Can EML Payments overcome European challenges with new CEO?

The share price of ASX-listed fintech company EML Payments (ASX: EML) faces uncertainty following the departure of CEO Emma Shand, just 10 months after her appointment to the top position.

Shand's resignation arrives just as EML commences a strategic review of its business, with potential outcomes including the sale of part or all of the payment company's operations.

EML could benefit, however, from the appointment of a veteran of the Irish banking sector to the position of interim CEO, given its recent disputes with the Central Bank of Ireland.

Shand resigns amidst operational transition

On 17 April, Emma Shand stepped down from her role as EML CEO, citing a 'change in operational priorities' as the reason for her resignation.

On the same date, EML appointed Kevin Murphy as Interim Group CEO, as well as kicked off a global search for a permanent replacement for Shand.

In a statement, EML said the changes to its top executive arrived amidst efforts to realign its business.

These efforts include the appointment of Barrenjoey, a partner of Barclays, to conduct a strategic review of EML's operations. According to EML, the review will 'consider all options,' including a sale of operations to 'maximise shareholder value.'

Following its reconstitution on 22 February 2023, EML's board undertook an internal review of its business, concluding that strategic initiatives were needed to deal with the challenges facing the payment company.

EML reported a sharp drop in profits for the first half of FY23, with earnings before interest, taxes, depreciation and amortisation (EBITDA) dropping 50% year-on-year (YoY) to $13.4 million.

EML imputed the earnings decline to efforts to expand into Europe that incurred heavy overheads.

On 17 April, EML announced that its board had resolved to transition away from the long-range strategy previously announced at its November 2022 AGM, to instead focus on four key challenges.

These challenges include remediation efforts in relation to Irish and UK regulators; enterprise-wide cost optimisation, unlocking growth in its more profitable core businesses, and talent retention following the recent departures of key personnel.

Interim CEO could help overcome Irish regulatory challenges

One of the biggest challenges EML currently faces is a regulatory dispute in the Eurozone – one of the key regions targeted by the company for expansion.

In February, EML announced that the Central Bank of Ireland (CBI) was considering sterner penalties for the company due to dissatisfaction with its remediation progress.

According to the statement made on 24 February, EML's Irish subsidiary PFS Card Services Ireland Limited (PCSIL) had received correspondence from CBI stating that 'it is not satisfied with PCSIL's remediation plan and timetable for completion.'

CBI informed PCSIL that it is 'minded to issue a direction' for growth in total payments volumes for the period from 31 March 2023 to 30 March 2024 to be restricted to nil above annualised baseline volumes in 2022, as compared to the previous 10% growth restriction slated for imposition until 8 December.

Interim CEO Kevin Murphy may be well-positioned to help EML deal with the major hurdle for its Eurozone expansion plans.

Murphy is an Irish national as well as a veteran of the Irish banking sector, who has significant regulatory experience with the CBI. He is also a former Managing Director of Bank of Ireland (cards business) – one of the country's big four commercial lenders.

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