Interim Report

RNS Number : 1885Y

Alpha FX Group PLC

05 September 2022

 

5 September 2022

Alpha FX Group plc

("Alpha", the "Company" or the "Group")

Interim Report

Alpha FX Group plc (AIM:AFX), a high-tech, high-touch provider of FX risk management, accounts and payments solutions to corporates and institutions internationally, today announces its Unaudited Interim Report for the six months ended 30 June 2022.

Financial Highlights

-	Group H1 revenue up 35% to £46.1m including £1.4m of recharged interest (H1 2021: £34.2m including £0.2m recharged interest).[1]
-	FX Risk Management revenues up 31% to £32.3m (H1 2021: £24.7m).
-	Alternative Banking Solutions revenues up 47% to £13.9m (H1 2021: £9.5m).
-	Underlying[2] H1 profit before tax up 16% to £18.0m (H1 2021: £15.4m).
-	Reported H1 profit before tax up 16% to £17.8m (H1 2021: £15.3m).
-	H1 profit before tax margin of 39% (FY 2021: 43%), reflecting increased investment in people and technology to capture the market opportunity.
-	Deferred revenue from account fees, which will be recognised over the next 12 months, increased from £2.2m as at 31 Dec 2021 to £4.0m as at 30 June 2022.
-	Basic earnings per share up 21% to 33.3p (H1 2021: 27.6p).
-	Cash conversion remains strong, with adjusted net cash up 10% to £97.5m (FY 21: £88.2m).
-	Proposed interim dividend of 3.4 pence per share (H1 2021: 3.0p).

Operational Highlights

-	FX Risk Management client numbers[3] increased 11% from 881 at 31 December 2021 to 975 at 30 June 2022.
-	Alternative Banking Solutions accounts[4] increased 75% from 1,746 at 31 December 2021 to 3,061 at 30 June 2022.
-	74 new heads were added during the period, taking total headcount to 288. This compared to 67 heads added in the whole year in 2021.
-	Launch of our brand-new FX Risk Management client platform, marking the completion of our decentralisation programme.
-	Corporate Milan office, launched in March 2022, is already profitable alongside our other established divisions in London, Toronto and Amsterdam.
-	Luxembourg and Australia offices progressing closer towards their official launches, with significant investment already made to set up regulatory licenses and office space.
-	P roportionate step-change in our investment in people, infrastructure and technology reflecting a strong and growing market opportunity.
-	Launch of new employee growth share schemes, taking the total number of employees with a long-term equity interest in the business to over 110.

Outlook

We delivered H1 earnings in line with expectations, including unprecedented levels of investment focused on extending our long-term growth runway. As we enter the second half, trading remains strong across both FX Risk Management and Alternative Banking Solutions. The Board therefore intends to continue investing for growth in H2, and expects to comfortably meet management expectations on revenue and profit for FY22.

Morgan Tillbrook, Chief Executive Officer of Alpha FX commented:

" It is a privilege to report on another strong set of results, and I would like to thank our team for all their hard work in delivering this performance. Although much of the world is moving into a challenging macro environment, I have never felt more confident about the potential of the business and our long-term growth prospects. Our highly decentralised structure has helped us to evolve our business model and strategy in a way that is delivering significant competitive advantage and momentum whilst giving us the clarity and confidence to increase the rate at which we are investing for long-term growth. I am therefore confident we are in a strong position to sustain our company's growth and returns in the long term, whilst continuing to deliver strong performance in the short term."

Enquiries: Alpha FX Group plc	via Alma PR
Morgan Tillbrook, Founder and CEO
Tim Kidd, CFO
Liberum Capital Limited  (Nominated Adviser and Sole Broker)	Tel: [phone]
Neil Patel
Cameron Duncan
Kane Collings
Alma PR (Financial Public Relations)	Tel: [phone]
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.

Market Abuse Regulation

This announcement is released by Alpha FX Group plc and contains inside information for the purposes of the Market Abuse Regulation (EU) 596/2014 ("MAR") and is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person who arranged for the release of this announcement on behalf of Alpha FX Group plc was Tim Kidd, Chief Financial Officer.

Chief Executive's Statement

Overview

In the first half of 2022, we have continued to grow our client numbers, invest in our people, and see the benefits of our decentralisation. We now have 288 people based across our two divisions, underpinned by independent leadership, clearly defined strategies, and a high-performance culture. As CEO, it is an absolute privilege to be in a position where these divisions are executing so well, and I take great pleasure in seeing our leadership teams honing their strategy-setting and execution capabilities . This provides me with the bandwidth to better utilise my time to support both divisions strategically and explore exciting new growth opportunities for the Group.

In terms of overall numbers - revenue grew 35% in the period from £34.2m in H1 2021 to £46.1m; deferred revenue related to Alternative Banking Solutions increased from £2.2m as at 31 Dec 2021 to over £4m as at 30 June 2022; and the Group was profitable across both divisions, with underlying profit before tax of £18.0m and a margin of 39%. The latter was despite a significant increase in investment in our cost base across the board: 74 new people were hired during the period, more than in the whole of 2021; long-term leases were agreed on three new offices, each with significant capacity for growth; our marketing strategy was launched, with a new website and brand refresh imminent; travel expenses relating to clients increased back to pre-COVID levels; and significant progress was made on our regulatory applications in Australia and Luxembourg.

Despite the acceleration in investment, at the end of June we still had £97.5m of adjusted net cash, providing a substantial platform for growth. With our people, infrastructure and capabilities continuing to go from strength to strength, and our strategic investments proving themselves, we are strongly positioned to deliver on the opportunities in front of us.

Business overview

FX Risk Management[5]

We enjoyed strong trading across our FX Risk Management division, in both our London office and overseas offices. Overall, our client base grew to 975 and delivered 31% revenue growth against H1 2021, to 32.3m. Average revenue per client also increased, reflecting our ability to increase wallet share and work with increasingly larger clients as our business matures.

Our strong performance reflects our differentiated service offering and the continued success of our investments in people, processes and technology. The opportunity to maintain sustainable long-term growth in this division has never felt stronger. Underpinning this confidence is the breadth and depth of talent within the division's Front and Back Office teams. Front Office headcount increased from 74 to 97 in the period, but even without new hires, there remains considerable capacity for growth within our existing team, the majority of which are in the earlier stages of their learning curve. This means that the hires we make today are not crucial to delivering on short-term targets but instead represent investment for the longer term, allowing us to strengthen our future growth prospects and extend our runway.

In May we launched our brand-new client platform for FX Risk Management. Prior to decentralisation, our technology spend and focus had predominantly been in Alternative Banking Solutions. However, with decentralisation complete and our online platform built upon an entirely new tech stack, we are excited to be ushering in a new era for technological innovation within FX Risk Management. Our new platform already benefits from an entirely new client interface and greater functionality, and we are looking forward to building on this as part of an ongoing roadmap of insight-led product development, designed to deepen our differentiation and add further value to clients.

Further progress has also been made in scaling our selling standards globally. These standards ensure our teams operate with high levels of integrity and possess the knowledge and skills to deliver the best possible solutions to clients. Within our industry, banks and foreign exchange brokers continue to heavily focus on market commentary, economic updates and currency market predictions, all of which tap into people's emotions and encourage businesses to purchase currency based on how favourable the current exchange rate appears against future expectations. This however leads businesses to hedge disproportionately, either out of desire for gains - i.e. hedging excessively when the exchange rate appears favourable - or out of fear of realising losses - i.e. not hedging at all when an exchange rate appears unfavourable, in the hope that it will "bounce back". Ultimately, this pattern of hedging creates concentration risks and leaves businesses vulnerable to exchange rate volatility. Changing this mindset however can be difficult and will often require us to challenge clients on what they want, in order to provide them with what they need. Whilst this often can be a much harder sell, we also know it is the right one, and by looking after the long-term interests of our clients, we will ultimately ensure more sustainable long-term growth of our own.

FXRM Overseas Offices

Our London office serves as an incubator for our strong culture and talent, developing individuals, some of whom, go on to establish new offices overseas. Our Milan office is testament to this: launched in March 2022 by three experienced existing employees, the business has grown quickly under their stewardship and is already profitable. Our more established Amsterdam office also delivered very strong trading in H1, with revenues more than trebling.

Canada grew revenue in the half from £2.3m to £2.5m, and profits were marginally down. Whilst this was partly due to investment in our cost base, I believe it is important to be candid about the fact that sales growth in Canada has been lower than we originally expected.

We now anticipate a small reduction in revenue and profit for Canada in H2 due to a shortage of senior staff in the office which has been further exacerbated by the office's top salesperson moving to our new operation in Australia, and one of the founding members moving back to the UK for family reasons. Our focus is now on upskilling and building out the existing team in order to restore the senior bandwidth needed to return to sustainable growth in 2023 and beyond. Moving forward we will also be conducting more regular and detailed reviews of skills resource in each office to ensure we can pre-empt potential growing pains like this far in advance. Steps have already been taken in this regard and we are therefore confident this is not a trend that will repeat in other overseas offices - all of which are performing ahead of expectations and have appropriate weightings of junior and senior staff to support pipeline growth.

We continue to focus on growing in new territories, with our office in Australia expected to launch later this year, upon receipt of regulatory approval. Additionally, we are also pleased to be making preparations to launch a Spanish office in Q1 of 2023. Much like our Italian office, our Spanish office will see four existing employees from London move to Madrid to lead a team, each with strong track records of success in penetrating the Spanish market when operating from our UK base. Establishing a presence in Madrid not only provides greater prospects within this already encouraging marketplace, but will also enable the team to attract high-quality local talent to support their expansion.

Alternative Banking Solutions

We have seen excellent trading in our global accounts solution for the alternative investment sector. This division is serviced by a specialist team, backed by growing investment in technology, intelligent processes and strong relationships with high-quality banking partners. The Alternative Banking Solutions technology platform had a Beta launch in Q4 2020 but was formally launched in September 2021.

Traditional offerings (bank or fintech) are typically mass-market in nature and built to service either corporate or retail clients. They are therefore not designed to efficiently cater for the complexity, nuances and rigid time pressures that characterise investment structures. The result is a service that is time-consuming, resource-intensive and expensive, both for the solution providers but also the clients they serve. Alpha provides clients operating in the alternative investment sector with a truly purpose-built platform, underpinned by bespoke end-to-end technology and a dedicated team of over 120 people across onboarding, settlement, compliance, client services and technology. The result is a service offering that can better meet the needs and pressures facing the alternative investment market, whilst unlocking powerful new levels of efficiency, visibility, and connectivity.

We receive revenues from the platform in the form of annually recurring account fees (which are recognised over a 12-month period) and commissions on spot trading. Revenues for the Alternative Banking Solutions division grew over 47% against H1 2021 to £13.9m , and the number of live accounts invoiced increased by c. 75% over the 6-month period to 30 June 2022 from 1,746 to 3,061, with record account openings in May and June. Deferred revenue from account fees, which will be recognised over the next 12 months, nearly doubled to 4.0m from £2.2m at FY21, highlighting the increasing visibility within our revenue model.

The product's success to date has been very encouraging, and it is now clear to us that the size of the market opportunity and demand for this service is even greater than we originally estimated. With this comes the opportunity to set our ambitions even higher by accelerating our technology roadmap. To support this, we will be making a proportionate increase in the level of investment into product and technology in the medium term. Since the majority of these investments will be capitalised, this will have a negligible impact on profit in the near term. Furthermore, by accelerating our product roadmap and scalability, future amortisation is expected to be offset by the proportionate acceleration in revenue opportunities created.

As part of our investment in technology, we are partnering with specialist companies that provide high-quality software contractors in the UK. These companies are well-regarded within our own network and beyond, and will provide us with quick access to a strong pool of talent to deliver on our ambitious roadmap. Long-term investors will be familiar with the fact that in 2020 we made the decision to wind down all offshore technology contractors in order to bring everyone in-house. At the time, our reasons for this were simple - if we wanted to have market-leading technology that was built to last, we needed to apply the same standards to the team behind it. Today, however, our technology team is far more established, and we can therefore integrate contractors without sacrificing the sustainability of the team and culture. Furthermore, all new contractors that join us will be working within our existing delivery teams, thereby ensuring they are properly integrated.

People & Offices

Emerging from lockdown has enabled us to accelerate hiring, with 74 new team members added in the Front and Back Office (more than were added in the whole of 2021). This resulted in overall headcount increasing from 214 to 288 in the period. Our internal recruitment team also continues to make excellent progress, helping us increase Group Front Office headcount by 34.

Whilst we are conscious of the pressure that the current macro-environment is having on staff retention and wage inflation, we remain confident in our ability to provide attractive remuneration packages, with our employee equity schemes remaining a stand-out factor in our industry and beyond.

Alongside remuneration, our office working environments play a key role in attracting and retaining talent and maximising employee well-being, morale and performance. Having seen the impact of launching our new London HQ back in 2019, we remain committed to ensuring that world-class office spaces are a milestone that all divisions can work towards as part of their growth stories. Accordingly, our sales office in Amsterdam completed moves to a new state-of-the-art office space in the half, representing a powerful motivational environment as the team embark on the next stage in their journey.

In Malta we have agreed in principle to a ten-year lease on a new 20,000 sq. ft. office, which will allow us to continue growing our Compliance, Client Services, and Technology teams within the Alternative Banking Solutions division. We are incredibly excited by the quality of talent we have been able to hire since launching inside the country at the start of 2021, with the team in Malta having already grown to 60 people by 30 June 2022. Based on the current demand for our Alternative Banking Solutions, the team is expected to grow to over 180 people over the next three years.

Market Developments

Whilst the macro environment in which we operate remains complex, we have not seen any material direct or indirect impact from the Russian invasion of Ukraine, nor any noticeable negative impact from higher levels of inflation or slowing economies. Our financial model also builds in some natural protection against the macro-economic headwinds: for example, in an environment where prices rise, the volume of currency our clients need to trade will typically rise too.

Where we do however see changes is in the trading psychology of clients. For example, with the recent rapid appreciation of the US Dollar against the Euro, some clients purchasing Euros will be reluctant to hedge until the rate returns to historically more favourable levels. Equally, those on the other side of the equation will often be tempted to hedge more than they should, and potentially become 'over-hedged'. As an FX risk management specialist, our role is to advise clients on a pattern of trading that protects their competitive position, and not take unnecessary risks or speculate. Nonetheless, in times of heightened volatility, we can see more pronounced imbalances in trading activity month on month.

At a Group level, our balance sheet strength, diversity of clients (full details of which can be viewed on our website) and the nimbleness and robustness of our credit control systems means we can continue to grow our FX forward book with confidence. Indeed, we are already winning new business as a result of competitors lacking the capital and detailed underwriting ability needed to confidently provide competitive terms in the current climate. This is not to say that we are being cavalier in our approach to underwriting credit - in fact there were no new material bad debts in the first half of the year. Equally, as our business continues to grow and we underwrite more facilities, the Group expects that some defaults and losses will occur, particularly in more challenging macro environments. Importantly however, such losses are factored into our expectations each year and are ultimately inherent in any business that extends credit. The key is maintaining the right balance between risk and reward.

Although we provide our clients with credit facilities for hedging, our terms and conditions ensure all future client trades are at our discretion. We can therefore react quickly to changes in the macro environment or individual client profiles by refusing future trades, thereby capping our exposure to past trades only. This reduces our risk exposure and poses significantly less risk than providing committed credit facilities. In addition, unlike a typical lending/borrowing facility we are only exposed to the deviation in MTM value of the FX contract (which could be in or out of the money) and not the notional value of the trade.

Looking across our competitive landscape, an uncertain macro environment and ever-increasing UK and European regulation has driven further consolidation of our non-bank competitors. Four of our key non-bank competitors have been acquired and/or merged - three in the last 12 months alone. For Alpha, this is welcome news. As our peers consolidate and centralise, their businesses move further towards the type of model we have worked so hard to avoid through our decentralisation strategy. Subsequently, they become slower and more complex like their traditional bank rivals, typically targeting a broader marketplace with more generic solutions, whilst their people become numbers within a system and disempowered. As a cash-rich, debt-free, long-term focused PLC with a highly decentralised and thus focused and agile business model, we are well-positioned to win market share from these providers, many of which also often lose momentum and motivation as they move towards pre-defined investment horizons. I would however like to remind investors that the banks remain our predominant competition, holding the vast majority of market share… at least for now!

Use of cash

The Group's cash conversion continues to grow, providing adjusted net cash of £97.5m at the period end. With considerable cash reserves, the question of how we put this to best use and whether we should return cash to shareholders via increasing dividends or buybacks, is understandable. To help investors better understand how we view and use our cash internally, I have provided a summary as follows:

· Cash for existing investments

We continue to use our cash to invest in both our FX Risk Management and Alternative Banking Solutions divisions. FX Risk Management has a 12-year track record of trading, and therefore the appropriate levels of investment required to grow are more forecastable. Our Alternative Banking Solutions division however is in a far more nascent stage and is a first mover in a marketplace that continues to exceed our expectations. We therefore believe it is prudent to ensure we have sufficient cash kept aside to ensure we can capitalise not only on the opportunities we have now, but also have the ability to accelerate investment in the future, if faced with even greater upside.

· Cash for regulatory capital

The Group is required to set aside regulatory capital against the client balances it holds as part of its global account's solution, and when entering into forward and derivative trades. The amount of regulatory capital includes a calculation based on the percentage of client balances held, and the volume of our trading positions in the market.

As our business grows and the average size of our clients increases, both the balances we hold for our global accounts solution and the size of forward and derivative trades we enter into, are becoming larger, resulting in a growing requirement for regulatory capital.

· Cash for collateral on hedging facilities

As we expand our FX forward book, the amount of cash required for collateral will also increase. The step change in the size of clients we are supporting (and therefore the size of trades we place) is also increasing the proportion of free cash we need to support this. It is therefore important we have sufficient cash set aside to capitalise on all the opportunities in front us and provide attractive terms versus our competitors.

· Cash for confidence

As a financial services business handling large amounts of client money, the strength of our balance sheet is a key consideration for clients looking to work with us. Furthermore, the larger our clients become, the greater (typically) their expectations for how large our balance sheet needs to be. Maintaining a strong balance sheet is therefore important in ensuring we can continue to move up the 'food chain' and win the business of larger clients.

· Cash for new investments

The Group has strong appetite to launch new products and services in the future that have synergies with our existing business and can amplify our growth opportunities. Naturally, this will require additional investment.

When taking all of the above into consideration, we are confident that the Group's current cash position creates significant return enhancing opportunities. We will of course review our cash position on a regular basis, and if we feel our cash position becomes excessive, will look to adjust.

Financial Review

In the six months to 30 June 2022 revenue increased by 35% over the prior period to £46.1m. The revenue includes £1.4m (6m to 30 June 2021 - £0.2) relating to the recharge of bank fees incurred by the Group on Euro E-money wallet balances which attract a negative interest rate, with the cost being directly passed to the client.

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 and Amsterdam, together with the Milan office that was established in the period. Revenue grew by 31% over the prior year to £32.3m. Alternative Banking Solutions revenue grew by 47% from £9.5m in the prior period to £13.9m. There was an acceleration in the number of client accounts opened in the period to send, hold and receive their funds and the total number of accounts at 30 June 2022 was 3,061 (30 June 2021: 904, 31 December 2021 1,746). Revenue from annual account fees is recognised on a straight-line basis over the 12 months from the date the account is opened and deferred revenue in the period increased from £2.2m at 31 December 2021 to £4.0m.

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 share-based payments, and on this basis, the underlying profit before tax in the year increased by 16% to £18.0m.

In the six months to 30 June 2022 there has been significant investment, including the launch of the Milan office in March 2022. A total of 74 new team members were added in the period across the Front and Back office primarily focused on business development, client services and compliance, compared to a total of 67 heads across the full year in 2021.

The underlying profit before tax margin for the period was 39% (FY 2021: 43%) reflecting the increased investment in our cost base as well as more normalised travel and entertaining with the impact of COVID subsiding. If the impact of the gross up of bank fees recharged to clients for negative interest rates is excluded, the underlying profit before tax margin is 40% (FY 2021: 44%).

The effective tax for the period of 16.5% has benefitted from the tax relief on the exercise of the SAYE options, whilst the effective tax rate in FY 2021 of 21.5% was impacted by the tax on the transfer of clients to Malta.

Underlying basic earnings per share increased by 21% in the period to 33.7p (H1 2021: 27.9p) whilst basic earnings per share were 33.3p (H1 2021: 27.6p).

Balance sheet

On the balance sheet there is a requirement to show all outstanding forward and option contracts at fair value. The liability to our banking counterparties with respect to these trades is shown net, with the corresponding client position shown as an asset or a liability depending upon whether the trade is in or out of the money.

The total derivative financial assets within trades & other receivables (note 9 of the Interim Report) of £141.7m (£35.0m in non-current assets and £106.7m in current assets) represents an increase of £65.8m since the year end with an offsetting increase in derivative financial liabilities and other payables (note 11).

As a result of the strong growth in the period, total net assets increased from £109.8m to £121.2m.

Cash flow

On a statutory basis, net cash and cash equivalents increased in the six months to 30 June 2022 by £17.9m to £126.0m. The Group's cash position can fluctuate significantly from period to period due to the impact of changes in the collateral received from clients, early settlement of trades, or the unrealised mark to market profit or loss from client swaps, resulting 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 below which excludes the above items.

In the period to June 2022 adjusted net cash on this basis has increased by £9.3m to £97.5m. This represents the net impact of the cash conversion from the trading in the period together with the cash inflow of £4m from the client subject to a repayment plan.

	30 June 22 £'000m		31 Dec 21 £'000m
Net cash & cash equivalents	125,952		108,044
Variation margin paid to banking counterparties	13,981		8,380
	139,933		116,424
Margin received from clients & client held funds*	(56,983)		(34,259)
Net MTM timing loss from client drawdowns and extensions with trade receivables	14,514		6,025
Adjusted net cash**	97,464		88,190

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

** Excluding collateral received from clients, early settlements and the unrealised mark to market profit or loss from client swaps

Dividend

The Board is pleased to declare an interim dividend of 3.4 pence per share (2021: 3.0 pence). The interim dividend will be payable on 7 October 2022 to shareholders on the register at 9 September 2022. The ex-dividend date is 8 September 2022.

Any questions?

As our shareholder base has grown and become more diverse, we feel it is important to ensure that all investors have the same opportunity for Q&A. We will shortly therefore be adding a section on our investor relations site that will enable investors to submit their own questions, whilst also seeing the answers we have given to others.

Consolidated Statement of Comprehensive Income

		Unaudited six months to 30 June 2022	Unaudited six months to 30 June 2021	Audited year ended 31 Dec 2021
	Note	£'000	£'000	£'000
Revenue		46,144	34,184	77,471
Operating expenses		(28,187)	(18,801)	(44,143)
Underlying operating profit		18,109	15,51 7	33,588
Share-based payments expense		(152)	(134)	(260)
Operating profit	4	17,957	15,383	33,328
Finance income	5	93	318	536
Finance expenses	5	(240)	(397)	(681)
Profit before taxation		17,810	15,304	33,183
Taxation	6	(2,931)	(3,036)	(7,140)
Profit for the period		14,879	12,268	26,043
Attributable to:
Equity holders of the parent		13,866	11,201	23,531
Non-controlling interests		1,013	1,067	2,512
Profit for the period		14,879	12,268	26,043
Other comprehensive income/(loss):
Exchange gain/(loss) arising on translation of foreign operations		515	2	(148)
Total comprehensive income for the period		15,394	12,270	25,895
Attributable to:
Equity owners of the parent		14,381	11,203	23,383
Non-controlling interests		1,013	1,067	2,512
Total comprehensive income for the period		15,394	12,270	25,895
Earnings per share attributable to equity owners of the parent (pence per share)
- basic	7	33.3p	27.6p	57.7p
- diluted	7	32.4p	26.9p	55.1p
- underlying basic	7	33.7p	27.9p	58.3p
- underlying diluted	7	32.7p	27.2p	55.7p

Consolidated Statement of Financial Position

			Unaudited as at	Unaudited as at	Audited at
			30 June 2022	30 June 2021	31 Dec 2021
		Note	£'000	£'000	£'000
Non-current assets
Intangible assets			3,779	2,530	2,995
Property, plant and equipment			2,720	2,170	2,323
Right-of-use assets			7,147	6,540	6,136
Trade and other receivables		9	35,000	11,168	17,335
Total non-current assets			48,646	22,408	28,789
Current assets
Trade and other receivables		9	110,873	58,129	68,358
Cash and cash equivalents		10	125,952	86,102	108,044
Other cash balances		10	3,519	4,002	3,506
Total current assets			240,344	148,233	179,908
Total assets			288,990	170,641	208,697
Equity
Share capital		12	84	82	82
Share premium account			53,252	50,608	50,783
Capital redemption reserve			4	4	4
Merger reserve			667	667	667
Retained earnings			63,379	43,068	54,189
Translation reserve			391	26	(124)
Equity attributable to equity holders of the parent			117,777	94,455	105,601
Non-controlling interests			3,434	4,082	4,193
Total equity			121,211	98,537	109,794
Current liabilities
	Trade and other payables	11	153,672	55,984	78,888
	Current tax liability	6	2,758	2,665	3,847
	Lease liability		450	293	450
Total current liabilities			156,880	58,942	83,185
Non-current liabilities
Trade and other payables		11	1,512	5,177	7,745
Deferred tax liability		6	1,291	941	1,061
Lease liability			8,096	7,044	6,912
Total non-current liabilities			10,899	13,162	15,718
Total equity and liabilities			288,990	170,641	208,697

Consolidated Cash Flow Statement		Unaudited six months to 30 June 2022	Unaudited six months to 30 June 2021	Audited year ended 31 Dec 2021
	Note	£'000	£'000	£'000
Cash flows from operating activities
Profit before taxation		17,810	15,304	33,183
Net finance expense		147	79	145
Amortisation of intangible assets		725	398	950
Impairment of intangible assets		-	-	121
Depreciation of property, plant and equipment		380	271	589
Depreciation of right-of-use assets		512	405	809
Share-based payment expense		152	134	260
(Increase)/decrease in other receivables		(663)	(950)	127
Increase/(decrease) in other payables		29,416	(21,361)	(14,235)
(Increase)/decrease in derivative financial assets		(65,780)	986	(21,894)
Decrease in financial assets at amortised cost		5,803	6,298	11,778
Increase in derivative financial liabilities		39,135	8,505	26,851
(Increase)/decrease in other cash balances		(13)	23	519
Cash (outflows)/inflows from operating activities		27,624	10,092	39,203
Tax paid		(3,790)	(1,864)	(4,666)
Net cash (outflows)/inflows from operating activities		23,834	8,228	34,537
Cash flows from investing activities
Payments to acquire property, plant and equipment		(775)	(190)	(661)
Proceeds from the sale of property, plant and equipment		2	-	-
Expenditure on internally developed intangible assets		(1,509)	(854)	(1,992)
Net cash outflows from investing activities		(2,282)	(1,044)	(2,653)
Cash flows from financing activities
Dividends paid to equity owners of the Parent Company		(3,375)	(3,276)	(4,505)
Dividends paid to non-controlling interests		(1,272)	(473)	(1,739)
Issue of ordinary shares by Parent Company		996	236	26
Issue of ordinary shares by subsidiary		-	-	327
Payment of lease liabilities		(515)	(310)	(465)
Net interest received/(paid)		7	(233)	(308)
Net cash outflows from financing activities		(4,159)	(4,056)	(6,664)
Increase in net cash and cash equivalents in the period		17,393	3,128	25,220
Net cash and cash equivalents at beginning of period		108,044	82,972	82,972
Net exchange gains / (loss)		515	2	(148)
Cash and cash equivalents at end of period	10	125,952	86,102	108,044

Consolidated Statement of Changes in Equity
	Attributable to the owners of the parent
	Share capital	Share premium account	Capital redemption reserve	Merger reserve	Retained earnings	Translation reserve	Total	Non-controlling interests	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2020	80	50,582	4	667	35,631	24	86,988	3,653	90,641
Profit for the period	-	-	-	-	23,531	-	23,531	2,512	26,043
Other comprehensive income	-	-	-	-	-	(148)	(148)	-	(148)
Shares issued on vesting of share option scheme	2	175	-	-	(164)	-	13	(13)	-
Issue of shares to non-controlling interests in subsidiary undertakings	-	-	-	-	-	-	-	107	107
Shares repurchased from non-controlling interests	-	-	-	-	56	-	56	(162)	(106)
Shares issued in relation to SAYE share scheme	-	26	-	-	-	-	26	-	26
Forfeiture of shares in subsidiary	-	-	-	-	(620)	-	(620)	(165)	(785)
Share-based payments	-	-	-	-	260	-	260	-	260
Dividends paid	-	-	-	-	(4,505)	-	(4,505)	(1,739)	(6,244)
Balance at 31 December 2021	82	50,783	4	667	54,189	(124)	105,601	4,193	109,794
Profit for the period	-	-	-	-	13,866	-	13,866	1,013	14,879
Other comprehensive income	-	-	-	-	-	515	515	-	515
Transactions with owners
Shares issued on vesting of share option scheme	2	-	-	-	(2)	-	-	-	-
Shares issued in relation to SAYE share scheme	-	563	-	-	-	-	563	-	563
Issue of shares in relation to subsidiary earnout	-	1,906	-	-	(1,801)	-	105	(105)	-
Issue of shares to non-controlling interests in subsidiary undertakings	-	-	-	-	395	-	395	(395)	-
Forfeiture of shares in subsidiary	-	-	-	-	(45)	-	(45)		(45)
Share-based payments	-	-	-	-	152	-	152	-	152
Dividends paid	-	-	-	-	(3,375)	-	(3,375)	(1,272)	(4,647)
Balance at 30 June 2022	84	53,252	4	667	63,379	391	117,777	3,434	121,211

Notes to the Consolidated Financial Statements

1. Corporate information

The Company, Alpha FX Group plc, 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). The consolidated financial statements incorporate the results of the Company and its subsidiary undertakings Alpha FX Limited, Alpha FX Institutional Limited, Alpha Foreign Exchange (Canada) Limited, Alpha FX Netherlands Limited, Alpha FX Europe Limited and Alpha FX Italy Limited.

2.  Basis of preparation

The basis of preparation of this financial information is consistent with the basis that will be adopted for the full year accounts which will be prepared in accordance with UK adopted international accounting standards.

The financial information is presented in Pounds Sterling ("£"), which is the Group's functional currency, rounded to the nearest thousand.

Whilst the financial figures included in this half-yearly report have been computed in accordance with IFRS applicable to interim periods, this half-yearly report does not contain sufficient information to constitute an interim financial report as that term is defined in IAS 34.

This interim financial information has not been audited and the financial information contained in this report does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The year to 31 December 2021 has been extracted from the audited financial statements for that year.

The Group's financial statements for the year ended 31 December 2021 have been reported on by auditors, BDO LLP, and have been delivered to the Registrar of Companies. The auditors report on those financial statements was unqualified and did not contain statements under Section 498(2) or Section 498(3) of the Companies Act 2006.

Accounting policies

New accounting policies

There are no new standards and interpretations which became mandatorily effective for the current reporting period which have had any material effect on the financial statements of the Group.

3. Segmental reporting

During the period the Group principally generated revenue from the sale of forward currency contracts, option contracts, foreign exchange spot transactions and fees received from payments collections and currency accounts.

In accordance with IFRS 8, the Group has five reportable segments based on internal management reporting.   

· Corporate London represents revenue generated by Alpha FX Limited's corporate clients globally that are serviced from the UK, as well as revenue generated from corporate clients serviced from Italy. The Italian office based in Milan, was established in March 2022 by 3 members of the London Corporate team

· Institutional represents revenue from Alpha FX Institutional Limited, which primarily services alternative investment funds globally.

· Corporate Toronto represents revenue generated from corporate clients by Alpha Foreign Exchange (Canada) Limited, serviced from Toronto, Canada.

· Alpha Pay (formerly Alpha Platform Solutions), a division of Alpha FX Limited which services clients who require international payments and accounts. The offering is distributed via our European Corporate offices and Institutional division, as well as Alpha Pay's own sales team.

· Corporate Amsterdam represents revenue generated by Alpha FX Netherlands Limited, which services corporate clients from Amsterdam, The Netherlands.

In April 2021, the Group decentralised into two divisions: Alternative Banking Solutions and FX Risk Management. These two divisions are now 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 now reflects how the chief operating decision-makers manage the business. In the prior year (June 2021), revenue by operating segment was split as FX hedging, and Spot & Payment transactions.

 As a result of the above, the prior year figures have been restated to reflect the decentralisation of 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.

Some profit remains within Alpha FX Europe as part of the Groups transfer pricing agreement. In the below table, this profit has been allocated amongst the relevant segments, based on the proportion of net profit generated within Alpha FX Europe in the reporting period.

Six months ended June 2022	Corporate London	Institutional	Corporate Toronto	Alpha Pay	Corporate Amsterdam	Total
	£'000	£'000	£'000	£'000	£'000	£'000
FX Risk Management*	19,177	8,058	2,464	669	1,918	32,286
Alternative Banking Solutions**	169	2,872	-	10,386	431	13,858
Total revenue	19,346	10,930	2,464	11,055	2,349	46,144
Underlying operating profit	7,863	4,733	196	4,374	943	18,109
Share-based payments	(136)	(16)	-	-	-	(152)
Finance expenses	(92)	(40)	-	(64)	(44)	(240)
Finance income	93	-	-	-	-	93
Profit before taxation	7,728	4,677	196	4,310	899	17,810
Six months ended June 2021	Corporate London	Institutional	Corporate Toronto	Alpha Pay	Corporate Amsterdam	Total
	£'000	£'000	£'000	£'000	£'000	£'000
FX Risk Management*	16,058	4,578	2,290	1,291	514	24,731
Alternative Banking Solutions**	-	2,318	-	6,906	229	9,453
Total revenue	16,058	6,896	2,290	8,197	743	34,184
Underlying operating profit	7,655	3,525	608	3,618	111	15,517
Share-based payments	(118)	(16)	-	-	-	(134)
Finance expenses	(319)	(29)	-	(49)	-	(397)
Finance income	318	-	-	-	-	318
Profit before taxation	7,536	3,480	608	3,569	111	15,304
Year ended December 2021	Corporate London	Institutional	Corporate Toronto	Alpha Pay	Corporate Amsterdam	Total
	£'000	£'000	£'000	£'000	£'000	£'000
FX Risk Management*	34,166	11,069	5,497	3,369	2,935	57,036
Alternative Banking Solutions**	61	4,565	-	14,961	848	20,435
Total revenue	34,227	15,634	5,497	18,330	3,783	77,471
Underlying operating profit	15,955	6,485	1,745	7,776	1,627	33,588
Share-based payments	(228)	(32)	-	-	-	(260)
Finance expenses	(526)	(57)	-	(98)	-	(681)
Finance income	536	-	-	-	-	536
Profit before taxation	15,737	6,396	1,745	7,678	1,627	33,183

	Six months ended	Six months ended	Year ended
Revenue by product	30 June 2022	30 June 2021	31 Dec 2021
	£'000	£'000	£'000
Foreign exchange forward transactions	19,307	13,806	31,945
Foreign exchange spot transactions	13,363	11,649	26,053
Option contracts	6,340	3,328	8,779
Payments and account fees	7,134	5,401	10,694
Total	46,144	34,184	77,471

*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 Solutions represents revenues derived from fees and foreign exchange spot contracts generated from the provision of cross border payments and accounts to corporates and institutions.

4. Operating profit

Operating profit is stated after charging/(crediting):

	Six months	Six months	Year
	ended	ended	ended
	30 June 2022	30 June 2021	31 Dec 2021
	£'000	£'000	£'000
Depreciation of owned property, plant and equipment	380	271	589
Amortisation of internally generated intangible assets	725	398	950
Depreciation of right-of-use assets	512	405	809
Rental cost of short-term leases	267	161	179
Staff costs	14,699	10,353	21,680
Estimated probability of client default in relation to Norwegian client	(27)	(153)	(243)
Bad debts realised*	-	-	2,869
Net foreign exchange losses	312	332	118

*During the year ended 31 December 2021, two clients with sterling/euro and US dollar/Canadian dollar contracts were unable to meet their obligations and the Group immediately closed out all their open contracts. Subsequently these clients entered administration and as a result the Group recorded a bad debt charge of £2,869,400. There have been no equivalent bad debts realised in the period to 30 June 2022.

5. Finance income and expenses

	Six months	Six months	Year
	ended	ended	ended
	30 June 2022	30 June 2021	31 Dec 2021
	£'000	£'000	£'000
Finance income
Finance income to reverse the discount relating to the Norwegian client	56	318	507
Other interest receivable	37	-	29
Total	93	318	536
Finance costs
Bank interest payable	(30)	(233)	(337)
Finance cost on lease liabilities	(210)	(164)	(344)
Total	(240)	(397)	(681)

6. Taxation

Tax charge

	Six months	Six months	Year
	ended	ended	ended
	30 June 2022	30 June 2021	31 Dec 2021
	£'000	£'000	£'000
Current tax:
UK Corporation tax charge on profit	2,613	2,721	5,816
UK Corporation tax charge on the internal transfer of clients	-	-	892
Adjustments relating to prior years	(183)	-	(282)
Overseas Corporation tax charge on the profit	272	-	279
Total current tax	2,702	2,721	6,705
Deferred Tax
Origination and reversal of temporary differences	229	117	237
Adjustments relating to change in rate	-	198	198
Total deferred tax	229	315	435
Total tax expense	2,931	3,036	7,140

The Group's effective tax rate at 30 June 2022 was 16.5% (30 June 2021: 19.8%). The decrease is predominately due to a tax deduction in the current period from the exercise of options under the SAYE scheme.

7. 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 during the 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 Group additionally discloses an underlying earnings per share calculation that excludes the impact of share-based payments, non-recurring costs and their tax effect, which better enables comparison of financial performance in the current year with comparative years.

	Six months	Six months	Year
	ended	ended	ended
	30 June 2022	30 June 2021	31 Dec 2021
Basic earnings per share	33.3p	27.6p	57.7p
Diluted earnings per share	32.4p	26.9p	55.1p
Underlying - basic	33.7p	27.9p	58.3p
Underlying - diluted	32.7p	27.2p	55.7p

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

	Six months	Six months	Year
	ended	ended	ended
	30 June 2022	30 June 2021	31 Dec 2021
	No.	No.	No.
Basic weighted average shares	41,604,881	40,585,128	40,773,748
Contingently issuable shares	1,241,027	1,015,233	1,925,202
Diluted weighted average shares	42,845,908	41,600,361	42,698,950

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

	Six months	Six months	Year
	ended	ended	ended
	30 June 2022	30 June 2021	31 Dec 2021
	£'000	£'000	£'000
Profit after tax for the period	14,879	12,268	26,043
Non-controlling interests	(1,013)	(1,067)	(2,512)
Earnings - basic and diluted	13,866	11,201	23,531
Share-based payments	152	134	260
Earnings - underlying	14,018	11,335	23,791

8. Dividends

	Six months	Six months	Year
	ended	ended	ended
	30 June 2022	30 June 2021	31 Dec 2021
	£'000	£'000	£'000
Final dividend for the year ended 31 December 2020 of 8.0p per share	-	3,276	3,276
Interim Dividend for the year ended 31 December 2021 of 3.0p per share	-	-	1,229
Final dividend for the year ended 31 December 2021 of 8.0p per share	3,375	-	-
	3,375	3,276	4,505

All dividends paid are in respect of the ordinary shares of £0.002 each.

The Directors propose an interim dividend in respect of the year ended 31 December 2022 of 3.4p per share amounting to £1,434,683 payable on 7 October 2022 to shareholders on the register at 9 September 2022.

9. Trade and other receivables

Trade receivables represent the fair value of derivative financial assets arising as a result of matched principal transactions and are shown net of the Credit Value Adjustment.

	Six months	Six months	Year
	ended	ended	ended
	30 June 2022	30 June 2021	31 Dec 2021
Current:	£'000	£'000	£'000
Trade receivables (derivative financial assets)	106,666	41,838	58,551
Other receivables	2,516	2,487	2,542
Prepayments	1,691	2,147	1,462
Financial assets at amortised cost	-	11,657	5,803
	110,873	58,129	68,358
Non-current:
Trade receivables (derivative financial assets)	35,000	11,168	17,335
Total trade and other receivables	145,873	69,297	85,693

10. Cash

Cash and cash equivalents comprise cash balances and deposits held at call with banks.

Other cash balances comprise 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 against out of the money trades with banking counterparties.

	Six months	Six months	Year
	ended	ended	ended
	30 June 2022	30 June 2021	31 Dec 2021
	£'000	£'000	£'000
Cash and cash equivalents	125,952	86,102	108,044
Variation margin called by counterparties	13,981	5,235	8,380
Other cash balances	3,519	4,002	3,506
Total cash	143,452	95,339	119,930

11. Trade and other payables

Trade payables represent the fair value of derivative financial liabilities arising as a result of matched principal transactions.

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

	Six months	Six months	Year
	ended	ended	ended
	30 June 2022	30 June 2021	31 Dec 2021
Current:	£'000	£'000	£'000
Trade payables (derivative financial liabilities)	82,065	20,919	36,697
Other payables	60,834	28,251	34,363
Other taxation and social security	1,836	830	1,018
Lease liability	450	293	450
Accruals and deferred income	8,937	5,984	6,810
	154,122	56,277	79,338
Non-current:
Trade payables (derivative financial liabilities)	1,512	5,177	7,745
Total trade and other payables	155,634	61,454	87,083

Included within accruals and deferred income is £4.0m (30 June 2021 - £1.1m; 31 December 2021 - £2.2m) relating to deferred annual account fee revenue.

12. Share capital

The following movements of share capital occurred in the six months to 30 June 2022:

	Ordinary	Nominal
	shares	value
	No.	'000
As at 1 January 2022 - shares of £0.002 each	40,964,225	82
Shares issued on vesting of share option scheme	1,123,946	2
Shares issued in relation to SAYE share scheme	108,383	-
As at 30 June 2022	42,196,554	84

---

[1] Interest relates to the recharge of bank fees incurred by the  Group on Euro account balances which attract a negative interest rate, with the cost being directly passed to the client.

[2] Underlying excludes the impact of non-cash share-based payments.

[3] Up until March 2022, client numbers were stated at Group level and defined as 'clients that have traded in the last 12 months and generated more than £10,000 since being onboarded'. Following the Group's decentralisation into FX Risk Management and Alternative Banking Solutions, client numbers continue to be shown on the same basis for FX Risk Management. For Alternative Banking Solutions however, the Group reports on the number of accounts that are live at the period end.

[4] 'Account' refers to an account opened by clients to send, hold and receive their funds, and that are live at the period end.

[5] Our FX Risk Management division supports corporates and institutions that trade currency for commercial purposes, such as buying or selling goods and services overseas or hedging the underlying value of an asset or liability.

 

END

 

 

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