Alpha Group ends challenging first half with record month

25th Jul 2023 08:18

(Sharecast News) - Corporate and institutional-focussed financial services provider Alpha Group International reported a decent financial performance and continued growth in a trading update on Tuesday, despite a challenging economic environment.

The AIM-traded company said group revenue increased 20% to £55m in the six months ended 30 June, compared to £46m in the same period in 2022.

Both divisions of the company, FX risk management (FXRM) and alternative banking, contributed significantly to that growth.

It said the FXRM division experienced a period of temporary reduction in corporate clients' appetite for FX hedging contracts.

Factors contributing to that included supply chain pressures falling to record lows, and increased borrowing costs, prompting companies to adopt a more conservative approach to sales forecasts and stock holding.

However, Alpha Group's corporate FXRM revenues remained resilient, and revenue from spot contracts increased by almost 50%.

The firm said its institutional FXRM offering also showed strong growth in both spot and hedging services, benefitting from cross-selling opportunities through the group's alternative banking solution.

Collectively, the FXRM division achieved impressive revenue growth of 21% in the first half, with client numbers increasing from 1,047 to 1,089.

The growth rates varied due to a focus on larger, higher revenue potential businesses and adjustments to credit appetite in response to the macroeconomic environment.

Looking at the alternative banking division, the company said the global alternative investment market experienced a decline in deal activity, resulting in fewer accounts being opened and reduced transaction volumes.

Despite that backdrop, it said the division achieved impressive results, with a 17% increase in revenues compared to the same period last year.

Additionally, deferred revenues from account fees grew from £4.9m to £7m, providing increased confidence and visibility for the future.

When considering the net increase in deferred revenue, Alpha Group said growth reached an impressive 32%.

On the financial front, the company said the alternative banking division reported average client balances of £1.9bn in the second quarter, with a blended average interest rate of 3.8%.

That resulted in more than £33m of other operating income, contributing to a 26% increase in adjusted net cash to over £142m at the end of the first half.

With an increasing number of clients adopting Alpha Group's alternative banking solution and current interest rate levels, the firm said it expected that to remain a significant tailwind, allowing for new and accelerated strategic investments.

Looking ahead, Alpha said that despite the challenging economic conditions in the first half, it managed to deliver strong results, leading to confidence over the outlook for the rest of the year.

The company said it expected continuing revenue and underlying profit growth in line with expectations, driven by momentum in the alternative banking business and strong other operating income from interest on client cash balances.

June marked a record month for the group, and the pipeline of activity for the second half was continuing to grow, further reinforcing Alpha Group's positive outlook.

"It is testament to our strategy, offering, and most importantly, our team, that we have continued to grow strongly in spite of some challenging macro-economic headwinds," said chief executive officer Morgan Tillbrook.

"I am proud that the operational progress and investments that we have continued to make during this period remain very much long-term focussed.

"I am therefore confident that our prospects remain excellent, and that as macro-economic conditions improve, we remain in a great position to capitalise on the sizeable market opportunity in front of us."

At 0804 BST, shares in Alpha Group International were up 0.23% at 2,205p.

Reporting by Josh White for Sharecast.com.