AFX.L Regulatory News (AFX)

16 March 2022

Alpha FX Group plc

("Alpha FX" or the "Group")

Full Year Results

for the year ended 31 December 2021

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, is pleased to announce its audited Full Year Results for the financial year ended 31 December 2021.

Financial Highlights

Operational Highlights

* Underlying excludes the impact of non-cash share-based payments.

** The Group excludes Training Accounts (those that have generated less than £10,000 in revenue since being onboarded) in order to provide a clearer picture of client retention for the purposes of these figures.

*** The Group defines a 'long-term equity interest' as an equity stake: held prior to the Company's IPO as ordinary shares in the plc; or held in the Group's B, C, D or E growth share scheme; or shares owned directly in one of the Group's trading subsidiaries.

Russia-Ukraine

We are deeply saddened by the tragic events unfolding in Ukraine and our thoughts are first and foremost with those affected. In the lead up to and following Russia's invasion the Group has taken the necessary precautions to mitigate the impact on our business. The Group has historically had limited exposure to the Russian rouble, currently 0.02% of the forward book, across two clients with strong financial standings. In addition, there are only a small number of clients with direct exposure to Eastern European currencies making up 1.7% of the forward book. These clients have all undergone a detailed credit review in light of recent events and those that have not already closed out their contracts continue to hold positions based on the strength of their credit standing. We also continue to monitor our client base for businesses that have the potential to feel wider knock-on effects from the conflict.

There has been no material impact to the Group to date, nor does the Group anticipate any material impact to trading moving forward. However, recognising that the situation is developing rapidly, we will continue to review and monitor it closely.

Outlook

Looking forward, we see major opportunities across all our businesses. We continue to take share in UK FX Risk Management and are well on the way to replicating that UK success in overseas markets. We have also made an excellent start to Front Office hiring in Q1 22, as the disruption from COVID-19 subsides and our maturing internal recruitment team finds its stride. The initial response from our increased sales drive and marketing effort targeting alternative asset managers with our Alternative Banking Solutions validates that we have a sizeable opportunity in this space. We will continue to focus on understanding our clients' needs and concentrating on those areas and markets where we know we can differentiate and therefore grow sustainably. Whilst we remain mindful of Russia's invasion of Ukraine, we look forward to 2022 with confidence.

Morgan Tillbrook, Chief Executive Officer of Alpha FX commented:

"I am incredibly proud of our team for the results achieved. We have consistently delivered year-after-year, even in the most testing of macro environments, and 2021 was no exception. Our capabilities, cash position and governance have never been stronger - bolstered by a healthy and balanced management bandwidth and clear and considered strategy. It's a very privileged position to be in, and one I know didn't happen by chance. I'd therefore like to thank everyone for their hard work and commitment, and look forward to seeing what we can do together in 2022 and beyond."

Enquiries:

Market Abuse Regulation

This announcement is released by Alpha FX Group plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("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.

Notes to Editors

Alpha is a high-tech, high-touch provider of enhanced financial solutions dedicated to corporates and institutions operating internationally. Working with over 900 clients across 50+ countries, we blend 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 - over 200 people based across five 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.

Chief Executive's Statement

It's been an exciting and gratifying year as we started to see the benefits of decentralising our operations on the day-to-day running of the business. These investments have strengthened our position in FX Risk Management and empowered us to build out new propositions in our Alternative Banking Solutions division. Together with an excellent performance from our overseas offices, we have delivered strong revenue and profit growth across the Group.

At the end of the year, client numbers increased by 204 to 958 (FY 2020: 754), contributing to full-year revenue increasing 68% to £77.5m compared to the same period last year, with record H2 revenues of £43.3m (growth of 55% year-on-year).

The Group continues to deliver on its strategy, with all business units profitable and setting new records. Underlying profit before tax was £33.4m with a margin of 43% (FY 2020 38%). Margins were higher than expected given the strong revenue momentum through the year, which more than offset the planned H2 cost increases from accelerated hiring, increased travel and entertainment spend, and further investments in new international offices and technology.

People and Culture

We are increasingly confident in the repeatability of the Alpha way and the company's longer-term growth. We have been highly successful in expanding and exporting our culture, product strategy and technology roadmap as we launched Alternative Banking Solutions and established new overseas offices. Our core UK Corporate FX Risk Management business has been the incubator for many of these initiatives and it has been exciting to see our talented team leaders launch new business divisions which develop and deliver on our strategies and objectives.

Our in-house recruitment team is developing in line with our ambitions, successfully bringing new talent into the organisation both in the UK and overseas. Overall headcount increased from 147 at the start of the year to 214 at 31 December 2021. Front Office headcount increased to 92 (31 December 2020: 78), with hiring focused on new business development. Whilst we will continue to grow our team to support the rate of client acquisition, there is also significant capacity within the existing team to support considerable long-term growth. The strength of our sales team remains a key differentiator and can sometimes be taken for granted. However, the ability to engage senior decision-makers on complex topics within a noisy marketplace is rare. Even rarer is the propensity for these same people to consistently put the needs of these clients before their own, whilst also prioritising the learning and development of their colleagues. But rarest of all is to have an entire team that share these qualities. This is why we have grown the way we have; it's why each year our new hires develop faster than our previous ones; and it's why recruitment will always be a hard but rewarding challenge!

Back Office headcount increased to 122 (31 December 2020: 69), predominantly reflecting the build-out of our support teams in the UK and Malta for our Alternative Banking Solutions offering across Compliance, Technology and Client Services, and our continued emphasis on solid risk management processes as we grow our business.

Our culture, principles and values are consistently ingrained across our growing businesses. We have settled on our definition of a high-performance culture - 'a place where everyone's getting better'. It is a simple statement but an incredibly ambitious one. There is no destination with this; it is an ongoing, never-ending pursuit, but one that precisely encapsulates the reason we're all here.

Personal development is an intrinsic part of our high-performance culture, and we are investing in training and world-class coaching to strengthen this. We are passionate about providing our team with the support and tools to maximise their potential and elevate themselves and the company.

Our employee share ownership schemes continue to be another source of competitive advantage. Our team's collective ownership and ability to benefit tangibly from the client outcomes they deliver, ensures that we are all pulling in the same direction, whilst always putting the long-term interests of our clients first, along with those of our shareholders. Despite our growth in headcount, 36% of employees now hold a long-term equity interest in our business, and we continue to devise new share schemes that ensure colleagues are both rewarded and accountable for delivering exceptional growth within their respective divisions.

Following our announcement that Tim Kidd will be retiring in April of next year, I would like to thank him enormously for his support and contribution over the past six years both professionally and personally. From the moment Tim joined, he has consistently gone above and beyond for the business, and his decision to provide an extended notice period is yet another example of his loyalty and affection for Alpha. We have already begun the search for Tim's successor and intend to hire in good time in order to create an extended handover period with Tim and therefore complete an optimal transition.

Benefits of decentralising

We take calling ourselves Alpha very seriously - we set out to win wherever we operate and you can't win without creating an environment that creates complete alignment between the team and their customers. To achieve this, we must be agile, focused, and thus decentralised.

For those new to Alpha, decentralisation refers to the process of dividing an organisation into separate business units, each focused on their own propositions and supported by their own people, processes and technology. The goal is to generate complete alignment between the team and their customers, without compromise.

In 2021, we decentralised Alpha's offerings, FX Risk Management (first established in 2009) and Alternative Banking Solutions (first established in 2019), into two distinct divisions. Both divisions now benefit from being underpinned by dedicated and specialist people, operations, technology and research units. Our colleagues within these teams also benefit from having clear lines of accountability and recognition.

The products and services developed and launched by our FX Risk Management and Alternative Banking Solutions teams are distributed across various sectors and geographies via the Group's sales operations. We recognise these in our segmental reporting as: Corporate London, Institutional, Corporate Toronto, Corporate Amsterdam, and Alpha Pay (formerly Alpha Platform Solutions). These highly motivated teams are building out well-received and targeted client propositions and leveraging our long-established consultative sales approach.

At a Group level, we continue to benefit from the optimisation of our technology investments, enhanced compliance and risk management processes, improved financial reporting and forecasting, and an evolving business culture that brings together everyone, regardless of geography or division.

Although we have two separate divisions, they both combine intelligent human interaction with automated technologies. We call this blend, 'being bionic'. In order to successfully service high-value clients and solve the complex challenges they face, being both high-touch and high-tech is essential. However, getting to a point where you can do both well is difficult and rare. With decentralisation, the capabilities of our people and technology can continue to grow from strength to strength and become increasingly difficult for our competitors to emulate.

Most businesses default to centralising and consolidation, typically trying to save costs and control processes and people. This often leads to the businesses and business leaders becoming generalists, and further distanced from their customers and their requirements. Under my leadership, I will continue to look to decentralise as we invest and grow. We truly have talented and committed people that must stay close to our customers and be trusted and backed. An overfocus on saving costs and an overcontrolling strategy at the expense of an agile, client-centric approach has no place within our Group.

Business overview

FX Risk Management

Our FX Risk Management division focuses on supporting 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. We service this marketplace through our corporate and institutional sales teams in London, Toronto, Amsterdam and from 2022, Milan. Revenues are derived from commissions on forward, option and spot contracts. Trading patterns reverted to a more normal trend this year following the COVID-19 driven volatility of 2020. Revenue growth of 43% to £57.0m reflects the division's successful onboarding of new clients, growing wallet share with existing clients, and importantly, accelerating client acquisition and trading momentum in our overseas offices.

The established Corporate London business continues to perform well with FX Risk Management revenues up 24% to £34.2m, while our Institutional business continued to deliver strong results with FX Risk Management revenues up by 48% in the year to £11.1m. Overall, our strong performance in both businesses, resulting in further market share gains from traditional banks and other foreign exchange providers, derives from our continued investment in growing our operations, alongside maintaining the quality of our people, and differentiated service offering.

Despite much of our most established talent moving on from the Corporate London division to lead and incubate our other offices, we are increasingly attracting clients with potential higher group lifetime values as we develop, launch and offer them additional value-added payments and accounts solutions. Furthermore, as our new offices mature, they too are becoming incubators for entrepreneurial talent that can go off to help launch other new investments. Our top-performing Portfolio Manager in Toronto has transferred from our Toronto office to spend H1 with our team in the UK, in preparation for the launch of our Australian office later this year. It is exciting to realise that, as this trend continues across our other offices, the pool of entrepreneurial talent we have will continue to proliferate.

I would also like to thank the Managing Director of our Canadian Office, Mark Stuart, for his selflessness in supporting this move. Many in Mark's position would have been reluctant to transfer their top-performing Portfolio Manager. However, the level of support and encouragement Mark has shown is a testament to his passion for seeing people grow and his propensity to always put the wider business before himself. Ultimately, whilst moves like this may have a short-term impact on the growth of individual subsidiaries, the longer-term growth prospects it creates for the Group far outweigh this.

Overseas offices

Alpha's overseas offices provide an entry point into new markets for the Group whilst retaining the strong culture and business model established in London.

Our Toronto office was launched in Q4 2018 and the team had the challenge of being our first venture overseas as well as dealing with COVID-19 disruption. Nevertheless, the second half of 2021 saw a break-out in client volumes, delivering full-year revenues of £5.5m, growth of 158%, and a further improvement in profit margins. The business is on a similar trajectory to our early years in the UK and we see no reason in the medium term why the revenue profile and margin structure cannot continue to evolve in a similar way to the success delivered in the UK over the last decade.

Our Amsterdam office is also clearly demonstrating the success of exporting Alpha's culture. Set up in April 2020, this office achieved a profitable contribution in 2021 and delivered H2 vs H1 2021 revenue growth of over 3x.

Our Malta office was established in March 2021, initially to create a European regulatory base from which we could continue passporting our regulated services into the EU, following the UK's Brexit withdrawal. However, we have also been very impressed by the calibre of people that have shown an interest in working for us since opening there, particularly in the areas of Compliance and Client Services. As a result, we believe our Malta office now has all the makings of a leading team, and our intention is to build out our headcount within the country to support the growth of our Alternative Banking Solutions business.

In March 2022 we launched a new office in Milan with three existing employees from our Corporate London office having moved to Italy to lead the team. Establishing a local presence in Italy not only provides greater prospects within this already encouraging marketplace but, additionally, enables the Group to attract high-quality domestic talent.

We also intend to invest in an office and presence in Australia in the second half of 2022. Alongside our offices in Toronto and London, an office in Sydney will give us the 24/7 capability to support our clients globally.

Alternative Banking Solutions

Our Alternative Banking Solutions division focuses on providing corporates and institutions globally with a suite of alternative banking solutions covering payments and accounts. Serviced by a specialist team of technology, compliance, and front office business development staff, the team also benefits the wider Group through cross-selling with our corporate and institutional sales teams. Alternative Banking Solutions revenues grew substantially in the year, from £6.4m to £20.4m. Revenues are derived from commissions on spot transactions as well as Account & Payment fees. Our mass payments solution is now an established player in the market, helping companies send thousands of payments in multiple currencies, often with far greater efficiency, visibility and control than their existing providers.

Our Alternative Banking Solutions business is built on providing high-impact financial solutions and simplifying banking processes, backed by a growing investment in technology and intelligent processes. In September, we officially launched our alternative banking platform for the alternative investment sector. The build-out of our platform into this sector was well researched and planned. The result is an agile and purpose-built technology stack, underpinned by high levels of dedicated support and service. It is also another example of leveraging our talented teams with the overlap and collaboration with our institutional team that has over a decade's experience working within the sector.

The Group is supporting the launch of our alternative banking platform by opening an office in Luxembourg, and we have appointed Nick Maton as its Managing Director. Nick has over 30 years of experience in financial services and in-depth knowledge of the alternative investment sector alongside his traditional banking experience. Nick has spent the past 15 years in senior executive positions at J.P. Morgan, HSBC and most recently as Managing Director of Intertrust, Luxembourg.

Alternative Investment Managers often encounter issues opening local bank accounts globally and completing transactions, due to policies and technologies that are typically mass-market or burdened by legacy systems and therefore not designed to efficiently cater for the complexity of investment structures. We have invested significantly in understanding the challenges that alternative investment institutions face, developing a bespoke front and back-end platform solely focused on the industry. This includes building a dedicated in-house team for effective onboarding, settlement and compliance of funds and their investment entities, whilst also meeting the understandably complex regulatory requirements of such funds. The Group now offers a service that traditional providers have struggled for years to provide to alternative investment funds. The result is that overseas accounts that would have taken months to open are now typically taking less than a week.

We receive revenues from the platform in the form of both account fees and commissions on spot trading. We typically receive most fees on set-up but recognise the revenues over a 12-month period. Our initial success is reflected in the £2.2m of deferred income on the balance sheet at the end of December 2021 which also highlights the potential for enhanced cash flow as we grow, and clients renew their account facilities with us annually with recurring account maintenance fees.

Revenue from payments and account fees represented 14% of Group revenue in the year. We are excited by the initial client engagement and the innovation from our team, and a dedicated marketing drive in 2022 is already underway. Not only do we believe we have the opportunity to continue scaling the business materially, but there will also be opportunities to offer FX risk management services to these clients.

Technology

Following our decentralisation, we were left with two separate technology stacks, each serviced by their own dedicated technology teams (one for FX Risk Management, one for Alternative Banking Solutions). A core element of our strategy is investing in technology across these two divisions.

Prior to our decentralisation, we had predominantly focused on investing in our Alternative Banking Solutions technology, with our new offering successfully launched last year. This naturally constrained our bandwidth and meant we invested less in our FX Risk Management technology than we would have liked to. However, following decentralisation, we now have a dedicated team and technology roadmap for FX Risk Management, and are looking forward to once again accelerating the rate of innovation within this division. This will begin with the launch of an upgraded client portal later this year. The new portal will benefit from an entirely new client-facing suite, as well as several powerful enhancements to our existing back-end technology stack. We are very excited about the value it adds to our offering and look forward to updating the market with more details once we have publicly launched.

Ultimately, with two purpose-built technology stacks serviced by two dedicated technology teams, our developers now have the focus, freedom, and capabilities to build the best possible products for our clients, and an organisational structure that will ensure they are clearly recognised and rewarded for the impact they have on their respective offerings.

Market developments

Since the beginning of H2 2020, the overall market opportunity has been broadly consistent with pre-COVID levels. Overall, our strong performance in 2021 reflects our continued investment in growing existing and new businesses, alongside the quality of our people, service offering, technology stack and highly diversified client base. We will continue to monitor conditions and business activity globally, but the signs are that hopefully COVID-19 is in retreat, which adds to our confidence that we are well-positioned for the year ahead.

Beyond COVID, we also faced additional challenges when the UK exited the EU at the start of 2021. Whilst we had been preparing for the possibility of a no-deal Brexit for a considerable length of time, the limited scope covering financial services within the Free Trade Agreement meant the team had to move quickly to establish an office and regulatory presence in Malta. This ultimately ensured we could continue servicing our clients with limited disruption to them or our market opportunity. The efficiency with which this process was carried out, despite the unprecedented macro back-drop is ultimately a testament to our ability to adapt and scale at speed. I would like to thank all those involved for their hard work in seeing this through, in particular Simon Kang, our General Counsel, and Tim Butters, our Chief Risk Officer.

The year ahead

When I think back to how far Alpha has come since we started in 2009, I am reminded that much of what made us successful back then continues to drive our success today.

Successful start-ups excel because they have great cultures, high levels of agility, know their customers inside out and go the extra mile. Established companies often slow down because, as they scale, they start to compromise on their culture, become mired in legacy and complexity, and lose touch with what's important to their clients and people.

The challenge is, how do you keep those 'start-up' credentials when you find yourself a much bigger business? Our answer was decentralisation, and it has been truly game-changing for the business. Moving into 2022 and beyond, our strategy is to remain focused on maintaining the credentials that I believe have always defined our growth story: cultural density, operational agility and client centricity.

I truly believe that if we can continue to maintain these three things whilst also growing our capabilities, we can maintain this exciting and rewarding growth story for long into the future. It is, as one of our close business partners put it, about building a business that is both 'David and Goliath'.

Financial Review

In the year ended 31 December 2021 revenue increased by 68% over the prior year to £77.5m with strong growth across all divisions. In the segmental analysis in note 3, which is primarily based on legal entities, the Group additionally segments the revenue between FX Risk Management and Alternative Banking Solutions to reflect the two main drivers of growth.

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. Revenue grew by 43% over the prior year to £57.0m with strong growth across all regions.

Alternative Banking Solutions revenue grew substantially from £6.4m in the prior year to £20.4m in 2021. The revenue includes £1.1m (2020: £nil) 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. As account fees are a growing revenue stream within the Group, management has reassessed revenue recognition relating to account fees. As a result, in 2021, revenue from annual account fees is recognised on a straight-line basis over the 12 months from the date the account was opened. At 31 December 2021 there was £2.2m of deferred revenue that will be recognised in the Statement of Comprehensive Income for 2022.

Total revenue from hedging products (forwards and options) has increased against the prior year from £27.5m to £40.7m. The revenue from forward transactions represents the difference between the rate charged to clients and the rate paid to banking counterparties. There were no structural changes in forward commission rates in the year in comparison to the prior year. Spot revenue increased from £14.7m to £26.1m due to the growth of Alpha Pay, a branch of Alpha FX Limited (formerly Alpha Platform Solutions), together with increased spot flow from the Institutional business, where underlying activities mean that spot transactions are more common.

In the prior year the Group entered into a settlement agreement with a Norwegian client whereby weekly repayments are due until June 2022 in respect of their obligations for unpaid margin totalling £30.2m. Throughout the current year the client has continued to meet their settlement agreement cash repayment obligations on time with a gross balance of £6.4m outstanding as at 31 December 2021.

As we continue to receive the weekly repayments from the Norwegian client, our results have benefited from the reversal of two accounting provisions. In the year ended 31 December 2021 the reversal of these two accounting provisions totalled £0.7m and can be broken down as follows:

· A provision for the estimated probability of default which reduced by £0.2m in the year ended 31 December 2021, with the credit included in operating expenses.

· A provision representing the difference between the nominal value of future payments and their net present value which reduced by £0.5m in the year ended 31 December 2021, with the credit included in finance income.

· The total of the outstanding provisions remaining as at 31 December 2021 was £0.1m.

Bad debts are expected to occur from time to time and are an inevitable part of Alpha's trading model, as the Group takes a risk-based approach that balances revenue opportunities against the risk of default. As described in note 4, the Group incurred a bad debt expense of £2.9m in the year in respect of two clients with sterling/euro and US dollar/Canadian dollar contracts that were unable to meet their obligations and subsequently entered administration.

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 91% to £33.4m. Statutory profit before tax increased by 94% to £33.2m.

The year ended 31 December 2021 was another year of significant investment. Overall headcount increased in the year from 147 to 214 at 31 December 2021 to support future long-term growth. Despite this investment and the impact of the recharge in bank charges of £1.1m being included in revenue as explained above, the underlying profit before tax margin increased to 43% (2020 - 38%). This was in line with the statutory profit before tax margin of 43% (2020 - 37%).

Taxation

When planning for the possibility of a no-deal Brexit and in response to the limited scope covering financial services within the Free Trade Agreement, we opened a wholly-owned subsidiary established in Malta in March 2021. This has ensured that we can continue to service all clients without disruption both now and in the future. As a result, a number of clients have been transferred from Alpha FX Limited to Alpha FX Europe Limited in Malta which has crystalised a tax charge of £0.9m within the UK for the transfer of business. This one-off tax charge is included within taxation in the year ended 31 December 2021 and has resulted in the effective tax rate increasing from 19% in the prior year to 22%.

Earnings per share

Underlying basic earnings per share increased in the year to 58.3p (2020: 32.8p) whilst basic earnings per share were 57.7p (2020: 31.7p).

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, underlying profit before tax margin, number of clients and number of Front Office staff.

Balance sheet

Overall net assets of the Group increased in the year by £19.2m to £109.8m. In the prior year the Group completed a share placing by the issue of 2,941,177 new shares raising £19.2m after expenses.

Cash flow

In the year ended 31 December 2021, 59% 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, as opposed to 51% in FY 2020. This has continued to have a positive impact on the Group's cashflow.

On a statutory basis, net cash and cash equivalents increased in the year by £25.1m to £108.0m. 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 year ended 31 December 2021 adjusted net cash on this basis has increased in the year by £35.9m to £88.2m. This increase represents the net impact of the cash conversion from the trading in the year together with the cash inflow of £13.8m from the client subject to a repayment plan.

* 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

Following the strong full year results, the Board is pleased to declare a final dividend of 8.0p per share (2020 - 8.0p). Subject to shareholder approval, the final dividend will be payable to Shareholders on the register at 19 April 2022 and will be paid on 13 May 2022. This represents a total dividend for the year of 11.0p per share (2020 - 8.0p).

B Share Growth Scheme

The Group has previously implemented the B Share Growth Scheme pursuant to which B Shares were issued to certain full-time employees of the Group. The B Share Growth Scheme is administered and managed by the Board. The B Shares contain a put option, such that, when and to the extent vested, they can be converted into ordinary shares in the Company. The B Shares vest in five equal tranches, occurring annually, starting on 31 December 2017 until 31 December 2021. The requirement for revenue growth of Alpha FX Limited in the first three years is 30% per annum, whilst vesting in years four and five requires 20% annual revenue growth.

The Group previously announced on 17 March 2021 that the Company had chosen to defer the issuance of shares to employees that had vested under the B Share Growth Scheme by circa 12 months. These shares (total of 630,279) will now be issued to these employees.

Since Alpha FX Limited achieved revenue growth in excess of 20% in the year ended 31 December 2021, the final tranche of B Shares has vested. Following careful consultation with employees, the Company has again chosen to defer the issuance of these shares to employees under the B Share Growth by circa 12 months. The total number of shares due to be issued in March 2023 is 675,419.

C Share Growth Scheme

The Group has previously implemented the C Share Growth Scheme pursuant to which C Shares were issued to certain full-time employees of the Group. The C Shares contain a put option, such that, when and to the extent vested, they can be converted into ordinary shares in the Company.

The C Shares vest in five tranches, occurring annually on 31 December 2018, 31 December 2019, 31 December 2021, 31 December 2022 and 31 December 2023. The first and second tranches that have vested were equal to 10% and 22.5% of the participant's C Share entitlement and all remaining tranches are equal to 22.5% of the participant's C Share entitlement. The requirement for revenue growth is 25% in 2021, 20% in 2022 and 20% in 2023 in order for vesting to occur. There was no revenue growth requirement for the shares in respect of 2018 and 2019. From 2021, the gain that a C Shareholder can receive is also capped through placing a ceiling on the maximum market capitalisation of Alpha of £650m. The result of doing so is that the C Shares will be entitled to a pro rata share of the gain in market capitalisation of Alpha between the hurdle price at the time of allotment and the market capitalisation ceiling of £650m.

Since Alpha FX Limited achieved revenue growth in excess of 20% in the year ended 31 December 2021, the third tranche of C Shares has vested. The Company will issue 219,494 ordinary shares to employees under the C Share Growth Scheme.

E Share Growth Scheme

The Group has previously implemented the E Share Growth Scheme pursuant to which E Shares were issued to certain full-time employees of the Group. The E Shares contain a put option, such that, when and to the extent vested, they can be converted into ordinary shares in the Company.

The E Shares vest in four tranches, occurring annually on 31 December 2021, 31 December 2022, 31 December 2023 and 31 December 2024. The requirement for revenue growth is 25% in 2021, 20% in 2022, 20% in 2023 and 20% in 2024 in order for vesting to occur. The gain that an E Shareholder can receive is also capped through placing a ceiling on the maximum market capitalisation of Alpha of £650m. The result of doing so is that the E Shares will be entitled to a pro rata share of the gain in market capitalisation of Alpha between the hurdle price at the time of allotment and the market capitalisation ceiling of £650m.

Since Alpha FX Limited achieved revenue growth in excess of 20% in the year ended 31 December 2021, the first tranche of E Shares has vested. The Company will issue 174,345 ordinary shares to employees under the E Share Growth Scheme.

Institutional Division Employee Share Ownership Scheme

The Group has previously implemented the Institutional Employee Share Ownership Scheme pursuant to which B, D2 and D3 Shares were issued to certain full-time employees of the Group. The B, D2 and D3 Shares contain a put option, such that, when and to the extent vested, they can be converted into ordinary shares in the Company. The B Shares vest in four equal tranches, occurring annually, starting on 31 December 2021 until 31 December 2024. The D2 and D3 Shares vest in four equal tranches, occurring annually, starting on 31 December 2022 until 31 December 2025.

Since the first tranche of the B Shares has vested. The Company will issue 99,828 ordinary shares to employees under the Institutional Employee Share Ownership Scheme.

Following the continued success of the Institutional Division, the Group is also in the process of adjusting the employee share ownership incentive scheme to include additional key employees as well as reward existing employees (the "Participants"). In order to enable equity to be awarded to the Participants to support the ongoing growth of the division, Alpha Institutional FX Limited ("Alpha Institutional") will be utilising both the issued shares in Alpha Institutional that were set aside for new and existing employees following the announcement on 20 November 2019, as well as issued shares that have been transferred back to Alpha Institutional from former employees. As a result, Alpha FX Limited's shareholding in Alpha Institutional is 73.9% (up from 70% previously announced due to shares transferred from former employees). The new shares being issued are structured in a similar way to the shares issued to existing employee shareholders of Alpha Institutional, and will vest in four equal tranches, for each of the financial years ending 31 December 2024, 31 December 2025, 31 December 2026 and 31 December 2027.

Save As You Earn (SAYE) Scheme

Following the vesting of the SAYE scheme, the Company will be issuing a total of 108,671 shares over the next few months starting on 25 March 2022 with the date of allotment, dependent on when employees elect to exercise their option during the prescribed window.

Based on the issue of shares pursuant to the B Share Growth Scheme, C Share Growth Scheme, E Share Growth Scheme, the Institutional Employee Share Ownership Scheme and the SAYE Scheme, applications will be made for the 1,232,617 new ordinary shares of £0.002 each in the Company (the "New Ordinary Shares") to be admitted to trading on AIM in the coming weeks and further announcements will be released in due course to confirm when these have taken place. The new ordinary shares will rank pari passu in all respects with the existing ordinary shares of the Company.

Alpha Canada Employee Share Ownership Scheme

Following the continued success of Alpha Canada, the Group is in the process of adjusting the employee share ownership incentive scheme for Alpha Canada to include additional key employees (the "Participants"). In order to enable equity to be awarded to the Participants to support the ongoing growth of the division, Mark Stuart, Managing Director of Alpha Canada has agreed to reduce his shareholding in Alpha Canada from 23% to 18%, and Alpha FX Limited has agreed to reduce its shareholding in Alpha Canada from 75% to 74.7%. The new shares being issued are structured in a similar way to the shares issued to existing employee shareholders of Alpha Canada (the "Existing Employee Shareholders"), and the shares will vest in four equal tranches, for each of the financial years ending 31 December 2024, 31 December 2025, 31 December 2026 and 31 December 2027. In addition, as part of the adjustments, the vesting schedule for the Existing Employee Shareholders has been amended to vest in four equal tranches for each of the financial years ending 31 December 2022, 31 December 2023, 31 December 2024 and 31 December 2025 (previously announced as vesting for each of the financial years ending 31 December 2021, 31 December 2022, 31 December 2023 and 31 December 2024).

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2021

Consolidated Statement of Financial Position

As at 31 December 2021

Consolidated Statement of Cash Flows

For the year ended 31 December 2021

Consolidated Statement of Changes in Equity

For the year ended 31 December 2021

Notes to the Consolidated Financial Statements

For the year ended 31 December 2021

1. General information

Alpha FX Group 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, Canalside Walk, London, W2 1DG. The consolidated financial statements incorporate the results of the Company and its subsidiary undertakings.

Statutory accounts for the year ended 31 December 2020 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2021 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 2021 and 31 December 2020 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. Accounting policies

Basis of preparation

The consolidated financial statements have been prepared in accordance with UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006.

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 2021 and 31 December 2020, 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 2021.

The preparation of consolidated financial statements in conformity with 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.

Accounting policies

The accounting policies adopted in these financial statements are identical to those adopted in the Group's most recent annual financial statements for the year ended 31 December 2020.

Segment reporting

The revenue for the Group is generated through the sale of forward currency contracts, option contracts, foreign exchange spot transactions and fees received from payments collections and currency accounts. The Group has five reportable segments based on the individually reportable subsidiaries and divisions. 

In 2021, 30% of the Group's revenue derived from within the UK. Details of segmental reporting are shown in note 3.

3. Segmental reporting

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

The Group has five reportable operating segments under the provisions of IFRS 8, based on the individually reportable subsidiaries and divisions. These five segments are:

· Corporate London represents revenue generated by Alpha FX Limited's Corporate clients serviced from the London head office.

· 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 (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.

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.

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 for the year ended 31 December 2021 has been split by the two divisions, as this now reflects how the chief operating decision makers manage the business. In the prior year, revenue by operating segment was split as FX hedging, and Spot & Payment transactions. Additionally, in the prior year, Corporate Amsterdam was included within Corporate London's figures, due to the size of the segment being immaterial under IFRS 8.

As a result of the above, the prior year figures have been restated to reflect both the decentralisation of the business, and the new operating segment.

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.

*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):

\* The provision of £1,275,066 in the prior year represents the initial recognition of the difference between the nominal value of future payments from the Norwegian client and their net present value. As the provision unwinds, the reversal is recorded within finance income (note 5). In the year to December 2021, £506,893 was reversed (2020: £712,639). As at 31 December 2021 there remains £55,533 to be reversed in finance income as the remaining repayments are due to be received in the period to June 2022.

** Credit risk is inherent in Alpha's business model and the Board accepts that the Group will inevitably incur credit losses from time to time. 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 (2020: £369,740).

5. Finance income and expenses

6. 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 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.

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

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

7. Dividends

All dividends paid 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 2021 of 8.0p per share amounting to £3,277,138 will be paid on 13 May 2022 to all shareholders on the register of members on 19 April 2022. 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'.

8. 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 May 2019, the Group signed a ten-year lease for the Head Office Premises in London expiring in May 2029. The rent is subject to a rent review after five years and the lease does not contain any break clause. The incremental borrowing rate used to discount lease liabilities at initial inception is based on the assessment of management of 4.5% (2020: 4.5%).

Right-of-use assets

Lease liabilities

9. Trade and other receivables

Trade receivables represent the fair value of derivative financial assets arising as a result of matched principal transactions. At 31 December 2021 and 31 December 2020, the receivables are shown net of the Credit Value Adjustment.

As the Group continues to grow, it is entering into an increasing number of longer dated trades that are due for settlement in over 12 months' time. In the prior year, a higher proportion of clients took the decision to close out their contracts early due to uncertainty over their cashflows as a result of COVID-19. Management now believe that a higher proportion of contracts will run to their original value date as clients have increasing certainty over their cash flows. As a result, management has taken the decision to present derivative financial assets as current and non-current as at 31 December 2021, based upon their expectations of when the contract will be realised. 

Contracts due for settlement in less than 12 months' time are classified as current, and contracts that are due for settlement in over 12 months' time are non-current. However, as this has been a change in management expectation in the year to 31 December 2021, the derivative financial assets in the year to 31 December 2020 have not been reclassified as current and non-current.

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.

Cash balances included within derivative financial assets relate to the variation margin called against out of the money trades with banking counterparties.

*Included within trade receivables and trade payables

11. Share capital

The following movements of share capital occurred during the year ended 31 December 2021:

On 23 March 2021, the Company issued 822,873 new shares following the vesting of shares under the B and C Growth Share Schemes.

On 23 March 2021, the Company issued 2,403 new shares in respect of shares issued following the early exercise by an employee of the SAYE share scheme.

On 19 April 2021, the Company issued 2,596 new shares in respect of shares issued following the early exercise by an employee of the SAYE share scheme.

On 10 September 2021, the Company issued 12,785 new shares in respect of shares issued to a former employee of Alpha FX Institutional Limited as part of a settlement agreement.

The following movements of share capital occurred during the year ended 31 December 2020:

On 9 April 2020, the Company issued 2,941,177 new shares following a placing.

On 18 August 2020, the Company issued 1,038 new shares in respect of shares issued following the early exercise by an employee of the SAYE share scheme.

On 17 September 2020, the Company issued 57,397 new shares following the exercise of the unapproved share option scheme.

12. 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.

Included within accruals and deferred income is £2,192,742 (2020: £nil) relating to deferred annual account fee revenue.

13. Events after the reporting period

In the lead up to and following Russia's invasion of Ukraine, the Group has taken the necessary precautions to mitigate the impact on our business. The Group has historically had limited exposure to the Russian rouble, currently 0.02% of the forward book, across two clients with strong financial standing. In addition, there are only a small number of clients with direct exposure to Eastern European currencies making up 1.7% of the forward book. These clients have all undergone a detailed credit review in light of recent events and those that have not already closed out their contracts continue to hold positions based on the strength of their credit standing. We continue to monitor our client base for businesses that have the potential to feel wider knock-on effects from the conflict.

There has been no material impact to the Group to date, nor does the Group anticipate any material impact to trading moving forward. However, recognising that the situation is developing rapidly, we will continue to review and monitor it closely.

Following the vesting of the B Growth Share Scheme for the year ended 31 December 2020, the Company will be issuing 630,279 shares in March 2022. Following the revenue growth target for the year ended 31 December 2021 being met for the B Growth Share Scheme the Company will issue 675,419 shares in March 2023.

Following the vesting of the C Growth Share Scheme for the year ended 31 December 2021, the Company will be issuing 219,494 shares in March 2022.

Following the vesting of the E Growth Share Scheme for the year ended 31 December 2021, the Company will be issuing 174,345 shares in March 2022.

Following the first year of vesting of the Alpha FX Institutional Limited share scheme for the year ended 31 December 2021, the Company will be issuing 99,828 shares in March 2022.

Following the vesting of the SAYE scheme, the Company will be issuing a total of 108,671 shares over the next few months starting on 25 March 2022, with the date of allotment dependent upon when employees elect to exercise their option during the prescribed window.

14. Availability of Annual Financial Report

The Group notes that the Annual Report & Accounts for the year ended 31 December 2021 will be posted to Alpha FX shareholders w/c 11th of April 2022. The document will also be available on the Group's website at www.alphafx.co.uk and in hard copy at Brunel Building, 2 Canalside Walk, London, W2 1DG.