TIDMAFX
RNS Number : 3119L
Alpha FX Group PLC
12 January 2021
12 January 2021
Alpha FX Group plc
("Alpha FX" or the "Group")
Trading Update
Alpha FX Group plc (AIM: AFX), a provider of FX risk management
and alternative banking solutions to corporates and institutions
internationally, today announces a trading update for the financial
year ended 31 December 2020.
Performance
Following the last trading update on 3 December 2020, trading
has continued to be strong, with revenue for the full year expected
to be approximately GBP46m and underlying operating profit slightly
ahead of most recent expectations. Growth for the year came from
both our FX risk management and alternative banking divisions,
despite the former seeing a significant impact in the first half
from businesses delaying their trading activity because of the
slowdown in global trade as a result of COVID-19. Despite the
backdrop, client numbers increased by 16% during the year from 648
to 754.
FX Risk Management
Our FX risk management division focuses on supporting corporates
and institutions across the UK, Europe and Canada that trade
currency for commercial purposes, such as buying or selling goods
and services overseas or hedging the underlying value of an asset.
We service this marketplace through our corporate and institutional
sales teams in London, Canada and Amsterdam.
Whilst revenue growth from FX risk management solutions slowed
in H1 as businesses delayed their trading activity, H2 saw much
stronger growth, with our corporate and institutional teams in
London performing well and a strong performance from our corporate
team in Canada leading to that office posting a profit for the
year. Our team in Amsterdam (launched at the start of the pandemic
in March and now fully operational) also performed well in its
first year, achieving consecutive quarterly revenue growth.
Alternative Banking Solutions
Our alternative banking solutions division focuses on providing
corporates and institutions across the UK, Europe and Canada with a
suite of alternative banking solutions covering payments,
collections and accounts. Serviced primarily by a specialist team
within Alpha Platform Solutions (formerly named Alpha Payment
Solutions), the team also benefits the Group from cross-selling to
and from our corporate and institutional sales teams.
Our alternative banking solutions division also delivered strong
growth throughout the year, with Alpha Platform Solutions
increasing its traction and stickiness with clients by delivering
not just payments but an increasingly wider range of solutions. As
a result of the growing traction of our alternative banking
solutions, we are seeing an increase in cash conversion, since the
offering typically involves transactions such as spot trades and
invoicing.
Investments & People
Since our IPO in 2017, we have continued to invest in the
breadth and depth of our offering and the quality of our team to
ensure we can deliver sustainable, long-term growth. Our ability to
remain a growth business in 2020, despite the impact of COVID-19,
is a testament to this strategy. Accordingly, the Group continued
its investment in Back Office headcount, which grew from 50 to 69
during the period to support the ongoing technological development
of our alternative banking solutions, and the increase in support
required across Compliance, Risk, and Settlements as the business
scales.
Our Front Office team meanwhile saw a small increase in
headcount from 74 to 78. This was largely down to employee
attrition rates remaining stable, but new hiring being reduced,
owing to the challenge of inducting new salespeople remotely and at
a time where people were naturally more reluctant to move from
known job security. Ultimately, while the size of the team has not
grown as much as we would have liked, we are confident the 'talent
density' within the team has, with many of our more recent starters
now making significant traction. Whilst we will continue to grow
the team to support the rate of client acquisition, we are
confident there also remains significant capacity within the
existing team to support considerable growth long into the
future.
COVID-19
The Group has proven its resilience and ability to adapt to the
challenges posed by COVID-19. We are also mindful however that at
the height of the pandemic, when lockdown measures were at their
peak, growth slowed, particularly on the FX risk management side of
the business.
With a full lockdown once again in place and infection rates
rising, we are now returning to an environment similar to that at
the height of the pandemic and naturally anticipate conditions to
be more challenging than they were in H2 of last year when
restrictions were lower, and infection rates were on the decline.
Nonetheless, with COVID-19 now a more familiar challenge than it
was in Q2 2020 and due to the roll-out of vaccinations, we are
cautiously optimistic for the year ahead.
Brexit
The Group has been preparing for a no-deal Brexit for a
considerable length of time and is therefore able to continue
servicing the vast majority of its European clients. However, the
limited scope covering financial services within the Free Trade
Agreement means the Group will now be concluding the final set up
of a wholly-owned subsidiary established in Malta, with completion
expected by the end of Q1 at the latest. Until this time, the
business will service European derivative clients through reverse
solicitation and operating on an execution only basis. Due to
reverse solicitation not being uniformly implemented across EU
Member States, the Group will not be servicing derivative clients
in certain EU Member States and so a small number of existing
clients representing less than 1% of the Group's revenue will not
be able to place new derivative trades with us until Malta is
operational.
Whilst reverse solicitation means we can only offer our European
clients derivative services when they request them, we are
confident the revenue impact will be minimal during the short
period that we are concluding the setup of our European base.
Indeed, due to the sophisticated nature of derivative products,
Alpha has always made the conscious decision to only provide them
to professional clients who have
requested them, and these clients are therefore typically covered by the concept of reverse solicitation.
The vast majority of preparations were complete prior to 2021,
with an in-principle no objection letter obtained from the Maltese
financial services regulator. However, the Group chose not to
initiate the final setup until a Brexit outcome was confirmed,
conscious that requirements were vulnerable to change, and that the
process could even have proven unnecessary.
We continue to stay abreast of any developments but do not
anticipate any further material impact arising from the EU-UK Trade
and Cooperation Agreement.
Cash & Liquidity
Alpha remains profitable, debt-free, and extremely well
capitalised, with circa GBP 48m in own free cash immediately
available on its balance sheet. Due to the growing traction of our
alternative banking solutions, we are naturally seeing an increase
in the proportion of products sold that are readily convertible
into cash, in particular spot transactions, which is providing
accelerated cash conversion to support our growth.
Dividend
As announced previously, the Board intends to reinstate a
dividend policy at the time of the release of the full-year results
in March.
Morgan Tillbrook, Founder & Chief Executive Officer of Alpha
said:
"Despite the challenges faced, the team ensured 2020 was another
consecutive year of strong growth across all divisions of the
business. The lifeblood of Alpha's success is our people and I am
extremely proud of our team for rising to the challenge to deliver
in the way they have. It is a real privilege to lead the Group and
I believe the progress made this year will set us in very good
stead long into the future."
Enquiries:
Alpha FX Group plc via Alma PR
Morgan Tillbrook, Founder and CEO
Tim Kidd, CFO
Liberum Capital Limited (Nominated Adviser and Sole Broker) Tel:
+44 (0) 20 3100 2000
Neil Patel
Richard Bootle
Kane Collings
Alma PR (Financial Public Relations) Tel: +44 0203 405 0205
Josh Royston
Helena Bogle
Notes to Editors
Alpha provides FX risk management and alternative banking
solutions to corporates and institutions across the UK, Europe and
Canada. Combining leading expertise and technology, the Group
partners with a small number of high value clients, to provide
enterprise-level solutions across four key areas: FX risk
management, international payments, accounts and collections.
Since it was incorporated in 2010, Alpha FX has been able to
build and retain a high-quality client base that includes a number
of highly respected brands.
Market Abuse Regulation
This announcement is released by Alpha FX Group plc and contains
inside information for the purposes of the Market Abuse Regulation
(EU) 596/2014 ("MAR") and is disclosed in accordance with the
Company's obligations under Article 17 of MAR. The person who
arranged for the release of this announcement on behalf of Alpha FX
Group plc was Tim Kidd, Chief Financial Officer.
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END
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