Alpha Fin. Markets - Audited Results for the Year Ended 31 March 2024
20/06/2024 07:00
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RNS Number : 1323T Alpha Fin Markets Consulting plc 20 June 2024
20 June 2024
Alpha Financial Markets Consulting plc
("Alpha", the "Company" or the "Group")
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2024
Resilient performance in a more competitive market environment
Alpha Financial Markets Consulting plc (AIM:AFM), a leading global consultancy
to the financial services industry, is pleased to report its audited results
for the 12 months ended 31 March 2024 ("FY 24").
Financial highlights(1)
· Revenue increased by 3.0% to £235.5m (FY 23: £228.7m) and net fee
income(2) increased by 2.8% to £233.6m (FY 23: £227.2m), mostly on an
organic(3) basis. On a constant currency basis net fee income grew by 4.8%
· Gross profit was £78.3m (FY 23: £80.4m) with a 33.5% margin(2) (FY
23: 35.4%), reflecting lower average consultant utilisation, particularly
across the Q2 summer months, and selective investment in growing the
consultant team, alongside consistent consultant day rates and active
management of variable costs
· Adjusted(2) EBITDA was £42.2m (FY 23: £46.6m), with a 18.0% margin
(FY 23: 20.5%)
· Adjusted profit before tax was £38.5m (FY 23: £44.0m) and adjusted
earnings per share was 24.90p (FY 23: 29.27p)
· On a statutory basis, profit before tax was £22.6m (FY 23: £25.8m)
and basic earnings per share was 13.85p (FY 23: 15.82p), after deducting
reduced adjusting items
· Adjusted cash generated from operations was £23.6m (FY 23: £46.2m)
reflecting the relative size of prior year bonus payments compared to the
Group's lower profitability and bonus accruals in the year, alongside good
underlying working capital management
· Robust balance sheet maintained with a net cash balance of £29.4m
(31 March 2023: £59.2m) and an undrawn £50.0m revolving credit facility at
31 March 2024
· Separately today, the Board announced the terms of the recommended
cash offer to acquire Alpha by Actium Bidco (UK) Limited, a newly incorporated
indirect subsidiary of certain funds managed by Bridgepoint Advisers Limited
12 months to 12 months to Change
31 March 2024 31 March 2023
Revenue £235.5m £228.7m 3.0%
Gross profit £78.3m £80.4m (2.6%)
Adjusted EBITDA £42.2m £46.6m (9.5%)
Adjusted profit before tax £38.5m £44.0m (12.5%)
Profit before tax £22.6m £25.8m (12.4%)
Adjusted EPS 24.90p 29.27p (14.9%)
Basic EPS 13.85p 15.82p (12.5%)
Operating highlights
· Net fee income growth delivered by all geographic regions on a
constant currency basis, in a challenging market environment
· Continued growth of client relationships in all global markets, with
the Group adding 146 new clients and growing market share in the year
· The Group approached hiring selectively in FY 24, investing for
current demand and future growth: consultant(4) headcount reached 1,000 (FY
23: 994)
· Addition of 15 new directors(5) to provide further expertise and
reinforce the platform for growth, including new directors in important
practice and sector offerings: Operations, Wealth and Alternatives
· Alpha continued to make good progress in a number of strategic growth
areas: in North America, including the alternative investments consulting
business, which has traded well; in launching an insurance consulting offering
in North America, with the hiring of two specialist directors to support the
development of the proposition locally; and in selective acquisitions with the
integration of Shoreline(6) in the first half of the year, which consolidates
Alpha's APAC presence
· First standalone Sustainability Report published, including Alpha's
first public diversity target
· 2023 marked 20 years since Alpha was first established as a
specialist consultancy to the financial services industry
Outlook
· Alpha has performed resiliently in a more competitive and challenging
environment resulting from overcapacity in the global consulting market, with
a longer sales cycle than typical
· This resilience is a testament to Alpha's excellent reputation,
robust business model, very strong talent base, and a sector-focused
proposition that continues to appeal to a diverse range of clients in multiple
geographies
· We continue to invest in the business for future growth, while
actively managing the cost base carefully
· Consultant utilisation incrementally ticked up through the final
quarter of FY 24, reaching close to target levels by the end of the year
overall, and maintaining this level into the early part of FY 25, albeit with
further improvement required in certain areas of the business through the year
· We have seen higher sales wins in recent months and Alpha enters the
new year with a strong and high quality pipeline of new business opportunities
· While there remains some uncertainty as the supply and demand
dynamics continue to rebalance, the long-term structural drivers of growth
will continue to drive demand for Alpha's services
Commenting on the results, Luc Baqué, Chief Executive Officer, said:
"The Group's trading this year has been resilient, despite a more competitive
and challenging market environment and a longer sales cycle. While the supply
and demand dynamics continue to rebalance, the current market still faces
certain challenges. However, with our unique value proposition, unrivalled
consulting team and robust long-term structural growth drivers, we remain well
positioned for the future and focused on our ambition to double the business
again by 2028(7)."
Enquiries:
Alpha Financial Markets Consulting plc +44 (0)20 7796 9300
Luc Baqué (Chief Executive Officer)
John Paton (Chief Financial Officer)
Georgina Sharley (Company Secretary)
Investec Bank plc - Nominated Adviser, Joint Corporate Broker +44 (0)20 7597 4000
Patrick Robb
James Rudd
St John Hunter
Berenberg - Joint Corporate Broker +44 (0)20 3207 7800
Toby Flaux
James Thompson
Alix Mecklenburg-Solodkoff
Camarco - Financial PR +44 (0)20 3757 4980
Ed Gascoigne-Pees
Phoebe Pugh
Analyst Presentation:
A presentation for analysts will be held today at 10:30 a.m. For further
information, please contact Camarco at alphafmc@camarco.co.uk.
A copy of the presentation slides will be available on the company website
(https://alphafmc.com/investors/reports-presentations/
(https://alphafmc.com/investors/reports-presentations/) ) following the
meeting.
About Alpha FMC:
Headquartered in the UK and quoted on the Alternative Investment Market of the
London Stock Exchange, Alpha is a leading global consultancy to the financial
services industry.
Alpha combines highly specialist, sector-focussed management consulting and
technology expertise to support the client transformation lifecycle. It has
1,000 consultants globally, operating from 17 client-facing offices(8)
spanning the UK, North America, Europe and APAC.
(1) All financial and operating highlights relate to the year ended 31 March
2024 ("FY 24") and the comparative year ended 31 March 2023 ("FY 23") unless
otherwise specified. All rounding and percentage change calculations are from
the basis of the financial statements in £'000s
(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 Shoreline, acquired during the
year. Refer to note 3 for further information on the Group's APMs
(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. Alpha is progressively updating the
director title to "partner" in some teams to better align to their roles in
the consulting markets
(6) "Shoreline" refers to Shoreline Consulting Pty Ltd, Shoreline
Consolidated Pty Ltd and their subsidiaries acquired by Alpha on 1 May 2023
(7) The statement that the Alpha Group's growth plan has an ambition to double
the size of its business by 2028 is aspirational only and should not be
construed as a profit forecast within the meaning of the Takeover Code. There
can be no certainty that Alpha will achieve its ambition, which is subject to
various assumptions, risks and uncertainties that could cause Alpha's growth
to differ materially from its expressed ambition
(8) The Group uses "office" to refer to a client-facing office location; that
is, if there are multiple offices in one location, they will be counted as one
office
Chairman's report
Having consistently achieved growth since AIM admission in 2017, the Group
experienced increased competition in the global consulting market and a
lengthened sales cycle in FY 24. Against this backdrop, Group net fee income
increased 2.8% and 4.8% on a constant currency basis. Client wins and trading
have incrementally improved in recent months with consultant utilisation
approaching near target levels by the end of the year, and maintained at this
level into the early part of FY 25. The Board views this as a resilient
performance within the broader market landscape, reflecting the Group's robust
business model, leading expertise and strong proposition.
Alpha's multi-boutique model, with its cross-selling framework across regions
and sectors, and collaboration between management and technology consulting,
is a key part of Alpha's growth strategy. The Group continued to invest
selectively in the foundations that support this growth agenda and made
progress in a number of key areas in the year.
The Group broadened and deepened its proposition, which will support the
future scaling of the business. This included selective hires or internal
promotions in all regions, key hires to further establish our insurance
consulting offering in North America, and completing the acquisition of
Shoreline to consolidate our offering in the APAC region.
Scaling up and rolling out our newer businesses, including alternatives and
insurance consulting, continues to be one of our growth pillars as we aim to
meet our 2028(9) strategic target. Our alternatives business, Lionpoint, saw
increased demand across all regions, particularly in North America, growing
the client base with 55 new client wins. North America remains a very
exciting, strategic growth region for the Group and we grew headcount by 15
overall.
We continue to enhance and diversify our sector-specific offerings, in line
with client demand and needs. We are proud that the Alpha offering now embeds
technology consulting and a software business, in Aiviq, which adds depth to
our delivery and cross-sell opportunity. To capitalise on the technology
opportunities that we see in all our markets, both for standalone technology
services projects and as part of major change programmes, we formalised a
number of technology lead roles in our asset & wealth management and
insurance consulting teams.
The Group ended the year well positioned, with a healthy net cash position of
£29.4m (FY 23: £59.2m).
Since Alpha began over 20 years ago, it has been our outstanding staff that
has helped establish and earn a global reputation for delivering challenging
and complex projects to the highest standards. This year has been no exception
and I want to take this opportunity to thank Alpha's people for their
unwavering focus and excellent contributions in a challenging period. We
believe that there are very exciting opportunities ahead for Alpha, with such
a strong group of consultants and a culture that encourages and celebrates
success for everyone.
Governance and the Board
The Board is dedicated to upholding the highest standards of corporate
governance. We consider business ethics, integrity, and strong governance
fundamental to reducing risk and securing long-term shareholder value. In
recognition of the crucial role the Board has in overseeing and advancing the
Group's ESG(10) efforts, the ESG Committee was formally established in the
period, under the guidance of Jill May as Chair.
The ESG Committee's role is to maintain oversight of Alpha's ESG agenda,
ensuring that the Group complies with regulatory requirements, meets the
expectations of its stakeholders and positions the Group for long-term
sustainable success. The Board intends to stay actively engaged with ESG
across all relevant topics as they evolve and, to this end, we commenced a
schedule of Board training, emphasising current and emerging areas of
responsibility across all ESG-related topics.
For the first time this year, Alpha is publishing metrics and information
under the Task Force on Climate-related Financial Disclosures ("TCFD"). We
have also published our first dedicated Sustainability Report, which sets out
the Group's ESG progress to date, vision and roadmap. The report covers our
focus on diversity and social responsibility, strong governance, and playing
our part in protecting the environment. The Board is fully supportive of
Alpha's first public diversity target and its ambition to identify and
progress actions that foster inclusion and increase diversity across the
Group. The enhanced disclosures and our ESG strategy provide us with the
frameworks necessary for long-term sustainable growth.
The Board is committed to engaging with shareholders and understanding their
expectations. To this end, we were pleased to have completed a consultation
with investors regarding Alpha's FY 25 remuneration policy and have
incorporated their feedback accordingly.
Dividend
In view of the recommended cash offer to acquire Alpha by Actium Bidco (UK)
Limited ("Bidco"), a newly incorporated indirect subsidiary of certain funds
managed by Bridgepoint Advisers Limited ("Bridgepoint"), the Board is not
recommending a final dividend. If the acquisition does not complete, it is
expected that the Board would declare a final dividend in respect of FY 24 at
a later date.
Outlook
Although some challenges in the market environment remain, the Group saw an
uptick in client wins and consultant utilisation in the last quarter of FY 24,
with utilisation levels maintained into the start of FY 25. Long-term demand
for our services remains robust and is underpinned by ongoing structural
drivers: growth in assets under management and insurance policies, regulatory
demand, cost pressures, client and societal expectations and technology
breakthroughs.
With a strong and high quality sales pipeline, a compelling client
proposition, market-leading consultants and clear strategic objectives, the
Board remains confident in the Group's prospects.
Ken Fry
Chairman
20 June 2024
(9) The statement that the Alpha Group's growth plan has an ambition to double
the size of its business by 2028 is aspirational only and should not be
construed as a profit forecast within the meaning of the Takeover Code. There
can be no certainty that Alpha will achieve its ambition, which is subject to
various assumptions, risks and uncertainties that could cause Alpha's growth
to differ materially from its expressed ambition
(10) ESG refers to environment, social and governance matters and efforts
Chief Executive Officer's report
As previously reported, the Group saw increased competition in FY 24 due to
overcapacity in the global consulting market. Alpha navigated this period
well, ending the year with consultant utilisation at close to target levels.
This resilient performance reflects the strength of our business model and the
expertise of our people in addressing clients' needs and challenges, even
during more uncertain periods.
While the sales cycle remains longer as the supply and demand dynamics
continue to rebalance, the drivers for clients seeking Alpha's services remain
prevalent, which is evidenced by our healthy global sales pipeline.
Despite the more challenging environment in FY 24, the strategic growth
pillars that underpin our ambition remain consistent: further expansion in
North America, the global scale-up and roll-out of Alpha's propositions,
including alternatives and insurance consulting, and selective acquisitions.
The year in review
The Group achieved modest growth in net fee income, reflecting the resilience
of the business model despite challenging market conditions. Throughout the
year, the Group actively managed its cost base alongside utilisation and day
rates, and continued to build its pipeline of new business opportunities.
Market demand levels were slower to recover than first anticipated, and our
actions to manage the business through this environment included a limited
number of redundancies to support affected areas of the business. This was a
very difficult decision, however it was one that we felt was commensurate with
the levels of demand, and key to achieving more normal levels of utilisation
and profitability.
As market conditions continued to rebalance, consultant utilisation rates
improved through the final quarter, ending the year at close to target levels
albeit FY 24 margins remained lower than historical levels overall. Gross
profit was £78.3m (FY 23: £80.4m) reflecting lower average consultant
utilisation, while maintaining consistent day rates and actively managing
variable costs.
12 months to 12 months to Change
31 March 2024 31 March 2023
Net fee income
UK £91.2m £87.1m 4.7%
North America £90.5m £91.1m (0.6%)
Europe & APAC £51.9m £49.0m 6.1%
Year-end totals £233.6m £227.2m 2.8%
12 months to 12 months to Change
31 March 2024 31 March 2023
Gross profit
UK £33.0m £35.0m (5.8%)
North America £28.3m £30.0m (5.6%)
Europe & APAC £17.0m £15.4m 10.6%
Year-end totals £78.3m £80.4m (2.6%)
The UK region, which continues to attract clients and maintains a leading
reputation, generated 4.7% organic net fee income growth to £91.2m (FY 23:
£87.1m). The reduced gross profit margin of 36.2% (FY 23: 40.2%) reflects
lower average consultant utilisation, partly offset by reduced variable costs
and consistent consultant day rates on the previous year. During the year, we
made selective hires as we invested for current demand and future growth. In
addition to maintaining our graduate programme, which is a source of future
talent, we were pleased to make a number of key director appointments. These
included adding three experienced directors to support Alpha UK's wealth
sector proposition, where we are working with many of the UK's top tier wealth
managers and private banks.
Alpha's strategy includes rolling out its proposition to new clients and
locations. After the year end, Alpha has launched a branch in Abu Dhabi, which
is overseen by and will initially form part of the UK business. Abu Dhabi is
an important financial centre, and this branch provides access to an area that
is growing and transforming rapidly. We are delighted that our offering,
including our Investments proposition and technology services, is already
resonating well and attracting demand.
North America net fee income was £90.5m (FY 23: £91.1m) and up 3.8% on a
constant currency basis. This resilient performance in a competitive market
environment follows more than 50% average annual organic growth in the
previous three years. A key pillar of our growth strategy, we continued to
invest in our services and people in this very sizeable market, broadening and
deepening our existing relationships and expanding our client base. We added
58 new clients in the region in FY 24, and at the year end the North America
team had 357 consultants (FY 23: 342). We are pleased that our proposition
there, which now encompasses three sectors (asset and wealth management,
alternatives and insurance), is resonating so well and we are proud that Alpha
has again ranked in "America's Best Management Consulting Firms" by Forbes and
Statista. We remain confident in the significant market opportunity of North
America, which is over eight(11) times the size of the UK.
Europe & APAC delivered net fee income growth of 6.1% to £51.9m (FY 23:
£49.0m), of which 1.4% was organic. In line with our acquisition strategy, we
welcomed Shoreline to the Group at the start of the year. With the integration
complete, this boutique asset and wealth management consultancy reinforces our
position in the APAC region. In Europe, we now have offices in seven financial
centres and we were delighted to have been selected as a "#1 Consulting Firm"
in asset management in France by Décideurs Magazine in the year. Across
Europe & APAC, we continue to see a very strong opportunity for Alpha's
combined proposition of management and technology consulting.
Alpha has continued to make progress on its strategic growth objectives,
further cementing its position as a leading provider of specialist consulting
services within the financial services industry. We have grown our global
client base across the sectors that we service. Our global model, expertise
and the alignment of our practices to our clients' sectors and core functions
have again enabled us to deliver some of the most complex, challenging and
defining projects in the industry.
Lionpoint, our alternatives consulting business, experienced another year of
steady growth as our expertise and capabilities continue to resonate with
private equity, credit, infrastructure, real estate and fund of funds clients.
Traditional asset managers also continue to seek to expand their books of
alternative investments, which brings a need for technology investment and
operating model consolidation. Joint-offer opportunities between Lionpoint and
our asset & wealth management consulting team therefore represent a
significant driver for future growth.
Insurance consulting remains a strategic growth pillar for Alpha and we were
delighted to complete on a goal to launch in the US in FY 24, appointing two
senior directors to spearhead progress in that region. Both individuals have
extensive industry experience and established networks, which we will leverage
to establish the brand. In Europe, Alpha's insurance consulting business added
new clients, reinforced its capabilities and expanded its team of deep sector
experts.
We have continued to develop and align the Group's technology consulting
capabilities and solutions with our management consulting proposition for each
sector: asset and wealth management, alternatives and insurance. Our
technology solutions and delivery teams possess unrivalled knowledge and
expertise in the technology platforms and models utilised in those sectors,
and we are delivering important strategic outcomes for our clients, focused on
cost reduction, management insights, automation and efficiency, and scale-up.
Acquisitions
We were pleased to complete the acquisition of Shoreline in May 2023 to
consolidate our offering in the APAC region. Selective acquisitions remain a
strategic growth pillar for Alpha and we continue to review potential
acquisition opportunities. Outline heads of terms have been agreed recently
with two small bolt-on opportunities, which are currently subject to ongoing
due diligence.
Financial performance summary
Group net fee income increased 2.8% to £233.6m (FY 23: £227.2m), mainly
organically, and 4.8% on a constant currency basis.
Lower consultant utilisation and rising costs across a larger team, partly
offset by reduced variable costs, resulted in reduced adjusted EBITDA on the
previous year of £42.2m (FY 23: £46.6m) at an adjusted EBITDA margin of
18.0% (FY 23: 20.5%). The Group delivered a slightly improved margin in H2
compared to the first half as the market continues to rebalance supply and
demand dynamics.
Adjusted profit before tax was £38.5m (FY 23: £44.0m), and adjusted earnings
per share ("EPS") was 24.90p (FY 23: 29.27p).
On a statutory basis, revenue increased 3.0% to £235.5m (FY 23: £228.7m),
operating profit decreased to £25.1m (FY 23: £28.6m) and profit before tax
was £22.6m (FY 23: £25.8m). Basic EPS was 13.85p (FY 23: 15.82p).
The Group ends the period with increased sales wins and a strong pipeline of
new business opportunities. This resilient performance, in the context of the
competitive market conditions in FY 24, demonstrates the strength of Alpha's
business model and client proposition. The Chief Financial Officer's report
provides further information about the financial performance of the last 12
months.
Our people
As Alpha celebrated its 20(th) anniversary this financial year, we take pride
in our team and our achievements. Alpha started life as a single sector
consultancy in the UK. The Group now includes 1,000 consultants, in addition
to its business operations staff, with offices in a number of locations across
the globe.
In 20 years, one thing has remained consistent about Alpha's success: our
people.
Our clients recognise the quality of our people and their exclusive
sector-specific focus. It helps to define our proposition, but what makes us
stand out as a market leading consulting firm is our global teams' unrelenting
attention to delivering projects to the very highest standards. This has
always been reflected in the high levels of repeat business and growth of our
client base, and was evidenced by over 90% of revenue in the year being
generated by existing clients. I am proud of Alpha's people every year, but
this year has been exceptional for its challenges and I am particularly
grateful for the focus on solving clients' needs and delivery excellence shown
in this difficult market environment.
While we focus on identifying and attracting the right people to Alpha, it is
also important that we can retain, nurture and develop the best consulting
talent in the market. We constantly strive to ensure that we foster an
inclusive and meritocratic culture that offers opportunities for progression
and success, aided by a robust support system. We were delighted to have been
nominated and to have won a place in the Top 10 Best Large Companies to Work
For and as a Top 5 Consultancy to Work For by Best Companies, a leading
employee engagement specialist in the UK.
While in the last 12 months we have approached hiring selectively, reflecting
the wider market environment, we are pleased to have grown our headcount of
global consultants to 1,000 (FY 23: 994). We made 15 director appointments,
including both strategic additions in all our regions and internal promotions,
underscoring our ongoing investment in talent development and progression.
As at As at Change
31 March 2024 31 March 2023
Consultant headcount
UK 385 394 (2.3%)
North America 357 342 4.4%
Europe & APAC 258 258 -
Year-end totals 1,000 994 0.6%
Sustainable growth
At Alpha, we are focused on building a platform for long-term success and
delivering outstanding outcomes for all our stakeholders. We nurture and
safeguard a strong sustainability culture, which for us means commitments to
diversity and inclusion, community impact work and our actions to address
climate change.
In the last year, we have continued to develop our ESG frameworks and
reporting disclosures. We recently published our first dedicated
Sustainability Report, which explains Alpha's position and objectives, and the
governance we use to apply and monitor them. I encourage you to read it to
understand more about our focus on diversity and social responsibility, strong
governance, and the part we want to play in the environment and combating
climate change.
Diversity and inclusion is one of the most important focus areas for Alpha,
now and as we grow the business. We can be a better employer and a better
partner for our clients through the diversity of perspectives that our people
bring, and we are on a journey to improving the diversity of our teams
globally. We were delighted to announce our first public diversity target this
year, for 25% of the global director team to be women or nonbinary in five
years' time.
We are also very excited about the progress being made in the financial
services sectors we operate in. We are proud that ESG is at the heart of
Alpha's service offering and that we can support clients in adopting relevant
and meaningful approaches. We look forward to sharing more about our
developments and plans as they progress.
Current trading and outlook
Despite some uncertainty and ongoing challenges as the supply and demand
dynamics in the global consulting market continue to rebalance, client demand
remains robust, and consultant utilisation has improved through the last
quarter of FY 24 and was maintained into the early part of FY 25. While
further improvement in utilisation is required in certain areas of the
business through FY 25, we enter the year with a strong new business
opportunity pipeline, higher sales win levels and a healthy net cash position.
The long-term structural drivers of demand including growth in assets and
insurance policies, regulatory demand, cost pressures, client and societal
expectations, and technology breakthroughs continue to present significant
growth opportunities for us.
We have continued to invest in our people, recognising their importance in our
future growth. The trust and relationships that our people cultivate with our
clients provide significant cross- and joint-selling opportunities between our
sector-focused services. Our people and client relationships are cornerstones
of our business model and organic growth ambitions.
We also continue to see and respond to the strategic growth drivers of North
America and addressing the market opportunity in the newer sectors of
insurance and alternatives. Our selective investments in people, the service
proposition and our business model, make us well placed to capitalise on
improving market conditions.
With the structural drivers of demand remaining in place, our market-leading
consultants, and our highly compelling client proposition, we are well
positioned for the future and remain focused on our ambition to double the
business again by 2028(12).
Luc Baqué
Chief Executive Officer
20 June 2024
(11) Thinking Ahead Institute and Pensions & Investments, "The world's
largest 500 asset managers" (October 2023)
(12) The statement that the Alpha Group's growth plan has an ambition to
double the size of its business by 2028 is aspirational only and should not be
construed as a profit forecast within the meaning of the Takeover Code. There
can be no certainty that Alpha will achieve its ambition, which is subject to
various assumptions, risks and uncertainties that could cause Alpha's growth
to differ materially from its expressed ambition
Chief Financial Officer's report
Group results
Group performance has been resilient this year, navigating a more challenging
and competitive market backdrop.
12 months to 12 months to Change
31 March 2024
31 March 2023
Revenue £235.5m £228.7m 3.0%
Net fee income £233.6m £227.2m 2.8%
Gross profit £78.3m £80.4m (2.6%)
Operating profit £25.1m £28.6m (12.4%)
Adjusted EBITDA £42.2m £46.6m (9.5%)
Adjusted EBITDA margin 18.0% 20.5% (250 bps)
Adjusted profit before tax £38.5m £44.0m (12.5%)
Profit before tax £22.6m £25.8m (12.4%)
Adjusted EPS 24.90p 29.27p (14.9%)
Adjusted diluted EPS 23.34p 27.37p (14.7%)
Basic EPS 13.85p 15.82p (12.5%)
Revenue
In a more competitive market environment, the Group performed resiliently this
year with net fee income up by 2.8% compared to the last financial year, and
4.8% on a constant currency basis, mostly organically. Revenue also grew 3.0%,
including increased rechargeable expenses, compared to last year.
Overall, the Group's revenue and net fee income growth reflects ongoing client
demand across a slightly larger global consulting team on average, set against
the more competitive environment and longer sales cycles generally. We were
pleased to maintain consistent consultant day rates overall, albeit at lower
than target average consultant utilisation, particularly during the first half
summer months. All our geographic regions delivered net fee income growth on
a constant currency basis in the year, with an inorganic contribution from the
acquisition of Shoreline.
The Group's largest geographic region, the UK, delivered good 4.7% organic net
fee income growth on last year. We continued to see robust client demand in
our established practices, retaining our market-leading reputation and
supporting some of the highest profile projects. This included substantial
contributions from our asset and wealth management capabilities in
Investments, Operations and Client & Digital, and UK Alternatives
Consulting also delivering strongly, growing their headcount by over 20% to
78. Our newer UK insurance consulting team consolidated its position this year
after strong growth in recent years. The UK ended the year with total
headcount of 385, down 9 in the year including a small recent restructuring
process given UK market conditions. Overall UK consultant utilisation ended
the year below target utilisation levels, firming closer to target levels
through the first quarter of FY 25.
Within the UK results, while Alpha's data and product solutions business,
Aiviq, delivered flat revenue against last year, it also recently secured a
major, new top-ten global asset management client, underscoring the
market-leading Aiviq technology offering. We are delighted that Aiviq's
proposition has been endorsed in this way alongside recognition from a FinTech
Global Wealth Tech "Top 100" award in the year.
In North America, after almost doubling its top line in the previous year, FY
24 saw a flatter profile with net fee income growing 3.8% on a constant
currency basis and easing 0.6% on a reported basis. Our alternative
investments consulting business, Lionpoint, continued to trade well enjoying
strong client demand and adding 47 new clients in the region. The North
America business expanded its domestic client base, as well as successfully
capturing client demand through a number of cross-selling opportunities with
its existing clients, although it experienced some fee rate compression during
the year. In line with the Group's selective approach to hiring in FY 24,
headcount in North America increased by 15 consultants overall, including
investing in the launch of our Insurance Consulting offering in North America
with two senior team hires. North America witnessed the tougher market
conditions earlier than the rest of the Group and has started FY 25 with the
team well deployed, growing consultant numbers and a strong pipeline of
interesting project opportunities.
Europe & APAC delivered the strongest regional growth in FY 24, with net
fee income increasing by 6.9% on a constant currency basis and 6.1%
overall. Organic net fee income growth was 1.4%, with some rates progression
in Europe, plus the acquisition of Shoreline in APAC. Europe & APAC
headcount remained flat overall, in line with the Group's selective hiring
approach. The Europe & APAC region has started FY 25 well, with good
utilisation being enjoyed across all teams.
Given the more challenging market conditions prevalent this year, the Group
adopted a selective hiring approach, focused on growth areas, and the number
of consultants reached 1,000 by the year end (FY 23: 994). Despite a selective
approach to recruitment we remained committed to our well-established graduate
programme, the future talent of the Group, welcoming a number of graduates
through the year globally.
Group profitability
Group gross profit was £78.3m, £2.1m lower than the prior year (FY 23:
£80.4m). Gross profit margin was 33.5% (FY 23: 35.4%), and consistent with
H1. This primarily reflects reduced average consultant utilisation in the
competitive market environment, alongside consistent day rates on average and
increased costs from selective investment in growing our team while
maintaining a competitive remuneration package, partly offset by active
management of variable costs given performance. Utilisation levels were most
affected through the second quarter's summer months, ticking up through H2,
and reaching close to target levels of 70% to 75% on average globally towards
the year end.
The UK business generated £2.0m less gross profit than last year, at 36.2%
gross margin (FY 23: 40.2%), reflecting lower consultant utilisation levels
than target and the previous year, particularly in the insurance consulting
and asset & wealth management teams, alongside consistent day rates. North
America's gross profit is also lower than last year by £1.7m, generating
31.3% margin (FY 23: 32.9%) reflecting good levels of average consultant
utilisation, some day rate compression in the region given the competitive
market, and a higher cost base accompanying North America team growth. This
includes the establishment of an insurance consulting team in the region
during the year. Europe & APAC grew gross profit to £17.0m (FY 23:
£15.4m), with an improved margin of 32.7% (FY 23: 31.4%) reflecting good
average consultant day rate progression in Europe, partly offset by an easing
in utilisation, particularly in APAC. The North America gross margin saw the
greatest currency headwind in the Group. On a constant currency basis, North
America's gross margin would be broadly flat with the prior year.
Adjusted administration expenses, as detailed in note 3, increased by £2.3m
to £36.1m in the year (FY 23: £33.8m). This increase mainly reflects
investment in the Group's central team in the second half of the prior year
and increased overall spend supporting the larger average consultant headcount
base including further office space and IT licences, partially offset by lower
recruitment spend in the year.
Including the adjusting items, which decreased against the prior year,
administration expenses increased overall to £53.2m (FY 23: £51.7m) on a
statutory basis. The adjusting items, set out in note 3, decreased in the year
to £14.3m (FY 23: £15.8m), reflecting decreased earn-out and deferred
consideration charges, share-based payment charges and intangible asset
amortisation, partially offset by redundancy-related restructuring costs in
the year.
The lower earn-out and deferred consideration charge of £1.1m (FY 23: £2.5m)
reflects payments in the year and last year's net fair value increase in
acquisition liabilities held. Further details on the earn-out and deferred
consideration charges are set out in note 5. The share-based payment charge
also reduced to £7.3m (FY 23: £8.0m), having updated the input assumptions
to reflect FY 24's lower performance, Alpha's lower share price and share
option vests in the period. Further details of the share-based payment charge
and sensitivity analysis are set out in notes 3 and 10.
This year, the Group incurred £0.9m of restructuring costs, relating to the
exit fees and costs involved in a small UK redundancy process. Acquisition and
integration costs were £0.3m (FY 23: £0.3m) as the Shoreline team was
successfully integrated into the Group during the first half. The acquired
intangibles amortisation charge decreased against the prior year, reflecting
some fully amortised intangibles, partly offset by the newly acquired
Shoreline intangibles. Further detail of these adjusting items is set out in
note 3.
The depreciation charge grew to £2.8m (FY 23: £1.9m) reflecting increased
depreciation on a higher lease right-of-use asset. The amortisation of
capitalised development costs was nil (FY 23: £0.2m) as the asset became
fully amortised in the prior year.
Adjusted EBITDA was £42.2m (FY 23: £46.6m) and adjusted EBITDA margin was
18.0% (FY 23: 20.5%), reflecting both the lower gross profit and the higher
adjusted administration expenses. If no adjustment was made for the
share-based payment charge, adjusted EBITDA for the period would be £34.8m
(FY 23: £38.6m) and adjusted EBITDA margin would be 14.9% (FY 23:
17.0%). Operating profit was £25.1m (FY 23: £28.6m) after also charging
increased depreciation.
Currency
Currency translation was a headwind on net fee income and profits during the
year, particularly in North America. In the year, the pound sterling averaged
USD 1.26 (FY 23: USD 1.21) and CAD 1.69 (FY 23: CAD 1.59), which, with some
other smaller currency movements, resulted in an unfavourable net currency
effect on net fee income of £4.4m and on gross profit of £1.3m. On a
constant currency basis, North America net fee income would have grown 3.8%
and Europe & APAC net fee income would have grown 6.9%.
Overall, the Group's net fee income would have grown 4.8% to £238.0m on this
constant currency basis. Similarly, the Group's gross profit would have been
£79.6m and would have reduced 0.9% on a constant currency basis.
Net finance expenses
Net finance expenses fell slightly to £2.5m (FY 23: £2.9m), primarily
reflecting reduced non-underlying finance expenses relating to acquisition
consideration discount unwinding, which decreased given acquisition-related
payments in the period, as set out in note 5. This reduction was partially
offset by increased underlying interest expenses reflecting refinancing fees
on enlarging the Group's revolving credit facility ("RCF") and interest on
periodic RCF drawings, plus additional lease costs.
Adjusted profit before tax was £38.5m (FY 23: £44.0m) after charging
increased depreciation and net underlying finance expenses. Statutory pre-tax
profit was £22.6m (FY 23: £25.8m). The larger decrease in adjusted profits
as compared to statutory profits is driven by the lower level of adjusting
items and non-underlying finance costs.
Taxation
The Group's taxation charge for the year was £6.7m (FY 23: £7.8m),
reflecting the lower taxable profits and the blended tax rate of the
increasingly international jurisdictions in which the Group operates. The
Group's cash tax payment in the year was £7.6m (FY 23: £13.3m), reflecting
increased prior year payments as the Group moved to a quarterly tax payment
cycle in North America that year.
Adjusted profit after tax is shown after adjustments for the applicable tax on
adjusting items as set out in note 3.
Earnings per share
Adjusted earnings per share ("EPS") was 24.90p per share (FY 23: 29.27p) and
adjusted diluted EPS was 23.34p (FY 23: 27.37p), reflecting the adjusted
profit after tax and the increased number of weighted average shares, which
increased as a result of share option exercises in the current and prior
periods, partly offset by the Group's purchase of shares into Alpha's employee
benefit trust ("EBT"). After including the adjusting items, basic earnings per
share was 13.85p (FY 23: 15.82p), while diluted EPS was 12.98p (FY 23:
14.79p), after including the dilutive effect of the share options awards
outstanding.
As at 31 March 2024, 11,227,844 share options (FY 23: 9,996,040) remained
outstanding, with FY 24 grants partly offset by some share options exercised
and forfeited in the year. See note 10 for further detail.
Cash flow and net funds
Cash generated from operations was £20.4m (FY 23: £43.9m) and, after
adjusting for employment-linked acquisition payments, acquisition, integration
and restructuring costs, was £23.6m (FY 23: £46.2m).
Underlying working capital remains well managed, with debtor days within the
typical range, albeit higher than the previous year. The overall operating
cash generation in FY 24 primarily reflects profit share bonus payments
relating to prior years, and their relative size compared to the Group's
profitability this year. These bonus payments include both the payment of FY
23 profit share and the second tranche of deferred FY 22 bonus payments. These
payments alongside the lower performance-adjusted bonus accruals in FY 24
result in an increased movement in working capital in the year. Adjusted cash
conversion is similarly affected and was 60% (FY 23: 104%). We refined the
definitions of adjusted cash generated from operations and adjusted cash
conversion in FY 24 to exclude tax paid in the year, to allow for consistency
in the calculation to exclude tax from both profits and operating cash flows
in line with comparable companies, as detailed in note 3. Given the weightings
and timings of bonus payments, we expect adjusted cash generated from
operations and adjusted cash conversion to return to more normal levels in FY
25.
During FY 24, the Group made payments of £17.0m relating to deferred and
contingent acquisition consideration principally as regards Lionpoint,
including £1.8m of employment-linked amounts. Please see note 5 for further
details.
The Group also provided £3.8m funding to Alpha's employee benefit trust
("EBT") to purchase 1,035,154 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.
Net interest paid was £1.3m (FY 23: £0.5m), reflecting the higher cost of
maintaining and periodically drawing the Group's enlarged RCF to manage the
Group's ongoing currency requirements and RCF refinancing fees paid, partially
offset by interest income from cash balances held.
The Group also capitalised expenditure of £0.3m in relation to the
development of enhancements to Aiviq's client data and analytics software.
Dividends paid increased to £16.2m (FY 23: £12.8m), reflecting the Group's
dividend policy and a consistent FY 24 interim dividend payment.
At the year end, the Group's cash position was £29.4m (FY 23: £59.2m).
During the year, the Group refinanced and upscaled its RCF to a £50.0m
facility to provide additional liquidity, and alongside the net cash position,
provides Alpha further flexibility.
Statement of financial position
The Group's net assets at 31 March 2024 totalled £148.5m (FY 23: £149.3m).
This movement principally arises from the retained profits net of dividends
and other reserves movements including additional share-based payment
reserves, offset by foreign exchange losses on overseas assets. The Group
continues to maintain a strong financial position.
The Group's non-current assets movement principally results from ongoing
amortisation and depreciation charges on intangible assets and right-of-use
assets on leases, partly offset by goodwill and intangibles added as part of
the Shoreline acquisition.
Working capital remains well managed. Trade and other receivables balances
increased in FY 24 through the ongoing growth in the business. Debtor
collections continued to be strong, albeit with debtor days increasing on the
previous year's strong collections and closing balance.
Trade and other payables balances decreased, principally representing lower
performance-adjusted bonus accruals and acquisition liabilities. The decrease
in acquisition-related deferred consideration and earn-out liabilities
reflects Lionpoint deferred and contingent consideration payments, partially
offset by employment-linked consideration as well as the unwinding of
discounting in the year, as disclosed in note 5.
As at 31 March 2024, the Company had 122,009,736 ordinary shares in issue (FY
23: 120,509,736), of which no shares were held in treasury and 7,537,366
shares were held in the Company's EBT to satisfy future option exercises (FY
23: 6,274,380).
Dividends
In view of the recommended cash offer to acquire Alpha by Bidco, a newly
incorporated indirect subsidiary of certain funds managed by Bridgepoint, the
Board is not recommending a final dividend. If the acquisition does not
complete, it is expected that the Board would declare a final dividend in
respect of FY 24 at a later date.
Risk management and the year ahead
The Group's risk management approach includes regular monitoring of
macro-economic and end-market conditions and assessing the potential impacts
across all business areas. In the risk management framework, which was
reviewed during the year, the senior leadership team, including the Chief
Executive Officer and me as Chief Financial Officer, has primary
responsibility for keeping abreast of developments that may affect the
implementation of the Group's strategy and financial performance. This entails
identifying and agreeing the appropriate mitigating actions that should be
taken and ensuring, as far as possible, that those actions are then executed
by the senior management team. The Board as a whole oversees risk and, within
that framework, considers the material risks that the Group faces and agrees
on the principal risks and uncertainties. Alpha has a set of core Company
values, which are embedded globally, that reflect the Group's ethical and
responsible approach to operating and managing the business.
Alpha has navigated well through this more challenging year. While closely
monitoring the ongoing market rebalancing, Alpha continues to enjoy a strong
pipeline of new business opportunities and incrementally improving current
trading. The structural drivers in the sectors in which we operate, which
drive ongoing demand for Alpha's services, remain prevalent. We are confident
in the quality of our people, our excellent market reputation, and business
opportunities to extend the service offering, and therefore the Board looks
forward to further progress ahead.
The Board has considered all of the above factors in its review of going
concern and has been able to conclude the review positively. While cognisant
of potential macro-economic risks and the more competitive environment, the
Group's talented people, widening range of service offerings and international
footprint, together with the long-term structural drivers, position the Group
well.
Summary and current trading
In a more competitive market environment with a longer sales cycle, the Group
performed resiliently in the year. The Group has grown net fee income, while
maintaining consistent consultant day rates.
While the global consulting market continues to rebalance and present some
challenges, a more positive market sentiment is returning, with improving
sales wins over recent months. Utilisation rates ticked up in the final
quarter of FY 24, close to target levels overall, maintaining this level into
the early part of FY 25.
We are very confident in the quality of our people, our excellent market
reputation, and business opportunities to extend the service offering for our
clients further. Accordingly, the Group remains well positioned for the
future.
John Paton
Chief Financial Officer
20 June 2024
Consolidated statement of comprehensive income
For the year ended 31 March 2024
Year ended Year ended
31 March 2024
31 March 2023
Note £'000 £'000
Continuing operations
Revenue 2 235,471 228,717
Rechargeable expenses 2 (1,846) (1,562)
Net fee income(13) 2 233,625 227,155
Cost of sales 2 (155,328) (146,796)
Gross profit 2 78,297 80,359
Administration expenses (53,219) (51,723)
Operating profit 25,078 28,636
Finance income 346 364
Finance expense (2,854 (3,229)
Profit before tax 22,570 25,771
Taxation (6,723) (7,810)
Profit for the year 15,847 17,961
Items that may be reclassified to profit or loss:
Foreign exchange differences on translation of foreign operations (1,966) 3,510
Total other comprehensive income for the year (1,966) 3,510
Total comprehensive income for the year 13,881 21,471
Basic earnings per share (p) 4 13.85 15.82
Diluted earnings per share (p) 4 12.98 14.79
( )
(13) Net fee income, adjusted EBITDA and other alternative performance
measures are defined and reconciled in note 3
Consolidated statement of financial position
As at 31 March 2024
As at As at
31 March 2024
31 March 2023
Note £'000 £'000
Assets
Non-current assets
Goodwill 105,179 103,676
Intangible fixed assets 25,073 27,588
Property, plant and equipment 947 1,113
Right-of-use assets 2,333 4,008
Deferred tax assets 2,666 3,033
Capitalised contract fulfilment costs 76 108
Total non-current assets 136,274 139,526
Current assets
Trade and other receivables 6 42,185 34,128
Cash and cash equivalents 29,392 59,215
Total current assets 71,577 93,343
Current liabilities
Trade and other payables 7 (46,373) (60,539)
Provisions (3,308) (3,326)
Corporation tax (1,526) (1,321)
Lease liabilities (1,413) (2,104)
Total current liabilities (52,620) (67,290)
Net current assets 18,957 26,053
Non-current liabilities
Deferred tax liabilities (2,442) (2,783)
Other non-current liabilities 8 (3,149) (11,400)
Lease liabilities (1,147) (2,057)
Total non-current liabilities (6,738) (16,240)
Net assets 148,493 149,339
Equity
Issued share capital 9 92 90
Share premium 119,438 119,438
Foreign exchange reserve 5,026 6,992
Other reserves 18,777 17,258
Retained earnings 5,160 5,561
Total shareholders' equity 148,493 149,339
Consolidated statement of cash flows
For the year ended 31 March 2024
Year ended Year ended
31 March 2024 31 March 2023
Note £'000 £'000
Cash flows from operating activities:
Profit for the year 15,847 17,961
Taxation 6,723 7,810
Finance income (346) (364)
Finance expenses 2,854 3,229
Loss/(profit) from exchange rate movements on cash held 448 (2,364)
Depreciation charge 2,769 1,933
Profit on disposal of fixed assets (44) (14)
Amortisation of intangible fixed assets 4,325 4,762
Share-based payment charge 10 6,663 7,023
Increase/(decrease) in provisions 18 (19)
Working capital adjustments:
Increase in trade and other receivables (7,679) (3,834)
(Decrease)/increase in trade and other payables (11,170) 7,752
Cash generated from operations 20,408 43,875
Tax paid (7,633) (13,285)
Net cash generated from operating activities 12,775 30,590
Cash flows from investing activities:
Interest received 346 364
Acquisition consideration payments, including deferred and contingent, net of 5 (16,981) (20,829)
cash acquired
Purchase of intangible assets (311) (319)
Purchase of property, plant and equipment, net of disposals (503) (860)
Net cash used in investing activities (17,449) (21,644)
Cash flows from financing activities:
Net settlement of vested share options (457) (343)
Purchase of own shares by the EBT (3,843) (1,139)
Drawdown of revolving credit facility 10,150 12,500
Repayment of revolving credit facility (10,150) (12,500)
Interest and bank loan fees (1,254) (482)
Principal lease liability payments (1,989) (1,315)
Interest on lease liabilities (308) (216)
Dividends paid (16,246) (12,774)
Net cash used in financing activities (24,097) (16,269)
Net decrease in cash and cash equivalents (28,771) (7,323)
Cash and cash equivalents at beginning of the year 59,215 63,516
Effect of exchange rate movements on cash held (1,052) 3,022
Cash and cash equivalents at end of the year 29,392 59,215
Consolidated statement of changes in equity
For the year ended 31 March 2024
Issued share capital Share premium Foreign exchange reserve Other reserves Retained earnings Total shareholders' equity
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2022 89 119,438 3,482 9,361 375 132,745
Comprehensive income
Profit for the year - - - - 17,961 17,961
Foreign exchange differences on translation of foreign operations - - 3,510 - - 3,510
Transactions with owners
Shares issued (equity) 1 - - - (1) -
Purchase of own shares by the EBT - - - (1,139) - (1,139)
Share-based payment charge - - - 7,023 - 7,023
Net settlement of vested share options - - - (343) - (343)
Current tax recognised in equity - - - 1,486 - 1,486
Deferred tax recognised in equity - - - 870 - 870
Dividends - - - - (12,774) (12,774)
As at 31 March 2023 90 119,438 6,992 17,258 5,561 149,339
Comprehensive income
Profit for the year - - - - 15,847 15,847
Foreign exchange differences on translation of foreign operations - - (1,966) - - (1,966)
Transactions with owners
Shares issued (equity) 2 - - - (2) -
Purchase of own shares by the EBT - - - (3,843) - (3,843)
Share-based payment charge - - - 6,663 - 6,663
Net settlement of vested share options - - - (457) - (457)
Current tax recognised in equity - - - 569 - 569
Deferred tax recognised in equity - - - (1,413) - (1,413)
Dividends - - - - (16,246) (16,246)
As at 31 March 2024 92 119,438 5,026 18,777 5,160 148,493
Issued share capital
Issued share capital represents the nominal value of share capital subscribed.
Share premium
The share premium account is used to record the aggregate value of premiums
paid when the Company's shares are issued at a premium, net of associated
share issuance 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 net settlement of vested share options, equity-settled
acquisition consideration reserves, and purchases of the Company's own shares
by the employee benefit trust ("EBT").
Retained earnings
The retained earnings reserve represents cumulative net profits and losses
recognised in the consolidated statement of comprehensive income less
dividends paid.
1. Basis of preparation
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 March 2024 or 2023 but is derived
from those accounts. Statutory accounts for the year ended 31 March 2023 have
been delivered to the registrar of companies, and those for the year ended 31
March 2024 will be delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include a reference
to any matters to which the auditor drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
These condensed preliminary financial statements have been prepared in
accordance with UK-adopted international accounting standards, in line with
the Group's statutory accounts.
2. Segmental information
Group management has determined the operating segments by considering the
segment information that is reported internally to the chief operating
decision maker, the Board of Directors. For management purposes, the Group is
currently organised into three geographical operating divisions: UK, North
America and Europe & APAC, which allows the Board to evaluate the nature
and financial effects of the business activities of the Group and the economic
environments in which it operates.
The Group's operations all consist of one type: specialist consultancy and
related services to the financial services industry. Revenues associated with
software licensing arrangements were not significant in both the current and
prior years. Therefore, the Directors consider that disaggregating revenue by
operating segments is most relevant to depict how the nature, amount, timing
and uncertainty of revenue and cash flows may be affected by economic factors.
FY 24 UK North Europe & APAC(16) Total
America(15)
£'000 £'000 £'000 £'000
Revenue 91,547 91,359 52,565 235,471
Rechargeable expenses (353) (813) (680) (1,846)
Net fee income 91,194 90,546 51,885 233,625
Cost of sales (58,190) (62,219) (34,919) (155,328)
Gross profit 33,004 28,327 16,966 78,297
Margin on net fee income(14) (%) 36.2% 31.3% 32.7% 33.5%
FY 23 UK North Europe & APAC(16) Total
America(15)
£'000 £'000 £'000 £'000
Revenue 87,467 91,815 49,435 228,717
Rechargeable expenses (327) (717) (518) (1,562)
Net fee income 87,140 91,098 48,917 227,155
Cost of sales (52,117) (61,104) (33,575) (146,796)
Gross profit 35,023 29,994 15,342 80,359
Margin on net fee income(14) (%) 40.2% 32.9% 31.4% 35.4%
During the year, the Group did not have any customers that comprised more than
10% of the Group's revenues (FY 23: nil).
(14) Margin on net fee income is gross profit expressed as a percentage of net
fee income. Please refer to note 3 for further detail on the Group's APMS
(15) Within North America, the United States generated revenue of £78.0m (FY
23: £77.1m) and Canada generated revenue of £13.4m (FY 23: £14.7m)
(16) Within Europe & APAC, France is a material country and generated
revenue of £20.1m (FY 23: £18.7m)
3. Reconciliations to alternative performance measures
Alpha uses alternative performance measures ("APMs") that are not defined
under the requirements of IFRS. The APMs, including net fee income, margin on
net fee income, adjusted EBITDA, adjusted profit before tax, adjusted EPS,
adjusted cash generated from operations, adjusted cash conversion, organic net
fee income growth and constant currency growth, are provided to allow
stakeholders a further understanding of the underlying trading performance of
the Group and aid comparability between accounting periods. These measures
have been presented consistently across reporting periods. They are not
considered a substitute for, or superior to, IFRS measures, and may not be
comparable across other companies. The exclusion of adjusting items in the
Group's APMs may result in adjusted profitability being materially higher when
compared with the nearest equivalent statutory 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 to revenue on the face of the consolidated statement of
comprehensive income and by segment in note 2.
Profit margins
Margin on net fee income and adjusted EBITDA margin are calculated using gross
profit and adjusted EBITDA, expressed as a percentage of net fee income. These
represent the margin that the Group earns on its productive output, excluding
nil or negligible margin expense recharge to clients over which the Group has
limited control, and allows comparability of business output between periods.
Such adjusted margins are used by senior management and the Board to assess
the performance of the Group.
Reconciliation of adjusted profit before tax, adjusted operating profit and
adjusted EBITDA
FY 24 FY 23
Note £'000 £'000
Profit before tax 22,570 25,771
Amortisation of acquired intangible assets 4,325 4,576
Profit on disposal of fixed assets (44) (14)
Share-based payment charge 10 7,337 7,950
Earn-out and deferred consideration(17) 5 1,122 2,525
Acquisition and integration costs 292 331
Restructuring costs 945 -
Foreign exchange losses 331 459
Adjusting items 14,308 15,827
Non-underlying finance expenses 1,621 2,417
Adjusted profit before tax 38,499 44,015
Net underlying finance expenses 887 448
Adjusted operating profit 39,386 44,463
Depreciation charge 2,769 1,933
Amortisation of capitalised development costs - 186
Adjusted EBITDA 42,155 46,582
Adjusted EBITDA margin (%) 18.0% 20.5%
(17) The earn-out and deferred consideration charge in the year comprises an
employment-linked consideration charge of £1.1m, an associated social
security charge of £0.1m, offset by a £0.1m fair value adjustment. Refer to
note 5 for further details
Adjusting items
To assist in understanding the underlying performance of the Group and aid
comparability between periods, management applies judgement to exclude certain
expense items from the Group's APMs, which are deemed to warrant separate
disclosure due to either their nature or size. Such adjusting items as
described below 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 Group's share-based payment charge and related social security taxes are
excluded from adjusted profit measures. This allows for better comparability
between periods given the complexity of the assumptions underlying the
calculation and the multi-year effect of mid-cycle changes to certain
assumptions being adjusted for on a cumulative basis, sometimes resulting in
material fluctuations in the charge between periods that are not reflective of
the underlying operational performance of the business. The charge and related
social security taxes are also subject to external factors, such as the
Group's share price, over which the Directors have less day-to-day influence
compared to other more directly controllable factors. This approach has been
applied consistently across reporting periods. Note 10 sets out further
details of the employee share-based payment charge calculation under IFRS 2.
The Group will continue to assess the status of this charge as an adjusting
item in the Group's financial statements, considering the development of the
charge, the Group and its remuneration policies. If no adjustment was made for
the share-based payment charge, adjusted EBITDA for the period would be
£34.8m (FY 23: £38.6m) and adjusted EBITDA margin would be 14.9% (FY 23:
17.0%).
As per note 5, the acquisitions of Shoreline in the year, and Lionpoint in FY
22, involved both deferred and contingent payments. Some of these acquisition
payments are dependent on the ongoing employment of certain members of the
respective senior management teams, and this element is expensed annually over
several years until the date of payment. These costs have been treated as
adjusting items as they are acquisition related, reflecting the acquisition
terms rather than the Group's trading performance. Additionally, where there
is a change to the expected future payments or discount rates, a fair value
adjustment to the liability is recorded in the income statement. Whilst these
acquisition-related costs will recur in the short term through the earn-out
periods, the adjustment allows comparability of underlying productive output
and operating performance of the Group across reporting periods.
Other acquisition and integration costs expensed in the year relate to the
acquisition of Shoreline, including due diligence, legal fees and integration
costs. Whilst further similar acquisition and integration 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.
Restructuring costs in FY 24 relate to a specific UK-focused redundancy
programme, which aims to support returning the business to more normal levels
of utilisation and profitability, given the more competitive market
environment. These costs are non-recurring and, therefore have been treated as
an adjusting item to allow comparability of the underlying performance of the
Group.
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. The foreign exchange movements were immaterial in
both the current and prior years.
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 payment charge, acquisition-related payments and costs,
non-underlying finance expenses and other non-underlying expenses. This
measure allows 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 fees on bank
loans and interest 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 the depreciation charge.
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 is 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 the
adjusting items. A nil effective tax rate has been applied to earn-out and
deferred consideration, acquisition costs and non-underlying finance expenses
totalling £3.0m as these items are treated as capital in nature and are
therefore non-deductible for tax purposes. An overall effective tax rate of
26.0% has been applied to all other adjusting items totalling £12.9m,
reflecting the tax rates in the geographical locations to which the items
relate.
FY 24 FY 23
£'000 £'000
Adjusted profit before tax 38,499 44,015
Tax charge (6,723) (7,810)
Tax impact of adjusting items (3,289) (2,976)
Adjusted profit after tax 28,487 33,229
Adjusted earnings per share
Adjusted earnings per share ("EPS") is calculated by dividing the adjusted
profit after tax for the year attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the year.
Adjusted diluted EPS is calculated by dividing adjusted profit after tax by
number of shares as above, adjusted for the impact of potentially dilutive
ordinary shares. Potentially dilutive ordinary shares are only treated as
dilutive when their conversion to ordinary shares would decrease EPS (or
increase loss per share). Refer to note 4 for further detail.
Adjusted EPS FY 24 FY 23
Adjusted EPS (p) 24.90 29.27
Adjusted diluted EPS (p) 23.34 27.37
Reconciliation of adjusted administration expenses
To express them on the same basis as the APMs described above, adjusted
administration expenses are stated before adjusting items, depreciation and
amortisation of capitalised development costs and are used by the Board to
monitor the underlying administration expenses of the business in calculating
adjusted EBITDA.
FY 24 FY 23
£'000 £'000
Administration expenses 53,219 51,723
Adjusting items (14,308) (15,827)
Depreciation charge (2,769) (1,933)
Amortisation of capitalised development costs - (186)
Adjusted administration expenses 36,142 33,777
Adjusted cash generated from operations
Adjusted cash generated from operations excludes the operating cash flow
impact of adjusting items, such as employment-linked acquisition payments and
associated social security taxes, other acquisition and integration costs paid
in the period, and restructuring costs. This is to reflect the Group's
underlying operating cash flows on a consistent basis with adjusted profit
measures.
FY 24 FY 23(18)
£'000 £'000
Cash generated from operations 20,408 43,875
Employment-linked acquisition payments(19) 1,923 1,981
Acquisition and integration costs 292 331
Restructuring costs 945 -
Adjusted cash generated from operations 23,568 46,187
(18) The Group has refined the definition of adjusted cash generated from
operations to exclude tax paid in the year. This allows for greater
consistency as adjusted operating profit, used as the denominator in the
calculation for adjusted cash conversion, is before tax. Additionally, this
approach is in line with comparable companies and allows ease of comparison
against these companies. The FY 23 comparative has been restated on this new
basis to allow for comparability between years
(19) Employment-linked acquisition payments of £1.9m comprises £1.8m of
acquisition consideration classified as employment-linked and £0.1m of
associated social security payments
Adjusted cash conversion
Cash conversion is stated as cash generated from operations expressed as a
percentage of operating profit.
Adjusted cash conversion is stated as adjusted cash generated from operations
expressed as a percentage of adjusted operating profit.
FY 24 FY 23(20)
Cash conversion 81% 153%
Adjusted cash conversion 60% 104%
(20) FY 23 cash conversion and adjusted cash conversion have been restated to
exclude tax paid in the year, reflecting the Group's refined definition of
adjusted cash generated from operations
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 1.8% (FY 23: 39.6%) for the current period
represents FY 24 net fee income less £2.3m of net fee income attributable to
Shoreline, treated as inorganic.
Constant currency growth
The Group operates in multiple jurisdictions and generates revenues and
profits in various currencies. Results are translated on consolidation at the
average 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
changes in exchange rates.
Currency translation had an impact on both net fee income and gross profit in
the year, primarily in North America, as a result of a strengthening British
pound sterling through the year. In the year, British pound sterling averaged
USD 1.26 (FY 23: USD 1.21), and CAD 1.69 (FY 23: CAD 1.59), whilst it was flat
against the euro at an average of €1.16 (FY 23: €1.16).
On a constant currency basis, Group net fee income would be £238.0m, which is
growth of 4.8% overall. Similarly, North America net fee income would be
£94.5m and Europe & APAC would be £52.3m which would be growth of 3.8%
and 6.9% respectively.
On a similar basis the Group's gross profit would have been £79.6m
representing a 0.9% decrease, as opposed to a 2.6% decrease on a reported
basis.
4. 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 year attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year. In the
calculation of diluted EPS the Group applies the treasury share method to
include the impact of potentially dilutive shares arising from the Group's
share option plans.
In order to reconcile to the adjusted profit after tax, the same adjustments
as set out in note 3 have been made to the Group's profit for the financial
year. The profits and weighted average number of shares used in the
calculations are set out below:
Note FY 24 FY 23
Basic and diluted EPS
Profit for the financial year (£'000) 15,847 17,961
Weighted average number of ordinary shares in issue ('000) 114,398 113,531
Number of dilutive shares ('000) 7,658 7,883
Weighted average number of ordinary shares, including dilutive shares ('000) 122,056 121,414
Basic EPS (p) 13.85 15.82
Diluted EPS (p) 12.98 14.79
Adjusted EPS and adjusted diluted EPS
Adjusted profit after tax (£'000) 3 28,487 33,229
Weighted average number of ordinary shares in issue ('000) 114,398 113,531
Number of dilutive shares ('000) 7,658 7,883
Weighted average number of ordinary shares, including dilutive shares ('000) 122,056 121,414
Adjusted EPS (p) 24.90 29.27
Adjusted diluted EPS (p) 23.34 27.37
5. Acquisition of businesses
Acquisitions in the year
Shoreline
On 1 May 2023, the Group reached an agreement to acquire 100% of the issued
share capital of Shoreline Consulting Pty Ltd and Shoreline Consolidated Pty
Ltd and its subsidiaries (together, "Shoreline"), a boutique consultancy that
provides services to the asset and wealth management sector in APAC, on a cash
free, debt free basis. The Directors consider that the acquisition enables
Alpha to reinforce our position and take advantage of opportunities in the
APAC region.
The maximum potential cash consideration payable by the Group pursuant to the
acquisition agreement was AUD 13.0m (£6.8m), allocated between AUD 8.0m
(£4.2m) non-contingent cash consideration and a contingent earn-out structure
up to a maximum of AUD 5.0m (£2.6m), payable in several instalments.
Subsequent to the acquisition date, in light of market conditions and
performance, an agreement with the founders was reached to modify the terms of
the earn-out agreement. This agreement has reduced the maximum amount of
earn-out consideration available from AUD 5.0m (£2.6m) to AUD 3.1m (£1.6m)
with modified earn-out targets, payable in July 2026, 2027 and 2028.
The fair value of consideration recognised on the date of acquisition,
excluding employment linked amounts, amounted to AUD 8.2m (£4.3m), of which
AUD 4.5m (£2.4m) relates to initial cash consideration paid, AUD 0.2m
(£0.1m) relates to additional amounts paid in the year in relation to
completion working capital, AUD 2.4m (£1.2m) relates to deferred
consideration, and AUD 1.1m (£0.6m) relates to discounted contingent
consideration.
Initial consideration was funded from the Group's cash reserves, with any
remaining deferred and contingent consideration amounts expected to be settled
in cash, with the option to settle a portion of the deferred amounts in the
Group's ordinary shares.
A summary of the purchase consideration, net assets acquired, identifiable
intangible assets and goodwill is set out below. These fair values are
determined by using established estimation techniques such as income-based
discounted cash flow models.
Shoreline Book values Fair value adjustments Values on acquisition
£'000 £'000 £'000
Acquiree's net assets at the acquisition date:
Customer relationships - 1,729 1,729
Trade and other receivables 768 - 768
Cash and cash equivalents 92 - 92
Trade and other payables (636) - (636)
Deferred tax asset/(liability) 54 (432) (378)
Net identifiable assets acquired 278 1,297 1,575
Cash consideration relating to business combination 4,286
Goodwill on acquisition 2,711
Of the total maximum potential amounts payable, £0.9m was classified as
employment-linked because these payments are conditional on the continuing
employment of certain Shoreline employees. These employment-linked acquisition
payments are expensed through profit or loss proportionately until the
relevant payment date, based on the amounts expected to be paid, taking into
consideration expected performance against earn-out targets. During the year,
the Group has expensed £0.3m in relation to these employment-linked payments
through the consolidated statement of comprehensive income, with £0.1m paid
in the year.
Deferred and contingent consideration is discounted to fair value. Discount
unwinding is recognised as a finance expense proportionately across the
periods until final payment. During the year, £0.1m of discount unwinding was
expensed as a non-underlying finance cost in relation to the Shoreline
acquisition consideration.
A fair value adjustment of £0.1m was recognised in the consolidated statement
of comprehensive income at 31 March 2024 to reflect the modified earn-out
agreement and revised payment timings described above.
As consideration for the acquisition of Shoreline is payable in Australian
dollars, foreign exchange gains and losses are recognised at each reporting
date in relation to translating these liabilities into pound sterling. In the
period, the Group recognised a small foreign exchange gain through other
comprehensive income in relation to the re-translation of these liabilities.
As at 31 March 2024, a £2.1m liability is recorded, of which £0.9m is
current and £1.2m is non-current.
Shoreline contributed £2.3m to the Group's revenue in the year and had an
immaterial impact on the Group's profit after tax for the year from the date
of acquisition to 31 March 2024. If the acquisition of Shoreline had been
completed on 1 April 2023, Group revenues for the year would have been
£235.7m with an immaterial impact on the Group profits after tax, without
adjustment to amortisation assumptions.
Acquisition and integration costs of £0.3m related to the Shoreline
acquisition are included within administration expenses as detailed in note 3.
Acquisitions in previous years
Lionpoint
As at 31 March 2023, the Group held a liability of £24.9m 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 year, the Group has expensed
£0.8m 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 year, £1.5m of discount unwinding was
expensed as a non-underlying finance cost in relation to the Lionpoint
acquisition consideration.
During the year, the Group made deferred and contingent Lionpoint acquisition
payments totalling £16.3m. Of these payments, £1.7m relates to
employment-linked consideration, and is presented within cash from operating
activities, with the remaining £14.6m presented within cash used in investing
activities in the consolidated 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 pound sterling. In the year, the Group
recognised a foreign exchange profit of £0.5m in relation to the
re-translation of these liabilities.
As at 31 March 2024, a £10.4m liability is recorded, of which £10.1m is
current and £0.3m is non-current.
The below table summarises the movements in the deferred and contingent
consideration liabilities to 31 March 2024:
Shoreline Lionpoint Total
£'000 £'000 £'000
Balance as at 1 April 2023 - 24,949 24,949
Additions 1,824 - 1,824
Employment-linked consideration 318 817 1,135
Payments in the year(21) (57) (16,328) (16,385)
Unwinding of discounting 127 1,494 1,621
Fair value adjustment (72) - (72)
Foreign exchange gains (36) (522) (558)
Balance as at 31 March 2024 2,104 10,410 12,514
Represented by:
Current 883 10,070 10,953
Non-current 1,221 340 1,561
Balance as at 31 March 2024 2,104 10,410 12,514
(21) Deferred and contingent acquisition payments of £16.4m includes £1.8m
of employment-linked consideration, which is reported in net cash generated
from operating activities in the consolidated statement of cash flows.
Additionally, acquisition payments reported within cash flows from investing
activities in the consolidated statement of cash flows includes £2.4m paid
upon completion of the acquisition of Shoreline, net of cash acquired, which
is not included in the table above
As at 31 March 2024, the Group held a total liability of £12.5m in relation
to future deferred and contingent consideration payable for acquisitions. Of
this liability at the balance sheet date, £2.4m relates to deferred
consideration and the remaining £10.1m relates to contingent consideration.
Within these deferred and contingent consideration liabilities, £1.9m relates
to employment-linked amounts.
The fair value of acquisition earn-outs is no longer considered to be an area
of significant estimation uncertainty given proximity to and more certainty
around the Lionpoint final earn-out payment. The fair value of the earn-out
liability held in relation of Shoreline is also not considered to have a
material level of estimation uncertainty to the value of the liability held at
31 March 2024.
6. Trade and other receivables
FY 24 FY 23
£'000 £'000
Amounts due within one year:
Trade receivables 34,190 26,781
Less: allowance for expected credit losses (685) (657)
Trade receivables - net 33,505 26,124
Other receivables 1,080 1,194
Capitalised contract fulfilment costs 753 1,101
Prepayments 2,478 1,999
Accrued income 4,369 3,710
Total amounts due within one year 42,185 34,128
Trade receivables are non-interest bearing and generally have a 30- to 60-day
term. Due to their short maturities, the carrying amount of trade and other
receivables is a reasonable approximation of their fair value. Trade
receivables have increased in the year through the ongoing growth of the
business with higher debtor days at 53 days (FY 23: 43 days) against strong
collections in the prior year.
7. Trade and other payables
Note FY 24
FY 23
£'000 £'000
Trade payables 4,400 5,156
Accruals 18,929 29,880
Deferred income 1,756 796
Social security tax on share options 10 2,075 1,669
Taxation and social security 5,731 4,734
Other payables 2,529 2,277
Earn-out and deferred consideration 5 10,953 16,027
Total amounts owed within one year 46,373 60,539
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 Group's trade
payables payment policy is to provide payment within the agreed terms, which
is generally 30 days from the date of receipt of invoice.
The decrease in accruals reflects the payment in the year of both the FY 23
profit share and the second tranche of deferred FY 22 payments, as well as a
lower performance-adjusted bonus accrual amounts for FY 24.
The earn-out and deferred consideration liability comprises the amounts due
within one year relating to the Lionpoint and Shoreline acquisitions. Refer to
note 5 for further detail.
8. Other non-current liabilities
Note FY 24 FY 23
£'000
£'000
Earn-out and deferred consideration 5 1,561 8,922
Deferred income 156 213
Social security tax on share options 10 1,432 1,640
Other non-current liabilities - 625
Total amounts owed after one year 3,149 11,400
Earn-out and deferred consideration relates to future deferred and contingent
earn-out payments to be made for the acquisition of Lionpoint and Shoreline.
Given the passage of time, the third Lionpoint deferred and contingent
consideration payments now fall due within 12 months from the balance sheet
date. Refer to note 5 for further detail.
Deferred income recognises contract liabilities arising from the Group's
revenue-generating activities relating to payments received in advance of
performance delivered under a contract. Deferred income recognised as
non-current entirely relates to contracts held within the Aiviq business,
where revenue is sometimes recognised over a contractual licence period of
greater than one year.
Other non-current liabilities fell to nil in the year as the remaining
deferred element of FY 23 bonuses for certain directors and senior management
globally now falls due within 12 months from the reporting date.
9. Called up share capital
FY 24 FY 23
Number Number
Allotted, called up and fully paid 122,009,736 120,509,736
Ordinary 0.075p shares (1 vote per share)
FY 24 FY 23
£ £
Allotted, called up and fully paid 91,507 90,382
Ordinary 0.075p shares (1 vote per share)
Movements in share capital during the year ended 31 March 2024:
£
Balance as at 1 April 2023 90,382
120,509,736 ordinary shares of 0.075p each
Issued shares (i) 1,125
Balance as at 31 March 2024 91,507
122,009,736 ordinary shares of 0.075p each
(i) During the year, a total of 1,500,000 ordinary shares were issued by the
Group, all of which were issued to the employee benefit trust ("EBT") for
future satisfaction of share option awards.
Alpha employee benefit trust
The Group held 7,537,366 (FY 23: 6,274,380) 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. The EBT has waived all dividend
and voting rights in respect of these shares. Therefore, the number of shares
with exercisable voting rights at 31 March 2024 was 114,472,370 (FY 23:
114,235,356).
During the year, 1,500,000 ordinary shares were transferred by the Company to
the EBT for potential future satisfaction of share incentive plans through the
issuance of new shares at nominal value. Further, the EBT purchased a total of
1,035,154 shares from the market in the year for a total of £3.8m, which was
funded by the Group and is accounted for as a deduction from other reserves.
In the year, 1,272,168 shares held in the EBT were utilised for employee share
option exercises.
Treasury shares
The Group held nil (FY 23: nil) shares in treasury.
10. 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 years, 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 total shareholder return ("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.
As disclosed last year, the Remuneration Committee approved performance
conditions for FY 23 awards, which further 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 11.25% or more to trigger a
maximum award, or 7.5% to trigger a 66% award, with a linear application of
awards between these levels; (b) personal adherence to corporate values and
risk policy; and (c) specific business unit EBITDA, or other personal targets
and goals. These criteria were also applied to FY 24 awards granted in the
year.
Awards to senior management also contain a market condition requiring the
Group to achieve a TSR over three years in excess of the mean TSR delivered by
a peer group of comparable companies.
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 are usually equity settled.
The employee incentive plan
In addition to the MIP, the Board has previously put in place a medium-term
employee incentive plan ("EIP"). Under the EIP, a broad base of the Group's
employees has been granted share options or share awards over a small number
of shares. The EIP is structured as is most appropriate under the local tax,
legal and regulatory rules in the key jurisdictions and therefore varies
between those jurisdictions. No EIP awards were made in the current or prior
years.
Movements in the year
During the year ended 31 March 2024, a total of 2,805,590 share option and
award grants were made to employees and senior management (FY 23: 3,153,014).
The weighted average of the estimated fair values of these options awarded in
the year is £3.23 per share (FY 23: £3.14).
During the year 3,231,673 MIP and EIP awards vested following the satisfaction
of performance conditions. The 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
regional or individual budgetary performance conditions were met in full or
part, in their respective year of grant. Of these vested awards, 1,148,787
have been exercised, with a further 229,798 awards that vested in previous
periods also exercised in the year. Of these total 1,378,585 options
exercised, the Group settled 1,272,168 through shares transferred from the
Group's EBT, with a further 106,417 options retained for net tax settlement.
The weighted average share price at the date of these exercises was £3.80.
During the year, 195,201 share options were forfeited or as a result of
leavers before vesting.
Of the 2,129,394 share options exercisable at the year end, 2,082,886 share
options vested in the year. The remaining vested award holders have a further
six to seven-year period, from the date of vesting, in which to exercise their
vested awards.
Details of the share option awards made are as follows:
FY 24
Number of
share options
Outstanding at the beginning of the year 9,996,040
Granted during the year 2,805,590
Exercised during the year (1,378,585)
Forfeited during the year (195,201)
Expired during the year -
Outstanding at the year end 11,227,844
Exercisable at the year end 2,129,394
The weighted average exercise price for all options outstanding in both the
current and prior years was nominal. The options outstanding as at 31 March
2024 had a weighted average remaining contractual life of 1.2 years (FY 23:
1.7 years).
During the year ended 31 March 2024, options were granted in July 2023 and
January 2024 to certain employees and senior management.
MIP share options with an external market condition were valued at award using
the Monte Carlo option pricing model. The model simulates a variety of
possible results, across 10,000 iterations for each of the options, by
substituting a range of values for any factor that has inherent uncertainty
over a number of scenarios using a different set of random values from the
probability functions. The model takes any market-based performance conditions
into account and adjusts the fair value of the options based on the likelihood
of meeting the stated vesting conditions.
MIP share options without external market conditions and EIP share options
were valued at award using a Black-Scholes model.
The inputs to these models in the period were as follows:
FY 24
Weighted average share price at grant date £3.98
Exercise price Nominal
Volatility 26.42%
Weighted average share option life 4 years
Risk free rate 4.93%
Expected dividend yield 3.00%
Volatility is calculated based on the relative rate at which Alpha's share
price moves up and down. It is derived from calculating the annualised
standard deviation of the daily changes in share price. 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 £7.3m (FY 23: £8.0m) in the current
year, comprising £6.7m (FY 23: £7.0m) in relation to equity-settled
share-based payments, and £0.6m (FY 23: £1.0m) relating to relevant social
security taxes.
Given the more challenging market environment and the Group's performance in
FY 24, in April 2024, the Remuneration Committee considered the vesting of FY
24 awards to Executive Directors and senior management of the Group. It was
determined that the overall vesting levels of the FY 24 share options awards
would be significantly lower than FY 23. This has been reflected in the
calculation of the share-based payment charge in the year as well as the
associated social security costs.
The combined carrying value of current and non-current liabilities relating to
social security tax on share options as at 31 March 2024 is £3.5m (FY 23:
£3.3m) of which £2.1m was current and £1.4m was non-current. A £0.6m
charge was recognised in the consolidated statement of comprehensive income in
the year, offset by £0.4m of payments. 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 analyst research and applicable future tax rates. For
these purposes, the share price is updated at each reporting period to reflect
historical trends, and is assumed to grow in line with the estimated future
performance of the business.
If the estimated future share price assumption were to increase by 30%, the
social security costs in the period would increase by £0.4m. Were the share
price assumption to reduce by 30% the charge would reduce by £0.4m.
If the estimated number of share options expected to forfeit annually were to
decrease by 3% for all outstanding share options, the share-based payment
charge in the year would increase by £0.7m. If estimated annual forfeits were
to increase by 3%, the charge in the year would reduce by £0.7m.
-ENDS-
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