ASX finance stock dives 6% as FY24 disappoints #CashNews.co

ASX finance stock EML Payments Ltd (ASX: EML) has fallen on Wednesday after the company posted its FY24 results.

EML shares are currently fetching 73 cents apiece, 5.8% lower on the day, as investors consider the company’s year-end results.

Let’s see what the company posted.

ASX finance stock tumbles on FY24 results

Key highlights from EML’s earnings results include:

• Revenue increased by 18% year over year to $217.3 million (excluding Irish entity PCSIL).
• Earnings before interest, tax, depreciation and amortisation (EBITDA) reached $57.1 million, up 54% year over year.
• Net loss was $9.6 million, an improvement from the $260.3 million loss in FY23.
• Exited Irish business PCSIL and sold its interests in Sentenial to GoCardless for $54 million.

What else happened in FY24?

The ASX finance stock made several moves during FY24 to stabilise the business. In particular, EML exited its “loss-making” PCSIL business in Ireland and sold Sentenial for $54 million.

These exits were part of EML’s broader restructuring efforts and a larger move to reduce ongoing costs.

In total, EML’s cost base reduced by 8% over the year in H2, translating to $5 million. Management expects further cost reductions over the coming 1–2 years.

As such, it was a period of growth for EML, with sales up 18% (excluding PSIL), 54% EBITDA growth, and an improved net loss.

EML’s UK subsidiary, Prepaid Financial Services Limited (PFSL), also completed its “regulatory remediation program”. This is a critical point that has been plaguing EML shares for some time.

It also established a new syndicated loan facility to “support the business over the coming years”. This came into effect yesterday.

What did management say?

EML’s newly appointed CEO, Ron Hynes, expressed cautious optimism about the company’s future:

FY24 was an inflection point for the reinvigoration of EML, with excellent progress made on the operational priorities as set by the Board in April 2023 and improved financial performance. This lays the foundations for EML 2.0 being a stronger, more efficient and growth orientated organisation delivering high quality performance for our customers and shareholders over the coming years.

While I only joined EML in June, I have followed its journey closely over the course of my career in the global prepaid card industry. EML is a business of strong foundations and with the work done in FY24 to successfully address the challenges that impaired recent periods, we are now well placed to turn our full attention to building for growth with green shoots emerging.

What’s next?

Looking forward, EML plans to continue implementing cost reductions. Management forecasts $54 million – $60 million in EBITDA for FY25.

This is part of the company’s ‘EML 2.0’ initiative, which includes new leadership and a focus on “3-year underlying metrics” such as EBITDA margins and recurring revenues.

Management will outline the full strategy at the AGM in November.

ASX finance stock snapshot

EML shares have been under pressure in the last 12 months, having slipped more than 27% in that time. The ASX finance stock has lagged the broad market by 38% in that time.