TIDMAFM
RNS Number : 9251C
Alpha Fin Markets Consulting plc
24 June 2021
24 June 2021
Alpha Financial Markets Consulting plc
("Alpha", the "Company" or the "Group")
Alpha Financial Markets Consulting plc (AIM:AFM), a leading
global provider of specialist consultancy services to the asset
management, wealth management and insurance industries, is pleased
to report its audited results for the 12 months ended 31 March 2021
(FY 21).
ALPHA DELIVERS A STRONG FINANCIAL PERFORMANCE AND FURTHER
STRATEGIC PROGRESS, BUILDING MOMENTUM INTO THE NEW FINANCIAL
YEAR
Financial Highlights (1)
-- Revenue increased by 7.9% to GBP98.1m (FY 20: GBP90.9m) and
net fee income increased by 10.2% to GBP98.0m (FY 20: GBP88.9m)
-- Gross profit was GBP34.8m (FY 20: GBP34.4m) reflecting
continued investment in our people and the business, alongside
resilient fee rates and good utilisation overall
-- Adjusted (2) EBITDA increased by 7.2% to GBP21.7m (FY 20: GBP20.2m)
-- Adjusted earnings per share increased to 14.91p (FY 20: 14.21p)
-- Profit before tax was GBP9.0m (FY 20: GBP9.3m) with basic
earnings per share at 5.75p (FY 20: 6.11p)
-- Strong adjusted cash conversion of 111% (FY 20: 106%) with
adjusted cash generation from operating activities of GBP22.3m (FY
20: GBP19.9m)
-- Robust balance sheet with a net cash balance as at 31 March
2021 of GBP34.0m (31 March 2020: GBP26.0m)
-- In view of Alpha's performance and cash position at the year
end, the Board is recommending a final dividend of 4.85p (FY 20:
nil)
12 months to 12 months to
31 March 2021 31 March 2020 Change
---------------------------- --------------- --------------- --------
Revenue GBP98.1m GBP90.9m 7.9%
Gross Profit GBP34.8m GBP34.4m 1.2%
Adjusted EBITDA GBP21.7m GBP20.2m 7.2%
Adjusted Profit before Tax GBP19.6m GBP18.6m 5.3%
Profit before Tax GBP9 . 0m GBP9.3m (3.5%)
Adjusted EPS 14.91p 14.21p 4 . 9%
Basic EPS 5.75p 6.11p (5.9%)
Total Dividend per Share 6.95p 2.10p
---------------------------- --------------- --------------- --------
Operating Highlights
-- All the Group's regions performed well and grew in the year
-- Given the backdrop of the global COVID-19 pandemic, the Group
continued to invest in selective, strategic hires throughout the
period:
o Expansion of the Group's revenue-generating director team
through the addition of 11 experienced directors (3) globally
o Fee-earning headcount (4) rose by 2.8% to 448 (FY 20: 436)
-- Following the robust H1 21 results, and strong H2 21
performance, all COVID-19 business protection measures including
hiring restrictions have now been removed
-- Strong client retention and growth in new clients globally;
addition of 58 new client relationships entirely through organic
growth (FY 20: 30). Alpha has worked with 90% of world's top 20
asset managers by AUM
-- Continued expansion of the service offering with creation of
ESG & Responsible Investment practice, meeting a major
strategic need across the industry
-- Progressing the insurance consulting offering through
successful launch of France-based Insurance practice and the
UK-based Pensions & Retail Investments practice both performing
well
-- Successfully completed the acquisition of Lionpoint Holdings,
Inc. ("Lionpoint") after the year end; expanding the Group's
geographic footprint particularly in North America and
strengthening its capabilities for alternatives clients
Outlook
-- The structural growth drivers remain in place and the Group
has made excellent strategic progress including extension of the
service offering into insurance consulting, expansion in North
America and via acquisition
-- The acquisition of Lionpoint, completed after the year end,
materially enhances the Group's service offering and footprint
particularly in North America, and is expected to generate growth
at attractive margins
-- Alpha's diversified, resilient and growing business model,
complemented by strong levels of utilisation and an excellent
global pipeline, support the Board's confidence in the further
growth of the Group
Commenting on the results, Euan Fraser, Global Chief Executive
Officer said:
"We are delighted with the performance of the Group over the
financial year, with the second half of the year creating further
momentum and a very strong pipeline of new business. All the growth
drivers for our business continue to add impetus to our performance
with AUM in the asset and wealth management industry expected to
increase by over 30% by 2025.
Continuing to differentiate ourselves successfully against the
big 6 consulting firms on specialism and quality, the Group has
made further strategic progress, expanding our services, global
footprint and in making our largest acquisition to date. We
launched our strategically important ESG & Responsible
Investment practice and further built out our new insurance
offering. Our recent acquisition of Lionpoint also supplements our
strong growth in North America and will help us achieve our target
of doubling the size of our business within four years.
The heart of our business is our people and I am extremely
grateful to all of my colleagues for adapting to these exceptional
times and continuing to support our clients successfully to the
highest standards, while expanding the business through the year.
We look forward to the future with confidence as the business
continues to grow and we explore new revenue streams."
Enquiries:
+44 (0)20 7796
Alpha Financial Markets Consulting plc 9300
Euan Fraser (Global Chief Executive Officer)
John Paton (Chief Financial Officer)
Investec Bank plc - Nominated Adviser, Joint +44 (0)20 7597
Corporate Broker 4000
Patrick Robb
James Rudd
Harry Hargreaves
+44 (0)20 3207
Berenberg - Joint Corporate Broker 7800
Chris Bowman
Toby Flaux
Alix Mecklenburg-Solodkoff
+44 (0)20 3757
Camarco - Financial PR 4980
Ed Gascoigne-Pees
Candice Adam
Analyst Presentation:
A results presentation will take place at 10:30 a.m. today on
Zoom. Those wishing to attend should contact AlphaFMC@camarco.co.uk
.
A copy of the presentation slides, for those unable to attend,
will be available on the company website at:
https://alphafmc.com/investors/reports-presentations/ .
About Alpha FMC:
Alpha is a leading global provider of specialist consultancy
services to the asset management, wealth management and insurance
industries. With over 550 consultants across 15 offices (5)
spanning the UK, Europe, North America and APAC, Alpha has the
largest dedicated team in the industry. Alpha has provided
consultancy services to over 550 clients, including 90 per cent of
the 20 largest global asset managers by AUM (6) and a range of
other buy-side firms.
(1) Except for "About Alpha FMC", all operational and financial
highlights relate to the period ending 31 March 2021, and do not
take account of Group size and figures following the 21 May 2021
acquisition of Lionpoint Holdings, Inc. ("Lionpoint")
(2) The Group uses alternative performance measures ("APMs") to
provide stakeholders further metrics to aid understanding of the
underlying trading performance of the Group. These measures exclude
non-operational costs including acquisition and integration costs,
earn-out and deferred consideration costs and share-based payment
charges. Refer to note 3 for further details
(3) "Directors" refers to the executive and non-executive
members of the Board; meanwhile, "directors" refers to non-Board
directors within the management teams of the Group
(4) "Consultants" and "headcount" refer to fee-generating
consultants at the year end: employed consultants plus utilised
contractors in client-facing roles
(5) 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
(6) "Top 20" refers to Investment & Pensions Europe, "Top
500 Asset Managers 2021"
Chairman's Report
Introduction
I am pleased to present the Annual Report & Accounts of the
Group for the 12 months to 31 March 2021. This has been a year like
few others, but Alpha responded admirably to the challenges of
COVID-19. The Group has advanced all its strategic objectives,
demonstrated great operational resilience and delivered an
excellent financial outcome in these extraordinary times.
The Alpha Board, supported by the executive team, remains
committed to the Group's strategic aim to be recognised as the
leading global consultancy to the asset management, wealth
management and insurance industries. Alpha pursues this aim by
differentiating itself, through a specialist high-quality service
offering and experienced consulting team, and diversifying its
business, through organic growth and the acquisition of
complementary businesses. The Board believes that the Group has the
correct strategy to deliver profitable growth and ongoing value for
its shareholders.
The Group is well positioned to achieve its growth ambitions by
developing new service offerings, investing in high-performing
people and acquiring complementary businesses. In this regard, we
are delighted to have welcomed Lionpoint to the Alpha Group post
the year end.
Overview of the Financial Year
Alpha has produced strong performances across all of its
geographic regions and continued to expand in North America, which
represents a significant growth opportunity for the Group. Alpha
has also progressed another key growth project: its roadmap to move
into the adjacent insurance industry. The Pensions & Retail
Investments ("P&RI") practice in the UK and the newly launched
Insurance practice in France are both gaining good traction and
demonstrate the rapid progress that Alpha is making on its
strategic growth objectives.
The Group was also delighted to announce the successful
expansion of its service offering with the launch of the new ESG
(Environmental, Social, Governance) & Responsible Investment
practice. ESG is a topic of great strategic importance for Alpha's
clients and therefore a crucial element of the Group's service
proposition, building on its acknowledged expertise in
organisational transformation and regulation.
Following the onset of the COVID-19 pandemic during early 2020,
Alpha took pre-emptive action to preserve financial flexibility.
The Board(7) , senior leadership and broader director(8) team took
temporary salary sacrifices, employee profit share payments were
deferred, the final dividend for the year to 31 March 2020 was
cancelled and recruitment was confined to selective strategic
hires.
However, thanks to the professionalism of Alpha's teams in
maintaining momentum while transitioning to and successfully
sustaining remote working, the Group continued to progress and
deliver against its objectives. Its financial performance
strengthened throughout the year, producing results at the higher
end of market expectations. The Board was pleased to reinstate the
Group's dividend during the year, with the payment of the interim
dividend in December 2020, and the precautionary financial measures
in response to COVID-19 have now been withdrawn. The temporary
salary sacrifices taken by the Board, directors and senior
leadership team ended on 30 September 2020 as planned and have now
been repaid in full, after the year end. The formal departure of
the UK from the European Union at the end of 2020 passed with no
material impact on the Group, removing a degree of uncertainty from
the market.
The Group has achieved annual revenue growth of 7.9% on the
previous financial year to GBP98.1m. I am also pleased to report
the Group's highest ever adjusted EBITDA of GBP21.7m (FY 20:
GBP20.2m) and growth in adjusted earnings per share of 4.9% to
14.91p. Basic earnings per share was 5.75p, after increased
adjusting costs as set out in note 3 of the notes to the
consolidated financial statements.
Governance and the Board
The Group is well served by a robust corporate governance
framework, which it continues to develop to ensure that it
appropriately safeguards the interests of shareholders, employees,
clients and wider stakeholders. The Board is committed to upholding
very high standards of corporate governance and ethical behaviour,
which it regards as key to reducing risk and securing long-term
value for shareholders and stakeholders. Its members bring
extensive knowledge of the asset and wealth management industry
coupled with substantial leadership experience to their roles.
As announced at the 2020 Annual General Meeting, Nick Kent
stepped down from the Board with effect from 1 September 2020. Nick
founded Alpha in 2003 and led the Group as Chief Executive Officer
through its first decade of growth before becoming a Non-Executive
Director in 2013. The Board is extremely grateful to Nick for his
contributions to Alpha's success over the past 18 years and is
pleased that he will continue to support its work as an
adviser.
As part of our commitment to review and evolve the Board's
governance framework, including enhancing its independence, in July
2020 we welcomed Jill May to the Board as an additional
Non-Executive Director. Jill has significant experience of
financial services, regulation and public company governance and,
on her appointment, also joined the Audit and Risk, Remuneration
and Nomination Committees of the Board.
The Group is committed to achieving high levels of transparency
on ESG and sustainability issues, building on the ESG metrics first
disclosed in last year's Annual Report. It will continue to develop
its reporting in these areas in line both with mandatory disclosure
frameworks, such as the forthcoming requirements set out by the
Taskforce on Climate-Related Financial Disclosures, and with our
own determination to provide the most appropriate and helpful
non-financial metrics. In making all such disclosures, the Group's
intention is to enhance understanding of Alpha's approach to risk
management and to demonstrate that it is a business capable of
generating sustainable, long-term growth.
Finally, in January we were pleased to announce the appointment
of Investec Bank plc as Nominated Adviser in addition to its role
as joint broker alongside Berenberg.
Strategy
Alpha's goal is to be the leading global asset, wealth
management and insurance consultancy. The Board's strategy for
achieving this has two main axes: geographic expansion to provide
local support for clients all over the world, and the transfer of
our teams' industry-leading expertise and our strong client
relationships into complementary business areas. Within this
context, the Group is starting to capitalise on the huge
opportunity and make good progress in the North America market.
Relevant to the roll-out of the business model into different
service lines, the Group now has a clear roadmap to achieve growth
within insurance consulting, which is an adjacent industry with
enormous potential to accelerate Alpha's expansion over the next
few years, initially within the UK and Europe through its newly
established business practices.
Although organic growth, by hiring and developing the world's
strongest team of industry specialists, is the central plank of our
strategy, Alpha has already demonstrated its capability to expand
in strategically important areas through acquisition. Obsidian and
Axxsys, acquired during the previous financial year, have
significantly strengthened our offering in data solutions and asset
management technology consulting, respectively. Further strategic
acquisitions remain on the growth agenda.
Alpha will not reduce its efforts to hire the most talented
consultants with highly attractive incentive packages and a working
environment that is based on good communication, effective support
for employees' wellbeing and a spirit of close collaboration. The
Group recognises the importance of developing an active diversity
and inclusion agenda and managing environmental, social and
governance issues appropriately. It continues to develop and refine
its approach to these topics.
Dividend
In view of Alpha's strengthening performance through the past
year and its good cash position at the year end, the Board is
recommending a final dividend of 4.85p per share, bringing the
total for the year to 6.95p (FY 20: 2.10p). Subject to shareholder
approval at the Annual General Meeting ("AGM") to be held on 23
September 2021, the final dividend will be paid on 30 September
2021 to shareholders on the register at close of business on 17
September 2021.
Outlook
It is still unclear how much longer COVID-19 will continue to
affect our daily lives. However, Alpha's performance over the past
year has demonstrated that it is flexible and resilient enough to
thrive, even in the face of extraordinary challenges. The Group has
made excellent progress against all its strategic growth
objectives, including having acquired Lionpoint following the year
end, which marks a significant milestone in Alpha's growth
journey.
The Group enters the current financial year in robust health
with substantially increased cash resources, strong levels of
utilisation across the teams and an excellent pipeline of new
business opportunities under discussion. The long-term industry
trends that fuel Alpha's growth - cost pressures, regulatory change
and increasing assets under management - remain in place. We
therefore look to the future with confidence.
My thanks go to my fellow Directors, Alpha's management team and
all employees for their outstanding professionalism and teamwork.
Together, they have guided the Group through testing times to its
current position of strength.
Ken Fry
Chairman
24 June 2021
(7) "Alpha Board" is the Alpha Board of Directors, also referred
to as the "Board of Directors", the "Board" and the "Directors"
(8) "Directors" refers to the executive and non-executive
members of the Board; meanwhile "directors" refers to non-Board
directors within the management teams of the Group
Global Chief Executive Officer's Report
Introduction
Welcome to Alpha's fourth set of full-year results as a public
company. I am delighted to report that we ended a year of huge
challenge and uncertainty with strong revenue and adjusted EBITDA
growth, an excellent business pipeline and key strategic
initiatives progressing well. We have demonstrated outstanding
resilience and the foundations are now clearly in place to achieve
our medium-term goal: doubling the size of the Group within the
next four years.
Alpha has enjoyed many successes over the last year but what
stands out most is the dedication and commitment of our people.
Their performance under extremely testing conditions has been
exemplary. Thanks to their efforts, Alpha was able to adapt quickly
to the changing situation and serve our clients with the same
diligence and flair as ever. This has allowed us to report strong
revenue and adjusted EBITDA growth.
The Group has also made significant strategic progress including
our continued extension into the insurance consulting market and
the launch of our strategically important ESG & Responsible
Investment practice.
COVID-19
The pandemic has tested the culture and values of every company.
Responding to it forced us to take difficult decisions but, in
doing so, I believe that we remained true to Alpha's values. We
communicated clearly and regularly with our teams and ensured that
everyone shared in the sacrifices that had to be made, whilst still
recognising excellence and prioritising growth. We continued to
promote people and make selective, strategic hires. The Board and
senior leadership team all took a temporary salary reduction of
40%, and our broader director team a reduction of 20%. We also
postponed payment of the profit share scheme for FY 20 until the
outlook had stabilised, and we cancelled the final dividend for FY
20.
These pre-emptive measures conserved cash while we monitored
closely the macro environment and its impact on the business. By
the end of the first half of the financial year, we were
comfortable with the resilient business performance and our success
in winning new work without significant cuts to our rates, which
enabled us to reverse those measures progressively. We paid the
delayed profit share in November 2020 and, as a final step, after
the year end, we paid back the salary sacrifice that our Board,
senior leadership and broader director team had made.
The past year has been exceptionally tough, but it has also
brought into sharp focus the qualities that I believe make Alpha so
successful. The business that we have built over the past 18 years
maintained its unbroken record of growth through the toughest of
circumstances, delivering some of the most complex and demanding
projects in the market as effectively as ever.
Summary of Financial Performance
Alpha's success in transitioning seamlessly to remote working,
our teams' strong utilisation rates and our significant new
business wins have together delivered excellent financial results.
Globally, we won 58 new clients during the year entirely from
organic growth (FY 20: 30). Group net fee income increased by 10.2%
to GBP98.0m (FY 20: GBP88.9m), adjusted EBITDA by 7.2% to GBP21.7m
(FY 20: GBP20.2m) and adjusted profit before tax by 5.3% to
GBP19.6m (FY 20: GBP18.6m). We ended the year with net cash of
GBP34.0m (FY 20: GBP26.0m).
Both pillars of our growth strategy - expanding our service
offering and growing in key regional markets - are delivering well.
We are seeing good traction for our new service lines, the latest
being our ESG & Responsible Investment practice, and our entry
into the adjacent market for insurance consulting is going well,
with our France-based Insurance and UK-based Pensions & Retail
Investments practices making excellent progress. We continued to
hire across both teams during the year to strengthen their
propositions. Our regional growth strategy is also firmly on track,
with another strong year of growth in North America delivered. Over
the past year, the two strategic acquisitions that we completed in
FY 20 have been fully integrated, with the Axxsys business making a
particularly strong contribution to the Group.
Given the Group's resilient performance, we were pleased to
reinstate the dividend at the interim stage and are proposing a
final dividend for FY 21 of 4.85p (FY 20: nil), giving a total of
6.95p for this year (FY 20: 2.10p).
Operational Review
The Group has seen consistent demand for its services throughout
the past year, with little sign that the pandemic has affected our
clients' need for our specialist expertise and consulting support.
The launch of our ESG & Responsible Investment practice is a
significant step forward and addresses an area of huge long-term
importance for asset managers, wealth managers and asset owners .
The ESG & Responsible Investment team is working on multiple
projects with a strong pipeline of business under discussion.
Similarly, we can already see that our move into insurance
consulting is progressing well, confirming our belief that there is
a major long-term opportunity for the Group in consulting to the
insurance industry.
Among our established practices, Distribution, M&A
Integration and Operations & Outsourcing continue to perform
well in all our key regional markets. Newer practices including
Digital and Regulatory Compliance & Risk (9) are showing good
growth. Across the business, we were able to agree new projects
with resilient consultant fee rates overall and improving margin
performance towards the end of the period give us confidence for FY
22 and beyond, as the market continues to normalise.
Alpha's progress during the year is testament both to our
leading position in the market and to the long-term structural
drivers of demand for our services: reducing asset management fees
leading to universal cost pressures, new regulation and growing
assets under management. These factors are forcing asset and wealth
managers to optimise their technology and processes, consider
outsourcing back and middle-office activities, and invest in
technology to derive greater value and efficiency from the data
they hold. This all constitutes a strong tailwind for Alpha,
including our expanded technology consulting and data products and
services activities, which we augmented in the previous year with
the acquisitions of Axxsys and Obsidian.
Sustainability is a topic of huge importance for Alpha and, as
we grow, it becomes increasingly important for us to assess and
disclose how it informs the way in which we plan and operate. Our
overriding objective is to ensure that our business model is
sustainable in the long term and we therefore continue to develop
our ESG approach, building on the formal disclosure framework that
we outlined in our 2020 Annual Report.
We have learned that, alongside the significant challenges,
there are advantages in remote working, both for our people, who
can manage their working day more flexibly, and for our clients,
who can draw on our global talent pool to address their needs. We
are therefore reflecting more broadly on the lessons of the past
year and how we can use them to improve the way the Group operates
in future.
Geographic Overview
Alpha's global footprint allows us to support clients all over
the world as well as to deliver programmes covering multiple
territories for our largest and most international clients. Our
regional financial performance for the past year demonstrates the
strength of demand that we have seen in all parts of the world.
12 months 12 months
to to Change
31 March 2021 31 March 2020
----------------- ---------------- ---------------- --------
Net Fee Income
UK GBP53.5m GBP50.5m 5.7%
North America GBP16.5m GBP14.4m 14.4%
Europe & Asia GBP28.0m GBP24.0m 16.9%
----------------- ---------------- ---------------- --------
Year-end totals GBP98.0m GBP88.9m 10.2%
----------------- ---------------- ---------------- --------
12 months 12 months
to to Change
31 March 2021 31 March 2020
----------------- ---------------- ---------------- --------
Gross Profit
UK GBP21.4m GBP22.2m (4.0%)
North America GBP4.4m GBP4.8m (6.1%)
Europe & Asia GBP9.0m GBP7.4m 21.6%
----------------- ---------------- ---------------- --------
Year-end totals GBP34.8m GBP34.4m 1.2%
----------------- ---------------- ---------------- --------
As at As at
31 March 2021 31 March 2020 Change
---------------------- --------------- --------------- --------
Consultant Headcount
UK 223 217 2.8%
North America 78 68 14.7%
Europe & Asia 147 151 (2.6%)
---------------------- --------------- --------------- --------
Year-end totals 448 436 2.8%
---------------------- --------------- --------------- --------
The UK remains Alpha's largest territory and delivered a strong
performance. Net fee income increased 5.7% year-on-year thanks to
our success in winning new business at solid rates. We saw strong
contributions from our M&A Integration, Distribution and
Operations & Outsourcing practices, and continued good levels
of demand for Axxsys's technology-focussed consulting services.
Against a challenging backdrop, Alpha's excellent reputation in the
UK market worked strongly to our advantage and we remain very
confident about the strength of our service proposition for
clients, particularly as we continue to expand and differentiate
according to client demand. COVID-19 has proved a more challenging
backdrop with longer sales cycles for Alpha Data Solutions ("ADS"),
but the business goes into the new financial year with a good
pipeline and new project wins.
North America again delivered strong growth, with net fee income
up 14.4%. As well as adding a number of new domestic clients in the
region, we have continued to build on recently created client
relationships and are delivering large-scale projects. This serves
to demonstrate the relevance and strong appeal of our service
offering there. We have continued to invest in growing the Alpha
team accordingly, to capitalise on the opportunity and demand that
we see, as Alpha North America reports the strongest headcount
increase in the Group. Our growth in North America has also been
recognised by Forbes, who identified Alpha as one of "America's
Best Management Consulting Firms" in 2021. We see the huge scale of
the opportunity for Alpha in the world's biggest asset management
market and we are making good progress in building relationships
with the largest asset managers there.
Our teams in Europe and Asia delivered 16.9% net fee income
growth for the year. Europe saw a resilient performance in the
first half of FY 21 and this market returned to strong growth in
the second half of the year. We see good long-term growth prospects
for Alpha in the Nordic countries and Central Europe and will
continue to build our presence in these markets. We added four
directors to our team in Europe during the year, three in our asset
and wealth management practices and one new Axxsys Europe director
who has also been appointed Chief Innovation Officer for Axxsys. In
Asia, Alpha enjoyed a period of rapid growth, with a number of
large projects delivered for clients in Singapore and APAC more
widely, and a healthy new business pipeline for the current
year.
Our People
Alpha's people are the secret of our success and I am especially
proud of their performance during the past year, when they have had
to face personal difficulties while continuing to deliver
high-profile, complex projects for our clients. Their exceptional
professionalism and commitment are the key reason why Alpha has
delivered such robust results this year and why it enjoys a very
strong reputation in all its markets.
Although it was smoothly executed, the transition to remote
working, without the opportunity to bring our teams together for
much of the year, created additional pressures for everyone as they
tried to balance professional commitments with the demands of their
personal lives. We designed a framework to support our teams based
on feedback from employees across the Group. This addressed three
main streams of work: wellbeing - to inspire, motivate and support
Alpha's people; productivity - to optimise remote working practices
and collaboration; and technology - to ensure a continuous
operational framework and effective remote technology solutions. It
has been critical to recognise that there has been a wide range of
reactions to remote working among our people and that individuals
need varying levels of support to help them manage the transition.
I believe the efforts we have made in this regard demonstrate the
best aspects of Alpha's culture and we continue to evolve this
framework to ensure that we remain as connected and supportive as
we can be.
We slowed external hiring during the first half of the year to
focus on selective strategic hiring only, while we took steps to
put the business on the strongest possible footing. We expanded our
team of revenue-generating directors by 11 during the year (FY 20:
13), through promotions and selective hires. By the end of March
2021, our global headcount increased to 448 (March 2020: 436) and
we have returned recruitment overall to a more normal pace.
Hiring and motivating the most talented people is fundamental to
our long-term success, which is why we felt that it was crucial to
carry on promoting high-performing people even when conditions for
our business were at their most uncertain. Our highly skilled,
hugely committed global teams allow us to deliver unrivalled
outcomes for our clients, which in turn drives client loyalty and
repeat business. In practice, this means that we constantly assess
how we best support and develop our exceptional group of
consultants and, in addition, we regularly review the Group's
highly competitive proposition for attracting and retaining the
very best consulting talent.
Alpha's unique culture and quality have always been an important
part of how we attract and retain the best candidates. We are
delighted that this strong culture and offering has been recognised
globally, for example by earning us a place in the 100 Best Large
Companies to Work For (UK) list 2021.
Growth Strategy and Acquisitions
Alpha's aim is to be recognised as the leading global
consultancy to the asset management, wealth management and
insurance industries, and we pursue both organic and inorganic
growth in delivery of this goal. Our strategy is both to increase
the range of services that we offer, most recently by adding our
ESG & Responsible Investment practice and building our
expertise in insurance consulting, and to expand our global
presence, particularly in North America.
Our growth during the past year has been almost entirely
organic, although it was significantly strengthened by the two
acquisitions - Axxsys in technology consulting and Obsidian in data
products and services - that we completed in the year to 31 March
2020. In both cases, the new businesses brought us valuable local
introductions and cross-selling opportunities in the markets where
they operate, as well as adding services that have enhanced Alpha's
client proposition overall. The integration of Axxsys has brought a
strong technology-led consulting offering to the Group's core
functions and incorporated a strong pension client base, in
particular extending our expertise in SimCorp software and
investment management platforms. Obsidian has added a highly
complementary software development and product expertise within the
ADS team, while providing increased exposure to alternative
assets.
Acquisitions remain a key part of the Group's growth strategy
and we will continue to monitor opportunities that will strengthen
Alpha in key growth segments, including data and product businesses
and technology consulting firms that will broaden the Group's
service offering.
We were delighted to announce the acquisition of Lionpoint in
May 2021, which marks another significant milestone in Alpha's
growth strategy. It represents a very strong strategic addition
into the alternatives investment market and North America
footprint. I look forward to working with Nick Moore, Jonathan
Balkin and the wider Lionpoint team, and we are excited about the
opportunity to grow the consolidated business together.
Current Trading and Outlook
The Group has emerged from the most testing year in our history
firing on all cylinders. Our financial results for the year to 31
March 2021 demonstrate the resilience of our business model and the
quality of our people. We are seeing strong demand for our services
in all regions and have an excellent pipeline of new business under
discussion.
The results that we have achieved and the good progress that we
are making in the areas of our business that are targeted for
strategic growth - our developing insurance consulting capability
and our North American presence - show that we have successfully
put in place the foundations for a further significant expansion of
the Group. Our business enjoyed growing momentum through the second
half of FY 21 and that has continued into the early part of the new
financial year. All of these factors increase our confidence that
Alpha can double in size within the next four years.
Finally, I would like to join with Ken in thanking all our
people for their fabulous efforts over the past year. They have
delivered consistently outstanding work and their team spirit and
professionalism has been second to none, and we are very proud to
have the best consulting team in the industry.
Euan Fraser
Global Chief Executive Officer
24 June 2021
(9) Updated from Regulatory Compliance practice to Regulatory
Compliance & Risk in the period to reflect better the range of
projects and services delivered for clients and the breadth of
subject matter expertise across the Alpha team
Chief Financial Officer's Report
Group Results
I am very pleased to report that Alpha has delivered another
year of good growth, demonstrating the resilience of Alpha's
quality proposition, against a backdrop of global macro
uncertainty.
12 months 12 months
to to Change
31 March 2021 31 March 2020
------------------------ --------------- --------------- --------
Revenue GBP98.1m GBP90.9m 7.9%
Net Fee Income GBP98.0m GBP88.9m 10.2%
Gross Profit GBP34.8m GBP34.4m 1.2%
Operating Profit GBP10.2m GBP10.4m (2.4%)
Adjusted EBITDA GBP21.7m GBP20.2m 7.2%
Adjusted EBITDA Margin 22.2% 22.8% (2.7%)
Adjusted Profit before
Tax GBP19.6m GBP18.6m 5.3%
Profit before Tax GBP9.0m GBP9.3m (3.5%)
Adjusted EPS 14.91p 14.21p 4.9%
Adjusted Diluted EPS 14.26p 13.62p 4.7%
Basic EPS 5.75p 6.11p (5.9%)
------------------------ --------------- --------------- --------
The Group has successfully traded through the COVID-19
restrictions and related social distancing measures this year, with
our consulting teams continuing to deliver high-quality client
service whilst remote working. The Group continued to make progress
and to deliver good levels of new business wins across its
geographies, ending the year with strong momentum.
Revenue
The Group was very pleased with net fee income performance of
10.2% growth in the year, including 8.0% organic(10) contribution.
Revenue grew 7.9%, including reduced rechargeable client expenses
compared to the prior year.
Revenue and net fee income grew in all geographic regions,
reflecting both average consultant headcount growth globally and
utilisation averaging slightly ahead of target levels, the prior
year and the first half, alongside broadly resilient consultant fee
rates overall.
Alpha Europe & Asia delivered the Group's strongest regional
growth with net fee income up 16.9%, and on an organic basis the
region reported 14.3% growth. Growth was delivered across the
region with the European team well deployed, complemented by the
increased contribution from Axxsys Europe and the strongest growth
enjoyed in Asia.
Alpha North America delivered another period of strong regional
growth with net fee income up 14.4% (16.9% on a constant currency
basis) almost entirely organically. The North America business
continues to expand its domestic client base, including several
longer duration projects, successfully deploying its growing
consultant team at Group target utilisation levels across the
year.
The UK business, Alpha's largest geographic region, grew net fee
income 5.7% overall and 3.4% organically. The UK benefitted from
strong contributions from our M&A Integration and Distribution
practices and a good contribution from Axxsys UK in the year. The
more recently established Pensions & Retail Investments
business also performed strongly. Within the UK results, Alpha's
Data Solutions business was most affected in the year by COVID-19,
with a longer sales cycle being experienced for its speciality
software products, though it maintains a good sales pipeline and
outlook.
Alpha continues to support clients in some of the largest, most
challenging and interesting projects across the industry. Alpha's
revenue is driven by continuing strong demand in its established
practices, as well as progress in newer areas. Alpha's Pensions
& Retail Investments and ESG & Responsible Investment
offerings, launched in September 2019 and October 2020
respectively, made strong progress in the year by winning a number
of projects both with existing and new client relationships.
Alpha's growth was supported by further investment in global
consultant headcount. The number of consultants (including
contractors) reached 448 by the year end (March 2020: 436), with
Alpha North America adding the most to its team overall, while a
selective recruitment policy was adopted to best navigate the more
uncertain environment during the first part of FY 21.
Group Profitability
Group gross profit was GBP34.8m (FY 20 GBP34.4m), reflecting
revenue growth, alongside continued investment in our people and
the business and a resilient fee rate performance in a competitive
market. Investment in the team included an increase in average team
headcount, promotion-related pay increases and accrued profit share
bonuses, alongside the accrual for the full repayment of the
director salary sacrifices that were made in the first half. UK and
North America gross margin movements reflect these effects, with
Europe & Asia margin improving on last year through an
offsetting comparable increase in team utilisation. We believe that
the impact on Group gross margin in the year is temporary and that
gross margin will improve as the market normalises.
Adjusted administrative expenses, before charging the adjusting
items detailed in note 3 to the consolidated financial statements,
reduced 7.3% to GBP13.1m (FY 19: GBP14.2m), reflecting lower levels
of discretionary spend largely due to the COVID-19 pandemic. This
was partly offset by an increase in Group management team resource,
higher PLC and professional fee spend and increased technology
security and infrastructure expense, as the Group continues to
grow. Statutory administrative costs increased 2.8% overall,
principally reflecting increased acquisition-related and
share-based payment costs, as set out in note 3 and below.
Adjusted EBITDA grew 7.2% to GBP21.7m (FY 20: GBP20.2m)
resulting from the resilient rates performance, consistent gross
profit and reduced adjusted administrative expenses in the year.
Adjusted EBITDA margin eased overall to 22.2% (FY 20: 22.8%), while
improving sequentially in the second half to 23.0% from 21.3% in H1
21, supported by trading momentum and these lower adjusted
administration expenses. Adjusted profit before tax increased by
5.3% to GBP19.6m (FY 20: GBP18.6m), including higher capitalised
development cost amortisation and increased underlying financing
costs, arising from the Group's precautionary drawing of its
revolving credit facility in the early months of the COVID-19
pandemic.
Group operating profit was GBP10.2m (FY 20: GBP10.4m) after
charging all costs, including the adjusting items. These cost
adjustments, detailed in note 3 to the consolidated financial
statements, increased to GBP9.8m (FY 20: GBP8.4m) principally due
to increased acquisition-related and share-based payment costs. The
fair value of the Axxsys acquisition earn-out liability increased
due to Axxsys's strong performance in the year. This resulted in a
one-off charge, which lifts the Axxsys earn-out to its maximum
pay-out level. This charge is also supplemented by a full-year
impact of employment-linked earn-out charges relating to
acquisitions made during the prior year. The share-based payment
charge, including relevant social security costs, increased in the
current year, reflecting new awards granted, updated valuation
assumptions and a higher closing share price. These increases in
adjusting items were offset by lower acquisition and integration
costs compared to the prior year. Further details are set out in
notes 3 and 13. Similarly, profit before tax reduced to GBP9.0m (FY
20: 9.3m) after charging these increased adjusting item costs,
increased depreciation and increased finance expenses.
Currency
Currency translation had a minimal impact on both Group net fee
income and profits in FY 21. Sterling strengthened through the
period against the US Dollar and translation was offset by Sterling
weakening against the Euro. In the year, Sterling averaged $1.31
(FY 20: $1.28) and EUR1.12 (FY 20: EUR1.15). Currency translation
immaterially increased FY 21 Group net fee income by GBP0.2m
(0.2%), albeit the individual geographic regional results were more
affected. On a constant currency basis, North America net fee
income growth would increase to 16.9% and Europe & Asia would
report 14.5% total net fee income growth.
Net Finance Expense
Net finance costs increased in the year to GBP1.2m (FY 20:
GBP1.1m), arising from increased revolving credit facility ("RCF")
charges, owing to the Group's precautionary drawing of the facility
in the first half. This was offset by a reduction in the annual
unwinding of the discount applied to deferred and earn-out
consideration due on recent acquisitions, following deferred
consideration payments made in the year.
Taxation
Pre-tax profit, after non-operating adjusting items, was GBP9.0m
(FY 20: GBP9.3m). The Group's tax charge remained consistent for
the year at GBP3.1m (FY 20: GBP3.1m), reflecting the lower taxable
profit, utilisation of certain Group reliefs, partially offset by
disallowable expense items and an increase in the blended tax rate
of the jurisdictions in which the Group operates. The Group's cash
tax payment in the year was GBP5.7m (FY 20: GBP2.4m) as certain
COVID-related deferrals from FY 20 were also repaid in full in the
year.
For further taxation details, see note 5 to the consolidated
financial statements. Adjusted profit after tax is shown after
adjustments for the applicable tax rates on adjusting items as set
out in note 3.
Acquisition Activity
Since the acquisitions of Axxsys and Obsidian in the prior year,
the Group has focussed on the successful integration of their
product and service offerings and their teams into the Alpha Group,
and has begun to bring the benefits of these acquisitions to the
client base.
Axxsys has integrated into the Group well and grown since
acquisition, particularly in further expanding the team to take
advantage of opportunities across Europe. Since acquiring Obsidian
within ADS, the Obsidian technology integration work to align
technology protocols with the ADS 360 SalesVista product set was
completed early in the first half of the year, with the combined
ADS Obsidian product now successfully implemented for several Alpha
clients. These one-off integration costs completed in early FY 21
and totalled GBP0.1m in the year.
After the year end, on 20 May 2021, the Group announced the
acquisition of Lionpoint for a maximum payable amount of $90.0m.
Lionpoint represents a highly complementary business within the
alternatives investments segment and provides an attractive
opportunity to expand the range of services provided to the
combined client base. Please refer to note 14 for further
detail.
Earnings per Share
Adjusted earnings per share ("EPS") improved 4.9% to 14.91p per
share (FY 20: 14.21p) and, after including the adjusting expense
items, the basic EPS is 5.75p per share (FY 20: 6.11p). Adjusted
diluted EPS increased 4.7% to 14.26p (FY 20: 13.62p). As at 31
March 2021, 7,613,969 share options remained outstanding, with
1,818,562 share options having vested during the year.
Cash Flow and Net Funds
The Group enjoyed strong cash generation with net cash generated
from operating activities rising to GBP21.0m (FY 20: GBP18.2m) and,
after adjusting for employment-linked acquisition payments, to
GBP22.3m (FY 20: GBP19.9m). This represents a 111% adjusted cash
conversion rate from adjusted operating profit and improves on FY
20's 106% adjusted cash conversion rate, through an ongoing focus
on working capital and on internal process rigour around timely
debtor collection.
The Group's income tax paid totalled GBP5.7m (FY 20: GBP2.4m). A
total of GBP4.0m acquisition payments were paid during the year in
relation to Axxsys, Obsidian and TrackTwo deferred considerations,
GBP1.2m of which was employment linked. Capitalised development
expenditure reduced from last year following completion of the
initial investment programme in the ADS product suite.
Net interest paid was GBP0.5m (FY 20: GBP0.1m), reflecting the
cost of maintaining and, in the first half, drawing on the Group's
RCF, less the benefit of holding net cash balances through the
year. At the year end, the Group's cash position had improved to
GBP34.0m net cash (FY 20: GBP26.0m), having repaid the drawn down
RCF in full during the year.
As previously reported, the Group renewed and extended its
committed RCF with Lloyds Banking Group in June 2020 into a
GBP20.0m committed facility. This facility is undrawn and,
alongside cash balances, ensures Group funding flexibility.
Statement of Financial Position
The Group continues to maintain a strong financial position. The
Group's non-current assets movement is driven by intangible assets,
which continue to amortise, with no new additions in the year. A
key change to the Group's statement of financial position relates
to the recognition in the year of GBP0.3m capitalised
implementation costs arising from ADS software implementations, in
which certain client contracts extend over a period of greater than
one year. Expenditure incurred ahead of the satisfaction of the
relevant contractual performance obligations is capitalised and
amortised across the expected life of the contract. See note 9 for
further detail.
Trade and other receivables balances decreased in FY 21,
principally from continued improvement in debtor collections during
the year. The Group ended the year with GBP34.0m of cash, having
also repaid the GBP5.0m drawings on the RCF facility in the
year.
Trade and other payables balances increased, representing an
increased level of accruals, including the directors' salary
sacrifices, which were fully accrued for repayment after the year
end and higher profit share accruals owing to the enlarged team
size and good performance. Total acquisition related deferred
consideration and earn-out liabilities have also increased
slightly, as disclosed in note 8, which relates to the increase in
the fair value of the Axxsys earn-out liability and
employment-linked consideration, and the unwinding of discounting,
offset by deferred consideration payments made during the year.
As noted, after the year end, the Group acquired the Lionpoint
Group. The initial cash payments on completion totalled GBP24.5m,
with cash balances replenished with an equity placing raising
GBP31.1m, before expenses, from the Group's supportive shareholder
base. The Group continues to maintain a strong balance sheet.
Dividends
The Board was delighted to reinstate the interim dividend at the
half year. In view of Alpha's performance through the past year and
its strong net cash position at the year end, the Board is
recommending a final dividend of 4.85p per share (FY 20: nil),
bringing the total for the year to 6.95p (FY 20: 2.10p), in line
with the Group's policy to pay out approximately 50% of adjusted
profit after tax.
Total Shareholders' Funds
Total shareholders' funds increased to GBP94.4m (March 2020:
GBP91.4m). The changes in equity reserves reflect the retained
profit after tax for the year, currency movements on overseas asset
and goodwill values, the addition of further share-based payment
reserves and the payment of dividends. As at 31 March 2021, the
Company had 106,521,966 ordinary shares in issue, of which no
shares were held in treasury and 4,413,628 shares were held in the
Company's employee benefit trust ("EBT") to satisfy future option
vesting.
Risk Management and the Year Ahead
The Group's risk management approach includes regular monitoring
of macro-economic and end-market conditions and assessing the
potential impacts across all business areas. In the risk management
framework, which has been reviewed during the year, the executive
team, including me as Chief Financial Officer and the Global Chief
Executive Officer, has primary responsibility for keeping abreast
of developments that may affect the implementation of the Group's
strategy and financial performance. This entails identifying the
appropriate mitigating actions that should be taken and ensuring,
as far as possible, that those actions are then executed by the
senior management team. The Board as a whole oversees risk and,
within that framework, considers the material risks that the Group
faces and agrees on the principal risks and uncertainties. Alpha
has a set of core company values, which are embedded globally, that
reflect the Group's ethical and responsible approach to operating
and managing the business.
In the early months of the financial year, Alpha took several
early decisive steps in response to the pandemic, implementing
protective measures in March to reduce costs and maintain
liquidity. All of these measures have now been reversed, with full
FY 20 profit share payments made to the team in November 2020, and
full director salaries reinstated for the Board, senior leadership
and broader director team, and salary sacrifices repaid after the
year end, in response to the resilience and performance
demonstrated by the Group in the period.
Alpha will continue to monitor the COVID-19 situation closely
and will act sensitively and appropriately in managing the Group in
the interests of all stakeholders. The formal departure of the UK
from the European Union at the end of 2020 had no noticeable effect
on the Group and any further developments will continue to be
monitored.
The Board has considered all of the above factors in its review
of going concern and has been able to conclude the review
positively. While cognisant of potential macro-economic risks and
the competitive environment, the Group's people, investment in
product and service offerings and increasing international
footprint help position Alpha for the year ahead. Alpha has
delivered an exceptionally resilient year, demonstrating good
revenue and adjusted EBITDA growth, while maintaining a strong
pipeline and set of capabilities to take advantage of future
opportunities.
The Group finished the year well positioned to achieve our
future growth aspirations, further enhanced by the subsequent
acquisition of Lionpoint. We look forward to further progress.
John Paton
Chief Financial Officer
24 June 2021
(10) Please see note 3 for further detail on organic net fee
income growth
Consolidated statement of comprehensive income
For the year ended 31 March 2021
Year ended Year ended
31 March 31 March
2021 2020
Note GBP'000 GBP'000
Continuing operations
Revenue 2 98,066 90,901
Rechargeable expenses 2 (112) (1,977)
Net fee income 2 97,954 88,924
Cost of sales 2 (63,130) (54,521)
Gross profit 2 34,824 34,403
Administration expenses (24,648) (23,977)
Operating profit 10,176 10,426
Depreciation 1,085 1,022
Amortisation of capitalised
development costs 613 428
Adjusting items 3 9,833 8,372
Adjusted EBITDA 3 21,707 20,248
Finance income - 1
Finance expense (1,207) (1,133)
Profit before tax 8,969 9,294
Taxation 5 (3,142) (3,127)
Profit for the year 5,827 6,167
Exchange differences on translation
of foreign operations (3,104) 1,311
Total comprehensive income for
the year 2,723 7,478
Basic earnings per ordinary
share (p) 7 5.75 6.11
Diluted earnings per ordinary
share (p) 7 5.50 5.85
Consolidated statement of financial position
As at 31 March 2021
As at Restated(11) as at
31 March 2021 31 March 2020
Note GBP'000 GBP'000
Assets
Non-current assets
Goodwill 63,067 64,642
Intangible fixed assets 21,648 25,774
Property, plant and equipment 415 530
Right-of-use asset 1,816 2,611
Capitalised implementation costs 154 -
Total non-current assets 87,100 93,557
--------------- -------------------
Current assets
Trade and other receivables 9 17,938 21,212
Cash and cash equivalents 34,012 25,996
Total current assets 51,950 47,208
Current liabilities
Trade and other payables 10 (27,241) (26,018)
Corporation tax (1,792) (4,150)
Lease liabilities (514) (791)
Interest bearing loans and borrowings - (5,000)
Total current liabilities (29,547) (35,959)
Net current assets 22,403 11,249
Non-current liabilities
Deferred tax provision (3,022) (4,438)
Other non-current liabilities 11 (10,737) (7,104)
Lease liabilities (1,379) (1,878)
Total non-current liabilities (15,138) (13,420)
---------------
Net assets 94,365 91,386
Equity
Issued share capital 12 80 78
Share premium 89,396 89,396
Capital redemption reserve - -
Foreign exchange reserve 302 3,406
Other reserves 4,044 1,652
Retained earnings 543 (3,146)
Total shareholders' equity 94,365 91,386
=============== ===================
(11) Prior period restatement relates to a measurement period
adjustment to the value of goodwill on the acquisition of Obsidian
in FY 20. This has resulted in an immaterial increase in goodwill
and current liabilities of GBP89,000, which has had no impact on
the Group's brought forward net assets
Consolidated statement of cash flows
For the year ended 31 March 2021
Year ended Year ended
31 March 2021 31 March 2020
Note GBP'000 GBP'000
Cash flows from operating activities:
Operating profit for the year 10,176 10,426
Depreciation of property, plant and equipment 1,085 1,022
Loss on disposal of fixed assets 13 11
Amortisation of intangible fixed assets 4,130 3,804
Share-based payment charge 13 1,693 917
Operating cash flows before movements in working capital 17,097 16,180
Working capital adjustments:
Decrease in trade and other receivables 3,221 30
Increase in trade and other payables 6,424 4,444
Tax paid (5,707) (2,446)
Net cash generated from operating activities 21,035 18,208
Cash flows from investing activities:
Interest received - 1
Acquisition of subsidiaries, net of acquired cash (2,752) (7,339)
Capitalised development costs - (1,387)
Purchase of property, plant and equipment, net of disposals (151) (349)
Net cash used in investing activities (2,903) (9,074)
Cash flows from financing activities:
Issue of ordinary share capital - (1)
(Repayment)/drawdown of bank borrowings (5,000) 5,000
Interest and bank loan fees (486) (47)
Principal lease liability payments (809) (706)
Interest on lease liabilities (102) (129)
Dividends paid (2,136) (6,256)
Net cash used in financing activities (8,533) (2,139)
Net increase in cash and cash equivalents 9,599 6,995
Cash and cash equivalents at beginning of the period 25,996 18,581
Effect of exchange rate fluctuations on cash held (1,583) 420
Cash and cash equivalents at end of the period 34,012 25,996
===================== ====================
Consolidated statement of changes in equity
For the year ended 31 March 2021
Capital Foreign
Share Share redemp-tion exchange Other Retained
capital premium reserve reserves reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2019 76 89,396 1 2,095 737 (3,056) 89,249
Comprehensive
income
Profit for the year - - - - - 6,167 6,167
Foreign exchange
differences on
translation
of foreign
operations - - - 1,311 - - 1,311
Transactions with
owners
Shares issued
(equity) 2 - (1) - - (1) -
Share-based payment
charge - - - - 917 - 917
Deferred tax
recognised
in equity - - - - (2) - (2)
Dividends - - - - - (6,256) (6,256)
---------- ------------- ------------- ------------- ----------- ------------- -----------
As at 1 April 2020 78 89,396 - 3,406 1,652 (3,146) 91,386
---------- ------------- ------------- ------------- ----------- ------------- -----------
Comprehensive
income
Profit for the
period - - - - - 5,827 5,827
Foreign exchange
differences on
translation
of foreign
operations - - - (3,104) - - (3,104)
-
Transactions with
owners
Shares issued
(equity) 2 - - - - (2) -
Share-based payment
charge - - - - 1,693 - 1,693
Net settlement of
vested share
options - - - - (100) - (100)
Current tax
recognised
in equity - - - - 374 - 374
Deferred tax
recognised
in equity - - - - 425 - 425
Dividends - - - - - (2,136) (2,136)
---------- ------------- ------------- ------------- ----------- ------------- -----------
As at 31 March 2021 80 89,396 - 302 4,044 543 94,365
========== ============= ============= ============= =========== ============= ===========
Share capital
Share capital represents the nominal value of share capital
subscribed.
Share premium
The share premium account is used to record the aggregate amount
or value of premiums paid when the Company's shares are issued at a
premium, net of associated share issue costs.
Capital redemption reserve
The capital redemption reserve is a non-distributable reserve
into which amounts are transferred following the redemption or
purchase of the Company's own shares.
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 to be recognised each year and
equity-settled consideration reserves.
Retained earnings
The retained earnings reserve represents cumulative net gains
and losses recognised in the consolidated statement of
comprehensive income.
Notes to the consolidated financial statements
1. Basis of preparation and significant accounting policies
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 31 March 2021 or
2020 but is derived from those accounts. Statutory accounts for the
year ended 31 March 2020 have been delivered to the registrar of
companies, and those for the year ended 31 March 2021 will be
delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying their report, and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
These condensed preliminary financial statements have been
prepared in accordance with the recognition and measurement
requirements of international accounting standards in conformity
with the requirements of the Companies Act 2006, in line with the
Group's statutory accounts.
Going concern
In assessing the Group's and the Company's abilities to continue
on a going concern basis for a period of at least 12 months from
the approval of these financial statements (the "going concern
period"), the Directors considered the Group's projected cash
flows, cash liquidity and existing borrowing facilities.
As at 31 March 2021, the Group held considerable financial
resources including cash balances of GBP34.0m. The Group also has
access, throughout the going concern period, to a revolving credit
facility ("RCF") of GBP20.0m, which remains undrawn at the date of
approval of these financial statements, providing further
liquidity.
Subsequent to the year end, in May 2021, the Group announced the
acquisition of Lionpoint Holdings, Inc. alongside a share placing.
The GBP31.1m gross proceeds of the share placing exceeded the
initial $34.5m (GBP24.5m) acquisition consideration paid on
completion. As a result, the Group added to its cash resources and
retains a strong liquidity position following the acquisition.
The Group prepared cash-flow forecasts covering the going
concern period. The base case assumes trading performance over the
forecast period in line with average revenue growth in recent years
at similar margins, and additionally incorporates future cash flows
related to the newly acquired Lionpoint business, including
expected payments of deferred and earn-out considerations. The
Directors considered the principal risks and mitigants and analysed
a range of cash-flow downside scenarios including a "severe but
plausible" downside scenario reducing revenue by 20 per cent
compared to the base case, while assuming the maximum Lionpoint
acquisition payments. The Directors considered this appropriate,
noting the Group's continued growth and strong cash conversion and
the Group's new business pipeline, while also remaining cognisant
of the residual uncertainty in the macro-economic environment
arising from the ongoing COVID-19 pandemic. The "severe but
plausible" downside scenario does not require the drawdown of the
Group's RCF. After careful consideration of these downside
scenarios, the Directors are satisfied that the Group's existing
resources are adequate to meet its requirements over the going
concern period.
Consequently, the Directors have a reasonable expectation that
the Group and Company will have sufficient funds to continue to
meet their liabilities as they fall due for a period of at least 12
months from the approval of these financial statements. On this
basis, the Directors consider that it is appropriate to adopt the
going concern basis in preparing the financial statements.
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
& Asia. The Group's operations all consist of one type:
consultancy and related services to the asset management, wealth
management and insurance industries.
The Directors consider that there is a material level of
operational support and linkage provided to the Group's emerging
territories in Europe and Asia as they develop their presence
locally and, as such, these clusters of territories have been
deemed to constitute one operating segment.
Revenues associated with software licensing arrangements were
immaterial in both the current and prior years. Therefore, the
Directors consider disaggregating revenue by operating segments is
most relevant to depict the nature, amount, timing and uncertainty
of revenue and cash flows as may be affected by economic
factors.
Segmental revenue
FY 21 UK North America Europe & Total
Asia(13)
============== =================== ================== =================
GBP'000 GBP'000 GBP'000 GBP'000
============== =================== ================== =================
Revenue 53,471 16,531 28,064 98,066
============== =================== ================== =================
Rechargeable expenses (51) (17) (44) (112)
-------------- ------------------- ------------------ -----------------
Net fee income 53,420 16,514 28,020 97,954
============== =================== ================== =================
Cost of sales (32,022) (12,040) (19,068) (63,130)
-------------- ------------------- ------------------ -----------------
Gross profit 21,398 4,474 8,952 34,824
============== =================== ================== =================
Margin on net fee
income(12) (%) 40.1% 27.1% 31.9% 35.6%
-------------- ------------------- ------------------ -----------------
Non-current assets 59,181 7,766 20,153 87,100
============== =================== ================== =================
FY 20 UK North America Europe & Total
Asia
GBP'000 GBP'000 GBP'000 GBP'000
============== =================== ================== =================
Revenue 51,391 15,222 24,288 90,901
============== =================== ================== =================
Rechargeable expenses (864) (786) (327) (1,977)
-------------- ------------------- ------------------ -----------------
Net fee income 50,527 14,436 23,961 88,924
============== =================== ================== =================
Cost of sales (28,247) (9,672) (16,602) (54,521)
-------------- ------------------- ------------------ -----------------
Gross profit 22,280 4,764 7,359 34,403
============== =================== ================== =================
Margin on net fee
income (%) 44.1% 33.0% 30.7% 38.7%
-------------- ------------------- ------------------ -----------------
Non-current assets 62,779 9,785 20,993 93,557
============== =================== ================== =================
During the year, the Group had one customer that comprised more
than 10% of the Group's revenues, reporting within the UK segment
and comprising GBP11.7m or 12.0% of Group revenue. No customers
comprised more than 10% of Group revenues in FY 20.
The Group's central non-current assets have been allocated to
the UK operating segment, except for goodwill, intangible assets
and right-of-use assets, which have been allocated to relevant
operating segments.
In the year, the Group received immaterial COVID-19 related
government financial support totalling less than GBP0.1m, all in
Europe & Asia. This has been offset against the related cost of
sales, in line with IAS 20.
(12) Margin on net fee income is gross profit expressed as a
percentage of net fee income. Please refer to note 3 for further
detail
(13) Within Europe & Asia, France is a material entity and
generated profits after tax of GBP1.9m (FY 20: GBP1.1m) and revenue
of GBP12.5m (FY 20: GBP11.2m)
3. Reconciliations to alternative performance measures
Alpha uses alternative performance measures ("APMs") that are
not defined or specific under the requirements of IFRS. The APMs,
including net fee income, margin on net fee income, adjusted
EBITDA, adjusted profit before tax, adjusted EPS, adjusted cash
conversion and organic growth, are provided to allow stakeholders a
further understanding of the underlying trading performance of the
Group and aid comparability between accounting periods. They are
not considered a substitute for, or superior to, IFRS measures.
Net fee income
The Group disaggregates revenue into net fee income and expenses
recharged to clients. Net fee income provides insight into the
Group's productive output and is used by the Board to set budgets
and measure performance. This APM is reconciled on the face of the
income statement and net fee income by segment is reconciled to
revenue in note 2.
Profit margins
Margin on net fee income and adjusted EBITDA margins are
calculated using gross profit and adjusted EBITDA expressed as a
percentage of net fee income. These margins represent the margin
that the Group earns on its productive output, excluding nil or
negligible margin expense recharges to clients over which the Group
has limited control, and allows comparability of the business
output between periods. Such adjusted margins are used by the
management team and the Board to assess the performance of the
Group.
Reconciliation of adjusted profit before tax, adjusted operating
profit and adjusted EBITDA
FY 21 FY 20
Note GBP'000 GBP'000
Profit before tax 8,969 9,294
Amortisation of acquired intangible
assets 3,517 3,376
Loss on disposal of fixed assets 13 11
Share-based payments charge 13 2,496 1,307
Earn-out & deferred consideration 8 3,606 2,761
Acquisition costs - 488
Integration costs 107 509
Foreign exchange losses/(gains) 94 (80)
--------------------- ----------------------
Adjusting items 9,833 8,372
Non-underlying finance expenses 803 951
Adjusted profit before tax 19,605 18,617
Net underlying finance expenses 404 181
Adjusted operating profit 20,009 18,798
Depreciation of property, plant
and equipment 1,085 1,022
Amortisation of capitalised
development costs 613 428
Adjusted EBITDA 21,707 20,248
===================== ======================
Adjusted EBITDA margin (%) 22.2% 22.8%
Adjusting items
Certain expense items, which management believe do not reflect
the underlying operating performance of the business, are excluded
from adjusted profit measures. These items are generally non-cash,
acquisition related or are non-recurring by nature.
Amortisation of acquired intangible assets and profit or loss on
disposal of fixed assets are treated as adjusting items to better
reflect the underlying performance of the business, as they are
non-cash items, principally relating to acquisitions.
The share-based payments charge and related social taxes are
excluded from adjusted profit measures. This allows comparability
between periods as the Group's share option plans were established
on AIM admission. It also aligns more closely with the operational
activities of the business, as well as accounts for the fact that
the charge is a non-cash item and the fact that estimated future
social taxes payable fluctuate with the future market value of
shares assumed. This approach has been applied consistently across
reporting periods. Note 13 sets out further details of the employee
share-based payments expense calculation under IFRS 2.
As per note 8, the acquisitions of Axxsys and Obsidian in the
prior year involved deferred contingent and non-contingent
consideration payments, which, in accordance with IFRS 3, are being
expensed annually over several years, dependent on the ongoing
employment of the respective vendors or to reflect adjustments made
to the fair value of the expected future payment. This cost has
been treated as an adjusting item as, whilst it will recur in the
short term, it represents additional payments linked to these
acquisitions and not underlying operational performance, allowing
comparability across reporting periods.
Other acquisition costs expensed in the prior year relating to
the Axxsys and Obsidian acquisitions were also treated as an
adjusting item as they were not directly attributable to the
ongoing trading performance of the Group.
Integration costs incurred in order to align the acquired
Obsidian product suite security and to integrate the technology
protocols with the ADS 360 SalesVista product directly result from
the acquisition of Obsidian in the prior year. Integration was
completed in April 2020 and was managed as a discrete short-term
project subsequent to the acquisition. These costs are excluded
from adjusted profit measures to allow clarity on the underlying
operational performance of the Group between periods.
Similarly, the impact of foreign currency volatility in
translating local working capital balances to their relevant
functional currencies has been excluded from the calculation of
adjusted profit measures on the basis that such exchange rate
movements do not reflect the underlying trends or operational
performance of the Group.
Non-underlying finance expenses
In calculating adjusted profit before tax, unwinding of the
discounted contingent and non-contingent acquisition consideration
within finance expenses is considered non-underlying as these
amounts relate to acquisition consideration, rather than the
Group's underlying trading performance.
Adjusted profit before tax
Adjusted profit before tax is an APM calculated as profit before
tax stated before the adjusting items above, including amortisation
of acquired intangible assets, share-based payment charge,
acquisition-related consideration and costs, non-underlying finance
expenses and other non-underlying expenses. This measure was
introduced in the prior year to allow comparability of the Group's
underlying performance after the adoption of IFRS 16. This measure
also reflects the underlying amortisation charges arising from
capitalised development costs relating to ADS product development.
This measure will likely be of increasing importance in allowing
comparability across periods as the ADS business grows further in
future periods.
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 interes t on lease
liabilities. The Directors consider this metric aligned to the
defined components of operating profit, adjusted for the adjusting
items above, and provides a clearer view of the underlying
operating performance of the business. This measure is 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 trading performance across the Group and forms the basis of
the performance measures for aspects of remuneration, including
consultant profit share.
Adjusted profit after tax
Adjusted profit after tax and adjusted earnings per share
metrics are also APMs, similarly used to allow a further
understanding of the underlying performance of the Group. Adjusted
profit after tax is stated before adjusting items and their
associated tax effects. The associated tax effects are calculated
by applying the relevant effective tax rate to allowable expenses
that have been excluded as adjusting items.
FY 21 FY 20
GBP'000 GBP'000
Adjusted profit before tax 19,605 18,617
Tax charge (3,142) (3,127)
Tax impact of adjusting items (1,358) (1,142)
Adjusted profit after tax 15,105 14,348
================ ================
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 potential ordinary
shares. Potential ordinary shares are only treated as dilutive when
their conversion to ordinary shares would decrease EPS (or increase
loss per share). Refer to note 7 for further detail.
Adjusted EPS FY 21 FY 20
Adjusted EPS (p) 14.91 14.21
Adjusted diluted EPS (p) 14.26 13.62
Reconciliation of adjusted administrative expenses
FY 21 FY 20
GBP'000 GBP'000
Administrative expenses 24,648 23,977
Adjusting items (9,833) (8,372)
Depreciation of property, plant
and equipment (1,085) (1,022)
Amortisation of capitalised
development costs (613) (428)
Adjusted administrative expenses 13,117 14,155
===================== =====================
To express 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.
Adjusted cash generated from operating activities
Adjusted cash generated from operating activities excludes any
employment-linked acquisition payments and other acquisition costs
expensed in the year, treated as operating cash flows under IFRS,
to reflect the Group's underlying operating cash flows, exclusive
of cash payments relating to acquisitions.
FY 21 FY 20
GBP'000 GBP'000
Net cash generated from operating activities 21,035 18,208
Employment-linked acquisition payments(14) 1,246 1,200
Acquisition costs - 488
Adjusted cash generated from operating activities 22,281 19,896
======== ========
Adjusted cash conversion
Cash conversion is stated as net cash generated from operating
activities expressed as a percentage of operating profit.
Adjusted cash conversion is stated as adjusted cash generated
from operating activities expressed as a percentage of adjusted
operating profit.
FY 21 FY 20
Cash conversion 207% 175%
Adjusted cash conversion 111% 106%
Organic net fee income growth
Organic net fee income growth of 8.0% (FY 20: 7.7%) for the
current period represents FY 21 net fee income less GBP1.9m net fee
income attributable to the acquisitions completed during the prior
period.
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.
Constant currency growth
The Group operates in multiple jurisdictions and generates
revenues and profits in various currencies. Those results are
translated on consolidation at the foreign exchange rates
prevailing in that period. These exchange rates vary from year to
year, so the Group presents some of its results on a "constant
currency" basis. This means that the current year's results have
been retranslated using the average exchange rates from the prior
year to allow for comparison of year-on-year results, eliminating
the effects of volatility in exchange rates.
Currency translation had a minimal impact on both net fee income
and profits in FY 21, as a result of a strengthening sterling
through the period against the US Dollar being offset by weakening
against the Euro. In the year, sterling averaged $1.31 (FY 20:
$1.28) and EUR1.12 (FY 20: EUR1.15). Currency translation
immaterially increased FY 21 net fee income by GBP0.2m or 0.2% (FY
20: GBP0.3m or 0.4%), albeit the individual geographic regional
results were more affected. On a constant currency basis, North
America net fee income growth would increase to 16.9% and Europe
& Asia would report 14.5% total net fee income growth.
(14) Total acquisition payments made in the year were GBP4.0m,
comprising GBP1.2m relating to employment-linked acquisition
payments, treated as operating under IFRS, and a further GBP2.8m
considered to be capital in nature and included within investing
activities in the Group's consolidated statement of cash flows.
Please see note 8 for further details
4. Staff costs
The average number of employees employed by the Group, where
"employees" includes Executive Directors but excludes contractors,
was:
FY 21 FY 20
Number Number
UK 197 174
North America 66 53
Europe & Asia 125 128
Administration 48 42
436 397
======= =======
FY 21 FY 20
GBP'000 GBP'000
Wages and salaries 51,205 42,178
Social security costs 6,069 5,076
Pension costs 924 952
Share-based payment charge 2,496 1,307
60,694 49,513
======== ========
The Directors are considered to be the key management personnel.
The share-based payment charge, including social security taxes, in
respect of key management personnel was GBP353,000 (FY 20:
GBP136,000).
5. Taxation
FY 21 FY 20
GBP'000 GBP'000
Current tax
In respect of the current year
- UK 2,058 2,473
Foreign taxation 2,282 1,243
Adjustment in respect of prior
periods (242) (372)
Deferred tax
In respect of the current year (959) (829)
Change in tax rate - 426
Adjustment in respect of prior
periods 3 186
Total tax expense for the year 3,142 3,127
=================== ===================
The difference between the total tax expense shown above and the
amount calculated by applying the standard rate of UK corporation
tax to the profit before tax is as follows:
FY 21 FY 20
GBP'000 GBP'000
Profit before taxation 8,969 9,294
Tax on profit on ordinary activities
at standard UK corporation tax
rate of 19% (FY 20: 19%) 1,704 1,766
Effects of:
Fixed asset differences (4) (1)
Expenses not deductible for
taxation 463 1,042
Differences due to overseas
tax rates 856 74
Adjustments in respect of prior
periods (242) (372)
Adjustments in respect of prior
periods - deferred tax 3 186
Change in deferred tax rate (13) 406
Current tax charged to equity 374 -
(share option exercise)
Deferred tax not recognised 1 26
Total tax expense for the year 3,142 3,127
===================== =====================
Expenses not deductible for taxation relate mainly to
employment-linked acquisition consideration, treated as capital for
tax purposes, with non-deductible share-based payment charges being
offset by current tax credits on share option exercises in the
year.
6. Dividends
FY 21 FY 20
GBP'000 GBP'000
Amounts recognised as distributions
to equity holders:
Interim dividend for the year
ended 31 March 2021 of 2.10p
(FY 20: 2.10p) per share 2,136 2,121
Proposed final dividend for 5,416 -
the year ended 31 March 2021
of 4.85p (FY 20: nil) per share
------------------ -----------------
Total dividend for the year
ended 31 March 2021 of 6.95p
(FY 20: 2.10p) per share 7,552 2,121
================== =================
The proposed final FY 21 dividend is subject to approval by
shareholders at the AGM and has, therefore, not been included as a
liability in these consolidated financial statements.
7. Earnings per share and adjusted earnings per share
The Group presents basic and diluted earnings per share ("EPS")
data, both adjusted and non-adjusted for its ordinary shares. Basic
EPS is calculated by dividing the profit or loss for the period
attributable to ordinary shareholders by the weighted average
number of ordinary shares fully outstanding during the period.
Potential ordinary shares are only treated as dilutive when their
conversion to ordinary shares would decrease EPS (or increase loss
per share).
In order to reconcile to the adjusted profit for the financial
period, the same adjustments as in note 3 have been made to the
Group's profit for the financial period. The profits and weighted
average number of shares used in the calculations are set out
below:
Note FY 21 FY 20
Basic & diluted EPS
Profit for the financial year
used in calculating basic and
diluted EPS (GBP'000) 5,827 6,167
Weighted average number of ordinary
shares in issue ('000) 101,312 101,003
Number of dilutive shares ('000) 4,590 4,341
Weighted average number of ordinary
shares, including potentially
dilutive shares ('000) 105,902 105,344
Basic EPS (p) 5.75 6.11
Diluted EPS (p) 5.50 5.85
Adjusted EPS and adjusted diluted
EPS
Adjusted profit for the financial
year used in calculating adjusted
basic and diluted EPS (GBP'000) 3 15,105 14,348
Weighted average number of ordinary
shares in issue ('000) 101,312 101,003
Number of dilutive shares ('000) 4,590 4,341
Weighted average number of ordinary
shares, including potentially
dilutive shares ('000) 105,902 105,344
Adjusted EPS (p) 14.91 14.21
Adjusted diluted EPS (p) 14.26 13.62
Earnings per share is calculated based on the share capital of
the Company and the earnings of the Group.
8. Acquisition of business
Acquisitions in the prior year
As part of the acquisition of Axxsys Limited and Obsidian
Solutions Limited in previous periods, the Group agreed earn-out
arrangements and a final ownership consideration based on the
financial performance of the respective acquired entities over an
agreed period of time, subject to continuous employment of the
respective vendors, as previously disclosed.
Obsidian
On 9 November 2019, the Group acquired 100% of the share capital
of Obsidian Solutions Limited. Obsidian provides specialised
software products to the investment management industry.
Obsidian Solutions Limited (restated) Fair value Values
Book adjustments on acquisition
values
GBP'000 GBP'000 GBP'000
--------------------------------------- -------- ------------- ----------------
Acquiree's net assets at the
acquisition date:
Tangible fixed assets 6 - 6
Customer relationships - 146 146
Trade name - 318 318
Intellectual property - 1,302 1,302
Trade and other debtors 501 - 501
Cash 155 - 155
Trade and other creditors (149) - (149)
Deferred tax liability - (300) (300)
-------- ------------- ----------------
Net identifiable assets and
liabilities acquired 513 1,466 1,979
-------- ------------- ----------------
Cash consideration relating
to business combination 7,896
Goodwill on acquisition 5,917
================
The remaining GBP1.8m base consideration outstanding from the
acquisition of Obsidian as at 31 March 2020 was paid in the period.
Including the contingent earn-out and unwinding of discounting, a
total GBP4.4m estimated consideration is recorded within
liabilities. In the period, GBP1.7m was expensed as a
non-underlying cost relating to employment-linked consideration,
with an offsetting GBP0.1m recognised in respect of a fair value
adjustment arising from a re-assessment of the profile of the
future earn-out payments, weighted towards the later earn-out
years. The earn-out payments have been estimated by the Directors
based on anticipated future earnings and discounted to present
value.
The unwinding of this earn-out discount in each period will be
recognised as a finance cost. During the period, GBP0.3m of this
discount unwinding was expensed as a non-underlying cost in
relation to Obsidian. Any remaining employment-linked balance will
be expensed through the income statement in line with IFRS 3,
proportionately until 2023.
Axxsys
On 5 June 2019, the Group acquired 100% of the share capital and
voting interests of Axxsys Limited and subsidiaries. Axxsys has
provided specialised consultancy and technology implementation
services to the investment management industry since 2003 .
Axxsys Limited Fair value Values
Book adjustments on acquisition
values
GBP'000 GBP'000 GBP'000
------------------------------ -------- ------------- ----------------
Acquiree's net assets at the
acquisition date:
Tangible fixed assets 30 - 30
Customer relationships - 4,067 4,067
Order backlog - 1,308 1,308
Trade name - 284 284
Trade and other debtors 1,572 - 1,572
Cash 374 - 374
Trade and other creditors (1,220) - (1,220)
Deferred tax liability - (1,166) (1,166)
-------- ------------- ----------------
Net identifiable assets and
liabilities acquired 756 4,493 5,249
-------- ------------- ----------------
Cash consideration relating
to business combination 7,890
Goodwill on acquisition 2,641
================
Of the remaining GBP4.2m base consideration due on the
acquisition of Axxsys as at 31 March 2020, GBP2.1m was paid during
the period, of which GBP1.1m was employment linked. The remaining
GBP2.1m base consideration is payable in June 2021.
Given Axxsys's strong ongoing performance, the Directors have
revised their initial estimate in relation to the earn-out and
expect that Axxsys is likely to meet its full GBP5.0m undiscounted
earn-out payment, payable in June 2022. In addition, management has
revised the initial discount rate applied at the time of
acquisition downwards given most of the earn-out period has now
elapsed. Therefore, in the period, a fair value adjustment of
GBP1.2m was expensed to reflect the higher estimated earn-out
payment and the lower level of discounting.
A further GBP0.9m was expensed in the year in relation to
employment-linked base and earn-out consideration. These result in
a total GBP2.1m of earn-out and deferred consideration costs
expensed in the period relating to the acquisition of Axxsys,
treated as non-underlying costs.
Both the earn-out payments, which have been estimated by the
Directors based on anticipated future earnings, and the deferred
consideration, are discounted to present value. The unwinding of
this discount in each period shall be recognised as a finance
cost.
During the period, GBP0.5m of this discount unwinding was
expensed as a non-underlying cost in relation to Axxsys. Including
the contingent earn-out and unwinding of discounting, a total
GBP6.7m estimated consideration is recorded within liabilities. Any
remaining employment-linked balance will be expensed through the
income statement in line with IFRS 3, proportionately until
2022.
TrackTwo
As part of the acquisition of TrackTwo GmbH in 2017, the Group
agreed an earn-out arrangement and a final ownership consideration
based on the financial performance of TrackTwo over the 3-year
period to July 2020, subject to continuous employment of the vendor
until July 2020, as previously disclosed. During the year, the
Group has settled the outstanding liability in relation to TrackTwo
through a payment of GBP0.1m. No residual liability remains.
The below table summarises the movements in the deferred and
contingent consideration balances in relation to liabilities held
at 31 March 2021.
Axxsys Obsidian TrackTwo Total
GBP ' GBP ' GBP ' GBP '
000 000 000 000
Balance at 1 April 2020
(restated) 6,184 4,368 100 10,652
Fair value adjustment
to existing provision 1,195 (138) - 1,057
Employment-linked consideration 891 1,658 - 2,549
Payments in the year (2,100) (1,798) (100) (3,998)
Unwinding of discounting 536 267 - 803
Balance as at 31 March
2021 6,706 4,357 - 11,063
================ =============== ================== ================
The above liabilities are reflected in non-current and current
liabilities as shown in the following table.
Axxsys Obsidian TrackTwo Total
GBP ' GBP ' GBP ' GBP '
000 000 000 000
Current 1,992 - - 1,992
Non-current 4,714 4,357 - 9,071
Balance as at 31 March
2021 6,706 4,357 - 11,063
============== ============== ================= ===============
9. Trade and other receivables
FY 21 FY 20
GBP'000 GBP'000
Amounts due within 1 year:
Trade receivables 16,497 19,420
Less: allowance for expected
credit losses (378) (523)
Trade receivables - net 16,119 18,897
Other debtors 319 101
Capitalised implementation costs 182 -
Prepayments 798 926
Accrued income 520 1,288
Total amounts due within 1 year 17,938 21,212
================== ==================
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.
An expected credit loss attributable to trade receivables is
established after consideration of historical loss rates in
preceding periods and relevant current circumstances. The Group has
determined historical loss rates for each aging category of trade
receivables by performing an in-depth analysis of historical
losses.
The Group has considered a number of factors in determining
appropriate expected credit loss rates, including macro-economic
factors and asset-specific indicators such as customer
correspondence, default or delinquency in payment and significant
financial difficulties of the customer.
At 31 March Expected Gross carrying Loss allowance Net carrying
2021 loss rate amount amount
% GBP'000 GBP'000 GBP'000
------------- ----------- --------------- --------------- -------------
<31 days 1.17% 9,813 (115) 9,698
31-60 days 1.84% 4,080 (75) 4,005
61-90 days 3.87% 1,671 (65) 1,606
91-120 days 7.87% 321 (25) 296
121+ days 16.06% 612 (98) 514
-------------- ----------- --------------- --------------- -------------
16,497 (378) 16,119
------------- ----------- --------------- --------------- -------------
At 31 March Expected Gross carrying Loss allowance Net carrying
2020 Loss Rate amount amount
% GBP'000 GBP'000 GBP'000
------------- ----------- --------------- --------------- -------------
<31 days 1.60% 11,787 (189) 11,598
31-60 days 2.08% 5,332 (111) 5,221
61-90 days 4.16% 913 (38) 875
91-120 days 7.59% 293 (22) 271
121+ days 14.91% 1,095 (163) 932
-------------- ----------- --------------- --------------- -------------
19,420 (523) 18,897
------------- ----------- --------------- --------------- -------------
The movement in the Group's allowance for expected credit losses
in the year is summarised below:
Allowance for expected credit losses: FY 21 FY 20
GBP'000 GBP'000
At 1 April 523 447
Charge for the period - 76
Uncollected amounts written off, net of recoveries (145) -
As at 31 March 378 523
============= ========
During the current year, the Group has released an amount in
relation to a historic balance from FY 16, which was fully provided
for in prior years. Alpha continues to work with the related
client.
Amounts relating to the capitalisation of non-distinct software
implementation costs, incurred in advance of the commencement of
the client's licence period, are recognised in current and
non-current assets. Non-current capitalised implementation costs
are presented on the face of the consolidated statement of
financial position. These current and non-current implementation
assets are primarily in relation to ADS contracts within the UK
segment, and total GBP0.3m as at 31 March 2021 to be amortised over
an expected life equivalent to the contracted licence period.
Amortisation recognised in the period in respect of these costs
amounted to GBP0.2m. No impairment was deemed necessary in the
period. No significant judgements have been made in determining the
amount of costs to be capitalised, which primarily comprise costs
within scope of IAS 19 Employee Benefits.
Contract receivables are recognised in accrued income and relate
to satisfied performance obligations recognised and not invoiced at
the year end. All such contract receivables are expected to be
realised within one year and classified within current assets.
Contract receivables are recorded on a time spent basis and as
performance obligations are met on agreed fees and day rates,
billed in arrears. These are typically short-term timing
differences that are administrative in nature at each year end
date. Contract receivable payments are due on standard terms once
the invoices are raised. The contract receivables movement in the
year represents these timing differences across contracts at each
year end.
The expected credit loss calculated on accrued income and
contract receivables was not material at the current or prior year
ends.
10. Trade and other payables
Note FY 21 Restated
FY 20
GBP'000 GBP'000
Trade payables 1,780 2,329
Accruals 16,215 12,863
Deferred income 1,692 1,336
Taxation and social security 4,352 4,213
Other creditors 1,210 1,578
Earn-out and deferred consideration 8 1,992 3,699
Total amounts owed within 1 year 27,241 26,018
======== =========
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.
Accruals included a balance for the employee profit share bonus
accrued through the year and paid after the year end. FY 21
accruals also include amounts due to senior management in lieu of
COVID-19 related salary sacrifices, which were repaid shortly after
the year end.
Deferred income recognises contract liabilities arising from the
Group's revenue generating activities relating to payments received
in advance of performance delivered under a contract. These
contract liabilities typically arise on short-term timing
differences between performance obligations in some milestone or
fixed fee contracts and their respective contracted payment
schedules. The contract liability movement in the year represents
these timing differences across contracts at each year end.
Within taxation and social security, in the current and prior
year, is an existing GBP1.4m provision relating to historic pre-AIM
admission potential tax treatments. The amount of this tax
provision is subject to significant uncertainty. A final position
agreed with a tax authority or through the expiry of a tax audit
period could differ from the estimated provision. Currently there
are no significant ongoing tax audits. Whilst a range of outcomes
is reasonably possible, the extent of the range is a potential
liability of between GBP1.2m and GBP2.2m.
Earn-out and deferred consideration comprise GBP2.0m relating to
deferred consideration payments arising from the acquisition of
Axxsys Limited at the balance sheet date.
11. Other non-current liabilities
Note FY 21 FY 20
GBP'000 GBP'000
Earn-out and deferred consideration 8 9,071 6,864
Deferred income 304 -
Other non-current liabilities 1,362 240
Total amounts owed after 1 year 10,737 7,104
======== ========
Within non-current liabilities is GBP4.4m associated with the
potential earn-out payments linked to the acquisition of Obsidian
Solutions Limited, contingent on performance and falling due over
12 months from the balance sheet date. In addition, GBP4.7m of
costs are included within non-current liabilities relating to
deferred consideration and earn-out payments from the Axxsys
Limited acquisition falling due over 12 months from the balance
sheet date. Refer to note 8 for further detail.
Deferred income recognises contract liabilities arising from the
Group's revenue generating activities relating to payments received
in advance of performance delivered under a contract. Deferred
income recognised as non-current entirely relates to contracts held
within the ADS business, where revenue is sometimes recognised over
a contractual licence period of greater than 1 year. For further
details refer to note 9.
Other non-current liabilities include an estimate of the social
security costs that may become due on future vesting of share
options. Refer to note 13.
12. Called up share capital
FY 21 FY 20
Number Number
Allotted, called up and fully
paid
Ordinary 0.075p shares (1 vote
per share) 106,521,966 103,607,638
FY 21 FY 20
GBP GBP
Allotted, called up and fully
paid
Ordinary 0.075p shares (1 vote
per share) 79,891 77,706
Movements in share capital during the year ended 31 March
2021:
GBP
Balance at 1 April 2020 77,706
103,607,638 ordinary shares of 0.075p each
Issued shares (i) 2,185
Balance at 31 March 2021
106,521,966 ordinary shares of 0.075p each 79,891
=======
(i) During the year, the Group issued 2,914,328 ordinary shares of 0.075p each.
Alpha Employee Benefit Trust
The Group held 4,413,628 (FY 20: 2,669,429) shares in the
employee benefit trust ("EBT") comprising shares held to satisfy
share options granted under its joint share ownership plan ("JSOP")
or unallocated ordinary shares to satisfy share options granted
under the Group's other share option plans. Ordinary shares held
within the EBT have no dividend or voting rights.
During the year, 2,156,511 ordinary shares were transferred by
the Company to the EBT for potential future satisfaction of share
incentive plans, either through the issuance of new shares or the
transfer of shares bought back from prior employees at nominal
value. Of these, t he Company bought back a total of 226,130
ordinary shares from prior employees for nominal value. All of the
reclaimed shares will be held in the EBT for the satisfaction of
future employee awards.
In the period 412,312 shares held in the EBT were utilised for
employee share option exercises.
Treasury shares
The Group held nil (FY 20: nil) shares in treasury from prior
employees for nominal value.
13. Share-based payments
The Group has adopted a globally consistent share incentive plan
approach, which is implemented using efficient jurisdiction
specific plans, as appropriate.
The Management Incentive Plan
The Group has a management incentive plan ("MIP") to retain and
incentivise the directors and senior management. The MIP consists
of four parts: part A of which will enable the granting of
enterprise management incentive and non-tax advantaged options to
acquire shares; part B of which will enable the awarding of JSOPs;
part C of which will enable the awarding of restricted stock units
("RSUs") for participants in the US; and Part D of which will
enable the awarding of RSUs in France (together the "options").
Options granted in prior years to the directors and senior
management of the Group were subject to the fulfilment of two or
more of the following performance conditions: (a) a specific
business unit's budgetary EBITDA, or other personal targets and
goals; (b) the Group achieving a total shareholder return for the 3
years from date of award in excess of the average total shareholder
return of a peer group of comparable companies; and (c) the Group
achieving at least 10% EPS growth against the comparative financial
year.
As disclosed in the prior year, responding to the impact of
COVID-19, options granted to senior management in the current
period were subject to more flexible performance criteria. For most
participants these include local budget targets and a variety of
stretching personal sales or other targets. Awards made in the
period to the Executive Directors' of the Board are, as before,
also subject to the Group achieving a total shareholder return for
the 3 years from the date of grant, in excess of the average total
shareholder return of a peer group of comparable companies.
MIP awards have either nil exercise price payable (or no more
than a nominal purchase price payable) in order to acquire shares
pursuant to options. MIP awards have either 3- or 4-year vesting
periods from the date of grant and can be equity settled only.
The Employee Incentive Plan
In addition to the MIP, the Board has previously put in place a
medium-term employee incentive plan ("EIP"). Under the EIP, a broad
base of the Group's employees has been granted share options or
share awards over a small number of shares. The EIP is structured
as is most appropriate under the local tax, legal and regulatory
rules in the key jurisdictions and therefore varies between those
jurisdictions.
During the year ended 31 March 2021, a total of 3,376,744 share
option and award grants were made to employees and senior
management (FY 20: 3,374,881).
On 12 October 2020 certain of the MIP awards granted at the time
of the October 2017 AIM admission partially vested, following
satisfaction of performance conditions. The awards' performance
conditions relating to EPS growth and total shareholder return
exceeding a basket of comparable companies over three years to the
vesting date were met in full and the relevant local country or
divisional budgetary performance conditions were met in full or
part dependent on Alpha location. As a result, 1,818,562 nil or
nominal cost awards over ordinary shares of 0.075 pence per share
vested and 164,360 share awards were forfeited under performance
conditions or as a result of leavers before vesting.
Subsequently, a number of these share options, and a small
number of EIP awards were exercised in the year. Of the vested
awards, 1,443,562 awards have been exercised. The Company settled
these exercised awards by issuing 983,947 ordinary shares and an
additional 412,312 from shares held in the EBT, with 47,303
additional share options retained for net tax settlement. The
weighted average share price at the date of these exercises was
GBP2.23. The remaining vested award holders have a further 7-year
period in which to exercise their vested awards.
Details of the share option awards made are as follows:
FY 21 FY 21
Number of Weighted average
share options exercise price
Outstanding at the beginning 6,490,661 -
of the year
Granted during the year 3,376,744 -
Exercised during the year (1,443,562) -
Forfeited during the year (809,874) -
Expired during the year - -
Outstanding at the year end 7,613,969 -
====================== =======================
Exercisable at the year end 375,000 -
====================== =======================
The options outstanding at 31 March 2021 had a weighted average
remaining contractual life of 2 years and a nil or nominal exercise
price. The weighted average of the estimated fair values of the
options outstanding is GBP1.23 per share (FY 20: GBP0.77).
During the year ended 31 March 2021, options were granted on 22
July 2020, 14 August 2020 and 13 January 2021 to employees and
certain senior management.
MIP share options awarded in prior years and to Executive
Directors in FY 21 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.
The inputs into the model were as follows:
FY 21
Weighted average share price at grant date 1.94
Exercise price -
Volatility 22.00%
Weighted average vesting period 4
Risk free rate 0.44%
Expected dividend yield 3.00%
Expected volatility was determined by calculating the historic
volatility of the market in which the Group operates. The expected
expense calculated in the model has been adjusted, based on
management's best estimate, for the effects of non market-based
performance conditions and employee attrition.
MIP share options without market-based conditions granted to
senior management in FY 21 and EIP share options outstanding were
valued using a Black-Scholes model, using the same inputs as above
for FY 21 awards.
The Group recognised a total expense of GBP2.5m (FY 20: GBP1.3m)
in the current year, comprising GBP1. 7m (FY 20: GBP0.9m) in
relation to equity settled share-based payments, and GBP0.8m (FY
20: GBP0.4m) relating to relevant social security taxes. Given the
estimation, were the future conditions for all outstanding share
options assumed to be met at the end of the reporting period, the
charge in the year would increase by GBP1.0m.
Other assumptions associated with the calculation of the social
security tax liability due on vesting of share options include an
estimation of the forward-looking share price at the vesting date
based on applicable analyst research and applicable future tax
rates. For these purposes, share price is assumed to grow in line
with the estimated future performance of the business. Accelerating
the future share price growth estimate could increase the social
security costs by a further GBP0.3m.
14. Events after the reporting period
Acquisition of Lionpoint Holdings, Inc.
On 20 May 2021, the Group reached an agreement to acquire 100%
of the issued share capital of Lionpoint Holdings, Inc.
("Lionpoint"), a US-based provider of specialist consultancy
services to the alternative investments industry, on a cash free,
debt free basis for a total amount (payable over four years) of up
to US$90.0 million (GBP63.8 million) in a combination of cash and
ordinary shares.
The maximum total cash payable by Alpha under the acquisition is
US$73.6 million (GBP52.2 million), of which US$34.5 million
(GBP24.5 million) was paid on completion. The total cash payable
will be funded from the Group's cash reserves and the proceeds of a
May 2021 placing of 9,569,839 new ordinary shares of the Company,
issued at a price of 325 pence per share raising gross proceeds of
approximately GBP31.1 million (the "placing"). The new ordinary
shares issued represented approximately 9.0% of the issued share
capital of the Company.
As at the date of signing these financial statements, given the
proximity to the announcement date, the accounting is incomplete in
respect of the valuation of the fair value of the acquiree's assets
and liabilities, and the associated goodwill for this
acquisition.
Total voting rights
Following the placing, the Company has a total of 116,091,805
ordinary shares in issue, of which none are held in treasury and
4,413,628 are held in the Company's EBT. The total number of voting
rights in the Company is 111,678,177.
This figure of 111,678,177 may be used by shareholders as the
denominator for the calculations by which they will determine if
they are required to notify their interest in, or a change to their
interest in the Company, under the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority.
- END -
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