EML Payments Ltd

ASX:EML

Earnings Call Analysis

Earnings Call Transcript 2020-Q3

[Operator]

Thank you for standing by, and welcome to the EML Payments Limited Trading Update. [Operator Instructions] I would now like to hand the conference over to Mr. Tom Cregan, Group Chief Executive Officer and Managing Director. Please go ahead.

[Thomas Anthony Cregan, Group CEO, MD & Director]

Thank you, Rachel. Good morning, and welcome, everyone, to the EML Trading Update. I'm joined today by Rob Shore, Chief Financial Officer; and Peter Martin, Chairman of EML. The impact of COVID-19 has been a significant one for EML, as it has been for a lot of businesses, that creates both challenges and opportunities for us. And given it's an unprecedented time, we've invited Peter onto the call today, so feel free to ask any questions at the end of Rob, Peter or myself. This morning, we posted the update to the ASX with unaudited financials through to the end of March and an update on trading conditions in April, which we would reasonably consider to be the low-water mark in terms of the impact of COVID-19. I'll take you through a summary of the presentation and some key underlying themes, try to get through that relatively quickly and then open it up for questions. On Page 2, you'll note our unaudited financial performance for the 9 months to March 31, 2020, which excludes the acquisition of PFS, which we closed on March 31. The highlight, as you can see there, was GDV of $9.83 billion, up 55%; revenue of $87 million; EBITDA of $27 million, up 24% over the prior comparative period; and operating cash flows of $27.3 million, an increase of $18.2 million over the first half result. This result was achieved despite more closures starting in earnest, really, from March -- from early March onwards with substantially all of our mortgage card programs suspended by the end of March due to social mobility and social-distancing restrictions, closing physical malls in most of the countries in which we operate. As important, we transitioned our operation to a fully remote workforce model with an emphasis on keeping our people safe. And as dislocating as the whole COVID event is, we've managed to continue to support our customers, launch new programs, sign new contracts, which really is a testament, I think, to the resiliency and adaptability of our team and also of our customers who are having to change the way they ordinarily do business as well. We have taken steps to reduce headcount costs where applicable and where those decisions are driven by just business logic. This is being driven by COVID-19 and needing to artificially make larger reductions to the workforce or furlough significant numbers of staff. Moreover, we were also able to close the PFS acquisition, which was fundamental to our strategy of transitioning from a company deriving the majority of its revenue and earnings from gift cards and more gift cards, in particular, to a company deriving the majority of its revenues and earnings from general purpose reloadable programs. Had EML and PFS been consolidated in March, the revenue from the GPR segment would have been 56% with the Gift & Incentive segment of 37%. And that is the first time that, that has happened in the company's history to be deriving the majority of its revenues from GPR programs. The fact that we're able to close the PFS acquisition on improved terms was a great result for shareholders. That's positioned us with a very strong balance sheet that gives us incredible flexibility as we look forward. The key extracts of cash and breakage from the balance sheet as at 30 April 2020, as shown on the following page. The company held in excess of $125 million in cash. And despite weaker trading conditions, obviously, in March and April, generated positive operating cash flows in both months. In addition to our cash balance, our breakage or our contract asset stood at $36.8 million, of which we expect 75% to convert to cash in the coming 12 months. And we benefited from a onetime cash gain of $3.77 million on unwinding foreign currency positions related to the PFS acquisition, which we took in November of last year. Whilst that's a cash gain, this amount is excluded from our calculation of EBITDA, which does not include FX gains or losses. To provide shareholders with more color into trading conditions in March and April, and I'll provide a little bit of color into May as well, GDV in our Gift & Incentive segment was down 29% on the prior comparative period. In March, whilst GDV in our GPR segment increased 10.4% and GDV in our VANS segment was up 56% over the prior year. Given gift cards convert to revenue at circa 600 basis points versus GPR at circa 90 basis points and VANS at circa 12, the impact to EBITDA is obviously significant as malls and more discount programs are suspended. In April 2020, the gift card, the Gift & Incentive segment declined further to a 53% decline on the prior comparative period. The fact that the decline wasn't higher was due to our non-mall business, which is our incentive gift card piece of the business, generating the vast majority of that $31.4 million in GDV for the month. As I said at the start of the call, we expect that April will really be the low-water mark for malls. And there's some early signs of improvement in Europe in May, and we expect that hopefully similar traction coming to the U.S. kind of in June -- towards the end of June. Pleasingly, organic growth in the EML GPR segment, so this is, again, prior to PFS, actually grew from 10% to 26% in April, which is really driven by growth in our Salary Packaging programs, including New South Wales Health, which was a key program that was implemented. And when you include PFS for the first time, we generated debit volume from GPR programs of $681 million, which is pretty significant. And even in the month of April, I think PFS would say that, that would be their low-water mark as well as social distancing and lockdown provisions impacted transactional activity in some of their segments in April, particularly in neo-banking and alternative banking. If you're in a lockdown mode, you're still transacting, but you're obviously transacting less because you're just not out and about in the economy. For those who have followed us or invested in us for some time, we're always focused on diversifying the business as much as possible, and I think that's evident in the April result. No one can see something like COVID coming, but the reason you have a diversified approach is in case something like that happens. So I think we were always mindful of positioning the business against those kind of -- against those shocks. And I think as an example of that, our PFS GDV growth was up 39% in January and February over the prior comparative period, so the start of the year with extremely strong growth. That growth fell to 12% in April 2020 versus April 2019. So still positive on the year prior. And as I said before, digital bank cardholders continued to transact in April but less so given lockdowns, but those volumes were offset by higher government disbursements, albeit those government disbursements convert at a lower yield. Early data in May 2020, and so this is only for -- this is kind of up to the 19th, suggests that PFS will experience GDV growth of circa 20% over May last year. So in essence, you're going from broad-based GDV growth of 39% in the first 2 months of the year, falling to 12% in April and on track to be 20%, slightly better than that, in May. So as recover -- as economies are reopening and recovering, their growth is picking up. So that's probably likely to be in the parlance, more of the V-shaped curve than the U-shaped one. Digital banking and government payments are not discretionary in the same way that mall gift cards are and nor are they seasonal. So we benefit structurally from the shift to that mix as well. And in the month of April, we generated $2.7 million of EBITDA with a contract asset of $2.2 million under AASB coming into EBITDA based on December 2019 activations, and therefore, unaudited year-to-date EBITDA as at the end of April was $29.68 million. Our balance sheet strength positions us favorably to reposition the company further in the coming years. We will continue to service the mall gift card programs, but we are not in control of when malls reopen, when gift card sales recommence, the impact of macroeconomic conditions on consumer spending or the degree of structural shift that might have occurred to online purchasing as a result of lockdown measures. But what we are in control of is creating a vision of the future that will see EML become a preferred partner for disruptive organizations in the fintech, banking and lending industry and for investing in our own technology and products and our people to get us there. And that is the entirety of what's taking up the management group's time and energy at the moment. Some of that progress is evident on Page 4 and 5 in terms of new business development, both in terms of new contracts signed and programs launched and/or programs pending.In the Salary Packaging space, we increased our accounts from 187,000 at the half year to 228,000 to date as a result of the commencement of the rollout to New South Wales Health and the continuation of the SmartGroup conversion from Westpac and also a contract win on the commencement of the rollout to ACT health as well. All of our partners in that segment are now contracted to move across to a fully digital EML-issued program, as in mobile-driven versus the need for a physical card, which drives margin expansion once that transition is complete at the end of FY '21. It drives margin expansion because we will be the issuer as opposed to paying issuing bank fees to third parties. Given we generate circa $60 per account per annum, those incremental accounts launched between -- since January 1 to today, north of $2.6 million, $2.7 million in incremental revenue for the company, and we continue to expect that we'll meet our target of circa 300,000 accounts, as indicated. In our ControlPay segment, we've signed a number of programs in the buy-now-pay-later and neo-lending space that will see us supporting Buy-Now-Pay-Later programs in each of our regions. Our digital banking and fintech partners continue to grow as well. We saw the number of programs in that space. Those 4 are just kind of representative of some of them as opposed to the laundry list of them, which would be longer than that. And we also signed a number of gaming-related disbursement programs in the U.S.A. as well. As I said before, they're representative of some of them as opposed to all of them, but we do see an expanding pipeline of activity, arguably better than it's ever been. I think COVID has fast-tracked many companies' plans towards digitization. Plans that they might have had in motion to do in 2 or 3 years are now far urgent -- more urgent than they probably were. And as Mastercard and Visa have said recently, they're calling cash is dead. They're making that proclamation. And I think the path toward digital payments has just accelerated significantly. And we fully intend to take advantage of that transition. Page 6 talks to our gift card segments. And I won't go to each point there, but I think it's worth noting that GDV for the month of May in Europe is approximately 47% of what it was in May of last year. So if you think about it in the month of April, malls were almost all closed. So that would have been down 97% in the month of April 2019 -- 2020, a big part on 2019. And in May, just as malls are starting to open in different countries, we've got kind of 47% of that back. So that's pleasing. It's a bit too early to call that a trend, but that's certainly pleasing to see. Although most of our malls in the U.K. remain -- still remain closed. So -- and I think that may be the case for a little while longer as well. We're not seeing that sales recovery in May that we've seen in Europe so far in the U.S.A. or Canada, given lockdown restrictions still remain, which makes sense given that they are behind Europe in terms of enforcing the lockdown measures in the first place. And we are told by our customers that where malls have reopened, the foot traffic is substantially lower. So I think we're starting to see that pickup in that recovery in Europe with most malls, for example, open in Germany and Poland, and Italy and Spain and other markets starting to open up. I think it will probably be until the end of June that we start to see -- have a better position of where the U.S. lies when it comes to how that will recover. We will launch EML Connect at the end of June, which is a platform that we've been working on for a year that will allow our mall customers anywhere in the world to use that platform for in-store, web and mobile or digital sales. And we're working to implement that in the coming 12 months. And to the right-hand side, on the incentive space, we're seeing positive traction as companies really migrate to a digital Pays solution versus physical gift cards. And that solution enables the delivery of the gift card to a mobile device, automatically loaded into an Apple Pay, Google Pay or Samsung Pay wallet, and some of the employee rewards and consumer incentive programs there are listed. AGL Employee Rewards for example, Harvey Norman programs, FMCG programs. So we're definitely seeing traction in that, which is good, because we had invested heavily in that product and launched it over a year ago, and we've been selling it since. So I think we're starting to see that traction happening, which is a very positive thing. And then finally, on Page 7, we just wanted to share some positive stories around how our products have been used to support vulnerable people in multiple countries covering causes such as economic vulnerability, domestic violence and mental illness. United Way, which we mentioned there, is a charitable program for economically vulnerable people. We signed a contract with United Way, which is a referral from Mastercard. We've launched that within 6 days in the State of Connecticut, which enabled them to get money immediately to those in need without having to have a card manufacturer, then a card put in the mail that will be received by that individual, which would obviously take time. And we're now talking to United Way about extending that into other markets. Our partner, Epipoli, in Italy is working on similar kind of government stimulus programs. PFS have extended a number of their programs that already exist with different government agencies and local market authorities, some of which are mentioned right at the bottom there, to include programs funding domestic violence and mental illness and other programs, which is very -- which is great to see. And on the top corner there, the RVS, which is the Royal Voluntary Service, which is a group of volunteers who support clinically vulnerable individuals in the U.K. that are under the health system under the NHS. We've been selected as the only prepaid issuer to those individuals. So what that means is that these are people who are at home, who are clinically vulnerable, so ill or having to distance themselves, who have volunteers making purchases on their behalf, whether that be -- it could be anything, could be clothes, could be support, could be groceries, et cetera. And they can do that through different ways. They can do that by providing cash to those volunteers, they can do that through -- risky but giving volunteers their bank account details and debit cards, they can get vouchers to people. So there's multiple ways that they're doing that today, but then they now have the option of using prepaid cards as well with all of the controls inherent in that. So the person can load money on the card and then have restrictions on when and how much that card can be used for. So expect a bit more press and the media on that in the coming weeks in the U.K. So it's a pleasing thing. And with crisis comes kind of opportunities, but it's nice, from a society perspective, that our products are able to be used in that way. Finally, you'll note that the earn-out for the acquisition of Presend in the Nordics has been completed, and those shares will be released to the vendors as per the terms of the earn-out. And given our product scope, our broadened product scope, that business was a very small company we bought at the time. Largely, the consideration was an earn-out. And that's been more than achieved, which brings our effective purchase price multiple down from something like 16.5x to 5.5x, somewhere in that ballpark, by taking what was expensively a very simple gift card business and then allowing them to sell reloadable programs and other programs into the Nordics. And with that, Rachel, I'd like to open up to any questions if I can.

[Operator]

[Operator Instructions] Your first question comes from Garry Sherriff with RBC.

[Garry Sherriff]

Tom and Rob, can you hear me okay?

[Robert Shore, Group Chief Financial Officer]

Yes, Garry. Cheers.

[Garry Sherriff]

Just a quick question. You talked about the April EBITDA being $2.7 million. The vast majority of that was breakage. How should we think about May and June? In the context of materially lower gift card sales, should we effectively look at having that breakage assumption, I guess, in each month in April -- or sorry, May and June? Is that the right way to think about things?

[Thomas Anthony Cregan, Group CEO, MD & Director]

Sorry, I was talking, and I was muting myself. Yes, that probably is right. I think the in -- April being -- the way I would look at it really is with April being -- having all malls closed, the $2.2 million was the sales in December of last year under the AASB 15 accounting standard, which will start to get smaller now in the next couple of months. And if you took that out, so if that had been recorded in the first half, then the kind of EML core business, if you want to think of it like that, would have been breakeven in the month of April with PFS being kind of incremental to that. And with sales coming back, if our sales in May are 50% issue of what they were in the previous month, then I think if you added back kind of half of that $2.2 million, that's probably the right rule of thumb. Rob, would you agree on it?

[Robert Shore, Group Chief Financial Officer]

Yes. That's probably the right way to think about. I mean we won't be saying $2.2 million have been new gift card sales, but I think in the order of magnitude of where the forecast is going to be for May and June, volumes are going to be better in May and June for the shopping mall segment than we saw in April. So certainly, in terms of the sort of ongoing trading, we only see it improving from a low-water mark of April.

[Garry Sherriff]

Yes, that's clear. And maybe if I shift to gift cards specifically. Can you maybe just remind us on what that historical split between in-store and online gift card purchases are? And I guess my next question is was there a shift to online gift cards over the last few months specifically?

[Thomas Anthony Cregan, Group CEO, MD & Director]

Probably not within the mall space. I think the -- within the Gift & Incentive segment, we always had malls as one part of that, and incentives as the other part of that. And it was -- and malls are probably 65%, 70% of that segment, and the incentive piece was the rest. The malls haven't really been selling any digital product at all because they were closed, right? So I think that they took the view that they didn't want to be selling products online that couldn't be redeemed. So when the physical property is closed, so did their online percentage of selling. But even when they were open, the online percentage of a bulk gift card program is pretty small. It'd be single -- low single-digit percentages. I mean the vast majority is walk-in traffic being acquired there and being gifted to people. The incentive part of the business is growing but in an aggregate sense as well as shifting from physical to digital. And it's vital because of now, I think, again, as I said, some of the benefits of it, which were always the case, are the immediacy of it and the ability to get it to someone now without anyone handling it. And so as concerns about cash handling have kind of become pronounced during the last few months, it's similar with a card. I could send an incentive card to someone's house, but it will take time to get there. And they're probably thinking how many 20 or 30 people touched this thing before I got it in my letter box as opposed to I'm sending it directly to their phone in seconds, and that kind of alleviates that concern. So there's a shift in that particular segment from physical to digital, but there's growth in that segment as well, driven by digital.

[Garry Sherriff]

Moving over to PFS. The volumes were very solid with PFS. But you did mention there were, I guess, some lower volumes in some of those more profitable digital banking multicurrency segments. How should we think about margins for PFS? Historically, we have a sense, given what's happened of late and your intimation that perhaps margins might be a little bit lower in PFS. Can we get some guide on what we should be thinking going forward with PFS?

[Thomas Anthony Cregan, Group CEO, MD & Director]

I think we'll probably -- I'd say we're end of June, I think, before we can do that. I think looking at April is -- it's a different one to really get that guidance because what we saw was the GDV remained up because of growth in government programs, but they yield lower than the traditional kind of digital banking programs. But then in May, in the first weeks of May, they had record loads from those digital banking customers. So I think probably in the next -- by the end of May and maybe the bit of June, we'll have a better view on kind of margin and how that looks going up for the next couple of months. It's a hard one to answer, but we'll come back with a bit of color on that in the next time we speak.

[Garry Sherriff]

Yes. That's fine. No trouble. The last question I had was just in relation to Brandon Thompson, your COO. I noticed the announcement came out saying that he's leaving the firm. Can you maybe provide some color? I mean I know he was one of your earliest ties. You've got a long relationship with Brandon, and he was one of the key lieutenants being the COO, particularly out of the U.S. Just trying to get a sense on what's happened. Is he going elsewhere? Who is replacing him?

[Thomas Anthony Cregan, Group CEO, MD & Director]

Yes. Fair call. I mean he certainly was -- I mean someone that I've worked with in the past in 2 previous companies. In fact, this was the third iteration. He had someone back up a truck with a ton of money in it. And so it was a very simple decision to make, quite frankly. We're talking quantums different to what our remuneration structures would be, which would have set off a whole range of different precedent issues within the organization. So just not something we were kind of prepared to prepare to match. But also, I think that we had -- we're not replacing the role because again, it's just a change in our own cycle, a change in our own kind of operating cycle. I think we're working remotely and being more connected to the different regions and the different key people within the organization. Our view is we want to kind of de-layer that business. And whilst that took a bit of stress off me, frankly, just in terms of workload, COVID makes you reassess all these jobs and makes you think. That's a job that is important, but it's a job that costs us probably, when you take currency into effect, probably $600,000 or $700,000, right? And so it just forces you to look at all those roles and think how essential are they in the forward -- in the forward mirror as opposed to the kind of rearview mirror. And so we just elected not to replace the role. And that the bulk of those responsibilities will be taken through a kind of taken up by the existing team. So he's a ripping guy, and he's done really well for us. He's staying within the industry, but I'll let him announce where he's going to -- not to a competitor of ours. And yes, we just wish him well.

[Operator]

Your next question comes from Nick Caley from E.L. & C. Baillieu.

[Nicholas Caley, Equity Research Analyst]

Just 2 questions. One is just in terms of the VANS stuff, it still seems to be growing at places that you're marketing or the trends in the market or both?

[Thomas Anthony Cregan, Group CEO, MD & Director]

It's -- trends in the market I would put it down to, like we're adding partners, I think the last one being Viewpost that would have been the larger one. And there's other ones that they're winning that are in the kind of $20 million, $30 million, $50 million a year kind of spend. In April, I think there was, I would say, a minor decline. I mean growth is still positive. But I think some of our customers in that space are in health care, and again, people weren't going to visit their dentists and chiropractors and so forth in April. So I think we'll see that bounce back. I think given it's 12 basis points, I mean you can have $100 million variation in GDV. It's $120,000 in revenue. So -- but I would say structural trend in that space will only get better. I mean you -- again, you fight it to get people change from their habits, to get them to change from a check to a digital payment requires beating inertia, which is a hard thing to do, except when that person can no longer get back into their office. They can't physically [ clip ] a check, and they can't get out to mail the check. The person who gets the check doesn't want the check because that check's been touched by 10 people, and then they're going to take it to the bank branch. And so that will be one of the trends for sure that just continue to help VANS as a segment because people have no option but to start adopting it. And so it's probably a similar trend to online retail sales in Australia moving from bricks-and-mortar to online because that's what -- that was the only avenue available to people. So long term, I think that, that business will be pretty well served structurally.

[Nicholas Caley, Equity Research Analyst]

Okay. And just finally, before mall closures, did you -- is there any much visibility on early success with Simon Malls? Or is it too early?

[Thomas Anthony Cregan, Group CEO, MD & Director]

It's too early. I mean they went into -- so they went live, I think, on maybe the 15th or 18th of January from memory, and they were closed in March. So we've -- it was the first week. So I think we only had a month's worth of trading activity. So it was kind of a rounding error. But the talks with them, we're meeting with them and talking about it regularly. So we think that they will be likely to be selling cards probably towards the end of June. And most of the locations probably going to be opened by the end of June. So our discussions with them are how do we come out of the gates as strong as we can once we're kind of back in business.

[Operator]

Your next question comes from Ron Shamgar from TAMIM Asset Management.

[Ron Shamgar;TAMIM Asset Management;Analyst]

Yes. Can you hear me?

[Thomas Anthony Cregan, Group CEO, MD & Director]

Yes. We got you, Ron.

[Ron Shamgar;TAMIM Asset Management;Analyst]

Just quickly. So just the Simon malls, I know there was also a large opportunity in the corporate incentives part of their business that doesn't rely on malls. Any traction getting that launched?

[Thomas Anthony Cregan, Group CEO, MD & Director]

It does rely on the malls because they still have to -- they're sold to companies as employee incentives, for example, employee rewards, but they're still going to be redeemed in the mall. So with malls closed, they weren't selling any kind of B2B, as I would call it B2B, since they kind of went into lockdown mode. So I think when -- as and when the stores start to, like, open up again, then that will pick up and we will be part of that from when it kicks off.

[Ron Shamgar;TAMIM Asset Management;Analyst]

Yes. Okay. And then you mentioned you going into New Zealand. I'm just wondering was that sort of a long-term plan or was that customer-led or Mastercard-driven?

[Thomas Anthony Cregan, Group CEO, MD & Director]

Yes, but it was Mastercard-driven. So we hadn't ever really -- we looked at it in the past. And just we -- I guess we were just focused on broader market opportunities in the U.S. and in Europe and so forth. And Mastercard issue a number of programs in NZ that they prefer to get out of the issuing business because we're -- we've got a direct license for them, with them to issue in Australia. They've asked us to take some of those initial programs over, which will now -- and that's been in the wings. I think Rob, we've been working on that for, I would say, 9 months probably. So now we'll have some -- we'll get some programs live, but we can now start to look at other kind of potential opportunities over there as well.

[Ron Shamgar;TAMIM Asset Management;Analyst]

Okay. And then just the gross margin, that was a pretty good 76% second half. With PFS coming into the group next year, is that going to sort of be a drag on gross margins initially or you still expect incremental increases half on half?

[Thomas Anthony Cregan, Group CEO, MD & Director]

It will be a drag because of the -- it won't be a drag in the gift card segment because they don't issue gift cards. But because they pay -- they have the funds that they pay to a third-party processor, which is GBP 3-and-a-bit million, GBP 3.2 million, GBP 3.4 million a year, that comes out of their gross margin. So as they move programs from that to their own processor, then their margins will start to kind of reflect what EML's margins are today. But in the -- it'll be a drag there for [ probably for the ] 18 months. So we'll need to kind of communicate that effectively just to make sure people understand why that is.

[Ron Shamgar;TAMIM Asset Management;Analyst]

Yes. And just last question for me. The new director that joined this week, can you -- I mean what sort of opportunities do you think that's going to open to you in the U.S.?

[Thomas Anthony Cregan, Group CEO, MD & Director]

So George, George was CFO of Netspend when I was an Executive Vice President there, and he really has a pretty -- he's had an excellent career, frankly, across all manner of publicly traded companies. He's done -- he's taken public companies private, private public, restructures, private equity deals, you name it. So I -- the team had talked to George a while I think obviously took the reins a while back. But he's a bit of a humble bloke, so he probably wouldn't want me saying it, but he is a name. I mean people would follow him in the U.S., public investors, private investors. We've had a lot of positive track record dealing with him, and he's done -- he's known for being a pretty special guy. So we -- he's a huge addition. And he'll add a whole range of values. But Pete, I might throw it to you, if you just want to give a minute or half a minute of your perspective on George, okay?

[Peter Martin, Independent Non]

Yes. Sure, Tom. Yes, George is a very high-quality individual, but he's also got a real depth of experience, as Tom said, across the whole payment space. And in fact, during our discussions within regarding becoming a director, he had another truck back up to him offering him a massive amount of money to go into a listed public company in the U.S. as, effectively, the #2, a very big company, much bigger than EML. And he decided to trend that he didn't want to take a full-time job again. So he turned to us and accepted our role. But look, it's part of a Board transition. When Tom and I got involved back in 2012, to be honest, the Board was half a dozen old white guys, and I don't think that's sustainable in today's market. So we're transitioning the Board, adding skills and experience from overseas. We added a couple of some really high-quality women in Kirstin and Mel in the last 18 months or so. George is the next step, and you can expect to see a few other changes over the next 2 or 3 years as we transition to, let's say, a younger, more vibrant and more diversified Board structure. But George is a -- he's a fabulous addition. And Tom's knowledge of the market really comes in, and these people really comes in handy because we would have been struggling to find a George if we didn't have Tom and the key U.S. guys in the market knowing who's who in the zoo, if you like, in payments, and he is a very high-quality name. In fact, his name has been mentioned in some of the big newspapers over there regarding the EML directorship. So we're delighted to have him.

[Operator]

Your next question comes from Cameron Halkett with Wilsons.

[Cameron Halkett, Research Analyst]

A few from me. Just quickly on Salary Packaging, noticing the win with ACT Health and in conjunction with the earlier announced NSW Health, how about other states? Is there an opportunity there? Or have you already signed deals within that I'm currently unfamiliar with?

[Thomas Anthony Cregan, Group CEO, MD & Director]

I think most of the other states were -- like SA Health, is already a customer of McMillan's, for example. And I think -- so I think New South Wales Health was kind of the outlier in that respect. And ACT Health was supported by Westpac and Westpac are obviously exiting the space. So I think there's a -- I think there are other opportunities coming to us similar to ACT Health. But I don't think they're material. I mean I'll throw this to Rob. But I think when you -- when we add up all those other ones similar to ACT Health, we might be talking maybe 10,000 accounts thereabouts. You want to take it, Rob?

[Robert Shore, Group Chief Financial Officer]

Yes. That's about right. They only are large on the Queensland Health, which operate a sort of manual program, and they work with them, and they have [ built ] a bigger program. But they do it manually using sort of spreadsheets.

[Thomas Anthony Cregan, Group CEO, MD & Director]

I mean the bulk of what will get us from 228,000 to 300,000 will be a continuation of that New South Wales Health program or probably half the way through that and then the continuation of the SmartGroup rollout as well. So those 2 things are things that will get it to 300,000.

[Cameron Halkett, Research Analyst]

Cool. Okay, that's pretty clear. I'm keen to hear more, if I can, about PFS. You did disclose GDV for April, which performed well. But I'm keen to hear about the conversion rate in April, given a lower mix of higher-margin, multi-currency cards and more of a government mix. So if I look at the original presentation when the deal was announced, conversion was around 160 bps. So can we expect this to be a bit lower coming into the next few months?

[Thomas Anthony Cregan, Group CEO, MD & Director]

Definitely, yes. I mean the -- I mean Rob can grab that number. The reasonably lower is the -- I mean our -- if you look at our malls as our area of kind of weakness, for example, their area of weakness that will take longer to recover will be multicurrency cards because they're essentially travel cards, but nobody is traveling. So that was 7% or 8% of the earnings back in November when the investor deck went out. And those programs are still there, and they're, believe it or not, still launching, but the volumes are going to be low. And so they're more profitable programs because of FX margins and so forth. So there, they were [ probably ] 165 basis points. And Rob, I'll put you on the spot for...

[Robert Shore, Group Chief Financial Officer]

Yes. For April about 120. But I think April, you'll see the conversion is lower. The mix shift away from those high-yielding, multi-currency programs and also the mix shift away from a lower digital banking program volumes and higher government programs, that mix shift is sort of shaking that around. It's a combination of all those factors. So I don't necessarily think that April will be reflective of May or [cash in June ] necessarily.

[Cameron Halkett, Research Analyst]

Perfect. That's really clear. Last one from me. Just interested to hear if you can talk a bit more around the in-store opportunities you're going to be rolling out in conjunction with Scalapay. Can you talk more on whether that increases their ability to roll out their in-store functionality? And also if you can comment whether there's further opportunities and progress in the space that you're working through that you can speak to.

[Thomas Anthony Cregan, Group CEO, MD & Director]

Yes. It's both in-store and online. So it covers -- the tech solution covers both elements. So obviously, the U.S. Scalapay initially in Italy, but they have plans to launch into other European markets that we're also in. I think they -- we have approval, I think, for Spain and France, and the U.K. is on their road map as well. So as they expand into those markets, we can kind of expand there as well. Given Sezzle is public and Zip is public, I'll probably let them talk to the product rather than us trying to give away any IP of how they choose to use it. And because at the end of the day, they're competing with each other. But all I can say is it covers in-store and online.

[Operator]

Your next question comes from Owen Humphries with Canaccord.

[Owen Humphries, Senior Industrials Analyst]

Guys, I'll be very quick because I know [ straining on ]. But just one quick question. Just the Gifts & Incentive volumes, talking about it being down 47% in May. And you're saying April was down 95% but just for the mall part. And then can you just clarify, is it 47% like-for-like to the 95%?

[Thomas Anthony Cregan, Group CEO, MD & Director]

Yes. So it was 47% of -- so far, it's tracking at 47% of last May. So it's down 53%, if you want to take it in those terms, versus down 97% in April. So...

[Owen Humphries, Senior Industrials Analyst]

And that's, well, U.K. and Europe, U.S. remain closed. And is that like-for-like in terms of numbers because it was -- does that exclude or include the acquisition of Flex-e-Card?

[Thomas Anthony Cregan, Group CEO, MD & Director]

Yes. So that's the Europe number. So in Europe, the volumes were, say, 97% down 53% down. In North America, Canada, it would have been 100% down in April, and I'd probably say the same in May. I mean [ hardly any of them have ] opened, we might start to see that towards the end of May and into June. But the Europe recovery will be quicker than the U.S. one will be by probably a few months, I think.

[Operator]

[Operator Instructions] Your next question comes from Angus Wright with Tribeca Investment Partners.

[Angus Wright;Tribeca Investment Partners;Analyst]

Good updates. Quick ones on PFS. Just trying to get a sort of where volumes are relative to, I suppose, an undisturbed level. In calendar last year did -- it did through [indiscernible] the GDV. So you had a much second -- a much stronger second half than first half. But across the year, that averaged out at sort of GBP 250 a month or AUD [ 468 million ]. Just trying to -- and you've given us April, it sounds like this year [indiscernible] was pretty much just tracking at [ 400 million ] a month is below the average for last year. So just trying to understand if there's any programs that have sort of rolled off this year that's just sort of from the impact of lockdown. And that sort of looks -- what that profile is expected to look like if lockdown conditions ease.

[Thomas Anthony Cregan, Group CEO, MD & Director]

Yes. I mean that, I think, is -- I mean it's the absolute right question. And I think everyone, us included, are looking for -- are looking at what numbers do you start to attribute to this as it grows and which parts are impacted and which parts are kind of unimpacted. The 3 -- they did just over GBP 3 billion in GDV for last year. But as I said, about 7% or 8% of that was multi-currency cards. So you've got the best part of probably GBP 250 million still that will be coming out of that and will take a while to recover. I think it will be next January onwards really, well, as soon as people are free to start traveling, which is probably a bigger question than when they can go back to a shopping mall. So that -- that you've got to kind of take off. And then you're adding back for growth in digital banking and government. So their volumes, if GBP 250 million is what they averaged for last year, and obviously, there's some seasonality, but if that was a straight-line number, they beat that in Jan. They beat that in Feb. They only marginally missed that in April. So I mean in the month of May, that would be about that. So...

[Angus Wright;Tribeca Investment Partners;Analyst]

The GBP 250 million, is it because they get the 300 and -- or they did AUD 395 of GDV and that [ target has been ] sort of about GBP 200 million.

[Thomas Anthony Cregan, Group CEO, MD & Director]

There is a program that we didn't include the GDV in this month, which is a similar program to a [ Low La Row ], if you like, which is kind of a low-yield thing that skews it up. And so we'll -- we're looking at whether we include that GDV or not.

[Angus Wright;Tribeca Investment Partners;Analyst]

Okay. The rest of my questions are already answered.

[Operator]

Thank you. There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.