REG - Alpha Fin. Markets - Full Year Audited Results
23/06/2022 07:00
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RNS Number : 9298P Alpha Fin Markets Consulting plc 23 June 2022
23 June 2022
Alpha Financial Markets Consulting plc
("Alpha", the "Company" or the "Group")
Alpha Financial Markets Consulting plc (AIM:AFM), a leading global provider of
specialist consultancy services to the asset management, wealth management and
insurance industries, is pleased to report its audited results for the 12
months ended 31 March 2022 (FY 22).
A YEAR OF EXCELLENT RESULTS AND PROGRESS TOWARDS ACHIEVING ALPHA'S AMBITIOUS
GROWTH PLANS
Financial Highlights
· Revenue and net fee income(1) increased by 61.1% to £158.0m (FY
21: £98.1m) and £157.8m (FY 21: £98.0m) respectively; 31.3% on an
organic(2) basis
· Gross profit increased by 70.4% to £59.4m (FY 21: £34.8m)
· Adjusted(1) EBITDA increased by 56.0% to £33.9m (FY 21: £21.7m)
· Adjusted profit before tax increased to £31.8m (FY 21: £19.6m)
· Adjusted earnings per share increased by 43.9% to 21.46p (FY 21:
14.91p)
· On a statutory basis, profit before tax increased to £14.9m (FY21:
£9.0m) and basic earnings per share increased to 7.69p (FY 21: 5.75p)
· Robust balance sheet with a net cash balance as at 31 March 2022 of
£63.5m (31 March 2021: £34.0m)
· Strong adjusted cash conversion of 112% (FY 21: 111%), with adjusted
cash generated from operating activities of £36.0m (FY 21: £22.3m)
· In view of Alpha's performance and cash position at the year end, the
Board is recommending a final dividend of 7.50p (FY 21: 4.85p)
12 months to 12 months to Change
31 March 2022 31 March 2021
Revenue £158.0m £98.1m 61.1%
Gross profit £59.4m £34.8m 70.4%
Adjusted EBITDA £33.9m £21.7m 56.0%
Adjusted profit before tax £31.8m £19.6m 62.0%
Profit before tax £14.9m £9.0m 65.9%
Adjusted EPS 21.46p 14.91p 43.9%
Basic EPS 7.69p 5.75p 33.7%
Total dividend per share 10.40p 6.95p 49.6%
Operational Highlights
· Strong growth within the asset and wealth management consulting
business, with 31.3% organic net fee income growth in the last financial year
(FY 21: 8.0%). Strong organic progress across all regions, in particular in
North America (62.2%, FY 21: 13.6%)
· Successful acquisition and integration of Lionpoint(3), bringing
global scale in alternative and other private asset classes, and cross
collaboration opportunities on client projects
· Continued momentum and growth in the Group's insurance consulting
offering, strengthened by UK extension into General Insurance and Specialty
client segments as well as doubling of the team
· Strong client retention and growth in new clients globally, with the
number of clients(4) that the Group has supported increasing to 718 (FY 21:
439)
· Consultant(5) headcount increased by 69.6% to 760 (March 2021: 448),
including the addition of 33 new directors(6) and the wider Lionpoint team
· Addition of offices(7) in Denver, San Francisco, Sydney and
Frankfurt, taking the Group to 16 client-facing offices globally
Outlook
· Alpha continues to focus on growing the business through geographic
expansion in all regions, particularly in North America, as well as extending
the depth and range of client segment and service line offerings
· Whilst mindful of the macro-economic backdrop including inflationary
pressures, the strong momentum experienced by the Group in FY 22 has continued
into the early part of FY 23. With a strong pipeline of potential new business
and the structural tailwinds that underpin demand for Alpha's services
remaining robust, the Group is well positioned to balance the risks of these
pressures and continue to deliver attractive growth and margins
Commenting on the results, Euan Fraser, Global Chief Executive Officer said:
"This past financial year has been the most successful in Alpha's history and
we experienced strong growth in every part of Alpha's consulting business. It
is the result of a tremendous team effort and I am extremely thankful to all
our employees across the globe who have worked tirelessly to deliver
exceptional service to our clients.
"We also welcomed 123 new colleagues to the Group with the successful
acquisition of Lionpoint, which gives us an enviable position in the rapidly
growing alternatives sector. The value of our specialist expertise is well
recognised and the benefits of this are increasing as we scale and extend our
competitive challenge."
Enquiries:
Alpha Financial Markets Consulting plc +44 (0)20 7796 9300
Euan Fraser (Global Chief Executive Officer)
John Paton (Chief Financial Officer)
Investec Bank plc - Nominated Adviser, 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
Georgia Edmonds
Analyst Presentation:
A results presentation will take place at 9.30 a.m. today by conference
call. Those wishing to attend should email AlphaFMC@camarco.co.uk
(mailto:AlphaFMC@camarco.co.uk) .
The full-year results and a copy of the presentation slides, for those unable
to attend, will be available on the company website at
https://alphafmc.com/investors/reports-presentations/
(https://alphafmc.com/investors/reports-presentations/) .
About Alpha FMC:
Headquartered in the UK and quoted on the AIM of the London Stock Exchange,
Alpha is a leading global provider of specialist consultancy services to the
asset management, wealth management and insurance industries.
Alpha has worked with all of the world's top 20 and 76% of the world's top 50
asset managers by AUM(8), along with a wide range of other buy-side firms. It
has the largest dedicated team in the industry, with over 760 consultants
globally, operating from 16 client-facing offices spanning the UK, North
America, Europe and APAC.
(1) The Group uses alternative performance measures ("APMs") to provide
stakeholders further metrics to aid understanding of the underlying trading
performance of the Group. Refer to the Chief Financial Officer's report and
note 3 for further details.
(2) Organic net fee income growth excludes Lionpoint, acquired during the
year. Refer to note 3 for further information on the APMs.
(3) "Lionpoint" refers to Lionpoint Holdings, Inc.
(4) Client numbers are cumulative and have been updated to include all client
relationships from acquisitions.
(5) "Consultants" and "headcount" refer to fee-generating consultants at the
year end: employed consultants plus utilised contractors in client-facing
roles. Total increase of 312, of which 123 was through acquisition.
(6) "Directors" refer to fee-generating directors at the year end. Total
increase of 33, of which 13 was through acquisition.
(7) The Group uses "office" to refer to client-facing office location; that
is, if there are multiple offices in one location, they will be counted as one
office.
(8) "World's top 20" and "world's top 50" refer to Investment & Pensions
Europe, "Top 500 Asset Managers 2021".
Chairman's Report
Alpha's blueprint for international expansion has once again been extremely
effective. Key growth initiatives have gained momentum and the Group has
continued to attract the outstanding consulting talent that underpins its
unique market proposition.
Introduction
I am delighted to present the Annual Report & Accounts for the Group for
the year ended 31 March 2022, which demonstrate another year of impressive
profitable growth. Having navigated through the pandemic resiliently in FY 21,
we approached FY 22 with confidence. This confidence has been well founded as
the Group's performance has been excellent. Alongside strong organic progress,
the strategic acquisition of Lionpoint has been successfully integrated and
delivered a very strong performance. This combination has enabled the Group to
achieve an outcome well ahead of initial market expectations. On behalf of the
Board(9), I would therefore like to thank all of the Group's employees for
their enormous efforts, hard work and contributions to consistently deliver
first class service and expertise to our clients.
The Group has made significant progress towards its medium-term goal of
doubling in size over the four years to November 2024. Alpha has achieved
major advances in the three priority areas of North America, insurance
consulting and making acquisitions. The broad-based nature of progress in the
past year has reinforced the Board's confidence that the Group is on track to
deliver on its medium-term strategy.
The asset management, wealth management and insurance markets are influenced
by powerful long-term trends, notably the drive for efficiency, fee
compression, regulatory change and the growing focus on ESG(10) and
responsible investment. These trends represent a strong tailwind for the Group
and are steadily increasing the relevance and value of its proposition: to
provide the best specialist consultancy services for clients wherever in the
world they need us.
The Alpha Board, supported by the senior management team, remains committed to
the Group's strategic aim to be recognised as the leading global consultancy
to the asset management, wealth management and insurance industries.
Overview of the Financial Year
Alpha's performance over the past year has been nothing short of outstanding.
Demand for specialist expertise across all areas of the industry's value chain
has been very strong, and Alpha's ability to capture this has pushed
year-on-year organic growth in Group net fee income to 31.3% and to 62.2% in
the key North America market. Notably, we have seen significant growth in all
three areas identified as strategic growth initiatives.
The Group's strategic decision to enter the insurance consulting market has
been particularly successful. The Pensions & Retail Investments practice
in the UK has doubled in size over the past year and continues to forge ahead.
The UK launch of Alpha's General Insurance and Specialty client segments, and
the hiring of two new directors specifically aligned to these areas, gives us
confidence that we will continue to see further material growth from our
insurance teams.
Organic growth in North America has also accelerated sharply over the past 12
months. The Group continues to build relationships with the biggest asset and
wealth managers and, excluding Lionpoint, now has over 125 consultants based
in North America. Given the size of the market and the potential to introduce
or scale up the full range of asset and wealth management practices in North
America, the Board believes that there continues to be significant potential
for further growth in this market.
The acquisition of Lionpoint, with its focus on private-market asset managers,
has proved extremely complementary to the public-market focus of the rest of
the Group. Since the acquisition in May 2021, Lionpoint has added 75 people to
its headcount and won 64 new clients. Many of the world's largest public asset
managers are expanding into alternative assets and the Lionpoint acquisition
brings deep expertise in these areas. The Group now offers an integrated
proposition spanning both public and private markets, unlocking many growth
opportunities.
Overall, Group revenues rose 61.1% to £158.0m, including Lionpoint's
contribution. Organic net fee income growth accelerated to 31.3% (FY 21: 8.0%)
as Alpha successfully captured client demand for its expanding range of
high-quality consulting services. Despite increasing costs post the COVID-19
pandemic, the strong revenue growth fed through to record adjusted EBITDA of
£33.9m (FY 21: £21.7m) and profit before tax of £14.9m (FY 21: £9.0m).
Adjusted earnings per share of 21.46p (FY 21: 14.91p) and basic earnings per
share of 7.69p (FY 21: 5.75p) grew 43.9% and 33.7% respectively.
Governance and the Board
The members of Alpha's Board have a wide knowledge of financial services and
substantial leadership experience within the industry, and they are committed
to the highest standards of corporate governance and ethical behaviour. Alpha
benefits from a robust corporate governance framework that ensures the
interests of shareholders, employees, clients and wider stakeholders are
properly safeguarded. The Board recognises that strong and appropriate
governance is essential to reduce risk and secure long-term value for
shareholders and therefore the topic remains under continual review.
We have taken steps to further broaden the range of experience at Board level
with the appointment of Maeve Byrne as an Independent Non-Executive
Director(11) from 16 May 2022. Maeve has more than 30 years' experience in
financial services and was a partner in the financial services practice at
KPMG from 2002 to 2014. Between 2010 and 2017, first on secondment and then
as an executive, she held senior roles at Royal Bank of Scotland and Williams
& Glyn. Subsequently, she has worked as an independent board adviser
focussing on transformation services. On appointment, Maeve joined the Board's
Audit and Risk, Nomination and Remuneration Committees.
The Group regards ESG and sustainability as important elements of Alpha's
governance and approach to risk management. The Board recognises that it has
an important role in overseeing and progressing these ESG efforts and we are
therefore progressing plans to establish an ESG Committee in the coming
financial year.
Internally, we are increasing our focus on issues linked to sustainability,
both by preparing the Group to start reporting under the framework set out by
the Taskforce on Climate-Related Financial Disclosures, and by developing our
own roadmap to net zero greenhouse gas emissions. The Group has hired a
full-time Sustainability Manager within its business operations team whose
role will include overseeing the development of this work and the
implementation of Alpha's emissions reduction targets.
Strategy
The Board, supported by Alpha's executive team, is fully committed to the
Group's strategic goal, which is to be recognised as the leading global
consultancy to the asset management, wealth management and insurance
industries. Alpha therefore aims to attract and train the most talented team
of industry specialists available. To do this, the Group provides a highly
attractive offering encompassing compensation, career development, high
quality work in multiple geographies, recognition and support. This
combination of continuing to develop an excellent corporate culture alongside
competitive remuneration has resulted in growth in headcount in FY 22 of 189
consultants (FY 21: 12), excluding Lionpoint consultants at the time of
acquisition, bringing our total number of consultants at 31 March 2022 to 760.
Alpha also keeps the wellbeing of its employees under constant review and
strives to ensure that the workplace culture emphasises mutual support,
teamwork and effective communication. Diversity and inclusion are vital
elements of the culture that the Group aims to foster. The recent hire of an
experienced full-time Diversity & Inclusion Manager, who will join Alpha
at the beginning of the new financial year, is intended to ensure that Alpha's
culture of inclusivity, governance frameworks and recruitment processes are
delivering a sufficiently diverse team through all levels of the
organisation.
The specialist nature of Alpha's consulting teams is critical to differentiate
the Group's proposition and to create long-term relationships with clients
that can broaden to include more practice areas and service offerings. The
strong organic growth achieved over the past year in North America provides an
illustration of this process. Around 80% of Alpha's organic net fee income in
North America last year were generated by three of the Group's more
established asset and wealth management practices: Investments, Distribution
and M&A(12). Having reached scale in North America, these practices are
now producing opportunities to introduce Alpha's more recently launched
practices, such as ESG & Responsible Investment ("ESG & RI").
Acquisition continues to be a key element of the Alpha growth strategy. The
addition of Lionpoint in May 2021 built on the success of prior acquisitions
enabling Alpha to broaden its proposition. This acquisition is a particularly
good example in that it secured entry to the highly complementary area of
private-market asset managers, incorporating private equity, private credit,
infrastructure, real estate and fund of funds, and also more than doubling the
Group's headcount in the key growth market of North America.
Dividend
As a result of Alpha's outstanding performance over the past year, the Board
is recommending a 54.6% increase in the final dividend to 7.50p per share,
bringing the total for the year to 10.40p (FY 21: 6.95p). Subject to
shareholder approval at the Annual General Meeting ("AGM"), to be held on 13
September 2022, the final dividend will be paid on 20 September 2022 to
shareholders on the register at close of business on 9 September 2022.
Outlook
Whilst we are mindful of the geopolitical and economic backdrop at present,
the Alpha business enjoyed strong momentum through FY 22 and that has
continued into FY 23. The Group's business is strongly cash generative and has
a record pipeline of potential new business, while the industry tailwinds that
underpin demand for its services remain strong. Therefore, we start the year
in excellent health.
Once again, I would like to reiterate my thanks to everyone at Alpha for their
tremendous efforts. With the combination of industry tailwinds, globalisation
of the Group's services and strategic acquisitions, all supported by our
enormously talented teams, the Board looks forward to the future with
confidence.
Ken Fry
Chairman
23 June 2022
(9) The "Board" is Alpha's Board of Directors, also referred to as the "Board
of Directors", the "Alpha Board" and the "Directors".
(10) Environment, Social, Governance ("ESG").
(11) "Director" refers to the executive and non-executive members of the
Board; meanwhile "directors" refers to non-Board directors within the
management teams of the Group.
(12) Practice name changed to "M&A" practice in the year to better reflect
the client proposition.
Global Chief Executive Officer's Report
Introduction
This past financial year has been one of the most successful in Alpha's
history. Despite the continuing impact of COVID-19, which prolonged the
challenges that remote working created for our team, they responded
magnificently and continued to deliver excellent results servicing Alpha's
clients. Their professionalism enabled us to meet buoyant demand for our
services among asset and wealth managers and insurers, leading to the
outstanding growth and profit performance that we achieved in FY 22.
We had many wonderful client wins over the past year and it is clear that we
are constantly gaining market share. The value of our specialist expertise is
well recognised and the benefits of this are increasing as we scale and extend
our competitive challenge against the generalist consultancy firms.
Alpha ended FY 22 in a stronger position than ever. Whilst the macro-economic
outlook for the coming months has some uncertainty, and we remain cautious and
vigilant for the potential for further developments, including inflationary
pressures, the Group continues to perform very strongly.
Delivering on our Strategy
After a year of very strong growth in every region of Alpha's consulting
business, we are well on the way to achieving our medium-term goal of doubling
the size of our Group over the four-year period to November 2024. The
structural drivers for our sector continue to create significant tailwinds for
Alpha. We have previously highlighted the three most significant growth
opportunities that would enable Alpha to achieve our growth target of doubling
the business - rapid expansion in insurance consulting, continued strong
growth in North America and acquisitions - and FY 22 was a year in which we
delivered outstanding progress on all three fronts.
We launched insurance consulting in FY 20 with a Pensions & Retail
Investments practice in the UK, subsequently expanded into France and the
business doubled its headcount over the past year. Our belief that the
insurance industry offers an opportunity for Alpha of comparable scale to our
core asset and wealth management market is being rapidly vindicated. During
the past year, we have started broadening our proposition for insurance
clients with the extension in the UK into General Insurance and Specialty
client segments. This team is already harnessing strong demand and we are
building a wonderful reputation.
A major part of our growth strategy - scaling our North America business -
also made excellent progress. In addition to Lionpoint, we increased our
headcount in North America to 259, a 232.1% increase over the course of FY 22.
Organic net fee income growth in North America reached 62.2% year on year as
we won a string of new clients from the world's top asset management
companies. This is the world's largest asset management market with assets
under management around eight times greater(13) than in the UK, where we now
have 287 consultants in aggregate. This simple comparison offers a good
indication of the growth opportunity we see for Alpha in North America over
the next few years.
The third pillar of our growth strategy is acquisitions and, with the
acquisition of Lionpoint in May 2021, we have transformed our proposition by
adding a leading global consultancy specialising in the fast-growing
alternatives sector of private equity, private credit, infrastructure, real
estate and fund of funds. We had been targeting private markets as a natural
area of growth and concluded that Lionpoint would be the perfect partner.
Many of Alpha's core asset and wealth management clients are increasing their
exposure to alternatives and, now that Lionpoint is part of the Group, we can
propose integrated solutions that span our clients' public and private
portfolios, opening up an important growth opportunity. This acquisition also
brings us a much-increased presence in the key strategic market of North
America and is forecast to continue to deliver a strong performance in the
first full year of ownership.
It was pleasing to see the level of support among our shareholders for this
important strategic acquisition. We were able to raise £31.1m, before
expenses, of new equity to purchase Lionpoint at zero discount to the
prevailing share price - the best endorsement we could have hoped for from our
investors. We are grateful for the trust they have shown in the Group.
The progress we have made during FY 22 in realising the potential of our three
biggest growth opportunities puts us in a strong position to deliver on our
pledge in late 2020 to double the size of Alpha's business within four
years.
Summary of Financial Performance
The powerful momentum across our priority growth areas and the large number of
new client wins have enabled us to announce exceptionally strong financial
results, with both revenue and adjusted EBITDA well ahead of initial market
expectations. In addition to the 164 new clients that came to us through the
acquisition of Lionpoint, Alpha gained 51 new clients during FY 22 (FY 21:
58), excluding Lionpoint additions in the year. Lionpoint continues to trade
strongly, winning 64 new clients since the acquisition in May 2021 and
delivering strong revenue growth.
Group net fee income, including Lionpoint's contribution, increased by 61.1%
to £157.8m (FY 21: £98.0m) and by 31.3% to £128.6m on an organic basis.
Adjusted EBITDA increased by 56.0% to £33.9m (FY 21: £21.7m) and adjusted
profit before tax by 62.0% to £31.8m (FY 21: £19.6m). Alpha continues to
generate strong cash flows and ended the year with net cash of £63.5m (FY 21:
£34.0m).
On a statutory basis, revenue increased by 61.1% to £158.0m (FY 21: £98.1m),
operating profit by 74.7% to £17.8m (FY 21: £10.2m) and profit before tax by
65.9% to £14.9m (FY 21: £9.0m). The difference between these statutory and
adjusted performance measures set out above arise from the adjusting items as
explained in the Chief Financial Officer's Report and note 3.
Trading has been very positive across all our consulting operations, and our
new business pipeline strengthened steadily throughout the year. We are still
seeing many clients commit to larger business change projects and technology
transformations as they seek operating models that are more robust and better
adapted to hybrid working. Our margins are strong, driven in part by
above-target consultant utilisation levels. We continue to invest in
industry-leading talent at all levels to drive further growth across all parts
of the Group.
Alpha's robust financial performance and strong momentum have enabled the
Board to announce an increase in the final dividend for FY 22 to 7.50p (FY 21:
4.85p), giving a total of 10.40p for this year, up 49.6% on the FY 21 total
dividend of 6.95p.
Operational Review
With the acquisition of Lionpoint in May 2021 we welcomed 123 new consultants
to the Group in May 2021 and the integration of Lionpoint's team into the
wider Group has been one of the key operational priorities for FY 22. This is
now complete and directors across the wider Group meet regularly and
collaborate extremely well. Since the year end, in early April we further
invested with a team lift-out of 14 real estate investment professionals,
mainly based in the US. This additional real estate capability again enhances
the Group's offering and adds several new client relationships.
Alpha's established asset and wealth management consulting practices all
traded very strongly through FY 22, including Investments, Distribution,
M&A and Operations, with newer practices such as Regulatory Compliance
& Risk and Digital also showing excellent organic growth. We continue to
globalise our consulting practices and add new propositions such as Data
Science to meet new client demand.
Our insurance consulting business area, which is focussed on the UK and
France, has doubled its headcount over the past year in response to very
strong client demand and we have recruited two directors to lead our General
Insurance and Specialty segments in the UK. This marks the expansion of our
insurance offering from the investment-focussed areas we initially targeted
into traditional risk underwriting and reinsurance.
Our technology services business has also been significantly strengthened over
the past year thanks to major investments in Axxsys, the software
implementation specialist that we acquired in FY 20. Over the past 12 months,
Axxsys has broadened its proposition with the launch of technology consulting
practices focussed on data and cloud services, front office projects and
wealth management. There is huge demand for technology consultancy among asset
and wealth managers and we believe that these new practice areas are poised
for strong growth in FY 23 and beyond.
The Group's Alpha Data Solutions(14) ("ADS") business, including Obsidian, has
made less progress than planned in the year, despite a good opportunity
pipeline. We were delighted to welcome a new global head to focus the strategy
and gain further traction.
Geographic Overview
Alpha's regional financial performance for the past year demonstrates the
strong demand that our teams have encountered in all parts of the world. In
regional terms, the major development over the past year is that Alpha has now
achieved scale in each of our main regions, thanks to a combination of robust
hiring and the addition of Lionpoint's global team, almost 70% of which are
based in North America.
By the end of FY 22, we had over 285 consultants in the UK, over 255 in North
America and more than 210 in Europe & APAC. Our North America operations
are well diversified between East and West coasts, the Mid-west and South,
alongside a growing presence in Canada.
12 months to 12 months to Change
31 March 2022 31 March 2021
Net Fee Income
UK £72.1m £53.5m 34.9%
North America £46.9m £16.5m 184.1%
Europe & APAC £38.8m £28.0m 38.6%
Year-end totals £157.8m £98.0m 61.1%
( )
12 months to 12 months to Change
31 March 2022 31 March 2021
Gross Profit
UK £30.6m £21.4m 43.2%
North America £15.4m £4.4m 242.6%
Europe & APAC £13.4m £9.0m 49.5%
Year-end totals £59.4m £34.8m 70.4%
North Europe
America
& APAC
UK Totals
Consultant Headcount
As at 31 March 2021 223 78 147 448
Lionpoint team on acquisition 27 88 8 123
Team additions - Lionpoint 12 45 18 75
Team additions - rest of the Group 25 48 41 114
As at 31 March 2022 287 259 214 760
Change 28.7% 232.1% 45.6% 69.6%
We continue to build relationships with the largest asset managers in North
America and the Group has now worked with 80% of top 25 North American asset
managers(15). We also continue to broaden these relationships to include more
of our services. Net fee income in North America grew 184.1% over the year and
62.2% organically.
Our businesses in the UK and Europe & APAC also delivered excellent
performances, increasing net fee income by 34.9% and 38.6% respectively. Our
established offerings in the Operations, Investments and Distribution spaces
continue to grow strongly in those regions and we have seen increased industry
interest in our most recent offerings around ESG & RI and Insurance.
All our consulting businesses globally have experienced strong client demand,
resulting in higher than planned consultant utilisation through the year,
which we aim to glide back to more normalised levels with ongoing recruitment
through the new financial year. Strong demand has also supported good
consultant day rate progression in all regions and is a helpful environment in
which to manage inflationary cost pressures.
Our People
Over the past two years, Alpha's employees have had to deal with unprecedented
conditions due to the pandemic and their response to the heavy demands placed
upon them has been magnificent. The quality of their performance is clear from
the outstanding financial results that we have achieved in FY 22. However, we
do not take any of this for granted.
Although the most acute phase of the pandemic is behind us, we are still very
mindful that many of our people have faced ongoing challenges in working
remotely and we have thought very carefully about how we can support them
better. We reopened our offices as soon as conditions allowed so that those
who wished to return could do so, albeit with relevant precautions in place.
The flexibility to work remotely has advantages for many employees and also
for Alpha in terms of our ability to draw on our global talent pool for
projects irrespective of where the client is based, and to use our capacity as
efficiently as possible. Our clients continue to respond very favourably to
our talent and service delivery proposition, which is reflected in consultant
utilisation rates for FY 22 that were slightly above target. This should be
counteracted to some degree by our ongoing hiring programmes, which bring new
talent into the Group at every level to ensure that we have strong foundations
for further growth.
Our attrition rate has risen post COVID-19 yet remains well below the average
among our peers, and we continue to attract extremely talented people although
competition in recruitment remains strong. We are continually looking at ways
in which we can attract, develop and reward our people - including reviewing
our policies to ensure that they compare favourably with those available
elsewhere.
Current Trading and Outlook
FY 22 was a remarkable year for Alpha, in which we achieved over 60% revenue
growth across the Group and over 30% on an organic basis. We made huge
progress in each of our three priority areas for growth - North America,
insurance consulting and acquisitions - and gained powerful momentum across
the business more generally. We are making excellent progress on our
medium-term growth target of doubling the business.
We therefore enter FY 23 in a very strong position. With the addition of
Lionpoint, we now have a compelling, specialist proposition across both public
and private markets, with significant scale in both. Our regional footprint
has been transformed and our newer practices are growing very strongly.
We recognise that there is geopolitical and economic uncertainty at present,
and the impact of inflation and the situation in Ukraine is difficult to
predict with confidence. Accordingly, we remain vigilant and are watching
developments very closely.
However, our current trading and project pipeline to date is very strong, and
our revenue visibility is better than ever as our clients commit to longer and
more complex business change projects. These factors, coupled with Alpha's
robust balance sheet, give us considerable confidence that even if we are
heading into more difficult markets, we are doing so from a position of real
strength.
Finally, I would like to join Ken in thanking everyone across the Group for
their outstanding efforts. We are very proud to have the best consulting team
in the industry.
Euan Fraser
Global Chief Executive Officer
23 June 2022
(13) BCG, "Global Asset Management 2021: The $100 Trillion Machine" (July
2021).
(14) Renamed to Aiviq at beginning of FY 23 to better reflect the proposition
for clients.
(15) "Top 25" refers to Investment & Pensions Europe, "Top 500 Asset
Managers 2021" where the asset manager country is US or Canada, as defined in
the report.
Chief Financial Officer's Report
Group Results
I am delighted to report that Alpha has delivered another year of strong
growth both organically and including Lionpoint, which was acquired in May
2021.
12 months to 12 months to Change
31 March 2022
31 March 2021
Revenue £158.0m £98.1m 61.1%
Net fee income £157.8m £98.0m 61.1%
Gross profit £59.4m £34.8m 70.4%
Operating profit £17.8m £10.2m 74.7%
Adjusted EBITDA £33.9m £21.7m 56.0%
Adjusted EBITDA margin 21.5% 22.2% (70 bps)
Adjusted profit before tax £31.8m £19.6m 62.0%
Profit before tax £14.9m £9.0m 65.9%
Adjusted earnings per share 21.46p 14.91p 43.9%
Adjusted diluted earnings per share 20.23p 14.26p 41.8%
Basic earnings per share 7.69p 5.75p 33.7%
Revenue
The Group delivered 61.1% net fee income growth in the year, including 31.3%
organic contribution. Revenue also grew 61.1%, including increased
rechargeable client expenses, compared to the prior year.
Across the Group's regions, FY 22 revenue and net fee income grew ahead of the
strong average consultant headcount growth, with average consultant
utilisation above target levels and up on FY 21 alongside improving consultant
day rates overall, continuing the strong trading metrics reported for H1 22.
Revenue and net fee income grew in all geographic regions, both overall and on
an organic basis.
North America delivered the Group's strongest regional growth with net fee
income up 184.1% overall and 62.2% on an organic basis. On a constant currency
basis North America net fee income growth was 194.6% overall. The Lionpoint
acquisition contributed significantly to North America growth this year, while
also adding 45 consultants to its North America team since acquisition.
Independently of the Lionpoint business, the North America business still
continued to expand its domestic client base, including several longer
duration projects, successfully deploying its strongly growing consultant team
ahead of Group target utilisation levels and FY 21 comparatives, while also
improving consultant day rates.
Europe & APAC also delivered another year of strong growth. The region
grew net fee income by 38.6% on the previous year, and on an organic basis the
region reported 29.3% growth. This growth was delivered across the region with
the Alpha Europe team well deployed, complemented by further progress growing
the APAC business.
The UK business, the Group's largest geographic region, grew net fee income
34.9% overall and 22.8% organically. This strong UK organic performance
benefitted from consistent and strong demand across the full range of Alpha
practices, including significant growth in emerging propositions such as UK
Insurance and ESG & RI, alongside substantial contributions from our
established Investments, Distribution, M&A and Operations teams. Within
the UK results, Alpha's Data Solutions business continued to have less
traction than planned in the year. ADS, including Obsidian, while adding new
clients and increasing revenue in the year, did not progress as anticipated
overall.
Alpha continues to support clients in some of the largest, most challenging
and interesting projects across the industry. Alpha's revenue is driven by
continuing strong demand in its established practices, as well as progress in
newer areas. Alpha's Pensions & Retail Investments and ESG & RI
offerings, launched in September 2019 and October 2020 respectively, also made
strong progress in the year by winning a number of projects both with existing
and new client relationships.
The Lionpoint business, acquired in May 2021, has performed ahead of initial
expectations and contributed £29.2m in net fee income in the year. Lionpoint
has continued to enjoy strong client demand, adding 64 new clients and 75
consultants globally since acquisition.
Alpha's growth was supported by further investment in global consultant
headcount. The number of consultants reached 760 by the year end (FY 21: 448).
Of this 312 consultant team increase, Lionpoint added 123 to the Group when it
was acquired and has since added a further 75. While excluding Lionpoint, the
Alpha North America region added most to its team size overall.
Group Profitability
The Group also delivered strong growth in profits in the year. Group gross
profit was £59.4m (FY 21: £34.8m), increasing by £24.6m overall or 70.4%
over the previous year, with this increase well balanced between organic and
inorganic contributions.
Gross profit margin rose to 37.6% (FY 21: 35.6%), returning closer to
pre-pandemic margin levels as anticipated, supported by both the higher than
target utilisation level and improved consulting day rates, alongside a strong
contribution from Lionpoint. Within the strong results the team profit share
bonus cost increased, as did bonus costs for the wider global director team,
some of which will be paid on a part-deferred basis in summer 2022 and
2023.
Gross margin improved in all geographical regions compared to last year. The
significant improvement in North America was driven by strong utilisation
levels and improving consultant day rates. UK and Europe & APAC gross
margins also firmed, with good utilisation and consultant day rate
progression. Alpha continues to invest in the business, growing its consulting
teams in all markets and, therefore, utilisation is expected to progressively
normalise towards target levels through FY 23. Alongside this planned easing
of utilisation, consultant day rates are anticipated to progress further with
strong client demand, balancing gross margin.
Adjusted administration expenses, as detailed in note 3, increased by £12.4m
to £25.5m (FY 21: £13.1m) in the year, of which £8.1m represented the
increase excluding Lionpoint. Following last year's tighter control of
discretionary spend and the impact of COVID-19 on the operating environment,
costs increased primarily in recruitment spend as we grew our consulting teams
globally, and across staff and client entertainment and travel spend, which
continue to return to more normalised levels. We also continued to invest in
the Group's central team through the year and following the Lionpoint
acquisition, in areas such as finance, HR, risk and legal.
Including the adjusting expense items, which also rose, administrative
expenses increased to £41.6m (FY 21: £24.6m) on a statutory basis. The
adjusting expense items, set out in note 3, increased in the year to £14.4m
(FY 21: £9.8m), reflecting increased acquisition costs, higher acquired
intangible asset amortisation and share-based payments costs.
The £0.7m (FY 21: £nil) acquisition costs include diligence and legal fees
incurred in connection with the Lionpoint acquisition, with the acquisition
consequentially increasing the acquired intangible asset amortisation charge
to £4.7m (FY 21: £3.5m). The share-based payment charge of £6.2m (FY 21:
£2.5m) continues to develop since Alpha's share incentive plans were
established at AIM admission, with Alpha's share price growth and further new
annual awards alongside relatively limited award vests at this stage. Further
detail of the share-based payment charge is set out in notes 3 and 12.
The earn-out and deferred consideration charge of £1.4m (FY 21: £3.6m)
reflects employment-linked expenses and changes to the Lionpoint and Obsidian
earn-out assumptions. With Lionpoint's strong performance since acquisition
and ongoing positive outlook, the future performance assumptions have been
improved closer to the maximum earn-out achievable. This uplift is offset by a
scale-back in the future Obsidian projections, in which performance has been
flatter since acquisition and reduced future earn-out payments are now
anticipated. Axxsys met its earn-out terms in full and the final payment was
made in early FY 23. Further detail on the earn-out and deferred consideration
charges are set out in note 6.
The foreign exchange loss within adjusting items relates mainly to deferred
and contingent payments associated with the acquisition of Lionpoint, payable
in US dollars, with the USD:GBP rate experiencing some movement around the
completion date. The depreciation charge grows to £1.2m (FY 21: £1.1m)
alongside the growth of the Group, while the £0.6m (FY 21: £0.6m)
amortisation of capitalised development costs eases slightly as the asset
reduces with no further additions in the year.
Adjusted EBITDA grew 56.0% to £33.9m (FY 21: £21.7m) and adjusted EBITDA
margin eased to 21.5% (FY 21: 22.2%), reflecting the higher gross profit
margins, offset by the higher adjusted administration expenses. Operating
profit rose 74.7% to £17.8m (FY 21: £10.2m) after charging increased
adjusting expense items, including acquisition costs, earn-out and deferred
consideration expenses, and share-based payment charges. Further detail of
these adjusting items is set out in note 3.
Currency
Currency translation had a noticeable effect on net fee income and profits
during the year. Through the year, British pound sterling averaged $1.37 (FY
21: $1.31) and €1.18 (FY 21: €1.12), which, with other similar currency
movements, resulted in an unfavourable net currency effect on net fee income
of £3.4m. On this basis, North America net fee income growth would increase
to 194.6% and Europe & APAC would report 44.5% total net fee income
growth.
Net Finance Expense
Net finance costs increased in the year to £2.9m (FY 21: £1.2m), primarily
from increased non-underlying finance expenses relating to acquisition
consideration discount unwinding, as set out in note 3.
Taxation
Adjusted profit before tax rose 62.0% to £31.8m (FY 21: £19.6m) after
charging depreciation, amortisation of capitalised development costs and net
underlying finance expenses. Pre-tax profit rose 65.9% to £14.9m (FY 21:
£9.0m) after also charging increased adjusting expenses and non-underlying
finance expenses.
The Group's taxation charge for the year was £6.4m (FY 21: £3.1m),
reflecting the growth in taxable profits, the blended tax rate of the
increasingly international jurisdictions in which the Group operates and an
increase in the rates applied to the deferred tax liability. The Group's cash
tax payment in the year was £4.8m (FY 21: £5.7m), reflecting payment timings
overall and COVID-19 related deferrals paid in the prior year.
Adjusted profit after tax is shown after adjustments for the applicable tax on
adjusting items as set out in note 3.
Acquisition Activity
Since the acquisition of Lionpoint in May 2021, the Group has focussed on the
successful integration of its service offerings and the team into the Alpha
Group, and has begun to deliver the benefits of the increased service offering
to the Group's enlarged client base. Lionpoint has integrated into the Group
well and grown since acquisition, with strong further expansion of the team.
Following the year end, the Group has also supported the lift-out of a team of
14 real estate consultants to further invest in the Lionpoint offering; see
note 13 for further detail.
Axxsys has integrated well into the Group, met its earn-out in full and has
grown its team size since acquisition to 55 consultants at the year end,
including key senior management hires, to take advantage of further
opportunities.
As noted above, since acquiring Obsidian, the business has made less progress
than anticipated and details of the earn-out consideration fair value
adjustment are set out in note 6.
Earnings per Share
Adjusted earnings per share ("EPS") improved 43.9% to 21.46p per share (FY 21:
14.91p) and adjusted diluted EPS increased 41.8% to 20.23p (FY 21: 14.26p).
After including the adjusting expense items, the basic earnings per share
increased 33.7% to 7.69p (FY 21: 5.75p), while diluted EPS increased 31.8% to
7.25p (FY 21: 5.50p), reflecting the increase in the share options awards
outstanding.
As at 31 March 2022, 9,504,379 share options (FY 21: 7,613,969) remained
outstanding, with 873,169 share options exercised during the year; see note 12
for further detail.
Cash Flow and Net Funds
The Group again enjoyed strong cash generation with net cash generated from
operating activities rising to £33.5m (FY 21: £21.0m) and, after adjusting
for employment-linked acquisition payments and acquisition costs, to £36.0m
(FY 21: £22.3m). This represents a 112% adjusted cash conversion rate from
adjusted operating profit and improves on FY 21's 111% adjusted cash
conversion rate.
During the first half, Alpha acquired Lionpoint with completion payments
totalling £24.9m, offset by the Group raising £31.1m gross proceeds from the
Group's supportive shareholder base in its May equity placing. The final
£2.1m deferred non-contingent payment was also made in relation to the Axxsys
acquisition, with a further £0.7m payment made in relation to the Lionpoint
acquisition. A total £1.8m of the FY 22 acquisition payments were
employment-linked.
During the year, the Group funded Alpha's employee benefit trust ("EBT") to
purchase 57,006 shares at the prevailing market share price to hold in
satisfaction of future award vests. Alpha will likely fund the EBT further in
the future to build the shares held in the EBT for the satisfaction of future
share option exercises.
The Group's income taxes paid totalled £4.8m (FY 21: £5.7m). Net interest
paid was £0.3m (FY 21: £0.5m), reflecting the cost of maintaining and
periodically drawing the Group's revolving credit facility ("RCF").
Dividends paid increased in the year to £8.7m (FY 21: £2.1m), reflecting the
return to the Group's dividend policy in FY 21, having not declared a final FY
20 dividend at the start of the pandemic.
At the year end, the Group's cash position had strengthened further to £63.5m
(FY 21: £34.0m). This strong balance sheet primarily provides Alpha funding
flexibility to deliver on its acquisition strategy.
Statement of Financial Position
The Group's net assets at 31 March 2022 totalled £132.7m (FY 21: £94.4m).
This increase principally arises from the acquisition of Lionpoint in the
first half and the associated £31.1m gross equity capital raising, along with
other reserves movements including retained profits. The Group continues to
maintain a strong financial position.
The Group's non-current assets movement principally results from the
additional intangible assets recognised on the acquisition of Lionpoint
partially offset by ongoing amortisation charges for the year.
Working capital remains well managed. Trade and other receivables balances
increased in FY 22, both through the addition of Lionpoint and the ongoing
growth in the business. Debtor collections continued to improve during the
year with debtor days again reducing. The Group ended the year with £63.5m
(FY 21: £34.0m) of cash. The Group's £20.0m RCF facility was undrawn at 31
March 2022 and, alongside cash balances, ensures Group funding flexibility.
Trade and other payables balances increased, representing an increased level
of trade payables and accruals alongside the Group's growth. This includes
higher profit share bonus accruals reflecting the enlarged teams and the
year's strong performance. Total acquisition-related deferred consideration
and earn-out liabilities have also increased, as disclosed in note 6, which
results from the acquisition of Lionpoint, the increase in the fair value of
the Lionpoint earn-out liability and employment-linked consideration, and the
unwinding of discounting in the year, offset by the Lionpoint and Axxsys
deferred consideration payments made during the year and by the Obsidian fair
value adjustment recognised.
Dividends
The Board is delighted with the performance this year. As a result, the Board
is recommending a final dividend of 7.50p per share (FY 21: 4.85p), bringing
the total for the year to 10.40p (FY 21: 6.95p), in line with the Group's
policy to pay out approximately half of adjusted profit after tax. After
approval at the AGM in September, this final dividend should be paid on 20
September 2022 to shareholders on the register at the close of business 9
September 2022.
Total Shareholders' Funds
Total shareholders' funds increased to £132.7m (FY 21: £94.4m). The changes
in equity reserves reflect the equity capital raise, profit after tax for the
year, currency movements on overseas assets, goodwill and intangible values,
the addition of further share-based payment reserves and the payment of
dividends.
As at 31 March 2022, the Company had 118,707,336 ordinary shares in issue (FY
21: 106,521,966), of which no shares were held in treasury and 6,216,501
shares were held in the Company's employee benefit trust to satisfy future
option exercises (FY 21: 4,413,628).
Risk Management and the Year Ahead
The Group's risk management approach includes regular monitoring of
macro-economic and end-market conditions and assessing the potential impacts
across all business areas. In the risk management framework, which has been
reviewed during the year, the senior leadership team, including me as Chief
Financial Officer and the Global Chief Executive Officer, has primary
responsibility for keeping abreast of developments that may affect the
implementation of the Group's strategy and financial performance. This entails
identifying the appropriate mitigating actions that should be taken and
ensuring, as far as possible, that those actions are then executed by the
senior management team. The Board as a whole oversees risk and, within that
framework, considers the material risks that the Group faces and agrees on the
principal risks and uncertainties. Alpha has a set of core company values,
which are embedded globally, that reflect the Group's ethical and responsible
approach to operating and managing the business.
The Board is delighted with the Group's progress in the year, while remaining
cognisant of the potential risks and uncertainties ahead. These risks include
political and economic uncertainty, as well as market volatility. We are aware
of the risk of inflation globally, driven by an uplift in costs, demand for
personnel in key areas and the increase in energy costs. Alpha remains alert
to inflationary pressures, the risks of which we believe will continue to be
balanced by strong structural growth drivers and demand for the Group's
services.
The Board has considered all of the above factors in its review of going
concern and has been able to conclude the review positively. While cognisant
of potential macro-economic risks and the competitive environment, the Group's
people, investment in product and service offerings and increasing
international footprint help position Alpha for the year ahead. Alpha has
delivered strongly and is well placed to take advantage of future
opportunities.
The Group finished the year well positioned and we look forward to further
progress.
John Paton
Chief Financial Officer
23 June 2022
Consolidated statement of comprehensive income
For the year ended 31 March 2022
Year ended Year ended
31 March 2022
31 March 2021
Note £'000 £'000
Continuing operations
Revenue 2 158,005 98,066
Rechargeable expenses 2 (196) (112)
Net fee income 2 157,809 97,954
Cost of sales 2 (98,452) (63,130)
Gross profit 2 59,357 34,824
Administration expenses (41,582) (24,648)
Operating profit 17,775 10,176
Depreciation 1,155 1,085
Amortisation of capitalised development costs 556 613
Adjusting items 3 14,382 9,833
Adjusted EBITDA 3 33,868 21,707
Finance income 1 -
Finance expense (2,894) (1,207)
Profit before tax 14,882 8,969
Taxation (6,370) (3,142)
Profit for the year 8,512 5,827
Exchange differences on translation of foreign operations 3,180 (3,104)
Total comprehensive income for the year 11,692 2,723
Basic earnings per ordinary share (p) 5 7.69 5.75
Diluted earnings per ordinary share (p) 5 7.25 5.50
( )
Consolidated statement of financial position
As at 31 March 2022
As at As at
31 March 2022
31 March 2021
Note £'000 £'000
Assets
Non-current assets
Goodwill 100,991 63,067
Intangible fixed assets 31,333 21,648
Property, plant and equipment 806 415
Right-of-use asset 2,304 1,816
Deferred tax asset 671 -
Capitalised contract fulfilment costs 131 154
Total non-current assets 136,236 87,100
Current assets
Trade and other receivables 7 29,569 17,938
Cash and cash equivalents 63,516 34,012
Total current assets 93,085 51,950
Current liabilities
Trade and other payables 8 (56,671) (27,241)
Provisions 9 (3,277) -
Corporation tax (4,788) (1,792)
Lease liabilities (1,134) (514)
Total current liabilities (65,870) (29,547)
Net current assets 27,215 22,403
Non-current liabilities
Deferred tax provision (4,331) (3,022)
Other non-current liabilities 10 (25,100) (10,737)
Lease liabilities (1,275) (1,379)
Total non-current liabilities (30,706) (15,138)
Net assets 132,745 94,365
Equity
Issued share capital 11 89 80
Share premium 119,438 89,396
Foreign exchange reserve 3,482 302
Other reserves 9,361 4,044
Retained earnings 375 543
Total shareholders' equity 132,745 94,365
Consolidated statement of cash flows
For the year ended 31 March 2022
Restated(16)
Year ended year ended
31 March 2022 31 March 2021
Note £'000 £'000
Cash flows from operating activities:
Profit for the year 8,512 5,827
Taxation 6,370 3,142
Finance income (1) -
Finance expense 2,894 1,207
Depreciation of property, plant and equipment 1,155 1,085
Loss on disposal of fixed assets 32 13
Amortisation of intangible fixed assets 5,272 4,130
Share-based payment charge 12 4,075 1,693
Increase in provisions 9 1,302 -
Operating cash flows before movements in working capital 29,611 17,097
Working capital adjustments:
(Increase)/decrease in trade and other receivables (7,066) 3,221
Increase in trade and other payables 15,729 6,424
Tax paid (4,767) (5,707)
Net cash generated from operating activities 33,507 21,035
Cash flows from investing activities:
Interest received 1 -
Acquisition of subsidiaries, net of acquired cash (23,796) (2,752)
Purchase of property, plant and equipment, net of disposals (684) (151)
Net cash used in investing activities (24,479) (2,903)
Cash flows from financing activities:
Issue of ordinary share capital 31,102 -
Share issuance costs (1,053) -
EBT purchase of Company's own shares (205) -
Repayment of bank borrowings - (5,000)
Interest and bank loan fees (285) (486)
Principal lease liability payments (814) (809)
Interest on lease liabilities (111) (102)
Dividends paid 4 (8,678) (2,136)
Net cash generated from/(used in) financing activities 19,956 (8,533)
Net increase in cash and cash equivalents 28,984 9,599
Cash and cash equivalents at beginning of the year 34,012 25,996
Effect of exchange rate fluctuations on cash held 520 (1,583)
Cash and cash equivalents at end of the year 63,516 34,012
(16) The Group has re-presented the consolidated statement of cash flows in
the comparative year to reconcile from "profit for the year" rather than
"operating profit" to align with the requirements of IAS 7.
Consolidated statement of changes in equity
For the year ended 31 March 2022
Share capital Share premium Foreign exchange reserves Other reserves Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2020 78 89,396 3,406 1,652 (3,146) 91,386
Comprehensive income
Profit for the year - - - - 5,827 5,827
Foreign exchange differences on translation of foreign operations - - (3,104) - - (3,104)
Transactions with owners
Shares issued (equity) 2 - - - (2) -
Share-based payment charge - - - 1,693 - 1,693
Net settlement of vested share options - - - (100) - (100)
Current tax recognised in equity - - - 374 - 374
Deferred tax recognised in equity - - - 425 - 425
Dividends - - - - (2,136) (2,136)
As at 31 March 2021 80 89,396 302 4,044 543 94,365
Comprehensive income
Profit for the year - - - - 8,512 8,512
Foreign exchange differences on translation of foreign operations - - 3,180 - - 3,180
Transactions with owners
Shares issued (equity) 9 30,042 - - (2) 30,049
Purchase of own shares by the EBT - - - (205) - (205)
Share-based payment charge - - - 4,075 - 4,075
Net settlement of vested share options - - - (12) - (12)
Current tax recognised in equity - - - 220 - 220
Deferred tax recognised in equity - - - 1,239 - 1,239
Dividends - - - - (8,678) (8,678)
As at 31 March 2022 89 119,438 3,482 9,361 375 132,745
Notes to the consolidated financial statements
1. Basis of preparation
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 March 2022 or 2021 but is derived
from those accounts. Statutory accounts for the year ended 31 March 2021 have
been delivered to the registrar of companies, and those for the year ended 31
March 2022 will be delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include a reference
to any matters to which the auditor drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
These condensed preliminary financial statements have been prepared in
accordance with the recognition and measurement requirements of UK-adopted
international financial reporting standards in conformity with the
requirements of the Companies Act 2006, in line with the Group's statutory
accounts.
2. Segment information
Group management has determined the operating segments by considering the
segment information that is reported internally to the chief operating
decision maker, the Board of Directors. For management purposes, the Group is
currently organised into three geographical operating divisions: UK, North
America and Europe & APAC, which allows the Board to evaluate the nature
and financial effects of the business activities of the Group and the economic
environments in which it operates. The Group's operations all consist of one
type: consultancy and related services to the asset management, wealth
management and insurance industries.
The Directors consider that there is a material level of operational support
and linkage provided to the Group's emerging territories in Europe & APAC,
as they develop their presence locally, and as such have been deemed to
constitute one operating segment.
Revenues associated with software licensing arrangements were immaterial in
both the current and prior years. Therefore, the Directors consider that
disaggregating revenue by operating segments is most relevant to depict the
nature, amount, timing and uncertainty of revenue and cash flows as may be
affected by economic factors.
Segmental information
FY 22 UK North Europe & APAC(18) Total
America
£'000 £'000 £'000 £'000
Revenue 72,134 47,001 38,870 158,005
Rechargeable expenses (71) (80) (45) (196)
Net fee income 72,063 46,921 38,825 157,809
Cost of sales (41,419) (31,594) (25,439) (98,452)
Gross profit 30,644 15,327 13,386 59,357
Margin on net fee income(17) (%) 42.5% 32.7% 34.5% 37.6%
Non-current assets 71,110 42,808 22,318 136,236
FY 21 UK North Europe & APAC Total
America
£'000 £'000 £'000 £'000
Revenue 53,471 16,531 28,064 98,066
Rechargeable expenses (51) (17) (44) (112)
Net fee income 53,420 16,514 28,020 97,954
Cost of sales (32,022) (12,040) (19,068) (63,130)
Gross profit 21,398 4,474 8,952 34,824
Margin on net fee income(17) (%) 40.1% 27.1% 31.9% 35.6%
Non-current assets 59,181 7,766 20,153 87,100
(17) Margin on net fee income is gross profit expressed as a percentage of net
fee income. Please refer to note 3 for further detail.
(18) Within Europe & APAC, France is a material country and generated
profits after tax of £3.0m (FY 21: £1.9m) and revenue of £17.8m (FY 21:
£12.5m).
During the year, the Group did not have any customers that comprised more than
10% of the Group's revenues. One customer within the UK segment comprised more
than 10% of Group revenues in FY 21 comprising £11.7m or 12.0% of Group
revenue.
The Group's central non-current assets have been allocated to the UK operating
segment, except for goodwill, intangible assets and right-of-use assets, which
have been allocated to relevant operating segments.
Following the acquisition of Lionpoint in the year, the Group has recognised
the relevant amounts within the segments in line with the different
territories in which Lionpoint operates.
3. Reconciliations to alternative performance measures
Alpha uses alternative performance measures ("APMs") that are not defined or
specific under the requirements of IFRS. The APMs, including net fee income,
margin on net fee income, adjusted EBITDA, adjusted profit before tax,
adjusted EPS, adjusted cash conversion and organic net fee income growth, are
provided to allow stakeholders a further understanding of the underlying
trading performance of the Group and aid comparability between accounting
periods. These measures have been applied consistently across reporting
periods. They are not considered a substitute for, or superior to, IFRS
measures.
Net fee income
The Group disaggregates revenue into net fee income and expenses recharged to
clients. Net fee income provides insight into the Group's productive output
and is used by the Board to set budgets and measure performance. This APM is
reconciled on the face of the income statement and by segment to revenue in
note 2.
Profit margins
Margin on net fee income and adjusted EBITDA margin are calculated using gross
profit and adjusted EBITDA, and are expressed as a percentage of net fee
income. These margins represent the margin that the Group earns on its
productive output, excluding nil or negligible margin expense recharges to
clients over which the Group has limited control, and allows comparability of
the business output between periods. Such adjusted margins are used by the
management team and the Board to assess the performance of the Group.
Reconciliation of adjusted profit before tax, adjusted operating profit and
adjusted EBITDA
FY 22 FY 21
Note £'000 £'000
Profit before tax 14,882 8,969
Amortisation of acquired intangible assets 4,716 3,517
Loss on disposal of fixed assets 32 13
Share-based payments charge 12 6,218 2,496
Earn-out and deferred consideration 6 1,423 3,606
Acquisition costs 683 -
Integration costs - 107
Foreign exchange losses 1,310 94
Adjusting items 14,382 9,833
Non-underlying finance expenses 2,487 803
Adjusted profit before tax 31,751 19,605
Net underlying finance expenses 406 404
Adjusted operating profit 32,157 20,009
Depreciation of property, plant and equipment 1,155 1,085
Amortisation of capitalised development costs 556 613
Adjusted EBITDA 33,868 21,707
Adjusted EBITDA margin (%) 21.5% 22.2%
Adjusting items
The Group's APMs exclude certain expense items in order to aid understanding
of the comparable underlying performance of the business. These items are
generally non-cash, non-recurring by nature or are acquisition related.
Amortisation of acquired intangible assets and profit or loss on disposal of
fixed assets are treated as adjusting items to better reflect the underlying
performance of the business, as they are non-cash items, principally relating
to acquisitions.
The share-based payments charge, and related social taxes are excluded from
adjusted profit measures. This allows comparability between periods as the
Group's share option plans were established on AIM admission and have not yet
settled into a regular cycle of awards and vesting. The accounting treatment
of the Group's share options requires the charge for each share option award
to be recognised over the vesting period, resulting in significant growth in
the charge year on year as the Group matures post-IPO. The estimated future
social taxes payable are closely linked to the share-based payment charge and
fluctuate with the assumed future market value of shares. This approach has
been applied consistently across reporting periods. Note 12 sets out further
details of the employee share-based payments expense calculation under IFRS
2. A more regular share option award cycle is anticipated in the coming
years. If no adjustment was made for the share-based payments charge, adjusted
EBITDA for the year would be £27.7m (FY 21: £19.2m).
As per note 6, the acquisition of Lionpoint in the year involved both deferred
and contingent payments. Part of the Lionpoint acquisition payments are
dependent on the ongoing employment of certain members of the senior Lionpoint
management team, and this element is expensed annually over several years
until the date of payment. In prior years, the Group similarly recognised
employment-linked costs through the income statement relating to payments for
the previous acquisitions of Axxsys and Obsidian, or to reflect adjustments
made to the fair value of the expected future payment. These costs have been
treated as adjusting items as they are acquisition related, reflecting the
acquisition terms rather than Group trading performance. Whilst these
acquisition-related costs will recur in the short term through the earn-out
period, the adjustment allows comparability of underlying productive output
and operating performance across reporting periods.
Other acquisition costs expensed in the year in relation to the acquisition of
Lionpoint, including diligence and legal fees. Whilst further similar
acquisition costs could be incurred in the future, these costs are not
directly attributable to the ongoing operational trading performance of the
Group, the timing and amount of such costs may vary year to year and treating
these as an adjusting item allows comparability of the operating performance
across reporting periods.
Integration costs in the previous year were in relation to the acquired
Obsidian product suite, including security and its integration with the
technology protocols within the ADS 360 SalesVista product. Those costs
directly resulted from the acquisition of Obsidian in previous years.
Integration of Obsidian was completed in April 2020 and was managed as a
discrete short-term project subsequent to the acquisition.
Similarly, the impact of foreign currency volatility in translating local
working capital balances to their relevant functional currencies has been
excluded from the calculation of adjusted profit measures on the basis that
such exchange rate movements do not reflect the underlying trends or
operational performance of the Group. This year the foreign exchange loss is
predominantly acquisition related with Lionpoint's deferred consideration
payable in US dollars and the USD:GBP rate experiencing some movement around
the completion date.
Non-underlying finance expenses
In calculating adjusted profit before tax, unwinding of the discounted
contingent and deferred acquisition consideration within finance expenses is
considered non-underlying as these amounts relate to acquisition
consideration, rather than the Group's underlying trading performance.
Adjusted profit before tax
Adjusted profit before tax is an APM calculated as profit before tax stated
before the adjusting items above, including amortisation of acquired
intangible assets, share-based payment charge, acquisition-related payments
and costs, non-underlying finance expenses and other non-underlying expenses.
This measure was introduced to allow comparability of the Group's underlying
performance after the adoption of IFRS 16. This measure also reflects the
underlying amortisation charges arising from capitalised development costs
relating to ADS product development.
Adjusted operating profit
Adjusted operating profit is an APM defined by the Group as adjusted profit
before tax before charging underlying finance expenses, including fees on bank
loans and 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.
FY 22 FY 21
£'000 £'000
Adjusted profit before tax 31,751 19,605
Tax charge (6,370) (3,142)
Tax impact of adjusting items (1,624) (1,358)
Adjusted profit after tax 23,757 15,105
Adjusted earnings per share
Adjusted earnings per share ("EPS") is calculated by dividing the adjusted
profit after tax for the year attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the year.
Adjusted diluted EPS is calculated by dividing adjusted profit after tax by
number of shares as above, adjusted for the impact of potentially dilutive
ordinary shares. Potentially dilutive ordinary shares are only treated as
dilutive when their conversion to ordinary shares would decrease EPS (or
increase loss per share). Refer to note 5 for further detail.
Adjusted EPS FY 22 FY 21
Adjusted EPS (p) 21.46 14.91
Adjusted diluted EPS (p) 20.23 14.26
Reconciliation of adjusted administrative expenses
To express them on the same basis as the APMs described above, adjusted
administration expenses are stated before adjusting items, depreciation and
amortisation of capitalised development costs and are used by the Board to
monitor the underlying administration expenses of the business in calculating
adjusted EBITDA.
FY 22 FY 21
£'000 £'000
Administrative expenses 41,582 24,648
Adjusting items (14,382) (9,833)
Depreciation of property, plant and equipment (1,155) (1,085)
Amortisation of capitalised development costs (556) (613)
Adjusted administrative expenses 25,489 13,117
Adjusted cash generated from operating activities
Adjusted cash generated from operating activities excludes any
employment-linked acquisition payments and other acquisition costs expensed in
the year, treated as operating cash flows under IFRS, to reflect the Group's
underlying operating cash flows, exclusive of cash payments relating to
acquisitions.
FY 22 FY 21
£'000 £'000
Net cash generated from operating activities 33,507 21,035
Employment-linked acquisition payments(19) 1,848 1,246
Acquisition costs 683 -
Adjusted cash generated from operating activities 36,038 22,281
(19) Total gross acquisition payments made in the year were £25.6m, excluding
£2.1m of cash acquired. £24.9m of initial Lionpoint consideration was paid
in May 2021, with a further £2.8m of deferred and contingent payments made
during the year. Please see note 6 for further details. Of the £25.6m, £1.8m
related to employment-linked acquisition payments, treated as operating under
IFRS, and a further £23.8m is considered to be capital in nature and included
within investing activities in the Group's consolidated statement of cash
flows.
Adjusted cash conversion
Cash conversion is stated as net cash generated from operating activities
expressed as a percentage of operating profit.
Adjusted cash conversion is stated as adjusted cash generated from operating
activities expressed as a percentage of adjusted operating profit.
FY 22 FY 21
Cash conversion 189% 207%
Adjusted cash conversion 112% 111%
Organic net fee income growth
Organic net fee income growth excludes net fee income from acquisitions in the
12 months following acquisition. Net fee income from any acquisition made in
the period is excluded from organic growth. For acquisitions made part way
through the comparative period, the current period's net fee income
contribution is reduced to include only net fee income for the period
following the acquisition anniversary, in order to compare organic growth on a
like-for-like basis.
Organic net fee income growth of 31.3% (FY 21: 8.0%) for the current period
represents FY 22 net fee income less £29.2m net fee income attributable to
the Lionpoint acquisition completed during the year.
Constant currency growth
The Group operates in multiple jurisdictions and generates revenues and
profits in various currencies. Those results are translated on consolidation
at the foreign exchange rates prevailing in that period. These exchange rates
vary from year to year, so the Group presents some of its results on a
"constant currency" basis. This means that the current year's results have
been retranslated using the average exchange rates from the prior year to
allow for comparison of year-on-year results, eliminating the effects of
volatility in exchange rates.
Currency translation had a noticeable impact on both net fee income and gross
profit in the year, as a result of a strengthening British pound sterling
through the year against both the US dollar and against the Euro. In the year,
British pound sterling averaged $1.37 (FY 21: $1.31) and €1.18 (FY 21:
€1.12). On a constant currency basis, the Group's net fee income for the
year would be £3.4m higher (2.1%) and, similarly, gross profit would be
£1.4m higher.
4. Dividends
FY 22 FY 21
£'000 £'000
Amounts recognised as distributions to equity holders:
Final dividend for the year ended 31 March 2021 of 4.85p (FY 20: nil) per 5,431 -
share (restated)
Interim dividend for the year ended 31 March 2022 of 2.90p (FY 21: 2.10p) per 3,247 2,136
share
Total dividends paid in the year 8,678 2,136
After the balance sheet date, the Directors proposed a final dividend of 7.50p
per ordinary share, totalling approximately £8.6m based on the estimated
eligible shares in issue at the payment date. The proposed final FY 22
dividend is subject to approval by shareholders at the AGM and has, therefore,
not been included as a liability in these consolidated financial statements.
Subject to approval, the dividend will be paid on 20 September 2022 to
shareholders on the register at close of business on 9 September 2022.
The total final dividend for the year ended 31 March 2021 of 4.85p per share
was previously disclosed as an estimated £5,416,000 in the prior year. This
has been updated to reflect the actual dividend paid in the table above.
5. Earnings per share and adjusted earnings per share
The Group presents basic and diluted EPS data, on both an adjusted and
non-adjusted basis. Basic EPS is calculated by dividing the profit or loss for
the year attributable to ordinary shareholders by the weighted average number
of ordinary shares fully outstanding during the year.
The weighted average number of diluted ordinary shares used in the calculation
of diluted EPS includes the number of shares that are issued to satisfy share
incentive awards granted to employees as they fall due, adjusted for the
likelihood of meeting performance criteria, if any. Potential ordinary shares
are only treated as dilutive when their conversion to ordinary shares would
decrease EPS (or increase loss per share).
In order to reconcile to the adjusted profit for the financial year, the same
adjustments as in note 3 have been made to the Group's profit for the
financial year. The profits and weighted average number of shares used in the
calculations are set out below:
Note FY 22 FY 21
Basic & diluted EPS
Profit for the financial year used in calculating basic and diluted EPS 8,512 5,827
(£'000)
Weighted average number of ordinary shares in issue ('000) 110,689 101,312
Number of dilutive shares ('000) 6,748 4,590
Weighted average number of ordinary shares, including potentially dilutive 117,437 105,902
shares ('000)
Basic EPS (p) 7.69 5.75
Diluted EPS (p) 7.25 5.50
Adjusted EPS and adjusted diluted EPS
Adjusted profit for the financial year used in calculating adjusted basic and 3 23,757 15,105
diluted EPS (£'000)
Weighted average number of ordinary shares in issue ('000) 110,689 101,312
Number of dilutive shares ('000) 6,748 4,590
Weighted average number of ordinary shares, including potentially dilutive 117,437 105,902
shares ('000)
Adjusted EPS (p) 21.46 14.91
Adjusted diluted EPS (p) 20.23 14.26
6. Acquisition of businesses
Acquisition in the current year
On 20 May 2021, the Group reached an agreement to acquire 100% of the issued
share capital of Lionpoint Holdings, Inc. ("Lionpoint"), a provider of
specialist consultancy services to the alternatives investments industry, on a
cash free, debt free basis. The Directors consider that the acquisition is in
line with the Group's stated growth strategy, significantly increasing both
the Group's exposure to the attractive and fast-growing alternatives
investments market and its footprint in the large and strategically important
North America segment.
A summary of the purchase consideration, net assets acquired, identifiable
intangible assets and goodwill is set out below. These fair values are
determined by using established estimation techniques such as discounted cash
flow and option valuation models. Since the provisional amounts disclosed
within the Group's Interim Report & Accounts 2022, the Directors have made
a measurement period adjustment to reflect an additional social security tax
provision as at the acquisition date relating to Lionpoint. This resulted in
an additional £0.3m provision reducing the recognised net assets in the table
below and has resulted in an increase in goodwill of £0.3m. For further
detail on this provision, please refer to note 9. Further, the Group have made
a reclassification of £0.1m of tangible fixed assets to trade and other
debtors due to obtaining further clarity on the nature of these amounts.
Lionpoint Book values Fair value adjustments Values on acquisition
£'000 £'000 £'000
Acquiree's net assets at the acquisition date:
Trade name - 2,602 2,602
Order backlog - 829 829
Customer relationships - 10,752 10,752
Tangible fixed assets 53 - 53
Right-of-use assets 478 - 478
Trade and other receivables 4,588 - 4,588
Cash and cash equivalents 2,148 - 2,148
Trade and other payables (2,380) - (2,380)
Provisions (291) (291)
Lease liabilities (478) - (478)
Corporation tax liability (67) - (67)
Deferred tax liability - (3,423) (3,423)
Net identifiable assets acquired 4,051 10,760 14,811
Cash consideration relating to business combination 50,849
Goodwill on acquisition 36,038
The maximum amount payable for the acquisition (over four years) is $90.0m
(£63.8m) alongside an additional $2.1m (£1.4m) in relation to completion
working capital to be settled in cash, with the option to settle a portion of
the deferred and contingent amounts in the Group's ordinary shares. Of this
maximum amount payable, $7.5m (£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, together with the
additional $2.1m (£1.4m) completion working capital payment. A balancing
$0.5m (£0.3m) receivable is held at 31 March 2022, which will be deducted
from future consideration payments to the management vendors.
Of the remaining maximum consideration payable, deferred consideration of
$17.0m (£12.0m) is payable across the first and second anniversaries of the
acquisition and contingent earn-out consideration of up to a maximum of $32.0m
(£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 total 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.
The total cash payable on completion was funded from the Group's cash reserves
and the proceeds of the May 2021 share placing, raising net proceeds of
£30.0m. During the year, a further $1.0m (£0.7m) employment-linked deferred
payments were made.
Employment-linked deferred and contingent consideration will be expensed
through the income statement proportionately until FY 26. During the year, the
Group has expensed £2.8m in relation to these employment-linked payments
through the consolidated statement of comprehensive income.
The remaining deferred and contingent consideration is discounted to fair
value. Discount unwinding is recognised in finance costs proportionately
across the periods until final payment. During the year, £2.0m of discount
unwinding was expensed as a non-underlying finance cost in relation to the
Lionpoint acquisition consideration.
As consideration for the acquisition of Lionpoint is payable in US dollars,
foreign exchange differences are recognised at each reporting date in relation
to translating these liabilities into British pound sterling. In the year, the
Group recognised a foreign exchange loss of £2.3m in the income statement
arising from acquisition-related currency movements, particularly relating to
movements around the acquisition date.
Following a strong performance of Lionpoint in the 10 months following
acquisition, and reflective of a healthy pipeline of opportunities as at the
balance sheet date, the Group has uplifted the Lionpoint forward projections,
and in turn the total undiscounted expected earn-out payment to £22.3m from
£21.0m, closer to the maximum payable. These values are inclusive of
employment-linked amounts. After taking into account the impact of
discounting, the Group has recognised a fair value adjustment relating to the
valuation of the Lionpoint earnout liability as at 31 March 2022, reflecting
this uplift. This adjustment has resulted in an additional charge through the
Group's consolidated statement of comprehensive income of £1.1m.
As at 31 March 2022, a £33.7m liability is recorded, of which £15.5m is a
current and £18.2m is a non-current liability. Of this liability at the
balance sheet date, £14.0m relates to deferred consideration and the
remaining £19.7m relates to contingent consideration.
Lionpoint contributed £29.2m to the Group's revenue and £3.7m to the Group's
profit after tax for the year from the date of acquisition to 31 March 2022.
If the acquisition of Lionpoint had been completed on 1 April 2021, Group
revenues for the year would have been £161.3m and Group profits after tax
would have been £7.8m, without adjustment to amortisation assumptions.
Acquisitions in previous years
As part of the acquisition of Axxsys Limited and Obsidian Solutions Limited in
previous years, the Group agreed earn-out arrangements based on the financial
performance of the respective acquired entities over an agreed period of time,
subject to continuous employment of the respective vendors, as previously
disclosed.
Obsidian
On 9 November 2019, the Group acquired 100% of the share capital of Obsidian
Solutions Limited. Obsidian provides specialised software products to the
investment management industry.
Employment-linked payments associated with the acquisition of Obsidian have
been expensed through the Group's consolidated statement of comprehensive
income proportionately from the acquisition date. During the year, the Group
has expensed £1.1m in relation to these employment-linked payments through
the consolidated statement of comprehensive income.
The earn-out payments have been estimated by the Directors based on
anticipated future earnings, discounted to current values. The unwinding of
this earn-out discount is recognised as a finance cost. During the year,
£0.3m of this discount unwinding was expensed as a non-underlying cost in
relation to Obsidian.
During the year, the Directors have revised their previous estimate in
relation to the undiscounted value of the Obsidian earn-out based on the lower
profitability achieved to date, and reduced projections for the remainder of
the earn-out period, alongside the lapsing of an ongoing employment condition
attached to the Obsidian earn-out agreement. The Directors have revised their
estimate of the projected cash flows in relation to potential earn-out
scenarios. The Directors have re-assessed the fair value of the earn-out
liability based on several plausible scenarios, leading to a reduction in the
assumed undiscounted earn-out from £9.3m to £1.9m. This resulted in a fair
value adjustment of £3.8m to the liability as at 31 March 2022, which has
been credited to the Group's consolidated statement of comprehensive income in
the year. As at 31 March 2022, none of the remaining liability is being
accounted for as employment-linked, given the lapsing of the ongoing
employment condition referred to above.
Including the contingent earn-out and unwinding of discounting, and the above
fair value adjustment, a total £1.9m estimated consideration is recorded
within non-current liabilities.
Axxsys
On 5 June 2019, the Group acquired 100% of the share capital and voting
interests of Axxsys Limited and subsidiaries. Axxsys has provided specialised
consultancy and technology implementation services to the investment
management industry since 2003.
Of the remaining deferred and contingent consideration amounts that were
outstanding at 31 March 2021 in relation to the acquisition of Axxsys, £2.1m
was paid during the year, of which £1.1m was employment-linked. £5.0m of
contingent consideration remained outstanding at 31 March 2022 and was paid
shortly after the year end. In the year, £0.2m was expensed relating to
employment-linked consideration, and £0.2m of discount unwinding was expensed
as a non-underlying finance cost in relation to Axxsys up to the final payment
dates.
The below table summarises the movements in the deferred and contingent
consideration liabilities held at 31 March 2022:
Axxsys Obsidian Lionpoint Total
£'000 £'000 £'000 £'000
Balance at 1 April 2021 6,706 4,357 - 11,063
Additions - - 26,210 26,210
Fair value adjustment - (3,815) 1,138 (2,677)
Employment-linked consideration 219 1,087 2,794 4,100
Payments in the year (2,100) - (707) (2,807)
Unwinding of discounting 175 269 2,043 2,487
Foreign exchange loss - - 2,270 2,270
Balance as at 31 March 2022 5,000 1,898 33,748 40,646
The £40.6m liability held at 31 March 2022 comprised £14.0m related to
deferred consideration and £26.6m related to contingent consideration. Within
these deferred and contingent consideration liabilities, £2.2m relates to
employment-linked amounts.
The above liabilities are reflected in non-current and current liabilities as
shown in the following table:
Axxsys Obsidian Lionpoint Total
£'000 £'000 £'000 £'000
Current 5,000 - 15,500 20,500
Non-current - 1,898 18,248 20,146
Balance as at 31 March 2022 5,000 1,898 33,748 40,646
7. Trade and other receivables
FY 22 FY 21
£'000 £'000
Amounts due within 1 year:
Trade receivables 24,182 16,497
Less: allowance for expected credit losses (541) (378)
Trade receivables - net 23,641 16,119
Other debtors 539 319
Capitalised contract fulfilment costs 1,548 182
Prepayments 1,113 798
Accrued income 2,728 520
Total amounts due within 1 year 29,569 17,938
Trade receivables are non-interest bearing and generally have a 30- to 60-day
term. Due to their short maturities, the carrying amount of trade and other
receivables is a reasonable approximation of their fair value. Trade
receivables have grown in the year reflecting the overall growth of the Group,
with debtor days reducing to 55 days (FY 21: 60 days).
8. Trade and other payables
Note FY 22 Restated(20)
FY 21
£'000 £'000
Trade payables 5,114 1,780
Accruals 23,898 15,948
Deferred income 1,865 1,692
Social security tax on share options 12 1,050 267
Taxation and social security 2,964 4,352
Other creditors 1,280 1,210
Earn-out and deferred consideration 6 20,500 1,992
Total amounts owed within 1 year 56,671 27,241
(20) Trade and other payables in the FY 21 comparative period have been
re-presented within this note to separately disclose social security tax on
share options from other tax and social security liabilities.
Trade payables comprise amounts outstanding for trade purchases and ongoing
costs. The Directors consider that the carrying amount of trade and other
payables is a reasonable approximation of their fair value. The trade payables
balance has grown in the year reflecting the overall growth of the Group and
the timing of payments made around the balance sheet date.
The accruals balance has grown in the year reflecting the overall growth of
the Group and higher balances for the employee profit share bonuses and
director bonuses, reflecting the enlarged team headcount and strong
performance. These are accrued through the year and paid after the year end.
Earn-out and deferred consideration comprises £15.5m relating to the deferred
and contingent consideration due on the acquisition of Lionpoint in the next
twelve months, and £5.0m relating to the remaining contingent consideration
payment arising from the acquisition of Axxsys Limited at the balance sheet
date, which was paid shortly after year end.
9. Provisions
Social security tax provisions Legal and other provisions Total
Note £'000 £'000 £'000
Balance at 1 April 2021 - - -
Transfers from trade & other payables 1,400 284 1,684
Acquired through business combinations 6 291 - 291
Additional provisions made in the year 899 403 1,302
Balance as at 31 March 2022 2,590 687 3,277
The carrying value of the provisions disclosed above is a reasonable
approximation of their fair value. Within social security tax provisions is an
existing £1.4m (FY 21: £1.4m) provision relating to historic pre-AIM
admission potential tax treatments. A further £0.3m of existing amounts
related to several dilapidation provisions on the Group's leased offices.
These were reported in the prior year within trade and other payables.
During the year, a further £0.9m provision was recognised relating to
potential social security tax exposures, with an additional £0.3m acquired
through business combinations. The amount of these tax provisions is subject
to significant uncertainty. A final position agreed with a tax authority or
through the expiry of a tax audit period could differ from the estimated
provision. Currently there are no significant ongoing tax audits.
The Group has also recognised several immaterial provisions in the year
totalling £0.4m (FY 21: £nil) relating to various ongoing legal claims,
representing the most probable outcome at the balance sheet date.
Whilst a range of outcomes is reasonably possible, these total potential
liabilities range between £1.2m and £5.2m.
10. Other non-current liabilities
Note FY 22 FY 21
£'000
£'000
Earn-out and deferred consideration 6 20,146 9,071
Deferred income 233 304
Social security tax on share options 12 1,953 1,362
Other non-current liabilities 2,768 -
Total amounts owed after 1 year 25,100 10,737
Within earn-out and deferred consideration is £1.9m associated with the
potential earn-out payments linked to the acquisition of Obsidian Solutions
Limited and £18.2m associated with deferred and contingent earn-out payments
relating to the Lionpoint acquisition. These amounts are expected to fall due
over 12 months from the balance sheet date. Refer to note 6 for further
detail.
Other non-current liabilities of £2.8m (FY 21: £nil) represents the deferred
element of FY 22 bonuses, due to be paid in summer 2023 to senior management
and certain directors globally.
11. Called up share capital
FY 22 FY 21
Number Number
Allotted, called up and fully paid 118,707,336 106,521,966
Ordinary 0.075p shares (1 vote per share)
FY 22 FY 21
£ £
Allotted, called up and fully paid 89,031 79,891
Ordinary 0.075p shares (1 vote per share)
Movements in share capital during the year ended 31 March 2022:
£
Balance at 1 April 2021 79,891
106,521,966 ordinary shares of 0.075p each
Issued shares (i) 9,140
Balance at 31 March 2022 89,031
118,707,336 ordinary shares of 0.075p each
i) During the year, the Group issued 12,185,370 ordinary shares of 0.075p
each, of which 9,569,839 shares were issued as part of the Group's May 2021
share placing for net proceeds of £30.0m, net of transaction costs of £1.1m,
815,531 shares relate to the exercise of some vested share options and
1,800,000 shares were issued to the employee benefit trust ("EBT") for future
satisfaction of share incentive plans.
Alpha Employee Benefit Trust
The Group held 6,216,501 (FY 21: 4,413,628) shares in the employee benefit
trust ("EBT") comprising shares held to satisfy share options granted under
its joint share ownership plan ("JSOP") or unallocated ordinary shares to
satisfy share options granted under the Group's other share option plans.
Ordinary shares held within the EBT have no dividend or voting rights.
During the year, 1,800,000 ordinary shares were transferred by the Company to
the EBT for potential future satisfaction of share incentive plans, either
through the issuance of new shares or the transfer of shares bought back from
prior employees at nominal value. In the year, the EBT purchased 57,006 shares
at market value. Ordinary shares held within the EBT have no dividend or
voting rights.
In the year, 54,133 shares held in the EBT were utilised for employee share
option exercises.
Treasury shares
The Group held nil (FY 21: nil) shares in treasury.
12. Share-based payments
The Group has adopted a globally consistent share incentive plan approach,
which is implemented using efficient jurisdiction specific plans, as
appropriate.
The Management Incentive Plan
The Group has a management incentive plan ("MIP") to retain and incentivise
the directors and senior management. The MIP consists of four parts: part A of
which will enable the granting of enterprise management incentive and non-tax
advantaged options to acquire shares; part B of which will enable the awarding
of JSOPs; part C of which will enable the awarding of restricted stock units
("RSUs") for participants in the US; and Part D of which will enable the
awarding of RSUs in France (together the "options").
Options granted up to FY 20 to certain directors and senior management of the
Group were subject to the fulfilment of two or more of the following
performance conditions: (a) a specific business unit's budgetary EBITDA, or
other personal targets and goals; (b) the Group achieving a total shareholder
return for the 3 years from year of award in excess of the average total
shareholder return of a peer group of comparable companies; and (c) the Group
achieving at least 10% EPS growth against the comparative financial year.
As disclosed last year, responding to the impact of COVID-19, options granted
to senior management in FY 21 were subject to more flexible performance
criteria, including local budget targets and a variety of stretching personal
sales or other targets. FY 21 awards made to Executive Directors, as in prior
years, were also subject to the Group achieving a total shareholder return
("TSR") in excess of the average total shareholder return of a peer group of
comparable companies, for a period of 3 years from the year of grant.
This year the Remuneration Committee has returned to a more standard approach
in setting the FY 22 award criteria. The criteria for FY 22 share incentive
awards to the Executive directors and senior management of the Group,
depending on the individual and their role, include: (a) the Group achieving
adjusted EPS growth of 15% or more to trigger a maximum award, or 10% to
trigger a 66% award, with a linear application of awards between these levels;
(b) the Group achieving a TSR over three years in excess of the mean TSR
delivered by a peer group of comparable companies; (c) personal adherence to
corporate values and risk policy; and (d) specific business unit EBITDA, or
other personal targets and goals.
MIP awards have either nominal or minimal exercise price payable in order to
acquire shares pursuant to options. MIP awards have either 3- or 4-year
vesting periods from the date of grant and can be equity settled only.
The Employee Incentive Plan
In addition to the MIP, the Board has previously put in place a medium-term
employee incentive plan ("EIP"). Under the EIP, a broad base of the Group's
employees has been granted share options or share awards over a small number
of shares. The EIP is structured as is most appropriate under the local tax,
legal and regulatory rules in the key jurisdictions and therefore varies
between those jurisdictions. A limited number of EIP awards were made in the
year.
During the year ended 31 March 2022, a total of 2,959,429 share option and
award grants were made to employees and senior management (FY 21: 3,376,744).
The weighted average of the estimated fair values of these options awarded in
the year is £2.68 per share (FY 21: £1.68).
On 12 August 2021, 13 December 2021, 18 December 2021 and 3 March 2022,
certain MIP awards vested, following satisfaction of performance conditions.
The awards' performance conditions relating to EPS growth and total
shareholder return exceeding a basket of comparable companies over 3 years to
the vesting date were met in full and the relevant local country or divisional
budgetary performance conditions were met in full or part, dependent on Alpha
location. As a result, 529,419 nominal cost awards over ordinary shares of
0.075 pence per share vested and 195,850 share awards were forfeited under
performance conditions or as a result of leavers before vesting.
All of these vested awards were exercised, with an additional 343,750 share
options that vested in FY 21 also exercised on 2 July 2021. Of these total
873,169 share options exercised, the Company settled 815,531 through the
issuance of ordinary shares, with 3,505 additional share options retained for
net tax settlement. A further 54,133 share options were settled through the
issuance of existing shares from the EBT. The weighted average share price at
the date of these exercises was £3.90. The remaining vested award holders
have a further 6-year period in which to exercise their vested awards.
Details of the share option awards made are as follows:
FY 22
Number of
share options
Outstanding at the beginning of the year 7,613,969
Granted during the year 2,959,429
Exercised during the year (873,169)
Forfeited during the year (195,850)
Expired during the year -
Outstanding at the year end 9,504,379
Exercisable at the year end 194,168
The weighted average exercise price for all options outstanding in both the
current and prior years was nominal. The options outstanding at 31 March 2022
had a weighted average remaining contractual life of 2 years.
During the year ended 31 March 2022, options were granted on 6 July 2021 and
20 July 2021 to employees and certain senior management.
MIP share options with an external market condition were valued at award using
the Monte Carlo option pricing model. The model simulates a variety of
possible results, across 10,000 iterations for each of the options, by
substituting a range of values for any factor that has inherent uncertainty
over a number of scenarios using a different set of random values from the
probability functions. The model takes any market-based performance conditions
into account and adjusts the fair value of the options based on the likelihood
of meeting the stated vesting conditions.
MIP share options without external market conditions and EIP share options
were valued at award using a Black-Scholes model using the following inputs:
FY 22
Weighted average share price at grant date £3.53
Exercise price nominal
Volatility 17.80%
Weighted average vesting period 4.00
Risk free rate 0.12%
Expected dividend yield 3.00%
Expected volatility was determined by calculating the historic volatility of
the market in which the Group operates. The expected expense calculated in the
model has been adjusted, based on management's best estimate, for the effects
of non market-based performance conditions and employee attrition.
The Group recognised a total expense of £6.2m (FY 21: £2.5m) in the current
year, comprising £4.1m (FY 21: £1.7m) in relation to equity settled
share-based payments, and £2.1m (FY 21: £0.8m) relating to relevant social
security taxes. Given the estimation, were the future conditions for all
outstanding share options assumed to be met at the end of the reporting
period, the charge in the year would increase by £1.7m.
The carrying value of amounts relating to social security tax on share options
as at 31 March 2022 is £3.0m (FY 21: £1.3m), with £2.1m recognised in the
P&L and payments amounting to £0.7m made in the year. Assumptions
associated with the calculation of the social security tax liability due on
vesting of share options include an estimation of the forward-looking share
price at the vesting date based on applicable analyst research and applicable
future tax rates. For these purposes, share price is updated at each reporting
period to reflect historic levels, and is assumed to grow in line with the
estimated future performance of the business. If the estimated future share
price growth assumption were to double, the social security costs in the year
could increase by £0.3m. Were the share price to remain flat the charge would
reduce by £0.4m
13. Events after the reporting period
Purchase of investment management enterprise technology solutions practice
On 8 April 2022, the Group reached an agreement to onboard the investment
management enterprise technology solutions practice of CohnReznick LLP, a
leading advisory, assurance and tax firm primarily based in the United States
for £0.3m.
Based on initial assessment, this is considered to be an asset purchase, not
the acquisition of a business in line with IFRS 3 para B5-B12D.
- END -
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