Fintech News | Fintech Zoom
EML payments
EML payments

EML Payments leading the change in COVID-19

Strategic Focus

We have had a long-term strategy to deliver revenue and earnings diversification – both through organic growth and strategic acquisitions. Prior to the acquisition of Prepaid Financial Services (PFS), revenue from mall gift cards represented 65% of group revenues (H1FY20) and prior to Covid-19 could have been expected to be approximately 55% for the full year – EML Payments leading the change in COVID-19.

The acquisition of PFS was a central plank in our strategy of re-balancing revenue across our segments. For example, if PFS had been in the EML consolidated financials for the month of March 2020, 56% of revenues would have come from General Purpose Reloadable (GPR), 37% from Gift & Incentive (G&I) and 7% from Virtual Account Numbers (VANS).

Mall closures, social mobility restrictions and social distancing requirements will significantly impact mall gift card sales for the remainder of FY20. However, we are hopeful that volumes will start to recover as lock downs ease and economies re-open. We have suspended earnings guidance because there is no reliable data on when and how that may commence and over what time period. It is also difficult to predict how economies will respond and the impact of weaker economic conditions on mall gift card sales.


Update on PFS Acquisition

The acquisition of PFS, a multi award winning European provider of white label payments and banking-as-a-service technology will make EML one of the largest global prepaid fintech enablers.


This is an exciting time for the combined EML and PFS businesses. We are very pleased to see great collaboration between the sales, marketing and business development teams as we look to crosssell our respective solutions.


We have commenced a number of integration projects and expect to complete those over the next 24 months. Net run rate synergies of $6m expected to commence in FY22.


Update on COVID-19

Our first focus in response to Covid-19 has been the health, safety and security of our colleagues and customers. Given the international nature of our business, we had previously invested in remote working functionality and were able to make a smooth transition to a work-from-home mode.


EML considers our values and culture to be critical to our sustained success. Ours is an incredibly dynamic global marketplace and our responsiveness, agility and execution are competitive advantages for us, which are all reliant on our team and culture. This has been especially evident in our employees’ response to Covid-19 and their ability to adapt to the present environment and its challenges.


We have taken some steps to manage headcount expenses, including some select redundancies, cost savings because short-term incentive plan targets for FY20 will not be met and implementing general headcount and salary freezes. We will not pursue mass redundancies or significant employee furloughs to drive short term, relatively immaterial upside to our P&L as we believe this to be to the long term detriment of our team, culture and financial performance.


READ  Industrial Mortgage Delinquencies Could Attain Nice Recession Ranges, Credit score Ranking Company Says

Trading Condition – EML Payments

March 2020:

  • During March 2020, the G&I segment experienced the impacts of Covid-19 in some regions. GDV in March was down 29% on the PCP reflecting mall closures for up to 3 weeks in some countries.
  • The GPR segment saw GDV growth of 10.4% in March 2020 over the PCP which we expect to continue through Q4 as our Australian salary packaging programs have launched additional benefit accounts.
  • VANS segment up 56% over the PCP and on a run-rate to do c. $9B in GDV for FY20.
  • Unaudited Group EBITDA in March of $1.9M was down 37% on the PCP as mall sales declined, given their disproportionately higher conversion rates and margin contribution.

April 2020:

  • Due to social mobility and social distancing restrictions associated with Covid-19, most of our customers in the retail malls segment (with the exception of Sweden) remained closed in April 2020 across our global footprint for the month with the G&I segment GDV of $31.4M down 53% on the PCP $66.5M.
  • Excluding PFS, EMLs’ GPR segment contributed GDV of $286.5m, up 26% on the PCP driven by Salary Packaging and resilient volumes from our online gaming vertical. PFS which is consolidated into the GPR segment from 1 April contributed a further $395.3M of GDV to a total segment GDV of $681.8M.
  • PFS volumes in April were in line with the average monthly GDV between 1 January 2020 to 29 February 2020 and up 13% on the PCP of April 2019. Program mix in April was impacted by lower volumes from the more profitable multi-currency and digital banking programs due to lock downs in Spain & France offset by higher volumes in UK Government programs.
  • The VANS segment showed minimal signs of impact from Covid-19 with GDV of $612.5M in the month, up 9% over April 2019. Growth comparisons over the PCP were lower in April than in March due to timing of new customer launches in 2019.
  • Unaudited Group EBITDA in April 2020 was $2.7M (inclusive of PFS) and includes the release of $2.2M of breakage on December 2019 card activations and the likely maximum impact of Covid-19 with substantially our entire G&I segment impacted globally by lock downs.
  • Globally, Central Bank interest rates continue to fall, and in some countries are negative, impacting the interest the Group earns on stored value float balances.
  • We expect to see a gradual opening of malls in various countries during May and June 2020 onwards which should represent an improvement to the trading conditions experienced in April 2020.
READ  Airways’ $120B Debt Balloon Might Reshape Business Aviation

Balance Sheet – EML Payments

As at 30 April 2020

We are in an enviable position of having the balance sheet to weather any downturn in business and the financial strength to continue to invest in growth and take advantage of opportunities.

At the end of April 2020, EML holds in excess of $125M in cash. YTD operating cashflow (excluding acquisition, tax and interest expense payments) converted at approximately 100% of EBITDA

Contract asset of $36.8M will convert to operating cash inflows EML will continue to generate operating cash inflows from breakage on gift cards sold 12 months ago as the contract asset of $36.8M converts to operating cash inflows. Approximately 75% of the contract asset will be released into operating cash within 12 months. EMLs’ contract asset derives from breakage on approx. 11M gift cards previously sold reflecting individually small amounts per card which gives us a reasonable expectation that breakage rates will remain consistent with prior trends.

EML benefited from a one-time cash gain of $3.77M as surplus forward foreign currency contracts, entered into in November 2019 for the PFS acquisition, were unwound.

Long term value creation capabilities EML is in the enviable position of being able to think longterm about what we want the business to look like in 3 years, and to make decisions to fund those actions which will generate long term value creation.


Business Development Update – EML Payments

EML powers payments for companies in multiple industries, including Government, Charitable, Gaming, Retail Malls, Finance, Salary Packaging, Digital Banking, Multi-Currency, Marketing and Telecoms, and we expect the number of companies we serve to increase as the world embraces digital payments.
We anticipate that Covid-19 will accelerate the take up of digital payments.

We operate in 28 countries, providing a breadth of opportunity for us as markets and economies come through the economic impacts of Covid-19. Our increased size, scale and solutions, married to a strong balance sheet are a competitive advantage. With the addition of PFS into the EML business on 1 April 2020, we operate a more diversified business and a business that has pivoted to generate the majority of its revenue from General Purpose Reloadable (GPR) products.

Customers in various industry segments and geographies have experienced differing impacts from Covid-19; as have we. However, since inception we have been a company that has had a longer-term strategic focus and that will not change. Our focus remains resolute to continue to expand and invest. As we invest in our products, technology and solutions we will continue to focus our energies on envisioning what we want the company to look like in 3 years versus 3 months.

READ  A Stunning Purpose Why You Didn’t Get Your Stimulus Test But

Mia Turner


Add comment