TIDMAFX
RNS Number : 8927E
Alpha FX Group PLC
16 March 2022
16 March 2022
Alpha FX Group plc
("Alpha FX" or the "Group")
Full Year Results
for the year ended 31 December 2021
Alpha FX Group plc (AIM: AFX), a high-tech, high-touch provider
of FX risk management, accounts and payments solutions to
corporates and institutions internationally, is pleased to announce
its audited Full Year Results for the financial year ended 31
December 2021.
Financial Highlights
-- Group revenue up 68% to GBP77.5m (2020: GBP46.2m).
-- Underlying* profit before tax up 91% to GBP33.4m (2020: GBP17.5m).
-- Reported profit before tax up 94% to GBP33.2m (2020: GBP17.1m).
-- Underlying profit before tax margin of 43% (2020: 38%).
-- Reported profit before tax margin of 43% (2020: 37%).
-- Basic earnings per share up 82% to 57.7p (2020: 31.7p).
-- Underlying basic earnings per share up 78% to 58.3p (2020:
32.8p).
-- Final dividend of 8.0 pence per share, payable on 13 May
2022 to shareholders on the register as at 19 April 2022,
making a total dividend for 2021 of 11.0p (2020: 8.0p).
Operational Highlights
-- Client numbers increased 27%, from 754 to 958.**
-- Average revenue per client grew by 32%.
-- 36% increase in average employee headcount, from 135 to 184.
-- 36% of employees hold a long-term equity interest in the
business.***
-- Strong cash position and debt free with GBP109.8m net assets.
-- Public launch of alternative banking platform for the alternative
investment sector.
-- Continued investment into our risk and governance functions
with headcount increased to seven heads.
-- Post-period launch of new office in Milan, with further office
launches in Luxembourg and Australia later in the year.
* Underlying excludes the impact of non-cash share-based
payments.
** The Group excludes Training Accounts (those that have
generated less than GBP10,000 in revenue since being onboarded) in
order to provide a clearer picture of client retention for the
purposes of these figures.
*** The Group defines a 'long-term equity interest' as an equity
stake: held prior to the Company's IPO as ordinary shares in the
plc; or held in the Group's B, C, D or E growth share scheme; or
shares owned directly in one of the Group's trading
subsidiaries.
Russia-Ukraine
We are deeply saddened by the tragic events unfolding in Ukraine
and our thoughts are first and foremost with those affected. In the
lead up to and following Russia's invasion the Group has taken the
necessary precautions to mitigate the impact on our business. The
Group has historically had limited exposure to the Russian rouble,
currently 0.02% of the forward book, across two clients with strong
financial standings. In addition, there are only a small number of
clients with direct exposure to Eastern European currencies making
up 1.7% of the forward book. These clients have all undergone a
detailed credit review in light of recent events and those that
have not already closed out their contracts continue to hold
positions based on the strength of their credit standing. We also
continue to monitor our client base for businesses that have the
potential to feel wider knock-on effects from the conflict.
There has been no material impact to the Group to date, nor does
the Group anticipate any material impact to trading moving forward.
However, recognising that the situation is developing rapidly, we
will continue to review and monitor it closely.
Outlook
Looking forward, we see major opportunities across all our
businesses. We continue to take share in UK FX Risk Management and
are well on the way to replicating that UK success in overseas
markets. We have also made an excellent start to Front Office
hiring in Q1 22, as the disruption from COVID-19 subsides and our
maturing internal recruitment team finds its stride. The initial
response from our increased sales drive and marketing effort
targeting alternative asset managers with our Alternative Banking
Solutions validates that we have a sizeable opportunity in this
space. We will continue to focus on understanding our clients'
needs and concentrating on those areas and markets where we know we
can differentiate and therefore grow sustainably. Whilst we remain
mindful of Russia's invasion of Ukraine, we look forward to 2022
with confidence.
Morgan Tillbrook, Chief Executive Officer of Alpha FX
commented:
" I am incredibly proud of our team for the results achieved. We
have consistently delivered year-after-year, even in the most
testing of macro environments, and 2021 was no exception. Our
capabilities, cash position and governance have never been stronger
- bolstered by a healthy and balanced management bandwidth and
clear and considered strategy. It's a very privileged position to
be in, and one I know didn't happen by chance. I'd therefore like
to thank everyone for their hard work and commitment, and look
forward to seeing what we can do together in 2022 and beyond. "
Enquiries:
Alpha FX Group plc via Alma PR
Morgan Tillbrook, Founder and CEO
Tim Kidd, CFO
Liberum Capital Limited Tel: +44 (0) 20
(Nominated Adviser and Sole Broker) 3100 2000
Neil Patel
Cameron Duncan
Kane Collings
Alma PR (Financial Public Relations) Tel: +44 (0) 20
3405 0205
Josh Royston
Andy Bryant
Kieran Breheny
Market Abuse Regulation
This announcement is released by Alpha FX Group plc and contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("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.
Notes to Editors
Alpha is a high-tech, high-touch provider of enhanced financial
solutions dedicated to 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: FX risk management,
global accounts 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.
Chief Executive's Statement
It's been an exciting and gratifying year as we started to see
the benefits of decentralising our operations on the day-to-day
running of the business. These investments have strengthened our
position in FX Risk Management and empowered us to build out new
propositions in our Alternative Banking Solutions division.
Together with an excellent performance from our overseas offices,
we have delivered strong revenue and profit growth across the
Group.
At the end of the year, client numbers increased by 204 to 958
(FY 2020: 754), contributing to full-year revenue increasing 68% to
GBP77.5m compared to the same period last year, with record H2
revenues of GBP43.3m (growth of 55% year-on-year).
The Group continues to deliver on its strategy, with all
business units profitable and setting new records. Underlying
profit before tax was GBP33.4m with a margin of 43% (FY 2020 38%).
Margins were higher than expected given the strong revenue momentum
through the year, which more than offset the planned H2 cost
increases from accelerated hiring, increased travel and
entertainment spend, and further investments in new international
offices and technology.
People and Culture
We are increasingly confident in the repeatability of the Alpha
way and the company's longer-term growth. We have been highly
successful in expanding and exporting our culture, product strategy
and technology roadmap as we launched Alternative Banking Solutions
and established new overseas offices. Our core UK Corporate FX Risk
Management business has been the incubator for many of these
initiatives and it has been exciting to see our talented team
leaders launch new business divisions which develop and deliver on
our strategies and objectives.
Our in-house recruitment team is developing in line with our
ambitions, successfully bringing new talent into the organisation
both in the UK and overseas. Overall headcount increased from 147
at the start of the year to 214 at 31 December 2021. Front Office
headcount increased to 92 (31 December 2020: 78), with hiring
focused on new business development. Whilst we will continue to
grow our team to support the rate of client acquisition, there is
also significant capacity within the existing team to support
considerable long-term growth. The strength of our sales team
remains a key differentiator and can sometimes be taken for
granted. However, the ability to engage senior decision-makers on
complex topics within a noisy marketplace is rare. Even rarer is
the propensity for these same people to consistently put the needs
of these clients before their own, whilst also prioritising the
learning and development of their colleagues. But rarest of all is
to have an entire team that share these qualities. This is why we
have grown the way we have; it's why each year our new hires
develop faster than our previous ones; and it's why recruitment
will always be a hard but rewarding challenge!
Back Office headcount increased to 122 (31 December 2020: 69),
predominantly reflecting the build-out of our support teams in the
UK and Malta for our Alternative Banking Solutions offering across
Compliance, Technology and Client Services, and our continued
emphasis on solid risk management processes as we grow our
business.
Our culture, principles and values are consistently ingrained
across our growing businesses. We have settled on our definition of
a high-performance culture - 'a place where everyone's getting
better'. It is a simple statement but an incredibly ambitious one.
There is no destination with this; it is an ongoing, never-ending
pursuit, but one that precisely encapsulates the reason we're all
here.
Personal development is an intrinsic part of our
high-performance culture, and we are investing in training and
world-class coaching to strengthen this. We are passionate about
providing our team with the support and tools to maximise their
potential and elevate themselves and the company.
Our employee share ownership schemes continue to be another
source of competitive advantage. Our team's collective ownership
and ability to benefit tangibly from the client outcomes they
deliver, ensures that we are all pulling in the same direction,
whilst always putting the long-term interests of our clients first,
along with those of our shareholders. Despite our growth in
headcount, 36% of employees now hold a long-term equity interest in
our business, and we continue to devise new share schemes that
ensure colleagues are both rewarded and accountable for delivering
exceptional growth within their respective divisions.
Following our announcement that Tim Kidd will be retiring in
April of next year, I would like to thank him enormously for his
support and contribution over the past six years both
professionally and personally. 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 and affection for Alpha. We have already
begun the search for Tim's successor and intend to hire in good
time in order to create an extended handover period with Tim and
therefore complete an optimal transition.
Benefits of decentralising
We take calling ourselves Alpha very seriously - we set out to
win wherever we operate and you can't win without creating an
environment that creates complete alignment between the team and
their customers. To achieve this, we must be agile, focused, and
thus decentralised.
For those new to Alpha, decentralisation refers to the process
of dividing an organisation into separate business units, each
focused on their own propositions and supported by their own
people, processes and technology. The goal is to generate complete
alignment between the team and their customers, without
compromise.
In 2021, we decentralised Alpha's offerings, FX Risk Management
(first established in 2009) and Alternative Banking Solutions
(first established in 2019), into two distinct divisions. Both
divisions now benefit from being underpinned by dedicated and
specialist people, operations, technology and research units. Our
colleagues within these teams also benefit from having clear lines
of accountability and recognition.
The products and services developed and launched by our FX Risk
Management and Alternative Banking Solutions teams are distributed
across various sectors and geographies via the Group's sales
operations. We recognise these in our segmental reporting as:
Corporate London, Institutional, Corporate Toronto, Corporate
Amsterdam, and Alpha Pay (formerly Alpha Platform Solutions). These
highly motivated teams are building out well-received and targeted
client propositions and leveraging our long-established
consultative sales approach.
At a Group level, we continue to benefit from the optimisation
of our technology investments, enhanced compliance and risk
management processes, improved financial reporting and forecasting,
and an evolving business culture that brings together everyone,
regardless of geography or division.
Although we have two separate divisions, they both combine
intelligent human interaction with automated technologies. We call
this blend, 'being bionic'. In order to successfully service
high-value clients and solve the complex challenges they face,
being both high-touch and high-tech is essential. However, getting
to a point where you can do both well is difficult and rare. With
decentralisation, the capabilities of our people and technology can
continue to grow from strength to strength and become increasingly
difficult for our competitors to emulate.
Most businesses default to centralising and consolidation,
typically trying to save costs and control processes and people.
This often leads to the businesses and business leaders becoming
generalists, and further distanced from their customers and their
requirements. Under my leadership, I will continue to look to
decentralise as we invest and grow. We truly have talented and
committed people that must stay close to our customers and be
trusted and backed. An overfocus on saving costs and an
overcontrolling strategy at the expense of an agile, client-centric
approach has no place within our Group.
Business overview
FX Risk Management
Our FX Risk Management division focuses on supporting 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 or liability. We service this
marketplace through our corporate and institutional sales teams in
London, Toronto, Amsterdam and from 2022, Milan. Revenues are
derived from commissions on forward, option and spot contracts.
Trading patterns reverted to a more normal trend this year
following the COVID-19 driven volatility of 2020. Revenue growth of
43% to GBP57.0m reflects the division's successful onboarding of
new clients, growing wallet share with existing clients, and
importantly, accelerating client acquisition and trading momentum
in our overseas offices.
The established Corporate London business continues to perform
well with FX Risk Management revenues up 24% to GBP34.2m, while our
Institutional business continued to deliver strong results with FX
Risk Management revenues up by 48% in the year to GBP11.1m.
Overall, our strong performance in both businesses, resulting in
further market share gains from traditional banks and other foreign
exchange providers, derives from our continued investment in
growing our operations, alongside maintaining the quality of our
people, and differentiated service offering.
Despite much of our most established talent moving on from the
Corporate London division to lead and incubate our other offices,
we are increasingly attracting clients with potential higher group
lifetime values as we develop, launch and offer them additional
value-added payments and accounts solutions. Furthermore, as our
new offices mature, they too are becoming incubators for
entrepreneurial talent that can go off to help launch other new
investments. Our top-performing Portfolio Manager in Toronto has
transferred from our Toronto office to spend H1 with our team in
the UK, in preparation for the launch of our Australian office
later this year. It is exciting to realise that, as this trend
continues across our other offices, the pool of entrepreneurial
talent we have will continue to proliferate.
I would also like to thank the Managing Director of our Canadian
Office, Mark Stuart, for his selflessness in supporting this move.
Many in Mark's position would have been reluctant to transfer their
top-performing Portfolio Manager. However, the level of support and
encouragement Mark has shown is a testament to his passion for
seeing people grow and his propensity to always put the wider
business before himself. Ultimately, whilst moves like this may
have a short-term impact on the growth of individual subsidiaries,
the longer-term growth prospects it creates for the Group far
outweigh this.
Overseas offices
Alpha's overseas offices provide an entry point into new markets
for the Group whilst retaining the strong culture and business
model established in London.
Our Toronto office was launched in Q4 2018 and the team had the
challenge of being our first venture overseas as well as dealing
with COVID-19 disruption. Nevertheless, the second half of 2021 saw
a break-out in client volumes, delivering full-year revenues of
GBP5.5m, growth of 158%, and a further improvement in profit
margins. The business is on a similar trajectory to our early years
in the UK and we see no reason in the medium term why the revenue
profile and margin structure cannot continue to evolve in a similar
way to the success delivered in the UK over the last decade.
Our Amsterdam office is also clearly demonstrating the success
of exporting Alpha's culture. Set up in April 2020, this office
achieved a profitable contribution in 2021 and delivered H2 vs H1
2021 revenue growth of over 3x.
Our Malta office was established in March 2021, initially to
create a European regulatory base from which we could continue
passporting our regulated services into the EU, following the UK's
Brexit withdrawal. However, we have also been very impressed by the
calibre of people that have shown an interest in working for us
since opening there, particularly in the areas of Compliance and
Client Services. As a result, we believe our Malta office now has
all the makings of a leading team, and our intention is to build
out our headcount within the country to support the growth of our
Alternative Banking Solutions business.
In March 2022 we launched a new office in Milan with three
existing employees from our Corporate London office having moved to
Italy to lead the team. Establishing a local presence in Italy not
only provides greater prospects within this already encouraging
marketplace but, additionally, enables the Group to attract
high-quality domestic talent.
We also intend to invest in an office and presence in Australia
in the second half of 2022. Alongside our offices in Toronto and
London, an office in Sydney will give us the 24/7 capability to
support our clients globally.
Alternative Banking Solutions
Our Alternative Banking Solutions division focuses on providing
corporates and institutions globally with a suite of alternative
banking solutions covering payments and accounts. Serviced by a
specialist team of technology, compliance, and front office
business development staff, the team also benefits the wider Group
through cross-selling with our corporate and institutional sales
teams. Alternative Banking Solutions revenues grew substantially in
the year, from GBP6.4m to GBP20.4m. Revenues are derived from
commissions on spot transactions as well as Account & Payment
fees. Our mass payments solution is now an established player in
the market, helping companies send thousands of payments in
multiple currencies, often with far greater efficiency, visibility
and control than their existing providers.
Our Alternative Banking Solutions business is built on providing
high-impact financial solutions and simplifying banking processes,
backed by a growing investment in technology and intelligent
processes. In September, we officially launched our alternative
banking platform for the alternative investment sector. The
build-out of our platform into this sector was well researched and
planned. The result is an agile and purpose-built technology stack,
underpinned by high levels of dedicated support and service. It is
also another example of leveraging our talented teams with the
overlap and collaboration with our institutional team that has over
a decade's experience working within the sector.
The Group is supporting the launch of our alternative banking
platform by opening an office in Luxembourg, and we have appointed
Nick Maton as its Managing Director. Nick has over 30 years of
experience in financial services and in-depth knowledge of the
alternative investment sector alongside his traditional banking
experience. Nick has spent the past 15 years in senior executive
positions at J.P. Morgan, HSBC and most recently as Managing
Director of Intertrust, Luxembourg.
Alternative Investment Managers often encounter issues opening
local bank accounts globally and completing transactions, due to
policies and technologies that are typically mass-market or
burdened by legacy systems and therefore not designed to
efficiently cater for the complexity of investment structures. We
have invested significantly in understanding the challenges that
alternative investment institutions face, developing a bespoke
front and back-end platform solely focused on the industry. This
includes building a dedicated in-house team for effective
onboarding, settlement and compliance of funds and their investment
entities, whilst also meeting the understandably complex regulatory
requirements of such funds. The Group now offers a service that
traditional providers have struggled for years to provide to
alternative investment funds. The result is that overseas accounts
that would have taken months to open are now typically taking less
than a week.
We receive revenues from the platform in the form of both
account fees and commissions on spot trading. We typically receive
most fees on set-up but recognise the revenues over a 12-month
period. Our initial success is reflected in the GBP2.2m of deferred
income on the balance sheet at the end of December 2021 which also
highlights the potential for enhanced cash flow as we grow, and
clients renew their account facilities with us annually with
recurring account maintenance fees.
Revenue from payments and account fees represented 14% of Group
revenue in the year. We are excited by the initial client
engagement and the innovation from our team, and a dedicated
marketing drive in 2022 is already underway. Not only do we believe
we have the opportunity to continue scaling the business
materially, but there will also be opportunities to offer FX risk
management services to these clients.
Technology
Following our decentralisation, we were left with two separate
technology stacks, each serviced by their own dedicated technology
teams (one for FX Risk Management, one for Alternative Banking
Solutions). A core element of our strategy is investing in
technology across these two divisions.
Prior to our decentralisation, we had predominantly focused on
investing in our Alternative Banking Solutions technology, with our
new offering successfully launched last year. This naturally
constrained our bandwidth and meant we invested less in our FX Risk
Management technology than we would have liked to. However,
following decentralisation, we now have a dedicated team and
technology roadmap for FX Risk Management, and are looking forward
to once again accelerating the rate of innovation within this
division. This will begin with the launch of an upgraded client
portal later this year. The new portal will benefit from an
entirely new client-facing suite, as well as several powerful
enhancements to our existing back-end technology stack. We are very
excited about the value it adds to our offering and look forward to
updating the market with more details once we have publicly
launched.
Ultimately, with two purpose-built technology stacks serviced by
two dedicated technology teams, our developers now have the focus,
freedom, and capabilities to build the best possible products for
our clients, and an organisational structure that will ensure they
are clearly recognised and rewarded for the impact they have on
their respective offerings.
Market developments
Since the beginning of H2 2020, the overall market opportunity
has been broadly consistent with pre-COVID levels. Overall, our
strong performance in 2021 reflects our continued investment in
growing existing and new businesses, alongside the quality of our
people, service offering, technology stack and highly diversified
client base. We will continue to monitor conditions and business
activity globally, but the signs are that hopefully COVID-19 is in
retreat, which adds to our confidence that we are well-positioned
for the year ahead.
Beyond COVID, we also faced additional challenges when the UK
exited the EU at the start of 2021. Whilst we had been preparing
for the possibility of a no-deal Brexit for a considerable length
of time, the limited scope covering financial services within the
Free Trade Agreement meant the team had to move quickly to
establish an office and regulatory presence in Malta. This
ultimately ensured we could continue servicing our clients with
limited disruption to them or our market opportunity. The
efficiency with which this process was carried out, despite the
unprecedented macro back-drop is ultimately a testament to our
ability to adapt and scale at speed. I would like to thank all
those involved for their hard work in seeing this through, in
particular Simon Kang, our General Counsel, and Tim Butters, our
Chief Risk Officer.
The year ahead
When I think back to how far Alpha has come since we started in
2009, I am reminded that much of what made us successful back then
continues to drive our success today.
Successful start-ups excel because they have great cultures,
high levels of agility, know their customers inside out and go the
extra mile. Established companies often slow down because, as they
scale, they start to compromise on their culture, become mired in
legacy and complexity, and lose touch with what's important to
their clients and people.
The challenge is, how do you keep those 'start-up' credentials
when you find yourself a much bigger business? Our answer was
decentralisation, and it has been truly game-changing for the
business. Moving into 2022 and beyond, our strategy is to remain
focused on maintaining the credentials that I believe have always
defined our growth story: cultural density, operational agility and
client centricity.
I truly believe that if we can continue to maintain these three
things whilst also growing our capabilities, we can maintain this
exciting and rewarding growth story for long into the future. It
is, as one of our close business partners put it, about building a
business that is both 'David and Goliath'.
Financial Review
In the year ended 31 December 2021 revenue increased by 68% over
the prior year to GBP77.5m with strong growth across all divisions.
In the segmental analysis in note 3, which is primarily based on
legal entities, the Group additionally segments the revenue between
FX Risk Management and Alternative Banking Solutions to reflect the
two main drivers of growth.
The FX Risk Management division focuses on supporting corporates
and institutions that trade currency for commercial purposes
through the Group's sales teams located in London, Toronto and
Amsterdam. Revenue grew by 43% over the prior year to GBP57.0m with
strong growth across all regions.
Alternative Banking Solutions revenue grew substantially from
GBP6.4m in the prior year to GBP20.4m in 2021. The revenue includes
GBP1.1m (2020: GBPnil) relating to the recharge of bank fees
incurred by the Group on Euro E-money wallet balances which attract
a negative interest rate, with the cost being directly passed to
the client. As account fees are a growing revenue stream within the
Group, management has reassessed revenue recognition relating to
account fees. As a result, in 2021, revenue from annual account
fees is recognised on a straight-line basis over the 12 months from
the date the account was opened. At 31 December 2021 there was
GBP2.2m of deferred revenue that will be recognised in the
Statement of Comprehensive Income for 2022.
Total revenue from hedging products (forwards and options) has
increased against the prior year from GBP27.5m to GBP40.7m. The
revenue from forward transactions represents the difference between
the rate charged to clients and the rate paid to banking
counterparties. There were no structural changes in forward
commission rates in the year in comparison to the prior year. Spot
revenue increased from GBP14.7m to GBP26.1m due to the growth of
Alpha Pay, a branch of Alpha FX Limited (formerly Alpha Platform
Solutions), together with increased spot flow from the
Institutional business, where underlying activities mean that spot
transactions are more common.
In the prior year the Group entered into a settlement agreement
with a Norwegian client whereby weekly repayments are due until
June 2022 in respect of their obligations for unpaid margin
totalling GBP30.2m. Throughout the current year the client has
continued to meet their settlement agreement cash repayment
obligations on time with a gross balance of GBP6.4m outstanding as
at 31 December 2021.
As we continue to receive the weekly repayments from the
Norwegian client, our results have benefited from the reversal of
two accounting provisions. In the year ended 31 December 2021 the
reversal of these two accounting provisions totalled GBP0.7m and
can be broken down as follows:
-- A provision for the estimated probability of default which
reduced by GBP0.2m in the year ended 31 December 2021, with the
credit included in operating expenses.
-- A provision representing the difference between the nominal
value of future payments and their net present value which reduced
by GBP0.5m in the year ended 31 December 2021, with the credit
included in finance income.
-- The total of the outstanding provisions remaining as at 31 December 2021 was GBP0.1m.
Bad debts are expected to occur from time to time and are an
inevitable part of Alpha's trading model, as the Group takes a
risk-based approach that balances revenue opportunities against the
risk of default. As described in note 4, the Group incurred a bad
debt expense of GBP2.9m in the year in respect of two clients with
sterling/euro and US dollar/Canadian dollar contracts that were
unable to meet their obligations and subsequently entered
administration.
Underlying profit is presented in the income statement to allow
a better understanding of the Group's financial performance on a
comparable basis from year to year. The underlying profit excludes
the impact of share-based payments, and on this basis, the
underlying profit before tax in the year increased by 91% to
GBP33.4m. Statutory profit before tax increased by 94% to
GBP33.2m.
The year ended 31 December 2021 was another year of significant
investment. Overall headcount increased in the year from 147 to 214
at 31 December 2021 to support future long-term growth. Despite
this investment and the impact of the recharge in bank charges of
GBP1.1m being included in revenue as explained above, the
underlying profit before tax margin increased to 43% (2020 - 38%).
This was in line with the statutory profit before tax margin of 43%
(2020 - 37%).
Taxation
When planning for the possibility of a no-deal Brexit and in
response to the limited scope covering financial services within
the Free Trade Agreement, we opened a wholly-owned subsidiary
established in Malta in March 2021. This has ensured that we can
continue to service all clients without disruption both now and in
the future. As a result, a number of clients have been transferred
from Alpha FX Limited to Alpha FX Europe Limited in Malta which has
crystalised a tax charge of GBP0.9m within the UK for the transfer
of business. This one-off tax charge is included within taxation in
the year ended 31 December 2021 and has resulted in the effective
tax rate increasing from 19% in the prior year to 22%.
Earnings per share
Underlying basic earnings per share increased in the year to
58.3p (2020: 32.8p) whilst basic earnings per share were 57.7p
(2020: 31.7p).
Key performance indicators
The Group monitors its performance using several key performance
indicators which are reviewed at operational and Board level. The
key financial performance indicators are revenue, underlying profit
before tax margin, number of clients and number of Front Office
staff.
Balance sheet
Overall net assets of the Group increased in the year by
GBP19.2m to GBP109.8m. In the prior year the Group completed a
share placing by the issue of 2,941,177 new shares raising GBP19.2m
after expenses.
Cash flow
In the year ended 31 December 2021, 59% of the revenue in the
year was derived from products where the revenue is converted into
cash within a few days of the trade date, as opposed to 51% in FY
2020. This has continued to have a positive impact on the Group's
cashflow.
On a statutory basis, net cash and cash equivalents increased in
the year by GBP25.1m to GBP108.0m. The Group's cash position can
fluctuate significantly from period to period due to the impact of
changes in the collateral received from clients, early settlement
of trades, or the unrealised mark to market profit or loss from
client swaps, resulting in an increase or decrease in cash with a
corresponding change in other payables and trade receivables.
Therefore, in addition to the statutory cash flow, the Group
presents an adjusted net cash summary below which excludes the
above items.
In the year ended 31 December 2021 adjusted net cash on this
basis has increased in the year by GBP35.9m to GBP88.2m. This
increase represents the net impact of the cash conversion from the
trading in the year together with the cash inflow of GBP13.8m from
the client subject to a repayment plan.
31 December 31 December
2021 2020
GBP'000 GBP'000
Net cash and cash equivalents 108,044 82,972
Variation margin paid to banking counterparties 8,380 17,734
------------------------------------------------- ------------ ------------
116,424 100,706
Margin received from clients and client
held funds* (34,259) (50,767)
Net MTM timing loss from client drawdowns
and extensions within trade receivables 6,025 2,332
Adjusted net cash** 88,190 52,271
* Included in 'other payables' within 'trade and other
payables'
** Excluding collateral received from clients, early settlements
and the unrealised mark to market profit or loss from client
swaps
Dividend
Following the strong full year results, the Board is pleased to
declare a final dividend of 8.0p per share (2020 - 8.0p). Subject
to shareholder approval, the final dividend will be payable to
Shareholders on the register at 19 April 2022 and will be paid on
13 May 2022. This represents a total dividend for the year of 11.0p
per share (2020 - 8.0p).
B Share Growth Scheme
The Group has previously implemented the B Share Growth Scheme
pursuant to which B Shares were issued to certain full-time
employees of the Group. The B Share Growth Scheme is administered
and managed by the Board. The B Shares contain a put option, such
that, when and to the extent vested, they can be converted into
ordinary shares in the Company. The B Shares vest in five equal
tranches, occurring annually, starting on 31 December 2017 until 31
December 2021. The requirement for revenue growth of Alpha FX
Limited in the first three years is 30% per annum, whilst vesting
in years four and five requires 20% annual revenue growth.
The Group previously announced on 17 March 2021 that the Company
had chosen to defer the issuance of shares to employees that had
vested under the B Share Growth Scheme by circa 12 months. These
shares (total of 630,279) will now be issued to these
employees.
Since Alpha FX Limited achieved revenue growth in excess of 20%
in the year ended 31 December 2021, the final tranche of B Shares
has vested. Following careful consultation with employees, the
Company has again chosen to defer the issuance of these shares to
employees under the B Share Growth by circa 12 months. The total
number of shares due to be issued in March 2023 is 675,419.
C Share Growth Scheme
The Group has previously implemented the C Share Growth Scheme
pursuant to which C Shares were issued to certain full-time
employees of the Group. The C Shares contain a put option, such
that, when and to the extent vested, they can be converted into
ordinary shares in the Company.
The C Shares vest in five tranches, occurring annually on 31
December 2018, 31 December 2019, 31 December 2021, 31 December 2022
and 31 December 2023. The first and second tranches that have
vested were equal to 10% and 22.5% of the participant's C Share
entitlement and all remaining tranches are equal to 22.5% of the
participant's C Share entitlement. The requirement for revenue
growth is 25% in 2021, 20% in 2022 and 20% in 2023 in order for
vesting to occur. There was no revenue growth requirement for the
shares in respect of 2018 and 2019. From 2021, the gain that a C
Shareholder can receive is also capped through placing a ceiling on
the maximum market capitalisation of Alpha of GBP650m. The result
of doing so is that the C Shares will be entitled to a pro rata
share of the gain in market capitalisation of Alpha between the
hurdle price at the time of allotment and the market capitalisation
ceiling of GBP650m.
Since Alpha FX Limited achieved revenue growth in excess of 20%
in the year ended 31 December 2021, the third tranche of C Shares
has vested. The Company will issue 219,494 ordinary shares to
employees under the C Share Growth Scheme.
E Share Growth Scheme
The Group has previously implemented the E Share Growth Scheme
pursuant to which E Shares were issued to certain full-time
employees of the Group. The E Shares contain a put option, such
that, when and to the extent vested, they can be converted into
ordinary shares in the Company.
The E Shares vest in four tranches, occurring annually on 31
December 2021, 31 December 2022, 31 December 2023 and 31 December
2024. The requirement for revenue growth is 25% in 2021, 20% in
2022, 20% in 2023 and 20% in 2024 in order for vesting to occur.
The gain that an E Shareholder can receive is also capped through
placing a ceiling on the maximum market capitalisation of Alpha of
GBP650m. The result of doing so is that the E Shares will be
entitled to a pro rata share of the gain in market capitalisation
of Alpha between the hurdle price at the time of allotment and the
market capitalisation ceiling of GBP650m.
Since Alpha FX Limited achieved revenue growth in excess of 20%
in the year ended 31 December 2021, the first tranche of E Shares
has vested. The Company will issue 174,345 ordinary shares to
employees under the E Share Growth Scheme.
Institutional Division Employee Share Ownership Scheme
The Group has previously implemented the Institutional Employee
Share Ownership Scheme pursuant to which B, D2 and D3 Shares were
issued to certain full-time employees of the Group. The B, D2 and
D3 Shares contain a put option, such that, when and to the extent
vested, they can be converted into ordinary shares in the Company.
The B Shares vest in four equal tranches, occurring annually,
starting on 31 December 2021 until 31 December 2024. The D2 and D3
Shares vest in four equal tranches, occurring annually, starting on
31 December 2022 until 31 December 2025.
Since the first tranche of the B Shares has vested. The Company
will issue 99,828 ordinary shares to employees under the
Institutional Employee Share Ownership Scheme.
Following the continued success of the Institutional Division,
the Group is also in the process of adjusting the employee share
ownership incentive scheme to include additional key employees as
well as reward existing employees (the "Participants"). In order to
enable equity to be awarded to the Participants to support the
ongoing growth of the division, Alpha Institutional FX Limited
("Alpha Institutional") will be utilising both the issued shares in
Alpha Institutional that were set aside for new and existing
employees following the announcement on 20 November 2019, as well
as issued shares that have been transferred back to Alpha
Institutional from former employees. As a result, Alpha FX
Limited's shareholding in Alpha Institutional is 73.9% (up from 70%
previously announced due to shares transferred from former
employees). The new shares being issued are structured in a similar
way to the shares issued to existing employee shareholders of Alpha
Institutional, and will vest in four equal tranches, for each of
the financial years ending 31 December 2024, 31 December 2025, 31
December 2026 and 31 December 2027.
Save As You Earn (SAYE) Scheme
Following the vesting of the SAYE scheme, the Company will be
issuing a total of 108,671 shares over the next few months starting
on 25 March 2022 with the date of allotment, dependent on when
employees elect to exercise their option during the prescribed
window.
Based on the issue of shares pursuant to the B Share Growth
Scheme, C Share Growth Scheme, E Share Growth Scheme, the
Institutional Employee Share Ownership Scheme and the SAYE Scheme,
applications will be made for the 1,232,617 new ordinary shares of
GBP0.002 each in the Company (the "New Ordinary Shares") to be
admitted to trading on AIM in the coming weeks and further
announcements will be released in due course to confirm when these
have taken place. The new ordinary shares will rank pari passu in
all respects with the existing ordinary shares of the Company.
Alpha Canada Employee Share Ownership Scheme
Following the continued success of Alpha Canada, the Group is in
the process of adjusting the employee share ownership incentive
scheme for Alpha Canada to include additional key employees (the
"Participants"). In order to enable equity to be awarded to the
Participants to support the ongoing growth of the division, Mark
Stuart, Managing Director of Alpha Canada has agreed to reduce his
shareholding in Alpha Canada from 23% to 18%, and Alpha FX Limited
has agreed to reduce its shareholding in Alpha Canada from 75% to
74.7%. The new shares being issued are structured in a similar way
to the shares issued to existing employee shareholders of Alpha
Canada (the "Existing Employee Shareholders"), and the shares will
vest in four equal tranches, for each of the financial years ending
31 December 2024, 31 December 2025, 31 December 2026 and 31
December 2027. In addition, as part of the adjustments, the vesting
schedule for the Existing Employee Shareholders has been amended to
vest in four equal tranches for each of the financial years ending
31 December 2022, 31 December 2023, 31 December 2024 and 31
December 2025 (previously announced as vesting for each of the
financial years ending 31 December 2021, 31 December 2022, 31
December 2023 and 31 December 2024).
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
Note GBP'000 GBP'000
Revenue 77,471 46,217
Operating expenses (44,143) (29,457)
Underlying operating profit 33,588 17,149
Share-based payments expense (260) (389)
Operating profit 4 33,328 16,760
Finance income 5 536 747
Finance expenses 5 (681) (370)
Profit before taxation 33,183 17,137
Taxation (7,140) (3,333)
Profit for the year 26,043 13,804
---------------------------------------------- ----- ------------- -------------
Attributable to:
Equity holders of the parent 23,531 12,469
Non-controlling interests 2,512 1,335
---------------------------------------------- ----- ------------- -------------
Profit for the year 26,043 13,804
---------------------------------------------- ----- ------------- -------------
Other comprehensive income :
Exchange (loss)/ gain arising on translation
of foreign operations (148) 17
---------------------------------------------- ----- ------------- -------------
Total comprehensive income for the
year 25,895 13,821
---------------------------------------------- ----- ------------- -------------
Attributable to:
Equity owners of the parent 23,383 12,486
Non-controlling interests 2,512 1,335
---------------------------------------------- ----- ------------- -------------
Total comprehensive income for the
year 25,895 13,821
---------------------------------------------- ----- ------------- -------------
Earnings per share attributable to
equity owners of the parent (pence
per share)
- basic 6 57.7p 31.7p
- diluted 6 55.1p 30.5p
- underlying basic 6 58.3p 32.8p
- underlying diluted 6 55.7p 31.6p
Consolidated Statement of Financial Position
As at 31 December 2021
Company number: 07262416 As at As at
31 December 31 December
2021 2020
Note GBP'000 GBP'000
Non-current assets
Intangible assets 2,995 2,074
Property, plant and equipment 2,323 2,251
Right-of-use assets 8 6,136 6,945
Trade and other receivables 9 17,335 5,832
--------------------------------------- ----- ------------ ------------
Total non-current assets 28,789 17,102
--------------------------------------- ----- ------------ --------------
Current assets
Trade and other receivables 9 68,358 70,476
Cash and cash equivalents 10 108,044 82,972
Other cash balances 10 3,506 4,025
--------------------------------------- ----- ------------ --------------
Total current assets 179,908 157,473
--------------------------------------- ----- ------------ --------------
Total assets 208,697 174,575
--------------------------------------- ----- ------------ --------------
Equity
Share capital 11 82 80
Share premium account 50,783 50,582
Capital redemption reserve 4 4
Merger reserve 667 667
Retained earnings 54,189 35,631
Translation reserve (124) 24
--------------------------------------- ----- ------------ --------------
Equity attributable to equity holders
of the parent 105,601 86,988
Non-controlling interests 4,193 3,653
--------------------------------------- ----- ------------ --------------
Total equity 109,794 90,641
--------------------------------------- ----- ------------ --------------
Current liabilities
Trade and other payables 12 78,888 74,017
Lease liability 8 450 293
Current tax liability 3,847 1,808
--------------------------------------- ----- ------------ --------------
Total current liabilities 83,185 76,118
--------------------------------------- ----- ------------ --------------
Non-current liabilities
Trade and other payables 12 7,745 -
Deferred tax liability 1,061 626
Lease liability 8 6,912 7,190
Total non-current liabilities 15,718 7,816
--------------------------------------- ----- ------------ --------------
Total equity and liabilities 208,697 174,575
--------------------------------------- ----- ------------ --------------
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
Note GBP'000 GBP'000
Cash flows from operating activities
Profit before taxation 33,183 17,137
Finance (income) (536) (747)
Finance expense 681 370
Amortisation of intangible assets 950 496
Impairment of intangible assets 121 278
Depreciation of property, plant and
equipment 589 449
Depreciation of right-of-use assets 809 805
Initial recognition of discount relating
to the Norwegian client - 1,275
Loss on disposal of fixed assets - 1
Share-based payment expense 260 389
Provision utilised in year - (95)
Decrease/(increase) in other receivables 127 (1,117)
(Decrease)/increase in other payables (14,235) 10,972
(Increase) in derivative financial
assets (21,894) (11,453)
Decrease/(increase) in financial assets
at amortised cost 11,778 (18,199)
Increase/(decrease) in derivative financial
liabilities 26,851 (4,691)
Decrease/(increase) in other cash balances 519 (158)
--------------------------------------------- ----- ------------- ----------------------
Cash inflows/(outflows) from operating
activities 39,203 (4,288)
Tax paid (4,666) (2,029)
--------------------------------------------- ----- ------------- ----------------------
Net cash inflows/(outflows) from operating
activities 34,537 (6,317)
--------------------------------------------- ----- ------------- ----------------------
Cash flows from investing activities
Payments to acquire property, plant
and equipment (661) (425)
Proceeds from the sale of property,
plant and equipment - 3
Expenditure on intangible assets (1,992) (1,666)
Net cash outflows from investing activities (2,653) (2,088)
--------------------------------------------- ----- ------------- --------------------
Cash flows from financing activities
Dividends paid to equity owners of (4,505) -
the Parent Company
Dividends paid to non-controlling interests (1,739) (1,020)
Issue of ordinary shares by Parent
Company 26 19,281
Share issue costs - (81)
Issue of ordinary shares by subsidiary 327 1
Payment of lease liabilities (465) (775)
Net interest paid (308) (6)
Net cash (outflows)/inflows from financing
activities (6,664) 17,400
--------------------------------------------- ----- ------------- --------------------
Increase in net cash and cash equivalents
in the year 25,220 8,995
Net cash and cash equivalents at beginning
of year 82,972 73,960
Net exchange (loss)/gains (148) 17
--------------------------------------------- ----- ------------- ----------------------
Net cash and cash equivalents at end
of year 10 108,044 82,972
--------------------------------------------- ----- ------------- ----------------------
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Attributable to the owners of the Parent
Share Capital
Share premium redemption Merger Retained Translation Non-controlling
capital account reserve reserve earnings reserve Total interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
1 January 2020 74 31,388 4 667 22,932 7 55,072 2,499 57,571
----------------- --------- -------- ----------- --------- ---------- ------------- --------- ---------------- ---------
Profit for
the year 12,469 - 12,469 1,335 13,804
Other
comprehensive
loss - - - - - 17 17 - 17
Transactions
with owners
Shares issued
on vesting
of share option
scheme - 5 - - - - 5 - 5
Issue of shares
to
non-controlling
interests in
subsidiary
undertakings - - - - - - - 1,089 1,089
Shares
repurchased
from
non-controlling
interests - - - - (185) - (185) (192) (377)
Forfeiture
of shares in
subsidiary - - - - - - - (58) (58)
Share-based
payments - - - - 415 - 415 - 415
Shares issued
on placing 6 19,994 - - - - 20,000 - 20,000
Cost of shares
issued on
placing - (805) - - - - (805) - (805)
Dividends paid - - - - - - - (1,020) (1,020)
----------------- --------- -------- ----------- --------- ---------- ------------- --------- ---------------- ---------
Balance at
31 December
2020 80 50,582 4 667 35,631 24 86,988 3,653 90,641
----------------- --------- -------- ----------- --------- ---------- ------------- --------- ---------------- ---------
Profit for
the year - - - - 23,531 - 23,531 2,512 26,043
Other
comprehensive
income - - - - - (148) (148) - (148)
Transactions
with owners
Shares issued
on vesting
of share option
scheme 2 175 - - (164) - 13 (13) -
Issue of shares
to
non-controlling
interests in
subsidiary
undertakings - - - - - - - 107 107
Shares
repurchased
from
non-controlling
interests - - - - 56 - 56 (162) (106)
Shares issued
in relation
to SAYE share
scheme - 26 - - - - 26 - 26
Forfeiture
of shares in
subsidiary - - - - (620) - (620) (165) (785)
Share-based
payments - - - - 260 - 260 - 260
Dividends paid - - - - (4,505) - (4,505) (1,739) (6,244)
----------------- --------- -------- ----------- --------- ---------- ------------- --------- ---------------- ---------
Balance at
31 December
2021 82 50,783 4 667 54,189 (124) 105,601 4,193 109,794
----------------- --------- -------- ----------- --------- ---------- ------------- --------- ---------------- ---------
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
1. General information
Alpha FX Group plc, (the "Company") is a public limited company
having listed its shares on AIM, a market operated by The London
Stock Exchange, on 7 April 2017. The Company is incorporated and
domiciled in the UK (registered number 07262416) and its registered
office is Brunel Building, Canalside Walk, London, W2 1DG. The
consolidated financial statements incorporate the results of the
Company and its subsidiary undertakings.
Statutory accounts for the year ended 31 December 2020 have been
delivered to the Registrar of Companies. The statutory accounts for
the year ended 31 December 2021 will be delivered to the Registrar
of Companies following the Group's Annual General Meeting.
The auditors' reports on the financial statements for 31
December 2021 and 31 December 2020 were unqualified, did not draw
attention to any matters by way of emphasis, and did not contain a
statement under 498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
Basis of preparation
The consolidated financial statements have been prepared in
accordance with UK adopted international accounting standards in
conformity with the requirements of the Companies Act 2006.
The financial information set out above does not constitute
statutory accounts for the purposes of section 435 of the Companies
Act 2006, for the years ended 31 December 2021 and 31 December
2020, but is derived from those accounts.
The Directors have assessed the Group's projected business
activities and available financial resources together with detailed
forecasts for cash flow and relevant sensitivity analysis. The
directors believe that the Group remains well placed to manage its
business risks successfully. After making appropriate enquiries the
directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, the directors continue to adopt the going
concern basis in preparing the statutory accounts for the year
ended 31 December 2021.
The preparation of consolidated financial statements in
conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of policies
and reported amounts of assets, liabilities, income and expenses.
The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making judgements about the carrying value of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
Accounting policies
The accounting policies adopted in these financial statements
are identical to those adopted in the Group's most recent annual
financial statements for the year ended 31 December 2020.
Segment reporting
The revenue for the Group is generated through the sale of
forward currency contracts, option contracts, foreign exchange spot
transactions and fees received from payments collections and
currency accounts. The Group has five reportable segments based on
the individually reportable subsidiaries and divisions.
In 2021, 30% of the Group's revenue derived from within the UK.
Details of segmental reporting are shown in note 3.
3. Segmental reporting
During the year, the Group generated revenue from the sale of
forward currency contracts, option contracts, foreign exchange spot
transactions and fees received from payments collections and
currency accounts.
The Group has five reportable operating segments under the
provisions of IFRS 8, based on the individually
reportable subsidiaries and divisions. These five segments are:
-- Corporate London represents revenue generated by Alpha FX
Limited's Corporate clients serviced from the London head
office.
-- Institutional represents revenue from Alpha FX Institutional
Limited, which primarily services funds.
-- Corporate Toronto represents revenue generated by Alpha
Foreign Exchange (Canada) Limited, serviced from Toronto,
Canada.
-- Corporate Amsterdam represents revenue generated by Alpha FX
Netherlands Limited, which services Corporate clients from
Amsterdam, The Netherlands.
-- Alpha Pay (formerly Alpha Platform Solutions), a division of
Alpha FX Limited which services clients who require international
payments and accounts. The offering is distributed via our European
Corporate offices and Institutional division, as well as Alpha
Pay's own sales team.
The chief operating decision makers, being the Group's Chief
Executive Officer and the Chief Financial Officer, monitor the
results of the operating segments separately each month. Key
measures used to evaluate performance are revenue and profit before
taxation. Management believe that these measures are the most
relevant in evaluating the performance of the segment and for
making resource allocation decisions.
In April 2021, the Group decentralised into two divisions;
Alternative Banking Solutions and FX Risk Management. These two
divisions are now the key drivers to the Group strategy and growth
of each operating segment. Revenue for each operating segment for
the year ended 31 December 2021 has been split by the two
divisions, as this now reflects how the chief operating decision
makers manage the business. In the prior year, revenue by operating
segment was split as FX hedging, and Spot & Payment
transactions. Additionally, in the prior year, Corporate Amsterdam
was included within Corporate London's figures, due to the size of
the segment being immaterial under IFRS 8.
As a result of the above, the prior year figures have been
restated to reflect both the decentralisation of the business, and
the new operating segment.
Revenue in the table below is in accordance with the methodology
used for preparing the financial information for management, for
each operating segment. Although a proportion of the revenue from
EU clients is initially booked through Alpha FX Europe Limited in
Malta, revenue in the table below has been reallocated to the
relevant entity where the sales team is located.
2021
Corporate Corporate Corporate
London Institutional Toronto Amsterdam Alpha Pay Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ---------------- ------------ ------------ ------------ --------
FX Risk Management* 34,166 11,069 5,497 2,935 3,369 57,036
Alternative Banking Solutions** 61 4,565 - 848 14,961 20,435
--------------------------------- ------------ ---------------- ------------ ------------ ------------ --------
Total revenue 34,227 15,634 5,497 3,783 18,330 77,471
--------------------------------- ------------ ---------------- ------------ ------------ ------------ --------
Underlying operating profit 15,955 6,485 1,745 1,627 7,776 33,588
--------------------------------- ------------ ---------------- ------------ ------------ ------------ --------
Share-based payments (228) (32) - - - (260)
Finance costs (526) (57) - - (98) (681)
Finance income 536 - - - - 536
------------ ---------------- ------------ ------------ ------------ --------
Profit before taxation 15,737 6,396 1,745 1,627 7,678 33,183
--------------------------------- ------------ ---------------- ------------ ------------ ------------ --------
2020
Corporate Corporate Corporate
London Institutional Toronto Amsterdam Alpha Pay Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ---------------- ------------ ------------ ------------ --------
FX Risk Management* 27,655 7,492 2,131 29 2,484 39,791
Alternative Banking Solutions** 157 1,282 - 245 4,742 6,426
--------------------------------- ------------ ---------------- ------------ ------------ ------------ --------
Total revenue 27,812 8,774 2,131 274 7,226 46,217
--------------------------------- ------------ ---------------- ------------ ------------ ------------ --------
Underlying operating
profit/(loss) 9,881 4,612 181 (472) 2,947 17,149
--------------------------------- ------------ ---------------- ------------ ------------ ------------ --------
Share-based payments (383) (6) - - - (389)
Finance costs (276) (52) - - (42) (370)
Finance income 747 - - - - 747
--------------------------------- ------------ ---------------- ------------ ------------ ------------ --------
Profit/(loss) before
taxation 9,969 4,554 181 (472) 2,905 17,137
--------------------------------- ------------ ---------------- ------------ ------------ ------------ --------
*FX Risk Management represents revenue derived from foreign
exchange forward, spot, and option contracts provided to corporate
and institutional clients, primarily for the purpose of hedging
commercial foreign exchange exposures.
**Alternative Banking Solutions represents revenues derived from
fees and foreign exchange spot contracts generated from the
provision of cross border payments and accounts to corporates and
institutions.
31 December 31 December
2021 2020
Revenue by product GBP'000 GBP'000
--------------------------------------- ------------ ------------
Foreign exchange forward transactions 31,945 22,437
Foreign exchange spot transactions 26,053 14,746
Option contracts 8,779 5,020
Payments and account fees 10,694 4,014
Total 77,471 46,217
--------------------------------------- ------------ ------------
4. Operating profit
Operating profit is stated after charging/(crediting):
31 December 31 December
2021 2020
GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Depreciation of owned property, plant and
equipment 589 449
Amortisation of internally generated intangible
assets 950 496
Depreciation of right-of-use assets 809 805
Rental costs for short-term leases 179 286
Staff costs 21,680 16,175
Estimated probability of default in relation
to Norwegian client (243) 270
Initial recognition of discount relating
to the Norwegian client* - 1,275
Bad debt expense** 2,869 369
Net foreign exchange losses 118 711
Audit fees
Audit fees in respect of the Group and Company
financial statements 200 110
Audit fees in respect of the subsidiary accounts 95 71
*The provision of GBP1,275,066 in the prior year represents the
initial recognition of the difference between the nominal value of
future payments from the Norwegian client and their net present
value. As the provision unwinds, the reversal is recorded within
finance income (note 5). In the year to December 2021, GBP506,893
was reversed (2020: GBP712,639). As at 31 December 2021 there
remains GBP55,533 to be reversed in finance income as the remaining
repayments are due to be received in the period to June 2022.
** Credit risk is inherent in Alpha's business model and the
Board accepts that the Group will inevitably incur credit losses
from time to time. During the year ended 31 December 2021, two
clients with sterling/euro and US dollar/Canadian dollar contracts
were unable to meet their obligations and the Group immediately
closed out all their open contracts. Subsequently these clients
entered administration and as a result the Group recorded a bad
debt charge of GBP2,869,400 (2020: GBP369,740).
5. Finance income and expenses
31 December 31 December
2021 2020
GBP'000 GBP'000
---------------------------------------- ------------ ------------
Finance income
Finance income to reverse the discount
relating to the Norwegian client
(note 4) 507 713
Other interest receivable 29 34
Total 536 747
---------------------------------------- ------------ ------------
Finance costs
Interest on bank deposits (337) (43)
Finance cost on lease liabilities
(note 8) (344) (327)
---------------------------------------- ------------ ------------
Total (681) (370)
---------------------------------------- ------------ ------------
6. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the year attributable to equity holders of the Parent, by the
weighted average number of ordinary shares in issue during the
financial year. Diluted earnings per share additionally includes in
the calculation, the weighted average number of ordinary shares
that would be issued on conversion of any dilutive potential
ordinary shares. The dilutive effect is calculated on the full
exercise of all potentially dilutive ordinary share options granted
by the Group.
The Group additionally discloses an underlying
earnings-per-share calculation that excludes the impact of
share-based payments, non-recurring costs and their tax effect,
which better enables comparison of financial performance in the
current year with comparative years.
31 December 31 December
2021 2020
pence pence
---------------------------- ------------ ------------
Basic earnings per share 57.7p 31.7p
Diluted earnings per share 55.1p 30.5p
Underlying - basic 58.3p 32.8p
Underlying - diluted 55.7p 31.6p
The calculation of basic and diluted earnings per share is based
on the following number of shares:
31 December 31 December
2021 2020
No. No.
--------------------------------- ------------ ------------
Basic weighted average shares 40,773,748 39,286,578
Contingently issuable shares 1,925,202 1,541,006
--------------------------------- ------------ ------------
Diluted weighted average shares 42,698,950 40,827,584
--------------------------------- ------------ ------------
The earnings used in the calculation of basic, diluted and
underlying earnings per share are set out below:
31 December 31 December
2021 2020
GBP'000 GBP'000
----------------------------------------- ------------ ------------
Profit after tax for the year 26,043 13,804
Non-controlling interests (2,512) (1,335)
----------------------------------------- ------------ ------------
Earnings - basic and diluted 23,531 12,469
Share-based payments 260 389
Taxation impact on share-based payments - 136
----------------------------------------- ------------ ------------
Earnings - underlying 23,791 12,994
----------------------------------------- ------------ ------------
7. Dividends
31 December 31 December
2021 2020
GBP'000 GBP'000
------------------------------------- ------------ ------------
Final dividend for the year ended 31 3,276
December 2020 of 8.0p per share -
Interim dividend for the year ended 1,229 -
31 December 2021 of 3.0p per share
------------------------------------- ------------ ------------
4,505 -
------------------------------------- ------------ ------------
All dividends paid are in respect of the ordinary shares of
GBP0.002 each.
The Directors propose that a final dividend in respect of the
year ended 31 December 2021 of 8.0p per share amounting to
GBP3,277,138 will be paid on 13 May 2022 to all shareholders on the
register of members on 19 April 2022. This dividend is subject to
approval by shareholders at the AGM and has not been accrued as a
liability in these Financial Statements in accordance with IAS 10
'Events after the reporting period'.
8. Right-of-use assets and lease liabilities
Leases where the Group is a lessee are accounted for by
recognising a right-of-use asset and a lease liability except for
leases of low value assets and leases with a term of 12 months or
less.
In May 2019, the Group signed a ten-year lease for the Head
Office Premises in London expiring in May 2029. The rent is subject
to a rent review after five years and the lease does not contain
any break clause. The incremental borrowing rate used to discount
lease liabilities at initial inception is based on the assessment
of management of 4.5% (2020: 4.5%).
Right-of-use assets
31 December 31 December
2021 2020
GBP'000 GBP'000
---------------------------------- ------------ ------------
At 1 January 6,945 7,750
Depreciation charge for the year (809) (805)
---------------------------------- ------------ ------------
At 31 December 6,136 6,945
---------------------------------- ------------ ------------
Lease liabilities
31 December 31 December
2021 2020
GBP'000 GBP'000
---------------------- ------------ ------------
At 1 January 7,483 7,931
Finance cost 344 327
Payments in the year (465) (775)
---------------------- ------------ ------------
At 31 December 7,362 7,483
---------------------- ------------ ------------
Analysis:
Current 450 293
Non-current 6,912 7,190
------------------------- ------ ------
Total lease liabilities 7,362 7,483
------------------------- ------ ------
9. Trade and other receivables
31 December 31 December
2021 2020
Current: GBP'000 GBP'000
----------------------------------------- ------------ ------------
Trade receivables (derivative financial
assets) 58,551 53,992
Financial assets at amortised cost 5,803 11,804
Other receivables 2,542 3,335
Prepayments 1,462 1,345
----------------------------------------- ------------ ------------
68,358 70,476
Non-current:
Trade receivables (derivative financial 17,335 -
assets)
Financial assets at amortised cost - 5,832
----------------------------------------- ------------ ------------
Total trade and other receivables 85,693 76,308
----------------------------------------- ------------ ------------
Trade receivables represent the fair value of derivative
financial assets arising as a result of matched principal
transactions. At 31 December 2021 and 31 December 2020, the
receivables are shown net of the Credit Value Adjustment.
As the Group continues to grow, it is entering into an
increasing number of longer dated trades that are due for
settlement in over 12 months' time. In the prior year, a higher
proportion of clients took the decision to close out their
contracts early due to uncertainty over their cashflows as a result
of COVID-19. Management now believe that a higher proportion of
contracts will run to their original value date as clients have
increasing certainty over their cash flows. As a result, management
has taken the decision to present derivative financial assets as
current and non-current as at 31 December 2021, based upon their
expectations of when the contract will be realised.
Contracts due for settlement in less than 12 months' time are
classified as current, and contracts that are due for settlement in
over 12 months' time are non-current. However, as this has been a
change in management expectation in the year to 31 December 2021,
the derivative financial assets in the year to 31 December 2020
have not been reclassified as current and non-current.
10 . Cash
Cash and cash equivalents comprise cash balances and deposits
held at call with banks.
Other cash balances comprise cash held as collateral with
banking counterparties for which the Group does not have immediate
access.
Cash balances included within derivative financial assets relate
to the variation margin called against out of the money trades with
banking counterparties.
31 December 31 December
2021 2020
GBP'000 GBP'000
-------------------------------------------- ------------ ------------
Cash and cash equivalents 108,044 82,972
Variation margin called by counterparties* 8,380 17,734
Other cash balances 3,506 4,025
-------------------------------------------- ------------ ------------
Total cash 119,930 104,731
-------------------------------------------- ------------ ------------
Cash balances included within derivative financial assets relate
to the variation margin called against out of the money trades with
banking counterparties.
*Included within trade receivables and trade payables
11. Share capital
At 31 December At 31 December
2021 2020
No. GBP'000 No. GBP'000
----------------------------- ----------- -------- ----------- --------
Authorised, issued and
fully paid
Ordinary shares of GBP0.002
each 40,964,225 82 40,123,568 80
----------------------------- ----------- -------- ----------- --------
Ordinary
Number of shares shares
-------------------------------------------------- -----------
At 1 January 2020 37,123,956
Shares issued on vesting of share option schemes 58,435
Shares issued on placing 2,941,177
-------------------------------------------------- -----------
At 31 December 2020 40,123,568
-------------------------------------------------- -----------
Shares issued on vesting of share option schemes 840,657
-------------------------------------------------- -----------
At 31 December 2021 40,964,225
-------------------------------------------------- -----------
The following movements of share capital occurred during the
year ended 31 December 2021:
On 23 March 2021, the Company issued 822,873 new shares
following the vesting of shares under the B and C Growth Share
Schemes.
On 23 March 2021, the Company issued 2,403 new shares in respect
of shares issued following the early exercise by an employee of the
SAYE share scheme.
On 19 April 2021, the Company issued 2,596 new shares in respect
of shares issued following the early exercise by an employee of the
SAYE share scheme.
On 10 September 2021, the Company issued 1 2,785 new shares in
respect of shares issued to a former employee of Alpha FX
Institutional Limited as part of a settlement agreement.
The following movements of share capital occurred during the
year ended 31 December 2020:
On 9 April 2020, the Company issued 2,941,177 new shares
following a placing.
On 18 August 2020, the Company issued 1,038 new shares in
respect of shares issued following the early exercise by an
employee of the SAYE share scheme.
On 17 September 2020, the Company issued 57,397 new shares
following the exercise of the unapproved share option scheme.
12 . Trade and other payables
31 December 31 December
2021 2020
Current: GBP'000 GBP'000
-------------------------------------- ------------ ------------
Trade payables (derivative financial
liabilities) 36,697 17,591
Other payables 34,363 51,621
Other taxation and social security 1,018 974
Accruals and deferred income 6,810 3,831
-------------------------------------- ------------ ------------
78,888 74,017
Non-current:
Trade payables (derivative financial 7,745 -
liabilities)
-------------------------------------- ------------ ------------
Total trade and other payables 86,633 74,017
-------------------------------------- ------------ ------------
Trade payables represent the fair value of derivative financial
liabilities arising as a result of matched principal
transactions.
Other payables consist of margin received from clients and
client-held funds. The carrying value of trade and other payables
classified as financial liabilities measured at amortised cost,
approximates fair value.
Included within accruals and deferred income is GBP2,192,742
(2020: GBPnil) relating to deferred annual account fee revenue.
13. Events after the reporting period
In the lead up to and following Russia's invasion of Ukraine,
the Group has taken the necessary precautions to mitigate the
impact on our business. The Group has historically had limited
exposure to the Russian rouble, currently 0.02% of the forward
book, across two clients with strong financial standing. In
addition, there are only a small number of clients with direct
exposure to Eastern European currencies making up 1.7% of the
forward book. These clients have all undergone a detailed credit
review in light of recent events and those that have not already
closed out their contracts continue to hold positions based on the
strength of their credit standing. We continue to monitor our
client base for businesses that have the potential to feel wider
knock-on effects from the conflict.
There has been no material impact to the Group to date, nor does
the Group anticipate any material impact to trading moving forward.
However, recognising that the situation is developing rapidly, we
will continue to review and monitor it closely.
Following the vesting of the B Growth Share Scheme for the year
ended 31 December 2020, the Company will be issuing 630,279 shares
in March 2022. Following the revenue growth target for the year
ended 31 December 2021 being met for the B Growth Share Scheme the
Company will issue 675,419 shares in March 2023.
Following the vesting of the C Growth Share Scheme for the year
ended 31 December 2021, the Company will be issuing 219,494 shares
in March 2022.
Following the vesting of the E Growth Share Scheme for the year
ended 31 December 2021, the Company will be issuing 174,345 shares
in March 2022.
Following the first year of vesting of the Alpha FX
Institutional Limited share scheme for the year ended 31 December
2021, the Company will be issuing 99,828 shares in March 2022.
Following the vesting of the SAYE scheme, the Company will be
issuing a total of 108,671 shares over the next few months starting
on 25 March 2022, with the date of allotment dependent upon when
employees elect to exercise their option during the prescribed
window.
14. Availability of Annual Financial Report
The Group notes that the Annual Report & Accounts for the
year ended 31 December 2021 will be posted to Alpha FX shareholders
w/c 11(th) of April 2022. The document will also be available on
the Group's website at www.alphafx.co.uk and in hard copy at Brunel
Building, 2 Canalside Walk, London, W2 1DG.
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END
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