Alpha Financial Markets Consulting plc

Operations

What's the mission of the company?

The mission of the company is to help businesses maximise their profits, in particular by being recognised as the leading global consultancy to the asset management, wealth management and insurance industries.

What's the company's main offering(s)?

Who’s the target audience of the company’s flagship/first product?

The audience is companies that operate in the asset management, wealth management and insurance industries.

What's a major problem that the target audience experience?

A lack of profits/growth.

What's a key solution to the problem?

The solution is consultancy services. What makes the consultancy services unique is that it's focused on the asset management, wealth management and insurance industries. Research suggests that asset management, wealth management and insurance industries focused consultancy services enable asset managers, wealth managers and insurance companies, respectively, to make better decisions, ultimately leading the companies to improve/maximise their profits.

Client service proposition

The group’s client proposition can be broadly categorised into three areas: Alpha Financial Markets Consulting, Alpha Technology Services and Alpha Data Solutions.

Alpha Financial Markets Consulting

The group provides advice to its clients in the asset and wealth management industry based on its sector experience and deep knowledge of the needs of specific industry participants. The group’s financial markets consulting proposition extends to working with clients across the four primary areas of:

1. Strategy and advisory
2. Evaluation and selection
3. Implementation and execution
4. Benchmarking

In each case, these services are delivered across the value chain, which comprises:

1. Portfolio optimisation
2. Order management
3. Pre-trade and post-trade compliance
4. Sales, marketing and distribution operating model design
5. Client relationship management and engagement
6. Regulatory and investment guidance change and other risk management
7. Middle and back office outsourcing selection
8. Client reporting
9. Trade and corporate action processing
10. Fund and portfolio accounting
11. Custody services

Strategy and Advisory

The group provides its clients with insight into market trends, new products, the regulatory agenda and competitive threats and opportunities. The advice that the group provides allows its clients to make decisions on managing their business and connecting with the market. The group’s consultants are industry specialists, and as part of a global team, are able to provide an international perspective for their clients, giving insight across the value chain.

Evaluation and Selection

The group provides independent and impartial advice to its clients on the choice of technology solutions, outsourcing providers and other partners for their businesses. Using its current knowledge of the market and proprietary benchmarking data, the group is able to provide an up-to-date view of provider capabilities and the best solutions for the specific needs of its clients. The group’s impartial position also enables it to conduct commercial negotiations on behalf of clients and build relationships between these clients and their providers.

Implementation and Execution

For the implementation and execution of complex projects, the group provides clients with professional teams who have specialist hands-on expertise in delivering complex and time critical projects. These projects span the spectrum of front, middle and back office functions.

Benchmarking

The group has developed an extensive library of data and analysis on the asset and wealth management industry, providing benchmarking analysis on comparable costs, operational performance, key performance Indicators and other metrics. This library of benchmarking data is proprietary to the group. Clients are able to benchmark their operational capability and cost profile against other asset managers; if the operational activity is outsourced, they can compare capability and cost profiles against the services provided by third party administrators to other outsourced asset managers.

The studies benchmark core comparison metrics and include:

• Tariff and rate cards;
• Key performance indicators and service performance;
• Service level agreements; and
• Commercial contract items.

Alpha Technology Services

Through Alpha Technology Services, the group delivers specialist technical expertise to clients in two key areas:

Project Delivery

The group’s specialists include developers or configurators with deep expertise in a particular software platform or range of platforms.

Ongoing Support

Following the implementation of a software platform (for example, the Salesforce.com Client Relationship Management tool), Alpha Technology Services supports clients with the ongoing maintenance, improvement and configuration of the platform. This is typically contracted on an annual basis, providing clients with access to a set number of days of support per week or month, and Alpha with an annuity revenue stream.

Currently, Alpha Technology Services is predominantly focused on servicing the distribution part of the asset and wealth management value chain, but demand is already emerging in other areas, and the group’s strategy is to address the growing area of demand by broadening its technical capabilities accordingly.

Alpha Data Solutions

Following the acquisition of TrackTwo GmbH in July 2017, the company’s new division, Alpha Data Solutions, provides a specialist data offering to asset managers. This data offering, 360 SalesVista, enables asset managers to match client transactions and AUM to create a golden source for client data. This improved visibility and accuracy of customer flows can be used by asset managers to deliver improved business outcomes across distribution, finance and compliance.

Project portfolio overview

Projects classification

Projects typically span multiple service lines and vary in size, duration and nature. The group undertakes projects across most of the asset and wealth management value chain and these fall into three categories:

• Major programmes: these typically span more than one financial year, are multi-geography and would be valued in excess of £2 million. There are usually 2 to 5 major programmes running in any year.
• Large programmes: these are typically up to a year in duration, single or multi regions and valued between £1 million and £2 million. There are circa 10 large programmes undertaken in a year.
• Small programmes: these are typically single region, focused programmes valued at less than £1 million. There are usually more than 100 small programmes undertaken in a year.
• The group principally prices its consulting services on a time and materials basis using daily charge out rates, but also uses fixed price contracts on occasions (typically in continental Europe).

Client segments

The group identifies challenges to and provides offerings for a range of clients, including:

Asset Managers

The group has provided services to over 200 clients across the globe, including 17 of the 20 largest global asset managers by AUM and 60% of the top 50 as at 31 March 2017. In addition to traditional asset managers, Alpha also advises insurance-backed and pension-based businesses. The group’s clients cover the whole spectrum of institutional, intermediary and retail asset managers.

Wealth Managers

Alpha works with wealth managers delivering private banking and wealth solutions, discretionary fund management and family office services to end clients. The services provided to these organisations mirror those delivered to traditional asset managers.

Third Party Administrators

The group works with the majority of the largest third party administrators, organisations that provide outsourced middle and back office services to the asset and wealth management industry. Alpha supports these organisations with a wide range of services, including sales effectiveness consulting, deal management and target operating model design and implementation.

Alternative Investment Managers

Alpha supports a range of clients in the alternative investment space, including private equity houses, alternative fund managers, and traditional asset managers with alternative investment strategies (such as real estate, private equity or other illiquid investments). The services provided to these organisations mirror those delivered to the traditional asset managers.

Other Providers

Finally, Alpha supports a range of other providers to the asset and wealth management industry, including software vendors and data providers. Engagements with these clients include new product development, market reviews and support responding to market requests for proposal.

Key strengths of the Group

As a leading global consultancy provider to the asset and wealth management industry, the directors believe that Alpha is well-positioned for continued growth in a marketplace shaped by the primary market drivers of an underlying growth in AUM, rising cost pressures, regulatory change and continuing consolidation, all of which are underpinned by technological change in the asset and wealth management industry. The group’s approach is to create value for clients by leveraging its extensive industry knowledge, proprietary database, product expertise and application of technology and digital innovation to deliver a targeted service offering across most of the asset and wealth management value chain from portfolio management through sales, distribution and the middle and back office. This approach allows the group to help its clients improve key aspects of their business.

The directors believe that Alpha’s strategy, together with the following competitive strengths, distinguish it from its competitors in this marketplace.

Focused industry proposition delivering true expertise – Alpha has developed specialised expertise and experience in the asset and wealth management industry. This industry focus enables the group’s professionals to provide offerings on a global basis with a comprehensive understanding of the market, business issues and relevant technologies, and ultimately deliver tailored solutions for each client.

Strong reputation and deep relationships with global clients – Alpha has served a large proportion of the world’s largest and most successful asset managers and wealth management companies, including 17 of the 20 largest global asset managers by AUM and 60% of the top 50 as at 31 March 2017.

Broad, diversified and expanding base of clients – The group’s business extends to delivering a range of product offerings to global asset managers, wealth managers, asset owners and third party administrators. Revenue is diversified across a growing client base with no single client accounting for more than 10% in the year ended 31 March 2017.

Intellectual property – The group combines industry leading consulting expertise with detailed proprietary benchmarking data developed since the creation of the group, which has enabled it to develop trusted, long term relationships with clients. This information is held by the company, preventing the company from becoming dependent on one particular individual or group of individuals.

Alpha’s people and culture – The group competes with the largest consultancy companies globally for talent, operating a business in which people are central to the delivery of its growth strategy. Alpha targets both graduates and experienced professionals and has developed a strong culture which attracts high calibre consultants and places people at the heart of the business. Further, Alpha has created an environment in which people are rewarded for both their own contribution and for the success of the business as a whole. The directors believe that Alpha’s reputation is key to attracting those talents. To develop and support high performance, the directors believe that the group has developed a rigorous recruitment process and comprehensive training and development plan, offers a market leading compensation package including profit share arrangements, and has a strong focus on employee wellbeing. This results in Alpha having attained what the directors believe to be an industry leading unmanaged consultant attrition rate of less than 5% in the year ended 31 March 2017.

Strong track record of organic growth – Alpha has delivered a consistent record of growth with a revenue CAGR of 37% from £6.71 million for the year ended 31 March 2011 to £43.56 million for the year ended 31 March 2017. This significant revenue growth has been accompanied by a CAGR in adjusted EBITDA of 47% over the same period, reaching £8.55 million for the year ended 31 March 2017.

Proven, experienced high-calibre management team – The group benefits from a high-calibre senior management team with substantial and diverse experience, led by Euan Fraser, the group’s Chief Executive Officer. Together, the senior management team has driven the growth and strong financial performance of the business over the past several years and has a proven track record of delivering results.

Building on the significant growth already achieved in recent years, the directors believe that the group has the potential to capture a significantly larger market share of its chosen markets. The directors believe that the competitive advantages as described above position the group to deliver profitable growth.

Which are the main competitors of the product?

A key way to determine an offering’s closest competitors is by looking at other offerings that are targeting the same or similar target audience (i.e. ccc) and providing or aiming to provide the same core benefit (i.e. more/maximum business profits, in particular ccc), and then ranking the offerings in terms of the total amount of time spent using and/or money spent purchasing the offerings. With that said, we view that the closest competitors of the Alpha FMC offering(s) are ccc, ccc and ccc. A detailed comparison between Alpha FMC and its main competitors are shown in the table below.

Alpha operates in a competitive global market and competes with several organisations that offer services similar to those offered by the group. Competitors include the advisory practices of major accounting firms, global consulting firms and boutique consulting businesses.

The group has been able to successfully compete against these firms by providing specialist expertise to the asset and wealth management industry, and by consistently delivering a high quality service which attracts repeat business and fosters long term relationships. Against the boutique consulting businesses, Alpha is able to differentiate itself through its global offering, relationships with the largest fund managers and reputation for high quality and efficient service. Against the global consulting firms, the group differentiates itself with a specialised industry offering and tailored client solutions. Alpha is able to set itself apart from the advisory practices of major accounting firms through its specialist sector focus and by deploying highly experienced industry consultants to client engagements, who have demonstrable track records of delivering complex projects. This is made possible through the group’s ability to attract and retain high calibre consultants.

Total Addressable Market

Here, the total addressable market (TAM) is defined as the global consultancy market, and based on a number of assumptions, it is estimated that the size of the market as of today (23rd January 2023), in terms of revenue, is $590 billion.

Serviceable Available Market

The serviceable available market (SAM) is defined as the global asset management, wealth management and insurance consultancy market, and based on a number of assumptions, it is estimated that the size of the market as of today (23rd January 2023), in terms of revenue, is $59 billion.

The asset and wealth management industry has grown significantly since 2008, with global aggregate assets under management standing at approximately $69.1 trillion at the end of 2016, compared to $38.5 trillion at the end of 2008.

Whilst overall AUM is growing, the asset and wealth management industry is experiencing challenges stemming from regulatory changes and cost pressures from the regulators and end clients. These factors are driving an increased focus by asset and wealth managers on improving systems, data quality and operational processes, in order to gain a competitive advantage, generate above average returns and reduce costs. This in turn has helped drive demand for the management consulting services provided to the asset and wealth management industry, across the spectrum of front, middle and back office functions.

The industry is subject to a wide range of regulatory and risk management considerations, which the directors believe will continue to drive growth in consulting services. In addition to the ever more demanding regulatory environment, the industry is having to react to requests from institutional and retail customers for greater transparency in reporting, engagement and accountability, which in turn is driving a growth in demand for more effective data systems and processes.

The pressure on margins within the asset and wealth management industry has also resulted in significant consolidation in recent years, as fund managers seek to increase assets under management, drive synergies and ultimately generate better returns through mergers and acquisitions (“M&A”).

The value of global M&A deals completed in the sector totalled approximately $34.9 billion in 2015 and $71.3 billion in 2016, with many market commentators expecting continued consolidation through M&A in the asset and wealth management industry in the near future. This has created substantial opportunities and areas of growth for Alpha as it continues to provide M&A integration, operational and outsourcing consultancy services to increasingly larger and more complex fund managers.

Serviceable Obtainable Market

Here, the serviceable obtainable market (SOM) is defined as the United Kingdom asset management, wealth management and insurance consultancy market, and based on a number of assumptions, it is estimated that the size of the market as of today (23rd January 2023), in terms of revenue, is $2.17 billion.

What are the main achievements of the company?

• Worked with all of the world's top 20 and 80% of the world's top 50 asset managers (in terms of asset under management), along with a wide range of other buy-side companies.
• The company has the largest dedicated team in the industry, with in excess of 900 consultants, globally.
• It operates from 16 client-facing offices, across the United Kingdom, North America, Europe and APAC.

What's the business strategy of the company?

The group’s strategy is to continue to grow in both existing and new jurisdictions. The group has a strong track record of EBITDA growth and intends to further grow its business in the following ways:

Expand existing services in existing markets – The group currently serves clients in multiple countries and the directors consider that there is substantial scope to grow within these markets. In addition to winning new clients, the group also aims to grow by extending the services delivered to existing clients, or by serving other client group entities.

Expand existing services into new jurisdictions – The group currently serves clients from its offices in the UK, France, the US, Luxembourg, Switzerland, the Netherlands and Singapore. The group will seek to extend its international reach to cover new jurisdictions and is considering new offices in Germany, Switzerland and Hong Kong over the coming years.

Adding new services to deliver to existing and new clients – The group will continue to evaluate market demand for new services, products and propositions to deliver to both existing and new clients in both existing and new jurisdictions. This assessment will take place at a local level and any new opportunities for such services shared globally across the group.

Make selective acquisitions – In addition to organic growth, the group will consider small scale acquisitions of consulting businesses, technology and intellectual property, to deepen, enhance or extend the group’s existing capabilities and the range of products and services offered to its clients.

Extend into new sectors within the financial services industry – The directors believe that the business model that has been successfully deployed in the asset and wealth management industry can be applied to new sectors within the financial services industry which exhibit similar industry characteristics such as (i) high regulatory oversight, (ii) a focus on operating model and technology change, (iii) changing end-client dynamics, and (iv) a familiar competitive landscape. In the medium term, Alpha will seek to develop a market leading proposition in industries which meet the above criteria. Of these, the directors currently believe the insurance industry is the most attractive area in which the company may look to expand, having already delivered some services in the space at the request of its clients (many of whom have insurance parents) and is exploring making relevant specialist hires into a separate pool of resource to support growth in this area.

Who are the key members of the team?

The company is led by the person who believes in the mission of the company the most: the creator of the company mission (i.e. ccc). Between them, the members of the team have helped companies raise a significant amount of finance and build some of the world's most renowned digital platforms.

Executive

Global Chief Executive Officer: Euan Fraser

Euan has served as Global Chief Executive Officer of Alpha since 2013. During this period, the business has increased EBITDA almost seven-fold, and he has led the Group through two private equity transitions and a public listing on the London Stock Exchange’s AIM in 2017. Euan was previously Chief Executive Officer of Alpha UK, starting in April 2011, where he established both Alpha’s M&A Integration and Operations & Outsourcing practices. He joined Alpha in 2004 and has over 20 years’ financial services experience, having worked at Merrill Lynch and KPMG, where he qualified as a chartered accountant.

Euan keeps the skills to support and deliver the Group’s strategy up to date through his role as Chief Executive Officer of a global consulting firm operating within the financial services sector. In this role, Euan has to understand and manage the interests of a range of stakeholders, including employees, clients, competitors and investors. Euan maintains a number of strong industry relationships that involve sharing of knowledge and perspectives.

Global Chief Financial Officer: John Paton

John is a chartered accountant with 23 years of corporate finance, banking and audit experience. He joined from HSBC where he was a Director in the UK Mid-Market Advisory team (2007-12), the Corporate Origination team (2012-16) and latterly, the UK Banking team (2016-2018). Over his 11 year tenure he advised on a variety of M&A transactions and led loan financings for UK corporates. Prior to this he spent more than five years at MacArthur & Co. focusing on capital raisings including AIM IPOs. John started his career at KPMG, where he spent nearly seven years, working across financial services audit and risk management with exposure to financial reporting requirements, governance, risk & internal controls and systems’ implementation. He is a member of the Institute of Chartered Accountants of Scotland, graduated LLB (Hons) from the University of Aberdeen and holds an Executive MBA from the University of Bristol & École Nationale des Ponts & Chaussées, France. John joined Alpha in February 2018.

Global Chief Commercial Officer: Nick Fienberg

Nick has 15 years of experience consulting in the financial services, and in particular the capital markets sector. Specialising in asset management outsourcing, he has worked with a wide range of clients on advisory and implementation roles covering large scale outsourcing and organisational change initiatives, strategic business studies and market trend analysis.

Global Chief Operating Officer: Sarah Peacock

Sarah is Alpha’s Global Chief Operating Officer. She joined Alpha in 2008. Before moving into business operations, she spent over 10 years in asset and wealth management consulting with experience performing both project management and functional roles, and working extensively on implementation and business transformation projects. As COO, Sarah is responsible for overseeing operations functions globally including IT & infrastructure, data privacy, people and talent management, service delivery and knowledge management.

Global Head - Aiviq: Lee Griggs

Lee is the Global Head of Aiviq. Lee has a record of international business building with over 20 years experience, providing market leading enterprise and SaaS solutions to leading financial institutions. Lee has extensive knowledge of strategy creation, execution and expansion and has a proven track record in business development, process management and organisational optimisation.

Global Chief Client Officer and Head of UK - Asset & Wealth Management Consulting: Stuart McNulty

Stuart is the Global Chief Client Officer & Head of UK for Asset & Wealth Management Consulting at Alpha. Stuart began his career at Accenture, where he specialised in the capital markets sector, leading projects ranging from system implementations to process change initiatives. Stuart then moved to J.P. Morgan, where he ran strategic projects within the credit exotics and hybrids middle office team, before joining Alpha in 2007. Since then, Stuart has worked on a wide variety of asset management projects, including new product development, competitive analysis, rate card reviews and large-scale onboarding programmes.

Stuart holds a First Class honours degree in Computer Science from the University of Sheffield.

Head of North America - Asset & Wealth Management Consulting: Joe Morant

Joe is Head of North America for Asset & Wealth Management Consulting at Alpha. Prior to joining Alpha Joe held operations and technology leadership roles at Nuveen Investments and BNY Mellon Asset Management. Joe has also held executive management positions at several service provider and consulting firms. Joe has worked extensively across the US and Europe, consulting to a range of leading asset managers. He has a breadth of experience across all aspects of the asset management business ranging from major change programs to corporate strategy and operating model definition.

Global Head of Innovation - Asset & Wealth Management Consulting: Neil Curham

Neil joined Alpha in April 2011 as a result of the acquisition of Tomtom Consultants. Neil established Tomtom Consultants in 2005 to become the leading consultant to distribution in investment management.

Neil has fifteen years experience working within investment management distribution and has more than eight years consultancy experience. During this time, Neil has assisted with business, operational and technical strategy addressing areas such as service proposition, client relationship management, client communications, marketing automation and web delivery.

Executive Director and Global Head of Distribution - Asset & Wealth Management Consulting: Mike Smith

Mike has over 20 years’ consulting experience and is an Executive Director and the Global Head of Alpha’s Distribution Practice, advising Asset Managers globally across their Sales, Marketing, Client Service and Product functions. Mike specialises in Distribution Transformation, including Strategy, Operating Models, Process Optimisation, Distribution Technology, Client Experience, Distribution Data & Analytics.  

Board

Independent Non-Executive Chairman: Ken Fry N (Chair), A, R

Ken joined the Alpha Board in 2016, following almost 10 years as the Global Chief Operating Officer at Aberdeen Asset Management. He was appointed the Board’s Non-Executive Chairman in February 2018. Ken has over 27 years’ experience in financial services, and has considerable experience integrating acquisitions within the investment management industry. Ken has a strong technology and operations background, and has undertaken a number of transformational projects during his career. He directed the integration of many major acquisitions while at Aberdeen Asset Management, including assets acquired from Deutsche Asset Management, Credit Suisse Asset Management and Scottish Widows Investment Partners.

Ken keeps the skills to support and deliver the Group’s strategy up to date by maintaining a wide network of contacts within investment management globally. He regularly attends conferences and discussion forums to keep abreast of industry issues and meets with both clients and investors. He also advises on M&A strategy within the investment management industry.

Global Chief Executive Officer: Euan Fraser

For the profile, see the 'executive' team section of this report, above.

Global Chief Financial Officer: John Paton

For the profile, see the 'executive' team section of this report, above.

Non-Executive Director: Penny Judd R (Chair), A, N

Penny joined the Alpha Board as a Non-Executive Director in February 2018, having previously held the roles of Managing Director and EMEA Head of Compliance at both Nomura International plc and UBS AG. Penny has a strong public markets and financial services background, with over 30 years’ experience in compliance, regulation, corporate finance and audit. She is also a chartered accountant and is currently Non-Executive Director and Chair of Audit Committee for both Trufin plc and Team17 Group plc.

Penny keeps the skills to support and deliver the Group’s strategy up to date through her experience gained on other listed company boards, while also maintaining a wide network of contacts in financial services and regulation. She attends various conferences and events covering relevant industry and governance matters, and meets with a range of advisers and institutional investors in AIM and main market companies.

Independent Non-Executive Director: Jill May A, N, R

Jill joined the Alpha Board as a Non-Executive Director in July 2020. She has over 20 years’ experience in investment banking, with her executive career spent working in corporate finance for SG Warburg & Co. Ltd from 1985 to 1995, and senior positions in Group Strategy at UBS where she was a Managing Director from 2001 to 2012.

She was a Panel Member from 2013 to 2018 and a Non-Executive Director from 2013 to 2016 of the Competition and Markets Authority (CMA), and a Non-Executive Director of the Institute of Chartered Accountants in England and Wales (ICAEW) from 2015 to 2019.

Jill is currently an External Member of the Prudential Regulation Committee at the Bank of England. Her current listed company experience includes her roles as Non-Executive Director of Standard Life Investments Property Income Trust Limited, JP Morgan Claverhouse Investment Trust plc and Ruffer Investment Company Limited.

Non-Executive Director: Maeve Byrne A (Chair), N, R

Maeve is a Fellow of the Institute of Chartered Accountants in Ireland and has over 30 years’ experience in Financial Services.

She started her career as an auditor with KPMG Ireland and worked in several other KPMG international offices in Europe and North America. Within KPMG, Maeve moved from Audit to Transaction Services where she was a Financial Services Partner from 2002 to 2014. From 2010 to 2013, Maeve was seconded to Royal Bank of Scotland and the Non-Core Division where she was CFO and a member of the Group Finance Board & Risk and Control Committee. From 2014 to 2017, she held senior executive roles at the Royal Bank of Scotland in Capital Resolutions Group and Williams & Glyn.

Since 2017, Maeve has focused on transformation services, offering Board advisory services as an independent consultant. She has worked with Financial Services companies including Santander and clients in the Fintech/Neo bank space.

How much does the company expect to make over the next five years?

• Most recent full-year results
  • Profit and loss
    • Non-adjusted
      • In the 12-months period ended 31st March 2022, revenue increased by 61.1% to £158.0 million (FY21: £98.1 million), driven almost entirely by net fee income (99.9%).
      • Gross profit increased by 70.4% to 59.4 million (FY21: 34.8 million).
      • Profit before tax increased by 65.9% to £14.9 million (FY21: £9.0 million).
      • Basic earnings per share increased by 33.7% to 7.69p (FY21: 5.75p).
    • Adjusted
      • On a like-for-like basis (i.e. excluding the acquisition of Lionpoint), revenue increased by 31.3% to £ccc million (FY22: £ccc million).
      • Adjusted EBITDA increased by 56.0% to £33.9 million (FY21: £21.7 million).
      • Adjusted profit before tax increased by 62.2% to £31.8 million (FY21: £19.6 million).
      • Adjusted earnings per share increased by 43.9% to 21.46p (FY21: 14.91p)
  • Balance sheet
    • Net current assets
      • Net current assets increased by 21.5% to £27.2 million (FY21: £22.4 million).
    • Cash
      • Cash increased by 86.7% to £63.5 million (FY21: £34.0 million).
    • Net assets
      • Net assets increased by 40.7% to £132.7 million (FY21: £94.4 million).
    • Debt
      • No debt.
    • Net debt
      • Net cash increased by 86.7% to £63.5 million (FY21: £34.0 million).
  • Cash flow
    • CFO
      • Non-adjusted
        • Net cash generated from operating activities increased by 59.3% to £33.5 million (FY21: £21.0 million).
      • Adjusted
        • Adjusted cash generated from operating activities ccc by ccc% to £ccc million (FY21: £ccc million).
    • CIO
      • Net cash used from investing activities increased by 8x to £24.5 million (FY21: £2.9 million).
    • CFO
      • Net cash from financing activities switched to using £20.0 million (FY21: £8.5 million).
      • Final dividend increased by 55% to 7.50p per share (FY21: 4.85p).
• Most recent interims
  • Profit and loss
    • Non-adjusted
      • In the six month period ended 30th September 2022, revenue increased by 57.3% to £107.6 million (H1 FY22: £68.4 million), driven almost entirely by higher net fee income, in particular from the North America region, which is in-line with one of the company's key strategic objective. Net fee income jumped by 56.5% to £107.0 million (H1 FY22: £68.4 million).
      • Gross profit increased by 45.3% to £38.4 million (H1 FY22: £26.5 million), equating to a gross profit margin of 35.9% (H1 FY22: ccc%).
      • Profit before tax increased by 235.6% to £14.2 million (H1 22: £4.2 million).
      • Basic earnings per share increased by 10x to 9.10p (H1 22: 0.87p).
    • Adjusted
      • On a like-for-like basis (i.e. excluding the acquisition of Lionpoint), revenue increased by £ccc million (H1 22: £ccc million). Net fee income increased by 45.3% to £ccc million (H1 22: £ccc million).
      • Adjusted EBITDA increased by 45.6% to £22.5 million (H1 FY22: £15.4 million), equating to a margin of 21.5% (H1 FY22: 22.6%).
      • Adjusted profit before tax increased by 47.2% to £21.3 million (H1 22: £14.4 million).
      • Adjusted earnings per share increased by 43.0% to 14.09p (H1 22: 9.85p).
  • Balance sheet
    • Net current assets
      • Net current assets decreased by 32.0% to £18.5 million (H2 22: £27.2 million).
    • Cash
      • Cash decreased by 24.7% to £47.8 million (H2 22: £63.5 million).
    • Net assets
      • Net assets increased by 11.4% to £147.9 million (H2 22: £132.7 million).
    • Debt
      • Debt increased to £7.5 million (H2 22: nil). The company has access to a £20.0m revolving credit facility ("RCF"), enabling the company to further improve its liquidity if required.
    • Net debt
      • Net cash decreased by 36.5% to £40.3 million (H2 22: £63.5 million).
  • Cash flow
    • CFO
      • Non-adjusted
        • Net cash generated from operating activities decreased by 63.3% to £2.2 million (H1 FY22: £6.0 million) as the improved profits were outweighed by higher working capital requirements.
      • Adjusted
        • Adjusted cash generated from operating activities decreased by 50.6% to £4.2 million (H1 FY22: £8.5 million).
    • CIO
      • Net cash used from investing activities decreased by 10.4% to £21.5 million (H1 FY22: £24.0 million). A significant portion of the cash (96%) was used to pay for the (Lionpoint) acquisition.
    • CFO
      • Net cash from financing activities switched to using £3.3 million (H1 FY22: £23.8 million), mainly because no new shares were issued during the period.
      • Interim dividend increased by 27.6% to 3.70p per share (H1 FY22: 2.90p).
  • Other
    • The company added that in-line with its strategic objectives, it will continue to focus on growing the business through the deepening of its service offering and through geographic expansion.
    • The company added that its confident in the outlook of the second half of the current financial year and beyond.
    • The number of consultants increased by 40.4% to 921 consultants (H1 FY22: 656 consultants), driven by client demand. The director headcount increased by 11% to 97 directors (H1 FY22: 88 directors).
    • The number of client relationships increased by 19% to 787 clients (H1 22: 662), boosted by both new clients wins and client retention.

What are the key risks of investing in the company?

As with any investment, investing in Alpha FMC carries a level of risk. Overall, based on the Alpha FMC's adjusted beta (i.e. 1.139), the degree of risk associated with an investment in Alpha FMC is 'medium'.

Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. We note that the company in its current state was only really formed (following a reverse takeover) on 27th March 2020, and, therefore, the numbers of available data observations is less than what's typically used in the five years of monthly data beta calculation (i.e. 33 observations vs. 60 observations). The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'medium' risk, it must have a beta value of between 0.5 and 1.5. Further information about the beta ratings can be found in the appendix section of this report.

The key risks can be found below. For us, currently, the biggest risk to the valuation of the company relates to the company's ability (and willingness) to take the appropriate risk to maintain the growth of the business.

Risks relating to the group's business and the industry in which it operates

• Ability to retain key personnel and senior management
• Low barriers to entry
• Concentration of key customers
• Revenue growth is partly reliant on attracting new personnel to expand existing services and lead new service offerings
• Revenue growth is also reliant on ability to cross sell and up sell new services to existing clients and to win new clients
• Revenue growth is sensitive to selling major and large scale projects
• Ability to maintain quality of service and fulfil obligations on client contracts
• Technological change and reliability
• Geography
• Currency and exchange rates
• Regulatory environment
• Training and risk management
• Cash collection and bad debt
• Funding and use of proceeds of the Placing
• Macroeconomic conditions
• Tax risks
• Use of contractors
• Utilisation rates of consultants
• Relationships with technology platforms and service providers

Risks relating to the shares

• Share price volatility and liquidity
• Investment risk
• Dilution
• Dividends may not be paid

How much can I expect to make from an investment in the company?

What's the expected return of an investment in the company?

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What are the assumptions used to estimate the return figure?

Key inputs

Description	Value	Commentary
Which valuation model do you want to use?	Discounted cash flow	Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more/most accurate is the absolute valuation approach, so that's the approach that we suggest using to determine the estimated value of the company.
Which type of discounted cash flow model do you want to use?	Dividend discount model	The policy of Alpha FMC is to pay out approximately half of adjusted profit after tax. Accordingly, we suggest using the dividend discount model (DDM), which is one of the most common discounted cash flow models.
How many distinct stage of growth do you want to use?	Two stages	For simplicity, we have used two stages here.
What is the expected lifespan of the business?	Perpetual	Again, for simplicity, we have assumed that the business continues forever.
What is the expected constant growth rate in dividends?	1.57%	We note that the gross domestic product (GDP) growth rate in the last 20 years (2001 to 2022) is around 3% per year for the global economy, and around 2.25% for the United Kingdom. Since the company's inception (i.e. eight years ago), the median dividend of the company is 1.57%. Further information about the company's dividend pay-outs can be found in the appendix section of this report.
Which financial forecasts to use?	Proactive Investors	Here, we have used the forecasts of Proactive Investors.
What is the required return on equity?	9.479%	For estimating the required return on equity, we used the Capital Asset Pricing Model (CAPM), which provides an economically grounded and relatively objective procedure for required return estimation, and, therefore, it has been widely used in valuation. The calculation of the required return on equity (and the reasons behind the calculation) can be found in the table below.
What's the current value of the company?	454.88 pence per share	As at 18t January 2023, the current value of Alpha FMC is 454.88p per share.
Which time period do you want to use to estimate the expected return?	Between now and five years time	Research suggests that following a market crash, the average amount of time it takes for the price of a stock market to return to its pre-crash level (i.e. the recovery period) is at least three years. Accordingly, we suggest that to account for general market cyclicity, it's best to estimate the expected return of the company between now and five years time.

Cost of equity (%)

Input	Input value	Additional information
Risk-free rate (%)	3.488%	Here, the risk free rate is the US 30 year treasury bond, and is calculated as at 16th December 2022. Research suggests that for the risk-free rate, it's best to use one that has the same or similar maturity to the estimated remaining lifespan of the company. Here, we have assumed that the estimated lifespan of the company is 50 years, so we have used the longest maturity, which is 30 years.
Beta	1.139	Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.
Equity risk premium (%)	5.26	Here, the equity risk premium is in relation to the global region, and is calculated as at 1st January 2022. Research suggests that for the region of equity risk premium, it's best to use one that is the same or similar to the region of the beta market portfolio. Here, the region of the beta market portfolio is the world/global, so we have used the world/global region for the equity risk premium.
Cost of equity (%)	9.479%	Cost of equity = Risk-free rate + Beta x Equity risk premium.

Appendix

Relative valuation approach

What are the assumptions used to estimate the return figure?

Name
Accenture (ACN)
Booz Allen Hamilton (BAH)
Marsh & McLennan (MMC)
Huron Consulting (HURN)
FTI Consulting (FCN)

Name	2Y Corr	Mkt Cap (USD)	BF P/E	BF EV/EBITDA	BF EV/EBIT	BF EV/Rev	LF P/BV
Alpha Financial Markets Consulting		646.52M	20.6x	11.1x	12.8x	2.2x	3.5x
Randstad NV	0.27	11.84B	14.0x	8.3x	10.8x	0.4x	2.3x
Coor Service Management Holdin	0.25	635.89M	13.3x	9.1x	15.6x	0.7x	3.1x
Bure Equity AB	0.25	1.82B	--	--	--	--	1.5x
GFT Technologies SE	0.24	1.10B	18.7x	10.9x	13.8x	1.2x	5.3x
Rejlers AB	0.21	287.34M	14.8x	8.4x	13.9x	0.9x	2.1x
XPS Pensions Group PLC	0.17	414.52M	14.2x	9.7x	11.4x	2.4x	2.3x
Science Group PLC	0.16	219.09M	--	--	--	--	2.5x
Fintel Plc	0.13	266.34M	16.9x	10.7x	12.7x	3.2x	2.3x
RPS Group PLC	0.12	762.27M	24.9x	11.8x	17.5x	1.2x	1.7x
Alan Allman Associates	0.04	442.12M	19.5x	13.2x	15.6x	1.4x	2.9x
Current Premium to Comps Mean			21%	11%	-6%	43%	32%
Mean   (Including AFM LN)		1.68B	17.0x	10.0x	13.5x	1.5x	2.7x

Dividend

Since the company's listing (i.e. around five years ago), the median dividend growth rate is 16%, and the mean is 48%. The constant/fixed rate dividend rate is 11.97%; in other words, if the company had grown its dividend during that period at a rate that is constant (rather than variable), then the rate would be 11.97%.

Dividend

Financial year	Interim	Full-year	Total	Growth
2023	3.70	7.60	11.30	9%
2022	2.90	7.50	10.40	50%
2021	2.10	4.85	6.95	231%
2020	2.10	0.00	2.10	-65%
2019	1.91	4.09	6.00	16%
2018	1.48	3.69	5.17	N/A

Significant Shareholders

Shareholders	% of issued share capital with voting rights
Abrdn	10.69
Invesco	9.06
Janus Henderson Investors	7.51
BlackRock	5.45
Investec Wealth & Investment	4.65
NFU Mutual	3.98
M&G Investment Management	3.84

Last updated 17th January 2023. The percentage of the company’s issued share capital not in public hands is 6.4%.

• The company's medium term goal is to double it size over the four years to November 2024 (from November 2020).
• 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 ESG 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 group’s strategic aim to be recognised as the leading global consultancy to the asset management, wealth management and insurance industries.

Consolidated statement of comprehensive income

	Year ended 31st March 2022 (£'000)	Year ended 31st March 2021 (£'000)	Difference (%)
	£'000	£'000
Continuing operations
Revenue	158,005	98,066	61.1%
Rechargeable expenses	(196)	(112)	75.0%
Net fee income	157,809	97,954	61.1%
Cost of sales	(98,452)	(63,130)	56.0%
Gross profit	59,357	34,824	70.4%
Administration expenses	(41,582)	(24,648)	68.7%
Operating profit	17,775	10,176	74.7%
Depreciation	1,155	1,085	6.5%
Amortisation of capitalised development costs	556	613	-9.3%
Adjusting items	14,382	9,833	46.3%
Adjusted EBITDA	33,868	21,707	56.0%
Finance income	1	-
Finance expense	(2,894)	(1,207)	139.8%
Profit before tax	14,882	8,969	65.9%
Taxation	(6,370)	(3,142)	102.7%
Profit for the year	8,512	5,827	46.1%
Exchange differences on translation of foreign operations	3,180	(3,104)	-202.4%
Total comprehensive income for the year	11,692	2,723	329.4%
Basic earnings per ordinary share (p)	7.69	5.75	33.7%
Diluted earnings per ordinary share (p)	7.25	5.50	31.8%

Consolidated statement of financial position

	As at 31st March 2022 (£'000)	As at 31st March 2021 (£'000)	Difference (%)
Assets
Non-current assets
Goodwill	100,991	63,067	60.1%
Intangible fixed assets	31,333	21,648	44.7%
Property, plant and equipment	806	415	94.2%
Right-of-use asset	2,304	1,816	26.9%
Deferred tax asset	671	-
Capitalised contract fulfilment costs	131	154	-14.9%
Total non-current assets	136,236	87,100	56.4%
Current assets
Trade and other receivables	29,569	17,938	64.8%
Cash and cash equivalents	63,516	34,012	86.7%
Total current assets	93,085	51,950	79.2%
Current liabilities
Trade and other payables	(56,671)	(27,241)	108.0%
Provisions	(3,277)	-
Corporation tax	(4,788)	(1,792)	167.2%
Lease liabilities	(1,134)	(514)	120.6%
Total current liabilities	(65,870)	(29,547)	122.9%
Net current assets	27,215	22,403	21.5%
Non-current liabilities
Deferred tax provision	(4,331)	(3,022)	43.3%
Other non-current liabilities	(25,100)	(10,737)	133.8%
Lease liabilities	(1,275)	(1,379)	-7.5%
Total non-current liabilities	(30,706)	(15,138)	102.8%
Net assets	132,745	94,365	40.7%
Equity
Issued share capital	89	80	11.3%
Share premium	119,438	89,396	33.6%
Foreign exchange reserve	3,482	302	1053.0%
Other reserves	9,361	4,044	131.5%
Retained earnings	375	543	-30.9%
Total shareholders' equity	132,745	94,365	40.7%

Consolidated statement of cash flows

	Year ended 31 March 2022 (£'000)	Restated year ended 31 March 2021 (£'000)	Difference (%)
Cash flows from operating activities:
Profit for the year	8,512	5,827	46.1%
Taxation	6,370	3,142	102.7%
Finance income	(1)	-
Finance expense	2,894	1,207	139.8%
Depreciation of property, plant and equipment	1,155	1,085	6.5%
Loss on disposal of fixed assets	32	13	146.2%
Amortisation of intangible fixed assets	5,272	4,130	27.7%
Share-based payment charge	4,075	1,693	140.7%
Increase in provisions	1,302	-
Operating cash flows before movements in working capital	29,611	17,097	73.2%
Working capital adjustments:
(Increase)/decrease in trade and other receivables	(7,066)	3,221	-319.4%
Increase in trade and other payables	15,729	6,424	144.8%
Tax paid	(4,767)	(5,707)	-16.5%
Net cash generated from operating activities	33,507	21,035	59.3%
Cash flows from investing activities:
Interest received	1	-
Acquisition of subsidiaries, net of acquired cash	(23,796)	(2,752)	764.7%
Purchase of property, plant and equipment, net of disposals	(684)	(151)	353.0%
Net cash used in investing activities	(24,479)	(2,903)	743.2%
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)	-41.4%
Principal lease liability payments	(814)	(809)	0.6%
Interest on lease liabilities	(111)	(102)	8.8%
Dividends paid	(8,678)	(2,136)	306.3%
Net cash generated from/(used in) financing activities	19,956	(8,533)	-333.9%
Net increase in cash and cash equivalents	28,984	9,599	201.9%
Cash and cash equivalents at beginning of the year	34,012	25,996	30.8%
Effect of exchange rate fluctuations on cash held	520	(1,583)	-132.8%
Cash and cash equivalents at end of the year	63,516	34,012	86.7%

Interim condensed consolidated statement of comprehensive income

	Unaudited six months ended 30 Sep 2022	Unaudited six months ended 30 Sep 2021
	£'000	£'000
Continuing operations
Revenue	107,599	68,421
Rechargeable expenses	(583)	(31)
Net fee income	107,016	68,390
Cost of sales	(68,573)	(41,930)
Gross profit	38,443	26,460
Administration expenses	(22,679)	(20,992)
Operating profit	15,764	5,468
Depreciation	898	497
Amortisation of capitalised development costs	151	301
Adjusting items	5,668	9,171
Adjusted EBITDA	22,481	15,437
Finance income	65	1
Finance expense	(1,630)	(1,238)
Profit before tax	14,199	4,231
Taxation	(3,922)	(3,278)
Profit for the period	10,277	953
Exchange differences on translation of foreign operations	9,963	2,100
Total comprehensive income for the period	20,240	3,053
Basic earnings per ordinary share (p)	9.10	0.87
Diluted earnings per ordinary share (p)	8.55	0.83

Interim condensed consolidated statement of financial position

	Unaudited as at 30 Sep 2022	Unaudited as at 30 Sep 2021	Audited as at 31 Mar 2022
	£'000	£'000	'000
Non-current assets
Goodwill	107,310	100,307	100,991
Intangible fixed assets	30,936	33,661	31,333
Property, plant and equipment	1,109	576	806
Right-of-use asset	1,904	2,032	2,304
Deferred tax asset	1,088	-	671
Capitalised contract fulfilment costs	119	168	131
Total non-current assets	142,466	136,744	136,236
Current assets
Trade and other receivables	41,695	27,644	29,569
Cash and cash equivalents	47,764	40,032	63,516
Total current assets	89,459	67,676	93,085
Current liabilities
Trade and other payables	(55,709)	(47,579)	(56,671)
Provisions	(3,433)	-	(3,277)
Corporation tax	(3,226)	(2,307)	(4,788)
Lease liabilities	(1,072)	(745)	(1,134)
Interest bearing loans and borrowings	(7,477)	-	-
Total current liabilities	(70,917)	(50,631)	(65,870)
Net current assets	18,542	17,045	27,215
Non-current liabilities
Deferred tax liability	(3,765)	(5,598)	(4,331)
Other non-current liabilities	(8,357)	(22,279)	(25,100)
Lease liabilities	(941)	(1,375)	(1,275)
Total non-current liabilities	(13,063)	(29,252)	(30,706)
Net assets	147,945	124,537	132,745
Equity
Issued share capital	90	89	89
Share premium	119,438	119,438	119,438
Foreign exchange reserve	13,445	2,402	3,482
Other reserves	12,867	6,545	9,361
Retained earnings	2,105	(3,937)	375
Total shareholders' equity	147,945	124,537	132,745

Interim condensed consolidated statement of cash flows

	Unaudited six months ended 30 Sep 2022	Restated10 unaudited six months ended 30 Sep 2021	Audited year ended 31 Mar 2022
	£'000	£'000	£'000
Cash flows from operating activities:
Profit for the period	10,277	953	8,512
Taxation	3,922	3,278	6,370
Finance income	(65)	(1)	(1)
Finance expenses	1,630	1,238	2,894
Depreciation of property, plant and equipment	898	497	1,155
Loss on disposal of fixed assets	-	21	32
Amortisation of intangible fixed assets	2,507	2,559	5,272
Share-based payment charge	3,588	1,672	4,075
Increase in provisions	-	-	1,302
Foreign exchange gain on cash and cash equivalents	(4,764)	-	-
Operating cash flows before movements in working capital	17,993	10,217	29,611
Working capital adjustments:
Increase in trade and other receivables	(9,065)	(5,160)	(7,066)
(Decrease)/increase in trade and other payables	(676)	3,573	15,729
Tax paid	(6,062)	(2,660)	(4,767)
Net cash generated from operating activities	2,190	5,970	33,507
Cash flows from investing activities:
Interest received	65	1	1
Consideration paid on acquisitions, net of cash acquired	(20,716)	(23,796)	(23,796)
Purchase of intangible assets	(319)	-	-
Purchase of property, plant and equipment, net of disposals	(564)	(204)	(684)
Net cash used in investing activities	(21,534)	(23,999)	(24,479)
Cash flows from financing activities:
Issue of ordinary share capital	-	31,102	31,102
Share issuance costs	-	(1,053)	(1,053)
Net settlement of vested share options	(322)	-	-
EBT purchase of Company's own shares	(1,129)	(187)	(205)
Drawdown of bank borrowings	7,477	-	-
Interest and bank loan fees	(110)	(199)	(285)
Principal lease liability payments	(650)	(348)	(814)
Interest on lease liabilities	(53)	(52)	(111)
Dividends paid	(8,547)	(5,431)	(8,678)
Net cash (used in)/generated from financing activities	(3,334)	23,832	19,956
Net (decrease)/increase in cash and cash equivalents	(22,678)	5,803	28,984
Cash and cash equivalents at beginning of the period	63,516	34,012	34,012
Effect of exchange rate fluctuations on cash held	6,926	217	520
Cash and cash equivalents at end of the period	47,764	40,032	63,516

0.61% of GDP is spent on management consultancy services.

GDP-weighted spending on consultancy in 2005

Country	Consulting revenue (billion)	GDP (billion)	Consulting spend/GDP (%)
USA	112.50	13,094.79	0.86%
United Kingdom	19.40	2,321.84	0.84%
Germany	18.50	2,767.30	0.67%
Japan	20.40	4,572.81	0.45%
France	8.40	2,137.36	0.39%
Italy	2.60	1,786.07	0.15%
China	2.34	2,256.70	0.10%
India	1.49	834.05	0.18%
South Korea	1.64	844.20	0.19%