Nexi outlines plan to tackle payments sector challenges as shares plunge

Nexi outlines plan to tackle payments sector challenges as shares plunge

Nexi's Strategic Response to Industry Disruption and Share Performance

By Valentina Za and Romolo Tosiani

Share Price Reaction and Analyst Perspectives

MILAN, March 5 (Reuters) - Shares in Italy's Nexi sank up to 22% to a record low on Thursday after Europe's biggest payments group in terms of handled transactions outlined a three-year strategy to cope with mounting sector challenges.

Analysts said the share reaction appeared overdone because the company's 2025 earnings were only slightly below expectations, as were the mid-term forecasts.

Investor Sentiment and Dividend Policy

However, some investors, especially U.S. ones, may have been disappointed by Nexi's choice to hike 2026 dividends by 20% and forgo a share buyback, which in 2025 matched in size the cash returns, CEO Paolo Bertoluzzo said.

Bertoluzzo told a press briefing that Nexi was transitioning from a fast-growing company to one that produces steady cash flows, with its investor base adjusting accordingly.

Ownership Structure and Key Shareholders

Private equity firms Advent and Bain, which took Nexi public in 2019, last month sold their remaining stake, leaving rival fund Hellman & Friedman and Italian state investor CDP as the top two shareholders with around one fifth of the shares each.

Industry Challenges and Nexi's Position

Advances in technology are disrupting the payments industry, allowing new entrants to move in and undercut the role of banks.

Legacy payments firms like Nexi—which has focused on merchant payments and expanded by buying banks' payments divisions over the years—are particularly exposed.

Financial Adjustments and Strategic Shifts

Nexi wrote down 3.7 billion euros in its 2025 accounts to reflect cheaper sector valuations of previously acquired businesses, such as Nordic peer Nets.

Nexi bought companies at high prices but paid for them in shares when its stock was worth six times its current price, Bertoluzzo said.

Future Growth and Market Focus

The company said its revenue and profit margin growth would accelerate again in 2028, as it pivots its business towards mid-sized companies to defend its market share.

In the meantime, it plans to use cash distributions to reassure investors about the resilience of its business model.

"You don't have to believe we can go to the moon," Bertoluzzo told investors.

Short-Term Pressures and Financial Outlook

Revenues and margins are under pressure in the near term because Nexi offered discounts to some banks to secure the renewal of contracts and bore the hit from contracts lost years back, Bertoluzzo said.

Nexi expects to generate 2.4 billion euros in excess cash in 2026-2028 and return more than 1.1 billion euros to shareholders as dividends.

(Reporting by Valentina Za in Milan and Romolo Tosiani in Gdansk; editing by Milla Nissi-Prussak)