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FairFX sees great opportunities in UK corporate expenses

Published: 05:35 02 Nov 2016 EDT

Foreign exchange
The group’s strategy is to continue to focus on growth via the combination of marketing and staying ahead of the competition on the technology side.

Summer is here and a traveller’s thoughts turn to foreign currency - good news for FairFX Group PLC (LON:FFX), voted the UK’s most trusted pre-paid card provider.

The multi-currency payments service won the award, bestowed by personal finance site Moneywise.co.uk, ahead of big names such as Travelex, Thomas Cook and the Post Office, establishing its credentials as a disruptive force in the foreign exchange business.

You will not find FairFX bureaus and kiosks on the high street, and neither, if you use its services, will you be stuck in a queue behind some poor soul ostensibly enquiring about postage costs to Bratislava but really in the post office for a bit of a natter.

Instead, FairFX has developed a cloud-based peer-to-peer (P2P) payments platform that enables personal and business customers to make easy, low-cost multi-currency payments in a broad range of currencies and countries and across a range of FX products via one integrated system.

The company recently extended its footprint to South Africa’s domestic market, through a  tripartite agreement with Morgan West Ltd and Mercantile Bank. The collaboration will result in customers having access to FairFX's telephone dealing desk, where a personal account management service that will support them when transferring funds both to and from South Africa.

FairFX’s platform enables payments to be made directly to bank accounts, or at more than 30mln merchants and more than 30mln cash machines in a broad range of countries via mobile apps, the internet, text messages, wire transfer and MasterCard/VISA debit cards.

The company said it regarded the South African agreement as a potential gateway into other parts of Africa.

Current trading

A trading update in November showed the focus on the corporate market was paying off. In the first 10 months of 2016, volume going through the corporate card platform was up 92% year-on-year.

Turnover for the whole group in the four months to 31 October 2016 was up 45% year-on-year to £314 million, while turnover for the year to 31 October 2016 was up 24% to £656 million.

What the CEO says

"The business continues to make great strides and has performed well during what has been a volatile period for the currency markets. We are also particularly encouraged that the corporate card platform has been achieving such strong growth against this backdrop,” said Ian Strafford-Taylor, FairFX’s chief executive officer.

The path to profitability

Those who invest in Aim stocks are used to the familiar story of a fast growing top line being accompanied by mounting losses. In FairFX’s case, loss before tax widened to £3.40mln in 2015 from £2.83mln in 2014, but this was in line with expectations and, as seasoned investors know, it’s all about building the business and, especially for technology firms, staking a claim in the land grab.

Gross profit for 2015 was £5mln, up from £3.8mln in 2014. As the top line grows and economies of scale are achieved, the corner should be turned and the bottom line should turn black.  

The group’s strategy is to continue to focus on growth via the combination of marketing and staying ahead of the competition on the technology side.

Management see further opportunities for rapid expansion, both in the UK and overseas, while the growing presence in the corporate market “represents a great opportunity” for FairFX.

“Our Corporate card expense solution is a unique platform and enables us to use disruptive technology to compete head-on with the charge-card offerings which currently predominate,” Strafford-Taylor said .

The plan is to use a similar model for growth that worked for the retail product but with tweaks for the different challenges of acquiring corporate customers.

“As this is a growing market space and we are in a position to offer a unique product solution, we are extremely excited by the potential for this market and our product capabilities within it,” Strafford-Taylor declared.

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