19 January 2022

Alpha FX Group plc

("Alpha FX" or the "Group")

Trading Update and Intended Board Change

Alpha FX Group plc (AIM: AFX), a high-tech, high-touch 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 2021.

Performance

Following on from the trading update issued on 8 December 2021, the Group's trading has continued to be strong across all our divisions, resulting in an exceptionally strong November and December. As a result, revenue for the full year is now expected to be in excess of £77m, representing an increase of 67% compared to the previous FY, and ahead of previous analyst expectations set following the Group's December trading update. This includes £1m of recharges to clients of bank costs that mainly arose in the second half of the year. Underlying operating profit is also expected to be ahead of most recent analyst expectations.

In the interim report, we anticipated that H2 margins would be impacted by an acceleration in hiring, the normalisation of travel and entertainment spend, and investments in new offices. Whilst these investments were carried out as planned, the exceptionally strong revenue performance in H2 has served to partially offset the fall in margins that we originally anticipated in our interim results.

Following the strong end to Q4 2021, the Board looks forward to another year of strong growth and will provide an update on the outlook for FY 2022 at the full year results in March.

FX Risk Management

Our FX Risk Management offering supports international corporates and institutions 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 sales teams in London, Toronto and Amsterdam.

Following the COVID-19 driven volatility of 2020, trading patterns in 2021 were far more normalised and our strong FX Risk Management revenue growth reflects our successful onboarding of new clients, growing wallet share with existing clients and, importantly, the growing traction for our services in our overseas offices. The Corporate London and Institutional London divisions delivered further strong results reflecting the continued investment in our operations, alongside the quality of our people and differentiated service offering. The ongoing momentum within the Corporate London team is very encouraging given that many of our most experienced colleagues have moved on to lead and incubate Alpha's more nascent international operations, as well as the sales team within Alpha Platform Solutions.

Our overseas offices performed strongly and delivered significant revenue growth in H2 2021 versus H1 2021. We are pleased to announce that we intend to establish an office in Italy in the first half of 2022 and Australia in the second half. Our research suggests that the Australian market has similar structural characteristics to the UK with a number of large domestic sectors and major companies that trade internationally. Additionally, in combination with our Toronto and European offices, our presence in Sydney will give us the 24/7 capability to support our clients globally.  

Alternative Banking Solutions

Our Alternative Banking Solutions offering focuses on providing corporates and institutions globally with a suite of products and services covering international payments and accounts. Developed and operated by a specialist team within Alpha Platform Solutions, the offering is distributed via our corporate and institutional sales teams, as well as some of Alpha Platform Solutions' own sales staff. 

Alternative Banking Solutions' revenues grew substantially in the period, buoyed by a particularly strong start for our new accounts product, focused on the alternative investment sector, which was launched publicly in September following a few years of testing.

The accounts product significantly shortens the time it takes for investment managers to open overseas accounts relative to traditional competitors and provides far easier day-to-day functionality and use. The design, delivery and launch of this product represents the most recent example of Alpha's strategy to build high-impact financial solutions, using technology to provide a simpler alternative to traditional banking processes, and leveraging our sector knowledge. As part of this launch, the Group is opening an office in Luxembourg. We have recently appointed Nick Maton, a highly experienced Managing Director from a major fund administrator to lead it, and are in the process of applying for a financial licence with the local regulator. We believe we have the opportunity over the next few years to both scale the product into a significant revenue stream and to further increase our revenues by offering FX risk management solutions to these clients.

Investments & People

Overall headcount during the year increased from 147 to 214 at 31 December 2021.

Front Office headcount increased to 92 (31 December 2020: 78), with hiring mainly focused on new business development.  Whilst we will continue to grow our team to support the rate of client acquisition, we are confident that there is also significant capacity within the existing team to support considerable growth long-term.

Back Office headcount increased to 122 (31 December 2020: 69) predominantly reflecting the build-out of our support teams for our Alternative Banking Solutions offering across Compliance, Technology and Client Services, and our continued emphasis on strong risk management processes as we grow our business.

Having completed the decentralisation of the business into two separate offerings and teams, we are now reaping the benefit of highly motivated teams building out well-received client propositions as well as, at a Group level, benefitting from the optimisation of our technology investments, enhancing our risk management processes, and improving our financial reporting and forecasting.

Our culture, principles and values are consistently ingrained across our growing businesses, and we are investing in training our people in order to strengthen this successful culture, rather than simply maintaining it.

Cash & Liquidity

Alpha FX remains profitable, debt-free, and well capitalised. The growing traction of our Alternative Banking Solutions offering means that we are seeing an increase in the proportion of products sold that are readily convertible into cash, from spot trades and payment & account fees. The increased cash conversion, coupled with our strong balance sheet, continues to support our growth.

Intended Board Change

After a long career spanning over 30 years, Tim Kidd intends to retire from his role as Group CFO next year. However, prior to formalising his retirement, Tim has agreed to an extended notice period (up until April 2023) so that we can take our time finding a strong successor and to allow for an optimal transition period.

Tim has had an incredible influence on the business since joining in 2016 and Alpha has grown from strength-to-strength under his stewardship.  We would like to thank him for all his hard work and look forward to continuing to benefit from his counsel for a while yet. A further announcement will be made in due course. 

Morgan Tillbrook, Founder & Chief Executive Officer of Alpha said:

"In 2021 we started to see the benefits of the investments we made in decentralising our operations and the day-to-day running of the business, empowering our management teams to strengthen our position in FX risk management and build out new and innovative propositions in our alternative banking operations. This strategy, together with the recovery in many of our clients' markets, has delivered strong revenue and profit growth across the Group. I'd like to thank the wider team for their outstanding performance in 2021, but I would also like to give an additional thank you to Adam Dowling and Alex Howorth for showing such outstanding leadership as MDs of the Group's two, now distinct, offerings.

Lastly (but by no means least) I would like to give an enormous thank you to Tim Kidd for his support and contribution over the past six years. From the moment Tim joined, he has consistently gone above and beyond for the business, and his decision to provide an extended notice period is yet another example of his loyalty to Alpha. Although we'll be sorry to see him go next year, we look forward to retaining his company for a while yet!

With the vast addressable markets across both our divisions and a highly talented team driven by our strong Group culture, we remain excited by the prospects for 2022 and beyond."

The information contained within this announcement is deemed by Alpha FX Group plc to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019. 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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Notes to Editors

Alpha is a high-tech, high-touch bank alternative for corporates and institutions operating internationally. Working with over 900 clients across 50+ countries, we blend human capabilities with new technologies to solve complex problems across three key areas: currency management, international banking, and mass payments.

Key to our success is our team - over 200 people based across five global offices, brought together by a high-performance culture and a partnership structure that empowers them to act as owners of our business.

Despite being an established business listed on the London Stock Exchange, we remain relentlessly focused on maintaining the same level of operational agility and client focus we had when we first started in 2009. This dynamic, combined with the passion of our people, have enabled us to make a substantial and enduring difference to our clients, and deliver a growth story to match.