REG - Alpha Group Intl PLC - Launch of Bristol Office & Share Scheme

Alpha InternationalAnnouncement

05/01/2023 07:00

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RNS Number : 6978L  Alpha Group International PLC  05 January 2023

5 January 2023

Alpha Group International plc

("Alpha" or the "Group")

Launch of Bristol Office and Share Scheme

New Share Scheme

Overview

Alpha Group International plc (AIM: ALPH), a leading provider of financial
solutions dedicated to global corporates and institutions, is pleased to
announce the formal launch of a new sales office in Bristol along with a
related share scheme.

The Bristol office (the "Bristol Operation") was initially established in
January 2022, to focus on providing Alpha's existing offering to smaller
corporates (UK companies with turnovers of £5m - £30m) compared to those the
Group has historically served. The Bristol Operation has a sales team that
leverages the existing operations and infrastructure of the Group's FX Risk
Management ("FXRM") division in the same manner as its FXRM offices in
Amsterdam, Milan and Toronto.

Why this market?

Having only captured a fraction of the UK corporate market, the Board believes
that the Group already has a substantial runway for growth. However, the UK
SME market represents an additional and attractive market opportunity that can
be captured efficiently, cost-effectively and without distracting from our
wider focus on larger corporates and institutions. The Bristol Operation is
already off to a strong start and has generated revenues in excess of £2m in
2022.

UK companies in this turnover range are often even more underserved by
traditional providers than their larger peers. By providing these clients with
Alpha's distinctive approach to FX risk management and access to established
capabilities, the Group can provide them with a much-needed level of service
and enter this market with a significant competitive advantage. Although
clients will be smaller, our focus will remain on servicing high-quality
companies, thereby providing a valuable opportunity to partner with
high-growth companies and secure a significant share of wallet at an early
stage.

After almost fifteen years of investment in our operations, underpinned by a
strong focus on scalability and agility, the Group is now able to enjoy strong
economies of scale across the business and service this marketplace whilst
leveraging the capacity within its existing operations.

Why Bristol?

Smaller businesses naturally provide smaller revenue opportunities. In order
to take Alpha's high-quality offering to this marketplace whilst maintaining
attractive profit margins, we needed to ensure that our cost to service would
be lower, whilst also ensuring we could continue to access high-quality
talent. An office in Bristol made this possible for three main reasons:
firstly, Bristol provides a high standard, but lower cost of living; secondly,
the city has one of the highest productivity levels per capita, employment and
qualification rates of all major UK cities(1), which underlines the quality of
available local talent; and thirdly commercial rents are significantly lower.

 

One of the core considerations when deciding to launch a SME division was
ensuring we could build and sustain a high-quality team with a resolute focus
on becoming a leader within the SME market. Achieving this meant that we
needed to avoid becoming an incubator for front office employees wishing to
eventually work with larger businesses - something that would have naturally
occurred if the SME division was based within or near the London office.
Having a separate office in Bristol, where the cost of living is lower, but
the quality of life is high, ensures that the financial and lifestyle dynamics
available to the team are equally as attractive as they are in our other
offices.

(1) Bristol Key Facts 2022 | www.bristol.gov.uk

 

Bristol Share Scheme

 

In order to incentivise the key personnel within the Bristol Operation, the
Group is putting in place an employee share ownership scheme for certain
individuals (the "Bristol Participants").

A new class of shares ("I Shares") in Alpha FX Limited is being created, with
79% owned by the Group and 21% owned by the remaining Bristol Participants.
The value of the I Shares will be linked to the performance of the Bristol
Operation. The Bristol share ownership scheme is structured in a similar way
to the share schemes implemented for other FX risk management divisions in
Canada and The Netherlands. From March 2025, the Bristol Participants will
have the option to convert 25% of their holding of I Shares into ordinary
shares of £0.002p each in the Company ("Ordinary Shares") each year for four
years (with the final option being exercisable in March 2028).  The value of
the shares upon conversion is based on an 8x multiple of the operation's
annual profit after tax, and therefore is designed to be accretive on an EPS
basis for our Group shareholders as long as Alpha's valuation stays in excess
of an 8x multiple of earnings and Group earnings continue to grow
sufficiently.

 

Speaking on the launch of the Bristol office, Morgan Tillbrook, CEO of Alpha
said:

 

"The opportunity to apply Alpha's principles of currency risk management and
powerful capabilities to UK SMEs is an attractive one. Whether you're a £5m
company or a £500m company, the impact of currency volatility is felt in the
same way, but unfortunately smaller businesses often remain the most
overlooked when it comes to strategic support. It's also a pleasure to see
another long-standing member of the team, Luc Barford, leading this division.
Luc first joined Alpha in 2015 and is someone who lives and breathes the Alpha
ethos. I am looking forward to seeing him and the team go from strength to
strength as they embark on this next stage in their journey."

Alpha's approach to share schemes

Share schemes are intrinsically linked to both dilution and long-term value
creation for shareholders. We therefore believe it is important to clearly
explain our approach to new share schemes in any related announcements.

Providing employees with the opportunity to earn a stake in the business via
share ownership schemes is an intrinsic part of Alpha's entrepreneurial
culture and client-first philosophy. Employees that think and act like owners
are naturally deeply invested in building sustainable businesses. Likewise,
they recognise that the future of their business is determined by the
long-term value they can provide their clients.

Naturally however, issuing new shares schemes dilutes existing holders. It is
therefore essential that the growth they are designed to create is of a
long-term nature and materially outweighs the impact of any dilution. To
achieve this, our focus is on creating separate schemes that ensure
participants' rewards are contingent on the growth of the divisions they
directly influence. For example, if one division underperformed, but the rest
of the group overperformed, shareholders would not be expected to dilute for
the underperforming division.

With over 110 employee shareholders and multiple business units, achieving
this level of alignment naturally introduces complexity. However, we strongly
believe that a simple, one-size-fits-all scheme, whilst easier to understand
and administer, would not create the individual accountability that is so
important to ensuring rewards are always and clearly linked to results. People
must be rewarded for their ability to contribute to growth, not simply for
being part of a journey. With this in mind, the Group has two main types of
share schemes:

1.    Group & Established Division Share Schemes

The above schemes are typically used to incentivise either Central Services
employees who support divisions across the Group, or divisional employees who
are targeted on growing revenues within the Group's more established business
divisions, currently just UK Corporate.

These schemes vest annually in equal tranches over a period of no less than
four years, based on the achievement of organic revenue growth targets. For
Group schemes, these targets are based on Group revenue. For established
division schemes, they are based on the organic revenue growth of the division
they are a part of. All revenue targets are ambitious and compounding, and
rewards are now also capped against a maximum market capitalisation, and thus
designed to make each growth scheme earnings per share accretive, as long as
overall Group earnings continue to grow sufficiently.

2.    New Venture Share Schemes

Share schemes for new ventures are typically used to incentivise employees who
are working within newer divisions, e.g. Bristol, Toronto, Amsterdam,
Institutional, Alpha Platform Solutions, and in due course, Milan and Sydney.

With this type of scheme, employees own an equity stake in their individual
business unit, with an option to convert their stake into Group shares in
equal annual tranches over a period of four years, with the first vesting
typically beginning in their third or fourth year of operation. The value of
shares at the time of conversion is based on an 8x multiple of the operation's
profits after tax and is therefore designed to make each growth scheme
earnings accretive to the Group, as long as Group earnings continue to grow
sufficiently and Alpha's valuation stays in excess of an 8x multiple of
earnings. At conversion, and in exchange for converting their shares into
Group shares, participants' holdings in their business units commensurately
decrease and the Group's holding commensurately increases.

Equity stakes within these new ventures are typically larger than in our Group
& Established Division share schemes. This reflects the fact that these
ventures are new, unproven, and being led by individuals from experienced and
established backgrounds, who are taking on significant levels of
accountability - often requiring long-term relocations to new countries or
even continents. Aligning the schemes to profitability ensures that these
rewards are intrinsically linked to their ability to execute and create
sustainable and profitable revenue growth.

 

Speaking on Alpha's share schemes, Morgan Tillbrook, CEO of Alpha said:

 

"Alpha has a strong track record of generating organic growth and successfully
breaking into new products and markets. It is important to remember however
that behind each strong set of results       are people who have
committed deeply to building valuable, long-term businesses with
market-leading offerings. Whilst it may be rare for a company to invest so
much effort into creating bespoke share schemes, it is also rare for a company
within our industry to deliver such consistently high levels of growth. We
believe this correlation is not by chance and that, as our track record has
shown, empowering our people in this way is ultimately the most rewarding path
for everyone involved."

 

Enquiries:

 

 Alpha Group International plc           via Alma PR
 Morgan Tillbrook, Founder and CEO
 Tim Powell, CFO

 Liberum Capital Limited                 Tel: +44 (0) 20 3100 2000

 (Nominated Adviser and Sole Broker)
 Neil Patel
 Cameron Duncan
 Kate Bannatyne
 Kane Collings

 Alma PR (Financial Public Relations)    Tel: +44 (0) 20 3405 0205
 Josh Royston
 Andy Bryant
 Kieran Breheny

 

Notes to Editors

Alpha is a high-tech, high-touch provider of enhanced financial solutions
dedicated to corporates and institutions operating internationally. Working
with clients across 50+ countries, we blend intelligent human capabilities
with new technologies to solve complex problems across three key areas: FX
risk management, global accounts and mass payments.

Key to our success is our team - nearly 300 people based across seven global
offices, brought together by a high-performance culture and a partnership
structure that empowers them to act as owners of our business.

Despite being an established business listed on the London Stock Exchange, we
remain relentlessly focused on maintaining the same level of operational
agility and client focus we had when we first started in 2009. This dynamic,
combined with the passion of our people, have enabled us to make a substantial
and enduring difference to our clients, and deliver a growth story to match.

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