No luck of the Irish for EML Payments

Shares in EML Payments crashed more than 20% for the second time in a couple of weeks on Monday on more bad news from Ireland.

On July 11, EML revealed the surprise departure of long time CEO, Tom Cregan and a new CEO in Emma Shand (a current director) without an explanation and down went the shares.

A fortnight later, EML revealed yesterday that the Irish central bank had not approved the company’s remediation programme for its European operations (PFS Card Services Ireland).

EML said the Central Bank of Ireland had identified what EML termed in the statement as, “shortcomings in components of the remediation programme, principally the sequencing and approach taken to the risk assessment of its distributors, corporates and customers.”

Down went the shares, dropping more than 22% to close at 93 cents on Monday. They touched a low of 92 cents in trading, which is a new low for the shares

EML also said in Monday’s statement to the ASX that the additional work, ordered by the Irish central bank, may result in further controls being embedded into its internal control framework.

While that worried investors, they also noticed a slippage in the timing of the new controls.

EML told the market that the adjustments to the remediation program will result in “assurance” being finalised “in 2023”, which much later than expected. Just when in 2023 wasn’t specified either.

PFS’s history with EML has been a short but tortured experience of just over two years. It has also been dangerous for the company’s share price.

The shares were trading at $5.72 in May 2021 when the problems with the Irish central bank first emerged. At yesterday’s close EML shares have lost more than 80% of their value in 14 months.

EML acquired the Ireland-based PFS in March 2020 after renegotiating the deal – the cost, $362 million.

The was supposed to push EML into the digital banking space, beef up its prepaid cards offerings and raise momentum.

But in May, 2021, the Irish Central Bank raised concerns about the anti-money laundering and counter-terrorism financing risk and control framework at PFS’ card services business.

The central bank imposed restrictions on the growth of the business.

EML worked with the Irish authorities to sort out the situation and put in place a multimillion-dollar remediation designed program to address the Central Bank of Ireland’s (CBI) concerns related to perceived anti-money laundering and counter-terrorism financing risks.

April saw EM slash earnings guidance and warn of continued challenges in the troubled European operations. It downgraded earnings by 13% at the midpoint to $53.5 million, and also said full year revenue and profit would also be lower.

July 11 saw the mysterious loss of long-time CEO.

On top of all this, there’s a continuing class action concerning the level of disclosure of its Irish problems.

Shine Lawyers launched action in the Supreme Court of Victoria seeking compensation for shareholders who suffered losses after buying EML’s shares in late 2020 through to mid-May 2021.

That legal action continues to worry the market.