Argentex Group plc share price, company news, analysis and interviews

Argentex Group plc (LON:AGFX) Chief Executive Officer Harry Adams caught up with DirectorsTalk for an exclusive interview to discuss record revenues, seeing benefits of the strategy, increase in share of clients, attracting new clients and key growth drivers going forward.

Q1: Harry, the results showed record revenues despite challenging market conditions, what do you think has helped to drive this growth?

A1: We have an incredibly robust business model that we have demonstrated half on half since inception that we can turn around very decent organic growth. If you look at our post-IPO performance, we’ve got a half-year CAGR of around about 36%, all the way up to the half just gone.

The core business to date has been currency management and that’s helping corporates and institutions navigate the currency conundrum, making sure they’re protecting their bottom line, and we have done that through some spot, forward and now, more recently, structured solution products.

Since then, we’ve been executing a three-pronged strategy which I have been relentless in messaging to investors, which is around people, product in technology and overseas expansion. What you’ve seen is we made some great inroads into each pillar of that strategy but probably the most impressive being the product and technology side.

So, from where we’ve been, which is historically a very high-touch, low-tech FX brokerage, to where we sit today which is a very high-touch, tech-enabled business that is not only facilitating currency management but also offering our clients alternative transaction banking and payments. So, we’re able to offer more products to more clients, and that’s helped us put out this record performance in the half just gone.

Q2: Are you actually seeing the benefits of this investment come through from the strategy?

A2: Yes, absolutely. Of course, we’ve seen the benefits so 28% growth from January, in a flat market, which you alluded to in your first question, is no mean feat. A lot of that has been down to the new development in products and we expect that to continue to grow.

So, there has been a huge shift in the mindset, not only in our staff in terms of we are no longer a high-touch brokerage, we’re now more of a tech-enabled business that can offer new products and benefits to the clients. As we go through that journey, you’re going to see even more take up of these products which will lead to market share and more wallet share.

Q3: I assume that you’ve seen an increase of your share of clients while it’s as a result of the investment in technology and products?

A3: Yes, we’ve seen a large uptick, I think in terms of quality of clients and the way we monitor quality of client is on average revenue per client, we’ve seen a big uptick. So, there’s been about a 57% growth in new revenue per European clients, and overall the for the group, there’s been an uptick of about 18% of revenue per client so you’re starting to see the fruits of that investment come through.

Actually, what’s great to see too is the new business, we’ve knocked out of the park this half and that’s demonstrating the overhaul of our sales and marketing strategy was the right thing to do towards the start of the year. Also, having those new products that our sales team are able to push out to the market, we had an increase of about 55% in average revenue per new client.

So, it just goes to show that that’s the new client base that we’re selling to, once we can cross-sell across our more established client base you’re probably going to see an uptick in that too.

Q4: Just thinking about how your client base has changed as you develop these new products, are you attracting new clients in addition then?

A4: We’re always attracting new clients and we’re attracting difference clients.

Historically, the currency management business will attract the corporates and institutions that either want to hedge their currency exposure or execute a trade, which historically they’ve probably been doing with their bank at probably poor rates with a substandard service, that’s why they’re using Argentex. Now, with the alternative transaction banking, that offering is very different.

So, we’re able to offer clients bank accounts that is held in their name with their own IBAN with a tier one bank within 48 hours so we’re now competing not only with the banks on the foreign exchange transaction but also on the ability to hold and pay away currencies.

It’s a totally new proposition, and that attracts totally different clients.

Q5: Have you seen any benefits from the award of the Dutch virtual IBAN in growing your business in Europe?

A5: Of course, yes, we’ve seen some great traction in Europe in general.

We’ve only been live with the virtual IBAN in the UK since March, we’ve only been live with the Dutch virtual IBAN since mid-June but even then, we are starting to pick up more and more clients. One of the issues for the Europeans with Brexit is that the corporates were forced to close their bank accounts in the UK , therefore they could no longer hold sterling accounts.

However, what we can do now is offer these corporates or institutions their own bank accounts that’s with a Dutch virtual IBAN with a tier one bank and they can hold 15 currencies in that virtual IBAN.

So, I just gave that example of not being able to have that sterling account anymore but there are countless other examples that I could give you that can demonstrate that that product is geared towards the Dutch market. It really allows us also to pass that across Europe as well so the European market is a $60 billion market and we generated £1.8 million worth of revenue in the half just gone so we’re not even a rounding error in that market.

Q6: The outlook is challenging, how will Argentex navigate this, and what do you think will be the key growth drivers going forward?

A6: The outlook I don’t think is that challenging, the economic backdrop has been flat, straight challenging, we’ve operated in marketing conditions like this countless times and we will probably do so over the next 10 years or so.

What we’re here to do is going back to the fact that we need to bring on more clients, we are offering a service that is very compelling, it’s credible, we have a strong balance sheet, we are up against the banks who still hold about 85% of the market share so I see absolutely no reason why the trend won’t continue.

As long as we are offering the clients what they want, we’re not shoehorning products into them, they’re going to continue to use us and they’ll be sticky.

Argentex Group plc (LON:AGFX) Chief Executive Officer Harry Adams caught up with DirectorsTalk for an exclusive interview to discuss their latest trading update, how its growth strategy is working, new transactional banking division, virtual IBANs and key growth drivers for 2024.

Q1: Harry, Argentex trading update just released and the markets have been extremely volatile just lately. How has the core business performed?

A1: The stock markets have been relatively volatile but actually the currency markets have been quite benign. There’s been a steady move against the dollar and the sterling seems to be recovering from the mini budget towards the end of the year.

Actually, if you look at the three month implied volatility on sterling dollar and sterling euro, it’s back down to 2021 lows. So, although volatility is helpful for this business, it’s certainly not imperative for growth.

We’ve demonstrated that the business can flourish in any market backdrop but in terms of the core business, the majority of our clients are corporate and institutions, they tend to be on the more sophisticated end of the market. We help those clients with hedging but also, we’re here to undercut the banks in terms of spot transactions.,

So, the demand for our products has been steadily growing over the last 12-18 months since we overhauled our strategy and, as we expand over to Europe and we launch new products, we expect that trend to continue.

Q2: You did present a clear growth strategy and one pillar is to invest in technologies and products, are you winning new clients as a result of growing your online platform? Has it helped to win a greater share of customer wallets?

A2: Yes, absolutely. I think we’ve learned a lot from our journey both being from the early days of the startup through to the IPO in 2019 and going through a lot of black swan events in the last 4 years or so.

I think looking back, one of the improvements I would have made, given my time again, is to invest more heavily in technology a little bit earlier. We took the decision back in 2021 to overhaul the strategy and a lot of the investment is going into technology and that’s really what the clients expect from a business operating in this day and age.

So, we now have that all singing, all dancing technology platform which is capable of facilitating both the corporate end of the market but also the institutional end of the market. You’ve got to appreciate that the technology strategy never really ends, it is always evolving but as we are investing more, we’re able to garner more client wallets and market share.

Q3: Now, you’ve recently launched a new alternative transaction banking division, can you just remind us of what that is and is it getting the traction that you expected?

A3: Our core business since inception has been currency management so that is helping corporates and institutions navigate the foreign exchange markets. We’ve now launched the alternative banking product that really compliments the currency management.

So, what effectively that is, is an online platform, it’s an offering for clients to log on, they’re able to hold 15 currencies under one account number in their name, and they can move currency and payments between different companies within their group. What it’s there to do is take out the requirement for high street bank where let’s be honest, the banks don’t really want that transactional business, they don’t make any money off the back of it.

So, we’re able to onboard clients very quickly, just from the KYC that we require and it gives the clients the ability to pay in and pay out, as I say, from 15 different currencies.

Q4: why is the award of a virtual IBAN key to driving growth across Europe, and are there many other providers who can offer that?

A4: A virtual IBAN is there to provide one account number that can hold 15 currencies which is great for both corporates and institutions for different reasons.

In terms of Europe, they are slightly behind the UK in this technology. We took the decision back in 2020 to have a gold standard regulation in Europe that comes from the Dutch National Bank (DMB) so with that, we are now able to provide our European clients with a Dutch virtual IBAN which again, is the gold standard of European regulation.

That actually allows to garner more clients as they’ll probably prefer to have a Dutch IBAN as opposed to some of the grey regulators across Europe. It actually makes us only one of three non-bank providers of virtual IBANs in Europe.

You are seeing a couple of competitors, not really competitors, they just operate in the similar space but more on the smaller SME side, they’re making some great traction over in Europe just by offering these credible virtual IBANs. So, we are very excited about the possibilities across Europe.

Q5: Finally, what will be the growth drivers for 2024 and beyond for Argentex?

A5: I guess that comes back to our strategy, which is along with people, product, technology, and places.

We have invested very heavily into our technology and product over the las t24 months or so, and now we’re slowly but surely setting up different offices across other jurisdictions. Our Australian office is live, we’re still waiting for that final rubber stamp from the Australian regulator, we’re expecting that anytime soon, although I have been saying that for 3 or 4 months now, but it is absolutely imminent.

So, really what we’re doing is just pushing these new products across different jurisdictions, we’ve invested heavily into our CRM platform that now allows us to seamlessly go into new markets without having that initial investment in time. What we found was when we first went into Europe, it was quite evident that the platform, the foundations that we built in London didn’t really suit that move into Europe. So, we spent a lot of money and a lot of time in making sure our platform, our CRM is now scalable and we can push it into new territory seamlessly.