How insulated is Wirecard's UK arm from the extraordinary scandal at its German parent?
thetimes.co.uk/article/fears-…
thetimes.co.uk/article/fears-…
Wirecard Card Solutions is a separate legal entity regulated by FCA, with its own board. Last set of accounts (for 2018) show pre-tax profit of £2.5m. Hundreds of millions of client funds is held in segregated accounts with Barclays and Citi. So, all good?
A closer look at the accounts provides cause for concern. It's far from clear which costs are being passed up to the group company, likely flattering the bottom line. Speaking generally, FCA is uncomfortable with this kind of opacity in e-money firms.
Customer relationships – now under threat – are recorded on the balance sheet as a supposed sign of financial stability. The cost of securing customer relationships is booked as an intangible asset on a 20-year amortisation.
The subsidiary appears to defer booking the cost of paying upfront incentives and sales commissions to match future revenues derived from those relationships over two decades. Paints an unduly rosy picture and reminiscent of the accounting practices of the German parent.
Other points of note include an assertion that the global pandemic would be “immaterial” to the business, justification for a projected 30 per cent revenue growth this year(!) and legal and accountancy costs up 700k.
Directors are employed by German parent, and small print updated on UK company's FCA register entry shows how interlinked finances are.
FCA update suggests that when people pay with cards issued by UK subsidiary, it is the German company that makes the daily settlement with merchants, with Wirecard UK subsequently paying the parent back.
So, in short, UK accounts not as rosy as they appear at first glance and the business at least a little more closely linked to the German parent than some would have you believe.
