12 April 2023

Argentex Group PLC

("Argentex" or the "Group")

Full results for the 9 month period ended 31st December 2022

Growth strategy continuing to deliver strong results, with adjusted operating profit³ marginally ahead of market expectations

Argentex Group PLC (AIM: AGFX), the service led, tech enabled provider of currency management and payment services to international institutions and corporates, today issues its results for the 9 month period ended 31st December 2022¹

Financial Highlights for the 9 month period ending 31 December 2022

·      Group revenue increased by 63% to £41.0m compared to the same period last year² (FY22: £34.5m)

·      Operating profit of £8.1m (FY22: £10.4m)

·      Adjusted operating profit³ of £9.0m (FY22: £11.0m)

·      Debt free and cash generative with net cash increasing by £6m in the reporting period to £26.2m⁴

·      Earnings per share (EPS) of 6.2p basic and 6.8p adjusted (FY22: 6.6p basic and 7.0p adjusted)

·      Final dividend of 2.25p per share (FY22: 2.0p per share)

As previously announced, the Group is transitioning from a 31 March year end to a 31 December year end. To assist investors, relevant additional pro forma information is also provided for the 12 months to 31 December 2022.

Financial Highlights for the 12 month period ending 31 December 2022

·      Group revenues increased by 54% to £50.4m compared to the same period last year⁵ (FY22: £34.5m)

·      Adjusted operating profit³ marginally ahead of already increased expectations at £12.3m (FY22: £11.0m)

·      Adjusted operating profit margins marginally ahead of already increased expectations at 24.4% (FY22: 31.9%)

·      Netherlands revenue increased to £2.0m (FY22: £0.7m)

¹In line with the change in year end, all references are made to the 9 month statutory reporting period and where relevant additional information is provided for the 12 months to 31 December 2022

² Revenues generated in the 9 month period ended 31 December 2021 were £25m

³ Adjusted operating profit excludes one off costs in relation to the set up of overseas offices and any restructuring costs incurred in the period, in line with accounting policy

⁴ Net cash represents cash and cash equivalents plus collateral held at counterparties less amounts payable to clients

⁵Revenues generated in the 12 months to 31 December 2021 were £32.8m

Operational Highlights

·      Focused growth and investment strategy delivering a greater share of client wallet

·      1,595 corporate clients traded over the 9 month period

·      1,749 corporate clients traded over the 12 month period being 12% increase on 1,562 year-on-year (1,624 in FY22)

·      Average revenue per corporate client increased by 45% on FY22 over the 12 month period

·      10% of Group revenue from Structured Solutions over the 9 month period (FY22: 3%)

·      Online revenue increased by 89% over the 9 month period to £1.2m

Strong progress made with the Group's focused three pillar growth strategy:

Technology & product

·      Phase one of the technology strategy saw the Group's online platform successfully rolled out during the period

·      Online platform adoption and repeat utilisation growing ahead of management expectations

·      Alternative Transaction Banking division launched post period end, allowing customers to take advantage of a compelling alternative to current accounts offered by traditional banks

·      New Institutional division established post year end to specialise in the financial services sector

International Expansion

·      Netherlands subsidiary awarded Electronic Money Institution ("EMI") licence, providing a significant platform to grow Argentex across Europe

·      Awarded draft Australian Financial Services License (ASFL) post year end, providing continued momentum behind Argentex' Australasian ambitions

·      Australian team established

People

·      Continued to attract leading talent, totalling 137 global employees at period end, with 25 newly created roles filled in the period, 21 in the UK and 4 overseas

·      Hires across the Group to support investment in future business growth, with 33% of new roles created in the UK being technology development related

·      Continued investment planned to support technology development, international growth and further market share gains

Outlook

The strong momentum over the 9 month period to 31 December 2022 has continued into 2023. Q1 (to March) 2023 revenue increased by 34% to £12.7m compared to the same three month period to 31 March 2022, with every division of the Group delivering in line with or ahead of management expectations.

Addressing the increasing requirements of our clients remains at the forefront of our growth strategy. We have progressed into phase two of our technology led product pipeline with the launch of our Alternative Transaction Banking division in March 2023. This important and differentiating development of both products and solutions will enable the Group to service a broader client base, as well as further increase our share of wallet of the existing customer base by providing a compelling alternative to current accounts offered by traditional banks across the UK, Europe, and Australia.

Our European operations, headquartered in Amsterdam, continue to make progress and deliver ahead of expectations, while the Australasian focused office is established and ready to begin trading once regulatory permissions are granted.

As we evolve our product suite, it is important that we continue to provide our clients with a best-in-class service supported by experienced specialists, not generalists. Our financial services client base has grown steadily, now contributing 30% to Group revenue. It is for this reason that we have established a new dedicated Institutional division led by Kit Smith who has been integral to the Group's success in this market segment over his 10-year tenure.    

To further accelerate our global growth strategy, we will continue to invest in people, doubling the footprint of our UK, European and Australian headquarters during H1 2023 as planned. As the Group adds more products across more geographies, Lee McDarby joins Argentex as Chief Commercial Officer with over 20 years' experience in global banking and international payments.

Despite the uncertain global macro-economic backdrop, we look to the year ahead with optimism as we remain focused on delivering our growth strategy and will continue to generate a strong return on investment while increasing profitability and quality of earnings.

Harry Adams, Chief Executive Officer, said:

"I am pleased to report another record set of results for Argentex, further evidencing the significant progress we are making in the implementation of our long-term growth strategy. Our business is experiencing excellent momentum, demonstrated by 63% revenue growth over the 9 month period and 34% revenue growth in the first quarter of 2023."

"The impact of our investment in technology and products is especially encouraging. We have more than doubled the amount of people working in technology and have increased the focus on additional products that are now contributing circa 13% of revenues and increased the average revenue per corporate client by 45%. Our newly launched Alternative Transaction Banking product set and focused divisions will drive additional revenue streams and client engagement that will allow us to continue to deliver further wallet share and open new revenue opportunities."

"We are wholly focused on ensuring these initiatives deliver both short-term earnings potential and sustainable, long-term growth for all our stakeholders."

Lord Digby Jones, Non-Executive Chairman, said:

"Argentex has put the building blocks in place to unlock its significant potential and create a market leading client proposition. Emphasis has always been on investing for sustainable growth although it is highly encouraging to see immediate and tangible results cement its viability and potential for future performance."

"The Group has made an excellent start to the new financial year extending the strategic and operational momentum which generated the record financial performance during the period. The new technology and product roll out is heralding an exciting new chapter for the Group. The expanded geographical footprint and strong ongoing sector fundamentals further support Argentex's engine for growth. We remain confident that the Group's ambitious strategy will continue to deliver for clients, employees and shareholders."

For further information please contact:

Argentex Group PLC

Harry Adams - CEO

Jo Stent - CFO

[email protected]

FTI Consulting LLP (Financial PR)

Ed Berry / Ambrose Fullalove / Jenny Boyd

07703 330 199

[email protected]

Singer Capital Markets (Nominated Adviser and Broker)

Tom Salvesen / James Maxwell / Justin McKeegan

020 7496 3000

Analyst briefing

A meeting for analysts will be held virtually at 9.30am today, 12th April 2023. Analysts wishing to attend this event can register via email to [email protected]. Argentex's Full Year results announcement will also be available today on the Group's website at www.argentex.com.

Retail investor presentation

Management will additionally host a presentation for retail investors via the Investor Meet Company platform at 16:30 on results day. The presentation is open to all existing and potential shareholders. Questions can be submitted via the Investor Meet Company dashboard up until 09:00 on the day before the meeting, or at any time during the live presentation.

Investors who already follow Argentex Group PLC on the Investor Meet Company platform will automatically be invited. Those wishing to sign up for free, and meet Argentex, can do so via https://www.investormeetcompany.com/argentex-group-plc/register-investor.

Chairman's statement

Global businesses have faced significant challenges over the last two years, navigating the unprecedented global lockdowns followed shortly by the tragic outbreak of the war in Ukraine and a downturn in the UK macro-economic outlook. Inevitably this has led to many adjusting their course to navigate this uncertainty.

Hindsight shows us that the companies successfully performing in and emerging from these conditions are those that prioritised the pursuit of stable, measured growth through the uncertain times, while maintaining an unrelenting focus on the building blocks needed to capitalise on new sector trends.

It is this that defines the strength of Argentex's financial performance through the period - a considered repositioning of the business's strategy which is already delivering, refocusing on investment in people, technology and international expansion in order to pursue new opportunities emerging across the foreign exchange sector. Under the expert leadership of Harry Adams, the evolution of Argentex and its path forward are clear, with a sustainable and diversified platform that is better positioned than ever to meet increasing client needs and delivering for all stakeholders.

I am proud to serve as Chairman of a business that continues to demonstrate its agility and innovation making the most of changing market conditions. My thanks go to Harry and the full Argentex team for their hard work and commitment this year. The ongoing success of the business is testament to their expertise and collective mindset geared towards sustainable growth. It is an honour to work alongside them.

I must also extend my thanks to Lena Wilson for her invaluable contributions to the business's growth in the last few years as a Board Director. Her expertise has come at a vital time for a newly listed business and she leaves with our deep gratitude and best wishes for her future endeavours.

Fundamentally, Argentex has remained a trusted partner to a client base that has, in recent years, had to grapple with a series of volatile macroeconomic conditions, including the latest period of high inflation, rising rates and a consequential cost of-living crisis. While such pressures will undoubtedly continue to weigh on business and market sentiment over the short to medium term, Argentex's ability to continue to grow its corporate client base and relative market share, while supporting clients and navigating the market-wide headwinds speaks of the resilience and professionalism in the business.

Argentex is committed to continue outperforming expectations for its clients and shareholders alike by providing a viable and flexible alternative to traditional banks, growing internationally, and developing technology enabled products - there is much to be excited about on the horizon.

KEY ACHIEVEMENTS
Against this backdrop, the Board is very pleased to have delivered results that were marginally ahead of market expectations during the year, with record revenue growth and a substantial increase in profitability over the period. These strong results have been achieved alongside the management of an ambitious investment programme and ensuring the continued progressive dividend policy is maintained.

This recent strong performance has not come overnight, nor is it a symptom of external market drivers alone. Through a refined strategy, the last 18 months have been about putting the building blocks in place to unlock the significant growth potential identified and to create a market leading client proposition. While the ambition is long-term, the immediate and tangible results of the corporate strategy cement its viability and potential for future performance. 

Argentex continues to build out its core offering to capitalise on the evolving needs and interests of its growing and increasingly global client base. Through the high-quality talent it increasingly attracts, the strengthening expertise within the Group alongside an exciting product development pipeline demonstrates a commitment to being a sophisticated partner to clients.

The business has welcomed market leading talent at all levels during 2022. On behalf of the Board, I'd like to extend my congratulations to David Christie for all he has accomplished in the first full year of his role as Chief Operating Officer. Hires over the period have professionalised further back-office functions, strengthened marketing, compliance and risk management divisions, while adding efficiencies and critical resources to the sales team. Their collective contributions are fundamental to Argentex's delivery of a high quality, sustainable and responsible client service.

What is vital in any growing business is the preservation of good corporate culture and a sense of belonging and contribution among its employees. I am proud of the way the business is focused on fostering a culture defined by inclusivity, innovation and collegiality, enhancing the way it delivers value for clients, attracts new business and grows its market share. It is also central to its ability to attract and retain talent.

The increasingly dynamic sector in which Argentex operates, and the evolving needs of clients around the world, mean there is no limit to the role technology can play in enhancing its offering to existing and new customers. The Board looks forward to announcing further developments to the business's technological capabilities as a result of the recent focused investment that has been made.

Argentex's internationalisation strategy designed to replicate its proven and growing UK model in highly regulated geographies where there is demonstrable latent demand for its products and services continues to gain momentum. The Board is pleased that the Group has further strengthened its presence and local market offerings in the Netherlands and Australia. We continue to assess new territories that can support our ambitious growth plans and remain confident in the role these regional offices will play as a springboard to further expansion in new, highly regulated, markets over time.

OUTLOOK
2022 has been a defining year for Argentex operationally, strategically and financially. Our investment as part of the three-pillared strategy is delivering robust results and we are winning further market share and client wallet as a result of our client centric approach and growing breadth of services.  I am excited about the business's continued ability to capitalise on the significant opportunities that present themselves in the global FX and payments sectors.

Argentex is well positioned to continue to enhance its client service, product suite and footprint in line with the increasing trading and digital demands of its clients and further increase market share. I look ahead to the remainder of the year (and beyond) confident in the Company's sustainable diversification strategy and long term prospects.

Lord Digby Jones Kb.

Non-Executive Chairman

CEO statement

OVERVIEW

The 9 month period to 31 December 2022 represented a pivotal period for the Group where Argentex has focused on driving sustainable and diversified growth across its 3 strategic pillars: People, Technology and International expansion. The evolving suite of technology enabled products and high service levels has attracted a growing number of institutional and corporate clients who seek a trusted and well capitalised counterparty to provide solutions for their global foreign exchange and treasury requirements. The positive momentum from our last financial year continued into the 9 month reporting period and has resulted in Group revenues of £41m (FY22 £34.5m) and an adjusted operating profit ¹of £9.0m (FY22 £11.0m). On a 12 month basis from 01 January 2022 to 31 December 2022, Group revenues of £50.4m and adjusted operating profit¹ of £12.3m. These strong results, which are marginally ahead of already increased expectations highlight the positive impact this investment in our growth strategy has had on our performance. It also reinforces the significant long-term market opportunities both geographically and through new diversified products and solutions, as we continue to progress taking a greater share of client wallet through this organic growth strategy.

I am delighted by the quality of talent that Argentex has recruited this year. I believe this has contributed to the Company's recent growth and reinforces our strong position as a leading provider in the global B2B payments market over the longer term. We have invested in people at every level of our business across front office, operational and technological roles, as well as strengthening the Senior Leadership team.  In November 2022 we announced our LTIP and I am pleased to welcome 42 members of staff as partners and owners of the Group in order to incentivise and encourage retention of senior employees in a manner that aligns with the interests of the Group's shareholders.  I'd like to thank the team for their continued hard work and commitment to the Group and look forward to maintaining this positive momentum as we enter the next phase of Argentex's growth.

MARKET BACKDROP

The reported period has once again been dominated by domestic and global uncertainty. The UK's mini budget plunged the pound to its the lowest level against the dollar since decimalisation in 1971, while interest rates across the world have increased to levels not seen since the global financial crisis in 2008.

The Group has supported clients through these unprecedented events and the ongoing impacts of the Russia's invasion of Ukraine, which has had a significant impact on trade, currency, and by extension many businesses' profitability. Every day we speak to clients and prospects who are in desperate need of guidance, which they are not receiving from large banks and other payment institutions. 

While these events created volatility in FX markets our de-risked model and disciplined approach allowed us to create revenue opportunities, alongside underlying growth in our client base and share of client wallet that resulted in outperformance on an adjusted profit basis for the 12 month period.

FINANCIAL PERFORMANCE 

The Group has capitalised on the increasing demand from institutions and corporates for a credible, service led, technology enabled provider, to manage their foreign exchange exposure and payments. Our "right tech, right touch" approach has led to Group revenues increasing to £41.0m (FY22: £34.5m). In addition, 1,595 corporate clients traded with Argentex for the period (1749 for the 12 month period ending 31 December, FY22:1,624). Argentex remains focused on maintaining a high quality and diversified client-base with the Group's top 20 clients accounting for 39% of total Group revenues. When considering the improved higher-margin product mix, such as an increase in Structured Solutions as a proportion of total Group revenue to 10%, in aggregate with the increased client wins and client trades through the 12 month period, it represented a clear increase in our share of client wallet, with an average revenue per corporate client traded increasing by 45% in the twelve month period compared to FY22.

The Group has maintained a disciplined approach to managing costs through the period resulting in an operating profit of £8.1m (£11.3m for the 12 month period ending 31st December 2022, FY22: £10.4m). Operating margins are marginally ahead of market expectations, with adjusted operating margins¹ of 24.4%. 

As a result of this strong performance through the period and positive outlook for the Group's prospects, the Board is pleased to announce a 12.5% increase in the total dividend to 2.25p per share.

The strength of Argentex's performance over the period is ultimately down to the trust our clients place in us to generate the best quality outcomes for the spectrum of their foreign exchange and payment needs. We remain a key partner for their trading requirements in our core foreign exchange proposition and have seen an increase in revenue generated from existing clients seeking different products and solutions. This was particularly evident during the latter months of 2022, as market dynamics created one of the most volatile periods for sterling on record, therefore, companies relied on Argentex to guide them through this black swan event, seeking hedging strategies, payments, treasury and risk management solutions.

Historically, our revenue mix has been a 50:50 split from spot and forward trades, however since the inception of our Structured Solutions division in FY22, which generates higher margins than spot or future contracts, 10% of revenue was generated through this new division in the reporting period. Not only has the product mix diversified, we have seen a 65% increase in clients trading online for the period, like for like, using our new platform.

GROWTH STRATEGY

Our strategic investments across our three pillars:  people, technology and international expansion, have enabled us to increase our share of client's wallet and provide a viable alternative to the traditional banks who are seeing their historic 85% market share come under pressure. 

People:

We remain focused on investing in our people to drive forward our organic strategy, creating an empowering and collaborative environment for our growing team as well as fostering the next generation of graduates and financial services professionals through their early stage careers. Our success has been accelerated by the senior hires we have made in the last year across the Group to support our strategy.

The strategy to grow our office capacity continues with 25 new hires over the period. At the period end date, global headcount was 137 and our bench has never been stronger. I am proud of the entrepreneurial and supportive culture we have created, and to which every Argentex employee contributes.

Technology:

The technology strategy was driven by the demand from institutional and corporate clients to give them optionality and flexibility whilst also creating efficiencies in our business.  As part of 'phase one' of our technology strategy we launched an enhanced online platform during the period.  Pleasingly, our results clearly demonstrate the immediate positive contribution this first phase of our technology development has had on both client experience and Group earnings. Online revenue increased to £1.2m (FY22 £0.6m) and the number of trades online grew by 41% to 4248 (FY22 3010).  We now look to activate 'Phase 2' of our technology plan, initially focused on the launch of our new Alternative Banking Transaction division, in addition to remaining focused on maintaining the momentum to meet evolving client demands, both in the UK and overseas.

International Expansion:

Our presence in the Netherlands and Australia is indicative of our strategy to transform Argentex from a single product, single-office business into a multi-product, global business. The Netherlands subsidiary, was awarded an Electronic Money Institution ("EMI") licence by the Dutch National Bank in September, providing access to a substantial domestic market. In 3 years, the office has grown to 16 professionals and delivers a meaningful contribution to Group revenue. While the office prioritises domestic revenue streams, this credible licence endorses Argentex's differentiated and uncompromising approach to regulation and provides our business with a springboard to other European countries, creating a scalable model for future growth in the continent. I am pleased to announce following the period end, we have been awarded a draft Australian Financial Services License (AFSL) which launches the Australasian offering.  We look forward to reporting on progress of this exciting market opportunity.  We maintain a measured and client-led approach to our international expansion, will consider seeking future regulatory permissions where they are value additive to operations and are actively monitoring for long-term growth opportunities in new regions.

SUSTAINABILITY

Our growth strategy is supported by clear sustainability goals under the three pillars of Planet, People and Partners. We are committed to putting the right focus on sustainability, encompassing environmental, social and governance (ESG) issues to support our growth and yield greater business benefits by transitioning towards a sustainable business model. 

OUTLOOK

We are encouraged that our three pillar strategy is delivering results and we will continue to focus on building this positive momentum into 2023. These results are supportive of our strategy to continue to invest in order to capitalise on the market opportunity and drive accelerated growth in revenues and profitability over the medium term. As such, we will double the footprint of our UK and European headquarters during H1 2023, with a number of expected new hires in the UK, Netherlands and Australia.  Looking ahead, our focus on attracting industry-leading talent remains unchanged, whilst fostering our existing talent and bringing them up through the ranks.

Our planned investment will also ensure our capabilities meet the increasingly digitalised requirements of our stakeholders through progressing into 'phase two' of our technology led product launch pipeline. This year, we will launch our alternative transaction banking division, initially giving institutions and corporates their own unique multi-currency accounts. This is an important and differentiating step for the Group as it capitalises on its core business to propel itself into new markets and territories. 

The successful combination of people, technology and international expansion are expected to generate a strong return through growth in revenues, increased profitability and continued earnings quality. I would like to thank our employees, business partners and shareholders for their continued support and look forward to sharing more updates with you in the coming period.

Harry Adams

Chief Executive Officer

¹Adjusted operating profit excludes one off items relating to the set up of overseas offices or any restructuring costs as per accounting policy

Financial Review

As previously communicated, we made the decision to change our year end to 31 December in line with the Group's transition to a global financial solutions provider.  Our report throughout is reflective of the 9 month short accounting period to 31 December 2022 as we transition our new year end date.  Where appropriate, and to assist investors, we make additional pro forma reference to performance for the 12 months to 31 December 2022 for information purposes only.

In the 9 months to 31 December 2022, Argentex delivered record revenue growth alongside continuing to pursue its ambitious investment programme across all three facets of its strategy; people, technology and international expansion.  Whilst the period included two weeks of heightened volatility in the pound, our scalable, highly cash generative and increasingly diversified business model continued to demonstrate its long-term resilience and highlight the Group's ability to deliver for all stakeholders against any economic backdrop.  As a result of this strong performance throughout the period and positive outlook for the prospects of the Group, the Board is pleased to announce a dividend of 2.25p per share for the 9 month period.

FINANCIAL PERFORMANCE

Argentex generated revenues of £41.0m in the 9 month period, an increase of 63% compared to the same period in the prior year. For the 12 months to 31 December 2022, Argentex delivered a year on year increase of 54% with revenues of £50.4m (12 months to 31 December 2021: £32.8m). Record revenues generated in the period were supported by an increase in corporate clients trading in addition to incremental contributions from an enhanced product mix such as Structured Solutions and revenues from our online platform.

1,595 corporate clients traded with Argentex for the 9 month short accounting period compared to 1,624 corporate clients having traded for 12 months to 31 March 2022. Of this 1,595 corporate clients traded, 409 were new in the period (FY22: 528). A total of 1,749 corporate clients traded over the 12 month period to 31 December 2022. Historically, our revenue mix has been a 50:50 split from spot and forward trades, however since the inception of our Structured Solutions division in FY22, 10% of revenue was generated through this new division in the 9 month period. Not only has the product mix diversified, we have seen an increase in clients using our new online platform. 351 clients traded online with Argentex for the 9 month short accounting period compared to 252 clients trading for 12 months to 31 March 2022 resulting in a 89% increase in online revenue.  Combined, these factors resulted in a 45% increase in average revenue per customer in the 12 month period to 31 December 2022 compared to FY22 which shows encouraging early results from our investments in growth to date and is clear demonstration of our increasing share of client wallet.

The Group has maintained a disciplined approach to managing costs through the period resulting in an operating profit of £8.1m (12 months to 31 December 2022 £11.3m, FY22: £10.4m). Adjusting for one off expenditure relating to restructuring and the set up of overseas offices, adjusted operating profit in the 9 month period was £9.0m, or 22% margin and in the 12 months to 31 December 2022 £12.3m, reflecting a 24% margin. However, margins delivered in the 12 months to 31 December 2022 were marginally ahead of already increased market expectations. The planned decline in operating margins compared to FY22 reflects the previously communicated ambitious investment programme across all three facets of Argentex's growth strategy.

The Group's robust approach to risk remains unchanged, which is demonstrably reflected in the consistently low instances of client default. In the 9 month period ended 31 December, the Group recorded a credit valuation adjustment of £1.1m in recognition of the broader macroeconomic backdrop and trends in addition to the Group's increase in size and scale.

People

In the 9 month period to 31st December 2022 the number of employees (including Directors and LLP members) grew to 137 (FY22: 112). Front office/Back office split has shifted moderately versus prior periods at 53%/47% (FY22: 62%/38%) and reflects the investment in technology in support of the growth strategy and further professionalisation in the support functions proportionate to the maturation of the business as well as a continued balanced approach to risk. A total of 25 people were hired into new roles created in the period, 21 UK and 4 overseas.

Technology

Total investment in technology in the 9 month period was £1.4m (FY22 £1.7m), with the impact on profit margins mitigated by the fact that benefits of the technology spend will be realised in future periods and as such investment spend is treated as capital investment and amortised over a three year period in line with accounting policy. In recognition of the ambitious nature of our investment programme, the Group has invested in programme management resources to enhance operational efficiency and manage execution risk given the pace of growth across multiple facets.

Overseas Expansion

International expansion continued with focus on the Netherlands and Australia including set up costs in the period of £0.5m. Revenues generated in the Netherlands for the 9 month period totalled £1.6m (FY22: £0.7m). The Netherlands will be the central hub for European operations and licences granted in the Netherlands will act as a gold standard for the region to create further opportunities in the coming years.

FINANCIAL POSITION

Argentex views its ability to generate cash from its trading portfolio is a key indicator of performance within an agreed risk appetite framework. As at 31 December 2022, Argentex has net cash of £26.2m, an increase of £6.0m on prior period. Total cash and cash equivalents include client balances pertaining to collection of any collateral and variation margin in addition to routine operating cash balances. Further, cash and cash equivalents does not include collateral placed with financial counterparties. Collateral placed with financial counterparties of £10.0m (FY22: £7.2m) recorded in other assets of the statement of financial position.

Before movements in client balances held as shown in the Consolidated Financial Statements note 19, the Group generated £7.5m in cash from operating activities. A £12.1m decrease in client balances held, when deducted from cash generated results in a net cash outflow inclusive of client balance movements of £4.6m (FY22 cash generated of £17.2m). Of the £7.5m in cash generated from operating activities, £1.4m was used to invest in technology and a further £1.5m was returned to shareholders in the form of a dividend.

Cash generation from the Group's revenues is a function of i) the composition of revenues (spot, forward and option and swap revenues) and ii) the average duration of the FX forwards in the portfolio. In the period, Argentex has generated revenues in a ratio of approximately 45:55 between spot and forward contracts outside of options and swap revenues. While spot FX contracts attract a smaller revenue spread, the inherent risk profile is much reduced and cash is generated almost immediately. As such, having this proportion of revenues generated by spot trades with a minimal working capital cycle creates a strong positive immediate cash flow for the business compared to its operating cost base.

Argentex continues to enjoy a high percentage of trades converting to cash within a short time frame, which is a result of almost 50% on average of revenue from trades outside of structured solutions and swap trades being spot contracts in addition to forward contracts carrying a relatively short tenor on average. Excluding swap revenue, 81% of revenue converts to cash within 3 months which is consistent with prior years as follows:

CASH CONVERSION

Derivative financial assets grew 62% in the period to £66.5m with current element being £57.7m (87% of total derivative financial assets). The Group diversifies liquidity requirements across five liquidity providers, the largest providing 62% of liquidity required (77% at 31 March 2022).

PORTFOLIO COMPOSITION

Argentex's client base continues to grow with an increase in corporate clients traded in the 9 month period to 1,595 (FY22: 1,624), and 409 of these corporate clients traded representing new business. Even when taking growth into account however the composition of our client portfolio remains consistent year-over-year in that it consists of similar businesses with exposures in the major currencies of sterling, euro and US dollar. In line with prior year, as at the period end 78% of the Group's portfolio was comprised of trades in those currencies and hence the Group's exposure to exotic currencies or currencies with higher volatility and less liquidity remains significantly limited.

Further, client concentration has been maintained with 39% of revenue represented by the top twenty customers (FY22 36%).

Argentex has put in place a low risk approach to managing collateral requirements with institutional counterparties to mitigate significant volatility risk which, when coupled with a selective and robust client acceptance process, has ensured that Argentex continues to avoid any material issues over settlement. In addition, as a result of a conservative approach to risk, Argentex continues to enjoy immaterial occurrence of bad debt. A credit valuation adjustment charge of £1.1m has been maintained at broadly the same level as previously reported (£0.9m at 30th September 2022).

CHANGE IN FINANICAL REPORTING PERIOD

In line with the Group's transition to a global financial solutions provider, the financial reporting timetable has moved to a 31st December year end.

DIVIDEND

Argentex is pleased to declare a final dividend for the 9 month period ended 31 December 2022 of 2.25p per share. The final dividend record date will be 30 June 2023 and will be paid on 4 August 2023. The ex-dividend date is 29 June 2023.

Jo Stent

Chief Financial Officer

Consolidated Statement of Profit or Loss and other comprehensive income for the period ended 31 December 2022

Consolidated Statement of Financial Position as at 31 December 2022

Consolidated Statement of Financial Position (continued) as at 31 December 2022

The financial statements of Argentex Group PLC were approved by the Board of Directors on 11 April 2023 and were signed on its behalf by:

   Harry Adams

Director

Consolidated Statement of Changes in Equity for the period ended 31 December 2022