Alpha Fin. Markets - Interim Results
23/11/2022 07:00
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RNS Number : 2828H Alpha Fin Markets Consulting plc 23 November 2022
23 November 2022
Alpha Financial Markets Consulting plc
("Alpha", the "Company" or the "Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022
Double-digit organic growth across all regions
Alpha Financial Markets Consulting plc (AIM:AFM), a leading global provider of
specialist consultancy services to the asset management, wealth management and
insurance industries, is pleased to report its unaudited results for the six
months ended 30 September 2022 ("H1 23").
Financial Highlights(1)
· Revenue increased by 57.3% to £107.6m (H1 22: £68.4m) and net fee
income(2) increased by 56.5% to £107.0m (H1 22: £68.4m) or 48.4%, on a
constant currency basis. On an organic(3) basis, net fee income grew by 45.3%
· Gross profit increased by 45.3% to £38.4m (H1 22: £26.5m) at 35.9%
margin(2) (H1 22: 38.7%), reflecting utilisation normalising to target levels,
alongside continued investment in our growing team
· Adjusted(2) EBITDA increased by 45.6% to £22.5m (H1 22: £15.4m),
with 21.0% margin largely consistent with FY 22's 21.5% (H1 22: 22.6%)
· Adjusted profit before tax increased by 47.2% to £21.3m (H1 22:
£14.4m)
· Adjusted earnings per share increased by 43.0% to 14.09p (H1 22:
9.85p)
· On a statutory basis, profit before tax was £14.2m (H1 22: £4.2m)
and basic earnings per share increased to 9.10p (H1 22: 0.87p) after deducting
adjusting items
· Adjusted cash generated from operating activities was £4.2m (H1 22:
£8.5m) with specific H1 cash outflows, alongside good underlying working
capital management
· Robust balance sheet with a net cash balance of £40.3m as at 30
September 2022 (31 March 2022: £63.5m), providing flexibility for Alpha's
continued growth strategy
· Interim dividend of 3.70p per share declared (H1 22: 2.90p),
reflecting the Board's confidence in the business
6 months to 6 months to Change
30 Sep 2022 30 Sep 2021
Revenue £107.6m £68.4m 57.3%
Gross profit £38.4m £26.5m 45.3%
Adjusted EBITDA £22.5m £15.4m 45.6%
Adjusted profit before tax £21.3m £14.4m 47.2%
Profit before tax £14.2m £4.2m 235.6%
Adjusted EPS 14.09p 9.85p 43.0%
Basic EPS 9.10p 0.87p 946.0%
Interim dividend per share 3.70p 2.90p 27.6%
Operating Highlights
· Continued strong growth in all regions, with double-digit revenue
growth in all our key territories
· Consultant(4) headcount has increased by 40.4% to 921 (H1 22: 656);
ensuring our consultant base continues to keep pace with client demand
· Director(5) headcount has increased by nine in the period to 97 as
Alpha continues to attract experienced top talent globally
· Successfully expanding the Lionpoint footprint, with Lionpoint
consultant numbers having more than doubled since May 2021 acquisition to now
over 260 globally
· North America is our biggest contributor to net fee income,
representing 41.4% of net fee income and 36.9% of total consultants; this is
in line with our strategic objective to grow in the largest addressable market
· Insurance consulting continues to see strong client demand, with the
recently launched General Insurance and Specialty segments progressing well.
We have appointed a Global Head of Insurance Consulting as this business
continues to offer exciting growth potential
· Number of client relationships increased to 787 (H1 22: 662); with
continued impressive client wins and strong client retention due to Alpha's
sector expertise, global footprint and holistic end-to-end offering
Outlook
· We remain mindful of the uncertainties presented by the global
macroeconomic and geopolitical picture, including the possible effects of the
war in Ukraine as well as monetary tightening in the face of inflation
· Against this backdrop, Alpha has performed extremely well and carries
good momentum into the second half
· In line with our strategic objectives, we will continue to grow the
business through deepening of the service offering and through geographic
expansion
· The industry tailwinds remain firmly intact; the Group continues to
experience strong demand and a healthy pipeline of business-critical projects
across a range of timeframes, underpinning our confidence in the outlook for
H2 and beyond
· Accordingly, the Board now expects Alpha to deliver full-year results
ahead of current market expectations
Commenting on the results, Euan Fraser, Global Chief Executive Officer said:
"Alpha has just passed the five-year anniversary of being a listed company.
Since AIM admission, we have more than tripled the number of consultants,
operate from almost twice the number of offices across the globe and have
almost quadrupled our profits. It is a huge achievement that is down to our
growing team of global consultants who continue to deliver exceptional service
to our clients.
In the first half, we have delivered double-digit organic growth in all our
territories and, in line with our strategic objectives, North America has
become the largest contributor to the Group's revenue. We are acutely mindful
of the macroeconomic and geopolitical environment, but we go into the second
half of our year with confidence that we have a business that addresses our
clients' evolving requirements."
Enquiries:
Alpha Financial Markets Consulting plc +44 (0)20 7796 9300
Euan Fraser (Global Chief Executive Officer)
John Paton (Chief Financial Officer)
Investec Bank plc - Nominated Adviser and Joint Corporate Broker +44 (0)20 7597 4000
Patrick Robb
James Rudd
Harry Hargreaves
Berenberg - Joint Corporate Broker +44 (0)20 3207 7800
Chris Bowman
Toby Flaux
Alix Mecklenburg-Solodkoff
Camarco - Financial PR +44 (0)20 3757 4980
Ed Gascoigne-Pees
Phoebe Pugh
Prism Cosec - Company Secretary +44 (0)7407 733 518
Sally Chandler
Analyst Presentation:
A results presentation will take place at 9:30 a.m. today on Zoom. Those
wishing to attend should contact AlphaFMC@camarco.co.uk
(mailto:AlphaFMC@camarco.co.uk) .
A copy of the presentation slides, for those unable to attend, will be
available on the company website
at: https://alphafmc.com/investors/reports-presentations/
(https://alphafmc.com/investors/reports-presentations/) .
About Alpha FMC:
Headquartered in the UK and quoted on the Alternative Investment Market of the
London Stock Exchange, Alpha is a leading global provider of specialist
consultancy services to the asset management, wealth management and insurance
industries.
Alpha has worked with all of the world's top 20 and 80% of the world's top 50
asset managers by AUM(6), along with a wide range of other buy-side firms. It
has the largest dedicated team in the industry, with over 900 consultants
globally, operating from 16 client-facing offices(7) spanning the UK, North
America, Europe and APAC.
(1) All financial and operating highlights relate to the period ended 30
September 2022 ("H1 23") and the comparative period is 30 September 2021 ("H1
22") unless otherwise specified
(2) The Group uses alternative performance measures ("APMs") to provide
stakeholders further metrics to aid understanding of the underlying trading
performance of the Group. Margins are expressed as a percentage of net fee
income. Refer to note 3 for further details
(3) Organic net fee income growth excludes Lionpoint's current period net fee
income contribution prior to the acquisition anniversary. Refer to note 3 for
further details
(4) "Consultants" and "headcount" refer to fee-earning consultants at the year
end: employed consultants plus utilised contractors in client-facing roles
(5) "Directors" refers to fee-generating directors at the year end. All
director increases are presented as net
(6) "World's top 20" and "world's top 50" refer to Investment & Pensions
Europe, "Top 500 Asset Managers 2022"
(7) Group uses "office" to refer to office location; that is, if there are
multiple offices in one location, they will be counted as one office
INTERIM REPORT
Alpha has just passed its five-year anniversary of being quoted on the
Alternative Investment Market ("AIM") of the London Stock Exchange. In Alpha's
first report as a listed company, we had 274 consultants across nine major
cities, reporting a revenue of £28.7m and adjusted EBITDA of £5.8m (H1 18).
Over the last five years we have significantly grown the business, now with a
total of 921 consultants, based across 16 offices, reporting £107.6m revenue
and £22.5m adjusted EBITDA in H1 23. It has been a delight and a privilege to
have been a part of this extraordinary journey, and to have successfully grown
Alpha's industry-leading, high-quality teams to consistently deliver to our
expanding client base globally.
Client demand for Alpha's services globally has meant that the Group has
continued to deliver impressive double-digit revenue growth for the first six
months of this financial year, compared to the first half of the prior year,
both overall and on an organic basis. Alpha's trading momentum from FY 22 has
continued positively into H1 23, maintaining the Group's healthy pipeline of
client opportunities.
The global macroeconomic and geopolitical picture, which includes the effects
of the war in Ukraine as well as monetary tightening in the face of inflation,
continues to be extremely uncertain. The Board and the entire leadership team
remains mindful of the potential risks and uncertainties ahead. In this
context, the Board is particularly pleased that Alpha has continued with the
strong momentum experienced at the end of FY 22 and to have seen an increase
in client demand in all geographical regions in the half.
Half Year Review
While cognisant of the macro environment, we have continued to make excellent
headway on a number of our key strategic areas during the first half. Most
notable is the exciting growth we continue to achieve in North America, both
organically and buoyed by our transformational acquisition of Lionpoint, which
was completed in May 2021. The Group continues to hire and invest in Lionpoint
to match the ongoing demand for our services in the alternative investments
space, more than doubling the number of consultants in Lionpoint since
acquisition. Importantly, Alpha has experienced double-digit revenue growth in
all our key territories. The Group has also made further progress in building
out the insurance consulting proposition, which Alpha continues to view as
another exciting area for significant further growth.
The financial performance of the Group has been extremely encouraging for the
first half of the financial year, with strong double-digit increases in
revenues and profits. Alpha has also successfully continued to deliver
excellent sales wins across the Group. Net fee income across the Group is up
56.5% to £107.0m (H1 22: £68.4m), continuing its growth trajectory from the
second half of last year. On an organic basis, net fee income grew by 45.3%.
Adjusted EBITDA increased by 45.6% to £22.5m (H1 22: £15.4m) and adjusted
profit before tax increased by 47.2% to £21.3m (H1 22: £14.4m). This
excellent progress has been achieved while adjusted EBITDA margin has been
maintained at 21.0%, a similar level to FY 22's 21.5% (H1 22: 22.6%). As
expected, we have managed to balance cost increases and gently reducing our
consultant utilisation levels towards a more normalised level, while
progressing consultant day rates in a strong market demand environment. On a
statutory basis, operating profit was £15.8m (H1 22: £5.5m) and profit
before tax was £14.2m (H1 22: £4.2m), after charging adjusting items, which
were comparatively lower in the period. Adjusted earnings per share were
14.09p (H1 22: 9.85p) and basic earnings per share were 9.10p (H1 22: 0.87p).
( )
Operational and Geographical Review
We are well on the way to achieving our medium-term goal of doubling the size
of the Alpha Group over the four-year period to November 2024. The structural
drivers for our sector continue to create significant tailwinds for Alpha: fee
compression and the drive for efficiency, growth in AUM, regulatory change and
the growing focus on ESG and responsible investment. Just as the growth
drivers remain unchanged, so our growth objectives remain unchanged: to extend
the depth and range of our services and to increase Alpha's footprint in all
markets, with a model that serves both to address current client needs and
promote new client demand.
In terms of our practices and service proposition to clients, we have
continued to deepen and extend our offering across many of our verticals. We
have promoted people from within and have also made incremental hires,
including growing our director team by nine in the past six months. In
addition, we continue to invest in broadening our service proposition across
the Group. For example, we have launched an Enterprise Transformation practice
in the UK, which recognises a long-term capability and focus on helping asset
and wealth management clients address issues and challenges across their
end-to-end businesses. This includes reorganising operating models, shaping
cost reduction programmes and ensuring change portfolios are aligned to
strategic priorities.
The Group's insurance consulting offering continues to build on its rapid
expansion last year. This business area more than doubled its headcount last
year in response to strong client demand and we are delighted to have added
another director to the team since the financial year end. Our recently
launched General Insurance and Specialty segments in the UK are progressing
well; we are engaging with a range of new clients and expanding the teams of
dedicated experts.
We see significant market potential in the insurance industry and, ultimately,
believe that our insurance offerings could grow to a similar size as Alpha's
asset and wealth management consulting ("AWM") business in the medium to long
term. Given the strength of this proposition, and to support its further
growth and expansion, we have appointed a Global Head of Insurance Consulting
from within our Group.
Lionpoint continues to increase its footprint, particularly in North America,
and we still see considerable scope for growth as the alternative investments
market continues to attract AUM across the private equity, private credit,
infrastructure, real estate and fund of funds segments. Additionally, the
structural growth drivers in the asset management, wealth management and
insurance industries - cost pressures, regulation, growing AUM as well as
changing client and societal expectations - are also prevalent in the
alternatives space and are driving client demand. The Lionpoint team has added
a further 66 consultants globally during the period, more than doubling the
total consultant number in Lionpoint to over 260, compared to 123 consultants
on acquisition.
The integration of Lionpoint has been a success; this is particularly evident
in the growing number of cross-selling opportunities and collaboration on
client projects across the Group. Lionpoint employees are currently working
with colleagues in the wider Group on a range of technology implementation and
operating model projects, a number of which are large transformation
programmes in the growing North America market. Through this combination of
specialist consultants working across all asset classes, we are delighted to
be able to offer an end-to-end suite of client solutions on a global scale.
During the period, the Group has continued to win business with both new and
existing clients across all locations. As a Group, including Lionpoint, we
have now worked with 787 clients (H1 22: 662). The Board is pleased with the
range and growth of Alpha's client base across all locations and the Group's
continued focus on ensuring it has the ability to deliver for clients across
all verticals. We are very well placed to add value to clients in their most
demanding of projects and increase our market penetration.
Geographic performance in the period can be summarised as follows:
6 months to 6 months to Change
30 Sep 2022 30 Sep 2021
Net Fee Income
UK £39.8m £32.5m 22.7%
North America £44.3m £18.8m 135.4%
Europe & APAC £22.9m £17.1m 33.7%
Total £107.0m £68.4m 56.5%
( )
As at As at Change
30 Sep 2022 30 Sep 2021
Consultant Headcount
UK 350 266 31.6%
North America 340 204 66.7%
Europe & APAC 231 186 24.2%
Period-end totals 921 656 40.4%
All our geographic regions delivered excellent growth over the six-month
period, driven by client demand as a result of the ongoing structural
catalysts that we continue to experience in all our market segments.
Continuing the FY 22 momentum, North America delivered the strongest growth in
net fee income for the Group, producing growth rates of 135.4% overall,
including Lionpoint, and 107.0% on an organic basis. In addition, the Group
has continued to invest in this region and we achieved 66.7% headcount growth
compared to the comparable period. This means that, for the first time, North
America is our largest contributor to net fee income. In the period, we have
also gained 41 new clients in North America, many of which are from the
world's top asset managers. This reflects the considerable size of the North
America market, which is around eight times(8) greater than the UK, and we
expect to continue growing as we win market share from our competitors due to
our industry knowledge, deep expertise and highly talented team.
The UK delivered net fee income growth of 22.7% on the comparative period,
with this growth being almost entirely organic. We retain our market-leading
position as consultant to the asset management, wealth management and
insurance industries and are proud to be supporting some of the highest
profile projects in the UK marketplace. We also continue to support our growth
in the UK by hiring consultants and we have increased our headcount in the
region by 31.6% to 350. This includes our exciting UK insurance business,
which continues to progress well.
Europe & APAC also delivered a robust performance in the period, with net
fee income increasing by 33.7% overall, with the majority being organic.
Growth continues to be evenly distributed across the region's offices. Our
best-in-class service offering continues to attract new clients in Europe
& APAC, with 16 new clients added in the period. We are also delighted
that Alpha Europe has been selected as the #1 consulting firm in France by
Décideurs Magazine in both the categories of "asset management" and "wealth
management" for the fourth consecutive year.
(8) BCG, "Global Asset Management 2021: The $100 Trillion Machine" (July 2021)
Our People
Our team of talented professionals are core to delivering such a strong set of
results. People are the foundation of our business; in having experts in every
area of consulting for the asset management, wealth management and insurance
industries, we are able to deliver exceptional added value for our clients,
engendering loyalty and repeat business. We recognise the importance of
retaining and nurturing this talent and continue to invest in the development
of our people to ensure they flourish at Alpha, in turn driving our business
success.
Retaining and developing our local and global director teams remains an
important factor in providing the right level of support for our consultants,
instilling our values and ensuring delivery excellence across all client
engagements. We continue to expand our director teams across all locations
through a combination of promotions and new experienced hires. Director
headcount grew by nine, including four director additions in North America.
We were delighted to broaden and deepen our global consulting leadership
structures by including four regional AWM management committees to work
alongside the heads of region. This marks an important milestone for Alpha's
growing asset and wealth management business - with the updated leadership
structure in place to support, enable and advance the next phases of growth
across the UK, North America, Europe & APAC. Organisationally and
culturally, it aligns to our aims to ensuring a broad range of progression
paths at Alpha; and in creating the management committee structures, we have
been able to ensure long-term access to a wide pool of Alpha talent for
leadership roles.
Alpha's goal is to foster a diverse and inclusive culture where employees feel
valued and appreciated. The addition of a full-time Diversity & Inclusion
Manager, who joined the Group at the beginning of the financial year, is
intended to ensure that Alpha's culture of inclusivity, governance frameworks
and recruitment processes are delivering a sufficiently diverse team through
all levels of the organisation. Building on this, we will continue to consider
how our governance and processes could be modified to reflect progress on our
culture, organisation, diversity, equality and inclusion aims.
It has been a challenging few years with the pandemic and global economic
uncertainties but, throughout these difficult times, the commitment and
service that our people have shown to our clients have been exemplary and
never faltered. On behalf of the Board, we would like to thank our employees
for the hard work and dedication during the period, which they continue to
demonstrate on a daily basis and without which the success of the Group would
not be what it is today.
Growth Strategy
Alpha continues to strive towards being recognised as the leading consultancy
to the asset management, wealth management and insurance industries globally
and in all the markets in which it operates. In progressing this strategic
aim, we have achieved major advances in the three priority areas of North
America, insurance consulting and making acquisitions.
Our footprint in North America has doubled in terms of net fee income, helped
by the acquisition of Lionpoint, which complements organic growth across all
geographic regions. Lionpoint continues to grow strongly; we have now managed
to double the business's headcount since acquiring it in May 2021.
Similarly, our insurance consulting offering has expanded, adding 14 new
consultants in H1 23. This, alongside strong organic growth in UK and Europe
& APAC, places the Group in a good position as it wins business with both
new and existing clients and makes excellent progress towards its medium-term
aim to double in size.
Acquisitions
Acquisitions remain a core part of the Group's strategy and we have a track
record of successfully identifying suitable opportunities in the market that
can accelerate the Group's growth and development and which help us to further
service our clients' needs.
The Group recognises that a broader range of knowledge, credentials and
capabilities can increase cross-selling potential and bring access to new
areas of the market. The integrations of Axxsys, Obsidian and, more recently,
Lionpoint have successfully extended the service offering and added further,
highly complementary expertise to the Group. Alpha is delighted that its
acquisitions have unlocked many new growth opportunities, now spanning both
public and private markets.
We continue to review acquisition opportunities to complement and grow the
Group's service offering to deliver client and shareholder value.
Governance and the Board
The Alpha Board recognises its duties and responsibilities in delivering
effective corporate culture and is committed to adhering to the core values of
strong governance, integrity and business ethics. These are key to reducing
risk and creating long-term success for the business, generating sustainable,
long-term value for shareholders.
We continuously assess and monitor the regulatory landscape and regard ESG and
sustainability as important elements of Alpha's governance and approach to
risk management. We recognise that we have an important role in overseeing and
progressing these ESG efforts, meeting regulatory requirements and stakeholder
expectations, and have established an ESG Committee of the Board at the
beginning of the second half, as was announced in the FY 22 results.
A responsible business function has now been established within Alpha's
business operations to oversee the development of our governance, best
practice and disclosure frameworks and to work in conjunction with the ESG
Committee in relation to these priorities. Overseen by the Head of Risk, the
responsible business team includes Alpha's Global Diversity & Inclusion
Manager and Global Sustainability Manager.
Internally, we continue to increase our focus on issues linked to
sustainability and prepare our reporting on sustainability-linked matters,
such as by preparing the Group to start reporting under the framework set out
by the Taskforce on Climate-Related Financial Disclosures ("TCFD") and by
developing our own roadmap to net zero greenhouse gas emissions. Our recently
appointed Global Sustainability Manager within the business operations team is
overseeing the development of this work and the definition of Alpha's
emissions reduction targets.
Financial Performance Review
6 months to 6 months to Change
30 Sep 2022 30 Sep 2021
Revenue £107.6m £68.4m 57.3%
Net fee income £107.0m £68.4m 56.5%
Gross profit £38.4m £26.5m 45.3%
Operating profit £15.8m £5.5m 188.3%
Adjusted EBITDA £22.5m £15.4m 45.6%
Adjusted EBITDA margin 21.0% 22.6% (160 bps)
Adjusted profit before tax £21.3m £14.4m 47.2%
Profit before tax £14.2m £4.2m 235.6%
Adjusted earnings per share 14.09p 9.85p 43.0%
Adjusted diluted earnings per share 13.23p 9.34p 41.6%
Basic earnings per share 9.10p 0.87p 946.0%
Alpha enjoyed strong first half growth, with net fee income of £107.0m, up by
56.5% compared to the first half of the last financial year (H1 22: £68.4m).
This includes 45.3% organic growth, with the remainder being the inorganic
contribution from the acquisition of Lionpoint in the prior period. Revenue
also grew 57.3%, including increased rechargeable expenses, compared to the
prior period. Across the Group's regions, revenue and net fee income grew
slightly below average consultant headcount growth, with average consultant
utilisation returning to target levels as planned, alongside improving
consultant day rates overall. Alpha's core established practices continue to
perform well, with newer areas also progressing, such as Digital and ESG &
Responsible Investments. Lionpoint also contributed strongly in the first
half.
Currency translation had a noticeable effect on net fee income and profits
during the first half of the financial year. In the period, British pound
sterling averaged $1.23 (H1 22: $1.39) and €1.18 (H1 22: €1.17), which,
with other similar currency movements, resulted in a favourable net currency
effect on net fee income of £5.5m. On a constant currency basis, Group net
fee income growth would be 48.4% overall. Similarly, North America net fee
income growth would be 108.3% and Europe & APAC would report 31.3% net fee
income growth.
Group gross profit was £38.4m, increasing by £11.9m or 45.3% over the prior
period. Gross profit margin was 35.9% (H1 22: 38.7%). This reflects average
consultant utilisation normalising to target levels, alongside continued
investment in our growing team while maintaining a competitive remuneration
package, partly offset by improved consultant day rates. Consultant day rates
have improved in H1 23 and we will continue to seek further rate progress in
the second half.
North America delivered the strongest regional growth, ending the half as the
largest geographic region in the Group by net fee income, with growth of
135.4% overall and 107.0% on an organic basis. The recently acquired Lionpoint
business performed well in the first half and contributed significantly to
North America net fee income this year. The North America business overall
continued to expand its domestic client base, as well as successfully
capturing client demand through a number of cross-selling opportunities with
its existing client base. The strongly growing consultant team was well
deployed, while also improving consultant day rates.
Europe & APAC also delivered another period of strong growth. The region
grew net fee income by 33.7% on the comparative period, and on an organic
basis the region reported 28.1% growth. This growth was delivered across the
region with the Europe team well deployed, complemented by further good
progress growing the APAC business.
The UK business grew net fee income 22.7% overall and 18.6% organically. This
strong UK organic performance benefitted from solid client demand across the
full range of Alpha practices, including substantial contributions from our
established Investments, Distribution and Operations teams. Within the UK
results, Alpha's data solutions business, Aiviq, including Obsidian, performed
consistently with the comparative period, although it maintains a good
pipeline and outlook.
The Lionpoint business performed extremely well in the period and has
continued to enjoy strong client demand, adding 118 new clients and 141
consultants globally since acquisition.
Overall, gross profit margins reflect the planned easing of utilisation to
target levels, continued investment in our consultants while maintaining
competitive remuneration packages, partly offset by improving consultant day
rates across all regions. North America maintained a consistent gross profit
margin as the North America team grew substantially and successfully
normalised average utilisation back to target levels, while balancing costs
and consultant rates progress in the period. The UK business grew gross profit
well and 40.4% gross margin similarly reflects managing utilisation levels and
further rates progress ongoing. Europe & APAC also experienced good gross
profit growth, with margin reflecting utilisation and continued investment in
the business, partially offset by consultant day rate progression.
Adjusted administration expenses, as detailed in note 3, increased by £5.0m
to £16.0m (H1 22: £11.0m) in the first six months. Discretionary spend
continues to return to normalised levels following COVID-19, for example
across staff and client entertainment and travel spend, and in recruitment
spend as we grow our consulting teams globally. We also continued to invest in
the Group's central team through the year in areas such as finance, HR, legal,
risk and responsible business.
Including the adjusting items, which fell comparatively, administrative
expenses increased to £22.7m (H1 22: £21.0m) on a statutory basis. The
adjusting items, set out in note 3, reduced in the period to £5.7m (H1 22:
£9.2m), reflecting lower acquisition costs and earn-out and deferred
consideration charges, partially offset by higher intangible asset
amortisation and share-based payments charges.
Acquisition costs fell to nil in the period (H1 22: £0.6m) with the
comparative including Lionpoint-related acquisition transaction costs. The
acquired intangibles amortisation charge increased against the comparative
period, reflecting a full period charge. In the first half, the Group
recognised an earn-out and deferred consideration credit of £0.3m (H1 22:
charge of £2.5m), reflecting a fair value reduction in the liability held for
Obsidian as a lower, mutually-agreed position was reached with the original
vendors, part of which was paid in the period. Further detail on the earn-out
and deferred consideration charges are set out in note 8.
The share-based payments charge continues to develop since Alpha's share
incentive plans were established at AIM admission, with Alpha's share price
growth and new awards, alongside relatively limited award vests to date being
key factors in the higher charge for the period. Further detail of the
share-based payments charge is set out in notes 3 and 13.
Adjusted EBITDA grew 45.6% to £22.5m (H1 22: £15.4m) and adjusted EBITDA
margin was 21.0% (H1 22: 22.6%), reflecting increased gross profit and higher
administration expenses. Operating profit rose 188.3% to £15.8m (H1 22:
£5.5m) after charging reduced adjusting expenses. Further detail of these
adjusting items is set out in note 3.
Finance expenses rose in the first half overall, primarily from increased
non-underlying finance expenses relating to acquisition consideration discount
unwinding, as set out in note 4. Adjusted profit before tax rose by 47.2% to
£21.3m (H1 22: £14.4m) after charging depreciation, amortisation of
capitalised development costs and underlying finance costs. Statutory pre-tax
profit was £14.2m (H1 22: £4.2m) after also charging adjusting expenses and
non-underlying finance expenses.
Taxation charges for the period were £3.9m (H1 22: £3.3m), reflecting the
growth in taxable profits and the blended tax rate of the increasingly
international jurisdictions in which the Group operates. Further detail on the
tax charge is set out in note 5.
Adjusted earnings per share ("EPS") improved by 43.0% to 14.09p per share (H1
22: 9.85p) and adjusted diluted EPS increased by 41.6% to 13.23p (H1 22:
9.34p). After including the adjusting items, basic earnings per share
increased to 9.10p (H1 22: 0.87p), while diluted EPS increased to 8.55p (H1
22: 0.83p), reflecting the increase in the share options awards outstanding.
Net assets at 30 September 2022 totalled £147.9m (31 March 2022: £132.7m).
This increase principally arises from foreign exchange gains in the period on
the goodwill and intangibles recognised on the acquisition of Lionpoint. The
Group continues to maintain a strong financial position.
Net cash flow generated from operations was £2.2m (H1 22: £6.0m). Adjusted
cash generated from operating activities was £4.2m (H1 22: £8.5m). Operating
cash generation was affected in the half by the payment of last year's
increased profit share, given the strong FY 22 performance, as well as
additional North America tax payments as that business grows and moves to
quarterly payments in that region. While debtor days remain good and similar
to last year, accrued income increased at 30 September 2022, simply reflecting
the timing of project approvals. We continue to expect good adjusted cash
conversion for the full year, while reflecting these specific cash outflows.
The Group's net cash position was £40.3m as at 30 September 2022 (31 March
2022: £63.5m), after a further £22.5m of deferred and contingent acquisition
payments, including £1.8m of employment-linked amounts, and the payment of
the FY 22 final dividend in the half. During the period, the Group provided
£1.1m funding to Alpha's employee benefit trust ("EBT") to purchase 254,817
shares at the prevailing market share price, to hold for the satisfaction of
future award vests. Alpha will likely fund the EBT further in the future to
build the shares held in the EBT for the satisfaction of future share option
exercises. Alpha also drew £7.5m temporarily on its revolving credit facility
("RCF"), to assist with managing currency requirements in the period.
The Board is pleased to declare today an interim dividend for FY 23 of 3.70p
per share (H1 22: 2.90p), which will be paid on 21 December 2022 to
shareholders on the register at the close of business 9 December 2022.
Risk Management
The Board is pleased with the Group's progress in the first half, while
remaining cognisant of the potential risks and uncertainties. These risks
include political and economic uncertainty, as well as market volatility. The
Board does not consider that these principal risks and uncertainties differ
from those at 31 March 2022 as detailed on pp 50-54 of the Annual Report &
Accounts 2022. These risks relate to the following areas: people and
resourcing; quality of service; data security; acquisition risk; market
strategy; strategic objectives; macroeconomic conditions; political/regulatory
environment; competitors; client concentration; skills and subject matter
expertise; utilisation rates; and cash collection.
The Directors(9) and the senior management team are closely monitoring the
situation in Ukraine as it evolves and continues. Alpha's operational
footprint does not extend to either Russia or Ukraine, and we do not service
clients based in those countries. The principal risk to Alpha therefore
remains from a macroeconomic perspective, and the possible market impacts.
We are aware of the risk of rising inflation globally, driven by an uplift in
costs, demand for personnel in key areas and the increase in energy costs.
Alpha remains alert to inflationary pressures, the risks of which we believe
will continue to be balanced by strong structural growth drivers and demand
for Alpha's services.
(9) "Director" refers to the executive and non-executive members of the Board;
meanwhile "directors" refers to non-Board directors within the management
teams of the Group
Outlook
We are pleased to be reporting on a strong performance in H1 23, whilst being
mindful of the macroeconomic and wider geopolitical uncertainty.
There is good momentum within the Group globally and we remain focussed on
identifying and progressing ways to grow the business both organically and
inorganically.
The structural drivers in the asset management, wealth management and
insurance industries, which will drive ongoing demand for Alpha's services,
remain prevalent. We are confident that with the quality of our people, which
we continue to reinforce, our excellent market reputation, and business
opportunities to extend the service offering, we are in the best position to
withstand further challenges ahead.
It is unclear how long the current macro uncertainty will prevail and how
precisely it may affect local and global markets. However, the structural
drivers remain firmly in place and Alpha continues to experience strong
demand; the Board therefore looks forward with confidence in the outlook for
H2 and beyond. The Group now enters the second half well positioned, with a
healthy pipeline of new business opportunities and having made excellent
progress on its objectives. The performance of the business demonstrates the
strength of our business model and growth strategy, which we continue to
progress. Consequently, we expect to deliver full-year results ahead of
current market expectations.
Ken
Fry
Euan Fraser
Chairman
Global Chief Executive Officer
Responsibility Statement
The Directors confirm that, to the best of their knowledge, these interim
condensed consolidated financial statements have been prepared in accordance
with UK-adopted International Accounting Standard (IAS) 34 Interim Financial
Reporting. The Interim Report includes a fair review of the information
required by:
· DTR 4.2.7R of the Disclosure Guidance and Transparency Rules (DTR),
being an indication of important events that have occurred during the first
six months of the financial year and their impact on the interim condensed
consolidated financial statements; and a description of the principal risks
and uncertainties for the remaining six months of the financial year; and
· DTR 4.2.8R of the DTR, being related party transactions that have
taken place in the first six months of the current financial year and that
have materially affected the financial position or the performance of the
Group during that period; and any changes in the related party transactions
described in the last Annual Report that could do so.
This Interim Report contains certain forward-looking statements with respect
to the Group's current targets, expectations and projections about future
performance, anticipated events or trends and other matters that are not
historical facts. These forward-looking statements, which sometimes use words
such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect"
and words of similar meaning, include all matters that are not historical
facts and reflect the Directors' beliefs and expectations and involve a number
of risks, uncertainties and assumptions that could cause actual results and
performance to differ materially from any expected future results or
performance expressed or implied by the forward-looking statement.
Ken
Fry
Euan Fraser
Chairman
Global Chief Executive Officer
Interim condensed consolidated statement of comprehensive income
For the six months ended 30 September 2022
Unaudited Unaudited
six months ended six months ended
30 Sep 2021
30 Sep 2022
Note £'000 £'000
Continuing operations
Revenue 2 107,599 68,421
Rechargeable expenses 2 (583) (31)
Net fee income 2 107,016 68,390
Cost of sales 2 (68,573) (41,930)
Gross profit 2 38,443 26,460
Administration expenses (22,679) (20,992)
Operating profit 15,764 5,468
Depreciation 898 497
Amortisation of capitalised development costs 151 301
Adjusting items 3 5,668 9,171
Adjusted EBITDA 3 22,481 15,437
Finance income 4 65 1
Finance expense 4 (1,630) (1,238)
Profit before tax 14,199 4,231
Taxation 5 (3,922) (3,278)
Profit for the period 10,277 953
Exchange differences on translation of foreign operations 9,963 2,100
Total comprehensive income for the period 20,240 3,053
Basic earnings per ordinary share (p) 6 9.10 0.87
Diluted earnings per ordinary share (p) 6 8.55 0.83
Interim condensed consolidated statement of financial position
As at 30 September 2022
Unaudited Unaudited Audited
as at
as at
30 Sep 2022 as at
31 Mar 2022
30 Sep 2021
Note £'000 £'000 £'000
Non-current assets
Goodwill 7 107,310 100,307 100,991
Intangible fixed assets 7 30,936 33,661 31,333
Property, plant and equipment 1,109 576 806
Right-of-use asset 1,904 2,032 2,304
Deferred tax asset 1,088 - 671
Capitalised contract fulfilment costs 119 168 131
Total non-current assets 142,466 136,744 136,236
Current assets
Trade and other receivables 9 41,695 27,644 29,569
Cash and cash equivalents 47,764 40,032 63,516
Total current assets 89,459 67,676 93,085
Current liabilities
Trade and other payables 10 (55,709) (47,579) (56,671)
Provisions (3,433) - (3,277)
Corporation tax (3,226) (2,307) (4,788)
Lease liabilities (1,072) (745) (1,134)
Interest bearing loans and borrowings (7,477) - -
Total current liabilities (70,917) (50,631) (65,870)
Net current assets 18,542 17,045 27,215
Non-current liabilities
Deferred tax liability (3,765) (5,598) (4,331)
Other non-current liabilities 11 (8,357) (22,279) (25,100)
Lease liabilities (941) (1,375) (1,275)
Total non-current liabilities (13,063) (29,252) (30,706)
Net assets 147,945 124,537 132,745
Equity
Issued share capital 12 90 89 89
Share premium 119,438 119,438 119,438
Foreign exchange reserve 13,445 2,402 3,482
Other reserves 12,867 6,545 9,361
Retained earnings 2,105 (3,937) 375
Total shareholders' equity 147,945 124,537 132,745
The accompanying notes form part of these interim condensed consolidated
financial statements.
Interim condensed consolidated statement of cash flows
For the six months ended 30 September 2022
Unaudited Restated(10) unaudited
six months ended six months ended Audited
30 Sep 2021
30 Sep 2022 year ended
31 Mar 2022
Note £'000 £'000 £'000
Cash flows from operating activities:
Profit for the period 10,277 953 8,512
Taxation 3,922 3,278 6,370
Finance income (65) (1) (1)
Finance expenses 1,630 1,238 2,894
Depreciation of property, plant and equipment 898 497 1,155
Loss on disposal of fixed assets - 21 32
Amortisation of intangible fixed assets 2,507 2,559 5,272
Share-based payment charge 3,588 1,672 4,075
Increase in provisions - - 1,302
Foreign exchange gain on cash and cash equivalents (4,764) - -
Operating cash flows before movements in working capital 17,993 10,217 29,611
Working capital adjustments:
Increase in trade and other receivables (9,065) (5,160) (7,066)
(Decrease)/increase in trade and other payables (676) 3,573 15,729
Tax paid (6,062) (2,660) (4,767)
Net cash generated from operating activities 2,190 5,970 33,507
Cash flows from investing activities:
Interest received 65 1 1
Consideration paid on acquisitions, net of cash acquired 8 (20,716) (23,796) (23,796)
Purchase of intangible assets 7 (319) - -
Purchase of property, plant and equipment, net of disposals (564) (204) (684)
Net cash used in investing activities (21,534) (23,999) (24,479)
Cash flows from financing activities:
Issue of ordinary share capital - 31,102 31,102
Share issuance costs - (1,053) (1,053)
Net settlement of vested share options (322) - -
EBT purchase of Company's own shares (1,129) (187) (205)
Drawdown of bank borrowings 7,477 - -
Interest and bank loan fees (110) (199) (285)
Principal lease liability payments (650) (348) (814)
Interest on lease liabilities (53) (52) (111)
Dividends paid (8,547) (5,431) (8,678)
Net cash (used in)/generated from financing activities (3,334) 23,832 19,956
Net (decrease)/increase in cash and cash equivalents (22,678) 5,803 28,984
Cash and cash equivalents at beginning of the period 63,516 34,012 34,012
Effect of exchange rate fluctuations on cash held 6,926 217 520
Cash and cash equivalents at end of the period 47,764 40,032 63,516
(10) The Group has re-presented the consolidated statement of cash flows in
the comparative period to reconcile from "profit for the period" rather than
"operating profit" to align with the requirements of IAS 7. Share issuance
costs have also been restated in the comparative period to be separated from
the issue of ordinary share capital, to align with the audited FY 22
disclosure
Interim condensed consolidated statement of changes in equity
For the six months ended 30 September 2022
Share Share premium Foreign exchange reserves Other reserves Retained earnings Total
capital
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2021 80 89,396 302 4,044 543 94,365
Comprehensive income
Profit for the period - - - - 953 953
Foreign exchange differences on translation of foreign operations - - 2,100 - - 2,100
Transactions with owners
Shares issued (equity) 9 30,042 - - (2) 30,049
EBT purchase of Company's own shares - - - (187) - (187)
Share-based payments - - - 1,672 - 1,672
Current tax recognised in equity - - - 146 - 146
Deferred tax recognised in equity - - - 870 - 870
Dividends - - - - (5,431) (5,431)
As at 30 September 2021 89 119,438 2,402 6,545 (3,937) 124,537
Comprehensive income
Profit for the period - - - - 7,559 7,559
Foreign exchange differences on translation of foreign operations - - 1,080 - - 1,080
Transactions with owners
Shares issued (equity) - - - - - -
EBT purchase of Company's own shares - - - (18) - (18)
Share-based payments - - - 2,403 - 2,403
Net settlement of vested share options - - - (12) - (12)
Current tax recognised in equity - - - 74 - 74
Deferred tax recognised in equity - - - 369 - 369
Dividends - - - - (3,247) (3,247)
As at 31 March 2022 89 119,438 3,482 9,361 375 132,745
Comprehensive income
Profit for the period - - - - 10,277 10,277
Foreign exchange differences on translation of foreign operations - - 9,963 - - 9,963
Transactions with owners
Shares issued (equity) 1 - - - - 1
EBT purchase of Company's own shares - - - (1,129) - (1,129)
Share-based payments - - - 3,588 - 3,588
Net settlement of vested share options - - - (322) - (322)
Current tax recognised in equity - - - 1,180 - 1,180
Deferred tax recognised in equity - - - 189 - 189
Dividends - - - - (8,547) (8,547)
As at 30 September 2022 90 119,438 13,445 12,867 2,105 147,945
Share capital
Share capital represents the nominal value of share capital subscribed.
Share premium
The share premium account is used to record the aggregate amount or value of
premiums paid when the Company's shares are issued at a premium, net of
associated share issue costs.
Foreign exchange reserve
The foreign exchange reserve represents exchange differences that arise on
consolidation from the translation of the financial statements of foreign
subsidiaries, including goodwill.
Other reserves
The other reserves represent the cumulative fair value of the IFRS 2
share-based payment charge recognised each year, associated current tax,
deferred tax and equity-settled acquisition consideration reserves.
Retained earnings
The retained earnings reserve represents cumulative net gains and losses
recognised in the consolidated statement of comprehensive income, less
dividends paid.
Notes to the interim condensed consolidated financial statements
1. Basis of preparation and significant accounting policies
1.1. General information
The principal activity of the Group is the provision of consulting and related
services to clients in the asset management, wealth management and insurance
industries, principally in the UK, North America, Europe and APAC.
Alpha Financial Markets Consulting plc is incorporated in England and Wales
with registered number 09965297. The Company's registered office is 60 Gresham
Street, London, EC2V 7BB. The Company is a public limited company and is
admitted to trading on the AIM of the London Stock Exchange.
These interim condensed consolidated financial statements were authorised for
issue on 23 November 2022 in accordance with a resolution of the Directors.
1.2. Basis of preparation
These interim financial statements have been prepared in accordance with IAS
34 Interim Financial Reporting and should be read in conjunction with the
Group's most recent annual consolidated financial statements, for the year
ended 31 March 2022. They do not include all of the information required for a
complete set of IFRS financial statements, however selected explanatory notes
are included to explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and performance
since Alpha's Annual Report & Accounts 2022.
The financial information presented for the period ended 30 September 2022 and
the period ended 30 September 2021 is unaudited. The financial information for
the 12 months to 31 March 2022 was audited.
The presentational currency of these financial statements is British pound
sterling. All amounts in these financial statements have been rounded to the
nearest £1,000, unless otherwise stated.
1.3. Statutory accounts
Financial information contained in this document does not constitute statutory
accounts within the meaning of section 434 of the Companies Act 2006 (the
"Act"). The statutory accounts for the year ended 31 March 2022 have been
filed with the Registrar of Companies. The report of the auditors on those
statutory accounts was unqualified, did not draw attention to any matters by
way of emphasis and did not contain a statement under section 498(2) or (3) of
the Act.
1.4. Basis of consolidation
These interim condensed financial statements consolidate the interim financial
statements of the Company and its subsidiary undertakings (the "Group") as at
30 September 2022.
Subsidiaries are fully consolidated from the date of acquisition, being the
date on which the Group obtains control, and continue to be consolidated until
the date that such control ceases. The financial statements of subsidiaries
are prepared for the same reporting period as the parent company, using
consistent accounting policies.
All intra-group balances, income and expenses, and unrealised gains and losses
resulting from intra-group transactions are eliminated in full.
1.5. Seasonality of operations
Given the nature of the Group's consulting and related services, and the
composition of the Group's customers and contracts, seasonality is generally
not expected to have a significant bearing on the financial performance of the
Group.
1.6. Going concern
The Directors have, at the time of approving these interim condensed
consolidated financial statements, a reasonable expectation that the Group has
adequate resources to continue in operation for a period of at least 12 months
from the approval of these financial statements (the "going concern period").
The Group's forecasts and projections, taking into account plausible changes
in trading performance, show that the Group has sufficient financial
resources, together with assets that are expected to generate cash flow in the
normal course of business.
Since the assessment at 31 March 2022, the Group has considered whether there
are any indicators of significant adverse variations or material uncertainty
in the Group's trading performance, both against the internal budget for the
period, and in the Group's forecasts for the going concern period. No such
indicators have been identified. The ongoing trading performance of the
Group's core revenue-generating regions has been encouraging and is ahead of
the downside scenarios modelled during the Group's FY 22 going concern
assessment.
The Group has maintained a strong balance sheet and liquidity position. The
Group held a net cash position of £40.3m as at 30 September 2022 and has
access to a £20.0m revolving credit facility ("RCF") providing further
liquidity, of which £7.5m was drawn temporarily at the end of the period.
On this basis, the Directors consider that it is appropriate to adopt the
going concern basis in preparing these interim condensed consolidated
financial statements.
1.7. Principal accounting policies
Please refer to Alpha's Annual Report & Accounts 2022 for full disclosures
of the principal accounting policies that have been adopted in the preparation
of these interim condensed consolidated financial statements. There have been
no changes to the accounting policies adopted by the Group in the period.
1.8. Significant judgements and estimates
The preparation of financial information in accordance with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets,
liabilities, income and expenses.
Judgements
The Directors have made one judgement, excluding those involving estimations,
in the process of applying the Group's accounting policies, which is
considered to have a significant effect on the amounts recognised in the
financial statements for the period ended 30 September 2022.
Alternative performance measures
To assist in understanding the underlying performance of the Group, management
presents various alternative performance measures ("APMs"), which exclude
certain adjusting items. APMs are provided to allow stakeholders a further
understanding of the underlying trading performance of the Group and aid
comparability between accounting periods. Management applies judgement to
identify those income or expense items that are deemed to warrant exclusion
from the calculation of the Group's adjusted measures to allow stakeholders a
further understanding of the underlying performance of the business. These
adjusting items have been applied consistently across reporting periods. A
reconciliation to IFRS measures, and explanation of each adjusting item
excluded is provided in note 3.
All adjusting items are considered individually for exclusion by virtue of
their nature or size. In the period ended 30 September 2022, these items
totalled £5.7m (H1 22: £9.2m) and are recognised in administration expenses.
A further £1.4m (H1 22: £1.0m) was recognised within finance expenses.
Estimates
A number of estimates have been made in the preparation of the financial
information. The underlying assumptions in the Group's estimates are based on
historical experience and various other factors that are deemed to be
reasonable under the circumstances. These assumptions form the basis of
developing estimates of the carrying values of assets and liabilities that are
not apparent from other sources. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to estimates are recognised in the
period in which the estimate is revised and any future years affected. Actual
results can differ from these estimates.
The Directors have identified the following areas as key estimates that are
considered to have a significant risk of resulting in a material adjustment to
the carrying amounts of assets or liabilities within the next financial year.
Share-based payments (note 13)
Management has estimated the share-based payments charge under IFRS 2. In
determining the fair value of share-based payments, management has considered
several internal and external factors to judge the probability that management
and employee share incentives may vest and to assess the fair value of share
options at the date of grant. Such assumptions involve estimating future
performance and other factors. The fair value calculations have been
externally assessed for reasonableness in the current and prior periods. Refer
to note 13 for sensitivity analysis.
Acquisition earn-outs (note 8)
Alpha's acquisition earn-out liability calculations under IFRS 3 contain
estimation uncertainty, as the earn-out potentially payable is linked to the
future performance of the acquiree. To determine the fair value of the
earn-out liability at the balance sheet date, management has assessed the
potential future cash flows of the acquired businesses respectively, the
likelihood of an earn-out payment being made and discounted using an
appropriate discount rate. These estimates could potentially change because of
events over the coming years. Refer to note 8 for sensitivity analysis.
1.9. New accounting standards and interpretations
In the period ended 30 September 2022, the Group has adopted the following
amendments to existing accounting standards with no material impact on the
financial statements. Refer to pp 144-45 of the Group's Annual Report &
Accounts 2022 for details of recently adopted standards and interpretations in
the prior period.
· Reference to the Conceptual Framework (Amendments to IFRS 3),
effective from 1 January 2022;
· Property, Plant and Equipment - Proceeds before Intended Use
(Amendments to IAS 16), effective from 1 January 2022;
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS
37), effective from 1 January 2022; and
· Annual Improvements to IFRS Standards 2018-20 Cycle, effective from 1
January 2022.
The following other standards, interpretations and amendments to existing
standards have been issued but were not mandatory for accounting periods
beginning on 1 April 2022 and are not expected to have a material impact on
the Group.
· Extension of the Temporary Exemption from Applying IFRS 9 (Amendments
to IFRS 4), effective from 1 January 2023;
· Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (amendments to IAS 12), effective from 1 January 2023 (not yet
endorsed by the UK);
· IFRS 17 Insurance Contracts, effective from 1 January 2023;
· Amendments to IFRS 17, effective from 1 January 2023;
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2), effective from 1 January 2023 (not yet endorsed by the
UK);
· Classification of Liabilities as Current or Non-Current - Deferral of
Effective Date (Amendment to IAS 1), effective from 1 January 2023 (not yet
endorsed by the UK);
· Definition of Accounting Estimates (Amendments to IAS 8), effective
from 1 January 2023 (not yet endorsed by the UK);
· Lease Liability in a Sale and Leaseback (Amendments to IFRS 16),
effective from 1 January 2024 (not yet endorsed by the UK); and
· Non-Current Liabilities with Covenants (Amendments to IAS 1),
effective from 1 January 2024 (not yet endorsed by the UK).
2. Segment information
Group management has determined the operating segments by considering the
segment information that is reported internally to the chief operating
decision maker, the Board of Directors. For management purposes, the Group is
currently organised into three geographical operating divisions: UK, North
America and Europe & APAC. The Group's operations all consist of one type:
consultancy and related services to the asset management, wealth management
and insurance industries.
The Directors consider that there is a continued material level of operational
support and linkage provided to the Group's emerging territories in Europe and
APAC, as they develop their presence locally, and as such have been deemed to
constitute one operating segment ("Europe & APAC").
Revenues associated with software licensing arrangements were immaterial in
both the current and prior periods. Therefore, the Directors consider that
disaggregating revenue by operating segments is most relevant to depict the
nature, amount, timing and uncertainty of revenue and cash flows as may be
affected by economic factors.
30 September 2022 UK North America Europe & Total
APAC
£'000 £'000 £'000 £'000
Revenue 39,912 44,602 23,085 107,599
Rechargeable expenses (128) (279) (176) (583)
Net fee income 39,784 44,323 22,909 107,016
Cost of sales (23,728) (29,026) (15,819) (68,573)
Gross profit 16,056 15,297 7,090 38,443
Margin on net fee income (%)(11) 40.4% 34.5% 30.9% 35.9%
30 September 2021 UK North America Europe & APAC Total
£'000 £'000 £'000 £'000
Revenue 32,433 18,854 17,135 68,422
Rechargeable expenses (4) (22) (6) (32)
Net fee income 32,429 18,832 17,129 68,390
Cost of sales (18,577) (12,349) (11,004) (41,930)
Gross profit 13,852 6,483 6,125 26,460
Margin on net fee income (%)(11) 42.7% 34.4% 35.8% 38.7%
(11) Margin on net fee income is gross profit expressed as a percentage of
net fee income. Please refer to note 3 for further detail
3. Alternative performance measures
Alpha uses alternative performance measures ("APMs") that are not defined or
specific under the requirements of IFRS. The APMs, including net fee income,
margin on net fee income, adjusted EBITDA, adjusted profit before tax,
adjusted operating profit, adjusted profit after tax, adjusted administration
expenses, adjusted cash from operating activities, adjusted EPS, adjusted cash
conversion and organic net fee income growth, are provided to allow
stakeholders a further understanding of the underlying trading performance of
the Group and aid comparability between accounting periods. They are not
considered a substitute for, or superior to, IFRS measures.
Net fee income
The Group disaggregates revenue into net fee income and expenses recharged to
clients. Net fee income provides insight into the Group's productive output
and is used by the Board to set budgets and measure performance. This APM is
reconciled on the face of the income statement and by segment to revenue in
note 2.
Profit margins
Margin on net fee income and adjusted EBITDA margin are calculated using gross
profit and adjusted EBITDA, and are expressed as a percentage of net fee
income. These margins represent the margin that the Group earns on its
productive output, excluding nil or negligible margin expense recharges to
clients over which the Group has limited control, and allows comparability of
the business output between periods. Such adjusted margins are used by the
management team and the Board to assess the performance of the Group.
Reconciliation of adjusted profit before tax, adjusted operating profit and
adjusted EBITDA
30 Sep 2022 30 Sep 2021
Note £'000 £'000
Profit before tax 14,199 4,231
Amortisation of acquired intangible assets 7 2,356 2,258
Loss on disposal of fixed assets - 21
Share-based payments charge 13 4,091 2,357
Earn-out and deferred consideration(12) 8 (316) 2,539
Acquisition costs - 643
Foreign exchange (gains)/losses (463) 1,353
Adjusting items 5,668 9,171
Non-underlying finance expenses 8 1,383 1,032
Adjusted profit before tax 21,250 14,434
Net underlying finance expenses 182 205
Adjusted operating profit 21,432 14,639
Depreciation of property, plant and equipment 898 497
Amortisation of capitalised development costs 7 151 301
Adjusted EBITDA 22,481 15,437
Adjusted EBITDA margin (%) 21.0% 22.6%
(12) The earn-out and deferred consideration credit in the period comprises a
fair value adjustment of £1.4m offset by an employment-linked consideration
charge of £1.0m as set out in note 8, as well as an associated social
security charge of £0.1m
Adjusting items
The Group's APMs exclude certain expense items in order to aid understanding
of the comparable underlying performance of the business. These items are
generally non-cash, non-recurring by nature or are acquisition related.
Amortisation of acquired intangible assets and profit or loss on disposal of
fixed assets are treated as adjusting items to better reflect the underlying
performance of the business, as they are non-cash items, principally relating
to acquisitions.
The share-based payments charge and related social taxes are excluded from
adjusted profit measures. This allows comparability between periods as the
Group's share option plans were established on AIM admission and have not yet
settled into a regular cycle of awards and vesting. The accounting treatment
of the Group's share options requires the charge for each share option award
to be recognised over the vesting period, resulting in significant growth in
the charge in the period as the Group matures post AIM admission. The
estimated future social security taxes payable are closely linked to the
share-based payment charge and fluctuate with the assumed future market value
of shares. This approach has been applied consistently across reporting
periods. Note 13 sets out further details of the employee share-based payments
charge calculation under IFRS 2. A more regular share option award cycle is
anticipated in the coming years. If no adjustment was made for the share-based
payments charge, adjusted EBITDA for the six-month period would be £18.4m (H1
22: £13.1m).
As per note 8, the acquisition of Lionpoint in the prior year involved both
deferred and contingent payments. Part of the Lionpoint acquisition payments
are dependent on the ongoing employment of certain members of the senior
Lionpoint management team, and this element is expensed annually over several
years until the date of payment. In prior periods, the Group similarly
recognised employment-linked costs through the income statement relating to
payments for the previous acquisitions of Axxsys and Obsidian, or to reflect
adjustments made to the fair value of the expected future payment. These costs
have been treated as adjusting items as they are acquisition related,
reflecting the acquisition terms rather than Group trading performance. Whilst
these acquisition-related costs will recur in the short term through the
earn-out period, the adjustment allows comparability of underlying productive
output and operating performance across reporting periods.
Other acquisition costs expensed in the prior period relate to the acquisition
of Lionpoint, including diligence and legal fees. Whilst further similar
acquisition costs could be incurred in the future, these costs are not
directly attributable to the ongoing operational trading performance of the
Group, the timing and amount of such costs may vary and treating these as an
adjusting item allows comparability of the operating performance across
reporting periods.
The impact of foreign currency volatility in translating local working capital
and cash balances to their relevant functional currencies has been excluded
from the calculation of adjusted profit measures on the basis that such
exchange rate movements do not reflect the underlying trends or operational
performance of the Group. In the prior period, the movement was predominantly
acquisition related and, in the current period, there is an immaterial gain on
other foreign currency cash and working capital balances across the Group.
Non-underlying finance expenses
In calculating adjusted profit before tax, unwinding of the discounted
contingent and deferred acquisition consideration within finance expenses is
considered non-underlying as these amounts relate to acquisition
consideration, rather than the Group's underlying trading performance.
Adjusted profit before tax
Adjusted profit before tax is an APM calculated as profit before tax stated
before adjusting items, including amortisation of acquired intangible assets,
share-based payments charge, acquisition-related payments and costs,
non-underlying finance expenses and other non-underlying expenses. This
measure was introduced to allow comparability of the Group's underlying
performance, reflecting depreciation, amortisation of capitalised development
costs and underlying finance expenses.
Adjusted operating profit
Adjusted operating profit is an APM defined by the Group as adjusted profit
before tax before charging underlying finance expenses, including interest
fees on bank loans and 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 depreciation of property,
plant and equipment. Adjusted EBITDA is a measure that is used by management
and the Board to assess underlying trading performance across the Group, and
forms the basis of the performance measures for aspects of remuneration,
including consultant profit share and bonuses.
Adjusted profit after tax
Adjusted profit after tax and adjusted earnings per share metrics are also
APMs, similarly used to allow a further understanding of the underlying
performance of the Group. Adjusted profit after tax is stated before adjusting
items and their associated tax effects. The associated tax effects are
calculated by applying the relevant effective tax rate to allowable expenses
that have been excluded as adjusting items.
30 Sep 2022 30 Sep 2021
£'000 £'000
Adjusted profit before tax 21,250 14,434
Tax charge (3,922) (3,278)
Tax impact of adjusting items (1,419) (413)
Adjusted profit after tax 15,909 10,743
Adjusted earnings per share
Adjusted earnings per share ("EPS") is calculated by dividing the adjusted
profit after tax for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the period.
Adjusted diluted EPS is calculated by dividing adjusted profit after tax by
number of shares as above, adjusted for the impact of potentially dilutive
ordinary shares. Potentially dilutive ordinary shares are only treated as
dilutive when their conversion to ordinary shares would decrease EPS (or
increase loss per share). Refer to note 6 for further detail.
30 Sep 2022 30 Sep 2021
Adjusted EPS
Adjusted EPS 14.09p 9.85p
Adjusted diluted EPS 13.23p 9.34p
Reconciliation of adjusted administrative expenses
To express them on the same basis as the APMs described above, adjusted
administration expenses are stated before adjusting items, depreciation and
amortisation of capitalised development costs and are used by the Board to
monitor the underlying administration expenses of the business in calculating
adjusted EBITDA.
30 Sep 2022 30 Sep 2021
£'000 £'000
Administration expenses 22,679 20,992
Adjusting items (5,668) (9,171)
Depreciation of property, plant and equipment (898) (497)
Amortisation of capitalised development costs (151) (301)
Adjusted administration expenses 15,962 11,023
Adjusted cash generated from operating activities
Adjusted cash generated from operating activities excludes any
employment-linked acquisition payments and associated social security taxes,
as well as other acquisition costs paid in the period, treated as operating
cash flows under IFRS, to reflect the Group's underlying operating cash flows,
exclusive of cash payments relating to acquisitions.
30 Sep 2022 30 Sep 2021
£'000 £'000
Net cash generated from operating activities 2,190 5,970
Employment-linked acquisition payments(13) 1,981 1,848
Acquisition costs - 643
Adjusted cash generated from operating activities 4,171 8,461
( )
(13) Of the £22.5m total deferred and contingent acquisition payments in the
period as set out in note 8, £1.8m is classified as employment linked and is
included within net cash generated from operating activities in the period.
The associated social security payments of £0.2m are also included within net
cash generated from operating activities
Adjusted cash conversion
Cash conversion is stated as net cash generated from operating activities
expressed as a percentage of operating profit.
Adjusted cash conversion is stated as adjusted cash generated from operating
activities expressed as a percentage of adjusted operating profit.
30 Sep 2022 30 Sep 2021
Cash conversion 13.9% 109.2%
Adjusted cash conversion 19.5% 57.8%
Organic net fee income growth
Organic net fee income growth excludes net fee income from acquisitions in the
12 months following acquisition. Net fee income from any acquisition made in
the period is excluded from organic growth. For acquisitions made part way
through the comparative period, the current period's net fee income
contribution is reduced to include only net fee income for the period
following the acquisition anniversary, in order to compare organic growth on a
like-for-like basis.
Organic net fee income growth of 45.3% (H1 22: 21.7%) in the current period
represents H1 23 net fee income less £7.6m attributable to Lionpoint, treated
as inorganic as it preceded the acquisition anniversary.
Constant currency growth
The Group operates in multiple jurisdictions and generates revenues and
profits in various currencies. Those results are translated on consolidation
at the foreign exchange rates prevailing in that period. These exchange rates
vary from year to year, so the Group presents some of its results on a
"constant currency" basis. This means that the current year's results have
been retranslated using the average exchange rates from the prior year to
allow for comparison of year-on-year results, eliminating the effects of
volatility in exchange rates.
Currency translation had a noticeable impact on both net fee income and gross
profit in the first half. This is most notable against the US dollar where, in
the six months, British pound sterling averaged $1.23 (H1 22: $1.39). British
pound sterling averaged €1.18 (H1 22: €1.17) against the euro. On a
constant currency basis, the Group's net fee income for the period would be
£5.5m lower and, similarly, gross profit would be £1.8m lower.
On a constant currency basis, Group net fee income growth would be 48.4%
overall. Similarly, North America net fee income growth would be 108.3% and
Europe & APAC would report 31.3% net fee income growth.
4. Net finance expenses
30 Sep 2022 30 Sep 2021
Note £'000 £'000
Bank interest receivable 65 1
Total finance income 65 1
Interest and fees payable on bank loans (194) (154)
Interest on lease liabilities (53) (52)
Total underlying finance expenses (247) (206)
Non-underlying finance expenses 8 (1,383) (1,032)
Total finance expenses (1,630) (1,238)
Net underlying finance expenses 3 (182) (205)
Net finance expenses (1,565) (1,237)
The Group holds one principal bank facility comprising a £20.0m committed RCF
facility with Lloyds Bank Plc. £7.5m of this facility was temporarily drawn
as at the end of the period to assist with managing currency requirements. The
Group remains in a strong net cash position of £40.3m.
5. Tax
30 Sep 2022 30 Sep 2021
£'000 £'000
Current tax
In respect of the current period - UK 1,553 1,418
Foreign taxation 3,768 1,836
Deferred tax
In respect of the current period - UK (1,033) (1,098)
Foreign taxation (366) -
Change in tax rate on opening balances - 1,146
Adjustment in respect of prior periods - (24)
Total tax expense for the period 3,922 3,278
An increase in the UK corporation tax rate from 19% to 25% (effective 1 April
2023) was substantively enacted during the prior period on 24 May 2021. This
change would increase the Group's future current tax charge accordingly.
In addition to the tax expense for the period ended 30 September 2022, the
Group has also recognised a total of £1.4m (H1 22: £1.0m) of tax through
equity, of which £1.2m (H1 22: £0.1m) relates to current tax on the exercise
of share options and £0.2m (H1 22: £0.9m) relates to deferred tax on share
options outstanding. Additionally, a £0.7m charge (H1 22: £nil) was
recognised through other comprehensive income, relating to the deferred tax
impact of foreign exchange fluctuations on acquired intangible assets.
6. Earnings per share and adjusted earnings per share
The Group presents basic and diluted earnings per share ("EPS") on both a
statutory and adjusted basis. Basic EPS is calculated by dividing the profit
or loss for the period attributable to ordinary shareholders by the weighted
average number of ordinary shares fully outstanding during the period.
The weighted average number of diluted ordinary shares used in the calculation
of diluted EPS includes the number of shares that could be issued to satisfy
share incentive awards granted to employees as they fall due, adjusted for the
likelihood of meeting performance criteria, if any. Potential ordinary shares
are only treated as dilutive when their conversion to ordinary shares would
decrease EPS (or increase loss per share).
In order to reconcile to adjusted profit after tax for the period, the same
adjustments as set out in note 3 have been made to the Group's profit for the
financial period. The profits and weighted average number of shares used in
the calculations are set out below:
Note 30 Sep 2022 30 Sep 2021
Basic & diluted EPS
Profit for the period used in calculating basic and diluted EPS (£'000) 10,277 953
Weighted average number of ordinary shares in issue ('000) 112,904 109,040
Number of dilutive shares ('000) 7,310 5,949
Weighted average number of ordinary shares, including potentially dilutive 120,214 114,989
shares ('000)
Basic EPS 9.10p 0.87p
Diluted EPS 8.55p 0.83p
Adjusted EPS
Adjusted profit after tax used in calculating adjusted basic and diluted EPS 3 15,909 10,743
(£'000)
Weighted average number of ordinary shares in issue ('000) 112,904 109,040
Number of dilutive shares ('000) 7,310 5,949
Weighted average number of ordinary shares, including potentially dilutive 120,214 114,989
shares ('000)
Adjusted EPS 14.09p 9.85p
Adjusted diluted EPS 13.23p 9.34p
7. Goodwill and intangibles
Net book value as at 30 September 2022
Order backlog Customer relationships Intellectual property Trade name Capitalised development costs Total intangible fixed assets Goodwill
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 31 March 2022 120 23,569 1,247 6,211 186 31,333 100,991
Additions 319 - - - - 319 -
Amortisation charge for the period (294) (1,515) (247) (300) (151) (2,507) -
Exchange differences 40 1,401 - 350 - 1,791 6,319
As at 30 September 2022 185 23,455 1,000 6,261 35 30,936 107,310
Net book value as at 30 September 2021
Order backlog Customer relationships Intellectual property Trade name Capitalised development costs Total intangible fixed assets Goodwill
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 31 March 2021 90 15,048 1,743 4,026 741 21,648 63,067
Additions 829 10,752 - 2,602 - 14,183 35,747
Amortisation charge for the period (398) (1,345) (248) (267) (301) (2,559) -
Exchange differences 22 296 - 71 - 389 1,493
As at 30 September 2021 543 24,751 1,495 6,432 440 33,661 100,307
Additions in the period of £0.3m relate to the purchase by the Group of
several contracts from the management enterprise technology solutions practice
of CohnReznick LLP, a leading advisory, assurance and tax firm primarily based
in the United States.
8. Acquisition of businesses
Acquisitions in prior periods
Lionpoint
On 20 May 2021, the Group acquired 100% of the issued share capital of
Lionpoint Holdings, Inc. ("Lionpoint"), a provider of specialist consultancy
services to the alternative investments industry, on a cash free, debt free
basis.
The maximum payable for the acquisition (over four years) is $90.0m (£63.8m),
to be settled in cash, with the option to settle a portion of the deferred
amounts in the Group's ordinary shares. Of this maximum amount payable, $7.5m
(£5.3m) is employment linked. The fair value of consideration recognised on
the date of acquisition amounted to $72.3m (£50.8m), of which $33.5m
(£23.5m) was paid on completion, alongside an additional net cash payment of
$2.1m (£1.4m) in relation to completion working capital. A balancing $0.5m
(£0.3m) receivable was held at 30 September 2021.
Deferred consideration of $17.0m (£12.0m) is payable across the first and
second anniversaries of the acquisition and contingent earn-out consideration
up to a maximum of $32.0m (£22.6m) is payable in three instalments across FY
23 to FY 25. The FY 23 to FY 25 earn-out consideration payments are contingent
on Lionpoint meeting certain profitability targets over the earn-out period.
The fair value of future consideration payable recognised on the date of
acquisition was $37.3m (£26.2m), of which $20.6m (£14.5m) related to
contingent consideration and $16.7m (£11.7m) related to deferred
consideration.
As at 31 March 2022, the Group held a liability of £33.7m in relation to
future deferred and contingent consideration payable for this acquisition.
Employment-linked acquisition payments are expensed through the income
statement proportionately until FY 26. During the period, the Group has
expensed £1.0m in relation to these employment-linked payments.
The deferred and contingent consideration is discounted to fair value.
Discount unwinding is recognised as a finance cost proportionately across the
periods until final payment. During the period, £1.4m of discount unwinding
was expensed as a non-underlying finance cost in relation to the Lionpoint
acquisition consideration.
During the period, the Group made payments of £17.3m net of a £0.4m
receivable that was due back from the sellers. Of these payments, £1.5m
relates to employment-linked consideration, and is presented within cash
generated from operating activities, with the remaining £15.8m presented
within cash used in investing activities in the statement of cash flows.
As consideration for the acquisition of Lionpoint is payable in US dollars,
foreign exchange differences are recognised at each reporting date in relation
to translating these liabilities into British pound sterling. In the period,
the Group recognised a foreign exchange loss of £5.0m in the income statement
arising from acquisition-related currency movements, arising from this
re-translation. However, this loss is offset by a foreign exchange gain on US
dollar cash held by the Group.
As at 30 September 2022, a £23.4m liability is recorded, of which £16.6m is
current and £6.8m is a non-current liability.
Sensitivity analysis
If the discount rates used for the Lionpoint acquisition were to be 5% higher
or lower than that assumed by management, the fair value of the liability
recognised by the Group would not change by a material amount.
Were the financial performance achieved by Lionpoint in the remaining earn-out
periods to increase by 5%, there would be a £1.1m increase to the
undiscounted earn-out and a £0.9m increase in the liability as at 30
September 2022. Were financial performance to decrease by 5%, the undiscounted
earn-out would fall by £2.7m and the H1 23 liability would decrease by
£2.2m.
The Group has also considered a reasonable range of circumstances to sensitise
the forecast cash flows to calculate reasonable estimated remaining earn-out
pay-out ranges for the Lionpoint acquisition. The Directors have determined
that the reasonable range of undiscounted contingent earn-out payments is
between £8.5m and £20.2m, excluding the deferred consideration.
Obsidian
As at 31 March 2022, the Obsidian earn-out liability of £1.9m reflected a
balanced assessment of the Directors' best estimate of projected cash flows in
relation to several plausible scenarios. During the period, a lower
mutually-agreed position was reached with the original vendors. As a result, a
fair value adjustment of £1.4m has been credited to the Group's consolidated
statement of comprehensive income in the period. A payment of £0.2m was made
in the period, none of which was employment-linked, with the remainder
expected to be paid within the next 12 months.
No expense has been recognised in the period in relation to employment-linked
consideration given the ongoing employment condition attached to the Obsidian
earn-out agreement, which lapsed in the year ended 31 March 2022.
Axxsys
The remaining £5.0m liability due on the acquisition of Axxsys as at 31 March
2022 was paid during the period, of which £0.3m was employment-linked.
The below table summarises the movements in the deferred contingent and
non-contingent consideration liabilities to 30 September 2022:
Axxsys Obsidian Lionpoint Total
£'000 £'000 £'000 £'000
Balance as at 1 April 2022 5,000 1,898 33,748 40,646
Fair value adjustment - (1,448) - (1,448)
Employment-linked consideration - - 1,019 1,019
Payments in the period(14) (5,000) (200) (17,315) (22,515)
Amounts receivable deducted from payments in the period - - (350) (350)
Unwinding of discounting - - 1,383 1,383
Foreign exchanges losses - - 4,951 4,951
Balance as at 30 September 2022 - 250 23,436 23,686
1(4) Of the £22.5m payments made in the period, £1.8m is classified as
employment-linked and is included in net cash generated from operating
activities in the statement of cash flows
The £23.7m liability held at 30 September 2022 comprised £7.9m related to
deferred consideration and £15.8m related to contingent consideration. Within
these deferred and contingent consideration liabilities, £2.1m relates to
employment-linked amounts.
The above liabilities are reflected in non-current and current liabilities as
shown in the following table:
30 Sep 2022 30 Sep 2021 31 Mar 2022
£'000 £'000 £'000
Amounts due within one year 16,863 18,822 20,500
Amounts due after one year 6,823 20,725 20,146
Total earn-out and deferred liabilities 23,686 39,547 40,646
9. Trade and other receivables
30 Sep 2022 30 Sep 2021 31 Mar 2022
£'000 £'000 £'000
Trade receivables 31,981 22,823 23,641
Other debtors 927 378 539
Capitalised contract fulfilment costs 1,725 235 1,548
Prepayments 2,105 1,373 1,113
Accrued income 4,957 2,835 2,728
Total amounts due within one year 41,695 27,644 29,569
Trade receivables are non-interest bearing and generally have a 30- to 60-day
term. Due to their short maturities, the carrying amount of trade and other
receivables is a reasonable approximation of their fair value.
In assessing the appropriateness of the Group's expected credit loss provision
at 30 September 2022, the Directors have considered the Group's historical
loss rates for each aging category of receivables in conjunction with other
factors in key Alpha territories. There are no indicators at 30 September 2022
that the profile of risk associated with the Group's receivables is materially
different from that determined through the full assessment performed for the
year ended 31 March 2022. Therefore, the expected credit loss provision has
not changed materially from the provision disclosed in Alpha's Annual Report
& Accounts 2022.
10. Trade and other payables
30 Sep 2022 Restated(15) 31 Mar 2022
30 Sep 2021
Note £'000 £'000 £'000
Trade payables 4,851 2,562 5,114
Accruals 22,800 16,781 23,898
Deferred income 1,599 2,534 1,865
Social security tax on share options 13 1,657 1,040 1,050
Taxation and social security 6,118 4,840 2,964
Other creditors 1,821 1,000 1,280
Earn-out and deferred consideration 8 16,863 18,822 20,500
Total amounts owed within one year 55,709 47,579 56,671
(15) Trade and other payables in the H1 22 comparative period have been
re-presented within this note to separately disclose social security tax on
share options from other tax and social security liabilities, in line with the
audited FY 22 disclosure
Trade payables comprise amounts outstanding for trade purchases and ongoing
costs. The Directors consider that the carrying amount of trade and other
payables is a reasonable approximation of their fair value.
The reduced accruals balance reflects the payment in the period of increased
employee profit share and director bonuses relating to strong FY 22
performance, partially offset by the continued growth of the Group.
Earn-out and deferred consideration comprises the fair value of deferred and
contingent consideration arising from the Group's acquisitions owed within 12
months. Please refer to note 8 for further details.
11. Other non-current liabilities
30 Sep 2022 Restated(16) 31 Mar 2022
30 Sep 2021
Note £'000 £'000 £'000
Earn-out and deferred consideration 8 6,823 20,725 20,146
Deferred income 204 236 233
Social security tax on share options 13 1,330 1,318 1,953
Other non-current liabilities - - 2,768
Total amounts owed after one year 8,357 22,279 25,100
(16) Other non-current liabilities in the H1 22 comparative period have been
re-presented within this note to separately disclose social security tax on
share options from other non-current liabilities, in line with the audited FY
22 disclosure
Earn-out and deferred consideration of £6.8m falls due over 12 months from
the balance sheet date and relates to the Group's acquisition of Lionpoint.
Please refer to note 8 for further details.
Other non-current liabilities fell to nil in the period (FY 22: £2.8m) as the
remaining deferred element of FY 22 bonuses for certain directors and senior
management globally now falls due within 12 months.
12. Called up share capital
30 Sep 2022 30 Sep 2021 31 Mar 2022
Number Number Number
Allotted, called up and fully paid
Ordinary shares of 0.075p each 120,507,336 118,238,586 118,707,336
30 Sep 2022 30 Sep 2021 31 Mar 2022
£ £ £
Allotted, called up and fully paid
Ordinary shares of 0.075p each 90,381 88,679 89,031
Note £
Balance at 1 April 2022 89,031
118,707,336 ordinary shares of 0.075p each
Issued shares (i) 1,350
Balance at 30 September 2022 90,381
120,507,336 ordinary shares of 0.075p each
(i) During the period, a total of 1,800,000 ordinary shares
were issued by the Group, all of which were issued to the employee benefit
trust ("EBT") for future satisfaction of share incentive plans.
Alpha Employee Benefit Trust
The Group held 6,546,656 (FY 22: 6,216,501) shares in the EBT comprising
shares held to satisfy share options granted under its joint share ownership
plan ("JSOP") or unallocated ordinary shares to satisfy share options granted
under the Group's other share option plans.
During the period, 1,800,000 ordinary shares were transferred by the company
to the EBT for potential future satisfaction of share incentive plans, through
the issuance of new shares. Further, the EBT purchased 254,817 shares in the
period at market value for £1.1m. Ordinary shares held within the EBT have no
dividend or voting rights.
In addition, a total of 1,724,662 shares held in the EBT were utilised for
employee share option exercises.
Treasury shares
The Group held nil shares in treasury at 30 September 2022 (FY 22: nil).
Shares with voting rights
The total number of voting rights in the Company at 30 September 2022 was
113,960,680 (FY 22: 112,480,835).
Dividends
During the period, the Group paid a final dividend in relation to the year
ended 31 March 2022 of 7.50p per ordinary share (H1 22: 4.85p).
The Board has declared an interim FY 23 dividend of 3.70p per share (H1 22:
2.90p).
13. Share-based payments
The Group has adopted a globally consistent share incentive plan approach,
which is implemented using efficient jurisdiction specific plans, as
appropriate.
The Management Incentive Plan
The Group has a management incentive plan ("MIP") to retain and incentivise
directors and senior management. The MIP consists of four parts: part A of
which will enable the granting of enterprise management incentive and non-tax
advantaged options to acquire shares; part B of which will enable the awarding
of JSOPs; part C of which will enable the awarding of restricted stock units
("RSUs") for participants in the US; and Part D of which will enable the
awarding of RSUs in France (together the "options").
In prior periods, the majority of options granted to certain directors and
senior management of the Group were subject to the fulfilment of three or more
of the following performance conditions: (a) the Group achieving adjusted EPS
growth of 15.0% or more to trigger a maximum award, or 10.0% to trigger a 66%
award, with a linear application of awards between these levels; (b) the Group
achieving a TSR over three years in excess of the mean TSR delivered by a peer
group of comparable companies; (c) personal adherence to corporate values and
risk policy; and (d) specific business unit EBITDA, or other personal targets
and goals. In FY 21, in response to COVID-19, options granted were subject to
more flexible performance criteria, including local budget targets and a
variety of stretching personal sales or other targets. In FY 22, the
performance conditions of options granted in that year returned to the
previous award criteria.
As disclosed in the 2022 Annual Report & Accounts, the Remuneration
Committee approved performance conditions for FY 23 awards, which modified the
adjusted EPS growth range set out above to reflect the growth of the Group
since AIM admission. The criteria for these share incentive awards to certain
directors and senior management of the Group, depending on the individual and
their role, include: (a) the Group achieving adjusted EPS growth of 11.0% or
more to trigger a maximum award, or 7.0% to trigger a 66% award, with a linear
application of awards between these levels; (b) the Group achieving a TSR over
three years in excess of the mean TSR delivered by a peer group of comparable
companies; (c) personal adherence to corporate values and risk policy; and (d)
specific business unit EBITDA, or other personal targets and goals.
MIP awards have either nominal or minimal exercise price payable in order to
acquire shares pursuant to options. MIP awards have either three- or four-year
vesting periods from the date of grant and can be equity settled only.
The Employee Incentive Plan
In addition to the MIP, the Board previously put in place a medium-term
employee incentive plan ("EIP"). Under the EIP, a broad base of the Group's
employees has been granted share options or share awards over a small number
of shares. The EIP is structured as is most appropriate under the local tax,
legal and regulatory rules in the key jurisdictions and therefore varies
between those jurisdictions. No EIP awards were made in the current or prior
periods.
Movements in the period
During the period, a total of 3,138,309 share option and award grants were
made to employees and senior management (H1 22: 2,959,429). The weighted
average of the estimated fair values of these options awarded in the period is
£3.11 per share (H1 22: £2.68).
In June 2022 and August 2022 certain MIP awards vested, following satisfaction
of performance conditions. The awards' performance conditions relating to EPS
growth and total shareholder return exceeding a basket of comparable companies
over three years to the vesting date were met in full and the relevant local
country or divisional budgetary performance conditions were met in full or
part, dependent on Alpha location. As a result, 2,020,861 nominal cost awards
over ordinary shares of 0.075 pence per share vested and 156,423 share awards
were forfeited under performance conditions or as a result of leavers before
vesting.
Of these awards vested in the period, 1,706,999 were exercised, with an
additional 109,375 share options that vested in FY 21 also exercised on 22
June 2022. Of these total 1,816,374 share options exercised, the Company
settled 1,724,662 through the transfer of existing shares from the EBT, with
91,712 additional share options retained for net tax settlement. The weighted
average share price at the date of these exercises was £4.18. The remaining
vested award holders have a further six-year period in which to exercise their
vested awards.
Movements in share options outstanding in the period ended 30 September 2022
are as follows:
Number of
share options
Outstanding at the beginning of the period 9,504,379
Granted during the period 3,138,309
Exercised during the period (1,816,374)
Forfeited during the period (156,423)
Expired during the period -
Outstanding at the period end 10,669,891
Exercisable at the period end 398,655
The weighted average exercise price for all options outstanding in both the
current and prior periods was nominal. The options outstanding as at 30
September 2022 had a weighted average remaining contractual life of two years.
MIP share options with an external market condition were valued at award using
the Monte Carlo option pricing model. The model simulates a variety of
possible results, across 10,000 iterations for each of the options, by
substituting a range of values for any factor that has inherent uncertainty
over a number of scenarios using a different set of random values from the
probability functions. The model takes any market-based performance conditions
into account and adjusts the fair value of the options based on the likelihood
of meeting the stated vesting conditions.
MIP share options without external market conditions were valued at award
using a Black-Scholes model.
The inputs to these models in the period were as follows:
Period ended
30 Sep 2022
Weighted average share price at grant date £3.99
Exercise price Nominal
Volatility 20.14%
Time to maturity 4 years
Risk free rate 1.67%
Expected dividend yield 3.00%
Expected volatility was determined by calculating the historic volatility of
the market in which the Group operates. The expected expense calculated in the
model has been adjusted, based on management's best estimate, for the effects
of non market-based performance conditions and employee attrition.
The Group recognised a total expense of £4.1m (H1 22: £2.4m) in the current
period, comprising £3.6m (H1 22: £1.7m) in relation to equity settled
share-based payments and £0.5m (H1 22: £0.7m) relating to relevant social
security taxes. Given the estimation, were the future conditions for all
outstanding share options assumed to be met at the end of the reporting
period, the charge in the period would increase by £0.4m.
The carrying value of amounts relating to social security tax on share options
as at 30 September 2022 is £3.0m (FY 22: £3.0m), with £0.5m recognised in
the statement of comprehensive income in the period, offset by £0.5m of
payments made in the period. Assumptions associated with the calculation of
the social security tax liability due on vesting of share options include an
estimation of the forward-looking share price at the vesting date based on
applicable analyst research and applicable future tax rates. For these
purposes, share price is updated at each reporting period to reflect historic
levels, and is assumed to grow in line with the estimated future performance
of the business. If the estimated future share price growth assumption were to
double, the social security costs in the period could increase by £0.3m. Were
the share price to remain flat the charge would reduce by £0.3m.
14. Related party transactions
Related parties, following the definitions within IAS 24 Related Party
Disclosures, are the Group's subsidiary companies, members of the Board, key
management personnel and their families, and shareholders who have control or
significant influence over the Group.
The Group considers key management personnel, as defined under IAS 24, to be
the Company's Directors and certain members of the Group's senior management
team that report into the Group Coordination Committee. There were no
transactions within the period in which the Directors had any interest.
Transactions between the Company and its subsidiaries are on an arm's length
basis and have been eliminated on consolidation and are not disclosed in this
note.
None of the Group's shareholders are deemed to have control or significant
influence and therefore are not classified as related parties for the purposes
of this note.
-ENDS-
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