REG - Alpha Fin. Markets - Full Year Audited Results
22/06/2023 07:00
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RNS Number : 5162D Alpha Fin Markets Consulting plc 22 June 2023
22 June 2023
Alpha Financial Markets Consulting plc
("Alpha", the "Company" or the "Group")
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2023
Excellent double-digit organic growth across all regions
Alpha Financial Markets Consulting plc (AIM:AFM), a leading global provider of
specialist consultancy services to the asset management, wealth management and
insurance industries, is pleased to report its audited results for the 12
months ended 31 March 2023 (FY 23).
Financial highlights(1)
· Revenue increased by 44.8% to £228.7m (FY 22: £158.0m) and net
fee income(2) increased by 43.9% to £227.2m (FY 22: £157.8m), or 36.1% on a
constant currency basis. On an organic(3) basis, net fee income grew by 39.6%
· Gross profit increased by 35.4% to £80.4m (FY 22: £59.4m) at
35.4% margin(2) (FY 22: 37.6%), reflecting the easing of utilisation to target
levels, alongside continued investment in our growing team
· Adjusted(2) EBITDA increased by 37.5% to £46.6m (FY 22: £33.9m)
with 20.5% margin largely consistent with FY 22's 21.5%
· Adjusted profit before tax increased by 38.6% to £44.0m (FY
22: £31.8m)
· Adjusted earnings per share increased by 36.4% to 29.27p (FY 22:
21.46p)
· On a statutory basis, profit before tax increased to £25.8m (FY 22:
£14.9m) and basic earnings per share increased to 15.82p (FY 22: 7.69p)
· Good adjusted cash conversion of 74.0% (FY 22: 112.1%) with adjusted
cash generated from operating activities of £32.9m (FY 22: £36.0m),
reflecting specific cash outflows, alongside good underlying working capital
management
· Robust balance sheet with a net cash balance as at 31 March 2023 of
£59.2m (31 March 2022: £63.5m)
· In view of Alpha's performance and cash position at the year end, the
Board is recommending a final dividend of 10.50p (FY 22: 7.50p)
12 months to 12 months to Change
31 March 2023 31 March 2022
Revenue £228.7m £158.0m 44.8%
Gross profit £80.4m £59.4m 35.4%
Adjusted EBITDA £46.6m £33.9m 37.5%
Adjusted profit before tax £44.0m £31.8m 38.6%
Profit before tax £25.8m £14.9m 73.2%
Adjusted EPS 29.27p 21.46p 36.4%
Basic EPS 15.82p 7.69p 105.7%
Total dividend per share 14.20p 10.40p 36.5%
Operational highlights
· Double-digit organic net fee income growth across all regions,
including North America, a key strategic region for the Group
· Continued strong growth of client relationships, with the number of
clients(4) that the Group has worked with increasing to 874 (FY 22: 718) and
new client wins spanning the Group's global businesses
· Continued growth in the Group's insurance offering, supported by the
appointment of a Global Head of Insurance Consulting to further the expansion
of the proposition
· Investment in the best talent: consultant(5) headcount increased to
994 (FY 22: 760), including the addition of 13 new directors(6)
· CEO succession plan and relevant governance changes implemented,
including the appointment of a new Global Head of Asset & Wealth
Management Consulting
· Post-year end acquisition of Shoreline, an APAC-based asset and
wealth management consultancy, completed in May 2023; integration initiated
and progressing well
Outlook
· Alpha has performed extremely well in the year against a backdrop
of ongoing macro-economic uncertainty, and the long-term structural growth
drivers that underpin demand for Alpha's services remain very strong
· Alpha has the best consultants in its chosen industries and an
excellent global reputation to address the demand created from those drivers
· In recent months, the global consulting market has experienced
increased levels of competition as a result of overcapacity, which we expect
to be the market backdrop in the short term
· As the global consulting market balances supply with overall
demand, the Group will continue to manage appropriately its discretionary
spend and hire selectively to invest for the future, in line with our 2028
strategic ambition to double the business
· While we currently see higher levels of competition and a
lengthening sales cycle, we are confident that Alpha's strong client
proposition and business strategy will continue to drive market share growth
· The Group enters FY 24 with resilient trading and a good pipeline
of new business opportunities, and the Board remains confident of delivering
full-year results in line with current market expectations
Commenting on the results, Luc Baqué, Chief Executive Officer, said:
"I am very pleased by the financial performance of the business over the
year; the Group has exceeded expectations and achieved excellent organic
growth across all regions, in particular North America. I am excited to take
the helm of Alpha and have the honour of leading its fabulous team; and I am
thankful to Euan for his excellent leadership over the last decade and look
forward to building on the Group's continued success and leading it through
the next growth chapter.
Whilst we have recently seen a lengthening sales cycle and higher levels of
competition, we enter FY 24 with resilient trading and a good pipeline of new
business opportunities. Our compelling proposition to clients, leading talent
base and clear growth strategy give us confidence as we progress towards our
2028 strategic goals."
Commenting on the results, Euan Fraser, Chief Executive Officer to 31 March
2023, said:
"The past financial year covers the final year of my decade as Alpha's CEO. I
am delighted that the Group has experienced such strong growth and a set of
financial results that exceeded our expectations. The Group has also achieved,
well ahead of plan, the ambition we set out in 2020 to double in size.
I am extremely proud of everyone in the Alpha team for reaching that landmark
and I am certain many more will follow. It has been an incredible journey and
a huge honour being CEO. Alpha is in very good hands with Luc Baqué - and I
for one cannot wait to see where the outstanding talent, commitment and
expertise across the Group takes Alpha next."
Enquiries:
Alpha Financial Markets Consulting plc +44 (0)20 7796 9300
Luc Baqué (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
Toby Flaux
James Thompson
Alix Mecklenburg-Solodkoff
Camarco - Financial PR +44 (0)20 3757 4980
Ed Gascoigne-Pees
Phoebe Pugh
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.
It has the largest dedicated team in those industries, with approximately
1,000 consultants globally, operating from 17 client-facing offices(7)
spanning the UK, North America, Europe and APAC. Alpha has worked with all of
the world's top 20 and 80% of the world's top 50 asset managers by AUM(8),
along with a wide range of insurance and other buy-side firms.
1 All financial and operating highlights relate to the year ended 31 March
2023 ("FY 23") and the comparative period is 31 March 2022 ("FY 22") unless
otherwise specified. All rounding and percentage change calculations are from
the basis of the financial statements in £'000s
2 The Group uses alternative performance measures ("APMs") to provide
stakeholders further metrics to aid understanding of the underlying trading
performance of the Group. Margins are expressed as a percentage of net fee
income. Refer to note 3 for further details
3 Organic net fee income growth excludes Lionpoint's current year net fee
income contribution prior to the acquisition anniversary. Refer to note 3 for
further details
4 Client numbers are cumulative and have been updated to include all client
relationships from acquisitions
5 "Consultants" and "headcount" refer to fee-earning consultants at the year
end: employed consultants plus utilised contractors in client-facing roles
6 "Directors" refers to fee-generating directors at the year end. All director
increases are presented as net
7 Group uses "office" to refer to office location; that is, if there are
multiple offices in one location, they will be counted as one office
8 "World's top 20" and "world's top 50" refer to Investment & Pensions
Europe, "Top 500 Asset Managers 2022"
Chairman's Report
Alpha has demonstrated the strength of its strategy and business model over
the past year. We have a clear and compelling set of objectives and are laying
strong foundations to achieve our ambitious growth plans.
Since joining London's Alternative Investment Market ("AIM") in October 2017,
Alpha has achieved an unbroken record of growth in revenues and profits as a
public company. I am therefore delighted to present the Group's Annual Report
& Accounts for the year to 31 March 2023, which demonstrates another
excellent year across all activities and geographies. This outcome has been
delivered by the extraordinary skill and dedication of Alpha's employees all
over the world.
But before I proceed to talk about governance, the year in review and outlook,
I must thank Euan Fraser for his outstanding performance as Chief Executive
Officer. He has presided over another excellent year of growth - across our
financial KPIs, client relationships, business proposition and talent base.
The last 10 years under Euan's leadership as CEO are a very successful period
in Alpha's rich story in which the platform for long-term growth for our
investors, clients and Alpha's people has been built and proven. The Board(9)
and I are delighted to retain Euan as a strategic adviser. I know that, in Luc
Baqué, the Group has chosen a very worthy successor with the vision, skills
and capabilities to take the business through its next chapter of growth.
Strategy
For the next phase of Alpha's growth plan, the Group has set the target of
doubling the size of the business again by 2028, leveraging the same growth
strategy that has served it well so far: scaling up and broadening the client
proposition, rolling out the client proposition globally, and making selective
acquisitions.
The objective is to build out a multi-boutique model with a strong culture of
cross-selling the Group's services so that it progressively deepens its
relationship with each client. The Board believes this approach will deliver
outstanding client service and provide the best opportunities for long-term
growth.
In delivering this strategy, Alpha's ability to attract and retain the world's
best specialist consulting talent remains fundamental to the successful
realisation of its ambitions. The Group therefore provides a highly attractive
offering encompassing competitive compensation, career development,
high-quality work in multiple geographies, recognition and support. These
factors, alongside a focus on offering an excellent corporate culture and
inclusive working environment for all employees, have helped the Group to
increase its consultant numbers by 234 during the year, bringing the total to
994.
Overview of the financial year
The Group has achieved the strategic goal set in November 2020 to double in
size over the four years to November 2024. Reaching this target so quickly
underlines the strength and relevance of the Group's proposition, the
market-leading expertise of its people and the quality of the executive team.
During the past year, Alpha made excellent progress in all three areas of its
strategic growth agenda. The Group has further broadened its proposition with
particularly strong growth in Insurance Consulting and, through Lionpoint,
services for alternatives clients. Geographic expansion is also progressing
well, with excellent progress in North America, the Group's key strategic
growth region. Alpha's third growth pillar, selective acquisitions, made its
latest advance following the year end with the acquisition of Shoreline, an
asset and wealth management consultancy based in Sydney. The addition of
Shoreline makes Alpha the leading specialist asset and wealth management
consultancy in APAC.
The Group delivered an excellent trading performance during FY 23, continuing
the progress we reported at the half year and achieving double-digit growth in
revenues and profits. Net fee income increased by 43.9% to £227.2m (FY 22:
£157.8m) and 39.6% on an organic basis. Revenue also increased 44.8% to
£228.7m (FY 22: £158.0m). Adjusted EBITDA increased by 37.5% to £46.6m (FY
22: £33.9m) and operating profit increased by 61.1% to £28.6m (FY 22:
£17.8m), which fed through to the Group's healthy net cash position of
£59.2m (FY 22: £63.5m) at the year end, leaving the Group well positioned to
fund its growth initiatives over the coming year and beyond.
Governance and the Board
Strong governance, integrity and business ethics are critical to the Group's
long-term success and its ability to generate sustainable value for our
investors and other stakeholders. These considerations are fundamental to how
the Board manages its discussions and decisions both as a Board and as
individual committees, and we continue to improve governance aspects alongside
the Group's growth.
The Board also considers ESG(10) as an important aspect of the Group's
governance and risk management framework, and recognises its responsibility to
guide Alpha's approach, and ensure it complies with regulatory requirements
and meeting the expectations of its stakeholders. With this in mind, the Board
has now established an ESG Committee, which is chaired by Jill May. The
Committee oversees all components of Alpha's corporate ESG agenda, and we are
delighted to have welcomed both a dedicated Global Sustainability Manager and
a Global Diversity & Inclusion Manager to support our planning, progress
and reporting linked to this important area. Among the key topics that the
Group is currently focussing on are its preparations to start reporting under
the framework set out by the Task Force on Climate-Related Financial
Disclosures ("TCFD"), and the further development and global roll-out of our
D&I programme and supporting disclosures.
On 1 April 2023, Luc Baqué succeeded Euan Fraser as Chief Executive Officer
and joined the Board. On stepping down from the CEO role, Euan became a
strategic adviser to the Board and we are delighted to maintain access to his
strong industry relationships and knowledge of the Group. Alongside the growth
of the Group, to ensure that the Board has suitable support and advice, we are
also very pleased to have appointed an internal company secretary to work
alongside Prism CoSec.
Dividend
Alpha performed ahead of market expectations in FY 23 and the Board is
therefore recommending a 40.0% increase in the final dividend to 10.50p per
share, bringing the total for the year to 14.20p, an increase of 36.5%
compared with the 10.40p paid in respect of FY 22, in line with the Group's
dividend policy. Subject to shareholder approval at the Annual General Meeting
("AGM"), to be held on 6 September 2023, the final dividend will be paid on 19
September 2023 to shareholders on the register at close of business on 8
September 2023.
Outlook
The Board is delighted with the Group's performance over the past year. Alpha
has delivered a set of excellent results against a backdrop of macro-economic
uncertainty, and has entered the current year with both a good pipeline across
the Group and clear plans to achieve its strategic ambitions of doubling the
business by 2028.
Although we are facing continuing macro-economic uncertainty and some
increased competition in the global consulting market, the structural drivers
that underpin growth and demand for the Group's services over the medium to
long term remain strong. This, together with the Group's market-leading
consulting talent and the growing number of client relationships, means the
Group remains confident of further progress. On behalf of the Board, I would
like to thank everyone at Alpha for their fantastic contributions in another
successful year.
Ken Fry
Chairman
22 June 2023
(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")
Chief Executive Officer's Report
Alpha's teams around the world have delivered another outstanding performance
and record year of results. I want to start by thanking our people everywhere
for their fantastic contribution and, on behalf of us all, to thank Euan
Fraser for his vision and leadership throughout the past decade. Euan has
successfully steered the Group through 10 years of growth, including the
excellent performance of the last financial year.
Since AIM admission, we have made great strides and have doubled the size of
the business since 2020. My intention as Chief Executive Officer is to
continue building on our successes to date.
As Euan led the Group as Chief Executive Officer during the financial year
under review, we have both contributed to this report this year.
Our growth strategy
In meeting the Group's previous target - to double the size of the business by
November 2024 - we diversified and strengthened across multiple dimensions: by
consulting activity, by client sector and by geography; growing both
organically and through complementary acquisitions.
At our capital markets event in March 2023, we announced an evolution of that
strategy and a refreshed ambition to double the size of Alpha again over the
next five years, while maintaining our record of profitable growth and
targeting a consistent adjusted EBITDA margin. The key pillars that will
enable us to achieve that strategic ambition are: further expansion in asset
and wealth management consulting, particularly in North America; the global
scale-up and roll-out of our Insurance Consulting business; and making
selective acquisitions.
Over the next five years, growth in these important areas and markets will
continue to be our focus and the potential further opportunity is significant.
The year in review
The past year was one of strong performance across all regions and business
activities, despite the ongoing macro-economic uncertainty. We saw further
excellent progress across the key growth pillars of North America, insurance
consulting and acquisitions.
We have continued to execute on our strategy of launching new service areas
and consulting practices, rolling them out globally and delivering strong
organic growth by investing in our people and expertise. We have invested
nearly 20 years in creating a leading position as a consultancy and we see
continued demand to expand the business and provide an even more comprehensive
service to clients globally.
12 months to 12 months to Change
31 March 2023 31 March 2022
Net fee income
UK £87.1m £72.1m 20.9%
North America £91.1m £46.9m 94.2%
Europe & APAC £49.0m £38.8m 26.0%
Year-end totals £227.2m £157.8m 43.9%
( )
12 months to 12 months to Change
31 March 31 March 2022
2023
Gross profit
UK £35.0m £30.6m 14.3%
North America £30.0m £15.4m 95.7%
Europe & APAC £15.4m £13.4m 14.6%
Year-end totals £80.4m £59.4m 35.4%
Regionally, we have achieved meaningful growth in all our geographic regions,
fuelled by the excellent reputation and appeal of Alpha's leading client
proposition, which we continue to extend. Thanks to the robust structural
drivers of demand in the core markets in which we operate, including growth in
assets and insurance policies, cost pressure, regulation, technology
breakthroughs, and changes in societal expectations, we believe that the Group
has the potential and the scope to continue to grow and gain market share.
Continuing on the momentum of the previous year, North America became our
largest region by net fee income, achieving net fee income growth of 94.2%
overall, mostly organically, and 71.7% on a constant currency basis. This is a
key pillar of our growth strategy and we are delighted with our progress in
the very sizeable North America market. The strong progress is due to our
industry knowledge, deep expertise and highly talented team, which encompasses
consultants who are specialists in asset and wealth management, technology and
alternatives, through the Lionpoint business.
We successfully grew our North America team by 32.0% to 342 consultants by the
year end. We also expanded our North America client base, across the
traditional and private markets, adding 72 clients in the year, including a
number of the world's largest asset managers. The Group has now worked with
88% of the top 25 North America asset managers(11) and continues to broaden
and deepen these relationships. We see significant growth potential in the
world's largest asset management market to continue to grow the Group's market
share in that region.
Our businesses in the UK and Europe & APAC also delivered excellent
performances, increasing net fee income by 20.9% and 26.0% respectively, while
continuing to win and deliver market-defining projects. We retain our
market-leading position in the UK as consultants to the asset and wealth
management industry, with the Group's established practices, including
Investments, Operations and Client & Digital(12), contributing well, and
adding 47 clients across the region. In Europe & APAC, our best-in-class
service offering continues to attract new clients, with 37 new clients added
in the year.
Our second key growth pillar, expanding our Insurance Consulting business,
also continued its strong momentum and ended FY 23 with 81 people across the
UK and Europe, up from 50 in FY 22, and added 10 clients in the year. The
General Insurance & Specialty offering launched last year has continued to
gain traction this year, and we were delighted to welcome a third director
dedicated to this client segment to drive further growth. The Group also made
further progress in building out the Insurance Consulting proposition with the
launch of a Retail Distribution & Advice practice, which helps financial
advisers, investment platforms and life and pensions providers transform and
grow their businesses.
We see significant market potential in the insurance industry and, ultimately,
believe that our offering could grow to a similar size to Alpha's asset and
wealth management consulting business in the medium to long term. In FY 24, we
will also be progressing the launch of our Insurance Consulting proposition in
the US.
Other notable additions to the Group's client proposition during the past year
include the Enterprise Transformation practice, which helps asset and wealth
management clients address issues and challenges around reconfiguring global
operating models and cost structures. Meanwhile, the continued development of
Alpha's Data Science proposition recognises the importance of data-driven
insights in differentiating and scaling our clients' businesses.
We have also continued the ongoing development of our technology services
proposition, including Axxsys. Almost all the consulting engagements we
undertake with asset managers, wealth managers and insurance clients lead to a
requirement for technology services and there is strong demand for software
solutions and technology experts with deep sector knowledge. Aiviq presents an
attractive data solutions and product proposition for asset managers and
continues to add clients. We see further potential in this offering, although
it remains currently a small part of the Group.
Alongside the Group's organic growth, we are very pleased with the strong
contributions from our acquisitions. Lionpoint, the alternative assets
consultancy acquired in May 2021, continued to grow very strongly, benefiting
from excellent synergies between Lionpoint and our other businesses as
alternatives become an increasingly mainstream part of the asset management
landscape. Demonstrating this, Lionpoint added 93 new clients globally in the
year, including several of the largest alternative investments managers, and
increased its headcount by 43.9% to end the year with 285 consultants
globally.
After the year end, we were delighted to acquire Shoreline, a specialist APAC
asset and wealth management consultancy headquartered in Sydney. The
acquisition, which included a team of nearly 20 people, was completed smoothly
after the year end under the oversight of our Asset & Wealth Management
consulting leadership team; and the integration is now under way and
progressing well. Shoreline's client base, capabilities and company culture
are highly complementary to Alpha, strengthening the Group's existing
offerings and creating the leading specialist asset and wealth management
consulting firm in the region. We look forward to working with the Shoreline
team and growing the APAC business further.
We are delighted with the progress in the year across our three key growth
pillars and the wider business and look forward to continuing to progress
globally in delivering the next phase of the Group's growth.
Financial performance summary
This robust performance across all our business areas produced full-year
financial results that were ahead of market expectations. Group net fee income
increased 43.9% to £227.2m (FY 22: £157.8m), on a mostly organic basis, and
36.1% on a constant currency basis.
Adjusted EBITDA increased by 37.5% to £46.6m (FY 22: £33.9m) and adjusted
profit before tax rose 38.6% to £44.0m (FY 22: £31.8m), while achieving
adjusted EBITDA margin at 20.5% (FY 22: 21.5%). As expected, strong demand for
our services allowed us to balance rising costs and a gradual reduction in our
consultant utilisation towards more normal levels, alongside increases in our
day rates. Adjusted earnings per share ("EPS") also increased by 36.4% to
29.27p (FY 22: 21.46p).
On a statutory basis, revenue increased 44.8% to £228.7m (FY 22: £158.0m),
operating profit increased 61.1% to £28.6m (FY 22: £17.8m) and profit before
tax increased 73.2% to £25.8m (FY 22: £14.9m). Basic EPS more than doubled
in the year to 15.82p (FY 22: 7.69p). A reconciliation between these statutory
and adjusted performance measures is set out in the Chief Financial Officer's
Report and note 3 to the consolidated financial statements.
Alpha continues to generate good cash flows and net cash ended the year at
£59.2m (FY 22: £63.5m). We are also delighted to recommend a 10.50p
full-year dividend in line with our policy to pay out approximately 50% of
adjusted profits.
Our people
To oversee the execution of our 2028 growth strategy, we have strengthened our
executive team. Joe Morant moves from Head of Asset & Wealth Management
Consulting in North America to take global responsibility for this business.
Nick Fienberg takes charge of technology services and Lionpoint, which covers
both management consulting and technology services to the alternatives sector.
Stuart McNulty, who successfully led our UK Asset & Wealth Management
business for many years and oversaw the launch of our Insurance Consulting
business there, becomes Global Head of Insurance Consulting.
We have also strengthened our operational capabilities during the past year to
support the delivery of our growth targets by appointing a Group Managing
Director, a Global Operations Director, a Global Head of Risk, a Group and a
Divisional Finance Director.
Our consultants are the best in our industry and are the key to the Group's
success. Attracting, developing, motivating and celebrating talented people at
all levels are among our most important strategic objectives and ones to which
we give much thought and attention. Over the past year, we increased our
global consulting team to 994 (FY 22: 760), adding 234 new consultants (FY 22:
189) and 13 new directors (FY 22: 20), excluding additions as part of the
Lionpoint acquisition in the prior year.
As at As at Change
31 March 2023 31 March 2022
Consultant headcount
UK 394 287 37.3%
North America 342 259 32.0%
Europe & APAC 258 214 20.6%
Year-end totals 994 760 30.8%
Clients come to us because of the specialist knowledge and experience of our
consulting teams and their determination to deliver excellent outcomes that
solve clients' problems. Thanks to our market-leading talent and reputation
for delivery excellence, we build strong client relationships that yield major
cross-selling opportunities as we extend our range of practices and services.
This enables us to generate consistently strong organic growth - a powerful
business model that is the foundation of our plan to achieve the ambitious
goals we have set for 2028.
Maintaining our inclusive and meritocratic culture is therefore essential and
we are especially pleased that our emphasis on people and culture has helped
make the integration of Lionpoint in the prior year, our largest acquisition
to date, so successful. We are also delighted to be welcoming 19 new
consultants to the Group as part of our recent acquisition of Shoreline.
ESG focus
We continue to be very excited and supportive of the progress that the asset
management, wealth management and insurance industries are making when it
comes to both sustainable investing and assessing broader ESG commitments. As
a business, we are sharpening our focus on ESG and enhancing our approaches,
operations and policies to be able to embrace the necessary changes and report
upon them effectively.
The Group adopted the SASB framework in 2019 and we have reported on our
adherence to those standards each year since. We are continuing to advance our
environmental work and response to climate change. This includes improvements
to our data collection and analysis, which will support us in setting out and
progressing a journey towards net zero, a key focus of Alpha's ESG roadmap. To
support this and ensure progress, we have added responsible business oversight
to our global business operations team, including a Global Sustainability
Manager and a Global Diversity & Inclusion Manager, who took up their
roles during FY 23.
Current trading and outlook
FY 23 was a year of further strong growth globally. Substantial progress was
achieved across our three key growth pillars and the business more generally,
and we enter FY 24 as a leading global management consultancy of almost 1,000
consultants.
We are mindful of the uncertainties presented by the global macro picture,
including the war in Ukraine and the recessionary outlook in many economies.
We have also recently seen a lengthening sales cycle and increased competition
as a result of the current overcapacity in the global consulting market. This
is expected to be a short-term backdrop, while the consulting market balances
supply with overall demand. The medium to long-term outlook for our key client
markets is positive, with the structural drivers of demand and growth
remaining strong.
Against this backdrop, the Group enters FY 24 with resilient current trading
and a good pipeline of new business opportunities. These factors, coupled with
the Group's compelling proposition to clients, give us confidence in
delivering full year results in line with current market expectations and
progressing towards our 2028 strategic goals.
We have a clear growth strategy, excellent client relationships and the most
talented group of consultants in our industry. We therefore look to
the future with great optimism.
Luc Baqué
Chief Executive Officer
22 June 2023
(11) "Top 25" refers to Investment & Pensions Europe, "Top 500 Asset
Managers 2022" where the asset manager country is US or Canada, as defined in
the report
(12) Practice name changed from Distribution to Client & Digital to better
reflect the complete client proposition
Chief Financial Officer's Report
Alpha has delivered another year of strong growth, with net fee income up by
43.9% and adjusted EPS increasing by 36.4% in FY 23. The Group has delivered
double-digit growth across all geographic regions on an organic basis, with
the strongest growth in our key North America region. The balance sheet
remains robust, with good cash generation, and the Group ends the year well
positioned.
Group Results
I am delighted to report another strong year of growth for the Group across
all regions, both organically and including Lionpoint, which was acquired in
the previous year.
12 months to 12 months to Change
31 March
31 March
2023 2022
Revenue £228.7m £158.0m 44.8%
Net fee income £227.2m £157.8m 43.9%
Gross profit £80.4m £59.4m 35.4%
Operating profit £28.6m £17.8m 61.1%
Adjusted EBITDA £46.6m £33.9m 37.5%
Adjusted EBITDA margin 20.5% 21.5% (100 bps)
Adjusted profit before tax £44.0m £31.8m 38.6%
Profit before tax £25.8m £14.9m 73.2%
Adjusted EPS 29.27p 21.46p 36.4%
Adjusted diluted EPS 27.37p 20.23p 35.3%
Basic EPS 15.82p 7.69p 105.7%
Revenue
The Group delivered 43.9% net fee income growth in the year, including a 39.6%
organic contribution. Revenue also grew 44.8%, including increased
rechargeable client expenses, compared to the prior year.
Overall, the Group's revenue and net fee income growth reflects average
consultant headcount growth, average consultant utilisation returning to
target levels as planned, alongside improving consultant day rates overall and
some assistance from currency translation. Revenue and net fee income grew in
all geographic regions, mostly on an organic basis, with the remaining
inorganic contribution from the acquisition of Lionpoint in the prior year.
North America delivered the strongest regional growth, ending the year as the
largest geographic region in the Group by net fee income. In the year, net fee
income grew 94.2% overall and 83.3% on an organic basis. On a constant
currency basis North America net fee income growth was 71.7% overall.
Lionpoint continued to perform well in the year and contributed significantly
to North America net fee income, adding a further 51 consultants to its North
America team in the year. The North America business overall continued to
expand its domestic client base, as well as successfully capturing client
demand through a number of cross-selling opportunities with its existing
clients. The strongly growing consultant team was well deployed, while also
improving consultant day rates.
Europe & APAC also delivered another year of strong growth. The region
grew net fee income by 26.0% on the previous year, 24.4% on an organic basis
and, on a constant currency basis, the region reported 21.3% growth overall.
This growth was delivered across the region with the Europe team generally
well deployed, complemented by further good progress growing the APAC
business.
The UK business grew net fee income 20.9% overall and 19.3% organically. This
strong UK organic performance benefited from solid client demand across the
full range of Alpha practices, including substantial contributions from our
established Investments, Client & Digital and Operations teams. Within the
UK results, Alpha's data solutions business, Aiviq, increased its client base
and revenue in the year, and continues to focus on building further scale.
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 Insurance and Technology Consulting businesses also made
good progress in the year by winning a number of projects both with existing
and new client relationships.
Alpha's growth was supported by further investment in global consultant
headcount. The number of consultants reached 994 by the year end (FY 22: 760).
Of this 234 consultant team increase, Lionpoint added 87 to the Group
globally.
Group profitability
Group profits also grew strongly. Group gross profit was £80.4m (FY 22:
£59.4m), increasing by 35.4% over the previous year and 28.7% on a constant
currency basis.
Gross profit margin was 35.4% (FY 22: 37.6%), mainly reflecting the easing of
utilisation to target levels, alongside continued investment in our
consultants while maintaining competitive remuneration packages, partially
offset by improving consultant day rates across all regions.
North America maintained a consistent gross profit margin of 32.9% (FY 22:
32.7%) as the North America team grew substantially and successfully
normalised average utilisation back to target levels, while balancing costs
and consultant rates progress. The UK business grew gross profit well and its
40.2% gross margin (FY 22: 42.5%) similarly reflects utilisation returned to
target levels and further rates progress ongoing. Europe & APAC also
experienced good gross profit growth, with a margin of 31.4% (FY 22: 34.5%)
reflecting utilisation and continued investment in the business, partially
offset by consultant day rate progression.
Adjusted administration expenses, as detailed in note 3, increased by 32.5% or
£8.3m to £33.8m (FY 22: £25.5m) in the year. Discretionary spend returned
to normalised levels following COVID-19, for example across staff and client
entertainment and travel spend, and in recruitment spend as we grew our
consulting teams globally. We also continued to invest in the Group's central
team through the year in areas such as finance, HR, legal, risk and
responsible business, alongside the Group's expansion.
Including the adjusting expense items, which also rose, administration
expenses increased to £51.7m (FY 22: £41.6m) on a statutory basis. The
adjusting expense items, set out in note 3, increased in the year to £15.8m
(FY 22: £14.4m), reflecting increased earn-out and deferred consideration and
share-based payment charges, partially offset by lower foreign exchange loss
and acquisition costs, which, in the prior year, mainly related to the
acquisition of Lionpoint.
The £0.3m (FY 22: £0.7m) acquisition costs include diligence and legal fees
incurred in connection with the Shoreline acquisition, which completed after
the year end, in May 2023. The acquired intangible asset amortisation charge
was £4.6m (FY 22: £4.7m). The share-based payment charge of £8.0m (FY 22:
£6.2m) 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 lower award vests at this stage. Further
details of the share-based payment charge is set out in notes 3 and 12.
The earn-out and deferred consideration charge of £2.5m (FY 22: £1.4m)
reflects employment-linked acquisition expenses and two fair value
adjustments. With Lionpoint's continued strong performance since acquisition
and ongoing positive outlook, the future performance assumptions have been
uplifted to the maximum earn-out payment for the final earn-out year in FY 24.
This uplift is partially offset by a scale-back fair value reduction in the
liability held for Obsidian as a lower, mutually agreed position was reached
with the original vendors, which was paid in full in the year. Further detail
on the earn-out and deferred consideration charges are set out in note 7.
The depreciation charge grew to £1.9m (FY 22: £1.2m) alongside the growth of
the Group, while the £0.2m (FY 22: £0.6m) amortisation of capitalised
development costs eased as the asset was fully amortised in the year.
Adjusted EBITDA grew 37.5% to £46.6m (FY 22: £33.9m) and adjusted EBITDA
margin eased to 20.5% (FY 22: 21.5%), reflecting the gross profit margin and
the adjusted administration expenses. Operating profit rose 61.1% to £28.6m
(FY 22: £17.8m) after charging the adjusting expense items, including
earn-out and deferred consideration expenses and share-based payment charges.
Further detail of these adjusting items is set out in note 3. If no
adjustment had been made for the share-based payment charge, adjusted EBITDA
would have grown by 39.7% to £38.6m (FY 22: £27.7m) at a margin of 17.0% (FY
22: 17.5%).
Currency
Currency translation had a noticeable effect on net fee income and profits
during the year. Through the year, British pound sterling averaged $1.21 (FY
22: $1.37) and €1.16 (FY 22: €1.18), which, with other similar currency
movements, resulted in an overall favourable net currency effect on net fee
income of £12.4m. On this basis, North America net fee income growth would
have been 71.7% and Europe & APAC would have reported 21.3% total net fee
income growth.
Overall, the Group's net fee income would have grown 36.1% to £214.8m on this
constant currency basis. On a similar basis, the Group's gross profit would
have been £76.4m and would have grown 28.7% on a constant currency basis.
With British pound sterling strengthening towards the end of the second half,
this currency benefit has begun to unwind and continues to do so into FY 24.
Net finance expense
Net finance costs remained flat in the year at £2.9m (FY 22: £2.9m),
primarily comprising non-underlying finance expenses relating to acquisition
consideration discount unwinding, as set out in note 3.
Taxation
Adjusted profit before tax rose 38.6% to £44.0m (FY 22: £31.8m) after
charging depreciation, amortisation of capitalised development costs and net
underlying finance expenses. Statutory pre-tax profit rose 73.2% to £25.8m
(FY 22: £14.9m) after charging adjusting items and non-underlying finance
expenses.
The Group's taxation charge for the year was £7.8m (FY 22: £6.4m),
reflecting the growth in taxable profits and the blended tax rate of the
increasingly international jurisdictions in which the Group operates. The
Group's cash tax payment in the year was £13.3m (FY 22: £4.8m), reflecting
the growth in profits and the Group moving to a quarterly tax payment cycle in
North America.
For further taxation details, see note 4. 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 services and the team into the Alpha Group, and
has seen 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.
After the year end, on 1 May 2023, the Group announced the acquisition of
Shoreline for a maximum consideration of AUD 13.0m (£6.8m). Shoreline enables
Alpha to build upon a robust platform in APAC and ensures that the Group can
take advantage of opportunities in one of the fastest growing regions in the
asset and wealth management sector. We are pleased to welcome Shoreline into
the Group and look forward to further regional growth. Please refer to note 13
for further detail.
Earnings per share
Adjusted EPS improved 36.4% to 29.27p per share (FY 22: 21.46p) and adjusted
diluted EPS increased 35.3% to 27.37p (FY 22: 20.23p). After including the
adjusting expense items, both basic and diluted EPS more than doubled to
15.82p (FY 22: 7.69p) and 14.79p (FY 22: 7.25p), respectively.
As at 31 March 2023, 9,996,040 share options (FY 22: 9,504,379) remained
outstanding, with 2,108,886 share options exercised during the year, as share
option awards begin to settle into a normal cycle of awards and vests. See
note 12 for further detail.
Cash flow and net funds
Net cash generated from operating activities was £30.6m (FY 22: £33.5m) and,
after adjusting for employment-linked acquisition payments and acquisition
costs, was £32.9m (FY 22: £36.0m). Working capital remains well managed with
debtor days reducing again this year. Operating cash generation in the year
reflected the payment of last year's increased profit share, given the strong
FY 22 performance, as well as additional North America tax payments as that
business grows and moved to quarterly payments in that region. The 74.0%
adjusted cash conversion rate from adjusted operating profit (FY 22: 112.1%)
reflects these specific cash outflows.
During the year, the Group made further payments of £22.6m relating to
deferred and contingent acquisition consideration, including £1.8m of
employment-linked amounts. Final Axxsys and Obsidian payments were settled in
full in the year. Please see note 7 for further details.
The Group also provided £1.1m funding to Alpha's employee benefit trust
("EBT") to purchase 266,922 shares at the prevailing market share price, to
hold for the satisfaction of future award vests. Alpha will likely fund the
EBT further in the future to build the shares held in the EBT for the
satisfaction of future share option exercises.
The Group's income taxes paid totalled £13.3m (FY 22: £4.8m), reflecting the
Group's profit growth, as well as the move to quarterly tax payments in North
America. Net interest paid was £0.1m (FY 22: £0.3m), reflecting the cost of
maintaining and periodically drawing the Group's revolving credit facility
("RCF") in the year to manage the Group's ongoing currency requirements,
offset by interest income from cash balances held.
Dividends paid increased in the year to £12.8m (FY 22: £8.7m), reflecting
the Group's dividend policy and the increase in the Group's adjusted profit
after tax.
At the year end, the Group's cash position was £59.2m (FY 22: £63.5m). This
strong balance sheet provides Alpha funding flexibility to continue to deliver
on its acquisition strategy.
Statement of financial position
The Group's net assets at 31 March 2023 totalled £149.3m (FY 22: £132.7m).
This increase principally arises from other reserves movements including
retained profits, foreign exchange gains on overseas assets and additional
share-based payment reserves. The Group continues to maintain a strong
financial position.
The Group's non-current assets movement principally results from foreign
exchange gains on goodwill balances and increased right-of-use assets on new
leases entered into by the Group, partially offset by ongoing amortisation
charges for the year.
Working capital remains well managed. Trade and other receivables balances
increased in FY 23 through the ongoing growth in the business. Debtor
collections continued to be strong during the year with debtor days falling
again from the prior year. The Group ended the year with £59.2m (FY 22:
£63.5m) of cash. The Group's £20.0m RCF was undrawn at 31 March 2023 and,
alongside cash balances, ensures the Group's funding flexibility. Following
the year end, the Group refinanced and upscaled its RCF to a £50.0m facility
to provide funding flexibility in line with the Group's growth, as set out in
note 13.
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 team and the year's
strong performance. Total acquisition-related deferred consideration and
earn-out liabilities decreased in the year, reflecting Lionpoint deferred
consideration payments and final Axxsys and Obsidian payments, partially
offset by the increase in the fair value of the Lionpoint earn-out liability
and employment-linked consideration as well as the unwinding of discounting in
the year, as disclosed in note 7.
Dividends
The Board is very pleased with FY 23 performance. As a result, the Board is
recommending a final dividend of 10.50p per share (FY 22: 7.50p), bringing the
total for the year to 14.20p (FY 22: 10.40p), 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 19 September 2023
to shareholders on the register at the close of business on 8 September 2023.
Total shareholders' funds
Total shareholders' funds increased to £149.3m (FY 22: £132.7m). The changes
in equity reserves reflect profit after tax for the year, currency movements
on net assets held overseas, goodwill and intangible assets, the addition of
further share-based payment reserves and the payment of dividends.
As at 31 March 2023, the Company had 120,509,736 ordinary shares in issue (FY
22: 118,707,336), of which no shares were held in treasury and 6,274,380
shares were held in the Company's employee benefit trust to satisfy future
option exercises (FY 22: 6,216,501).
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 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. The structural
drivers in the asset management, wealth management and insurance industries,
which will drive ongoing demand for Alpha's services, remain prevalent. We are
confident that with the quality of our people, our excellent market
reputation, and business opportunities to extend the service offering, we are
in a good position to navigate further challenges ahead.
It is unclear how long the current macro uncertainty and recessionary
environment, which includes a lengthening sales cycle and higher levels of
competition, may prevail and how precisely it may affect local and global
markets. However, Alpha continues to enjoy a good pipeline of new business
opportunities and resilient current trading And, therefore, the Board looks
forward to further progress ahead.
The Board has considered all of the above factors in its review of going
concern and has been able to conclude the review positively. While cognisant
of potential macro-economic risks and the more competitive environment
currently, the Group's talented people, widening range of service offerings
and international footprint, and the long-term structural drivers of growth,
position the Group well.
John Paton
Chief Financial Officer
22 June 2023
Consolidated statement of comprehensive income
For the year ended 31 March 2023
Year ended Year ended
31 March 2023
31 March 2022
Note £'000 £'000
Continuing operations
Revenue 2 228,717 158,005
Rechargeable expenses 2 (1,562) (196)
Net fee income(13) 2 227,155 157,809
Cost of sales 2 (146,796) (98,452)
Gross profit 2 80,359 59,357
Administration expenses (51,723) (41,582)
Operating profit 28,636 17,775
Finance income 364 1
Finance expense (3,229) (2,894)
Profit before tax 25,771 14,882
Taxation (7,810) (6,370)
Profit for the year 17,961 8,512
Exchange differences on translation of foreign operations 3,510 3,180
Total other comprehensive income 3,510 3,180
Total comprehensive income for the year 21,471 11,692
Basic earnings per ordinary share (p) 6 15.82 7.69
Diluted earnings per ordinary share (p) 6 14.79 7.25
( )
(13) Net fee income, adjusted EBITDA and other alternative performance
measures are defined and reconciled in note 3
Consolidated statement of financial position
As at 31 March 2023
As at As at
31 March 2023
31 March 2022
Note £'000 £'000
Assets
Non-current assets
Goodwill 103,676 100,991
Intangible fixed assets 27,588 31,333
Property, plant and equipment 1,113 806
Right-of-use asset 4,008 2,304
Deferred tax asset 3,033 671
Capitalised contract fulfilment costs 108 131
Total non-current assets 139,526 136,236
Current assets
Trade and other receivables 8 34,128 29,569
Cash and cash equivalents 59,215 63,516
Total current assets 93,343 93,085
Current liabilities
Trade and other payables 9 (60,539) (56,671)
Provisions (3,326) (3,277)
Corporation tax (1,321) (4,788)
Lease liabilities (2,104) (1,134)
Total current liabilities (67,290) (65,870)
Net current assets 26,053 27,215
Non-current liabilities
Deferred tax liability (2,783) (4,331)
Other non-current liabilities 10 (11,400) (25,100)
Lease liabilities (2,057) (1,275)
Total non-current liabilities (16,240) (30,706)
Net assets 149,339 132,745
Equity
Issued share capital 11 90 89
Share premium 119,438 119,438
Foreign exchange reserve 6,992 3,482
Other reserves 17,258 9,361
Retained earnings 5,561 375
Total shareholders' equity 149,339 132,745
Consolidated statement of cash flows
For the year ended 31 March 2023
Year ended Year ended
31 March 2023 31 March 2022
Note £'000 £'000
Cash flows from operating activities:
Profit for the year 17,961 8,512
Taxation 7,810 6,370
Finance income (364) (1)
Finance expenses 3,229 2,894
Profit from exchange rate movements on cash held (2,364) -
Depreciation charge 1,933 1,155
(Gain)/loss on disposal of fixed assets (14) 32
Amortisation of intangible fixed assets 4,762 5,272
Share-based payment charge 12 7,023 4,075
(Decrease)/increase in provisions (19) 1,302
Operating cash flows before movements in working capital 39,957 29,611
Working capital adjustments:
Increase in trade and other receivables (3,834) (7,066)
Increase in trade and other payables 7,752 15,729
Tax paid (13,285) (4,767)
Net cash generated from operating activities 30,590 33,507
Cash flows from investing activities:
Interest received 364 1
Acquisition consideration, including deferred and contingent 7 (20,829) (23,796)
Purchase of intangible assets (319) -
Purchase of property, plant and equipment, net of disposals (860) (684)
Net cash used in investing activities (21,644) (24,479)
Cash flows from financing activities:
Issue of ordinary share capital - 31,102
Share issuance costs - (1,053)
Net settlement of vested share options (343) -
EBT purchase of Company's own shares (1,139) (205)
Drawdown of revolving credit facility 12,500 -
Repayment of revolving credit facility (12,500) -
Interest and bank loan fees (482) (285)
Principal lease liability payments (1,315) (814)
Interest on lease liabilities (216) (111)
Dividends paid 5 (12,774) (8,678)
Net cash (used in)/generated from financing activities (16,269) 19,956
Net (decrease)/increase in cash and cash equivalents (7,323) 28,984
Cash and cash equivalents at beginning of the year 63,516 34,012
Effect of exchange rate movements on cash held 3,022 520
Cash and cash equivalents at end of the year 59,215 63,516
Consolidated statement of changes in equity
For the year ended 31 March 2023
Share capital Share premium Foreign exchange reserves Other reserves Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2021 80 89,396 302 4,044 543 94,365
Comprehensive income
Profit for the 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
Comprehensive income
Profit for the year - - - - 17,961 17,961
Foreign exchange differences on translation of foreign operations - - 3,510 - - 3,510
Transactions with owners
Shares issued (equity) 1 - - - (1) -
Purchase of own shares by the EBT - - - (1,139) - (1,139)
Share-based payment charge - - - 7,023 - 7,023
Net settlement of vested share options - - - (343) - (343)
Current tax recognised in equity - - - 1,486 - 1,486
Deferred tax recognised in equity - - - 870 - 870
Dividends - - - - (12,774) (12,774)
As at 31 March 2023 90 119,438 6,992 17,258 5,561 149,339
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 2023 or 2022 but is derived
from those accounts. Statutory accounts for the year ended 31 March 2022 have
been delivered to the registrar of companies, and those for the year ended 31
March 2023 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 international accounting 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 and APAC,
as they develop their presence locally, and as such have been deemed to
constitute one operating segment ("Europe & APAC").
Segmental information
FY 23 UK North Europe & APAC Total
America
£'000 £'000 £'000 £'000
Revenue 87,467 91,815 49,435 228,717
Rechargeable expenses (327) (717) (518) (1,562)
Net fee income 87,140 91,098 48,917 227,155
Cost of sales (52,117) (61,104) (33,575) (146,796)
Gross profit 35,023 29,994 15,342 80,359
Margin on net fee income(14) (%) 40.2% 32.9% 31.4% 35.4%
FY 22 UK North Europe & APAC 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(14) (%) 42.5% 32.7% 34.5% 37.6%
(14) Margin on net fee income is gross profit expressed as a percentage of net
fee income. Please refer to note 3 for further detail
During the year, the Group did not have any customers that comprised more than
10% of the Group's revenues (FY 22: nil).
3. Reconciliations to alternative performance measures
Alpha uses alternative performance measures ("APMs") that are not defined
under the requirements of IFRS. The APMs, including net fee income, margin on
net fee income, adjusted EBITDA, adjusted profit before tax, adjusted EPS,
adjusted cash conversion, organic net fee income growth and constant currency
growth, are provided to allow stakeholders a further understanding of the
underlying trading performance of the Group and aid comparability between
accounting periods. These measures have been 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 consolidated statement of comprehensive income
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 23 FY 22
Note £'000 £'000
Profit before tax 25,771 14,882
Amortisation of acquired intangible assets 4,576 4,716
(Profit) / loss on disposal of fixed assets (14) 32
Share-based payment charge 12 7,950 6,218
Earn-out and deferred consideration(15) 7 2,525 1,423
Acquisition costs 331 683
Foreign exchange losses 459 1,310
Adjusting items 15,827 14,382
Non-underlying finance expenses 2,417 2,487
Adjusted profit before tax 44,015 31,751
Net underlying finance expenses 448 406
Adjusted operating profit 44,463 32,157
Depreciation charge 1,933 1,155
Amortisation of capitalised development costs 186 556
Adjusted EBITDA 46,582 33,868
Adjusted EBITDA margin (%) 20.5% 21.5%
(15) The earn-out and deferred consideration expense in the period comprises a
fair value adjustment of £0.7m and an employment-linked consideration charge
of £1.7m as set out in note 7, as well as an associated social security
charge of £0.1m
Adjusting items
To assist in understanding the underlying performance of the Group and aid
comparability between periods, management applies judgement to exclude certain
expense items from the Group's APMs, which are deemed to warrant separate
disclosure due to either their nature or size. Such adjusting items as
described below are generally non-cash, non-recurring by nature or are
acquisition related.
Amortisation of acquired intangible assets and profit or loss on disposal of
fixed assets are treated as adjusting items to better reflect the underlying
performance of the business, as they are non-cash items, principally relating
to acquisitions.
The share-based payment charge and related social security 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 fully settled into a regular cycle of awards and vesting. The share-based
payment charge is also subject to external factors, such as the Group's share
price, over which the Directors have less day-to-day influence as compared to
other more directly controllable factors. The accounting treatment of the
Group's share options requires the charge for each share option award to be
recognised over the vesting period, resulting in significant growth in the
charge in recent years as the Group matured post AIM admission. The associated
estimate of future employer's social security taxes payable on these options
is closely linked to the share-based payment charge, and fluctuates with the
assumed future market value of shares, and has therefore also been treated as
an adjusting item. This approach has been applied consistently across
reporting periods. Note 12 sets out further details of the employee
share-based payment charge calculation under IFRS 2.
This cycle of share option awards and vesting is now beginning to settle
following the vesting of substantially all the remaining options issued at
IPO, and as such this charge is expected to become more comparable year on
year in future periods. The Group will continue to assess the status of this
charge as an adjusting item in the Group's financial statements. If no
adjustment was made for the share-based payment charge, adjusted EBITDA for
the year would be £38.6m (FY 22: £27.7m) and adjusted EBITDA margin would be
17.0% (FY 22: 17.5%).
As per note 7, the acquisition of Lionpoint in the prior year involved both
deferred and contingent payments. Part of the Lionpoint acquisition payments
are dependent on the ongoing employment of certain members of the senior
Lionpoint management team, and this element is expensed annually over several
years until the date of payment. In prior 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 considered to be part of the
purchase price of the acquisition, rather than an ongoing expense item, and
reflect 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.
Acquisition costs expensed in the year relate to the acquisition of Shoreline,
which completed shortly after the reporting period as disclosed in note 13.
These costs include diligence and legal fees. In the prior year the
acquisition costs related to the purchase of Lionpoint. 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. There were no integration costs in the current or
prior years.
The impact of foreign currency volatility in translating local working capital
and cash balances to their relevant functional currencies has been excluded
from the calculation of adjusted profit measures on the basis that such
exchange rate movements do not reflect the underlying trends or operational
performance of the Group. The foreign exchange movements primarily relate to
acquisition liabilities denominated in US dollars and associated US dollar
cash balances. The other foreign exchange gains and losses on foreign currency
working capital and cash balances across the Group are immaterial in both the
current and prior year.
Non-underlying finance expenses
In calculating adjusted profit before tax, unwinding of the discounted
contingent and deferred acquisition consideration within finance expenses is
considered non-underlying as these amounts relate to acquisition
consideration, rather than the Group's underlying trading performance.
Adjusted profit before tax
Adjusted profit before tax is an APM calculated as profit before tax stated
before adjusting items, including amortisation of acquired intangible assets,
share-based payment charge, acquisition-related payments and costs,
non-underlying finance expenses and other non-underlying expenses. This
measure allows comparability of the Group's underlying performance, reflecting
depreciation, amortisation of capitalised development costs and underlying
finance expenses.
Adjusted operating profit
Adjusted operating profit is an APM defined by the Group as adjusted profit
before tax before charging underlying finance expenses, including fees on bank
loans and interest on lease liabilities. The Directors consider this metric
alongside statutory operating profit to allow further understanding and
comparability of the underlying operating performance of the Group between
periods. This measure has been consistently used as the basis for adjusted
cash conversion.
Adjusted EBITDA
Adjusted EBITDA is a commonly used operating measure, which is defined by the
Group as adjusted operating profit stated before non-cash items, including
amortisation of capitalised development costs and 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. An effective tax rate of 0% has
been applied to earn-out and deferred consideration, acquisition costs and
non-underlying finance expenses totalling £5.3m as these items are treated as
capital in nature and are therefore non-deductible for tax purposes. An
overall effective tax rate of 23% has been applied to all other adjusting
items totalling £13.0m, reflecting the tax rates in the geographical
locations to which the items relate.
FY 23 FY 22
£'000 £'000
Adjusted profit before tax 44,015 31,751
Tax charge (7,810) (6,370)
Tax impact of adjusting items (2,976) (1,624)
Adjusted profit after tax 33,229 23,757
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 6 for further detail.
Adjusted EPS FY 23 FY 22
Adjusted EPS (p) 29.27 21.46
Adjusted diluted EPS (p) 27.37 20.23
Reconciliation of adjusted administration expenses
To express them on the same basis as the APMs described above, adjusted
administration expenses are stated before adjusting items, depreciation and
amortisation of capitalised development costs and are used by the Board to
monitor the underlying administration expenses of the business in calculating
adjusted EBITDA.
FY 23 FY 22
£'000 £'000
Administration expenses 51,723 41,582
Adjusting items (15,827) (14,382)
Depreciation charge (1,933) (1,155)
Amortisation of capitalised development costs (186) (556)
Adjusted administration expenses 33,777 25,489
Adjusted cash generated from operating activities
Adjusted cash generated from operating activities excludes any
employment-linked acquisition payments and associated social security taxes,
as well as other acquisition costs paid in the 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 23 FY 22
£'000 £'000
Net cash generated from operating activities 30,590 33,507
Employment-linked acquisition payments(16) 1,981 1,848
Acquisition costs 331 683
Adjusted cash generated from operating activities 32,902 36,038
( )
(16) Of the £22.6m total deferred and contingent acquisition payments in the
period as set out in note 7, £1.8m is classified as employment linked and is
included within net cash generated from operating activities in the period.
The associated social security payments of £0.2m are also included within net
cash generated from operating activities
Adjusted cash conversion
Cash conversion is stated as net cash generated from operating activities
expressed as a percentage of operating profit.
Adjusted cash conversion is stated as adjusted cash generated from operating
activities expressed as a percentage of adjusted operating profit.
FY 23 FY 22
Cash conversion 107% 189%
Adjusted cash conversion 74% 112%
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 39.6% (FY 22: 31.3%) for the current period
represents FY 23 net fee income less £6.9m net fee income attributable to
Lionpoint, treated as inorganic as the portion of net fee income preceded the
acquisition anniversary.
Constant currency growth
The Group operates in multiple jurisdictions and generates revenues and
profits in various currencies. Those results are translated on consolidation
at the foreign exchange rates prevailing in that period. These exchange rates
vary from year to year, so the Group presents some of its results on a
"constant currency" basis. This means that the current year's results have
been retranslated using the average exchange rates from the prior year to
allow for comparison of year-on-year results, eliminating the effects of
volatility in exchange rates.
Currency translation had a noticeable impact on both net fee income and gross
profit in the year, as a result of a weakening British pound sterling through
the year against both the US dollar and against the Euro. In the year, British
pound sterling averaged $1.21 (FY 22: $1.37) and €1.16 (FY 22: €1.18).
On a constant currency basis, Group net fee income would be £214.8m which is
growth of 36.1% overall. Similarly, North America net fee income would be
£80.6m and Europe & APAC would be £47.1m which would be growth of 71.7%
and 21.3% respectively.
On a similar basis the Group's gross profit would have been £76.4m and would
have grown 28.7% on a constant currency basis.
4. Taxation
FY 23 FY 22
£'000 £'000
Current tax
In respect of the current year - UK 3,660 2,763
Foreign taxation 8,059 5,321
Adjustment in respect of prior periods (442) (168)
Deferred tax
In respect of the current year - UK (1,995) (2,241)
Foreign taxation (1,380) (671)
Change in tax rate on opening balance 8 1,186
Adjustment in respect of prior periods (100) 180
Total tax expense for the year 7,810 6,370
An increase in the UK corporation tax rate from 19% to 25% (effective 1 April
2023) was substantively enacted during the prior year on 24 May 2021. In FY
24, this change will increase the Group's current tax charge accordingly. The
UK deferred tax balances as disclosed below reflect this substantively enacted
rate.
Movements in deferred tax
1 April 2022 Impact of foreign exchange revaluation Recognised in income Recognised in equity 31 March 2023
£'000 £'000 £'000 £'000 £'000
Accelerated capital allowances 110 - 18 - 128
Short-term timing differences (690) 53 (1,381) - (2,018)
Share options (3,213) - (1,215) (870) (5,298)
Arising on business combinations 7,453 374 (889) - 6,938
Net deferred tax liability / (asset) 3,660 427 (3,467) (870) (250)
Deferred tax assets recognised within these consolidated financial statements
represent the future tax effect of share-based payment charges in respect of
awards that have yet to vest. Deductions in excess of the cumulative
share-based payment charge recognised in the consolidated statement of
comprehensive income are recognised in equity. Other deferred tax assets
recognised primarily relate to timing differences on deductions for tax
purposes and as such there is no restriction on recoverability.
Deferred tax liabilities represent the future tax impact arising from
temporary timing differences between accounting and tax treatments including
from the initial recognition of acquired intangible assets and changes in tax
rates as the liability is settled. The closing deferred tax liability arising
on business combinations reflects the tax effect of these temporary
differences at 31 March 2023.
5. Dividends
FY 23 FY 22
£'000 £'000
Amounts recognised as distributions to equity holders:
Final dividend for the year ended 31 March 2022 of 7.50p (FY 21: 4.85p) per 8,547 5,431
share
Interim dividend for the year ended 31 March 2023 of 3.70p (FY 22: 2.90p) per 4,227 3,247
share
Total dividends paid in the year 12,774 8,678
After the balance sheet date, the Directors proposed a final dividend of
10.50p per ordinary share, totalling approximately £12.4m based on the
estimated eligible shares in issue at the payment date. The proposed final FY
23 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 19 September
2023 to shareholders on the register at close of business on 8 September 2023.
6. Earnings per share and adjusted earnings per share
The Group presents basic and diluted earnings per share ("EPS"), on both a
statutory and adjusted basis. Basic EPS is calculated by dividing the profit
or loss for the year attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year. In the
calculation of diluted EPS the Group applies the treasury share method to
include the impact of potentially dilutive shares arising from the Group's
share option plans.
In order to reconcile to the adjusted profit for the financial year, the same
adjustments as set out in note 3 have been made to the Group's profit for the
financial year. The profits and weighted average number of shares used in the
calculations are set out below:
Note FY 23 FY 22
Basic and diluted EPS
Profit for the financial year used in calculating basic and diluted EPS 17,961 8,512
(£'000)
Weighted average number of ordinary shares in issue ('000) 113,531 110,689
Number of dilutive shares ('000) 7,883 6,748
Weighted average number of ordinary shares, including potentially dilutive 121,414 117,437
shares ('000)
Basic EPS (p) 15.82 7.69
Diluted EPS (p) 14.79 7.25
Adjusted EPS and adjusted diluted EPS
Adjusted profit for the financial year used in calculating adjusted basic and 3 33,229 23,757
diluted EPS (£'000)
Weighted average number of ordinary shares in issue ('000) 113,531 110,689
Number of dilutive shares ('000) 7,883 6,748
Weighted average number of ordinary shares, including potentially dilutive 121,414 117,437
shares ('000)
Adjusted EPS (p) 29.27 21.46
Adjusted diluted EPS (p) 27.37 20.23
7. Acquisition of businesses
Acquisitions in previous years
As part of the acquisition of Lionpoint Holdings, Inc. in FY 22, as well as
Axxsys Ltd and Obsidian Ltd in FY 20, the Group agreed deferred consideration
payments as well as contingent earn-out arrangements which were based on the
financial performance of the respective acquired entities over an agreed
period of time. An update on the activity in the year and the outstanding
balance in relation to each of these acquisitions is provided below.
Lionpoint
In the prior year, the Group acquired 100% of the issued share capital of
Lionpoint Holdings, Inc. ("Lionpoint"), a provider of specialist consultancy
services to the alternative investments industry, on a cash free, debt free
basis.
The maximum payable for the acquisition (over four years) is $90.0m (£63.8m),
to be settled in cash, with the option to settle a portion of the deferred 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, alongside an additional net cash
payment of $2.1m (£1.4m) in relation to completion working capital. A
balancing $0.5m (£0.3m) receivable was held at 31 March 2022.
Deferred consideration of $17.0m (£12.0m) was payable across the first and
second anniversaries of the acquisition and contingent earn-out consideration
up to a maximum of $32.0m (£22.6m) was payable in three instalments across FY
23 to FY 25. The FY 23 to FY 25 earn-out consideration payments are contingent
on Lionpoint meeting certain profitability targets over the earn-out period.
The fair value of future consideration payable recognised on the date of
acquisition was $37.3m (£26.2m), of which $20.6m (£14.5m) related to
contingent consideration and $16.7m (£11.7m) related to deferred
consideration. In the opening consolidated statement of financial position as
at 31 March 2022, the Group held a liability of £33.7m in relation to future
deferred and contingent consideration payable for this acquisition.
Employment-linked acquisition payments are expensed through the consolidated
income statement proportionately until FY 26. During the year, the Group has
expensed £1.7m (FY 22: £2.8m) in relation to these employment-linked
payments.
The deferred and contingent consideration is discounted to fair value.
Discount unwinding is recognised as a finance cost proportionately across the
periods until final payment. During the year, £2.4m (FY 22: £2.0m) of
discount unwinding was expensed as a non-underlying finance cost in relation
to the Lionpoint acquisition consideration.
In FY 23, the Group made payments of £17.3m net of a £0.4m receivable that
was due back from the sellers. Of these payments, £1.5m relates to
employment-linked consideration, and is presented within cash generated from
operating activities, with the remaining £15.8m presented within cash used in
investing activities in the consolidated statement of cash flows.
As consideration for the acquisition of Lionpoint is payable in US dollars,
foreign exchange differences are recognised at each reporting date in relation
to translating these liabilities into British pound sterling. In the period,
the Group recognised a foreign exchange loss of £2.5m in the income statement
arising from acquisition-related currency movements, arising from this
re-translation. However, this loss was mostly offset by a foreign exchange
gain on US dollar cash held by the Group.
Following the strong performance of Lionpoint in FY 23 and reflective of a
healthy pipeline of opportunities, the Group has reassessed the fair value of
the Lionpoint contingent consideration liability at the balance sheet date.
The Group has updated its projections for the remainder of the earn-out period
and has therefore uplifted the total undiscounted expected earn-out payment
from £17.7m to £20.0m, assuming the maximum amount payable. These values are
inclusive of employment-linked amounts. Additionally, at the reporting date,
the Group remeasured the discount rate applied to the expected future
contingent consideration payments from 14.6% to 11.0%, reflecting market
conditions and the risk profile of the Lionpoint business. Accordingly, a fair
value adjustment has been recognised through the Group's consolidated
statement of comprehensive income, which has increased the liability by
£2.3m.
As at 31 March 2023, the Group held a liability of £24.9m (FY 22: £33.7m) in
relation to future deferred and contingent consideration payable for this
acquisition. Of this liability at the balance sheet date, £7.2m (FY 22:
£14.0m) relates to deferred consideration and the remaining £17.7m (FY 22:
£19.7m) relates to contingent consideration. Within these deferred and
contingent consideration liabilities, £2.6m relates to employment-linked
amounts.
Obsidian
As at 31 March 2022, the Obsidian earn-out liability of £1.9m reflected a
balanced assessment of the Directors' best estimate of projected cash flows in
relation to several plausible scenarios. During the year, a lower mutually
agreed position was reached with the original vendors. As a result, a fair
value adjustment of £1.6m has been credited to the Group's consolidated
statement of comprehensive income in the period. A final payment of £0.3m was
made in the year, none of which was employment-linked.
Axxsys
The remaining £5.0m liability due on the acquisition of Axxsys as at 31 March
2022 was paid during the year, of which £0.3m was employment-linked.
The below table summarises the movements in the deferred and contingent
consideration liabilities held at 31 March 2023:
Axxsys Obsidian Lionpoint Total
£'000 £'000 £'000 £'000
Balance as at 1 April 2022 5,000 1,898 33,748 40,646
Employment-linked consideration - - 1,658 1,658
Payments in the year(17) (5,000) (314) (17,315) (22,629)
Amounts receivable deducted from payments in the period - - (350) (350)
Unwinding of discounting - - 2,417 2,417
Fair value adjustment - (1,584) 2,251 667
Foreign exchange loss - - 2,540 2,540
Balance as at 31 March 2023 - - 24,949 24,949
Represented by:
Current - - 16,027 16,027
Non-current - - 8,922 8,922
Balance as at 31 March 2023 - - 24,949 24,949
(17) Payments in the year comprise £1.8m of employment-linked payments
included within cash generated from operating activities in the consolidated
statement of cash flows and £20.8m included in cash used in investing
activities
8. Trade and other receivables
FY 23 FY 22
£'000 £'000
Amounts due within one year:
Trade receivables 26,781 24,182
Less: allowance for expected credit losses (657) (541)
Trade receivables - net 26,124 23,641
Other debtors 1,194 539
Capitalised contract fulfilment costs 1,101 1,548
Prepayments 1,999 1,113
Accrued income 3,710 2,728
Total amounts due within one year 34,128 29,569
Trade receivables are non-interest bearing and generally have a 30- to 60-day
term. Due to their short maturities, the carrying amount of trade and other
receivables is a reasonable approximation of their fair value. Trade
receivables have grown in the year reflecting the overall growth of the Group,
with debtor days reducing to 43 days (FY 22: 55 days).
9. Trade and other payables
Note FY 23
FY 22
£'000 £'000
Trade payables 5,156 5,114
Accruals 29,880 23,898
Deferred income 796 1,865
Social security tax on share options 12 1,669 1,050
Taxation and social security 4,734 2,964
Other creditors 2,277 1,280
Earn-out and deferred consideration 7 16,027 20,500
Total amounts owed within one year 60,539 56,671
Trade payables comprise amounts outstanding for trade purchases and ongoing
costs. The Directors consider that the carrying amount of trade and other
payables is a reasonable approximation of their fair value. The Group's trade
payables payment policy is to provide payment within the agreed terms, which
is generally 30 days from the date of receipt of invoice.
The majority of the accruals balance is the profit share bonus accrual, which
has increased in the year, reflecting the enlarged team size, the strong
performance of the Group and the timing of some payments.
Earn-out and deferred consideration relates to the second deferred and
contingent earn-out payment to be made for the acquisition of Lionpoint. Refer
to note 7 for further detail.
10. Other non-current liabilities
Note FY 23 FY 22
£'000
£'000
Earn-out and deferred consideration 7 8,922 20,146
Deferred income 213 233
Social security tax on share options 12 1,640 1,953
Other non-current liabilities 625 2,768
Total amounts owed after one year 11,400 25,100
Earn-out and deferred consideration relates to future deferred and contingent
earn-out payments to be made for the acquisition of Lionpoint. Given the
passage of time, the second deferred and contingent consideration payments now
fall due within 12 months from the balance sheet date. Refer to note 7 for
further detail.
Other non-current liabilities decreased in the year as the remaining deferred
element of FY 22 bonuses for certain directors and senior management globally
now falls due within 12 months from the reporting date, partially offset by FY
23 bonuses awarded in the year, payable in summer 2024.
11. Called up share capital
FY 23 FY 22
Number Number
Allotted, called up and fully paid 120,509,736 118,707,336
Ordinary 0.075p shares (1 vote per share)
FY 23 FY 22
£ £
Allotted, called up and fully paid 90,382 89,031
Ordinary 0.075p shares (1 vote per share)
Movements in share capital during the year ended 31 March 2023:
£
Balance as at 1 April 2022 89,031
118,707,336 ordinary shares of 0.075p each
Issued shares (i) 1,351
Balance as at 31 March 2023 90,382
120,509,736 ordinary shares of 0.075p each
(i) During the year, a total of 1,800,000 ordinary shares were issued by the
Group, all of which were issued to the employee benefit trust ("EBT") for
future satisfaction of share incentive plans. A further 2,400 ordinary shares
were issued by the Group, to satisfy exercises under the employee incentive
plan (EIP).
Alpha employee benefit trust
The Group held 6,274,380 (FY 22: 6,216,501) 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. The
EBT has waived all dividend and voting rights in respect of these shares.
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. Further, the EBT purchased 266,922 shares in
the year at market value for £1.1m, which was funded by the Group and is
accounted for as a deduction other reserves.
In the year, 2,009,043 shares held in the EBT were utilised for employee share
option exercises.
Treasury shares
The Group held nil (FY 22: 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
directors and senior management. The MIP consists of four parts: part A of
which will enable the granting of enterprise management incentive and non-tax
advantaged options to acquire shares; part B of which will enable the awarding
of JSOPs; part C of which will enable the awarding of restricted stock units
("RSUs") for participants in the US; and part D of which will enable the
awarding of RSUs in France (together the "options").
In prior periods, the majority of options granted to certain directors and
senior management of the Group were subject to the fulfilment of three or more
of the following performance conditions: (a) the Group achieving adjusted EPS
growth of 15.0% or more to trigger a maximum award, or 10.0% to trigger a 66%
award, with a linear application of awards between these levels; (b) the Group
achieving a total shareholder return ("TSR") over three years in excess of the
mean TSR delivered by a peer group of comparable companies; (c) personal
adherence to corporate values and risk policy; and (d) specific business unit
EBITDA, or other personal targets and goals. In FY 21, in response to
COVID-19, options granted were subject to more flexible performance criteria,
including local budget targets and a variety of stretching personal sales or
other targets. In FY 22, the performance conditions of options granted in that
year returned to the previous award criteria.
As disclosed last year, the Remuneration Committee approved performance
conditions for FY 23 awards, which further modified the adjusted EPS growth
range set out above to reflect the growth of the Group since AIM admission.
The criteria for these share incentive awards to certain directors and senior
management of the Group, depending on the individual and their role, include:
(a) the Group achieving adjusted EPS growth of 11.25% or more to trigger a
maximum award, or 7.5% to trigger a 66% award, with a linear application of
awards between these levels; (b) personal adherence to corporate values and
risk policy; and (c) specific business unit EBITDA, or other personal targets
and goals.
Some of these share incentive awards also contain a market condition requiring
the Group to achieve a TSR over three years in excess of the mean TSR
delivered by a peer group of comparable companies.
MIP awards have either nominal or minimal exercise price payable in order to
acquire shares pursuant to options. MIP awards have either three- or four-year
vesting periods from the date of grant and 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. No EIP awards were made in the current or prior
years.
During the year ended 31 March 2023, a total of 3,153,014 share option and
award grants were made to employees and senior management (FY 22: 2,959,429).
The weighted average of the estimated fair values of these options awarded in
the year is £3.14 per share (FY 22: £2.68).
During the year 2,191,024 MIP and EIP awards vested following the satisfaction
of performance conditions. The performance conditions relating to EPS growth
and total shareholder return exceeding a basket of comparable companies over
three years to the vesting date were met in full and the relevant local
regional or individual budgetary performance conditions were met in full or
part. Of these vested awards, 1,853,088 have been exercised, with a further
158,355 awards that vested in previous periods also exercised in the year. Of
these total 2,108,886 options exercised, the Group settled 2,011,443 either
through the issuance of new shares, or shares transferred from the Group's EBT
with a further 97,443 options retained for net tax settlement. The weighted
average share price at the date of these exercises was £4.27.
During the year, 552,467 share options were forfeited under performance
conditions or as a result of leavers before vesting.
Of the 276,306 share options exercisable at the year end, 240,493 share
options vested in the year. The remaining vested award holders have a further
six-year to seven-year period, from the date of vesting, in which to exercise
their vested awards.
Details of the share option awards made are as follows:
FY 23
Number of
share options
Outstanding at the beginning of the year 9,504,379
Granted during the year 3,153,014
Exercised during the year (2,108,886)
Forfeited during the year (552,467)
Expired during the year -
Outstanding at the year end 9,996,040
Exercisable at the year end 276,306
The weighted average exercise price for all options outstanding in both the
current and prior years was nominal. The options outstanding as at 31 March
2023 had a weighted average remaining contractual life of 1.7 years.
During the year ended 31 March 2023, options were granted in July 2022 and
January 2023 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.
The inputs to these models in the period were as follows:
FY 23
Weighted average share price at grant date £3.99
Exercise price Nominal
Volatility 20.10%
Weighted average share option life 4 years
Risk free rate 1.65%
Expected dividend yield 3.00%
Expected volatility was determined by calculating the historical 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 £8.0m (FY 22: £6.2m) in the current
year, comprising £7.0m (FY 22: £4.1m) in relation to equity-settled
share-based payments, and £1.0m (FY 22: £2.1m) relating to relevant social
security taxes. As previously announced, Euan Fraser stepped down from the
role of Chief Executive Officer and from the Board on 31 March 2023 and
remains with the Group as a strategic adviser on a part-time basis. This has
resulted in an acceleration of the share-based payment charge in relation to
Euan's share options, as all employment-linked conditions attached to these
share options have been removed.
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 £0.8m.
The combined carrying value of current and non-current liabilities relating to
social security tax on share options as at 31 March 2023 is £3.3m (FY 22:
£3.0m). A £1.0m charge was recognised in the consolidated statement of
comprehensive income in the year, offset by £0.7m of payments. Assumptions
associated with the calculation of the social security tax liability due on
vesting of share options include an estimation of the forward-looking share
price at the vesting date based on applicable analyst research and applicable
future tax rates. For these purposes, the share price is updated at each
reporting period to reflect historical levels, and is assumed to grow in line
with the estimated future performance of the business. If the estimated future
share price growth assumption were to double, the social security costs in the
period could increase by £0.3m. Were the share price to remain flat the
charge would reduce by £0.3m.
13. Events after the reporting period
Acquisition of Shoreline
On 1 May 2023, the Group reached an agreement to acquire 100% of the issued
share capital of Shoreline Consulting Pty Ltd and Shoreline Consolidated Pty
Ltd (together, "Shoreline"), a boutique consultancy that provides services to
the asset and wealth management industry in APAC, on a cash and debt-free
basis, for AUD 8.0m (£4.2m) initial cash consideration plus a
performance-driven earn-out of up to AUD 5.0m (£2.6m). The initial cash
consideration is payable in instalments, with AUD 4.9m (£2.6m) paid on
completion, and AUD 1.7m (£0.9m) and AUD 1.4m (£0.7m) payable on the first
and second anniversaries of completion respectively. Any contingent earn-out
tranches are payable by July 2025, 2026 and 2027 respectively. The maximum
potential cash consideration payable by the Group pursuant to the acquisition,
assuming full payment of the earn-out, would be AUD 13.0m (£6.8m). The
initial consideration was funded from the Group's cash resources.
Renewal of the Group's revolving credit facility
The Group has one principal bank facility which, as at 31 March 2023,
comprised a £20.0m committed revolving credit facility ("RCF") with Lloyds
Bank.
Subsequent to the year end, the Group has increased the amount of its
committed RCF to £50.0m, with both Lloyds Bank and HSBC, to provide funding
flexibility in line with the Group's growth. The facility tenor now runs until
June 2026.
- END -
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