Shares in foreign exchange risk management and alternative banking solutions group Alpha FX (AFX:AIM) gained 4.5% to reach a new all-time high of £18.74 after reporting 90% growth in first half revenues.
A broad recovery in client activity post lockdown as well as continued growth from new territories drove the strong growth in revenues which reached £34.2 million at 30 June 2021, up from £18 million in the first half of 2020.
Lower travel, hiring and client entertainment expenses resulted in an uplift in the pre-tax profit margin to 45% from 27% last year while the added benefit of operational gearing saw pre-tax profit increase 214% to £15.4 million.
Operational gearing results in profit growing faster than revenue when a business has a high proportion of fixed costs. The costs are absorbed across a higher revenue base, disproportionality increasing profits.
The company indicated that a normalisation of expenses in the second half and additional hiring and investments in the business will likely see a lower pre-tax margin.
Chief executive Morgan Tilbrook told Shares that the business had invested in an inhouse recruitment team composed of five specialists which was having a marked effect on bringing new talent into the business.
GROWTH ACROSS THE BOARD
The FX (foreign exchange) risk management division which supports corporates and institutions that need to trade currencies for commercial reasons saw revenues increase 48% to £24.7 million.
The company services clients through sales teams based in the London, Toronto, and Amsterdam while a Milan base is due to go live in the second half subject to regulatory approval. London continued to see strong growth with revenues rising 29%.
The Canadian office was said to have made a ‘significant’ profit contribution while Amsterdam also made a profit contribution despite only opening in April last year.
The nascent but fast-growing Alternative Banking division achieved consecutive record-breaking revenue growth in the first two quarters of the year. First half revenues grew 600% to £9.5 million led by the payments business.
Looking forward the company said the market opportunity was larger post pandemic than before and it continued to see healthy demand for its services from existing and new clients.
