As a business soap opera, the trials and tribulations of EML Payments (ASX:EML) has been a headline act on the ASX now for several years. Management changes, problems with its pre-paid card business and in dealings with the Irish Central bank, claims about improvements not actually happening and board and management changes.
On Monday a very brutal management change and a monumental shift in strategy.
Out went CEO Emma Shand. She resigned, according to the company, after just nine months in the top job. She has been replaced by Kevin Murphy as interim group chief executive as the company commences a global search for a permanent replacement.
The company intimated that Ms Shand decided to resign in response to the change in operational priorities. It was a big change.
Up went the shares – by 14% higher to 65.5 cents at the close of Monday trade.
The company also announced it will transition away from the previous long-range strategy announced at its November AGM and will instead focus on solving the challenges it believes are facing the business right now – one of the most important is sorting out the concerns of the Irish central bank with the pre-paid card business which has caused many of the other problems.
The central bank wasn’t mentioned directly in the challenges facing EML which were listed as four key priorities: remediation, cost optimisation, targeted growth in core businesses, and talent retention.
The part of the statement that could help the company was a strategic review will consider all options available to the board. This includes a potential sale of all or parts of the business in order to maximise shareholder value.
Barrenjoey – an Australian strategic partner of Barclays Bank of the UK – will conduct a strategic review of EML’s business.
Since the Board of EML payments was reconstituted in February 2023, it has undertaken an internal review of the business and believes that these initiatives are an important first step towards solving the challenges now facing EML (sounds like the strategy revealed at the AGM was replaced earlier this year).
This means the problematic pre-paid cards business in Europe – the one that has run into problems at the Irish central bank could very well go, if a buyer can be found
The interim CEO (he could end up as the permanent CEO) could be part of the answer to the Irish Central bank concerns.
Mr Murphy is a former managing director of Bank of Ireland’s cards business and is said by EML to have a deep understanding of the global payments industry.
EML also notes that Murphy has significant regulatory experience (including with the Central Bank of Ireland) and has been involved in several successful business turnaround scenarios for private equity funds.
New Chair Luke Bortoli (a former Afterpay executive) said in Monday’s statement:
“The renewed Board has spoken with internal and external stakeholders and formed a view on the urgent priorities for the business. We are focused on doing the right thing by our people, customers, regulators and shareholders and we are committed to taking actions that will help the business move through its immediate challenges, deliver sustainable growth in the medium to long term and maximise value for shareholders.
“We are pleased to welcome Kevin Murphy as interim Group CEO and are excited to have an executive of Kevin’s calibre join EML. His understanding of the Irish and broader European regulatory environments, previous interactions with the Central Bank of Ireland and deep experience in the payments sector are perfectly aligned to addressing the needs of our business today.”
Even though EML claims to have improved its pre-paid cards business, the Irish central bank still has not given it a clean bill of health.
It has expressed dissatisfaction, especially with EML’s Pre-Paid Card Services, or PCSIL, pointing to weak controls to counter money laundering/counter-terrorism financing, the risk and security framework and governance. PCSIL’s remediation program and third-party assessment were expected to be completed by the end of 2023. But now, EML considers this timeframe at risk.
The Irish Central Bank feels that PCSIL has made limited progress, but has with significant and ongoing deficiencies remaining in its framework. It also noted that it is not satisfied with PCSIL’s remediation plan and timetable for completion.