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.
