The EML Payments Ltd (ASX: EML) share price is ending the week on a high after the company outlined "a new chapter" at today's annual general meeting (AGM).
It comes after an 18-month period of upset brought about by regulatory issues, misaligned organisational structure, and a competitive environment.
Right now, the EML share price is up 12.26%, trading at 59.5 cents. That's more than 80% lower than it was 18 months ago.
For comparison, the All Ordinaries Index (ASX: XAO) is up 0.22% at the time of writing.
Let's take a closer look at the news driving the EML Payments share price today.
What's boosting the EML share price today?
The EML share price is roaring upward today as the company's leaders address recent challenges. Speaking at its AGM, chair Peter Martin said:
As far as EML is concerned it's been one of the toughest periods in our history.
It is clear that uncertainty about EML's future prospects has led to a loss of confidence and contributed to the fall in market value. I'm referring to the continuing regulatory issues in our Irish subsidiary, PFS Card Services, and our UK subsidiary, Prepaid Financial Services, and the related costs.
Despite our genuine efforts, there's been a lack of clarity about what this means to EML and how we are going about fixing the problems.
How indeed? Well, that was also outlined today. EML has undergone a strategic review, with CEO and managing director Emma Shand commenting:
The review identified numerous shortcomings which the company will address as a priority in a bid to reshape it a competitive valuable proposition for stakeholders.
"It won't happen overnight, but we can do it," Shand said, continuing:
Of EML's seven acquisitions between FY15 and FY21, six were prepaid card businesses. However … the acquired businesses have largely been left to operate in silos, missing an opportunity to integrate, extract synergies, and align culturally.
Finally, while EML's point solutions are well appreciated by our loyal client base, these highly bespoke point solutions, across 10+ industry sectors, are not easily scaled.
What's next?
On the back of the findings, EML will begin a transformation. It will focus on its European and UK remediation efforts, streamlining its customer and operational effectiveness, and repositioning the business for growth. Speaking on the latter, Shand said:
There is a significant and exciting opportunity to evolve our business over time; from being largely in prepaid cards, to an embedded finance leader within the next five years.
The company will focus its efforts on embedded payments solutions, human capital management, retail, and government. It says these four pillars represent 70% of global total addressable payments revenue.
It expects to have a controllable cost out of the business of between 10% and 15% by FY24, with full impact in FY25.
Trading update
EML also provided a trading update this morning.
Its revenue fell 5% over the first quarter on that of the prior comparable period (pcp), coming in at $49 million. Its gross profit also slumped 4% to $32.5 million after cycling $5.3 million of one-off revenues in the pcp.
The company's overheads lifted 29% on those of the pcp but fell quarter-on-quarter. Its gifting segment has started off the holiday period strongly.
It also saw $2.5 million of net interest income last quarter, compared to $1.4 million over the whole of FY22.
Finally, it recognised $14 million of casts relating to regulatory matters, one-off restructuring, executive retentions, and European fraud costs.
Is new FY23 guidance also lifting the EML share price?
The company's new guidance may be another driver lifting the EML share price today.
It expects its net interest margin to increase to between $17 million and $21 million this fiscal year. Rising interest rates are also expected to add $16 million to $20 million to its full-year earnings before interest, tax, depreciation, and amortisation (EBITDA).
EML's revenue is tipped to come in at between $240 million and $260 million. Meanwhile, its gross profit margin is expected to be around 67%.
The company's overheads guidance is between $135 million and $145 million. Finally, its underlying EBITDA is expected to come in at $26 million to $34 million.
