EML Payments plunged to a loss in the year to June, as costs associated with a number of acquisitions it made last year more than offset revenue gains.
The company reported revenue of A$120.9 million – an increase of 24.4 per cent over the previous year. This was generated from a 54 per cent increase in “gross debit volume” to $13.8 billion.
However, expenses were up 52.8 per cent to $97.8 million. Cost of sales also rose sharply.
The bottom line went from a profit of $8.4 million in 2018/19 to a loss of $5.8 million in the year to June. After including the $23.4 million exchange rate impact on foreign operations, the company went from a “total comprehensive profit” of $11.7 million in 2018/19 to a loss of $29.2 million.
Net cash from operations fell from $29.2 million to $22.1 million as a result of big increases in payments to suppliers and employees, and payments for acquisition related expenses.
The company’s headcount went up from 266 to 444 over the year and employment related expenses rose 34 per cent.
The company preferred to focus on its NPATA (net profit after tax, adjusted for tax-affected amortisation arising from acquisition related intangible assets), which rose 17 per cent to $24 million.
However, one-off costs were not the only thing having an impact. One effect of the changing business mix resulting from acquisitions and changing consumer behaviour was that the revenue yield (a key metric for the company, measuring the ratio of revenue to gross debit volume) fell from 108 basis points to 88 bps.
In other words, the company is not getting the same revenue from transactions it once did.
In May last year, EML paid $45 million to acquire Flex-e-Card Ltd – a gift cards business that trades as flex-e-card and flex-e-vouchers.
Two months later, it acquired the 25.1 per cent of Irish payment card company PerfectCard DAC it did not already own, in a deal worth $4.7 million.
And in November it entered into an agreement to acquire a European payments company, Prepaid Financial Services (Ireland) Ltd. PFS is a provider of white label payments and banking-as-a-service technology.
The deal was worth $341 million, with $157.23 million paid in cash, $67.2 million of equity, $40.3 million of deferred payments due in 2024 and 2025 and a $76.2 million earn-out.
EML said the PFS acquisition would make it one of the world’s leading prepaid payments providers and a leading fintech enabler in open banking, and that it would add digital banking and multi-currency offerings to its product suite.
Its business segments include gift and incentive cards, general purpose reloadable cards and virtual account numbers. The biggest business is gifts and incentive cards, which produced more than half the company’s revenue, but the PFS acquisition means that in future the company will earn much more of its revenue from the general purpose reloadable segment.
Gift and incentive debit volume was 32 per cent down in March to June, compared with the previous year.
The company said it expects COVID-19 impacts to continue in the current financial year,