ALPH Alpha Group International Plc

20 March 2024

Alpha Group International plc

("Alpha" or the "Group")

Full Year Results

for the year ended 31 December 2023

Alpha Group International plc, (AIM: ALPH), a high-tech, high-touch provider of financial solutions, dedicated to corporates and institutions operating internationally, is pleased to announce its audited Full Year Results for the year ended 31 December 2023.

Financial Highlights

Business Highlights

¹ Alternative Banking revenue includes £0.7m of revenue from Fund Finance solution, which was born out of this division

² Underlying excludes the impact of non-cash shared-based payments, net treasury income on client balances, one-off listing-related and M&A costs, and amortisation of purchased intangibles in 2023.

³ Cobase was acquired on 1 December 2023, and during the month generated revenue of £0.2m, EBITDA of £0.0m, and a PBT loss of £0.2m.

⁴ Previously "Other Operating Income".

⁵ The prior period restatement is detailed further in note 3 of the financial statements.
⁶ Excluding collateral received from clients, collateral paid to banking counterparties, early settlement of trades and the unrealised mark to market profit or loss from client swaps and rolls.
⁷ Subject to the completion of normal regulatory due diligence by the Company's Nomad.

Enquiries:

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 provide an enhanced alternative to traditional banking services, with solutions covering: FX risk management, global accounts, mass payments, fund finance, and cash management.

Key to our success is our team - over 400 people based across nine 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, has enabled us to make a substantial and enduring difference to our clients, and deliver a growth story to match.

CEO STATEMENT

Introduction

This year's statement has been an interesting one to write, as my reflection on the year's performance differs according to which lens it is viewed through. As a shareholder, I am delighted with the profitability and cash generation of the Group: profit before tax grew 148% to £115.9m, underlying profit before tax grew 11% to £43.0m, and interest on client balances of over £73m (2022: £9.3m) contributed to adjusted net cash increasing by £64m to £179m.

At the same time, the interest rate tailwinds that generated such exceptional bottom line growth proved frustrating for our underlying business, stymying its pace of growth, albeit the growth of our FXRM division reduced somewhat at our own discretion, particularly where our considered credit appetite and high selling standards saw us walk away from a number of revenue opportunities. Our reputation has been built on high-quality, sustainable growth, and we will not compromise that for short-term gains, even when the business environment is more challenging.

As a founder, I am extremely proud that our team have built such a strong, diversified business, that can thrive in different external environments. Should the relatively high interest rate environment continue, our diversification of business will continue to benefit the Group, and our balance sheet and cash will strengthen further; whilst a return to lower rates should stimulate client activity and revenues.

That said, we will not rest on our laurels. As a business that strives for high levels of performance, we very much remain focused on delivering continued strong underlying growth. That is why we continue to present our underlying numbers excluding net treasury income from client balances, despite the continuing benefits gained from our cash generation, as it is the benchmark by which we judge ourselves, and therefore fitting that our shareholders can too. The challenging conditions have given us the opportunity to re-analyse all aspects of our business, highlighting areas that we can improve upon, and we have already made positive changes.

In a year in which Alpha expects to complete its milestone transition from AIM to a listing on the Premium segment of the Main Market, I would like to thank all of our shareholders whose capital and support have helped us create such a dynamic enterprise. London's capital markets have endured a difficult period, with much conjecture surrounding their competitiveness. Without them however, we would not have been able to achieve nearly as much in such a short space of time, and certainly would not be the business we are today, now employing over 480 people globally. It is gratifying that we have been able to reward our shareholders handsomely and we will endeavour to continue doing so. The move from AIM feels like a change of era, and this is apt for our business. As I will discuss through this report, recent years have been dominated by our international roll-out, as well as investment in platform development and back-office to provide the infrastructure and regulatory frameworks needed to build a business of scale. Having made significant progress in this area, our investment focus within our core FX Risk Management and Alternative Banking divisions will become more weighted towards the Front Office - enhancing sales capability, refining our technology to improve client interaction and user experience, and bringing this all together to amplify our sales engine. At the same time, we will continue to invest in establishing strong foundations for our newer ventures (Fund Finance & Cobase), as well as leveraging our existing experience and client relationships, so they can go on to forge exciting long-term growth stories of their own.

A Note on Detail

We are proud to provide existing and prospective shareholders with a comprehensive level of detail on the performance of the business within our regulatory disclosures. However, recognising the time constraints (and varying levels of interest!) among our audiences, I will continue to reference relevant context via hyperlinks throughout our statements in line with our recent results announcements.

Client centricity is key to outperforming business cycles

Alongside reviewing the performance of our income streams, FX Risk Management and Alternative Banking, it is important to highlight how we address our two client audiences, Corporate and Institutional, as much of our strategic planning centres around the solutions that each need.

Both client types continue to be underserved by traditional banking and, whilst there is overlap in the products sold, the sales channels, expertise and technologies are distinct. This drives our entire approach to growth: our strategy and planning; how we think about future investment in headcount, technology, sales and marketing; how we drive client acquisition, retention and expansion; and ultimately, how we set our expectations around the scalability and pace of returns from our targeted investments. In addition, these two client groups have different needs and demands, and we are at different stages along our maturity curve in terms of how we build solutions to service them. Evaluating the Group through these two customer lenses (Corporate and Institutional) is therefore helpful for understanding the opportunity in front of us.

Corporates - doubling down on our existing global footprint

Our Corporate clients are served through teams in the UK and seven overseas offices across Europe, North America and Australia. With native speakers in each market, and our presence across multiple time zones, we provide genuine 24/7 service capability across our client base. Significant developments during the year include the establishment of operations in Madrid and Munich, and the Group's first acquisition, Cobase, which completed in December 2023.

We have largely completed the current phase of our planned international roll-out of our Corporate FXRM business, and our intention now is to double-down on these offices to deliver on their substantial potential. Each office has been spearheaded by highly capable leaders and each has the potential to replicate the success of London, which is only 15 years old and still remains in an early stage of its growth phase.

Our investment into our back office functions to date provides bandwidth to scale significantly. With this in mind, although there is significant capacity within our existing front office teams to support materially higher revenues, our intention now is to accelerate our prospects by focusing on front office headcount growth and retention across our current global offices. All the regions we operate in have highly knowledgeable and incentivised management teams operating in markets that can structurally and competitively scale to be similar to the UK in the long term. The acquisition of Cobase, acquired in December 2023, has also added technology, talent and clients, and expands our total addressable market, providing a further growth engine.

Institutional - scaling our sales channels across our multiple product offerings

Alpha's Institutional offering has continually evolved in the six years since we first launched our Institutional FXRM team and represents an exciting growth opportunity in the short, medium and long term. The alternative investment industry is currently in a cyclical downturn, but the success of our investment in the sector through this challenging period is highlighted by the 6,467 accounts that Alpha has onboarded to date, representing growth of 54% year-on-year, as well as the 55% growth in Institutional FXRM revenues, and the launch of our Fund Finance offering in May, which generated over £700k in revenue in its first seven months of operation. Our Institutional account solutions have also generated the vast majority of the £73m in net treasury income from interest on client balances.

Similar to our Corporate marketplace, the market opportunity in Institutional is sizeable, as we continue to take share from banks with our specialist, high-tech, high-touch solutions. Our ongoing investment in our infrastructure and solutions continues to enhance our capabilities, with significant progress made in 2023. Heading into 2024, we are looking forward to leveraging these upgrades, whilst building out new sales channels and expanding our sales teams across our growing institutional offering, with front office headcount expected to increase.

Increasing cross-sell opportunities across the Group has the potential to transform our prospects

Leveraging the overlap between our solutions is at the centre of our growth strategy and provides us with the opportunity to increase our wallet share and deepen our relationships with clients by becoming a larger part of their day-to-day financial operations, as well as provide us with a wider net to win new clients. We have a strong track record of launching new solutions and offices that go on to deliver attractive levels of growth within highly specialised markets. We also continue to invest in enhancing our CRM system across the group to improve the volume of data and quality of insights we have, enabling our sales teams to more effectively cross-sell and deliver increasing value to our clients.

A clear example of our early success here is our Institutional FXRM office which (as previously mentioned) grew revenues by 55% against a challenging market backdrop, reflecting not only the team's hard work but the initial wins from our cross-selling initiatives into our Alternative Banking offering.

In May, in a further step to diversify our offering, we launched our Fund Finance proposition, which can benefit from cross-selling opportunities with clients that come from Alpha's Institutional FXRM and Alternative Banking relationships. At the same time, the Fund Finance team is already reciprocating by creating new business opportunities of their own, which can then be sold Alpha's other services.

Likewise, our acquisition of Cobase brings a unique technology platform, a SaaS revenue model and c. 130 clients, which opens up a number of opportunities to offer solutions from our other divisions in the medium term, albeit our initial focus will remain on accelerating Cobase's own client acquisition.

Strong cross-selling opportunities within both our markets

Deep foundations laid to deliver operational gearing

We not only plan to continue delivering future high growth in revenues and client numbers but, over time, we expect an increasingly higher proportion of that growth to drop through into profitability and cash. We have made significant investments in people, processes and technology over the last five years across our core divisions, and whilst we expect macro conditions to continue to be a challenge through 2024, this has put us in a strong position to benefit from operational gearing as markets pick up.  

Infrastructure & Technology: The substantial investment we have made in our technology and infrastructure over the last five years spans two decentralised divisions, alongside recently acquired Cobase, each with highly attractive propositions and clear development roadmaps. With Australia, alongside Europe and Canada, Alpha is now able to operate 24/7 across time zones, and our investments in infrastructure and back office systems over the last few years have provided significant capacity for us to scale our global revenues. The objective now is to enhance the experience for our clients and sales teams while streamlining processes and building in additional automation; the opportunity is to improve the efficiency of our systems rather than simply grow the size of our technology footprint or headcount, in order that we can deliver more with less.

People: Owing to our investments in people, processes and technology to date, we also believe we can significantly grow the size of our business with far more modest increases in back office headcount going forward. The financial productivity of our front office teams meanwhile will benefit from not only our investment in internal technology but also the growing range of solutions we can offer each client.

Cash provides the springboard

At the end of the year we had £178.8m of adjusted net cash, and the strength of our balance sheet now provides the opportunity to supercharge our growth. As a Board, we continually discuss our capital allocation policy and the balance between dividends, share buy-backs, acquisitions, and re-investing back into the business, as well as ensuring we maintain a strong balance sheet for all our stakeholders and counterparties. Following the initiation of our £20m share buyback programme in January 2024, the Board's decision, for now, is that, while we always look for a balanced approach, our remaining cash gives us a major competitive advantage as markets pick up and we identify relevant opportunities across our matrix of offices, services and clients. We also believe it is prudent to have sufficient cash kept aside to capitalise not only on the opportunities we have now, but also to have the ability to accelerate investment in the future, if faced with even greater upside. We will naturally continue to keep this under review in the normal course.

Strong financial KPIs despite the challenging economic backdrop

Throughout the year we have seen the interest rate environment suppress the activity levels of our FX hedging and alternative investment clients. The challenging macro conditions have resulted in our clients being more conservative around forecasting and, thus, FX hedging. At the same time, these macro conditions meant we chose to reduce our own credit appetite, resulting in a number of clients having hedging facilities removed or reduced. This decision ultimately ensured we had no meaningful defaults during the year but also meant we walked away from a number of revenue opportunities by taking a balanced approach to growth.

Additionally, our institutional clients had the challenge of higher financing costs in structuring new deals and managing the mismatch between buyer and seller expectations across all of the key asset classes we serve: Private Equity, Venture Capital, Real Estate, Infrastructure and Private Debt. Deal flow last year was well below 2022 as funds faced increased uncertainty about the economic outlook, and the impact of higher interest rates and credit spreads. As a result, the fundraising environment and private equity M&A activity slowed considerably. However, in this market we are starting from a low base with a strong proposition, highlighted by a 54% increase in accounts within Alternative Banking in the year.

Source: Preqin Ltd (2021-2023)

Outlook - our natural hedge

We currently expect markets to slowly pick up through 2024 and monetary policy to ease, providing greater certainty over global trade, investment decisions and demand visibility for our clients. While higher interest rates will continue to provide a significant bottom-line tailwind for the Group, driving exceptional levels of net treasury income, we do not know to what extent any easing of monetary policy will release the brakes on currently suppressed activity levels of both our corporate and institutional clients. The ability for higher interest rates to amplify net treasury income (from interest) on one hand, whilst simultaneously suppressing underlying trading activity on the other is referred to internally as our 'natural interest rate hedge' and will likely remain a feature in 2024. Overall, trading in 2024 to date has been encouraging and we remain confident in the strength and scalability of our business model, and our strategy to take advantage of the vast growth opportunity available to the Group.

Divisional Analysis

FX RISK MANAGEMENT

Highlights

FXRM Environment

As previously outlined, the FXRM environment in 2023 reflected challenging macro conditions, which have suppressed our clients' FX hedging activity. The first nine months of the year were characterised by high inflation rates globally and central banks responding by increasing interest rates, and during this period in particular, we made the decision to take a more conservative approach when it came to our own credit appetite. This resulted in us reducing or removing hedging facilities for a number of clients, and also curtailed our appetite to work with some new clients. Through this disciplined approach, we are pleased to report we had no significant defaults during the year; however, naturally, this also resulted in us walking away from some revenue opportunities.

The benefits of our diversification strategy across FXRM were also clearly reflected during the period, with our Institutional FXRM business and our overseas corporate offices doing well to offset the impact of the economic headwinds experienced in the UK Corporate business.

FXRM Selling Standards

We set out to be the global leader in FX risk management, and believe that integrity is as important as expertise if we want to deliver on this vision. This is particularly pertinent when it comes to complex FX options products, which provide the short-term benefit of a more favourable initial exchange rate, but commit the client to a potentially more unfavourable exchange rate in the future.

We do not seek to advise on or promote complex options products, and our selling standards dictate that any we do facilitate should be on an execution-only basis, driven by client demand. We are unfortunately seeing these products being promoted more and more within our industry, particularly in this tougher economic climate. I believe this is largely the symptom of two simple facts: i) complex options provide high margins for the FX provider and ii) the same less-scrupulous providers allure clients with the prospect of outperforming the market.

As a business, we feel this trend is an increasing problem within our industry, however, I am pleased to report that, in line with the intentions set out in my last annual report statement, our teams have continued to move in the opposite direction, with the percentage of FXRM revenues coming from complex options products reducing from 13% to 4% during the year. Since 2022 we have purposely adjusted our commission structure to incentivise our sales teams to provide simple and appropriate solutions, while paying lower rates of commission on more complex products. If we are serious about maintaining our selling standards as we grow into a global business, it is important that our incentives are aligned with our culture.

Whilst our avoidance of complex options products has naturally cost us revenue in the short term, I am incredibly proud that we have a team that is committed to acting in the best interest of their clients, delivering them what they need, even if it's not always what they initially request or might have been sold by other FX companies. In a challenging sales environment, it takes a certain type of salesperson to turn down the low-hanging fruit of a high-margin options trade. Indeed, many of our competitors have seen their options revenue increase during this challenging period, as clients are encouraged to seek outperformance in a tough environment.

The moves our team are making around selling standards give me further confidence in the future of this business and will unquestionably lead to more sustainable revenue growth in the long-term, whilst further differentiating us within an industry which, unfortunately, is moving increasingly in the opposite direction.

FXRM Performance

Overview

Overall divisional revenues grew 10% to £76.3m for the year (FY 2022: £69.5m), and client numbers grew by 2% to 1,071. This small gain in client numbers (actually a decrease since June 2023) largely reflects the tightening of our credit appetite within the current interest rate environment, which has seen us stop working with certain existing clients, as well as reduce the pool of new clients we are prepared to work with. Additionally, there have been a handful of clients who have become insolvent in the current environment. Our push to reduce the number of clients using complex option products has also weighed on our growth, with not every business ready to be persuaded that complex options are not in their interests. Despite only a small increase in client numbers, average revenue per client continued to increase, reflecting our continued ability to work with larger businesses as well as increase our wallet share with existing clients, as our reputation continues to grow. Front Office productivity also continued to increase as the chart below shows.

What is Front Office Productivity?

Front Office productivity compares the total cumulative tenure of our Front Office, compared to our revenues. The graph shows that we have been able to maintain productivity despite both the market headwinds and experienced salespeople moving into roles focused on leading international expansion and/or the growth and development of our Front Office teams. When we take into account new joiners, whose contribution in their first year is naturally lower than more experienced colleagues, this is even more pronounced.

UK Corporate

The UK Corporate FXRM office has grown its revenues by around five times since our IPO in 2017, but during the period experienced its first decline in revenue and has remained the most impacted by the economic environment. This is primarily because it has the largest and longest-standing client base and has therefore also been affected most by the adjustments to our credit appetite and the doubling down of our selling standards.

Our UK Corporate office has long served as the talent incubator for cultivating leaders to spearhead the establishment of overseas offices. Over 125 years of Alpha experience has been exported abroad over the past five years and, as a result, during this more challenging period, the team have missed some of this talent. Our Madrid office, for example, was our most recent export of talent from the UK, and has taken with it over 15 years of combined Alpha experience; this from a team of four who delivered over £1.1m in Spanish client revenue from the UK office over the past four years, and left the UK at a more mature stage in their learning curve.

With our current overseas offices now established, we feel there is no requirement to further export our talent from the UK for the time being. This will ensure that our existing talent can fully compound within the UK, which remains an enormous growth opportunity in its own right.

Having done so much to drive growth across the wider business, I would like to personally thank our UK office for all they have done for the Group, and I am looking forward to this team now being able to once again double down on their own journey.

Overseas Corporate offices

As highlighted, we believe we have (for now) completed the "landing" phase of our "land and expand" strategy (i.e. rolling out overseas Corporate offices). In all cases, we believe the structural and competitive dynamics, together with the size of these local markets, means we have the potential to replicate the financial size and success of the UK office in the longer term. To underpin this, we work very hard to ensure our selling standards and culture are successfully exported overseas and led by experienced individuals who are highly invested in the future of each venture. Launching new offices overseas is not without its challenges, but upholding our standards is key if we want to become the undisputed global leader in FX risk management.

Despite a year of challenging trading, our Corporate Toronto office remains profitable, albeit with revenues slightly down on 2022. As well as a difficult macro backdrop, investors who have followed our updates over the past 18 months will know we temporarily found ourselves in a position where we did not have enough senior talent to support the development of our junior talent. We therefore had some rebuilding to do in Toronto to position it for long-term growth. Throughout this rebuilding process, we have been focusing on developing and upskilling the team and, having successfully gone through this, towards the end of 2023 we subsequently promoted an existing team member to take over leadership of the office. This individual is a highly respected, high-performing, long-term member of the team, who has been instrumental in the office's growth to date.

The early performance from the office since making these changes has been encouraging, and having spent a week in Toronto with the team at the start of January, I feel confident the office is turning a corner and has the right people and foundations in place to re-establish its growth journey.

In H1, we also established a Madrid office. This office, comprised of Spanish speakers, is led by a team of four with 15 years' combined Alpha experience, and is the last and most recent export of UK talent for the time being. Our presence in Madrid has provided the foundations for further expansion into a wide range of Spanish-speaking markets, and we are pleased to report the office has seen strong trading to date with significant prospects ahead.  

In Q4 2023, we also launched a new office in Munich. Germany is a large and attractive market for us, and historically we have had good success selling into the market from our Amsterdam and UK offices. Whilst we have wanted to launch in Germany for a long time, finding the right person to lead a team there has not been easy. Wherever possible, we like our overseas offices to be established by existing team members who have excelled through the UK 'Alpha Academy' and can therefore be relied upon to successfully export our culture and standards overseas. Whilst there is a lack of German-speaking candidates in London, in H1 last year we met with an experienced individual working locally within the German FX market. Whilst this person has come from outside our company, they quickly showed that their standards and values aligned with our own, and to reinforce this, they have also been joined by another early Alpha hire from our Amsterdam office.

Toronto is our only office that started without any existing Alpha team members, and having learned a lot from this experience, we have been keen to apply these learnings to our selection and integration process this time around. Consequently, we feel that, in Munich, we have a leader and team who believe in the Alpha way and are capable of delivering it successfully. The early signs from Munich have been positive, and we are looking forward to seeing what they can deliver in their first full year of operation.

Launched in 2022, our Sydney office has delivered good revenue growth in its first full year of trading. This office is led by a core team possessing over 30 years' combined experience working at Alpha, ensuring that we have been able to quickly communicate our proposition and export our culture. In addition to providing the basis for further expansion across the Australian territories, our Sydney base will enable the Group to better access a wide range of target Asian markets in the future, contributing to our truly 24/7 client service capabilities.

Institutional FXRM

As we have previously highlighted, our Institutional FXRM office (based in the UK) continued to show particularly strong growth in the period, with revenue increasing 55% despite a significantly suppressed market. Launching in 2018, the Institutional FXRM team has a strong reputation within the Institutional space. This business has solid foundations in place in terms of talent, clients and solutions, to deliver substantial organic growth going forward, but also to be at the centre of our efforts to amplify our prospects within the Institutional market by successfully cross-selling our growing range of products. Having had an excellent year in a subdued market, it will be exciting to see what the team can achieve when activity levels start to pick up in the alternative investment market, particularly when considering the significant growth in our balance sheet and presence over the past 18 months.

FXRM Technology

Our FXRM platform is designed to provide clients with greater efficiency and visibility when managing and reporting on FX. We continued to make significant improvements to the platform throughout the year, with modular credit facilities, derivatives online, mark-to-market tooling, and accelerated payment processing, all well-received upgrades by our clients. Whilst it would be easy to get lost in technical jargon, the principles behind any new upgrades we make to the platform are simple - we strive to create platform features for our clients that unlock new efficiencies and insights, so they can be more informed, more productive, and ultimately get more value from working with us. The success of these developments can be seen in the increasing levels of activity on the platform, with the number of accounts booking trades on the platform increasing 19% in the year. Moving forward we will continue to innovate and evolve our FXRM platform and are also looking forward to exploring the longer-term opportunity to integrate the capabilities of Cobase following its acquisition in December 2023.

FXRM Strategy

While the macro backdrop to 2023 certainly provided challenges to the growth of our FXRM revenues, the growth prospects for FXRM heading into 2024 remain exciting. Throughout 2023 we have continued to make significant investments to further enhance the FXRM division's potential, including investment in our online platform, and the exciting acquisition of the treasury-focused fintech, Cobase, in December 2023. At the same time, average revenues per client continue to increase, alongside Front Office productivity. We are pleased to have not only continued to improve our existing foundations but have also opened two new offices alongside this to facilitate further growth.

The bigger picture is we have a clear strategy, a tried and tested model and an identified runway to continue delivering long-term growth with our existing FXRM teams, markets and products. We have  international FXRM offices across three continents and the strategy will now be doubling down on our office investments and focusing on "expanding" now that we have successfully "landed". This will also benefit our operational leverage going forward, as a result of the investments made in recent years. FXRM Front Office headcount increased 18% to 120 people in 2023 (FY 2022: 102), and our plan is to focus in 2024 on growing and developing our Front Office sales teams in our current offices. Having successfully doubled down on our selling standards in 2023, a big focus in 2024 will be on doing the same with our nurturing and training standards; ultimately, we believe that by getting both of these areas right, we will continue to put ourselves in an excellent position to deliver strong and sustainable revenue growth moving forward.

ALTERNATIVE BANKING

Highlights

Alternative Banking Environment

Over the last three years we have built a business based around solving a service and technology challenge in an institutional market inefficiently served by banks. The growth in accounts we now manage highlights the success of the team and our product development roadmap. The 54% growth in accounts was achieved despite a marked drop in investment activity amongst our existing and target clients. The decline in deal activity in the institutional market in the first half of 2023 continued throughout the rest of the year, with deal volumes and flows significantly down on 2022 across all of the key asset classes served by the division. This reduction in activity led to a knock-on effect on the demand for new accounts, payments and FX spot transactions.

Alternative Banking Performance

As a result, growth in account numbers was lower than we had anticipated at the start of the financial year, with just under 6,500 accounts, achieving significant growth on the 4,200 accounts held at 31 December 2022. Revenues meanwhile increased by 18% to £33.9m, with consecutive record revenue quarters delivered in Q3 and Q4.

Alternative Banking highlights the sentiment I outlined at the start of this statement; as Chief Executive, the economic backdrop has proved frustrating in growing the business, but as a shareholder, the economic rewards have been substantial in 2023. Not only has Alternative Banking been key to our early success in cross-selling with our FXRM and more recently Fund Finance teams, but we have also earned interest on overnight client balances throughout the year. As previously outlined, our average client balances grew by c. 30% between 2022 and 2023, as we continued to open more accounts and grow wallet share with clients. The interest rates generated by these balances meanwhile averaged 3.6% for the year. Together this contributed towards over £73m of net treasury income on client funds, an increase of nearly eight times against FY 2022.

Alternative Banking Technology

Our alternative banking technology has been purpose-built for alternative investment clients, and combined with our specialist teams, enables us to provide our clients with a compelling alternative to traditional banking providers, who are typically characterised by legacy technologies and more generalist offerings.

New product development is focused around three key client-centric tenets of: Ease, Responsiveness, and Reliability, with the ongoing goal of making every interaction with our clients as efficient and effective as possible, whilst also remaining highly controlled and compliant. What we find particularly exciting here is that much of the progress we make increases both the attractiveness of our offering, whilst simultaneously reducing our own time and cost to serve. A great example of this is our investment in automation to reduce the amount of manual involvement required between our teams and clients. This is improving the onboarding speeds and experience for clients, whilst also reducing the operational burden on our teams.

Moving forward, we will continue to upgrade and evolve our product offering, and with a growing range of complimentary product offerings, each with innovative technologies of their own, we are moving ever closer towards our ambition of becoming the leading non-bank provider of financial solutions to the institutional space. 

Alternative Banking Strategy

Despite the temporary downturn in investment activity within our core markets, it is encouraging that we have been able to continue to grow, and we are excited about the prospects for Alternative Banking as this slowdown unwinds and business activity increases. When the market picks up, our growing market presence, partnership relationships and scale mean we are well-positioned to capitalise on the increased opportunity, with increasing levels of operational efficiency.

We will continue to invest to scale the business, but feel we are over the hump of our major technology infrastructure spend. This year, the focus will be on automation and improving the client experience with incremental enhancements to the functionality and interfaces. This will in turn increase the ease of use and performance of our systems for our clients, improve the responsiveness of our support, as well as reduce our time and cost to serve - enabling us to do more with less.

This step-change in scalability and efficiency is also expected to reduce the level of growth in operational headcount we need in Alternative Banking going forward, whilst giving us the confidence to grow our Front Office teams in 2024 within this division. As markets return to growth, we want to make it as easy and attractive as possible for institutions and fund managers to deal with Alpha. The exciting opportunity is to take the platform and brand we have built and now layer on the sales-led culture that has been core to Alpha's success over the last 15 years. We plan to open up a range of new sales channels across the institutional marketplace, each focused on capitalising on different routes to market, and as part of this will be increasing the size of our sales team. Suffice to say, the team and I are very much looking forward to this next chapter in the division's growth journey.

FUND FINANCE

Highlights

Born out of our Alternative Banking division, our expansion into fund finance forms another important step in our ambition to lead the way in global financial solutions for the alternative investment market - a bank alternative, dedicated to Alternatives. This solution embodies our 'high-tech, high-touch' approach to business, blending our specialist expertise with smart technology to disrupt industries that are both outdated and have high barriers to entry.

We initially launched our solution in May 2023 (read here), and in November followed up with the launch of the industry's first digital platform for connecting borrowers with lenders (read here). We are pleased to report early successes in this division, with our solution already proving popular among clients, contributing over £700k towards Alternative Banking revenues for the seven months of FY 2023 since its launch in May. Looking ahead, we have further medium-term ambitions to continuously improve the platform, grow the client base, and focus on opportunities to cross-sell, all of which provide an exciting roadmap for the future.

When it comes to innovative new solutions, barriers to entry are naturally a keen area of focus for both Alpha and its investors. Here we believe we enter this industry with a natural position of strength. This is because, for a platform solution to be worthwhile for borrowers and lenders, there needs to be speed and scale on both sides of the equation: borrowers want to know they can instantly screen across a large pool of lenders, whilst lenders want to know they are going to have easy access to a sizeable pool of borrowers. Traditional fund finance intermediaries, however, typically work with much smaller numbers of clients on an irregular basis and rely on manual processes to deliver their service. This makes speed and scale challenging.

Alpha's ability to launch this solution has only been possible because of our ability to combine deep expertise within fund finance, with Alpha's scale and technological capabilities in the institutional market. From launch, the fund finance team has been able to instantly leverage 1,300+ relationships with potential borrowers, whilst using technology to dramatically streamline processes. Achieving this level of speed and scale did not happen overnight though. It has taken significant time, investment, and expertise, built up over many years, with our institutional teams now made up of over 250 people across three global offices. The barriers to entry to launch a competing platform from scratch are therefore significant and give us a unique and sizeable first-mover advantage.

COBASE - expanding our market

Highlights

¹ Only revenue generated after Cobase's acquisition in December is included in the Group's figures, which was £0.2m.

December saw us make our first-ever acquisition, Amsterdam-based Cobase, a treasury-focused fintech which supports corporates with seamless connectivity between their ERP, payment and banking systems (a more detailed overview of their offering can be found here).

In 2023, Cobase grew revenues by c. 67% to €2m¹, with all revenues derived through SaaS subscription fees. Cobase's client base has also increased by c. 67% during the year, to end 2023 with over 130 clients. Alpha acquired circa 86% of the company for an initial consideration of €9.6m (£8.3m) in cash, with the remaining stake to be acquired via a performance-based earn-out between 2025 and 2028.

Going forward, Cobase will retain its team and continue to operate under its own brand, but the addition of the business expands our available market. Their bank-connectivity technology added to Alpha's stable of products, means the Group is now able to offer our corporate client base a comprehensive and flexible portfolio of treasury-focused solutions covering FX, payments, accounts, bank connectivity, and treasury solutions.

We look at our capital allocation policy below, but Cobase is a good example of how we plan to partly use our cash to inorganically expand Alpha where appropriate. We are often shown opportunities to acquire businesses that compete in our FXRM marketplace, but in reviewing their clients, service and teams, typically they offer more risk than reward and do not add to our ambition. We will look for companies that meet our stringent criteria of adding technology, clients and products, together with the opportunity to cross-sell, and most importantly complement the Alpha culture.

Capital Allocation and Share Buyback

As highlighted throughout the report, the Group generated significant levels of cash throughout 2023. As at 31 December 2023 we had net assets of £223.5m (2022 restated: £142.9m), with adjusted net cash increasing by £64m to over £178.8m (2022: £114.4m).

As highlighted in last year's statement, we do review our cash position on a regular basis, and if we feel our cash position becomes greater than we require, will look to reassess. Given the current cash balances and the likelihood of further cash generation this year, the Board agreed to implement a Share Buyback programme of £20m, full details of which can be found here. Purchased shares will be held in treasury, enabling us to use the shares to offset future dilution from our long-term growth share schemes.

Our overarching preference remains to allocate capital into high-confidence organic growth initiatives, within both existing and potential new business units. Such initiatives include: extending and improving product lines and tech solutions, expanding our territories when appropriate, or any other moat-widening opportunities that differentiate us from competitors.

In view of the Group's confidence in the sizable and exciting market opportunities that are presented to us, it is the Board's belief that, after maintaining our progressive dividend policy and initiating our £20m share buyback, retaining and deploying our remaining cash within the business will deliver significant levels of growth and deliver the best value for shareholders long-term. Examples of this last year include the opening of offices in Madrid and Munich, the launch of Fund Finance and the acquisition of Cobase.

As well as providing cash for investment, a strong balance sheet is also important to our counterparties, as a healthy cash profile is required as collateral for hedging facilities, regulatory capital, and also provides our clients with confidence.

Main Market Listing

As highlighted in last year's statement and reiterated to the market last September, Alpha intends to move up to the Premium List of the Main Market. In line with previous guidance, we are working to complete this move in May 2024 with relevant workstreams well progressed. The rationale for the intended move is repeated below.

As a business that is growing in size, becoming more global, and gaining interest from increasingly larger clients, we believe a Main Market Premium listing will serve to further enhance our reputation and support our market penetration as we move into new countries and engage larger clients. At the same time, Premium Listing standards will align to Alpha's commitment to providing higher levels of governance and disclosure, both of which we know will continue to be well-received by our clients, banking partners and investors alike.

Thank you

2023 was a remarkable year for Alpha. We faced different challenges in an interest rate environment not experienced since we began trading in 2010. Despite a natural inclination to do more, we have maintained our discipline and been steadfast in our approach to both credit management and our selling standards - delivering our clients what they need (even if it's not always what they initially request or might have been sold by other FX companies). We are privileged to work with some truly great clients, and our commitment to safeguarding their interests during these challenging times has gone a long way to maintaining their trust and enhancing our reputation further. At the same time, the team have made significant strides in delivering on our accelerated investment programme, which has expanded and enhanced our capabilities, and created significant efficiencies and capacity from which to scale whilst enjoying increasing levels of operational leverage.  

To the team - I would like to thank you for your unwavering dedication throughout the year. Given that we delivered record profits, it is difficult to reconcile that we didn't achieve the underlying growth we set out to, however, given the market we found ourselves in, I am incredibly proud of what we achieved together. The mindset and ambition heading into 2024 has been equally inspiring, and this gives me confidence that together, we can meet future challenges and seize the opportunities that lie ahead. 2024 has started well, and I am looking forward to seeing what we can achieve together throughout the rest of the year.

FINANCIAL REVIEW

Revenue

2023 has seen good growth across both divisions despite a tough macro-economic environment, with total revenues increasing 12% to £110.4m (2022: £98.3m). FX Risk Management revenue grew 10% to £76.3m (2022: £69.5m), whilst Alternative Banking grew 18% to £33.9m (2022: £28.8m). Cobase, the group's first acquisition, completed on 1^st December 2023 and contributed £0.2m of revenues in the one month of ownership in 2023.

*  Corporate division is primarily UK but also includes other offices not disclosed elsewhere (Milan, Madrid, Munich, and Sydney)

**For the purpose of deriving margins for Alternative Banking and FX Risk Management, the cost base of the Institutional division has been allocated based on revenue.

FX Risk Management

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, Amsterdam, Milan, Madrid, Munich, and Sydney. Revenue grew by 10% over the prior year to £76.3m (2022: £69.5m), with a 3% increase in UK revenues and a 42% increase in overseas offices' revenues, with growth across all regions except Canada.

Revenue was up 3% in the London FX Risk Management business, driven by strong growth from our institutional client base, up 55% to £23.5m (2022: £15.1m), partially offset by a weaker performance within our corporate client base, which was down 14% to £35.2m (2022: £41.2m). This fall in revenue was primarily driven by the increased levels of uncertainty within the UK corporate market, resulting from the high inflation and interest rate environment.

The underlying profit margin of the division increased to c. 42%, (2022: c. 39%) with the Corporate segment delivering a margin of 50% (62% excluding the newer lower-margin overseas offices).

Alternative Banking

Alternative Banking revenue grew 18% from £28.8m in the prior year to £33.9m in 2023, driven by an increased number of accounts, as well as revenue from our new Fund Finance offering launched in May 2023.

Account fee revenue increased by £5.8m (76%) to £13.5m (2022: £7.7m), as the number of accounts being managed increased by over 50% from 4,200 to just under 6,500, and we generated a full year of income from accounts opened in the prior year. Revenue from annual account fees is recognised on a straight-line basis over the 12 months from the date the account was opened or renewed. At 31 December 2023 deferred revenue was £7.1m (2022: £4.9m), and this will be recognised as revenue in 2024.

The underlying operating profit margin of the Alternative Banking division was c. 33% (2022: c. 39%). The reduction against 2022 was predominately due to the timing mismatch of in-year investment, increased deferred account fees and the macro environment suppressing revenues.

Fund finance had a very encouraging start with over £700k of revenue in its first seven months of operations.

Group Profitability

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 the net treasury income on client balances (see below) and non-underlying items. On this basis, the underlying profit before tax, increased by 11% to £43m (2022: £38.6m). Statutory profit before tax increased by 148% to £115.9m (2022: £46.8m).

As previously highlighted, the Group continued to invest in the year, some of which was accelerating plans from 2024 & 2025. Investments included; launching operations in Spain and Germany, a new office in London focused on Institutional clients, and further technology improvements to increase scalability and digitisation. Overall headcount increased in the year from 357 to over 480 at 31 December 2023 to support future long-term growth, of which 21 were Cobase employees. The underlying profit before tax margin, excluding Cobase, remained broadly flat at 38% (2022: 39%). However, the statutory profit before tax margin increased significantly to 62% (2022: 43%) reflecting the growth in net treasury income from client balances.

Net Treasury Income (NTI)

The current interest rate environment has continued to allow the Group to benefit from interest income generated from client balances. 'Net treasury income - client funds' has contributed £73.7m of net treasury income in the year (last four months of 2022: £9.3m), with the number and size of client balances growing to an average of £2.1bn in Q4 2023. 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 a short amount of time.

Whilst the increased interest income 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 previously outlined, we have therefore chosen to recognise this income on client balances as 'net treasury income - client balances' and exclude it from our underlying results.

This year the Group has also generated net treasury income on the initial and variation margins it requires for its FX Risk Management client relationships. These balances contribute to the Group's cash and cash equivalent balances and directly relate to the operating activities of the business. Therefore, we have decided to separately disclose these amounts within total income at the top of the Income Statement as opposed to within finance income, totalling £1.8m (2022: £nil).

Taxation

The effective tax rate for the period was 23% (2022: 17%). The increase in effective rate is primarily due to the change in UK corporation tax from 19% to 25% in April 2023. The rate was lower than the pro rata UK headline rate of 23.5% due to the  mix of profits across our global subsidiaries. There were no other material changes in underlying rates.

Earnings Per Share

Underlying basic earnings per share was flat at 76.7p (2022: 76.3p), whilst total earnings per share were over 120% higher at 206.2p (2022: 92.1p). The impact of the increased corporate rates of taxation was to suppress underlying basic EPS by c6p and basic EPS by c. 14p.

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, total income, underlying profit before tax, profit before tax, PBT margin, number of FXRM clients, number of Alternative Banking client accounts, and the number of FXRM Front Office staff.

Cash Flow and Balance Sheet

In the year ended 31 December 2023, 53% 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 (2022: 57%). Including net treasury income, cash conversion increased to 72% in 2023 (2022: 60%). This has continued to have a positive impact on the Group's cash flow. On a statutory basis, net cash and cash equivalents increased in the year by £61m to £198m.

The Group's statutory cash position can fluctuate significantly from day to day due to the impact of changes in: collateral paid to banking partners, margin received from clients, early settlement of trades, or the unrealised mark-to-market profit or loss from client swaps. These movements result 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 excluding these items, shown below. On this basis, adjusted net cash increased in the year by £64m to £179m.

*   Included in 'other payables' within 'trade and other payables'.

** Excluding collateral received from clients, collateral paid to banking counterparties, early settlement of trades and the unrealised mark to market profit or loss from client swaps and rolls.

The overall net assets of the Group increased in the year by £81m to £223m.

Prior Period Restatement

After reviewing the IFRS 2 Share-Based Payment standard and related guidance from the IFRIC, the Group has concluded that share ownership schemes that grant employees shares or options in subsidiaries, with conversion rights to the holding company should be accounted for under IFRS 2 Share-Based Payment, rather than a non-controlling interest in a subsidiary. As a result of this, the previous years' non-controlling interest recognised over the annual profits of the subsidiaries were overstated.

In addition, a number of other amounts relating to these schemes have been restated in 2022, namely the share-based payment charge to the Consolidated Statement of Comprehensive Income, the share premium recognised on vesting, and other receivables relating to the purchase of the options. Accordingly, the Group has restated its financial statements in accordance with IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors'.

The correction of these entries in 2022 results in a slight decrease to profit after tax (£0.4m), an increase to profits attributed to shareholders of the parent (£2.7m), an increase to retained earnings (£4.6m), and an increase to basic earnings per share (5.3p).

Full details of the restatement are shown in note 3 of the accounts.

Cobase

On 1 December 2023 the group acquired a c. 86% stake in Cobase - an innovative, cloud-based provider of bank connectivity technology that enables corporates to manage their banking relationships, accounts, and transaction activity via one single interface. The balance sheet has been incorporated into the Group's 31 December financial position. The income statement impact in 2023 of one month of trading was: revenue of £0.2m, EBITDA £nil, and a loss before tax of £0.2m.

Buyback

In January 2024 we announced a share buyback programme of up to £20m; as at 18 March 2024 we had purchased 332,429 shares at a total cost of £5.7m.

Dividend

Following the strong full year results, the Board is pleased to declare a final dividend of 12.3p per share (2022 - 11.0p). Subject to shareholder approval, the final dividend will be payable to shareholders on the register at 5 April 2024, and will be paid on 10 May 2024. This represents a total dividend for the year of 16.0p per share (2022: 14.4p).

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2023

¹The prior period restatement is detailed further in note 3.

Consolidated Statement of Financial Position

¹The prior period restatement is detailed further in note 3.

Consolidated Statement of Cash Flows

For the year ended 31 December 2023

¹The prior period restatement is detailed further in note 3.

Consolidated Statement of Changes in Equity

For the year ended 31 December 2023

¹The prior period restatement is detailed further in note 3.

Notes to the Consolidated Financial Statements

For the year ended 31 December 2023

1. General information

Alpha Group International 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, 2 Canalside Walk, London, England, W2 1DG. The Consolidated Financial Statements incorporate the results of the Company and its subsidiary undertakings.

Statutory accounts for the year ended 31 December 2022 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2023 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 2022 and 31 December 2021 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. Material accounting policies

Basis of preparation

The Consolidated Financial Statements have been prepared in accordance with UK adopted international accounting standards using the measurement bases specified by UK IFRS for each type of asset, liability, revenue or expense.

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 2023 and 31 December 2022, 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 2023.

The preparation of consolidated financial statements in conformity with UK adopted 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.

3. Prior period adjustment

A number of Group employees receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity settled transactions). Typically, employees subscribe for shares in a subsidiary. These shares are then exchangeable into shares of the parent if the vesting conditions are met. The Group recorded the amounts receivable from the employees as a debtor and recorded non-controlling interests in respect of the shares and options issued to employees. Some of these schemes also entitled the employees to dividends over the vesting period. Where an employee leaves prior to vesting, (and are not considered to be a good leaver) the Group can require the employee to return the shares in exchange for the lower of the subscription amounts paid and the fair market value of the shares.

Historically, the Group has recognised a share-based payment charge in the Consolidated Statement of Comprehensive Income equivalent to the difference between the subscription price payable by the employee and the fair market value of that option over the life of the scheme. 

On vesting of the share options, share premium was also recognised on issue of shares by the Parent Company.

After reviewing the IFRS 2 Share-Based Payment standard and related guidance from the IFRIC, the Group has concluded that share ownership schemes that grant employees shares or options in subsidiaries, with conversion rights to the holding company should be accounted for under IFRS 2 Share-Based Payment, rather than a non-controlling interest in a subsidiary. As a result of this, the previous years' non-controlling interest recognised over the annual profits of the subsidiaries were overstated.

In addition, the previous years' share-based payment charge to the Consolidated Statement of Comprehensive Income was also found to be insufficient due to a miscalculation. On vesting of some share options, share premium was incorrectly recognised.

Accordingly, the Group has restated its financial statements in accordance with IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors'. Other receivables are to be reduced for the loan amounts recognised as a debtor relating to the purchase of those shares and options, conversely a creditor is recognised for any subscription amounts paid up in advance of vesting due to the non-recourse nature of the schemes. Any non-controlling interest recognised, including profit attributed, in respect of these schemes has been reversed.

The correction of these entries results in an increase to profits attributed to shareholders of the parent, an increase to retained earnings and an increase to earnings per share. Dividends paid to non-controlling interest in prior years have been included within retained earnings. The effect of these adjustments is shown by restating each of the prior year affected financial statement line items as follows:

These movements did not result in any specific impact on cash however the Consolidated Statement of Cash Flows has been restated as a consequence of the adjustments detailed above.

In addition to the above, within the Consolidated Statement of Cash Flows, £729k in relation to interest received in the prior year has been represented from financing to investing activities.

4.   Segmental reporting

During the year, the Group generated revenue from the sale of forward currency contracts, option contracts, foreign exchange spot transactions, fees received from payments collections, cash accounts, and fund finance advisory fees.

The Group has six reportable operating segments under the provisions of IFRS 8, based on the individually reportable subsidiaries and divisions. These six segments are:

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.

The Group's two divisions, FX Risk Management and Alternative Banking are the key drivers to the Group strategy and growth of each operating segment. Revenue for each operating segment has been split by the two divisions, as this reflects how the chief operating decision-makers manage the business.

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.

The Group has overseas offices in Australia, Italy, Spain and Germany. All of these offices service Corporate clients from their local offices. The results of these offices are included within the Corporate London Segment. The revenue of these offices in aggregate was £5.8m and underlying loss before taxation in aggregate was £1.0m (£2.1m and £627k loss respectively in prior year). There were costs associated with Alpha Europe (based in Luxembourg), before it was dissolved, which have been shown 50/50 within Institutional and Alpha Pay. Fund Finance, which began trading in May 2023 has been included within the Alpha Pay segment. Under IFRS 8 these segments do not meet the quantitative reporting thresholds in 2023.

*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 represents revenues derived from fees and foreign exchange spot contracts generated from the provision of cross border payments, collections and annual account fees to corporates and institutions, as well as Fund Finance advisory fees.

¹The prior period restatement is detailed further in note 3.

Net Treasury Income (NTI)

Interest is earned on overnight deposits with several credit institutions all 'A' rated with the leading rating agencies.  The amount of interest earned is dependent on several variables:

-      The absolute balance we hold, which can move significantly from day-to-day

-      The mix of currency balances we hold, and;

-      The interest rate environment and rates that can be obtained from credit worthy institutions.

Net treasury income is a natural by-product of our accounts solution, and is an uncontrollable income stream for the Group, which would be at least partly transitory if we return to a low interest rate environment. We have therefore chosen to recognise interest income on client cash balances as 'Net treasury income- client funds ' (formerly 'Other operating income'), not operating revenue.

In 2023 material interest income was earned over the twelve months of the year.  During this time the blended average ABS client balances and interest rates were £1.9bn and 3.6% respectively (£1.6bn and 1.5% respectively in August to December in the prior year).

'Net treasury income- own funds' relates to interest earned on client margin held by the FX risk management division, a direct consequence of the operational business, shown in total income.

5.   Operating profit

Operating profit is stated after charging/(crediting):

¹The prior period restatement is detailed further in note 3.

The Group separately identifies results before non-underlying items in the Consolidated Statement of Comprehensive Income (we refer to these results as 'adjusted'). This is consistent with the way that financial performance is measured by management and reported to the Executive Committee and Board. These measures are not measures of performance under IFRS and should be considered in addition to, and not as a substitute for, IFRS measures of financial performance and liquidity.

Non-underlying items in the year are made up of the below charges/ (credits), most of which have arisen as a result of the business combination (see note 17):

6.   Finance income and expenses

7.    Taxation

 Tax charge

Deferred tax has increased in the year due to the further investment into internally generated assets, new leases within the Group, and the acquisition of Cobase.

Factors affecting tax charge for the year

At the year ended 31 December 2023 the Group had unused overseas tax losses amounting to £102,304 (2022: £182,079).

*This is the first year that the company has qualified for RDEC instead of SME. Therefore, this income has been recognised in staff costs rather than a tax credit for the year ended 31 December 2023, amounting to £802,463.

Tax Loss Memo

Deferred tax

The deferred taxation liability is based on the expected future rate of corporation tax of 25% (2022: 25%) and comprises the following:

The UK deferred tax liability as at 31 December 2023 and as at 31 December 2022 relates to the tax effect of timing differences in respect of fixed assets. The deferred tax also includes charges through Other Comprehensive Income and from acquired operations.

Deferred tax on each component of other comprehensive income/(expense) is as follows:

8. 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 underlying calculation excludes the impact of share-based payments, net treasury income on client funds, non-underlying items and their tax effect. This better enables comparison of financial performance in the current year with comparative years.

The prior year restatement has resulted in an increase in earnings per share in the various earnings per share calculations, as stated within note 3, for the year ended 31 December 2022. This is driven from non-controlling interests being restated to £nil.

The calculation of basic and diluted earnings per share is based on the following number of shares:

The earnings used in the calculation of basic, diluted and underlying earnings per share are set out below:

¹The prior period restatement is detailed further in note 3.

9.  Dividends

All dividends paid by Alpha Group International plc are in respect of the ordinary shares of £0.002 each.

The Directors propose that a final dividend in respect of the year ended 31 December 2023 of 12.3p per share amounting to £5,328,583 will be paid on 10 May 2024 to all shareholders on the register of members on 5 April 2024. 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.

10. 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 April 2023 a lease was signed for new premises in London for the Alternative Banking division. The lease has a contractual start date of 1 September 2023 and is a ten-year lease. The rent is subject to a rent review after five years.

In December 2023 we took on an office lease as part of our acquisition of Cobase (see note 17).

Right-of-use assets

Lease liabilities

11. Derivative financial assets and financial liabilities

Items that will be reclassified to the Consolidated Statement of Comprehensive Income:

Since the Group's inception, it has historically operated in a low interest rate environment. However, since Q3, 2022, when interest rates started to rise, the Group started to receive a large amount of interest on its own free cash balances as well as client cash balances. In line with the Group's treasury policy, we have entered into interest rate swap contracts to manage interest rate risk, see further details below.

Interest rate swap contracts

The interest rate swap contracts designated as hedging instruments relate to transactions entered into in 2022 and 2023 to fix the rate of interest receivable on cash balances held by the Group in respect of its own free cash balances as well as client cash balances.  With the interest rate swap, the Group receives a fixed rate of interest and pays a floating interest rate based on SONIA.

The contracts commence between June and December 2023 with expiries between June 2025 and June 2026. Upon expiry of the contracts or if they no longer qualify for hedge accounting, the deferred gains/losses in comprehensive income relating to the Group's own free cash balances will be reclassified within finance income and those relating to client cash balances will be reclassified within net treasury income. The hedge effectiveness is reassessed at each reporting date and all hedges remained effective throughout 2023.

Foreign currency forward contracts

The forward contracts designated as hedging instruments relate to hedges entered into in December 2022 and February 2023 to fix the exchange rate of interest receivable denominated in dollars and euros. The contracts have monthly expiries up to January 2024. The deferred gains/losses in comprehensive income will be reclassified within net treasury income upon expiry of the contracts or if they no longer qualify for hedge accounting. The hedge effectiveness is reassessed at each reporting date and all hedges remained effective throughout 2023.

12. Other receivables

¹The prior period restatement is detailed further in note 3.

13. Cash

Cash and cash equivalents comprise cash balances and deposits held at call with banks for which the Group has immediate access.

Fixed collateral comprises 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 by banking counterparties regarding out of the money trades counterparties for which the Group does not have immediate access.

14. Capital and reserves

Share capital

The following movements of share capital occurred during the year ended 31 December 2023:

On 27 March 2023, the Company issued 1,125,259 new shares following the vesting of shares under the B, C and E Growth Share Schemes, and the Institutional, Canada and Alpha Pay share schemes.

The following movements of share capital occurred during the year ended 31 December 2022:

On 21 March 2022, the Company issued 1,123,946 new shares following the vesting of shares under the B, C and E Growth Share Schemes and the Institutional Share Scheme.

On 25 March 2022, the Company issued 99,386 new shares in respect of shares issued following the vesting of the SAYE share scheme.

The Company issued a further 8,997 new shares in respect of shares issued following the vesting of the SAYE share scheme, between April 2022 and June 2022.

15. Non-controlling interests

As detailed in note 3, historically some of the employee equity shareholding on a number of the share schemes had been recognised as non-controlling interest. However after reviewing the IFRS 2: Share-Based Payment standard and related guidance from the IFRIC, the Group has concluded that they should not have been recognised as non-controlling interest and therefore non-controlling interest has subsequently been restated to £nil as at 31 December 2022.

Non-controlling interest as at 31 December 2023 is made up of Financial Transaction Services B.V. ("Cobase") which was acquired in December 2023. The NCI's shareholding is 13.64%. Further information on the acquisition of Cobase is provided in note 17.

Below shows summarised financial information for Cobase, before intra-group eliminations.

¹The prior period restatement is detailed further in note 3.

16. Other payables

¹The prior period restatement is detailed further in note 3.

Other payables consist of margin received from clients and client-held funds. The carrying value of other payables classified as financial liabilities measured at amortised cost, approximates fair value.

17. Business combinations

On 1 December 2023, Alpha Group International plc acquired 86.36% of Financial Transaction Services B.V., trading as "Cobase", a leading multibank connectivity platform. Cobase is an innovative, cloud-based provider of bank connectivity technology that enables corporates to manage their banking relationships, accounts, and transaction activity via one single interface. In doing so, the company unlocks significant operational and financial efficiencies, especially for international businesses with multiple banking counterparties across the world. Alpha believes there are opportunities to amplify one another's growth by leveraging and sharing each other's unique capabilities and experience.

The purchase price allocation (shown in the table below) has been prepared on a provisional basis in accordance with IFRS 3 Business Combinations because of the acquisition completing one month prior to the year end and information regarding the intangible assets is still being sought. As a result, the intangible asset, deferred tax and goodwill amounts in the table below are provisional.  If new information is obtained within one year of the acquisition date, about facts and circumstances that existed at the acquisition date, identifies adjustments to the amounts that existed at the date of acquisition, then the accounting for the acquisition will be revised.

The initial consideration for the acquisition was €9.6m (£8.3m) in cash, with the remaining stake to be acquired via a performance-based earn-out between 2025 and 2028.

Transaction costs relating to professional fees and integration costs associated with the business combination in the year ended 31 December 2023 were £486,633 and have been expensed within non-underlying items (note 5).

The fair value of the net assets acquired is set out below:

Goodwill of £4,707k reflects certain intangible assets that cannot be individually separated and reliably measured due to their nature. These items include the value of expected synergies arising from the business combination and the experience and skill of the acquired workforce. The fair value of the acquired software, brand name and customer relationships was identified and included in intangible assets.

Included in the Consolidated Statement of Financial Position is redemption liability of £1,884,165. This represents the fair value of the consideration payable to the non-controlling interest of the subsidiary Cobase on the date that the agreement was entered into. 25% of the non-controlling interest is to be acquired each period over a four-year period between 31 December 2025 and 31 December 2028. The opposite entry has been recognised within redemption reserve in equity.

Cobase generated revenue of £186k and loss after tax of £241k in the one month from the acquisition date to 31 December 2023, this is included in the Consolidated Statement of Comprehensive Income for the reporting period.

18. Events after the reporting period

Following the third year of vesting of the Alpha FX Institutional Limited share scheme for the year ended 31 December 2023, the Company will be issuing 126,201 shares in March 2024.

Following the second year of vesting of the Alpha Foreign Exchange (Canada) Limited share scheme for the year ended 31 December 2023, the Company will be issuing 5,734 shares in March 2024.

Following the second year of the vesting for D1 and D2 Share scheme and the first year of vesting for the D3 Share scheme for the year ended 31 December 2023, the Company will be issuing 80,544 shares in March 2024.

Following the first year of vesting of the Alpha FX Netherlands Limited share scheme for the year ended 31 December 2023, the Company will be issuing 22,148 shares in March 2024.

On 29 January 2024, the Group announced a share repurchase programme up to a value of £20m to purchase ordinary shares of 0.2 pence each.  The Ordinary Shares purchased will be held in treasury. As at 19 March 2024, 339,929 ordinary shares of 0.2 pence each had been purchased for a consideration of £5.8m representing 0.8% per cent of the issued share capital of the Group as at 19 March 2024. All shares purchased were held in Treasury.

On 29 February 2024, the Group entered into an interest rate swap for a notional amount of up to €100m to fix the rate of interest receivable on Euro cash balances held in respect of the Group's client cash balances. With the interest rate swap, the Group receives a fixed rate of interest and pays a floating interest rate based on EuroSTR, the difference between the rates results in the Group receiving a fixed rate of interest. The contract commences in March 2024 and expires in March 2026 with a net interest rate receivable of 3%. Hedge accounting is applied in accordance with IFRS 9.

On 20 March the Group announced changes to the Board of Directors with Dame Jayne-Anne Gadhia appointed to the board as Chair Designate, effective from the Company's AGM on 01 May 2024, subject to the completion of normal regulatory due diligence by the Company's Nominated Adviser. In line with this, Clive Kahn, who has been Chair of the Company since 2016, will therefore not be seeking re-election at the Company's 2025 AGM, with Jayne-Anne remaining Chair Designate until the conclusion of Clive's term as Chair. Lisa Gordon, Non-Executive Director of the Company will also step down from the Board by not putting herself up for re-election at the Company's AGM on 01 May 2024. A process to recruit an additional Non-Executive Director will be undertaken in the coming months.

19. Availability of Annual Financial Report

The Group notes that the Annual Report & Accounts for the year ended 31 December 2023 will be posted to Alpha Group International shareholders w/c 8th of April 2024. The document will also be available on the Group's website at www.alphagroup.com and in hard copy at Brunel Building, 2 Canalside Walk, London, W2 1DG.