EML (ASX:EML) share price sinks 9% despite record-breaking product demand

Shares in the payment solutions company are under pressure today.

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Key points

  • The EML Payments share price is more than 8% lower on Wednesday
  • The company released its results for the half ending 31 December 2021 this morning
  • EML revealed a major increase in gross debit volume and revenue

The EML Payments Ltd (ASX: EML) share price has tanked today amid the company releasing its half-year results for the period ending 31 December 2021.

The payment solutions company announced a 209% increase in its record gross debit volume, along with increased revenues.

But it seems investors are not convinced. At the time of writing, the EML share price is down 8.61% to $2.76. Earlier in the session, it fell as low as $2.69.

Let's take a closer look at what the company announced this morning.

What did EML announce?

Here are the highlights of EML's half-yearly results:

EML has attributed its record GDV — the monetary value of transactions across its payment products — to "demand for our payment services" and "strong organic growth" during the period.

Within that, the company saw a 431% increase in its digital payments sector. This coincided with the integration of European payments provider Sentenial Limited which it acquired on 30 September. EML expects to continue to reap the benefits from this buy into the next half of FY22.

The company saw a drop in its cash flow during the half due to two major delays in customer receipts. These totalled $8.6 million although 75% of this overdue balance has been recouped, the company said.

Its lower EBITDA was due to "higher overhead costs, lower net interest income (down $2.7 million) and lower European setup fees (down $2.4 million on PCP)".

EML expects its EBITDA guidance for the full financial year to be between $58-$65 million.

What else did EML report?

The payment company acknowledged ongoing legal proceedings with its own shareholders.

The class action involves EML's Irish subsidiary PFS Card Services and the Central Bank of Ireland (CBI). It is alleged "EML did not comply with its disclosure obligations and engaged in misleading and deceptive conduct regarding disclosure".

While EML has denied the allegations and liability, the company says it will "vigorously defend the proceedings" with legal costs potentially amounting to $10.5 million. The matter will be heard in the Supreme Court of Victoria.

Looking ahead to the next half, EML said:

As we head into H2 FY22 and beyond, we expect to see further growth in digital-first solutions with the introduction of open banking products in Europe and the upcoming launch of a new gaming proposition that couples the latest in open banking technology with the Group's industry leading card solutions for sports betting and social gaming providers.

Work is underway to integrate the Nuapay business and provide customers with the ability to access the full suite of open banking, accounts and card payments via a single integration.

EML share price snapshot

Over the last 12 months, the EML Payments share price has dropped by 33%.

The company saw a 52% plunge in its share price in May 2021 following news of ongoing queries between its Irish subsidiary and the Central Bank of Ireland. At that time, the EML share price hit a low of $2.47.

However, just last week UBS considered the payment company to be potentially undervalued due to its recent business growth.

The company has a current market capitalisation of $1.04 billion.

Motley Fool contributor Alice de Bruin has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended EML Payments. The Motley Fool Australia owns and has recommended EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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