REG - Alpha Group Intl PLC - Full Year Results
20/03/2024 07:00
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RNS Number : 5042H Alpha Group International PLC 20 March 2024
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
- Group revenue increased 12% to £110.4m (2022: £98.3m)
- FX Risk Management revenue increased 10% to £76.3m (2022: £69.5m)
- Alternative Banking revenue(1) increased 18% to £33.9m (2022: £28.8m)
- Underlying(2) profit before tax grew 11% to £43.0m, excluding Cobase(3)
growth was 12% to £43.2m (FY 2022: £38.6m)
- Consistent underlying profit margins of 38% (FY 2022: 39%)
- Alternative Banking client balances increased by 30% to £2.1bn in Q4 (2022
Q4: £1.6bn)
- Net treasury income(4) from interest on client balances of over £73m (2022:
£9.3m)
- Total income increased 73% to £186.0m (2022: £107.6m)
- Profit before tax increased 148% to £115.9m (2022 restated(5): £46.8m)
- Strong cash generation and debt free, with adjusted net cash(6) increasing by
£64m to £178.8m (2022: £114.4m)
- Basic earnings per share up 124% to 206.2p (2022 restated: 92.1p), and
underlying basic earnings per share flat at 76.7p (2022 restated: 76.3p)
- Final dividend of 12.3 pence per share, payable on 10 May 2024 to shareholders
on the register at 5 April 2024, making a total final dividend for 2023 of
16.0 pence per share (2022: 14.4p)
- Cobase (acquired 1 December 2023) contributed revenue of £186k in the month
post-acquisition
- Initiated up-to £20m share buyback in January 2024
Business Highlights
- Against a difficult macro-environment, average revenue per FX Risk Management
client increased 7% (2022: 3%) and FX Risk Management client numbers increased
2% to 1,071 (2022: 1,047)
- Number of accounts booking trades on our FXRM platform increased 19% in the
year
- Number of accounts within Alternative Banking increased 54% to 6,467 (2022:
4,200)
- Group Front Office headcount increased 25% to 136 at the year-end (2022: 109)
- Benefits of diversification strategy clearly evidenced in resilient revenue
and profit growth
- Disciplined approach to credit and risk reflected in the lowest level of
client defaults in the past five years
- Business is well invested with scalable platform, creating operational gearing
opportunity moving forward
- Launch of new Fund Finance business in May 2023
- Launch of new Corporate FXRM offices in Madrid and Munich
- Completed our first acquisition (Cobase) in December 2023
- Working towards a listing on the Premium Segment of the Main Market in May
2024
- Appointment of Dame Jayne-Anne Gadhia to the Board intended for 1 May 2024, as
Chair Designate(7)
- 2024 has started well, in line with our expectations
(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:
Alpha Group International plc Via Alma
Morgan Tillbrook, Founder and CEO
Tim Powell, CFO
Liberum (Nominated Adviser and Joint Broker) +44 (0) 20 3100 2000
Max Jones
Ben Cryer
Anake Singh
Peel Hunt (Joint Broker) +44 (0) 20 7418 8900
Neil Patel
Paul Gillam
Kate Bannatyne
Alma Strategic Communications +44 (0) 20 3405 0205
(Financial Public Relations)
Josh Royston
Andy Bryant
Kieran Breheny
Notes to editors
Alpha is a high-tech, high-touch provider of enhanced financial solutions
dedicated to corporates and institutions operating internationally. Working
with clients across 50+ countries, we blend intelligent human capabilities
with new technologies to 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
- Revenue growth of 10% to £76.3m (2022: £69.5m)
- Underlying profit before tax increased 18% to £32.3m (2022: £27.3m)
- Client numbers increased 2% to 1,071 (2022: 1,047)
- Average revenue per client increased 7%
- Front Office headcount increased by 18% to 120 (2022: 102)
- Launch of two new offices, in Madrid & Munich
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
- Revenue increased 18% to £33.9m (2022: £28.8m)
- Number of accounts invoiced within Alternative Banking increased 54% to 6,467
(2022: 4,200)
- Underlying profit before tax of £10.9m, a reduction of 3.3% on the prior year
(2022: £11.3m) as a result of our accelerated investment programme throughout
the year, particularly in headcount
- Headcount increased 35% to 230 (2022: 171)
- Alternative Banking client balances increased by 30% to £2.1bn in Q4 (FY 2022
Q4: £1.6bn)
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
- Launched in May 2023
- Revenue of over £700k for the seven months of FY 2023 (currently recognised
within Alternative Banking)
- Digital platform launched
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
(https://polaris.brighterir.com/public/alpha_group/news/rns/story/ryeo13w) ),
and in November followed up with the launch of the industry's first digital
platform for connecting borrowers with lenders (read here
(https://www.alphagroup.com/2023/alpha-launches-fund-finance-platform/) ). 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
- Acquired December 2023
- Revenue growth of 67% to €2m (2022: €1.2m)(1)
- Client numbers increased 67% to 130 (2022: 78)
(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
(https://polaris.brighterir.com/public/alpha_group/news/rns/story/w9me4gx) ).
In 2023, Cobase grew revenues by c. 67% to €2m(1), 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
(https://polaris.brighterir.com/public/alpha_group/news/rns/story/rdlg5px) .
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.
31 December 31 December
2023
2022
£'000 £'000
Net cash and cash equivalents 197.9 136.8
Variation margin paid to banking counterparties 11.1 44.9
209.0 181.7
Margin received from clients* (51.1) (70.2)
Net MTM timing of profit from client drawdowns and extensions within trade 2.9
receivables
20.9
Adjusted net cash** 178.8 114.4
* 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
Year ended Year ended
31 December 2023 31 December 2022
Restated(1)
Note £'000 £'000
Revenue 4 110,442 98,332
Net treasury income - client funds 4 73,676 9,278
Net treasury income - own funds 4 1,843 -
Total income 185,961 107,610
Operating expenses (73,809) (61,159)
Operating profit 5 112,152 46,451
Underlying operating profit 39,205 38,274
5
Net treasury income - client funds 73,676 9,278
Non-underlying items (729) (1,101)
Finance income 6 4,616 784
Finance expenses 6 (834) (458)
Profit before taxation 115,934 46,777
Underlying profit before taxation 42,987 38,600
Net treasury income - client funds 73,676 9,278
Non-underlying items 5 (729) (1,101)
Taxation 7 (27,142) (8,164)
Profit for the year 88,792 38,613
Attributable to:
Equity holders of the parent 88,825 38,613
Non-controlling interests 15 (33) -
Profit for the year 88,792 38,613
Other comprehensive income/(loss):
Items that may be reclassified to the profit or loss:
Exchange (loss)/ gain on translation of foreign operations (679) 1,382
Gain/(loss) recognised on hedging instruments 3,193 (639)
Tax relating to items that may be reclassified (798) 160
Total comprehensive income for the year 90,508 39,516
Attributable to:
Equity holders of the parent 90,541 39,516
Non-controlling interests (33) -
Total comprehensive income for the year 90,508 39,516
Earnings per share attributable to equity owners of the Parent (pence per
share)
- basic 8 206.2p 92.1p
- diluted 8 203.4p 89.0p
- underlying basic 8 76.7p 76.3p
- underlying diluted 8 75.6p 73.7p
( )
(1)The prior period restatement is detailed further in note 3.
Consolidated Statement of Financial Position
As at 31 December 2023
As at 31 December 2023 As at 31 As at
December 2022
1 January 2022 Restated(1)
Restated(1)
Non-current assets Note £'000 £'000 £'000
Goodwill 4,707 - -
Intangible assets 14,007 4,814 2,995
Property, plant and equipment 8,800 3,248 2,323
Right-of-use assets 10 20,894 11,848 6,136
Derivative financial assets 11 14,369 27,819 17,335
Total non-current assets 62,777 47,729 28,789
Current assets
Cash and cash equivalents 13 197,941 136,799 108,044
Derivative financial assets 11 95,203 99,119 58,551
Other receivables 12 7,796 5,333 7,825
Fixed collateral 13 8,810 4,726 3,506
Current tax asset 73 - -
Total current assets 309,823 245,977 177,926
Total assets 372,600 293,706 206,715
Equity
Share capital 14 87 84 82
Share premium account 52,566 52,075 50,819
Capital redemption reserve 4 4 4
Merger reserve 667 667 667
Redemption reserve (1,884) - -
Retained earnings 170,939 88,807 56,260
Translation reserve 581 1,260 (122)
Equity attributable to equity holders of the parent 222,960 142,897 107,710
Non-controlling interests 531 - -
Total equity 223,491 142,897 107,710
Current liabilities
Derivative financial liabilities 11 34,288 42,764 36,697
Other payables 16 59,750 77,340 40,100
Deferred income 7,072 4,924 2,193
Lease liability 10 1,028 1,407 450
Current tax liability 11,293 3,781 3,847
Total current liabilities 113,431 130,216 83,287
Non-current liabilities
Derivative financial liabilities 11 5,922 7,317 7,745
Other payables 16 875 222 -
Redemption liability 1,884 - -
Deferred tax liability 7 5,305 1,387 1,061
Lease liability 10 21,692 11,667 6,912
Total non-current liabilities 35,678 20,593 15,718
Total liabilities 149,109 150,809 99,005
Total equity and liabilities 372,600 293,706 206,715
(
1)The prior period restatement is detailed further in note 3.
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
Year ended 31 December 2023 Year ended 31 December
2022
Restated(1)
Note £'000 £'000
Cash flows from operating activities
Profit before taxation 115,934 46,777
Net treasury income - client funds (73,676) (9,278)
Net treasury income - own funds (1,843) -
Finance income (4,616) (784)
Finance expense 834 458
Amortisation of intangible assets 3,111 1,573
Intangible assets written off 26 43
Depreciation of property, plant and equipment 1,325 764
Depreciation of right-of-use assets 1,939 1,154
Loss on disposal of property, plant and equipment 8 50
Share-based payment (credit)/expense (58) 1,101
(Increase) in other receivables (1,343) (1,476)
(Decrease)/increase in other payables (15,550) 40,014
Decrease/(increase) in derivative financial assets 19,920 (51,052)
Decrease in financial assets at amortised cost - 5,803
(Decrease)/increase in derivative financial liabilities (9,232) 5,000
Increase in fixed collateral (4,084) (1,220)
Cash inflows from operating activities 32,695 38,927
Net treasury income received 73,975 7,490
Tax paid (15,881) (7,486)
Net cash inflows from operating activities 90,789 38,931
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired (8,227) -
Payments to acquire property, plant and equipment (6,927) (1,739)
Payments to acquire right-of-use assets (235) (46)
Proceeds from sale of property, plant and equipment 5 -
Expenditure on intangible assets (8,025) (3,435)
Interest received 4,616 729
Net cash outflows from investing activities (18,793) (4,491)
Cash flows from financing activities
Issue of ordinary shares by Parent Company 491 996
Issue of shares options - 44
Forfeiture of share options - (77)
Dividends paid to equity holders of Parent Company (6,368) (4,810)
Dividends paid to subsidiary shareholders (2,762) (1,877)
Payment of lease liabilities - principal (779) (891)
Payment of lease liabilities - interest (793) (452)
Net cash outflows from financing activities (10,211) (7,067)
Increase in net cash and cash equivalents in the year 61,785 27,373
Net cash and cash equivalents at beginning of year 136,799 108,044
Net exchange (loss)/gains (643) 1,382
Net cash and cash equivalents at end of year 13 197,941 136,799
( )
(1)The prior period restatement is detailed further in note 3.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
Attributable to the owners of the Parent
Share premium account Translation reserve Non-controlling interests
Capital redemption reserve Merger reserve ( )
Share capital Redemption reserve Retained earnings Total Total
( )
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 (as previously reported) 82 50,783 4 667 - 54,189 (124) 105,601 4,193 109,794
Prior period restatement(1) - 36 - - - 2,071 2 2,109 (4,193) (2,084)
Balance at 1 January 2022 (restated) 82 50,819 4 667 - 56,260 (122) 107,710 - 107,710
Profit for the year (Restated(1)) - - - - - 38,613 - 38,613 - 38,613
Other comprehensive income/(expense) - - - - - (479) 1,382 903 - 903
Transactions with owners
Shares issued on vesting of share option schemes (Restated(1)) 2 432 - - - (2) - 432 - 432
Issue of share options in subsidiary undertakings - - - - - 1 - 1 - 1
(Restated(1))
Shares issued in relation to SAYE share scheme - 824 - - - - - 824 - 824
Share-based payments (Restated(1)) - - - - - 1,101 - 1,101 - 1,101
Dividends paid (Restated(1)) - - - - - (6,687) - (6,687) - (6,687)
Balance at 31 December 2022 (restated) 84 52,075 4 667 - 88,807 1,260 142,897 - 142,897
Profit/(loss) for the year - - - - - 88,825 - 88,825 (33) 88,792
Other comprehensive income/(expense) - - - - - 2,395 (679) 1,716 - 1,716
Transactions with owners
Acquisition of subsidiary - - - - (1,884) 103 - (1,781) 564 (1,217)
Shares issued on vesting of share option schemes 3 491 - - - (3) - 491 - 491
Share-based payments - - - - - (58) - (58) - (58)
Dividends paid - - - - - (9,130) - (9,130) - (9,130)
Balance at 31 December 2023 87 52,566 4 667 (1,884) 170,939 581 222,960 531 223,491
(
1)The 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:
As previously reported Restatement Restatement Year ended Restatement Restated
31 December As at 31 December Cumulative to
2022 1 January 2022 31 December 31 December
£'000 2022 £'000 2022 2022
£'000 £'000 £'000
Non-controlling interest (4,707) 4,193 514 4,707 -
Retained earnings (84,220) (2,071) (2,516) (4,587) (88,807)
Translation reserve (1,258) (2) - (2) (1,260)
Share premium account (53,513) (36) 1,474 1,438 (52,075)
Other receivables 6,821 (1,982) 494 (1,488) 5,333
Other payables (77,272) (102) 34 (68) (77,340)
Year ended
31 December
2022
£'000
Effect on the Statement of Comprehensive Income
Profit for the year (as previously reported) 39,050
Increase in share-based payment expense (437)
Profit for the year (restated) 38,613
Attributable to Equity holders of the parent (as previously reported) 36,372
Decrease in non-controlling interest (as previously reported) 2,678
Increase in share-based payment expense (437)
Attributable to Equity holders of the parent (restated) 38,613
Year ended
31 December 2022
£'000
Effect on the Total comprehensive income
Total comprehensive income for the year (as previously reported) 39,953
Share-based payment expense increase (437)
Total comprehensive income for the year (restated) 39,516
Attributable to Equity holders of the parent (as previously reported) 37,275
Decrease in non-controlling interest (as previously reported) 2,678
Share-based payment expense increase (437)
Attributable to Equity holders (restated) 39,516
Year ended
31 December 2022
£'000
Effect on earnings per share
Basic earnings per share (as previously reported) 86.8p
Prior period adjustment 5.3p
Basic earnings per share for the year (restated) 92.1p
Diluted earnings per share (as previously reported) 83.8p
Prior period adjustment 5.2p
Diluted earnings per share for the year (restated) 89.0p
Underlying Basic earnings per share (as previously reported) 70.1p
Prior period adjustment 6.2p
Underlying Basic earnings per share for the year (restated) 76.3p
Underlying diluted earnings per share (as previously reported) 67.7p
Prior period adjustment 6.0p
Underlying diluted earnings per share for the year (restated) 73.7p
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:
· Corporate London represents revenue generated by Alpha FX Limited's Corporate
clients serviced from the UK.
· Institutional represents revenue from Alpha FX Institutional Limited, which
primarily services funds.
· Corporate Toronto represents revenue generated by Alpha Foreign Exchange
(Canada) Limited, serviced from Toronto, Canada.
· Corporate Amsterdam represents revenue generated by Alpha FX Netherlands
Limited, which services corporate clients from Amsterdam, The Netherlands.
· Alpha Pay, a branch of Alpha FX Limited which services clients who require
international payments and accounts. The offering is distributed via our
European Corporate offices and Alpha FX Institutional Limited, as well as
Alpha Pay's own sales team.
· Cobase, a Dutch based company that was acquired by the Group in December 2023.
They are a cloud-based provider of bank connectivity technology that enables
corporates to manage their banking relationships and transactions.
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.
2023
Corporate London Institutional Corporate Toronto Corporate Alpha Pay Cobase Total
Amsterdam
£'000 £'000 £'000 £'000 £'000 £'000 £'000
FX Risk Management* 39,884 23,518 4,228 8,699 - - 76,329
Alternative Banking** - 3,701 - - 30,226 - 33,927
Cobase - - - - - 186 186
Total revenue 39,884 27,219 4,228 8,699 30,226 186 110,442
Underlying operating profit 15,621 8,506 408 4,566 10,352 (248) 39,205
Finance income 4,612 - (1) - - 5 4,616
Finance expenses (254) (200) (58) (87) (235) - (834)
Underlying profit before taxation 19,979 8,306 349 4,479 10,117 (243) 42,987
Non-underlying Items (708) (21) - - - - (729)
Net treasury income- client funds 5,534 34,071 - - 34,071 - 73,676
Profit before taxation 24,805 42,356 349 4,479 44,188 (243) 115,934
2022 Corporate London Institutional Corporate Toronto Corporate Alpha Pay Cobase Total
Restated(1) Amsterdam Restated(1)
£'000 £'000 £'000 £'000 £'000 £'000 £'000
FX Risk Management* 43,332 15,133 4,698 5,500 846 - 69,509
Alternative Banking** 581 4,703 - 888 22,651 - 28,823
Total revenue 43,913 19,836 4,698 6,388 23,497 - 98,332
Underlying operating profit 18,457 7,325 536 3,095 8,861 - 38,274
Finance income 779 - - - 5 - 784
Finance expenses (146) (83) (31) (68) (130) - (458)
Underlying profit before taxation 19,090 7,242 505 3,027 8,736 - 38,600
Non-underlying Items (1,069) (32) - - - - (1,101)
Net treasury income- client funds 468 4,412 - - 4,398 - 9,278
Profit before taxation 18,489 11,622 505 3,027 13,134 - 46,777
*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.
(1)The prior period restatement is detailed further in note 3.
31 December 2023 31 December 2022
Revenue by product £'000 £'000
Foreign exchange forward transactions 51,966 41,073
Foreign exchange spot transactions 31,791 29,027
Option contracts 7,823 9,046
Payments, accounts and advisory fees 18,676 19,186
Platform fees 186 -
Total 110,442 98,332
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):
31 December 2023 31 December 2022
Restated(1)
£'000 £'000
Staff costs 37,665 32,150
Depreciation of owned property, plant and equipment 1,325 764
Amortisation of internally generated intangible assets 3,121 1,573
Depreciation of right-of-use assets 1,939 1,154
Rental costs for short-term leases 897 787
Property, plant and equipment written off 8 50
Impairment of intangible assets 26 43
Bad debt expense in the year 135 235
Bad debt expense fully provided for in previous years 858 -
Net foreign exchange losses/(gains) 372 (274)
Audit fees
Audit fees in respect of the Group, Company and subsidiary financial 680 550
statements
Audit fees in respect of Cobase acquisition 56 -
Non-Audit fees
Fees in respect of CASS Limited Assurance 10 7
(1)The 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):
31 December 2023 31 December 2022
£'000 £'000
Acquisition costs in relation to business combinations 487 -
Other M&A related integration and transaction costs 62 -
Costs associated with the move from AIM to premium listing 248 -
Amortisation of purchased intangible assets (10) -
Share-based payments (credit)/charge (58) 1,101
Total 729 1,101
6. Finance income and expenses
31 December 2023 31 December 2022
£'000 £'000
Finance income
Interest on bank deposits 4,491 622
Finance income to reverse the discount relating to the Norwegian client - 55
Other interest receivable 125 107
Total 4,616 784
Finance expenses
Finance expense on dilapidation provision (41) (6)
Finance expense on lease liabilities (note 10) (793) (452)
Total (834) (458)
7. Taxation
Tax charge
31 December 2023 31 December 2022
£'000 £'000
Current tax:
UK Corporation tax on the profit for the year 24,536 8,056
Adjustments relating to prior years (633) (591)
Overseas Corporation tax on the profit for the year 219 216
Total current tax 24,122 7,681
Deferred tax
Origination and reversal of temporary differences 3,020 483
Total deferred tax 3,020 483
Total tax expense 27,142 8,164
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
31 December 2023 31 December
2022
Restated(1)
£'000 £'000
Profit on ordinary activities before tax 115,934 46,777
Profit on ordinary activities multiplied by the effective standard rate of UK 27,244 8,888
corporation tax of 23.5% (2022: 19%)
Effects of:
Expenses not deductible for tax purposes 561 764
Additional R&D deduction* - (837)
Adjustments relating to prior years (633) (591)
Different tax rates applied in overseas jurisdictions 93 292
Unutilised trading losses (102) (182)
Trading losses brought forward (21) (170)
Total tax charge for the year 27,142 8,164
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
31 December 2023 31 December 2022
£'000 £'000
Losses
At 1 January (205) -
Losses utilised in the year 166 -
Losses created in the year (135) (205)
Total losses (174) (205)
Deferred tax
The deferred taxation liability is based on the expected future rate of
corporation tax of 25% (2022: 25%) and comprises the following:
31 December 2023 31 December 2022
£'000 £'000
Liabilities
At 1 January 1,387 1,061
UK tax charge relating to current year from continuing operations 1,960 483
UK tax charge relating to current year from acquired operations 1,060 -
Tax charge relating to acquired operations 102 -
Tax (credit)/charge relating to foreign exchange rate movements (2) 3
Tax charge/(credit) on other comprehensive income 798 (160)
Total deferred tax liability 5,305 1,387
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:
31 December 2023 31 December 2022
Before tax Tax After tax Before tax Tax After tax
£'000 £'000 £'000 £'000 £'000 £'000
Cash flow hedges
Gain/(losses) recognised on hedging instruments 3,193 (798) 2,395 (639) 160 (479)
Exchange (loss)/ gain arising on translation of foreign operations (679) - (679) 1,382 - 1,382
Total tax (charge)/credit on other comprehensive income/(expense) 2,514 (798) 743 160 903
1,716
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.
31 December 2023 31 December 2022 Restated(1)
Pence Pence
Basic earnings per share 206.2p 92.1p
Diluted earnings per share 203.4p 89.0p
Underlying - basic 76.7p 76.3p
Underlying - diluted 75.6p 73.7p
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:
31 December 2023 31 December 2022
No. No.
Basic weighted average shares 43,072,098 41,923,407
Contingently issuable shares 593,955 1,482,706
Diluted weighted average shares 43,666,053 43,406,113
The earnings used in the calculation of basic, diluted and underlying earnings
per share are set out below:
31 December 2023 31 December 2022
Restated(1)
£'000 £'000
Profit after tax for the year 88,792 38,613
Non-controlling interests 33 -
Earnings - basic and diluted 88,825 38,613
Non-underlying items 729 1,101
Net treasury income - client funds (73,676) (9,278)
Tax effect of above items 17,143 1,554
Earnings - underlying 33,021 31,990
(1)The prior period restatement is detailed further in note 3.
9. Dividends
31 December 2023 31 December 2022
£'000 £'000
Final Plc dividend for the year ended 31 December 2021 of 8.0p per share
- 3,375
Interim Plc dividend for the year ended 31 December 2022 of 3.4p per share - 1,435
Final Plc dividend for the year ended 31 December 2022 of 11.0p per share 4,765 -
Interim Plc dividend for the year ended 31 December 2023 of 3.7p per share 1,603 -
6,368 4,810
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
31 December 2023 31 December 2022
£'000 £'000
At 1 January 11,848 6,136
Additions 10,954 6,866
Additions in relation to business combination 182 -
Depreciation charge for the year (1,939) (1,154)
Foreign exchange translation (151) -
At 31 December 20,894 11,848
Lease liabilities
31 December 2023 31 December 2022
£'000 £'000
At 1 January 13,074 7,362
Additions 10,405 6,603
Additions in relation to business combination 182 -
Finance cost (note 6) 793 452
Payments in the year (1,572) (1,343)
Foreign exchange translation (162) -
At 31 December 22,720 13,074
Analysis:
Current 1,028 1,407
Non-current 21,692 11,667
Total lease liabilities 22,720 13,074
11. Derivative financial assets and financial liabilities
31 December 2023 31 December 2022
Derivative financial assets not designated as hedging instruments Notional principal Notional principal
Fair value Fair value
£'000 £'000 £'000 £'000
Foreign currency forward and option contracts with customers
103,975 12,686,128 116,515 16,521,973
Foreign currency forward and option contracts with banking counterparties
3,043 830,319 10,194 4,787,695
Other foreign exchange forward contracts
- - 229 16,592
107,018 13,516,447 126,938 21,326,260
31 December 2023 31 December 2022
Derivative financial assets designated as hedging instruments Notional Notional principal
Fair value Principal Fair value
£'000 £'000 £'000 £'000
Foreign currency forward contracts 156 3,913 - -
Interest rate swap contracts 2,398 825,546 - -
2,554 829,459 - -
31 December 2023 31 December 2022
Total Derivative financial assets Notional Notional principal
Fair value Principal Fair value
£'000 £'000 £'000 £'000
109,572 14,345,906 126,938 21,326,260
31 December 2023 31 December
2022
Fair value Fair value
Analysis: £'000 £'000
Current 95,203 99,119
Non-current 14,369 27,819
Total derivative financial assets 109,572 126,938
31 December 2023 31 December 2022
Derivative financial liabilities not designated as hedging instruments Notional Notional principal
Fair value Principal Fair value
£'000 £'000 £'000 £'000
Foreign currency forward and option contracts with customers
37,584 7,334,032 47,706 6,164,718
Foreign currency forward and option contracts with banking counterparties
2,559 5,354,982 1,736 5,711,465
Other foreign exchange forward contracts 67 33,090 - -
40,210 12,722,104 49,442 11,876,183
31 December 2023 31 December 2022
Derivative financial liabilities designated as hedging instruments Notional Notional principal
Fair value Principal Fair value
£'000 £'000 £'000 £'000
Foreign currency forward contracts - - 286 21,648
Interest rate swap contracts - - 353 205,000
- - 639 226,648
31 December 2023 31 December 2022
Total Derivative financial liabilities Notional Notional principal
Fair value Principal Fair value
£'000 £'000 £'000 £'000
40,210 12,722,104 50,081 12,102,831
31 December 2023 31 December 2022
Fair value Fair value
Analysis: £'000 £'000
Current 34,288 42,764
Non-current 5,922 7,317
Total derivative financial liabilities 40,210 50,081
Items that will be reclassified to the Consolidated Statement of Comprehensive
Income:
31 December 31 December
2023 2022
Movement in year £'000 £'000
Cash flow hedges
Gains/(losses) recognised on hedging instruments 3,193 (639)
Exchange differences arising on translation of foreign operations (679) 1,382
Tax relating to items that may be reclassified (798) 160
1,716 903
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
31 December 2023 31 December 2022
Restated(1)
£'000 £'000
Other receivables 4,538 2,896
Prepayments 3,258 2,437
Total other receivables 7,796 5,333
(1)The 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.
31 December 2023 31 December 2022
£'000 £'000
Cash and cash equivalents 197,941 136,799
Variation margin called by counterparties 11,125 44,876
Fixed collateral 8,810 4,726
Total cash 217,876 186,401
14. Capital and reserves
Share capital
At 31 December At 31 December
2023 2022
No. £'000 No. £'000
Authorised, issued and fully paid
Ordinary shares of £0.002 each 43,321,813 87 42,196,554 84
Ordinary shares
Number of shares
At 1 January 2022 40,964,225
Shares issued on vesting of share option schemes 1,232,329
At 31 December 2022 42,196,554
Shares issued on vesting of share option schemes 1,125,259
At 31 December 2023 43,321,813
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.
Year ended Year ended
31 December 31 December
2023 2022
Restated(1)
£'000 £'000
Revenue 186 -
Loss after taxation (241) -
Loss allocated to non-controlling interests (33) -
31 December 2023 31 December 2022
Restated(1)
Assets
Non-current assets 3,880 -
Current assets 1,391 -
Liabilities
Current liabilities (340) -
Net assets 4,931 -
( )
(1)The prior period restatement is detailed further in note 3.
16. Other payables
31 December 2023 31 December 2022
Restated(1)
Current: £'000 £'000
Other payables 51,243 70,272
Other taxation and social security 1,455 1,369
Accruals 7,052 5,699
59,750 77,340
Non-current:
Provisions 875 222
875 222
Total other payables 60,625 77,562
(1)The 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:
Book value Fair value adjustments Fair value
£'000 £'000 £'000
Intangible assets 3,292 980 4,272
Property, plant and equipment 9 - 9
Right-of-use-asset 182 - 182
Trade and other receivables 1,322 - 1,322
Cash and cash equivalents 53 - 53
Trade and other payables (1,354) - (1,354)
Lease liabilities (182) - (182)
Dilapidation provision (63) - (63)
Deferred tax liabilities 143 (245) (102)
Total identifiable net assets 3,402 735 4,137
Non-controlling interest (564)
Goodwill on the business combination 4,707
Discharged by:
Cash consideration 8,280
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.
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