Argentex grows customers in H1 23 but share price dips

Argentex grows customers in H1 23 but share price dips

UK-based corporate FX player Argentex saw group revenues grow 28% to £25m in H1 23, driving a 16% increase in operating profit to £5.2m. However, the company’s share price fell after it noted a recent reduction in market activity in its institutional and European divisions, as well as a dip in its operating margin from 23% to 21% after heavy investment. 

Argentex revenues rise, profit margin hit by investment
Argentex H1 revenues, 2019-2023

As mentioned in Argentex’s last earnings, the company has now changed its reporting period, transitioning from a 31 March year end to a 31 December year end. This means that H1 2022 and H1 2023 now refer to calendar H1 (1 January to 30 June). Previously the company had reported its first half as being the period from March to September. 

Argentex key revenue drivers in H1 23

Argentex attributed its growth to investment in new products and geographies, which represented 23% of total revenues in H1 23, while digital revenues also grew 100%. New products include Alternative Transaction Banking, which allows businesses to collect, hold and send money to other businesses internationally, across a number of multi-currency accounts. Adopted by 43 new clients in Q2, the product aims to compete directly with traditional banks, a common theme amongst cross-border fintechs.  

The number of clients traded ramped up by 8% to 1,493, with the company putting this down to its broader product offering. Overall, Argentex saw an 18% increase in average revenue per client traded, and it aims to boost this by cross-selling across its existing clients – the top 20 of which represent 38% of revenue. 

Overseas operations also grew, with Argentex Europe more than doubling its contribution to £1.8m, though this is still a smaller part of the business, with around 76% of revenues generated from the Netherlands. Argentex expects to expand its international base in the Netherlands, where it acquired a payments licence in 2022 and is now one of three non-bank providers of a Dutch Virtual IBAN.

Argentex grows its client base
Argentex H1 number of customers, 2020-2023

Argentex’s investment and diversification strategy

Argentex said the decline in profit was anticipated as it continues to spread its investment across three pillars: People, Technology and Product, and International Expansion. Overall tech investment was £2.6m, up from 1.7m in H1 22, while the number of full-time employees has also grown rapidly since the end of last year to 165, with many new additions being tech hires. 

Argentex increases investment in new employees
Argentex H1 number of employees, 2020-2023

Argentex CEO noted that changing central bank policies in response to inflation have resulted in reduction in currency volatility amongst the sterling, a less favourable environment for an FX broker. However, the company aims to continue to diversify its offering in order to combat this.

As we saw with payments processor Adyen, investing expenses away from profits and market slowdowns can spook investors, but Argentex believes investment in a more diversified product portfolio will help mitigate short-term impacts. The company noted that despite tougher market conditions after the reported period, it has delivered double digit growth of 20% to £35m from the end of H1 23 to 5 September 2023, compared to the same period last year.

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