OFX’s first foray into the M&A market appears to be paying off, with the company reporting a strong pick-up in revenue and earnings in the six months to September, thanks in large part to its acquisition of Canadian company Firma Foreign Exchange Corporation.
OFX announced a deal to acquire Firma last December and the A$98 million transaction was completed in May. OFX said at the time that Firma would benefit from moving onto OFX’s digitised foreign exchange platform.
In results announced yesterday revenue rose 52 per cent to $112.7 million in the September half, based on FX turnover of $19.9 billion, and its net profit rose 35 per cent to $14.7 million.
The company’s biggest market is corporate customers (actually SMEs). The corporate business contributed $59.2 million of revenue during the half, up from $29.8 million in the previous corresponding period, and Firma accounted for $23.4 million of that revenue.
Firma made a small contribution to consumer revenue which grew 11.3 per cent to $38.3 million.
The company said the integration of the Firma business was on track “and the business is producing exceptional results.”
It has forecast that Firma will add 20 per cent to earnings per share for the full year.
It was not all good news during the half. Revenue was flat for the company’s two newer business units – one servicing online sellers and the other, enterprise, which provides white label services to other financial institutions.
The financial report said the online seller result reflected soft conditions in the e-commerce market due to “supply chain challenges”.
It said “activation” of enterprise opportunities was slower than expected. It is continuing to invest in the business and it “grew prospects” during the half.
Another negative was an increase in bad and doubtful debts, which rose from $3,000 in the September half 2021 to $1.2 million in the latest half. The company said the increase was caused by a number of small transactions in North America.
OFX is continuing to invest for growth. Operating expenses grew by 51 per cent to $73 million.
It said high inflation and foreign exchange volatility are good for FX businesses, while the potential dangers are rising client losses, fraud and a fall in economic activity.