TIDMAFM
RNS Number : 2828H
Alpha Fin Markets Consulting plc
23 November 2022
23 November 2022
Alpha Financial Markets Consulting plc
("Alpha", the "Company" or the "Group")
INTERIM RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2022
Double-digit organic growth across all regions
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 unaudited results for the six months ended 30
September 2022 ("H1 23").
Financial Highlights(1)
-- Revenue increased by 57.3% to GBP107.6m (H1 22: GBP68.4m) and
net fee income(2) increased by 56.5% to GBP107.0m (H1 22: GBP68.4m)
or 48.4%, on a constant currency basis. On an organic(3) basis, net
fee income grew by 45.3%
-- Gross profit increased by 45.3% to GBP38.4m (H1 22: GBP26.5m)
at 35.9% margin(2) (H1 22: 38.7%), reflecting utilisation
normalising to target levels, alongside continued investment in our
growing team
-- Adjusted(2) EBITDA increased by 45.6% to GBP22.5m (H1 22:
GBP15.4m), with 21.0% margin largely consistent with FY 22's 21.5%
(H1 22: 22.6%)
-- Adjusted profit before tax increased by 47.2% to GBP21.3m (H1 22: GBP14.4m)
-- Adjusted earnings per share increased by 43.0% to 14.09p (H1 22: 9.85p)
-- On a statutory basis, profit before tax was GBP14.2m (H1 22:
GBP4.2m) and basic earnings per share increased to 9.10p (H1 22:
0.87p) after deducting adjusting items
-- Adjusted cash generated from operating activities was GBP4.2m
(H1 22: GBP8.5m) with specific H1 cash outflows, alongside good
underlying working capital management
-- Robust balance sheet with a net cash balance of GBP40.3m as
at 30 September 2022 (31 March 2022: GBP63.5m), providing
flexibility for Alpha's continued growth strategy
-- Interim dividend of 3.70p per share declared (H1 22: 2.90p),
reflecting the Board's confidence in the business
6 months 6 months
to to Change
30 Sep 2022 30 Sep 2021
------------------------ ------------- ------------- --------
Revenue GBP107.6m GBP68.4m 57.3%
Gross profit GBP38.4m GBP26.5m 45.3%
Adjusted EBITDA GBP22.5m GBP15.4m 45.6%
Adjusted profit before
tax GBP21.3m GBP14.4m 47.2%
Profit before tax GBP14.2m GBP4.2m 235.6%
Adjusted EPS 14.09p 9.85p 43.0%
Basic EPS 9.10p 0.87p 946.0%
Interim dividend
per share 3.70p 2.90p 27.6%
------------------------ ------------- ------------- --------
Operating Highlights
-- Continued strong growth in all regions, with double-digit
revenue growth in all our key territories
-- Consultant(4) headcount has increased by 40.4% to 921 (H1 22:
656); ensuring our consultant base continues to keep pace with
client demand
-- Director(5) headcount has increased by nine in the period to
97 as Alpha continues to attract experienced top talent
globally
-- Successfully expanding the Lionpoint footprint, with
Lionpoint consultant numbers having more than doubled since May
2021 acquisition to now over 260 globally
-- North America is our biggest contributor to net fee income,
representing 41.4% of net fee income and 36.9% of total
consultants; this is in line with our strategic objective to grow
in the largest addressable market
-- Insurance consulting continues to see strong client demand,
with the recently launched General Insurance and Specialty segments
progressing well. We have appointed a Global Head of Insurance
Consulting as this business continues to offer exciting growth
potential
-- Number of client relationships increased to 787 (H1 22: 662);
with continued impressive client wins and strong client retention
due to Alpha's sector expertise, global footprint and holistic
end-to-end offering
Outlook
-- We remain mindful of the uncertainties presented by the
global macroeconomic and geopolitical picture, including the
possible effects of the war in Ukraine as well as monetary
tightening in the face of inflation
-- Against this backdrop, Alpha has performed extremely well and
carries good momentum into the second half
-- In line with our strategic objectives, we will continue to
grow the business through deepening of the service offering and
through geographic expansion
-- The industry tailwinds remain firmly intact; the Group
continues to experience strong demand and a healthy pipeline of
business-critical projects across a range of timeframes,
underpinning our confidence in the outlook for H2 and beyond
-- Accordingly, the Board now expects Alpha to deliver full-year
results ahead of current market expectations
Commenting on the results, Euan Fraser, Global Chief Executive
Officer said:
"Alpha has just passed the five-year anniversary of being a
listed company. Since AIM admission, we have more than tripled the
number of consultants, operate from almost twice the number of
offices across the globe and have almost quadrupled our profits. It
is a huge achievement that is down to our growing team of global
consultants who continue to deliver exceptional service to our
clients.
In the first half, we have delivered double-digit organic growth
in all our territories and, in line with our strategic objectives,
North America has become the largest contributor to the Group's
revenue. We are acutely mindful of the macroeconomic and
geopolitical environment, but we go into the second half of our
year with confidence that we have a business that addresses our
clients' evolving requirements."
Enquiries:
Alpha Financial Markets Consulting plc +44 (0)20 7796 9300
Euan Fraser (Global Chief Executive Officer)
John Paton (Chief Financial Officer)
Investec Bank plc - Nominated Adviser and
Joint Corporate Broker +44 (0)20 7597 4000
Patrick Robb
James Rudd
Harry Hargreaves
Berenberg - Joint Corporate Broker +44 (0)20 3207 7800
Chris Bowman
Toby Flaux
Alix Mecklenburg-Solodkoff
Camarco - Financial PR +44 (0)20 3757 4980
Ed Gascoigne-Pees
Phoebe Pugh
Prism Cosec - Company Secretary
Sally Chandler +44 (0)7407 733 518
Analyst Presentation:
A results presentation will take place at 9:30 a.m. today on
Zoom. Those wishing to attend should contact AlphaFMC@camarco.co.uk
.
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 Alternative Investment
Market 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 80% of the
world's top 50 asset managers b y AUM(6) , along with a wide range
of other buy-side firms. It has the largest dedicated team in the
industry, with over 900 consultants globally, operating from 16
client-facing offices(7) spanning the UK, North America, Europe and
APAC.
(1) All financial and operating highlights relate to the period
ended 30 September 2022 ("H1 23") and the comparative period is 30
September 2021 ("H1 22") unless otherwise specified
(2) The Group uses alternative performance measures ("APMs") to
provide stakeholders further metrics to aid understanding of the
underlying trading performance of the Group. Margins are expressed
as a percentage of net fee income. Refer to note 3 for further
details
(3) Organic net fee income growth excludes Lionpoint's current
period net fee income contribution prior to the acquisition
anniversary. Refer to note 3 for further details
(4) "Consultants" and "headcount" refer to fee-earning
consultants at the year end: employed consultants plus utilised
contractors in client-facing roles
(5) "Directors" refers to fee-generating directors at the year
end. All director increases are presented as net
(6) "World's top 20" and "world's top 50" refer to Investment
& Pensions Europe, "Top 500 Asset Managers 2022"
(7) Group uses "office" to refer to office location; that is, if
there are multiple offices in one location, they will be counted as
one office
INTERIM REPORT
Alpha has just passed its five-year anniversary of being quoted
on the Alternative Investment Market ("AIM") of the London Stock
Exchange. In Alpha's first report as a listed company, we had 274
consultants across nine major cities, reporting a revenue of
GBP28.7m and adjusted EBITDA of GBP5.8m (H1 18). Over the last five
years we have significantly grown the business, now with a total of
921 consultants, based across 16 offices, reporting GBP107.6m
revenue and GBP22.5m adjusted EBITDA in H1 23. It has been a
delight and a privilege to have been a part of this extraordinary
journey, and to have successfully grown Alpha's industry-leading,
high-quality teams to consistently deliver to our expanding client
base globally.
Client demand for Alpha's services globally has meant that the
Group has continued to deliver impressive double-digit revenue
growth for the first six months of this financial year, compared to
the first half of the prior year, both overall and on an organic
basis. Alpha's trading momentum from FY 22 has continued positively
into H1 23, maintaining the Group's healthy pipeline of client
opportunities.
The global macroeconomic and geopolitical picture, which
includes the effects of the war in Ukraine as well as monetary
tightening in the face of inflation, continues to be extremely
uncertain. The Board and the entire leadership team remains mindful
of the potential risks and uncertainties ahead. In this context,
the Board is particularly pleased that Alpha has continued with the
strong momentum experienced at the end of FY 22 and to have seen an
increase in client demand in all geographical regions in the
half.
Half Year Review
While cognisant of the macro environment, we have continued to
make excellent headway on a number of our key strategic areas
during the first half. Most notable is the exciting growth we
continue to achieve in North America, both organically and buoyed
by our transformational acquisition of Lionpoint, which was
completed in May 2021. The Group continues to hire and invest in
Lionpoint to match the ongoing demand for our services in the
alternative investments space, more than doubling the number of
consultants in Lionpoint since acquisition. Importantly, Alpha has
experienced double-digit revenue growth in all our key territories.
The Group has also made further progress in building out the
insurance consulting proposition, which Alpha continues to view as
another exciting area for significant further growth.
The financial performance of the Group has been extremely
encouraging for the first half of the financial year, with strong
double-digit increases in revenues and profits. Alpha has also
successfully continued to deliver excellent sales wins across the
Group. Net fee income across the Group is up 56.5% to GBP107.0m (H1
22: GBP68.4m), continuing its growth trajectory from the second
half of last year. On an organic basis, net fee income grew by
45.3%.
Adjusted EBITDA increased by 45.6% to GBP22.5m (H1 22: GBP15.4m)
and adjusted profit before tax increased by 47.2% to GBP21.3m (H1
22: GBP14.4m). This excellent progress has been achieved while
adjusted EBITDA margin has been maintained at 21.0%, a similar
level to FY 22's 21.5% (H1 22: 22.6%). As expected, we have managed
to balance cost increases and gently reducing our consultant
utilisation levels towards a more normalised level, while
progressing consultant day rates in a strong market demand
environment. On a statutory basis, operating profit was GBP15.8m
(H1 22: GBP5.5m) and profit before tax was GBP14.2m (H1 22:
GBP4.2m), after charging adjusting items, which were comparatively
lower in the period. Adjusted earnings per share were 14.09p (H1
22: 9.85p) and basic earnings per share were 9.10p (H1 22:
0.87p).
Operational and Geographical Review
We are well on the way to achieving our medium-term goal of
doubling the size of the Alpha Group over the four-year period to
November 2024. The structural drivers for our sector continue to
create significant tailwinds for Alpha: fee compression and the
drive for efficiency, growth in AUM, regulatory change and the
growing focus on ESG and responsible investment. Just as the growth
drivers remain unchanged, so our growth objectives remain
unchanged: to extend the depth and range of our services and to
increase Alpha's footprint in all markets, with a model that serves
both to address current client needs and promote new client
demand.
In terms of our practices and service proposition to clients, we
have continued to deepen and extend our offering across many of our
verticals. We have promoted people from within and have also made
incremental hires, including growing our director team by nine in
the past six months. In addition, we continue to invest in
broadening our service proposition across the Group. For example,
we have launched an Enterprise Transformation practice in the UK,
which recognises a long-term capability and focus on helping asset
and wealth management clients address issues and challenges across
their end-to-end businesses. This includes reorganising operating
models, shaping cost reduction programmes and ensuring change
portfolios are aligned to strategic priorities.
The Group's insurance consulting offering continues to build on
its rapid expansion last year. This business area more than doubled
its headcount last year in response to strong client demand and we
are delighted to have added another director to the team since the
financial year end. Our recently launched General Insurance and
Specialty segments in the UK are progressing well; we are engaging
with a range of new clients and expanding the teams of dedicated
experts.
We see significant market potential in the insurance industry
and, ultimately, believe that our insurance offerings could grow to
a similar size as Alpha's asset and wealth management consulting
("AWM") business in the medium to long term. Given the strength of
this proposition, and to support its further growth and expansion,
we have appointed a Global Head of Insurance Consulting from within
our Group.
Lionpoint continues to increase its footprint, particularly in
North America, and we still see considerable scope for growth as
the alternative investments market continues to attract AUM across
the private equity, private credit, infrastructure, real estate and
fund of funds segments. Additionally, the structural growth drivers
in the asset management, wealth management and insurance industries
- cost pressures, regulation, growing AUM as well as changing
client and societal expectations - are also prevalent in the
alternatives space and are driving client demand. The Lionpoint
team has added a further 66 consultants globally during the period,
more than doubling the total consultant number in Lionpoint to over
260, compared to 123 consultants on acquisition.
The integration of Lionpoint has been a success; this is
particularly evident in the growing number of cross-selling
opportunities and collaboration on client projects across the
Group. Lionpoint employees are currently working with colleagues in
the wider Group on a range of technology implementation and
operating model projects, a number of which are large
transformation programmes in the growing North America market.
Through this combination of specialist consultants working across
all asset classes, we are delighted to be able to offer an
end-to-end suite of client solutions on a global scale.
During the period, the Group has continued to win business with
both new and existing clients across all locations. As a Group,
including Lionpoint, we have now worked with 787 clients (H1 22:
662). The Board is pleased with the range and growth of Alpha's
client base across all locations and the Group's continued focus on
ensuring it has the ability to deliver for clients across all
verticals. We are very well placed to add value to clients in their
most demanding of projects and increase our market penetration.
Geographic performance in the period can be summarised as
follows:
6 months 6 months to
to 30 Sep 2021 Change
30 Sep 2022
---------------- -------------- ------------- --------
Net Fee Income
UK GBP39.8m GBP32.5m 22.7%
North America GBP44.3m GBP18.8m 135.4%
Europe & APAC GBP22.9m GBP17.1m 33.7%
---------------- -------------- ------------- --------
Total GBP107.0m GBP68.4m 56.5%
---------------- -------------- ------------- --------
As at As at
30 Sep 30 Sep 2021 Change
2022
---------------------- -------- ------------ --------
Consultant Headcount
UK 350 266 31.6%
North America 340 204 66.7%
Europe & APAC 231 186 24.2%
---------------------- -------- ------------ --------
Period-end totals 921 656 40.4%
---------------------- -------- ------------ --------
All our geographic regions delivered excellent growth over the
six-month period, driven by client demand as a result of the
ongoing structural catalysts that we continue to experience in all
our market segments. Continuing the FY 22 momentum, North America
delivered the strongest growth in net fee income for the Group,
producing growth rates of 135.4% overall, including Lionpoint, and
107.0% on an organic basis. In addition, the Group has continued to
invest in this region and we achieved 66.7% headcount growth
compared to the comparable period. This means that, for the first
time, North America is our largest contributor to net fee income.
In the period, we have also gained 41 new clients in North America,
many of which are from the world's top asset managers. This
reflects the considerable size of the North America market, which
is around eight times(8) greater than the UK, and we expect to
continue growing as we win market share from our competitors due to
our industry knowledge, deep expertise and highly talented
team.
The UK delivered net fee income growth of 22.7% on the
comparative period, with this growth being almost entirely organic.
We retain our market-leading position as consultant to the asset
management, wealth management and insurance industries and are
proud to be supporting some of the highest profile projects in the
UK marketplace. We also continue to support our growth in the UK by
hiring consultants and we have increased our headcount in the
region by 31.6% to 350. This includes our exciting UK insurance
business, which continues to progress well.
Europe & APAC also delivered a robust performance in the
period, with net fee income increasing by 33.7% overall, with the
majority being organic. Growth continues to be evenly distributed
across the region's offices. Our best-in-class service offering
continues to attract new clients in Europe & APAC, with 16 new
clients added in the period. We are also delighted that Alpha
Europe has been selected as the #1 consulting firm in France by
Décideurs Magazine in both the categories of "asset management" and
"wealth management" for the fourth consecutive year.
(8) BCG, "Global Asset Management 2021: The $100 Trillion
Machine" (July 2021)
Our People
Our team of talented professionals are core to delivering such a
strong set of results. People are the foundation of our business;
in having experts in every area of consulting for the asset
management, wealth management and insurance industries, we are able
to deliver exceptional added value for our clients, engendering
loyalty and repeat business. We recognise the importance of
retaining and nurturing this talent and continue to invest in the
development of our people to ensure they flourish at Alpha, in turn
driving our business success.
Retaining and developing our local and global director teams
remains an important factor in providing the right level of support
for our consultants, instilling our values and ensuring delivery
excellence across all client engagements. We continue to expand our
director teams across all locations through a combination of
promotions and new experienced hires. Director headcount grew by
nine, including four director additions in North America.
We were delighted to broaden and deepen our global consulting
leadership structures by including four regional AWM management
committees to work alongside the heads of region. This marks an
important milestone for Alpha's growing asset and wealth management
business - with the updated leadership structure in place to
support, enable and advance the next phases of growth across the
UK, North America, Europe & APAC. Organisationally and
culturally, it aligns to our aims to ensuring a broad range of
progression paths at Alpha; and in creating the management
committee structures, we have been able to ensure long-term access
to a wide pool of Alpha talent for leadership roles.
Alpha's goal is to foster a diverse and inclusive culture where
employees feel valued and appreciated. The addition of a full-time
Diversity & Inclusion Manager, who joined the Group at the
beginning of the 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. Building on this, we will continue to
consider how our governance and processes could be modified to
reflect progress on our culture, organisation, diversity, equality
and inclusion aims.
It has been a challenging few years with the pandemic and global
economic uncertainties but, throughout these difficult times, the
commitment and service that our people have shown to our clients
have been exemplary and never faltered. On behalf of the Board, we
would like to thank our employees for the hard work and dedication
during the period, which they continue to demonstrate on a daily
basis and without which the success of the Group would not be what
it is today.
Growth Strategy
Alpha continues to strive towards being recognised as the
leading consultancy to the asset management, wealth management and
insurance industries globally and in all the markets in which it
operates. In progressing this strategic aim, we have achieved major
advances in the three priority areas of North America, insurance
consulting and making acquisitions.
Our footprint in North America has doubled in terms of net fee
income, helped by the acquisition of Lionpoint, which complements
organic growth across all geographic regions. Lionpoint continues
to grow strongly; we have now managed to double the business's
headcount since acquiring it in May 2021.
Similarly, our insurance consulting offering has expanded,
adding 14 new consultants in H1 23. This, alongside strong organic
growth in UK and Europe & APAC, places the Group in a good
position as it wins business with both new and existing clients and
makes excellent progress towards its medium-term aim to double in
size.
Acquisitions
Acquisitions remain a core part of the Group's strategy and we
have a track record of successfully identifying suitable
opportunities in the market that can accelerate the Group's growth
and development and which help us to further service our clients'
needs.
The Group recognises that a broader range of knowledge,
credentials and capabilities can increase cross-selling potential
and bring access to new areas of the market. The integrations of
Axxsys, Obsidian and, more recently, Lionpoint have successfully
extended the service offering and added further, highly
complementary expertise to the Group. Alpha is delighted that its
acquisitions have unlocked many new growth opportunities, now
spanning both public and private markets.
We continue to review acquisition opportunities to complement
and grow the Group's service offering to deliver client and
shareholder value.
Governance and the Board
The Alpha Board recognises its duties and responsibilities in
delivering effective corporate culture and is committed to adhering
to the core values of strong governance, integrity and business
ethics. These are key to reducing risk and creating long-term
success for the business, generating sustainable, long-term value
for shareholders.
We continuously assess and monitor the regulatory landscape and
regard ESG and sustainability as important elements of Alpha's
governance and approach to risk management. We recognise that we
have an important role in overseeing and progressing these ESG
efforts, meeting regulatory requirements and stakeholder
expectations, and have established an ESG Committee of the Board at
the beginning of the second half, as was announced in the FY 22
results.
A responsible business function has now been established within
Alpha's business operations to oversee the development of our
governance, best practice and disclosure frameworks and to work in
conjunction with the ESG Committee in relation to these priorities.
Overseen by the Head of Risk, the responsible business team
includes Alpha's Global Diversity & Inclusion Manager and
Global Sustainability Manager.
Internally, we continue to increase our focus on issues linked
to sustainability and prepare our reporting on
sustainability-linked matters, such as by preparing the Group to
start reporting under the framework set out by the Taskforce on
Climate-Related Financial Disclosures ("TCFD") and by developing
our own roadmap to net zero greenhouse gas emissions. Our recently
appointed Global Sustainability Manager within the business
operations team is overseeing the development of this work and the
definition of Alpha's emissions reduction targets.
Financial Performance Review
6 months 6 months to
to 30 Sep 2021 Change
30 Sep 2022
--------------------------- ------------- ------------ ----------
Revenue GBP107.6m GBP68.4m 57.3%
Net fee income GBP107.0m GBP68.4m 56.5%
Gross profit GBP38.4m GBP26.5m 45.3%
--------------------------- ------------- ------------ ----------
Operating profit GBP15.8m GBP5.5m 188.3%
--------------------------- ------------- ------------ ----------
Adjusted EBITDA GBP22.5m GBP15.4m 45.6%
--------------------------- ------------- ------------ ----------
Adjusted EBITDA margin 21.0% 22.6% (160 bps)
--------------------------- ------------- ------------ ----------
Adjusted profit before
tax GBP21.3m GBP14.4m 47.2%
Profit before tax GBP14.2m GBP4.2m 235.6%
Adjusted earnings per
share 14.09p 9.85p 43.0%
Adjusted diluted earnings
per share 13.23p 9.34p 41.6%
Basic earnings per share 9.10p 0.87p 946.0%
--------------------------- ------------- ------------ ----------
Alpha enjoyed strong first half growth, with net fee income of
GBP107.0m, up by 56.5% compared to the first half of the last
financial year (H1 22: GBP68.4m). This includes 45.3% organic
growth, with the remainder being the inorganic contribution from
the acquisition of Lionpoint in the prior period. Revenue also grew
57.3%, including increased rechargeable expenses, compared to the
prior period. Across the Group's regions, revenue and net fee
income grew slightly below average consultant headcount growth,
with average consultant utilisation returning to target levels as
planned, alongside improving consultant day rates overall. Alpha's
core established practices continue to perform well, with newer
areas also progressing, such as Digital and ESG & Responsible
Investments. Lionpoint also contributed strongly in the first
half.
Currency translation had a noticeable effect on net fee income
and profits during the first half of the financial year. In the
period, British pound sterling averaged $1.23 (H1 22: $1.39) and
EUR1.18 (H1 22: EUR1.17), which, with other similar currency
movements, resulted in a favourable net currency effect on net fee
income of GBP5.5m. On a constant currency basis, Group net fee
income growth would be 48.4% overall. Similarly, North America net
fee income growth would be 108.3% and Europe & APAC would
report 31.3% net fee income growth.
Group gross profit was GBP38.4m, increasing by GBP11.9m or 45.3%
over the prior period. Gross profit margin was 35.9% (H1 22:
38.7%). This reflects average consultant utilisation normalising to
target levels, alongside continued investment in our growing team
while maintaining a competitive remuneration package, partly offset
by improved consultant day rates. Consultant day rates have
improved in H1 23 and we will continue to seek further rate
progress in the second half.
North America delivered the strongest regional growth, ending
the half as the largest geographic region in the Group by net fee
income, with growth of 135.4% overall and 107.0% on an organic
basis. The recently acquired Lionpoint business performed well in
the first half and contributed significantly to North America net
fee income this year. The North America business overall continued
to expand its domestic client base, as well as successfully
capturing client demand through a number of cross-selling
opportunities with its existing client base. The strongly growing
consultant team was well deployed, while also improving consultant
day rates.
Europe & APAC also delivered another period of strong
growth. The region grew net fee income by 33.7% on the comparative
period, and on an organic basis the region reported 28.1% growth.
This growth was delivered across the region with the Europe team
well deployed, complemented by further good progress growing the
APAC business.
The UK business grew net fee income 22.7% overall and 18.6%
organically. This strong UK organic performance benefitted from
solid client demand across the full range of Alpha practices,
including substantial contributions from our established
Investments, Distribution and Operations teams. Within the UK
results, Alpha's data solutions business, Aiviq, including
Obsidian, performed consistently with the comparative period,
although it maintains a good pipeline and outlook.
The Lionpoint business performed extremely well in the period
and has continued to enjoy strong client demand, adding 118 new
clients and 141 consultants globally since acquisition.
Overall, gross profit margins reflect the planned easing of
utilisation to target levels, continued investment in our
consultants while maintaining competitive remuneration packages,
partly offset by improving consultant day rates across all regions.
North America maintained a consistent gross profit margin as the
North America team grew substantially and successfully normalised
average utilisation back to target levels, while balancing costs
and consultant rates progress in the period. The UK business grew
gross profit well and 40.4% gross margin similarly reflects
managing utilisation levels and further rates progress ongoing.
Europe & APAC also experienced good gross profit growth, with
margin reflecting utilisation and continued investment in the
business, partially offset by consultant day rate progression.
Adjusted administration expenses, as detailed in note 3,
increased by GBP5.0m to GBP16.0m (H1 22: GBP11.0m) in the first six
months. Discretionary spend continues to return to normalised
levels following COVID-19, for example across staff and client
entertainment and travel spend, and in recruitment spend as we grow
our consulting teams globally. We also continued to invest in the
Group's central team through the year in areas such as finance, HR,
legal, risk and responsible business.
Including the adjusting items, which fell comparatively,
administrative expenses increased to GBP22.7m (H1 22: GBP21.0m) on
a statutory basis. The adjusting items, set out in note 3, reduced
in the period to GBP5.7m (H1 22: GBP9.2m), reflecting lower
acquisition costs and earn-out and deferred consideration charges,
partially offset by higher intangible asset amortisation and
share-based payments charges.
Acquisition costs fell to nil in the period (H1 22: GBP0.6m)
with the comparative including Lionpoint-related acquisition
transaction costs. The acquired intangibles amortisation charge
increased against the comparative period, reflecting a full period
charge. In the first half, the Group recognised an earn-out and
deferred consideration credit of GBP0.3m (H1 22: charge of
GBP2.5m), reflecting a fair value reduction in the liability held
for Obsidian as a lower, mutually-agreed position was reached with
the original vendors, part of which was paid in the period. Further
detail on the earn-out and deferred consideration charges are set
out in note 8.
The share-based payments charge continues to develop since
Alpha's share incentive plans were established at AIM admission,
with Alpha's share price growth and new awards, alongside
relatively limited award vests to date being key factors in the
higher charge for the period. Further detail of the share-based
payments charge is set out in notes 3 and 13.
Adjusted EBITDA grew 45.6% to GBP22.5m (H1 22: GBP15.4m) and
adjusted EBITDA margin was 21.0% (H1 22: 22.6%), reflecting
increased gross profit and higher administration expenses.
Operating profit rose 188.3% to GBP15.8m (H1 22: GBP5.5m) after
charging reduced adjusting expenses. Further detail of these
adjusting items is set out in note 3.
Finance expenses rose in the first half overall, primarily from
increased non-underlying finance expenses relating to acquisition
consideration discount unwinding, as set out in note 4. Adjusted
profit before tax rose by 47.2% to GBP21.3m (H1 22: GBP14.4m) after
charging depreciation, amortisation of capitalised development
costs and underlying finance costs. Statutory pre-tax profit was
GBP14.2m (H1 22: GBP4.2m) after also charging adjusting expenses
and non-underlying finance expenses.
Taxation charges for the period were GBP3.9m (H1 22: GBP3.3m),
reflecting the growth in taxable profits and the blended tax rate
of the increasingly international jurisdictions in which the Group
operates. Further detail on the tax charge is set out in note
5.
Adjusted earnings per share ("EPS") improved by 43.0% to 14.09p
per share (H1 22: 9.85p) and adjusted diluted EPS increased by
41.6% to 13.23p (H1 22: 9.34p). After including the adjusting
items, basic earnings per share increased to 9.10p (H1 22: 0.87p),
while diluted EPS increased to 8.55p (H1 22: 0.83p), reflecting the
increase in the share options awards outstanding.
Net assets at 30 September 2022 totalled GBP147.9m (31 March
2022: GBP132.7m). This increase principally arises from foreign
exchange gains in the period on the goodwill and intangibles
recognised on the acquisition of Lionpoint. The Group continues to
maintain a strong financial position.
Net cash flow generated from operations was GBP2.2m (H1 22:
GBP6.0m). Adjusted cash generated from operating activities was
GBP4.2m (H1 22: GBP8.5m). Operating cash generation was affected in
the half by the payment of last year's increased profit share,
given the strong FY 22 performance, as well as additional North
America tax payments as that business grows and moves to quarterly
payments in that region. While debtor days remain good and similar
to last year, accrued income increased at 30 September 2022, simply
reflecting the timing of project approvals. We continue to expect
good adjusted cash conversion for the full year, while reflecting
these specific cash outflows.
The Group's net cash position was GBP40.3m as at 30 September
2022 (31 March 2022: GBP63.5m), after a further GBP22.5m of
deferred and contingent acquisition payments, including GBP1.8m of
employment-linked amounts, and the payment of the FY 22 final
dividend in the half. During the period, the Group provided GBP1.1m
funding to Alpha's employee benefit trust ("EBT") to purchase
254,817 shares at the prevailing market share price, to hold for
the 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. Alpha also drew
GBP7.5m temporarily on its revolving credit facility ("RCF"), to
assist with managing currency requirements in the period.
The Board is pleased to declare today an interim dividend for FY
23 of 3.70p per share (H1 22: 2.90p), which will be paid on 21
December 2022 to shareholders on the register at the close of
business 9 December 2022.
Risk Management
The Board is pleased with the Group's progress in the first
half, while remaining cognisant of the potential risks and
uncertainties. These risks include political and economic
uncertainty, as well as market volatility. The Board does not
consider that these principal risks and uncertainties differ from
those at 31 March 2022 as detailed on pp 50-54 of the Annual Report
& Accounts 2022. These risks relate to the following areas:
people and resourcing; quality of service; data security;
acquisition risk; market strategy; strategic objectives;
macroeconomic conditions; political/regulatory environment;
competitors; client concentration; skills and subject matter
expertise; utilisation rates; and cash collection.
The Directors(9) and the senior management team are closely
monitoring the situation in Ukraine as it evolves and continues.
Alpha's operational footprint does not extend to either Russia or
Ukraine, and we do not service clients based in those countries.
The principal risk to Alpha therefore remains from a macroeconomic
perspective, and the possible market impacts.
We are aware of the risk of rising 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 Alpha's
services.
(9) "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
Outlook
We are pleased to be reporting on a strong performance in H1 23,
whilst being mindful of the macroeconomic and wider geopolitical
uncertainty.
There is good momentum within the Group globally and we remain
focussed on identifying and progressing ways to grow the business
both organically and inorganically.
The structural drivers in the asset management, wealth
management and insurance industries, which will drive ongoing
demand for Alpha's services, remain prevalent. We are confident
that with the quality of our people, which we continue to
reinforce, our excellent market reputation, and business
opportunities to extend the service offering, we are in the best
position to withstand further challenges ahead.
It is unclear how long the current macro uncertainty will
prevail and how precisely it may affect local and global markets.
However, the structural drivers remain firmly in place and Alpha
continues to experience strong demand; the Board therefore looks
forward with confidence in the outlook for H2 and beyond. The Group
now enters the second half well positioned, with a healthy pipeline
of new business opportunities and having made excellent progress on
its objectives. The performance of the business demonstrates the
strength of our business model and growth strategy, which we
continue to progress. Consequently, we expect to deliver full-year
results ahead of current market expectations.
Ken Fry Euan Fraser
Chairman Global Chief Executive Officer
Responsibility Statement
The Directors confirm that, to the best of their knowledge,
these interim condensed consolidated financial statements have been
prepared in accordance with UK-adopted International Accounting
Standard (IAS) 34 Interim Financial Reporting. The Interim Report
includes a fair review of the information required by:
-- DTR 4.2.7R of the Disclosure Guidance and Transparency Rules
(DTR), being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the interim condensed consolidated financial statements; and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
-- DTR 4.2.8R of the DTR, being related party transactions that
have taken place in the first six months of the current financial
year and that have materially affected the financial position or
the performance of the Group during that period; and any changes in
the related party transactions described in the last Annual Report
that could do so.
This Interim Report contains certain forward-looking statements
with respect to the Group's current targets, expectations and
projections about future performance, anticipated events or trends
and other matters that are not historical facts. These
forward-looking statements, which sometimes use words such as
"aim", "anticipate", "believe", "intend", "plan", "estimate",
"expect" and words of similar meaning, include all matters that are
not historical facts and reflect the Directors' beliefs and
expectations and involve a number of risks, uncertainties and
assumptions that could cause actual results and performance to
differ materially from any expected future results or performance
expressed or implied by the forward-looking statement.
Ken Fry Euan Fraser
Chairman Global Chief Executive Officer
Interim condensed consolidated statement of comprehensive
income
For the six months ended 30 September 2022
Unaudited Unaudited
six months ended six months ended
30 Sep 2022 30 Sep 2021
Note GBP'000 GBP'000
Continuing operations
Revenue 2 107,599 68,421
Rechargeable expenses 2 (583) (31)
Net fee income 2 107,016 68,390
Cost of sales 2 (68,573) (41,930)
Gross profit 2 38,443 26,460
Administration expenses (22,679) (20,992)
Operating profit 15,764 5,468
Depreciation 898 497
Amortisation of capitalised development costs 151 301
Adjusting items 3 5,668 9,171
Adjusted EBITDA 3 22,481 15,437
Finance income 4 65 1
Finance expense 4 (1,630) (1,238)
Profit before tax 14,199 4,231
Taxation 5 (3,922) (3,278)
Profit for the period 10,277 953
Exchange differences on translation of foreign operations 9,963 2,100
Total comprehensive income for the period 20,240 3,053
Basic earnings per ordinary share (p) 6 9.10 0.87
Diluted earnings per ordinary share (p) 6 8.55 0.83
Interim condensed consolidated statement of financial
position
As at 30 September 2022
Unaudited Unaudited Audited
as at as at as at
30 Sep 2022 30 Sep 2021 31 Mar 2022
Note GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 7 107,310 100,307 100,991
Intangible fixed assets 7 30,936 33,661 31,333
Property, plant and equipment 1,109 576 806
Right-of-use asset 1,904 2,032 2,304
Deferred tax asset 1,088 - 671
Capitalised contract fulfilment costs 119 168 131
Total non-current assets 142,466 136,744 136,236
Current assets
Trade and other receivables 9 41,695 27,644 29,569
Cash and cash equivalents 47,764 40,032 63,516
Total current assets 89,459 67,676 93,085
Current liabilities
Trade and other payables 10 (55,709) (47,579) (56,671)
Provisions (3,433) - (3,277)
Corporation tax (3,226) (2,307) (4,788)
Lease liabilities (1,072) (745) (1,134)
Interest bearing loans and borrowings (7,477) - -
Total current liabilities (70,917) (50,631) (65,870)
Net current assets 18,542 17,045 27,215
Non-current liabilities
Deferred tax liability (3,765) (5,598) (4,331)
Other non-current liabilities 11 (8,357) (22,279) (25,100)
Lease liabilities (941) (1,375) (1,275)
Total non-current liabilities (13,063) (29,252) (30,706)
Net assets 147,945 124,537 132,745
Equity
Issued share capital 12 90 89 89
Share premium 119,438 119,438 119,438
Foreign exchange reserve 13,445 2,402 3,482
Other reserves 12,867 6,545 9,361
Retained earnings 2,105 (3,937) 375
Total shareholders' equity 147,945 124,537 132,745
The accompanying notes form part of these interim condensed
consolidated financial statements.
Interim condensed consolidated statement of cash flows
For the six months ended 30 September 2022
Restated(10)
Unaudited unaudited
six months six months Audited
ended ended year ended
30 Sep 2022 30 Sep 2021 31 Mar 2022
Note GBP'000 GBP'000 GBP'000
Cash flows from operating
activities:
Profit for the period 10,277 953 8,512
Taxation 3,922 3,278 6,370
Finance income (65) (1) (1)
Finance expenses 1,630 1,238 2,894
Depreciation of property,
plant and equipment 898 497 1,155
Loss on disposal of fixed
assets - 21 32
Amortisation of intangible
fixed assets 2,507 2,559 5,272
Share-based payment charge 3,588 1,672 4,075
Increase in provisions - - 1,302
Foreign exchange gain on cash
and cash equivalents (4,764) - -
Operating cash flows before
movements in working capital 17,993 10,217 29,611
Working capital adjustments:
Increase in trade and other
receivables (9,065) (5,160) (7,066)
(Decrease)/increase in trade
and other payables (676) 3,573 15,729
Tax paid (6,062) (2,660) (4,767)
Net cash generated from operating
activities 2,190 5,970 33,507
Cash flows from investing
activities:
Interest received 65 1 1
Consideration paid on acquisitions,
net of cash acquired 8 (20,716) (23,796) (23,796)
Purchase of intangible assets 7 (319) - -
Purchase of property, plant
and equipment, net of disposals (564) (204) (684)
Net cash used in investing
activities (21,534) (23,999) (24,479)
Cash flows from financing
activities:
Issue of ordinary share capital - 31,102 31,102
Share issuance costs - (1,053) (1,053)
Net settlement of vested share
options (322) - -
EBT purchase of Company's
own shares (1,129) (187) (205)
Drawdown of bank borrowings 7,477 - -
Interest and bank loan fees (110) (199) (285)
Principal lease liability
payments (650) (348) (814)
Interest on lease liabilities (53) (52) (111)
Dividends paid (8,547) (5,431) (8,678)
Net cash (used in)/generated
from financing activities (3,334) 23,832 19,956
Net (decrease)/increase in
cash and cash equivalents (22,678) 5,803 28,984
Cash and cash equivalents
at beginning of the period 63,516 34,012 34,012
Effect of exchange rate fluctuations
on cash held 6,926 217 520
Cash and cash equivalents
at end of the period 47,764 40,032 63,516
============ ============ =============
(10) The Group has re-presented the consolidated statement of
cash flows in the comparative period to reconcile from "profit for
the period" rather than "operating profit" to align with the
requirements of IAS 7. Share issuance costs have also been restated
in the comparative period to be separated from the issue of
ordinary share capital, to align with the audited FY 22
disclosure
Interim condensed consolidated statement of changes in
equity
For the six months ended 30 September 2022
Share Foreign exchange
capital Share premium reserves Other reserves Retained earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2021 80 89,396 302 4,044 543 94,365
Comprehensive
income
Profit for the
period - - - - 953 953
Foreign exchange
differences on
translation of
foreign
operations - - 2,100 - - 2,100
Transactions with
owners
Shares issued
(equity) 9 30,042 - - (2) 30,049
EBT purchase of
Company's own
shares - - - (187) - (187)
Share-based
payments - - - 1,672 - 1,672
Current tax
recognised in
equity - - - 146 - 146
Deferred tax
recognised in
equity - - - 870 - 870
Dividends - - - - (5,431) (5,431)
As at 30 September
2021 89 119,438 2,402 6,545 (3,937) 124,537
Comprehensive
income
Profit for the
period - - - - 7,559 7,559
Foreign exchange
differences on
translation of
foreign
operations - - 1,080 - - 1,080
Transactions with
owners
Shares issued - - - - - -
(equity)
EBT purchase of
Company's own
shares - - - (18) - (18)
Share-based
payments - - - 2,403 - 2,403
Net settlement of
vested share
options - - - (12) - (12)
Current tax
recognised in
equity - - - 74 - 74
Deferred tax
recognised in
equity - - - 369 - 369
Dividends - - - - (3,247) (3,247)
As at 31 March
2022 89 119,438 3,482 9,361 375 132,745
Comprehensive
income
Profit for the
period - - - - 10,277 10,277
Foreign exchange
differences on
translation of
foreign
operations - - 9,963 - - 9,963
Transactions with
owners
Shares issued
(equity) 1 - - - - 1
EBT purchase of
Company's own
shares - - - (1,129) - (1,129)
Share-based
payments - - - 3,588 - 3,588
Net settlement of
vested share
options - - - (322) - (322)
Current tax
recognised in
equity - - - 1,180 - 1,180
Deferred tax
recognised in
equity - - - 189 - 189
Dividends - - - - (8,547) (8,547)
As at 30 September
2022 90 119,438 13,445 12,867 2,105 147,945
Share capital
Share capital represents the nominal value of share capital
subscribed.
Share premium
The share premium account is used to record the aggregate amount
or value of premiums paid when the Company's shares are issued at a
premium, net of associated share issue costs.
Foreign exchange reserve
The foreign exchange reserve represents exchange differences
that arise on consolidation from the translation of the financial
statements of foreign subsidiaries, including goodwill.
Other reserves
The other reserves represent the cumulative fair value of the
IFRS 2 share-based payment charge recognised each year, associated
current tax, deferred tax and equity-settled acquisition
consideration reserves.
Retained earnings
The retained earnings reserve represents cumulative net gains
and losses recognised in the consolidated statement of
comprehensive income, less dividends paid.
Notes to the interim condensed consolidated financial
statements
1. Basis of preparation and significant accounting policies
1.1. General information
The principal activity of the Group is the provision of
consulting and related services to clients in the asset management,
wealth management and insurance industries, principally in the UK,
North America, Europe and APAC.
Alpha Financial Markets Consulting plc is incorporated in
England and Wales with registered number 09965297. The Company's
registered office is 60 Gresham Street, London, EC2V 7BB. The
Company is a public limited company and is admitted to trading on
the AIM of the London Stock Exchange.
These interim condensed consolidated financial statements were
authorised for issue on 23 November 2022 in accordance with a
resolution of the Directors.
1.2. Basis of preparation
These interim financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting and should be
read in conjunction with the Group's most recent annual
consolidated financial statements, for the year ended 31 March
2022. They do not include all of the information required for a
complete set of IFRS financial statements, however selected
explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in the
Group's financial position and performance since Alpha's Annual
Report & Accounts 2022.
The financial information presented for the period ended 30
September 2022 and the period ended 30 September 2021 is unaudited.
The financial information for the 12 months to 31 March 2022 was
audited.
The presentational currency of these financial statements is
British pound sterling. All amounts in these financial statements
have been rounded to the nearest GBP1,000, unless otherwise
stated.
1.3. Statutory accounts
Financial information contained in this document does not
constitute statutory accounts within the meaning of section 434 of
the Companies Act 2006 (the "Act"). The statutory accounts for the
year ended 31 March 2022 have been filed with the Registrar of
Companies. The report of the auditors on those statutory accounts
was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under section 498(2) or
(3) of the Act.
1.4. Basis of consolidation
These interim condensed financial statements consolidate the
interim financial statements of the Company and its subsidiary
undertakings (the "Group") as at 30 September 2022.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date that such control
ceases. The financial statements of subsidiaries are prepared for
the same reporting period as the parent company, using consistent
accounting policies.
All intra-group balances, income and expenses, and unrealised
gains and losses resulting from intra-group transactions are
eliminated in full.
1.5. Seasonality of operations
Given the nature of the Group's consulting and related services,
and the composition of the Group's customers and contracts,
seasonality is generally not expected to have a significant bearing
on the financial performance of the Group.
1.6. Going concern
The Directors have, at the time of approving these interim
condensed consolidated financial statements, a reasonable
expectation that the Group has adequate resources to continue in
operation for a period of at least 12 months from the approval of
these financial statements (the "going concern period"). The
Group's forecasts and projections, taking into account plausible
changes in trading performance, show that the Group has sufficient
financial resources, together with assets that are expected to
generate cash flow in the normal course of business.
Since the assessment at 31 March 2022, the Group has considered
whether there are any indicators of significant adverse variations
or material uncertainty in the Group's trading performance, both
against the internal budget for the period, and in the Group's
forecasts for the going concern period. No such indicators have
been identified. The ongoing trading performance of the Group's
core revenue-generating regions has been encouraging and is ahead
of the downside scenarios modelled during the Group's FY 22 going
concern assessment.
The Group has maintained a strong balance sheet and liquidity
position. The Group held a net cash position of GBP40.3m as at 30
September 2022 and has access to a GBP20.0m revolving credit
facility ("RCF") providing further liquidity, of which GBP7.5m was
drawn temporarily at the end of the period.
On this basis, the Directors consider that it is appropriate to
adopt the going concern basis in preparing these interim condensed
consolidated financial statements.
1.7. Principal accounting policies
Please refer to Alpha's Annual Report & Accounts 2022 for
full disclosures of the principal accounting policies that have
been adopted in the preparation of these interim condensed
consolidated financial statements. There have been no changes to
the accounting policies adopted by the Group in the period.
1.8. Significant judgements and estimates
The preparation of financial information in accordance with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and reported
amounts of assets, liabilities, income and expenses.
Judgements
The Directors have made one judgement, excluding those involving
estimations, in the process of applying the Group's accounting
policies, which is considered to have a significant effect on the
amounts recognised in the financial statements for the period ended
30 September 2022.
Alternative performance measures
To assist in understanding the underlying performance of the
Group, management presents various alternative performance measures
("APMs"), which exclude certain adjusting items. APMs are provided
to allow stakeholders a further understanding of the underlying
trading performance of the Group and aid comparability between
accounting periods. Management applies judgement to identify those
income or expense items that are deemed to warrant exclusion from
the calculation of the Group's adjusted measures to allow
stakeholders a further understanding of the underlying performance
of the business. These adjusting items have been applied
consistently across reporting periods. A reconciliation to IFRS
measures, and explanation of each adjusting item excluded is
provided in note 3.
All adjusting items are considered individually for exclusion by
virtue of their nature or size. In the period ended 30 September
2022, these items totalled GBP5.7m (H1 22: GBP9.2m) and are
recognised in administration expenses. A further GBP1.4m (H1 22:
GBP1.0m) was recognised within finance expenses.
Estimates
A number of estimates have been made in the preparation of the
financial information. The underlying assumptions in the Group's
estimates are based on historical experience and various other
factors that are deemed to be reasonable under the circumstances.
These assumptions form the basis of developing estimates of the
carrying values of assets and liabilities that are not apparent
from other sources. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to estimates are recognised
in the period in which the estimate is revised and any future years
affected. Actual results can differ from these estimates.
The Directors have identified the following areas as key
estimates that are considered to have a significant risk of
resulting in a material adjustment to the carrying amounts of
assets or liabilities within the next financial year.
Share-based payments (note 13)
Management has estimated the share-based payments charge under
IFRS 2. In determining the fair value of share-based payments,
management has considered several internal and external factors to
judge the probability that management and employee share incentives
may vest and to assess the fair value of share options at the date
of grant. Such assumptions involve estimating future performance
and other factors. The fair value calculations have been externally
assessed for reasonableness in the current and prior periods. Refer
to note 13 for sensitivity analysis.
Acquisition earn-outs (note 8)
Alpha's acquisition earn-out liability calculations under IFRS 3
contain estimation uncertainty, as the earn-out potentially payable
is linked to the future performance of the acquiree. To determine
the fair value of the earn-out liability at the balance sheet date,
management has assessed the potential future cash flows of the
acquired businesses respectively, the likelihood of an earn-out
payment being made and discounted using an appropriate discount
rate. These estimates could potentially change because of events
over the coming years. Refer to note 8 for sensitivity
analysis.
1.9. New accounting standards and interpretations
In the period ended 30 September 2022, the Group has adopted the
following amendments to existing accounting standards with no
material impact on the financial statements. Refer to pp 144-45 of
the Group's Annual Report & Accounts 2022 for details of
recently adopted standards and interpretations in the prior
period.
-- Reference to the Conceptual Framework (Amendments to IFRS 3), effective from 1 January 2022;
-- Property, Plant and Equipment - Proceeds before Intended Use
(Amendments to IAS 16), effective from 1 January 2022;
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments
to IAS 37), effective from 1 January 2022; and
-- Annual Improvements to IFRS Standards 2018-20 Cycle, effective from 1 January 2022.
The following other standards, interpretations and amendments to
existing standards have been issued but were not mandatory for
accounting periods beginning on 1 April 2022 and are not expected
to have a material impact on the Group.
-- Extension of the Temporary Exemption from Applying IFRS 9
(Amendments to IFRS 4), effective from 1 January 2023;
-- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (amendments to IAS 12), effective from 1 January
2023 (not yet endorsed by the UK);
-- IFRS 17 Insurance Contracts, effective from 1 January 2023;
-- Amendments to IFRS 17, effective from 1 January 2023;
-- Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2), effective from 1 January 2023 (not yet
endorsed by the UK);
-- Classification of Liabilities as Current or Non-Current -
Deferral of Effective Date (Amendment to IAS 1), effective from 1
January 2023 (not yet endorsed by the UK);
-- Definition of Accounting Estimates (Amendments to IAS 8),
effective from 1 January 2023 (not yet endorsed by the UK);
-- Lease Liability in a Sale and Leaseback (Amendments to IFRS
16), effective from 1 January 2024 (not yet endorsed by the UK);
and
-- Non-Current Liabilities with Covenants (Amendments to IAS 1),
effective from 1 January 2024 (not yet endorsed by the UK).
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. 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 continued material level
of operational support and linkage provided to the Group's emerging
territories in Europe and APAC, as they develop their presence
locally, and as such have been deemed to constitute one operating
segment ("Europe & APAC").
Revenues associated with software licensing arrangements were
immaterial in both the current and prior periods. 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.
30 September 2022 UK North America Europe & Total
APAC
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 39,912 44,602 23,085 107,599
Rechargeable expenses (128) (279) (176) (583)
Net fee income 39,784 44,323 22,909 107,016
Cost of sales (23,728) (29,026) (15,819) (68,573)
Gross profit 16,056 15,297 7,090 38,443
Margin on net fee income (%) (11) 40.4% 34.5% 30.9% 35.9%
30 September 2021 UK North America Europe & APAC Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 32,433 18,854 17,135 68,422
Rechargeable expenses (4) (22) (6) (32)
Net fee income 32,429 18,832 17,129 68,390
Cost of sales (18,577) (12,349) (11,004) (41,930)
Gross profit 13,852 6,483 6,125 26,460
Margin on net fee income (%) (11) 42.7% 34.4% 35.8% 38.7%
(11) Margin on net fee income is gross profit expressed as a
percentage of net fee income. Please refer to note 3 for further
detail
3. 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 operating profit,
adjusted profit after tax, adjusted administration expenses,
adjusted cash from operating activities, 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. 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
30 Sep 2022 30 Sep 2021
Note GBP'000 GBP'000
Profit before tax 14,199 4,231
Amortisation of acquired intangible assets 7 2,356 2,258
Loss on disposal of fixed assets - 21
Share-based payments charge 13 4,091 2,357
Earn-out and deferred consideration(12) 8 (316) 2,539
Acquisition costs - 643
Foreign exchange (gains)/losses (463) 1,353
Adjusting items 5,668 9,171
Non-underlying finance expenses 8 1,383 1,032
Adjusted profit before tax 21,250 14,434
Net underlying finance expenses 182 205
Adjusted operating profit 21,432 14,639
Depreciation of property, plant and equipment 898 497
Amortisation of capitalised development costs 7 151 301
Adjusted EBITDA 22,481 15,437
Adjusted EBITDA margin (%) 21.0% 22.6%
(12) The earn-out and deferred consideration credit in the
period comprises a fair value adjustment of GBP1.4m offset by an
employment-linked consideration charge of GBP1.0m as set out in
note 8, as well as an associated social security charge of
GBP0.1m
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 in the period as the Group matures post AIM
admission. The estimated future social security 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 13 sets out
further details of the employee share-based payments charge
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 six-month
period would be GBP18.4m (H1 22: GBP13.1m).
As per note 8, the acquisition of Lionpoint in the prior 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 periods, 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 prior period relate 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 and treating these as an adjusting item
allows comparability of the operating performance across reporting
periods.
The impact of foreign currency volatility in translating local
working capital and cash 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. In the prior period, the movement was predominantly
acquisition related and, in the current period, there is an
immaterial gain on other foreign currency cash and working capital
balances across the Group.
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 adjusting items, including amortisation of
acquired intangible assets, share-based payments 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, reflecting depreciation, amortisation of capitalised
development costs and underlying finance expenses.
Adjusted operating profit
Adjusted operating profit is an APM defined by the Group as
adjusted profit before tax before charging underlying finance
expenses, including interest 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.
30 Sep 2022 30 Sep 2021
GBP'000 GBP'000
Adjusted profit before
tax 21,250 14,434
Tax charge (3,922) (3,278)
Tax impact of adjusting
items (1,419) (413)
Adjusted profit after
tax 15,909 10,743
Adjusted earnings per share
Adjusted earnings per share ("EPS") is calculated by dividing
the adjusted profit after tax for the period attributable to
ordinary shareholders by the weighted average number of ordinary
shares outstanding during the period. 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 6 for
further detail.
30 Sep 2022 30 Sep 2021
Adjusted EPS
Adjusted EPS 14.09p 9.85p
Adjusted diluted EPS 13.23p 9.34p
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.
30 Sep 2022 30 Sep 2021
GBP'000 GBP'000
Administration expenses 22,679 20,992
Adjusting items (5,668) (9,171)
Depreciation of property, plant and equipment (898) (497)
Amortisation of capitalised development costs (151) (301)
Adjusted administration expenses 15,962 11,023
Adjusted cash generated from operating activities
Adjusted cash generated from operating activities excludes any
employment-linked acquisition payments and associated social
security taxes, as well as other acquisition costs paid in the
period, treated as operating cash flows under IFRS, to reflect the
Group's underlying operating cash flows, exclusive of cash payments
relating to acquisitions.
30 Sep 2022 30 Sep 2021
GBP'000 GBP'000
Net cash generated from operating
activities 2,190 5,970
Employment-linked acquisition payments(13) 1,981 1,848
Acquisition costs - 643
Adjusted cash generated from operating
activities 4,171 8,461
(13) Of the GBP22.5m total deferred and contingent acquisition
payments in the period as set out in note 8, GBP1.8m is classified
as employment linked and is included within net cash generated from
operating activities in the period. The associated social security
payments of GBP0.2m are also included within net cash generated
from operating activities
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.
30 Sep 2022 30 Sep 2021
Cash conversion 13.9% 109.2%
Adjusted cash conversion 19.5% 57.8%
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 45.3% (H1 22: 21.7%) in the
current period represents H1 23 net fee income less GBP7.6m
attributable to Lionpoint, treated as inorganic as it preceded the
acquisition anniversary.
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 first half. This is most notable
against the US dollar where, in the six months, British pound
sterling averaged $1.23 (H1 22: $1.39). British pound sterling
averaged EUR1.18 (H1 22: EUR1.17) against the euro. On a constant
currency basis, the Group's net fee income for the period would be
GBP5.5m lower and, similarly, gross profit would be GBP1.8m
lower.
On a constant currency basis, Group net fee income growth would
be 48.4% overall. Similarly, North America net fee income growth
would be 108.3% and Europe & APAC would report 31.3% net fee
income growth.
4. Net finance expenses
30 Sep 2022 30 Sep 2021
Note GBP'000 GBP'000
Bank interest receivable 65 1
Total finance income 65 1
Interest and fees payable on bank
loans (194) (154)
Interest on lease liabilities (53) (52)
Total underlying finance expenses (247) (206)
Non-underlying finance expenses 8 (1,383) (1,032)
Total finance expenses (1,630) (1,238)
Net underlying finance expenses 3 (182) (205)
Net finance expenses (1,565) (1,237)
The Group holds one principal bank facility comprising a
GBP20.0m committed RCF facility with Lloyds Bank Plc. GBP7.5m of
this facility was temporarily drawn as at the end of the period to
assist with managing currency requirements. The Group remains in a
strong net cash position of GBP40.3m.
5. Tax
30 Sep 2022 30 Sep 2021
GBP'000 GBP'000
Current tax
In respect of the current period - UK 1,553 1,418
Foreign taxation 3,768 1,836
Deferred tax
In respect of the current period - UK (1,033) (1,098)
Foreign taxation (366) -
Change in tax rate on opening balances - 1,146
Adjustment in respect of prior periods - (24)
Total tax expense for the period 3,922 3,278
An increase in the UK corporation tax rate from 19% to 25%
(effective 1 April 2023) was substantively enacted during the prior
period on 24 May 2021. This change would increase the Group's
future current tax charge accordingly.
In addition to the tax expense for the period ended 30 September
2022, the Group has also recognised a total of GBP1.4m (H1 22:
GBP1.0m) of tax through equity, of which GBP1.2m (H1 22: GBP0.1m)
relates to current tax on the exercise of share options and GBP0.2m
(H1 22: GBP0.9m) relates to deferred tax on share options
outstanding. Additionally, a GBP0.7m charge (H1 22: GBPnil) was
recognised through other comprehensive income, relating to the
deferred tax impact of foreign exchange fluctuations on acquired
intangible assets.
6. Earnings per share and adjusted earnings per share
The Group presents basic and diluted earnings per share ("EPS")
on both a statutory and adjusted basis. Basic EPS is calculated by
dividing the profit or loss for the period attributable to ordinary
shareholders by the weighted average number of ordinary shares
fully outstanding during the period.
The weighted average number of diluted ordinary shares used in
the calculation of diluted EPS includes the number of shares that
could be 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 adjusted profit after tax for the
period, the same adjustments as set out in note 3 have been made to
the Group's profit for the financial period. The profits and
weighted average number of shares used in the calculations are set
out below:
Note 30 Sep 2022 30 Sep 2021
Basic & diluted EPS
Profit for the period used in calculating basic and diluted EPS (GBP'000) 10,277 953
Weighted average number of ordinary shares in issue ('000) 112,904 109,040
Number of dilutive shares ('000) 7,310 5,949
Weighted average number of ordinary shares, including potentially dilutive shares
('000) 120,214 114,989
Basic EPS 9.10p 0.87p
Diluted EPS 8.55p 0.83p
Adjusted EPS
Adjusted profit after tax used in calculating adjusted basic and diluted EPS
(GBP'000) 3 15,909 10,743
Weighted average number of ordinary shares in issue ('000) 112,904 109,040
Number of dilutive shares ('000) 7,310 5,949
Weighted average number of ordinary shares, including potentially dilutive shares
('000) 120,214 114,989
Adjusted EPS 14.09p 9.85p
Adjusted diluted EPS 13.23p 9.34p
7. Goodwill and intangibles
Net book value as at 30 September 2022
Total
Capitalised intangible
Order Customer Intellectual Trade development fixed
backlog relationships property name costs assets Goodwill
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 31
March 2022 120 23,569 1,247 6,211 186 31,333 100,991
Additions 319 - - - - 319 -
Amortisation
charge for
the period (294) (1,515) (247) (300) (151) (2,507) -
Exchange
differences 40 1,401 - 350 - 1,791 6,319
------------------- ------------------------- ------------------------ ------------------- ----------------------- ---------------------- --------------------
As at 30
September
2022 185 23,455 1,000 6,261 35 30,936 107,310
=================== ========================= ======================== =================== ======================= ====================== ====================
Net book value as at 30 September 2021
Total
Capitalised intangible
Order Customer Intellectual Trade development fixed
backlog relationships property name costs assets Goodwill
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 31
March 2021 90 15,048 1,743 4,026 741 21,648 63,067
Additions 829 10,752 - 2,602 - 14,183 35,747
Amortisation
charge for
the period (398) (1,345) (248) (267) (301) (2,559) -
Exchange
differences 22 296 - 71 - 389 1,493
------------------- ------------------------- ------------------------ ------------------- ----------------------- ---------------------- --------------------
As at 30
September
2021 543 24,751 1,495 6,432 440 33,661 100,307
=================== ========================= ======================== =================== ======================= ====================== ====================
Additions in the period of GBP0.3m relate to the purchase by the
Group of several contracts from the management enterprise
technology solutions practice of CohnReznick LLP, a leading
advisory, assurance and tax firm primarily based in the United
States.
8. Acquisition of businesses
Acquisitions in prior periods
Lionpoint
On 20 May 2021, the Group acquired 100% of the issued share
capital of Lionpoint Holdings, Inc. ("Lionpoint"), a provider of
specialist consultancy services to the alternative investments
industry, on a cash free, debt free basis.
The maximum payable for the acquisition (over four years) is
$90.0m (GBP63.8m), to be settled in cash, with the option to settle
a portion of the deferred 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, alongside an additional net cash
payment of $2.1m (GBP1.4m) in relation to completion working
capital. A balancing $0.5m (GBP0.3m) receivable was held at 30
September 2021.
Deferred consideration of $17.0m (GBP12.0m) is payable across
the first and second anniversaries of the acquisition and
contingent earn-out consideration 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 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.
As at 31 March 2022, the Group held a liability of GBP33.7m in
relation to future deferred and contingent consideration payable
for this acquisition.
Employment-linked acquisition payments are expensed through the
income statement proportionately until FY 26. During the period,
the Group has expensed GBP1.0m in relation to these
employment-linked payments.
The deferred and contingent consideration is discounted to fair
value. Discount unwinding is recognised as a finance cost
proportionately across the periods until final payment. During the
period, GBP1.4m of discount unwinding was expensed as a
non-underlying finance cost in relation to the Lionpoint
acquisition consideration.
During the period, the Group made payments of GBP17.3m net of a
GBP0.4m receivable that was due back from the sellers. Of these
payments, GBP1.5m relates to employment-linked consideration, and
is presented within cash generated from operating activities, with
the remaining GBP15.8m presented within cash used in investing
activities in the statement of cash flows.
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 period, the Group recognised a
foreign exchange loss of GBP5.0m in the income statement arising
from acquisition-related currency movements, arising from this
re-translation. However, this loss is offset by a foreign exchange
gain on US dollar cash held by the Group.
As at 30 September 2022, a GBP23.4m liability is recorded, of
which GBP16.6m is current and GBP6.8m is a non-current
liability.
Sensitivity analysis
If the discount rates used for the Lionpoint acquisition were to
be 5% higher or lower than that assumed by management, the fair
value of the liability recognised by the Group would not change by
a material amount.
Were the financial performance achieved by Lionpoint in the
remaining earn-out periods to increase by 5%, there would be a
GBP1.1m increase to the undiscounted earn-out and a GBP0.9m
increase in the liability as at 30 September 2022. Were financial
performance to decrease by 5%, the undiscounted earn-out would fall
by GBP2.7m and the H1 23 liability would decrease by GBP2.2m.
The Group has also considered a reasonable range of
circumstances to sensitise the forecast cash flows to calculate
reasonable estimated remaining earn-out pay-out ranges for the
Lionpoint acquisition. The Directors have determined that the
reasonable range of undiscounted contingent earn-out payments is
between GBP8.5m and GBP20.2m, excluding the deferred
consideration.
Obsidian
As at 31 March 2022, the Obsidian earn-out liability of GBP1.9m
reflected a balanced assessment of the Directors' best estimate of
projected cash flows in relation to several plausible scenarios.
During the period, a lower mutually-agreed position was reached
with the original vendors. As a result, a fair value adjustment of
GBP1.4m has been credited to the Group's consolidated statement of
comprehensive income in the period. A payment of GBP0.2m was made
in the period, none of which was employment-linked, with the
remainder expected to be paid within the next 12 months.
No expense has been recognised in the period in relation to e
mployment-linked consideration given the ongoing employment
condition attached to the Obsidian earn-out agreement, which lapsed
in the year ended 31 March 2022.
Axxsys
The remaining GBP5.0m liability due on the acquisition of Axxsys
as at 31 March 2022 was paid during the period, of which GBP0.3m
was employment-linked.
The below table summarises the movements in the deferred
contingent and non-contingent consideration liabilities to 30
September 2022:
Axxsys Obsidian Lionpoint Total
GBP ' GBP ' GBP ' GBP '
000 000 000 000
Balance as at 1 April
2022 5,000 1,898 33,748 40,646
Fair value adjustment - (1,448) - (1,448)
Employment-linked consideration - - 1,019 1,019
Payments in the period(14) (5,000) (200) (17,315) (22,515)
Amounts receivable deducted
from payments in the
period - - (350) (350)
Unwinding of discounting - - 1,383 1,383
Foreign exchanges losses - - 4,951 4,951
Balance as at 30 September
2022 - 250 23,436 23,686
1 (4) Of the GBP22.5m payments made in the period, GBP1.8m is
classified as employment-linked and is included in net cash
generated from operating activities in the statement of cash
flows
The GBP23.7m liability held at 30 September 2022 comprised
GBP7.9m related to deferred consideration and GBP15.8m related to
contingent consideration. Within these deferred and contingent
consideration liabilities, GBP2.1m relates to employment-linked
amounts.
The above liabilities are reflected in non-current and current
liabilities as shown in the following table:
30 Sep 2022 30 Sep 2021 31 Mar 2022
GBP'000 GBP'000 GBP'000
Amounts due within one year 16,863 18,822 20,500
Amounts due after one year 6,823 20,725 20,146
Total earn-out and deferred
liabilities 23,686 39,547 40,646
9. Trade and other receivables
30 Sep 2022 30 Sep 2021 31 Mar 2022
GBP'000 GBP'000 GBP'000
Trade receivables 31,981 22,823 23,641
Other debtors 927 378 539
Capitalised contract fulfilment costs 1,725 235 1,548
Prepayments 2,105 1,373 1,113
Accrued income 4,957 2,835 2,728
Total amounts due within one year 41,695 27,644 29,569
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.
In assessing the appropriateness of the Group's expected credit
loss provision at 30 September 2022, the Directors have considered
the Group's historical loss rates for each aging category of
receivables in conjunction with other factors in key Alpha
territories. There are no indicators at 30 September 2022 that the
profile of risk associated with the Group's receivables is
materially different from that determined through the full
assessment performed for the year ended 31 March 2022. Therefore,
the expected credit loss provision has not changed materially from
the provision disclosed in Alpha's Annual Report & Accounts
2022.
10. Trade and other payables
Restated(15)
30 Sep 2022 30 Sep 2021 31 Mar 2022
Note GBP'000 GBP'000 GBP'000
Trade payables 4,851 2,562 5,114
Accruals 22,800 16,781 23,898
Deferred income 1,599 2,534 1,865
Social security tax on share options 13 1,657 1,040 1,050
Taxation and social security 6,118 4,840 2,964
Other creditors 1,821 1,000 1,280
Earn-out and deferred consideration 8 16,863 18,822 20,500
Total amounts owed within one year 55,709 47,579 56,671
(15) Trade and other payables in the H1 22 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, in line with the audited FY 22 disclosure
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 reduced accruals balance reflects the payment in the period
of increased employee profit share and director bonuses relating to
strong FY 22 performance, partially offset by the continued growth
of the Group.
Earn-out and deferred consideration comprises the fair value of
deferred and contingent consideration arising from the Group's
acquisitions owed within 12 months. Please refer to note 8 for
further details.
11. Other non-current liabilities
Restated(16)
30 Sep 2022 30 Sep 2021 31 Mar 2022
Note GBP'000 GBP'000 GBP'000
Earn-out and deferred consideration 8 6,823 20,725 20,146
Deferred income 204 236 233
Social security tax on share options 13 1,330 1,318 1,953
Other non-current liabilities - - 2,768
Total amounts owed after one year 8,357 22,279 25,100
(16) Other non-current liabilities in the H1 22 comparative
period have been re-presented within this note to separately
disclose social security tax on share options from other
non-current liabilities, in line with the audited FY 22
disclosure
Earn-out and deferred consideration of GBP6.8m falls due over 12
months from the balance sheet date and relates to the Group's
acquisition of Lionpoint. Please refer to note 8 for further
details.
Other non-current liabilities fell to nil in the period (FY 22:
GBP2.8m) as the remaining deferred element of FY 22 bonuses for
certain directors and senior management globally now falls due
within 12 months.
12. Called up share capital
30 Sep 2022 30 Sep 2021 31 Mar 2022
Number Number Number
Allotted, called up and fully paid
Ordinary shares of 0.075p each 120,507,336 118,238,586 118,707,336
30 Sep 2022 30 Sep 2021 31 Mar 2022
GBP GBP GBP
Allotted, called up and fully paid
Ordinary shares of 0.075p each 90,381 88,679 89,031
Note GBP
Balance at 1 April 2022 89,031
118,707,336 ordinary shares of 0.075p each
Issued shares (i) 1,350
Balance at 30 September 2022 90,381
120,507,336 ordinary shares of 0.075p each
(i) During the period , a total of 1,800,000 ordinary shares
were issued by the Group, all of which were issued to the employee
benefit trust ("EBT") for future satisfaction of share incentive
plans.
Alpha Employee Benefit Trust
The Group held 6,546,656 (FY 22: 6,216,501) shares in the 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.
During the period, 1,800,000 ordinary shares were transferred by
the company to the EBT for potential future satisfaction of share
incentive plans, through the issuance of new shares. Further, the
EBT purchased 254,817 shares in the period at market value for
GBP1.1m. Ordinary shares held within the EBT have no dividend or
voting rights.
In addition, a total of 1,724,662 shares held in the EBT were
utilised for employee share option exercises.
Treasury shares
The Group held nil shares in treasury at 30 September 2022 (FY
22: nil).
Shares with voting rights
The total number of voting rights in the Company at 30 September
2022 was 113,960,680 (FY 22: 112,480,835).
Dividends
During the period, the Group paid a final dividend in relation
to the year ended 31 March 2022 of 7.50p per ordinary share (H1 22:
4.85p).
The Board has declared an interim FY 23 dividend of 3.70p per
share (H1 22: 2.90p).
13. 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 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").
In prior periods, the majority of options granted to certain
directors and senior management of the Group were subject to the
fulfilment of three or more of the following performance
conditions: (a) the Group achieving adjusted EPS growth of 15.0% or
more to trigger a maximum award, or 10.0% 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. In FY
21, in response to COVID-19, options granted were subject to more
flexible performance criteria, including local budget targets and a
variety of stretching personal sales or other targets. In FY 22,
the performance conditions of options granted in that year returned
to the previous award criteria.
As disclosed in the 2022 Annual Report & Accounts, the
Remuneration Committee approved performance conditions for FY 23
awards, which modified the adjusted EPS growth range set out above
to reflect the growth of the Group since AIM admission. The
criteria for these share incentive awards to certain directors and
senior management of the Group, depending on the individual and
their role, include: (a) the Group achieving adjusted EPS growth of
11.0% or more to trigger a maximum award, or 7.0% 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 three- or four-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 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. No EIP awards were made in the current or prior
periods.
Movements in the period
During the period, a total of 3,138,309 share option and award
grants were made to employees and senior management (H1 22:
2,959,429). The weighted average of the estimated fair values of
these options awarded in the period is GBP3.11 per share (H1 22:
GBP2.68).
In June 2022 and August 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 three 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, 2,020,861 nominal
cost awards over ordinary shares of 0.075 pence per share vested
and 156,423 share awards were forfeited under performance
conditions or as a result of leavers before vesting.
Of these awards vested in the period, 1,706,999 were exercised,
with an additional 109,375 share options that vested in FY 21 also
exercised on 22 June 2022. Of these total 1,816,374 share options
exercised, the Company settled 1,724,662 through the transfer of
existing shares from the EBT, with 91,712 additional share options
retained for net tax settlement. The weighted average share price
at the date of these exercises was GBP4.18. The remaining vested
award holders have a further six-year period in which to exercise
their vested awards.
Movements in share options outstanding in the period ended 30
September 2022 are as follows:
Number of
share options
Outstanding at the beginning of the period 9,504,379
Granted during the period 3,138,309
Exercised during the period (1,816,374)
Forfeited during the period (156,423)
Expired during the period -
Outstanding at the period end 10,669,891
Exercisable at the period end 398,655
The weighted average exercise price for all options outstanding
in both the current and prior periods was nominal. The options
outstanding as at 30 September 2022 had a weighted average
remaining contractual life of two years.
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 were valued
at award using a Black-Scholes model.
The inputs to these models in the period were as follows:
Period ended
30 Sep 2022
Weighted average share price at GBP3.99
grant date
Exercise price Nominal
Volatility 20.14%
Time to maturity 4 years
Risk free rate 1.67%
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 GBP4.1m (H1 22: GBP2.4m)
in the current period, comprising GBP3.6m (H1 22: GBP1.7m) in
relation to equity settled share-based payments and GBP0.5m (H1 22:
GBP0.7m) 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 period would increase by GBP0.4m.
The carrying value of amounts relating to social security tax on
share options as at 30 September 2022 is GBP3.0m (FY 22: GBP3.0m),
with GBP0.5m recognised in the statement of comprehensive income in
the period, offset by GBP0.5m of payments made in the period.
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 period could increase by GBP0.3m. Were the
share price to remain flat the charge would reduce by GBP0.3m.
14. Related party transactions
Related parties, following the definitions within IAS 24 Related
Party Disclosures, are the Group's subsidiary companies, members of
the Board, key management personnel and their families, and
shareholders who have control or significant influence over the
Group.
The Group considers key management personnel, as defined under
IAS 24, to be the Company's Directors and certain members of the
Group's senior management team that report into the Group
Coordination Committee. There were no transactions within the
period in which the Directors had any interest.
Transactions between the Company and its subsidiaries are on an
arm's length basis and have been eliminated on consolidation and
are not disclosed in this note.
None of the Group's shareholders are deemed to have control or
significant influence and therefore are not classified as related
parties for the purposes of this note.
-ENDS-
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END
IR FEASSDEESELF
(END) Dow Jones Newswires
November 23, 2022 02:00 ET (07:00 GMT)
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