A plummeting share price, board shuffles, poor decision-making and lost credibility—global payments platform EML payments (ASX: EML) has been at the bottom of the barrel for over a year now. And it just keeps getting worse somehow.
The trainwreck began when, in May 2021, the Central Bank of Ireland (CBI) conducted an audit and decided it was dissatisfied with how things were going at EML in the region—particularly its Pre-Paid Card Services, or PCSIL. The CBI dished out some serious allegations, pointing to the Company’s anti-money laundering/counter-terrorism financing, risk and security framework and governance. Since then, EML has been on a remediation program, and things haven’t been going too well.
PCSIL’s remediation program and third-party assessment were expected to be completed by the end of 2023. But now, EML considers this timeframe at risk.
The CBI feels that PCSIL has made limited progress, with significant and ongoing deficiencies remaining in its framework. It also noted that it is not satisfied with PCSIL’s remediation plan and timetable for completion.
It’s like the Shawshank Redemption…but without successful attempts at redemption.
“The Board is disappointed with this development,” read EML’s announcement. But it is not giving up on the program. The Company has established a new dedicated subcommittee (chaired by the new non-executive director, Peter Lang) charged with oversight of the remediation program.
EML has also shuffled its board in response to shareholder pressure. It appointed three new non-executive directors. Dr Luke Bortoli and Mr Peter Lang will join the EML Board as Independent Non-Executive Directors, and Mr Connor Haley as Nominee Director of Alta Fox Opportunities Fund, LP, managed by Alta Fox Capital—currently a 10.26% shareholder in EML. Group Chief Financial Officer (CFO), Robert Shore, will step down from his role and depart EML on 16 April 2023; Jonathan Gatt has taken his place.
Besides internal board renewals, EML is paying heavily trying to please the CBI. For H2 FY23, it expects a revenue reduction of about $3.5 million and a reduction in earnings of approximately $2 million.
CBI has told PCSIL that it is ‘minded to issue a direction’ that growth in total payment volumes for 31 March 2023 to 30 March 2024 be restricted to 0% above annualised baseline volumes in January to December 2022. It represents a change from the previously noted 10% growth restriction imposed until 8 December 2023. However, the CBI has not yet made that direction and has provided PCSIL with an opportunity to provide it with submissions by 10 March 2023 for its consideration.
If that wasn’t enough, EML has been suffering on other fronts, too. Its attempt to enter the Spanish employee benefits market took a hit as financial services company Up Spain pulled out of a multi-year deal with EML without an explanation. Plus, the Company is currently being sued by Shine Lawyers, who are seeking compensation for losses to shareholders.
In H1 FY23, EML’s earnings fell by 50% on H1 FY22 to $13.4 million, made worse by a net loss of $129.9 million for the half. Since 2021, its share price has fallen from $4.50 to a mere 52.50 cents now.
EML Payments’ decisions have left a lot to be answered: why didn’t it take lucrative takeover deals? Why won’t it give up on the PFS pursuit?
Clearly, there’s a lot in its hands right now, and it is going to be difficult to bounce back if it does.
Alinda is a Business Reporter for The Sentiment
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