Italy's Nexi Surprises Markets With Ambitious Goals

Nexi, Europe's biggest payment firm by volume, on Tuesday said it would increase profits more than markets expected over the next three years and generate around 2.8 billion euros ($2.7 billion) in excess cash.

Unveiling a strategic plan which sent its shares sharply higher, the Italian firm said it could use the cash for mergers and acquisitions if opportunities arose, return it to shareholders through dividends and buybacks or use it to cut debt.

Milan-based Nexi forecast average annual revenue growth of 9% between 2021 and 2025, to around 4.2 billion euros, with a 14% annual rise in core profit over the same period.

"Targets are above consensus and imply a solid growth profile for both the top and bottom line, coupled with strong deleveraging," Equita analyst Gianmarco Bonacina said.

Nexi's aim to grow normalised earnings per share by 20% per year through 2025 compares with a 14% market forecast, he added.

Steered to a 2019 public listing by its private equity owners, Nexi became a top European payments group rivalling France's Worldline through the acquisition of domestic peer SIA and Danish group Nets.

"The European payments market is complex and fragmented, and we love it," CEO Paolo Bertoluzzo said.

Nexi generates 55% of its business in Italy, where Bertoluzzo said it would be difficult to expand further given Nexi's large market share. The Nordics account for 22%.

Over half of its business derives from running payments for retailers, an activity known as merchant acquiring which banks have increasingly been outsourcing in the face of growing technology investments.

Nexi is among bidders for the merchant acquiring business of Spanish bank Sabadell, sources have told Reuters, and Bertoluzzo said other banks may follow Sabadell's lead.

He added that Nexi's acquisition targets included buying merchant acquiring services in countries where it is already present as well as new European markets where the penetration of electronic payments is still low and banks are behind in disposing of merchant acquiring units.

Shares in Nexi, which have fallen below their IPO price of 9 euros as the sector suffers from recession fears and high inflation, rose as much as 8%, leading the European Stoxx 600 index.

They were up 4.8% at 8.82 euros as of 1200 GMT.

Equita's Bonacina said Nexi's targets were similar to those set by Worldline last year, adding the 20% discount at which Nexi shares traded versus Worldline was unwarranted.

Nexi trades at 14 times its 2023 earnings while Worldline trades at 17 times.

($1 = 1.0378 euros)