ASX All Ords stock EML Payments Ltd (ASX: EML) has jumped from the open on Tuesday and now trades 4% higher at 73.5 cents apiece.
Investors are buying EML shares today after the company announced the sale of its Sentenial business.
Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is less than 1% in the red today.
Let's see what the company posted.
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ASX All Ords stock rallies on asset sale
The ASX All Ords stock advised today it has sold its European open banking and account-to-account payments business, Sentenial, to payments processing company GoCardless Ltd for 32.75 million Euros.
The acquisition was first completed three years ago now, in September 2021, when EML paid 70 million Euros.
So it paid 70 million Euros for Sentenial and is selling the business for less than half that amount.
Taking the current Euro to Aussie dollar exchange rate, this equates to paying $114 million and selling for $53 million, a more than 53% loss on investment.
The reason for the sale? Sentenial simply hasn't performed well under EML's stewardship.
On 15 March 2024, EML announced it had entered into an agreement to sell Sentenial to GoCardless. The Sentenial business was deemed to be non-core to the EML Group's operations, being unprofitable under EML ownership and without material synergies with other EML customers and business lines.
Completion of the Sentenial sale is another significant milestone in the delivery of the EML's strategic review.
EML will use the proceeds to retire some debt, shifting its balance sheet from a net debt position of $48 million to a net cash position of $5 million.
It has also secured a new $70 million debt facility, which gives it access to further liquidity to fund its growth if necessary.
Peter Lang, the ASX All Ords stock's executive director, expressed satisfaction with the Sentenial sale, calling it another strategic win for EML in FY24.
We are pleased to have completed the Sentenial sale to GoCardless. The sale proceeds significantly strengthen EML's balance sheet and completes another strategic objective of the Board's FY24 plan to simplify our operating structure and solve for loss making businesses within the EML Group.
We thank Barrenjoey and Barclays for their advisory support and wish the Sentenial and GoCardless teams every success over the coming years.
What's next for EML?
The ASX All Ords stock also stands to benefit from an earnout payment that is linked to contracts signed by Sentenial between February and October 2024.
The payment will be the "first year's revenue derived from those contracts, multiplied by 4.1".
EML considers the sale as essential so that it can focus on higher-margin areas of the business.
It follows EML's earlier exit from its unprofitable PCSIL business in Ireland in FY24.
Excluding results from this entity, sales were up 18% last financial year, with 54% growth in pre-tax earnings on an improved net loss.
Management had also laid out ambitions to hit $54–$60 million in profits before tax in FY25. It looks to these on the back of a number of cost savings already implemented.
Time will tell to see what long-term impacts these may have on the stock price.
ASX All Ords stock takeaway
EML shares have been heavily sold over the past 12 months, during which time the ASX All Ords stock has been down more than 27%.
This is a more than 49% disadvantage to the broader market.
