Summary
Operations
How did the idea of the company come about?
What's the mission of the company?
What's the company's main offering(s)?
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.
What is the main way that the company expects to make money?
What’s the size of the company target market?
Total Addressable Market
Here, the total addressable market (TAM) is defined as the global ccc market, and based on a number of assumptions, it is estimated that the size of the market as of today (18th January 2023), in terms of revenue, is $ccc billion.
Serviceable Available Market
The serviceable available market (SAM) is defined as the global ccc market, and based on a number of assumptions, it is estimated that the size of the market as of today (18th January 2023), in terms of revenue, is $ccc billion.
Serviceable Obtainable Market
Here, the serviceable obtainable market (SOM) is defined as the United Kingdom ccc market, and based on a number of assumptions, it is estimated that the size of the market as of today (18th January 2023), in terms of revenue, is $ccc billion.
What's the business strategy of the company?
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
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.
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?
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)[1], 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[2], 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 ccc.
How much can I expect to make from an investment in the company?
What's the expected return of an investment in the company?
ccc
What are the assumptions used to estimate the return?
What are the assumptions used to estimate the return figure?
| 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? | One stage | For simplicity, we have used the one stage pattern 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. |
| 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. |
Relative valuation approach
Sensitive analysis
Appendix
Relative valuation approach
What's the expected return of an investment in the company using the relative valuation approach?
What are the assumptions used to estimate the return figure?
| Name | 2Y Corr | Mkt Cap (USD) | BF P/E | BF EV/EBITDA | BF EV/EBIT | BF EV/Rev | LF P/BV |
|---|---|---|---|---|---|---|---|
| Alpha Financial Markets Consul | 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 |
Sensitive analysis
Dividend
Median is 16% and the mean is 48%.
| 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 |
References and notes
- ↑ Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For example, Supply@ME Capital's adjusted beta (5 years, monthly data) is 4.61, and is, accordingly, 561% above the market beta (of 1); assuming that a 'high' level of riskiness is 50% or more above the market beta, then the riskiness of investing in Supply@ME Captial is considered to be 'high' (561%>50%). For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. One study of U.S. stocks found support for five years of monthly data over alternatives. An argument can be made that the 2 years, weekly data can be especially appropriate in fast growing markets. The beta value in a future period has been found to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk security, than to the value of the raw beta. Because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.
- ↑ Officially, the company was formed on 1st March 2000 (i.e. almost 23 years ago).