Payments provider EML Payments (ASX: EML) is looking to Germany to further expand its growing assortment of revenue streams.
Via its European subsidiary EML Payments Europe, EML has signed a five-year agreement with German shopping mall operator ECE Projektmanagement to manage a new consumer gift card program for 87 shopping malls in Germany.
The deal was first unveiled in February this year after EML signed a letter of intent with ECE. Following the receipt of necessary regulatory approvals, EML can now proceed with the deal.
ECE Projektmanagement develops and operates shopping centres, implements large-scale real estate projects in office towers, industrial facilities, logistics centres, transportation facilities, hotels and city districts.
The company was first founded by mail-order company pioneer Werner Otto in 1965 and remains privately-owned by the Otto family to this day, led by CEO Alexander Otto. At current prices, ECE has around €34 billion (A$53.6 billion) of assets under management and is responsible for the management of approximately 200 shopping centres.
According to ECE, the company serves more than 4.3 million customers through its shopping centres on a daily basis. In total, the company looks after 20,000 retail tenants, occupying a sales area in excess of 7.1 million square meters and generates an annual turnover of approximately €24.4 billion (A$38.5 billion).
The deal means EML can expand its operational horizons and potentially generate additional sales revenue volumes through ECE’s German shopping centres.
Deal done and dusted
The new program with ECE will be what’s known as a “single load private label (PVL) gift card”, which has been restricted for use within the ECE shopping malls.
The gift cards will be sold predominantly from the customer service desks within the malls and effectively replace their existing voucher program, according to EML.
EML says the program is due to launch in its entirety in October 2018 and will be issued by Perfectcard DAC – a company EML acquired in early July as part of a strategy to act as both the issuer and technology provider.
EML says this formulates the key part of its strategy which provides “regulatory certainty”, a streamlined offering and “improved program economics”.
EML managing director Tom Cregan said that EML’s expansion is undergoing sequential expansion with October’s program launch supplementing the recent acquisition of Presend in January 2018.
The acquisition expanded EML’s mall portfolio from 145 to 225 while October’s program with ECE will “see the company’s mall program portfolio increase to over 310 malls and increases our gross debit volume in the mall segment by over 60%. It’s a significant new program for EML and we’re delighted to be working with the ECE team,” said Mr Cregan.
EML said it estimates annualised gross debit volume (GDV) for this program to be approximately €90 Million (A$142 million) and that it expects the GDV-to-revenue conversion ratio to be materially in line with other non-reloadable card programs the group operates.
Following this morning’s news, EML shares were trading up 12% at $1.60 per share, thereby valuing the company at around A$400 million by market capitalisation.