |
A$m |
52.1 |
52.1 |
0.0% |
-2.6% |
67.7 |
58.3 |
-13.9% |
11.9% |
86.9 |
78.4 |
-9.8% |
34.4% |
Underlying EBITDA margin |
22.8% |
22.8% |
0.0% |
-5.1% |
25.2% |
22.8% |
-2.4% |
0.1% |
28.4% |
26.6% |
-1.8% |
3.8% |
|
Normalised operating profit |
A$m |
23.2 |
23.2 |
0.0% |
-26.4% |
49.2 |
39.8 |
-19.1% |
71.2% |
64.7 |
56.3 |
-13.1% |
41.4% |
Normalised operating margin |
10.1% |
10.1% |
0.0% |
-6.3% |
18.3% |
15.6% |
-2.8% |
5.4% |
21.2% |
19.1% |
-2.1% |
3.6% |
|
Reported operating profit |
A$m |
-7.5 |
-7.5 |
0.0% |
55.3% |
26.7 |
17.3 |
-35.2% |
-331.5% |
42.2 |
33.8 |
-20.1% |
95.4% |
Reported operating margin |
-3.3% |
-3.3% |
0.0% |
-0.8% |
9.9% |
6.8% |
-3.2% |
10.0% |
13.8% |
11.5% |
-2.4% |
4.7% |
|
Normalised PBT |
A$m |
20.1 |
20.1 |
0.0% |
-33.4% |
45.5 |
36.1 |
-20.7% |
79.5% |
61.0 |
52.5 |
-13.9% |
45.7% |
Reported PBT |
A$m |
-14.9 |
-14.9 |
0.0% |
-36.2% |
20.1 |
10.7 |
-46.9% |
-171.7% |
36.4 |
27.9 |
-23.3% |
161.7% |
Normalised net income |
A$m |
16.1 |
16.1 |
0.0% |
-33.4% |
36.4 |
28.8 |
-20.7% |
79.5% |
48.8 |
42.0 |
-13.9% |
45.7% |
NPATA |
A$m |
15.5 |
15.5 |
0.0% |
-26.2% |
38.9 |
31.4 |
-19.3% |
102.5% |
51.2 |
44.5 |
-13.2% |
41.5% |
Add back CBI costs |
A$m |
12.0 |
12.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||||||
Underlying NPATA |
A$m |
27.5 |
27.5 |
0.0% |
-15.0% |
38.9 |
31.4 |
-19.3% |
14.2% |
51.2 |
44.5 |
-13.2% |
41.5% |
Reported net income |
A$m |
-14.9 |
-14.9 |
0.0% |
-48.2% |
16.1 |
8.5 |
-46.9% |
-157.4% |
29.1 |
22.3 |
-23.3% |
161.7% |
Normalised basic EPS |
A$ |
0.04 |
0.04 |
0.0% |
-35.2% |
0.10 |
0.08 |
-20.7% |
78.1% |
0.13 |
0.11 |
-13.9% |
45.7% |
Normalised diluted EPS |
A$ |
0.04 |
0.043 |
0.0% |
-35.2% |
0.10 |
0.08 |
-20.7% |
78.1% |
0.13 |
0.11 |
-13.9% |
45.7% |
Reported basic EPS |
A$ |
-0.04 |
-0.04 |
0.0% |
-49.6% |
0.04 |
0.02 |
-46.9% |
-156.9% |
0.08 |
0.06 |
-23.3% |
161.7% |
NPATA/share |
A$ |
0.04 |
0.04 |
0.0% |
-28.2% |
0.10 |
0.08 |
-19.3% |
101.0% |
0.13 |
0.12 |
-13.2% |
41.5% |
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$m |
(42.6) |
(42.6) |
0.0% |
-58.6% |
(62.0) |
(54.6) |
-11.9% |
28.1% |
(71.3) |
(57.3) |
-19.7% |
4.9% |
GDV |
A$bn |
80.6 |
80.6 |
0.0% |
309.4% |
106.6 |
106.6 |
0.0% |
32.4% |
120.6 |
120.6 |
0.0% |
13.1% |
Yield |
bp |
28 |
28 |
0 |
-70 |
25 |
24 |
-1 |
-4 |
25 |
24 |
-1 |
0 |
Source: Edison Investment Research
Exhibit 2: Financial summary
A$m |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
2024e |
||
Year end 30 June |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||||
Revenue |
|
|
71.0 |
97.2 |
121.0 |
192.2 |
229.1 |
255.5 |
294.2 |
Cost of Sales |
(17.7) |
(24.2) |
(32.9) |
(63.8) |
(70.9) |
(75.5) |
(83.8) |
||
Gross Profit |
53.3 |
73.0 |
88.1 |
128.4 |
158.2 |
180.0 |
210.4 |
||
EBITDA |
|
|
21.0 |
29.7 |
32.5 |
42.2 |
37.1 |
58.3 |
78.4 |
Normalised operating profit |
|
|
18.1 |
25.6 |
22.4 |
31.6 |
23.2 |
39.8 |
56.3 |
Amortisation of acquired intangibles |
(7.2) |
(7.5) |
(11.1) |
(20.2) |
(20.0) |
(20.0) |
(20.0) |
||
Exceptionals |
(0.3) |
(3.0) |
(13.6) |
(11.2) |
(4.7) |
0.0 |
0.0 |
||
Share-based payments |
(5.0) |
(4.2) |
(6.1) |
(5.0) |
(6.0) |
(2.5) |
(2.5) |
||
Reported operating profit |
5.6 |
10.9 |
(8.5) |
(4.8) |
(7.5) |
17.3 |
33.8 |
||
Net Interest |
(0.1) |
(0.0) |
(0.7) |
(1.4) |
(3.2) |
(3.7) |
(3.7) |
||
Joint ventures & associates (post tax) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(0.5) |
(1.8) |
1.3 |
(17.1) |
(4.2) |
(2.9) |
(2.1) |
||
Profit Before Tax (norm) |
|
|
17.9 |
25.6 |
21.6 |
30.2 |
20.1 |
36.1 |
52.5 |
Profit Before Tax (reported) |
|
|
5.0 |
9.0 |
(7.9) |
(23.3) |
(14.9) |
10.7 |
27.9 |
Reported tax |
(2.8) |
(0.6) |
0.7 |
(5.4) |
0.0 |
(2.1) |
(5.6) |
||
Profit After Tax (norm) |
14.4 |
20.5 |
17.2 |
24.1 |
16.1 |
28.8 |
42.0 |
||
Profit After Tax (reported) |
2.2 |
8.5 |
(7.1) |
(28.7) |
(14.9) |
8.5 |
22.3 |
||
Minority interests |
0.0 |
(0.2) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Discontinued operations |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
14.4 |
20.3 |
17.2 |
24.1 |
16.1 |
28.8 |
42.0 |
||
Net income (reported) |
2.2 |
8.3 |
(7.1) |
(28.7) |
(14.9) |
8.5 |
22.3 |
||
Basic ave. number of shares outstanding (m) |
246 |
249 |
304 |
360 |
371 |
373 |
373 |
||
EPS - basic normalised (A$) |
|
|
0.058 |
0.081 |
0.056 |
0.067 |
0.043 |
0.077 |
0.11 |
EPS - diluted normalised (A$) |
|
|
0.057 |
0.078 |
0.055 |
0.066 |
0.043 |
0.076 |
0.11 |
EPS - basic reported (A$) |
|
|
0.009 |
0.033 |
(0.023) |
(0.080) |
(0.040) |
0.023 |
0.06 |
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 |
19.2 |
11.5 |
15.2 |
||
Gross Margin (%) |
75.1 |
75.1 |
72.8 |
66.8 |
69.0 |
70.4 |
71.5 |
||
EBITDA Margin (%) |
29.6 |
30.6 |
26.9 |
21.9 |
16.2 |
22.8 |
26.6 |
||
Normalised Operating Margin |
25.4 |
26.4 |
18.5 |
16.4 |
10.1 |
15.6 |
19.1 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
108.0 |
162.9 |
872.1 |
685.3 |
943.8 |
980.0 |
1,010.8 |
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 |
474.5 |
532.2 |
580.8 |
||
Current Assets |
|
|
131.6 |
313.8 |
1,008.6 |
1,603.5 |
1,854.5 |
2,097.9 |
2,228.2 |
Stocks |
12.6 |
18.2 |
22.3 |
16.4 |
20.0 |
21.9 |
24.0 |
||
Debtors |
8.9 |
14.4 |
21.7 |
22.0 |
28.3 |
31.6 |
36.4 |
||
Cash & cash equivalents |
39.0 |
33.1 |
118.4 |
141.2 |
129.1 |
141.0 |
75.5 |
||
Other |
71.1 |
248.2 |
846.2 |
1,424.0 |
1,677.1 |
1,903.4 |
2,092.3 |
||
Current Liabilities |
|
|
(90.5) |
(299.0) |
(1,357.8) |
(1,792.8) |
(2,188.4) |
(2,464.1) |
(2,694.1) |
Creditors |
(21.2) |
(33.9) |
(47.5) |
(62.9) |
(79.2) |
(80.2) |
(87.9) |
||
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) |
(2,101.9) |
(2,376.5) |
(2,598.8) |
||
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 |
460.9 |
471.9 |
496.7 |
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 |
460.9 |
471.9 |
496.7 |
CASH FLOW |
|||||||||
Op Cash Flow before WC and tax |
19.7 |
28.4 |
31.2 |
41.2 |
37.1 |
58.3 |
78.4 |
||
Working capital |
(9.2) |
2.0 |
3.6 |
31.7 |
9.6 |
(14.2) |
(5.7) |
||
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 |
(2.1) |
(5.6) |
||
Net operating cash flow |
|
|
6.5 |
29.2 |
22.8 |
50.2 |
13.9 |
42.0 |
67.1 |
Capex |
(5.3) |
(5.8) |
(11.0) |
(12.6) |
(14.0) |
(17.0) |
(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 |
(60.3) |
12.0 |
2.7 |
||
Opening net debt/(cash) |
|
|
(39.9) |
(39.0) |
(18.1) |
(82.5) |
(103.0) |
(42.6) |
(54.6) |
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) |
(42.6) |
(54.6) |
(57.3) |
Source: EML Payments, Edison Investment Research
|
|
Research: TMT
discoverIE has made a small bolt-on acquisition within its Sensing & Connectivity division for £5m in cash. CDT, a high-margin business, provides cross-selling opportunities and should support more complex integrated designs within the Contour business cluster. We estimate the deal is earnings accretive, upgrading our underlying EPS forecasts by 1.0% in FY23 and 1.2% in FY24.