23 July 2024
Alpha
Group International plc
("Alpha"
or the "Group")
Trading
Update
Alpha Group International plc (LON:
ALPH) a high-tech, high-touch provider of financial solutions to
corporates and institutions, today provides a trading update for
the six-month period ended 30 June 2024.
Key Highlights for H1
2024
|
-
Group revenue increased by 16% to over £64m (H1 2023:
£55m)
|
|
-
Corporate revenue1
increased by 12% to £30m (H1 2023:
£27m)
|
|
- Institutional revenue1 increased by 15% to £33m (H1
2023: £29m)
|
|
-
Cobase revenue increased by 80% to £1m, compared to H1 2023 (pre
acquisition)
|
|
-
Average client balances increased by 16% to £2.07bn (H1 2023:
£1.77bn)
|
|
- Net
Treasury Income (client and own)2 of £42m (H1 2023:
£34m)
|
|
-
Total income3
increased 19% to £107m (H1 2023: £90m)
|
|
-
Delivered strong underlying profit margins alongside continued
strategic investment
|
|
-
Strong cash and liquidity position with adjusted net cash of
£180m4
|
|
-
Inclusion in the FTSE 250 in June, following a successful listing
on the Premium Segment of the Main Market in May
|
|
- Two
share buyback programmes totalling up to £40m, with over £20m
completed to date
|
|
-
Appointment of Dame Jayne-Anne Gadhia to the Board as Chair
Designate in May 2024
|
1 Change in segmental reporting to Corporate & Institutional
divisions to more closely align to the Group's organisational
structure and provide better clarity around our business model. A
reconciliation has been provided as an appendix to this
announcement.
2 'NTI comprises of NTI-client: £41.8m (H1 2023: £33.3m) and
NTI-own: £0.7m (H1 2023: £0.8m).
3 Total income is made up of the Group's total revenues plus Net
Treasury Income (client and own)
4 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. 'Adjusted net cash' therefore excludes
these items.
Overview
The Group performed well during H1
of this year, delivering strong growth in revenue and profit in
both its corporate and institutional markets. Group revenues
increased by 16% to over £64m (H1 2023: £55m), which includes a £1m
contribution from Cobase (organic growth without Cobase of 14%).
This growth has been delivered whilst maintaining strong underlying
profit margins alongside continued strategic investment.
Furthermore, the Group generated an additional £42m in net treasury
income (Own and Client), taking total income in H1 to £107m (H1
2023: £90m).
Despite continuing headwinds
persisting within the Institutional market, trading year to date
has been encouraging and remains in line with expectations at the
start of the year. The Board looks forward to sharing its half-year
results statement in September.
Changes to Reporting
Segments
Historically the Group has reported
on its performance through the lens of its two core service
offerings: FX risk management and alternative banking. However, as
the Group has expanded into new markets and added more products,
continuing to report through these segments has potentially made
our business model more difficult to understand than it needs to
be. This is a view that has been shared by a number of our
investors, and therefore, after careful consideration, we have
chosen to change the way we present the business to better reflect
the current operating model.
These improvements will see us
reporting through the lens of the two key markets we operate in:
the corporate market and the alternative investment / institutional
market. Importantly, this also aligns with how our business is now
run operationally: our Corporate and Institutional divisions have
separate organisational structures, leadership teams and offices.
We will continue to disclose the contributions that each of our
service offerings has on the division's performance - these
offerings being: FX risk management, alternative banking, fund
finance and bank connectivity (Cobase).
We hope these changes will make it
easier to understand our business model, strategy, performance, and
what is driving our growth. We have also included a historical
comparison at the end of this statement to show how our figures
would have looked under our previous method of segmental
reporting.
Corporate
Division
About
Our Corporate division operates from
its own UK HQ (consisting of sales and operations), and six
additional international sales offices in Amsterdam, Madrid, Milan,
Munich, Sydney and Toronto. Revenues are derived from the provision
of FX risk management services to corporates across more than 50
countries.
Summary
Whilst the business environment
impacting corporate markets remains more challenging than in
previous years, market activity now feels broadly consistent with
what we saw in H1 last year. Companies are continuing to take a
more conservative approach to their forecasting, and thus hedging;
however, we have moved beyond the peak levels of uncertainty that
we saw in Q3 2023 around inflation and interest rates.
Against this backdrop, our strategy
of winning more clients whilst growing wallet share with existing
ones has proved resilient. Corporate revenues increased by 12% to
£30m (H1 2023: £27m), client numbers increased by 9% to 941 (H1
2023: 862), and average revenue per client increased marginally to
£63k (2023 H1: £62k).
Breaking this performance down, six
of our seven offices grew revenues against H1 of last year,
including our UK HQ. The exception was our Toronto office, where
revenues were marginally down on H1 2023, but the team has a strong
pipeline going into H2, and we are seeing all the right indicators
for them to deliver long-term sustainable growth. Our newest office
in Munich was launched in Q4 of last year and is off to an
excellent start, finishing the half ahead of our internal
expectations.
Whilst we are pleased with the
performance to date, a more challenging environment also brings
with it a heightened risk of businesses defaulting. Although Alpha
has not experienced any significant client defaults to date, this
is a risk that we will nonetheless continue to manage judiciously
moving forward. Ultimately, our focus remains on
adopting a risk appetite that will allow us to maximise revenue
whilst minimising risk, rather than targeting a total absence of
default.
Institutional
Division
About
Our Institutional division operates
from its own UK HQ (consisting of sales and operations) and two
additional operations offices in Luxembourg and Malta. Revenues are
derived from the provision of FX risk management, alternative
banking and fund finance services to alternative investment
managers and their service providers. Asset classes principally
include: private equity, private credit, venture capital, fund of
funds, real estate and infrastructure.
Summary
The subdued business environment we
saw within our institutional market in 2023 has remained stubbornly
with us throughout the first half of this year, and our own
experience on the ground aligns with the Q1 analysis of
institutional deal flow and volume published by Preqin.
Despite this challenging backdrop,
our Institutional division continued to deliver strong growth
across both its core product lines in alternative banking and FX
risk management. This resulted in institutional revenues growing by
15% to £33m (H1 2023: £29m), FX Risk management client numbers
increasing by 19% to 271 (H1 2023: 227), and account numbers
increasing by 31% to 7,030 (H1 2023: 5,350). The division's latest
product line, fund finance, launched in May of 2023 has also
continued to perform positively, with a strong and growing pipeline
of interest.
Cross-selling of our offerings has
remained strong and validates our continued investment in building
a comprehensive product solution customised to this marketplace - a
bank alternative dedicated to the alternative investment
industry.
Whilst market conditions within the
institutional market are likely to remain challenging throughout
the remainder of the year, the division's performance has been
encouraging, and our teams have continued to make excellent
strategic progress. We are therefore both confident in the division
maintaining its momentum in the near term, and excited about the
division's prospects as market conditions return to those that we
experienced when we first launched our service offering.
Cobase
About
Cobase is a treasury-focused
technology platform acquired by the Group in December 2023. Based
in Amsterdam, the company provides bank connectivity technologies
that enable corporates and institutions to manage their banking
relationships, accounts and transaction activity all in one place.
Revenues are derived from platform usage and annual subscription
fees.
Summary
The sales process that Cobase went
through between June and December of last year, represented an
unavoidable but nonetheless sizeable distraction for the team in
Amsterdam. It is therefore pleasing to note that, despite this
disruption, the team continued to hit the ground running in the
first half of this year; revenues were £1m with client numbers
increasing to 169. This represents growth on their 2023 H1
pre-acquisition revenue and client numbers of 80% and 55%
respectively. Whilst currently, the majority of these clients
continue to come from Cobase's own sales and marketing activities,
our corporate and institutional teams are gradually upskilling on
the Cobase offering and both teams have now successfully signed up
customers and are building strong pipelines.
Balance
Sheet
As we have continued to open more
accounts and grow the size of our client balances, the net treasury
income1 we receive on these balances has also continued
to grow, up 25% against the same period last year to £42m (H1 2023:
£33m). This increase in Net Treasury Income - Client has also
helped to maintain an adjusted net cash position of £180m at the
period end (H1 2023: £142m, FY2023: £179m) whilst also completing
over £20m in share buybacks.
Interest rates are widely expected
to come down over the medium to long term. This represents a
headwind for net treasury income, however, falling interest rates
are good for our underlying trading prospects: as rates go down,
the trading activity of both our corporate and institutional
clients should increase. This will then also provide us with more
opportunities to open accounts, leading to larger balances, which
will then go on to earn more interest income.
A quarter-on-quarter breakdown of
our average client balances and interest rates is shared
below.
Quarter
|
Blended average client balance, Alternative
Banking
|
Blended average interest rate
|
Q2 2024
|
£2.1bn
|
3.9%
|
Q1 2024
|
£2.0bn
|
4.0%
|
Q4 2023
|
£2.1bn
|
3.8%
|
Q3 2023
|
£1.9bn
|
3.8%
|
Q2 2023
|
£1.9bn
|
3.8%
|
Q1 2023
|
£1.6bn
|
2.8%
|
1 A full explanation of Net Treasury Income can be found
here.
Share
Buyback Programmes of
up to £40
million
Between 30 January 2024 and 27 June
2024, Alpha completed its £20 million share buyback programme,
repurchasing 1,006,428 shares at an average price of
£19.87.
Following the conclusion of this
programme, the Board reviewed its cash position and, after giving
careful consideration to its current cash balances, the likelihood
of further cash generation this year and beyond, and the views of
its shareholders, decided to implement a second buyback programme
of £20 million. This buyback commenced on 28 June and will expire
on or before the company's next AGM (see
announcement here).
Since the start of this new buyback,
the company has purchased an additional 30,000 shares at an average
price of £24.20, taking the total value of shares purchased since
its first buyback on 30 January 2024 to £20.7m.
Appendix | Historical Comparison
i)
Reporting Framework
|
Key
|
2020
|
2021
|
2022
|
2023
|
|
|
FY £'000
|
H1
£'000
|
H2
£'000
|
FY
£'000
|
H1
£'000
|
H2
£'000
|
FY
£'000
|
H1
£'000
|
H2
£'000
|
FY
£'000
|
Group Historical Disclosure
|
|
|
|
|
|
|
|
FX Risk Management
|
A
|
39,791
|
24,731
|
32,305
|
57,036
|
32,286
|
37,223
|
69,509
|
39,144
|
37,185
|
76,329
|
Alternative Banking
|
B
|
6,426
|
9,453
|
10,982
|
20,435
|
13,858
|
14,965
|
28,823
|
16,315
|
17,612
|
33,927
|
Cobase
|
|
|
|
|
|
|
|
|
|
|
186
|
Total
|
|
46,217
|
34,184
|
43,287
|
77,471
|
46,144
|
52,188
|
98,332
|
55,459
|
54,797
|
110,442
|
Institutional operating segment, historical
disclosure1
|
|
|
|
|
|
|
|
Institutional FX Risk
Management1
|
C
|
7,492
|
4,578
|
6,491
|
11,069
|
8,058
|
7,075
|
15,133
|
12,584
|
10,934
|
23,518
|
Institutional Alternative
Banking
|
|
1,282
|
2,318
|
2,247
|
4,565
|
2,872
|
1,831
|
4,703
|
2,141
|
1,560
|
3,701
|
Total
|
|
8,774
|
6,896
|
8,738
|
15,634
|
10,930
|
8,906
|
19,836
|
14,725
|
12,494
|
27,219
|
Revised Group with new divisions
|
|
|
|
|
|
|
|
Corporate
|
A - C
|
32,299
|
20,153
|
25,814
|
45,967
|
24,228
|
30,148
|
54,376
|
26,560
|
26,251
|
52,811
|
Institutional
|
B + C
|
13,918
|
14,031
|
17,473
|
31,504
|
21,916
|
22,040
|
43,956
|
28,899
|
28,546
|
57,455
|
Cobase
|
|
|
|
|
|
|
|
|
|
|
186
|
Total
|
|
46,217
|
34,184
|
43,287
|
77,471
|
46,144
|
52,188
|
98,332
|
55,459
|
54,797
|
110,442
|
ii)
FX Risk Management Client Numbers
FX
Risk Management client numbers
|
2020
|
2021
|
2022
|
2023
|
FY
|
H1
|
FY
|
H1
|
FY
|
H1
|
FY
|
Corporate
|
659
|
685
|
709
|
772
|
838
|
862
|
838
|
Institutional
|
95
|
153
|
172
|
203
|
211
|
227
|
233
|
Total (as previously reported)
|
754
|
838
|
881
|
975
|
1,049
|
1,089
|
1,071
|
1 As reported in Segmental Reporting note to the Group's
accounts
Enquiries:
Alpha Group International plc
Morgan Tillbrook, Founder and
CEO
Tim Powell, CFO
|
Via Alma Strategic
Communications
|
Alma
Strategic Communications
(Financial Public Relations)
Josh Royston
Andy Bryant
Kieran Breheny
|
+44 (0) 20 3405 0205
|
Notes to editors
Alpha is a high-tech, high-touch
provider of financial solutions dedicated to corporates and
institutions. 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 450 people based across ten 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.