Alpha Group sees FY 2023 revenue growth amid headwinds

Alpha Group sees FY 2023 revenue growth amid headwinds

B2B payments player Alpha Group has published its FY 2023 earnings results, reporting a 12% YoY rise in top-line revenue to £110.4m ($137m) – the first time it has reported full-year revenues over £100m.

Underpinning this was a significant improvement in profit. While underlying profit before tax increased by 11% YoY to £43m, the company saw profit before tax increase 148% to £115.9m.

This profit upswing was the result of high interest rates, which had dual impacts on Alpha. While these hit the company’s underlying business growth, it was also the core driver of its sharp upswing in profits.

Having begun a £20m share buyback programme in January, over a quarter of which is now completed, the company is expecting a pickup in the markets over the next year, paired with easing monetary policies.

Alpha Group grows revenues, maintains profit margin
Alpha Group yearly revenue by segment and profit margin, 2018-2023

Alternative banking drives division growth for Alpha

While FX Risk Management (FXRM) remains the largest of Alpha’s two main divisions, accounting for 69% of revenues in 2023, it grew at 10% YoY to £76.3m, compared to Alternative Banking, which saw 18% growth to £33.9m, giving it 31% of revenue for the year.

Cobase, which became Alpha’s first acquisition in December 2023, contributed around 0.2% of revenues for the year, although did see YoY revenue growth of 67%.

Alternative Banking drives growth for Alpha Group in 2023
Alpha Group yearly revenue by division, 2020-2023

FXRM faced what the company described as “a difficult macro environment”, although did see average revenue per client increase by 7%, while overall client numbers for the division grew by 2%. The number of accounts booking trades on the FXRM platform, however, increased by 19%.

Alpha again restated its increased focus on providing simpler products in this space, against what it sees as a trend for increasingly complex products that provide initial benefits but are unfavourable for clients in the long run. Here, it has reduced complex products from 13% to 4% across 2023. This has impacted the company’s growth, however Alpha did draw a connection with its increased revenue per customer.

Alternative banking, meanwhile, saw the number of accounts increase by 54%, while average client balances increased by around 30% YoY, with interest rates averaging 3.6%. 

While Alpha’s Alternative Banking division covers both Alpha Pay and almost a quarter of its Institutional business, its FX Risk management division is split between its Institutional segment and its three main Corporate segments: London, Toronto and Amsterdam. 

Alpha sees significant profit gains amid macroeconomic environment

The company’s significant top-line increases in profit before tax were in part the result of a sharp rise in interest on client balances, which climbed to £73m in 2023, up from £9.3m in 2022.

However, underlying profit increases were much more in line with revenues and profit margins remained in line with 2022 overall, although did see some movements within individual segments.

Alpha sees broad profit margin spread for segments

Alpha Pay and Institutional both saw profit margins drop slightly year-over year, continuing a multi-year trend that began during the pandemic. Meanwhile, Corporate Amsterdam and Corporate London both saw increases in profit margins to top 50%, while Corporate Toronto remains considerably lower.

The company did also see an increase in group Front Office headcount of 25% during the year, although it now plans to focus on growing the efficiency of its systems rather than focusing on headcount or technology investments in order to “do more with less”. It also plans to increase cross-selling as it heads into 2024 and has a strong position in terms of net cash, which allows it to take strategic moves as markets pick up.

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