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FairFX Group Plc

FairFX Group plc Strong growth and improved margins

FairFX Group plc (LON:FXX), the low cost multi-currency payments service, announced today its interim results for the six months ended 30 June 2016.

Key Financial Highlights

· Turnover up 10 per cent. to £344 million (H1 2015: £312 million)
· Revenue up 26 per cent. to £4.6 million (H1 2015: £3.6 million)
· Gross profit up 30 per cent. to £3.6 million (H1 2015: £2.7 million)
· Net loss reduced by 57 per cent. to £0.9 million (H1 2015: £2.1 million)

Key Operational Highlights

· Raised £5.25 million through placing, including strategic investment by Crystal Amber Fund Limited
· The Group delivered on its strategy to shift the business mix towards higher margin products. As a result, increases of 26 per cent and 30 per cent in revenue and gross profit respectively were achieved from a 10 per cent. rise in turnover
· Total retail customer numbers increased by 40,376 to a total of 548,424 with emphasis on card customers, which increased by 34,165 despite headwinds experienced by many travel-related companies
· Corporate card platform growth of 64% to £30.4 million in turnover (H1 2015: £18.5 million)
· Remodelled website with rebranding and full-service mobile app deployed ahead of schedule
· Targeted marketing investments of £1.6 million (H1 2015: £2 million), principally used for running of TV commercial
· Fully operational throughout EU referendum campaign with record week during voting period
· Strategic partnership with HolidayExtras to promote FairFX’s products to its customer base

Post-Period End

· Growth in new card sales accelerated further with 17,002 cards sold in the 2 months post-period end
· Total turnover in July and August was approximately £165 million, an increase of 32 per cent. on the same period last year
· Strategic partnership with Premier League Champions Leicester City signed
· Accelerated growth in Corporate card platform usage to 79 per cent. year-on-year


Commenting on the results and outlook, FairFX Group plc Chief Executive Officer, Ian Strafford-Taylor, said: “The first half of the year has been very successful for FairFX, especially given the various macro-economic factors encountered. The twin effects of global political events and the EU referendum campaign have hindered many companies with a travel-related focus but FairFX has continued to grow. At the same time, we have significantly reduced the net loss for the first half, showing a clear path towards achieving profitability in 2017.”

Operational Summary

The Group has delivered another strong period of growth during the half, with progress continuing across both the Corporate and Retail segments. This growth has been driven by an improved mix of business and FairFX’s proven marketing capabilities, which are driving the growing customer base. The business is also well capitalised to continue its platform and marketing investment following the £5.25 million placing in March, which included a £5 million strategic investment by Crystal Amber Fund Limited.

As at 30 June 2016, the Group’s total number of retail customers had reached 548,424, increasing by 40,376 during the period, of which 34,165 were new card customers. This growth was particularly encouraging given the discernible impact of negative headwinds faced by many companies operating in the travel industry, such as people delaying their overseas travel decisions. The Group regards the continued growth in customers as evidence of the effectiveness of its card products, especially taking into account the external market environment.

The strategy to drive further optimisation saw the Group’s business mix shift towards higher margin products. As a result, the Group saw an increase of 26 per cent. and 30 per cent. in revenues and gross profits respectively. Reflecting the Company’s grasp of current market requirements and ability to harness value, FairFX’s corporate business segment delivered considerable growth of 64 per cent. compared to the same period last year, resulting in turnover of £30.4 million.

The remodelling and rebranding of the Group’s website is delivering a much improved customer experience and the provision of essential product information and offers. Furthermore, deployment of the FairFX full-service mobile app means that we are capturing growth from the shift in consumer preference to using mobile as their primary means to perform retail transactions. The developments and upgrades were all completed on time for the start of the peak season for marketing FairFX’s retail card product, and were in place for the Group’s TV advertising campaign which started on 6th June to tie in with the holiday season.

During the period, the Group deployed £1.6 million for use in targeted marketing investments to promote its products, principally across broadcast media. This policy has delivered marked increases in new customer acquisitions and brand awareness.

The Group remained fully operational throughout the EU referendum campaign when currency markets were particularly volatile, which was testament to the robustness of our systems and procedures. As such the Group delivered a record performance in terms of KPIs during the week of the referendum when some peers did not accept business. In the week of the referendum, revenues increased 30 per cent. on the previous record week and 50 per cent. on the same week in June 2015.

In June, FairFX also launched its South African business, which provides services converting ZAR into other currencies for movement out of South Africa through a tripartite agreement with Morgan West Ltd and Mercantile Bank. It is the intention of FairFX to expand its presence in the country through delivering a full-service offering, including currency cards.

FairFX continues to develop commercial partnerships that expose the business to new customers and revenue streams. In line with this strategy, FairFX entered into a partnership with HolidayExtras to promote the Company’s products to its customer base. The agreement sought to exploit synergies present in the shared objectives of improving customer experience through innovative technology, a broad product range and highly competitive pricing.

Since the period end, FairFX has developed three further commercial partnerships. In August the Group signed deals with social dining network VizEat as well as Monarch Airlines, which is promoting FairFX’s products to its air passengers who receive preferential currency card rates. The Group also signed a high profile agreement in July with Leicester City FC, for whom FairFX is providing all foreign exchange requirements, including money conversion for player transfers.


Financial Review

The six months ended 30 June 2016 has seen the Group continue the strong trajectory of 2015, with key product lines experiencing double-digit growth.

Group turnover for the period was £344 million (H1 2015: 312 million), an increase of 10 per cent. Gross profits were £3.6 million (H1 2015: £2.7 million), an increase of 30 per cent. These substantial increases were mainly due to a business mix focused on higher margin products. While the Group incurred a £0.9 million loss, this was 57 per cent. lower than the 2015 figure (H1 2015: £2.1 million).

On March 7 2016 FairFX successfully raised £5.25 million (before expenses) from the issue of new ordinary shares to certain institutional investors, including Crystal Amber Fund Limited (“Placing”). Proceeds from the Placing have been used to accelerate FairFX’s marketing activities and aggressively target the corporate card segment in 2016 across TV and digital platforms. The Placing proceeds also helped bolster the sales effort to corporates for the market-leading FairFX platform, and expand IT resources for new product developments and overseas roll-outs.

Crystal Amber held approximately 24.24 per cent. of the enlarged share capital of FairFX as a result of the Placing, and continues to provide the Company with a key strategic institutional investor who can provide insight and advice to the Company, as well as access to a business network to help accelerate top-line sales growth.


Current Trading and Outlook

FairFX continues to build on the significant growth seen in 2015, with total turnover for July and August at £165 million, up 32 per cent. on the same period last year. Card and international payments products have delivered excellent returns and the Corporate card platform is showing outstanding growth, which accelerated in July and August. The platform has seen an annual growth rate of 79 per cent., up from 64 per cent. at the end of H1.

FairFX remains confident about the trading outlook despite ongoing economic uncertainties in the UK post EU referendum. We have a pipeline of IT developments, which will add exciting functionality to our Corporate offering whilst continuing to refine the retail side of the business. In addition, we are automating and improving efficiency in our supply chain. This will reduce costs and improve our efficiency. As an online business, we continue to focus on making it as simple as possible to become a customer, and to transact on whatever device the user favours.

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