Argentex Group PLC
LSE:AGFX
Earnings Call Analysis
Summary
Q1-2024
Amid difficult market conditions since January, Argentex reported solid interim results due to successful execution of its growth strategy, notably diversifying revenue by 60% year-on-year. Revenue growth stems from a 63% increase in new business revenue and a total rise of 28% to GBP 25 million. Adjusted operating profit grew by 13%, and operating profit margins stayed in line with plans despite investments in growth. The firm introduced new digital products, such as alternative transaction banking, contributing to 5% of revenues—an increase of 75% year-on-year. Argentex remains debt-free, well-capitalized, and cash generative, with staff growing by 20% to 165 members. Their European business excelled, with revenue up by 108% to GBP 1.8 million, and they are poised to launch in Australia, emphasizing their commitment to develop high-quality client relationships and increase their product range and geographical presence.
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Good afternoon, and welcome to the Argentex Group PLC Interim Results Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand over to Harry Adams, CEO. Good afternoon sir.
Good afternoon. Thank you, everyone, for joining us on this very sunny Thursday afternoon. My name is Harry Adams. I'm co-founder and CEO of Argentex alongside me, I have Joanne Stent, our CFO; and David Christie, our COO. If we can move on to Slide 2, please, with Slide 3. What's the next one. So just a quick order of play. I'll start off with the company overview. We'll talk about the investment case. I'll then hand over to Joe, who will take you through the numbers. I will then hand over to David to take us through the growth strategy and finish with me on the summary and outlook. So I just like to wait some key takeaways for the reported period. Firstly, these interim results evidenced the successful execution and implementation of our growth strategy, made although more impressive given the challenging trading conditions that we've experienced since January.
This record more diversified revenue has not come at any cost, however, with margins in line with expectations, which has been consistent throughout this investment cycle. A swift adoption of new products via new delivery channels not only improves our earnings quality, but also further derisks the resilient business model and coupled with our A-grade regulatory permissions and strong foundations, this makes us one of the most credible nonbank providers in this vast market, which is right for disruption.
So on to the next slide, please. So the next one, please. You're familiar with the fundamentals of the business, and we tracked our journey from a low tech, high touch FX brokerage to where we are today, a high touch, service-led, tech-enabled, currency management and payment specialists. This transition has been driven by addressing evolving customer needs through focused strategic investments over the last 18 months. In this time, we've made some significant improvements to the business, but what has not changed is that we remain debt-free, well-capitalized and cash generative.
We have offices in London, Amsterdam and Sydney, but between them it houses a 165 staff led by experienced leaders with a proven track record. We've established specialized teams in our core markets, offering our clients who tend to be on the more sophisticated end of the spectrum, the growing suite of products delivered by our currency management and alternative transaction banking divisions.
We generate revenues through FX spread, payment charges and annual account fees, and we also got interest on balances which has its own line item in our P&L. We continue to scale the business organically, taking a risk-based approach, our client base and product offering has never been so diverse, meaning that we are not overly exposed or reliant to any one sector or currency. The bar chart on the top right serves 3 purposes.
Firstly, to illustrate that the company's organic revenue growth has been solid since our IPO in 2019. Secondly, to demonstrate the stickiness of our clients improving through the increasing repeat business bars that you can see in green. And finally, to show that since the overhaul of our sales and marketing strategy, our sales forces are hitting that stride with a 63% increase in new business half-on-half.
Go to the next slide, please. So the opportunity in front of us is rather unique according to Allied Market Research, our addressable market for B2B currency management alone is absolutely vast at $150 billion. It's also estimated to be growing around 10% to 15% year-on-year. The market remains highly fragmented with no one player owning more than 1% of market share. Historically, customers have been wed to dealing with incumbent banks, perceiving them as safe or secure and the only viable way to move money, but even with this mainstream shift in behavior that we've experienced in the last 20 years or so towards challenger banks and disruptors, it's estimated 85% of U.K. corporate still used the High Street Bank for their currency management from who they receive poor pricing, little flexibility and a lackluster service. Bank's client onboarding is also arduous and incredibly slow, meaning more and more call press institutions are looking outside for credible alternatives who are well capitalized and can offer a high level of service with a robust technology platform.
Credibility can't be bought though, it is got to be earned. And over the last few years, we've worked tirelessly to establish ourselves as one of the most credible nonbank currency specialists being the only U.K. listed nonbank, it is regulated to whole client money that owns both an e-money and investment license, a one-stop shop for all regulated and unregulated activity as stipulated by the FCA.
Our European license is also for a Tier 1 regulator, which is the true differentiator for us on the acquiring clients and passporting our services across Europe. And with these solid foundations as we continue to innovate our technology and products, the addressable market really gets bigger and less competitive, increasing the opportunity to garner wallet share.
On to the next slide, please. So this slide illustrates our 3-year journey from single product, single office in 2020 where we were only offering U.K. clients currency management through spot and forward by the telephone to where we are today, a service-led tech-enable provider of currency management, payments and virtual accounts.
We're in the very early stages of monetizing these products, highlighted numbers. However, given the impressive early traction we've made, it is safe to say that the decision to invest in digitalizing this business whilst retaining that high level of service was certainly the right one. Our alternative transaction banking products has opened up a completely new revenue stream. But as David will cover it a little later, is only the second is a suite of product developments that once built will result in us becoming a true global treasury solution for our clients.
I'll now hand over to Joe to take us through the financials.
Thanks, Harry. So if we can go on to the next slide, please, next again. So starting with the results for what has been a strong first half performance. Revenues have increased by 28% to GBP 25 million, with a notable contribution from new business. New business revenues increased by 63% and now represent 23% of total revenues compared to just 18% in H1 '22.
Adjusted operating profit is about 13% supported by enhanced product mix and efficiencies generated in the business, providing the operating leverage to self-fund investment in growth. Number of clients trading and new clients trading grew in the period as can be seen on the chart. However, the corresponding increase in average revenue per client and new clients drove a much higher overall increase in revenues demonstrating our ability to attract higher quality clients and increase our wallet share to our enhanced product offering.
Adjusted operating profit margins declined as planned in the period, but a corresponding modest decline in return on capital employed, and this is reflective of our investment in growth as previously communicated, with all facets of the implementation plan on track. This has led to a 20% growth in employees with 165 Argentex team members on board as of 30 June. The 13% increase in adjusted operating profit has driven a corresponding 16% increase in EPS with 1reported operating profit margins held broadly flat.
Can we move on to the next slide, please. Moving on to key metrics underpinning our performance in the half and showing trends since IPO. You can see that an encouraging trend continues towards enhanced wallet share, as more clients trading more often using a broader product mix. New digital products such as alternative transaction banking, now drive 5% of revenues with our structured solutions product offering, driving hedging up to 61% of revenues.
Other spot revenues have declined as a percentage of the total cash generation levels are maintained by the fact that options premiums are typically paid upfront. And taking all new products into account across both digital and structured solutions, these now represent 15% of revenues compared to just 9% in the last half. These higher-margin products provide enhanced profitability and provide incremental operating leverage as these products scale.
Move on to the next slide, please. And as we get into the financial statement summary, we can see here the key highlights already reviewed running through the summary P&L. As noted, revenues increased by 28% to GBP 25 million, leading to adjusted operating profit of GBP 5.4 million, while margin is 22%. The decline versus prior year is in line with plan and reflecting our investment in growth as previously communicated. It's also worth noting that revenues in the prior half and prior year far exceeded expectations Therefore, this is to be reflected in the bottom line as investments progressed in line with plan.
Reported or unadjusted operating profit increased by 16%, driving a corresponding, as mentioned before, 16% increase in EPS and reported operating profit has decreased by a lower reporting capacity of adjusted operating profit due to one-off expenditures such as setup of overseas offices incurred last half but not in H1 '23. EBITDA margins were largely maintained in the period, driven by higher gross margins obtained from our enhanced product offering as well as other efficiencies created in our operating model, offsetting investment in growth in addition to the capital nature of a portion of that investment. Average headcount increased by 44% with [indiscernible] highest made focus on [ front ] office, international expansion or technology and product roles.
As you can see, the front office-back office split has shifted downward slightly albeit with support port functions now including technology.
Moving on to the next slide, please. This next page dives into a little more detail and is more reflective of our business model compared to statutory reporting. When all variable costs, including variable compensation is classified as variable costs, you can see the true gross margin and flexibility within our operating model. On this basis, gross margins increased by 4% demonstrating the impact of our enhanced product mix with new higher-margin products now representing 50% of our revenues, as previously mentioned.
In addition, we have maintained a discipled approach to cost, including our review of total reward. This is manifested in the P&L through reduced variable compensation, now balanced the potential rewards associated with the recently launched to align with shareholder interests.
We've begun to guard our interest on balances as seen in other income, which is in line with other e-money institutions. And although we benefited from this income, it does not form a core part of our 3-pillar growth strategy.
All facets are our investment in growth are rolling out in line of plan, all of which is self-funded through consistently high levels of cash generation with enhanced gross margins providing the operating leverage to offset any impact on EBITDA margins in the period. And due to the capital nature of a portion of our investment in growth, this has resulted in an increased depreciation and amortization charge and a subsequent planned decline in adjusted operating profit margins, albeit adjusted operating profit has increased in absolute terms by 13%. Next slide, please. Turning now to balance sheet and cash. Our balance sheet has grown modestly over the period with net burn cash up by GBP 3 million. Other notable movements include that within our PP&E reflecting the growth of footprint across group and European HQ.
As a reminder, own cash as shown on the right-hand side, is adjusted for what [ we might owe to clients ], which is included on trade and other payables on the face of the balance sheet. And as could be seen from this analysis, we have generated a net rise in GBP 3 million cash after self-funding of growth initiatives supporting BAU activity as well as ensuring we have sufficient liquidity and regulatory capital amounts held in the business.
Next slide, please. This slide is a summary of statutory view of our cash flow statement, which outside of any movements in client funds held, we generated GBP 7.6 million in cash from operating activities. This is after any investment in growth through operational expenditure. This was generated across the 6-month period compared to a similar amount that has been generated in the previous 9 months reporting period. Investing activities reflect the capital elements of our investment in growth and include those made in technology and products in addition to the expanded footprint across group and European HQ. The business remains debt free with financing activities, including any lease payments in the period in addition to any dividends paid to shareholders.
Next slide, please. As previously mentioned, we've maintained consistent levels of short-term cash generation as we expand our product offering and increase revenues, offering us the ability to fund our ambitious growth program. This is possible even with hedging now representing 61% of our revenues, a significant increase versus prior years due to the fact that options premiums are typically paid upfront. We have not altered our risk appetites with client concentration levels remaining consistent with prior years and assisting to continued high proportion of trading transaction across 3 major currencies.
Then the next slide, please. So this provides a more detailed view of the growth cash generated in the period and how this has been utilized. As can be seen, over 30% of cash generated in the period has been directed towards growth within each of the 3 pillars of our growth strategy, with the remainder feeling ongoing BAU activity as well as retaining healthy levels of liquidity and necessary regulatory capital requirements.
So in summary, as shown first half performance would benefit from our enhanced product offering already bearing fruits and a notable performance from new business in the period. And that, coupled with continued high levels of cash generation has enabled us to invest in growth driving enhanced quality of earnings and maintaining a balanced approach to risk.
And with that, I'll hand over to David to take through our growth strategy in more detail.
Thank you, Joe. Next, slide please. As mentioned in previous presentations, there were 3 phases of our technology strategy. The first phase was to launch our online trading platform where clients can traded on forward contracts in over 50 currencies to supplement the offline service-based proposition that remained in place for about a decade.
The second phase was the launch of the alternative transaction banking product, which happened in late March. And this gives the clients the ability to collect funds and hold balances in 15 currencies from a single virtual IBAN account. And these virtual IBANs are held with Tier 1 banks and are in the name of the client. And as highlighted previously, can be used by both institutional as well as corporate clients alike.
For example, this can allow funds to make capital calls from investors or from exporter to allow their international clients to play in local currencies. These funds can then be converted and paid out globally as needed, all from within a single platform. This combined digital offering now generates GBP 1.4 million in revenue in the period, which is an increase of 75% year-on-year. It accounts for 5% of group revenues, as Joe mentioned earlier, and is now consumed by 12% of our clients.
Next slide, please. Digging deeper, we can see that the number of clients using the digital platform increased 62% year-on-year to 396 clients. This includes 43 alternative transaction banking clients set up within the 3 months from launch. 80% of these clients were net new clients that would never have traded with us before if we didn't have that virtual IBAN capability.
Impressively, these clients account for 14% of all new clients onboarded in the period, showed a solid appetite for this proposition in only 3 months. Additionally, the number of trades being completed increased 88% year-on-year with 5% of those digital trades attributable from our alternative transaction banking clients.
Of note, was average revenue per trade for transaction banking, which came in at GBP 13,000 versus GBP 242 for a digital trading only client demonstrating the benefit of the combined proposition. And even though alternative transaction banking has only been in place for 3 months, FX revenue from the products was 22% of the total of digital revenue and 34% if you take fees and interest into account.
This revenue would not have been possible without the combined proposition being made available. The compound effect of this is that more clients trade more often but this increased product offering is driving it, the average revenue per client up for digital proposition of 5 fold to GBP 13,000. So we're extremely pleased with the performance of our digital products, which are ahead of management expectations and the coming period will all be about accelerating momentum.
Next slide, please. Phase 3 of our technology strategy is all about building specific products that meet the unique needs of our various segments that we serve. As part of our client-driven approach, we interviewed 600 CFOs from noncustomers to really understand what keeps them awake at night and what their biggest challenges are with respect to FX. These insights, coupled with the feedback we get from our existing clients is helping us prioritize and build our future products. New developments will include helping our clients improve their visibility on the impact FX can have on that business as well as help them better manage this FX volatility through improved insights and better hedging decisions.
This product presents potential opportunities for inorganic acquisitions that we may want to pursue to fast track this development. Additionally, we are in the process of building a mass payments product to help larger payment focus clients to better manage their requirements. These clients have much larger beneficiary bases than our historical clients and need help managing payments more effectively. So we really need to assemble them to be it on mass rather than one transaction at a time with all the governance and control that you would expect.
Mass Payments is a higher-margin product which will typically yield 200 to 500 basis points versus 20 to 30 for a standard spot transaction, where speed and convenience are much more important than price.
Next slide, please. So switching gears to international expansion. Our performance in Europe continues to track ahead of management expectations with revenue increasing 108% to GBP 1.8 million in the period. Digital adoption in Europe is more progressed at 18% of clients and is generating 11% of revenues in the region, which is double out of the wider group, showing clients in the EU have a higher propensity for digital solutions.
Additionally, we are seeing great traction in selling outside of the Netherlands with 24% of revenue already generated across the wider EU region. This combination bodes well to growth in this massive $60 billion market opportunity.
Next slide, please. Digging deeper into the numbers, we can see more clients trading more often. The number of trading clients grew 50% year-on-year to 181 clients with trades of 81%. This resulted in the average revenue client increasing impressive 57% to GBP 11,000. You can see that the mix of product in Europe is more heavily biased towards hedging than that seen in the U.K. But as we push alternative transaction banking into the region, we expect these numbers to move around a little as we believe there is a massive opportunity to really grow this digital product across the region given their increased propensity to use these digital solutions.
Next slide, please. Whilst we wait for an Australian financial service license, we've spent the time getting operationally ready. We pulled the banking and liquidity rails already in place. We've enhanced the core proposition on the system as well as implemented governance and processes needed to meet local regulatory requirements. The sales team in Australia is already generating revenue and are building a solid pipeline of clients. And just before this, we've recently supported the team within options dealer locally, and we will be relocating the Head of Enterprise Solutions down there to kick start our alternative transaction banking product in the region. So once we get this license granted, we will hit the ground running with a full spectrum of our products. Harry, over to you.
Thanks, David. On to the next slide, please. And our people and culture continue to be a differentiator as a strategic weapon for Argentex. And it can be very challenging to retain a good culture when a business is scaling and transitioning at such speed; however, focus on our company values and employee well-being [indiscernible] staff for embracing this challenge.
We invest in the development of our staff across the group, always trying to fill a vacancy internally if it leads to progression. Our overseas offices have aided career progression with some staff relocating from the U.K., which we encourage in order to help replicate our culture. As Joe pointed out earlier, the lion's share of the increased investment has been people. And whilst we continue to attract top talent, we believe that the bench strength of our U.K. senior leadership team is now sufficient for the next chapter of growth.
Our sustainability strategy is cornerstone by planet, people and partners. Whilst we have a responsibility to lead by example in protecting the planet, we do through our partners, Earthly and Product Mark by planting a tree for every trade. But it is the people pillar that we focus on. And each member of staff has access to one-on-one performance coaching with over 400 hours spent in the period, focusing on the individual's mental health and well-being.
On to the next slide, please. So in summary, the group delivered another record Half 1 despite challenging trading conditions. This is a testament to the commitment of our growth strategy, which is paying dividends. Our European office was the standout outperformer in the half. We have barely scratched the surface in the Netherlands and are very excited about the ability to pass ball across Mainland Europe a $60 billion market.
Our earnings quality has improved further through the impressive adoption of our new higher-margin products, demonstrated by the uptick in average revenue per client. But finally, one underpins the success is our wonderful team of 165, both new and old. And I believe their dedication to this business has never been stronger. So I suppose in outlook it will be a miss not to mention that the market backdrop has become more challenging this year with the seasonal slowdown across the European and institutional divisions. However, the opportunity remains unchanged.
The launch of the new alternative transaction banking products and the dedicated division to sell and serve these products will accelerate across the U.K., Europe and in time Australia, further diversified revenue and increasing wallet share. We will continue to innovate, investing in our technology and products which will drive revenue and efficiencies as we focus on attracting more high-quality clients who can sell more products more frequently across more geographies. Thank David. That concludes the presentation, and I will open up to questions.
Perfect. Harry, Joe, David thanks very much for the presentation. [Operator Instructions] I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. As you can see, we have received a number of questions throughout today's presentation. And Harry at this point, if I could just hand over to you just chair the Q&A, that would be great.
Sure. No problem. So we've had quite a few presubmitted questions actually. So we'll go through a few of these, and then we'll go on to the online questions. So we'll crack on -- you paint a picture of post-period-end environment, which is very soft, should not the market be worried?
No, absolutely not. So we've been very clear that the trading conditions that we've experienced over the last 9 months have not been anywhere there as good as we've experienced in the past. However, we've experienced similar market conditions to what we're seeing at the moment. That really is -- with all the volatility that is very tight trading ranges across G7 currencies. And also, this tends to be a bit of a slowdown in commitments. And we saw this through COVID as well where it is less certainty from clients, what they do is they [indiscernible] their hands and wait to either to have more certainty on the economic backdrop or it might be more certainty in the business decisions that they're making. But I think the bottom line here is that this business is not a volatility play, and we are here to operate in any market backdrop, and we've proved some new [indiscernible] that we will continue to do that.
Yes, it is helpful, but we see a lot of volatility as we experienced last September. However, by no means is this integral to what we do. So taking it back into the post period, which I guess is sort of more about this question here, there was a seasonal slowdown. There always is a seasonal slowdown in July and August. This is just the first full year that we've had a dedicated team in Amsterdam that is selling over to our European clients. And I was warned that it was likely to slow down in August, but I guess I was not expecting it to slow down that much.
But remember although it's growing, our European division is growing, but still equates to a very slow part of our revenue. And we're very pleased to see that as of late August, beginning of September, that activity is certainly picking up. And that's really sort of echo across institutional as well. So you've seen [indiscernible] well publicized I guess as throughout the summer months the institutional deals are down, but also, I think there was a report recently saying that for the first time, there is some net inflows into the U.K. and the funds are starting to pick up. So I am afraid either we're experiencing it, we're still 20% from first of January to the end of August with 3 trading days in September. So no, nothing to be worried about whatsoever.
How you calculated the market opportunity? So throughout our presentation, I think I used a couple of figures in there. First of all, the size, the estimated size of the B2B market globally at about GBP 150 billion by added market research, you seem to remember. And also the European market opportunity. I think no one really knows how big this market is. There's a lot of guesstimates going on. You don't know how much is going to be speculative and how much is B2B. I think really the bottom line here is that the market is absolutely enormous. We have historically been focusing on currency risk management, which that we've grown a great business on the back of just hedging the spot and forward and more recently, options and structured solutions.
Now we have this new opportunity of entering this alternative, transaction banking market, which David spent a bit of time talking about. We are only sort of 3 or 4 months into this process, and it is great to see that not only are we making good traction, the opportunity is as such that we are being very selective on the types of clients that we onboard. We don't want to onboard every single client. We still have that sort of foreign exchange requirement as a core. However, we are mindful that despite it not being a core pillar of our strategy, interest rates are -- hit straight. Therefore, if we're able to guard our interest on large balances, then, of course, we will take that and we will drive behaviors as such to onboard those kind of clients. So yes, it matters. Number three, how has volatility impacted your earnings this year, what caution has been baked into forward guidance, given that the macro economy backdrop, okay? So I'll touch on this on question one. In terms of what our business is here to do, we're not here to thrive on volatility. Yes, it is helpful. We're here to sort of manage our companies or our clients' risk and trying to take out our foreign exchange noise and try and get the client to focus on covering that risk and protecting their bottom line.
It is helpful, absolutely. But of course, it's not integral to this business. I think it's probably worth going up enough to say that we have obviously been investing heavily in our technology and new products and diversified our revenue streams, which made us even less dependent on that sort of business. So I'll be sat here next year or a year after, volatility won't even be a question because we'll be so much further on with our technology strategy. It will be so much more diversified. We have more clients across different jurisdictions, but the U.K. market dynamics won't affect this company. It's a revenue contribution of the new tech products in line with expectations for this stage in development. David, do you want to take that one?
Yes, sure. If anything, I think it's not just in lineup, it's tracking ahead of expectations on a number of fronts. As you saw in the deck that we walked you through the average revenue per client for the digital products has increased 5 fold, which is really pleasing. The fact that 14% of our clients that we onboarded in the period is attributable to the alternative transaction banking product, which we would never offboarded if we hadn't had that wider product set and when you think about the fact that it was only there for 3 months in the period, it really starts setting the stage for some interesting dynamics going forward.
Also from a European perspective, but as I mentioned earlier, 18% of our clients, 11% of our revenues come from the digital products and we launched our first virtual IBAN, that is one of Dutch clients is part of 43. So we can't really see that hit the ground running and as I mentioned, we're really positive about the potential for this product going forward and as well as the options product that we've got is now 12% of revenues, give or take, and that's really developing well as well. And that's more supported by technology investment underneath of those than what you see in the alternative transaction banking side.
So that overall packaging mix and our diversification of that higher-margin revenue is really, really pleasing. And we are hoping that is going to do a lot of good in the future.
Thank you, David. Is there any inorganic growth appetite, for example, M&A, particularly given Alpha Group has announced acquisition. David, sort of speculated around this later...
I mean look, I think it is [indiscernible] that the growth ambitions that we already have laid out, I am very confident that we're able to deliver those organically, and we continue to prove that as we progress through the investment cycle, but it always makes common sense to be reviewing options as they appear, and we would always be open to evaluating those as long as they're accretive from a shareholder standpoint and deliver value, then we would always be open to looking at those.
I think just building on that, Joe. When we look at a new product or a new strategic investment, we go through that. Do we build it ourselves? Do we partner with somebody to try and help us deliver that? Or do should we buy something? And we'll continue to take that wide approach and make sort of decisions on a case-by-case basis going forward.
Thanks, David. Can you explain the interest income generated during the period?
Yes, sure. So we just garnered GBP 600,000 interest in the period for interest income, which, as I explained is that is a separate line item in our P&L and it's nothing as core to our business, but obviously, we take advantage of that online with other e-money license companies. And part of that is driven from own balances that we hold. But as the alternative transaction banking product skills and expands, then there's sort of an evident opportunity for garnering the proportionate amount of interest as we kind of remain in that sort of positive interest rate environment.
A few questions about this -- so I will paraphrase, but are the start-up costs in Europe and Australia now realized?
Yes. So I think from a setup cost point of view, then those kind of one-off costs that we take out of the adjusted operating profit line, yes, I would say that and within -- certainly from Netherlands or European, it is 2-point of view as well as Australia, the lion's share of those are substantially complete. As we look at expanding footprint across Europe, that may change, but I would say in the main, those are substantially completed.
Are you looking at any other geographies. Yes, of course. Of note, overseas expansion is one of our key pillars to our strategy. We have that critical license over in the Netherlands, which allows us to pass port seamlessly across Europe. The strategy here is that we have multiline [indiscernible] in the Netherlands, who can sell into different countries across Europe. Then as we start gaining more traction within those countries, we'll start to bring boots on the ground. We'll probably have to put a little bit of compliance around them because sort of each country has its sort of own regulatory requirements. But certainly, that's a strategy that we're executing. Further afield, we talked about Australia, Australasia, and there are a few opportunities over there, maybe New Zealand, but obviously we want to focus on the Australian market first.
And then, yes, of course, we're looking at other opportunities that have similar market dynamics to the U.K. We like to focus on highly regulated markets, which you can probably tell in the level of regulation that we put ourselves through. So really watch the space and we look forward to update you on the market firstly on Australia, obtaining that license, and then some potential new jurisdictions going into next year. Have got a few questions about operating margin here. So they've fallen. Yes, do you expect them to fall further, where they're going and can paraphrasing? Joe?
Yes. Just to take that one. We flagged about 18 months ago was the change in our strategy and introduction of our 3-pillar growth strategy that we were entering into an investment period and we're still in that investment period phase. Whilst, we've seen a decline in operating margins year-on-year I mean, it's just worth noting that we did benefit from much higher-than-anticipated revenues in the prior period and the consequential drop through to the bottom line in the previous year. So we may have guided towards 20% with our broker last year and delivered 25% because of that incremental revenue and this year, we are guiding towards the 23% for the full year.
So while we're still in this investment period and launching those new higher margin products and entering into those new geographies, those are although they're incrementally, they're representing a higher and higher proportion of total revenues across all geographies and products. For example, those are now 23% of revenues in the half versus 14% in the last. We're starting to see some of that benefit to go through in terms of margin, but as we scale those products and as we scale them across those geographies, you can see that natural incremental operating efficiency and operating leverage that will drop to reach the bottom line. So the investment program is very much on track, and we're looking forward to seeing those results flow through.
Has you plan to make change to develop these new products? Or are you attracting new clients in addition? David, you cover this a little bit sort of more.
Yes, sure. Obviously, the sectorial mix across corporate institutions is pretty much the same year-on-year. But what we are seeing is a higher quality level of client coming through. And what I mean by that is these guys are larger. They're doing larger volumes by using more products and ultimately, as Joe mentioned earlier, we're seeing a higher average revenue that the client take through. And when you compare period-on-period, we're really seeing a positive improvement in that and as we continue to push into that new product and the improving sales capacity as well as the sales capability on the sales floor, we should see that improve going forward into the second half overall.
The outlook is challenging. How will Argentex navigate this? And what do you think will be the key growth drivers I think we've covered the majority of this in deck, but also in the Q&A. But yes, the outlook is challenging and it has been changing for the last 9 months. There was a lot of chatter this time last year about us entering sort of a very large recession, that's not happened.
Yes, okay the growth in the U.K. is down. We still posted an increase of 28% of revenue up to the end of June, which fell through to 20% towards the end of August. Just to reiterate we've seen this [indiscernible] back-to-school with all these clients starting to waking up. The beauty of what we do is training and also got training but dealing with risk management for currencies for corporates. There's always going to be a requirement, whether the company is hedging today or hedging in 3 months, it doesn't really matter to us. There's always they are hedging or obviously they are trading.
So as long as the economy continues to stimulate, there's always -- our clients continuing to trade, which they are, then there's no concern whatsoever. Key drivers are that we've been over these really more products to more clients focusing on the higher quality clients, as David just said, and garnering more wallet share from those clients? There's quite a few questions in there. We probably answer regarding share price, which is not really for me to comment on. So with that, I think we've answered all the questions we can. So I will hand back to...
I think as you mentioned, you have addressed those questions, you can, from investors. And of course, the company will review all the questions submitted today, and we'll publish those responses on the Investor Meet company platform. But just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Harry, could I ask you for a few closing comments.
Yes. Please do give us feedback. Some of the feedback last year was that we were a bit wooden, so we put up this lovely stage behind us. And hopefully, we're going bit and bit more [indiscernible] So please give us feedback, it's really important to us. We read it all, and we do actually. Thank you very much for your interest. Thank you for your time today, and we look forward to updating you if not before January. We'll be back on IMC for our full year results towards April, May time. Thank you.
It's perfect. Harry, Joe, David thank you once again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This is going to a few moments to complete, but as mentioned, will be greatly valued by the company. On behalf of the management team of our Argentex Group plc, I would like to thank you for attending today's presentation, and good afternoon to you all.