TIDMAFM
RNS Number : 5162D
Alpha Fin Markets Consulting plc
22 June 2023
22 June 2023
Alpha Financial Markets Consulting plc
("Alpha", the "Company" or the "Group")
AUDITED RESULTS FOR THE YEARED 31 MARCH 2023
Excellent double-digit organic growth across all regions
Alpha Financial Markets Consulting plc (AIM:AFM), a leading
global provider of specialist consultancy services to the asset
management, wealth management and insurance industries, is pleased
to report its audited results for the 12 months ended 31 March 2023
(FY 23).
Financial h ighlights(1)
-- Revenue increased by 44.8% to GBP228.7m (FY 22: GBP158.0m)
and net fee income(2) increased by 43.9% to GBP227.2m (FY 22:
GBP157.8m), or 36.1% on a constant currency basis. On an organic(3)
basis, net fee income grew by 39.6%
-- Gross profit increased by 35.4% to GBP80.4m (FY 22: GBP59.4m)
at 35.4% margin(2) (FY 22: 37.6%), reflecting the easing of
utilisation to target levels, alongside continued investment in our
growing team
-- Adjusted(2) EBITDA increased by 37.5% to GBP46.6m (FY 22:
GBP33.9m) with 20.5% margin largely consistent with FY 22's
21.5%
-- Adjusted profit before tax increased by 38.6% to GBP44.0m (FY 22: GBP31.8m)
-- Adjusted earnings per share increased by 36.4% to 29.27p (FY 22: 21.46p)
-- On a statutory basis, profit before tax increased to GBP25.8m
(FY 22: GBP14.9m) and basic earnings per share increased to 15.82p
(FY 22: 7.69p)
-- Good adjusted cash conversion of 74.0% (FY 22: 112.1%) with
adjusted cash generated from operating activities of GBP32.9m (FY
22: GBP36.0m), reflecting specific cash outflows, alongside good
underlying working capital management
-- Robust balance sheet with a net cash balance as at 31 March
2023 of GBP59.2m (31 March 2022: GBP63.5m)
-- In view of Alpha's performance and cash position at the year
end, the Board is recommending a final dividend of 10.50p (FY 22:
7.50p)
12 months to 12 months to
31 March 2023 31 March 2022 Change
------------------------ --------------- --------------- --------
Revenue GBP228.7m GBP158.0m 44.8%
Gross profit GBP80.4m GBP59.4m 35.4%
Adjusted EBITDA GBP46.6m GBP33.9m 37.5%
Adjusted profit before
tax GBP44.0m GBP31.8m 38.6%
Profit before tax GBP25.8m GBP14.9m 73.2%
Adjusted EPS 29.27p 21.46p 36.4%
Basic EPS 15.82p 7.69p 105.7%
Total dividend per
share 14.20p 10.40p 36.5%
------------------------ --------------- --------------- --------
Operational h ighlights
-- Double-digit organic net fee income growth across all
regions, including North America, a key strategic region for the
Group
-- Continued strong growth of client relationships, with the
number of clients(4) that the Group has worked with increasing to
874 (FY 22: 718) and new client wins spanning the Group's global
businesses
-- Continued growth in the Group's insurance offering, supported
by the appointment of a Global Head of Insurance Consulting to
further the expansion of the proposition
-- Investment in the best talent: consultant(5) headcount
increased to 994 (FY 22: 760), including the addition of 13 new
directors(6)
-- CEO succession plan and relevant governance changes
implemented, including the appointment of a new Global Head of
Asset & Wealth Management Consulting
-- Post-year end acquisition of Shoreline, an APAC-based asset
and wealth management consultancy, completed in May 2023;
integration initiated and progressing well
Outlook
-- Alpha has performed extremely well in the year against a
backdrop of ongoing macro-economic uncertainty, and the long-term
structural growth drivers that underpin demand for Alpha's services
remain very strong
-- Alpha has the best consultants in its chosen industries and
an excellent global reputation to address the demand created from
those drivers
-- In recent months, the global consulting market has
experienced increased levels of competition as a result of
overcapacity, which we expect to be the market backdrop in the
short term
-- As the global consulting market balances supply with overall
demand, the Group will continue to manage appropriately its
discretionary spend and hire selectively to invest for the future,
in line with our 2028 strategic ambition to double the business
-- While we currently see higher levels of competition and a
lengthening sales cycle, we are confident that Alpha's strong
client proposition and business strategy will continue to drive
market share growth
-- The Group enters FY 24 with resilient trading and a good
pipeline of new business opportunities, and the Board remains
confident of delivering full-year results in line with current
market expectations
Commenting on the results, Luc Baqué, Chief Executive Officer ,
said:
"I am very pleased by the financial performance of the business
over the year; the Group has exceeded expectations and achieved
excellent organic growth across all regions, in particular North
America. I am excited to take the helm of Alpha and have the honour
of leading its fabulous team; and I am thankful to Euan for his
excellent leadership over the last decade and look forward to
building on the Group's continued success and leading it through
the next growth chapter.
Whilst we have recently seen a lengthening sales cycle and
higher levels of competition, we enter FY 24 with resilient trading
and a good pipeline of new business opportunities. Our compelling
proposition to clients, leading talent base and clear growth
strategy give us confidence as we progress towards our 2028
strategic goals."
Commenting on the results, Euan Fraser, Chief Executive Officer
to 31 March 2023 , said:
"The past financial year covers the final year of my decade as
Alpha's CEO. I am delighted that the Group has experienced such
strong growth and a set of financial results that exceeded our
expectations. The Group has also achieved, well ahead of plan, the
ambition we set out in 2020 to double in size.
I am extremely proud of everyone in the Alpha team for reaching
that landmark and I am certain many more will follow. It has been
an incredible journey and a huge honour being CEO. Alpha is in very
good hands with Luc Baqué - and I for one cannot wait to see where
the outstanding talent, commitment and expertise across the Group
takes Alpha next."
Enquiries:
Alpha Financial Markets Consulting plc
Luc Baqué (Chief Executive Officer)
John Paton (Chief Financial Officer) +44 (0)20 7796 9300
Investec Bank plc - Nominated Adviser, Joint
Corporate Broker
Patrick Robb
James Rudd
Harry Hargreaves +44 (0)20 7597 4000
Berenberg - Joint Corporate Broker
Toby Flaux
James Thompson
Alix Mecklenburg-Solodkoff +44 (0)20 3207 7800
Camarco - Financial PR
Ed Gascoigne-Pees
Phoebe Pugh +44 (0)20 3757 4980
Analyst p resentation:
A results presentation will take place at 9.30 a.m. today by
conference call. Those wishing to attend should email
AlphaFMC@camarco.co.uk .
The full-year results and a copy of the presentation slides, for
those unable to attend, will be available on the C ompany website
at https://alphafmc.com/investors/reports-presentations/ .
About Alpha FMC:
Headquartered in the UK and quoted on the AIM of the London
Stock Exchange, Alpha is a leading global provider of specialist
consultancy services to the asset management, wealth management and
insurance industries.
It has the largest dedicated team in those industries, with
approximately 1,000 consultants globally, operating from 17
client-facing offices(7) spanning the UK, North America, Europe and
APAC. Alpha has worked with all of the world's top 20 and 80% of
the world's top 50 asset managers b y AUM(8) , along with a wide
range of insurance and other buy-side firms.
1 All financial and operating highlights relate to the year
ended 31 March 2023 ("FY 23") and the comparative period is 31
March 2022 ("FY 22") unless otherwise specified. All rounding and
percentage change calculations are from the basis of the financial
statements in GBP'000s
2 The Group uses alternative performance measures ("APMs") to
provide stakeholders further metrics to aid understanding of the
underlying trading performance of the Group. Margins are expressed
as a percentage of net fee income. Refer to note 3 for further
details
3 Organic net fee income growth excludes Lionpoint's current
year net fee income contribution prior to the acquisition
anniversary. Refer to note 3 for further details
4 Client numbers are cumulative and have been updated to include
all client relationships from acquisitions
5 "Consultants" and "headcount" refer to fee-earning consultants
at the year end: employed consultants plus utilised contractors in
client-facing roles
6 "Directors" refers to fee-generating directors at the year
end. All director increases are presented as net
7 Group uses "office" to refer to office location; that is, if
there are multiple offices in one location, they will be counted as
one office
8 "World's top 20" and "world's top 50" refer to Investment
& Pensions Europe, "Top 500 Asset Managers 2022"
Chairman's Report
Alpha has demonstrated the strength of its strategy and business
model over the past year. We have a clear and compelling set of
objectives and are laying strong foundations to achieve our
ambitious growth plans.
Since joining London's Alternative Investment Market ("AIM") in
October 2017, Alpha has achieved an unbroken record of growth in
revenues and profits as a public company. I am therefore delighted
to present the Group's Annual Report & Accounts for the year to
31 March 2023, which demonstrates another excellent year across all
activities and geographies. This outcome has been delivered by the
extraordinary skill and dedication of Alpha's employees all over
the world.
But before I proceed to talk about governance, the year in
review and outlook, I must thank Euan Fraser for his outstanding
performance as Chief Executive Officer. He has presided over
another excellent year of growth - across our financial KPIs,
client relationships, business proposition and talent base. The
last 10 years under Euan's leadership as CEO are a very successful
period in Alpha's rich story in which the platform for long-term
growth for our investors, clients and Alpha's people has been built
and proven. The Board(9) and I are delighted to retain Euan as a
strategic adviser. I know that, in Luc Baqué, the Group has chosen
a very worthy successor with the vision, skills and capabilities to
take the business through its next chapter of growth.
Strategy
For the next phase of Alpha's growth plan, the Group has set the
target of doubling the size of the business again by 2028,
leveraging the same growth strategy that has served it well so far:
scaling up and broadening the client proposition, rolling out the
client proposition globally, and making selective acquisitions.
The objective is to build out a multi-boutique model with a
strong culture of cross-selling the Group's services so that it
progressively deepens its relationship with each client. The Board
believes this approach will deliver outstanding client service and
provide the best opportunities for long-term growth.
In delivering this strategy, Alpha's ability to attract and
retain the world's best specialist consulting talent remains
fundamental to the successful realisation of its ambitions. The
Group therefore provides a highly attractive offering encompassing
competitive compensation, career development, high-quality work in
multiple geographies, recognition and support. These factors,
alongside a focus on offering an excellent corporate culture and
inclusive working environment for all employees, have helped the
Group to increase its consultant numbers by 234 during the year,
bringing the total to 994.
Overview of the financial year
The Group has achieved the strategic goal set in November 2020
to double in size over the four years to November 2024. Reaching
this target so quickly underlines the strength and relevance of the
Group's proposition, the market-leading expertise of its people and
the quality of the executive team.
During the past year, Alpha made excellent progress in all three
areas of its strategic growth agenda. The Group has further
broadened its proposition with particularly strong growth in
Insurance Consulting and, through Lionpoint, services for
alternatives clients. Geographic expansion is also progressing
well, with excellent progress in North America, the Group's key
strategic growth region. Alpha's third growth pillar, selective
acquisitions, made its latest advance following the year end with
the acquisition of Shoreline, an asset and wealth management
consultancy based in Sydney. The addition of Shoreline makes Alpha
the leading specialist asset and wealth management consultancy in
APAC.
The Group delivered an excellent trading performance during FY
23, continuing the progress we reported at the half year and
achieving double-digit growth in revenues and profits. Net fee
income increased by 43.9% to GBP227.2m (FY 22: GBP157.8m) and 39.6%
on an organic basis. Revenue also increased 44.8% to GBP228.7m (FY
22: GBP158.0m). Adjusted EBITDA increased by 37.5% to GBP46.6m (FY
22: GBP33.9m) and operating profit increased by 61.1% to GBP28.6m
(FY 22: GBP17.8m), which fed through to the Group's healthy net
cash position of GBP59.2m (FY 22: GBP63.5m) at the year end,
leaving the Group well positioned to fund its growth initiatives
over the coming year and beyond.
Governance and the Board
Strong governance, integrity and business ethics are critical to
the Group's long-term success and its ability to generate
sustainable value for our investors and other stakeholders. These
considerations are fundamental to how the Board manages its
discussions and decisions both as a Board and as individual
committees, and we continue to improve governance aspects alongside
the Group's growth.
The Board also considers ESG(10) as an important aspect of the
Group's governance and risk management framework, and recognises
its responsibility to guide Alpha's approach, and ensure it
complies with regulatory requirements and meeting the expectations
of its stakeholders. With this in mind, the Board has now
established an ESG Committee, which is chaired by Jill May. The
Committee oversees all components of Alpha's corporate ESG agenda,
and we are delighted to have welcomed both a dedicated Global
Sustainability Manager and a Global Diversity & Inclusion
Manager to support our planning, progress and reporting linked to
this important area. Among the key topics that the Group is
currently focussing on are its preparations to start reporting
under the framework set out by the Task Force on Climate-Related
Financial Disclosures ("TCFD"), and the further development and
global roll-out of our D&I programme and supporting
disclosures.
On 1 April 2023, Luc Baqué succeeded Euan Fraser as Chief
Executive Officer and joined the Board. On stepping down from the
CEO role, Euan became a strategic adviser to the Board and we are
delighted to maintain access to his strong industry relationships
and knowledge of the Group. Alongside the growth of the Group, to
ensure that the Board has suitable support and advice, we are also
very pleased to have appointed an internal company secretary to
work alongside Prism CoSec.
Dividend
Alpha performed ahead of market expectations in FY 23 and the
Board is therefore recommending a 40.0% increase in the final
dividend to 10.50p per share, bringing the total for the year to
14.20p, an increase of 36.5% compared with the 10.40p paid in
respect of FY 22, in line with the Group's dividend policy. Subject
to shareholder approval at the Annual General Meeting ("AGM"), to
be held on 6 September 2023, the final dividend will be paid on 19
September 2023 to shareholders on the register at close of business
on 8 September 2023.
Outlook
The Board is delighted with the Group's performance over the
past year. Alpha has delivered a set of excellent results against a
backdrop of macro-economic uncertainty, and has entered the current
year with both a good pipeline across the Group and clear plans to
achieve its strategic ambitions of doubling the business by
2028.
Although we are facing continuing macro-economic uncertainty and
some increased competition in the global consulting market, the
structural drivers that underpin growth and demand for the Group's
services over the medium to long term remain strong. This, together
with the Group's market-leading consulting talent and the growing
number of client relationships, means the Group remains confident
of further progress. On behalf of the Board, I would like to thank
everyone at Alpha for their fantastic contributions in another
successful year.
Ken Fry
Chairman
22 June 2023
(9) The "Board" is Alpha's Board of Directors, also referred to
as the "Board of Directors", the "Alpha Board" and the
"Directors"
(10) Environment, Social, Governance ("ESG")
Chief Executive Officer's Report
Alpha's teams around the world have delivered another
outstanding performance and record year of results. I want to start
by thanking our people everywhere for their fantastic contribution
and, on behalf of us all, to thank Euan Fraser for his vision and
leadership throughout the past decade. Euan has successfully
steered the Group through 10 years of growth, including the
excellent performance of the last financial year.
Since AIM admission, we have made great strides and have doubled
the size of the business since 2020. My intention as Chief
Executive Officer is to continue building on our successes to
date.
As Euan led the Group as Chief Executive Officer during the
financial year under review, we have both contributed to this
report this year.
Our growth strategy
In meeting the Group's previous target - to double the size of
the business by November 2024 - we diversified and strengthened
across multiple dimensions: by consulting activity, by client
sector and by geography; growing both organically and through
complementary acquisitions.
At our capital markets event in March 2023, we announced an
evolution of that strategy and a refreshed ambition to double the
size of Alpha again over the next five years, while maintaining our
record of profitable growth and targeting a consistent adjusted
EBITDA margin. The key pillars that will enable us to achieve that
strategic ambition are: further expansion in asset and wealth
management consulting, particularly in North America; the global
scale-up and roll-out of our Insurance Consulting business; and
making selective acquisitions.
Over the next five years, growth in these important areas and
markets will continue to be our focus and the potential further
opportunity is significant.
The year in review
The past year was one of strong performance across all regions
and business activities, despite the ongoing macro-economic
uncertainty. We saw further excellent progress across the key
growth pillars of North America, insurance consulting and
acquisitions.
We have continued to execute on our strategy of launching new
service areas and consulting practices, rolling them out globally
and delivering strong organic growth by investing in our people and
expertise. We have invested nearly 20 years in creating a leading
position as a consultancy and we see continued demand to expand the
business and provide an even more comprehensive service to clients
globally.
12 months 12 months
to to
31 March 31 March
2023 2022 Change
----------------- ----------- ---------- --------
Net fee income
UK GBP87.1m GBP72.1m 20.9%
North America GBP91.1m GBP46.9m 94.2%
Europe & APAC GBP49.0m GBP38.8m 26.0%
------------------ ----------- --------- --------
Year-end totals GBP227.2m GBP157.8m 43.9%
------------------ ----------- --------- --------
12 months 12 months
to to
31 March 31 March
2023 2022 Change
----------------- ----------- ---------- --------
Gross profit
UK GBP35.0m GBP30.6m 14.3%
North America GBP30.0m GBP15.4m 95.7%
Europe & APAC GBP15.4m GBP13.4m 14.6%
------------------ ----------- --------- --------
Year-end totals GBP80.4m GBP59.4m 35.4%
------------------ ----------- --------- --------
Regionally, we have achieved meaningful growth in all our
geographic regions, fuelled by the excellent reputation and appeal
of Alpha's leading client proposition, which we continue to extend.
Thanks to the robust structural drivers of demand in the core
markets in which we operate, including growth in assets and
insurance policies, cost pressure, regulation, technology
breakthroughs, and changes in societal expectations, we believe
that the Group has the potential and the scope to continue to grow
and gain market share.
Continuing on the momentum of the previous year, North America
became our largest region by net fee income, achieving net fee
income growth of 94.2% overall, mostly organically, and 71.7% on a
constant currency basis. This is a key pillar of our growth
strategy and we are delighted with our progress in the very
sizeable North America market. The strong progress is due to our
industry knowledge, deep expertise and highly talented team, which
encompasses consultants who are specialists in asset and wealth
management, technology and alternatives, through the Lionpoint
business.
We successfully grew our North America team by 32.0% to 342
consultants by the year end. We also expanded our North America
client base, across the traditional and private markets, adding 72
clients in the year, including a number of the world's largest
asset managers. The Group has now worked with 88% of the top 25
North America asset managers(11) and continues to broaden and
deepen these relationships. We see significant growth potential in
the world's largest asset management market to continue to grow the
Group's market share in that region.
Our businesses in the UK and Europe & APAC also delivered
excellent performances, increasing net fee income by 20.9% and
26.0% respectively, while continuing to win and deliver
market-defining projects. We retain our market-leading position in
the UK as consultants to the asset and wealth management industry,
with the Group's established practices, including Investments,
Operations and Client & Digital(12) , contributing well, and
adding 47 clients across the region. In Europe & APAC, our
best-in-class service offering continues to attract new clients,
with 37 new clients added in the year.
Our second key growth pillar, expanding our Insurance Consulting
business, also continued its strong momentum and ended FY 23 with
81 people across the UK and Europe, up from 50 in FY 22, and added
10 clients in the year. The General Insurance & Specialty
offering launched last year has continued to gain traction this
year, and we were delighted to welcome a third director dedicated
to this client segment to drive further growth. The Group also made
further progress in building out the Insurance Consulting
proposition with the launch of a Retail Distribution & Advice
practice, which helps financial advisers, investment platforms and
life and pensions providers transform and grow their
businesses.
We see significant market potential in the insurance industry
and, ultimately, believe that our offering could grow to a similar
size to Alpha's asset and wealth management consulting business in
the medium to long term. In FY 24, we will also be progressing the
launch of our Insurance Consulting proposition in the US.
Other notable additions to the Group's client proposition during
the past year include the Enterprise Transformation practice, which
helps asset and wealth management clients address issues and
challenges around reconfiguring global operating models and cost
structures. Meanwhile, the continued development of Alpha's Data
Science proposition recognises the importance of data-driven
insights in differentiating and scaling our clients'
businesses.
We have also continued the ongoing development of our technology
services proposition, including Axxsys. Almost all the consulting
engagements we undertake with asset managers, wealth managers and
insurance clients lead to a requirement for technology services and
there is strong demand for software solutions and technology
experts with deep sector knowledge. Aiviq presents an attractive
data solutions and product proposition for asset managers and
continues to add clients. We see further potential in this
offering, although it remains currently a small part of the
Group.
Alongside the Group's organic growth, we are very pleased with
the strong contributions from our acquisitions. Lionpoint, the
alternative assets consultancy acquired in May 2021, continued to
grow very strongly, benefiting from excellent synergies between
Lionpoint and our other businesses as alternatives become an
increasingly mainstream part of the asset management landscape.
Demonstrating this, Lionpoint added 93 new clients globally in the
year, including several of the largest alternative investments
managers, and increased its headcount by 43.9% to end the year with
285 consultants globally.
After the year end, we were delighted to acquire Shoreline, a
specialist APAC asset and wealth management consultancy
headquartered in Sydney. The acquisition, which included a team of
nearly 20 people, was completed smoothly after the year end under
the oversight of our Asset & Wealth Management consulting
leadership team; and the integration is now under way and
progressing well. Shoreline's client base, capabilities and company
culture are highly complementary to Alpha, strengthening the
Group's existing offerings and creating the leading specialist
asset and wealth management consulting firm in the region. We look
forward to working with the Shoreline team and growing the APAC
business further.
We are delighted with the progress in the year across our three
key growth pillars and the wider business and look forward to
continuing to progress globally in delivering the next phase of the
Group's growth.
Financial performance summary
This robust performance across all our business areas produced
full-year financial results that were ahead of market expectations.
Group net fee income increased 43.9% to GBP227.2m (FY 22:
GBP157.8m), on a mostly organic basis, and 36.1% on a constant
currency basis.
Adjusted EBITDA increased by 37.5% to GBP46.6m (FY 22: GBP33.9m)
and adjusted profit before tax rose 38.6% to GBP44.0m (FY 22:
GBP31.8m), while achieving adjusted EBITDA margin at 20.5% (FY 22:
21.5%). As expected, strong demand for our services allowed us to
balance rising costs and a gradual reduction in our consultant
utilisation towards more normal levels, alongside increases in our
day rates. Adjusted earnings per share ("EPS") also increased by
36.4% to 29.27p (FY 22: 21.46p).
On a statutory basis, revenue increased 44.8% to GBP228.7m (FY
22: GBP158.0m), operating profit increased 61.1% to GBP28.6m (FY
22: GBP17.8m) and profit before tax increased 73.2% to GBP25.8m (FY
22: GBP14.9m). Basic EPS more than doubled in the year to 15.82p
(FY 22: 7.69p). A reconciliation between these statutory and
adjusted performance measures is set out in the Chief Financial
Officer's Report and note 3 to the consolidated financial
statements.
Alpha continues to generate good cash flows and net cash ended
the year at GBP59.2m (FY 22: GBP63.5m). We are also delighted to
recommend a 10.50p full-year dividend in line with our policy to
pay out approximately 50% of adjusted profits.
Our people
To oversee the execution of our 2028 growth strategy, we have
strengthened our executive team. Joe Morant moves from Head of
Asset & Wealth Management Consulting in North America to take
global responsibility for this business. Nick Fienberg takes charge
of technology services and Lionpoint, which covers both management
consulting and technology services to the alternatives sector.
Stuart McNulty, who successfully led our UK Asset & Wealth
Management business for many years and oversaw the launch of our
Insurance Consulting business there, becomes Global Head of
Insurance Consulting.
We have also strengthened our operational capabilities during
the past year to support the delivery of our growth targets by
appointing a Group Managing Director, a Global Operations Director,
a Global Head of Risk, a Group and a Divisional Finance
Director.
Our consultants are the best in our industry and are the key to
the Group's success. Attracting, developing, motivating and
celebrating talented people at all levels are among our most
important strategic objectives and ones to which we give much
thought and attention. Over the past year, we increased our global
consulting team to 994 (FY 22: 760), adding 234 new consultants (FY
22: 189) and 13 new directors (FY 22: 20), excluding additions as
part of the Lionpoint acquisition in the prior year.
As at As at
31 March 31 March
2023 2022 Change
---------------------- --------- ---------- --------
Consultant headcount
UK 394 287 37.3%
North America 342 259 32.0%
Europe & APAC 258 214 20.6%
----------------------- --------- ---------- --------
Year-end totals 994 760 30.8%
----------------------- --------- ---------- --------
Clients come to us because of the specialist knowledge and
experience of our consulting teams and their determination to
deliver excellent outcomes that solve clients' problems. Thanks to
our market-leading talent and reputation for delivery excellence,
we build strong client relationships that yield major cross-selling
opportunities as we extend our range of practices and services.
This enables us to generate consistently strong organic growth - a
powerful business model that is the foundation of our plan to
achieve the ambitious goals we have set for 2028.
Maintaining our inclusive and meritocratic culture is therefore
essential and we are especially pleased that our emphasis on people
and culture has helped make the integration of Lionpoint in the
prior year, our largest acquisition to date, so successful. We are
also delighted to be welcoming 19 new consultants to the Group as
part of our recent acquisition of Shoreline.
ESG focus
We continue to be very excited and supportive of the progress
that the asset management, wealth management and insurance
industries are making when it comes to both sustainable investing
and assessing broader ESG commitments. As a business, we are
sharpening our focus on ESG and enhancing our approaches,
operations and policies to be able to embrace the necessary changes
and report upon them effectively.
The Group adopted the SASB framework in 2019 and we have
reported on our adherence to those standards each year since. We
are continuing to advance our environmental work and response to
climate change. This includes improvements to our data collection
and analysis, which will support us in setting out and progressing
a journey towards net zero, a key focus of Alpha's ESG roadmap. To
support this and ensure progress, we have added responsible
business oversight to our global business operations team,
including a Global Sustainability Manager and a Global Diversity
& Inclusion Manager, who took up their roles during FY 23.
Current trading and outlook
FY 23 was a year of further strong growth globally. Substantial
progress was achieved across our three key growth pillars and the
business more generally, and we enter FY 24 as a leading global
management consultancy of almost 1,000 consultants.
We are mindful of the uncertainties presented by the global
macro picture, including the war in Ukraine and the recessionary
outlook in many economies. We have also recently seen a lengthening
sales cycle and increased competition as a result of the current
overcapacity in the global consulting market. This is expected to
be a short-term backdrop, while the consulting market balances
supply with overall demand. The medium to long-term outlook for our
key client markets is positive, with the structural drivers of
demand and growth remaining strong.
Against this backdrop, the Group enters FY 24 with resilient
current trading and a good pipeline of new business opportunities.
These factors, coupled with the Group's compelling proposition to
clients, give us confidence in delivering full year results in line
with current market expectations and progressing towards our 2028
strategic goals.
We have a clear growth strategy, excellent client relationships
and the most talented group of consultants in our industry. We
therefore look to the future with great optimism.
Luc Baqué
Chief Executive Officer
22 June 2023
(11) "Top 25" refers to Investment & Pensions Europe, "Top
500 Asset Managers 2022" where the asset manager country is US or
Canada, as defined in the report
(12) Practice name changed from Distribution to Client &
Digital to better reflect the complete client proposition
Chief Financial Officer's Report
Alpha has delivered another year of strong growth, with net fee
income up by 43.9% and adjusted EPS increasing by 36.4% in FY 23.
The Group has delivered double-digit growth across all geographic
regions on an organic basis, with the strongest growth in our key
North America region. The balance sheet remains robust, with good
cash generation, and the Group ends the year well positioned.
Group Results
I am delighted to report another strong year of growth for the
Group across all regions, both organically and including Lionpoint,
which was acquired in the previous year.
12 months 12 months to
to 31 March
31 March 2022
2023 Change
------------------------ ---------- ------------ ----------
Revenue GBP228.7m GBP158.0m 44.8%
Net fee income GBP227.2m GBP157.8m 43.9%
Gross profit GBP80.4m GBP59.4m 35.4%
------------------------ ---------- ------------ ----------
Operating profit GBP28.6m GBP17.8m 61.1%
------------------------ ---------- ------------ ----------
Adjusted EBITDA GBP46.6m GBP33.9m 37.5%
------------------------ ---------- ------------ ----------
Adjusted EBITDA margin 20.5% 21.5% (100 bps)
------------------------ ---------- ------------ ----------
Adjusted profit before
tax GBP44.0m GBP31.8m 38.6%
Profit before tax GBP25.8m GBP14.9m 73.2%
Adjusted EPS 29.27p 21.46p 36.4%
Adjusted diluted EPS 27.37p 20.23p 35.3%
Basic EPS 15.82p 7.69p 105.7%
------------------------ ---------- ------------ ----------
Revenue
The Group delivered 43.9% net fee income growth in the year,
including a 39.6% organic contribution. Revenue also grew 44.8%,
including increased rechargeable client expenses, compared to the
prior year.
Overall, the Group's revenue and net fee income growth reflects
average consultant headcount growth, average consultant utilisation
returning to target levels as planned, alongside improving
consultant day rates overall and some assistance from currency
translation. Revenue and net fee income grew in all geographic
regions, mostly on an organic basis, with the remaining inorganic
contribution from the acquisition of Lionpoint in the prior
year.
North America delivered the strongest regional growth, ending
the year as the largest geographic region in the Group by net fee
income. In the year, net fee income grew 94.2% overall and 83.3% on
an organic basis. On a constant currency basis North America net
fee income growth was 71.7% overall. Lionpoint continued to perform
well in the year and contributed significantly to North America net
fee income, adding a further 51 consultants to its North America
team in the year. The North America business overall continued to
expand its domestic client base, as well as successfully capturing
client demand through a number of cross-selling opportunities with
its existing clients. The strongly growing consultant team was well
deployed, while also improving consultant day rates.
Europe & APAC also delivered another year of strong growth.
The region grew net fee income by 26.0% on the previous year, 24.4%
on an organic basis and, on a constant currency basis, the region
reported 21.3% growth overall. This growth was delivered across the
region with the Europe team generally well deployed, complemented
by further good progress growing the APAC business.
The UK business grew net fee income 20.9% overall and 19.3%
organically. This strong UK organic performance benefited from
solid client demand across the full range of Alpha practices,
including substantial contributions from our established
Investments, Client & Digital and Operations teams. Within the
UK results, Alpha's data solutions business, Aiviq, increased its
client base and revenue in the year, and continues to focus on
building further scale.
Alpha continues to support clients in some of the largest, most
challenging and interesting projects across the industry. Alpha's
revenue is driven by continuing strong demand in its established
practices, as well as progress in newer areas. Alpha's Insurance
and Technology Consulting businesses also made good progress in the
year by winning a number of projects both with existing and new
client relationships.
Alpha's growth was supported by further investment in global
consultant headcount. The number of consultants reached 994 by the
year end (FY 22: 760). Of this 234 consultant team increase,
Lionpoint added 87 to the Group globally.
Group profitability
Group profits also grew strongly. Group gross profit was
GBP80.4m (FY 22: GBP59.4m), increasing by 35.4% over the previous
year and 28.7% on a constant currency basis.
Gross profit margin was 35.4% (FY 22: 37.6%), mainly reflecting
the easing of utilisation to target levels, alongside continued
investment in our consultants while maintaining competitive
remuneration packages, partially offset by improving consultant day
rates across all regions.
North America maintained a consistent gross profit margin of
32.9% (FY 22: 32.7%) as the North America team grew substantially
and successfully normalised average utilisation back to target
levels, while balancing costs and consultant rates progress. The UK
business grew gross profit well and its 40.2% gross margin (FY 22:
42.5%) similarly reflects utilisation returned to target levels and
further rates progress ongoing. Europe & APAC also experienced
good gross profit growth, with a margin of 31.4% (FY 22: 34.5%)
reflecting utilisation and continued investment in the business,
partially offset by consultant day rate progression.
Adjusted administration expenses, as detailed in note 3,
increased by 32.5% or GBP8.3m to GBP33.8m (FY 22: GBP25.5m) in the
year. Discretionary spend returned to normalised levels following
COVID-19, for example across staff and client entertainment and
travel spend, and in recruitment spend as we grew our consulting
teams globally. We also continued to invest in the Group's central
team through the year in areas such as finance, HR, legal, risk and
responsible business, alongside the Group's expansion.
Including the adjusting expense items, which also rose,
administration expenses increased to GBP51.7m (FY 22: GBP41.6m) on
a statutory basis. The adjusting expense items, set out in note 3,
increased in the year to GBP15.8m (FY 22: GBP14.4m), reflecting
increased earn-out and deferred consideration and share-based
payment charges, partially offset by lower foreign exchange loss
and acquisition costs, which, in the prior year, mainly related to
the acquisition of Lionpoint.
The GBP0.3m (FY 22: GBP0.7m) acquisition costs include diligence
and legal fees incurred in connection with the Shoreline
acquisition, which completed after the year end, in May 2023. The
acquired intangible asset amortisation charge was GBP4.6m (FY 22:
GBP4.7m). The share-based payment charge of GBP8.0m (FY 22:
GBP6.2m) continues to develop since Alpha's share incentive plans
were established at AIM admission, with Alpha's share price growth
and further new annual awards alongside relatively lower award
vests at this stage. Further details of the share-based payment
charge is set out in notes 3 and 12.
The earn-out and deferred consideration charge of GBP2.5m (FY
22: GBP1.4m) reflects employment-linked acquisition expenses and
two fair value adjustments. With Lionpoint's continued strong
performance since acquisition and ongoing positive outlook, the
future performance assumptions have been uplifted to the maximum
earn-out payment for the final earn-out year in FY 24. This uplift
is partially offset by a scale-back fair value reduction in the
liability held for Obsidian as a lower, mutually agreed position
was reached with the original vendors, which was paid in full in
the year. Further detail on the earn-out and deferred consideration
charges are set out in note 7.
The depreciation charge grew to GBP1.9m (FY 22: GBP1.2m)
alongside the growth of the Group, while the GBP0.2m (FY 22:
GBP0.6m) amortisation of capitalised development costs eased as the
asset was fully amortised in the year.
Adjusted EBITDA grew 37.5% to GBP46.6m (FY 22: GBP33.9m) and
adjusted EBITDA margin eased to 20.5% (FY 22: 21.5%), reflecting
the gross profit margin and the adjusted administration expenses.
Operating profit rose 61.1% to GBP28.6m (FY 22: GBP17.8m) after
charging the adjusting expense items, including earn-out and
deferred consideration expenses and share-based payment charges.
Further detail of these adjusting items is set out in note 3. If no
adjustment had been made for the share-based payment charge,
adjusted EBITDA would have grown by 39.7% to GBP38.6m (FY 22:
GBP27.7m) at a margin of 17.0% (FY 22: 17.5%).
Currency
Currency translation had a noticeable effect on net fee income
and profits during the year. Through the year, British pound
sterling averaged $1.21 (FY 22: $1.37) and EUR1.16 (FY 22:
EUR1.18), which, with other similar currency movements, resulted in
an overall favourable net currency effect on net fee income of
GBP12.4m. On this basis, North America net fee income growth would
have been 71.7% and Europe & APAC would have reported 21.3%
total net fee income growth.
Overall, the Group's net fee income would have grown 36.1% to
GBP214.8m on this constant currency basis. On a similar basis, the
Group's gross profit would have been GBP76.4m and would have grown
28.7% on a constant currency basis. With British pound sterling
strengthening towards the end of the second half, this currency
benefit has begun to unwind and continues to do so into FY 24.
Net finance expense
Net finance costs remained flat in the year at GBP2.9m (FY 22:
GBP2.9m), primarily comprising non-underlying finance expenses
relating to acquisition consideration discount unwinding, as set
out in note 3.
Taxation
Adjusted profit before tax rose 38.6% to GBP44.0m (FY 22:
GBP31.8m) after charging depreciation, amortisation of capitalised
development costs and net underlying finance expenses. Statutory
pre-tax profit rose 73.2% to GBP25.8m (FY 22: GBP14.9m) after
charging adjusting items and non-underlying finance expenses.
The Group's taxation charge for the year was GBP7.8m (FY 22:
GBP6.4m), reflecting the growth in taxable profits and the blended
tax rate of the increasingly international jurisdictions in which
the Group operates. The Group's cash tax payment in the year was
GBP13.3m (FY 22: GBP4.8m), reflecting the growth in profits and the
Group moving to a quarterly tax payment cycle in North America.
For further taxation details, see note 4. Adjusted profit after
tax is shown after adjustments for the applicable tax on adjusting
items as set out in note 3.
Acquisition activity
Since the acquisition of Lionpoint in May 2021, the Group has
focussed on the successful integration of its services and the team
into the Alpha Group, and has seen the benefits of the increased
service offering to the Group's enlarged client base. Lionpoint has
integrated into the Group well and grown since acquisition, with
strong further expansion of the team.
After the year end, on 1 May 2023, the Group announced the
acquisition of Shoreline for a maximum consideration of AUD 13.0m
(GBP6.8m). Shoreline enables Alpha to build upon a robust platform
in APAC and ensures that the Group can take advantage of
opportunities in one of the fastest growing regions in the asset
and wealth management sector. We are pleased to welcome Shoreline
into the Group and look forward to further regional growth. Please
refer to note 13 for further detail.
Earnings per share
Adjusted EPS improved 36.4% to 29.27p per share (FY 22: 21.46p)
and adjusted diluted EPS increased 35.3% to 27.37p (FY 22: 20.23p).
After including the adjusting expense items, both basic and diluted
EPS more than doubled to 15.82p (FY 22: 7.69p) and 14.79p (FY 22:
7.25p), respectively.
As at 31 March 2023, 9,996,040 share options (FY 22: 9,504,379)
remained outstanding, with 2,108,886 share options exercised during
the year, as share option awards begin to settle into a normal
cycle of awards and vests. See note 12 for further detail.
Cash flow and net funds
Net cash generated from operating activities was GBP30.6m (FY
22: GBP33.5m) and, after adjusting for employment-linked
acquisition payments and acquisition costs, was GBP32.9m (FY 22:
GBP36.0m). Working capital remains well managed with debtor days
reducing again this year. Operating cash generation in the year
reflected the payment of last year's increased profit share, given
the strong FY 22 performance, as well as additional North America
tax payments as that business grows and moved to quarterly payments
in that region. The 74.0% adjusted cash conversion rate from
adjusted operating profit (FY 22: 112.1%) reflects these specific
cash outflows.
During the year, the Group made further payments of GBP22.6m
relating to deferred and contingent acquisition consideration,
including GBP1.8m of employment-linked amounts. Final Axxsys and
Obsidian payments were settled in full in the year. Please see note
7 for further details.
The Group also provided GBP1.1m funding to Alpha's employee
benefit trust ("EBT") to purchase 266,922 shares at the prevailing
market share price, to hold for the satisfaction of future award
vests. Alpha will likely fund the EBT further in the future to
build the shares held in the EBT for the satisfaction of future
share option exercises.
The Group's income taxes paid totalled GBP13.3m (FY 22:
GBP4.8m), reflecting the Group's profit growth, as well as the move
to quarterly tax payments in North America. Net interest paid was
GBP0.1m (FY 22: GBP0.3m), reflecting the cost of maintaining and
periodically drawing the Group's revolving credit facility ("RCF")
in the year to manage the Group's ongoing currency requirements,
offset by interest income from cash balances held.
Dividends paid increased in the year to GBP12.8m (FY 22:
GBP8.7m), reflecting the Group's dividend policy and the increase
in the Group's adjusted profit after tax.
At the year end, the Group's cash position was GBP59.2m (FY 22:
GBP63.5m). This strong balance sheet provides Alpha funding
flexibility to continue to deliver on its acquisition strategy.
Statement of financial position
The Group's net assets at 31 March 2023 totalled GBP149.3m (FY
22: GBP132.7m). This increase principally arises from other
reserves movements including retained profits, foreign exchange
gains on overseas assets and additional share-based payment
reserves. The Group continues to maintain a strong financial
position.
The Group's non-current assets movement principally results from
foreign exchange gains on goodwill balances and increased
right-of-use assets on new leases entered into by the Group,
partially offset by ongoing amortisation charges for the year.
Working capital remains well managed. Trade and other
receivables balances increased in FY 23 through the ongoing growth
in the business. Debtor collections continued to be strong during
the year with debtor days falling again from the prior year. The
Group ended the year with GBP59.2m (FY 22: GBP63.5m) of cash. The
Group's GBP20.0m RCF was undrawn at 31 March 2023 and, alongside
cash balances, ensures the Group's funding flexibility. Following
the year end, the Group refinanced and upscaled its RCF to a
GBP50.0m facility to provide funding flexibility in line with the
Group's growth, as set out in note 13.
Trade and other payables balances increased, representing an
increased level of trade payables and accruals alongside the
Group's growth. This includes higher profit share bonus accruals
reflecting the enlarged team and the year's strong performance.
Total acquisition-related deferred consideration and earn-out
liabilities decreased in the year, reflecting Lionpoint deferred
consideration payments and final Axxsys and Obsidian payments,
partially offset by the increase in the fair value of the Lionpoint
earn-out liability and employment-linked consideration as well as
the unwinding of discounting in the year, as disclosed in note
7.
Dividends
The Board is very pleased with FY 23 performance. As a result,
the Board is recommending a final dividend of 10.50p per share (FY
22: 7.50p), bringing the total for the year to 14.20p (FY 22:
10.40p), in line with the Group's policy to pay out approximately
half of adjusted profit after tax. After approval at the AGM in
September, this final dividend should be paid on 19 September 2023
to shareholders on the register at the close of business on 8
September 2023.
Total shareholders' funds
Total shareholders' funds increased to GBP149.3m (FY 22:
GBP132.7m). The changes in equity reserves reflect profit after tax
for the year, currency movements on net assets held overseas,
goodwill and intangible assets, the addition of further share-based
payment reserves and the payment of dividends.
As at 31 March 2023, the Company had 120,509,736 ordinary shares
in issue (FY 22: 118,707,336), of which no shares were held in
treasury and 6,274,380 shares were held in the Company's employee
benefit trust to satisfy future option exercises (FY 22:
6,216,501).
Risk management and the year ahead
The Group's risk management approach includes regular monitoring
of macro-economic and end-market conditions and assessing the
potential impacts across all business areas. In the risk management
framework, which has been reviewed during the year, the senior
leadership team, including me as Chief Financial Officer and the
Chief Executive Officer, has primary responsibility for keeping
abreast of developments that may affect the implementation of the
Group's strategy and financial performance. This entails
identifying the appropriate mitigating actions that should be taken
and ensuring, as far as possible, that those actions are then
executed by the senior management team. The Board as a whole
oversees risk and, within that framework, considers the material
risks that the Group faces and agrees on the principal risks and
uncertainties. Alpha has a set of core Company values, which are
embedded globally, that reflect the Group's ethical and responsible
approach to operating and managing the business.
The Board is delighted with the Group's progress in the year,
while remaining cognisant of the potential risks and uncertainties
ahead. The structural drivers in the asset management, wealth
management and insurance industries, which will drive ongoing
demand for Alpha's services, remain prevalent. We are confident
that with the quality of our people, our excellent market
reputation, and business opportunities to extend the service
offering, we are in a good position to navigate further challenges
ahead.
It is unclear how long the current macro uncertainty and
recessionary environment, which includes a lengthening sales cycle
and higher levels of competition, may prevail and how precisely it
may affect local and global markets. However, Alpha continues to
enjoy a good pipeline of new business opportunities and resilient
current trading And, therefore, the Board looks forward to further
progress ahead.
The Board has considered all of the above factors in its review
of going concern and has been able to conclude the review
positively. While cognisant of potential macro-economic risks and
the more competitive environment currently, the Group's talented
people, widening range of service offerings and international
footprint, and the long-term structural drivers of growth, position
the Group well.
John Paton
Chief Financial Officer
22 June 2023
Consolidated statement of comprehensive income
For the year ended 31 March 2023
Year ended Year ended
31 March 2023 31 March 2022
Note GBP'000 GBP'000
Continuing operations
Revenue 2 228,717 158,005
Rechargeable expenses 2 (1,562) (196)
Net fee income(13) 2 227,155 157,809
Cost of sales 2 (146,796) (98,452)
Gross profit 2 80,359 59,357
Administration expenses (51,723) (41,582)
Operating profit 28,636 17,775
Finance income 364 1
Finance expense (3,229) (2,894)
Profit before tax 25,771 14,882
Taxation (7,810) (6,370)
Profit for the year 17,961 8,512
Exchange differences on translation of foreign operations 3,510 3,180
Total other comprehensive income 3,510 3,180
Total comprehensive income for the year 21,471 11,692
Basic earnings per ordinary share (p) 6 15.82 7.69
Diluted earnings per ordinary share (p) 6 14.79 7.25
(13) Net fee income, adjusted EBITDA and other alternative
performance measures are defined and reconciled in note 3
Consolidated statement of financial position
As at 31 March 2023
As at As at
31 March 2023 31 March 2022
Note GBP'000 GBP'000
Assets
Non-current assets
Goodwill 103,676 100,991
Intangible fixed assets 27,588 31,333
Property, plant and equipment 1,113 806
Right-of-use asset 4,008 2,304
Deferred tax asset 3,033 671
Capitalised contract fulfilment costs 108 131
Total non-current assets 139,526 136,236
--------------- ---------------
Current assets
Trade and other receivables 8 34,128 29,569
Cash and cash equivalents 59,215 63,516
Total current assets 93,343 93,085
--------------- ---------------
Current liabilities
Trade and other payables 9 (60,539) (56,671)
Provisions (3,326) (3,277)
Corporation tax (1,321) (4,788)
Lease liabilities (2,104) (1,134)
Total current liabilities (67,290) (65,870)
--------------- ---------------
Net current assets 26,053 27,215
--------------- ---------------
Non-current liabilities
Deferred tax liability (2,783) (4,331)
Other non-current liabilities 10 (11,400) (25,100)
Lease liabilities (2,057) (1,275)
Total non-current liabilities (16,240) (30,706)
--------------- ---------------
Net assets 149,339 132,745
--------------- ---------------
Equity
Issued share capital 11 90 89
Share premium 119,438 119,438
Foreign exchange reserve 6,992 3,482
Other reserves 17,258 9,361
Retained earnings 5,561 375
Total shareholders' equity 149,339 132,745
--------------- ---------------
Consolidated statement of cash flows
For the year ended 31 March 2023
Year ended Year ended
31 March 2023 31 March 2022
Note GBP'000 GBP'000
Cash flows from operating activities:
Profit for the year 17,961 8,512
Taxation 7,810 6,370
Finance income (364) (1)
Finance expenses 3,229 2,894
Profit from exchange rate movements on cash held (2,364) -
Depreciation charge 1,933 1,155
(Gain)/loss on disposal of fixed assets (14) 32
Amortisation of intangible fixed assets 4,762 5,272
Share-based payment charge 12 7,023 4,075
(Decrease)/increase in provisions (19) 1,302
Operating cash flows before movements in working capital 39,957 29,611
Working capital adjustments:
Increase in trade and other receivables (3,834) (7,066)
Increase in trade and other payables 7,752 15,729
Tax paid (13,285) (4,767)
Net cash generated from operating activities 30,590 33,507
Cash flows from investing activities:
Interest received 364 1
Acquisition consideration, including deferred and contingent 7 (20,829) (23,796)
Purchase of intangible assets (319) -
Purchase of property, plant and equipment, net of disposals (860) (684)
Net cash used in investing activities (21,644) (24,479)
Cash flows from financing activities:
Issue of ordinary share capital - 31,102
Share issuance costs - (1,053)
Net settlement of vested share options (343) -
EBT purchase of Company's own shares (1,139) (205)
Drawdown of revolving credit facility 12,500 -
Repayment of revolving credit facility (12,500) -
Interest and bank loan fees (482) (285)
Principal lease liability payments (1,315) (814)
Interest on lease liabilities (216) (111)
Dividends paid 5 (12,774) (8,678)
Net cash (used in)/generated from financing activities (16,269) 19,956
Net (decrease)/increase in cash and cash equivalents (7,323) 28,984
Cash and cash equivalents at beginning of the year 63,516 34,012
Effect of exchange rate movements on cash held 3,022 520
Cash and cash equivalents at end of the year 59,215 63,516
Consolidated statement of changes in equity
For the year ended 31 March 2023
Foreign
Share Share exchange Other Retained
capital premium reserves reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2021 80 89,396 302 4,044 543 94,365
Comprehensive income
Profit for the year - - - - 8,512 8,512
Foreign exchange differences
on translation of
foreign operations - - 3,180 - - 3,180
Transactions with
owners
Shares issued (equity) 9 30,042 - - (2) 30,049
Purchase of own shares
by the EBT - - - (205) - (205)
Share-based payment
charge - - - 4,075 - 4,075
Net settlement of
vested share options - - - (12) - (12)
Current tax recognised
in equity - - - 220 - 220
Deferred tax recognised
in equity - - - 1,239 - 1,239
Dividends - - - - (8,678) (8,678)
--------- --------- ---------- ---------- ---------- ---------
As at 31 March 2022 89 119,438 3,482 9,361 375 132,745
--------- --------- ---------- ---------- ---------- ---------
Comprehensive income
Profit for the year - - - - 17,961 17,961
Foreign exchange differences
on translation of
foreign operations - - 3,510 - - 3,510
Transactions with
owners
Shares issued (equity) 1 - - - (1) -
Purchase of own shares
by the EBT - - - (1,139) - (1,139)
Share-based payment
charge - - - 7,023 - 7,023
Net settlement of
vested share options - - - (343) - (343)
Current tax recognised
in equity - - - 1,486 - 1,486
Deferred tax recognised
in equity - - - 870 - 870
Dividends - - - - (12,774) (12,774)
--------- --------- ---------- ---------- ---------- ---------
As at 31 March 2023 90 119,438 6,992 17,258 5,561 149,339
--------- --------- ---------- ---------- ---------- ---------
Notes to the consolidated financial statements
1. Basis of preparation
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 31 March 2023 or
2022 but is derived from those accounts. Statutory accounts for the
year ended 31 March 2022 have been delivered to the registrar of
companies, and those for the year ended 31 March 2023 will be
delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying their report, and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
These condensed preliminary financial statements have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006, in line
with the Group's statutory accounts.
2. Segment information
Group management has determined the operating segments by
considering the segment information that is reported internally to
the chief operating decision maker, the Board of Directors. For
management purposes, the Group is currently organised into three
geographical operating divisions: UK, North America and Europe
& APAC, which allows the Board to evaluate the nature and
financial effects of the business activities of the Group and the
economic environments in which it operates . The Group's operations
all consist of one type: consultancy and related services to the
asset management, wealth management and insurance industries.
The Directors consider that there is a material level of
operational support and linkage provided to the Group's emerging
territories in Europe and APAC, as they develop their presence
locally, and as such have been deemed to constitute one operating
segment ("Europe & APAC").
Segmental information
North Europe
FY 23 UK America & APAC Total
============== ========= ========= ==========
GBP'000 GBP'000 GBP'000 GBP'000
============== ========= ========= ==========
Revenue 87,467 91,815 49,435 228,717
============== ========= ========= ==========
Rechargeable expenses (327) (717) (518) (1,562)
-------------- --------- --------- ----------
Net fee income 87,140 91,098 48,917 227,155
============== ========= ========= ==========
Cost of sales (52,117) (61,104) (33,575) (146,796)
-------------- --------- --------- ----------
Gross profit 35,023 29,994 15,342 80,359
-------------- --------- --------- ----------
Margin on net fee
income(14) (%) 40.2% 32.9% 31.4% 35.4%
-------------- --------- --------- ----------
North Europe
FY 22 UK America & APAC Total
GBP'000 GBP'000 GBP'000 GBP'000
============== ========= ========= ==========
Revenue 72,134 47,001 38,870 158,005
============== ========= ========= ==========
Rechargeable expenses (71) (80) (45) (196)
-------------- --------- --------- ----------
Net fee income 72,063 46,921 38,825 157,809
============== ========= ========= ==========
Cost of sales (41,419) (31,594) (25,439) (98,452)
-------------- --------- --------- ----------
Gross profit 30,644 15,327 13,386 59,357
-------------- --------- --------- ----------
Margin on net fee
income(14) (%) 42.5% 32.7% 34.5% 37.6%
-------------- --------- --------- ----------
(14) Margin on net fee income is gross profit expressed as a
percentage of net fee income. Please refer to note 3 for further
detail
During the year, the Group did not have any customers that
comprised more than 10% of the Group's revenues (FY 22: nil).
3. Reconciliations to alternative performance measures
Alpha uses alternative performance measures ("APMs") that are
not defined under the requirements of IFRS. The APMs, including net
fee income, margin on net fee income, adjusted EBITDA, adjusted
profit before tax, adjusted EPS, adjusted cash conversion, organic
net fee income growth and constant currency growth, are provided to
allow stakeholders a further understanding of the underlying
trading performance of the Group and aid comparability between
accounting periods. These measures have been applied consistently
across reporting periods. They are not considered a substitute for,
or superior to, IFRS measures.
Net fee income
The Group disaggregates revenue into net fee income and expenses
recharged to clients. Net fee income provides insight into the
Group's productive output and is used by the Board to set budgets
and measure performance. This APM is reconciled on the face of the
consolidated statement of comprehensive income and by segment to
revenue in note 2.
Profit margins
Margin on net fee income and adjusted EBITDA margin are
calculated using gross profit and adjusted EBITDA, and are
expressed as a percentage of net fee income. These margins
represent the margin that the Group earns on its productive output,
excluding nil or negligible margin expense recharges to clients
over which the Group has limited control, and allows comparability
of the business output between periods. Such adjusted margins are
used by the management team and the Board to assess the performance
of the Group.
Reconciliation of adjusted profit before tax, adjusted operating
profit and adjusted EBITDA
FY 23 FY 22
Note GBP'000 GBP'000
Profit before tax 25,771 14,882
Amortisation of acquired intangible
assets 4,576 4,716
(Profit) / loss on disposal of
fixed assets (14) 32
Share-based payment charge 12 7,950 6,218
Earn-out and deferred consideration(15) 7 2,525 1,423
Acquisition costs 331 683
Foreign exchange losses 459 1,310
--------------------------- ---------------------------
Adjusting items 15,827 14,382
Non-underlying finance expenses 2,417 2,487
--------------------------- ---------------------------
Adjusted profit before tax 44,015 31,751
Net underlying finance expenses 448 406
Adjusted operating profit 44,463 32,157
Depreciation charge 1,933 1,155
Amortisation of capitalised development
costs 186 556
--------------------------- ---------------------------
Adjusted EBITDA 46,582 33,868
--------------------------- ---------------------------
Adjusted EBITDA margin (%) 20.5% 21.5%
(15) The earn-out and deferred consideration expense in the
period comprises a fair value adjustment of GBP0.7m and an
employment-linked consideration charge of GBP1.7m as set out in
note 7, as well as an associated social security charge of
GBP0.1m
Adjusting items
To assist in understanding the underlying performance of the
Group and aid comparability between periods, management applies
judgement to exclude certain expense items from the Group's APMs,
which are deemed to warrant separate disclosure due to either their
nature or size. Such adjusting items as described below are
generally non-cash, non-recurring by nature or are acquisition
related.
Amortisation of acquired intangible assets and profit or loss on
disposal of fixed assets are treated as adjusting items to better
reflect the underlying performance of the business, as they are
non-cash items, principally relating to acquisitions.
The share-based payment charge and related social security taxes
are excluded from adjusted profit measures. This allows
comparability between periods as the Group's share option plans
were established on AIM admission and have not yet fully settled
into a regular cycle of awards and vesting. The share-based payment
charge is also subject to external factors, such as the Group's
share price, over which the Directors have less day-to-day
influence as compared to other more directly controllable factors.
The accounting treatment of the Group's share options requires the
charge for each share option award to be recognised over the
vesting period, resulting in significant growth in the charge in
recent years as the Group matured post AIM admission. The
associated estimate of future employer's social security taxes
payable on these options is closely linked to the share-based
payment charge, and fluctuates with the assumed future market value
of shares, and has therefore also been treated as an adjusting
item. This approach has been applied consistently across reporting
periods. Note 12 sets out further details of the employee
share-based payment charge calculation under IFRS 2.
This cycle of share option awards and vesting is now beginning
to settle following the vesting of substantially all the remaining
options issued at IPO, and as such this charge is expected to
become more comparable year on year in future periods. The Group
will continue to assess the status of this charge as an adjusting
item in the Group's financial statements. If no adjustment was made
for the share-based payment charge, adjusted EBITDA for the year
would be GBP38.6m (FY 22: GBP27.7m) and adjusted EBITDA margin
would be 17.0% (FY 22: 17.5%).
As per note 7, the acquisition of Lionpoint in the prior year
involved both deferred and contingent payments. Part of the
Lionpoint acquisition payments are dependent on the ongoing
employment of certain members of the senior Lionpoint management
team, and this element is expensed annually over several years
until the date of payment. In prior years, the Group similarly
recognised employment-linked costs through the income statement
relating to payments for the previous acquisitions of Axxsys and
Obsidian, or to reflect adjustments made to the fair value of the
expected future payment. These costs have been treated as adjusting
items as they are considered to be part of the purchase price of
the acquisition, rather than an ongoing expense item, and reflect
the acquisition terms rather than Group trading performance. Whilst
these acquisition-related costs will recur in the short term
through the earn-out period, the adjustment allows comparability of
underlying productive output and operating performance across
reporting periods.
Acquisition costs expensed in the year relate to the acquisition
of Shoreline, which completed shortly after the reporting period as
disclosed in note 13. These costs include diligence and legal fees.
In the prior year the acquisition costs related to the purchase of
Lionpoint. Whilst further similar acquisition costs could be
incurred in the future, these costs are not directly attributable
to the ongoing operational trading performance of the Group, the
timing and amount of such costs may vary year to year and treating
these as an adjusting item allows comparability of the operating
performance across reporting periods. There were no integration
costs in the current or prior years.
The impact of foreign currency volatility in translating local
working capital and cash balances to their relevant functional
currencies has been excluded from the calculation of adjusted
profit measures on the basis that such exchange rate movements do
not reflect the underlying trends or operational performance of the
Group. The foreign exchange movements primarily relate to
acquisition liabilities denominated in US dollars and associated US
dollar cash balances. The other foreign exchange gains and losses
on foreign currency working capital and cash balances across the
Group are immaterial in both the current and prior year.
Non-underlying finance expenses
In calculating adjusted profit before tax, unwinding of the
discounted contingent and deferred acquisition consideration within
finance expenses is considered non-underlying as these amounts
relate to acquisition consideration, rather than the Group's
underlying trading performance.
Adjusted profit before tax
Adjusted profit before tax is an APM calculated as profit before
tax stated before adjusting items, including amortisation of
acquired intangible assets, share-based payment charge,
acquisition-related payments and costs, non-underlying finance
expenses and other non-underlying expenses. This measure allows
comparability of the Group's underlying performance, reflecting
depreciation, amortisation of capitalised development costs and
underlying finance expenses.
Adjusted operating profit
Adjusted operating profit is an APM defined by the Group as
adjusted profit before tax before charging underlying finance
expenses, including fees on bank loans and interest on lease
liabilities. The Directors consider this metric alongside statutory
operating profit to allow further understanding and comparability
of the underlying operating performance of the Group between
periods. This measure has been consistently used as the basis for
adjusted cash conversion.
Adjusted EBITDA
Adjusted EBITDA is a commonly used operating measure, which is
defined by the Group as adjusted operating profit stated before
non-cash items, including amortisation of capitalised development
costs and depreciation of property, plant and equipment. Adjusted
EBITDA is a measure that is used by management and the Board to
assess underlying trading performance across the Group, and forms
the basis of the performance measures for aspects of remuneration,
including consultant profit share and bonuses.
Adjusted profit after tax
Adjusted profit after tax and adjusted earnings per share
metrics are also APMs, similarly used to allow a further
understanding of the underlying performance of the Group. Adjusted
profit after tax is stated before adjusting items and their
associated tax effects. The associated tax effects are calculated
by applying the relevant effective tax rate to allowable expenses
that have been excluded as adjusting items. An effective tax rate
of 0% has been applied to earn-out and deferred consideration,
acquisition costs and non-underlying finance expenses totalling
GBP5.3m as these items are treated as capital in nature and are
therefore non-deductible for tax purposes. An overall effective tax
rate of 23% has been applied to all other adjusting items totalling
GBP13.0m, reflecting the tax rates in the geographical locations to
which the items relate.
FY 23 FY 22
GBP'000 GBP'000
Adjusted profit before tax 44,015 31,751
Tax charge (7,810) (6,370)
Tax impact of adjusting items (2,976) (1,624)
Adjusted profit after tax 33,229 23,757
---------------- ----------------
Adjusted earnings per share
Adjusted earnings per share ("EPS") is calculated by dividing
the adjusted profit after tax for the year attributable to ordinary
shareholders by the weighted average number of ordinary shares
outstanding during the year. Adjusted diluted EPS is calculated by
dividing adjusted profit after tax by number of shares as above,
adjusted for the impact of potentially dilutive ordinary shares.
Potentially dilutive ordinary shares are only treated as dilutive
when their conversion to ordinary shares would decrease EPS (or
increase loss per share). Refer to note 6 for further detail.
Adjusted EPS FY 23 FY 22
Adjusted EPS (p) 29.27 21.46
Adjusted diluted EPS (p) 27.37 20.23
------------------ ------------------
Reconciliation of adjusted administration expenses
To express them on the same basis as the APMs described above,
adjusted administration expenses are stated before adjusting items,
depreciation and amortisation of capitalised development costs and
are used by the Board to monitor the underlying administration
expenses of the business in calculating adjusted EBITDA.
FY 23 FY 22
GBP'000 GBP'000
Administration expenses 51,723 41,582
Adjusting items (15,827) (14,382)
Depreciation charge (1,933) (1,155)
Amortisation of capitalised development
costs (186) (556)
--------------------- ---------------------
Adjusted administration expenses 33,777 25,489
--------------------- ---------------------
Adjusted cash generated from operating activities
Adjusted cash generated from operating activities excludes any
employment-linked acquisition payments and associated social
security taxes, as well as other acquisition costs paid in the
year, treated as operating cash flows under IFRS, to reflect the
Group's underlying operating cash flows, exclusive of cash payments
relating to acquisitions.
FY 23 FY 22
GBP'000 GBP'000
Net cash generated from operating activities 30,590 33,507
Employment-linked acquisition payments(16) 1,981 1,848
Acquisition costs 331 683
Adjusted cash generated from operating activities 32,902 36,038
-------- ----------------
(16) Of the GBP22.6m total deferred and contingent acquisition
payments in the period as set out in note 7, GBP1.8m is classified
as employment linked and is included within net cash generated from
operating activities in the period. The associated social security
payments of GBP0.2m are also included within net cash generated
from operating activities
Adjusted cash conversion
Cash conversion is stated as net cash generated from operating
activities expressed as a percentage of operating profit.
Adjusted cash conversion is stated as adjusted cash generated
from operating activities expressed as a percentage of adjusted
operating profit.
FY 23 FY 22
Cash conversion 107% 189%
Adjusted cash conversion 74% 112%
Organic net fee income growth
Organic net fee income growth excludes net fee income from
acquisitions in the 12 months following acquisition. Net fee income
from any acquisition made in the period is excluded from organic
growth. For acquisitions made part way through the comparative
period, the current period's net fee income contribution is reduced
to include only net fee income for the period following the
acquisition anniversary, in order to compare organic growth on a
like-for-like basis.
Organic net fee income growth of 39.6% (FY 22: 31.3%) for the
current period represents FY 23 net fee income less GBP6.9m net fee
income attributable to Lionpoint, treated as inorganic as the
portion of net fee income preceded the acquisition anniversary.
Constant currency growth
The Group operates in multiple jurisdictions and generates
revenues and profits in various currencies. Those results are
translated on consolidation at the foreign exchange rates
prevailing in that period. These exchange rates vary from year to
year, so the Group presents some of its results on a "constant
currency" basis. This means that the current year's results have
been retranslated using the average exchange rates from the prior
year to allow for comparison of year-on-year results, eliminating
the effects of volatility in exchange rates.
Currency translation had a noticeable impact on both net fee
income and gross profit in the year, as a result of a weakening
British pound sterling through the year against both the US dollar
and against the Euro. In the year, British pound sterling averaged
$1.21 (FY 22: $1.37) and EUR1.16 (FY 22: EUR1.18).
On a constant currency basis, Group net fee income would be
GBP214.8m which is growth of 36.1% overall. Similarly, North
America net fee income would be GBP80.6m and Europe & APAC
would be GBP47.1m which would be growth of 71.7% and 21.3%
respectively.
On a similar basis the Group's gross profit would have been
GBP76.4m and would have grown 28.7% on a constant currency
basis.
4. Taxation
FY 23 FY 22
GBP'000 GBP'000
Current tax
In respect of the current year
- UK 3,660 2,763
Foreign taxation 8,059 5,321
Adjustment in respect of prior
periods (442) (168)
Deferred tax
In respect of the current year
- UK (1,995) (2,241)
Foreign taxation (1,380) (671)
Change in tax rate on opening
balance 8 1,186
Adjustment in respect of prior
periods (100) 180
------------- --------
Total tax expense for the year 7,810 6,370
------------- --------
An increase in the UK corporation tax rate from 19% to 25%
(effective 1 April 2023) was substantively enacted during the prior
year on 24 May 2021. In FY 24, this change will increase the
Group's current tax charge accordingly. The UK deferred tax
balances as disclosed below reflect this substantively enacted
rate.
Movements in deferred tax
Impact
of foreign
1 April exchange Recognised Recognised 31 March
2022 revaluation in income in equity 2023
GBP GBP ' 000 GBP ' 000 GBP ' 000 GBP '
' 000 000
Accelerated capital
allowances 110 - 18 - 128
Short-term timing differences (690) 53 (1,381) - (2,018)
Share options (3,213) - (1,215) (870) (5,298)
Arising on business
combinations 7,453 374 (889) - 6,938
------- ------------ ---------- ---------- --------
Net deferred tax liability
/ (asset) 3,660 427 (3,467) (870) (250)
------- ------------ ---------- ---------- --------
Deferred tax assets recognised within these consolidated
financial statements represent the future tax effect of share-based
payment charges in respect of awards that have yet to vest.
Deductions in excess of the cumulative share-based payment charge
recognised in the consolidated statement of comprehensive income
are recognised in equity. Other deferred tax assets recognised
primarily relate to timing differences on deductions for tax
purposes and as such there is no restriction on recoverability.
Deferred tax liabilities represent the future tax impact arising
from temporary timing differences between accounting and tax
treatments including from the initial recognition of acquired
intangible assets and changes in tax rates as the liability is
settled. The closing deferred tax liability arising on business
combinations reflects the tax effect of these temporary differences
at 31 March 2023.
5. Dividends
FY 23 FY 22
GBP'000 GBP'000
Amounts recognised as distributions
to equity holders:
Final dividend for the year ended
31 March 2022 of 7.50p (FY 21:
4.85p) per share 8,547 5,431
Interim dividend for the year
ended 31 March 2023 of 3.70p (FY
22: 2.90p) per share 4,227 3,247
------------------- ------------------
Total dividends paid in the year 12,774 8,678
------------------- ------------------
After the balance sheet date, the Directors proposed a final
dividend of 10.50p per ordinary share, totalling approximately
GBP12.4m based on the estimated eligible shares in issue at the
payment date. The proposed final FY 23 dividend is subject to
approval by shareholders at the AGM and has, therefore, not been
included as a liability in these consolidated financial statements.
Subject to approval, the dividend will be paid on 19 September 2023
to shareholders on the register at close of business on 8 September
2023.
6. Earnings per share and adjusted earnings per share
The Group presents basic and diluted earnings per share ("EPS"),
on both a statutory and adjusted basis. Basic EPS is calculated by
dividing the profit or loss for the year attributable to ordinary
shareholders by the weighted average number of ordinary shares
outstanding during the year. In the calculation of diluted EPS the
Group applies the treasury share method to include the impact of
potentially dilutive shares arising from the Group's share option
plans.
In order to reconcile to the adjusted profit for the financial
year, the same adjustments as set out in note 3 have been made to
the Group's profit for the financial year. The profits and weighted
average number of shares used in the calculations are set out
below:
Note FY 23 FY 22
Basic and diluted EPS
Profit for the financial year
used in calculating basic and
diluted EPS (GBP'000) 17,961 8,512
Weighted average number of ordinary
shares in issue ('000) 113,531 110,689
Number of dilutive shares ('000) 7,883 6,748
-------------------- --------------------
Weighted average number of ordinary
shares, including potentially
dilutive shares ('000) 121,414 117,437
Basic EPS (p) 15.82 7.69
Diluted EPS (p) 14.79 7.25
-------------------- --------------------
Adjusted EPS and adjusted diluted
EPS
Adjusted profit for the financial
year used in calculating adjusted
basic and diluted EPS (GBP'000) 3 33,229 23,757
Weighted average number of ordinary
shares in issue ('000) 113,531 110,689
Number of dilutive shares ('000) 7,883 6,748
------------------ ------------------
Weighted average number of ordinary
shares, including potentially
dilutive shares ('000) 121,414 117,437
Adjusted EPS (p) 29.27 21.46
Adjusted diluted EPS (p) 27.37 20.23
------------------ ------------------
7. Acquisition of businesses
Acquisitions in previous years
As part of the acquisition of Lionpoint Holdings, Inc. in FY 22,
as well as Axxsys Ltd and Obsidian Ltd in FY 20, the Group agreed
deferred consideration payments as well as contingent earn-out
arrangements which were based on the financial performance of the
respective acquired entities over an agreed period of time. An
update on the activity in the year and the outstanding balance in
relation to each of these acquisitions is provided below.
Lionpoint
In the prior year, the Group acquired 100% of the issued share
capital of Lionpoint Holdings, Inc. ("Lionpoint"), a provider of
specialist consultancy services to the alternative investments
industry, on a cash free, debt free basis.
The maximum payable for the acquisition (over four years) is
$90.0m (GBP63.8m), to be settled in cash, with the option to settle
a portion of the deferred and contingent amounts in the Group's
ordinary shares. Of this maximum amount payable, $7.5m (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) receivable was held at
31 March 2022.
Deferred consideration of $17.0m (GBP12.0m) was payable across
the first and second anniversaries of the acquisition and
contingent earn-out consideration up to a maximum of $32.0m
(GBP22.6m) was payable in three instalments across FY 23 to FY 25.
The FY 23 to FY 25 earn-out consideration payments are contingent
on Lionpoint meeting certain profitability targets over the
earn-out period. The fair value of future consideration payable
recognised on the date of acquisition was $37.3m (GBP26.2m), of
which $20.6m (GBP14.5m) related to contingent consideration and
$16.7m (GBP11.7m) related to deferred consideration. In the opening
consolidated statement of financial position as at 31 March 2022,
the Group held a liability of GBP33.7m in relation to future
deferred and contingent consideration payable for this
acquisition.
Employment-linked acquisition payments are expensed through the
consolidated income statement proportionately until FY 26. During
the year, the Group has expensed GBP1.7m (FY 22: GBP2.8m) in
relation to these employment-linked payments.
The deferred and contingent consideration is discounted to fair
value. Discount unwinding is recognised as a finance cost
proportionately across the periods until final payment. During the
year, GBP2.4m (FY 22: GBP2.0m) of discount unwinding was expensed
as a non-underlying finance cost in relation to the Lionpoint
acquisition consideration.
In FY 23, the Group made payments of GBP17.3m net of a GBP0.4m
receivable that was due back from the sellers. Of these payments,
GBP1.5m relates to employment-linked consideration, and is
presented within cash generated from operating activities, with the
remaining GBP15.8m presented within cash used in investing
activities in the consolidated statement of cash flows.
As consideration for the acquisition of Lionpoint is payable in
US dollars, foreign exchange differences are recognised at each
reporting date in relation to translating these liabilities into
British pound sterling. In the period, the Group recognised a
foreign exchange loss of GBP2.5m in the income statement arising
from acquisition-related currency movements, arising from this
re-translation. However, this loss was mostly offset by a foreign
exchange gain on US dollar cash held by the Group.
Following the strong performance of Lionpoint in FY 23 and
reflective of a healthy pipeline of opportunities, the Group has
reassessed the fair value of the Lionpoint contingent consideration
liability at the balance sheet date. The Group has updated its
projections for the remainder of the earn-out period and has
therefore uplifted the total undiscounted expected earn-out payment
from GBP17.7m to GBP20.0m, assuming the maximum amount payable.
These values are inclusive of employment-linked amounts.
Additionally, at the reporting date, the Group remeasured the
discount rate applied to the expected future contingent
consideration payments from 14.6% to 11.0%, reflecting market
conditions and the risk profile of the Lionpoint business.
Accordingly, a fair value adjustment has been recognised through
the Group's consolidated statement of comprehensive income, which
has increased the liability by GBP2.3m.
As at 31 March 2023, the Group held a liability of GBP24.9m (FY
22: GBP33.7m) in relation to future deferred and contingent
consideration payable for this acquisition. Of this liability at
the balance sheet date, GBP7.2m (FY 22: GBP14.0m) relates to
deferred consideration and the remaining GBP17.7m (FY 22: GBP19.7m)
relates to contingent consideration. Within these deferred and
contingent consideration liabilities, GBP2.6m relates to
employment-linked amounts.
Obsidian
As at 31 March 2022, the Obsidian earn-out liability of GBP1.9m
reflected a balanced assessment of the Directors' best estimate of
projected cash flows in relation to several plausible scenarios.
During the year, a lower mutually agreed position was reached with
the original vendors. As a result, a fair value adjustment of
GBP1.6m has been credited to the Group's consolidated statement of
comprehensive income in the period. A final payment of GBP0.3m was
made in the year, none of which was employment-linked.
Axxsys
The remaining GBP5.0m liability due on the acquisition of Axxsys
as at 31 March 2022 was paid during the year, of which GBP0.3m was
employment-linked.
The below table summarises the movements in the deferred and
contingent consideration liabilities held at 31 March 2023:
Axxsys Obsidian Lionpoint Total
GBP ' GBP ' GBP ' GBP '
000 000 000 000
Balance as at 1 April
2022 5,000 1,898 33,748 40,646
Employment-linked consideration - - 1,658 1,658
Payments in the year(17) (5,000) (314) (17,315) (22,629)
Amounts receivable deducted
from payments in the period - - (350) (350)
Unwinding of discounting - - 2,417 2,417
Fair value adjustment - (1,584) 2,251 667
Foreign exchange loss - - 2,540 2,540
------- -------- --------- --------
Balance as at 31 March
2023 - - 24,949 24,949
------- -------- --------- --------
Represented by:
Current - - 16,027 16,027
Non-current - - 8,922 8,922
------- -------- --------- --------
Balance as at 31 March
2023 - - 24,949 24,949
------- -------- --------- --------
(17) Payments in the year comprise GBP1.8m of employment-linked
payments included within cash generated from operating activities
in the consolidated statement of cash flows and GBP20.8m included
in cash used in investing activities
8. Trade and other receivables
FY 23 FY 22
GBP'000 GBP'000
Amounts due within one year:
Trade receivables 26,781 24,182
Less: allowance for expected credit
losses (657) (541)
---------------- ------------------
Trade receivables - net 26,124 23,641
Other debtors 1,194 539
Capitalised contract fulfilment
costs 1,101 1,548
Prepayments 1,999 1,113
Accrued income 3,710 2,728
Total amounts due within one
year 34,128 29,569
---------------- ------------------
Trade receivables are non-interest bearing and generally have a
30- to 60-day term. Due to their short maturities, the carrying
amount of trade and other receivables is a reasonable approximation
of their fair value. Trade receivables have grown in the year
reflecting the overall growth of the Group, with debtor days
reducing to 43 days (FY 22: 55 days).
9. Trade and other payables
Note FY 23 FY 22
GBP'000 GBP'000
Trade payables 5,156 5,114
Accruals 29,880 23,898
Deferred income 796 1,865
Social security tax on share options 12 1,669 1,050
Taxation and social security 4,734 2,964
Other creditors 2,277 1,280
Earn-out and deferred consideration 7 16,027 20,500
Total amounts owed within one year 60,539 56,671
-------- --------
Trade payables comprise amounts outstanding for trade purchases
and ongoing costs. The Directors consider that the carrying amount
of trade and other payables is a reasonable approximation of their
fair value. The Group's trade payables payment policy is to provide
payment within the agreed terms, which is generally 30 days from
the date of receipt of invoice.
The majority of the accruals balance is the profit share bonus
accrual, which has increased in the year, reflecting the enlarged
team size, the strong performance of the Group and the timing of
some payments.
Earn-out and deferred consideration relates to the second
deferred and contingent earn-out payment to be made for the
acquisition of Lionpoint. Refer to note 7 for further detail.
10. Other non-current liabilities
Note FY 23 FY 22
GBP'000 GBP'000
Earn-out and deferred consideration 7 8,922 20,146
Deferred income 213 233
Social security tax on share options 12 1,640 1,953
Other non-current liabilities 625 2,768
Total amounts owed after one year 11,400 25,100
-------- -----------------
Earn-out and deferred consideration relates to future deferred
and contingent earn-out payments to be made for the acquisition of
Lionpoint. Given the passage of time, the second deferred and
contingent consideration payments now fall due within 12 months
from the balance sheet date. Refer to note 7 for further
detail.
Other non-current liabilities decreased in the year as the
remaining deferred element of FY 22 bonuses for certain directors
and senior management globally now falls due within 12 months from
the reporting date, partially offset by FY 23 bonuses awarded in
the year, payable in summer 2024.
11. Called up share capital
FY 23 FY 22
Number Number
Allotted, called up and fully
paid 120,509,736 118,707,336
------------ ------------
Ordinary 0.075p shares (1 vote
per share)
------------ ------------
FY 23 FY 22
GBP GBP
Allotted, called up and fully
paid 90,382 89,031
------------ ------------
Ordinary 0.075p shares (1 vote
per share)
------------ ------------
Movements in share capital during the year ended 31 March
2023:
GBP
Balance as at 1 April 2022 89,031
118,707,336 ordinary shares of 0.075p each
Issued shares (i) 1,351
Balance as at 31 March 2023
120,509,736 ordinary shares of 0.075p each 90,382
-------
(i) During the year, a total of 1,800,000 ordinary shares were
issued by the Group, all of which were issued to the employee
benefit trust ("EBT") for future satisfaction of share incentive
plans. A further 2,400 ordinary shares were issued by the Group, to
satisfy exercises under the employee incentive plan (EIP).
Alpha employee benefit trust
The Group held 6,274,380 (FY 22: 6,216,501) shares in the
employee benefit trust ("EBT") comprising shares held to satisfy
share options granted under its joint share ownership plan ("JSOP")
or unallocated ordinary shares to satisfy share options granted
under the Group's other share option plans. The EBT has waived all
dividend and voting rights in respect of these shares.
During the year, 1,800,000 ordinary shares were transferred by
the Company to the EBT for potential future satisfaction of share
incentive plans, either through the issuance of new shares or the
transfer of shares bought back from prior employees at nominal
value. Further, the EBT purchased 266,922 shares in the year at
market value for GBP1.1m, which was funded by the Group and is
accounted for as a deduction other reserves.
In the year, 2,009,043 shares held in the EBT were utilised for
employee share option exercises.
Treasury shares
The Group held nil (FY 22: nil) shares in treasury.
12. Share-based payments
The Group has adopted a globally consistent share incentive plan
approach, which is implemented using efficient jurisdiction
specific plans, as appropriate.
The management incentive plan
The Group has a management incentive plan ("MIP") to retain and
incentivise directors and senior management. The MIP consists of
four parts: part A of which will enable the granting of enterprise
management incentive and non-tax advantaged options to acquire
shares; part B of which will enable the awarding of JSOPs; part C
of which will enable the awarding of restricted stock units
("RSUs") for participants in the US; and part D of which will
enable the awarding of RSUs in France (together the "options").
In prior periods, the majority of options granted to certain
directors and senior management of the Group were subject to the
fulfilment of three or more of the following performance
conditions: (a) the Group achieving adjusted EPS growth of 15.0% or
more to trigger a maximum award, or 10.0% to trigger a 66% award,
with a linear application of awards between these levels; (b) the
Group achieving a total shareholder return ("TSR") over three years
in excess of the mean TSR delivered by a peer group of comparable
companies; (c) personal adherence to corporate values and risk
policy; and (d) specific business unit EBITDA, or other personal
targets and goals. In FY 21, in response to COVID-19, options
granted were subject to more flexible performance criteria,
including local budget targets and a variety of stretching personal
sales or other targets. In FY 22, the performance conditions of
options granted in that year returned to the previous award
criteria.
As disclosed last year, the Remuneration Committee approved
performance conditions for FY 23 awards, which further modified the
adjusted EPS growth range set out above to reflect the growth of
the Group since AIM admission. The criteria for these share
incentive awards to certain directors and senior management of the
Group, depending on the individual and their role, include: (a) the
Group achieving adjusted EPS growth of 11.25% or more to trigger a
maximum award, or 7.5% to trigger a 66% award, with a linear
application of awards between these levels; (b) personal adherence
to corporate values and risk policy; and (c) specific business unit
EBITDA, or other personal targets and goals.
Some of these share incentive awards also contain a market
condition requiring the Group to achieve a TSR over three years in
excess of the mean TSR delivered by a peer group of comparable
companies.
MIP awards have either nominal or minimal exercise price payable
in order to acquire shares pursuant to options. MIP awards have
either three- or four-year vesting periods from the date of grant
and can be equity settled only.
The employee incentive plan
In addition to the MIP, the Board has previously put in place a
medium-term employee incentive plan ("EIP"). Under the EIP, a broad
base of the Group's employees has been granted share options or
share awards over a small number of shares. The EIP is structured
as is most appropriate under the local tax, legal and regulatory
rules in the key jurisdictions and therefore varies between those
jurisdictions. No EIP awards were made in the current or prior
years.
During the year ended 31 March 2023, a total of 3,153,014 share
option and award grants were made to employees and senior
management (FY 22: 2,959,429). The weighted average of the
estimated fair values of these options awarded in the year is
GBP3.14 per share (FY 22: GBP2.68).
During the year 2,191,024 MIP and EIP awards vested following
the satisfaction of performance conditions. The performance
conditions relating to EPS growth and total shareholder return
exceeding a basket of comparable companies over three years to the
vesting date were met in full and the relevant local regional or
individual budgetary performance conditions were met in full or
part. Of these vested awards, 1,853,088 have been exercised, with a
further 158,355 awards that vested in previous periods also
exercised in the year. Of these total 2,108,886 options exercised,
the Group settled 2,011,443 either through the issuance of new
shares, or shares transferred from the Group's EBT with a further
97,443 options retained for net tax settlement. The weighted
average share price at the date of these exercises was GBP4.27.
During the year, 552,467 share options were forfeited under
performance conditions or as a result of leavers before
vesting.
Of the 276,306 share options exercisable at the year end,
240,493 share options vested in the year. The remaining vested
award holders have a further six-year to seven-year period, from
the date of vesting, in which to exercise their vested awards.
Details of the share option awards made are as follows:
FY 23
Number of
share options
Outstanding at the beginning of the year 9,504,379
Granted during the year 3,153,014
Exercised during the year (2,108,886)
Forfeited during the year (552,467)
Expired during the year -
Outstanding at the year end 9,996,040
Exercisable at the year end 276,306
--------------------
The weighted average exercise price for all options outstanding
in both the current and prior years was nominal. The options
outstanding as at 31 March 2023 had a weighted average remaining
contractual life of 1.7 years.
During the year ended 31 March 2023, options were granted in
July 2022 and January 2023 to employees and certain senior
management.
MIP share options with an external market condition were valued
at award using the Monte Carlo option pricing model. The model
simulates a variety of possible results, across 10,000 iterations
for each of the options, by substituting a range of values for any
factor that has inherent uncertainty over a number of scenarios
using a different set of random values from the probability
functions. The model takes any market-based performance conditions
into account and adjusts the fair value of the options based on the
likelihood of meeting the stated vesting conditions.
MIP share options without external market conditions and EIP
share options were valued at award using a Black-Scholes model.
The inputs to these models in the period were as follows:
FY 23
Weighted average share price at GBP3.99
grant date
Exercise price Nominal
Volatility 20.10%
Weighted average share option life 4 years
Risk free rate 1.65%
Expected dividend yield 3.00%
Expected volatility was determined by calculating the historical
volatility of the market in which the Group operates. The expected
expense calculated in the model has been adjusted, based on
management's best estimate, for the effects of non-market-based
performance conditions and employee attrition.
The Group recognised a total expense of GBP8.0m (FY 22: GBP6.2m)
in the current year, comprising GBP7.0m (FY 22: GBP4.1m) in
relation to equity-settled share-based payments, and GBP1.0m (FY
22: GBP2.1m) relating to relevant social security taxes. As
previously announced, Euan Fraser stepped down from the role of
Chief Executive Officer and from the Board on 31 March 2023 and
remains with the Group as a strategic adviser on a part-time basis.
This has resulted in an acceleration of the share-based payment
charge in relation to Euan's share options, as all
employment-linked conditions attached to these share options have
been removed.
Given the estimation, were the future conditions for all
outstanding share options assumed to be met at the end of the
reporting period, the charge in the year would increase by
GBP0.8m.
The combined carrying value of current and non-current
liabilities relating to social security tax on share options as at
31 March 2023 is GBP3.3m (FY 22: GBP3.0m). A GBP1.0m charge was
recognised in the consolidated statement of comprehensive income in
the year, offset by GBP0.7m of payments. Assumptions associated
with the calculation of the social security tax liability due on
vesting of share options include an estimation of the
forward-looking share price at the vesting date based on applicable
analyst research and applicable future tax rates. For these
purposes, the share price is updated at each reporting period to
reflect historical levels, and is assumed to grow in line with the
estimated future performance of the business. If the estimated
future share price growth assumption were to double, the social
security costs in the period could increase by GBP0.3m. Were the
share price to remain flat the charge would reduce by GBP0.3m.
13. Events after the reporting period
Acquisition of Shoreline
On 1 May 2023, the Group reached an agreement to acquire 100% of
the issued share capital of Shoreline Consulting Pty Ltd and
Shoreline Consolidated Pty Ltd (together, "Shoreline"), a boutique
consultancy that provides services to the asset and wealth
management industry in APAC, on a cash and debt-free basis, for AUD
8.0m (GBP4.2m) initial cash consideration plus a performance-driven
earn-out of up to AUD 5.0m (GBP2.6m). The initial cash
consideration is payable in instalments, with AUD 4.9m (GBP2.6m)
paid on completion, and AUD 1.7m (GBP0.9m) and AUD 1.4m (GBP0.7m)
payable on the first and second anniversaries of completion
respectively. Any contingent earn-out tranches are payable by July
2025, 2026 and 2027 respectively. The maximum potential cash
consideration payable by the Group pursuant to the acquisition,
assuming full payment of the earn-out, would be AUD 13.0m
(GBP6.8m). The initial consideration was funded from the Group's
cash resources.
Renewal of the Group's revolving credit facility
The Group has one principal bank facility which, as at 31 March
2023, comprised a GBP20.0m committed revolving credit facility
("RCF") with Lloyds Bank.
Subsequent to the year end, the Group has increased the amount
of its committed RCF to GBP50.0m, with both Lloyds Bank and HSBC,
to provide funding flexibility in line with the Group's growth. The
facility tenor now runs until June 2026.
- END -
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June 22, 2023 02:00 ET (06:00 GMT)
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