High-flying EML Payments shares slumped by 12 per cent on Wednesday despite a big jump in earnings, as the market fretted about a possible delay to regulatory approval of its game-changing acquisition of Prepaid Financial Services in Ireland.EML Payments, which is focused on niche aspects of the payments market like digital gift cards for smartphone wallets, saw its stock surge by 200 per cent in 2019, catapulting the Brisbane-based company into the ASX 200.EML Payments chief executive Tom Cregan: "“If there was something of concern we would have had to flag that - it’s pretty much BAU." Jesse MarlowEML hit expectations for the half with a 42 per cent increase in earnings before interest, tax, depreciation and amortisation (EBITDA) of $19.7 million and guided the market to EBITDA for the full-year of between $39.5 million and $42.5 million. This includes a slight tick-up in expenses in the second half, including travel costs as staff seek to bed down the PFS deal.Revenue for the first half of $59 million was up 25 per cent and the gross profit margin of 76 per cent is expected to be maintained over the full-year.Much of the excitement around the stock - which started calendar 2019 at $1.50 and surged to $5.52 earlier this month before a 12 per cent fall to $4.88 by mid-afternoon on Wednesday - comes from the potential of PFS, which has built ‘banking-as-a-service’ technology to support the European fintech sector under its open banking regime.But on the results call, brokers probed about a possible delay to approval of the PFS deal by regulators in Ireland and the UK. The company suggested this might not be forthcoming until March or April but CEO Tom Cregan sought to calm any worries the deal had hit a snag.“There is certainly nothing of any concern,” Mr Cregan said in response to a question from head of equity research at Wilson, Mark Bryan, who asked how he would describe discussions with regulators.“If there was something of concern, we would have had to flag that. It’s pretty much BAU (business as usual),” Mr Cregan said.“They didn’t exactly inundate us with questions. We are already a regulated entity in Ireland. That process was pretty reasonable…. We are hopeful it is not too far away and there is nothing that would give us any cause, as of today.. that would tell us there will be an issue there.”EML paid $425 million for Prepaid Financial Services and Mr Cregan said it was “critical to come out of the gate swinging and to deliver against expectations”.He said EML would not look at any further acquisitions in Europe until PFS had been properly integrated, but beyond, “we are always going to be acquisitive and look at opportunities”.EML has been pushing into payments services in the US around sports betting and is making a play in the salary packaging niche in Australia, including a recent deal with NSW Health. As legacy salary packaging products migrate to mobile phone, “we will start to see the second tick of margin,” Mr Cregan said.He said that when the PFS deal closes, the company will update its earnings guidance for the market.
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