Good morning, everyone, and Welcome to our First Half 2024 results and presentation. For many of you, this is your first time at our new offices, so happy to have you here. I'm joined here today by our new CEO, Neeraj Kapur, and CFO, Richard Hallett. Neeraj will start off by giving a strategic update on the business as new CEO, and Richard will summarize the financial performance in the first half of the year. After the presentation, there'll be an opportunity for Q&A, firstly, from those in the audience today, and then those dialing in remotely via the conference line. Could I just remind you, please, just to put your phones on silent, just so, 'cause we are recording and on the webcast. With that said, I'll hand it over to Neeraj.
Morning, everyone. Thanks, Gaurav, for a lovely introduction there. This is my first results presentation as CEO of CAB Payments and Crown Agents Bank. I've met some of you before, but not all of you, and so welcome to all of you, and I look forward to seeing you, meeting you more as time goes on. But before we start, let me just say, on a personal level, that I am very excited to be here. This is truly a unique business with a differentiated business model, sitting within vast markets. I would add that this is a perfect opportunity for me. Personally, I have been given the responsibility and leadership of a U.K.-regulated bank that primarily operates in challenging international markets with ambitious growth plans.
CAB has some unique strengths, such as its prominence in the sub-Saharan market and the ability to unlock liquidity for its clients in hard-to-reach markets. We are broadening the opportunities for business in the European market through our Dutch DNB-regulated subsidiary, and we will soon enter the U.S. market. CAB has valuable operational leverage and is therefore able to scale up with limited additional investment. All this is great, but what truly attracted me to work here is our purpose: moving money where and when it is needed, into geographies that have some real challenges, and for clients that are internationally renowned for providing significant aid. We're a purpose-driven organization, and we always have been. This was a really important attribute of the culture for me, and we will continue to make sure we fulfill and embed our purpose in everything that we do.
Finally, but also very uniquely, our status as a B Corp is only achieved by a handful of U.K. banks, which shows our serious commitment to sustainability, both ourselves sustainably to serve both ourselves and our clients. All this lays the ground for a truly world-class international business that is delivering good in the world. So turning to page three, I wanted to summarize our position at the end of the first half. This was a solid performance in comparison with the exceptional prior year performance, which saw a significant tailwind from our trading activities in Nigerian Naira, tempered significantly in the second half of last year. We saw central bank interventions in the Central African franc and West African franc.
These were our top three currencies previously, and the impacts have been felt well into the first half of this year, where we generated GBP 56 million of gross income, a decline of 23% versus that prior year. Encouragingly, excluding these currencies, our core business has continued to grow double digits, showing that the CAB business model is robust, and we are growing in other geographies without the noise of dislocations. The result of this is that our corridor concentration has reduced from 49% a year ago to 32%, a significant improvement, but this is not by design, and there is more to do in terms of reducing our concentration. We made good commercial progress in the half, having grown our network by 13% to just under 360 partners, giving us differentiated access to hard-to-reach markets.
Furthermore, we onboarded 35 new clients, and our active client book now number 526. The key here is that we are building increasingly good relationships with central banks in new jurisdictions, such as in the Caribbean, but there is a lot more to do. As mentioned in our update in July, we saw the global cross-border payments market decline by 10% in the first half of this year. Despite this, we managed to grow our volumes by 4%, which is very encouraging as we continue to gain market share. I've spent some time with the senior leadership team, considering our overall strategy, and have concluded that it is largely fit for purpose.
I'm going to provide an update on our strategy by simplifying it into four pillars that will drive the business into the next phase of its growth, which, of course, builds on the strong foundations already in place with a laser focus on execution. Part of the outcome of the strategic review process has been some strong and significant additions to my leadership team and throughout the organization to enhance our execution capabilities. Let me provide you with my view of our corporate strategy, which builds on the business's strong foundations. As the new CEO, I'm keen to give you my initial impressions of the business. The box on the left shows how I perceive CAB now. Nothing has changed. It is still a leading B2B cross-border FX transactions provider with a differentiated network.
It is a PRA-regulated bank with a flexible balance sheet that can provide some real differentiation and leverage with and through our clients, a point of detail that may have been missed by many in the past. Moving over to our key differentiators, again, these have not changed, and these are well understood, so what do we need to do? The main focus areas are we need to improve our capabilities and further professionalize the business. We need to focus on improving the depth and breadth of our network, both quantitatively and qualitatively. We can then expand the customer base, expand the geographies we operate in, and improve our share of wallet. None of this is revolutionary, but needs a highly focused execution mindset throughout our business to deliver this.
So moving on to page six, this shows the four strategic pillars that I mentioned earlier that we will be focusing on to drive our strategy. Put simply, delivering these pillars will create a better performing and more sustainable business. Through delivering the strategy, this business will become more diversified in terms of network, clients, corridors, and geographies. It will also deliver a more sustainable growth business that is able to grow consistently year-on-year with reduced volatility and will not rely on market dislocations to drive revenue. Once all the building blocks are in place, it will also deliver significant operational leverage with the ability to grow EBITDA margins as we generate more revenue. So the four pillars focus on network, not just the size, but also the quality and the ability for it to deliver what our clients need at competitive prices.
Clients, again, this is not just the number of clients, it's about getting the most out of existing ones and adding new ones in the right geographies, so our revenues are more balanced. Platform, utilizing a significant untapped resource at our disposal, the banking license, to drive incremental FX and payments flow, generating both transactions income and net interest income. To invest and innovate, allocating our non-regulatory capital correctly to deliver the best value for shareholders, including continuing to grow our technology and balance sheet. So I'd now like to take you through each of these four pillars. Pillar one focuses on our network, which is a key differentiator and strength of our business. The network is a combination of payment partners and liquidity providers on the ground in the local markets we serve. We've done a great job in continuously growing this network by approximately 17% per year.
We now need to turn to the quality of our network, which is also a key factor and is essential to deliver competitive pricing for our clients and the volumes that they need. Today, we have strong networks, but only in certain jurisdictions and concentrated in the sub-Saharan African region. The chart in the bottom right shows that our network by size, has been consistently concentrated in Africa by approximately 50% since 2021, and the mix fairly steady. This was commensurate with the bulk of our revenue, which was originated in that region. The issues last year, particularly with XAF and XOF, show that we need to improve the network, especially in markets where liquidity and pricing has been tightened due to central bank intervention.
The quality of the network and relationships with central banks advances our understanding of the macroeconomic picture of those jurisdictions and improves our understanding of emerging trends, so we can get ahead of them proactively rather than be reactive. On payments, a number of our existing partners do not have the capabilities to deal with large volumes of payments, which has resulted in increased payment costs and a shortfall in our functionality, while also being costly in some areas. So what are the focus areas moving forward? The slide shows you where we are focusing to improve our network of providers, as well as the actions we are already taking. The key here is to broaden, diversify, and localize the network. Our new head of network has already devised a regional strategy and is building teams in each of our target jurisdictions.
The importance here is that we are building local in-country presence to build the relationships with local banks and, most importantly, central banks. Previously, our network effort was being run centrally and exclusively from London. By hiring local expertise, we are also figuring out the best way to expand our network in new jurisdictions, such as LATAM and the MENA regions. We have developed a framework to assess the quality of all of our partners, including pricing capabilities, capacity, and reach, and we will focus on spending time with those that meet most or all of our criteria in order to facilitate best execution for our clients. We are also building relationships with local remittance players, who can help us serve the large payment volumes that our local banking partners cannot do, as well as integrating with the last mile payments networks.
And on this subject, I'm very proud to inform you all that we recently signed a global partnership with Visa to help us achieve this. Visa were very keen to partner with us after gaining a strong appreciation of our business and the value of our business model. So the ultimate aims are as follows: grow the network, quality, especially in Africa, especially in those regions where we have suffered as a result of central bank interventions, which allow us to foresee the next emerging macro theme. We will grow the number of liquidity providers with a view of getting differentiated and priority access to liquidity at good pricing for our clients. Partner with local fintech or remittance companies that are able to provide the high volume payment solutions that we need. This has been addressed in large part through our Visa partnership.
And importantly, grow our network in wider geographies so we can enhance the sales effort in those regions. So speaking of sales, that brings me on to pillar two. So pillar two focuses on our client relationships, both in terms of our existing client base and onboarding new ones. We have over 500 clients across our four main customer segments, which are IDO, emerging market financial institutions, non-bank financial institutions, and major market banks. However, we are under-monetizing our existing client book. The charts at the bottom show that 12% of our customers generate more than GBP 500,000 per annum of revenue, and that 66% of our customers generate less than GBP 100,000, which we consider to be the tail. We either need to monetize those clients in the tail of our book or exit them entirely.
Major market banks were highlighted as a core growth area for us. They still are, but it will be no surprise to hear that they are subject to a fairly lengthy sales cycle and complex onboarding processes. As a result, we will continue to pursue large banking clients, but will de-emphasize their contribution to growth in the very short term. Finally, our sales effort was concentrated from our London head office. We have very little on-the-ground presence in local jurisdictions. The output of these focus areas is a new client model to enhance coverage. The first major priority is to improve sales leadership. We have appointed a new global head of sales and a head of payments. These new leaders will take on the charge of optimizing the sales organization and integrating it deeper into our trading and network operations to facilitate closer cooperation.
We're also finalizing a new sales incentivization scheme, which closely aligns sales performance and client value to individual monetary compensation and our sales goals, something that has not been done previously. We also work towards a decentralized sales model, which focuses on on-the-ground presence and allows us to build closer client relationships that are more culturally aligned rather than over the phone, thousands of miles away in London. The opening of the European and U.S. offices will add to this effort. However, independent of those offices, we will also have salespeople on the ground in Africa and LATAM. Our ambition is to double the sales force over the next three years, but the key is to grow them in the right areas with specific targets.
While we expect an increase in cost to build this, we do not expect it to be significant, and it will also be aligned with higher revenue. We are also doing a thorough review of the client base. This involves assessing clients that have signed with us, but choose not to use us, potentially because they see us as a backup provider. We will see if there are ways we can get them to transact with us. Otherwise, we will exit these relationships if we do not see any meaningful revenue in the near future. If there is any support we can offer these clients to support their FX and payments activity, such as liquidity or trade finance within our risk parameters, then we will do so, which brings us on to pillar three, our platform, which is all about leveraging the banking license to accelerate FX and payments growth.
In particular, I want to look at our banking operation. I see this as a key differentiator versus our peers, one which has been historically underleveraged, and I believe can drive significant FX and payments volume through our platform. The banking license provides us with a real advantage. It allows us to deploy our balance sheet where we are able to use our own capital and deposits together. It also gives us access to more sophisticated treasury investment options, such as the Bank of England and the Fed, which allows us to generate higher returns from our balances and hedge where we can. The bank is also unique in that we generate significant revenue from non-balance sheet activity, which creates quite high returns on equity.
At the same time, we have been very conservative as to how we allocate our capital, which are usually in high quality liquid assets or HQLA. These are all placed with the Bank of England. Currently, we have approximately GBP 1.5 billion in customer deposits. However, 80% of these deposits have been placed with central banks in the HQLAs, thereby earning a below-market average net interest margin. Net-net, we need to do better things with our banking license, make better use of our lending facilities to our clients, as well as better allocation of assets to earn improved returns for a similar risk profile. I now want to talk about the focus areas, the actions we have taken, and those we are about to take.
So in May, we increased the limits on our liquidity-as-a-service, or LaaS, as it's known, from GBP 40 million -GBP 75 million, and our trade finance lines from GBP 100 million - GBP 200 million. We have done this in a controlled manner to only our top customers, where we can keep the risk level low. We've seen good take-up of these facilities, and it works well for us, as the credit risk is only incurred over a short duration of typically less than five days for liquidity-as-a-service and less than six months for trade finance. The major point here is that these liquidity and trade finance lines are only to facilitate trade, trading through us, so they drive FX and payments income as well.
In our experience, these facilities tend to turn over at least four times a year, meaning that GBP 1 drawn on our balance sheet drives GBP 4 of FX or payments volume in any given year. This is a great use of our balance sheet to facilitate more volume and clearly stronger relationships. By being able to do this, we're able to act as a one-stop shop for those customers, allowing us to drive both net interest income, and transactions income. Another thing we are doing with our balance sheet is improving our asset side allocation framework. This is to move us into higher-returning assets that are able to offer similar risk profiles. In June, we completed our first trade, acquiring a high-yielding corporate bond from a listed bank, which has instantly increased the yield in our portfolio.
We are professionalizing our treasury management function, and we have made the appropriate hires to get this started. Going forward, we should see our net interest income continuing to be meaningful, meaningful contributor to our revenue, but at the same time, driving increased FX and transactions income. The important thing to stress is that we will continue to be a transactions-led bank. Underpinning all our initiatives, we'll have a disciplined approach to capital allocation, so capital allocation is extremely important in order to deliver sustainable growth in the future. Today, I want to provide some important insights as to how our capital allocation works, especially since the understanding of us as a P&L-driven banking institution places a different type of regulatory capital requirement on us, compared to a typical bank that just lends money. Our capital waterfall is simple.
We need to prioritize our regulatory capital requirements, making sure we can firstly run the bank. Next, we want to make sure we have sufficient capital to invest in the organic growth opportunities in front of us, such as extending liquidity-as-a-service, trade finance lines, as well as our tech stack. We have an ambitious pipeline of projects to make sure that we can keep the business growing and competitive in our chosen markets. Finally, after that, we will consider whether there is sufficient capital to sustainably return capital to shareholders. Richard will go into the makeup of our capital stack a bit later, but by way of simple illustration, we have GBP 113 million of capital today, of which GBP 89 million is allocated to satisfy a regulatory requirement.
The calculation of this requirement is largely based on the average of our last three years' revenue growth. In other words, as our revenue grows, our regulatory capital requirement grows in a straight line. Currently, that leaves us with GBP 25 million of capital, which is available for our use. Of this amount remaining, we allocate spending towards CapEx, specifically IT, for growth and extending our balance sheet. That results in a small amount remaining. We could distribute this to shareholders, but we would prefer to build this surplus for future opportunities, given the relatively small quantums involved. Returning capital to shareholders is something we want to do responsibly and consistently. We also want to make sure it's not at the cost of growth opportunities. So where are the opportunities for deploying capital to drive growth?
So turning to page 14, I want to highlight some of the exciting technology projects we are working on. This goes towards building a bigger and better business, with the ability to serve client needs in today's and tomorrow's markets. This includes new products such as FX derivatives. This requires an overhaul to our systems in terms of treasury and capital management, as well as dynamic hedging and regulatory reporting. We want to make sure we are fully ready from a technology, regulatory, and operational perspective before we launch this at scale to our clients.
We are also working on expanding our global payments reach, specifically utilizing the ACH network through Visa in our payment flow, which will allow us to perform a higher volume of payments in more cost-efficient manner, thereby lowering the cost per transaction and allowing us to work with lower ticket payments as well for our clients. We are also looking to adopt a more efficient FX settlement system, notably payment versus payment, or PVP, which mitigates settlement risk and reduces friction in the payment value chain for wholesale FX. Central banks, in particular, are strong proponents of this. On the processing side, we are looking at enhancing our straight-through processing, or STP, as well, which should improve our ability to interact with our clients' network and payment rails without manual intervention. On the protection side, we are prioritizing AI-driven processes to enhance our operations.
We've been working on this for some time, which should improve speed and reliability, especially with transaction monitoring, AML, and client screening, as well as transaction processing. We are very much in a test and learn phase, but this promises some real benefits. And finally, on the platform side, we will continue to upgrade our FX payments and banking platforms to ensure they are scalable and can meet the increasingly complex needs of our clients, as well as being fit for purpose as we become a more global organization. We expect to spend about GBP 15 million this year on technology development. So now that I've explained my four strategic pillars, what will they deliver? Well, a more resilient business, something that can grow sustainably and predictably. I want to be clear that we are still very much a growth business.
A business that is diversified, both in terms of clients, geographies, and corridors. A more professionalized business, both in the front office and in operations. We are also going to be tracking process through a number of strategic KPIs to show that our strategy is being executed as planned and driving the output KPIs beneficially. These KPIs focus on certain growth metrics, such as network, clients, and geographies, but also the quality of that growth, which will drive revenue growth. We will report against these periodically and finally, a core component to delivering this strategy is the quality and capability of the people executing it. I've already started strengthening the leadership team when it comes to that with some key hires made both in the front office and operationally.
Our front office hires have all had significant experience in emerging markets at major financial institutions, as well as at our competitors. The fact that I've been able to attract such high-quality talent to our organization shows that they believe in our business model and the opportunity for growth that it offers. Kirsty and Claire joined us last month. Kostas joined us last year and has done a fantastic job building the European office and setting up the local sales effort. Thomas has just joined, yesterday, actually, from StoneX. Operationally, we welcomed our new COO, Stuart Houlston, from our competitor, Fleetcor. Stuart will further professionalize our operations and review our technology stack. Darren, our new Head of Network, has been with the organization for quite a while, but I'm very excited about the new role, which is key to our future success.
We also welcome Matt Talty, who I've worked with extensively in the past. He has a proven track record of enhancing treasury operations and balance sheet management. We also have a new CRO due to join us shortly. We're actively recruiting for a head of sales in the U.S. and a head of the Middle East and North Africa. So in conclusion, the past few months have been about honing the strategy into four pillars, ensuring that we have the capital allocation to support our revised strategy, and with the right people in place to drive execution for growth. Thank you for listening, and I'll pass you over to Richard to talk about the financial details.
Thank you, boss. Many thanks, Neeraj, and good morning to everybody. It's great to see some familiar faces here today. So if we turn to page 18, I'd like to take you through some of the key highlights of our performance in the first half. Importantly, I think it's important to say, first off, the narrative has not changed since our trading update, given at the end of July. Some of the numbers I'm going to quote show some strong declines. However, this masks some good underlying performance in what we consider to be a reset year. Gross income fell by 22%, some GBP 16 million, which is explained by the elevated income we earned in the prior year period from Naira trading, as well as the continuing tailwinds from XAF and XOF currencies prior to the fourth quarter 2023 Central Bank interventions.
If we adjust for these three corridors, our underlying gross income went up by 11%, and actually, our FX and payments FX businesses went up by 14%. It's important to stress here that we continue to trade in these markets where we can, and so we still consider them to be core to our income. Adjusted EBITDA fell by 53% to GBP 18.7 million. On the face of it, this is a material reduction, but this simply reflects the lower revenue, largely Naira, XOF, and XAF , and higher costs versus last year, much of which is the effect of annualization of our talent acquisitions in 2023. I will go into this in a little bit more detail on subsequent slides. Operating free cash flow fell by 75% to GBP 9.4 million.
Again, this is a combination of lower EBITDA, but also higher CapEx than the prior year, where we did actually underspend in the first half of 2023 . And so taking all of this together, our adjusted PAT fell by 62%. Now, sifting through all the noise of comparability to last year, we do consider twenty twenty-four to be a reset year. There have been no meaningful dislocations that we've benefited from for the first time in many reporting periods, and as such, the business can now grow sustainably from this level, reinforced by the strategic update that Neeraj has just laid out.... Turning to page 19. So here we provide a bridge between gross income in H1, 2023 , and that reported in H1, 2024 . This helped better define the good underlying performance of the business, excluding Naira, XOF, and XAF.
We can see that the combined gross income for Naira, XOF and XAF was GBP 29 million in the prior year numbers, and GBP 8 million in the current year. This equated to a fall of 73% in those currency corridors. However, the underlying 11% gross income growth, excluding these three currencies, was a combination of good progress in emerging markets and G10 currencies. In emerging markets, we've managed to make further progression in our broader range of currencies, with emerging market volumes up 9%, excluding the three currencies. For developed markets, we have been building strong relationships with central banks, notably in the Caribbean, which are increasingly channeling their flow through us. With regards to NII, this hasn't fallen off as much as we had anticipated, given the rate curve resilience.
You will recall from the March presentation, we anticipated a 10%-15% reduction through 2024. That said, the balance sheet initiatives that Neeraj has highlighted earlier today will help us mitigate the effects in a falling rate environment. Other growth includes same currency payments, which grew by 8%, and other banking services, which includes trade finance fees, which grew by more than 100%. I'd now like to turn to revenue progression by client segment, and so on page 20, firstly, the chart shows just how elevated 2023 revenue was. It's also worth noting... It's also worth looking at the longer term trajectory of the business, which has shown a 50% revenue growth from H1, 2024, in H1, 2024, versus H1, 2022, or a 23% CAGR over the same period.
We have traditionally reported across our four main client types, namely EMFIs, NBFIs, and Fintechs, IDOs, and major market banks. As you would expect, most client segments were down at a headline level versus last year, given the prior year elevated income from our three significant West African corridors. But excluding the effect of these, you can see some good underlying growth in most segments. In EMFI segment, there was a conscious decision to drive stronger relationships with central banks, who have provided us with some good volume this year, and on an underlying basis, we improved revenues by 18%. Margins have been resilient in this segment. For NBFIs, they show good, good strength in sales channel with over 20% growth in volumes and 10% in revenues, excluding, of course, the three currencies.
For IDOs, as we explained previously, they generated below trend volumes. We explained in our trading update that given the elections happening around the world and the political volatility, aid budgets are being cut. We do expect some uptick in the second half of the year, as we usually do with this segment, given the need to meet annual budgets. Major market banks also generated strong volume, but there was a mix shift towards G10 currencies, which inherently have a lower take rate. Again, there was good volume growth in this segment, excluding the three currencies. As Neeraj mentioned earlier, major market banks have a long sales cycle, so despite having signed new clients in this segment, it has taken a while to get them transacting with us. It's worth now turning to our corridor performance on the next page, so moving into page 21.
Volumes were robust, having increased 4% year-on-year, especially in a market that contracted both at a global level, some 10%, and in our traditional sub-Saharan African market, some 5%. In our emerging market segment, volumes were down approximately 2%, and the headline take rates have contracted significantly from 61 basis points - 33 basis points. This really does show the impact of the dislocated take rates we were generating from Naira trades in the prior year period. However, on an underlying basis, stripping out the effects of Naira, XAF, and XOF, shows a more encouraging picture. That is, the take rates remain broadly stable at 33 basis points in our emerging corridors, and the volumes were actually went up by about 9%.
On the major market side, our take rates were marginally up at seven basis points, but our volumes were up a healthy 8%. Concentration and concentration risk is a big positive coming out of this. You will recall that when we sat here in March, that our top five currencies for 2023 accounted for 45% of our gross income. In H1 last year, that was an even higher 49%. This has now come down to 32% for H1 2024, which is helpful with respect to concentration risk. As Neeraj mentioned earlier, this is not by design, but given the fall away from, you know, Naira ,XAF and XOF, we expect further improvement from here as we expand. What did all of this mean for our EBITDA performance?
So on page 22, we can see the results of our decreased revenue and increased costs has resulted in a decrease in our Adjusted EBITDA margin from 56% a year earlier to 33% for the first half in 2024. Costs in the half increased by approximately GBP 5.5 million versus the prior year period. The largest component of this increase was people costs. We made some significant hires in 2023, which have now begun to annualize in 2024. These hires were largely in technology, risk, and of course, our sales force, particularly in gearing up for our geographic expansion. We've also made some new hires this year, as outlined by Neeraj, as part of strengthening the leadership team.
We also had an increase in technology costs, which accounts for new software to streamline business processes and increase operational resilience, increased numbers of software licenses due to higher headcount, as well as inflationary increases embedded in our relevant software contracts. We also incurred higher property expenses resulting from our new London headquarters and two offices in Amsterdam, and in the U.S. that were not present this time last year. We're expecting the revenue to cost jaws to widen in the next half through revenue growth, which will outpace the marginal increase in costs through the remainder of this year. We are generally expecting a higher margin in the second half of the year, and I'll come onto this later. So if we turn to page 23, thank you. It is logical to see that our cash generation has also declined.
Not only did we have lower Adjusted EBITDA than this time last year, but we also incurred higher CapEx cost. Our intangible or core CapEx was GBP 6.8 million this year versus GBP 2 million last year, and our fixed asset CapEx was GBP 2.2 million versus GBP 0.2 million last year, largely due to the fit-out of the building we're in today. Given the much lower CapEx spend last year, our cash conversion for H1 2024 was much lower at 50%. Our capital intensity or core CapEx, as a proportion of total gross income, was 12% in this period versus 3% last year, which really contextualizes the drop in cash conversion. As Neeraj mentioned in this section, we expect core CapEx to be around about GBP 15 million for this year.
As with prior presentations, I'd now like to say a few words around capital and our strong capital base. So turning to page 24. Our capital position showed that we had GBP 113 million of capital or tangible net assets. In Neeraj's section, he went through our banking structure and the fact that a significant proportion of this capital must be held back to cover our minimum capital requirements set out by our regulator. The biggest change here is the trade finance and overdraft line, which GBP was 22.9 million at the end of H1, but stood at just over GBP 13 million at the end of 2023. This is principally due to the increase in credit limits that we've offered to certain customers and the take-up of those facilities. Given the large amount of this growth...
Sorry, given the large amount of this growth was at the end of H1, there's not been enough time for profitability to come through to accordingly increase the capital base. As a result, our available capital contracted slightly from GBP 34 million at the end of the year to GBP 24.9 million at the end of H1. With the remaining capital, we're then able to execute our CapEx and strategic growth plans. As a reminder, given our revenue generation profile, which was largely transactionally oriented rather than balance sheet, our capital requirements are largely based on our revenue profile over a moving three-year time horizon. Finally, I'd like to say something about the outlook for the second half of the year. Turning to page 25. We mentioned in our trading update that we're anticipating gross income for 2024 to be marginally below that of last year.
We expect this to be a combination of BAU performance combined with strategic initiatives. Let's firstly look at BAU performance. In H1, we generated GBP 56 million of gross income, and that was without any tailwinds from Naira and still suffering from the headwinds from XAF and XOF. As is well known, we tend to transact more in the second half of the year. It is therefore worth noting that in 2023, stripping out the three currencies highlighted, H2 revenues were higher than H1 by 22%. And indeed, if we go back to 2022, H2 revenues were higher than H1 by 57%. This implies both seasonality and underlying business growth half on half. This has happened consistently, and we expect this to happen in H2 of this year.
The seasonality element of our business is hopefully well understood, but as a reminder, a number of remittance customers tend to be back-end weighted to account for cultural holidays such as Christmas, Hanukkah, Diwali, Thanksgiving, et cetera. Furthermore, for IDOs, spend has a strong track record of picking up in the second half, as organizations tend to spend their budgets in a use-it-or-lose-it model. The second component of this growth will come from the strategic initiatives that we put in place towards the end of H1, but have not yet had a chance to make a financial impact in H1 2024. This includes the extension of increased trade finance and liquidity facilities to certain customers, where we've seen a strong take-up and perhaps some small contribution from the new European office in the second half of this year.
And finally, our newly structured sales force and sales initiatives are expected to make you know, some impact in Q4. By way of current trading, we've seen a healthy start to H2, which gives us confidence, you know, in the outlook for 2024 . An increased revenue in the second half, together with a marginal increase in costs, we expect Adjusted EBITDA to expand in the second half, bringing the blended full year margin into the high 30s, approximately. Thank you for listening, and let me pass you back to Neeraj for his closing remarks.
Thanks. So thanks, Richard. So in summary, we are focusing on executing our strategic plan, outlining my four strategic pillars of network, clients, platform, and innovation and investment. The fundamental business model is sound and intact, with a huge target addressable market. My approach is to get the basics right and having the execution discipline and management talent to get things done. So we're going to strengthen the network, focus on our client base, taking advantage of being a bank, and continue to invest and innovate. We have made high quality hires with significant capabilities and experience to drive this forward. I'm really excited by the next phase of the growth, and look forward to updating you on our progress. So thank you for listening, and we can now go to Q&A.
Just ask your name and institution for your question.
Hi. Thanks. Orson here from Barclays. Just two from my perspective. The first is on CapEx into free cash flow. Free cash flow is obviously a bit softer due to the higher CapEx in H1, so I was wondering if you could give a bit more color on what this increased CapEx spend went into, and then sort of nice to have guidance for H2, but in our FY year, should we expect CapEx to remain at similar elevated levels, or do you expect them to go back to what they were last year? That's the first question. Second is just on Naira, XAF and XOF. If you could provide a bit of an update on those corridors? I was a bit surprised in the network slide to see that you're actually looking to increase network capabilities in these corridors.
Last I heard in Naira, the margins are still razor thin, so, so sort of would be interesting to get a bit of color on what the rationale is to actually build out a network in a market which on the surface level doesn't look attractive due to the thin margins. Thank you.
Okay. I'll deal with your last question first, and then Richard can deal with your other two questions. On the XAF and XOF and so forth and Naira, ultimately, these are still big markets, right? So these regions are, you know, they are transacting with the world in very large volume. So the volumes are there. The way that the margins have worked, as we've stated, has been. There's been a dislocation in the past, and that has allowed for, if you like, abnormal margins to be in place. The normalization of those margins, which is what you're sort of referring to in terms of them being a lot thinner, doesn't stop us from trading in that region, which we have a...
You know, we have got the experience, knowledge and history to be able to deal in those markets very, very successfully. So what we want to do is whilst we want to grow into all of the other markets I talked about, it isn't about saying that we don't want to become bigger and deeper in the markets we're already in. And that is where the profitability from those markets can be improved. So when, as you say, margins are reducing, the only real compensation to that is increasing volume, right?
So from our perspective, it's not about walking away. It's about saying: "Okay, well, look, these countries are still trading very, very hard, and we need to be just part of more of it." Some of the other things that we're putting into place, like, the ability to go into the ACH network through Visa, et cetera, et cetera, will help us too, probably in those regions, so hopefully, that helps you understand that, it is. All of the strategy I talked about, none of it is about moving away from anything. It's about growing further and creating that diversity, and then reducing concentration through that growth in more broad, broader terms.
Just quickly on XAF, XOF is the situation unchanged from a market dynamic perspective? Or have there been any recent changes?
No, there hasn't been anything particularly un change. But, the point is that we are still working further to understand how we can get more liquidity providers, more relationships, and again, building stronger relationships with central banks, so that we are seen to be the acceptable face to deal with in those territories.
Orson, I'll endeavor to tackle your CapEx questions. So I think we've consistently said that, you know, we plan for, where appropriate, a CapEx spend of around about 8%-10% of revenue in any given year. I think it's fair to say, in 2023, you'll recall from the March update that we gave, that we somewhat underspent. However, the exit run rate from 2023, so in November, December, was at that run rate. We've continued at a, you know, at a very consistent pace. Now, why has there been a year-on-year differentiator? You know, we have been under a new CTO from about 18 months ago, building an enhanced roadmap, and that takes time.
you know, to craft and prioritize, and that's why we, you know, towards the end of last year, we got to the run rate that we are now seeing. As to the secondary question, you know, do you expect it to, you know, go back to previous years' levels? I think you'll probably, you know, get from my first remarks that that is unlikely. We are, you know, we have a huge opportunity here to, you know, you know, to gain market share, and, you know, that requires technology, you know, a advancement.
And indeed, if I can draw attention to the Visa mandate and partnership that we've just announced, you know, there are developments in that space that brought, you know, that will, you know, require CapEx spend as one example.
Perfect. Well, thank you. Thanks.
Hi, good morning, chaps. It's Vivek Raja from Shore Capital. Haven't counted this, so forgive me, be two or three questions. I think the first one is what you learned last year in West Africa, in terms of the importance of central bank relationships, and what you've done since then. Neeraj, you've obviously talked about getting closer to central banks, being in more constant dialogue with them. Just wonder if you could unpack that, what that actually means, and how you go about doing that. The next question is about the Visa relationship. I appreciate that there are things you need to do in terms of investment, but I'm wondering how long is it before that could start generating revenue?
What sort of revenue will that be? And then just to clarify, GBP 1 million of below-the-line costs in H1, including some restructuring. I can't remember what the number was. Are you expecting any more this year? Thanks.
I'll let Richard talk about your cost point, but on the West Africa central banks piece, one of the things that I'm about to embark on is actually going to see these central bank governors face-to-face. I think it's very important that we have those relationships, and that they have access to people like myself and other senior people on my team. However, we will also be, as we've said, putting people on the ground through our network, so that we have a more constant dialogue with those central banks that we obviously operate through their currencies, and wanted to grow, and want to grow our business through. So that is about to happen, so you know, it isn't that I have been over there already.
I've not done that so far, but I will be doing that, and we do have advisors in those regions that we are using to get access to the right people, and it is important that we access the highest levels in those central banks to talk about two things. One is, obviously, to explain what we are doing and what our importance is, in terms of how we can help them, but also to understand what they need from them at a macro level, and so we can understand where we can then fit in with our proposition, in terms of forex and payments, so I think it'll be very helpful and useful for us to have those relationships, and as I say, that's what we will build out.
On the Visa, I say we've announced that just now, so that's just happened. It will take some time to create the technology, but not too long. We expect to see revenues probably sometime next year, probably in the second half, most likely being more significant. And, you know, it will then continue through how we can then leverage that further with our customers. Just to be very clear on that as well, this is not a consumer proposition. So what this is, is a business-to-business proposition that allows our client to then deliver to their clients. So it's a business to business to consumer operation, which we're kind of getting involved in here. So I don't want there to be any confusion about what this ACH access allows us to do from a business perspective.
So if that helps, do you want to talk about the exceptional costs?
Was it... Vivek, your question was around non-recurring costs?
Yes.
Yes, and so we believe it's useful to really hone in on recurring costs. You know, we've had a small overhang in the first half of this year, you know, with some residual costs associated with the IPO over last year. I as a rule don't like using that line, but it you know is useful for clarity. I don't expect a meaningful cost there in the second half of this year.
Okay, good. Neeraj. Neeraj, I just wanted to follow up on, on the central bank, answer. Thank you for the answer. Obviously, part of the agenda, I'm understanding today, is sort of decentralization, more boots on the ground compared to a business previously sort of run out of London. I just wanted to understand, in terms of the central bank piece, what sort of connectivity was there previously from the business, into the central banks? Was it again, sort of done very, fairly remotely, or, or were there regular face-to-face meetings with central banks, and clearly that is something that you, you are prioritizing now to, to improve going forward?
... Well, I wasn't there then, so I can't really give you that answer. Richard might know, but-
Yeah, no, I'm happy to do that. I mean, we've talked about. I mean, there are many different levels of relationship that one can have with the central bank. I think, you know, what we came to realize is that a lot of those relationships centered around the treasury function within, you know, the central banks. I think what we have learned and have started to execute upon, you know, is to ensure that we have the relationship at the very highest level, you know, i.e., the, you know, within the central bank. I think there's a subtle shift, you know, we're still maintaining those treasury relationships, and they're very, very influential.
But in terms of policy and macroeconomic direction, we're recognizing that we are developing, you know, relationships at a different level.
Thank you.
Thank you. Portia from Canaccord. I just wanted to ask about the take rate, so just noticing, excluding the three African corridors, it was fairly resilient year-on-year.
Yeah.
I just wanted to ask, Can you just remind us if that's something that you feel you have any degree of control over, through pricing or otherwise? And also, how you'd encourage us to think about the take rate going forward as you expand into different, and new territories.
There's quite a lot in that, Portia, but you'll recall, and I think it's important to reiterate that, you know, when we did, we did a lot of market research, primary market research going, you know, going into the IPO process, and I, and I believe that still holds true. And that is, that generally speaking, in emerging markets, you know, you can expect take rates to reduce over time by a small amount, you know, and typically, we put a 1% number on that. However, with a firm that is expanding into new emerging markets, you know, there is an opportunity, you know, to be, you know, for high, you know, higher take rates.
And therefore, over time, you'll recall in some of our other conversations, we broadly expect it to remain, you know, comparably flat. So a little bit of reduction overall, but because we're going into new frontier territories, you know, some pricing advantage there. It is important to reiterate, though, that when it comes to planning and forecasting, and obviously, it's something that we have focused a lot on, you know, we try to take a conservative approach to that. You know, and we build it from a top-down point of view, perspective, and a bottoms-up, working with our traders and market intelligence. We take a conservative view wherever we possibly can.
And so over the cycle, we sort of plan for it to come down, you know, marginally, you know, yeah, over time, but in reality, we do see more resilience than we planned for.
Mark Brown, also Shore Capital. Just a general, or more general question on costs. Neeraj, I think you said that the sum of the strategic initiatives wouldn't have a material impact on cost. Is that because it's not material, or because you think you can find offsetting savings elsewhere?
Yeah, thank you, Mark. I think the thing with the strategy is, the strategy was already in place and is part of our kind of costings generally. What I'm trying to do is to do two things. One is to clarify it, so that we can all understand it at every level, whether it's at, you know, the investor level, all the way through down to the people that are working, colleagues of ours, all the way through that. The second part is that we, by creating that clarity and by creating the plans that will then sit below those, that we actually create a more efficient way of delivering that.
So whilst there are costs that will go in and out of that, that ultimately the organization was trying to deliver those things in any case, and had costed quite a lot of that in. I'm just trying to make it more effective and more efficient in the way that what we get out of it, through doing it the way that we are. And that's why my point at the moment is, that notwithstanding what I don't know, in other words, if we have other opportunities that we should invest in, that we need to put more money into, that have a good, you know, earnings accretion, notwithstanding those, the costs of doing what I'm doing is, I say, immaterial.
You know, quite rightly, I'm not saying the impact of what I'm doing is immaterial. I'm saying the materiality of the impact is what we're after. But it isn't about putting a lot more cost in.
Anyone? Turn it down the line.
There's no questions on the line.
No question on the line.
... If you-
Yeah, sure.
I noticed that the nonprofit organization, Crown Agents, has gone into liquidation. I know it's got nothing to do with you now, but is there any sort of knock-on reputational relationship sort of impact to that?
As you can imagine, we were looking at that very closely when it happened, and our PR advisors were also looking at all the various channels, and we were also looking at any kind of investor reaction to that, and actually, we saw absolutely nothing at all, so clearly, the market is very aware of the difference between us and them, and you know, we are quite a long way from when that happened now, and I therefore don't really see how that can be an effect going forward, really. I mean, I can't see. I'm not saying there won't be anything. We are always ready to react, and we have, you know, all our advisors ready if we need to do something to make that clarification, but it's got nothing to do with us.
It may be worth just to emphasize that we had no financial exposure to them either. I think it's important to clarify that.
Yeah, they've got nothing to do with us in any way.
Yeah.
Yeah.
I suppose I was thinking about not so much market impact, but in the local markets, where maybe if they're supplying aid and people associate Crown Agents, you know, as they supply aid, and all of a sudden, that dries up, and-
No, no, exactly. So, as I say, you know, we have been waiting to see if anybody would come out of our, you know, customer client segment to say, "Is this something to do with you?" Nope, nobody has. I'm not sure what their activities were towards the end, to be fair.
A lot of their activity was very much logistics and organizing, you know, aid on the ground rather than necessarily financial. And so I think there was a... In market, there would have been a strong recognition of what they do versus what we do.
Mm-hmm.
And they would have known that even when, you know, we were part of that group prior to the Helios Group acquiring the asset. So I don't think there is any, you know, considered overlap there.
Thank you.
So any more questions?
Is anyone on the phone?
Nothing on the phone?
Nothing on the phone.
Any written questions?
No written questions.
No? I think we can close there. Thank you very much.
Thank you, everyone.
Thank you.