15 July 2020
Alpha FX Group plc
("Alpha FX" or the "Group")
Alpha FX Group plc (AIM: AFX), a FX risk management and payments specialist servicing corporates and institutions internationally, today announces a trading update for the six-month period ended 30 June 2020.
- Group revenue increased 16% to £18.0m (H1 2019: £15.6m).
- The Group remains profitable, well capitalised and debt free, with net assets in excess of £80m and c. £37m of own free cash on the balance sheet.
- Alpha Payment Solutions reported consecutive record revenue quarters in Q1 and Q2.
- During the period, average revenue per client continued to increase and the Group saw a net increase of 28 clients to 671.
- Despite the challenging environment, our long-term gro-wth ambitions remain unchanged and we have continued to invest in back office headcount, technology and geographic expansion to support this.
- Strong business continuity planning has enabled the Group to continue operating effectively and securely with 100% of staff able to work remotely.
- All cash repayments of the debt due from the Norwegian client referenced in our announcement on 2 April 2020 have been received on schedule. Accounting standards require the Group to book two accounting provisions with no cash impact, one for the difference between the nominal value and the net present value of future repayments, and one to reflect the possibility that the debt will not be fully repaid. Both provisions reverse as each cash repayment is received. The provisions required at the year-end should therefore be significantly lower than the provisions at H1 2020.
Morgan Tillbrook, CEO of Alpha FX commented:
"I am very pleased with the progress made during the period given the challenges faced. The fundamental drivers of our business not only remain unchanged but continue to strengthen as we further invest in our operations and technology, and I remain confident in the Group's ability to maintain its long-term profitable growth. I would like to thank all our employees for continuing to uphold our high standards of service for our clients whilst working remotely. Although a pandemic like this undoubtedly brings with it challenges, I also believe it can bring opportunities. Rallying together has brought the team closer to one another, reminded us to focus on what's important, and ultimately allowed us to identify and address our weaknesses head on. Whilst we never wished for a scenario like this, I do believe we will look back at 2020 as a year of positive change - a year that made our business even stronger."
Trading in H1 has remained profitable, with revenue up 16% on H1 2019. Furthermore, the Group continues to be well capitalised and debt free, placing us in a strong position to maintain our long-term growth strategy.
As expected, COVID-19 has had a significant impact on the FX sector for corporates, with many delaying or reducing FX activities until they have a clearer outlook on trading. As a result, growth in our UK corporate marketplace has remained broadly flat year-on-year. Our newer business divisions meanwhile have continued to grow strongly, validating the strategic investments we have made in new products and markets since the Group's IPO in 2017. Alpha Payment Solutions achieved consecutive record revenue quarters in Q1 and Q2, whilst Alpha Institutional also recorded impressive growth of 21% against the comparable period last year. Despite the slowdown in the corporate marketplace, our Canadian office continues to make good progress, alongside our recently launched sales office in the Netherlands.
The diversity of both our client base and product offering has served us well in the current environment, with opportunities created in certain sectors mitigating the temporary slowing of foreign exchange activity in others. As a result, we remain cautiously optimistic for the year ahead as we remain focused on making the most of the market opportunities that exist.
Cash & Liquidity
Despite the unprecedented challenges faced, Alpha remains profitable, debt free and extremely well capitalised, with circa £37m in own free cash immediately available on its balance sheet, alongside over £80m in net assets. At a time when many within our industry are adopting more defensive strategies, our strong cash position has provided us with the financial flexibility to continue acquiring new clients, whilst maintaining our key strategic investments in new products and markets.
As previously announced on 2 April 2020 the Group entered into a settlement agreement with a Norwegian client. Since this date, the client has continued to meet their settlement agreement cash repayment obligations on time. Accounting standards require the Group to book two accounting provisions that have no cash impact. The first provision is based on an estimated probability of default, with the charge included in operating expenses. The second provision is charged to finance costs and represents the difference between the nominal value of future payments and their net present value. These non-cash accounting provisions total approximately £2m at 30 June 2020. Both these provisions should reverse in full as cash repayments are received in the period to June 2022, with the provisions expected to reduce by approximately 25% by the year end. Despite the unprecedented macro-economic impact of COVID-19, the bad debt provision created in respect of all other clients during H1 amounted to only £0.2m.
During the period, the Group saw a net increase in clients of 28 to 671. Average revenue per client also continues to increase, as the Group's ability to leverage its balance sheet and reputation enables it to attract increasingly larger clients.
The Group's growing portfolio of high-quality clients is diversified across a variety of geographies and sectors. Our largest client trading in a non-major currency  makes up less than 1% of the Group's forward book and further details of the makeup of our clients are now available for investors to view bi-annually on our website at https://www.alphafx.co.uk/investors/financial-information/client-concentration/ .
Staff and Infrastructure
The Group's transition to remote working was seamless and the team has largely been able to continue to operate unaffected, providing our normal high standard of service to our clients.
Faced with a reduction in FX demand in Q2 and the natural challenge of inducting new salespeople remotely, the Group deferred hiring new Front Office team members. As a result, Front Office headcount has remained flat during the period at 74 people. As the Front Office team has begun returning to the office, we have resumed hiring and have already been joined by a number of new starters in July.
Back Office headcount increased by 7 from 50 to 57 largely due to the continued investment in the development of Alpha Payment Solutions, and to ensure we have the team and infrastructure needed to retain our highly efficient operating model as we scale. Furthermore, the increase reflects our focus on reducing external contractors in favour of full-time members of staff that can become a long term part of our sustainable growth.
In the UK it remains uncertain when the Group will be able to return to normal office working conditions. As such the Group has implemented a rota-based system in order to ensure that social distancing measures can be maintained for those employees working from the office. We will continue to follow Government guidelines on this matter, but ultimately the health and safety of our employees remains our top priority and we are able to continue operating effectively under remote working conditions.
Following the outbreak of COVID-19, the Group took the decision to utilise the Government's furlough scheme. The Group furloughed six of the 113 staff employed in the UK at 31 March 2020. As the situation has become clearer, and in light of current performance, these furlough payments have now been repaid to HMRC.
The Group expects to announce its half year results on 3 September 2020.
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
Alma PR (Financial Public Relations) Tel: +44 0203 405 0205
Notes to Editors
Alpha is an FX risk management and payments specialist that combines people and technology to help organisations more effectively manage currency. In an industry that typically works with tens of thousands, the Company partners with a small number of high value institutions and corporates, to provide enterprise-level solutions across three key areas: FX risk management, international payments 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.
 The Group defines major currencies as Pounds Sterling, Dollars, Euros, Canadian Dollars and Japanese Yen.
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