TIDMAFM
RNS Number : 3936U
Alpha Fin Markets Consulting plc
23 November 2023
23 November 2023
Alpha Financial Markets Consulting plc
("Alpha", the "Company" or the "Group")
INTERIM RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2023
Resilient performance in a more competitive market
environment
Alpha Financial Markets Consulting plc (AIM:AFM), a leading
global consultancy to the financial services industry, is pleased
to report its unaudited results for the six months ended 30
September 2023 ("H1 24").
Financial highlights(1)
-- Revenue increased by 7.5% to GBP115.6m (H1 23: GBP107.6m) and
net fee income(2) increased by 7.2% to GBP114.8m (H1 23:
GBP107.0m), mostly on an organic(3) basis. On a constant currency
basis net fee income grew by 8.5%
-- Gross profit was consistent at GBP38.4m (H1 23: GBP38.4m)
with a 33.5% margin(2) (H1 23: 35.9%), reflecting lower average
consultant utilisation, particularly across the summer months, and
selective investment in growing the consultant team, alongside
consistent consultant day rates and management of variable
costs
-- Adjusted(2) EBITDA was GBP20.1m (H1 23: GBP22.5m), with a
17.5% margin (H1 23: 21.0%) reflecting gross profit and continued
cost control across a larger team
-- Adjusted profit before tax was GBP18.4m (H1 23: GBP21.3m)
-- Adjusted earnings per share was 11.81p (H1 23: 14.09p)
-- On a statutory basis, profit before tax was GBP10.8m (H1 23:
GBP14.2m) and basic earnings per share was 6.32p (H1 23: 9.10p)
after deducting increased adjusting items, principally relating to
acquisition-related costs
-- Adjusted cash from operating activities was an outflow of
GBP5.4m (H1 23: inflow of GBP4.2m), reflecting the normal H1 timing
of payments, their relative size and weighting to first half
profitability, and the associated performance-adjusted bonus
accruals in the half. Adjusted cash conversion for the full year is
estimated to be approximately 50%, given the expected H2 weighting
of trading
-- Robust balance sheet maintained with a net cash balance of
GBP16.1m (31 March 2023: GBP59.2m) and a largely undrawn GBP50.0m
revolving credit facility, with the net cash movement reflecting
the usual H1 weighting of payments, including acquisition-related
payments
-- Maintained interim dividend declared of 3.70p per share (H1 23: 3.70p)
6 months 6 months
to to Change
30 Sep 2023 30 Sep 2022
------------------------ ------------- ------------- --------
Revenue GBP115.6m GBP107.6m 7.5%
Gross profit GBP38.4m GBP38.4m -
Adjusted EBITDA GBP20.1m GBP22.5m (10.5%)
Adjusted profit before
tax GBP18.4m GBP21.3m (13.6%)
Profit before tax GBP10.8m GBP14.2m (23.6%)
Adjusted EPS 11.81p 14.09p (16.2%)
Basic EPS 6.32p 9.10p (30.5%)
Interim dividend
per share 3.70p 3.70p -
------------------------ ------------- ------------- --------
Operating highlights
-- Continued progress in all Alpha's regions, with net fee
income growth on a constant currency basis, despite a more
competitive global consulting market and longer sales cycle
-- Consultant(4) headcount increased by 14.1% from the
comparative half to 1,051 (H1 23: 921). This includes the addition
of 38 consultants organically in the last six months (H1 23: 161),
consistent with our selective hiring approach and committed
graduate programme
-- Continued strong growth of client relationships, with the
number of clients(5) that the Group has worked with increasing to
971 (H1 23: 787) and new client wins spanning the Group's global
businesses
-- Director(6) headcount has increased by 15 in the period to
116, including promotions, three hires into Alpha's Insurance
Consulting business and six additions from the Shoreline(7)
acquisition
-- Further strategic progress in the Group's North America
business, which continues to represent a key growth region, adding
23 consultants including 10 directors in the period
-- The Shoreline acquisition consolidates Alpha's APAC presence,
with the integration successfully completed in the first half
Outlook
-- As previously noted, the global consulting market has
experienced a more competitive environment with alonger sales cycle
in the first half of the financial year
-- Against this backdrop, Alpha's trading has been resilient,
growing net fee income while maintaining consistent consultant day
rates, albeit at lower average utilisation particularly in the
summer months
-- The current market remains competitive and continues to
rebalance amidst an uncertain macro-economic environment
-- Utilisation rates ticked up from summer lows in September and
further in October, closer to target levels. The Group expects this
improving trend to continue through the second half of the year
-- The long-term market drivers that underpin demand for Alpha's
services remain strong; the Group enters the second half with good
near-term visibility and a strong and high quality pipeline of new
business opportunities
-- Accordingly, the Board continues to expect to deliver full
year results in line with current market expectations
Commenting on the results, Luc Baqué, Chief Executive Officer ,
said:
"The Group's first half trading has been resilient. As
communicated in June and outlined in our pre-close trading update,
we have seen a lengthening sales cycle and increased competition as
a result of overcapacity in the global consulting market. The
current market remains challenging but is progressively
rebalancing. With our unique value proposition and unrivalled
consulting team, we continue to see robust client demand and enter
the second half of the year with a strong pipeline. We remain well
positioned for future growth in the medium to long term, in line
with our ambition to double the business again by 2028."
Enquiries:
Alpha Financial Markets Consulting plc
Luc Baqué (Chief Executive Officer)
John Paton (Chief Financial Officer)
Georgina Sharley (Company Secretary) +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 Presentation:
A presentation for analysts will be held today at 10:30 a.m. For
further information, please contact Camarco at
alphafmc@camarco.co.uk.
A copy of the presentation slides will be available on the
company website (
https://alphafmc.com/investors/reports-presentations/ ) following
the meeting.
About Alpha FMC:
Headquartered in the UK and quoted on the Alternative Investment
Market of the London Stock Exchange, Alpha is a leading global
consultancy to the financial services industry.
Alpha combines highly specialist, sector-focussed management
consulting and technology expertise to support the client
transformation lifecycle. It has over 1,000 consultants globally,
operating from 17 client-facing offices(8) spanning the UK, North
America, Europe and APAC.
(1) All financial and operating highlights relate to the period
ended 30 September 2023 ("H1 24") and the comparative period ended
30 September 2022 ("H1 23") unless otherwise specified
(2) The Group uses alternative performance measures ("APMs") to
provide stakeholders further metrics to aid understanding of the
underlying trading performance of the Group. Margins are expressed
as a percentage of net fee income. Refer to note 3 for further
details
(3) Organic net fee income growth excludes Shoreline, acquired
during the period. Refer to note 3 for further information on the
Group's APMs
(4) "Consultants" and "headcount" refer to fee-earning
consultants at the period end: employed consultants plus utilised
contractors in client-facing roles. Total increase of 57, of which
19 was through acquisition; where "organically" refers to growth
excluding consultants added through acquisition
(5) Client numbers are cumulative and have been updated to
include all client numbers from acquisition. Total increase of 184,
of which 36 was through acquisition
(6) "Directors" refers to fee-generating directors at the period
end. All director increases are presented as net. Total increase of
15, of which six was through acquisition; where "organically"
refers to growth excluding directors added through acquisition
(7) "Shoreline" refers to Shoreline Consulting Pty Ltd,
Shoreline Consolidated Pty Ltd and their subsidiaries acquired by
Alpha on 1 May 2023
(8) Group uses "office" to refer to office location; that is, if
there are multiple offices in one location, they will be counted as
one office
INTERIM REPORT
The start of 2023 marked both 20 years of Alpha and the
beginning of a new chapter for the Group. Having doubled the size
of the business ahead of its November 2024 target, Alpha set out a
vision to double the Group's net fee income again over the next
five years, through both organic growth and selective
acquisitions.
As mentioned previously, the Group saw increased competition and
a lengthening sales cycle in H1 as a result of overcapacity in the
global consulting market. We still expect that this will be a
short-term feature, while the consulting market balances supply
with overall demand. Against this backdrop, trading in H1 has been
resilient, with consistent sales wins monthly and 7.2% growth in
net fee income compared to the first half of the prior year.
The Group has made good progress across key business areas and
continues to see long-term structural drivers of demand for our
services, which have created tailwinds for Alpha despite the more
competitive market. We enter H2 with a strong pipeline of new
business opportunities and see positive market sentiment returning.
As outlined in our pre-close trading update in October, we expect
to deliver full year results in line with current market
consensus.
Half year review
Despite the more competitive environment, Alpha made headway in
all three areas of its strategic growth agenda during the first
half of the year: scaling up and broadening the client proposition,
rolling out the client proposition globally, and making selective
acquisitions.
The Group has continued to expand its client offering,
strengthening its Insurance Consulting business by adding 12
clients and 38 consultants on the comparative half. Lionpoint is
also performing well as we see ongoing demand for our consulting
services in the alternative investments space. Alpha continues to
broaden its geographic reach; in North America, a key strategic
growth region for the Group, headcount has increased by 25 and
there were 59 new client wins. Alpha's third growth pillar,
selective acquisitions, made its latest advance with the
acquisition of Shoreline, a boutique consultancy that provides
services to the asset and wealth management sector in APAC. This
acquisition cements Alpha's position as the leading consultancy for
the asset and wealth management sector in the region.
Overall, H1 has been a period of selective investment in people,
balancing the need to maintain control over costs while also
positioning the Group for future growth opportunities.
Our financial performance has been resilient over the period,
with the Group continuing to see solid client demand, repeat
business and consistent consultant day rates. Amidst the more
competitive backdrop, the Group has delivered a good increase in
net fee income during the period, up 7.2% to GBP114.8m (H1 23:
GBP107.0m) on a mostly organic basis, and on a constant currency
basis net fee income has grown by 8.5%.
Adjusted EBITDA was GBP20.1m (H1 23: GBP22.5m) and adjusted
profit before tax was GBP18.4m (H1 23: GBP21.3m). As outlined in
our pre-close trading update, adjusted EBITDA margin was 17.5%;
lower than prior years as a result of reduced consultant
utilisation, which partly reflected quieter summer months,
alongside continued selective investment in our consulting teams,
maintenance of competitive remuneration packages and well
controlled costs across our larger team.
Operational and geographical review
In announcing our ambition to double net fee income over the
next five years we have set out a clear strategy for our growth,
with the bulk of that growth expected to come from currently
serviced sectors: asset and wealth management, alternatives and
insurance. We aim to achieve this by continuing our disciplined
expansion strategy, combining both organic growth and selective
bolt-on acquisitions. We have established and are further
developing a multi-boutique model with a strong cross-selling
framework, which will enable us to deliver outstanding client
service and maximise revenue opportunities on a global scale over
the long term.
As previously outlined, the global consulting market was more
competitive over the half with a longer sales cycle, and continues
to rebalance. Alpha has navigated through this market backdrop
well, growing net fee income; and our strategy gives us a clear
path through this environment. Utilisation rates ticked up in
September from summer lows, and further in October, closer to
target levels, and the Group expects this trend to continue through
the second half of the year. Alpha enters H2 with a strong and high
quality pipeline of new business opportunities.
Alongside our excellent reputation and highly relevant service
offering, the long-term structural drivers that underpin demand for
Alpha's services remain strong. We believe that the Group has
potential and scope to continue to grow and gain market share in
all our geographic regions .
Scaling up and rolling out our Insurance Consulting business
globally continues to be one of our growth pillars as we aim to
meet our 2028 strategic target. We are therefore pleased that the
Group's offering for the insurance sector continued to build on its
rapid expansion in the previous year. We see significant market
potential in consulting to insurance clients and, ultimately,
believe that our offering could grow to a similar size as Alpha's
Asset & Wealth Management business in the medium to long
term.
An important part of growing the insurance offering is ensuring
that we have the right skills and expertise to lead the
proposition, hence we are delighted to have added three directors
in the first half. Two of those new directors added were in the
North America insurance market where the Group sees a strong growth
opportunity. In May 2023, Alpha launched a dedicated insurance
offering in the US with the aim of replicating the success of the
Insurance Consulting teams in the UK and France. Reflecting the
size of the 70 plus person Insurance Consulting team in the UK, and
our ambition to grow and diversify further, we also appointed a new
Head of Insurance Consulting for the UK from within the director
team.
Our alternatives consulting business, Lionpoint, traded strongly
and increased its footprint as our alternatives proposition
resonates with clients globally. The Lionpoint team has added a
further 28 consultants globally, bringing the total consultant
number in Lionpoint to over 290. Several key practices are being
rolled out internationally in line with client demand, such as Fund
Accounting & Operations. Looking forward, we see further scope
for international roll-out and scale-up of the Lionpoint service
offerings as the alternative investments market continues to
attract growth in investments across the private equity, private
credit, infrastructure, real estate and fund of funds segments.
During the period, the Group has continued to win business with
both new and existing clients across all locations. As a Group, we
have now worked with 971 clients (H1 23: 787).
Geographic performance in the period can be summarised as
follows:
6 months to 6 months Change
30 Sep 2023 to
30 Sep
2022
Reported Constant Reported Reported Constant
currency currency
--------------- ---------- ---------- ---------- -------- ---------
Net fee income
UK GBP45.4m GBP45.4m GBP39.8m 14.1% 14.1%
North America GBP43.8m GBP45.3m GBP44.3m (1.1%) 2.1%
Europe & APAC GBP25.6m GBP25.4m GBP22.9m 11.6% 11.0%
--------------- ---------- ---------- ---------- -------- ---------
Total GBP114.8m GBP116.1m GBP107.0m 7.2% 8.5%
--------------- ---------- ---------- ---------- -------- ---------
Consultant headcount grew in each geography as follows:
As at As at Change
30 Sep 2023 30 Sep
2022
--------------------- ------------ ------- ------
Consultant headcount
UK 420 350 20.0%
North America 365 340 7.4%
Europe & APAC 266 231 15.2%
--------------------- ------------ ------- ------
Period-end totals 1,051 921 14.1%
--------------------- ------------ ------- ------
All our geographic regions delivered net fee income growth on a
constant currency basis in the first half, mostly organically,
driven by resilient client demand as a result of the ongoing
structural drivers that we continue to experience in all our market
segments.
The UK delivered the strongest growth in net fee income across
the Group, producing organic growth rates of 14.1% overall, against
the comparative period. We retain our market-leading reputation and
are proud to be supporting some of the highest profile projects in
the UK marketplace. We continue to see robust client demand in our
established practices, with good progress in our newer Insurance
Consulting offering. In line with the growth in net fee income in
the region and selectively investing for future growth, Alpha UK
added 26 consultants in the first half, mainly in the Insurance
Consulting team, including a number of consultant hires committed
in the prior half.
Also in the UK region, the Lionpoint alternatives investments
team continued to grow strongly. Alpha's data and product solutions
business, Aiviq, also grew revenue against the comparative period,
while building a good pipeline and improving outlook. We are
delighted that Aiviq's proposition has been recognised with a
FinTech Global Wealth Tech "Top 100" award in the half.
In North America, following very strong net fee income growth in
excess of 50% on average over the last three years, the quieter
summer months were more pronounced. This reflects the more
competitive environment and longer sales cycle that we previously
indicated. While we saw a flatter half compared to the very high
rates of growth in previous periods, the region continued to trade
consistently, delivering net fee income growth of 2.1% on a
constant currency basis.
The Group's alternative investments consulting business,
Lionpoint, continues to trade strongly in North America. In line
with the Group's selective approach to hiring, reflecting the
near-term environment, headcount in North America increased by 23,
including 10 directors to support further the Group's North America
growth opportunity and ambitions. This included the addition of a
new director in the Operations practice in North America, which
continues to be an important client focus within the asset and
wealth management sector.
Europe & APAC also delivered a robust performance in the
period, with net fee income increasing by 11.0% on a constant
currency basis and 11.6% overall. Organic growth accounted for over
half of this overall growth, with the acquisition of Shoreline
delivering the remainder of the growth. Again, consistent with our
strategy of selective investment and hiring, headcount in the
region increased by 6.9% on an organic basis and by 15.2% overall,
taking into account the 19 consultants joining the Group as part of
the Shoreline acquisition.
Our people
2023 marks 20 years since Alpha was established. Alpha started
life as an asset management consultancy based out of London - it is
now a Group of over 1,000 consultants as well as a strong business
operations team, with offices globally and a diversified client
base that we support across an array of specialist services and
offerings. Thanks to the efforts of our outstanding staff, we have
established a global reputation for delivering challenging and
complex projects to the highest standards, with quality of work
evidenced by significant repeat business. Our record of attracting
and retaining high calibre employees can be attributed to our
highly attractive offering, which we are constantly reevaluating,
as well as our unique and inclusive culture that places people at
the heart of the business.
In the context of a more competitive backdrop, we have been
selective in our hiring this period, prioritising investment in
accordance with demand and opportunity. While we remain cautious in
our hiring approach, we are very excited about the talent we are
able to attract and hire. As we continue to invest in our strategy,
we have seen 20.0% headcount growth in the UK, 7.4% in North
America and 15.2% in Europe & APAC on the comparative half,
with much of this team growth added or committed in the second half
of the prior year, and more selective additions this half.
We continue to develop and foster a multi-boutique organisation
with an extremely solid cross-selling framework and culture of
collaboration, consistent with our 2028 growth ambition. To
reinforce this further, we have formalised roles to facilitate
this, including four technology lead roles within our Asset &
Wealth Management and Insurance Consulting businesses (based in the
UK and North America) to capitalise on technology opportunities in
the market.
Alpha is committed to developing and fostering early talent,
offering a competitive graduate scheme and development programme
for future leaders, and welcomed a further graduate intake in the
period, across all our regions.
Alpha's directors play a vital role in developing this talent
and in instilling our values, whilst ensuring delivery excellence
across all client engagements. Maintaining and growing our director
teams subsequently remains a key long-term priority for us as we
look to successfully realise our ambitions. Over the period we have
broadened our global director teams, adding 9 directors organically
through a combination of promotions and selective experienced new
hires.
Alpha has achieved so much since it began 20 years ago - and
this is thanks to the incredible talent, unrivalled knowledge and
unfailing commitment of our exceptional people. Our consultants are
the best in the financial services sectors in which we operate and
the key driving force behind the success of the business. The Board
and the entire leadership team would like to thank everyone at
Alpha for enabling us to progress this incredible growth story and
we remain very excited to see what opportunities lie ahead.
Growth strategy
The Group kicked off the year with a refreshed ambition to
double the size of Alpha again over the next five years. As
outlined in the FY 23 results, the key pillars that will enable
Alpha to achieve this are: further expansion in asset and wealth
management consulting, particularly in North America; the global
scale-up and roll-out of our Insurance Consulting and alternatives
businesses; and making selective acquisitions.
We are pleased with the progress that the Group has made so far,
especially in the more competitive market, and continue to expect
that the majority of growth over the next five years will come from
our consulting teams in the existing asset and wealth management,
alternatives and insurance sectors. We are continuously monitoring
for opportunities to diversify and scale up the consulting and
technology practices, and for selective bolt-on acquisitions to
supplement growth.
Although mindful of the current market environment, we continue
to believe that that this market rebalancing will be short lived.
The Group performed resiliently in H1 and enters the second half of
the year with a strong pipeline. The long-term structural drivers
that underpin client demand for Alpha's services remain strong and,
therefore, we believe that Alpha's 2028 vision remains both
appropriate and achievable.
Acquisitions
The Board recognises that adding further complementary expertise
or adding geographic footprints in existing skill-sets through
carefully selected acquisitions both enhances and strengthens the
business proposition and increases the cross-sell opportunities
across the Group.
In May 2023, Alpha announced the acquisition of Shoreline, an
APAC-based boutique consultancy that provides services to asset and
wealth management clients. This acquisition adds a further 19
consultants with a client network that spans Australia and
South-East Asia. The integration of this acquisition was
successfully completed in the first half, making Alpha the leading
consulting firm in the region for the asset and wealth management
sector.
We continue to review acquisition opportunities to complement
and grow the Group's service offering to deliver client and
shareholder value.
Governance and the Board
The members of Alpha's Board remain committed to the highest
standards of corporate governance and regard business ethics,
integrity, and strong governance as foundational elements in
reducing risk and securing long-term value for shareholders.
The Board understands its crucial role in overseeing and
advancing the Group's ESG efforts. The ESG Committee, which was
established by the Board in recognition of this, held its inaugural
meeting in the half, chaired by Jill May. The Committee's role is
to maintain oversight of all facets of Alpha's corporate ESG
agenda, ensuring the Group complies with regulatory requirements,
meets the expectations of its stakeholders, and positions the Group
for long-term, sustainable success.
The Group continues to focus on preparations to start reporting
under the framework set out by the Task Force on Climate-Related
Financial Disclosures ("TCFD"), as well as other regulatory
requirements such as Gender Pay Gap Reporting, as the Group
increases in scale. Alongside regulatory work, the Group is
concluding its materiality assessment to further understand and
assess stakeholder expectations, and is preparing for initiatives
that will embed and demonstrate progress on this important agenda,
including diversity targets and emissions reduction analysis. We
look forward to launching our first dedicated sustainability report
later in the financial year, to provide further details on these
important parts of our strategy.
Having previously used the services of a third-party Company
Secretarial provider, the Board appointed an internal Company
Secretary with effect from 7 September 2023. The Board would like
to thank Prism CoSec for their excellent service over the recent
years and their role in transitioning responsibilities to the
internal Alpha team.
Financial performance review
6 months 6 months to
to 30 Sep 2022 Change
30 Sep 2023
--------------------------- ------------- ------------ ----------
Revenue GBP115.6m GBP107.6m 7.5%
Net fee income GBP114.8m GBP107.0m 7.2%
Gross profit GBP38.4m GBP38.4m -
--------------------------- ------------- ------------ ----------
Operating profit GBP12.0m GBP15.8m (23.8%)
--------------------------- ------------- ------------ ----------
Adjusted EBITDA GBP20.1m GBP22.5m (10.5%)
--------------------------- ------------- ------------ ----------
Adjusted EBITDA margin 17.5% 21.0% (350 bps)
--------------------------- ------------- ------------ ----------
Adjusted profit before
tax GBP18.4m GBP21.3m (13.6%)
Profit before tax GBP10.8m GBP14.2m (23.6%)
Adjusted earnings per
share 11.81p 14.09p (16.2%)
Adjusted diluted earnings
per share 11.09p 13.23p (16.2%)
Basic earnings per share 6.32p 9.10p (30.5%)
--------------------------- ------------- ------------ ----------
In a more competitive market environment, the Group performed
resiliently in the first half with net fee income up by 7.2%
compared to the first half of the last financial year, and 8.5% on
a constant currency basis, mostly organically. Revenue also grew
7.5%, including increased rechargeable expenses, compared to the
comparative period.
Overall, the Group's revenue and net fee income growth reflects
strong ongoing client demand across a larger consulting team. We
were pleased to maintain consistent consultant day rates overall
and sales wins monthly through the first half, albeit at lower than
target average consultant utilisation, particularly during the
summer months. Net fee income grew in all geographic regions on a
constant currency basis, with an inorganic contribution from the
acquisition of Shoreline in the period.
Group gross profit was GBP38.4m, consistent with the comparative
period (H1 23: GBP38.4m). Gross profit margin was 33.5% (H1 23:
35.9%). This primarily reflects reduced average consultant
utilisation in the current competitive market environment,
alongside consistent day rates and selective investment in growing
our team while maintaining a competitive remuneration package,
partly offset by reduced variable costs given performance. The
Group has added 57 consultants in the last six months (H1 23: 161),
including 19 from the Shoreline acquisition and the majority of the
remainder from our committed graduate intake in September.
The UK delivered the strongest regional growth in net fee income
against the comparative period, growing 14.1% overall, entirely
organically. This strong UK organic performance reflects solid
client demand across the full range of Alpha practices, supported
through a larger consulting team, the growth of which was mostly
delivered in the second half of last year. This included
substantial contributions from our established asset and wealth
management capabilities in Investments, Operations and Client &
Digital, and our newer Insurance Consulting and alternatives
businesses also delivering strong growth against the comparative
period. Within the UK results, Alpha's data and product solutions
business, Aiviq also grew on the comparative period and maintains a
good pipeline and outlook.
North America net fee income grew by 2.1% on a constant currency
basis. Including the currency movement, North America performed
largely consistently with the prior half, entirely on an organic
basis. Alpha's alternatives business, Lionpoint, continued to
perform well in the first half and contributed significantly to
North America net fee income. The North America business overall
continued to expand its domestic client base, as well as
successfully capturing client demand through a number of
cross-selling opportunities. The consultant team grew modestly in
the first half, maintaining the Group's selective recruitment
strategy.
Europe & APAC also delivered another period of good growth.
The region grew net fee income by 11.6% on the comparative period
and, on an organic basis, the region reported 6.7% growth. This
growth was delivered across the region, complemented by the
acquisition of Shoreline.
Currency translation had some effect on net fee income and
profits during the first half of the financial year. In the period,
the pound sterling averaged $1.26 (H1 23: $1.23) and EUR1.16 (H1
23: EUR1.18), which, with other similar currency movements,
resulted in an unfavourable net currency effect on net fee income
of GBP1.3m and on gross profit of GBP0.5m. On a constant currency
basis, North America net fee income growth was 2.1% and Europe
& APAC net fee income growth was 11.0%.
Alpha continues to support clients in some of the largest, most
challenging and interesting projects across the industry. Alpha's
revenue is driven by good client demand in its established
practices, as well as progress in newer areas. Alpha's Insurance
Consulting business and the Group's technology proposition
continued to progress against the comparative half, winning a
number of projects both with existing and new client
relationships.
Overall, gross profit margin principally reflects reduced
average consultant utilisation, selective investment in growing our
team while maintaining a competitive remuneration package, partly
offset by lower variable costs, alongside consistent consultant day
rates overall. North America gross profit margin was 31.1%,
primarily reflecting reduced average consultant utilisation. The UK
gross margin of 35.6% similarly reflects reduced utilisation
levels, particularly in the summer months, and consistent
consultant day rates. Europe & APAC experienced good gross
profit growth, with an improved 33.8% margin reflecting good rates
growth relative to costs, partly offset by lower utilisation.
Adjusted administration expenses, as detailed in note 3,
increased by GBP2.3m to GBP18.3m (H1 23: GBP16.0m) against the
comparative period. This increase reflects investment in the
Group's central team in the second half of the last year and some
increases in overall spend to supporting the larger consultant
headcount base, alongside ongoing cost control.
Including the adjusting items, which increased against the
comparative half, administration expenses increased to GBP26.4m (H1
23: GBP22.7m) on a statutory basis. The adjusting items, set out in
note 3, increased in the period to GBP6.6m (H1 23: GBP5.7m),
reflecting increased acquisition and integration costs and earn-out
and deferred consideration charges, partially offset by lower
intangible asset amortisation and share-based payment charges.
Acquisition and integration costs were GBP0.2m (H1 23: GBPnil)
as the Shoreline team was integrated into the Group in the first
half of the year. The acquired intangibles amortisation charge
decreased against the comparative period, reflecting some fully
amortised intangibles, partly offset by the newly acquired
Shoreline intangibles. In the first half, the Group recognised an
earn-out and deferred consideration charge of GBP0.7m (H1 23:
credit of GBP0.3m), reflecting a return of the charge after a fair
value reduction in the liability held for Obsidian in the prior
period. Further details on the earn-out and deferred consideration
charges are set out in note 7.
The share-based payment charge reduced to GBP3.7m (H1 23:
GBP4.1m), having updated the input assumptions for current year
performance, Alpha's share price and share option vests in the
period. Further details of the share-based payment charge are set
out in notes 3 and 12.
Adjusted EBITDA was GBP20.1m (H1 23: GBP22.5m) and adjusted
EBITDA margin was 17.5% (H1 23: 21.0%), reflecting consistent gross
profit and higher adjusted administration expenses. Operating
profit was GBP12.0m (H1 23: GBP15.8m) after charging increased
depreciation and adjusting expenses. Further detail of these
adjusting items is set out in note 3. If no adjustment was made for
the share-based payment charge, adjusted EBITDA for the period
would be GBP16.4m (H1 23: GBP18.4m) and adjusted EBITDA margin
would be 14.3% (H1 23: 17.2%).
Net finance expenses fell to GBP1.2m (H1 23: GBP1.6m), primarily
comprising non-underlying finance expenses relating to acquisition
consideration discount unwinding, which decreased given payments in
the period, as set out in note 7. Adjusted profit before tax was
GBP18.4m (H1 23: GBP21.3m) after charging increased depreciation
and underlying finance costs, reflecting periodic revolving credit
facility ("RCF") drawings and additional leases. Statutory pre-tax
profit was GBP10.8m (H1 23: GBP14.2m) after also charging adjusting
expenses and non-underlying finance expenses.
Taxation charges for the period were GBP3.6m (H1 23: GBP3.9m),
reflecting reduced taxable profits, partially offset by the
increase of the UK corporation tax rate from 19% to 25%.
Adjusted earnings per share ("EPS") was 11.81p per share (H1 23:
14.09p) and adjusted diluted EPS was 11.09p (H1 23: 13.23p),
reflecting the adjusted profit after tax and the increased number
of weighted average shares as a result of share option exercises in
the current and prior periods, partly offset by the Group's
purchase of shares into Alpha's employee benefit trust ("EBT").
After including the adjusting items, basic earnings per share was
6.32p (H1 23: 9.10p), while diluted EPS was 5.93p (H1 23: 8.55p),
reflecting the increase in the share options awards
outstanding.
Net assets at 30 September 2023 totalled GBP143.1m (31 March
2023: GBP149.3m). This movement principally reflects profits in the
period, offset by the Group's FY 23 final dividend payment and the
purchase of the Company's own shares into the EBT. The Group
continues to maintain a strong financial position.
Net cash from operating activities was an outflow of GBP7.6m (H1
23: inflow of GBP2.2m) and adjusted cash from operating activities
was an outflow of GBP5.4m (H1 23: inflow of GBP4.2m). Underlying
working capital remains well managed, with consistent debtor days
on the comparative half. The operating cash outflow in the period
reflects the normal timing of profit share payments and their
relative size compared to first half profitability. These profit
share payments include both the payment of FY 23 profit share and
the second tranche of deferred FY 22 payments. The size of these
payments alongside the lower performance-adjusted bonus accruals in
the half also results in an increased movement in working capital
in the first half. Adjusted cash conversion is similarly affected
in the half, and for the full year is estimated to be approximately
50% given the expected weighting of trading in the second half of
the year.
The Group's net cash position was GBP16.1m as at 30 September
2023 (31 March 2023: GBP59.2m), reflecting the normal H1 timing of
payments, a further GBP18.6m of acquisition consideration payments,
including GBP1.7m of employment-linked amounts, and the payment of
the GBP12.0m FY 23 final dividend in the half. During the period,
the Group also provided GBP3.8m funding to Alpha's EBT to purchase
1,033,954 shares at the prevailing market share price. These shares
will be held in the EBT, a discretionary trust, and are intended to
be used to satisfy future exercises of share options by employees,
including the Directors of the Company. Alpha was drawn GBP10.1m on
its RCF at 30 September 2023, to assist with managing currency
requirements in the period.
The Board is pleased to declare a maintained interim dividend
for FY 24 of 3.70p per share (H1 23: 3.70p), which will be paid on
21 December 2023 to shareholders on the register at the close of
business on 8 December 2023.
Risk management
The Board is encouraged by the Group's resilient trading
performance in the first half, while remaining cognisant of the
potential risks and wider political and macro-economic
uncertainties. While it is unclear how these potential risks will
affect the current market conditions, including higher levels of
competition and a longer sales cycle, we see a more positive market
sentiment returning following the summer months. The Group
continues to attract client demand for its services and has a
strong pipeline of new business opportunities.
The Board does not consider that the principal risks and
uncertainties differ from those at 31 March 2023 as detailed on pp
50-53 of the Annual Report & Accounts 2023. These risks relate
to the following areas: people and resourcing; quality of service;
data security; acquisition risk; market strategy; strategic
objectives; macro-economic conditions; political/regulatory
environment; competitors; client concentration; skills and subject
matter expertise; utilisation rates; and cash collection.
The Directors and the senior management team are closely
monitoring the situation in Israel and Gaza as it evolves. Alpha's
operational footprint does not extend to that particular area, and
we do not service clients based in those territories. Currently,
the principal risk to Alpha is from a macro-economic perspective
and the possible market impacts; however we continue to assess the
risk of the conflict encompassing wider parts of the Middle East
region.
Outlook
We are pleased by the resilient performance in H1 24 in a more
competitive market environment with a longer sales cycle.
The Group has grown net fee income, while maintaining consistent
consultant day rates and sales wins monthly. We have also continued
to make good progress on a number of our growth pillars - in North
America, including our alternative investments consulting business,
Lionpoint, which has traded strongly; in expanding our Insurance
Consulting business against the comparative half; and in selective
acquisitions, with the acquisition of Shoreline.
While the global consulting market continues to rebalance, a
more positive market sentiment is returning following the summer
months. Utilisation rates ticked up from summer lows in September,
and further in October, closer to target levels. The Group expects
this improving trend to continue through the second half of the
year. The structural drivers of growth in the core markets in which
we operate, including increase in assets and insurance policies,
cost pressure, regulation, technology breakthroughs, and changes in
client and societal expectations, remain prevalent and will
continue to drive ongoing demand for Alpha's services. We are very
confident in the quality of our people, which we have continued to
reinforce selectively in the period, our excellent market
reputation, and business opportunities to extend the service
offering for our clients further.
We enter the second half with a strong and high quality pipeline
of new business opportunities, alongside improving current trading
and utilisation levels. Accordingly, the Board continues to expect
to deliver full year results in line with current market
expectations.
Ken Fry Luc Baqué
Chairman Chief Executive Officer
23 November 2023
Responsibility statement
The Directors confirm that, to the best of their knowledge,
these interim condensed consolidated financial statements have been
prepared in accordance with UK-adopted International Accounting
Standard (IAS) 34 Interim Financial Reporting. The Interim Report
includes a fair review of the information required by:
-- DTR 4.2.7R of the Disclosure Guidance and Transparency Rules
(DTR), being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the interim condensed consolidated financial statements; and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
-- DTR 4.2.8R of the DTR, being related party transactions that
have taken place in the first six months of the current financial
year and that have materially affected the financial position or
the performance of the Group during that period; and any changes in
the related party transactions described in the last Annual Report
that could do so.
This Interim Report contains certain forward-looking statements
with respect to the Group's current targets, expectations and
projections about future performance, anticipated events or trends
and other matters that are not historical facts. These
forward-looking statements, which sometimes use words such as
"aim", "anticipate", "believe", "intend", "plan", "estimate",
"expect" and words of similar meaning, include all matters that are
not historical facts and reflect the Directors' beliefs and
expectations and involve a number of risks, uncertainties and
assumptions that could cause actual results and performance to
differ materially from any expected future results or performance
expressed or implied by the forward-looking statement.
Ken Fry Luc Baqué
Chairman Chief Executive Officer
23 November 2023
Interim condensed consolidated statement of comprehensive
income
For the six months ended 30 September 2023
Unaudited Unaudited
six months ended six months ended
30 Sep 2023 30 Sep 2022
Note GBP'000 GBP'000
Continuing operations
Revenue 2 115,623 107,599
Rechargeable expenses 2 (863) (583)
Net fee income(9) 2 114,760 107,016
Cost of sales 2 (76,324) (68,573)
Gross profit 2 38,436 38,443
Administration expenses (26,420) (22,679)
Operating profit 12,016 15,764
Finance income 4 260 65
Finance expense 4 (1,431) (1,630)
Profit before tax 10,845 14,199
Taxation (3,620) (3,922)
Profit for the period 7,225 10,277
Foreign exchange differences on translation of foreign operations 263 9,963
Total other comprehensive income for the period 263 9,963
Total comprehensive income for the period 7,488 20,240
Basic earnings per share (p) 5 6.32 9.10
Diluted earnings per share (p) 5 5.93 8.55
9 Net fee income, adjusted EBITDA and other alternative
performance measures are defined and reconciled in note 3
Interim condensed consolidated statement of financial
position
As at 30 September 2023
Unaudited Unaudited Audited
as at as at as at
30 Sep 2023 30 Sep 2022 31 Mar 2023
Note GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 6 106,599 107,310 103,676
Intangible fixed assets 6 27,421 30,936 27,588
Property, plant and equipment 1,121 1,109 1,113
Right-of-use assets 3,674 1,904 4,008
Deferred tax assets 2,424 1,088 3,033
Capitalised contract fulfilment costs 70 119 108
Total non-current assets 141,309 142,466 139,526
Current assets
Trade and other receivables 8 42,381 41,695 34,128
Cash and cash equivalents 26,236 47,764 59,215
Total current assets 68,617 89,459 93,343
Current liabilities
Trade and other payables 9 (42,605) (55,709) (60,539)
Provisions (3,326) (3,433) (3,326)
Corporation tax (1,195) (3,226) (1,321)
Lease liabilities (2,273) (1,072) (2,104)
Interest bearing loans and borrowings (10,150) (7,477) -
Total current liabilities (59,549) (70,917) (67,290)
Net current assets 9,068 18,542 26,053
Non-current liabilities
Deferred tax liabilities (3,065) (3,765) (2,783)
Other non-current liabilities 10 (2,579) (8,357) (11,400)
Lease liabilities (1,637) (941) (2,057)
Total non-current liabilities (7,281) (13,063) (16,240)
Net assets 143,096 147,945 149,339
Equity
Issued share capital 11 92 90 90
Share premium 119,438 119,438 119,438
Foreign exchange reserve 7,255 13,445 6,992
Other reserves 15,537 12,867 17,258
Retained earnings 774 2,105 5,561
Total shareholders' equity 143,096 147,945 149,339
The accompanying notes form part of these interim condensed
consolidated financial statements.
Interim condensed consolidated statement of cash flows
For the six months ended 30 September 2023
Unaudited Unaudited
six months six months Audited
ended ended year ended
30 Sep 2023 30 Sep 2022 31 Mar 2023
Note GBP'000 GBP'000 GBP'000
Cash flows from operating
activities:
Profit for the period 7,225 10,277 17,961
Taxation 3,620 3,922 7,810
Finance income 4 (260) (65) (364)
Finance expenses 4 1,431 1,630 3,229
Loss/(profit) from exchange
rate movements on cash held 222 (4,764) (2,364)
Depreciation charge 1,474 898 1,933
Loss/(profit) on disposal
of fixed assets 12 - (14)
Amortisation of intangible
fixed assets 6 2,012 2,507 4,762
Share-based payment charge 12 3,329 3,588 7,023
Decrease in provisions - - (19)
Operating cash flows before
movements in working capital 19,065 17,993 39,957
Working capital adjustments:
Increase in trade and other
receivables (6,876) (9,065) (3,834)
(Decrease)/increase in trade
and other payables (15,793) (676) 7,752
Tax paid (3,974) (6,062) (13,285)
Net cash (used in)/generated
from operating activities (7,578) 2,190 30,590
Cash flows from investing
activities:
Interest received 260 65 364
Acquisition consideration
payments, including deferred
and contingent, net of cash
acquired 7 (16,862) (20,716) (20,829)
Purchase of intangible assets - (319) (319)
Purchase of property, plant
and equipment, net of disposals (328) (564) (860)
Net cash used in investing
activities (16,930) (21,534) (21,644)
Cash flows from financing
activities:
Net settlement of vested share
options (446) (322) (343)
Purchase of own shares by
the EBT (3,843) (1,129) (1,139)
Drawdown of revolving credit
facility 10,150 7,477 12,500
Repayment of revolving credit
facility - - (12,500)
Interest and bank loan fees (437) (110) (482)
Principal lease liability
payments (1,084) (650) (1,315)
Interest on lease liabilities (175) (53) (216)
Dividends paid (12,010) (8,547) (12,774)
Net cash used in financing
activities (7,845) (3,334) (16,269)
Net decrease in cash and
cash equivalents (32,353) (22,678) (7,323)
Cash and cash equivalents
at beginning of the period 59,215 63,516 63,516
Effect of exchange rate movements
on cash held (626) 6,926 3,022
Cash and cash equivalents
at end of the period 26,236 47,764 59,215
============ ============ =============
Interim condensed consolidated statement of changes in
equity
For the six months ended 30 September 2023
Foreign Total
Issued share exchange Retained shareholders'
capital Share premium reserve Other reserves earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April
2022 89 119,438 3,482 9,361 375 132,745
Comprehensive
income
Profit for the
period - - - - 10,277 10,277
Foreign
exchange
differences on
translation of
foreign
operations - - 9,963 - - 9,963
Transactions
with owners
Shares issued
(equity) 1 - - - - 1
Purchase of own
shares by the
EBT - - - (1,129) - (1,129)
Share-based
payment charge - - - 3,588 - 3,588
Net settlement
of vested
share options - - - (322) - (322)
Current tax
recognised in
equity - - - 1,180 - 1,180
Deferred tax
recognised in
equity - - - 189 - 189
Dividends - - - - (8,547) (8,547)
As at 30
September 2022 90 119,438 13,445 12,867 2,105 147,945
Comprehensive
income
Profit for the
period - - - - 7,684 7,684
Foreign
exchange
differences on
translation of
foreign
operations - - (6,453) - - (6,453)
Transactions
with owners
Shares issued
(equity) - - - - (1) (1)
Purchase of own
shares by the
EBT - - - (10) - (10)
Share-based
payment charge - - - 3,435 - 3,435
Net settlement
of vested
share options - - - (21) - (21)
Current tax
recognised in
equity - - - 306 - 306
Deferred tax
recognised in
equity - - - 681 - 681
Dividends - - - - (4,227) (4,227)
As at 31 March
2023 90 119,438 6,992 17,258 5,561 149,339
Comprehensive
income
Profit for the
period - - - - 7,225 7,225
Foreign
exchange
differences on
translation of
foreign
operations - - 263 - - 263
Transactions
with owners
Shares issued
(equity) 2 - - - (2) -
Purchase of own
shares by the
EBT - - - (3,843) - (3,843)
Share-based
payment charge - - - 3,329 - 3,329
Net settlement
of vested
share options - - - (446) - (446)
Current tax
recognised in
equity - - - 287 - 287
Deferred tax
recognised in
equity - - - (1,048) - (1,048)
Dividends - - - - (12,010) (12,010)
As at 30
September 2023 92 119,438 7,255 15,537 774 143,096
Issued share capital
Issued share capital represents the nominal value of share
capital subscribed.
Share premium
The share premium account is used to record the aggregate amount
or value of premiums paid when the Company's shares are issued at a
premium, net of associated share issuance costs.
Foreign exchange reserve
The foreign exchange reserve represents exchange differences
that arise on consolidation from the translation of the financial
statements of foreign subsidiaries, including goodwill.
Other reserves
The other reserves represent the cumulative fair value of the
IFRS 2 share-based payment charge recognised each year, associated
current tax, deferred tax and net settlement of vested share
options, equity-settled acquisition consideration reserves, and
purchases of the Company's own shares by the employee benefit trust
("EBT").
Retained earnings
The retained earnings reserve represents cumulative net gains
and losses recognised in the consolidated statement of
comprehensive income less dividends paid.
Notes to the interim condensed consolidated financial
statements
1. Basis of preparation and significant accounting policies
1.1. General information
The principal activity of the Group is the provision of
specialist consulting and related services to clients in the
financial services industry, principally in the UK, North America,
Europe and APAC.
Alpha Financial Markets Consulting plc is incorporated in
England and Wales with registered number 09965297. The Company's
registered office is 60 Gresham Street, London, EC2V 7BB. The
Company is a public limited company and is admitted to trading on
the AIM of the London Stock Exchange.
These interim condensed consolidated financial statements were
authorised for issue on 23 November 2023 in accordance with a
resolution of the Directors.
1.2. Basis of preparation
These interim financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting and should be
read in conjunction with the Group's most recent annual
consolidated financial statements, for the year ended 31 March
2023. They do not include all of the information required for a
complete set of IFRS financial statements, however selected
explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in the
Group's financial position and performance since Alpha's Annual
Report & Accounts 2023.
The financial information presented for the periods ended 30
September 2023 and 30 September 2022 is unaudited. The financial
information for the 12 months to 31 March 2023 is audited.
The presentational currency of these financial statements is
pound sterling. All amounts in these financial statements have been
rounded to the nearest GBP1,000, unless otherwise stated.
1.3. Statutory accounts
Financial information contained in this document does not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006 (the "Act"). The statutory accounts for the
year ended 31 March 2023 have been filed with the Registrar of
Companies. The independent auditor's report on those statutory
accounts was unqualified, did not draw attention to any matters by
way of emphasis and did not contain a statement under Section
498(2) or (3) of the Act.
1.4. Basis of consolidation
These interim condensed financial statements consolidate the
interim financial statements of the Company and its subsidiary
undertakings (the "Group") as at 30 September 2023.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date that such control
ceases. The financial statements of subsidiaries are prepared for
the same reporting period as the parent company, using consistent
accounting policies.
All intra-group balances, income and expenses, and unrealised
gains and losses resulting from intra-group transactions are
eliminated in full.
1.5. Seasonality of operations
Given the nature of the Group's consulting and related services
and the composition of the Group's customers and contracts,
seasonality is generally not expected to have a significant bearing
on the financial performance of the Group.
1.6. Going concern
The Directors have, at the time of approving these interim
condensed consolidated financial statements, a reasonable
expectation that the Group has adequate resources to continue in
operation for a period of at least 12 months from the approval of
these financial statements (the "going concern period"). The
Group's forecasts and projections, taking into account plausible
changes in trading performance, show that the Group has sufficient
financial resources, together with assets that are expected to
generate cash flow in the normal course of business.
The ongoing trading performance of the Group has been resilient
against the backdrop of more competitive market conditions with
profits considerably ahead of the "reverse stress test" downside
scenario modelled during the Group's FY 23 going concern
assessment. This "reverse stress test" scenario has been extended
to cover the going concern period for these interim condensed
consolidated financial statements. The Directors continue to
consider this scenario to be remote as it requires significant
revenue reductions compared to the base case forecast, without
assuming any cost mitigants or drawdowns of the RCF.
The Group maintains a robust balance sheet and liquidity
position. At 30 September 2023, the Group held a gross cash
position of GBP26.2m and has access to a GBP50.0m RCF providing
further liquidity, of which GBP10.1m was drawn at the end of the
period, to assist with short-term currency and liquidity
requirements. The Group enters the second half well positioned with
a strong and high quality pipeline of new business opportunities,
with an expectation of a return to positive operating cash
generation for the full year.
Given the above factors, the Directors consider that it is
appropriate to adopt the going concern basis in preparing these
interim condensed consolidated financial statements.
1.7. Principal accounting policies
Please refer to Alpha's Annual Report & Accounts 2023 for
full disclosures of the principal accounting policies that have
been adopted in the preparation of these interim condensed
consolidated financial statements. There have been no changes to
the Group's accounting policies in the period.
1.8. Significant judgements and estimates
The preparation of financial information in accordance with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and reported
amounts of assets, liabilities, income and expenses.
Key judgements
In the process of applying the Group's accounting policies, the
Directors have made two judgements (excluding those involving
estimations), which are considered to have a significant effect on
the interim condensed financial statements for the period ended 30
September 2023.
Alternative performance measures
To assist in understanding the underlying performance of the
Group, management presents various alternative performance measures
("APMs"), which exclude certain adjusting items. APMs are provided
to allow stakeholders a further understanding of the underlying
trading performance of the Group and to aid comparability between
accounting periods. Management applies judgement to identify those
income or expense items that are deemed to warrant exclusion from
the calculation of the Group's adjusted measures to allow
stakeholders a further understanding of the underlying performance
of the business. These adjusting items have been applied
consistently across reporting periods. A reconciliation to IFRS
measures, and explanation of each adjusting item excluded, is
provided in note 3.
All adjusting items are considered individually for exclusion by
virtue of their nature or size. In the period ended 30 September
2023, these items totalled GBP6.6m (H1 23: GBP5.7m) recognised in
administration expenses. A further GBP0.9m (H1 23: GBP1.4m) was
recognised within finance expenses.
Revenue recognition
Revenue is the Group's most significant caption in the statement
of comprehensive income. Whilst the majority of the Group's revenue
is contracted on a time and materials basis, the Group also has
some fixed-price milestone contracts. The recognition of revenue on
such contracts involves consideration of the detailed contractual
terms against the requirements of IFRS 15. The key judgements
include assessment of whether revenue should be recognised over
time or at a point in time, and whether the performance obligations
under the contract have been met at the balance sheet date, to best
reflect the transfer of services through the life of each
contract.
Further information regarding the methods used to recognise
revenue, for both time and materials and milestone contracts, is
provided in the Group's accounting policy as detailed on p. 99
within Alpha's Annual Report & Accounts 2023.
Key estimates
A number of estimates have been made in the preparation of the
financial statements. The underlying assumptions in the Group's
estimates are based on historical experience and various other
factors that are deemed to be reasonable under the circumstances.
These assumptions form the basis of developing estimates of the
carrying values of assets and liabilities that are not apparent
from other sources. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to estimates are recognised
in the year in which the estimate is revised and any future years
affected. Actual results can differ from these estimates.
The Directors have identified one area as a key estimate that is
considered to have a significant risk of a material adjustment
within the next financial year.
Share-based payments (note 12)
Management has estimated the share-based payment expense under
IFRS 2. In determining the share-based payment expense and the
associated social security tax thereon, management has considered
several internal and external factors to judge the probability that
management and employee share incentives may vest and to assess the
fair value of share options at the date of grant. Such assumptions
involve estimating future performance, share price and other
factors. The fair value calculations have been assessed by a
third-party expert for reasonableness in the current and prior
periods. Refer to note 12 for sensitivity analysis.
1.9. New accounting standards and interpretations
In the period ended 30 September 2023, the Group has adopted the
following new accounting standards and amendments to existing
accounting standards with no material impact on the financial
statements:
-- IFRS 17 Insurance Contracts, effective from 1 January 2023;
-- Amendments to IFRS 17, effective from 1 January 2023;
-- Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2), effective from 1 January 2023;
-- Definition of Accounting Estimates (Amendments to IAS 8), effective from 1 January 2023;
-- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12), effective from 1 January
2023;
-- International Tax Reform - Pillar Two Model Rules (Amendments
to IAS 12) - Application of the exception and disclosure of that
fact, effective from 23 May 2023; and
-- International Tax Reform - Pillar Two Model Rules (Amendments
to IAS 12) - other disclosure requirements, effective from 1
January 2023.
Refer to p. 101 of the Group's Annual Report & Accounts 2023
for details of recently adopted standards and interpretations in
the prior year.
2. Segment information
Group management has determined the operating segments by
considering the segment information that is reported internally to
the chief operating decision maker, the Board of Directors. For
management purposes, the Group is currently organised into three
geographical operating divisions: UK, North America and Europe
& APAC. This allows the Board to evaluate the nature and
financial effects of the business activities of the Group and the
economic environments in which it operates . The Group's operations
all consist of one type: specialist consultancy and related
services to the financial services industry.
The Directors consider that the aggregation of Europe and APAC
into a single operating segment is appropriate on the basis that
these territories have similar economic characteristics, including
similar gross margins.
Revenues associated with software licensing arrangements were
not significant in both the current and prior periods. Therefore,
the Directors consider that disaggregating revenue by operating
segments is most relevant to depict the nature, amount, timing and
uncertainty of revenue and cash flows as may be affected by
economic factors.
Six months ended 30 Sep 2023 UK North Europe & Total
America APAC
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 45,515 44,237 25,871 115,623
Rechargeable expenses (140) (423) (300) (863)
Net fee income 45,375 43,814 25,571 114,760
Cost of sales (29,205) (30,186) (16,933) (76,324)
Gross profit 16,170 13,628 8,638 38,436
Margin on net fee income (%) (10) 35.6% 31.1% 33.8% 33.5%
Six months ended 30 Sep 2022 UK North Europe & Total
America APAC
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 39,912 44,602 23,085 107,599
Rechargeable expenses (128) (279) (176) (583)
Net fee income 39,784 44,323 22,909 107,016
Cost of sales (23,728) (29,026) (15,819) (68,573)
Gross profit 16,056 15,297 7,090 38,443
Margin on net fee income (%) (10) 40.4% 34.5% 30.9% 35.9%
(10) Margin on net fee income is gross profit expressed as a
percentage of net fee income. Please refer to note 3 for further
detail
3. Reconciliations to alternative performance measures
Alpha uses alternative performance measures ("APMs") that are
not defined under the requirements of IFRS. The APMs, including net
fee income, margin on net fee income, adjusted EBITDA, adjusted
profit before tax, adjusted EPS, adjusted cash conversion, organic
net fee income growth and constant currency growth, are provided to
allow stakeholders a further understanding of the underlying
trading performance of the Group and aid comparability between
accounting periods. These measures have been applied consistently
across reporting periods. They are not considered a substitute for,
or superior to, IFRS measures.
Net fee income
The Group disaggregates revenue into net fee income and expenses
recharged to clients. Net fee income provides insight into the
Group's productive output and is used by the Board to set budgets
and measure performance. This APM is reconciled to revenue on the
face of the consolidated statement of comprehensive income and by
segment in note 2.
Profit margins
Margin on net fee income and adjusted EBITDA margin are
calculated using gross profit and adjusted EBITDA, and are
expressed as a percentage of net fee income. These margins
represent the margin that the Group earns on its productive output,
excluding nil or negligible margin expense recharges to clients
over which the Group has limited control, and allows comparability
of the business output between periods. Such adjusted margins are
used by senior management and the Board to assess the performance
of the Group.
Reconciliation of adjusted profit before tax, adjusted operating
profit and adjusted EBITDA
30 Sep 2023 30 Sep 2022
Note GBP'000 GBP'000
Profit before tax 10,845 14,199
Amortisation of acquired intangible assets 6 2,012 2,356
Loss on disposal of fixed assets 12 -
Share-based payment charge 12 3,737 4,091
Earn-out and deferred consideration(11) 7 729 (316)
Acquisition and integration costs 247 -
Foreign exchange gains (106) (463)
Adjusting items 6,631 5,668
Non-underlying finance expenses 4 883 1,383
Adjusted profit before tax 18,359 21,250
Net underlying finance expenses 4 288 182
Adjusted operating profit 18,647 21,432
Depreciation charge 1,474 898
Amortisation of capitalised development costs - 151
Adjusted EBITDA 20,121 22,481
Adjusted EBITDA margin (%) 17.5% 21.0%
(11) The earn-out and deferred consideration charge in the
period comprises an employment-linked consideration charge of
GBP0.7m as set out in note 7, as well as a small associated social
security charge. In the prior period, the credit comprises a
GBP1.4m fair value adjustment, partly offset by a GBP1.1m
employment-linked and associated social security charge
Adjusting items
To assist in understanding the underlying performance of the
Group and aid comparability between periods, management applies
judgement to exclude certain expense items from the Group's APMs,
which are deemed to warrant separate disclosure due to either their
nature or size. Such adjusting items as described below are
generally non-cash, non-recurring by nature or are acquisition
related.
Amortisation of acquired intangible assets and profit or loss on
disposal of fixed assets are treated as adjusting items to better
reflect the underlying performance of the business, as they are
non-cash items, principally relating to acquisitions.
The Group's share-based payment charge and related social
security taxes are excluded from adjusted profit measures. This
allows for better comparability between periods given the
complexity of the assumptions underlying the calculation and the
multi-year effect of mid-cycle changes to these assumptions being
adjusted on a cumulative basis, sometimes resulting in material
fluctuations in the charge between periods that are not reflective
of the underlying operational performance of the business. The
charge and related social security taxes are also subject to
external factors, such as the Group's share price, over which the
Directors have less day-to-day influence compared to other more
directly controllable factors. This approach has been applied
consistently across reporting periods. Note 12 sets out further
details of the employee share-based payment charge calculation
under IFRS 2.
The Group will continue to assess the status of this charge as
an adjusting item in the Group's financial statements, considering
the development of the charge, the Group and its remuneration
policies. If no adjustment was made for the share-based payment
charge, adjusted EBITDA for the period would be GBP 16.4m (H1 23:
GBP18.4m) and adjusted EBITDA margin would be 14.3% (H1 23:
17.2%).
As per note 7, the acquisitions of Shoreline in the period, and
Lionpoint in FY 22, involved both deferred and contingent payments.
Part of these acquisition payments are dependent on the ongoing
employment of certain members of the respective senior management
teams, and this element is expensed annually over several years
until the date of payment. These costs have been treated as
adjusting items as they are acquisition related, reflecting the
acquisition terms rather than Group trading performance.
Additionally, where there is a change to the expected future
payments or discount rates, a fair value adjustment to the
liability is recorded in the income statement. No such fair value
adjustments were recognised in the period. Whilst these
acquisition-related costs will recur in the short term through the
earn-out periods, the adjustment allows comparability of underlying
productive output and operating performance across reporting
periods.
Other acquisition and integration costs expensed in the period
relate to the acquisition of Shoreline, including diligence, legal
fees and integration costs. Whilst further similar acquisition and
integration costs could be incurred in the future, these costs are
not directly attributable to the ongoing operational trading
performance of the Group, the timing and amount of such costs may
vary and treating these as an adjusting item allows comparability
of the operating performance across reporting periods. There were
no such costs incurred in the comparative period.
The impact of foreign currency volatility in translating local
working capital and cash balances to their relevant functional
currencies has been excluded from the calculation of adjusted
profit measures on the basis that such exchange rate movements do
not reflect the underlying trends or operational performance of the
Group. The foreign exchange movements were immaterial in both the
current and prior periods.
Non-underlying finance expenses
In calculating adjusted profit before tax, unwinding of the
discounted contingent and deferred acquisition consideration within
finance expenses is considered non-underlying as these amounts
relate to acquisition consideration, rather than the Group's
underlying trading performance.
Adjusted profit before tax
Adjusted profit before tax is an APM calculated as profit before
tax stated before adjusting items, including amortisation of
acquired intangible assets, share-based payment charge,
acquisition-related payments and costs, non-underlying finance
expenses and other non-underlying expenses. This measure allows
comparability of the Group's underlying performance, reflecting
depreciation, amortisation of capitalised development costs and
underlying finance expenses.
Adjusted operating profit
Adjusted operating profit is an APM defined by the Group as
adjusted profit before tax before charging underlying finance
expenses, including fees on bank loans and interest on lease
liabilities. The Directors consider this metric alongside statutory
operating profit to allow further understanding and comparability
of the underlying operating performance of the Group between
periods. This measure has been consistently used as the basis for
adjusted cash conversion.
Adjusted EBITDA
Adjusted EBITDA is a commonly used operating measure, which is
defined by the Group as adjusted operating profit stated before
non-cash items, including amortisation of capitalised development
costs and depreciation of property, plant and equipment. Adjusted
EBITDA is a measure that is used by management and the Board to
assess underlying trading performance across the Group and forms
the basis of the performance measures for aspects of remuneration,
including consultant profit share and bonuses.
Adjusted profit after tax
Adjusted profit after tax and adjusted earnings per share
metrics are also APMs, similarly used to allow a further
understanding of the underlying performance of the Group. Adjusted
profit after tax is stated before adjusting items and their
associated tax effects. The associated tax effects are calculated
by applying the relevant effective tax rate to allowable expenses
that have been excluded as adjusting items. A nil effective tax
rate has been applied to acquisition-related expenses totalling
GBP1.9m as these items are treated as capital in nature and are
therefore non-deductible for tax purposes. An overall effective tax
rate of 21.9% has been applied to all other adjusting items
totalling GBP5.7m, reflecting the specific tax rates applicable to
each adjusting item.
30 Sep 2023 30 Sep 2022
GBP'000 GBP'000
Adjusted profit before
tax 18,359 21,250
Tax charge (3,620) (3,922)
Tax impact of adjusting
items (1,237) (1,419)
Adjusted profit after
tax 13,502 15,909
Adjusted earnings per share
Adjusted earnings per share ("EPS") is calculated by dividing
the adjusted profit after tax for the period attributable to
ordinary shareholders by the weighted average number of ordinary
shares outstanding during the period. Adjusted diluted EPS is
calculated by dividing adjusted profit after tax by number of
shares as above, adjusted for the impact of potentially dilutive
ordinary shares. Potentially dilutive ordinary shares are only
treated as dilutive when their conversion to ordinary shares would
decrease EPS (or increase loss per share). Refer to note 5 for
further detail.
30 Sep 2023 30 Sep 2022
Adjusted EPS (p) 11.81 14.09
Adjusted diluted EPS (p) 11.09 13.23
Reconciliation of adjusted administration expenses
To express them on the same basis as the APMs described above,
adjusted administration expenses are stated before adjusting items,
depreciation and amortisation of capitalised development costs and
are used by the Board to monitor the underlying administration
expenses of the business in calculating adjusted EBITDA.
30 Sep 2023 30 Sep 2022
GBP'000 GBP'000
Administration expenses 26,420 22,679
Adjusting items (6,631) (5,668)
Depreciation charge (1,474) (898)
Amortisation of capitalised development costs - (151)
Adjusted administration expenses 18,315 15,962
Adjusted cash from operating activities
Adjusted cash generated from operating activities excludes any
employment-linked acquisition payments and associated social
security taxes, as well as other acquisition and integration costs
paid in the period, treated as operating cash flows under IFRS, to
reflect the Group's underlying operating cash flows, exclusive of
cash payments relating to acquisitions.
30 Sep 2023 30 Sep 2022
GBP'000 GBP'000
Net cash from operating activities (7,578) 2,190
Employment-linked acquisition payments(12) 1,923 1,981
Acquisition and integration costs 247 -
Adjusted cash from operating activities (5,408) 4,171
(12) Employment-linked acquisition payments of GBP1.9m comprises
GBP1.7m of acquisition consideration classified as
employment-linked and GBP0.2m of associated social security
payments
Adjusted cash conversion
Cash conversion is stated as net cash generated from operating
activities expressed as a percentage of operating profit.
Adjusted cash conversion is stated as adjusted cash generated
from operating activities expressed as a percentage of adjusted
operating profit.
30 Sep 2023 30 Sep 2022
Cash conversion (63.1%) 13.9%
Adjusted cash conversion (29.0%) 19.5%
Organic net fee income growth
Organic net fee income growth excludes net fee income from
acquisitions in the 12 months following acquisition. Net fee income
from any acquisition made in the period is excluded from organic
growth. For acquisitions made part way through the comparative
period, the current period's net fee income contribution is reduced
to include only net fee income for the period following the
acquisition anniversary, in order to compare organic growth on a
like-for-like basis.
Organic net fee income growth of 6.2% (H1 23: 45.3%) for the
current period represents H1 24 net fee income less GBP1.1m net fee
income attributable to Shoreline, treated as inorganic.
Constant currency growth
The Group operates in multiple jurisdictions and generates
revenues and profits in various currencies. Those results are
translated on consolidation at the foreign exchange rates
prevailing in that period. These exchange rates vary from period to
period, so the Group presents some of its results on a "constant
currency" basis. This means that the current period's results have
been retranslated using the average exchange rates from the prior
period to allow for comparison of period-on-period results,
eliminating the effects of volatility in exchange rates.
Currency translation had some impact on both net fee income and
gross profit in the period, as a result of a strengthening pound
sterling through the period against the US dollar, partially offset
against a slight weakening against the euro. In the period, pound
sterling averaged $1.26 (H1 23: $1.23) and EUR1.16 (H1 23:
EUR1.18).
On a constant currency basis, Group net fee income would be
GBP116.1m which is growth of 8.5% overall. Similarly, North America
net fee income would be GBP45.3m and Europe & APAC would be
GBP25.4m, which would be growth of 2.1% and 11.0% respectively.
On a similar basis the Group's gross profit would have been
GBP38.9m and would have grown 1.1% on a constant currency
basis.
4. Finance income and expenses
30 Sep 2023 30 Sep 2022
Note GBP'000 GBP'000
Bank interest receivable 260 65
Total finance income 260 65
Interest and fees payable on bank
loans (373) (194)
Interest on lease liabilities (175) (53)
Total underlying finance expenses (548) (247)
Non-underlying finance expenses 3 (883) (1,383)
Total finance expenses (1,431) (1,630)
Net underlying finance expenses 3 (288) (182)
Net finance expenses (1,171) (1,565)
The Group holds one principal bank facility comprising a
GBP50.0m committed RCF with Lloyds and HSBC with a tenor to June
2026. The Group has utilised up to GBP17.8m of the facility, drawn
down occasionally through the period to meet short-term currency
requirements. As at 30 September 2023, GBP10.1m of this facility
was drawn down, and the Group is in a net cash position of
GBP16.1m. The amounts drawn down and repaid within the period have
been presented net in the consolidated statement of cash flows, as
the drawings were repaid within three months in each instance.
5. Earnings per share and adjusted earnings per share
The Group presents basic and diluted earnings per share ("EPS"),
on both a statutory and adjusted basis. Basic EPS is calculated by
dividing the profit or loss for the period attributable to ordinary
shareholders by the weighted average number of ordinary shares
outstanding during the period. In the calculation of diluted EPS
the Group applies the treasury share method to include the impact
of potentially dilutive shares arising from the Group's share
option plans.
In order to reconcile to the adjusted profit for the period, the
same adjustments as set out in note 3 have been made to the Group's
profit for the period. The profits and weighted average number of
shares used in the calculations are set out below:
Note 30 Sep 2023 30 Sep 2022
Basic and diluted EPS
Profit for the period used in calculating basic and diluted EPS (GBP'000) 7,225 10,277
Weighted average number of ordinary shares in issue ('000) 114,358 112,904
Number of dilutive shares ('000) 7,412 7,310
Weighted average number of ordinary shares, including dilutive shares ('000) 121,770 120,214
Basic EPS (p) 6.32 9.10
Diluted EPS (p) 5.93 8.55
Adjusted EPS and adjusted diluted EPS
Adjusted profit after tax used in calculating adjusted basic and diluted EPS
(GBP'000) 3 13,502 15,909
Weighted average number of ordinary shares in issue ('000) 114,358 112,904
Number of dilutive shares ('000) 7,412 7,310
Weighted average number of ordinary shares, including dilutive shares ('000) 121,770 120,214
Adjusted EPS (p) 11.81 14.09
Adjusted diluted EPS (p) 11.09 13.23
6. Goodwill and intangible fixed assets
Net book value as at 30 September 2023
Total
Capitalised intangible
Order Customer Intellectual Trade development fixed
backlog relationships property name costs assets Goodwill
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 31
March 2023 - 21,060 786 5,742 - 27,588 103,676
Additions - 1,729 - - - 1,729 2,711
Amortisation
charge for
the period - (1,573) (141) (298) - (2,012) -
Exchange
differences - 92 - 24 - 116 212
--------------------- ------------------------- ------------------------ ------------------- ----------------------- ---------------------- --------------------
As at 30
September
2023 - 21,308 645 5,468 - 27,421 106,599
===================== ========================= ======================== =================== ======================= ====================== ====================
Net book value as at 30 September 2022
Total
Capitalised intangible
Order Customer Intellectual Trade development fixed
backlog relationships property name costs assets Goodwill
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 31
March 2022 120 23,569 1,247 6,211 186 31,333 100,991
Additions 319 - - - - 319 -
Amortisation
charge for
the period (294) (1,515) (247) (300) (151) (2,507) -
Exchange
differences 40 1,401 - 350 - 1,791 6,319
------------------- ------------------------- ------------------------ ------------------- ----------------------- ---------------------- --------------------
As at 30
September
2022 185 23,455 1,000 6,261 35 30,936 107,310
=================== ========================= ======================== =================== ======================= ====================== ====================
Additions in the period of GBP1.7m customer relationships and
GBP2.7m goodwill relate to the acquisition by the Group of
Shoreline Consulting Pty Ltd, Shoreline Consolidated Pty Ltd and
their subsidiaries, a boutique consultancy that provides services
to the asset and wealth management sector in APAC.
In the context of a more competitive environment and a
lengthening sales cycle in the period, the Group has considered
whether there are any indicators of impairment that would
constitute a reason to perform a full impairment assessment at the
balance sheet date. The Directors concluded that despite this
market backdrop, the Group is still well positioned entering the
second half, with a strong and high quality pipeline of new
business opportunities. Further, the Group had a significant level
of headroom at the date of the last annual assessment. Therefore,
the Directors consider that no additional impairment assessment is
required at the reporting date.
7. Acquisitions of businesses
Acquisitions in the period
Shoreline
On 1 May 2023, the Group reached an agreement to acquire 100% of
the issued share capital of Shoreline Consulting Pty Ltd and
Shoreline Consolidated Pty Ltd and its subsidiaries (together,
"Shoreline"), a boutique consultancy that provides services to the
asset and wealth management sector in APAC, on a cash free, debt
free basis. The Directors consider that the acquisition enables
Alpha to build upon a robust platform within APAC and ensures that
the Group can take advantage of opportunities in that region.
The maximum potential cash consideration payable by the Group
pursuant to the acquisition is AUD 13.0m (GBP6.8m), allocated
between AUD 8.0m (GBP4.2m) non-contingent cash consideration and a
contingent earn-out structure up to a maximum of AUD 5.0m
(GBP2.6m), payable in several instalments, falling due on July
2025, 2026 and 2027, respectively. The non-contingent cash
consideration is also payable in instalments, with AUD 4.9m
(GBP2.6m) paid on completion and deferred consideration of AUD 1.7m
(GBP0.9m) and AUD 1.4m (GBP0.7m) payable on the first and second
anniversaries of completion, respectively. Of this maximum amount
payable, AUD 1.2m (GBP0.6m) is employment linked. The FY 26 to FY
28 Shoreline earn-out consideration payments are contingent on
meeting certain profitability targets over the earn-out period.
Initial consideration was funded from the Group's cash reserves,
with any remaining deferred and contingent consideration amounts
expected to be settled in cash, with the option to settle a portion
of the deferred amounts in the Group's ordinary shares.
The fair value of consideration recognised on the date of
acquisition amounted to AUD 8.2m (GBP4.3m), of which AUD 4.5m
(GBP2.3m) relates to initial cash consideration paid, AUD 0.2m
(GBP0.1m) relates to an additional payable in relation to
completion working capital, AUD 2.4m (GBP1.3m) relates to deferred
consideration, and AUD 1.1m (GBP0.6m) relates to contingent
consideration.
A summary of the purchase consideration, net assets acquired,
identifiable intangible assets and goodwill is set out below. These
fair values are determined by using established estimation
techniques such as income-based discounted cash flow models.
Book Fair value Values
values adjustments on acquisition
GBP'000 GBP'000 GBP'000
Acquiree's net assets at the
acquisition date:
Customer relationships - 1,729 1,729
Trade and other receivables 768 - 768
Cash and cash equivalents 92 - 92
Trade and other payables (636) - (636)
Deferred tax asset/(liability) 54 (432) (378)
Net identifiable assets acquired 278 1,297 1,575
Cash consideration relating
to business combination 4,286
Goodwill on acquisition (note
6) 2,711
Employment-linked acquisition payments will be expensed through
the income statement proportionately until FY 28. During the
period, the Group has expensed AUD 0.3m (GBP0.2m) in relation to
these employment-linked payments through the statement of
comprehensive income, with AUD 0.1m (GBP0.1m) paid in the
period.
Deferred and contingent consideration is discounted to fair
value. Discount unwinding is recognised as a finance cost
proportionately across the periods until final payment. During the
period, AUD 0.1m (GBP0.1m) of discount unwinding was expensed as a
non-underlying finance cost in relation to the Shoreline
acquisition consideration.
As at 30 September 2023, a AUD 3.8m (GBP2.0m) liability is
recorded, of which AUD 1.5m (GBP0.8m) is current and AUD 2.3m
(GBP1.2m) is non-current.
As consideration for the acquisition of Shoreline is payable in
Australian dollars, foreign exchange gains and losses are
recognised at each reporting date in relation to translating these
liabilities into pound sterling. In the period, the Group
recognised a small foreign exchange loss through other
comprehensive income in relation to the re-translation of these
liabilities.
Shoreline contributed GBP1.1m to the Group's revenue and had an
immaterial impact on the Group's profit after tax for the period
from the date of acquisition to the 30 September 2023. If the
acquisition of Shoreline had been completed on 1 April 2023, Group
revenues for the period would have been GBP115.8m and the Group
profits after tax would have been unchanged, without adjustment to
amortisation assumptions.
The Directors consider the undiscounted future contingent
consideration payable in respect of the Shoreline acquisition could
reasonably range between GBPnil and GBP2.6m.
Acquisitions in prior periods
Lionpoint
As at 31 March 2023, the Group held a liability of GBP24.9m in
relation to future deferred and contingent consideration payable
for this acquisition.
Employment-linked acquisition payments are expensed through the
income statement proportionately until FY 26. During the period,
the Group has expensed GBP0.5m in relation to these
employment-linked payments.
The deferred and contingent consideration is discounted to fair
value. Discount unwinding is recognised as a finance cost
proportionately across the periods until final payment. During the
period, GBP0.8m of discount unwinding was expensed as a
non-underlying finance cost in relation to the Lionpoint
acquisition consideration.
During the period, the Group made deferred and contingent
Lionpoint acquisition payments totalling GBP16.3m. Of these
payments, GBP1.7m relates to employment-linked consideration, and
is presented within cash from operating activities, with the
remaining GBP14.6m presented within cash used in investing
activities in the statement of cash flows.
As consideration for the acquisition of Lionpoint is payable in
US dollars, foreign exchange differences are recognised at each
reporting date in relation to translating these liabilities into
pound sterling. In the period, the Group recognised a foreign
exchange gain of GBP0.2m in the statement of comprehensive income
arising from acquisition-related currency movements in relation to
this re-translation.
As at 30 September 2023, a GBP9.8m liability is recorded, of
which GBP9.5m is current and GBP0.3m is non-current.
The below table summarises the movements in the deferred and
contingent consideration liabilities to 30 September 2023:
Shoreline Lionpoint Total
GBP ' 000 GBP ' 000 GBP ' 000
Balance as at 1 April 2023 - 24,949 24,949
Additions 1,824 - 1,824
Employment-linked consideration 176 525 701
Payments in the period(13) (57) (16,328) (16,385)
Unwinding of discounting 56 827 883
Foreign exchanges losses/(gains) 6 (186) (180)
Balance as at 30 September
2023 2,005 9,787 11,792
========== ========== ==========
Represented by:
Current 813 9,497 10,310
Non-current 1,192 290 1,482
---------- ---------- ----------
Balance as at 30 September
2023 2,005 9,787 11,792
========== ========== ==========
1 (3) Deferred and contingent acquisition payments presented in
the table above includes GBP1.7m of employment-linked
consideration, which is reported in net cash from operating
activities in the consolidated statement of cash flows.
Additionally, acquisition payments reported within cash flows from
investing activities in the consolidated statement of cash flows
includes GBP2.3m paid upon completion of the acquisition of
Shoreline, which is not included in the table above
As at 30 September 2023, the Group held a liability of GBP11.8m
in relation to future deferred and contingent consideration payable
for acquisitions. Of this liability at the balance sheet date,
GBP2.2m relates to deferred consideration and the remaining GBP9.6m
relates to contingent consideration. Within these deferred and
contingent consideration liabilities, GBP1.6m relates to
employment-linked amounts.
The fair value of acquisition earn-outs is no longer considered
to be an area of significant estimation uncertainty given proximity
to and more certainty around the Lionpoint final earn-out payment.
The fair value of the earn-out liability held in relation of
Shoreline is also not considered to have a material level of
estimation uncertainty to the value of the liability held at 30
September 2023.
8. Trade and other receivables
30 Sep 2023 30 Sep 2022 31 Mar 2023
GBP'000 GBP'000 GBP'000
Trade receivables 32,715 31,981 26,124
Other receivables 1,586 927 1,194
Capitalised contract fulfilment costs 1,291 1,725 1,101
Prepayments 3,033 2,105 1,999
Accrued income 3,756 4,957 3,710
Total amounts due within one year 42,381 41,695 34,128
Trade receivables are non-interest bearing and generally have a
30- to 60-day term. Due to their short maturities, the carrying
amount of trade and other receivables is a reasonable approximation
of their fair value.
In assessing the appropriateness of the Group's expected credit
loss provision at 30 September 2023, the Directors have considered
the Group's historical loss rates for each ageing category of
receivables in conjunction with other factors in key Alpha
territories. There are no indicators at 30 September 2023 that the
profile of risk associated with the Group's receivables is
materially different from that determined through the full
assessment performed for the year ended 31 March 2023. Therefore,
the expected credit loss provision has not changed materially from
the provision disclosed in Alpha's Annual Report & Accounts
2023.
9. Trade and other payables
30 Sep 2023 30 Sep 2022 31 Mar 2023
Note GBP'000 GBP'000 GBP'000
Trade payables 3,891 4,851 5,156
Accruals 16,057 22,800 29,880
Deferred income 648 1,599 796
Social security tax on share options 2,310 1,657 1,669
Taxation and social security 7,007 6,118 4,734
Other payables 2,382 1,821 2,277
Earn-out and deferred consideration 7 10,310 16,863 16,027
Total amounts owed within one year 42,605 55,709 60,539
Trade payables comprise amounts outstanding for trade purchases
and ongoing costs. The Directors consider that the carrying amount
of trade and other payables is a reasonable approximation of their
fair value. The Group's trade payables payment policy is to provide
payment within the agreed terms, which is generally 30 days from
the date of receipt of invoice.
The reduction in accruals reflects the normal H1 timing of
profit share payments, including both the payment of FY 23 profit
share and the second tranche of deferred FY 22 payments, partly
offset by associated performance-adjusted bonus accruals in the
period.
10. Other non-current liabilities
30 Sep 2023 30 Sep 2022 31 Mar 2023
Note GBP'000 GBP'000 GBP'000
Earn-out and deferred consideration 7 1,482 6,823 8,922
Deferred income 156 204 213
Social security tax on share options 941 1,330 1,640
Other non-current liabilities - - 625
Total amounts owed after one year 2,579 8,357 11,400
Other non-current liabilities fell to GBPnil in the period (FY
23: GBP0.6m) as the remaining deferred element of FY 23 bonuses for
certain directors and senior management globally now falls due
within 12 months.
11. Called up share capital
30 Sep 2023 30 Sep 2022 31 Mar 2023
Number Number Number
Allotted, called up and fully paid
Ordinary 0.075p shares (1 vote per share) 122,009,736 120,507,336 120,509,736
30 Sep 2023 30 Sep 2022 31 Mar 2023
GBP GBP GBP
Allotted, called up and fully paid
Ordinary 0.075p shares (1 vote per share) 91,507 90,381 90,382
Movements in share capital during the period ended 30 September
2023:
Note GBP
Balance as at 1 April 2023 90,382
120,509,736 ordinary shares of 0.075p each
Issued shares (i) 1,125
Balance as at 30 September 2023 91,507
122,009,736 ordinary shares of 0.075p each
(i) During the period , a total of 1,500,000 ordinary shares
were issued by the Group, all of which were issued to the employee
benefit trust ("EBT") for the satisfaction of future share options
awards.
Alpha's Employee Benefit Trust
The Group held 7,627,623 (FY 23: 6,274,380) shares in the EBT
comprising shares held to satisfy share options granted under its
joint share ownership plan ("JSOP") or unallocated ordinary shares
to satisfy future share option vests granted under the Group's
other share option plans.
During the period, 1,500,000 ordinary shares were transferred by
the Company to the EBT for potential future satisfaction of share
option awards. Further, the EBT purchased 1,033,954 shares in the
period at market value for GBP3.8m.
In addition, a total of 1,180,711 shares held in the EBT were
utilised for employee share option exercises in the period.
Treasury shares
The Group held nil shares in treasury at 30 September 2023 (FY
23: nil).
Shares with voting rights
The total number of shares with voting rights in the Company at
30 September 2023 was 122,009,736 (FY 23: 120,509,736). The EBT
holds 7,627,623 of these shares as disclosed above, however the EBT
has waived all dividend and voting rights in respect of these
shares. Therefore, the number of shares with exercisable voting
rights at the balance sheet date is 114,382,113 (FY 23:
114,235,356).
Dividends
During the period, the Group paid a final dividend in relation
to the year ended 31 March 2023 of 10.50p per ordinary share (H1
23: 7.50p).
The Board has declared an interim FY 24 dividend of 3.70p per
share (H1 23: 3.70p).
12. Share-based payments
The Group has adopted a globally consistent share incentive plan
approach, which is implemented using efficient jurisdiction
specific plans, as appropriate.
The Management Incentive Plan
The Group has a management incentive plan ("MIP") to retain and
incentivise directors and senior management. The MIP consists of
four parts: part A of which will enable the granting of enterprise
management incentive and non-tax advantaged options to acquire
shares; part B of which will enable the awarding of JSOPs; part C
of which will enable the awarding of restricted stock units
("RSUs") for participants in the US; and part D of which will
enable the awarding of RSUs in France (together the "options").
In prior periods, the majority of options granted to certain
directors and senior management of the Group were subject to the
fulfilment of three or more of the following performance
conditions: (a) the Group achieving adjusted EPS growth of 15.0% or
more to trigger a maximum award, or 10.0% to trigger a 66% award,
with a linear application of awards between these levels; (b) the
Group achieving a TSR over three years in excess of the mean total
shareholder return ("TSR") delivered by a peer group of comparable
companies; (c) personal adherence to corporate values and risk
policy; and (d) specific business unit EBITDA, or other personal
targets and goals. In FY 21, in response to COVID-19, options
granted were subject to more flexible performance criteria,
including local budget targets and a variety of stretching personal
sales or other targets. In FY 22, the performance conditions of
options granted in that year returned to the previous award
criteria.
As disclosed in the 2023 Annual Report & Accounts, the
Remuneration Committee approved performance conditions for FY 23
awards, which further modified the adjusted EPS growth range set
out above to reflect the growth of the Group since AIM admission.
The criteria for these share incentive awards to certain directors
and senior management of the Group, depending on the individual and
their role, include: (a) the Group achieving adjusted EPS growth of
11.25% or more to trigger a maximum award, or 7.5% to trigger a 66%
award, with a linear application of awards between these levels;
(b) personal adherence to corporate values and risk policy; and (c)
specific business unit EBITDA, or other personal targets and goals.
These criteria were also applied to FY 24 awards granted in the
period.
Some of these share incentive awards also contain a market
condition requiring the Group to achieve a TSR over three years in
excess of the mean TSR delivered by a peer group of comparable
companies.
MIP awards have either nominal or minimal exercise price payable
in order to acquire shares pursuant to options. MIP awards have
either three- or four-year vesting periods from the date of grant
and are usually equity settled.
The Employee Incentive Plan
In addition to the MIP, the Board has previously put in place a
medium-term employee incentive plan ("EIP"). Under the EIP, a broad
base of the Group's employees has been granted share options or
share awards over a small number of shares. The EIP is structured
as is most appropriate under the local tax, legal and regulatory
rules in the key jurisdictions and therefore varies between those
jurisdictions. No EIP awards were made in the current or prior
periods.
Movements in the period
During the period, a total of 2,729,582 share option and award
grants were made to employees and senior management (H1 23:
3,138,309). The weighted average of the estimated fair values of
these options awarded in the period is GBP3.24 per share (H1 23:
GBP3.11).
During the period, 3,177,545 MIP and EIP awards vested following
the satisfaction of performance conditions. The performance
conditions relating to EPS growth and total shareholder return
exceeding a basket of comparable companies over three years to the
vesting date were met in full and the relevant local regional or
individual budgetary performance conditions were met in full or
part. Of these vested awards, 1,068,471 were exercised, with a
further 2,109,074 vested options remaining outstanding. An
additional 216,664 awards that vested in previous periods were also
exercised in the period, with 59,642 remaining outstanding at the
end of the period. Of the above total 1,285,135 options exercised,
the Group settled 1,180,711 either through the issuance of new
shares, or shares transferred from the Group's EBT with a further
104,424 options retained for net tax settlement. The weighted
average share price at the date of these exercises was GBP3.83. The
remaining vested award holders have a further six-year to
seven-year period, from the date of vesting, in which to exercise
their vested awards.
During the period, 97,382 share options were forfeited under
performance conditions or as a result of leavers before
vesting.
Details of the share option awards made are as follows:
30 Sep 2023
Number of
share options
Outstanding at the beginning of the period 9,996,040
Granted during the period 2,729,582
Exercised during the period (1,285,135)
Forfeited during the period (97,382)
Expired during the period -
Outstanding at the period end 11,343,105
Exercisable at the period end 2,168,716
The weighted average exercise price for all options outstanding
in both the current and prior periods was nominal. The options
outstanding as at 30 September 2023 had a weighted average
remaining contractual life of 1.5 years.
MIP share options with an external market condition were valued
at award using the Monte Carlo option pricing model. The model
simulates a variety of possible results, across 10,000 iterations
for each of the options, by substituting a range of values for any
factor that has inherent uncertainty over a number of scenarios
using a different set of random values from the probability
functions. The model takes any market-based performance conditions
into account and adjusts the fair value of the options based on the
likelihood of meeting the stated vesting conditions.
MIP share options without external market conditions and EIP
share options were valued at award using a Black-Scholes model.
The inputs to these models in the period were as follows:
30 Sep 2023
Weighted average share price at GBP4.00
grant date
Exercise price Nominal
Volatility 26.40%
Weighted average share option life 4 years
Risk-free rate 4.93%
Expected dividend yield 3.00%
Volatility was determined by calculating the historical
volatility of the market in which the Group operates. The expected
expense calculated in the model has been adjusted, based on
management's best estimate, for the effects of non-market-based
performance conditions and employee attrition.
The Group recognised a total expense of GBP3.7m (H1 23: GBP4.1m)
in the current period, comprising GBP3.3m (H1 23: GBP3.6m) in
relation to equity settled share-based payments and GBP0.4m (H1 23:
GBP0.5m) relating to relevant social security taxes.
The combined carrying value of current and non-current
liabilities relating to social security tax on share options as at
30 September 2023 is GBP3.3m (FY 23: GBP3.3m). A GBP0.4m charge was
recognised in the consolidated statement of comprehensive income in
the period, offset by GBP0.4m of payments. Assumptions associated
with the calculation of the social security tax liability due on
vesting of share options include an estimation of the
forward-looking share price at the vesting date based on applicable
analyst research and applicable future tax rates. For these
purposes, the share price is updated at each reporting period to
reflect historical levels, and is assumed to grow in line with the
estimated future performance of the business.
If the estimated future share price assumption were to increase
by 30%, the social security costs in the period would increase by
GBP0.4m. Were the share price assumption to reduce by 30%, the
charge would reduce by GBP0.4m.
If the estimated number of share options expected to forfeit
annually were to decrease by 3%, the share-based payment charge in
the period would increase by GBP0.7m. If estimated annual forfeits
were to increase by 3%, the charge in the period would reduce by
GBP0.7m.
13. Related party transactions
Related parties, following the definitions within IAS 24, are
the Group's subsidiary companies, members of the Board, key
management personnel and their families, and shareholders who have
control or significant influence over the Group.
The Group considers key management personnel, as defined under
IAS 24, to be the Company's Directors and certain members of the
Group's senior management team that report into the Group
Coordination Committee. There were no transactions within the
period in which the Directors had any interest.
Transactions between the Company and its subsidiaries are on an
arm's length basis and have been eliminated on consolidation and
are not disclosed in this note. None of the Group's shareholders
are deemed to have control or significant influence and therefore
are not classified as related parties for the purposes of this
note.
-ENDS-
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END
IR FFFLFLALFFIV
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November 23, 2023 02:00 ET (07:00 GMT)
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