Argentex still in expansionary mode

Argentex (AGFX) recorded a 30 per cent drop in adjusted operating profits to £8.7m at its March year-end, with financial performance constrained by flat interest rates as the points (yield) on forwards was close to zero. Forward points allow the group to take a larger spread on trades and can lead to further revenue when clients initiate a swap to draw down on their forward contract. However, the FX trader continued to build client numbers and the number of corporates actively traded despite a challenging trading backdrop.

Group chairman Digby Jones said that increased volatility at the start of the year “eventually translated into trading hesitancy”, while the overall number of trades and their average value decreased in the aftermath. This is unsurprising given that commercial requirements for FX trades were temporarily curtailed due to the wider business disruption. And it is also worth remembering that 40 per cent of the business is linked to financial services.

However, the group revealed record client activity through the second half, and Q1 revenues for FY2022 are 34 per cent up on the prior year. With more banks exiting the market, the commercial opportunity is growing, evidenced by the group’s expanded footprint in the Netherlands and Australia. A positive beat given a stop/start trading environment. Buy.