TIDMAFM
RNS Number : 4242T
Alpha Fin Markets Consulting plc
24 November 2021
24 November 2021
Alpha Financial Markets Consulting plc
("Alpha", the "Company" or the "Group")
INTERIM RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2021
Continuing strong momentum
Alpha Financial Markets Consulting plc (AIM:AFM), a leading
global provider of specialist consultancy services to the asset
management, wealth management and insurance industries, is pleased
to report its unaudited results for the six months ended 30
September 2021 ("H1 22").
Financial Highlights(1)
-- Revenue increased by 43.7% to GBP68.4m (H1 21: GBP47.6m) and
net fee income increased by 43.9% to GBP68.4m (H1 21: GBP47.5m). On
an organic basis, net fee income grew by 21.7%
-- Gross profit increased by 62.3% to GBP26.5m (H1 21: GBP16.3m)
at 38.7% margin (H1 21: 34.3%), reflecting higher than target
consultant utilisation levels and an improving consultant day rate
environment
-- Adjusted(2) EBITDA increased by 52.5% to GBP15.4m (H1 21:
GBP10.1m), with margin improving to 22.6% (H1 21: 21.3%)
-- Adjusted profit before tax increased to GBP14.4m (H1 21:
GBP9.1m). Profit before tax was GBP4.2m (H1 21: GBP4.5m) after
deducting adjusting items, which increased due to higher
acquisition-related expenses and share-based payment charge
-- Adjusted earnings per share increased by 40.9% to 9.85p (H1 21: 6.99p)
-- Adjusted cash generation from operating activities was
GBP8.5m (H1 21: GBP16.4m), with the prior period benefiting from
various COVID-19 related deferrals
-- Robust balance sheet with a net cash balance as at 30
September 2021 of GBP40.0m (31 March 2021: GBP34.0m), providing
flexibility for Alpha's continued growth strategy
-- Interim dividend of 2.90p per share declared (H1 21: 2.10p),
reflecting the Board's confidence in the business
6 months 6 months
to to Change
30 Sep 2021 30 Sep 2020
------------------------ ------------- ------------- --------
Revenue GBP68.4m GBP47.6m 43.7%
Gross profit GBP26.5m GBP16.3m 62.3%
Adjusted EBITDA GBP15.4m GBP10.1m 52.5%
Adjusted profit before
tax GBP14.4m GBP9.1m 58.7%
Profit before tax GBP4.2m GBP4.5m (5.0%)
Adjusted EPS 9.85p 6.99p 40.9%
Basic EPS 0.87p 2.95p (70.5%)
Interim dividend per
share 2.90p 2.10p 38.1%
------------------------ ------------- ------------- --------
Operating Highlights
-- Growth across all geographies, with particularly strong net
fee income growth in Alpha's North America region and Europe &
APAC region, growing 143.2% and 28.6% respectively and 46.6% and
22.6% on an organic basis
-- In May 2021, Alpha acquired Lionpoint, which has performed well:
o Strong strategic rationale, expanding the Group's consultant
team size in the large North America market
o Lionpoint strengthens capabilities for alternatives clients
and brings 166 new clients to the Group
o The integration has progressed smoothly and the team has grown
substantially since acquisition. Operational and systems
integration is also advancing well
-- Continued momentum and growth in the UK Insurance consulting
offering, which is also bolstered with the hiring of a new director
aligned to general insurance and specialty clients
-- Axxsys proposition has extended with the hiring of two new
directors(3) in North America and broadening of the offering to
data and cloud propositions
-- ESG & Responsible Investment(4) practice continues to
grow, underpinned by Alpha's strong expertise and experience in
this area
-- Including 12 directors from the acquisition of Lionpoint, 25
new revenue-generating directors (H1 21: 8) added in total during
the first half; continuing to expand Alpha's capabilities and
further drive revenue growth
-- Fee-earning consultant(5) headcount, including Lionpoint,
rose by 49.8% to 656 (H1 21: 438), with hiring continuing in all
regions to drive growth of the business
-- Strong client retention and growth in new clients globally;
addition of 57 new client relationships entirely through organic
growth (H1 21: 28). Alpha has now worked with 95% of world's top 20
asset managers by AUM
Outlook
-- Alpha continues to focus on growing the business through
geographic expansion in all regions, particularly in North America,
as well as extending the depth and range of client segment and
service line offerings
-- Strong structural growth drivers remain in place: continued
growth in AUM globally increases the scale of the Group's
addressable market; cost and regulatory pressures have led to a
continuing increase in demand from clients for Alpha's specialist
services; and shifting client and market expectations, for example
a growing focus on ESG
-- The Group has strong sales momentum and a growing pipeline of
potential new business going into the second half of the financial
year
-- The Board is pleased by the progress and business momentum in
the first half and the growth in the opportunity pipeline. As a
result, the Board now expects to deliver full-year results ahead of
market expectations
Commenting on the results, Euan Fraser, Global Chief Executive
Officer said:
"We have seen a strong performance in the Alpha Group over the
first half of the financial year. We have made excellent progress
on key strategic initiatives, including the integration of
Lionpoint and continued momentum around Alpha's insurance
consulting offering, as well as achieving organic growth in all
regions of the business and particularly strong growth in North
America. The ESG & Responsible Investment practice has been
well received by clients and we are meeting a growing demand in
this important space.
The Group is adding to its teams globally and investing in key
strategic hires to expand our service offerings. Consequently, we
continue to win new clients and remain confident to deliver on the
ambition we announced in November 2020 to double the size of the
business.
The Group enters the second half in robust shape, and we are
delighted to upgrade our full-year expectations. We look forward to
the second half with confidence, knowing that our people provide
clients with a first-class service and we continue to explore new
opportunities to drive the Group's growth."
Enquiries:
+44 (0)20 7796
Alpha Financial Markets Consulting plc 9300
Euan Fraser (Global Chief Executive Officer)
John Paton (Chief Financial Officer)
Investec Bank plc - Nominated Adviser, Joint +44 (0)20 7597
Corporate Broker 4000
Patrick Robb
James Rudd
Harry Hargreaves
+44 (0)20 3207
Berenberg - Joint Corporate Broker 7800
Chris Bowman
Toby Flaux
Alix Mecklenburg-Solodkoff
+44 (0)20 3757
Camarco - Financial PR 4980
Ed Gascoigne-Pees
Jake Thomas
Analyst Presentation:
A results presentation will take place at 9:30 a.m. today on
Zoom. Those wishing to attend should contact AlphaFMC@camarco.co.uk
.
A copy of the presentation slides, for those unable to attend,
will be available on the company website at:
https://alphafmc.com/investors/reports-presentations/ .
About Alpha FMC:
Alpha is a leading global consultancy to the asset management,
wealth management and insurance industries. With over 650
consultants across 15 offices(6) spanning the UK, North America,
Europe and APAC, Alpha has the largest dedicated team in the
industry. Alpha has provided specialist consulting services to over
650 clients, including 95 per cent of the 20 largest global asset
managers by AUM(7) and a range of other buy-side firms.
(1) All financial and operating highlights relate to the period
ending 30 September 2021 ("H1 22") and the comparative period is 30
September 2020 ("H1 21") unless otherwise specified
(2) The Group uses alternative performance measures ("APMs") to
provide stakeholders further metrics to aid understanding of the
underlying trading performance of the Group. These measures exclude
non-operational costs including acquisition and integration costs,
earn-out and deferred consideration costs and share-based payment
charges. Refer to note 3 for further details
(3) "Directors" refers to the executive and non-executive
members of the Board; meanwhile, "directors" refers to non-Board
directors within the management teams of the Group
(4) ESG (Environmental, Social, Governance) & Responsible
Investment
(5) "Consultants" and "headcount" refer to fee-earning
consultants at the year end: employed consultants plus utilised
contractors in client-facing roles
(6) Group uses "office" to refer to office location; that is, if
there are multiple offices in one location, they will be counted as
one office
(7) "Top 20" refers to Investment & Pensions Europe, "Top
500 Asset Managers 2021" while "AUM" refers to assets under
management
INTERIM REPORT
The strong momentum and encouraging pipeline of work that we saw
at the end of last year has continued into the first six months of
this financial year and we are very pleased by the win rate and the
continued profitable growth of the Group during the period.
Increased client demand has delivered double-digit revenue
growth.
Progress has been made on a number of key strategic areas during
the first half, including the continued delivery of geographic
growth across all regions, with particularly strong organic and
inorganic growth in North America. The acquisition of Lionpoint, a
significant strategic step for the Group, extends our offering in
the alternatives investment market and doubles Alpha's team size in
the North America market.
The Group also continues to extend its service offering to
clients with particular progress made in the insurance consulting
proposition, while the ESG & Responsible Investment practice
has received a very positive response from clients.
Half Year Review
The Group has continued to focus on growth during the period as
global economies have emerged from the pandemic. We have seen an
increase in client demand in all geographical regions.
It has been a period of very strong financial performance, with
excellent client retention rates and the addition of new clients
across all locations. The Group has delivered a strong increase in
revenue during the period, up 43.7% to GBP68.4m (H1 21: GBP47.6m),
while net fee income has similarly grown to GBP68.4m (H1 21:
GBP47.5m). On an organic basis, net fee income grew by 21.7%.
Adjusted EBITDA increased by 52.5% to GBP15.4m (H1 21: GBP10.1m)
and adjusted profit before tax increased by 58.7% to GBP14.4m (H1
21: GBP9.1m).
Gross profit margin has been strong during the first half of the
year as a result of above target consultant utilisation levels and
a firmer consultant day rate environment. Operating profit was
GBP5.5m (H1 21: GBP5.0m) and profit before tax was GBP4.2m (H1 21:
GBP4.5m) after charging adjusting items, which increased due to
acquisition-related expenses and a higher share-based payment
charge, as detailed in note 3. Basic earnings per share were 0.87p
(H1 21: 2.95p) and adjusted earnings per share were 9.85p (H1 21:
6.99p).
Operational and Geographical Review
The Group grew revenue and adjusted EBITDA in FY 21 and, as the
COVID-19 pandemic recedes, we continue to focus on key strategic
initiatives and growing the business further. Our growth objectives
remain unchanged: to extend the depth and range of our 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.
The acquisition of Lionpoint was a key highlight for the Group
in the period. In addition to doubling the Group's North America
team size, Lionpoint has a market-leading capability to address the
rapidly growing alternatives client segment, which is highly
complementary to Alpha's relationships with clients in more
traditional asset classes, and allows the Group to sell more
services to the enlarged joint client base. The acquisition also
strengthens our technology-focussed consulting service
proposition.
Financially, the acquisition is also highly attractive. It is
expected to be significantly accretive to earnings in the first
financial year of ownership and has contributed revenues of
GBP10.6m in the four months of the first half since acquisition. We
are excited by the potential growth of this business and the
step-change it provides Alpha in terms of our presence in North
America and the alternatives investment market. The integration of
the Lionpoint team has been smooth and we are pleased to report
that the team size has also grown substantially since acquisition,
with all revenue-generating senior management staying within the
business, whilst the operational and systems integration of
Lionpoint continues to plan. We very much welcome the team from
Lionpoint into the Alpha Group.
Alpha continues to identify and launch new offerings where there
is client-led demand, while continuing to expand our existing
offerings. Our well-established practices, including Investments,
Distribution, M&A Integration and Operations, continue to be
successful across the Group's key markets.
Newer practices such as ESG & Responsible Investment,
Digital and Regulatory Compliance continue to see strong momentum
and demand. We see persistent structural changes in the industry
driving strong demand for Alpha's ESG & Responsible Investment
offering across the investment value chain. These include increased
regulation such as SFDR in Europe, and substantial demand from
clients to their asset managers for clear commitments such as
net-zero alignment, enhanced product ranges and better
reporting.
ESG assets are expected to represent half of global AUM by
2025(8) , and there is significant uncertainty over how the asset
management industry will make the transition. This, therefore,
represents an exciting growth driver for the Alpha business in the
years to come. With many types of firms now offering ESG services,
our clients tell us that it is the assurance that our projects are
staffed by asset and wealth management specialists, combined with
our relentless focus on practical implementation and realistic
recommendations, that make us stand out from our competitors.
The Group's insurance offering continues to go from strength to
strength. In the UK, building on the success of the Pensions &
Retail Investments practice, we have continued to develop the
insurance proposition and launched general insurance and specialty
client segments. The team, which includes a new director aligned to
these important areas of demand, focusses on a broad range of
insurance clients, from domestic general insurance providers
through to commercial risks handled by the specialist Lloyd's and
London Market carriers and brokers.
The development of the insurance offering, both in the UK and
France, has been a key driver of organic growth over the first half
and we are excited by the scale that we believe this offering can
achieve. We continue to grow the client base and have increased the
headcount to 33 at period end. The structural trends that we have
highlighted previously as driving growth in the asset and wealth
management industries are equally applicable to the insurance
industry, and we believe that the business can capitalise on these
trends and continue to deliver further growth.
The structural growth drivers in the asset management, wealth
management and insurance industries - cost pressures, regulation,
growing AUM as well as changing client and societal expectations -
ensure that buyers in client organisations are seeking to maximise
the efficiency of their technology. As such, we continue to see
good demand and opportunity in our technology consulting and data
products services.
To improve our offering further in this expanding area, Axxsys
has hired two new directors: a lead for the business in North
America as well as a Global Head of Data and Cloud Technology, also
based in North America, to drive further Axxsys growth in this key
strategic geography. The Group has also strengthened its product
business with the appointment of a new Global Head of Alpha Data
Solutions. We see a good pipeline and new project wins in this
offering.
During the period, the Group has continued to win business with
both new and existing clients across all locations. As a Group,
including Lionpoint, we have now worked with 662 clients (H1 21:
409)(9) . The Board is pleased with the range and growth of Alpha's
client base across all locations and the Group's continued focus on
ensuring that it has the ability to deliver for clients across all
verticals. We are very well placed to add value to clients in their
most demanding projects and increase our market penetration.
Geographic performance in the period can be summarised as
follows:
6 months 6 months to
to 30 Sep 2020 Change
30 Sep 2021
---------------- -------------- ------------- --------
Net Fee Income
UK GBP32.5m GBP26.5m 22.6%
North America GBP18.8m GBP7.7m 143.2%
Europe & APAC GBP17.1m GBP13.3m 28.6%
---------------- -------------- ------------- --------
Total GBP68.4m GBP47.5m 43.9%
---------------- -------------- ------------- --------
As at As at
30 Sep 2021 30 Sep 2020 Change
---------------------- ------------- ------------ --------
Consultant Headcount
UK 266 219 21.5%
North America 204 76 168.4%
Europe & APAC 186 143 30.1%
---------------------- ------------- ------------ --------
Period-end totals 656 438 49.8%
---------------------- ------------- ------------ --------
The UK remains the largest region for the Group and we are proud
to be supporting some of the highest profile projects in the UK
marketplace. UK net fee income grew 22.6% compared to the prior
period. On an organic basis, the UK business grew net fee income
14.0% compared to H1 21, with particularly strong progress by the
UK insurance consulting team, as well as strong demand across
Alpha's Investments, Operations and Digital practices. We are
pleased with our win rates over the first half of the year and by
the current opportunity pipeline of new business in the UK.
The North America business delivered the strongest geographical
growth in the first half, with a GBP11.1m increase in net fee
income. Lionpoint contributed GBP7.5m to North America net fee
income since acquisition, with the remaining 46.6% organic growth
supported by Alpha's Distribution and M&A Integration practices
in the region.
Europe & APAC also delivered a robust performance in the
period, with net fee income increasing by 28.6% overall and 22.6%
organically. Pleasingly, growth was seen across the region's
offices. Our best-in-class service offering continues to attract
new clients in Europe & APAC, with ten new clients added in the
period on an organic basis.
(8) Deloitte, "Advancing environmental, social and governance
investing" (February 2020)
(9) The H1 21 comparative number excludes Lionpoint clients
Our People
We are very proud of the hard work and dedication shown by our
employees, including over the last six months. Our highly skilled
team allows Alpha to deliver exceptional added value for our
clients, which drives loyalty and repeat business. We are
constantly considering how we best invest in, and develop, our
people to ensure that they thrive at Alpha and, consequently, that
the business continues to move forwards; this is a key driver of
our growth.
Reinforcing our local and global director teams is an important
factor in providing the right level of support for our consultants
and instilling our values. We continue to expand our director teams
across all locations, with 13 new directors added during the period
on an organic basis, seven of which result from promotion and six
from external hires. All 13 new directors have leading experience
in their roles and will aid the Group in growing the business and
providing a first-class service to our client base.
With the lifting of Government restrictions in the UK and across
many of our locations, we have seen employees return to the office,
albeit that many continue to work from home at least part of the
week. In these times, we believe that providing a supportive
environment and considering the health and wellbeing of our
employees is vital for our culture, the performance and
sustainability of the business. We continue to create a working
environment that focusses on the different needs and wellbeing of
our employees. This focus is shared across Alpha's teams, with
employees volunteering to design and execute on supportive
initiatives, including our wellbeing champions scheme.
The Group also prides itself on its initiatives and actions in
the community and corporate social responsibility ("CSR") space.
This year, Alpha's chosen global charity of the year is the
Rainforest Trust, with whom we are working closely to raise
awareness of nature conservation and ways of engaging with local
communities, whilst organising company events to achieve a minimum
fundraising target of GBP20,000 by March 2022. In addition to
fundraising efforts, Alpha has engaged in two pro bono projects
alongside Rainforest Trust: the creation of an ESG due diligence
framework as well as a wealth management engagement strategy. Both
projects allow the Alpha teams to apply their experiences across
asset and wealth management to a worthwhile cause.
As a Group, we are also very proud of the progress that we are
making on our environmental agenda. We are delighted to have
extended our carbon footprint report to include all the Group's
geographic locations and to have offset our carbon footprint, after
reducing our emissions where possible, for the year ended 31 March
2020. We have calculated Alpha's carbon emissions for FY 21 and are
in the process of offsetting our remaining footprint, which we will
describe further at the year end. This progress would not have been
possible if not for the interest, drive and commitment to
environment and sustainability priorities of our people across the
globe.
The performance of our people over the period has been
exceptional and we are very proud of the way in which they have
responded to the challenges posed by the pandemic. Our team has
worked very hard throughout and shown real dedication to providing
a high-class service to clients and to continuing to grow the
business across geographies and different offerings. On behalf of
the Board, we would like to say thank you for all the efforts,
support and commitment that you have shown over the period and
continue to show every day.
Growth Strategy
The Group's strategic aim continues to be the same: to be
recognised as the leading global consultancy to the asset
management, wealth management and insurance industries, and as the
leading consultancy in all the markets in which it operates. We
continue to focus on both organic and inorganic growth, with the
Board recognising that selective, complementary acquisitions can
add value corporately and for shareholders.
A key strategic driver of growth in the business is geographic
expansion. The Group has significantly expanded its geographic
presence in the North America market through the acquisition of
Lionpoint, which complements strong organic growth in all
geographic areas. As a Group, we continue to explore geographic
expansion across all regions.
We are delighted by the fact that organic net fee income growth
has been achieved in all regions, indicating that our offering
continues to attract clients globally. The wider asset management,
wealth management and insurance industries have long-term
structural growth drivers that have propelled assets in the asset
management industry alone to $103tn at the end of 2020(10) , and we
expect there to be further expansion ahead.
In order to capitalise on this, Alpha continues to focus on
driving growth in the business through the extension of its service
offering to clients. Alpha's recently launched insurance consulting
offering, which is currently based in the UK and France, continues
to grow strongly and offers significant global potential.
Meanwhile, the ESG & Responsible Investment practice is seeing
increasing momentum and traction with clients. The strategically
important acquisition of Lionpoint has provided the Group with a
greater ability to service the alternatives investment market.
Alpha continues to seek new verticals to expand into and further
service offerings to provide its clients, and we remain confident
in our ability to double the size of the business.
(10) BCG, "The $100 Trillion Machine" (July 2021)
Acquisitions
Acquisitions remain a core part of the Group's strategy and
Lionpoint was an important strategic acquisition. The Lionpoint
business is high quality and increases the Group's footprint both
in the attractive and fast-growing alternatives client segment as
well as in the key strategic North America market. It has a highly
complementary service offering with a blue-chip client base that
has broadened the Group's capabilities, thus providing our combined
client base with an expanded range of services. The high quality of
the business is demonstrated by the awards that Lionpoint has won
this year, including being named "Best Technology Advisory Firm" by
Private Equity Wire as well as "Best Advisory/Consultancy" at the
2021 Drawdown Awards.
The Lionpoint team operates globally and brings three new office
locations to the Alpha Group in Sydney, San Francisco, and Denver.
The acquisition added more than 120 experienced consultants; a
number that has already grown to 150 consultants as at 30 September
2021, all with highly relevant operations, industry and technology
backgrounds. In total, the acquisition has increased our number of
consultants in North America by 105, as at the period end.
The integration of Lionpoint continues to proceed as planned and
the business has performed well, delivering good revenue growth
since it was acquired. We are pleased that all revenue-generating
senior management have integrated smoothly into the Group. The
integration of operations continues well, whilst client and
platform migrations are progressing.
We continue to review acquisition opportunities to complement
and grow the Group's service offering.
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 all the Group's stakeholders.
Alpha continues to strive towards achieving high levels of
transparency on ESG and sustainability. Following our first formal
ESG and sustainability reporting in FY 20, we have further
considered and reported on a number of non-financial metrics in our
Annual Report & Accounts 2021.
In order to facilitate an understanding of Alpha as a
risk-managed business that is focussed on sustainable, long-term
growth, we have identified and are reporting on such topics as
workforce diversity and engagement, professional integrity and data
security as material factors that impact the Group. Alpha also
understands that reporting its impact on the environment is
important to its investors as they consider systemic risks that may
affect their portfolios and, as such, we continue to look at ways
in which we can increase, improve and meet our environmental
obligations. We have made three notable accomplishments during the
period:
-- We extended our annual disclosure of Alpha's global carbon
emissions according to streamlined energy and carbon reporting
("SECR") requirements in the Annual Report & Accounts 2021. As
part of our disclosure, we described the actions that we are taking
to reduce and avoid carbon emissions where possible as well as the
processes that we follow to offset our entire global carbon
footprint.
-- We are pleased to confirm that, since the year ended 31 March
2021, we initiated climate change related disclosure under the
Carbon Disclosure Project ("CDP") framework. The CDP is aligned
with the recommendations of the Taskforce on Climate-related
Financial Disclosures ("TCFD") and the disclosure about Alpha's
environmental transparency and action can be requested from the
CDP.
-- We also confirmed our intention to continue to focus on
improving the quality and completeness of the information that we
provide about our environmental impact and carbon reduction
activities to ensure our communications on these topics align to
the leading practices of organisations within our sector.
Financial Performance Review
6 months 6 months to
to 30 Sep 2020 Change
30 Sep 2021
------------------------- ------------- ------------ --------
Revenue GBP68.4m GBP47.6m 43.7%
Net fee income GBP68.4m GBP47.5m 43.9%
Gross profit GBP26.5m GBP16.3m 62.3%
------------------------- ------------- ------------ --------
Adjusted EBITDA GBP15.4m GBP10.1m 52.5%
------------------------- ------------- ------------ --------
Adjusted EBITDA margin 22.6% 21.3% 1.3%
------------------------- ------------- ------------ --------
Adjusted profit before
tax GBP14.4m GBP9.1m 58.7%
Profit before tax GBP4.2m GBP4.5m (5.0%)
Net cash from operating
activities GBP6.0m GBP15.3m (60.9%)
------------------------- ------------- ------------ --------
Alpha enjoyed strong growth in the first half, with net fee
income of GBP68.4m, up by 43.9% compared to the first half of the
last financial year (H1 21: GBP47.5m). This includes 21.7% organic
growth, with the remainder being the contribution from Lionpoint
since its acquisition in May 2021. Across the Group, H1 22 net fee
income grew ahead of the average consultant headcount growth, with
consultant utilisation above target levels and up on the
comparative period, alongside improving consultant day rates
overall. The core established Alpha practices continue to perform
well, with increased contribution most notably from Distribution,
Investments and Operations projects.
Currency translation had a noticeable effect on net fee income
and profits during the first half of the financial year. In the
first half, Sterling averaged $1.39 (H1 21: $1.27) and EUR1.17 (H1
21: EUR1.12), which, with other offsetting currency movements,
resulted in an unfavourable net currency effect on net fee income
of GBP2.2m.
Group gross profit was GBP26.5m, increasing by GBP10.2m or 62.3%
over the prior period. Gross profit margin was 38.7% (H1 21:
34.3%), returning close to pre-pandemic margin levels, supported by
both improved consulting day rates and the higher than target
utilisation level, alongside a strong contribution from Lionpoint,
at comparable margins to the wider Group.
The UK business, the Group's largest geographical region,
increased net fee income by 22.6% in the first six months. On an
organic basis, UK net fee income grew 14.0% compared to H1 21, with
solid consulting demand overall and particularly strong progress in
the UK insurance consulting practice Pension & Retail
Investments, complemented by the Lionpoint contribution. Within the
UK results, Alpha's Data Solutions business was consistent with the
comparative period, having continued to experience a longer sales
cycle for its speciality software products, although it maintains a
good pipeline and outlook.
The North America business increased net fee income by GBP11.1m
or 143.2%, including Lionpoint. On an organic basis, the North
America results were up 46.6% on the comparative period. The Alpha
North America team successfully added to its domestic client base,
continuing to meet client demand by growing the consulting
headcount and maintaining above target utilisation levels,
benefitting from several longer duration projects. In Europe &
APAC, net fee income was up by 28.6%. On an organic basis, the
region reported 22.6% growth overall. Growth was seen across the
region with the increasing Alpha Europe team very well
deployed.
The Lionpoint business, acquired in May 2021, has performed
slightly ahead of initial expectations and contributed GBP10.6m in
revenue in the first half. Lionpoint has continued to enjoy strong
client demand, adding 34 new clients and 27 consultants globally
since acquisition.
Group gross profit margins improved due to higher than target
consultant utilisation, a firmer day rate environment globally and
a good contribution from Lionpoint. A significant improvement in
North America and Europe & APAC gross margins to nearer Group
average levels was driven by strong utilisation levels and
improving consultant day rates in both regions. UK gross margin
also firmed, with good utilisation and consultant day rate
progression. Alpha continues to invest in the business, growing its
consulting teams in all markets and utilisation is therefore
expected to normalise towards target levels over the remainder of
the financial year.
Adjusted administration expenses, as detailed in note 3,
increased by GBP4.8m to GBP11.0m in the first six months, of which
GBP3.2m represented the increase excluding Lionpoint. Following
last year's tighter control of discretionary spend and the impact
of COVID-19 on the operating environment, costs increased primarily
in recruitment spend as we grew our consulting teams globally, and
across staff and client entertainment and travel spend. We also
invested in the Group team through the period following the
Lionpoint acquisition. Including the adjusting expense items, which
also rose in the half, administrative expenses increased to
GBP21.0m (H1 21: GBP11.3m). The adjusting expense items, set out in
note 3, increased in the period to GBP9.2m (H1 21: GBP4.2m),
reflecting increased acquisition costs, earn-out and deferred
consideration charges following the Lionpoint acquisition, higher
intangible asset amortisation and share-based payments charges. The
share-based payment charge continues to develop since Alpha's share
incentive plans were established at AIM admission, with Alpha's
share price growth and new awards being key factors in the higher
charge for the period. The foreign exchange loss within adjusting
items relates mainly to deferred payments associated with the
acquisition of Lionpoint, payable in US Dollars, with the USD:GBP
rate experiencing some volatility around the completion date.
Adjusted EBITDA grew 52.5% to GBP15.4m (H1 21: GBP10.1m) and
adjusted EBITDA margin lifted to 22.6% (H1 21: 21.3%), reflecting
the enlarged Group growth and higher gross profit margins, partly
offset by higher administration expenses. Operating profit rose
8.8% to GBP5.5m (H1 21: GBP5.0m) after charging increased adjusting
expenses, including acquisition costs, earn-out and deferred
consideration expenses, and share-based payment charges. Further
detail of these adjusting items is set out in note 3.
Finance expenses rose in the first half overall, primarily from
increased non-underlying finance expenses relating to acquisition
consideration discount unwinding, as set out in note 4. Adjusted
profit before tax rose 58.7% to GBP14.4m (H1 21: GBP9.1m) after
charging depreciation, amortisation of capitalised development
costs and underlying finance costs. Pre-tax profit was GBP4.2m (H1
21: GBP4.5m) after also charging increased adjusting expenses and
non-underlying finance expenses.
Taxation charges for the period were GBP3.3m (H1 21: GBP1.5m),
reflecting the growth in taxable profits, the blended tax rate of
the increasingly international jurisdictions in which the Group
operates and an increased deferred tax charge in the period as set
out in note 5.
Basic earnings per share were 0.87p (H1 21: 2.95p) and adjusted
earnings per share were 9.85p (H1 21: 6.99p).
Net assets at 30 September 2021 totalled GBP124.5m (31 March
2021: GBP94.4m). This increase principally arises from the
acquisition of Lionpoint in the first half and the associated
GBP30.0m equity capital raising, net of expenses, along with other
reserves movements. Since 31 March 2021, working capital remains
well managed, with the employee profit share payment now returned
to its normal summer payment cycle, having been deferred last year
to a November payment as part of Alpha's response to COVID-19.
Net cash flow generated from operations reduced to GBP6.0m (H1
21: GBP15.3m) following the significant H1 21 cash flow benefit
related to the deferral of the team profit share payments and some
temporary corporation tax and VAT deferrals permitted in relation
to COVID-19 last year. Adjusted cash generated from operating
activities was GBP8.5m (H1 21: GBP16.4m). During the first half,
Alpha acquired Lionpoint with completion payments totalling
GBP24.9m, offset by the Group raising GBP30.0m, net of expenses, in
its May equity placing. The Group's net cash position increased to
GBP40.0m at 30 September 2021 (31 March 2021: GBP34.0m), after a
further GBP2.8m of deferred acquisition payments, including GBP1.8m
of employment-linked amounts, and the payment of the FY 21 final
dividend in the half. During the period, Alpha also refreshed its
revolving credit facility ("RCF") tenor back to three years and
maintains its GBP20.0m RCF undrawn at 30 September 2021, providing
further capital flexibility.
The Board is pleased to declare today an interim dividend for FY
22 of 2.90p per share (H1 21: 2.10p), which will be paid on 22
December 2021 to shareholders on the register at the close of
business 10 December 2021.
Risk Management and the Year Ahead
The Board is delighted with the Group's progress in the first
half, while remaining cognisant of the potential risks and
uncertainties. These risks include political and economic
uncertainty, as well as market volatility. The Board does not
consider that these principal risks and uncertainties differ from
those published in the Annual Report & Accounts 2021.
We are aware of the risk of inflation globally, driven by an
uplift in costs, demand for personnel in key areas and the increase
in energy costs. Alpha remains alert to inflationary pressures, the
risks of which we believe will continue to be balanced by strong
structural growth drivers and demand for Alpha's services.
Outlook
We are delighted by the progress that the Group has made on the
key strategic initiatives that we have outlined and the financial
performance of the business over the period.
There is strong momentum and we continue to seek ways in which
to grow the business, both organically and inorganically. Alpha
remains supported by an exceptional employee base of highly skilled
and motivated people who are committed to providing a very
high-quality service to all clients and to ensuring the growth of
the business.
Alpha's growth strategy is reinforced by the long-term
structural drivers of demand in the asset management, wealth
management and insurance industries in which it operates. They
continue to present opportunities for the Alpha business and an
optimal environment in which to deliver substantial growth. The
Board therefore looks forward to the second half of the year with
confidence and now expects to deliver full-year results ahead of
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 2021
Unaudited Unaudited
six months ended six months ended
30 Sep 2021 30 Sep 2020
Note GBP'000 GBP'000
Continuing operations
Revenue 2 68,421 47,613
Rechargeable expenses 2 (31) (97)
Net fee income 2 68,390 47,516
Cost of sales 2 (41,930) (31,210)
Gross profit 2 26,460 16,306
Administration expenses (20,992) (11,282)
Operating profit 5,468 5,024
Depreciation 497 558
Amortisation of capitalised development costs 301 306
Adjusting items 3 9,171 4,233
Adjusted EBITDA 3 15,437 10,121
Finance income 4 1 -
Finance expense 4 (1,238) (568)
Profit before tax 4,231 4,456
Taxation 5 (3,278) (1,481)
Profit for the period 953 2,975
Exchange differences on translation of foreign operations 2,100 (20)
Total comprehensive income for the period 3,053 2,955
Basic earnings per ordinary share (p) 6 0.87 2.95
Diluted earnings per ordinary share (p) 6 0.83 2.81
Interim condensed consolidated statement of financial
position
As at 30 September 2021
Unaudited Unaudited Audited
as at as at as at
30 Sep 2021 30 Sep 2020 31 Mar 2021
Note GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 7 100,307 64,661 63,067
Intangible fixed assets 33,661 23,691 21,648
Property, plant and equipment 576 544 415
Right-of-use asset 2,032 2,271 1,816
Capitalised implementation costs 168 - 154
Total non-current assets 136,744 91,167 87,100
Current assets
Trade and other receivables 9 27,644 19,806 17,938
Cash and cash equivalents 40,032 32,536 34,012
Total current assets 67,676 52,342 51,950
Current liabilities
Trade and other payables 10 (47,579) (30,315) (27,241)
Corporation tax (2,307) (5,186) (1,792)
Lease liabilities (745) (694) (514)
Total current liabilities (50,631) (36,195) (29,547)
Net current assets 17,045 16,147 22,403
Non-current liabilities
Deferred tax provision (5,598) (3,453) (3,022)
Other non-current liabilities 11 (22,279) (6,755) (10,737)
Lease liabilities (1,375) (1,647) (1,379)
Total non-current liabilities (29,252) (11,855) (15,138)
Net assets 124,537 95,459 94,365
Equity
Issued share capital 12 89 79 80
Share premium 119,438 89,396 89,396
Foreign exchange reserve 2,402 3,386 302
Other reserves 6,545 2,769 4,044
Retained earnings (3,937) (171) 543
Total shareholders' equity 124,537 95,459 94,365
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 2021
Unaudited Unaudited
six months six months Audited
ended ended year ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
GBP'000 GBP'000 GBP'000
Cash flows from operating activities:
Operating profit for the period 5,468 5,024 10,176
Depreciation of property, plant
and equipment 497 558 1,085
Loss on disposal of fixed assets 21 - 13
Amortisation of intangible fixed
assets 2,559 2,083 4,130
Share-based payment charge 1,672 638 1,693
Operating cash flows before movements
in working capital 10,217 8,303 17,097
Working capital adjustments:
(Increase)/decrease in trade
and other receivables (5,160) 1,639 3,221
Increase in trade and other payables 3,573 6,292 6,424
Tax paid (2,660) (949) (5,707)
Net cash generated from operating
activities 5,970 15,285 21,035
Cash flows from investing activities:
Interest received 1 - -
Acquisition of subsidiary, net
of acquired cash (23,796) (2,752) (2,752)
Purchase of property, plant and
equipment, net of disposals (204) (143) (151)
Net cash used in investing activities (23,999) (2,895) (2,903)
Cash flows from financing activities:
Issue of ordinary share capital 30,049 1 -
Purchase of own shares by the
employee benefit trust (187) - -
Repayment of bank borrowings - (5,000) (5,000)
Interest and bank loan fees (199) (340) (486)
Principal lease liability payments (348) (418) (809)
Interest on lease liabilities (52) (55) (102)
Dividends paid (5,431) - (2,136)
Net cash generated from/(used
in) financing activities 23,832 (5,812) (8,533)
Net increase in cash and cash
equivalents 5,803 6,578 9,599
Cash and cash equivalents at
beginning of the period 34,012 25,996 25,996
Effect of exchange rate fluctuations
on cash held 217 (38) (1,583)
Cash and cash equivalents at
end of the period 40,032 32,536 34,012
============ ============ =============
Interim condensed consolidated statement of changes in
equity
For the six months ended 30 September 2021
Share Foreign exchange Retained
capital Share premium reserves Other reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April
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 charge - - - 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
Comprehensive
income
Profit for the
period - - - - 2,852 2,852
Foreign exchange
differences on
translation of
foreign
operations - - (3,084) - - (3,084)
Transactions
with owners
Shares issued
(equity) 1 - - - (2) (1)
Share-based
payment charge - - - 1,055 - 1,055
Net settlement
of vested share
option - - - (100) - (100)
Current tax
recognised in
equity - - - 374 - 374
Deferred tax
recognised in
equity - - - (54) - (54)
Dividends - - - - (2,136) (2,136)
As at 31 March
2021 80 89,396 302 4,044 543 94,365
Comprehensive
income
Profit for the
period - - - - 953 953
Foreign exchange
differences on
translation of
foreign
operations - - 2,100 - - 2,100
Transactions
with owners
Shares issued
(equity) 9 30,042 - - (2) 30,049
Purchase of own
shares by the
employee
benefit trust - - - (187) - (187)
Share-based
payment charge - - - 1,672 - 1,672
Current tax
recognised in
equity - - - 146 - 146
Deferred tax
recognised in
equity - - - 870 - 870
Dividends - - - - (5,431) (5,431)
As at 30
September 2021 89 119,438 2,402 6,545 (3,937) 124,537
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.
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,
associated current and deferred tax charged through equity, as well
as equity-settled consideration reserves and the purchase of the
Company's own shares by the employee benefit trust ("EBT").
Retained earnings
The retained earnings reserve represents cumulative net gains
and losses recognised in the consolidated statement of
comprehensive income and all other transactions with owners.
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 management,
wealth management and insurance industries, principally in the UK,
North America, Europe & APAC.
Alpha Financial Markets Consulting plc is incorporated in
England and Wales with registered number 09965297. The Company's
registered office is 60 Gresham Street, London, EC2V 7BB. The
Company is a public limited company and is admitted to trading on
the AIM of the London Stock Exchange.
These interim condensed consolidated financial statements were
authorised for issue on 24 November 2021 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
2021. They do not include all of the information required for a
complete set of IFRS financial statements, however, selected
explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in the
Group's financial position and performance since Alpha's Annual
Report & Accounts 2021.
The financial information presented for the period ended 30
September 2021 and the period ended 30 September 2020 is unaudited.
The financial information for the 12 months to 31 March 2021 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, unless otherwise stated.
1.3. Statutory accounts
Financial information contained in this document does not
constitute statutory accounts within the meaning of section 434 of
the Companies Act 2006 ("the Act"). The statutory accounts for the
year ended 31 March 2021 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 2021.
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 has adequate resources
to continue in operation for a period of at least 12 months from
the approval of these financial statements (the "going concern
period"). The Group's forecasts and projections, taking into
account plausible changes in trading performance, show that the
Group has sufficient financial resources, together with assets that
are expected to generate cash flow in the normal course of
business.
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 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. The Group maintains a net cash position of GBP40.0m as at
30 September 2021 and has access to an undrawn GBP20.0m RCF to
support the Group's financing needs.
In May 2021, the Group announced the acquisition of Lionpoint
alongside a share placing. The GBP30.0m net proceeds of the share
placing exceeded the initial $35.6m(11) (GBP24.9m) acquisition
consideration paid on completion. As a result, the Group added to
its cash resources and retains a strong liquidity position
following the acquisition. The Directors are satisfied that the
Group's existing resources are adequate to meet its requirements
over the going concern period.
Therefore, the Directors have adopted a going concern basis for
the preparation of these interim condensed consolidated financial
statements.
(1[1]) All $ references in the notes to the interim condensed
consolidated financial statements are in relation to US Dollars
1.7. Principal accounting policies
Please refer to Alpha's Annual Report & Accounts 2021 for
full disclosures of the principal accounting policies that have
been adopted in the preparation of these interim condensed
consolidated financial statements. There have been no changes to
the 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 2021.
Employment-linked acquisition payments
The contingent and non-contingent consideration related to the
Group's acquisitions are part linked to the ongoing employment of
certain members of the vendor's management team and some judgement
has been applied in determining whether any future payments should
be classified as consideration or as remuneration for future
services. The apportionment in the financial statements can be
based on the interpretation of complex clauses within the share
purchase agreement ("SPA") or related documents of the relevant
acquisition.
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 share-based payments,
management has considered several internal and external factors in
order to judge the probability that management and employee share
incentives may vest and to assess the fair value of share options
at the date of grant. Such assumptions involve estimating 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
13.
Acquisition earn-outs
The earn-out liability calculations performed under IFRS 3 in
relation to the Group's recent acquisitions 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 each
business respectively, the likelihood of an earn-out payment being
made and discounted using an appropriate discount rate. These
estimates are also affected by residual market uncertainty due to
the current COVID-19 environment and could potentially change as a
result of related events over the coming years. For further details
please see note 8.
Business combinations - valuation and asset lives of separately
identifiable intangible assets
In determining the fair value of intangible assets arising in a
business combination, management is required to make estimates
regarding the timing and amount of future cash flows applicable to
the intangible assets being acquired, discounted using an
appropriate discount rate. Such estimates are based on current
budgets and forecasts, extrapolated for an appropriate period
considering growth rates and expected changes to selling prices and
operating costs. Management estimates the appropriate discount rate
using post-tax rates that reflect current market assessments of the
time value of money and the risks specific to the businesses being
acquired. The Directors consider that the assumptions applied by
the Group in developing an estimate of the valuation of acquired
intangible assets at the acquisition date represent the Directors'
best estimate of circumstances on the date of acquisition, and an
independent accountancy firm was used to assess and advise on these
estimates.
Impairment of goodwill
The Group determines whether goodwill is impaired on at least an
annual basis. At 30 September 2021, the Group has considered
whether there are any indicators of impairment that would require a
full impairment assessment to be performed at the half year. No
such indicators have been identified.
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 COVID-19 environment, and the
fact that it could change as a result of future events over the
next several years.
1.9. New accounting standards and interpretations
In the period ended 30 September 2021, the Group has adopted the
following amendments to existing accounting standards with no
material impact on the financial statements. Refer to p. 139 of the
Group's Annual Report & Accounts 2021 for details of recently
adopted standards and interpretations in the prior period.
-- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16), effective from 1 January
2021.
The following other standards, interpretations and amendments to
existing standards have been issued but were not mandatory for
accounting periods beginning on 1 April 2021 and are not expected
to have a material impact on the Group.
-- Reference to the conceptual framework (Amendments to IFRS 3),
effective from 1 January 2022 (not yet endorsed by the UK);
-- Property, Plant and Equipment - Proceeds before intended use
(Amendments to IAS 16), effective from 1 January 2022 (not yet
endorsed by the UK);
-- Onerous contracts - Cost of fulfilling a Contract (Amendments
to IAS 37), effective from 1 January 2022 (not yet endorsed by the
UK);
-- Provisions, Contingent Liabilities and Contingent Assets
(Amendments to IAS 37), effective from 1 January 2022 (not yet
endorsed by the UK);
-- Annual Improvements to IFRS Standards 2018-20 Cycle,
effective from 1 January 2022 (not yet endorsed by the UK);
-- Extension of the Temporary Exemption from Applying IFRS 9
(Amendments to IFRS 4), effective from 1 January 2023;
-- Deferred tax related to assets and liabilities arising from a
single transaction (amendments to IAS 12), effective from 1 January
2023;
-- IFRS 17 Insurance Contracts, effective from 1 January 2023 (not yet endorsed by the UK);
-- Disclosure of accounting policies (Amendments to IAS 1 and
IFRS practice statement 2), effective from 1 January 2023 (not yet
endorsed by the UK);
-- Classification of liabilities as current or non-current -
deferral of effective date (Amendment to IAS 1), effective from 1
January 2023; and
-- Definition of Accounting Estimates (Amendments to IAS 8), effective from 1 January 2023.
2. Segment information
Group management has determined the operating segments by
considering the segment information that is reported internally to
the chief operating decision maker, the Board of Directors. For
management purposes, the Group is currently organised into three
geographical operating divisions: UK, North America and Europe
& APAC. The Group's operations all consist of one type:
consultancy and related services to the asset management, wealth
management and insurance industries.
The Directors consider that there is a material level of
operational support and linkage provided to the Group's emerging
territories in Europe & APAC as they develop their presence
locally, and as such, these clusters of territories have been
deemed to constitute one operating segment.
Revenues associated with software licensing arrangements were
immaterial in both the current and prior years. Therefore, the
Directors consider that disaggregating revenue by operating
segments is most relevant to depict the nature, amount, timing and
uncertainty of revenue and cash flows as may be affected by
economic factors.
30 September 2021 UK North America Europe & Total
APAC
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 32,433 18,854 17,135 68,422
Rechargeable expenses (4) (22) (6) (32)
Net fee income 32,429 18,832 17,129 68,390
Cost of sales (18,577) (12,349) (11,004) (41,930)
Gross profit 13,852 6,483 6,125 26,460
Margin on net fee income (%) (12) 42.7% 34.4% 35.8% 38.7%
Non-current assets 73,514 40,535 22,695 136,744
30 September 2020 UK North America Europe & APAC Total
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 (%)
(12) 39.0% 28.7% 28.4% 34.3%
Non-current assets 60,924 8,395 21,848 91,167
The Group's central non-current assets have been allocated to
the UK operating segment, with the exception of goodwill and
acquired intangible asset balances, which have been allocated in
line with operating segments.
Following the acquisition of Lionpoint in the period, the Group
has recognised the relevant amounts within the segments in line
with the different territories in which Lionpoint operates.
(12) Margin on net fee income is gross profit expressed as a
percentage of net fee income. Please refer to note 3 for further
detail
3. Reconciliations to alternative performance measures
Alpha uses alternative performance measures ("APMs") that are
not defined or specific under the requirements of IFRS. The APMs,
including net fee income, margin on net fee income, adjusted
EBITDA, adjusted profit before tax, adjusted EPS, adjusted cash
conversion and organic net fee income growth, are provided to allow
stakeholders a further understanding of the underlying trading
performance of the Group and aid comparability between accounting
periods. They are not considered a substitute for, or superior to,
IFRS measures.
Net fee income
The Group disaggregates revenue into net fee income and expenses
recharged to clients. Net fee income provides insight into the
Group's productive output and is used by the Board to set budgets
and measure performance. This APM is reconciled on the face of the
income statement and net fee income by segment is reconciled to
revenue in note 2.
Profit margins
Margin on net fee income and adjusted EBITDA margin 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
30 Sep 2021 30 Sep 2020
Note GBP'000 GBP'000
Profit before tax 4,231 4,456
Amortisation of acquired intangible assets 2,258 1,777
Loss on disposal of fixed assets 21 -
Share-based payments charge 13 2,357 719
Earn-out and deferred consideration 8 2,539 1,561
Acquisition costs 643 -
Integration costs - 107
Foreign exchange (gains)/losses 1,353 69
Adjusting items 9,171 4,233
Non-underlying finance expenses 4 1,032 409
Adjusted profit before tax 14,434 9,098
Net underlying finance expenses 4 205 159
Adjusted operating profit 14,639 9,257
Depreciation of property, plant and equipment 497 558
Amortisation of capitalised development costs 301 306
Adjusted EBITDA 15,437 10,121
Adjusted EBITDA margin (%) 22.6% 21.3%
Adjusting items
Certain expense items, which management believes do not reflect
the underlying operating performance of the business, are excluded
from adjusted profit measures. These items are generally non-cash,
non-recurring by nature or are acquisition related.
Amortisation of acquired intangible assets and profit or loss on
disposal of fixed assets are treated as adjusting items to better
reflect the underlying performance of the business, as they are
non-cash items, principally relating to acquisitions.
The share-based payments charge and related social taxes are
excluded from adjusted profit measures. This allows comparability
between periods as the Group's share option plans were established
on AIM admission. It also aligns more closely with the operational
activities of the business, as well as accounts for the fact that
the charge is a non-cash item and the fact that estimated future
social taxes payable fluctuate with the future market value of
shares assumed. This approach has been applied consistently across
reporting periods. Note 13 sets out further details of the employee
share-based payments expense calculation under IFRS 2.
As per note 8, the acquisition of Lionpoint in the period
involved some deferred non-contingent and contingent payments, some
of which, in line with IFRS 3, are being expensed annually over
several years until the date of payment. These amounts are
dependent on the ongoing employment of certain members of Lionpoint
senior management. In addition, the Group continues to recognise
employment-linked costs through the income statement relating to
payments for the previous acquisitions of Axxsys and Obsidian, or
to reflect adjustments made to the fair value of the expected
future payment. These costs have been treated as adjusting items as
they are acquisition related and, whilst they will recur in the
short term, the adjustment allows comparability of underlying
operational performance across reporting periods.
Other acquisition costs expensed in the period in relation to
the acquisition of Lionpoint are also treated as an adjusting item
as they were not directly attributable to the ongoing trading
performance of the Group.
Integration costs in the previous year were in relation to the
acquired Obsidian product suite security and its integration with
the technology protocols within the ADS 360 SalesVista product,
which directly result from the acquisition of Obsidian in previous
years. Integration of Obsidian was completed in April 2020 and was
managed as a discrete short-term project subsequent to the
acquisition.
Similarly, the impact of foreign currency volatility in
translating local working capital balances to their relevant
functional currencies has been excluded from the calculation of
adjusted profit measures on the basis that such exchange rate
movements do not reflect the underlying trends or operational
performance of the Group. This is particularly relevant in the
current period with Lionpoint's deferred consideration payable in
US Dollars and the USD:GBP rate experiencing some volatility around
the completion date.
Non-underlying finance expenses
In calculating adjusted profit before tax, unwinding of the
discounted contingent and non-contingent acquisition consideration
within finance expenses is considered non-underlying as these
amounts relate to acquisition consideration, rather than the
Group's underlying trading performance.
Adjusted profit before tax
Adjusted profit before tax is an APM calculated as profit before
tax stated before the adjusting items above, including amortisation
of acquired intangible assets, share-based payment charge,
acquisition-related payments and costs, non-underlying finance
expenses and other non-underlying expenses. This measure was
introduced to allow comparability of the Group's underlying
performance after the adoption of IFRS 16. This measure also
reflects the underlying amortisation charges arising from
capitalised development costs relating to ADS product development.
This measure will likely be of increasing importance in allowing
comparability across periods as the ADS business grows further in
future periods.
Adjusted operating profit
Adjusted operating profit is an APM defined by the Group as
adjusted profit before tax before charging underlying finance
expenses, including fees on bank loans and interes t on lease
liabilities. The Directors consider this metric aligned to the
defined components of operating profit, adjusted for the adjusting
items above, and provides a clearer view of the underlying
operating performance of the business. This measure is used as the
basis for adjusted cash conversion.
Adjusted EBITDA
Adjusted EBITDA is a commonly used operating measure, which is
defined by the Group as adjusted operating profit stated before
non-cash items, including amortisation of capitalised development
costs and depreciation of property, plant and equipment. Adjusted
EBITDA is a measure that is used by management and the Board to
assess trading performance across the Group and forms the basis of
the performance measures for aspects of remuneration, including
consultant profit share.
Adjusted profit after tax
Adjusted profit after tax and adjusted earnings per share
metrics are also APMs, similarly used to allow a further
understanding of the underlying performance of the Group. Adjusted
profit after tax is stated before adjusting items and their
associated tax effects. The associated tax effects are calculated
by applying the relevant effective tax rate to allowable expenses
that have been excluded as adjusting items.
30 Sep 2021 30 Sep 2020
GBP'000 GBP'000
Adjusted profit before
tax 14,434 9,098
Tax charge (3,278) (1,481)
Tax impact of adjusting
items (413) (562)
Adjusted profit after tax 10,743 7,055
Adjusted earnings per share
Adjusted earnings per share ("EPS") is calculated by dividing
the adjusted profit after tax for the period attributable to
ordinary shareholders by the weighted average number of ordinary
shares outstanding during the period. Adjusted diluted EPS is
calculated by dividing adjusted profit after tax by number of
shares as above, adjusted for the impact of potentially dilutive
ordinary shares. Potentially dilutive ordinary shares are only
treated as dilutive when their conversion to ordinary shares would
decrease EPS (or increase loss per share). Refer to note 6 for
further detail.
30 Sep 2021 30 Sep 2020
Adjusted EPS
Adjusted EPS (p) 9.85 6.99
Adjusted diluted EPS (p) 9.34 6.67
Reconciliation of adjusted administrative expenses
To express on the same basis as the APMs described above,
adjusted administration expenses are stated before adjusting items,
depreciation and amortisation of capitalised development costs and
are used by the Board to monitor the underlying administration
expenses of the business in calculating adjusted EBITDA.
30 Sep 2021 30 Sep 2020
GBP'000 GBP'000
Administration expenses 20,992 11,282
Adjusting items (9,171) (4,233)
Depreciation of property, plant and equipment (497) (558)
Amortisation of capitalised development costs (301) (306)
Adjusted administration expenses 11,023 6,185
Adjusted cash generated from operating activities
Adjusted cash generated from operating activities excludes any
employment-linked acquisition payments and other acquisition costs
expensed in the year, treated as operating cash flows under IFRS,
to reflect the Group's underlying operating cash flows, exclusive
of cash payments relating to acquisitions.
30 Sep 2021 30 Sep 2020
GBP'000 GBP'000
Net cash generated from operating
activities 5,970 15,285
Employment-linked acquisition payments 1,848 1,146
Acquisition costs 643 -
Adjusted cash generated from operating
activities 8,461 16,431
Adjusted cash conversion
Cash conversion is stated as net cash generated from operating
activities expressed as a percentage of operating profit.
Adjusted cash conversion is stated as adjusted cash generated
from operating activities expressed as a percentage of adjusted
operating profit.
30 Sep 2021 30 Sep 2020
Cash conversion 109.2% 304.2%
Adjusted cash conversion 57.8% 177.5%
Organic net fee income growth
Organic net fee income growth excludes net fee income from
acquisitions in the 12 months following acquisition. Net fee income
from any acquisition made in the period is excluded from organic
growth. For acquisitions made part way through the comparative
period, the current period's net fee income contribution is reduced
to include only net fee income for the period following the
acquisition anniversary, in order to compare organic growth on a
like-for-like basis.
Organic net fee income growth of 21.7% (H1 21: 7.5%) in the
current period represents H1 22 net fee income less GBP10.5m
attributable to Lionpoint, treated as inorganic as it was acquired
in the period.
Constant currency growth
The Group operates in multiple jurisdictions and generates
revenues and profits in various currencies. Those results are
translated on consolidation at the foreign exchange rates
prevailing in that period. These exchange rates vary from period to
period, so the Group presents some of its results on a "constant
currency" basis. This means that the current period's results have
been retranslated using the average exchange rates from the prior
period to allow for comparison of period-on-period results,
eliminating the effects of volatility in exchange rates.
Currency translation had a noticeable impact on both net fee
income and gross profit in the first half, as a result of a
strengthening Sterling through the period against both the US
Dollar and against the Euro. In the six months, Sterling averaged
$1.39 (H1 21: $1.27) and EUR1.17 (H1 21: EUR1.12). On a constant
currency basis, the Group's net fee income for the period would be
GBP2.2m higher (3.6%) and, similarly, gross profit would be GBP0.9m
higher.
4. Net finance expenses
30 Sep 2021 30 Sep 2020
Note GBP'000 GBP'000
Bank interest receivable 1 -
Total finance income 1 -
Interest and fees payable on bank
loans (154) (104)
Interest on lease liabilities (52) (55)
Total underlying finance expenses (206) (159)
Non-underlying finance expenses 3 (1,032) (409)
Total finance expenses (1,238) (568)
Net underlying finance expenses 3 (205) (159)
Net finance expenses (1,237) (568)
As at 31 March 2021, the Group held one principal bank facility
comprising a GBP20.0m undrawn, committed RCF facility with Lloyds
Bank Plc. In May 2021, the Group drew down GBP2.0m of the available
facility temporarily, to facilitate completion payments made during
the acquisition of Lionpoint, which was repaid following receipt of
funds from the placing. The facility is undrawn as at 30 September
2021, and the Group remains in a strong net cash position of
GBP40.0m.
5. Tax
30 Sep 2021 30 Sep 2020
GBP'000 GBP'000
Current tax
In respect of the current period - UK 1,418 1,166
Foreign taxation 1,836 803
Adjustments in respect of prior periods - 17
Deferred tax
In respect of the current period (1,098) (486)
Change in tax rate 1,146 -
Adjustment in respect of prior periods (24) (19)
Total tax expense for the period 3,278 1,481
An increase in the UK corporation rate from 19% to 25%
(effective 1 April 2023) was substantively enacted on 24 May 2021.
An initial assessment is that, once effective, this change will
increase the Group's future current tax charge accordingly. In
relation to this tax rate change, the Group has recognised an
increase to its existing deferred tax liability of GBP1.1m,
reflecting an increased liability recognised on acquired intangible
assets partially offset by the increased carrying value of deferred
tax assets relating to share options outstanding.
During the period, the Group also recognised a deferred tax
liability of GBP3.4m in relation to the acquisition of Lionpoint
through goodwill. Refer to note 8 for further details.
In addition, for the period ended 30 September 2021, the Group
has recognised a total of GBP1.0m of tax through equity, of which
GBP0.1m relates to current tax on the exercise of share options and
GBP0.9m relates to deferred tax on share options outstanding.
6. Earnings per share and adjusted earnings per share
The Group presents basic and diluted EPS data, on both an
adjusted and non-adjusted basis. Basic EPS is calculated by
dividing the profit or loss for the 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. Potential ordinary shares are only
treated as dilutive when their conversion to ordinary shares would
decrease EPS (or increase loss per share).
In order to reconcile to the adjusted profit for the financial
period, the same adjustments as in note 3 have been made to the
Group's profit for the financial period. The profits and weighted
average number of shares used in the calculations are set out
below:
Note 30 Sep 2021 30 Sep 2020
Basic & diluted EPS
Profit for the period used in calculating basic and diluted EPS (GBP'000) 953 2,975
Weighted average number of ordinary shares in issue ('000) 109,040 100,905
Number of dilutive shares ('000) 5,949 4,915
Weighted average number of ordinary shares, including potentially dilutive
shares 114,989 105,820
Basic EPS (p) 0.87 2.95
Diluted EPS (p) 0.83 2.81
Adjusted EPS
Adjusted profit for the period used in calculating adjusted basic and
diluted EPS (GBP'000) 3 10,743 7,055
Weighted average number of ordinary shares in issue ('000) 109,040 100,905
Number of dilutive shares ('000) 5,949 4,915
Weighted average number of ordinary shares, including potentially dilutive
shares 114,989 105,820
Adjusted EPS (p) 9.85 6.99
Adjusted diluted EPS (p) 9.34 6.67
7. Goodwill
30 Sep 2021 30 Sep 2020 31 Mar 2021
GBP'000 GBP'000 GBP'000
Cost at beginning of the period 63,067 64,642 64,642
Additions 35,747 - -
Gains/(losses) from foreign exchange 1,493 19 (1,575)
Cost at end of the period 100,307 64,661 63,067
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.
Goodwill is represented by assets that do not qualify for separate
recognition and includes the potential synergy benefits of
combining the intellectual property and talents of the teams into
the Group. In line with IAS 21 para 47, goodwill arising on the
acquisition of a foreign operation is held in local currency and is
retranslated into the Group's presentational currency at each
reporting date using the closing foreign exchange rate.
During the period, the Group has recognised goodwill on the
acquisition of Lionpoint. The goodwill recognised is reflective of
the potential value of the consulting skillset and market coverage,
as well as the potential synergies and market opportunities that
the acquisition provides, over and above that which has been
recognised through the identifiable intangible assets described in
note 8. None of the goodwill recognised is expected to be
deductible for tax purposes.
The carrying value of goodwill is not subject to systematic
amortisation but is reviewed at least annually for impairment. The
Group performs a full annual impairment assessment at each year end
and, at the half year, considered whether there were indicators of
risk of impairment, and whether they warrant an intermediate
impairment assessment to be performed for the period ended 30
September 2021. No indicators for impairment have been identified
in the period.
Further details of the review performed for the year ended 31
March 2021 are provided on pp 151-52 of Alpha's Annual Report &
Accounts 2021.
8. Acquisitions
Acquisition in the current period
On 20 May 2021, the Group reached an agreement to acquire 100%
of the issued share capital of Lionpoint Holdings, Inc.
("Lionpoint"), a provider of specialist consultancy services to the
alternatives investments industry, on a cash free, debt free basis.
The Directors consider that the acquisition is in line with the
Group's stated growth strategy, significantly increasing both the
Group's exposure to the attractive and fast-growing alternatives
investments market and its footprint in the large and strategically
important North America segment.
A summary of the purchase consideration, net assets acquired,
identifiable intangible assets and goodwill is set out below. These
fair values are provisional and determined by using established
estimation techniques such as discounted cash flow and option
valuation models. Provisional fair values contain amounts that will
be finalised no later than one year after the date of acquisition.
These provisional amounts are at an advanced stage of completion,
but remain subject to finalising and audit.
Lionpoint Book values Fair value Values
adjustments on acquisition
GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------- ----------------
Acquiree's net assets at the
acquisition date:
Trade name - 2,602 2,602
Order Backlog - 829 829
Customer relationships - 10,752 10,752
Tangible fixed assets 113 - 113
Right-of-use assets 478 - 478
Trade and other debtors 4,528 - 4,528
Cash 2,148 - 2,148
Trade and other creditors (2,380) - (2,380)
Lease liabilities (478) - (478)
Corporation tax liability (67) - (67)
Deferred tax liability - (3,423) (3,423)
Net identifiable assets and
liabilities acquired 4,342 10,760 15,102
Cash consideration relating
to business combination 50,849
Goodwill on acquisition (see
note 7) 35,747
The maximum payable for the acquisition (over four years) is
$90.0m (GBP63.8m) to be settled in cash, with the option to settle
a portion of the deferred amounts in the Group's ordinary shares.
Of this maximum amount payable, $7.5m (GBP5.3m) is employment
linked. The fair value of consideration recognised on the date of
acquisition amounted to $72.3m (GBP50.8m), of which $33.5m
(GBP23.5m) was paid on completion, alongside an additional net cash
payment of $2.1m (GBP1.4m) in relation to completion working
capital. A balancing $0.5m (GBP0.3m) debtor is held at 30 September
2021, which will be deducted from future consideration payments to
the management vendors.
Of the remaining maximum consideration payable, a deferred
non-contingent consideration of $17.0m (GBP12.0m) is payable across
the first and second anniversaries of the acquisition and
contingent earn-out consideration up to a maximum of $32.0m
(GBP22.6m) is payable in three instalments across FY 23 to FY 25.
The FY 23 to FY 25 earn-out consideration payments are contingent
on Lionpoint meeting certain profitability targets over the
earn-out period. The fair value of deferred consideration
recognised on the date of acquisition was $37.3m (GBP26.2m), of
which $20.6m (GBP14.5m) related to contingent consideration and
$16.7m (GBP11.7m) related to non-contingent consideration.
Employment-linked acquisition payments will be expensed through
the income statement proportionately until FY 26. During the
period, the Group has expensed $2.2m (GBP1.6m) in relation to these
employment-linked payments through the income statement.
The deferred consideration is discounted to fair value. Discount
unwinding is recognised as a finance cost proportionately across
the periods until final payment. During the period, $1.1m (GBP0.8m)
of discount unwinding was expensed as a non-underlying finance cost
in relation to the Lionpoint acquisition consideration.
As at 30 September 2021, a $39.5m (GBP29.4m) liability is
recorded, of which $18.9m (GBP14.0m) is a current and $20.6m
(GBP15.4m) is a non-current liability.
The total cash payable on completion was funded from the Group's
cash reserves and the proceeds of the May 2021 share placing,
raising net proceeds of GBP30.0m. During the period, a further
$1.0m (GBP0.7m) employment-linked deferred payments were made.
As consideration for the acquisition of Lionpoint is payable in
US Dollars, foreign exchange differences are recognised at each
reporting date in relation to translating these liabilities into
Pounds Sterling. In the period, the Group recognised a foreign
exchange loss of GBP1.5m in the income statement arising from
acquisition-related currency movements, particularly those
immediately around the acquisition date.
Given the fair value of the liability relating to contingent
consideration includes estimation, the Group has applied the
following sensitivities to Lionpoint's assumed financial
performance over the remaining earn-out period. Were profitability
performance to be 5% better or worse than anticipated, the earn-out
related liability as at 30 September 2021 would increase or
decrease by GBP1.5m, respectively.
Lionpoint contributed GBP10.6m to the Group's revenue and
GBP1.8m to the Group's profit after tax for the period from the
date of acquisition to the 30 September 2021. If the acquisition of
Lionpoint had been completed on 1 April 2021, Group revenues for
the period would have been GBP72.0m and Group profits after tax
would have been GBP0.6m, without adjustment to amortisation
assumptions.
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 2021.
Obsidian
Including the contingent earn-out and unwinding of discounting,
a total GBP5.3m estimated consideration is recorded within
liabilities. In the period, GBP0.8m was expensed as a
non-underlying cost relating to employment-linked consideration.
Any remaining employment-linked balance will be expensed through
the income statement proportionately until 2023, as
appropriate.
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 will 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.
Consistent with 31 March 2021, the Directors consider that the
Obsidian undiscounted earn-out payment could reasonably be expected
to range from GBP5.3m to GBP9.3m. This estimated range reflects the
stretching growth targets required through the earn-out period, the
profile of potential earn-out payments weighted towards the later
earn-out years and the structure of the Obsidian earn-out
arrangement.
Axxsys
The remaining GBP2.1m base consideration due on the acquisition
of Axxsys as at 31 March 2021 was paid during the period, of which
GBP1.1m was employment linked. In the period, GBP0.2m was expensed
as a non-underlying cost relating to employment-linked
consideration. A total GBP4.8m estimated consideration is recorded
within liabilities, now wholly in relation to the contingent
earn-out arrangement. Any remaining employment-linked balance will
be expensed through the income statement 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 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 Axxsys.
The below table summarises the movements in the deferred
contingent and non-contingent consideration liabilities held at 30
September 2021:
Axxsys Obsidian Lionpoint Total
GBP ' GBP ' GBP ' GBP '
000 000 000 000
Balance as at 1 April
2021 6,706 4,357 - 11,063
Additions - - 26,210 26,210
Employment-linked consideration 153 818 1,568 2,539
Payments in the period(13) (2,100) - (707) (2,807)
Unwinding of discounting 78 135 819 1,032
Foreign exchanges (gains)
/ losses - - 1,510 1,510
Balance as at 30 September
2021 4,837 5,310 29,400 39,547
The above liabilities are reflected in non-current and current
liabilities as shown in the following table:
30 Sep 2021 30 Sep 2020 31 Mar 2021
GBP'000 GBP'000 GBP'000
Amounts due within one year 18,822 2,450 1,992
Amounts due after one year 20,725 6,275 9,071
Total earn-out and deferred
liabilities 39,547 8,725 11,063
1 (3) Of the GBP2.8m deferred consideration paid in the period,
GBP1.8m is employment-linked and is excluded from investing
activities on the statement of cash flows. Further payments of
GBP22.8m were made in the period on the completion of the Lionpoint
acquisition
9. Trade and other receivables
30 Sep 2021 30 Sep 2020 31 Mar 2021
GBP'000 GBP'000 GBP'000
Trade receivables 22,823 17,927 16,119
Other debtors 378 256 319
Capitalised implementation costs 235 - 182
Prepayments 1,373 876 798
Accrued income 2,835 747 520
Total amounts due within one year 27,644 19,806 17,938
Trade receivables are non-interest bearing and generally have a
30- to 60-day term. Due to their short maturities, the carrying
amount of trade and other receivables is a reasonable approximation
of their fair value.
In assessing the appropriateness of the Group's expected credit
loss provision at 30 September 2021, the Directors have considered
the Group's historical loss rates for each aging category of
receivables in conjunction with other factors in key Alpha
territories. There are no indicators at 30 September 2021 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 2021. Therefore,
immaterial changes have been made to the Group's existing loss
rates, as disclosed in Alpha's Annual Report & Accounts
2021.
10. Trade and other payables
30 Sep 2021 30 Sep 2020 31 Mar 2021
Note GBP'000 GBP'000 GBP'000
Trade payables 2,562 1,669 1,780
Accruals 16,781 16,408 16,215
Deferred income 2,534 1,674 1,692
Taxation and social security 5,880 6,487 4,352
Other creditors 1,000 1,627 1,210
Earn-out and deferred consideration 8 18,822 2,450 1,992
Total amounts due within one year 47,579 30,315 27,241
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.
Earn-out and deferred consideration comprises the fair value of
contingent and non-contingent consideration arising from the
acquisitions of Lionpoint, Axxsys and Obsidian at the balance sheet
date. Please refer to note 8 for further details.
11. Other non-current liabilities
30 Sep 2021 30 Sep 2020 31 Mar 2021
Note GBP'000 GBP'000 GBP'000
Earn-out and deferred consideration 8 20,725 6,275 9,071
Deferred income 236 - 304
Other non-current liabilities 1,318 480 1,362
Total amounts owed after one year 22,279 6,755 10,737
Non-current liabilities include GBP20.7m of deferred and
contingent consideration that falls due over 12 months from the
balance sheet date and relates to the Group's recent acquisitions
of Lionpoint, Axxsys and Obsidian.
Other non-current liabilities include an estimate of the social
security costs that may become due on future vesting of outstanding
share options.
12. Called up share capital
30 Sep 2021 30 Sep 2020 31 Mar 2021
Number Number Number
Allotted, called up and fully paid
Ordinary 0.075p shares (1 vote per share) 118,238,586 105,538,019 106,521,966
30 Sep 2021 30 Sep 2020 31 Mar 2021
GBP GBP GBP
Allotted, called up and fully paid
Ordinary 0.075p shares (1 vote per share) 88,679 79,154 79,891
Balance at 1 April 2021 79,891
106,521,966 ordinary shares of 0.075p each
Issued shares (i) 8,788
Balance at 30 September 2021 88,679
118,238,586 ordinary shares of 0.075p each
(i) During the period , a total of 11,716,620 ordinary shares
were issued by the Group, of which 9,569,839 shares were issued as
part of the Group's share placing, 346,781 shares relate to the
exercise of some vested share options and 1,800,000 shares were
issued to the employee benefit trust ("EBT") for future
satisfaction of share incentive plans.
The total number of voting rights in the Company at 30 September
2021 was 111,971,933.
Alpha Employee Benefit Trust
The Group held 6,266,653 (FY 21: 4,413,628) shares in the EBT
comprising shares held to satisfy share options granted under its
joint share ownership plan ("JSOP") or unallocated ordinary shares
to satisfy share options granted under the Group's other share
option plans. In the period, the EBT purchased 53,025 shares at
market value. 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
2021 (FY 21: nil).
Dividends
During the period, the Group paid a final dividend in relation
to the year ended 31 March 2021 of 4.85p per ordinary share (H1 21:
nil).
The Board has declared an interim FY 22 dividend of 2.90p per
share (FY 21: 2.10p).
13. Share-based payments
The Group has adopted a globally consistent share incentive plan
approach, which is implemented using efficient jurisdiction
specific plans, as appropriate.
The Management Incentive Plan
The Group has a management incentive plan ("MIP") to retain and
incentivise the directors and senior management. The MIP consists
of four parts: part A of which will enable the granting of
enterprise management incentive and non-tax advantaged options to
acquire shares; part B of which will enable the awarding of JSOPs;
part C of which will enable the awarding of restricted stock units
("RSUs") for participants in the US; and Part D of which will
enable the awarding of RSUs in France (together the "options").
Options granted up to FY 20 to the directors and senior
management of the Group were subject to the fulfilment of two or
more of the following performance conditions: (a) a specific
business unit's budgetary EBITDA, or other personal targets and
goals; (b) the Group achieving a total shareholder return for the 3
years from date of award in excess of the average total shareholder
return of a peer group of comparable companies; and (c) the Group
achieving at least 10% EPS growth against the comparative financial
year.
As disclosed in the last year, responding to the impact of
COVID-19, options granted to senior management in FY 21 were
subject to more flexible performance criteria, including local
budget targets and a variety of stretching personal sales or other
targets. FY 21 awards made to Executive Directors, as in prior
years, were also subject to the Group achieving a total shareholder
return ("TSR") in excess of the average total shareholder return of
a peer group of comparable companies, for a period of 3 years from
the date of grant.
As previously disclosed, the Remuneration Committee has returned
to a more standard approach in setting the FY 22 award criteria.
The criteria for FY 22 share incentive awards to the Executive
Directors and senior management of the Group, depending on the
individual and their role, include: (a) the Group achieving
adjusted EPS growth of 15% or more to trigger a maximum award, or
10% to trigger a 66% award, with a linear application of awards
between these levels; (b) the Group achieving a TSR over three
years in excess of the mean TSR delivered by a peer group of
comparable companies; (c) personal adherence to corporate values
and risk policy; and (d) specific business unit EBITDA, or other
personal targets and goals.
MIP awards have either nil exercise price payable (or no more
than a nominal purchase price payable) in order to acquire shares
pursuant to options. MIP awards have either 3- or 4-year vesting
periods from the date of grant and can be equity settled only.
The Employee Incentive Plan
In addition to the MIP, the Board has previously put in place a
medium-term employee incentive plan ("EIP"). Under the EIP, a broad
base of the Group's employees has been granted share options or
share awards over a small number of shares. The EIP is structured
as is most appropriate under the local tax, legal and regulatory
rules in the key jurisdictions and therefore varies between those
jurisdictions.
During the period ended 30 September 2021, a total of 2,959,429
share option and award grants were made to employees and senior
management (H1 21: 3,365,900).
On 2 July 2021, certain MIP awards vested, following
satisfaction of performance conditions. The awards' performance
conditions relating to EPS growth and total shareholder return
exceeding a basket of comparable companies over 3 years to the
vesting date were met in full and the relevant local country or
divisional budgetary performance conditions were met in full or
part, dependent on Alpha location. As a result, 6,536 nil or
nominal cost awards over ordinary shares of 0.075 pence per share
vested and 149,527 share awards were forfeited under performance
conditions or as a result of leavers before vesting.
All of these vested awards were exercised, with an additional
343,750 share options which vested in FY 21 also exercised in the
period. Of these total 350,286 share options exercised, the Company
settled 346,781 through the issuance of ordinary shares, with 3,505
additional share options retained for net tax settlement. The
weighted average share price at the date of these exercises was
GBP3.55. The remaining vested award holders have a further 7-year
period in which to exercise their vested awards.
Details of the share option awards made are as follows:
Period ended 30 Sep 2021
Number of Weighted average exercise price
share options
Outstanding at the beginning of the period 7,613,969 -
Granted during the period 2,959,429 -
Exercised during the period (350,286) -
Forfeited during the period (149,527) -
Expired during the period - -
Outstanding at the period end 10,073,585 -
Exercisable at the period end 31,250 -
The options outstanding at 30 September 2021 had a weighted
average remaining 2 years to vest , exercisable at a nil or nominal
exercise price.
During the period ended 30 September 2021, options were granted
on 6 July 2021 and 20 July 2021 to employees and certain senior
management. The weighted average of the estimated fair values of
the options outstanding is GBP1.65 per share (H1 21: GBP1.01).
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 2021
Weighted average share price at GBP3.48
grant date
Exercise price -
Volatility 22.00%
Weighted average vesting period 3
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 recognised a total expense of GBP2.4m (H1 21: GBP0.7m)
in the current period, comprising GBP1.7m (H1 21: GBP0.6m) in
relation to equity settled share-based payments, and GBP0.7m (H1
21: GBP0.1m) relating to relevant social security taxes. Given the
estimation in calculating the share-based payment expense, were the
future performance conditions for all outstanding share options
assumed to be met at the end of the reporting period, the charge in
the period would increase by GBP0.5m.
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.
14. 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.
-ENDS-
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END
IR FIFFRLILSFIL
(END) Dow Jones Newswires
November 24, 2021 02:00 ET (07:00 GMT)
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