TIDMAFM
RNS Number : 9298P
Alpha Fin Markets Consulting plc
23 June 2022
23 June 2022
Alpha Financial Markets Consulting plc
("Alpha", the "Company" or the "Group")
Alpha Financial Markets Consulting plc (AIM:AFM), a leading
global provider of specialist consultancy services to the asset
management, wealth management and insurance industries, is pleased
to report its audited results for the 12 months ended 31 March 2022
(FY 22).
A YEAR OF EXCELLENT RESULTS AND PROGRESS TOWARDS ACHIEVING
ALPHA'S AMBITIOUS GROWTH PLANS
Financial Highlights
-- Revenue and net fee income(1) increased by 61.1% to GBP158.0m
(FY 21: GBP98.1m) and GBP157.8m (FY 21: GBP98.0m) respectively;
31.3% on an organic(2) basis
-- Gross profit increased by 70.4% to GBP59.4m (FY 21: GBP34.8m)
-- Adjusted(1) EBITDA increased by 56.0% to GBP33.9m (FY 21: GBP21.7m)
-- Adjusted profit before tax increased to GBP31.8m (FY 21: GBP19.6m)
-- Adjusted earnings per share increased by 43.9% to 21.46p (FY 21: 14.91p)
-- On a statutory basis, profit before tax increased to GBP14.9m
(FY21: GBP9.0m) and basic earnings per share increased to 7.69p (FY
21: 5.75p)
-- Robust balance sheet with a net cash balance as at 31 March
2022 of GBP63.5m (31 March 2021: GBP34.0m)
-- Strong adjusted cash conversion of 112% (FY 21: 111%), with
adjusted cash generated from operating activities of GBP36.0m (FY
21: GBP22.3m)
-- In view of Alpha's performance and cash position at the year
end, the Board is recommending a final dividend of 7.50p (FY 21:
4.85p)
12 months to 12 months to
31 March 2022 31 March 2021 Change
------------------------ --------------- --------------- --------
Revenue GBP158.0m GBP98.1m 61.1%
Gross profit GBP59.4m GBP34.8m 70.4%
Adjusted EBITDA GBP33.9m GBP21.7m 56.0%
Adjusted profit before
tax GBP31.8m GBP19.6m 62.0%
Profit before tax GBP14.9m GBP9.0m 65.9%
Adjusted EPS 21.46p 14.91p 43.9%
Basic EPS 7.69p 5.75p 33.7%
Total dividend per
share 10.40p 6.95p 49.6%
------------------------ --------------- --------------- --------
Operational Highlights
-- Strong growth within the asset and wealth management
consulting business, with 31.3% organic net fee income growth in
the last financial year (FY 21: 8.0%). Strong organic progress
across all regions, in particular in North America (62.2%, FY 21:
13.6%)
-- Successful acquisition and integration of Lionpoint(3) ,
bringing global scale in alternative and other private asset
classes, and cross collaboration opportunities on client
projects
-- Continued momentum and growth in the Group's insurance
consulting offering, strengthened by UK extension into General
Insurance and Specialty client segments as well as doubling of the
team
-- Strong client retention and growth in new clients globally,
with the number of clients(4) that the Group has supported
increasing to 718 (FY 21: 439)
-- Consultant(5) headcount increased by 69.6% to 760 (March
2021: 448) , including the addition of 33 new directors(6) and the
wider Lionpoint team
-- Addition of offices(7) in Denver, San Francisco, Sydney and Frankfurt, taking the Group to 16 client-facing offices globally
Outlook
-- Alpha continues to focus on growing the business through
geographic expansion in all regions, particularly in North America,
as well as extending the depth and range of client segment and
service line offerings
-- Whilst mindful of the macro-economic backdrop including
inflationary pressures, the strong momentum experienced by the
Group in FY 22 has continued into the early part of FY 23. With a
strong pipeline of potential new business and the structural
tailwinds that underpin demand for Alpha's services remaining
robust, the Group is well positioned to balance the risks of these
pressures and continue to deliver attractive growth and margins
Commenting on the results, Euan Fraser, Global Chief Executive
Officer said:
"This past financial year has been the most successful in
Alpha's history and we experienced strong growth in every part of
Alpha's consulting business. It is the result of a tremendous team
effort and I am extremely thankful to all our employees across the
globe who have worked tirelessly to deliver exceptional service to
our clients.
"We also welcomed 123 new colleagues to the Group with the
successful acquisition of Lionpoint, which gives us an enviable
position in the rapidly growing alternatives sector. The value of
our specialist expertise is well recognised and the benefits of
this are increasing as we scale and extend our competitive
challenge."
Enquiries:
Alpha Financial Markets Consulting plc
Euan Fraser (Global Chief Executive Officer)
John Paton (Chief Financial Officer) +44 (0)20 7796 9300
Investec Bank plc - Nominated Adviser, Joint
Corporate Broker
Patrick Robb
James Rudd
Harry Hargreaves +44 (0)20 7597 4000
Berenberg - Joint Corporate Broker
Chris Bowman
Toby Flaux
Alix Mecklenburg-Solodkoff +44 (0)20 3207 7800
Camarco - Financial PR
Ed Gascoigne-Pees
Georgia Edmonds +44 (0)20 3757 4980
Analyst Presentation:
A results presentation will take place at 9.30 a.m. today by
conference call. Those wishing to attend should email
AlphaFMC@camarco.co.uk .
The full-year results and a copy of the presentation slides, for
those unable to attend, will be available on
the company website at https://alphafmc.com/investors/reports-presentations/ .
About Alpha FMC:
Headquartered in the UK and quoted on the AIM of the London
Stock Exchange, Alpha is a leading global provider of specialist
consultancy services to the asset management, wealth management and
insurance industries.
Alpha has worked with all of the world's top 20 and 76% of the
world's top 50 asset managers b y AUM(8) , along with a wide range
of other buy-side firms. It has the largest dedicated team in the
industry, with over 760 consultants globally, operating from 16
client-facing offices spanning the UK, North America, Europe and
APAC.
(1) The Group uses alternative performance measures ("APMs") to
provide stakeholders further metrics to aid understanding of the
underlying trading performance of the Group. Refer to the Chief
Financial Officer's report and note 3 for further details.
(2) Organic net fee income growth excludes Lionpoint, acquired
during the year. Refer to note 3 for further information on the
APMs.
(3) "Lionpoint" refers to Lionpoint Holdings, Inc.
(4) Client numbers are cumulative and have been updated to
include all client relationships from acquisitions.
(5) "Consultants" and "headcount" refer to fee-generating
consultants at the year end: employed consultants plus utilised
contractors in client-facing roles. Total increase of 312, of which
123 was through acquisition.
(6) "Directors" refer to fee-generating directors at the year
end. Total increase of 33, of which 13 was through acquisition.
(7) The Group uses "office" to refer to client-facing office
location; that is, if there are multiple offices in one location,
they will be counted as one office.
(8) "World's top 20" and "world's top 50" refer to Investment
& Pensions Europe, "Top 500 Asset Managers 2021".
Chairman's Report
Alpha's blueprint for international expansion has once again
been extremely effective. Key growth initiatives have gained
momentum and the Group has continued to attract the outstanding
consulting talent that underpins its unique market proposition.
Introduction
I am delighted to present the Annual Report & Accounts for
the Group for the year ended 31 March 2022, which demonstrate
another year of impressive profitable growth. Having navigated
through the pandemic resiliently in FY 21, we approached FY 22 with
confidence. This confidence has been well founded as the Group's
performance has been excellent. Alongside strong organic progress,
the strategic acquisition of Lionpoint has been successfully
integrated and delivered a very strong performance. This
combination has enabled the Group to achieve an outcome well ahead
of initial market expectations. On behalf of the Board (9) , I
would therefore like to thank all of the Group's employees for
their enormous efforts, hard work and contributions to consistently
deliver first class service and expertise to our clients.
The Group has made significant progress towards its medium-term
goal of doubling in size over the four years to November 2024.
Alpha has achieved major advances in the three priority areas of
North America, insurance consulting and making acquisitions. The
broad-based nature of progress in the past year has reinforced the
Board's confidence that the Group is on track to deliver on its
medium-term strategy.
The asset management, wealth management and insurance markets
are influenced by powerful long-term trends, notably the drive for
efficiency, fee compression, regulatory change and the growing
focus on ESG (10) and responsible investment. These trends
represent a strong tailwind for the Group and are steadily
increasing the relevance and value of its proposition: to provide
the best specialist consultancy services for clients wherever in
the world they need us.
The Alpha Board, supported by the senior management team,
remains committed to the Group's strategic aim to be recognised as
the leading global consultancy to the asset management, wealth
management and insurance industries.
Overview of the Financial Year
Alpha's performance over the past year has been nothing short of
outstanding. Demand for specialist expertise across all areas of
the industry's value chain has been very strong, and Alpha's
ability to capture this has pushed year-on-year organic growth in
Group net fee income to 31.3% and to 62.2% in the key North America
market. Notably, we have seen significant growth in all three areas
identified as strategic growth initiatives.
The Group's strategic decision to enter the insurance consulting
market has been particularly successful. The Pensions & Retail
Investments practice in the UK has doubled in size over the past
year and continues to forge ahead. The UK launch of Alpha's General
Insurance and Specialty client segments, and the hiring of two new
directors specifically aligned to these areas, gives us confidence
that we will continue to see further material growth from our
insurance teams.
Organic growth in North America has also accelerated sharply
over the past 12 months. The Group continues to build relationships
with the biggest asset and wealth managers and, excluding
Lionpoint, now has over 125 consultants based in North America.
Given the size of the market and the potential to introduce or
scale up the full range of asset and wealth management practices in
North America, the Board believes that there continues to be
significant potential for further growth in this market.
The acquisition of Lionpoint, with its focus on private-market
asset managers, has proved extremely complementary to the
public-market focus of the rest of the Group. Since the acquisition
in May 2021, Lionpoint has added 75 people to its headcount and won
64 new clients. Many of the world's largest public asset managers
are expanding into alternative assets and the Lionpoint acquisition
brings deep expertise in these areas. The Group now offers an
integrated proposition spanning both public and private markets,
unlocking many growth opportunities.
Overall, Group revenues rose 61.1% to GBP158.0m, including
Lionpoint's contribution. Organic net fee income growth accelerated
to 31.3% (FY 21: 8.0%) as Alpha successfully captured client demand
for its expanding range of high-quality consulting services.
Despite increasing costs post the COVID-19 pandemic, the strong
revenue growth fed through to record adjusted EBITDA of GBP33.9m
(FY 21: GBP21.7m ) and profit before tax of GBP14.9m (FY 21:
GBP9.0m). Adjusted earnings per share of 21.46p (FY 21: 14.91p) and
basic earnings per share of 7.69p (FY 21: 5.75p) grew 43.9% and
33.7% respectively.
Governance and the Board
The members of Alpha's Board have a wide knowledge of financial
services and substantial leadership experience within the industry,
and they are committed to the highest standards of corporate
governance and ethical behaviour. Alpha benefits from a robust
corporate governance framework that ensures the interests of
shareholders, employees, clients and wider stakeholders are
properly safeguarded. The Board recognises that strong and
appropriate governance is essential to reduce risk and secure
long-term value for shareholders and therefore the topic remains
under continual review.
We have taken steps to further broaden the range of experience
at Board level with the appointment of Maeve Byrne as an
Independent Non-Executive Director (11) from 16 May 2022. Maeve has
more than 30 years' experience in financial services and was a
partner in the financial services practice at KPMG from 2002 to
2014. Between 2010 and 2017, first on secondment and then as an
executive, she held senior roles at Royal Bank of Scotland and
Williams & Glyn. Subsequently, she has worked as an independent
board adviser focussing on transformation services. On appointment,
Maeve joined the Board's Audit and Risk, Nomination and
Remuneration Committees.
The Group regards ESG and sustainability as important elements
of Alpha's governance and approach to risk management. The Board
recognises that it has an important role in overseeing and
progressing these ESG efforts and we are therefore progressing
plans to establish an ESG Committee in the coming financial
year.
Internally, we are increasing our focus on issues linked to
sustainability, both by preparing the Group to start reporting
under the framework set out by the Taskforce on Climate-Related
Financial Disclosures, and by developing our own roadmap to net
zero greenhouse gas emissions. The Group has hired a full-time
Sustainability Manager within its business operations team whose
role will include overseeing the development of this work and the
implementation of Alpha's emissions reduction targets.
Strategy
The Board, supported by Alpha's executive team, is fully
committed to the Group's strategic goal, which is to be recognised
as the leading global consultancy to the asset management, wealth
management and insurance industries. Alpha therefore aims to
attract and train the most talented team of industry specialists
available. To do this, the Group provides a highly attractive
offering encompassing compensation, career development, high
quality work in multiple geographies, recognition and support. This
combination of continuing to develop an excellent corporate culture
alongside competitive remuneration has resulted in growth in
headcount in FY 22 of 189 consultants (FY 21: 12), excluding
Lionpoint consultants at the time of acquisition, bringing our
total number of consultants at 31 March 2022 to 760.
Alpha also keeps the wellbeing of its employees under constant
review and strives to ensure that the workplace culture emphasises
mutual support, teamwork and effective communication. Diversity and
inclusion are vital elements of the culture that the Group aims to
foster. The recent hire of an experienced full-time Diversity &
Inclusion Manager, who will join Alpha at the beginning of the new
financial year, is intended to ensure that Alpha's culture of
inclusivity, governance frameworks and recruitment processes are
delivering a sufficiently diverse team through all levels of the
organisation.
The specialist nature of Alpha's consulting teams is critical to
differentiate the Group's proposition and to create long-term
relationships with clients that can broaden to include more
practice areas and service offerings. The strong organic growth
achieved over the past year in North America provides an
illustration of this process. Around 80% of Alpha's organic net fee
income in North America last year were generated by three of the
Group's more established asset and wealth management practices:
Investments, Distribution and M&A (12) . Having reached scale
in North America, these practices are now producing opportunities
to introduce Alpha's more recently launched practices, such as ESG
& Responsible Investment ("ESG & RI").
Acquisition continues to be a key element of the Alpha growth
strategy. The addition of Lionpoint in May 2021 built on the
success of prior acquisitions enabling Alpha to broaden its
proposition. This acquisition is a particularly good example in
that it secured entry to the highly complementary area of
private-market asset managers, incorporating private equity,
private credit, infrastructure, real estate and fund of funds, and
also more than doubling the Group's headcount in the key growth
market of North America.
Dividend
As a result of Alpha's outstanding performance over the past
year, the Board is recommending a 54.6% increase in the final
dividend to 7.50p per share, bringing the total for the year to
10.40p (FY 21: 6.95p). Subject to shareholder approval at the
Annual General Meeting ("AGM"), to be held on 13 September 2022,
the final dividend will be paid on 20 September 2022 to
shareholders on the register at close of business on 9 September
2022.
Outlook
Whilst we are mindful of the geopolitical and economic backdrop
at present, the Alpha business enjoyed strong momentum through FY
22 and that has continued into FY 23. The Group's business is
strongly cash generative and has a record pipeline of potential new
business, while the industry tailwinds that underpin demand for its
services remain strong. Therefore, we start the year in excellent
health.
Once again, I would like to reiterate my thanks to everyone at
Alpha for their tremendous efforts. With the combination of
industry tailwinds, globalisation of the Group's services and
strategic acquisitions, all supported by our enormously talented
teams, the Board looks forward to the future with confidence.
Ken Fry
Chairman
23 June 2022
(9) The "Board" is Alpha's Board of Directors, also referred to
as the "Board of Directors", the "Alpha Board" and the
"Directors".
(10) Environment, Social, Governance ("ESG").
(11) "Director" refers to the executive and non-executive
members of the Board; meanwhile "directors" refers to non-Board
directors within the management teams of the Group.
(12) Practice name changed to "M&A" practice in the year to
better reflect the client proposition.
Global Chief Executive Officer's Report
Introduction
This past financial year has been one of the most successful in
Alpha's history. Despite the continuing impact of COVID-19, which
prolonged the challenges that remote working created for our team,
they responded magnificently and continued to deliver excellent
results servicing Alpha's clients. Their professionalism enabled us
to meet buoyant demand for our services among asset and wealth
managers and insurers, leading to the outstanding growth and profit
performance that we achieved in FY 22.
We had many wonderful client wins over the past year and it is
clear that we are constantly gaining market share. The value of our
specialist expertise is well recognised and the benefits of this
are increasing as we scale and extend our competitive challenge
against the generalist consultancy firms.
Alpha ended FY 22 in a stronger position than ever. Whilst the
macro-economic outlook for the coming months has some uncertainty,
and we remain cautious and vigilant for the potential for further
developments, including inflationary pressures, the Group continues
to perform very strongly.
Delivering on our Strategy
After a year of very strong growth in every region of Alpha's
consulting business, we are well on the way to achieving our
medium-term goal of doubling the size of our Group over the
four-year period to November 2024. The structural drivers for our
sector continue to create significant tailwinds for Alpha. We have
previously highlighted the three most significant growth
opportunities that would enable Alpha to achieve our growth target
of doubling the business - rapid expansion in insurance consulting,
continued strong growth in North America and acquisitions - and FY
22 was a year in which we delivered outstanding progress on all
three fronts.
We launched insurance consulting in FY 20 with a Pensions &
Retail Investments practice in the UK, subsequently expanded into
France and the business doubled its headcount over the past year.
Our belief that the insurance industry offers an opportunity for
Alpha of comparable scale to our core asset and wealth management
market is being rapidly vindicated. During the past year, we have
started broadening our proposition for insurance clients with the
extension in the UK into General Insurance and Specialty client
segments. This team is already harnessing strong demand and we are
building a wonderful reputation.
A major part of our growth strategy - scaling our North America
business - also made excellent progress. In addition to Lionpoint,
we increased our headcount in North America to 259, a 232.1%
increase over the course of FY 22. Organic net fee income growth in
North America reached 62.2% year on year as we won a string of new
clients from the world's top asset management companies. This is
the world's largest asset management market with assets under
management around eight times greater (13) than in the UK, where we
now have 287 consultants in aggregate. This simple comparison
offers a good indication of the growth opportunity we see for Alpha
in North America over the next few years.
The third pillar of our growth strategy is acquisitions and,
with the acquisition of Lionpoint in May 2021, we have transformed
our proposition by adding a leading global consultancy specialising
in the fast-growing alternatives sector of private equity, private
credit, infrastructure, real estate and fund of funds. We had been
targeting private markets as a natural area of growth and concluded
that Lionpoint would be the perfect partner.
Many of Alpha's core asset and wealth management clients are
increasing their exposure to alternatives and, now that Lionpoint
is part of the Group, we can propose integrated solutions that span
our clients' public and private portfolios, opening up an important
growth opportunity. This acquisition also brings us a
much-increased presence in the key strategic market of North
America and is forecast to continue to deliver a strong performance
in the first full year of ownership.
It was pleasing to see the level of support among our
shareholders for this important strategic acquisition. We were able
to raise GBP31.1m, before expenses, of new equity to purchase
Lionpoint at zero discount to the prevailing share price - the best
endorsement we could have hoped for from our investors. We are
grateful for the trust they have shown in the Group.
The progress we have made during FY 22 in realising the
potential of our three biggest growth opportunities puts us in a
strong position to deliver on our pledge in late 2020 to double the
size of Alpha's business within four years.
Summary of Financial Performance
The powerful momentum across our priority growth areas and the
large number of new client wins have enabled us to announce
exceptionally strong financial results, with both revenue and
adjusted EBITDA well ahead of initial market expectations. In
addition to the 164 new clients that came to us through the
acquisition of Lionpoint, Alpha gained 51 new clients during FY 22
(FY 21: 58), excluding Lionpoint additions in the year. Lionpoint
continues to trade strongly, winning 64 new clients since the
acquisition in May 2021 and delivering strong revenue growth.
Group net fee income, including Lionpoint's contribution,
increased by 61.1% to GBP157.8m (FY 21: GBP98.0m) and by 31.3% to
GBP128.6m on an organic basis. Adjusted EBITDA increased by 56.0%
to GBP33.9m (FY 21: GBP21.7m) and adjusted profit before tax by
62.0% to GBP31.8m (FY 21: GBP19.6m). Alpha continues to generate
strong cash flows and ended the year with net cash of GBP63.5m (FY
21: GBP34.0m).
On a statutory basis, revenue increased by 61.1% to GBP158.0m
(FY 21: GBP98.1m), operating profit by 74.7% to GBP17.8m (FY 21:
GBP10.2m) and profit before tax by 65.9% to GBP14.9m (FY 21:
GBP9.0m). The difference between these statutory and adjusted
performance measures set out above arise from the adjusting items
as explained in the Chief Financial Officer's Report and note
3.
Trading has been very positive across all our consulting
operations, and our new business pipeline strengthened steadily
throughout the year. We are still seeing many clients commit to
larger business change projects and technology transformations as
they seek operating models that are more robust and better adapted
to hybrid working. Our margins are strong, driven in part by
above-target consultant utilisation levels. We continue to invest
in industry-leading talent at all levels to drive further growth
across all parts of the Group.
Alpha's robust financial performance and strong momentum have
enabled the Board to announce an increase in the final dividend for
FY 22 to 7.50p (FY 21: 4.85p), giving a total of 10.40p for this
year, up 49.6% on the FY 21 total dividend of 6.95p.
Operational Review
With the acquisition of Lionpoint in May 2021 we welcomed 123
new consultants to the Group in May 2021 and the integration of
Lionpoint's team into the wider Group has been one of the key
operational priorities for FY 22. This is now complete and
directors across the wider Group meet regularly and collaborate
extremely well. Since the year end, in early April we further
invested with a team lift-out of 14 real estate investment
professionals, mainly based in the US. This additional real estate
capability again enhances the Group's offering and adds several new
client relationships.
Alpha's established asset and wealth management consulting
practices all traded very strongly through FY 22, including
Investments, Distribution, M&A and Operations, with newer
practices such as Regulatory Compliance & Risk and Digital also
showing excellent organic growth. We continue to globalise our
consulting practices and add new propositions such as Data Science
to meet new client demand.
Our insurance consulting business area, which is focussed on the
UK and France, has doubled its headcount over the past year in
response to very strong client demand and we have recruited two
directors to lead our General Insurance and Specialty segments in
the UK. This marks the expansion of our insurance offering from the
investment-focussed areas we initially targeted into traditional
risk underwriting and reinsurance.
Our technology services business has also been significantly
strengthened over the past year thanks to major investments in
Axxsys, the software implementation specialist that we acquired in
FY 20. Over the past 12 months, Axxsys has broadened its
proposition with the launch of technology consulting practices
focussed on data and cloud services, front office projects and
wealth management. There is huge demand for technology consultancy
among asset and wealth managers and we believe that these new
practice areas are poised for strong growth in FY 23 and
beyond.
The Group's Alpha Data Solutions (14) ("ADS") business,
including Obsidian, has made less progress than planned in the
year, despite a good opportunity pipeline. We were delighted to
welcome a new global head to focus the strategy and gain further
traction.
Geographic Overview
Alpha's regional financial performance for the past year
demonstrates the strong demand that our teams have encountered in
all parts of the world. In regional terms, the major development
over the past year is that Alpha has now achieved scale in each of
our main regions, thanks to a combination of robust hiring and the
addition of Lionpoint's global team, almost 70% of which are based
in North America.
By the end of FY 22, we had over 285 consultants in the UK, over
255 in North America and more than 210 in Europe & APAC. Our
North America operations are well diversified between East and West
coasts, the Mid-west and South, alongside a growing presence in
Canada.
12 months 12 months
to to Change
31 March 31 March
2022 2021
----------------- ----------- ---------- --------
Net Fee Income
UK GBP72.1m GBP53.5m 34.9%
North America GBP46.9m GBP16.5m 184.1%
Europe & APAC GBP38.8m GBP28.0m 38.6%
------------------ ----------- --------- --------
Year-end totals GBP157.8m GBP98.0m 61.1%
------------------ ----------- --------- --------
12 months 12 months
to to Change
31 March 31 March
2022 2021
----------------- ----------- ---------- --------
Gross Profit
UK GBP30.6m GBP21.4m 43.2%
North America GBP15.4m GBP4.4m 242.6%
Europe & APAC GBP13.4m GBP9.0m 49.5%
------------------ ----------- --------- --------
Year-end totals GBP59.4m GBP34.8m 70.4%
------------------ ----------- --------- --------
North Europe
UK America & APAC Totals
------------------------------- ----- --------- ------- ---------
Consultant Headcount
As at 31 March 2021 223 78 147 448
Lionpoint team on acquisition 27 88 8 123
Team additions - Lionpoint 12 45 18 75
Team additions - rest of
the Group 25 48 41 114
------------------------------- ----- --------- ------- ---------
As at 31 March 2022 287 259 214 760
------------------------------- ----- --------- ------- ---------
Change 28.7% 232.1% 45.6% 69.6%
------------------------------- ----- --------- ------- ---------
We continue to build relationships with the largest asset
managers in North America and the Group has now worked with 80% of
top 25 North American asset managers(15) . We also continue to
broaden these relationships to include more of our services. Net
fee income in North America grew 184.1% over the year and 62.2%
organically.
Our businesses in the UK and Europe & APAC also delivered
excellent performances, increasing net fee income by 34.9% and
38.6% respectively. Our established offerings in the Operations,
Investments and Distribution spaces continue to grow strongly in
those regions and we have seen increased industry interest in our
most recent offerings around ESG & RI and Insurance.
All our consulting businesses globally have experienced strong
client demand, resulting in higher than planned consultant
utilisation through the year, which we aim to glide back to more
normalised levels with ongoing recruitment through the new
financial year. Strong demand has also supported good consultant
day rate progression in all regions and is a helpful environment in
which to manage inflationary cost pressures.
Our People
Over the past two years, Alpha's employees have had to deal with
unprecedented conditions due to the pandemic and their response to
the heavy demands placed upon them has been magnificent. The
quality of their performance is clear from the outstanding
financial results that we have achieved in FY 22. However, we do
not take any of this for granted.
Although the most acute phase of the pandemic is behind us, we
are still very mindful that many of our people have faced ongoing
challenges in working remotely and we have thought very carefully
about how we can support them better. We reopened our offices as
soon as conditions allowed so that those who wished to return could
do so, albeit with relevant precautions in place.
The flexibility to work remotely has advantages for many
employees and also for Alpha in terms of our ability to draw on our
global talent pool for projects irrespective of where the client is
based, and to use our capacity as efficiently as possible. Our
clients continue to respond very favourably to our talent and
service delivery proposition, which is reflected in consultant
utilisation rates for FY 22 that were slightly above target. This
should be counteracted to some degree by our ongoing hiring
programmes, which bring new talent into the Group at every level to
ensure that we have strong foundations for further growth.
Our attrition rate has risen post COVID-19 yet remains well
below the average among our peers, and we continue to attract
extremely talented people although competition in recruitment
remains strong. We are continually looking at ways in which we can
attract, develop and reward our people - including reviewing our
policies to ensure that they compare favourably with those
available elsewhere.
Current Trading and Outlook
FY 22 was a remarkable year for Alpha, in which we achieved over
60% revenue growth across the Group and over 30% on an organic
basis. We made huge progress in each of our three priority areas
for growth - North America, insurance consulting and acquisitions -
and gained powerful momentum across the business more generally. We
are making excellent progress on our medium-term growth target of
doubling the business.
We therefore enter FY 23 in a very strong position. With the
addition of Lionpoint, we now have a compelling, specialist
proposition across both public and private markets, with
significant scale in both. Our regional footprint has been
transformed and our newer practices are growing very strongly.
We recognise that there is geopolitical and economic uncertainty
at present, and the impact of inflation and the situation in
Ukraine is difficult to predict with confidence. Accordingly, we
remain vigilant and are watching developments very closely.
However, our current trading and project pipeline to date is
very strong, and our revenue visibility is better than ever as our
clients commit to longer and more complex business change projects.
These factors, coupled with Alpha's robust balance sheet, give us
considerable confidence that even if we are heading into more
difficult markets, we are doing so from a position of real
strength.
Finally, I would like to join Ken in thanking everyone across
the Group for their outstanding efforts. We are very proud to have
the best consulting team in the industry.
Euan Fraser
Global Chief Executive Officer
23 June 2022
(13) BCG, "Global Asset Management 2021: The $100 Trillion
Machine" (July 2021).
(14) Renamed to Aiviq at beginning of FY 23 to better reflect
the proposition for clients.
(15) "Top 25" refers to Investment & Pensions Europe, "Top
500 Asset Managers 2021" where the asset manager country is US or
Canada, as defined in the report.
Chief Financial Officer's Report
Group Results
I am delighted to report that Alpha has delivered another year
of strong growth both organically and including Lionpoint, which
was acquired in May 2021.
12 months 12 months to
to 31 March 2021
31 March
2022 Change
----------------------------- ---------- -------------- ---------
Revenue GBP158.0m GBP98.1m 61.1%
Net fee income GBP157.8m GBP98.0m 61.1%
Gross profit GBP59.4m GBP34.8m 70.4%
----------------------------- ---------- -------------- ---------
Operating profit GBP17.8m GBP10.2m 74.7%
----------------------------- ---------- -------------- ---------
Adjusted EBITDA GBP33.9m GBP21.7m 56.0%
----------------------------- ---------- -------------- ---------
Adjusted EBITDA margin 21.5% 22.2% (70 bps)
----------------------------- ---------- -------------- ---------
Adjusted profit before
tax GBP31.8m GBP19.6m 62.0%
Profit before tax GBP14.9m GBP9.0m 65.9%
Adjusted earnings per share 21.46p 14.91p 43.9%
Adjusted diluted earnings
per share 20.23p 14.26p 41.8%
Basic earnings per share 7.69p 5.75p 33.7%
----------------------------- ---------- -------------- ---------
Revenue
The Group delivered 61.1% net fee income growth in the year,
including 31.3% organic contribution. Revenue also grew 61.1%,
including increased rechargeable client expenses, compared to the
prior year.
Across the Group's regions, FY 22 revenue and net fee income
grew ahead of the strong average consultant headcount growth, with
average consultant utilisation above target levels and up on FY 21
alongside improving consultant day rates overall, continuing the
strong trading metrics reported for H1 22. Revenue and net fee
income grew in all geographic regions, both overall and on an
organic basis.
North America delivered the Group's strongest regional growth
with net fee income up 184.1% overall and 62.2% on an organic
basis. On a constant currency basis North America net fee income
growth was 194.6% overall. The Lionpoint acquisition contributed
significantly to North America growth this year, while also adding
45 consultants to its North America team since acquisition.
Independently of the Lionpoint business, the North America business
still continued to expand its domestic client base, including
several longer duration projects, successfully deploying its
strongly growing consultant team ahead of Group target utilisation
levels and FY 21 comparatives, while also improving consultant day
rates.
Europe & APAC also delivered another year of strong growth.
The region grew net fee income by 38.6% on the previous year, and
on an organic basis the region reported 29.3% growth. This growth
was delivered across the region with the Alpha Europe team well
deployed, complemented by further progress growing the APAC
business.
The UK business, the Group's largest geographic region, grew net
fee income 34.9% overall and 22.8% organically. This strong UK
organic performance benefitted from consistent and strong demand
across the full range of Alpha practices, including significant
growth in emerging propositions such as UK Insurance and ESG &
RI, alongside substantial contributions from our established
Investments, Distribution, M&A and Operations teams. Within the
UK results, Alpha's Data Solutions business continued to have less
traction than planned in the year. ADS, including Obsidian, while
adding new clients and increasing revenue in the year, did not
progress as anticipated overall.
Alpha continues to support clients in some of the largest, most
challenging and interesting projects across the industry. Alpha's
revenue is driven by continuing strong demand in its established
practices, as well as progress in newer areas. Alpha's Pensions
& Retail Investments and ESG & RI offerings, launched in
September 2019 and October 2020 respectively, also made strong
progress in the year by winning a number of projects both with
existing and new client relationships.
The Lionpoint business, acquired in May 2021, has performed
ahead of initial expectations and contributed GBP29.2m in net fee
income in the year. Lionpoint has continued to enjoy strong client
demand, adding 64 new clients and 75 consultants globally since
acquisition.
Alpha's growth was supported by further investment in global
consultant headcount. The number of consultants reached 760 by the
year end (FY 21: 448). Of this 312 consultant team increase,
Lionpoint added 123 to the Group when it was acquired and has since
added a further 75. While excluding Lionpoint, the Alpha North
America region added most to its team size overall.
Group Profitability
The Group also delivered strong growth in profits in the year.
Group gross profit was GBP59.4m (FY 21: GBP34.8m), increasing by
GBP24.6m overall or 70.4% over the previous year, with this
increase well balanced between organic and inorganic
contributions.
Gross profit margin rose to 37.6% (FY 21: 35.6%), returning
closer to pre-pandemic margin levels as anticipated, supported by
both the higher than target utilisation level and improved
consulting day rates, alongside a strong contribution from
Lionpoint. Within the strong results the team profit share bonus
cost increased, as did bonus costs for the wider global director
team, some of which will be paid on a part-deferred basis in summer
2022 and 2023.
Gross margin improved in all geographical regions compared to
last year. The significant improvement in North America was driven
by strong utilisation levels and improving consultant day rates. UK
and Europe & APAC gross margins also firmed, with good
utilisation and consultant day rate progression. Alpha continues to
invest in the business, growing its consulting teams in all markets
and, therefore, utilisation is expected to progressively normalise
towards target levels through FY 23. Alongside this planned easing
of utilisation, consultant day rates are anticipated to progress
further with strong client demand, balancing gross margin.
Adjusted administration expenses, as detailed in note 3,
increased by GBP12.4m to GBP25.5m (FY 21: GBP13.1m) in the year, of
which GBP8.1m represented the increase excluding Lionpoint.
Following last year's tighter control of discretionary spend and
the impact of COVID-19 on the operating environment, costs
increased primarily in recruitment spend as we grew our consulting
teams globally, and across staff and client entertainment and
travel spend, which continue to return to more normalised levels.
We also continued to invest in the Group's central team through the
year and following the Lionpoint acquisition, in areas such as
finance, HR, risk and legal.
Including the adjusting expense items, which also rose,
administrative expenses increased to GBP41.6m (FY 21: GBP24.6m) on
a statutory basis. The adjusting expense items, set out in note 3,
increased in the year to GBP14.4m (FY 21: GBP9.8m), reflecting
increased acquisition costs, higher acquired intangible asset
amortisation and share-based payments costs.
The GBP0.7m (FY 21: GBPnil) acquisition costs include diligence
and legal fees incurred in connection with the Lionpoint
acquisition, with the acquisition consequentially increasing the
acquired intangible asset amortisation charge to GBP4.7m (FY 21:
GBP3.5m). The share-based payment charge of GBP6.2m (FY 21:
GBP2.5m) continues to develop since Alpha's share incentive plans
were established at AIM admission, with Alpha's share price growth
and further new annual awards alongside relatively limited award
vests at this stage. Further detail of the share-based payment
charge is set out in notes 3 and 12.
The earn-out and deferred consideration charge of GBP1.4m (FY
21: GBP3.6m) reflects employment-linked expenses and changes to the
Lionpoint and Obsidian earn-out assumptions. With Lionpoint's
strong performance since acquisition and ongoing positive outlook,
the future performance assumptions have been improved closer to the
maximum earn-out achievable. This uplift is offset by a scale-back
in the future Obsidian projections, in which performance has been
flatter since acquisition and reduced future earn-out payments are
now anticipated. Axxsys met its earn-out terms in full and the
final payment was made in early FY 23. Further detail on the
earn-out and deferred consideration charges are set out in note
6.
The foreign exchange loss within adjusting items relates mainly
to deferred and contingent payments associated with the acquisition
of Lionpoint, payable in US dollars, with the USD:GBP rate
experiencing some movement around the completion date. The
depreciation charge grows to GBP1.2m (FY 21: GBP1.1m) alongside the
growth of the Group, while the GBP0.6m (FY 21: GBP0.6m)
amortisation of capitalised development costs eases slightly as the
asset reduces with no further additions in the year.
Adjusted EBITDA grew 56.0% to GBP33.9m (FY 21: GBP21.7m) and
adjusted EBITDA margin eased to 21.5% (FY 21: 22.2%), reflecting
the higher gross profit margins, offset by the higher adjusted
administration expenses. Operating profit rose 74.7% to GBP17.8m
(FY 21: GBP10.2m) after charging increased adjusting expense items,
including acquisition costs, earn-out and deferred consideration
expenses, and share-based payment charges. Further detail of these
adjusting items is set out in note 3.
Currency
Currency translation had a noticeable effect on net fee income
and profits during the year. Through the year, British pound
sterling averaged $1.37 (FY 21: $1.31) and EUR1.18 (FY 21:
EUR1.12), which, with other similar currency movements, resulted in
an unfavourable net currency effect on net fee income of GBP3.4m.
On this basis, North America net fee income growth would increase
to 194.6% and Europe & APAC would report 44.5% total net fee
income growth.
Net Finance Expense
Net finance costs increased in the year to GBP2.9m (FY 21:
GBP1.2m), primarily from increased non-underlying finance expenses
relating to acquisition consideration discount unwinding, as set
out in note 3.
Taxation
Adjusted profit before tax rose 62.0% to GBP31.8m (FY 21:
GBP19.6m) after charging depreciation, amortisation of capitalised
development costs and net underlying finance expenses. Pre-tax
profit rose 65.9% to GBP14.9m (FY 21: GBP9.0m) after also charging
increased adjusting expenses and non-underlying finance
expenses.
The Group's taxation charge for the year was GBP6.4m (FY 21:
GBP3.1m), reflecting the growth in taxable profits, the blended tax
rate of the increasingly international jurisdictions in which the
Group operates and an increase in the rates applied to the deferred
tax liability. The Group's cash tax payment in the year was GBP4.8m
(FY 21: GBP5.7m), reflecting payment timings overall and COVID-19
related deferrals paid in the prior year.
Adjusted profit after tax is shown after adjustments for the
applicable tax on adjusting items as set out in note 3.
Acquisition Activity
Since the acquisition of Lionpoint in May 2021, the Group has
focussed on the successful integration of its service offerings and
the team into the Alpha Group, and has begun to deliver the
benefits of the increased service offering to the Group's enlarged
client base. Lionpoint has integrated into the Group well and grown
since acquisition, with strong further expansion of the team.
Following the year end, the Group has also supported the lift-out
of a team of 14 real estate consultants to further invest in the
Lionpoint offering; see note 13 for further detail.
Axxsys has integrated well into the Group, met its earn-out in
full and has grown its team size since acquisition to 55
consultants at the year end, including key senior management hires,
to take advantage of further opportunities.
As noted above, since acquiring Obsidian, the business has made
less progress than anticipated and details of the earn-out
consideration fair value adjustment are set out in note 6.
Earnings per Share
Adjusted earnings per share ("EPS") improved 43.9% to 21.46p per
share (FY 21: 14.91p) and adjusted diluted EPS increased 41.8% to
20.23p (FY 21: 14.26p). After including the adjusting expense
items, the basic earnings per share increased 33.7% to 7.69p (FY
21: 5.75p), while diluted EPS increased 31.8% to 7.25p (FY 21:
5.50p), reflecting the increase in the share options awards
outstanding.
As at 31 March 2022, 9,504,379 share options (FY 21: 7,613,969)
remained outstanding, with 873,169 share options exercised during
the year; see note 12 for further detail.
Cash Flow and Net Funds
The Group again enjoyed strong cash generation with net cash
generated from operating activities rising to GBP33.5m (FY 21:
GBP21.0m) and, after adjusting for employment-linked acquisition
payments and acquisition costs, to GBP36.0m (FY 21: GBP22.3m). This
represents a 112% adjusted cash conversion rate from adjusted
operating profit and improves on FY 21's 111% adjusted cash
conversion rate.
During the first half, Alpha acquired Lionpoint with completion
payments totalling GBP24.9m, offset by the Group raising GBP31.1m
gross proceeds from the Group's supportive shareholder base in its
May equity placing. The final GBP2.1m deferred non-contingent
payment was also made in relation to the Axxsys acquisition, with a
further GBP0.7m payment made in relation to the Lionpoint
acquisition. A total GBP1.8m of the FY 22 acquisition payments were
employment-linked.
During the year, the Group funded Alpha's employee benefit trust
("EBT") to purchase 57,006 shares at the prevailing market share
price to hold in satisfaction of future award vests. Alpha will
likely fund the EBT further in the future to build the shares held
in the EBT for the satisfaction of future share option
exercises.
The Group's income taxes paid totalled GBP4.8m (FY 21: GBP5.7m).
Net interest paid was GBP0.3m (FY 21: GBP0.5m), reflecting the cost
of maintaining and periodically drawing the Group's revolving
credit facility ("RCF").
Dividends paid increased in the year to GBP8.7m (FY 21:
GBP2.1m), reflecting the return to the Group's dividend policy in
FY 21, having not declared a final FY 20 dividend at the start of
the pandemic.
At the year end, the Group's cash position had strengthened
further to GBP63.5m (FY 21: GBP34.0m). This strong balance sheet
primarily provides Alpha funding flexibility to deliver on its
acquisition strategy.
Statement of Financial Position
The Group's net assets at 31 March 2022 totalled GBP132.7m (FY
21: GBP94.4m). This increase principally arises from the
acquisition of Lionpoint in the first half and the associated
GBP31.1m gross equity capital raising, along with other reserves
movements including retained profits. The Group continues to
maintain a strong financial position.
The Group's non-current assets movement principally results from
the additional intangible assets recognised on the acquisition of
Lionpoint partially offset by ongoing amortisation charges for the
year.
Working capital remains well managed. Trade and other
receivables balances increased in FY 22, both through the addition
of Lionpoint and the ongoing growth in the business. Debtor
collections continued to improve during the year with debtor days
again reducing. The Group ended the year with GBP63.5m (FY 21:
GBP34.0m) of cash. The Group's GBP20.0m RCF facility was undrawn at
31 March 2022 and, alongside cash balances, ensures Group funding
flexibility.
Trade and other payables balances increased, representing an
increased level of trade payables and accruals alongside the
Group's growth. This includes higher profit share bonus accruals
reflecting the enlarged teams and the year's strong performance.
Total acquisition-related deferred consideration and earn-out
liabilities have also increased, as disclosed in note 6, which
results from the acquisition of Lionpoint, the increase in the fair
value of the Lionpoint earn-out liability and employment-linked
consideration, and the unwinding of discounting in the year, offset
by the Lionpoint and Axxsys deferred consideration payments made
during the year and by the Obsidian fair value adjustment
recognised.
Dividends
The Board is delighted with the performance this year. As a
result, the Board is recommending a final dividend of 7.50p per
share (FY 21: 4.85p), bringing the total for the year to 10.40p (FY
21: 6.95p), in line with the Group's policy to pay out
approximately half of adjusted profit after tax. After approval at
the AGM in September, this final dividend should be paid on 20
September 2022 to shareholders on the register at the close of
business 9 September 2022.
Total Shareholders' Funds
Total shareholders' funds increased to GBP132.7m (FY 21:
GBP94.4m). The changes in equity reserves reflect the equity
capital raise, profit after tax for the year, currency movements on
overseas assets, goodwill and intangible values, the addition of
further share-based payment reserves and the payment of
dividends.
As at 31 March 2022, the Company had 118,707,336 ordinary shares
in issue (FY 21: 106,521,966), of which no shares were held in
treasury and 6,216,501 shares were held in the Company's employee
benefit trust to satisfy future option exercises (FY 21:
4,413,628).
Risk Management and the Year Ahead
The Group's risk management approach includes regular monitoring
of macro-economic and end-market conditions and assessing the
potential impacts across all business areas. In the risk management
framework, which has been reviewed during the year, the senior
leadership team, including me as Chief Financial Officer and the
Global Chief Executive Officer, has primary responsibility for
keeping abreast of developments that may affect the implementation
of the Group's strategy and financial performance. This entails
identifying the appropriate mitigating actions that should be taken
and ensuring, as far as possible, that those actions are then
executed by the senior management team. The Board as a whole
oversees risk and, within that framework, considers the material
risks that the Group faces and agrees on the principal risks and
uncertainties. Alpha has a set of core company values, which are
embedded globally, that reflect the Group's ethical and responsible
approach to operating and managing the business.
The Board is delighted with the Group's progress in the year,
while remaining cognisant of the potential risks and uncertainties
ahead. These risks include political and economic uncertainty, as
well as market volatility. We are aware of the risk of inflation
globally, driven by an uplift in costs, demand for personnel in key
areas and the increase in energy costs. Alpha remains alert to
inflationary pressures, the risks of which we believe will continue
to be balanced by strong structural growth drivers and demand for
the Group's services.
The Board has considered all of the above factors in its review
of going concern and has been able to conclude the review
positively. While cognisant of potential macro-economic risks and
the competitive environment, the Group's people, investment in
product and service offerings and increasing international
footprint help position Alpha for the year ahead. Alpha has
delivered strongly and is well placed to take advantage of future
opportunities.
The Group finished the year well positioned and we look forward
to further progress.
John Paton
Chief Financial Officer
23 June 2022
Consolidated statement of comprehensive income
For the year ended 31 March 2022
Year ended Year ended
31 March 2022 31 March 2021
Note GBP'000 GBP'000
Continuing operations
Revenue 2 158,005 98,066
Rechargeable expenses 2 (196) (112)
Net fee income 2 157,809 97,954
Cost of sales 2 (98,452) (63,130)
Gross profit 2 59,357 34,824
Administration expenses (41,582) (24,648)
Operating profit 17,775 10,176
Depreciation 1,155 1,085
Amortisation of capitalised development costs 556 613
Adjusting items 3 14,382 9,833
Adjusted EBITDA 3 33,868 21,707
Finance income 1 -
Finance expense (2,894) (1,207)
Profit before tax 14,882 8,969
Taxation (6,370) (3,142)
Profit for the year 8,512 5,827
Exchange differences on translation of foreign operations 3,180 (3,104)
Total comprehensive income for the year 11,692 2,723
Basic earnings per ordinary share (p) 5 7.69 5.75
Diluted earnings per ordinary share (p) 5 7.25 5.50
Consolidated statement of financial position
As at 31 March 2022
As at As at
31 March 2022 31 March 2021
Note GBP'000 GBP'000
Assets
Non-current assets
Goodwill 100,991 63,067
Intangible fixed assets 31,333 21,648
Property, plant and equipment 806 415
Right-of-use asset 2,304 1,816
Deferred tax asset 671 -
Capitalised contract fulfilment costs 131 154
Total non-current assets 136,236 87,100
--------------- --------------------
Current assets
Trade and other receivables 7 29,569 17,938
Cash and cash equivalents 63,516 34,012
Total current assets 93,085 51,950
Current liabilities
Trade and other payables 8 (56,671) (27,241)
Provisions 9 (3,277) -
Corporation tax (4,788) (1,792)
Lease liabilities (1,134) (514)
Total current liabilities (65,870) (29,547)
--------------- --------------------
Net current assets 27,215 22,403
--------------- --------------------
Non-current liabilities
Deferred tax provision (4,331) (3,022)
Other non-current liabilities 10 (25,100) (10,737)
Lease liabilities (1,275) (1,379)
Total non-current liabilities (30,706) (15,138)
---------------
Net assets 132,745 94,365
--------------- --------------------
Equity
Issued share capital 11 89 80
Share premium 119,438 89,396
Foreign exchange reserve 3,482 302
Other reserves 9,361 4,044
Retained earnings 375 543
Total shareholders' equity 132,745 94,365
--------------- --------------------
Consolidated statement of cash flows
For the year ended 31 March 2022
Restated(16)
Year ended year ended
31 March 2022 31 March 2021
Note GBP'000 GBP'000
Cash flows from operating activities:
Profit for the year 8,512 5,827
Taxation 6,370 3,142
Finance income (1) -
Finance expense 2,894 1,207
Depreciation of property, plant and equipment 1,155 1,085
Loss on disposal of fixed assets 32 13
Amortisation of intangible fixed assets 5,272 4,130
Share-based payment charge 12 4,075 1,693
Increase in provisions 9 1,302 -
Operating cash flows before movements in working capital 29,611 17,097
Working capital adjustments:
(Increase)/decrease in trade and other receivables (7,066) 3,221
Increase in trade and other payables 15,729 6,424
Tax paid (4,767) (5,707)
Net cash generated from operating activities 33,507 21,035
Cash flows from investing activities:
Interest received 1 -
Acquisition of subsidiaries, net of acquired cash (23,796) (2,752)
Purchase of property, plant and equipment, net of disposals (684) (151)
Net cash used in investing activities (24,479) (2,903)
Cash flows from financing activities:
Issue of ordinary share capital 31,102 -
Share issuance costs (1,053) -
EBT purchase of Company's own shares (205) -
Repayment of bank borrowings - (5,000)
Interest and bank loan fees (285) (486)
Principal lease liability payments (814) (809)
Interest on lease liabilities (111) (102)
Dividends paid 4 (8,678) (2,136)
Net cash generated from/(used in) financing activities 19,956 (8,533)
Net increase in cash and cash equivalents 28,984 9,599
Cash and cash equivalents at beginning of the year 34,012 25,996
Effect of exchange rate fluctuations on cash held 520 (1,583)
Cash and cash equivalents at end of the year 63,516 34,012
--------------------- --------------
(16) The Group has re-presented the consolidated statement of
cash flows in the comparative year to reconcile from "profit for
the year" rather than "operating profit" to align with the
requirements of IAS 7.
Consolidated statement of changes in equity
For the year ended 31 March 2022
Foreign
Share Share exchange Other Retained
capital premium reserves reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2020 78 89,396 3,406 1,652 (3,146) 91,386
Comprehensive income
Profit for the year - - - - 5,827 5,827
Foreign exchange differences
on translation of
foreign operations - - (3,104) - - (3,104)
Transactions with
owners
Shares issued (equity) 2 - - - (2) -
Share-based payment
charge - - - 1,693 - 1,693
Net settlement of
vested share options - - - (100) - (100)
Current tax recognised
in equity - - - 374 - 374
Deferred tax recognised
in equity - - - 425 - 425
Dividends - - - - (2,136) (2,136)
--------- ----------- ------------ ------------ ---------- ---------
As at 31 March 2021 80 89,396 302 4,044 543 94,365
--------- ----------- ------------ ------------ ---------- ---------
Comprehensive income
Profit for the year - - - - 8,512 8,512
Foreign exchange differences
on translation of
foreign operations - - 3,180 - - 3,180
Transactions with
owners
Shares issued (equity) 9 30,042 - - (2) 30,049
Purchase of own shares
by the EBT - - - (205) - (205)
Share-based payment
charge - - - 4,075 - 4,075
Net settlement of
vested share options - - - (12) - (12)
Current tax recognised
in equity - - - 220 - 220
Deferred tax recognised
in equity - - - 1,239 - 1,239
Dividends - - - - (8,678) (8,678)
--------- ----------- ------------ ------------ ---------- ---------
As at 31 March 2022 89 119,438 3,482 9,361 375 132,745
--------- ----------- ------------ ------------ ---------- ---------
Notes to the consolidated financial statements
1. Basis of preparation
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 31 March 2022 or
2021 but is derived from those accounts. Statutory accounts for the
year ended 31 March 2021 have been delivered to the registrar of
companies, and those for the year ended 31 March 2022 will be
delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying their report, and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
These condensed preliminary financial statements have been
prepared in accordance with the recognition and measurement
requirements of UK-adopted international financial reporting
standards in conformity with the requirements of the Companies Act
2006, in line with the Group's statutory accounts.
2. Segment information
Group management has determined the operating segments by
considering the segment information that is reported internally to
the chief operating decision maker, the Board of Directors. For
management purposes, the Group is currently organised into three
geographical operating divisions: UK, North America and Europe
& APAC, which allows the Board to evaluate the nature and
financial effects of the business activities of the Group and the
economic environments in which it operates . The Group's operations
all consist of one type: consultancy and related services to the
asset management, wealth management and insurance industries.
The Directors consider that there is a material level of
operational support and linkage provided to the Group's emerging
territories in Europe & APAC, as they develop their presence
locally, and as such have been deemed to constitute one operating
segment.
Revenues associated with software licensing arrangements were
immaterial in both the current and prior years. Therefore, the
Directors consider that disaggregating revenue by operating
segments is most relevant to depict the nature, amount, timing and
uncertainty of revenue and cash flows as may be affected by
economic factors.
Segmental information
North Europe
FY 22 UK America & APAC(18) Total
============== ========= ============ =========
GBP'000 GBP'000 GBP'000 GBP'000
============== ========= ============ =========
Revenue 72,134 47,001 38,870 158,005
============== ========= ============ =========
Rechargeable expenses (71) (80) (45) (196)
-------------- --------- ------------ ---------
Net fee income 72,063 46,921 38,825 157,809
============== ========= ============ =========
Cost of sales (41,419) (31,594) (25,439) (98,452)
-------------- --------- ------------ ---------
Gross profit 30,644 15,327 13,386 59,357
-------------- --------- ------------ ---------
Margin on net fee
income(17) (%) 42.5% 32.7% 34.5% 37.6%
-------------- --------- ------------ ---------
Non-current assets 71,110 42,808 22,318 136,236
-------------- --------- ------------ ---------
North Europe
FY 21 UK America & APAC Total
GBP'000 GBP'000 GBP'000 GBP'000
============== ========= ============ =========
Revenue 53,471 16,531 28,064 98,066
============== ========= ============ =========
Rechargeable expenses (51) (17) (44) (112)
-------------- --------- ------------ ---------
Net fee income 53,420 16,514 28,020 97,954
============== ========= ============ =========
Cost of sales (32,022) (12,040) (19,068) (63,130)
-------------- --------- ------------ ---------
Gross profit 21,398 4,474 8,952 34,824
-------------- --------- ------------ ---------
Margin on net fee
income(17) (%) 40.1% 27.1% 31.9% 35.6%
-------------- --------- ------------ ---------
Non-current assets 59,181 7,766 20,153 87,100
-------------- --------- ------------ ---------
(17) Margin on net fee income is gross profit expressed as a
percentage of net fee income. Please refer to note 3 for further
detail.
(18) Within Europe & APAC, France is a material country and
generated profits after tax of GBP3.0m (FY 21: GBP1.9m) and revenue
of GBP17.8m (FY 21: GBP12.5m).
During the year, the Group did not have any customers that
comprised more than 10% of the Group's revenues. One customer
within the UK segment comprised more than 10% of Group revenues in
FY 21 comprising GBP11.7m or 12.0% of Group revenue.
The Group's central non-current assets have been allocated to
the UK operating segment, except for goodwill, intangible assets
and right-of-use assets, which have been allocated to relevant
operating segments.
Following the acquisition of Lionpoint in the year, the Group
has recognised the relevant amounts within the segments in line
with the different territories in which Lionpoint operates.
3. Reconciliations to alternative performance measures
Alpha uses alternative performance measures ("APMs") that are
not defined or specific under the requirements of IFRS. The APMs,
including net fee income, margin on net fee income, adjusted
EBITDA, adjusted profit before tax, adjusted EPS, adjusted cash
conversion and organic net fee income growth, are provided to allow
stakeholders a further understanding of the underlying trading
performance of the Group and aid comparability between accounting
periods. These measures have been applied consistently across
reporting periods. They are not considered a substitute for, or
superior to, IFRS measures.
Net fee income
The Group disaggregates revenue into net fee income and expenses
recharged to clients. Net fee income provides insight into the
Group's productive output and is used by the Board to set budgets
and measure performance. This APM is reconciled on the face of the
income statement and by segment to revenue in note 2.
Profit margins
Margin on net fee income and adjusted EBITDA margin are
calculated using gross profit and adjusted EBITDA, and are
expressed as a percentage of net fee income. These margins
represent the margin that the Group earns on its productive output,
excluding nil or negligible margin expense recharges to clients
over which the Group has limited control, and allows comparability
of the business output between periods. Such adjusted margins are
used by the management team and the Board to assess the performance
of the Group.
Reconciliation of adjusted profit before tax, adjusted operating
profit and adjusted EBITDA
FY 22 FY 21
Note GBP'000 GBP'000
Profit before tax 14,882 8,969
Amortisation of acquired intangible
assets 4,716 3,517
Loss on disposal of fixed assets 32 13
Share-based payments charge 12 6,218 2,496
Earn-out and deferred consideration 6 1,423 3,606
Acquisition costs 683 -
Integration costs - 107
Foreign exchange losses 1,310 94
--------------------------- ---------------------
Adjusting items 14,382 9,833
Non-underlying finance expenses 2,487 803
--------------------------- ---------------------
Adjusted profit before tax 31,751 19,605
Net underlying finance expenses 406 404
Adjusted operating profit 32,157 20,009
Depreciation of property, plant
and equipment 1,155 1,085
Amortisation of capitalised
development costs 556 613
--------------------------- ---------------------
Adjusted EBITDA 33,868 21,707
--------------------------- ---------------------
Adjusted EBITDA margin (%) 21.5% 22.2%
Adjusting items
The Group's APMs exclude certain expense items in order to aid
understanding of the comparable underlying performance of the
business. These items are generally non-cash, non-recurring by
nature or are acquisition related.
Amortisation of acquired intangible assets and profit or loss on
disposal of fixed assets are treated as adjusting items to better
reflect the underlying performance of the business, as they are
non-cash items, principally relating to acquisitions.
The share-based payments charge, and related social taxes are
excluded from adjusted profit measures. This allows comparability
between periods as the Group's share option plans were established
on AIM admission and have not yet settled into a regular cycle of
awards and vesting. The accounting treatment of the Group's share
options requires the charge for each share option award to be
recognised over the vesting period, resulting in significant growth
in the charge year on year as the Group matures post-IPO. The
estimated future social taxes payable are closely linked to the
share-based payment charge and fluctuate with the assumed future
market value of shares. This approach has been applied consistently
across reporting periods. Note 12 sets out further details of the
employee share-based payments expense calculation under IFRS 2. A
more regular share option award cycle is anticipated in the coming
years. If no adjustment was made for the share-based payments
charge, adjusted EBITDA for the year would be GBP27.7m (FY 21:
GBP19.2m).
As per note 6, the acquisition of Lionpoint in the year involved
both deferred and contingent payments. Part of the Lionpoint
acquisition payments are dependent on the ongoing employment of
certain members of the senior Lionpoint management team, and this
element is expensed annually over several years until the date of
payment. In prior years, the Group similarly recognised
employment-linked costs through the income statement relating to
payments for the previous acquisitions of Axxsys and Obsidian, or
to reflect adjustments made to the fair value of the expected
future payment. These costs have been treated as adjusting items as
they are acquisition related, reflecting the acquisition terms
rather than Group trading performance. Whilst these
acquisition-related costs will recur in the short term through the
earn-out period, the adjustment allows comparability of underlying
productive output and operating performance across reporting
periods.
Other acquisition costs expensed in the year in relation to the
acquisition of Lionpoint, including diligence and legal fees.
Whilst further similar acquisition costs could be incurred in the
future, these costs are not directly attributable to the ongoing
operational trading performance of the Group, the timing and amount
of such costs may vary year to year and treating these as an
adjusting item allows comparability of the operating performance
across reporting periods.
Integration costs in the previous year were in relation to the
acquired Obsidian product suite, including security and its
integration with the technology protocols within the ADS 360
SalesVista product. Those costs directly resulted from the
acquisition of Obsidian in previous years. Integration of Obsidian
was completed in April 2020 and was managed as a discrete
short-term project subsequent to the acquisition.
Similarly, the impact of foreign currency volatility in
translating local working capital balances to their relevant
functional currencies has been excluded from the calculation of
adjusted profit measures on the basis that such exchange rate
movements do not reflect the underlying trends or operational
performance of the Group. This year the foreign exchange loss is
predominantly acquisition related with Lionpoint's deferred
consideration payable in US dollars and the USD:GBP rate
experiencing some movement around the completion date.
Non-underlying finance expenses
In calculating adjusted profit before tax, unwinding of the
discounted contingent and deferred acquisition consideration within
finance expenses is considered non-underlying as these amounts
relate to acquisition consideration, rather than the Group's
underlying trading performance.
Adjusted profit before tax
Adjusted profit before tax is an APM calculated as profit before
tax stated before the adjusting items above, including amortisation
of acquired intangible assets, share-based payment charge,
acquisition-related payments and costs, non-underlying finance
expenses and other non-underlying expenses. This measure was
introduced to allow comparability of the Group's underlying
performance after the adoption of IFRS 16. This measure also
reflects the underlying amortisation charges arising from
capitalised development costs relating to ADS product
development.
Adjusted operating profit
Adjusted operating profit is an APM defined by the Group as
adjusted profit before tax before charging underlying finance
expenses, including fees on bank loans and interes t on lease
liabilities. The Directors consider this metric alongside statutory
operating profit to allow further understanding and comparability
of the underlying operating performance of the Group between
periods. This measure has been consistently used as the basis for
adjusted cash conversion.
Adjusted EBITDA
Adjusted EBITDA is a commonly used operating measure, which is
defined by the Group as adjusted operating profit stated before
non-cash items, including amortisation of capitalised development
costs and depreciation of property, plant and equipment. Adjusted
EBITDA is a measure that is used by management and the Board to
assess underlying trading performance across the Group, and forms
the basis of the performance measures for aspects of remuneration,
including consultant profit share and bonuses.
Adjusted profit after tax
Adjusted profit after tax and adjusted earnings per share
metrics are also APMs, similarly used to allow a further
understanding of the underlying performance of the Group. Adjusted
profit after tax is stated before adjusting items and their
associated tax effects. The associated tax effects are calculated
by applying the relevant effective tax rate to allowable expenses
that have been excluded as adjusting items.
FY 22 FY 21
GBP'000 GBP'000
Adjusted profit before tax 31,751 19,605
Tax charge (6,370) (3,142)
Tax impact of adjusting items (1,624) (1,358)
Adjusted profit after tax 23,757 15,105
---------------- ----------------
Adjusted earnings per share
Adjusted earnings per share ("EPS") is calculated by dividing
the adjusted profit after tax for the year attributable to ordinary
shareholders by the weighted average number of ordinary shares
outstanding during the year. Adjusted diluted EPS is calculated by
dividing adjusted profit after tax by number of shares as above,
adjusted for the impact of potentially dilutive ordinary shares.
Potentially dilutive ordinary shares are only treated as dilutive
when their conversion to ordinary shares would decrease EPS (or
increase loss per share). Refer to note 5 for further detail.
Adjusted EPS FY 22 FY 21
Adjusted EPS (p) 21.46 14.91
Adjusted diluted EPS (p) 20.23 14.26
------------------ ------------------
Reconciliation of adjusted administrative expenses
To express them on the same basis as the APMs described above,
adjusted administration expenses are stated before adjusting items,
depreciation and amortisation of capitalised development costs and
are used by the Board to monitor the underlying administration
expenses of the business in calculating adjusted EBITDA.
FY 22 FY 21
GBP'000 GBP'000
Administrative expenses 41,582 24,648
Adjusting items (14,382) (9,833)
Depreciation of property, plant
and equipment (1,155) (1,085)
Amortisation of capitalised
development costs (556) (613)
--------------------- ------------------
Adjusted administrative expenses 25,489 13,117
--------------------- ------------------
Adjusted cash generated from operating activities
Adjusted cash generated from operating activities excludes any
employment-linked acquisition payments and other acquisition costs
expensed in the year, treated as operating cash flows under IFRS,
to reflect the Group's underlying operating cash flows, exclusive
of cash payments relating to acquisitions.
FY 22 FY 21
GBP'000 GBP'000
Net cash generated from operating activities 33,507 21,035
Employment-linked acquisition payments(19) 1,848 1,246
Acquisition costs 683 -
Adjusted cash generated from operating activities 36,038 22,281
-------- --------------
(19) T otal gross acquisition payments made in the year were
GBP25.6m, excluding GBP2.1m of cash acquired. GBP24.9m of initial
Lionpoint consideration was paid in May 2021, with a further
GBP2.8m of deferred and contingent payments made during the year.
Please see note 6 for further details. Of the GBP25.6m, GBP1.8m
related to employment-linked acquisition payments, treated as
operating under IFRS, and a further GBP23.8m is considered to be
capital in nature and included within investing activities in the
Group's consolidated statement of cash flows.
Adjusted cash conversion
Cash conversion is stated as net cash generated from operating
activities expressed as a percentage of operating profit.
Adjusted cash conversion is stated as adjusted cash generated
from operating activities expressed as a percentage of adjusted
operating profit.
FY 22 FY 21
Cash conversion 189% 207%
Adjusted cash conversion 112% 111%
Organic net fee income growth
Organic net fee income growth excludes net fee income from
acquisitions in the 12 months following acquisition. Net fee income
from any acquisition made in the period is excluded from organic
growth. For acquisitions made part way through the comparative
period, the current period's net fee income contribution is reduced
to include only net fee income for the period following the
acquisition anniversary, in order to compare organic growth on a
like-for-like basis.
Organic net fee income growth of 31.3% (FY 21: 8.0%) for the
current period represents FY 22 net fee income less GBP29.2m net
fee income attributable to the Lionpoint acquisition completed
during the year.
Constant currency growth
The Group operates in multiple jurisdictions and generates
revenues and profits in various currencies. Those results are
translated on consolidation at the foreign exchange rates
prevailing in that period. These exchange rates vary from year to
year, so the Group presents some of its results on a "constant
currency" basis. This means that the current year's results have
been retranslated using the average exchange rates from the prior
year to allow for comparison of year-on-year results, eliminating
the effects of volatility in exchange rates.
Currency translation had a noticeable impact on both net fee
income and gross profit in the year, as a result of a strengthening
British pound sterling through the year against both the US dollar
and against the Euro. In the year, British pound sterling averaged
$1.37 (FY 21: $1.31) and EUR1.18 (FY 21: EUR1.12). On a constant
currency basis, the Group's net fee income for the year would be
GBP3.4m higher (2.1%) and, similarly, gross profit would be GBP1.4m
higher.
4. Dividends
FY 22 FY 21
GBP'000 GBP'000
Amounts recognised as distributions
to equity holders:
Final dividend for the year 5,431 -
ended 31 March 2021 of 4.85p
(FY 20: nil) per share (restated)
Interim dividend for the year
ended 31 March 2022 of 2 .90p
(FY 21: 2.10p) per share 3,247 2,136
------------------ ------------------
Total dividends paid in the
year 8,678 2,136
------------------ ------------------
After the balance sheet date, the Directors proposed a final
dividend of 7.50p per ordinary share, totalling approximately
GBP8.6m based on the estimated eligible shares in issue at the
payment date. The proposed final FY 22 dividend is subject to
approval by shareholders at the AGM and has, therefore, not been
included as a liability in these consolidated financial statements.
Subject to approval, the dividend will be paid on 20 September 2022
to shareholders on the register at close of business on 9 September
2022.
The total final dividend for the year ended 31 March 2021 of
4.85p per share was previously disclosed as an estimated
GBP5,416,000 in the prior year. This has been updated to reflect
the actual dividend paid in the table above.
5. Earnings per share and adjusted earnings per share
The Group presents basic and diluted EPS data, on both an
adjusted and non-adjusted basis. Basic EPS is calculated by
dividing the profit or loss for the year attributable to ordinary
shareholders by the weighted average number of ordinary shares
fully outstanding during the year.
The weighted average number of diluted ordinary shares used in
the calculation of diluted EPS includes the number of shares that
are issued to satisfy share incentive awards granted to employees
as they fall due, adjusted for the likelihood of meeting
performance criteria, if any. Potential ordinary shares are only
treated as dilutive when their conversion to ordinary shares would
decrease EPS (or increase loss per share).
In order to reconcile to the adjusted profit for the financial
year, the same adjustments as in note 3 have been made to the
Group's profit for the financial year. The profits and weighted
average number of shares used in the calculations are set out
below:
Note FY 22 FY 21
Basic & diluted EPS
Profit for the financial year
used in calculating basic and
diluted EPS (GBP'000) 8,512 5,827
Weighted average number of ordinary
shares in issue ('000) 110,689 101,312
Number of dilutive shares ('000) 6,748 4,590
-------------------- --------------------
Weighted average number of ordinary
shares, including potentially
dilutive shares ('000) 117,437 105,902
Basic EPS (p) 7.69 5.75
Diluted EPS (p) 7.25 5.50
-------------------- --------------------
Adjusted EPS and adjusted diluted
EPS
Adjusted profit for the financial
year used in calculating adjusted
basic and diluted EPS (GBP'000) 3 23,757 15,105
Weighted average number of ordinary
shares in issue ('000) 110,689 101,312
Number of dilutive shares ('000) 6,748 4,590
------------------ ------------------
Weighted average number of ordinary
shares, including potentially
dilutive shares ('000) 117,437 105,902
Adjusted EPS (p) 21.46 14.91
Adjusted diluted EPS (p) 20.23 14.26
------------------ ------------------
6. Acquisition of businesses
Acquisition in the current year
On 20 May 2021, the Group reached an agreement to acquire 100%
of the issued share capital of Lionpoint Holdings, Inc.
("Lionpoint"), a provider of specialist consultancy services to the
alternatives investments industry, on a cash free, debt free basis.
The Directors consider that the acquisition is in line with the
Group's stated growth strategy, significantly increasing both the
Group's exposure to the attractive and fast-growing alternatives
investments market and its footprint in the large and strategically
important North America segment.
A summary of the purchase consideration, net assets acquired,
identifiable intangible assets and goodwill is set out below. These
fair values are determined by using established estimation
techniques such as discounted cash flow and option valuation
models. Since the provisional amounts disclosed within the Group's
Interim Report & Accounts 2022, the Directors have made a
measurement period adjustment to reflect an additional social
security tax provision as at the acquisition date relating to
Lionpoint. This resulted in an additional GBP0.3m provision
reducing the recognised net assets in the table below and has
resulted in an increase in goodwill of GBP0.3m. For further detail
on this provision, please refer to note 9. Further, the Group have
made a reclassification of GBP0.1m of tangible fixed assets to
trade and other debtors due to obtaining further clarity on the
nature of these amounts.
Lionpoint Book Fair value Values
values adjustments on acquisition
GBP'000 GBP'000 GBP'000
Acquiree's net assets at the
acquisition date:
Trade name - 2,602 2,602
Order backlog - 829 829
Customer relationships - 10,752 10,752
Tangible fixed assets 53 - 53
Right-of-use assets 478 - 478
Trade and other receivables 4,588 - 4,588
Cash and cash equivalents 2,148 - 2,148
Trade and other payables (2,380) - (2,380)
Provisions (291) (291)
Lease liabilities (478) - (478)
Corporation tax liability (67) - (67)
Deferred tax liability - (3,423) (3,423)
Net identifiable assets acquired 4,051 10,760 14,811
Cash consideration relating
to business combination 50,849
Goodwill on acquisition 36,038
The maximum amount payable for the acquisition (over four years)
is $90.0m (GBP63.8m) alongside an additional $2.1m (GBP1.4m) in
relation to completion working capital to be settled in cash, with
the option to settle a portion of the deferred and contingent
amounts in the Group's ordinary shares. Of this maximum amount
payable, $7.5m (GBP5.3m) is employment-linked. The fair value of
consideration recognised on the date of acquisition amounted to
$72.3m (GBP50.8m), of which $33.5m (GBP23.5m) was paid on
completion, together with the additional $2.1m (GBP1.4m) completion
working capital payment. A balancing $0.5m (GBP0.3m) receivable is
held at 31 March 2022, which will be deducted from future
consideration payments to the management vendors.
Of the remaining maximum consideration payable, deferred
consideration of $17.0m (GBP12.0m) is payable across the first and
second anniversaries of the acquisition and contingent earn-out
consideration of up to a maximum of $32.0m (GBP22.6m) is payable in
three instalments across FY 23 to FY 25. The FY 23 to FY 25
earn-out consideration payments are contingent on Lionpoint meeting
certain profitability targets over the earn-out period. The total
fair value of future consideration payable recognised on the date
of acquisition was $37.3m (GBP26.2m), of which $20.6m (GBP14.5m)
related to contingent consideration and $16.7m (GBP11.7m) related
to deferred consideration.
The total cash payable on completion was funded from the Group's
cash reserves and the proceeds of the May 2021 share placing,
raising net proceeds of GBP30.0m. During the year, a further $1.0m
(GBP0.7m) employment-linked deferred payments were made.
Employment-linked deferred and contingent consideration will be
expensed through the income statement proportionately until FY 26.
During the year, the Group has expensed GBP2.8m in relation to
these employment-linked payments through the consolidated statement
of comprehensive income.
The remaining deferred and contingent consideration is
discounted to fair value. Discount unwinding is recognised in
finance costs proportionately across the periods until final
payment. During the year, GBP2.0m of discount unwinding was
expensed as a non-underlying finance cost in relation to the
Lionpoint acquisition consideration.
As consideration for the acquisition of Lionpoint is payable in
US dollars, foreign exchange differences are recognised at each
reporting date in relation to translating these liabilities into
British pound sterling. In the year, the Group recognised a foreign
exchange loss of GBP2.3m in the income statement arising from
acquisition-related currency movements, particularly relating to
movements around the acquisition date.
Following a strong performance of Lionpoint in the 10 months
following acquisition, and reflective of a healthy pipeline of
opportunities as at the balance sheet date, the Group has uplifted
the Lionpoint forward projections, and in turn the total
undiscounted expected earn-out payment to GBP22.3m from GBP21.0m,
closer to the maximum payable. These values are inclusive of
employment-linked amounts. After taking into account the impact of
discounting, the Group has recognised a fair value adjustment
relating to the valuation of the Lionpoint earnout liability as at
31 March 2022, reflecting this uplift. This adjustment has resulted
in an additional charge through the Group's consolidated statement
of comprehensive income of GBP1.1m.
As at 31 March 2022, a GBP33.7m liability is recorded, of which
GBP15.5m is a current and GBP18.2m is a non-current liability. Of
this liability at the balance sheet date, GBP14.0m relates to
deferred consideration and the remaining GBP19.7m relates to
contingent consideration.
Lionpoint contributed GBP29.2m to the Group's revenue and
GBP3.7m to the Group's profit after tax for the year from the date
of acquisition to 31 March 2022. If the acquisition of Lionpoint
had been completed on 1 April 2021, Group revenues for the year
would have been GBP161.3m and Group profits after tax would have
been GBP7.8m, without adjustment to amortisation assumptions.
Acquisitions in previous years
As part of the acquisition of Axxsys Limited and Obsidian
Solutions Limited in previous years, the Group agreed earn-out
arrangements based on the financial performance of the respective
acquired entities over an agreed period of time, subject to
continuous employment of the respective vendors, as previously
disclosed.
Obsidian
On 9 November 2019, the Group acquired 100% of the share capital
of Obsidian Solutions Limited. Obsidian provides specialised
software products to the investment management industry.
Employment-linked payments associated with the acquisition of
Obsidian have been expensed through the Group's consolidated
statement of comprehensive income proportionately from the
acquisition date. During the year, the Group has expensed GBP1.1m
in relation to these employment-linked payments through the
consolidated statement of comprehensive income.
The earn-out payments have been estimated by the Directors based
on anticipated future earnings, discounted to current values. The
unwinding of this earn-out discount is recognised as a finance
cost. During the year, GBP0.3m of this discount unwinding was
expensed as a non-underlying cost in relation to Obsidian.
During the year, the Directors have revised their previous
estimate in relation to the undiscounted value of the Obsidian
earn-out based on the lower profitability achieved to date, and
reduced projections for the remainder of the earn-out period,
alongside the lapsing of an ongoing employment condition attached
to the Obsidian earn-out agreement. The Directors have revised
their estimate of the projected cash flows in relation to potential
earn-out scenarios. The Directors have re-assessed the fair value
of the earn-out liability based on several plausible scenarios,
leading to a reduction in the assumed undiscounted earn-out from
GBP9.3m to GBP1.9m. This resulted in a fair value adjustment of
GBP3.8m to the liability as at 31 March 2022, which has been
credited to the Group's consolidated statement of comprehensive
income in the year. As at 31 March 2022, none of the remaining
liability is being accounted for as employment-linked, given the
lapsing of the ongoing employment condition referred to above.
Including the contingent earn-out and unwinding of discounting,
and the above fair value adjustment, a total GBP1.9m estimated
consideration is recorded within non-current liabilities.
Axxsys
On 5 June 2019, the Group acquired 100% of the share capital and
voting interests of Axxsys Limited and subsidiaries. Axxsys has
provided specialised consultancy and technology implementation
services to the investment management industry since 2003.
Of the remaining deferred and contingent consideration amounts
that were outstanding at 31 March 2021 in relation to the
acquisition of Axxsys, GBP2.1m was paid during the year, of which
GBP1.1m was employment-linked. GBP5.0m of contingent consideration
remained outstanding at 31 March 2022 and was paid shortly after
the year end. In the year, GBP0.2m was expensed relating to
employment-linked consideration, and GBP0.2m of discount unwinding
was expensed as a non-underlying finance cost in relation to Axxsys
up to the final payment dates.
The below table summarises the movements in the deferred and
contingent consideration liabilities held at 31 March 2022:
Axxsys Obsidian Lionpoint Total
GBP ' GBP ' GBP ' GBP '
000 000 000 000
Balance at 1 April 2021 6,706 4,357 - 11,063
Additions - - 26,210 26,210
Fair value adjustment - (3,815) 1,138 (2,677)
Employment-linked consideration 219 1,087 2,794 4,100
Payments in the year (2,100) - (707) (2,807)
Unwinding of discounting 175 269 2,043 2,487
Foreign exchange loss - - 2,270 2,270
-------- --------- ---------- --------
Balance as at 31 March
2022 5,000 1,898 33,748 40,646
-------- --------- ---------- --------
The GBP40.6m liability held at 31 March 2022 comprised GBP14.0m
related to deferred consideration and GBP26.6m related to
contingent consideration. Within these deferred and contingent
consideration liabilities, GBP2.2m relates to employment-linked
amounts.
The above liabilities are reflected in non-current and current
liabilities as shown in the following table:
Axxsys Obsidian Lionpoint Total
GBP ' GBP ' GBP ' GBP '
000 000 000 000
Current 5,000 - 15,500 20,500
Non-current - 1,898 18,248 20,146
------- --------- ---------- -------
Balance as at 31 March
2022 5,000 1,898 33,748 40,646
------- --------- ---------- -------
7. Trade and other receivables
FY 22 FY 21
GBP'000 GBP'000
Amounts due within 1 year:
Trade receivables 24,182 16,497
Less: allowance for expected
credit losses (541) (378)
------------------ ------------------
Trade receivables - net 23,641 16,119
Other debtors 539 319
Capitalised contract fulfilment
costs 1,548 182
Prepayments 1,113 798
Accrued income 2,728 520
Total amounts due within 1
year 29,569 17,938
------------------ ------------------
Trade receivables are non-interest bearing and generally have a
30- to 60-day term. Due to their short maturities, the carrying
amount of trade and other receivables is a reasonable approximation
of their fair value. Trade receivables have grown in the year
reflecting the overall growth of the Group, with debtor days
reducing to 55 days (FY 21: 60 days).
8. Trade and other payables
Restated(20)
Note FY 22 FY 21
GBP'000 GBP'000
Trade payables 5,114 1,780
Accruals 23,898 15,948
Deferred income 1,865 1,692
Social security tax on share options 12 1,050 267
Taxation and social security 2,964 4,352
Other creditors 1,280 1,210
Earn-out and deferred consideration 6 20,500 1,992
Total amounts owed within 1 year 56,671 27,241
-------- -------------
(20) Trade and other payables in the FY 21 comparative period
have been re-presented within this note to separately disclose
social security tax on share options from other tax and social
security liabilities.
Trade payables comprise amounts outstanding for trade purchases
and ongoing costs. The Directors consider that the carrying amount
of trade and other payables is a reasonable approximation of their
fair value . The trade payables balance has grown in the year
reflecting the overall growth of the Group and the timing of
payments made around the balance sheet date.
The accruals balance has grown in the year reflecting the
overall growth of the Group and higher balances for the employee
profit share bonuses and director bonuses, reflecting the enlarged
team headcount and strong performance. These are accrued through
the year and paid after the year end.
Earn-out and deferred consideration comprises GBP15.5m relating
to the deferred and contingent consideration due on the acquisition
of Lionpoint in the next twelve months, and GBP5.0m relating to the
remaining contingent consideration payment arising from the
acquisition of Axxsys Limited at the balance sheet date, which was
paid shortly after year end.
9. Provisions
Social Legal and Total
security other provisions
tax provisions
Note GBP ' 000 GBP ' 000 GBP ' 000
Balance at 1 April 2021 - - -
Transfers from trade
& other payables 1,400 284 1,684
Acquired through business
combinations 6 291 - 291
Additional provisions
made in the year 899 403 1,302
Balance as at 31 March
2022 2,590 687 3,277
----------------- ------------------ ---------------
The carrying value of the provisions disclosed above is a
reasonable approximation of their fair value. Within social
security tax provisions is an existing GBP1.4m (FY 21: GBP1.4m)
provision relating to historic pre-AIM admission potential tax
treatments. A further GBP0.3m of existing amounts related to
several dilapidation provisions on the Group's leased offices.
These were reported in the prior year within trade and other
payables.
During the year, a further GBP0.9m provision was recognised
relating to potential social security tax exposures, with an
additional GBP0.3m acquired through business combinations. The
amount of these tax provisions is subject to significant
uncertainty. A final position agreed with a tax authority or
through the expiry of a tax audit period could differ from the
estimated provision. Currently there are no significant ongoing tax
audits.
The Group has also recognised several immaterial provisions in
the year totalling GBP0.4m (FY 21: GBPnil) relating to various
ongoing legal claims, representing the most probable outcome at the
balance sheet date.
Whilst a range of outcomes is reasonably possible, these total
potential liabilities range between GBP1.2m and GBP5.2m.
10. Other non-current liabilities
Note FY 22 FY 21
GBP'000 GBP'000
Earn-out and deferred consideration 6 20,146 9,071
Deferred income 233 304
Social security tax on share options 12 1,953 1,362
Other non-current liabilities 2,768 -
Total amounts owed after 1 year 25,100 10,737
-------- ----------------------------
Within earn-out and deferred consideration is GBP1.9m associated
with the potential earn-out payments linked to the acquisition of
Obsidian Solutions Limited and GBP18.2m associated with deferred
and contingent earn-out payments relating to the Lionpoint
acquisition. These amounts are expected to fall due over 12 months
from the balance sheet date. Refer to note 6 for further
detail.
Other non-current liabilities of GBP2.8m (FY 21: GBPnil)
represents the deferred element of FY 22 bonuses, due to be paid in
summer 2023 to senior management and certain directors
globally.
11. Called up share capital
FY 22 FY 21
Number Number
Allotted, called up and fully
paid 118,707,336 106,521,966
------------ ------------
Ordinary 0.075p shares (1 vote
per share)
------------ ------------
FY 22 FY 21
GBP GBP
Allotted, called up and fully
paid 89,031 79,891
------------ ------------
Ordinary 0.075p shares (1 vote
per share)
------------ ------------
Movements in share capital during the year ended 31 March
2022:
GBP
Balance at 1 April 2021 79,891
106,521,966 ordinary shares of 0.075p each
Issued shares (i) 9,140
Balance at 31 March 2022
118,707,336 ordinary shares of 0.075p each 89,031
----------
i) During the year, the Group issued 12,185,370 ordinary shares
of 0.075p each, of which 9,569,839 shares were issued as part of
the Group's May 2021 share placing for net proceeds of GBP30.0m,
net of transaction costs of GBP1.1m, 815,531 shares relate to the
exercise of some vested share options and 1,800,000 shares were
issued to the employee benefit trust ("EBT") for future
satisfaction of share incentive plans.
Alpha Employee Benefit Trust
The Group held 6,216,501 (FY 21: 4,413,628) shares in the
employee benefit trust ("EBT") comprising shares held to satisfy
share options granted under its joint share ownership plan ("JSOP")
or unallocated ordinary shares to satisfy share options granted
under the Group's other share option plans. Ordinary shares held
within the EBT have no dividend or voting rights.
During the year, 1,800,000 ordinary shares were transferred by
the Company to the EBT for potential future satisfaction of share
incentive plans, either through the issuance of new shares or the
transfer of shares bought back from prior employees at nominal
value. In the year, the EBT purchased 57,006 shares at market
value. Ordinary shares held within the EBT have no dividend or
voting rights.
In the year, 54,133 shares held in the EBT were utilised for
employee share option exercises.
Treasury shares
The Group held nil (FY 21: nil) shares in treasury.
12. Share-based payments
The Group has adopted a globally consistent share incentive plan
approach, which is implemented using efficient jurisdiction
specific plans, as appropriate.
The Management Incentive Plan
The Group has a management incentive plan ("MIP") to retain and
incentivise the directors and senior management. The MIP consists
of four parts: part A of which will enable the granting of
enterprise management incentive and non-tax advantaged options to
acquire shares; part B of which will enable the awarding of JSOPs;
part C of which will enable the awarding of restricted stock units
("RSUs") for participants in the US; and Part D of which will
enable the awarding of RSUs in France (together the "options").
Options granted up to FY 20 to certain directors and senior
management of the Group were subject to the fulfilment of two or
more of the following performance conditions: (a) a specific
business unit's budgetary EBITDA, or other personal targets and
goals; (b) the Group achieving a total shareholder return for the 3
years from year of award in excess of the average total shareholder
return of a peer group of comparable companies; and (c) the Group
achieving at least 10% EPS growth against the comparative financial
year.
As disclosed last year, responding to the impact of COVID-19,
options granted to senior management in FY 21 were subject to more
flexible performance criteria, including local budget targets and a
variety of stretching personal sales or other targets. FY 21 awards
made to Executive Directors, as in prior years, were also subject
to the Group achieving a total shareholder return ("TSR") in excess
of the average total shareholder return of a peer group of
comparable companies, for a period of 3 years from the year of
grant.
This year the Remuneration Committee has returned to a more
standard approach in setting the FY 22 award criteria. The criteria
for FY 22 share incentive awards to the Executive directors and
senior management of the Group, depending on the individual and
their role, include: (a) the Group achieving adjusted EPS growth of
15% or more to trigger a maximum award, or 10% to trigger a 66%
award, with a linear application of awards between these levels;
(b) the Group achieving a TSR over three years in excess of the
mean TSR delivered by a peer group of comparable companies; (c)
personal adherence to corporate values and risk policy; and (d)
specific business unit EBITDA, or other personal targets and
goals.
MIP awards have either nominal or minimal exercise price payable
in order to acquire shares pursuant to options. MIP awards have
either 3- or 4-year vesting periods from the date of grant and can
be equity settled only.
The Employee Incentive Plan
In addition to the MIP, the Board has previously put in place a
medium-term employee incentive plan ("EIP"). Under the EIP, a broad
base of the Group's employees has been granted share options or
share awards over a small number of shares. The EIP is structured
as is most appropriate under the local tax, legal and regulatory
rules in the key jurisdictions and therefore varies between those
jurisdictions. A limited number of EIP awards were made in the
year.
During the year ended 31 March 2022, a total of 2,959,429 share
option and award grants were made to employees and senior
management (FY 21: 3,376,744). The weighted average of the
estimated fair values of these options awarded in the year is
GBP2.68 per share (FY 21: GBP1.68).
On 12 August 2021, 13 December 2021, 18 December 2021 and 3
March 2022, certain MIP awards vested, following satisfaction of
performance conditions. The awards' performance conditions relating
to EPS growth and total shareholder return exceeding a basket of
comparable companies over 3 years to the vesting date were met in
full and the relevant local country or divisional budgetary
performance conditions were met in full or part, dependent on Alpha
location. As a result, 529,419 nominal cost awards over ordinary
shares of 0.075 pence per share vested and 195,850 share awards
were forfeited under performance conditions or as a result of
leavers before vesting.
All of these vested awards were exercised, with an additional
343,750 share options that vested in FY 21 also exercised on 2 July
2021. Of these total 873,169 share options exercised, the Company
settled 815,531 through the issuance of ordinary shares, with 3,505
additional share options retained for net tax settlement. A further
54,133 share options were settled through the issuance of existing
shares from the EBT. The weighted average share price at the date
of these exercises was GBP3.90. The remaining vested award holders
have a further 6-year period in which to exercise their vested
awards.
Details of the share option awards made are as follows:
FY 22
Number of
share options
Outstanding at the beginning of the year 7,613,969
Granted during the year 2,959,429
Exercised during the year (873,169)
Forfeited during the year (195,850)
Expired during the year -
Outstanding at the year end 9,504,379
Exercisable at the year end 194,168
-------------------
The weighted average exercise price for all options outstanding
in both the current and prior years was nominal. The options
outstanding at 31 March 2022 had a weighted average remaining
contractual life of 2 years.
During the year ended 31 March 2022, options were granted on 6
July 2021 and 20 July 2021 to employees and certain senior
management.
MIP share options with an external market condition were valued
at award using the Monte Carlo option pricing model. The model
simulates a variety of possible results, across 10,000 iterations
for each of the options, by substituting a range of values for any
factor that has inherent uncertainty over a number of scenarios
using a different set of random values from the probability
functions. The model takes any market-based performance conditions
into account and adjusts the fair value of the options based on the
likelihood of meeting the stated vesting conditions.
MIP share options without external market conditions and EIP
share options were valued at award using a Black-Scholes model
using the following inputs:
FY 22
Weighted average share price at GBP3.53
grant date
Exercise price nominal
Volatility 17.80%
Weighted average vesting period 4.00
Risk free rate 0.12%
Expected dividend yield 3.00%
Expected volatility was determined by calculating the historic
volatility of the market in which the Group operates. The expected
expense calculated in the model has been adjusted, based on
management's best estimate, for the effects of non market-based
performance conditions and employee attrition.
The Group recognised a total expense of GBP6.2m (FY 21: GBP2.5m)
in the current year, comprising GBP4.1m (FY 21: GBP1.7m) in
relation to equity settled share-based payments, and GBP2.1m (FY
21: GBP0.8m) relating to relevant social security taxes. Given the
estimation, were the future conditions for all outstanding share
options assumed to be met at the end of the reporting period, the
charge in the year would increase by GBP1.7m.
The carrying value of amounts relating to social security tax on
share options as at 31 March 2022 is GBP3.0m (FY 21: GBP1.3m), with
GBP2.1m recognised in the P&L and payments amounting to GBP0.7m
made in the year. Assumptions associated with the calculation of
the social security tax liability due on vesting of share options
include an estimation of the forward-looking share price at the
vesting date based on applicable analyst research and applicable
future tax rates. For these purposes, share price is updated at
each reporting period to reflect historic levels, and is assumed to
grow in line with the estimated future performance of the business.
If the estimated future share price growth assumption were to
double, the social security costs in the year could increase by
GBP0.3m. Were the share price to remain flat the charge would
reduce by GBP0.4m
13. Events after the reporting period
Purchase of investment management enterprise technology
solutions practice
On 8 April 2022, the Group reached an agreement to onboard the
investment management enterprise technology solutions practice of
CohnReznick LLP, a leading advisory, assurance and tax firm
primarily based in the United States for GBP0.3m.
Based on initial assessment, this is considered to be an asset
purchase, not the acquisition of a business in line with IFRS 3
para B5-B12D.
- END -
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