Alpha Group describes strong 2023 performance

(Sharecast News) - Alpha Group International reported a strong financial performance 2023 in a trading update on Thursday. The AIM-traded firm's unaudited figures showed a 12% increase in revenue to £110m, with profit before tax soaring more than 140% to £115m.

Underlying profit before tax grew 10% to around £42 million, as the company maintained a consistent profit margin of 39%.

Its balance sheet strengthened, with adjusted net cash rising by over £60m to more than £177m.

Alpha Group highlighted its diversification strategy's success, yielding resilient revenue and robust profit growth.

It also emphasised a disciplined credit and risk approach, resulting in its lowest client default levels in five years.

Strategic investments led to operational efficiencies, and hiring focused primarily on the front office, the board explained.

Key initiatives in 2023 included the launch of a fund finance division in May, the establishment of new corporate FXRM offices in Madrid and Munich, and the acquisition of Cobase in December.

The company acknowledged challenges from the interest rate environment and macroeconomic uncertainties throughout the year.

While the third quarter presented difficulties, Alpha said it ended the year positively with record revenue in the fourth quarter.

Despite potential macroeconomic challenges in 2024, the firm said it was confident in its strategy.

In the FX risk management (FXRM) sector, conservative client hedging and credit appetite amid uncertain economic conditions posed challenges.

However, diversification efforts, including growth in institutional FXRM and overseas offices, mitigated issues in the UK corporate business.

Alpha Group said it expected growth prospects in FXRM for 2024, with investments positioning the division for success.

In alternative banking, reduced deal activity affected account growth, but revenue increased 18% to £34m.

The division generated over £73m in other operating income from interest on client balances, indicating optimism for future prospects.

Alpha Group's fund finance offering, launched in May, had a successful start, with plans to leverage cross-selling opportunities.

The acquisition of Cobase in December expanded the company's product portfolio and client base, particularly among medium to large corporates.

Alpha said it was aiming to maximise synergies between the two businesses in the long term.

"Despite a challenging trading environment in 2023, our team has continued to work hard to deliver profitable revenue growth, whilst also making excellent progress on our long-term growth strategy," said chief executive officer Morgan Tillbrook.

"At the same time, our previous diversification into alternative banking has enabled us to benefit from exceptional levels of interest income.

"Whilst we have opted to exclude these numbers from our underlying profit for transparency, the fact remains that this is very much a by-product of our diversified business model and is providing us with transformative levels of capital from which we can significantly enhance our long-term growth prospects."

Tillbrook said the company had already started to show that in 2023 with the acquisition of Cobase, the launch of its new fund finance division, and new offices in Spain and Germany.

"The higher interest rate environment has created economic headwinds which have impacted our underlying revenue momentum.

"However, the additional operating income of over £73m that we have generated as a result of this same environment has more than compensated for this, and highlights the resilience of our diversified business model.

"In simple terms, 2023 showed that in a higher interest rate environment, underlying growth becomes more challenging, but the cash and statutory profit from interest income becomes exceptional - a trade-off that, in reality, creates significant opportunities for Alpha's long-term growth prospects."

At 1420 GMT, shares in Alpha Group International were down 3.55% at 1,630p.

Reporting by Josh White for Sharecast.com.