Foreign exchange company OFX has flagged results for the year to March that will show a strong recovery from the COVID-related fall in revenue and earnings in its 2020/21 financial year.
At an investor briefing yesterday, OFX chief executive Skander Malcolm said he expects to report net operating income of A$145 million to $147 million for the year, an increase of around 25 per cent, and EBITDA of $43 million to $45 million, an increase of 41 to 48 per cent.
The hardest hit segment of the business in 2020/21 was consumer. Sources of revenue in the consumer division include holidays and travel, migration, property investment, loan repayments and expat salary transfers. All were affected by COVID.
Malcolm said all segments of the business have performed well in 2021/22.
He said one of the strengths of the business has been the move into the provision of cross-border payment services to SMEs (what OFX calls its corporate division). Customers in this segment transact more frequently and margins are higher.
The “corporate” division now accounts for about 40 per cent of OFX’s revenue and 78 per cent of the company’s revenue is now from recurring business, thanks largely to SME customers.
In recent times the company has been looking to grow share in a subset of the SME segment – online sellers.
It is also looking to grow what it calls its “enterprise” business, providing white label services to other financial institutions.
Malcolm said the cross-border payments market has attracted a lot of entrants in recent years, as fintechs saw an opportunity to take share from incumbent banks.
He said it is getting harder for unprofitable business to survive, as the current “risk-off” environment makes investors less enthusiastic about businesses that do not make money. There is also a growing demand for higher regulatory spend.
OFX sees an opportunity for M&A in this market. It has made a strategic investment in a European treasury management software company, TreasurUp. It hopes this investment will allow it to provide automated hedging and risk management services for small and medium business clients.
And in December, it announced a deal to acquire a Canadian company, Firma Foreign Exchange Corporation.
Malcolm said the acquisition, which will give OFX a greater presence in the “corporate” market, will be completed in April.