TIDMWISE
RNS Number : 4276Q
Wise PLC
28 June 2022
28 June 2022
Wise plc
Preliminary results for the financial year ended 31 March
2022
"In our first year as a publicly listed company, we continued to
push forward on our mission to make moving and managing money
across borders faster, easier, cheaper and more transparent for
everyone, everywhere.
Among our successes this year was the introduction of the Wise
Account and Wise Card to Brazil and Malaysia, and the Wise Card to
Canada as well. We launched Assets for Wise Account customers in
the UK, increased the functionality of Wise Business and added new
partners through Wise Platform. At the same time, we engineered
away substantial points of friction in the payments process,
enabling us to lower prices over time while continuing to invest in
product and marketing.
We made sound progress on our mission this year, we saw volumes
grow 40% yoy to GBP76 billion and we helped our 13 million
customers save what we estimate to be over GBP1 billion in fees.
But this remains just the beginning for Wise. Today, millions of
people and businesses continue to be overcharged and poorly served
by banks and other providers. We will continue to invest in our
infrastructure, build features for a smooth and delightful
international banking experience, and expand globally to bring Wise
to more people and businesses around the world."
Kristo Käärmann, Co-founder and Chief Executive Officer
Highlights for the twelve months ended 31 March 2022
We've made strong progress on our mission
- We managed to reduce the average price our customers pay for
moving money across borders to 0.61% in Q4 FY22, down 8bps compared
with Q4 FY21;
- Our payments continued to get faster too. 49% of all
cross-border transfers were delivered instantly in Q4 FY22;
- We launched the Wise Account and debit card in Brazil and
Malaysia, introduced the debit card in Canada and also enhanced the
Wise Account with features including auto-conversion, scheduled
transfers, and the launch of our Assets in the UK;
- We also expanded the features for businesses around the world
who can now issue cards to their employees and manage their
expenses using Wise;
- We've added new Platform partners in the year, taking the
total number to over 50;
- Our customer base increased: in Q4 FY22 we served 4.6 million
active customers, an increase of 29% on the same period last year;
and
- This allowed us to grow volumes, in fact we transferred over
GBP76 billion for our customers in FY22, 40% more than in FY21.
We've become a stronger business in FY22, as we continue to
generate a sustainable and healthy gross margin whilst reducing
prices for our customers and investing in our long term growth.
- While growing volume by 40%, we also engineered and optimised
away marginal costs, passing savings back to customers;
- The Wise Account continued to gain traction, with fees
associated to the account growing such that the take rate only
reduced by 4 bps to 0.73% in the year, with revenue growing by 33%
to GBP560 million;
- Gross profit grew by 43% to GBP372 million, with our gross
profit margin increasing to 66% from 62%;
- Adjusted EBITDA margin* reduced slightly to 22% from 26% as we
invested as planned back into our teams, products and marketing;
and
- Free Cash Flow* remains healthy, increasing 9% to GBP113.3
million.
*This measure is an alternative performance measure ("APM");
Wise uses a number of APMs within its financial reporting. These
measures are not defined under the requirements of IFRS and may not
be comparable with the APMs of other companies.
Outlook
- We continue to invest and build for the future. In the medium
term, we continue to expect to deliver revenue growth above 20%
(CAGR), and an adjusted EBITDA margin at or above 20% as we
continue to invest sustainably; and
- With some positive trends from FY22 carrying through to
provide a strong start to the next financial year, we expect
revenue to grow by between 30% to 35% in FY23.
Financial information
Selected financial Information:
2022 2021 YoY Movements
%
Revenue (GBP million) 559.9 421.0 33%
Gross profit (GBP million) 371.9 260.5 43%
Gross profit margin 66.4% 61.9% 4.5 pps
Adjusted EBITDA (GBP million) 121.4 108.7 12%
Adjusted EBITDA Margin(1) 21.7% 25.8% -4.1 pps
Free cash flow (FCF) (GBP million) 113.3 103.9 9%
FCF conversion (FCF as a % of Adjusted
EBITDA) 93.3% 95.6% -2.3 pps
======================================== ====== ====== ===============
(1)Adjusted EBITDA as a proportion of revenue.
Growth metrics:
Annually
2022 2021 YoY Movement
%
Customers (million)(1) 7.4 6.0 24%
Personal (million) 7.0 5.7 24%
Business (million) 0.4 0.3 34%
Volume Per Customer(2) (GBPk) 10.3 9.1 13%
Personal (GBP thousand) 8.1 7.4 9%
Business (GBP thousand) 47.7 40.4 18%
Volume(3) 76.4 54.4 40%
Personal (GBP billion) 56.9 42.1 35%
Business (GBP billion) 19.5 12.3 59%
Revenue 559.9 421.0 33%
Personal (GBP million) 433.2 341.3 27%
Business (GBP million) 126.7 79.7 59%
Cross-currency revenue take rate
(%) 0.63% 0.70% -7 bps
Take rate (%) 0.73% 0.77% -4 bps
================================== ====== ====== ==============
Quarterly
Q4 FY21 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 QoQ Mvmt YoY(6) Mvmt
GBPm GBPm GBPm GBPm GBPm % %
Customers (million)(1) 3.5 3.7 3.9 4.3 4.6 6% 29%
Personal (million) 3.3 3.4 3.7 4.1 4.3 5% 29%
Business (million) 0.20 0.22 0.23 0.25 0.27 6% 36%
Volume Per Customer(2)
(GBPk) 4.4 4.5 4.6 4.7 4.7 -1% 7%
Personal (GBP thousand) 3.6 3.6 3.7 3.7 3.7 -1% 3%
Business (GBP thousand) 18.1 18.6 19.4 21.6 20.8 -4% 15%
Volume(3) 15.6 16.4 18.0 20.6 21.4 4% 38%
Personal (GBP billion) 12.0 12.4 13.5 15.1 15.9 5% 32%
Business (GBP billion) 3.6 4.0 4.5 5.5 5.5 0% 54%
Revenue 116.9 123.5 132.8 149.8 153.8 3% 32%
Personal (GBP million) 93.7 96.9 103.4 114.7 118.3 3% 26%
Business (GBP million) 23.2 26.6 29.4 35.1 35.5 1% 53%
Take rate (%) 0.75% 0.75% 0.74% 0.73% 0.72% -1 bps -3 bps
========================= ======= ======= ======= ======= ======= ======== ===========
(1) Total number of unique customers who have completed at least
one cross currency transaction in a given period.
(2) Average volume per active customer, calculated as total volume
divided by total active customers in the period.
(3) Total cross currency transactions converted by customers.
Total fees on cross currency transactions as a proportion of
volume.
Total revenue as a proportion of volume.
(6) Q4 FY22 over Q4 FY21
Results presentation
A presentation of the full year results will be held at 12.00pm
GMT Tuesday 28 June at Wise's London offices in Shoreditch. Please
contact Owner Relations if you wish to attend. A live webcast will
be available via our website, www.wise.com/owners , and a replay
will be available on-demand shortly after the presentation
concludes.
Enquiries
Martyn Adlam - Head of Owner Relations
martyn.adlam@wise.com
Sana Rahman - Global Head of Communications
press@wise.com
Brunswick Group
Charles Pretzlik / Sarah West / Samantha Chiene
Wise@brunswickgroup.com
+44 (0) 20 7404 5959
About Wise
Wise is a global technology company, building the best way to
move money around the world. With the Wise account people and
businesses can hold over 50 currencies, move money between
countries and spend money abroad. Large companies and banks use
Wise technology too; an entirely new cross-border payments network
that will one day power money without borders for everyone,
everywhere. However you use the platform, Wise is on a mission to
make your life easier and save you money.
Co-founded by Kristo Käärmann and Taavet Hinrikus, Wise launched
in 2011 under its original name TransferWise. It is one of the
world's fastest growing tech companies and is listed on the London
Stock Exchange under the ticker WISE.
Over 13 million people and businesses use Wise. Today we process
over GBP8 billion in cross-border transactions every month, saving
customers over GBP1 billion a year.
Forward looking statements and other important information
This report may include forward-looking statements, including
within the meaning of the US Private Securities Litigation Reform
Act of 1995, which are based on current expectations and
projections about future events. These statements may include,
without limitation, any statements preceded by, followed by or
including words such as "target", "believe", "expect", "aim",
"intend", "may", "anticipate", "estimate", "plan", "project",
"will", "can have", "likely", "should", "would", "could" and any
other words and terms of similar meaning or the negative thereof.
These forward-looking statements are subject to risks,
uncertainties and assumptions about Wise and its subsidiaries. In
light of these risks, uncertainties and assumptions, the events in
the forward-looking statements may not occur. Past performance
cannot be relied upon as a guide to future performance and should
not be taken as a representation that trends or activities
underlying past performance will continue in the future. No
representation or warranty is made or will be made that any
forward-looking statement will come to pass.
Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by
these forward-looking statements. Details of the potential risks
and uncertainties affecting the Wise Group are described in the
Group's filings with the London Stock Exchange, including in the
TransferWise Ltd Annual Report and Accounts 2021.
The forward-looking statements in this report speak only as at
the date of this report. Wise expressly disclaims any obligation or
undertaking to update, review or revise any forward-looking
statements contained in this report and disclaims any obligation to
update its view of any risks or uncertainties described herein or
to publicly announce the results of any revisions to the
forward-looking statements made in this report, whether as a result
of new information, future developments or otherwise, except as
required by law.
An update from Kristo, our Co-founder and CEO
In 2011 TransferWise was born. My co-founder Taavet and I set
out to fix banking for international people. In fact, international
banking didn't really exist.
We knew people deserved better than hidden charges, marked-up
exchange rates and slow transfers when their money crossed borders.
They didn't want trips to their bank branch and they didn't want
anxiety about where their money was when in transit.
So we started building the infrastructure to move money
instantly, conveniently, transparently and working towards getting
it closer to free. Fast-forward 11 years and we're now moving 3.5%
of all personal money that moves across borders. We're really
pleased to get this far - but there's still 96.5% left to go. And
the opportunity to support businesses is even greater.
We've come a long way, including some significant strides
forward in the past year: we lowered costs and dropped prices (even
faster than expected!), our payments got faster, we developed more
features for businesses and initiated more platform
partnerships.
Today the Wise Account lets you keep over 50 currencies in one
place, and convert between them instantly. And in addition to
sending and receiving money, you can spend anywhere with the Wise
debit card. Last year we also launched 'Assets' in the UK, so
customers can choose to invest their money, whilst retaining access
to it - no matter the currency.
49% of our transfers are now instant, arriving in less than 20
seconds, compared with 36% just twelve months ago. And a lot of the
time they're incredibly low cost, and we continue to find ways to
reduce the cost for the customer. This means that now, over 13
million people and businesses are saving over a billion pounds a
year compared to using their bank.
This financial year was also big for the company itself. We grew
from around 2,400 Wisers to almost 3,400 in just 12 months - and
opened a new office in Austin to power up our growth in North
America. In July, Wise listed on the London Stock Exchange, and
although the listing hasn't changed who we are or how we operate,
we're hugely proud that our customers can now own a stake in Wise.
Now every stakeholder can be more closely aligned with our mission
and invest in the fight against archaic financial borders.
Product enhancements and successes
Throughout FY22 we continued to invest in our infrastructure,
improving our service across our core products.
-- Wise Account. This year we brought the Wise Account to people
in Brazil and Malaysia and introduced the Wise Card in Canada. We
also launched Assets in the UK, our new investment product.
-- Wise Business. We've deepened our partnerships with
QuickBooks so that paying bills is simple and quick. Money
management has been made easier with the launch of expense
cards.
-- Wise Platform. In the USA we have integrated with Google Pay
and linked up with other financial services providers like Sable, a
US neo-bank. We also integrated Shinhan Bank, South Korea's second
largest bank.
We have so much more to do
In an increasingly fractured world, the need for honest and
borderless international banking has never been greater. We are
driven by our mission to build money without borders and to make
the lives of international people and businesses easier - from
their very first transfer to giving their successful business a
global reach.
International people and businesses are underserved. We grew our
market share of personal transfers to 3.5%, and we will continue to
grow our smaller share of business transfers.
We will continue to invest in infrastructure, build features for
a smooth and delightful banking experience, and expand globally to
bring Wise to more people and businesses around the world.
A financial update from Matt, our CFO
Our mission is to create the best way to move and manage money
around the world. We remain focused on our customers' needs and
solving their problems, whilst building out a sustainable long-term
business to achieve the mission. In bringing transparency and
fairness in how we price our products, we've found a common ground
of creating massive value for our customers and also our
shareholders.
In FY22, we helped over 7 million active personal customers and
410,000 active business customers. Both segments are growing
rapidly with personal customers growing at 24% and business
customers growing at 34% over FY21.
We processed GBP76.4 billion in cross-border payments in FY22,
which was a 40% increase over the prior year. We saw volume from
personal customers grow by 35% YoY whilst Business customer volume
grew by 59% YoY.
The volume growth was faster than the growth seen in the number
of customers, driven by the average volume per customer. This was
significantly lower in the first quarter of FY21 due to the impact
of the COVID-19 pandemic on customer demand for international
payments, but quickly rebounded in the second quarter of FY21.
Furthermore, businesses typically send larger volumes compared to
personal customers, and, as they represent a growing proportion of
the total number of customers, the average volume per customer for
Wise is gradually increasing, reaching GBP10,300 in FY22, a 13%
increase over the prior year.
This volume growth has been partially hindered by changing FX
rates causing a headwind. On a fixed FX basis, we saw VPCs grow 18%
(vs 13% using floating rates) and therefore overall volume grew at
46% on a fixed FX basis (vs 40% using floating rates).
The volume growth has driven our revenue growth, which is a
function of the volume our customers move and also of the prices we
charge our customers. In FY22 we generated GBP559.9 million of
revenue, a 33% increase versus GBP421.0 million in FY22. Revenue
from personal customers grew 27% YoY and revenue from business
customers grew 59% YoY.
We managed to reduce our cross-currency take rate by 7bps to
0.63% in FY22 as compared to 0.70% in the prior year. This was
primarily driven by reductions in price that were enabled by
reduced unit costs that we passed on to our customers.
Specifically, this is enabled by lower foreign exchange losses and
reduced spread costs thanks to better risk management and more
favourable terms with our banking partners. With price reductions
being funded in this way we are able to grow the business and
strengthen our market position while generating a healthy level of
gross profit to reinvest into our future.
Cross border payments and conversions make up the majority of
our revenue. But as we serve customers more broadly, we've seen
that our revenue from other products has been growing faster. We
earn fees when customers move money in their local currencies,
spend on their Wise debit card, and hold their money in our Assets
product. Because of this the total take rate decreased by only 4bps
to 0.73% in FY22 compared to 0.77% in the prior year, as the
contribution to take-rate from other revenues grew from 0.07% in
FY21 to 0.10% in FY22.
Whilst we dropped prices, we still generated GBP371.9 million of
gross profit, a 43% increase on GBP260.5 million last year and
equivalent to a 66% gross margin (FY21: 62%), thanks to the savings
in our marginal unit costs mentioned above. This growth in gross
profit, which is in line with our growth in volume, demonstrates
that reductions in price can be made whilst sustaining our ability
to invest.
Administrative costs increased 48% to GBP321.4 million,
primarily due to an increase in employee costs, outsourced
services, marketing and other administrative expenses.
Employee costs increased 31% to GBP184.8 million as we continued
to build our teams to support growth. We increased the number of
Wisers by c.950 to almost 3,400.
Consultancy and outsourced services increased by 55% to GBP42.3
million and other administrative expenses were almost four times
higher at GBP22.9 million. This increase includes the one-off
listing costs plus an increase in consultancy services related to
stricter compliance standards. The return of travel and
office-based working has also driven an increase in related
expenses.
Marketing costs increased 30% to GBP28.2 million as we have used
additional targeted ways to drive customer growth, beyond our
primary 'word-of-mouth' approach. We continue to operate a
disciplined approach to return on investment for marketing.
Capitalisation of intangible assets in FY22 reduced versus the
prior year by 76% to GBP4.7 million (vs GBP19.5M in FY21). This
previously announced change does not impact our cash flows and we
continue to expand and invest in our engineering team.
Our Adjusted EBITDA margin was 22% for the year (FY21: 26%)
which corresponds to GBP121.4 million of Adjusted EBITDA (FY21:
GBP108.7 million) and a 12% increase over the prior year reflecting
our commitment to investment in future growth whilst maintaining
sustainability.
Our profit before tax was GBP43.9 million in FY22 compared to
GBP41.1 million in FY21 reflecting a 7% increase.
As at 31 March 2022, we held GBP7.2 billion of cash and highly
liquid investment grade assets, up 76% from GBP4.1 billion held at
the end of FY21. Specifically, this includes GBP6.8 billion of
customer deposits (GBP3.7 billion at the end of FY2021).
This amount also includes GBP357.8 million of our "own cash"
(GBP286.1 million at the end of FY21). We are seeing this cash
balance increasing thanks to the cash generating qualities of the
business we've built. Our FCF conversion remains high at 93.3% (%
of Adjusted EBITDA) for the year.
We are well capitalised for the future and as at 31 March 2022,
our group eligible capital of GBP242.5 million was significantly
above our capital requirements.
Outlook
We are very much focused on the future. In the medium term, we
continue to expect to deliver revenue growth above 20% (CAGR), and
an adjusted EBITDA margin at or above 20% as we continue to invest
sustainably.
For FY23, we expect revenue to grow by between 30% to 35% thanks
to a continuation of some positive trends from FY22 carrying
through to the beginning of the financial year.
We're growing fast at scale, and profitable. And our growth
continues to be fueled today and tomorrow by the products we've
been investing in over the past years, supported by the ability to
grow our investments in marketing and underpinned by building
products and features that customers love and continue to
recommend. We're seeing faster growth from customers adopting more
features, which helps to drive their activity, engagement and
volumes they trust us with.
Last year was notable for our listing, but the work we do to
continue to build our business cannot and will not stop. We have,
as to be expected, work to do to continue to develop our controls,
processes and operations so that we can move money around the world
instantly, for everyone.
Our focus on our mission will not change as we continue to grow
and scale, and neither will our focus on building a strong,
sustainable and cash-generating business that is best placed to
address the evolving needs of our customers. I'm therefore happy to
keep saying that we've just got started, and that we have a long
way to go. But it is working. Onwards.
Consolidated statement of profit or loss and other comprehensive
income (unaudited)
For the year ended 31 March 2022
Note 2022 2021
GBPm GBPm
-------------------------------------------------- ---- ------- -------
Revenue 6 559.9 421.0
Cost of sales 7 (185.8) (151.7)
Net credit losses on financial assets 7 (2.2) (8.8)
-------------------------------------------------- ---- ------- -------
Gross profit 371.9 260.5
Administrative expenses 7 (321.4) (217.5)
Interest income from investments and operating
assets 3.9 1.9
Interest expense from operating assets (6.7) (3.8)
Other operating income 5.8 3.8
Other operating expenses (4.8) -
-------------------------------------------------- ---- ------- -------
Operating profit 48.7 44.9
Finance expense (4.8) (3.8)
-------------------------------------------------- ---- ------- -------
Profit before tax 43.9 41.1
Income tax expense 9 (11.0) (10.2)
-------------------------------------------------- ---- ------- -------
Profit for the year 32.9 30.9
Other comprehensive (loss)/income
Items that may be reclassified to profit or loss:
Fair value loss on investments, net (17.2) (3.0)
Currency translation differences 2.7 (3.8)
-------------------------------------------------- ---- ------- -------
Total other comprehensive loss (14.5) (6.8)
Total comprehensive income for the year 18.4 24.1
Earnings per share*
Basic, in pence 10 3.40 3.31
Diluted, in pence 10 3.18 3.04
-------------------------------------------------- ---- ------- -------
* See note 10 for further information on the weighted average
number of shares included in the calculation of the comparable
earnings per share.
All results are derived from continuing operations.
Consolidated statement of financial position (unaudited)
As at 31 March 2022
Note 2022 2021
*Represented
GBPm GBPm
--------------------------------- ---- ------- --------------------------
Non-current assets
Deferred tax assets 9 113.6 56.7
Property, plant and equipment 11 22.6 24.0
Intangible assets 12 20.3 27.5
Trade and other receivables 13 14.3 15.1
--------------------------------- ---- ------- --------------------------
Total non-current assets 170.8 123.3
Current assets
Current tax assets 7.3 1.1
Trade and other receivables 13 137.6 81.3
Short-term financial investments 14 1,192.4 737.5
Cash and cash equivalents 15 6,056.3 3,358.6
--------------------------------- ---- ------- --------------------------
Total current assets 7,393.6 4,178.5
Total assets 7,564.4 4,301.8
Non-current liabilities
Trade and other payables 16 15.7 22.6
Provisions 2.2 -
Deferred tax liabilities 9 0.5 2.0
Borrowings 17 90.2 95.2
--------------------------------- ---- ------- --------------------------
Total non-current liabilities 108.6 119.8
Current liabilities
Trade and other payables 16 7,034.2 3,888.6
Provisions 1.6 2.6
Current tax liabilities 5.3 2.0
Borrowings 17 5.5 3.5
--------------------------------- ---- ------- --------------------------
Total current liabilities 7,046.6 3,896.7
Total liabilities 7,155.2 4,016.5
Equity
Share capital 18 10.2 9.4
Equity merger reserve 19 (8.0) (8.0)
Share-based payment reserves 200.5 124.5
Own shares reserve (0.4) -
Other reserves (17.8) (0.7)
Currency translation reserve 0.2 (2.5)
Retained earnings 224.5 162.6
--------------------------------- ---- ------- --------------------------
Total equity 409.2 285.3
Total liabilities and equity 7,564.4 4,301.8
--------------------------------- ---- ------- --------------------------
* Comparative balances have been represented to show the impact
or reorganisation (refer to note 1.1) and to present the current
provisions separately from the trade and other payables (refer to
note 16).
Consolidated statement of changes in equity (unaudited)
For the year ended 31 March 2022
Note Share Equity Share-based Own Other Currency Retained Total equity
capital* merger payment shares reserves translation earnings GBPm
GBPm reserve reserves reserve GBPm reserve GBPm
GBPm GBPm GBPm GBPm
================== ==== ========= ======== =========== ======== ========= ============ ========= ============
At 1 April 2020 9.4 111.1 63.8 - 2.3 1.3 8.9 196.8
Profit for the
year - - - - - 30.9 30.9
Fair value loss on
investments - - - - (3.0) - - (3.0)
Currency
translation
differences - - - - - (3.8) - (3.8)
------------------ ---- --------- -------- ----------- -------- --------- ------------ --------- ------------
Total
comprehensive
income for the
year - - - - (3.0) (3.8) 30.9 24.1
Share-based
employee
compensation
expense - - 36.9 - - - - 36.9
Deferred tax on
share-based
compensation - - 26.6 - - - - 26.6
Issue of share
capital - 0.9 (2.8) - - - 2.8 0.9
Reduction of share
capital - (120.0) - - - - 120.0 0.0
------------------ ---- --------- -------- ----------- -------- --------- ------------ --------- ------------
At 31 March 2021 9.4 (8.0) 124.5 - (0.7) (2.5) 162.6 285.3
Profit for the
year - - - - - - 32.9 32.9
Fair value loss on
investments,
net 19 - - - - (17.2) - - (17.2)
Currency
translation
differences - - - - - 2.7 - 2.7
------------------ ---- --------- -------- ----------- -------- --------- ------------ --------- ------------
Total
comprehensive
income for the
year - - - - (17.2) 2.7 32.9 18.4
Issue of share
capital 18 0.8 - - (0.8) - - - -
Share-based
compensation
expense 20 - - 42.5 - - - 1.0 43.5
Tax on share-based
compensation 9 - - 58.7 - - - - 58.7
Employee share
schemes 20 - - (25.2) 0.4 - - 28.1 3.3
Redemption of
preference
shares - - - - 0.1 - (0.1) -
------------------ ---- --------- -------- ----------- -------- --------- ------------ --------- ------------
At 31 March 2022 10.2 (8.0) 200.5 (0.4) (17.8) 0.2 224.5 409.2
------------------ ---- --------- -------- ----------- -------- --------- ------------ --------- ------------
*The share capital presented reflects the share capital
structure of Wise plc as if it had been the ultimate parent of the
Group as of the comparative date. See note 18 for further
details.
Consolidated statement of cash flows (unaudited)
For the year ended 31 March 2022
Note 2022 2021
GBPm GBPm
================================================ ==== ======= =======
Cash flows from operating activities
Cash generated from operations 21 3,134.1 2,076.3
Interest received 21.1 7.6
Interest expense paid (10.7) (6.0)
Corporate income tax paid (6.5) (4.0)
------------------------------------------------ ---- ------- -------
Net cash generated from operating activities 3,138.0 2,073.9
Cash flows from investing activities
Payments for property, plant and equipment (4.6) (2.3)
Payments for intangible assets (7.3) (20.9)
Payments for financial assets at FVOCI (868.4) (723.9)
Proceeds from sale and maturity of financial
assets at FVOCI 389.8 75.3
Proceeds from sublease 0.1 0.0
------------------------------------------------ ---- ------- -------
Net cash used in investing activities (490.4) (671.8)
Cash flows from financing activities
Proceeds from issues of shares and other equity 3.4 0.9
Proceeds from borrowings 17 43.0 118.6
Repayments of borrowings 17 (43.0) (90.0)
Principal elements of lease payments 17 (3.8) (3.9)
Interest paid on leases 17 (0.9) (0.8)
------------------------------------------------ ---- ------- -------
Net cash (used in)/generated from financing
activities (1.3) 24.8
Net increase in cash and cash equivalents 2,646.3 1,426.9
Cash and cash equivalents at beginning of
the year 15 3,358.6 2,077.6
Effects of exchange rate changes on cash and
cash equivalents 51.4 (145.9)
------------------------------------------------ ---- ------- -------
Cash and cash equivalents at end of the year 15 6,056.3 3,358.6
------------------------------------------------ ---- ------- -------
Notes to the Group consolidated financial statements
For the year ended 31 March 2022
Note 1. Presentation of the consolidated financial
statements
1.1 General information
Wise plc (the "Company") is a public limited company and is
incorporated and domiciled in the United Kingdom. The Company was
incorporated under the Companies Act 2006 on 18 February 2021 under
the name "456 Newco plc" and changed its name to Wise plc on 17
June 2021. The address of its registered office is 6th Floor Tea
Building, 56 Shoreditch High Street, London E1 6JJ. The principal
activity of the Company and its subsidiaries (the "Group") is the
provision of cross-border money transfer services. Further
information on the Group's operations and principal activities is
presented in the Strategic Report.
The Company became the parent company of the former Transferwise
Limited group on 22 June 2021 as a consequence of the pre-listing
reorganisation (see below). The parent of the group for the
comparative period was Wise Payments Ltd (formerly Transferwise
Ltd).
Group reorganisation and listing
The Class A Shares of the Company were admitted to trading on
the London Stock Exchange on 7 July 2021. In relation to the
listing of the Company on the London Stock Exchange on 7 July 2021,
the following steps were completed on 22 June 2021:
-- the existing preferred and Ordinary Shares in Wise Payments
Ltd were re-designated as A Ordinary Shares and a share split was
undertaken;
-- the existing shareholders of Wise Payments Ltd were offered
the opportunity to elect to receive the B Shares, in addition to
their A Shares, to create a dual-class share structure comprising A
Shares and B Shares. Such B Shares were issued by way of bonus
issue to such electing, existing shareholders;
-- the existing shareholders in Wise Payments Ltd entered into a
share for share exchange with Wise plc, pursuant to which Wise plc
acquired the entire issued share capital of Wise Payments Ltd in
exchange for the issue of matching Class A Shares, Class B Shares
and a non-voting redeemable preference share in Wise plc to the
existing shareholders (and any unexercised options and unvested
awards over shares in Wise Payments Ltd were exchanged for options
over Class A Shares in Wise plc).
As a result of the reorganisation, Wise Payments Ltd transferred
its share-based payment obligations to Wise plc, who will be
responsible for the settlement of the share-based payment awards.
At the same time the Company became the ultimate parent company of
the entities comprising, at that point in time, the Group. This
transfer did not impact the post-reorganisation consolidated
results of the Group.
1.2 Basis of preparation
The financial information set out in this document is unaudited
and does not constitute statutory accounts for the Group for the
year ended 31 March 2022, but is extracted from the 2022 Annual
Report. The Annual Report for 2022 will be delivered to the
Registrar of Companies in due course.
Statutory accounts for the year ended 31 March 2021 have been
filed with the Registrar of Companies. The report of the auditor on
those accounts (i) was unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report, and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
This is the first year of consolidated financial statements
being prepared under Wise plc.
The consolidated financial statements of the Group have been
prepared in accordance with the UK adopted international accounting
standards in conformity with the applicable legal requirements of
the Companies Act 2006.
The Group reorganisation undertaken on 22 June 2021, as
disclosed in note 1.1, does not constitute a business combination
under IFRS 3 Business Combinations. Therefore it was accounted for
as a capital reorganisation. The set of consolidated financial
statements included in this Annual Report have been prepared as a
continuation of the consolidated financial statements of Wise
Payments Ltd. As such, the comparative equity of the Group is
adjusted to reflect the statutory share capital, equity merger
reserve and own share reserve of the Company as if it had always
been the ultimate parent of the Group, using the retrospective
presentation method.
The financial statements are prepared on a going concern basis.
All financial information is presented in millions of Pounds
Sterling ("GBP"), which is the Group's presentation currency,
rounded to the nearest GBP0.1m, unless otherwise stated. The
financial statements have been prepared under the historical cost
convention, except for certain financial assets measured at fair
value.
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out in note 2.
These policies have been consistently applied to all the years
presented, unless otherwise stated.
Preparation of financial statements requires significant
accounting judgements and estimates which have been laid out in
note 3.
Going concern
The Group's business activities together with the factors likely
to affect its future development and position are set out in the
Strategic Report.
The financial statements are prepared on a going concern basis
as the Directors are satisfied that the Group has the available
resources to continue in business for the foreseeable future.
The going concern assessment is based on the detailed forecast
prepared by management and approved by the Board (base plan). As
part of the going concern review, the Directors have considered
severe, but plausible, downside scenarios to stress test the
viability of the business. These downside scenarios covered
reduction in revenues, profitability, cash position and liquidity
as well as the Group's ability to meet its regulatory capital and
liquidity requirements. Appropriate assumptions have been made in
respect to revenue growth and profitability, based on the economic
outlook over the forecast period. Appropriate sensitivities have
been applied in order to stress test the base plan, considering
situations in which future costs are substantially higher than the
forecast and future trading is less than forecasted. Management
expects that sufficient liquidity and regulatory capital
requirement headroom is maintained throughout the forecast
period.
The Directors have made inquiries of management and considered
forecasts for the Group and have, at the time of approving these
financial statements, a reasonable expectation that the Group has
adequate resources to continue in operations for the foreseeable
future.
1.3 Basis of consolidation
The financial statements comprise the consolidated financial
statements of Wise plc and its subsidiaries as at 31 March
2022.
Subsidiaries are all entities over which the Group has control.
The Group controls an entity when it is exposed to, or has rights
to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the
entity.
Subsidiaries are fully consolidated from the date on which
control is obtained by the Group and are de-consolidated from the
date that control ceases.
Inter-company transactions, balances and unrealised gains on
transactions between companies within the Group are eliminated on
consolidation. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the transferred
asset. Group accounting policies are consistently applied to all
entities and transactions.
Note 2. Summary of significant accounting policies
2.1 Changes in accounting policies and disclosures
Adoption of new or revised standards and interpretations
The following new or revised standards and interpretations
became effective for the Group from 1 April 2021:
-- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 -
Interest Rate Benchmark Reform - Phase 2
-- Amendment to IFRS 16 - Covid-19 Related Rent Concessions
beyond 30 June 2021
The adoption of the above amendments did not have a material
impact on the Group. There are no other new or revised standards or
interpretations that are effective for the first time for the
financial year beginning on or after 1 April 2021 that would be
expected to have a material impact on the Group.
New standards, amendments and interpretations not yet
adopted
The following amendments are effective for annual periods
beginning on or after 1 January 2022. These amendments have not
been early adopted by the Group. None of the amendments are
expected to have a material impact on the Group in the current or
future reporting periods or on foreseeable future transactions:
-- Amendments to IAS 37 - Onerous Contracts: Cost of Fulfilling
a Contract
-- Amendments to IAS 16 - Property, Plant and Equipment:
Proceeds before Intended Use
-- Annual Improvements to IFRS (2018-2020 cycle): IFRS 9
Financial Instruments - Fees in the '10 per cent' Test for
Derecognition of Financial Liabilities
-- IFRS 17 Insurance Contracts
-- Amendments to IFRS 3 - Reference to the Conceptual
Framework
-- Amendment to IAS 1 - Classification of Liabilities as Current
or Non-current
-- Amendments to IAS 1 and IFRS Practise Statement 2 -
Disclosure of Accounting Policies
-- Amendments to IAS 8 - Definition of Accounting Policies
-- Amendments to IAS 12 - Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
-- Amendments to IFRS 10 and IAS 28 - Sale of contribution of
assets between an investor and its associate or joint venture
-- Amendments to IFRS 4 Insurance contract - deferral of IFRS
9
-- Annual improvements on IFRS 1, IFRS 9, IAS 41 and IFRS 16
2.2 Current versus non-current classification
The Group presents assets and liabilities in the statement of
financial position based on current or non-current
classification.
An asset is current when it satisfies any of the following
criteria:
-- expected to be realised or intended to be sold or consumed in
the normal operating cycle;
-- held primarily for the purpose of trading;
-- expected to be realised within twelve months after the
reporting period;
-- cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least twelve months
after the reporting period.
All other assets are classified as non-current.
A liability is current when it satisfies any of the following
criteria:
-- it is expected to be settled in the normal operating
cycle;
-- it is held primarily for the purpose of trading;
-- it is due to be settled within twelve months after the
reporting period;
-- there is no unconditional right to defer the settlement of
the liability for at least twelve months after the reporting
period.
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current
assets and liabilities.
2.3 Foreign currencies translation
The Group's consolidated financial statements are presented in
Pounds Sterling. For each entity, the Group determines the
functional currency and items included in the financial statements
of each entity are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the
Group's entities at their respective functional currency spot rates
at the date the transaction is recognised.
Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation of monetary assets
and liabilities denominated in foreign currencies at year end
exchange rates are recognised in profit or loss (either as cost of
sales or operating expenses). Non-monetary assets and liabilities
are translated at historical exchange rates if held at historical
cost or year-end exchange rates if held at fair value, and the
resulting foreign exchange gains or losses are recognised in either
the income statement or shareholders' equity depending on the
treatment of the gain or loss on the asset or liability.
Group companies
On consolidation, the results and financial position of foreign
operations (none of which has the currency of a hyperinflationary
economy) are translated into pounds as follows:
assets and liabilities for each balance sheet presented are
translated at the closing exchange rate at the date of that balance
sheet;
income and expenses are translated at average monthly exchange
rates (unless exchange rates fluctuate significantly during the
year, in which case the exchange rates at the transaction date are
used), and
all resulting exchange differences are recognised in other
comprehensive income.
2.4 Cash and cash equivalents
Cash and cash equivalents include cash on hand, on-demand
deposits, Money Market Funds (MMF) and other short-term high
quality liquid investments with original maturities of three months
or less and e-money held with payment processing partners. Cash
that has been paid out from the Group bank account but has not been
delivered to the bank account of the beneficiary is classified as
cash in transit. Cash collateral deposits the Group holds with its
counterparties are recognised under Trade and other receivables in
the statement of financial position.
Customer deposits
The Group recognises financial assets and liabilities for the
funds customers hold on their accounts ("Wise Accounts") and the
funds collected from customers, as part of the money transfer
settlement process, that have not yet been processed. The liability
is recognised upon receipt of cash or capture confirmation
(depending on pay-in method), and is derecognised when cash is
delivered to the beneficiary. Additionally, pursuant to IAS 32, the
Group considers it does not have a legally enforceable right to set
off these financial assets and liabilities, or an intention to
settle them on a net basis or settle them simultaneously.
Principles to determine the point of delivery are the same as
applied in revenue recognition; see note 2.10. Cash that has been
paid out but has not yet been delivered to the beneficiary account
is reflected as cash in transit to customers.
The Group is subject to various regulatory safeguarding
compliance requirements with respect to customer funds. As
safeguarding requirements may vary across the different
jurisdictions in which the Group operates, the Group holds customer
funds in segregated accounts and other high quality liquid assets
such as MMFs and investment grade bonds.
2.5 Financial assets
Investments and other financial assets
The Group classifies its financial assets, at initial
recognition, and subsequently measures them at amortised cost, fair
value through profit or loss (FVTPL) and fair value through other
comprehensive income (FVOCI).
The classification of financial assets at initial recognition
depends on the financial asset's contractual cash flows and the
Group's business model for managing them.
In order for a financial asset to be classified and measured at
amortised cost or FVOCI, it needs to give rise to cash flows that
are 'solely payments of principal and interest (SPPI)' on the
principal amount outstanding. This assessment is referred to as the
SPPI test and is performed at an instrument level. Financial assets
with cash flows that are not SPPI are classified and measured at
fair value through profit or loss, irrespective of the business
model.
The Group's business model for managing financial assets refers
to how they are used in order to generate cash flows. The business
model determines whether cash flows will result from collecting
contractual cash flows, selling the financial assets, or both.
Financial assets classified and measured at amortised cost are held
with the objective to collect contractual cash flows, while
financial assets classified and measured at fair value through OCI
are held with the objective of both holding to collect contractual
cash flows and selling.
The Group classifies debt securities (e.g. bonds) as FVOCI
pursuant with the above policy as the contractual cash flows are
solely payments of principal and interest, and the objective of the
Group's business model is achieved both by collecting contractual
cash flows and selling financial assets. On disposal of these debt
investments, any related balance within the FVOCI reserve is
reclassified to profit or loss.
Recognition and derecognition
Purchases and sales of financial assets are recognised on the
settlement date according to market conventions. Financial assets
are derecognised when the rights to receive cash flows from the
financial assets have expired or have been transferred and the
Group has transferred substantially all the risks and rewards of
ownership. Cash flows in relation to purchase or sale of these
instruments are classified as investing activities in the
consolidated cash flow statement.
Measurement
At initial recognition, the Group measures a financial asset at
its fair value plus, in the case of a financial asset not at fair
value through profit or loss, transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction
costs of financial assets carried at fair value through profit or
loss are expensed in profit or loss. Financial assets at amortised
costs are subsequently measured using the effective interest method
and are subject to impairment. Gains and losses are recognised in
the profit or loss when the asset is derecognised, modified or
impaired.
Impairment
The Group recognises an allowance for expected credit losses
(ECL) for trade receivables and uses a simplified approach in
calculating ECLs. Therefore, the Group does not track changes in
credit risk, but instead recognises a loss allowance based on
lifetime ECLs at each reporting date. The Group has established a
provision matrix that is based on its historical credit loss
experience, adjusted for forward-looking factors specific to the
debtors and the economic environment.
For debt instruments held at FVOCI, the Group applies the low
credit risk simplification. At every reporting date, the Group
evaluates whether or not the debt instrument is considered to have
low credit risk using all reasonable and supportable information
that is available without undue cost or effort.
In making that evaluation, the Group reassesses the internal
credit rating of the debt instrument. In addition, the Group
considers that there has been a significant increase in credit risk
when contractual payments are more than 30 days past due.
The Group's debt instruments held at FVOCI consisted solely of
quoted bonds that are graded in the top investment category Aa2 and
better by Moody's Credit Rating Agency and, therefore, are
considered to be low credit risk investments. It is the Group's
policy to measure ECLs on such instruments on a 12-month basis.
However, when there has been a significant increase in credit risk
since origination, the allowance will be based on the lifetime ECL.
The Group uses the ratings from Moody's both to determine whether
the debt instrument has significantly increased in credit risk and
to estimate ECLs.
Refer to notes 2.19 and 4.2 for further information on trade
receivables and expected credit losses.
2.6 Derivative financial instruments
Derivative financial instruments are used to manage exposure to
market risks. The principal derivative instruments used by the
Group are foreign currency swaps, foreign exchange forwards and
non-deliverable foreign exchange forwards. The Group does not hold
or issue derivative financial instruments for trading or
speculative purposes.
Changes in the fair value of any derivative instruments that do
not qualify for hedge accounting are recognised immediately in the
income statement.
2.7 Property, plant and equipment
Property, plant and equipment is stated at historical cost less
accumulated depreciation and any accumulated impairment losses.
Historical cost includes expenditure that is directly attributable
to bringing the asset to the location and condition necessary for
it to be capable of operating in the manner intended by
management.
Note 2. Summary of significant accounting policies continued
Depreciation is charged so as to allocate the cost of assets
less their residual value over their estimated useful lives, using
the straight-line method. Right-of-use assets are depreciated over
the lease term (2-7 years). Capitalised reconstruction and internal
design costs of leased office space (shown as 'Leased office
improvements' in the Notes to the Group Consolidated Financial
Statements) are depreciated over the lease term (typically 2-5
years) and other office equipment over 2 years.
Computer equipment is not recorded into property, plant and
equipment but expensed, as low value short-lived equipment in the
Group.
2.8 Intangible assets - Internally generated software
development costs
The Group develops software used in provisioning of its
services. Development costs that are directly attributable to the
design, development and testing of the software controlled by the
Group are recognised as intangible assets when the following
criteria are met:
-- it is technically feasible to complete the software so that
it will be available for use;
-- management intends to complete the software;
-- there is an ability to use the software;
-- it can be demonstrated how the software will generate
probable future economic benefits;
-- adequate technical, financial and other resources to complete
the development and to use the software are available; and
-- the expenditure attributable to the software during its
development can be reliably measured.
Costs associated with maintaining computer software are
recognised as an expense as incurred.
Directly attributable costs that are capitalised as part of the
software product comprise the software development employee
costs.
Other development expenditures that do not meet these criteria
are recognised as an expense as incurred. Development costs
previously recognised as an expense are not recognised as an asset
in a subsequent period.
Capitalised development costs, domain and licence purchases are
recorded as intangible assets and amortised over their estimated
useful economic lives. Intangible assets are assessed for
impairment whenever there is an indicator that they might be
impaired, for example when the assets are no longer in use and need
to be decommissioned.
The Group amortises intangible assets on a straight-line basis
over 3 years, except for mobile applications which are amortised
over 2 years and licence purchases that are amortised over a period
of 2-10 years.
2.9 Trade and other payables
Trade payables consist of obligations to pay for goods and
services that have been acquired in the ordinary course of business
from suppliers on the basis of normal credit terms and do not bear
interest. Other payables, which relate to Wise Accounts and money
transfers that have not been processed by the Group at the
reporting date, are non-derivative liabilities to individuals or
business customers for money they hold with the Group and do not
constitute borrowings.
Payables are initially recognised at fair value and subsequently
measured at amortised cost.
2.10 Revenue recognition
The Group primarily generates revenue from money transfers and
Wise Account, including conversions and debit card services.
The Group recognises revenue according to the principles of IFRS
15 using the five-step model:
1. Identify the contracts with customers
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction to the performance obligations
in the contract
5. Recognise the revenue when (or as) the entity satisfies
the performance obligation
A customer enters into the contract with the Group at the time
of opening a Wise Account or initiating a money transfer.
Generally, the customer agrees to the contractual terms by formally
accepting, on Wise's website or the App, the terms and conditions
of the respective service, which detail the Group's performance
obligations and fees.
In the case of debit card services, it is at the time the card
is made available for use and the customer is able to either make a
payment or a withdrawal.
The fees charged to customers are shown to them upfront prior to
the transaction being initiated. For international transfers, a
single upfront fee per transaction is charged, consisting of a
fixed and variable amount. The amount of both the fixed and the
variable portion of the fee depends on a number of factors,
including the currency route, the transfer size, the type of
transaction being undertaken and the payment method used.
As there is typically a single performance obligation associated
with each type of service provided to a customer, the revenue is
recognised at the point in time when the performance obligation has
been satisfied. For money transfers it is upon delivery of funds to
the recipient. In case of money conversions it is when a customer
balance is converted into a different currency and for debit card
services it is upon transaction capture.
The timing required for the Group to process the payment to the
recipient and, hence, to satisfy its performance obligations
largely depends on the processing time its banking partners require
to deliver funds to the recipient. Therefore, the revenue is
deferred until the funds are delivered. In certain jurisdictions
where the Group has settlement accounts with the Central Banks or
in the case of transfers between Wise Accounts or conversions
within a Wise Account, such transactions are fulfilled
instantly.
Other revenue
In FY2022 the Group launched a new investment product which
allows customers to purchase investments using their Wise Account
balance ("Assets"). The Group generates revenue from charging a fee
on the value of the assets under management. The revenue, which is
accrued on a daily basis, is recognised over time, in line with the
period the Group provides its services to Assets customers.
The Group acts as a Matched Principal Broker and does not retain
control nor benefits from the Assets. Therefore, the Group does not
recognise financial assets and liabilities for the Assets.
2.11 Other income recognition from contracts with partners
Income from contracts with partners is recognised over their
contractual terms as the relevant performance conditions are met.
The contracts may contain certain performance conditions and
milestones. The Group defers any cash consideration received up
front until it is probable that these conditions and milestones are
met.
2.12 Interest income and expense
Interest income from investments and interest earned from
holding customer funds on Wise Accounts is recognised as interest
income from investments and operating assets using the effective
interest rate method. Investments are classified as financial
assets at fair value through other comprehensive income, whilst
Wise Accounts holding customer funds are financial assets measured
at amortised cost.
Interest expense incurred from holding customer funds on Wise
Accounts primarily relate to negative interest rates on euro
denominated balances.
2.13 Leases
A lease is a contract or part of a contract that conveys to the
lessee the right to control the use of an identifiable asset for a
period of time in exchange for consideration.
The Group as the lessee
Initial measurement
At the commencement date, a lessee shall recognise a
right-of-use asset and a lease liability. At the commencement date,
a lessee shall measure the right-of-use asset at cost. The cost of
the right-of-use asset shall comprise:
-- the amount of the initial measurement of the lease
liability;
-- any lease payments made at or before the commencement date,
less any lease incentives received;
-- any initial direct costs incurred by the lessee; and
-- an estimate of costs to be incurred by the lessee in
dismantling and removing the underlying asset, restoring the site
on which it is located or restoring the underlying asset to the
condition required by the terms and conditions of the lease.
Right-of-use of assets are recorded within the 'Property, plant
and equipment' line in the statement of financial position. These
are measured at an amount equal to the lease liability they are
predominantly related to office space leased in various locations.
The lease liability is measured at the present value of the lease
payments that are not paid at that date. The lease payments are
discounted using the interest rate implicit in the lease, if that
rate can be readily determined.
If that rate cannot be readily determined, the lessee shall use
the lessee's incremental borrowing rate, being the rate that the
individual lessee would have to pay to borrow the funds necessary
to obtain an asset of similar value to the right-of-use asset in a
similar economic environment with similar terms, security and
conditions.
At the commencement date, the lease payments included in the
measurement of the lease liability comprise the following payments
for the right to use the underlying asset during the lease term
that are not paid at the commencement date:
-- fixed payments, less any lease incentives receivable;
-- variable lease payments that depend on an index or a rate,
initially measured using the index or rate as at the commencement
date. Variable lease payments that depend on an index or a rate
include, for example, payments linked to a consumer price
index;
-- amounts expected to be payable by the lessee under residual
value guarantees;
-- the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising an option to terminate the
lease.
Subsequent measurement
After the commencement date, a lessee measures the right-of-use
asset estimated by applying a cost model. To apply a cost model, a
lessee measures the right-of-use asset at cost less any accumulated
depreciation and any accumulated impairment losses and adjusted for
any remeasurement of the lease liability.
Right-of-use assets are generally depreciated over the shorter
of the asset's estimated useful life and the lease term on a
straight-line basis.
Otherwise, the lessee shall depreciate the right-of-use asset
from the commencement date to the earlier of the end of the useful
life of the right-of-use asset or the end of the lease term.
If there are changes in lease payments, there may be a need to
remeasure the lease liability. A lessee shall recognise the amount
of the remeasurement of the lease liability as an adjustment to the
right-of-use asset. However, if the carrying amount of the
right-of-use asset is reduced to zero and there is a further
reduction in the measurement of the lease liability, a lessee shall
recognise any remaining amount of the remeasurement in profit or
loss.
The Group has elected not to apply the requirements of IFRS 16
to short-term leases and leases for which the underlying asset is
of low value. Payments associated with short-term leases and all
leases of low-value assets are recognised on a straight-line basis
as an expense in profit or loss. Short-term leases are leases with
a lease term of 12 months or less. Low-value assets comprise IT and
office equipment.
The Group presents the payments of principal and interest on
lease liabilities as part of financing cash flows.
Extension and termination options
Extension and termination options are included in a number of
property and equipment leases across the Group. These are used to
maximise operational flexibility in terms of managing the assets
used in the Group's operations. The extension and termination
options held are exercisable only by the Group and not by the
lessors.
At the reporting date, the Group is exposed to future cash
outflows that are not reflected in the measurement of lease
liabilities. These arise from extension options and a termination
option available to the Group for a number of lease agreements for
office spaces. The Group initially assesses at lease commencement
whether it is reasonably certain it will exercise the options and
subsequently reassesses it if there is a significant event or
significant changes in circumstances within its control. The Group
has concluded it is not reasonably certain that the options will be
exercised.
2.14 Cost of sales
Cost of sales comprises the costs that are directly associated
with the Group's principal revenue stream of money transfer and
conversion services. This includes:
-- bank and partner fees, including any applicable discounts,
incurred in processing customer transfers;
-- net foreign exchange costs generated due to customer
transactions and costs related to the difference between the
published mid-market rate offered to customers and the rate
obtained by the Group in acquiring currency as required as well as
product losses that are directly generated from consumer
transactions, including chargeback losses.
Note 2. Summary of significant accounting policies continued
2.15 Current and deferred tax
The tax expense for the year comprises current and deferred tax.
Tax is recognised in the income statement, except to the extent
that it relates to items recognised in other comprehensive income
or directly in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity, respectively.
The current tax charge is calculated on the basis of the tax
laws enacted or substantively enacted at the balance sheet date in
the countries where the Company and its subsidiaries operate and
generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred tax is recognised on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the Group financial statements. Deferred tax is
determined using tax rates (and laws) that have been enacted or
substantively enacted by the balance sheet date and are expected to
apply when the related deferred tax asset is realised, or the
deferred tax liability is settled.
Deferred tax assets are recognised only to the extent that it is
probable that future taxable profit will be available against which
the temporary differences can be utilised.
Deferred tax assets on share-based payments are recognised for
the share options not exercised at the balance sheet date. The
deferred tax assets on share-based payments are determined based on
the share price at the balance sheet date. The impact of
recognition is split between income tax expense in profit or loss
for the year, for the element up to the cumulative remuneration
expense; and the share-based payment reserve, recognised directly
in equity, for the element in excess of the related cumulative
remuneration expense. Refer to note 9 for further details.
The impact of the recognition of deferred tax assets on losses
is split between the share-based payment reserve for the element of
the tax deduction on exercise in excess of the related cumulative
remuneration expense and the income tax expense in profit or loss
for the balance of the loss.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred tax assets and
liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities and there is an intention to settle the balances on a net
basis.
2.16 Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary
benefits and accumulating annual leave that are expected to be
settled wholly within 12 months after the end of the period in
which the employees render the related service are recognised in
respect of employees' services up to the end of the reporting
period and are measured at the amounts expected to be paid when the
liabilities are settled. The liabilities are presented as current
employee benefit obligations in the balance sheet.
Long-term obligation
Employee entitlement for long-term leave is recognised as a
liability using probability of staff departures and leave
utilisation.
Share-based payments
The Company operates a scheme, under which the Group receives
services from employees as consideration for equity instruments of
the Company. The fair value of the employee services received in
exchange for the grant of the options and awards is recognised in
employee benefit expenses together with a corresponding increase in
equity (share-based payment reserves), over the period in which the
service and the performance conditions are fulfilled (the vesting
period).
The total amount to be expensed is determined by reference to
the fair value of the options granted. Non-market vesting
conditions are included in assumptions of the number of options and
awards that are expected to vest.
The total amount of the grant expense is recognised over the
vesting period. At each reporting date, the entity revises its
estimates of the number of options and awards that are expected to
vest based on the non-market vesting conditions. It recognises the
impact of the revision to original estimates, if any, in the
statement of comprehensive income, with a corresponding adjustment
to the share-based payment reserves. Upon exercises of share
options, the impact is recognised in retained earnings.
Refer to note 3.4 for the significant accounting estimate in
relation to employee share-based payments.
2.17 Employee share trust
The Group provides finance to the Employee Share Ownership Plan
(ESOP) Trust to subscribe for newly issued share capital, to meet
the Group's obligation to provide shares when employees exercise
their options or awards. Costs of running the ESOP Trust are
charged to the income statement. Shares held by the ESOP Trust are
deducted from reserves and presented in equity as own shares until
such time that employees exercise their awards.
2.18 Segment reporting
The Group is managed on the basis of a single segment. This is
consistent with the internal reporting provided to, and regularly
reviewed by, the Chief Operating Decision Maker ("CODM"), which is
currently the Board of Directors of the Group. The Group has
therefore determined that it has only one reportable segment under
IFRS 8, which is 'cross border payment services'. Refer to note
5.
2.19 Trade and other receivables
Trade and other receivables primarily consist of amounts due
from payment processors and collateral deposits the Group holds
with its counterparts. Trade and other receivables are initially
recognised at fair value and subsequently measured at amortised
cost less impairment for expected credit losses. The Group applies
the simplified approach permitted by IFRS 9, which requires
expected lifetime credit losses to be recognised from the initial
recognition of the receivables. Refer to note 2.5 above for further
information on expected credit losses.
2.20 Earnings per share
Basic earnings per share is calculated by dividing:
-- the profit attributable to the owners of the Group;
-- by the weighted average number of Ordinary Shares outstanding
during the financial year after deducting shares held by the ESOP
Trust.
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account:
-- the after-income tax effect of interest and other financing
costs associated with dilutive potential Ordinary Shares; and
-- the weighted average number of additional Ordinary Shares
that would have been outstanding, assuming the conversion of all
dilutive potential Ordinary Shares. For the purposes of diluted
earnings per share it is assumed that any performance conditions
attached to the schemes have been met at the balance sheet
date.
2.21 Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred, and are subsequently carried at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
income statement over the term of the borrowing using the effective
interest method. Fees paid on the establishment of loan facilities
are recognised as transaction costs of the loan to the extent that
it is probable that some or all of the facility will be drawn down.
In this case, the fee is deferred and treated as a transaction cost
when the draw-down occurs. The Group presents the impact of
transaction costs as part of financing cash flows.
2.22 Provisions
Provisions are liabilities where the exact timing and amount of
the obligation are uncertain. Provisions are recognised when the
Group has a present obligation (legal or constructive) as a result
of past events, when an outflow of resources is probable to settle
the obligation and when an amount can be reliably estimated. Where
the time value of money is material, provisions are discounted to
current values using appropriate rates of interest. The unwinding
of the discounts is recorded in net finance income or expense.
2.23 Specific allowance for expected credit losses
The Group may recognise specific allowance for individually
material financial assets for which credit quality deteriorates
significantly. The Group takes into account specific facts and
circumstances that might indicate impairment, such as litigation
risk, credit rating and financial results of the counterparty. The
Group also uses the weighted probability method to assess the
recoverability of the amounts and monitors subsequent changes in
the assumptions and estimates on a regular basis. The recognised
specific allowance amount at the year ended 31 March 2022 is
GBP7.4m (2021: GBP6.7m). This allowance for credit losses is
related to all of our funds being improperly withheld by a
Brazilian financial institution, MS Bank S.A. Banco de Ca mbio and
all of the accounts receivable from the same party. The change in
the allowance amount within the year relates to FX movements.
2.24 Legal provisions and contingent liabilities
The Group may become party to litigation proceedings from time
to time and recognise a legal provision when a) it has a present
obligation as the result of a past event, b) it is probable the
outflow of economic resources will be required to settle the
obligation and c) a reliable estimate of the such amount can be
made. If these conditions are not met, the Group discloses
contingent liabilities; unless the likelihood of the outflow of the
economic benefit is remote.
The Group did not recognise any legal provision in relation to
ongoing litigations for the year ended 31 March 2022 (2021:nil). In
addition, the probability of the outflow of the economic benefit
for any ongoing litigations is considered remote, thus the Group
does not disclose any contingent liability for the year ended 31
March 2022 (2021:nil).
Note 3. Significant accounting judgements, estimates and
assumptions
The preparation of the Group's consolidated financial statements
requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities, and the accompanying disclosures. Uncertainty about
these estimates and assumptions could result in outcomes that
require a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
Judgements
In the process of applying the Group's accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
3.1 Customer balances
The Group recognises financial assets and corresponding
liabilities for the funds customers hold on their Wise Accounts and
the funds the Group receives as part of the money transfer
settlement process. At the point that the cash is received from the
customer, the Group becomes party to a contract and has a right and
an ability to control the economic benefit from the cash flows
associated with this balance. Additionally, pursuant to IAS 32, the
Group considers it does not have a legally enforceable right to set
off these financial assets and liabilities, or an intention to
settle them on a net basis or settle them simultaneously.
Therefore, Management has concluded that the recognition of the
financial assets and their respective liabilities on the balance
sheet is appropriate.
3.2 Deferred taxes
Deferred tax judgement is not dependent on assumptions or other
key sources of estimation uncertainty, at the end of the reporting
period, that could have a significant risk of causing material
adjustment to the carrying amounts of assets and liabilities within
the next 12 months. However, it does require estimates that are
subject to inherent uncertainty.
Deferred tax assets are recognised for unused tax losses, future
share option tax deductions and other temporary differences to the
extent that it is probable that sufficient taxable profit will be
available against which these assets can be utilised. Management
judgement is required to determine the amount of deferred tax
assets that can be recognised, based upon the likely timing and the
level of future taxable profits. A significant element of the
deferred tax asset relates to share-based payments and as referred
below, in note 3.4, the share price at the balance sheet date is
used in determining the amount of deferred tax asset.
In assessing the probability and sufficiency of future taxable
profit, the management takes into account long-term forecasts and
whether future profit forecasts are considered 'more likely than
not' as supporting evidence for deferred tax asset recognition. The
deferred tax asset is recognised at GBP113.6m (2021: GBP56.7m).
3.3 Net gains and losses from foreign exchange differences
The Group classifies net foreign exchange gains and losses from
customer transactions, including the costs related to the
difference between the published mid-market rate offered to
customers and the rate obtained by the Group in acquiring currency
as required, as cost of sales. The Group considers these costs as
directly related to and incurred as part of providing services to
the customers. The total net foreign exchange differences
recognised in the cost of sales for the year ended 31 March 2022 is
GBP13.3m (2021: GBP18.3m).
Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are described below. The Group based its assumptions and estimates
on parameters available when the consolidated financial statements
were prepared.
Existing circumstances and assumptions about future
developments, however, may change due to market changes or
circumstances arising that are beyond the control of the Group.
Such changes are reflected in the assumptions when they occur.
3.4 Share-based payments
Estimating fair value for share-based payment transactions
requires determination of the most appropriate valuation model,
which depends on the terms and conditions of the grant. This
estimate also requires determination of the most appropriate inputs
to the valuation model including the expected life of the share
option or appreciation right, volatility and dividend yield and
making assumptions about them.
The cost of share options is determined by the fair value at the
date when the grant is made using the Black Scholes model. Further
details on the assumptions are disclosed in note 20.
If the average share price within the financial year was higher
or lower by 5%, the annual share-based payment compensation expense
would be higher or lower by up to GBP1.1m (2021: GBP0.8m).
Additionally, the Group uses the share price at the balance
sheet date in determining the deferred tax asset. Refer to note
9.
Note 4. Financial risk and capital management
This note further explains the Group's exposure to financial
risks and how these risks could affect the Group's future financial
performance. Current year profit and loss information has been
included where relevant to add context.
In the course of its business, the Group is exposed to the main
financial risks: liquidity, credit and market risk from its use of
financial instruments. The Group's financial risk management
programme seeks to minimise potential adverse effects on the
Group's financial performance.
4.1 Liquidity risk
The Group monitors its risk of shortage of funds using cash flow
forecasting. Management monitors rolling forecasts of the Group's
liquidity requirements to make sure it has sufficient cash to meet
operational needs. The Group's objective is to maintain a balance
between continuity of funding and flexibility through the use of
its revolving credit facility, share capital and lease
contracts.
The Group's approach to managing liquidity risk is to make sure,
as far as possible, that it always has enough liquidity to meet its
liabilities when due, under both normal and stressed scenarios,
without incurring unacceptable losses or risking damage to the
Group's position.
The Group assessed the concentration of risk with respect to
refinancing its debt and concluded it to be low. The Group has
access to a GBP212.0m multi currency revolving facility and does
not currently have debt maturing within 12 months.
The breakdowns of trade payables and borrowings into current and
non-current are shown in notes 16 and 17. See also note 4.5 for the
maturity profile of the Group's financial liabilities based on
contractual undiscounted payments.
4.2 Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations.
Credit risk is managed at Group level and comes mainly from the
Group's cash and cash equivalents held in banks and investments in
bonds. The impairment provisions for financial assets disclosed in
note 7 are based on assumptions about risk of default and expected
loss rates.
If a bank or other financial institution has no independent
credit rating, the Group evaluates its credit quality by analysing
its financial position, past experience and other factors.
The Group's maximum exposure to credit risk by class of
financial asset is as follows:
2022 2021
GBPm GBPm
==================================== ======= =======
Asset category
Cash and cash equivalents 6,056.3 3,358.6
Short-term financial investments 1,192.4 737.5
Trade and other receivables 130.1 76.3
------------------------------------ ------- -------
Total assets subject to credit risk 7,378.8 4,172.4
==================================== ======= =======
Due to the short duration of the cash and cash equivalents (less
than 3 months), the fair value approximates the carrying value
at each reporting period.
Credit risk is mitigated as financial assets subject to credit
risk are held with reputable institutions or in highly rated
financial investments.
The Group's financial assets breakdown by credit rating of
institution is as follows:
2022 2021
GBPm GBPm
==================================================== ======= ========
Credit rating (Moody's)
Cash and cash equivalents
Aa 4,249.5 2,316.9
A 1,519.0 710.6
Baa, Ba, B 62.4 73.3
Caa 0.8 -
No rating * 36.3 99.8
Cash in transit 188.3 158.0
---------------------------------------------------- ------- --------
Total cash and cash equivalents subject to credit
risk 6,056.3 3,358.60
Short-term financial investments
Aa 1,192.4 737.5
---------------------------------------------------- ------- --------
Total short-term financial instruments subject to
credit risk 1,192.4 737.5
Trade and other receivables
Aa 36.3 14.7
A 26.8 1.0
Baa, Ba, B 20.8 15.4
No rating * 46.2 45.2
---------------------------------------------------- ------- --------
Total trade and other receivables subject to credit
losses 130.1 76.3
==================================================== ======= ========
* 'No rating' includes payment providers and banks with no
public credit rating.
Before deciding to onboard third parties, the Group undertakes
due diligence measures to assess and mitigate potential credit
risks.
4.3 Market risk
Cash flow and fair value interest rate risk
The Group is exposed to interest rate risk from floating
interest rate borrowings (note 17) and manages the potential that
financial expenses increase when interest rates increase.
Sensitivity analysis is used to assess the interest rate risk.
In a stressed scenario a change of 10 basis points in the
interest rates of interest-bearing liabilities at the reporting
date would have changed profit and equity by GBP0.1m (2021:
GBP0.1m).
The Group is also exposed to interest rate risk from negative
interest rates on safeguarded customer balances. This risk is
deemed negligible for the Group, due to its business model, as
interest rate costs can be passed onto the customer in due course
as well as general macroeconomic trends can result in interest rate
increases on deposits.
Foreign exchange risk
The Group is exposed to foreign exchange rate movement from
holding assets and liabilities in different currencies and
guaranteeing customers a foreign exchange rate on their
international transfers for a limited period of time. Wise actively
monitors foreign exchange risk, and exposures are managed through a
combination of natural hedging and treasury products hedging.
The table below presents the Group's net position (difference
between financial assets and liabilities) across its main
currencies and the Group's exposure to foreign exchange risk at the
end of each reporting period.
Note 4. Financial risk and capital management continued
The Group's exposure to foreign exchange risk by currency is as
follows:
2022 2021
GBPm GBPm
============================ ====== ======
Net exposure by currency
AUD 17.3 4.7
INR 14.7 13.7
BRL 10.8 3.7
MYR 4.1 0.4
USD (27.8) (9.8)
EUR (10.5) (21.9)
CAD (6.9) (0.9)
IDR (4.0) (3.5)
VND (3.6) (2.9)
JPY (3.4) 0.6
Other financial assets 12.9 25.2
Other financial liabilities (17.7) (18.2)
----------------------------- ------ ------
The Group's sensitivity to foreign exchange fluctuations by
currency is as follows:
2022 2021
GBPm GBPm
======================================= ===== =====
Sensitivity to 5% exchange rate change
AUD 0.9 0.2
INR 0.7 0.7
BRL 0.5 0.2
MYR 0.2 0.0
USD (1.4) (0.5)
EUR (0.5) (1.1)
CAD (0.3) 0.0
IDR (0.2) (0.2)
VND (0.2) (0.1)
JPY (0.2) 0.0
Other financial assets 0.6 1.3
Other financial liabilities (0.9) (0.9)
---------------------------------------- ----- -----
The Group's sensitivity analysis shows that a 5% strengthening
or weakening of the functional currency against the non-functional
currency of its subsidiaries would result in the total
comprehensive income, excluding tax effect, being GBP0.7m lower
(2021: GBP0.4m lower). A 5% weakening would have an equal but
opposite effect on total comprehensive income for the year,
excluding tax effect.
The Group considers a 5% strengthening or weakening of the
functional currency against the non-functional currency of its
subsidiaries as a reasonably possible change in foreign exchange
rates.
4.4 Treasury and capital risk management
Treasury and capital risk mainly comprises:
Treasury risk:
The risk that the Group is unable to meet its contractual or
contingent obligations or that it does not have the appropriate
amount, tenor and composition of funding and liquidity to support
its assets.
Capital risk:
The risk that the Group has an insufficient level of capital to
support its normal business activities and to meet its regulatory
capital requirements, both under normal operating environments and
stressed conditions.
The Group's capital comprises ordinary share capital, reserves
and retained earnings.
The Group's objectives when managing capital risk are to:
-- safeguard the Group's ability to continue as a going concern,
so that the Group can continue to provide returns for shareholders
and benefits for other stakeholders;
-- maintain an optimal capital structure to reduce the cost of
capital; and
-- adhere to regulatory requirements in each jurisdiction.
Since 1 January 2022 the Group is subject to prudential
regulatory consolidation which is subject to prudential sourcebook
for MIFID Investment Firms ("MIFIDPRU"). This is the case due to
the existence of TINV Ltd, a group UK FCA-regulated investment firm
subject to the same rules.
Up to 31 December 2021, the Group followed prudential
consolidation subject to Capital Requirements Directive IV ("CRD
IV") which set out the framework for UK Capital Requirements
Regulation ("CRR") and the FCA Prudential sourcebook for investment
firms ("IFPRU").
Both TINV Ltd (MIFID Investment Firm) and the Group (MIFID
Investment Group) are classified as Non-small and
Non-interconnected investment firms ("SNI").
Overall own funds requirement
The Group own funds requirement is subject to the variable own
funds requirement that is the highest of:
1. its permanent minimum capital requirement (i.e. its initial
capital requirement);
2. its fixed overheads requirement ("FOR"); and
3. its K-factor requirement ("KFR").
The Group's Internal Capital Adequacy Assessment ("ICARA") is a
continuous risk assessment process which considers the business
model implication on capital on an on-going basis pursuant to the
guidance of MIFIDPRU 7 (similar to the Pillar 2 ICAAP process that
was followed by the Group under CRR).
4.5 Carrying amounts and fair values of financial
instruments
The Group's financial assets mainly consist of cash, short-term
trade and other receivables and listed bonds. Its financial
liabilities include trade liabilities and obligations towards
financial institutions. All purchases and sales of financial assets
are recognised on the settlement date according to market
conventions.
The Group classifies its financial assets at amortised cost only
if both of the following criteria are met:
-- the asset is held within a business model whose objective is
to collect the contractual cash flows; and
-- the contractual terms give rise to cash flows that are solely
payments of principal and interest.
Financial assets at fair value through other comprehensive
income (FVOCI) comprise investments into highly liquid bonds with
the objective of both collecting contractual cash flows and selling
financial assets.
Financial assets and liabilities by measurement basis:
2022 2021
GBPm GBPm
============================================== ========= =========
Financial assets at amortised cost
Long-term receivables 0.9 1.0
Short-term trade and other receivables 129.2 76.3
Cash and cash equivalents 6,056.3 3,358.6
---------------------------------------------- --------- ---------
Total financial assets at amortised cost 6,186.4 3,435.9
Financial liabilities at amortised cost
Non-current lease liabilities (11.7) (16.6)
Non-current borrowings (78.5) (78.6)
Non-current trade and other payables (0.1)
Current lease liabilities (5.5) (3.5)
Current trade and other payables (6,997.7) (3,859.3)
---------------------------------------------- --------- ---------
Total financial liabilities at amortised cost (7,093.5) (3,958.0)
Financial assets at FVOCI
Short-term financial investments 1,192.4 737.5
---------------------------------------------- --------- ---------
Total financial assets at FVOCI 1,192.4 737.5
============================================== ========= =========
Fair value hierarchy
The Group estimates that the fair values of assets and
liabilities reported at amortised cost in the statement of
financial position as at 31 March 2022 and 31 March 2021 do not
materially differ from the carrying amounts reported in the
consolidated financial statements.
The carrying amount of current accounts receivable and payable
less impairments is estimated to be approximately equal to their
fair value.
IFRS 13 has sought to make measurements at fair value more
consistent and comparable by categorising fair value according to
the hierarchy of the inputs used to measure them. These are
categorised from Level 1 to Level 3 as follows:
-- Level 1 - Quoted prices in active markets for identical
assets or liabilities which the Group can access at the date of
measurement.
-- Level 2 - Inputs, other than quoted market prices included in
Level 1, that are observable either directly or indirectly.
-- Level 3 - Inputs that are not based on observable market
data
Note 4. Financial risk and capital management continued
The following table presents the Group's assets and liabilities
that are measured at fair value by the level in the fair value
hierarchy as at the reporting date:
2022 2021
GBPm GBPm
================================= ======= =====
Measurement Level 1
Financial assets
Short-term financial investments 1,192.4 737.5
--------------------------------- ------- -----
Level 1 financial assets total 1,192.4 737.5
================================= ======= =====
Financial instruments in level 1
The fair value of financial instruments traded in active markets
is based on quoted market prices at the balance sheet date. A
market is regarded as active if quoted prices are readily and
regularly available from an exchange, dealer, broker, industry
group, pricing service, or regulatory agency, and those prices
represent actual and regularly occurring market transactions on an
arm's length basis.
The quoted market price used for financial assets held by the
Group is the current close price at the balance sheet date.
If the fair value of the short-term financial assets would
change by 1% at the reporting date, that would result in a GBP11.9m
(2021: GBP7.4m) increase or decrease in the balances and the
corresponding impact on the comprehensive income.
Financial instruments in level 2 and 3
Throughout and at the end of the reporting period, the Group had
no financial instruments in level 2 and 3 consistent with prior
year.
Contractual maturity of financial liabilities based on
undiscounted cash flows:
2022 2021
GBPm GBPm
===================================== ========= =========
Less than 1 year
Current lease liabilities (6.1) (4.4)
Current borrowings (3.3) (2.4)
Current trade and other payables (6,997.7) (3,859.3)
-------------------------------------- --------- ---------
Total financial liabilities (7,007.1) (3,866.1)
Between 1 and 5 years
Non-current lease liabilities (12.4) (18.3)
Non-current borrowings (83.3) (84.8)
Non-current trade and other payables (0.1) -
====================================== ========= =========
Total financial liabilities (95.8) (103.1)
====================================== ========= =========
Current and non-current borrowings include principal and
interest.
Note 5. Segment information
Description of segment
The information regularly reported to the Board of Directors,
which is considered to be the CODM, for the purposes of resource
allocation and the assessment of performance, is based wholly on
the overall activities of the Group. Based on the Group's business
model, the Group has determined that it has only one reportable
segment under IFRS 8, which is 'Cross-border payment services
provider'.
The Group's revenue, assets and liabilities for this one
reportable segment can be determined by reference to the statement
of comprehensive income and the statement of financial position.
The analysis of revenue by type of customer and geographical
region, is set out in note 6.
At the end of each period, the majority of the non-current
assets were carried by Wise Payments Ltd in the UK. Based on the
location of the non-current asset, the following geographical
breakdown on non-current assets is prepared:
2022 2021
GBPm GBPm
------------------------------------------ ----- -----
Non-current assets by geographical region
United Kingdom 146.5 99.4
Rest of the world 24.3 23.9
------------------------------------------- ----- -----
Total non-current assets 170.8 123.3
=========================================== ===== =====
Note 6. Revenue
Year ended 31
March
---------------
2022 2021
GBPm GBPm
------------------------- ------- ------
Revenue by customer type
Personal 433.2 341.3
Business 126.7 79.7
-------------------------- ------- ------
Total revenue 559.9 421.0
========================== ======= ======
Disaggregation of revenues
In the following table revenue from contract with customers is
disaggregated by major geographical market based on customer
address:
Year ended 31
March
---------------
2022 2021
GBPm GBPm
-------------------------------- ------- ------
Revenue by geographical regions
Europe (excluding UK) 185.7 136.3
United Kingdom 124.3 95.8
North America 117.0 89.8
Asia-Pacific 101.3 72.4
Rest of the world 31.6 26.7
--------------------------------- ------- ------
Total revenue 559.9 421.0
================================= ======= ======
Comparative figures for the North America and Asia-Pacific
regions have been represented, as in the 2021 Annual Report and
Accounts, a portion of revenue (GBP16.8m) for North America was
presented as Asia-Pacific revenues and vice versa. This did not
impact the total revenue or the split for any other geographical
regions.
No individual customer contributed more than 10% to the total
revenue in 2022 and 2021.
Note 7. Cost of sales and administrative expenses
Breakdown of expenses by nature:
Year ended 31
March
---------------
2022 2021
GBPm GBPm
---------------------------------------------- ------- ------
Cost of sales
Bank and partner fees 146.4 117.8
Net foreign exchange loss and other product
costs 39.4 33.9
----------------------------------------------- ------- ------
Total cost of sales 185.8 151.7
Net credit losses on financial assets
Amounts charged to credit losses on financial
assets 2.2 8.8
----------------------------------------------- ------- ------
Total net credit losses 2.2 8.8
=============================================== ======= ======
Expected credit losses are presented as net credit losses within
gross profit and subsequent recoveries of amounts previously
written off are credited against the same line item. Subsequent
recoveries of amounts previously written off are negligible in both
current and prior year.
Year ended 31
March
---------------
2022 2021
GBPm GBPm
------------------------------------ ------ -------
Administrative expenses
Employee benefit expenses 184.8 141.6
Marketing 28.2 21.7
Technology and development 25.0 19.9
Consultancy and outsourced services 42.3 27.3
Other administrative expenses 22.9 4.8
Depreciation and amortisation 22.9 21.7
Less: Capitalisation of staff costs (4.7) (19.5)
------------------------------------ ------ -------
Total administrative expenses 321.4 217.5
==================================== ====== =======
Refer to note 8 for details on employee benefit expenses.
Note 7. Cost of sales and administrative expenses continued
Administrative expenses include GBP7.6m of exceptional items
(2021: GBP4.0m) in relation to the one-off costs associated with
the Group's direct listing on the London Stock Exchange on 7 July
2021. These exceptional items were reported as follows: GBP4.9m in
Consultancy and outsourced services (2021: GBP3.9m), GBP0.2m in
Marketing (2021: GBP0.1m) and GBP2.5m in Other administrative
expenses (2021: nil). FY2022 exceptional items are net of GBP3.9m
contribution received from the shareholders at the time of the
listing (2021: nil).
These costs were treated as non-tax deductible in FY2022 and the
corresponding impact in tax has resulted in an increase in expenses
not deductible for tax purposes, as per note 9.
The cash flow in the year, associated with exceptional items,
was GBP10.3m (FY2021: GBP1.3m).
During the year, the Group (including its overseas subsidiaries)
obtained the following services from the Company's auditors:
Year ended 31
March
---------------
2022 2021
GBPm GBPm
---------------------------------------------------------- ------- ------
Audit fees
Fees payable to the Company's auditors and its associates
for the audit of Company and
consolidated financial statements 1.7 0.9
Audit of the financial statements of the Company's
subsidiaries 0.8 0.2
---------------------------------------------------------- ------- ------
Total audit fees 2.5 1.1
Non-audit fees
Other services 0.5 1.3
---------------------------------------------------------- ------- ------
Total non-audit fees 0.5 1.3
========================================================== ======= ======
Other services include assurance fees, other regulatory and
reporting services associated with the listing.
Note 8. Employee benefit expenses
Year ended 31
March
---------------
2022 2021
GBPm GBPm
------------------------------------------ ------- ------
Salaries and wages 117.6 86.4
Share-based payment compensation expense 42.2 38.1
Social security costs 17.8 14.0
Pension costs 3.6 1.9
Other employment taxes and insurance cost 3.6 1.2
------------------------------------------- ------- ------
Total employee benefit expense 184.8 141.6
=========================================== ======= ======
Refer to note 20 for details on share options granted to
employees.
The monthly average number of employees during the year ended 31
March 2022 was 2,919 (2021: 2,243 employees). Remuneration of key
management personnel is disclosed in note 23.
Note 9. Tax
Tax expense:
Year ended 31
March
---------------
2022 2021
GBPm GBPm
------------------------------------------------- -------- -----
Current income tax for the year
UK corporation tax 15.4 6.2
Foreign corporation tax 6.6 4.9
Adjustment in respect of prior years (0.8) (1.3)
------------------------------------------------- -------- -----
Total current tax expense for the year 21.2 9.8
Deferred income tax for the year
(Increase)/Decrease in deferred tax (10.5) 1.3
Adjustment in respect of prior years 0.3 (0.9)
------------------------------------------------- -------- -----
Total deferred tax (credit)/expense for the year (10.2) 0.4
Total tax expense for the year 11.0 10.2
------------------------------------------------- -------- -----
Factors affecting tax expense for the year:
Year ended 31
March
---------------
2022 2021
GBPm GBPm
---------------------------------------------- ------- ------
Profit before taxation 43.9 41.1
Profit multiplied by the UK tax rate of 19%
(2021: 19%) 8.3 7.8
Adjustments in respect of prior periods (0.5) (2.2)
Effect of expenses not deductible 2.4 0.5
Movement in tax provisions 1.2 2.8
Employee option plan 1.8 0.5
Difference in overseas tax rates 2.2 1.0
Change in rate of recognition of deferred tax (4.4) -
Other adjustments - (0.2)
----------------------------------------------- ------- ------
Total tax expense for the year 11.0 10.2
----------------------------------------------- ------- ------
The Group's effective tax rate (ETR) before other comprehensive
income (OCI) is a 25% charge (2021: 25% charge).
This equates to the applicable UK tax rate of 19%, adjusted for
a number of factors such as disallowable listing costs, UK tax rate
change, employee option plans and higher overseas tax rates.
On 24 May 2021, an increase in the UK corporation tax rate from
19% to 25% applicable from 1 April 2023 was substantively enacted.
Therefore, the UK deferred tax assets and liabilities, which are
expected to unwind after 1 April 2023, have been re-measured in the
current reporting period based on the increased UK corporation tax
rate and reflected in the statement of profit and loss and
equity.
Amounts recognised in other comprehensive income:
2022 2021
GBPm GBPm
------------------------------------------------------- ----- -----
Deferred tax
Recognition of deferred tax asset on listed bonds 5.4 -
------------------------------------------------------- ----- -----
Total amounts recognised in other comprehensive income 5.4 -
------------------------------------------------------- ----- -----
Amounts recognised directly in equity:
2022 2021
GBPm GBPm
---------------------------------------------------------- ----- -----
Current tax
Deduction for exercised options 16.0 3.1
Deferred tax
Recognition of deferred tax asset on share-based payments 42.7 23.5
---------------------------------------------------------- ----- -----
Total amounts recognised directly in equity 58.7 26.6
---------------------------------------------------------- ----- -----
Recognition of deferred tax on share-based payments consists of
future share-based payments deductions and carry forward losses
generated by share-based payments.
The deferred tax asset in relation to share-based payments was
recognised based on the share price at the balance sheet date which
was GBP4.95. Comparative figures have been updated to present more
appropriately the equity movements between current tax: deduction
for exercised options and deferred tax: recognition of deferred tax
asset on share-based payments for the year ended 31 March 2021.
Deferred tax assets and liabilities
Movements during the year
Year ended 31 March 2022
1 April Recognised Recognised FX 31 March
2021 in income in equity/OCI GBPm 2022
GBPm GBPm GBPm GBPm
------------------------------ ------- ---------- -------------- ----- --------
Property, plant and equipment 0.2 (0.2) - 0.1 0.1
Share-based payments 54.9 7.1 (12.0) (0.1) 49.9
Intangibles (2.7) 0.5 - - (2.2)
Provisions 1.9 0.8 - - 2.7
Tax losses 2.4 0.5 54.2 0.1 57.2
Other (2.0) 1.5 5.9 - 5.4
------------------------------ ------- ---------- -------------- ----- --------
Closing deferred tax asset 54.7 10.2 48.1 0.1 113.1
Represented by:
Deferred tax assets 113.6
Deferred tax liabilities (0.5)
------------------------------ ------- ---------- -------------- ----- --------
Total 113.1
------------------------------ ------- ---------- -------------- ----- --------
Year ended 31 March 2021
1 April Recognised Recognised FX 31 March
2020 in income in equity/OCI GBPm 2021
GBPm GBPm GBPm GBPm
------------------------------ ------- ---------- -------------- ----- --------
Property, plant and equipment (0.2) 0.4 - - 0.2
Share-based payments 28.9 6.1 20.3 (0.3) 55.0
Intangibles (1.3) (1.4) - - (2.7)
Provisions 1.0 0.9 - - 1.9
Tax losses 4.8 (5.6) 3.2 - 2.4
Other (1.2) (0.8) - - (2.0)
------------------------------ ------- ---------- -------------- ----- --------
Closing deferred tax asset 32.0 (0.4) 23.5 (0.3) 54.7
Represented by:
Deferred tax assets 56.7
Deferred tax liabilities (2.0)
------------------------------ ------- ---------- -------------- ----- --------
Total 54.7
------------------------------ ------- ---------- -------------- ----- --------
The deferred tax asset is predominantly generated in the UK and
the US and mainly comprises unexercised share options and losses
generated by share-based payment deductions. The current year tax
losses have arisen due to post-listing share option exercises.
The deferred tax assets are reviewed at each reporting date to
determine recoverability and to determine a reasonable time frame
for utilisation. To determine this, the group has derived their
forecasts from the approved group forecast used for the viability
statements and going concern analysis. There is no time limit for
utilisation of UK tax losses and the US losses can be carried
forward for 20 years. Therefore, losses in the US generated in the
current financial year will only expire at the end of FY2042. In
light of this analysis, the Group considers it is probable that
there will be sufficient taxable profits in the next 6 years to
realise the deferred tax asset. Consequently, the Group has
unrecognised deductible temporary differences of GBPnil (2021:
GBPnil) and the asset has been recognised in full as at 31 March
2022.
Note 10. Earnings per share
The following table reflects the income and share data used in
the basic and diluted earnings per share (EPS) calculations:
2022 2021 *
----------------------------------------------------- ------ -------
Profit for the year (GBPm) 32.9 30.9
Weighted average number of Ordinary Shares for basic
EPS (in millions of shares) 967.2 934.0
Plus the effect of dilution from Share options (in
millions of shares) 66.8 83.6
Weighted average number of Ordinary Shares adjusted
for the effect of dilution (in millions of shares) 1034.0 1,017.6
Basic EPS, in pence 3.40 3.31
Diluted EPS, in pence 3.18 3.04
----------------------------------------------------- ------ -------
*For comparability and consistent presentation, the weighted
average number of Ordinary Shares and share options for 2021 were
determined on the same basis as the 2022 figures, i.e. as if all
shares (common and preference) were redesignated into a single
class of A Ordinary Shares, then each Class A shares split into 26
Class A Shares. Refer to note 18 for further details.
Note 11. Property, plant and equipment
Right-of-use Leased office Office Assets under Total
assets improvements equipment construction GBPm
GBPm GBPm GBPm GBPm
----------------------------- ------------ -------------- ----------- -------------- ------
At 31 March 2020
Cost 17.5 6.5 4.6 0.1 28.7
Accumulated depreciation (4.0) (3.4) (2.2) - (9.6)
----------------------------- ------------ -------------- ----------- -------------- ------
Net book value 13.5 3.1 2.4 0.1 19.1
Additions 10.2 1.7 0.5 0.4 12.8
Reclassifications - - 0.1 (0.1) -
Depreciation charge (4.4) (1.8) (0.8) - (7.0)
Foreign currency translation
differences (0.6) (0.1) (0.2) - (0.9)
As at 31 March 2021
Cost 26.4 7.5 4.0 0.4 38.3
Accumulated depreciation (7.7) (4.6) (2.0) - (14.3)
----------------------------- ------------ -------------- ----------- -------------- ------
Net book value 18.7 2.9 2.0 0.4 24.0
Additions 2.8 4.1 1.5 0.2 8.6
Reclassifications - 0.4 - (0.4) -
Depreciation charge (4.9) (1.7) (1.1) - (7.7)
Write-offs (2.4) - - - (2.4)
Foreign currency translation
differences - - 0.1 - 0.1
At 31 March 2022
Cost 25.8 10.5 4.9 0.2 41.4
Accumulated depreciation (11.6) (4.8) (2.4) - (18.8)
----------------------------- ------------ -------------- ----------- -------------- ------
Net book value 14.2 5.7 2.5 0.2 22.6
----------------------------- ------------ -------------- ----------- -------------- ------
Note 12. Intangible assets
Software Other intangible Total
GBPm assets GBPm
GBPm
--------------------------------- -------- ----------------- ------
At 31 March 2020
Cost 45.6 - 45.6
Accumulated amortisation (24.3) - (24.3)
--------------------------------- -------- ----------------- ------
Net book value 21.3 - 21.3
Additions 19.3 1.6 20.9
Amortisation charge (14.5) (0.2) (14.7)
As at 31 March 2021
Cost 45.8 1.6 47.4
Accumulated amortisation (19.7) (0.2) (19.9)
--------------------------------- -------- ----------------- ------
Net book value 26.1 1.4 27.5
Additions 4.7 3.3 8.0
Amortisation charge (14.8) (0.4) (15.2)
Currency translation differences - 0.1 0.1
At 31 March 2022
Cost 39.0 4.9 43.9
Accumulated amortisation (23.0) (0.6) (23.6)
--------------------------------- -------- ----------------- ------
Net book value 16.0 4.3 20.3
--------------------------------- -------- ----------------- ------
Software is an internally generated intangible asset which
consists of capitalised development costs. Other intangible assets
primarily include licences and domain purchases.
The Group's total product engineering costs for the year ended
31 March 2022 are GBP64.5m (2021: GBP49.8m), including GBP4.7m that
was capitalised as Software intangible (2021: 19.5m). These costs
directly relate to the development of the Group's product offerings
and primarily comprise employee costs of the engineering and
product teams.
Note 13. Trade and other receivables
2022 2021
GBPm GBPm
---------------------------------------------- ----- -----
Non-current trade and other receivables
Office lease deposits 0.7 1.0
Other non-current receivables 13.6 14.1
---------------------------------------------- ----- -----
Total non-current trade and other receivables 14.3 15.1
Current trade and other receivables
Receivables from payment processors 69.5 44.3
Collateral deposits 33.6 26.0
Prepayments 8.3 6.0
Other receivables * 26.2 5.0
---------------------------------------------- ----- -----
Total current trade and other receivables 137.6 81.3
---------------------------------------------- ----- -----
*Net of expected credit loss provision of GBP19.8m as at 31
March 2022 (2021: GBP14.2m). The movement in the year is
predominantly related to increased activity and the related
increase in customer balances, which resulted in the increase of
customers' balances older than 60 days. Customer chargebacks
increased by GBP1.5m to GBP2.9m at 31 March 2022 (31 March 2021:
GBP1.4m) and overdrawn accounts increased by GBP3.4m to GBP9.5m (31
March 2021: GBP6.1m). The remaining GBP0.7m is attributable to
exchange rate movements in the specific provision booked in FY2021
for the receivables with MS Bank S.A. Banco de Câmbio. The
recognised specific provision amount at the year ended 31 March
2022 is GBP7.4m (2021: GBP6.7m).
The carrying values of current trade receivables approximate
their fair values because these balances are expected to be cash
settled in the near future unless a provision is made.
Note 14. Financial assets at fair value through other
comprehensive income
Short-term financial investments are recognised as debt
investments at FVOCI and comprise the following investments in
listed bonds:
2022 2021
GBPm GBPm
------------------------------------------- ------- -----
Short-term financial investments - level 1
Listed bonds 1,192.4 737.5
------------------------------------------- ------- -----
Total short-term financial investments 1,192.4 737.5
------------------------------------------- ------- -----
During the year, the following losses were recognised in other
comprehensive income:
2022 2021
GBPm GBPm
------------------------------------------------------ ------ -----
Debt investments at FVOCI
Fair value losses recognised in other comprehensive
income (22.6) (3.0)
Recognition of deferred tax asset on listed bonds 5.4 -
------------------------------------------------------ ------ -----
Total fair value losses in other comprehensive income (17.2) (3.0)
------------------------------------------------------ ------ -----
During the year, the Group sold GBP147.3m of financial assets at
FVOCI before maturity. The net loss of GBP4.8m on disposal of the
listed bond was transferred from the fair value reserves in equity
to the consolidated income statement in other operating
expenses.
Note 15. Cash and cash equivalents
2022 2021
GBPm GBPm
--------------------------------------------------- ------- -------
Cash and cash equivalents
Cash at bank, in hand and in transit between Group
bank accounts 5,618.8 3,018.0
Cash in transit to customers* 154.6 108.6
Investment into money market funds 282.9 232.0
--------------------------------------------------- ------- -------
Total cash and cash equivalents 6,056.3 3,358.6
--------------------------------------------------- ------- -------
*Cash in transit to customers represents cash that has been paid
out from the Group bank accounts but has not been delivered to the
bank account of the beneficiary.
Of the GBP6,056.3m (2021: GBP3,358.6m) cash and cash equivalents
at the period end, GBP357.8m (2021: GBP286.1m) is considered
corporate cash balance, not related to customer funds, which is
held on Wise Accounts or collected from customers as part of the
money transfer settlement process. Refer to note 21 for further
details.
Customer funds are subject to various regulatory safeguarding
compliance requirements. Such requirements may vary across the
different jurisdictions in which the Group operates.
As at 31 March 2022, in addition to other highly liquid assets,
such as money market funds and investment grade bonds, the Group
held GBP4,930.2m (2021: GBP2,472.9m) of cash at bank in segregated,
safeguarded bank accounts to secure customer deposits.
Note 16. Trade and other payables
2022 2021
GBPm GBPm
-------------------------------------------- ------- -------
Non-current trade and other payables
Non-current accruals and provisions 15.7 22.6
-------------------------------------------- ------- -------
Total non-current trade and other payables 15.7 22.6
-------------------------------------------- ------- -------
Current trade and other payables
Outstanding money transmission liabilities* 170.6 141.2
Wise Accounts 6,783.2 3,712.7
Accounts payable 10.4 3.1
Accrued expenses** 26.5 20.5
Deferred revenue 5.6 3.2
Other payables 37.9 7.9
-------------------------------------------- ------- -------
Total current trade and other payables 7,034.2 3,888.6
-------------------------------------------- ------- -------
Money transmission liabilities represent transfers that have not
yet been paid out or delivered to a recipient.
** In the comparative year, within accrued expenses were
included GBP2.6m of other provisions that are now presented
separately in the Consolidated statement of financial position.
Trade and other payables are unsecured unless otherwise
indicated; due to the short-term nature of current payables, their
carrying values approximate their fair value.
Note 17. Borrowings
2022 2021
GBPm GBPm
----------------------------- ----- -----
Current
Lease liabilities 5.5 3.5
----------------------------- ----- -----
Total current borrowings 5.5 3.5
Non-current
Revolving credit facility 78.5 78.6
Lease liabilities 11.7 16.6
----------------------------- ----- -----
Total non-current borrowings 90.2 95.2
Total borrowings 95.7 98.7
----------------------------- ----- -----
Debt movement reconciliation:
Revolving Lease Total
credit liabilities GBPm
facility GBPm
GBPm
---------------------------------------------- --------- ------------ ------
As at 31 March 2020 49.2 14.6 63.8
Cash flows:
Proceeds 118.6 - 118.6
Repayments (90.0) (3.9) (93.9)
Interest expense paid (2.2) (0.8) (3.0)
Non-cash flows:
New leases 10.2 10.2
Interest expense 3.0 0.8 3.8
Foreign currency translation differences - (0.8) (0.8)
---------------------------------------------- --------- ------------ ------
As at 31 March 2021 78.6 20.1 98.7
Cash flows:
Proceeds 43.0 - 43.0
Transaction costs related to revolving credit
facility (0.8) - (0.8)
Repayments (43.0) (3.8) (46.8)
Interest expense paid (2.8) (0.9) (3.7)
Non-cash flows:
New leases - 2.8 2.8
Interest expense 3.5 0.9 4.4
Foreign currency translation differences - 0.1 0.1
Other lease movements - (2.0) (2.0)
---------------------------------------------- --------- ------------ ------
As at 31 March 2022 78.5 17.2 95.7
---------------------------------------------- --------- ------------ ------
The interest expense accrued is recognised within the finance
expense in the Consolidated statement of profit and loss.
Revolving credit facility (RCF)
In the year 31 March 2021, the Group entered into a Multi
Currency Debt facility for GBP160.0m with Silicon Valley Bank,
Citibank N.A., JP Morgan Chase Bank N.A. and National Westminster
Bank plc with maturity date in March 2024. In August 2021, the
Group exercised an accordion with Barclays Bank plc, Goldman Sachs
Lending Partners LLC and Morgan Stanley Senior Funding Inc to
increase the debt facility by an additional GBP52m.
The facility bears interest at a rate per annum equal to SONIA
plus a margin determined by reference to adjusted leverage
(calculated as a ratio of debt to adjusted EBITDA*). The agreement
contains certain customary covenants, including to maintain a
maximum total net leverage ratio not in excess of 3:1 and interest
cover (calculated as a ratio of adjusted EBITDA* to finance charges
in accordance with the terms of the agreement) is not less than a
ratio of 4:1 in respect of any relevant period.
The undrawn amount of the facility as at 31 March 2022 was
GBP132.0m (2021: GBP80.0m). During the year ended 31 March 2022,
the effective interest rate on the relevant facility was between
2.8% and 3.7% (2021: 2.8-3.6%).
The facility is secured by certain customary security interests
and pledges including over shares in certain Group entities (Wise
plc, Wise Financial Holdings Ltd, Wise Payments Limited, Wise US
Inc., Wise Europe SA and Wise Australia Pty Ltd), and fixed and
floating pledges over assets and undertakings of Wise Payments Ltd,
excluding customer and partner funds, share capital or equity
contributions maintained for regulatory purposes, cash paid into a
bank or collateral account in connection with, and for the benefit
of, relevant card scheme providers and assets held in safeguarded
accounts or otherwise segregated for regulatory purposes.
Lease liabilities
As at 31 March 2022, the lease liabilities are GBP17.2m (2021:
GBP20.1m) and relate to the expected terms remaining on UK, US,
Estonia, Hungary and Singapore office space leases discounted at
between 2.51% and 5.18%. The leases expire between 2023-2025.
The Group has extension options in a number of leases for office
space, which have not been exercised as at 31 March 2022. The
potential future lease payments, should the Group exercise the
extension options, would result in an increase in the lease
liability of GBP3.5m.
The Group has a termination option in an office lease, which has
not been exercised as at 31 March 2022. The potential future lease
payments, should the Group exercise the termination option, would
result in a decrease in the lease liability of GBP0.9m.
Note 18. Share capital
As at 31 March 2022 As at 31 March 2021
------------------------------------ ---------------------------------------------------------------
Wise plc Wise plc Wise Payments Ltd
------------------------------------ ------------------------------- ------------------------------
Class Nominal Number Share Nominal Number Share Nominal Number Share
value, of shares capital, value, of shares capital, value, of shares capital,
GBP GBP GBP * * GBP * GBP GBP
----------- --------- ------------- ---------- ------- ----------- --------- ------- ---------- ---------
Class A
Shares 0.01 1,024,589,856 10,245,899 - - - - - -
Class B 0.000 000
Shares 001 398,889,814 0.40 - - - - - -
0.000
Ordinary - - - 0.01 433,918,706 4,339,187 01 16,689,181 166
Seed 0.000
preferred - - - 0.01 130,364,000 1,303,640 01 5,014,000 50
Series A 0.000
preferred - - - 0.01 176,410,000 1,764,100 01 6,785,000 68
Series B 0.000
preferred - - - 0.01 73,553,350 735,534 01 2,828,975 28
Series C 0.000
preferred - - - 0.01 65,033,436 650,334 01 2,501,286 25
Series D 0.000
preferred - - - 0.01 22,662,848 226,628 01 871,648 9
Series E 0.000
preferred - - - 0.01 39,911,482 399,115 01 1,535,057 15
----------- --------- ------------- ---------- ------- ----------- --------- ------- ---------- ---------
Total 1,423,479,670 10,245,899 941,853,822 9,418,538 36,225,147 361
----------- --------- ------------- ---------- ------- ----------- --------- ------- ---------- ---------
The share capital presented reflects the share capital structure
of Wise plc as if it had been the ultimate parent of the Group as
of the comparative date.
On 22 June 2021, in relation to the preparation for the direct
listing on the London Stock Exchange, Wise Payments Ltd undertook a
share reorganisation in which all shares (ordinary and preference)
were redesignated into a single class of A Ordinary Shares.
Following which, each Class A Share was split into 26 Class A
Shares. Wise Payments Ltd then undertook a bonus issue of B
Ordinary Shares.
On the same day and following the above share reorganisation,
Wise Payments Ltd shareholders entered into a share-for-share
exchange agreement with the shareholder of Wise plc, acquiring Wise
Payments Ltd's Class A and Class B Shares with nominal values of
GBP0.000 01 and GBP0.000 000 001, in exchange for the issue of Wise
plc Class A and Class B Shares with nominal values of GBP0.01 (i.e.
1,000 times greater than the nominal value of Wise Payments Ltd's
Class A Shares) and GBP0.000 000 001, respectively. As a result,
Wise plc became the ultimate parent company of the Group, with a
100% indirect investment in Wise Payments Ltd through Wise
Financial Holdings Ltd.
During the financial year 2022 a total of 82,736,034 Ordinary
Shares were issued for a total of GBP0.8m (2021:563,587 Ordinary
Shares were issued for a total of GBP0.9m, classified as equity
merger reserves post reorganisation).
Each Class A shareholder is entitled to one vote for each Class
A Share held, subject to any restrictions on total voting rights as
set out in the Company's Articles of Association. Class A
shareholders are entitled to interim or annual dividends to the
extent declared and do not hold any preferential rights to
dividends. Class A Shares are non-redeemable.
Each Class B shareholder is entitled to nine votes for each
Class B Share held, subject to any restrictions on total voting
rights as set out in the Company's Articles of Association. Class B
Shares carry no rights to distributions of dividends except on
distribution of assets, up to their nominal value, on a liquidation
or winding up. Class B Shares are strictly non-transferable,
non-tradeable and non-distributable to any person or entity
whatsoever.
Note 19. Equity merger reserve and Other reserves
Equity merger reserve
The merger reserve arises from the Group pre-listing
reorganisation accounted for as capital reorganisation. Upon the
reorganisation, the Group's Ordinary Shares have been represented
as those of Wise plc. The difference between Wise Payments Ltd net
assets and the nominal value of the shares in issue is recorded in
the merger reserve.
Other reserves
Other reserves predominantly relate to investments into highly
liquid bonds measured at FVOCI. For these investments, changes in
fair value are accumulated within the FVOCI reserve within equity.
On disposal of these debt investments, any related balance within
the FVOCI reserve is reclassified to profit or loss. Refer to note
14 for further details.
Note 20. Share-based employee compensation
After the reorganisation of the Group, as described in notes 1
and 18, share options for Wise Payments Ltd Ordinary Shares were
replaced by share options for Wise plc Class A Shares. The same
share-split ratio was applied as for the share capital
reorganisation described in note 18.
As the result of the reorganisation, Wise Payments Ltd
transferred its share-based payment reserves to retained earnings
as the obligation to settle share-based payment awards would be
with Wise plc. This transfer did not impact the consolidated
results of the Group following the reorganisation and will be
reflected in the standalone financial statements of Wise plc.
The employee share option plans are designed to provide
long-term incentives for all employees to deliver long-term
shareholder returns. Under the plans, participants are granted
share options of the Company, which vest gradually over a 4-year
period and are equity settled for shares within Wise plc. The
awards are subject to service conditions, i.e. the requirement for
recipients of awards to remain in employment with the Group over
the vesting period.
Transactions on the share option plan for employees during the
year were as follows:
As at 31 March 2022 As at 31 March 2021
Wise plc Wise plc Wise Payments Ltd
----------------------------- --------------------------- ---------------------------
Class Average exercise Number Average Number of Average exercise Number of
price per share of options exercise options* price per options
option, GBP price per share option,
share option, GBP
GBP*
----------------------- ---------------- ----------- -------------- ----------- ---------------- ---------
Beginning of year 0.11 97,252,168 0.14 106,686,138 3.57 4,103,313
Granted during
the year 0.01 8,373,106 0.32 13,282,230 8.32 510,855
Exercised during
the year 0.08 42,170,404 0.06 14,653,262 1.54 563,587
Forfeited during
the year 0.16 5,149,847 0.84 8,062,938 21.96 310,113
----------------------- ---------------- ----------- -------------- ----------- ---------------- ---------
End of year 0.11 58,305,023 0.11 97,252,168 2.86 3,740,468
Vested and exercisable
as at end of year 0.15 36,294,247 0.13 63,899,550 3.28 2,457,675
----------------------- ---------------- ----------- -------------- ----------- ---------------- ---------
* Following the Group reorganisation, in which each Class A
Share was split into 26 Class A Shares, the number of share options
for all of the periods prior to 2022 were determined with the same
share-split ratio and the average share exercise price was adjusted
accordingly. For further information on the reorganisation refer to
note 1.
The share-based payment compensation expense for the year ended
31 March 2022 is GBP42.2m (2021: GBP36.5m) for employees directly
employed by the Group and GBP0.3m (2021: GBP0.4m) for outsourced
personnel.
During the year GBP25.2m (2021: GBP2.8m) of share-based payments
were exercised, forfeited or vested and were recycled to retained
earnings.
Share options outstanding at the end of the year have the
following expiry dates and exercise prices:
Grant date Expiry date Weighted average Share options Share options
range range exercise price as at as at
12 months ended 12 months ended 31 March 2022 31 March 2021*
31 March 31 March
----------------- ----------------- ---------------- -------------- ---------------
2013 2023 0.00014 275,126 3,043,118
2014 2024 0.00014 232,310 3,149,822
2015 2025 0.00271 1,443,678 8,835,606
2016 2026 0.10578 2,031,776 7,660,588
2017 2027 0.17574 3,258,130 7,405,450
2018 2028 0.17981 4,988,593 12,387,830
2019 2029 0.12845 11,429,400 18,760,586
2020 2030 0.15303 15,262,193 19,932,172
2021 2031 0.10972 8,810,346 16,076,996
2022 2032 0.00012 10,573,471 -
================= ================= ================ ============== ===============
Total 58,305,023 97,252,168
==================================== ================ ============== ===============
Weighted average remaining 7.2 years 6.9 years
contractual life of options
outstanding at end of year
------------------------------------ ---------------- -------------- ---------------
*For comparability and consistent presentation, the weighted
average exercise price and the number of share options for all of
the periods prior to 2022, were determined on the same basis as the
2022 figures; i.e. as if all share options split into 26, in
accordance with the share-split ratio of Class A Shares during the
Group reorganisation. Refer to note 1 for further details.
Valuation of share awards
The assessed fair value at the grant date of share options
granted during the year ended 31 March 2022 was GBP9.51 per option
on average (2021: GBP3.52). The fair value of the share options
granted after the listing is calculated using the closing share
price at the grant date. The fair value of the share options
granted prior to the listing was independently determined using the
Black Scholes Model that takes into account the exercise price, the
term of the share option, the share price at grant date and
expected price volatility of the underlying share, the risk-free
interest rate for the term of the share option and the correlations
and volatilities of the peer group companies.
For the year ended 31 March 2022 a total of 1,526,247 options
were granted prior to listing and 6,846,859 options were granted
post listing.
The Black-Scholes model inputs included:
-- Options are granted for no consideration and vest over the
4-year period according to the vesting conditions;
-- Average exercise price: GBP0.01;
-- No dividends are expected to be paid;
-- Expected price volatility of the Company's shares: 48%
-- Risk-free interest rate: 1.44%
-- Expected price volatility is based on the comparative
information of the peer-group companies.
-- Risk-free interest rate is based on the UK 5-year government
bond yield.
Share trust
The Group consolidates one share trust. The Group's own share
reserve represents the weighted average cost of shares in the Wise
Group Employee Benefit Trust (Ocorian) which are held for the
purposes of fulfilling obligations in respect of the Group's share
awards.
Note 21. Cash generated from operating activities
Note 2022 2021
GBPm GBPm
--------------------------------------------------- ------- ------- -------
Cash generated from operations
Profit for the year 32.9 30.9
Adjustments for:
Depreciation and amortisation 7,11,12 22.9 21.7
Non-cash share-based payments expense 42.2 38.5
Foreign currency exchange differences 18.3 17.1
Current tax expense 9 11.0 10.2
Effect of other non-monetary transactions 10.6 5.7
Changes in operating assets and liabilities:
(Increase)/decrease in prepayments and receivables (16.7) 6.1
Increase in trade and other payables 16.8 30.0
(Increase)/decrease in receivables from customers
and payment processors (34.0) 3.2
Increase in liabilities to customers, payment
processors and deferred revenue 46.2 31.3
Increase in Wise Accounts 2,983.9 1,881.6
--------------------------------------------------- ------- ------- -------
Cash generated from operations 3,134.1 2,076.3
--------------------------------------------------- ------- ------- -------
The table below show a non-IFRS view of the 'Corporate cash'
metric that is used by the Group management as a Key Performance
Indicator in assessment of the Group's ability to generate cash and
maintain liquidity. Corporate cash represents cash and cash
equivalents that are not considered customer related balances.
Information presented in the table below is based on the Group's
internal reporting principles and might differ from the similar
information provided in IFRS disclosures:
Note 2022 2021
GBPm GBPm
--------------------------------------------------- ------ --------- ---------
Breakdown of corporate and customer cash
Cash and cash equivalents and short-term financial
investments 14, 15 7,248.7 4,096.1
Receivables from customers and payment processors 85.2 47.3
Adjustments for:
Outstanding money transmission liabilities
and other customer payables (192.9) (144.6)
Wise Accounts 16 (6,783.2) (3,712.7)
--------------------------------------------------- ------ --------- ---------
Corporate cash at end of the year 357.8 286.1
--------------------------------------------------- ------ --------- ---------
Corporate cash includes the 'Receivables from payments
processors' as disclosed in note 13, as well as receivables from
customers and partners. Those balances are reported under 'Other
receivables' in note 13, but exclude those elements which are
considered customer related balances.
Similarly, corporate cash includes the 'Outstanding money
transmission liabilities' and the payables reported under 'Deferred
revenue' and 'Other payables' in note 16, which are not considered
customer related balances.
Note 22. Commitments and contingencies
The Group's minimum future payments from non-cancellable
agreements as at year end are detailed below:
2022 2021
GBPm GBPm
-------------------------------------------- ----- -----
Infrastructure subscriptions
No later than 1 year 1.4 2.5
Later than 1 year and no later than 5 years 0.7 2.0
--------------------------------------------- ----- -----
Total 2.1 4.5
Significant capital expenditure contracted
No later than 1 year - 2.1
--------------------------------------------- ----- -----
Total - 2.1
--------------------------------------------- ----- -----
The Group does not have any other material commitments, capital
commitments or contingencies as at 31 March 2022 and 31 March
2021.
Note 23. Transactions with related parties
Related parties of the Group and Wise plc include subsidiaries,
key management personnel ("KMP"), close family members of KMP and
entities that are controlled or jointly controlled by KMP or their
close family members. Wise identifies the Board of Directors as
KMP.
Balances and transactions between the Company and its
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
Details of the Directors remuneration and interest in shares are
disclosed in the Remuneration Report. Additional information for
key management compensation and particulars of transactions with
related parties are tabulated below, in accordance with IAS 24
Related party disclosures requirements.
2022 2021
GBPm GBPm
------------------------------------------ ----- -----
Compensation of KMP of the Group
Short-term employee benefits 0.5 0.5
Share-based payment expense 3.1 1.7
------------------------------------------- ----- -----
Total compensation paid to key management
personnel 3.6 2.2
------------------------------------------- ----- -----
Short-term employee benefits include salaries for the KMP.
Share-based payment expense is related to employee share option
plan (more information about the plan is provided in note 20).
2022 2021
GBPm GBPm
-------------------------------------------- ----- -----
Transactions and balances with KMP of the
Group
Balances in Wise accounts 1.8 0.3
Other transactions 0.7 -
--------------------------------------------- ----- -----
Total transactions and balances with KMP of
the Group 2.5 2.2
--------------------------------------------- ----- -----
Other transactions referred to contributions received from
related parties at the time of the listing.
No other material transactions with related parties of the Group
incurred during the financial years ended 31 March 2022 and 31
March 2021.
Note 24. Post balance sheet events
No post balance sheet events have occurred since 31 March
2022.
Alternative performance measures
The Group uses a number of alternative performance measures
("APMs") within its financial reporting. These measures are not
defined under the requirements of IFRS and may not be comparable
with the APMs of other companies.
The Group believes these APMs provide stakeholders with
additional useful information in providing alternative
interpretations of the underlying performance of the business and
how it is managed and are used by the Directors and management for
performance analysis and reporting. These APMs should be viewed as
supplemental to, but not a substitute for, measures presented in
the financial statements which are prepared in accordance with
IFRS.
Adjusted EBITDA Measure of profitability which is calculated See definition
as profit for the year excluding the for calculation
impact of income taxes, finance income method
and expense, depreciation and amortisation,
share-based payment compensation expense
as well as exceptional items. The Group
believes that Adjusted EBITDA is a
useful measure for investors because
it is a measure closely tracked by
management to evaluate the Group's
performance and make financial, strategic
and operating decisions and because
it may help investors to understand
and evaluate, in the same manner as
management, the underlying trends in
the Group's performance on a comparable
basis, period on period
================ ============================================== =================
Free cash flow Measure of cash flow which further See definition
(FCF) takes into account the net cash flows for calculation
from operating activities less the method
change in working capital (excluding
the change in collateral and other
pass-through items), the costs of purchasing
property, plant and equipment, intangible
assets capitalisation and payments
for leases. It is a non-statutory measure
used by the Board and the senior management
team to measure the ability of the
Group to support future business expansion,
distributions or financing
================ ============================================== =================
Adjusted EBITDA Adjusted EBITDA as a percentage of See definition
margin total revenue for calculation
method
================ ============================================== =================
FCF conversion Free cash flow as a percentage of Adjusted See definition
EBITDA for calculation
method
================ ============================================== =================
Exceptional Exceptional items are items of income See note 7
items or expense that the Group considers for further
to be material, one-off in nature and information
of such significance that they merit
separate presentation in order to aid
with understanding of the Group's financial
performance. Such items include costs
associated with the changes in the
Group's organisational structure and
direct listing
================ ============================================== =================
Corporate Cash Corporate cash represents cash and See note 21
cash equivalents that are not considered for further
customer related balances. Measure information
of the Group's ability to generate
cash and maintain liquidity
================ ============================================== =================
Adjusted EBITDA and FCF reconcile to profit for the year as
follows:
2022 2021
GBPm GBPm
-------------------------------------------------------- ----- ------
Profit for the year 32.9 30.9
Adjusted for:
Income tax expense 11.0 10.2
Finance expense 4.8 3.8
Depreciation and amortisation 22.9 21.7
Share-based payment compensation expense 42.2 38.1
Exceptional items 7.6 4.0
-------------------------------------------------------- ----- ------
Adjusted EBITDA 121.4 108.7
Revenue 559.9 421.0
-------------------------------------------------------- ----- ------
Adjusted EBITDA* margin 21.7% 25.8%
Corporate cash working capital change excl. collaterals 9.0 23.1
Adjustment for exceptional and pass-through items
in the working capital (0.5) -
Payments for lease liabilities (4.7) (4.7)
Capitalised expenditure - Property, plant and
equipment (4.6) (2.3)
Capitalised expenditure - Intangible assets (7.3) (20.9)
-------------------------------------------------------- ----- ------
Free cash flow (FCF) 113.3 103.9
-------------------------------------------------------- ----- ------
FCF conversion (FCF as a % of Adjusted EBITDA) 93.3% 95.6%
-------------------------------------------------------- ----- ------
Corporate cash
The tables below show a non-IFRS view of the "Corporate cash"
metric that is used by the Group management as a Key Performance
Indicator in assessment of the Group's ability to generate cash and
maintain liquidity.
2022 2021
GBPm GBPm
------------------------------------------------- ------ ------
Cash flows from operating activities
Profit for the period 32.9 30.9
Adjustments for non-cash transactions 53.4 76.5
Change in corporate working capital 2.2 38.7
Receipt of interest 0.7 0.4
Payment of income tax and interest charges (17.1) (10.1)
-------------------------------------------------- ------ ------
Net cash generated from operating activities 72.1 136.4
Net cash used in investing activities (11.6) (23.2)
Net cash (used in)/generated from financing
activities (1.3) 24.8
Total increase in corporate cash 59.2 138.0
Corporate cash at beginning of year 286.1 155.1
Effect of exchange rate differences on corporate
cash 12.5 (7.0)
Corporate cash at end of the year 357.8 286.1
-------------------------------------------------- ------ ------
2022 2021
GBPm GBPm
-------------------------------------------------- --------- ---------
Breakdown of corporate and customer cash
Cash and cash equivalents and short-term
financial investments 7,248.7 4,096.1
Receivables from customers and payment processors 85.2 47.3
Adjustments for:
Outstanding money transmission liabilities
and other customer payables (192.9) (144.6)
Wise Accounts (6,783.2) (3,712.7)
--------------------------------------------------- --------- ---------
Corporate cash at end of the year 357.8 286.1
--------------------------------------------------- --------- ---------
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FR PPUAAQUPPUAR
(END) Dow Jones Newswires
June 28, 2022 02:00 ET (06:00 GMT)
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