TIDMAFM
RNS Number : 4032G
Alpha Fin Markets Consulting plc
25 November 2020
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25 November 2020
Alpha Financial Markets Consulting plc
("Alpha", the "Company" or the "Group")
INTERIM RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2020
Alpha Financial Markets Consulting plc (AIM:AFM), a leading
global provider of specialist consultancy services to the asset and
wealth management industry, is pleased to report its unaudited
results for the six months ended 30 September 2020 (H1 21).
Financial Highlights
-- Revenue increased by 10.3% to GBP47.6m (H1 20: GBP43.2m)
and net fee income increased by 12.0% to GBP47.5m (H1
20: GBP42.4m)
-- Gross profit maintained at GBP16.3m, reflecting continued
investment in our people and the business, alongside resilient
fee rates and utilisation overall
-- Adjusted EBITDA increased by 6.1% to GBP10.1m (H1 20:
GBP9.5m)
-- Adjusted earnings per share increased by 2.5% to 6.99p
(H1 20: 6.82p)
-- Profit before tax decreased to GBP4.5m (H1 20: GBP4.9m)
-- Strong adjusted cash conversion of 177.5% (H1 20: 70.4%),
with adjusted cash generation from operating activities
of GBP16.4m (H1 20: GBP6.2m), reflecting certain COVID-19
related payment deferrals
-- Robust balance sheet with a net cash balance as at 30
September 2020 of GBP32.5m (31 March 2020: GBP21.0m)
-- Reinstatement of dividend payments with an interim dividend
of 2.10p per share declared (H1 20: 2.10p)
6 months to 6 months to
30-Sep 2020 30-Sep 2019 Change
---------------------------- ------------- ------------- --------
Revenue GBP47.6m GBP43.2m 10.3%
Gross Profit GBP16.3m GBP16.3m 0.2%
Adjusted EBITDA GBP10.1m GBP9.5m 6.1%
Adjusted Profit before Tax GBP9.1m GBP8.8m 3.8%
Profit before Tax GBP4.5m GBP4.9m (9.4%)
Adjusted EPS 6.99p 6.82p 2.5%
Basic EPS 2.95p 3.54p (16.7%)
Interim Dividend per Share 2.10p 2.10p -
---------------------------- ------------- ------------- --------
Operating Highlights
-- Given COVID-19, the Group continued to invest carefully
and selectively in the future growth of the business,
including:
o Further strategic expansion of the Group's service offering
with the launch of new Insurance practice in France
o A small number of strategic hires in the period: number
of consultants rose by 4.8% to 438 (30 September 2019:
418)
o Expansion of the Group's director team through the addition
of 8 directors globally
-- Swift and seamless transition to home working in all locations
as a result of the health pandemic; a testament to the
Group's investment in technology and infrastructure improvement
to support its growth objectives
-- North America continued to perform well, with revenue
increase of 8.2% to GBP7.8m (H1 20: GBP7.2m). Good growth
in Europe & Asia, including revenue increase of 22.5%
to GBP13.4m (H1 20: GBP10.9m) and a strong contribution
from Asia
-- Strong client retention rates and growth in new clients
globally: the number of clients that the Group has supported
now stands at 409 (H1 20: 350)
COVID-19 Update and Outlook
-- Remote working remains across most Alpha locations; the
entire team has adjusted very well and we continue to
service clients to the highest standards
-- As previously reported, Alpha took early pre-emptive action
to maintain liquidity and protect the business in response
to COVID-19. Given the resilient business performance
in the first half, the Group has begun to ease and reverse
those protective measures
-- The Group has maintained its strong balance sheet with
good cash collection continuing in the first half. In
addition to a GBP32.5m net cash position, the Group has
further flexibility through its undrawn credit facility
of GBP20.0m
-- The Group continues to make selective investments in strategic
hires while maintaining a controlled approach to discretionary
operational expenditure
-- Notwithstanding the current macroeconomic uncertainty,
the strong structural growth drivers remain in place and
the Group continues to see opportunities, new client wins
and extensions to existing projects
-- We are pleased with a robust global pipeline, strong sales
momentum and good win rate moving into the second half
-- Accordingly, the Board is confident that Alpha is well
positioned for future growth and that the Group will deliver
a full-year performance in line with current market expectations
Commenting on the results, Euan Fraser, Global Chief Executive
Officer said:
"We are very pleased with the resilient performance of the Group
and to be reporting on a good set of results for the six months
ended 30 September 2020. In a period dominated by economic
uncertainty, the Group has demonstrated the strength of its people
and its service proposition.
We took early pre-emptive action to mitigate the impacts of the
COVID-19 pandemic and to protect the long-term growth prospects of
the business. In the first half, we made good strategic progress
through selective headcount increases and the creation of a new
Insurance practice in France. I am also delighted to confirm that
we have continued to win new projects and new clients. None of this
would have been possible without the commitment, hard work and
understanding of all our people, to whom I would like to extend a
very big thank you.
We are pleased with the resilience of the Alpha business, as
demonstrated during the first half, and we see multiple
opportunities to deliver further growth ahead. Notwithstanding the
macroeconomic uncertainty, which we continue to monitor, the Board
looks forward to progressing its strategic objectives through the
remainder of the financial year and is confident in the Group
delivering a full-year performance in line with current market
expectations."
Enquiries:
Alpha Financial Markets Consulting
plc
Euan Fraser, Global Chief Executive
Officer
John Paton, Chief Financial Officer +44 (0)20 7796 9300
Temple Bar Advisory (Financial Public
Relations)
Alex Child-Villiers +44 (0)77 9542 5580
William Barker +44 (0)78 2796 0151
Sam Livingstone +44 (0)77 6965 5437
Grant Thornton UK LLP (Nominated Adviser)
Philip Secrett
Harrison Clarke
Seamus Fricker +44 (0)20 7383 5100
Berenberg (Joint Broker)
Chris Bowman
Toby Flaux
Alix Mecklenburg-Solodkoff +44 (0)20 3207 7800
Investec Bank plc (Joint Broker)
Patrick Robb
James Rudd
Will Fenby +44 (0)20 7597 4000
Analyst Presentation:
A results presentation will take place at 11:00 a.m. today by
conference call. Those wishing to attend should email
alpha@templebaradvisory.com or call 0207 183 1190.
The interim results and a copy of the presentation slides, for
those unable to attend the results presentation, will be available
on the company website at:
https://alphafmc.com/investors/reports-presentations/ .
Notes:
This announcement contains certain forward-looking statements
with respect to the Company's current targets, expectations and
projections about future performance, anticipated events or trends
and other matters that are not historical facts. These
forward-looking statements, which sometimes use words such as
"aim", "anticipate", "believe", "intend", "plan", "estimate",
"expect" and words of similar meaning, include all matters that are
not historical facts and reflect the Directors' beliefs and
expectations and involve a number of risks, uncertainties and
assumptions that could cause actual results and performance to
differ materially from any expected future results or performance
expressed or implied by the forward-looking statement.
INTERIM REPORT
We are delighted with the resilient performance of the Group in
the first half of the financial year, which was a period dominated
by economic uncertainty and operational change as a result of the
COVID-19 pandemic. The Group has continued to trade profitably,
with growth in both net fee income and adjusted EBITDA compared to
the first half of the previous financial year, and ends the first
half with a strong balance sheet and net cash position.
During the six months ended 30 September 2020, Alpha has
continued to invest carefully and selectively in the growth of the
Group through strategic headcount increases and the launch of a new
Insurance practice in France. We are very pleased that client
demand for Alpha's proposition has continued and that the Group has
been able to sustain good growth in the period.
COVID-19 Response and Half Year Review(1)
Alpha has delivered a strong performance during the first half,
against a backdrop of unprecedented conditions and economic
uncertainty. This performance confirms the resilience of the
business, and the outstanding commitment and talent of Alpha's
consultants.
Following a successful and seamless transition to home working
in March 2020, the Group continued to deliver all in-flight
projects remotely. Projects progressed well with consistently
positive client feedback. Whilst Alpha, similar to many companies,
has faced a shifting business development environment during the
period, it has continued to make strong progress with good win
rates and project extensions. The Board is very pleased with how
the Group has performed during these challenges and continues to
monitor leading indicators in order to be able to respond
appropriately to changes in the economic environment.
Alpha has continued to make good progress in the half year ended
30 September 2020, maintaining excellent
client retention rates as well as adding new clients in many
locations. This has resulted in the Group achieving a 10.3% revenue
increase compared to the first half of the previous financial year
to GBP47.6m (H1 20: GBP43.2m) and a 12.0% net fee income increase
to GBP47.5m (H1 20: GBP42.4m), with resilient fee rates
overall.
Adjusted EBITDA increased by 6.1% to GBP10.1m (H1 20: GBP9.5m)
and adjusted profit before tax by 3.8% to GBP9.1m (H1 20: GBP8.8m).
While the Group benefitted from cost control initiatives and
further cost savings driven by COVID-19, such as travel reductions,
these have now begun to be reduced and reversed. The temporary
salary sacrifices ended on 30 September 2020 as planned and a
year-end salary sacrifice part repayment has been accrued for the
director team globally, partially offsetting these savings. Before
adjusting for non-underlying items, statutory operating profit was
GBP5.0m (H1 20: GBP5.2m). The basic earnings per share were 2.95p
(H1 20: 3.54p) and, when adjusted for non-underlying items,
adjusted earnings per share were 6.99p (H1 20: 6.82p), representing
a 2.5% increase.
The Group has strengthened its balance sheet with good cash
collection continuing in the first half. After recently repaying
the GBP5.0m outstanding balance on its revolving credit facility
(RCF), as at 30 September 2020, the Group held cash balances of
GBP32.5m and has further available liquidity from its undrawn
GBP20.0m RCF.
(1) All rounding and percentage change calculations are from the
basis of the financial statements, in GBP'000s. All comparisons are
to the H1 20 period (six months ended 30 September 2019) unless
otherwise stated
Operational and Geographical Review
In the context of the COVID-19 pandemic, our key operational
focus over the last six months has been the health and safety of
our people, and ensuring that our teams can be effective while
working remotely. The transition to remote working was executed
swiftly and seamlessly, enabling Alpha to continue to work closely
with its clients and to service them to the very highest standards.
The Group has demonstrated the resilience of its operational
platform and the strength of its technology, collaborative culture
and client delivery structures. Looking forward, we are confident
that the flexibility of our business and the commitment that our
high-performing team has shown during the period will ensure that
we remain resilient and can continue to respond to client demand
through any further challenges ahead.
Whilst the Board continues to monitor the impacts of the
COVID-19 pandemic, the underlying structural drivers within the
asset and wealth management industry of cost reduction, changing
regulation and increasing assets under management remain in place,
and are still driving change programmes globally. Consequently, the
Group's growth objectives have remained unchanged from those
previously stated: to extend the depth and range of services, and
to increase Alpha's footprint in all markets, with a model that
serves both to address current client needs and promote new client
demand.
We strategically aim to identify and launch new practices where
there is client-led demand, while pursuing growth in our existing
practice areas. During the period, Alpha's well-established
practices, including Investments, Distribution, M&A Integration
and Operations (previously Operations & Outsourcing), continued
to be successful across the Group's key markets. Meanwhile,
business practices that the Group has newly established, such as
Digital and Regulatory Compliance, have progressed well, and there
were a number of large projects serviced in the Pensions &
Retail Investment (P&RI) practice, which was launched in the
first half of FY 20.
We launched the P&RI practice as part of a roadmap to extend
into the insurance sector and to diversify our service offering. We
were delighted to progress that roadmap further during the first
half with the creation of a new Insurance practice, based out of
the Group's Paris office, and we are pleased that it is already
gaining traction with clients. It offers clients focussed expertise
in the insurance space, with a strong value proposition for the
insurance "CFO agenda", consulting across such topics as finance
transformation, accounting standards, technology solutions, cost
reduction, data management and operating model optimisation.
Currently, the Insurance practice offering is targeted at the
Group's French clients. However, we see a significant growth
opportunity in insurance and the objective is to advance this
proposition into an established service vertical in the insurance
market in due course, leveraging Alpha's wealth of advisory and
delivery expertise across the value chain, and combining its
experience in servicing pension and retail investment clients.
We are very proud of Alpha's collaborative culture and we are
delighted in how well our teams combine expertise, market knowledge
and practical approaches to provide our clients the same
exceptional levels of service and delivery outcomes irrespective of
where they are in the world. The Group has remained successful in
identifying and winning both new work and new clients across all
locations, as well as in securing multi-jurisdiction engagements.
We have worked with 59 new clients in the 12 months since H1 20,
taking the number of clients that we have now worked with to 409
(2) (H1 20: 350). The Board is pleased with the domestic client
base in all geographies as well as a growing, scaled capability
that extends the asset management value chain, meaning that Alpha
remains very well placed to support clients with their most
challenging projects and increase further its market
penetration.
(2) A total of 409 clients includes 21 client relationships
acquired from the Obsidian acquisition in the second half of FY
20
Geographic performance in the period can be summarised as
follows:
6 months to 6 months to
30-Sep 2020 30-Sep 2019 Change
---------------- -------------- ------------- --------
Net Fee Income
UK GBP26.5m GBP24.7m 6.9%
North America GBP7.7m GBP6.9m 12.9%
Europe & Asia GBP13.3m GBP10.8m 23.0%
---------------- -------------- ------------- --------
GBP47.5m GBP42.4m 12.0%
-------------- ------------------------------ --------
30-Sep 2020 30-Sep 2019 Change
-------------------------- ------------ ----------- --------
Consultant Headcount (3)
UK 219 225 (2.7%)
North America 76 59 28.8%
Europe & Asia 143 134 6.7%
-------------------------- ------------ ----------- --------
Period-end totals 438 418 4.8%
-------------------------- ------------ ----------- --------
(3) Consultant headcount refers to fee-generating consultants:
employed consultants plus utilised contractors in client-facing
roles
The Board is pleased with the good performance delivered in the
first half and the regional performances being reported. Despite
the challenging macro environment, revenue and net fee income
growth continued when compared to both the first half of last
financial year (H1 20) and the previous half (H2 20). The change in
consultant headcount reflects the Group's pre-emptive decision at
the start of the financial year to reduce recruitment to all but
strategic hires as a business protection measure.
The UK remains the largest geography within the Group and we are
proud to be supporting some of the highest profile projects in the
UK marketplace. UK net fee income grew 6.9% against the comparative
H1 20. On an organic basis(4) , t he UK business grew 2.3% when
compared to H1 20, with solid consulting demand complemented by
Axxsys's growth and a consistent contribution from Alpha Data
Solutions (ADS) during the period. The Board is satisfied that
Alpha UK is navigating the new business development landscape very
well, maintaining good win rates throughout the period and with a
strong pipeline going into the second half. The core Alpha
practices continued to perform well, with increased UK contribution
from M&A Integrations. The newer P&RI practice also
contributed well, which creates a strong foundation for future
growth. We are confident that Alpha's exceptional reputation in the
UK, together with a practice-focussed expansion strategy, will
enable sustainable growth over the long term.
Europe & Asia delivered a good H1 21 performance, with net
fee income increasing by 23.0%, and 17.1% organically, with strong
growth in Asia and Axxsys Europe. The six months ended 30 September
2020 saw some good individual country performances and the Board
was reassured to see consistent client demand for our subject
matter expertise led proposition and improved consultant
utilisation levels. At the start of the second half of FY 21, our
Europe & Asia pipeline is good, and we expect to achieve
further progress in the latter part of the year.
We are pleased that Alpha's high-quality service offering and
expertise continues to resonate with those Europe & Asia local
markets, attracting 14 new clients since the comparative half last
year and enabling the Group to make a number of strategic new
hires, including the addition of a new director in France to lead
the Insurance practice. In FY 20, with the acquisition by the Group
of Axxsys, we added an office in Denmark into Alpha's European
footprint, and we see the Nordics and Central Europe as an
attractive growth market. We have strengthened the team there with
the hiring of a new director, who is also appointed Chief
Innovation Officer for Axxsys.
The North America business continued to perform well, delivering
a net fee income increase of 12.9% on an almost entirely organic
basis. The North America business expanded its domestic client base
and the projects in the region include several longer duration
systems implementation and acquisition integration projects.
Consultant team utilisation has been well aligned to Group target
levels through the half. The Board is confident that the market
represents a significant opportunity for growth within the Group
and is pleased with the performance of Alpha North America in the
first half. We are delivering against our growth plan and are
delighted to have added two directors to the team during the
period, both through internal promotions, reflecting the
exceptional talent within the business.
(4) Please see note 3 for more detail on organic net fee income
growth
Our People
Alpha's competitive advantage stems from its people. 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. Consequently, investing in our people
is a key component of the growth strategy. 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 market-leading proposition for attracting and
retaining the very best consulting talent.
In response to the COVID-19 pandemic, we tightened our
recruitment targets to selective, strategic hiring only; however,
we have still strengthened our consultancy teams with key hires
during the period. Overall, we have increased the headcount of
consultants by 4.8% to 438(5) globally (September 2019: 418),
reinforcing our strong track record and reputation for identifying
outstanding performers both in the market and at graduate level. M
any of our graduates have progressed quickly, achieving very senior
grades within the organisation, which is a fantastic testament to
both the quality of the people as well as our focus on maintaining
the most supportive and progressive environment for our teams to
work in. We were delighted that the North America business was able
to welcome its third graduate class in September 2020, reflective
of both growth in that region and the high level of interest from
exceptional candidates to work for Alpha.
Reinforcing our local and global director teams is a key factor
in providing the right level of support for our consultants and our
values. We continue to ensure that we have the appropriate blend of
industry expertise and cultural values within the Group to lead the
business and, in the period, we have expanded the director team
across the UK, North America and Europe. We were delighted to
welcome four new directors to the business and to make four
successful promotions to director.
The start of the reporting period involved the temporary closure
of all of our physical offices and, while many of our offices are
now open in a certain capacity, in accordance with government
guidelines, all Alpha's employees have had to accept changes in
their working practices. We are very proud of the way in which our
people have responded, and the level of dedication, diligence and
collective spirit shown across the Group. These positive responses
from an exceptionally talented group of consultants have enabled
the Alpha business to provide full continuity of service to our
clients, which can be seen in the financial performance.
As an employer, we are committed to providing a collaborative
and supportive environment for all our people at all times. We know
that the health and wellbeing of our people is a crucial factor in
delivering the best results for our clients, developing and
retaining our highly talented team, and meeting the challenges of a
fast-growing business. Prioritising and supporting the health,
safety and wellbeing of our people was, understandably, a key focus
of Alpha's remote working strategy, with a number of initiatives
implemented to help Alpha's people navigate through these difficult
times. All these initiatives were designed by individuals within
the Alpha team, demonstrating the full value that our employees see
in helping one another. The wellbeing plan was adapted to focus on
supporting the mental and physical wellbeing of staff while they
work in isolation. To provide the best possible support, more
regular "pulse" surveys were introduced to understand the position
of the team on the topics of wellbeing, productivity and stress.
The results have been used to drive new approaches and guide
communications, including ideas and suggestions for keeping
mentally and physically well, activity challenges, discussions on
health-related topics, virtual coffee meetings with wellbeing
champions and resilience training with an external partner.
Community and corporate social responsibility (CSR) have always
been very important to Alpha's leadership team, employees and the
organisation as a whole. We were hugely impressed by the way in
which the Alpha teams have increased and adapted their CSR
activities in response to the constraints and impacts of the
pandemic. Our teams recognise that many charities have been
affected by COVID-19 due to fewer donations, less in-person
volunteering and fundraising opportunities. Alpha has continued to
maintain a very strong relationship with its Charity of the Year
partner, Plastic Oceans (UK), using multiple approaches to enhance
awareness and develop its contributions, while supporting
remotely.
These CSR efforts have included:
-- Creating a "housecup challenge" both to encourage internal
collaboration and socialisation within Alpha (following
the transition to working from home), and to support the
Charity of the Year programme. Participation in the housecup
challenge was donations based, to facilitate ongoing financial
support for the charity;
-- Given the reduced opportunities to volunteer physically,
the Alpha CSR team worked with Plastic Oceans to create
an agenda that focussed on education, action and awareness.
The resulting set of activities and discussions have challenged
our behaviours with respect to plastic usage, thus developing
awareness around the true goal of Plastic Oceans; and
-- Identifying and providing pro bono work 100% remotely,
across a series of important and meaningful projects for
Plastic Oceans at a very challenging time for the charitable
sector.
The performance of our people during the unique challenges of
the first half is fully representative of their values, quality and
resilience. Alpha's highly skilled teams have demonstrated
exceptional standards of client delivery; ensured our ability to
identify and win new business; extended the unique culture of
collaboration, integrity and responsibility; and enabled further
strategic progress to be delivered. On behalf of the Board, we
would like to extend our thanks to everybody for their hard work,
commitment and incredible contributions during the period.
(5) Total headcount of 438 includes 10 consultants arising from
the Group's acquisition of Obsidian in the second half of FY 20
Growth Strategy
Alpha's strategic aim is consistent with that reported
previously: to be recognised as the leading global asset and wealth
management consultancy, and as the leading consultancy in all the
domestic asset and wealth management markets in which it operates.
We have a dedicated focus on achieving this aim through organic and
inorganic growth, wherein the Board recognises the benefits of
increasing the breadth of the service offering through selective,
complementary acquisitions.
Alpha has developed a proven track record for supporting clients
globally through deep subject matter expertise and a commitment to
the highest delivery standards. Alpha's strategy is premised upon
leveraging the multiple growth opportunities that it sees across
the industry, while using its strong reputation and highly
successful business model to progress and expand further. This
includes both expanding the Group's capabilities in establishing
new practices and the continued roll-out of the practice framework
globally. The Group has continued to make progress on its strategic
objectives in the period, by extending the range of services that
it offers. We have increased the number of business practices from
13 to 14, and we expect that to grow as we explore new industry
opportunities and client propositions.
As previously stated, the Board supports the view that the
strategy includes moving into additional parts of the asset and
wealth management chain. We are very pleased to announce that the
Group's France business has established a new proposition in
Insurance, with an experienced team of high-performing individuals
that includes one new director. With the introduction of our
Insurance practice, Alpha can replicate its compelling blueprint in
the adjacent area of investments, and we look forward to developing
and growing this new proposition further.
Despite the market uncertainty that dominated the period,
organic revenue growth has been achieved in all regions, which is
evidence of the strength and direction of the Group's growth
strategy. The asset and wealth management industry exhibits ongoing
growth, and the structural drivers of change represent clear
opportunities for the Group to continue developing its service
offering to support clients across the spectrum of their operating
models, both in terms of capabilities and jurisdictional footprint.
We will broaden our service offering and extend the number of
business practices to meet evolving client needs and demand. We
remain committed to strengthening and deepening Alpha's existing
practices across all regions, and it is the building out of this
practice structure across North America, Europe and, ultimately,
Asia that will help to drive our future growth organically.
To support its growth objectives, Alpha will continue to invest
in and incentivise its high-performing employees. We will also seek
the addition of new talent to the Group both through targeted
recruitment and selective acquisitions. Alpha's performance in the
six months ended 30 September 2020 further demonstrates the Group's
ability to identify and secure opportunities that enhance the
proposition for its employees, its clients and, consequently, its
investors, and validates the strength of the business strategy.
Acquisitions
Acquisitions remain a key part of the Group's growth strategy,
alongside organic growth, with a continued focus on acquiring
businesses that offer complementary services to our clients in both
existing and target markets. The objective remains to extend our
consulting and service proposition, and to broaden our reach both
across and into additional parts of the asset and wealth management
industry.
In the prior financial year, we acquired two businesses in
Axxsys and Obsidian, which strengthened both our expertise and our
service offering. These acquisitions have added to Alpha's growth
this year, enabling strong local introductions and cross-selling
opportunities in the markets in which they operate. Both businesses
have been completely integrated and are performing well within the
Alpha Group.
The addition of Axxsys to the Alpha Group brings a strong
technology-focussed consulting service to the client proposition;
in particular, it extends the Group's expertise in SimCorp and
investment management platforms. We are very pleased to report that
the Axxsys business made a strong contribution to the financial
performance of the first half. Aligned to the Group's strategic
objectives, during the period, Axxsys has continued to develop its
unique expertise and recognition in implementing the SimCorp
platform for the pension and insurance sector. The Axxsys and Alpha
consulting teams are also collaborating very successfully on the
delivery of a number of strategic client projects in the UK, Europe
and North America, with multiple cross-selling opportunities
developing globally.
The acquisition and integration of Obsidian, a specialist
provider of software solutions for the investment management
industry, added a strategically important technology development
and product capability within our data solutions business. The
expanded and enhanced ADS proposition offers the market a
comprehensive and rich suite of data and business intelligence
products, which form the basis of a recurring license revenue
stream. We are pleased with how the combined business is
performing, and we see very strong growth potential based around
the highly relevant product offering, albeit COVID-19 has
lengthened the software sales cycle for the moment.
The Group considers acquisitions a key part of the growth
strategy and continues to build a healthy pipeline of acquisition
opportunities that promise to provide diversified and established
revenues, looking in particular at data and product businesses and
technology consulting firms that can complement and grow the
Group's service offering. As a Board, we will monitor how we best
implement that strategy, in line with both market opportunity and
client demand.
Governance and the Board
The Alpha Board meets regularly to oversee the Group's corporate
and operational activities, and to manage the progression of its
strategic objectives. The Board is committed to the core values of
strong governance, integrity and business ethics, which we believe
are key to reducing risk, adding value and, in turn, bringing
long-term benefits to the Group's shareholders and
stakeholders.
As part of this commitment, we continue to review and evolve the
Board governance framework. In July 2020, Alpha welcomed an
additional independent Non-Executive Director to the Board. On her
appointment, Jill May also joined the Audit and Risk, Remuneration
and Nomination Committees of the Board, and we are very happy to be
benefitting already from her range of experience across financial
services, regulation and public companies.
As announced prior to the AGM, Nick Kent decided to step down
from the Board, with effect from 1 September 2020. Having founded
Alpha in 2003, Nick managed the business through a significant
chapter of growth and expansion. The Board remains very grateful to
Nick for his important contributions to Alpha's success both in his
previous CEO role and as a Non-Executive Director of the Board. We
are pleased that he has agreed to continue to support the Board as
an adviser.
The Board was pleased with its third AGM on 23 September 2020,
at which all the resolutions proposed were successfully passed.
During the period, we have engaged further with shareholders
through the FY 20 results roadshows, albeit in a different format
due to COVID-19. We welcome opportunities to talk to all our
shareholders and we will continue to maintain a regular and
constructive dialogue, while seeking to broaden our shareholder
base.
Financial Performance Review
6 months to 6 months to
30-Sep 2020 30-Sep 2019 Change
------------------------- ------------- ------------ --------
Revenue GBP47.6m GBP43.2m 10.3%
Net Fee Income GBP47.5m GBP42.4m 12.0%
Gross Profit GBP16.3m GBP16.3m 0.2%
------------------------- ------------- ------------ --------
Adjusted EBITDA GBP10.1m GBP9.5m 6.1%
------------------------- ------------- ------------ --------
Adjusted EBITDA Margin 21.3% 22.5% (1.2%)
------------------------- ------------- ------------ --------
Adjusted Profit before
Tax GBP9.1m GBP8.8m 3.8%
Profit before Tax GBP4.5m GBP4.9m (9.4%)
Net Cash from Operating
Activities GBP15.3m GBP6.2m 145.0%
------------------------- ------------- ------------ --------
Alpha enjoyed strong first half growth, with net fee income of
GBP47.5m, up by 12.0% compared to the first half of the last
financial year (H1 20: GBP42.4m), including 7.5% organic growth and
the remainder being the inorganic contribution from the Axxsys and
Obsidian acquisitions. Across the Group, H1 21 net fee income grew
in line with average headcount growth, with utilisation averaging
close to target levels, slightly up on the comparative period, and
resilient consultant fee rates overall. The core established Alpha
practices continued to perform well, with increased contribution
most notably from M&A Integrations and Distribution projects.
Currency translation had almost no effect on net fee income and
profits during the first half of the financial year. In the six
months, Sterling averaged $1.27 (H1 20: $1.26) and EUR1.12 (H1 20:
EUR1.13), which, with other offsetting currency movements, resulted
in a negligible net currency effect.
Group gross profit was consistent with the prior period at
GBP16.3m, reflecting continued investment in our people and the
business through the period to support future growth and a
resilient fee rate performance in what remains overall a
competitive market. Investment in the team included an increase in
average team headcount, promotion-related pay increases and accrued
profit share payments, alongside a contingent accrual for the part
repayment of the director salary sacrifices that were made. We
believe that the impact on gross margin in the period is temporary
and that gross margin will improve as the market normalises.
The UK business, the Group's largest geographical region,
increased net fee income 6.9% in the first six months. On an
organic basis, UK net fee income grew 2.3% compared to H1 20, with
solid consulting demand complemented by Axxsys's growth. The North
America business increased net fee income by 12.9%, successfully
deploying its growing consulting team at target utilisation levels
as it continued to widen further its domestic client base and
benefit from several longer duration projects. In Europe & Asia
net fee income was up by 23.0%. On an organic basis, the region
reported 17.1% growth overall. Growth was seen across the region,
with the European team well deployed and the strongest growth in
Asia. The Axxsys Europe team also grew through last year, lifting
its relative H1 21 contribution.
UK consultant fee rates were resilient in the period,
accompanied by continued investment in the team and near-target
utilisation achieved. The North America team grew substantially and
there was some discounting on certain longer-term engagements,
impacting margins overall. Europe & Asia delivered increased
gross profits at resilient margins.
The Axxsys business, acquired in June 2019, has performed well
and contributed GBP5.0m in revenue (H1 20: GBP2.5m). The Obsidian
business, acquired in November 2019 within Alpha Data Solutions,
contributed GBP0.4m revenues in the first half, with COVID-19
proving a more challenging backdrop to winning new clients and
deploying its software products, and a similar lengthening of the
client sales cycle also experienced across the wider ADS
offering.
Administration expenses, before non-underlying items, fell 8.2%
or GBP0.5m in the six months, reflecting tighter control of
discretionary spend and the impact of the COVID-19 operating
environment. 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. Including
non-underlying expense items, which rose slightly in H1 21,
administrative expenses increased 1.9% to GBP11.3m (H1 20:
GBP11.1m). The non-underlying expense items, set out in note 3,
increased in the period to GBP4.2m (H1 20: GBP3.7m) reflecting an
increased Axxsys and Obsidian earn-out and deferred consideration
charge, higher intangible asset amortisation and share-based
payments charges, offset by reduced acquisition costs.
Adjusted EBITDA grew 6.1% to GBP10.1m (H1 20: GBP9.5m),
reflecting the lower adjusted administration expenses, and adjusted
EBITDA margin eased from 22.5% in H1 20 to 21.3%. Adjusted profit
before tax rose 3.8% to GBP9.1m (H1 20: GBP8.8m) after charging
depreciation, amortisation of capitalised development costs and
underlying finance costs. Operating profit fell 3.5% to GBP5.0m (H1
20: GBP5.2m) after non-underlying expenses, including earn-out and
deferred consideration expenses, and share-based payment charges.
Further detail of these non-operating expenses is set out in note
3.
Finance expenses rose in the first half as a result of Alpha
having drawn GBP5.0m of its RCF for the period, now repaid, and
increased non-underlying finance expenses relating to acquisition
consideration discount unwinding, as set out in note 3. Pre-tax
profit, after non-underlying items, was GBP4.5m (H1 20: GBP4.9m).
Taxation charges for the period were GBP1.5m (H1 20: GBP1.3m),
reflecting the growth in taxable profits and the blended tax rate
of the jurisdictions in which the Group operates, while the
comparative period benefitted from utilising some historic group
losses.
Net assets at 30 September 2020 totalled GBP95.5m (31 March
2020: GBP91.4m). This increase principally arises from GBP3.0m in
retained earnings, along with a GBP1.1m increase in other reserves
relating to share-based payments. Since 31 March 2020, the increase
in current trade and other payables mainly relates to the deferral
of FY 20 team profit share payments, normally paid in the summer
months, but deferred as part of Alpha's response to COVID-19,
partially offset by a decrease in acquisition consideration related
liabilities, reflecting payments in the period. FY 20 profit share
will be paid shortly as Alpha eases the protective measures taken
earlier in the year.
Net cash flow generated from operations increased to GBP15.3m
(H1 20: GBP6.2m), being significantly improved by the deferral of
the team profit share payments and some temporary corporation tax
and VAT deferrals permitted in relation to COVID-19. Adjusted cash
generated from operating activities was GBP16.4m and, after
allowing for COVID-19 related payment deferrals, underlying cash
conversion remains strong, assisted by improved working capital
management. The Group's net cash position increased to GBP32.5m at
30 September 2020 (31 March 2020: GBP21.0m), after a further
GBP3.9m of deferred acquisition payments and the full repayment of
Alpha's GBP5.0m RCF balance. As previously disclosed, Alpha renewed
and upsized its RCF in June 2020 and now maintains its GBP20.0m RCF
undrawn, providing further capital flexibility.
Basic earnings per share were 2.95p (H1 20: 3.54p) and adjusted
earnings per share were 6.99p (H1 20: 6.82p). The Board suspended
the Group's dividend earlier in the year in light of the unfolding
COVID-19 situation and the uncertainty that it created. Given
Alpha's good H1 21 performance, the Board is pleased to reinstate
Alpha's dividend and today it declares an interim dividend for the
current year of 2.10p per share (H1 20 2.10p), which will be paid
on 22 December 2020 to shareholders on the register at the close of
business 11 December 2020.
Risk Management and the Year Ahead
The Group remains cognisant that there are a number of potential
risks and uncertainties that could have a material impact on its
performance over the remaining six months of the financial year and
that could cause results to differ from expectations. These risks
include political and economic uncertainty, and market volatility.
The Board does not consider that these principal risks and
uncertainties differ from those published in the Annual Report
& Accounts for the year ended 31 March 2020.
The current COVID-19 situation is a significant event that
brings an unprecedented level of uncertainty to the business
environment and a shifting business development landscape. Alpha
took early decisive action in response to the pandemic,
implementing protective measures in March to reduce costs and
maintain liquidity. FY 21 trading has begun well in the first half
and the Group continues to see opportunities, new client wins and
extensions to existing projects. Consequently, those measures are
being reduced and reversed. However, the Board will continue to
monitor the COVID-19 situation closely and will act appropriately
in managing the Group through more uncertainty ahead in the
interests of all stakeholders.
The Board and the executive team also continue to monitor the
geopolitical developments surrounding the UK's decision to leave
the European Union ("Brexit") closely, including the prospect of a
"no deal" Brexit. The Group has assessed that it does not expect
Brexit to have a material direct impact on its ongoing growth and
development of the business, given arrangements between the UK and
EU countries, and its network of offices across Europe. The most
likely impact of Brexit on the business is a potential short-term
delay to client decision making, which is not expected to have any
adverse effects over the medium term.
The Board has considered all the above factors in its assessment
of going concern and has been able to conclude the review
positively. While cognisant of potential macroeconomic risks and
the competitive environment, the Group's people, investment in
product and service offerings and an international footprint help
position Alpha well for the second half of the year.
Outlook
We are pleased to be reporting on a resilient performance in H1
21, while recognising that economic uncertainty remains given the
ongoing impact of COVID-19, alongside some wider geopolitical
uncertainty. There is good momentum within the business, and the
Group has developed a strong client base with a deep understanding
of the markets in which it operates to be able to leverage this.
The Board is confident that the business model is robust, with the
prospect of long-term revenues from repeat client business, focus
on margins and strong cash flow generation.
The Group's strategy remains focussed on identifying
opportunities and creating a platform for both organic and
inorganic growth, and we are well positioned to make further
progress against our strategic objectives in the second half of the
financial year. The structural drivers in the asset and wealth
management industry, which will drive ongoing demand for Alpha's
services, remain strong. It is through the quality of our people,
which we continue to reinforce; an excellent delivery track record;
and multiple new business opportunities to extend the service
offering that we can ensure that we have the best foundations from
which to both withstand any further challenges ahead and to grow
the business successfully.
The performance of the business during the global pandemic
demonstrates the exceptional talent of our people and the strength
of our service proposition for our clients. Moving into the second
half, there is a good pipeline of new projects and we are confident
that results for the full year will be in line with current market
expectations.
Ken Fry Euan Fraser
Chairman Global Chief Executive Officer
Interim condensed consolidated statement of comprehensive
income
For the six months ended 30 September 2020
Unaudited Restated(6) reviewed
six months ended six months ended
30 Sep 2020 30 Sep 2019
Note GBP'000 GBP'000
Continuing operations
Revenue 2 47,613 43,183
Rechargeable expenses (97) (743)
Net fee income 47,516 42,440
Cost of sales (31,210) (26,160)
Gross profit 16,306 16,280
Administration expenses (11,282) (11,076)
Operating profit 5,024 5,204
Depreciation 558 522
Amortisation of capitalised development costs 306 156
Adjusting items 3 4,233 3,659
Adjusted EBITDA 3 10,121 9,541
Finance income - -
Finance expense (568) (286)
Profit before tax 4,456 4,918
Taxation (1,481) (1,338)
Profit for the period 2,975 3,580
Exchange differences on translation of foreign operations (20) 1,624
Total comprehensive income for the period 2,955 5,204
Basic earnings per ordinary share (p) 4 2.95 3.54
Diluted earnings per ordinary share (p) 4 2.81 3.42
(6) For further information on prior period restatements, please
refer to the 'Prior period restatements' section of note 1
Interim condensed consolidated statement of financial
position
As at 30 September 2020
Restated reviewed Restated audited
Unaudited as at as at
as at 30 Sep 2019 31 Mar 2020
30 Sep 2020
Note GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 6 64,661 58,777 64,642
Intangible fixed assets 23,691 25,602 25,774
Property, plant and equipment 544 550 530
Right-of-use asset 2,271 2,919 2,611
Total non-current assets 91,167 87,848 93,557
Current assets
Trade and other receivables 8 19,806 23,462 21,212
Cash and cash equivalents 32,536 17,144 25,996
Total current assets 52,342 40,606 47,208
Current liabilities
Trade and other payables 9 (30,315) (23,458) (26,018)
Corporation tax (5,186) (3,460) (4,150)
Lease liabilities (694) (750) (791)
Interest bearing loans and borrowings - - (5,000)
Total current liabilities (36,195) (27,668) (35,959)
Net current assets 16,147 12,938 11,249
Non-current liabilities
Deferred tax provision (3,453) (4,703) (4,438)
Other non-current liabilities (6,755) (3,171) (7,104)
Lease liabilities (1,647) (2,195) (1,878)
Total non-current liabilities (11,855) (10,069) (13,420)
Net assets 95,459 90,717 91,386
Equity
Issued share capital 10 79 78 78
Share premium 89,396 89,396 89,396
Capital redemption reserve - (1) -
Foreign exchange reserve 3,386 3,719 3,406
Other reserves 2,769 1,136 1,652
Retained earnings (171) (3,611) (3,146)
Total shareholders' equity 95,459 90,717 91,386
The attached notes form part of these interim condensed
consolidated financial statements.
Interim condensed consolidated statement of cash flows
For the six months ended 30 September 2020
Unaudited Reviewed
six months six months
ended ended
30 Sep 2020 30 Sep 2019
GBP'000 GBP'000
Cash flows from operating activities:
Operating profit for the period 5,024 5,204
Depreciation of property, plant and equipment 558 522
Loss on disposal of fixed assets - 11
Amortisation of intangible fixed assets 2,083 1,700
Acquisition related costs - 430
Share-based payment charge 638 399
Operating cash flows before movements
in working capital 8,303 8,266
Working capital adjustments:
(Increase)/decrease in trade and other
receivables 1,639 (2,149)
Increase/(decrease) in trade and other
payables 6,292 1,391
Tax paid (949) (1,269)
Net cash generated from operating activities 15,285 6,239
Cash flows from investing activities:
Acquisition of subsidiary, net of acquired
cash (2,752) (2,582)
Capitalised development costs - (876)
Additions to property, plant and equipment (143) (272)
Net cash used in investing activities (2,895) (3,730)
Cash flows from financing activities:
Issue of ordinary share capital 1 -
Repayment of borrowings (5,000) -
Interest paid (340) (23)
Lease liability payments (473) (438)
Dividends paid - (4,135)
Net cash used in financing activities (5,812) (4,596)
Net increase/(decrease) in cash and cash
equivalents 6,578 (2,087)
Cash and cash equivalents at beginning
of the period 25,996 18,581
Effect of exchange rate fluctuations on
cash held (38) 650
Cash and cash equivalents at end of the
period 32,536 17,144
Interim condensed consolidated statement of changes in
equity
For the six months ended 30 September 2020
Capital Foreign
Share redempti-on exchange Retained
capital Share premium reserve reserves Other reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 31 March
2019 76 89,396 1 2,095 737 (3,165) 89,140
IFRS 16
modified
retrospective
adjustments - - - - - 109 109
As at 1 April
2019 -
restated 76 89,396 1 2,095 737 (3,056) 89,249
Comprehensive
income
Profit for the
period - - - - - 3,580 3,580
Foreign
exchange
differences
on
translation
of foreign
operations - - - 1,624 - - 1,624
Transactions
with owners
Shares issued
(equity) 2 - (2) - - - -
Share-based
payment
reserves - - - - 399 - 399
Dividends - - - - - (4,135) (4,135)
As at 30
September
2019 -
restated 78 89,396 (1) 3,719 1,136 (3,611) 90,717
Comprehensive
income
Profit for the
period - - - - - 2,587 2,587
Foreign
exchange
differences
on
translation
of foreign
operations - - - (313) - - (313)
Transactions
with owners
Shares issued
(equity) - - 1 - - (1) -
Share-based
payment
reserves - - - - 518 - 518
Deferred tax
recognised in
equity - - - - (2) - (2)
Dividends - - - - - (2,121) (2,121)
As at 31 March
2020 78 89,396 - 3,406 1,652 (3,146) 91,386
Comprehensive
income
Profit for the
period - - - - - 2,975 2,975
Foreign
exchange
differences
on
translation
of foreign
operations - - - (20) - - (20)
Transactions
with owners
Shares issued
(equity) 1 - - - - - 1
Share-based
payment
reserves - - - - 638 - 638
Deferred tax
recognised in
equity - - - - 479 - 479
Dividends - - - - - - -
As at 30
September
2020 79 89,396 - 3,386 2,769 (171) 95,459
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 period 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 interim condensed consolidated financial
statements
1. Basis of preparation and significant accounting policies
1.1. General information
The principal activity of the Group is the provision of
consulting and related services to clients in the asset and wealth
management industry, principally in the UK, North America, Europe
& Asia.
Alpha Financial Markets Consulting plc is incorporated in
England and Wales with registered number 09965297. The Company's
registered office is 60 Gresham Street, London, EC2V 7BB. The
Company is a public limited company and is admitted to trading on
the AIM of the London Stock Exchange.
These interim condensed consolidated financial statements were
authorised for issue on 25 November 2020 in accordance with a
resolution of the Directors.
1.2. Basis of preparation
These interim financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting and should be
read in conjunction with the Group's most recent annual
consolidated financial statements, for the year ended 31 March
2020. They do not include all of the information required for a
complete set of IFRS financial statements, however, selected
explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in the
Group's financial position and performance since Alpha's 2020
Annual Report & Accounts.
The financial information presented for the period to 30
September 2020 is unaudited. The financial information presented
for the comparative period to 30 September 2019 was subject to an
interim review and for the twelve months to 31 March 2020 was
audited.
The presentational currency of these financial statements and
the functional currency of the Group is pounds Sterling. All
amounts in these financial statements have been rounded to the
nearest GBP1,000.
1.3. Statutory accounts
Financial information contained in this document does not
constitute statutory accounts within the meaning of section 434 of
the Companies Act 2006 ("the Act"). The statutory accounts for the
year ended 31 March 2020 have been filed with the Registrar of
Companies. The report of the auditors on those statutory accounts
was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under section 498(2) or
(3) of the Act.
1.4. Basis of consolidation
These interim condensed financial statements consolidate the
interim financial statements of the Company and its subsidiary
undertakings (the "Group") as at 30 September 2020.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date that such control
ceases. The financial statements of subsidiaries are prepared for
the same reporting period as the parent company, using consistent
accounting policies.
All intra-group balances, income and expenses, and unrealised
gains and losses resulting from intra-group transactions are
eliminated in full.
1.5. Seasonality of operations
Given the nature of the Group's consulting and related services,
and the composition of the Group's customers and contracts,
seasonality is generally not expected to have a significant bearing
on the financial performance of the Group.
1.6. Going concern
The Directors have, at the time of approving these interim
condensed consolidated financial statements, a reasonable
expectation that the Company and the Group have adequate resources
to continue in operation for the foreseeable future. The Group's
forecasts and projections, taking into account plausible changes in
trading performance, show that the Group has sufficient financial
resources, together with assets that are expected to generate cash
flow in the normal course of business.
Impact of Coronavirus (COVID-19)
The Directors note that the World Health Organisation declared a
pandemic relating to COVID-19 on 11 March 2020 and social
distancing measures were put in place shortly thereafter. In the
period, the Group's key revenue generating territories closed
offices and transitioned to a remote working functionality to
protect the Group's employees and clients. In line with the Group's
accounting policies, a going concern review was undertaken for the
year ended 31 March 2020, which examined the sensitivity of the
Group's financial resources to a significant adverse impact of the
pandemic in FY 21.
Since the annual assessment, the Group has considered whether
there are any indicators of significant adverse variations or
material uncertainty in the Group's trading performance, both in
the period against the internal budget, and in the Group's
forecasts for at least 12 months from the date of issuance of this
report (the "going concern period"), taking into account plausible
downside scenarios. No such indicators have been identified. The
ongoing trading performance of the Group's core revenue generating
regions has been encouraging, and is ahead of the downside
scenarios assumed during the annual assessment.
The Group has maintained a strong balance sheet and liquidity
position and has repaid the GBP5.0m drawn RCF in the period. The
Group maintains a net cash position of GBP32.5m as at 30 September
2020 and has access to an undrawn GBP20.0m RCF, arranged in the
period, to support the Group's financing needs. While uncertainty
remains prevalent in the macroeconomic environment, the Directors
believe that the Group remains in a sufficiently strong financial
position to respond to further issues within the going concern
period.
Therefore, the Directors have adopted a going concern basis for
the preparation of these interim condensed consolidated financial
statements.
1.7. Principal accounting policies
Please refer to Alpha's Annual Report & Accounts 2020 for
full disclosures of the principal accounting policies that have
been adopted in the preparation of these interim condensed
consolidated financial statements. There have been no significant
changes to the accounting policies adopted by the Group in the
period.
1.8. Significant judgements and estimates
The preparation of financial information in accordance with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and reported
amounts of assets, liabilities, income and expenses.
Judgements
The Directors have made one judgement, excluding those involving
estimations, in the process of applying the Group's accounting
policies, which is considered to have a significant effect on the
amounts recognised in the financial statements for the period
ending 30 September 2020.
Employment-linked acquisition payments
The contingent and non-contingent consideration related to
acquisitions made in prior periods are part linked to the ongoing
employment of certain management vendors. The apportionment of
these payments in the financial statements is based on the
interpretation of multiple complex clauses within the Share
Purchase Agreement (SPA) of the relevant acquisition. For further
details please see note 7.
Estimates
A number of estimates have been made in the preparation of the
financial information. The underlying assumptions in the Group's
estimates are based on historical experience and various other
factors that are deemed to be reasonable under the circumstances.
These assumptions form the basis of developing estimates of the
carrying values of assets and liabilities that are not apparent
from other sources. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to estimates are recognised
in the period in which the estimate is revised and any future years
affected. Actual results can differ from these estimates.
The Directors have identified the following areas as key
estimates that are considered to have a significant risk of
resulting in a material adjustment to the carrying amounts of
assets or liabilities within the next financial year.
Share-based payments
Management has estimated the share-based payments expense under
IFRS 2. In determining the fair value of the share-based payment
charge, management has considered several internal and external
factors in judging the probability that management and employee
share incentives may vest and in assessing the fair value of share
options at the date of grant. Such assumptions involve estimating a
number of future performance and other factors. The fair value
calculations have been externally assessed for reasonableness in
the current and prior period. For further details please see note
5.
Acquisition earn-outs
The Obsidian and Axxsys earn-out expense calculations under IFRS
3 contain estimation uncertainty, as the earn-out potentially
payable in each case is linked to the future performance of the
acquiree. In order to determine the fair value of the earn-out at
the acquisition date, management has assessed the potential future
cash flows of the Axxsys and Obsidian businesses respectively, the
likelihood of an earn-out payment being made, and discounted using
an appropriate discount rate. These estimates are also affected by
the heightened uncertainty due to the current COVID-19 environment
and can change as a result of related events over the next several
years. The fair value of the estimated earn-out expense is
reassessed at each reporting date. For further details please see
note 7.
Impairment of goodwill
The Group determines whether goodwill is impaired on at least an
annual basis. At 30 September 2020, the Group has considered
whether there are any indicators of impairment that would
constitute a full impairment assessment to be performed at the half
year. No such indicators have been identified. For further detail
refer to note 6.
It is considered appropriate to disclose this as an area of
significant estimation due to the size of the balance, the
heightened uncertainty due to the current COVID-19 environment, and
the fact that it could change as a result of future events over the
next several years.
Coronavirus (COVID-19)
For the purposes of considering going concern and non-financial
asset impairment, management has applied a number of key
assumptions that relate to the ongoing outbreak of COVID-19 and the
associated market uncertainty in Alpha's operational territories.
The key assumptions applied for these purposes relate to the
potential ongoing impact of the pandemic and any further protective
measures as determined by government bodies globally, and the
associated assumptions as to the potential impact of these factors
on the Group's asset impairment and going concern
considerations.
Management consider that the impact of uncertainty related to
COVID-19 will be most apparent in the following areas of the
financial statements.
-- Going concern: refer to the "'Going concern'" section
above for further detail on the impact of COVID-19.
-- Impairment of non-financial assets: refer to note 6 for
further details on the impact of COVID-19 on asset impairment.
-- Valuation of expected credit loss on financial assets:
refer to note 8 for details of consideration given to
the valuation of the expected credit loss of receivables
in light of the COVID-19 uncertainty.
-- Acquisition earn-outs: refer to note 7 for further detail.
1.9. Prior period restatements
Remeasurement of lease accounting on transition to IFRS 16
During the reporting process for the year ended 31 March 2020,
which represented the first year of implementation, the Group
performed a reassessment of the opening balance sheet impact of the
Group's transition to IFRS 16 on 1 April 2019. The impact of this
has resulted in a GBP136,000 increase in the Group's net assets as
at 30 September 2019.
Previously, the 1 April 2019 opening adjustment was (GBP27,000)
and this was reassessed to GBP109,000, increasing the Group's
brought forward retained earnings by GBP136,000, of which GBP27,000
related to an increase in the Group's right-of-use asset and
GBP109,000 related to a reversal of the Group's rent-free accrual
balance at 1 April 2019.
Revenue including rechargeable expenses
As disclosed in the Group's Annual Reports and Accounts 2020, in
line with IFRS 15 Para. B35B, revenue was restated in H1 20 to be
recognised on a gross basis and the fees and associated
rechargeable expenses are disaggregated and shown separately. This
change in presentation has arisen from the Group's reassessment of
the principal versus agent considerations guidance in IFRS 15 with
regard to rechargeable expenses arrangements. This represents a
prior year adjustment under IAS 8 and has been applied
retrospectively from the earliest comparative period disclosed
within these financial statements.
This change increased revenue and rechargeable expenses by
GBP743,000 in H1 20 and has no impact on the Group's profits or net
asset position.
Remeasurement of the fair value of goodwill
In line with IFRS 3 Para. 45, the Group have made a measurement
period adjustment to the valuation of goodwill associated with the
acquisition of Obsidian Solutions Limited in the comparative period
ended 31 March 2020, due to a residual net cash payment made in the
period. This resulted in an immaterial GBP89,000 increase in the
value of goodwill and current liabilities, which has been reflected
in the restated statement of financial position as at 31 March
2020.
Additionally, as previously disclosed in the Group's Annual
Report & Accounts 2020, an immaterial GBP40,000 measurement
period adjustment to the fair value of goodwill and current
liabilities was recognised on the acquisition of Axxsys, and has
been reflected through the restatement of the statement of
financial position as at 30 September 2019.
Both restatements have no impact on the Group's net assets as at
31 March 2020 and 30 September 2019.
1.10. New accounting standards and interpretations
The following changes in accounting policies were applied by the
Group in these consolidated financial statements for the period
ended 30 September 2020. These included the adoption of new
standards and interpretations described below.
The International Accounting Standards Board (IASB) and IFRS
Interpretations Committee (IFRIC) have issued the following
standards and interpretations which are now effective:
- Amendments to references to the conceptual framework in IFRS standards
- Definition of a business (Amendments to IFRS 3)
- Definition of material (IAS 1)
- Interest rate benchmark reform (Amendments to IFRS 9, IAS 39 and IFRS 7).
None of the above standards or interpretations had a material
impact on the Group's financial statements for the period ended 30
September 2020.
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 and wealth management
industry.
The Directors consider that there is a material level of
operational support and linkage provided to the Group's emerging
territories in Asia and Europe 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 period. 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.
30 September 2020 UK North America Europe & Total
Asia
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 26,494 7,758 13,361 47,613
Rechargeable expenses (37) (16) (44) (97)
Net fee income 26,457 7,742 13,317 47,516
Cost of sales (16,151) (5,520) (9,539) (31,210)
Gross profit 10,306 2,222 3,778 16,306
Margin on net fee income (%)(7) 39.0% 28.7% 28.4% 34.3%
Net assets 54,856 9,948 30,655 95,459
Restated 30 September 2019 UK North America Europe & Asia Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 25,107 7,170 10,906 43,183
Rechargeable expenses (351) (314) (78) (743)
Net fee income 24,756 6,856 10,828 42,440
Cost of sales (13,930) (4,511) (7,719) (26,160)
Gross profit 10,826 2,345 3,109 16,280
Margin on net fee income (%)(7) 43.7% 34.2% 28.7% 38.4%
Net assets 55,565 8,464 26,688 90,717
The Group's central net assets have been allocated to the UK
operating segment, with the exception of goodwill balances, which
have been allocated in line with operating segments.
In the period, 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.
(7) Margin on net fee income is gross profit expressed as a
percentage of net fee income. Please refer to note 3 for further
detail
3. Reconciliations to alternative performance measures (APMs)
Alpha uses 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 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
Six months ended Six months ended
30 Sep 2020 30 Sep 2019
Note GBP'000 GBP'000
Profit before tax 4,456 4,918
Amortisation of acquired intangible assets 1,777 1,544
Loss on disposal of fixed assets - 11
Share-based payments charge 5 719 654
Earn-out and deferred consideration 7 1,561 1,257
Acquisition costs - 266
Integration costs 107 -
Foreign exchange (gains)/losses 69 (73)
Adjusting items 4,233 3,659
Non-underlying finance expenses 409 192
Adjusted profit before tax 9,098 8,769
Net underlying finance expenses 159 94
Adjusted operating profit 9,257 8,863
Depreciation of plant and equipment 558 522
Amortisation of capitalised development costs 306 156
Adjusted EBITDA 10,121 9,541
Adjusted EBITDA margin (%) 21.3% 22.5%
Adjusted EBITDA
Adjusted EBITDA is a commonly used operating measure, which is
defined by the Group as earnings stated before non-cash items
including intangible asset amortisation, depreciation, net finance
expenses and other non-operating expenses. 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 EBITDA also excludes the employee share-based payments
charge and related social taxes. This allows comparability between
periods as the Group's share option plans were established on AIM
admission, aligns more closely with the operational activities of
the business, accounts for the fact that the charge is a non-cash
item and that the estimated future social taxes payable fluctuate
with the future market value of the shares. This has been applied
consistently across reporting periods. Note 5 sets out further
details of the employee share-based payments expense calculation
under IFRS 2.
As per note 7, the acquisition of Axxsys and Obsidian in the
prior period involved deferred contingent and non-contingent
consideration payments, which, in accordance with IFRS 3, will be
expensed over several years, dependent on the ongoing employment of
the respective vendors. This cost has been removed to calculate
adjusted EBITDA as, whilst it will recur in the short term, it
represents additional payments linked to these acquisitions and not
operational performance. In prior periods, the employment-linked
deferred consideration relating to the acquisition of TrackTwo was
similarly adjusted.
Similarly, the impact of foreign currency volatility in
translating the underlying trading of the Group to the Group's
functional currency has been excluded from the calculation of
adjusted EBITDA on the basis that such exchange rate movements do
not reflect the underlying trends or operational performance of the
Group.
Acquisition costs expensed in the prior period relating to the
Axxsys acquisition have also been excluded from adjusted EBITDA as
they are not directly attributable to the ongoing trading
performance of the Group.
Integration costs incurred 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, and have been managed as a discrete
short-term project subsequent to the acquisition now completed.
These costs are excluded to allow clarity on the underlying
operational performance of the Group between periods.
Adjusted profit before tax
Adjusted profit before tax is an alternative performance measure
introduced to allow comparability of the Group's underlying
performance after net underlying finance expenses, including bank
interest and charges, and IFRS 16 Lease depreciation and interest
charges. This measure also reflects the underlying amortisation
charges arising from the capitalised costs of 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.
In addition, the related unwinding of the discounted contingent
and non-contingent acquisition consideration within finance
expenses is also considered non-operating in calculating adjusted
profit before tax.
Reconciliation of adjusted administration expenses
Six months ended Six months ended
30 Sep 2020 30 Sep 2019
GBP'000 GBP'000
Administration expenses 11,282 11,076
Adjusting items (4,233) (3,659)
Depreciation of plant and equipment (558) (522)
Amortisation of capitalised development costs (306) (156)
Adjusted administration expenses 6,185 6,739
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 costs of the business in calculating adjusted
EBITDA. Adjusted administrative expenses fell 8.2% to GBP6.2m.
Adjusted profit after tax
Six months Six months
ended ended
30 Sep 2020 30 Sep 2019
GBP'000 GBP'000
Adjusted profit before tax 9,098 8,769
Tax charge (1,481) (1,338)
Tax impact of adjusting items (562) (540)
Adjusted profit after tax 7,055 6,891
Adjusted profit after tax and adjusted earnings per share
metrics are further alternative performance measures, 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.
Adjusted earnings per share (EPS)
Adjusted 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 4
for further detail.
Six months ended Six months ended
30 Sep 2020 30 Sep 2019
Adjusted EPS
Adjusted EPS (p) 6.99 6.82
Adjusted diluted EPS (p) 6.67 6.58
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 period, treated as operating cash flows under IFRS,
in order to exclude the effect of cash payments relating to
acquisitions from underlying operating performance.
Six months Six months
ended ended
30 Sep 2020 30 Sep 2019
GBP'000 GBP'000
Net cash generated from operating
activities 15,285 6,239
Employment-linked acquisition payments 1,146 -
Adjusted cash generated from operating
activities 16,431 6,239
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.
Six months ended Six months ended
30 Sep 2020 30 Sep 2019
Cash conversion 304.2% 119.9%
Adjusted cash conversion 177.5% 70.4%
Organic net fee income growth
Organic net fee income growth of 7.5% for the current period
represents H1 21 net fee income less GBP1.9m net fee income
attributable to the acquisitions completed during prior
periods.
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 average foreign exchange rates
prevailing in that period. These exchange rates vary from period to
period, so the Group presents some of its results on a constant
currency basis. This means that the current period's results have
been retranslated using the average exchange rates from the
comparative period to allow for comparison of results, eliminating
the effects of volatility in exchange rates.
Currency translation had a minimal impact on both net fee income
and profits in H1 21, as a result of offsetting movements in
foreign exchange of Sterling against all currencies in Alpha's key
territories. In the six months, Sterling averaged $1.27 (H1 20:
$1.26) and EUR1.12 (H1 20: EUR1.13), which, with other offsetting
currency movements, resulted in a negligible net currency
effect.
4. Earnings per share and adjusted earnings per share
The Group presents basic and diluted 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.
The weighted average number of diluted ordinary shares used in
the calculation of diluted EPS includes the number of shares that
are issued to satisfy share incentive awards granted to employees
as they fall due, adjusted for the likelihood of meeting
performance criteria, if any, and employee attrition. 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:
Six months ended Six months ended
30 Sep 2020 30 Sep 2019
Note
Basic & diluted EPS
Profit/(loss) for the period used in calculating basic and diluted
EPS (GBP'000) 2,975 3,580
Weighted average number of ordinary shares in issue ('000) 100,905 101,040
Number of dilutive shares ('000) 4,915 3,770
Weighted average number of ordinary shares, including potentially
dilutive shares 105,820 104,810
Basic EPS (p) 2.95 3.54
Diluted EPS (p) 2.81 3.42
Adjusted EPS
Adjusted profit for the period used in calculating adjusted basic
and diluted EPS (GBP'000) 3 7,055 6,891
Weighted average number of ordinary shares in issue ('000) 100,905 101,040
Number of dilutive shares ('000) 4,915 3,770
Weighted average number of ordinary shares, including potentially
dilutive shares 105,820 104,810
Adjusted EPS (p) 6.99 6.82
Adjusted diluted EPS (p) 6.67 6.58
5. 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 (MIP)
The Group has a 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 periods to the Directors and senior
management of the Company are subject to the fulfilment of two or
more of the following performance conditions: (a) a specific
business unit 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 Annual Report & Accounts 2020,
responding to the impact of COVID-19, options granted to the senior
management of the Company in the 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. The Executive Directors' awards in the period are,
as before, also subject to 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.
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 (EIP)
In addition to the MIP, in the year ended 31 March 2018, the
Board put in place a medium-term 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 will be structured as
is most appropriate under the local tax, legal and regulatory rules
in the key jurisdictions and therefore varies between those
jurisdictions.
At 30 September 2020, a total of 3,365,900 share option and
award grants were made to employees and senior management during
the period (H1 20: 3,318,807).
Details of the share option awards made are as follows:
Period ended 30 Sep 2020
Number of Weighted average exercise price
share options
Outstanding at the beginning of the period 6,490,661 -
Granted during the period 3,365,900 -
Exercised during the period - -
Forfeited during the period (704,947) -
Expired during the period - -
Outstanding at the period end 9,151,614 -
Exercisable at the period end - -
No share options were exercisable in the period.
The options outstanding at 30 September 2020 had a weighted
average remaining contractual life of 2 years and a nil or nominal
exercise price.
During the period ended 30 September 2020, options were granted
on 23 July 2020 to employees and certain senior management. The
weighted average of the estimated fair values of the options
outstanding is GBP1.01 per share (H1 20: GBP0.76).
MIP share options with an external market condition were valued
at award using the Monte Carlo option pricing model. The model
simulates a variety of possible results, across 10,000 iterations
for each of the options, by substituting a range of values for any
factor that has inherent uncertainty over a number of scenarios
using a different set of random values from the probability
functions. The model takes any market-based performance conditions
into account and adjusts the fair value of the options based on the
likelihood of meeting the stated vesting conditions.
MIP share options without external market conditions and EIP
share options were valued at award using a Black-Scholes model
using the following inputs:
Period ended
30 Sep 2020
Weighted average share price at GBP1.94
grant date
Exercise price -
Volatility 22.00%
Weighted average vesting period 3 years
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.
The Group has also applied incremental increases in the assumed
likelihood of vesting for share options as the vesting date
approaches, in line with individual entity performance to date, as
per the Group's market expectations, and other internal performance
conditions.
The Group recognised a total expense of GBP0.7m related to
equity settled share-based payment transactions in the current
period, including relevant social security taxes (H1 20: GBP0.7m).
Given the estimation, were the future performance conditions for
all outstanding share options assumed to be met, the charge in the
period would increase by GBP0.3m.
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 performance of the business. Reasonable changes in this
specific estimate do not have a material impact on the expense
incurred in relation to social security costs or share-based
payments in the period.
6. Goodwill
30 Sep 2020 Restated Restated
30 Sep 2019 31 Mar 2020
GBP'000 GBP'000 GBP'000
Cost at beginning of the period 64,642 55,162 55,162
Additions - 2,641 8,558
Gains/(losses) from foreign exchange 19 974 922
Cost at end of the period 64,661 58,777 64,642
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group's share of the net identifiable
assets of the acquired subsidiary at the date of acquisition.
In line with IAS 36, the carrying value of goodwill is not
subject to systematic amortisation but is reviewed at least
annually for impairment.
In line with IAS 36, the Group performs a full annual impairment
assessment. At the half year, the Group considered whether there
are any indications that the assets held are at risk of impairment,
and whether such indications warrant an intermediate impairment
assessment to be performed for the period ended 30 September
2020.
The Directors consider that the Group's goodwill impairment
review for the year ended 31 March 2020 was performed amidst the
most severe months of the COVID-19 pandemic and, as such, the
forecasts applied for the purposes of the goodwill impairment
testing, as disclosed within the Group's Annual Report &
Accounts 2020, were reflective of the Group's assessment of
reasonably possible outcomes at that date. Significant COVID-19
related downside sensitivities were built into management's
assessment of future cash flows. This assessment was performed to
determine whether, given a range of reasonably possible outcomes,
there was a risk of impairment. The determination made at that date
was that no impairment exists.
For the purposes of the period ended 30 September 2020, the
Directors have therefore considered whether any further changes in
the macroeconomic environment as a result of the ongoing pandemic
indicate an extension of, or an increase in severity of, the
downside sensitivities applied at 31 March 2020. Having performed
this review, the Directors conclude that trading performance in the
six months to 30 September 2020 has been significantly above the
downside sensitivity levels applied in the last full impairment
assessment. As such, there is not considered to be an indicator
that an additional impairment assessment is required for this
interim period.
Further details of the review performed for the year ended 31
March 2020 are provided on pp142-43 of Alpha's Annual Report &
Accounts 2020.
7. Earn-out and deferred consideration liabilities
Acquisitions in prior periods
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 in the Group's Annual
Report & Accounts 2020.
Obsidian
The remaining GBP1.7m base consideration outstanding from the
acquisition of Obsidian was paid in the period. Including the
contingent earn-out and unwinding of discounting, a total GBP3.7m
estimated consideration is recorded within liabilities. In the
period, GBP1.0m was expensed as a non-underlying cost relating to
employment-linked consideration. Any remaining employment-linked
balance will be expensed through the income statement in line with
IFRS 3, proportionately until 2023.
The earn-out payments have been estimated by the Directors based
on anticipated future earnings and discounted to current values.
The unwinding of this earn-out discount annually shall be
recognised as a finance cost. During the period, GBP0.1m of this
discount unwinding was expensed as a non-underlying cost in
relation to Obsidian.
Axxsys
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 due on the second anniversary of the
acquisition. In the period, GBP0.6m was expensed as a
non-underlying cost relating to employment-linked consideration.
Including the contingent earn-out and unwinding of discounting, a
total GBP4.9m 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.
Both the earn-out payments, which have been estimated by the
Directors based on anticipated future earnings, and the deferred
consideration, are discounted to current values. The unwinding of
this discount annually shall 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 Axxsys.
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. In line with FY 20, as at
30 September 2020, GBP0.1m is recorded in current liabilities to
reflect the expected final payment due to be settled shortly.
The below table summarises the deferred and contingent
consideration balances in relation to acquisitions held within
current and non-current liabilities as at 30 September 2020:
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBP'000 GBP'000 GBP'000
Amounts due within one year 2,450 4,143 3,699
Amounts due after one year 6,275 2,916 6,864
Total acquisition consideration
liability held 8,725 7,059 10,563
8. Trade and other receivables
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBP'000 GBP'000 GBP'000
Trade receivables 17,927 19,625 18,897
Other debtors 256 1,085 101
Prepayments 876 906 926
Accrued income 747 1,846 1,288
Total amounts due within one year 19,806 23,462 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.
In assessing the appropriateness of the Group's expected credit
loss provision at 30 September 2020, the Directors have considered
the Group's historical loss rates for each aging category of
receivables in conjunction with other factors, including the
ongoing outbreak of COVID-19 in key Alpha territories. There are no
indicators at 30 September 2020 that the profile of risk associated
with the Group's receivables is materially different from that
determined through the full assessment performed for the year ended
31 March 2020. Therefore, immaterial changes have been made to the
Group's existing loss rates, as disclosed in Alpha's Annual Report
& Accounts 2020.
9. Trade and other payables
30 Sep 2020 Restated Restated
30 Sep 2019 31 Mar 2020
Note GBP'000 GBP'000 GBP'000
Trade payables 1,669 2,210 2,329
Accruals 16,408 8,911 12,863
Deferred income 1,674 1,051 1,336
Taxation and social security 6,487 5,122 4,213
Other creditors 1,627 2,021 1,578
Earn-out and deferred consideration 7 2,450 4,143 3,699
Total amounts due within one year 30,315 23,458 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 include the provision for employee profit share and
bonus, accrued through the period, as well as the unpaid FY 20
provision. As part of Alpha's response to COVID-19, the Group
delayed the payment of FY 20 team profit share payments, normally
paid in the summer months. This delayed FY 20 payment is expected
to be made shortly, as Alpha eases the protective measures taken
earlier in the year.
Earn-out and deferred consideration predominantly comprises the
fair value of contingent and non-contingent consideration arising
from the acquisitions of Axxsys and Obsidian at the balance sheet
date. Please refer to note 7 for further details.
Within taxation and social security are deferrals of certain
payroll liabilities allowed as part of COVID-19 related government
support measures. These amounts are expected to be paid in full in
the second half of the year.
10. Called up share capital
30 Sep 2020 30 Sep 2019 31 Mar 2020
Number Number Number
Allotted, called up and fully paid
Ordinary 0.075p shares (1 vote per share) 105,538,019 103,607,638 103,607,638
30 Sep 2020 30 Sep 2019 31 Mar 2020
GBP GBP GBP
Allotted, called up and fully paid
Ordinary 0.075p shares (1 vote per share) 79,154 77,706 77,706
Balance at 1 April 2020 (i) 77,706
103,607,638 ordinary shares of 0.075p each
Issued shares (ii) 1,448
Balance at 30 September 2020 79,154
105,538,019 ordinary shares of 0.075p each
====================
(i) No shares were issued or cancelled in the year ended 31 March 2020.
(ii) During the period, 1,930,381 ordinary shares were issued by
the Company to the employee benefit trust (EBT) for potential
future satisfaction of share incentive plans. In addition, the
Company bought back 88,648 shares from prior employees at nominal
value and also transferred these to the EBT.
The total number of voting rights in the Company at 30 September
2020 was 100,849,561.
Alpha Employee Benefit Trust
At 30 September 2020, the Group held 4,688,458 (31 March 2020:
2,669,429) shares in the EBT to satisfy share options granted under
its Joint Share Ownership Plan (JSOP). Unallocated ordinary shares
held within the EBT have no dividend or voting rights.
Treasury shares
The Group did not hold any shares in treasury at 30 September
2020 (31 March 2020: nil).
Dividends
In light of the uncertainty caused by the COVID-19 pandemic, the
Board did not recommend a final dividend for the year ended 31
March 2020 and, therefore, no dividends were paid in the
period.
The Board has declared an interim FY 21 dividend of 2.10p per
share (H1 20: 2.10p).
11. Related party transactions
Related parties, following the definitions within IAS 24, are
the Group's subsidiary companies, members of the Board, key
management personnel and their families, and shareholders who have
control or significant influence over the Group.
The Group considers the Directors to be the key management
personnel. There were no transactions within the period in which
the Directors had any interest outside of their contractual
remuneration.
Transactions between the Company and its subsidiaries are on an
arm's length basis and have been eliminated on consolidation and
are not disclosed in this note. None of the Group's shareholders
are deemed to have control or significant influence and therefore
are not classified as related parties for the purposes of this
note.
12. Events after the reporting period
Exercise of incentive awards and total voting rights
As previously disclosed, 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 12 October 2020 were met in full and the
relevant local country or divisional budgetary performance
conditions were met in full or part dependant on Alpha location. As
a result, 1,812,500 nil or nominal cost awards over ordinary shares
of 0.075 pence per share vested.
Of these vested awards, 1,031,250 awards have been exercised.
The Company settled these exercised awards, some net settled after
taxes due, by issuing 983,947 ordinary shares. The remaining vested
award holders have a further 7-year period in which to exercise
their vested awards.
On 14 October 2020, the Company bought back 137,482 ordinary
shares from prior employees ("reclaimed shares") for nominal value.
All of the reclaimed shares will be held in the EBT for the
satisfaction of future employee awards.
As at 25 November 2020, in accordance with the Financial Conduct
Authority's Disclosure and Transparency Rules, the Company
continues to have 106,521,966 ordinary shares in issue, of which
none are held in Treasury. The total number of voting rights in the
Company is 101,696,026. This figure of 101,696,026 may be used by
shareholders in the Company as the denominator for the calculations
by which they will determine if they are required to notify their
interest in, or a change in their interest in, the share capital of
the Company under the FCA's Disclosure and Transparency Rules.
-ENDS-
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END
IR FEIEDLESSELF
(END) Dow Jones Newswires
November 25, 2020 02:00 ET (07:00 GMT)
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