AFX.L Regulatory News (AFX)

21 July 2022

Alpha FX Group plc

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

Trading Update

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 a trading update for the six-month period ended 30 June 2022.

Key Highlights

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 Up until March 2022, client numbers were stated at Group level and defined as 'clients that generated more than £10,000'. Following the Group's decentralisation into FX Risk Management and Alternative Banking, client numbers have been separated out and redefined to provide a clearer picture of growth within each division. For FX Risk Management - a client remains defined as a company that generates more than £10,000 in revenue per annum for the Group. For Alternative Banking - the Group reports on the number of accounts that have been invoiced in the past 12 months.

3 'Account' refers to an account opened by clients to send, hold and receive their funds (and that has been invoiced in the past 12 months).

Overview

Trading across the Group has been strong into the first half, with revenue increasing 35% to £46m on the same period last year.

We have continued to grow both divisions alongside our planned investments in headcount, technology and infrastructure. We added 74 new team members in the Front and Back Office primarily focused on business development, client services and compliance. As a result, overall headcount has increased from 214 to 288 in the first half. Trading remains strong, and with a substantial opportunity ahead, the Board expects to comfortably meet its current expectations for the full year.

We look forward to providing a more comprehensive update on the first half in the interim results statement, which the Group expects to publish in September 2022.

Market Dynamics

Despite the inflationary pressures impacting businesses worldwide, we continue to observe healthy markets, in line with those of pre-Covid levels. Overall, our strong performance in the period reflects our continued investment for long-term growth, alongside the quality of our people, differentiated service offering and, importantly, our highly diversified client base. There continues to be no material impact experienced from the Russia-Ukraine war or the macroeconomic volatility, nor does the Group anticipate any material impact ahead.

FX Risk Management

Across our FX Management division our teams have performed very strongly to grow the client base to 975 at 30 June 2022 (H1 2021: 801, FY 2021: 881) and deliver over 30% revenue growth against H1 2021 to £32m.

Our internal sales recruitment team also made excellent progress during the period and contributed to 34 new Front Office hires. Each new cohort ensures we continue to pave the way for long-term sustainable growth, but in the medium term there is considerable capacity for growth from within our existing team.

Our London office serves as the incubator for fostering our strong culture and talent, enabling the establishment of further expansion overseas. Our Milan office is testament to this: launched in March 2022 by three well-proven Alpha individuals, the business has grown quickly under their stewardship and has already become profitable. We continue to focus on growing in new territories, with offices in Luxembourg and Australia expected to be formally established in due course following regulatory approval.

In May the planned launch of our upgraded client portal for FX Risk Management went live. The portal benefits from an entirely new client-facing suite, as well as several powerful enhancements. We are excited about the value it adds to our offering and the feedback from our client base has already been very positive. This new launch is just the start of an ongoing roadmap of insight led innovation; more new features are due to be released throughout the year, each designed to deepen our differentiation, and add further value to clients by improving the efficiency and effectiveness of their currency management.

We continue to manage our growth in clients and revenue in a measured way and remain focused on monitoring concentration risk across an already well-diversified client base (full details of which can be viewed on our website). Our strong cash and liquidity position and robust credit control procedures enable us to confidently grow our forward book in the current climate and provide a competitive advantage over our peers.

Alternative Banking

Alternative Banking performed excellently in the first half, with the Group experiencing significant demand for its global accounts solution focused on the alternative investment sector. Revenue grew over 40% against H1 to £14m, and the number of live accounts invoiced grew to 3,061 by 30 June 2022 (H1 2021: 904, FY 2021: 1,746,). Additionally, deferred revenue from account fees which will be recognised over the next 12 months increased to £4.0m as at 30 June 2022 (31 Dec 2021: £2.2m).4 Following significant ongoing investment into the Group's technology stack and new hires within this division, the Group has further improved its account onboarding times during the period in order to meet the considerable demand seen so far this year for our purpose-built solution, and we are pleased to report record account openings in May and June as a result.

The decentralisation of the business, which was completed at the start of 2021, has allowed the Alternative Banking division to scale at the pace required. FX Risk Management and Alternative Banking are two very different business models servicing two very different needs, hence we built a custom-made solution for the Alternative Investment industry with a proprietary technology stack. Due to the complexity of the Alternative Investment industry, it has been paramount that all of our systems are front-to-back customised for the sector, and that this is supported by dedicated teams in Compliance, Technology, Product, Client Services and Sales. The significant investments made over the last 24 months have given us the right foundation from which to scale and this investment will continue in response to the growing demand for the product. As part of this, we have agreed a ten-year lease on a new 20,000 sq ft office in Malta, which will allow us to continue growing our Compliance, Client Services, and Technology teams within the Alternative banking 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. The team in Malta has already grown to 60 people by 30 June 2022, and based on the current demand for the solution, is expected to grow to over 180 people over the next three years.

Morgan Tillbrook, Chief Executive Officer of Alpha FX said:

"I'm pleased to report on a strong period of trading for the Group, with strong growth across both our divisions. Following the decentralisation of our divisions, we have never been more confident in their significant standalone potential. The enhanced focus is enabling each division to better direct their resources toward their distinct strategic priorities, in turn, creating more value for all their stakeholders, and positioning them to build a new era of innovation and growth."

4 The Group typically receives most fees for its accounts solution on set-up but recognises the revenues over a 12-month period.

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.