The EML Payments Ltd (ASX: EML) share price has jumped more than 12% after the company announced its FY22 result.
EML is a business that provides the technology for a number of payments including gift cards, virtual accounts, payouts, buy now pay later and so on.
EML FY22 result
The payments business announced the following highlights:
- Gross debit value (GDV) increased by 308% to $80.2 billion, largely due to the acquisition of Sentenial which added $56.8 billion
- Revenue increased by 21% to $234.1 million
- Underlying EBITDA (EBITDA explained) fell by 4% to $51.2 million
- Underlying net profit decreased 1% to $32.1 million
EML said that each of its segments delivered GDV growth. It said that a “conducive” environment reinforced a “strong base”.
Management said that the Sentenial acquisition delivers “leading edge open banking solutions” to EML in the rapidly growing area of payments.
It also said that an increasing interest rate environment in key markets will benefit its significant stored value float.
At 30 June 2022, it had A$2.2 billion in its store float, with $1.7 billion held in cash. Across its various currencies, it looks to achieve a return equivalent to the respective currency central bank rate.
In July, its net interest income totalled $0.5 million, including $0.3 million of negative interest that won’t be incurred going forward. This doesn’t include interest rate raises in late July and early August. The August annualised run rate exceeds $10 million.
Sale and share buyback
EML also announced an on-market share buy-back of up to $20 million as part of a proactive capital management strategy. This can boost the EML share price.
It said it’s still focused on driving organic growth across all of its business segments.
EML announced it had entered into a sale agreement for its finlabs investment in Interchecks Technologies which was a 4x return on its investment into approximately $10.6 million of cash. It said it would continue to make finlab investments to support the extension of functionality to its customers.
At 30 June 2022, it had a closing cash balance of $73.7 million, before receiving the proceeds of the sale of Interchecks. It’s also expecting stronger cashflow in FY23. As a result, EML said it had sufficient capital to deliver growth initiatives while also returning cash to shareholders.
EML will buy up to $20 million of shares with a buyback.
Guidance, outlook and my thoughts on the EML share price
EML is expecting further growth in FY23 as it recovers from the impacts of COVID.
The FY23 gross profit is expected to be in line with FY22. It warned that inflationary pressures will impact FY23 before investments in automation and system efficiencies can deliver savings.
It also said it would apply a disciplined approach to cost management while ensuring it applies sufficient resources to sustainably resolve European regulatory challenges now and in the future.
EML has been through a lot of over the last two and a half years. At such a low level, the EML share price may be able to perform well from here considering the growth it continues to achieve and the rising interest rates.
