The EML Payments Ltd (ASX: EML) share price is up more than 4% after the company sold one of its divisions.
EML is a global payments business that operates in Australia, the UK, Europe and North America. It has customers like governments, retailers, human capital management and financial services companies.
EML sells Sentenial
The ASX share announced today it has sold the Sentenial business, including Nuapay, to GoCardless for an enterprise value of €32.75 million. This was announced in March 2024.
EML said the sale was completed without “downward adjustment” to the sale price for key contract performance and was subject to usual completion adjustments for working capital and net debt.
Sentenial was deemed to be “non-core” to its operations because it was unprofitable during EML’s ownership and didn’t provide any significant synergies with other EML customers and business lines.
Based on the gross proceeds of the sale, the pro-forma (company-calculated) balance sheet as at 30 June 2024 would improve from a net debt position of approximately $48 million to a net cash position of approximately $5 million.
After completion of the Sentenial sale, EML’s debt facility limit will be $70 million, providing increased capacity to support future growth.
EML can benefit further from an ‘earnout’ payment from GoCardless for an amount related to contracts signed by Sentenial between 1 February 2024 and 2 October 2024, based on the first year’s revenue derived from those contracts, multiplied by 4.1x.
Management commentary
Peter Lang, executive director and chief corporate development officer said:
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.
Final thoughts on the EML share price
The payments business is doing what it needs to do to achieve profitable growth. Selling the loss-making parts of the business seems like a smart move as a way to boost the bottom line and the balance sheet at the same time.
I’m not sure I can call it a buy at this stage, but I’d be pleased if I were a shareholder. There are other ASX growth shares I’d rather buy first.
