The EML Payments Ltd (ASX: EML) share price has been amongst the worst performers on the S&P/ASX 200 Index (ASX: XJO) on Thursday.
At one stage today the payments company's shares were down as much as 22% to a 52-week low of $1.20.
Why is the EML Payments under pressure?
This afternoon EML Payments provided the market with an update on the potential impact of COVID-19 on future trading conditions.
According to the release, the company is following government advice in each region and has enacted contingency plans to minimise disruption to the business. All offices have proven capable of full office closure with work from home capabilities.
Another positive is that the company has been monitoring its daily Gross Debit Volumes (GDV) closely and notes that as of mid-March, it has not experienced materially adverse trading conditions.
Same-store mall gift card volumes in its United States, German, and British malls increased relative to the prior period and offset lower volumes in Canada, Italy and the Middle East. In addition to this, volumes in its gaming programs, through to mid-March, have not shown any material variances to its expectations.
However, management acknowledges that the current trading environment is unpredictable. It also notes that several of its major customers, including shopping mall owners and gaming customers, have been significantly negative with respect to future trading conditions.
This is due to social distancing rules being implemented, non-essential retail stores in certain countries being closed, and gaming operations being impacted by the cancellation of events.
In light of this, management explained that it is difficult to quantify with any confidence the impact these developments could have on its business. As a result, it has made the decision to suspend forward earnings guidance for FY 2020 and will provide trading updates based on actual trading performance.
Acquisition update.
The company notes that the acquisition of Prepaid Financial Services has still not completed. This will remain the case until conditions precedent have been satisfied.
It will provide an update on the transaction at the appropriate time.
Finally, with a cash balance of $278.6 million, strong cash flows, and no debt, the company advised that it has no plans to undertake a capital raise in the foreseeable future.
