April 25, 2019
By Douglas Busvine
MUNICH (Reuters) – German payments company Wirecard sought on Thursday to refocus on growth after securing audit approval of annual results which had been delayed by allegations of fraud and false accounting at its Singapore office.
Germany’s leading fintech company has been shaken by a string of reports in the Financial Times, which it has denied, citing a whistleblower’s allegations that local staff padded revenues through sham transactions.
Wirecard said auditor EY had found “no objections against the accounting treatment of the facts that were the subject of various allegation made by a purported whistleblower in Singapore”.
Wirecard won the backing of a heavyweight investor on Wednesday when it announced a partnership with Japan’s Softbank that included the sale of a 900 million euro five-year bond convertible into a 5.6 percent stake in the company.
Its annual results were delayed by an investigation by Wirecard’s outside law firm Rajah & Tann, which exonerated head office but did find that local staff in Singapore may have committed crimes that were not material to the company’s finances.
CEO Markus Braun, who remains the company’s largest shareholder with a 7 percent stake, said that management recognized weaknesses in the handling of software licenses used by its partners and would tighten up compliance in this area.
“We are a growth company,” Braun told a news conference in Munich.
“This is all about innovation and expansion, but of course we must catch up when it comes to compliance, audit and controlling.”
Management confirmed guidance that earnings before interest, taxation, depreciation and amortization (EBITDA) would rise to between 740 and 800 million euros ($825-$892 million) this year.
Wirecard, which recently displaced Commerzbank from Germany’s DAX blue-chip index, reported a 36.6 percent gain in EBITDA to 560.5 million euros in 2018, while EBITDA margin widened by 0.2 percentage points to 27.8 percent.
Management proposed a dividend of 20 euro cents.
Braun said the Softbank deal offered the chance to work with companies backed by a group which runs the world’s largest venture fund and counts ride hailing firms Uber, Grab and Didi in its portfolio.
Digital payments scenarios that the alliance could work on included connected vehicles or food delivery, said Braun, who will seek shareholder approval for the arrangement.
Wirecard, founded in 1999, has profited from a boom in online payments by acting both as an acquirer, handling payments to merchants, and as an issuer of real and ‘virtual’ payment cards to consumers.
It handled a total of 125 billion euros in transactions for 280,000 merchants last year, generating revenues of 2 billion euros. It expects revenues to grow to 3 billion euros in 2020 and 10 billion in 2025 as digital payments become increasingly pervasive.
ANOTHER FT DENIAL
Even as Wirecard has grown apace, it has remained a favorite target of ‘short’ sellers seizing on negative reports to try to profit from declines in its share price. This has sparked investigations into suspected market manipulation by German prosecutors and the market regulator.
Wirecard, which has already sued the FT, denied another report in the newspaper on Wednesday that alleged the accounts of a Dubai-based unit were not audited in 2016 and 2017. It said all its subsidiaries were audited regularly.
The FT’s reporting, starting Jan. 30, triggered a 50-percent slide in Wirecard’s share price, while Singapore police have opened an investigation and raided Wirecard’s office there.
Braun said he retained his appetite for running a listed company.
“I enjoy being on the stock market,” the Austrian said, “and I haven’t lost my passion for the job in the last two months.”
(Reporting by Douglas Busvine; Additional reporting by Tassilo Hummel; Editing by Paul Carrel/Keith Weir)