TIDMALPH
RNS Number : 0433N
Alpha Group International PLC
18 January 2023
18 January 2023
Alpha Group International plc
("Alpha" or the "Group")
Trading Update
Overview
Alpha Group International plc (AIM: ALPH), a high-tech,
high-touch provider of financial solutions dedicated to corporates
and institutions operating internationally, today announces a
trading update for the financial year ended 31 December 2022.
Following our update in October 2022, trading has remained
strong: we expect revenue for the full year to increase 27% to
approximately GBP98m (2021: GBP77.5m), operating profit to be
in-line with expectations and profit before tax (including
interest) to be ahead. These results have been achieved alongside
increased investment in our people, infrastructure, and technology,
in particular within our Alternative Banking Solutions division,
where client demand continues to exceed our expectations.
Since our inception, Alpha has carefully balanced its investment
programme, delivering thirteen consecutive years of strong revenue
growth and attractive profit margins. Moving into 2023, we find
ourselves in the fortunate position of expecting exceptional growth
in absolute earnings and cash generation, driven by a combination
of expected strong revenue growth and interest income.
In light of this, we believe it would be a missed opportunity to
not bring forward investment in our operations (in particular in
our Alternative Banking Solutions division), originally planned for
2024/25 and beyond. This investment is already underway and is
focused on accelerating future revenue growth and strengthening the
long-term scalability and sustainability of our business.
Furthermore, in the event our Operating Profit (which excludes
interest) exceeds current market expectations for 2023, we will
look to make additional investments in discretionary initiatives
(e.g. marketing campaigns), designed to further accelerate growth,
without becoming embedded into our cost base. From a presentational
point of view, because of our decision in October 2022 not to
classify interest income as revenue, any accelerated investment
(whether ongoing or discretionary) which is charged to profit will
be reflected in the operating margin in the short-term, but Group
profit before tax margins and the absolute level of EPS will be
significantly enhanced by the expected increase in interest income
received.
We have adopted this strategy in the belief that it will lead to
an exciting step change in our long-term growth prospects . We feel
privileged that at a time when many companies are looking to cut
back investment, our track record, strategy, and strong balance
sheet allow us to act differently and accelerate our growth
ambitions.
FX Risk Management ("FXRM")
Trading within our FXRM division has produced strong results,
with revenues increasing to approximately GBP69m (2021: GBP57m) and
client numbers increasing to 1,050. Underpinning this growth were
some solid dynamics: a reduction in overall client concentration, a
continued increase in average revenue per client, and further
increases in the average revenue generated by our Front Office
sales team in their first, second and third years - something we
call the "learning curve". The increase in average revenue per
client reflects our ability to grow wallet share with existing
clients together with our ability to win increasingly larger
clients as we build on our reputation and balance sheet.
We also look forward to launching our sixth FXRM office in
Madrid later in the year. The Madrid team will be led by three
highly experienced, long-term Alpha employees who have been
successfully penetrating these markets from our London HQ since
2017, and therefore have already built up a sizeable Spanish
speaking client base. Our presence in Spain is designed to enhance
our growth prospects in Spanish-speaking markets by providing us
with greater access to Spanish-speaking talent, as well as
increasing our attractiveness to clients who prefer to do business
with suppliers that have a local presence.
Attracting and retaining high-quality sales talent remains key
to our long-term growth strategy in this division and our internal
recruitment team has made excellent progress in the year across all
our offices. As a result, global Front Office headcount increased
to 111 (December 2021: 74) and we have a strong pipeline of
candidates going into Q1. Importantly, with significant capacity
within our existing Front Office team, and an ever-improving
learning curve, the hires made in the year are not needed to
deliver on short-term targets but are instead paving the way for
sustainable growth in the years to come. This has always been
Alpha's strategy and we will continue to recruit ahead of capacity
to cement our future growth prospects and extend our runway.
Alternative Banking Solutions ("ABS")
Our Alternative Banking Solutions division continues to grow
from strength to strength, with live accounts invoiced increasing
to 4,200 and revenues increasing to approximately GBP29m (2021:
GBP20m). Our ABS 2022 performance included a record month in
December for both new accounts and revenue. This encouraging
performance continued into 2023 with a very strong start to
January. Importantly, there remains significant demand for our ABS
services which we are yet to capitalise on, including increasing
demand from corporate service providers and fund administrators.
Such service providers typically open and manage many thousands of
accounts on behalf of alternative investment funds and, in a number
of instances, now wish to move from an informal trading
relationship of new accounts to a formal partnership with
Alpha.
These partnerships represent an exciting step change in our ABS
growth opportunities. However, in order to scale with high levels
of control, client service and healthy operating margins, it is
imperative we ensure the right foundations are in place. Achieving
this requires carefully managing our rate of growth, in line with
our levels of investment in the scalability of our teams and
technology. Many of the ABS partners only place a portion of their
accounts with Alpha, and importantly, fully support our decision to
take a measured and controlled approach to the growth of our
capacity.
With the benefit of the additional interest income, a strong
pipeline of client demand, and a clear line of sight from our
decentralisation, we are now fortunate to be in a position where we
can accelerate our investment with high levels of confidence in
onboarding significant increases in accounts and generating
significant increases in revenues in the coming years.
Whilst we remain vigilant to the potential for new entrants in
this marketplace, we take confidence from significant barriers to
entry and our strong competitive advantage. Accelerated investment
in this division should cement this further. ABS today employs
circa 170 people focused on the alternative investment market,
underpinned by purpose-built processes and technology, as well as
global blue-chip banking relationships. It has taken us many years
to build a solution that can effectively and sustainably service
this marketplace. Client appetite is also dependent on a balance
sheet and track record that most new entrants simply do not have,
whilst incumbent banks continue to retrench - a trend that speaks
to the deep levels of specialisation required to service this
marketplace effectively and profitably.
Income from interest
As outlined in our October trading update, the current increased
interest rate environment has allowed the Group to benefit from
additional interest income predominantly generated from its client
balances, as well as a small proportion from its own. With our
client balances growing, we now expect this to contribute circa
GBP9m of interest income in the last four months of 2022, and for
this benefit to continue into 2023 if the current interest rate
environment remains. As outlined above, this increased interest
income stream enables us to grow profits, whilst also producing the
means to accelerate our investments in our ABS division.
Additionally, it also allows us to help support our high-quality
client base with more attractive hedging facilities.
It is worth noting that the Group is only able to obtain
attractive interest rates on these overnight client cash balances
because of our ability to aggregate numerous individual client
balances, many of which are transitory in nature and typically only
held for 24 hours.
Whilst the increased interest stream is a positive boost for the
Group and a natural by-product of our increasingly diversified
product offering, we are mindful that aspects of its dynamics are
driven by macroeconomics beyond our control. As outlined in
October, we have therefore chosen to recognise interest income on
client balances as 'other operating income', not revenue from
operating activities.
Morgan Tillbrook, Founder & Chief Executive Officer of Alpha
said:
"2022 continued Alpha's thirteen consecutive years of strong
organic and profitable revenue growth. Whilst there is no doubt the
world has moved into a more challenging macro-environment, we have
proven our resilience, even when faced with unprecedented
challenges. Importantly, whether it's exchanging currency, holding
accounts, or making payments, businesses will always need to carry
out these activities. Indeed, managing them efficiently and
effectively often becomes even more important in a challenging
environment. As well as our business model benefitting from being
largely non-discretionary, we also benefit from being highly
diversified across two decentralised divisions, each with their own
product lines and client bases that are sector agnostic and span
over 50 countries. Meanwhile our service offering continues to grow
from strength to strength in response to our continued and prudent
investment, and is led by a team who, through carefully structured
growth equity schemes and a client-centric culture, are deeply
invested in delivering sustainable returns. As a business,
we are in the strongest position we have ever been in, and with
our growing number of products and geographies still barely
scratching the surface of our addressable market. Moving into 2023
and beyond, we have all the foundations in place to deliver
predictable, defensible, long-term growth and I am therefore
looking forward to the year ahead with confidence."
Market Abuse Regulation
This announcement is released by Alpha Group International 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 Group International plc was Tim Powell, Chief
Financial Officer.
Enquiries:
Alpha Group International plc via Alma PR
Morgan Tillbrook, Founder and CEO
Tim Powell, CFO
Liberum Capital Limited Tel: +44 (0) 20
(Nominated Adviser and Sole Broker) 3100 2000
Neil Patel
Cameron Duncan
Kate Bannatyne
Kane Collings
Alma PR (Financial Public Relations) Tel: +44 (0) 20
3405 0205
Josh Royston
Andy Bryant
Kieran Breheny
Notes to Editors
Alpha is a high-tech, high-touch provider of enhanced financial
solutions dedicated to corporates and institutions operating
internationally. Working with clients across 50+ countries, we
blend intelligent 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 - nearly 300 people based across
seven 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.
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END
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