Payments group Worldline unleashed fresh shockwaves through Europe’s fintech sector on Wednesday as it warned of various challenges, including an “increase in cybercrime and emerging fraudulent patterns.”
The French group’s shares nosedived 58% to €9.60 as its third-quarter update showed revenue growth overall and at its largest division, the increase in cybercrime, fraudulent patterns, plus tighter regulatory guidelines and market constraints, led to it tightening its risk appetite policy.
This, along with weakening macroeconomics factors in Europe, means it has terminated relationships with some higher-risk merchants, which it said could represent around €30 million of revenue in the second half and roughly €100 million in 2024, mostly in the first half.
What further spooked investors was that this came just a day after UK rival CAB Payments Holdings PLC (LSE:CABP) shares crashed more than 60% after the cross-border payments specialist issued a profit warning due to reduced trading volumes and profit margins in key African currencies.
The update from Worldline, even though its showed overall revenue growth of 4.8%, coincided with CAB Payments falling another 16%, Italy’s Nexi SpA dropping 14% and Dutch payments firm Adyen sliding 7% and hitting a four-year low. Adyen, which is listed in Amsterdam and New York, had sent initial ripples of worry through the sector in August when it reported weaker earnings, which it blamed on heightened competition in the online payments sector.
Worldline, which only recently issued €600 million of bonds, cut its full-year targets to organic revenue growth of 6-7% versus 8-10% previously, with underlying operating margins (OMDA) not rising as expected, and said it will aim to accelerate its transformation plan, including “technology optimization, organization improvement and sourcing streamlining”.
Objectives for 2024 have been scrapped, with the focus next year on operating profit margins.
Broker Stifel noted that while revenue was 2.4% below consensus expectations the overall updated was “much worse than feared” due to the guidance cut, which implies consensus downward revisions of circa 2% on revenue, 11% on OMDA, and 38% on free cash flow.
Analysts also highlighted that the company had pointed to weakening macro in Germany, with consumers allocating more spending to non-discretionary verticals, impacting the business’s growth and profitability.