Carl Zeiss Meditec
Annual Report 2023

Plain-text annual report

Alpha Group International plc Annual Report 2023 Company Overview 2023 Highlights 1 Introduction to Alpha Group 3 Strategic Report Chairman’s Statement 6 Chief Executive’s Statement 8 Chief Financial Officer’s Statement 24 Key Performance Indicators 29 Introduction to FX Risk Management 30 Introduction to Alternative Banking 36 Introduction to Fund Finance 40 Introduction to Cobase 42 Principal Risks & Uncertainties 44 Sustainability 56 Engaging with our Stakeholders (s172) 66 Principal Board Decisions 69 Business Model 71 Corporate Governance Report Board of Directors 72 Corporate Governance Statement 74 Remuneration Committee Report 82 Audit Committee Report 86 Directors’ Report 90 Independent Auditor’s Report 94 Financial Statements Consolidated Statement of Comprehensive Income 104 Consolidated Statement of Financial Position 105 Consolidated Statement of Cash Flows 106 Consolidated Statement of Changes in Equity 107 Notes to the Consolidated Financial Statements 108 Shareholder Information 162 C5 Highlights FY2023 FINANCIAL HIGHLIGHTS1 − Group revenue increased 12% to £110.4m (2022: £98.3m) − FX Risk Management revenue increased 10% to £76.3m (2022: £69.5m) − Alternative Banking revenue1 increased 18% to £33.9m (2022: £28.8m) − Underlying2 profit before tax grew 11% to £43.0m, excluding Cobase3 growth was 12% to £43.2m (2022: £38.6m) − Consistent underlying profit margins of 38% (2022: 39%) − Alternative Banking client balances increased by 30% to £2.1bn in Q4 (2022 Q4: £1.6bn) − Net treasury income4 from interest on client balances of over £73m (2022: £9.3m) − Total Income increased 73% to £186.0m (2022: £107.6m) − Profit before tax increased 148% to £115.9m (2022 restated5: £46.8m) − Strong cash generation and debt free, with adjusted net cash6 increasing by £64m to £178.8m (2022: £114.4m) − Basic earnings per share up 124% to 206.2p (2022 restated: 92.1p), and underlying basic earnings per share flat at 76.7p (2022 restated: 76.3p) − Final dividend of 12.3 pence per share, payable on 10 May 2024 to shareholders on the register at 5 April 2024, making a total final dividend for 2023 of 16.0 pence per share (2022: 14.4p) − Cobase (acquired 1 December 2023) contributed revenue of £186k in the month post-acquisition − Initiated up-to £20m share buyback in January 2024 BUSINESS HIGHLIGHTS − Against a difficult macro-environment, average revenue per FX Risk Management client increased 7% (2022: 3%) and FX Risk Management client numbers increased 2% to 1,071 (2022: 1,047) − No. of accounts booking trades on our FXRM platform increased 19% in the year − No. of accounts within Alternative Banking increased 54% to 6,467 (2022: 4,200) − Group Front Office headcount increased 25% to 136 at the year-end (2022: 109) − Benefits of diversification strategy clearly evidenced in resilient revenue and profit growth − Disciplined approach to credit and risk reflected in the lowest level of client defaults in the past five years − Business is well invested with scalable platform, creating operational gearing opportunity moving forward − − Launch of new Fund Finance business in May 2023 Launch of new Corporate FXRM offices in Madrid and Munich − Completed our first acquisition (Cobase) in December 2023 − Working towards a listing on the Premium Segment of the Main Market in May 2024 − Appointment of Dame Jayne-Anne Gadhia to the Board intended for 1 May 2024, as Chair Designate7 − 2024 has started well, in line with our expectations REVENUE (+12%) £110M ADJUSTED NET CASH (+£64m) £179M PROFIT BEFORE TAX (+148%) £116M TOTAL INCOME (+73%) £186M UNDERLYING2 PBT (+11%) £43M FRONT OFFICE HEADS (+25%) 136 1 Alternative Banking revenue includes £0.7m of revenue from Fund Finance solution, which was born out of this division. 2 Underlying excludes the impact of non-cash share- based payments expense, net treasury income on client balances, one-off listing-related and M&A costs and amortisation of purchased intangibles in 2023. 3 Cobase was acquired on 1 December 2023, and during the month generated revenue of £0.2m, EBITDA of £0.0m, and a PBT loss of £0.2m. 4 Previously “Other Operating Income”. 5 The prior period restatement is detailed further in note 4 of the financial statements. 6 Excluding collateral received from clients, collateral paid to banking counterparties, early settlement of trades and the unrealised mark to market profit or loss from client swaps and rolls. 7 Subject to the completion of normal regulatory due diligence by the Company’s Nomad. 1 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 COMPANY OVERVIEW ABOUT ALPHA Alpha Group Part fintech, part consultancy, wholly different. Alpha is a leading non-bank provider of financial partnership structure that creates a powerful sense solutions to corporates and institutions operating of collective ownership across the business. internationally. Blending deep expertise with cutting- edge technologies, we provide a growing portfolio of Whilst we are an established company listed on financial solutions to clients across more than fifty the London Stock Exchange, we remain relentlessly countries, serving as an enhanced alternative to their focused on maintaining the same level of agility and traditional bank. client focus we had when we commenced operations in 2010. These dynamics, combined with the passion of The key to our success is our team, over 480 people our people, have enabled us to make a substantial and based across ten international offices, brought enduring difference to our clients, and deliver a growth together by a high-performance culture and a story to match. OUR DIVISIONS AND MARKETS DIVISION FX Risk Management Alternative Banking (est. 2010) (est. 2020) Cobase (acquired 2023) PRODUCTS Risk Management Mass Payments MONETISATION Margins on Spot, Forward & Option Contracts Payment Fees Bank Connectivity Technology Platform Fees Global Accounts Mass Payments Fund Finance (‘FF’) Account Fees Payment Fees Margins on Spot Contracts Platform Fees (FF) Advisory Fees (FF) CLIENTS Corporates & Institutions Institutions Corporates & Institutions OFFICES UK, Canada, Netherlands, Italy, Australia, Spain, Germany UK, Luxembourg, Malta Netherlands FY23 REVENUE £76.3m £33.9m £0.2m 192 FX Risk Management 230 Alternative Banking 21 Cobase HEADCOUNT 43 Central Services 2 3 Our History Our past performance is the result of being relentlessly focused on the future. COMPANY OVERVIEW OUR HISTORY 2023 2022 2021 December 2023: Acquisition of Cobase completed. September 2023: Launch of FXRM sales offices in Madrid and Munich. August 2023: Opened second HQ in London, focused on the Institutional market. May 2023: Launch of Fund Finance business. December 2022: Company rebrands as Alpha Group International plc. October 2022: Launch of FXRM office in Sydney. March 2022: Launch of FXRM sales office in Milan. January 2022: Launch of Alternative Banking office in Luxembourg. December 2021: Employee shareholder milestone, with over 100 employee shareholders. September 2021: Company formally launches global accounts solution for alternative investments. April 2021: Group completes decentralisation into FX Risk Management and Alternative Banking. March 2021: Launch of office in Malta, focused on alternative investment market. placing for investment, raising £20m. 2020 April 2020: Capital raise and share 2019 2018 October 2018: Capital raise and share January 2019: Company joins AIM-100 list of the London Stock Exchange. December 2018: Launch of mass payments platform. placing for investment, raising £20m. March 2020: Launch of FXRM sales office in Amsterdam. October 2018: Launch of FXRM sales office in Toronto. March 2018: Launch of Institutional business. 4 5 2017 2010 August 2017: Obtained FCA licence to provide derivatives. April 2017: IPO on AIM with a market cap of c. £65m. February 2010: Alpha launches as FX Risk Management specialist to UK corporates. ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Chairman’s Statement Clive Kahn I am pleased to report another year of strong financial and operational progress for the Group, in which we delivered double- digit growth alongside further geographic expansion and the completion of our first acquisition. Our ability to maintain our track record of top- Jayne-Anne brings a wealth of experience setting line growth during a period dominated by such up and leading high-quality financial institutions, challenging and turbulent macroeconomic more details of which can be found in our regulatory conditions underlines the resilience of our business. announcement dated 20th March. To have recorded such a performance despite suppressed activity levels within both our corporate In addition, Lisa Gordon will be stepping down from and institutional markets validates both the strength the Board on 1st May 2024 by not seeking re-election of our proposition and the correctness of our at the next AGM. On behalf of the Board and the strategy to diversify our business streams and to wider company, I would like to thank Lisa for all her reinvest previous profits into our infrastructure and contributions throughout Alpha’s growth journey people. over the past seven years – from our IPO on AIM, to a company that is about to embark on its Main Market A further result of the previous investment is that listing. The Board and I look forward to working with our best-in-class back office function has the Jayne-Anne as Alpha embarks on the next chapter in capacity for further growth. This enabled us to its growth story. focus our investment and capital allocation during the year on our front office functions. We opened two new overseas offices and launched a new fund COBASE ACQUISITION finance offering directed at the institutional market. We were delighted, last December, to complete We ended the year with record cash flows and a our acquisition of Cobase, a leading multibank strengthened balance sheet with £178.8m adjusted connectivity platform. As a high-tech, disruptive force net cash. BOARD APPOINTMENTS within the corporate and institutional space, Cobase represents a natural fit for Alpha Group. There is significant overlap between our client bases, with considerable potential for mutual value adds, as well The Group continues to benefit from an experienced as the ability to provide a more integrated treasury and founder-led leadership team. After eight years as service for our clients. Chair of the Company, I have agreed with the Board that I will step down from this position at our 2025 The acquisition has brought a further 21 talented AGM. Subsequently, on 20th March 2024, we were colleagues into the Alpha Group, who will continue to pleased to announce that Dame Jayne-Anne Gadhia operate from the Cobase Amsterdam office. will be joining the Board as Chair Designate, effective upon the conclusion of the Company’s AGM on 1st On behalf of Alpha, I would like to formally welcome May 2024 (and subject to normal regulatory due these new colleagues and, with the significant diligence by the Group’s Nomad). cross-selling prospects across our client bases in mind, I am excited to see the opportunities our two businesses can create in 2024 and beyond. STRATEGIC REPORT CHAIRMAN’S STATEMENT We were also pleased to be able to initiate a £20m share buy-back programme at the end of January of this year, full details of which can be found in our regulatory announcement dated 29 January 2024. LOOKING AHEAD I believe the Group has never been better positioned to deliver substantial growth and operational gearing over the long term. Our industry-leading position, achieved through investment and diversification decisions taken in recent years, together with our strong culture and leadership driving us forward, means that, despite macro conditions that will likely continue to challenge our clients and markets CLIVE KAHN Non-Executive Chairman MAIN MARKET PREMIUM LISTING Our plans remain on course for a Main Market through 2024, our prospects are sound. Premium listing later in May of this year. We view this new listing as a key opportunity for Alpha to There is a clear roadmap to grow our client base and add to our solid reputation within our markets wallet share across our seven FXRM offices, all of and to allow us to target further clients across which are still barely scratching the surface of their new geographies. From a Board perspective, addressable Corporate marketplaces. Equally, we we also believe the higher levels of governance have proven we can grow strongly in a suppressed and disclosure required by the listing will also Institutional market, and now that we are over the strengthen our relationships with new and existing hump of investing in our operational scalability and stakeholders. Having joined Alpha in 2016, prior infrastructure, there is an exciting opportunity to to its IPO, it is incredible to reflect on how the accelerate our growth by doubling down on our business has grown and matured over the past investments in our sales channels. eight years. I look forward to seeing what the company can achieve as it embarks on this next THANK YOU chapter. FINAL DIVIDEND I would like to thank all our long-standing and new colleagues for their contributions to the success and continued growth of our business, as well as our Following the strong full-year results, and shareholders for their continued support throughout associated cash generation, the Board is pleased the year. As we enter the next stage of Alpha’s to declare a final dividend of 12.3p per share (2022: evolution, with a clear roadmap ahead for disruption 11.0p). Subject to shareholder approval, the final across our markets, I look forward to another year of dividend will be payable to Shareholders on the delivering significant growth. register at 5 April 2024 and will be paid on 10 May 2024. This represents a total dividend for the year Clive Kahn of 16.0p per share (2022: 14.4p). Non-Executive Chairman 6 7 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Chief Executive’s Statement Morgan Tillbrook This year’s statement has been an interesting one to write, as my reflection on the year’s performance differs according to which lens it is viewed through. As a shareholder, I am delighted with the profitability and cash generation of the Group: profit before tax grew 148% to £115.9m, underlying profit before tax grew 11% to £43.0m, and interest on client balances of over £73m (FY 2022: £9.3m) contributed to adjusted net cash increasing by £64m to £178.8m. STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT and back office to provide the infrastructure and regulatory frameworks needed to build a business of scale. Having made significant progress in this area, our investment focus within our core FX Risk Management and Alternative Banking divisions will become more weighted towards the Front Office – enhancing sales capability, refining our technology to improve client interaction and user experience, and bringing this all together to amplify our sales engine. At the same time, we will continue to invest in establishing strong foundations for our newer ventures (Fund Finance & Cobase), as well as leveraging our existing experience and client relationships, so they can go on to forge exciting long-term growth stories of their own. A NOTE ON DETAIL We are proud to provide existing and prospective shareholders with a comprehensive level of detail on the performance of the business within our MORGAN TILLBROOK Chief Executive Officer At the same time, the interest rate tailwinds that excluding net treasury income from client balances, time constraints (and varying levels of interest!) different stages along our maturity curve in terms of generated such exceptional bottom line growth despite the continuing benefits gained from our cash among our audiences, I will continue to reference how we build solutions to service them. Evaluating the proved frustrating for our underlying business, generation, as it is the benchmark by which we judge relevant context via URL links throughout Group through these two customer lenses (Corporate stymying its pace of growth, albeit the growth of ourselves, and therefore fitting that our shareholders our statements in line with our recent results and Institutional) is therefore helpful for understanding our FXRM division reduced somewhat at our own can too. The challenging conditions have given us the announcements. the opportunity in front of us. regulatory disclosures. However, recognising the have different needs and demands, and we are at discretion, particularly where our considered credit opportunity to re-analyse all aspects of our business, appetite and high selling standards saw us walk highlighting areas that we can improve upon, and we away from a number of revenue opportunities. Our have already made positive changes. reputation has been built on high-quality, sustainable CLIENT CENTRICITY IS KEY TO OUTPERFORMING CORPORATES – DOUBLING DOWN ON OUR EXISTING BUSINESS CYCLES GLOBAL FOOTPRINT growth, and we will not compromise that for short- In a year in which Alpha expects to complete its Alongside reviewing the performance of our income Our Corporate clients are served through teams in the term gains, even when the business environment is milestone transition from AIM to a listing on the streams, FX Risk Management and Alternative UK and seven overseas offices across Europe, North more challenging. Premium segment of the Main Market, I would like to thank all of our shareholders whose capital and Banking, it is important to highlight how we America and Australia. With native speakers in each address our two client audiences, Corporate and market, and our presence across multiple time zones, As a founder, I am extremely proud that our team support have helped us create such a dynamic Institutional, as much of our strategic planning we provide genuine 24/7 service capability across our have built such a strong, diversified business, enterprise. London’s capital markets have endured centres around the solutions that each need. client base. Significant developments during the year that can thrive in different external environments. a difficult period, with much conjecture surrounding include the establishment of operations in Madrid Should the relatively high interest rate environment their competitiveness. Without them however, we Both client types continue to be underserved by and Munich, and the Group’s first acquisition, Cobase, continue, our diversification of business will continue would not have been able to achieve nearly as much traditional banking and, whilst there is overlap in which completed in December 2023. to benefit the Group, and our balance sheet and cash in such a short space of time, and certainly would not the products sold, the sales channels, expertise will strengthen further; whilst a return to lower rates be the business we are today, now employing over and technologies are distinct. This drives our entire We have largely completed the current phase of our should stimulate client activity and revenues. 480 people globally. It is gratifying that we have been approach to growth: our strategy and planning; how planned international roll-out of our Corporate FXRM able to reward our shareholders handsomely and we we think about future investment in headcount, business, and our intention now is to double-down on That said, we will not rest on our laurels. As a will endeavour to continue doing so. The move from technology, sales and marketing; how we drive these offices to deliver on their substantial potential. business that strives for high levels of performance, AIM feels like a change of era, and this is apt for our client acquisition, retention and expansion; and Each office has been spearheaded by highly capable we very much remain focused on delivering business. As I will discuss through this report, recent ultimately, how we set our expectations around the leaders and each has the potential to replicate the continued strong underlying growth. That is why years have been dominated by our international roll- scalability and pace of returns from our targeted success of London, which is only 15 years old and still we continue to present our underlying numbers out, as well as investment in platform development investments. In addition, these two client groups remains in an early stage of its growth phase. 8 9 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Chief Executive’s Statement Continued Our investment into our back office functions to date provides bandwidth to scale significantly. With this in mind, although there is significant capacity within our existing front office teams to support materially higher revenues, our intention now is to accelerate our prospects by focusing on front office headcount growth and retention across our current global offices. All the regions we operate in have highly knowledgeable and incentivised management teams operating in markets that can structurally and competitively scale to be similar to the UK in the long term. The acquisition of Cobase, acquired in December 2023, has also added technology, talent and clients, and expands our total addressable market, providing a further growth engine. INSTITUTIONAL - SCALING OUR SALES CHANNELS ACROSS OUR MULTIPLE PRODUCT OFFERINGS Alpha’s Institutional offering has continually evolved in the six years since we first launched our Institutional FXRM team and represents an exciting growth opportunity in the short, medium and long “Significant developments during the year include the establishment of operations in Madrid and Munich, and the Group’s first acquisition, Cobase, which completed in December 2023.” out new sales channels and expanding our sales teams across our growing institutional offering, with front office headcount expected to increase. INCREASING CROSS-SELL OPPORTUNITIES ACROSS THE GROUP HAS THE POTENTIAL TO TRANSFORM OUR PROSPECTS term. The alternative investment industry is currently Leveraging the overlap between our solutions is at in a cyclical downturn, but the success of our the centre of our growth strategy and provides us investment in the sector through this challenging with the opportunity to increase our wallet share and period is highlighted by the 6,467 accounts that deepen our relationships with clients by becoming a Alpha has onboarded to date, representing growth larger part of their day-to-day financial operations, as of 54% year-on-year, as well as the 55% growth well as provide us with a wider net to win new clients. in Institutional FXRM revenues, and the launch of We have a strong track record of launching new our Fund Finance offering in May, which generated solutions and offices that go on to deliver attractive over £700k in revenue in its first seven months of levels of growth within highly specialised markets. We operation. Our Institutional account solutions have also continue to invest in enhancing our CRM system also generated the vast majority of the £73m in net across the group to improve the volume of data and treasury income from interest on client balances. quality of insights we have, enabling our sales teams to more effectively cross-sell and deliver increasing Similar to our Corporate marketplace, the market value to our clients. opportunity in Institutional is sizeable, as we continue to take share from banks with our specialist, high- A clear example of our early success here is our tech, high-touch solutions. Our ongoing investment Institutional FXRM office which (as previously in our infrastructure and solutions continues to mentioned) grew revenues by 55% against a enhance our capabilities, with significant progress challenging market backdrop, reflecting not only the made in 2023. Heading into 2024, we are looking team’s hard work but the initial wins from our cross- forward to leveraging these upgrades, whilst building selling initiatives into our Alternative Banking offering. STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT In May, in a further step to diversify our offering, we DEEP FOUNDATIONS LAID TO DELIVER launched our Fund Finance proposition, which can OPERATIONAL GEARING benefit from cross-selling opportunities with clients that come from Alpha’s Institutional FXRM and Alternative Banking relationships. At the same time, the Fund Finance team is already reciprocating by creating new business opportunities of their own, which can then be sold Alpha’s other services. Likewise, our acquisition of Cobase brings a unique technology platform, a SaaS revenue model and c. 130 clients, which opens up a number of opportunities to offer solutions from our other divisions in the medium term, albeit our initial focus will remain on accelerating Cobase’s own client acquisition. We not only plan to continue delivering future high growth in revenues and client numbers but, over time, we expect an increasingly higher proportion of that growth to drop through into profitability and cash. We have made significant investments in people, processes and technology over the last five years across our core divisions, and whilst we expect macro conditions to continue to be a challenge through 2024, this has put us in a strong position to benefit from operational gearing as markets pick up. STRONG CROSS-SELLING OPPORTUNITIES WITHIN BOTH OUR MARKETS FX Risk Management FX Risk Management Bank Connectivity (Cobase) Global Accounts CORPORATES INSTITUTIONS Bank Connectivity (Cobase) Mass Payments Fund Finance Mass Payments 10 11 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Chief Executive’s Statement Continued Infrastructure & Technology CASH PROVIDES THE SPRINGBOARD DEAL FLOWS WITHIN THE ALTERNATIVE INVESTMENT MARKET STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT The substantial investment we have made in our technology and infrastructure over the last five years spans two decentralised divisions, alongside recently acquired Cobase, each with highly attractive propositions and clear development roadmaps. With Australia, alongside Europe and Canada, Alpha is now able to operate 24/7 across time zones, and our investments in infrastructure and back office systems over the last few years have provided significant capacity for us to scale our global revenues. The objective now is to enhance the experience for our clients and sales teams while streamlining processes and building in additional automation; the opportunity is to improve the efficiency of our systems rather than simply grow the size of our technology footprint or headcount, in order that we can deliver more with less. People Owing to our investments in people, processes and technology to date, we also believe we can significantly grow the size of our business with far more modest increases in back office headcount going forward. The financial productivity of our front office teams meanwhile will benefit from not only our investment in internal technology but also the growing range of solutions we can offer each client. At the end of the year we had £178.8m of adjusted net cash, and the strength of our balance sheet now provides the opportunity to supercharge our growth. As a Board, we continually discuss our capital allocation policy and the balance between dividends, share buybacks, acquisitions, re-investing back into the business, as well as ensuring we maintain a strong balance sheet for all our stakeholders and counterparties. Following the initiation of our £20m share buyback programme in January 2024, the Board’s decision, for now, is that, while we always look for a balanced approach, our remaining cash gives us a major competitive advantage as markets pick up and we identify relevant opportunities across our matrix of offices, services and clients. We also believe it is prudent to have sufficient cash kept aside to capitalise not only on the opportunities we have now, but also to have the ability to accelerate investment in the future, if faced with even greater upside. We will naturally continue to keep this under review in the normal course. DEAL VOLUMES WITHIN THE ALTERNATIVE INVESTMENT MARKET 40000 30000 20000 10000 0 Private Equity Venture Capital Real Estate Infrastructure 2021 2022 2023 Preqin Quarterly Updates (2021-2023) n b $ 1500 1000 500 0 Private Equity Venture Capital Real Estate Infrastructure 2021 2022 2023 Preqin Quarterly Updates (2021-2023) STRONG FINANCIAL KPIS DESPITE THE in this market we are starting from a low base with a CHALLENGING ECONOMIC BACKDROP strong proposition, highlighted by a 54% increase in accounts within Alternative Banking in the year. Throughout the year we have seen the interest rate environment suppress the activity levels of our FX hedging and alternative investment clients. The challenging macro conditions have resulted in our clients being more conservative around forecasting and, thus, FX hedging. At the same time, these macro conditions meant we chose to reduce our own credit appetite, resulting in a number of clients having hedging facilities removed or reduced. This decision ultimately ensured we had no meaningful defaults during the year but also meant we walked away from a number of revenue opportunities by taking a balanced approach to growth. Additionally, our institutional clients had the challenge of higher financing costs in structuring new deals and managing the mismatch between buyer and seller expectations across all of the key asset classes we serve: Private Equity, Venture Capital, Real Estate, Infrastructure and Private Debt. Deal flow last year was well below 2022 as funds faced increased uncertainty about the economic outlook, and the impact of higher interest rates and credit spreads. As a result, the fundraising environment and private equity M&A activity slowed considerably. However, OUTLOOK – OUR NATURAL HEDGE We currently expect markets to slowly pick up through 2024 and monetary policy to ease, providing greater certainty over global trade, investment decisions and demand visibility for our clients. While higher interest rates will continue to provide a significant bottom-line tailwind for the Group, driving exceptional levels of net treasury income, we do not know to what extent any easing of monetary policy will release the brakes on currently suppressed activity levels of both our corporate and institutional clients. The ability for higher interest rates to amplify net treasury income (from interest) on one hand, whilst simultaneously suppressing underlying trading activity on the other is referred to internally as our ‘natural interest rate hedge’ and will likely remain a feature in 2024. Overall, trading in 2024 to date has been encouraging and we remain confident in the strength and scalability of our business model, and our strategy to take advantage of the vast growth opportunity available to the Group. 12 13 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Chief Executive’s Statement Continued DIVISIONAL ANALYSIS FX RISK MANAGEMENT Highlights − Revenue growth of 10% to £76.3m (2022: £69.5m) − Underlying profit before tax increased 18% to £32.3m (2022: £27.3m) − Client numbers increased 2% to 1,071 (2022: 1,047) − Average revenue per client increased 7% − Front Office headcount increased by 18% to 120 (2022: 102) − Launch of two new offices, in Madrid & Munich FXRM ENVIRONMENT As previously outlined, the FXRM environment in the short-term benefit of a more favourable initial exchange rate, but commit the client to a potentially more unfavourable exchange rate in the future. We do not seek to advise on or promote complex options products, and our selling standards dictate that any we do facilitate should be on an execution-only basis, driven by client demand. We are unfortunately seeing these products being promoted more and more within our industry, particularly in this tougher economic climate. I believe this is largely the symptom of two simple facts: i) complex options provide high margins for the FX provider and ii) the same less-scrupulous providers allure clients with the prospect of outperforming the market. 2023 reflected challenging macro conditions, which As a business, we feel this trend is an increasing have suppressed our clients’ FX hedging activity. The problem within our industry, however, I am pleased first nine months of the year were characterised to report that, in line with the intentions set out in by high inflation rates globally and central banks my last annual report statement, our teams have responding by increasing interest rates, and during continued to move in the opposite direction, with the this period in particular, we made the decision to percentage of FXRM revenues coming from complex take a more conservative approach when it came to options products reducing from 9% to 3% during our own credit appetite. This resulted in us reducing the year. Since 2022 we have purposely adjusted our or removing hedging facilities for a number of clients, commission structure to incentivise our sales teams and also curtailed our appetite to work with some to provide simple and appropriate solutions, while new clients. Through this disciplined approach, we paying lower rates of commission on more complex are pleased to report we had no significant defaults products. If we are serious about maintaining our during the year; however, naturally, this also resulted selling standards as we grow into a global business, it in us walking away from some revenue opportunities. is important that our incentives are aligned with our The benefits of our diversification strategy across culture. FXRM were also clearly reflected during the period, Whilst our avoidance of complex options products with our Institutional FXRM business and our has naturally cost us revenue in the short term, I overseas corporate offices doing well to offset the am incredibly proud that we have a team that is impact of the economic headwinds experienced in committed to acting in the best interest of their the UK Corporate business. FXRM SELLING STANDARDS clients, delivering them what they need, even if it’s not always what they initially request or might have been sold by other FX companies. In a challenging sales environment, it takes a certain type of salesperson We set out to be the global leader in FX risk to turn down the low-hanging fruit of a high-margin management, and believe that integrity is as options trade. Indeed, many of our competitors have important as expertise if we want to deliver on this seen their options revenue increase during this vision. This is particularly pertinent when it comes challenging period, as clients are encouraged to seek to complex FX options products, which provide outperformance in a tough environment. STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT The moves our team are making around selling their interests. Despite only a small increase in client standards give me further confidence in the future numbers, average revenue per client continued to of this business and will unquestionably lead to more increase, reflecting our continued ability to work with sustainable revenue growth in the long-term, whilst larger businesses as well as increase our wallet share further differentiating us within an industry which, with existing clients, as our reputation continues unfortunately, is moving increasingly in the opposite to grow. Front Office productivity also continued to direction. increase as the chart on the following page shows. FXRM PERFORMANCE UK Corporate Overview The UK Corporate FXRM office has grown its revenues by around five times since our IPO in 2017, Overall divisional revenues grew 10% to £76.3m for but during the period experienced its first decline the year (FY 2022: £69.5m), and client numbers grew in revenue and has remained the most impacted by by 2% to 1,071. This small gain in client numbers the economic environment. This is primarily because (actually a decrease since June 2023) largely reflects it has the largest and longest-standing client base the tightening of our credit appetite within the and has therefore also been affected most by the current interest rate environment, which has seen adjustments to our credit appetite and the doubling us stop working with certain existing clients, as well down of our selling standards. as reduce the pool of new clients we are prepared to work with. Additionally, there have been a handful Our UK Corporate office has long served as the talent of clients who have become insolvent in the current incubator for cultivating leaders to spearhead the environment. Our push to reduce the number of establishment of overseas offices. Over 125 years of clients using complex option products has also Alpha experience has been exported abroad over weighed on our growth, with not every business ready the past five years and, as a result, during this more to be persuaded that complex options are not in challenging period, the team have missed some REVENUE DEVELOPMENT OF CORPORATE OFFICES (FY2023) ) m £ ( e u n e v e R £40 £35 £30 £25 £20 £15 £10 £5 £– Full Years Established London Toronto Amsterdam 14 5 4 Milan 2 Sydney Madrid Munich 1 0 0 14 15 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Chief Executive’s Statement Continued FXRM FRONT OFFICE PRODUCTIVITY e u n e v e R l a u n n A M R X F £90m £80m £70m £60m £50m £40m £30m £20m £10m £0m 350 300 250 200 150 100 50 - l C u m u a t i v e Y e a r s o f E x p e r i e n c e o f F r o n t O f f i c e Excluding hires <1yr (revenue contribution is minimal in first year) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Revenue (LHS) Cumulative Years (RHS) What is Front Office Productivity? Front Office productivity compares the total cumulative tenure of our Front Office, compared to our revenues. The graph shows that we have been able to maintain productivity despite both the market headwinds, and experienced sales people moving into roles focused on leading international expansion and/or the growth and development of our Front Office teams. When we take into account new joiners, whose contribution in their first year is naturally lower than more experienced colleagues, this is even more pronounced. of this talent. Our Madrid office, for example, was Overseas Corporate Offices our most recent export of talent from the UK, and has taken with it over 15 years of combined Alpha experience; this from a team of four who delivered over £1.1m in Spanish client revenue from the UK office over the past four years, and left the UK at a more mature stage in their learning curve. With our current overseas offices now established, we feel there is no requirement to further export our talent from the UK for the time being. This will ensure that our existing talent can fully compound within the UK, which remains an enormous growth opportunity in its own right. As highlighted, we believe we have (for now) completed the “landing” phase of our “land and expand” strategy (i.e. rolling out overseas Corporate offices). In all cases, we believe the structural and competitive dynamics, together with the size of these local markets, means we have the potential to replicate the financial size and success of the UK office in the longer term. To underpin this, we work very hard to ensure our selling standards and culture are successfully exported overseas and led by experienced individuals who are highly invested in the future of each venture. Launching new offices overseas is not without its challenges, but upholding Having done so much to drive growth across the our standards is key if we want to become the wider business, I would like to personally thank our undisputed global leader in FX risk management. UK office for all they have done for the Group, and I am looking forward to this team now being able to Despite a year of challenging trading, our Corporate once again double down on their own journey. Toronto office remains profitable, albeit with STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT revenues slightly down on 2022. As well as a difficult to successfully export our culture and standards macro backdrop, investors who have followed our overseas. Whilst there is a lack of German-speaking updates over the past 18 months will know we candidates in London, in H1 last year we met with temporarily found ourselves in a position where an experienced individual working locally within the we did not have enough senior talent to support German FX market. Whilst this person has come from the development of our junior talent. We therefore outside our company, they quickly showed that their had some rebuilding to do in Toronto to position it standards and values aligned with our own, and to for long-term growth. Throughout this rebuilding reinforce this, they have also been joined by another process, we have been focusing on developing early Alpha hire from our Amsterdam office. and upskilling the team and, having successfully gone through this, towards the end of 2023 we Toronto is our only office that started without any subsequently promoted an existing team member existing Alpha team members, and having learned a to take over leadership of the office. This individual lot from this experience, we have been keen to apply is a highly respected, high-performing, long-term these learnings to our selection and integration member of the team, who has been instrumental in process this time around. Consequently, we feel that, the office’s growth to date. in Munich, we have a leader and team who believe in the Alpha way and are capable of delivering it The early performance from the office since making successfully. The early signs from Munich have been these changes has been encouraging, and having positive, and we are looking forward to seeing what spent a week in Toronto with the team at the start of they can deliver in their first full year of operation. January, I feel confident the office is turning a corner and has the right people and foundations in place to Launched in 2022, our Sydney office has delivered re-establish its growth journey. good revenue growth in its first full year of trading. This office is led by a core team possessing In H1, we also established a Madrid office. This office, over 30 years’ combined experience working comprised of Spanish speakers, is led by a team of at Alpha, ensuring that we have been able to four with 15 years’ combined Alpha experience, and is quickly communicate our proposition and export the last and most recent export of UK talent for the our culture. In addition to providing the basis for time being. Our presence in Madrid has provided the further expansion across the Australian territories, foundations for further expansion into a wide range our Sydney base will enable the Group to better of Spanish-speaking markets, and we are pleased to access a wide range of target Asian markets in the report the office has seen strong trading to date with future, contributing to our truly 24/7 client service significant prospects ahead. capabilities. In Q4 2023, we also launched a new office in Munich. Germany is a large and attractive market for us, and historically we have had good success selling into the market from our Amsterdam and UK offices. Whilst we have wanted to launch in Germany for a long time, finding the right person to lead a team there has not been easy. Wherever possible, we like our overseas offices to be established by existing team members who have excelled through the UK ‘Alpha Academy’ and can therefore be relied upon Institutional FXRM As we have previously highlighted, our Institutional FXRM office (based in the UK) continued to show particularly strong growth in the period, with revenue increasing 55% despite a significantly suppressed market. Launching in 2018, the Institutional FXRM team has a strong reputation within the Institutional space. This business has solid foundations in place in terms of talent, clients and solutions, to deliver substantial organic growth going forward, but 16 17 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Chief Executive’s Statement Continued also to be at the centre of our efforts to amplify our prospects within the Institutional market by successfully cross-selling our growing range of products. Having had an excellent year in a subdued market, it will be exciting to see what the team can achieve when activity levels start to pick up in the alternative investment market, particularly when considering the significant growth in our balance sheet and presence over the past 18 months. FXRM TECHNOLOGY Our FXRM platform is designed to provide clients with greater efficiency and visibility when managing and reporting on FX. We continued to make significant improvements to the platform throughout the year, with modular credit facilities, derivatives online, mark-to-market tooling, and accelerated payment processing, all well-received upgrades by our clients. Whilst it would be easy to get lost in technical jargon, the principles behind any new upgrades we make to the platform are simple – we At the same time, average revenues per client continue strive to create platform features for our clients that to increase, alongside Front Office productivity. We unlock new efficiencies and insights, so they can are pleased to have not only continued to improve our be more informed, more productive, and ultimately existing foundations but have also opened two new get more value from working with us. The success of offices alongside this to facilitate further growth. these developments can be seen in the increasing levels of activity on the platform, with the number of accounts booking trades on the platform increasing 19% in the year. Moving forward we will continue to innovate and evolve our FXRM platform and are also looking forward to exploring the longer-term opportunity to integrate the capabilities of Cobase following its acquisition in December 2023. FXRM STRATEGY While the macro backdrop to 2023 certainly provided challenges to the growth of our FXRM revenues, the growth prospects for FXRM heading into 2024 remain exciting. Throughout 2023 we have continued to make significant investments to further enhance the FXRM division’s potential, including investment in our online platform, and the exciting acquisition of the treasury-focused fintech, Cobase, in December 2023. The bigger picture is we have a clear strategy, a tried and tested model and an identified runway to continue delivering long-term growth with our existing FXRM teams, markets and products. We have seven international FXRM offices across three continents and the strategy will now be doubling down on our office investments and focusing on “expanding” now that we have successfully “landed”. This will also benefit our operational leverage going forward, as a result of the investments made in recent years. FXRM Front Office headcount increased 18% to 120 people in 2023 (FY 2022: 102), and our plan is to focus in 2024 on growing and developing our Front Office sales teams in our current offices. Having successfully doubled down on our selling standards in 2023, a big focus in 2024 will be on doing the same with our nurturing and training standards; ultimately, we believe that by getting both of these areas right, STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT we will continue to put ourselves in an excellent Alternative Banking highlights the sentiment I position to deliver strong and sustainable revenue outlined at the start of this statement; as Chief growth moving forward. ALTERNATIVE BANKING Highlights − Revenue increased 18% to £33.9m (2022: £28.8m) − Number of accounts invoiced within Alternative Banking increased 54% to 6,467 (2022: 4,200) − Underlying profit before tax of £10.9m, a reduction of 3.3% on the prior year (2022: £11.3m) as a result of our accelerated investment programme throughout the year, particularly in headcount − Headcount increased 35% to 230 (2022: 171) − Alternative Banking client balances increased by 30% to £2.1bn in Q4 (FY 2022 Q4: £1.6bn) Alternative Banking Environment Executive, the economic backdrop has proved frustrating in growing the business, but as a shareholder, the economic rewards have been substantial in 2023. Not only has Alternative Banking been key to our early success in cross-selling with our FXRM and more recently Fund Finance teams, but we have also earned interest on overnight client balances throughout the year. As previously outlined, our average client balances grew by c. 30% between 2022 and 2023, as we continued to open more accounts and grow wallet share with clients. The interest rates generated by these balances meanwhile averaged 3.6% for the year. Together this contributed towards over £73m of net treasury income on client funds, an increase of nearly eight times against FY 2022. Over the last three years we have built a business Alternative Banking Technology based around solving a service and technology challenge in an institutional market inefficiently served by banks. The growth in accounts we now manage highlights the success of the team and our product development roadmap. The 54% growth in accounts was achieved despite a marked drop in investment activity amongst our existing and target clients. The decline in deal activity in the institutional market in the first half of 2023 continued throughout the rest of the year, with deal volumes and flows significantly down on 2022 across all of the key asset classes served by the division. This reduction in activity led to a knock-on effect on the demand for new accounts, payments and FX spot transactions. Alternative Banking Performance Our alternative banking technology has been purpose-built for alternative investment clients, and combined with our specialist teams, enables us to provide our clients with a compelling alternative to traditional banking providers, who are typically characterised by legacy technologies and more generalist offerings. New product development is focused around three key client-centric tenets of: Ease, Responsiveness, and Reliability, with the ongoing goal of making every interaction with our clients as efficient and effective as possible, whilst also remaining highly controlled and compliant. What we find particularly exciting here is that much of the progress we make increases both the attractiveness of our offering, As a result, growth in account numbers was lower whilst simultaneously reducing our own time than we had anticipated at the start of the financial and cost to serve. A great example of this is our year, with just under 6,500 accounts, achieving investment in automation to reduce the amount of significant growth on the 4,200 accounts held at 31 manual involvement required between our teams December 2022. Revenues meanwhile increased and clients. This is improving the onboarding speeds by 18% to £33.9m, with consecutive record revenue and experience for clients, whilst also reducing the quarters delivered in Q3 and Q4. operational burden on our teams. 18 19 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Chief Executive’s Statement Continued Moving forward, we will continue to upgrade and This will in turn increase the ease of use and evolve our product offering, and with a growing performance of our systems for our clients, improve range of complimentary product offerings, each with the responsiveness of our support, as well as reduce innovative technologies of their own, we are moving our time and cost to serve – enabling us to do more ever closer towards our ambition of becoming the with less. leading non-bank provider of financial solutions to the institutional space. ALTERNATIVE BANKING STRATEGY This step-change in scalability and efficiency is also expected to reduce the level of growth in operational headcount we need in Alternative Banking going forward, whilst giving us the confidence to grow Despite the temporary downturn in investment our Front Office teams in 2024 within this division. activity within our core markets, it is encouraging As markets return to growth, we want to make it that we have been able to continue to grow, and as easy and attractive as possible for institutions we are excited about the prospects for Alternative and fund managers to deal with Alpha. The exciting Banking as this slowdown unwinds and business opportunity is to take the platform and brand we activity increases. When the market picks up, our have built and now layer on the sales-led culture growing market presence, partnership relationships that has been core to Alpha’s success over the last and scale mean we are well-positioned to capitalise 15 years. We plan to open up a range of new sales on the increased opportunity, with increasing levels channels across the institutional marketplace, of operational efficiency. each focused on capitalising on different routes to market, and as part of this will be increasing the size We will continue to invest to scale the business, but of our sales team. Suffice to say, the team and I are feel we are over the hump of our major technology very much looking forward to this next chapter in the infrastructure spend. This year, the focus will be on division’s growth journey. automation and improving the client experience with incremental enhancements to the functionality and interfaces. ALTERNATIVE BANKING OPERATIONAL SCALABILITY FUND FINANCE Highlights − Launched in May 2023 − Revenue of over £700k for the seven months of FY 2023 (currently recognised within Alternative Banking) − Digital platform launched Born out of our Alternative Banking division, our expansion into fund finance forms another important step in our ambition to lead the way in global financial solutions for the alternative investment market – a bank alternative, dedicated to Alternatives. This solution embodies our ‘high- tech, high-touch’ approach to business, blending our specialist expertise with smart technology to disrupt industries that are both outdated and have high barriers to entry. We initially launched our solution in May 2023, and in November followed up with the launch of the industry’s first digital platform for connecting borrowers with lenders. We are pleased to report early successes in this division, with our solution already proving popular among clients, contributing over £700k towards Alternative Banking revenues for the seven months of FY 2023 since its launch in May. Looking ahead, we have further medium-term ambitions to continuously improve the platform, grow the client base, and focus on opportunities to cross-sell, all of which provide an exciting roadmap s t n u o c c A e v i L f o # g n k n a B e v i t a n r e t l A i 7,000 6,000 5,000 4,000 3,000 2,000 1,000 FY 2020 0 - 20 FY 2023 for the future. FY 2022 FY 2021 20 40 60 80 100 120 Client Services and Compliance (full-time equivalent) When it comes to innovative new solutions, barriers to entry are naturally a keen area of focus for both Alpha and its investors. Here we believe we enter this industry with a natural position of strength. This is because, for a platform solution to be worthwhile for borrowers and lenders, there needs to be speed and scale on both sides of the equation: borrowers want to know they can instantly screen across a large pool of lenders, whilst lenders want to know they are going to have easy access to a sizeable pool of borrowers. Traditional fund finance intermediaries, however, typically work with much smaller numbers of clients STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT on an irregular basis and rely on manual processes to deliver their service. This makes speed and scale challenging. Alpha’s ability to launch this solution has only been possible because of our ability to combine deep expertise within fund finance, with Alpha’s scale and technological capabilities in the institutional market. From launch, the fund finance team has been able to instantly leverage 1,300+ relationships with potential borrowers, whilst using technology to dramatically streamline processes. Achieving this level of speed and scale did not happen overnight though. It has taken significant time, investment, and expertise, built up over many years, with our institutional teams now made up of over 250 people across three global offices. The barriers to entry to launch a competing platform from scratch are therefore significant and give us a unique and sizeable first-mover advantage. COBASE – EXPANDING OUR MARKET Highlights − Acquired December 2023 − Revenue growth of 67% to €2m (2022: €1.2m)1 − Client numbers increased 67% to 130 (2022: 78) December saw us make our first-ever acquisition, Amsterdam-based Cobase, a treasury-focused fintech which supports corporates with seamless connectivity between their ERP, payment and banking systems (a more detailed overview of their offering can be found in our RNS announcement dated 12 October 2023). In 2023, Cobase grew revenues by c. 67% to €2m1, with all revenues derived through SaaS subscription fees. Cobase’s client base has also increased by c. 67% during the year, to end 2023 with over 130 clients. Alpha acquired circa 86% of the company for an initial consideration of €9.6m (£8.3m) in cash, with the remaining stake to be acquired via a performance- based earn-out between 2025 and 2028. 1 Only revenue generated after Cobase’s acquisition in December is included in the Group’s figures, which was £0.2m. 21 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Chief Executive’s Statement Continued Going forward, Cobase will retain its team and Our overarching preference remains to allocate continue to operate under its own brand, but the capital into high-confidence organic growth addition of the business expands our available initiatives, within both existing and potential new market. Their bank-connectivity technology added business units. Such initiatives include: extending to Alpha’s stable of products, means the Group and improving product lines and tech solutions, is now able to offer our corporate client base a expanding our territories when appropriate, or any comprehensive and flexible portfolio of treasury- other moat-widening opportunities that differentiate focused solutions covering FX, payments, accounts, us from competitors. bank connectivity, and treasury solutions. In view of the Group’s confidence in the sizable and We look at our capital allocation policy below, but exciting market opportunities that are presented to Cobase is a good example of how we plan to partly us, it is the Board’s belief that, after maintaining our use our cash to inorganically expand Alpha where progressive dividend policy and initiating our £20m appropriate. We are often shown opportunities share buyback, retaining and deploying our remaining to acquire businesses that compete in our FXRM cash within the business will deliver significant levels marketplace, but in reviewing their clients, service of growth and deliver the best value for shareholders and teams, typically they offer more risk than long-term. Examples of this last year include the reward and do not add to our ambition. We will look opening of offices in Madrid and Munich, the launch for companies that meet our stringent criteria of of Fund Finance and the acquisition of Cobase. adding technology, clients and products, together with the opportunity to cross-sell, and most As well as providing cash for investment, a strong importantly complement the Alpha culture. balance sheet is also important to our counterparties, CAPITAL ALLOCATION AND SHARE BUY BACK As highlighted throughout the report, the Group generated significant levels of cash throughout 2023. As at 31 December 2023 we had net assets of £223.5m (2022 restated: £142.9m), with adjusted net cash increasing by £64m to over £178.8m (2022: £114.4m). As highlighted in last year’s statement, we do review our cash position on a regular basis, and if we feel our cash position becomes greater than we require, will look to reassess. Given the current cash balances and the likelihood of further cash generation this year, the Board agreed to implement a Share Buyback programme of £20m, full details of which can be found in our RNS announcement dated 29 January 2024. Purchased shares will be held in treasury, enabling us to use the shares to offset future dilution from our long-term growth share schemes. as a healthy cash profile is required as collateral for hedging facilities, regulatory capital, and also provides our clients with confidence. “The team have made significant strides in delivering on our accelerated investment programme, which has expanded and enhanced our capabilities.” STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT MAIN MARKET LISTING As highlighted in last year’s statement and reiterated to the market last September, Alpha intends to move up to the Premium List of the Main Market. In line with previous guidance, we are working to complete this move in May 2024 with relevant workstreams well progressed. The rationale for the intended move is repeated below. As a business that is growing in size, becoming more global, and gaining interest from increasingly larger clients, we believe a Main Market Premium listing will serve to further enhance our reputation and support our market penetration as we move into new countries and engage larger clients. At the same time, Premium Listing standards will align to Alpha’s commitment to providing higher levels of governance and disclosure, both of which we know will continue to be well-received by our clients, banking partners and investors alike. THANK YOU 2023 was a remarkable year for Alpha. We faced To the team – I would like to thank you for your different challenges in an interest rate environment unwavering dedication throughout the year. Given not experienced since we began trading in 2010. that we delivered record profits, it is difficult to Despite a natural inclination to do more, we have reconcile that we didn’t achieve the underlying maintained our discipline and been steadfast in our growth we set out to, however, given the market we approach to both credit management and our selling found ourselves in, I am incredibly proud of what standards – delivering our clients what they need we achieved together. The mindset and ambition (even if it’s not always what they initially request heading into 2024 has been equally inspiring, and or might have been sold by other FX companies). this gives me confidence that together, we can meet We are privileged to work with some truly great future challenges and seize the opportunities that clients, and our commitment to safeguarding their lie ahead. 2024 has started well, and I am looking interests during these challenging times has gone forward to seeing what we can achieve together a long way to maintaining their trust and enhancing throughout the rest of the year. our reputation further. At the same time, the team have made significant strides in delivering on our Morgan Tillbrook accelerated investment programme, which has Chief Executive Officer expanded and enhanced our capabilities, and created significant efficiencies and capacity from which to scale whilst enjoying increasing levels of operational leverage. 22 23 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Chief Financial Officer’s Statement Tim Powell 2023 has seen good growth across both divisions despite a tough macro-economic environment, with total revenues increasing 12% to £110.4m (2022: £98.3m). FX Risk Management revenue grew 10% to £76.3m (2022: £69.5m), whilst Alternative Banking grew 18% to £33.9m (2022: £28.8m). Cobase, the Group’s first acquisition, completed on 1st December 2023 and contributed £0.2m of revenues in the one month of ownership in 2023. REVENUE ALTERNATIVE BANKING FX RISK MANAGEMENT Alternative Banking revenue grew 18% from £28.8m in the prior year to £33.9m in 2023, driven by an The FX Risk Management division focuses on increased number of accounts, as well as revenue supporting corporates and institutions that trade from our new Fund Finance offering launched in May currency for commercial purposes through the 2023. Group’s sales teams located in London, Toronto, Amsterdam, Milan, Madrid, Munich, and Sydney. Account fee revenue increased by £5.8m (76%) to Revenue grew by 10% over the prior year to £76.3m £13.5m (2022: £7.7m), as the number of accounts (2022: £69.5m), with a 3% increase in UK revenues being managed increased by over 50% from 4,200 and a 42% increase in overseas offices’ revenues, to just under 6,500, and we generated a full year with growth across all regions except Canada. of income from accounts opened in the prior year. Revenue was up 3% in the London FX Risk a straight-line basis over the 12 months from the date Management business, driven by strong growth from the account was opened or renewed. At 31 December our institutional client base, up 55% to £23.5m (2022: 2023 deferred revenue was £7.1m (2022: £4.9m), and £15.1m), partially offset by a weaker performance this will be recognised as revenue in 2024. Revenue from annual account fees is recognised on within our corporate client base, which was down 14% to £35.2m (2022: £41.2m). This fall in revenue was The underlying operating profit margin of the primarily driven by the increased levels of uncertainty Alternative Banking division was c. 33% (2022: c. within the UK corporate market, resulting from the 39%). The reduction against 2022 was predominately high inflation and interest rate environment. due to the timing mismatch of in-year investment, The underlying profit margin of the division increased environment suppressing revenues. to c. 42%, (2022: c. 39%) with the Corporate segment delivering a margin of 50% (62% excluding the newer Fund finance had a very encouraging start with lower-margin overseas offices). over £700k of revenue in its first seven months of increased deferred account fees and the macro operations. STRATEGIC REPORT CHIEF FINANCIAL OFFICER’S STATEMENT £2m £74m £186m FXRM Growth 10% Alternative Banking Growth 18% £(6)m £8m £4m £6m £(1)m £1m £0m £110m £34m £76m £98m £29m £69m 2022 Revenue UK Corporate UK Institutional FXRM Overseas Offices AB Account Revenue AB Payment & Spot Revenue Fund Finance Cobase 2023 Revenue NTI - Client NTI - Own 2023 Income FX Risk Management Alternative Banking FX Risk Management Margin 2023: c.42% Alternative Banking Margin 2023: c.33% 50% £40m £20m 2023 Corporate* 31% £24m £7m 51% £9m £4m 31% £4m £1m 33% £30m £10m 2023 Netherlands 2023 Institutional FXRM** 2023 Institutional AB** 2023 Alpha Pay PBT Revenue 8% £4m £0m 2023 Canada * Corporate division is primarily UK but also includes other offices not disclosed elsewhere (Milan, Madrid, Munich, and Sydney) **For the purpose of deriving margins for Alternative Banking and FX Risk Management, the cost base of the Institutional division has been allocated based on revenue. 24 25 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Financial Review Continued GROUP PROFITABILITY Underlying profit is 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 profit excludes the impact of the net treasury income on client balances (see below) and non-underlying items. On this basis, the underlying profit before tax, increased by 11% to £43m (2022: £38.6m). Statutory profit before tax increased by 148% to £115.9m (2022 restated: £46.8m). As previously highlighted, the Group continued to invest in the year, some of which was accelerating plans from 2024 & 2025. Investments included; launching operations in Spain and Germany, a new office in London focused on Institutional clients, and further technology improvements to increase scalability and digitisation. Overall headcount increased in the year from 357 to over 480 at 31 December 2023 to support future long-term growth, of which 21 were Cobase Employees. The underlying profit before tax margin, excluding Cobase, remained broadly flat at 38% (2022: 39%). However, the statutory profit before tax margin increased significantly to 62% (2022: 43%) reflecting the growth in net treasury income from client balances. NET TREASURY INCOME (NTI) The current interest rate environment has continued to allow the Group to benefit from interest income generated from client balances. ‘Net treasury income – client funds’ has contributed £73.7m of net treasury income in the year (last four months of 2022: £9.3m), with the number and size of client balances growing to an average of £2.1bn in Q4 2023. The Group is only able to obtain attractive interest rates on these overnight client cash balances because of our ability to aggregate numerous individual client balances, many of which are transitory in nature and typically only held for a short amount of time. 26 Whilst the increased interest income stream is a positive boost for the Group and a natural by-product of our increasingly diversified product offering, we are mindful that aspects of its dynamics are driven by macroeconomics beyond our control. As previously outlined, we have therefore chosen to recognise this income on client balances as ‘net treasury income – client balances’ and exclude it from our underlying results. This year the Group has also generated net treasury income on the initial and variation margins it requires for its FX Risk Management client relationships. These balances contribute to the Group’s cash and cash equivalent balances and directly relate to the operating activities of the business. Therefore, we have decided to separately disclose these amounts within total income at the top of the Income Statement as opposed to within finance income, totalling £1.8m (2022: £nil). TAXATION The effective tax rate for the period was 23% (2022: 17%). The increase in effective rate is primarily due to the change in UK corporation tax from 19% to 25% in April 2023. The rate was lower than the pro rata UK headline rate of 23.5% due to the mix of profits across our global subsidiaries. There were no other material changes in underlying rates. EARNINGS PER SHARE Underlying basic earnings per share was flat at 76.7p (2022: 76.3p), whilst total earnings per share were over 120% higher at 206.2p (2022: 92.1p). The impact of the increased corporate rates of taxation was to suppress underlying basic EPS by c. 6p and basic EPS by c. 14p. 206.2p 76.3p 76.7p 92.1p Underlying EPS EPS 2022 2023 STRATEGIC REPORT CHIEF FINANCIAL OFFICER’S STATEMENT Net cash and cash equivalents Variation margin paid to banking counterparties Margin received from clients* Net MTM timing of profit from client drawdowns and extensions within trade receivables ADJUSTED NET CASH** 31 DECEMBER 2023 £’000 31 DECEMBER 2022 £’000 197.9 11.1 209.0 (51.1) 20.9 178.8 136.8 44.9 181.7 (70.2) 2.9 114.4 * Included in ‘other payables’ within ‘trade and other payables’. ** Excluding collateral received from clients, collateral paid to banking counterparties, early settlement of trades and the unrealised mark to market profit or loss from client swaps and rolls. KEY PERFORMANCE INDICATORS corresponding change in other payables and trade The Group monitors its performance using several key performance indicators which are reviewed at operational and Board level. The key financial performance indicators are revenue, total income, underlying profit before tax, profit before tax, PBT margin, number of FXRM clients, number of Alternative Banking client accounts, and the number of FXRM Front Office staff. CASH FLOW AND BALANCE SHEET In the year ended 31 December 2023, 53% of the revenue in the year was derived from products where the revenue is converted into cash within a few days of the trade date (2022: 57%). Including net treasury income, cash conversion increased to 72% in 2023 (2022: 60%). This has continued to have a positive impact on the Group’s cash flow. On a statutory basis, net cash and cash equivalents increased in the year by £61m to £198m. The Group’s statutory cash position can fluctuate significantly from day to day due to the impact of changes in: collateral paid to banking partners, margin received from clients, early settlement of trades, or the unrealised mark-to-market profit or loss from client swaps. These movements result in an increase or decrease in cash with a receivables. Therefore, in addition to the statutory cash flow, the Group presents an adjusted net cash summary excluding these items, shown above. On this basis, adjusted net cash increased in the year by £64m to £179m. The overall net assets of the Group increased in the year by £81m to £223m. Tim Powell Chief Financial Officer 27 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Financial Review Continued PRIOR PERIOD RESTATEMENT BUYBACK After reviewing the IFRS 2 Share-Based Payment In January 2024 we announced a share buyback standard and related guidance from the IFRIC, programme of up to £20m; as at 18 March 2024 the Group has concluded that share ownership we had purchased 332,429 shares at a total cost schemes that grant employees shares or options in of £5.7m. DIVIDEND Following the strong full year results, the Board is pleased to declare a final dividend of 12.3p per share (2022 – 11.0p). Subject to shareholder approval, the final dividend will be payable to shareholders on the register at 5 April 2024, and will be paid on 10 May 2024. This represents a total dividend for the year of 16.0p per share (2022: 14.4p). Tim Powell Chief Financial Officer subsidiaries, with conversion rights to the holding company should be accounted for under IFRS 2 Share-Based Payment, rather than a non-controlling interest in a subsidiary. As a result of this, the previous years’ non-controlling interest recognised over the annual profits of the subsidiaries were overstated. In addition, a number of other amounts relating to these schemes have been restated in 2022, namely the share-based payment charge to the Consolidated Statement of Comprehensive Income, the share premium recognised on vesting, and other receivables relating to the purchase of the options. Accordingly, the Group has restated its financial statements in accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’. The correction of these entries in 2022 results in a slight decrease to profit after tax (£0.4m), an increase to profits attributed to shareholders of the parent (£2.7m), an increase to retained earnings (£4.6m), and an increase to basic earnings per share (5.3p). Full details of the restatement are shown in note 4 of the accounts on page 119. COBASE On 1 December 2023 the group acquired a c. 86% stake in Cobase – an innovative, cloud-based provider of bank connectivity technology that enables corporates to manage their banking relationships, accounts, and transaction activity via one single interface. The balance sheet has been incorporated into the Group’s 31 December financial position. The income statement impact in 2023 of one month of trading was: revenue of £0.2m, EBITDA £nil, and a loss before tax of £0.2m. 28 STRATEGIC REPORT KEY PERFORMANCE INDICATORS Key Performance Indicators The following KPIs are used to track the performance of the business against the Group’s strategy on page 18-20. REVENUE FXRM CLIENT NUMBERS3 The income from services and products provided to clients during the year. The number of clients that have generated revenues in excess of £10,000 over the previous 12 months. £110.4M 1,071 2023 2022 2021 2020 £77.5m £46.2m £110.4m £98.3m 2019 £35.4m 2018 £23.5m 2023 2022 2021 2020 2019 2018 1,071 1,047 881 754 648 482 UNDERLYING PROFIT BEFORE TAX 1 FXRM FRONT OFFICE HEADCOUNT Profit before interest, tax, exceptional items and share-based payments. The number of employees in Front Office employed by the Group as at 31 December of each year. £43.0M £43.0m £38.6m £33.4m 2023 2022 2021 2020 2019 2018 £17.5m £14.6m £10.0m 120 2023 2022 2021 2020 2019 2018 67 66 64 51 120 102 PROFIT BEFORE TAX £115.9M 2023 20222 £46.8m 2021 £33.2m 2020 £17.1m 2019 £13.5m 2018 £9.7m £115.9m ALTERNATIVE BANKING ACCOUNTS INVOICED The number of accounts opened by clients that were live at the period end. 6,467 2023 2022 2021 1,746 6,467 4,200 58.3p 1 Underlying excludes the impact of non-cash share-based payments, net treasury income on client balances, one-off listing-related and M&A costs and amortisation of purchased intangibles in 2023, and in the prior years, exceptional property-related costs. 2 Full details of the restatement are shown in Note 4 of the Consolidated Financial Statements. 3 The Group excludes Training Accounts (those that have generated less than £10,000 in revenue since being onboarded) in order to provide a clearer picture of client retention for the purpose of these figures. 29 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Our Businesses FX Risk Management WHO ARE WE HELPING? REVENUE FY2023 (£) Our FX Risk Management division focuses on supporting corporate and institutional clients that need to buy or sell currency for commercial purposes, typically for buying and selling goods and services overseas, or to fix the underlying value of an asset or liability. The clients that we support are regularly impacted by movements in exchange rates, and therefore exposed to material risk that can significantly impact their performance and profitability. We support them by providing strategies and technologies that enable them to £76.3M (2022: £69.5M) CLIENT NUMBERS 1,071 (2022: 1,047) mitigate risk by managing the impact of currency % GROUP REVENUE volatility more easily and effectively. Similar to a traditional currency broker, we then underpin these solutions with a variety of ways to buy and sell currency – from simple spot contracts through to more sophisticated hedging products. Despite our consultative approach, we charge no 69% upfront costs or retainer fees, instead monetising WHAT PROBLEM ARE WE SOLVING? our services through commissions on forward, option and spot contracts. To understand the distinctiveness of our model, one must first understand the following three STRATEGIC REPORT OUR BUSINESSES The latter of these is more complex, and where When considering the answers to the above, it’s clients naturally face the biggest challenge – and important to first understand what “bad” looks this is where Alpha focuses its proposition and like. Essentially this falls into one of the two camps differentiates itself the most. mentioned above: under-hedging (hedging too little, including nothing) or over-hedging (hedging too Some examples of the questions that decision- much). For organisations that are hedging cash-flow makers continuously need to consider when hedging forecasts, the implications of under or over-hedging include: how to approach fixing the rate and how not can be significant. For corporates, it can materially to approach it, when to fix the rate and when not to, impact their purchasing and pricing power, and for how much is too much, and how much is not enough. funds, it can impact their investment performance. In Only by answering these questions correctly can both cases, this results in reduced competitiveness they ultimately avoid the problem of under or over- and profits. Additionally, over-hedging can also lead hedging. to margin calls that result in cash outflows that can negatively affect the business. The aim is to ii. What ‘good’ risk management looks like ultimately get the balance right and ensure that To develop a well-balanced hedging solution, the profits aren’t unnecessarily eroded, commercial first step is to start with the business itself. We objectives aren’t unnecessarily obstructed, and the cannot, with any integrity, propose a solution to a day-to-day running of the business is not negatively client without understanding how their business impacted. Understandably, this is easier said than works. Thus, our primary focus is to obtain a deep done. Part of the difficulty in answering these understanding of an organisation’s operating questions and striking the right balance stems from model, any supply chain considerations, their target the fact that decision-makers are faced with a web of market, competitive landscape, profit margins, cash complexity and distraction from the FX market itself. constraints (cyclical or not), pain points that make the day-to-day operations harder to navigate, and, iii. Fear, Greed, & Sub-optimal Decision-making importantly, the core commercial short, medium, Whilst there is risk from unfavourable volatility, and long-term objectives of the key decision- there is also “opportunity” from favourable currency makers and owners. This understanding gives us swings. It is not uncommon therefore for businesses a base foundation from which a strategic hedging to be driven by a desire on the one hand to protect programme can then be built. their margins, and on the other, to increase their profitability. The combination of both introduces The annual global market opportunity for our considerations: i) the ongoing challenge that The next step is to determine how to protect the two quite strong emotional drivers into the decision- FXRM division is estimated to be worth over businesses with a recurring exposure to currency business against currency volatility itself. At this making equation – fear and greed – an age-old £200bn, meaning we have captured less than volatility are faced with, ii) what a well-balanced point we want to explore the following questions: human problem which negatively influences the 1%. Our main competitors are banks, who hold hedging solution looks like, and iii) the set of FX- i) how much to hedge, ii) which instrument to use, performance of a hedging strategy. When faced with an estimated market share of over 80% through related conditions that create a web of complexity, iii) when to hedge, and iv) how often to revisit these such unpredictability, the one thing that people will pre-existing relationships, with the remaining and often suboptimal decision making, for 20% held by non-bank foreign exchange businesses to navigate through. brokers. We service this marketplace through our Corporate and Institutional teams in the UK, i. The challenge our clients face questions. The possible solutions will consider the often seek the most is reassurance. Often however commercial risk posed to the business because they find this in the wrong places. Consequently, it’s of volatility itself (indicating what an organisation quite normal for decision makers to seek counsel needs to do to protect itself), the cash position from those “in the know” about which way the market Canada, the Netherlands, Italy, Australia, Spain Any organisation with ongoing exposure to currency and creditworthiness of the business (indicating is likely to move. This usually comes in the form of and Germany. We are sector agnostic and our volatility must continuously and appropriately what they can afford to do), and the risk appetite market commentaries or forecasts, and despite revenues are highly diversified across a variety of determine how to protect their business against the and commercial objectives of the decision-makers this approach producing suboptimal results when sectors, currencies and continents, with clients risk that currency volatility creates. This can range (indicating what they would like to do). measured over the medium to long-term, to this day in over 50 countries. from hedging firm commitments, through to hedging cashflow forecasts. it remains the default service offering by both banks and non-banks alike. 30 31 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023FX Risk Management Continued In our experience, most banks are passive and THE SHORT-TERM TRAP risk-averse, sending generic in-house forecasts and analysis en-masse to their customer base, usually via email. Our non-bank competitors on the other hand typically actively engage in providing businesses with personal predictions and opinions, as well as producing generic commentary and in-house forecasts. Adding to the complexity is the plethora of financial instruments available to businesses, which can also be placed into one of two camps: (i) genuine risk management products with a commercial purpose, and (ii) speculative products that are akin to gambling. Regarding the speculative products, these instruments serve no logical purpose in a genuine risk management strategy and tend to offer immediate short-term benefits by providing a more favourable exchange rate today, at the expense of committing the client to a potentially more undesirable exchange rate in the future – hence the gamble. Despite the odds being firmly against the client, these instruments remain highly alluring to many. The final challenge relates to the ongoing conflict of interest created by the traditional commission model within non-banks. Notably, the immediate short-term earning potential for the individuals involved in the sale and dealing of FX, often stands to compromise the integrity of their hedging advice in terms of timing, quantum, and product. Collectively, the problems outlined above serve to fuel fear and greed tendencies, and subsequently suboptimal decision-making, at a time when a balanced and strategic approach to managing currency is often needed the most. We refer to this as the Short- term Trap. The obvious question to ask is, if the Short- term Trap leads to such suboptimal outcomes, why then does it persist? Ultimately, the answer to this lies in the fact that international businesses will always be faced with a recurring decision to buy or sell currency (this will never go away), and as long as that decision remains intrinsically linked to a live moving variable (FX rates), it will continue to create the conditions for success or failure. Furthermore, in an industry where FX providers and the global media continue to indulge and promote FX market forecasts and commentary, a convention is established that lures businesses into believing there is genuine value and credibility in relying on them. If this approach is fundamentally flawed, why don’t more providers choose to challenge the short-term cycle? The answer to this is simple – people are human with emotional drivers that are unfortunately easy to sell to, and the commercial opportunity to monetise this with short-term market opinions and/or speculative products, is inherently easier and lucrative in the short-term. The conditions that our clients face can therefore be HOW WE DIFFERENTIATE – “THE ALPHA WAY” summarised as follows: significant sums of risk linked to a recurring business decision, overseen by human beings who are prone to making imperfect decisions, linked to a variable that is hard to predict and can both boost or cripple performance, with instruments that vary wildly and can be difficult to understand, and influenced by advice that often has a short-term focus and can be self-serving in nature. If it sounds like a lot, it’s because it is! If the traditional way of doing things is easier, why have we chosen a more difficult path? Ultimately this comes down to three things – integrity, purpose, and sustainability. In terms of integrity – we know the short-term model is not in the long-term interest of our clients. In terms of purpose – we are genuinely passionate about solving the problem of currency risk for our clients; in an industry fixated on the direction of FX markets and being part of the fanfare that surrounds them, we are proud to be different and have a clear vision to become the global leader in FX risk management. And in terms of sustainability – we STRATEGIC REPORT OUR BUSINESSES believe it is easier to keep the clients you have, Keeping it simple by providing sound risk management advice that In terms of the hedging products we recommend delivers consistent results over the long-term. to our clients, we know that, used in the right way, simple products are, in the vast majority of cases, Ultimately, by avoiding the path of least resistance, far more effective than complex or speculative we set out to remain a business that is long-term, ones at managing currency risk. To support this high-growth, and a global leader in its space. ethos, we incentivise our people by deliberately However, by leaning into a more difficult path paying significantly lower rates of remuneration our challenge becomes, how can we navigate on more complex products, whilst celebrating and it successfully? This comes down to three core over-rewarding scenarios where we successfully components: our Business Philosophy, our talk clients down from more complex ones, to using Performance Culture, and our Remuneration System. simple ones. Our philosophy has always been to PILLAR 1. OUR BUSINESS PHILOSOPHY avoid the path of least resistance and challenge clients on what they need versus what they want. Over the past fourteen years we have made it our Effective strategy requires a deep understanding mission to distinguish ourselves away from the short- of how a client’s organisation works, in order to term, FX-focused, and sales-led services that have diagnose their challenges and build an appropriate always been abundant in the market. We have sought solution. This cannot be achieved by talking to a to challenge preconceived ideas of what “good” looks client about their generic “FX requirements” only like by prioritising the commercial development and to put forward a pre-conceived FX solution. This is acumen of our people, and engaging in conversations just a sales conversation. What is needed instead that seek to genuinely understand our clients’ is a business conversation – one that evaluates businesses and what they truly need, rather than the client’s business dynamics, competitive what they might want, or have become accustomed environment, and commercial objectives, to. in order that we can then tailor appropriate risk management principles to their unique Risk management led circumstances. Only by adopting this approach can Our approach to managing currency volatility is risk a well-balanced hedging strategy be achieved. management-led, not FX market-led. We know that nobody can reliably predict the currency market, and to pretend otherwise would compromise our clients’ commercial objectives. Our belief is that any SUMMARY conversations around currency markets and “when” Our business philosophy intrinsically takes us down to buy should only take place after a clearly defined risk management strategy is in place. It is for this reason that we don’t consider ourselves, nor position ourselves, as FX market experts, and therefore, unlike our peers, since inception we have never published FX market commentary, analysis or forecasts. In fact, we don’t believe the notion of an FX market expert even exists or carries any legitimacy at all. A risk management culture, like Alpha’s, versus one that indulges market commentary and forecasts, are mutually exclusive and deliver distinctly different outcomes. a more challenging path, but we believe this leads to more meaningful and sustainable results. By forging long-term relationships with our clients based on value, credibility, and trust, the rewards that follow (which are proven to compound over time) create strong earning potential for our people, and strong sustainable value for our investors. Everyone wins. 32 33 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023FX Risk Management Continued PILLAR 2. OUR PERFORMANCE CULTURE sub-component of our performance culture, which is Our second core component is our performance culture. We are relentlessly committed to cultivating a team-oriented performance environment that runs through the entire organisation. We believe highly effective, team-led systems drive higher levels of performance, versus a cluster of highly talented individuals working independently and focused on self-interest. But team-led systems need organising, they need direction, and they need purpose: our performance culture is our second core component and acts as a central pillar in helping us achieve this. It has several sub-components, the first of which is development. Everyone’s getting better In many organisations, development is something which is reserved for more junior people, and the more senior you become the less you are expected to develop. We do not subscribe to this notion, and instead our focus on development is both top-down and bottom-up, from our most entry-level people, to our most senior. By creating an environment where ensuring this journey remains enjoyable for everyone. Yes, we want to get better, and yes we want to operate at an elite level, but we also want this to be fun – not least because we believe enjoyment is an integral ingredient to performing at a higher level. Ultimately our people are our most treasured asset, and we demand a lot from them. For our people-led model to remain sustainable it’s imperative we invest in them appropriately. SUMMARY In any high-performing sports team, what separates those who finish first, from those who don’t, is their intent. Individually and collectively, they train that extra bit harder, they create a culture where 1% improvements are both valued and sought out, they empower and elevate one another, and they constantly look to invest in areas that will make the boat go that little bit faster. We subscribe to the everyone is getting better, seeking out their next level belief that business is no different. It’s one of the of performance, and addressing inconvenient facts main reasons we have established an exciting and or uncovering uncomfortable truths, we continuously long-standing relationship with a world-renowned performance coach, Dr Ceri Evans, who, in addition to Alpha, works with some of the world’s most respected and successful sports teams. elevate our collective potential. A winning mindset Across all divisions and departments, we want to be considered exceptional at what we do and pursue excellence in every field. Throughout the organisation we emphasise that, whoever you are and whatever role you play, we all have an obligation STRATEGIC REPORT OUR BUSINESSES and a clear cultural direction. We then reinforce our Ultimately, we want our people to prioritise client approach with very deliberate and well-designed retention and acting in the long-term interests of remuneration structures. their clients, rather than be influenced by the need to hit a short-term recurring revenue target. Despite our strong track record of growth, since inception, our Front Office employees have never We also use remuneration to both incentivise and had a recurring revenue target for existing clients – disincentivise our people relative to the complexity not at the individual client level or across their wider of the products they sell (i.e. the more complex portfolio. We believe this is not only unique in our the product, the lower the remuneration). We industry, but also in sales environments. Instead, believe in most instances the simplest solution or we opt solely for monthly new business targets that product should always be prioritised, which often are deliberately modest and static. We believe this means less revenue today, but more over time. In approach is critical in driving the right behaviour an industry where the sale of complex products is at the outset of a new client relationship and in often overly rewarded, and the people that sell them delivering consistent positive client outcomes over are pedestalled as experts, this is a key cultural the long-term, which then leads to high levels of difference. retention and allows us to organically increase our wallet share over time. DIFFERENTIATION AT A GLANCE THE TRADITIONAL WAY THE ALPHA WAY FX Market “Experts” Risk Management Experts Sales & FX market conversations Business & risk management conversations Publish market predictions & commentary Avoid the noise and distraction of the markets Recurring revenue targets No recurring revenue targets since inception PILLAR 3. OUR REMUNERATION SYSTEM Promote complex products Promote simple products to achieve and uphold a reputation of excellence. Our Our remuneration system is the third component of people knowingly sign up to this when they join, it is our model and is designed to both complement our one of our most important guiding principles and, business philosophy and regulate our performance unsurprisingly, it is not for everyone. culture. Enjoying the journey As a fast-growing business with growth expectations Performance environments can be mentally and from investors, one could envisage a conflict physically taxing, and we don’t want our people to between our long-term principles and results- become slaves to performance or burn out. Thus, oriented environment. We however feel the two are we place a huge amount of importance on the third aligned and show this through strong leadership Sell clients what they want Sell clients what they need High volumes of low-value clients Low volumes of high-value clients Legacy technology, built for the mass market Cutting-edge technology, purpose-built for currency risk management 34 35 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Our Businesses Alternative Banking WHO ARE WE HELPING? REVENUE FY2023 (£) Our global accounts solution has been purpose- built for alternative investment managers and the corporate service providers and fund administrators that support them (“Service Providers”). These clients require local accounts in key investment jurisdictions for their investment vehicles, typically for the purpose of asset sales, purchases, or distributions. Fund types typically include: private equity, private debt, venture capital, real estate, infrastructure and fund of funds. As our reputation and capabilities have grown, we are seeing increasing levels of interest from service providers who wish to partner with us. These organisations are responsible for managing a number of back office activities on behalf of funds and their underlying investment entities, including: opening and managing accounts, sending payments, and FX execution. Such service providers can range significantly in size, with our existing partners estimated to be managing anywhere between 2,000 and 30,000 investment £33.9M (2022: £28.8M) LIVE ACCOUNTS 6,467 (2022: 4,200) % GROUP REVENUE 31% THE PROBLEM entities each. Each of these investment entities will Whether you are an investment manager or one of typically require their own local account, therefore their service providers, opening and managing bank representing a significant undertaking for these accounts in key investment jurisdictions is often a service providers. time-consuming, resource-intensive, and unreliable Data company Preqin tracks 180,000+ alternative process. fund profiles globally, and we estimate that Whilst this can be a significant headache for individual each fund will have, on average, ten assets, each investment managers, these problems are amplified requiring accounts. Based on these calculations we considerably for the service providers tasked with are barely scratching the surface of the market. Our managing many thousands of accounts on their behalf, competition is almost exclusively banks. day-in, day-out. For these service providers, the sheer number of interactions across all their bank accounts Our clients operate globally, with their funds for workstreams such as onboarding KYC, payments, domiciled in key investment jurisdictions, in FX, and reporting, is staggering. Furthermore, if the particular Europe, Singapore (Asia) and the USA quality of these interactions is poor or inefficient, (Americas). Our existing regulatory scope means it leads to significant pain and cost for the service we can currently service each fund’s European provider. We are on a mission to bring down the business, with an application in Singapore number of these interactions, whilst simultaneously underway to expand our global reach. raising their quality. STRATEGIC REPORT OUR BUSINESSES To understand the scale of this problem and why it exists, it is helpful to explain the availability of options in the marketplace today. Traditional banks have generalised, low-touch offerings built on legacy systems that are designed to handle standard corporate and retail clients at scale. They are not however built to handle the specialised and often complex nature of alternative investment structures. This (as will be outlined later) requires a high-tech, high-quality service, underpinned by specialised teams, processes and technologies. As a result, for traditional providers, servicing these entities to a high standard and efficiently is simply not viable over the long term. For most clients, the result is an unreliable and time- intensive banking experience. Opening accounts can take months, as clients manually navigate a back and forth of onerous KYC and compliance processes, often with customer representatives who do not specialise in their industry. Furthermore, if an account is granted, there is often considerable uncertainty over whether it will remain open, with many of our clients reporting that banks have closed their accounts at short notice. In our experience, this is because the ongoing KYC and compliance obligations outweigh the revenue the bank is able to generate on the account. Often this also “Our approach is underpinned by three service principles: speed, responsiveness and reliability, and everything we do is considered through these lenses.” Ultimately, our own success in this space was only possible because of the maturity of our core business, and ability to become a specialist “start-up” through our decentralisation strategy. Our clients now benefit from dedicated people, processes and technologies, alongside the capabilities of an established PLC business, a strong Group balance sheet, and a track record they can trust. It’s a rare combination and one that provides us with a significant competitive advantage. means that clients will only be granted accounts on WHAT WE DO the basis that they agree to take on ancillary services, despite these services not always being commercially preferable. The difficulty traditional providers face when servicing this marketplace naturally invites the question, “Why have no new providers entered this space?” The reality is, to do this successfully, you need three key things: segment focus and expertise, dedicated processes and systems, and importantly, a balance sheet and track record that can be trusted. As a publicly listed company with a strong balance sheet and a track record of processing tens of billions in transactions, even Alpha still comes under significant amounts of due diligence and scrutiny before service providers and investment managers open an account with us. Any fintech seeking to service this calibre of client however would rarely have the expertise, track record, balance sheet, or blue-chip local banking relationships, needed to get a robust solution up and running. At Alpha, we have built a leading accounts solutions dedicated to the alternative investment industry – a bank alternative, built for Alternatives. Our clients benefit from people, processes and technology that have been purpose-built for their industry, and this makes a significant difference to both the efficiency and service levels they receive – whether they are an investment manager managing multiple accounts, or a service provider managing thousands. Working with Alpha, clients can be confident they will be able to have an account when they need it, where they need it and without any of the traditional hassle, uncertainty or ancillary obligations typically associated with opening and maintaining these accounts. Furthermore, once accounts are open, we provide an intuitive online platform for managing all accounts within one place, enabling clients to gain a top-level view of accounts across their entire structure, as well as segregated views across individual SPVs – providing even more improvements in efficiency and visibility. 36 37 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023STRATEGIC REPORT OUR BUSINESSES Alternative Banking Solutions Continued Ultimately our aim is for every interaction with clients MONETISATION to be as efficient and streamlined as possible, whilst also remaining highly controlled and compliant. Our approach is underpinned by three service principles: speed, responsiveness and reliability, and everything we do is considered through these lenses. Once again, whilst this makes a big difference to investment managers, for service providers that are managing thousands of accounts for hundreds of different investment managers, the benefits of these efficiencies are compounded significantly, and make a sizeable difference to their day-to-day operations, and thus, the quality and profitability of their own service offerings. We typically generate revenues through annually recurring subscription fees against each account that is opened. A number of these accounts will often then go on to process payments and FX transactions at key stages throughout their lifecycle, which provide additional revenue opportunities. Importantly, providing clients with an account also gives us the opportunity to build enduring relationships with the investment managers. This means that even when the existing assets or funds come to the end of their lifecycles (typically 5-7 years), we will have the opportunity to work with the investment manager on their other investments and funds in the future. DIFFERENTIATION AT A GLANCE THE TRADITIONAL WAY THE ALPHA WAY One-size-fits-all approach, servicing mass volumes People, processes and technology dedicated to the of corporate and retail clients. alternative investment industry Low-touch reactive service delivered by generalist High-quality proactive service delivered by teams specialist teams Generic compliance processes and manual, Bespoke compliance processes and streamlined, resource-intensive onboarding digitalised onboarding Slow and unreliable account opening times Fast and reliable account opening times Inability to access local accounts in key investment Local accounts available across key investment jurisdictions jurisdictions Ancillary revenue obligations and minimum spends Fixed and transparent annual fee, with no ancillary required to keep accounts opened obligations or minimum spends Accounts managed via multiple banks, platforms All accounts managed through a single platform, and logins built for managing multiple investment entities Legacy technology, built for the mass market Cutting-edge technology, purpose-built for alternative investments 38 39 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Our Businesses Fund Finance1 WHO WE WORK WITH REVENUE MAY 2023 - DEC 2023 Phase 1 – Digital Screening BENEFITS TO LENDERS STRATEGIC REPORT OUR BUSINESSES Our fund finance offering is focused on providing investment managers with a more efficient and cost-effective way of obtaining borrowing facilities for their funds. Such facilities typically consist of short-term revolving credit facilities (Capital Call, NAV Facilities, GP Facilities) designed to optimise liquidity and returns throughout key stages in the fund’s lifecycle. Preqin reports that there are circa 50,000 fund managers globally and conservatively, we believe that there are c. 20,000 of these that have between 1-2 borrowing requirements per year. These clients are primarily split out across North America, Europe, and Asia, with the remaining distributed across the rest of the world. As a result of Alpha’s existing client base, our focus has initially been on European funds and their managers, however, our ability to sell further £700k+ MANDATES COMPLETED 28 HEADCOUNT 5 afield is not restricted, and we are already seeing Unsurprisingly therefore, our research has shown interest outside of Europe. THE PROBLEM that (depending on complexity) arranging a facility can typically take anywhere between 3-9 months when screening across a pool of lenders. With over 200 lenders in the marketplace, each with their own lending appetite, accessing fund WHAT WE DO finance has traditionally been a time-consuming and At Alpha, we’re disrupting the traditional fund resource-intensive process for investment managers. finance intermediary model. By combining a highly Furthermore, even once the right lender has been experienced fund finance team with smart systems, identified, the process of structuring a loan, agreeing processes and technologies, we are making it easier and underwriting terms, engaging legal teams, and than ever before to secure the right facility on the onboarding, creates large and complex manual right terms. Our offering has been built in a modular workstreams. This would be the case if a borrower manner, broken down across two key phases, in was only engaging with one lender; however, if a order to provide our clients with the flexibility to borrower wants to validate the competitiveness pick and choose the services that best meet their of the terms they receive, they will typically need requirements. to engage with multiple. Given the sheer size and ever-changing nature of the market, screening even just a handful of lenders (let alone 250) is either, internally very time-intensive, or requires expensive outsourcing to traditional debt advisers. 1 Fund finance was established within our Alternative Banking division, and therefore headcount and revenue contributions are currently recognised within Alternative Banking. Our team begin by working in consultation with clients to help them identify the right borrowing facilities for them and create a borrowing profile. With this profile in place, we will screen their requirements across a large universe of lenders using our digital fund finance platform. Our fund finance platform is the first of its kind in the marketplace and uses digital automation and our proprietary lender database to take a process As well as offering significant benefits to borrowers, lenders also stand to benefit considerably from featuring on Alpha’s fund finance platform, as it provides them with fast access to a large and growing pool of pre-qualified borrowers that match their specific requirements, as well as streamlined administration of their loans. that would traditionally take months (or not be A STRONG FIRST-MOVER ADVANTAGE carried out at all) and condense it down to a matter of minutes. At the same time, by screening the borrower’s requirements across the whole of the market, clients gain unprecedented levels of market validation, and can therefore be more confident than ever before in the competitiveness of the terms they receive. After using our screening tool, borrowers will receive a custom-built report of relevant lenders. From here, we offer a matching service, where we will secure heads of terms for a facility from one or more lenders. Phase 2 – Structuring & Execution The second phase of our offering is focused on using the fund finance team’s knowledge and expertise to negotiate, structure and execute the client’s facility on their behalf. Here our focus is on ensuring the process is as efficient as possible for the borrowers and that they can feel confident they are receiving the right facility on the right terms. MONETISATION There are two main ways we generate revenues from our fund finance offering. For phase 1 of our offering, we charge a platform screening fee, and for phase 2, we charge advisory fees, which vary depending on the depth of support the client would like us to provide. For a platform solution to be worthwhile for borrowers and lenders, there needs to be speed and scale on both sides of the equation: borrowers want to know they can instantly screen across a large pool of lenders, whilst lenders want to know they are going to have easy access to a sizeable pool of borrowers. In our experience, however, traditional providers are not set up to deliver this. Whilst they offer high levels of expertise, their offerings rely solely on human delivery. As a result, the speed and scale of their operations are heavily limited, with most fund finance intermediaries consisting of a cadre of advisers, working with a small number of borrowers each year. This is where Alpha differs. In terms of scale – through the success of our FX Risk Management and Alternative Banking divisions, we have been able to enter this market with an existing client base of over 1,300 investment managers, all of whom are potential borrowers. And in terms of speed – we are able to use the Group’s strong capital position and capabilities in technology to build a digital offering that can process a workstream that would have taken months, in a matter of minutes. As a result, we believe we have a strong and sizeable first-mover advantage in this market and an opportunity to drive meaningful improvements within the industry. 40 41 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Our Businesses Cobase INTRODUCTION REVENUE FY2023 (€) STRATEGIC RATIONALE Joining Alpha Group in December 2023, Cobase is an innovative, cloud-based provider of bank connectivity technology that enables corporates to manage their banking relationships, accounts, and transaction activity via one single interface. In doing so, the company unlocks significant operational and financial efficiencies, especially for international businesses, with multiple banking relationships across the world. Without Cobase, companies have to manage multiple €2m1 MANDATES COMPLETED ~ 130 platforms and integrations across an array of banks, HEADCOUNT significantly reducing the efficiency and visibility with which they can manage their payments, cash management and treasury functions. The more banks and accounts a company has, the more challenging this becomes. 21 Companies can utilise Cobase’s solution either This makes Cobase a flexible and accessible option directly through its platform or via its off-the- for corporates that would benefit from many of shelf ERP connections, with widely used solutions the features of a TMS, but have been put off by the providers such as Oracle, Netsuite, Microsoft time, costs and expertise traditionally required to Dynamics and SAP S4/HANA. The ease and simplicity implement and maintain one. with which this connectivity can be offered is a key differentiator in a marketplace where it is typically The company was founded in 2017 by Jorge only achieved through enterprise-grade Treasury Schafraad, and is made up of 21 people Management Systems (“TMSs”). Such systems headquartered in Amsterdam, The Netherlands. The require expensive and resource-intensive manual platform has already benefitted from significant integrations with separate banking and payment investment prior to Alpha’s acquisition, and a providers, as well as separate memberships with visionary management team, creating an innovative networks such as SWIFT. As a result, research of multibank platform that has over 500 bank Alpha’s existing client base shows that less than 10% connections across more than 80 countries. are using a traditional TMS. Cobase enables companies to leapfrog the subscription fees, generating recurring revenues aforementioned barriers through its unique approach of circa €2m per annum. The company has a client of being a software business, whilst also holding its base of circa 130 corporate groups across the world, own regulatory statuses and SWIFT membership. reflecting 67% growth in the last 12 months (2022: 78). Cobase current revenue is solely from SaaS Alongside its bank connectivity, key features include a Central Payments Hub as well as a Cash Management and Treasury Management module. 1 Only revenue generated after Cobase’s acquisition in December is included in the Group’s figures, which was £0.2m STRATEGIC REPORT OUR BUSINESSES providing a more holistic treasury service around our core FX risk management proposition. This will, in turn, enable Alpha to provide more value to existing clients and increase wallet share and retention. Additionally, it will naturally allow Alpha to attract new clients for whom bank connectivity is an initial purchasing driver, as is evidenced by the 100 corporates who are already using Cobase. At the same time, we see an exciting opportunity for the Cobase team to leverage the scale and experience of Alpha’s global sales team, as well as the cross-selling opportunities with Alpha’s own client base. Alpha and Cobase’s offerings are highly complementary, and provide exciting opportunities to amplify one another’s growth by leveraging and sharing each other’s unique capabilities and experience. Indeed, 80% of Cobase’s existing client base falls within Alpha’s own target market, highlighting the strong potential for mutual value adds. Cobase has retained its team and continues to operate under its own brand and management whilst its proprietary technology will help to accelerate Alpha’s digital proposition and enable us to become increasingly more integrated with our clients by Portal Mobile App Host2Host API Payments FX Robo Assistant Reporting Netting Alerts Cash Pooling In-House Banking User Admin Audit Trail Forecasting TX Screening Bank Integration via SWIFT, H2H, EBICS, API,... Bank A Bank B Bank C Bank ... Clients can either utilise Cobase through the company’s own portal or mobile app, or from within their own ERP system by sending instructions via host2host or API connectivity. 42 43 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Principal Risks & Uncertainties Tim Butters, Chief Risk Officer Against a backdrop of rising inflation and interest rates, we have continued to grow, maintaining a disciplined approach to credit and risk, whilst further enhancing our control environment. We remain well capitalised, with increasing levels of liquidity, driven by operating profit and net treasury income, whilst having managed our risk appetite in key risk areas, to continue delivering consistent returns. OUR APPROACH TO RISK MANAGEMENT SECOND LINE OF DEFENCE In 2023 we hired an experienced cyber security professional as Alpha’s first Chief Information Security Officer, and built out a dedicated application security function, further demonstrating our commitment to cyber and data security, one of our major risks. We continue to focus on key risk matters, ensuring proportionate yet robust controls, and have increased the size of the internal audit team to provide further independent assurance. Familiar readers may notice the addition of one new risk this year, Financial Crime. Whilst in previous years we have covered several financial crime controls under regulatory risk, we have made considerable investment in further enhancing our financial crime team, systems, and controls in recent years, so we feel it warrants its own entry. We continue to adopt a ‘three lines of defence’ model to manage our principal business risks, in line with enterprise risk management best practices. FIRST LINE OF DEFENCE Primary responsibility for managing risk through the design and implementation of appropriate controls. This sits with operational management who own and manage their risks. Comprised of the Risk, Second-line Compliance, Cyber Security, and Legal teams, who are responsible for building and embedding the risk framework. At Alpha, the second line works closely with the first line to challenge, but also to advise on and monitor our controls. The second line ensures that levels of risk against risk appetite are reported to the Board and escalated when exceeded. THIRD LINE OF DEFENCE Internal Audit, along with other third-party reviewers, provide independent assurance to the Board on the effectiveness of the risk management framework and the operation of the first and second lines of defence. Alpha has independent external audits across (i) Compliance & AML (including safeguarding) (ii) Information Security, (iii) Finance (including Settlements), and (iv) Technology. The Risk Committee, together with the Audit Committee, decides quarterly whether any additional external audits should be scoped. Where appropriate, insurance policies are used to further reduce the impact of risks manifesting as losses. STRATEGIC REPORT PRINCIPAL RISKS & UNCERTAINTIES RISK APPETITE 3 RISK PROFILE 2 4 GROUP STRATEGY 1 RISK REPORTING AND MONITORING 8 CONTROLS TESTING 7 6 IDENTIFICATION AND ASSESSMENT ENTERPRISE RISK FRAMEWORK 5 RISK CULTURE AND GOVERNANCE RISK POLICIES ENTERPRISE RISK MANAGEMENT FRAMEWORK − Creating a clear framework of accountability and Our Enterprise Risk Management (“ERM”) framework provides assurance to the Board on the sound management of existing and emerging risks and the effectiveness of our internal controls. 1. GROUP STRATEGY Risk is a core consideration when setting strategy and business plans. Risks that can impact the responsibility that is transparent and allows for better decision-making; − Recognising that our two divisions face different and common risks, and will therefore set policies, procedures, and the necessary reporting mechanics to ensure and validate that risks are understood, monitored, managed, and controlled; delivery of the strategy are proactively identified to − Recruiting, retaining, and developing our people ensure we can manage them accordingly. to embed a culture that reflects the risk appetite. 2. RISK APPETITE Set by the Board, the risk appetite defines how much risk we are willing to take in pursuit of our strategic objectives. Our risk appetite ensures the ongoing monitoring and management of prudent The appetite statements provide clarity on the scale and type of activities we wish to undertake, and the Board has set a two-tiered limit approach to the quantitative metrics (KRIs) through amber and red thresholds. The amber thresholds allow for early levels of operational, compliance, financial, strategic, identification of risks that are regularly occurring, and information risk, whilst enhancing shareholder value. Our risk appetite is established by qualitative risk appetite statements and measured through quantitative key risk indicators (“KRI”) metrics. To stay within our appetite, we always observe a compliant legal and regulatory regime whilst applying best practices, including: picking up velocity or approaching appetite limits. The red thresholds are set to appetite; a level of risk more than the red limit is seen as ‘out of appetite’ and reportable to the Board. 44 45 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Principal Risks & Uncertainties Continued 3. RISK PROFILE This is the current measure of the level of risk the business is exposed to. Key risk indicators and risk limits determine the Group’s risk profile and indicate whether we are operating within appetite. We continue to invest in risk infrastructure to provide better insight into our risk profile. 4. RISK CULTURE AND GOVERNANCE The group prides itself on its strong and embedded risk culture. The executive team are full-standing members and regular attendees of the monthly Risk Committee. Oversight of the risk management framework is governed by the Risk Committee under delegated authority from the Board. 5. RISK POLICIES Policies are used to clearly define the approach to risk management across the group and to assign accountability. 6. IDENTIFICATION AND ASSESSMENT – PRINCIPAL RISKS To be managed, risks need to be identified and understood. Alpha utilises several approaches to do so, from risk assessments and workshops to ensuring risk has a ‘seat at the table’ in operational and strategic decisions. In total, we have over 100 risks in our risk register which we monitor closely, with a focus on our Principal Risks (see page 47). 7. CONTROLS TESTING We continuously work towards strengthening our control framework, with key controls frequently tested to assess their design and operational effectiveness. This gives us a more proactive approach to risk management, with the results of the assessments reported to the Risk Committee ensuring clear accountability for the firm’s key controls. Tim Butters Chief Risk Officer This is complemented by ad-hoc ‘deep-dives’ where, in response to internal or external developments, specific areas of the business may be targeted for a more in-depth review. In addition to internal controls testing, Alpha undergoes several internal and external audits per annum whereby our controls are independently reviewed. Any findings are tracked by the Internal Audit function through to closure via the Group Risk Committee. 8. RISK REPORTING AND MONITORING Reporting provides oversight of the firm’s risk profile against appetite and identifies new risks or increasing exposures that may become out of appetite. We continue to enhance our risk reporting, ensuring key risks are presented in a way that enables decisions to be made. Daily scenario testing ensures appropriate management of liquidity and credit risk. STRATEGIC REPORT PRINCIPAL RISKS & UNCERTAINTIES Principal Risks FY2023 We assess, manage, and mitigate risks in order to deliver on our purpose and strategy. The risks below have been grouped as per Alpha’s risk taxonomy. Operational and Compliance Risk Risk Type: Regulatory Risk The Group faces the risk of failing to adhere to its regulatory and legal requirements. Failure could see the Group exposed to significant regulatory penalties and reputational damage, as well as counterparties terminating our relationship. Additionally, any new regulation or changes to existing regulations may require the Group to increase its spending on regulatory compliance and/or change business practices. RISK MITIGATIONS AND UPDATE MOVEMENT − We maintain robust policies, procedures, systems and controls, UNCHANGED monitoring, and assurance programs. These ensure continued compliance with our regulatory obligations. − We have strong relationships with best-in-class regulatory compliance consultancies which we utilise to provide independent advice and assurance on our compliance processes. − Independent external audits are conducted on our AML and safeguarding processes and controls. − We have integrated with several Reg-tech providers to ensure we have the best and most innovative tools at our disposal. − The Compliance team continues to appropriately increase its headcount to accommodate regulatory and business needs, including hiring resources to ensure local expertise and compliance in newly licensed jurisdictions. − The governance of compliance risk via Risk Committee forums reflects the prioritisation of compliance within Alpha’s long-term objectives and goals. − Our dedicated quality assurance and compliance monitoring functions have been enhanced further this year, showing our commitment to high levels of oversight and accountability. 46 47 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Principal Risks Operational and Compliance Risk Risk Type: Financial Crime Risk Risk Type: Operational Risk The Group faces the risk of being used as a conduit to commit financial crime, involving fraud or dishonesty; The Group is subject to the risk of loss resulting from inadequate or failed internal processes, people, systems, misconduct in, or misuse of information; or handling the proceeds of crime. or external events. This can include incorrect inputting or execution of a trade or settlement, internal fraud, and financial reporting delays or errors. RISK MITIGATIONS AND UPDATE MOVEMENT RISK MITIGATIONS AND UPDATE MOVEMENT − We have partnered with two industry-leading providers to implement NEW − We continue to invest in, and focus on, retaining a scalable operating DECREASED STRATEGIC REPORT PRINCIPAL RISKS & UNCERTAINTIES new transaction monitoring and screening systems, which has enabled us to enhance our oversight of client trading activity and payments. The oversight has allowed us to make more informed changes to the financial crime framework of the business. − The Compliance team continues to appropriately increase its headcount to manage financial crime risk in line with transaction flows. Notable hires include two Deputy Money Laundering Reporting Officers and an additional Senior Sanctions specialist. − We are implementing a new KYC application with system-based controls and validation at its core. The tool will allow for an increase in the quality of data reporting to help to highlight any emerging financial crime risks. − We have conducted annual reviews of our Financial Crime Risk Assessment, and internal policies and procedures to ensure these are up-to-date and appropriate to counter the financial crime threats posed to Alpha. − An annual independent external audit is conducted on our AML procedures across the Group. − We have invested in companywide sanctions training and are growing our sanctions expertise internally. − A standalone Financial Crime working group has been established to deep dive into financial crime risk. − As stated above, our dedicated quality assurance and compliance monitoring functions have been enhanced further this year. model, with a particular ongoing focus on automation and straight- through processing. REASON FOR MOVEMENT: − We promote a positive speak-up culture, so risk events are proactively Process optimisation including an increase of straight-through processing. identified and escalated. − The Risk team oversees the operational risk framework, working closely with risk champions in each first-line team to ensure risks and risk events are proactively identified and reported. − Firmwide risk and control self-assessments are conducted in each department at least twice a year to identify risks and controls at an inherent and residual level. − We have a clear control framework in place, with key controls regularly tested for effectiveness by the risk team. − We maintain a strict division between Front and Back Office functions to ensure Back Office remains independent and attentive to any errors that the Front Office may have caused. We have further strengthened our lines of defence model this year. − Further enhancement of our operational resiliency framework, with further BCP and incident response testing. 48 49 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Principal Risks Operational and Compliance Risk Risk Type: Dispute Risk Risk Type: Technology Risk Whilst a client may not default on a contract, they may dispute its validity. With the challenging macro backdrop, Technology underpins most businesses and Alpha is no different. We rely on the uptime and availability of in-house there is a risk clients may try to renege on trades that have gone against them. and third-party systems. A failure in this technology could disrupt both our own and our clients’ businesses. RISK MITIGATIONS AND UPDATE MOVEMENT RISK MITIGATIONS AND UPDATE MOVEMENT − Our thematic deep dive on dispute risk is frequently re-visited and UNCHANGED − We are cloud-first, giving us the ability to host our services with DECREASED STRATEGIC REPORT PRINCIPAL RISKS & UNCERTAINTIES reviewed. − All trades have evidence recorded against them of the trade instruction. − All derivative trades are reviewed by the compliance team, ensuring trades are booked in line with regulation and policy. − All credit facilities are reviewed by the credit team, ensuring credit agreements are executed correctly. − Our Compliance Monitoring team samples a percentage of all trades to ensure all documents are correct and present and evidence is attached to trades. − Controls regarding the disclosure of complex derivative products to our clients are in place, including compulsory monthly valuation reports sent to all authorised signatories, and trade confirmations sent to the director(s) in addition to authorised contacts. − We have reduced our offering of more complex products. − The Risk team control tests the above processes to ensure they are operating effectively. resilience built in, and scale our platform according to our clients’ demands and needs. REASON FOR MOVEMENT: − The vendors we partner with are tier 1 providers, allowing Alpha to We continue to remove take advantage of out-of-the-box, turn-key security solutions and legacy technology through migrating our services to cloud-based solutions. industry-leading service level availability. − Working with leading cloud providers such as Amazon and Azure gives us the ability to utilise evolving technologies with minimal effort. − We understand that our clients expect that their data is handled with care and utmost confidentiality. Alpha’s alternative banking and all central supporting services are certified to internationally recognised security certification, namely ISO27001. − Alpha continues to invest in world-leading security technologies, adopting a defence-in-depth approach to provide both protection and the ability to react to cyber incidents. 50 51 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Principal Risks Financial Risk Risk Type: Credit Risk Credit risk is inherent in Alpha’s business model. The Board accepts that credit losses are a function of our trading, and we take a risk-based approach to balance revenue opportunities against the risk of default. We are 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, minus any deposit held at the time of cancellation. STRATEGIC REPORT PRINCIPAL RISKS & UNCERTAINTIES Risk Type: Liquidity Risk Alpha operates a matched principal brokerage model, meaning that it immediately executes a matching trade with its banking counterparties on receipt of client orders. Liquidity risk arises if Alpha is unable to meet its financial obligations when they fall due. This could result from an overextension of credit facilities, or a large move in a currency pair that Alpha has a large exposure to. If Alpha was unable or restricted to meet its trading capital requirements, this could result in its banking counterparties closing out positions or even terminating the trading facilities currently provided. RISK MITIGATIONS AND UPDATE MOVEMENT RISK MITIGATIONS AND UPDATE − We have a dedicated Credit team with significant experience who INCREASED review all credit requests and conduct ongoing reviews throughout the duration of the contract. The frequency of these reviews is driven REASON FOR MOVEMENT: by the risk level of each client as well as any material macro event that may affect our client base. Whilst our approach to credit has remained disciplined in − We have built and released a new internal credit platform for better 2023, the macroeconomic backdrop of rising interest rates, high inflation, and the potential of recession have resulted in a net increase in risk. management and oversight of credit facilities, margin calls and reporting. − Our terms and conditions enable all future customer trades to be at our discretion, therefore we can react quickly to changes in the macro environment or individual client profile, capping our exposure to past trades only. This significantly reduces our risk exposure and poses significantly less risk than providing traditional credit facilities. − We conduct ongoing stress testing of our credit book to simulate stressed market conditions. In 2023, particular emphasis has been put on clients’ exposures to high interest rates and energy costs. − Second-line oversight of credit exposures and policy adherence is performed by the Risk team. − Top client concentrations are monitored closely and disclosed on our website by currency pair. − Our terms of business enable us to collect margin from clients in response to adverse market moves (margin calls). Alpha benefits from netting: whilst we are called to place margin from our banking counterparties on a netted currency pair basis, we can call our clients for margin on a gross basis. − Key risk indicators act as an early warning system to alert the Board to conditions that could potentially lead to a period of stretched liquidity. − Our cash position has increased significantly due to profitable trading and interest accrued on balances. − The Senior Management team reviews forecasts and cash flows regularly to determine whether the Group has sufficient cash reserves to meet future working capital requirements, and to take advantage of business opportunities. − We perform liquidity analysis at a net currency and FX cross basis, including client margin call versus bank margin call, to identify any funding shortfall. − We conduct client and overall book stress testing, with circuit breakers in place. − Top client concentrations are closely monitored and are disclosed on our website by currency pair. − We have multiple liquidity providers, reducing the concentration risk to our banking counterparties. MOVEMENT DECREASED REASON FOR MOVEMENT: Our cash position has further increased, driven by cash conversion, profitable trading and interest earned. 52 53 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Principal Risks Strategic Risk Principal Risks Information Risk Risk Type: Strategic Risk Risk Type: Cyber And Data Security Risk is inherent in any strategy. To ensure we execute effectively we need to understand and actively manage our strategic risks. Security is a vital part of Alpha’s fabric and is integral to ensuring the sensitive data and money that we process on behalf of our clients maintains confidentiality, integrity, and availability. The Group faces the risk of its operating systems failing and the failure to safeguard business-critical data and systems. STRATEGIC REPORT PRINCIPAL RISKS & UNCERTAINTIES MOVEMENT UNCHANGED RISK MITIGATIONS AND UPDATE MOVEMENT − With the implementation of core protective controls in 2022, the DECREASED RISK MITIGATIONS AND UPDATE − We have a clearly defined strategy, which we continue to successfully execute, with key risks to delivery identified and reviewed regularly. − The Board is presented to and signs off on the strategy of the Group and receives updates from the Executive Directors throughout the year. − Alpha’s Board has extensive experience in entering new markets and scaling businesses, which it applies when considering new opportunities. − A succession plan is in place and approved by the Board for all key roles. Key management has contracts that provide notice periods for the Group’s protection. − The Group has a comprehensive key-person insurance policy in place. − We hold strong, transparent relationships with multiple banking partners and remain aligned on risk appetite. Risk Type: Reputational Risk Alpha is highly regarded in our industry. Maintaining this reputation is important to retain our existing clients, expand our client base, and preserve our strong relationships with our banking partners. There is a risk that an unforeseen event may adversely affect Alpha’s reputation, impacting future profitability. KEY TOPICS MOVEMENT − We have a marketing and communication strategy that includes detailed UNCHANGED and open public reporting. − We pride ourselves on strong cultural values and a positive risk and compliance culture. − We maintain an open and proactive dialogue with our banks and regulators to provide high levels of transparency and comfort. − We have a contract with a cyber security and reputation management company, which provides an online impersonation takedown service to minimise, where possible, brand impersonation. REASON FOR MOVEMENT: The enhancement of controls, increased resource, and the establishment of more mature processes aligning to ISO27001. Group focused on enhancing these further and on detection controls in 2023, i.e. the ability to be alerted on anomalous behaviour within the Group’s network and critical systems. − Hiring of a Chief Information Security Officer with over 15 years of experience in the industry, to own and drive the information security risk agenda. − Creation and implementation of a comprehensive information security management system, in compliance with and certified to ISO27001, across central services and Alternative Banking. − A Security, Information and Event Management (SIEM) system has been implemented, enabling automated detection of attacks and alerting to the Security and operational teams. − Externally validated testing across all of the Group’s online domains to identify weaknesses and confirm defensive cyber capabilities through Purple team exercises. − Hiring of an Application Security Specialist to work closely with engineering functions, and enhance the security of our software development, to reduce risk of release of our platform to clients with potential vulnerabilities. − We have renewed and increased the coverage of our comprehensive cyber insurance policy. − Continuation of security education across all staff to lower the risk of common attack methodologies and safeguard data. − Introduction of a data loss prevention tool to provide full visibility of data movement outside of the Group network as well as the ability to pre-emptively block the movement of sensitive data. − We continue to leverage top-tier cloud service providers. In line with the shared responsibility model, we ensure our responsibility regarding data security is fulfilled in line with best practices, a defence-in-depth approach, control testing, and training. − We continue to invest in cloud technologies to leverage security built by design, and provide the Group with scalable services in preparation for expansion across existing regions and geographies. 54 55 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Sustainability At Alpha, sustainable business practices aren’t just about doing the right thing. We believe they can be a long-term driver of superior financial performance and make for a better-quality company and investment. OUR PURPOSE – TO CREATE AN EXCEPTIONAL SOCIAL COMMUNITY FULL OF OPPORTUNITY. DIVERSITY & INCLUSION Our ability to attract, develop and retain the right We are committed to ensuring Alpha is a diverse people is fundamental to our long-term success. and inclusive place to work – one where everyone We strive to align all our team to our core purpose is empowered to fulfil their potential. We operate a of ‘creating an exceptional community full of true meritocracy, recruiting and promoting people opportunity that works hard but lives well’. By based on their attitude, skills and experience. We do providing our team with the best possible career not discriminate between employees or prospective opportunities and working environment, we place employees on the grounds of age, race, disability, their interests at the heart of our business. Our religion, gender, education, or any other background. people then capitalise on these opportunities and introduce new skills and knowledge to the Alpha Our stance on diversity forms not only the expectations community, strengthening our business and driving we have for ourselves but also for the recruitment us forward, for the benefit of all our stakeholders. partners we work with. We ask our recruitment partners to diversify their candidate shortlists to ensure that our hiring managers are seeing a true representation of the best candidates in the market. L i ves Well OPPORTUNITY The more opportunities we capture, the more we can invest back into our community COMMUNITY The stronger our community becomes, the more opportunities we can capture Works Ha r d STRATEGIC REPORT SUSTAINABILITY During the year we were also pleased to launch our CHARITABLE SUPPORT DEI Working Group. The Group was set up to create a forum where the perspectives and ideas of team members from different backgrounds can be heard, with the intention of informing and driving our DEI strategy. Each meeting is focused on the priorities raised by the members of the committee, with the Head of HR acting as Chair and a Board member also in attendance at every session. Alpha’s role as an employer is to work with the DEI group to provide the support and tools to enact the changes that matter. Alpha also conducts an annual DEI survey to gather anonymous feedback from our team members. In 2024, this survey will be used by the DEI working group to set an agenda of deliverables, in order that we can focus on the areas that matter the most. The tables below show the gender and ethnic breakdown of our team as of December 2023. HEADCOUNT BY GENDER – DEC 20231 FEMALE MALE OTHER Team member 128 253 Line manager Direct reports to Executives Executive team Non-executive Directors 14 13 0 1 29 24 5 2 1 - - - - In 2023, Alpha dedicated several fundraising events to the Movember cause: an organisation which advocates for and supports men’s mental and physical health and wellbeing. As part of this, the team took part in a 60km movement challenge, bake sale, football tournament and golfing competition, raising a total of £6,795. In 2024 we are partnering with the charity, Boxing Futures, which was nominated and voted for by the Alpha team. Boxing Future’s mission is to improve the lives of economically and socially disadvantaged young people, including those at risk of involvement in crime, through non-contact boxing and other physical exercise, by creating a community of support which champions well-being. We are also looking forward to rolling out corporate social responsibility days in 2024, where our team will be encouraged to take two days of paid leave to volunteer their time to a local cause. This initiative will initially be trialled with our London Office, where we will be partnering with a charity called “Paddington Partnerships” – an organisation focused on providing support to local schools and ecosystems in the Paddington area where our London offices are based. HEALTH & WELLBEING ‘Work hard, live well’ is an essential part of our purpose statement. It emphasises that, in order to sustain our high performance, we must look after our employees’ well-being and help them find the optimum work-life balance, whilst pursuing exciting career opportunities. HEADCOUNT BY ETHNICITY – DEC 20232 WHITE ETHNIC surveys annually, which enable the team to give We carry out anonymous wellness and wellbeing Team member 83% 17% 1 Numbers exclude Cobase, which was acquired in December 2023. 2 Alpha’s demographic data is collated via an annual confidential survey. As such, a breakdown of the seniority bandings of team members is not available. feedback on the areas that are most important to them when it comes to health and wellbeing, in order that we can better focus on supporting them. As a result of these surveys, in 2023 we launched an international Employee Assistance Platform. 56 57 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Sustainability Continued The platform provides wide-ranging support Our team also have access to world-class across the wellbeing spectrum, including: mental performance coaching and workshops with Dr Ceri health, sleep guidance, physical exercise plans, Evans – a high-performance coach and clinical complimentary counselling sessions, discount psychologist whose client base has included the codes for healthy meal providers, and access to likes of the New Zealand All Blacks. His knowledge articles written by subject matter experts in the and coaching have shaped how we discuss personal field of wellbeing. Also in 2023, we hired a Head of performance across the business and enhanced our Wellness to join our business, who is responsible for culture. The senior leadership team has participated developing and implementing wellness initiatives and in several high-performance workshops led by Ceri strategies across the business. Evans and is now translating these learnings into PERSONAL DEVELOPMENT their coaching style with their teams. We’re proud to invest in external training and “Everyone gets better”. This ethos is an intrinsic part qualifications wherever it’s relevant to a person’s role, of Alpha’s high-performance culture and drives our with a number of our staff undertaking company- focus on personal and professional development sponsored qualifications each year. In 2024 we are initiatives. looking to formalise our professional development policy in order to encourage more employees to Internally, we ensure that new open positions are pursue professional development opportunities as advertised in an accessible way, to encourage our business continues to grow. This will include a upward progression and horizontal movements for strategy to increase understanding and visibility of team members seeking new challenges. Our focus the professional development opportunities across is always on trying to promote from within, and our the business. international expansion and ongoing growth also provide employees with exciting opportunities to work in new marketplaces and quickly increase their responsibility and move up the learning curve. STRATEGIC REPORT SUSTAINABILITY ETHICAL STANDARDS We believe that strong ethics are key to maintaining a positive and sustainable business. The principle of “Doing what’s right” sits at the heart of our company charter and is intrinsic to Alpha’s culture. We then work hard to monitor and improve our ethical standards through the following initiatives. INITIATIVE DESCRIPTION Sales Commissions Banks and brokers need clients to transact to make revenue and meet sales targets; however, within the foreign exchange market, it may not always be in a client’s best interest to transact. We’ve eliminated this conflict of interest through a unique commission structure that removes recurring revenue targets and also pays lower commissions on more complex products. Instead, we pay lifetime commissions to all employees that incentivise them to retain clients for the long- term by always acting in their best interests, even if it means foregoing shorter- term opportunities for commissions. (Read more on pg 34) Employee handbook Our Employee Handbook (including a Code of Conduct) formally outlines the standards we expect of our team and ensures they comply with relevant laws in an ethical manner. Our handbook and policies are reviewed annually by our Head of HR and updated as required in response to legislative updates or internal business developments. Shared Ownership We believe that equity provides employees with an enhanced sense of ownership, and that this comes with an enhanced sense of responsibility and long-term thinking. Close to 100 employees have an equity stake in the business, and we are committed to making new shareholders each year. Modern Slavery We are conscious that potential human rights risks exist within any business and supply chain, and are committed to improving our business practices and methods of conducting due diligence to combat modern slavery and human trafficking. We therefore comply with the annual reporting requirements contained within Section 54 of the Modern Slavery Act 2015, being a relevant commercial organisation as defined by Section 54. Formal Policies Alongside the initiatives described above, we also have a number of formal policies designed to ensure our employees uphold our high ethical standards and comply with applicable laws. These include: a formal policy on bribery and anti-corruption, and a whistleblower policy that provides whistle-blowers with protection from retaliation. Annual Ethics Audit Our Head of Internal Audit, in conjunction with HR, carries out annual audits of our ethical standards to ensure we are upholding them, and also ideating ways for improvement. 58 59 Alpha’s official charity in 2024 is Boxing Futures Employee Training on All employees receive regular online training throughout the year on ethical Ethical Standards standards and are required to complete a series of modules and tests to ensure these standards are properly understood. ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023STRATEGIC REPORT SUSTAINABILITY Sustainability Continued SOCIAL RESPONSIBILITY TARGETS SUBJECT FY 23 STATUS GOALS FOR 2024 Diversity & Inclusion − We have increased the percentage of women in the business from 17% − Implement an anonymised CV policy to remove the potential for unconscious bias and ensure to 26% in 2023. objectivity in all of our interview processes. − We engaged with our recruitment partners to ensure their policies and − Expand our benefits offering to support parents returning to work, via childcare benefit support standards around diversity align with our own. programmes. − We launched Alpha’s first diversity, equity and inclusion working Group, − Continue to leverage the DEI working group to contribute to further positive actions across this space. endorsed by Non-executive Director, Lisa Gordon. Giving back − £6,795 was donated to Movember by employees, an organisation − Trialling of corporate social responsibility days in London, to give back to the local community. dedicated to funding and supporting men’s mental and physical wellbeing. Charitable initiatives included: a 60-kilometer movement challenge, a bake sale, a football tournament and a golf competition. − Raise in excess of £10,000 for Boxing Futures, Alpha’s nominated charitable partner for 2024. Earning & Learning − We pride ourselves on providing market-leading remuneration packages − Organise sessions for the Alpha team, focused on financial wellbeing and planning for the future. Providing sector-leading and carried out a company-wide pay review in Q1 to benchmark remuneration and training in employees against industry standards. order to attract and empower high-performance people. − Access to world-class performance coaching through Dr Ceri Evans, alongside subsidised formal qualifications with educational institutions. − New performance matrix introduced to help people measure their own performance and identify development goals. − Formalise our professional and personal development policy for 2024 to support team members achieve their next level of performance. Community − All employees who have past 12 months of service were taken skiing as − Improve employee engagement scores and voluntary retention. Building a supportive and part of an annual teambuilding and incentive trip. engaged community that people enjoy being a part of. − Quarterly wrap-ups are hosted across all our offices, followed by an evening event to celebrate. − Carried out company-wide employee engagement survey, with a 70%+ participation rate. − Introduced Electric Vehicle benefit scheme in the UK. Living Well − Complimentary mental health support for all employees introduced in − Continue to improve engagement and understanding of our Employee Assistant Programme. Supporting our team’s mental 2023. We also provide private healthcare for all employees (and their and physical wellbeing. families) from day one of joining. − Head of Wellbeing hired in London, focused on helping the team improve their physical and mental health. − Outstanding office environments. − Leverage our Head of Wellness role to create specific training plans and invite speakers and educators to present to our team. − Utilise wellness surveys to gather feedback from our team to understand what further support we can offer. 60 61 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Sustainability Continued ENVIRONMENT ENVIRONMENTAL STREAMLINED ENERGY AND CARBON REPORTING (SECR) The Group is required to report under the Streamlined Energy & Carbon Reporting (SECR) framework. The Group’s operations have inherently low emissions, and we attained our carbon neutral certification in January 2022 by partnering with Natural Capital Partners and offsetting our carbon emissions from January 2021. Our SECR reporting covers the energy consumption and Greenhouse Gas (GHG) emissions for the year ended 31 December 2023 including scope 1, 2 and 3 emissions. The table in the following section shows the energy and GHG emissions from business activities involving the combustion of gas and fuels, the purchase of electricity, and business travel in both kWh and tCO2e. We have selected an intensity metric based on the energy consumption per employee of Alpha Group; this is 297/kgCO2e employee. The key driver for the Methodology decrease in the intensity ratio between 2022 and 2023 is due to the increase in headcount. The Group’s operations are largely limited to its offices and have an inherently low environmental impact. Nevertheless, the Group does believe in further minimising its impact where possible. Our London- based Corporate HQ was built in 2019 with sustainability at the forefront of its design, with water recycling and a 71% improvement in operational energy consumption over a standard office fit-out. We have a mostly paperless marketing model, and our team endeavours to separate waste and recycle all office supplies where possible. Other steps we have taken include automating office lights to turn off when not being used, zero use of plastic cups, the Cycle to Work scheme, and a new Electric Vehicle (EV) lease scheme with Loveelectric. We will be targeting a reduction in the average emission generated using business travel per employee. We also carefully consider suppliers and their values before onboarding them. This year we partnered with 51-Carbon Zero to help us calculate our carbon footprint in line with the GHG Protocol Corporate Accounting and Reporting standard. Part of the decision to work with an external specialist was to ensure we are presenting our environmental reporting in the most accurate and independent way possible. 51-Carbon Zero have specialised knowledge of GHG and SECR reporting standards which have been able to improve the accuracy of our carbon footprint calculation whilst reducing the chance of bias. The figures quoted in the table below have been presented in accordance with the SECR standards and reflect our carbon footprint for 2023 and 2022. Conversion factors used to calculate the data are BEIS, EPA, GHG Protocol, CE Delft, DCCEEW and Climate Transparency. STRATEGIC REPORT SUSTAINABILITY Differences from prior year Changes to the methodology for calculating our carbon footprint have been implemented in 2023 with best practice guidance from 51-Carbon Zero. Due to this change in methodology, we have restated last year’s business travel figure from 8 tCO2e in 2022, to 720 tCO2e. This has then impacted i) our total gross emissions in 2022, which has changed from 81 tCO2e to 793 tCO2e and ii) the Intensity Ratio, which we have restated from 263 KgCO2e per average employee, to 2575 KgCO2e per average employee. With the help of 51-Carbon Zero, data now includes spend on mileage, airfares, personal car mileage, taxis, hotels, and public transport. Whereas, in 2022 before the restatement, this was limited to airfare, taxis, and personal car mileage only. In relation to energy, the kWh consumption figure has decreased due to improved accuracy in data collection at the offices. In 2022, there was limited data available from the smaller and newer offices, so Alpha was advised to use the same figures produced from one office and extrapolate this out to other offices of a comparable size. Whereas in 2023, 51-Carbon Zero supported us in gathering more accurate information as well as the use of individual country emission factors for electricity, rather than just using the UK average factor applied in 2022. As a result of increased accuracy, as referenced above, increased headcount and lower business travel in 2023 compared to 2022, Alpha’s overall intensity ratio has also decreased. UNIT 31 DECEMBER 2023 31 DECEMBER 2022 Restated TOTAL ENERGY USE COVERING ELECTRICITY, GAS, kWh 293,722 348,709 OTHER FUELS AND TRANSPORT Scope 1: Total emissions generated through combustion of gas tCO2e Scope 2: Total emissions generated through purchased electricity tCO2e Scope 3: Total emissions generated through business travel Total emissions generated through use of water and waste Total gross emissions INTENSITY RATIO (TOTAL GROSS EMISSIONS PER HEADCOUNT) tCO2e tCO2e tCO2e kgCO2e PER AVERAGE EMPLOYEE 2.7 94 439 24 560 0 72 720 0.7 793 1,297 2,575 62 63 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023STRATEGIC REPORT SUSTAINABILITY Sustainability Continued CARBON NEUTRAL We are proud to be a Carbon Neutral company and We take pride in being able to offset our emissions have offset all our carbon emissions since 2021. This in a way that produces not only environmental year we partnered with Citibank to offset our carbon benefits but also social and political benefits. emissions. Citibank have provided a Verra standard approved project in Vietnam, which finances the Alpha is alert to the fast-developing discourse on distribution of water purifiers to provide clean water to households in Vietnam (Project 2577)1 . how capital markets can have a positive impact on improving the world’s environmental situation through investing in carbon offsetting projects. The project aims to distribute 300,000 safe drinking However, there is always the risk of greenwashing water purifiers across Vietnam, to rural, low-income where projects are being produced without households, whilst also mitigating greenhouse having been through a rigorous assessment of gas emissions. These devices will prevent CO2 their quality and integrity. To ensure Alpha does emissions and deforestation by reducing the not contribute to this we have invested in this use of wood fuel that would have been used by project. By being Verra standard approved we households to boil and purify water. The water are confident that our carbon credits will have a purifiers also reduce and prevent the spread genuine impact in reducing the world’s emissions. of waterborne diseases by removing 99.99% of bacteria and capturing contaminants. The project has been through vigorous due diligence checks and has been awarded Verra Standard. Why we chose this project We chose this project to recognise the role Alpha can play in reducing the World’s carbon emissions, whilst also improving the livelihood of others. The project aligns to many of the United Nation’s Sustainable Development Goals (SGDs), such as: − No poverty (Goal 1); − Good Health (Goal 2); − Clean Water and Sanitation (Goal 6); and − Climate action (Goal 13). 1 https://registry.verra.org/app/projectDetail/VCS/2557 64 65 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Engaging with our Stakeholders (s172) Our Directors are aware of their responsibilities under Section 172(1) of the Companies Act 2006 and take their responsibilities seriously. In making its decisions throughout the year, the Board considers it has acted in a way that would promote the success of the Company for the benefit of its members as a whole, whilst having regard to stakeholders and matters set out in Section 172(1) (a-f) of the Act. In 2023, we identified six key stakeholder Groups, whose interests the Board considers and balances when making their decisions. The table below outlines how we engaged with them throughout 2023, and how their interests have influenced some of the decisions that have been made. Employees Our people are the lifeblood of our business. Their skills, values and commitment are what enable us to provide a leading level of our service to our clients and grow our business. HOW WE ENGAGED KEY TOPICS KEY OUTCOMES − Company-wide employee engagement surveys, with results and actions presented back to teams and Board. − Operational and financial − Group performance and performance. strategy shared across the − Vision, mission and strategy entire company. for the Group and each − FXRM and Alternative − D&I working Group established division. (see pg 57) − 360 feedback surveys carried out on Senior Management. − Bi-annual townhalls led by MDs of each division to present progress against strategy, future plans, and recognise key achievements. − Following investor roadshows, CEO & CFO hosted employee roadshows. − Regular team-building activities, including an annual company- wide trip abroad. − Fortnightly strategy meetings attended by all department heads and chaired by divisional MDs. − Employee reviews on Glassdoor. − Remuneration and incentives. − General wellbeing and job satisfaction, including recognition of achievements. − Company culture. − Diversity and inclusion. Banking divisions shared their strategy and performance with the teams. − Company-wide annual review of salaries conducted in January 2024. − All employees provided with office equipment allowance to better support working − Learning, development and from home. career progression. − Recognising key achievements. − Launch of international Employee Assistance Platform. − Charity and fundraising − New performance matrix initiatives. introduced. − Resource planning. − Anti-money laundering & Cyber Security responsibilities. STRATEGIC REPORT ENGAGING WITH OUR STAKEHOLDERS Clients Understanding the needs and challenges facing our clients is central to our growth strategy. HOW WE ENGAGED KEY TOPICS KEY OUTCOMES − Client surveys are sent out to new customers with the results shared with CEO & MDs. − Attendance at over 20 industry events in 2023. − Active memberships with a number of key industry associations. − Direct engagement between Directors and key clients. − Frontline employees share feedback with senior management, which is put forward to the Board for consideration where appropriate. − The Board reviews key client data and trends, such as growth in client numbers, retention, and sector concentration. − Email updates on upcoming developments and releases, with feedback requested. − Prior to our acquisition of Cobase, the Directors garnered feedback from a number of the business’ key clients. − Customer experience and − Enhanced product offerings, key challenges they face. both online and offline to − Regulations and compliance. − New products and features. − Reasons for choosing Alpha. − Alpha’s sales model. provide a better customer experience. − Client feedback implemented into our product development roadmap. − Acquisition of Cobase, validated by existing and − Technology propositions. prospective client feedback. − Instant insights reporting introduced to measure the quality of customer experience. − Approval of the annual budget, which includes investment to ensure we continue to improve the quality and efficiency of interactions with clients. Communities & Environment We value the opportunity to support organisations and causes that are important to our stakeholders and us. HOW WE ENGAGED KEY TOPICS KEY OUTCOMES − Which charities our team − Raised £6,795 for our chosen wish to support. charities. − Ways to raise money and − Boosted awareness for awareness for each cause. − Environmental sustainability. charitable and environmental causes across the business and our wider stakeholders. − Remained a certified Carbon Neutral company. − Fundraising activities for charities, including: bake sales, sponsored runs, football tournaments and golf competitions. − Partnered with Citibank as part of our commitment to remaining a Carbon Neutral company (see pg 64). − Partnered with 51-Carbon Zero to help us better calculate and understand our carbon footprint (see pg 62). − Introduction of employee electric vehicle scheme to support carbon emission reduction. 66 67 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Our Shareholders We value the views of our shareholders and the financial commitment they’ve made to support our growth. HOW WE ENGAGED KEY TOPICS KEY OUTCOMES − CEO and CFO hold meetings with major shareholders following interim and full year results to present the Group’s performance. Ad-hoc site visits and virtual meetings are also held throughout the year. − Shareholder analysis is presented once a quarter to inform Directors of key changes. − Anonymous shareholder feedback is obtained via Nomads after half year and full year roadshows. − All shareholders were invited to submit questions to the Board at the Annual General Meeting. − Operational and financial performance. − Sustainability initiatives − We continue to increase the level of detail in our trading updates and full year reports. and goals. − Enhancements made to − Company strategy and vision. − Capital allocation. − Key risks and governance. − Alpha’s business model. − Market opportunities. − Dividend strategy. − Impact of macro- environment. − The Alpha culture. annual report, in particular detailed sections on FXRM and Alternative Banking. − Feedback from investors presented back to the Board. − Created a Diversity & Inclusion working group, responsible for driving new initiatives to improve diversity & inclusion. Our Business Partners & Suppliers Our partners and suppliers (for example banking counterparties or third-party software vendors) play a key part in enabling us to deliver a leading service to our clients by amplifying our capabilities and efficiencies. HOW WE ENGAGED KEY TOPICS KEY OUTCOMES − Sharing of key regulatory − Financial and operational announcements, face-to-face meetings, site visits and telephone contact. − Senior Management engage with key suppliers and provide key updates to Executive Directors. performance. − Strategic direction. − Key challenges we face. − Business referrals and promotional support. − Our Alternative Banking − Risk, governance and Partnerships team develops relationships with Service Providers responsible for recommending Alpha’s solutions. compliance. − Innovation and knowledge sharing. − Audit and risk committee information. − Diversity & inclusion. − Employee wellbeing. − Enhanced products and services by leveraging suppliers’ capabilities. − We continue to partner with a selection of high-quality businesses that understand our company and the part they play in our long-term success. − Increasing focus on diversity & inclusion with our recruitment partners. − By maintaining high levels of transparency with our key counterparties in areas of risk, compliance and strategy, we deepen the trust and loyalty we have with our suppliers as we grow. STRATEGIC REPORT ENGAGING WITH OUR STAKEHOLDERS Key Decisions In accordance with section 172 of the Companies Act 2006, the Board regularly considers the likely consequences of our strategy and long-term decisions, taking into account the interests of employees, clients, shareholders, suppliers, communities and the environment. Throughout 2023, the Board made decisions to deliver against our strategy, whilst considering the different interests of our stakeholder groups and the impact of key decisions upon them. STRATEGY & BUSINESS PERFORMANCE − Regularly considered the trading performance of the business and reviewed and contributed to regulatory communications with the market. − Reviewed the Group’s strategy, key challenges and proposed responses. − Agreed investment priorities across the Group. − Approved the acquisition of Cobase. − Approved the opening of Munich and Madrid offices. − Approved the launch of the Fund Finance division. − Approved the move to the Premium List of the Main Market. OPERATIONAL & FINANCIAL PLANNING − Reviewed and approved the FY2024 budget and considered this against strategic performance, objectives and market expectations. − Approved dividend policy and payment of final dividend in respect of FY2022 and interim dividend in respect of FY2023. − Approved decision to acquire a long-term office lease for a second HQ in London for our Institutional division. − Approved initiation of £20m share buyback programme. GOVERNANCE & LEGAL − On the recommendation of the Audit Committee, reviewed and approved the Full Year Announcement, Annual Report and Financial Statements for FY2022, and the Half Year Announcement for FY2023 and other updates to the market. − Reviewed and approved the Group’s risk appetite. − Monitored regulatory and legislative developments and considered any potential impact on the Group’s operations. 68 69 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023STRATEGIC REPORT OUR BUSINESS MODEL Our Business Model Business can be complicated. We strive to make it less so. OUR RESOURCES PEOPLE PROCESSES TECHNOLOGY PARTNERS CAPABILITIES 480+ speaking 20+ languages, brought together by a high- performance culture, led by an experienced leadership team with a founder-CEO. Streamlined but robust systems and processes, enabling quick and controlled decision making, with increasingly high levels of automation. Low-legacy, modular technologies, that are always evolving, in order to more effectively and efficiently meet the needs of our team and clients. Working in partnership with leading suppliers and channel partners enhances our business model and enables us to reach a wider audience. Well-capitalised, debt free and profitable, with a high-quality and diverse product offering, and a strong reputation. ▼ OUR STRATEGY Our overarching objective is to grow our business by delivering on our KPIs (pg 29). This is achieved by delivering on our strategies outlined in our CEO statement on pg 18 and 20. ▼ GUIDED BY OUR BEHAVIOURS Act as One Be Humble Seek Reality Expect More Make Moves ▼ THE VALUE WE CREATE EMPLOYEES CLIENTS SHAREHOLDERS PARTNERS COMMUNITIES Providing outstanding earning and learning potential for everyone who works with us. Solutions that make a substantial and enduring difference to our clients. Delivering sustainable long-term returns to our shareholders. As our business grows, so do the opportunities for our partners that work with us. Fundraising and volunteering for our chosen charities and environmental causes. ~ 100 Continued growth ~ 600% 10 100% Employee Shareholders. In average revenue per client 2021-23. Share price growth since IPO. FX counterparties Carbon Neutral company. ▼ OUR PURPOSE To create an exceptional community, full of opportunity, that works hard but lives well. COMMUNITY OPPORTUNITY All of the above stakeholders we work with: Employees, Clients, Shareholders, Partners and Communities. The growth and rewards that come from playing a part in our community’s success. 70 71 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023The Board CORPORATE GOVERNANCE BOARD OF DIRECTORS Morgan Tillbrook Chief Executive Officer Tim Powell Chief Financial Officer Tim Butters Chief Risk Officer Clive Kahn Non-Executive Chairman Lisa Gordon Non-Executive Director Vijay Thakrar Non-Executive Director SKILLS & EXPERIENCE SKILLS & EXPERIENCE SKILLS & EXPERIENCE SKILLS & EXPERIENCE SKILLS & EXPERIENCE SKILLS & EXPERIENCE Tim Powell brings over 20 years of experience working in high-quality fast-growing public companies. 17 of these years were at the FTSE 100 listed, London Stock Exchange Group (“LSEG”). He was CFO of the LSEG’s largest subsidiary, London Stock Exchange, and was finance lead for the $27bn acquisition and integration of Refinitiv. Tim is a Chartered Accountant and graduated with an engineering degree from Birmingham University. Tim joined Alpha in 2019 with over 15 years’ experience in risk management, including as Head of Risk at World First, the global payments provider, and Mako Trading, a leading derivatives market maker. Beginning his career at Mitsubishi UFJ Securities, Tim has experience across both financial and non-financial risk and is Certified by the Global Association of Risk Professionals having achieved their FRM designation. Morgan founded Alpha in 2009 and has over 20 years’ experience building and leading fast-growing companies across technology and financial services. Self-funded and debt free up until its IPO in 2017, the company has delivered fourteen years of profitable and organic growth, alongside a consistent track record of strategic investments which have expanded the company from a sole provider of FX Risk Management solutions in the UK, to a global leader of a diverse (and growing) range of financial solutions. Outside of Alpha, Morgan successfully competes in the British GT racing championship. He is also a passionate angel investor to several exciting early- stage companies. Clive has over 35 years of experience in financial services, particularly in FX and payments. He previously served as Chief Financial Officer and Chief Executive Officer of Travelex, the global foreign exchange business, as well as CEO of Cardsave, a credit card acceptance and payments solutions business. In addition to his role as Non-Executive Chairman of Alpha, Clive is CEO of takepayments LTD, a payment solutions business. Clive is also a Chartered Accountant. Lisa has over 30 years’ Board experience in Executive and Non-Executive roles at both listed and private companies. She began her career as an equities investment analyst and subsequently spent many years in strategy and business development roles in the media, financial services and technology sectors. Lisa currently holds a number of Non- Executive positions which include Chairman, Cavendish Financial Plc; Non-Executive Director, JP Morgan UK Small Cap Growth & Income Plc, Non- Executive Director, Magic Light Pictures and Adviser to the Board at Fulcrum Asset Management LLP. Vijay is a Chartered Accountant with extensive strategic, commercial and governance experience with fast-growth listed companies, and was previously a Partner at EY and Deloitte, chairing Deloitte’s mid-cap listed companies’ practice. He has served on various Boards as a Non-Executive, including The Quoted Companies Alliance and Quorn Foods. Vijay is currently Chairman of The Alumasc Group plc, Treatt plc, and a NED at RSM Group (Remuneration Committee Chair). MAINTAINING SKILL SET MAINTAINING SKILL SET MAINTAINING SKILL SET MAINTAINING SKILL SET MAINTAINING SKILL SET MAINTAINING SKILL SET As CEO 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. He also attends a variety of meetings and events to support his personal development and is an avid reader of self-development literature. As CFO of Alpha, 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. Tim’s experience is kept up to date by the nature of his day-to-day role. He is a member of the Global Association of Risk Professionals and undertakes regular CPD training. Nomination Committee Member None None As Chief Executive Officer of a regulated and high-growth payments business, Clive’s skills and experience are kept up to date by nature of his current role. He also attends a variety of skill-focused conferences. Lisa’s skills and experience are kept up to date by nature of her current roles. She also attends numerous NED CPD training events and professional seminars. Vijay stays up to date by virtue of his roles and CPD that he continues to undertake, including attendance on various update webinars and training events. Audit Committee Member Nomination Committee Chair Remuneration Committee Member Audit Committee Member Nomination Committee Member Remuneration Committee Chair Audit Committee Chair Nomination Committee Member Remuneration Committee Member Appointed: 2009 Appointed: 2022 Appointed: 2021 Appointed: 2016 Appointed: 2017 Appointed: 2021 72 (stepping down at 2024 AGM) 73 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023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 effectively.” This section sets out our approach to 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 (QCA Code) for Small and Mid-Sized Quoted Companies (the “QCA Code”). Clive Kahn Non-Executive Chairman CORPORATE GOVERNANCE REPORT QCA CODE PRINCIPLE RELEVANT SECTION(S) OF THE ANNUAL REPORT 1. ESTABLISH A PURPOSE, STRATEGY AND BUSINESS Sustainability | Our Purpose | pg 56 MODEL WHICH PROMOTE LONG-TERM VALUE FOR SHAREHOLDERS. Business Model | pg 71 CEO Statement | pg 8 2. PROMOTE A CORPORATE CULTURE THAT IS BASED Ethical Standards | pg 59 ON ETHICAL VALUES AND BEHAVIOURS. Business Culture, Behaviour & Ethics | pg 78 3. SEEK TO UNDERSTAND AND MEET SHAREHOLDER Engaging with Stakeholders (s172) | pg 68 NEEDS AND EXPECTATIONS. Relations with Stakeholders | pg 80 Shareholder Communications | pg 80 4. TAKE INTO ACCOUNT WIDER STAKEHOLDER Engaging with Stakeholders (s172) | pg 67 INTERESTS, INCLUDING SOCIAL AND ENVIRONMENT RESPONSIBILITIES AND THEIR IMPLICATIONS FOR LONG-TERM SUCCESS. Sustainability, Social | pg 56 Sustainability, Environmental | pg 62 5. EMBED EFFECTIVE RISK MANAGEMENT, INTERNAL Principal Risks | pg 44 CONTROLS AND ASSURANCE ACTIVITIES, CONSIDERING BOTH OPPORTUNITIES AND THREATS, THROUGHOUT THE ORGANISATION. Internal Controls & Risk Management | pg 79 6. ESTABLISH AND MAINTAIN THE BOARD AS A Board of Directors | pg 72 WELL-FUNCTIONING, BALANCED TEAM LED BY THE Board Composition | pg 77 CHAIR. 7. MAINTAIN APPROPRIATE GOVERNANCE Board of Directors | pg 72 STRUCTURES AND ENSURE THAT INDIVIDUALLY AND COLLECTIVELY THE DIRECTORS HAVE THE NECESSARY UP-TO-DATE EXPERIENCE, SKILLS AND Board Performance | pg 78 Board Experience | pg 79 CAPABILITIES. 8. EVALUATE BOARD PERFORMANCE BASED ON Board Effectiveness | pg 78 CLEAR AND RELEVANT OBJECTIVES, SEEKING Remuneration Policy | pg 82 CONTINUOUS IMPROVEMENT. 9. ESTABLISH A REMUNERATION POLICY WHICH IS Remuneration Committee Report | pg 82 SUPPORTIVE OF LONG-TERM VALUE CREATION AND THE COMPANY’S PURPOSE, STRATEGY, AND CULTURE. 10. COMMUNICATE HOW THE COMPANY IS GOVERNED Corporate Governance Statement | pg 74 AND IS PERFORMING BY MAINTAINING A DIALOGUE WITH SHAREHOLDERS AND OTHER RELEVANT STAKEHOLDERS. Engaging with Stakeholders (s172) | pg 66 Further information is also published on our website: alphagroup.com/investors/corporate-governance. 74 75 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Corporate Governance The Board The Board is responsible for the proper management of the Group by formulating, reviewing, approving and BOARD COMPOSITION HOW THE BOARD OPERATES CORPORATE GOVERNANCE REPORT monitoring the Group’s strategy, budgets, corporate actions and risk appetite. AUDIT COMMITTEE NOMINATION COMMITTEE REMUNERATION COMMITTEE 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 ensures they are properly monitored and reported on, alongside reviewing regulatory announcements. The Audit Committee meets not less than three times in each financial year and has unrestricted access to the Group’s auditors. The Audit Committee is chaired by Vijay Thakrar and its other members are Lisa Gordon and Clive Kahn, both of whom are independent Non- Executive Directors and have recent and relevant financial experience. The Nomination Committee reviews and recommends nominees as new Directors to the Board. The Nomination Committee meets as the Chairman of the committee requires. 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 QCA Corporate Governance Code and to industry benchmarks. The Nomination Committee is chaired by Clive Kahn; its other members are Lisa Gordon, Vijay Thakrar and Morgan Tillbrook. The Remuneration Committee is chaired by Lisa Gordon and its other members are Clive Kahn and Vijay Thakrar, both of whom are independent, Non-Executive Directors. KEY AREAS OF ACTIVITY KEY AREAS OF ACTIVITY KEY AREAS OF ACTIVITY − Financial reporting and market updates − Internal control and risk management reviews − External audit − Review of the Risk Register − Engage with Chief Risk Officer and Risk Committee − Review of complaints register − Review strategy and performance with Executive Directors & Senior Management − 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 for Executive Directors and Senior Management − Oversight of Executive Remuneration policy − Review of Director’s remuneration against benchmark data − Setting and appraisal of performance targets − Reviewing equity incentive schemes The Board is responsible to shareholders for the successful stewardship of the Group and sets the strategy for its long-term success. It is important that the Board contains the right mix of skills, experience and knowledge in order to deliver the strategy of the Group. As such, the Board comprises three Executive Directors and, including the Chairman, three independent Non-Executive Directors. The Board considers all three Non- Executive Directors to be fully independent within the meaning of the UK Corporate Governance Code. The Board maintains a flexible, efficient and effective management framework within an entrepreneurial environment, aiming to deliver long-term growth for shareholders. Matters reserved for the attention of the Board which are reviewed annually include the Group’s: − Objectives and strategy − Structure and capital − Financial reporting, controls and dividend policy − Regulatory reporting and controls − Risk management, internal controls and The Chairman and Chief Executive have distinct governance roles. The Chairman’s primary responsibility is the delivery of the Group’s corporate governance and the effective operation of the Board of Directors, whilst the Chief Executive is responsible for the operation of the Group, in order to deliver on its strategic objectives. The Chairman has a clear separation from the day-to-day business of the Group which allows them to make independent decisions. − Significant contracts or investments − Shareholder communications − Board membership, succession planning and other appointments − Remuneration of Senior Management − Delegation of authority BOARD MEETINGS The Board believes that the size and composition of The Board held 11 scheduled Board meetings during the Board is appropriate given the size and stage of the year. Non-Executive Directors also communicate development of the Group and, as per the individual directly with Executive Directors and Senior biographies, that the Directors bring a desirable and diverse range of skills, experience, personal qualities and capabilities in light of the Group’s Management between formal Board meetings. The Chairman and the CFO plan the agenda for challenges and opportunities, whilst at the same each Board meeting in consultation with all other time ensuring that no individual(s) can dominate Directors. The agenda is issued with supporting the Board’s decision making. All Board Directors papers ahead of the Board meetings, along with are subject to election at their first Annual General appropriate information required to enable the Board Meeting and to re-election annually thereafter. to discharge its duties. Given the Group’s intention to move to the Main Market, we will look to add another Non-Executive Directors are expected to attend all Board meetings Director to the Board in 2024. and the Committee meetings for which they are members. The table below shows the Director’s attendance at scheduled Board and Committee meetings during the year. 76 77 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Corporate Governance Continued BOARD MEETINGS FY2023 BOARD EXPERIENCE BOARD REMUNERATION COMMITTEE AUDIT COMMITTEE MORGAN TILLBROOK TIM TIM CLIVE LISA POWELL BUTTERS KAHN GORDON VIJAY THAKRAR CORPORATE GOVERNANCE REPORT SCHEDULED MEETINGS CLIVE KAHN LISA GORDON VIJAY THAKRAR MORGAN TILLBROOK TIM POWELL TIM BUTTERS 7 7 7 7 7 7 7 1 1 1 1 N/A N/A N/A 3 3 3 3 3 3 3 BOARD COMMITTEES The skills and experience of the Board are outlined in The Board has established an Audit Committee, Remuneration Committee and Nominations 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 period. Full details on each committee can be seen on page 76. BOARD PERFORMANCE In February 2024, the Board instructed an independent company (Independent Audit) to conduct a Board performance review. Key areas of focus included: − Strategy; − Risk Management; − Financial Oversight; − Management Team; − People & Culture; and − Stakeholders. The review is ongoing and is expected to be completed by the end of April 2024. their biographical details on page 72 and 79. Their experience and characteristics give them the ability to deliver and challenge the Group’s strategy for the benefit of all its stakeholders. The Board keeps succession planning under review and monitors the progress and success of the development plans which have been established for relevant employees, with a particular focus on ensuring over time all senior management positions have at least one internal successor. The Nomination Committee also monitors the length of tenure of the Chairman and Non-Executive Directors and the mix and skills of the Directors. BUSINESS CULTURE, BEHAVIOURS AND ETHICS The Group has a clearly defined vision, mission and purpose along with key behaviours and principles. ‘Cultural Density’ is a core strategic pillar for the business, and as the company continues to scale, we believe retaining our culture and high ethical standards will be key to maintaining our high performance and delivering on our strategy. Anonymous employee engagement surveys are conducted annually and the company’s “Speak Up Culture” also ensures that all employees are empowered to give feedback on culture and behaviours, regardless of tenure or seniority. FINANCIAL MANAGEMENT SECTOR KNOWLEDGE GLOBAL BUSINESS LEADERSHIP & VALUES SALES & MARKETING ✓ ✓ ✓ ✓ ✓ TECHNOLOGY & OPERATIONS ✓ SUSTAINABILITY RISK MANAGEMENT MERGERS & ACQUISITIONS CAPITAL MARKETS ✓ ✓ ✓ REGULATORY ENVIRONMENT ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ Integrity is everything at Alpha and is underpinned DEVELOPMENT by our principle of “Doing what’s right”. The Directors believe that the main determinant of whether a business behaves ethically and does the right thing is the quality of its people. The Directors are responsible for ensuring that individuals employed by the Group demonstrate the highest levels of integrity and undertake reviews of its employees regularly. In addition, the Group has a formal Bribery and Anti-Corruption Policy and a Share Dealing Code. The Company Secretary ensures that all Directors are kept up to date on any relevant changes in legislation and regulations, with the assistance of the Group’s advisers where appropriate. Executive Directors are subject to the Group’s performance development review process, through which their performance against predetermined objectives and their personal and professional developments needs are considered. TIME COMMITMENTS INTERNAL CONTROLS & RISK MANAGEMENT The Directors recognise the need to commit the The Board has ultimate responsibility for the Group’s time necessary to fulfil their roles. This requirement control and risk management environment, all of is included in their letters of appointment. The which are designed to manage and mitigate risks that Board is satisfied that the Chairman and Non- may undermine its strategic objectives. Such systems Executive Directors are able to commit sufficient can only provide a reasonable but not absolute level time to the Group’s business. There has been of assurance against material loss or misstatement. no significant change in the Chairman’s time The Audit Committee monitors and reviews the commitments since his appointment. Group’s internal control procedures and reports its conclusions and recommendations to the Board. 78 79 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 CORPORATE GOVERNANCE REPORT Corporate Governance Continued As further described on page 86 to 88 of the Audit Anonymous feedback from institutional investors Committee report, the Group has an established is obtained and shared with the Board following its framework of risk management and internal control interim and final results roadshows, and a quarterly systems, policies and procedures in place, including breakdown of the share register is provided to the an internal audit function. Board for consideration. RELATIONS WITH STAKEHOLDERS ANNUAL GENERAL MEETING (“AGM”) The Group is committed to ensuring it engages with The Group’s AGM will take place at 12:30pm on 1 May all of its stakeholders to ensure their needs and 2024. The Notice of AGM and explanatory notes on all considerations are taken into account in its decision resolutions are provided alongside all copies of the making. Further details can be found on page 68. annual report mailed to shareholders. Digital copies are also available via the Group’s website. SHAREHOLDER COMMUNICATIONS The Group maintains communication with both current and potential institutional shareholders through one-to-one meetings with the Chief Executive Officer and Chief Financial Officer, particularly following the publication of its interim and full year results, as well as ad-hoc meetings and conference calls. Private shareholders are encouraged to attend the Annual General Meeting at which the Group’s activities are considered and questions answered. The Group’s website has a dedicated investor relations page which contains the latest information, including its most recent results. New and potential investors also have the opportunity to submit questions at any time throughout the year via the investor relations website, and all responses are published for everyone to see. 80 81 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Remuneration Committee Report Lisa Gordon Non-Executive Director I am pleased to present the 2023 remuneration report, which sets out the remuneration policy and the remuneration paid to the Directors for the year. Alpha Group International 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. MEMBERS OF THE REMUNERATION COMMITTEE EXECUTIVE DIRECTORS’ SERVICE CONTRACTS Details of the Remuneration Committee are provided in the Corporate Governance Statement. REMUNERATION POLICY The Group’s policy is that the Executive Directors’ remuneration package 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. The Remuneration Committee’s intention is that remuneration should reward achievement of objectives and that these align with shareholder’s interests over the medium-term. Remuneration EXECUTIVE DIRECTOR REQUIRED WRITTEN NOTICE BY BOTH THE COMPANY AND INDIVIDUALS Morgan Tillbrook 12 months Tim Powell 6 months Tim Butters 6 months NON-EXECUTIVE DIRECTORS SERVICE CONTRACTS CORPORATE GOVERNANCE REMUNERATION COMMITTEE REPORT BASE SALARY INCREASE The only changes made to Director’s Remuneration for shareholders. In light of this review, it was in 2023 was to increase the salary of the CRO, Tim concluded that the salary of Tim Butters was not Butters from £200,000 to £250,000. The Committee aligned to these benchmarks. The Committee carried out a review where Directors’ Remuneration believes that the best outcome for all stakeholders was benchmarked against businesses in a similar was to increase base salary to a level where it is sector and/or delivering similar growth and returns aligned to the wider market. The Committee will continue to undertake an annual benchmark review. YEAR ENDED 31 DECEMBER 2023 EXECUTIVE Basic Salary / Fee £ Morgan Tillbrook 500,000 Tim Butters Tim Powell NON-EXECUTIVE Clive Kahn Lisa Gordon Vijay Thakrar 250,000 225,000 52,500 52,500 52,500 Bonus* Pension Share-based Payment £ - - - - - - £ 4,527 3,750 3,750 - - - Other £ - Total £ 504,527 8,464 816 263,030 44,923 1,004 274,677 - - - - 52,500 1,371 53,871 - 52,500 * The bonus arrangement for Morgan Tillbrook and Tim Powell for the year ended 31 December 2023 was a maximum bonus of 200% of basic salary for Morgan Tillbrook and 125% for Tim Powell, on the Group’s achievement against key performance indicators (year ended 31 December 2022: 200% for Morgan Tillbrook and 150% for Tim Kidd). Due to tough market conditions and key performance indicators not being met, the Directors did not receive a bonus for 2023. YEAR ENDED 31 DECEMBER 2022 Basic Salary / Fee Bonus* Pension Share-based Payment EXECUTIVE £ £ £ Other £ Total £ 5,130 1,008,687 1,318 407,654 £ - £ – – consists of a basic salary, performance-related The Non-Executive Directors do not have service Morgan Tillbrook 500,000 500,000 3,557 bonus, long-term incentive plan and pension contracts but are appointed under letters of contributions. appointment. Appointment letters are intended to be for a two-year term. No compensation is payable Performance-related bonuses are based on in the event of a Non-Executive not being re-elected. achievement of the Group’s budget for both revenue The Board determines the terms and conditions of and underlying profit, both of which are key KPIs for the Non-Executive Directors. the Group. The Committee ensures that the balance between fixed and variable remuneration helps to ensure objectives are aligned. The Committee DIRECTORS’ REMUNERATION believes that the dual focus on revenue and profit The following table summarises the total gross performance is integral to ensuring delivery of remuneration of the Directors who served in the year shareholder value. ended 31 December 2023. Tim Kidd (resigned 5 December 2022) Tim Butters Tim Powell1 NON-EXECUTIVE Clive Kahn Lisa Gordon Vijay Thakrar 232,192 174,144 – 200,000 16,331 52,500 52,500 52,500 – – – – – 3,750 23,894 819 228,463 – – – – 15,928 – – – – – – – 32,259 52,500 52,500 52,500 82 83 1 Tim Powell was appointed to the Board on 5 December 2022. His salary for the year ended 31 December 2023 was £225,000. This has been apportioned in the prior year 2022 table below from the date of his appointment. ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 CORPORATE GOVERNANCE REMUNERATION COMMITTEE REPORT Remuneration Committee Report Continued The Executive remuneration policy for the year ended December 2024 is set out in the table below: EXECUTIVE Morgan Tillbrook Tim Powell Tim Butters Base Salary £ £500,000 £325,000 £300,000 Bonus % 150% 125% Nil Pension £ £3,750 £3,750 £3,750 For the Executives, the Annual Bonus Plan is based Tim Butters is a participant in the E and F Growth on the Group’s achievement against key performance Share Schemes. Full details of the scheme are indicators. The calculation is aligned to revenue and provided in Note 25 of the Consolidated Financial profit growth, with a maximum bonus requiring the Statements. Following the revenue growth target of Group to achieve a minimum of 10% above its internal 20% being met for the year ended 31 December 2022, budget. In order to avoid any perceived conflicts of he was awarded 22,636 shares in March 2023. interest, the Chief Risk Officer is not incentivised via a performance-related bonus. At 31 December 2023 Tim Powell had no beneficial The highest paid Director was paid £504,527 during the participant in the F Growth Share Scheme which was year (2022: £1,008,687). The average earnings within established prior to his appointment as a Director. the Group for the year ending 31 December 2023, Full details of the scheme are provided in Note 25 of excluding Directors, was £74,818 (2022: £72,707). the Consolidated Financial Statements. interest in the shares of the Company. He is a DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS Following the revenue growth target for the year ended 31 December 2023 not being met for the E Growth Shares or the F Growth Shares, the shares The following table summarises the shareholding and lapsed. As a result, no shares in Alpha Group share interests of the Directors at 31 December 2023. International plc will be issued as consideration for the lapsed E and F Growth Shares in March 2024. A non-binding resolution to accept the Remuneration Committee Report will be put to shareholders at the Annual General Meeting and the Committee will conduct a full annual review of the policy. Lisa Gordon Non-Executive Director Remuneration Committee Chair AS AT 31 DECEMBER 2023 BENEFICIALLY OWNED EXECUTIVE Morgan Tillbrook Tim Butters Tim Powell NON-EXECUTIVE Clive Kahn Lisa Gordon Vijay Thakrar 5,934,168 34,229 - 355,000 25,665 2,400 84 85 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Audit Committee Report Vijay Thakrar Non-Executive Director On behalf of the Board, I am pleased to present the Audit Committee report for the year ended 31 December 2023. The Audit Committee is responsible for ensuring that the financial performance of the Group is appropriately 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 by the whole Board, reviewing any changes to accounting policies, reviewing and monitoring the extent of the non-audit services undertaken by external auditors, overseeing the internal audit plan, and advising on the appointment of external auditors. The Audit Committee met at three scheduled meetings during the year and also held meetings, independent of management, with BDO LLP, the Company’s external auditors. DUTIES REVENUE RECOGNITION CORPORATE GOVERNANCE AUDIT COMMITTEE REPORT FAIR VALUE OF OPEN TRADES PRIOR PERIOD ADJUSTMENT FOR SHARE-BASED Accounts receivable include unrealised profits on PAYMENTS open trades as at the year end. The committee The Committee considered with management and discussed with management the accounting the auditors the background to the prior period treatment applied to determining the fair value adjustment and proposed adjustment. The reasons of open positions, who confirmed that the for the adjustment we discussed, and the Committee methodology is consistent with previous years. received assurances that the proposed treatment The auditors have also reviewed the same and was appropriate and had been scrutinised by concluded that it is appropriate. technical experts. NET TREASURY INCOME ROLE OF THE EXTERNAL AUDITOR Given the increases in interest rates over H1 2023, The external auditor, BDO LLP, was initially appointed the Committee discussed with management the in the financial year to 31 December 2016, following reporting of net treasury income arising from client a formal tender process. As a result of the five-year balances and whether it should be included within rotation policy to enhance auditor independence, The main items of business considered by the Audit Given the different nature of the Company’s operating / underlying profits or not. The proposed the current audit partner was appointed for the 2021 Committee during the year included: income streams from FX Risk Management and treatment, agreed with the auditors, seeks to audit. No changes were made for the 2022 or 2023 − review of the 2023 BDO LLP audit plan and audit engagement letter; − consideration of key audit matters and how they are addressed; − review of the effectiveness of the external audit process; − monitoring of the integrity of the financial statements and Annual Report, and of any trading updates provided externally; − review of the risk management and internal control systems by the whole Board; − review of the annual internal audit plan; − consideration of regulatory developments and their impact; and − reviewed the accounting for share schemes and the associated prior year restatement. Alternative Banking, the Committee discussed the revenue recognition treatment adopted for the different streams with management and with the auditors, who have confirmed that the Company’s treatments accord with relevant accounting standards. This included consideration of the appropriateness of traders’ incentivisation plans and the strength of anti-fraud controls. CREDIT RISK In light of the changes within the macro-economic environment continuing into 2023, the committee discussed with management the likelihood of material customer defaults and their impact on the Group’s financial performance. The Committee concluded that adequate safeguards are in place to reduce the risk of material customer defaults As a result of considering the above matters, the from arising. Committee focused on the following matters considered to potentially have a material impact on the Group’s financial results. achieve transparency. CREDIT VALUATION ADJUSTMENT (CVA) audits to ensure continuity of service. The Audit Committee monitors the relationship to ensure that auditor independence and objectivity are maintained. The Committee is satisfied with BDO’s independence The Committee has discussed with management but will keep under review the need for an external the CVA methodology adopted. Management have tender. The breakdown of fees between audit confirmed that the CVA methodology is consistent and non-audit services is provided in Note 6 of with previous years, and the auditors have also the Group’s financial statements. The Committee reviewed the Company’s CVA and concluded that it monitors the non-audit fees. Having reviewed the is appropriate. NON-RECURRING COSTS auditor’s independence and performance, the Audit Committee recommends that BDO LLP be reappointed as the Group’s auditor at the next AGM. The Committee discussed with management the treatment of costs that are not part of underlying EXTERNAL AUDIT PROCESS profits e.g. those associated with listing the group BDO LLP prepares a plan for the audit of the full on the Main Market. It was concluded that the period financial statements. This audit plan sets out proposed treatment of these costs appropriately the scope of the audit, areas to be targeted and the reflects the underlying profits, and has been audit timetable. This plan is reviewed and agreed agreed with the auditors. In the interests of in advance by the Audit Committee. Following the transparency, the disclosures make clear what audit, the auditor presents its findings to the Audit these non-underlying costs are. Committee for discussion, including management 86 87 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 CORPORATE GOVERNANCE AUDIT COMMITTEE REPORT Audit Committee Report Continued letter points detailing areas for improvement within WHISTLEBLOWING the company’s internal controls framework. The Audit Committee monitors management’s remediation plans in respect of such recommendations, which are formally tracked and reported by the Head of Internal Audit. INTERNAL AUDIT An internal audit function was created in February 2022 with the appointment of an experienced internal auditor with relevant industry experience to lead the function, with a direct and open line of communication between the Audit Committee The Group has a whistleblowing policy which enables employees of the Group to confidentially report matters of concern. The Group is committed to conducting business with honesty and integrity at all times, and Alpha staff are encouraged to speak up without fear of retribution if they have any concerns. In the event that any such concerns are raised, these would be escalated to the Chief Risk Officer in accordance with the policy and reported to the Board. No such instances were reported to the Board during 2023. Chair and the Head of Audit. In 2023 the Internal OUR PRIORITIES FOR THE YEAR AHEAD Audit function has continued to grow, recruiting an additional headcount to the team and creating new relationships with external consultancies to deliver the annual internal audit plan. This plan was proposed independently from the Alpha Executives/ Management Team and approved by the Audit Committee. Any findings arising from internal audit During 2024, the Committee will focus on: − Reviewing the reporting of the Group’s results / performance externally for balance and consistency with how performance is reviewed and monitored internally; activity are reported to the Audit Committee, which − Monitoring with the Board as a whole the key reviews the appropriateness of any follow-up actions. risks facing the Group; the effectiveness of the RISK MANAGEMENT AND INTERNAL CONTROLS material controls over those risks; ensuring that appropriate resources and experience are provided to help mitigate the risks and enhance As described on page 79 of the corporate controls where necessary; governance report, the Group has established a framework of risk management and internal control systems, policies and procedures. The Board as a whole is responsible for reviewing the risk management and internal control framework and ensuring that it operates effectively. The Committee ensures that the Company’s Chief Risk Officer, who chairs the Company’s Risk Committees to consider the principal risks facing the Company, presents a − Assessing any ongoing changes to the regulatory environment, business practices and risk profile of the Group; and − Considering changes needed to the Company’s reporting and risk management processes as a result of its planned move to be listed on the UK Main Market Premium Segment. regular update of the Risk Committees’ work to the Vijay Thakar Board, and internal control systems are routinely Non-Executive Director assessed via the performance of a controls testing Audit Committee Chair programme and the internal audit plan. 88 89 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Directors’ Report The Directors present their Annual Report and the audited financial statements for the year ended 31 December 2023. The corporate governance statement on page 74 also forms part of this Director’s Report. BUSINESS REVIEW DIRECTORS’ INTERESTS An analysis of the Group’s development (including likely The Directors’ interests in the Group’s shares and future developments) and performance is contained in options over ordinary shares are shown in the the Chairman’s Statement, CEO’s Statement and Our remuneration report on page 84. 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 page 52. PRINCIPAL ACTIVITY Alpha Group International 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 CHARITABLE DONATIONS During the year, the Group donated £1,419 to charity. POLITICAL DONATIONS The Group has not made any political donations in the past, nor does it intend to make them in the future. registered company number is 07262416. The Company ENVIRONMENT presents a list of its subsidiaries in note 15. The Company’s principal activity is the development of financial strategies and technologies for global corporates and institutions covering: FX risk management, mass payments and account opening requirements. RESULTS AND DIVIDEND The Group shows its results for the year in the Consolidated Statement of Comprehensive Income on page 104. Details of the proposed final dividend for the year are included on page 7. The Group believes in minimising its impact to the environment where possible and is a certified carbon neutral company. More details on the measures it has taken are set out on 62-64. EQUAL OPPORTUNITIES We are committed to ensuring our workplace is equal, diverse and inclusive. We operate a true meritocracy, recruiting and promoting staff based on their attitude, skills and experience. We do not discriminate between employees or prospective employees on the grounds of age, race, disability, religion, gender or any other criteria. We are also committed to ensuring all employees feel respected and are able to perform to DIRECTORS the best of their ability. The Directors of the Company during the year were: EXECUTIVE NON-EXECUTIVE EVENTS AFTER THE REPORTING PERIOD Morgan Tillbrook Clive Kahn Following the third year of vesting of the Alpha FX Tim Butters Tim Powell Lisa Gordon Vijay Thakrar Institutional Limited share scheme for the year ended 31 December 2023, the Company will be issuing 126,201 shares in March 2024. Biographical details, along with committee responsibilities, are provided on page 72. CORPORATE GOVERNANCE DIRECTORS’ REPORT Following the second year of vesting of the Alpha Lisa Gordon, Non-Executive Director of the Company Foreign Exchange (Canada) Limited share scheme for will also step down from the Board by not putting the year ended 31 December 2023, the Company will herself up for re-election at the Company’s AGM on be issuing 5,734 shares in March 2024. the 01 May 2024. A process to recruit an additional Non-Executive Director will be undertaken in the Following the second year of the vesting for D1 and coming months. D2 Share scheme and the first year of vesting for the D3 Share scheme for the year ended 31 December 2023, the Company will be issuing 80,544 shares in March 2024. Following the first year of vesting of the Alpha FX Netherlands Limited share scheme for the year ended 31 December 2023, the Company will be issuing 22,148 shares in March 2024. On 29 January 2024, the Group announced a share repurchase programme up to a value of £20m to purchase ordinary shares of 0.2 pence each. The Ordinary Shares purchased will be held in treasury. As at 19 March 2024, 339,929 ordinary shares of 0.2 pence each had been purchased for a consideration FINANCIAL INSTRUMENTS The financial risk management objectives and policies of the Group, including credit risk, market risk, liquidity risk, interest rate risk and currency risk, are provided in note 18 to the Consolidated Financial Statements. SHARE CAPITAL STRUCTURE Details of changes in the Group’s share capital are disclosed in note 21 of the Consolidated Financial Statements. SHARE OPTIONS SCHEMES of £5.8m representing 0.8% per cent of the issued Details of employee share schemes are set out in share capital of the Group as at 19 March 2024. All note 25 to the Consolidated Financial Statements. shares purchased were held in Treasury. On 29 February 2024, the Group entered into an interest rate swap for a notional amount of up to €100m to fix the rate of interest receivable on Euro cash balances held in respect of the Group’s client cash balances. With the interest rate swap, the Group receives a fixed rate of interest and pays a floating interest rate based on EuroSTR, the difference between the rates results in the Group receiving a fixed rate of interest. The contract commences in March 2024 and expires in March 2026 with a net interest rate receivable of 3%. Hedge accounting is applied in accordance with IFRS 9. On 20 March the group announced changes to the Board of Directors with Dame Jayne-Anne Gadhia appointed to the board as Chair Designate, effective PURCHASE OF OWN SHARES There was no purchase of own shares in the period. GOING CONCERN As described in note 2 of the financial statements, the Group has carried out a Going Concern assessment. 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 & DEVELOPMENT from the Company’s AGM on 01 May 2024, subject to The Company has a continuous programme of the completion of normal regulatory due diligence by development expenditure as part of its focus on the Company’s Nominated Adviser. In line with this, evolving its service offering through technological Clive Kahn, who has been Chair of the Company since innovation. Capitalised internal development 2016, will therefore not be seeking re-election at the expenditure is disclosed in note 12 of the accounts. Company’s 2025 AGM, with Jayne-Anne remaining All other development expenditure is recognised in Chair Designate until the conclusion of Clive’s term the Statement of Comprehensive Income. as Chair. 90 91 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Directors’ Report Continued BRANCHES STATEMENT OF DIRECTORS RESPONSIBILITIES The Directors are responsible for keeping adequate Financial statements are published on the CORPORATE GOVERNANCE DIRECTORS’ REPORT accounting records that are sufficient to show and Company’s website in accordance with legislation explain the company’s transactions and disclose in the United Kingdom governing the preparation with reasonable accuracy at any time the company’s and dissemination of financial statements, which financial position and enable them to ensure may vary from legislation in other jurisdictions. The that the financial statements comply with the maintenance and integrity of the Company’s website requirements of the Companies Act 2006. They are is the responsibility of the Directors. The Directors’ also responsible for safeguarding the assets of the responsibility also extends to the ongoing integrity of Company and hence for taking reasonable steps the financial statements contained therein. for the prevention and detection of fraud and other irregularities. WEBSITE PUBLICATION By order of the board Simon Kang Company Secretary The Directors are responsible for ensuring the 19 March 2024 annual report and the financial statements are made available on a website. The Group has a number of branches outside of the The Directors are responsible for preparing the Annual United Kingdom located in The Netherlands, Italy, Report and the financial statements in accordance with Spain, Germany, and Australia. applicable law and regulations. FUTURE DEVELOPMENTS The board intends to continue to pursue the business strategy as outlined in the strategic report on page 18 and 20. STAKEHOLDER INVOLVEMENT POLICIES The Directors believe that the involvement of employees, clients and suppliers is an integral part of the Group’s culture and plays a key part in its decision making and growth to date. For more information, view pages 66, 67 and 68. AUDITOR AND DISCLOSURE OF INFORMATION TO AUDITOR Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Consolidated Financial Statements in accordance with UK adopted International Accounting Standards and the company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 of the Group and company and of the profit or loss of the Group and company for that period. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the BDO LLP were appointed as auditors on 7 December Alternative Investment Market. 2016 and are continuing in office. In accordance with s489(4) of the Companies Act 2006 a resolution In preparing these financial statements, the Directors for their reappointment will be proposed at the are required to: forthcoming Annual General Meeting. As far as the Directors are aware, there is no them consistently; − select suitable accounting policies and then apply 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 12:30pm on 01 May 2024 at the offices of Bird & Bird LLP, 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. − make judgements and accounting estimates that are reasonable and prudent; − state whether they have been prepared in accordance with UK adopted international accounting standards subject to any material departures disclosed and explained in the financial statements; and − prepare the financial statements on the going concern basis, unless it is appropriate to presume that the Company will continue in business. 92 93 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Independent Auditor’s report To the members of Alpha Group International Plc Opinion on the financial statements 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 2023 and of the Group’s profit for the year then ended; Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice). BASIS FOR OPINION − the Group financial statements have been We conducted our audit in accordance with properly prepared in accordance with UK adopted International Standards on Auditing (UK) (ISAs (UK)) international accounting standards; and applicable law. Our responsibilities under those − the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and − the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of Alpha Group International Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended 31 December 2023 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity, the Company Statement of Financial Position, the Company Statement of Changes in Equity and notes to the financial statements, including material accounting policy information. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and UK adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. INDEPENDENCE We remain 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. CONCLUSIONS RELATING TO GOING CONCERN In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt the going concern basis of accounting included: − We considered the risks identified and judgements made by the Directors as most likely to adversely affect the Group’s and Parent CORPORATE GOVERNANCE INDEPENDENT AUDITOR’S REPORT Company’s available financial resources and independent sources. We also performed challenged the Directors on their appropriateness retrospective testing to compare prior year’s based on our understanding of the business, forecasts to current year actual results to results of our audit work and the relevant macro- evaluate the reliability and reasonableness of economic factors. historic forecasts. − The risks and judgement the Directors considered − Impact of climate risks on long-term strategy, as most likely to impact the business and where financial projections, and viability of the business. we challenged were: − Reasonableness of bad debt provisions and − A major client default or loss of a major client: valuation adjustments including credit value In doing so we considered the reduced client adjustments (CVA). concentration risk in the forward and options business based on revenue. − Free cash position: We reviewed the Directors cash flow forecast for a period of at least 12 months from the date of signing these financial statements. We reviewed the Directors downside scenario considering the impact of rising interest rates, inflation and contraction in the UK economy on the operations and Group’s internal forecast including related assumptions. − We also considered the adequacy of the Group’s capital regulatory requirements. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. − Reliability of the forecasts prepared by the Our responsibilities and the responsibilities of the Directors were compared to relevant published Directors with respect to going concern are described data and to data obtained from reputable in the relevant sections of this report. OVERVIEW COVERAGE 99% (2022: 96%) of Group profit before tax 100% (2022: 100%) of Group revenue 99% (2022: 100%) of Group total assets KEY AUDIT MATTERS 2023 2022 Existence and accuracy of revenue Accounting for growth share schemes Appropriateness of Credit value adjustments (CVA) Fair value of growth shares * ** *** MATERIALITY Group financial statements as a whole £2.1 million (2022: £1.9 million) based on 5% of adjusted profit before tax excluding the impact of one-off expenses incurred for business combination and interest earned on the e-money balance (2022: 5% of Profit before tax less other operating income). *This pertains to the errors identified in the current year relating to the accounting treatment of growth share schemes in previous years. **This is no longer considered to be a KAM because the model is now well established in addition to the rationale and justification of the various associated inputs. ***This is no longer considered to be a KAM due to our enhanced understanding of the valuation methodology and consistency of its application, assumptions and judgments around the valuation of growth share schemes as well as the limited impact in the current year where only one new scheme was issued. 94 95 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Independent Auditor’s report Continued AN OVERVIEW OF THE SCOPE OF OUR AUDIT OUR INVOLVEMENT WITH COMPONENT KEY AUDIT MATTER EXISTENCE AND ACCURACY OF REVENUE The Group’s revenue recognition policy is included with the accounting policies in note 2 and segment reporting on revenue is included in note 5 Our Group audit was scoped by obtaining an AUDITORS understanding of the Group and its environment, For the work performed by component auditors, including the Group’s system of internal we determined the level of involvement needed control, and assessing the risks of material in order to be able to conclude whether sufficient misstatement in the financial statements. We appropriate audit evidence has been obtained also addressed the risk of management override as a basis for our opinion on the Group financial of internal controls, including assessing whether statements as a whole. Our involvement with there was evidence of bias by the Directors component auditors included the following: that may have represented a risk of material misstatement. The Group comprises the Parent Company and 10 subsidiaries (2022: 14). Alpha Group International Plc, Alpha FX Limited, Alpha FX Institutional Limited and Alpha FX Europe Limited have been determined to be significant components. With the exception of Alpha FX Europe Limited, the audits of all significant components were performed by the Group engagement team. The audit of Alpha FX Europe Limited was performed by our network firm in Malta with the Group engagement team performing additional specific audit procedures on material financial statements areas. We determined that the Alpha Foreign Exchange (Canada) Limited, Financial transactional services B.V and Alpha FX Italy Limited (active until 30 Sept 2023, transferred to Alpha FX Europe) were not significant components for the purposes of the Group audit. For these entities, specific audit procedures on material financial statements areas were performed by the Group engagement team. The financial information of Alpha FX Netherlands, a non-significant component, was subject to review procedures performed by the Group engagement team. All other entities are not trading currently or are dormant and have no impact on the Group audit. − Instructions were issued to the component auditor detailing the scope, the risk assessment, timing of their work and the allocated component materiality thresholds; − We conducted numerous meetings through the planning, execution and completion stages of the audit; − We performed a detailed review of the submitted reporting deliverables and reviewed the work undertaken by our component auditor by including their working papers, and findings where necessary. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgement, 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) that 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. CORPORATE GOVERNANCE INDEPENDENT AUDITOR’S REPORT The risk relating to the FX Hedging revenue stream revolves around the existence and accuracy of revenue recorded in the year. Existence refers to the risk that trades did not occur or were overstated, accuracy refers to the risk that calculations identifying the revenue amounts to be recorded contain errors. The Group’s reported FX Hedging revenue drives the level of sales commissions payable to front office staff and is a key metric in the Group’s Growth Share Scheme used to incentivise directors, key Management and certain staff, which further increases the risk over the existence of revenue recognised. For Alternative Banking, the risk lies in the payments revenue which is recognised on a monthly basis in line with the minimum monthly fee agreed with customers subject to adjustments for other fees e.g. monthly bank charges based on volume collections or payments transactions are added. There is a risk that the calculations identifying the revenue amounts to be recorded contains errors. For these reasons we considered the existence and accuracy of revenue to be a key audit matter. HOW THE SCOPE OF OUR AUDIT ADDRESSED THE KEY AUDIT MATTER We reviewed the revenue recognition policy applied by management to each of the Group’s revenue streams and considered its compliance with IFRS 9 ‘Financial Instruments’ (FX hedging revenue) and IFRS15 ‘Revenue from Contracts with Customers’’ (Payments transaction fee) with a specific focus on existence and measurement of revenue. For FX Hedging revenue, we tested a sample of matched principal spot, forward and option contracts to verify the existence and accuracy of revenue, with reference to underlying supporting trade tickets and third party information recorded with the relevant banking counterparty. We recalculated the profits arising from the trades and tested key inputs to the relevant underlying supporting documents outlined above. For Alternative Banking, payments revenue, we agreed a sample of the Payments transaction fee revenue to supporting documentation. We obtained revenue confirmations from a sample of customers on the payments transaction fee revenue report to address existence and accuracy. Further, we have performed operating effectiveness testing over the key revenue controls in the process, as part of our testing we have selected the appropriate sample size as per our methodology and assessed whether these controls have operated as intended during the financial period under consideration. KEY OBSERVATIONS: Based on the procedures performed we consider the recognition of revenue to be appropriate and in line with the requirements of the reporting framework. 96 97 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Independent Auditor’s report Continued KEY AUDIT MATTER HOW THE SCOPE OF OUR AUDIT ADDRESSED ACCOUNTING FOR GROWTH SHARE SCHEMES See note 2 on accounting policy for Share-based payments and note 4 for additional disclosures The group has several growth share schemes in place to reward key employees who work within the entities in the Group. These schemes are equity settled and are within the scope of International Financial Reporting Standards (IFRS) 2. Accounting for growth share schemes is an inherently complex area in relation to the share option charge, vesting period and fair valuation accounting treatment. During the current year, we have identified various errors in the accounting treatment of the growth share scheme in previous years. Due to the material nature of these errors, the previous years financial statements have been restated in accordance with the requirements of International Accounting Standards (IAS) 8 and a third statement of financial position has been presented in accordance with the requirements of International Accounting Standards (IAS) 1. THE KEY AUDIT MATTER We have obtained an understanding of the accounting treatment and the related controls around the growth share schemes (schemes). We reviewed the schemes agreements to understand the mechanics and various terms and conditions. With the assistance from our technical accounting department, we assessed the accounting treatment of the several growth share schemes, including the impact of the previous years’ errors on the financial statements. We evaluated the prior year restatement disclosures and assessed if these are in line with the requirements of IAS 8. Additionally, we tested the completeness and accuracy of the prior year restatement calculations by tracing back to the prior year audited financial statements and ensuring the correct journal have been posted within the correct period. KEY OBSERVATIONS: Based on the above procedures, We have not identified any indicator that would suggest that the prior period errors have not been corrected appropriately and that the current accounting treatment for growth share schemes does not comply with the requirements of IFRS 2 CORPORATE GOVERNANCE INDEPENDENT AUDITOR’S REPORT Group financial statements Parent company financial statements 2023 £ million 2022 £ million 2023 £ million 2022 £ million Materiality 2.1 1.9 0.7 0.7 Basis for determining materiality Rationale for the benchmark applied Performance materiality Basis for determining performance materiality Rationale for the percentage applied for performance materiality 5% of Profit before tax excluding the impact of one-off expenses incurred for business combination and interest earned on e-money balance. Investors are the principal stakeholders and are primarily interested in profitability. Due to rising interest rates, the Group has earned a significant amount of interest income which has been eliminated to arrive at a profit more reflective of investors’ interest and core business profitability. 5% of Profit before tax less other operating income. 1% of total assets 1% of total assets The entity is an asset based entity and serves as a holding company for group. In the absence of any revenue total assets is used as a benchmark to calculate materiality. The entity is an asset based entity and serves as a holding company for group. In the absence of any revenue total assets is used as a benchmark to calculate materiality. Investors are the principal stakeholders and are primarily interested in profitability. Due to rising interest rates, the Group has earned a significant amount of interest income which has been eliminated to arrive at a profit more reflective of investors interest. 1.37 1.24 0.4 0.4 65% of Materiality 65% of Materiality 65% of Materiality 65% of Materiality The Group has extended its geographical range and has some complex estimates involved in the financial statements. As such, we have deemed it appropriate to set our threshold at 65%. The Group has extended its geographical range and has some complex estimates involved in the financial statements. As such, we have deemed it appropriate to set our threshold at 65%. This is based on our expected value of known and likely misstatements in the current year, and Management’s attitude to proposed adjustments. This is based on our expected value of known and likely misstatements in the current year, and Management’s attitude to proposed adjustments. OUR APPLICATION OF MATERIALITY In order to reduce to an appropriately low level the Based on our professional judgement, we determined dependent on the size and our assessment of the 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. probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. materiality for the financial statements as a whole risk of material misstatement of that component. and performance materiality as shown above. Component materiality ranged from £0.42m to COMPONENT MATERIALITY £2.1 million (2022: £0.132 million to £1.8 million). In the audit of each component, we further applied performance materiality levels of 65% (2022: 65%) For the purposes of our Group audit opinion, we of the component materiality to our testing to set materiality for each significant component of ensure that the risk of errors exceeding component the Group based on a percentage of between 21% materiality was appropriately mitigated. and 90% (2022: 7% and 95%) of Group materiality 98 99 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Independent Auditor’s report Continued REPORTING THRESHOLD We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £42k (2022: £39.4k). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. OTHER INFORMATION The directors are responsible for the other information. The other information comprises the information included in the annual report 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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. OTHER COMPANIES ACT 2006 REPORTING Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. STRATEGIC REPORT In our opinion, based on the work undertaken in the course of the audit: AND DIRECTORS’ REPORT − 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. In the light of the knowledge and understanding of the Group and 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. MATTERS ON WHICH We have nothing to report in respect of the following matters in relation to which the WE ARE REQUIRED Companies Act 2006 requires us to report to you if, in our opinion: TO REPORT BY EXCEPTION − adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from 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 CORPORATE GOVERNANCE INDEPENDENT AUDITOR’S REPORT RESPONSIBILITIES OF DIRECTORS respect of irregularities, including fraud. The extent As explained more fully in the Directors’ responsibilities statement, 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. to which our procedures are capable of detecting irregularities, including fraud is detailed below. We gained an understanding of the legal and regulatory framework applicable to the Group and Parent Company, and the industry in which it operates and considered the risk of acts by the Group and Parent Company which would be contrary to applicable laws and regulations, including fraud. These included but were not limited to compliance with the Companies Act 2006, Accounting standards, AIM Rules, Corporation Tax Act 2010 and the Financial Conduct Authority (FCA) regulations. We assessed compliance with applicable laws and regulations and performed audit procedures on these areas as considered necessary. OUR PROCEDURES INVOLVED: AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF − enquiry with the management and those 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 charged with governance regarding how the Group and Parent Company is complying with those legal and regulatory frameworks and whether there were any known instances of non-compliance, or any actual, suspected or alleged fraud; − assessment of the Group’s compliance with applicable taxation regulations with the assistance of tax specialists; exists. Misstatements can arise from fraud or error − review of board and audit committee meeting and are considered material if, individually or in the minutes for any known instances of non- aggregate, they could reasonably be expected to compliance, or any actual, suspected or alleged influence the economic decisions of users taken on fraud; and review of legal correspondence and the basis of these financial statements. those from the regulator; and EXTENT TO WHICH THE AUDIT WAS CAPABLE OF from the regulator for any instances of non- DETECTING IRREGULARITIES, INCLUDING FRAUD compliance with laws and regulations. − review of legal correspondence and those Irregularities, including fraud, are instances of We assessed the susceptibility of the financial non-compliance with laws and regulations. We statements to material misstatement, including design procedures in line with our responsibilities, fraud. Our risk assessment procedures included but outlined above, to detect material misstatements in not limited to: 100 101 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023CORPORATE GOVERNANCE INDEPENDENT AUDITOR’S REPORT Independent Auditor’s report Continued − Enquiry with management and those charged non-compliance with laws and regulations throughout with governance regarding any known or the audit. We also reviewed the result of component suspected instances of fraud; audit teams procedures performed in this regard. − Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud; − Discussion amongst the engagement team (including internal forensics experts) as to how and where fraud might occur in the financial statements; Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. − Performing analytical procedures to identify any There are inherent limitations in the audit procedures unusual or unexpected relationships that may performed and the further removed non-compliance indicate risks of material misstatement due to with laws and regulations is from the events and fraud. Based on the above, we identified the areas most susceptible to fraud to be management override of controls, revenue recognition (existence and accuracy) including the related traders commission earned on the FX Hedging revenue. transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. OUR PROCEDURES IN RESPONSE TO THE ABOVE USE OF OUR REPORT INCLUDED: − The procedures set out in the key audit matters section of our report; − In addressing the risk of fraud through management override of controls, we tested the appropriateness of a sample of journal entries and other adjustments in the general ledger by agreeing to supporting documentation and evaluated the business rationale of any significant transactions that were unusual or outside the normal course of business and testing of accounting estimates due to risk of management bias; and − Incorporating unpredictability procedures into our audit approach. We communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including component engagement teams and remained alert to any indications of fraud or 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. Justin Chait (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor, London, UK 19 March 2024 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 102 103 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Consolidated Statement of Comprehensive Income For the year ended 31 December 2023 Year ended 31 December 2023 Year ended 31 December 2022 Consolidated Statement of Financial Position As at 31 December 2023 Company number: 07262416 As at 31 December 2023 REVENUE Net treasury income – client funds Net treasury income – own funds TOTAL INCOME Operating expenses OPERATING PROFIT Underlying operating profit Net treasury income – client funds Non-underlying items Finance income Finance expenses PROFIT BEFORE TAXATION Underlying profit before taxation Net treasury income – client funds Non-underlying items Taxation PROFIT FOR THE YEAR Attributable to: Equity holders of the parent Non-controlling interests PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME/(LOSS): Items that may be reclassified to the profit or loss: Exchange (loss)/gain on translation of foreign operations Gain/(loss) recognised on hedging instruments Tax relating to items that may be reclassified TOTAL COMPREHENSIVE INCOME FOR THE YEAR Attributable to: Equity holders of the parent Non-controlling interests TOTAL COMPREHENSIVE INCOME FOR THE YEAR Earnings per share attributable to equity owners of the parent (pence per share) − basic − diluted − underlying basic − underlying diluted 1The prior period restatement is detailed further in note 4. 104 Note 5 5 5 6 6 7 7 6 9 22 10 10 10 10 £’000 110,442 73,676 1,843 185,961 (73,809) 112,152 39,205 73,676 (729) 4,616 (834) 115,934 42,987 73,676 (729) (27,142) 88,792 88,825 (33) 88,792 (679) 3,193 (798) 90,508 90,541 (33) 90,508 206.2p 203.4p 76.7p 75.6p Restated1 £’000 98,332 9,278 - 107,610 (61,159) 46,451 38,274 9,278 (1,101) 784 (458) 46,777 38,600 9,278 (1,101) (8,164) 38,613 38,613 - 38,613 1,382 (639) 160 39,516 39,516 - 39,516 92.1 p 89.0p 76.3p 7 3.7 p FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2022 As at 1 January 2022 Restated1 £’000 Restated1 £’000 NON-CURRENT ASSETS Goodwill Intangible assets Property, plant and equipment Right-of-use assets Derivative financial assets TOTAL NON-CURRENT ASSETS CURRENT ASSETS Cash and cash equivalents Derivative financial assets Other receivables Fixed collateral Current tax asset TOTAL CURRENT ASSETS TOTAL ASSETS EQUITY Share capital Share premium account Capital redemption reserve Merger reserve Redemption reserve Retained earnings Translation reserve EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT Non-controlling interests TOTAL EQUITY CURRENT LIABILITIES Derivative financial liabilities Other payables Deferred income Lease liability Current tax liability TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Derivative financial liabilities Other payables Redemption liability Deferred tax liability LEASE LIABILITY TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES Note 12, 26 12, 26 13 14 16 20 16 19 20 21 21 21 21 21, 26 21 21 16 23 14 16 23 26 9 14 £’000 4,707 14,007 8,800 20,894 14,369 62,777 197,941 95,203 7,796 8,810 73 309,823 372,600 87 52,566 4 667 (1,884) 170,939 581 222,960 531 223,491 34,288 59,750 7,072 1,028 11,293 113,431 5,922 875 1,884 5,305 21,692 35,678 149,109 372,600 - 4,814 3,248 11,848 27,819 47,729 136,799 99,119 5,333 4,726 - 245,977 293,706 84 52,075 4 667 - 88,807 1,260 142,897 - 142,897 42,764 77,340 4,924 1,407 3,781 130,216 7,317 222 - 1,387 11,667 20,593 150,809 293,706 The Consolidated Financial Statements of Alpha Group International plc were approved by the Board of Directors on 19 March 2024 and signed on its behalf by: 1The prior period restatement is detailed further in note 4. M J Tillbrook Director T Powell Director - 2,995 2,323 6,136 17,335 28,789 108,044 58,551 7,825 3,506 - 177,926 206,715 82 50,819 4 667 - 56,260 (122) 107,710 - 107,710 36,697 40,100 2,193 450 3,847 83,287 7,745 - - 1,061 6,912 15,718 99,005 206,715 105 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Consolidated Statement of Cash Flows For the year ended 31 December 2023 Consolidated Statement of Changes in Equity For the year ended 31 December 2023 Year ended 31 December 2023 Year ended 31 December 2022 Note £’000 Restated1 £’000 Share capital Share premium account Capital redemption reserve Merger reserve Redemption Reserve Retained earnings Translation reserve Total Non- controlling interests Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Attributable to the owners of the Parent FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Net treasury income – client funds Net treasury income – own funds Finance income Finance expense Amortisation of intangible assets Intangible assets written off Depreciation of property, plant and equipment Depreciation of right-of-use assets Loss on disposal of property, plant and equipment Share-based payment (credit)/expense (Increase) in other receivables (Decrease)/increase in other payables Decrease/(increase) in derivative financial assets Decrease in financial assets at amortised cost (Decrease)/increase in derivative financial liabilities Increase in fixed collateral CASH INFLOWS FROM OPERATING ACTIVITIES Net treasury income received Tax paid NET CASH INFLOWS FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of subsidiary, net of cash acquired Payments to acquire property, plant and equipment Payments to acquire right-of-use assets Proceeds from sale of property, plant and equipment Expenditure on intangible assets Interest received NET CASH OUTFLOWS FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Issue of ordinary shares by Parent Company Issue of shares options Forfeiture of share options Dividends paid to equity holders of Parent Company Dividends paid to subsidiary shareholders Payment of lease liabilities – principal Payment of lease liabilities – interest NET CASH OUTFLOWS FROM FINANCING ACTIVITIES INCREASE IN NET CASH AND CASH EQUIVALENTS IN THE YEAR Net cash and cash equivalents at beginning of year Net exchange (loss)/gains NET CASH AND CASH EQUIVALENTS AT END OF YEAR 115,934 (73,676) (1,843) (4,616) 834 3,111 26 1,325 1,939 8 (58) (1,343) (15,550) 19,920 - (9,232) (4,084) 32,695 73,975 (15,881) 90,789 (8,227) (6,927) (235) 5 (8,025) 4,616 (18,793) 491 - - (6,368) (2,762) (779) (793) (10,211) 61,785 136,799 (643) 197,941 46,777 (9,278) - (784) 458 1,573 43 764 1,154 50 1,101 (1,476) 40,014 (51,052) 5,803 5,000 (1,220) 38,927 7,490 (7,486) 38,931 - (1,739) (46) - (3,435) 729 (4,491) 996 44 (77) (4,810) (1,877) (891) (452) (7,067) 27,373 108,044 1,382 136,799 7 7 12 12 13 14 13 26 13 13 12 11 14 14 20 BALANCE AT 1 JANUARY 2022 (as previously reported) 82 50,783 Prior period restatement1 - 36 BALANCE AT 1 JANUARY 2022 (restated) 82 50,819 4 - 4 - - - - - - - 667 - 667 - - - - - - - - - - - 2 432 - - - - - 824 - - 84 52,075 4 667 - - - 3 - - - - - 491 - - 87 52,566 - - - - - - 4 - - - - - - - - - - - - - - - - - - - (1,884) - - - 54,189 (124) 105,601 4,193 109,794 2,071 2 2,109 (4,193) (2,084) 56,260 (122) 107,710 38,613 (479) - 38,613 1,382 903 (2) 1 - 1,101 (6,687) - - - - - 432 1 824 1,101 (6,687) 88,807 1,260 142,897 - - - - - - - - - 107,710 38,613 903 432 1 824 1,101 (6,687) 142,897 88,825 2,395 103 (3) (58) (9,130) - 88,825 (33) 88,792 (679) 1,716 - 1,716 - - - - (1,781) 491 (58) (9,130) 564 (1,217) - - - 491 (58) (9,130) 667 (1,884) 170,939 581 222,960 531 223,491 Profit for the year (restated1) Other comprehensive income/(expense) Transactions with owners Shares issued on vesting of share option schemes (restated1) Issue of share options in subsidiary undertakings (restated1) Shares issued in relation to SAYE share scheme Share-based payments (restated1) Dividends paid(restated1) BALANCE AT 31 DECEMBER 2022 (restated) Profit/(loss) for the year Other comprehensive income/(expense) Transactions with owners Acquisition of subsidiary Shares issued on vesting of share option schemes Share-based payments Dividends paid BALANCE AT 31 DECEMBER 2023 1The prior period restatement is detailed further in note 4. 1The prior period restatement is detailed further in note 4. 106 107 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Notes to the Consolidated Financial Statements For the year ended 31 December 2023 1. GENERAL INFORMATION Alpha Group International 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 07262416) and its registered office is Brunel Building, 2 Canalside Walk, London, England, W2 1DG. The Consolidated Financial Statements incorporate the results of the Company and its subsidiary undertakings. The Group’s principal activity is the development of financial strategies and technologies to assist corporates and institutions in their FX risk management, mass payments and account opening requirements. The material accounting policies adopted in the preparation of the Consolidated Financial Statements are set out in note 2. 2. MATERIAL ACCOUNTING POLICIES Basis of preparation The Consolidated Financial Statements have been prepared in accordance with UK adopted international accounting standards using the measurement bases specified by UK IFRS for each type of asset, liability, revenue or expense. The Consolidated Financial Statements are presented in Pounds Sterling (“£”), and all values are rounded to the nearest thousand (“£’000”) except where otherwise indicated. The material 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 adopted UK adopted 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 those detailed within ‘Financial Instruments’ below. a) New standards, interpretations and amendments effective from 1 January 2023: − IAS 1 has replaced the requirement for the Group to disclose its significant accounting policies with the requirement to disclose material accounting policy information. − There are no other new standards, interpretations and amendments which became mandatorily effective for the current reporting period which have had any material effect on the financial statements of the Group. b) New standards, interpretations and amendments not yet effective: − There are no IFRS interpretations that are not yet effective that would be expected to have a material impact on the Group. Any new or amended accounting standards or interpretations that are not yet mandatory have not been early adopted. FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION Basis of consolidation The Consolidated Financial Statements consist of the financial statements of the ultimate Parent Company (Alpha Group International plc) and all entities controlled by the Company (its subsidiaries). 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. Acquisition accounting Business combinations are accounted for using the acquisition method. The cost of the business combination is measured as the aggregate of the consideration transferred and contingent consideration, measured at fair value on the date of the business combination, and the value of any non-controlling interests in the acquiree. The business combination costs incurred are expensed. When the Group acquires a business it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions at the business combination date. On an acquisition-by-acquisition basis, the Group elects whether to measure the non-controlling interests in the acquiree, if any, at fair value or at the proportionate share of the acquiree’s identifiable net assets. iv. 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. Where there is an obligation to purchase the non-controlling interest at a future date, a financial liability will be recognised on the business combination. The liability is initially recognised at fair value if it meets the definition of a derivative under IFRS 9 Financial instruments. The financial liability for the non-controlling interest is subsequently accounted for under IFRS 9, with all changes in the carrying amount, including the non-controlling interest share of profit, recognised as a re-measurement in the income statement. When the obligation or “put liability” is exercised, the carrying amount of the financial liability at that date is extinguished by the payment of the exercise price. 108 109 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 2. MATERIAL ACCOUNTING POLICIES [CONT.] Annual account fees Segmental 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 makers 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-makers. The chief operating decision-makers responsible for allocating resources and assessing performance of the operating segments are identified as the Group’s Chief Executive Officer and Chief Financial Officer. Going concern The Board has concluded that it is appropriate to adopt the going concern basis, having undertaken a review of financial forecasts and available resources. The Group meets its day-to-day working capital requirements through its strong cash reserves. As at 31 December 2023, the Group had a healthy liquidity position with £197.9m of cash and cash equivalents (see note 20), with no debt financing commitments. The Group has net current assets of £196.4m at 31 December 2023 and net assets of £223.5m. In assessing going concern, management have considered the potential effects the current high interest rate environment and the impact that these rates would have on our clients and the sectors in which they operate in. We do not anticipate any significant impact, from a going concern perspective to the business from these events. This assessment has considered the impact on the Group’s operations, its 2024 budget and 2025 internal forecast. Given the nature of the above events, severe downside scenarios have been modelled where revenue targets are missed with the assumption that a number of clients are unable to meet their mark-to-market obligations, resulting in bad debts. Even in these scenarios, the Group has strong liquidity, no external debt and the availability of mitigating actions that would allow it to meet its financial liabilities as they fall due. These mitigating actions, should they be required, are all within management’s control and could include reducing new recruitment, lowering commission or bonus payments, and reducing capital expenditure. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group continues to adopt the going concern basis in preparing its Consolidated Financial Statements. Revenue FX Hedging When the Group enters into a foreign exchange contract with a client, it immediately enters into a separate matched contract with its banking counterparty. Revenue from annual account fees is recognised on a straight-line basis over the 12 months from the date the account is opened, resulting in deferred income on the face of the Consolidated Statement of Financial Position. The initial set-up of the account may only happen upfront at a single point in time (with the associated fee being charged at this point), but the ongoing access to the account (particularly through access to the portal) and other ancillary services are provided to the customer throughout the period the account is open. Fund Finance Fund Finance provides advisory services to institutional clients who require intermediary advisory services to support their funding requirements. The offering is distributed via a newly established sales team from the London head office. Revenue is recognised in the period in which the advisory work is performed. Cobase Cobase charge recurring monthly subscription fees for use of their multibank connectivity platform. They also charge implementation fees and user costs. Revenue from subscription fees and user costs are recognised on a straight-line basis over the period in which the account is being used. Implementation fees and are recognised in the period in which the implementation project has been finalised. Net treasury income (previously called Other Operating Income) ‘Net treasury income- client funds’ is made up of interest generated from client cash balances, as a result of the increased interest rate environment (further detail within note 5). Whilst the increased interest stream is a positive boost for the Group and a natural by-product of our increasingly diversified product offering, we are mindful that aspects of its dynamics are driven by macroeconomics beyond our control. We have therefore chosen to recognise interest income on client balances as ‘net treasury income-client funds’ (formerly Other operating income), not operating revenue, on the face of the Consolidated Statement of Comprehensive Income. The changes to the interest rate environment has meant that these accounts can be interest bearing, whilst maintaining the safeguarding requirements. The Group is able to obtain attractive interest rates on these overnight client cash balances only because of its ability to aggregate numerous individual client balances, many of which are transitory and typically only held for short periods of time. Under the terms of the Electronic Money Licence (EMI) the Group is not able to pass any of the interest earned back to the clients. ‘Net treasury income – own funds’ relates to interest generated within the FX risk management division on initial and variation margin held by the Group. The Group has title over these funds with the balances and therefore associated interest earned being a direct consequence of the operational business and has therefore been included within Total Income and Operating Profit in the Consolidated Statement of Comprehensive Income. Spot and forward revenue is recognised when a binding contract is entered into by a client and the rate is fixed and determined. Interest earned on Alpha’s own, free cash is recognised within finance income in the Consolidated Statement of Revenue represents the difference between the rate offered to clients and the rate the Group pays its banking counterparties aggregated with the volume of currency transacted. 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 paid by clients and the premium the Group pays to its banking counterparties. Payments and collections Alternative Banking provides payment and collection services and receives revenue from both banking fees and spot transactions. Banking fees are charged for (but are not limited to) electronic payments in and out of accounts (e.g. Faster Payments, CHAPS, International payments and collections) and implementation fees. Revenue in respect of transactional banking fees is recognised when a payment is executed. Revenue is recognised at this point in time as the performance obligation is satisfied by transferring control of the contract to the client. Comprehensive Income. Underlying measures The Group reports underlying operating profit, underlying EPS and underlying Profit before taxation. These measures are not measures of performance under IFRS and should be considered in addition to, and not as a substitute for, IFRS measures of financial performance and liquidity. The Group uses non-GAAP performance measures as key financial indicators as the Board believe these better reflect the underlying performance of the business. Underlying items exclude net treasury income from client funds, share award costs, M&A deal costs, amortization of purchased intangibles and costs in relation to the anticipated move to premium listing on the London Stock Exchange. 110 111 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 2. MATERIAL ACCOUNTING POLICIES [CONT.] Fair value through profit or loss Foreign currency translation The Group’s consolidated historical financial statements are presented in pounds sterling, which is the functional currency of the Parent. 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. 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: 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). Other than derivative financial instruments which are not designated as hedging instruments, the Group does not have any financial assets at fair value through profit or loss. Amortised cost The Group’s financial assets measured at amortised cost comprise other receivables and cash and cash equivalents in the Consolidated Statement of Financial Position. 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. De-recognition of financial assets Financial assets will be de-recognised when the contractual rights to the cash flows from the assets have expired, or when the Group transfers its contractual rights to receive the cash flows and substantially all of the risk and rewards of the assets have been transferred. − Assets and liabilities at each period end are translated at the prevailing closing rate at the date of the Consolidated Statement of Financial Position; Management’s judgement is applied in determining whether the contractual rights to the cash flows from the transferred assets have expired or whether the Group retains the rights to receive cash flows on the assets but assume an obligation to − Income and expenses for each period within the Consolidated Statement of Comprehensive Income are translated at the pay for those cash flows. average rate for the period; and − On consolidation, exchange differences arising from the translation of overseas operations are recognised in other Impairment comprehensive income and accumulated in the translation reserve as a separate component of equity. On disposal of a Impairment provisions are recognised under the general approach according to a three-stage expected credit loss foreign operation, the cumulative translation differences are transferred to the Consolidated Statement of Comprehensive impairment model. Impairment provisions represent the difference between the present value of all contractual cashflows Income as part of the gain or loss on disposal. Financial instruments Financial Assets Initial measurement All financial assets are measured initially at fair value less transaction costs. The Group’s financial assets include derivatives not designated as hedging instruments (foreign exchange forward and option contracts with customers and banking counterparties), derivatives designated as hedging instruments (foreign exchange forward and interest rate swap contracts with customers and banking counterparties) and amortised cost assets (financial assets at amortised cost, other receivables, cash and cash equivalents and fixed collateral). Subsequent measurement IFRS 9 divides all financial assets into two classifications ¬- those measured at amortised cost and those measured at fair value. Where assets are measured at fair value, gains and losses are recognised in the Consolidated Statement of Comprehensive Income. The classification of a financial asset is made at the time it is initially recognised, namely when the Group becomes a party to the and the present value of expected future cashflows. Impairment losses are recognised in the Consolidated Statement of Comprehensive Income. The Group performs an assessment of a significant increase in credit risk on an annual basis. In accordance with IFRS 9, the Group can apply the policy election for trade receivables. The Group recognises lifetime expected credit losses under the simplified approach. The Group has performed a re-assessment of lifetime expected credit losses at 31 December 2023. 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, subsequently 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 and trade and other payables. De-recognition of liabilities A financial liability is de-recognised when the obligation under the liability is discharged, substantially modified, 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 contractual provisions of the instrument. If certain conditions are met, the classification of an asset may subsequently need to de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying be reclassified. amounts is recognised in the Consolidated Statement of Comprehensive Income. Following initial measurement, the Group measures its financial assets at fair value through profit or loss or amortised cost, based on the business model for managing the financial instruments and the contractual cash flow characteristics of the instrument. 112 113 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 2. MATERIAL ACCOUNTING POLICIES [CONT.] Financial liabilities [cont.] Offsetting financial instruments Cash and cash equivalents Cash and cash equivalents comprise cash balances and deposits held at call with banks. For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above. When there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or Cash held as collateral with banking counterparties for which the Group does not have immediate access, is shown as fixed realise the asset and settle the liability immediately, financial assets and liabilities are offset, and the net amount reported in collateral on the face of the Consolidated Statement of Financial Position. 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. 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 Changes in the fair value of derivatives are included in the Consolidated Statement of Comprehensive Income. The Group’s 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 derivative financial assets and liabilities comprise of forward and option foreign exchange contracts, and interest rate swap are presented as non-current liabilities. contracts. The Group undertakes matched principal broking involving undertaking 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. Derivative financial instruments and hedge accounting The Group uses derivative financial instruments to hedge part of its exposure to foreign exchange and interest rate risks. All derivative financial instruments are initially measured at fair value on the contract date and are also measured at fair value at subsequent reporting dates. Hedge accounting is applied to financial assets and financial liabilities only where all of the following criteria are met: − The hedging relationship consists only of eligible hedging instruments and eligible hedged items; − At the inception of hedge there is formal designation and documentation of the hedging relationship, the Group’s risk management objective and strategy for undertaking the hedge, the hedged item and hedging instrument, and how the hedge effectiveness will be assessed; − An economic relationship exists between the hedged item and the hedging instrument; − Credit risk does not dominate changes in value; and − The hedge ratio is the same for both the hedging relationship and the quantity of the hedged item actually hedged and the quantity of the hedging instrument used to hedge it. If derivatives do not qualify for hedge accounting, any changes in the fair value of the derivative financial instrument are recognised in the income statement as they arise. Hedge relationships are classified as cash flow hedges where the derivative financial instruments hedge the Group’s exposure to variability in cash flows resulting from a highly probable forecasted transaction. These include the exchange rate risk of interest receivable denominated in foreign currency and interest rate risk. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in other comprehensive income and the ineffective portion is recognised immediately in the income statement. If the hedging derivative expires or is sold, terminated, or exercised, or the hedge no longer meets the criteria for hedge accounting, or the hedge designation is revoked, hedge accounting is discontinued prospectively. 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. 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 is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised, based on the tax rates that have been enacted or substantively enacted by the balance sheet date. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. 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. 114 115 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 2. MATERIAL ACCOUNTING POLICIES [CONT.] 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. Contributions made by the company are charged to the Consolidated Statement of Comprehensive Income. 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. Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses. The amortisation and impairment losses of intangible assets acquired in a business combination are classified as non-underlying in the income statement. The estimated useful lives of intangible assets are as follows: Internally generated software and Domain names Software obtained through acquisition Brand Customer relationships — — — — 3 years straight line 3 years straight line 10 years straight line 14 years straight line Impairment of property, plant and equipment and intangible assets Equity-settled share-based schemes are measured at fair value, excluding the effect of non-market-based vesting conditions, Tangible and intangible assets are assessed for any indicators of impairment at each balance sheet date or if there are at the date of grant using an appropriate option pricing model. The Growth Shares Schemes have been valued using a any indicators of impairment. If any indication exists, or when annual impairment testing for an asset is required, the Group Monte Carlo Simulation Approach due to the existence of market-based conditions. Non-market-based conditions exist over estimates the asset’s recoverable amount. The recoverable amount is determined on an individual asset-by-asset basis. revenue-based targets which require management to estimate the probability of meeting these conditions. The Approved and When the recoverable amount is less than its carrying amount, the asset is considered impaired and is written down to its Unapproved Options Schemes have been valued using a Black Scholes option pricing model as only a service-based condition recoverable amount. exists. Both schemes require the estimation of appropriate attrition rates to estimate the number of share options which are likely to vest. Goodwill The fair value of the shares or share options less the subscription price payable by the employees 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 Consolidated Statement of Comprehensive Income. Property, plant and equipment Owned assets Property, plant and equipment is stated at cost less accumulated depreciation and where applicable, impairment losses. Depreciation Depreciation is charged to the Consolidated Statement of Comprehensive Income on a straight-line basis over the estimated useful lives of each item of property, plant and equipment. Estimated residual values are included in the calculation of depreciation. The estimated useful lives of property, plant and equipment are as follows: Improvements to property Fixtures and fittings Computer equipment — — — Period of lease, straight line 4 to 5 years straight line 3 years straight line Intangible assets Goodwill arising on the acquisition of subsidiaries represents the excess of the cost over the fair value of the identifiable net assets acquired at the date of the acquisition and is carried at cost less any accumulated impairment losses. Impairment of goodwill Goodwill is not subject to amortisation and is tested annually for impairment. Impairment is determined by assessing the recoverable amount of the cash generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount, where the recoverable amount is the higher of the asset’s fair value less costs of disposal and value in use. Impairment losses relating to goodwill cannot be reversed in future periods. Leases In accordance with IFRS 16, the Group recognises a right-of-use asset and corresponding liability at the date at which the leased asset is available for use. Right-of-use assets are recorded initially at cost and amortised on a straight-line basis over the lease term. Cost is defined as the net present value of the lease liabilities, plus any initial costs and dilapidation provisions, less any lease incentives received. The right-of-use asset is tested for impairment if there are any indicators of impairment. Intangible assets not acquired in a business combination consist of internally developed software and domain names. The lease liability is measured at the present value of the lease payments, discounted at the rate implicit in the lease, or if Expenditure on internally developed software is capitalised if the costs can be reliably measured, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group has sufficient resources to that cannot be readily determined, at the lessee’s incremental borrowing rate specific to the term, country, currency and start date of the lease. complete the development and to use or sell the asset. The assets are initially recorded at cost including labour, directly The finance cost is charged to the Consolidated Statement of Comprehensive Income over the lease period so as to attributable costs and any third-party expenses, and amortised over their useful economic lives of 3 years from the date of produce a constant periodic rate of interest on the remaining balance of the liability for each period. first use. Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy Payments associated with leases with a lease term of twelve months or less and leases of low-value assets are recognised the definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their as an expense in the Consolidated Statement of Comprehensive Income on a straight-line basis. Short-term/low value exemptions fair value at the acquisition date. 116 117 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 2. MATERIAL ACCOUNTING POLICIES [CONT.] Significant judgements FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 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 of the new shares to which they relate. 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 only recognised if the amount can be estimated reliably. Provisions are measured based on the best estimates of the expenditure required to settle the obligation at the reporting date and are discounted to present value where the effect is material. 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. Significant estimates Impairment of financial assets The Group recognises impairment provisions under the general approach according to a three-stage expected credit loss impairment model. Impairment provisions represent the difference between the present value of all contractual cash flows and the present value of expected future cashflows. 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. When assessing future cash flows and discount factors the Group takes the following into account: − Changes in the credit quality of the borrower or instrument − The Group’s liquidity and free cash position − Forward-looking macroeconomic factors (upside and downside) An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment losses are recognised in the Consolidated Statement of Comprehensive Income. The Group performs an assessment of significant increase in credit risk on an annual basis. Credit value adjustment The credit value adjustment of £3.0m (2022: £3.4m) has been calculated by management based on the assumption that the Group will be unable to collect all the receivable amounts due under the contract terms, and therefore, is a method of counterparty credit risk management. In order to calculate expected future cash flows, management make an estimate using the latest real-time market information, risk ratings of the clients, and experience. 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, i.e. Group revenue, and the expected period of benefits. Details are shown in note 12. Share-based payments As described in note 2, 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 subject to non-market vesting conditions that will vest. Impairment of goodwill The Group’s impairment test for goodwill is based on a value in use calculation using a discounted cash flow model. The test aims to ensure that goodwill is not carried at a value greater than the recoverable amount, which is considered to be the higher of fair value less costs of disposal and value in use. The identification of the Group’s cash generating units (CGUs) used for impairment testing is considered a critical judgement within the scope of paragraph 122 of IAS1. Client balances Where client balances are held by the Group, as part of its EMI obligations those funds must be held in segregated accounts, not available for use by the Group, and must comply with regulatory safeguarding compliance requirements. The Group is not a party to the contractual provisions nor a beneficial owner of the funds. As a result, the Group has determined that it does not have sufficient ownership or control over these balances to include them and their corresponding liability on the Groups Statement of Financial Position. Intangible assets acquired as part of a business combination The fair value of acquired intangible assets, and therefore the resulting goodwill recognised on acquisition is significantly affected by a number of factors. These include management’s best estimates of future performance including forecast revenue, expected revenue attrition, forecast operating margin, any contributory assets changes, and estimates of the return required to determine an appropriate discount rate (in order to calculate the net present value of the assets). 4. PRIOR PERIOD ADJUSTMENT A number of Group employees receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity settled transactions). Typically, employees subscribe for shares in a subsidiary. These shares are then exchangeable into shares of the parent if the vesting conditions are met. The Group recorded the amounts receivable from the employees as a debtor and recorded non-controlling interests in respect of the shares and options issued to employees. Some of these schemes also entitled the employees to dividends over the vesting period. Where an employee leaves prior to vesting, (and are not considered to be a good leaver) the Group can require the employee to return the shares in exchange for the lower of the subscription amounts paid and the fair market value of the shares. Historically, the Group has recognised a share-based payment charge in the Consolidated Statement of Comprehensive Income equivalent to the difference between the subscription price payable by the employee and the fair market value of that option over the life of the scheme. On vesting of the share options, share premium was also recognised on issue of shares by the Parent Company. 118 119 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 4. PRIOR PERIOD ADJUSTMENT [CONT.] After reviewing the IFRS 2 Share-Based Payment standard and related guidance from the IFRIC, the Group has concluded EFFECT ON THE STATEMENT OF COMPREHENSIVE INCOME that share ownership schemes that grant employees shares or options in subsidiaries, with conversion rights to the holding company should be accounted for under IFRS 2 Share-Based Payment, rather than a non-controlling interest in a subsidiary. As a result of this, the previous years’ non-controlling interest recognised over the annual profits of the subsidiaries were overstated. In addition, the previous years’ share-based payment charge to the Consolidated Statement of Comprehensive Income was also found to be insufficient due to a miscalculation. On vesting of some share options, share premium was incorrectly recognised. Accordingly, the Group has restated its financial statements in accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’. Other receivables are to be reduced for the loan amounts recognised as a debtor relating to the purchase of those shares and options, conversely a creditor is recognised for any subscription amounts paid up in advance of vesting due to the non-recourse nature of the schemes. Any non-controlling interest recognised, including profit attributed, in respect of these schemes has been reversed. The correction of these entries results in an increase to profits attributed to shareholders of the parent, an increase to retained earnings and an increase to earnings per share. Dividends paid to non-controlling interest in prior years have been included within retained earnings. The effect of these adjustments is shown by restating each of the prior year affected financial statement line items as follows: As previously Restatement Restatement Restatement Restated reported As at Year ended Cumulative to 31 December 2022 1 January 2022 31 December 2022 31 December 2022 31 December 2022 Non-controlling interest Retained earnings Translation reserve Share premium account Other receivables Other payables £’000 (4,707) (84,220) (1,258) (53,513) 6,821 (77,272) £’000 4,193 (2,071) (2) (36) (1,982) (102) £’000 514 (2,516) - 1,474 494 34 £’000 4,707 (4,587) (2) 1,438 (1,488) (68) £’000 - (88,807) (1,260) (52,075) 5,333 (77,340) Profit for the year (as previously reported) Increase in share-based payment expense PROFIT FOR THE YEAR (restated) Attributable to Equity holders of the parent (as previously reported) Decrease in non-controlling interest (as previously reported) Increase in share-based payment expense ATTRIBUTABLE TO EQUITY HOLDERS (restated) EFFECT ON THE TOTAL COMPREHENSIVE INCOME Total comprehensive income for the year (as previously reported) Share-based payment expense increase TOTAL COMPREHENSIVE INCOME FOR THE YEAR (restated) Attributable to Equity holders of the parent (as previously reported) Decrease in non-controlling interest (as previously reported) Share-based payment expense increase ATTRIBUTABLE TO EQUITY HOLDERS (restated) EFFECT ON EARNINGS PER SHARE Basic earnings per share (as previously reported) Prior period adjustment BASIC EARNINGS PER SHARE FOR THE YEAR (restated) Diluted earnings per share (as previously reported) Prior period adjustment DILUTED EARNINGS PER SHARE FOR THE YEAR (restated) Underlying Basic earnings per share (as previously reported) Prior period adjustment UNDERLYING BASIC EARNINGS PER SHARE FOR THE YEAR (restated) Underlying diluted earnings per share (as previously reported) Prior period adjustment UNDERLYING DILUTED EARNINGS PER SHARE FOR THE YEAR (restated) Year Ended 31 December 2022 £’000 39,050 (437) 38,613 36,372 2,678 (437) 38,613 Year Ended 31 December 2022 £’000 39,953 (437) 39,516 37,275 2,678 (437) 39,516 Year Ended 31 December 2022 £’000 86.8p 5.3p 92.1p 83.8p 5.2p 89.0p 70.1p 6.2p 76.3p 67.7p 6.0p 73.7p 120 121 These movements did not result in any specific impact on cash however the Consolidated Statement of Cash Flows has been restated as a consequence of the adjustments detailed above. In addition to the above, within the Consolidated Statement of Cash Flows, £729k in relation to interest received in the prior year has been represented from financing to investing activities. ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY20235. SEGMENTAL REPORTING During the year, the Group generated revenue from the sale of forward currency contracts, option contracts, foreign exchange spot transactions, fees received from payments collections, cash accounts, and fund finance advisory fees. The Group has six reportable operating segments under the provisions of IFRS 8, based on the individually reportable subsidiaries and divisions. These six segments are: − Corporate London represents revenue generated by Alpha FX Limited’s Corporate clients serviced from the UK. − Institutional 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. − Corporate Amsterdam represents revenue generated by Alpha FX Netherlands Limited, which services corporate clients from Amsterdam, The Netherlands. − Alpha Pay, a branch of Alpha FX Limited which services clients who require international payments and accounts. The offering is distributed via our European Corporate offices and Alpha FX Institutional Limited, as well as Alpha Pay’s own sales team. − Cobase, a Dutch based company that was acquired by the Group in December 2023. They are a cloud-based provider of bank connectivity technology that enables corporates to manage their banking relationships and transactions. The chief operating decision makers, being the Group’s Chief Executive Officer and the Chief Financial Officer, monitor the results of the operating 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. The Group’s two divisions, FX Risk Management and Alternative Banking are the key drivers to the Group strategy and growth of each operating segment. Revenue for each operating segment has been split by the two divisions, as this reflects how the chief operating decision-makers manage the business. Revenue in the following table is in accordance with the methodology used for preparing the financial information for management, for each operating segment. Although a proportion of the revenue from EU clients is initially booked through Alpha FX Europe Limited in Malta, revenue in the table below has been reallocated to the relevant entity where the sales team is located. The Group has overseas offices in Australia, Italy, Spain and Germany. All of these offices service Corporate clients from their local offices. The results of these offices are included within the Corporate London Segment. The revenue of these offices in aggregate was £5.8m and underlying loss before taxation in aggregate was £1.0m (£2.1m and £627k loss respectively in prior year). There were costs associated with Alpha Europe (based in Luxembourg), before it was dissolved, which have been shown 50/50 within Institutional and Alpha Pay. Fund Finance, which began trading in May 2023 has been included within the Alpha Pay segment. Under IFRS 8 these segments do not meet the quantitative reporting thresholds in 2023. FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 2023 Corporate London Institutional Corporate Toronto Corporate Amsterdam FX Risk Management* Alternative Banking** Cobase TOTAL REVENUE Underlying operating profit Finance income Finance expenses Underlying profit before taxation Non-underlying Items Net treasury income- client funds £’000 39,884 - - 39,884 15,621 4,612 (254) 19,979 (708) 5,534 £’000 23,518 3,701 - 27,219 8,506 - (200) 8,306 (21) 34,071 £’000 4,228 - - 4,228 408 (1) (58) 349 - - £’000 8,699 - - 8,699 4,566 - (87) 4,479 - - PROFIT BEFORE TAXATION 24,805 42,356 349 4,479 Alpha Pay £’000 - 30,226 - 30,226 10,352 - (235) 10,117 - 34,071 44,188 Cobase Total £’000 - - 186 186 £’000 76,329 33,927 186 110,442 (248) 39,205 5 - (243) - - 4,616 (834) 42,987 (729) 73,676 (243) 115,934 2022 FX Risk Management* Alternative Banking** TOTAL REVENUE Underlying operating profit Finance income Finance expenses Underlying profit before taxation Non-underlying Items Net treasury income- client funds PROFIT BEFORE TAXATION Corporate London Restated1 £’000 43,332 581 43,913 18,457 779 (146) 19,090 (1,069) 468 18,489 Institutional Corporate Toronto Corporate Amsterdam Alpha Pay Cobase Total £’000 15,133 4,703 19,836 7,325 - (83) 7,242 (32) 4,412 £’000 4,698 - 4,698 536 - (31) 505 - - £’000 5,500 888 6,388 3,095 - (68) 3,027 - - 11,622 505 3,027 £’000 £’000 846 22,651 23,497 8,861 5 (130) 8,736 - 4,398 13,134 - - - - - - - - - - Restated1 £’000 69,509 28,823 98,332 38,274 784 (458) 38,600 (1,101) 9,278 46,777 * FX Risk Management represents revenue derived from foreign exchange forward, spot, and option contracts provided to corporate and institutional clients, primarily for the purpose of hedging commercial foreign exchange exposures. ** Alternative Banking represents revenues derived from fees and foreign exchange spot contracts generated from the provision of cross border payments, collections and annual account fees to corporates and institutions, as well as Fund Finance advisory fees. 122 123 1The prior period restatement is detailed further in note 4. ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 5. SEGMENTAL REPORTING [CONT.] All revenue is from external customers and is based on the location of those customers. 6. OPERATING PROFIT Operating profit is stated after charging/(crediting): Revenue by region of customer United Kingdom Europe Canada Rest of world TOTAL Revenue by product Foreign exchange forward transactions Foreign exchange spot transactions Option contracts Payments, accounts and advisory fees Platform fees TOTAL Non-current assets for each country is as follows: Non-current assets United Kingdom Malta The Netherlands* Canada Other TOTAL NON-CURRENT ASSETS 31 December 2023 £’000 31 December 2022 £’000 40,252 55,238 4,251 10,701 110,442 39,414 47,542 4,962 6,414 98,332 31 December 2023 £’000 31 December 2022 £’000 51,966 31,791 7,823 18,676 186 110,442 41,073 29,027 9,046 19,186 - 98,332 31 December 2023 £’000 31 December 2022 £’000 32,596 16,971 11,855 1,336 19 62,777 29,811 14,400 2,434 1,063 21 47,729 Staff costs (note 8) Depreciation of owned property, plant and equipment Amortisation of internally generated intangible assets Depreciation of right-of-use assets Rental costs for short-term leases Property, plant and equipment written off Impairment of intangible assets Bad debt expense in the year Bad debt expense fully provided for in previous years Net foreign exchange losses/(gains) Audit fees Audit fees in respect of the Group, Company and subsidiary financial statements Audit fees in respect of Cobase acquisition Non Audit fees Fees in respect of CASS Limited Assurance 31 December 2023 31 December 2022 £’000 37,665 1,325 3,121 1,939 897 8 26 135 858 372 680 56 10 Restated1 £’000 32,150 764 1,573 1,154 787 50 43 235 - (274) 550 - 7 The Group separately identifies results before non-underlying items in the Consolidated Statement of Comprehensive Income (we refer to these results as ‘adjusted’). This is consistent with the way that financial performance is measured by management and reported to the Executive Committee and Board. These measures are not measures of performance under IFRS and should be considered in addition to, and not as a substitute for, IFRS measures of financial performance and liquidity. *The Netherlands includes £9.1m of Intangibles relating to the Cobase acquisition. Non-underlying items in the year are made up of the below charges/ (credits), most of which have arisen as a result of the Net Treasury Income (NTI) Interest is earned on overnight deposits with several credit institutions all ‘A’ rated with the leading rating agencies. The amount of interest earned is dependent on several variables: − The absolute balance we hold, which can move significantly from day-to-day − The mix of currency balances we hold, and; − The interest rate environment and rates that can be obtained from credit worthy institutions. Net treasury income is a natural by-product of our accounts solution, and is an uncontrollable income stream for the Group, which would be at least partly transitory if we return to a low interest rate environment. We have therefore chosen to recognise business combination (see note 26): Acquisition costs in relation to business combinations Other M&A related integration and transaction costs Costs associated with the move from AIM to premium listing Amortisation of purchased intangible assets Share-based payments (credit)/charge interest income on client cash balances as ‘Net treasury income- client funds ‘ (formerly ‘Other operating income’), not operating TOTAL revenue. In 2023 material interest income was earned over the twelve months of the year. During this time the blended average ABS client balances and interest rates were £1.9bn and 3.6% respectively (£1.6bn and 1.5% respectively in August to December in the prior year). ‘Net treasury income- own funds’ relates to interest earned on client margin held by the FX risk management division, a direct consequence of the operational business, shown in total income. 124 1The prior period restatement is detailed further in note 4. 31 December 2023 £’000 31 December 2022 £’000 487 62 248 (10) (58) 729 - - - - 1,101 1,101 125 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 7. FINANCE INCOME AND EXPENSES Remuneration of key management personnel FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION FINANCE INCOME Interest on bank deposits Finance income to reverse the discount relating to the Norwegian client Other interest receivable TOTAL FINANCE EXPENSES Finance expense on dilapidation provision Finance expense on lease liabilities (note 14) TOTAL 8. EMPLOYEE COSTS Staff costs, including Directors’ remuneration, were as follows: Wages and salaries Social security costs Share-based payment (credit)/expense Other pension costs EMPLOYEE BENEFIT EXPENSE INCLUDED IN OPERATING PROFIT 31 December 2023 £’000 31 December 2022 £’000 4,491 - 125 4,616 622 55 107 784 31 December 2023 £’000 31 December 2022 £’000 (41) (793) (834) (6) (452) (458) 31 December 2023 31 December 2022 £’000 33,360 3,485 (58) 878 37,665 Restated1 £’000 27,312 3,062 1,101 675 32,150 During the year 2023, the research and development expenditure credit (RDEC) of £802,463 (2022: £nil) was offset against employee costs. Key management personnel represent those personnel who have authority and responsibility for planning, directing and controlling the activities of the Group, including the Non-Executive Directors. Key management remuneration and benefits include: Wages and salaries Social security costs Share-based payments Defined contribution scheme TOTAL 31 December 2023 31 December 2022 £’000 2,533 285 68 46 2,932 Restated1 £’000 3,234 335 97 26 3,692 During 2023, retirement benefits accrued to 10 (2022: 7) individuals who are regarded as key management personnel within the Group in respect of defined contribution pension schemes. 9. TAXATION Tax charge CURRENT TAX: UK Corporation tax on the profit for the year Adjustments relating to prior years Overseas Corporation tax on the profit for the year TOTAL CURRENT TAX DEFERRED TAX Origination and reversal of temporary differences TOTAL DEFERRED TAX TOTAL TAX EXPENSE 31 December 2023 £’000 31 December 2022 £’000 24,536 (633) 219 24,122 3,020 3,020 27,142 8,056 (591) 216 7,681 483 483 8,164 The average number of employees, including the Executive Directors, was as follows: Deferred tax has increased in the year due to the further investment into internally generated assets, new leases within the Executive Directors Sales, administration and support staff TOTAL 31 December 2023 No. 31 December 2022 No. 3 431 434 3 305 308 Group, and the acquisition of Cobase. 1The prior period restatement is detailed further in note 4. 1The prior period restatement is detailed further in note 4. 126 127 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 9. TAXATION [CONT.] 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 23.5% (2022: 19%) Effects of: Expenses not deductible for tax purposes Additional R&D deduction* Adjustments relating to prior years Different tax rates applied in overseas jurisdictions Unutilised trading losses Trading losses brought forward TOTAL TAX CHARGE FOR THE YEAR 31 December 2023 31 December 2022 Deferred tax on each component of other comprehensive income/(expense) is as follows: The UK deferred tax liability as at 31 December 2023 and as at 31 December 2022 relates to the tax effect of timing differences in respect of fixed assets. The deferred tax also includes charges through Other Comprehensive Income and from acquired operations. £’000 115,934 27,244 561 - (633) 93 (102) (21) 27,142 Restated1 £’000 46,777 8,888 764 (837) (591) 292 (182) (170) 8,164 CASH FLOW HEDGES Gain/(losses) recognised on hedging instruments Exchange (loss)/ gain arising on translation of foreign operations TOTAL TAX (CHARGE)/CREDIT ON OTHER COMPREHENSIVE INCOME/(EXPENSE) 31 December 2023 31 December 2022 Before tax £’000 Tax £’000 After tax £’000 Before tax £’000 Tax £’000 After tax £’000 3,193 (798) 2,395 (639) 160 (479) (679) - (679) 1,382 - 1,382 2,514 (798) 1,716 743 160 903 * This is the first year that the company has qualified for RDEC instead of SME. Therefore, this income has been recognised in staff costs (note 8) rather than a tax credit for the year ended 31 December 2023, amounting to £802,463. 10. EARNINGS PER SHARE At the year ended 31 December 2023 the Group had unused overseas tax losses amounting to £102,304 (2022: £182,079). Tax loss memo LOSSES At 1 January Losses utilised in the year Losses created in the year TOTAL LOSSES Deferred tax 31 December 2023 £’000 31 December 2022 £’000 (205) 166 (135) (174) - - (205) (205) The deferred taxation liability is based on the expected future rate of corporation tax of 25% (2022: 25%) and comprises the following: LIABILITIES At 1 January UK tax charge relating to current year from continuing operations UK tax charge relating to current year from acquired operations Tax charge relating to acquired operations Tax (credit)/charge relating to foreign exchange rate movements Tax charge/(credit) on other comprehensive income TOTAL DEFERRED TAX LIABILITY 31 December 2023 £’000 31 December 2022 £’000 1,387 1,960 1,060 102 (2) 798 5,305 1,061 483 - - 3 (160) 1,387 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 in issue during the financial 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 dilutive effect is calculated on the full exercise of all potentially dilutive ordinary share options granted by the Group. The underlying calculation excludes the impact of share-based payments, net treasury income on client funds, non- underlying items and their tax effect. This better enables comparison of financial performance in the current year with comparative years. Basic earnings per share Diluted earnings per share Underlying – basic Underlying – diluted 31 December 2023 31 December 2022 Pence 206.2p 203.4p 76.7p 75.6p Restated1 Pence 92. 1 p 89.0p 76.3p 73.7p The prior year restatement has resulted in an increase in earnings per share in the various earnings per share calculations, as stated within note 4, for the year ended 31 December 2022. This is driven from non-controlling interests being restated to £nil. 1The prior period restatement is detailed further in note 4. 1The prior period restatement is detailed further in note 4. 128 129 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY202310. EARNINGS PER SHARE [CONT.] 12. INTANGIBLE ASSETS FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 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 2023 No. 31 December 2022 No. 43,072,098 593,955 43,666,053 41,923,407 1,482,706 43,406,113 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 Non-underlying items Net treasury income – client funds Tax effect of above items Earnings – underlying 11. DIVIDENDS Final Plc dividend for the year ended 31 December 2021 of 8.0p per share Interim Plc dividend for the year ended 31 December 2022 of 3.4p per share Final Plc dividend for the year ended 31 December 2022 of 11.0p per share Interim Plc dividend for the year ended 31 December 2023 of 3.7p per share 31 December 2023 31 December 2022 £’000 88,792 33 88,825 729 (73,676) 17,143 33,021 Restated1 £’000 38,613 - 38,613 1,101 (9,278) 1,554 31,990 31 December 2023 £’000 31 December 2022 £’000 - - 4,765 1,603 6,368 3,375 1,435 - - 4,810 All dividends paid by Alpha Group International plc are in respect of the ordinary shares of £0.002 each. The Directors propose that a final dividend in respect of the year ended 31 December 2023 of 12.3p per share amounting to £5,328,583 will be paid on 10 May 2024 to all shareholders on the register of members on 5 April 2024. This dividend is subject to approval by shareholders at the AGM and has not been accrued as a liability in these Financial Statements in accordance with IAS 10 ‘Events after the reporting period. Goodwill* Software £’000 £’000 Domain names £’000 Brand £’000 Customer relationships £’000 COST At 1 January 2022 Additions Impairment AT 31 DECEMBER 2022 Additions Impairment On business combinations Foreign exchange translation - - - - - - 4,707 - 4,506 3,410 (621) 7,295 8,025 (1,985) 3,292 33 AT 31 DECEMBER 2023 4,707 16,660 AMORTISATION At 1 January 2022 Charge for the year Impairment AT 31 DECEMBER 2022 Charge for year Impairment AT 31 DECEMBER 2023 NET BOOK VALUE At 1 January 2022 At 31 December 2022 - - - - - - - - - AT 31 DECEMBER 2023 4,707 1,538 1,557 (578) 2,517 3,083 (1,959) 3,641 2,968 4,778 13,019 37 25 - 62 - - - - 62 10 16 - 26 21 - 47 27 36 15 - - - - - - 542 - 542 - - - - 5 - 5 - - - - - - - - 438 - 438 - - - - 2 - 2 - - 537 436 Total £’000 4,543 3,435 (621) 7,357 8,025 (1,985) 8,979 33 22,409 1,548 1,573 (578) 2,543 3,111 (1,959) 3,695 2,995 4,814 18,714 * Goodwill of £4,706,860 was recognised during the year on a provisional basis as a result of the acquisition of Cobase (see note 26). The acquisition of Cobase only occurred on 1 December 2023 and the associated determination of goodwill remains provisional. As part of the year end impairment assessment, the recoverable amount was determined to be higher than the carrying value. In determining the recoverable amount, the assumptions used included a long-term growth rate of 2% and a discount rate of 27.4%. The goodwill has been fully allocated to the Cobase CGU. Intangible assets, excluding goodwill, had a net book value totalling £14,006,684 (2022: £4,813,898). 1The prior period restatement is detailed further in note 4. 130 131 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 13. PROPERTY, PLANT AND EQUIPMENT Leasehold improvements £’000 Fixtures & fittings £’000 Computer equipment £’000 COST At 1 January 2022 Additions Write offs Reclassification* AT 1 JANUARY 2023 Additions On business combinations Write offs Foreign exchange translation AT 31 DECEMBER 2023 DEPRECIATION At 1 January 2022 Charge for the year Write offs AT 1 JANUARY 2023 Charge for the year Write offs Foreign exchange translation AT 31 DECEMBER 2023 NET BOOK VALUE At 1 January 2022 At 31 December 2022 AT 31 DECEMBER 2023 1,453 1,167 - 147 2,767 4,675 - - (41) 7,401 348 206 - 554 534 - (2) 1,086 1,105 2,213 6,315 1,010 239 (116) (147) 986 1,403 - (6) (7) 2,376 396 189 (84) 501 320 (1) (1) 819 614 485 1,557 1,196 333 (377) - 1,152 849 11 (12) (5) 1,995 592 369 (359) 602 471 (4) (2) 1,067 604 550 928 Total £’000 3,659 1,739 (493) - 4,905 6,927 11 (18) (53) 11,772 1,336 764 (443) 1,657 1,325 (5) (5) 2,972 2,323 3,248 8,800 * £146,866 of tangible assets were incorrectly classified as Fixtures and fittings in 2021 and were reclassified to Leasehold improvements in the prior year. During the year, assets with a cost of £18,458 (2022: £493,000) were written off. The resulting loss was £8,455 (2022: £50,000). 14. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES Leases where the Group is a lessee are accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets and leases with a term of 12 months or less. In April 2023 a lease was signed for new premises in London for the Alternative Banking division. The lease has a contractual start date of 1 September 2023 and is a ten-year lease. The rent is subject to a rent review after five years. In December 2023 we took on an office lease as part of our acquisition of Cobase (see note 26). FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION Right-of-use assets At 1 January Additions Additions in relation to business combination Depreciation charge for the year Foreign exchange translation AT 31 DECEMBER Lease liabilities At 1 January Additions Additions in relation to business combination Finance cost (note 7) Payments in the year Foreign exchange translation AT 31 DECEMBER Analysis: Current Non-current TOTAL LEASE LIABILITIES 31 December 2023 £’000 31 December 2022 £’000 11,848 10,954 182 (1,939) (151) 20,894 6,136 6,866 - (1,154) - 11,848 31 December 2023 £’000 31 December 2022 £’000 13,074 10,405 182 793 (1,572) (162) 22,720 1,028 21,692 22,720 7,362 6,603 - 452 (1,343) - 13,074 1,407 11,667 13,074 The total undiscounted payments committed to over the remaining useful life of the respective leases as of the end of 31 December 2023 amounted to £28,613,000. Amounts recognised in the Consolidated Statement of Comprehensive Income Depreciation charge on right-of-use assets (note 6) Interest on lease liabilities (note 7) Rental costs for short-term leases (note 6) TOTAL 31 December 2023 £’000 31 December 2022 £’000 1,939 793 897 3,629 1,154 452 787 2,393 The rental costs for short-term leases amounting to £897,069 (2022: £786,931) relate to leases of less than one year for premises for a number of the Group’s overseas offices. 132 133 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 15. SUBSIDIARIES 16. DERIVATIVE FINANCIAL ASSETS AND FINANCIAL LIABILITIES The Group’s subsidiaries as at 31 December 2023 are as follows: Derivative financial assets not designated as hedging instruments FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION Name DIRECT HOLDING Alpha FX Limited Alpha Agency Solutions Ltd Financial Transaction Services B.V. INDIRECT HOLDING Alpha FX Institutional Limited Alpha Foreign Exchange (Canada) Limited Alpha FX Netherlands Limited Alpha FX Europe Limited Alpha FX Italy Limited Alpha FX Australia Pty Ltd AGI Financial Pte. Ltd. Registered addresses: Country of incorporation England1 England1 Netherlands6 England1 Canada2 England1 Malta3 England1 Australia4 Singapore5 Proportion of ordinary shares held 100% 100% 86.36% 100%* 100%* 100%* 100% 100% 100% 100% Active Non-trading Active Active Active Active Active Active Active Non-trading 1. Brunel Building, 2 Canalside Walk, London, UK, W2 1DG 2. 3. 181 Bay Street, Suite 4210, Toronto, ON, M5J 2T3 171, Old Bakery Street, Valletta VLT1455, Malta 4. c/o Intertrust Australia Pty Ltd, Suite 2, Level 25, 100 Miller Street, North Sydney, NSW 2060 5. 14 Robinson Road #12-01/02, Far East Finance Building, Singapore (048545) 6. Haaksbergweg 75, 1101BR Amsterdam * As detailed in note 4, historically some of the employee equity shareholding on a number of the share schemes had been recognised as non- controlling interest, with the remainder of ordinary shares in the subsidiary being held by Group. However after reviewing the IFRS 2 Share-Based Payment standard and related guidance from the IFRIC, the Group has concluded that they should not have been recognised as non-controlling interest and therefore the proportion of ordinary shares held by the Group in respect of these subsidiaries has been revised to 100%. The principal activity of the Group and its subsidiary undertakings is the development of financial strategies and technologies to assist corporates and institutions in their FX risk management, mass payments and account opening requirements. More detail on each subsidiary undertaking is provided in note 5. Shares in all indirect subsidiary holdings are held by Alpha FX Limited. The accounting year-ends of all subsidiaries is 31 December 2023. In December 2023 Alpha Europe S.A. was dissolved and transferred to a branch of Alpha FX Europe Limited. In December 2023 86.36% of Financial Transaction Services B.V. was acquired as part of a business combination (note 26). The assets and operations of Alpha FX Italy Limited were transferred to its own branch of Alpha FX Europe Limited in the year. The entity is in the process of being dissolved. Foreign currency forward and option contracts with customers Foreign currency forward and option contracts with banking counterparties 31 December 2023 31 December 2022 Fair value £’000 Notional principal £’000 Fair value £’000 Notional principal £’000 103,975 12,686,128 116,515 16,521,973 3,043 830,319 10,194 4,787,695 Other foreign exchange forward contracts - - 229 16,592 107,018 13,516,447 126,938 21,326,260 Derivative financial assets designated as hedging instruments 31 December 2023 31 December 2022 Fair value £’000 Notional principal £’000 Fair value £’000 Notional principal £’000 Foreign currency forward contracts 156 3,913 Interest rate swap contracts 2,398 825,546 2,554 829,459 - - - - - - Total Derivative financial assets 31 December 2023 31 December 2022 Fair value £’000 Notional principal £’000 Fair value £’000 Notional principal £’000 109,572 14,345,906 126,938 21,326,260 31 December 2023 Fair value £’000 31 December 2022 Fair value £’000 95,203 14,369 109,572 99,119 27,819 126,938 Analysis: Current Non-current TOTAL DERIVATIVE FINANCIAL ASSETS 134 135 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 16. DERIVATIVE FINANCIAL ASSETS AND FINANCIAL LIABILITIES [CONT.] Items that will be reclassified to the Consolidated Statement of Comprehensive Income: Derivative financial liabilities not designated as hedging instruments Foreign currency forward and option contracts with customers Foreign currency forward and option contracts with banking counterparties 31 December 2023 31 December 2022 Fair value £’000 Notional principal £’000 Fair value £’000 Notional principal £’000 37,584 7,334,032 47,706 6,164,718 2,559 5,354,982 1,736 5,711,465 Other foreign exchange forward contracts 67 33,090 - - 40,210 12,722,104 49,442 11,876,183 Derivative financial liabilities designated as hedging instruments 31 December 2023 31 December 2022 Fair value £’000 Notional principal £’000 Fair value £’000 Notional principal £’000 - - - - - - 286 353 639 21,648 205,000 226,648 Foreign currency forward contracts Interest rate swap contracts Total Derivative financial liabilities Movement in year Cash flow hedges Gains/(losses) recognised on hedging instruments Exchange differences arising on translation of foreign operations Tax relating to items that may be reclassified 31 December 2023 £’000 31 December 2022 £’000 3,193 (679) (798) 1,716 (639) 1,382 160 903 Since the Group’s inception, it has historically operated in a low interest rate environment. However, since Q3, 2022, when interest rates started to rise, the Group started to receive a large amount of interest on its own free cash balances as well as client cash balances. In line with the Group’s treasury policy, we have entered into interest rate swap contracts to manage interest rate risk, see further details below. Interest rate swap contracts The interest rate swap contracts designated as hedging instruments relate to transactions entered into in 2022 and 2023 to fix the rate of interest receivable on cash balances held by the Group in respect of its own free cash balances as well as client cash balances. With the interest rate swap, the Group receives a fixed rate of interest and pays a floating interest rate based on SONIA. The contracts commence between June and December 2023 with expiries between June 2025 and June 2026. Upon expiry of the contracts or if they no longer qualify for hedge accounting, the deferred gains/losses in comprehensive income relating to the Group’s own free cash balances will be reclassified within finance income and those relating to client cash balances will be reclassified within net treasury income. The hedge effectiveness is reassessed at each reporting date and all hedges remained effective throughout 2023. Foreign currency forward contracts 31 December 2023 31 December 2022 Fair value £’000 Notional principal £’000 Fair value £’000 Notional principal £’000 The forward contracts designated as hedging instruments relate to hedges entered into in December 2022 and February 2023 to fix the exchange rate of interest receivable denominated in dollars and euros. The contracts have monthly expiries up to January 2024. The deferred gains/losses in comprehensive income will be reclassified within net treasury income 40,210 12,722,104 50,081 12,102,831 upon expiry of the contracts or if they no longer qualify for hedge accounting. The hedge effectiveness is reassessed at each Analysis: Current Non-current TOTAL DERIVATIVE FINANCIAL LIABILITIES 31 December 2023 Fair value £’000 31 December 2022 Fair value £’000 34,288 5,922 40,210 42,764 7,317 50,081 reporting date and all hedges remained effective throughout 2023. 17. FINANCIAL INSTRUMENTS 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 reporting date. The fair value of option foreign exchange contracts is measured using an industry standard external model that best presents the unpublished interbank valuations. 136 137 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 17. FINANCIAL INSTRUMENTS [CONT.] The transactions are subject to ISDA (“International Swaps and Derivatives Association”) Master Agreements and similar master agreements which provide a legally enforceable right of offset in the normal course of business, the event of a default and the event of insolvency or bankruptcy. In accordance with the master agreements, contracts with banking There were no transfers between level 1 and 2 during the current or prior year. The fair value of all other financial assets and counterparties are assessed daily on a net basis. financial liabilities is approximate to their carrying value. FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION However, contracts with clients are assessed daily on a gross basis, and therefore shown as separate financial assets and financial liabilities in the Consolidated Statement of Financial Position. 31 December 2023 31 December 2022 2023 The principal financial instruments of the Group, from which financial instrument risk arises, are as follows: a) Financial assets per statement of financial position FAIR VALUE ASSETS Derivatives not designated as hedging instruments (note 16) Derivatives designated as hedging instruments (note 16) TOTAL FAIR VALUE ASSETS AMORTISED COST ASSETS Other receivables excluding prepayments Cash and cash equivalents Fixed collateral TOTAL AMORTISED COST ASSETS TOTAL FINANCIAL ASSETS £’000 107,018 2,554 109,572 4,538 197,941 8,810 211,289 320,861 Restated1 £’000 126,938 - 126,938 2,896 136,799 4,726 144,421 271,359 b) Financial liabilities per statement of financial position 31 December 2023 31 December 2022 FAIR VALUE LIABILITIES Derivatives not designated as hedging instruments (note 16) Derivatives designated as hedging instruments (note 16) TOTAL FAIR VALUE LIABILITIES OTHER PAYABLES MEASURED AT AMORTISED COST Other payables and accruals TOTAL OTHER PAYABLES TOTAL FINANCIAL LIABILITIES £’000 40,210 - 40,210 58,295 58,295 98,505 Restated1 £’000 49,442 639 50,081 75,971 75,971 126,052 c) Offsetting financial assets and financial liabilities Financial instruments at fair value through profit or loss represent immediate back-to-back derivative transactions with banking counterparties and are reported as financial assets and financial liabilities in the Consolidated Statement of Financial Position. Gross fair value £’000 147,916 (92,233) Gross fair value £’000 186,868 (154,248) Variation margin offset £’000 - 11,125 Variation margin offset £’000 - 44,876 Amounts subject to enforceable netting arrangements Fair value offset £’000 (40,898) 40,898 Net derivative financial asset/(liability) (Note 16) £’000 107,018 (40,210) Fixed collateral £’000 8,810 - Amounts subject to enforceable netting arrangements Fair value offset £’000 (59,930) 59,930 Net derivative financial asset/(liability) (Note 16) £’000 126,938 (49,442) Fixed collateral £’000 4,726 - Derivative financial assets Derivative financial liabilities 2022 Derivative financial assets Derivative financial liabilities 18. FINANCIAL RISK MANAGEMENT Objectives, policies and processes for managing and the methods used to measure risk There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods, unless otherwise stated in this note. Financial assets principally comprise trade and other receivables, cash and cash equivalents, fixed collateral and derivative financial assets. Financial liabilities comprise trade and other payables, 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 monitors and mitigates financial risk on a consolidated basis. The Group has implemented a framework to ensure that risk management practices appropriate to a listed company are in place. 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. 1The prior period restatement is detailed further in note 4. 138 139 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 18. FINANCIAL RISK MANAGEMENT [CONT.] The Group has sufficient cash resources to pay its debts and contractual liabilities as they fall due. Consequently, management Objectives, policies and processes for managing and the methods used to measure risk [cont] does not believe that the Group has a material exposure to liquidity risk. 1. First Line is risk management: Primary responsibility for strategy, performance and risk management lies with the Market risk Executive Team and the Heads of each department. 2. Second Line is risk oversight: The Risk, Compliance, Finance and Legal Teams provide risk oversight. 3. Third Line is independent assurance: Independent assurance on the effectiveness of the risk management systems. Specialist external reviews provide an additional line of defence. Market risk is also inherent in Alpha’s business model, however this 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. The Group may from time to time buy treasury hedges from its banking counterparties, that are not matched with the client, to limit the tail risk of individual trades. The treasury hedges involve buying an option and therefore the Group has the right to trade rather than an obligation so there is no downside risk on these transactions. Credit risk Interest rate risk Credit risk is inherent in Alpha’s business model. The Board accepts that credit losses are a function of our trading model, and the Group takes a risk-based approach to balance revenue opportunities against the risk of default. Credit risk is the risk that a client fails to deliver currency at maturity of a contract and/or fails to deposit margin when a margin call is made which could ultimately lead 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 based on both quantitative and qualitative factors. Credit policies are aimed at reducing the impact of losses, credit terms will only be granted to customers who satisfy a creditworthiness assessment and demonstrate an appropriate payment history. The client terms and conditions and the credit facility confirmation letter highlight the client’s margin terms and requirement to provide collateral. This provides further mitigation to the credit exposure and reduces the risk of potential disputes. 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. Client credit exposures are monitored daily. Stress tests are carried out to assess and minimise client credit risk exposures under various market volatility scenarios. Counterparty risk The Group relies on third party institutions in order to trade with clients. To reduce counterparty credit risk, the Group only trades with institutional counterparties with robust balance sheets, high credit ratings and strong capital resources. The Group monitors the creditworthiness of institutional counterparties on an ongoing basis. As part of the Group’s business continuity procedures settlement lines have been established with several institutional counterparties in order to reduce the impact of business disruption as a result of counterparty risk. 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 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 ongoing basis. The Group attempts to ensure it maintains (as closely as 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”). 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. Therefore, the Group generally does not incur interest on overdue balances. In 2023 the interest receivable on cash and cash equivalents was managed using derivative instruments to hedge interest rate risk (note 16). 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, expenses and net assets 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 20. 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, netting off 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 or 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. 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 Comprehensive Income. Foreign currency risk – sensitivity analysis The Group’s principal recurring foreign currency transactions are in Euros, US Dollar and Canadian Dollar. The table below shows the impact on the Group’s operating profit and equity, of a 10% change in the exchange rate of the principal currencies, euro, US dollar and Canadian dollar. 140 141 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 18. FINANCIAL RISK MANAGEMENT [CONT.] Foreign currency risk – sensitivity analysis [cont] Year ended 31 December EURO: 10% weakening in the £/€ exchange rate 10% strengthening in the £/€ exchange rate US DOLLAR: 10% weakening in the £/$ exchange rate 10% strengthening in the £/$ exchange rate CANADIAN DOLLAR: 10% weakening in the £/$ exchange rate 10% strengthening in the £/$ exchange rate Impact on profit after tax Impact on equity 2023 £’000 6,570 (5,375) 6,403 (5,239) 448 (366) 2022 £’000 4,624 (3,784) 2,546 (2,083) 384 (314) 2023 £’000 4,827 (3,949) 1,229 (1,005) 327 (267) 2022 £’000 3,540 (2,897) 1,187 (971) 410 (335) The sensitivities in the table above do not include the impact of foreign exchange hedges in place to optimise cash management across the Group. By including the impact of hedges in place throughout 2023, the impact of a 10% weakening of the pound on profit after tax would have been £3,789k, £4,416k and £409k (2022: £804k, £1,733k and £nil) for Euro, US dollar and Canadian dollar respectively. Similarly, the impact of a 10% strengthening of the pound on profit after tax would have been -£3,100k, -£3,613k and -£335k (2022: -£658k, -£1,418k and £nil) for Euro, US dollar and Canadian dollar respectively. Exchange rates for financial year EURO: Average rate Closing rate US DOLLAR: Average rate Closing rate CANADIAN DOLLAR: Average rate Closing rate 2023 1.1499 1.1539 1.2436 1.2747 1.6780 1.6810 2022 1.1730 1.1269 1.2369 1.2027 1.6080 1.6295 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. 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 Group monitors 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, adjust the dividends paid to shareholders or buy back shares. FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 19. OTHER RECEIVABLES Other receivables Prepayments TOTAL OTHER RECEIVABLES 20. CASH 31 December 2023 31 December 2022 £’000 4,538 3,258 7,796 Restated1 £’000 2,896 2,437 5,333 Cash and cash equivalents comprise cash balances and deposits held at call with banks for which the Group has immediate access. Fixed collateral comprises cash held as collateral with banking counterparties for which the Group does not have immediate access. Cash balances included within derivative financial assets (see note 16 and 17) relate to the variation margin called by banking counterparties regarding out of the money trades counterparties for which the Group does not have immediate access. Cash and cash equivalents Variation margin called by counterparties (note 17) Fixed collateral TOTAL CASH Cash at bank is made up of the following currency balances: British pound Euro US Dollar Canadian Dollar Australian Dollar Chinese Renminbi Norwegian Krone Other currencies 31 December 2023 £’000 31 December 2022 £’000 197,941 11,125 8,810 217,876 136,799 44,876 4,726 186,401 31 December 2023 £’000 31 December 2022 £’000 135,584 53,153 17,858 4,754 2,224 1,090 542 2,671 217,876 86,421 61,325 20,565 4,070 1,007 3,307 7,622 2,084 186,401 143 142 1The prior period restatement is detailed further in note 4. ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 20. CASH [CONT.] Share premium account In the year ended 31 December 2023 the share premium account increased by £491,227 following the vesting of share option schemes. The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value. All changes in financial liabilities arising from financing activities, other than the lease liabilities taken out in 2019, 2022 and 2023, are due to In the year ended 31 December 2022 the share premium account increased by £823,771 following the vesting of the SAYE cash flow movements and are shown in the Consolidated Statement of Cash Flows within cash flow from financing activities. share scheme and £431,756 (restated) following the vesting of share option schemes. Further details on the restatement can FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 21. CAPITAL AND RESERVES Share capital AUTHORISED, ISSUED AND FULLY PAID At 31 December 2023 At 31 December 2022 No. £’000 No. £’000 Ordinary shares of £0.002 each 43,321,813 87 42,196,554 84 Number of shares AT 1 JANUARY 2022 Shares issued on vesting of share option schemes AT 31 DECEMBER 2022 Shares issued on vesting of share option schemes AT 31 DECEMBER 2023 Ordinary shares 40,964,225 1,232,329 42,196,554 1,125,259 43,321,813 The following movements of share capital occurred during the year ended 31 December 2023: On 27 March 2023, the Company issued 1,125,259 new shares following the vesting of shares under the B, C and E Growth Share Schemes, and the Institutional, Canada and Alpha Pay share schemes. The following movements of share capital occurred during the year ended 31 December 2022: On 21 March 2022, the Company issued 1,123,946 new shares following the vesting of shares under the B, C and E Growth Share Schemes and the Institutional Share Scheme. On 25 March 2022, the Company issued 99,386 new shares in respect of shares issued following the vesting of the SAYE share scheme. The Company issued a further 8,997 new shares in respect of shares issued following the vesting of the SAYE share scheme, between April 2022 and June 2022. be found in note 4. Capital redemption reserve The capital redemption 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. Redemption reserve The redemption reserve of £(1,884,165) comprises the fair value of the consideration payable to the non-controlling interest of Financial Transaction Services B.V. (Cobase) on the date that the agreement was entered into. The reserve is expected to be utilised over a four-year period between 31 December 2025 and 31 December 2028, with 25% of the non-controlling interest acquired each period over the four years. More details on the acquisition can be found in note 26. Retained earnings Represents accumulated profits attributable to equity owners of the parent less accumulated dividends. Translation reserve The translation reserve of £580,515 (2022: £1,260,398 restated) represents the foreign exchange differences arising from the translation of the net investment in foreign entities. 22. NON-CONTROLLING INTERESTS As detailed in note 4, historically some of the employee equity shareholding on a number of the share schemes had been recognised as non-controlling interest. However after reviewing the IFRS 2 Share-Based Payment standard and related guidance from the IFRIC, the Group has concluded that they should not have been recognised as non- controlling interest and therefore non-controlling interest has subsequently been restated to £nil as at 31 December 2022. Non-controlling interest as at 31 December 2023 is made up of Financial Transaction Services B.V. (“Cobase”) which was acquired in December 2023. The NCI’s shareholding is 13.64%. Further information on the acquisition of Cobase is provided in note 26. 144 145 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 20. NON-CONTROLLING INTEREST [CONT.] 24. RELATED PARTY TRANSACTIONS AND BALANCES Below shows summarised financial information for Cobase, before intra-group eliminations. Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions, or one other party controls both. 31 December 2023 31 December 2022 Subsidiaries Revenue Loss after taxation Loss allocated to non-controlling interests £’000 186 (241) (33) Restated1 £’000 - - - The Parent Company of the Group is Alpha Group International plc. Note 15 provides information about the subsidiaries and the holding company. Details of the ultimate controlling party can be found in note 27. Transactions between the Group and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. Key management personnel 31 December 2023 31 December 2022 The Group considers its key management personnel to be the Directors of Companies within the Group. Assets Non-current assets Current assets Liabilities Current liabilities NET ASSETS 23. OTHER PAYABLES CURRENT: Other payables Other taxation and social security Accruals NON-CURRENT: Provisions TOTAL OTHER PAYABLES £’000 3,880 1,391 (340) 4,931 Restated1 £’000 - - - - 31 December 2023 31 December 2022 £’000 51,243 1,455 7,052 59,750 875 875 60,625 Restated1 £’000 70,272 1,369 5,699 77,340 222 222 77,562 Other payables consist of margin received from clients and client-held funds. The carrying value of other payables classified as financial liabilities measured at amortised cost, approximates fair value. The compensation of the Directors of the Company, together with their shareholding, is included in the Remuneration Committee report on pages 84. Transactions with key management personnel During the year, Alpha FX Limited traded gross foreign currency contracts with; M J Tillbrook £1,424,473 (2022: £2,291,400) and M E Stuart £47,690 (2022: £30,853), on an arm’s length basis. Other entities During the year, the Group purchased goods and services from entities classified as related parties as follows: − Services totalling £121,793 (2022: £391,128) on an arms-length basis from Klarify Group Limited, a multi-cloud and cyber security specialist in which M J Tillbrook owned a 42% (2022: 42%) beneficial ownership. − Services totalling £214,698 (2022: nil) on an arms-length basis from Assured Cyber Limited, a cyber insurance broker in which M J Tillbrook owns a 30% beneficial ownership. During the year, the Group traded gross foreign currency contracts with entities classified as related parties as follows: − Gross foreign currency contracts of £4,168 (2022: £1,670) on an arms-length basis with Zip Cap Limited, a financial services company in which M J Tillbrook owns 100% of the share capital. 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). The Group recognised a total credit related to all the above equity-settled share-based payment transactions in the year ended 31 December 2023 of £57,946. The share-based payment charge for the year ended 31 December 2022 has been restated to a charge of £1,101,095, further details can be found in note 4. 1The prior period restatement is detailed further in note 4. 146 147 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 25. SHARE-BASED PAYMENTS [CONT.] The Group operates several 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. External tax valuations for share schemes are obtained from an independent third party prior to issue. Indemnities are also obtained 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 In March 2023, 148 C Growth Shares were exercised in respect of the year ended 31 December 2022. As a result, 171,810 shares in Alpha Group International plc were issued as consideration in March 2023. Following the revenue growth target for the year not being met for the C Growth Shares, the remaining C Growth Shares lapsed. As a result, no shares in Alpha Group International plc will be issued as consideration for the lapsed C Growth Shares in March 2024. Further, the year ended 31 December 2023 was the final year of the C Growth Shares scheme. The share-based payment charge of the C Growth Shares in the year ended 31 December 2023 was a credit of £243,084 (2022: credit of £17,918). assessed that should such an event occur, there would not be a material impact on the Group’s net assets or the result for E Share Growth Scheme the year. B Growth Share Scheme Under the B Growth Share Scheme, selected employees of the Group who were employed prior to the Company’s IPO in 2017, were 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. In March 2022, following the revenue growth target for the year being met in respect of the year ended 31 December 2021, 333 B Growth Shares were exercised when the share price of the Company was 1909p. Due to the impact of COVID-19, the issuance of these shares had been deferred from March 2021 with all future issuances similarly deferred by a year. As a result, 549,137 shares in Alpha Group International plc were issued as consideration in March 2023 and with a further In 2020 the Group adopted an E Share Growth Scheme under which 882 E ordinary shares (“E Shares”) in Alpha FX Limited were issued to full time employees of the Group (“E Share Growth Scheme”). The E Shares contain a put option, such that, when and to the extent vested, they can be converted into ordinary shares in the Group. The E Shares will vest in four equal tranches, occurring annually, starting on 31 December 2021 until 31 December 2024. Vesting will require Group revenue growth of 25% in 2021, 20% in 2022, 20% in 2023 and 20% in 2024. The rate of conversion of the E Shares, is a pro rata share of the market capitalisation gain of Alpha above a hurdle price of £300m. The gain that an E Shareholder could receive is capped through placing a ceiling on the maximum market capitalisation of Alpha of £650m. The result of doing so is that the E Shareholders will be entitled to a pro rata share of the gain in market capitalisation of Alpha between £300m and the market capitalisation ceiling of £650m. 88,015 shares to be issued to an ex-employee in March 2025 as part of a settlement agreement. This represents the final Upon conversion, the number of ordinary shares in the Group an E Shareholder will receive is such number of ordinary shares vesting of the B Growth Share Scheme. 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 Group International plc above a hurdle price of 550p based upon the market price of Alpha Group International plc at the time of allotment. Upon conversion, the number of ordinary shares in Alpha Group International plc that a C Shareholder will receive is 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 Share Growth Scheme includes a requirement for Group revenue to grow 20% in 2023 in order for vesting to occur. The gain that a C Shareholder can receive is capped at a ceiling on the maximum market capitalisation of Alpha of £650m. As a result, the C Shareholders will be entitled to a pro rata share of the gain in market capitalisation of Alpha between the hurdle price at the time of allotment and the market capitalisation ceiling of £650m. 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. whose value is equivalent to the Group’s closing share price at the conversion date. Conversion is only permitted to the extent that the E Shares have vested. In March 2023, 185 E Growth Shares were exercised in respect of the year ended 31 December 2022. As a result, 161,064 shares in Alpha Group International plc were issued as consideration in March 2023. Following the revenue growth target for the year not being met for the E Growth Shares, 185 E Growth Shares lapsed. As a result, no shares in Alpha Group International plc will be issued as consideration for the lapsed E Growth Shares in March 2024. The share-based payment charge of the E Growth Shares in the year ended 31 December 2023 was a credit of £258,792 (2022: £322,304 restated). F Share Growth Scheme In June 2022 the Group issued an initial 285 shares under the F Share Growth Scheme with a further 99 shares issued in November 2022. The F Shares contain a put option, such that, when and to the extent vested, they can be converted into ordinary shares of the Group. The F Shares will vest in four equal tranches, occurring annually, in respect of the Financial Years for 2023, 2024, 2025 and 2026. Vesting for each Financial Year requires Group revenue growth of 20% in Financial Year 2023, 20% in Financial Year 2024, 20% in Financial Year 2025 and 20% in Financial Year 2026. The rate of conversion that the F Shares will be regarded as worth, is a pro rata share of the market capitalisation gain of Alpha above a hurdle price of £740m. The gain that an F shareholder could receive is capped through placing a ceiling on the maximum market capitalisation of Alpha of £1,867m. The result of doing so is that the F Shares will be entitled to a pro rata share of the gain in market capitalisation of Alpha between £740m and the market capitalisation ceiling of £1,867m. 148 149 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY202325. SHARE-BASED PAYMENTS [CONT.] F Growth Share Scheme [cont] Upon conversion, the number of ordinary shares in Alpha that an F Shareholder will receive is such number of ordinary shares whose value is equivalent to Alpha’s closing share price at the conversion date. Conversion is only permitted to the extent that the F Shares have vested. Following the revenue growth target for the year not being met for the F Growth Shares, 82 F Growth Shares lapsed. Alpha Group International plc exercised the call options to buy the shares back from the employees at the original subscription price. As a result, no shares in Alpha Group International plc will be issued as consideration for the lapsed F Growth Shares in March 2024. The share-based payment charge of the F Growth Shares in the year ended 31 December 2023 was £201,111 (2022: £213,314 restated). G and H Share Growth Scheme In June 2022 the Group awarded 360 shares under the G Share Growth Scheme and 265 shares under the H share scheme. The G and H Shares contain a put option, such that, when and to the extent vested, they can be converted into ordinary shares in the Group. The shares will vest in five tranches, occurring annually, in respect of the Financial Years for 2022, 2023, 2024, 2025 and 2026. The shareholders will be able to vest 12.5% of their holding for Financial Year 2022, 12.5% for Financial Year 2023, 25% for Financial Year 2024, 25% for Financial Year 2025 and 25% for Financial Year 2026. Vesting for each Financial Year for the G shareholders will require revenue from the London Corporate division (and the Spain corporate division) to grow by 5.5% in Financial Year 2022, 15% in Financial Year 2023, 15% in Financial Year 2024, 15% in Financial Year 2025 and 15% in Financial Year 2026. Vesting for each Financial Year for the H shareholders is subject to 2 revenue targets being met, with shareholders being entitled to vest 50% of their holding for each Financial Year in respect of each target being met. The first revenue target is for the London Corporate division (and the Spain corporate division) to grow by 5.5% in Financial Year 2022, 15% in Financial Year 2023, 15% in Financial Year 2024, 15% in Financial Year 2025 and 15% in Financial Year 2026. The second target is for the revenue from all the global corporate divisions to grow by 18.6% in Financial Year 2022, 20% in Financial Year 2023, 20% in Financial Year 2024, 20% in Financial Year 2025 and 20% in Financial Year 2026. The rate of conversion that the G and H Shares will be regarded as worth, is a pro rata share of the market capitalisation gain of Alpha above a hurdle price of £740m. The gain that a shareholder could receive is capped through placing a ceiling on the maximum market capitalisation of Alpha of £1,867m. The result of doing so is that the G and H Shares will be entitled to a pro rata share of the gain in market capitalisation of Alpha between £740m and the market capitalisation ceiling of £1,867m. Upon conversion, the number of ordinary shares in Alpha that a shareholder will receive is such number of ordinary shares whose value is equivalent to Alpha’s closing share price at the conversion date. Conversion is only permitted to the extent that the G and H Shares have vested. In respect of the year ending 31 December 2022, the revenue targets were met for the G and H Shares, however the market capitalisation of Alpha did not exceed the hurdle price of £740m. With respect to the year ending 31 December 2023, the revenue targets for the G and H Shares were not met. Accordingly, no shares in Alpha Group International plc will be issued as consideration in March 2024 in respect of years ending 31 December 2022 and 31 December 2023. The share-based payment charge of the G and H Growth Shares in the year ended 31 December 2023 was £221,967 (2022: £551,489 restated). 150 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION Details of the outstanding shares in Alpha FX Limited in respect of the above schemes are as follows: 31 December 2023 B Growth Share Scheme No. C Growth Share Scheme No. E Growth Share Scheme No. F Growth Share Scheme No. G Growth Share Scheme No. H Growth Share Scheme No. Outstanding at beginning of year Granted in the year Exercised in the year Forfeited in the year OUTSTANDING AT END OF YEAR - - - - - 301 - (148) (11) 142 602 - (185) (16) 401 361 - - (5) 356 360 265 - - - - - - 360 265 31 December 2022 B Growth Share Scheme No. C Growth Share Scheme No. E Growth Share Scheme No. F Growth Share Scheme No. G Growth Share Scheme No. H Growth Share Scheme No. Outstanding at beginning of year Granted in the year Exercised in the year* Forfeited in the year OUTSTANDING AT END OF YEAR 358 - (333) (25) - 568 - (186) (81) 301 882 - (197) (83) 602 - 384 - (23) 361 - 360 - - - 265 - - 360 265 * The 333 B shares that were exercised in March 2022 in respect of the ended 31 December 2021 and the shares in the Company will not be issued until March 2023 and March 2025. 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. 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: B Growth Share Scheme C Growth Share Scheme E Growth Share Scheme F, G & H Growth Share Schemes Expected volatility % Risk free interest rate % Option life (years) Starting equity value (£m) 25.0% 0.09% 3 £33.6m 25.0% 0.75% 5 45%-55% 0.10% 5 40% 2.3% 5 £186.6m £300.0m £740.0m 151 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 25. SHARE-BASED PAYMENTS [CONT.] Alpha Pay Alpha FX Institutional Limited Alpha FX Institutional Limited was incorporated in 2018, and at 31 December 2023 the management team had share options equivalent to 10.4% of the business. With the initial share award, the individuals have the option to convert a percentage of their holding into Group shares over a four-year period, based upon strict performance criteria, with the first year of conversion being the year ended 31 December 2021. 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. In 2019 the Group adjusted the employee share ownership incentive scheme to include additional key employees. These individuals have the option to convert a percentage of their holding into Group shares over a four-year period, based upon strict performance criteria, with the first year of conversion being the year ended 31 December 2022. Following the continued success of Alpha FX Institutional Limited, the Group further adjusted the employee share ownership incentive scheme in March 2022 to include additional key employees. The shares are structured in a similar way to the shares issued to previous employee shareholders of Alpha Institutional, and will vest in four equal tranches, for each of the financial years ending 31 December 2024, 31 December 2025, 31 December 2026 and 31 December 2027. In March 2023, employees exercised their options equivalent to 4.99% of the business in respect of the year ended 31 December 2022. As a result, 123,768 shares in the Company were issued as consideration. In 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 Pay). A new class of shares (“D Shares”) in Alpha FX Limited was created. The value of the D Shares will be linked to the performance of the Alpha Pay business. Under the initial share award, from March 2023, the Alpha Pay 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. Following the continued success of Alpha Pay, in December 2021 the Group adjusted the employee share ownership scheme to include additional new employees to support the ongoing growth of the division. As a result, a new class of non-dividend bearing and non-voting D3 shares and D4 shares were issued. The value of the D3 Shares and D4 Shares will be linked to the performance of the Alpha Pay business and are structured in a similar way to the existing D shares issued in 2019. The D3 Shareholders will have the option to convert 25% of their holding of D3 Shares into ordinary shares of the Group each year for four years commencing from March 2024 (with the final option being exercisable in March 2027). The D4 Shareholders will have the option to convert 25% of their holding of D4 Shares into Group Shares each year for four years commencing from March 2025 (with the final option being exercisable in March 2028). At conversion, and in exchange for converting their D3 shares and D4 Shares into Group Shares, the D3 shares held by the D3 Shareholders and the D4 Shares held by the D4 Shareholders in Alpha FX Limited will commensurately decrease and the Group’s holding will commensurately increase. Based on the share price of the Company of 1750p as at 31 December 2023, it is estimated that the Company will issue 121,823 shares as consideration for employees converting options equivalent to 5.01% of the business in respect of the year In March 2023, employees exercised their option to convert share options equivalent to 3.7% of their holding in respect of the year ended 31 December 2022. As a result, 111,085 shares in the Company were issued as consideration. ended 31 December 2023. The share-based payment charge in the year ended 31 December 2023 was £20,852 (2022: £31,906). Based on the share price of the Company of 1750p as at 31 December 2023, it is estimated that the Company will issue 106,928 shares as consideration for employees converting options in respect of the year ended 31 December 2023. Alpha Foreign Exchange (Canada) Limited Alpha FX Netherlands Limited In 2019 the Group announced the share ownership plan for Alpha Foreign Exchange (Canada) Limited in which management owned options equivalent to 25% of the business. 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 2022, 31 December 2023, 31 December 2024 and 31 December 2025. 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. In April 2022 the Group adjusted the employee share ownership incentive scheme for Alpha Canada to include additional key employees. The new shares are structured in a similar way to the shares issued to existing employee shareholders of Alpha Canada and will vest in four equal tranches, for each of the financial years ending 31 December 2024, 31 December 2025, 31 December 2026 and 31 December 2027. Following the establishment of our Netherlands business in 2020, in May 2021 the Group announced a new share scheme to incentivise key personnel within Alpha FX Netherlands Limited. These individuals have the option to exchange 25% of the shares they hold in Alpha FX Netherlands Limited for new ordinary shares in the Company for each of the financial years ended 31 December 2023, 31 December 2024, 31 December 2025 and 31 December 2026. The shares exchanged will be valued with reference to an 8x multiple of underlying profit after tax achieved by Alpha FX Netherlands Limited. 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. Based on the share price of the Company of 1750p as at 31 December 2023, it is estimated that the Company will issue 21,379 shares as consideration for an employee converting 1.6% of their equity in respect of the year ended 31 December In March 2023, an employee exercised his option to convert options equivalent to 4.5% in the business in respect of the year 2023. ended 31 December 2022. As a result, 8,395 shares in the Company were issued as consideration. Based on the share price of the Company of 1750p as at 31 December 2023, it is estimated that the Company will issue 5,593 shares as consideration for an employee converting options equivalent to 4.5% in the business in respect of the year ended 31 December 2023. 152 153 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 25. SHARE-BASED PAYMENTS [CONT.] The fair value of the net assets acquired is set out below: FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION Bristol Following the establishment of a new sales office in Bristol in 2022, in January 2023 the Group announced a new share scheme to incentivise key personnel within the Bristol office. A new class of shares (“I Shares”) in Alpha FX Limited was created. The value of the I Shares will be linked to the performance of the Bristol Operation. The Bristol share ownership scheme is structured in a similar way to the share schemes implemented for other FX risk management divisions in Canada and The Netherlands. From March 2025, the Bristol Participants will have the option to convert 25% of their holding of I Shares into ordinary shares of £0.002p each in the Company (“Ordinary Shares”) each year for four years (with the final option being exercisable in March 2028). The shares exchanged will be valued with reference to an 8x multiple of underlying profit after tax achieved by the Bristol operation. At conversion, and in exchange for converting their I shares into shares in the Group, the Bristol Participants’ holding of I Shares in Alpha FX Limited will commensurately decrease and the Group’s holding will commensurately increase. 26. BUSINESS COMBINATIONS On 1 December 2023, Alpha Group International plc acquired 86.36% of Financial Transaction Services B.V., trading as “Cobase”, a leading multibank connectivity platform. Cobase is an innovative, cloud-based provider of bank connectivity technology that enables corporates to manage their banking relationships, accounts, and transaction activity via one single interface. In doing so, the company unlocks significant operational and financial efficiencies, especially for international businesses with multiple banking counterparties across the world. Alpha believes there are opportunities to amplify one another’s growth by leveraging and sharing each other’s unique capabilities and experience. The purchase price allocation (shown in the following table) has been prepared on a provisional basis in accordance with IFRS 3 Business Combinations because of the acquisition completing one month prior to the year end and information regarding the intangible assets is still being sought. As a result, the intangible asset, deferred tax and goodwill amounts in the table below are provisional. If new information is obtained within one year of the acquisition date, about facts and circumstances that existed at the acquisition date, identifies adjustments to the amounts that existed at the date of acquisition, then the accounting for the acquisition will be revised. The initial consideration for the acquisition was €9.6m (£8.3m) in cash, with the remaining stake to be acquired via a performance-based earn-out between 2025 and 2028. Transaction costs relating to professional fees and integration costs associated with the business combination in the year ended 31 December 2023 were £486,633 and have been expensed within non-underlying items (note 6). Intangible assets Property, plant and equipment Right-of-use-asset Trade and other receivables Cash and cash equivalents Trade and other payables Lease liabilities Dilapidation provision Deferred tax liabilities TOTAL IDENTIFIABLE NET ASSETS NON-CONTROLLING INTEREST Goodwill on the business combination DISCHARGED BY: Cash consideration Book value £’000 Fair value adjustments £’000 Fair value £’000 3,292 9 182 1,322 53 (1,354) (182) (63) 143 3,402 980 - - - - - - - (245) 735 4,272 9 182 1,322 53 (1,354) (182) (63) (102) 4,137 (564) 4,707 8,280 Goodwill of £4,707k reflects certain intangible assets that cannot be individually separated and reliably measured due to their nature. These items include the value of expected synergies arising from the business combination and the experience and skill of the acquired workforce. The fair value of the acquired software, brand name and customer relationships was identified and included in intangible assets. Included in the Consolidated Statement of Financial Position is redemption liability of £1,884,165. This represents the fair value of the consideration payable to the non-controlling interest of the subsidiary Cobase on the date that the agreement was entered into. 25% of the non-controlling interest is to be acquired each period over a four-year period between 31 December 2025 and 31 December 2028. The opposite entry has been recognised within redemption reserve in equity. Cobase generated revenue of £186k and loss after tax of £241k in the one month from the acquisition date to 31 December 2023, this is included in the Consolidated Statement of Comprehensive Income for the reporting period. 27. ULTIMATE CONTROLLING PARTY The Directors believe that there is no ultimate controlling party of the Group. 154 155 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY202328. EVENTS AFTER THE REPORTING PERIOD Following the third year of vesting of the Alpha FX Institutional Limited share scheme for the year ended 31 December 2023, the Company will be issuing 126,201 shares in March 2024. Following the second year of vesting of the Alpha Foreign Exchange (Canada) Limited share scheme for the year ended 31 December 2023, the Company will be issuing 5,734 shares in March 2024. Following the second year of the vesting for D1 and D2 Share scheme and the first year of vesting for the D3 Share scheme for the year ended 31 December 2023, the Company will be issuing 80,544 shares in March 2024. Following the first year of vesting of the Alpha FX Netherlands Limited share scheme for the year ended 31 December 2023, the Company will be issuing 22,148 shares in March 2024. On 29 January 2024, the Group announced a share repurchase programme up to a value of £20m to purchase ordinary shares of 0.2 pence each. The Ordinary Shares purchased will be held in treasury. As at 19 March 2024, 339,929 ordinary shares of 0.2 pence each had been purchased for a consideration of £5.8m representing 0.8% per cent of the issued share capital of the Group as at 19 March 2024. All shares purchased were held in Treasury. On 29 February 2024, the Group entered into an interest rate swap for a notional amount of up to €100m to fix the rate of interest receivable on Euro cash balances held in respect of the Group’s client cash balances. With the interest rate swap, the Group receives a fixed rate of interest and pays a floating interest rate based on EuroSTR, the difference between the rates results in the Group receiving a fixed rate of interest. The contract commences in March 2024 and expires in March 2026 with a net interest rate receivable of 3%. Hedge accounting is applied in accordance with IFRS 9. On 20 March the Group will announce changes to the Board of Directors with Dame Jayne-Anne Gadhia appointed to the board as Chair Designate, effective from the Company’s AGM on 01 May 2024, subject to the completion of normal regulatory due diligence by the Company’s Nominated Adviser. In line with this, Clive Kahn, who has been Chair of the Company since 2016, will therefore not be seeking re-election at the Company’s 2025 AGM, with Jayne-Anne remaining Chair Designate until the conclusion of Clive’s term as Chair. Lisa Gordon, Non-Executive Director of the Company will also step down from the Board by not putting herself up for re-election at the Company’s AGM on 01 May 2024. A process to recruit an additional Non-Executive Director will be undertaken in the coming months. FINANCIAL STATEMENTS COMPANY STATEMENT OF FINANCIAL POSITION Company Statement of Financial Position As at 31 December 2023 Company number: 07262416 NON-CURRENT ASSETS Investments TOTAL NON-CURRENT ASSETS CURRENT ASSETS Trade and other receivables Current tax asset 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 As at 31 December 2023 As at 31 December 2022 Note £’000 Restated1 £’000 As at 1 January 2022 Restated1 £’000 5 6 9 7 64,574 64,574 6,020 75 6,095 70,669 87 52,566 4 667 17,204 70,528 141 141 70,669 54,568 54,568 10,033 51 10,084 64,652 84 52,075 4 667 11,815 64,645 7 7 53,033 53,033 10,483 249 10,732 63,765 82 50,819 4 667 12,173 63,745 20 20 64,652 63,765 The Company reported a profit for the year ended 31 December 2023 of £11,814,708 (2022: £3,351,205). The financial statements of Alpha Group International plc were approved by the Board of Directors on 19 March 2024 and signed on its behalf by: M J Tillbrook Director T Powell Director 156 157 1The prior period restatement is detailed further in note 4. ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023Company Statement of Changes in Equity For the year ended 31 December 2023 Notes to the Company Financial Statements For the year ended 31 December 2023 Called up share capital Share premium account Capital redemption reserve Merger reserve Retained earnings Total equity 1. BASIS OF PREPARATION 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 £’000 £’000 £’000 £’000 £’000 £’000 Reduced Disclosure Framework (“FRS 101”). FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS BALANCE AT 1 JANUARY 2022 (as previously reported) Prior period adjustment1 BALANCE AT 1 JANUARY 2022 (restated1) Profit for the year Transactions with owners Shares issued on vesting of share option scheme (restated ) Shares issued in relation to SAYE share scheme Share-based payments (restated1) Dividends paid 82 - 82 - 2 - - - 50,783 36 50,819 - 432 824 - - BALANCE AT 31 DECEMBER 2022 (restated1) 84 52,075 Profit for the year Transactions with owners Shares issued on vesting of share option scheme Share-based payments Dividends paid - 3 - - - 491 - - BALANCE AT 31 DECEMBER 2023 87 52,566 4 - 4 - - - - - 4 - - - - 4 667 11,609 63,145 - 667 564 600 12,173 63,745 - - - - - 667 - - - - 667 3,351 3,351 - - 1,101 434 824 1,101 (4,810) (4,810) 11,815 11,815 - (58) (6,368) 17,204 64,645 11,815 494 (58) (6,368) 70,528 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 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 Group International 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 Consolidated Financial Statements. These financial statements do not include certain disclosures in respect of: − share-based payments; or − 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 (“£”), and all values are rounded to the nearest thousand (“£’000”) except where otherwise indicated 2. MATERIAL ACCOUNTING POLICIES The material 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. 3. PROFIT FOR THE YEAR As permitted in section 408 of the Companies Act 2006, the Company has elected not to present its own statement of comprehensive income for the year. The Company reported a profit for the financial year ended 31 December 2023 of £11,814,708 (2022: £3,351,205). The auditor’s remuneration for audit and other services is disclosed in note 6 to the Consolidated Financial Statements. 1The prior period restatement is detailed further in note 4. 158 159 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 4. PRIOR PERIOD ADJUSTMENT As detailed in note 4 to the Consolidated Financial Statements, a number of Group employees receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity settled transactions). Historically, the Company has recognised an investment in subsidiary and a credit to retained earnings for the share-based payment charge. On vesting of the share options, share premium and a corresponding intercompany receivable were also recognised on issue of shares by the Company. After reviewing IFRS 2, the Group concluded that on vesting of the share options, share premium had been incorrectly recognised and other receivables were overstated as there was no arrangement for the subsidiary to reimburse the company. In addition, the previous years’ share-based payment charge was also found to be insufficient due to a miscalculation. Accordingly, the Company has restated its financial statements in accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’. The correction of these entries results in an increase to investments, an increase to retained earnings and a decrease to share premium. The effect of these adjustments is shown by restating each of the prior year affected financial statement line items as follows: As previously reported 31 December 2022 Restatement As at 1 January 2022 Restatement Year ended 31 December 2022 Restatement Cumulative to 31 December 2022 Restated 31 December 2022 Retained earnings Share premium account Investments Other receivables £’000 (10,779) (53,513) 53,076 11,927 £’000 (564) (36) 635 (35) £’000 (472) 1,474 857 (1,859) £’000 (1,036) 1,438 1,492 (1,894) £’000 (11,815) (52,075) 54,568 10,033 These movements did not result in any impact on cash. 5. INVESTMENTS IN SUBSIDIARY UNDERTAKINGS FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS The additional investments in the year represent the acquisition of Financial Transactions Services B.V. (Cobase) in the year (see note 26 to the Consolidated Financial Statements), share-based payments for employee share schemes in the subsidiary company and a buyback of shares from employees that left the business in the year. 6. TRADE AND OTHER RECEIVABLES Amount owed by Group undertaking Prepayments 31 December 2023 31 December 2022 £’000 6,018 2 6,020 Restated1 £’000 10,033 - 10,033 During the year, no impairment provisions have been made against any class of debtor. 7. TRADE AND OTHER PAYABLES Accruals 8. EMPLOYEE COSTS 31 December 2023 £’000 31 December 2022 £’000 141 141 7 7 Other than the Directors, the Company did not have any employees during the year (2022: nil). All staff are employees of the subsidiary undertaking. 9. SHARE CAPITAL The Company’s investment in the share capital of Alpha FX Limited and details of the subsidiary companies are disclosed in note 15 to the Consolidated Financial Statements. Details of the share capital of the Company are included in note 21 to the Consolidated Financial Statements. Balance at 1 January Share for share exchange On business combinations BALANCE AT 31 DECEMBER 31 December 2023 31 December 2022 £’000 54,568 437 9,569 64,574 Restated1 £’000 53,033 1,535 - 54,568 1The prior period restatement is detailed further in note 4. 1The prior period restatement is detailed further in note 4. 160 161 ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023 Shareholder Information REGISTERED OFFICE Brunel Building 2 Canalside Walk London W2 1DG COMPANY ADVISER & CORPORATE BROKER Liberum Capital Limited Ropemaker Place, Level 12 25 Ropemaker Street London EC2Y 9LY CORPORATE BROKER Peel Hunt LLP 100 Liverpool Street London EC2M 2AT SHARE REGISTRARS Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA FINANCIAL PR & ADVISORS Alma Strategic Communications 71 - 73 Carter Lane London EC4V 5EQ AUDITORS BDO LLP 55 Baker St Marylebone London W1U 7EU LEGAL ADVISERS Bird & Bird LLP 12 New Fetter Lane London EC4A 1JP Linklaters LLP One Silk Street London EC2Y 8HQ This document has been printed on Splendorgel, a paper sourced from well man managed, responsible FSC® certified forests and other controlled sources. The paper has been balanced with the World Land Trust, an international conservation charity, who offset carbon emissions through the purchase and preservation of high conservation value land. Designed by Camber, printed by Perivan. 162 CBP024244ALPHA GROUP INTERNATIONAL PLC REPORT AND ACCOUNTS FY2023ALPHA GROUP INTERNATIONAL PLC Brunel Building 2 Canalside Walk London W2 1DG www.alphagroup.com 

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