Rising costs take shine off strong revenue growth at Wise

Payments app Wise reported strong revenue growth and said it was “business as usual” a day after the group revealed its chief executive was under investigation by the UK financial watchdog.

Rising transaction volumes, especially among businesses, helped boost revenues by a third in the year to March 31 — its first as a listed company — but rising costs from new staff and the expense of listing weighed on its earnings.

“It’s been business as usual — we are growing fast and we are profitable,” said Matt Briers, Wise’s chief financial officer. “This year we’ve seen volume growth but also we’ve launched new products and new markets, and nearly half our payments are instant.”

The company’s share price was down by close to 10 per cent by mid-morning on Tuesday.

On Monday, Wise said the Financial Conduct Authority had launched an investigation into Kristo Käärmann, after HM Revenue & Customs included him on a list of individuals who had received a penalty over a tax default.

“The board takes this issue very seriously,” said Briers. “Now it’s time for the FCA to do their own work — as a board and company we continue to support Kristo,” he said, adding that the investigation related to a personal tax issue.

Wise has been one of the UK’s most high profile fintech companies, listing in London just a year ago with a value of £8bn. Käärmann owns around a fifth of the company, formerly known as TransferWise, which he co-founded in 2010.

Wise said on Tuesday that revenues in the year to March 31 were £559.9mn, a 33 per cent increase on the previous year and ahead of consensus estimates of £554.8mn. Profit before tax increased by a more modest 7 per cent to £43.9mn. Revenues are expected to grow by between 30 per cent and 35 per cent for the year ahead.

However, administrative costs increased by 48 per cent to £321.4mn. Adjusted earnings before interest, tax, depreciation and amortisation were £121.4mn, a 12 per cent increase year on year but missing estimates of £128.2mn.

The company provides services such as international money transfer to consumers and businesses, and recorded a 40 per cent increase in cross-currency transactions in the year to March to £76.4bn. Wise said that it had reduced the average cost to customers of moving money to 0.61 per cent of transaction value by the fourth quarter, 8 basis points lower than a year earlier.

Among the new products launched was Assets, an investment that allows users to switch money in their online account from cash to stocks, which has been launched in the UK. The company has also rolled out accounts in Brazil and Malaysia and a debit card in Canada.

Despite shares ticking up on Tuesday, they have dropped more than 60 per cent since Wise listed last year, reflecting broader struggles for payment fintechs.

“The only thing we worry and investors worry about is the long term and proving that we are building a very sustainable business,” said Briers. Wise was profitable for a number of years before it listed, unlike many other fintechs who are now facing difficulties as access to easy cash has dried up.