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Date : 03/11/2022

EML Payments (ASX: EML) Shares Plunge 30% on Another Regulatory Bombshell

The ASX-listed EML Payments Ltd (ASX: EML) offers a cutting-edge platform for payment processing that facilitates exceptional customer service for businesses worldwide. The company began operations in 2005 and has its headquarters in Australia.

This year, on March 16th, 2022, the company announced that it partnered with UP Spain.

With the recent EML ASX news that the company has received yet another regulatory bombshell, EML share price hit a new multi-year low on Monday.

 

EML ASX News: FY22 Results

This Halloween, EML shares experience a nightmare. The payment business saw a 30% drop in early trading on Monday, as EML share price plunges to a new multi-year low of 40 cents. As a result, the value of EML shares has dropped by about 90% since the beginning of the year.

ASX EML Payments shares to buy

  1. The Group set a new high in revenue with $234.1 million, up 21% from the prior year’s revenue.
  2. The company reported $32.1 million in underlying NPATA, down 1% from PCP.
  3. As a result of increased investment in EML’s European businesses, the Group’s underlying EBITDA has decreased by 4% to $51.2 million.
  4. The Group Gross Debit Volume reached an all-time high of $80.2 billion, an increase of 308% from PCP.
  5. As the General Purpose Reloadable segment’s contribution grew compared to the other segments, it became the primary contributor to EML’s gross profit margins, accounting for 68%.
  6. The company has a healthy cash balance and balance sheet and plans to repurchase $20 million in stock over the next year.

 

The Reason for the Plunge in EML Share Price?

After receiving feedback from the Financial Conduct Authority (FCA), a UK regulator, EML has decided to temporarily halt onboarding new clients, agents, and distributors regarding its UK subsidiary, Prepaid Financial Services Limited (PFS UK).

Although this is just a temporary solution, the firm is worried that the EML Group’s sales will drop by less than $5 million in FY23 due to this decision.

These actions will help PFS UK address concerns identified by the FCA that are similar to those raised by the Central Bank of Ireland (CBI) and notified to the ASX about our Irish subsidiary, PFS Card Services (Ireland) Limited (PCSIL).

According to the company, EML acquired the Prepaid Financial Services group in 2020, which comprises PCSIL and its companies in France and Spain. This group includes PFS UK.

As previously disclosed to the ASX, PCSIL is subject to a material growth cap that will be removed in December 2022. It’s unclear if further restrictions would be imposed by regulators. Still, the restrictions may be lifted if the remediation program is finished and a third-party review is positive. The agreement to halt onboarding by PFS UK will stay in effect until the FCA is satisfied that PFS UK has implemented a remediation plan based on an acceptable third-party evaluation.

 

New Managing Director and CEO’s Remarks

The group’s new Managing Director and CEO, Emma Shand, said that having positive interactions with the Authorities has always been a top goal of mine. EML acknowledges that it has been slow to act on regulatory concerns in the PFS business in the past. Our performance has been inadequate, but we want to rectify that.

We have strengthened our senior management team and are investing heavily in developing our capabilities in risk management, compliance with industry standards, and overall organizational direction and control.

When dangers to the banking and payments industries are rising, we are aware of our vital role in combating financial crime and protecting our consumers.

 

Conclusion

EML’s new low raises concerns for investors of EML shares. Investors were assuming that these regulatory headwinds would be behind them soon, but it seems they are increasing as each day passes. The volatility will lead even the most optimistic of EML investors to question their beliefs on the long-term prospects that EML has to offer.

 

Previous EML ASX News and Insights:

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