ALPHA FX GROUP PLC
Annual Report 2019
ALPHA FX GROUP PLC
A 10-year track record.
A day 1 mentality.
The end of 2019 marked Alpha’s 10-year anniversary. Within that time, we have delivered
organic revenue and profit growth each and every year by always making decisions for the
long-term. Both strategically and culturally.
Today, our business looks very different to how it did ten years ago. However, the
foundations behind our success have always remained the same: a talented and ambitious
team, inspired by a shared vision and life-changing career opportunities. This is why, as a
company, we continue to put our people first, knowing that in turn they will do the same
by our clients and that our shareholders will benefit from the growth that results.
Drawing a line under the last decade, we now look to 2020 and beyond with the same level
of ambition we had when we first started. What’s more, by expanding our geographies
and range of products, our addressable marketplace is today larger than it has ever been
before and we are approaching it with a team that has never been stronger. This is without
doubt the most exciting stage in Alpha’s journey so far, and whilst this report outlines
another strong set of results, the feeling amongst our entire team is unanimous – we are
just getting started.
Company Overview
Highlights 2
Business Introduction 8
Our Market 10
Strategic Report
Business Model 14
Chairman’s Statement 26
CEO’s Statement 28
Our Strategy 32
Financial Review 38
Governance
Principal Risks and Uncertainties 46
Board of Directors 56
Corporate Governance Statement 60
Our Behaviours 66
Remuneration Committee Report 72
Audit Committee Report 75
Directors’ Report 77
Financial Statements 86
Section 172 Statement 42
Shareholder Information 126
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HIGHLIGHTS FINANCIAL
Financial Highlights
FY 2019
REVENUE
UNDERLYING BASIC EARNINGS PER SHARE
IN SUMMARY
£35.4m
(2018: £23.5m)
+51%
30.1p
(2018: 22.7p)
UNDERLYING OPERATING PROFIT BEFORE TAX1
BASIC EARNINGS PER SHARE
£14.7m
(2018: £10.0m)
+47%
27.7p
(2018: 21.8p)
OPERATING PROFIT
TOTAL ANNUAL DIVIDEND PER SHARE
£13.7m
(2018: £9.7m)
+41%
7.6p
(2018: 6.5p)
Revenue for the year increased by 51%
to £35.4m with revenues from Corporate
clients serviced from the London Head office
increasing by 34% to £27.2m. The Institutional
team that was established in March 2018 had
an impressive year with revenue of £6.3m
compared to £3.1m in the prior year, whilst
the recent investments in Canada and Alpha
Payment Solutions generated revenue of
£0.9m and £1.0m respectively.
Group operating profit in the year grew by
41% to £13.7m. Underlying operating profit
is also presented in the income statement to
allow a better understanding of the Group’s
financial performance on a comparable basis
from year to year. The underlying operating
profit excludes the impact of share-based
payments and in the year ended 31 December
2019 also excludes the one-off property
related costs relating to the move to new Head
Office premises in Paddington. On this basis
the underlying operating profit in the year
increased by 47% to £14.7m.
Despite the significant investment in the new
businesses, the underlying operating profit
margin for the year was 42% (2018 – 43%).
During the year the total headcount of the
Group increased from 82 to 124.
1 Underlying excludes the impact of exceptional property related costs for the move to Paddington office and non-cash share-based payments made during the financial year.
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 HIGHLIGHTS OPERATIONAL
Operational Highlights
FY 2019
CLIENTS
INTERNATIONAL REACH
LONDON OFFICE
+34%
36
Increase in clients2, from 482 to 648 in 2019.
Revenue generated outside of the UK from
clients in 36 countries.
New HQ
Moved into our new office in Paddington,
which is up for nomination with a prestigious
commercial interior-design body.
EXPANSION
EMPLOYEE PARTNERS3
NEW DIVISIONS
+42
44%
We have recruited 42 additional people to join our
44% of employees are Partners in the business
team, taking our headcount to 124.
as at 31 Dec 2019.*
Alpha Canada
and Alpha
Payment Solutions
Alpha Canada and Alpha Payment Solutions
grew revenue consecutively quarter on
quarter in their first full year of trading.
2
The Group exclude Training Accounts (those that have generated less than £10,000 in revenue since being onboarded) in order to provide a clearer picture of client numbers for the
purpose of these figures.
3
The Group defines ‘Partner’ as an existing employee who held an equity stake prior to the Company’s IPO; or is a participant in either the Group’s B or C growth shares schemes; or owns
shares in one of the Group’s subsidiaries. It does not include employees who are solely part of the SAYE scheme when calculating these percentages.
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019
BUSINESS INTRODUCTION BUSINESS INTRODUCTION
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 What makes Alpha different?
Overview
BUSINESS INTRODUCTION BUSINESS INTRODUCTION
FX Risk Management
International Payments
and Collections
We are Alpha – a company where people and technology come together to deliver powerful FX risk
Exchange rates are fluctuating all the time. A modest
Sending and receiving payments internationally should
management and payment solutions to over 600 organisations across 30+ countries.
In an industry that typically adopts a mass-market approach, we partner with higher value clients,
to provide enterprise-level solutions across three key areas: FX risk management, international
payments and collections.
Our ‘quality over quantity’ approach means that we concentrate our time and effort on
considerable revenue opportunities and earn the loyalty of our clients by making a significant
difference to their business. This fundamentally requires intelligent, ongoing human interaction
which we then amplify through quality processes, capital and technology.
By ensuring our value proposition relies on intelligent human interaction, supported by great
processes and technology, we significantly reduce the risk of margin compression and copycat
competitors. This remains our significant competitive advantage and is what continues to power
our sustainable and profitable revenue growth.
movement of just 1-2% can have a material impact on
be a simple requirement for any business. However,
the financial performance of organisations trading or
traditional systems are struggling to keep up with
investing internationally. Indeed, annual volatility in
the fast paced and increasingly complex commercial
GBP/USD has moved on average 14% each year over
landscapes of businesses operating internationally.
the past 30 years.
As a result, sending and receiving payments is generally
more time-consuming, complicated and costly than it
Under our approach to FX risk management, we
needs to be.
provide clients with strategies, analysis and technology
that helps them manage currency volatility more
Large organisations with vast operations and payment
effectively, whilst saving them time and resource. We
volumes spanning multiple countries are those that
then underpin these solutions with a variety of ways to
stand to lose the most from these inefficiencies, as they
buy and sell currency.
are amplified by the sheer scale and complexity of their
operations. Equally, they have the most to gain if these
Despite our consultative approach, we charge no
problems can be overcome.
upfront costs or retainer fees, instead monetising our
services through a margin on trades. By doing so,
This is where Alpha Payment Solutions adds value.
we are able to provide a service traditionally the
Our international payments and collections offering
privilege of FTSE100 companies or those with large
has been built from the ground-up using greenfield
treasury departments and make it accessible to those
technology, deep domain knowledge, and a global
medium to large businesses that are impacted by
banking network which, until now, has largely remained
currency volatility.
beyond the reach of medium to large businesses. Our
strong sales team and track record has enabled us to
cut through a noisy marketplace to introduce medium
to large businesses to an enterprise-level payments
offering – one that marries high levels of expertise with
high levels of innovation to provide significant ROI.
Furthermore, in 2020 we will be expanding our offering
further to provide a comprehensive alternative banking
solution for clients covering payments, collections,
accounts, and virtual accounts.
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 BUSINESS INTRODUCTION OUR MARKET
Our Market
Market Opportunity
Quality Not Quantity
Growing our runway
In an industry that typically turns over high volumes of
For our FX risk management clients, our focus is on
When Alpha listed on AIM in 2017 we operated solely
As as result, we believe the market opportunity for
clients, our focus remains on growing and retaining a
supporting medium to large businesses that are
in the UK and had one core offering – corporate
Alpha is more exciting than ever before. Furthermore,
high-quality client base to create strong and enduring
materially impacted by currency volatility – those
currency risk management. Since then, our market
we believe that the dynamics within each of our
mutual value.
with turnover typically ranging from £10m – £500m.
For our payments clients, our focus is also on
We provide enterprise-level solutions to over 600
supporting medium to large businesses which are
opportunity has grown even larger, driven by the
markets, married with the strength of Alpha’s own
following:
offering and focus on high value clients, means the
Group is well placed to grow its market share long into
medium to large organisations in more than 30
sending and receiving large volumes of payments
−
Alpha’s plc status and increased balance sheet
the future.
countries, the majority operating in the UK, Europe
and/or have complex and extensive international
and Canada. Managing currency and international
operations.
payments is a universal problem for any organisation
operating internationally, and as a result our clients
span a wide variety of industries. Regardless of
geography or industry, all however share one
overarching challenge – the need to manage their
international finances in the most effective and
efficient way possible. Alpha’s role is to provide a
service that empowers them to do this, whether
through providing support around currency risk
management, or introducing new efficiencies into their
payment and collection processes.
has enabled us to expand our forward book to
service increasingly larger clients, who would not
have conducted business with us pre-IPO, due to
perceived counterparty risk.
−
Investment in a multi-lingual team has enabled
geographical expansion, with notable traction in
the Netherlands, Nordics, Spain and Italy.
−
The expansion of our product offering from
corporate currency risk management in 2017, to
now include institutional FX services, derivative
products, payments, collections and accounts,
has enabled us to increase our wallet share from
existing customers, as well as service new types
of clients whose needs previously fell outside our
capabilities.
−
The opening of our Canadian sales office has
enabled us to overcome regulatory and time zone
hurdles, to access a large and exciting new market
which shares similar dynamics to the UK.
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 BUSINESS INTRODUCTION OUR MARKET
Competitive Landscape
In order to understand the competitive landscape we face, we have provided
a breakdown of each of the key markets we operate in below.
FX Risk Management
Payments and Collections
The corporate and institutional foreign exchange
The growing familiarity of organisations with NBFIs
Banks are by far the largest service provider of
By securing unique partnerships with large
market within the UK, Europe and Canada can largely
means that, ostensibly, foreign exchange specialists
international payment and collection solutions to
multinational banks, alongside greenfield technology,
be broken down into two segments – banks and
have a greater opportunity than ever before to gain
medium to large businesses. However, only a cadre of
the Group established Alpha Payment Solutions to
non-bank financial institutions (‘NBFIs’), like Alpha.
market share from the banks. This has led to a rise
the largest multi-national banks have retained a truly
provide a leading international payments offering to
Banks continue to dominate the industry: all
makers (particularly in the corporate space) and as
required to support such an offering. Since 2008,
cloud-based platform. Partner banks also benefit
organisations have at least one banking relationship
many do so with similar offerings, the receptiveness
regulatory sanctions and the global recession have put
from leveraging Alpha’s high-performing sales team,
and therefore banks’ market share has largely been
of decision makers to changing providers is overall
increasing pressure on banks – pressure that has been
cutting edge technology and focus on medium to large
in the number of specialists selling to decision
global presence and therefore provide the solutions
medium to large clients, delivered through an intuitive,
inherited through pre-existing relationships and
very low.
apathy towards change. However, bank offerings
further exacerbated by legacy technologies and the
businesses, with Alpha acting as a valuable aggregator
advent of digital challenger banks who are increasingly
to a market segment historically too resource intensive
are also typically transactional and reactive, with
In light of the above, we believe the foreign exchange
vying for domestic market share.
for them to service cost-effectively.
corporates and institutions left to understand
providers best positioned to capitalise on this trend
and solve problems around effective currency
are those with a strong track record, intelligent
As a result, only a small number of large global banks
Importantly, the same core competencies that have
management themselves.
sales team, and differentiated high-tech, high-touch
service offering. As a Group that fulfils each of these
have continued to invest in their international product
enabled Alpha to secure unique banking relationships,
offerings, and those that have remain predominantly
also provide high barriers of entry to new entrants
NBFIs make up the remainder of the market. With
criteria, Alpha is therefore positioned well on all
focused on large FTSE-level clients – those that
(such as the growing wave of Fintechs).
sales teams dedicated to acquiring clients, they are
fronts to continue capturing market share in this
generate sufficient revenues to offset the cost of
typically more aggressive then banks, and as a result
space – not just from bank providers, but also its
maintaining their vast international infrastructure
Whilst Alpha Payment Solutions remains at an early
have been increasing market share. However, they also
non-banking peers.
rely on high volumes of customers and transactions
to generate revenues, and their offerings are primarily
differentiated by pricing, products and personalities.
and physical presence. Furthermore, integrating with
stage in its development, we are excited about the
these banking providers is often a complex process
opportunity this market presents. Not only will this
that requires large treasury teams and sophisticated
offering enable us to expand our wallet share within
treasury systems (something that clients outside of
our existing client base, but it will also increase our
the FTSE index do not typically have). Because of these
addressable market further, by enabling us to service
trends, many businesses outside of the FTSE-elite
clients who have payments or collections as a primary
remain underserviced by their primary (and more
driver, rather than FX risk management. Furthermore,
domestically focused) banking providers, prohibiting
the recurring nature of payments and collections,
them from accessing products and services that would
means that clients acquired in this space provide
dramatically streamline their international banking
recurring revenues.
requirements.
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 BUSINESS MODEL WHAT SETS US APART
What sets us apart
Working in a competitive industry, we have grown strongly year on year since
inception. The fundamental drivers behind our growth (listed below) are relatively
simple. All businesses for example have their own people, culture, owners,
technology and finances. However, it is how these resources are shaped and
prioritised that determine the momentum they generate.
It is therefore the strength and deep levels of differentiation within each of the
following areas that continues to set us apart as a business.
−
−
−
−
−
−
Talent
Culture
Clients
Technology
Ownership
Financial Status
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 BUSINESS MODEL WHAT SETS US APART
Talent
Culture
Clients
Technology
As the talent of a team grows, so too does its
Guided by a shared set of behaviours and principles,
In an industry that is generally volume-based,
Technology provides both Alpha and its clients with a
performance potential. By investing significantly
as well as a clearly defined vision, mission, and purpose,
transactional and target driven, we continue to grow
smarter way of working, using cloud-based systems to
in our recruitment process and retaining our high
our culture is key to ensuring talented people get the
our business by forging long-term relationships with
empower both our employees and clients. Internally, we
standards, we ensure we have the foundations in
most out of their potential, both for themselves and
a more focused group of higher value clients. The
leverage proprietary software that enables us to work
place to achieve high levels of performance, both for
the business. Our people work harder, develop faster,
result is strong levels of client retention, which in
more efficiently, make more informed decisions and
ourselves and our clients.
dream bigger and achieve more because of our culture.
turn enables us to invest more time and resource
therefore achieve greater output. Externally, we provide
Importantly, there are plenty of talented people
The result is exceptional levels of commitment and
have, rather than stretching our resources across
designed to improve efficiencies and decision making
within average businesses – a reminder that
service innovation for our clients, delivered by people
larger numbers of lower value opportunities.
across our three core disciplines: FX risk management,
into providing a superior service to the clients we
our clients with modular platform-based solutions
unless talent is empowered, inspired and given
who are inspired by the opportunities they have and
the environment and support to grow, it will never
the team they work with.
realise its potential. This is why our culture, which
empowers and drives our people, is key.
KEY CHALLENGE:
ALIGNING INTERESTS
payments and collections. Ultimately, by building leading
edge solutions for both our clients and ourselves, we
ensure we remain at the forefront of our industry.
KEY CHALLENGE:
DILUTION OF CULTURE AND TALENT
As we scale and our business becomes more complex,
the pressures of resource gaps, managing budgets,
growth targets and external influence can all lead to
cultural and talent compromises. To prevent this,
we continue to ensure we stay true to our values and
vision, hiring within our own image.
Businesses that force employees to prioritise their
KEY CHALLENGE:
own interests over their clients invariably see an
ROI RETURN ON INNOVATION
erosion in the quality of their service, client retention
and employee satisfaction.
Keeping up with the pace of innovation is important and
the high-performance nature of our tech team ensures
The optimum business model is one where both
we are well placed to do so. However, equally important
client and employees’ interests are aligned. We
is understanding what clients want and the problems they
continue to achieve this by remunerating staff
need solving.
based on long-term relationships with clients, not
short-term results, whilst also never setting individual
In looking to achieve a competitive advantage from our
revenue targets per client. Integrity is everything at
technology, our biggest challenge is to not be drawn into
Alpha; we are not and never will be a business for
innovation for innovation’s sake. We instead focus on
individuals who are happy to generate revenue at the
developing solutions that are the most relevant to our
detriment of a client.
client base and therefore are the most likely to provide
the highest ROI for all involved. We’re leading edge, not
bleeding edge and those that lead our tech offering, have
a strong track record delivering successful technology
solutions.
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Collective
Ownership
Financial
Status
Alpha is a founder-led business with over 40% of
The strength of our balance sheet and capital position
Directors and employees owning some form of
ensures we are able to continue investing in our
equity interest in our Group (‘Partners’). We are
business to support our growth.
also a business on a journey: our ambitions are
long-term and we are fortunate enough not to have
Our plc status also provides us with a compelling
any predefined investment horizons that might
story and public track record with which we can
curtail them. As a result, our commitment and
differentiate ourselves and attract new clients
teamwork go further than most – our people put
– especially international businesses and larger
the business first because they recognise what they
corporates. Furthermore, it has enabled us to
do (has) or will directly affect them in the future.
onboard stronger blue-chip banking counterparties,
negotiate better terms with our suppliers, and attract
better talent.
KEY CHALLENGE:
RETAINING OUR OPERATIONAL FREEDOM
Finally, as a public company with strong financial
backing, the pressure to compromise or cut corners
In order to ensure we maintain the same level of
in order to achieve short-term results is not a threat.
collective ownership as we scale, we are committed
Instead, we can focus on growing our business in a
to always providing employees with the opportunity
way that will deliver long-term sustainable growth and
to work towards becoming a Partner, with new
build shareholder value.
equity issued through performance-based growth
share schemes. These schemes incentivise and
reward employees for achieving exceptional results,
which in turns translates into enhanced returns for
shareholders.
BUSINESS MODEL WHAT SETS US APART
“ FX has a huge impact on our investors and the team at Alpha
are instrumental in helping us structure a strategy to mitigate
risk on the share class. Having dealt with a number of FX
providers before, the biggest advantage of working with Alpha
is dealing with a team who fully understand the pressures and
problems faced by investment managers.
By providing us with the ability to track the impact of FX
throughout the life of an investment from our side, their unique
approach will serve us well in raising further foreign capital.”
Javier Boveda
Chief Financial Officer
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 BUSINESS MODEL HOW WE DELIVER
How we deliver – We have a simple but
effective process for maintaining deep levels
of differentiation and ensuring our growth
remains sustainable.
Page 16 to 18 outline our key differentiators – the things that set us apart from our
competition and drive our growth. The following pages meanwhile breakdown how
we seek to maintain and deepen our points of difference – from finding the right
people, to ensuring those people are armed with the resources and infrastructure
they need to devise the very best solutions for our clients.
− We identify our people
− We develop our people
− We focus on retaining our people
− We deliver a superior service
− We seek to retain existing clients and win new ones
− We expand into new markets
− We’re leading edge, not bleeding edge
− We deliver value for our stakeholders
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 BUSINESS MODEL HOW WE DELIVER
We identify
our people
We develop
our people
We focus on
retaining our people
We deliver a
superior service
We look for high-calibre people who can add to our
Once we have found the right people, our focus is on
Once we have found the right people, we work hard to
When it comes to providing a leading service, we
culture. We’ve interviewed thousands of candidates to
ensuring they maximise their potential.
ensure they want to remain with us.
passionately believe there are two things that matter
get to the size we are today and will continue to retain
more than anything else – people and culture. The
our high standards in order to maintain our talent and
We believe that high-performing people develop
We recognise businesses lose employees for four
reason for this is simple: people and cultures grow,
cultural density as we scale. When a business grows
organically: they are self-improving and self-managing
primary reasons: they would prefer to work with other
USPs shrink. The quality of our service stems from
in size and becomes more complex, there is always
through experience, observation, reflection, reading
people in another environment; they perceive better
the quality of the people behind the service and the
a risk its culture and talent density will be diluted.
and discussion. To support this development style,
opportunities at other companies; they are not testing
culture they share. Our ‘client first’ culture means
Amongst other things, a lack of a clear organisational
we’ve worked hard to foster an environment built
their abilities; and/or they lack the desired work-life
that we never set individual revenue targets per
identity and resource pressures can lead businesses
around collaborative mentorship: one where everyone
balance.
to compromise on their standards: people are hired
at Alpha has the opportunity to develop and be
clients, as it creates a clear conflict of commercial
interests. Instead, we focus on ensuring our people’s
who are not only less talented, but also less culturally
developed by other people. This manifests itself in
We believe our company purpose addresses these four
interests are aligned with our clients. Furthermore,
compatible. To combat this, we must ensure our
a number of ways. For example, our flat hierarchy
issues, which is why we base our retention strategy
our long-term equity incentive schemes and simple
investment in recruitment, people and culture is
means that everyone from Board Directors to new
around it. By providing an exceptional community
commission structures support our team’s desire to
commensurate to the company’s growth, so we can
starters sit amongst one another, whilst our principle
full of opportunity, that works hard but lives well, we
focus on long-term relationships with clients. This
continually maintain our talent and cultural density as
of radical candour ensures both are just as likely
ensure that our people have every reason to stay and
avoids a ‘churn and burn’ mentality, which is often
we scale.
to give candid feedback to one another on how to
improve. Collective ownership meanwhile ensures
Ultimately, we fully accept that our culture isn’t
people are generous with their time: everyone is
for everyone. However, the moment we appeal to
invested in the long-term growth of the company and
everyone and dilute our standards is the moment we
recognises one another’s development is key to it.
become an ordinary business.
Ultimately, our collaborative development style works
because of our commitment to surrounding great
people with great people.
little reason to go.
the default strategy in highly competitive industries.
As a result, we are able to provide a true risk
management offering, whilst providing highly
valuable payments and collections solutions.
See page 9 for more information.
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 BUSINESS MODEL HOW WE DELIVER
We seek to retain existing
clients and win new ones
We expand into
new markets
We’re leading edge,
not bleeding edge
We deliver value for
our stakeholders
By penetrating both new and existing markets
We recognise that as well as continuing our
Our strategy is to monitor trends within our industry
Our Clients
we win more clients. We then aim to retain these
penetration within our core UK corporate market,
and assess their commercial viability. We step back
We deliver an exceptional level of service to our
clients, whilst increasing our wallet share, by
there are other segments both domestically and
from the bleeding edge of product innovation,
clients – combining leading people, processes
constantly evolving our service and earning loyalty
internationally that share similar characteristics, which
recognising that the first to market, risks being the
and technology, with a philosophy that puts their
and trust.
can represent significant opportunities for growth,
as demonstrated by the launch of Alpha Institutional,
first to fail. Products that are deemed to have strong
needs first. The value clients get from this service
upside and affinity with our client base are taken into
is reflected in our growth, and strong levels of client
The currency market is the largest and most liquid
Alpha Payment Solutions and Alpha Canada.
development where our high-performance tech team
retention.
market in the world and our market opportunity
and scalable modular infrastructure are able to quickly
is both extensive and growing. In addition to
When looking at new sectors, our strategy is to
develop an upgraded solution. They then benefit from
Our Shareholders
supporting corporates and institutions within our
find or nurture entrepreneurial talent with the
the momentum of our sales team to realise a strong
Our vision is to provide long-term, sustainable
core UK market, we now support the FX needs of
experience or ability to capitalise on those sectors.
second-mover advantage.
shareholder value by delivering revenue growth,
businesses in over 36 countries. Moving forward,
We then empower these individuals with our culture,
strong operating margins and sustained
we will continue to capitalise on opportunities that
infrastructure, reputation and technology, enabling
Ultimately, our strategy of ‘moving second to come
shareholder value.
we believe represent significant opportunities for
them to take the Alpha platform into new markets
first’ is a more sustainable way of growing our
growth, whether through new product development
as shareholders in their own ventures. By doing
business. It ensures more consistent returns for our
Our People
or expansion into new jurisdictions.
so, these individuals realise accelerated returns for
shareholders, whilst keeping us on the leading edge,
Our purpose is to create an exceptional community
both themselves and the Group, whilst fulfilling their
ambitions of leading their own ventures. Importantly,
we take a measured approach to expansion, and
by doing so, we look to protect the interests of our
shareholders and ensure our growth remains both
consistent and sustainable.
but not the bleeding edge, of the innovation curve.
full of opportunity – one that works hard but lives
well. By doing so, we strive to ensure our people’s
efforts and contributions are properly rewarded,
and that they love the business they are a part of
and the work they do.
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Chairman’s Statement
Clive Kahn
“I am pleased to report on another successful year for Alpha, a year in
which our corporate and institutional divisions continued to perform
well across both the UK and European markets.”
Newly formed Alpha FX Canada and Alpha Payment
Solutions continue to build momentum and we
expect to see further growth from both over the
coming financial year. The successful move into our
Paddington headquarters in August 2019, not only
provided us with sufficient capacity to support our
growth plans, but helped us to continue attracting
high-calibre people and foster the right environment
for our culture, both of which are so integral to the
Group’s success.
Results
Once again, we had an excellent year with revenue up
51% to £35.4m (2018 £23.5m). Throughout the year
we invested heavily in additional resources to support
further market penetration, technological development
and the strengthening of our risk and control
frameworks. The returns from these investments are
already being seen. It is particularly significant, that we
have increased our underlying operating profit by 47%
to £14.7m (2018 £10.0m) in a year in which we have
also increased our investment in our people, technical
and controls infrastructure.
People
Alpha’s people and culture are the bedrock of our
success. We strive to create an environment that
empowers bright and ambitious people. Our entry
into new markets and products has been successful
STRATEGIC REPORT CHAIRMAN’S STATEMENT
because the desire and ability to achieve great things
order to continue to deliver our services to our clients
runs throughout our team. By continuing to invest
at this critical time, whilst also safeguarding the health
significantly in our recruitment process, we are able to
of our employees and their families.
build a high-performance team and benefit from their
efforts, as reflected in another set of strong results.
The global outlook remains uncertain at this relatively
early stage of the COVID-19 outbreak, however, as at
With that in mind, it is pleasing to note that following
the date of this report, trading for Alpha continues to
another strong set of results, 29 employees are now
be in line with expectations. With the growing diversity
able to see their share options vest. As a company that
of our client base and products, both of which span
has always thrived off its entrepreneurial mindset,
an increasing number of geographies and sectors, and
this increased level of ownership naturally bodes well
a strong cash and liquidity position, we are confident
and I believe our results to date speak volumes for the
in our ability to continue servicing the needs of our
effectiveness of this approach.
clients and growing our business as a result.
I would like to thank all our staff for their continued
hard work and dedication throughout the year. The
ambition and passion you share is inspiring and I am
looking forward to working with you to build further on
Clive Kahn
Non-Executive Chairman
this in 2020.
Dividend
An interim dividend of 2.2p was paid in October and I
am pleased to report that the Board is recommending
a final dividend of 5.4p, giving a total dividend for the
financial year of 7.6p, a 17% increase on the prior year.
Subject to approval by shareholders at the Annual
General Meeting on 6 May 2020, the final dividend
will be paid on 13 May 2020 to shareholders on the
register at 14 April 2020.
The Year Ahead
Having made good progress in both new and existing
markets during the year, and with great capacity in
our expanded market, we remain confident that the
opportunity for Alpha FX remains strong.
Whilst we are mindful of the potential impact of
COVID-19, which we continue to monitor carefully, the
robustness of our credit and liquidity risk management
frameworks has meant that to date the impact of
recent high levels of market volatility on our business
has been limited. Furthermore, having adopted cloud
technology since inception, Alpha has always been
very well placed to operate remotely. Should it be
necessary, we are able to utilise this core capability in
26
27
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Chief Executive’s Statement
Morgan Tillbrook
“2019 was another highly successful year for Alpha – one that marked
10 consecutive years of strong organic revenue and profit growth.”
As well as another strong financial performance from
our core corporate and institutional divisions across
both the UK and Europe, our new products and
divisions have all continued to grow, along with our
team, which is now just over 120 people strong.
As a result, during the year, client numbers increased
by 34% from 482 to 648, whilst average revenue per
client grew by 12%. These trends reflect our ability to
attract both new and larger clients, whilst retaining
most of our existing clients, whose spend we look
to increase as our service offering evolves and the
relationship matures.
Our Canadian sales office was launched in October
2018, and grew revenues consecutively in each quarter
during the year. We expect both client and employee
numbers in this region to grow as we further penetrate
this market, and with a strong start to this year
already, are expecting to record a profit in Q1 2020.
Alpha Payment Solutions, whilst still in its infancy,
performed in line with our expectations during the
year, despite also preparing for the launch of a vastly
upgraded version of the platform, due for release
later this year. With an enhanced offering and a strong
leadership team in place, we are therefore highly
confident Alpha Payment Solutions is on track to
become a meaningful contributor of earnings in the
medium-term.
STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT
Investment in technology and infrastructure remains
customers with much simpler requirements. Whilst
important for the continued success of the Group,
aspects of our offering would undoubtedly be
enabling us to both retain our operational efficiencies
attractive in this marketplace, medium to large clients
and improve our service offering. Our ability to
stand to achieve a far greater ROI from working with
innovate not only adds value to existing clients, but
us, which in turn provides a far greater ROI for our
also attracts new types of clients, those with needs
own efforts.
in addition to our core currency risk management
offering. At the same time, this widens the gap
between us and our competitors, by amplifying our
Core market
areas of differentiation.
Our growth is predominantly driven through our
corporate and institutional divisions based within the
Despite our investments, we have continued to
UK (which represent the Group’s core market). We
retain high levels of profitability, which gives us great
plan to continue to grow our high value client base in
confidence in our growth strategy moving forward.
these segments through further penetration within
Market Opportunity
the UK, whilst expanding our international client base,
particularly within Europe. To support our growth
now and in the future, we have continued to increase
Alpha still only services a very small portion of a
our headcount in front office, whilst investing further
market which, through our successful expansion into
in our infrastructure, client-facing technology, and
new products and geographies, continues to grow.
settlement, risk and compliance functions.
The UK and Europe present a vast opportunity for
sustained long-term growth, whilst the launch of our
Whilst the increase in front office staff will support
sales office in Canada provides the opportunity to
further client acquisition in the medium to long-term,
replicate our success in a market which shares very
the contributions from new hires during the year is
similar dynamics. Alongside this, new products in
minimal as they are in the early stages of their learning
the form of Alpha Pay provide an ever-larger total
curve. The strong results from our core market in 2019
addressable market and also enable us to increase
are therefore testament to the quality of our more
the potential wallet share of our existing market.
mature hires and their ability to develop further along
As businesses’ familiarity with non-bank financial
the learning curve. This also highlights that, with many
institutions increases, the appetite for a specialist
staff still in their infancy and even our most mature
provider with a clear focus and innovative technology
staff continuing to significantly increase the size of
suite such as Alpha increases.
their portfolios, considerable growth can come from
our existing front office headcount alone.
Despite the scale of the opportunity in front of us, it is
important to note that we remain focused on taking
We plan to continue to hire and expand the team
a ‘quality over quantity’ approach, both to the clients
to support future growth of our core division. As
we work with, the people we employ and the solutions
our team grows, our concentration risk is naturally
we provide. Whilst we are sector agnostic, our focus
decreasing: revenue generation not only spans a
remains on servicing high value opportunities by
larger number of employees and countries, but clients
providing a high-tech, high-touch service to medium
also build multiple relationships within the business,
to large businesses – those with complex needs who
as a result of Alpha’s high-touch and growing service
fundamentally require intelligent, ongoing human
offering. Furthermore, as front office staff grow their
interaction, the value of which can then be amplified
portfolio of clients, they build an increasing annuity
by the quality of our processes, capital and technology.
which, when combined with Alpha’s culture and
Whilst we recognise an even larger marketplace exists
wider career opportunities, ensures strong employee
beyond this, it is one that is predominantly penetrated
retention and the sustainability of our revenue
by providing low value, product-based solutions to
generation with it.
28
29
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT
STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT
New products and markets
The expansion of our corporate division into Europe
in the form of greater automation, resilience and
must retain our high-performance work ethic. This
The launch of Alpha Payment Solutions and our
continues to deliver, driven by a multi-lingual sales
scalability, all of which should support the Group in
means that those who join us now must be prepared
Canadian sales office reflects our appetite to capitalise
team based from our London head office. As a result
retaining its highly efficient operating model long into
to work as hard as the team before them have, in
on new markets which play to our core strengths in
of our success in Europe, we are also now planning to
the future.
order to create additional growth opportunities whilst
open a sales office in Amsterdam to increase our rate
order that they can reach the standard we need to
continue our growth trajectory. Likewise, it will also be
also diversifying our revenue streams.
of penetration within Europe. Amsterdam has more
Our culture and people are what sets us apart from
important to remember that more experienced team
languages per capita than any other European city,
our competitors and in turn give us the confidence in
members who have met these standards should afford
Our institutional division is a good example of the
making it an attractive hub with which to attract more
our long-term growth ambitions. Given we have scaled
themselves the freedom to ‘live well’. Working hard
returns that can be made from venturing beyond
European speakers in the future. Furthermore, whilst
our headcount significantly, I am proud of the fact that
is important, but it should be done in the knowledge
our existing core market: what was a new market
penetration within Europe has already been strong,
we have done so without compromising on either of
that, as your ability increases, there is time to live well
opportunity for us in 2017, is now a core contributor
we believe it could be further enhanced by having a
these foundations.
and enjoy the rewards of your efforts.
of revenue for the business.
physical presence in another European capital – and
one which is fast becoming one of Europe’s leading
A cornerstone of our culture has always been
I would like to end by thanking all of our team for their
Our Canadian sales office, launched in Q4 2018,
business centres. Like our Canadian sales office,
‘collective ownership’, and as part of this it is pleasing
continued support and dedication. Your commitment
achieved consecutive quarter on quarter revenue
operations will remain in the UK, ensuring the move
to note that over 40% of our team hold a long-term
and ambition are inspiring and I am incredibly
growth in 2019 and has made a strong start to this
remains a low-cost, low-risk option. Indeed, the setup
equity interest in the Group: a reflection of not only
excited about what we can achieve together in 2020
year. All key operational and control functions
and maintenance costs are expected to be lower
the part they’ve played in this growth story to date,
and beyond. Over the last 10 years, we have proven
remain in the UK. The sales team in Toronto has now
than Canada, due to the similarities in time zones,
but the impact they will have on it in the long-term
that we have what it takes to lead the way in our
established a strong core team from which to grow.
regulation, and our ability to migrate members of our
future. This level of collective ownership only deepens
marketplace. However, I believe I speak for everyone
Importantly, we have gone to great lengths to ensure
existing team from London to that office. This includes
the difference between us and our competitors
when I say, we have a lot more to prove. In that sense,
the team we have built is hired according to the same
two of Alpha’s Senior Partners (who will be leading the
further – fostering a culture of entrepreneurialism
although we have a decade behind us, we are in many
cultural values as our UK office. We will therefore
team), both of whom have had considerable success
that is the driving force behind an exciting, but more
ways, a 10-year-old start-up.
continue to invest to ensure Alpha’s core values are
penetrating the European marketplace from London
importantly, sustainable growth story. As part of this
embedded within the Canadian team.
and who have also played a key part in maintaining
equity alignment, we are pleased to announce the
Here’s to the next decade!
Alpha’s culture as we have grown.
Alpha Payment Solutions also performed well during
the year and underwent significant developments,
which in 2020 will see its capabilities evolve far beyond
People and Culture
that of a traditional payments provider. Much like our
Our people and culture remain the lifeblood of our
FX risk management offering, our focus with payments
business and we remain committed to investing
establishment of an E Share Growth Scheme, which
will provide further committed and high performing
employees with the opportunity to share in the long-
term success they create.
Morgan Tillbrook
Chief Executive Officer
remains on servicing medium to large businesses with
in both. The increase in headcount predominantly
Work hard, Live well
more complex structures and requirements.
took place in the second half of the year as it
was coordinated around the move into our new
The second generation of our Alpha Payment
headquarters in Paddington.
Solutions platform is due for launch in 2020 and
will add considerable depth to the payments and
The increase in front office headcount, from 51 to
collections solutions the team provides. The advances
74, was planned to further our penetration in the
to the platform will allow us to build and customise
UK and beyond. Within this increase, we have grown
an alternative banking platform for medium to large
our multilingual sales team from 8 to 14 people,
businesses covering: payments, collections, accounts
and this team has enabled us to add clients in 7 new
and virtual accounts. Furthermore, through our
countries (from 29 to 36). In the back office meanwhile,
partnership with leading global banks, we will also
the acceleration in hires (versus prior years) was
be able to provide clients with access to one of the
predominantly designed to support the development
world’s largest local banking network and payment
of Alpha’s second-generation payments, collections
infrastructures. Our second-generation platform is a
and accounts solutions and further enhance the
significant upgrade to our previous platform, which
Group’s overall technology stack. Importantly, the
solely provided a traditional cross-border payments
technology being built by the Alpha Payment Solutions
service.
team provides benefits to the wider group as a whole,
The end of 2019 marked Alpha’s 10-year anniversary
and looking back over the past decade, I am incredibly
proud of how far we have come. However, if we wish
to continue recreating this success in the future, it is
also important to consider what it will take moving
forward. In doing so, I come back to Alpha’s purpose
statement – “to create an exceptional community full
of opportunity, that works hard, but lives well.” A focus
on Community and Opportunity is what has enabled us
to become the fast growing, entrepreneurial business
we are today: it’s what attracts exceptional people to
Alpha, nurtures them, and inspires them to achieve
outstanding results. However, these opportunities
haven’t come about through luck or chance. One
of Alpha’s core behaviours is “seek reality”, and our
reality is this: if we are going to continue providing
meaningful opportunities to our team members, we
30
31
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 COMPANY OVERVIEW BUSINESS STRATEGY
Our Strategy
Whilst our business has become larger, we are passionate about focusing on the
things that matter the most. Whilst many businesses find comfort in the detail of
prescriptive strategies, we are conscious of wrapping ourselves up too tightly in an
overly complex strategy that stifles the entrepreneurial spirit that has been key to
our business’ success.
Fundamentally, we have got to where we are today by focusing on acquiring and
retaining high value clients, whilst differentiating ourselves across three key areas:
People, Technology and Processes.
If we are able to continue to widen the differentiation between us and our
competitors, whilst focusing on the right marketplaces, growth will be the natural
outcome. With that in mind, we continue to persevere with a simple but highly
effective strategy, which can be broken down as follows:
−
−
−
Acquire and retain high value clients
Attract, develop and retain the right people
Develop our processes and technology
32
33
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Business Strategy
AREA
STRATEGY
PROGRESS TO DATE
COMPANY OVERVIEW BUSINESS STRATEGY
Acquire and retain
high-value clients
We will continue to grow our client base by increasing market
penetration of our FX risk management and payments offerings in
the UK, Europe and Canada.
−
−
−
−
−
The Group’s total number of clients increased from 482 to 648 during the year, representing an increase of 34%.
Average revenue per client increased by 12%
The Group’s Front Office headcount increased from 51 to 74 to further accelerate the rate of client acquisition.
The Group’s client base expanded from 29 countries to 36 countries, extending our runway for growth.
Alpha FX Canada grew revenues consecutively in each quarter during the year and is well placed to contribute to
the Group’s profit in 2020.
−
Alpha Payment Solutions performed in line with expectations and with a clear strategy and strong leadership
team established, we are confident it is on track to become a meaningful contributor of earnings in the medium-
term.
−
New website launched in order to support Alpha’s expanded product offering and hone Alpha’s areas of
differentiation more clearly – both as a potential provider of FX services, but also an employer.
−
Client Services team established, providing a fast and responsive central point of contact for onboarding,
implementation phases and day-to-day business queries. Having links to all support team in both front and back
office, the client service team can ensure that they achieve the right resolutions and results first time for the
client.
−
Dealing team grew from 7 to 9 ensuring we continue to provide a high-touch service to existing clients in order to
retain their business and grow wallet share.
−
The ongoing evolution of our platform offering through Alpha Payment Solutions continues to add value to our
existing client base and provide opportunities to increase our share of their spend. Alongside this, the range of
currencies and countries we can provide payments in also increased during the year.
−
−
By reinvesting profits we have been able to support larger trades from existing clients.
The currency options offering continues to prove valuable to a growing number of clients, enabling us to cater
for a wide spectrum of requirements and sectors, whilst also selling deeper into existing ones and better
servicing their needs.
34
35
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Business Strategy [cont.]
AREA
STRATEGY
PROGRESS TO DATE
Attract, develop and retain
People and culture are the lifeblood of our business. As the Group
−
Our London team moved to permanent headquarters in Paddington, which has been put forward for nomination
the right people
continues to grow, we remain focused on hiring and retaining high-
with a prestigious design award. The space was designed to nurture and support the Alpha culture and since the
performing individuals who will add to our culture.
move, the positive atmosphere amongst the team has been unprecedented.
COMPANY OVERVIEW BUSINESS STRATEGY
−
Several key hires were made throughout the year to ensure we maintain an efficient and scalable operating model
as we grow, including a Head of Enterprise Risk, General Counsel and Head of Operations.
−
Scaled the technology team from 12 to 19 people, to support the development of Alpha Payment solutions, with
significantly enhanced functionality scheduled for release later this year.
−
A number of ‘work hard, live well’ initiatives were launched to support retention and the well-being of our team.
These included: private healthcare for all employees and their families and the launch of our in-office gym, complete
with personal trainer.
−
The Group’s equity incentive plans continue to provide committed and high performing employees with the
opportunity to obtain equity in the Company. They create a culture of ownership that remains a key part of the
entrepreneurial mentality that drives our growth, with 15 new Partners created in 2019.
Develop our technology and
We will continue to ensure our core service offering and infrastructure
−
Significant investments were made in the Group’s cloud-based infrastructure in order to support greater
processes
remain agile in order that we can maintain an ever-evolving foundation
automation, scalability and resiliency across the entire organisation, and ensure we reduce operational complexity
upon which to scale and drive efficiencies.
as we grow.
−
The Group’s Back Office headcount grew from 31 to 50, providing significant operational bandwidth for the future
and ensuring excellent service levels upon engagement.
−
Significant investments made to enhance the Group’s enterprise risk management framework, with a Head of
Enterprise Risk hired in H1 2019, bringing significant experience and expertise.
−
Significant investments made in a new reg-tech tool, which will introduce considerable efficiencies into the Group’s
existing transaction monitoring processes.4
−
Our modular technology and API driven tech stack has enabled us to fully connect into our key banking partners,
enabling our business to scale without the need for a commensurate increase in Back Office headcount.
− We continue to invest in our internal operational technology throughout 2019, with a focus on increasing straight
through processing, enhancing our risk controls and increasing scalability through automation.
4
Regtech is a catch-all term given to a number of highly innovative technology companies that are leveraging recent advancements in technology (e.g. machine learning and artificial intelligence) in order to
significantly enhance regulatory compliance globally. What was previously the preserve of large compliance teams both onshore and offshore, can now in some cases be largely offset with sophisticated
technologies. Alpha keeps abreast of these products and services, and where it identifies value, invests accordingly. Alpha’s modular and low legacy technology stack has enabled it to integrate these
new providers cost-effectively and efficiently.
36
Henry Lisney
Chief Operating Officer
37
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Financial Review
FY 2019
Financial Review
Revenue for the year increased by 51% to £35.4m
with revenues from Corporate clients serviced from
the London Head office increasing by 34% to £27.2m.
The Institutional team that was established in March
2018 had an impressive year with revenue of £6.3m
compared to £3.1m in the prior year, whilst the recent
investments in Canada and Alpha Payment Solutions
generated revenue of £0.9m and £1.0m respectively.
The majority of revenue arises from forward
transactions and represents the difference between
the rate charged to clients and the rate paid to banking
counterparties. There were no structural changes in
forward commission rates in the year in comparison to
the prior year.
The underlying operating profit excludes the impact
of share-based payments and in the year ended 31
December 2019 also excludes the one-off property
related costs relating to the move to new Head
Office premises in Paddington. On this basis the
underlying operating profit in the year increased by
47% to £14.7m.
Despite the significant investment in the new
businesses, the underlying operating profit margin
for the year was 42% (2018 – 43%). During the year
the total headcount of the Group increased from 82
to 124.
Underlying basic earnings per share increased from
22.7p in 2018 to 30.1p in 2019. Basic earnings per
share in the year increased from 21.8p to 27.7p.
During the year the Group adopted IFRS 16 (Leases)
in respect of the lease for its new Head Office
premises. On inception of the lease the Group
recognised a right-of-use asset on the balance sheet
of £8.1m together with £0.2m of incidental costs
and a corresponding liability of £8.1m at the date at
which the leased asset is available for use.
Overall net assets of the Group increased in the year
by £8.9m to £57.6m.
Group operating profit in the year grew by 41%
Tim Kidd
to £13.7m. Underlying operating profit is also
Chief Financial Officer
presented in the income statement to allow a better
understanding of the Group’s financial performance on
a comparable basis from year to year.
STRATEGIC REPORT FINANCIAL REVIEW
Key performance indicators
The Group monitors its performance using a number of key performance indicators which are reviewed at
operational and Board level. The key financial performance indicators are revenue, underlying operating profit
margin, number of customers and number of front office staff.
m
4
5
3
.
%
0
5
%
3
4
%
2
4
m
5
3
2
.
8
4
6
4
7
2
8
4
1
5
0
1
3
2
3
8
1
0
2
9
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
m
5
3
1
.
7
1
0
2
REVENUE (£)
UNDERLYING OPERATING
PROFIT MARGIN
NUMBER OF CUSTOMERS5
FRONT OFFICE
HEADCOUNT
+51%
42%
+34%
+45%
5 The Group exclude Training Accounts (those that have generated less than £10,000 in revenue since being
onboarded) in order to provide a clearer picture of client numbers for the purpose of these figures.
Cash flow
On a statutory basis, net cash and cash equivalents increased significantly by £35.6m to £74.0m. The Group’s cash
position can fluctuate significantly from year to year due to the impact of changes in the collateral received from
clients, cash received from clients in advance of the settlement of trades, or the unrealised mark to market profit or
loss from client swaps, resulting in an increase or decrease in cash with a corresponding change in other payables
and trade receivables. Therefore, in addition to the statutory cash flow, the Group presents an adjusted net cash
summary overleaf which excludes the above items.
38
39
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Cash flow [cont.]
Dividend
Net cash and cash equivalents
Variation margin paid to banking counterparties
31 DECEMBER 2019
£’000
31 DECEMBER 2018
£’000
73,960
1,127
38,396
3,539
75,087
41,935
In our 2018 Annual Report, it was announced that with effect from the start of the year ended 31 December 2019,
the Group intended to adopt a progressive dividend policy, targeted at growing dividends each year, rather than
basing a dividend on a fixed percentage of profits. Following the payment of an interim dividend of 2.2 pence per
share in October 2019, the Board is pleased to declare a final dividend of 5.4 pence per share, equating to an annual
dividend of 7.6 pence per share (2018: 6.5p). Subject to shareholder approval, the final dividend will be payable to
Shareholders on the register as at 14 April 2020 and will be paid on 13 May 2020. The ex-dividend date is 9 April 2020.
STRATEGIC REPORT FINANCIAL REVIEW
Margin received from clients and client held funds*
(41,862)
(11,424)
Net MTM timing loss/(profit) from client drawdowns
and extensions within trade receivables
5,364
5,208
Adjusted net cash**
38,589
35,719
* Included in ‘other payables’ within ‘trade and other payables’
** Excluding collateral received from clients, early settlements and the unrealised mark to market profit or loss from client swaps
The table below presents the operating cash conversion on a similar basis, which excludes collateral received from
clients, early settlements and the unrealised mark to market profit or loss from client swaps.
The cash conversion in the year was negatively impacted by the increase in capital expenditure of £3.0m arising from
the office move and internally developed software costs, principally for Alpha Payment Solutions. However, this was
largely offset by the impact of an increase in the proportion of revenue being derived from spot, options and payment
transactions where the revenue is almost immediately converted into cash. As shown in note 4 to the Financial
Statements, this revenue accounted for 30% of total revenue in 2019 compared to 15% in the prior year.
Underlying operating profit
Depreciation and amortisation
Loss on sale of fixed assets
Increase in debtors**
Increase in creditors**
Capital expenditure
YEAR ENDED
31 DECEMBER 2019
£’000
YEAR ENDED
31 DECEMBER 2018
£’000
14,735
452
-
(2,715)
1,596
(3,523)
10,005
174
63
(3,713)
1,299
(526)
Cash from operations before tax, and after capital expenditure**
10,545
7,302
Conversion
72%
73%
** Excluding collateral received from clients, early settlements and the unrealised mark to market profit or loss from client swaps
40
41
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Section 172 Statement
A key focus of the Board is to promote the success
The following are some examples of the stakeholder
of the company for the benefit of its members as
engagement that has taken place during the financial
a whole, whilst having regard to other matters (as
year:
set out below), as outlined in Section 172 of the
Companies Act 2006. Throughout this report there are
many examples of how the Board has regard to the
Our People
likely consequences of any decision in the long-term;
In order to ensure Alpha and its employees’ interests
the interests of our employees; the need to foster
remain aligned, employee engagement remains a key
relationships with key stakeholders; the impact of our
priority. In 2018, the Board established an Employee
operations on the community and environment; and
Engagement team led by the company’s CEO, focused
how the company maintains a reputation for high
on maintaining strong relationships between the
standards, whilst conducting its business in a fair and
company and its employees as the business scales.
responsible manner. The stakeholders we consider in
Through this initiative, the Board has continued to
this regard are our customers, the people who work
engage with and review feedback from its employees in
for us, our owners and those who provide the services
a number of ways throughout 2019, including: bi-annual
we rely on to operate our business.
townhalls, departmental surveys and forums, feedback
via Glassdoor, 1-2-1 meetings, company-wide social
The following statement provides an overview of how
events, and annual awards ceremonies. Furthermore,
the Board has performed its duties. As a dynamic
the company adopts a principle of radical candour,
and fast-growing Group, day-to-day decision making,
routinely encouraging employees to provide candid
and stakeholder engagement is often delegated
feedback to all members of the business, regardless
to employees through our governance framework
of seniority and tenure. The CEO’s report includes a
and therefore naturally occurs at an operational
summary of feedback received in that period, and the
level. However, the Board regularly receives and
content of relevant feedback is always considered during
discusses information from across the Group to help
board decision making.
it understand the impact of the Group’s operations as
well as the interests and views of key stakeholders.
For more information on how we promote the success of
This information is provided to the Board through
our company over the long-term by giving regard to our
reports and in-person presentations. As a result of
employees’ interests, see:
these activities, the Board has an overview of the
outcomes of the stakeholder engagement, and other
factors, enabling the Directors to comply with their
duties under s172 of the Companies Act 2006.
For more details on how the Board operates, including
a summary of its key activities during the year, see
page 61-62.
−
−
−
−
−
−
Talent, Culture and Collective Ownership | p. 16 - 18
‘How we deliver’ | p. 21-25
Other Stakeholders | p. 64
‘Work hard, live well’ | p. 31
Business, Culture, Behaviour & Ethics | p. 65
Corporate Social Responsibility | p. 70
STRATEGIC REPORT 172 STATEMENT
Clients
Suppliers
We seek to grow our business organically and
Our suppliers play a key part in enabling us to
sustainably by acquiring new clients, retaining existing
deliver a leading level of service to our clients by
ones, and increasing our share of their spend. To
amplifying our capabilities and efficiencies. We
achieve this, we put our clients’ interests first and aim
seek to choose the best products and services
to provide them with a high value service that yields
to meet our requirements, and then develop
incremental value as the relationship (and our service
strong, long-term relationships with the suppliers
offering) matures.
that provide them, in order to create strong and
enduring mutual value over time. We regularly look
As part of engaging with clients, the senior
for ways to support our suppliers beyond simply
management including the CEO, CFO and COO often
providing our custom, whether through providing
meet with key clients to obtain feedback on the
testimonials, sharing knowledge or recommending
service. Informal meetings are also regularly held with
them to others we work with.
senior client representatives to help the Board better
understand the needs and motivations of clients.
Regular face-to-face meetings take place throughout
Community & Environment
the year between Front Office employees and clients,
“Creating an exceptional community full of
and our team also attend and host industry related
opportunity” is Alpha’s purpose statement and
events, which provide us with the opportunity to
outlines the vision the Board has set for our people.
engage with new and existing clients on a range of
As our business grows, we are now taking steps to
topics.
look beyond our own community to look for ways
we can support others. Meetings have already been
Further information on our strategic approach to
held to this respect, with the intention of selecting a
clients can be found under ‘Clients’ on p. 17 and ‘How
meaningful cause that we can support in 2020.
we deliver’ on p. 21.
Investors/Shareholders
The Board is committed to minimising the impact
our operations have on the environment. Recycling
of office supplies is undertaken wherever possible
Access to capital has been key to our long-term
and the Group operates a largely paperless
success, and the Board therefore strives to obtain
marketing model. When designing our HQ in
investor buy-in to the Group’s strategy, which is
London, the Board also made the conscious
focused on achieving long-term sustainable growth
decision to prioritise more sustainable materials
both for the business and its shareholders.
over cheaper, but more harmful non-renewable
As part of shareholders deciding whether to invest in
our business, we recognise that strong and ongoing
shareholder communication is key and the Board
Culture
alternatives.
regularly receives updates from investors from senior
The Board believes culture to be key in achieving
management. The Board is committed to ensuring
long-term growth. Our high standards of business
that shareholders are treated fairly with regard to the
conduct are the direct result of a culture that focuses
level of disclosure provided, whilst being mindful of the
not only on achieving high-levels of performance,
commercially sensitive aspects of the business.
but doing so in a way that is sustainable and has
high-levels of integrity. The Board supports the CEO
For more information on how we engage with our
in embedding this culture into the business, and as
shareholders and act in their interests, see:
a result the Group now has a clearly defined vision,
−
−
How we deliver | p. 21
Shareholder communications | p. 64
mission and purpose along with five key behaviours
which govern how we act as a business.
42
43
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 For more information on how our culture supports our
Consideration of the long-term consequences of
business, see:
−
−
Business, Culture, Behaviour & Ethics | p. 65
Our Behaviours |p. 67
− What sets us apart | Culture | p. 16
decisions also forms the foundation of our approach to
managing risks, and more information on this can be
found under the Principal Risks & Uncertainties section
of our report on p. 48.
We are by nature, a long-term focused business and
further details of this can be found in the following
Long-Term Decision Making
sections of our report:
Alpha has always been a business with a long-term
focus. A focus on continued innovation and
improvements to our service offering (for example,
Alpha Payment Solutions) ensures we retain our
competitive edge, whilst our investments in new
markets and geographies have been designed to
expand our runway long into the future. We also
only innovate in areas where we are confident there
is long-term value to be gained (see ‘We’re leading
Business Model
Introduction | p. 1
Market Opportunity | p. 11
What Sets Us Apart | p. 15
How we deliver | p. 21
Business Strategy | p. 33
edge not bleeding edge on p. 25) and aim to minimise
Principal Risks & Uncertainties | p. 48
execution risk by ensuring we have researched new
markets thoroughly, have the appropriate expertise
in place, and that our team and infrastructure will
not become overstretched by new ventures. As we
grow, we continue to invest in maintaining a scalable
and agile operating model, often investing ahead of
the curve in anticipation of projected growth. Key
examples of this have been, the expansion of our Back
Office team to add depth and experience to our core
functions, the replacement of our legacy systems with
a greenfield and modular tech stack, and the move to
our new office.
In an industry that is traditionally volume based and
transactional, we continue to grow our business
by fostering long-term relationships with a smaller
number of higher-value clients, who we look to retain
year-on-year. Since our people are key to growing our
client base, we take a similarly long-term approach
to them too. Over 40% of our team have long-term
equity interests in the Group, and commissions for
Front Office staff are aligned to the lifetime of our
clients, rather than short-term revenue targets.
Furthermore, we have invested significantly into
creating an environment and culture which supports
the long-term ambitions and well-being of our team,
notably launching a state-of-the-art HQ in 2019.
STRATEGIC REPORT 172 STATEMENT
BUSINESS MODEL WHAT SETS US APART
“
From day one Alpha have been very helpful and efficient
when managing our foreign exchange requirements. The
flexibility on our facility allows us to hedge our revenues
in a cost-effective manner, even when our requirements
change, and their intuitive portal gives us quick and easy
access to view our exposure. The time they took to initially
understand our requirements has paid dividends in the
service we receive from them today.”
Samantha Bartlett
Head of Finance
44
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019
GOVERNANCE PRINCIPLE RISKS AND UNCERTAINTIES
Principal Risks
and Uncertainties
Alpha operates a ‘Three Lines of Defence’ approach to risk management.
This framework is overseen and enforced by the Group’s Risk Committee.
−
Line 1 is risk management: primary responsibility for strategy,
performance and risk management lies with the Executive Team and the
heads of each department.
−
Line 2 is risk oversight: the Risk, Compliance, Finance and Legal Teams
provide risk oversight.
−
Line 3 is independent assurance: independent assurance on the
effectiveness of the risk management systems and controls.
In 2019 Alpha invested heavily in the Risk and Compliance functions by first of
all splitting them into two distinct risk and compliance departments, and then
hiring an experienced Head of Enterprise Risk and doubling the size of the
Compliance team. In anticipation of projected growth, Alpha invests ahead of
the curve especially in terms of compliance and risk management.
Alpha’s Enterprise Risk management framework has been materially
strengthened across all four key risk categories: Operational and Compliance
Risk, Financial Risk, Strategic Risk and Information Risk. A significant piece
of work has been completed in 2019 to ensure Alpha’s risk appetite remains
clearly defined and communicated across the Group. This has included the
embedding of Board level key risk indicators as well as a groupwide risk
and control self-assessment. Through allocating individual risks within four
distinct categories Alpha has a clear and defined framework against which all
risk reporting is categorised and structured.
In 2019 annual independent external audits were conducted across
(i) Compliance AML, (ii) Information Security, (iii) Settlements/Finance and
(iv) Technology – change management and access controls.
46
47
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 GOVERNANCE PRINCIPLE RISKS AND UNCERTAINTIES
Principle Risks and Uncertainties
The key strategic risks and uncertainties that the Directors
consider could impact the business are set out below.
RISK
POTENTIAL IMPACT
RISK MITIGATION
Information Risk - cyber and
The Group depends on the performance, availability and reliability of its
−
A multi-layered defence in depth approach to information security, including robust network perimeter
data security, including GDPR
technology systems to operate. The Group faces the risk of its operating
defences, vulnerability management, and endpoint protection is taken. Our core infrastructure leverages
compliance
systems failing, as well as the failure to safeguard the business-critical
cloud-based security services.
data and systems against information security risks.
As a result, the Group may become unable to carry out its business
activities resulting in a financial and reputational loss, as well as the
potential for regulatory sanctions.
−
Penetration testing is conducted throughout the year alongside independent assessments and certification
(such as Cyber Essentials Plus).
−
Company-wide training and communications to boost awareness including phishing simulations at varying
degrees of sophistication.
−
−
Disaster recovery arrangements are in place alongside comprehensive back-up arrangements.
Alpha’s Head of Data is responsible for data security alongside external support and validation, ensuring
compliance with GDPR and other relevant legislation.
Operational Risk
The Group is subject to the risk of loss resulting from inadequate or failed
−
A significant investment has been made in operational risk management in 2019. The hiring of a Head
internal processes, people, systems or external events.
of Enterprise Risk, Head of Operations, and the establishment of a more stringent risk framework has
This can include the incorrect inputting or execution of a trade or
settlement (either into the Group’s reporting software or to one of the
Group’s banking counterparties), as well as internal fraud e.g. intentional
misreporting of positions, employee thefts, and insider trading on an
employee’s own account.
enabled the group to more succinctly identify and quantify operational risk across the firm.
−
A firm-wide risk and control self-assessment has been conducted on each department to identify all
operational risks at an inherent and residual level. Risk champions are embedded within all departments
across the front and back office teams to instil accountability.
−
The Group maintains a strict division between Front and Back Office functions to ensure Back Office
remain independent and attentive to any errors that may have been caused by Front Office.
−
Internal fraud is minimised through investment in compliance resource and functions, pre-employment
screening of all employees, maintaining strict delegated authority limits, segregation of duties and regular
monitoring and oversight across different management functions. The Group also has comprehensive
insurance policies in place to partially indemnify against the risk of fraud from an internal member of staff.
−
The Group continue to invest and focus on retaining a scalable operating model, with particular ongoing
focus on automation and straight through processing.
48
49
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 GOVERNANCE PRINCIPLE RISKS AND UNCERTAINTIES
Principle Risks and Uncertainties [cont.]
RISK
POTENTIAL IMPACT
RISK MITIGATION
Operational Risk – Financial
The Group may face the risk of reputational damage and financial loss
−
Ongoing internal reviews and reconciliations carried out by qualified and experienced members of staff
Reporting Risk
resulting from a material misstatement in the Group’s financial reporting.
and the oversight of the Audit Committee.
Regulatory Risk
The Group faces the risk of failing to adhere to its regulatory and legal
−
The Group maintains robust policies and procedures, systems and controls, and monitoring and assurance
requirements. The provision of the Group’s services falls within various
programs to ensure continued compliance with its regulatory obligations. The Board is provided with a
regulatory spheres, including the UK Money Laundering Regulations 2017,
compliance update at each Board meeting.
the E Money Regulations 2011, the UK Financial Services and Markets Act
2000, the Markets in Financial Instruments Directive (MiFID), Senior Managers
& Certification Regime (SMCR) and the General Data Protection Regulation
(GDPR) enforced by the Information Commissioner’s Office (ICO).
Failure to meet the above regulatory requirements could see the Group
exposed to significant regulatory penalties. Additionally, any new regulation
or changes to existing regulation may require the Group to increase its
spending on regulatory compliance and / or change business practices.
−
The Group engages the services of independent compliance consultancies to review its compliance
with regulatory requirements. In 2019 independent external audits were conducted on our AML and
Safeguarding processes and presented to the plc Board. There were no high-risk findings.
−
The Compliance team has doubled in size in 2019. Senior hires have been made to complement the
existing set up and futureproof the team for near-term growth. A new transaction monitoring system has
been chosen and the Group commenced integration at the end of 2019.
−
The impact of Brexit is being monitored and in the event of a hard Brexit, the Group has a plan designed
to limit its impact.
Financial Risk - Credit Risk
Alpha is exposed to credit risk if a client fails to deliver currency at
maturity of the contract and/or fails to deposit margin when a margin
call is made. Alpha’s credit risk is equal to the negative fair value of the
contract at the time of cancellation (net of any deposit or variation margin
held at the time of cancellation).
−
−
A dedicated Credit team with significant experience reviews all credit lines and conducts ongoing reviews.
Alpha assesses the creditworthiness of clients and establishes credit limits when extending hedging
facilities which are reviewed by senior management, according to thresholds set out in a delegated
authority matrix.
−
A credit policy is in place to mitigate any potential losses arising from a client failing to settle. Alpha
maintains limits which when exceeded enable it to request deposit (known as margin call) from clients,
minimising its credit exposure.
−
Alpha conducts ongoing stress testing of its credit book to simulate stressed market conditions.
50
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ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 GOVERNANCE PRINCIPLE RISKS AND UNCERTAINTIES
Principle Risks and Uncertainties [cont.]
RISK
POTENTIAL IMPACT
RISK MITIGATION
Financial Risk - Liquidity
Alpha operates a matched-principal brokerage model, meaning that it
−
The Group has developed an in-house bespoke liquidity platform which monitors balances and performs
immediately executes a matching trade with its banking counterparties on
daily liquidity stress testing. The platform is monitored by Alpha’s Liquidity department with second level
receipt of client orders. Liquidity risk arises if Alpha is unable to meet its
oversight provided by the Risk team.
financial obligations when they fall due. An example of this would be the
inability of Alpha to place margin (deposit), when requested by its banking
counterparties. In this scenario, Alpha may be unable or restricted to meet
its trading capital requirements which in turn could result in its banking
counterparties terminating the financing facilities currently provided.
−
Alpha’s terms of business enable it to collect margin from its client in response to adverse market moves
(margin calls). Alpha benefits from the impact of netting. Alpha is called to place margin from its banking
counterparties on a netted currency pair basis whereas it is able to call its clients for margin on a gross
basis.
−
Key risk indicators alert the Board (as applicable) early on to conditions which could potentially lead to a
period of stretched liquidity.
−
The Group continues to reinvest profits in order to continue to grow its free-cash base. Cash conversion
has been improved by Alpha’s growing product mix (e.g. FX Options and Alpha Pay)
−
The Senior Management team reviews forecasts and actual cash flows on a regular basis to determine
whether the Group has sufficient cash reserves to meet future working capital requirements and to take
advantage of business opportunities.
Key Person Risk
The Group’s success is linked to the efforts and abilities of key personnel
and its capacity to retain such personnel. The executive management
team has significant experience in the industry and has made an
important contribution to the Group’s growth and success. The loss of any
member of the executive management team may have an adverse effect
on the operations of the Group.
−
−
The Group continues to value the contribution made by its key employees and reward them accordingly.
The Group operates cross functional input and knowledge sharing, and there is a detailed business
continuity plan in the event of a disruption.
−
The Group has comprehensive key person insurance policy in place. All key management have entered
into service contracts which provide notice periods for the Group’s protection.
Strategic Risk - Relationships with
Banking partners may cease to deal with Alpha, cease to service our
−
The Group holds strong, transparent relationships with multiple banking partners and remains aligned on
banking counterparties
sector, reduce the service they offer, alter the terms on which they are
risk appetite.
willing to offer services to Alpha or exit one or more of the markets for
which Alpha uses its services. Loss of one or more banking partners could
result in business disruption.
−
The Group invests considerably in compliance and independent audits, to prevent any material breaches
from occurring that could undermine its relationships.
−
The Group focuses on ensuring reputational risks are identified and remedied, where possible.
52
53
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 GOVERNANCE PRINCIPLE RISKS AND UNCERTAINTIES
Principle Risks and Uncertainties [cont.]
RISK
POTENTIAL IMPACT
RISK MITIGATION
Strategic Risk - Competition and
All of the Group’s businesses compete in the areas of pricing and service,
−
Our value proposition relies on intelligent human interaction, not just great processes and technology,
spread compression
facing competition from a number of sources. Increased competition can
which significantly reduces the risk of margin compression and copycat competitors.
result in lost business, revenue and reduced profitability.
−
The Group maintains an experienced ‘best in class’ sales team and leading service offering.
Strategic Risk -
Reputational risk
Alpha is highly regarded in its industry. Maintaining this reputation is
−
Alpha’s strategic risk register identifies reputational risks and the mechanisms we have in place to control
important to retaining our existing clients, expanding our client base and
them. Ownership of Strategic risk is assigned to individual Board members of Alpha FX Limited.
preserving our strong relationships with our banking partners. There is
a risk that an unforeseen event may adversely affect Alpha’s reputation
impacting future profitability.
Strategic Risk - Expansion and
As Alpha looks to expand our service offering and diversify into new
−
The Group looks to acquire highly talented business heads/MDs to lead the new products or geographies
diversification
markets there is the risk that our expansion and diversification exposes us
it looks to expand into.
to execution risk.
−
Regular and open dialogue between Execs and Non-execs at plc Board level on execution risk and group
strategy takes place before moving into new markets. Alpha’s Board has extensive experience of entering
new markets and scaling businesses, which it applies when considering new opportunities.
−
The Group has a strong track record of expanding successfully into new geographical markets and draws
upon its experience and lessons learned when considering new opportunities.
54
55
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2018
GOVERNANCE BOARD OF DIRECTORS
Board of Directors
The Board is responsible for the proper management of the Company by
formulating, reviewing and approving the Company’s strategy, budgets and
corporate actions.
In order to achieve its objectives, the Board adopts the ten principles of
the QCA code. Through successfully implementing these principles, the
Company aims to deliver long-term growth for shareholders and is able to
maintain a flexible, efficient and effective management framework within an
entrepreneurial environment.
Clive Kahn
Non-Executive Chairman
Morgan Tillbrook
Chief Executive Officer
Clive has over 30 years of experience in financial
Morgan founded Alpha in 2009 after identifying the
services, particularly FX and payments. He previously
opportunity to provide a high-quality FX advisory
served as Chief Financial Officer and Chief Executive
service differentiated from traditional providers. As
Officer of Travelex, the global foreign exchange
CEO, Morgan has been instrumental in the expansion
business, as well as CEO of Cardsave, a credit card
of the Group and its strong organic growth profile, and
acceptance and payments solutions business.
is responsible for the overall strategic development of
In addition to his role as Non-Executive Chairman of
the Group (both within the UK and internationally).
Alpha FX Group PLC, Clive is CEO of takepayments LTD,
a payment solutions business. Clive is also a Chartered
Maintaining Skill Set:
Accountant.
Maintaining Skill Set:
As Chief Executive Officer of a regulated and high
growth FX solutions business, Morgan’s experience
is kept up to date by nature of his day to day role.
As Chief Executive Officer of a regulated and
He also attends a variety of meetings and events to
high growth payments business, Clive’s skills and
support his personal development and is an avid
experience are kept up to date by nature of his
reader of self-development literature.
current role. He also attends a variety of skill-focused
conferences.
Committee Membership:
– Nominations Committee member
Committee Membership:
−
−
−
Nominations Committee Chair
Remuneration Committee member
Audit Committee member
56
57
GOVERNANCE BOARD OF DIRECTORS
Tim Kidd
Chief Financial Officer &
Company Secretary
Tim has over 25 years’ experience in accounting and
finance, including 16 years at FTSE listed ICAP PLC
where he held several senior finance and accounting
roles, including Group Financial Controller and
EMEA Chief Financial Officer. Tim is also a Chartered
Accountant and Graduated with a degree in
Accounting and Finance in 1987.
Maintaining Skill Set:
As CFO of Alpha FX, Tim keeps his skills and
experience up to date by nature of his day-to-day
role. Furthermore, as a Chartered Accountant he
undertakes Continuous Professional Development
(CPD) training, alongside a variety of technical courses
and subscriptions to professional publications.
Committee membership:
– N/A
Henry Lisney
Chief Operating Officer
Henry is responsible for ensuring Alpha maintains
a scalable operating model, whilst overseeing our
regulatory controls, governance and security. He
joined Alpha in 2013, before quickly rising to the Role
of Operations Director in 2015. He was appointed to
the Board as COO in 2018.
Henry is a member of the Chartered Institute for
Securities and Investment and holds a first-class
degree in Management and Accounting.
Maintaining Skill Set:
As COO of a regulated and high growth FX solutions
business, Henry’s experience is kept up to date by
nature of his day to day role. He is also a practicing
member of the Chartered Institute of Securities and
Investments and attends a variety of skill-focused
conferences and seminars.
Committee membership:
– N/A
Lisa Gordon
Non-Executive Director
Matthew Knowles
Non-Executive Director
Lisa has more than 25 years of board experience
Matt brings significant industry expertise to Alpha,
at both listed and private companies. She was
having spent 19 years at HiFX, a business he
previously a founding Director of Local World PLC
co-founded, providing international payment services
which was acquired by Trinity Mirror PLC in November
to both consumer and corporate clients. At the time
2015, as well as COO of Yattendon Group, a private
of his departure from HiFX Matt was responsible
conglomerate, and Corporate Development Director of
for approximately 400 employees across 6 offices
Chrysalis Group PLC, the media group.
internationally, and had led the company through a
number of high-profile acquisitions, as well as a sale to
Lisa has also recently been appointed Chairman at
Nasdaq listed Euronet Inc.
Cenkos Securities Plc, (subject to FCA approval), and is
also a Non-Executive Director of Magic Light Pictures,
Matt is also a Venture Partner at TempoCap, a
a leading children’s film and television production
late-stage growth investor (VC Fund), investing in
company.
Maintaining Skill Set:
disruptive technology companies. Alongside this, he is
Chairman of Bleckwen, a French regtech business.
Lisa’s skills and experience are kept up to date
Maintaining Skill Set:
by nature of her current roles. She also attends
As a Chairman, Non-Executive Director and Venture
numerous NED CPD training events and professional
Partner involved and exposed to numerous disruptive
seminars.
Committee membership:
business models and technology, Matt’s skills and
experience are kept up to date by nature of his
day-to-day roles. He also attends numerous NED
−
−
−
Remuneration Committee Chair
training events and professional seminars, as well as
Audit Committee Chair
Nomination Committee member
skills-focused conferences.
Committee membership:
−
−
Remuneration Committee member
Audit Committee member
58
59
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Corporate Governance Statement
The Board recognises the value and importance of high standards
of corporate governance and ensuring that all of its practices are
conducted transparently, ethically and efficiently. This section sets
out our approach to corporate governance and provides further
information on how the Board and its committees operate.
In compliance with the AIM Rules for Companies, the Group has chosen to formalise its governance policies by
complying with the QCA Corporate Governance Code for Small and Mid-Sized Quoted Companies (the “QCA Code”).
The table below outlines the ten principles of the QCA code and highlights where in this report the company’s
compliance is detailed. Further information on Alpha’s corporate governance can be found on our website –
https://www.alphafx.co.uk/investors.
The QCA Corporate Governance Code
1
2
3
4
5
GOVERNANCE PRINCIPLES
RELEVANT SECTIONS OF THE ANNUAL REPORT
Establish a strategy and business model to
Strategic Report | p.8 - 37
promote long-term value for shareholders.
Seek to understand and meet shareholders
Investors/Shareholders | p. 43
needs and expectations.
Shareholder Communications | p.64
Take into account wider stakeholder and
Section 172 Statement | p. 43
social responsibilities and their implications
Other Stakeholders | p.64
for long-term success.
Corporate Social Responsibility | p. 70
Embed effective risk management,
Principal Risks & Uncertainties | p.47-55
considering both opportunities and threats,
Internal Controls & Assessment of Business Risk | p.64
throughout the entire organisation.
Maintain the Board as a well-functioning,
Board of Directors | p.57-59
balanced team led by the Chair.
Corporate Governance Statement| p.61-65
6
Ensure that between them the Directors
Board of Directors | p.57-59
have the necessary up-to-date experience,
Board Effectiveness |p.63
skills and capabilities.
GOVERNANCE CORPORATE GOVERNANCE STATEMENT
7
8
9
GOVERNANCE PRINCIPLES
RELEVANT SECTIONS OF THE ANNUAL REPORT
Evaluate Board performance based on
Board Effectiveness |p.63
clear and relevant objectives, seeking
Remuneration Committee Report |p.72-74
continuous improvement.
Promote a corporate culture that is based
Clients | p. 17
on ethical values and behaviours.
Culture | p. 43
Business Culture, Behaviour & Ethics | p.65
Corporate Social Responsibility | p.70
Maintain governance structures and
Corporate Governance Statement | p.61-65
processes that are fit for purpose and
Remuneration Committee Report | p.72-74
support good decision-making by the
Audit Committee Report | p.75-76
Board.
10
Communicate how the Company
Corporate Governance Statement | p.61-65
is governed and is performing by
Further information is also published on our website:
maintaining a dialogue with shareholders
alphafx.co.uk/investors
and other relevant stakeholders.
Board Composition
The Board believes the size and composition of the
The Board is responsible to shareholders for the
Board is appropriate given the size and stage of
successful stewardship of the Group and sets the
development of the Group and, as per the individual
Group’s strategy for long-term success. It is important
biographies, that the Directors bring a desirable
that the Board itself contains the right mix of skills,
range of skills, experience, personal qualities and
experience and knowledge in order to deliver the
capabilities in light of the Group’s challenges and
Strategy of the Group. As such, the Board comprises
opportunities, while at the same time ensuring
three Executive Directors and, including the Chairman,
that no individual (or a small group of individuals)
three independent Non-Executive Directors. The Board
can dominate the Board’s decision making. All
considers that Clive Kahn (acting as Chairman), Lisa
Board Directors are subject to election at their first
Gordon and Matthew Knowles are independent within
Annual General Meeting and to re-election annually
the meaning of the UK Corporate Governance Code.
thereafter.
The Chairman and Chief Executive have distinct roles.
The Chairman’s primary responsibility is the delivery
How the Board Operates
of the Group’s corporate governance and the effective
The Board is responsible for the proper
operation of the Board of Directors, whilst the Chief
management of the Group by formulating, reviewing
Executive is responsible for the operation of the Group
and approving the Group’s strategy, budgets, and
in order to deliver on its strategic objectives. The
corporate actions.
Chairman has a clear separation from the day-to-
day business of the Group which allows him to make
In order to achieve its objectives, the Board adopts
independent decisions.
the ten principles of the QCA Code.
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61
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Strategy and management
Structure and capital
to discharge its duties.
auditors.
Directors are expected to attend all Board meetings,
Key areas of activity:
Corporate Governance Statement [cont.]
Through successfully implementing these principles,
Board Meetings
the Group aims to deliver long-term growth for
The Board met seven times during the year and Non-
shareholders and is able to maintain a flexible,
Executive Directors also communicate directly with
efficient and effective management framework within
Executive Directors and Senior Management between
an entrepreneurial environment.
formal Board meetings.
The Group’s strategy is outlined on pages 33-37
The Chairman and the Chief Operating Officer plan the
and summarises the Board’s approach to achieving
agenda for each Board meeting in consultation with all
sustainable long-term growth and value for
other Directors. The agenda is issued with supporting
shareholders. Matters reserved for the attention of the
papers ahead of the Board meetings, along with
Board which are reviewed annually include:
appropriate information required to enable the Board
−
−
−
−
−
−
−
−
−
−
−
−
−
−
Financial reporting and controls
and the Committee meetings on which they
Risk management and internal controls
are members. The table below shows Director’s
Regulatory reporting and controls
attendance at scheduled Board and Committee
Contracts
meetings during the year. The Nominations
Investment in new businesses
Committee did not meet during the year.
Commitment to material expenditure
Senior management succession
Shareholder communication
Board Committees
The Board has established an Audit Committee,
Board membership and other appointments
Remuneration Committee and Nominations
Remuneration
Delegation of authority
Corporate governance
Committee, each with formally delegated duties and
responsibilities and with written terms of reference.
Each Committee comprises Non-Executive Directors of
the Group. No new independent external advice was
sought by the Board or its Committees during the year.
MEMBER
Clive Kahn
Morgan Tillbrook
Tim Kidd
Henry Lisney
Lisa Gordon
Matthew Knowles
BOARD
REMUNERATION
AUDIT
7/7
7/7
7/7
7/7
7/7
7/7
1/1
NA
NA
NA
1/1
1/1
2/2
NA
NA
NA
2/2
2/2
GOVERNANCE CORPORATE GOVERNANCE STATEMENT
Audit Committee
Key areas of activity:
The Audit Committee is chaired by Lisa Gordon and its
other members are Clive Kahn and Matthew Knowles, all
of whom are independent Non-Executive Directors and
have recent and relevant financial experience.
The Audit Committee determines and examines any
matters relating to the financial affairs of the Group
including the terms of engagement of the Group’s
auditors and, in consultation with the auditors, the scope
of the audit. In addition, it considers the financial
performance, position and prospects of the Group and
ensure they are properly monitored and reported on.
The Audit Committee meets not less than twice in each
financial year and has unrestricted access to the Group’s
−
−
−
−
−
Financial reporting
Internal control and risk management reviews
External audit
Review of the Risk Register
Consult with Head of Compliance department
independent of executive Directors
−
Review of complaints register
Remuneration Committee
The Remuneration Committee is chaired by Lisa Gordon
and its other members are Clive Kahn and Matthew
Knowles all of whom are independent, Non-Executive
Directors.
The Remuneration Committee reviews the performance
of the Executive Directors and sets their remuneration,
determines the payment of bonuses to the Executive
Directors and considers the Group’s long-term
incentive arrangements for employees. In exercising
this role, members of this committee have regard to
the recommendations put forward in the Corporate
Governance Code and to industry benchmarks. The
Remuneration Committee meets not less than once a
year and at such other times as the Chairman of the
committee requires.
−
−
−
−
Oversight of Executive Remuneration policy
Review of Director’s remuneration against
benchmark data
Setting and appraisal of performance targets
Established equity scheme through Sharesave
Nominations Committee
The nomination committee is chaired by Clive Kahn;
its other members are Lisa Gordon and Morgan
Tillbrook. The Nominations Committee reviews and
recommends nominees as new Directors to the
Board. The Nominations Committee meets as the
Chairman of the committee requires.
Key areas of activity:
−
Assesses the adequacy of the knowledge pool
of Non-Executive Directors
−
Assesses the adequacy of representativeness of
Non-Executive Directors
−
Approve the appointment of any new
Non-Executive Directors
−
Succession planning
Board Effectiveness
At the current stage of the Group’s development,
assessment of the Board’s performance and that
of its committees is undertaken by the Board as a
whole, led by the Group’s Chairman.
Although the Group has no formal procedure for
measuring the effectiveness of the Board, the Board
will be carefully reviewing its effectiveness and
the need to refresh its membership by reference
to financial performance, adherence to budgets
and the overall growth of the Group, and taking
account of the opinions and insights of its auditors,
Nominated Adviser, broker, legal and other advisers,
and shareholders. The method of assessing Board
effectiveness and performance will be reviewed on a
continuing basis.
The Remuneration Report on pages 72 to 74 contains
more detailed information on the Committee’s roles and
the Director’s remuneration and fees.
The skills, experience, personal qualities and
capabilities of the Board are outlined in their
biographical details on pages 57 to 59.
62
63
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 GOVERNANCE CORPORATE GOVERNANCE STATEMENT
Corporate Governance Statement [cont.]
Their experiences and characteristics give them the
for the benefit of its members, and will continue to
ability to deliver and challenge the Group’s strategy
assess and evolve the effectiveness of its engagement
for the benefit of shareholders. The Board keeps
with all stakeholders.
succession planning under review and monitors
the progress and success of the development plans
Alpha is committed to ensuring appropriate
Annual General Meeting
The Group’s Annual General Meeting (AGM) will take
place at 9:30am on 6 May 2020. The Notice of AGM
and explanatory notes on all resolutions are provided
alongside all copies of the annual report mailed to
shareholders. Digital copies are also available to view
via the Group’s website.
which have been established for relevant employees,
communication and reporting structures exist between
Business Culture, Behaviours and Ethics
with a particular focus on ensuring over time all
the Board and its existing and potential shareholders.
senior management positions have at least one
The Group maintains communication with both current
internal successor. The Committee also monitors the
and potential institutional shareholders through one-
length of tenure of the Chairman and Non-Executive
to-one meetings with Executive Directors, particularly
Directors and the mix and skills of the Directors.
after the publication of interim and full year results, as
well as ad-hoc meetings and conference calls.
Time Commitments
Private shareholders are encouraged to attend the
The Directors recognise the need to commit the time
Annual General Meeting at which the Group’s activities
The Group operates in the highly competitive foreign
exchange industry. It is Alpha’s belief that its success
comes from its culture and long-term focused strategy.
As a founder-led business, the Group has always hired
within its image attracting and retaining people who
share the Alpha culture. As it continues to scale, the
Group sees retaining its culture as key to maintaining
its high performance and delivering on its objectives,
necessary to fulfil their roles. This requirement is
are considered and questions answered. Any material
strategy and business model.
included in their letters of appointment. The Board
presented (including the results of shareholder
is satisfied that the Chairman and Non-Executive
votes) is uploaded to the Group’s website where it is
Directors are able to commit sufficient time to the
available to all shareholders. The Group’s website has
Group’s business. There has been no significant
a dedicated investor page which contains the latest
change in the Chairman’s time commitments since
information including the most recent results.
his appointment.
Internal Controls and Assessment of Business Risk
The Board believes that other than shareholders, the
The Board has ultimate responsibility for the Group’s
Group’s key stakeholders are the Group’s staff and
Other Stakeholders
In light of this, the Group has established an Employee
Engagement team, led by CEO Morgan Tillbrook,
which is responsible for defining, embedding and
reinforcing the Alpha culture and ensuring it evolves in
the right way as the company expands. As part of this,
the Group has a clearly defined vision, mission and
purpose along with five key behaviours and a series of
business principles. It is our belief that Alpha’s unique
culture supports the Group’s objectives, strategy and
internal control and risk management processes, all
its corporate clients from which it generates revenue.
business model.
of which are designed to manage and mitigate risks
Given the size of the Group, all matters relating to staff
that may undermine the Group’s strategic objectives.
and corporate clients are dealt with at Board level.
Such systems can only provide a reasonable but
not absolute level of assurance against material
Employees are also encouraged to openly provide
misstatement or loss. The Audit Committee monitors
feedback on a regular basis to all other members of
and reviews the Group’s internal control procedures
staff (regardless of seniority and tenure) through a
and reports its conclusions and recommendations to
performance management principle known as ‘radical
the Board.
candour’ and by utilising internal communication
platforms throughout the Group. Seeking and
providing feedback to others is a key part of the Alpha
Shareholder Communications
culture, and as a result feedback is habitually sought
The Directors are conscious of their duty under
from clients, suppliers and counterparties in order to
section 172 of the Companies Act 2006 to have
ensure the Group is continually improving the quality
regard to stakeholder interests when discharging
of its service and relationships.
their duty to promote the success of the Company
The Group is committed to ensuring that Alpha
operates according to the highest ethical standards
for which the Board has primary responsibility.
The Directors believe that the main determinant
of whether a business behaves ethically and with
integrity is the quality of its people. The Directors have
responsibility for ensuring that individuals employed
by the Group demonstrate the highest levels of
integrity and undertakes reviews of its employees
regularly. In addition, the Group has a formal Bribery
and Anti-Corruption Policy and a Share Dealing Code.
64
65
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 BUSINESS MODEL OUR BEHAVIOURS
Our Behaviours
Our behaviours are what make us Alpha - continuous actions that drive our
culture and performance.
They set the tone for our culture and are not just words on a page, they are part
of our DNA. These behaviours underpin everything we do and are reflected in
the day-to-day activity of the company, they are part of our vocabulary (an ‘Alpha
language’) and exhibiting them is referred to as ‘Bringing Your A Game’.
Our behaviours provide a lightweight and scalable behavioural framework
that sets transparent expectations of what high performance and standards
of business conduct look like throughout the business. The result: every team
member (regardless of role) can direct their energies in alignment with one
another to unlock the full potential of our organisation and deliver on our
mission, vision and purpose.
66
67
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 BUSINESS MODEL OUR BEHAVIOURS
Act as one
Make moves
Means sharing one mission, one vision and one purpose.
Means we do the meaningful things that make the biggest difference.
At Alpha we learn together, grow together and win together. We expect one another to
challenge actions inconsistent with our culture and high standards of business conduct,
celebrate other people’s wins (as well as our own), act fairly, and seek what is best for the
company rather than ourselves. Ultimately, it’s about remembering our individual success is
amplified by the team around us.
Whether it’s helping a client solve a problem, unlocking efficiencies in the business or even
bringing someone up who’s on a low, we never let opportunities pass us by or overlook a
problem. We get the job done and are accountable for making the right things happen.
Be humble
Expect more
Means being a learn-it-all not a know it all.
Means we’re always striving to raise the bar.
We have a saying at Alpha: squash the biggest ego in the room. Success here comes from
accepting that we know very little, embracing feedback and finding perspective through
humility. We don’t let praise get to our heads and we don’t let criticism get to our hearts –
nobody is the finished article and we look for ‘learn-it-alls’ not ‘know-it-alls’.
We’re comfortable with being uncomfortable, because that’s how we grow. By reflecting
on our journey, being self-critical about our performance and using any setback as an
opportunity for a comeback, we continually re-evaluate what it means to be successful and
raise the bar even higher.
Seek reality
Means we see the world as it is.
We think critically, independently and freely, and never shy away from the truth. Our people
open their mind and consider multiple perspectives to get closer to reality. We ask the
hardest questions to find the best insights, and avoid group think and confirmation bias by
seeking opinions that are contrary to our own. Debate isn’t just encouraged at Alpha, it’s
inevitable.
68
69
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Corporate Social Responsibility
We remain committed to providing equal opportunities and
diversity in the workplace, by recruiting and promoting staff
based on their experience, skills and attitude. We therefore do
not discriminate between employees or prospective employees
on the grounds of age, race, disability, religion, gender or any
other criteria.
We believe gender diversity within the foreign exchange industry
has considerable room for improvement. We are therefore
focused on working with our recruitment partners to improve
this trend, and in 2019 the percentage of women within the
business increased from 18% to 25%.
We take seriously our responsibility to provide a safe and
healthy working environment. The Group complies with health
and safety legislation including conducting regular inspections
and risk assessments.
We are committed to minimising the impact our operations have
on the environment. Recycling of office supplies is undertaken
where possible and the Group has adopted a largely paperless
marketing model. When designing our new HQ, we made the
conscious decision to prioritise more sustainable materials over
cheaper but more harmful, non-renewable alternatives.
GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY
“
One of the key differentials we perceived Alpha as
being able to provide over other brokers was their
portal. Developed in house and with resource dedicated
to continue development bespoke to Halfords’
requirements, the results to date have been outstanding.
Every request made has been considered and
expectations have been constantly exceeded with each
update released. Not all brokers are the same and I
wouldn’t hesitate in recommending anyone
to work with Alpha FX.”
Stuart Harvey
Head of Tax & Treasury
70
71
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Remuneration Committee Report
FY 2019
I am pleased to present the 2019 remuneration report, which sets out the remuneration policy and the
remuneration paid to the Directors for the year.
Alpha FX Group plc is listed on the Alternative Investment Market (AIM) and, as such, in the interests of
transparency, the following disclosures are prepared on a voluntary basis for the Group.
Remuneration Committee
Details of the Remuneration Committee are provided in the Corporate Governance Statement.
Remuneration Policy
The Group’s policy is that the remuneration package of the Executive Directors should be sufficiently
competitive to attract, retain and motivate those Directors to achieve the Group’s objectives without making
excessive payments. Remuneration is reviewed each year in light of the Group’s business objectives. It is the
Remuneration Committee’s intention that remuneration should reward achievement of objectives and that
these are aligned with shareholder’s interests over the medium-term. Remuneration consists of basic salary,
performance-related bonus, long-term incentive plan and pension contributions.
Performance-related bonuses are based on achievement of the Group’s budget for both revenue and profit.
Revenue and profit growth are key KPI’s for the Group. The Committee ensures that the balance between
fixed and variable remuneration helps to ensure objectives are aligned. The Committee believes that the
dual focus on revenue and profit performance is integral to ensuring delivery of shareholder value.
Executive Directors’ service contracts
REQUIRED WRITTEN NOTICE BY BOTH THE COMPANY
AND INDIVIDUALS
Executive Director
Morgan Tillbrook
Henry Lisney
Tim Kidd
12 months
6 months
6 months
Non- Executive Directors service contracts
The Non-Executive Directors do not have service contracts but are appointed under letters of appointment.
Appointment letters are intended to be for a two-year term. No compensation is payable in the event of a
Non-Executive not being re-elected. The Board determines the terms and conditions of the Non-Executive
Directors.
GOVERNANCE REMUNERATION COMMITTEE REPORT
Directors’ remuneration
The following table summarises the total gross remuneration of the Directors who served in the year ended
31 December 2019.
YEAR ENDED 31 DECEMBER 2019
BASIC
SALARY/FEE
£
BONUS*
PENSION
£
£
SHARE-
BASED
PAYMENT
OTHER
TOTAL
£
£
Executive
Morgan Tillbrook
Tim Kidd
Henry Lisney
Non-executive
Clive Kahn
Lisa Gordon
Matthew Knowles**
275,000
125,000
1,188
-
1,563
402,752
140,000
75,000
225,000
125,000
30,000
45,000
45,000
-
-
-
-
-
-
-
707
7,191
1,046
223,237
-
-
-
-
399
350,399
-
417
-
30,000
45,417
45,707
*The bonus paid to the executive directors in the year represents 71.4% of the maximum potential bonus
payable, based on the Group’s achievement against key performance indicators.
**The salary/fee for Matthew Knowles included £15,000 for consulting advice in the year.
BASIC
SALARY/FEE
£
BONUS
PENSION
£
£
SHARE-
BASED
PAYMENT
OTHER
TOTAL
£
£
YEAR ENDED 31 DECEMBER 2018
Executive
Morgan Tillbrook
Tim Kidd
250,000
120,000
62,500
60,000
Henry Lisney (appointed 21 March
93,636
96,154
2018)
Non-executive
Clive Kahn
Lisa Gordon
30,000
45,000
Matthew Knowles (appointed 22 October
5,000
2018)
-
-
-
703
-
1,516
314,719
-
-
-
-
80
14,808
-
-
27,462
-
-
-
-
-
-
194,202
189,789
30,000
72,462
5,080
The highest paid Director was paid £402,752 during the year (2018: £314,917). The average wage within the
Group for the year ending 31 December 2019 was £104,235 (2018: £87,020).
72
73
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Remuneration Committee Report [cont.]
Directors’ shareholding and share interests
The following table summarises the shareholding and share interests of the Directors at 31 December 2019.
Audit Committee report
FY 2019
GOVERNANCE AUDIT COMMITTEE REPORT
BENEFICIALLY
OWNED
UNAPPROVED
SHARE OPTION
GROWTH
SHARE SCHEME
TOTAL
On behalf of the Board, I am pleased to present the Audit Committee report for the year ended 31 December 2019.
AS AT 31 DECEMBER 2019
Executive
Morgan Tillbrook
Tim Kidd
Henry Lisney
Non-executive
Clive Kahn
Lisa Gordon
Matthew Knowles
9,748,220
172,869
1,125,539
397,361
-
-
-
-
-
-
57,297
-
-
9,748,220
83,139
256,008
-
-
-
-
1,125,539
397,361
57,297
-
Details of the Growth Share Scheme and the unapproved share option are included in Note 25 of the Consolidated
Financial Statements.
No shares were sold by any of the Directors in the year.
A resolution to accept the Report of the Remuneration Committee will be put to shareholders at the Annual General
Meeting and the Committee will conduct a full annual review of the policy.
Lisa Gordon
Chair of the Remuneration Committee
The Audit Committee is responsible for ensuring that the financial performance of the Group is properly reported and
reviewed. Its role includes monitoring the integrity of the financial statements (including annual and interim accounts
and results announcements), reviewing internal control and risk management systems, reviewing any changes to
accounting policies, reviewing and monitoring the extent of the non-audit services undertaken by external auditors and
advising on the appointment of external auditors.
The Audit Committee met twice for scheduled meetings during the year and also held meetings, independent of
management, with BDO LLP, the Company’s external auditors.
Members of the audit committee
Details of the Audit Committee membership are provided in the Corporate Governance Statement.
Duties
The main items of business considered by the Audit Committee during the year included:
−
−
Review of the 2019 audit plan and audit engagement letter;
Reviewing the effectiveness of the external audit process;
− Monitoring the integrity of the financial statements and Annual Report;
−
−
−
Going concern review;
Review of the risk management and internal control systems;
Review the Group’s ICAAP and risk framework;
− Meeting with the external auditor without management present; and
−
Consideration of regulatory developments and their impact.
The Chair of the Audit Committee consults with all members prior to the meeting to ensure all matters arising are raised
and discussed openly.
The full terms of reference of the Committee comply with the UK’s Quoted Companies Alliance Corporate Governance
Guidelines for Small and Mid-Size Quoted Companies (the “QCA Code”) and are available on the Group’s website or from
the Company Secretary at the registered office address.
74
75
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Role of the external auditor
The external auditor, BDO LLP, were re-appointed in the financial year to 31 December 2017, following a formal
tender process. The Audit Committee monitors the relationship to ensure that auditor independence and
objectivity are maintained. The Committee will keep under review the need for external tender.
The breakdown of fees between audit and non-audit services is provided in Note 5 of the Group’s financial
statements.
Having reviewed the auditor’s independence and performance, the Audit Committee recommends that BDO LLP
be reappointed as the Group’s auditor at the next AGM.
Audit process
The auditor prepares a plan for the audit of the full period financial statements. The audit plan sets out the scope
of the audit, areas to be targeted and audit timetable. This plan is reviewed and agreed in advance by the Audit
Committee. Following the audit, the auditor presented its findings to the Audit Committee for discussion.
Internal Audit
At present the Group does not have an internal audit function and the Committee believes that management
is able to derive assurance as to the adequacy and effectiveness of internal controls and risk management
procedures without one.
Risk Management and Internal Controls
As described on page 47 of the corporate governance report, the Group has established a framework of risk
management and internal control systems, policies and procedures. The Audit Committee is responsible for
reviewing the risk management and internal control framework and ensuring that it operates effectively. During
the period, the Committee has reviewed the framework and the Committee is satisfied that the internal control
systems in place are currently operating effectively.
Whistleblowing
The Group has in place a whistleblowing policy which enables employees of the Group to confidentially report
matters of concern.
Our priorities for the year ahead
During 2020, the Committee will continue to focus on:
−
−
−
Reviewing the Group’s ICAAP and risk framework
Assessing the resilience of the technology infrastructure
Considering the implications of Brexit including any change to the regulatory environment, business
practices and risk profile of the Group.
Lisa Gordon
Chair of the Audit Committee
GOVERNANCE DIRECTORS REPORT
Directors’ Report
FY 2019
The Directors present their Annual Report and the audited financial statements for the year ended 31 December 2019.
The corporate governance statement on page 60 also forms part of this Directors’ report.
Business Review
An analysis of the Group’s development (including likely future developments) and performance is contained in the
Chairman’s Statement, CEO Statement and Our Strategy. Information on the financial risk management strategy of the
Group and its exposure to its principal risks & uncertainties section of the report is on pages 47-55.
Principal Activity
Alpha FX Group plc (the “Company”) is a public limited company incorporated and domiciled in England and Wales. The
registered office of the Company is Brunel Building, 2 Canalside Walk, London W2 1DG. The registered company number
is 07262416. A list of the Company’s subsidiaries is presented in note 14.
The Company’s principal activity is the provision of foreign exchange services for corporates and institutions exposed
to currency market volatility. Activities range from initial design and implementation of hedging strategies, to ongoing
management and monitoring of currency risks.
Results and Dividend
The Group’s results for the year are shown in the statement of comprehensive income on page 86. Details of both the
interim and final dividend for the year are included on page 41.
Directors
The Directors of the Company during the year were:
Executive
Morgan Tillbrook
Tim Kidd
Henry Lisney
Non-Executive
Clive Kahn
Lisa Gordon
Matthew Knowles
Biographical details, along with committee responsibilities are provided on pages 57-59.
76
77
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 GOVERNANCE DIRECTORS REPORT
Directors’ Interests
Statement of Directors’ Responsibilities
The Directors’ interests in the Group’s shares and options over ordinary shares are shown in the remuneration
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with
report on page 74.
Political Donations
applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
The Group has not made in the past, nor does it intend to make in the future, any political donations.
Directors have elected to prepare the Group and Company financial statements in accordance with International
Events after the reporting period
Financial Reporting Standards as adopted by the European Union (IFRSs). Under company law the Directors must
not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs
On 17 March 2020 the Company determined that following the vesting of shares under the Growth Share Schemes
and profit or loss of the Group and the Company for the period. The Directors are also required to prepare financial
for the year ended 31 December 2019, it would be issuing 822,873 shares on or around 31 March 2020. Details are
statements in accordance with the rules of the London Stock Exchange for companies trading securities on the
provided in note 27 to the financial statements.
Alternative Investment Market.
Financial Instruments
In preparing these financial statements, the Directors are required to:
The financial risk management objectives of the Group, including credit risk, market risk, liquidity risk, interest rate
risk and currency risk, are provided in note 16 to the Consolidated Financial Statements on pages 108 to 109.
−
Select suitable accounting policies and then apply them consistently;
Share Capital Structure
− Make judgements and accounting estimates that are reasonable and prudent;
−
State whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in
Details of changes in the Group’s share capital are disclosed in note 20 of the consolidated financial statement.
the financial statements; and
Share Options Schemes
Details of employee share schemes are set out in note 25 to the Consolidated Financial Statements.
Going Concern
The Directors believe the Group is in a strong financial position due to its profitable operations and strong cash
generation, and therefore that the Group has adequate resources to continue its operations for the foreseeable
future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
Research and Development
The Company has a continuous programme of development expenditure as part of its focus on evolving its service
offering through technological innovation. Capitalised internal development expenditure is disclosed in note 11 of
the accounts. All other development expenditure is recognised in the Statement of Comprehensive income.
Future developments
Auditor and disclosure of information to auditor
BDO LLP were appointment as auditors on 7 December 2016 and are continuing in office. In accordance with
s489(4) of the Companies Act 2006 a resolution for their reappointment will be proposed at the forthcoming Annual
General Meeting.
As far as the Directors are aware, there is no relevant audit information of which the Company’s auditor is unaware,
and each Director has taken all reasonable steps that he or she ought to have taken to make himself or herself
aware of any relevant audit information and to establish that the Group’s auditors are aware of this information.
Annual General Meeting
The Annual General Meeting will be held at 9.30am on 6 May 2020 at the offices of Bird & Bird, 12 New Fetter Lane,
London EC4A 1JP. The Notice of Annual General Meeting and the ordinary and special resolutions to be put to the
meeting are included at the end of this Annual Report and financial statements.
−
Prepare the financial statements on the going concern basis unless it is appropriate to presume that the Company
will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy at any time the financial position of the company
and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006.
They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The directors are responsible for ensuring the annual report and the financial statements are made available on a
website. Financial statements are published on the company’s website in accordance with legislation in the United
Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in
other jurisdictions. The maintenance and integrity of the company’s website is the responsibility of the directors.
The directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.
By order of the board
T C Kidd
Company Secretary
17 March 2020
78
79
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Independent auditor’s report to the
members of Alpha FX Group plc
Opinion
We have audited the financial statements of Alpha FX Group plc (the ‘Parent Company’) and its
subsidiaries (the ‘Group’) for the year ended 31 December 2019 which comprise consolidated statement
of comprehensive income, the consolidated statement of financial position, the consolidated cash flow
statement, the consolidated statement of changes in equity, notes to the consolidated financial statements,
the company statement of financial position, the company statement of changes in equity and notes to the
company financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group financial
statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union. The financial reporting framework that has been applied in the preparation of the Parent
Company financial statements is applicable law and United Kingdom Accounting Standards, including
Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted
Accounting Practice).
In our opinion:
−
the financial statements give a true and fair view of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2019 and of the Group’s profit for the year then ended;
−
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union;
GOVERNANCE INDEPENDENT AUDITOR’S REPORT
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to
you where:
−
the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
−
the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the Group’s or the Parent Company’s ability to continue to adopt the going concern basis of accounting for
a period of at least twelve months from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.
KEY AUDIT MATTER
HOW WE ADDRESSED THE KEY AUDIT MATTER IN THE AUDIT
1. Existence and accuracy of revenue
We reviewed the revenue recognition policy applied to each of the
The Group’s revenue recognition policy is
Group’s revenue streams and considered its compliance with IFRS15
included with the accounting policies in note 2.
‘Revenue from Contracts with Customers’ and IFRS 9 ‘Financial
Instruments’ with a specific focus on existence and measurement of
The risk in Alpha FX Group plc revolves around
revenue.
the existence and accuracy of revenue recorded
in the year, specifically concerning both trade
We have tested controls over existence and accuracy of revenue for
and adjustment profit amounts. Existence
operating effectiveness throughout the year.
−
the Parent Company financial statements have been properly prepared in accordance with United
refers to the risk that trades did not occur or
Kingdom Generally Accepted Accounting Practice; and
−
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We are independent of the
Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
were overstated, accuracy refers to the risk that
We tested a sample of revenue transactions for each material revenue
calculations identifying the revenue amounts to
stream to verify the existence and accuracy of revenue with reference
record contain errors.
to underlying supporting trade tickets and third party information
The Group’s reported revenue drives the level
re-calculations of the revenue based on trade tickets, third party
of sales commissions payable to front office
information recorded with banking counterparties and external
recorded with the banking counterparty. We have also performed
staff and is a key metric in the Group’s Growth
exchange rates.
Share Scheme used to incentivise directors, key
Management and certain staff, and as such we
The Group entered into material long dated open window forwards
consider this to be a key audit matter.
during the year. We have performed detailed revenue recognition
testing procedures challenging management on revenue recognition
in relation to forward-points revenue recognised.
Key observations:
Based on our testing we consider the recognition of revenue to be
appropriate and in line with the requirements of the accounting
standards.
80
81
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 GOVERNANCE INDEPENDENT AUDITOR’S REPORT
KEY AUDIT MATTER
HOW WE ADDRESSED THE KEY AUDIT MATTER IN THE AUDIT
KEY AUDIT MATTER
HOW WE ADDRESSED THE KEY AUDIT MATTER IN THE AUDIT
2. Fair value of open trades at year-end
We reviewed the fair value policy applied to the open positions at
3. Growth Shares
We have engaged with BDO Valuations specialist to review the
Alpha FX Group plc holds a large open forward
year-end and considered its compliance with IFRS 13 ‘Fair Value
As well as the existing growth shares and option
appropriateness of the fair value calculation methodology and model
book of trades not yet settled at year end.
Measurement’.
Under accounting standards any open derivative
schemes, the Group has introduced two new
used. The BDO valuation experts have recalculated the fair value
growth share schemes in the year for staff
of the growth shares and compared inputs used by management’s
positions at year end are required to be held
In response to the changes implemented by management through a
across the group which contain both market and
experts to independently sourced information. Differences were
at fair value. The gain or loss on these forward
new risk rating process and the new CVA methodology, we have:
performance based vesting conditions. These
discussed with management and agreed to supporting documentation
trades is taken to the income statement with a
−
Engaged our internal valuation experts to review the new risk
new schemes are applicable for Alpha FX Limited
where appropriate.
corresponding financial asset or liability held on
rating process and CVA methodology for reasonableness and
and Alpha FX Institutional Limited Shares.
the balance sheet.
compliance to IFRS.
The audit team has reviewed and assessed the reasonableness of
− We reviewed the memorandum received from the valuation
The key input is the fair value applied to the new
Management’s assumptions related to profit after tax, underlying
At each reporting date management spend
experts and performed a Gap Analysis. We have discussed with
growth shares schemes which is highly subjective
profit after tax and dividends projections which are the key inputs into
significant amount of time to reassess the fair
management the gaps identified and corroborated management
and requires use of Management judgment
the IFRS 2 valuation calculations. We have challenged management’s
value of open trades, which includes adjusting the
explanations with supporting evidence.
and estimates which inherently creates more
assumptions and corroborated these assumptions to supporting
carrying value of the forward book with reference
− Management have adopted the proposed changes and
audit risk in respect of valuations applied to the
documentation.
to their mark to market forward rates as well as
implemented them for the year end 31 December 2019.
schemes.
an assessment of the credit worthiness of their
counterparties.
Management are required to exercise a
significant level of judgement in their assessment
of the credit worthiness of their counterparties
and their probability of default. This presents
a significant risk of material misstatement in
the completeness and accuracy of the credit
valuation adjustment. During the year Alpha
have implemented a new risk rating policy in
addition to a new Credit valuation adjustment
(CVA) methodology which represents additional
complexity. We have therefore identified fair
value of open trades at year-end as a key audit
matter.
The Group’s fair value policy is included with the
accounting policies note 2 and the significant
judgments in relation to Credit valuation
adjustment is set out in note 3.
We then performed credit reviews on a sample basis to confirm that
the credit ratings which are a key input into the CVA calculation are
accurate and in compliance with the credit risk rating methodology.
We checked that the credit ratings at year end were accurate through
performing credit reviews and reviewing external information
supporting the ratings.
We recalculated the credit valuation adjustment on a sample of trades
and compared against Management’s own assessment.
We have vouched input data to underlying supporting documentation
on a sample basis with specific focus on credit risk rating, MTM rates,
currency volatility and probability of default.
We tested a sample of trades within the open forward book at
year-end, checking that the mark to market forward rate has been
appropriately applied.
Key observations:
Accounting for growth shares under IFRS2 Share
Based on our testing we consider that the fair value of the growth
based payments is complex and this further
shares are appropriate and in line with the requirements of the
Key observations:
increases the risk of errors in the financial
accounting standards.
statements.
See Note 2 on accounting policy on Share based
payments and note 25 for additional disclosures.
We have therefore identified growth shares as a
key audit matter.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence
the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to
an appropriately low level the probability that any misstatements exceeded materiality, we use a lower level, “performance
materiality”, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily
We concur with the judgments made by management with regards to
be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular
calculating the fair value of open trades.
circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Materiality for the Group financial statements as a whole was set at £720,000 (2018: £500,000). Group materiality was
determined with reference to 5% (2018:5%) of the Group’s profit before tax consistent with prior year. Profit before tax is
considered the most appropriate measure in assessing the performance of the Group given the markets focus on this as a
key performance measure. Performance materiality was set at 65% (2018: 65%) of materiality at £460,000 (2018: £325,000)
of the Group materiality level.
82
83
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 The materiality for the parent company financial statement was set at £680,000 (2018: £450,000). Parent company
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
materiality was capped at 95% of the value of the Group materiality, being £680,000. Performance materiality for the
report to you if, in our opinion:
parent company was set at 65% (2018:65%) of materiality at £440,000 (2018: £325,000).
−
adequate accounting records have not been kept, or returns adequate for our audit have not been received from
GOVERNANCE INDEPENDENT AUDITOR’S REPORT
In relation to components within the Group, component materiality was set between £170,000 and £680,000. In 2018
component materiality range was between £66,000 and £430,000.
We agreed with the Audit Committee that we would report to the committee all individual audit differences in excess of
£28,000. We also agreed to report differences below Clearly Trivial threshold that, in our view, warranted reporting on
qualitative grounds.
An overview of the scope of our audit
The Group comprises the parent company and three trading subsidiaries (2018: Three), Alpha FX limited, Alpha FX
Institutional Limited and Alpha Foreign Exchange (Canada) Limited. Alpha FX Limited and Alpha FX Institutional Limited
have been determined to be significant components, a full scope audit of the parent company and UK subsidiaries was
performed by BDO LLP.
We determined that the Canadian subsidiary was not a significant component for the audit and BDO LLP performed
specific audit procedures on material financial statements areas related to revenue and expenses. As a result of our
audit approach above, we achieved coverage of 100% of the Group’s net assets, revenue and profit before tax.
Other information
The Directors are responsible for the other information. The other information comprises the information included
in the annual report 2019, other than the financial statements and our auditor’s report thereon. Our opinion on the
financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
−
the information given in the Strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
−
the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in
the course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report.
branches not visited by us; or
−
−
−
the Parent Company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors Responsibilities set out on page 79, the Directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Neil Fung-On (Senior Statutory Auditor)
For and on behalf of:
BDO LLP, Statutory Auditor
London, United Kingdom
17 March 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)
84
85
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
Consolidated Statement of Financial Position
For the year ended 31 December 2019
YEAR ENDED
31 DECEMBER 2019
£
YEAR ENDED
31 DECEMBER 2018
£
NOTE
YEAR ENDED
31 DECEMBER 2019
£
YEAR ENDED
31 DECEMBER 2018
£
NOTE
FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS
Revenue
Operating expenses
Underlying operating profit
Exceptional property related costs
Share-based payments
Operating profit
Finance income
Finance expenses
Profit before taxation
Taxation
Profit for the year
Other comprehensive income:
Currency translation differences arising from consolidation
Total comprehensive income for the year
Profit for the year attributable to:
Equity owners of the parent
Non-controlling interests
Earnings per share attributable to equity owners of the parent
(pence per share)
− basic
− diluted
− underlying basic
− underlying diluted
35,378,200
23,474,709
(21,698,615)
(13,781,984)
14,734,984
10,004,589
(558,378)
(497,021)
13,679,585
81,467
(215,789)
13,545,263
(2,525,394)
11,019,869
(3,133)
11,016,736
10,257,023
759,713
11,016,736
-
(311,864)
9,692,725
39,054
-
9,731,779
(1,911,082)
7,820,697
10,087
7,830,784
7,402,768
428,016
7,830,784
27.7p
26.9p
30.1p
29.2p
21.8p
21.3p
22.7p
22.1p
5
5
6
6
8
9
9
9
9
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Other cash balances
Total current assets
Total assets
Equity
Share capital
Share premium account
Capital redemption reserve
Merger reserve
Retained earnings
Translation reserve
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
Current liabilities
Trade and other payables
Current tax liability
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liability
Lease liability
Provisions
Total non-current liabilities
Total equity and liabilities
11
12
13
18
19
19
20
20
20
20
21
22
23
8
13
23
1,182,089
2,279,503
7,750,425
11,212,017
45,452,687
73,960,407
3,866,514
123,279,608
134,491,625
74,248
31,387,853
3,701
666,529
22,932,520
6,954
55,071,805
2,499,392
57,571,197
437,488
172,851
-
610,339
34,462,611
38,396,301
2,562,538
75,421,450
76,031,789
73,092
31,387,853
3,701
666,529
15,002,646
10,087
47,143,908
1,562,422
48,706,330
68,056,068
26,052,174
837,341
95,603
68,989,012
293,617
7,637,799
-
7,931,416
134,491,625
1,028,498
43,350
27,124,022
45,724
-
155,713
201,437
76,031,789
The consolidated financial statements of Alpha FX Group PLC were approved by the Board of Directors
on 17 March 2020 and signed on its behalf by:
Morgan Tillbrook
Director
T C Kidd
Director
86
87
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Consolidated Cash Flow Statement
For the year ended 31 December 2019
Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS
6
11
12
12
23
12
11
Cash flows from operating activities
Profit before taxation
Net finance expense/(income)
Amortisation of intangible assets
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Loss on disposal of fixed assets
Share-based payment expense
Provision (utilised)/charged in year
Decrease/(increase) in other receivables
Increase in other payables
(Increase) in derivative financial assets
Increase in derivative financial liabilities
(Increase) in other cash balances
Cash inflows from operating activities
Tax paid
Net cash inflows from operating activities
Cash flows from investing activities
Payments to acquire property, plant and equipment
Payments to acquire right-of-use assets
Proceeds from the sale of property, plant and equipment
Expenditure on internally developed intangible assets
Net cash outflows from investing activities
Cash flows from financing activities
Dividends paid to equity owners of the Parent Company
Dividends paid to non-controlling interests
Issue of ordinary shares by Parent Company
Share issue costs
Issue of ordinary shares by subsidiary
Payment of lease liabilities
Net interest received
Purchase of non-controlling interest for cash
Net cash inflows/(outflows) from financing activities
Increase in net cash and cash equivalents in the year
Net cash and cash equivalents at beginning of year
Foreign currency movements
Net cash and cash equivalents at end of year
19
w
88
YEAR ENDED
31 DECEMBER 2019
£
YEAR ENDED
31 DECEMBER 2018
£
NOTE
13,545,263
9,731,779
134,322
248,340
203,551
485,171
46,645
442,764
(103,460)
236,180
32,145,626
(9,814,747)
9,565,500
(1,303,976)
45,831,179
(2,468,658)
43,362,521
(2,364,874)
(164,835)
8,026
(992,941)
(3,514,624)
(2,524,358)
(1,088,325)
-
-
175
(355,986)
81,470
(393,634)
(4,280,658)
35,567,239
38,396,301
(3,133)
73,960,407
(39,054)
108,492
65,810
-
63,259
296,072
9,063
(210,612)
8,670,508
(16,174,082)
8,551,155
(991,063)
10,081,327
(1,552,133)
8,529,194
(104,895)
-
-
(421,260)
(526,155)
(1,766,350)
(119,000)
19,955,332
(798,993)
-
-
39,054
-
17,310,043
25,313,082
13,073,132
10,087
38,396,301
SHARE
CAPITAL
SHARE
CAPITAL
MERGER
PREMIUM
REDEMPTION
RESERVE
RETAINED
EARNINGS
ACCOUNT
RESERVE
£
£
£
£
£
TRANS-
LATION
RESERVE
£
TOTAL
NON-
TOTAL
CONTROLLING
INTERESTS
£
£
£
ATTRIBUTABLE TO THE OWNERS OF THE PARENT
Balance at
1 January 2018
65,524 12,237,951
3,701 666,529
9,081,374
- 22,055,079
- 22,055,079
Profit for the year
-
Transactions with
owners
Shares issued on
vesting of share option
scheme
1,131
Issue of shares to non-
controlling interests in
subsidiary undertakings
Share-based payments
-
-
-
-
-
-
6,437 19,948,895
-
-
(798,993)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,392,681
10,087
7,402,768
428,016
7,830,784
(1,131)
-
296,072
-
-
(1,766,350)
-
-
-
-
-
-
- 1,253,406
1,253,406
296,072
-
296,072
- 19,955,332
- 19,955,332
-
-
(798,993)
-
(798,993)
(1,766,350)
(119,000)
(1,885,350)
73,092 31,387,853
3,701 666,529
15,002,646
10,087 47,143,908 1,562,422 48,706,330
Shares issued on
placing
Cost of shares issued
on placing
Dividends paid
Balance at
31 December 2018
Profit for the year
Other comprehensive
income
Transactions with
owners
Issue of shares to non-
controlling interests in
subsidiary undertakings
Shares repurchased
from non-controlling
interests
Forfeiture of shares in
subsidiary
Share-based payments
Dividends paid
Balance at
31 December 2019
w
Shares issued on
vesting of share option
scheme
1,156
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,260,156
- 10,260,156
759,713 11,019,869
-
(3,133)
(3,133)
-
-
(3,133)
-
-
(1,156)
-
(247,532)
-
442,764
(2,524,358)
-
-
-
-
-
-
- 1,426,300
1,426,300
(247,532)
(146,102)
(393,634)
-
(14,616)
(14,616)
442,764
-
442,764
(2,524,358) (1,088,325)
(3,612,683)
74,248 31,387,853
3,701 666,529
22,932,520
6,954 55,071,805 2,499,392 57,571,197
89
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
For the year ended 31 December 2019
1. GENERAL INFORMATION
Alpha FX Group plc, (the ‘Company’) is a public limited company having listed its shares on AIM, a market operated by
The London Stock Exchange, on 7 April 2017. The Company is incorporated and domiciled in the UK (registered number
a. New standards, interpretations and amendments effective from 1 January 2019
IFRS 16 Leases (IFRS 16)
On 1 January 2019 the Group adopted IFRS 16. Details of the impact this standard are provided in the accounting
policy for Leases below.
IFRIC 23 Uncertainty over Income Tax Treatments
IFRIC 23 is effective for periods beginning on or after 1 January 2019 and requires:
−
The Group to determine whether uncertain tax treatments should be considered separately, or together as a
group, based on which approach provides better predictions of the resolution;
−
−
The Group to consider if it is probable that the tax authorities will accept the uncertain tax treatment; and
If it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on
the most likely amount or expected value, depending on whichever method better predicts the resolution of
07262416) and its registered office is Brunel Building, 2 Canalside Walk, London, W2 1DG. The consolidated financial
the uncertainty.
statements incorporate the results of the Company and its subsidiary undertakings, Alpha FX Limited,
Alpha FX Institutional Limited and Alpha Foreign Exchange (Canada) Limited.
The Group’s principal activity is the provision of foreign exchange services for corporates and institutions exposed
to currency market volatility. Activities range from initial design and implementation of hedging strategies, on-going
management and monitoring of currency risks and the provision of technology solutions.
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out in
note 2.
2. ACCOUNTING POLICIES
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards and International Accounting Standards as issued by the International Accounting Standards Board as
adopted by the European Union and interpretations (“Collectively IFRSs”).
The consolidated financial statements have been prepared using the measurement bases specified by IFRS for each type
of asset, liability or expense. The detailed measurement bases and principal accounting policies of the Group are set out
below. The consolidated financial statements are presented in Pounds Sterling (“£”) which is also the Group’s functional
currency. The principal accounting policies adopted in the preparation of the consolidated financial statements are set
out below and have been applied consistently throughout all periods presented, unless otherwise stated.
The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s
accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the consolidated financial statements are disclosed in note 3.
The consolidated financial statements are prepared on the historical cost basis except for the measurement of certain
financial instruments.
The Group does not believe that it is impacted by IFRIC 23 and therefore opening retained earnings remain
unaffected.
b. New standards, interpretations and amendments not yet effective
There are currently none that impact the Group.
Basis of consolidation
i. Subsidiaries
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all
three of the following elements are present: power over the investee, exposure to variable returns from the investee,
and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any elements of control.
ii. Transactions eliminated on consolidation
Intragroup balances, and any gains and losses or income and expenses arising from intragroup transactions, are
eliminated in preparing the consolidated financial information.
iii. Non-controlling interests
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s
equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business
combination and the minority’s share of changes in equity since the date of the combination. In accordance with IFRS
10, the Group recognises any non-controlling interest at the non-controlling interest’s proportionate share of the
acquiree’s net assets on a transaction by transaction basis.
The Group treats transactions with the non-controlling interest as transactions with equity owners of the Group. For
purchases from non-controlling interests the difference between the fair value of consideration paid and the relevant
share of net assets acquired is recorded in equity.
90
91
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 2. ACCOUNTING POLICIES [CONT.]
Segment reporting
In accordance with IFRS 8 ‘Operating Segments’, an operating segment is defined as a business activity whose operating
results are reviewed by the chief operating decision maker and for which discrete information is available.
Operating segments are reported in a manner consistent with the internal management reporting provided to the
chief operating decision-maker. The chief operating decision-maker responsible for allocating resources and assessing
performance of the operating segments is identified as the Group’s Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer.
Going concern
After making appropriate enquiries, the Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future and for at least one year from the approval
date of the consolidated financial statements. For these reasons, they continue to adopt the going concern basis in
preparing the Group’s financial statements.
Revenue
Spot and forward revenue is recognised when a binding contract is entered into by a client and the rate is fixed and
determined. Revenue represents the difference between the rate offered to clients and the rate the Group receives
from its banking counterparties.
Options revenue is recognised when a binding contract is entered into by a client and the revenue is fixed and
determined. Revenue represents the difference between the premiums offered to clients and the premium the Group
receives from its banking counterparties.
When the Group enters into a contract with a client, it immediately enters into a separate matched contract with its
banking counterparty.
Alpha Payment Solutions provide payment and collection services and receive revenue from both Account Fees and
Spot FX Transactions. Account Fees include (but are not limited to) electronic payments in and out of accounts (e.g.
Faster Payments, CHAPS, International payments and collections) and implementation fees.
The Group entered into new contracts in the year to provide payment and collection services. The revenue in relation to
these contracts is recognised in line with IFRS 15.
The Group receives revenue on Account Fees based on a billing schedule at the end of each month, as established in our
contracts. Billing occurs simultaneously with revenue recognition and as such, revenue is recognised using the output
method when the performance obligation is satisfied (when the services are rendered and transferred to the customer).
The output method accurately reflects the transfer of services as the contracts are priced on the basis of the number
of transactions provided through the platform and therefore also represents the amount to which the Group will be
entitled based on its performance to date.
Foreign currency translation
The Group’s consolidated historical financial statements are presented in pounds sterling, which is the functional
currency of the parent.
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Transactions and balances
Transactions in foreign currencies are initially recorded by the Group entities at the functional currency rates prevailing
at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the
functional currency spot rate of exchange ruling at the reporting date. All differences are taken to the consolidated
statement of comprehensive income.
Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates at
the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the
exchange rate at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items
is recognised in line with the gain or loss of the item that gave rise to the translation difference (translation differences
on items whose gain, or loss is recognised in other comprehensive income or statement of comprehensive income is also
recognised in other comprehensive income or statement of comprehensive income respectively).
Group companies
The results and financial position of Group entities that have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
−
Assets and liabilities at each period end are translated at the prevailing closing rate at the date of the consolidated
statement of financial position.
−
Income and expenses for each period within the consolidated statement of comprehensive income are translated at
the average rate for the period, and; on consolidation, exchange differences arising from the translation of the net
investment in foreign entities are recognised in other comprehensive income and accumulated in the translation
reserve as a separate component of equity. On disposal of a foreign operation, the cumulative translation differences
are transferred to the consolidated statement of comprehensive income as part of the gain or loss on disposal.
All intragroup transactions, balances, income, expenses and dividends are eliminated on consolidation.
Financial instruments
Financial assets
All financial assets are measured initially at fair value plus or minus, in the case of a financial asset not at fair value through
profit or loss, transaction costs. Subsequently, the Group classifies its financial assets into one of the two categories
discussed below, depending on the purpose for which the asset was acquired. Other than financial assets in a qualifying
hedging relationship, the Group’s accounting policy for each category is as follows:
Fair value through profit or loss.
This category comprises in-the-money derivatives and out-of-money derivatives where the time value offsets the negative
intrinsic value (see “Financial liabilities” section for out-of-money derivatives classified as liabilities). They are carried in
the statement of financial position at fair value with changes in fair value recognised in the consolidated statement of
comprehensive income in the finance income or expense line. Other than derivative financial instruments which are not
designated as hedging instruments, the Group does not have any assets held for trading nor does it voluntarily classify any
financial assets as being at fair value through profit or loss.
Amortised cost
These assets arise principally from financial assets where the objective is to hold these assets in order to collect contractual
cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at
fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at
amortised cost using the effective interest rate method, and where applicable, less provision for impairment.
92
93
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019
2. ACCOUNTING POLICIES [CONT.]
Amortised cost [cont,]
Impairment provisions for loans to related parties are recognised based on a forward-looking expected credit loss
model. The methodology used to determine the amount of the provision is based on whether there has been a
significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not
increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with
gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected
credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net basis are recognised. The Group has considered
whether amounts due from loans to related parties are impaired and conclude that there is an immaterial impact on
the financial statements.
The Group’s financial assets measured at amortised cost comprise other receivables and cash and cash equivalents in
the consolidated statement of financial position.
There are no changes to the accounting policies in respects of financial liabilities as a result of the adoption of IFRS 9.
These policies are set out in the note below.
The financial instrument accounting policies below are applicable to the prior year comparative figures.
Financial instruments are classified according to the substance of the contractual arrangements into which the Group
enters. An equity instrument is a contract that evidences a residual interest in the assets to the entity after deduction all
of its financial liabilities.
Financial liabilities
Classification
The Group determines the classification of its financial liabilities at initial recognition. All financial liabilities are
recognised initially at fair value and, in the case of loans and borrowings, carried at amortised cost including directly
attributable transaction costs. The Group has not applied the option to designate any financial liabilities as measured
at fair value through profit or loss that were previously measured at amortised cost. The Group’s financial liabilities
include derivative financial liabilities, trade and other payables, and loans received from shareholders.
De-recognition of liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of
the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is
recognised in the consolidated statement of comprehensive income.
Offsetting financial instruments
When there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a
net basis or realise the asset and settle the liability immediately, financial assets and liabilities are offset, and the net
amount reported in the consolidated statement of financial position.
Derivative financial instruments
Derivative financial assets are carried as assets when their fair value is positive and liabilities when their fair value is
negative. Changes in the fair value of derivatives are included in the consolidated statement of comprehensive income.
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group’s derivative financial assets and liabilities at fair value through profit or loss comprise of forward foreign
exchange contracts and options.
The Group undertakes matched principal broking involving immediate back-to-back derivative transactions with
counterparties. These transactions are classified as financial instruments at fair value through profit or loss and are
shown gross, except where a netting agreement, which is legally enforceable, exists and the intention is for the asset and
liability to be settled net.
The credit valuation adjustment (“CVA”) reflects the credit risk of the counterparties inherent in the valuation of the
derivative financial instruments. The adjustment represents the estimated fair value of protection required to hedge the
counterparty credit risk. The adjustment takes into account counterparty exposure, applicable collateral arrangement and
default probability rates.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and deposits held at call with banks. For the purposes of the
consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above.
Other payables
Other payables are initially stated at fair value and subsequently measured at amortised cost using the effective interest
method. Other payables are obligations to pay for goods or services that have been acquired in the ordinary course of
business. They are classified as current liabilities if payment is due in one year or less. If payment is due at a later date,
they are presented as non-current liabilities.
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
The Group uses valuation techniques that are appropriate to the circumstances and for which sufficient data is available
to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement
as a whole:
−
−
Level 1 quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 valuation techniques for which the lowest level input that is significant to the fair value measurement
is directly or indirectly observable.
−
Level 3 valuation techniques for which the lowest level input that is significant to the fair value measurement
is unobservable.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities based on the nature,
characteristics and risks of the inputs into the valuations and the level of the fair value hierarchy as explained above.
Taxes
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively
enacted at the reporting date.
94
95
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 2. ACCOUNTING POLICIES [CONT.]
Current income tax [cont.]
Current income tax relating to items recognised directly in equity or other comprehensive income is recognised in equity
and not in the consolidated statement of comprehensive income.
Deferred income tax
Deferred income tax is provided on all temporary differences at the reporting date arising between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets
and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
Employee benefits
Pension obligations
The Group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately
from those of the Group. The annual contributions are charged to the consolidated statement of comprehensive income.
Discretionary contributions are occasionally made to Director’s defined benefit pension plans.
Share-based payments
The Group issues equity-settled share-based payments to directors and employees of the Group through the Growth
Share Schemes, Approved and Unapproved Options Schemes.
Equity-settled share-based schemes are measured at fair value, excluding the effect of non-market-based vesting
conditions, at the date of grant using an appropriate option pricing model. The Growth Shares Schemes have been valued
using a Monte Carlo Simulation Approach due to the existence of market-based conditions. Non-market-based conditions
exist over revenue-based targets which require management to estimate the probability of meeting these conditions.
The Approved and Unapproved Options Schemes have been valued using a Black Scholes option pricing model as only a
service-based condition exists. Both schemes require the estimation of appropriate attrition rates to estimate the number
of share options which are likely to vest.
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets
Intangible assets consist of internally developed software. Development expenditure on an individual project is
recognised as an intangible asset when the Group can demonstrate:
-
-
-
-
-
-
the technical feasibility of completing the development;
that it will be available for use or sale;
its intention to complete and its ability to use or sell the asset;
how the asset will generate future economic benefits;
the availability of resources to complete the development;
the ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to
be carried at cost less any accumulated amortisation and where applicable, accumulated impairment losses. Amortisation
of the asset begins when development is complete, and the asset is available for use.
Internally developed software costs are amortised over the useful life of the asset on a straight-line basis over 3 years
being the period of expected future benefit. Amortisation is recorded in operating expenses in the consolidated
statement of comprehensive income.
During the period of development, the asset is tested annually for impairment.
Impairment of non-financial assets
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in
share premium as a deduction from the proceeds.
The fair value of the shares or share options is recognised over the vesting period to reflect the value of the employee
services received. The charge relating to grants to employees of the Company is recognised as an expense in the
Leases
consolidated statement of comprehensive income.
Property, plant and equipment
Owned assets
On 1 January 2019 the Group adopted IFRS 16 Leases. As at 1 January 2019 the only leases held by the Group were for
a lease term of twelve months or less and accordingly the adoption of IFRS 16 has not required any adjustment to the
opening statement of the consolidated financial position at that date. The Group now recognises a right-of-use asset and
a corresponding liability at the date at which the leased asset is available for use. Assets and liabilities arising from a lease
Property, plant and equipment is stated at cost less accumulated depreciation and where applicable, impairment losses.
are initially measured on a present value basis. The lease payments are discounted using the interest rate implicit in the
lease, if that rate can be determined, or the Group’s estimated incremental borrowing rate.
Depreciation
Depreciation is charged to the consolidated statement of comprehensive income on a straight-line basis over the
The finance cost is charged to the consolidated statement of comprehensive income over the lease period so as to
estimated useful lives of each item of property, plant and equipment. Estimated residual values are included in the
produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use
calculation of depreciation. The estimated useful lives of property, plant and equipment are as follows:
asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Payments
Improvements to property
- Period of lease
Fixtures and fittings
- 4 to 5 years straight line
Computer equipment
- 3 years straight line
The residual values and useful lives are reviewed by the Directors and adjusted if appropriate at the end of each
reporting period.
96
associated with leases with a lease term of twelve months or less and leases of low-value assets are recognised as an
expense in the consolidated statement of comprehensive income on a straight-line basis.
97
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 2. ACCOUNTING POLICIES [CONT.]
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that
the Group will be required to settle the obligation. Provisions are measured based on the Directors’ best estimate of the
expenditure required to settle the obligation at the reporting date and are discounted to present value where the effect
is material.
An onerous property provision is recognised and measured as a provision when the Group has a present obligation
arising under a property related contract. An onerous contract is considered to exist where the Group has a contract
under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected
to be received under it.
3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of the Group’s financial statements requires management to make estimates, judgements and
assumptions about the carrying amounts of assets and liabilities. Uncertainty about these assumptions and estimates
could result in outcomes that could require a material adjustment to the carrying amount of the assets or liability affected
in the future.
The estimates and underlying assumptions are reviewed on an ongoing basis. In the process of applying the Group’s
accounting policies, management has made the following judgements and estimates which have the most significant
effect on the amounts recognised in the consolidated financial statements:
Impairment of financial assets
Impairment provisions are recognised under the expected credit loss approach, the amount being the difference between
the present value of all contractual cashflows and the present value of expected future cashflows. In order to calculate
the present value of the future expected cash flows, management must make an estimate of expected future cash flows
and apply an appropriate discount factor, estimated using the latest market information.
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Share-based payments
As described in note 2 (share-based payments), equity settled share awards are recognised as an expense based on
their fair value at date of grant. The fair value of equity settled growth shares scheme and unapproved share options
are estimated through the use of option valuation models which require an element of judgement in assessing the
inputs. Judgement is also exercised in assessing the number of options subjects to non-market vesting conditions that
will vest.
4. SEGMENTAL REPORTING
During the year the Group principally generated revenue from the sale of forward currency contracts, foreign
exchange spot transactions, payments & collections and option contracts.
The Group has four reportable segments, based on the individually reportable subsidiaries and divisions.
The Corporate London segment represents revenue generated by Alpha FX Limited’s Corporate clients serviced from
the London head office. The Institutional segment represents revenue from Alpha FX Institutional Limited, which
primarily services funds. Corporate Toronto represents revenue generated by Alpha Foreign Exchange (Canada)
Limited, serviced from Toronto, Canada. Alpha Payment Solutions is a division of Alpha FX Limited which services
clients who have the requirement to send, hold or receive money from overseas, in the form of international
payments, collections and currency accounts.
The chief operating decision makers, being the Group’s Chief Executive Officer, Chief Operating Officer and the Chief
Financial Officer, monitor the operating results of the business segments separately each month. Key measures used
to evaluate performance are revenue and profit before taxation. Management believe that these measures are the
most relevant in evaluating the performance of the segment and for making resource allocation decisions.
2019
Revenue
CORPORATE
LONDON
£
INSTITUTIONAL
£
CORPORATE
TORONTO
£
ALPHA PAYMENT
SOLUTIONS
£
TOTAL
£
27,217,318
6,285,611
854,961
1,020,310
35,378,200
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Underlying operating profit
12,624,097
3,634,949
(663,944)
(860,118)
14,734,984
Impairment losses are recognised in the consolidated statement of comprehensive Income.
Development costs
Development costs that are directly attributable to the development of a project are capitalised based on management’s
assessment of the likelihood of a successful outcome for each project. This is based on the management’s judgement
that the project is technologically, commercially and economically feasible in accordance with IAS 38 Intangible Assets.
In determining the amount to be capitalised, management makes assumptions regarding the expected future cash
generation of the project, discount rates to be applied and the expected period of benefits. Details of capitalised
development costs are shown in note 11.
Credit value adjustment
The credit value adjustment has been calculated by management based on the assumption that the Group will be
unable to collect all the amounts due under the term’s receivable, and therefore, is a method of counterparty credit
risk management. The amount of the adjustment represents the difference between the net carrying amount and the
value of the future expected cash flows associated with the receivables. In order to calculate expected future cash flows,
Exceptional property related costs*
Share-based payments
Finance (income)/ expense
(555,230)
(465,813)
(111,898)
(3,148)
(31,208)
(14,240)
-
-
-
-
-
(558,378)
(497,021)
(8,184)
(134,322)
Profit before taxation
11,491,156
3,586,353
(663,944)
(868,302)
13,545,263
2018
Revenue
CORPORATE
LONDON
£
INSTITUTIONAL
£
CORPORATE
TORONTO
£
ALPHA PAYMENT
SOLUTIONS
£
20,367,548
3,072,797
34,364
Underlying operating profit
9,051,870
1,269,801
(317,082)
Exceptional property related costs*
Share-based payments
Finance (income)/ expense
-
(311,864)
39,054
-
-
-
-
-
-
Profit before taxation
8,779,060
1,269,801
(317,082)
TOTAL
£
23,474,709
10,004,589
-
(311,864)
39,054
9,731,779
-
-
-
-
-
-
management make an estimate using the latest real-time market information, risk ratings of the clients and experience.
*Exceptional items relate to initial double running and move related costs following the signing of a lease for new
premises for the Group’s Head Office.
98
99
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019
4. SEGMENTAL REPORTING [CONT.]
Revenue by product
Foreign exchange forward transactions
Foreign exchange spot transactions
Option contracts
Payments and collections**
Total
31 DECEMBER 2019
£
31 DECEMBER 2018
£
24,849,162
7,825,598
2,196,566
506,874
35,378,200
19,863,847
2,483,000
1,127,862
-
23,474,709
**Payments and collections relate to payment charges only and exclude any related foreign exchange spot transactions.
Geographical analysis of non-current assets
UK
Canada
Total
31 DECEMBER 2019
£
31 DECEMBER 2018
£
11,192,867
19,150
11,212,017
599,299
11,040
610,339
During the year the Group earned revenue of £19,916,611 (2018: £16,337,837) from entities in the UK,
£2,562,010 (2018: £2,061,667) from entities in Norway, £2,542,055 (2018: £1,606,374) from entities in Cayman Islands,
£2,918,961 (2018: £39,348) from entities in Isle of Man, £855,376 (2018: £16,833) from entities in Canada and £6,583,187
(2018: £3,412,650) from entities in other countries. There were no significant transactions between the segments within
the year. All revenue is from external customers.
5. OPERATING PROFIT
Operating profit is stated after charging/(crediting):
Lease rentals
Depreciation of owned property, plant and equipment
Amortisation of internally generated intangible assets
Depreciation of right-of-use assets
Loss on disposal of fixed assets
Staff costs (note 7)
Net foreign exchange (gains)/losses
Provisions (note 23)
Exceptional property related costs
Audit fees
Audit fees in respect of the Group and Company
financial statements
Audit fees in respect of the subsidiary accounts
Non-Audit fees
Other assurance services
100
31 DECEMBER 2019
£
31 DECEMBER 2018
£
1,072,019
203,551
248,340
485,171
46,645
12,803,765
38,091
-
558,378
78,000
64,500
3,300
713,329
65,810
108,492
-
63,259
9,091,872
(11,521)
203,684
-
35,000
52,500
7,200
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. FINANCE INCOME AND EXPENSES
Finance income
Interest on bank deposits
Other interest receivable
Total
Finance Cost
Finance cost on lease liabilities (note 13)
Total
7. EMPLOYEE COSTS
Staff costs, including directors’ remuneration, were as follows:
Wages and salaries
Social security costs
Share-based payment charge
Other pension costs
31 DECEMBER 2019
£
31 DECEMBER 2018
£
62,630
18,837
81,467
37,201
1,853
39,054
31 DECEMBER 2019
£
31 DECEMBER 2018
£
(215,789)
(215,789)
-
-
31 DECEMBER 2019
£
31 DECEMBER 2018
£
10,881,140
1,303,773
497,021
7,764,922
970,694
311,864
121,831
44,392
Employee benefit expense included in operating profit
w
12,803,765
9,091,872
The share-based payment charge includes employer’s national insurance amounting to £54,257 (2018: £15,792) relating
to an unapproved option scheme.
The average number of employees, including the executive directors, was as follows:
Executive Directors
Sales, administration and support staff
Total
31 DECEMBER 2019
NO.
31 DECEMBER 2018
NO.
3
99
102
3
64
67
Remuneration of key management personnel
Key management personnel represent those personnel which hold a statutory directorship of a company within the
Group, as well as the non-executive directors.
Director’s remuneration and benefits include:
Wages and salaries
Social security costs
Share-based payments
Pension contributions
Total
31 DECEMBER 2019
£
31 DECEMBER 2018
£
1,709,553
202,664
7,191
9,704
1,929,112
1,186,748
163,771
41,664
2,326
1,394,509
101
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019
7. EMPLOYEE COSTS [CONT.]
Remuneration of key management personnel [cont.]
During 2019 retirement benefits accrued to 6 Directors who are regarded as key management personnel within the
Group (2018: 4) in respect of defined contribution pension schemes.
Further information of executive and non-executive directors of the Group, including the highest paid director, is
disclosed separately in the Remuneration report.
8. TAXATION
Tax charge
Current tax:
UK Corporation tax charge on the profit for the year
Adjustments relating to prior years
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Adjustments relating to prior years
Total deferred tax
Total tax expense
Factors affecting tax charge for the year
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by the effective
standard rate of UK corporation tax of 19%
Effects of:
Expenses not deductible for tax purposes
Deferred tax relating to share based payments
Adjustments relating to prior years
Adjust closing deferred tax in respect of change in future
rate of taxation
Overseas taxation
Total tax charge for the year
31 DECEMBER 2019
£
31 DECEMBER 2018
£
2,399,165
(121,664)
2,277,501
242,514
5,379
247,893
2,525,394
1,960,130
(74,191)
1,885,939
27,309
(2,166)
25,143
1,911,082
31 DECEMBER 2019
£
13,545,263
2,573,600
31 DECEMBER 2018
£
9,731,779
1,849,038
16,692
(74,702)
(121,664)
5,379
126,089
2,525,394
97,424
(19,454)
(74,191)
(2,166)
60,431
1,911,082
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax
The deferred taxation liability is based on the expected future rate of corporation tax of 19% (2018: 17%) and
comprises the following:
Liabilities
At 1 January
Tax charge relating to current year
Tax (charge)/credit relating to change in future tax rates
Total deferred tax liability
31 DECEMBER 2019
£
31 DECEMBER 2018
£
45,724
242,514
5,379
293,617
20,581
27,309
(2,166)
45,724
The provision for deferred taxation consists of the tax effect of timing differences in respect of:
Fixed asset differences
Share-based payments
Total deferred tax liability
9. EARNINGS PER SHARE
31 DECEMBER 2019
£
31 DECEMBER 2018
£
429,935
(136,318)
293,617
100,854
(55,130)
45,724
Basic earnings per share is calculated by dividing the profit for the year attributable to equity holders of the parent, by
the weighted average number of ordinary shares during the year. Diluted earnings per share additionally includes in the
calculation, the weighted average number of ordinary shares that would be issued on conversion of any dilutive potential
ordinary shares.
The Group additionally discloses an underlying earnings per share calculation that excludes the impact of share-based
payments, non-recurring costs and their tax effect, which better enables comparison of financial performance in the
current year with comparative years.
31 DECEMBER 2019
31 DECEMBER 2018
Basic earnings per share
Diluted earnings per share
Underlying – basic
Underlying - diluted
27.7p
26.9p
30.1p
29.2p
21.8p
21.3p
22.7p
22.1p
The calculation of basic and diluted earnings per share is based on the following number of shares:
Basic weighted average shares
Contingently issuable shares
Diluted weighted average shares
31 DECEMBER 2019
NO.
31 DECEMBER 2018
NO.
36,990,813
1,093,530
38,084,343
33,945,238
795,913
34,741,151
102
103
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 9. EARNINGS PER SHARE [CONT.]
The earnings used in the calculation of basic, diluted and underlying earnings per share are set out below:
Profit after tax for the year
Non-controlling interests
Earnings – basic and diluted
Exceptional property related costs
Tax effect
Share-based payments
Deferred tax asset impact on share-based payments
Earnings - underlying
10. DIVIDENDS
Final dividend for the year ended 31 December 2017 of 3.4p per share
Interim dividend for the year ended 31 December 2018 of 1.9p per share
Final dividend for the year ended 31 December 2018 of 4.6p per share
Interim dividend for the year ended 31 December 2019 of 2.2p per share
All dividends paid are in respect of the ordinary shares of £0.002 each.
31 DECEMBER 2019
£
31 DECEMBER 2018
£
11,019,869
(759,713)
10,260,156
558,378
(95,704)
497,921
(81,188)
11,138,663
7,820,697
(428,016)
7,392,681
-
-
311,864
(15,257)
7,689,288
31 DECEMBER 2019
£
31 DECEMBER 2018
£
-
-
1,133,130
633,220
1,707,631
816,727
2,524,358
-
-
1,766,350
The Directors propose that a final dividend in respect of the year ended 31 December 2019 of 5.4p per share amounting
to £2,004,694 will be paid on 13 May 2020 to all shareholders on the register of members on 14 April 2020. This dividend
is subject to approval by shareholders at the AGM and has not been included as a liability in these Financial Statements in
accordance with IAS 10 ‘Event after the reporting period’.
A reconciliation of the movements in share capital for each year is included in note 20.
11. INTANGIBLE ASSETS
Cost
At 1 January 2018
Additions
At 31 December 2018
Additions
At 31 December 2019
INTERNALLY GENERATED SOFTWARE
£
153,015
421,260
574,275
992,941
1,567,216
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
INTERNALLY GENERATED SOFTWARE
£
Amortisation
At 1 January 2018
Charge for the year
At 31 December 2018
Charge for year
At 31 December 2019
Net book value
At 31 December 2018
At 31 December 2019
12.
PROPERTY, PLANT AND EQUIPMENT
Cost
At 1 January 2018
Additions
Disposals
At 31 December 2018
Additions
Disposals
At 31 December 2019
Depreciation
At 1 January 2018
Charge for the year
Disposals
At 31 December 2018
Charge for the year
Disposals
At 31 December 2019
Net book value
At 31 December 2018
At 31 December 2019
LEASEHOLD
IMPROVEMENTS
£
FIXTURES
& FITTINGS
£
COMPUTER
EQUIPMENT
£
-
-
-
-
1,452,501
-
1,452,501
-
-
-
-
48,633
-
48,633
-
1,403,868
286,056
35,855
(181,201)
140,710
671,938
(92,469)
720,179
142,500
29,301
(117,942)
53,859
76,750
(38,214)
92,395
86,851
627,784
104,974
69,040
-
174,014
240,435
(4,894)
409,555
51,505
36,509
-
88,014
78,168
(4,478)
161,704
86,000
247,851
28,295
108,492
136,787
248,340
385,127
437,488
1,182,089
TOTAL
£
391,030
104,895
(181,201)
314,724
2,364,874
(97,363)
2,582,235
194,005
65,810
(117,942)
141,873
203,551
(42,692)
302,732
172,851
2,279,503
During the year assets totalling £97,363 (2018: £181,201) were disposed of. The total loss on disposal of fixed assets
was £46,645 (2018: £63,259).
104
105
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019
13. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
14. SUBSIDIARIES
The following table reconciles the minimum lease commitments disclosed in the Annual Report of the Group for the year
The Group’s operating subsidiaries as at 31 December 2019 are as follows:
ended 31 December 2018 to the amount of lease liabilities recognised on 1 January 2019:
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Minimum operating lease commitment at 31 December 2018
Less: short-term leases not recognised under IFRS 16
Less: low value leases not recognised under IFRS 16
Plus: effect of extension options reasonably certain to be exercised
Undiscounted lease payments
Less: lease commitments relating to the Brunel building to be recognised upon lease
commencement
Lease liability as at 1 January 2019
Right-of-use assets
At 1 January
Additions
Depreciation charge for the year
At 31 December
1 JANUARY 2019
£
13,153,569
(1,016,425)
(108,659)
-
12,028,485
(12,028,485)
-
31 DECEMBER 2019
£
31 DECEMBER 2018
£
-
8,235,596
(485,171)
7,750,425
-
-
-
-
As explained in the accounting policy for leases in note 2, as at 1 January 2019 the only leases held by the Group were
for a lease term of twelve months or less. The adoption of IFRS 16 has not required any adjustment to the opening
consolidated statement of financial position at that date.
In May 2019, the Group signed a ten-year lease for the new Head Office premises in London.
The additions above include £164,835 relating to the initial costs directly attributable to the lease.
Lease liabilities
At 1 January
Additions
Finance cost
Payments in the year
At 31 December
Analysis:
Current (note 22)
Non-current
31 DECEMBER 2019
£
31 DECEMBER 2018
£
-
8,070,761
215,792
(355,986)
7,930,567
292,768
7,637,799
7,930,567
-
-
-
-
-
-
-
-
Direct Holding
Alpha FX Limited
Indirect Holding
Alpha FX Institutional Limited
Alpha Foreign Exchange (Canada) Limited
COUNTRY OF
INCORPORATION
PROPORTION OF
ORDINARY SHARES HELD
England1
England1
Canada2
100%
70%
75%
The principal activity of all subsidiary undertakings is the provision of foreign exchange services. Shares in Alpha FX
Institutional Limited and Alpha Foreign Exchange (Canada) Limited are held by Alpha FX Limited. The accounting year-
ends of all subsidiaries is 31 December.
In November 2019 Alpha FX Limited increased its shareholding in Alpha FX Institutional Limited from 63.2% to 70.0%.
Registered addresses:
1. Brunel Building, 2 Canalside Walk, London, W2 1DG
2. 2200 HSBC Building, 885 West Georgia Street, Vancouver BC, V6C 3E8
15. DERIVATIVE FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Derivative financial assets not designated as hedging instruments
Foreign currency forward and option
contracts with customers
Foreign currency forward and option
contracts with banking counterparties
Other foreign exchange forward
contracts
31 DECEMBER 2019
31 DECEMBER 2018
FAIR VALUE
£
NOTIONAL PRINCIPAL
£
FAIR VALUE
£
NOTIONAL PRINCIPAL
£
34,041,209
1,325,798,765
28,649,374
773,013,132
8,045,090
1,549,496,597
4,075,204
273,831,873
453,026
15,384,010
-
-
42,539,325
2,890,679,372
32,724,578
1,046,845,005
Foreign currency forward contracts with customers generally require immediate settlement on the value date of the
individual contract.
The incremental borrowing rate used to discount lease liabilities at initial inception is based on the assessment of
management of 4.5%.
106
107
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 15. DERIVATIVE FINANCIAL ASSETS AND FINANCIAL LIABILITIES [CONT.]
Derivative financial liabilities not designated as hedging instruments
31 DECEMBER 2019
31 DECEMBER 2018
FAIR VALUE
£
NOTIONAL PRINCIPAL
£
FAIR VALUE
£
NOTIONAL PRINCIPAL
£
22,199,291
2,636,803,290
12,709,620
719,218,696
82,300
9,101,344
-
-
Foreign currency forward and option
contracts with customers
Foreign currency forward and option
contracts with banking counterparties
Other foreign exchange forward
contracts
22,281,591
2,645,904,634
12,716,091
723,138,751
Net gains/(losses) on financial assets at fair value through profit or loss
Foreign exchange derivatives
31 DECEMBER 2019
£
31 DECEMBER 2018
£
(38,091)
(38,091)
11,521
11,521
Derivatives not designated as hedging instruments are intended to reduce the level of foreign currency risk for expected
future cash flows. The tables above show the fair value of those foreign exchange forward contracts as at each year-end.
Forward foreign exchange contracts and options fall into level 2 of the fair value hierarchy as set out in note 2. Level 2
comprises those financial instruments which can be valued using inputs other than quoted prices that are observable
for the asset or liability either directly (i.e. prices) or indirectly (i.e. derived from prices). The fair value of forward foreign
exchange contracts is measured using observable forward exchange rates for contracts with a similar maturity at the
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Amortised cost assets
Other receivables excluding prepayments
Cash and cash equivalents
Other cash balances
Total amortised cost assets
Total financial assets
31 DECEMBER 2019
£
31 DECEMBER 2018
£
2,434,006
73,960,407
3,866,514
80,260,927
122,800,252
1,427,331
38,396,301
2,562,538
42,386,170
75,110,750
31 DECEMBER 2019
£
31 DECEMBER 2018
£
22,199,291
12,709,620
82,300
-
-
6,471
Derivatives not designated as hedging instruments
Foreign currency forward and option contracts with
customers
Foreign currency forward and option contracts with banking
counterparties
Other foreign exchange forward contracts
Total derivatives not designated as hedging instruments
22,281,591
12,716,091
Other payables measured at amortised cost
Other payables and accruals
Total other payables
44,397,769
44,397,769
12,506,732
12,506,732
Total financial liabilities
66,679,360
25,222,823
-
-
6,471
3,920,055
b) Financial liabilities per statement of financial position
reporting date. The fair value of option foreign exchange contracts is measured using an industry standard external
c) Offsetting financial assets and financial liabilities
model that best presents the unpublished interbank valuations.
Financial instruments at fair value through profit and loss represent immediate back-to-back derivative transactions
with banking counterparties and are reported as separate financial assets and financial liabilities in the consolidated
There were no transfers between level 1 and 2 during the current or prior year. The fair value of all other financial assets
statement of financial position. The transactions are subject to ISDA (International Swaps and Derivatives Association)
and financial liabilities approximate to their carrying value.
Master Netting Agreements which provide a legally enforceable right of in the normal course of business, the event of a
16. FINANCIAL INSTRUMENTS
The principal financial instruments of the Group, from which financial instrument risk arises, are as follows:
a) Financial assets per statement of financial position
Derivatives not designated as hedging instruments
Foreign currency forward and option contracts with
customers
Foreign currency forward and option contracts with banking
counterparties
Other foreign exchange forward contracts
Total derivatives not designated as hedging instruments
31 DECEMBER 2019
£
31 DECEMBER 2018
£
34,041,209
28,649,374
8,045,090
4,075,204
453,026
42,539,325
-
32,724,578
default and the event of insolvency or bankruptcy.
AMOUNTS SUBJECT TO ENFORCEABLE NETTING ARRANGEMENTS
2019
GROSS FAIR
VALUE
VARIATION
MARGIN OFFSET
FAIR VALUE
OFFSET
NET DERIVATIVE
FINANCIAL ASSET/
(LIABILITY) (Note 15)
OTHER CASH
BALANCES
Derivative financial assets
55,328,581
-
(12,789,256)
42,539,325
3,866,514
Derivative financial liabilities
(36,197,777)
1,126,930
12,789,256
(22,281,591)
-
AMOUNTS SUBJECT TO ENFORCEABLE NETTING ARRANGEMENTS
2018
GROSS FAIR
VALUE
VARIATION
MARGIN OFFSET
FAIR VALUE
OFFSET
NET DERIVATIVE
FINANCIAL ASSET/
(LIABILITY) (Note 15)
OTHER CASH
BALANCES
Derivative financial assets
47,831,481
-
(15,106,903)
32,724,578
2,562,538
Derivative financial liabilities
(31,361,581)
3,538,587
15,106,903
(12,716,091)
-
108
109
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019
17. FINANCIAL RISK MANAGEMENT
Objectives, policies and processes for managing and the methods used to measure risk
Financial assets principally comprise trade and other receivables, cash and cash equivalents, other cash balances and
derivative financial assets. Financial liabilities comprise trade and other payables, shareholder loans and derivative
financial liabilities. The main risks arising from financial instruments are credit risk, liquidity risk, market risk, foreign
currency risk and interest rate risk each of which are discussed in further detail below.
The Group has sufficient cash resources to pay its debts and contractual liabilities as they fall due. Consequently,
management does not believe that the Group has a material exposure to liquidity risk. The table below summarises
the maturity profile of the Group’s derivative financial liabilities arising from forward currency contracts with customers
based on contractual (undiscounted) payments.
Derivative liabilities - forward currency contracts with customers
2019
TOTAL
0-3 MONTHS
3-6 MONTHS
6-12 MONTHS
12 MONTHS+
The Group monitors and mitigates financial risk on a consolidated basis. The Group has implemented a framework to
Buy currency
Inflow
670,054,099
230,157,752
163,114,597
241,890,182
34,891,568
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ensure that the Directors have in place risk management practices appropriate to a listed company.
The Group operates under the Three Lines of Defence approach to risk management. This framework is overseen and
enforced by the Risk Committee and Board.
1.
2.
3.
Line 1 is risk management: Primary responsibility for strategy, performance and risk management lies with the
Executive Team and the Heads of each department.
Line 2 is risk oversight: The Risk, Compliance, Finance and Legal Teams provide risk oversight.
Line 3 is independent assurance: Independent assurance on the effectiveness of the risk management
systems. External audits and reviews provide an additional line of defence.
Credit risk
Credit risk is the risk that one or more customers will not meet their obligations under a financial instrument or
customer contract leading to a financial loss.
Where the Group provides credit to customers, this is subject to credit verification checks and an in-depth underwriting
process by our Credit Team. The client terms and conditions set out the clients margin terms and requirements to
provide collateral which provides further mitigation to the credit exposure. Credit policies are aimed at reducing the
impact of losses, deferred terms will only be granted to customers who demonstrate an appropriate payment history
and satisfy a creditworthiness assessment. The Group evaluated the concentration of risk as low with respect to
derivative financial assets arising from contracts with counterparties. This is due to the fact that no single customer
represents a significant proportion of the total value of customer contracts and the business has historically low levels
of counterparty default.
Counterparty exposures are monitored in real time. Daily stress tests are carried out to assess and minimise client
credit risk exposures under various market volatility scenarios. The Group’s maximum exposure to credit risk is
illustrated in the financial assets table in note 16.
Liquidity risk
Liquidity risk is the risk that the Group may encounter difficulty in meeting its financial obligations as they are due.
Extensive controls are in place to ensure that liquidity risk is mitigated. The Group’s liquidity requirements are reviewed
daily, and the Group employs stress testing to model the sufficiency of its liquidity in stressed market scenarios.
The ability of clients to pay margin and settle contracts is monitored in real-time, with automated triggers and alerts
configured into the Group’s systems. The Group maintains cash reserves and continues to increase these reserves
relative to its trading activity on an on-going basis.
The Group manages its liquidity on a trade by trade basis, rejecting any trade that has the potential to harm its liquidity
and maintains robust margin terms with its clients that require them to deposit margin if their forward contracts
adversely deviate in fair value. The Group also attempts to ensure it maintains (as closely as is possible) a balanced
position in each currency, with regular stress testing of its net long/short position in a particular currency against
sudden and unforeseen market movements (“Black Swan Events”).
Sell currency
Outflow
(652,825,351)
(240,503,555)
(140,609,170)
(167,726,085)
(103,986,540)
Netted
17,228,748
(10,345,803)
22,505,427
74,164,096
(69,094,972)
2018
TOTAL
0-3 MONTHS
3-6 MONTHS
6-12 MONTHS
12 MONTHS+
Buy currency
Inflow
664,337,176
298,028,921
147,472,774
185,401,717
33,433,764
Sell currency
Outflow
(653,934,875)
(269,322,242)
(195,844,129)
(124,115,889)
(64,652,615)
Netted
10,402,301
28,706,679
(48,371,355)
61,285,828
(31,218,851)
Derivative liabilities - forward currency contracts with brokers
2019
2018
Netted
Netted
(15,190,931)
10,885,455
(22,396,500)
(74,432,061)
70,752,175
5,485,479
(23,780,947)
52,157,750
(56,545,924)
33,654,601
TOTAL
0-3 MONTHS
3-6 MONTHS
6-12 MONTHS
12 MONTHS+
The table below summarises the maturity profile of the Group’s other financial liabilities based on contractual
(undiscounted) payments.
Other liabilities
AT 31 DECEMBER 2019
TOTAL
ON DEMAND
UP TO 1 YEAR
1-2 YEARS
2-5 YEARS
Other payables and accruals
44,397,769
44,397,769
-
-
44,397,769
44,397,769
-
-
-
-
AT 31 DECEMBER 2018
TOTAL
ON DEMAND
UP TO 1 YEAR
1-2 YEARS
2-5 YEARS
Other payables and accruals
13,336,083
13,336,083
-
-
13,336,083
13,336,083
-
-
-
-
Market risk
Market risk is minimised by the operation of matched derivative transactions, whereby all derivatives sold to customers
are matched on a back-to-back basis with an offsetting derivative from a banking counterparty. The Group is only
exposed to the net position of its derivative assets and liabilities and this position is collateralised on a daily basis.
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will
fluctuate due to changes in market interest rates. Interest rate risk arises from interest bearing financial assets and
liabilities used by the Group. Interest bearing assets comprise cash and cash equivalents which are considered short-term
liquid assets. It is the Group’s policy to settle derivative financial liabilities arising from contracts with customers (included
within trade payables) and other payables within the credit terms allowed and the Group does not therefore incur
interest on overdue balances.
110
111
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. FINANCIAL RISK MANAGEMENT [CONT.]
Foreign currency risk
Foreign currency risk refers to the risk that non-sterling revenue earned on a transaction may fluctuate due to changes in
foreign currency rates. The Group is exposed to foreign currency risk on revenue and cash holdings that are denominated
in a currency other than sterling. The principal currencies giving rise to this risk vary from period to period depending on the
currency of transactions undertaken by the Group. Details of the foreign currency cash balances can be found in note 19.
The Group manages its exposure to currency movements in line with its Treasury Policy. Client money received in a foreign
currency is deposited in a bank account of the same currency to provide a natural hedge. The Group reduces its exposure
to foreign exchange by retranslating excess cash in foreign currencies into sterling on a regular basis. The Group hedges a
proportion of its unrealised profits through foreign exchange contracts designated as fair value through profit and loss.
The Group’s policy is to reduce the risk associated with the revenue denominated in foreign currencies by using forward
fixed rate currency hedges.
Management of capital
The Group’s objectives when managing capital are to maximise shareholder value whilst safeguarding the Group’s ability
to continue as a going concern.
The Group’s policy is to maintain a capital base and funding structure that retains creditor and market confidence,
provides flexibility for business development, ensures adherence to regulatory requirements, whilst optimising returns
to shareholders.
The entity monitors its total capital as its total equity as shown in the consolidated statement of financial position.
In order to maintain or adjust the capital structure, the Company may issue new shares or adjust the dividends paid
to shareholders.
18. TRADE AND OTHER RECEIVABLES
31 DECEMBER 2019
£
31 DECEMBER 2018
£
42,539,325
2,434,006
479,356
45,452,687
32,724,578
1,427,331
310,702
34,462,611
The settlement of these forward foreign exchange contracts is expected to occur within the following twelve months.
Changes in the fair values of forward foreign exchange contracts are recognised directly in the consolidated statement of
Trade receivables (derivative financial assets – note 15)
comprehensive income.
Foreign currency risk – sensitivity analysis
The Group’s principal recurring foreign currency transactions are in Euros and US Dollar. Foreign currency transactions
that occur in other currencies including Canadian Dollar and Norwegian Krone, are for shorter periods of time, resulting in
minimal risk to the business.
Other receivables
Prepayments
Trade receivables represent the fair value of derivative financial assets arising as a result of matched principal
transactions (note 15). At 31 December 2019 and 31 December 2018, the receivables are shown net of the Credit
The table below shows the impact on the Group’s operating profit and equity, of a 10% change in the exchange rate of the
Value Adjustment.
principal currencies, Euro and US Dollar.
IMPACT ON PROFIT AFTER TAX
IMPACT ON EQUITY
19. CASH
Year ended 31 December
Euro:
Average rate
Closing rate
2019
£
1.1397
1.1801
2018
£
1.1286
1.1138
10% weakening in the £/€ exchange rate
823,599
504,388
10% strengthening in the £/€ exchange rate
(673,854)
(412,681)
US Dollar:
Average rate
Closing rate
1.2769
1.3248
1.3322
1.2736
10% weakening in the £/$ exchange rate
859,333
240,384
10% strengthening in the £/$ exchange rate
(703,091)
(196,678)
2019
£
2018
£
1.1397
1.1801
766,408
(627,061)
1.2769
1.3248
581,050
(475,404)
1.1286
1.1138
459,453
(375,916)
1.3322
1.2736
160,792
(131,557)
The impact of a change of 10% has been selected as this is considered reasonable given the current level of exchange rates
and the volatility observed both on a historical basis and market expectations for future movement.
Cash and cash equivalents comprise cash balances and deposits held at call with banks.
Other cash balances comprise cash held as collateral with banking counterparties for which the Group does not have
immediate access.
Cash balances included within derivative financial assets relate to the variation margin called against out of the money
trades with banking counterparties.
Cash and cash equivalents
Variation margin called by counterparties (note 16c)
Other cash balances
Total cash
31 DECEMBER 2019
£
73,960,407
1,126,930
3,866,514
78,953,851
31 DECEMBER 2018
£
38,396,301
3,538,587
2,562,538
44,497,426
112
113
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. CASH [CONT.]
Share premium account
Cash at bank earns interest at floating rates based on daily bank deposit rates and is made up of the following
currency balances:
British Pound
Euro
US Dollar
Norwegian Krone
Other currencies
31 DECEMBER 2019
£
40,818,107
16,273,123
15,273,194
2,609,018
3,980,409
78,953,851
31 DECEMBER 2018
£
32,342,702
2,935,909
1,760,861
5,555,546
1,902,408
44,497,426
The initial share premium account of £12,237,951 arose in the year ended 31 December 2017 on the issue of new shares on 7 April
2017 upon admission to the London Stock Exchange. In the year ended 31 December 2018 the share premium account increased by
£19,149,902 as a result of a placing on 3 October 2018 of £19,948,895, less the directly attributable costs of issuing the new equity,
amounting to £798,993.
Capital redemption reserve
The reserve of £3,701 arose following the buy-back of shares in prior years.
Merger reserve
The merger reserve of £666,529 was created in October 2016 as a result of the share for share exchange with non-controlling
interests. The merger relief reserve represents the difference between the fair value and nominal value of shares issued on the
acquisition of non-controlling interests, where the Company has taken advantage of merger relief.
The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.
Retained earnings
All changes in financial liabilities arising from financing activities are due to cash flow movements and are shown in the
Represents all other net gains and losses and transactions not recognised elsewhere.
consolidated cash flow statement within cash flow from financing activities.
20.
CAPITAL AND RESERVES
Share capital
Translation reserve
The translational reserve of £6,954 represents the foreign exchange differences arising from the translation of the net investment in
foreign entities.
31 DECEMBER 2019
31 DECEMBER 2018
21. NON-CONTROLLING INTERESTS
NO.
£
NO.
£
Non-controlling interests (NCI’s) include the following:
Authorised, issued and fully paid
Ordinary shares of £0.002 each
37,123,956
74,248
36,545,968
73,092
Number of shares
At 1 January 2018
Shares issued on vesting of share option scheme
Shares issued on placing
At 31 December 2018
Shares issued on vesting of share option scheme
At 31 December 2019
ORDINARY SHARES
32,761,979
565,387
3,218,602
36,545,968
577,988
37,123,956
The following movements of share capital occurred during the year ended 31 December 2019:
On 26 March 2019, the Company issued 576,442 new shares following the vesting of shares under the B Growth Share Scheme.
On 25 April 2019, the Company issued 1,546 new shares in respect of shares exercised following the initial vesting of shares under
the C Growth Share Scheme for the year ended 31 December 2018.
The following movements of share capital occurred during the year ended 31 December 2018:
On 26 March 2018, the Company issued 565,387 new shares following the vesting of shares under the B Growth Share Scheme.
On 3 October 2018, the Company issued 3,218,602 new shares following a placing.
−
−
−
Alpha Foreign Exchange (Canada) Limited in which the NCI’s own 25%.
Alpha FX Institutional Limited in which the NCI’s shareholdings reduced from 36.84% to 30.00% in November 2019.
During the year the Group announced that it has put in place an employee share ownership incentive scheme for certain
individuals employed in the Group’s newly formed business division, Alpha Payments Solutions, a division of Alpha FX Limited. A
new class of shares (“D Shares”) in Alpha FX Limited has been created, with 82% owned by the Group,
and the remaining 18% by APS participants. The 18% share of the results of the division is included within the NCI.
The summarised financial information is before intra-group eliminations.
ALPHA FX
ALPHA FOREIGN EXCHANGE
INSTITUTIONAL LIMITED
(CANADA) LIMITED
ALPHA PAYMENTS
SOLUTIONS
31 DECEMBER
2019
£
31 DECEMBER
2018
E
31 DECEMBER
2019
£
31 DECEMBER
2018
£
31 DECEMBER
2019
£
31 DECEMBER
2018
£
6,285,611
3,072,797
854,961
36,113
1,020,310
2,904,582
1,374,901
(663,626)
(319,205)
(713,518)
1,054,053
507,530
(165,907)
(79,514)
(128,433)
(1,088,325)
(199,000)
-
-
-
-
-
-
-
Revenue
Profit after tax
Profit allocated to non-
controlling interests
Dividends declared to
non-controlling interests
114
115
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 21. NON-CONTROLLING INTERESTS [CONT.]
24. RELATED PARTY TRANSACTIONS
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ALPHA FX
ALPHA FOREIGN EXCHANGE
INSTITUTIONAL LIMITED
(CANADA) LIMITED
ALPHA PAYMENTS
SOLUTIONS
31 DECEMBER
2019
£
31 DECEMBER
2018
E
31 DECEMBER
2019
£
31 DECEMBER
2018
£
31 DECEMBER
2019
£
31 DECEMBER
2018
£
At 31 December
Assets
Non-current assets
11,507
18,247
Current assets
Liabilities
3,503,042
1,957,675
19,150
38,891
11,040
10,398
-
-
Current liabilities
(1,115,295)
(370,771)
(1,033,865)
(316,773)
(128,433)
Net assets/(liabilities)
2,339,254
1,605,151
(975,824)
(295,335)
(128,433)
-
-
-
-
22. TRADE AND OTHER PAYABLES
Trade payables (derivative financial liabilities – note 15)
Other payables
Other taxation and social security
Lease liability (note 13)
Accruals and deferred income
31 DECEMBER 2019
£
31 DECEMBER 2018
£
22,281,591
41,873,327
1,083,940
292,768
2,524,442
68,056,068
12,716,091
11,412,369
829,351
-
1,094,363
26,052,174
Trade payables represent the fair value of derivative financial liabilities arising as a result of matched principal transactions
(note 15).
Other payables consist of margin received from clients and client held funds. The carrying value of trade and other
payables classified as financial liabilities measured at amortised cost, approximates fair value.
23. PROVISIONS
Onerous lease provision
At 1 January
Increase in provision
Utilised in year
At 31 December
Analysis:
Current
Non-current
31 DECEMBER 2019
£
31 DECEMBER 2018
£
199,063
-
(103,460)
95,603
95,603
-
95,603
190,000
203,684
(194,621)
199,063
43,350
155,713
199,063
The onerous lease provision represents the present value of the estimated obligations under a lease where the
unavoidable costs of the lease exceed the economic benefit expected to be received from it.
The Parent Company of the Group is Alpha FX Group plc. Note 14 provides information about the subsidiaries and the
holding company. Details of the ultimate controlling party can be found in note 26.
The Group considers its key management personnel to be the Directors of companies within the Group. The compensation
of the Directors of the Company, together with their shareholding, is included in the Remuneration Report.
Transactions between the Group and its subsidiaries have been eliminated on consolidation and are not disclosed in
this note.
The total transaction volume of foreign currency contracts traded by Alpha FX Limited on normal commercial terms, with
the following key management personnel within the year was as follows;
−
C I Kahn £15,637 (2018: £22,899),
− M J Tillbrook £32,689 (2018: £0),
−
A J Hall £7,692 (2018: £0),
None of these contracts were open at the year end.
25. SHARE-BASED PAYMENTS
Employees (including senior executives) of the Group receive remuneration in the form of share-based payments, whereby
employees render services as consideration for equity instruments (equity-settled transactions).
B Growth Share Scheme
Under the B Growth Share Scheme, selected employees of the Group have been issued with B shares in Alpha FX Limited.
The rights attaching to the B shares include a put option which, when exercised, enable the shareholder to convert the
B shares into ordinary shares of the Company. The rate of conversion is that the B shares will be regarded as worth a
pro rata share of the gain above a specific hurdle set at £25m. The B shares vests in 5 equal annual instalments from 31
December 2017 to 31 December 2021. Vesting requires 30% revenue growth per annum for the first three years and 20%
revenue growth per annum in years four and five. Conversion each year is following the publication of the audited financial
statements of Alpha FX Limited. The share options granted will not vest if performance conditions are not met.
Providing the vesting conditions have been met, the Company will issue shares in consideration of the B shares based on
he average share price of Company over the 60 days prior to the exercise of the put option. The B shares were subscribed
for at their nominal value with the employee settling the applicable tax based on the market value at the date of grant.
Under the original terms of the Growth Share Scheme, the B Shares allotted to participants would vest in three equal
tranches, occurring annually, starting on 31 December 2017 until 31 December 2019. Vesting would require 30 per cent
revenue growth per year, meaning that full vesting would require three-year compound growth of 120 per cent. After
consultations with participants in the scheme it was extended to 5 years. However, in line with IFRS2, the charges incurred
by Alpha FX Limited are still recognised over the original three-year period, assuming modification had not occurred.
In March 2019, 352 B Growth Shares were exercised in respect of the year ended 31 December 2018 and 576,442 shares
in Alpha FX Group plc were issued as consideration. Based on share price of the Company of 1250p at 31 December 2019,
it is estimated upon exercise of the put options in respect of the year ended 31 December 2019, the Company will issue
596,341 shares.
The share-based payment charge of the B Growth Shares in the year ended 31 December 2019 was £54,134 (2018: £115,385).
116
117
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019
25. SHARE-BASED PAYMENTS [CONT.]
C Growth Share Scheme
In October 2018 the Group adopted a C Growth Share Scheme, under which 863 C ordinary shares (“C Shares”) in Alpha
FX Limited (the “Company”) were issued to full-time employees of the Group (“C Share Growth Scheme”). The C Shares
confer no upfront economic rights to their holders and in particular holders of the C Shares are not entitled to receive
dividends, receive notice of, attend, speak or vote at general meetings of the Company and are not entitled rights to
participate in any distributions upon a liquidation or capital reduction of the Company.
The C Shares contain a put option, such that, when and to the extent vested, they can be converted into ordinary shares
in the Group. The rate of conversion is that the C Shares will be regarded as worth a pro rata share of the share price
gain of Alpha FX Group plc above a hurdle price of 550p based upon the market price of Alpha FX Group plc at the time
of allotment.
Upon conversion the number of ordinary shares in Alpha FX Group plc, a C Shareholder will receive such number of
ordinary shares whose value is equivalent to the Group’s closing share price at the conversion date. Conversion is only
permitted to the extent that the C Shares have vested. The C Shares vest in five tranches, occurring annually, starting
on 31 December 2018 until 31 December 2022. The first tranche to vest represents ten per cent of the participant’s C
Share entitlement and thereafter is equal to 22.5 per cent of the participant’s C Share entitlement over the following four
years. A participant may choose to roll each tranche of C Shares into the next year provided that no rollover is permitted
after the final vesting date (March 2023). If a participating employee either leaves employment with the Group or
commits a performance breach (broadly conduct detrimental to the business and reputation of the Group), the Group is
entitled to buy back the relevant C Shares at cost.
In April 2019, 4 C Growth Shares were exercised in respect of the year ended 31 December 2018 and 1,546 shares in
Alpha FX Group plc were issued as consideration, whilst 89 C Growth Shares that were available to be exercised were
rolled to subsequent years. Based on share price of the Company of 1250p at 31 December 2019, if all C Shareholders
exercise the put options in respect of the year ended 31 December 2019 together with those unexercised for the year
ended 31 December 2018, it is estimated that the Company will issue 306,647 shares.
The share-based payment charge of the C Growth Shares in the year ended 31 December 2019 was £305,115
(2018: £150,178).
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
When determining the grant date fair value of awards, service and non-market performance conditions are not
considered. However, the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the
number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant
date fair value.
The inputs used for fair valuing the awards at the date of grant were as follows:
Expected volatility %
Risk free interest rate %
Option life (years)
Starting equity value (£m)
Save As You Earn (SAYE) scheme
B GROWTH
SHARE SCHEME
C GROWTH
SHARE SCHEME
25.0%
0.09%
3
£33.6m
25.0%
0.75%
5
£186.6m
In December 2018 the Group announced that it had launched a scheme for all employees under which they are granted
an option to purchase ordinary shares in the Group under a HMRC-approved SAYE scheme. Options are granted at
a 20% discount to the market price of the shares on the day preceding the date of offer and are linked to a savings
contract with a term of three years. These funds are used to fund the option exercise. No performance criteria are
applied to the exercise of Sharesave options. At 31 December 2019 options were outstanding over 134,281 shares (31
December 2018 – 140,857 shares). The assumptions used in the measurement of the fair value at grant date of the
Sharesave plans are as follows:
Share price at date of grant
Exercise price at date of grant
Expected volatility %
Risk free interest rate %
Option life (years)
Dividend yield %
578p
520p
25%
0.75%
3
0.7%
The share-based payment charge of the SAYE scheme the year ended 31 December 2019 was £52,306 (2018: £31,208).
Details of the outstanding shares in Alpha FX Limited in respect of the above schemes are as follows:
Alpha FX Institutional Limited
Outstanding at beginning of year
Granted in the year
Exercised in the year
Forfeited in the year
Outstanding at end of year
31 DECEMBER 2019
31 DECEMBER 2018
B GROWTH
SHARE SCHEME NO.
C GROWTH
SHARE SCHEME NO.
B GROWTH
SHARE SCHEME NO.
C GROWTH
SHARE SCHEME NO.
1,503
-
(352)
(139)
1,012
863
-
(4)
(18)
841
2,073
-
(390)
(180)
1,503
-
863
-
-
863
The fair value of the Growth Share Schemes was calculated using a Monte-Carlo simulation model. The model considers
historical and expected dividends, and the share price volatility of the Group relative to that of its competitors, to predict
the share performance.
In the year ended 31 December 2018, the Group incorporated a new subsidiary undertaking, Alpha FX Institutional
Limited which at 31 December 2019 is owned 30.0% by the management team. Commencing three years following
incorporation, the individuals will have the option to convert a percentage of their holding into group shares over a four-
year period, based upon strict performance criteria. At conversion, and in exchange for converting their shares into the
Group, Alpha FX Limited’s shareholding over Alpha FX Institutional Limited will commensurately increase.
Following the continued success of the Institutional Division, the Group adjusted the employee share ownership
incentive scheme in November 2019 to include additional key employees and further employees in the future. The
existing employee shareholders have agreed with Alpha FX Limited to reduce their shareholding in Alpha FX Institutional
Limited to enable equity to be awarded to future and existing employees to support the ongoing growth of the division.
The share-based payment charge in the year ended 31 December 2019 in relation to additional shares awarded in
November 2019 was £31,208.
118
119
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 25. SHARE-BASED PAYMENTS [CONT.]
Alpha Foreign Exchange (Canada) Limited
On 16 April 2019 the Group announced the share ownership plan for Alpha Foreign Exchange (Canada) Limited which
is 25% owned by management. Under the agreement management can exchange 25% of the shares they hold in the
subsidiary for new ordinary shares in the Company in each of the financial years ended 31 December 2021, 31 December
2022, 31 December 2023 and 31 December 2024. As the shares held by the management in the subsidiary is reduced
over time, Alpha FX Limited’s shareholding over the subsidiary will commensurately increase.
Alpha Payment Solutions (APS)
On 20 November 2019 the Group announced that it had put in place an employee share ownership incentive scheme
for certain individuals employed in the Group’s newly formed business division, Alpha Payments Solutions (“APS”). A
new class of shares (“D Shares”) in Alpha FX Limited has been created, with 18% owned by management and selected
employees. The value of the D Shares will be linked to the performance of the APS business. From March 2023, the APS
Participants will have the option to convert 25% of their holding of D Shares into Group shares each year for four years
(with the final option being exercisable in March 2026). At conversion, and in exchange for converting their D shares into
shares in the Group, the APS Participants’ holding of D Shares in Alpha FX Limited will commensurately decrease and the
Group’s holding will commensurately increase.
Other share schemes
In the year ended 31 December 2017, an award was made to a Director under an unapproved option agreement of
57,297 share options at an exercise price of £0.002 per option share which is exercisable between 3 April 2018 and 3 April
2020. The fair value of the option granted in the prior year was £27,462 which was calculated using a Black Scholes model.
The inputs used for fair valuing this award were expected volatility of 25%, a risk-free interest rate of 0.09% and a one-
year option life.
The Group recognised a total expense related to all the above equity-settled share-based payment transactions in the
year ended 31 December 2019 of £497,021 (2018: £311,864).
The Group operates a number of growth share schemes where shares in subsidiary entities are awarded to employees
and are converted into shares in the Company at a future date based on pre-determined vesting criteria. The Group
obtains external tax valuations for all share schemes from an independent third party prior to issue and also obtains
indemnities from all employees for any future tax liabilities that may arise.
Should any additional payroll tax liabilities arise, in the first instance, they would be paid by the subsidiary company and
the tax indemnities would ensure recovery of any additional tax liabilities from the growth shareholders. The Board has
assessed that should such an event occur, there would not be a material impact on the Group’s net assets or the result
for the year.
FINANCIAL STATEMENTS COMPANY FINANCIAL STATEMENTS
Company Statement of Financial Position
For the year ended 31 December 2019
Company number: 07262416
Non-current assets
Investments
Deferred tax asset
Total non-current assets
Current assets
Trade and other receivables
Current tax asset
Cash and cash equivalents
Total current assets
Total assets
Equity
Share capital
Share premium account
Capital redemption reserve
Merger reserve
Retained earnings
Total equity
Current liabilities
Trade and other payables
Total current liabilities
Total equity and liabilities
w
YEAR ENDED
31 DECEMBER 2019
£
YEAR ENDED
31 DECEMBER 2018
£
NOTE
4
7
5
9
6
1,706,934
136,318
1,843,252
1,346,865
55,130
1,401,995
35,207,574
34,379,941
81,277
-
35,288,851
37,132,103
74,248
31,387,853
3,701
666,529
4,846,570
36,978,901
153,202
153,202
34,842
14,949
34,429,731
35,831,726
73,092
31,387,853
3,701
666,529
3,629,607
35,760,782
70,944
70,944
37,132,103
35,831,726
The Company reported a profit for the year ended 31 December 2019 of £3,330,921 (2018: £2,820,415).
The financial statements of Alpha FX Group plc were approved by the Board of Directors on 17 March 2020
and signed on its behalf by:
26. ULTIMATE CONTROLLING PARTY
The Directors believe that there is no ultimate controlling party of the Group.
M J Tillbrook
Director
T C Kidd
Director
27. EVENTS AFTER THE REPORTING PERIOD
On 17 March 2020 the Company determined that following the vesting of shares under the Growth Share Schemes for the
year ended 31 December 2019, it would be issuing 822,873 shares on or around 31 March 2020.
120
121
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 Company Statement of Changes in Equity
For the year ended 31 December 2019
Notes to the Company Financial Statements
For the year ended 31 December 2019
CALLED UP
SHARE
CAPITAL
£
SHARE
PREMIUM
ACCOUNT
£
CAPITAL
REDEMPTION
RESERVE
£
MERGER
RESERVE
RETAINED
EARNINGS
TOTAL
EQUITY
£
£
£
Balance at 1 January 2018
65,524
12,237,951
3,701
666,529
2,280,601
15,254,306
1. BASIS OF PREPARATION
FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
Changes in equity
Shares issued on vesting of share
option scheme
Share-based payments
1,131
-
-
-
Shares issued on placing
6,437
19,948,895
Cost of shares issued on placing
Dividends paid
Total comprehensive income
Shares issued on vesting of share
option scheme
-
-
-
1,131
(798,993)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,131)
-
296,072
296,072
-
-
19,955,332
(798,993)
(1,766,350)
(1,766,350)
2,820,415
2,820,415
(1,131)
-
Balance at 31 December 2018
73,092
31,387,853
3,701
666,529
3,629,607
35,760,782
Changes in equity
Shares issued on vesting of share
option schemes
1,156
Share-based payments
Dividends paid
Total comprehensive income
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,156)
-
411,556
411,556
(2,524,358)
(2,524,358)
3,330,921
3,330,921
Balance at 31 December 2019
74,248
31,387,853
3,701
666,529
4,846,570
36,978,901
The financial statements have been prepared under the historical cost convention and with Financial Reporting
Standard 100 Application of Financial Reporting Requirements (“FRS 100”) and Financial Reporting Standard 101
Reduced Disclosure Framework (“FRS 101”).
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred
by FRS 101. Therefore, these financial statements do not include:
−
−
−
−
−
−
certain comparative information as otherwise required by EU-endorsed IFRS;
certain disclosures regarding the Company’s capital;
a statement of cash flows;
the effect of future accounting standards not yet adopted;
the disclosure of the remuneration of key management personnel; and
disclosures of related party transactions with other wholly owned members of Alpha FX Group plc group
of companies.
In addition, and in accordance with FRS 101 financial instrument disclosure exemptions have been adopted
because equivalent disclosures are included in the Company’s consolidated financial statements. These financial
statements do not include certain disclosures in respect of:
−
−
share based payments;
financial instruments (other than certain disclosures required as a result of recording financial instruments at
fair value); or
−
fair value measurement other than certain disclosures required as a result of recording financial instruments
at fair value.
The financial statements are prepared in pounds sterling which is the functional currency of the Group.
2. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted are the same as those set out in Note 2 to the Consolidated Financial
Statements except as noted below.
Investments in subsidiaries and associates are stated at cost less, where appropriate, provisions for impairment.
122
123
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
3. PROFIT FOR THE YEAR
7. DEFERRED TAX
As permitted in section 408 of the Companies Act 2006, the Company has elected not to present its own profit and loss
The deferred taxation liability is based on the expected future rate of corporation tax of 19% (2018: 17%) and
account for the year. The Company reported a profit for the financial year ended 31 December 2019 of £3,330,921
comprises the following:
(2018: £2,820,415).
The auditor’s remuneration for audit and other services is disclosed in Note 5 to the consolidated financial statements.
4. INVESTMENTS IN SUBSIDIARY UNDERTAKINGS
The Company’s investment in the share capital of Alpha FX Limited and details of the subsidiary companies are disclosed
in Note 14 to the consolidated financial statements.
Balance at 1 January
Share for share exchange
Balance at 31 December
31 DECEMBER 2019
£
31 DECEMBER 2018
£
1,346,865
360,069
1,706,934
1,081,302
265,563
1,346,865
At 1 January
Deferred tax relating to share-based payments
Total deferred tax asset
31 DECEMBER 2019
£
31 DECEMBER 2018
£
55,130
81,188
136,318
39,873
15,257
55,130
8. EMPLOYEE COSTS
The Company did not have any employees during the year (2018: nil). All staff are employees of the subsidiary
undertaking.
The additional investment in the year represents the share-based payment for employee share schemes in the subsidiary
9. SHARE CAPITAL
Details of the share capital of the Company are included in note 20 to the consolidated accounts.
company.
5. TRADE AND OTHER RECEIVABLES
Amount owed by Group undertaking
Prepayments
31 DECEMBER 2019
£
31 DECEMBER 2018
£
35,207,444
130
35,207,574
34,377,570
2,371
34,379,941
During the year, no impairment provisions have been made against any class of debtor.
6. TRADE AND OTHER PAYABLES
Accruals and deferred income
31 DECEMBER 2019
£
31 DECEMBER 2018
£
153,202
153,202
70,944
70,944
124
125
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019
FINANCIAL PR & ADVISORS
Alma PR
71- 73 Carter Lane
London EC4V 5EQ
AUDITORS
BDO LLP
Level 12 Thames Tower
Station Road
Reading
Berkshire RG1 1LX
LEGAL ADVISERS
Bird & Bird
12 New Fetter Lane
London EC4A 1JP
Shareholder Information
REGISTERED OFFICE
Brunel Building
2 Canalside Walk
London W2 1DG
COMPANY ADVISERS
Liberum Capital Limited
Ropemaker Place, Level 12
25 Ropemaker Street
London EC2Y 9LY
SHARE REGISTRARS
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
CORPORATE BROKERS
Liberum Capital Limited
Ropemaker Place, Level 12
25 Ropemaker Street
London EC2Y 9LY
126
ALPHA FX GROUP PLC ANNUAL REPORT AND ACCOUNTS FY2019 LONDON (HEAD OFFICE)
Brunel Building
2 Canalside Walk, London W2 1DG
+44 (0)20 3800 0120
info@alphafx.co.uk
TORONTO
150 King Street West, Third Floor
Toronto, Ontario M5H 1J9
+1 (437) 370 4366
info@alphafx.ca
AMSTERDAM
Nieuwezijds Voorburgwal
162, 1012 SJ, Amsterdam, Netherlands
+44 (0)20 3800 0120
info@alphafx.nl
WWW.ALPHAFX.CO.UK