REG - Alpha Fin. Markets - Interim Results
23/11/2023 07:00
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RNS Number : 3936U Alpha Fin Markets Consulting plc 23 November 2023
23 November 2023
Alpha Financial Markets Consulting plc
("Alpha", the "Company" or the "Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2023
Resilient performance in a more competitive market environment
Alpha Financial Markets Consulting plc (AIM:AFM), a leading global consultancy
to the financial services industry, is pleased to report
its unaudited results for the six months ended 30 September 2023 ("H1
24").
Financial highlights(1)
· Revenue increased by 7.5% to £115.6m (H1 23: £107.6m) and net fee
income(2) increased by 7.2% to £114.8m (H1 23: £107.0m), mostly on an
organic(3) basis. On a constant currency basis net fee income grew by 8.5%
· Gross profit was consistent at £38.4m (H1 23: £38.4m) with a 33.5%
margin(2) (H1 23: 35.9%), reflecting lower average consultant utilisation,
particularly across the summer months, and selective investment in growing the
consultant team, alongside consistent consultant day rates and management of
variable costs
· Adjusted(2) EBITDA was £20.1m (H1 23: £22.5m), with a 17.5% margin
(H1 23: 21.0%) reflecting gross profit and continued cost control across a
larger team
· Adjusted profit before tax was £18.4m (H1 23: £21.3m)
· Adjusted earnings per share was 11.81p (H1 23: 14.09p)
· On a statutory basis, profit before tax was £10.8m (H1 23: £14.2m)
and basic earnings per share was 6.32p (H1 23: 9.10p) after deducting
increased adjusting items, principally relating to acquisition-related costs
· Adjusted cash from operating activities was an outflow of £5.4m (H1
23: inflow of £4.2m), reflecting the normal H1 timing of payments, their
relative size and weighting to first half profitability, and the associated
performance-adjusted bonus accruals in the half. Adjusted cash conversion for
the full year is estimated to be approximately 50%, given the expected H2
weighting of trading
· Robust balance sheet maintained with a net cash balance of £16.1m (31
March 2023: £59.2m) and a largely undrawn £50.0m revolving credit facility,
with the net cash movement reflecting the usual H1 weighting of payments,
including acquisition-related payments
· Maintained interim dividend declared of 3.70p per share (H1 23:
3.70p)
6 months to 6 months to Change
30 Sep 2023 30 Sep 2022
Revenue £115.6m £107.6m 7.5%
Gross profit £38.4m £38.4m −
Adjusted EBITDA £20.1m £22.5m (10.5%)
Adjusted profit before tax £18.4m £21.3m (13.6%)
Profit before tax £10.8m £14.2m (23.6%)
Adjusted EPS 11.81p 14.09p (16.2%)
Basic EPS 6.32p 9.10p (30.5%)
Interim dividend per share 3.70p 3.70p −
Operating highlights
· Continued progress in all Alpha's regions, with net fee income growth
on a constant currency basis, despite a more competitive global consulting
market and longer sales cycle
· Consultant(4) headcount increased by 14.1% from the comparative half
to 1,051 (H1 23: 921). This includes the addition of 38 consultants
organically in the last six months (H1 23: 161), consistent with our selective
hiring approach and committed graduate programme
· Continued strong growth of client relationships, with the number of
clients(5) that the Group has worked with increasing to 971 (H1 23: 787) and
new client wins spanning the Group's global businesses
· Director(6) headcount has increased by 15 in the period to 116,
including promotions, three hires into Alpha's Insurance Consulting business
and six additions from the Shoreline(7) acquisition
· Further strategic progress in the Group's North America business,
which continues to represent a key growth region, adding 23 consultants
including 10 directors in the period
· The Shoreline acquisition consolidates Alpha's APAC presence, with the
integration successfully completed in the first half
Outlook
· As previously noted, the global consulting market has experienced a
more competitive environment with alonger sales cycle in the first half of the
financial year
· Against this backdrop, Alpha's trading has been resilient, growing net
fee income while maintaining consistent consultant day rates, albeit at lower
average utilisation particularly in the summer months
· The current market remains competitive and continues to rebalance
amidst an uncertain macro-economic environment
· Utilisation rates ticked up from summer lows in September and
further in October, closer to target levels. The Group expects this improving
trend to continue through the second half of the year
· The long-term market drivers that underpin demand for Alpha's
services remain strong; the Group enters the second half with good near-term
visibility and a strong and high quality pipeline of new business
opportunities
· Accordingly, the Board continues to expect to deliver full year results
in line with current market expectations
Commenting on the results, Luc Baqué, Chief Executive Officer, said:
"The Group's first half trading has been resilient. As communicated in June
and outlined in our pre-close trading update, we have seen a lengthening sales
cycle and increased competition as a result of overcapacity in the global
consulting market. The current market remains challenging but is progressively
rebalancing. With our unique value proposition and unrivalled consulting team,
we continue to see robust client demand and enter the second half of the year
with a strong pipeline. We remain well positioned for future growth in the
medium to long term, in line with our ambition to double the business again by
2028."
Enquiries:
Alpha Financial Markets Consulting plc +44 (0)20 7796 9300
Luc Baqué (Chief Executive Officer)
John Paton (Chief Financial Officer)
Georgina Sharley (Company Secretary)
Investec Bank plc - Nominated Adviser, Joint Corporate Broker +44 (0)20 7597 4000
Patrick Robb
James Rudd
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 presentation for analysts will be held today at 10:30 a.m. For further
information, please contact Camarco at alphafmc@camarco.co.uk.
A copy of the presentation slides will be available on the company website
(https://alphafmc.com/investors/reports-presentations/
(https://alphafmc.com/investors/reports-presentations/) ) following the
meeting.
About Alpha FMC:
Headquartered in the UK and quoted on the Alternative Investment Market of the
London Stock Exchange, Alpha is a leading global consultancy to the financial
services industry.
Alpha combines highly specialist, sector-focussed management consulting and
technology expertise to support the client transformation lifecycle. It has
over 1,000 consultants globally, operating from 17 client-facing offices(8)
spanning the UK, North America, Europe and APAC.
(1) All financial and operating highlights relate to the period ended 30
September 2023 ("H1 24") and the comparative period ended 30 September 2022
("H1 23") unless otherwise specified
(2) The Group uses alternative performance measures ("APMs") to provide
stakeholders further metrics to aid understanding of the underlying trading
performance of the Group. Margins are expressed as a percentage of net fee
income. Refer to note 3 for further details
(3) Organic net fee income growth excludes Shoreline, acquired during the
period. Refer to note 3 for further information on the Group's APMs
(4) "Consultants" and "headcount" refer to fee-earning consultants at the
period end: employed consultants plus utilised contractors in client-facing
roles. Total increase of 57, of which 19 was through acquisition; where
"organically" refers to growth excluding consultants added through acquisition
(5) Client numbers are cumulative and have been updated to include all client
numbers from acquisition. Total increase of 184, of which 36 was through
acquisition
(6) "Directors" refers to fee-generating directors at the period end. All
director increases are presented as net. Total increase of 15, of which six
was through acquisition; where "organically" refers to growth excluding
directors added through acquisition
(7) "Shoreline" refers to Shoreline Consulting Pty Ltd, Shoreline
Consolidated Pty Ltd and their subsidiaries acquired by Alpha on 1 May 2023
(8) Group uses "office" to refer to office location; that is, if there are
multiple offices in one location, they will be counted as one office
INTERIM REPORT
The start of 2023 marked both 20 years of Alpha and the beginning of a new
chapter for the Group. Having doubled the size of the business ahead of its
November 2024 target, Alpha set out a vision to double the Group's net fee
income again over the next five years, through both organic growth and
selective acquisitions.
As mentioned previously, the Group saw increased competition and a lengthening
sales cycle in H1 as a result of overcapacity in the global consulting market.
We still expect that this will be a short-term feature, while the consulting
market balances supply with overall demand. Against this backdrop, trading in
H1 has been resilient, with consistent sales wins monthly and 7.2% growth in
net fee income compared to the first half of the prior year.
The Group has made good progress across key business areas and continues to
see long-term structural drivers of demand for our services, which have
created tailwinds for Alpha despite the more competitive market. We enter H2
with a strong pipeline of new business opportunities and see positive market
sentiment returning. As outlined in our pre-close trading update in October,
we expect to deliver full year results in line with current market consensus.
Half year review
Despite the more competitive environment, Alpha made headway in all three
areas of its strategic growth agenda during the first half of the year:
scaling up and broadening the client proposition, rolling out the client
proposition globally, and making selective acquisitions.
The Group has continued to expand its client offering, strengthening its
Insurance Consulting business by adding 12 clients and 38 consultants on the
comparative half. Lionpoint is also performing well as we see ongoing demand
for our consulting services in the alternative investments space. Alpha
continues to broaden its geographic reach; in North America, a key strategic
growth region for the Group, headcount has increased by 25 and there were 59
new client wins. Alpha's third growth pillar, selective acquisitions, made its
latest advance with the acquisition of Shoreline, a boutique consultancy that
provides services to the asset and wealth management sector in APAC. This
acquisition cements Alpha's position as the leading consultancy for the asset
and wealth management sector in the region.
Overall, H1 has been a period of selective investment in people, balancing the
need to maintain control over costs while also positioning the Group for
future growth opportunities.
Our financial performance has been resilient over the period, with the Group
continuing to see solid client demand, repeat business and consistent
consultant day rates. Amidst the more competitive backdrop, the Group has
delivered a good increase in net fee income during the period, up 7.2% to
£114.8m (H1 23: £107.0m) on a mostly organic basis, and on a constant
currency basis net fee income has grown by 8.5%.
Adjusted EBITDA was £20.1m (H1 23: £22.5m) and adjusted profit before tax
was £18.4m (H1 23: £21.3m). As outlined in our pre-close trading update,
adjusted EBITDA margin was 17.5%; lower than prior years as a result of
reduced consultant utilisation, which partly reflected quieter summer months,
alongside continued selective investment in our consulting teams, maintenance
of competitive remuneration packages and well controlled costs across our
larger team.
Operational and geographical review
In announcing our ambition to double net fee income over the next five years
we have set out a clear strategy for our growth, with the bulk of that growth
expected to come from currently serviced sectors: asset and wealth management,
alternatives and insurance. We aim to achieve this by continuing our
disciplined expansion strategy, combining both organic growth and selective
bolt-on acquisitions. We have established and are further developing a
multi-boutique model with a strong cross-selling framework, which will enable
us to deliver outstanding client service and maximise revenue opportunities on
a global scale over the long term.
As previously outlined, the global consulting market was more competitive over
the half with a longer sales cycle, and continues to rebalance. Alpha has
navigated through this market backdrop well, growing net fee income; and our
strategy gives us a clear path through this environment. Utilisation rates
ticked up in September from summer lows, and further in October, closer to
target levels, and the Group expects this trend to continue through the second
half of the year. Alpha enters H2 with a strong and high quality pipeline of
new business opportunities.
Alongside our excellent reputation and highly relevant service offering, the
long-term structural drivers that underpin demand for Alpha's services remain
strong. We believe that the Group has potential and scope to continue to grow
and gain market share in all our geographic regions.
Scaling up and rolling out our Insurance Consulting business globally
continues to be one of our growth pillars as we aim to meet our 2028 strategic
target. We are therefore pleased that the Group's offering for the insurance
sector continued to build on its rapid expansion in the previous year. We see
significant market potential in consulting to insurance clients and,
ultimately, believe that our offering could grow to a similar size as Alpha's
Asset & Wealth Management business in the medium to long term.
An important part of growing the insurance offering is ensuring that we have
the right skills and expertise to lead the proposition, hence we are delighted
to have added three directors in the first half. Two of those new directors
added were in the North America insurance market where the Group sees a strong
growth opportunity. In May 2023, Alpha launched a dedicated insurance
offering in the US with the aim of replicating the success of the Insurance
Consulting teams in the UK and France. Reflecting the size of the 70 plus
person Insurance Consulting team in the UK, and our ambition to grow and
diversify further, we also appointed a new Head of Insurance Consulting for
the UK from within the director team.
Our alternatives consulting business, Lionpoint, traded strongly and increased
its footprint as our alternatives proposition resonates with clients globally.
The Lionpoint team has added a further 28 consultants globally, bringing the
total consultant number in Lionpoint to over 290. Several key practices are
being rolled out internationally in line with client demand, such as Fund
Accounting & Operations. Looking forward, we see further scope for
international roll-out and scale-up of the Lionpoint service offerings as the
alternative investments market continues to attract growth in investments
across the private equity, private credit, infrastructure, real estate and
fund of funds segments.
During the period, the Group has continued to win business with both new and
existing clients across all locations. As a Group, we have now worked with
971 clients (H1 23: 787).
Geographic performance in the period can be summarised as follows:
6 months to 6 months to Change
30 Sep 2023 30 Sep 2022
Reported Constant currency Reported Reported Constant currency
Net fee income
UK £45.4m £45.4m £39.8m 14.1% 14.1%
North America £43.8m £45.3m £44.3m (1.1%) 2.1%
Europe & APAC £25.6m £25.4m £22.9m 11.6% 11.0%
Total £114.8m £116.1m £107.0m 7.2% 8.5%
( )
Consultant headcount grew in each geography as follows:
As at As at Change
30 Sep 2023 30 Sep 2022
Consultant headcount
UK 420 350 20.0%
North America 365 340 7.4%
Europe & APAC 266 231 15.2%
Period-end totals 1,051 921 14.1%
All our geographic regions delivered net fee income growth on a constant
currency basis in the first half, mostly organically, driven by resilient
client demand as a result of the ongoing structural drivers that we continue
to experience in all our market segments.
The UK delivered the strongest growth in net fee income across the Group,
producing organic growth rates of 14.1% overall, against the comparative
period. We retain our market-leading reputation and are proud to be supporting
some of the highest profile projects in the UK marketplace. We continue to see
robust client demand in our established practices, with good progress in our
newer Insurance Consulting offering. In line with the growth in net fee
income in the region and selectively investing for future growth, Alpha UK
added 26 consultants in the first half, mainly in the Insurance Consulting
team, including a number of consultant hires committed in the prior half.
Also in the UK region, the Lionpoint alternatives investments team continued
to grow strongly. Alpha's data and product solutions business, Aiviq, also
grew revenue against the comparative period, while building a good pipeline
and improving outlook. We are delighted that Aiviq's proposition has been
recognised with a FinTech Global Wealth Tech "Top 100" award in the half.
In North America, following very strong net fee income growth in excess of 50%
on average over the last three years, the quieter summer months were more
pronounced. This reflects the more competitive environment and longer sales
cycle that we previously indicated. While we saw a flatter half compared to
the very high rates of growth in previous periods, the region continued to
trade consistently, delivering net fee income growth of 2.1% on a constant
currency basis.
The Group's alternative investments consulting business, Lionpoint, continues
to trade strongly in North America. In line with the Group's selective
approach to hiring, reflecting the near-term environment, headcount in North
America increased by 23, including 10 directors to support further the Group's
North America growth opportunity and ambitions. This included the addition of
a new director in the Operations practice in North America, which continues to
be an important client focus within the asset and wealth management sector.
Europe & APAC also delivered a robust performance in the period, with net
fee income increasing by 11.0% on a constant currency basis and 11.6%
overall. Organic growth accounted for over half of this overall growth, with
the acquisition of Shoreline delivering the remainder of the growth. Again,
consistent with our strategy of selective investment and hiring, headcount in
the region increased by 6.9% on an organic basis and by 15.2% overall, taking
into account the 19 consultants joining the Group as part of the Shoreline
acquisition.
Our people
2023 marks 20 years since Alpha was established. Alpha started life as an
asset management consultancy based out of London - it is now a Group of over
1,000 consultants as well as a strong business operations team, with offices
globally and a diversified client base that we support across an array of
specialist services and offerings. Thanks to the efforts of our outstanding
staff, we have established a global reputation for delivering challenging and
complex projects to the highest standards, with quality of work evidenced by
significant repeat business. Our record of attracting and retaining high
calibre employees can be attributed to our highly attractive offering, which
we are constantly reevaluating, as well as our unique and inclusive culture
that places people at the heart of the business.
In the context of a more competitive backdrop, we have been selective in our
hiring this period, prioritising investment in accordance with demand and
opportunity. While we remain cautious in our hiring approach, we are very
excited about the talent we are able to attract and hire. As we continue to
invest in our strategy, we have seen 20.0% headcount growth in the UK, 7.4% in
North America and 15.2% in Europe & APAC on the comparative half, with
much of this team growth added or committed in the second half of the prior
year, and more selective additions this half.
We continue to develop and foster a multi-boutique organisation with an
extremely solid cross-selling framework and culture of collaboration,
consistent with our 2028 growth ambition. To reinforce this further, we have
formalised roles to facilitate this, including four technology lead roles
within our Asset & Wealth Management and Insurance Consulting businesses
(based in the UK and North America) to capitalise on technology opportunities
in the market.
Alpha is committed to developing and fostering early talent, offering a
competitive graduate scheme and development programme for future leaders, and
welcomed a further graduate intake in the period, across all our regions.
Alpha's directors play a vital role in developing this talent and in
instilling our values, whilst ensuring delivery excellence across all client
engagements. Maintaining and growing our director teams subsequently remains a
key long-term priority for us as we look to successfully realise our
ambitions. Over the period we have broadened our global director teams, adding
9 directors organically through a combination of promotions and selective
experienced new hires.
Alpha has achieved so much since it began 20 years ago - and this is thanks to
the incredible talent, unrivalled knowledge and unfailing commitment of our
exceptional people. Our consultants are the best in the financial services
sectors in which we operate and the key driving force behind the success of
the business. The Board and the entire leadership team would like to thank
everyone at Alpha for enabling us to progress this incredible growth story and
we remain very excited to see what opportunities lie ahead.
Growth strategy
The Group kicked off the year with a refreshed ambition to double the size of
Alpha again over the next five years. As outlined in the FY 23 results, the
key pillars that will enable Alpha to achieve this are: further expansion in
asset and wealth management consulting, particularly in North America; the
global scale-up and roll-out of our Insurance Consulting and alternatives
businesses; and making selective acquisitions.
We are pleased with the progress that the Group has made so far, especially in
the more competitive market, and continue to expect that the majority of
growth over the next five years will come from our consulting teams in the
existing asset and wealth management, alternatives and insurance sectors. We
are continuously monitoring for opportunities to diversify and scale up the
consulting and technology practices, and for selective bolt-on acquisitions to
supplement growth.
Although mindful of the current market environment, we continue to believe
that that this market rebalancing will be short lived. The Group performed
resiliently in H1 and enters the second half of the year with a strong
pipeline. The long-term structural drivers that underpin client demand for
Alpha's services remain strong and, therefore, we believe that Alpha's 2028
vision remains both appropriate and achievable.
Acquisitions
The Board recognises that adding further complementary expertise or adding
geographic footprints in existing skill-sets through carefully selected
acquisitions both enhances and strengthens the business proposition and
increases the cross-sell opportunities across the Group.
In May 2023, Alpha announced the acquisition of Shoreline, an APAC-based
boutique consultancy that provides services to asset and wealth management
clients. This acquisition adds a further 19 consultants with a client network
that spans Australia and South-East Asia. The integration of this acquisition
was successfully completed in the first half, making Alpha the leading
consulting firm in the region for the asset and wealth management sector.
We continue to review acquisition opportunities to complement and grow the
Group's service offering to deliver client and shareholder value.
Governance and the Board
The members of Alpha's Board remain committed to the highest standards of
corporate governance and regard business ethics, integrity, and strong
governance as foundational elements in reducing risk and securing long-term
value for shareholders.
The Board understands its crucial role in overseeing and advancing the Group's
ESG efforts. The ESG Committee, which was established by the Board in
recognition of this, held its inaugural meeting in the half, chaired by Jill
May. The Committee's role is to maintain oversight of all facets of Alpha's
corporate ESG agenda, ensuring the Group complies with regulatory
requirements, meets the expectations of its stakeholders, and positions the
Group for long-term, sustainable success.
The Group continues to focus on preparations to start reporting under the
framework set out by the Task Force on Climate-Related Financial Disclosures
("TCFD"), as well as other regulatory requirements such as Gender Pay Gap
Reporting, as the Group increases in scale. Alongside regulatory work, the
Group is concluding its materiality assessment to further understand and
assess stakeholder expectations, and is preparing for initiatives that will
embed and demonstrate progress on this important agenda, including diversity
targets and emissions reduction analysis. We look forward to launching our
first dedicated sustainability report later in the financial year, to provide
further details on these important parts of our strategy.
Having previously used the services of a third-party Company Secretarial
provider, the Board appointed an internal Company Secretary with effect from 7
September 2023. The Board would like to thank Prism CoSec for their excellent
service over the recent years and their role in transitioning responsibilities
to the internal Alpha team.
Financial performance review
6 months to 6 months to Change
30 Sep 2023 30 Sep 2022
Revenue £115.6m £107.6m 7.5%
Net fee income £114.8m £107.0m 7.2%
Gross profit £38.4m £38.4m -
Operating profit £12.0m £15.8m (23.8%)
Adjusted EBITDA £20.1m £22.5m (10.5%)
Adjusted EBITDA margin 17.5% 21.0% (350 bps)
Adjusted profit before tax £18.4m £21.3m (13.6%)
Profit before tax £10.8m £14.2m (23.6%)
Adjusted earnings per share 11.81p 14.09p (16.2%)
Adjusted diluted earnings per share 11.09p 13.23p (16.2%)
Basic earnings per share 6.32p 9.10p (30.5%)
In a more competitive market environment, the Group performed resiliently in
the first half with net fee income up by 7.2% compared to the first half of
the last financial year, and 8.5% on a constant currency basis, mostly
organically. Revenue also grew 7.5%, including increased rechargeable
expenses, compared to the comparative period.
Overall, the Group's revenue and net fee income growth reflects strong ongoing
client demand across a larger consulting team. We were pleased to maintain
consistent consultant day rates overall and sales wins monthly through the
first half, albeit at lower than target average consultant utilisation,
particularly during the summer months. Net fee income grew in all geographic
regions on a constant currency basis, with an inorganic contribution from the
acquisition of Shoreline in the period.
Group gross profit was £38.4m, consistent with the comparative period (H1 23:
£38.4m). Gross profit margin was 33.5% (H1 23: 35.9%). This primarily
reflects reduced average consultant utilisation in the current competitive
market environment, alongside consistent day rates and selective investment in
growing our team while maintaining a competitive remuneration package, partly
offset by reduced variable costs given performance. The Group has added 57
consultants in the last six months (H1 23: 161), including 19 from the
Shoreline acquisition and the majority of the remainder from our committed
graduate intake in September.
The UK delivered the strongest regional growth in net fee income against the
comparative period, growing 14.1% overall, entirely organically. This strong
UK organic performance reflects solid client demand across the full range of
Alpha practices, supported through a larger consulting team, the growth of
which was mostly delivered in the second half of last year. This included
substantial contributions from our established asset and wealth management
capabilities in Investments, Operations and Client & Digital, and our
newer Insurance Consulting and alternatives businesses also delivering strong
growth against the comparative period. Within the UK results, Alpha's data and
product solutions business, Aiviq also grew on the comparative period and
maintains a good pipeline and outlook.
North America net fee income grew by 2.1% on a constant currency basis.
Including the currency movement, North America performed largely consistently
with the prior half, entirely on an organic basis. Alpha's alternatives
business, Lionpoint, continued to perform well in the first half and
contributed significantly to North America net fee income. 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. The consultant team grew modestly in the first half,
maintaining the Group's selective recruitment strategy.
Europe & APAC also delivered another period of good growth. The region
grew net fee income by 11.6% on the comparative period and, on an organic
basis, the region reported 6.7% growth. This growth was delivered across the
region, complemented by the acquisition of Shoreline.
Currency translation had some effect on net fee income and profits during the
first half of the financial year. In the period, the pound sterling averaged
$1.26 (H1 23: $1.23) and €1.16 (H1 23: €1.18), which, with other similar
currency movements, resulted in an unfavourable net currency effect on net fee
income of £1.3m and on gross profit of £0.5m. On a constant currency basis,
North America net fee income growth was 2.1% and Europe & APAC net fee
income growth was 11.0%.
Alpha continues to support clients in some of the largest, most challenging
and interesting projects across the industry. Alpha's revenue is driven by
good client demand in its established practices, as well as progress in newer
areas. Alpha's Insurance Consulting business and the Group's technology
proposition continued to progress against the comparative half, winning a
number of projects both with existing and new client relationships.
Overall, gross profit margin principally reflects reduced average consultant
utilisation, selective investment in growing our team while maintaining a
competitive remuneration package, partly offset by lower variable costs,
alongside consistent consultant day rates overall. North America gross profit
margin was 31.1%, primarily reflecting reduced average consultant utilisation.
The UK gross margin of 35.6% similarly reflects reduced utilisation levels,
particularly in the summer months, and consistent consultant day rates. Europe
& APAC experienced good gross profit growth, with an improved 33.8% margin
reflecting good rates growth relative to costs, partly offset by lower
utilisation.
Adjusted administration expenses, as detailed in note 3, increased by £2.3m
to £18.3m (H1 23: £16.0m) against the comparative period. This increase
reflects investment in the Group's central team in the second half of the last
year and some increases in overall spend to supporting the larger consultant
headcount base, alongside ongoing cost control.
Including the adjusting items, which increased against the comparative half,
administration expenses increased to £26.4m (H1 23: £22.7m) on a statutory
basis. The adjusting items, set out in note 3, increased in the period to
£6.6m (H1 23: £5.7m), reflecting increased acquisition and integration costs
and earn-out and deferred consideration charges, partially offset by lower
intangible asset amortisation and share-based payment charges.
Acquisition and integration costs were £0.2m (H1 23: £nil) as the Shoreline
team was integrated into the Group in the first half of the year. The acquired
intangibles amortisation charge decreased against the comparative period,
reflecting some fully amortised intangibles, partly offset by the newly
acquired Shoreline intangibles. In the first half, the Group recognised an
earn-out and deferred consideration charge of £0.7m (H1 23: credit of
£0.3m), reflecting a return of the charge after a fair value reduction in the
liability held for Obsidian in the prior period. Further details on the
earn-out and deferred consideration charges are set out in note 7.
The share-based payment charge reduced to £3.7m (H1 23: £4.1m), having
updated the input assumptions for current year performance, Alpha's share
price and share option vests in the period. Further details of the share-based
payment charge are set out in notes 3 and 12.
Adjusted EBITDA was £20.1m (H1 23: £22.5m) and adjusted EBITDA margin was
17.5% (H1 23: 21.0%), reflecting consistent gross profit and higher adjusted
administration expenses. Operating profit was £12.0m (H1 23: £15.8m) after
charging increased depreciation and adjusting expenses. Further detail of
these adjusting items is set out in note 3. If no adjustment was made for the
share-based payment charge, adjusted EBITDA for the period would be £16.4m
(H1 23: £18.4m) and adjusted EBITDA margin would be 14.3% (H1 23: 17.2%).
Net finance expenses fell to £1.2m (H1 23: £1.6m), primarily comprising
non-underlying finance expenses relating to acquisition consideration discount
unwinding, which decreased given payments in the period, as set out in note 7.
Adjusted profit before tax was £18.4m (H1 23: £21.3m) after charging
increased depreciation and underlying finance costs, reflecting periodic
revolving credit facility ("RCF") drawings and additional leases. Statutory
pre-tax profit was £10.8m (H1 23: £14.2m) after also charging adjusting
expenses and non-underlying finance expenses.
Taxation charges for the period were £3.6m (H1 23: £3.9m), reflecting
reduced taxable profits, partially offset by the increase of the UK
corporation tax rate from 19% to 25%.
Adjusted earnings per share ("EPS") was 11.81p per share (H1 23: 14.09p) and
adjusted diluted EPS was 11.09p (H1 23: 13.23p), reflecting the adjusted
profit after tax and the increased number of weighted average shares as a
result of share option exercises in the current and prior periods, partly
offset by the Group's purchase of shares into Alpha's employee benefit trust
("EBT"). After including the adjusting items, basic earnings per share was
6.32p (H1 23: 9.10p), while diluted EPS was 5.93p (H1 23: 8.55p), reflecting
the increase in the share options awards outstanding.
Net assets at 30 September 2023 totalled £143.1m (31 March 2023: £149.3m).
This movement principally reflects profits in the period, offset by the
Group's FY 23 final dividend payment and the purchase of the Company's own
shares into the EBT. The Group continues to maintain a strong financial
position.
Net cash from operating activities was an outflow of £7.6m (H1 23: inflow of
£2.2m) and adjusted cash from operating activities was an outflow of £5.4m
(H1 23: inflow of £4.2m). Underlying working capital remains well managed,
with consistent debtor days on the comparative half. The operating cash
outflow in the period reflects the normal timing of profit share payments and
their relative size compared to first half profitability. These profit share
payments include both the payment of FY 23 profit share and the second tranche
of deferred FY 22 payments. The size of these payments alongside the lower
performance-adjusted bonus accruals in the half also results in an increased
movement in working capital in the first half. Adjusted cash conversion is
similarly affected in the half, and for the full year is estimated to be
approximately 50% given the expected weighting of trading in the second half
of the year.
The Group's net cash position was £16.1m as at 30 September 2023 (31 March
2023: £59.2m), reflecting the normal H1 timing of payments, a further £18.6m
of acquisition consideration payments, including £1.7m of employment-linked
amounts, and the payment of the £12.0m FY 23 final dividend in the half.
During the period, the Group also provided £3.8m funding to Alpha's EBT to
purchase 1,033,954 shares at the prevailing market share price. These shares
will be held in the EBT, a discretionary trust, and are intended to be used to
satisfy future exercises of share options by employees, including the
Directors of the Company. Alpha was drawn £10.1m on its RCF at 30 September
2023, to assist with managing currency requirements in the period.
The Board is pleased to declare a maintained interim dividend for FY 24 of
3.70p per share (H1 23: 3.70p), which will be paid on 21 December 2023 to
shareholders on the register at the close of business on 8 December 2023.
Risk management
The Board is encouraged by the Group's resilient trading performance in the
first half, while remaining cognisant of the potential risks and wider
political and macro-economic uncertainties. While it is unclear how these
potential risks will affect the current market conditions, including higher
levels of competition and a longer sales cycle, we see a more positive market
sentiment returning following the summer months. The Group continues to
attract client demand for its services and has a strong pipeline of new
business opportunities.
The Board does not consider that the principal risks and uncertainties differ
from those at 31 March 2023 as detailed on pp 50-53 of the Annual Report &
Accounts 2023. These risks relate to the following areas: people and
resourcing; quality of service; data security; acquisition risk; market
strategy; strategic objectives; macro-economic conditions;
political/regulatory environment; competitors; client concentration; skills
and subject matter expertise; utilisation rates; and cash collection.
The Directors and the senior management team are closely monitoring the
situation in Israel and Gaza as it evolves. Alpha's operational footprint does
not extend to that particular area, and we do not service clients based in
those territories. Currently, the principal risk to Alpha is from a
macro-economic perspective and the possible market impacts; however we
continue to assess the risk of the conflict encompassing wider parts of the
Middle East region.
Outlook
We are pleased by the resilient performance in H1 24 in a more competitive
market environment with a longer sales cycle.
The Group has grown net fee income, while maintaining consistent consultant
day rates and sales wins monthly. We have also continued to make good progress
on a number of our growth pillars - in North America, including our
alternative investments consulting business, Lionpoint, which has traded
strongly; in expanding our Insurance Consulting business against the
comparative half; and in selective acquisitions, with the acquisition of
Shoreline.
While the global consulting market continues to rebalance, a more positive
market sentiment is returning following the summer months. Utilisation rates
ticked up from summer lows in September, and further in October, closer to
target levels. The Group expects this improving trend to continue through the
second half of the year. The structural drivers of growth in the core markets
in which we operate, including increase in assets and insurance policies, cost
pressure, regulation, technology breakthroughs, and changes in client and
societal expectations, remain prevalent and will continue to drive ongoing
demand for Alpha's services. We are very confident in the quality of our
people, which we have continued to reinforce selectively in the period, our
excellent market reputation, and business opportunities to extend the service
offering for our clients further.
We enter the second half with a strong and high quality pipeline of new
business opportunities, alongside improving current trading and utilisation
levels. Accordingly, the Board continues to expect to deliver full year
results in line with current market expectations.
Ken Fry
Luc Baqué
Chairman
Chief Executive Officer
23 November 2023
Responsibility statement
The Directors confirm that, to the best of their knowledge, these interim
condensed consolidated financial statements have been prepared in accordance
with UK-adopted International Accounting Standard (IAS) 34 Interim Financial
Reporting. The Interim Report includes a fair review of the information
required by:
· DTR 4.2.7R of the Disclosure Guidance and Transparency Rules (DTR),
being an indication of important events that have occurred during the first
six months of the financial year and their impact on the interim condensed
consolidated financial statements; and a description of the principal risks
and uncertainties for the remaining six months of the financial year; and
· DTR 4.2.8R of the DTR, being related party transactions that have
taken place in the first six months of the current financial year and that
have materially affected the financial position or the performance of the
Group during that period; and any changes in the related party transactions
described in the last Annual Report that could do so.
This Interim Report contains certain forward-looking statements with respect
to the Group's current targets, expectations and projections about future
performance, anticipated events or trends and other matters that are not
historical facts. These forward-looking statements, which sometimes use words
such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect"
and words of similar meaning, include all matters that are not historical
facts and reflect the Directors' beliefs and expectations and involve a number
of risks, uncertainties and assumptions that could cause actual results and
performance to differ materially from any expected future results or
performance expressed or implied by the forward-looking statement.
Ken Fry
Luc Baqué
Chairman
Chief Executive Officer
23 November 2023
Interim condensed consolidated statement of comprehensive income
For the six months ended 30 September 2023
Unaudited Unaudited
six months ended six months ended
30 Sep 2023 30 Sep 2022
Note £'000 £'000
Continuing operations
Revenue 2 115,623 107,599
Rechargeable expenses 2 (863) (583)
Net fee income(9) 2 114,760 107,016
Cost of sales 2 (76,324) (68,573)
Gross profit 2 38,436 38,443
Administration expenses (26,420) (22,679)
Operating profit 12,016 15,764
Finance income 4 260 65
Finance expense 4 (1,431) (1,630)
Profit before tax 10,845 14,199
Taxation (3,620) (3,922)
Profit for the period 7,225 10,277
Foreign exchange differences on translation of foreign operations 263 9,963
Total other comprehensive income for the period 263 9,963
Total comprehensive income for the period 7,488 20,240
Basic earnings per share (p) 5 6.32 9.10
Diluted earnings per share (p) 5 5.93 8.55
9 Net fee income, adjusted EBITDA and other alternative performance measures
are defined and reconciled in note 3
Interim condensed consolidated statement of financial position
As at 30 September 2023
Unaudited Unaudited Audited
as at
as at
as at
30 Sep 2023
30 Sep 2022
31 Mar 2023
Note £'000 £'000 £'000
Non-current assets
Goodwill 6 106,599 107,310 103,676
Intangible fixed assets 6 27,421 30,936 27,588
Property, plant and equipment 1,121 1,109 1,113
Right-of-use assets 3,674 1,904 4,008
Deferred tax assets 2,424 1,088 3,033
Capitalised contract fulfilment costs 70 119 108
Total non-current assets 141,309 142,466 139,526
Current assets
Trade and other receivables 8 42,381 41,695 34,128
Cash and cash equivalents 26,236 47,764 59,215
Total current assets 68,617 89,459 93,343
Current liabilities
Trade and other payables 9 (42,605) (55,709) (60,539)
Provisions (3,326) (3,433) (3,326)
Corporation tax (1,195) (3,226) (1,321)
Lease liabilities (2,273) (1,072) (2,104)
Interest bearing loans and borrowings (10,150) (7,477) -
Total current liabilities (59,549) (70,917) (67,290)
Net current assets 9,068 18,542 26,053
Non-current liabilities
Deferred tax liabilities (3,065) (3,765) (2,783)
Other non-current liabilities 10 (2,579) (8,357) (11,400)
Lease liabilities (1,637) (941) (2,057)
Total non-current liabilities (7,281) (13,063) (16,240)
Net assets 143,096 147,945 149,339
Equity
Issued share capital 11 92 90 90
Share premium 119,438 119,438 119,438
Foreign exchange reserve 7,255 13,445 6,992
Other reserves 15,537 12,867 17,258
Retained earnings 774 2,105 5,561
Total shareholders' equity 143,096 147,945 149,339
The accompanying notes form part of these interim condensed consolidated
financial statements.
Interim condensed consolidated statement of cash flows
For the six months ended 30 September 2023
Unaudited Unaudited
six months ended six months ended Audited
30 Sep 2023 30 Sep 2022 year ended
31 Mar 2023
Note £'000 £'000 £'000
Cash flows from operating activities:
Profit for the period 7,225 10,277 17,961
Taxation 3,620 3,922 7,810
Finance income 4 (260) (65) (364)
Finance expenses 4 1,431 1,630 3,229
Loss/(profit) from exchange rate movements on cash held 222 (4,764) (2,364)
Depreciation charge 1,474 898 1,933
Loss/(profit) on disposal of fixed assets 12 - (14)
Amortisation of intangible fixed assets 6 2,012 2,507 4,762
Share-based payment charge 12 3,329 3,588 7,023
Decrease in provisions - - (19)
Operating cash flows before movements in working capital 19,065 17,993 39,957
Working capital adjustments:
Increase in trade and other receivables (6,876) (9,065) (3,834)
(Decrease)/increase in trade and other payables (15,793) (676) 7,752
Tax paid (3,974) (6,062) (13,285)
Net cash (used in)/generated from operating activities (7,578) 2,190 30,590
Cash flows from investing activities:
Interest received 260 65 364
Acquisition consideration payments, including deferred and contingent, net of 7 (16,862) (20,716) (20,829)
cash acquired
Purchase of intangible assets - (319) (319)
Purchase of property, plant and equipment, net of disposals (328) (564) (860)
Net cash used in investing activities (16,930) (21,534) (21,644)
Cash flows from financing activities:
Net settlement of vested share options (446) (322) (343)
Purchase of own shares by the EBT (3,843) (1,129) (1,139)
Drawdown of revolving credit facility 10,150 7,477 12,500
Repayment of revolving credit facility - - (12,500)
Interest and bank loan fees (437) (110) (482)
Principal lease liability payments (1,084) (650) (1,315)
Interest on lease liabilities (175) (53) (216)
Dividends paid (12,010) (8,547) (12,774)
Net cash used in financing activities (7,845) (3,334) (16,269)
Net decrease in cash and cash equivalents (32,353) (22,678) (7,323)
Cash and cash equivalents at beginning of the period 59,215 63,516 63,516
Effect of exchange rate movements on cash held (626) 6,926 3,022
Cash and cash equivalents at end of the period 26,236 47,764 59,215
Interim condensed consolidated statement of changes in equity
For the six months ended 30 September 2023
Issued share Share premium Foreign exchange reserve Other reserves Retained earnings Total shareholders' equity
capital
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2022 89 119,438 3,482 9,361 375 132,745
Comprehensive income
Profit for the period - - - - 10,277 10,277
Foreign exchange differences on translation of foreign operations - - 9,963 - - 9,963
Transactions with owners
Shares issued (equity) 1 - - - - 1
Purchase of own shares by the EBT - - - (1,129) - (1,129)
Share-based payment charge - - - 3,588 - 3,588
Net settlement of vested share options - - - (322) - (322)
Current tax recognised in equity - - - 1,180 - 1,180
Deferred tax recognised in equity - - - 189 - 189
Dividends - - - - (8,547) (8,547)
As at 30 September 2022 90 119,438 13,445 12,867 2,105 147,945
Comprehensive income
Profit for the period - - - - 7,684 7,684
Foreign exchange differences on translation of foreign operations - - (6,453) - - (6,453)
Transactions with owners
Shares issued (equity) - - - - (1) (1)
Purchase of own shares by the EBT - - - (10) - (10)
Share-based payment charge - - - 3,435 - 3,435
Net settlement of vested share options - - - (21) - (21)
Current tax recognised in equity - - - 306 - 306
Deferred tax recognised in equity - - - 681 - 681
Dividends - - - - (4,227) (4,227)
As at 31 March 2023 90 119,438 6,992 17,258 5,561 149,339
Comprehensive income
Profit for the period - - - - 7,225 7,225
Foreign exchange differences on translation of foreign operations - - 263 - - 263
Transactions with owners
Shares issued (equity) 2 - - - (2) -
Purchase of own shares by the EBT - - - (3,843) - (3,843)
Share-based payment charge - - - 3,329 - 3,329
Net settlement of vested share options - - - (446) - (446)
Current tax recognised in equity - - - 287 - 287
Deferred tax recognised in equity - - - (1,048) - (1,048)
Dividends - - - - (12,010) (12,010)
As at 30 September 2023 92 119,438 7,255 15,537 774 143,096
Issued share capital
Issued share capital represents the nominal value of share capital subscribed.
Share premium
The share premium account is used to record the aggregate amount or value of
premiums paid when the Company's shares are issued at a premium, net of
associated share issuance costs.
Foreign exchange reserve
The foreign exchange reserve represents exchange differences that arise on
consolidation from the translation of the financial statements of foreign
subsidiaries, including goodwill.
Other reserves
The other reserves represent the cumulative fair value of the IFRS 2
share-based payment charge recognised each year, associated current tax,
deferred tax and net settlement of vested share options, equity-settled
acquisition consideration reserves, and purchases of the Company's own shares
by the employee benefit trust ("EBT").
Retained earnings
The retained earnings reserve represents cumulative net gains and losses
recognised in the consolidated statement of comprehensive income less
dividends paid.
Notes to the interim condensed consolidated financial statements
1. Basis of preparation and significant accounting policies
1.1. General information
The principal activity of the Group is the provision of specialist consulting
and related services to clients in the financial services industry,
principally in the UK, North America, Europe and APAC.
Alpha Financial Markets Consulting plc is incorporated in England and Wales
with registered number 09965297. The Company's registered office is 60 Gresham
Street, London, EC2V 7BB. The Company is a public limited company and is
admitted to trading on the AIM of the London Stock Exchange.
These interim condensed consolidated financial statements were authorised for
issue on 23 November 2023 in accordance with a resolution of the Directors.
1.2. Basis of preparation
These interim financial statements have been prepared in accordance with IAS
34 Interim Financial Reporting and should be read in conjunction with the
Group's most recent annual consolidated financial statements, for the year
ended 31 March 2023. They do not include all of the information required for a
complete set of IFRS financial statements, however selected explanatory notes
are included to explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and performance
since Alpha's Annual Report & Accounts 2023.
The financial information presented for the periods ended 30 September 2023
and 30 September 2022 is unaudited. The financial information for the 12
months to 31 March 2023 is audited.
The presentational currency of these financial statements is pound sterling.
All amounts in these financial statements have been rounded to the nearest
£1,000, unless otherwise stated.
1.3. Statutory accounts
Financial information contained in this document does not constitute statutory
accounts within the meaning of Section 434 of the Companies Act 2006 (the
"Act"). The statutory accounts for the year ended 31 March 2023 have been
filed with the Registrar of Companies. The independent auditor's report on
those statutory accounts was unqualified, did not draw attention to any
matters by way of emphasis and did not contain a statement under Section
498(2) or (3) of the Act.
1.4. Basis of consolidation
These interim condensed financial statements consolidate the interim financial
statements of the Company and its subsidiary undertakings (the "Group") as at
30 September 2023.
Subsidiaries are fully consolidated from the date of acquisition, being the
date on which the Group obtains control, and continue to be consolidated until
the date that such control ceases. The financial statements of subsidiaries
are prepared for the same reporting period as the parent company, using
consistent accounting policies.
All intra-group balances, income and expenses, and unrealised gains and losses
resulting from intra-group transactions are eliminated in full.
1.5. Seasonality of operations
Given the nature of the Group's consulting and related services and the
composition of the Group's customers and contracts, seasonality is generally
not expected to have a significant bearing on the financial performance of the
Group.
1.6. Going concern
The Directors have, at the time of approving these interim condensed
consolidated financial statements, a reasonable expectation that the Group has
adequate resources to continue in operation for a period of at least 12 months
from the approval of these financial statements (the "going concern period").
The Group's forecasts and projections, taking into account plausible changes
in trading performance, show that the Group has sufficient financial
resources, together with assets that are expected to generate cash flow in the
normal course of business.
The ongoing trading performance of the Group has been resilient against the
backdrop of more competitive market conditions with profits considerably ahead
of the "reverse stress test" downside scenario modelled during the Group's FY
23 going concern assessment. This "reverse stress test" scenario has been
extended to cover the going concern period for these interim condensed
consolidated financial statements. The Directors continue to consider this
scenario to be remote as it requires significant revenue reductions compared
to the base case forecast, without assuming any cost mitigants or drawdowns of
the RCF.
The Group maintains a robust balance sheet and liquidity position. At 30
September 2023, the Group held a gross cash position of £26.2m and has access
to a £50.0m RCF providing further liquidity, of which £10.1m was drawn at
the end of the period, to assist with short-term currency and liquidity
requirements. The Group enters the second half well positioned with a strong
and high quality pipeline of new business opportunities, with an expectation
of a return to positive operating cash generation for the full year.
Given the above factors, the Directors consider that it is appropriate to
adopt the going concern basis in preparing these interim condensed
consolidated financial statements.
1.7. Principal accounting policies
Please refer to Alpha's Annual Report & Accounts 2023 for full disclosures
of the principal accounting policies that have been adopted in the preparation
of these interim condensed consolidated financial statements. There have been
no changes to the Group's accounting policies in the period.
1.8. Significant judgements and estimates
The preparation of financial information in accordance with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets,
liabilities, income and expenses.
Key judgements
In the process of applying the Group's accounting policies, the Directors have
made two judgements (excluding those involving estimations), which are
considered to have a significant effect on the interim condensed financial
statements for the period ended 30 September 2023.
Alternative performance measures
To assist in understanding the underlying performance of the Group, management
presents various alternative performance measures ("APMs"), which exclude
certain adjusting items. APMs are provided to allow stakeholders a further
understanding of the underlying trading performance of the Group and to aid
comparability between accounting periods. Management applies judgement to
identify those income or expense items that are deemed to warrant exclusion
from the calculation of the Group's adjusted measures to allow stakeholders a
further understanding of the underlying performance of the business. These
adjusting items have been applied consistently across reporting periods. A
reconciliation to IFRS measures, and explanation of each adjusting item
excluded, is provided in note 3.
All adjusting items are considered individually for exclusion by virtue of
their nature or size. In the period ended 30 September 2023, these items
totalled £6.6m (H1 23: £5.7m) recognised in administration expenses. A
further £0.9m (H1 23: £1.4m) was recognised within finance expenses.
Revenue recognition
Revenue is the Group's most significant caption in the statement of
comprehensive income. Whilst the majority of the Group's revenue is contracted
on a time and materials basis, the Group also has some fixed-price milestone
contracts. The recognition of revenue on such contracts involves consideration
of the detailed contractual terms against the requirements of IFRS 15. The key
judgements include assessment of whether revenue should be recognised over
time or at a point in time, and whether the performance obligations under the
contract have been met at the balance sheet date, to best reflect the transfer
of services through the life of each contract.
Further information regarding the methods used to recognise revenue, for both
time and materials and milestone contracts, is provided in the Group's
accounting policy as detailed on p. 99 within Alpha's Annual Report &
Accounts 2023.
Key estimates
A number of estimates have been made in the preparation of the financial
statements. The underlying assumptions in the Group's estimates are based on
historical experience and various other factors that are deemed to be
reasonable under the circumstances. These assumptions form the basis of
developing estimates of the carrying values of assets and liabilities that are
not apparent from other sources. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to estimates are recognised in the
year in which the estimate is revised and any future years affected. Actual
results can differ from these estimates.
The Directors have identified one area as a key estimate that is considered to
have a significant risk of a material adjustment within the next financial
year.
Share-based payments (note 12)
Management has estimated the share-based payment expense under IFRS 2. In
determining the share-based payment expense and the associated social security
tax thereon, management has considered several internal and external factors
to judge the probability that management and employee share incentives may
vest and to assess the fair value of share options at the date of grant. Such
assumptions involve estimating future performance, share price and other
factors. The fair value calculations have been assessed by a third-party
expert for reasonableness in the current and prior periods. Refer to note 12
for sensitivity analysis.
1.9. New accounting standards and interpretations
In the period ended 30 September 2023, the Group has adopted the following new
accounting standards and amendments to existing accounting standards with no
material impact on the financial statements:
· IFRS 17 Insurance Contracts, effective from 1 January 2023;
· Amendments to IFRS 17, effective from 1 January 2023;
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2), effective from 1 January 2023;
· Definition of Accounting Estimates (Amendments to IAS 8), effective
from 1 January 2023;
· Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12), effective from 1 January 2023;
· International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12)
- Application of the exception and disclosure of that fact, effective from 23
May 2023; and
· International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12)
- other disclosure requirements, effective from 1 January 2023.
Refer to p. 101 of the Group's Annual Report & Accounts 2023 for details
of recently adopted standards and interpretations in the prior year.
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. This allows the Board to evaluate the nature
and financial effects of the business activities of the Group and the economic
environments in which it operates. The Group's operations all consist of one
type: specialist consultancy and related services to the financial services
industry.
The Directors consider that the aggregation of Europe and APAC into a single
operating segment is appropriate on the basis that these territories have
similar economic characteristics, including similar gross margins.
Revenues associated with software licensing arrangements were not significant
in both the current and prior periods. Therefore, the Directors consider that
disaggregating revenue by operating segments is most relevant to depict the
nature, amount, timing and uncertainty of revenue and cash flows as may be
affected by economic factors.
Six months ended 30 Sep 2023 UK North Europe & Total
America APAC
£'000 £'000 £'000 £'000
Revenue 45,515 44,237 25,871 115,623
Rechargeable expenses (140) (423) (300) (863)
Net fee income 45,375 43,814 25,571 114,760
Cost of sales (29,205) (30,186) (16,933) (76,324)
Gross profit 16,170 13,628 8,638 38,436
Margin on net fee income (%)(10) 35.6% 31.1% 33.8% 33.5%
Six months ended 30 Sep 2022 UK North Europe & Total
America APAC
£'000 £'000 £'000 £'000
Revenue 39,912 44,602 23,085 107,599
Rechargeable expenses (128) (279) (176) (583)
Net fee income 39,784 44,323 22,909 107,016
Cost of sales (23,728) (29,026) (15,819) (68,573)
Gross profit 16,056 15,297 7,090 38,443
Margin on net fee income (%)(10) 40.4% 34.5% 30.9% 35.9%
(10) Margin on net fee income is gross profit expressed as a percentage of
net fee income. Please refer to note 3 for further detail
3. 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 to revenue on the face of the consolidated statement of
comprehensive income and by segment in note 2.
Profit margins
Margin on net fee income and adjusted EBITDA margin are calculated using gross
profit and adjusted EBITDA, 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 senior
management and the Board to assess the performance of the Group.
Reconciliation of adjusted profit before tax, adjusted operating profit and
adjusted EBITDA
30 Sep 2023 30 Sep 2022
Note £'000 £'000
Profit before tax 10,845 14,199
Amortisation of acquired intangible assets 6 2,012 2,356
Loss on disposal of fixed assets 12 -
Share-based payment charge 12 3,737 4,091
Earn-out and deferred consideration(11) 7 729 (316)
Acquisition and integration costs 247 -
Foreign exchange gains (106) (463)
Adjusting items 6,631 5,668
Non-underlying finance expenses 4 883 1,383
Adjusted profit before tax 18,359 21,250
Net underlying finance expenses 4 288 182
Adjusted operating profit 18,647 21,432
Depreciation charge 1,474 898
Amortisation of capitalised development costs - 151
Adjusted EBITDA 20,121 22,481
Adjusted EBITDA margin (%) 17.5% 21.0%
(11) The earn-out and deferred consideration charge in the period comprises an
employment-linked consideration charge of £0.7m as set out in note 7, as well
as a small associated social security charge. In the prior period, the credit
comprises a £1.4m fair value adjustment, partly offset by a £1.1m
employment-linked and associated social security charge
Adjusting items
To assist in understanding the underlying performance of the Group and aid
comparability between periods, management applies judgement to exclude certain
expense items from the Group's APMs, which are deemed to warrant separate
disclosure due to either their nature or size. Such adjusting items as
described below are generally non-cash, non-recurring by nature or are
acquisition related.
Amortisation of acquired intangible assets and profit or loss on disposal of
fixed assets are treated as adjusting items to better reflect the underlying
performance of the business, as they are non-cash items, principally relating
to acquisitions.
The Group's share-based payment charge and related social security taxes are
excluded from adjusted profit measures. This allows for better comparability
between periods given the complexity of the assumptions underlying the
calculation and the multi-year effect of mid-cycle changes to these
assumptions being adjusted on a cumulative basis, sometimes resulting in
material fluctuations in the charge between periods that are not reflective of
the underlying operational performance of the business. The charge and related
social security taxes are also subject to external factors, such as the
Group's share price, over which the Directors have less day-to-day influence
compared to other more directly controllable factors. This approach has been
applied consistently across reporting periods. Note 12 sets out further
details of the employee share-based payment charge calculation under IFRS 2.
The Group will continue to assess the status of this charge as an adjusting
item in the Group's financial statements, considering the development of the
charge, the Group and its remuneration policies. If no adjustment was made for
the share-based payment charge, adjusted EBITDA for the period would be
£16.4m (H1 23: £18.4m) and adjusted EBITDA margin would be 14.3% (H1 23:
17.2%).
As per note 7, the acquisitions of Shoreline in the period, and Lionpoint in
FY 22, involved both deferred and contingent payments. Part of these
acquisition payments are dependent on the ongoing employment of certain
members of the respective senior management teams, and this element is
expensed annually over several years until the date of payment. These costs
have been treated as adjusting items as they are acquisition related,
reflecting the acquisition terms rather than Group trading performance.
Additionally, where there is a change to the expected future payments or
discount rates, a fair value adjustment to the liability is recorded in the
income statement. No such fair value adjustments were recognised in the
period. Whilst these acquisition-related costs will recur in the short term
through the earn-out periods, the adjustment allows comparability of
underlying productive output and operating performance across reporting
periods.
Other acquisition and integration costs expensed in the period relate to the
acquisition of Shoreline, including diligence, legal fees and integration
costs. Whilst further similar acquisition and integration costs could be
incurred in the future, these costs are not directly attributable to the
ongoing operational trading performance of the Group, the timing and amount of
such costs may vary and treating these as an adjusting item allows
comparability of the operating performance across reporting periods. There
were no such costs incurred in the comparative period.
The impact of foreign currency volatility in translating local working capital
and cash balances to their relevant functional currencies has been excluded
from the calculation of adjusted profit measures on the basis that such
exchange rate movements do not reflect the underlying trends or operational
performance of the Group. The foreign exchange movements were immaterial in
both the current and prior periods.
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. A nil effective tax rate has been
applied to acquisition-related expenses totalling £1.9m as these items are
treated as capital in nature and are therefore non-deductible for tax
purposes. An overall effective tax rate of 21.9% has been applied to all other
adjusting items totalling £5.7m, reflecting the specific tax rates applicable
to each adjusting item.
30 Sep 2023 30 Sep 2022
£'000 £'000
Adjusted profit before tax 18,359 21,250
Tax charge (3,620) (3,922)
Tax impact of adjusting items (1,237) (1,419)
Adjusted profit after tax 13,502 15,909
Adjusted earnings per share
Adjusted earnings per share ("EPS") is calculated by dividing the adjusted
profit after tax for the period attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the period.
Adjusted diluted EPS is calculated by dividing adjusted profit after tax by
number of shares as above, adjusted for the impact of potentially dilutive
ordinary shares. Potentially dilutive ordinary shares are only treated as
dilutive when their conversion to ordinary shares would decrease EPS (or
increase loss per share). Refer to note 5 for further detail.
30 Sep 2023 30 Sep 2022
Adjusted EPS (p) 11.81 14.09
Adjusted diluted EPS (p) 11.09 13.23
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.
30 Sep 2023 30 Sep 2022
£'000 £'000
Administration expenses 26,420 22,679
Adjusting items (6,631) (5,668)
Depreciation charge (1,474) (898)
Amortisation of capitalised development costs - (151)
Adjusted administration expenses 18,315 15,962
Adjusted cash 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 and integration costs paid in the period, treated
as operating cash flows under IFRS, to reflect the Group's underlying
operating cash flows, exclusive of cash payments relating to acquisitions.
30 Sep 2023 30 Sep 2022
£'000 £'000
Net cash from operating activities (7,578) 2,190
Employment-linked acquisition payments(12) 1,923 1,981
Acquisition and integration costs 247 -
Adjusted cash from operating activities (5,408) 4,171
( )
(12) Employment-linked acquisition payments of £1.9m comprises £1.7m of
acquisition consideration classified as employment-linked and £0.2m of
associated social security payments
Adjusted cash conversion
Cash conversion is stated as net cash generated from operating activities
expressed as a percentage of operating profit.
Adjusted cash conversion is stated as adjusted cash generated from operating
activities expressed as a percentage of adjusted operating profit.
30 Sep 2023 30 Sep 2022
Cash conversion (63.1%) 13.9%
Adjusted cash conversion (29.0%) 19.5%
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 6.2% (H1 23: 45.3%) for the current period
represents H1 24 net fee income less £1.1m net fee income attributable to
Shoreline, treated as inorganic.
Constant currency growth
The Group operates in multiple jurisdictions and generates revenues and
profits in various currencies. Those results are translated on consolidation
at the foreign exchange rates prevailing in that period. These exchange rates
vary from period to period, so the Group presents some of its results on a
"constant currency" basis. This means that the current period's results have
been retranslated using the average exchange rates from the prior period to
allow for comparison of period-on-period results, eliminating the effects of
volatility in exchange rates.
Currency translation had some impact on both net fee income and gross profit
in the period, as a result of a strengthening pound sterling through the
period against the US dollar, partially offset against a slight weakening
against the euro. In the period, pound sterling averaged $1.26 (H1 23: $1.23)
and €1.16 (H1 23: €1.18).
On a constant currency basis, Group net fee income would be £116.1m which is
growth of 8.5% overall. Similarly, North America net fee income would be
£45.3m and Europe & APAC would be £25.4m, which would be growth of 2.1%
and 11.0% respectively.
On a similar basis the Group's gross profit would have been £38.9m and would
have grown 1.1% on a constant currency basis.
4. Finance income and expenses
30 Sep 2023 30 Sep 2022
Note £'000 £'000
Bank interest receivable 260 65
Total finance income 260 65
Interest and fees payable on bank loans (373) (194)
Interest on lease liabilities (175) (53)
Total underlying finance expenses (548) (247)
Non-underlying finance expenses 3 (883) (1,383)
Total finance expenses (1,431) (1,630)
Net underlying finance expenses 3 (288) (182)
Net finance expenses (1,171) (1,565)
The Group holds one principal bank facility comprising a £50.0m committed RCF
with Lloyds and HSBC with a tenor to June 2026. The Group has utilised up to
£17.8m of the facility, drawn down occasionally through the period to meet
short-term currency requirements. As at 30 September 2023, £10.1m of this
facility was drawn down, and the Group is in a net cash position of £16.1m.
The amounts drawn down and repaid within the period have been presented net in
the consolidated statement of cash flows, as the drawings were repaid within
three months in each instance.
5. Earnings per share and adjusted earnings per share
The Group presents basic and diluted earnings per share ("EPS"), on both a
statutory and adjusted basis. Basic EPS is calculated by dividing the profit
or loss for the period attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the period. 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 period, the same
adjustments as set out in note 3 have been made to the Group's profit for the
period. The profits and weighted average number of shares used in the
calculations are set out below:
Note 30 Sep 2023 30 Sep 2022
Basic and diluted EPS
Profit for the period used in calculating basic and diluted EPS (£'000) 7,225 10,277
Weighted average number of ordinary shares in issue ('000) 114,358 112,904
Number of dilutive shares ('000) 7,412 7,310
Weighted average number of ordinary shares, including dilutive shares ('000) 121,770 120,214
Basic EPS (p) 6.32 9.10
Diluted EPS (p) 5.93 8.55
Adjusted EPS and adjusted diluted EPS
Adjusted profit after tax used in calculating adjusted basic and diluted EPS 3 13,502 15,909
(£'000)
Weighted average number of ordinary shares in issue ('000) 114,358 112,904
Number of dilutive shares ('000) 7,412 7,310
Weighted average number of ordinary shares, including dilutive shares ('000) 121,770 120,214
Adjusted EPS (p) 11.81 14.09
Adjusted diluted EPS (p) 11.09 13.23
6. Goodwill and intangible fixed assets
Net book value as at 30 September 2023
Order backlog Customer relationships Intellectual property Trade name Capitalised development costs Total intangible fixed assets Goodwill
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 31 March 2023 - 21,060 786 5,742 - 27,588 103,676
Additions - 1,729 - - - 1,729 2,711
Amortisation charge for the period - (1,573) (141) (298) - (2,012) -
Exchange differences - 92 - 24 - 116 212
As at 30 September 2023 - 21,308 645 5,468 - 27,421 106,599
Net book value as at 30 September 2022
Order backlog Customer relationships Intellectual property Trade name Capitalised development costs Total intangible fixed assets Goodwill
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 31 March 2022 120 23,569 1,247 6,211 186 31,333 100,991
Additions 319 - - - - 319 -
Amortisation charge for the period (294) (1,515) (247) (300) (151) (2,507) -
Exchange differences 40 1,401 - 350 - 1,791 6,319
As at 30 September 2022 185 23,455 1,000 6,261 35 30,936 107,310
Additions in the period of £1.7m customer relationships and £2.7m goodwill
relate to the acquisition by the Group of Shoreline Consulting Pty Ltd,
Shoreline Consolidated Pty Ltd and their subsidiaries, a boutique consultancy
that provides services to the asset and wealth management sector in APAC.
In the context of a more competitive environment and a lengthening sales cycle
in the period, the Group has considered whether there are any indicators of
impairment that would constitute a reason to perform a full impairment
assessment at the balance sheet date. The Directors concluded that despite
this market backdrop, the Group is still well positioned entering the second
half, with a strong and high quality pipeline of new business opportunities.
Further, the Group had a significant level of headroom at the date of the last
annual assessment. Therefore, the Directors consider that no additional
impairment assessment is required at the reporting date.
7. Acquisitions of businesses
Acquisitions in the period
Shoreline
On 1 May 2023, the Group reached an agreement to acquire 100% of the issued
share capital of Shoreline Consulting Pty Ltd and Shoreline Consolidated Pty
Ltd and its subsidiaries (together, "Shoreline"), a boutique consultancy that
provides services to the asset and wealth management sector in APAC, on a cash
free, debt free basis. The Directors consider that the acquisition enables
Alpha to build upon a robust platform within APAC and ensures that the Group
can take advantage of opportunities in that region.
The maximum potential cash consideration payable by the Group pursuant to the
acquisition is AUD 13.0m (£6.8m), allocated between AUD 8.0m (£4.2m)
non-contingent cash consideration and a contingent earn-out structure up to a
maximum of AUD 5.0m (£2.6m), payable in several instalments, falling due on
July 2025, 2026 and 2027, respectively. The non-contingent cash consideration
is also payable in instalments, with AUD 4.9m (£2.6m) paid on completion and
deferred consideration of AUD 1.7m (£0.9m) and AUD 1.4m (£0.7m) payable on
the first and second anniversaries of completion, respectively. Of this
maximum amount payable, AUD 1.2m (£0.6m) is employment linked. The FY 26 to
FY 28 Shoreline earn-out consideration payments are contingent on meeting
certain profitability targets over the earn-out period.
Initial consideration was funded from the Group's cash reserves, with any
remaining deferred and contingent consideration amounts expected to be settled
in cash, with the option to settle a portion of the deferred amounts in the
Group's ordinary shares.
The fair value of consideration recognised on the date of acquisition amounted
to AUD 8.2m (£4.3m), of which AUD 4.5m (£2.3m) relates to initial cash
consideration paid, AUD 0.2m (£0.1m) relates to an additional payable in
relation to completion working capital, AUD 2.4m (£1.3m) relates to deferred
consideration, and AUD 1.1m (£0.6m) relates to contingent consideration.
A summary of the purchase consideration, net assets acquired, identifiable
intangible assets and goodwill is set out below. These fair values are
determined by using established estimation techniques such as income-based
discounted cash flow models.
Book values Fair value adjustments Values on acquisition
£'000 £'000 £'000
Acquiree's net assets at the acquisition date:
Customer relationships - 1,729 1,729
Trade and other receivables 768 - 768
Cash and cash equivalents 92 - 92
Trade and other payables (636) - (636)
Deferred tax asset/(liability) 54 (432) (378)
Net identifiable assets acquired 278 1,297 1,575
Cash consideration relating to business combination 4,286
Goodwill on acquisition (note 6) 2,711
Employment-linked acquisition payments will be expensed through the income
statement proportionately until FY 28. During the period, the Group has
expensed AUD 0.3m (£0.2m) in relation to these employment-linked payments
through the statement of comprehensive income, with AUD 0.1m (£0.1m) paid in
the period.
Deferred and contingent consideration is discounted to fair value. Discount
unwinding is recognised as a finance cost proportionately across the periods
until final payment. During the period, AUD 0.1m (£0.1m) of discount
unwinding was expensed as a non-underlying finance cost in relation to the
Shoreline acquisition consideration.
As at 30 September 2023, a AUD 3.8m (£2.0m) liability is recorded, of which
AUD 1.5m (£0.8m) is current and AUD 2.3m (£1.2m) is non-current.
As consideration for the acquisition of Shoreline is payable in Australian
dollars, foreign exchange gains and losses are recognised at each reporting
date in relation to translating these liabilities into pound sterling. In the
period, the Group recognised a small foreign exchange loss through other
comprehensive income in relation to the re-translation of these liabilities.
Shoreline contributed £1.1m to the Group's revenue and had an immaterial
impact on the Group's profit after tax for the period from the date of
acquisition to the 30 September 2023. If the acquisition of Shoreline had been
completed on 1 April 2023, Group revenues for the period would have been
£115.8m and the Group profits after tax would have been unchanged, without
adjustment to amortisation assumptions.
The Directors consider the undiscounted future contingent consideration
payable in respect of the Shoreline acquisition could reasonably range between
£nil and £2.6m.
Acquisitions in prior periods
Lionpoint
As at 31 March 2023, the Group held a liability of £24.9m in relation to
future deferred and contingent consideration payable for this acquisition.
Employment-linked acquisition payments are expensed through the income
statement proportionately until FY 26. During the period, the Group has
expensed £0.5m in relation to these employment-linked payments.
The deferred and contingent consideration is discounted to fair value.
Discount unwinding is recognised as a finance cost proportionately across the
periods until final payment. During the period, £0.8m of discount unwinding
was expensed as a non-underlying finance cost in relation to the Lionpoint
acquisition consideration.
During the period, the Group made deferred and contingent Lionpoint
acquisition payments totalling £16.3m. Of these payments, £1.7m relates to
employment-linked consideration, and is presented within cash from operating
activities, with the remaining £14.6m presented within cash used in investing
activities in the statement of cash flows.
As consideration for the acquisition of Lionpoint is payable in US dollars,
foreign exchange differences are recognised at each reporting date in relation
to translating these liabilities into pound sterling. In the period, the Group
recognised a foreign exchange gain of £0.2m in the statement of comprehensive
income arising from acquisition-related currency movements in relation to this
re-translation.
As at 30 September 2023, a £9.8m liability is recorded, of which £9.5m is
current and £0.3m is non-current.
The below table summarises the movements in the deferred and contingent
consideration liabilities to 30 September 2023:
Shoreline Lionpoint Total
£'000 £'000 £'000
Balance as at 1 April 2023 - 24,949 24,949
Additions 1,824 - 1,824
Employment-linked consideration 176 525 701
Payments in the period(13) (57) (16,328) (16,385)
Unwinding of discounting 56 827 883
Foreign exchanges losses/(gains) 6 (186) (180)
Balance as at 30 September 2023 2,005 9,787 11,792
Represented by:
Current 813 9,497 10,310
Non-current 1,192 290 1,482
Balance as at 30 September 2023 2,005 9,787 11,792
1(3) Deferred and contingent acquisition payments presented in the table above
includes £1.7m of employment-linked consideration, which is reported in net
cash from operating activities in the consolidated statement of cash flows.
Additionally, acquisition payments reported within cash flows from investing
activities in the consolidated statement of cash flows includes £2.3m paid
upon completion of the acquisition of Shoreline, which is not included in the
table above
As at 30 September 2023, the Group held a liability of £11.8m in relation to
future deferred and contingent consideration payable for acquisitions. Of this
liability at the balance sheet date, £2.2m relates to deferred consideration
and the remaining £9.6m relates to contingent consideration. Within these
deferred and contingent consideration liabilities, £1.6m relates to
employment-linked amounts.
The fair value of acquisition earn-outs is no longer considered to be an area
of significant estimation uncertainty given proximity to and more certainty
around the Lionpoint final earn-out payment. The fair value of the earn-out
liability held in relation of Shoreline is also not considered to have a
material level of estimation uncertainty to the value of the liability held at
30 September 2023.
8. Trade and other receivables
30 Sep 2023 30 Sep 2022 31 Mar 2023
£'000 £'000 £'000
Trade receivables 32,715 31,981 26,124
Other receivables 1,586 927 1,194
Capitalised contract fulfilment costs 1,291 1,725 1,101
Prepayments 3,033 2,105 1,999
Accrued income 3,756 4,957 3,710
Total amounts due within one year 42,381 41,695 34,128
Trade receivables are non-interest bearing and generally have a 30- to 60-day
term. Due to their short maturities, the carrying amount of trade and other
receivables is a reasonable approximation of their fair value.
In assessing the appropriateness of the Group's expected credit loss provision
at 30 September 2023, the Directors have considered the Group's historical
loss rates for each ageing category of receivables in conjunction with other
factors in key Alpha territories. There are no indicators at 30 September 2023
that the profile of risk associated with the Group's receivables is materially
different from that determined through the full assessment performed for the
year ended 31 March 2023. Therefore, the expected credit loss provision has
not changed materially from the provision disclosed in Alpha's Annual Report
& Accounts 2023.
9. Trade and other payables
30 Sep 2023 30 Sep 2022 31 Mar 2023
Note £'000 £'000 £'000
Trade payables 3,891 4,851 5,156
Accruals 16,057 22,800 29,880
Deferred income 648 1,599 796
Social security tax on share options 2,310 1,657 1,669
Taxation and social security 7,007 6,118 4,734
Other payables 2,382 1,821 2,277
Earn-out and deferred consideration 7 10,310 16,863 16,027
Total amounts owed within one year 42,605 55,709 60,539
Trade payables comprise amounts outstanding for trade purchases and ongoing
costs. The Directors consider that the carrying amount of trade and other
payables is a reasonable approximation of their fair value. The Group's trade
payables payment policy is to provide payment within the agreed terms, which
is generally 30 days from the date of receipt of invoice.
The reduction in accruals reflects the normal H1 timing of profit share
payments, including both the payment of FY 23 profit share and the second
tranche of deferred FY 22 payments, partly offset by associated
performance-adjusted bonus accruals in the period.
10. Other non-current liabilities
30 Sep 2023 30 Sep 2022 31 Mar 2023
Note £'000 £'000 £'000
Earn-out and deferred consideration 7 1,482 6,823 8,922
Deferred income 156 204 213
Social security tax on share options 941 1,330 1,640
Other non-current liabilities - - 625
Total amounts owed after one year 2,579 8,357 11,400
Other non-current liabilities fell to £nil in the period (FY 23: £0.6m) as
the remaining deferred element of FY 23 bonuses for certain directors and
senior management globally now falls due within 12 months.
11. Called up share capital
30 Sep 2023 30 Sep 2022 31 Mar 2023
Number Number Number
Allotted, called up and fully paid
Ordinary 0.075p shares (1 vote per share) 122,009,736 120,507,336 120,509,736
30 Sep 2023 30 Sep 2022 31 Mar 2023
£ £ £
Allotted, called up and fully paid
Ordinary 0.075p shares (1 vote per share) 91,507 90,381 90,382
Movements in share capital during the period ended 30 September 2023:
Note £
Balance as at 1 April 2023 90,382
120,509,736 ordinary shares of 0.075p each
Issued shares (i) 1,125
Balance as at 30 September 2023 91,507
122,009,736 ordinary shares of 0.075p each
(i) During the period, a total of 1,500,000 ordinary shares were
issued by the Group, all of which were issued to the employee benefit trust
("EBT") for the satisfaction of future share options awards.
Alpha's Employee Benefit Trust
The Group held 7,627,623 (FY 23: 6,274,380) shares in the EBT comprising
shares held to satisfy share options granted under its joint share ownership
plan ("JSOP") or unallocated ordinary shares to satisfy future share option
vests granted under the Group's other share option plans.
During the period, 1,500,000 ordinary shares were transferred by the Company
to the EBT for potential future satisfaction of share option awards. Further,
the EBT purchased 1,033,954 shares in the period at market value for £3.8m.
In addition, a total of 1,180,711 shares held in the EBT were utilised for
employee share option exercises in the period.
Treasury shares
The Group held nil shares in treasury at 30 September 2023 (FY 23: nil).
Shares with voting rights
The total number of shares with voting rights in the Company at 30 September
2023 was 122,009,736 (FY 23: 120,509,736). The EBT holds 7,627,623 of these
shares as disclosed above, however the EBT has waived all dividend and voting
rights in respect of these shares. Therefore, the number of shares with
exercisable voting rights at the balance sheet date is 114,382,113 (FY 23:
114,235,356).
Dividends
During the period, the Group paid a final dividend in relation to the year
ended 31 March 2023 of 10.50p per ordinary share (H1 23: 7.50p).
The Board has declared an interim FY 24 dividend of 3.70p per share (H1 23:
3.70p).
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 TSR over three years in excess of the mean total shareholder
return ("TSR") delivered by a peer group of comparable companies; (c) personal
adherence to corporate values and risk policy; and (d) specific business unit
EBITDA, or other personal targets and goals. In FY 21, in response to
COVID-19, options granted were subject to more flexible performance criteria,
including local budget targets and a variety of stretching personal sales or
other targets. In FY 22, the performance conditions of options granted in that
year returned to the previous award criteria.
As disclosed in the 2023 Annual Report & Accounts, the Remuneration
Committee approved performance conditions for FY 23 awards, which further
modified the adjusted EPS growth range set out above to reflect the growth of
the Group since AIM admission. The criteria for these share incentive awards
to certain directors and senior management of the Group, depending on the
individual and their role, include: (a) the Group achieving adjusted EPS
growth of 11.25% or more to trigger a maximum award, or 7.5% to trigger a 66%
award, with a linear application of awards between these levels; (b) personal
adherence to corporate values and risk policy; and (c) specific business unit
EBITDA, or other personal targets and goals. These criteria were also applied
to FY 24 awards granted in the period.
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 are usually equity settled.
The Employee Incentive Plan
In addition to the MIP, the Board has previously put in place a medium-term
employee incentive plan ("EIP"). Under the EIP, a broad base of the Group's
employees has been granted share options or share awards over a small number
of shares. The EIP is structured as is most appropriate under the local tax,
legal and regulatory rules in the key jurisdictions and therefore varies
between those jurisdictions. No EIP awards were made in the current or prior
periods.
Movements in the period
During the period, a total of 2,729,582 share option and award grants were
made to employees and senior management (H1 23: 3,138,309). The weighted
average of the estimated fair values of these options awarded in the period is
£3.24 per share (H1 23: £3.11).
During the period, 3,177,545 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, 1,068,471 were exercised, with a
further 2,109,074 vested options remaining outstanding. An additional 216,664
awards that vested in previous periods were also exercised in the period, with
59,642 remaining outstanding at the end of the period. Of the above total
1,285,135 options exercised, the Group settled 1,180,711 either through the
issuance of new shares, or shares transferred from the Group's EBT with a
further 104,424 options retained for net tax settlement. The weighted average
share price at the date of these exercises was £3.83. 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.
During the period, 97,382 share options were forfeited under performance
conditions or as a result of leavers before vesting.
Details of the share option awards made are as follows:
30 Sep 2023
Number of
share options
Outstanding at the beginning of the period 9,996,040
Granted during the period 2,729,582
Exercised during the period (1,285,135)
Forfeited during the period (97,382)
Expired during the period -
Outstanding at the period end 11,343,105
Exercisable at the period end 2,168,716
The weighted average exercise price for all options outstanding in both the
current and prior periods was nominal. The options outstanding as at 30
September 2023 had a weighted average remaining contractual life of 1.5 years.
MIP share options with an external market condition were valued at award using
the Monte Carlo option pricing model. The model simulates a variety of
possible results, across 10,000 iterations for each of the options, by
substituting a range of values for any factor that has inherent uncertainty
over a number of scenarios using a different set of random values from the
probability functions. The model takes any market-based performance conditions
into account and adjusts the fair value of the options based on the likelihood
of meeting the stated vesting conditions.
MIP share options without external market conditions and EIP share options
were valued at award using a Black-Scholes model.
The inputs to these models in the period were as follows:
30 Sep 2023
Weighted average share price at grant date £4.00
Exercise price Nominal
Volatility 26.40%
Weighted average share option life 4 years
Risk-free rate 4.93%
Expected dividend yield 3.00%
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 £3.7m (H1 23: £4.1m) in the current
period, comprising £3.3m (H1 23: £3.6m) in relation to equity settled
share-based payments and £0.4m (H1 23: £0.5m) relating to relevant social
security taxes.
The combined carrying value of current and non-current liabilities relating to
social security tax on share options as at 30 September 2023 is £3.3m (FY 23:
£3.3m). A £0.4m charge was recognised in the consolidated statement of
comprehensive income in the period, offset by £0.4m of payments. Assumptions
associated with the calculation of the social security tax liability due on
vesting of share options include an estimation of the forward-looking share
price at the vesting date based on 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 assumption were to increase by 30%, the
social security costs in the period would increase by £0.4m. Were the share
price assumption to reduce by 30%, the charge would reduce by £0.4m.
If the estimated number of share options expected to forfeit annually were to
decrease by 3%, the share-based payment charge in the period would increase by
£0.7m. If estimated annual forfeits were to increase by 3%, the charge in the
period would reduce by £0.7m.
13. Related party transactions
Related parties, following the definitions within IAS 24, are the Group's
subsidiary companies, members of the Board, key management personnel and their
families, and shareholders who have control or significant influence over the
Group.
The Group considers key management personnel, as defined under IAS 24, to be
the Company's Directors and certain members of the Group's senior management
team that report into the Group Coordination Committee. There were no
transactions within the period in which the Directors had any interest.
Transactions between the Company and its subsidiaries are on an arm's length
basis and have been eliminated on consolidation and are not disclosed in this
note. None of the Group's shareholders are deemed to have control or
significant influence and therefore are not classified as related parties for
the purposes of this note.
-ENDS-
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