Company Announcements

23 June 2022

 

Alpha Financial Markets Consulting plc

 

("Alpha", the "Company" or the "Group")

Alpha Financial Markets Consulting plc (AIM:AFM), a leading global provider of specialist consultancy services to the asset management, wealth management and insurance industries, is pleased to report its audited results for the 12 months ended 31 March 2022 (FY 22).

 

A YEAR OF EXCELLENT RESULTS AND PROGRESS TOWARDS ACHIEVING ALPHA'S AMBITIOUS GROWTH PLANS

 

Financial Highlights

·    Revenue and net fee income¹ increased by 61.1% to £158.0m (FY 21: £98.1m) and £157.8m (FY 21: £98.0m) respectively; 31.3% on an organic² basis

·    Gross profit increased by 70.4% to £59.4m (FY 21: £34.8m)

·    Adjusted¹ EBITDA increased by 56.0% to £33.9m (FY 21: £21.7m)

·    Adjusted profit before tax increased to £31.8m (FY 21: £19.6m)

·    Adjusted earnings per share increased by 43.9% to 21.46p (FY 21: 14.91p)

·  On a statutory basis, profit before tax increased to £14.9m (FY21: £9.0m) and basic earnings per share increased to 7.69p (FY 21: 5.75p)

·    Robust balance sheet with a net cash balance as at 31 March 2022 of £63.5m (31 March 2021: £34.0m)

·  Strong adjusted cash conversion of 112% (FY 21: 111%), with adjusted cash generated from operating activities of £36.0m (FY 21: £22.3m)

·    In view of Alpha's performance and cash position at the year end, the Board is recommending a final dividend of 7.50p (FY 21: 4.85p)

 

	12 months to 31 March 2022	12 months to 31 March 2021	Change
Revenue	£158.0m	£98.1m	61.1%
Gross profit	£59.4m	£34.8m	70.4%
Adjusted EBITDA	£33.9m	£21.7m	56.0%
Adjusted profit before tax	£31.8m	£19.6m	62.0%
Profit before tax	£14.9m	£9.0m	65.9%
Adjusted EPS	21.46p	14.91p	43.9%
Basic EPS	7.69p	5.75p	33.7%
Total dividend per share	10.40p	6.95p	49.6%

 

 

Operational Highlights

·   Strong growth within the asset and wealth management consulting business, with 31.3% organic net fee income growth in the last financial year (FY 21: 8.0%). Strong organic progress across all regions, in particular in North America (62.2%, FY 21: 13.6%)

·    Successful acquisition and integration of Lionpoint³, bringing global scale in alternative and other private asset classes, and cross collaboration opportunities on client projects

·    Continued momentum and growth in the Group's insurance consulting offering, strengthened by UK extension into General Insurance and Specialty client segments as well as doubling of the team

·   Strong client retention and growth in new clients globally, with the number of clients⁴ that the Group has supported increasing to 718 (FY 21: 439)

·   Consultant⁵ headcount increased by 69.6% to 760 (March 2021: 448), including the addition of 33 new directors⁶ and the wider Lionpoint team

·    Addition of offices⁷ in Denver, San Francisco, Sydney and Frankfurt, taking the Group to 16 client-facing offices globally

 

Outlook

·    Alpha continues to focus on growing the business through geographic expansion in all regions, particularly in North America, as well as extending the depth and range of client segment and service line offerings

·  Whilst mindful of the macro-economic backdrop including inflationary pressures, the strong momentum experienced by the Group in FY 22 has continued into the early part of FY 23. With a strong pipeline of potential new business and the structural tailwinds that underpin demand for Alpha's services remaining robust, the Group is well positioned to balance the risks of these pressures and continue to deliver attractive growth and margins

 

Commenting on the results, Euan Fraser, Global Chief Executive Officer said:

 

"This past financial year has been the most successful in Alpha's history and we experienced strong growth in every part of Alpha's consulting business. It is the result of a tremendous team effort and I am extremely thankful to all our employees across the globe who have worked tirelessly to deliver exceptional service to our clients.

 

"We also welcomed 123 new colleagues to the Group with the successful acquisition of Lionpoint, which gives us an enviable position in the rapidly growing alternatives sector.  The value of our specialist expertise is well recognised and the benefits of this are increasing as we scale and extend our competitive challenge."

 

 

Enquiries:

 

Alpha Financial Markets Consulting plc Euan Fraser (Global Chief Executive Officer) John Paton (Chief Financial Officer)	+44 (0)20 7796 9300
Investec Bank plc - Nominated Adviser, Joint Corporate Broker Patrick Robb James Rudd Harry Hargreaves	+44 (0)20 7597 4000
Berenberg - Joint Corporate Broker Chris Bowman Toby Flaux Alix Mecklenburg-Solodkoff	+44 (0)20 3207 7800
Camarco - Financial PR Ed Gascoigne-Pees Georgia Edmonds	+44 (0)20 3757 4980

Analyst Presentation:

A results presentation will take place at 9.30 a.m. today by conference call.  Those wishing to attend should email AlphaFMC@camarco.co.uk.

The full-year results and a copy of the presentation slides, for those unable to attend, will be available on the company website at  https://alphafmc.com/investors/reports-presentations/.

 

 

About Alpha FMC:

  

Headquartered in the UK and quoted on the AIM of the London Stock Exchange, Alpha is a leading global provider of specialist consultancy services to the asset management, wealth management and insurance industries.

Alpha has worked with all of the world's top 20 and 76% of the world's top 50 asset managers by AUM⁸, along with a wide range of other buy-side firms. It has the largest dedicated team in the industry, with over 760 consultants globally, operating from 16 client-facing offices spanning the UK, North America, Europe and APAC.

 

¹ The Group uses alternative performance measures ("APMs") to provide stakeholders further metrics to aid understanding of the underlying trading performance of the Group. Refer to the Chief Financial Officer's report and note 3 for further details.

² Organic net fee income growth excludes Lionpoint, acquired during the year. Refer to note 3 for further information on the APMs.

³ "Lionpoint" refers to Lionpoint Holdings, Inc.

⁴ Client numbers are cumulative and have been updated to include all client relationships from acquisitions.

⁵ "Consultants" and "headcount" refer to fee-generating consultants at the year end: employed consultants plus utilised contractors in client-facing roles. Total increase of 312, of which 123 was through acquisition.

⁶ "Directors" refer to fee-generating directors at the year end. Total increase of 33, of which 13 was through acquisition.

⁷ The Group uses "office" to refer to client-facing office location; that is, if there are multiple offices in one location, they will be counted as one office.

⁸ "World's top 20" and "world's top 50" refer to Investment & Pensions Europe, "Top 500 Asset Managers 2021".

Chairman's Report

Alpha's blueprint for international expansion has once again been extremely effective. Key growth initiatives have gained momentum and the Group has continued to attract the outstanding consulting talent that underpins its unique market proposition. 

 

Introduction

I am delighted to present the Annual Report & Accounts for the Group for the year ended 31 March 2022, which demonstrate another year of impressive profitable growth. Having navigated through the pandemic resiliently in FY 21, we approached FY 22 with confidence. This confidence has been well founded as the Group's performance has been excellent. Alongside strong organic progress, the strategic acquisition of Lionpoint has been successfully integrated and delivered a very strong performance. This combination has enabled the Group to achieve an outcome well ahead of initial market expectations. On behalf of the Board⁹, I would therefore like to thank all of the Group's employees for their enormous efforts, hard work and contributions to consistently deliver first class service and expertise to our clients.

 

The Group has made significant progress towards its medium-term goal of doubling in size over the four years to November 2024. Alpha has achieved major advances in the three priority areas of North America, insurance consulting and making acquisitions. The broad-based nature of progress in the past year has reinforced the Board's confidence that the Group is on track to deliver on its medium-term strategy.

 

The asset management, wealth management and insurance markets are influenced by powerful long-term trends, notably the drive for efficiency, fee compression, regulatory change and the growing focus on ESG¹⁰ and responsible investment. These trends represent a strong tailwind for the Group and are steadily increasing the relevance and value of its proposition: to provide the best specialist consultancy services for clients wherever in the world they need us.

 

The Alpha Board, supported by the senior management team, remains committed to the Group's strategic aim to be recognised as the leading global consultancy to the asset management, wealth management and insurance industries. 

 

Overview of the Financial Year

Alpha's performance over the past year has been nothing short of outstanding. Demand for specialist expertise across all areas of the industry's value chain has been very strong, and Alpha's ability to capture this has pushed year-on-year organic growth in Group net fee income to 31.3% and to 62.2% in the key North America market. Notably, we have seen significant growth in all three areas identified as strategic growth initiatives.

 

The Group's strategic decision to enter the insurance consulting market has been particularly successful. The Pensions & Retail Investments practice in the UK has doubled in size over the past year and continues to forge ahead. The UK launch of Alpha's General Insurance and Specialty client segments, and the hiring of two new directors specifically aligned to these areas, gives us confidence that we will continue to see further material growth from our insurance teams.

 

Organic growth in North America has also accelerated sharply over the past 12 months. The Group continues to build relationships with the biggest asset and wealth managers and, excluding Lionpoint, now has over 125 consultants based in North America. Given the size of the market and the potential to introduce or scale up the full range of asset and wealth management practices in North America, the Board believes that there continues to be significant potential for further growth in this market.

 

The acquisition of Lionpoint, with its focus on private-market asset managers, has proved extremely complementary to the public-market focus of the rest of the Group. Since the acquisition in May 2021, Lionpoint has added 75 people to its headcount and won 64 new clients. Many of the world's largest public asset managers are expanding into alternative assets and the Lionpoint acquisition brings deep expertise in these areas. The Group now offers an integrated proposition spanning both public and private markets, unlocking many growth opportunities.

 

Overall, Group revenues rose 61.1% to £158.0m, including Lionpoint's contribution. Organic net fee income growth accelerated to 31.3% (FY 21: 8.0%) as Alpha successfully captured client demand for its expanding range of high-quality consulting services. Despite increasing costs post the COVID-19 pandemic, the strong revenue growth fed through to record adjusted EBITDA of £33.9m (FY 21: £21.7m) and profit before tax of £14.9m (FY 21: £9.0m). Adjusted earnings per share of 21.46p (FY 21: 14.91p) and basic earnings per share of 7.69p (FY 21: 5.75p) grew 43.9% and 33.7% respectively.

 

Governance and the Board

The members of Alpha's Board have a wide knowledge of financial services and substantial leadership experience within the industry, and they are committed to the highest standards of corporate governance and ethical behaviour. Alpha benefits from a robust corporate governance framework that ensures the interests of shareholders, employees, clients and wider stakeholders are properly safeguarded. The Board recognises that strong and appropriate governance is essential to reduce risk and secure long-term value for shareholders and therefore the topic remains under continual review.

 

We have taken steps to further broaden the range of experience at Board level with the appointment of Maeve Byrne as an Independent Non-Executive Director¹¹ from 16 May 2022. Maeve has more than 30 years' experience in financial services and was a partner in the financial services practice at KPMG from 2002 to 2014.  Between 2010 and 2017, first on secondment and then as an executive, she held senior roles at Royal Bank of Scotland and Williams & Glyn. Subsequently, she has worked as an independent board adviser focussing on transformation services. On appointment, Maeve joined the Board's Audit and Risk, Nomination and Remuneration Committees.

 

The Group regards ESG and sustainability as important elements of Alpha's governance and approach to risk management. The Board recognises that it has an important role in overseeing and progressing these ESG efforts and we are therefore progressing plans to establish an ESG Committee in the coming financial year. 

 

Internally, we are increasing our focus on issues linked to sustainability, both by preparing the Group to start reporting under the framework set out by the Taskforce on Climate-Related Financial Disclosures, and by developing our own roadmap to net zero greenhouse gas emissions. The Group has hired a full-time Sustainability Manager within its business operations team whose role will include overseeing the development of this work and the implementation of Alpha's emissions reduction targets.

 

Strategy

The Board, supported by Alpha's executive team, is fully committed to the Group's strategic goal, which is to be recognised as the leading global consultancy to the asset management, wealth management and insurance industries. Alpha therefore aims to attract and train the most talented team of industry specialists available. To do this, the Group provides a highly attractive offering encompassing compensation, career development, high quality work in multiple geographies, recognition and support. This combination of continuing to develop an excellent corporate culture alongside competitive remuneration has resulted in growth in headcount in FY 22 of 189 consultants (FY 21: 12), excluding Lionpoint consultants at the time of acquisition, bringing our total number of consultants at 31 March 2022 to 760.

 

Alpha also keeps the wellbeing of its employees under constant review and strives to ensure that the workplace culture emphasises mutual support, teamwork and effective communication. Diversity and inclusion are vital elements of the culture that the Group aims to foster. The recent hire of an experienced full-time Diversity & Inclusion Manager, who will join Alpha at the beginning of the new financial year, is intended to ensure that Alpha's culture of inclusivity, governance frameworks and recruitment processes are delivering a sufficiently diverse team through all levels of the organisation. 

 

The specialist nature of Alpha's consulting teams is critical to differentiate the Group's proposition and to create long-term relationships with clients that can broaden to include more practice areas and service offerings. The strong organic growth achieved over the past year in North America provides an illustration of this process. Around 80% of Alpha's organic net fee income in North America last year were generated by three of the Group's more established asset and wealth management practices: Investments, Distribution and M&A¹². Having reached scale in North America, these practices are now producing opportunities to introduce Alpha's more recently launched practices, such as ESG & Responsible Investment ("ESG & RI").

 

Acquisition continues to be a key element of the Alpha growth strategy. The addition of Lionpoint in May 2021 built on the success of prior acquisitions enabling Alpha to broaden its proposition. This acquisition is a particularly good example in that it secured entry to the highly complementary area of private-market asset managers, incorporating private equity, private credit, infrastructure, real estate and fund of funds, and also more than doubling the Group's headcount in the key growth market of North America.

 

Dividend

As a result of Alpha's outstanding performance over the past year, the Board is recommending a 54.6% increase in the final dividend to 7.50p per share, bringing the total for the year to 10.40p (FY 21: 6.95p). Subject to shareholder approval at the Annual General Meeting ("AGM"), to be held on 13 September 2022, the final dividend will be paid on 20 September 2022 to shareholders on the register at close of business on 9 September 2022.

 

Outlook

Whilst we are mindful of the geopolitical and economic backdrop at present, the Alpha business enjoyed strong momentum through FY 22 and that has continued into FY 23. The Group's business is strongly cash generative and has a record pipeline of potential new business, while the industry tailwinds that underpin demand for its services remain strong. Therefore, we start the year in excellent health.

 

Once again, I would like to reiterate my thanks to everyone at Alpha for their tremendous efforts. With the combination of industry tailwinds, globalisation of the Group's services and strategic acquisitions, all supported by our enormously talented teams, the Board looks forward to the future with confidence.

 

Ken Fry

Chairman

23 June 2022

 

⁹ The "Board" is Alpha's Board of Directors, also referred to as the "Board of Directors", the "Alpha Board" and the "Directors".

¹⁰ Environment, Social, Governance ("ESG").

 

¹¹ "Director" refers to the executive and non-executive members of the Board; meanwhile "directors" refers to non-Board directors within the management teams of the Group.

 

¹² Practice name changed to "M&A" practice in the year to better reflect the client proposition. 

 

Global Chief Executive Officer's Report

Introduction

This past financial year has been one of the most successful in Alpha's history. Despite the continuing impact of COVID-19, which prolonged the challenges that remote working created for our team, they responded magnificently and continued to deliver excellent results servicing Alpha's clients. Their professionalism enabled us to meet buoyant demand for our services among asset and wealth managers and insurers, leading to the outstanding growth and profit performance that we achieved in FY 22.

 

We had many wonderful client wins over the past year and it is clear that we are constantly gaining market share. The value of our specialist expertise is well recognised and the benefits of this are increasing as we scale and extend our competitive challenge against the generalist consultancy firms.

 

Alpha ended FY 22 in a stronger position than ever. Whilst the macro-economic outlook for the coming months has some uncertainty, and we remain cautious and vigilant for the potential for further developments, including inflationary pressures, the Group continues to perform very strongly.

 

Delivering on our Strategy

After a year of very strong growth in every region of Alpha's consulting business, we are well on the way to achieving our medium-term goal of doubling the size of our Group over the four-year period to November 2024. The structural drivers for our sector continue to create significant tailwinds for Alpha. We have previously highlighted the three most significant growth opportunities that would enable Alpha to achieve our growth target of doubling the business - rapid expansion in insurance consulting, continued strong growth in North America and acquisitions - and FY 22 was a year in which we delivered outstanding progress on all three fronts.

 

We launched insurance consulting in FY 20 with a Pensions & Retail Investments practice in the UK, subsequently expanded into France and the business doubled its headcount over the past year. Our belief that the insurance industry offers an opportunity for Alpha of comparable scale to our core asset and wealth management market is being rapidly vindicated. During the past year, we have started broadening our proposition for insurance clients with the extension in the UK into General Insurance and Specialty client segments. This team is already harnessing strong demand and we are building a wonderful reputation.

 

A major part of our growth strategy - scaling our North America business - also made excellent progress. In addition to Lionpoint, we increased our headcount in North America to 259, a 232.1% increase over the course of FY 22. Organic net fee income growth in North America reached 62.2% year on year as we won a string of new clients from the world's top asset management companies. This is the world's largest asset management market with assets under management around eight times greater¹³ than in the UK, where we now have 287 consultants in aggregate. This simple comparison offers a good indication of the growth opportunity we see for Alpha in North America over the next few years.

 

The third pillar of our growth strategy is acquisitions and, with the acquisition of Lionpoint in May 2021, we have transformed our proposition by adding a leading global consultancy specialising in the fast-growing alternatives sector of private equity, private credit, infrastructure, real estate and fund of funds. We had been targeting private markets as a natural area of growth and concluded that Lionpoint would be the perfect partner.

 

Many of Alpha's core asset and wealth management clients are increasing their exposure to alternatives and, now that Lionpoint is part of the Group, we can propose integrated solutions that span our clients' public and private portfolios, opening up an important growth opportunity. This acquisition also brings us a much-increased presence in the key strategic market of North America and is forecast to continue to deliver a strong performance in the first full year of ownership.

 

It was pleasing to see the level of support among our shareholders for this important strategic acquisition. We were able to raise £31.1m, before expenses, of new equity to purchase Lionpoint at zero discount to the prevailing share price - the best endorsement we could have hoped for from our investors. We are grateful for the trust they have shown in the Group.

 

The progress we have made during FY 22 in realising the potential of our three biggest growth opportunities puts us in a strong position to deliver on our pledge in late 2020 to double the size of Alpha's business within four years. 

 

Summary of Financial Performance

The powerful momentum across our priority growth areas and the large number of new client wins have enabled us to announce exceptionally strong financial results, with both revenue and adjusted EBITDA well ahead of initial market expectations. In addition to the 164 new clients that came to us through the acquisition of Lionpoint, Alpha gained 51 new clients during FY 22 (FY 21: 58), excluding Lionpoint additions in the year. Lionpoint continues to trade strongly, winning 64 new clients since the acquisition in May 2021 and delivering strong revenue growth.

 

Group net fee income, including Lionpoint's contribution, increased by 61.1% to £157.8m (FY 21: £98.0m) and by 31.3% to £128.6m on an organic basis. Adjusted EBITDA increased by 56.0% to £33.9m (FY 21: £21.7m) and adjusted profit before tax by 62.0% to £31.8m (FY 21: £19.6m). Alpha continues to generate strong cash flows and ended the year with net cash of £63.5m (FY 21: £34.0m).

 

On a statutory basis, revenue increased by 61.1% to £158.0m (FY 21: £98.1m), operating profit by 74.7% to £17.8m (FY 21: £10.2m) and profit before tax by 65.9% to £14.9m (FY 21: £9.0m). The difference between these statutory and adjusted performance measures set out above arise from the adjusting items as explained in the Chief Financial Officer's Report and note 3.

 

Trading has been very positive across all our consulting operations, and our new business pipeline strengthened steadily throughout the year. We are still seeing many clients commit to larger business change projects and technology transformations as they seek operating models that are more robust and better adapted to hybrid working. Our margins are strong, driven in part by above-target consultant utilisation levels. We continue to invest in industry-leading talent at all levels to drive further growth across all parts of the Group.

 

Alpha's robust financial performance and strong momentum have enabled the Board to announce an increase in the final dividend for FY 22 to 7.50p (FY 21: 4.85p), giving a total of 10.40p for this year, up 49.6% on the FY 21 total dividend of 6.95p.

 

Operational Review

With the acquisition of Lionpoint in May 2021 we welcomed 123 new consultants to the Group in May 2021 and the integration of Lionpoint's team into the wider Group has been one of the key operational priorities for FY 22. This is now complete and directors across the wider Group meet regularly and collaborate extremely well. Since the year end, in early April we further invested with a team lift-out of 14 real estate investment professionals, mainly based in the US. This additional real estate capability again enhances the Group's offering and adds several new client relationships.

 

Alpha's established asset and wealth management consulting practices all traded very strongly through FY 22, including Investments, Distribution, M&A and Operations, with newer practices such as Regulatory Compliance & Risk and Digital also showing excellent organic growth. We continue to globalise our consulting practices and add new propositions such as Data Science to meet new client demand.

 

Our insurance consulting business area, which is focussed on the UK and France, has doubled its headcount over the past year in response to very strong client demand and we have recruited two directors to lead our General Insurance and Specialty segments in the UK. This marks the expansion of our insurance offering from the investment-focussed areas we initially targeted into traditional risk underwriting and reinsurance.

 

Our technology services business has also been significantly strengthened over the past year thanks to major investments in Axxsys, the software implementation specialist that we acquired in FY 20. Over the past 12 months, Axxsys has broadened its proposition with the launch of technology consulting practices focussed on data and cloud services, front office projects and wealth management. There is huge demand for technology consultancy among asset and wealth managers and we believe that these new practice areas are poised for strong growth in FY 23 and beyond. 

 

The Group's Alpha Data Solutions¹⁴ ("ADS") business, including Obsidian, has made less progress than planned in the year, despite a good opportunity pipeline. We were delighted to welcome a new global head to focus the strategy and gain further traction.

 

Geographic Overview

Alpha's regional financial performance for the past year demonstrates the strong demand that our teams have encountered in all parts of the world. In regional terms, the major development over the past year is that Alpha has now achieved scale in each of our main regions, thanks to a combination of robust hiring and the addition of Lionpoint's global team, almost 70% of which are based in North America.

 

By the end of FY 22, we had over 285 consultants in the UK, over 255 in North America and more than 210 in Europe & APAC. Our North America operations are well diversified between East and West coasts, the Mid-west and South, alongside a growing presence in Canada.

 

		12 months to 31 March 2022	12 months to 31 March 2021	Change
Net Fee Income
UK		£72.1m	£53.5m	34.9%
North America		£46.9m	£16.5m	184.1%
Europe & APAC		£38.8m	£28.0m	38.6%
Year-end totals		£157.8m	£98.0m	61.1%

 

		12 months to 31 March 2022	12 months to 31 March 2021	Change
Gross Profit
UK		£30.6m	£21.4m	43.2%
North America		£15.4m	£4.4m	242.6%
Europe & APAC		£13.4m	£9.0m	49.5%
Year-end totals		£59.4m	£34.8m	70.4%

 

 

	UK	North America	Europe & APAC	Totals
Consultant Headcount
As at 31 March 2021	223	78	147	448
Lionpoint team on acquisition	27	88	8	123
Team additions - Lionpoint	12	45	18	75
Team additions - rest of the Group	25	48	41	114
As at 31 March 2022	287	259	214	760
Change	28.7%	232.1%	45.6%	69.6%

 

We continue to build relationships with the largest asset managers in North America and the Group has now worked with 80% of top 25 North American asset managers¹⁵. We also continue to broaden these relationships to include more of our services. Net fee income in North America grew 184.1% over the year and 62.2% organically.

 

Our businesses in the UK and Europe & APAC also delivered excellent performances, increasing net fee income by 34.9% and 38.6% respectively. Our established offerings in the Operations, Investments and Distribution spaces continue to grow strongly in those regions and we have seen increased industry interest in our most recent offerings around ESG & RI and Insurance.

 

All our consulting businesses globally have experienced strong client demand, resulting in higher than planned consultant utilisation through the year, which we aim to glide back to more normalised levels with ongoing recruitment through the new financial year. Strong demand has also supported good consultant day rate progression in all regions and is a helpful environment in which to manage inflationary cost pressures. 

 

Our People

Over the past two years, Alpha's employees have had to deal with unprecedented conditions due to the pandemic and their response to the heavy demands placed upon them has been magnificent. The quality of their performance is clear from the outstanding financial results that we have achieved in FY 22. However, we do not take any of this for granted.

 

Although the most acute phase of the pandemic is behind us, we are still very mindful that many of our people have faced ongoing challenges in working remotely and we have thought very carefully about how we can support them better. We reopened our offices as soon as conditions allowed so that those who wished to return could do so, albeit with relevant precautions in place.

 

The flexibility to work remotely has advantages for many employees and also for Alpha in terms of our ability to draw on our global talent pool for projects irrespective of where the client is based, and to use our capacity as efficiently as possible. Our clients continue to respond very favourably to our talent and service delivery proposition, which is reflected in consultant utilisation rates for FY 22 that were slightly above target. This should be counteracted to some degree by our ongoing hiring programmes, which bring new talent into the Group at every level to ensure that we have strong foundations for further growth.

 

Our attrition rate has risen post COVID-19 yet remains well below the average among our peers, and we continue to attract extremely talented people although competition in recruitment remains strong. We are continually looking at ways in which we can attract, develop and reward our people - including reviewing our policies to ensure that they compare favourably with those available elsewhere.

 

Current Trading and Outlook

FY 22 was a remarkable year for Alpha, in which we achieved over 60% revenue growth across the Group and over 30% on an organic basis. We made huge progress in each of our three priority areas for growth - North America, insurance consulting and acquisitions - and gained powerful momentum across the business more generally. We are making excellent progress on our medium-term growth target of doubling the business.

 

We therefore enter FY 23 in a very strong position. With the addition of Lionpoint, we now have a compelling, specialist proposition across both public and private markets, with significant scale in both. Our regional footprint has been transformed and our newer practices are growing very strongly.

 

We recognise that there is geopolitical and economic uncertainty at present, and the impact of inflation and the situation in Ukraine is difficult to predict with confidence. Accordingly, we remain vigilant and are watching developments very closely.

 

However, our current trading and project pipeline to date is very strong, and our revenue visibility is better than ever as our clients commit to longer and more complex business change projects. These factors, coupled with Alpha's robust balance sheet, give us considerable confidence that even if we are heading into more difficult markets, we are doing so from a position of real strength.

 

Finally, I would like to join Ken in thanking everyone across the Group for their outstanding efforts. We are very proud to have the best consulting team in the industry.

 

Euan Fraser

Global Chief Executive Officer

23 June 2022

 

¹³ BCG, "Global Asset Management 2021: The $100 Trillion Machine" (July 2021).

¹⁴ Renamed to Aiviq at beginning of FY 23 to better reflect the proposition for clients.

 

¹⁵ "Top 25" refers to Investment & Pensions Europe, "Top 500 Asset Managers 2021" where the asset manager country is US or Canada, as defined in the report.

 

 

Chief Financial Officer's Report

Group Results

I am delighted to report that Alpha has delivered another year of strong growth both organically and including Lionpoint, which was acquired in May 2021.

 

	12 months to   31 March 2022	12 months to   31 March 2021	Change
Revenue	£158.0m	£98.1m	61.1%
Net fee income	£157.8m	£98.0m	61.1%
Gross profit	£59.4m	£34.8m	70.4%
Operating profit	£17.8m	£10.2m	74.7%
Adjusted EBITDA	£33.9m	£21.7m	56.0%
Adjusted EBITDA margin	21.5%	22.2%	(70 bps)
Adjusted profit before tax	£31.8m	£19.6m	62.0%
Profit before tax	£14.9m	£9.0m	65.9%
Adjusted earnings per share	21.46p	14.91p	43.9%
Adjusted diluted earnings per share	20.23p	14.26p	41.8%
Basic earnings per share	7.69p	5.75p	33.7%

 

Revenue
The Group delivered 61.1% net fee income growth in the year, including 31.3% organic contribution. Revenue also grew 61.1%, including increased rechargeable client expenses, compared to the prior year. 

 

Across the Group's regions, FY 22 revenue and net fee income grew ahead of the strong average consultant headcount growth, with average consultant utilisation above target levels and up on FY 21 alongside improving consultant day rates overall, continuing the strong trading metrics reported for H1 22. Revenue and net fee income grew in all geographic regions, both overall and on an organic basis. 

 

North America delivered the Group's strongest regional growth with net fee income up 184.1% overall and 62.2% on an organic basis. On a constant currency basis North America net fee income growth was 194.6% overall. The Lionpoint acquisition contributed significantly to North America growth this year, while also adding 45 consultants to its North America team since acquisition. Independently of the Lionpoint business, the North America business still continued to expand its domestic client base, including several longer duration projects, successfully deploying its strongly growing consultant team ahead of Group target utilisation levels and FY 21 comparatives, while also improving consultant day rates. 

 

Europe & APAC also delivered another year of strong growth. The region grew net fee income by 38.6% on the previous year, and on an organic basis the region reported 29.3% growth. This growth was delivered across the region with the Alpha Europe team well deployed, complemented by further progress growing the APAC business. 

 

The UK business, the Group's largest geographic region, grew net fee income 34.9% overall and 22.8% organically. This strong UK organic performance benefitted from consistent and strong demand across the full range of Alpha practices, including significant growth in emerging propositions such as UK Insurance and ESG & RI, alongside substantial contributions from our established Investments, Distribution, M&A and Operations teams. Within the UK results, Alpha's Data Solutions business continued to have less traction than planned in the year. ADS, including Obsidian, while adding new clients and increasing revenue in the year, did not progress as anticipated overall.

 

Alpha continues to support clients in some of the largest, most challenging and interesting projects across the industry. Alpha's revenue is driven by continuing strong demand in its established practices, as well as progress in newer areas. Alpha's Pensions & Retail Investments and ESG & RI offerings, launched in September 2019 and October 2020 respectively, also made strong progress in the year by winning a number of projects both with existing and new client relationships.

 

The Lionpoint business, acquired in May 2021, has performed ahead of initial expectations and contributed £29.2m in net fee income in the year. Lionpoint has continued to enjoy strong client demand, adding 64 new clients and 75 consultants globally since acquisition. 

 

Alpha's growth was supported by further investment in global consultant headcount. The number of consultants reached 760 by the year end (FY 21: 448). Of this 312 consultant team increase, Lionpoint added 123 to the Group when it was acquired and has since added a further 75. While excluding Lionpoint, the Alpha North America region added most to its team size overall.  

 

Group Profitability

The Group also delivered strong growth in profits in the year. Group gross profit was £59.4m (FY 21: £34.8m), increasing by £24.6m overall or 70.4% over the previous year, with this increase well balanced between organic and inorganic contributions.

 

Gross profit margin rose to 37.6% (FY 21: 35.6%), returning closer to pre-pandemic margin levels as anticipated, supported by both the higher than target utilisation level and improved consulting day rates, alongside a strong contribution from Lionpoint. Within the strong results the team profit share bonus cost increased, as did bonus costs for the wider global director team, some of which will be paid on a part-deferred basis in summer 2022 and 2023.    

 

Gross margin improved in all geographical regions compared to last year. The significant improvement in North America was driven by strong utilisation levels and improving consultant day rates. UK and Europe & APAC gross margins also firmed, with good utilisation and consultant day rate progression. Alpha continues to invest in the business, growing its consulting teams in all markets and, therefore, utilisation is expected to progressively normalise towards target levels through FY 23. Alongside this planned easing of utilisation, consultant day rates are anticipated to progress further with strong client demand, balancing gross margin.

 

Adjusted administration expenses, as detailed in note 3, increased by £12.4m to £25.5m (FY 21: £13.1m) in the year, of which £8.1m represented the increase excluding Lionpoint. Following last year's tighter control of discretionary spend and the impact of COVID-19 on the operating environment, costs increased primarily in recruitment spend as we grew our consulting teams globally, and across staff and client entertainment and travel spend, which continue to return to more normalised levels. We also continued to invest in the Group's central team through the year and following the Lionpoint acquisition, in areas such as finance, HR, risk and legal.

 

Including the adjusting expense items, which also rose, administrative expenses increased to £41.6m (FY 21: £24.6m) on a statutory basis. The adjusting expense items, set out in note 3, increased in the year to £14.4m (FY 21: £9.8m), reflecting increased acquisition costs, higher acquired intangible asset amortisation and share-based payments costs.

 

The £0.7m (FY 21: £nil) acquisition costs include diligence and legal fees incurred in connection with the Lionpoint acquisition, with the acquisition consequentially increasing the acquired intangible asset amortisation charge to £4.7m (FY 21: £3.5m). The share-based payment charge of £6.2m (FY 21: £2.5m) continues to develop since Alpha's share incentive plans were established at AIM admission, with Alpha's share price growth and further new annual awards alongside relatively limited award vests at this stage. Further detail of the share-based payment charge is set out in notes 3 and 12.

 

The earn-out and deferred consideration charge of £1.4m (FY 21: £3.6m) reflects employment-linked expenses and changes to the Lionpoint and Obsidian earn-out assumptions. With Lionpoint's strong performance since acquisition and ongoing positive outlook, the future performance assumptions have been improved closer to the maximum earn-out achievable. This uplift is offset by a scale-back in the future Obsidian projections, in which performance has been flatter since acquisition and reduced future earn-out payments are now anticipated. Axxsys met its earn-out terms in full and the final payment was made in early FY 23. Further detail on the earn-out and deferred consideration charges are set out in note 6. 

 

The foreign exchange loss within adjusting items relates mainly to deferred and contingent payments associated with the acquisition of Lionpoint, payable in US dollars, with the USD:GBP rate experiencing some movement around the completion date. The depreciation charge grows to £1.2m (FY 21: £1.1m) alongside the growth of the Group, while the £0.6m (FY 21: £0.6m) amortisation of capitalised development costs eases slightly as the asset reduces with no further additions in the year. 

 

Adjusted EBITDA grew 56.0% to £33.9m (FY 21: £21.7m) and adjusted EBITDA margin eased to 21.5% (FY 21: 22.2%), reflecting the higher gross profit margins, offset by the higher adjusted administration expenses. Operating profit rose 74.7% to £17.8m (FY 21: £10.2m) after charging increased adjusting expense items, including acquisition costs, earn-out and deferred consideration expenses, and share-based payment charges. Further detail of these adjusting items is set out in note 3.   

 

Currency
Currency translation had a noticeable effect on net fee income and profits during the year. Through the year, British pound sterling averaged $1.37 (FY 21: $1.31) and €1.18 (FY 21: €1.12), which, with other similar currency movements, resulted in an unfavourable net currency effect on net fee income of £3.4m. On this basis, North America net fee income growth would increase to 194.6% and Europe & APAC would report 44.5% total net fee income growth. 

 

Net Finance Expense

Net finance costs increased in the year to £2.9m (FY 21: £1.2m), primarily from increased non-underlying finance expenses relating to acquisition consideration discount unwinding, as set out in note 3.

 

Taxation
Adjusted profit before tax rose 62.0% to £31.8m (FY 21: £19.6m) after charging depreciation, amortisation of capitalised development costs and net underlying finance expenses. Pre-tax profit rose 65.9% to £14.9m (FY 21: £9.0m) after also charging increased adjusting expenses and non-underlying finance expenses.

 

The Group's taxation charge for the year was £6.4m (FY 21: £3.1m), reflecting the growth in taxable profits, the blended tax rate of the increasingly international jurisdictions in which the Group operates and an increase in the rates applied to the deferred tax liability. The Group's cash tax payment in the year was £4.8m (FY 21: £5.7m), reflecting payment timings overall and COVID-19 related deferrals paid in the prior year.

 

Adjusted profit after tax is shown after adjustments for the applicable tax on adjusting items as set out in note 3.

 

Acquisition Activity

Since the acquisition of Lionpoint in May 2021, the Group has focussed on the successful integration of its service offerings and the team into the Alpha Group, and has begun to deliver the benefits of the increased service offering to the Group's enlarged client base. Lionpoint has integrated into the Group well and grown since acquisition, with strong further expansion of the team. Following the year end, the Group has also supported the lift-out of a team of 14 real estate consultants to further invest in the Lionpoint offering; see note 13 for further detail. 

 

Axxsys has integrated well into the Group, met its earn-out in full and has grown its team size since acquisition to 55 consultants at the year end, including key senior management hires, to take advantage of further opportunities.

 

As noted above, since acquiring Obsidian, the business has made less progress than anticipated and details of the earn-out consideration fair value adjustment are set out in note 6. 

 

Earnings per Share

Adjusted earnings per share ("EPS") improved 43.9% to 21.46p per share (FY 21: 14.91p) and adjusted diluted EPS increased 41.8% to 20.23p (FY 21: 14.26p). After including the adjusting expense items, the basic earnings per share increased 33.7% to 7.69p (FY 21: 5.75p), while diluted EPS increased 31.8% to 7.25p (FY 21: 5.50p), reflecting the increase in the share options awards outstanding. 

 

As at 31 March 2022, 9,504,379 share options (FY 21: 7,613,969) remained outstanding, with 873,169 share options exercised during the year; see note 12 for further detail.

 

Cash Flow and Net Funds

The Group again enjoyed strong cash generation with net cash generated from operating activities rising to £33.5m (FY 21: £21.0m) and, after adjusting for employment-linked acquisition payments and acquisition costs, to £36.0m (FY 21: £22.3m). This represents a 112% adjusted cash conversion rate from adjusted operating profit and improves on FY 21's 111% adjusted cash conversion rate.

 

During the first half, Alpha acquired Lionpoint with completion payments totalling £24.9m, offset by the Group raising £31.1m gross proceeds from the Group's supportive shareholder base in its May equity placing. The final £2.1m deferred non-contingent payment was also made in relation to the Axxsys acquisition, with a further £0.7m payment made in relation to the Lionpoint acquisition. A total £1.8m of the FY 22 acquisition payments were employment-linked. 

 

During the year, the Group funded Alpha's employee benefit trust ("EBT") to purchase 57,006 shares at the prevailing market share price to hold in satisfaction of future award vests. Alpha will likely fund the EBT further in the future to build the shares held in the EBT for the satisfaction of future share option exercises.

 

The Group's income taxes paid totalled £4.8m (FY 21: £5.7m). Net interest paid was £0.3m (FY 21: £0.5m), reflecting the cost of maintaining and periodically drawing the Group's revolving credit facility ("RCF").

 

Dividends paid increased in the year to £8.7m (FY 21: £2.1m), reflecting the return to the Group's dividend policy in FY 21, having not declared a final FY 20 dividend at the start of the pandemic.  

 

At the year end, the Group's cash position had strengthened further to £63.5m (FY 21: £34.0m). This strong balance sheet primarily provides Alpha funding flexibility to deliver on its acquisition strategy.

 

Statement of Financial Position

The Group's net assets at 31 March 2022 totalled £132.7m (FY 21: £94.4m). This increase principally arises from the acquisition of Lionpoint in the first half and the associated £31.1m gross equity capital raising, along with other reserves movements including retained profits. The Group continues to maintain a strong financial position. 

 

The Group's non-current assets movement principally results from the additional intangible assets recognised on the acquisition of Lionpoint partially offset by ongoing amortisation charges for the year.

 

Working capital remains well managed. Trade and other receivables balances increased in FY 22, both through the addition of Lionpoint and the ongoing growth in the business. Debtor collections continued to improve during the year with debtor days again reducing. The Group ended the year with £63.5m (FY 21: £34.0m) of cash. The Group's £20.0m RCF facility was undrawn at 31 March 2022 and, alongside cash balances, ensures Group funding flexibility.

 

Trade and other payables balances increased, representing an increased level of trade payables and accruals alongside the Group's growth. This includes higher profit share bonus accruals reflecting the enlarged teams and the year's strong performance. Total acquisition-related deferred consideration and earn-out liabilities have also increased, as disclosed in note 6, which results from the acquisition of Lionpoint, the increase in the fair value of the Lionpoint earn-out liability and employment-linked consideration, and the unwinding of discounting in the year, offset by the Lionpoint and Axxsys deferred consideration payments made during the year and by the Obsidian fair value adjustment recognised.  

 

Dividends
The Board is delighted with the performance this year. As a result, the Board is recommending a final dividend of 7.50p per share (FY 21: 4.85p), bringing the total for the year to 10.40p (FY 21: 6.95p), in line with the Group's policy to pay out approximately half of adjusted profit after tax. After approval at the AGM in September, this final dividend should be paid on 20 September 2022 to shareholders on the register at the close of business 9 September 2022.

 

Total Shareholders' Funds

Total shareholders' funds increased to £132.7m (FY 21: £94.4m). The changes in equity reserves reflect the equity capital raise, profit after tax for the year, currency movements on overseas assets, goodwill and intangible values, the addition of further share-based payment reserves and the payment of dividends.

 

As at 31 March 2022, the Company had 118,707,336 ordinary shares in issue (FY 21: 106,521,966), of which no shares were held in treasury and 6,216,501 shares were held in the Company's employee benefit trust to satisfy future option exercises (FY 21: 4,413,628).

 

Risk Management and the Year Ahead

The Group's risk management approach includes regular monitoring of macro-economic and end-market conditions and assessing the potential impacts across all business areas. In the risk management framework, which has been reviewed during the year, the senior leadership team, including me as Chief Financial Officer and the Global Chief Executive Officer, has primary responsibility for keeping abreast of developments that may affect the implementation of the Group's strategy and financial performance. This entails identifying the appropriate mitigating actions that should be taken and ensuring, as far as possible, that those actions are then executed by the senior management team. The Board as a whole oversees risk and, within that framework, considers the material risks that the Group faces and agrees on the principal risks and uncertainties. Alpha has a set of core company values, which are embedded globally, that reflect the Group's ethical and responsible approach to operating and managing the business.

 

The Board is delighted with the Group's progress in the year, while remaining cognisant of the potential risks and uncertainties ahead. These risks include political and economic uncertainty, as well as market volatility. We are aware of the risk of inflation globally, driven by an uplift in costs, demand for personnel in key areas and the increase in energy costs. Alpha remains alert to inflationary pressures, the risks of which we believe will continue to be balanced by strong structural growth drivers and demand for the Group's services.

 

The Board has considered all of the above factors in its review of going concern and has been able to conclude the review positively. While cognisant of potential macro-economic risks and the competitive environment, the Group's people, investment in product and service offerings and increasing international footprint help position Alpha for the year ahead. Alpha has delivered strongly and is well placed to take advantage of future opportunities.

 

The Group finished the year well positioned and we look forward to further progress.  

 

John Paton

Chief Financial Officer

23 June 2022

 

Consolidated statement of comprehensive income

For the year ended 31 March 2022

 

			Year ended 31 March 2022		Year ended 31 March 2021
		Note	£'000		£'000
Continuing operations
Revenue		2	158,005		98,066
Rechargeable expenses		2	(196)		(112)
Net fee income		2	157,809		97,954
Cost of sales		2	(98,452)		(63,130)
Gross profit		2	59,357		34,824
Administration expenses			(41,582)		(24,648)
Operating profit			17,775		10,176
Depreciation			1,155		1,085
Amortisation of capitalised development costs			556		613
Adjusting items		3	14,382		9,833
Adjusted EBITDA		3	33,868		21,707
Finance income			1		-
Finance expense			(2,894)		(1,207)
Profit before tax			14,882		8,969
Taxation			(6,370)		(3,142)
Profit for the year			8,512		5,827
Exchange differences on translation of foreign operations			3,180		(3,104)
Total comprehensive income for the year			11,692		2,723
Basic earnings per ordinary share (p)		5	7.69		5.75
Diluted earnings per ordinary share (p)		5	7.25		5.50

   

 

 

Consolidated statement of financial position

As at 31 March 2022

 

		As at 31 March 2022		As at 31 March 2021
	Note	£'000		£'000
Assets
Non-current assets
Goodwill		100,991		63,067
Intangible fixed assets		31,333		21,648
Property, plant and equipment		806		415
Right-of-use asset		2,304		1,816
Deferred tax asset		671		-
Capitalised contract fulfilment costs		131		154
Total non-current assets		136,236		87,100
Current assets
Trade and other receivables	7	29,569		17,938
Cash and cash equivalents		63,516		34,012
Total current assets		93,085		51,950
Current liabilities
Trade and other payables	8	(56,671)		(27,241)
Provisions	9	(3,277)		-
Corporation tax		(4,788)		(1,792)
Lease liabilities		(1,134)		(514)
Total current liabilities		(65,870)		(29,547)
Net current assets		27,215		22,403
Non-current liabilities
Deferred tax provision		(4,331)		(3,022)
Other non-current liabilities	10	(25,100)		(10,737)
Lease liabilities		(1,275)		(1,379)
Total non-current liabilities		(30,706)		(15,138)
Net assets		132,745		94,365
Equity
Issued share capital	11	89		80
Share premium		119,438		89,396
Foreign exchange reserve		3,482		302
Other reserves		9,361		4,044
Retained earnings		375		543
Total shareholders' equity		132,745		94,365

 

Consolidated statement of cash flows
For the year ended 31 March 2022

				Restated16
		Year ended		year ended
		31 March 2022		31 March 2021
	Note	£'000		£'000
Cash flows from operating activities:
Profit for the year		8,512		5,827
Taxation		6,370		3,142
Finance income		(1)		-
Finance expense		2,894		1,207
Depreciation of property, plant and equipment		1,155		1,085
Loss on disposal of fixed assets		32		13
Amortisation of intangible fixed assets		5,272		4,130
Share-based payment charge	12	4,075		1,693
Increase in provisions	9	1,302		-
Operating cash flows before movements in working capital		29,611		17,097
Working capital adjustments:
(Increase)/decrease in trade and other receivables		(7,066)		3,221
Increase in trade and other payables		15,729		6,424
Tax paid		(4,767)		(5,707)
Net cash generated from operating activities		33,507		21,035
Cash flows from investing activities:
Interest received		1		-
Acquisition of subsidiaries, net of acquired cash		(23,796)		(2,752)
Purchase of property, plant and equipment, net of disposals		(684)		(151)
Net cash used in investing activities		(24,479)		(2,903)
Cash flows from financing activities:
Issue of ordinary share capital		31,102		-
Share issuance costs		(1,053)		-
EBT purchase of Company's own shares		(205)		-
Repayment of bank borrowings		-		(5,000)
Interest and bank loan fees		(285)		(486)
Principal lease liability payments		(814)		(809)
Interest on lease liabilities		(111)		(102)
Dividends paid	4	(8,678)		(2,136)
Net cash generated from/(used in) financing activities		19,956		(8,533)
Net increase in cash and cash equivalents		28,984		9,599
Cash and cash equivalents at beginning of the year		34,012		25,996
Effect of exchange rate fluctuations on cash held		520		(1,583)
Cash and cash equivalents at end of the year		63,516		34,012

 

¹⁶ The Group has re-presented the consolidated statement of cash flows in the comparative year to reconcile from "profit for the year" rather than "operating profit" to align with the requirements of IAS 7.

 

 

 

Consolidated statement of changes in equity

For the year ended 31 March 2022

 

	Share capital £'000		Share premium £'000		Foreign exchange reserves £'000		Other reserves £'000		Retained earnings £'000		Total £'000
As at 1 April 2020	78		89,396		3,406		1,652		(3,146)		91,386
Comprehensive income
Profit for the year	-		-		-		-		5,827		5,827
Foreign exchange differences on translation of foreign operations	-		-		(3,104)		-		-		(3,104)
Transactions with owners
Shares issued (equity)	2		-		-		-		(2)		-
Share-based payment charge	-		-		-		1,693		-		1,693
Net settlement of vested share options	-		-		-		(100)		-		(100)
Current tax recognised in equity	-		-		-		374		-		374
Deferred tax recognised in equity	-		-		-		425		-		425
Dividends	-		-		-		-		(2,136)		(2,136)
As at 31 March 2021	80		89,396		302		4,044		543		94,365
Comprehensive income
Profit for the year	-		-		-		-		8,512		8,512
Foreign exchange differences on translation of foreign operations	-		-		3,180		-		-		3,180
Transactions with owners
Shares issued (equity)	9		30,042		-		-		(2)		30,049
Purchase of own shares by the EBT	-		-		-		(205)		-		(205)
Share-based payment charge	-		-		-		4,075		-		4,075
Net settlement of vested share options	-		-		-		(12)		-		(12)
Current tax recognised in equity	-		-		-		220		-		220
Deferred tax recognised in equity	-		-		-		1,239		-		1,239
Dividends	-		-		-		-		(8,678)		(8,678)
As at 31 March 2022	89		119,438		3,482		9,361		375		132,745

 

 

Notes to the consolidated financial statements

 

1.   Basis of preparation

 

The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 March 2022 or 2021 but is derived from those accounts. Statutory accounts for the year ended 31 March 2021 have been delivered to the registrar of companies, and those for the year ended 31 March 2022 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

These condensed preliminary financial statements have been prepared in accordance with the recognition and measurement requirements of UK-adopted international financial reporting standards in conformity with the requirements of the Companies Act 2006, in line with the Group's statutory accounts.

 

2.   Segment information

 

Group management has determined the operating segments by considering the segment information that is reported internally to the chief operating decision maker, the Board of Directors. For management purposes, the Group is currently organised into three geographical operating divisions: UK, North America and Europe & APAC, which allows the Board to evaluate the nature and financial effects of the business activities of the Group and the economic environments in which it operates. The Group's operations all consist of one type: consultancy and related services to the asset management, wealth management and insurance industries.

 

The Directors consider that there is a material level of operational support and linkage provided to the Group's emerging territories in Europe & APAC, as they develop their presence locally, and as such have been deemed to constitute one operating segment.

 

Revenues associated with software licensing arrangements were immaterial in both the current and prior years. Therefore, the Directors consider that disaggregating revenue by operating segments is most relevant to depict the nature, amount, timing and uncertainty of revenue and cash flows as may be affected by economic factors.

 

Segmental information

 

FY 22	UK	North America	Europe & APAC18	Total
	£'000	£'000	£'000	£'000
Revenue	72,134	47,001	38,870	158,005
Rechargeable expenses	(71)	(80)	(45)	(196)
Net fee income	72,063	46,921	38,825	157,809
Cost of sales	(41,419)	(31,594)	(25,439)	(98,452)
Gross profit	30,644	15,327	13,386	59,357
Margin on net fee income17 (%)	42.5%	32.7%	34.5%	37.6%
Non-current assets	71,110	42,808	22,318	136,236
FY 21	UK	North America	Europe & APAC	Total
	£'000	£'000	£'000	£'000
Revenue	53,471	16,531	28,064	98,066
Rechargeable expenses	(51)	(17)	(44)	(112)
Net fee income	53,420	16,514	28,020	97,954
Cost of sales	(32,022)	(12,040)	(19,068)	(63,130)
Gross profit	21,398	4,474	8,952	34,824
Margin on net fee income17 (%)	40.1%	27.1%	31.9%	35.6%
Non-current assets	59,181	7,766	20,153	87,100

¹⁷ Margin on net fee income is gross profit expressed as a percentage of net fee income. Please refer to note 3 for further detail.

 

¹⁸ Within Europe & APAC, France is a material country and generated profits after tax of £3.0m (FY 21: £1.9m) and revenue of £17.8m (FY 21: £12.5m).

 

During the year, the Group did not have any customers that comprised more than 10% of the Group's revenues. One customer within the UK segment comprised more than 10% of Group revenues in FY 21 comprising £11.7m or 12.0% of Group revenue.

 

The Group's central non-current assets have been allocated to the UK operating segment, except for goodwill, intangible assets and right-of-use assets, which have been allocated to relevant operating segments.

 

Following the acquisition of Lionpoint in the year, the Group has recognised the relevant amounts within the segments in line with the different territories in which Lionpoint operates.

 

3.   Reconciliations to alternative performance measures

 

Alpha uses alternative performance measures ("APMs") that are not defined or specific under the requirements of IFRS. The APMs, including net fee income, margin on net fee income, adjusted EBITDA, adjusted profit before tax, adjusted EPS, adjusted cash conversion and organic net fee income growth, are provided to allow stakeholders a further understanding of the underlying trading performance of the Group and aid comparability between accounting periods. These measures have been applied consistently across reporting periods. They are not considered a substitute for, or superior to, IFRS measures.

 

Net fee income

 

The Group disaggregates revenue into net fee income and expenses recharged to clients. Net fee income provides insight into the Group's productive output and is used by the Board to set budgets and measure performance. This APM is reconciled on the face of the income statement and by segment to revenue in note 2.

 

Profit margins

 

Margin on net fee income and adjusted EBITDA margin are calculated using gross profit and adjusted EBITDA, and are expressed as a percentage of net fee income. These margins represent the margin that the Group earns on its productive output, excluding nil or negligible margin expense recharges to clients over which the Group has limited control, and allows comparability of the business output between periods. Such adjusted margins are used by the management team and the Board to assess the performance of the Group.  

Reconciliation of adjusted profit before tax, adjusted operating profit and adjusted EBITDA

 

		FY 22		FY 21
	Note	£'000		£'000
Profit before tax		14,882		8,969
Amortisation of acquired intangible assets		4,716		3,517
Loss on disposal of fixed assets		32		13
Share-based payments charge	12	6,218		2,496
Earn-out and deferred consideration	6	1,423		3,606
Acquisition costs		683		-
Integration costs		-		107
Foreign exchange losses		1,310		94
Adjusting items		14,382		9,833
Non-underlying finance expenses		2,487		803
Adjusted profit before tax		31,751		19,605
Net underlying finance expenses		406		404
Adjusted operating profit		32,157		20,009
Depreciation of property, plant and equipment		1,155		1,085
Amortisation of capitalised development costs		556		613
Adjusted EBITDA		33,868		21,707
Adjusted EBITDA margin (%)		21.5%		22.2%

 

Adjusting items

 

The Group's APMs exclude certain expense items in order to aid understanding of the comparable underlying performance of the business. These items are generally non-cash, non-recurring by nature or are acquisition related.

 

Amortisation of acquired intangible assets and profit or loss on disposal of fixed assets are treated as adjusting items to better reflect the underlying performance of the business, as they are non-cash items, principally relating to acquisitions.

 

The share-based payments charge, and related social taxes are excluded from adjusted profit measures. This allows comparability between periods as the Group's share option plans were established on AIM admission and have not yet settled into a regular cycle of awards and vesting. The accounting treatment of the Group's share options requires the charge for each share option award to be recognised over the vesting period, resulting in significant growth in the charge year on year as the Group matures post-IPO. The estimated future social taxes payable are closely linked to the share-based payment charge and fluctuate with the assumed future market value of shares. This approach has been applied consistently across reporting periods. Note 12 sets out further details of the employee share-based payments expense calculation under IFRS 2.  A more regular share option award cycle is anticipated in the coming years. If no adjustment was made for the share-based payments charge, adjusted EBITDA for the year would be £27.7m (FY 21: £19.2m).

 

As per note 6, the acquisition of Lionpoint in the year involved both deferred and contingent payments. Part of the Lionpoint acquisition payments are dependent on the ongoing employment of certain members of the senior Lionpoint management team, and this element is expensed annually over several years until the date of payment. In prior years, the Group similarly recognised employment-linked costs through the income statement relating to payments for the previous acquisitions of Axxsys and Obsidian, or to reflect adjustments made to the fair value of the expected future payment. These costs have been treated as adjusting items as they are acquisition related, reflecting the acquisition terms rather than Group trading performance. Whilst these acquisition-related costs will recur in the short term through the earn-out period, the adjustment allows comparability of underlying productive output and operating performance across reporting periods.

 

Other acquisition costs expensed in the year in relation to the acquisition of Lionpoint, including diligence and legal fees. Whilst further similar acquisition costs could be incurred in the future, these costs are not directly attributable to the ongoing operational trading performance of the Group, the timing and amount of such costs may vary year to year and treating these as an adjusting item allows comparability of the operating performance across reporting periods.

 

Integration costs in the previous year were in relation to the acquired Obsidian product suite, including security and its integration with the technology protocols within the ADS 360 SalesVista product. Those costs directly resulted from the acquisition of Obsidian in previous years. Integration of Obsidian was completed in April 2020 and was managed as a discrete short-term project subsequent to the acquisition.

 

Similarly, the impact of foreign currency volatility in translating local working capital balances to their relevant functional currencies has been excluded from the calculation of adjusted profit measures on the basis that such exchange rate movements do not reflect the underlying trends or operational performance of the Group. This year the foreign exchange loss is predominantly acquisition related with Lionpoint's deferred consideration payable in US dollars and the USD:GBP rate experiencing some movement around the completion date.

 

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 the adjusting items above, including amortisation of acquired intangible assets, share-based payment charge, acquisition-related payments and costs, non-underlying finance expenses and other non-underlying expenses. This measure was introduced to allow comparability of the Group's underlying performance after the adoption of IFRS 16. This measure also reflects the underlying amortisation charges arising from capitalised development costs relating to ADS product development.

 

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. 

 

		FY 22		FY 21
		£'000		£'000
Adjusted profit before tax		31,751		19,605
Tax charge		(6,370)		(3,142)
Tax impact of adjusting items		(1,624)		(1,358)
Adjusted profit after tax		23,757		15,105

 

 

Adjusted earnings per share

 

Adjusted earnings per share ("EPS") is calculated by dividing the adjusted profit after tax for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Adjusted diluted EPS is calculated by dividing adjusted profit after tax by number of shares as above, adjusted for the impact of potentially dilutive ordinary shares. Potentially dilutive ordinary shares are only treated as dilutive when their conversion to ordinary shares would decrease EPS (or increase loss per share). Refer to note 5 for further detail.

 

 

Adjusted EPS		FY 22		FY 21
Adjusted EPS (p)		21.46		14.91
Adjusted diluted EPS (p)		20.23		14.26

 

 

Reconciliation of adjusted administrative expenses

 

To express them on the same basis as the APMs described above, adjusted administration expenses are stated before adjusting items, depreciation and amortisation of capitalised development costs and are used by the Board to monitor the underlying administration expenses of the business in calculating adjusted EBITDA.

 

		FY 22		FY 21
		£'000		£'000
Administrative expenses		41,582		24,648
Adjusting items		(14,382)		(9,833)
Depreciation of property, plant and equipment		(1,155)		(1,085)
Amortisation of capitalised development costs		(556)		(613)
Adjusted administrative expenses		25,489		13,117

 

Adjusted cash generated from operating activities

 

Adjusted cash generated from operating activities excludes any employment-linked acquisition payments and other acquisition costs expensed in the year, treated as operating cash flows under IFRS, to reflect the Group's underlying operating cash flows, exclusive of cash payments relating to acquisitions.

 

 

		FY 22		FY 21
		£'000		£'000
Net cash generated from operating activities		33,507		21,035
Employment-linked acquisition payments19		1,848		1,246
Acquisition costs		683		-
Adjusted cash generated from operating activities		36,038		22,281

 

¹⁹ Total gross acquisition payments made in the year were £25.6m, excluding £2.1m of cash acquired. £24.9m of initial Lionpoint consideration was paid in May 2021, with a further £2.8m of deferred and contingent payments made during the year. Please see note 6 for further details. Of the £25.6m, £1.8m related to employment-linked acquisition payments, treated as operating under IFRS, and a further £23.8m is considered to be capital in nature and included within investing activities in the Group's consolidated statement of cash flows.

 

Adjusted cash conversion

 

Cash conversion is stated as net cash generated from operating activities expressed as a percentage of operating profit.

 

Adjusted cash conversion is stated as adjusted cash generated from operating activities expressed as a percentage of adjusted operating profit.

 

		FY 22		FY 21
Cash conversion		189%		207%
Adjusted cash conversion		112%		111%

 

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 31.3% (FY 21: 8.0%) for the current period represents FY 22 net fee income less £29.2m net fee income attributable to the Lionpoint acquisition completed during the year.

 

Constant currency growth

 

The Group operates in multiple jurisdictions and generates revenues and profits in various currencies. Those results are translated on consolidation at the foreign exchange rates prevailing in that period. These exchange rates vary from year to year, so the Group presents some of its results on a "constant currency" basis. This means that the current year's results have been retranslated using the average exchange rates from the prior year to allow for comparison of year-on-year results, eliminating the effects of volatility in exchange rates.

 

Currency translation had a noticeable impact on both net fee income and gross profit in the year, as a result of a strengthening British pound sterling through the year against both the US dollar and against the Euro. In the year, British pound sterling averaged $1.37 (FY 21: $1.31) and €1.18 (FY 21: €1.12). On a constant currency basis, the Group's net fee income for the year would be £3.4m higher (2.1%) and, similarly, gross profit would be £1.4m higher.

 

 

4.   Dividends

 

		FY 22		FY 21
		£'000		£'000
Amounts recognised as distributions to equity holders:
Final dividend for the year ended 31 March 2021 of 4.85p (FY 20: nil) per share (restated)		5,431		-
Interim dividend for the year ended 31 March 2022 of 2.90p (FY 21: 2.10p) per share		3,247		2,136
Total dividends paid in the year		8,678		2,136

 

 

After the balance sheet date, the Directors proposed a final dividend of 7.50p per ordinary share, totalling approximately £8.6m based on the estimated eligible shares in issue at the payment date. The proposed final FY 22 dividend is subject to approval by shareholders at the AGM and has, therefore, not been included as a liability in these consolidated financial statements. Subject to approval, the dividend will be paid on 20 September 2022 to shareholders on the register at close of business on 9 September 2022.

 

The total final dividend for the year ended 31 March 2021 of 4.85p per share was previously disclosed as an estimated £5,416,000 in the prior year. This has been updated to reflect the actual dividend paid in the table above.

 

5.   Earnings per share and adjusted earnings per share

 

The Group presents basic and diluted EPS data, on both an adjusted and non-adjusted basis. Basic EPS is calculated by dividing the profit or loss for the year attributable to ordinary shareholders by the weighted average number of ordinary shares fully outstanding during the year.

 

The weighted average number of diluted ordinary shares used in the calculation of diluted EPS includes the number of shares that are issued to satisfy share incentive awards granted to employees as they fall due, adjusted for the likelihood of meeting performance criteria, if any. Potential ordinary shares are only treated as dilutive when their conversion to ordinary shares would decrease EPS (or increase loss per share).  

 

In order to reconcile to the adjusted profit for the financial year, the same adjustments as in note 3 have been made to the Group's profit for the financial year. The profits and weighted average number of shares used in the calculations are set out below:

 

	Note	FY 22		FY 21
Basic & diluted EPS
Profit for the financial year used in calculating basic and diluted EPS (£'000)		8,512		5,827
Weighted average number of ordinary shares in issue ('000)		110,689		101,312
Number of dilutive shares ('000)		6,748		4,590
Weighted average number of ordinary shares, including potentially dilutive shares ('000)		117,437		105,902
Basic EPS (p)		7.69		5.75
Diluted EPS (p)		7.25		5.50

 

 

Adjusted EPS and adjusted diluted EPS
Adjusted profit for the financial year used in calculating adjusted basic and diluted EPS (£'000)	3	23,757		15,105
Weighted average number of ordinary shares in issue ('000)		110,689		101,312
Number of dilutive shares ('000)		6,748		4,590
Weighted average number of ordinary shares, including potentially dilutive shares ('000)		117,437		105,902
Adjusted EPS (p)		21.46		14.91
Adjusted diluted EPS (p)		20.23		14.26

 

 

6.   Acquisition of businesses

 

Acquisition in the current year

 

On 20 May 2021, the Group reached an agreement to acquire 100% of the issued share capital of Lionpoint Holdings, Inc. ("Lionpoint"), a provider of specialist consultancy services to the alternatives investments industry, on a cash free, debt free basis. The Directors consider that the acquisition is in line with the Group's stated growth strategy, significantly increasing both the Group's exposure to the attractive and fast-growing alternatives investments market and its footprint in the large and strategically important North America segment.

 

A summary of the purchase consideration, net assets acquired, identifiable intangible assets and goodwill is set out below. These fair values are determined by using established estimation techniques such as discounted cash flow and option valuation models. Since the provisional amounts disclosed within the Group's Interim Report & Accounts 2022, the Directors have made a measurement period adjustment to reflect an additional social security tax provision as at the acquisition date relating to Lionpoint. This resulted in an additional £0.3m provision reducing the recognised net assets in the table below and has resulted in an increase in goodwill of £0.3m. For further detail on this provision, please refer to note 9. Further, the Group have made a reclassification of £0.1m of tangible fixed assets to trade and other debtors due to obtaining further clarity on the nature of these amounts.

 

Lionpoint	Book values		Fair value adjustments		Values on acquisition
	£'000		£'000		£'000
Acquiree's net assets at the acquisition date:
Trade name	-		2,602		2,602
Order backlog	-		829		829
Customer relationships	-		10,752		10,752
Tangible fixed assets	53		-		53
Right-of-use assets	478		-		478
Trade and other receivables	4,588		-		4,588
Cash and cash equivalents	2,148		-		2,148
Trade and other payables	(2,380)		-		(2,380)
Provisions	(291)				(291)
Lease liabilities	(478)		-		(478)
Corporation tax liability	(67)		-		(67)
Deferred tax liability	-		(3,423)		(3,423)
Net identifiable assets acquired	4,051		10,760		14,811
Cash consideration relating to business combination					50,849
Goodwill on acquisition					36,038

 

The maximum amount payable for the acquisition (over four years) is $90.0m (£63.8m) alongside an additional $2.1m (£1.4m) in relation to completion working capital to be settled in cash, with the option to settle a portion of the deferred and contingent amounts in the Group's ordinary shares. Of this maximum amount payable, $7.5m (£5.3m) is employment-linked. The fair value of consideration recognised on the date of acquisition amounted to $72.3m (£50.8m), of which $33.5m (£23.5m) was paid on completion, together with the additional $2.1m (£1.4m) completion working capital payment. A balancing $0.5m (£0.3m) receivable is held at 31 March 2022, which will be deducted from future consideration payments to the management vendors.  

 

Of the remaining maximum consideration payable, deferred consideration of $17.0m (£12.0m) is payable across the first and second anniversaries of the acquisition and contingent earn-out consideration of up to a maximum of $32.0m (£22.6m) is payable in three instalments across FY 23 to FY 25. The FY 23 to FY 25 earn-out consideration payments are contingent on Lionpoint meeting certain profitability targets over the earn-out period. The total fair value of future consideration payable recognised on the date of acquisition was $37.3m (£26.2m), of which $20.6m (£14.5m) related to contingent consideration and $16.7m (£11.7m) related to deferred consideration.

 

The total cash payable on completion was funded from the Group's cash reserves and the proceeds of the May 2021 share placing, raising net proceeds of £30.0m. During the year, a further $1.0m (£0.7m) employment-linked deferred payments were made.

 

Employment-linked deferred and contingent consideration will be expensed through the income statement proportionately until FY 26. During the year, the Group has expensed £2.8m in relation to these employment-linked payments through the consolidated statement of comprehensive income.

 

The remaining deferred and contingent consideration is discounted to fair value. Discount unwinding is recognised in finance costs proportionately across the periods until final payment. During the year, £2.0m of discount unwinding was expensed as a non-underlying finance cost in relation to the Lionpoint acquisition consideration.

 

As consideration for the acquisition of Lionpoint is payable in US dollars, foreign exchange differences are recognised at each reporting date in relation to translating these liabilities into British pound sterling. In the year, the Group recognised a foreign exchange loss of £2.3m in the income statement arising from acquisition-related currency movements, particularly relating to movements around the acquisition date.

 

Following a strong performance of Lionpoint in the 10 months following acquisition, and reflective of a healthy pipeline of opportunities as at the balance sheet date, the Group has uplifted the Lionpoint forward projections, and in turn the total undiscounted expected earn-out payment to £22.3m from £21.0m, closer to the maximum payable. These values are inclusive of employment-linked amounts. After taking into account the impact of discounting, the Group has recognised a fair value adjustment relating to the valuation of the Lionpoint earnout liability as at 31 March 2022, reflecting this uplift. This adjustment has resulted in an additional charge through the Group's consolidated statement of comprehensive income of £1.1m.

 

As at 31 March 2022, a £33.7m liability is recorded, of which £15.5m is a current and £18.2m is a non-current liability. Of this liability at the balance sheet date, £14.0m relates to deferred consideration and the remaining £19.7m relates to contingent consideration.

 

Lionpoint contributed £29.2m to the Group's revenue and £3.7m to the Group's profit after tax for the year from the date of acquisition to 31 March 2022. If the acquisition of Lionpoint had been completed on 1 April 2021, Group revenues for the year would have been £161.3m and Group profits after tax would have been £7.8m, without adjustment to amortisation assumptions.

 

Acquisitions in previous years

 

As part of the acquisition of Axxsys Limited and Obsidian Solutions Limited in previous years, the Group agreed earn-out arrangements based on the financial performance of the respective acquired entities over an agreed period of time, subject to continuous employment of the respective vendors, as previously disclosed.

 

Obsidian

 

On 9 November 2019, the Group acquired 100% of the share capital of Obsidian Solutions Limited. Obsidian provides specialised software products to the investment management industry.

 

Employment-linked payments associated with the acquisition of Obsidian have been expensed through the Group's consolidated statement of comprehensive income proportionately from the acquisition date. During the year, the Group has expensed £1.1m in relation to these employment-linked payments through the consolidated statement of comprehensive income.

 

The earn-out payments have been estimated by the Directors based on anticipated future earnings, discounted to current values. The unwinding of this earn-out discount is recognised as a finance cost. During the year, £0.3m of this discount unwinding was expensed as a non-underlying cost in relation to Obsidian.

 

During the year, the Directors have revised their previous estimate in relation to the undiscounted value of the Obsidian earn-out based on the lower profitability achieved to date, and reduced projections for the remainder of the earn-out period, alongside the lapsing of an ongoing employment condition attached to the Obsidian earn-out agreement. The Directors have revised their estimate of the projected cash flows in relation to potential earn-out scenarios. The Directors have re-assessed the fair value of the earn-out liability based on several plausible scenarios, leading to a reduction in the assumed undiscounted earn-out from £9.3m to £1.9m. This resulted in a fair value adjustment of £3.8m to the liability as at 31 March 2022, which has been credited to the Group's consolidated statement of comprehensive income in the year. As at 31 March 2022, none of the remaining liability is being accounted for as employment-linked, given the lapsing of the ongoing employment condition referred to above.

 

Including the contingent earn-out and unwinding of discounting, and the above fair value adjustment, a total £1.9m estimated consideration is recorded within non-current liabilities.

 

Axxsys

 

On 5 June 2019, the Group acquired 100% of the share capital and voting interests of Axxsys Limited and subsidiaries. Axxsys has provided specialised consultancy and technology implementation services to the investment management industry since 2003.

 

Of the remaining deferred and contingent consideration amounts that were outstanding at 31 March 2021 in relation to the acquisition of Axxsys, £2.1m was paid during the year, of which £1.1m was employment-linked. £5.0m of contingent consideration remained outstanding at 31 March 2022 and was paid shortly after the year end. In the year, £0.2m was expensed relating to employment-linked consideration, and £0.2m of discount unwinding was expensed as a non-underlying finance cost in relation to Axxsys up to the final payment dates.

 

The below table summarises the movements in the deferred and contingent consideration liabilities held at 31 March 2022:

 

	Axxsys		Obsidian		Lionpoint		Total
	£'000		£'000		£'000		£'000
Balance at 1 April 2021	6,706		4,357		-		11,063
Additions	-		-		26,210		26,210
Fair value adjustment	-		(3,815)		1,138		(2,677)
Employment-linked consideration	219		1,087		2,794		4,100
Payments in the year	(2,100)		-		(707)		(2,807)
Unwinding of discounting	175		269		2,043		2,487
Foreign exchange loss	-		-		2,270		2,270
Balance as at 31 March 2022	5,000		1,898		33,748		40,646

 

The £40.6m liability held at 31 March 2022 comprised £14.0m related to deferred consideration and £26.6m related to contingent consideration. Within these deferred and contingent consideration liabilities, £2.2m relates to employment-linked amounts.

 

The above liabilities are reflected in non-current and current liabilities as shown in the following table:

 

	Axxsys		Obsidian		Lionpoint		Total
	£'000		£'000		£'000		£'000
Current	5,000		-		15,500		20,500
Non-current	-		1,898		18,248		20,146
Balance as at 31 March 2022	5,000		1,898		33,748		40,646

 

 

7.   Trade and other receivables

 

		FY 22		FY 21
		£'000		£'000
Amounts due within 1 year:
Trade receivables		24,182		16,497
Less: allowance for expected credit losses		(541)		(378)
Trade receivables - net		23,641		16,119
Other debtors		539		319
Capitalised contract fulfilment costs		1,548		182
Prepayments		1,113		798
Accrued income		2,728		520
Total amounts due within 1 year		29,569		17,938

 

Trade receivables are non-interest bearing and generally have a 30- to 60-day term. Due to their short maturities, the carrying amount of trade and other receivables is a reasonable approximation of their fair value. Trade receivables have grown in the year reflecting the overall growth of the Group, with debtor days reducing to 55 days (FY 21: 60 days).

 

 

8.   Trade and other payables

 

	Note	FY 22		Restated20 FY 21
		£'000		£'000
Trade payables		5,114		1,780
Accruals		23,898		15,948
Deferred income		1,865		1,692
Social security tax on share options	12	1,050		267
Taxation and social security		2,964		4,352
Other creditors		1,280		1,210
Earn-out and deferred consideration	6	20,500		1,992
Total amounts owed within 1 year		56,671		27,241

 

²⁰ Trade and other payables in the FY 21 comparative period have been re-presented within this note to separately disclose social security tax on share options from other tax and social security liabilities.

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 trade payables balance has grown in the year reflecting the overall growth of the Group and the timing of payments made around the balance sheet date.

 

The accruals balance has grown in the year reflecting the overall growth of the Group and higher balances for the employee profit share bonuses and director bonuses, reflecting the enlarged team headcount and strong performance. These are accrued through the year and paid after the year end.

 

Earn-out and deferred consideration comprises £15.5m relating to the deferred and contingent consideration due on the acquisition of Lionpoint in the next twelve months, and £5.0m relating to the remaining contingent consideration payment arising from the acquisition of Axxsys Limited at the balance sheet date, which was paid shortly after year end.

 

 

9.   Provisions

 

		Social security tax provisions		Legal and other provisions		Total
	Note	£'000		£'000		£'000
Balance at 1 April 2021		-		-		-
Transfers from trade & other payables		1,400		284		1,684
Acquired through business combinations	6	291		-		291
Additional provisions made in the year		899		403		1,302
Balance as at 31 March 2022		2,590		687		3,277

The carrying value of the provisions disclosed above is a reasonable approximation of their fair value. Within social security tax provisions is an existing £1.4m (FY 21: £1.4m) provision relating to historic pre-AIM admission potential tax treatments. A further £0.3m of existing amounts related to several dilapidation provisions on the Group's leased offices. These were reported in the prior year within trade and other payables.

 

During the year, a further £0.9m provision was recognised relating to potential social security tax exposures, with an additional £0.3m acquired through business combinations. The amount of these tax provisions is subject to significant uncertainty. A final position agreed with a tax authority or through the expiry of a tax audit period could differ from the estimated provision. Currently there are no significant ongoing tax audits.

 

The Group has also recognised several immaterial provisions in the year totalling £0.4m (FY 21: £nil) relating to various ongoing legal claims, representing the most probable outcome at the balance sheet date.

 

Whilst a range of outcomes is reasonably possible, these total potential liabilities range between £1.2m and £5.2m.

 

 

10. Other non-current liabilities

 

	Note	FY 22 £'000		FY 21 £'000
Earn-out and deferred consideration	6	20,146		9,071
Deferred income		233		304
Social security tax on share options	12	1,953		1,362
Other non-current liabilities		2,768		-
Total amounts owed after 1 year		25,100		10,737

 

Within earn-out and deferred consideration is £1.9m associated with the potential earn-out payments linked to the acquisition of Obsidian Solutions Limited and £18.2m associated with deferred and contingent earn-out payments relating to the Lionpoint acquisition. These amounts are expected to fall due over 12 months from the balance sheet date. Refer to note 6 for further detail.

 

Other non-current liabilities of £2.8m (FY 21: £nil) represents the deferred element of FY 22 bonuses, due to be paid in summer 2023 to senior management and certain directors globally.

 

 

11. Called up share capital

 

		FY 22		FY 21
		Number		Number
Allotted, called up and fully paid		118,707,336		106,521,966
Ordinary 0.075p shares (1 vote per share)
		FY 22		FY 21
		£		£
Allotted, called up and fully paid		89,031		79,891
Ordinary 0.075p shares (1 vote per share)

 

Movements in share capital during the year ended 31 March 2022:

 

						£
Balance at 1 April 2021				79,891
106,521,966 ordinary shares of 0.075p each
Issued shares		(i)		9,140
Balance at 31 March 2022 118,707,336 ordinary shares of 0.075p each				89,031

 

i) During the year, the Group issued 12,185,370 ordinary shares of 0.075p each, of which 9,569,839 shares were issued as part of the Group's May 2021 share placing for net proceeds of £30.0m, net of transaction costs of £1.1m, 815,531 shares relate to the exercise of some vested share options and 1,800,000 shares were issued to the employee benefit trust ("EBT") for future satisfaction of share incentive plans.

 

Alpha Employee Benefit Trust

 

The Group held 6,216,501 (FY 21: 4,413,628) shares in the employee benefit trust ("EBT") comprising shares held to satisfy share options granted under its joint share ownership plan ("JSOP") or unallocated ordinary shares to satisfy share options granted under the Group's other share option plans. Ordinary shares held within the EBT have no dividend or voting rights. 

 

During the year, 1,800,000 ordinary shares were transferred by the Company to the EBT for potential future satisfaction of share incentive plans, either through the issuance of new shares or the transfer of shares bought back from prior employees at nominal value. In the year, the EBT purchased 57,006 shares at market value. Ordinary shares held within the EBT have no dividend or voting rights.

 

In the year, 54,133 shares held in the EBT were utilised for employee share option exercises.

 

Treasury shares

 

The Group held nil (FY 21: nil) shares in treasury.

 

12. Share-based payments

 

The Group has adopted a globally consistent share incentive plan approach, which is implemented using efficient jurisdiction specific plans, as appropriate.

 

The Management Incentive Plan

 

The Group has a management incentive plan ("MIP") to retain and incentivise the directors and senior management. The MIP consists of four parts: part A of which will enable the granting of enterprise management incentive and non-tax advantaged options to acquire shares; part B of which will enable the awarding of JSOPs; part C of which will enable the awarding of restricted stock units ("RSUs") for participants in the US; and Part D of which will enable the awarding of RSUs in France (together the "options").

 

Options granted up to FY 20 to certain directors and senior management of the Group were subject to the fulfilment of two or more of the following performance conditions: (a) a specific business unit's budgetary EBITDA, or other personal targets and goals; (b) the Group achieving a total shareholder return for the 3 years from year of award in excess of the average total shareholder return of a peer group of comparable companies; and (c) the Group achieving at least 10% EPS growth against the comparative financial year. 

 

As disclosed last year, responding to the impact of COVID-19, options granted to senior management in FY 21 were subject to more flexible performance criteria, including local budget targets and a variety of stretching personal sales or other targets. FY 21 awards made to Executive Directors, as in prior years, were also subject to the Group achieving a total shareholder return ("TSR") in excess of the average total shareholder return of a peer group of comparable companies, for a period of 3 years from the year of grant.

 

This year the Remuneration Committee has returned to a more standard approach in setting the FY 22 award criteria. The criteria for FY 22 share incentive awards to the Executive directors and senior management of the Group, depending on the individual and their role, include: (a) the Group achieving adjusted EPS growth of 15% or more to trigger a maximum award, or 10% to trigger a 66% award, with a linear application of awards between these levels; (b) the Group achieving a TSR over three years in excess of the mean TSR delivered by a peer group of comparable companies; (c) personal adherence to corporate values and risk policy; and (d) specific business unit EBITDA, or other personal targets and goals.

 

MIP awards have either nominal or minimal exercise price payable in order to acquire shares pursuant to options. MIP awards have either 3- or 4-year vesting periods from the date of grant and can be equity settled only. 

 

The Employee Incentive Plan

 

In addition to the MIP, the Board has previously put in place a medium-term employee incentive plan ("EIP"). Under the EIP, a broad base of the Group's employees has been granted share options or share awards over a small number of shares. The EIP is structured as is most appropriate under the local tax, legal and regulatory rules in the key jurisdictions and therefore varies between those jurisdictions. A limited number of EIP awards were made in the year.

 

During the year ended 31 March 2022, a total of 2,959,429 share option and award grants were made to employees and senior management (FY 21: 3,376,744). The weighted average of the estimated fair values of these options awarded in the year is £2.68 per share (FY 21: £1.68).

 

On 12 August 2021, 13 December 2021, 18 December 2021 and 3 March 2022, certain MIP awards vested, following satisfaction of performance conditions. The awards' performance conditions relating to EPS growth and total shareholder return exceeding a basket of comparable companies over 3 years to the vesting date were met in full and the relevant local country or divisional budgetary performance conditions were met in full or part, dependent on Alpha location. As a result, 529,419 nominal cost awards over ordinary shares of 0.075 pence per share vested and 195,850 share awards were forfeited under performance conditions or as a result of leavers before vesting.

 

All of these vested awards were exercised, with an additional 343,750 share options that vested in FY 21 also exercised on 2 July 2021. Of these total 873,169 share options exercised, the Company settled 815,531 through the issuance of ordinary shares, with 3,505 additional share options retained for net tax settlement. A further 54,133 share options were settled through the issuance of existing shares from the EBT. The weighted average share price at the date of these exercises was £3.90. The remaining vested award holders have a further 6-year period in which to exercise their vested awards.  

 

Details of the share option awards made are as follows:

 

				FY 22 Number of share options
Outstanding at the beginning of the year				7,613,969
Granted during the year				2,959,429
Exercised during the year				(873,169)
Forfeited during the year				(195,850)
Expired during the year				-
Outstanding at the year end				9,504,379
Exercisable at the year end				194,168

 

The weighted average exercise price for all options outstanding in both the current and prior years was nominal. The options outstanding at 31 March 2022 had a weighted average remaining contractual life of 2 years.

 

During the year ended 31 March 2022, options were granted on 6 July 2021 and 20 July 2021 to employees and certain senior management.

 

MIP share options with an external market condition were valued at award using the Monte Carlo option pricing model. The model simulates a variety of possible results, across 10,000 iterations for each of the options, by substituting a range of values for any factor that has inherent uncertainty over a number of scenarios using a different set of random values from the probability functions. The model takes any market-based performance conditions into account and adjusts the fair value of the options based on the likelihood of meeting the stated vesting conditions.

 

MIP share options without external market conditions and EIP share options were valued at award using a Black-Scholes model using the following inputs:

 

					FY 22
Weighted average share price at grant date					£3.53
Exercise price					nominal
Volatility					17.80%
Weighted average vesting period					4.00
Risk free rate					0.12%
Expected dividend yield					3.00%

 

Expected volatility was determined by calculating the historic volatility of the market in which the Group operates. The expected expense calculated in the model has been adjusted, based on management's best estimate, for the effects of non market-based performance conditions and employee attrition.

 

The Group recognised a total expense of £6.2m (FY 21: £2.5m) in the current year, comprising £4.1m (FY 21: £1.7m) in relation to equity settled share-based payments, and £2.1m (FY 21: £0.8m) relating to relevant social security taxes. Given the estimation, were the future conditions for all outstanding share options assumed to be met at the end of the reporting period, the charge in the year would increase by £1.7m.

 

The carrying value of amounts relating to social security tax on share options as at 31 March 2022 is £3.0m (FY 21: £1.3m), with £2.1m recognised in the P&L and payments amounting to £0.7m made in the year. Assumptions associated with the calculation of the social security tax liability due on vesting of share options include an estimation of the forward-looking share price at the vesting date based on applicable analyst research and applicable future tax rates. For these purposes, share price is updated at each reporting period to reflect historic levels, and is assumed to grow in line with the estimated future performance of the business. If the estimated future share price growth assumption were to double, the social security costs in the year could increase by £0.3m. Were the share price to remain flat the charge would reduce by £0.4m

 

13. Events after the reporting period

 

Purchase of investment management enterprise technology solutions practice

 

On 8 April 2022, the Group reached an agreement to onboard the investment management enterprise technology solutions practice of CohnReznick LLP, a leading advisory, assurance and tax firm primarily based in the United States for £0.3m.

 

Based on initial assessment, this is considered to be an asset purchase, not the acquisition of a business in line with IFRS 3 para B5-B12D.

 

- END -