Alpha FX (AIM: AFX), a provider of FX risk management and alternative banking solutions for corporates and institutions internationally, today announces its unaudited Interim Report for the six months ended 30 June 2020.
Financial Highlights
– Group revenue up 16% to £18.0m (H1 2019: £15.6m)
– Underlying[1] operating profit of £6.1m (H1 2019: £6.7m) after deducting a temporary provision of £0.5m for the debt of the Norwegian client referenced in our announcement of 2 April 2020
– Reported operating profit of £5.9m (H1 2019: £6.2m), again after deducting the £0.5m provision
– Underlying operating profit margin of 34% (H1 2019: 43%) after continued investment to support long-term growth
– Underlying basic earnings per share of 9.5p in the period (H1 2019: 14.0p), with basic earnings per share of 8.9p (H1 2019: 12.9p)
– Alpha Payment Solutions reported consecutive record revenue quarters in Q1 and Q2 and grew operating profit margin to 38%
– The Group was profitable throughout the period and is well capitalised and debt free, with net assets in excess of £80m and £37.0m of own free cash on the balance sheet
– All cash repayments of the debt due from the Norwegian client have been received on schedule. Accounting standards require the Group to book two accounting provisions with no cash impact, one of £1.0m for the difference between the nominal value and the net present value of future repayments, and one of £0.5m to reflect the possibility that the debt will not be fully repaid, which directly impacts our reported operating profit. Both provisions reverse as each cash repayment is received. The provisions required at the year-end should therefore be significantly lower than the provisions as at H1 2020
Operational Highlights
– Client numbers increased during the period from 648 to 671[2]
– Diversified client base resulting in largest client now representing less than 3% of the forward book
– Strong business continuity planning and cloud-based infrastructure enabled 100% of staff to transition to remote working within 24 hours, without compromising service levels, following the outbreak of COVID-19
– Completed migration away from both external and internal technology contractors, with all technology team members now full-time employees based at our London HQ
– Long-term growth ambitions remain unchanged and we will continue to invest in back office headcount, technology, geographical expansion and our operational agility
Outlook
After a strong Q1, trading in Q2 was marginally down against the comparable period, following the impact of COVID-19. However, as the world begins to recover from the impact of COVID-19, we have seen the Group’s performance return to the levels we saw in Q1, with a strong Group performance recorded in both July and August.
Since the period end, our core FX risk management business in the UK and Europe and our more recent investments have performed well, with strong client acquisition across the board, our Canadian office posting a record month for revenues and client acquisition in August, and Alpha Payment Solutions already achieving a record third quarter for revenues after only two months.
Whilst we recognise ongoing uncertainty regarding COVID-19, in light of our recent performance and the diversity of our products and market opportunity, we are confident in the full year outcome.
Morgan Tillbrook, Chief Executive Officer of Alpha FX commented:
“I am pleased to report on another period of progress delivered across all areas of the business. Whilst COVID-19 presented us with some challenges, the dedication and hard work of all employees ensured we were able to continue servicing our clients to a high standard and finish the period stronger than originally anticipated in the early stages of lockdown.
To our investors, clients and the team that I have the privilege of working with on a day-to-day basis – thank you for your continued support. Your belief in our business and understanding of our long-term growth ambitions is inspiring and fuels our goal to continue taking Alpha to new heights. Whilst uncertainty remains, we have proven that we have the resilience and drive to succeed, and I look ahead to the rest of the year with confidence.”
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