FTSE 100: Wise reveals higher profits amid founder’s tax probe

Money-transfer company Wise (WISE.L) has forecast strong revenue growth after posting higher profits and seeing a surge in demand.

The firm, which was formerly known as TransferWise and floated in a record-breaking London listing in July 2021, reported pre-tax profits of £43.9m ($53.9m) for the year to the end of March.

Meanwhile revenues at the company, which specialises in cross-border transfers and is one of Britain's most well-known fintech unicorns, soared to £560m, a 33% increase compared to the year before.

Wise now expects its revenue to grow by between 30% and 35% over the next financial year as it looks to grow internationally and invest in infrastructure. It has already expanded in Canada, Malaysia and Brazil.

Its customer base grew 29% to 4.6m in the final three months, with the group transferring 40% more money for customers over the year as the COVID-19 pandemic eased.

Wise also recorded a 40% rise in cross currency transactions in the year to March to £76.4bn, however it was not enough to boost its shares, which fell 6.9% in London.

The results come just one day after Wise said the Financial Conduct Authority (FCA) had started an investigation into its co-founder and chief executive Kristo Kaarmann.

He is being probed by the City watchdog after he was fined by HM Revenue & Customs (HMRC) for deliberately defaulting on his taxes.

Kaarmann’s default relates to an outstanding tax bill of £720,495 for the 2017-18 tax year, which led to a fine of £365,651. The FCA is involved due to Kaarmann’s status as an “approved person” who the regulator must deem “fit and proper” to do their job.

David Wells, the Wise chair, said: “The board takes Kristo’s tax default and the FCA’s investigation very seriously. After reviewing the matter late last year the board required that Kristo take remedial actions, including appointing professional tax advisers to ensure his personal tax matters are appropriately managed.

“The board has also shared details of its own findings, assessment and actions with the FCA and will cooperate fully with the FCA as and when they require, while continuing to support Kristo in his role as CEO.”

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The Estonian businessman owns around a fifth of the Wise, which he co-founded in 2010.

Wise listed on the London Stock Exchange last July in what was one of the biggest flotations of the year, and the largest London tech listing in history.

It made its stock market debut via a direct listing rather than selling shares at a set price in advance.

This meant that the opening price was determined in an open auction on the date of admission to the exchange. In direct listings, companies sell shares directly to the public without getting help from intermediaries.

This happens when firms can not afford underwriting, do not want share dilution, or are avoiding lockup periods, a less-expensive option than an IPO, according to Investopedia.

The method was pioneered by Spotify (SPOT), which used a direct listing to join the New York Stock Exchange in 2018. However, it is rarely seen on this side of the Atlantic.

Watch: What are SPACs?