EML Payments awarded $320m government contract to help stimulate the Spanish arts sector

Global payment solutions business EML Payments (ASX: EML) will play a leading role in helping the Spanish economy and cultural scene recover from the aftermath of COVID-19 after being awarded a €210 million ($320 million) contract by the Spanish government.

The Brisbane-based payments and gift card company has announced it will support its partner and key European client Correos in issuing a stimulus package through the Spanish national post office network.

The contract, known as the Bono Cultural Joven 2022 (Youth Cultural Bonus) tender, will see 500,000 virtual pre-paid cards loaded with €400 each ($602) issued to eligible 18-year-olds to spend on various cultural products and activities.

''Our business relationship with Correos goes back a long way, and we've achieved many milestones together," EML head of Spain Emilio Gutierrez said.

"We're delighted to continue to build on this partnership with such a significant and important initiative in helping support the arts sector across Spain."

Recipients of the stimulus will be allowed to spend the pre-paid credit on live music, films, museums, festivals, sheet music, records, books, performing arts, audiobooks and magazines.

''We're very happy to be able to collaborate with the Ministry to promote culture amongst young people," Correos Director of Products and Services Manuel Zapatero Sierra said. 

"This project, which is part of the Correos Prepago business line, positions Correos as a benchmark for the delivery of social aid and financial inclusion within the company's strategic framework of diversification."

The contract is similar to other programs EML Payments has rolled out in Europe, in addition to providing emergency funding assistance to governments and international aid organisations in Europe, Australia and the United States of America.

EML Payments was awarded the Annual Innovation Award at the Jersey One Gov Awards in 2020 after launching a stimulus program to issue £10 million ($17.56 million) in ‘spend local’ cards to 105,000 local citizens in partnership with Mastercard.

In July 2021, EML payments was awarded a £140 million ($245 million) contract to provide every resident in Northern Ireland over 18 with £100 ($175) to spend on local businesses through a Mastercard pre-paid card.

The Bono Cultural Joven program will contribute to revenue and EBITDA in FY23 and form part of next year’s guidance range. The program is also expected to utilise a material proportion of the growth cap imposed on its European licence by the Central Bank of Ireland (CBI), which remains in place until expiry in December 2022 – subject to any CBI decision as to removal or amendment of the cap.

EML Payments' share price has deteriorated sharply since the Irish financial services regulator raised "significant regulatory concerns" in May 2021 over its subsidiary PCSIL’s risk, control and governance frameworks.

The business continues to work co-operatively with the Central Bank of Ireland to address its concerns. EML maintains the matter has helped strengthen its management, system and governance, with the CBI confirming last November that it would not impose broad-based reductions in limit controls on the company's programs.

However, costs of $12.6 million associated with the CBI matter contributed to EML Payments reporting a net loss of $12.1 million for 1H22.

EML payments currently operate across 27 countries and manage an annualised Group gross development value (GDV) of over $19 billion.

Shares in EML Payments (ASX: EML) are up 9.34 per cent to $1.40 as of 12.47 AEST on the back of the update - still significantly lower than the $3.31 per share price it entered 2022 at.